Little more than a year ago it seemed as if AMD was unstoppable, with Intel’s chips becoming ever more inefficient and running at ever higher temperatures. But then, seemingly out of the blue, Intel introduced the Core 2, and everything changed. Intel’s new chips dramatically outperformed the competition in almost every testable category, and they were aggressively priced as well. In a desperate attempt not to fall too far behind the market leader, AMD was forced to act. Their product had to remain alluring, so they drastically cut prices on all chips – as much as 40% or more in some cases.

Over the course of the next fiscal year, the company saw its market share plummet, resulting in the loss of more than $1.2 billion in expected revenue. To complicate matters even more for AMD, they were already down an estimated $5.4 billion as a result of the recent ATI and AMD merger.

Unfortunately, There seems to be no easy way out of the current slump, especially considering that Intel is already well on their way to pushing out their new 45nm Penryn chip – AMD is still trying to push out their first 65nm chip, which might even be delayed until next year. There is, however, one rumor that might allow AMD to survive if the situation gets worse: sell of the fabrication plants, and only design chips, leaving the manufacturing to a third party.

As unfortunate as this rumor may sound, this scenario is plausible. AMD currently operates two fabrication facilities: Fab 30 and Fab 36. The proposal to sell is anything but definitive, and there are still plenty of possible outcomes. AMD may decide to outsource the manufacturing of its lower-end lineups, and keep the high-end stuff in-house – or it may decide to sell it all. As it currently stands, some of the R&D (Research and Development) work, along with some manufacturing, is already being handled by IBM and Chartered Semiconductors. It is foreseeable that if things don’t start looking better for AMD pretty soon, Chartered, IBM, or another one of AMD’s partners, might take over a hefty part of the fabrication process – if not the entire procedure.

If this rumor does pan out, however, the impact on the end product and the customers will probably manifest itself in terms of longer turn-around times. In the past, when AMD was in charge of all of its own manufacturing, it was all in their own hands and they could design chips with their own fabrication model in mind. With a third-party making the parts, adapting plants and designs will inevitably take longer.

As part of its asset-light strategy, AMD is looking to do whatever it can to keep down the costs of business. As of yet, AMD’s PR department is denying the rumors that plans are underway to outsource the entire fabrication process, but the rumors seem to have some merit. In the spirit of competition, let’s just hope that AMD will be able to remain a leader in the chip industry along with Intel.