Related Parties - Equity Joint Ventures
|12 Months Ended|
Dec. 26, 2020
|Equity Method Investments and Joint Ventures [Abstract]|
|Related Parties - Equity Joint Ventures||Related Parties—Equity Joint Ventures
ATMP Joint Ventures
The Company holds a 15% equity interest in two joint ventures (collectively, the ATMP JV) with affiliates of Tongfu Microelectronics Co., Ltd, a Chinese joint stock 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.
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 consolidated statement of operations.
The Company’s purchases from the ATMP JV during 2020 and 2019 amounted to $831 million and $660 million, respectively. As of December 26, 2020 and December 28, 2019, the amounts payable to the ATMP JV were $78 million and $213 million, respectively, and are included in Payables to related parties on the Company’s consolidated balance sheets. The Company’s resales to the ATMP JV during 2020 and 2019 amounted to $28 million and $56 million, respectively. As of December 26, 2020 and December 28, 2019, the Company had receivables from ATMP JV of $10 million and $7 million, respectively, included in Receivables from related parties on the Company’s consolidated balance sheets.
During 2020, the Company recorded a gain of $5 million in Equity income (loss) in investee on its consolidated statements of operations. During 2019, the Company did not record any gain or loss in Equity income (loss) in investee. During 2018, the Company recorded a $2 million loss in Equity income (loss) in investee, which included certain expenses incurred by the Company on behalf of the ATMP JV. As of December 26, 2020 and December 28, 2019, the carrying value of the Company’s investment in the ATMP JV were approximately $63 million and $58 million, respectively.
THATIC Joint Ventures
The Company holds equity interests in two joint ventures (collectively, the THATIC JV) with Higon Information Technology Co., Ltd. (THATIC), a third-party Chinese entity. The Company holds a majority interest in one of the joint ventures and a minority interest in the other. The Company is not a primary beneficiary of the THATIC JV and, as such, the Company does not consolidate either of these entities and accounts for its equity interests in the THATIC JV under the equity method of accounting.
The Company’s share in the net losses of the THATIC JV is not recorded in the Company’s 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 both December 26, 2020 and December 28, 2019.
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.
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.
The Company recognized $60 million as licensing gain associated with the Licensed IP during 2019. During 2018, the Company recognized $86 million of IP-related revenue upon completion of all technology milestones under the Development and IP agreement.
As of December 26, 2020, the Company had no receivables from the THATIC JV. The Company’s receivable from the THATIC JV was $13 million as of December 28, 2019, included in Receivables from related parties on its consolidated balance sheets.
In June 2019, the Bureau of Industry and Security of the United States Department of Commerce 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.
The entire disclosure for equity method investments and joint ventures. Equity method investments are investments that give the investor the ability to exercise significant influence over the operating and financial policies of an investee. Joint ventures are entities owned and operated by a small group of businesses as a separate and specific business or project for the mutual benefit of the members of the group.
Reference 1: http://www.xbrl.org/2003/role/disclosureRef