Wafer Manufacturing Agreement

Exhibit 10.18


CONFIDENTIAL TREATMENT REQUESTED

WAFER MANUFACTURING AGREEMENT

Introduction

This Wafer Manufacturing Agreement (this " Agreement" ) is entered into by and between California Micro Devices Corporation, a corporation formed under the laws of, and with a place of business and office in, California USA (" CAMD" ), and SANYO Electric Co., Ltd. Semiconductor Company, a corporation formed under the laws of, and with a place of business and an office in, Japan (" SANYO" ) effective upon the later of the dates (the " Effective Date" ) it is signed by a representative of each party under Authorized Signatures below .


Intention

A. CAMD markets and sells worldwide semiconductors which it designs and makes in Milpitas California and Tempe Arizona using proprietary processes. B. SANYO manufactures semiconductors for internal use and third parties with its plants located in Japan.

C. CAMD intends to subcontract manufacturing of some of its products to SANYO.

D. SANYO is willing to accept such subcontracting manufacturing, including but not limited to products using **.

Agreement

Based upon the facts and premises in the intention above, which are hereby conclusively presumed to be true and correct, and the mutual promises below, CAMD and SANYO (each a " Party" and collectively the " Parties" ) hereby agree as follows: 1. Capacity, Forecasts, and Orders

(a) Long-Term Capacity

Every December and June, officers of SANYO and CAMD will schedule a meeting to discuss, in the case of SANYO, its current allocated capacity and its forecast for such capacity for the next ** months and, in the case of CAMD, its current development plans and demand forecasts for the next ** months. The Parties will work together and SANYO shall reserve capacity for CAMD which is adequate to cover a mutually agreed upon forecast or, if no forecast is mutually agreed to, to cover future orders being at the same level as orders during the prior ** months (or during the term of this Agreement, if shorter), excluding from such calculation the first three months of this Agreement while orders are ramping up.


** CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO CERTAIN PORTIONS OF THIS AGREEMENT AND THE CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

CONFIDENTIAL TREATMENT REQUESTED

(b) Short-Term Forecasts

By the 20th of the month, CAMD will supply SANYO with a non-binding forecast of its demand for wafer starts during the following three months. The quantity variation in the short term forecast shall be ** for the 1 st , 2 nd and 3 rd month, respectively. SANYO will respond within the following four (4) business days as to whether it has the capacity to meet such forecast. If SANYO responds that it has adequate capacity, then it will reserve such capacity for CAMD.

(c) Purchase Orders

On each Monday, CAMD will place a purchase order for wafer starts covering wafer starts for the following week. The order quantity is defined in the 1 st month of the forecast in item 1.b. SANYO shall accept each CAMD order which is consistent with the short-term forecast to the extent SANYO had responded that it had adequate capacity. Wafers for CAMD would be started only when SANYO receives the purchase order in writing from CAMD. The average lead time of wafer material is ** weeks. SANYO shall hold one month wafer material in stock and CAMD shall be responsible to consume or to purchase the wafer material which Sanyo had arranged for CAMD products based on the short term forecast which is approximately 3 months worth.

Purchase orders issued by CAMD shall reference this Agreement. The terms and conditions of this Agreement shall exclusively govern the purchase and supply of wafers hereunder and shall override any conflicting, amending and/or additional terms contained in any pricing agreement, CAMD purchase order, CAMD acceptance documents or SANYO' s acknowledgement documents. No variation or addition to the terms and conditions contained in this Agreement shall be binding unless agreed in writing between the authorized representatives of the parties.


CAMD' s purchase order shall contain the CAMD product code, SANYO product code if different, quantity of wafers required, start dates for such wafers, wafer unit price, a statement as to whether unprobed or probed wafers are required and other purchase requirements.

POs to be issued to SANYO Semiconductor Corporation, 2010 North First St. Suite 500 San Jose, CA 95131 by e-mail or FAX.

(d) Cycle Time

SANYO will report weekly to CAMD on the wafer starts during the prior week. If SANYO is more than five (5) business days late in starting any wafer, then SANYO will immediately notify CAMD and make the utmost efforts to recover such delay and if SANYO is more than ten (10) business days late in starting any order, then SANYO will

** CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO CERTAIN PORTIONS OF THIS AGREEMENT AND THE CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

CONFIDENTIAL TREATMENT REQUESTED


immediately notify CAMD who may elect to cancel or reschedule the order. SANYO will make an effort to keep wafer fabrication cycle time not to exceed ** per photomask layer, plus ** for wafer installation and ** for wafer delivery from the fab to the SANYO warehouse, except that cycle time in engineering lots will be ** per mask. Thus, if a CAMD product has four photomask layers, then the calculated Fab cycle time will be no more than ** days for production lots and ** days for an engineering lot. The backlap and backgold processes as options are excluded from the ** cycle time estimate. If there are any technological issues that SANYO has to resolve with CAMD, that time will not be included in calculating the cycle time. Mask generation will take two (2) working days for 1 st mask, and thereafter one-half (0.5) working days respectively from the time the data base from CAMD is received by SANYO. Thus, if a CAMD product has four photomask layers then the mask set will be generated in 3 and one-half (3.5) days.

(e) Terms and Conditions

The terms and conditions specified in this Agreement shall govern each order and acceptance. As further described in Section 1c above, any pre-printed terms and conditions shall be ignored. Only those terms on the front of a purchase or sales order governing matters such as quantity, price, wafer start date, and packing and shipping instructions shall be binding on the parties.

(f) Lot size

CAMD shall try to use 50 and 48 non-engineering wafers per lot for ** and ** wafers respectively. SANYO reserves the right to levy additional charges if wafer lot sizes are less than the lot size in which case SANYO would propose such additional charges in its order acknowledgement/acceptance for CAMD to accept or reject.

2. Pricing (a) Price Determination.

The prices for products to be manufactured by SANYO will be determined by the methodology contained in Exhibit A, which presumes a die sort yield of at least **. SANYO and CAMD agree that these prices shall be fixed until **. Thereafter, it is anticipated that the parties will meet during December and set and fix prices for the following year pursuant to Section 2c . CAMD orders may include both ** inch and ** inch wafers.


All prices and payments and charges will be in US dollars. All prices include all taxes, export duties, and other charges imposed by Japan and any local governments in Japan but exclude all taxes, import duties, and other charges imposed by the United States of America (" USA" ) and any local governments in the USA.


** CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO CERTAIN PORTIONS OF THIS AGREEMENT AND THE CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

CONFIDENTIAL TREATMENT REQUESTED

(b) Future Products .

Whenever CAMD wishes SANYO to manufacture a new product with a new process technology the parties shall agree upon the pricing for such product and how long such price shall be fixed. Pricing for new products made with the existing process technologies will be determined per Exhibit A based upon the wafer cost and the number of layers. (c) Price Adjustments

In the Section 2a pricing meetings the parties shall agree whether to adjust the price upward or downwards.

It is anticipated that the parties will agree upon prices that yield reasonable profit to SANYO and yet result in as low a price as possible to CAMD so that CAMD and its products are competitive in the market which will result in more demand for CAMD and SANYO. SANYO agrees to provide CAMD with pricing and turnaround time consistent with that provided to its most favored customers. If the parties cannot agree on prices, then the current prices shall remain in effect for another ** months or else the parties will attempt to retain a mediator to assist them to reach agreement.

(d) Yield Improvement

The parties agree to work together to improve yield to above **. SANYO will provide product and process engineering support and CAMD will assist as requested. In order to improve the yield, CAMD shall measure the product delivered by SANYO and report the measurement result to SANYO within one month from such delivery.

(e) Engineering / Pilot / Qualification Lot Fee

The lot size of Engineering / Pilot / Qualification lot shall be no less than 12 wafers per lot. The wafer price for this purpose shall be ** surcharge on the production wafer price indicated in Exhibit A.

(f) Hot Lot Service Fee

If a CAMD order requires cycle time acceleration, then SANYO may impose an expediting surcharge of up to fifty percent (50%). SANYO would propose any such surcharges in its order acknowledgement/acceptance for CAMD to accept or reject.

3. Testing, Shipping, and Acceptance

(a) Testing by SANYO


** CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO CERTAIN PORTIONS OF THIS AGREEMENT AND THE CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

CONFIDENTIAL TREATMENT REQUESTED


SANYO will manufacture wafers to conform with the CAMD-specified acceptance criteria. SANYO will inspect and test all wafers prior to their shipment to CAMD using the tests specified in the acceptance criteria These tests, which should be agreed upon by the parties before such wafers go into production, will be tests of the electrical parameters by determining whether three out of five PCM sites on the wafer pass the specifications set by CAMD and if visual defects will make wafers not yield as specified. If more than one-half of the wafers in any lot fail the test, then SANYO will reject the entire lot and inform CAMD and await instructions for disposition. SANYO will also reject any individual wafer which fails the test as SANYO will ship only wafers which meet the acceptance criteria, unless CAMD waives such obligation in writing

(b) Effect of Acceptance Test Failure

If SANYO discovers that the wafers do not meet any one of the acceptance criteria, SANYO shall as soon as reasonably possible effect the rectification or replacement of the wafers. Provided, however, if CAMD decides that the wafers are or may be acceptable after consultation with SANYO, then SANYO may ship such wafers to CAMD in a package with an express statement of CAMD' s acceptance or conditional acceptance. CAMD might request partial shipment to verify if material is acceptable. In the event that CAMD requests SANYO to ship wafers that have failed the acceptance criteria, then the parties shall agree upon pricing of such wafers to take into account the yield of good die from the wafers once such yield is determined by CAMD.

(c) Shipping, Invoicing, and Payment Terms.

Wafers that have passed the Section 3a tests will be shipped to CAMD, in such packing as specified by CAMD, using Emery worldwide. SANYO will notify CAMD of such shipment no later than one (1) business day after such shipment. SANYO may make partial shipments. The minimum quantity of wafers for shipment is 1 Lot . The delivery term is FCA Emery at the Narita airport, meaning that CAMD will be responsible for any freight, insurance, and non-SANYO handling charges associated with the shipment of wafers as well as taxes, import duties, and other charges imposed by the USA as provided in Section 2a. All shipments will be accompanied by written documentation showing the test results. SANYO shall invoice CAMD on or after the date of shipment and CAMD will pay SANYO in US dollars by wire transfer within ** days to an account specified by SANYO. CAMD shall bear any bank charges outside Japan. Sanyo and CAMD will work out a process so that CAMD pays the freight and insurance charges of Emery but Sanyo handles the interaction with Emery at Narita.

(d) Acceptance and Warranty

(i) CAMD Acceptance

** CONFIDENTIA ...