Abu Dhabi's tech fund ups stake in Globalfoundries to 100 per cent

Abu Dhabi's Atic has totally acquired chipmaker Globalfoundries. Photo by Jeff Topping / The National

??Abu Dhabi's Advanced Technology Investment Company (Atic) is fully acquiring Globalfoundries, a semiconductor chip maker, as it seeks to grow business from an expanding market of smartphones and mobile gadgets.

The deal, which was announced this morning, means Atic is acquiring the remaining equity stake of nearly 9 per cent in Globalfoundries. That stake was previously controlled by Advanced Micro Devices (AMD), a semiconductor company headquartered in the US.

Acquiring the remaining stake in Globalfoundries is “much more than symbolic”, said Ibrahim Ajami, the chief executive of Atic.

“It enables Globalfoundries to continue to execute on its strategy, which is serving world-class customers, serving leading semiconductor companies in the world and offering them leading-edge technology,” he said.

Some of this gadgetry includes tiny chips, the production of which is being increased to feed a growing demand for smartphones. These technologies are designed to support more graphics and features while consuming less power and providing longer battery life.

Further investing in Globalfoundries gives Atic a deeper foothold in what the company sees as a high-value sector. Atic is a wholly owned subsidiary of Mubadala Development, a strategic investment company is owned by the Abu Dhabi Government.

Prior to the deal, AMD was considered a strategic partner and customer of Globalfoundries.

“Now, in transition, AMD continues to be a strategic partner and important customer – but no longer a shareholder in Globalfoundries,” Mr Ajami said.

In a statement, AMD announced that it had amended its wafer supply agreement with Globalfoundries, where it both agreed to transfer its remaining ownership interest to Globalfoundries and negotiated a wafer price mechanism for this year. AMD also stated that Globalfoundries had waived an exclusivity agreement for AMD to manufacture certain products. As a result, AMD said it had agreed to pay a cash payment of $425 million.

Overall, AMD said it expects to record a one-time charge of $703 million in the first quarter this year, consisting of both the $425 million cash payment and a non-cash charge.

"The amended wafer supply agreement demonstrates that AMD and Globalfoundries remain committed as long-term strategic business partners," said Rory Read, chief executive of AMD, in a statement. "We 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."

In a separate statement, Globalfoundries' chief executive said, "today marks the start of a new era for Globalfoundries as it becomes a truly independent foundry."

Plans to start building a factory in Abu Dhabi this year were previously delayed, and there is still no specific start-up date for the facility.

“We’re focused on getting it right, and getting all the pieces in place,” Mr Ajami said.

“We will do an evaluation on a timing perspective.

“You have internal forces, customer demand and a lot of the external macroeconomic competitive dynamics – and it’s changing all the time.”

Atic is also planning to launch a new semiconductor research centre in the UAE during the first quarter of next year. 
However, creating a local, robust research and development environment will take "years", Mr Ajami said.

“We have to build it one brick at a time.”