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AMD uses IBM Micro as back stop foundry

Second sourcing could spell further trouble

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A year ago From The Register No.68, 2 March 1998 Two weeks ago, The Register learned from a source at a chip design company in California that AMD had decided to outsource some of its manufacturing to other companies with fabs. It came as not very much of a surprise, then, when at the end of the week AMD issued a terse statement saying it had struck a deal with IBM to foundry its K6 processors in Q3 this year. But, as Joe D'Elia, a senior microprocessor analyst at Dataquest UK, told The Register last Friday, the news could be either good or bad for AMD. As far as he was aware, AMD had no huge deals coming up in the second half of this year which could justify second sourcing. Further, he said, if that was not the case, it meant that AMD was still having difficulty ramping up production and that suggested it was in trouble with its process technology. There had been rumours that IBM was actually contemplating buying AMD - reported here earlier - but it seems far more likely that negotiations with Big Blue to second source started just a day or two after National Semiconductor snapped up Cyrix. National has advanced fab technology of its own and it was clear that sooner or later it would ditch IBM Microelectronics and, so to speak, do it by itself. This year is a crucial one for AMD, particularly because it has products brewing which it claims will beat Intel to the technology mark. If its .25 micron process is not producing the quantity or quality of K6s that AMD needs, then it will be in trouble indeed. It cannot be any kind of coincidence that Vinod Dham left AMD at the same time that the company found itself in difficulties with volume - causing distributors and OEMs alike to complain loudly about lack of supply. But The Register still believes that the IBM-AMD connection is not the end of the story. There is still a strong possibility that someone will buy AMD. It could be that the company, which would be viable and profitable without the K6 family, will choose to dispose of its CPU business, leaving it free to make money for its shareholders. Sources say that the K6-3D, which AMD told us last year (passim) was slated for a Spring entry into the market, has only just begun sampling, and even then in very limited quantities. The rationale behind the IBM deal could also be that the only way AMD will be able to ship these processors is with outside help. And there's another side to this story too. The source who told us AMD was outsourcing, did not mention IBM by name. Indeed, he was not talking about fab capacity at all, but about design capability. He said that AMD was in talks with two Santa Clara companies to outsource this work. This is the second half of the equation which suggests strongly to us, at least, that AMD wants shot of the K6. ®

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