Fujitsu paid Cirrus Logic $25 million in 2005 to settle claims connected to alleged semiconductor-chip failures and disputed payments for hard-disk-drive-related chips. The payment followed arbitration and was part of a broader settlement involving Amkor Technology, Sumitomo Bakelite, and Cirrus Logic’s insurance carriers. It was a negotiated settlement—not a court-imposed fine—and the agreement included no admission of wrongdoing or liability.
What was the dispute about?
The conflict involved two related issues: Cirrus Logic’s claims that Fujitsu had not paid for hard-disk-drive-related chips delivered and accepted in fiscal 2002, and allegations of failures in semiconductor chips sold by Cirrus Logic to Fujitsu. Fujitsu’s claims also involved Amkor Technology and Sumitomo Bakelite, companies connected to the dispute.
On October 19, 2001, Cirrus Logic sued Fujitsu, seeking more than $46 million in damages over the alleged unpaid chip deliveries. On December 5, 2003, Fujitsu filed a California state-court complaint with substantially similar claims and additional fraud-related allegations against Amkor and Sumitomo. These were allegations in the parties’ competing claims, not findings of liability. (Cirrus Logic’s 2005 Form 8-K; settlement exhibit filed with the 8-K)
How the settlement was reached
On April 28, 2005, Cirrus Logic, Fujitsu, Amkor, Sumitomo, and Cirrus Logic’s insurers reached an agreement through arbitration covering pending claims related to alleged semiconductor integrated-circuit failures. Final settlement documents were completed on June 10. Cirrus Logic announced on June 16 that it had received Fujitsu’s $25 million payment and filed a Form 8-K that day. (Form 8-K, June 16, 2005)
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Arbitration resolved the pending claims without a trial. The settlement provided for mutual releases and dismissal with prejudice, which ended the covered claims rather than leaving them available to be brought again. It also expressly allowed the parties to say that a settlement occurred while stating that no party admitted wrongdoing or liability. (settlement agreement exhibit)
Who paid whom?
The $25 million headline figure was the lump-sum payment Fujitsu made to Cirrus Logic. The wider agreement also involved substantial payments to Fujitsu from other parties:
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| Payment direction | Amount |
|---|---|
| Fujitsu to Cirrus Logic | $25 million |
| Sumitomo Bakelite to Fujitsu | $45 million |
| Amkor Technology to Fujitsu | $40 million |
| Cirrus Logic’s insurance carriers to Fujitsu | $40 million |
The amounts and payment directions are reported in Cirrus Logic’s fiscal 2006 Form 10-K. The $25 million was not the total amount exchanged under the broader settlement; it was the payment Fujitsu made to Cirrus Logic. (Cirrus Logic fiscal 2006 Form 10-K)
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.How Cirrus Logic accounted for the payment
In its fiscal 2006 Form 10-K, Cirrus Logic reported the $25 million settlement receipt as a recovery of part of an approximately $46.8 million bad-debt expense it had recorded in fiscal 2002. The company also reported approximately $0.2 million in outside fees that partially offset the receipt. Those accounting figures describe Cirrus Logic’s reported treatment; they do not change the settlement’s legal effect. (Cirrus Logic fiscal 2006 Form 10-K)
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What the settlement did—and did not—mean
- It resolved claims through arbitration: the agreement covered pending claims among the parties related to the alleged chip failures.
- It was not a court fine: Fujitsu’s payment to Cirrus Logic was part of a negotiated settlement.
- It did not establish fault: the agreement included no admission of wrongdoing or liability.
- It ended the covered litigation: mutual releases and dismissal with prejudice closed the pending claims addressed by the agreement.
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