Nanotech: The Circuits Blog

Advanced Micro Devices appears to have found an alternative to going fabless.

The dramatic announcement by AMD Tuesday, which focuses on a new entity known for now as The Foundry Company, shows that there is another way to restructure that doesn't entail completely jettisoning manufacturing operations--referred to in the semiconductor industry as fabs or fabrication facilities.

"Real men have fabs." This quote attributed to former AMD CEO and Chairman Jerry Sanders has some import here. Though fabless concerns, such as Nvidia, have been held up as lean, mean chip-supplying machines that don't have the burden of funding costly manufacturing facilities, the downside is often ignored by Wall Street.

Going completely fabless separates the company from key process technologies that are needed to stay ahead. That's especially true in AMD's case, where the sole processor rival is chip behemoth Intel, which derives much of its strength by moving quickly from one chip manufacturing process to another. Going to a new manufacturing process typically results in faster, more power-efficient processors.

This artist's rendering shows what AMD expects its New York facility to look like when it opens for business about three to four years from now.

(Credit: AMD)

Look no further than the state AMD finds itself in today. It is a generation behind Intel, which has been shipping chips based on the 45-nanometer process for almost year. AMD is currently struggling to get out its first generation of 45nm processors.

The newly created Foundry Company was described by AMD Chief Executive Dirk Meyer on Tuesday as a "brand-new and leading-edge semiconductor manufacturing company." It will be run by Doug Grose, who will relinquish his current role as AMD's senior vice president of manufacturing operations to become CEO of The Foundry Company.

Two things will happen as a result of the backing by the Abu Dhabi-based investors. First, AMD, through the joint company Advanced Technology Investment Co. (ATIC), will expand its current manufacturing facilities in Dresden, Germany, and transform this into a foundry company that also builds chips for other companies.

As part of this expansion, Dresden will bring in IBM's silicon-on-insulator (SOI) and so-called "bulk silicon" technologies. "We deepen and widen our relationship with IBM," AMD said Tuesday. "So we'll be able to take bulk and SOI together to the 22-nanometer generation and beyond." (The next generation of chips will be made on a 32-nanometer process, followed by 22-nanometer in the 2012 time frame.)

AMD's Fab 36 in Dresden will focus on IBM's silicon-on-insulator (SOI) and so-called "bulk silicon" technologies.

(Credit: AMD)

Second, AMD will move forward to build manufacturing facilities at the Luther Forest Technology Campus, near the town of Malta, N.Y. "At the earliest opportunity we will break ground on upstate New York and begin work on what we believe will be the most sophisticated manufacturing facility in the United States," AMD said.

The intention is to "bring that fab online in the late 2011, 2012 time frame," AMD said. "And further cementing that upstate New York corridor as one of the leading (areas) in the world for nanotechnology." The planned facility will provide 1,400 jobs for the region, according to AMD.

AMD may also expand beyond Dresden and New York. "Once we complete the Dresden expansion and build out upstate New York--and if commercially justified--we will consider the creation of research and manufacturing facilities in Abu Dhabi," said Grose.

Hector Ruiz--the current AMD chairman--will relinquish his role as AMD's executive chairman to become chairman of The Foundry Company.

Update Tuesday 4:12 a.m. PDT: AMD has made the official announcement of the manufacturing spin-off.

On Tuesday, Advanced Micro Devices will announce a long-expected restructuring, according to sources familiar with the deal.

As expected, the No. 2 supplier of PC processors will split into two companies: one for designing chips, the other for manufacturing them. The capital-intensive business of manufacturing chips is weighing on AMD as it reels under a $5 billion debt load.

The investment is expected to allow AMD to remain directly involved in chip manufacturing--crucial for competing with Intel, which has used its manufacturing prowess to great advantage.

AMD would not comment Monday.

The company has secured about $5.7 billion of "confirmed, pledged investment," with some of the money earmarked for a future manufacturing facility in Malta, New York, according to sources.

AMD will own part of the new manufacturing entity, for the time being to be called The Foundry Company, while Advanced Technology Investment Co. (ATIC) will own the rest. One of the investors, Abu Dhabi-based Mubadala Development Co., invested approximately $622 million in AMD last November.

Mubadala already holds an 8.1 percent stake in AMD. Upon closing the deal, Mubadala will own 19.3 percent of AMD, according to sources.

ATIC--also based in Abu Dhabi--will have equal voting rights with AMD in The Foundry Company and own 55.6 percent of the new entity. ATIC will invest an initial $2.1 billion, of which $1.4 billion will be invested directly in the new company and $700 million will be paid directly to AMD, according to sources close to the deal.

In addition, ATIC will commit a minimum of $3.6 billion and up to $6 billion in additional funds over the next five years for the upgrade and expansion of fabrication facilities in Dresden, Germany, and construction of a new facility in upstate New York, near the town of Malta.

Mubadala, for its part, will purchase 58 million newly issued AMD shares valued at $314 million and warrants for 30 million additional shares, giving it a total stake in AMD of approximately 19.3 percent on a fully diluted basis, sources said.

Mubadala will also have the right to designate a representative for election as a member of the board of directors of AMD.

All of this is expected to greatly improve AMD's liquidity.

AMD CEO Dirk Meyer and other company executives are expected to make the announcement Tuesday.

The investment is characterized by one source as coming from investors with "a long-term vision, who want to help (AMD) scale the foundry operations to compete globally." A foundry is a manufacturing facility.

AMD has been laboring for months over details of the restructuring, which it has termed "Asset Smart." AMD Chief Financial Officer Bob Rivet said during AMD's second-quarter earnings conference call that Asset Smart would be "a major reformation of the company."

Also, at that time, AMD announced that Meyer would take over as CEO and Hector Ruiz would relinquish that post but remain as chairman to oversee AMD's transition to Asset Smart.

AMD already has a relationship with IBM in which AMD uses IBM's advanced test manufacturing facilities.

Nvidia has become a Silicon Valley hot spot for rumors. One is tied to an analyst downgrade Monday, the other to the rumored Apple MacBook refresh.

An analyst rekindled speculation Monday that the world's largest graphics chip supplier would sell off its chipset business, while rumors persist that the company would play a larger role in an expected refresh of the Apple MacBook.

Nvidia graphic on its notebook home page

(Credit: Nvidia)

Nvidia shares fell Monday after a Pacific Crest analyst issued a negative report on the company's prospects. In the report, the analyst said "our checks confirm" that Nvidia will exit the chipset business next year.

Nvidia chipsets--sometimes referred to as MCPs--serve as supporting silicon for the company's graphics processors. In the past, Nvidia has denied that it will exit the chipset business.

The analyst also speculated that Nvidia will pre-announce negative results for the third quarter (ended October). Nvidia has been dogged by negative press and analyst reports after it disclosed issues with its processors and chipsets back in July.

If that wasn't enough, Pacific Crest said Nvidia may see share loss in the notebook market next year as a result of a future refresh of "Montevina" graphics silicon from Intel.

But not all is lost. On the upside, rumors persist that Nvidia will play a large role in an expected MacBook refresh this month. The latest rumor holds that Nvidia is showing off prototypes internally of upcoming MacBooks with new Nvidia silicon.

Some are even pointing to a graphic on the Nvidia notebook home page of a slim notebook design as a possible MacBook design--though a more plausible explanation is that it's simply generic artwork.

Apple uses Nvidia graphics chips in its high-end MacBook Pros, but the MacBook and MacBook Air use Intel integrated graphics silicon. One of the latter two could be recipients of new Nvidia graphics chips.

Nvidia would not comment on the rumors.

Memory chipmakers are fighting for their life.

The memory chip market--and industry--is caught in a particularly brutal downward price spiral that is threatening the viability of even the largest players.

"Memory manufacturers who have already been losing money for several quarters are now looking at another six months to a year of absolutely ominous conditions," said Avi Cohen, managing partner at Avian Securities.

Companies are now in survival mode, according to Cohen. "It is a matter of survival and everyone needs to figure out how to stay in business over the next year or how to scavenge something if one (company) decides it cannot survive," said Cohen.

Currently, two major memory chip manufacturers are seeking investment lifelines. Hynix, the world's second largest maker of memory, is trying to scare up cash by seeking buyers for a 36 percent stake in the company. So far, the only likely bidder to emerge is Samsung--which has also made a play for struggling SanDisk, the largest supplier of retail flash memory cards.

The other ailing memory maker is Qimonda AG--an Infineon Technologies subsidiary. Rumors have been rife that the manufacturing assets of the loss-ridden company will be snapped up.

All of this turmoil was underscored this week when Micron Technology, the largest U.S. maker of memory, announced that it had lost $1.6 billion in fiscal 2008.

"The DRAM business--it just doesn't feel like that, for many companies, it's sustainable," said Ron Foster, chief financial officer at Micron, speaking during the company's earnings conference call on Wednesday.

The average selling price for NAND and DRAM has dropped sharply since May.

(Credit: Micron Technology)

Pricing has fallen off a cliff in the last few months, making a bad situation worse. Micron said Wednesday that the average selling prices of DRAM chips--the main memory used in PCs--was down between 15 percent and 20 percent from last quarter. NAND flash prices were down between 30 percent and 35 percent. (NAND flash is used as storage in portable music players, digital cameras, and the nascent solid-state drive market.)

The NAND price crash has forced Micron and Intel to delay the "build out" of manufacturing capacity in Singapore, which is part of their joint flash memory venture, IM Flash Technologies, Micron said Wednesday.

"Overall, the NAND market continues to be in an oversupply condition," said Micron's Foster.

This is affecting investment. "The capital expenditure for the NAND market in 2008 is going to be down sequentially (year-to-year), which is the first time that's happened since the inception of the market," said Steven Appleton, chairman and CEO of Micron on Wednesday.

The PC market has also turned bleak. "The PC business was plugging along pretty well and then all of sudden in the last months the demand profile has just really dropped off," according to Foster.

All these negatives add up to a cruel market that is forcing some companies to either merge or perish. "This is leading to a new wave of forced consolidations and partnerships. This industry will look very different a year from now with very few players controlling much larger market shares and with a much better ability to control production and pricing," said Cohen.

This consolidation is not only affecting manufacturers but players in the retail channel too. SanDisk--which does not manufacture flash chips but sources them from a Japan-based joint venture with Toshiba--has seen its stock price plunge more than $60 per share over the last two years. This has made it vulnerable. SanDisk's chairman and CEO, Eli Harari, said last month that the $26-a-share bid from Samsung was "opportunistically timed at the trough of an industry-wide downturn."

Not everything is doom and gloom. The market for solid-state drives--which use NAND flash--is poised to grow. Appleton cited the burgeoning netbook market as an opportunity for SSDs. The enterprise is a target market too: SSDs based on single-level cell (SLC) technology can offer many times the performance of hard disk drives for customers such as credit card companies and airlines.

Ultraportable laptops, such as the ThinkPad X301 and Dell Latitude E4200, are also beginning to use SSDs as a storage replacement for hard disk drives.

The price decline for solid-state drives over the last quarter makes these drives "more attractive from an end user's perspective," Micron said Wednesday, adding that "NAND far exceeds DRAM growth demand rates."

Fujitsu is in talks to sell its hard disk drive business to Western Digital, according to a Japan-based report.

Western Digital is the second-largest hard disk drive maker in the world behind Seagate Technology. Fujitsu's HDD unit is ranked sixth.

Fujitsu would sell all of its plants--including those in Japan, Thailand, and the Philippines--for between 70 billion yen and 100 billion yen (approximately $660 million to $944 million), according to Japan's Nikkei news service.

This would be one of the largest business unit sell-offs for a Japanese electronics company, Nikkei said, adding that Fujitsu's hard disk drive business has been posting losses.

The deal would be finalized by the end of the year, according to Nikkei.

A Western Digital representative would not comment on the report.

Beyond the brutal price competition that is typical in the hard disk drive industry, there is a clear-and-present threat now from solid-state drives. Until this year relegated to digital camera and music player storage, solid-state drives are now making inroads--albeit small--in laptops, particularly ultraportables like the MacBook Air, Dell's new E4200 line, and Netbooks such as the Asus Eee PC.

Solid-state drive suppliers such Intel, Micron Technology, Samsung, and STEC are also beginning to target SSDs as replacements for hard disk drives in the enterprise.

Micron's earnings pain will pass directly to executives. Micron Technology attributed a $344 million loss in the fourth quarter to a cratering memory market and said it would slash executives salaries as a result.

This was Micron's seventh straight quarterly loss. The largest memory chip manufacturer in the U.S. reported a net loss for the entire 2008 fiscal year of $1.6 billion, or $2.10 per diluted share on net sales of $5.8 billion.

Executives will feel the pain. "We are implementing a 20 percent reduction in salary compensation for Micron senior executives," Steve Appleton, Micron's CEO, said in a statement. "The global memory market continues to experience severe oversupply and price degradation, and it remains a challenging period for all of us competing in the industry."

Amid the dire market conditions, Micron said it would "diligently work...to ensure the competitiveness and long-term success of the company."

Sales of memory products in the fourth quarter decreased 4 percent compared with the third quarter. Sales of DRAM products decreased slightly compared with the preceding quarter, the company said.

For NAND flash memory products, sales decreased 10 percent, compared with the prior quarter, due to a 20 percent drop in the average selling price. Micron is a major manufacturer of flash memory and recently launched a line of solid state drives that will reach 256GB in capacity this year.

Micron is also in a flash chip manufacturing joint venture with Intel--IM Flash Technologies--that fabricates chips for both Micron's and Intel's solid state drive lines, among other products.

One bright spot: Sales of CMOS (complementary metal-oxide-semiconductor) image sensors in the fourth quarter of fiscal 2008 increased slightly compared with the third quarter and represented 12 percent of the company's total sales in the fourth quarter, Micron said.

Despite an economic crisis and volatile stock market, Intel copped an upgrade Tuesday.

Shares of the world's largest chipmaker rose 1.46 points, or 8.45 percent, Tuesday to $18.73.

At least some of this uptick can be attributed to investment bank Piper Jaffray, which raised its rating on Intel to "buy" from "neutral" on Tuesday. Piper Jaffray analyst Auguste Richard said in a research note reported widely on Tuesday that Intel should make its third-quarter earnings numbers and that checks show that Intel is running its factories nearly flat out, which should favorably impact gross margin, a key indicator of profitability.

In the third quarter, Intel's gross margins may come close to the midpoint of the gross margin range, on a profit of 35 cents and sales of $10.2 billion, according to Richard. In July, Intel forecast sales of $10 billion to $10.6 billion for the third quarter.

Intel will report third-quarter earnings on October 14.

On another front, Intel Chairman Craig Barrett said the chipmaker will continue to invest aggressively in products and technologies despite the U.S. financial meltdown's potentially negative impact on emerging markets that are needed for its growth, according to a Reuters report.

In 2007, Intel spent $5.8 billion on research and development and $5 billion on plant and equipment.

New products may help Intel's bottom line. Intel is getting set to ship a brand new chip architecture in the fourth quarter. The "Nehalem" line of processors will appear initially as the Core i7 line of desktop silicon.

Intel will follow the desktop chips with Nehalem server products in the first quarter of next year.

AMD said Monday it is set to roll out its next-generation "Shanghai" chip--minus the mistakes of the last generation.

The No. 2 processor maker wants to make one thing crystal clear: Shanghai is not Barcelona. The latter chip was rolled out in September 2007 to great fanfare only to be delayed a whopping eight months (or more, depending how the delay is calculated) due to production glitches and bugs. The chip was also hampered by speed (core clock frequency) limitations. This gave Intel an opportunity to regain ground it had lost to AMD in the server chip market.

"We had some mis-starts in getting Barcelona to market and wanted to bring as much velocity to Shanghai as possible. Learn from our mistakes and, as a company, never do that again," said Pat Patla, general manager of AMD's server and workstation chip business.

Shanghai--a quad-core product targeted at servers--will be AMD's first 45-nanometer processor. (Barcelona is 65-nanometer.) Typically, the smaller the geometries, the faster and more power efficient the chip. Intel has been shipping 45-nanometer processors since last year and these processors now make up most of Intel's offerings.

AMD needs Shanghai to succeed. It is reeling from a string of losses and is on the verge of announcing a major restructuring. "To bring it back to profitability the execution of the server product line is absolutely critical," said Ashok Kumar, an analyst at investment bank Collins Stewart. "That is really their only profit pool."

Toshiba will begin shipping a 256GB solid-state drive, matching Samsung, its bigger, badder rival.

Another nail in the hard-disk-drive coffin? Well, not quite. But Toshiba's drive rivals magnetic drives in size while delivering better performance.

Solid-state drives are more expensive than hard-disk drives but are also generally more power efficient and faster.

Toshiba is trying to keep pace with the 800-pound SSD gorilla, South Korea-based Samsung. Samsung is the largest flash memory chip supplier in the world and has stated in the past that it would sample a 256GB SSD in September. Toshiba is ranked No. 2.

And the two companies are duking it out in more ways than this: both are also vying for SanDisk, the largest maker of retail flash memory drives.

Dell, to date, has used mostly Samsung SSDs, as has Apple. Dell has said in the past that in tests of an SSD in a Latitude notebook, it saw a 35 percent overall system performance increase over a standard 2.5-inch 5400rpm notebook hard drive--the type of hard disk drive used in ultraportable notebooks today.

The Toshiba drive delivers a maximum read speed of 120MB per second and maximum write speed of 70MB per second using a high-speed SATA 3-gigabit-per-second interface.

Like Samsung, Micron, and Intel, Toshiba is using multi-level cell (MLC) technology in its high-capacity drives. An MLC memory cell structure allows drive makers to build larger capacity drives at lower cost but it is not as fast as single-level cell (SLC), nor inherently as reliable. (SLC solid state drives are used currently in laptops such as the Apple MacBook Air and ThinkPad X300.)

Toshiba, like Samsung, says it has developed a controller chip that mitigates the shortcomings of MLC. The "MLC controller...achieves higher read-write speeds, parallel data transfers, and wear leveling," the company said. Wear leveling reduces the "pounding" on one spot--that could wear out the cell--by spreading out the writes over many different cells.

(Credit: Toshiba)

Toshiba has plenty of other company in the high-capacity SSD market, too. Intel says it will ship a 160GB SSD in the fourth quarter, and Micron has stated that it plans to have a 256GB SSD in the same time frame. STEC already ships drives in this capacity.

Samples of Toshiba's 2.5-inch SSD are available now, with mass production following in the fourth quarter, the company said. SSDs currently come in two sizes: smaller 1.8-inch form factors and slightly larger 2.5-inch designs.

No pricing was given.

Are Netbooks ripe to be resized? Via Technologies thinks so. The Intel-compatible chipmaker says larger Netbooks are on the way.

Via Nano processor

(Credit: Via Technologies)

In an interview, Glenn Henry, the head of Via Technologies subsidiary Centaur Technology, said that Via has just begun commercial shipments of its Intel-compatible, power-sipping Nano processor. Centaur headed up development of the Nano processor.

"We just started shipping to customers last week and this week--literally right now," Henry said.

Henry said there is a lot of demand for larger form factors. "Everyone wants to build a (Netbook) of some variety these days. Most of the interest we see from customers is for a larger screen than the HP (2133). There's a lot of demand to move those things up to higher screen sizes. I've heard customers say they want to build 12- or 13-inch notebooks," Henry said.

Via's most illustrious customer is Hewlett-Packard, which currently uses the older Via C7 processor in its 2133 Mini-Note PC.

Though Henry refused to talk about design wins, he did say that there is interest from major companies. "We've given them (HP) samples," he said. Though Henry qualified this by saying that Via has given samples to a lot of potential customers. "There's a great deal of interest in the part from people whose name you would recognize," he said.

The Nano processor is seen as the only real competition for Intel's popular Atom chip, which is used in Netbooks from a long list of companies including Acer, Asus, Lenovo, and Dell.

The 2.6-pound HP 2133 Mini-Note uses the Via C7 processor.

(Credit: Hewlett-Packard)

There is one crucial difference with the Atom. Nano has a thermal envelope of 5 watts at 1GHz. Though this is low compared with a standard Intel Core 2 mobile processor (typically drawing 25 watts to 35 watts), this is higher than Intel's single-core Atom chip for netbooks which tops out at just 2 watts. At 1.3GHz, Nano has a thermal envelope of 8 watts, approaching that of Intel's dual-core Atom.

Why the difference? Nano uses a more sophisticated superscalar, out-of-order design, while Atom has a more simple "in-order execution" architecture. Because of Nano's more complex design, it may deliver better performance than Atom in some cases.

The thermal envelope, however, is important because it can influence the design of a Netbook-type device. Typically, parts with lower thermal envelopes can go into smaller devices.

On the upside, Nano can be plugged directly into a design that uses the older C7 processor. "One of the very interesting things about the Nano is that it's plug compatible with our current C7s. You can plug the part into the same socket." Though some adjustments must be made: A BIOS upgrade is necessary and "more importantly the part has a different power-versus-megahertz (paradigm) compared to the current part because it's running benchmarks two times faster," Henry said.

He said products using the Nano processor will not appear immediately. "No product that actually uses this is for sale to the end customer (yet). So the parts we're shipping are going into the (customer's) manufacturing process or development process."

And what about a Via dual-core processor? "We're working on it. When you see it, who knows. We're implementing it but it's not near at hand," Henry said.

(Note: There are several ways to categorize a design as a netbook. One is screen size. Typically netbooks have 7-, 8-, or 9-inch screens. But this definition is in flux with, for example, the newest Atom-processor-based Eee PC 1000 that sports a 10-inch screen. So, as netbooks get redefined upward, the silicon inside--and other hardware--becomes the defining factor, i.e., low-power, low-performance processors and graphics that dictate how the computer should be used: primarily as a Net-centric device for Web browsing and email. Prices will also typically be lower than standard notebooks.)