Could AMD spin off its fabs and go fab-less?

Amid financial troubles, a downtrodden economy, and stiff competition from both Intel and Nvidia, AMD could very well split from its fabrication plants and go entirely fab-less, according to an editorial by The Inquirer’s Charlie Demerjian. The editorial says AMD needs money and has “oodles” of unused fab capacity. The chipmaker’s new Fab 38 plant is “sitting almost idle,” and AMD still plans to inaugurate another fab at the Luther Forest Technology Campus in New York. AMD could walk away from that particular deal, but The Inq says the state’s $1 billion package of incentives is too tempting for AMD to pass up.

The obvious solution, the site goes on to say, is for AMD to spin off its foundry business as a separate company. The fabs are very valuable, and their sale would allow AMD to pay off its monumental debt. Abu Dhabi, which already owns 8% of AMD, would be a potential buyer. If successful, the separate foundry firm could conceivably nab up the fabrication businesses of both Chartered Semiconductor and IBM and become a very strong player in the field.

Such moves would force AMD to retain a majority stake in the foundry business, since its cross-licensing agreement with Intel limits the amount of non-AMD-produced x86 processor chips AMD can sell. However, The Inq says AMD will be able to renegotiate its contract with Intel in 2010, which could give it an opportunity to sell part of its remaining stake in the fab company.

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