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Globalfoundries
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9 Months Ended |
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Sep. 29, 2012
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| Related Party Transactions [Abstract] | |
| Globalfoundries |
GLOBALFOUNDRIES
Wafer Supply Agreement. The Wafer Supply Agreement (WSA) governs the terms by which the Company purchases products manufactured by GLOBALFOUNDRIES Inc. (GF). On March 4, 2012, the Company entered into a second amendment to its 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 accelerated processing unit (APU) products to be delivered by GF to the Company during 2012. Pursuant to the amendment, GF has committed to provide the Company with, and the Company has committed to purchase, a fixed number of production wafers in 2012. The Company pays GF fixed prices for production wafers delivered in 2012. The Company also established a framework for wafer pricing in 2013.
The second amendment also grants the Company certain rights to contract with another wafer foundry supplier with respect to specified 28 nanometer (nm) 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 (1,063,798 GF Class A Preferred Shares). As a result of the Company receiving these rights in the first quarter of 2012, the Company recorded a charge related to the limited waiver of exclusivity from GF of $703 million consisting of the above-mentioned $425 million cash payment and a $278 million non-cash charge equal to the carrying and fair value of its transferred capital stock in 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 to be paid by December 31, 2012. In addition, as security for the final two payments, the Company issued a $225 million non-interest bearing promissory note to GF.
As a result of the transfer of the Company’s shares of GF capital stock, the Company no longer owns 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.
The Company currently estimates that it will pay GF approximately $1.5 billion in 2012 for wafer purchases under the WSA, as amended. In addition, the Company estimates that additional purchase obligations in connection with research and development related to GF wafer production will be approximately $56 million in 2012. The Company is in the process of negotiating a third amendment to the WSA, including the pricing methodology for 2013. However, the Company has not finalized the terms of an amendment and cannot guarantee that it will be able to successfully conclude its negotiations. The Company is therefore not able to meaningfully quantify or estimate its purchase obligations to GF beyond 2012, but it expects that its future purchases from GF will continue to be material.
GF is a related party of the Company. The Company’s total purchases from GF related to wafer manufacturing and research and development activities during the quarter and nine months ended September 29, 2012 amounted to approximately $263 million and $1,098 million, respectively. The Company’s total purchases from GF related to wafer manufacturing and research and development activities during the quarter and nine months ended October 1, 2011 amounted to approximately $227 million and $648 million, respectively.
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