On the conference call regarding the Wafer Supply Agreement (WSA) amendment covering 2012, AMDs CFO Thomas Seifert delivered a few interesting statements that reveal some small details regarding the roadmap going forward. We will also go into a few details on the impact of the new WSA on AMD.
There is one statement made in the Q&A section of the call on the new WSA that caught our attention:
"So with respect to SOI (Silicon On Insulator), we made statements that on 28-nanometer, all of our products will be bulk."
Also he basically confirmed, that Kaveri, the successor to Trinity is going to be manufactured at GlobalFoundries at the 28nm node:
"If you look at the roadmaps that we have presented at Financial Analyst Day, there is a 28-nanometer successor product to Trinity on the roadmap that we will ramp next year, and that is also manufactured at GLOBALFOUNDRIES."
Kaveri will integrate 2-4 Steamroller CPU cores (successor to Piledriver cores in Trinity, 3rd Generation Bulldozer core) and a GPU based on the GCN architecture. It will also provide support for HSA, which means integration of third party IP into the same die. The APU is scheduled for a 2013 launch.
Departure from SOI
At the Morgan Stanley Technology, Media and Telecom Conference Thomas Seifert last week gave a bit more detail on the matter:
"We said that at the 28nm node we are going to be on bulk silicon across all products, not only graphics but also CPUs. And We have made no statement beyond that. But for 28[nm] we will be on bulk for all products."
He also added:
"There are always tradeoff decisions. But the flexibility that we gain moving in that direction... the flexibility across foundry partners, across design tools outhweigh that by far, the benefits of SOI."
So the reasoning behind moving away from SOI is centered on being more flexible with manufacturing. How big the impact on the performance (or lack thereof) will be, remains to be seen. It shouldn't materialize until high-end CPUs are being manufactured on 28nm bulk silicon, which will only happen in 2013.
While technically he hasn't denied the use of SOI going forward, for example at the 22nm node, at this point it seems a bit unlikely. Once you have transitioned your entire product lineup to a bulk process you are not going to move back to SOI at the next half-node step again, unless there are significant benefits to do so. The statement regarding the increased flexibility at a bulk process are a strong hint that going forward AMD would rather avoid SOI.
Regarding development of 22nm node technology, Seifert answered a bit ambiguously:
"We have very strong and engaging discussions on the roadmap, and we will provide updates on our roadmap as we proceed. But this is not a reflection of disengagement on future nodes."
It doesn't preclude a 22nm bulk process at GlobalFoundries, but depending on what processes TSMC offers it might be smarter to go straight to 20nm bulk silicon in order to leverage multiple sources of bleeding edge processes.
The details of the amended WSA
Regarding the amendment itself, there has been some confusion as to why actually AMD has to pay something when they actually transfer ownership back to GLOBALFOUNDRIES. In order to better understand this, one needs to go into the gory details of the agreement. For AMD there will be a $703 million one-time GAAP charge, which consists of a $425 million cash payment as well as a $278 million non-cash expense. The cash payment will be paid over the peroid of two AMD fiscal years, with $150 million paid now, $50 million at the end of the second and third quarter of 2012 and the remaining $175 million at the end of the fourth quarter of 2012. The non-cash expense is related to the transfer of GF equity from AMD back to GF.
In exchange of the $703 million value, an exclusivity agreement between AMD and GF to manufacture certain 28nm APU products for a specific period is waived. We'd like to note that the exclusivity agreement, which was in place until now, only covered a certain range of APU (and possibly CPU) products. For example AMD was already able to manufacture the APUs for the Brazos platform at TSMC on 40nm bulk silicon. We can only assume the exclusivity entailed mainstream APUs (i.e. Llano, Trinity and successors) and possibly high-end desktop, workstation and server chips from the AMD FX and Opteron line of products.
On the bright side an obligation on part of AMD to pay $430 million due to the 2011 WSA amendment is waived. So when criticizing AMD for the charge, this should be taken into account. For 2012 AMD moved back from "good die" pricing to fixed wafer pricing. Due to the improved yield situation it is beneficial for AMD to go back to the usual pricing method.
From a financial point of view, yesterdays news of the new WSA is not that exciting, considering AMD already accounted for it in the guidance it gave out during their fourth quarter 2011 earnings call as well as the recent Financial Analyst Day. The gross margin figures projected then are still valid and based on AMDs growth expectations for the year as well as further development of yields as the manufacturing processes at 32nm and 28nm improve.
The agreement however, gives both GlobalFoundries and AMD greather flexibility. For GlobalFoundries it allows them to focus on a more diverse set of customers which is paramount for them to evolve as a foundry. AMD can more freely choose their suppliers of subsequent APU products. It is also important to understand, that the added flexibility AMD now has is not planned to be used for dual-sourcing the same product. Rather, AMD would probably manufacture different products at different suppliers, much like it does now but in a more fine-grained way. This sounds sensible, as dual-sourcing can be challenging considering different design libraries and intricate properties of the processes at different foundry partners.