Investment in Aizu Fujitsu Semiconductor Wafer Solution Limited ("AFSW")

3 Months Ended

Mar. 31, 2020

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Investment in Aizu Fujitsu Semiconductor Water Solution Limited ("AFSW")

Investment in Aizu Fujitsu Semiconductor Wafer Solution Limited (“AFSW”)

The Company has 49% interest in AFSW and is a party to a joint venture agreement (the “JVA”) with Fujitsu Semiconductor Limited (“FSL”) the 51% owner of AFSW. AFSW manufactures semiconductor products exclusively for its owners under manufacturing agreements at prices estimated to cover the cost of production. AFSW was determined to be a variable interest entity (“VIE”) as the equity at risk was not believed to be sufficient. AFSW depends on its owners for any additional cash. The Company extended $1.5 million and $2.7 million to AFSW to fund AFSW’s operations for the three months ended March 31, 2020 and the year ended December 31, 2019, respectively. The Company’s known maximum exposure to loss approximated the carrying value of its investment balance, which included the financing. Potential future losses could be higher than the carrying amount of the Company’s investment, as we are liable, along with the other owner, for other future operating costs or obligations of AFSW. In addition, because Transphorm is currently committed to purchasing GaN wafers and production-related services from AFSW at pre-agreed pricing based upon the Company’s second generation products, the Company may be required to purchase products at a higher cost for its newer generation products. Unfunded commitment to AFSW was $1.5 million and $1.7 million as of March 31, 2020 and December 31, 2019, respectively.

On April 1, 2020, FSL exercised its put option under the JVA and notified the Company that FSL intended to exit the joint venture by selling its 51% interest in AFSW to us. See Note 12 - Subsequent Events.

        The Company’ investment activities in AFSW for the three months ended March 31, 2020 and for the year ended December 31, 2019 are summarized below (in thousands):

	For the Three Months Ended March 31, 2020		For the Year Ended December 31, 2019
Beginning balance	$	(1,688)	$	(659)
Investment	1,548		2,698
Loss	(1,419)		(3,703)
Effect of exchange rate change	13		(24)
Ending balance	$	(1,546)	$	(1,688)

Summarized financial information (unaudited) of AFSW for the periods indicated, as provided by the controlling owner, are as follows (in thousands):

	As of
	March 31, 2020		December 31, 2019
Current assets	$	1,019	$	3,733
Long-term assets	$	5,382	$	5,101
Other current liabilities	$	1,640	$	931
Due to controlling owner	$	15,842	$	17,913
Due to Transphorm	$	7,199	$	5,349
Net deficit	$	(18,345)	$	(15,359)
	Three Months Ended March 31,
	2020		2019
Sales	$	1,248	$	3,212
Gross loss	$	(2,197)	$	(1,588)
Net loss	$	(2,895)	$	(2,300)