CPU 2020

New York State is getting antsy about AMD building a fab in their state. They recently asked for some reassurances, and this is what they got:

“Their hopes, dreams and future are all tied up in this plant,” (U.S. Senator from New York Charles) Schumer said. “Hector Ruiz said, ‘If our company has any future it’s here.’ AMD is going to open up here and open soon. They need the next generation chip. They need a new plant to do it and the new plant is only planned for here.
There is no alternative.”

However, the same article also says this:

“. . . AMD spokesman Steve Groseclose said he’s unsure when a definite commitment might be forthcoming.
“As soon as it makes sense to make that decision we’ll make it,” he said. “It’s an extremely complex puzzle that needs to be worked through. Everything has to come together at the same time.”

Hmmm. Given AMD’s financial situation, statements like “if our company has any future” could be more than a form of rhetorical question. 🙂

If there really is no alternative, why not commit? Why doesn’t it make sense to go all the way? If there are specific reasons to hold off, why doesn’t AMD say something like, “As soon as A, B and C happen, then we’ll start.”

Here’s another quote from the AMD spokesperson:

“. . . now we’re in the process of trying to figure out how to make it and make it work.”

I think AMD knows how to build a fab and “make it work.”

So what’s the problem?

I don’t doubt AMD would like to build that fab in New York State. I have little doubt there isn’t anybody else (from all indications, the Germans aren’t going to outbid NY to keep them at Dresden; and German banks are having their own loan problems.

So what’s the problem? Hiding behind phrases like “complex puzzles” and “trying to figure out how” is one extremely simple fact:


And believe me, once you uncover the coverup, that’s no lie. AMD can’t get the financing up for it, and they haven’t found any Viagra for it yet. They owe over five billion dollars, and nobody is going to lend them an additional two during today’s financial crisis.

So where is AMD going to get the money? Assuming AMD’s financial picture doesn’t become unexpectedly and dramatically rosier (i.e., a financial Prince Charming shows up, the European Commission financially flogs and competitively cripples Intel in Europe), I see only two plausible possibilities:

1) Play financial games: AMD could spin off the former ATI into a separate corporate entity, much as they did Spansion. Make it the financially “bad” company by assigning it as much of AMD’s debt as possible. The new company won’t be worth much, but if AMD gets the debts off its book, maybe it will make fab loans possible, or at least make it easier to:

2) Get loans guaranteed by American governments At some point, if AMD can’t come up with the wherewithall to finance the fab, they’ll go to the well again and ask New York State to up their stake in the project via some form of loan guarantee, after New York State has spent a bunch of money on infrastructure to get the site ready for the project (and no doubt after election day).

3) Get IBM involved with the fab We’ve spoken about this before.

No one possibility excludes the others, and AMD is probably working all three angles, plus others.

A complex puzzle indeed.

P.S. In case you’re wondering where Dresden fits into all this, that’s a good question. The short, incomplete answer is that “Escape To New York” isn’t in the cards. At a minimum, AMD needs to guarantee employment levels at Fab36 until the end of 2013 or have to pay back a lot of governmental grant money (page 79). While this doesn’t preclude selling the property, keep in mind that even if the New York state fab is built, AMD has to make CPUs someplace from now until 2011/12. AMD might be able to sell Fab30 without too many hassles, but they can’t realistically leave Dresden entirely any time soon.


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