AMD Amends Global Foundries Wafer Supply Deal

Ever since spinning off their own semiconductor foundries, AMD has had a rocky road with their foundry partner. Called Global Foundries, the once AMD own fabs have remained a trouble for the processor firm. As part of their ongoing relationship, AMD has renegotiated their Wafer Supply Agreement with Global Foundries. This amendment will last until the end of 2020 with 4 years left to go until 2024 when the agreement ends.

As part of the dealing to spin off Global Foundries, AMD committed to a take or pay deal for wafers. This gave them a discount but meant if they didn’t meet their sales targets, the company would be shelling out extra cash. Due to poor performance over the past half decade, this has meant the Wafer Supply Agreement has been a massive drain on AMD’s already precarious financial situation. This amendment gives them a bit more flexibility to buy from other foundries but would require paying a penalty per wafer back to Global Foundries.

This amendment gives AMD a bit more flexibility to buy from other foundries. This likely means TSMC for use in SoCs and CPUs since those have always been built using Global Foundries. For GPUs, since TSMC has been a partner for a very long time, it’s unlikely this amendment dealt with that. While the amendment offers AMD more flexibility, it means  paying a penalty per wafer bought from either TSMC, Samsung or another foundry back to Global Foundries. How much this will cost has not been revealed.

In relation to the new agreement, there is also going to a big hit on AMD’s financials this quarter. The deal itself costs $100 million and a warrant to Global Foundries owner Mubadala Development Company for share options costs another $235 million. Hopefully, this means the company is hoping for cost savings in the excess of $325 million or that the other foundries will give them a competitive advantage.