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Abu Dhabi deal: A booster for AMD?

Funds from the wealthy Middle Eastern country will help boost the U.S.-based chipmaker's footprint in the microprocessor market, says IDC analyst.

Abu Dhabi's investment in Advanced Micro Devices will help boost and sustain the U.S.-based chipmaker's business, according to an analyst.

Earlier this month, Abu Dhabi's Mubdala Development announced plans to acquire an 8.1 percent stake estimated to cost between US$550 million and US$700 million, in the current No. 2 chipmaker.

Rajnish Arora, IDC's Asia-Pacific research director of enterprise servers and workstations research, said the investment from Mubdala--a separate organization funded by the government--will "help AMD sustain itself much longer in [the microprocessor] business".

"It gives AMD the much-needed capital injection to continue innovating [for a longer period of time]," Arora told ZDNet Asia in a phone interview.

He noted that this is important because "the whole semiconductor business is all about who can continue to invest in research and development (R&D), which vendor can continue to come out with newer faster [processing] technologies and better manufacturing technologies, earlier than the competition".

"The last 12 to 18 months have been a little tough for [AMD] because of the delay of Barcelona and the quad-core products for desktops and notebooks," Arora said.

The IDC analyst added that coupled with archrival Intel's timely introduction of its own product line, AMD faced significant pressure. This drove the latter to bring down the prices of its existing products, he said, noting that this move "hurt [AMD's] margins quite a bit".

"I think Intel got back into the game fairly quickly and started turning the tables around, and AMD was taken back by surprise," Arora said. He added that the smaller chipmaker has not been profitable according to the company's results in the last few quarters.

"[AMD] has pretty good products, [but] they need financial muscle to go up against Intel. This equity injection [from Abu Dhabi's Mubdala] will basically do just that," Arora said.

According to Shun Yoshizawa, marketing director of AMD Japan, the deal will strengthen the company's operations. He told ZDNet Asia that the fund injection will go toward "general corporate purposes", including accelerating its manufacturing processes ande long-term, customer-focused growth strategy through R&D investments.

"We believe this investment is good for the microprocessor industry, as a whole, because it strengthens AMD... With a strengthened AMD, it can lead to greater competition within the microprocessor industry," Yoshizawa said.