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Originally published Sunday, March 4, 2012 at 10:52 PM

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Abu Dhabi gets full ownership of chip manufacturer

The Abu Dhabi government on Monday agreed to acquire full control of Advanced Micro Devices Inc.'s former microchip manufacturing unit, though AMD will remain a key customer.

AP Business Writer

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DUBAI, United Arab Emirates —

The Abu Dhabi government on Monday agreed to acquire full control of Advanced Micro Devices Inc.'s former microchip manufacturing unit, though AMD will remain a key customer.

AMD is giving up its minority stake in Milpitas, Calif.-based manufacturer GlobalFoundries as part of a revised supply agreement. The deal will give Abu Dhabi's Advanced Technology Investment Co. total ownership of GlobalFoundries, which was founded as a spin-off from AMD in 2009.

While AMD will remain one of GlobalFoundries' "strategic customers," it will now be better positioned to diversify its customer base, according to ATIC communications head Laurie Doyle Kelly.

"It can really pursue its strategy and mandate of being a fully independent foundry," she said in an interview.

A foundry does the work of manufacturing chips for microprocessor designers such as AMD that do not operate their own production plants. Sunnyvale, Calif.-based AMD is the world's number two maker of personal computer microprocessors - the "brains" of PCs - after Intel Corp.

GlobalFoundries has chip-making plants in Dresden, Germany and Singapore. It is starting production at a new plant in upstate New York, which it expects will be fully operational by the end of this year or early 2013, Kelly said.

Under the terms of their new wafer supply deal, AMD said GlobalFoundries agreed to waive a requirement that it buy a new type of chip for a set period and make quarterly payment obligations that were outlined in an earlier supply agreement.

In addition to giving up its less than 10 percent stake, AMD said it will pay GlobalFoundries $425 million as part of the deal. It expects to book a one-time charge of $703 million in the first quarter to cover the cash payment and other costs.

AMD spun off its chip-making operations into GlobalFoundries in 2009 in an effort to cut costs. ATIC took a majority stake in the newly created company at the outset.

ATIC was set up by the government of Abu Dhabi to drive the development of a technology industry in the oil-rich sheikdom, the capital of the United Arab Emirates. It bought Singapore's Chartered Semiconductor Manufacturing Ltd. for $1.8 billion in 2009 and combined those operations into GlobalFoundries' business.

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