AMD has decided to change the wafer supply contract with Globalfoundries. AMD will continue to pay for wafers through the end of 2024 and is expected to spend $ 1.6 billion. However, all exclusivity obligations have been lifted, so that AMD can now have chips manufactured anywhere and with any technology.
The contract manufacturer Globalfoundries, which emerged from the spin-off of AMD's semiconductor plants in Dresden, is still closely associated with AMD, at least legally. Because both companies maintain what is known as a wafer supply agreement, under which AMD is obliged to purchase certain quantities of wafers and global foundries in turn to provide corresponding production capacities.
The latest change to the supply agreement stipulates that Globalfoundries must reserve a certain proportion of its manufacturing capacity in the 12 nm and 14 nm process for AMD by December 31, 2024. In return, AMD will have to continue to buy certain quantities of wafers and, according to its own estimates, will spend around 1.6 billion US dollars for the years 2022 to 2024. AMD is to make advance payments for certain quantities for the years 2022 and 2023. Should the quantities actually purchased by AMD fail to meet the previously agreed targets, the company will have to pay at least part of the difference. Currently, among other things, the I/O dies for processors of the Epyc and Ryzen families from AMD are manufactured by Globalfoundries.
Exclusivity obligations are a thing of the past
Given the approach taken so far, the updated agreement does not seem unusual on these points. The more interesting novelty lies elsewhere, because in the course of the new contract, AMD no longer has any restrictions on the use of other manufacturers' offers. AMD now has the full flexibility to enter into contracts with any other contract manufacturer, regardless of which product or manufacturing process is used. AMD now has the actual CPU dies manufactured by the contract manufacturer TSMC using the 7 nm process; this was already permitted under the previous agreement.
< p class = "p text-width"> The A & amp; R Seventh Amendment also removes all prior exclusivity commitments and provides the Company with full flexibility to contract with any wafer foundry with respect to all products manufactured at any technology node.
While the previous amendment to the supply contract was valid until March 1, 2024, the new agreement ends on December 31, 2024. It is at least unlikely that there will be a further extension of the Wafer Supply Agreement between AMD and Globalfoundries will come. According to this, AMD would ultimately be freed of its “legacy” from 2025.