AMD 2012 Annual Report Download - page 87

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microprocessors, including APU products. The first amendment also modified the Company’s existing
commitments regarding the production of certain GPU and chipset products at GF. Pursuant to the first
amendment, GF committed to provide the Company with, and the Company committed to purchase, a fixed
number of 45nm and 32nm wafers per quarter in 2011. The Company paid GF a fixed price for 45nm wafers
delivered in 2011. The Company’s price for 32nm wafers varied based on the wafer volumes and manufacturing
yield of such wafers and was based on good die. In addition, the Company also agreed to pay an additional
quarterly amount to GF during 2012 totaling up to $430 million if GF met specified conditions related to the
continued availability of 32nm capacity as of the beginning of 2012. As part of the second amendment described
below, GF agreed to waive these quarterly payments, and therefore the Company is no longer required to pay
them.
Amendments to Wafer Supply Agreement and Accounting in 2012
Second Amendment to Wafer Supply Agreement
On March 4, 2012, the Company entered into a second amendment to the WSA with GF. The primary effect
of this 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. Pursuant to
the second amendment, GF committed to provide the Company with, and the Company committed to purchase, a
fixed number of production wafers in 2012. The Company paid GF fixed prices for production wafers delivered
in 2012.
The second amendment also granted the Company certain rights to contract with another wafer foundry
supplier with respect to specified 28nm products for a specified period of time. In consideration for these rights,
the Company agreed to pay GF $425 million and transfer to GF all of the capital stock of GF that it owned. As a
result of the Company receiving these rights in the first quarter of 2012, the Company recorded a charge related
to this limited waiver of exclusivity from GF of $703 million consisting of the $425 million cash payment and a
$278 million non-cash charge representing the carrying and fair value of the capital stock that the Company
transferred to GF. Pursuant to the second amendment, $150 million of the $425 million was paid on March 5,
2012, $50 million was paid on June 29, 2012 and $50 million was paid on October 1, 2012 with the remaining
$175 million paid by December 31, 2012. In addition, as security for the final two payments, the Company issued
a $225 million promissory note to GF.
As a result of the transfer of the Company’s shares of GF capital stock, the Company no longer owned any
GF capital stock. Also, the Company is no longer entitled to designate a director to GF’s board, and its
designated director resigned effective as of the date of the second amendment. As of March 4, 2012, the
Company was no longer a party to either the Shareholders’ Agreement or the Funding Agreement.
Third Amendment to Wafer Supply Agreement
On December 6, 2012, the Company entered into a third amendment to the WSA with GF. Pursuant to the
third amendment, the Company modified its wafer purchase commitments for the fourth quarter of 2012 under
the second amendment to the WSA. In addition, the Company agreed to certain pricing and other terms of the
WSA applicable to wafers for the Company microprocessor and APU products to be delivered by GF to the
Company during 2013 and through December 31, 2013. Pursuant to the third amendment, the Company
committed to purchase a fixed number of production wafers at negotiated prices in the fourth quarter of 2012 and
through December 31, 2013.GF agreed to waive a portion of the Company’s wafer purchase commitments for the
fourth quarter of 2012. In consideration of 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,” or LCM 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 will be
spread over several quarters, with $80 million paid by December 28, 2012 and $40 million by April 1, 2013. For
the remainder of the fee, the Company issued a $200 million promissory note to GF that matures on
December 31, 2013.
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