AMD Sells Majority Back-end Manufacturing Fabs in a Joint venture

AMD sold a majority stake in its test, assembly and packaging facilities in Asia as part of a joint venture with China’s Nantong Fujitsu Microelectronics providing factories in Penang, Malaysia, and Suzhou, China, in exchange for $371 million in cash and a 15 percent stake in the new entity.

Nantong Fujitsu will get 85 percent ownership of the joint venture, which is expected to significantly reduce AMD’s capital expenditure, the companies said Thursday in a statement. About 1,700 AMD workers at the two factories will become employees of the joint venture, the companies said.

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The deal will provide AMD (Sunnyvale, Calif.) with an infusion of about $320 million as the company struggles the right the ship after reporting another quarterly loss that included a $65 million inventory write-down for older accelerated processing units (APUs). AMD also indicated it would look to drive revenue growth from more aggressive licensing of its technology going forward.

AMD will retain a 15% ownership in its test and assembly facilities in Penang, Malaysia and Suzhou, China. The 1,700 AMD employees at those facilities will be transferred to the joint venture.

The deal is consistent with AMD’s strategy to “focus the company on improving our long term financial performance by building great products and simplifying our business model,” said Lisa Su, AMD’s president and CEO, in a conference call with analysts.

“Forming a back-end manufacturing joint venture is a significant step toward achieving these goals, as we align our operating model with other fabless companies and strengthen our balance sheet,” Su said.

AMD reported third quarter sales of $1.06 billion, up 13% compared with the second quarter but down 26% compared with the third quarter of 2014. The company reported a net loss in accordance with generally accepted accounting principles of $197 million for the quarter, compared to a GAAP net loss of $181 million in the previous quarter and a GAAP net income of $17 million in the third quarter of 2014.

The third quarter marked AMD’s fourth straight quarterly loss. Earlier this month, AMD announced plans to cut 5% of its global workforce.

AMD has struggled in recent years amid a declining PC sales. As consumers have increasingly embraced mobile computing platforms such as tablets and smartphones, the dominance of x86 processors sold by AMD and Intel has decreased, opening the door for other types of processors based on the ARM architecture and others. In the first half of 2015, AMD slipped from the ranking of the 20 top chip suppliers compiled by IC Insights Inc.