Concentrations of Risk and Segment Information
Geographic Information and Major Customers. The Company markets and sells flash memory products in the U.S. and in foreign countries through its sales personnel, dealers, distributors, retailers and subsidiaries. The Company’s Chief Operating Decision Maker, its President and Chief Executive Officer, evaluates performance of the Company and makes decisions regarding allocation of resources based on total Company results. Since the Company operates in one segment, all financial segment information can be found in the accompanying Consolidated Financial Statements.
Other than sales in the U.S., China, South Korea and Taiwan, no individual country represented more than 10% of the Company’s revenue. Intercompany sales between geographic areas have been eliminated.
Revenue by geographic areas for fiscal years 2013, 2012 and 2011 were as follows (in thousands):
|
| | | | | | | | | | | |
| Fiscal years ended |
| December 29,
2013 | | December 30,
2012 | | January 1,
2012 |
United States | $ | 877,759 |
| | $ | 714,293 |
| | $ | 853,830 |
|
China | 1,887,207 |
| | 1,195,617 |
| | 872,295 |
|
South Korea | 496,030 |
| | 384,409 |
| | 617,119 |
|
Taiwan | 958,705 |
| | 981,801 |
| | 1,419,836 |
|
Other Asia-Pacific | 867,897 |
| | 905,882 |
| | 987,215 |
|
Europe, Middle East and Africa | 780,079 |
| | 642,494 |
| | 688,538 |
|
Other foreign countries | 302,326 |
| | 228,013 |
| | 223,312 |
|
Total | $ | 6,170,003 |
| | $ | 5,052,509 |
| | $ | 5,662,145 |
|
Product revenue from customers is designated based on the geographic location to which the product is delivered. License and royalty revenue is attributed to countries based upon the location of the headquarters of the licensee.
Long-lived assets by geographic area were as follows (in thousands):
|
| | | | | | | |
| December 29,
2013 | | December 30,
2012 |
United States | $ | 313,959 |
| | $ | 257,655 |
|
Japan | 553,318 |
| | 661,393 |
|
China | 299,704 |
| | 350,873 |
|
Other foreign countries | 47,070 |
| | 38,702 |
|
Total | $ | 1,214,051 |
| | $ | 1,308,623 |
|
Long-lived assets are attributed to the geographic location in which they are located. The Company includes in long-lived assets property and equipment, long-term equity investments in Flash Ventures and other equity investments, and attributes those investments to the location of the investee’s primary operations.
Customer and Supplier Concentrations. A limited number of customers or licensees have accounted for a substantial portion of the Company’s revenue. Revenue from the Company’s top 10 customers or licensees accounted for approximately 49%, 43% and 48% of the Company’s revenue for fiscal years 2013, 2012 and 2011, respectively. In fiscal year 2013 and 2012, Apple Inc. (“Apple”) accounted for 20% and 13% of the Company’s revenue, respectively. In fiscal year 2011, Samsung Electronics Co., Ltd. accounted for 10% of the Company’s revenue. Apple primarily purchases mobile embedded products and solid state drive (“SSD”) products from the Company.
All of the Company’s flash memory system products require silicon wafers for the memory and controller components. The Company’s memory wafers are currently supplied almost entirely from Flash Ventures and the controller wafers are all manufactured by third-party subcontractors. The failure of any of these sources to deliver silicon wafers could have a material adverse effect on the Company’s business, financial condition and results of operations. Moreover, the employees of Toshiba Corporation (“Toshiba”) that produce Flash Ventures’ products are covered by collective bargaining agreements and any strike or other job action by those employees could interrupt the Company’s wafer supply from Toshiba’s Yokkaichi, Japan operations.
In addition, some key components are purchased from single source vendors for which alternative sources are currently not available. Shortages could occur in these essential materials due to an interruption of supply or increased demand in the industry. If the Company were unable to procure certain of such materials, it could reduce sales, which could have a material adverse effect upon its results of operations. The Company also relies on third-party subcontractors to assemble and test a portion of its products. The Company does not have long-term contracts with some of these subcontractors and cannot directly control product delivery schedules or manufacturing processes. This could lead to product shortages or quality assurance problems that could increase the manufacturing costs of the Company’s products and have material adverse effects on the Company’s operating results.
Concentration of Credit Risk. The Company’s concentration of credit risk consists principally of cash, cash equivalents, short and long-term marketable securities and trade receivables. The Company’s investment policy restricts investments to high-credit quality investments and limits the amounts invested with any one issuer. The Company sells to Commercial and Retail customers in the Americas; Europe, Middle East and Africa (“EMEA”); and Asia-Pacific, and performs ongoing credit evaluations of its customers’ financial condition, and generally requires no collateral. As of end of fiscal years 2013 and 2012, the Company’s top 10 customers or licensees accounted for approximately 64% of the Company’s net accounts receivable in each of these fiscal years. As of end of fiscal year 2013, Apple and Best Buy Co., Inc. accounted for 32% and 11% of the Company’s net accounts receivable, respectively. As of the end of fiscal year 2012, Apple accounted for 34% of the Company’s net accounts receivable.
Off-Balance Sheet Risk. The Company has off-balance sheet financial obligations. See Note 12, “Commitments, Contingencies and Guarantees.”
