AMD 2009 Annual Report Download - page 23

technology, software and other functional intellectual property such as wired and wireless networking, and we
work with others in the industry, public foundations, universities and industry consortia to conduct early stage
research and development.
Our research and development expenses (including GF research and development expenses) for 2009, 2008,
and 2007 were approximately $1.7 billion, $1.8 billion and $1.8 billion. For more information, see Part II,
Item 7—“Management’s Discussion and Analysis of Financial Condition and Results of Operations,” or MD&A.
We conduct product and system research and development activities for our products in the United States
with additional design and development engineering teams located in Canada, India, Germany, Singapore, China,
Japan, Malaysia, and Taiwan.
Prior to the formation of GF in March 2009, we conducted microprocessor manufacturing process
development activities primarily through a joint development agreement with IBM. Under this Joint
Development Agreement or JDA, we jointly conducted development activities on new process technologies,
including 45 nm, 32 nm, 22 nm and certain other advanced technologies, to be implemented on silicon wafers.
Our relationship also included laboratory-based research of emerging technologies such as new transistor,
interconnect, lithography and die-to-package connection technologies. We paid fees to IBM for joint
development projects and we agreed to pay IBM royalties upon the occurrence of specified events, including in
the event that we sublicensed the jointly developed process technologies to specified third parties or if we
bumped wafers for a third party. Bumping wafers is one of the final stages of the manufacturing process in which
wafers are prepared for assembly and test. The JDA was assigned to GF in March 2009. For more information on
the fees paid to IBM, see “Part II, Item 7, MD&A—Contractual Obligations—Purchase Obligations.”
Manufacturing, Assembly and Test Facilities
In March 2009, upon consummation of the GF manufacturing joint venture, we began to purchase
substantially all of our microprocessor wafers from GF pursuant to the terms of a Wafer Supply Agreement. We
can also use Chartered Semiconductor’s Singapore facilities (currently, jointly managed and operated with GF)
as a second source for certain of our quarterly microprocessor product wafer requirements. In addition, once GF
develops certain specific qualified processes for bulk silicon wafers, we agreed to purchase from GF, where
competitive, specified percentages of our GPU requirements, which percentage is expected to increase over a
five-year period. We agreed not to sell, transfer or dispose of all or substantially all of our assets related to GPU
products and related technology to any third party without GF’s consent, unless the transferee agrees to be bound
by the terms of the Wafer Supply Agreement, including its minimum purchase obligations, where competitive,
with respect to GPU products. We currently compensate GF on a cost-plus basis. After the initial start-up period,
we will provide rolling, binding forecasts to GF. After reviewing forecasts provided by us, as agreed by the
parties, GF will allocate capacity sufficient to produce our microprocessor product volumes as set forth in the
binding forecasts. GF agreed to use commercially reasonable efforts to fill any capacity allocated to but
unutilized by us with production for third parties so as to offset and reduce our fixed cost reimbursement
obligations to GF; provided that such efforts will not be required if there exists any unutilized capacity that has
not been allocated to us. At our request, GF will also provide sort services to us on a product-by-product basis.
The Wafer Supply Agreement terminates no later than February 2024. The Wafer Supply Agreement may
also be terminated if and when a business plan deadlock with GF exists and ATIC elects to enter into a transition
period pursuant to the Funding Agreement. GF agreed to use commercially reasonable efforts to assist us to
transition the supply of products to another provider and continue to fulfill purchase orders for up to two years
following the termination or expiration of the Wafer Supply Agreement. During the transition period, pricing for
microprocessor products will remain as set forth in the Wafer Supply Agreement, but our purchase commitments
to GF will no longer apply.
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