It's going to be years before Advanced Micro Devices Inc. begins to look like and operate as a truly fabless semiconductor supplier.
In March, AMD gained a major partner—Advanced Technology Investment Co.—and much needed financial boost when it separated its fabrication operation as GlobalFoundries Inc.
What the company has not become—contrary to management spin on the transaction—is transform from an integrated device manufacturer into a full-fledged fabless IC vendor.
That process is continuing and it will take years to evolve. Industry observers said some of the actions taken already by the microprocessor and graphics IC vendor may eventually help move it back to profitability, ending numerous quarters of problems and market share losses to MPU rival Intel Corp.
Nevertheless, AMD and GlobalFoundries face a bunch of short-term problems that could derail the company's plans, a situation that has now been complicated by the recent global economic weakness that has resulted in double-digit revenue declines across the entire semiconductor industry.
Perhaps one of the more daunting challenges AMD and GlobalFoundries face is the perception that the spin-off of the manufacturing operation promised much more than the combined companies could hope to deliver.
While former AMD chairman and CEO Hector Ruiz billed the creation of GlobalFoundries a revolutionary move and one of the more defining corporate decisions in the history of the semiconductor industry, a closer look indicates the two companies are more like Siamese twins than independent enterprises.
AMD is currently GlobalFoundries' only customer, according to a company spokesman, and this is unlikely to change with more established wafer foundries struggling in the face of dropping demand from semiconductor customers. In the first quarter, for instance, AMD reported foundry revenue of $283 million, all of which were intra-company sales.
Lucy Patricola, a New York based credit analyst for Standard & Poor's believes "AMD stand-alone will remain the primary customer for GlobalFoundries for the medium term."
AMD owns 34.2 percent of GlobalFoundries and ATIC 65.2 percent although AMD consolidates the wafer vendor's results into its own. However, "AMD and ATIC have joint voting rights and representation on GlobalFoundries' board of directors," according to a spokesman for GlobalFoundries.
AMD has committed to purchasing all of its "microprocessor unit product requirements from GlobalFoundries," according to a Securities Exchange Commission filing by the company in May.
Future leading-edge product requirements have similarly been negotiated with AMD agreeing to source products for even its graphics IC division from GlobalFoundries.
"Once GlobalFoundries establishes a 32-nm-qualified process, the company will purchase from GlobalFoundries, where competitive, specified percentages of its graphics processor unit requirements at all process nodes, which percentages will increase linearly over a five-year period," AMD said in the SEC statement.