AMD 2013 Annual Report Download - page 21

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Manufacturing Arrangements and Assembly and Test Facilities
Third-Party Wafer Foundry Facilities
GLOBALFOUNDRIES, Inc. On March 2, 2009, we entered into a Wafer Supply Agreement (the WSA)
with GLOBALFOUNDRIES, Inc. (GF). The WSA governs the terms by which we purchase products
manufactured by GF, a related party to us. Pursuant to the WSA, we are required to purchase all of our
microprocessor and APU product requirements from GF with limited exceptions. If we acquire a third-party
business that manufactures microprocessor and APU products, we will have up to two years to transition the
manufacture of such microprocessor and APU products to GF.
The WSA terminates no later than March 2, 2024. GF has agreed to use commercially reasonable efforts to
assist us to transition the supply of products to another provider and to continue to fulfill purchase orders for up
to two years following the termination or expiration of the WSA. During the transition period, pricing for
microprocessor and APU products will remain as set forth in the WSA, but our purchase commitments to GF will
no longer apply.
On April 2, 2011, we entered into a first amendment to the WSA. The primary effect of the first amendment
was to change the pricing methodology applicable to wafers delivered in 2011 for our microprocessors and APU
products. The first amendment also modified our existing commitments regarding the production of certain GPU
and chipset products at GF.
On March 4, 2012, we entered into a second amendment to the WSA. The primary effect of the second
amendment was to modify certain pricing and other terms of the WSA applicable to wafers for our
microprocessor and APU products to be delivered by GF to us during 2012. Under the terms of the second
amendment to the WSA, GF granted us rights to contract with another wafer foundry supplier with respect to
specified 28nm products for a specified period of time (the limited waiver of exclusivity). In consideration for the
limited waiver of exclusivity, we recorded a charge of $703 million in the first quarter of 2012, consisting of a
$425 million cash payment and a $278 million non-cash charge representing the transfer to GF of our remaining
investment in GF at fair value.
On December 6, 2012, we entered into a third amendment to the WSA. Pursuant to the third amendment, we
modified our wafer purchase commitments for the fourth quarter of 2012 made pursuant to the second
amendment to the WSA. In addition, we agreed to certain pricing and other terms of the WSA applicable to
wafers for our microprocessor and APU products, to be delivered by GF to us from the fourth quarter of 2012
through December 31, 2013. Pursuant to the third amendment, GF agreed to waive a portion of our wafer
purchase commitments for the fourth quarter of 2012. In consideration for this waiver, we agreed to pay GF a fee
of $320 million. As a result, we recorded a lower of cost or market charge of $273 million for the write-down of
inventory to its market value in the fourth quarter of 2012. The cash impact of this $320 million fee was paid
over several quarters, with $80 million paid on December 28, 2012, $40 million paid on April 1, 2013 and $200
million paid on December 31, 2013.
We are currently in the process of negotiating a fourth amendment to the WSA, and we expect that our
future purchases from GF will continue to be material.
GF currently manufactures our microprocessors on 300 millimeter wafers in technologies ranging from
65nm to 28nm. Smaller process geometries can lead to gains in performance, lower power consumption and
lower per unit manufacturing costs. We continue to have our products manufactured on more advanced process
technology because using more advanced process technology can contribute to lower product manufacturing
costs and improve a product’s performance and power efficiency.
Taiwan Semiconductor Manufacturing Company.We also have foundry arrangements with Taiwan
Semiconductor Manufacturing Company (TSMC) for the production of certain graphics processors and chipsets,
embedded processors and APU products. We are in production in TSMC’s 300 millimeter fabrication facilities in
technologies ranging from 65nm to 28nm.
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