|
|
 | | | |
- close
- close
- close
- close
| |||||||||
These excerpts taken from the VSH 10-K filed Feb 26, 2009. Tower Semiconductor Foundry Agreement Our Siliconix subsidiary maintains long-term foundry agreements with subcontractors to ensure access to external front-end capacity. In 2004, Siliconix signed a definitive long-term foundry agreement for semiconductor manufacturing with Tower Semiconductor (the “2004 agreement”), pursuant to which Siliconix would purchase semiconductor wafers from and transfer certain technologies to Tower Semiconductor. Pursuant to the 2004 agreement, Siliconix was required to place orders valued at approximately $200 million for the purchase of semiconductor wafers to be manufactured in Tower’s Fab 1 facility over a seven to ten year period. The 2004 agreement specified minimum quantities per month and a fixed quantity for the term of the agreement. Siliconix was required to pay for any short-fall in minimum order quantities specified under the agreement through the payment of penalties equal to unavoidable fixed costs. Pursuant to the 2004 agreement, Siliconix advanced $20 million to Tower in 2004, to be used for the purchase of additional equipment required to satisfy Siliconix’s orders. This advance was considered a prepayment on future wafer purchases, reducing the per wafer cost to Siliconix over the term of the agreement. -40- During 2007, Siliconix was committed to purchase approximately $22 million of semiconductor wafers, but did not meet its commitments due to changing market demand for products manufactured using wafers supplied by Tower. Siliconix was required to pay penalties of approximately $1.7 million, which were recorded as a component of cost of products sold. In January 2008, Siliconix reached an agreement in principle to revise the 2004 agreement to more accurately reflect market demand. Based on the penalties paid in 2007 and the agreement in principle, during the fourth quarter of 2007, the Company recorded a write-off of the balance of the 2004 advance to Tower in the amount of $16.4 million, and accrued an additional $2.5 million based on its best estimate of additional contract termination charges related to the original agreement. At December 31, 2007, the remaining future purchase commitments under the 2004 agreement were approximately $160 million. In March 2008, Siliconix and Tower entered into an amended and restated foundry agreement (the “2008 agreement”). Pursuant to the 2008 agreement, Tower will continue to manufacture wafers covered by the 2004 agreement, but at lower quantities and at lower prices, through 2009. Tower will also begin manufacturing wafers for other product lines acquired as part of the PCS acquisition through 2012, pending a scheduled technology transfer. Siliconix must pay for any short-fall in the reduced minimum order quantities specified under the 2008 agreement through the payment of penalties equal to unavoidable fixed costs. Additionally, as contemplated, Siliconix agreed to forgive the balance of the 2004 advance and paid a $2.5 million contract termination charge. Tower Semiconductor Foundry Our Siliconix subsidiary maintains In 2004, Siliconix signed a definitive Pursuant to the 2004 agreement, -40- | |||||||
During 2007, Siliconix was committed to In January 2008, Siliconix reached an At December 31, 2007, the remaining In March 2008, Siliconix and Tower These excerpts taken from the VSH 10-K filed Feb 27, 2008. Tower Semiconductor Foundry Agreement Our Siliconix subsidiary maintains long-term foundry agreements with subcontractors to ensure access to external front-end capacity. In 2004, Siliconix signed a definitive long-term foundry agreement for semiconductor manufacturing with Tower Semiconductor, pursuant to which Siliconix would purchase semiconductor wafers from and transfer certain technology to Tower Semiconductor. Pursuant to the agreement, Siliconix was required to place orders valued at approximately $200 million for the purchase of semiconductor wafers to be manufactured in Tower’s Fab 1 facility over a seven to ten year period. The agreement specifies minimum quantities per month and a fixed quantity for the term of the agreement. Siliconix must pay for any short-fall in minimum order quantities specified under the agreement through the payment of penalties equal to unavoidable fixed costs. Pursuant to the agreement, Siliconix advanced $20 million to Tower in 2004, to be used for the purchase of additional equipment required to satisfy Siliconix’s orders. This advance was considered a prepayment on future wafer purchases, reducing the per wafer cost to Siliconix over the term of the agreement. -40- During 2007, Siliconix was committed to purchase approximately $22 million of semiconductor wafers, but did not meet its commitments due to changing market demand for products manufactured using wafers supplied by Tower. Siliconix was required to pay penalties of approximately $1.7 million, which were recorded as a component of costs of products sold. In January 2008, Siliconix reached an agreement in principle to revise the current arrangement with Tower to more accurately reflect market demand. Siliconix is presently negotiating the terms of a new legal contract. Based on the penalties paid in 2007 and the agreement in principle, management has determined that it is unlikely that Siliconix will be able to utilize the remaining prepayment of $16.4 million. Management has also accrued an additional $2.5 million based on its best estimate of additional contract termination charges related to the original agreement. Remaining future purchase commitments under the original Tower agreement are approximately $160 million. If Siliconix is unable to finalize a new agreement with Tower, significant additional penalties may be incurred. Tower Semiconductor Foundry Our Siliconix subsidiary maintains In 2004, Siliconix signed a definitive Pursuant to the agreement, Siliconix -40- | |||||||
During 2007, Siliconix was committed to In January 2008, Siliconix reached an Remaining future purchase commitments | EXCERPTS ON THIS PAGE:
|
| |||||||
