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.
Written by Eileen Yu, Senior Contributing Editor

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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