GLOBALFOUNDRIES (Notes)

6 Months Ended

Jun. 28, 2014

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).

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 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.

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, graphics processor and semi-custom game console products to be delivered by GF to the Company during the 2014 calendar year.

The Company’s total purchases from GF related to wafer manufacturing and research and development activities for the quarters ended June 28, 2014 and June 29, 2013 were $293 million and $255 million, respectively. The Company’s total purchases from GF related to wafer manufacturing and research and development activities for the six months ended June 28, 2014 and June 29, 2013 were $553 million and $524 million, respectively.

At June 28, 2014, the Company had prepayments to GF of $70 million related to wafer purchases, which were included in prepaid expenses and other current assets on the Company’s condensed consolidated balance sheets.

The Company currently estimates that its wafer purchase obligation from GF will be $1.2 billion for the 2014 calendar year. The Company is not able to meaningfully quantify or estimate its purchase obligations to GF beyond December 31, 2014, but it expects that its future purchases from GF will continue to be material.

GF is a related party of the Company because GF is affiliated with West Coast Hitech L.P. (WCH), the Company’s largest stockholder.