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GLOBALFOUNDRIES
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12 Months Ended |
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Dec. 29, 2012
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| Related Party Transactions [Abstract] | |
| GLOBALFOUNDRIES |
GLOBALFOUNDRIES
Formation and Accounting in 2009
On March 2, 2009, the Company consummated the transactions contemplated by the Master Transaction Agreement among the Company, Advanced Technology Investment Company LLC (ATIC), and WCH, pursuant to which the Company formed GLOBALFOUNDRIES, Inc. (GF). Based on the structure of the transaction and the guidance on accounting for interests in variable interest entities, during 2009, GF was deemed a variable-interest entity, and the Company was deemed to be the primary beneficiary. Therefore, the Company 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. The Company is 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. The Company was no longer a party to the Funding Agreement as of March 4, 2012.
Wafer Supply Agreement. The WSA governs the terms by which the Company purchases products manufactured by GF. Pursuant to the WSA, during 2010, the Company purchased substantially all of its microprocessor unit (MPU) product requirements from GF. During 2010, the Company paid GF for wafers on a cost-plus basis. If the Company acquires a third-party business that manufactures MPU products, the Company 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 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 products will remain as set forth in the WSA, but the Company's purchase commitments to GF will no longer apply. The agreement has been subsequently modified, as described 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 the Company's 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, the Company 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, the Company agreed that its 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 the Company 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 the Company's evaluation and in light of the governance changes whereby the Company believed it only had protective rights relative to the operations of GF, the Company 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, the Company deconsolidated GF, and during 2010 accounted for its ownership interest in GF under the equity method of accounting. For purposes of the Company's application of the equity method of accounting during 2010, the Company recorded its 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 the Company's related party.
Funding of GF
During 2010, ATIC contributed $930 million of cash to GF. The Company did not participate in the funding. These contributions resulted in an aggregate gain on the Company's ownership interest of $232 million which the Company recorded as part of the equity in net loss of investee line item on its consolidated statement of operations.
Contribution Agreement, Funding and Accounting in 2011
GLOBALFOUNDRIES Singapore Pte. Ltd. (GFS, formerly Chartered) Contribution in 2011
On December 27, 2010, pursuant to the Contribution Agreement, ATIC International Investment Company LLC, an affiliate of ATIC, contributed all of the outstanding Ordinary Shares of GFS to GF. As the result of dilution of the Company's ownership in GF, during the first quarter of 2011 and the year ended December 31, 2011, the Company recognized a non-cash gain of approximately $492 million, net of certain transaction related charges, in Equity income (loss) and dilution gain in investee, net.
Following the GFS contribution and governance changes described above, the Company assessed its ability to exercise significant influence over GF and considered factors such as the Company's representation on GF's board of directors, participation in GF's policy-making processes, material intra-entity transactions, interchange of managerial personnel, technological dependency, and the extent of the Company's ownership in relation to ownership by the other shareholders. Based on the results of its assessment, the Company concluded that it no longer had the ability to exercise significant influence over GF. Accordingly, as of the first quarter of 2011, the Company changed its method of accounting for its ownership interest in GF from the equity method to the cost method of accounting.
Under the cost method of accounting, the Company no longer recognized any share of GF's net income or loss in its consolidated statement of operations. In addition, the Company reviewed the carrying value of its investment in GF for impairment at each reporting period. Impairment indicators, among other factors, include significant deterioration in GF's earnings performance or business prospects, significant changes in the market conditions in which GF operates, and GF's ability to continue as a going concern.
Impairment of Investment in GF
During the fourth quarter of 2011, the Company identified indicators of impairment, including revised financial projections which the Company received from GF. The fair value of its GF investment was determined by a valuation analysis of GF's Class A Preferred Shares, utilizing the revised financial projections. The Company concluded the decline in fair value was other than temporary. As a result of the valuation analysis, the Company recorded a non-cash impairment charge of approximately $209 million, based on the difference between the carrying value and the fair value of the investment as of December 31, 2011. As of December 31, 2011, the Company's investment balance in GF after impairment was $278 million.
Amended Wafer Supply Agreement
On April 2, 2011, the Company entered into a first amendment to the WSA. The primary effect of the first amendment was to change the pricing methodology applicable to wafers delivered in 2011 for the Company's 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.
GF continues to be a related party of AMD. The Company's expenses related to GF's wafer manufacturing were $1.2 billion, $904 million and $1.2 billion in 2012, 2011 and 2010. The Company's expenses related to GF's research and development activities were $49 million, $79 million and $114 million for 2012, 2011 and 2010.
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