AMD Shareholders Greenlight Processor Manufacturing Spinoff

After failing to get enough shareholder votes earlier this month, Advanced Micro Devices announced Feb. 18 that its stockholders had approved the deal to spin off its chip manufacturing facilities into a new company.

The deal to create the new business, tentatively called “The Foundry Company,” is now expected to close March 2. The agreement to create the new manufacturing company also involves the Advanced Technology Investment Company of Abu Dhabi.

Under the agreement, the new company will take ownership of AMD’s two fabrication plants, or fabs, in Dresden, Germany, where AMD’s line of x86 processors are manufactured.

In addition, the new company plans to complete work on a new fab in upstate New York.

The spinoff is expected to save AMD money and allow the company to concentrate on processor design and marketing as a way to better compete against Intel in the x86 market.

At the same time, The Foundry Company will continue to manufacture processors for AMD and execute plans to expand its business by competing against the likes of other chip manufacturing companies such as Taiwan Semiconductor Manufacturing. Right now, AMD is looking to convert most of its manufacturing to 45-nanometer, and the deal is not expected to stop those plans.

However, the process of creating this new company has run into some problems.

In addition to the shareholder vote delay, Intel has made some noise about the deal and has publicly questioned whether the plan violates an agreement AMD has with Intel to use some of its processor technology. AMD CEO Dirk Meyer dismissed those concerns during the company’s recent call with financial analysts.

The deal also comes at a time when AMD is desperate to return to profitability, especially as it has watched demand for servers and PCs drop as the United States slips deeper into a recession and global demand for laptops and other hardware begins to dwindle. AMD has also eliminated jobs and imposed salary freezes.

At the same time, Intel is gearing up to move some of its fabs to 32-nm production later this year and the company also has plans to close or convert some of its older facilities. Intel recently announced that it plans to invest $7 billion in its U.S.-based manufacturing facilities.