SanDisk 2011 Annual Report Download - page 164

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Liabilities.” At January 1, 2012 and January 2, 2011, the Company had an equity investment in Flash Alliance of
$368.5 million and $262.6 million, respectively, denominated in Japanese yen, offset by $92.6 million and
$76.4 million, respectively, of cumulative translation adjustments recorded in accumulated OCI. In fiscal year
2011 and 2010, the Company recorded a basis adjustment of $24.5 million and $5.9 million, respectively, to its
equity 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.
Flash Forward. The Company has a 49.9% ownership interest in Flash Forward Ltd. (“Flash Forward”), a
business venture with Toshiba which owns 50.1%, formed in fiscal year 2010. In the venture, the Company and
Toshiba collaborate to develop and manufacture NAND flash memory products. In this venture, NAND flash
memory products are manufactured by Toshiba at a new 300-millimeter wafer fabrication facility (“Fab 5”)
located in Yokkaichi, Japan, using the semiconductor manufacturing equipment owned by Flash Forward.
Toshiba owns the Fab 5 building, which is adjacent to the site of the Company’s and Toshiba’s current Flash
Partners and Flash Alliance ventures. Fab 5 is being built in two phases. In the second quarter of fiscal year 2011,
the Phase 1 building shell construction was completed and initial NAND production began. As of January 2012,
Phase 1 of Fab 5 was approximately 30% equipped and the Company has invested in 50% of that capacity. No
commitment has yet been made for further Phase 1 capacity expansion; however, the Company is periodically
reviewing 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 and capacity
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 January 1, 2012, the Company had notes receivable from Flash Forward of $32.4 million,
denominated in Japanese yen. These notes are secured by the equipment purchased by Flash Forward using the
note proceeds. At January 1, 2012, the Company had an equity investment in Flash Forward of $19.5 million,
denominated in Japanese yen, offset by $1.1 million 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.
Flash Partners and Flash Alliance Restructuring. The Company and Toshiba restructured Flash Partners
and Flash Alliance in the first quarter of fiscal year 2009 by selling more than 20% of these ventures’ capacity to
Toshiba. The restructuring resulted in the Company receiving value of 79.3 billion Japanese yen of which
26.1 billion Japanese yen, or $277.1 million, was received in cash, reducing outstanding notes receivable from
these ventures, and 53.2 billion Japanese yen reflected the transfer of off-balance sheet equipment lease
guarantee obligations from the Company to Toshiba. The restructuring was completed in a series of closings
through March 31, 2009. The Company received the cash and transferred 53.2 billion Japanese yen of
off-balance sheet equipment lease guarantee obligations in the first half of fiscal year 2009. Transaction costs of
$10.9 million related to the sale and transfer of equipment and lease obligations were expensed in the first quarter
of fiscal year 2009.
Research and Development Activities. The Company participates in common research and development
activities with Toshiba but is not committed to any minimum funding level.
Toshiba Foundry. The Company has the ability to purchase additional capacity under a foundry
arrangement with Toshiba.
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