GlobalFoundries Signs STMicro as New Customer

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Advanced Micro Devices spin-off GlobalFoundries announced STMicroelectronics as a new customer on Wednesday, forging ahead in its effort to diversify manufacturing efforts over multiple customers.

GlobalFoundries will manufacture and supply chips for STMicroelectronics starting in 2010. The foundry will manufacture chips for STMicroelectronics using the 40-nanometer process, which would be ideal for handheld devices and consumer electronics, according to GlobalFoundries.

Among other things, STMicroelectronics supplies chips for mobile devices. It also owns chip manufacturing plants, but it wasn't immediately clear how much capacity GlobalFoundries would provide. GlobalFoundries declined to provide details about terms of the contract and STMicroelectronics officials weren't immediately available for comment.

GlobalFoundries has been trying to shed its reputation as AMD's manufacturing arm ever since it was spun-off earlier this year. Bringing in STMicroelectronics as a customer could underscore the establishment of GlobalFoundries as an independent fab.

"Bringing on a leader in low-power technology as our first customer is an important milestone in our transformation to an independent foundry and a strong endorsement of our leading-edge capabilities," said Jason Gorss, a GlobalFoundries spokesman.

GlobalFoundries was formed in March after AMD spun off its manufacturing unit in a joint venture with Advanced Technology Investment Co. (ATIC), an investment fund controlled by the Abu Dhabi government.

Nevertheless, AMD remains critical to GlobalFoundries' operations as it is the largest customer, said Dean McCarron, principal analyst at Mercury Research. GlobalFoundries currently supplies CPUs made using the 45-nanometer manufacturing process to AMD, and will jump to the advanced 32-nm node sometime next year.

AMD also holds a minority stake in the chip manufacturing operations, and could see some cost benefits from GlobalFoundries' signing of STMicro.

"AMD's business is not going to fill that factory. Getting other companies on board increases factory utilization and lowers the cost for everyone," McCarron said.

A low utilization rate of factories affected AMD's margins during the second quarter of 2009, burdening the company with an additional cost related to chip production. AMD's second quarter results were reported last week, and the books reflected some chip manufacturing costs incurred by GlobalFoundries.

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