AMD and Abu Dhabi Join Forces to Keep Fabs on Track
In a major boost to U.S. chip manufacturing, AMD and Abu Dhabi's Advanced Technology Investment Co. (ATIC) said they will create a new foundry that will go ahead with plans to build a 300 mm fab in the Luther Forest technology park in Saratoga County, N.Y., hiring ~1400 there. The Foundry Company will assume ownership of AMD's Dresden fabs, and have exclusive rights to build AMD's processors. ATIC will invest up to $6B in capacity expansions over the next five years.
David Lammers, News Editor -- Semiconductor International, 10/7/2008 7:52:00 AM
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Besides making New York a larger part of the semiconductor landscape, the infusion of Abu Dhabi’s oil riches into The Foundry Company, as it is being called temporarily, will benefit the AMD manufacturing center in Dresden, Germany. The Foundry Company will take over AMD’s two Dresden fabs, beginning life with ~3000 employees, and will complete the 300 mm upgrade of the original Dresden fab, which has been largely on hold because of AMD’s financial constraints.
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| The Foundry Company will proceed with an upgrade of the first AMD Dresden fab, connected by a walkway to the second fab. |
AMD executives emphasized that The Foundry Company has ambitions that go beyond being a manufacturing arm for AMD. Once operational, “the New York facility will be the only independently managed, leading-edge semiconductor manufacturing foundry in the United States,” they said in a statement. The new foundry will have exclusive rights to make AMD’s processors, as well as certain other AMD chips. With three 300 mm fabs in operation by the start of the next decade, the fab will “address the growing demand for independent, leading-edge foundry production capabilities.”
The complex financial transaction will result in Abu Dhabi’s Mubadala Development Co. owning a 19.3% stake in AMD, up from ~8.1% now. ATIC will invest $2.1B in The Foundry Company; it will invest $1.4B directly in the new entity, and the $700M remainder will be paid to AMD to purchase additional shares in the foundry. The Foundry Company will also assume ~$1.2B of AMD’s existing debt.
ATIC has committed additional equity funding to The Foundry Company of a minimum of $3.6B and up to $6B over the next five years to fund capacity expansions, beyond the two existing Dresden fabs initially contributed by AMD to the joint venture. ATIC will own a majority (55.6%) of the new venture, but AMD and ATIC will have equal voting rights on the board of directors, they said.
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| Doug Grose, senior vice president, AMD |
In a conference call Tuesday morning, Ruiz said he has been in touch with New York officials, and expects the estimated $1.2B in incentives offered to AMD by the state will smoothly transfer over to the foundry company. “We could not talk to New York until we created this new company. Now, with the announcement today, I will be in Albany this afternoon. I can tell you that the people in New York are excited by this.”
Meyer said the move is a major part of a larger restructuring at AMD, which includes “selling our non-core consumer electronics product lines. Certainly, through these decisions, we will see a small number of layoffs, but we see this as a job-creation move.”
As a member of the IBM-led Fishkill Alliance for both bulk and silicon-on-insulator (SOI) processes, the new foundry is expected to become a member of the Common Platform of compatible technology foundries, joining Chartered Semiconductor Manufacturing Co. (Singapore), IBM (Armonk, N.Y.) and Samsung Electronics Co. (Seoul, South Korea). John E. Kelly III, director of research at IBM, said, “The Foundry Company’s membership in the alliance brings new intellectual capital to our collaborative effort and continues to build on the momentum and leadership” of the Fishkill Alliance.
The new company said it “plans an aggressive recruitment strategy to round out a world-class semiconductor manufacturing leadership team.”
“Today is a landmark day for AMD, creating a financially stronger company with a tightened focus,” Meyer said in a statement. “With The Foundry Company, AMD has developed an innovative way to focus our efforts on design while maintaining access to the leading-edge manufacturing technologies that our business needs without the required capital-intensive investments of semiconductor manufacturing. I particularly want to congratulate our chairman, Hector Ruiz, whose vision and leadership of our Asset Smart strategy is fulfilled today.”
Khaldoon Al Mubarak, CEO and managing director of Mubadala, said, “We are as enthusiastic about AMD’s potential today as we were when we made our initial investment last year.” Asked if the tighter lending environment might impact Abu Dhabi’s ability to fund the new venture, an ATIC spokesman told reporters, “Today we do not see the same leveraging levels. But that is OK with us. We will look at the optimal way to internally fund the requirements.”
ATIC Chairman Waleed Al Mokarrab said, “More than a year in the making, today’s announcement significantly reshapes the global semiconductor industry — it is an investment where all parties see significant opportunity.”
Prior to closing, AMD, ATIC and Mubadala will file a joint voluntary notice of the transaction for review by the Committee on Foreign Investment in the United States (CFIUS), a government inter-agency committee chaired by the Secretary of the Treasury.
Upon closing, The Foundry Company is expected to have a total enterprise value of $5B, consisting of AMD’s contribution of manufacturing assets and intellectual property (including its fabs in Dresden), intellectual capital and employees valued together at $2.4B; ATIC’s contribution of $1.4B in new capital; and $1.2B of debt assumed by The Foundry Company from AMD.
