AMD 1996 Annual Report Download - page 15

The Company's joint venture with Fujitsu Limited, Fujitsu AMD Semiconductor
Limited (FASL), is constructing a second manufacturing facility in Aizu-
Wakamatsu, Japan. In addition, the Company is planning to construct and
operate a manufacturing facility in Dresden, Germany, through a wholly owned
subsidiary of the Company. AMD also has foundry arrangements for the
production of its products by third parties.
The Company's current assembly and test facilities are described in the
chart set forth below:
APPROX.
ASSEMBLY & TEST
FACILITY LOCATION SQUARE FOOTAGE ACTIVITY
----------------- --------------- ---------------
Penang, Malaysia.......................... 141,283 Assembly & Test
Bangkok, Thailand......................... 77,473 Assembly & Test
Singapore................................. 54,000 Test
In addition to the assembly and test facilities described above, AMD has a
50 year land lease in Suzhou, China, and is constructing an additional
assembly and test facility there. Foreign manufacturing entails political and
economic risks, including political instability, expropriation, currency
controls and fluctuations, changes in freight and interest rates, and loss or
modification of exemptions for taxes and tariffs. For example, if AMD were
unable to assemble and test its products abroad, or if air transportation
between the United States and the Company's overseas facilities were
disrupted, there could be a material adverse effect on the Company.
CERTAIN MATERIAL AGREEMENTS. Set forth below are descriptions of certain
material contractual relationships of the Company relating to FASL and the
Company's planned facility in Dresden, Germany.
FASL. In 1993, the Company and Fujitsu Limited (Fujitsu) formed a joint
venture, FASL, for the development and manufacture of non-volatile memory
devices. Through FASL, the two companies have constructed and are operating an
advanced integrated circuit manufacturing facility in Aizu-Wakamatsu, Japan,
to produce Flash memory devices. The facility began volume production in the
first quarter of 1995, and utilizes eight-inch wafer processing technologies
capable of producing products with geometrics of 0.5 micron or smaller.
Pursuant to the terms of the joint venture, the Company and Fujitsu have each
agreed not to independently produce Flash memory devices with geometrics of
0.5 micron or smaller outside of the joint venture.
In the third quarter of 1995, FASL approved construction of a second Flash
memory integrated circuit manufacturing facility (FASL II) at a site
contiguous to the existing FASL facility. Groundbreaking for FASL II occurred
in the first quarter of 1996. The $1.1 billion in capital expenditures planned
for the construction of FASL II are expected to be funded by cash generated
from FASL operations and, if necessary, borrowings by FASL. To the extent that
FASL is unable to secure the necessary funds for FASL II, the Company may be
required to contribute cash or guarantee third party loans in proportion to
its 49.95% interest in FASL. As of January 26, 1997, the Company had
guarantees of $33 million outstanding with respect to such loans. The planned
FASL II costs are denominated in yen and, therefore, are subject to change due
to foreign exchange rate fluctuations.
In connection with FASL, the Company and Fujitsu have entered into various
joint development, cross-license and investment arrangements. Accordingly, the
Company and Fujitsu are providing their product designs and process and
manufacturing technologies to FASL. In addition, both companies are
collaborating in developing manufacturing processes and designing integrated
circuits for FASL. The right of each company to use the licensed intellectual
property of the other with respect to certain products is limited to certain
geographic areas. Consequently, the Company's ability to sell Flash memory
products incorporating Fujitsu intellectual property, whether or not produced
by FASL, is also limited in certain territories, including the United Kingdom
and Japan. Fujitsu is likewise limited in its ability to sell Flash memory
devices incorporating the Company's intellectual property, whether or not
produced by FASL, in certain territories including the United States and
Europe, other than the United Kingdom and Ireland.
11
Source: ADVANCED MICRO DEVIC, 10-K, March 20, 1997