Variable Interest Entity |
9 Months Ended |
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Oct. 01, 2023 | |
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| Variable Interest Entity | Variable Interest Entity YBS Agreement
On July 26, 2023, the Company entered into a manufacturing agreement (the “Agreement”) with YBS International Berhad (“YBS”), a Malaysia-based investment holding company with segments including electronic manufacturing and assembly, high-precision engineering, precision machining and stamping, among others.
The Company and YBS agreed to share an initial investment of $100.0 million for the Gen2 Autoline 1 equipment and facilitation costs, as set out in the Agreement. Pursuant to the terms of the Agreement, the Company shall contribute 30% of the initial investment and YBS has the obligation to finance the remaining 70%. YBS assigned Orifast Solution Sdn Bhd (“OSSB”), a subsidiary, to manufacture lithium-ion batteries for Enovix under the terms and conditions of the Agreement. OSSB obtained $70.0 million of foreign currency term loan (the “Term Loan”) in financing for manufacturing operations under the Agreement from OCBC Bank (Malaysia) Berhad (“OCBC”). The Term Loan is expected to be repaid within six years with a 12 months grace period.
Pricing under the Agreement is set on a cost-plus basis and the Company is subject to a minimum commitment pursuant to the Agreement. At any time during the first seven years of the Agreement’s term, the Company reserves the right to purchase the Gen2 Autoline 1 by repaying the equipment cost, net of depreciation, as defined in the Agreement. The Company also bears the early repayment penalty fee imposed by OCBC, if any. The term of the Agreement is for ten years and automatically extends for an additional five years.
On September 13, 2023, the Company entered into a cash deposit agreement with OCBC to collateralize the Term Loan and the deposit will be placed in an interest-bearing account with an interest rate on par with the loan rate of the Term
Loan. The Company will deposit sufficient collateral for the Term Loan. As of October 1, 2023, there is no outstanding balance of the Term Loan and no deposit was made to OCBC for the collateralization.
Consolidated Variable Interest Entity The Company consolidates a VIE when it has the power to direct the activities that most significantly impact the VIE’s economic performance and the obligation to absorb losses or the right to receive benefits of the VIE, which could potentially be significant to the VIE, and, as a result, is considered the primary beneficiary of the VIE. As of October 1, 2023, the Company concluded that OSSB is considered a VIE and the Company is the primary beneficiary of OSSB based on certain assumptions and judgments made by the Company. As of October 1, 2023, the Company did not have an equity investment in OSSB. In accordance with GAAP, the Company consolidates 100% of OSSB financials. During the quarter ended and fiscal year-to-date ended October 1, 2023, OSSB had immaterial operating activities.
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