Equity Joint Ventures |
3 Months Ended |
|---|---|
Mar. 28, 2020 | |
| Equity Method Investments and Joint Ventures [Abstract] | |
| Equity Joint Ventures | Equity Joint Ventures ATMP Joint Ventures
The Company holds a 15% equity interest in two joint ventures (collectively, the ATMP JV) with Tongfu Microelectronics Co., Ltd, a Chinese joint stock company, and as such, the ATMP JV is a related party of the Company. The Company has no obligation to fund the ATMP JV. The Company accounts for its equity interests in the ATMP JV under the equity method of accounting due to its significant influence over the ATMP JV. As of both March 28, 2020 and December 28, 2019, the carrying value of the Company’s investment in the ATMP JV was $58 million.
The ATMP JV provides assembly, test, mark and packaging (ATMP) services to the Company. The Company assists the ATMP JV in its management of certain raw material inventory. The purchases from and resales to the ATMP JV of inventory under the Company’s inventory management program are reported within purchases and resales with the ATMP JV and do not impact the Company’s condensed consolidated statement of operations.
The Company’s total purchases from the ATMP JV during the three months ended March 28, 2020 and March 30, 2019 amounted to $151 million and $132 million, respectively. As of March 28, 2020 and December 28, 2019, the amounts payable to the ATMP JV were $187 million and $213 million, respectively, and are included in Payables to related parties on the Company’s condensed consolidated balance sheets. The Company’s resales to the ATMP JV during the three months ended March 28, 2020 and March 30, 2019 amounted to $7 million and $26 million, respectively. As of March 28, 2020 and December 28, 2019, the Company had receivables from the ATMP JV of $4 million and $7 million, respectively, included in Prepayment and receivables—related parties on the Company’s condensed consolidated balance sheets.
THATIC Joint Ventures
In February 2016, the Company and Higon Information Technology Co., Ltd. (THATIC), a third-party Chinese entity (JV Partner), formed a joint venture comprised of two separate legal entities, China JV1 and China JV2 (collectively, the THATIC JV). The Company’s equity share in China JV1 and China JV2 is a majority and minority interest, respectively, funded by the Company’s contribution of certain of its patents. The JV Partner is responsible for the initial and on-going financing of the THATIC JV’s operations. The Company has no obligations to fund the THATIC JV. The Company does not consolidate either of these entities and accounts for its investments in the THATIC JV under the equity method of accounting. The THATIC JV is a related party of the Company.
The Company’s share in the net losses of the THATIC JV for the three months ended March 28, 2020 is not recorded in the Company’s condensed consolidated statements of operations since the Company is not obligated to fund the THATIC JV’s losses in excess of the Company’s investment in the THATIC JV, which was zero as of March 28, 2020.
In February 2016, the Company licensed certain of its intellectual property (Licensed IP) to the THATIC JV for a total of $293 million in license fees payable over several years upon achievement of certain milestones. The Company also expects to receive a royalty based on the sales of the THATIC JV’s products to be developed on the basis of such Licensed IP. The Company classifies Licensed IP income and royalty income, associated with the February 2016 agreement, as licensing gain within operating income. The Company recognized $60 million as licensing gain associated with the Licensed IP during the three months ended March 30, 2019.
In March 2017, the Company entered into a development and intellectual property agreement (Development and IP) with the THATIC JV, and also expects to receive a royalty based on the sales of the THATIC JV’s products to be
developed on the basis of such agreement. The Company classifies Development and IP income and royalty income, associated with the March 2017 agreement, as revenue once earned.
In addition, from time to time, the Company entered into certain agreements with the THATIC JV to provide other services primarily related to research and development.
The Company’s receivable from the THATIC JV for the above agreements was $13 million as of both March 28, 2020 and December 28, 2019, and was included in Prepayment and receivables—related parties on its condensed consolidated balance sheets.
In June 2019, the U.S. Commerce Department’s Bureau of Industry and Security added certain Chinese entities to the Entity List, including THATIC and the THATIC JV. The Company is complying with U.S. law pertaining to the Entity List designation.
|