TSMC says ATI business unaffected by merger

AMD's purchase of ATI won't impact ATI's business dealings with its largest foundry partner, TSMC said.

Advanced Micro Devices' purchase of Canadian graphics chip developer, ATI Technologies, won't impact on ATI's business dealings with its largest foundry partner, Taiwan Semiconductor Manufacturing Co. (TSMC) said in a statement.

ATI develops the blueprints of a chip, then has other companies such as TSMC manufacture them. The graphics chipmaker is one of TSMC's biggest clients, and graphics chips tend to command higher prices than other types of chips for contract chipmakers.

On Monday, TSMC's stock dropped to $NT52.90 ($US1.61) on news reports predicting the merger, down $NT2 during trade on the Taiwan Stock Exchange. Investor's believed the AMD/ATI tie-up would mean ATI planned to pull its chip orders from TSMC and place them with AMD partners, IBM or Chartered Semiconductor Manufacturing, according to the evening edition of the United Daily News, a Taiwanese newspaper.

"Based on our discussions with ATI, our business with ATI will continue as usual after its merger with AMD," TSMC said in the statement.

Analysts sided with TSMC.

"We disagree with claims that TSMC would lose all ATI revenue," research analyst at Merrill Lynch in Hong Kong, Dan Heyler, said.

Volatility in the chipset and graphics markets made production more suitable for a contract manufacturing partner such as TSMC rather than a chipmaker such as AMD, he said. Contract manufacturers could offset market lulls in one product by making other kinds of chips, while companies such as AMD simply suffered losses when the market turned down. A transition of ATI orders away from TSMC would probably also be slow since AMD's own factories were already running at full steam on its own products.

TSMC shares were up 1.5 per cent early at $NT53.7 in Taipei.