FILE PHOTO: A smartphone with a displayed AMD logo is placed on a computer motherboard in this illustration taken March 6, 2023. REUTERS/Dado Ruvic/Illustration/File Photo
(Reuters) -AMD will sell the server-manufacturing business of recently acquired ZT Systems to Sanmina in a $3 billion deal, making the U.S.-based contract manufacturer its partner for building AI hardware as the chip designer works to onshore supply chains.
The deal, announced on Monday, highlights AMD's efforts to produce more of its chips on American soil amid global trade tensions and U.S. President Donald Trump's efforts to expand domestic semiconductor manufacturing.
AMD shares were down 2.2%, while Sanmina fell more than 5%.
"We expect to strengthen our U.S.-based manufacturing capabilities for rack and cluster-scale AI systems and accelerate quality and time-to-market for our cloud customers," said Forrest Norrod, executive vice president of AMD's data center solutions business unit.
The company had said last month its key central processor chips would soon be made at TSMC's new production site in Arizona — marking the first time its products will be manufactured in the U.S.
AMD had announced a $4.9 billion buyout of ZT Systems in 2024 and unveiled plans to sell its server manufacturing business once the transaction closes. The deal was completed in March.
Under Monday's agreement, AMD will retain ZT's AI systems design business — a key asset amid escalating computing requirements that require mapping out thousands of chips strung together in clusters.
ZT's design unit could be an important portfolio item for AMD, which has been struggling to compete against Nvidia in the booming market for AI processors.
Sanmina will pay $2.25 billion in cash for ZT Systems' manufacturing business, along with a $300 million premium consisting of 50% cash and 50% equity.
The deal, expected to close near the end of this year, also includes a $450 million contingent consideration based on the business' financial performance over the next three years.
AMD is entitled to receive up to $153 million, if the deal is terminated.
(Reporting by Arsheeya Bajwa in Bengaluru; Editing by Shilpi Majumdar)
