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[Engadget] AMD cuts wafer order by 75%, pays $320 million fine - Page 6

post #51 of 83

Link is broken for me. Does anyone think that this will affect their GPU production, more specifically the 8XXX series?

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Mugendramon
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post #52 of 83
The only way this can come out better (the situation is in no way good, this might just be 'better' than the alternative) for them was if the 500mil they spent on product from GF would be sold at a 65mil loss after operating expenses. Thats a pretty bad ratio. So either situation just sucks.

And this isn't good for GF either. Its why they have such s steep penalty for breaking the contract. The biggest expense for semi companies are their process equipment, which depreciate. So technically GF's cost of goods sold will be the same (minus wafer and materials cost which is much smaller than depreciation) yet they receive 65mil less income. Semi fabs run 24/7 just to pay for the equipment, esp those photolithography scanners.

I'm surprised no one has mentioned TSMC, unless I missed it. AMD could be moving CPU orders over to TSMC. Do they still make their GPU chips? Altho TSMC's 28nm capacity is probably pretty tight atm.
post #53 of 83
Which monkeys are in-charge of these decisions? I swear with a people like that working FOR AMD they need no competition at all to lose stock value.
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post #54 of 83
Doesn't do them any good if they can't push that inventory out. Everything is so heavily focus on tablets and phones. If these where waffers for processors for budget machines. I don't think there is any market for them right now. They would sit there, and managing that inventory would probably be more costly.
post #55 of 83
AMD sure knows how run the company into the ground. It's like their subconscious mind keeps sabotaging them at every step.
post #56 of 83
Imo keeping the free stuff which could they could resell or use for "free" would be better...
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post #57 of 83
Jeez. AMD needs a whole new management staff. Also a new legal team. This appears to be a huge mistake from what I can tell.
post #58 of 83
I read more about the deal....

Basically AMD paid GF to redo the contract they had with them that applies now and in the future.

In the long run this will be a HUGE savings for AMD, hundreds of millions. Apparently under the old contract AMD had to purchase a certain amount from GF as well as give GF kickbacks and other cash payments, as per the contract. Now under the new contract AMD won't have to purchase as much, and doesn't have to provide those additional "cash incentives" to GF, instead being able to pocket the money.

So, it sounds like, for now at least, someone at AMD did their homework and just knocked the ball out of the park by negotiating this. AMD is looking at saving HUNDREDS of millions over the next year or two with the new deal, and avoid having surplus stock that would further bite into their finances.
Edited by PostalTwinkie - 12/8/12 at 10:25am
    
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post #59 of 83
Quote:
Originally Posted by PostalTwinkie View Post

I read more about the deal....
Basically AMD paid GF to redo the contract they had with them that applies now and in the future.
In the long run this will be a HUGE savings for AMD, hundreds of millions. Apparently under the old contract AMD had to purchase a certain amount from GF as well as give GF kickbacks and other cash payments, as per the contract. Now under the new contract AMD won't have to purchase as much, and doesn't have to provide those additional "cash incentives" to GF, instead being able to pocket the money.
So, it sounds like, for now at least, someone at AMD did their homework and just knock the ball out of the park by negotiating this. AMD is looking at saving HUNDREDS of millions over the next year or two with the new deal, and avoid having surplus stock that would further bite into their finances.
Ah. Now that sounds like a good move. Thanks!
post #60 of 83
At first I thought this was because AMD had drastically misforcasted demand for their products, but it seems AMD probably entered into this take-or-pay agreement knowing it would having to pay a substational amount.

AMD negotiated the take-or-pay, to replace the previous agreement, at the same time that they got rid of their last 8% of ownership in GF.
http://www.extremetech.com/computing/121069-the-dream-is-dead-amd-gives-up-its-share-in-globalfoundries
Quote:
According to the new agreement, AMD has negotiated a “take or pay” agreement for wafer prices in 2012, as well as a “framework” for pricing in 2013. A take-or-pay agreement is a contract in which the buyer (AMD) either accepts a product or pays the manufacturer a penalty. In 2011, AMD negotiated a wafer price arrangement with GF in which it only paid for “good” dies. Scuttlebutt indicated that GF was quite unhappy with this deal, as it left the company losing money on every Llano wafer it could build.

So what did AMD get? Manufacturing flexibility. Previously, Sunnyvale had agreed to manufacture 28nm APUs solely with GlobalFoundries. This new agreement voids that arrangement, freeing AMD to work with TSMC other foundries. It’s not an agreement that came cheap — not only is AMD giving up its 8.8% equity share of GF, it’s agreed to pay the manufacturer some $425 million by the end of Q1 2013. AMD will take a $703M charge against the transaction.
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