What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2022-02-25 compared with 2021-02-26 · 34 added, 36 removed, 182 unchanged (28% of the section changed)

19 unchanged sentences

Our failure to meet any of these requirements will have a material adverse effect on our operating results and profitability.

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.

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.

In addition, we compete against third party parts suppliers for the sale of parts and consumables that are

not protected by patents or otherwise proprietary.

To the extent our customers purchase parts and services from other vendors or provide their own system maintenance labor, our revenue and profitability will be less.

If we fail to compete successfully in the highly competitive semiconductor capital equipment industry, our sales and profitability will decline.

The ion implant segment is highly competitive and includes one company with substantially greater financial, engineering, manufacturing, marketing and customer service and support resources that may better position it to compete successfully, as well as several smaller companies that could provide innovative systems with technology that may have performance advantages.

We expect our competitors to continue to improve the design and performance of their existing products and processes and to introduce new products and processes with improved price and performance characteristics.

If we are unable to improve or introduce competing products when demanded by the markets, our business will be harmed.

Finally, if we must lower prices to remain competitive without commensurate cost of goods savings, our gross margin and profitability will be adversely affected.

We are dependent on sales to a limited number of large customers;

the loss of a significant customer or any reduction in orders from them could materially affect our sales.

Historically, we have sold a significant portion of our products and services to a limited number of semiconductor chip manufacturers.

In 2020, our top ten customers accounted for 74.0% of our net sales, in comparison to 74.1% and 76.9% in 2019 and 2018, respectively.

None of our customers have entered into a long-term agreement requiring it to purchase our products.

Although the composition of the group comprising our largest customers has varied from year to year, the loss of a significant customer or any reduction or delays in orders from any significant customer will adversely affect us.

Consolidation of semiconductor chip manufacturers may result in the loss of a customer.

Axcelis is subject to the risks of operating internationally:

5 unchanged sentences

subsidiaries, accounted for 92.6% of total revenue in 2021.

Asia dominates our international sales.

Customers based in Asia dominates our international sales.

Ion implanter system shipments to customers in Asia represented 83.9% of total system revenue in 2021.

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

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.

In particular, we expect that sales to Chinese customers (both global 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.

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

export controls Entity List.

1 unchanged sentence

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.

This situation temporarily delayed shipments and resulted in the risk that this customer (and potentially other Chinese customers) would 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.

9 unchanged sentences

● extended payment terms beyond those customarily offered in the United States;

● difficulties in managing suppliers, service providers or representatives outside the United States;

● difficulties in managing suppliers, service providers or representatives outside of the United States;

● difficulties in staffing and managing foreign subsidiary operations;

12 unchanged sentences

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.

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

In addition, we compete against third-party parts suppliers for the sale of parts and consumables that are not protected by patents or otherwise proprietary.

To the extent our customers purchase parts and services from other vendors or provide their own system maintenance labor, our revenue and profitability will be reduced.

If we fail to compete successfully in the highly competitive semiconductor capital equipment industry, our sales and profitability will decline.

The ion implant segment is highly competitive and includes one company with substantially greater financial, engineering, manufacturing, marketing and customer service and support resources that may better position it to compete successfully than we can, as well as several smaller companies that could provide innovative systems with technology that may have performance advantages.

If we are unable to improve or introduce competing products when demanded by the markets, our business will be harmed.

Finally, if we must lower prices to remain competitive without commensurate cost of goods savings, our gross margin and profitability will be adversely affected.

We are dependent on sales to a limited number of large customers;

the loss of a significant customer or any reduction in orders from them could materially affect our sales.

Historically, we have sold a significant portion of our products and services to a limited number of semiconductor chip manufacturers.

In 2021, our top ten customers accounted for 69.5% of our net sales, in comparison to 74.0% and 74.1% in 2020 and 2019, respectively.

None of our customers have entered into a long-term agreement requiring it to purchase our products.

Consolidation of semiconductor chip manufacturers may result in the loss of a customer.

Our international operations involve currency risk.

19 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.

21 unchanged sentences

Failure to meet forecasted financial performance may have an adverse effect on the price of our common stock.

The semiconductor industry is cyclical and we expect that demand for our products will increase and decrease, making it difficult to manage the business and potentially causing harm to our sales and profitability.

The semiconductor equipment industry is cyclical and we expect that demand for our products will increase and decrease, making it difficult to manage the business and potentially causing harm to our sales and profitability.

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.

48 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.

We have one primary manufacturing facility located in Massachusetts.

Our operations could be subject to disruption for a variety of reasons, including, but not limited to natural disasters, work stoppages, operational facility constraints and terrorism.

If operations were to be disrupted at Axcelis’ manufacturing facilities, it would have a negative impact on our business.

Our primary manufacturing facility is located in Massachusetts, with a smaller facility located in South Korea.

Our operations could be subject to disruption for a variety of reasons, including, but not limited to severe weather events, natural disasters, work stoppages, operational facility constraints and terrorism.

Such disruption could cause delays in shipments of products to our customers and could result in cancellation of orders or loss of customers, which could seriously harm our business.

2 unchanged sentences

We routinely incur significant costs to purchase inventory to meet expected system sales, to develop and introduce new products, and to place evaluation systems at new customer sites.

Our Board has also authorized management to repurchase shares of our common stock under a stock repurchase program.

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

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.

Any inability to obtain funding on favorable terms, on the timeline we anticipate, or at all, may cause us to curtail our operations significantly, reduce planned capital expenditures and research and development, or obtain funds through arrangements that management does not currently anticipate, including disposing of our assets and relinquishing rights to certain technologies, the occurrence of any of which may significantly impair our ability to remain competitive, and materially and adversely affect our results of operations and financial condition.

Any inability to obtain financing on favorable terms, on the timeline we anticipate, or at all, may cause us to curtail our operations significantly, reduce planned capital expenditures and research and development, or obtain funds through arrangements that management does not currently anticipate, including disposing of our assets and relinquishing rights to certain technologies, the occurrence of any of which may significantly impair our ability to remain competitive, and materially and adversely affect our results of operations and financial condition.

The market price of our common stock may be volatile, which could result in substantial losses for investors.

10 unchanged sentences

● 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.

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

Unresolved Staff Comments.

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