For processors, smaller is super, but bigger is better for the wafers the processors are made from. Earlier this week, the Taiwan government gave TSMC -- which manufactures chips for virtually everybody -- permission to build a new $10 billion facility dedicated to creating 450mm-wide wafers, up from the 300mm-wide wafers being developed today. Intel also has plans to move to 450mm wafers. Larger diameter wafers yield more processors, which lowers production costs and makes everybody happy. Just don't expect them to come easy.
Call it the dawn of a new era or the beginning of the end, but however it turns out, AMD has officially closed the deal to finalize its processor manufacturing spinoff. Previously coined The Foundry, the new company will now be called Globalfoundries and led by former AMD executives.
"With the close of this historic transaction, AMD and its committed partners have conceived two strong industry-leading companies capable of charting future courses that will dramatically improve the technology industry,” said Dirk Meyer, president and chief executive officer of AMD. "Our ‘Asset Smart’ strategy is about more than providing AMD with long term access to world-class, leading-edge semiconductor manufacturing that is foundational to our growth strategy. It is about transforming the industry."
The finalized deal improves AMD's cash position by about $825 million, and as previously reported, the spinoff will be responsible for AMD's manufacturing needs. Globalfoundries also said it will offer an expanded roadmap of technologies to third-party customers, giving them early access to volume chip production when traditionally new technologies would be limited only to high-end microprocessor makers.
A new $4.2 billion manufacturing facility at the Luther Forest Technology Campus in Saratoga County, NY is also being planned. The facility will focus on 32nm and smaller technologies, and according to Globalfoundries, it will be the only independently-managed, advanced semiconductor manufacturing foundry in the U.S.
Time will tell if this proves to be a somber moment or cause for celebration, but AMD on Wednesday announced that it had secured stockholder approval for the creation of 'The Foundry Company.' That means AMD can now officially focus its efforts on the design of new chips and technologies, leaving the burden of manufacturing and associated costs to its Abu Dhabi-based spinoff.
While the split into separate design and manufacturing firms represents a major shift for the No. 2 CPU maker, the original vote had to be postponed after a low turnout by shareholders last week. At the time, 97 percent of the shares voted were cast in favor of the spinoff, but the shares voted represented only 42 percent of its total stock. This time around, AMD managed to scrounge up the majority vote it needed.
Under terms of the deal, AMD stockholders approved a proposal to issue 58 million shares of the company's common stock with warrants to purchase 35 million shares of its common stock and 35 million shares of the common stock upon exercise of those warrants to an affiliate of the Mubadala Development Company PJSC.
The transaction is expected to close by March 2, 2009.
Two months ago AMD made the decision to split into separate design and manufacturing companies. Under terms of the deal, which involved significant investments from the Abu Dhabi government, AMD was to own 44 percent of the new entity involved with chip making, temporarily known as the Foundry Company.
More recently, AMD cut its 4Q revenue forecast by 25 percent citing a sluggish global economy as the culprit. In an effort to reduce its manufacturing costs and realign itself with the current state of the economy, AMD said it will own less of the Foundry Company spinoff.
Abu-Dhabi-based Advanced Technology Investment Company (ATIC) was already a majority owner in the Foundry, and under terms of the new deal, ATIC will increase its share to 65.8 percent, with AMD dropping down to 34.2 percent. Other changes to the original deal include a restructured agreement that now says Mubadala, a minority owner, will purchase 58 million shares of AMD's common stock at a revised purchase price.
"All other material economic terms of the transaction agreements remain unchanged. ATIC will still 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 will pay $700 million to AMD," the chipmaker said in a statement.