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Why GlobalFoundries Matters

written by: M.S. Smith•edited by: J. F. Amprimoz•updated: 6/18/2009

GlobalFoundries, the fab spin-off by AMD, will save the processor company a great deal of cash. But its important goes beyond AMD's balance sheets, and the company's advanced manufacturing technology could significantly change the landscape of processor manufacturing.

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    Global What?

    GlobalFoundries is the new company created from AMD's fab facilities GlobalFoundries is the spin-off of AMD's manufacturing division, which formerly was responsible for making all of the processors sold by AMD. Before the creation of GlobalFoundries, AMD kept its own fabs capable of producing microprocessors. This made AMD special as only the largest companies, such as Intel and IBM, tend to keep fabs in service for their own use. This is because the cost of these facilities is extraordinarily high. They contain some of the most advanced processor manufacturing technology in the world, which in turn needs to be staffed by some of the most talented engineers to ever live. Both the technology and the brainpower carry a high price.

    With AMD constantly bleeding money, the burn of keeping fabs for its own exclusive use became too great. To relieve the pressure, AMD began talks in 2008 with various investors with the goal of finding backers who would be interested in fiscally supporting a spin-off of AMD's fabs into an independent company. AMD found the support it needed in the Advanced Technology Investment Company, an organization based in the United Arab Emirates. The UAE have backed AMD in the past, so it is little surprise that AMD has been able to gain their support.

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    Already ahead of the Game

    It is no secret that AMD has been trailing Intel in the last few years. AMD has had some success, most recently with the Phenom II, but this success is based in the market rather than in technology. Intel's Nehalem is faster in a number of ways, and Intel is ahead of AMD in both production and design. The Atom, for example, has proven that Intel's lead extends to more than just the market for high-end products, as AMD has yet to find a way to properly respond to Intel's ultra low power processor.

    In this context it is easy to believe the AMD's processors are lack-luster as a whole, and nothing appears more indicative of this from a distance than AMD's manufacturing process, which has lagged far behind Intel. Intel, which already has most of its product lines converted to a 45nm process, seems a full step ahead of AMD, which only began building 45nm processors with the Phenom II line. But looking at AMD's manufacturing capability through the lens of Intel is deceiving. While Intel may be better, AMD is nearly as good, and this meant they were always far ahead of what most companies were capable of.

    AMD's manufacturing capability has been world-class for years, and this remains true now that AMD's fabs have been turned into GlobalFoundries. The research into the creation of a 32nm process which was begun by AMD has been transferred to GlobalFoundries, and it appears possible that GlobalFoundries will be the first foundry company to make a 32nm fabrication process available to clients. Major merchant foundry competitors like TSMC appear weak in comparison.

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    Why GlobalFoundries MattersWhile AMD's fabs may have been second-fiddle to Intel's, they were still some of the best in the world. Now that AMD's fabs have been spun off into GlobalFoundries the new company has a major advantage over competitors. GlobalFoundries is already working on a 32nm bulk processor, something no competitor can say. And GlobalFoundries offers a background of experience in changing designs into finished products that most fab companies can't match.
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    The Big Advantage

    The GlobalFoundries fabs are among the most advanced in the world While AMD's fabs had always been among the most advanced, they were, like much of the enthusiast press, limited to seeing their fabs in the context of Intel. It did not matter that AMD had outstanding fabs capable of producing large volumes of chips. The fabs were limited to producing only those chips needed by AMD, and because AMD's competitor had always been Intel the quality of AMD's fabs was only relevant compared to the quality of Intel's.

    Breaking the fabs into the GlobalFoundries company negates that problem. It takes the fabs off the AMD balance sheet and allows the fabs to begin to pay for themselves based on the quality of the finished products they produce in comparison to the semiconductor market, which is as wide and varied as the market for pre-cooked meals. While the previous production processes used by the fabs were geared towards AMD products, GlobalFoundries will be aiming towards a 32nm bulk process which can be easily applied to various microprocessor designs.

    While Intel and AMD are the most recognizable microprocessor companies in the public eye, everything from cell phones to HDTVs to cars have microprocessors in them, and those processors are made by various smaller companies which work on specific processors for specific applications. These companies do not have their own fabs, and so they need to purchase the production services of companies like GlobalFoundries. And because GlobalFoundries is an independent company from AMD, it will be free to interact with clients in ways that AMD could not when the fabs were under its control.

    This is hugely relevant to the state of microprocessor technology, as it suddenly opens advanced production technology to hundreds of firms which design, but do not produce, their own processors. Perhaps the most obvious and ironic potential client for GlobalFoundries is Nvidia, which has designed not only its wide catalogue of GPUs but also the Tegra system-on-a-chip aimed at smartphones and other mobile devices. Nvidia, like ATI (which had access to AMD's fabs but continued to contract with TSMC due to the very specific silicon-on-insulator production process used by AMD's fabs), has apparently had trouble gaining the results expected from the 40nm product process that TSMC is just beginning to use. A 32nm bulk processor offered by GlobalFoundries would be the most advanced process available. It would allow companies like Nvidia and ATI to be able to produce processors which are cooler, quicker, and less expensive per processor.

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    The Road Ahead

    There are obstacles in the path of GlobalFoundries, not the least of which are the substantial costs involved with operating fabs even while production is limited. By having customers outside of AMD, they stand a better chance of keeping the fabs using their capacity. GlobalFoundries is actively shopping for clients, and will likely find them, but cash burn is a serious short-term problem. Despite this, GlobalFoundries is going ahead with the construction of a brand new facility in up-state New York which is to begin production in 2011. This fab, called Fab 2 by GlobalFoundries, is currently nothing but a woodland. This fab could serve as a gauge for how well GlobalFoundries is meeting its goals, as pulling back on the schedule for the fab's opening would indicate that the company's wallet is growing lighter than expected. Delays are unlikely, since there are subsidies from New York State, and since ATIC and its Emirate founders have what they call 'patient capital' (they can lose money for years before they start to worry).

    No matter the status of Fab 2, however, GlobalFoundries is in an enviable position. It has lept into the business of mass-producing processors with flair. The advanced production technology transferred to it from AMD makes it the most advanced fab company openly taking clients. The end result of this will be likely be consumer products which are smaller, cooler, faster, and cheaper than ever before. If GlobalFoundries can continue to advance its current production technology on a schedule similar to before the fabs were parted from AMD, the results will be extremely beneficial to microprocessor technology world-wide.