Equity Method Investments



	June 4, 2015				August 28, 2014
	Investment Balance		Ownership Percentage		Investment Balance		Ownership Percentage
Inotera⁽¹⁾	$	1,273	33	%	$	914	33	%
Tera Probe	35		40	%	48		40	%
Other	16		Various		9		Various
	$	1,324			$	971

⁽¹⁾ Entity is a variable interest entity.

As of June 4, 2015, substantially all of our maximum exposure to loss from our VIEs that were not consolidated was the $1.27 billion carrying value of our investment in Inotera. We may also incur losses in connection with our rights and obligations to purchase all of Inotera's wafer production capacity under our supply agreements with Inotera.

We recognize our share of earnings or losses from our equity method investees generally on a two-month lag. Included in our share of earnings for the first nine months of 2015 was $65 million related to Inotera's full release of its valuation allowance against net deferred tax assets related to its net operating loss carryforward. Equity in net income of equity method investees, net of tax, included the following:



	Quarter Ended						Nine Months Ended
	June 4, 2015			May 29, 2014			June 4, 2015			May 29, 2014
Inotera	$	67		$	134		$	402		$	349
Tera Probe	3			2			(3		)	8
Other	(2		)	(1		)	1			(2		)
	$	68		$	135		$	400		$	355

Inotera

We have partnered with Nanya in Inotera, a Taiwan DRAM memory company, since 2009. As of June 4, 2015, we held a 33% ownership interest in Inotera, Nanya and certain of its affiliates held a 33% ownership interest, and the remaining ownership interest in Inotera was publicly held.

As of June 4, 2015, the market value of our equity interest in Inotera was $2.26 billion based on the closing trading price in an active market of 32.40 New Taiwan dollars per share. As of June 4, 2015 and August 28, 2014, there were losses of $2 million and gains of $44 million, respectively, in accumulated other comprehensive income for cumulative translation adjustments from our equity investment in Inotera.

Since January 2013, we have purchased all of Inotera's DRAM output at prices reflecting discounts from market prices for our comparable components under a supply agreement (the "2013 Supply Agreement"). In the second quarter of 2015, we executed a supply agreement, to be effective beginning on January 1, 2016 (the "2016 Supply Agreement"), which will replace the 2013 Supply Agreement. Under the 2016 Supply Agreement, the price for DRAM products sold to us will be based on a formula that equally shares margin between Inotera and us. The 2016 Supply Agreement has an initial two-year term, followed by a three-year wind-down period, and contemplates negotiations in late 2016 with respect to a two-year extension, and annual negotiations thereafter with respect to successive one-year extensions. Upon termination of the initial two-year term of the 2016 Supply Agreement, or any extensions, we would purchase DRAM from Inotera during the wind-down period. Our share of Inotera's capacity would decline over the wind-down period. In the first nine months of 2015 and in 2014, our cost of products purchased from Inotera was significantly higher than our cost of similar products manufactured in our wholly-owned facilities. We purchased $533 million and $1.89 billion of DRAM products from Inotera in the third quarter and first nine months of 2015, respectively, and $700 million and $2.00 billion in the third quarter and first nine months of 2014, respectively.

Tera Probe

In 2013, we acquired a 40% interest in Tera Probe, which provides semiconductor wafer testing and probe services to us and others. As of June 4, 2015, the market value of our equity interest in Tera Probe was $45 million based on the closing trading price in an active market of 1,528 yen per share. During the first quarter of 2015, we recorded an impairment charge of $10 million within equity in net income of equity method investees to write down the carrying value of our investment in Tera Probe to its fair value, based on its trading price (Level 1 fair value measurement). As of June 4, 2015, the difference between our investment balance and our proportionate share of underlying equity in Tera Probe was $29 million and is accreted as income to our earnings through equity in net income of equity method investees over a weighted-average period of seven years. We incurred manufacturing costs for services performed by Tera Probe of $19 million and $66 million for the third quarter and first nine months of 2015, respectively, and $24 million and $88 million for the third quarter and first nine months of 2014, respectively.