AMD in talks with Tower Semi to sell fab equipment

Tuesday 05th June 2007, 10:30:00 AM, written by Arun

According to Reuters, AMD is in talks with Tower Semiconductor Ltd., an Israel-based foundry, to sell their 200mm fab equipment. The information comes from a local newspaper, the Yedioth Ahronoth daily, which also claims that the equipment could be worth approximately $80M USD.

Previous analyst reports had estimated the worth of AMD's total legacy equipment at Fab30 to be around $200M, indicating that this sale would only represent a fraction of AMD's 200mm fab equipment. Thus, they will have to find other companies to sell the rest of the equipment as they transition Fab30 to 300mm (and rename it Fab38) in 2008, but this is a major step in that direction.

It is not clear at this time when the sale is expected to occur and when the equipment would be moved out of Fab30. Assuming this is sooner rather than later, it would imply that AMD will reduce capacity at Fab30 within the next few months, before anyone was seemingly expecting them to and several months before the transition to 300mm.

Such a decision would make sense as AMD lost significant marketshare in Q1 and has plenty of inventory, putting them in a state of production overcapacity. Furthermore, their margins at Fab36 (65nm/300mm) must be noticeably higher than at Fab30, and thus getting rid of capacity at the latter would help them improve their product mix. This would slightly increase their corporate gross margins, while also boosting their highly challenged balance sheet through the sale.

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amd ± 90nm, 65nm, fab30, fab36, fab38

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