Abu Dhabi government buys into U.S. chipmaker
"Advance Micro Devices has found a way to compete with Intel's balance sheet," declared AMD founder Jerry Sanders, "and that is by using Abu Dhabi's balance sheet."
Many companies have shied away from the costly business of chip manufacturing, but the government of Abu Dhabi is betting up to $8.4 billion on the sector, as part of a financial rescue plan for Advanced Micro Devices Inc.
The complex deal marks a major shift in the fortunes of AMD, which has been losing lots of money. It also reflects the long-term shift of wealth to oil-rich countries as well as short-term jitters in financial markets that have kept other investors on the sidelines.
Advanced Micro Devices Inc. and a recently formed investment firm owned by Abu Dhabi's government said October they will become joint owners in a new company that will take over AMD's factories in Germany.
The firm will make a $1.4 billion initial investment in the new venture, temporarily called Foundry Co., and make a $700 million payment to AMD for its share of the new company's assets.
The firm, dubbed ATIC, or Advanced Technology Investment Co., will provide $3.6 billion to $6 billion over five years to fund expansion plans, including upgrading an existing factory in Dresden and building a $3.2 billion chip factory and research center in upstate New York that will employ 1,400 people.
A factory in Abu Dhabi may also eventually follow, if financial conditions warrant, though Brazil and other locations are also possibilities, said Waleed Al Mokarrab, ATIC's chair.
The idea is for Foundry to assume the burden for running factories from debt-ridden AMD, which has struggled to keep up with giant Intel Corp. in developing new production processes.
Nicholas Sheble (email@example.com) writes and edits Government News.