AMD may be expanding foundry relationship with TSMC, firm says

By Ann Steffora Mutschler, Senior Editor -- Electronic News, 11/26/2007

Demonstrating what could be an expansion in the relationship between microprocessor maker Advanced Micro Devices (AMD) and the world’s largest semiconductor foundry Taiwan Semiconductor Manufacturing Co. (TSMC), financial services firm Lehman Brothers semiconductor research analyst Tim Luke released a research note today stating that contacts in Asia are suggesting that TSMC may begin some limited pilot production of non mainstream microprocessor products using TSMC’s bulk silicon approach by as early as the first half of 2008.

“We would expect this to initially target 65-nm nodes. Our checks suggest that initial production may be in small scale and some technical challenges may still need to be overcome. The initial production by TSMC is likely to be 'risk production' in which only the good dies are bought by AMD,” Luke wrote in the note.

It is not clear which products Lehman is referring to, however, two weeks ago when AMD announced its ATI Radeon HD 3800 series of graphics processing units (GPU), which are part of the company’s Spider platform, the announcement stated that the GPUs are manufactured on TSMC’s 55-nm process technology, which allowed for a 12X increase in performance-per-watt over the previous generation with a significant reduction in die size.

“We believe that TSMC is also working on developing an integrated MPU and GPU (graphics) offering with AMD as part of AMD's Fusion strategy targeted, we believe, for 2009. Again we consider that this would be likely to be developed on bulk silicon,” he continued.

Luke also said he believes that while TSMC may have had some interest in purchasing the equipment from AMD's Dresden MPU manufacturing facilities for use in more cost competitive Asian facilities, the German government, which has provided subsidies for AMD, would be highly resistant to such a move.  

Further, “beyond the TSMC relationship, we believe that AMD may be continuing to develop a dialogue with other foundries such as IBM and Chartered as it weighs options. We note that IBM and Chartered may be more committed to a supporting SOI.  We note that for TSMC, the AMD relationship has not been a focus in recent analyst updates,” he offered.

Lehman expects updates from AMD management on its “asset light” strategy at its upcoming analyst day on December 13 in New York, and would view the move to outsource manufacturing as well as its recent securing of some additional longer term equity financing from Abu Dhabi as constructive for AMD. 

Still, the firm believes trends for AMD have remained solid in Q4 given healthy PC demand levels and some notebooks capacity constraint for rival Intel.

Other industry watchers have suggested that Apple should acquire AMD to combat the microprocessor maker’s ongoing financial woes.

AMD and TSMC could not be reached by Electronic News for comment.