If AMD gets out of the fab business, the future's going to be a lot gloomier

Summary:It's been a really rough year for AMD. Losing market share to Intel is bad enough, but doing so at a time when the company took on $2 billion of debt and lost $1.2 billion over a six month period is really bad. AMD is now looking for ways to cut costs, and if it's not careful, things will get a lot worse.

It's been a really rough year for AMD.  Losing market share to Intel is bad enough, but doing so at a time when the company took on $2 billion of debt and lost $1.2 billion over a six month period is really bad.  AMD is now looking for ways to cut costs, and if it's not careful, things will get a lot worse.

Back in July of last year I wrote about how I saw a gloomy future for the company.  Many people thought I was being far too pessimistic.  Now, almost a year on and AMD's future is looking far gloomier as the company looks for ways to stem the cash hemorrhage.  One idea that's apparently under consideration is for the company to get out of the fabrication business and outsource all the work.

I'm pretty sure that closing the two fab plants that AMD currently operates (Fab 30 and 36) would mean a dramatic drop in costs in the short term, but in the long term it could be a disaster.  One of the problems that has been plaguing AMD is the glacially slow process of getting new processors manufactured and out the door.  While companies like Texas Instruments and Sony can get away with outsourcing chip manufacture because their business models can accommodate for the increased time it takes to get a third-party fab to work with their designs, this could be fatal for a company like AMD which has to be able to get new products out of the door as fast as possible in order to compete.  It's doubly fatal when your competitor is Intel and will pounce on any mistake you make.

AMD needs to focus on what made it successful in the first place - fast, affordable processors.  Buying ATI might not have been the best move in terms of strategy, but pursuing fanciful technologies like Quad FX was an even worse idea because the company was chasing the fickle, high-end, low-volume gaming market.  The focus now should be bringing to market a serious competitor to Intel's Core 2 line.  Without a product that matches or betters this line, AMD's future is going to be gloomy no matter what it does.

Thoughts?

Topics: Processors

About

Adrian Kingsley-Hughes is an internationally published technology author who has devoted over a decade to helping users get the most from technology -- whether that be by learning to program, building a PC from a pile of parts, or helping them get the most from their new MP3 player or digital camera.Adrian has authored/co-authored technic... Full Bio

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