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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15 (d) of
the Securities Exchange Act of 1934
June 25, 1996
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(Date of Earliest Event Reported)
ANALOG DEVICES, INC.
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(Exact name of registrant as specified in its charter)
Massachusetts
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(State or other jurisdiction of incorporation)
1-07819 04-2348234
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(Commission File Number) (IRS Employer Identification No.)
One Technology Way, Norwood, MA 02062
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(Address of principal executive offices) (Zip Code)
(617) 329-4700
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(Registrant's telephone number, including area code)
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ITEM 5. OTHER EVENTS
On June 25, 1996, Analog Devices, Inc. (the "Company") entered
into a joint venture with Taiwan Semiconductor Manufacturing Co., Ltd.
("TSMC"), two other companies and several individual investors for the
construction and operation of a semiconductor fabrication facility
("fab") in Camas, Washington. The joint venture is organized as a limited
liability company under the name WaferTech, LLC ("WaferTech"). The
following summarizes the principal terms of the joint venture:
1. Project.
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The fab will be built on land acquired by WaferTech located in
Camas, Washington. The fab is expected to be at full operating
capacity in 1999. The initial process technology will be 0.5 or 0.35
micron. TSMC has committed to transferring to WaferTech additional
processes down to 0.25 micron within 6 months of such technologies
becoming operational at TSMC as well as sub-0.25 micron process
technologies if, as and when developed. The total estimated cost of
the project is approximately $1.2 billion.
2. Purpose.
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The Company's principal objective for the joint venture is to obtain
increased production capacity of semiconductor wafers and to expand
its supply of wafers to meet the future needs of its customers. The
Company is one of TSMC's largest customers and expects to continue
to buy wafers from TSMC as well as from WaferTech.
3. Investment.
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The Company is committed to investing a total of $140,400,000 in
cash for an 18% equity interest in WaferTech, of which $42,120,000
was paid on June 25, 1996, $42,120,000 is to be paid on November 30,
1996 and the remaining $56,160,000 is to be paid on November 3,
1997. Significant penalties may be imposed if the Company fails to
pay the second or third installment of its capital contribution when
due. In addition, the Company has an obligation to guarantee its pro
rata share of debt incurred by WaferTech, up to a maximum for the
Company of $45,000,000. In addition, the Company may be required to
contribute additional capital in order to avoid dilution of its
interest should the need arise in the future for additional capital.
4. Take or Pay Purchase Obligations.
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Each of the Company and the other two principal equity members of
WaferTech is committed to take or pay for at least 85% of
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its pro rata share of the capacity of the fab. When the fab is fully
ramped, it is expected that the Company will be required to take or
pay for at least approximately 54,000 8" wafers per year. The
Company will have the right, but not the obligation, to purchase up
to 27% of the capacity of the fab.
5. Equity Accounting.
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Wafers sold by WaferTech will be priced in accordance with
prevailing market prices. The Company intends to apply equity
accounting to its investment in WaferTech. Since the Company will be
obligated to purchase wafers from WaferTech and will share in
WaferTech's profits through its equity position, the Company can net
its share of the profits against the cost of the wafers purchased
from WaferTech, and thereby report the "net wafer cost" as cost of
goods sold. In the initial years of the venture, the expected
start-up losses will result in a higher cost of goods sold. The
amount and timing of any distribution of any profits will be
determined by the Board of Directors of WaferTech.
6. Management.
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WaferTech will be controlled by TSMC (which owns approximately 57%
of the venture), subject to certain veto powers for the Company and
the other two principal equity participants (which own 18% and 4%,
respectively). Specified matters will require the approval of
holders of at least 71% of the interests in WaferTech, and a more
limited set of matters will require approval by holders of at least
87% of the interests. WaferTech will be managed by a Board of
Directors, consisting of seven directors, of whom four shall be
designated by TSMC and one by each of the Company and the other two
principal equity participants. Each director (one "voting" director
in the case of TSMC) will have as many votes as the percentage
interest held by the member who designated that director.
Accordingly, TSMC will be in a position to control the Board of
Directors, and the Board of Directors appoints the executive
officers of WaferTech.
7. Intellectual Property Rights.
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TSMC has contributed to WaferTech non-exclusive rights to its
existing and certain future process technologies in consideration
for a portion of its equity interest in WaferTech. Some of TSMC's
process technology is licensed from others, and WaferTech is
obligated to pay TSMC the same royalties as TSMC is required to pay
to its licensors. In addition, TSMC has agreed to license to
WaferTech rights to its sub-0.25 micron process if, as and when
developed for a royalty based on net sales. WaferTech may also be
required to obtain
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licenses from third parties which could impose additional royalty
costs on WaferTech.
8. Limited Liability Company Status.
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WaferTech is organized as a Delaware limited liability company which
is expected to be treated as a partnership for federal income tax
purposes. As a result, WaferTech will not incur any federal income
tax expense; each of the participants will reflect its distributive
share of WaferTech's taxable income or loss on its own tax return.
TSMC has reserved the right to convert WaferTech to a regular
corporation at any time, subject to the approval of either the
Company or the venture's other 18% equity owner. If WaferTech is
converted to a regular corporation, it would become a separate
taxable entity and the accounting benefits to the Company would be
somewhat diminished. The participants have agreed to significantly
limit their right to sell or transfer their interests in WaferTech.
ITEM 7. EXHIBITS:
None.
SIGNATURE
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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.
By:/s/Joseph E. McDonough
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Joseph E. McDonough
Vice President - Finance
and Chief Financial Officer
Date: July 16, 1996
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