AMD, Globalfoundries revise wafer deal

SAN JOSE, Calif. –Advanced Micro Devices forged a complex amendment to its wafer-supply agreement with Globalfoundries, a move that could give AMD a better deal, at least on 32nm wafers in 2011. As part of the deal AMD appears to be transitioning more of its business in chip sets and graphics processors to Globalfoundries and away from TSMC.

Under the amended deal, AMD will pay Globalfoundries only for good 32nm die it receives in 2011. Prices for 45nm wafers will now be based on a fixed pre-agreed price rather than a "cost-plus model and fixed cost underutilization charges" from Globalfoundries, according to an AMD statement.

As part of the deal AMD agreed to buy a fixed number of 32 and 45nm wafers per quarter in 2011. AMD estimates that it will pay Globalfoundries $1.1 to $1.5 billion in 2011 and $1.5 to $1.9 billion in 2012 for wafers. In 2010, it paid Globalfoundries about $1.2 billion for wafers.

In 2012, AMD will resume paying Globalfoundries for wafers on a cost-plus basis. AMD also agreed to pay an additional quarterly amount in 2012 if Globalfoundries meets undisclosed conditions for availability of 32nm capacity at the beginning of 2012.

In addition, AMD said it committed to increased production at Globalfoundries of some GPUs and chip sets, but details were confidential.  Traditionally, TSMC has made most of those parts, a carry over from the days when TSMC made the parts for ATI Technologies which AMD acquired in 2006.

Finally, AMD began accounting for its investment in Globalfoundries under the cost method as of the first fiscal quarter of 2011. AMD said as a result of the contribution, it will recognize a non-cash gain in its first fiscal quarter 2011 financial results of about $492 million related to the dilution of its equity interest in Globalfoundries.

AMD's interim CEO will hold a press conference Monday morning reviewing the amendment.