AMD Reduces Processor Orders, Globalfoundries Has No Choice but to Agree

Advanced Micro Devices may rely on TSMC (Taiwan Semiconductor Manufacturing Company) when it comes to its graphics processing units, but the rest of its chips are made by Globalfoundries.

As it happens, the wafer supply agreement (WAS) with the latter fabrication expert has been modified in a way that gives AMD an easier time managing its money, although it also means fewer chips.

Semiconductors are mass-produced like most everything else in today's industry, and wafers are the easiest method of producing large capacities at once.

The main problem here is that part of the chips on a wafer end up defective.

Globalfoundries has a problem early on, in the way that it made more defective chips than viable ones.

Back then, AMD paid the foundry for all of them, not just the working ones. Eventually, the contract was changed but, now, the contract has been changed again.

AMD has established a fixed pricing scheme and reduced the wafer purchase commitments for the fourth quarter of 2012.

Since it needs to negotiate some agreements for 2013 and 2014, the Sunnyvale, California-based company is bound to stick to the same rules.

It can do no other really. AMD hasn't been in its best form lately, losing money and cutting jobs by 15%, which is why it cannot afford to be lenient with its supplier.

The new WSA agreement implies a lower number of central processing units and accelerated processing units for the fourth quarter of 2012 (October-December).

"Globalfoundries’ performance in meeting our delivery requirements in 2012 was strong and they remain a strategic and important foundry partner moving forward," said Rory Read, president and chief executive officer of AMD.

"We are committed to develop and grow our business with Globalfoundries, increasing our engagement across our industry leading APU and graphics roadmaps. The newly amended agreement is another step we are taking to further strengthen our relationship with Globalfoundries as well as AMD's financial foundation."