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Tuesday, April 05, 2011
 AMD Amends Agreement with GLOBALFOUNDRIES to Ensure Wafer Supply Flow
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Message Text: AMD today announced that it amended its Wafer Supply Agreement (WSA) with GLOBALFOUNDRIES Inc. The company also announced the availability of the first Liano portable devices this quarter.

AMD said that the primary purpose of the amendment was to revise the pricing methodology applicable to wafers delivered in 2011 for AMD's microprocessor and accelerated processing unit (APU) products. The amendment also modified AMD?s existing commitments regarding future increases in production of certain graphics processing unit (GPU) and chipset products at GLOBALFOUNDRIES.

Under the amended agreement, GLOBALFOUNDRIES has committed to provide AMD with, and AMD has committed to purchase, a fixed number of 45nm and 32nm wafers per quarter in 2011. AMD will pay GLOBALFOUNDRIES fixed prices for 45nm wafers delivered in 2011. AMD's price for 32nm products will be based "on good die," AMD said.

In addition, AMD also agreed to pay an additional quarterly amount to GLOBALFOUNDRIES during 2012 if GLOBALFOUNDRIES meets specified conditions related to continued availability of 32nm capacity as of the beginning of 2012.

For 2012, AMD will resume compensating GLOBALFOUNDRIES on a cost-plus basis to manufacture wafers for its microprocessor and APU products. AMD currently estimates that it will pay GLOBALFOUNDRIES approximately $1.1 to $1.5 billion in 2011 and $1.5 to $1.9 billion in 20121 for wafer purchases under the amended WSA. In 2010, AMD paid GLOBALFOUNDRIES approximately $1.2 billion for wafer purchases. In addition, and unrelated to the WSA amendment, AMD began accounting for its investment in GLOBALFOUNDRIES under the cost method as of the first fiscal quarter of 2011. This transition was triggered by the contribution of Chartered Semiconductor to GLOBALFOUNDRIES and amendments to certain agreements.

It is obvious that AMD has to avoid future yields issues and is trying to put Globalfoundries in an insurance policy. According to sources, Globalfoundries experienced low 32nm yields in the beginning of last year, which were later solved.

In related news, AMD's Singapore plant just celebrated the first shipment of the company's 32nm Llano A-series APUs, complete with discrete-level graphics. The new chips promise to change the way we think about netbook / ultraportable performance, as it will support DirectX 11 and 3D gaming.

The Llano chips will be the first from AMD made using the 32-nanometer manufacturing process.

Chief Financial Officer and Interim CEO Thomas Seifert notes that AMD is looking forward to seeing Llano-based machines during this quarter.

Llano chips will compete against Intel's Sandy Bridge microprocessors, which also combine a CPU and GPU on a single chip.
 
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