AMD announced that it restructured its Wafer Supply Agreement (WSA) with GlobalFoundries into a five-year contract. On the surface, the renegotiation appears to be a normal bit of strategic maneuvering, but it also indicates that AMD will likely skip the 10nm node and proceed directly to the goodness that is 7nm. GlobalFoundries recently announced that it is not investing in the 10nm node, which it claims is a "half-node" and does not provide enough scaling advantages in terms of cost, performance or power to be of extended value.
Intel is undoubtedly leveraging its 10nm process for its next-gen Cannonlake processors (it's already ramped up spending on 10nm fabs), but if AMD skips 10nm and transitions to the 7nm node, it just might gain the edge it needs to slip past the dominant Intel.
The agreement doesn’t guarantee that AMD will utilize 7nm for its upcoming CPUs. However, the announcement stated that the agreement "Establishes a framework for technology collaboration between AMD and GF at the 7nm technology node," so the transition is likely.
"The five-year amendment further strengthens our strategic manufacturing relationship with GLOBALFOUNDRIES while providing AMD with increased flexibility to build our high-performance product roadmap with additional foundries in the 14nm and 7nm technology nodes," said Dr. Lisa Su, AMD president and CEO. "Our goal is for AMD to have continued access to leading-edge foundry process technologies enabling us to build multiple generations of great products for years to come."
Kaby Lake and Zen will slug it out on the 14nm node, but AMD already has its next-generation Zen+ in the hopper. The Zen+ cores will likely consist of microarchitecture tweaks on the 14nm process. It is unlikely that 7nm, which appears to be a bit further out on the timeline, will be ready for Zen+. However, the future beyond Zen may find Intel fielding 10nm Cannonlake processors against competing AMD 7nm CPUs.
The new AMD and GlobalFoundries agreement covers microprocessors, graphics processors and semi-custom products for a five-year span from 2016 to 2020. The agreement does allow AMD to source wafers from other entities, but it also ties AMD into wafer purchase targets, which means that AMD has an obligation to order a fixed set of wafers every year or face levies. AMD is also required to pay an offset fee for any wafers it procures from other fabs.
AMD and GlobalFoundries have historically renegotiated the WSA on a yearly basis, so the extended term signifies a more stable relationship between the two companies. AMD will pay GlobalFoundries $100 million in cold hard cash as installments that begin in Q4 2016 and extend to Q3 2017. GlobalFoundries' parent company, Mubadala Development Company, also gains the option to purchase up to 19.9 percent of AMD's shares.
The economics of developing new smaller lithographies requires an ever-increasing amount of investment (see Rock's Law), so long-term agreements between partners will likely become a necessity. In either case, it appears that AMD is headed in the right direction by ensuring a stable production base as it launches its renewed onslaught against Intel.
I believe they did this deal to get a lower cash proposal. After all, they will really need this competitive edge in the near future.
I really hope this lights a fire under Intel, they get complacent with no real competition.