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AMD needs cash for the Dresden money pit

"Do or die" as service contracts change

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The chief financial officer of AMD caused a few hearts to beat faster in corporate HQ when he said his company was looking for a partner to help fund its fab. But now we have had word from a contractor who worked at Dresden that there are acres of space in the 90,000 square foot clean room. Fab 30, which we visited at the beginning of last week, uses a SMIF clean room of Class 100T (100@0.3µ). Its eight inch wafer size has a technology limit of below .13µ and can produce 5,000 wafers a week at full build out. Fab 30, he claimed, only has approximately 10 to 15 per cent of the total machines to produce this number of wafers a week. And service contracts have recently been changed in an attempt to save some money. According to the contractor, AMD is keen to get cash, including more loans from German banks,to buy more equipment. He said that AMD could do serious damage to Intel if and when it ramps up Fab 30. Its process is ahead of Intel's, partly because Chipzilla uses SVG scanners and partly because of its "copy fab" policy. Intel tries to replicate its fabs using particular processes exactly. "This is do or die time for AMD," he said. Currently it's very difficult to get high yields from copper parts, he claimed. Current tools for copper are only development tools, he added. AMD uses the SMIF technique to isolate wafers from the clean room and this means a "dirtier" cleanroom can be used. This is also a cost cutting move. We were not allowed a peek at the clean room when we visited it at the beginning of last week. AMD's current financial status is underlined by the latest report from Duff & Phelps Credit Rating, issued last Friday. It outlines the debts and debt types AMD has incurred, with the Federal Republic of Germany and Saxony together guaranteeing 65 per cent of the loans. "AMD's goal to remain the major maker of Intel-alternative microprocessors exposes it to difficult competitive issues, rapid product cycles, and the volatility of the PC market," the report says. "Other issues include further K6 price deterioration; AMD's ability to make Athlon in volume after a history of manufacturing execution problems; and computer makers` acceptance of Athlon, which, unlike previous AMD products, uses different interfaces than Intel's." AMD's total adjusted debt to the end of March this year is $2,038,000,000, according to Duff & Phelps. The report also shows current cash flow and a record of previous cash flows. It's obvious that AMD could do with a partner, as its CFO said. And quick. ®

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