Business | Technology
ATIC's semiconductor production set to double
Shakes up contract chip industry with big buys and global subsidiaries
- By James Drummond and Robin Wigglesworth, Financial Times
- Published: 00:00 March 8, 2010
Abu Dhabi: On the wall of Ebrahim Ajami's office in Abu Dhabi, a web of geometric patterns cut into what looks like a bronze-gold disc set in a dark wood frame. But, rather than a piece of modern art or a vinyl record, the object is a wafer, a slice of pure silicon semiconductor material worth about $6,000 (Dh22,032), which is at the centre of Ajami's ambitions.
Ajami is chief executive of Abu Dhabi's Advanced Technology Investment Company, or Atic. If anything illustrates the scale of Abu Dhabi's high-tech manufacturing ambitions it is the fact that Atic made not one, but two multi-billion-dollar acquisitions last year. It thereby joined a select band of companies with the scale and the pockets to compete in the cutting-edge contract chip industry.
Atic invested $1.4 billion in a partnership with Advanced Micro Devices (AMD) of the US to spin off its manufacturing arm into a new company called Globalfoundries. AMD had suffered nine consecutive quarters of losses and rising debts as it tried to keep up with Intel, the world's biggest chipmaker.
Then, in September, Atic paid $1.8 billion for a majority stake in Chartered Semiconductor of Singapore. Contract chipmakers make wafers to the designs of other manufacturers and Chartered was the world's third-biggest. Including debt and convertible preference shares, the deal was worth about $3.9 billion.
"For the next three years we're going to invest whatever it takes to build this company up," Ajami says.
"The core theme of the Chartered acquisition was really customers, and it is really the driving force behind that acquisition," he says.
Asia exposure
Analysts see the Chartered deal as a move to ensure that Globalfoundries has access to customers when new capacity being built in facilities in New York and Dresden comes on stream. The deal also gives Atic exposure to growth in Asia, which Globalfoundries lacked given it had factories only in Europe and the US, say analysts.
Atic itself was spun out of Mubadala, Abu Dhabi's sovereign investment vehicle, in 2008. Mubadala retains a 19.3 per cent stake in AMD.
Every month, Ajami flies to Singapore, Dresden, New York and San Francisco to visit Atic subsidiaries. It is not just geography that is a problem. Temasek, the Singapore sovereign wealth fund from which Atic bought its stake, spent 22 years trying to make money out of Chartered.
Chinese companies have tried to enter the business, but failed to make money. Only Taiwan, home to United Microelectronics Corporation and Taiwan Semiconductor Manufacturing International Company (TSMC), has succeeded.
TSMC, which has a market share of 49 per cent according to iSuppli, is the clear industry leader and plans capital expenditure of $5 billion this year alone.
Atic is responding by building a $4.5-billion manufacturing facility in Saratoga, New York, which is due to be finished in 2012. It is expanding a similar facility in Dresden from 25,000 wafers a month to 60,000, at a cost of $3 billion. It is also expanding its plants in Singapore. Managers expect that, with the Atic investments, Globalfoundries will roughly double its capacity in 300-millimetre wafer production.
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