Annual report pursuant to Section 13 and 15(d)

Commitments and Guarantees

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Commitments and Guarantees
 12 Months Ended
Dec. 25, 2021
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Guarantees Commitments and Guarantees
Operating Leases
The Company has entered into operating and finance leases for its corporate offices, data centers, research and development facilities and certain equipment. The leases expire at various dates through 2031, some of which include options to extend the lease for up to ten years.
For 2021, 2020 and 2019, the Company recorded $71 million, $59 million and $56 million, respectively, of operating lease expense, including short-term lease expense. For 2021 and 2020, the Company recorded $26 million and $27 million, respectively, of variable lease expense, which primarily included operating expenses and property taxes associated with the usage of facilities under the operating leases. For 2021 and 2020, cash paid for operating leases included in operating cash flows was $67 million and $55 million, respectively. The Company’s finance and short-term leases are immaterial to the Company’s consolidated financial statements.
Supplemental information related to leases is as follows:
December 25,
2021
Weighted-average remaining lease term in years – operating leases 6.10
Weighted-average discount rate – operating leases 3.70  %
Future minimum lease payments under non-cancellable operating lease liabilities as of December 25, 2021 are as follows:
Year (In millions)
2022 $ 89 
2023 85 
2024 78 
2025 68 
2026 59 
2027 and thereafter 92 
        Total minimum lease payments 471 
Less: interest (52)
        Present value of net minimum lease payments 419 
Less: current portion (71)
        Total long-term operating lease liabilities $ 348 
Certain other operating leases contain provisions for escalating lease payments subject to changes in the consumer price index.
Commitments
The Company’s purchase commitments primarily include the Company’s obligations to purchase wafers and substrates from third parties and future payments related to certain software and technology licenses and IP licenses.
Total future unconditional purchase commitments as of December 25, 2021 were as follows:
 Year (In millions)
2022 $ 5,765 
2023 1,658 
2024 755 
2025 329 
2026 176 
2027 and thereafter 383 
 Total unconditional purchase commitments $ 9,066 
Warranties and Indemnities
The Company generally warrants that its products sold to its customers will conform to its approved specifications and be free from defects in material and workmanship under normal use and conditions for one year. The Company may also offer one to three-year limited warranties based on product type and negotiated warranty terms with certain customers. The Company accrues warranty costs to Cost of sales at the time of sale of warranted products.
Changes in the Company’s estimated liability for product warranty during the years ended December 25, 2021 and December 26, 2020 are as follows:
December 25,
2021		 December 26,
2020
  (In millions)
Beginning balance $ 37  $ 15 
Provisions during the period 106  82 
Settlements during the period (92) (60)
Ending balance $ 51  $ 37 
In addition to product warranties, the Company from time to time in its normal course of business indemnifies other parties with whom it enters into contractual relationships, including customers, lessors and parties to other transactions with the Company, with respect to certain matters. In these limited matters, the Company has agreed to hold certain third parties harmless against specific types of claims or losses such as those arising from a breach of representations or covenants, third-party claims that the Company’s products when used for their intended purpose(s) and under specific conditions infringe the intellectual property rights of a third party, or other specified claims made against the indemnified party. It is not possible to determine the maximum potential amount of liability under these indemnification obligations due to the unique facts and circumstances that are likely to be involved in each particular claim and indemnification provision. Historically, payments made by the Company under these obligations have not been material. In addition, the impact from changes in estimates for pre-existing warranties has been immaterial.