Investments in Privately-held Companies

6 Months Ended

Jun. 30, 2011

Investments in Privately-held Companies [Abstract]

Note 9. Investments in Privately-held Companies

We have made strategic investments in private companies located in China in order to gain access to raw materials at a competitive cost that are critical to our substrate business.

Our investments are summarized below (in thousands):

	Investment Balance as of
	June 30,		December 31,		Accounting	Ownership
Company	2011		2010		Method	Percentage
Beijing JiYa Semiconductor Material Co., Ltd	$	996	$	996	Consolidated	46	%
Nanjing Jin Mei Gallium Co., Ltd	592		592		Consolidated	83	%
Beijing BoYu Semiconductor Vessel Craftwork Technology Co., Ltd	410		410		Consolidated	70	%
	$	1,998	$	1,998

Jiangsu Dongfang Electric, Inc.	$	2,200	$	-	Equity	46	%
Xilingol Tongli Germanium Co. Ltd		3,765		3,437	Equity	25	%
Emeishan Jia Mei High Purity Metals Co., Ltd	1,112		1,055		Equity	25	%
	$	7,077	$	4,492

Our ownership of Beijing JiYa Semiconductor Material Co., Ltd. (JiYa) is 46%. We continue to consolidate JiYa as we have significant influence in management and have a majority control of the board. Our chief executive officer is chairman of the JiYa board, while our president of China operations and our vice president of China administration and our vice president of wafer production are also members of the JiYa board.

Our ownership of Nanjing Jin Mei Gallium Co., Ltd. (Jin Mei) is 83%. We continue to consolidate Jin Mei as we have significant influence in management and have a majority control of the board. Our chief executive officer is chairman of the Jin Mei board, while our president of China operations and our vice president of China administration are also members of the Jin Mei board.

Our ownership of Beijing BoYu Semiconductor Vessel Craftwork Technology Co., Ltd (BoYu), is 70%. We continue to consolidate BoYu as we have a significant influence over management and have a majority control of the board. Our chief executive officer is chairman of the BoYu board and our president of China operations and our vice president of China administration are members of the BoYu board.

Although we have representation on the boards of directors of each of these companies, the daily operations of each of these companies are managed by local management and not by us. Decisions concerning their respective short term strategy and operations, any capacity expansion and annual capital expenditures, and decisions concerning sales of finished product, are made by local management with some input from us.

We have added a new joint venture accounted for under the equity method during the three months ended June 30, 2011. The investment balances for the joint ventures accounted for under the equity method are included in other assets in our consolidated balance sheets and totaled $7.1 million and $4.5 million as of June 30, 2011 and December 31, 2010, respectively. We own 46% of the ownership interests in one of these companies and 25% in each of the other two companies. These three companies are not considered variable interest entities because:

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these companies have sustainable businesses of their own;

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our voting power is proportionate to our ownership interests;

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we only recognize our respective share of the losses and/or residual returns generated by the companies if they occur; and

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we do not have controlling financial interest in, do not maintain operational or management control of, do not control the board of directors of, and are not required to provide additional investment or financial support to any of these companies.

During the three and six months ended June 30, 2011, the three consolidated joint ventures had income of $4.5 million and $7.1 million, respectively, of which $2.0 million and $3.1 million, respectively, was allocated to minority interests, resulting in income of $2.5 million and $4.0 million, respectively, included in our net income. During the three and six months ended June 30, 2010, the three consolidated joint ventures had income of $1.3 million and $1.8 million, respectively, of which $417,000 and $547,000, respectively, was allocated to minority interests, resulting in income of $930,000 and $1.3 million, respectively, included in our net income.

We also maintain minority investments indirectly in privately-held companies through our consolidated joint ventures. These minority investments are accounted for under the equity method in the books of our consolidated joint ventures. As of June 30, 2011 and December 31, 2010, our consolidated joint ventures included these minority investments in “other assets” in the condensed consolidated balance sheets with a carrying value of $892,000 and $341,000, respectively.

Our equity earnings from the three minority-owned joint ventures that are not consolidated are recorded as other income, net and totaled $309,000 and $382,000 for the three and six months ended June 30, 2011, respectively. Our equity earnings from the two-minority owned joint ventures that are not consolidated are recorded as other income, net and totaled $61,000 and $82,000 for the three and six months ended June 30 2010, respectively.

Undistributed retained earnings relating to all our investments in these companies were $20.7 million and $16.3 million as of June 30, 2011 and December 31, 2010, respectively.

Our three minority-owned joint ventures that are not consolidated and accounted for under the equity method had the following summarized income information (in thousands) for the three and six months ended June 30, 2011 and 2010.

	Three Months Ended June 30,				Six Months Ended June 30,
	2011		2010		2011		2010

Net Sales	$	4,519	$	3,504	$	7,823	$	6,842
Gross profit		2,294		895		3,653		1,790
Operating income		1,587		277		1,950		400
Net income		1,242		244		1,534		326

We also maintain minority investments directly in two privately-held companies accounted for under the cost method and we do not have the ability to exercise significant influence over their operations. As of June 30, 2011 and December 31, 2010, our investments in these two unconsolidated privately-held companies had a carrying value of $392,000 and are included in “other assets” in the condensed consolidated balance sheets.

- Definition

The entire disclosure for equity investment, or group of investments, for which combined disclosure is appropriate, including: (a) the name of each investee and percentage of ownership of common stock, (b) accounting policies for investments in common stock, (c) difference between the amount at which the investment is carried and the amount of underlying equity in net assets and the accounting treatment of the difference, (d) the total fair value of each identified investment for which a market value is available, (e) summarized information as to assets, liabilities, and results of operations of the investees (for investments in unconsolidated subsidiaries, common stock of joint ventures, or other investments using the equity method), and (f) material effects of possible conversions, exercises, or contingent issuances of the investee. Other disclosures include (a) the names of any investee in which the investor owns 20 percent or more of the voting stock and investment is not accounted for using the equity method, and the reasons why not, and (b) the names of any investee in which the investor owns less than 20 percent of the voting stock and the investment is accounted for using the equity method, and the reasons why it is.

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