Inventories

Inventories consisted of the following (in thousands):



	December 31, 2017			December 31, 2016
Raw materials	$	23,269		$	24,805
Work-in-process	—			12
Finished goods	4,012			5,005
	27,281			29,822
Less: inventory valuation allowance	(23,016		)	(9,801		)
Inventories, net	$	4,265		$	20,021

Consigned inventory is held at third-party locations, including the Company's contract manufacturing partner and customers. The Company retains title to the inventory until purchased by the third-party.

The Company’s consignment inventory with its contract manufacturer consists of inventory transferred from the Company’s prior contract manufacturer as well as inventory that has been purchased by the contract manufacturer as a result of the Company's forecasted demand. The Company is contractually obligated to purchase inventory transferred from the Company's prior contract manufacturer after the inventory ages for 365 days which was substantially complete as of December 31, 2017. The Company is also contractually obligated to purchase inventory that has been purchased by the contract manufacturer as a result of the Company's forecasted demand when the inventory ages beyond 180 days and has no forecasted demand. All of the Company’s consignment inventory was held by its contract manufacturing partner as of December 31, 2017 and December 31, 2016. The Company records a liability for adverse purchase commitments of inventory owned by its contract manufacturing partner. See Note 13 - Commitments and Contingencies for additional information regarding the Company's adverse purchase commitment liability.

The Company recorded the following charges associated with the valuation of inventory, inventory deposit and the adverse purchase commitment liability for the years ended December 31 (in thousands):



	2017		2016			2015
Inventory, net	$	15,050	$	6,120		$	1,447
Adverse purchase commitments^(A)	2,913		(1,908		)	1,831
Net charges^(B)	$	17,963	$	4,212		$	3,278


(A)	When the Company takes possession of inventory reserved for under the adverse purchase liability (Note 13 — Commitments and Contingencies), the associated liability is transferred from other accrued liabilities to the excess and obsolete inventory valuation allowance.


(B)	The increase for the year ended December 31, 2017 was the result of an inventory charge taken in the current period due to DCEngine restructuring activities and the Company's decision to change contract manufacturers in Asia resulting in an acceleration of last-time buys from customers for legacy embedded product lines.

The following is a summary of the change in the Company’s inventory valuation allowance for the years ended December 31 (in thousands):



	2017			2016
Inventory valuation allowance, beginning of the year	$	9,801		$	5,317
Usage:
Inventory scrapped	(870		)	(1,636		)
Inventory utilized	(882		)	(954		)
Subtotal—usage	(1,752		)	(2,590		)
Write-downs of inventory valuation and transfers to/from other liabilities ^(A)	14,967			7,074
Inventory valuation allowance, end of the year	$	23,016		$	9,801


(A)	Transfer to/from other liabilities is related to obsolete inventory purchased from contract manufacturers during the year which was previously reserved for as an adverse purchase commitment. (Note 9—Other Accrued and Other Long-Term Liabilities and Note 13—Commitments and Contingencies.)