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AMD to split into two

Chipmaker is expected to unveil plans to spin off its manufacturing operations into a joint venture, under a multi-billion dollar investment fund from Abu Dhabi, reports say.
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Written by Eileen Yu, Contributor on

Advanced Micro Devices (AMD) is expected to unveil plans to split the company into two, spinning off its manufacturing operations into a new joint venture under a multi-billion dollar fund from the Abu Dhabi government.

In a media alert sent Tuesday, the chipmaker said it will be making a "significant corporate announcement" via a teleconference to be hosted by AMD President and CEO Dirk Meyer.

According to various news reports, the company is likely to separate into two units--one focusing on chip design, and the other on manufacturing--and receive new funds from investment firms in Abu Dhabi.

The reports said Abu Dhabi investment firms will fork out US$700 million for the new manufacturing unit, which will run two plants in Germany and build a new one in New York. The firms are also expected to throw in another US$6 billion to expand the manufacturing facilities and US$1.4 billion in operating capital. An additional US$314 million will go toward doubling Abu Dhabi's stake in AMD to 19 percent.

The chip manufacturer last year secured between US$550 million and US$700 million from Abu Dhabi's government-linked investment firm Mubdala Development Agency, in exchange for an 8.1 percent stake in AMD. An analyst then described the deal as "much-needed capital injection" for the chipmaker, following the delay of its Barcelona chip and history of losses.

In a July 2008 report, research firm Technology Business Research noted that AMD saw stronger-than-expected unit shipments in the first half of the year, but was still in a worse position than rival Intel to weather a potential demand shortfall in the second half of 2008.

AMD executives had earlier hinted at restructuring plans, under a new strategy it dubbed "asset smart", to reduce costs and maintain its manufacturing prowess.

The chipmaker last month inked a foundry deal with Taiwan Semiconductor Manufacturing Company (TSMC), in which TSMC was appointed the OEM (original equipment manufacturer) for AMD processors.

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