In a short note published by AMD this afternoon as part of an 8-K filing with the US Securities and Exchange Commission, AMD is disclosing that the company has once again updated its wafer supply agreement with long-time fab partner (and AMD fab spin-off) GlobalFoundries. In the most recent wafer supply agreement, AMD and GlobalFoundries have agreed to buy and supply $2.1 billion in wafers for the years 2022 through 2025, extending the previous agreement by one year and $500 million in wafers.
To refresh your memory, AMD and GlobalFoundries last signed a new wafer supply agreement (WSA) in May. This arrangement further separated the two companies, removing any exclusivity agreements and allowing AMD to utilize any fab for whatever node they wanted. Regardless, AMD chose to continue buying 12nm/14nm wafers from GlobalFoundries, with the two companies agreeing to a $1.6 billion purchase arrangement for wafers from 2022 to 2024.
The latest modification to the Wafer Supply Agreement, officially known as the First Amendment to the Amended and Restated Seventh Amendment to the Wafer Supply Agreement, essentially adds another year’s worth of manufacturing to the WSA. AMD’s 12nm/14nm wafer purchases have been increased by $500 million to $2.1 billion as a result of the amended amendment, which runs through 2025.
The particular per-year wafer supply objectives aren’t disclosed by AMD and GlobalFoundries, but the agreement essentially binds GlobalFoundries to supply AMD with a little over $500 million in wafers per year for the next four years.
The new agreement increases the price of such wafers as well as the pre-payment requirements for 2022/2023, in addition to yearly spending commitments. AMD isn’t saying much more about this than it is about the number of wafers.
It’s also worth emphasizing that, as in the previous agreement, these goals are reciprocally binding. GlobalFoundries is forced to devote a certain amount of capacity to AMD orders, and AMD is obligated to pay for these wafers regardless of whether they use them or not. Given the persistent chip shortage, AMD appears to be hedging their bets and securing some more supply a couple of years ahead of schedule. Given the price renegotiation, it’ll be fascinating to see if AMD was forced to accept higher overall prices to get a greater supply of wafers from GlobalFoundries.
Apart from that, AMD isn’t saying what they’ll do with the extra wafer capacity at the moment, but they did say it has nothing to do with takeover target Xilinx. Early-generation Ryzen devices, as well as the I/O, die for AMD’s current-generation Ryzen and EPYC CPUs, which employ GlobalFoundries’ 12nm/14nm technologies.
However, we would expect demand for those products to be slowing off in normal conditions, particularly by 2024/2025. The 12nm/14nm processes are old and getting older, so it’s unclear whether AMD is building backup plans to deal with the chip shortage or if they expect demand for current 12/14 products to continue (e.g. if they need to produce their current long-term embedded products in larger numbers).
Barring any further amendments to the WSA, the current agreement between AMD and GlobalFoundries will now expire on December 31st, 2025.
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