Crucial 2015 Annual Report Download - page 59

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As of September 3, 2015, the market value of our equity interest in Inotera was $1.53 billion based on the closing trading
price of 23.20 New Taiwan dollars per share in an active market. As of September 3, 2015 and August 28, 2014, there were
gains of $13 million and $44 million, respectively, in accumulated other comprehensive income (loss) for cumulative
translation adjustments from our equity investment in Inotera.
Since January 2013, we have purchased all of Inotera's DRAM output at prices reflecting discounts from market prices for
our comparable components under a supply agreement. In the second quarter of 2015, we executed a supply agreement, to be
effective beginning on January 1, 2016 (the "2016 Supply Agreement"), which will replace the current agreement. Under the
2016 Supply Agreement, the price for DRAM products sold to us will be based on a formula that equally shares margin
between Inotera and us. The 2016 Supply Agreement has an initial two-year term, followed by a three-year wind-down period,
and contemplates negotiations in late 2016 with respect to a two-year extension, and annual negotiations thereafter with respect
to successive one-year extensions. Upon termination of the initial two-year term of the 2016 Supply Agreement, or any
extensions, we would purchase DRAM from Inotera during the wind-down period. Our share of Inotera's capacity would
decline over the wind-down period. In 2015 and 2014, our cost of products purchased from Inotera was significantly higher
than our cost of similar products manufactured in our wholly-owned facilities. We purchased $2.37 billion, $2.68 billion and
$1.26 billion of DRAM products in 2015, 2014, and 2013 respectively.
Tera Probe
In 2013, as part of the MMJ Acquisition, we acquired a 40% interest in Tera Probe, which provides semiconductor wafer
testing and probe services to us and others. The initial net carrying value of our investment was less than our proportionate
share of Tera Probe's equity and the difference is being amortized as a credit to our earnings through equity in net income (loss)
of equity method investees (the "Tera Probe Amortization"). As of September 3, 2015, the remaining balance of the Tera Probe
Amortization was $27 million and is expected to be amortized over a weighted-average period of seven years. Based on
closing trading prices, the market value of our equity interest in Tera Probe was $32 million as of September 3, 2015 and $41
million as of June 30, 2015 (the other-than-temporary impairment measurement date for our fourth quarter, commensurate with
our lag period). We evaluated our investment in Tera Probe and concluded that the decline in the market value did not indicate
an other-than-temporary impairment primarily because of the limited amount of time of the decline and historical volatility of
Tera Probe's stock price. In the first quarter of 2015, we recorded an impairment charge of $10 million within equity in net
income of equity method investees to write down the carrying value of our investment in Tera Probe to its fair value, based on
its trading price (Level 1 fair value measurement). We incurred manufacturing costs for 2015, 2014, and 2013 of $90 million,
$117 million, and $13 million respectively, for services performed by Tera Probe.
Other
Aptina: We held an equity interest in Aptina until August 15, 2014. On August 15, 2014, ON Semiconductor Corporation
acquired Aptina for approximately $433 million and we recognized a non-operating gain of $119 million based on our diluted
ownership interest of approximately 27%. The gain approximated our share of the consideration because the carrying value of
our investment had been reduced to zero in 2012, at which time we ceased recognizing our proportionate share of Aptina's
losses.
Through May 3, 2013, we manufactured components for Complementary Metal-Oxide Semiconductor ("CMOS") image
sensors for Aptina under a wafer supply agreement. Subsequent to May 3, 2013, we provided various services for Aptina under
a service agreement. For 2014 and 2013, we recognized net sales of $43 million and $182 million, respectively, from products
sold to and services performed for Aptina, and cost of goods sold of $37 million and $219 million, respectively. In 2013, we
assigned to LFoundry Marsica L.r.l. ("LFoundry") our supply agreement with Aptina to manufacture components for image
sensors. (See "Restructure and Asset Impairments" note.)