Right-wing bloggers in the United States wasted no time in venting their outrage at the purchase last week of an 8 percent stake in Advanced Micro Devices by Abu Dhabi's government-owned Mubadala Development Co. One investor blogger promised to make his "anger known" to AMD and added, "If I sense that even more of AMD will be going to Muslim interests, I will be selling my stock and submitting AMD to the 'boycott Islam' company list."
The sovereign wealth funds run by Middle Eastern countries have indeed been on a buying binge for the past few years, investing their runaway oil revenues in a bid to stave off inflation in their countries. But do oil and silicon mix?
In 1979, Jean Riboud, chairman and CEO of Schlumberger, the world's leader in oil exploration services, proclaimed to Wall Street that silicon was "the petroleum of the future"--a bold rationalization from a man who had just paid $425 million to buy the leading American semiconductor manufacturer, Fairchild Camera and Instrument Corp. Schlumberger hoped Fairchild's technical expertise would help keep it ahead of the pack in its various fields.
But Fairchild lost money and drained valuable R&D dollars from the rest of Schlumberger. The parent was forced to write off much of Fairchild's assets and sell the rest to National Semiconductor in 1987, at a loss of $220 million.
There's more to the story. Before sealing the deal with National, Schlumberger set off a firestorm of national-security fears about foreign ownership of a U.S. semiconductor maker when it tried to sell Fairchild to Japanese chip maker Fujitsu.
The proposed sale was blocked after Defense Secretary Caspar W. Weinberger, Commerce Secretary Malcolm Baldrige and the Central Intelligence Agency took the unusual step of asking the White House to intervene.
Although the objections centered on national-security concerns, some federal officials also pointed to mounting trade friction with Japan. At the time, the deal was viewed as a test case on Japanese efforts to invest in the United States, particularly in strategically important high technology.
To what extent, if any, Abu Dhabi's AMD stock purchase might trigger similar government concern or intervention is a matter of intense speculation. Some observers said the deal could attract the attention of the U.S. Committee on Foreign Investment on national-security grounds. Last week, a spokesman for AMD declined to comment on the deal as it tried to distance itself from the "Fujitsu Factor" by claiming that, contrary to news reports, the company's work does not include government contracts.
In the end, the AMD investment may simply reflect the desperate financial plight of yet another U.S. semiconductor maker. From a broader perspective, however, it's a test of the nation's adaptability to new and controversial investment patterns in this brave new "flat" world.