Manufacturing and Purchase Agreement

Exhibit 10.23















MANUFACTURING AND



PURCHASE AGREEMENT





TEXAS INSTRUMENTS INCORPORATED,



ANAM INDUSTRIAL CO., LTD.





AMKOR ELECTRONICS, INC.



DATED AS OF JANUARY 1, 1998 EXECUTION COPY





TABLE OF CONTENTS











Article 1. Definitions.......................................................1



Article 2. Items and Cooperation to be Supplied by Anam and/or Amkor.........3



Article 3. Specifications, Quality Inspection, Testing and Customer Service..5



Article 4. Manufacturing Changes............................................12



Article 5. TI Loading Obligations and Option................................12



Article 6. TI Forecasts and Purchase Orders.................................15



Article 7. Pricing .........................................................18



Article 8. Shipping, Payment and Packaging .................................21



Article 9. Warranties and Liability Limitations.............................23



Article 10. Amendment of Certain Prior Agreements...........................26



Article 11. Term............................................................26



Article 12. Confidentiality.................................................26



Article 13. Termination and Dispute Resolution..............................27



Article 14. Miscellaneous...................................................30











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MANUFACTURING AND PURCHASE AGREEMENT



This Manufacturing and Purchase Agreement (this "Agreement") dated as of January 1, 1998 (the "Effective Date") is made by and among TEXAS INSTRUMENTS INCORPORATED, a Delaware, U.S.A. corporation, with its principal place of business at 13500 North Central Expressway, Dallas, Texas 75265, U.S.A. ("TI"), ANAM INDUSTRIAL CO., LTD., a corporation of the Republic of Korea, with its principal place of business at Seoul, Republic of Korea ("Anam"), and AMKOR ELECTRONICS INC., a Pennsylvania, U.S.A. corporation, with its principal place of business at 1345 Enterprise Drive, West Chester, Pa 19380 ("Amkor"). TI, Anam and Amkor are hereinafter referred to individually by their respective names or as Party and collectively as Parties.







WHEREAS, Anam is engaged in the business of, among other things, operating a semiconductor foundry in Korea;



WHEREAS Amkor is in the business of, among other things contracting with third parties to sell semiconductor wafers and die manufactured by Anam;



WHEREAS, the Parties desire to implement certain provisions of the Technical Assistance Agreement dated as of January 28, 1997 ("Phase 1 TAA") between TI and Anam and the Technical Assistance Agreement of even date herewith ("Phase 2 TAA") between TI and Anam for the purchase by TI from Amkor, and the sale by Amkor to TI, of TI Products (as hereinafter defined) to be manufactured by Anam;



WHEREAS, TI and Anam desire to amend and supersede certain provisions of the Phase 1 TAA related to matters covered by this Agreement; and



WHEREAS, the Parties desire to address manufacturing requirements, loading, pricing and other purchase-related terms and conditions for both Phase 1 Products, Phase 2 Products;



NOW, THEREFORE, for and in consideration of the mutual promises and covenants contained herein, the Parties, intending to be legally bound, hereby agree as follows:



ARTICLE 1.





For purposes of this Agreement, the following words, terms and phrases shall have the meanings assigned to them in this Article 1 unless specifically otherwise stated. Furthermore, any defined term herein shall have a constant meaning regardless of whether it is used in its singular or plural form.







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ADVANCED AVAILABLE TECHNOLOGY means, as the context herein requires, "Advanced Available Technology" as defined in the Phase 1 TAA and/or "Advanced Available Technology" as defined in the Phase 2 TAA.



CUSTOMER QUALIFICATION means that a TI customer has qualified a particular TI Product device manufacturable by Anam hereunder for sale by TI to such customer, as reflected in TI's written notification thereof to Anam.



FACILITY means the completed wafer fabrication plant known as Anam Fabrication Buchon (AFB) 1, located at 222, Dodang-dong, Wonmi-gu, Buchon, Kyunggi-do, Korea 420-130 which Anam constructed, in connection with the Phase 1 TAA, which Facility includes only a single 60 meter by 100 meter clean room. The term Facility includes a wafer fabrication facility and equipment only, and shall not include facilities or equipment for assembly and testing of Products.



PHASE 1 means that portion of the clean room within the Facility, the process capability of which, as currently contemplated by the Parties, is sufficient to manufacture approximately 15,000 wafer starts per month under the provisions of the Phase 1 TAA.



PHASE 1 PRODUCTS means "TI Products," as defined in the Phase 1 TAA.



PHASE 2 means that portion of the clean room within the Facility, the process capability of which, as currently contemplated by the Parties, is sufficient to manufacture approximately 10,000 wafer starts per month under the provisions of the Phase 2 TAA.



PHASE 2 PRODUCTS means "TI Products," as defined in the Phase 2 TAA.



PROCESS QUALIFICATION means TI's written certification that a unique process flow within the broader C10-node or C07-node (e.g., the split-gate C10 process flow and the split-gate C07 process flow) in operation at the Facility, which unique process flow cannot be qualified by similarity to another already qualified process flow, is qualified per the standards referred to within TI as the "QSS standards."



PROCESS QUALIFICATION COSTS means all costs incurred during the period of operation preceding Process Qualification relating to (i) the fabrication of prototype wafers, (ii) the Process Qualification testing of those wafers, including but not limited to costs relating to the acquisition, production, testing (including but not limited to final test, life test and environmental test), assembly and/or qualification testing of sample materials (including but not limited to wafers), and (iii) the failure analysis of failed units.



PRODUCTS means Phase 1 Products and Phase 2 Products, as defined herein.



PRODUCT QUALIFICATION means, with respect to TI Products, the process, as described herein, resulting in TI issuing its written certification that such TI Products and their









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manufacture have achieved a level of quality, consistency and reliability that meets or exceeds the Specifications in accordance with this Agreement.



PRODUCT QUALIFICATION COSTS means all costs incurred during Product Qualification relating to (i) the fabrication of prototype wafers, (ii) the Product Qualification testing of those wafers, including but not limited to costs relating to the acquisition, production, testing (including but not limited to final test, life test and environmental test), assembly and/or qualification testing of sample materials (including but not limited to wafers), and (iii) the failure analysis of failed units; provided, however, that Product Qualification Costs shall not in any event include Process Qualification Costs.



QUALIFICATION COSTS means Product Qualification Costs and Process Qualification Costs.



SPECIFICATIONS means specifications related to a specific process flow which are supplied to Anam in writing by TI to describe, characterize, circumscribe and define the design characteristics, quality and performance of TI Products, manufacturing processes, manufacturing equipment or Product Qualification and which are consistent with Specifications which are applicable to the same process flow manufactured by a TI facility comparable to the Facility.



TERM means the period during which this Agreement is in effect, as more specifically set forth in Article 11 of this Agreement.



TI PRODUCTS means TI Products as defined in the Phase 1 TAA and as defined in the Phase 2 TAA.



Unless otherwise provided herein, other capitalized terms herein shall have the meaning assigned to them in either or both the Phase 1 TAA or the Phase 2 TAA, as the context herein requires.



ARTICLE 2.

ITEMS AND COOPERATION TO BE SUPPLIED BY ANAM AND/OR AMKOR



2.01 MANUFACTURE. In accordance with the Phase 1 TAA, Phase 2 TAA, or any other applicable Technical Assistance Agreement ("TAA") executed between the Parties, Anam shall manufacture the TI Products to be sold by Amkor to TI hereunder.



2.02 COSTS, EXPENSES AND FEES. Except as otherwise expressly provided for in this Agreement, any applicable TAA or as may otherwise be agreed between the Parties, Amkor and Anam shall be solely responsible for any and all costs, expenses, fees and the like for equipment, labor, facilities, materials and other items required in connection with Anam's and Amkor's performance of their obligations hereunder or under any applicable TAA.



2.03 QUALIFICATION COSTS. TI shall bear all Product Qualification Costs associated with the initial Product Qualification of each TI Product other than those costs relating to mask sets that, pursuant to Section 2.04 below, shall be borne by either Anam or TI. Without limiting the application of Section 2.02 above, Anam shall bear all Process Qualification









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Costs.







2.4 MASK SETS.



2.04.01 For each TI Product which is to be manufactured by Anam for TI

and which requires a specific mask design, TI agrees to

provide to Anam the design data base and Technical Information

necessary for Anam to manufacture or have manufactured mask

sets, including any such additional mask sets (or portions

thereof) as may be redesigned by TI from time to time, to be

used for manufacturing such product.



2.04.02 Subject to Sections 2.04.03, 2.04.04 and 5.04, Anam shall bear

the costs of all mask sets ordered prior to January 1, 1999

relating to Phase 1 Products.



2.04.03 TI shall bear the costs of (i) the initial mask set relating

to each Phase 2 Product and (ii) the initial mask set ordered

on or after January 1, 1999 for each Phase 1 Product. Anam

shall bear the cost of the mask sets used solely in connection

with Process Qualification under the Phase 1 TAA and the Phase

2 TAA; provided, however, that if, and to the extent (i) the

same mask set used in Process Qualification is used in

production, and (ii) TI would otherwise be obligated to have

paid for such production mask set under this Section 2.04.03,

then Anam and TI shall share equally the cost of purchasing

such qualification mask set.



2.04.04 Notwithstanding anything to the contrary set forth in this

Section 2.04, TI shall bear the cost of any reasonable mask

redesign and mask manufacturing costs associated with

modifications or changes to the original mask sets which are

necessitated by design errors or changes by TI or TI's

Customers with respect to the initial mask sets. For any

wafers that have been manufactured in whole or in part that

are required to be scrapped due to any such design error or

change of TI or TI's customers, TI shall pay Amkor an amount

(the "Wafer Termination Amount") equal to:





[*]





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2.04.05 Anam shall be responsible for the costs of all masks and mask

sets for which TI is not otherwise responsible pursuant to

Sections 2.04.03, 2.04.04 and 5.04.04.



2.05 TI MASK SET PROTECTION. Anam shall protect all mask sets as Trade and Industrial Secrets of TI according to Article 10 of the applicable TAA. When any mask set is no longer usable by Anam for the purposes of this Agreement, Anam shall either return the mask set to TI immediately, or, upon TI's instructions, destroy the mask set and provide TI with written certification of any such destruction.



2.06 MATERIAL QUALITY REQUIREMENTS AND EQUIPMENT USAGE. TI will provide to Anam the most current version of TI's manufacturing Specifications, test programs and other test procedures needed by Anam to manufacture TI Products. In the process of qualifying the Facility and the manufacture of each TI Product, Anam shall, unless it obtains TI's consent to the contrary, use the same materials, recipes, processes, specifications and equipment directly relating to the manufacture of TI Products that TI uses in its commercial production of such TI Products as may have been disclosed by TI to Anam or as otherwise instructed by TI. Notwithstanding the foregoing, where required by local availability of materials and supplies, with the consent of TI, which consent shall not unreasonably be withheld or delayed, Anam may use materials, recipes, processes, specifications and equipment that are different from those used by TI.



ARTICLE 3.

SPECIFICATIONS, QUALITY INSPECTION, TESTING AND CUSTOMER SERVICE



3.01 CHANGE TO SPECIFICATIONS. TI has the right to modify, change or alter the Specifications from time-to-time, at its sole discretion and upon reasonable written notice to Anam. In the event TI makes a change to the Specifications, the Parties, through good faith negotiations, shall agree upon the delivery schedule of the TI Products resulting from said change and TI's and Anam's respective responsibilities, in accordance with Section 3.02 for the costs incurred by Anam in connection with such changes, within thirty (30) days following any such notice. All Specification changes shall be consistent with TI's own Specification changes and shall not require Anam to perform changes not otherwise generally performed by TI with respect to comparable process flows under comparable circumstances.



3.02 SPECIFICATION CHANGE COSTS.











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3.02.01 In the event TI changes the Specifications pursuant to Section

3.01, then:



(a) If the change results in an improvement in the

manufacture of Products in general, including the

process for manufacturing the Products in general, then

Anam shall bear all costs associated with the change to

the extent that they relate to such improvements and

result in savings to Anam; or



(b) Subject to Section 3.02.01(a), TI shall bear all costs

associated with the change.



3.02.02 TI shall give Anam reasonable notice prior to exercising its

option to change Specifications, and TI and Anam shall

exercise reasonable efforts to resolve any hardships which

Anam would suffer from such change in the Specifications. For

purposes of this Section 3.02, "costs" shall include, but not

be limited to, costs relating to wafers, assembly, testing,

Qualification Costs, engineering for failure analysis,

incremental equipment to run qualification lots, and the like.



3.03 TI RESIDENT INSPECTOR. Anam agrees that TI employee safety and well-being, product quality and reliability assurance, and the protection of TI's intellectual property, including but not limited to Technical Information, are of material importance to TI. Therefore, throughout the Term, TI shall have the right to maintain at the Facility, at TI's sole discretion, one or more resident representatives, as reasonably approved by Anam, for the purpose of monitoring compliance with this Agreement, the Specifications, and TI safety and environmental standards for the protection of TI personnel, and protecting TI's intellectual property, including but not limited to Technical Information. Anam shall provide suitable office space for use by such representatives, and shall provide reasonable access to the manufacturing processes for the TI Products as may be required for monitoring said compliance. Such representatives shall not interfere with Anam's operation of the Facility.



3.04 TI CUSTOMER RIGHT OF INSPECTION. Upon reasonable notice, Anam agrees to allow TI customer representatives (who have been approved by TI), to conduct quality control and Specification audits and certification/qualification of the Facility, and manufacturing process, provided that, where requested by Anam, a TI employee accompanies such customer during its audit in the Facility, subject to reasonable rules of Anam relating to visitors.



3.05 TI RIGHT TO MONITOR PRODUCTION. Throughout the Term, during completion of production lots for TI, TI may perform monitoring tests and may recommend disposition or corrective action where variance to the Specifications exists. Anam will support this activity with quality trend reports and such other documentation as shall be reasonably requested by TI from time-to-time. In addition, if at any other time TI detects variances or deviations from Specifications, TI may recommend corrective actions to Anam.



3.06 VISITS AND SECRECY AGREEMENT. Anything to the contrary in this Article 3 notwithstanding, each and every personnel of TI or TI's customers who shall be given











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access to the Anam Facility pursuant to this Agreement, including, without limitation, pursuant to Section 3.03, 3.04 and 3.05 shall execute an agreement, which shall include reasonable terms governing the protection of Anam confidential information, as a condition precedent to admission or access to such Facility or receipt of technical information of Anam pursuant to this Agreement. All such personnel shall fully abide by all Facility rules and regulations. TI shall be fully liable for any personal injury or property damage resulting from any act or omission of TI's personnel while on the premises of Anam. All transitory visits of TI and TI customers shall be arranged at such times and in such manner as to minimize interference with the activities of Anam.



3.07 ANAM CORRECTIVE ACTIONS. During the Term, Anam agrees to use reasonable commercial efforts to make corrective actions as may be reasonably recommended by TI as soon as practicable, after written notification of the problem; provided, however, that TI shall use reasonable commercial efforts to assist Anam in taking such action recommended by TI or in solving problems.



3.08 CYCLE TIME. Anam agrees to supply TI Products to TI in cycle times which shall be competitive with merchant world-class foundry companies. In any event, Anam agrees that the maximum production cycle time (i.e., the period from the start date for production specified in the TI Start Plan (as defined below) by TI to Anam's shipment of TI Products) shall be [*] except where otherwise expressly provided for herein.





3.09 EXPEDITED PRODUCTION. On production lots specified by TI, Anam shall expedite cycle time to a [*], or such other cycle time as may be agreed (such expedited lots herein referred to as "Hot Lots"). Regardless of the stage of the production process at which a normal lot is converted into a Hot Lot, for each such Hot Lot shipped within such cycle time, TI shall pay Anam a fee of [*]; provided, however, that:







(a) Unless otherwise agreed, Anam shall not be obligated to so expedite

production, through March 31, 1998, on more than [*] at any one

time; from April 1, 1998 through June 30, 1998, on more than [*] at

any one time; and thereafter, on more than [*] at any one time; and





(b) Any lots required to be expedited pursuant to Section 8.05, below

shall not count against the limits described in Section 3.09.00(a)



3.10 TESTING. Anam shall perform multi-probe testing in a manner consistent with TI practice, to the extent disclosed by TI to Anam, at Anam's Buchon, Republic of Korea site on all TI Products delivered to TI hereunder and, without limiting its obligations elsewhere provided for herein, shall be responsible, at its sole expense, for having sufficient facilities, test equipment, labor, test programs and other items in place on such site to meet required quantities and cycle times. Notwithstanding the foregoing, TI shall be responsible, solely at its expense, for furnishing to Anam in a timely manner copies of the multi-probe test



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programs necessary for Anam to perform multiprobe testing on the required quantities and within the required cycle times; provided, however, that TI shall be under no obligation to furnish test programs compatible with any test equipment other than the test equipment TI uses in its wholly-owned facilities for comparable wafers. All test programs required to be implemented by Anam in accordance with this Section 3.10 shall be consistent with TI's own test programs and shall not require Anam to perform testing not otherwise generally performed by TI with respect to comparable products. Anam shall use no other test programs on TI Products other than those furnished or approved by TI. TI agrees to purchase any testers used by Anam for TI Products at the end of Anam's use of such testers on TI Products. TI's purchase price for such equipment shall be equal to Anam's original purchase price for such equipment depreciated on a five-year straight line basis and subject to a discount in price for excessive wear and tear.



3.11 TI INCOMING TESTING AND INSPECTION.



3.11.01 TI shall furnish to Anam from time to time, as required,

quality and reliability Specifications applicable to TI

Products. Among other things, those Specifications will

specify the quality standards referred to within TI as the

"Category 1" standards. Such Specification shall be consistent

with specifications applicable to the Category 1

specifications met by TI's own facilities. Following receipt

of each shipment, TI may perform incoming tests on each

shipment of TI Products. In the event such tests demonstrate

that such TI Products fail to conform to the then-applicable

quality and reliability Specifications furnished by TI and

such Specifications conform to the foregoing, TI shall have

the right to return, after confirmation of failures, such TI

Products to Anam for rework or replacement at no cost to TI.

TI has the right to recommend corrective action to address

variances from Specifications. Such return shipments shall be

made by TI, F.O.B. the destination from which they were

originally shipped by Anam. A return material authorization

("RMA") form previously issued by Anam must accompany any such

returned TI Products.



3.11.02 TI agrees to perform incoming inspection of TI Products for

conformance with applicable Specifications within ninety (90)

days of delivery, and to advise Anam and Amkor of rejections

by written or electronic notice within five (5) business days

after inspection. If any delivery of products by Anam or Amkor

does not conform in any material respect to TI's order for

such TI Products or is found to fail applicable inspection, TI

shall have the right to reject such delivery by giving timely

notice to Anam and Amkor to that effect. TI will thereupon

return the non-conforming TI Products to Amkor or Anam (as the

case may be) at Amkor's or Anam's cost and risk, for, as may

be agreed between Amkor and TI, credit or rescreen and

replacement. If it is agreed that such TI Products shall be

rescreened, Anam and Amkor shall use reasonable efforts to

rescreen and replace such non-











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conforming wafers or dies and to do so, if at all, within

forty-five (45) days after the receipt thereof. TI will

provide Anam and Amkor with a report specifying the reason for

any rejection. All rejected products may be subjected to

inspection by Anam or Amkor to confirm that they are

defective. Any TI Product not rejected by TI within ninety

(90) days plus five (5) business days after receipt by TI

shall be deemed accepted. In the event that it determined that

TI's rejection of a TI Produc ...