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April 03, 2011, 4:37 PM EDT
By Ian King
(Updates with estimate of payments in fourth paragraph.)
April 3 (Bloomberg) -- Advanced Micro Devices Inc., Intel Corp.’s largest competitor in computer processors, amended a supply agreement with Globalfoundries Inc. to pay only for chips that work.
The companies changed the agreement covering chips made on the latest technology -- so-called 32 nanometer -- for this year, Sunnyvale, California-based AMD said in a statement today. AMD will also record a $492 million, noncash gain in the first quarter because of dilution of its holding in Globalfoundries.
The revision is intended to give Globalfoundries an incentive to improve production of 32-nanometer chips this year. Under their previous deal, AMD paid for all chips produced at cost of production plus a markup for Globalfoundries.
AMD estimates it will pay Globalfoundries $1.1 billion to $1.5 billion in 2011 and $1.5 billion to $1.9 billion in 2012 for outsourced manufacturing. That compares with about $1.2 billion in 2010.
The government of Abu Dhabi is AMD’s largest shareholder, with about a 16 percent stake. AMD is also the biggest customer of Globalfoundries, which Abu Dhabi created out of manufacturing operations it bought from AMD and Singapore’s Chartered Semiconductor Manufacturing Ltd. in 2009. AMD is now primarily a chip designer.
The amended agreement also increases AMD’s commitment to having new processors with built-in graphics capabilities manufactured by Globalfoundries, the statement said. AMD currently uses Taiwan Semiconductor Manufacturing Co. to make some of its graphics products.
AMD, whose shares have risen 2.2 percent this year, declined 24 cents, or 2.8 percent, to $8.36 in New York Stock Exchange trading on April 4.
AMD and Globalfoundries will revert to an arrangement whereby AMD pays for all chips produced on a “cost-plus” basis in 2012, the statement said.
(AMD interim Chief Executive Officer Thomas Seifert will hold a conference call to explain the new accord at 8:30 a.m. New York time on April 4. Got to ir.amd.com to listen.)
--Editors: Kevin Miller, Joe Sabo
To contact the reporter on this story: Ian King in San Francisco at ianking@bloomberg.net
To contact the editor responsible for this story: Tom Giles at tgiles@bloomberg.net
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(Updates with estimate of payments in fourth paragraph.)
April 3 (Bloomberg) -- Advanced Micro Devices Inc., Intel Corp.’s largest competitor in computer processors, amended a supply agreement with Globalfoundries Inc. to pay only for chips that work.
The companies changed the agreement covering chips made on the latest technology -- so-called 32 nanometer -- for this year, Sunnyvale, California-based AMD said in a statement today. AMD will also record a $492 million, noncash gain in the first quarter because of dilution of its holding in Globalfoundries.
The revision is intended to give Globalfoundries an incentive to improve production of 32-nanometer chips this year. Under their previous deal, AMD paid for all chips produced at cost of production plus a markup for Globalfoundries.
AMD estimates it will pay Globalfoundries $1.1 billion to $1.5 billion in 2011 and $1.5 billion to $1.9 billion in 2012 for outsourced manufacturing. That compares with about $1.2 billion in 2010.
The government of Abu Dhabi is AMD’s largest shareholder, with about a 16 percent stake. AMD is also the biggest customer of Globalfoundries, which Abu Dhabi created out of manufacturing operations it bought from AMD and Singapore’s Chartered Semiconductor Manufacturing Ltd. in 2009. AMD is now primarily a chip designer.
The amended agreement also increases AMD’s commitment to having new processors with built-in graphics capabilities manufactured by Globalfoundries, the statement said. AMD currently uses Taiwan Semiconductor Manufacturing Co. to make some of its graphics products.
AMD, whose shares have risen 2.2 percent this year, declined 24 cents, or 2.8 percent, to $8.36 in New York Stock Exchange trading on April 4.
AMD and Globalfoundries will revert to an arrangement whereby AMD pays for all chips produced on a “cost-plus” basis in 2012, the statement said.
(AMD interim Chief Executive Officer Thomas Seifert will hold a conference call to explain the new accord at 8:30 a.m. New York time on April 4. Got to ir.amd.com to listen.)
--Editors: Kevin Miller, Joe Sabo
To contact the reporter on this story: Ian King in San Francisco at ianking@bloomberg.net
To contact the editor responsible for this story: Tom Giles at tgiles@bloomberg.net
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