A lot has been happening the past few months in the chip manufacturing business. While on one hand Intel’s sales have been soaring, its tiny rival AMD has been struggling. Not many years ago, Intel was troubled by the rate at which AMD was eating into its profits.
Today things are a bit different. Intel still maintains its monopoly in the microprocessor business. With sales just dwindling by the day, AMD had no choice, but to take drastic steps in order to be in a position to take on Intel. Among these, was shutting down its own manufacturing plants and raking in as many investments as possible — from wherever possible.
The money did come in, in the form of Advanced Technology Investment Company (ATIC), an Abu Dhabi state-owned venture capital firm that has pledged $2.1 billion. With this investment, ATIC will get a 55.6-per cent stake in the venture. $700 million will be paid to AMD, which will hold the remaining stake. As per the deal, both companies will have equal representation on the board.
Doug Grose, Senior Vice President of Technology at AMD will be the CEO of the new company, while Hector Ruiz, the current chairman of AMD will be the new chairman. Operations are planned at a new factory in New York early next year, with 1,400 employees.
Experts predict the new entity would start as a very small part of the industry, with probably around 5 per cent market share. However, in the long term, it is expected to significantly grow, with visible results expected after 2010. The new company christened Foundry Company will be a 3,000-strong entity and would own AMD’s two plants in Dresden, Germany. CPUs as well as chips for other companies will be manufactured from here.
All said and done, the optimistic plans for AMD haven’t gone down well with Intel, which has been vocal in questioning the deal.
Intel claims that AMD and Intel have a patent cross-licensing agreement under which AMD pays royalties to Intel. With controversy hitting out all around this development, what is left to be seen is the implication on prices on AMD and ATI-based processors and cards. Besides, this deal is also closely watched by companies like IBM, which has placed stakes on AMD-based PCs in the future.
AMD’s announcement now means that Intel is the last remaining company who both designs and manufactures chips themselves.