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

3 Months Ended

Jun. 30, 2021

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”)

As of June 30, 2021, the Company was party to a joint venture agreement (the “JVA”), by and among Aizu Fujitsu Semiconductor Limited, Fujistu Semiconductor Limited (“FSL”), the Company and Transphorm Aizu, Inc. (“Transphorm Aizu”) for the ownership and operations of AFSW. As of June 30, 2021, the Company held a 49% interest in AFSW through Transphorm Aizu, the Company’s wholly-owned subsidiary established in Japan to manage the financial transactions around 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 $2.0 million and $1.9 million to AFSW to fund AFSW’s operations for the three months ended June 30, 2021 and 2020, 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 $1.3 million and $1.9 million as of June 30, 2021 and March 31, 2021, respectively.

On April 1, 2020, FSL exercised its put option under the JVA and notified us that FSL intended to exit the joint venture by selling its 51% interest in AFSW to us. On August 1, 2021, our joint venture company in Singapore, in which we hold a 25%, acquired all of the interests in AFSW. See Note 12 - Subsequent Events.

The Company’s investment activities in AFSW for the periods presented are summarized below (in thousands):

	For the Three Months Ended June 30, 2021		For the Three Months Ended March 31, 2021
Beginning balance	$	(1,866)	(1,466)
Investment	2,018		968
Loss	(1,490)		(1,468)
Effect of exchange rate change	(1)		100
Ending balance	$	(1,339)	$	(1,866)

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

	As of
	June 30, 2021		March 31, 2021
Current assets	$	1,693	$	932
Long-term assets	$	5,395	$	5,330
Other current liabilities	$	2,495	$	2,200
Due to controlling owner	$	24,299	$	22,354
Due to Transphorm	$	14,820	$	13,179
Net deficit	$	(34,526)	$	(31,471)
	For the Three Months Ended June 30,
	2021		2020
Sales	$	1,430	$	538
Gross loss	$	(2,399)	$	(3,148)
Net loss	$	(3,041)	$	(3,789)