AMD has entered into a long-term amendment to its Wafer Supply Agreement (WSA) with semiconductor foundry company GlobalFoundries for the period from Jan. 1, 2016 to Dec. 31, 2020.

Under the terms of the new agreement, AMD will pay Globalfoundries $100 million in installments. The company will additionally make Globalfoundries quarterly payments, beginning in 2017, based on the volume of certain wafers bought from another foundry.

In addition to modifying certain terms of the WSA applicable to AMD’s microprocessor, graphics processor, and semi-custom products, the amendment:

  • Covers a 5-year period, spanning from calendar year 2016 through 2020;
  • Establishes a comprehensive framework for technology collaboration between AMD and GF for the 7nm technology node;
  • Provides AMD with the flexibility to manufacture certain products with another wafer foundry;
  • Sets annual wafer purchase targets from 2016 through the end of 2020, fixed wafer prices for 2016, and a framework for yearly wafer pricing.

In partial consideration for these rights, AMD will:

  • Make a $100 million cash payment to GlobalFoundries, paid in installments beginning in Q4 2016 through Q3 2017.
  • Make quarterly payments to the company beginning in 2017 based on the volume of certain wafers purchased from another wafer foundry.
  • Grant to West Coast Hitech, a wholly-owned subsidiary of the Mubadala Development Company, a warrant to purchase 75 million shares of AMD common stock at a purchase price of $5.98 per share.

AMD expects to record a one-time accounting charge in the third quarter of 2016 of approximately $335 million comprised of the $100 million payment and the $235 million value of the warrant.

[Image courtesy: AMD]

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