Intel 2007 Annual Report Download - page 95

Table of Contents
INTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Concurrent with the formation of IMFT, we paid Micron $270 million for product designs that Micron developed as well as
certain other intellectual property. We own the rights to all product designs and have licensed the designs to Micron. Micron
paid Intel $40 million to license these initial product designs and will pay additional royalties on new product designs. We
recorded our net investment in this technology of $230 million as an identified intangible asset, which we included in the
intellectual property asset classification. The identified intangible asset is being amortized into cost of sales over its expected
five-year life. Costs that Intel and Micron have incurred for product and process development related to IMFT are generally
split evenly between Intel and Micron and are classified in R&D.
Subject to certain conditions, we agreed to contribute up to approximately $1.4 billion for IMFT and up to approximately
$1.7 billion for IMFS in the three years following the initial capital contributions. Of these amounts, as of December 29, 2007,
our remaining commitment was approximately $260 million for IMFT and approximately $1.5 billion for IMFS. Additionally,
our portion of IMFT costs, primarily related to product purchases and start-up, was approximately $790 million during 2007
(approximately $300 million during 2006). The amount due to IMFT for product purchases and services provided was
approximately $130 million as of December 29, 2007 and was not significant as of December 30, 2006.
IMFT and IMFS are each governed by a Board of Managers, with Micron and Intel initially appointing an equal number of
managers to each of the boards. The number of managers appointed by each party adjusts depending on the parties’ ownership
interests. These ventures will operate until 2016, but are subject to prior termination under certain terms and conditions.
These joint ventures are variable interest entities as defined by FASB Interpretation No. 46(R), “Consolidation of Variable
Interest Entities” (FIN 46(R)), because all positive and negative variances in cost structure will be passed on to Micron and
Intel through our purchase agreements. However, we have determined that we are not the primary beneficiary of these joint
ventures, and as such, we account for our interests using the equity method of accounting and do not consolidate these joint
ventures. Micron and Intel are also considered related parties under the provisions of FIN 46(R).
We have entered into a long-term agreement with Apple, Inc. to supply a portion of the NAND flash memory output that we
will purchase from IMFT through December 31, 2010. In January 2006, Apple pre-paid Intel a refundable $250 million that
will be applied to Apple’s purchases of NAND flash memory beginning in 2008.
Note 20: Commitments
A portion of our capital equipment and certain facilities are under operating leases that expire at various dates through 2021.
Additionally, portions of our land are under leases that expire at various dates through 2062. Rental expense was $154 million
in 2007 ($160 million in 2006 and $150 million in 2005).
Minimum rental commitments under all non-cancelable leases with an initial term in excess of one year are payable as follows
(in millions):
86
Year Payable
2008
$
95
2009
73
2010
44
2011
30
2012
26
2013 and thereafter
52
Total
$
320