From today's WSJ - AMD may be looking to partner the Dresden fab...
John
Advanced Micro Devices May Seek
Partner in German Chip Factory
By DEAN TAKAHASHI
Staff Reporter of THE WALL STREET JOURNAL
Advanced Micro Devices Inc., looking to reduce financial
pressures, is considering seeking a partner to take a stake in a
new $1.8 billion chip factory in Dresden, Germany.
Fran Barton, chief financial officer of the Sunnyvale, Calif., chip
company, confirmed in an interview that the company is analyzing
its manufacturing capacity and whether it needs to find a partner,
especially if it turns out the company might have excess capacity.
The massive Dresden factory comes on line in the first quarter of
2000.
"We are absolutely committed to
Dresden," Mr. Barton said, referring to
the company's plans to make updated
versions of its flagship Athlon
microprocessor at the factory. "But if we
were to find ourselves with excess
capacity, it would be good to have the
option of a partner."
Mr. Barton wouldn't specify the options
AMD is considering, or whether it is
already talking to potential partners. But one person familiar with
the matter said the company could seek to sell up to half of the
plant.
Industry executives say Motorola Inc. would be the most logical
partner, though a Motorola spokesman declined comment. The
Schaumburg, Ill.-based electronics company has committed itself
to outsourcing half of its chip manufacturing in coming years and
already supplies AMD with a copper-based manufacturing
process that AMD will use in the factory.
The Dresden factory is key to AMD Chief Executive Officer W. J.
"Jerry" Sanders III's plan to use the powerful Athlon chip to grab
30% of the PC microprocessor market, up from AMD's current
12% share. Almost all of that increase will have to come at the
expense of archrival Intel Corp.
But AMD's financial pressures are a big hurdle; it reported a
$162 million loss in its latest second quarter, before extraordinary
items, because of price-cutting by Intel and the costs of the
Dresden factory. AMD, which also reported a $128 million loss in
the first quarter, has already said it doesn't know when the
company will be profitable again.
AMD may not need all of Dresden's production capacity. Linley
Gwennap, an analyst at Micro Design Resources Inc., said the
company is expected to make 20 million of its K6
microprocessors this year, mostly at another large factory in
Austin, Texas. AMD expects the Austin factory to hit its capacity
limit in either the third or fourth quarter this year.
Mr. Gwennap estimates the plant in Dresden could double AMD's
capacity to 50 million chips a year by 2001. While AMD might
need all of that capacity if Athlon takes off -- demand for K6 chips
is expected to decline as the Athlon takes its place -- the
company needs a contingency plan for the huge new
manufacturing capacity in case Athlon has trouble taking share
from Intel, which has a stronghold in corporate computers, Mr.
Gwennap said.
The same person familiar with the matter said AMD executives
have different opinions on what to do about the Dresden factory,
and it was one of the reasons for the recent resignation of Atiq
Raza, chief operating officer.
Mr. Raza is believed to have pushed AMD to look for a partner
sooner than later while Mr. Sanders and other executives
preferred a slower timetable to evaluate their options.
Mr. Sanders and other AMD officials, as well as Mr. Raza, have
declined to comment on the reasons for Mr. Raza's sudden
departure, other than to say it was for "personal" reasons. |
