A change for the better?
AMD announced a change in its wafer supply agreement with GlobalFoundries yesterday, and clarified the announcement in a conference call today. The call revealed a couple of interesting morsels about product collaborations between the two companies.
Firstly AMD confirmed Llano - its 32nm APU - is already shipping for revenue and will appear in systems this quarter.
Secondly AMD confirmed that it had already committed to purchase some of its GPU and chipset requirements from GF, once GF has developed certain qualified processes. But this change has increased its commitment in this area.
These two facts could potentially have a profound effect on the semiconductor competitive environment. The Llano chip will go up against Intel in the mainstream and performance PC markets, and expects to offer some distinct competitive advantages.
The GPU manufacturing market is currently dominated by TSMC, which counts both AMD and NVIDIA among its customers. Right now GF doesn't make any of AMD's graphics, but that looks set to change as soon as GF demonstrates it can deliver.
We asked Jon Carvill - VP of communications at GF - how this change benefits GF. "It provides a further upside opportunity to increase the proportion of GPU/chipset business at AMD in the future," he said. "In addition, it also allows for some further compensation next year as long as we execute to plan in 2011."
Temporary AMD CEO Thomas Seifert did most of the talking on the conference call. He explained that talks about this amendment commenced last year when the 32nm ramp looked "a bit more challenging".
Here's a transcript of Seifert explaining the thinking behind the amendment. "There were four primary motivations for us to reach agreement with GF and ATIC to amend the terms of the WSA. First, we needed to work with GF to develop a pricing strategy that better aligns to our business case. Second, we wanted to ensure that GF remains very focused on its yield curve progress for 32 nm and therefore have tied the 32 nm pricing to paying for good 32 nm die.
"Third, we've provided for better correlation between costs and our 32 nm RAM. And, not that I'm currently expecting any, we wanted to ensure better protection for AMD under lower than anticipated yield scenarios. The original WSA did not have adequate provisions to compensate or alleviate the cost burden on AMD in such unforeseen circumstances."
It should be very interesting to see what Llano has to offer and how much GPU business GF gets from AMD in the future.
