Advanced Micro Devices is shedding its remaining manufacturing assets, giving up its stake in foundry company GlobalFoundries and setting the stage to fully focus on chip design.
AMD took initial steps to focus on chip design when it spun off its manufacturing operations to GlobalFoundries, which began operating in 2009. AMD is now divesting its stake of around 9 percent in GlobalFoundries and also paying US$425 million in cash over two fiscal years to the company as part of an amended chip supply agreement.
GlobalFoundries will be fully owned by Advanced Technology Investment Company, which is a part of the Abu Dhabi government's Mubadala Development investment arm. AMD initially retained GlobalFoundries as its exclusive chip supplier after the 2009 spinoff, but the new deal provides the flexibility for AMD to seek other chip makers.
In a separate statement, GlobalFoundries said that acquiring AMD's stake completes a vision of becoming an independent foundry company. GlobalFoundries has factories in the US, Germany and Singapore, and is building a plant in Abu Dhabi, which could become operational in a few years.
AMD will take charges of $703 million (£445 million), including the payment and non-cash charge of $278 million (£176 million), for the first fiscal quarter of 2012 related to the transfer of its equity stake to GlobalFoundries.
The relationship between AMD and GlobalFoundries has seen bumps, which has affected AMD financially. AMD reduced its revenue projection for the third fiscal quarter of 2011 due to a limited supply of its PC chips related to manufacturing and yield issues on GlobalFoundries' 32-nanometer manufacturing process. AMD is already having low-power PC chips manufactured from GlobalFoundries competitors like Taiwan Semiconductor Manufacturing Co. (TSMC).
The transfer of cash from AMD to GlobalFoundries comes as a result of an amended wafer supply agreement. GlobalFoundries will not remain the exclusive supplier of chips based on the newer 28-nm process for AMD. However, AMD plans to have some chips produced using GlobalFoundries' 28-nm process, said AMD spokesman Drew Prairie, in an email.
"GlobalFoundries has waived the exclusivity arrangement for us to manufacture certain 28-nm APU products at TSMC for a specified period," Prairie said.
AMD's latest PC chips are made using the 32-nm process, but laptop and desktops chips due next year will be made using the 28-nm process. AMD is also taking a new direction on chip design in which it will mix and match third-party intellectual property with its own x86 and graphics processors inside chips.
The companies have set the new terms of pricing under the amended wafer supply deal, under which GlobalFoundries has waived $430 million (£272 million) due from AMD related to chip supplies. The companies have set the wafer price for 2012 and the framework for chip pricing for 2013.