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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  • Arbie - Friday, December 24, 2021 - link

    It's great for AMD to be selling as many high-margin chips as they can. They will need every nickel to even stay in business when Intel eventually recovers, and without AMD we'd be condemned to eternal sub-mediocrity. Intel proved that with ten years of quad cores! Think less about the cost of buying AMD chips and more about the cost of not buying them.
  • Tams80 - Saturday, December 25, 2021 - link

    And why should they?

    CPU-wise, AMD aren't ripping anyone off. Yes, they raised their prices a little, but that's a legacy from when they had to to compete with Intel. It wasn't a good long term strategy if you end up being able to command higher prices.

    It's great being a customer during times when companies use lower prices to compete. But you need to be aware that it is not healthy for those companies in many cases. They can only lower prices so much, and low margin products are luxury for them.

    This ignorance and sense of entitlement seems to be very strong amongst the gaming community. Just look at Steam. Too many gamers are only prepared to spend very small amounts of money on games. But for most developers, especially small ones, that's simply not sustainable.

    Nintendo get schtick from them for not lowing prices much or often. But really they just aren't devaluing their work to the point of self harm.
  • mode_13h - Sunday, January 2, 2022 - link

    > Too many gamers are only prepared to spend very small amounts of money on games.
    > But for most developers, especially small ones, that's simply not sustainable.

    They can always switch to a different line of work. Games are entertainment. The entertainment industry can be fickle and ruthless. Game developers ignore this at their peril.
  • melgross - Friday, December 24, 2021 - link

    It’s supply and demand. Through most of its life AMD ‘has been forced to sell low margin chips just to get them sold. Nobody wanted their chips. They had a few short peaks, but were then back in the valley. Now they’re peaking again. For how long? We don’t know.

    But between Apple’s M series of chips, to Microsoft trying ARM we’re seeing a possible long term shift away from x86, if other vendors such as Qualcomm and others can even come close to Apple’s work. So AMD should make as much money when they can. Low end chips don’t make much profit. If AMD is going to have rainy days ahead, every penny they make on their higher end products will come in handy while they work on a shift.

    Yeah yeah, we don’t know if that will ever happen, but then, people laughed when Apple came out with the dual core 64 bit A7. The industry is going under an upheaval right now, so it pays to put money away for later. And even now, AMD can’t command the prices Intel still can, so overpriced? Not really.
  • Josh128 - Monday, December 27, 2021 - link

    Microsoft is trying to aquire ARM? Since when? Its Nvidia only, AFAIK.
  • mode_13h - Sunday, January 2, 2022 - link

    I think "Microsoft trying ARM" refers to a rumored ARM-based CPU Microsoft has been working on.
  • Intel999 - Friday, December 24, 2021 - link

    Didn't AMD announce plans for a 12nm Chromebook chip recently? Or was that just a rumor?

    A 12nm wafer would be yielding at max quantities at this point and a 12nm wafer would be priced at a quarter of the price of a 7nm wafer. Chromebooks do not require cutting edge silicon to sell.

    Cheap wafers should go a long way towards minimizing negative margin impact while also addressing Intel's free run with Pentium and Celeron in this segment of the market.
  • Spunjji - Friday, December 24, 2021 - link

    AFAIK it was a rumour, but it would make a lot of sense. The rumoured chip is called Monet, supposedly a quad-core Zen 3 design with 4 CUs of RDNA 2 graphics. That ought to do nicely for things more powerful than Chromebooks - performance would likely be comparable to Intel's 10th gen quad-core mobile devices.
  • nandnandnand - Thursday, December 30, 2021 - link

    I think you could make a case for not needing anything greater than Monet in certain segments. Good enough for office work, web browsing, light gaming, with 4K H.265/AV1 playback for HTPC. I guess the TDP would be 15 W, maybe less if 12LP+ is good.
  • spaceship9876 - Friday, December 24, 2021 - link

    I wonder whether global foundries will ever make a 7nm process. They cancelled it due to cost but much of the 3rd party equipment needed to make 7nm is already on the market. I'm sure it would be cheaper for them to make 7nm now. As there is a chip shortage i'm sure they could get a lot of long term customers to sign up for it.

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