AMD Shedding Manufacturing UnitsCategory: Manufacturers
Posted: October 7, 2008 09:39AM
AMD made an announcement this morning it is splitting of it manufacturing units into a separate company. While many see this as a long-expected move, details about exactly which form it would take were unclear. Further uncertainty centered on the proposed new manufacturing facility AMD had promised to build in upstate New York in light of AMD's financial difficulties and the rumored sale of existing fabrication facilities in Germany.
The past year has been tough for AMD. The company has been struggling financially since its acquisition of ATI and the initial launch of its Barcelona quad-core processors was plagued by delays and the now infamous TLB erratum. Its struggle to return to profitability has led to AMD replacing its CEO and to pursue a strategy of returning to its core strengths. AMD recently sold off its digital TV unit to Broadcomm but speculation still remained on what was to happen to the rest of AMD's manufacturing plants. Earlier this year rumors began surfacing about AMD outsourcing its chip fabrication and with AMD denying subsequent reports it was selling is fab plants analysts where wondering just what direction AMD would take and what future role ex-CEO Hector Ruiz would have in the leaner, meaner AMD.
With today's announcement, AMD will join with Advanced Technology Investment Co. to form a new company to be initially known as The Foundry Co. ATIC, owned by the government of Abu Dhabi, will invest $1.4 in the new venture and give $700 million to AMD to buy added shares in The Foundry. This leaves AMD owning 44.4% of the venture and ATIC controlling the remainder. AMD will also get a $314 million cash infusion from another Abu Dhabi firm as well as transfer $1.2 billion in debt off its books which The Foundry will assume. Doug Grose from AMD will be the new CEO of The Foundry and Hector Ruiz, the former AMD CEO, will relinquish his job at AMD and become chairman of the new company. ATIC has also pledged to invest additional funds to expand capacity at the former AMD fabs in Dresden, Germany and The Foundry will also begin construction on a new facility in New York state. The Foundry will manufacture chips for AMD as well as other customers.