Hampered by undersupply, AMD has just shown how it can increase sales of its CPUs by at least 33% in the coming years.
AMD, late on Thursday, published details of another amendment to its wafer supply agreement (WSA) with GlobalFoundries. The document primarily emphasizes AMD's confidence in the growth of its CPU business as orders to GlobalFoundries are essentially multiplex orders to TSMC. However, the new WSA may contain some interesting details too.
Overall, AMD increases its committed purchases from GlobalFoundries (made using 12 nm and 14 nm-class nodes) from $1.6 billion to $2.1 billion through 2025, an about 30% increase in revenue. And while this means a decrease per year, given the already known reduction per I/O die chip price for AMD, the company expects its CPU sales (that made by TSMC) to rise by at least more than 30% in the coming years.
The amended WSA sets AMD's minimum annual capacity allocation at GlobalFoundries from December '21 and continues through December '25 to $2.1 billion. By comparison, another WSA amendment, inked back in May, sets it at $1.6 billion through December '2024. So this new deal increases AMD's payments to GlobalFoundries by about $500 million, which essentially means an expected committed demand (which multiplexes at TSMC, but given the lack of rates, we do not know the multiplexer).
What products does AMD get from GlobalFoundries now that most of its high-end compute silicon comes from TSMC? Ingredients for its premium CPU products include an input/output die (IOD), which essentially means all AMD EPYC and AMD high-end Ryzen processors with an I/O die. Yet there is some math going in into the place.
The ongoing contract between AMD and GlobalFoundries means that the chip designers pay around $533 million per year. With the new amendment signed back in May, AMD would have to pay $506 million a year, a decrease. But another part of the pact comes into play as 'the parties agreed to new pricing and annual wafer purchase targets for years 2022 through 2025, and modified the pre-payments agreed' to by AMD to GF for those wafers in 2022 and 2023.
With this math in place, AMD either increases its projected CPU output or lowers its per-CPU cost. In both cases, a win for AMD.
The whole text of AMD's press release covering the amendment submitted by the two companies to the SEC reads as follows:
Advanced Micro Devices, Inc. (the 'Company') 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 wafer pricing to the company.
The Amendment modifies certain terms of the Wafer Supply Agreement applicable to wafer purchases at the 12 nm and 14 nm technology nodes by the Company for the period commencing on December 23, 2021 and continuing through December 31, 2025. GF agreed to increase the minimum annual capacity allocation to the Company for years 2022 through 2025. Further, the parties agreed to new pricing and annual wafer purchase targets for years 2022 through 2025, and modified the pre-payments agreed to by the Company to GF for those wafers in 2022 and 2023.
The Amendment does not affect any of the prior exclusivity commitments that were removed under the A&R Seventh Amendment. The Company continues to have full flexibility to contract with any wafer foundry with respect to all products manufactured at any technology node. The Company currently estimates that it will purchase approximately $2.1 billion of wafers in total from GF for years 2022 through 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.