AMD 2015 Annual Report Download - page 84

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 of its microprocessor and APU product requirements and a
certain portion of its GPU 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.
Third Amendment to Wafer Supply Agreement. 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.
Fourth Amendment to Wafer Supply Agreement. On March 30, 2014, the Company 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 the Company’s microprocessor unit, graphics processor unit and semi-custom
game console products to be delivered by GF to the Company during the 2014 calendar year.
Fifth Amendment to Wafer Supply Agreement. On April 16, 2015, the Company entered into a fifth
amendment to the WSA. The primary effect of the fifth amendment was to establish volume purchase
commitments and fixed pricing for the 2015 calendar year as well as to modify certain other terms of the WSA
applicable to wafers for some of the Company’s microprocessor unit, graphics processor unit and semi-custom
products to be delivered by GF to the Company during the 2015 calendar year.
As of December 26, 2015, certain wafer deliveries under the fifth amendment to the WSA have been
delayed until fiscal 2016. As of December 26, 2015, purchase obligations for fiscal 2016 were approximately
$248 million, of which approximately $185 million, consisting of wafers and research and development
activities, were received by December 31, 2015.
The Company generally negotiates its purchase commitments with GF on an annual basis and as such the
Company cannot meaningfully quantify or estimate its future purchase obligations to GF. The Company is
currently in the process of negotiating a sixth amendment to the WSA, and it expects that its future purchases
from GF will continue to be material.
The Company’s total purchases from GF related to wafer manufacturing and research and development
activities were $0.9 billion for 2015 and $1 billion for each 2014 and 2013, respectively.
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