AMD drives processor sales growth: new WSA with GF

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Embarrassed by the under-offering, AMD has just shown how it can increase sales of its CPUs by at least 33% in the years to come.

AMD on Thursday evening released details of another amendment to its wafer supply agreement (WSA) with GlobalFoundries. The main focus of the paper is AMD’s confidence in growing its CPU business, as the orders to GlobalFoundries are essentially multiplex orders to TSMC. However, the new WSA may also contain some interesting details.

Overall, AMD is increasing its committed purchases from GlobalFoundries (made using 12nm and 14nm class nodes) from $ 1.6 billion to $ 2.1 billion through 2025, a approximately 30% increase in income. And while that means a decrease per year, given the already known reduction in the price of I / O chips for AMD, the company expects its processor sales (those made by TSMC) to increase by at least. less than 30% in the coming years.

The plan

The amended WSA sets AMD’s minimum annual capacity allocation at GlobalFoundries from December 21 and will run until December 25 at $ 2.1 billion. In comparison, another WSA amendment, signed in May, fixes it at $ 1.6 billion until December 2024. This new agreement therefore increases AMD’s payments to GlobalFoundries by around $ 500 million, which which basically means expected committed request (which multiplexes at TSMC, but given the lack of tariffs, we don’t know the multiplexer).

What products is AMD getting from GlobalFoundries now that most of its high-end compute silicon comes from TSMC? The ingredients of its high-end CPU products include an input / output matrix (IOD), which basically means all high-end AMD EPYC and AMD Ryzen processors with an I / O matrix. Still, there is some math that comes into play.

The ongoing contract between AMD and GlobalFoundries means chip designers pay around $ 533 million per year. With the new amendment signed in May, AMD is expected to pay $ 506 million per year, a decrease. But another part of the pact comes into play as “the parties agreed to new annual wafer price and purchase targets for the years 2022 to 2025, and changed the prepayments accepted by AMD to GF for these pads in 2022 and 2023.

With these calculations in place, AMD is increasing its projected CPU output or reducing its cost per CPU. Either way, a victory for AMD.

The full text of AMD’s press release covering the amendment submitted by the two companies to the SEC reads as follows:

The text

Advanced Micro Devices, Inc. (the “Company”) has 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 (GF) to extend GF’s capacity commitment and tranche pricing to the company.

The Amendment modifies certain terms of the Platelet Supply Agreement applicable to purchases of platelets at the 12nm and 14nm technology nodes by the Company for the period beginning December 23, 2021 and continuing until December 31, 2025. GF a agreed to increase the minimum annual capacity allocation amount to the Company for the years 2022 to 2025. In addition, the parties have agreed on new annual pricing and wafer purchase targets for the years 2022 to 2025, and have amended the prepayments agreed by the Company to GF for these wafers in 2022 and 2023.

The amendment does not affect any of the previous exclusivity commitments that were removed under the Seventh A&R Amendment. The Company continues to have complete flexibility to contract with any wafer foundry for all products manufactured at any technology node. The company currently estimates that it will purchase around $ 2.1 billion in total wafers from GF for the years 2022 to 2025 under the Amendment.

The foregoing description is not complete and is qualified in its entirety by reference to the Amendment, a copy of which will be filed with the Company’s Annual Report on Form 10-K.

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