Feeds

AMD cuts loose GlobalFoundries stake

It's fabulous to be fabless

Build a business case: developing custom apps

Advanced Micro Devices said last month that it was in the middle of renegotiating its wafer-supply agreement with its former foundry, which was spun out as GlobalFoundries and is now part of a much larger chip manufacturing operation. The deal is now done – and so is AMD's stake in GlobalFoundries itself.

Since spinning out its Dresden, Germany chip factories in late 2008 to the Abu Dhabi state investment vehicles Advanced Technology Investment Company (with a 44.4 per cent stake in the original GlobalFoundries) and Mubadala (which took a 19.3 per cent stake), AMD's stake in GlobalFoundries has been shrinking over time. AMD's stake was partially diluted when ATIC borged Chartered Semiconductor for $3.9bn in September 2009 and then further diluted as ATIC has pumped billions of dollars more into its existing fabs and a shiny new one in Malta, New York. Prior to the latest wafer supply agreement negotiated this week, AMD's stake in GlobalFoundries was around 9 per cent, and with this complex negotiation. It now goes to zero.

AMD is now absolutely fabless. Which seems to be a good thing unless you are AMD archrival Intel and maybe, for a few more years, AMD fab development partner IBM.

GlobalFoundries has had troubles with its 32 nanometer and now 28 nanometer processes ramps, and this, more than any other factor, has hurt AMD's finances in recent quarters. AMD was not able to get enough Fusion APU (hybrid CPU-GPU) parts to satisfy desktop and notebook customers, and the "Interlagos" Opteron 6200 server processors were delayed a few months last year as well because of yield issues. In April 2011, while the company was looking for a new CEO, AMD rejigged its wafer supply agreement with GlobalFoundries. But with Rory Read and a whole new set of execs in charge – along with revamped roadmaps – AMD and GlobalFoundries went back to the negotiating table to get the chip roadmaps and chip fabs in better alignment.

Under the original wafer-supply agreement, which runs through 2024, AMD was paying for wafers on a cost-plus basis. When there were troubles with the 32 nanometer ramp, AMD figured out it needed to incentivize GlobalFoundries to get the kinks worked out, and in April last year it modified the deal to basically pay a little more for working chips if the foundry could speed up the ramp. In January of this year, AMD was to revert to a cost-plus pricing on a per-wafer basis.

With this week's amendment, AMD is transferring its stake in GlobalFoundries – 1.06 million shares worth around $278m – to the fab. AMD had a five-year deal for the exclusive right to manufacture certain 28 nanometer Fusion APU chips, and the foundry is now waiving that right.

However, in a conference call with Wall Street analysts on Monday, Thomas Seifert, AMD's CFO – who was interim CEO when the 2011 amendment was negotiated – said that AMD did not intended to dual-source its APUs at this time. While Seifert wouldn't say it, AMD can now threaten to do exactly that, and then actually do it – which might prove to be motivation enough to work on yield improvement for both 32 nanometer and 28 nanometer processes. AMD's GPU partner, Taiwan Semiconductor Manufacturing Corp, which also makes Nvidia's GPUs, has 28 nanometer processes on the ramp right now and would probably like the extra business (if it could handle it, that is).

In exchange for this APU waver, AMD has agreed to pay GlobalFoundries $425m, payment of which will be spread out over the next two years. The amended agreement from April 2011 had cash incentives, worth $420m, that AMD had agreed to pay GlobalFoundries during 2012 for 32 nanometer capacity – and these quarterly fees are now waived.

AMD said in a filing with the Securities and Exchange Commission on Monday that it had paid approximately $904m for wafers and $79m in research and development to GlobalFoundries. In 2012, the company expects to spend $1.5bn on wafers and $71m on fabrication R&D with its former in-house foundry.

AMD is not revealing any volume commitments that it is making with GlobalFoundries, or vice versa, but it did confirm that it is back to a fixed cost for wafers. The company will continue to dual-source its Fusion APUs at the 28 nanometer node with both GlobalFoundries and TSMC. ®

Build a business case: developing custom apps

More from The Register

next story
iPad? More like iFAD: We reveal why Apple fell into IBM's arms
But never fear fanbois, you're still lapping up iPhones, Macs
Amazon says Hachette should lower ebook prices, pay authors more
Oh yeah ... and a 30% cut for Amazon to seal the deal
Philip K Dick 'Nazi alternate reality' story to be made into TV series
Amazon Studios, Ridley Scott firm to produce The Man in the High Castle
Nintend-OH NO! Sorry, Mario – your profits are in another castle
Red-hatted mascot, red-colored logo, red-stained finance books
Sonos AXES support for Apple's iOS4 and 5
Want to use your iThing? You can't - it's too old
Joe Average isn't worth $10 a year to Mark Zuckerberg
The Social Network deflates the PC resurgence with mobile-only usage prediction
Chips are down at Broadcom: Thousands of workers laid off
Cellphone baseband device biz shuttered
Feel free to BONK on the TUBE, says Transport for London
Plus: Almost NOBODY uses pay-by-bonk on buses - Visa
Twitch rich as Google flicks $1bn hitch switch, claims snitch
Gameplay streaming biz and search king refuse to deny fresh gobble rumors
Stick a 4K in them: Super high-res TVs are DONE
4,000 pixels is niche now... Don't say we didn't warn you
prev story

Whitepapers

Implementing global e-invoicing with guaranteed legal certainty
Explaining the role local tax compliance plays in successful supply chain management and e-business and how leading global brands are addressing this.
Boost IT visibility and business value
How building a great service catalog relieves pressure points and demonstrates the value of IT service management.
Why and how to choose the right cloud vendor
The benefits of cloud-based storage in your processes. Eliminate onsite, disk-based backup and archiving in favor of cloud-based data protection.
The Essential Guide to IT Transformation
ServiceNow discusses three IT transformations that can help CIO's automate IT services to transform IT and the enterprise.
Maximize storage efficiency across the enterprise
The HP StoreOnce backup solution offers highly flexible, centrally managed, and highly efficient data protection for any enterprise.