<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 29, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Transition period from_______________ to ________________
Commission File No. 1-7819
Analog Devices, Inc.
(Exact name of registrant as specified in its charter)
Massachusetts 04-2348234
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Technology Way, Norwood, MA 02062-9106
(Address of principal executive offices) (Zip Code)
(617) 329-4700
(Registrant's telephone number, including area code)
_______________
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES X NO
The number of shares outstanding of each of the issuer's classes of Common
Stock as of August 31, 1995 was 76,206,201 shares of Common Stock.
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<TABLE>
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ANALOG DEVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(thousands except per share amounts)
<CAPTION>
Three Months Ended
------------------
July 29, 1995 July 30, 1994
------------- -------------
<S> <C> <C>
Net sales $246,301 $197,058
Cost of sales 121,183 99,890
-------- --------
Gross margin 125,118 97,168
Operating expenses:
Research and development 35,035 27,205
Selling, marketing, general and
administrative 47,374 43,333
-------- --------
82,409 70,538
-------- --------
Operating income 42,709 26,630
Nonoperating expenses (income):
Interest expense 938 1,796
Interest income (1,721) (1,535)
Other 562 644
-------- --------
(221) 905
-------- --------
Income before income taxes 42,930 25,725
Provision for income taxes 11,149 6,046
-------- --------
Net income $ 31,781 $ 19,679
======== ========
Shares used to compute earnings per share 79,851 77,485
======== ========
Earnings per share of common stock $0.40 $0.25
===== =====
</TABLE>
See accompanying notes.
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<TABLE>
ANALOG DEVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(thousands except per share amounts)
<CAPTION>
Nine Months Ended
-----------------
July 29, 1995 July 30, 1994
------------- -------------
<S> <C> <C>
Net sales $684,352 $570,173
Cost of sales 337,980 292,991
-------- --------
Gross margin 346,372 277,182
Operating expenses:
Research and development 98,551 77,821
Selling, marketing, general and
administrative 136,637 126,534
-------- --------
235,188 204,355
-------- --------
Operating income 111,184 72,827
Nonoperating expenses (income):
Interest expense 3,242 5,455
Interest income (5,903) (3,059)
Other 2,026 2,037
-------- --------
(635) 4,433
-------- --------
Income before income taxes 111,819 68,394
Provision for income taxes 27,683 15,571
-------- --------
Net income $ 84,136 $ 52,823
======== ========
Shares used to compute earnings per share 79,064 77,004
======== ========
Earnings per share of common stock $1.06 $0.68
===== =====
</TABLE>
See accompanying notes.
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<TABLE>
ANALOG DEVICES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(thousands except share amounts)
<CAPTION>
Assets July 29, 1995 October 29, 1994 July 30, 1994
------------- ----------------- -------------
<S> <C> <C> <C>
Cash and cash equivalents $ 62,268 $109,113 $121,336
Short-term investments 66,233 72,652 36,424
Accounts receivable, net 185,700 162,337 154,316
Inventories:
Finished goods 37,479 45,678 47,854
Work in process 74,383 69,771 70,346
Raw materials 23,928 15,277 15,870
-------- -------- --------
135,790 130,726 134,070
Prepaid income taxes 27,780 25,587 23,455
Prepaid expenses 8,373 5,042 6,071
-------- -------- --------
Total current assets 486,144 505,457 475,672
-------- -------- --------
Property, plant and equipment,
at cost:
Land and buildings 130,328 111,857 87,790
Machinery and equipment 585,823 477,339 461,177
Office equipment 39,613 36,613 37,039
Leasehold improvements 40,802 33,070 32,010
-------- -------- --------
796,566 658,879 618,016
Less accumulated depreciation
and amortization 412,985 377,064 370,105
-------- -------- --------
Net property, plant and
equipment 383,581 281,815 247,911
-------- -------- --------
Intangible assets, net 17,738 19,262 19,770
Deferred charges and other
assets 24,073 9,337 8,779
-------- -------- --------
Total other assets 41,811 28,599 28,549
-------- -------- --------
$911,536 $815,871 $752,132
======== ======== ========
</TABLE>
See accompanying notes.
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<TABLE>
ANALOG DEVICES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(thousands except share amounts)
<CAPTION>
Liabilities and Stockholders' Equity July 29, 1995 October 29, 1994 July 30, 1994
------------- ---------------- -------------
<S> <C> <C> <C>
Short-term borrowings and current
portion of long-term debt $ 2,155 $ 22,917 $ 22,246
Obligations under capital leases 96 236 307
Accounts payable 67,682 74,506 52,176
Deferred income on shipments to
domestic distributors 25,787 18,881 19,598
Income taxes payable 39,857 29,425 19,207
Accrued liabilities 65,997 60,221 49,340
-------- -------- --------
Total current liabilities 201,574 206,186 162,874
-------- -------- --------
Long-term debt 80,000 80,000 80,000
Noncurrent obligations under
capital leases - 61 75
Deferred income taxes 4,000 3,225 8,000
Other noncurrent liabilities 6,315 4,484 4,647
-------- -------- --------
Total noncurrent liabilities 90,315 87,770 92,722
-------- -------- --------
Commitments and Contingencies
Stockholders' equity:
Preferred stock, $1.00 par value,
500,000 shares authorized,
none outstanding - - -
Common stock, $.16 2/3 par value,
300,000,000 shares authorized,
76,214,980 shares issued
(75,252,112 in October 1994,
51,287,792 in July 1994) 12,703 12,542 8,548
Capital in excess of par value 154,700 141,159 151,336
Retained earnings 446,330 362,194 340,521
Cumulative translation adjustment 5,999 6,020 5,763
-------- -------- --------
619,732 521,915 506,168
Less 2,777 shares in treasury,
at cost (none in October 1994
and 1,231,610 in July 1994) 85 - 9,632
-------- -------- --------
Total stockholders' equity 619,647 521,915 496,536
-------- -------- --------
$911,536 $815,871 $752,132
======== ======== ========
</TABLE>
See accompanying notes.
5
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<TABLE>
ANALOG DEVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
(thousands) Nine Months Ended
-----------------
July 29, 1995 July 30, 1994
------------- -------------
<S> <C> <C>
OPERATIONS
Cash flows from operations:
Net income $ 84,136 $ 52,823
Adjustments to reconcile net income
to net cash provided by operations:
Depreciation and amortization 47,047 46,068
Deferred income taxes 700 (595)
Other noncash expenses 529 2,052
Changes in operating assets and liabilities (12,154) 14,606
-------- --------
Total adjustments 36,122 62,131
-------- --------
Net cash provided by operations 120,258 114,954
-------- --------
INVESTMENTS
Cash flows from investments:
Additions to property, plant and equipment, net (145,838) (42,783)
Maturities of short-term investments 111,659 -
Purchase of short-term investments (105,240) (36,424)
Increase in other assets (14,308) (2,920)
-------- --------
Net cash used for investments (153,727) (82,127)
-------- --------
FINANCING ACTIVITIES
Cash flows from financing activities:
Payments on fixed rate borrowings (20,000) -
Proceeds from employee stock plans 9,095 8,987
Net (decrease) in variable rate borrowings (970) (66)
Payments on capital lease obligations (201) (250)
-------- --------
Net cash provided by (used for) financing activities (12,076) 8,671
-------- --------
Effect of exchange rate changes on cash (1,300) (830)
-------- --------
Net increase (decrease) in cash and cash equivalents (46,845) 40,668
Cash and cash equivalents at beginning of period 109,113 80,668
-------- --------
Cash and cash equivalents at end of period $ 62,268 $121,336
======== ========
SUPPLEMENTAL INFORMATION
Cash paid during the period for:
Income taxes $ 17,196 $ 10,127
======== ========
Interest $ 3,614 $ 3,973
======== ========
</TABLE>
See accompanying notes.
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Analog Devices, Inc.
Notes to Condensed Consolidated Financial Statements
July 29, 1995
Note 1 - In the opinion of management, the information furnished in the
accompanying financial statements reflects all adjustments, consisting only of
normal recurring adjustments, which are necessary to a fair statement of the
results for this interim period and should be read in conjunction with the most
recent Annual Report to Stockholders.
Note 2 - Certain amounts reported in the previous year have been reclassified
to conform to the 1995 presentation.
Note 3 - Commitments and Contingencies
As previously reported in the Company's Annual Report on Form 10-K for the
fiscal year ended October 29, 1994 and as set forth in Item 1, "Legal
Proceedings" in the Company's Forms 10-Q for the fiscal quarters ended January
28, 1995 and April 29, 1995, the Company has been engaged in patent
infringement litigation with Texas Instruments, Inc. ("TI") and a related
enforcement proceeding brought by the International Trade Commission ("ITC"),
and antitrust litigation with Maxim Integrated Products, Inc. ("Maxim").
The Company was a defendant in two lawsuits brought in Texas by TI, alleging
patent infringement, including patent infringement arising from certain plastic
encapsulation processes, and seeking an injunction and unspecified damages
against the Company. The alleged infringement of one of these patents is also
the subject matter of a proceeding brought by TI against the Company before
the ITC. On January 10, 1994, the ITC brought an enforcement proceeding against
the Company alleging that the Company had violated the ITC's cease and desist
order of February 1992 (as modified in July 1993), and seeking substantial
penalties against the Company for these alleged violations. In addition, in
June 1992, the Company commenced a lawsuit against TI in Massachusetts alleging
certain TI digital signal processors infringed one of the Company's patents.
Effective April 1, 1995, the Company and TI settled both Texas lawsuits and the
Massachusetts lawsuit principally by means of a royalty-free cross license of
certain of the Company's and TI's patents. On April 24, 1995, the Company
filed with the ITC a motion to terminate the ITC enforcement proceeding on the
grounds that further action by the ITC is unnecessary in light of the Company's
settlement with TI. On May 8, 1995, an Administrative Law Judge issued a
recommended determination to the ITC to grant the Company's motion to
terminate, and that motion is pending before the ITC.
The Company is a defendant in a lawsuit brought by Maxim seeking an injunction
against, and claiming damages for, alleged antitrust violations and unfair
competition in connection with distribution arrangements between the Company
and certain distributors. Maxim alleged that certain distributors ceased doing
business with Maxim as a result of the distribution arrangements between the
distributors and the Company, resulting in improper restrictions to Maxim's
access to channels by which it distributes its products. Maxim asserted actual
and consequential damages in the amount of $14.1 million and claimed
restitution and punitive damages in an unspecified amount. Under applicable
law, Maxim would receive three times the amount of any actual damages suffered
as a result of any antitrust violation. On September 7, 1994, Maxim's claim was
dismissed for lack of evidence. Maxim has appealed this ruling and briefing of
the appeal was concluded in March 1995. No hearing on this appeal has yet been
scheduled.
Although the Company believes it should prevail in these matters, the Company is
unable to determine their ultimate outcome or estimate the ultimate amount of
liability, if any, at this time. An adverse resolution of these matters could
have a material adverse effect on the Company's consolidated financial position
or on its consolidated results of operations or cash flows in the period in
which the matters are resolved.
7
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Third Quarter of Fiscal 1995 Compared to the Third Quarter of Fiscal 1994
Net sales of $246.3 million for the third quarter of fiscal 1995 grew $49.2
million or 25.0% from net sales of $197.1 million for the third quarter of
fiscal 1994. Third quarter sales growth was principally attributable to
significant increases in sales volumes of both standard linear IC and
system-level IC products as worldwide demand for precision integrated circuits
exceeded the industry's expectations and capacity. Sales of the Company's
standard linear IC products, the largest and most profitable part of the
Company's business, was up more than 35% from last year's third quarter. With
the exception of hard disk drive products, revenues from system-level IC
products, including both general-purpose digital signal processing and mixed
signal ICs, grew approximately 46% year over year. Revenues from disk drive
manufacturers declined $13.1 million compared to the third quarter of fiscal
1994 as the market continues to move rapidly to digital PRML channels.
Assembled product sales decreased approximately 9% from the third quarter of
fiscal 1994.
Demand for the Company's standard linear IC and system-level IC products was
broad based across all served application markets and geographies with the
strongest end user market growth in computers, wireless communications, high
speed digital communications, automatic test equipment and other
industrial-market applications. The distributor channel continued to have a
very positive effect on sales growth, particularly for standard linear IC
products, as worldwide sales through distribution increased approximately 67%
from the same period last year to comprise approximately 44% of total sales in
the third quarter of fiscal 1995. Distribution has become the fastest growing
channel for the Company's standard linear IC products.
Geographically, the largest year-over-year sales gains were registered in North
American distribution, Europe and Japan with a weaker average dollar exchange
rate contributing to a portion of the international sales increase.
Assuming continued increases in demand, further increases in sales will be
constrained in the near term by the Company's manufacturing capacity. See
"Liquidity and Capital Resources" below for a discussion of the Company's
efforts to address its capacity issues.
Gross margin increased to 50.8% of sales from 49.3% in the third quarter of
fiscal 1994, driven by a shift in the mix of products sold towards
higher-margin standard linear IC products. Gross margin on all IC products,
which include both standard linear and system-level ICs, was approximately 55%
of sales compared to 51% for the year ago quarter.
R&D expenses for the third quarter of fiscal 1995 increased 28.8% over the same
quarter last year to 14.2% of sales as the Company continued to fund the most
promising initiatives in new product and process development. Selling,
marketing, general and administrative expense (SMG&A) growth was held to 9.3%
over the amount in the third quarter of fiscal 1994 despite a weaker dollar, as
the Company continued to constrain spending growth to a rate significantly
below sales growth. As a result, the SMG&A-to-sales ratio decreased to 19.2%
from 22.0% in the third quarter of fiscal 1994.
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Operating profit rose 60.4% to 17.3% of sales compared to 13.5% of sales in
fiscal 1994's third quarter reflecting the combination of accelerated demand
for the Company's products, improved gross margin and continuing commitment to
growing expenses more slowly than sales.
Nonoperating expenses decreased $1.1 million in total, aided in large part by a
decrease in interest expense and an increase in interest income. The decrease
in interest expense related primarily to the maturity of a $20 million term
loan in the first quarter of fiscal 1995 while the increased interest income
reflected an increase in investment rates.
The effective income tax rate increased from 23.5% for the year ago quarter to
26.0% for the third quarter of fiscal 1995 due to a shift in the mix of
worldwide income to higher tax rate jurisdictions.
The growth in sales and improved operating performance yielded a 61.5% increase
in net income which rose from $19.7 million or $0.25 per share for the
year-earlier period to $31.8 million or $0.40 per share for the third quarter
of fiscal 1995.
Third Quarter of Fiscal 1995 Compared to the Second Quarter of Fiscal 1995
Net sales rose from $230.0 million for the second quarter of fiscal 1995 to
$246.3 million for the third quarter of fiscal 1995, an increase of $16.3
million or 7.1% as the strong order rate experienced during the second quarter
continued into the third quarter. The sales increase resulted largely from
increased sales volumes of standard linear IC products, which grew 12% from the
prior quarter, as the use of high performance standard linear IC components in
faster growing segments of the industrial, computer, communications and
consumer markets has become more pervasive. This trend together with the
Company's broader participation in the distributor channel and a strong demand
environment have accelerated the growth of the Company's standard linear IC
products. Sales were strong throughout all geographic regions including North
America, both in the Company's distributor and OEM businesses, Europe and
Japan.
The increased mix of standard linear IC sales had a beneficial impact on gross
margin which improved slightly from 50.6% in the second quarter to 50.8% in the
third quarter. R&D expenses for the third quarter rose $1.8 million from the
second quarter but as a percentage of sales decreased from 14.5% for the second
quarter of fiscal 1995 to 14.2% for the third quarter of fiscal 1995. SMG&A
expenses declined as a percentage of sales to 19.2% from 19.8% for the second
quarter of fiscal 1995. Higher sales, improved gross margin and further
reduction in total operating expenses as a percentage of sales generated a
sequential gain in operating income of 13.8% with operating income reaching
17.3% of sales compared to 16.3% in the preceding quarter.
Interest income was reduced from $2.0 million for the second quarter to $1.7
million for the third quarter of fiscal 1995 due to a lower average amount of
cash and cash equivalents. The effective tax rate increased to 26.0% compared
to 24.0% for the prior quarter, reflecting a change in the mix of worldwide
income. The improved operating performance led to a sequential improvement in
net income of 10.7% to $31.8 million or $0.40 per share compared to $28.7
million or $0.36 per share for last quarter.
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First Nine Months of Fiscal 1995 Compared to the First Nine Months of Fiscal
1994
Net sales of $684.4 million increased $114.2 million or approximately 20% from
the same period of fiscal 1994. Worldwide market demand in the semiconductor
industry increased throughout fiscal 1995 with the Company benefiting from this
demand both in its standard linear IC and system-level IC product areas. The
sales increase was primarily volume-based and was widespread across all product
lines, markets and geographies. Sales of standard linear ICs increased
approximately 28% while sales of system-level IC products, excluding hard disk
drive products, increased approximately 41%. Sales of hard disk drive products
decreased $27.3 million year over year. Total IC sales, representing both
standard linear and system-level ICs constituted approximately 91% of total
sales for the first nine months of fiscal 1995, continuing the long-term trend
of IC sales becoming a larger portion of the Company's revenues.
Sales of assembled products declined approximately 10% compared to the same
period last year.
The highest growth for both the Company's standard linear IC and system-level
IC products was in applications targeted for fast growing sectors of the
communications and computer markets. Sales growth for the Company's core
standard linear products was also very strong for the first nine months of
fiscal 1995 in the Company's traditional industrial and instrumentation markets
for such products as high-performance op amps and converters and pin
electronics for automatic test equipment.
Sales to North American and international customers increased 16% and 23%,
respectively, over the same period last year with the translation of local
currency sales to a weaker average U.S. dollar accounting for some of this
improvement. The distributor channel was a major contributor to sales growth in
North America as well as in Europe and Japan, especially for standard linear
products, as worldwide sales through distribution increased 53% compared to the
year ago period. For the first nine months of fiscal 1995, approximately 42% of
the Company's sales were derived from sales through distributors.
Gross margin increased two points from 48.6% for the first nine months of
fiscal 1994 to 50.6% of sales for the first nine months of fiscal 1995. This
increase resulted primarily from significantly stronger sales of higher-margin
standard linear IC products.
R&D expenses increased $20.7 million or 26.6% over the prior year reflecting
continued investment in high growth initiatives in the computer,
communications, consumer and automotive markets. As a percentage of sales, R&D
increased from 13.6% last year to 14.4% for the first nine months of fiscal
1995. SMG&A expense growth was held to 8.0% over these periods, leading to a
reduction in SMG&A as a percentage of sales from 22.2% for the first nine
months of fiscal 1994 to 20.0% for the first nine months of fiscal 1995
consistent with the Company's focus on maintaining tight control on operating
expenses in order to provide additional operating profit leverage as revenues
grow.
Operating profit reached $111.2 million or 16.2% of sales for the first nine
months of fiscal 1995, an increase of 52.7% from $72.8 million or 12.8% of
sales for the first nine months of fiscal 1994. This performance gain reflected
growth in sales, improvement in gross margin and a slower rate of SMG&A expense
growth versus sales.
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Nonoperating expenses decreased $5.1 million year-to-year due in large part to
increased interest income on a higher average level of cash investments and a
higher weighted average investment rate. A reduction in interest expense from
$5.5 million to $3.2 million related primarily to the maturity of a $20 million
term loan early in the first quarter of fiscal 1995 also contributed to the
decrease in nonoperating expenses. The effective income tax rate increased to
24.8% from 22.8% for the year ago period due to a change in the mix of
worldwide profits.
Net income grew 59.3% to $84.1 million or $1.06 per share compared to $52.8
million or $0.68 per share for the first nine months of fiscal 1994. As a
percentage of sales, net income improved to 12.3% from 9.3% for the
year-earlier period.
Liquidity and Capital Resources
At July 29, 1995, cash and cash equivalents and short-term investments totaled
$128.5 million, compared to $181.8 million and $157.8 million at the end of the
fourth and third quarters of fiscal 1994, respectively. The $53.3 million
decrease in cash, cash equivalents and short-term investments from the end of
the fourth quarter of fiscal 1994 resulted from cash used to fund a portion of
capital expenditures, the maturity of the Company's $20.0 million term loan in
the first quarter of fiscal 1995, and an investment made in an external wafer
foundry in the second quarter of fiscal 1995 as discussed below. Cash, cash
equivalents and short-term investments, in the aggregate, decreased $29.3
million compared to the third quarter of fiscal 1994 as the continued
generation of cash flow from operations was more than offset by a significant
increase in additions to property, plant and equipment associated with capacity
expansion.
For the first nine months of fiscal 1995, the Company generated cash flow from
operations of $120.3 million or 17.6% of sales compared to $115.0 million or
20.2% of sales for the same period of fiscal 1994. The change in operating
cash flow compared to the first nine months of fiscal 1994 principally
reflected higher net income offset in large part by an increase in working
capital requirements including increases in accounts receivable and
inventories. Cash flow from operations generated for the third quarter of
fiscal 1995 was $31.6 million or 12.8% of sales versus $38.6 million or 16.8%
of sales for the prior quarter and $39.6 million or 20.1% of sales for the
third quarter of fiscal 1994. The decrease in operating cash flows compared to
both of these quarters was mainly attributable to higher net working capital
requirements in the third quarter of fiscal 1995, as increased net income was
more than offset by growth in accounts receivable.
Accounts receivable of $185.7 million increased $7.4 million or 4.2%, $23.4
million or 14.4% and $31.4 million or 20.3% from the end of the second quarter
of 1995, the fourth quarter of 1994 and the third quarter of 1994,
respectively. The increase in accounts receivable in the third quarter of
fiscal 1995 compared to the fourth and third quarters of fiscal 1994 reflected
the higher sales levels combined with the translation of local currency
denominated receivables to a weaker U.S. dollar, particularly in Japan. The
increase in accounts receivable from the second quarter to the third quarter of
fiscal 1995 was attributable to the rise in sales. As a percentage of
annualized quarterly sales, however, accounts receivable was reduced to 18.8%
from 19.4%, 20.0% and 19.6% for the previous quarter and the fourth and third
quarters of 1994, respectively.
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Inventories rose $5.1 million during the first nine months of 1995 as a result
of heightened customer demand and the need to improve response times for
incoming orders. Inventories at the end of the third quarter of fiscal 1995
were relatively flat to the second quarter of fiscal 1995 as well as to the
year ago quarter. As a percentage of annualized quarterly sales, inventories
decreased to 13.8% from 14.6% for the prior quarter, 16.1% for the fourth
quarter of 1994 and 17.0% for the year-earlier quarter.
As previously discussed above and in the Company's "Management Discussion and
Analysis of Financial Condition and Results of Operations" contained in its
Form 10-Q for the fiscal quarter ended April 29, 1995, the Company's revenue
and order growth has been capacity constrained. The Company has several
capacity expansion programs under way that should provide the Company
substantially greater capacity during fiscal 1996.
Cash flow from operations together with cash on hand for both the third quarter
and first nine months of fiscal 1995 were used largely to fund net additions to
property, plant and equipment of $43.4 million and $145.8 million,
respectively. Capital expenditures were significantly higher than the
comparable periods of 1994 with the majority of these expenditures related to
capacity expansion including the new 6-inch, 0.6-micron wafer module at the
Company's wafer fabrication facility in Limerick, Ireland, primarily for
advanced mixed-signal products, and the ongoing conversion of the Company's
Wilmington, Massachusetts fab to provide new six-inch capability, primarily for
high-speed linear products. The module in Limerick, which has been supported in
part by grants from the Irish government, is currently expected to be on line
in early 1996 while the module in Wilmington is currently expected to be on
line during the second half of 1996. In addition, during the third quarter of
fiscal 1995, the Company completed the purchase of assets of an existing
six-inch wafer fab from Performance Semiconductor Corporation in Sunnyvale,
California. This facility is now undergoing rehabilitation and conversion to
advanced linear technology.
In addition to the ongoing capital expansions in Ireland, Massachusetts and
California, the Company has also shifted production of disk drive IC products
from its facility in Ireland to external foundries in order to free up internal
capacity. These actions in total, which principally support the production of
higher margin linear IC products, are expected to provide upside capacity in
fiscal 1996 that could accommodate the higher growth the Company is currently
experiencing in its core linear products, if such growth continues. Other
programs aimed at providing additional internal capacity include an expansion
of the Company's assembly and test facilities in the Philippines and a building
expansion program at the Company's facility in North Carolina to provide
capability to produce newer hybrids and multi-chip modules for communications
and other high growth applications.
12
<PAGE> 13
The Company's programs to address capacity shortages related to its external
wafer supply, particularly for system-level and digital signal processing ICs
for products in the computer and communications sectors, include its expanded
relationship with Taiwan Semiconductor Manufacturing Company (TSMC), the
Company's primary wafer foundry, to provide higher capacity over the 1996-1999
time frame. Under the agreement with TSMC, the Company will make option fees
aggregating $22.4 million to secure this additional capacity which are payable
over the period through 1999. Also, to secure access to additional external
wafer capacity, the Company invested $14 million in the second quarter of
fiscal 1995 in an external foundry, Chartered Semiconductor in Singapore. The
Company anticipates investing an additional $6 million in Chartered
Semiconductor in fiscal 1996. This supply agreement is scheduled to begin
providing access to eight-inch, 0.5-micron wafer capacity in 1996. The TSMC
option fees and Chartered Semiconductor investment described above will be
amortized over the related wafer output periods.
Despite these measures, which together are expected to provide increased
capacity in 1996, the Company currently expects that demand, based on recent
growth levels, will continue to exceed available supply for the balance of 1995
and into early 1996. The Company believes its current capacity is sufficient to
grow revenues by approximately 20-25% for the fourth quarter of fiscal 1995,
compared to the same period last year, assuming demand continues strong during
this period.
The Company currently anticipates that capital spending, including expenditures
related to the new wafer modules in Limerick and in Wilmington and the
Company's other internal capacity expansion programs, will be approximately
$190 million in fiscal 1995 and approximately the same level in fiscal 1996. As
a result of internal expansion, depreciation expense is expected to be
incrementally higher in fiscal 1996 as these planned additions begin to ramp
up.
At July 29, 1995, substantially all of the Company's lines of credit were
unused, including its four-year, $60 million credit facility.
The Company believes that its strong financial condition, existing sources of
liquidity, available capital resources and cash expected to be generated from
operations leave it well positioned to obtain the funds required to finance its
capital expenditure plan and to meet its current and future business
requirements.
Litigation
As set forth in Note 3 to the Condensed Consolidated Financial Statements
contained in this Form 10-Q for the fiscal quarter ended July 29, 1995, the
Company is engaged in an enforcement proceeding brought by the International
Trade Commission related to patent infringement litigation with Texas
Instruments, Inc., and antitrust litigation with Maxim Integrated Products,
Inc.
Although the Company believes it should prevail in these matters, the Company
is unable to determine their ultimate outcome or estimate the ultimate amount
of liability, if any, at this time. An adverse resolution of these matters
could have a material adverse effect on the Company's consolidated financial
position or on its consolidated results of operations or cash flows in the
period in which the matters are resolved.
13
<PAGE> 14
PART II - OTHER INFORMATION
ANALOG DEVICES, INC.
Item 6. Exhibits and reports on Form 8-K
(a) See Exhibit Index.
(b) There were no reports on Form 8-K filed for the three months ended
July 29, 1995.
14
<PAGE> 15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Analog Devices, Inc.
--------------------
(Registrant)
Date: September 12, 1995 By: /s/ Ray Stata
----------------------------------
Ray Stata
Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
Date: September 12, 1995 By: /s/ Joseph E. McDonough
----------------------------------
Joseph E. McDonough
Vice President-Finance
and Chief Financial Officer
(Principal Financial and
Accounting Officer)
15
<PAGE> 16
EXHIBIT INDEX
Analog Devices, Inc.
Item
*10 (a) Option Agreement dated as of May 16, 1995 between Analog Devices, B.V.
and Taiwan Semiconductor Manufacturing Company, Ltd.
*10 (b) Wafer Production Agreement dated as of May 16, 1995 between Taiwan
Semiconductor Manufacturing Company, Ltd. and Analog Devices, B.V.
27 Financial Data Schedule
* Confidential treatment has been requested as to certain portions of these
exhibits.
16
<PAGE> 1
EXHIBIT 10(a)
CONFIDENTIAL MATERIALS OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION. ASTERISKS DENOTE
SUCH OMMISSIONS.
OPTION AGREEMENT
Between
Analog Devices B.V.
And
Taiwan Semiconductor Manufacturing Co., Ltd.
Date: May 16, 1995
<PAGE> 2
OPTION AGREEMENT
THIS AGREEMENT is made and becomes effective as of May 16, 1995 (the
"Effective Date") by Taiwan Semiconductor Manufacturing Co., Ltd. ("TSMC"), a
company organized under the laws of the Republic of China with its registered
address at No. 121, Park Ave. 3, Science-Based Industrial Park, Hsinchu, Taiwan,
and Analog Devices B.V., a company organized under the laws of the Netherlands,
with its registered address at Beneluxweg 27, 4904 SJ Oosterhout, the
Netherlands ("Analog").
RECITALS
WHEREAS, TSMC currently supplies Analog and its affiliates with wafers and
Analog wishes to increase the volume of wafers to be purchased from TSMC;
WHEREAS, in order to increase its output, TSMC must accelerate its ramp up
in Fab 3 and advance the start of Fab 4;
WHEREAS, as a condition to TSMC's acceleration of these facilities, TSMC
has asked that Analog make a capacity commitment and advance payment for the
right to buy additional capacity, and Analog is willing to do so:
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and conditions
contained herein, the parties agree as follows:
<PAGE> 3
1. DEFINITIONS
(a) "Affiliate" used in this Agreement shall mean Analog Devices, Inc.
("ADI") and any direct subsidiary of ADI, in addition to Analog.
(b) "Analog Committed Capacity" used in this Agreement shall mean the sum
of the X% Base Capacity and the Option Capacity to be provided to
Analog by TSMC pursuant to this Agreement, and is set forth in Exhibit
A.
(c) "Base Capacity" used in this Agreement shall mean the capacity
commitment provided to Analog by TSMC set forth in Exhibit A.
(d) "Option Capacity" used in this Agreement shall mean the firm capacity
commitment provided to Analog by TSMC pursuant to this Agreement, for
which capacity Analog agrees to pay the Option Fee as defined in this
Section 1(e) below, and is set forth in Exhibit A.
(e) "Option Fee" used in this Agreement shall mean the deposit that Analog
agrees to place with TSMC as the advance payment for the Option
Capacity.
(f) "TSMC Committed Capacity" used in this Agreement shall mean the sum of
the Base Capacity and the Option Capacity to be provided by TSMC to
Analog pursuant to this Agreement, and is set forth in Exhibit A.
(g) "Wafer Equivalent" used in this Agreement shall mean the number of
wafers based on the Capacity Factor for 1995 Base Capacity. For
details of the Capacity Factor, please refer to Exhibit B. Any and all
of the capacity commitments referred to in this Agreement shall be
measured in Wafer Equivalent.
(h) "X% Base Capacity" used in this Agreement shall mean the Base Capacity
reduced by the agreed percentage set forth in Exhibit A.
-2-
<PAGE> 4
CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
2. VOLUME COMMITMENT
(a) Subject to the payment of the Option Fee by Analog under Section 5
below, TSMC agrees to provide to Analog the TSMC Committed Capacity.
In any calendar year, the orders placed by Analog shall first apply to
fulfill the X% Base Capacity portion of the Analog Committed Capacity,
and then the Option Capacity portion.
(b) Each month, Analog agrees to provide to TSMC a ********* rolling
forecast of the number of wafers that Analog will purchase, with the
volume for the first ****************** being frozen (i.e. Analog
must purchase all of the quantity forecast for the delivery in the
first ************** of the forecast). The forecast must be based on
wafers out or deliveries expected to be made by TSMC.
(c) TSMC will use its reasonable effort to cause its fabs to be capable of
producing wafers of more advanced specifications, as set forth in the
TSMC Technology Road Map attached as Exhibit C.
3. WAFER PRICE
(a) The wafer prices for the Option Capacity shall be not more than
********************* or ************************** for the same
technology in the same fab. In the event that the wafer prices for the
Option Capacity do not comply with the preceding sentence, TSMC will
make proper price changes for the unfilled orders, upon Analog's
notice in writing.
(b) The parties shall negotiate in good faith each year the wafer prices
for the Option Capacity of the following year, and if no agreement may
be reached by the parties before October each year, the parties agree
to submit the dispute to the binding arbitration in California under
the Rules of Arbitration of the International Chamber of Commerce by
three (3) arbitrators appointed in accordance with such rules, and
under such circumstances, ************* shall have the right to
terminate this Agreement under Section 8 below.
-3-
<PAGE> 5
CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION. ASTERISKS DENOTE SUCH OMMISSIONS.
4. OTHER PURCHASE TERMS AND CONDITIONS
The Analog/TSMC Agreement for Wafer Production entered into concurrently
with this Agreement will apply to all purchases of wafers by Analog From
TSMC, except that the provisions of this Agreement will supersede the above
Agreement for Wafer Production with respect to the subject matter hereof.
5. OBLIGATION TO PAY OPTION FEE FOR OPTION CAPACITY
Analog agrees to pay to TSMC the Option Fee in the amount of ****** per
Wafer Equivalent for the right to purchase the Option Capacity pursuant to
this Agreement. The Option Fee is set forth in Exhibit D, and it shall be
paid in cash by no later than every June 30 during the term of this
Agreement for the Option Capacity of the following year. Subject to
Sections 7 and 8 below, the Option Fee for any given year, once paid, shall
be non-refundable for any cause, and will be credited at the rate of ******
per Wafer Equivalent against the prices of wafers purchased by Analog from
TSMC when purchased from the Option Capacity provided by TSMC for that
given year under this Agreement.
6. Analog further agrees to deliver to TSMC, within ************* following
the Effective Date, four (4) promissory notes each in an amount of the
Option Fee due every year, and payable to TSMC on each June 30, which
promissory notes are in the form of Exhibit E. The promissory notes shall
be returned by TSMC to Analog within ************** upon receipt of the
corresponding Option Fee by TSMC.
7. FAILURE TO PURCHASE THE OPTION CAPACITY; FIRST RIGHT OF
REFUSAL
(a) If in any calendar year, for any reason, Analog is not able to use or
purchase all or a portion of the Analog Committed Capacity of that
year, or any other year(s) during the term of this Agreement, Analog
shall promptly notify TSMC of such in writing and first offer TSMC
such Capacity for sales to any third parties. TSMC may, at its option,
-4-
<PAGE> 6
CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION. ASTERISKS DENOTE SUCH OMMISSIONS.
accept such offer, in whole or in part, within thirty (30) days
following Analog's notification, and if TSMC so accepts, the
corresponding Option Fee, if paid, will be returned without interest
and, if not paid, will be cancelled and the corresponding Promissory
Note(s) returned to Analog. In the event that TSMC decides not to
accept such offer, Analog may assign this Agreement (including the
right to purchase the Analog Committed Capacity for the remaining term
of this Agreement) to any third parties acceptable to TSMC, within two
months upon TSMC's written notice that it will not accept such offer,
and if Analog fails to do so, Analog shall be liable for the Option
Fee for the remaining term of this Agreement under Section 5 above,
and TSMC is entitled to sell or use any such unused capacity
thereafter.
(b) Any of Analog's right or obligation set forth in this Section 7(a)
shall not affect its obligation to pay the Option Fee pursuant to
Section 5 above, except that if this Agreement is assigned to any
third parties acceptable to TSMC pursuant to this Section 7(a) above,
such third parties shall pay the Option Fee and abide by the terms and
conditions of this Agreement.
(c) Notwithstanding the foregoing, if in any calendar year, for any
reason, Analog does not purchase the Wafer Equivalent of the X% Base
Capacity for that year, then the Base Capacity and X% Base Capacity
for each following year of this Agreement shall be reduced by a
percentage equal to the *******************************
************************.
8. TERM AND TERMINATION
(a) The term of this Agreement shall commence on the Effective Date, and
continue until December 31, 1999.
(b) TERMINATION BY TSMC FOR ANALOG's FAILURE TO PAY THE OPTION FEE
-5-
<PAGE> 7
CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION. ASTERISKS DENOTE SUCH OMMISSIONS.
TSMC may terminate this Agreement if Analog fails to pay the Option
Fee pursuant to Section 5 above, and does not cure or remedy such
breach within **************** of receiving written notice of such
breach.
(c) TERMINATION FOR OTHER BREACH OR FOR BANKRUPTCY
Either party may terminate this Agreement if the other party breaches
any material provisions of this Agreement, and does not cure or
remedy such breach within ********************************* of
receiving written notice of such breach, or (ii) becomes the subject
of a voluntary or involuntary petition in bankruptcy or any
proceeding relating to insolvency, receivership or liquidation, if
such petition or proceeding is not dismissed with prejudice within
sixty (60) days after filing.
(d) EFFECT OF TERMINATION
Both parties shall remain liable to the other party for any
outstanding and matured rights and obligations at the time of
termination, including all outstanding payments of the Option Fee and
for the wafers already ordered and/or shipped to Analog. In addition,
if this Agreement is terminated by Analog due to a breach by TSMC,
then TSMC shall refund to Analog any portion of the Option Fee already
paid by Analog to TSMC but not yet credited to the purchase prices of
wafers in accordance with Section 5 above.
9. BOARD APPROVAL
Analog shall obtain the approval by its board of director of this
Agreement, and submit to TSMC, at the time of executing this Agreement, an
authentic copy of its board resolution authorizing the representative
designated below to execute this Agreement.
10. LIMITATION OF LIABILITY
(a) In no event shall TSMC be liable for any indirect, special, incidental
or consequential damages (including loss of profits and loss of use)
-6-
<PAGE> 8
CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION. ASTERISKS DENOTE SUCH OMMISSIONS.
resulting From, arising out of or in connection with TSMC's
performance or failure to perform under this Agreement, or resulting
from, arising out of or in connection with TSMC's producing,
supplying, and/or sale of the wafers, whether due to a breach of
contract, breach of warranty, tort, or negligence of TSMC, or
otherwise.
(b) TSMC's liability under this Agreement and the Analog/TSMC Agreement
for Wafer Production shall be *********** the
********************************************
************************************************.
11. NOTICE
All notices required or permitted to be sent by either party to the other
party under this Agreement shall be sent by registered air mail postage
prepaid, or by personal delivery, or by fax. Any notice given by fax shall
be followed by a confirmation copy within ten (10) days. Unless changed by
written notice given by either party to the other, the addresses and fax
numbers of the respective parties shall be as follows:
To TSMC:
TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY,
LTD.
No. 121, Park Avenue 3
Science-Based Industrial Park
Hsinchu, Taiwan
Republic of China
Fax: 35-781546
Attn: Legal Counsel
To Analog:
Analog Devices B.V.
Bay F-1
-7-
<PAGE> 9
Raheen Ind. Estate
Limerick, Ireland
Fax: 353-613-08448
Attn: Managing Director
With copy to:
Analog Devices, Inc.
One Technology Way
P.O. Box 9105
Norwood, MA 02062-9106
USA
Fax: 617-461-4100
Attn: Vice President & General Manager
12. ENTIRE AGREEMENT
This Agreement, including Exhibits A-E, constitutes the entire agreement
between the parties with respect to the subject matter hereof, and
supersedes and replaces all prior or contemporaneous understanding,
agreements, dealings and negotiations, oral or written, regarding the
subject matter hereof. No modification, alteration or amendment of this
Agreement shall be effective unless in writing and signed by both parties.
No waiver of any breach or failure by either party to enforce any provision
of this Agreement shall be deemed a waiver of any other or subsequent
breach, or a waiver of future enforcement of that or any other provision.
13. GOVERNING LAW
This Agreement will be governed by and interpreted in accordance with the
laws of the State of California, U.S.A. Litigation concerning this
Agreement shall be brought in and adjudicated by appropriate Courts of law
located in the State of California, U.S.A. which shall have exclusive
jurisdiction over the subject matter.
-8-
<PAGE> 10
14. PURCHASE FOR AFFILIATES AND THIRD PARTIES
Notwithstanding the foregoing, Analog shall be permitted to make purchases
of wafers from TSMC under this Agreement on behalf of Affiliates or third
parties designated by Analog and reasonably acceptable to TSMC, and all
such purchases shall be considered purchases by Analog for purposes of this
Agreement. Analog will remain responsible for those purchases made by
Analog for its Affiliates and third parties pursuant to this Section 14.
15. ASSIGNMENT
This Agreement shall be binding on and inure to the benefit of each party
and its successors, and except that Analog may assign this Agreement under
Section 7 above, neither party shall assign any of its rights hereunder,
nor delegate its obligations hereunder, to any third party, without the
prior written consent of the other.
16. CONFIDENTIALITY
Neither party shall disclose the existence or contents of this Agreement
except as required by Analog's assignment of this Agreement to any third
parties pursuant to Section 7 above, in confidence to its advisers, as
required by applicable law, or otherwise with the prior written consent of
the other party. Neither party shall make any public announcement
concerning this Agreement without the prior written consent of the other,
except to the extent required by law or regulation.
17. FORCE MAJEURE
Neither party shall be responsible for delays or failure in performance
resulting from acts beyond the reasonable control of such party. Such acts
shall include but not be limited to acts of God, war, riot, labor
stoppages, governmental actions, fires, floods, and earthquakes.
-9-
<PAGE> 11
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first stated above.
TAIWAN SEMICONDUCTOR ANALOG DEVICES B.V.
MANUFACTURING CO., LTD.
BY: /s/ Donald Brooks BY: /s/ Joseph E. McDonough
-------------------- ---------------------------
Donald Brooks Joseph E. McDonough
President Managing Director
-10-
<PAGE> 12
CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION. ASTERISKS DENOTE SUCH OMMISSIONS.
EXHIBIT A
ANALOG/TSMC COMMITTED CAPACITY
Unit: Wafer Equivalent
<TABLE>
<CAPTION>
1996 1997 1998 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Base Capacity ****** ****** ******* *******
X% of Base Capacity ****** ****** ******* *******
Option Capacity ****** ****** ****** ******
TSMC Committed Capacity ****** ******* ******* *******
(Base Capacity+Option Capacity)
Analog Committed Capacity ****** ******* ******* *******
(X% Base Capacity+Option Capacity)
</TABLE>
* The parties agree to maintain *************** throughout any calendar year.
<PAGE> 13
Exhibit B
CAPACITY FACTOR TABLE
<PAGE> 14
CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION. ASTERISKS DENOTE SUCH OMMISSIONS.
Capacity Factor Table
Date: 11-Apr-1995
<TABLE>
<CAPTION>
+-----------------------------+----------+----------+-----------+-----------+
| | | | | |
| | Masking | W-Plug | Complexity| Capacity |
| GENERIC TECHNOLOGY | Layers(A)| Layers(B)| Index(C) | Factor(D) |
| | (w/o ESD)| | | |
| | | | | |
+-----------------------------+----------+----------+-----------+-----------+
<S> <C> <C> <C> <C>
| ********** ******** | ** | | ** | **** |
| ********** ******* | ** | | ** | * |
| ********** ******* | ** | | ** | * |
| ********** ******** | ** | | ** | **** |
| ********** ******* | ** | | ** | * |
| ********** ****************| ** | | ** | **** |
| ********** ******** | ** | | ** | **** |
| ********** ******* | ** | * | **** | **** |
| ********** ******* | ** | * | **** | **** |
| ********** ****** | ** | | ** | **** |
| ********** ****** | ** | * | **** | **** |
| ********** ****** | ** | * | **** | **** |
| ********** ******* | ** | * | ** | **** |
| ********** ************* | ** | * | **** | **** |
| ********** *********** | ** | * | **** | **** |
| ********** ****** | ** | * | **** | **** |
| ********** ****** | ** | * | **** | **** |
| *********** *********** | ** | * | **** | **** |
| | | | | |
+-----------------------------+----------+----------+-----------+-----------+
| | | | | |
+-----------------------------+----------+----------+-----------+-----------+
</TABLE>
Remark: (1) Masking Layer of w/i ESD = Masking Layer of w/o ESD + *
(2) Masking Layer of Mixed-Mode(**) = Masking Layer of Logic(**) + *
(3) Complexity Index (C) = (A) + (B) / 2
(4) Capacity Factor (D) = (C) / **, normalized to ********** as 1
<PAGE> 15
Exhibit C
TSMC TECHNOLOGY ROAD MAP
<PAGE> 16
CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION. ASTERISKS DENOTE SUCH OMMISSIONS.
Generic Technology Roadmap
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
<PAGE> 17
CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION. ASTERISKS DENOTE SUCH OMMISSIONS.
Exhibit D
OPTION FEE
<TABLE>
<CAPTION>
Year Option Capacity Option Fee Due Date
(Unit: Wafer (Unit: US$
Equivalent Million)
-------------------------------------------------------------
<S> <C> <C> <C>
1996 ****** *** June 30, 1995
1997 ****** *** June 30, 1996
1998 ****** *** June 30, 1997
1999 ****** *** June 30, 1998
</TABLE>
<PAGE> 18
Exhibit E
STANDARD FORM OF PROMISSORY NOTE
Amount: US$__________ Due Date: _____________
The Undersigned, ____________________ (the "Maker"), unconditionally
promise to pay to Taiwan Semiconductor Manufacturing Co., Ltd. the sum of US
Dollars _________________ ($______________), plus interest calculated from the
Due date stated herein to the date of full payment at the rate of 10% per annum
on any unpaid portion of the principal amount stated herein, and said payment
will be made at Taipei, Taiwan.
This Note shall be governed in all respects by the laws of the State of
California.
The Maker of this Note agrees to waive protests and notice of whatever
kind.
This Note is made to evidence the obligation of the Maker to pay to TSMC
the Option Fee due on the Due Date hereof under the Option Agreement between the
Maker and TSMC dated ______________. This Note is nonnegotiable ad the Maker
shall be entitled to all the defenses available to it under the aforesaid Option
Agreement.
Issue Date: _________
Issue Place: ___________
Analog Devices B.V.
By: ________________
<PAGE> 1
CONFIDENTIAL MATERIALS OMITTED AND
FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION. ASTERISKS
DENOTE SUCH OMISSIONS.
WAFER PRODUCTION AGREEMENT
BETWEEN
TAIWAN SEMICONDUCTOR MANUFACTURING
COMPANY, LTD.
AND
ANALOG DEVICES, B.V.
DATE: May 16, 1995
<PAGE> 2
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
SECTION 1 DEFINITIONS 1
SECTION 2 PROCESS TECHNOLOGY 2
SECTION 3 QUALIFICATION 4
SECTION 4 PRODUCTION AND SUPPLY 5
SECTION 5 ON-SITE INSPECTION AND VENDOR INFORMATION 8
SECTION 6 DELIVERY 8
SECTION 7 ACCEPTANCE 9
SECTION 8 PRICE 9
SECTION 9 PROPRIETARY INFORMATION 9
SECTION 10 WARRANTY 10
SECTION 11 INTELLECTUAL PROPERTY INDEMNITY 11
SECTION 12 LIMITATION OF LIABILITY 12
SECTION 13 EXPORT CONTROL 12
SECTION 14 TERM AND TERMINATION 13
SECTION 15 FORCE MAJEURE 13
SECTION 16 NON-PUBLICITY 13
SECTION 17 ASSIGNMENT 14
SECTION 18 GOVERNING LAW 14
SECTION 19 NOTICE 14
SECTION 20 ENTIRE AGREEMENT 15
</TABLE>
2
<PAGE> 3
TSMC AGREEMENT
FOR WAFER PRODUCTION
This agreement ("Agreement") is entered into by Taiwan Semiconductor
Manufacturing Co., Ltd. ("TSMC"), a company duly incorporated under the laws of
the Republic of China, having its principal place of business at No. 121, Park
Avenue 3, Science Based Industrial Park, Hsin-Chu, Taiwan, and Analog Devices,
B.V.. ("Analog Devices"), a company organized under the laws of the Netherlands,
with its registered address at Beneluxweg Z7, 4904 FJ Oosterhout, the
Netherlands.
RECITALS
A. Analog Devices and its affiliates have designed and/or manufacture integrated
circuits, and wish to have an additional manufacturing source for certain of
such integrated circuits.
B. TSMC (all locations) represents that it can manufacture and is in the
business of manufacturing such integrated circuits and wishes to manufacture
such integrated circuits for Analog Devices.
NOW, THEREFORE, the parties agree as follows:
1.0 DEFINITIONS
1.1 "Device" shall mean good die of Analog Devices integrated circuits
meeting the parametric, electrical, and other specifications set forth
in Exhibit 1.1. Good die are those which meet agreed to specifications
and are topologically identical to Analog Devices manufactured
integrated circuits of the same type.
1.2 "Packaged Device" shall mean a device packaged and tested in accordance
with Analog Devices specifications, as set forth in exhibit 1.1.
1.3 "Process" shall mean either the process, as specified in Exhibit 1.1, or
such other process as may be mutually acceptable.
1.4 "Device Family" shall mean any group of products using the same base
layers.
3
<PAGE> 4
CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
1.5 "Wafers" and "Wafer Equivalents"
1.5.1 "Wafers" shall mean ****** or ****** silicon wafers manufactured by
TSMC using a process, design and mask set (or database tape) for
producing integrated circuits. Wafer quantities for forecasts and
most other purposes will be stated in terms of ** wafers, unless
stated explicitly otherwise, and are to be interpreted, regardless
of the wafer sizes actually delivered, to provide the same usable
area of silicon circuits as would have been represented by the
stated number of ** wafers.
1.5.2 "Wafer Equivalents" shall mean that adjusted quantity of ** wafers
which accounts for both the wafer size and the process complexity
factors that affect fab capacity, according to mutually acceptable
conversion indices. Capacity allocation and commitments will be
stated in terms of such "wafer equivalents."
1.6 "Proprietary Information" shall mean this Agreement, including all
exhibits, and any information including but not limited to technical
information, database tapes, specifications, test tapes, masks and
supporting documentation provided either orally, in writing, or in
machine readable format and masks or reticules generated by or for TSMC
using Analog Devices database tape; provided that all such information
is marked "Confidential" or similarly, or, if oral, identified as
proprietary at the time of disclosure. Each party's rights and
obligations are further described in section 9.0.
1.7 "Code Layer" shall mean mask layers which make a device unique to a
custom requirement and different from others of the same device family.
1.8 "Products" shall mean Devices, Wafers or Packaged Devices as defined in
sections 1.1, 1.2, and 1.5, but does not include test wafers or risk
starts described in section 3.
1.9 "Affiliate" used in this Agreement shall mean Analog Devices, Inc.
("ANALOG DEVICES") and any direct subsidiary of ANALOG DEVICES, in
addition to Analog Devices.
2.0 PROCESS TECHNOLOGY
2.1 TSMC will ******** ** Analog Devices the ****** **** *** **********
*********** for the Process. Analog Devices and TSMC will from time to
time exchange technical information. TSMC will provide technical
information required to allow Analog Devices to bring up compatible
process for engineering and low volume special application processes.
4
<PAGE> 5
CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
Analog Devices will supply technical information required to allow TSMC
to efficiently produce Analog Devices products.
2.2 TSMC will bring up the Process for the purpose of manufacturing Wafers
in accordance with qualification plan described in Section 3.1 and
Exhibit 3.1A All Wafers shall meet the reliability and quality
specifications described in Exhibit 3.1B.
2.3 TSMC will provide Analog Devices with the name of TSMC's chosen mask
vendor. Analog Devices will provide mask vendor with device data base
tapes. TSMC will provide mask vendor with mask alignment and test
structure data base, and oversee merging of device and mask alignment
data bases by mask vendor. Analog Devices will bear the cost of mask
set.
2.4 After TSMC has provided Analog Devices with sufficient Wafers for
qualification, but prior to completion of full qualification, Analog
Devices may request that TSMC provide additional Wafers or "risk
starts". TSMC will provide these additional Wafers to Analog Devices at
the prices specified in Section 8.
2.5 During qualification, TSMC and Analog Devices will agree upon parametric
and process flow specifications, which will be finalized before TSMC
begins production. TSMC will not modify agreed upon specifications in
any way without the prior written consent of Analog Devices.
2.6 TSMC and Analog Devices agree to jointly develop a long term technology
roadmap for the technologies listed in Exhibit 2.6. Analog Devices and
TSMC will cooperate in developing technology of common interest. Both
Analog Devices and TSMC shall each have full rights to jointly developed
technology. TSMC will provide its ****** technology roadmap and an
inclusive forecast of process obsolescence, ******** to Analog Devices.
Analog Devices will annually forecast its demand for the technologies
listed in the current TSMC technology roadmap.
2.7 Analog Devices agrees to include TSMC in any third party development of
CMOS and related technologies if TSMC desires to be involved and if
TSMC's involvement does not adversely affect the relationship of Analog
Devices and the third party.
2.8 TSMC agrees to commit prototype capacity for new technologies for design
and development purposes. This prototype capacity would normally be
available 3-6 months prior to risk production.
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CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
2.9 As additional consideration for the purchase of wafers by Analog Devices
from TSMC as provided by this Agreement, TSMC agrees to
*****************************
****************************************************
*******************************************************
******************************************************
********************************************************
******************************************************
*******************************************************
******************************************************* ************
3.0 QUALIFICATION
3.1 The parties shall agree upon the Process for the manufacture of the
Products in accordance with the Qualification plan described in Exhibit
3. 1A and upon the parametric, electrical, process flow, quality, and
reliability specifications, as well as other standards or requirements
that the parties deem necessary ("Quality and Reliability
Specifications"). The Quality and Reliability Specifications shall
constitute the contractual standards according to which Analog Devices
shall conduct acceptance of the Products. The Quality and Reliability
Specifications shall be reduced into writing and attached hereto as
Exhibit 3.1B.
3.2 After the Process and the Quality and Reliability Specifications are
agreed upon in accordance with Subsection 3.1, TSMC will provide Analog
Devices with such amount of test wafers as Analog Devices may require
for qualification, at the purchase prices specified in Section 8. Within
******** upon receipt of the test wafers, Analog Devices shall inform
TSMC in writing of whether or not such test wafers meet the Quality and
Reliability Specifications, and if affirmative, full qualification is
completed and TSMC will proceed to produce the Products pursuant to the
purchase order or orders issued by Analog Devices and accepted by TSMC
under Section 4 below, if any. If no notification is received by TSMC
during the time period specified in the preceding sentence, full
qualification shall be deemed accomplished. In the event that the test
wafers do not meet the Quality and Reliability Specifications, the
parties will work together in good faith to achieve full qualification.
3.3 Prior to the completion of the full qualification, Analog Devices may,
by giving at least ****** notice to TSMC, terminate the production of
any test wafers or risk starts specified in Subsection 2.4, and TSMC
will do so following the completion of the process steps at which such
test wafers or risk starts reside at the time of receiving such notice.
Analog Devices shall pay TSMC for all the test wafers and/or risk starts
so affected, and the prices for such wafers and/ or risk starts shall be
the respective purchase prices specified in Section 8, equitably
prorated based on the completed stage of production.
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CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
4.0 PRODUCTION AND SUPPLY
4.1 Using the Process, qualified to the requirements both of TSMC and of
Analog Devices as listed in Exhibit 3.1A, TSMC will manufacture those
integrated circuits of Analog Devices described in individual Purchase
Order documents accepted by TSMC. For those products and processes which
are no longer in active manufacturing, TSMC and Analog Devices shall
both agree before the obsolescence and destruction of existing tooling
and recipes for their manufacture. Analog Devices reserves the right to
witness the destruction of tooling consigned to TSMC for manufacture of
Analog Devices products. TSMC agrees to provide a minimum of *********
********** advance notice of the obsolescence of any process, for which
a compatible process would not be offered, with a phase-down plan to be
mutually agreed upon.
4.2 Subject to TSMC's qualification of the Process, TSMC will produce Analog
Devices' requirements for Wafers, up to a maximum number of wafers per
week as agreed upon from time to time.
4.2.1 If Analog Devices fails to load to the committed levels in any
given year for which there is no specific other agreement on
committed capacity levels, TSMC is obligated for the following
year to only increase the committed capacity by *** from actual
volume.
4.2.2 Analog Devices offers TSMC ************ to be Analog Devices'
primary source for **************** ********* for which TSMC
provides a competitive capability, price, delivery, and other
terms.
4.2.3 In any given year for which there is no specific other agreement
on committed capacity levels, TSMC agrees not to hold Analog
Devices' capacity to some arbitrary percentage of TSMC's total
capacity.
4.2.4 If ADI decides to build its own Fab of significant size or
invest in a TSMC competitor, ADI agrees to notify TSMC
*********** and TSMC and ADI would negotiate in good faith to
modify their commitments.
4.3.0 Purchase orders shall be provided to TSMC by Analog Devices
consistent with the current forecast. The sequence of events is as
follows:
4.3.1 **** times a year, Analog Devices will forecast * ******** in
the future (below numbered ** to **, indicating successive
******** into the future from the date of the forecast). TSMC
will allow
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CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
Analog Devices to at least change its actual volumes, for any
calendar *******, either up or down by the following percentages
from the previous ********* forecasts.
<TABLE>
<CAPTION>
** ** ** ** ** **
------ ------ ------ ------- ------ ------
<S> <C> <C> <C> <C> <C>
+/-**% +/-** +/-**% +/-**% +/-**% +/- **%
</TABLE>
For ** and **, Analog Devices agrees to order wafers within
these limits of its forecast and the percentages indicated
above.
For ** and **, Analog Devices has the right to reduce volume
below that determined by the *** ******* rules if their market
price is the primary determinate for reducing the volume. TSMC
has the right, after Analog Devices presents its price
requirements, to accept the new price requiring Analog Devices
to raise the volume back to the minimum under the ***********
rules, or to accept the new Analog Devices forecast. For this
purpose, Analog Devices agrees to provide ********** notice
before the start of any ******* for which a reduced volume limit
is being sought.
For ** and **, Analog Devices agrees to give *** ****** notice
of any forecast reduction below the *****************. If the
forecast drops below the six quarter rules, Analog Devices must
revise the ********* forecast consistent with the new
requirements.
4.3.2 TSMC will allow these changes as long as they do not exceed TSMC
maximum capacity commitment. TSMC will provide its ******
capacity plan, annually to Analog Devices.
4.3.3 It is agreed and understood that the purchase of Wafers and/or
Devices pursuant to this Agreement shall be accomplished by
means of Analog Devices individual purchase orders and/or other
release documents (hereinafter collectively referred to as
"purchase orders"). The purchase orders placed by Analog Devices
will be open purchase orders for a fixed quantity of Wafers,
covering the minimum guaranteed volume per *****. TSMC reserves
the right to refuse purchase orders beyond the TSMC commitment
of capacity.
4.4 Analog Devices will accept deliveries made in installments from TSMC,
upon mutual agreement to be determined in each case. Such partial
shipments will be billed as made; and payments, therefore, are subject
to the terms of payment noted below. Individual fab lots shall be
complete within a single shipment, unless agreed to by Analog Devices in
each case.
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CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
4.5 If the cumulative quantity shipped by TSMC of each product ordered by
Analog Devices is within +/- * percent of the quantity ordered, such
quantity shall constitute compliance with Analog Devices order. Billing
for partial orders shipped as described in this paragraph will be at the
established purchase price per unit times the total quantity of units
delivered.
4.6 If Analog Devices determines that modifications to the specifications
are required, including modifications to mask tooling, process or
testing, TSMC agrees to initiate corrective action within
******************** upon receipt of notification at appropriate TSMC
manufacturing location and to complete such modifications within a
reasonable period of time after notification in writing by Analog
Devices. The parties will negotiate adjustment to price and delivery
schedule as well as charges for retooling costs if warranted by such
modifications. Initiation of corrective action would include halting
manufacturing of affected material at the appropriate stages of
production and other action as mutually deemed appropriate.
4.7 Analog Devices may add or substitute similar product types using the
process flows approved by Analog Devices and TSMC for existing
production at any time, provided that the agreed upon quantities of
Wafer shipments required by Analog Devices will not be in excess of
those previously agreed upon except with the consent of TSMC. A similar
product type is one which is manufactured using the same process, or a
similar process in the same production facility as mutually agreed to be
acceptable, and in accordance with the same qualification plan as Analog
Devices integrated circuits currently manufactured by TSMC under this
Agreement. TSMC will provide Device and Wafers of such similar product
types under the same terms as specified herein.
4.8 If Wafers or Devices fail to meet Quality and Reliability
specifications, and in Analog Devices reasonable opinion such failure
appears material, Analog Devices may request TSMC to stop production. If
TSMC is unable to correct such failures within ************ ****, Analog
Devices may cancel such particular orders. Analog Devices will notify
TSMC in writing of its intention to suspend or cancel such orders and
will include any substantiating data.
5.0 ON-SITE INSPECTION AND VENDOR INFORMATION
5.1 Analog Devices representatives shall be allowed to visit TSMC's FAB and
test facilities during normal working hours upon reasonable notice to
TSMC.
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CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
5.2 Upon Analog Devices request, TSMC will allow Analog Devices to perform
an audit of TSMC manufacturing facility, and TSMC will provide Analog
Devices with process control information, including but not limited to:
Process and electrical test yield results, current process
specifications and conformance to specifications; calibration schedules
and logs for equipment; environmental monitor information for air, gases
and DI water; documentation of operator qualification and training;
documentation of traceability through TSMC's operation, TSMC process
verification information, and TSMC's trouble reports all in accordance
with Exhibit 5.2.
6. DELIVERY
6.1 Unless otherwise agreed to between the parties, TSMC shall deliver the
Products to Analog Devices in accordance with the terms and conditions
of the INCOTERMS 1990 - **************************************. Title
and risk of loss shall pass to Analog Devices upon delivery. TSMC shall
package the Products for secure shipment according to good manufacturing
practices in consideration of the method of shipment chosen. The bill of
lading or other receipt issued by the carrier shall be conclusive proof
of the date and fact of shipment of the Products.
6.2 Within the limitation of section 4.4, partial shipments are allowed, so
long as full shipment of the appropriate quantities are made by the
delivery dates specified in the respective Purchase Orders. Such partial
shipments may be invoiced individually or in combination with all the
other partial shipments made for the same Purchase Orders.
6.3 Any delivery or shipment made within ************** before or after the
delivery date(s) specified in the Purchase Orders shall constitute
timely delivery or shipment.
7. ACCEPTANCE
7.1 Analog Devices shall accept all conforming tenders of the Products
delivered under this Agreement, and shall notify TSMC in writing, within
*************** following the delivery of unprobed Wafers and within
********** ***** following the delivery of any other Products, as to
either acceptance or rejection thereof. If no notification indicating
rejection is received by TSMC within the above time period, then such
Products shall be deemed accepted.
7.2 Analog Devices may inspect the Products and carry out testing, prior to
acceptance thereof, at its own facilities. The inspection and testing
shall be performed pursuant to the methods set forth in Exhibit 7.2.
10
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CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
8. PRICE
8.1 The prices for the Products shall be such prices as are quoted in
Exhibit 8.1, and subject to Subsection 8.3 below, shall be **** and
***** for ********. The Prices quoted in Exhibit 8.1 are in
************* and ****** ****************************, including but not
limited to ****************************************************
**************. ************** shall pay all applicable ***** (including
one or more of the above *****) **** ********* the prices quoted in
Exhibit 8.1. The parties shall negotiate the prices for the Products for
each of the succeeding years, and if no agreement can be reached with
respect to the Product prices prior to the end of the preceding year,
the applicable prices in the succeeding year shall be those in
***************** then in effect.
8.2 Unless otherwise agreed upon by the parties, payment terms shall be net
due **************** after the date of TSMC's invoice or receipt of
material by Analog Devices, whichever is later. Any payment made under
this Agreement shall be in ************.
8.3 The prices quoted in Exhibit 8.1 are based upon the ***
************************* exchange rate in effect ******
********************************, and will be subject to
******************** due to changes in the exchange rate between
*********************************** exceeding plus or minus **** percent
(+/- *%).
9. PROPRIETARY INFORMATION
9.1 Both parties agree to maintain Proprietary Information in strict
confidence, not to make use thereof other than for the performance of
this Agreement, to release it only to employees who have a reasonable
need to know the same, and not to release or disclose it to any third
parties, without the prior written consent of the disclosing party. The
obligations set forth in this Subsection shall not apply to any
information that: (i) is now or hereafter in public domain or otherwise
becomes available to the public other than by breach of this Agreement
by the receiving party, (ii) has been rightfully in the receiving
party's possession prior to receipt from the disclosing party, (iii) is
rightfully received by the receiving party from a third party, (iv) is
independently developed by the receiving party, or (v) is authorized by
the disclosing party to be released or disclosed.
9.2 All Proprietary Information and any copies thereof shall remain the
property of the disclosing party, and no license or other rights are
granted or implied hereby. The receiving party shall, upon the
disclosing party's request, return the original and all copies of
tangible
11
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CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
Proprietary Information. Any masks generated by TSMC from Analog
Devices' database tapes shall be the property of Analog Devices, and
will be returned to Analog Devices upon request. TSMC reserves all
rights to any modifications or improvements to the Process and to any
TSMC Proprietary Information received or acquired during the course of
performance of this Agreement.
9.3 The obligations under this Section shall survive the termination or
expiration of this Agreement for five (5) years from the date of
termination or expiration.
10. WARRANTY
10.1 TSMC warrants that the Products delivered hereunder shall meet the
Quality and Reliability Specifications and shall be free from defects in
material and workmanship under normal use for a period of ******* ****
from the date of shipment. If, during the ******* **** period, (i) TSMC
is notified promptly in writing upon discovery of any defect in the
Products, including a detailed description of the alleged defect, (ii)
such Products are returned to TSMC, ******************** (INCOTERMS
1990), and (iii) TSMC's examination of such Products reveals that such
Products are indeed defective and such defect was not caused by
accident, abuse, misuse, neglect, improper installation or packaging,
repair or alteration by someone other than TSMC, or improper testing or
use contrary to any instructions given by TSMC, then TSMC shall, upon
mutual agreement, either repair, replace, or credit Analog Devices for
such defective Products. TSMC shall return any Products repaired or
replaced under this warranty to Analog Devices transportation prepaid ,
and shall reimburse Analog Devices for the transportation charges paid
by Analog Devices for returning such defective Products to TSMC. The
performance of this warranty shall not act to extend the ************
warranty period for any Products repaired or replaced beyond that period
applicable to such Products as originally delivered.
10.2 The foregoing warranty constitutes TSMC's exclusive liability, and
Analog Devices' exclusive remedy for any non-conformity of the Products
with the Quality and Reliability Specifications, or for any defects in
material or workmanship of the Products.
THE FOREGOING WARRANTY SHALL BE EXCLUSIVE AND IN LIEU OF ANY AND ALL
OTHER WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, INCLUDING BUT NOT
LIMITED TO THE WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE, ALL OF WHICH ARE HEREBY EXPRESSLY DISCLAIMED.
12
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CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
10.3 Notwithstanding the provisions of Subsection 10.1 above, prior to any
return of allegedly defective Products by Analog Devices pursuant to
Subsection 10.1 Analog Devices shall first afford TSMC the opportunity
upon TSMC's request, to inspect the allegedly defective Products at
Analog Devices' facilities. If TSMC thereby determines that the
allegedly defective Products are defective or non-conforming with the
Quality and Reliability Specifications, or that such alleged defects are
caused by defects in material or workmanship of TSMC, then Analog
Devices shall be entitled to repair, replacement or credit under
Subsection 10.1.
11. INTELLECTUAL PROPERTY INDEMNITY
11.1 Subject to Subsection 11.2 below, TSMC shall, at its expense and at
Analog Devices' request, defend any claim or suit brought against Analog
Devices, to the extent that it is based solely on a claim that the
Process used by TSMC pursuant to this Agreement infringes any patent,
copyright, trade secret or other proprietary rights of a third party,
and TSMC shall indemnify and hold Analog Devices harmless from and
against any costs, damages and fees reasonably incurred by Analog
Devices, including but not limited to attorney's fees, that are
attributable to such claim or suit, provided that (i) Analog Devices
gives TSMC reasonably prompt notice in writing of any such claim or
suit, and permits TSMC, through counsel of its choice, to answer the
charge of infringement and defend such claim or suit; (ii) Analog
Devices provides TSMC information, assistance and authority, at TSMC's
expense, to enable TSMC to defend such suit or claim; (iii) TSMC shall
not be responsible for any settlement made by Analog Devices without
TSMC's written permission.
11.2 TSMC shall have no liability under this Agreement for any claim or suit
to the extent that the alleged infringement is attributable to
********************** *******************************************
******************************************************
*******************************************************
******************************************************
******************************************************
*******************************************************
******************************************************* ******* any
costs, damages and fees reasonably incurred by TSMC, including but not
limited to attorneys' fees, that are attributable to such claims or
suit, provided that (i) TSMC gives Analog Devices reasonably prompt
notice in writing of any such claim or suit, and permits Analog Devices,
through counsel of its choice, to answer the charge of infringement and
defend such claims or suit; (ii) TSMC provides Analog Devices
information, assistance and authority, at Analog Devices' expense, to
enable Analog Devices to defend such claim or suit; and (iii) Analog
13
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CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
Devices shall not be responsible for any settlement made by TSMC without
Analog Devices' written permission.
11.3 If the court or a settlement enjoins the use of the Process by TSMC or
if, in TSMC's opinion, the Process is likely to become the subject of a
claim of infringement, TSMC shall have the option to modify such Process
so that it becomes non-infringing, substitute a substantially equivalent
noninfringing process, or obtain the right to continue using the
Products furnished under this Agreement, or aid Analog Devices in
identifying and qualifying a viable alternative.
11.4 The foregoing states the entire liability and exclusive remedies of TSMC
and Analog Devices for infringement by the Products, the Process and the
production of the Products furnished hereunder.
12. LIMITATION OF LIABILITY
12.1 In no event shall TSMC be liable for any indirect, special, incidental
or consequential damages (including loss of profits and loss of use)
resulting from, arising out of or in connection with TSMC's performance
or failure to perform under this Agreement, or resulting from, arising
out of or in connection with TSMC's producing, supplying, and/or sale of
the Products or any part thereof, whether due to a breach of contract,
breach of warranty, tort, or negligence of TSMC, or otherwise.
*******************************************
********************************************************
*************************************************** **************.
13. EXPORT CONTROL
13.1 TSMC and Analog Devices are subject to national export control
regulations of the Republic of China and Republic of Ireland and in
addition, to the Export Administration Regulations of the United States
of America. TSMC and Analog Devices will take all appropriate measures
not to violate these regulations and will keep the other party fully
harmless from all damages arising out of or in connection with any
violation.
14. TERM AND TERMINATION
14.1 The term of this Agreement shall be for five (5) years commencing from
the date hereof.
14.2 This Agreement may be terminated by either party if the other party (i)
breaches any material provision of this Agreement and does not cure or
remedy such breach within *** ******* ****** ***** **** of notice of
14
<PAGE> 15
breach; (ii) becomes the subject of a voluntary or involuntary petition
in bankruptcy or any proceeding relating to insolvency, receivership,
liquidation, or composition for the benefit of creditors if such
petition or proceeding is not dismissed with prejudice within sixty (60)
days after filing. If Analog Devices is the breaching party under this
provision, then TSMC shall be entitled to stop the production of the
Products upon giving notice to Analog Devices, and Analog Devices shall
be obligated to pay for all finished Products and work-in-process
(partially finished Products) which are identifiable to this Agreement,
at the purchase prices set forth in Section 8 without prejudice to
damages that may be claimed by TSMC due to the breach of Analog Devices.
14.3 In addition to Section 9 above, the provisions under Sections 11, 13 and
16 shall survive the termination or expiration of this Agreement.
15. FORCE MAJEURE
15.1 Neither party shall be responsible for any delay or failure to perform
under this Agreement if such delay or failure is caused by unforeseen
circumstances or to causes beyond its control, including but not limited
to acts of God, war, riot, embargoes, labor stoppages, acts of civil and
military authorities, fire, floods, earthquakes or accidents.
16. NON-PUBLICITY
16.1 No publicity or information regarding the existence or contents of this
Agreement shall be given or released by either party without the prior
written consent of the other party, except to the extent required by law
or regulation.
17. ASSIGNMENT
17.1 Neither party shall delegate any obligations under this Agreement or
assign this Agreement or any interest or rights hereunder without the
prior written consent of the other, except that TSMC shall be free to
choose the mask vendor to make mask sets and/or to subcontract the
packaging of the Devices, and (ii) Analog Devices shall be permitted to
make purchases of Wafers from TSMC under this Agreement on behalf of
Affiliates or third parties designated by Analog Devices and reasonably
acceptable to TSMC, and all such purchases shall be considered purchases
by Analog Devices for purposes of this Agreement. Analog Devices will
remain responsible for those purchases. made by Analog Devices for its
Affiliates and third parties pursuant to this section 17.
18. GOVERNING LAW
15
<PAGE> 16
18.1 This Agreement shall be governed by and construed in accordance with the
laws of the State of California, USA.
18.2 In the event of any dispute arising out of or in connection with this
Agreement which cannot be amicably settled by the parties, the parties
hereto agree to submit any such disputes to appropriate courts of law
located in the State of California, USA which shall have exclusive
jurisdiction over the subject matter.
19. NOTICE
19.1 All notices required or permitted to be sent by either party to the
other party under this Agreement shall be sent by registered mail
postage prepaid, or by personal delivery, or by fax. Any notice given by
fax shall be followed by a confirmation copy within ten (10) days.
Unless changed by written notice given by either party to the other, the
addresses and fax numbers of the respective parties shall be as follows:
To TSMC:
Taiwan Semiconductor Manufacturing Company, Ltd.
No. 121, Park Avenue 3
Science Based Industrial Park
Hsin-Chu, Taiwan
Republic of China
Fax: 886-35-781546
Attn:
To Analog Devices:
Analog Devices B.V.
Bay F-1
Raheen Industrial Estate
Limerick, Ireland
Fax: 353-613-08448
Attn: Managing Director
With a copy to:
Analog Devices, Inc.
One Technology Way
P. O. Box 9105
Norwood, MA 02062-9106
USA
Fax: 1-617-461-4100
Attn: Vice President & General Manager
16
<PAGE> 17
20. ENTIRE AGREEMENT
20.1 This Agreement and attached Exhibits 1.1, 2.6, 2.9, 3.1A, 3.1B, 5.2, 7.2
and 8.1 constitutes the entire agreement between the parties with
respect to the subject matter hereof and supersedes and replaces all
prior or contemporaneous understandings, agreements, dealings, and
negotiations, oral or written, regarding the subject matter. Any terms
and conditions listed in the Purchase Orders placed by Analog Devices
under this Agreement shall not constitute part of this Agreement, nor
affect or revise the terms and conditions of this Agreement, even in
cases such Purchase Orders are signed and returned by TSMC, unless both
parties expressly agree in writing to include any such terms or
conditions in the Agreement. No modification, alteration or amendment of
this Agreement shall be effective unless in writing and signed by both
parties. No waiver of any breach or failure by either party to enforce
any provision of this Agreement shall be deemed a waiver of any other or
subsequent breach or a waiver of future enforcement of that or any other
provision.
20.2 This Agreement is entered into concurrently with an Option Agreement
between the same parties. In the event of an conflict or inconsistency
between the provisions of this Agreement and those of the Option
Agreement, the Option Agreement shall control.
17
<PAGE> 18
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be duly
executed in duplicate on their behalf by their duly authorized officers and
representatives on the date given above.
Taiwan Semiconductor Analog Devices, BV
Manufacturing Company, Ltd.
/s/ Donald Brooks /s/ Joseph E. McDonough
----------------------- ----------------------------
Signature Signature
Donald Brooks Joseph E. McDonough
----------------------- ----------------------------
Name in Print Name in Print
President Managing Director
----------------------- ----------------------------
Title Title
18
<PAGE> 19
CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
ATTACHMENTS
ATTACHMENT 1.1 ANALOG DEVICES PROCUREMENT SPEC
ATTACHMENT 2.6 TSMC TECHNOLOGY ROADMAP
ATTACHMENT 2.9 REQUIREMENTS TO ******************************** *************
ANALOG DEVICES
ATTACHMENT 3.1A QUALIFICATION PLAN
ATTACHMENT 3.1B QUALITY AND RELIABILITY SPECIFICATIONS
ATTACHMENT 5.2 AUDIT INFORMATION
ATTACHMENT 7.2 INSPECTION AND ACCEPTANCE TESTING METHODS
ATTACHMENT 8.1 PRICES
19
<PAGE> 20
ATTACHMENT 1.1
/ShippiSpecification No.: ADI-0018 REV. D
Sun TITLE: TSMC GENERAL PROCUREMENT SPECIFICATION
REVISION HISTORY
----------------
<TABLE>
<CAPTION>
ECN # DATE REV. AUTHOR DESCRIPTION OF CHANGE
----- ---- ---- ------ ---------------------
<S> <C> <C> <C> <C>
61365 ****** A K. LISIAK INITIAL RELEASE
65075 ****** B M. ROBINSON REVISE APPENDIX 1 AND 4
ADD 3.11, 3.12, 3.13
67614 ****** C GARY CHEEK ADD PROCESS & DEVICE CODE
DEFINITION TO APPENDIX 3
D P. KORALISHN UPDATE APPENDIX 1 & 3;
UPDATE SEC. 9.2
</TABLE>
-----------------------------------------------------------------
START ADI-0018 REV. D CURRENT
ADI-0018 REV. D Page 1 of 21
<PAGE> 21
CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
1.0 GENERAL
1.1 The purpose of this specification is to define the procedure for the
supply of products manufactured at TAIWAN SEMICONDUCTOR
MANUFACTURING COMPANY (TSMC).
1.2 This specification applies to all parts supplied to
Analog Devices Inc. and manufactured at TSMC.
1.3 Electrical test limits, topology information, assembly requirements
and other division and product-specific requirements will be
detailed in a separate specification referring to this document.
1.4 A Purchase Order as described in 7.0 is required for
wafer fabrication.
2.0 APPLICABLE DOCUMENTS
2.1 The following documents, of the revision in effect on the date of
order, form a part of this specification to the extent specified in
this document.
2.1.1 Visual inspection requirements per TSMC Specification
************.
2.1.2 Electrical test requirements per the product- specific
procurement specification.
2.1.3 Topology requirements per the product-specific procurement
specification.
2.1.4 Bond strength requirements per *************** ***********.
2.1.5 SEM metallization step coverage requirements per
**************************.
2.1.6 Die attach requirements per *************** ***********.
2.1.7 Glassivation integrity requirements per ******
*******************.
2.1.8 Process changes requiring ADI notification per TSMC spec.
************ and Appendix 2 of this document.
ADI-0018 REV. D Page 2 of 21
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CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
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2.2 The following documents, of the revision noted below, form a part of
this specification to the extent specified in this document. Revised
versions of these specifications become effective when updated on
this list.
2.2.1 PCM Measurement specification, TSMC specification
***********************.
2.2.2 Regulation of Wafer Packing, TSMC specification
**********************.
2.2.3 If any item of quality or conformance is not explicitly
defined here, the TSMC quality manual shall define the
procedures and requirements. A list of relevant
specification numbers is attached in Appendix 4.
3.0 REQUIREMENTS
3.1 TSMC will manufacture product for Analog Devices Inc. using the
processes listed in Appendix 1.
3.2 ********************************************************
***********************************************.
3.3 TSMC must provide Analog Devices Inc. with a formal written
notification of proposed Significant Process Changes that may affect
the electrical parameters, quality or reliability of the finished
devices. No major change may be implemented prior to ADI acknowledging
and approving the change.
Significant Process Changes are defined in Appendix 2.
3.4 PCM Measurement Technology must comply with TSMC specification:
***********************.
3.5 PCM Monitor data must comply with TSMC specifications by number and
revision level as listed IN APPENDIX 3.
3.6 For each wafer, TSMC will test * PCM sites. A wafer must be rejected
if * or more sites fail the PCM specification.
3.7 Parametric results, traceable to each individual wafer, must be
available to Analog Devices. This data must be maintained by TSMC for
ADI use for a period of at least one year.
The Parametric results (WAT SUMMARY REPORT) must be sent with the
Wafer Lot, and a copy must also be sent electronically to the Analog
Devices' designated representative for the respective ordering
division as specified with the purchase order.
ADI-0018 REV. D Page 3 of 21
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3.8 For Engineering lots and on request, the WAT SUMMARY REPORT will also
include all other tested parameters which do NOT have PASS/FAIL
criteria, as per the usual TSMC procedures. Specific requirements
regarding these added tests for any lot shall be communicated to TSMC
with the order.
3.9 Only wafers that have met the required criteria and are documented as
having passed are to be shipped to Analog Devices or a location
designated by Analog Devices.
In the case of wafers being shipped to a designated location, it is
the responsibility of TSMC to ensure Parametric information has been
sent to the Analog Devices PRODUCT ENGINEER as designated in the
Purchase Requisition.
3.10 TSMC must provide ********* monitor information on electromigration,
step coverage, metal integrity, gate oxide integrity, and Vt stability
for the relevant processes, listed in APPENDIX 1. TSMC shall specify
normal control limits for these monitors. Any process, for which no
product using that process was ordered or delivered for ********, does
not require ********* monitors.
3.11 TSMC will work with ADI to jointly determine defect density and defect
size distribution for all wafer fabrication areas. This data will be
used to continuously validate the yield models.
3.12 OZONE DEPLETING SUBSTANCES (O.D.S.) must not be used in the
manufacturing and/or cleaning of components for Analog Devices, Inc.
after 1/1/93.
3.12.1 Use of OZONE DEPLETING SUBSTANCES in manufacture and / or
cleaning occurs when any component or part of a product is
ever in contact with ANY QUANTITY of an OZONE DEPLETING
SUBSTANCE anywhere in the manufacturing chain.
3.12.2 The definitions of Ozone Depleting substances are as follows:
CLASS 1 SUBSTANCES are those which significantly cause or
contribute to harming the OZONE LAYER and have an OZONE
DEPLETING POTENTIAL (O.D.P.) GREATER THAN OR EQUAL TO 0.2.
These substances, which include all ISOMERS, are separated
into five groups:
GROUP 1 - CFC 11,12,113,114,115
GROUP 2 - HALON 1211,1301,2402
GROUP 3 - OTHER CFC's with ONE, TWO or THREE CARBON ATOMS.
GROUP 4 - CARBON TETRACHLORIDE
ADI-0018 REV. D Page 4 of 21
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GROUP 5 - METHYL CHLOROFORM (except the 1,1,2 ISOMER)
CLASS 2 SUBSTANCES are those which are known or may be
reasonably anticipated to cause or contribute to harmful
effects on the Ozone layer. These substances include all
ISOMERS of HCFC's having ONE, TWO or THREE CARBON ATOMS.
+++++++++++++++++++++++++++++++++++++++++++++
ALL CLASS 1 AND CLASS 2 SUBSTANCES ARE
CONSIDERED TO BE OZONE DEPLETING SUBSTANCES.
+++++++++++++++++++++++++++++++++++++++++++++
3.13 REWORK
3.13.1 REWORK (the strip and redeposition or regrowth of a layer to
correct a non-conformance to a specification limit) may not be
performed. The following are not considered rework, but must
be identified for each lot affected:
**********************************. All other processing to
continue or finish incomplete processing is not allowed.
3.14 DISPOSITION
3.14.1 A wafer lot shall be maintained as a traceable, homogeneous
group, with all wafers starting and completing processing at
the same time. (No bonus lots or combination lots are
allowed.) TSMC shall reject or hold all lots which do not meet
parametric specifications for engineering disposition. An MRB
release must be signed by the responsible ADI engineer prior
to shipping or sending such material on to assembly.
3.15 MINIMUM YIELD
The mean and standard deviation of a product yield will be
calculated and the (Mean-4sigma) will be used to determine
the yield cutoff subject to the following conditions:
For Die > **** sq. mils the yield cut-off will be:
i) *********************************
or ii) *************
or iii) ************************************* ******************
ADI-0018 REV. D Page 5 of 21
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For Die < **** sq. mils the yield cut-off will be:
i) *********************************
or ii) *************
or iii) ************************************* ******************
3.16 For all ADI wafers processed, in-line control data will be made
available to the foundry engineering group upon request. This data
will be presented in a form that allows ADI to determine where the
in-line monitor data for the ADI materials is positioned statistically
relative to all materials processed in the manufacturing line.
4.0 APPROVED MASKS AND PROCESSES
4.1 TSMC shall maintain a cross reference table of product and mask level
revision codes indicating ADI and TSMC product designations and the
process version for each product. A current copy of this matrix will
be provided to the EXTERNAL FOUNDRY MANAGER on a monthly basis.
4.2 TSMC shall acknowledge product revision level, process, and process
status (Production, Risk, etc.) for each order.
4.3 TSMC shall ensure that mask tooling is supplied in accordance with
appropriate technical and quality standards normally specified by
TSMC.
4.3.1 Any mask supplier for ADI products will be an existing
approved vendor to TSMC. All masks will conform to TSMC
specifications appropriate to the wafer manufacturing process
to which they relate.
4.3.2 TSMC will have a non-disclosure agreement in place with any
mask vendor used for ADI products.
4.3.3 All masks for use on ADI products will be inspected by TSMC
prior to use, per TSMC incoming mask inspection procedure
specification ************. All non-conforming masks will be
replaced prior to use on wafers.
4.3.4 ADI must be informed in writing of all major changes related
to the manufacture of masks, including:
Change of materials
Change of materials supplier
Change of manufacturing location.
5.0 PROBED WAFERS
ADI-0018 REV. D Page 6 of 21
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5.1 PROCEDURE.
5.1.1 TSMC shall probe all wafers in accordance with
product-specific procedures provided by ADI.
5.1.2 Probe programs will be kept under revision control and cross
checked for accuracy using test standards provided by ADI at
each change of test set-up.
5.1.3 Acceptable dice may have no more than * probe marks on each
bond pad for parts that go through the production probe flow
once. For device which go through a logic probe and a memory
probe, no more than * probe marks are allowed.
5.1.4 Reject dice must be clearly marked with a single black ink
spot. Good dice must be unmarked.
5.1.5 All other die visual inspection criteria shall conform to TSMC
specification ************.
5.2 BINNING
5.2.1 TSMC shall provide data on product yield to all test bins when
each lot is shipped out of the probe area. Bin yield data
shall be sent to the ADI ordering location. At ADI's option,
the bin data on a wafer basis for every product will be made
available to the Foundry Engineer Manager or an agreed upon
electronic format.
5.3 DISPOSITION
5.3.1 All wafers from a lot shall be probed, reported and
dispositioned together, except where a partial or split lot
was requested by ADI. TSMC shall hold all lots which do not
meet minimum probe yield levels for engineering disposition.
An MRB release must be signed by the responsible ADI engineer
prior to shipping or sending such material on to assembly.
6.0 TESTED FINISHED PRODUCT
6.1 PROCEDURE.
6.1.1 TSMC shall test all product in accordance with
product-specific procedures provided by ADI.
6.1.2 Test programs will be kept under revision control and cross
checked for accuracy using test standards provided by ADI at
each change of test set-up and at least once per 8 hour shift.
6.2 BINNING
ADI-0018 REV. D Page 7 of 21
<PAGE> 27
6.2.1 TSMC shall provide data on product yield to all test bins when
each lot is shipped out of the test area. Bin yield data shall
be sent to the ADI ordering location. At ADI's option, the bin
data on a lot basis for every product will be made available
to the Foundry Engineering Manager on an agreed upon
electronic format.
6.3 DISPOSITION
6.3.1 All product from a single wafer fab lot shall be tested,
reported and dispositioned together, except where a partial or
split lot was requested by ADI. TSMC shall hold all lots which
do not meet minimum standard test yield for engineering
disposition. An MRB release must be signed by the responsible
ADI engineer prior to shipping such material.
7.0 ORDERING
7.1 All Analog Devices Purchase Orders for the manufacture of wafers at
TSMC will contain as a minimum the following information:
DIVISION SPECIFICATION FOR PROCUREMENT OF THIS PART
PRODUCT FORM (unprobed wafers, probed die in wafer form, assembled, or
assembled and tested finished product)
NUMBER OF WAFERS, DIE OR FINISHED GOODS
ACCEPTABLE TOLERANCE (over/under) ON QUANTITY
STARTING MATERIAL
PROCESS
ADI AND TSMC DEVICE NAME
PRICE AND TERMS
REQUIRED DELIVERY DATE
SHIP TO DESTINATION
SHIPMENT INSURANCE REQUIREMENTS
BILLING INFORMATION
PROBE REQUIREMENTS (probed die or finished product)
ORDERING DIVISION PRODUCT ENGINEERING CONTACT
The Purchase Order (initiated by a Purchase Requisition) should also
clearly indicate if a Production lot, an Engineering Evaluation lot or
a New Product lot is being ordered.
7.2 PURCHASE REQUISITION - ENGINEERING SIGNOFF
Purchase Requisitions for any device on a process (or process
variation) not included in this specification, require signoff by the
division PROCESS ENGINEER and QUALITY CONTROL ENGINEER. Details of
process (or process change) must accompany the
ADI-0018 REV. D Page 8 of 21
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Purchase Requisition, along with an ECO to update this spec.
(ADI-0018)
8.0 TRACEABILITY
8.1 Customer Product Status Report (WEEKLY STATUS REPORT) must be sent
to the EXTERNAL FOUNDRY MANAGER and to the PRODUCTION CONTROL at
each Analog Devices site at least once per week. This report will
describe the status of all active lots and contain a minimum of
PURCHASE ORDER NUMBER
TSMC DEVICE NAME
ANALOG DEVICES DEVICE NAME
LOT NUMBER
CURRENT PRODUCTION STAGE
CURRENT LOT SIZE
SHIP DATE (for completed lots)
In addition, the report will summarize the status of each purchase
order showing quantity shipped and projected schedule for open items.
8.2 Shipped or scrapped lots will be kept on the report for a period of
one week after which they will be deleted from the report.
8.3 The TSMC lot number will identify production lots from engineering
lots using the format:
**xxxx.x production lot
**xxxx.x production lot
**xxxx.x production lot
**xxxx.x engineering, split or skew lot (first silicon
or pilot lot on production process)
**xxxx.x development lot (process is under
development)
**xxxx.x TSMC R&D lot
8.4 Copies of all lot histories, parametric data, probe test results,
final test results, and related quality data shall be kept by TSMC for
a period of not less than 3 years and shall be identifiable by date
and lot number.
8.5 Other Reporting Requirements
8.5.1 ******* Commit Schedule. This report would show ADI requested
volumes, by process, for at least * months into the future in
******* buckets, with TSMC's commit schedule relative to
request. If several ADI divisions
ADI-0018 REV. D Page 9 of 21
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are involved, each division should be reported separately,
with an ADI total.
8.5.2 The following production lot travellers should be completed
and shipped to ADI with the individual production lots:
Assembly Lot Traveller (ASAT, ANAM, etc.)
Test Lot Traveller (TSMC)
8.5.3 TSMC should provide a list of standard turntimes for each
major step in the process flow (i.e. fab, probe and test).
This information should be updated whenever turn-times change
for any reason. This information is critical for ADI to
properly plan end-product deliveries to our customers.
9.0 PACKAGING
9.1 All wafer packaging must comply with the TSMC document no:
*******************************************.
9.2 METHOD
Wafers must be inspected and packed under a maximum of class ******
conditions, except EPROM wafers which will be handled in maximum class
*** conditions. Wafers shall be stored in a controlled environment
such that wafers shall not degrade physically or electrically and
shall at no time exceed the temperature range of **** to ****.
For wafers <= ** mils in thickness, Cylindrical Wafer Shipping Boxes
shall be used. For wafers >= ** mils in thickness, EMPAC shipping
boxes shall be used.
A maximum of ** wafers should be put into the Cylindrical Wafer
Shipping Box. Wafers are to be loaded by vacuum wands in the following
procedure:
ANTI STATIC SPONGE,
CONDUCTIVE PAPER,
WAFER,
CONDUCTIVE PAPER,
ANTI STATIC SPONGE,
ETC.
The last sponge must be at least *** from the rim of the box. If there
are less than ** wafers, additional sponges should be used, still
maintaining *** clearance at the rim of the box.
For wafers >= ** mils
Containers must be 100% inspected for foreign material.
ADI-0018 REV. D Page 10 of 21
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The container is then to be sealed such that particular matter and
other contamination are prevented from coming in contact with the
enclosed wafers.
All primary packaging must be non-shedding. The individual containers
are to be packed in a corrugated box (or similar pack) and secured to
prevent damage during transit.
In the case of individual wafers a single wafer packing method may be
used as defined in the TSMC document
*****************************
********************.
10.0 SHIPMENT REQUIREMENTS
10.1 All shipments must be preceded by a shipping alert. The shipping
alert will be sent to both the ordering location and the designated
shipping destination prior to sending any material. The shipping
alert must contain the same information as the packing list, as shown
below.
10.2 All outer containers must contain a packing list with the following
information for production material:
MANUFACTURERS NAME AND ADDRESS
DATECODE OR DATE OF MANUFACTURE
ANALOG DEVICES PART NUMBER.
LOT NUMBER
QUANTITY OF WAFERS (FOR WAFERS, PROBED OR UNPROBED)
QUANTITY OF DIE (FOR PROBED WAFERS)
QUANTITY OF FINISHED UNITS (FOR ASSEMBLED PRODUCT)
ANALOG DEVICES' PURCHASE ORDER NO. (P.O. No.)
QC ACCEPTANCE STAMP
SYMBOL INDICATING THAT MATERIAL IS STATIC SENSITIVE.
11.0 QUALITY ASSURANCE PROVISIONS
11.1 Responsibility for inspection: The manufacturer is responsible for
controlling the quality of this product and must provide devices that
conform to all requirements specified here.
11.2 ADI reserves the right to perform periodic audits of wafer
documentation, process flow charts, SPC program and processing after
giving the manufacturer *** week notice.
ADI-0018 REV. D Page 11 of 21
<PAGE> 31
12.0 SPECIFICATION CHANGES
12.1 This document is under Engineering Change Order (ECO) control at
Analog Devices, Inc. Wilmington.
TSMC will be involved in the SIGNOFF list for any changes to this
document.
TSMC will also be on the controlled circulation list for this
document.
12.2 Any changes and updates to this controlled specification must be
directed to the ADI EXTERNAL FOUNDRY MANAGER.
12.3 Any proposed changes to TSMC specifications listed in this document
must be approved by the ADI EXTERNAL FOUNDRY MANAGER and the new
revision level reflected in this document before being implemented.
Analog Devices must be on the controlled circulation list for all
TSMC specifications referenced in this spec. A copy of each
document must be kept in the TSMC Central File in Analog Devices,
Inc., Wilmington.
13.0 COMMUNICATIONS CHANNEL
13.1 The following communication channel between TSMC and Analog Devices
should be observed:
MAIN CONTACT: EXTERNAL FOUNDRY MANAGER
SECONDARY CONTACT: PRODUCT ENGINEER
(new products and engineering lots)
SECONDARY CONTACT: PRODUCTION CONTROL
or MATERIAL CONTROL
(released products)
The EXTERNAL FOUNDRY MANAGER must be copied on all Engineering
correspondence and documents and on all new product and production
lot status reports.
13.2 The following communication channel between Analog Devices and TSMC
should be observed:
MAIN EUROPEAN CONTACT:
TSMC European Sales Manager
MAIN U.S. CONTACT:
TSMC San Jose Sales Manager
One of these persons should be copied on all correspondence.
ADI-0018 REV. D Page 12 of 21
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13.3 CENTRAL FILE
13.3.1 In Analog Devices, a Central File for TSMC will contain
controlled copies of all specifications referenced in this
document, and other relevant information, related
documentation and procedures. The Central File will be
located in Wilmington, Massachusetts. These will address all
areas of interest (e.g. Design, Fabrication, Quality,
Product Engineering).
13.3.2 All specifications and technical information sent to
individual ADI sites should also be copied to the Central
File in Wilmington, Massachusetts.
13.4 RETURNS POLICY
TSMC shall accept return of discrepant material for up to ** days
from the date of final shipment to ADI or their designated
representative. Material shown to not conform with specifications
shall be replaced or credited at the option of ADI.
ADI-0018 REV. D Page 13 of 21
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APPENDIX
----------
TSMC PROCESS SPECIFICATION CROSS REFERENCE LIST FOR ADI
-------------------------------------------------------
<TABLE>
<CAPTION>
PROCESS CODE DESCRIPTION
<S> <C>
************** *********************************
************** *********************************
************** ****************************************
************** *************************************************
********
************** ****************************************
************** *************************************************
********
************** ****************************************
************** *************************************************
********
************** ****************************************
************** *************************************************
********
************** *********************************
************** *********************************
************** ****************************
************** *****************************
************** ***************
************** ***************
</TABLE>
PROCESS FLOW AND DESIGN RULE SPECIFICATIONS
<TABLE>
<CAPTION>
PROCESS CODE PROCESS FLOW DESIGN RULE
<S> <C> <C>
************** ************ ************
************** ************ ************
************** ************** ************
**************
**************
**************
************** ************ ************
**************
**************
**************
************** ************** ************
************** ************** ************
</TABLE>
ADI-0018 REV. D Page 14 of 21
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<TABLE>
<S> <C> <C>
************** *************** ************
************** *************** ************
************** ************ ************
</TABLE>
ADI-0018 REV. D Page 15 of 21
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APPENDIX 2
------------
SIGNIFICANT PROCESS CHANGES
---------------------------
* WAFER DIAMETER
* CHANGES TO PROCESS FLOW CHART
* WAFER FAB MOVE - ONE WAFER FAB AREA TO ANOTHER
* MAJOR CHANGES which affect the electrical parameters, quality
or reliability of the device as defined in
TSMC DOCUMENT NO:
************ (Engineering Change Request)
**********,
************ (Engineering Change Request
Notice Procedure) **********,
Analog Devices must be on the controlled circulation list. A
copy of these document must be kept in the TSMC Central File
at Analog Devices Inc., Wilmington, MA.
* Changes in Metal Composition on finished product wafer.
* Changes to the composition of the passivation materials.
ADI-0018 REV. D Page 16 of 21
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APPENDIX 3
----------
PCM SPECIFICATION CROSS REFERENCE
---------------------------------
For some processes with product-specific requirements, alternate PCM
spec. and/or test line may be required. The list below reflects the
active PCM and test line combinations for ADI products.
<TABLE>
<CAPTION>
PROCESS CODE PCM SPEC TEST LINE
<S> <C> <C>
************** ********* ****
************** ********* *****
************** ********* *****
************** ********* *****
************** ********* *****
************** ********* *****
************** ********* *****
************** ********* *****
************** ********* *****
************** ********* *****
************** ********* ****
************** ********* *****
************** ********* *****
************** ********* *****
************** ********* ****
</TABLE>
PROCESS CODE DEFINITION
e.g.**************
****: ********
** : ************************
*** : ****************
** : ********
********
DEVICE CODE DEFINITION
Once a foundry form is received, TSMC will identify the manufacturing
requirements in a coded format as follows. This then remains as the
official production instructions for the product lifetime. The last
four digits in the device name have not been seen before by ADI and
must be included in the procurement spec.
ADI-0018 REV. D Page 17 of 21
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e.g. ************* and ****************
****** : Standard part number assigned by TSMC.
*** : Example identifies a **** ****** with this **** from
another part being used.
* : ************************
* : ***************************************
Z : Internal use at TSMC only.
* : ********************************
ADI-0018 REV. D Page 18 of 21
<PAGE> 38
APPENDIX 4
------------
TSMC QUALITY MANUAL SPECIFICATIONS
----------------------------------
The following is a list of the TSMC quality specifications, which are
considered part of this document. A controlled copy of each must be
maintained in the TSMC Central File at Analog Devices in Wilmington. ADI
must be on the sign-off for any changes to these specifications.
ADI-0018 REV. D Page 19 of 21
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Table 1:
<TABLE>
<CAPTION>
TSMC Spec No. Document Title
------------- --------------
<S> <C>
************ ***************************************
************ ****************************
************ ****************************
************ *******************************************
************ *********************************************
************ ***************************************
*****************
************ ********************************
************ *****************************
************ ***************************************
*********
************ **************************************
************ *******************************************
************ *****************
************ *******************************************
*******
************** **********************************************
************ ***********************************
************ *********************
************ ************************************
*************
************ ********************************************
****
************ *************************
************ ***************************
************ **********************************************
************
************ ***********************************************
****
************ ****************************************
************ ******************************************
</TABLE>
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Table 1:
<TABLE>
<CAPTION>
TSMC Spec No. Document Title
------------- --------------
<S> <C>
************ **************************************
************ ***************************
************ ***************************************
************ ***********************************************
************ ****************************
************ ************************************
*************
************ **********************************************
*********
************ *******************
</TABLE>
Note: Use the most current version of these specifications.
ADI-0018 REV. D Page 21 of 21
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ATTACHMENT 2.6
GENERIC TECHNOLOGY ROADMAP
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
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EXHIBIT 2.9
REQUIREMENTS TO ******************************************* TO **************
TSMC and ANALOG DEVICES agree to an objective to ****************
*****************************************, starting some time in the next **
months.
PROJECT DEFINITION:
TSMC and ANALOG DEVICES will **************************** ANALOG DEVICES,
herein assumed to be the **********************, and hereafter referred
to as the *********.
GOAL OF THIS PROJECT:
The ******* would be ******************* using the *****************.
**************** will be completed in **** months from the time that
*********************** begins to ****** in the ************.
PROPOSED DEFINITION OF *****************************
All ********************** and *********** have been ********** at
**************.
************ for the ******* have been ******** and ********** at
************************ with *************** *** from the
*****************.
KEY ASSUMPTIONS:
ANALOG DEVICES will have a *********************** to *********** issues
as they arise.
The ********************* at TSMC, at all *********** levels, will be
authorized without ambiguity to ******** ********************************
and **** of the ********** ******* to ANALOG DEVICES *********.
One *********************** would ******** to **** for a period of time,
estimated to be **** to ****** months, as a member of the
*****************************. The essence and the details of the
********** will be *********** through this ******************** and
*********************. This ******** may need to ************ at **** for
the duration of the ******** to act as the ***************************
**************************, while at ****, will have access to the
************************************************ appropriate
**************************, designated office space and communication
equipment.
Every effort will be made to protect proprietary information of other
**************.
<PAGE> 43
CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
A dedicated ********************************, will be assigned to this
project, with the responsibility to assure that the
******************************** are ********* the *********** that they
need. ********************************* will work with the
***********************, who will request, review, and approve
************* related to the ********. These ********* will be **********
into ******* from ******* at ************************.
************** would also ******************* at the *************** for
short periods of time to *********************** in a ************* of
**********. **** will provide ****************************** to resolve
***************** in ************ the ******************. The details will
have to be discussed further at a later date when more information is
available.
************** would ************** of the ******** including
************************* of ***********************, and related direct
******** of *********************** to the project or ******* to
********************.
**** agrees to provide a ************* of the *************, the
*********** of the ************, the ****************************** and
the ****************** of the ********************************** to
**************.
************** and **** agree to **************************
******************************** this *******.
**** will ************************** to **** and any ************
arrangements which cover this *******; provided, however, **** shall not
be required to disclose any confidential information which it is not
permitted to disclose under ******************************.
**** shall ***** to **************, ******* to ***************** included
in the ******* to which **** has *************.
THE CRITICAL ITEMS TO BE *********** INCLUDE THE FOLLOWING:
A **************** of the ********************, including key options. (An
*************** has been received.)
The *********** of the ******** in terms of *************
***************** and **************** and the ********************* to
arrive at this ****.
The ********************************* and ****************** used for the
********** and **************************.
The actual ***************** to ******** the *******, including ******
from the **************** to ********* the **************************.
(Preliminary ************ have been received.)
Detailed access to the *********************** used in this
******************, such as *********** and ************, specific
************, special *********************************, and
**************** between ****************.
<PAGE> 44
CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
The *********************** and ************* procedures for
*******************.
Highly detailed ***************** and ************** indicating all
critical details such as the **********
****************************************************
************************************************************
************************************************************ (i.e. use of
*******************), ***************** and *******************,
******************************************* from ************* and
******************.
<PAGE> 45
CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
ATTACHMENT 3.1-A
QUALITY CONTROL/RELIABILITY
<TABLE>
<CAPTION>
SPECIFICATION NAME SPECIFICATION NUMBER
------------------ --------------------
<S> <C>
****************
*********************** ************
</TABLE>
<PAGE> 46
CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
ATTACHMENT 3.1-B
QUALITY CONTROL/RELIABILITY
<TABLE>
<CAPTION>
SPECIFICATION NAME SPECIFICATION NUMBER
------------------ --------------------
<S> <C>
**************************** ************
*********************
**************************** ************
************************* ************
********************* ************
***********************
****************** ************
*********************
********* ************
************************ ************
******************* ************
****************** ************
********************** ************ Obsolete
************************** Replaced by: ************
************************
************** ************
**********************
**** ************
***********************
************** ************
</TABLE>
<PAGE> 47
CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
EXHIBIT 5.2
AUDIT PROCEDURES
Analog Devices may conduct a QA audit of TSMC wafer fabrication facility
(re-audit at Analog Devices option on ********* frequency, with ********* prior
notification). Items to be included in the QA audit will include but not limited
to the following:
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
<PAGE> 48
CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
Attachment 7.2
Inspection and Acceptance Testing Methods
The following specifications describe the requirements and the minimum
conformance standards for TSMC manufactured products. The specifications listed
below apply to all products manufactured by TSMC for Analog Devices.
1) TSMC Document **********************************
2) ADI0018: TSMC General Procurement Specification (Attachment 1.1)
3) ADI Product probe requirements, per the Product-specific Procurement Spec
(for wafers delivered from TSMC probed, or unprobed for Analog Devices probing)
4) ADI Product test requirements, per the Product-specific Procurement Spec (for
assembled products delivered from TSMC tested, or untested for Analog Devices
testing)
The above specifications identify the electrical criteria, minimum yield
criteria, visual criteria, and structural and mechanical standards that all TSMC
manufactured products are required to meet.
<PAGE> 49
CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
ATTACHMENT 8.1
PRICING
<TABLE>
<CAPTION>
PROCESS 1995 (****) 1996 (BUDGETARY)
------- ----------- ----------------
<S> <C> <C>
********** $*** $***
********** $*** $***
********** $*** $***
********** $*** $***
********** $*** $***
********** $*** $***
********** $*** $***
********** $**** $****
********** $**** $****
********** $**** $****
********** $**** $****
********** $**** $****
********************* $**** $****
********************* $**** $****
********** $*** $***
********** $**** $****
********** $*** $***
********** $**** $****
</TABLE>
<PAGE> 50
CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
1995 PROTOTYPE NRE
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
Process Masking Nbr of Prototype Super Hot Lot
Technology Layers Masks NRE Days NRE Days
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
****
****
-----
********* ** ** $*** ***** $*** *****
****
********* ** ** $*** ***** $*** *****
****
***** ** ** $*** ***** $*** *****
****
*******
***** ** ** $*** ***** $*** *****
****
*******
***** ** ** $*** ***** $*** *****
****
*******
***** ** ** $*** ***** $*** *****
****
*******
***** ** ** $*** ***** $*** *****
****
*******
***** ** ** $*** ***** $*** *****
****
*******
***** ** ** $*** ***** $*** *****
****
*******
***** ** ** $*** ***** $*** *****
****
*******
***** ** ** $*** ***** $*** *****
****
*******
***** ** ** $*** ***** $*** *****
****
***** ** ** $*** ***** $*** *****
****
***** ** ** $*** ***** $*** *****
****
</TABLE>
<PAGE> 51
CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
1995 PROTOTYPE NRE
(continued)
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
Process Masking Nbr of Prototype Super Hot Lot
Technology Layers Masks NRE Days NRE Days
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
****
****
****
-----
***** ** ** $*** ***** $*** *****
****
***** ** ** $*** ***** $*** *****
****
****
****
----
***** ** ** $*** ***** $*** *****
****
***** ** ** $*** ***** $*** *****
****
******
------
***** ** ** $*** ***** $*** *****
****
***** ** ** $*** ***** $*** *****
****
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED CONDENSED FINANCIAL STATEMENTS OF ANALOG DEVICES, INC. FOR THE
NINE MONTHS ENDED JULY 29, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-28-1995
<PERIOD-START> OCT-30-1994
<PERIOD-END> JUL-29-1995
<EXCHANGE-RATE> 1
<CASH> 62,268
<SECURITIES> 66,233
<RECEIVABLES> 185,700*
<ALLOWANCES> 0
<INVENTORY> 135,790
<CURRENT-ASSETS> 486,144
<PP&E> 796,566
<DEPRECIATION> 412,985
<TOTAL-ASSETS> 911,536
<CURRENT-LIABILITIES> 201,574
<BONDS> 80,000
<COMMON> 12,703
0
0
<OTHER-SE> 606,944
<TOTAL-LIABILITY-AND-EQUITY> 911,536
<SALES> 684,352
<TOTAL-REVENUES> 684,352
<CGS> 337,980
<TOTAL-COSTS> 337,980
<OTHER-EXPENSES> 235,188
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,242
<INCOME-PRETAX> 111,819
<INCOME-TAX> 27,683
<INCOME-CONTINUING> 84,136
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 84,136
<EPS-PRIMARY> 1.06
<EPS-DILUTED> 1.06
<FN>
*ASSET VALUE REPRESENTS NET AMOUNT
</TABLE>
