AMD 2015 Annual Report Download - page 49

At GF’s formation on March 2, 2009 and through December 26, 2009, GF was deemed a variable-interest
entity, and we were deemed to be GF’s primary beneficiary. Accordingly, we consolidated GF under applicable
accounting rules. As a result of certain GF governance changes, we deconsolidated GF and accounted for our GF
ownership under the equity method of accounting as of December 27, 2009. Following the deconsolidation, GF
became our related party.
In the first quarter of 2011, as a result of a contribution to GF by an affiliate of Mubadala Tech and certain
GF governance changes noted above, our ownership in GF was diluted, and we concluded that we no longer had
the ability to exercise significant influence over GF. Accordingly, we changed our accounting for our 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, we identified indicators of impairment in GF that were
deemed other than temporary. We performed a valuation analysis and recorded a non-cash impairment charge of
$209 million. The carrying value of our 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, we transferred to GF all of the remaining capital stock of GF that we owned. In addition, as of March 4,
2012, the Funding Agreement was terminated, and we were no longer party to the Shareholders’ Agreement. As
a result of these transactions, we no longer owned any GF capital stock as of March 4, 2012.
GF continues to be a related party of us because Mubadala Development Company PJSC (Mubadala) and
Mubadala Tech are affiliated with WCH, our largest stockholder. WCH and Mubadala Tech are wholly-owned
subsidiaries of Mubadala.
Wafer Supply Agreement
The WSA governs the terms by which we purchase products manufactured by GF. Pursuant to the WSA, we
are required to purchase all of our microprocessor and APU product requirements, and a certain portion of our
GPU 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.
Third Amendment to Wafer Supply Agreement. 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.
Fourth Amendment to Wafer Supply Agreement. On March 30, 2014, we entered into a fourth amendment
to the WSA. The primary effect of the fourth amendment was to establish volume purchase commitments and
fixed pricing for the 2014 calendar year as well as to modify certain other terms of the WSA applicable to wafers
for some of our microprocessor, graphics processor and semi-custom game console products to be delivered by
GF to us during the 2014 calendar year.
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