SanDisk 2009 Annual Report Download - page 150

Notes To Consolidated Financial Statements
commitment because the price is determined by reference to the future cost of producing the semiconductor
wafers. In addition, the Company is committed to fund 49.9% of Flash Partners’ costs to the extent that Flash
Partners’ revenues from wafer sales to the Company and Toshiba are insufficient to cover these costs.
As of January 3, 2010, the Company had notes receivable from Flash Partners of 52.1 billion Japanese yen,
or approximately $562.9 million, based upon the exchange rate at January 3, 2010. These notes are secured by
the equipment purchased by Flash Partners using the note proceeds. The Company has additional guarantee
obligations to Flash Partners, see “Off-Balance Sheet Liabilities.” At January 3, 2010 and December 28, 2008,
the Company had an equity investment in Flash Partners of $199.1 million and $202.5 million, respectively,
denominated in Japanese yen, offset by $43.9 million and $48.5 million, respectively, of cumulative translation
adjustments recorded in accumulated OCI. During fiscal year 2009, the Company recorded an adjustment to its
equity in earnings from Flash Partners related to the difference between the basis in the Company’s equity
investment compared to the historical basis of the assets recorded by Flash Partners of $0.7 million.
Flash Alliance. The Company has a 49.9% ownership interest in Flash Alliance Ltd. (“Flash Alliance”), a
business venture with Toshiba which owns 50.1%, formed in fiscal year 2006. In the venture, the Company and
Toshiba have collaborated in the development and manufacture of NAND flash memory products. These NAND
flash memory products are manufactured by Toshiba at its 300 millimeter wafer fabrication facility (“Fab 4”)
located in Yokkaichi, Japan, using the semiconductor manufacturing equipment owned or leased by Flash
Alliance. Flash Alliance purchases wafers from Toshiba at cost and then resells those wafers to the Company and
Toshiba at cost plus a markup. The Company accounts for its 49.9% ownership position in Flash Alliance under
the equity method of accounting. The Company is committed to purchase its provided three-month forecast of
Flash Alliance’s NAND wafer supply, which generally equals 50% of the venture’s output. The Company is not
able to estimate its total wafer purchase commitment obligation beyond its rolling three-month purchase
commitment because the price is determined by reference to the future cost of producing the semiconductor
wafers. In addition, the Company is committed to fund 49.9% of Flash Alliance’s costs to the extent that Flash
Alliance’s revenues from wafer sales to the Company and Toshiba are insufficient to cover these costs.
As of January 3, 2010, the Company had notes receivable from Flash Alliance of 48.1 billion Japanese yen,
or approximately $520.2 million, based upon the exchange rate at January 3, 2010. These notes are secured by
the equipment purchased by Flash Alliance using the note proceeds. The Company has additional guarantee
obligations to Flash Alliance, see “Off-Balance Sheet Liabilities.” At January 3, 2010 and December 28, 2008,
the Company had an equity investment in Flash Alliance of $225.3 million and $215.9 million, respectively,
denominated in Japanese yen, offset by $45.3 million and $49.7 million, respectively, of cumulative translation
adjustments recorded in accumulated OCI. During fiscal year 2009, the Company recorded an adjustment to its
equity in earnings from Flash Alliance related to the difference between the basis in the Company’s equity
investment compared to the historical basis of the assets recorded by Flash Alliance of $13.9 million.
FlashVision. In June 2008, the Company agreed to wind-down its 49.9% ownership interest in FlashVision
Ltd. (“FlashVision”), a business venture with Toshiba which owns 50.1%. In this venture, the Company and
Toshiba collaborated in the development and manufacture of 200-millimeter NAND flash memory products.
However, the Company and Toshiba have determined that production of NAND flash memory products utilizing
200-millimeter wafers is no longer cost effective relative to current and projected market prices for NAND flash
memory.
As part of the ongoing wind-down of FlashVision, Toshiba agreed to purchase certain assets of FlashVision
and has retired the existing master lease agreement between FlashVision and a consortium of financial
institutions, thereby releasing the Company from its contingent indemnification obligation. Due to the wind-
down qualifying as a reconsideration event,the Company re-evaluated whether FlashVision is a variable interest
entity and concluded that FlashVision is no longer a variable interest entity. At January 3, 2010, the Company
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