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AMD splits into design, chipmaking firms

updated 08:00 am EDT, Tue October 7, 2008

AMD Splits

AMD this morning took a radical step to improve its fortunes by launching into its promised split into two separate companies. The plan will see AMD break off its semiconductor manufacturing business into a separate company, for now known as the The Foundry Company, and will result in the new company both assuming about $1.2 billion of AMD's debt and the Abu Dhabi-based firm Advanced Technology Investment Company (ATIC) supplying about $2.1 billion to both start up the new company as well as to help earn a majority stake in the project, which will also give it 55.6 percent of shares.

ATIC also promises to invest at least $3.6 billion over the next five years to help The Foundry Company grow and has the option of boosting its investment up to $6 billion. The increased cash flow will help the offshoot firm both upgrade its existing factories as well as build a new factory in Saratoga, New York.

A separate investment by the Mubadala Development Company will increase its stake in AMD itself to 19.3 percent; AMD chief Hector Ruiz and senior manufacturing VP Doug Grose are both leaving the existing company to respectively become chairman and CEO of The Foundry Company.

Approval by US government officials is anticipated sometime in early 2009 after an investigation to ensure the foreign investment doesn't pose a potential risk.

AMD justifies the move by claiming that it will give the remaining design firm a "tightened focus" on its core business, allowing the semiconductor component to scale independently of AMD's specific needs and also to make AMD itself more profitable in the long term. This includes the development of the company's new Fusion technology that incorporates graphics into the processor itself.

The Foundry Company itself is also touted for its potential influence on the chip production market, as AMD believes there is an increasing need for independent manufacturing firms that can build new processors. The eventual New York plant will also be the only independent but modernized semiconductor manufacturing location in the US, the company states. Existing AMD alliances for such technology, including one with IBM to develop 22 nanometer silicon, will be transferred to the new venture.

Although AMD has been improving performance in recent months, the move is already believed to be prompted by long term difficulties in competing against Intel, which continues to operate many of its own factories. The latter's Core architecture has had an edge in most areas versus AMD's Phenom and Opteron desktop processors as well as its mobile Turion designs, which only recently have become competitive and were set back by delays in design and manufacturing. AMD continues to make nearly all its chips on an older 65 nanometer process versus the smaller, more efficient 45 nanometers of nearly all new Intel parts.

Throughout the latter half of 2007, AMD also struggled to incorporate its recent buyout ATI into its operations, with 2008 bringing some relief as newer Radeon HD chipsets return a performance advantage over NVIDIA's GeForce line.

by MacNN Staff



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