AMD spins off chip fabrication business

Posted at: 3:37pm 7th October 2008 by Ben Hardwidge

Dirk Meyer promises a ‘financially stronger’ AMD, as The Foundry Company is formed to manufacture chips for different companies as well as AMD

Today AMD announced what’s possibly the most significant shake-up in its chip strategy since it developed the K5. After many years of fabricating its chips at its own facilities, the company has now announced that it’s going to split into two companies. AMD will concentrate on chip design, and a new company will be created to fabricate chips for ‘AMD and other semiconductor companies requiring leading edge production capabilities.’

Temporarily called The Foundry Company, the new fabrication firm has already been welcomed into IBM’s development alliance for the development of bulk silicon and silicon-on-insulator chips through the 22nm transistor generation. This is a significant boost to AMD, as IBM’s development alliance already includes several notable companies, including Toshiba, NEC Electronics, Freescale, Samsung Electronics and Infineon Technologies.

The Foundry Company is being created in conjunction with the Advanced Technology Investment Company (ATIC) of Abu Dhabi, which will invest $2.1 billion US into the new company to purchase its stake. Meanwhile, the Mubadala Development Company has also agreed to increase its ownership in AMD. Mubadala will pay $314 million US for 58 million newly issues shares, increasing its ownership of the company from 8.1 per cent to 19.3 per cent.

In a statement to the press, AMD’s CEO, Dirk Meyer, said that the combination of the new foundry company and the increased investment from Mubadala would ‘result in a financially stronger and more tightly focused AMD, unlocking the value of our manufacturing assets with a solid commitment to expand those assets.’ The Foundry Company will also assume $1.2 billion US of AMD’s debt.

AMD will hand over its manufacturing facilities to The Foundry Company, including two fabs in Dresden, Germany, and the new company also plans to open a new 300mm fabrication plant in New York (artist's impression pictured). The staff at the top are also undergoing a few changes, with former AMD CEO Hector Ruiz giving up his role at AMD to become the chairman of The Foundry Company. Meanwhile, AMD’s senior vice president, Doug Crose, will also relinquish his role at AMD in order to become the CEO of The Foundry Company.

Although this move has taken many by surprise, it seems a sensible decision considering AMD’s recent financial woes. Although AMD’s recent processors have disappointed us in terms of bangs per buck, the company’s fabrication facilities could be useful to many companies, which could make The Foundry Company quite profitable, particularly with backing from IBM’s development alliance. Many other successful chip design companies, including Nvidia and VIA, are also fabless.