That’s the gist of it. The major points of the Wafer Supply Agreement (the sheets of semiconductors, which are then cut into dies, out of which individual chips are made, are called wafers) are disclosed in the 8k filing (page 8). AMD will buy its CPUs from TFC with the price determined as a percentage of what AMD spends on making them overall (their Cost of Goods Sold). As soon as TFC gets its 32nm fabrication capacity up, AMD will buy, “where competitive,” some of its GPUs from them, the percentage increasing over the course of five years.
If AMD and ATIC can’t reach an agreement on something, AMD can go elsewhere to get its chips, and ATIC can start a “transition period.” As we said previously, many details of the agreement are confidential. In that scenario, TFC “will agree to use commercially reasonable efforts to assist” AMD in moving production to another foundry, and will keep making CPUs and GPUs at the prices already agreed to, for two years.
TFC will not only be making semiconductors for AMD, they will be operating as a merchant foundry. That means they will be manufacturing other companies’ chip designs on a contract basis. This is a growing trend in the semiconductor industry (because of difficulties in backward integration, explained here) as the chart (from AMD) to the right shows.
Clients of foundries come from a far wider breadth of industries than the computing and consumer electronics fields which immediately come to mind. Medical, transportation, measurement and control equipment, telecommunication, and other businesses are heavily dependent on semiconductors. So is the military, with which AMD does business.
Any transaction of this size needs to be accepted by a wide variety of regulators and investors (discussed here), none of which are like to disagree too strongly. Even Intel is unlikely to interfere, though some argue they could via AMD's x86 licencense. But plans for The Foundry Company will undergo even more scrutiny from CFIUS because of the foreign involvement and AMD’s military contracts. AMD has already obtained approval for the $1.2 billion from the State of New York mentioned above.