The word is out: AMD is now a fabless company!
The Sunnyvale, Calif., company manufacturing fabs now regrouped under the generic name “The Foundry Company”, headquartered in Silicon Valley, are now in the hands of Advanced Technology Investment Co., an Abu Dhabi-based firm that will make a $700 million payment to AMD for its 55.6% ownership interest in the new foundry.
But It seems that AMD will still officially own the foundry, for legal and financial reporting purposes.
Another firm from the same country that already holds an 8% stake in AMD, the Mubadala Development Co., will invest $314 million for more AMD shares, boosting its stake to 19.4%.
Under this complex deal that will include some layoffs, AMD will improve its liquidity by raising a total of $2.1 billion as the Foundry Company will also assume approximately $1.2 billion of AMD’s debt. That still leaves AMD with about $4.1 billion in debts (bonds and convertibles) and over $2 billion in cash.
“AMD gets to lower its fixed costs, making it profitable at a lower level of revenue, and it can still participate in leading-edge technology development. It gets out from under some of its debt and receives a cash infusion from a patient source”, said Roger Kay, President of analyst firm, Endpoint Technologies Associates.
A win-win deal?
Well at least for AMD that immediately unloads from its books both debts and a capital intensive manufacturing business. Intel is now the only semiconductor company in the world with dedicated fabs. Even IBM had to open its facilities to produce other people’s chips, like AMDs!
For Abu Dhabi, this is certainly a long term bet as its hard to see today if there’s a demand for another foundry. Eventually, the new foundry will create an R&D center in Dubai. But that’s after it opens the new factory in upstate New York. And that’s a big if, because 1) the incentives offered by that region might not be there anymore because of the economy; and 2) because I just don’t see the demand for another foundry. But of course, I may be wrong!
But what a reverse of fortune. Some of you might remember that AMD hired foundry Chartered Semiconductor to build AMD 64-bits chips when demand exceeded its own manufacturing output. That was about 4 years ago. Now, after the Barcelona debacle, AMD becomes fabless and enters the foundry business! OK, AMD says the German factories are highly efficient and can meet customers demand. But isn’t it because the demand is so low for AMD chips now? Comments?
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Allen Taylor
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Tim Ramsey