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Dubai debt won't affect AMD, GlobalFoundries

Posted: 07 Dec 2009 ?? ?Print Version ?Bookmark and Share

Keywords:Dubai crisis? processor? microprocessor?

Neither Advanced Technology Investment Co. LLC (ATIC) nor Advanced Micro Devices Inc. is likely to be affected by the Dubai debt crisis, according to a note from financial analysts FTN Equity Capital Markets Corp.

State-owned Dubai World said it would delay repaying some of its debt by six months. The company, with debts of $59 billion, was estimated to be holding almost three quarters of the State of Dubai's total debt of $80 billion. As a result concerns grew that Abu Dhabi, a neighboring state in the United Arab Emirates, might be forced to bail out Dubai.

A further worry was that the debt crisis could threaten funding for GlobalFoundries Inc.

The share price of microprocessor vendor AMD also came under pressure as it ramps up GlobalFoundries to manufacture processors. Another Abu Dhabi government investment vehicle, Mubadala Development Co., owns 19 percent of AMD.

"We believe these concerns are unwarranted and are reiterating our BUY rating on AMD. We are also raising our estimates on lower interest expenses anticipated through reduction of 2012 debt," FTN analysts said in the note.

It now appears that Abu Dhabi is likely to bail out Dubai World, but the problem appears manageable.

"In all, ATIC has committed approximately $12 billion to the AMD/GlobalFoundries effort and has set aside $4 billion to $6 billion just for the build-out of Dresden and New York facilities," the note to investors said. "These commitments are ring-fenced from any other funding needs and activities. All indications point to an acceleration of the spending timetable at GlobalFoundries, rather than a slowdown."

The note also stressed that ATIC's purchase of Chartered Semiconductor Manufacturing Co. in Singapore has been approved by shareholders, and has only routine regulatory hurdles to clear. The analyst said ATIC has likely set aside the entire $3.2 billion needed for the completion of that purchase.

Abu Dhabi has a sovereign fund valued at between $700 billion and $800 billion in assets. This accumulated wealth is best on the sale of oil and borrowing against oil reserves.

"If Abu Dhabi does end up helping out Dubai, we believe this would be unlikely to disturb any activities of ATIC. ATIC's mandate is to develop new foundations for long-term growth; we expect that to remain a very high priority for the government," the note concluded.

However, the analysts did not comment on any impact the debt crisis might have on the Dubai Silicon Oasis, a technology park aimed at the microelectronics and semiconductor industries. It is being developed largely on the premise: "Build it and they will come." The estimated total cost of the Dubai Silicon Oasis has been estimated to be as high as $1.3 billion. A zero tax regime and additional incentives are being used to attract companies and skilled workers to the campus.

- Peter Clarke
EE Times Europe





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