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July 21, 1998

AMD CANCELS ITS FOUNDRY DEAL WITH IBM

By CBR Staff Writer

Advanced Micro Devices Inc has canceled the foundry agreement it set up with IBM Corp back in February to manufacture its K6 chip (CI No 3,358). News of the cancellation comes in the wake of AMD’s cross licensing deal with Motorola Inc at the beginning of the week, which gives AMD access to Motorola’s copper interconnect technology. AMD says the cancellation is a result of it solving the yield problems it was having with its 0.25 micron K6 parts from its own Fab 25 plant in Austin, Texas. We just don’t need the extra capacity any more an AMD spokesperson said. AMD churned out 2.7 million K6 units from the plant in its second quarter, and has a target of between 3.2 million and 3.7 million for the next quarter. The deal didn’t include access to IBM’s copper technology, but might have done, had negotiations worked out differently. We’re much closer to Motorola following the deal, said the spokesperson. IBM got to the sampling stage with the K6, but hadn’t gone into production. It remains a customer for the part, using it in its Aptiva PCs. AMD now doesn’t have a second source, and while it’s possible that Motorola could take over, the qualification period would be at least nine months before production would be possible. Meanwhile AMD said it still hadn’t concluded negotiations with Compaq Computer Corp that would enable it to manufacture the Alpha RISC chip. Before its acquisition, Digital Equipment Corp was negotiating with AMD as part of the settlement it agreed with the Federal Trade Commission after its sale of Alpha technology to Intel Corp (CI No 3,397). The FTC insisted that DEC license the Alpha to two other sources before it would approve the sale. Samsung Electronic Co already has rights to the chip, but AMD says it is still working to finalize the details of its own deal.

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