The Committee on Foreign Investment in the United States (CFIUS) this week gave the thumbs up on AMD’s plans to spin off its chip-making operations into a company that will be controlled by the emirate of Abu Dhabi. CFIUS, a federal interagency panel led by the secretary of the US Treasury, also approved Mubadala Development Company’s increasing its equity stake in AMD from about 8% to around 20% and taking a seat on AMD’s board. Mubadala is the strategic-investment arm of the Abu Dhabi government.
The AMD manufacturing spin-off is tentatively called The Foundry Company, and I sure hope the marketing whizzes at One AMD Place have a snappier corporate name than that in the works. The American chip maker will own about 34% of the new foundry venture, with majority ownership held by the Advanced Technology Investment Company (ATIC), another Abu Dhabi investment vehicle. All that money we give to the oil companies is being reinvested in a German-American semiconductor manufacturer that will fabricate microchips for AMD and for other customers.
ATIC is immediately putting some $2B into The Foundry Company and AMD. It will be investing billions more if the foundry venture’s plans to build one or more wafer fabrication facilities in upstate New York go forward this year, as expected.
Of course, this seems like a terrible time to make big investments in the semiconductor industry, which is in an extended downturn, like many industries. AMD archrival Intel just cut the guidance on Q4, saying sales will be down 23% compared with the year before, citing fewer orders from PC suppliers. The deal may prove to be a profitable bet, though, as business inevitably improves, and those chip makers with the manufacturing capacity to handle increased orders will thrive in the upturn. It’s timing those upticks that’s the big question.
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