Abu Dhabi deal to boost AMD innovation

Abu Dhabi's recent investment will give the chipmaker the financial muscle to continue its fight against Intel, according to analyst IDC
Written by Lynn Tan @ Redhat, Contributor

Abu Dhabi's investment in AMD will help boost and sustain the US-based chipmaker's business, according to an analyst.

Earlier this month, Abu Dhabi's Mubadala Development announced plans to acquire an 8.1 percent stake, estimated to cost between $550m (£267m) and $700m, in the current numer-two chipmaker.

Rajnish Arora, IDC's Asia-Pacific research director of enterprise servers and workstations research, said the investment from Mubadala — owned by the government of the world's sixth-largest oil exporter — 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.

Arora 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 rival Intel's timely introduction of its own product line, AMD has been under significant pressure. This drove the latter to bring down the prices of its existing products, which "hurt [AMD's] margins quite a bit", according to Arora.

"I think Intel got back into the game fairly quickly and started turning the tables around, and AMD was taken 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 Mubadala] 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 manufacturing processes and a 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, [there can be] greater competition within the microprocessor industry," Yoshizawa said.

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