What changed in this filing

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Item 1A. Risk Factors

2021-02-26 compared with 2020-03-02 · 40 added, 39 removed, 178 unchanged (31% of the section changed)

7 unchanged sentences

When the rate of construction or expansion of fabrication facilities declines, demand for our systems will decline, reducing our revenue.

In addition, all or a portion of the demand for increased capacity may be satisfied by a semiconductor chip manufacturer’s ability to reconfigure and re-use equipment they already own.

Revenue decline also hurts our profitability because our established cost structure and our continued investments in engineering, research and development and marketing necessary to develop new products and to maintain extensive customer service and support capabilities limit our ability to reduce expenses in proportion to declining sales.

10 unchanged sentences

A significant portion of our revenue depends on customers electing to buy aftermarket products and services from Axcelis.

Historically, a significant portion of our product revenue and all of our service revenue relates to our sale of “aftermarket”

products and services, which include parts, consumables, upgrades, service contracts, and time and materials billings.

Historically, a significant portion of our product revenue and all of our service revenue relates to our sale of “aftermarket” products and services, which include parts, consumables, upgrades, service contracts, and time and materials billings.

Some of our customers purchase fewer aftermarket products and services, often training their own staff to maintain and service semiconductor capital equipment rather than relying on the equipment manufacturer for these services.

22 unchanged sentences

Asia dominates our international sales.

Ion implanter system shipments to Asian customers represented 87.7% of total system shipment dollars in 2019.

Ion implanter system shipments to customers in Asia represented 90.4% of total system revenue in 2020.

We anticipate that international sales will continue to account for a significant portion of our revenue.

In particular, we expect that sales to China will continue to increase in coming years, creating both risk and opportunity.

China represents a higher risk than some other international locations because of trade tensions with the United States, and other challenges reflecting China’s stage of development, including public health concerns and rapid growth.

We also source a substantial portion of our materials from outside of the United States.

In particular, we expect that sales to Chinese customers (both global chip manufacturers and domestic Chinese chip manufacturers) will continue to increase in coming years, creating both risk and opportunity.

Sales to Chinese customers represent a higher risk than some other international locations because of trade tensions between the United States government and the Chinese government, and other challenges reflecting China’s stage of development, including public health concerns and rapid growth.

In 2020, the United States Commerce Department placed one of our major Chinese customers on the U.S.

export controls Entity List.

As a result, we are currently required to obtain export controls licenses for all shipments from the U.S.

to this customer.

This situation is currently delaying shipments and risking a decision by this customer (and potentially other Chinese customers) to change suppliers to non-US vendors, such as Advanced Ion Beam Technology, Inc., Nissin Ion Equipment Co., Ltd.

and Sumitomo Heavy Industries Ion Technology Co., Ltd.

In addition, a Chinese entity, known as CETC Electronics Equipment Group Co., Ltd., is developing ion implanters for the Chinese domestic market.

The loss of a significant customer or any reduction or delays in our ability to ship to any significant customer will adversely affect us.

We source a substantial portion of our materials from outside of the United States.

Because of our dependence upon international sales and our global supply chain, our results and prospects may be adversely affected by a number of factors, including:

unexpected changes in laws or regulations resulting in more burdensome governmental controls, tariffs, restrictions, embargoes or export license requirements;

● changes in laws or regulations resulting in more burdensome governmental controls, tariffs, restrictions, embargoes or export license requirements;

● volatility in currency exchange rates;

● political and economic instability;

global health emergency (for example in early 2020, a novel coronavirus, COVID-19, was diagnosed in China and has spread globally.

Axcelis has both customers and suppliers in regions currently affected by the virus.

We have put policies in place to safeguard our employees while continuing to serve our customers.

The extent of the outbreak and its impact on our operations is uncertain.

This is a rapidly changing situation which could materially impact our business and results of operations.);

● global health emergencies, such as the COVID-19 pandemic, which have the potential to disrupt our manufacturing operations and those of our supply chain, as well as cause our customers to delay or cancel shipments;

● difficulties in accounts receivable collections;

13 unchanged sentences

This could delay our ability to manufacture or to ship our systems on a timely basis, causing us to lose sales, incur additional costs, delay new product introductions and suffer harm to our reputation.

Moreover, if actual demand for Axcelis’

products is different than expected, Axcelis may purchase more or fewer parts than necessary or incur costs for canceling, postponing or expediting delivery of parts.

Moreover, if actual demand for Axcelis’ products is different than expected, Axcelis may purchase more or fewer parts than necessary or incur costs for canceling, postponing or expediting delivery of parts.

If Axcelis purchases inventory in anticipation of customer demand that does not materialize, or if customers reduce or delay orders, Axcelis may incur excess inventory charges.

2 unchanged sentences

dollars, thereby reducing the impact of fluctuations in foreign exchange rates on our results.

We also pay almost all non-US vendors providing materials, components and subassemblies to our U.S.

We also pay almost all non-U.S.

vendors providing materials, components and subassemblies to our U.S.

factory in U.S.

5 unchanged sentences

Similarly, the translation of long-term asset and liability values to U.S.

dollars are recorded in stockholders’

equity as an element of accumulated other comprehensive income (loss).

dollars are recorded in stockholders’ equity as an element of accumulated other comprehensive income (loss).

Accordingly, fluctuations in exchange rates can impact reported revenues, expense, and profitability and asset values in our Consolidated Financial Statements.

6 unchanged sentences

Competition for such personnel is intense, particularly in the Boston metropolitan area, as well as in other locations around the world.

If we are unable to retain our existing key personnel, or attract and retain additional qualified personnel, we may from time to time experience insufficient levels of staffing to fully develop, manufacture and market our products and perform services for

our customers.

If we are unable to

retain our existing key personnel, or attract and retain additional qualified personnel, we may from time to time experience insufficient levels of staffing to fully develop, manufacture and market our products and perform services for our customers.

As a result, our growth could be limited or we could fail to meet our delivery commitments or experience deterioration in service levels or decreased customer satisfaction, all of which could adversely affect our financial results.

13 unchanged sentences

Any of these assumptions can prove erroneous and the level of revenue recognizable in a particular quarter may vary from the forecast.

Our lengthy sales cycle, coupled with customers’

competing capital budget considerations, make revenue difficult to predict.

Our lengthy sales cycle, coupled with customers’ competing capital budget considerations, make revenue difficult to predict.

In addition, our backlog at the beginning of a quarter typically does not include all orders required to achieve our sales objectives for that quarter and is not a reliable indicator of our future sales.

7 unchanged sentences

The semiconductor industry is cyclical, experiencing upturns when the demand for our products is high and downturns when our customers are not investing in new or expanded fabrication facilities.

From time to time, inventory buildups in the semiconductor industry produce an oversupply of semiconductors.

From time to time, inventory buildups in the semiconductor device industry produce an oversupply of semiconductors.

This can cause a reduced demand for capital equipment such as our products, negatively impacting our sales and level of profitability.

2 unchanged sentences

Significant decreases in revenue can therefore have a disproportionate effect on profitability.

In addition, reduced demand for our products and services may require Axcelis to implement cost reduction efforts, including restructuring activities, which may adversely affect Axcelis’

ability to capitalize on opportunities that arise in the future.

In addition, reduced demand for our products and services may require Axcelis to implement cost reduction efforts, including restructuring activities, which may adversely affect Axcelis’ ability to capitalize on opportunities that arise in the future.

Axcelis is exposed to risks related to cybersecurity threats and incidents.

2 unchanged sentences

As reported in the 2020 Verizon Data Breach Investigation Report, cyber-attacks in the manufacturing industries are largely financially motivated, although business espionage is the objective in a strong majority of the incidents.

Axcelis has been and expects to be subject to cybersecurity threats and incidents, including employee error or misuse;

Axcelis has been and expects to continue to be subject to cybersecurity threats and incidents, including employee error or misuse;

individual attempts to gain unauthorized access to information systems;

2 unchanged sentences

However, depending on their nature and scope, cybersecurity incidents could result in business disruption;

the misappropriation, corruption or loss of confidential information and critical data (Axcelis’

and that of third parties);

the misappropriation, corruption or loss of confidential information and critical data (Axcelis’ and that of third parties);

reputational damage;

1 unchanged sentence

litigation with third parties;

diminution in the value of Axcelis’

investment in research, development and engineering;

diminution in the value of Axcelis’ investment in research, development and engineering;

data privacy issues;

14 unchanged sentences

Axcelis could be required to alter its manufacturing and operations and incur substantial expense in order to comply with environmental, health and safety regulations.

Any failure to comply with these regulations could subject Axcelis to significant costs and liabilities that could adversely affect Axcelis’

business, financial condition and results of operations.

Any failure to comply with these regulations could subject Axcelis to significant costs and liabilities that could adversely affect Axcelis’ business, financial condition and results of operations.

Our financial condition and results of operations could be adversely affected by global pandemics.

Global pandemics, such as COVID-19, cause disruptions and restrictions on our operations and ability to travel, and similar disruptions and restrictions impacting our suppliers or customers could adversely affect our sales and operating results.

Axcelis’ products rely on an extensive global supply chain, and shortages of certain parts could impact our ability to meet customers’ shipment expectations, negatively affecting our revenues.

Such pandemics may drive changes in the demand for certain of our customers’ products, resulting in their delay or cancelation of purchases from us.

The extent to which pandemics may impact our results will depend on future developments, which are highly uncertain and cannot be predicted, including the severity of COVID-19 and the duration of the current pandemic.

Our proprietary technology may be vulnerable to efforts by competitors to challenge or design around, potentially reducing our market share.

5 unchanged sentences

Our competitors may independently develop similar technology, duplicate features of our products or design around patents that may be issued to us.

As a result of these threats to our proprietary technology, we may have to resort to costly litigation to enforce or defend our intellectual property rights.

As a result of these threats to our

proprietary technology, we may have to resort to costly litigation to enforce or defend our intellectual property rights.

Finally, all patents expire after a period of time (in the U.S., patents expire 20 years from the date of filing of the patent application).

10 unchanged sentences

Any of these situations could have a material adverse effect on our business results.

If operations were disrupted at Axcelis’

primary manufacturing facility, it would have a negative impact on our business.

If operations were disrupted at Axcelis’ primary manufacturing facility, it would have a negative impact on our business.

We have one primary manufacturing facility located in Massachusetts.

6 unchanged sentences

There can be no assurance that we will realize a return on the capital expended.

Although our current cash levels are expected to be adequate for our foreseeable cash requirements, if our operating results falter, or our cash flow or capital resources prove inadequate, we may incur debt to fund these requirements.

Although our current cash levels and borrowing capacity are expected to be adequate for our foreseeable cash requirements, if our operating results falter, or our cash flow or capital resources prove inadequate, we may incur additional debt to fund these requirements.

Significant volatility or disruption in the global financial markets may result in us not being able to obtain additional financing on favorable terms, on the timeline we anticipate, or at all, and we may not be able to refinance, if necessary, any outstanding debt when due, all of which could have a material adverse effect on our financial condition.

6 unchanged sentences

● the issuance or repurchase of shares of our common stock;

changes in securities analysts’

estimates of our financial performance;

● changes in securities analysts’ estimates of our financial performance;

● changes in market valuations of similar companies;

2 unchanged sentences

● additions or departures of key personnel;

unfavorable new positions adopted by investor stewardship groups and proxy advisory firms regarding desired environmental, social and governance disclosures, policies, ranking systems and other initiatives.

● new positions adopted by investor stewardship groups and proxy advisory firms regarding desired environmental, social and governance disclosures, policies, ranking systems and other initiatives.

The trading price of our common stock in the past has had significant volatility, and we cannot accurately predict every potential risk that may materially and adversely affect our stock price.

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors