Analyst: Yield drove Globalfoundries change

LONDON – Management changes recently announced at Globalfoundries Inc. are related to problems with 32-nm chip yield and the slowness of creating a foundry-like operation at Globalfoundries' Dresden facility in Germany, according to analysts at Nomura Equity Research.

Globalfoundries announced June 16 that Doug Grose, CEO and Chia Song Hwee, COO, would be stepping down from their posts and the appointment of Ajit Manocha as interim CEO. Globalfoundries itself cited "demands from customers for more capacity, faster technology development and greater agility," in its press release.

Yield problems at 32-nm were driving processor vendor Advanced Micro Devices Inc. (AMD) into the arms of rival Taiwan Semiconductor Manufacturing Co. Ltd. (Hsinchu, Taiwan) at the same time that Globalfoundries was struggling to reduce its reliance on AMD as lead customer, the analysts indicated in a note issued to clients. The transfer of the manufacturing operation out from AMD was the mechanism that created Globalfoundries in March 2009.

The note was issued mainly for the benefit of clients invested in AMD and concluded that the changes at Globalfoundries would have minimal impact on AMD, partly because AMD recently recut its deal so that it would only pay for good die coming off the 32-nm line.

The authors of the notes said the announced management changes reflect the past execution in changing the Dresden facility from a one-customer, few-product wafer fab into a traditional many-customer, many-product foundry.

"As it relates to AMD, we believe that the majority of the 32-nm issues have already been addressed. AMD is currently shipping the 32-nm Llano A-series APUs for production. And, while 32-nm yields are still not optimal, we do not foresee AMD materially under-shipping demand in the second half of 2011. We also note that AMD recently ratified its pricing arrangement with GF to provide downside protection by allowing AMD to pay only for good dies,” the note said.


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