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GLOBALFOUNDRIES
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12 Months Ended |
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Dec. 28, 2013
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| Related Party Transactions [Abstract] | |
| GLOBALFOUNDRIES |
GLOBALFOUNDRIES
Formation and Accounting
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 West Coast Hitech L.P. (WCH), pursuant to which the Company formed GLOBALFOUNDRIES, Inc. (GF). In connection with the consummation of the transactions contemplated by the Master Transaction Agreement, the Company, ATIC and GF entered into a Wafer Supply Agreement (the WSA), a Funding Agreement (the Funding Agreement) and a Shareholders' Agreement (the Shareholders' Agreement) on March 2, 2009.
At GF’s formation on March 2, 2009 and through December 26, 2009, GF was deemed a variable-interest entity and the Company was deemed to be GF's primary beneficiary. Accordingly, the Company consolidated GF under applicable accounting rules. As a result of certain GF governance changes, the Company deconsolidated GF and accounted for its GF ownership under the equity method of accounting as of December 27, 2009. Following the deconsolidation, GF became the Company’s related party.
In the first quarter of 2011, as a result of a contribution to GF by an affiliate of ATIC and certain GF governance changes noted above, the Company’s ownership in GF was diluted and the Company concluded that it no longer had the ability to exercise significant influence over GF. Accordingly, the Company changed the accounting for the 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, the Company identified indicators of impairment in GF that were deemed other than temporary. The Company performed a valuation analysis and recorded a non-cash impairment charge of $209 million. The carrying value of the Company’s 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, the Company transferred to GF all of the remaining capital stock of GF that the Company owned. In addition, as of March 4, 2012, the Funding Agreement was terminated and the Company was no longer party to the Shareholders’ Agreement. As a result of these transactions, the Company no longer owned any GF capital stock as of March 4, 2012.
GF continues to be a related party of the Company because Mubadala Development Company PJSC’s (Mubadala) and ATIC are affiliated with WCH, the Company's largest stockholder. WCH and ATIC are wholly-owned subsidiaries of Mubadala.
Wafer Supply Agreement
The WSA governs the terms by which the Company purchase products manufactured by GF. Pursuant to the WSA, the Company is required to purchase all microprocessor and APU 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.
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 and APU products. The first amendment also modified the existing commitments regarding the production of certain GPU and chipset products at GF.
On March 4, 2012, the Company entered into a second amendment to the WSA. The primary effect of the 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. Under the terms of the second amendment to the WSA, GF granted the Company rights to contract with another wafer foundry supplier with respect to specified 28nm products for a specified period of time (the limited waiver of exclusivity). In consideration for the limited waiver of exclusivity, the Company recorded a charge of $703 million in the first quarter of 2012, consisting of a $425 million cash payment and a $278 million non-cash charge representing the transfer to GF of the Company’s remaining investment in GF at fair value.
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 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 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.
The expenses related to GF's wafer manufacturing were $962 million, $1.2 billion and $904 million in 2013, 2012 and 2011, respectively. The expenses related to GF's research and development activities were $16 million, $49 million and $79 million for 2013, 2012 and 2011, respectively.
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