Posted by : bpburnwal on Nov 08, 2003 - 12:07 PM General

In another sign of a turnaround in the struggling semiconductor industry, Advanced Micro Devices said Thursday it should be profitable in the fourth quarter.
The chip maker also confirmed for the first time its plans to build a costly next-generation fabrication plant. Plus, AMD executives said they intend to do some selective hiring next year in response to what they see as a possible "mini-boomlet" in the personal computer market.

AMD's good news came at the company's yearly analyst meeting at its Sunnyvale headquarters, which followed an upbeat industry forecast from the Semiconductor Industry Association on Wednesday. The chip industry appears to be poised for a resurgence after the steepest downturn in its history.

"There is definitely a perceived recovery here," said AMD Chief Executive Hector Ruiz.

This year's AMD meeting contrasted sharply with last year's, when the money-losing company announced a major restructuring to lower its costs, and plans for layoffs.

The company said its microprocessor business, which reported an operating profit in the third quarter, should be profitable in the fourth quarter, and that would most likely lead to overall profitability for the company. But AMD's flash memory business, which just completed an expanded joint venture with Fujitsu, is a wild card. Flash memory, chips used in cell phones and other portable devices, lost money last quarter.

"As we are digesting the flash side, and the market is heating up; it is a challenge for the team," Ruiz said, adding that he does expect revenues to be up.

AMD shares added 3 cents to close at $17.04 on the New York Stock Exchange on Thursday.

Analysts had hoped for an update on AMD's manufacturing strategy and got one, albeit, a sketchy one. AMD said it plans to build a cutting-edge facility to make silicon wafers that are 300-millimeters in diameter.

But it was mum on details such as whether it will build the plant alone or work with one or more partners. It also did not disclose the location, saying it would announce all the details before the end of the year.

In February 2002, AMD signed a deal with Taiwan's United Microelectronics to jointly build a 300-millimeter plant for advanced chips, but the work did not progress quickly enough.

So AMD formed a joint venture with IBM for development work in advanced technologies.

Building a state-of-the-art plant is a huge expense, likely to cost between $2 billion and $3 billion, and big chip companies have shied away from building fabs in recent years. Some have formed joint ventures to share the cost. Analysts said they doubted AMD would build its plant alone, but they said IBM is not necessarily a shoe-in as a manufacturing partner.

Potential locations for the plant was another area rife for speculation.

"New York is one possibility, Dresden is another and Austin is a possibility," said Kevin Krewell, an analyst at InStat/MDR in San Jose. AMD already operates a plant in Dresden, Germany. It also operates a big flash memory plant in Austin, where Ruiz and many top AMD executives are based.