GlobalFoundries takes first step to break free from AMD

GlobalFoundries is trying to add customers beyond AMD

Advanced Micro Devices spin-off GlobalFoundries is set to announce its first customer soon, taking a step forward as it tries to build up its manufacturing operations.

GlobalFoundries' addition of a new customer is a big step in the company's efforts to diversify its chip manufacturing over multiple customers, the company said at the Semicon West trade show in San Francisco. The company declined to name the customer, saying an announcement would come in the next few weeks.

GlobalFoundries was formed in March after AMD spun off its manufacturing unit in a joint venture with Advanced Technology Investment Co. (ATIC), an investment fund controlled by the Abu Dhabi government. Close to 100 days on the company is still only working with AMD and finds itself trying to shed the identity as AMD's manufacturing arm.

Every new customer will bring a larger degree of separation from AMD, said Thomas Sonderman, vice president of manufacturing systems and technology at GlobalFoundries.

"As we begin to bring in non-AMD customers and create our own identity... over time the identity of GlobalFoundries will begin to supersede the notion that we are an AMD manufacturing operation," Sonderman said.

But separating from AMD's clutches could take time, he conceded. A bulk of the chip manufacturing volume surrounds CPUs and other chips for AMD, which holds a minority stake GlobalFoundries.

"AMD of course is a very critical part of our model. They are our one and only customer right now and we are absolutely committed to making them successful," Sonderman said.

A lot of CPU technologies acquired by GlobalFoundries also comes from AMD, which has put the chip manufacturer at the center of a cross-licensing spat between Intel and AMD.

In a 2001 patent cross-licensing agreement, Intel licensed AMD the rights to make and sell x86 chips. AMD transferred those rights to GlobalFoundries, which Intel alleges violates terms of the original agreement. Intel in March then sent a notice to AMD that it violated the agreement when it spun off a manufacturing arm into a separate company.

"We believe we have full rights to go ahead and manufacture x86 processors, but we'll let AMD and Intel deal with that one," Sonderman said. GlobalFoundries hopes reliance on the x86 architecture will decline as it starts manufacturing chips that go into products like graphics cards and mobile phones for other customers. GlobalFoundries currently has fabs in Dresden, Germany, and is establishing a chip manufacturing plant in the state of New York.

Breaking away may not be easy for GlobalFoundries as AMD has a vested interest in the factories, said Dean McCarron, principal analyst at Mercury Research. Production of chips designed by AMD are pinned to the factories, in which AMD holds a stake, he said.

GlobalFoundries currently supplies CPUs made using the 45-nanometer manufacturing process to AMD, and will jump to the advanced 32-nm node sometime next year, according to the GlobalFoundries' manufacturing roadmap. The 32-nm node will pack more features in a CPU while reducing its size and power consumption.

GlobalFoundries will also focus on the 28-nanometer manufacturing node to make chips used in graphics cards and mobile devices over the next two years.

Making chips for AMD -- like the complicated six-core chip codenamed Istanbul -- proves that GlobalFoundries is capable of making advanced chips, Sonderman said.

McCarron agreed, saying the advanced manufacturing technologies offered by GlobalFoundries were "pretty rare." Outside of Intel, GlobalFoundries will add competition to a market dominated by Taiwan Semiconductor Manufacturing Co., which is pushing the technological envelope in chip manufacturing, McCarron said.

"Today if you want to get something manufactured in the cutting-edge process, it's primarily TSMC. GlobalFoundries will be entering into a down market, but with a capability that is really attractive," McCarron said.

Chip manufacturers are struggling during the recession, and GlobalFoundries will need more than just a handful of customers to become profitable, McCarron said. Having additional customers helps them increase utilization and reduce chip manufacturing costs.

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