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Investments in Privately-Held Raw Material Companies (Tables)

9 Months Ended

Sep. 30, 2023

Investments in Privately-Held Raw Material Companies

Summary of investments


		Investment Balance as of
		September 30,			December 31,			Accounting		Ownership	*
Company		2023			2022			Method		Percentage
Nanjing JinMei Gallium Co., Ltd.		$	592		$	592		Consolidated		** 85.5	%
ChaoYang JinMei Gallium Co., Ltd.			1,820			1,820		Consolidated		** 85.5	%
Beijing BoYu Semiconductor Vessel Craftwork Technology Co., Ltd.			1,346			1,346		Consolidated		** 85.5	%
ChaoYang ShuoMei High Purity Semiconductor Materials Co., Ltd.			3,122			1,000		Consolidated		**** 75.0	%
ChaoYang XinMei High Purity Semiconductor Materials Co., Ltd.			7,331			7,331		Consolidated		*** 58.5	%
		$	14,211		$	12,089

Donghai County Dongfang High Purity Electronic Materials Co., Ltd.		$	1,716		$	1,887		Equity		** 46	%
Beijing JiYa Semiconductor Material Co., Ltd.			4,004			6,381		Equity		39	%
Xiaoyi XingAn Gallium Co., Ltd.			4,904			5,094		Equity		** 25	%
ChaoYang KaiMei Quartz Co., Ltd.			2,577			827		Equity		***** 40	%
Emeishan Jia Mei High Purity Metals Co., Ltd.			N/A			418		Equity		****** 25	%
		$	13,201		$	14,607

Emeishan Jia Mei High Purity Metals Co., Ltd.			551			N/A		Fair value		****** 10	%
		$	551		$	—

* These percentages reflect the ownership currently in effect upon the completion of the reorganization in China and the ownership in effect upon the completion of the new capital funding by private equity investors in January 2021.

** In preparation for Tongmei’s application for a listing of shares in an IPO on the STAR Market, in late December 2020 we reorganized our entity structures in China. JinMei and BoYu and its subsidiaries, previously organized under AXT, Inc., were assigned to Tongmei and effectively merged with Tongmei although they retained their own respective legal entity status and are wholly owned subsidiaries of Tongmei. The 33% minority interest stakeholders of BoYu converted their ownership to a 7.59% minority interest in Tongmei. The 8.5% minority interest stakeholders, employees of JinMei, converted their ownership to a 0.38% minority interest in Tongmei. Further, a number of employees, key managers and contributors, purchased a 0.4% minority interest in Tongmei. In 2020, the Investors transferred approximately $48.1 million of new capital to Tongmei. An additional investment of approximately $1.5 million of new capital was funded in early January 2021. Under China regulations these investments must be formally approved by the appropriate government agency and are not deemed to be dilutive until such approval is granted. The government approved the approximately $49 million investment in its entirety on January 25, 2021 at which time the Investors owned a redeemable noncontrolling interest in Tongmei of 7.28%. As of September 30, 2023, Tongmei’s noncontrolling interests and redeemable noncontrolling interests totaled approximately 14.5%. AXT remains the controlling stakeholder of Tongmei and holds a majority of the Board of Director positions of Tongmei.

*** In February 2021, Tongmei signed a joint venture agreement with certain investors to fund ChaoYang XinMei.

**** In April 2022, ChaoYang JinMei signed a joint venture agreement with certain investor to fund a new company, ChaoYang ShuoMei.

***** In April 2022, Tongmei signed a joint venture agreement with certain investors to fund a new company, ChaoYang KaiMei.

****** In May 2023, we sold 15% of our equity investments in Jia Mei to a third party. We now own 10% of Jia Mei and account for it under the fair value method.

Schedule of gain (loss) on sale and re measurement of equity method investments


		Amount
		(in thousands)
Fair value of the consideration received		$	779
Foreign income tax withholding			48
Carrying value of 15% of Emeishan Jia Mei High Purity Metals Co., Ltd.			(252)
Gain recognized on sale of 15% of Emeishan Jia Mei High Purity Metals Co., Ltd.		$	575


		Amount
		(in thousands)
Fair value of the retained investment in Emeishan Jia Mei High Purity Metals Co., Ltd.		$	551
Carrying value of retained noncontrolling investment (10%)			(168)
Gain on retained noncontrolling investment due to remeasurement (10%)		$	383

Summarized income information

AXT’s minority investment entities are not consolidated and are accounted for under the equity method. The equity investment entities had the following summarized statements of operations information (in thousands) for the three and nine months ended September 30, 2023 and 2022:



		Three Months Ended						Nine Months Ended
		September 30,						September 30,
		2023			2022			2023			2022
Net revenue		$	8,834		$	13,658		$	24,486		$	38,491
Gross profit		$	2,620		$	8,687		$	8,174		$	23,412
Operating income		$	1,962		$	8,039		$	7,134		$	21,308
Net income		$	1,449		$	6,088		$	6,307		$	17,039