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Investments and Fair Value Measurements

9 Months Ended

Sep. 30, 2024

Investments and Fair Value Measurements

Note 2. Investments and Fair Value Measurements

Our investments consist of instruments with original maturities of more than three months. As of September 30, 2024 and December 31, 2023, our cash and debt investments are classified as follows (in thousands):


	September 30, 2024								December 31, 2023
			Gross		Gross						Gross		Gross
	Amortized		Unrealized		Unrealized		Fair		Amortized		Unrealized		Unrealized		Fair
	Cost		Gain		(Loss)		Value		Cost		Gain		(Loss)		Value
Classified as:
Cash and restricted cash	$	38,791	$	—	$	—	$	38,791	$	50,114	$	—	$	—	$	50,114
Investments (available-for-sale):
Certificates of deposit ¹		—		—		—		—		2,160		—		(20)		2,140
Total cash, restricted cash and investments	$	38,791	$	—	$	—	$	38,791	$	52,274	$	—	$	(20)	$	52,254
Contractual maturities on investments:
Due within 1 year ²	$	—					$	—	$	2,160					$	2,140
	$	—					$	—	$	2,160					$	2,140

1.	Certificates of deposit with original maturities of more than three months.

2.	Classified as “Short-term investments” in our condensed consolidated balance sheets.

We manage our debt investments as a single portfolio of highly marketable securities that is intended to be available to meet our current cash requirements. Certificates of deposit and corporate bonds are typically held until maturity.

Historically, the gross unrealized losses related to our portfolio of available-for-sale debt securities were immaterial, and primarily due to normal market fluctuations and not due to increased credit risk or other valuation

concerns. There was an insignificant amount of gross unrealized losses on our available-for-sale debt securities as of September 30, 2024, and historically, such gross unrealized losses have been temporary in nature and we believe that it is probable the principal and interest will be collected in accordance with the contractual terms. We review our debt investment portfolio at least quarterly, or when there are changes in credit risks or other potential valuation concerns, to identify and evaluate whether an allowance for credit losses or impairment would be necessary. Factors considered in determining whether a loss is temporary include the magnitude of the decline in market value, the length of time the market value has been below cost (or adjusted cost), credit quality, and our ability and intent to hold the securities for a period of time sufficient to allow for any anticipated recovery in market value.

The following table summarizes the fair value and gross unrealized losses related to available-for-sale debt securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position as of September 30, 2024 (in thousands):

In Loss Position

Total In

< 12 months

> 12 months

Loss Position

Gross

Fair

Unrealized

Fair

Unrealized

Fair

Unrealized

As of September 30, 2024

Value

(Losses)

Value

(Losses)

Value

(Losses)

Investments:

Certificates of deposit

—

Total in loss position

—


	In Loss Position				In Loss Position				Total In
	< 12 months				> 12 months				Loss Position
			Gross				Gross				Gross
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
As of December 31, 2023	Value		(Loss)		Value		(Loss)		Value		(Loss)
Investments:
Certificates of deposit	$	—	$	—	$	2,140	$	(20)	$	2,140	$	(20)
Total in loss position	$	—	$	—	$	2,140	$	(20)	$	2,140	$	(20)

Restricted Cash

We maintain restricted cash in connection with cash balances temporarily restricted for regular business operations. These balances have been excluded from the Company’s cash balance. As of September 30, 2024, $13.9 million was included in restricted cash in our condensed consolidated balance sheets.

Investments in Privately-held Raw Material Companies

We have made strategic investments in private companies located in China in order to gain access at a competitive cost to raw materials that are critical to our substrate business (see Note 7). The investment balances for the non-consolidated companies are accounted for under the equity method, included in “Other assets” in the condensed consolidated balance sheets, totaled $13.5 million and $12.5 million as of September 30, 2024 and December 31, 2023, respectively. As of September 30, 2024, there were three companies accounted for under the equity method. One of our equity investments, Beijing JiYa Semiconductor Material Co., Ltd. (“JiYa”), determined one of their equity investments was fully impaired and wrote the asset balance down to zero. This resulted in a $754,000 impairment charge in our second quarter 2023 financial results. Except as mentioned above, there were no impairment charges for the remainder of these investments during the three and nine months ended September 30, 2024 and 2023.

In May 2023, we reduced our ownership in Jia Mei from 25% to 10% by selling a portion of our Jia Mei shares to a third party for approximately $827,000. As a result of our decreased ownership and the fact that we do not have the ability to exercise significant influence over Jia Mei’s operations, we adopted the fair value method of accounting to

report on the investment in Jia Mei. Our investments under the fair value method are reviewed for other-than-temporary declines in value on a quarterly basis. We monitor our investments for impairment and record reductions in carrying value when events or changes in circumstances indicate that the carrying value may not be recoverable. As of September 30, 2024, our investments in this unconsolidated company had a carrying value of $551,000 and were included in “Other assets” in the condensed consolidated balance sheets. As a result of the share sale, we recognized a gain of $575,000. Additionally, in accordance with Accounting Standards Codification (“ASC”) 321-10-35-2, we adjusted the investment in Jia Mei to its fair value at the time of the sale, which resulted in a gain of $383,000. The gain resulting from the sale and the subsequent remeasurement was incorporated as a component of “Equity in income of unconsolidated joint ventures” in the condensed consolidated statements of operations in the second quarter of 2023.

Fair Value Measurements

We invest primarily in certificates of deposits, corporate bonds and notes, government securities and money market accounts. We review our debt investment portfolio for credit loss at least quarterly or when there are changes in credit risk or other potential valuation concerns. As of September 30, 2024 and December 31, 2023, the total unrealized loss, net of tax, included in accumulated other comprehensive income was immaterial. We believe it is probable the principal and interest will be collected in accordance with the contractual terms, and the unrealized loss on these securities was due to normal market fluctuations, and not due to increased credit risk or other valuation concerns. ASC 820, Fair Value Measurements and Disclosures, establishes three levels of inputs that may be used to measure fair value. Level 1 instrument valuations are obtained from real-time quotes for transactions in active exchange markets of the asset or identical assets. Level 2 instrument valuations are obtained from readily- available, observable pricing sources for comparable instruments. Level 3 instrument valuations are obtained from unobservable inputs in which there is little or no market data, which require us to develop our own assumptions. On a recurring basis, we measure certain financial assets and liabilities at fair value, primarily consisting of our short-term and long-term debt investments.

The type of instrument valued based on quoted market prices in active markets includes our money market funds, which are generally classified within Level 1 of the fair value hierarchy. We classify our available-for-sale debt securities, including certificates of deposit and corporate bonds, as having Level 2 inputs. The valuation techniques used to measure the fair value of these financial instruments having Level 2 inputs were derived from bank statements, quoted market prices, broker or dealer statements or quotations, or alternative pricing sources with reasonable levels of price transparency.

We place short-term foreign currency hedges that are intended to offset the potential cash exposure related to fluctuations in the exchange rate between the United States dollar and Japanese yen. We measure the fair value of these foreign currency hedges at each month end and quarter end using current exchange rates and in accordance with U.S. GAAP. At quarter end, any foreign currency hedges not settled are netted in “Accrued liabilities” on the condensed consolidated balance sheets and classified as Level 3 assets and liabilities. As of September 30, 2024, the net change in fair value from the placement of the hedge to settlement at each month end during the quarter had a de minimis impact on the condensed consolidated results.

There were no changes in valuation techniques or related inputs in the three and nine months ended September 30, 2024. There have been no transfers between fair value measurements levels during the three and nine months ended September 30, 2024.

The following table summarizes our financial assets and liabilities measured at fair value on a recurring basis in accordance with ASC 820 as of September 30, 2024 (in thousands):

Quoted Prices in

Significant

Active Markets of

Significant Other

Unobservable

Balance as of

Identical Assets

Observable Inputs

Inputs

September 30, 2024

(Level 1)

(Level 2)

(Level 3)

Assets:

Investments:

Certificates of deposit

—

Total

—

The following table summarizes our financial assets and liabilities measured at fair value on a recurring basis in accordance with ASC 820 as of December 31, 2023 (in thousands):


			Quoted Prices in				Significant
			Active Markets of		Significant Other		Unobservable
	Balance as of		Identical Assets		Observable Inputs		Inputs
	December 31, 2023		(Level 1)		(Level 2)		(Level 3)
Assets:
Investments:
Certificates of deposit	$	2,140	$	—	$	2,140	$	—
Total	$	2,140	$	—	$	2,140	$	—

Items Measured at Fair Value on a Nonrecurring Basis

Certain assets that are subject to nonrecurring fair value measurements are not included in the table above. These assets include investments in privately-held companies accounted for by the equity or fair value method (see Note 7). We did not record any other-than-temporary impairment charges for these investments during the three and nine months ended September 30, 2024 and 2023, respectively.