Wednesday, August 31st 2016

AMD Announces Amendment to Wafer Supply Agreement With GLOBALFOUNDRIES

AMD announced that it has entered into a long-term amendment to its Wafer Supply Agreement (WSA) with GLOBALFOUNDRIES Inc. (GF) for the period from Jan. 1, 2016 to Dec. 31, 2020. "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 14 nm and 7 nm 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."

GLOBALFOUNDRIES' Fab 8 in Malta, N.Y. is playing a significant role in providing leading-edge capacity for AMD's graphics and processor products, including the recently launched AMD Radeon Polaris GPUs and upcoming "Zen"-based processors.
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.
AMD expects to record a one-time accounting charge in the third quarter of 2016 of approximately $335 million comprised of the $100 million payment and the $235 million value of the warrant.
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14 Comments on AMD Announces Amendment to Wafer Supply Agreement With GLOBALFOUNDRIES

#1
G33k2Fr34k
I can understand why. Glofo's 14nm is leakier than TSMC 28nm when it was announced back in early 2012.
Posted on Reply
#2
anubis44
This is almost certainly a good deal for AMD. They wouldn't be doing this unless it meant they could get more volume ramped up for Zen.
Posted on Reply
#3
Camm
What it looks like is AMD has modified its minimum wafer buy agreement with GloFo (which considering GloFo's ineptness has been a major cash hit on AMD for quite sometime).

What happens instead is AMD can produce wafers at other foundries, but GloFo gets a cut per wafer.

Obviously not ideal, but not much else AMD could do until 2020.
Posted on Reply
#4
R-T-B
G33k2Fr34k
I can understand why. Glofo's 14nm is leakier than TSMC 28nm when it was announced back in early 2012.
You read the article, right?

They aren't distancing themselves from GloFo. Opposite.
Posted on Reply
#5
LucidStrike
I think it's largely about skipping 10nm to 7nm.

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“I believe a few key customers looked at the 10nm process offering from TSMC and decided it will be better to wait for the 7nm solution,” said Joanne Itow, an analyst with Semico Research. “10nm will not get enough improvement compared to all the time and money required.”

“In general, we are seeing that this financial equation is pretty tight for most customers at 10nm,” GlobalFoundries’ Paggi said. “7nm, for most customers in most of the markets, appears to be a more favorable financial equation.”

http://semiengineering.com/10nm-versus-7nm/
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Posted on Reply
#6
Assimilator
R-T-B
You read the article, right?

They aren't distancing themselves from GloFo. Opposite.
Then why is this clause in the agreement?

"Provides AMD with the flexibility to manufacture certain products with another wafer foundry;"

There's only one other wafer foundry in town and that's TSMC's 16nm node, which has proved far superior to GloFo's 14nm. So I'm guessing that Vega will be TSMC 16nm, and perhaps even Zen (considering the low clocks on the demo silicon AMD was showing last week). Polaris may get a TSMC respin after the dust has settled from Vega and Zen's launches.

As for this:

"Establishes a comprehensive framework for technology collaboration between AMD and GF for the 7nm technology node, building on the success of the 14nm node;"

Further underlines the fact that GloFo botched 14nm royally, so AMD is going to take a more active involvement in 7nm development. And I'll bet there's an escape clause that says if they don't like what they see, they'll go back to TSMC.
Posted on Reply
#7
Cataclysm_ZA
Assimilator
Then why is this clause in the agreement?

"Provides AMD with the flexibility to manufacture certain products with another wafer foundry;"

There's only one other wafer foundry in town and that's TSMC's 16nm node, which has proved far superior to GloFo's 14nm. Everyone knows this, and since AMD has no Vega until next year, they need to get some extra mileage out of Polaris, so I'm guessing we'll see TSMC Polaris GPUs before 2016 is out.
This gives them the room to manufacture chips either at TSMC or Samsung's foundries, or to dump an entire product stack off to TSMC, and another stack to Samsung, leaving GloFo responsible for something like, say, Zen. The wording isn't an out for AMD to do less work at GloFo, it's quite the opposite.

Assimilator
As for this:

"Establishes a comprehensive framework for technology collaboration between AMD and GF for the 7nm technology node, building on the success of the 14nm node;"

Further underlines the fact that GloFo botched 14nm royally, so AMD is going to take a more active involvement in 7nm development. And I'll be there's an escape clause that says if they don't like what they see, they'll go back to TSMC.
Do we have anything that shows that they've botched up the process? After all the time and energy spent with Samsung, I don't think they've fudged this one up. Rather, I think it's that Samsung's process isn't mature enough for high-frequency dies at such a large size compared to what they normally use it for.

I think that the 7nm developments are also because AMD is the biggest customer at GloFo, and if they can use their foundry experience to tune the 7nm process in a way that best suits their products, then both parties come out winning.
Posted on Reply
#8
medi01
Cataclysm_ZA
The wording isn't an out for AMD to do less work at GloFo, it's quite the opposite.
Wah?
Mind blown.
Posted on Reply
#9
illli
I've felt for many years now that the crappy contract that AMD signed with GLOFLO has been dragging them down. I'm also convinced that since AMD is hamstrung to GLOFLO, that GLOFLO is ultimately responsible for AMD's gpus being much less power efficient than NV.

I remember a few years back, that the contract was so bad that AMD was paying them a few hundred million NOT to produce any cpus. That was just an awful contract from top to bottom.

While it seems encouraging that "Provides AMD with the flexibility to manufacture certain products with another wafer foundry" AMD also has to pay GLOFLO close to 1 billion over the course of a year. Seems like more of the same as before (paying them not to produce more chips)
Posted on Reply
#10
TheinsanegamerN
illli
I've felt for many years now that the crappy contract that AMD signed with GLOFLO has been dragging them down. I'm also convinced that since AMD is hamstrung to GLOFLO, that GLOFLO is ultimately responsible for AMD's gpus being much less power efficient than NV.

I remember a few years back, that the contract was so bad that AMD was paying them a few hundred million NOT to produce any cpus. That was just an awful contract from top to bottom.

While it seems encouraging that "Provides AMD with the flexibility to manufacture certain products with another wafer foundry" AMD also has to pay GLOFLO close to 1 billion over the course of a year. Seems like more of the same as before (paying them not to produce more chips)
AMD was less power efficient then nvidia with the 200 and 300 series, both of which were on 28nm TSMC. 3 years and AMD couldn't solve the problem. Please explain how global foundries was at fault there.

The issue isnt GF, it's that AMD never had a maxwell-style redesign. What we got in polaris should have been the 300 series, but AMD couldnt get it out until now.
Posted on Reply
#11
Camm
TheinsanegamerN
AMD was less power efficient then nvidia with the 200 and 300 series, both of which were on 28nm TSMC. 3 years and AMD couldn't solve the problem. Please explain how global foundries was at fault there.

The issue isnt GF, it's that AMD never had a maxwell-style redesign. What we got in polaris should have been the 300 series, but AMD couldnt get it out until now.
Maxwell style redesigns wouldn't have suited AMD's strategy with GPU's however (Maxwell is so power efficient mostly because it doesn't have compute on die - which for DX11\OpenGL games, was pretty well much unneeded). But AMD shifted the market to Vulkan\DX12 thru mantle to suit parallel style architectures.

GloFo has a history of fucking up its processes and being late to market, the problem really is is that when AMD became fabless (creating GloFo), one of the conditions of sale was minimum wafer buys until 2020. By the looks, this reengineers this agreement somewhat so AMD can satisfy its minimum wafer buys with purchases at other fabs, as long as GloFo gets a kickback. Obviously not ideal, but a better situation regardless.
Posted on Reply
#12
R-T-B
Assimilator
Then why is this clause in the agreement?

"Provides AMD with the flexibility to manufacture certain products with another wafer foundry;"

There's only one other wafer foundry in town and that's TSMC's 16nm node, which has proved far superior to GloFo's 14nm. So I'm guessing that Vega will be TSMC 16nm, and perhaps even Zen (considering the low clocks on the demo silicon AMD was showing last week). Polaris may get a TSMC respin after the dust has settled from Vega and Zen's launches.

As for this:

"Establishes a comprehensive framework for technology collaboration between AMD and GF for the 7nm technology node, building on the success of the 14nm node;"

Further underlines the fact that GloFo botched 14nm royally, so AMD is going to take a more active involvement in 7nm development. And I'll bet there's an escape clause that says if they don't like what they see, they'll go back to TSMC.
I've been combatting a fever as of late and my reading skills are suffering. Thanks for pointing that out, I need it.
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