CHIP DESIGNER AMD has tweaked its deal with Global Foundries for production of 32nm chips.
Following its spin-off from AMD, Global Foundries was reportedly having trouble producing wafers using the 32nm node process. When these issues first came to light in 2010, AMD clearly thought that the problem was so severe that it warranted meeting with Global Foundries to change the way it pays for silicon.
AMD's new deal with Global Foundries was revealed yesterday with the firms moving to a die based pricing model from their previous wafer based model. In a conference call today, AMD said that the deal will be in place for four quarters including the current one, after which it will go back the same "cost plus" arrangement with Global Foundries.
Essentially AMD will now pay Global Foundries a fixed price for 45nm wafers that are delivered in 2011, and will only pay for good 32nm dies. AMD will give Global Foundries additional quarterly payments in 2012 if it can meet "continued availability of 32nm capacity" in 2012. AMD added that it expects Global Foundries to meet the conditions but said that the total additional payments will not exceed $400 million.
With the new deal, AMD claims it "aligns costs with yields", though in the conference call the firm said that at the time it was negotiating this deal "the 32nm ramp looked a bit more challenging than it is now". AMD added the new pricing agreement doesn't mean it is expecting lower yields from Global Foundries' 32nm process but that it will give "better protection" if yields are lower than expected.
Not surprisingly, analysts on the call asked whether AMD felt its deal with Global Foundries was one-sided, to which AMD answered that it provided incentives for Global Foundries to increase yield. What AMD was unable to answer was if the firm will face a similar issue when it transitions from the 32nm process node to 22nm.
Intel has started its transition to 22nm and AMD reiterated that it plans to be six quarters behind Intel. The question remains whether it will have to sit down with Global Foundries at that point to thrash out a similar deal in order to pay a competitive price for CPU dies.
AMD said that 32nm production is ramping up better than it forecasted last year and it tried to play down the significance of its new deal with Global Foundries. Nevertheless, it is clear that AMD was concerned that it might end up carrying the can for Global Foundries' problems. The new deal does insulate AMD to some degree during the course of 2011, a year when Global Foundries should finally get over the growing pains of its 32nm process node.
The relationship between AMD and Global Foundries is slightly stricter now, but going by AMD's own figures, there's no sign the two firms are walking away from each other. In 2010 AMD paid Global Foundries in the region of $1.2 billion for wafers, and it projects to pay somewhere between $1.1 billion and $1.5 billion in 2011 and $1.5 billion and $1.9 billion 2012. Even with this new pricing agreement, Global Foundries will continue to get more revenue from AMD year-on-year.
With all its dealings with Global Foundries, AMD added that TSMC remains a "committed partner" to fabricate its chips. That said, AMD's deal with Global Foundries goes to show that despite being a fabless chip design house, it won't be dominated by the chip foundries that turn its designs into reality.
) Just trying to clear things up so others won't be confused about the die sizes.
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