Word of the spinoff was welcome news to Wall Street, which responded by lifting AMD's stock by 18% this morning - at the same time that the Dow had dropped by 200 points, noted John Lau, a senior semiconductor analyst and managing director at Jefferies & Co., who predicted the spinoff early last month.

Lau said the spinout of the fab operation is a necessary move for AMD. "This fab spinout changes the equation on how to remain competitive," he said. "Now it's a design race."

The new offshoot business, which is being temporarily called The Foundry Co., will be co-owned by AMD and ATIC, which is owned by the government of Abu Dhabi in the United Arab Emirates. ATIC will shell out US$2.1 billion -- $1.4 billion going to the new company and the rest going straight to AMD, according to AMD.

The Foundry will assume about $1.2 billion of AMD's debt.

ATIC will own 55.6% of The Foundry and AMD will own 44.4%. Its board of directors will be equally divided between representatives from AMD and ATIC.