Analysis: Is asset-lite a smart move for AMD?--2

R&D expenses
It's not clear though that AMD's research and development expenses would be impacted by the move towards an asset-light manufacturing strategy. In its bid to catch up with Intel, AMD jacked up its R&D budget in 2007 to $1.9 billion from $1.2 billion in 2006.
While this amount is dwarfed by Intel's $5.8 billion R&D budget for 2007, last year's figure represented an outsized 31 percent of AMD's annual revenue compared with 15 percent for Intel.
While outsourced manufacturing might be a viable option for AMD, it's not that clear the company would greatly improve its competitiveness by outsourcing R&D, a key driver of differentiation and market share gain in the semiconductor market.
AMD is locked into a microprocessor manufacturing process development agreement with IBM Corp. focused on the development of leading-edge 45-nanometer, 32-nanometer and 22-nanometer technologies. The agreement is expected to continue for several additional years and AMD isn't likely to scuttle the engagement with IBM even if it spins off its manufacturing operation.
Likely partners
AMD already has outsourced manufacturing agreements with several wafer foundries including Chartered Semiconductor Manufacturing Co. Ltd. for microprocessors and on the graphics IC and chipset products side with Taiwan Semiconductor Manufacturing Co. Ltd., United Microelectronics Corp. and Chartered.
Chartered is the most 8likely candidate for a manufacturing joint venture company if AMD were to move in that direction, according to Ashok Kumar, an analyst with CRT Capital Group speaking with Thomson Reuters News. Kumar believes AMD would still maintain a controlling interest in the company.
AMD currently operates five manufacturing facilities, two of them microprocessor wafer fabrication plants located in Dresden, Germany. The company also runs three microprocessor assembly and test facilities in Malaysia, Singapore and China that it could pool into a new company with a joint venture partner.
Other production agreements and operations the company might also have to review as it prepares for the asset-smart strategy are test, assembly and packaging as well as board-level services it currently outsources to contract manufacturing partners, including Amkor, Advanced Semiconductor Engineering Group, King Yuan Electronics, Silicon Precision Industries, Stats-Chippac,Celestica and Foxconn