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. Under the terms of the latest wafer supply agreement, AMD and GlobalFoundries are now committing to buying and supplying respectively $2.1 billion in wafers for the 2022 through 2025 period, adding an additional year and $500M in wafers to the previous agreement.

As a quick refresher, AMD and GlobalFoundries last inked a new wafer supply agreement (WSA) back in May of this year. That agreement further decoupled the two firms, ending any exclusivity agreements between the two and allowing AMD to use any fab for any node as they see fit. None the less, AMD opted to continue buying 12nm/14nm wafers from GlobalFoundries, with the two firms inking a $1.6 billion agreement to buy wafers for the 2022 through 2024 period.

Officially classified as the First Amendment to the Amended and Restated Seventh Amendment to the Wafer Supply Agreement, the latest amendment is essentially adding another year’s worth of production to the WSA. The updated amendment now goes through 2025, with AMD raising their 12nm/14nm wafer orders by $500 million to $2.1 billion. AMD and GlobalFoundries are not disclosing the specific per-year wafer supply targets, but the agreement essentially binds GlobalFoundries to supply AMD will a bit over $500M in wafers every year for the next 4 years.

Along with yearly spending commitments, the updated agreement also updates the price of said wafers, as well as the pre-payment requirements for 2022/2023. As with the specific number of wafers, AMD isn’t disclosing any further details here.

AMD/GlobalFoundries Wafer Share Agreement History
Amendment Date December 2021 May 2021 January 2019
Total Order Value $2.1B $1.6B N/A
Start Date 2022 2022 2019
End Date 2025 2024 2024
GlobalFoundries Exclusivity? No No Partial
(12nm and larger)

It’s also worth noting that, as with the previous agreement, these targets are binding in both directions. GlobalFoundries is required to allocate a minimum amount of its capacity to orders from AMD, and AMD in turn is required to pay for these wafers, whether they use this capacity or not. Given the ongoing chip crunch, it would seem that AMD is hedging their bets here, and locking in some additional supply a couple of years in advance. Though given the price re-negotiation, it would be interesting to see if AMD had to agree to higher overall prices in order to secure a larger supply of wafers from GlobalFoundries.

Past that, AMD isn’t currently disclosing what they’ll be using the additional wafer capacity for – though they did clarify that it has nothing to do with acquisition target Xilinx. AMD currently uses GlobalFoundries’ 12nm/14nm processes for early-generation Ryzen products as well as the I/O dies for AMD’s current-generation Ryzen and EPYC CPUs. However under normal circumstances, we would expect demand for those products to be tapering off, especially by the 2024/2025 timeframe. The 12nm/14nm processes are already dated and are getting older still, so it’s unclear if this is AMD developing some backup plans to deal with the chip crunch, or if they are expecting demand for current 12/14 products to persist (e.g. if they need to produce their current long-term embedded products in larger numbers).

Baring any further amendments to the WSA, the current agreement between AMD and GlobalFoundries will now expire on December 31st, 2025.

On December 23, 2021, Advanced Micro Devices, Inc. (the “Company”) entered into the First Amendment (the “Amendment”) to its Amended and Restated Seventh Amendment to the Wafer Supply Agreement (the “A&R Seventh Amendment”) with GLOBALFOUNDRIES Inc. (“GF”) to extend GF’s capacity commitment and wafer pricing to the Company.

The Amendment modifies certain terms of the Wafer Supply Agreement applicable to wafer purchases at the 12 nm and 14 nm technology nodes by the Company for the period commencing on December 23, 2021 and continuing through December 31, 2025. GF agreed to increase the minimum annual capacity allocation to the Company for years 2022 through 2025. Further, the parties agreed to new pricing and annual wafer purchase targets for years 2022 through 2025, and modified the pre-payments agreed to by the Company to GF for those wafers in 2022 and 2023. The Amendment does not affect any of the prior exclusivity commitments that were removed under the A&R Seventh Amendment. The Company continues to have full flexibility to contract with any wafer foundry with respect to all products manufactured at any technology node. The Company currently estimates that it will purchase approximately $2.1 billion of wafers in total from GF for years 2022 through 2025 under the Amendment.

Source: AMD IR

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  • StevoLincolnite - Friday, December 24, 2021 - link

    AMD not having low-end chips on the table is less cash in their pockets.*

    Need an edit button. Maybe next century.
    Reply
  • Spunjji - Friday, December 24, 2021 - link

    Not really, no. In a hypothetical scenario where they could increase production to sell more low-end chips then yes, they'd make more money. In their current situation, where they are making everything they can and selling all of it, it makes sense to sell what they can make into the highest possible market segment.

    It sucks for all of us who like bargain chips, for sure. The only way out is if Intel start a price war or if they suddenly get the opportunity to produce a LOT more chips.
    Reply
  • Oxford Guy - Friday, December 24, 2021 - link

    The joys of duopoly. ‘Too bad’ that our alleged capitalism is defined by inadequate competition. Reply
  • meacupla - Saturday, December 25, 2021 - link

    Yeah, it's not like there's an abundance of second hand Ryzen 1000/2000/3000 and Intel 2/3/4/5/6/7/8/9/10th gen parts on the used market right now.

    Oh, wait, there is.
    Reply
  • Spunjji - Friday, December 24, 2021 - link

    "when they can sell overpriced high margin products"
    Are they really overpriced? High margin sure, but given they can sell everything they build and they're still lower than Intel's historic price points, I'm not sure how that makes any sense in any context other than that AMD now charge more than they did when they were desperately clawing for second place in the market. To which I'd say sure, no surprise there, and it sucks for those of us who enjoyed riding that gravy train but it wasn't doing their finances any good.
    Reply
  • Arbie - Friday, December 24, 2021 - link

    If AMD can sell high-margin chips - great! And the more the better. They need every nickel they can make now to survive Intel's eventual comeback. Without them the PC desktop would be a quad-core wasteland, as Intel proved to us for *ten years*. We need to think less about the cost of buying AMD chips, and more about the cost of not buying them. Go AMD! Reply
  • Kangal - Saturday, December 25, 2021 - link

    It's weird you typed your comment twice, but you are not entirely correct.

    Capitalism used to work well during the early 1970s and earlier, because people were buying the highest quality product for the lowest amount of money. This was causing the industry to work harder, to be more innovative, and provide better for their customers than the competition. But this whole system stopped working effectively when companies started paying millions of dollars, and getting the best psychologists around the world, making deals with their networks, and crafting the biggest marketing campaigns in history. They realised they didn't need to make the best product or the cheapest prices, they can merely "life hack" their business into producing the greatest profits in their history just by clever marketing. Marketing was always around, and it started getting more traction in the late-1950s, but they really kicked it into high gear starting in the 1970s and on and on.

    So for AMD to survive is meaningless. Both companies will cooperate eventually to maximise their profits. Alternatively, Intel can acquire AMD and form a monopoly. Whichever way, businesses keep the end-result profits since they had the upfront risk (well, not anymore with government bailouts). So in this system, it is always the consumers who pay in the end. This is the natural result of a free-market capitalist system. Because of these imperfections, there have been many laws written to "control" the market somewhat, such as Antitrust.

    We have laws in place, in most countries, to make sure people don't get ripped off from buying certain goods, such as milk. These ensure farmers stay healthy, and consumers don't get price-gouged. Now I don't know if PC chips should be examined for similar roles, because the digitisation of our industrial and societal is heavily influenced by them. Surely its not quite relevant at the entry-level (Intel Atom), nor at the expensive luxury segment (RTX 3090). Yet, the mainstream area (Core i5, RX 6600) is still a lucrative market for Intel, AMD, and Nvidia.

    So the real question that needs to be asked is, can we make fair laws and enforce them, that will protect the consumers and the market, from the greed of these corporations?
    Reply
  • mode_13h - Sunday, January 2, 2022 - link

    > for AMD to survive is meaningless.

    Yeah, don't believe your lying eyes. Intel suddenly scrambling to add cores to their desktop chips had *nothing* to do with competition from AMD.

    > Alternatively, Intel can acquire AMD and form a monopoly.

    No, they can't. There's no way that would be approved by the FTC.

    > well, not anymore with government bailouts

    Specifically what bailouts?

    > Because of these imperfections, there have been many laws
    > written to "control" the market somewhat, such as Antitrust.

    Anti-trust laws exist specifically to keep the free-market functioning.

    Seriously, dude, you're being cynical to the point of stupidity.

    > We have laws in place, in most countries, to make sure people don't
    > get ripped off from buying certain goods, such as milk. These ensure
    > farmers stay healthy, and consumers don't get price-gouged.

    Price controls on agricultural goods primarily exist to keep farmers from getting wiped out when prices drop too low due to oversupply due to things like weather. Because, you know what happens when too many farmers go out of business? Food prices spike and people go hungry during the following years.

    > can we make fair laws and enforce them, that will protect the
    > consumers and the market, from the greed of these corporations?

    Speaking specifically of the US government, what they did was to subsidize semiconductor manufacturing like many other governments already do. That's a reasonable first step, IMO. To use your analogy of agricultural products, the next step would probably be for the government to provide some underwriting support for US-based fabs, so that if demand suddenly craters (as has happened many times before, in the semiconductor business), these fabs don't suddenly go out of business.
    Reply
  • mode_13h - Sunday, January 2, 2022 - link

    > Yeah, don't believe your lying eyes. Intel suddenly scrambling
    > to add cores to their desktop chips had *nothing* to do with competition from AMD.

    Not to mention anything about power, which really spiraled out of control starting with Kaby Lake (which launched around the same time as the first-gen Ryzen).
    Reply
  • mode_13h - Sunday, January 2, 2022 - link

    > this whole system stopped working effectively when companies started
    > paying millions of dollars, and getting the best psychologists around the world

    Also, did you ever hear about this thing called "the cloud"? It's one of the fastest-growing markets and cloud operators care about the bottom line, at the end of the day. If there's a more cost-effective solution, that's where they go, which is one reason ARM server CPUs are taking off.
    Reply

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