Item 7A. Quantitative and Qualitative Disclosures About Market Risk
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Interest Rate Risk. Our exposure to market risk for changes in interest rates relates primarily to our investment portfolio and long-term debt. We usually invest our cash in investments with short maturities or with frequent interest reset terms. Accordingly, our interest income fluctuates with short-term market conditions. As of December 30, 2023, our investment portfolio consisted of fixed income instruments, time deposits and commercial paper. Our primary aim with our investment portfolio is to invest available cash while preserving principal and meeting liquidity needs. In accordance with our investment policy, we place investments with high credit quality issuers and limit the amount of credit exposure to any one issuer based upon the issuer's credit rating. These securities are subject to interest rate risk and will decrease in value if market interest rates increase. A hypothetical 50 basis-point (half percentage point) increase or decrease in interest rates compared to rates at December 30, 2023 would have affected the fair value of our cash equivalent and investment portfolio by approximately $7 million.
As of December 30, 2023, all of our outstanding long-term debt had fixed interest rates. Consequently, our exposure to market risk for changes in interest rates on reported interest expense and corresponding cash flows is minimal.
We will continue to monitor our exposure to interest rate risk.
Default Risk. We mitigate default risk in our investment portfolio by investing in only high credit quality securities and by constantly positioning our portfolio to respond to a significant reduction in a credit rating of any investment issuer or guarantor. Our portfolio includes investments in marketable debt securities with active secondary or resale markets to ensure portfolio liquidity. We are averse to principal loss and strive to preserve our invested funds by limiting default risk and market risk.
We actively monitor market conditions and developments specific to the securities and security classes in which we invest. We believe that we take a conservative approach to investing our funds in that we invest only in highly-rated debt securities with relatively short maturities and do not invest in securities which we believe involve a higher degree of risk. As of December 30, 2023, all of our investments in debt securities were A-rated by at least one of the rating agencies. While we believe we take prudent measures to mitigate investment-related risks, such risks cannot be fully eliminated as there are circumstances outside of our control.
Foreign Exchange Risk. As a result of our foreign operations, we incur costs and we carry assets and liabilities that are denominated in foreign currencies, while sales of products are primarily denominated in U.S. dollars.
We maintain a foreign currency hedging strategy which uses derivative financial instruments to mitigate the risks associated with changes in foreign currency exchange rates. This strategy takes into consideration all of our exposures. We do not use derivative financial instruments for trading or speculative purposes.
The following table provides information about our foreign currency forward contracts as of December 30, 2023 and December 31, 2022. All of our foreign currency forward contracts mature within 24 months.
December 30, 2023 December 31, 2022
Notional
Amount Average
Contract
Rate Estimated
Fair Value
Gain (Loss) Notional
Amount Average
Contract
Rate Estimated
Fair Value
Gain (Loss)
(In millions except contract rates)
Foreign currency forward contracts:
Chinese Renminbi $ 655 6.7593 $ (10) $ 599 6.7848 $ (3)
Canadian Dollar 645 1.3479 11 607 1.3137 (16)
Indian Rupee 514 84.6922 1 516 82.1493 (9)
Taiwan Dollar 171 29.3064 (3) 207 29.1231 (4)
Singapore Dollar 495 1.3314 6 259 1.3600 4
Euro 303 0.9017 1 142 0.9334 1
Pound Sterling 167 0.8057 2 88 0.8204 (1)
Japanese Yen — — — 2 133.7593 —
Australian Dollar — — — 1 1.4689 —
Total $ 2,950 $ 8 $ 2,421 $ (28)
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