AMD Spins Off GlobalFoundries Chip Making Unit

GlobalFoundries, the chip-manufacturing spin-off of Advanced Micro Devices, officially opened for business Wednesday and laid out its preparations for moving to next-generation 32-nanometer products.

The joint venture of AMD and Advanced Technology Investment Co. said it will expand its Dresden, Germany, manufacturing capacity by bringing a second facility online in late 2009. Called Fab 1, the Dresden complex will dedicate one of its two facilities to making 45-nm chips, which AMD is in the process of transitioning its products to, and the other to 32-nm processors.

The numbers refer to the size of the microprocessor circuitry. The smaller the size, the more transistors can be placed on a piece of silicon, which translates into much higher performance without increasing power consumption. The move to 32-nm is seen as the next big jump in processor performance. A nanometer is a billionth of a meter.

GlobalFoundries, which will be AMD's main manufacturer, also plans to begin construction this year on a 32-nm manufacturing facility at the Luther Forest Technology Campus in Saratoga County, N.Y. Called Fab 2, the facility is expected to employ 1,400 people. GlobalFoundries, headquartered in Silicon Valley, Calif., currently employs 3,000 people worldwide.

AMD's larger rival Intel also is preparing its fabrication plants, or fabs, for the move to 32-nm chips. The company last month said it would invest $7 billion in the United States over the next two years to upgrade existing fabs for production of the next-generation technology.

Intel plans to start making 32-nm products in the fourth quarter of this year, while AMD expects GlobalFoundries to do the same by the middle of next year. The manufacturer, however, hasn't disclosed a production timetable.

AMD owns a 34.2% share of GlobalFoundries, with ATIC, formed by the Abu Dhabi government, holding the remaining stake. The spin-off deal was crucial in getting more than $1 billion in debt off of AMD's books, while also bringing an $825 million cash infusion.

In switching from a manufacturer to a design-only company, AMD hopes to reverse a string of quarterly losses that have amounted to several billion dollars. In January, the company reported a loss of $1.4 billion in the fourth quarter of last year.

In officially opening for business, GlobalFoundries, which also plans to make chips for companies other than AMD, is entering a market that has been crippled by the economic recession. The semiconductor industry this year is expected to see a near-record revenue decline of 24.1% from 2008 before returning to growth in 2010, according to Gartner.

Doug Grose, formerly senior VP of manufacturing operations at AMD, has been named chief executive of GlobalFoundries, with Hector Ruiz, former executive chairman and chairman of the board at AMD, appointed chairman. Bruce McDougall, former CFO of EMAL, is CFO. EMAL is an aluminum smelting and power plant project under construction in the United Arab Emirates, which is building the facility in partnership with Mubadala Development.

GlobalFoundries is a member of IBM's alliance of chip manufacturers that pool resources for research and development. Through AMD, GlobalFoundries has a technology agreement with IBM that it has extended to 2015. The alliance is currently working on 22-nm manufacturing processes.

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