AMD Splits Into Two Companies with Abu Dhabi Backing (NewsFactor)
Barry Levine, newsfactor.com 11 minutes ago
Advanced Micro Devices, which has been struggling to regain its footing in competition with rival Intel, announced Tuesday that it will split into two companies. One of the companies will be a global enterprise focused on semiconductor manufacturing, temporarily called The Foundry Company. AMD itself will focus on designing microprocessors.
Abu Dhabi Investment
The Advanced Technology Investment Company (ATIC), a corporate entity formed by the government of Abu Dhabi, will invest several billion dollars into the two companies, some of which will go toward construction of a new chip factory near Albany, N.Y., as well as to upgrade a current factory in Europe.
AMD said The Foundry Company starts with "key strengths" needed for a leading-edge manufacturer, including a history of "manufacturing excellence" from AMD, financial and intellectual capital, a talented workforce, and a long-term technology-sharing partnership with IBM.
The Foundry Company will continue with the planned capacity expansion for manufacturing facilities in Dresden, Germany. Its new factory in Saratoga County, New York, is on target to begin construction, pending the transfer to the new entity of previously approved state incentives. The New York facility is expected to hire more than 1,400 people.
Sunnyvale, Calif.-based AMD said it will concentrate on designing the "next generation of innovation based on the fusion of computing and graphic processing," adding that it is the only company with a proven track record in both x86 CPU and graphics technologies.
Equal Voting Rights
According to news reports, AMD will own 44.4 percent of The Foundry Company, and ATIC the rest, although each will have the same voting rights and the board will be equally divided. About $2 billion will be invested immediately by ATIC, including about $700 million to purchase shares in AMD, with up to $6 billion more to create or update chip-fabrication plants.
An Abu Dhabi company called The Mubadala Development Company recently bought eight percent of AMD, and will now invest another $314 million to increase its ownership to 19.3 percent.
AMD has been struggling to keep up with the accelerated stream of increasingly energy-efficient, powerful chips from Intel. Industry observers have noted that the new deal makes sense for AMD, since it gets out from under the crushing cost of maintaining state-of-the-art manufacturing facilities while concentrating resources on the development of new chips.
The arrangement also means it can benefit from efficient manufacturing and the boom periods. Additionally, depending on AMD's needs, the factories could maintain a revenue stream by contracting out services to other companies.
In addition to increasing capacity, the deal is part of AMD's initiative to become more efficient. It's expected that AMD will cut its workforce by about 3,000 people at the beginning of next year and reduce capital expenditures as it directs its attention and resources toward chip design.