AMD 2012 Annual Report Download - page 51

interests in variable interest entities, during 2009, GF was deemed a variable-interest entity, and we were deemed
to be the primary beneficiary. Therefore, we consolidated the accounts of GF from March 2, 2009 through
December 26, 2009.
At the Closing, AMD, ATIC and GF also entered into a Shareholders’ Agreement (the Shareholders’
Agreement), a Funding Agreement (the Funding Agreement), and a Wafer Supply Agreement (the WSA).
Shareholders’ Agreement. The Shareholders’ Agreement set forth the rights and obligations of AMD and
ATIC as shareholders of GF. The initial GF board of directors (GF Board) consisted of eight directors, and AMD
and ATIC each designated four directors. We were no longer a party to the Shareholders’ Agreement as of
March 4, 2012.
Funding Agreement. The Funding Agreement provided for the funding of GF and governed the terms and
conditions under which ATIC was obligated to provide such funding. We were no longer a party to the Funding
Agreement as of March 4, 2012.
Wafer Supply Agreement. The WSA governs the terms by which we purchase products manufactured by
GF. Pursuant to the WSA, during 2010, we purchased substantially all of our microprocessor unit (MPU) product
requirements from GF. During 2010, we paid GF for wafers on a cost-plus basis. If we acquire a third-party
business that manufactures MPU products, we will have up to two years to transition the manufacture of such
MPU 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 products will remain as set forth in the WSA, but our purchase commitments to GF will no
longer apply. This agreement has been subsequently modified, as disclosed below.
Governance Changes, Funding and Accounting in 2010
Deconsolidation of GF
On December 18, 2009, ATIC International Investment Company (ATIC II) acquired Chartered
Semiconductor Manufacturing Ltd. (Chartered). On December 28, 2009, with our consent, ATIC II, Chartered
and GF entered into a Management and Operating Agreement (MOA), which provided for the joint management
and operation of GF and Chartered, thereby allowing GF and Chartered to share costs, take advantage of
operating synergies and market wafer fabrications services on a collective basis. In order to allow for the signing
of the MOA on December 28, 2009, prior to obtaining any regulatory approvals, we agreed to irrevocably waive
rights under the Shareholders Agreement with respect to certain matters that require unanimous GF Board
approval. Additionally, if any such matters came before the GF Board, we agreed that our designated GF
directors will vote in the same manner as the majority of ATIC-designated GF Board members voting on any
such matters. As a result of waiving such approval rights, as of December 28, 2009, for financial reporting
purposes we no longer shared control with ATIC over GF.
In June 2009, the FASB issued an amendment to improve financial reporting by enterprises involved with
variable interest entities. Based on the results of our evaluation and in light of the governance changes whereby
we believed we only had protective rights relative to the operations of GF, we concluded that the other investor
in GF, ATIC, was the party who had the power to direct the activities of GF that most significantly impact GF’s
performance and was, therefore, the primary beneficiary of GF. Accordingly, effective as of December 27, 2009,
we deconsolidated GF, and during 2010 we accounted for our ownership interest in GF under the equity method
of accounting. For purposes of our application of the equity method of accounting during 2010, we recorded our
share of GF’s results excluding the results of Chartered because GF did not have an equity ownership interest in
Chartered. The terms of the Funding Agreement and the WSA described above were not affected by the
deconsolidation of GF. Following the deconsolidation, GF became our related party.
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