AMD, Globalfoundries Restructure Relationship

Advanced Micro Devices Inc. and the company that manufactures most of its computer chips have restructured their relationship, a deal that will trigger a $703 million charge for AMD and give it more freedom to have some of its products made elsewhere.

The agreement announced late Sunday includes a $425 million payment by AMD to Globalfoundries, a company that includes AMD's former manufacturing operations in Germany. AMD also agreed to give up its remaining 8.8% stake in Globalfoundries.

AMD spun off what became Globalfoundries in 2009, and that company later acquired Singapore's Chartered Semiconductor Manufacturing Ltd. The company's operations in Dresden, Germany, currently make AMD's microprocessor chips, which compete with those sold by Intel Corp. Such chip-manufacturing services are known as foundries.

The companies already renegotiated their relationship once before. The primary reason was problems experienced by Globalfoundries in refining a manufacturing process that fabricates circuitry measured at 32 nanometers, or billionths of a meter, on silicon wafers.

As part of the announcement Sunday, the companies said they had agreed on a new mechanism under which they will negotiate prices for processed wafers. Globalfoundries waived a requirement that required AMD to buy wafers based on the next production process—which will create chips with 28-nanometer circuitry—for a specified period.

As a result, AMD agreed to pay Globalfoundries the $425 million, starting with a $150 million installment on March 5. The $703 million charge, to be taken in the current quarter, reflects that payment and an additional noncash charge, AMD said.

An AMD spokesman said the agreement allows his company to make some 28-nanometer chips at Taiwan Semiconductor Manufacturing Co. instead of Globalfoundries, though the latter company also will build some of those chips for AMD.

A spokesman for Globalfoundries said the arrangement is also good for his company, since it allows the company to broaden its base of customers. Globalfoundries also said it was pleased with the fact that the deal leaves Abu Dhabi-based Advanced Technology Investment Co. as the manufacturer's sole owner.

"Today marks the start of a new era for Globalfoundries as it becomes a truly independent foundry," said Ajit Manocha, its chief executive, in prepared remarks.

Rory Read, AMD's chief executive, said the agreement means the two companies "remain committed as long-term strategic business partners."

AMD said the agreement doesn't affect its projections for its profit margins in the first quarter and all of 2012.

Write to Don Clark at don.clark@wsj.com