AMD 1993 Annual Report Download - page 9

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CMOS EPROM devices from 64K (64,000 bits) to 4 megabits (4,000,000 bits) in
density. AMD generally offers the highest performance at each density of any
standard EPROM supplier.
The Corporation has developed a family of Flash EPROMs to address the
emerging market for PC memory cards, solid-state disks, cellular communications
and networking applications. Flash Memory is a potential alternative to bulky
and relatively slow hard-disk drives for PCs because it is smaller, faster and
can store data almost indefinitely, yet can be erased, read and programmed
efficiently. The Corporation is developing a family of Flash EPROMs to address
the demand for PC memory cards, solid-state disks, cellular communications and
networking applications.
The Corporation's joint venture with Fujitsu Limited (Fujitsu) will allow
it to take advantage of expected growth in Flash Memory sales. Under the joint
venture, AMD and Fujitsu will jointly manufacture EPROMs and Flash Memory. (See
discussion of Joint Venture with Fujitsu Limited below).
Joint Venture with Fujitsu Limited. In 1993, AMD and Fujitsu entered into
various agreements for a comprehensive collaboration covering joint development,
manufacturing and sales of integrated circuits and formed a Joint Venture,
Fujitsu AMD Semiconductor Limited (the "Joint Venture"). Through the Joint
Venture, AMD expects to further develop its strong position in EPROMs and Flash
Memory. Under the Joint Venture, the two companies are cooperating in building
and operating an $800 million wafer fabrication facility in Aizu-Wakamatsu,
Japan to produce non-volatile memory devices such as EPROMs and Flash Memories.
The percentage of the equity of the Joint Venture owned by the Corporation and
Fujitsu are 49.95% and 50.05%, respectively (the "Ownership Percentage").
Currently, the primary mission of the Joint Venture is the production of Flash
Memory devices. Each company will contribute toward funding and supporting the
Joint Venture in proportion to its Ownership Percentage. In 1993, AMD
contributed approximately $2 million to the Joint Venture and it anticipates it
will make additional contributions in 1994 of approximately $135 million. AMD is
expected to contribute approximately one-half of its share of funding in cash as
equity investment, and guarantee third party loans made to the Joint Venture for
the remaining one-half. Accordingly, each company is obligated to invest up to
approximately $200 million as equity in the Joint Venture. As the forecasted
Joint Venture costs and funding commitments are denominated in Yen, the dollar
amounts involved are subject to change due to fluctuations in exchange rates.
The agreements provide that the Joint Venture will borrow funds required for
capital investment and working capital purposes which are in excess of the
participants' equity contributions. Each participant is obligated to guarantee a
portion of such borrowings proportionate to its Ownership Percentage. To the
extent that such borrowings cannot be made on the strength of a participant's
guarantee, the participant is obligated to make direct cash loans to the Joint
Venture.
The ability of the Corporation to sell products produced by the Joint
Venture into certain territories, including the United Kingdom and Japan, is
limited under the terms of the Joint Venture agreement. AMD and Fujitsu will not
independently produce EPROM and Flash Memory products with geometries of
one-half (0.5) micron and smaller outside of the Joint Venture and thus will not
compete with the Joint Venture in such products. Also under the agreement,
Fujitsu acquired a minority equity position in AMD and will continue to increase
its position over five (5) years. AMD has acquired a minority equity position in
Fujitsu. The respective equity investments will be less than five percent of the
common stock of each company.
The new facility is expected to begin volume production in 1995, and will
utilize eight-inch wafers and process technologies capable of producing products
with geometries of one-half (0.5) micron and smaller. In connection with the
Joint Venture, the Corporation and Fujitsu have entered into various joint
development, cross-license and investment arrangements. Accordingly, AMD and
Fujitsu will provide their product designs and process and manufacturing
technologies to the Joint Venture. In addition, both companies will collaborate
in developing manufacturing processes and designing integrated circuits for the
Joint Venture. 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, AMD's ability to sell certain products
incorporating Fujitsu intellectual property, whether or not produced by the
Joint Venture, is also limited in certain territories, including the United
Kingdom and Japan.
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Source: ADVANCED MICRO DEVIC, 10-K, March 07, 1994