AMD gave up its own chip factories to stop losing the capital-spending war with Intel

AMD had spent years funding its own semiconductor fabrication plants to compete directly with Intel's far larger manufacturing budget, a burden compounded by debt from its costly 2006 acquisition of ATI Technologies. AMD's own SEC filing reports a net loss of approximately $3.1 billion for 2008, following a $3.4 billion loss the year before, even as it had already cut capital expenditures to $621 million from $1.7 billion in 2007.

On October 6, 2008, AMD signed a Master Transaction Agreement with Abu Dhabi's Advanced Technology Investment Company and West Coast Hitech to spin its manufacturing operations into a new joint venture. ATIC contributed roughly $1.4 billion in cash to the new entity and paid AMD $700 million directly for preferred shares, while the venture assumed about $1.1 billion of AMD's outstanding debt. The deal closed March 2, 2009, forming GlobalFoundries and transferring roughly 2.3 million square feet of AMD's manufacturing facilities in the US and Germany.

Freed from fab capital spending, AMD's costs and results both turned around quickly. Capital expenditures fell to $466 million in 2009 and $148 million in 2010, down from $1.7 billion in 2007, according to AMD's own SEC filings, while the company swung to net income of $304 million in 2009 and $471 million in 2010, reversing the $3.1 billion and $3.4 billion losses of the two years before.

Spun the factories into a joint venture with Abu Dhabi's ATIC, which paid $1.4b and assumed $1.1b debt, making AMD fabless and cutting capex to $148m by 2010.

Spinning off the fabs converted AMD's single largest capital burden, staying at the leading edge of chip manufacturing, into a joint-venture partner's obligation instead of AMD's own balance sheet.

Taking on ATIC's cash and debt assumption as part of the deal let AMD cut liabilities at the same moment it cut capital spending, improving both sides of the balance sheet together.

Becoming fabless let AMD compete purely on chip design against Intel's integrated model, rather than trying to match manufacturing scale AMD's revenue could never fund alone.

When capital spending on owning your own factories is bankrupting you against a much larger competitor, converting it into a joint venture can free the balance sheet faster than funding it alone.

AMD's net income reached $471 million by 2010, up from a $3.1 billion loss in 2008, while capital expenditures fell to $148 million from $1.7 billion in 2007, according to its own SEC filings. GlobalFoundries continued as an independent contract chip manufacturer, later acquiring other foundry businesses, while AMD's fabless model became the template it used for the rest of its history, including its later resurgence under CEO Lisa Su in the following decade.