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Advanced Micro Devices
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Is IBM Building a Fab for AMD?

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By eachus
May 14, 2003

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Very interesting rumor. Let's look for a kernel of truth. It is there and if true, it would make the fab deal small potatoes.

Let's say that IBM knows they need a 90 nm generation fab for their Power 4+ and other Power series chips. But IBM can't see the volume they need to make the fab work, even with a lot of contract fab work.

On the other hand IBM looks at Opteron and sees what we see with just a bit more clarity. I have been exempting the Power architecture from the chips under pressure by (I'll call them the trio from now on) of IA-32, IA-64, and AMD64. No one-processor family could completely dominate the processor business, although x86 was growing to be the proverbial 800-pound gorilla in the microprocessor business. IA-64 (Itanium) has been very slow to take off. It is still not clear that it will grow to the stature that Intel has hoped. But Opteron will, and along the way everything high-end with the possible exceptions of IA-32, IA-64, and Power are getting blown out of the water.

So should IBM hitch its wagon to the trio, keep the Power architecture going only in the Apple market, and get rid of the old 360 baggage along the way? Hmmm. Thinking the way IBM thinks, it is way to early to decide, but the fab needs conversion now. If IBM decides not to go heavily into Opteron, they will need the fab. If IBM decides to go with Opteron but wants AMD to have a second source, AMD will not only be willing to buy a share--perhaps a majority share--of the IBM fab, they will need it to supply IBM, not just with Opterons, but probably Athlon 64s as well.

So I am sure that at this point IBM has not put pen to paper, other than to put AMD under draconian NDAs--been there, signed them. But if they are thinking about it, IBM already has enough AMD staff hidden in plain sight in the Newburgh area. But there may be some people not covered by NDAs who are able to read some of the tealeaves in who is talking to whom.

My read is that whatever caused the rumor may never happen. Or it may put AMD stock through the roof in a few months. Watch the skies, but hold on to your money for now. (IBM being IBM will have Opteron products in place at some of their best customers before they make any final strategic decisions. To IBM introducing an Opteron product line is cheap, even if nobody buys it. But basing the future of the company on AMD and Intel chips? That will take lots of careful consideration, and lots of market experience.

On the other hand if IBM kicks off their Computing on Demand program with Opterons, they probably have made the decision. (Depends on what other capacity they decide to offer.)


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