What is the main purpose of the amendment to the Wafer Supply Agreement with GLOBALFOUNDRIES?

The primary purpose of the amendment is to adjust the pricing methodology for wafers supplied by GLOBALFOUNDRIES in 2011, specifically for AMD's microprocessor and Accelerated Processing Unit (APU) products. It also modifies commitments regarding the production of certain graphics processing unit (GPU) and chipset products.

How will the pricing for wafers change in 2011 under the amended agreement?

For 2011, AMD will pay a fixed price for 45nm wafers. The price for 32nm wafers will vary based on the volume of wafers and the manufacturing yield. For 2012, AMD will return to a cost-plus basis for microprocessor and APU products.

What are AMD's estimated financial commitments for wafer purchases from GLOBALFOUNDRIES?

AMD estimates it will pay approximately $1.1 to $1.5 billion for wafer purchases in 2011 and $1.5 to $1.9 billion in 2012. These estimates are based on current expectations of GF's manufacturing yields, wafer volumes, and demand for AMD's products.

What is the significant non-cash gain AMD expects to report?

AMD expects to recognize a non-cash gain of approximately $492 million, net of certain costs, in its first fiscal quarter of 2011. This gain is related to the dilution of its equity interest in GLOBALFOUNDRIES following a previous transaction where ATIC International Investment Company LLC contributed shares of GLOBALFOUNDRIES Singapore Pte. Ltd. to GF.

AMD 8-K: Material Agreements

Summary

Advanced Micro Devices, Inc. (AMD) filed an 8-K on April 3, 2011, reporting an amendment to its Wafer Supply Agreement with GLOBALFOUNDRIES, Inc. (GF), effective April 2, 2011. The amendment primarily adjusts the pricing methodology for 2011 wafer deliveries of microprocessor and Accelerated Processing Unit (APU) products, establishing fixed pricing for 45nm wafers and a volume/yield-dependent pricing for 32nm wafers. A potential additional payment to GF in 2012 is also outlined, contingent on GF meeting specific 32nm capacity conditions. This amendment indicates a shift in AMD's wafer procurement strategy and cost structure. The company estimates substantial wafer purchase commitments, projecting $1.1 to $1.5 billion for 2011 and $1.5 to $1.9 billion for 2012, up from approximately $1.2 billion in 2010. These estimates are subject to variations in GF's manufacturing yields and product demand. Additionally, AMD disclosed it expects to recognize a significant non-cash gain of approximately $492 million in the first quarter of 2011, related to the dilution of its equity interest in GF following a prior transaction.

Key Highlights

1Amendment to Wafer Supply Agreement with GLOBALFOUNDRIES (GF) effective April 2, 2011.
2Changes pricing methodology for 2011 microprocessor and APU wafers: fixed price for 45nm, variable for 32nm based on volume and yield.
3GF commits to providing a fixed number of 45nm and 32nm wafers per quarter in 2011.
4Potential additional quarterly payment to GF in 2012 if specified 32nm capacity conditions are met.
5Estimated wafer purchase commitments: $1.1-$1.5 billion for 2011 and $1.5-$1.9 billion for 2012.
6Expects to recognize a non-cash gain of approximately $492 million in Q1 2011 related to equity in GF.

ADVANCED MICRO DEVICES INC 8-K Report, Material Agreement (Apr 4, 2011)

Summary

Key Highlights

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