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AMD's $1.2 Billion Globalfoundries Deal Includes Game Chips, GPUs

The chip maker amends its manufacturing agreement to include semi-custom chips that will be used in game consoles.

Advanced Micro Devices has revamped its deal with chip manufacturer Globalfoundries, which will now not only produce computing processors but also graphics chips and semi-custom silicon for game consoles.

AMD officials said they will pay Globalfoundries $1.2 billion in 2014 for the expanded manufacturing capabilities. Globalfoundries in the past has made computing chips for AMD, but this will be the first year it builds the GPUs and semi-custom products.

"This latest step in AMD’s continued transformation plays a critical role in our goals for 2014," AMD President and CEO Rory Read said in a statement.

The chip maker for more than a year has undergone a transformation as it expands into growth areas and reduces its reliance on the contracting global PC market. Those growth areas include dense servers, ultraportable devices, the embedded space and semi-custom chips, and AMD officials expect those markets to account for more than half of the vendor's revenues within the next two years.

Over the past year, the semi-custom business has become particularly important to AMD. The company's processors are powering Microsoft's Xbox One and Sony's PlayStation 4 gaming consoles, with the revenues from those systems being the key drivers in AMD's return to profitability in the third quarter 2013. It was the first time in three years that AMD had been profitable.

AMD's semi-custom chips also are being used in Nintendo's Wii U game system.

"Developing industry-leading technology remains at our core, and we are in the middle of a multi-year journey to redefine AMD as a leader across a more diverse set of growth markets," Read told analysts and journalists at the time the quarterly financial numbers were released.

Soon after the Xbox deal was announced last year, a former AMD executive said the agreement could be worth more than $3 billion for the company.