SanDisk 2012 Annual Report Download - page 204

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Flash Forward. Flash Forward Ltd. (“Flash Forward”) was formed in fiscal year 2010. NAND flash
memory products provided to the Company by this venture are manufactured by Toshiba at its 300-millimeter
wafer fabrication facility (“Fab 5”) located in Yokkaichi, Japan. Fab 5 is to be built in two phases. As of
December 30, 2012, the Phase 1 build-out had been completed and was equipped to a portion of the potential
equipment capacity. The Company had invested in 50% of that equipment. No commitment has yet been made
for further Phase 1 capacity expansion beyond productivity improvements; however, the Company periodically
reviews the timeline of further Phase 1 capacity expansion. Furthermore, no timelines have been finalized for the
construction of Phase 2. If and when Phase 2 is built, the Company is committed to 50% of the initial ramp in
Phase 2, similar to that in Phase 1. On completion of Phase 2, Fab 5 is expected to be of similar size to Toshiba’s
Fab 4. The Company and Toshiba will each retain some flexibility as to the extent and timing of each party’s
respective fab capacity ramps, and the output allocation will be in accordance with each party’s proportionate
level of equipment funding.
As of December 30, 2012, the Company had notes receivable from Flash Forward of $162.8 million,
denominated in Japanese yen. These notes are secured by the equipment purchased by Flash Forward with the
note proceeds. The Company also has guarantee obligations to Flash Forward; see “Off-Balance Sheet
Liabilities.” At December 30, 2012 and January 1, 2012, the Company had an equity investment in Flash
Forward of $65.7 million and $19.5 million, respectively, denominated in Japanese yen, offset by ($3.7) million
and $1.1 million, respectively, of cumulative translation adjustments recorded in accumulated OCI.
FlashVision. In the first quarter of fiscal year 2010, the wind-down was completed of FlashVision, a
business venture with Toshiba in which the Company owned 49.9%. The Company recorded a gain of
$4.1 million in the first quarter of fiscal year 2010 in other income (expense) related to the completion of this
wind-down.
Research and Development Activities. The Company participates in common research and development
activities with Toshiba but is not contractually committed to any minimum funding level.
Toshiba Foundry. The Company has the ability to purchase additional capacity under a foundry
arrangement with Toshiba.
Business Ventures and Foundry Arrangement with Toshiba. Purchase orders placed under Flash Ventures
and the foundry arrangement with Toshiba for up to three months are binding and cannot be canceled. These
outstanding purchase commitments are included as part of the total “Noncancelable production purchase
commitments” in the “Contractual Obligations” table.
Other Silicon Sources. The Company’s contracts with its other sources of silicon wafers generally require
the Company to provide monthly purchase order commitments based on non-binding nine month rolling
forecasts. The purchase orders placed under these arrangements are generally binding and cannot be canceled.
These outstanding purchase commitments for other sources of silicon wafers are included as part of the total
“Noncancelable production purchase commitments” in the “Contractual Obligations” table.
Subcontractors. In the normal course of business, the Company’s subcontractors periodically procure
production materials based on the forecast the Company provides to them. The Company’s agreements with
these subcontractors require that the Company reimburse them for materials that are purchased on the
Company’s behalf in accordance with such forecast. Accordingly, the Company may be committed to certain
costs over and above its open noncancelable purchase orders with these subcontractors. These commitments for
production materials to subcontractors are included as part of the total “Noncancelable production purchase
commitments” in the “Contractual Obligations” table.
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