Annual report pursuant to Section 13 and 15(d)

Commitments and Guarantees

Commitments and Guarantees
12 Months Ended
Dec. 31, 2022
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Guarantees Commitments and Guarantees
Operating Leases
The Company has entered into operating and finance leases for its corporate offices, data centers, research and development facilities and certain equipment. The leases expire at various dates through 2031, some of which include options to extend the lease for up to ten years.
For 2022, 2021 and 2020, the Company recorded $118 million, $71 million and $59 million, respectively, of operating lease expense, including short-term lease expense. For 2022 and 2021, the Company recorded $40 million and $26 million, respectively, of variable lease expense, which primarily included operating expenses and property taxes associated with the usage of facilities under the operating leases. For 2022 and 2021, cash paid for operating leases included in operating cash flows was $108 million and $67 million, respectively. The Company’s finance and short-term leases are immaterial to the Company’s consolidated financial statements.
Supplemental information related to leases is as follows:
December 31,
Weighted-average remaining lease term in years – operating leases 5.98
Weighted-average discount rate – operating leases 3.83  %
Future minimum lease payments under non-cancellable operating lease liabilities as of December 31, 2022 are as follows:
Year (In millions)
2023 $ 109 
2024 99 
2025 88 
2026 77 
2027 59 
2028 and thereafter 113 
        Total minimum lease payments 545 
Less: interest (56)
        Present value of net minimum lease payments 489 
Less: current portion (93)
        Total long-term operating lease liabilities $ 396 
Certain other operating leases contain provisions for escalating lease payments subject to changes in the consumer price index.
The Company’s purchase commitments primarily include the Company’s obligations to purchase wafers and substrates from third parties and future payments related to certain software and technology licenses and IP licenses. Purchase commitments include obligations made under noncancellable purchase orders and contractual obligations requiring minimum purchases or for which cancellation would lead to significant penalties.
Total future unconditional purchase commitments as of December 31, 2022 were as follows:
 Year (In millions)
2023 $ 6,489 
2024 1,434 
2025 271 
2026 129 
2027 85 
2028 and thereafter 202 
 Total unconditional purchase commitments $ 8,610 
On an ongoing basis, the Company works with suppliers on the timing of payments and deliveries of purchase commitments, taking into account business conditions.
Warranties and Indemnities
The Company generally warrants that its products sold to its customers will conform to its approved specifications and be free from defects in material and workmanship under normal use and conditions for one year. The Company may also offer one to three-year limited warranties based on product type and negotiated warranty terms with certain customers. The Company accrues warranty costs to Cost of sales at the time of sale of warranted products.
Changes in the Company’s estimated liability for product warranty during 2022 and 2021 are as follows:
December 31,
December 25,
  (In millions)
Beginning balance $ 51  $ 37 
Provisions during the period 115  106 
Settlements during the period (101) (92)
Ending balance $ 65  $ 51 
In addition to product warranties, the Company from time to time in its normal course of business indemnifies other parties with whom it enters into contractual relationships, including customers, lessors and parties to other transactions with the Company, with respect to certain matters. In these limited matters, the Company has agreed to hold certain third parties harmless against specific types of claims or losses such as those arising from a breach of representations or covenants, third-party claims that the Company’s products when used for their intended purpose(s) and under specific conditions infringe the intellectual property rights of a third party, or other specified claims made against the indemnified party. It is not possible to determine the maximum potential amount of liability under these indemnification obligations due to the unique facts and circumstances that are likely to be involved in each particular claim and indemnification provision. Historically, payments made by the Company under these obligations have not been material. In addition, the impact from changes in estimates for pre-existing warranties has been immaterial.