Globalfoundries publicly announced today that it celebrates its third anniversary by achieving full independence. It's hardly a surprise that AMD would eventually lose its entire stake in Globalfoundries, its former manufacturing arm, because it was clear from the start that AMD wouldn't have the cash required to make the required capital investments.
Additionally, GlobalFoundries is now no longer the exclusive manufacturer of certain 28nm APUs. AMD is now paying Globalfoundries $425 million over the course of four quarters for "negotiated wafer pricing", a deal that replaces a previous contract that had AMD per "good die". The previous deal amounted to $430 million, so these two figures offset each other.
GLOBALFOUNDRIES today announced it has agreed to terms with AMD to acquire the remaining stake in GLOBALFOUNDRIES, fulfilling the company's long-term vision of becoming an independent foundry company.
The agreement, part of an amendment to the commercial Wafer Supply Agreement (WSA) with AMD, firmly positions GLOBALFOUNDRIES as a pure-play, leading semiconductor foundry company with AMD as one of its primary and strategic customers. GLOBALFOUNDRIES will now be wholly owned by the Advanced Technology Investment Company (ATIC).
"Today marks the start of a new era for GLOBALFOUNDRIES as it becomes a truly independent foundry," said GLOBALFOUNDRIES CEO Ajit Manocha. "GLOBALFOUNDRIES has a clear vision to be the leading semiconductor foundry partner to AMD and one of the world's top technology companies. We continue to execute on our strategy to propel ATIC's long-term investment philosophy into true value creation for our shareholder and customers."
This acquisition of shares is the latest in a series of announcements marking significant milestones as GLOBALFOUNDRIES continues to gain strong momentum in the global semiconductor industry: " AMD's 32nm processor shipments increased by more than 80 percent from the third quarter to the fourth quarter and now represents a third of AMD's overall processor mix. In fact, GLOBALFOUNDRIES exited 2011 as the only foundry to have shipped in the hundreds of thousands of 32nm High K Metal Gate wafers.
In January, the company announced plans for more than $3 billion in capital spending in 2012 to fund expansion of its facilities in Singapore, Germany and New York.
Also in January, the company announced that its newest 300mm manufacturing facility, Fab 8 in New York, started running the first silicon as part of a new customer agreement to develop leading-edge chips for IBM.
The company achieved several significant milestones in its longstanding partnership with ARM, including the industry's first Cortex-A9 processor operating at more than 2.5GHz on 28nm high-performance technology, and the first 28nm ARM Cortex-A9 Processor Optimization Pack (POP) capable of up to 2GHz on a low-power process geared toward smartphones and other mobile application.
The acquisition of shares is part of a revised WSA for 2012 between GLOBALFOUNDRIES and AMD aimed at strengthening their strategic business partnership and commitment to delivering leading-edge technology solutions.
AMD today announced that it entered into an amendment to its Wafer Supply Agreement (WSA) with GLOBALFOUNDRIES Inc. In this amendment, AMD and GLOBALFOUNDRIES agreed to a negotiated wafer price mechanism for 2012. AMD also agreed to transfer its remaining ownership interest in GLOBALFOUNDRIES to GLOBALFOUNDRIES and, as a result, AMD will no longer hold an equity stake in GLOBALFOUNDRIES.
"The amended wafer supply agreement demonstrates that AMD and GLOBALFOUNDRIES remain committed as long-term strategic business partners," said Rory Read, chief executive officer, AMD. "We made significant progress last year to strengthen our relationship, and we're pleased with GLOBALFOUNDRIES' recent performance in meeting our delivery requirements across our product line."
Under the amended agreement:
- AMD and GLOBALFOUNDRIES established a wafer price mechanism with negotiated prices based on a take or pay arrangement in 2012, established a framework for wafer pricing in 2013, and agreed that AMD's additional 2012 quarterly payment obligations specified in the 2011 amendment will be waived.
- AMD also agreed to transfer its remaining ownership interest in GLOBALFOUNDRIES to GLOBALFOUNDRIES and, as a result, AMD will no longer hold an equity stake in GLOBALFOUNDRIES.
- GLOBALFOUNDRIES waived the exclusivity arrangement for AMD to manufacture certain 28 nm APU products at GLOBALFOUNDRIES for a specified period. As a result, AMD agreed to pay GLOBALFOUNDRIES a cash payment of $425 million, of which $150 million is being paid on March 5, 2012, $50 million will be paid by July 2, 2012, $50 million by October 2, 2012 and $175 million in the first quarter of 2013. In addition, AMD issued a promissory note to GLOBALFOUNDRIES for the payments due by October 2, 2012 and first quarter 2013.
AMD expects to record a one-time charge of $703 million in Q1 2012 consisting of the above-mentioned $425 million cash payment and the remainder will be a non-cash charge.
AMD's Q1 2012 non-GAAP gross margin guidance of approximately 45% and the 2012 non-GAAP gross margin guidance of 44% - 48% remain unchanged.