On November 9, Advanced Micro Devices (AMD) announced a manufacturing partnership with Chartered Semiconductor Manufacturing, a contract chip maker based in Singapore. Under that agreement, Chartered will begin producing 64-bit microprocessors for AMD in 2006.
The deal was big news in semiconductor and financial circles, but what does it mean for the average computer user?
"What it really means for the end -user) market perhaps is an opportunity for AMD to ramp the availability of their AMD 64-bit processors faster," Chartered's vice-president of marketing and services, Kevin Meyer, said. "There may be an ability for them to reach more end customers as a result of our relationship."
This deal also leaves open the door to further cooperation between the two companies down the road, according to Meyer.
Contract chip makers - called foundries by industry insiders - are an indispensable part of the IT manufacturing chain, producing semiconductors under contract for companies that cannot afford the expense of building a fabs on their own.
Even Intel, the world's largest semiconductor maker, contracts out some production of chips to Taiwan Semiconductor Manufacturing Co.(TSMC), although the company continues to do all of its PC and server processor manufacturing in-house.
Similarly, AMD contracts out some production work but manufactures its own microprocessors, churning them out on 200-millimetre wafers at a fab, called Fab 30, in Germany.
There are several reasons why Intel and AMD have kept the production of microprocessors in-house while so many other chip companies turned to foundries for their products. One of the reasons is that microprocessors are among the most difficult chips to manufacture and demand highly specialised manufacturing processes that are part science and part art.
To bring Chartered up to speed, AMD has licensed its Automated Precision Manufacturing software to the chip maker in order to help manage its production lines. The two companies will also spend one year testing the production line at Chartered's newest and most advanced fab, called Fab 7, which will produce chips on 300-millimetre wafers, before a single chip is produced for sale.
"It also turns out that the chips we provide to AMD have to be qualified by the end customer (the computer makers) before we really ramp production," Meyer said.
If everything goes to plan, Chartered will begin producing processors for AMD using a 90-nanometer manufacturing process in 2006, just as AMD begins shifting its own processor production lines to a 65-nanometer process. (The reference to size used when describing a chip-making process indicates the size of the smallest feature that can be created on a piece of silicon using a given process. Thus, the smaller the size is, the more advanced the process technology.)
The three-year production agreement between AMD and Chartered only covers production using the 90-nanometer process, but there's nothing that would prevent the deal from being expanded to include the 65-nanometer process at some point in the future, Meyer said.
"The capability of the fab would support that," he said.
It doesn't hurt Chartered's prospects for closer cooperation with AMD that both companies are also working separately with IBM to develop advanced chip-making processes, including the 90-nanometer process. Indeed, the shared connection with Big Blue helped bring the two companies together in the first place, Meyer said.
"The fact that we are in a relationship with IBM ... speaks to an opportunity that AMD was able to take advantage of," he said.
Asked whether Chartered and AMD could join forces in a joint-venture fab at some point in the future, Meyer declined to comment. But he said the company was interested in joint investments and other projects with its partners.
"We're fairly open," he said.
AMD once planned to build a joint-venture fab in Singapore with Taiwanese foundry United Microelectronics Corp. (UMC), but those plans were shelved after AMD and IBM signed an agreement in December 2002 to jointly develop advanced chip-making processes.
It continues to consider the option of building a joint-venture fab.
In September, the company announced an agreement with IBM that allows AMD to use technology jointly developed by the two companies in a joint-venture production facility with a third party. However, any such plans would likely be several years out in the future: AMD plans to start production at a second fab, called Fab 36, in Dresden during 2006. That fab will produce chips on 300-millimeter wafers.
"We've got to get that factory running and at full capacity before we make the next plan," AMD's executive vice-president of worldwide sales and marketing, Henri Richard, said, commenting on the company's future manufacturing plans in September.