AMD to spin off fabs, claims analyst

Is AMD about to announce that it's going to reinvent itself as a fabless semiconductor company? That's certainly what one analyst thinks.

John Lau, an analyst with investment hous Jefferies & Co. this week told his clients that moles have told him AMD has such a strategy in mind and might announce the plan as early as mid-September, the Austin American Statesman writes.

Lau's forecast is that AMD will say it's seeking a buyer or buyers for its Fab 36 and Fab 38 facilities in Dresden, Germany. In the meantime, the fabs will be spun off as a separate company. The spin-off will be free to produce chips for the other companies, not just AMD, and to seek investment on the open market.

For its part, AMD rids itself of one of its biggest overheads: the cost of building, equipping and maintaining fabs on an ongoing basis as fabrication technology evolves. This isn't cheap by any means, and for a chip maker as financially troubled as AMD is, it's arguably something of a neck-wrapping millstone.

Such a spin-off would also make it easier for the company to strike production deals with other foundries. It already does this to a small extent: it uses Singapore's Chartered to produce 64-bit processors, and its graphics wing uses the likes of Taiwan's TSMC to punch out product.

Lau hinted that AMD may have already lined up an investor, a "Middle East investment group" that will "acquire a large position in the new foundry and fund its purchase with cash".

Last month, AMD sold off its TV chip business, part of its ATI acquisition, to semiconductor company Broadcom. It got $192.8m in cash - it has a long way to go to wipe out its $5bn debt, incurred after the company lost $1.19bn during Q2.