Analyst: AMD may spin off fab plants this month

"It seems that the winds are blowing in that direction," said Jim McGregor, an analyst at In-Stat. "My concern is that if they get rid of manufacturing, they're going to say they don't need to focus on new process development technologies. That kind of expertise is critical to their long-term competitiveness, either against Intel or other market segments. If they lose that, I'd be concerned. That could be a short-term gain but a long-term loss."

Dan Olds, principal analyst with the Gabriel Consulting Group, said he would be concerned if AMD does split off its manufacturing operations.

"So much of their business is based on how well or poorly they can execute in manufacturing - not just CPUs, but GPUs too," he added. "I would think that, given how critical this is to their business, that it would not be in their best interest to give up control over this part of their business model. It'll give them a short-term financial gain, but it will definitely make their future roadmaps more risky in my mind."

Lau, however, doesn't see the move as negative for AMD.

"We believe that, like with Intel, controlling your own manufacturing capabilities is very important, especially for leading-edge processing technology," said Lau. "However, we believe this is a luxury that AMD can now not afford. We believe this spinoff of the fabs is a much welcome change to their balance sheet and improvement in cash flow."

He added that it would be very difficult for AMD to maintain its investment in chip design while tackling the needed upgrades to their fabs. One fab, for instance, would require an investment of US$2 billion, according to Lau, to make it able to manufacture 45-nanometer chips and 12-inch wafers. He added that AMD's current cash on hand is only $1.1 billion.