Today AMD announced that it had entered into a new Wafer Supply Agreement with Global Foundries that will end in 2021. The agreement covers the supply and development of both current generation 14nm products and AMD’s next generation of 7nm products. In the press release AMD confirmed that Global Foundries is currently producing both AMD’s Polaris chips and its upcoming Zen processors at Fab 8 in upstate New York. This agreement establishes a collaborative partnership between the two companies towards the development of the 7nm process node. It also rather nebulously ensures that AMD can produce ‘certain’ products at other fabs.
As part of this agreement AMD will pay Global Foundries $100 million over the next four quarters. From 2017 onward AMD will continue to make payments to Global Foundries based on how many wafers they’re buying from other foundries. One of Global Foundries sister company has also been granted the option of buying up to 75 million shares of AMD’s common stock at $6 a share between now and 2020. But Global Foundries parent company’s Mubadala may not own either directly or indirectly more than 19.99 percent of AMD’s stock at any one time. AMD’s going to account for these payments by taking a $335 million charge on its financial results for this quarter.
Full Speed Ahead to 7nm
With this agreement AMD’s recommitted itself to Global Foundries and made it abundantly clear that 7nm is the company’s next process node. AMD’s also ended the almost annual headache of negotiating its wafer supply agreement with Global Foundries which has occurred 6 times to date. This five-year agreement lends a new level of stability to the business models of both AMD and Global Foundries. The wafer supply agreement that required AMD to use Global Foundries expires complete in 2024 which will likely result in some kind of struggle between the two companies. But for the next five years we should expect to see a solid relationship between these partners assuming that Global Foundries can bring its 7nm process to market as planned.S|A