Source: EURLEX
Language: en
Format: md

4 . 6 . 94 Official Journal of the European Communities No C 153 / 11

Notice pursuant to Article 19 ( 3 ) of Regulation No 17 (')

( Case No IV / 34.891 — Fujitsu AMD Semiconductor )

( 94 / C 153 / 05 )

( Text with EEA relevance )

I. THE NOTIFICATION ' clone ' microprocessors . AMD's 1992 turnover was
approximately US$ 1,5 billion . .

1 . On 21 October 1993, Fujitsu Limited has notified a
joint venture agreement and five related agreements it
had entered into with Advanced Micro Devices, Inc .

The related agreements include : a technology cross ­

licence agreement, a joint development agreement, a
joint venture licence agreement and reciprocal
investments agreements .

The notification has been made unilaterally by Fujitsu

Limited with the consent and cooperation of Advanced
Micro Devices Inc . It is asked to the Commission to
issue a negative clearance or to grant an individual
exemption pursuant to Article 85 ( 3 ) of the EC Treaty .

Following the entry into force of the agreement on the
European Economic Area (' EEA Agreement '), on 11
February 1994 the parties requested the Commission to
extend the notification to cover also Article 53 of the

EEA Agreement .

2 . The joint venture company, Fujitsu AMD Semicon ­
ductor Limited (' the JV '), has been created under
Japanese law and will design, construct and operate a
plant in Japan to produce semiconductor wafers of
certain types of non-volatile memory (' NVM ') that is
electrically programmable read only memories
(' Eproms '.) and flash memories .

II . THE PARTIES

3 . Fujitsu Limited (' Fujitsu ') is the ultimate parent of a
group of companies that manufacture and sell infor ­
mation processing equipment, telecommunications
equipment, and electronic devices .

The consolidated turnover of the Fujitsu group in the
fiscal year 1992 was approximately US$ 29,8 billion .
Although an important producer of Eproms, Fujitsu sold
practically no flash memory before 1993 for which
calendar year it expects a very limited turnover in this
market segment .

4 . Advanced Micro Devices, Inc . (' AMD ') is an
American company specializing in the production and
sale of semiconductors and related devices, particularly
known for its production of Intel 386 ( and recently 486 )

(') OJ No 13, 21 . 2 . 1962, p . 204 / 62 .

III . THE AGREEMENTS

The Joint Venture Agreement

5 . Fujitsu AMD Semiconductor Limited, the joint
venture (' JV '), will be a company with limited liability

established under Japanese law . Fujitsu will hold
50,05 % and AMD 49,95 % of the JV's capital stock .
The maximum authorized capital of the JY will be 40
billion yen ( approximately ECU 325 million ).

Fujitsu will hold a majority of the seats on the board of
directors . Most decisions require a simple majority vote,
however, some major business decisions require super
majority approval .

The parties may not sell their shares in the JV for five
years . Thereafter, if either party sells its shares, it must
grant the other party the right of first refusal to purchase
them . So long as the parties hold shares in the JV, they
will be precluded from manufacturing NVMs that are or
may be competitive with the JV, or employing or
soliciting for employment any person employed by the

JV .

The agreement will be valid for so long as the JV
remains in existence, unless terminated earlier by mutual

agreement .

If either party breaches the agreement, becomes
insolvent, changes ownership / management, or ceases to
be a one-third shareholder of the JV, the other party will

have the option, among other things, to purchase the
first party's shares, dissolve the JV, or to terminate the
JV agreement and either or both of the investment

agreements .

6 . . The JV, which is expected to come on line by 1995,
will produce wafers of Eproms and flash memories
through processes with geometries of 0,5 micron or less
( meaning that the finest lines on the circuits are
5 / 10 000 000 of a meter in width or less corresponding
to 1 / 200 of a human hair ) that will be used by the JV or
the parties to make NVM devices . In fact, wafers are
unfinished products which must be cut into chips ( dice )
( i ) which are assembled into packaged devices that are
then incorporated into electronics equipment, or ( ii )
which are incorporated into memory cards . These NVM
devices ( the packaged devices and the memory cards )

No C 153 / 12 Official Journal of the European Communities 4 . 6 . 94

will be produced either by the JV or by the parent
companies . In either case, as the JV will not sell directly
its production on the market ('), the parent companies
will then sell the final product to OEMs or will use it for
their own production of information technology and
electronic consumer goods . According to the notifi ­
cation, wafers account for more than half of the final
product price .

Although both Eproms and flash memory are existing
products, the highest performance wafer currently in
commercial use is produced through processes with
geometries of 0,8 micron . Therefore, the product of the
JV will be a new generation of product .

7 . Presented as ancillary to the creation of the JV, the
agreement contains an ex-post non-competition
provision . According to this clause, if either party sells its
shares in the JV for any reason within 10 years from the
date the JV Agreement becomes effective, that party will
be precluded for two years following the date of such
sale from ( i ) engaging in manufacturing any NVM that
is or may be competitive with the JV and that embodies,
incorporates or is subject to any intellectual property
right owned by the other party or developed pursuant to
the Joint Development Agreement or the Joint Venture
Licence Agreement, or ( ii ) employing or soliciting for
employment any person employed by the JV . None the
less, under the terms of the Technology Cross-Licence
Agreement, the party will be able to continue its research

and development efforts based on the licensed tech ­
nology, which it can use to manufacture NVMs after the
two year period has passed .

rest of Europe . Unsolicited sales are allowed . After the
five-year period each party can sell throughout the EEA .

This agreement remains in effect for the longer of 10
years or the date of any of the following ' transitional
events ' :

— termination or expiration of the Joint Venture
Agreement,

— dissolution of the JV, or

— Fujitsu or AMD ceasing to be a shareholder of the

JV .

Upon the occurrence of a ' transitional event ', the
agreement automatically terminates and the licences
relating to NVMs and memory cards will become
worldwide licences .

The parties are also given the right to terminate this
Agreement for non-performance or for insolvency or

change in control of the other party .

Joint Development Agreement

10 . Through a Joint Development Committee the
parties will collaborate in the development of product
8 . The notification contains also five supplemental NVMs and process . technologies necessary to manufacture
agreements related to the establishment of the JV .

Each party will bear its costs of joint development . The
Technology Cross-Licence Agreement IPR developed by either or both of the parties under the
Joint Development Agreement will be jointly owned by

9 . The parties grant each other reciprocal
non-exclusive and non-transferable licences under their
respective IPRs to make and dispose in any possible way
of semiconductive materials and semiconductor products
in the world with the exception of NVMs and memory
cards . For these latter products the parties grant each
other reciprocal licences to make, assemble, package,
test, or use them in the world but the reciprocal licence
to sell, lease or otherwise dispose of them is limited to
certain specified territories . In Europe, for five years
from the first sale in the EEA market of each new NVM
or memory card, Fujitsu is granted a licence to sell in the
United Kingdom and Ireland and AMD to sell in the

(') A limited percentage of the JV's total production may be

allocated by the JV's board of directors to third parties . But,
according to the Joint Venture Licence Agreement, the JV
can sell NVMs only in certain Asian countries . Thus, the JV
is not active in the relevant geographic market for this case .

the parties . If either party independently develops
patented IPR, without access to confidential information

of the other party, that party will solely own that IPR .
The parties will grant the JV and the other party as the
case may be a licence to use the IPR developed under
the Joint Development Agreement, whether jointly or
individually owned .

The Joint Development Agreement will terminate auto ­
matically on the termination of the Joint Venture
Licence Agreement or the occurence of a ' transitional
event ' ( see above ).

Each party is also given the option to terminate if the
other party breaches the Agreement, becomes, insolvent,
changes ownership / management, or ceases to be a
one-third shareholder of the JV .

4 . 6 . 94 Official Journal of the European Communities No C 153 / 13

Upon termination of the Agreement for any reason, the
parties will continue to jointly own the jointly developed
IPR and to have the unlimited right to use and license
that IPR . The parties may not assign their ownership
interests in the jointly developed IPR without permission
from the other party .

Joint Venture Licence Agreement

11 . Fujitsu and AMD each grant the JV a
non-exclusive, non-transferable licence to use their IPR
to make, have made, and use NVMs anywhere in the
world and to sell, lease or otherwise dispose of NVMs in

certain Asian countries and, in the case of AMD's licence
to the JV, in Japan .

Fujitsu and AMD will be paid by the JV a royalty of

[. . .] ° / o (') on net sales ( to them ) of JV's products .

The JV grants the parties a non-exclusive, non-trans ­
ferable, worldwide licence to use its IPR .

The Agreement will terminate on the occurrence of a
' transitional event ' ( see above ).

Each party has the option to terminate the Agreement if
the other party breaches the Agreement, becomes
insolvent, changes management / ownership, or ceases to
be a one-third shareholder of the JV .

Reciprocal Investments Agreements

12 . Fujitsu and AMD will enter into reciprocal
investment agreements . Under the terms of these
agreements, Fujitsu is obligated to purchase directly from
AMD a certain number of AMD shares, not to exceed

5 % of ÀMD's outstanding common stock . AMD for its
part must purchase a much smaller amount of Fujitsu
stock on the open market . The parties are free to sell
their reciprocal investments after [. . .] ( x ). years .

IV . THE MARKET

1 . The relevant product market

and flash memory devices ( 2 ). An Eprom ( electrically
programmable read only memory ) is a non-volatile semi ­
conductor memory device that is programmable elec ­
trically and erasable using ultraviolet light . Flash
memory, on the other hand, is a non-volatile semicon ­
ductor memory device that is both electrically
programmable and electrically erasable, permitting
speedier erasure than is the case with an Eprom . As said
above, the JV's products will be produced using a new
generation product technology, the 0,5 micron ( or less )
technology . This process technology will narrow the
space between various circuit elements in the wafer
allowing it to hold more transistors and, therefore, to
store more information and to process them faster .

The main characteristic of NVMs is their capability to
retain stored data even after the power supply is cut .
Among NVMs, flash memory devices have advantages
over Eproms because they are erased more quickly,
without, removing the memory device from the system .
For the time being the price of flash memory is
considerably higher than that of Eprom . This is why
flash memory is currently used only in the high end of
the product market using NVMs .

2 . The relevant geographical market

14 . Generally speaking, NVM devices are freely
traded in substantial amounts all over the EEA ( and the
world ). There are neither particular price differences nor
national barriers to entry . Costs of transport are
irrelevant . Therefore, at the very least, the relevant
geographical market for this case should be considered
the European Economic Area as a whole .

3 . The existing structure of the market

15 . The worldwide value of the sub-market for
Eproms was US$ 1 358 million in 1991 and 1 253 in
1992 . For flash memory there are no data available for
1991 ( or before ); for 1992 the worldwide value was US$
239 million but this sub-market is expected to grow

almost 10 times by 1996 ( see paragraph 16 ). The
European value of the sub-markets in 1992 was US$ 293
million for Eproms and US$ 71 million for flash memory
respectively .

Figures about 1991 and 1992 revenues and worldwide
market shares of the major companies active in the two
market segments under consideration are summarized in
the following tables ( source : Dataquest Inc . 24 May

1993 ):

13 . The relevant product market in this case is the
market for NVM devices which is composed by Eprom ( 2 ) According to the parties, wafers do not constitute a separate

market apart from the semiconductor devices because they
are unfinished products rarely put on the market before
(') Business secret . being cut into cnips and incorporated into NVM devices .

No C 153 / 14 Official Journal of the European Communities 4 . 6 . 94

TABLE 1 — EPROM

Revenue Market share
( million US Dollars ) ( 0 / 0 )
Company

1991 1992 1991 1992

AMD 225 207 16,6 16,5
Intel 205 122 15,1 9,7
SGS-Thomson 158 180 11,6 14,4

Texas Instr . 136 197 10,0 15,7
Fujitsu 86 71 6,3 5,7
Mitsubishi 67 56 4,9 4,5
Toshiba 68 48 5,0 3,8

TABLE 2 — FLASH MEMORY

Revenue Market share
Company ( million US Dollars ) ( 0 / 0 )

1991 1992 1991 1992

Intel . NA 167 NA 69,9
AMD NA 46 NA 19,2
Mitsubishi NA 3 NA 1,3
SGS-Thomson NA 2 NA 0,8
Texas Instr . NA . 2 NA 0,8
Toshiba NA 1 NA 0,4

On the European market, the situation is as follows ( source : idem ):

TABLE 3 — EPROM

Revenue Market share
Company ( million US Dollars ) ( 0 / 0 ) '

1991 1992 1991 1992

SGS-Thomson 74 75 24,4 25,6
AMD 53 56 17,5 19,1
Intel 55 37 18,2 12,6
Texas Instr . 33 39 10,9 13,3
National Semiconductor 21 23 6,9 7,8
Fujitsu 9 9 3,0 3,1

TABLE 4 — FLASH MEMORY

Revenue Market share
Company ( million US Dollars ) ( 0 / 0 )

1991 1992 1991 1992

Intel ' NA 55 NA 77,5
AMD NA 11 NA 15,5
SGS-Thomson NA 2 NA 2,8

4 . Dynamic characteristics of the market

16 . During the next three to four years, the market
for NVMs is forecast to be a very dynamic one ; the
gradual process of shifting away from Eproms towards
flash memory initiated by Intel in late 1991 will be
followed at a much faster rate by all producers of semi ­
conductors .

According to the trade press, the worldwide demand for
flash memory is double the current manufacturing

production capacity, due to explosive growth in markets
for products requiring this technology such as cellular
phones, computer disk drives, mobile and desktop
personal computers and others .

According to Dataquest, the flash worldwide sales are

expected to grow from US$ 239 million in 1992 to 2,5
billion by 1996, the year in which flash is expected to
outnumber Eproms .

4 . 6 . 94 Official Journal of the European Communities No C 153 / 15

Intel is clearly leading this run against the shortage of
flash memories . By the end of 1994 Intel expects to have
increased eight times its production capacity of flash
memories . Intel recently entered into alliances
concerning flash memories with Sharp and Nippon Steel
Semiconductor .

To follow Intel, even aside from Fujitsu and AMD,
several companies have formed JVs in the flash memory
market : Mitsubishi / SGS-Thomson, IBM / Toshiba,
Toshiba / National Semiconductor, Toshiba / Samsung,
Hitachi / Mitsubishi, Sanyo / Silicon Storage Technology,
and SunDisk / Matsushita .

According to market analysts, this widespread effort to
increase production capacity of flash memory will
possibly generate overall over-Capacity in about five
years if not before . This extra capacity will bring the
prices down contributing to introduce the use of this

product in the manufacturing of more trivial electronic
consumer goods ( e.g . cameras ).

V. INTENTION OF THE COMMISSION

The Commission proposes to take a favourable position
with respect to the agreements summarized under the
competition rules of both the EC Treaty and the EEA

agreement .
Before doing so, the Commission invites interested third
parties to send their observations within one month from
the publication of this notice to the following address,
quoting the reference TW34.891 Fujitsu AMD Semicon ­
ductor '

Commission of the European Communities,
Directorate-General for Competition, IV / B-1,
200, rue de la Loi,
B - 1 049 Brussels .,

# Notice published pursuant to Article 26 ( 3 ) of Council Regulation ( EEC ) No 1017 / 68 (')

concerning agreements on the carriage of passengers by rail through the Channel Tunnel

( IV / 34.600 — Night Services )

( 94 / C 153 / 06 )

1 . On 29 January 1993 the Commission received an
application from European Night Services Limited
( ENS ), British Rail ( BR ), Deutsche Bundesbahn ( DB ),
NV Nederlandse Spoorwegen ( NS ) and Société des
Chemins de Fer Français ( SNCF ) seeking a declaration
of inapplicability of Article 2 of Council Regulation
( EEC ) No 1017 / 68 or, failing that, an exemption
pursuant to Article 5 of the abovementioned Regulation
as regards two categories of agreement on the carriage
of passengers by rail through the Channel Tunnel .

2 . Pursuant to Article 12 ( 2 ) of Regulation ( EEC ) No
1017 / 68, a summary of the application was published in
the Official Journal of the European Communities No
C 149 of 29 May 1993, page 10, to which reference can
be made for a statement of the facts .

3 . On 23 August 1993 the Commission informed the
undertakings in question that there were serious doubts
within the meaning of Article 12 ( 3 ) of Regulation

( EEC ) No 1017 / 68 as to the applicability of Article 5 of
the said Regulation to the agreements notified .

4 . Following discussions with the undertakings in
question, thé Commission considers that the agreements
notified could qualify for exemption from the prohibition
on restrictive agreements, provided that new entrants
could still supply night-time rail passenger transport
services . To do that, new entrants must be able to
purchase from the railway undertakings concerned the
same railway services as the latter have undertaken to

sell to their subsidiary European Night Services Ltd
( ENS ).

5 . The services comprise the provision of the loco ­
motive, the crew and the train-path on each national
network and in the Channel Tunnel .

6 . If required, the services should be made available
under the same technical and financial conditions as
those granted by the railway undertakings to ENS . The
railway undertakings would not be obliged to provide
the services if the new entrant is able to provide them
itself or if they do not have the necessary means of
traction .

7 . These obligations do not affect the general obli ­
gations incumbent on the railway undertakings pursuant
to Article 86 of the EC Treaty .

8 . The Commission is proposing to adopt a decision
exempting the agreements notified, subject to the
abovementioned conditions, pursuant to Article 85 ( 3 ) of
the EC Treaty and Article 53 ( 3 ) of the Agreement on
the European Economic Area .

9 . Before it does so, the Commission invites interested
third parties to submit their observations within 30 days
of the publication of this notice, quoting the reference
TVY34.600 Night Services ', to :

., Commission of the European Communities,
purchase from the railway undertakings concerned the Directorate-General for Competition,'
same railway services as the latter have undertaken to Directorate D / 3,

200 rue de la Loi,
o OJ No L 175, 23 . 7 . 1968, p . 1 . B - 1 049 Brussels .