AMD Announces Multi-Year Amendment to the Wafer Supply Agreement With GLOBALFOUNDRIES

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busydude

busydude

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Feb 5, 2010
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Source: http://ir.amd.com/phoenix.zhtml?c=74093&p=irol-newsArticle&ID=2198716

"The five-year amendment further strengthens our strategic manufacturing relationship with GLOBALFOUNDRIES while providing AMD with increased flexibility to build our high-performance product roadmap with additional foundries in the 14nm and 7nm technology nodes," said Dr. Lisa Su, AMD president and CEO. "Our goal is for AMD to have continued access to leading-edge foundry process technologies enabling us to build multiple generations of great products for years to come."
 
Elixer

Elixer

Lifer
May 7, 2002
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The most important parts are:
In addition to modifying certain terms of the WSA applicable to AMD's microprocessor, graphics processor, and semi-custom products, the amendment:

  • Covers a 5-year period, spanning from calendar year 2016 through 2020;
  • Establishes a comprehensive framework for technology collaboration between AMD and GF for the 7nm technology node, building on the success of the 14nm node;
  • Provides AMD with the flexibility to manufacture certain products with another wafer foundry;
  • Sets annual wafer purchase targets from 2016 through the end of 2020, fixed wafer prices for 2016, and a framework for yearly wafer pricing.
In partial consideration for these rights, AMD will:

  • Make a $100 million cash payment to GF, paid in installments beginning in Q4 2016 through Q3 2017.
  • Make quarterly payments to GF beginning in 2017 based on the volume of certain wafers purchased from another wafer foundry.
  • Grant to West Coast Hitech L.P., a wholly-owned subsidiary of the Mubadala Development Company PJSC, a warrant to purchase 75 million shares of AMD common stock at a purchase price of $5.98 per share. The warrant may be exercised in whole or in part prior to February 29, 2020. The warrant is only exercisable to the extent that Mubadala or its subsidiaries do not beneficially own, either directly or indirectly, an aggregate of more than 19.99 percent of AMD's outstanding capital stock after the exercise.
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I assume "Provides AMD with the flexibility to manufacture certain products with another wafer foundry" is for TSMC or maybe Sammy's fabs?

BTW, $100 Million cash payment every this Quarter smells bad. And this is tanking the stock now...
GloFlo continues to be the albatross around AMD's neck.
 
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Centauri

Centauri

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^I'm not reading that as a quarterly $100m payment, I'm reading it as a $100m payment broken down across several quarters.
 
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RoarTiger

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You know AMD's existing wafer agreement is bad when they are willing to pay $335 million plus additional payments for wafers purchased from other foundries just to modify the terms for a four year period. Hopefully this will loosen the GF noose around their neck enough so that we can actually see some top notch product again.
 
ClockHound

ClockHound

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Nov 27, 2007
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Centauri said:
^I'm not reading that as a quarterly $100m payment, I'm reading it as a $100m payment broken down across several quarters.
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That's how it reads to me too. If only they had the legal beagles to annotate it as 100M CDN, they'd get a 33% discount up front. With more to come! ;-)
 
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positivedoppler

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Apr 30, 2012
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GF is like the expensive Ex-Wife you just can't get rid of to move on with your life. Their 14nm was suspect(Polaris Watts) and was behind schedule. They demand a ridiculous amount of alimony and AMD is living in poverty supporting these payments.
 
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Elixer

Elixer

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Centauri said:
^I'm not reading that as a quarterly $100m payment, I'm reading it as a $100m payment broken down across several quarters.
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Hmm... well, from the Wall Street Journal: http://www.wsj.com/articles/amd-globalfoundries-change-terms-of-business-agreement-1472683377

AMD estimated it would book a $335 million charge in the current quarter. The amount includes $100 million in cash payments to be made to Globalfoundries and $235 million for the estimated value of a warrant to Mubadala Development Co.’s West Coast Hitech LP to buy 75 million AMD shares at $5.98 a share. The warrant is exercisable by Feb. 29, 2020.
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So, if it is $100 million total, then why did they add it all to this quarter?
 
A

atakall

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Elixer said:
Hmm... well, from the Wall Street Journal: http://www.wsj.com/articles/amd-globalfoundries-change-terms-of-business-agreement-1472683377



So, if it is $100 million total, then why did they add it all to this quarter?
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It is, indeed, $100 million total spread over four quarters (iirc). This question, along with why AMD was booking the entire charge on the warrants, was addressed during the call near the end. You can still listen to the conference call here.
The explanation, imo, was not satisfactory (essentially "the warrants will likely be exercised so we're taking the entire charge now") and it did not actually address or discuss the various accounting rules that would permit such. The answer is most likely (a) it's permissible under GAAP; and (b) they believe that taking the one time charge now will provide a better perspective on AMD's underlying financial picture going forward (versus taking the charges over various quarters).
 
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beginner99

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Jun 2, 2009
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Shouldn't they be able to fullfill WSA with their console SOCs? I mean that the one great things about the console market for AMD: high volume.
 
Elixer

Elixer

Lifer
May 7, 2002
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atakall said:
It is, indeed, $100 million total spread over four quarters (iirc). This question, along with why AMD was booking the entire charge on the warrants, was addressed during the call near the end. You can still listen to the conference call here.
The explanation, imo, was not satisfactory (essentially "the warrants will likely be exercised so we're taking the entire charge now") and it did not actually address or discuss the various accounting rules that would permit such. The answer is most likely (a) it's permissible under GAAP; and (b) they believe that taking the one time charge now will provide a better perspective on AMD's underlying financial picture going forward (versus taking the charges over various quarters).
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I see, thanks for the info!
I suppose it would look better on the books, once this quarter is over, but, a $335 million hit in this quarter is pretty huge.
 
NTMBK

NTMBK

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Nov 14, 2011
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And GloFo continues to suck the life out of their biggest customer. Who on earth would choose to go into business with these vampires after seeing what they have done to AMD?
 
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raghu78

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Aug 23, 2012
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NTMBK said:
And GloFo continues to suck the life out of their biggest customer. Who on earth would choose to go into business with these vampires after seeing what they have done to AMD?
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Actually nobody. Other than IBM who have basically given GF their 14nm SOI FINFET process technology to manufacture Power 9 high performance CPUs and AMD who is tied to GF due to WSA nobody is going to bother with GF. If somebody wants the best foundry process they will go to TSMC 16FF+ . If somebody feels they will not get the wafer volume they want because of very high demand for TSMC 16FF+ they will go to Samsung 14LPP. The terms of the WSA clearly indicate that AMD is having to pay to get out of WSA commitments. Having to pay GF for products fabbed at other foundries is just ridiculous. But AMD need that option at 7nm as TSMC is going to have a big time to market lead and most probably the best transistor performance and yields when compared against other foundries. AMD cannot afford to fall too far behind Nvidia on process node as they are already behind architecturally in terms of perf/watt.
 
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leoneazzurro

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Jul 26, 2016
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It's the same with TSMC, I've read they will go directly next year to the 7nm node. It's only likely that being the projects for 10nm and 7nm so close in the timeframe, it makes no sense in splitting resources.
 
Centauri

Centauri

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Dec 10, 2002
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So... Enlighten me, people: When will WSA be over and done with?

Sent from my LG G4 with Tapatalk
 
Arachnotronic

Arachnotronic

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Mar 10, 2006
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Phynaz said:
This would be the "pay" part of "take or pay".
$335M worth of "pay".

And there's this:


Buy from TSMC, they still have to pay GF.

Hector Ruiz, the CEO that keeps giving. Guy was a crook.
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Absolutely ridiculous that if they buy wafers from another foundry they have to give GloFo a cut.

GloFo is going to get its pound of flesh from AMD, one way or another.
 
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raghu78

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Aug 23, 2012
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Phynaz said:
This would be the "pay" part of "take or pay".
$335M worth of "pay".

And there's this:

Buy from TSMC, they still have to pay GF.

Hector Ruiz, the CEO that keeps giving. Guy was a crook.
Click to expand...

I agree. Hector destroyed AMD with so many blunders starting with overpaying for ATI acquisition.

Arachnotronic said:
Absolutely ridiculous that if they buy wafers from another foundry they have to give GloFo a cut.

GloFo is going to get its pound of flesh from AMD, one way or another.
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yeah. truly bizzare. GF gets paid even when they do not execute. I am sure this amendment to WSA is due to the fact that GF has a rubbish 14LPP process implementation. Moreover AMD must be looking at 7nm and it looks like TSMC will have a huge time to market lead over Samsung (who will do 7nm only with EUV). So AMD are making sure they can manufacture at TSMC 7nm so that they do not fall too far behind Nvidia in process node.
 
K

krumme

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Oct 9, 2009
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It might look ridiculous with all that paying and its still a pain to watch but after a handfull of years this is a step in the right direction as mubadala via the share option gets interest in amd business.

Secondly it forces some kind of incentive into gf pricing level and performance as the process can be substituted by tsmc or samsung.

Third its a long term agreement that makes working conditions more calm. Will surely help the relationship.
Good job ;)

Now what it probably also means is zen needs some tsmc 16nm. Was there 2 tape outs?
 
ElFenix

ElFenix

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Elixer said:
Hmm... well, from the Wall Street Journal: http://www.wsj.com/articles/amd-globalfoundries-change-terms-of-business-agreement-1472683377



So, if it is $100 million total, then why did they add it all to this quarter?
Click to expand...
(i think, not an accountant so don't take my word as gospel) accrual basis vs. cash basis accounting. the obligation to pay the money accrues on the execution of the contract, so has to accounted for this quarter under accrual basis accounting.

edit: i see this was sorta covered. for the warrant they probably have an option as to how to account it because the warrant itself is a conditioned event.
 
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