SanDisk 2013 Annual Report Download - page 211

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 29, 2013, over half of the Phase 1 building has been equipped with wafer capacity
or equipment required to enable technology transition of the Flash Ventures’ wafer capacity. The
Company regularly seeks to enhance wafer output through productivity improvements. In addition to what
it may obtain through these improvements, the Company is currently evaluating the timing of a limited
increase in wafer capacity in Flash Forward in fiscal year 2014. The Company and Toshiba each retain
some flexibility as to the extent and timing of each party’s respective fab capacity ramps. Construction of
the Phase 2 shell of the Fab 5 wafer fabrication facility is underway with expected completion in mid-2014.
The Phase 2 shell is currently intended to be used primarily for technology transition of the existing Flash
Ventures wafer capacity to 1Y-nanometer and 1Z-nanometer technology nodes and for a 3-dimensional
NAND (‘‘3D NAND’’) pilot line.
As of December 29, 2013, the Company had notes receivable from Flash Forward of $169.1 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 29, 2013 and December 30, 2012, the Company had an equity investment in
Flash Forward of $66.7 million and $65.7 million, respectively, denominated in Japanese yen, offset by
($16.2) million and ($3.7) million, respectively, of cumulative translation adjustments recorded in AOCI.
Inventory Purchase Commitments with Flash Ventures. Purchase orders placed under Flash Ventures 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 Arrangements and Activities
Research and Development Activities. The Company participates in common R&D activities with Toshiba
and is contractually committed to a minimum funding level.
Toshiba Foundry. In the first quarter of fiscal year 2013, the Company concluded its foundry
arrangement with Toshiba.
Other Silicon Sources. The Company’s contracts with its other sources of silicon wafers generally require
the Company to provide monthly purchase order commitments. 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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Annual Report