Foundry Agreement With Advanced Semiconductor Manufacturing Corp. of Shanghai

Exhibit 10.5


MONOLITHIC POWER SYSTEMS, INC HAS REQUESTED THAT PORTIONS OF THIS DOCUMENT BE ACCORDED CONFIDENTIAL TREATMENT PURSUANT TO RULE 406 OF REGULATION C PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. ACCORDINGLY, CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. OMITTED INFORMATION HAS BEEN REPLACED BY [*].


Dated this 14 th day of August 2001

Between


MONOLITHIC POWER SYSTEMS, INC.


and


ADVANCED SEMICONDUCTOR MANUFACTURING CORP.

OF SHANGHAI


FOUNDRY AGREEMENT


CONTENTS

Clause
Page
1. DEFINITIONS 1 2. MANUFACTURE OF WAFERS 2 3. QUALIFICATION AND MODIFICATION 2 4. PRODUCTION PLANNING 3 5. PURCHASE ORDERS 4 6. PRICING AND PAYMENT TERMS 4 7. QUALITY CONTROL AND INSPECTION 5 8. PROCEDURE FOR CUSTOMER RETURNS 5 9. PRODUCTION HALTS 6 10. DELIVERY 6 11. TERM AND TERMINATION 7 12. FORCE MAJEURE 8 13. USE RESTRICTION AND LIMITATION OF LIABILITY 8 14. CONFIDENTIALITY 9 15. NOTICES 10 16. WAIVER AND REMEDIES 10 17. SEVERANCE 11 18. ENTIRE AGREEMENT 11 19. NO ASSIGNMENT OR SUB-CONTRACTING 11 20. GOVERNING LAW 11 21. ARBITRATION 11

Agreed Price Quotations for Wafers Appendix A

Qualification of process and product and

Electrical Test and Electrical Parameters Appendix B Acceptance Criteria Appendix C Change Request Procedure Appendix D Process Change Requests Appendix E Procedure for Customer Returns Appendix F Cancellation Fee Appendix G


THIS FOUNDRY AGREEMENT is made this 14 th day of August 2001 (the " Effective Date" ) by and between:


(1) Monolithic Power Systems, Inc., with its principal place of business at 3777 Stevens Creek Blvd., Suit 400, Santa Clara, CA 95051-7364, U.S.A. (hereinafter referred to as ' MPS' ); and


(2) ADVANCED SEMICONDUCTOR MANUFACTURING CORP. OF SHANGHAI (ASMC), with a principal place of business at 385 Hong Cao Road, Shanghai 200233, China .


WHEREAS

(A) MPS has designed and developed certain integrated circuit products and desires to have wafers manufactured to its specifications for the purposes of manufacturing such products;


(B) ASMC is in the business of manufacturing and selling semiconductor wafers; and


(C) MPS and ASMC desire to enter into an agreement for the purpose of having ASMC manufacture wafers for MPS.

NOW IT IS HEREBY AGREED as follows:

1. DEFINITIONS

1.1 In this Agreement, unless otherwise defined or the context otherwise requires, the following words and expressions shall bear the following meanings:


' Acceptance Criteria' shall mean the visual inspection criteria, electrical test and electrical parameters and other criteria for each Product to be met by ASMC prior to delivery of Wafers and mutually agreed upon by the Parties. The Acceptance Criteria is set out in Appendix C;


' Masks' means the masks and reticle sets used by ASMC in the production of Wafers for MPS;

' Products' means MPS' s integrated circuit products identified by MPS' s product part numbers listed in MPS' s purchase orders;


' Scheduled Delivery Date' has the meaning set out in Clause 5.1;

' Wafers' means silicon wafers containing finished die for the Products manufactured by ASMC in accordance with the terms of this Agreement.


' Process Technology' means the process flow or the combination of manufacturing process modules for making each individual semiconductor device.


1.2 References to recitals, clauses and appendices are references to recitals, clauses and appendices of this Agreement.


1.3 The headings in this Agreement are inserted for convenience only and shall be ignored in the interpretation of this Agreement.

1.4 Unless the context otherwise requires, words denoting the singular number shall include the plural and vice versa, words importing the masculine gender shall include the feminine gender and words importing a person shall include a company or corporation and vice versa.

2. MANUFACTURE OF WAFERS

2.1 ASMC shall manufacture Wafers for MPS in accordance with the terms of this Agreement.

2.2 MPS shall furnish ASMC with all requisite technical support and assistance in starting up the manufacture of Wafers at ASMC' s wafer manufacturing facilities (' the facilities' ) on terms and conditions to be mutually agreed. MPS shall also assist, if it requires wafer sort and test services from ASMC, in starting up sort and test capabilities for the Wafers at the facilities. MPS shall bear mutually agreed upon non-recurring engineering costs incurred in the start-up of the manufacture of the Wafers at the facilities.


2.3 MPS shall provide at its own expense all requisite Masks which meet ASMC' s tooling specifications to ASMC within reasonable time for the manufacture of Wafers. The Parties agree that lot starts shall be initiated only after Masks meet ASMC' s tooling and other specifications. MPS shall bear the costs of any Wafer lots put on hold by reason of the non-availability of the Masks. Alternatively, MPS may authorise ASMC to procure at MPS' s expense and on terms mutually agreed beforehand, the Masks from a designated third-party contractor. Such Masks will be subject to ASMC' s in-coming reticle inspection criteria and qualification process.

2.4 Ownership of the MPS products and MPS proprietary Process technologies: MPS will retain and own exclusively throughout the world all right, title, and interest in the Products and designs, patents, copyrights, mask work rights and proprietary process technologies. ASMC shall not disclose any information related to MPS' s products and proprietary Process technologies to third parties without written permission from MPS. ASMC will not use MPS' s proprietary process technologies for any other customers.

2.5 ASMC will not disclose to the third parties the cooperation relationship between MPS and ASMC without written permission from MPS.


3. QUALIFICATION AND MODIFICATION

3.1 The Parties shall, where required by MPS, proceed in accordance with mutually agreed terms, with the qualification of the relevant ASMC process to be used in the manufacture of Wafers for MPS. ASMC shall provide to MPS the applicable electrical test and electrical parameters for each qualified process.


3.2 Upon successful qualification of the manufacturing process, ASMC shall manufacture the Wafers to conform with the Acceptance Criteria set out in Appendix C.


3.3 If the changes to the Acceptance Criteria are made otherwise than to correct any defects in the manufacture of Wafers hereunder, the Parties shall in good faith re-negotiate any existing terms and conditions of purchase (including pricing and delivery commitments) which require amendment as a result of such changes. Changes required shall be submitted to the MPS per procedures defined by Appendix D.

3.4 Any MPS requests for changes to the process flow for a Product and/or lot of Wafers shall be evaluated by ASMC in accordance with the ASMC' s Process Request Form (PRF) Procedure referenced in Appendix E, where applicable. Other requested process changes not governed by the Process Request Procedure, including a request for a non-standard process flow, shall be evaluated by ASMC in accordance with ASMC' s ROI Investigation Procedure for Non-standard Products.


4. PRODUCTION PLANNING

4.1 With effect from a date to be agreed by the Parties, MPS shall provide to ASMC no later than the 5th day of each month, its rolling 6-monthly forecast of its monthly volume requirements for Wafers for each relevant Product to be manufactured hereunder. The first 3 months of each 6-monthly forecast shall be backed by purchase orders for such first 3 months. By way of example, by 5th January, MPS shall provide to ASMC purchase orders for February, March and April, and a forecast of MPS' s monthly volume requirements for May, June and July; and by 5th February, MPS shall provide to ASMC purchase orders for May, and a forecast of MPS' s monthly volume requirements for June, July and August; and by 5th March, MPS shall provide to ASMC purchase orders for June, and a forecast of MPS' s monthly volume requirements for July, August and September; and so on.


4.2 MPS shall use commercially reasonable efforts to make orders for a minimum of 24 Wafers per lot for 6" wafers, or 49 wafers per lot for 5" wafers. ASMC reserves the right to levy additional charges if Wafer lot sizes ordered are less than 24 Wafers per lot for 6" wafers, or 49 wafers per lot for 5" wafers.


4.3 If requested by MPS, ASMC shall establish an in-line production inventory of Wafers for MPS upon mutually agreed terms. ASMC reserves the right to levy additional charges in the event that the ageing of such inventory exceeds 1 month at mutually agreed terms.


4.4 In the event that the actual quantity of Wafers ordered by MPS for the period commencing January 1st of a calendar year, and ending on 31 December of the same year (' MPS Fiscal Year' ) for all Products combined is less than the MPS Purchase Plan for that MPS Fiscal Year, then the ASMC Capacity Plan to the MPS for the following MPS Fiscal Year shall be re-negotiated and mutually agreed upon, and either Party shall have no other obligation to the other Party with respect to that renegotiated portion of the MPS Purchase Plan or ASMC Capacity Plan.


5. PURCHASE ORDERS


5.1 The purchase and supply of Wafers under this Agreement shall commence only when:

(a) MPS has issued a purchase order to ASMC; and


(b) ASMC has returned to MPS such purchase order with ASMC' s written acknowledgement thereon;


(c) ASMC has issued to MPS, within 5 business days, a written confirmation of the scheduled delivery date and scheduled starting week (the " Scheduled Delivery Date" ) of the Wafers ordered; and

(d) Subject to Appendix G, MPS may at any time cancel any purchase order prior to the commencement of manufacturing.


5.2 All purchase orders issued by MPS 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, MPS' s purchase order, MPS' s acceptance documents or ASMC' 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 authorised representatives of the Parties.

5.3 The MPS' s purchase order shall contain the Product code, ASMC product code, quantity of Wafers required, requested delivery dates for such Wafers, Wafer unit costs, a statement as to whether unprobed or probed Wafers are required and other purchase requirements. MPS shall request delivery dates consistent with ASMC' s then prevailing production cycle-times for the relevant Product specified in MPS' s purchase order.


6. PRICING AND PAYMENT TERMS


6.1 The purchase price of Wafers charged to MPS shall be in accordance with the terms of the relevant ASMC price quotation agreed to by the Parties for the relevant lots of Wafers purchased. Each Agreed Price Quotation, which shall reference this Agreement, shall be attached to this Agreement and shall be successively numbered as Appendix A-1, A-2, A-3 etc.

6.2 Payment term is determined according to credit check. MPS will use L/C as the payment term in first three month of production. After three months of production, ASMC will review MPS' s credit and determine if give MPS T/T 30 days credit payment term in next phase. ASMC has the right to change the payment term in case MPS has not made the payment according to the agreed upon time. Any late payment for Wafers shall be subject to interest charges of 1.5% per month. All bank charges outside of Mainland China shall be paid by MPS.


6.3 All invoices issued by ASMC shall identify the Wafers and the relevant MPS purchase order number, Product part number, purchase order line and release number, description of items and quantity of items shipped. Unless otherwise agreed by MPS and ASMC in writing, invoices may be mailed no earlier than the relevant date of shipment.


6.4 In the event of any dispute over the amount invoiced, MPS shall first make payment of the undisputed portion in accordance with Clause 6.2 pending resolution of the dispute between the Parties.

6.5 MPS shall pay, in addition to the Ex-Works (ASMC Factory) prices of Wafers stipulated herein, the amount of any freight, insurance, handling and other duties levied on the shipment of Wafers to MPS. MPS shall also pay for all sales, use, excise or other similar taxes levied on the purchase of Wafers by MPS herein.


7. QUALITY CONTROL AND INSPECTION


7.1 ASMC will use commercially reasonable efforts to manufacture Wafers to conform with the Acceptance Criteria set out in Appendix C. Prior to delivery, ASMC shall perform on each lot of Wafers manufactured, the tests specified in the Acceptance Criteria. ASMC will deliver only Wafers which meet the Acceptance Criteria, unless MPS waives such obligation in accordance with the applicable Waiver Procedures specified in Appendix C, or as mutually agreed between the Parties.

7.2 If ASMC discovers that the Wafers do not meet any one of the Acceptance Criteria, ASMC shall as soon as reasonably possible effect the rectification or replacement of the Wafers.


8. PROCEDURE FOR CUSTOMER RETURNS


8.1 The Procedure for Customer Returns as set out in Appendix F shall apply to Wafers manufactured under this Agreement. The time limit for the return of Wafers due to low sort yield is 60 days from the delivery date of such Wafers, and the time limit for the return of Wafers due to reliability failures is 1 year from the delivery date of such Wafers.

8.2 ASMC shall have no liability and shall not be obliged to accept the return of Wafers after the relevant period of 60 days or 1 year, as the case ma ...