AMD Taps Chartered To Meet Chip Demand

AMD said it will have its Dresden, Germany facility cranking out its latest processors, but will also rely on Chartered to meet "expanding end-customer demands" for Athlon64 and Opteron. Chartered will be ready to begin producing chips at a fabrication facility in Singapore beginning in 2006, the companies said.

Market Milestone

"This is another milestone in driving the market to pervasive 64-bit computing," said a statement from AMD executive vice president Dirk Meyer. "We believe that all of our customers around the globe will benefit from this relationship."

Meyer also referred to price/performance pluses with Athlon64 and Opteron, which industry analysts credit as the true reason for the chips' recent success.

"It's still true it's the price/performance positioning of their products rather than 64-bit that's explaining their success," Mercury Research president Dean McCarron told TechNewsWorld. "Sixty-four-bit is a piece, but it is far from the only reason those processors are working in the market."

Farming Out Foundry

Almost exactly one year after AMD announced groundbreaking on its US$2.4 billion foundry in Dresden, the company indicated that it may need more manufacturing capacity to meet demand for its chips.

AMD will license portions of its Automated Precision Manufacturing (APM) software suite, which has been a key part of its highly automated and efficient manufacturing.

The chip companies said that Chartered will begin integrating the APM process into its own 300 millimeter wafer fabrication plant beginning in the fourth quarter of this year.

Mercury's McCarron said that unlike Intel (Nasdaq: INTC) , which has a number of facilities that can ramp production up if needed, AMD has only its Dresden plant. The analyst said the manufacturing deal with Chartered would give AMD the increased capacity to meet market demand.

"This is a fairly effective strategy for them to be able to supply as much as the market is going to want without having to invest in another foundry," McCarron said.

Noting the cyclical nature of the chip market, McCarron said AMD appears to be using a "blended approach" to chip production by using its own factory and reserving more capacity through Chartered.

Big Blue's Blessing

McCarron said the Chartered announcement had been signaled when AMD and IBM (NYSE: IBM) extended a chip processing deal in September. While the deal centered on jointly developed technology, it also left AMD the option of using a third-party foundry to make chips that rely on the AMD-IBM work.

McCarron said the IBM and Charter deals were AMD's response to the rising cost of chip research and development.

While AMD has highlighted 64-bit computing, which is much more of a factor for servers than for desktop computers, analysts have consistently highlighted the impact of cost and efficiency benefits from Athlon64 and Opteron.

Gartner (NYSE: IT) research vice president Martin Reynolds told TechNewsWorld that AMD is moving aggressively to 64-bit processors, but is currently selling more Athlon and Opteron chips because of the current market.

Reynolds said the 64-bit strategy was more central to AMD's battle with Intel, which has more resources for research and development as well as for ramping up production.

"You have to make these types of investments to stay in the game," Reynolds said. "Intel sets a terrible pace for any competitor, not only in technology, but in production and manufacturing."