AMD Spins Off Manufacturing with Abu Dhabi

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Chipmaker AMD has announced it plans to spin off its manufacturing plants into a new joint venture with Abu Dhabi, in a more to increase cash liquidity, pay down its debt…and better compete with rival chipmaker Intel. The new operation will be named The Foundry Company—at least for the time being—and will manufacturer components not only for AMD, but for a variety of fabless semiconductor companies around the world.

AMD’s partners in the joint venture are Advanced Technology Investment Company (ATIC) and Mudadala Development Company. ATIC is a venture capital company run by the state of Abu Dhabi, and will be investing at least $5.7 billion for a 55 percent stake in The Foundry Company, along with half the seats on the new company’s board. Mudadala—already an AMD investor—will be putting $314 million into the venture, increasing its stake in AMD to 19.3 percent from 8.3 percent; Mudalala also gets a seat on AMD’s board of directors.

“Today is a landmark day for AMD, creating a financially stronger company with a tightened focus,” said AMD president and CEO Dirk Meyer, in a statement. “With The Foundry Company, AMD has developed an innovative way to focus our efforts on design while maintaining access to the leading-edge manufacturing technologies that our business needs without the required capital-intensive investments of semiconductor manufacturing.”

AMD is emphasizing that, although Abu Dhabi is a primary investor in The Foundry Company, it will be a U.S. headquartered company, and plans to begin construction of a new facility in Saratoga County, New York, and expand facilities in Dresden, Germany. Eventually, the company may build a facility in Abu Dhabi.

In recent years, AMD has been struggling to compete effectively with larger chipmaker Intel, has been forced to repeatedly write down the value of its multi billion-dollar acquisition of graphics developer ATI, and been plagued by problems with its Barcelona chip line. The company is also waging an antitrust battle against Intel; the European Commission has recently charged Intel with paying computer makers and retailers to shun projects built on AMD technology.

The Foundry Company will assume all of AMD’s $1.2 billion in debt, and will employ about 3,000 people; when completed, the new facility in New York will add about another 1,500 jobs to the company’s payroll.

If approved by regulators and shareholders, the companies expect the deal to close in late 2008 or early 2009.

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