AMD Gets in a New York State of Mind

AMD also has a partnership at the State University of New York at Albany's nanotech center.

Building a new fab from scratch takes at least two years, says iSuppli semiconductor manufacturing analyst Len Jelinek. The process takes longer if a company needs to take care of the initial tasks, such as securing the land and all the necessary permits.

The cost of building and equipping such a facility is about $3 billion, Jelinek says.

A new fab would give AMD a substantial chunk of manufacturing capacity, said Jelinek. "But if you look at the long-term road maps of these types of activities, at AMD and at Intel, you really have to be out there thinking strategically about the future," he says.

"The worst thing that can happen is to get caught with an undersupply of capacity and lose market share."

Jelinek points to another rumor as having some bearing. Were AMD to acquire graphics chipmaker ATI Technologies(ATYT), as one Wall Street analyst predicted last month, an additional fabrication facility would not be so excessive.

"You can put a scenario together that says with additional mergers and acquisitions at AMD, then potentially, it would be a situation where they would be able to fill that [fab capacity] relatively quickly," says Jelinek.

True, ATI is a fabless chip company, meaning that it designs its graphics processors itself and outsources the manufacturing to a third party. But AMD's business model of doing most manufacturing in house means the company could conclude that it's more cost-effective to manufacture the graphics processors itself in the event of an acquisition.

That said, many people consider a marriage between AMD and ATI to be highly unlikely, given the two companies' different product focus and business models.

For such strange bedfellows, a shared fab might be the only thing they have in common.

>To order reprints of this article, click here: Reprints