Note 6. 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
	December 31,		December 31,		Accounting	Ownership
Company	2013		2012		Method	Percentage
Beijing JiYa Semiconductor Material Co., Ltd	$	3,331	$	3,331	Consolidated		46	%
Nanjing Jin Mei Gallium Co., Ltd		592		592	Consolidated		83	%
Beijing BoYu Semiconductor Vessel Craftwork Technology Co., Ltd		1346		410	Consolidated		70	%
	$	5,269	$	4,333

Donghai County Dongfang High Purity Electronic Materials Co., Ltd.	$	1,900	$	2,038	Equity		46	%
Xilingol Tongli Germanium Co. Ltd		4,692		4,246	Equity		25	%
Emeishan Jia Mei High Purity Metals Co., Ltd		945		1,042	Equity		25	%
	$	7,537	$	7,326

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 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 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 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 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 in management and have majority control of the board. Our Chief Executive Officer is chairman of the BoYu board, while our president of China operations and our vice president of China administration are also members of the 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 inputs from us.

During 2013, 2012 and 2011, the three consolidated joint ventures generated $3.5 million, $7.4 million and $12.5 million of income, respectively, of which $1.1 million, $3.0 million and $5.5 million, respectively was allocated to minority interests, resulting in $2.4 million, $4.4 million and $7.0 million, respectively to our net income.

For the three equity investment entities that are not consolidated, the investment balances are included in “other assets” in our consolidated balance sheets and totaled $7.5 million and $7.3 million as of December 31, 2013 and 2012, 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:

all three companies have sustainable businesses of their own;

our voting power is proportionate to our ownership interests;

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

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.

These three equity investment entities had gross equity earnings of $270,000, $379,000 and $520,000 for the years ended December 31, 2013, 2012 and 2011, respectively, and was recorded as “equity in earnings of unconsolidated joint ventures” in the consolidated statements of operations.

Net income recorded from all of the consolidated joint ventures and these equity investment entities was $2.6 million, $4.7 million and $7.6 million for the years ended December 31, 2013, 2012 and 2011, respectively.

We also maintain minority investments indirectly in privately-held companies by our consolidated joint ventures. These minority investments are accounted for under the equity method in the books of our consolidated joint ventures. As of December 31, 2013 and 2012, our consolidated joint ventures included these minority investments in “other assets” in the consolidated balance sheets with a carrying value of $3.4 million and $2.0 million, respectively.

All the minority investment entities that are not consolidated and accounted for under the equity method had the following summarized operating information (in thousands) for the years ended December 31, 2013, 2012 and 2011, respectively.

	Years Ended December 31,						Our share for the Years Ended December 31,
	2013		2012		2011		2013		2012		2011
Net Revenue	$	41,257	$	32,858	$	21,340	$	10,240	$	8,091	$	5,196
Gross profit		13,836		11,057		7,576		3,328		2,643		1,814
Operating income		8,174		6,310		3,819		1,820		1,409		863
Net income		6,315		5,665		2,900		1,377		1,281		741

All the minority investment entities that are not consolidated and accounted for under the equity method had the following summarized balance sheet information (in thousands) as of December 31, 2013 and 2012, respectively.

	As of December 31,
	2013		2012
Current assets	$	22,139	$	20,594
Noncurrent assets		38,941		37,555
Current liabilities		15,289		20,772
Noncurrent liabilities		2,296		2,873

All the minority investment entities that are not consolidated and accounted for under the equity method had gross equity earnings of $1.4 million, $1.3 million and $741,000 for the years ended December 31, 2013, 2012 and 2011, respectively. Dividends received from these minority investment entities were $396,000, 277,000 and $357,000 for the years ended December 31, 2013, 2012 and 2011, respectively. Undistributed retained earnings relating to our investments in all these minority investment entities were $5.3 million and $4.3 million as of December 31, 2013 and 2012, respectively.