It has been long rumored that an aspect of AMD’s new “asset light” strategy would be the disassociation of AMD’s fabrication and design divisions. While both divisions mutually benefit the other, AMD has struggled to run its operation with a flagging fabrication business. A July 24 interview with fresh AMD CEO Dirk Meyer is known to have foretold the coming of this event. The Wall Street Journal is now confirming that AMD’s major business announcement scheduled for later in the day will officially announce the separation.
As AMD bids farewell to its global array of plants, it joins the growing community of IC design firms that have profitably outsourced their manufacturing. The so-called fabless model leaves companies like NVIDIA, Conexant, Broadcom and VIA to design chips which are later outsourced to companies like TSMC, the world’s largest independent foundry. It is alleged that the independent fabrication company to rise from the spinoff will continue to manufacture AMD CPUs in addition to other contracted work.
AMD design, headed by current CEO Dirk Meyer, will continue to run the business of designing new chips like the Phenom and the upcoming Bulldozer platform. Freed from the costs of fabrication, AMD will be able to compete more effectively with firms the likes of NVIDIA and Intel.
It can be assured that such a tremendous shakeup will scare investors as the market opens later in the morning. Despite any early dips the present AMD may suffer in its stock valuation, most — and AMD — appear confident that the move is for the best.
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