AMD finally announces "asset-smart" plan; new Foundry Company created

AMD and a technology investment company backed by the government of Abu Dhabi have established a new semiconductor company that will manufacture AMD's advanced processors. The new company--currently known as "The Foundry Company"--will take over all of AMD's existing manufacturing facilities, including the two leading-edge fabs in Dresden, Germany, and will construct an additional fab in upstate New York.

AMD and a technology investment company backed by the government of Abu Dhabi have established a new semiconductor company that will manufacture AMD's advanced processors. The new company--currently known as "The Foundry Company"--will take over all of AMD's existing manufacturing facilities, including the two leading-edge fabs in Dresden, Germany, and will construct an additional fab in upstate New York.

After eight years at the helm of AMD as CEO, and more recently as chairman, Hector Ruiz will become chairman of The Foundry Company. Doug Grose, currently AMD's senior vice president of manufacturing operations, will become CEO of The Foundry Company, which will be based in Silicon Valley. Most of the 3,000 employees at the new company will come from the fabs in Dresden, though about 300 process engineers from AMD offices in Sunnyvale, Austin and East Fishkill will also join The Foundry Company. The Foundry Company will join the IBM alliance for developing both silicon-on-insulator (SOI) and bulk silicon process technology through the 22nm generation.

The investment company, Advanced Technology Investment Company (ATIC) will invest $2.1 billion to purchase its stake in The Foundry Company, including $1.4 billion invested directly in the new company and $700 million paid to AMD to purchase shares in the new company. ATIC also assumed some AMD's formidable debt and committed significant funding--up to $5.7 billion over five years--to expanding manufacturing operations. This includes completing Fab 38, an advanced 300mm wafer fab in Dresden, in 2009, followed by construction of the Luther Forest facility in Malta, New York. Later The Foundry Company will consider a new fab in Abu Dhabi depending on market conditions.

"Today's announcement significantly alters the global semiconductor industry," said ATIC Chairman Waleed Al Mokarrab. "This is great news for those communities, but most importantly it is great news for the semiconductor industry."

When the deal closes around the end of this year, AMD will own 44.4% and ATIC will own 55.6% of The Foundry Company.

As part of the announcement, Mubadala Development Company, a sovereign wealth fund of the government of the Emirate of Abu Dhabi, that currently owns 8.1% of AMD increased its stake to 19.3% through the purchase for $314 million of 58 million newly-issued AMD shares with warrants to purchase 30 million additional shares. Mubadala also gets a seat on AMD's board.

AMD had been promising this "asset-smart" plan for so long that it had become the butt of jokes among industry analysts. The announcement turns the page on a difficult period for AMD, marked by the disappointment of its Barcelona native quad-core processor, and begins a new chapter in which AMD becomes a fabless semiconductor company. AMD's President and CEO, Dirk Meyer, promised the combination of the manufacturing spin-off and Mubadala increased investment would "result in a stronger and more tightly focused AMD."