Note 6. Investments in Privately-held Companies

We have made strategic investments in private companies located in China in order to gain access at a competitive cost to raw materials that are critical to our substrate business. Our consolidated subsidiaries have also made investments in private companies. These companies form part of our overall supply chain.

Our direct investments are summarized below (in thousands):


	Investment Balance as of
	December 31,		December 31,		Accounting	Ownership
Company	2015		2014		Method	Percentage
Beijing JiYa Semiconductor Material Co., Ltd.	$	3,331	$	3,331	Consolidated	46	%
Nanjing Jin Mei Gallium Co., Ltd.		592		592	Consolidated	83	%
Beijing BoYu Semiconductor Vessel Craftwork Technology Co., Ltd.		1,346		1,346	Consolidated	70	%
	$	5,269	$	5,269

Donghai County Dongfang High Purity Electronic Materials Co., Ltd.	$	1,524	$	1,723	Equity	46	%
Xilingol Tongli Germanium Co. Ltd.		5,343		5,351	Equity	25	%
Emeishan Jia Mei High Purity Metals Co., Ltd.		1,081		1,021	Equity	25	%
	$	7,948	$	8,095

Our ownership of Beijing JiYa Semiconductor Material Co., Ltd. (“JiYa”) is 46%. We continue to consolidate JiYa as we are the founding and the largest shareholder, we appoint the general manager and controller and have the ability to exercise control in substance over the long-term strategic decisions made. Our Chief Executive Officer is chairman of the JiYa board and we have appointed one other representative, Davis Zhang, to serve on the board. Mr. Zhang was an executive officer of AXT for 27 years. Further, our Chief Financial Officer, Gary Fischer, is on the board of supervisors of JiYa.

Our ownership of Nanjing Jin Mei Gallium Co., Ltd. (“Jin Mei”) is 83%. We continue to consolidate Jin Mei as we have a controlling financial interest and have majority control of the board. Our Chief Executive Officer is chairman of the Jin Mei board and we have appointed two other representatives to serve on the board.

Our ownership of Beijing BoYu Semiconductor Vessel Craftwork Technology Co., Ltd (BoYu) is 70%. We continue to consolidate BoYu as we have a controlling financial interest and have majority control of the board. Our Chief Executive Officer is chairman of the BoYu board and we have appointed two other representatives to serve on the board.

Although we have representation on the boards of directors of each of these companies, the daily operations of each of these companies are managed by local management and not by us. Decisions concerning their respective short- term strategy and operations, any capacity expansion and annual capital expenditures, and decisions concerning sales of finished product, are made by local management with regular guidance and input from us.

During 2015, 2014 and 2013, the three consolidated joint ventures generated $0.8 million, $3.0 million and $3.5 million of income, respectively, of which a loss of $0.3 million, a gain of $0.7 million and a gain of $1.1 million, respectively were allocated to noncontrolling interests, resulting in $1.2 million, $2.3 million and $2.4 million of income, respectively, to our net income.

For AXT’s three minority investment entities that are not consolidated, the investment balances are included in “other assets” in our consolidated balance sheets and totaled $7.9 million and $8.1 million as of December 31, 2015 and 2014, respectively. We own 46% of the ownership interests in one of these companies and 25% in each of the other two companies. These three companies are not considered variable interest entities because:

all three companies have sustainable businesses of their own;

our voting power is proportionate to our ownership interests;

we only recognize our respective share of the losses and/or residual returns generated by the companies if they occur; and

we do not have controlling financial interest in, do not maintain operational or management control of, do not control the board of directors of, and are not required to provide additional investment or financial support to any of these companies.

These three equity investment entities generated for AXT an equity loss of $43,000 for the year ended December 31, 2015 $569,000 and $270,000 for the years ended December 31, 2014, and 2013, respectively, which was recorded as “equity in earnings of unconsolidated joint ventures” in the consolidated statements of operations.

Net income recorded from all of the consolidated joint ventures and these three equity investment entities was $1.1 million, $2.9 million and $2.6 million for the years ended December 31, 2015, 2014, and 2013, respectively.

We also maintain four minority investments indirectly in privately-held companies through our consolidated joint ventures. Our subsidiary, Jiya, has three investments. Our subsidiary, Jinmei, has one investment. These minority investments are accounted for under the equity method in the books of our consolidated joint ventures. As of December 31, 2015 and 2014, our consolidated joint ventures included these minority investments in “other assets” in the consolidated balance sheets with a carrying value of $4.1 million and $4.0 million, respectively.

AXT’s three direct minority investment entities and the three minority investments of Jiya and the one minority investment of Jinmei are not consolidated and are accounted for under the equity method and had the following summarized income information (in thousands) for the years ended December 31, 2015, 2014 and 2013, respectively:


							Our share for the
		Year Ended					Year Ended
		December 31,					December 31,
	2015		2014		2013		2015		2014		2013
Net revenue	$	36,259	$	47,824	$	41,257	$	9,112	$	11,887	$	10,240
Gross profit		8,327		21,436		13,836		1,954		5,340		3,328
Operating income		2,494		9,046		8,174		494		2,059		1,820
Net income		2,371		6,765		6,315		462		1,528		1,377

These seven minority investment entities that are not consolidated, but rather are accounted for under the equity method and had the following summarized balance sheet information (in thousands) for the years ended December 31, 2015 and 2014, respectively:


	As of December 31,
	2015		2014
Current assets	$	32,097	$	31,482
Noncurrent assets		35,917		39,275
Current liabilities		18,185		19,923
Noncurrent liabilities		571		169

Our portion of the entity earnings from these seven minority investment entities that are not consolidated and are accounted for under the equity method were $462,000, $1.5 million and $1.4 million for the years ended December 31, 2015, 2014 and 2013, respectively. Dividends received from these minority investment entities were $305,000, $327,000 and $396,000 for the years ended December 31, 2015, 2014 and 2013, respectively. Undistributed retained earnings relating to our investments in all these minority investment entities were $6.6 million and $6.5 million as of December 31, 2015 and 2014, respectively.