AMD Denies Fab Sell-Off

Advanced Micro Devices is planning to keep its fabs for now.

AMD is denying a report that appeared in the Austin American-Statesman that contains an interview with new CEO Dirk Meyer that seemed to indicate that the chip maker was preparing to spin off its manufacturing facilities in Germany and sell its two fabrication plants, or fabs.

The story appeared in the July 18 editions of the Statesman but was brought back to life July 23, when the Inquirer news site used the Meyer interview to bolster its own story that AMD is ready to sell off its manufacturing infrastructure as part of cost-cutting drive. The selling of the two German fabs could be seen as part of AMD's plan called "asset-smart" or "asset-lite," which has been much talked about in the past year.

In the Statesman story, Meyer appears to have confirmed that AMD will sell off its manufacturing facilities in a few months, and then a new company would form with different ownership. Drew Prairie, an AMD spokesperson, said Meyer was referring to how the company manufactures its wafers.

"He said it is 'fundamentally important to AMD to transform how we manufacture our wafers,'" Prairie wrote in an e-mail. This could refer to a number of improvements, including AMD's planned shift to 45-nanometer manufacturing later in 2008.

Since announcing its seventh quarterly financial loss July 17, and with the departure of Hector Ruiz as CEO, AMD has been under scrutiny by both the financial community and the IT industry as the chip maker looks to come back by the end of 2008. Meyer has said AMD plans to refocus its energies on its core processor and graphics business.

However, the more AMD keeps its asset-smart strategy under wraps, the more speculation it generates, which puts additional pressure on the company. Ruiz has said he will remain with AMD as the executive chairman of its board and focus on implementing the asset-smart program.

Prairie said AMD hopes to release some information on asset-smart soon.

Some financial analysts believe asset-smart involves spinning off AMD's manufacturing facilities, and that would leave Ruiz as a natural choice to be the top executive of this new company.

AMD has two fabs in Dresden, Germany, called Fab 36 and Fab 38. In the chip business, manufacturing eats up a vast chunk of the revenue. Intel announced in 2007 that it had spent billions on just one new fab and AMD could save much-needed millions by selling its own facilities.

AMD has jettisoned manufacturing facilities in the past. In 2004, AMD converted its Fab 25 in Austin, Texas, into a facility that is now making flash memory for Spansion, a company in which AMD holds a financial stake.