AMD Sheds Remaining Interest in Globalfoundries

The move comes amid significant changes for AMD, which last week announced it was buying microserver maker and Intel partner SeaMicro.

Advanced Micro Devices has shed the last stakes it had in Globalfoundries, the chip fabrication company that was created when AMD spun off its manufacturing business in 2009.

The move, announced March 4, means that while AMD will continue to contract with Globalfoundries for manufacturing some of its chips, it can now more fully engage other foundries, such as Taiwan Semiconductor Manufacturing Co. (TSMC). After spinning off the manufacturing business in 2009, AMD had contracted with Globalfoundries as its exclusive chip manufacturer. AMD has engaged other chip makers in recent years.

Globalfoundries officials said the company is now fully independent and fully owned by Advanced Technology Investment Co., which is owned by the government of Abu Dhabi.

The change comes through an amended wafer supply agreement between the two companies. Under the amended agreement, AMD will shed its remaining 9 percent stake in Globalfoundires and pay $425 million in cash over the next two years. AMD expects to take charges of $703 million in the first quarter ending its stake in Globalfoundries.

In addition, Globalfoundries agreed to waive $430 million that AMD was set to pay under the old wafer supply agreement. The two companies also have set the price for wafers for 2012 and have created a framework for pricing next year.

Globalfoundries also will no longer be the exclusive maker of AMD€™s upcoming 28-nanometer chips. Instead, Globalfoundries will make some of the chips, with other foundries manufacturing the others.

€œThe amended wafer supply agreement demonstrates that AMD and Globalfoundries remain committed as long-term strategic business partners,€ AMD CEO Rory Read said in a statement. €œWe made significant progress last year to strengthen our relationship, and we€™re pleased with Globalfoundries€™ recent performance in meeting our delivery requirements across our product line.€

AMD executives in the third quarter of 2011 were forced to cut their financial forecasts after problems at Globalfoundries€™ fab in Dresden, Germany, limited the supplies of AMD€™s 32nm €œLlano€ processors and other 45nm chips. AMD leaned hard on Globalfoundries to fix the issues, and executives have said over recent months that they have been pleased with the improvements at the fab.

Globalfoundries executives applauded the new agreement with AMD, saying it adds to the momentum the foundry has built up in recent months. The company in January announced plans to spend more than $3 billion this year to expand its facilities in Singapore, New York and Germany. In addition, Globalfoundries also noted that its new 300mm fab in New York began operations to develop new chips for IBM, and that it is continuing to grow its partnership with ARM Holdings.

"Today marks the start of a new era for Globalfoundries as it becomes a truly independent foundry," CEO Ajit Manocha said in a statement. "Globalfoundries has a clear vision to be the leading semiconductor foundry partner to AMD and one of the world's top technology companies."

AMD€™s Read has aggressively reshaped the company since becoming CEO last year. In the latest move, AMD announced on Feb. 29 plans to buy microserver maker SeaMicro for $334 million. The move not only enables AMD to become a larger player in the burgeoning market for high-performance, low-power servers for the Web and cloud markets, but also dealt a blow to larger rival Intel.

SeaMicro built its business using Intel€™s Atom chips to power their highly efficient systems, and in January announced its new SM10000-XE server, which runs on Intel€™s Xeon X3-1260L processors. AMD is expected to quickly begin transitioning the SeaMicro servers to its own chip technologies.