Note 7. Investments in Privately-Held Raw Material 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. These companies form part of our overall supply chain strategy.

As of June 30, 2026, the investments are summarized below (in thousands):

* 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.

** As of June 30, 2026, 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.

Although we have representation on the board of directors of each of the privately held raw material 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, ordinary course of business capital expenditures and sales of finished product, are made by local management with regular guidance and input from us.

For AXT’s minority investment entities that are not consolidated, the investment balances are included in “Other assets” in our condensed consolidated balance sheets and totaled $14.1 million and $15.0 million as of June 30, 2026 and December 31, 2025, respectively. As of June 30, 2026, our ownership interests in ChaoYang KaiMei, Beijing JiYa Semiconductor Material Co., Ltd. ("JiYa"), and Xiaoyi XingAn Gallium Co., Ltd (“Xiaoyi XingAn”) were 40%, 39%, and 25%, respectively. These minority investment entities are not considered variable interest entities because:

In April 2025, we received a $0.9 million dividend from JiYa. In May 2026, we received a dividend of $1.5 million from Xiaoyi XingAn and $0.5 million from JiYa. We have no current intentions to distribute to our investors earnings under our corporate structure. All of these distributions were paid to the PRC companies and the minority shareholders.

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 six months ended June 30, 2026 and 2025:

Our portion of the income and losses, including impairment charges, from these minority investment entities that are not consolidated and are accounted for under the equity method was income of $0.4 million and a loss of $0.2 million, respectively, for the three months ended June 30, 2026 and 2025. Our portion of the income and losses, including impairment charges, from these minority investment entities that are not consolidated and are accounted for under the equity method was income of $0.8 million and $0.2 million, respectively, for the six months ended June 30, 2026 and 2025.