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) |
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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.
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