AMD to pay $6.5 billion to TSMC, GMC and other suppliers this year in bid to grab chip capacity

AMD expects to launch a new generation of processors manufactured using TSMC's 5nm process technology as early as September, sources have previously said.

Digitimes reported that AMD has launched a series of 6nm cpus and Gpus since 2022, with TSMC as its sole contract manufacturing partner. Sources believe that AMD is expected to launch a new generation of 5nm processors later this year due to its close cooperation with TSMC.

The deal with TSMC to produce its flagship processors has already played a positive role in AMD's battle with rivals such as Intel and Nvidia, sources said. AMD has been gaining market share in notebook, desktop and server processors since 2019.

In response, AMD, Intel, and Nvidia have all had to adjust and revise their strategies and product roadmap in response to rising competition from several other players, such as grabbing TSMC's advanced process capacity to manufacture their 5nm and below 5nm products.

The move follows news that Nvidia dumped Samsung's 8nm by demanding TSMC supply 5nm and below processes for its upcoming Gpus for more than $10 billion.

According to AMD 10-Q10's quarterly report, the company must pay a total of $6.5 billion in upfront payments to suppliers, including TSMC and Grofonde, for the rest of the year.

IT Home has learned that Nvidia previously released a similar public statement to pique the public's interest. Over the past six months, Nvidia has prepaid about $3.4 billion to suppliers to provide it with the necessary parts and related raw materials for production.

Even in the context of a global core shortage for some time to come, this is a very exaggerated increase in payments. AMD, by contrast, plans to pay no more than $1.9 billion upfront next year, starting in "hundreds of millions" after 2024.

Apparently, AMD's future payments to GlobalFoundries will be significantly reduced due to the expiration of its agreement with the supplier.

Second, AMD has invested this year to increase its product line and supply, which will require more services from TSMC and will therefore incur higher production costs, as well as the cost of buying wafers, substrates and other materials.