To Continue Fight with Intel, AMD Splits in Two

Microprocessor maker AMD announced this morning that it will be splitting off its manufacturing operations in order to better compete with market leader Intel. AMD and Abu Dhabi-based Advanced Technology Investment Company (ATIC) will form a new US-based company, temporarily named "The Foundry Company," to manufacture AMD chips.

"Today is a landmark day for AMD, creating a financially stronger company with a tightened focus," said AMD president and CEO Dirk Meyer. "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."

The plan relieves much of AMD's debt but seriously undercuts the company's role in its own future. As part of the deal, AMD will "contribute" all of its manufacturing facilities, and related assets and intellectual property rights, to The Foundry Company. This includes two existing fabrication facilities in Dresden, Germany and a new one in New York State; one of the Dresden locations will be upgraded to a state-of-the-art facility.

Meanwhile, the Mubadala Development Company is increasing its investment in AMD to 19.3 percent, and the Foundry Company will assume about $1.2 billion of AMD's existing debt.

The recently-created but cash-rich ATIC is wholly owned by the government of Abu Dhabi and seeks to rapidly expand its tech industry investments. It will invest $2.1 billion for its stake in The Foundry Company and receive a controlling interest. ATIC has further promised to provide ongoing equity funding to The Foundry Company: A minimum of $3.6 billion, but as much as $6 billion over the next five years.

As part of the deal, AMD executive chairman Hector Ruiz will leave the company to take the reins of The Foundry Company. He said he's now working with the state of New York to negotiate the construction of the new facility in Saratoga. Ruiz said the facility will generate 1400 jobs.

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