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AMD Amends Wafer Supply Agreement with GLOBALFOUNDRIES and Discloses GLOBALFOUNDRIES Investment-Related Noncash Gain of $492 Million
The Amendment delivers a pricing model that better aligns to AMD's business and incentivizes GLOBALFOUNDRIES to continue improving 32nm yields
Under the amended agreement, GLOBALFOUNDRIES has committed to provide AMD with, and AMD has committed to purchase, a fixed number of 45nm and 32nm wafers per quarter in 2011. AMD will pay GLOBALFOUNDRIES fixed prices for 45nm wafers delivered in 2011. AMD's price for 32nm products will be based on good die.
In addition, AMD also agreed to pay an additional quarterly amount to GLOBALFOUNDRIES during 2012 if GLOBALFOUNDRIES meets specified conditions related to continued availability of 32nm capacity as of the beginning of 2012.
For 2012, AMD will resume compensating GLOBALFOUNDRIES on a cost-plus basis to manufacture wafers for its microprocessor and APU products. AMD currently estimates that it will pay GLOBALFOUNDRIES approximately $1.1 to $1.5 billion in 2011 and $1.5 to $1.9 billion in 2012* for wafer purchases under the amended WSA. In 2010, AMD paid GLOBALFOUNDRIES approximately $1.2 billion for wafer purchases.
In addition, and unrelated to the WSA amendment, AMD began accounting for its investment in GLOBALFOUNDRIES under the cost method as of the first fiscal quarter of 2011. This transition was triggered by the contribution of Chartered Semiconductor to GLOBALFOUNDRIES and amendments to certain agreements. As a result of this contribution AMD will recognize a noncash gain in its first fiscal quarter 2011 financial results, net of certain costs, of approximately $492 million. The noncash gain is related to the dilution of its equity interest in GLOBALFOUNDRIES and will be reflected in the Equity in net income (loss) of investee line of its Consolidated Statement of Operations.
* AMD based its 2011 and 2012 estimated costs in part on AMD's current expectations regarding GLOBALFOUNDRIES manufacturing yields and wafer volumes. These costs could increase or decrease as a result of variations in those yields and several other factors including AMD's current expectations regarding demand for products. AMD is not able to meaningfully quantify or estimate purchase obligations from GLOBALFOUNDRIES beyond 2012, but it expects that future purchases from GLOBALFOUNDRIES under the Wafer Supply Agreement will continue to be material.
AMD will hold a conference call for the financial community at 5:30 a.m. PT (8:30 a.m. ET) on Monday April 4, 2011 to discuss the Wafer Supply Agreement amendment. AMD will provide a real time audio broadcast of the teleconference on the Investor Relations page of its Web site at AMD. The webcast will be available for 30 days after the conference call.
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