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Intel (Nasdaq: INTC ) is very proud of its manufacturing prowess. In fact, it's one of the strongest cards it holds in the never-ending rivalry against smaller processor designer Advanced Micro Devices (NYSE: AMD ) .
But now AMD has something it never had before: enough cash behind its manufacturing services to keep it competitive in the long run.
A Bloomberg report today says that Globalfoundries will double its capital investments this year, pumping the money into new and improved facilities on three continents. That's a $5.4 billion commitment that AMD could never have made on its own.
It's not all about making AMD look good: Globalfoundries Chief Financial Officer Rob Krakauer says that the big spending "is based on customer programs and requests. This isn't speculative." After acquiring Chartered Semiconductor and baking it together with AMD's factories, the customer list now includes Broadcom (Nasdaq: BRCM ) and Qualcomm (Nasdaq: QCOM ) ; heated AMD rival NVIDIA (Nasdaq: NVDA ) used to be a Chartered customer, but has probably moved its business elsewhere for competitive reasons.
But what it all boils down to is big investments in process methodology and manufacturing equipment, and AMD itself isn't paying for any of it. Whether or not Globalfoundries ever overtakes foundry leader Taiwan Semiconductor Manufacturing (NYSE: TSM ) is beside the point and really only matters if you're a Taiwan Semiconductor shareholder. AMD gains little (it does still own part of the company) from Globalfoundries widening its market reach, sales, or profitability, but gets all the benefits of a deeply funded manufacturing organization with strong ties to the company.
And it looks like the market gets it: AMD's stock jumped 2% today on this news and is reaching fresh six-month highs. It's a great start to what could be a banner year in AMD's rocky history.
Add AMD to your Foolish watchlist to stay apprised of coming twists and turns.