Sunnyvale: Advanced Micro Devices (AMD), 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 for this year, Sunnyvale, California-based AMD said in a statement. AMD will also record a $492 million (Dh1.8 billion), non-cash 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.
Primary designer
The government of Abu Dhabi is AMD's largest shareholder, with about a 16 per cent 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.
