Parent company Motorola will lend its spin-off semiconductor company Freescale a hand by becoming a prime customer for the company through 2006.

In an amendment to its initial public offering filings with the SEC, Freescale on Friday said that as part of its separation from Motorola the two companies intend to enter into a purchase and supply agreement for the next 20 months.

Motorola will commit, on behalf of its cellular subscriber businesses, to purchase "substantially all of its cellular baseband semiconductor requirements" from Freescale for its handsets through 2006. Baseband semiconductors based on code division multiple access (CDMA) were not included, as Freescale does not design that technology, it was said.

The agreement also sees Motorola treat Freescale as a preferred supplier for other components required by its cellular subscriber businesses for handset manufacturing, according to the amendment.

If all goes as planned, Freescale would start out of the gate with a large customer in its pocket. In 2003, Motorola’s purchases of baseband semiconductors accounted for 9 percent of then-incorporated Freescale total sales and about 38 percent of its total sales to its parent company. Motorola’s purchases of other semiconductor components required by its subscriber businesses accounted for 7 percent of Freescale's total sales in 2003 and about 30 percent of the fledgling company's total sales to Motorola last year.

In typical SEC filing fashion, Freescale warned that the agreement will not assure future sales to Motorola will be comparable with historical levels, and that Motorola’s obligations will be subject to Freescale's ability to continue to supply products on a competitive basis.

By: DocMemory
Copyright © 2023 CST, Inc. All Rights Reserved