Advanced Micro Devices` (AMD`s) local arm will make no changes to its local operational plans following the company`s decision to spin-off its manufacturing business.
The global hardware company announced it would join forces with Advanced Technology Investment Company (ATIC), of Abu Dhabi, to create an as yet unnamed foundry company that will take over AMD`s chip manufacturing.
In an exclusive interview with ITWeb, AMD SA country manager Imi Mosaheb said the spin-off of the manufacturing business would create opportunities for local chipset designers hoping to have their designs manufactured. "Africa will be a new opportunity for the foundry company.
"By spinning-off the manufacturing, the new company will have the opportunity to nurture new customers and not focus entirely on AMD`s manufacturing. As such, local designers will have the chance to approach the new business with their own designs," added Mosaheb.
Financial interest
The plan is essentially the outsourcing of an expensive section of the business. "It was a strategic and financial move. The spin-off business will alleviate the extremely high costs associated with the manufacturing of these components."
Following hefty investments by both AMD and ATIC, AMD will own 44.4% of the new business and ATIC the rest.
ATIC will invest $2.1 billion to purchase its stake in the foundry company, of which it will invest $1.4 billion directly in the new entity and the remainder will be paid to AMD to purchase additional shares in the foundry company.
ATIC has also committed to an additional equity fund which will make up a minimum of $3.6 billion and up to $6 billion over the next five years to fund the expansion of the new business`s chip-making capacity.
The new company will also have close executive ties to AMD, since the company`s current senior VP of manufacturing will head up the business. Hector Ruiz will take on the new company`s chairmanship, leaving the same role at AMD.
Long-time outsourcer
AMD will retain all design, testing, marketing, sales and packaging of all the chips manufactured through the foundry business.
The company has a long history of outsourcing in manufacturing. When the company purchased the ATI business, all manufacturing had already been outsourced. "If that model works for ATI, it will work for AMD," noted Mosaheb.
He pointed to the many businesses across the globe that are increasingly outsourcing expensive operations that are not core to the business. AMD`s core business is in chip design and Mosaheb said it makes sense to outsource the manufacturing.
Intel strikes back
Meanwhile, rival Intel has been quick to warn AMD about what it calls "patent and cross-licensing concerns".
These stem from agreements between the companies which date back to the late 1970s. The agreements have restrictions that expire in 2010 and relate to the transfer of the licences.
Mosaheb said Intel is concerned about what AMD is doing, because outsourcing its manufacturing will make it more flexible and competitive. "If you are a large company with everything done in-house, it becomes difficult to be liquid. And flexibility is required in this day-and-age."
The company expects little regulatory resistance to the spin-off and hopes it will provide AMD with the possibility of higher manufacturing volumes and faster recovery times.
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