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accounting for the investment in GF from the equity method to the cost method of accounting and recognized a
dilution gain in investee of approximately $492 million. In the fourth quarter of 2011, the Company identified
indicators of impairment in GF that were deemed other than temporary. The Company performed a valuation
analysis and recorded a non-cash impairment charge of $209 million. The carrying value of the Company’s
remaining investment in GF after the impairment charge was $278 million as of December 31, 2011.
On March 4, 2012, as partial consideration for certain rights received under a second amendment to the
WSA, the Company transferred to GF all of the remaining capital stock of GF that the Company owned. In
addition, as of March 4, 2012, the Funding Agreement was terminated, and the Company was no longer party to
the Shareholders’ Agreement. As a result of these transactions, the Company no longer owned any GF capital
stock as of March 4, 2012.
GF continues to be a related party of the Company because Mubadala Development Company PJSC
(Mubadala) and Mubadala Tech are affiliated with WCH, the Company’s largest stockholder. WCH and
Mubadala Tech are wholly-owned subsidiaries of Mubadala.
Wafer Supply Agreement
The WSA governs the terms by which the Company purchases products manufactured by GF. Pursuant to
the WSA, the Company is required to purchase all microprocessor and APU product requirements from GF, with
limited exceptions. If the Company acquires a third party business that manufactures microprocessor and APU
products, the Company 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 the Company 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 the Company’s purchase
commitments to GF will no longer apply.
On April 2, 2011, the Company 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 the Company’s
microprocessors and APU products. The first amendment also modified the existing commitments regarding the
production of certain GPU and chipset products at GF.
On March 4, 2012, the Company 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 the
Company’s microprocessor and APU products to be delivered by GF to the Company during 2012. Under the
terms of the second amendment to the WSA, GF granted the Company 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, the Company 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 the Company’s remaining investment in GF at fair value.
On December 6, 2012, the Company entered into a third amendment to the WSA. Pursuant to the third
amendment, the Company modified its wafer purchase commitments for the fourth quarter of 2012 made pursuant
to the second amendment to the WSA. In addition, the Company agreed to certain pricing and other terms of the
WSA applicable to wafers for its microprocessor and APU products to be delivered by GF to the Company from the
fourth quarter of 2012 through December 31, 2013. Pursuant to the third amendment, GF agreed to waive a portion
of the Company’s wafer purchase commitments for the fourth quarter of 2012. In consideration for this waiver, the
Company agreed to pay GF a fee of $320 million. As a result, the Company 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.
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