AMD (Advanced Micro Devices) has announced the sale of the server-manufacturing division of its recently acquired ZT Systems to Sanmina, a prominent U.S.-based contract manufacturer, in a deal valued at approximately $3 billion.
Deal Overview: The transaction, disclosed on Monday, comprises a $2.25 billion cash payment and a $300 million premium, split equally between cash and equity. Additionally, the deal includes a $450 million contingent consideration based on the performance of the acquired business over the next three years. This structure underscores Sanmina’s confidence in the potential profitability and strategic value of the ZT Systems manufacturing unit.
AMD will retain ZT Systems’ AI systems design business, a critical asset as the semiconductor giant intensifies its focus on AI processors and data center solutions. The design unit is expected to play a key role in developing advanced AI hardware solutions, positioning AMD more competitively against industry leader Nvidia in the burgeoning AI market.
Strategic Rationale: This transaction aligns with AMD’s strategy to localize its supply chain and mitigate geopolitical risks. By divesting the server-manufacturing business to Sanmina, AMD is effectively shifting its focus from manufacturing to design and intellectual property development — a strategic pivot aimed at optimizing its operational structure while maintaining oversight of key AI-focused assets.
Furthermore, the deal is consistent with AMD’s efforts to expand U.S.-based semiconductor production. Recently, the company announced that its central processor chips would soon be manufactured at TSMC’s new facility in Arizona, marking a significant step in reshoring chip production amid escalating trade tensions.
Market Implications and Financial Considerations: The announcement had a mixed impact on market sentiment. AMD shares dipped 2.2 percent following the news, while Sanmina’s stock declined over 5 percent, Reuters news report said. Analysts attribute the market reaction to concerns over potential disruptions during the transition period and uncertainty regarding the integration of ZT Systems’ manufacturing assets into Sanmina’s existing operations.
Nevertheless, the long-term implications could prove favorable for AMD as it consolidates its AI-focused design capabilities and reduces manufacturing overhead. The deal structure also provides AMD with financial flexibility, with a $153 million termination fee provision if the agreement fails to close.
The sale of ZT Systems’ server-manufacturing division to Sanmina is a strategic realignment for AMD, enabling it to concentrate on high-margin AI design and development while leveraging Sanmina’s manufacturing expertise to scale AI hardware production.
InfotechLead.com News Desk
