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Item 1A. Risk Factors

2023-03-02 compared with 2022-03-01 · 876 added, 629 removed, 620 unchanged (71% of the section changed)

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information contained in this report, including the consolidated financial statements and related notes set forth in “Item 8.

Financial Statements” of Part I above, before making an investment decision.

The occurrence of any of the following risks

or additional risks and uncertainties not presently known to us or that we currently believe to be immaterial could materially and adversely affect our business, financial condition, results of operations or cash flows.

In any such case, the

trading price of Class A common stock could decline, and you may lose all or part of your investment.

Financial Statements and Supplementary Data”, before making an investment decision.

The occurrence of any of the

following risks or additional risks and uncertainties not presently known to us or that we currently believe to be immaterial could materially and adversely affect our business, financial condition, results of operations or cash flows.

such case, the trading price of Class A common stock could decline, and you may lose all or part of your investment.

This report also contains forward-looking statements and estimates that involve risks and uncertainties.

Our actual results could differ

materially from those anticipated in the forward-looking statements as a result of specific factors, including the risks and uncertainties described below.

Our actual results

could differ materially from those anticipated in the forward-looking statements as a result of specific factors, including the risks and uncertainties described below.

Risk Factor Summary

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The risks are discussed more fully below and include, but are not limited to, the risks summarized below.

Risks Related to International Aspects of Our Business

if any PRC central government authority were to determine that existing PRC laws or regulations require that ACM Shanghai obtain the authority’s permission or approval to

continue the listing of ACM Research’s Class A common stock in the United States or if those existing PRC laws and regulations, or interpretations thereof, were to change to require such permission or approval, or if we

inadvertently conclude that permissions or approvals are not required, ACM Shanghai may be unable to obtain the required permission or approval or may only be able to obtain such permission or approval on terms and conditions

that impose material new restrictions and limitations on operation of ACM Shanghai, either of which could have a material adverse effect on our business, financial condition, results of operations, reputation and prospects and

on the trading price of ACM Research Class A common stock, which could decline in value or become worthless;

PRC central government authorities may intervene in, or influence, ACM Shanghai’s PRC-based operations at any time, and those authorities’ rules and regulations in the PRC can change quickly with little or no

advance notice;

the PRC central government may determine to exert additional control over offerings conducted overseas or foreign investment in PRC-based issuers, which could result in a material change in operations of ACM

Shanghai and cause significant declines in the value of ACM Research Class A common stock, or make them worthless;

if we are unable to comply with recent and proposed legislation and regulations regarding improved access to audit and other information and audit inspections of accounting firms, including registered public

accounting firms, such as our prior audit firm, operating in the PRC, we could be adversely affected;

it may be difficult for overseas regulators to conduct investigations or collect evidence within the PRC;

certain of our assets are located outside of the United States and certain of our directors and officers reside outside of the United States, which may make it difficult for you to enforce your rights based on

federal securities laws;

Risks Related to Our Business and Our Industry

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the cyclicality in the semiconductor industry that may lead to substantial variations in demand for our products;

industry manufacturers of integrated circuits, or chips, adopting our Space Alternated Phase Shift or SAPS, Timely Energized Bubble Oscillation or TEBO, Tahoe and Electro-Chemical Plating or ECP, and furnace

and other capital equipment, or tools;

our dependence on a small number of customers for a substantial portion of our revenue;

industry manufacturers of chips adopting our SAPS, TEBO, Tahoe, ECP, furnace and other technologies;

our SAPS, TEBO, Tahoe, ECP, furnace and other technologies not achieving widespread market acceptance;

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our ability to expand our customer base;

our dependence on a small number of customers for a substantial portion of our revenue;

our long and unpredictable sales cycle, including our incurrence of significant expenses long before we can recognize revenue from new products, if at all;

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Regulatory Risks

regulatory actions limiting our ability and the broader industry to import into the PRC items sourced from the U.S.

or otherwise subject to control under the U.S.

Export Administration Regulations (EAR),

thereby impacting our ability to sell our tools to customers in the PRC;

changes in government trade policies that could limit the demand for our tools and increase the cost of our tools;

regulatory action limiting our ability to sell our tools to Chinese customers;

changes in political and economic policies with respect to the People’s Republic of China or PRC;

changes in political and economic policies with respect to the PRC;

the PRC’s currency exchange control and government restrictions on investment repatriation may impact our ability to transfer funds outside of the PRC;

the inability of the U.S.

Public Company Accounting Oversight Board, or PCAOB, to inspect our auditor, as a registered public accounting firm operating in the PRC and the adoption of proposed legislation

related to companies operating in “restrictive markets”;

Risks Related to Our STAR Market Listing

Risks Related to Our STAR Listing

our ability to implement our strategy to expand our PRC operations;

our ability to achieve the results contemplated by our business strategy and our strategy for growth in the PRC and expectations related to the STAR Market listing;

our ability to achieve the results contemplated by our business strategy and our strategy for growth in the PRC and expectations related to the STAR Listing;

the effect of ACM Shanghai’s status as a publicly traded company that is controlled, but less than wholly owned, by ACM Research;

our ability to manage potentially inconsistent accounting and disclosure requirements of ACM Research and ACM Shanghai as a result of the STAR Market Listing;

our ability to manage potentially inconsistent accounting and disclosure requirements of ACM Research and ACM Shanghai as a result of the STAR Listing;

Risks Related to Our Intellectual Property and Data Security

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impacts on our global supply chain due to the COVID-19 pandemic, and our ability to successfully manage the demand, supply, and operational challenges associated with the global semiconductor shortage;

the impact of the COVID‑19 pandemic on our currently planned projects and investments in the PRC, including the STAR IPO;

the impact of the COVID-19 pandemic on our currently planned projects and investments in the PRC;

Risks Related to Ownership of Class A Common Stock

material weaknesses identified with respect to our internal controls over financial reporting;

the volatility in the market price of Class A common stock;

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the dual class structure of Class A common stock, which has the effect of concentrating voting control with our executive officers and directors;

the limited experience of our management team managing a public company, including a “large accelerated filer.”

the limited experience of our management team managing a public company.

Risks Related to International Aspects of Our Business

If any PRC central government authority were to determine that existing PRC laws or regulations require that ACM Shanghai obtain the authority’s permission

or approval to continue the listing of ACM Research’s Class A common stock in the United States or if those existing PRC laws and regulations, or interpretations thereof, were to change to require such permission or approval, or if we

material new restrictions and limitations on operation of ACM Shanghai, either of which could have a material adverse effect on our business, financial condition, results of operations, reputation and prospects and on the trading price of ACM

Research Class A common stock, which could decline in value or become worthless.

PRC central government authorities have taken steps to preclude, or significantly discourage, certain PRC companies from listing on U.S.

and other exchanges outside the PRC.

Investments activities

in the PRC by non-PRC investors are principally governed by the Encouraged Industries Catalog for Foreign Investment (2020 version) and the Special Administrative Measures for Foreign Investment Access (Negative List 2021), both of which were

promulgated by the PRC’s Ministry of Commerce, or MOFCOM, and National Development and Reform Commission.

These regulations set forth the industries in which foreign investments are encouraged, restricted and prohibited.

Industries that are not listed in any of these three categories are generally open to foreign investment unless otherwise specifically restricted by other PRC rules and regulations.

that our operations do not fall within any industry that is restricted or prohibited under these regulations and that the regulations therefore do not apply to us.

PRC-based companies that seek to list their shares in the United States but are subject to PRC restrictions on investments by non-PRC investors sometimes use a special purpose vehicle known as a

VIE created in an off-shore jurisdiction such as the Cayman Islands.

In these structures, a VIE enters into a series of contractual arrangements with the PRC-based operating company and its PRC-based shareholders that afford those shareholders,

rather than the shareholders of the VIE, effective control over the finances and operations of the operating company.

The VIE, effectively a shell company, issues share that are listed for trading on a U.S.

exchange, but the enterprise is

controlled by the legacy PRC-based shareholders and is subject to PRC laws and regulations.

ACM Research is not a VIE or other special purpose, or shell, company, and its relationship with ACM Shanghai does not involve the types of contractual

arrangements existing between a VIE and a PRC-based operating company.

ACM Research is a Delaware corporation founded in California in 1998 that formed ACM Shanghai to conduct business operations in the PRC.

ACM Research controls the operations

of ACM Shanghai through its direct ownership of ACM Shanghai shares, and it also conducts sales and marketing activities focused on sales of ACM Shanghai products in North America, Europe and certain regions in Asia outside mainland China.

We do not believe that our corporate structure or any other matters relating to our business operations currently require that ACM Shanghai obtain any permissions or approvals from the China

Securities Regulatory Commission, or CSRC, or any other PRC central government authority in connection with ACM’s listing, or offering for sale in the future, shares of our Class A common stock in the United States.

We, including ACM Shanghai,

therefore have never solicited any permission or approval from any PRC central government authority, and thus no such permissions or approvals have been received or denied, in connection with ACM Research’s seeking and maintaining the listing

of our Class A common stock in the United States.

In the event that we inadvertently conclude that permissions or approvals are not required, or either the CSRC or another PRC central government authority were to determine that existing PRC

laws or regulations require that ACM Shanghai obtain the authority’s permission or approval to continue ACM Research’s listing of Class A common stock in the United States or if those existing PRC laws and regulations, or interpretations

thereof, were to change to require such permission or approval, ACM Shanghai could be unable to obtain any such permission or approval or could be able to obtain such permission or approval only on terms and conditions that impose material new

operating or other restrictions and limitations on ACM Shanghai.

In such circumstances, it would materially and adversely affect the value of our Class A common stock, which may decline in value or become worthless.

In addition, ACM Shanghai

could face sanctions by the CSRC or other PRC central government authorities or pressure from the PRC government in various business matters for failure to obtain such permission or approval.

Such potential sanctions or pressure may include

fines and penalties on ACM Shanghai’s operations in the PRC, limitations on its operating privileges in the PRC, delays in or restrictions on the transfer of proceeds from a public offering of ACM Research securities in the United States to ACM

Shanghai, restrictions on or prohibition of the payments or remittance of dividends by ACM Shanghai to ACM Research, or other actions that could have a material and adverse effect on our business, financial condition, results of operations,

reputation and prospects, as well as the trading price of ACM Research Class A common stock, which could decline in value or become worthless.

PRC central government authorities may intervene in, or influence, ACM Shanghai’s PRC-based operations at any time, and those authorities’ rules and

regulations in the PRC can change quickly with little or no advance notice.

The business of ACM Shanghai is subject to complex laws and regulations in the PRC that can change quickly with little or no advance notice.

To date, beyond the COVID-19-related restrictions in

2022, we have not experienced such intervention or influence by PRC central government authorities or a change in those authorities’ rules and regulations that have had a material impact of ACM Shanghai or ACM Research.

We cannot assure you,

however, that future changes in PRC laws and regulations will not materially and adversely affect our PRC-based operations.

Intellectual Property .

Our commercial success depends in part on our ability to obtain and maintain patent and trade secret protection for our intellectual property,

including our SAPS, TEBO, Tahoe, ECP, furnace and other technologies and the design of our Ultra C equipment.

See “—Risks Related to Our Intellectual Property and Data Security— Our success depends

on our ability to protect our intellectual property, including our SAPS, TEBO, Tahoe, ECP, furnace and other technologies .” in Item 1A, “Risk Factors” of Part I of this report.

The significant majority of our intellectual

property has been developed in the PRC and is owned by ACM Shanghai.

Implementation and enforcement of intellectual property-related laws in the PRC has historically been lacking due primarily to ambiguities in PRC intellectual

property law.

See “—Risks Related to Our Intellectual Property and Data Security— We may not be able to protect our intellectual property rights throughout the world, including the PRC, which could

materially, negatively affect our business ” in Item 1A, “Risk Factors” of Part I of this report.

In the event PRC central government authorities were to significantly revise or revamp the current scope and structure of

intellectual property protection in the PRC, our ability to protect and enforce our intellectual property rights for our key proprietary technologies may be adversely impacted and competitors may be able to match our technologies

and tools in order to compete with us.

Title Defect in Leased Premises .

We conduct research and development, and service support operations at ACM Shanghai’s headquarters located in the Zhangjiang Hi Tech Park in Shanghai, which ACM Shanghai

leases from Zhangjiang Group.

Zhangjiang Group has not obtained a certificate of property title for the premises, although it has represented to ACM Shanghai that it has the right to rent the premises to ACM Shanghai.

If any adjustment

in local regional overall planning of Shanghai, or any other reason, results in the demolition of such premises, the premises could not continue to be leased to ACM Shanghai and the day-to-day production and operation of ACM Shanghai

would be materially and adversely affected.

See Item 2, “Properties” of Part I of this report.

COVID-19 Pandemic .

We conduct substantially all of our product development, manufacturing, support and services in the PRC, and those activities have been directly impacted by COVID-19 and related

restrictions on transportation and public appearances, including implementation by PRC government authorities of “spot” and full-city quarantines in the city of Shanghai, where substantially all of our operations are located.

Furthermore, a number of our key customers have substantial operations based in operations areas of the PRC, including in the City of Shanghai, which required us to defer, in the first quarter of 2022, shipments of finished products to

those customers.

A significant number of ACM Shanghai employees missed work in late 2022 and early 2023 for one or several weeks due to COVID-19 related illness following the relaxation of the PRC’s zero-COVID policies in December 2022.

For additional information see “—Risks Related to the COVID-19 Pandemic— Substantially all of our operations, as well as significant operations of a number of our key customers, are located in areas of

the PRC impacted by the COVID‑19 pandemic, and our operations have been, and may continue to be, adversely affected by the effects of PRC restrictions imposed as the result of COVID‑19 ” in Item 1A, “Risk Factors” of Part I of

Data Security .

The Standing Committee of the National People’s Congress, or the Standing Committee, has promulgated the Cyber Security Law, which imposes requirements on entities who build and operate

the PRC’s internet architecture or provide services in the PRC over the internet, and the Data Security Law, which imposes data security and privacy obligations on entities and individuals carrying out data activities.

The Data Security

Law also provides for a national security review procedure for data activities that may affect national security and imposes export restrictions on certain data an information.

ACM Shanghai is not subject to the existing restrictions

imposed by the Cyber Security Law or the Data Security Law, in part because its business operations do not involve the collection, processing or use of data or information involving personal privacy or private information of customers.

In addition, ACM Shanghai is subject to oversight by the Cyberspace Administration of China, or the CAC, regarding data security.

ACM Shanghai does not collect or maintain personal information except for routine personal information

necessary to process payroll payments and other benefits and emergency contact information, and as a result, ACM Shanghai is not currently subject to significant restrictions or limitations in addressing and managing data security

issues and complying with CAC regulations.

To date, ACM Shanghai has not been involved in any investigations on cybersecurity review initiated by the CAC or any related PRC central government authority and has not received any inquiry,

notice, warning, or sanction in such respect.

However, cybersecurity is increasingly a focus of the PRC central government.

If the CAC or other PRC central government authorities should in the future require ACM Shanghai to comply with

these or additional, or more restrictive, PRC cybersecurity regulations, it could require ACM Shanghai to make changes to its operations, and any failure to satisfy or delay in meeting such requirements may subject ACM Shanghai to

restrictions and penalties imposed by the CAC or other PRC regulatory authorities, which may include regulatory actions, fines and penalties on our operations in the PRC, which could materially harm our business, financial condition,

results of operations, reputation and prospects.

Anti-Monopoly .

A number of PRC laws and regulations have established procedures and requirements that could make merger and acquisition activities in China by foreign investors more time consuming and

These laws and regulations, which include the Anti-Monopoly Law and the Rules of the Ministry of Commerce on Implementation of Security Review System of Mergers and Acquisitions of Domestic Enterprises by Foreign Investors,

impose requirements that in some instances that MOFCOM be notified in advance of, for example, any change-of-control transaction in which a foreign investor takes control of a PRC domestic enterprise.

In addition, such Rules specify

that mergers and acquisitions by foreign investors that raise “national defense and security” concerns and mergers and acquisitions through which foreign investors may acquire de facto control over domestic enterprises that raise

“national security” concerns are subject to strict review by MOFCOM.

In February 2021, the Anti-Monopoly Committee of the State Council published the Anti-Monopoly Guidelines for the Internet Platform Economy Sector, which stipulate

that any concentration of undertakings involving VIEs is subject to anti-monopoly review.

Those Guidelines provide more stringent rules for Internet platform operators, including regulations on the use of data and algorithms, technology

and platform to commit abusive acts.

The Measures for the Security Review for Foreign Investment, which was promulgated jointly by National Development and Reform Commission and MOFCOM effective January 18, 2021, and the Standing

Committee on Amending the Anti-Monopoly Law of the People’s Republic of China, which was promulgated by the Standing Committee effective August 1, 2022, delineated provisions concerning the security review procedures on foreign

investment, including the types of investments subject to review and the scopes and procedures of the review.

ACM Shanghai does not have the concentration of business operators stipulated in the Anti-Monopoly Law, and our operations and

activities to date have not otherwise subjected us to restrictive provisions or limitations set forth in applicable PRC laws and regulations govern merger and acquisition activities.

Among other things, ACM Shanghai’s business

operations do not constitute identified “national defense and security” concerns associated with the arms industry, any industry ancillary to the arms industry, or any other field related to national defense security.

We cannot assure

you, however, that future changes in PRC laws and regulations governing mergers and acquisitions, including activities in the PRC by foreign investors, will not extend or otherwise modify existing requirements, which could materially

and adversely affect our PRC-based operations or our ability to expand by investments or acquisitions.

In the ordinary course of business, ACM Shanghai has obtained all of the permits and licenses it believes are necessary for it to operate in the PRC.

ACM Shanghai may be adversely affected,

however, by the complexity, uncertainties and changes in PRC laws and regulations applicable to, or otherwise affecting, the semiconductor equipment industry and related businesses, and any lack of requisite approvals, licenses or

permits applicable to ACM Shanghai’s business may have a material adverse effect on its business and results of operations.

Trade Policies .

Since 2018, general trade tensions between the United States and the PRC have escalated.

See “—Regulatory Risks— Changes in government trade policies

could limit the demand for our tools and increase the cost of our tools” in Item 1A, “Risk Factors” of Part I of this report.

The imposition of tariffs by the U.S.

and PRC governments and the surrounding economic uncertainty

may negatively impact the semiconductor industry, including by reducing the demand of fabricators for capital equipment such as our tools.

Further changes in trade policy, tariffs, additional taxes, restrictions on exports or other

trade barriers, or restrictions on supplies, equipment, and raw materials including rare earth minerals, may limit the ability of our customers to manufacture or sell semiconductors or to make the manufacture or sale of semiconductors

more expensive and less profitable, which could lead those customers to fabricate fewer semiconductors and to invest less in capital equipment such as our tools.

In addition, if the PRC were to impose additional tariffs on raw

materials, subsystems or other supplies that we source from the United States, our cost for those supplies would increase.

As a result of any of the foregoing events, the imposition of new or additional tariffs may limit our ability to

manufacture tools, increase our selling and/or manufacturing costs, decrease margins, or inhibit our ability to sell tools or to purchase necessary equipment and supplies, which could have a material adverse effect on our business,

results of operations, or financial condition.

Moreover, by imposing industrial policies and other economic measures, such as control of foreign exchange, taxation and foreign investment, the PRC central government exerts considerable direct

and indirect influence on the development of the PRC economy.

Other political, economic and social factors may also lead to further legal and regulatory changes and reforms, which may adversely affect our operations and business development.

The PRC central government may determine to exert additional control over offerings conducted overseas or foreign investment in PRC-based issuers, which

could result in a material change in operations of ACM Shanghai and cause significant declines in the value of ACM Research Class A common stock, or make them worthless.

The PRC central government may determine to exert additional control over securities offerings conducted overseas and/or foreign investment in PRC-based issuers, which could result in a material

adverse change in operations of ACM Shanghai and cause the value of ACM Research Class A common stock to significantly decline or become worthless.

See also “— If any PRC central government authority were to

determine that existing PRC laws or regulations require that ACM Shanghai obtain the authority’s permission or approval to continue the listing of ACM Research’s Class A common stock in the United States or if those existing PRC laws and

regulations, or interpretations thereof, were to change to require such permission or approval, ACM Shanghai may be unable to obtain the required permission or approval or may only be able to obtain such permission or approval on terms and

conditions that impose material new restrictions and limitations on operation of ACM Shanghai, either of which could have a material adverse effect on our business, financial condition, results of operations, reputation and prospects and on

the trading price of ACM Research Class A common stock, which could decline in value or become worthless ” above.

We could be adversely affected if we are unable to comply with recent and proposed legislation and regulations regarding improved access to audit and other

information and audit inspections of accounting firms, including registered public accounting firms, such as our prior audit firm, operating in the PRC.

We are one of the companies named in the SEC’s “Conclusive list of issuers identified under the HFCAA.” BDO China had been our independent registered public accounting firm in recent years,

including for the year ended December 31, 2021, and is not inspected by the PCAOB.

The HFCA Act, which became law in December 2020, includes requirements for the SEC to identify issuers whose audit work is performed by auditors that the PCAOB is unable to inspect or investigate

completely because of a restriction imposed by a non-U.S.

authority in any non-U.S.

jurisdiction.

The HFCA Act also requires that, to the extent that the PCAOB has been unable to inspect an issuer’s auditor for two consecutive years, the SEC

shall prohibit the issuer’s securities registered in the United States from being traded on any national securities exchange or over-the-counter market in the United States.

On March 24, 2021, the SEC adopted interim final amendments to implement congressionally mandated submission and disclosure required of the HFCA Act, and on December 2, 2021, the SEC adopted final amendments

to finalize rules implementing the submission and disclosures in the HFCA Act.

These final amendments apply to registrants that the SEC identifies as having filed an Annual Report on Form 10-K (or certain other forms) with an audit

report issued by a registered public accounting firm that is located in a foreign jurisdiction and that the PCAOB has determined it is unable to inspect or investigate completely because of a position taken by any non-U.S.

Any such identified registrant will be required to submit documentation to the SEC establishing that it is not owned or controlled by a governmental entity in that foreign jurisdiction and will also require disclosure in the

registrant’s annual report regarding the audit arrangements of, and governmental influence on, such a registrant.

Furthermore, on June 22, 2021, the U.S.

Senate passed the Accelerating Holding Foreign Companies Accountable Act, which was enacted under the Consolidated Appropriations Act, 2023, on December 29, 2022, as

further described below, and which amended the HFCA Act to require the SEC to prohibit an issuer’s securities from trading on any national securities exchange or over-the-counter market in the United States if the PCAOB has been unable

to inspect an issuer’s auditor for two, rather than three, consecutive years.

On September 22, 2021, the PCAOB adopted a final rule implementing the HFCA Act, which provides a framework for the PCAOB to use when determining, as

contemplated under the HFCA Act, whether the PCAOB is unable to inspect or investigate completely registered public accounting firms located in a foreign jurisdiction because of a position taken by one or more authorities in any

jurisdiction.

On December 16, 2021, the PCAOB designated China and Hong Kong as jurisdictions where the PCAOB was not allowed to conduct full and complete audit inspections and identified firms registered in such

jurisdictions, including BDO China.

Pursuant to each annual determination by the PCAOB, the SEC will, on an annual basis, identify issuers that have used non-inspected audit firms.

On March 8, 2022, the SEC published its first “Provisional list of issuers identified under the HFCAA.” Our company was identified on the SEC’s provisional list after we filed our Annual Report on Form 10-K

for the year ended December 31, 2021, which included an audit report issued by BDO China.

On March 30, 2022, our company was transferred to the SEC’s “Conclusive list of issuers identified under the HFCAA.”

On August 26, 2022, the PCAOB signed a Statement of Protocol, or SOP, Agreement with the CSRC and China’s Ministry of Finance.

The SOP, together with two protocol agreements governing inspections and

investigation, establishes a specific, accountable framework to make possible complete inspections and investigations by the PCAOB of audit firms based in China and Hong Kong, as required under U.S.

Pursuant to the fact sheet with

respect to the SOP disclosed by the SEC, the PCAOB has sole discretion to select the audit firms, engagements and potential violations that it inspects or investigates and has the ability to transfer information to the SEC in the normal

PCAOB inspectors and investigators can view all audit documentation without redaction, and the PCAOB can retain any audit information it reviews as needed to support the findings of its inspections and investigations.

addition, the SOP allows the PCAOB to interview and take testimony of personnel associated with the audits that the PCAOB inspects or investigates.

On December 15, 2022, the PCAOB announced that it was able to secure complete access to inspect and investigate PCAOB-registered public accounting firms headquartered in the PRC and Hong Kong in 2022 and

vacated its previous December 16, 2021 determination to the contrary.

However, whether the PCAOB will continue to be able to satisfactorily conduct inspections of PCAOB-registered public accounting firms headquartered in the PRC and

Hong Kong is subject to uncertainty and depends on a number of factors out of our, and our auditor’s, control.

PRC authorities will need to ensure that the PCAOB continues to have full access for inspections and investigations in 2023

Each year, the PCAOB will determine whether it can inspect and investigate completely audit firms in the PRC and Hong Kong, among other jurisdictions.

If the PRC authorities do not allow the PCAOB complete access for

inspections and investigations for two consecutive years, the SEC would prohibit trading in the securities of issuers engaging those audit firms, as required under the HFCA Act.

On December 29, 2022, the Consolidated Appropriations Act, 2023, was signed into law by U.S.

President Biden, which, among other things, amended the HFCA Act to reduce the number of consecutive non-inspection

years that would trigger the trading prohibition under the HFCA Act from three years to two years (originally such threshold under the HFCA Act was three consecutive years), and so that any foreign jurisdiction could be the reason why

the PCAOB does not have complete access to inspect or investigate a company’s public accounting firm (originally the HFCA Act only applied if the PCAOB’s ability to inspect or investigate was due to a position taken by an authority in

the jurisdiction where the relevant public accounting firm was located).

Per current regulations, if ACM Research were to appear for two consecutive years on the “Conclusive list of issuers identified under the HFCAA”, the value of our securities may significantly

decline or become worthless, and our securities would be prohibited from trading and may eventually be delisted.

It also remains unclear what further actions the SEC, the PCAOB or Nasdaq may take to address these issues and what impact those

actions will have on U.S.

companies, such as ours, that have significant operations in the PRC and have securities listed on a U.S.

stock exchange.

Any such actions could materially affect our operations and stock price, including by resulting

in our being de-listed from Nasdaq or being required to engage a new audit firm, which would require significant expense and management time.

Notwithstanding the foregoing, on June 30, 2022, stockholders of ACM Research ratified the appointment of Armanino LLP as our independent auditor for the fiscal year ended December 31, 2022.

Armanino LLP is neither headquartered in the PRC or Hong Kong nor was it subject to the determinations announced by the PCAOB on December 16, 2021, which determinations were vacated by the PCAOB on December 15, 2022, and subsequent to the

filing of this report, we do not believe ACM Research will appear on the “Conclusive list of issuers identified under the HFCAA” for a second time.

It may be difficult for overseas regulators to conduct investigations or collect evidence within the PRC.

Stockholder claims or regulatory investigations that are common in the United States generally are difficult to pursue as a matter of law or practicality in the PRC.

For example, in the PRC, there

are significant legal and other obstacles to providing information needed for regulatory investigations or litigation initiated outside of the PRC.

Although the authorities in the PRC may establish a regulatory cooperation mechanism with the

securities regulatory authorities of another country or region to implement cross-border supervision and administration, such cooperation with the securities regulatory authorities in the Unities States may not be efficient in the absence of

mutual and practical cooperation mechanism.

Furthermore, according to Article 177 of the PRC Securities Law, or Article 177, which became effective in March 2020, no overseas securities regulator is allowed to directly conduct investigation or

evidence collection activities within the territory of the PRC.

While detailed interpretation of or implementing rules under Article 177 have yet to be promulgated, the inability for an overseas securities regulator to directly conduct

investigation or evidence collection activities within the PRC may further increase difficulties faced by you in protecting your interests.

Because certain of our assets are located outside of the United States and certain of our directors and officers reside outside of the United States, it may

be difficult for you to enforce your rights based on the U.S.

federal securities laws against such assets or officers and directors or to enforce a judgment of a United States court against assets or officers and directors in the PRC.

While ACM Research is a Delaware corporation, certain of our officers and directors are nonresidents of the United States, and certain of our assets are located in the PRC, and the operations of

ACM Shanghai are conducted in the PRC.

It may, therefore, not be possible to effect service of process on such persons in the United States, and it may be difficult to enforce any judgments rendered against them or any of our assets that are

located overseas.

Moreover, there is doubt whether courts in the PRC would enforce (a) judgments of United States courts against ACM Shanghai, our directors or officers based on the civil liability provisions of the securities laws of the

United States or any state, or (b) in original actions brought in the PRC, liabilities against us or any nonresidents based upon the securities laws of the United States or any state.

We conduct substantially all of our operations outside the United States and face risks associated with conducting business in foreign markets.

Substantially all of our sales in 2022, 2021 and 2020 were made to customers outside the United States.

Our manufacturing center has been located in Shanghai since 2006 and substantially all of

our operations are located in the PRC.

We expect that all of our significant activities will remain outside the United States in the future.

We are subject to a number of risks associated with our international business activities, including:

imposition of, or adverse changes in, foreign laws or regulatory requirements, such as work stoppages and travel restrictions imposed in connection with the COVID-19 pandemic;

the need to comply with the import laws and regulations of various foreign jurisdictions, including a range of U.S.

potentially adverse tax consequences, including withholding tax rules that may limit the repatriation of our earnings, and higher effective income tax rates in foreign countries where we conduct business;

competition from local suppliers with which potential customers may prefer to do business;

seasonal reduction in business activity, such as during the Lunar New Year in parts of Asia and in other periods in various individual countries;

increased exposure to foreign currency exchange rates;

reduced protection for intellectual property;

longer sales cycles and reliance on indirect sales in certain regions;

increased length of time for shipping and acceptance of our products;

greater difficulty in responding to customer requests for maintenance and spare parts on a timely basis;

greater difficulty in enforcing contracts and accounts receivable collection and longer collection periods;

difficulties in staffing and managing foreign operations and the increased travel, infrastructure and legal and compliance costs associated with multiple international locations;

heightened risk of unfair or corrupt business practices in certain geographies and of improper or fraudulent sales arrangements that may impact financial results and result in restatements of, or

irregularities in, our consolidated financial statements;

general economic conditions, geopolitical events or natural disasters in countries where we conduct our operations or where our customers are located, including political unrest, war, acts of terrorism or

responses to such events.

In particular, the Asian market is extremely competitive, and chip manufacturers may be aggressive in seeking price concessions from suppliers, including chip equipment manufacturers.

We may not be successful in developing and implementing policies and strategies that will be effective in managing these risks in each country in which we do business.

Our failure to manage these

risks successfully could adversely affect our business, operating results and financial condition.

Fluctuation in foreign currency exchange rates may adversely affect our results of operations and financial position.

Our results of operations and financial position could be adversely affected as a result of fluctuations in foreign currency exchange rates.

Although our financial statements are denominated in

dollars, a sizable portion of our costs are denominated in other currencies, principally the Chinese Renminbi and, to a lesser extent, the South Korean Won.

Because many of our raw material purchases are denominated in Renminbi while the

majority of the purchase orders we receive are denominated in U.S.

dollars, exchange rates have a significant effect on our gross margin.

We have not engaged in any foreign currency exchange hedging transactions to date, and any strategies that

we may use in the future to reduce the adverse impact of fluctuations in foreign currency exchange rates may not be successful.

Our foreign currency exposure with respect to assets and liabilities for which we do not have hedging arrangements

could have a material impact on our results of operations in periods when the U.S.

dollar significantly fluctuates in relation to unhedged non-U.S.

currencies in which we transact business.

The exacerbation or further continuation of currently challenging global systemic economic and financial conditions could adversely affect our business,

results of operations and financial condition.

Any prolonged slowdown in the PRC, United States or global economy may have a negative impact on our business, results of operations and financial condition.

Market reactions to the global

outbreak of COVID-19 have negatively affected the world’s financial markets since March 2020, and a continuation of those reactions may cause a potential slowdown of the local, regional and global economy.

Financial and other markets in the

United States and worldwide have experienced significant volatility reflecting uncertainty over, among other things, (a) the long-term effects of the expansionary monetary and fiscal policies adopted by the central banks and financial

authorities of some of the world’s leading economies, including the United States and the PRC, (b) unrest in Ukraine, the Middle East and Africa, and (c) the rising level of inflation in major industrial countries, including the United States,

and worries that efforts to curb inflation may result in an economic recession.

General inflation, including rising energy prices, interest rates and wages, could adversely impact our business by increasing our operating and borrowing costs as

well as limiting the amount of capital available for customers to purchase our products.

This economic turmoil has had, and could continue to have, a number of repercussions on our business, including significant decreases in orders from our

customers, business slowdowns or cessations at key suppliers resulting in delays in our product deliveries, increased raw material prices leading to increased production costs that we may not be able to pass onto customers, and business

challenges at customers resulting in the inability to obtain credit to finance purchases of our products or even insolvency, and counterparty failures negatively impacting our operations and sales.

Any systemic economic or financial crisis

could cause revenues for the semiconductor industry as a whole to decline dramatically, which could materially and adversely affect our results of operations.

Risks Related to Our Business and Our Industry

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Additional funding may not be available to us on acceptable terms or at all.

If adequate funding is not available, we may be required to reduce expenditures, including curtailing

our growth strategies and reducing our product development efforts, or to forego acquisition opportunities.

Proceeds received by ACM Shanghai from the initial placements of shares with PRC investors and from STAR IPO, in connection with the STAR Listing, of ACM Shanghai shares on the STAR Market will

be used to grow and support our PRC operations.

If adequate funding is not available, we may be required to reduce expenditures, including

curtailing our growth strategies and reducing our product development efforts, or to forego acquisition opportunities.

Proceeds received by ACM Shanghai from the initial placements of shares with PRC investors and from the STAR IPO, in connection with the STAR Listing, of ACM Shanghai shares on the STAR Market

will be used to grow and support our PRC operations.

Those proceeds generally are not available for distribution to ACM Research.

Under existing PRC laws and regulations, it may be difficult, if not impossible, for ACM Research to be able to receive

dividends comprised of funds generated by ACM Shanghai and, even if such dividends can be paid from the PRC to the United States, any such dividends can be paid to ACM Research only if other holders of ACM Shanghai shares receive their pro rata

Under existing PRC laws and regulations, it may be difficult, if not impossible, for ACM Research to be able to

receive dividends comprised of funds generated by ACM Shanghai and, even if such dividends can be paid from the PRC to the United States, any such dividends can be paid to ACM Research only if other holders of ACM Shanghai shares receive their

pro rata dividends.

As a result, it is unlikely that funds raised or generated by ACM Shanghai will be readily distributable to ACM Research.

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the holders of these new securities or debt may have rights, preferences and privileges senior to those of the holders of Class A common stock.

In addition, any preferred equity issuance or debt financing that we may obtain in the future could have

restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential

In addition, any preferred equity issuance or debt financing that we may obtain in the future could

have restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential

acquisitions.

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our ability to sell our tools to Chinese customers due to regulatory restrictions, including the addition of our customers to the Entity List;

the ability of other suppliers to provide sufficient quantities of their tools to our Chinese customers which may indirectly the production plans of our customers and result in a reduction of demand for our

the ability of other suppliers to provide sufficient quantities of their tools to our Chinese customers which may indirectly impact the production plans of our customers and result in a reduction of demand for

the timing of investments in research and development related to releasing new applications of our technologies and new products;

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Chinese, or Lunar, New Year, which occurs in January or February, before implementing their capital acquisition plans.

The timing of new product releases also has an impact on seasonality, with the acquisition of manufacturing equipment occurring

six to nine months before a new release.

The timing of new product releases also has an impact on seasonality, with the acquisition of manufacturing equipment

occurring six to nine months before a new release.

Many of these factors are beyond our control, and the occurrence of one or more of them could cause our operating results to vary widely.

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operating results could lead to volatility in our stock price.

Because a substantial proportion of our expenses are relatively fixed in the short term, our results of operations will suffer if revenue falls below our expectations in a particular

quarter, which could cause the price of Class A common stock to decline.

Moreover, as a result of any of the foregoing factors, our operating results might not meet our announced guidance or expectations of public market analysts or investors, in

which case the price of Class A common stock could decrease significantly.

Cyclicality in the semiconductor industry is likely to lead to substantial variations in demand for our products, and as a result our operating results

could be adversely affected.

Because a substantial proportion of our expenses are relatively fixed in the short term, our results of operations will suffer if revenue falls below our expectations in a

particular quarter, which could cause the price of Class A common stock to decline.

Moreover, as a result of any of the foregoing factors, our operating results might not meet our announced guidance or expectations of public market analysts or

investors, in which case the price of Class A common stock could decrease significantly.

Cyclicality in the semiconductor industry is likely to lead to substantial variations in demand for our products, and as a result our operating results could

be adversely affected.

The chip industry has historically been cyclic and is characterized by wide fluctuations in product supply and demand.

From time to time, this industry has experienced significant downturns,

often in connection with, or in anticipation of, maturing product and technology cycles, excess inventories and declines in general economic conditions.

This cyclicality could cause our operating results to decline dramatically from one period to

From time to time, this industry has experienced significant downturns, often

in connection with, or in anticipation of, maturing product and technology cycles, excess inventories and declines in general economic conditions.

This cyclicality could cause our operating results to decline dramatically from one period to the

Our business depends upon the capital spending of chip manufacturers, which, in turn, depends upon the current and anticipated market demand for chips.

During industry downturns, chip manufacturers often have excess manufacturing capacity and may experience reductions in profitability due to lower sales and increased pricing pressure for their products.

As a result, chip manufacturers generally

sharply curtail their spending during industry downturns and historically have lowered their spending more than the decline in their revenues.

If we are unable to control our expenses adequately in response to lower revenue from our customers, our

operating results will suffer and we could experience operating losses.

During industry downturns, chip

manufacturers often have excess manufacturing capacity and may experience reductions in profitability due to lower sales and increased pricing pressure for their products.

As a result, chip manufacturers generally sharply curtail their spending

during industry downturns and historically have lowered their spending more than the decline in their revenues.

If we are unable to control our expenses adequately in response to lower revenue from our customers, our operating results will

suffer and we could experience operating losses.

For example, certain industry analysts, such as Gartner, forecast a downturn in 2023 for global WFE investments, as further described in “Item 1.

We cannot reasonably estimate the

duration or impact of such a downturn, and it could have a material adverse effect on our business and the value of our Class A common stock.

Conversely, during industry upturns we must successfully increase production output to meet expected customer demand.

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design to final system production.

If these policies, which include loans and subsidies, result in lower demand for equipment than is expected by equipment manufacturers, the resulting overcapacity in the chip manufacturing equipment market could

lead to excess inventory and price discounting that could have a material adverse effect on our business and operating results.

could lead to excess inventory and price discounting that could have a material adverse effect on our business and operating results.

We depend on a small number of customers for a substantial portion of our revenue, and the loss of, or a significant reduction in orders from, one or more of

our major customers could have a material adverse effect on our revenue and operating results.

There are also a limited number of potential customers for our products.

The chip manufacturing industry is highly concentrated, and we derive most of our revenue from a limited number of customers.

A total of three customers accounted for 43.8% of our revenue in 2022,

two customers accounted for 48.9% of our revenue in 2021, and three customers accounted for 75.8% of our revenue in 2020.

As a consequence of the concentrated nature of our customer base, our revenue and results of operations may fluctuate from quarter to quarter and are difficult to estimate, and any cancellation of

orders or any acceleration or delay in anticipated product purchases or the acceptance of shipped products by our larger customers could materially affect our revenue and results of operations in any quarterly period.

We may be unable to sustain or increase our revenue from our larger customers or offset the discontinuation of concentrated purchases by our larger customers with purchases by new or existing

We expect a small number of customers will continue to account for a high percentage of our revenue for the foreseeable future and that our results of operations may fluctuate materially as a result of such larger customers’ buying

Thus, our business success depends on our ability to maintain strong relationships with our customers.

The loss of any of our key customers for any reason, or a change in our relationship with any of our key customers, including a

significant delay or reduction in their purchases, may cause a significant decrease in our revenue, which we may not be able to recapture due to the limited number of potential customers.

We have seen, and may see in the future, consolidation of our customer base.

Industry consolidation generally has negative implications for equipment suppliers, including a reduction in the number

of potential customers, a decrease in aggregate capital spending and greater pricing leverage on the part of consumers over equipment suppliers.

Continued consolidation of the chip industry could make it more difficult for us to grow our

customer base, increase sales of our products and maintain adequate gross margins.

Our success will depend on industry chip manufacturers adopting our SAPS, TEBO, Tahoe, ECP, furnace and other technologies.

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In order for these industry leaders to adopt our tools, we need to establish our credibility by demonstrating the

differentiated, innovative nature of our SAPS, TEBO and Tahoe technologies.

Our SAPS technology has been tested and purchased by industry leaders, but has not achieved, and may never achieve, widespread market acceptance.

We have initiated a

similar commercialization process for our TEBO technology with a selected group of industry leaders.

differentiated, innovative nature of our SAPS, TEBO, Tahoe, ECP, furnace and other technologies.

If these leading manufacturers do not agree that our technologies add significant value over conventional technologies or do not otherwise accept

and use our tools, we may need to spend a significant amount of time and resources to enhance our technologies or develop new technologies.

Even if these leading manufacturers adopt our technologies, other manufacturers may not choose to accept and

adopt our tools and our products may not achieve widespread adoption.

Even if these leading manufacturers adopt our technologies, other manufacturers may not choose to accept

and adopt our tools and our products may not achieve widespread adoption.

Any of the above factors would have a material adverse effect on our business, results of operations and financial condition.

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In addition, obtaining orders from new customers may be difficult because many chip manufacturers have pre-existing relationships with our competitors.

Chip manufacturers must make a substantial investment to qualify and integrate wet processing equipment into a chip production line.

Due, in part, to the cost of manufacturing equipment and the investment necessary to integrate a particular

manufacturing process, a chip manufacturer that has selected a particular supplier’s equipment and qualified that equipment for production typically continues to use that equipment for the specific production application and process node, which is

the minimum line width on a chip, as long as that equipment continues to meet performance specifications.

Some of our potential and existing customers may prefer larger, more established vendors from which they can purchase equipment for a wider

variety of process steps than our tools address.

Further, because the cleaning process with our TEBO equipment can be up to five times longer than cleaning processes based on other technologies, we must convince chip manufacturers of the

innovative, differentiated nature of our technologies and the benefits associated with using our tools.

If we are unable to obtain new customers and continue to achieve widespread market acceptance of our tools, then our business, operations,

financial results and growth prospects will be materially and adversely affected.

Chip manufacturers must make a substantial

investment to qualify and integrate wet processing equipment into a chip production line.

Due, in part, to the cost of manufacturing equipment and the investment necessary to integrate a particular manufacturing process, a chip manufacturer

that has selected a particular supplier’s equipment and qualified that equipment for production typically continues to use that equipment for the specific production application and process node, which is the minimum line width on a chip, as

long as that equipment continues to meet performance specifications.

Some of our potential and existing customers may prefer larger, more established vendors from which they can purchase equipment for a wider variety of process steps than our

tools address.

Further, because the cleaning process with our TEBO equipment can be up to five times longer than cleaning processes based on other technologies, we must convince chip manufacturers of the innovative, differentiated nature of our

technologies and the benefits associated with using our tools.

If we are unable to obtain new customers and continue to achieve widespread market acceptance of our tools, then our business, operations, financial results and growth prospects

will be materially and adversely affected.

If we do not continue to enhance our existing single-wafer wet cleaning tools and achieve market acceptance, we will not be able to compete effectively.

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Additionally, if process nodes continue to shrink to ever-smaller

dimensions and conventional two-dimensional chips reach their critical performance limitations, the technology associated with manufacturing chips may advance to a point where our Ultra C equipment based on SAPS, TEBO, Tahoe, ECP, furnace and other

technologies becomes obsolete.

other technologies becomes obsolete.

Accordingly, the future of our business will depend in large part upon the continuing relevance of our technological capabilities, our ability to interpret customer and market requirements in advance of tool

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We expect to spend a significant amount of time and resources identifying new product markets in addition to the market for cleaning solutions and in developing new products for entry into these

Our TEBO technology took eight years to develop, and development of any new technology could require a similar, or even longer, period of time.

Product development requires significant investments in engineering hours, third-party

development costs, prototypes and sample materials, as well as sales and marketing expenses, which will not be recouped if the product launch is unsuccessful.

We may fail to predict the needs of other markets accurately or develop new, innovative

technologies to address those needs.

Further, we may not be able to design and introduce new products in a timely or cost-efficient manner, and our new products may be more costly to develop, may fail to meet the requirements of the market, or may

be adopted slower than we expect.

If we are not able to introduce new products successfully, our inability to gain market share in new product markets could adversely affect our ability to sustain our revenue growth or maintain our current revenue

Product development requires significant investments in engineering hours, third-party development costs, prototypes and sample materials, as well as sales and marketing expenses, which will not be recouped if the product launch is

unsuccessful.

We may fail to predict the needs of other markets accurately or develop new, innovative technologies to address those needs.

Further, we may not be able to design and introduce new products in a timely or cost-efficient manner,

and our new products may be more costly to develop, may fail to meet the requirements of the market, or may be adopted slower than we expect.

If we are not able to introduce new products successfully, our inability to gain market share in new

product markets could adversely affect our ability to sustain our revenue growth or maintain our current revenue levels.

If we fail to establish and maintain a reputation for credibility and product quality, our ability to expand our customer base will be impaired and our

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acceptance of our products.

Our market reputation is critical because we compete against several larger, more established competitors, many of which supply equipment for a larger number of process steps than we do to a broader customer base in an

industry with a limited number of customers.

In these circumstances, traditional marketing and branding efforts are of limited value, and our success depends on our ability to provide customers with reliable and technically sophisticated products.

an industry with a limited number of customers.

In these circumstances, traditional marketing and branding efforts are of limited value, and our success depends on our ability to provide customers with reliable and technically sophisticated

If the limited customer base does not perceive our products and services to be of high quality and effectiveness, our reputation could be harmed, which could adversely impact our ability to achieve our targeted growth.

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more extensive geographic coverage.

These competitors may also have the ability to offer their products at lower prices by subsidizing their losses in wet cleaning with profits from other lines of business in order to retain

current or obtain new customers.

These competitors may also have the ability to offer their products at lower prices by subsidizing their losses in wet cleaning with profits from other lines of business in order to retain current

or obtain new customers.

Among other things, some competitors have the ability to offer bundled discounts for customers purchasing multiple products.

Many of our competitors have more extensive customer and partner relationships than we do

and may therefore be in a better position to identify and respond to market developments and changes in customer demands.

Many of our competitors have more extensive customer and partner relationships than we do and

may therefore be in a better position to identify and respond to market developments and changes in customer demands.

Potential customers may prefer to purchase from their existing suppliers rather than a new supplier, regardless of product

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If we are not able to compete successfully against existing or new competitors, our business, operating results and financial condition will be negatively affected.

We depend on a small number of customers for a substantial portion of our revenue, and the loss of, or a significant reduction in orders from, one of our

major customers could have a material adverse effect on our revenue and operating results.

There are also a limited number of potential customers for our products.

The chip manufacturing industry is highly concentrated, and we derive most of our revenue from a limited number of customers.

A total of two customers

accounted for 48.9% of our revenue in 2021, three customers accounted for 75.8% of our revenue in 2020, and three customers accounted for 73.8% of our revenue in 2019.

As a consequence of the concentrated nature of our customer base, our revenue and results of operations may fluctuate from quarter to quarter and are difficult to estimate,

and any cancellation of orders or any acceleration or delay in anticipated product purchases or the acceptance of shipped products by our larger customers could materially affect our revenue and results of operations in any quarterly period.

We may be unable to sustain or increase our revenue from our larger customers or offset the discontinuation of concentrated purchases by our larger customers with purchases by new or existing

Thus, our business success depends on our ability to maintain strong relationships with our customers.

The loss of any of our key customers for any reason, or a change in our relationship with any of our key customers, including a

significant delay or reduction in their purchases, may cause a significant decrease in our revenue, which we may not be able to recapture due to the limited number of potential customers.

We have seen, and may see in the future, consolidation of our customer base.

Industry consolidation generally has negative implications for equipment suppliers, including a reduction in the

number of potential customers, a decrease in aggregate capital spending and greater pricing leverage on the part of consumers over equipment suppliers.

Continued consolidation of the chip industry could make it more difficult for us to grow our

customer base, increase sales of our products and maintain adequate gross margins.

Our customers do not enter into long-term purchase commitments, and they may decrease, cancel or delay their projected purchases at any time.

In accordance with industry practice, our sales are on a purchase order basis, which we seek to obtain three to four months in advance of the expected product delivery date.

Until a purchase

order is received, we do not have a binding purchase commitment.

Until a purchase order

is received, we do not have a binding purchase commitment.

Our customers to date have provided us with non-binding one- to two-year forecasts of their anticipated demands, but those forecasts can be changed at any time, without any required

notice to us.

Because the lead-time needed to produce a tool customized to a customer’s specifications can extend up to six months, we may need to begin production of tools based on non-binding forecasts, rather than waiting to receive a binding

purchase order.

binding purchase order.

No assurance can be made that a customer’s forecast will result in a firm purchase order within the time period we expect, or at all.

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manufacturing and customer evaluation process cycles.

We often incur significant research and development costs for products that are purchased by our customers only after much, or all, of the cost has been

incurred or that may never be purchased.

We allow some new customers, or existing customers considering new products, to evaluate products without any payment becoming due unless the product is ultimately accepted, which means we may invest a

significant amount in manufacturing a tool that may never be accepted and purchased or may be purchased months or even years after production.

In the past we have borrowed money in order to fund first-time purchase order equipment and

next-generation evaluation equipment.

When we deliver evaluation equipment, or a “first tool,” we may not recognize revenue or receive payment for the tool for 24 months or longer.

Even returning customers may take as long as six months to make any

If our sales efforts are unsuccessful after expending significant resources, or if we experience delays in completing sales, our future cash flow, revenue and profitability may fluctuate or be materially adversely affected.

Our sales cycle is long and unpredictable, which results in variability of our financial performance and may require us to incur high sales and marketing expenses with no

assurance that a sale will result, all of which could adversely affect our profitability.

We often incur significant research and development costs for products that are purchased by our customers only after much, or all, of the cost has been incurred or that may never be purchased.

allow some new customers, or existing customers considering new products, to evaluate products without any payment becoming due unless the product is ultimately accepted, which means we may invest a significant amount in manufacturing a tool

that may never be accepted and purchased or may be purchased months or even years after production.

In the past we have borrowed money in order to fund first-time purchase order equipment and next-generation evaluation equipment.

deliver evaluation equipment, or a “first tool,” we may not recognize revenue or receive payment for the tool for 24 months or longer.

Even returning customers may take as long as six months to make any payments.

If our sales efforts are

unsuccessful after expending significant resources, or if we experience delays in completing sales, our future cash flow, revenue and profitability may fluctuate or be materially adversely affected.

Our sales cycle is long and unpredictable, which results in variability of our financial performance and may require us to incur high sales and marketing

expenses with no assurance that a sale will result, all of which could adversely affect our profitability.

Our results of operations may fluctuate, in part, because of the resource-intensive nature of our sales efforts and the length and variability of our sales cycle.

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between initial contact with a prospective customer and any sale of our tools.

Our sales process involves educating customers about our tools, participating in extended tool evaluations and configuring our tools to customer-specific needs, after

which customers may evaluate the tools.

Our sales process involves educating customers about our tools, participating in extended tool evaluations and configuring our tools to customer-specific needs,

after which customers may evaluate the tools.

The length of our sales cycle, from initial contact with a customer to the execution of a purchase order, is generally 6 to 24 months.

During the sales cycle, we expend significant time and money on sales and

marketing activities and make investments in evaluation equipment, all of which lower our operating margins, particularly if no sale occurs or if the sale is delayed as a result of extended qualification processes or delays from our customers’

During the sales cycle, we expend significant time and money on

sales and marketing activities and make investments in evaluation equipment, all of which lower our operating margins, particularly if no sale occurs or if the sale is delayed as a result of extended qualification processes or delays from our

customers’ customers.

The duration or ultimate success of our sales cycle depends on factors such as:

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from our sales efforts for extended periods of time, or at all.

The loss or delay of one or more large transactions in a quarter could impact our results of operations for that quarter and any future quarters for which revenue from that transaction

is lost or delayed.

The loss or delay of one or more large transactions in a quarter could impact our results of operations for that quarter and any future quarters for which revenue from that

transaction is lost or delayed.

In addition, we believe that the length of the sales cycle and intensity of the evaluation process may increase for those current and potential customers that centralize their purchasing decisions.

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forecasts are based on multiple assumptions, including non-binding forecasts received from our customers years in advance, each of which may introduce error into our estimates.

Inventory levels for components necessary to build our tools in excess

of customer demand may result in inventory write-downs and could have an adverse effect on our operating results and financial condition.

Conversely, if we underestimate demand for our tools or if our manufacturing partners fail to supply

components we require at the time we need them, we may experience inventory shortages.

Inventory levels for components necessary to build our tools in

excess of customer demand may result in inventory write-downs and could have an adverse effect on our operating results and financial condition.

Conversely, if we underestimate demand for our tools or if our manufacturing partners fail to

supply components we require at the time we need them, we may experience inventory shortages.

Such shortages might delay production or shipments to customers and may cause us to lose sales.

These shortages may also harm our credibility, diminish the

loyalty of our channel partners or customers.

These shortages may also harm our credibility,

diminish the loyalty of our channel partners or customers.

A failure to prevent inventory shortages or accurately predict customers’ needs could result in decreased revenue and gross margins and harm our business.

Some of our products and supplies may become obsolete or be deemed excess while in inventory due to rapidly changing customer specifications, changes in

product structure, components or bills of material as a result of engineering changes, or a decrease in customer demand.

We also have exposure to contractual liabilities to our contract manufacturers for inventories purchased by them on our behalf,

based on our forecasted requirements, which may become excess or obsolete.

Some of our products and supplies may become obsolete or be deemed excess while in inventory due to rapidly changing customer specifications, changes in product structure, components or bills of

material as a result of engineering changes, or a decrease in customer demand.

We also have exposure to contractual liabilities to our contract manufacturers for inventories purchased by them on our behalf, based on our forecasted requirements,

which may become excess or obsolete.

Our inventory balances also represent an investment of cash.

To the extent our inventory turns are slower than we anticipate based on historical practice, our cash

conversion cycle extends and more of our cash remains invested in working capital.

If we are not able to manage our inventory effectively, we may need to write down the value of some of our existing inventory or write off non-saleable or obsolete

Any such charges we incur in future periods could materially and adversely affect our results of operations.

To the extent our inventory turns are slower than we anticipate based on historical practice, our cash conversion cycle extends and more of our

cash remains invested in working capital.

If we are not able to manage our inventory effectively, we may need to write down the value of some of our existing inventory or write off non-saleable or obsolete inventory.

Any such charges we incur

in future periods could materially and adversely affect our results of operations.

The difficulty in forecasting demand also makes it difficult to estimate our future results of operations and financial condition from period to period.

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If our tools contain defects or do not meet customer specifications, we could lose customers and revenue.

Highly complex tools such as our may develop defects during the manufacturing and assembly process.

Highly complex tools such as ours may develop defects during the manufacturing and assembly process.

We may also experience difficulties in customizing our tools to meet customer specifications or

detecting defects during the development and manufacturing of our tools.

Some of these failures may not be discovered until we have expended significant resources in customizing our tools, or until our tools have been installed in our customers’

production facilities.

Some of these failures may not be discovered until we have expended significant resources in customizing our tools, or until our tools have been installed in our

customers’ production facilities.

These quality problems could harm our reputation as well as our customer relationships in the following ways:

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Our tools are complex and require components and subassemblies having a high degree of reliability, accuracy and performance.

We rely on third parties to

manufacture most of the subassemblies and supply most of the components used in our tools.

We rely on third parties to manufacture most of the subassemblies and

supply most of the components used in our tools.

Accordingly, we cannot directly control our delivery schedules and quality assurance.

This lack of control could result in shortages or quality assurance

In addition, supply chain constraints have intensified due to COVID-19.

See also “Risks Related to the COVID 19 Outbreak—Our global supply chain may be materially adversely impacted due to the COVID‑19 pandemic.” These issues and our ability to manage increased demand could delay shipments of our tools, increase our testing or production costs or lead to costly failure claims.

We do not have long-term supply contracts with some of our suppliers, and those suppliers are not obligated to perform services or supply products to us for any specific period,

in any specific quantities or at any specific price, except as may be provided in a particular purchase order.

This reliance on third parties and lack of control could result in shortages or quality assurance problems.

In addition, supply chain constraints have intensified due to a variety of factors, including the ongoing COVID-19 pandemic and the June 2022 truck driver strike in South Korea, where certain of our operations and customers are located.

also “—Our supply chain may be materially adversely impacted due to global events, including continuing COVID-19 outbreaks, transportation delays and the armed conflict in Ukraine.” These issues and our

ability to manage increased demand could delay shipments of our tools, increase our testing or production costs or lead to costly failure claims.

We do not have long-term supply contracts with some of our suppliers, and those suppliers are not obligated to perform services or supply products to us for any specific period, in any specific

quantities or at any specific price, except as may be provided in a particular purchase order.

In addition, we attempt to maintain relatively low inventories and acquire subassemblies and components only as needed.

significant risks associated with our reliance on these third-party suppliers, including:

There are significant risks

associated with our reliance on these third-party suppliers, including:

potential price increases;

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increasing the price they charge us for subassemblies and components or arising from our need to replace our current suppliers that we are unable to pass on to our customers could negatively affect our operating results.

Our supply chain may be materially adversely impacted due to global events, including continuing COVID‑19 outbreaks, transportation delays and the armed

conflict in Ukraine.

We rely upon the facilities of our global suppliers with operations in the PRC, Japan, Taiwan and the United States to support our business.

We source the substantial majority of our components

from Asia, and as a result, our supply chain can be adversely affected by a variety of global events, including COVID-19 restrictions (see “Risks Related to the COVID-19 Pandemic—Substantially all of our operations, as well as significant

operations of a number of our key customers, are located in areas of the PRC impacted by the COVID-19 pandemic, and our operations have been, and may continue to be, adversely affected by the effects of PRC restrictions imposed as the result of

COVID-19”), transportation delays, including those related to the June 2022 truck driver strike in South Korea resulting from escalated fuel prices, and the armed conflict in Ukraine.

As a result of these types of global events and resulting

governmental and business reactions, our suppliers may not have the materials, capacity, or capability to supply our components according to our schedule and specifications.

Further, there may be logistics issues, including our ability and our

supply chain’s ability to quickly ramp up production, labor issues and transportation demands that may cause further delays.

Supply chain constraints have intensified due to COVID-19 and may further intensify due to other global events,

contributing to existing global shortages coupled with increased demand in the supply of semiconductors.

The unavailability of any component or supplier could result in production delays, underutilized facilities, and loss of access to critical

raw materials and parts for producing and supporting our tools, and could impact our ongoing capacity expansion and our ability to fulfill our product delivery obligations.

If our suppliers’ operations are curtailed, we may need to seek

alternate sources of supply, which may be more expensive.

Alternate sources may not be available or may result in delays in shipments to us from our supply chain and subsequently to our customers, each of which would affect our results of

These types of disruptions and governmental restrictions may also result in the inability of our customers to obtain materials necessary for their full production, which could also result in reduced demand for our products.

disruptions and governmental restrictions, as well as related general limitations on movement around the world, are expected to be temporary, the duration of the production and supply chain disruption, and related financial impact, cannot be

estimated at this time.

Should the production and distribution closures continue for an extended period of time, the impact on our supply chain could have a material adverse effect on our results of operations and cash flows.

disruptions could also negatively affect the sources and availability of components and materials that are essential to the operation of our business.

Moreover, our customers source a range of production equipment, supplies and services from

other suppliers with operations around the world, and any reduction in supply capacity at those customers’ factories may reduce or even halt those customers’ production and result in a decrease in the demand for our products.

Any shortage of components or subassemblies could result in delayed delivery of products to us or in increased costs to us, which could harm our business.

The ability of our manufacturers to supply our tools is dependent, in part, upon the availability certain components and subassemblies.

The ability of our manufacturers to supply our tools is dependent, in part, upon the availability of certain components and subassemblies.

Our manufacturers may experience shortages in the

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could increase the costs for our products or impair our ability to ship orders in a timely cost-efficient manner.

As a result, we could experience cancellation of orders, refusal to accept deliveries or a reduction in our prices and margins, any of

which could harm our financial performance and results of operations.

We depend on a limited number of suppliers, including single source suppliers, for critical components and subassemblies, and our business could be disrupted if they are unable

to meet our needs.

As a result, we could experience cancellation of orders, refusal to accept deliveries or a reduction in our prices and margins,

any of which could harm our financial performance and results of operations.

We depend on a limited number of suppliers, including single source suppliers, for critical components and subassemblies, and our business could be disrupted

if they are unable to meet our needs.

We depend on a limited number of suppliers for components and subassemblies used in our tools.

Certain components and subassemblies of our tools have only been purchased from our current

suppliers to date and changing the source of those components and subassemblies may result in disruptions during the transition process and entail significant delay and expense.

Certain components and subassemblies of our tools have only been purchased from our current suppliers

to date and changing the source of those components and subassemblies may result in disruptions during the transition process and entail significant delay and expense.

Product Systems, Inc., or ProSys, as the sole supplier of

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With some of these suppliers, we do not have long-term agreements and instead purchase components and subassemblies through a purchase order process.

result, these suppliers may stop supplying us components and subassemblies, limit the allocation of supply and equipment to us due to increased industry demand or significantly increase their prices at any time with little or no advance notice.

reliance on a limited number of suppliers could also result in delivery problems, reduced control over product pricing and quality, and our inability to identify and qualify another supplier in a timely manner.

Moreover, some of our suppliers may experience financial difficulties that could prevent them from supplying us with components or subassemblies used in the design and manufacture of our

As a result, these suppliers may stop

supplying us components and subassemblies, limit the allocation of supply and equipment to us due to increased industry demand or significantly increase their prices at any time with little or no advance notice.

Our reliance on a limited number

of suppliers could also result in delivery problems, reduced control over product pricing and quality, and our inability to identify and qualify another supplier in a timely manner.

Moreover, some of our suppliers may experience financial difficulties that could prevent them from supplying us with components or subassemblies used in the design and manufacture of our products.

In addition, our suppliers, including our sole supplier ProSys, may experience manufacturing delays or shut downs due to circumstances beyond their control, such as labor issues, political unrest or natural disasters.

deficiencies could materially and adversely affect our ability to fulfill customer orders and our results of operations.

We have in the past and may in the future, experience delays or reductions in supply shipments, which could reduce our revenue

and profitability.

Any supply deficiencies

could materially and adversely affect our ability to fulfill customer orders and our results of operations.

We have in the past and may in the future, experience delays or reductions in supply shipments, which could reduce our revenue and

profitability.

If key components or materials are unavailable, our costs would increase and our revenue would decline.

We have depended on PRC governmental subsidies to help fund our technology development since 2008, and our failure to obtain additional subsidies may impede

our development of new technologies and may increase our cost of capital and our operational expenses, either of which could make it difficult for us to expand our product base.

We received subsidies from local and central governmental authorities in the PRC in 2008, 2009, 2014, 2018, 2019, 2020 and 2021.

These grants have provided a significant portion of the funding

for our development and commercialization of stress-free polishing and electro copper-plating technologies.

If we are unable to obtain similar governmental subsidies for development projects in the future, our operating expenses could increase, or

we may need to raise additional funds through public financings, or other arrangements, which could force us to reduce our efforts to develop technologies beyond SAPS, TEBO, Tahoe and ECP.

The success of our business will depend on our ability to manage any future growth.

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management controls, as well as our reporting systems and procedures, at both ACM Research and ACM Shanghai.

The continued expansion of our infrastructure will require us to commit substantial financial, operational and management resources before

our revenue increases and without any assurances that our revenue will increase.

The continued expansion of our infrastructure will require us to commit substantial financial, operational and management resources

before our revenue increases and without any assurances that our revenue will increase.

We are highly dependent on our Chief Executive Officer and President and other senior management and key employees.

Our success largely depends on the skills, experience and continued efforts of our management, technical and sales personnel, including in particular Dr.

Wang, the Chair of the Board, Chief Executive Officer and President of ACM Research.

Wang, the Chair of the Board,

Chief Executive Officer and President of ACM Research.

All of our senior management are at-will employees, which means either we or the employee may terminate their employment at any time.

If one or more of

our other senior management were unable or unwilling to continue their employment with us, we may not be able to replace them in a timely manner.

Moreover, in connection with the STAR Listing and the STAR IPO, ACM Shanghai is now managed by a group

of officers separate from those of ACM Research and those officers owe fiduciary duties to the various stakeholders of ACM Shanghai.

We do not have employment or retention agreements with, or maintain key person life insurance policies on, any of

our employees.

Our business may be severely disrupted and our financial condition and results of operations may be materially and adversely affected.

If one or more of our other senior management personnel

were unable or unwilling to continue their employment with us, we may not be able to replace them in a timely manner.

Moreover, in connection with the STAR Listing and the STAR IPO, ACM Shanghai is now managed by a group of officers separate

from those of ACM Research and those officers owe fiduciary duties to the various stakeholders of ACM Shanghai.

We do not have employment or retention agreements with, or maintain key person life insurance policies on, any of our employees.

business may be severely disrupted and our financial condition and results of operations may be materially and adversely affected.

In addition, our senior management may join a competitor or form a competing company.

Wang or other key management personnel, including our Chief Financial Officer, could significantly delay or prevent the achievement of our business objectives.

The loss of Dr.

other key management personnel, including our Chief Financial Officer, could significantly delay or prevent the achievement of our business objectives.

Failure to attract and retain qualified personnel could put us at a competitive disadvantage and prevent us from effectively growing our business.

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December 31, 2021, we had NOLs of $56.1 million for U.S.

federal income tax purposes and $545,000 for U.S.

federal income tax purposes and $0.5 million for U.S.

state income tax purposes.

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changes, including in connection with our initial public offering and concurrent private placement in November 2017, our follow-on public offering in August 2019, and any future equity issuances.

Future changes in our stock ownership, some of which

are outside of our control, could result in an ownership change.

Regulatory changes, such as suspensions on the use of NOLs, or other unforeseen reasons, may cause our existing NOLs to expire or otherwise become unavailable to offset future income

tax liabilities.

Future changes in our stock ownership, some of

which are outside of our control, could result in an ownership change.

Regulatory changes, such as suspensions on the use of NOLs, or other unforeseen reasons, may cause our existing NOLs to expire or otherwise become unavailable to offset

future income tax liabilities.

Additionally, U.S.

state NOLs generated in one state cannot be used to offset income generated in another U.S.

For these reasons, we may be limited in our ability to realize tax benefits from the use of our NOLs, even if our

profitability would otherwise allow for it.

For these reasons, we may be limited in our ability to realize tax benefits from the use of our

NOLs, even if our profitability would otherwise allow for it.

Acquisitions that we pursue in the future, whether or not consummated, could result in other operating and financial difficulties.

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enter new and adjacent markets, obtain access to additional technical resources, enhance our intellectual property rights or pursue other competitive opportunities.

We may also make investments in certain key suppliers to align our interests with

such suppliers.

We may also make investments in certain key suppliers to align our interests

with such suppliers.

If we seek acquisitions, we may not be able to identify suitable acquisition candidates at prices we consider appropriate.

We cannot readily predict the timing or size of our future acquisitions, or the success of any future

acquisitions.

To the extent that we consummate acquisitions or investments, we may face financial risks as a result, including increased costs associated with merged or acquired operations, increased indebtedness, economic

dilution to gross and operating profit and earnings per share, or unanticipated costs and liabilities.

We cannot readily predict the timing or size of our future acquisitions, or the success of any

future acquisitions.

To the extent that we consummate acquisitions or investments, we may face financial risks as a result, including increased costs associated with merged or acquired operations, increased

indebtedness, economic dilution to gross and operating profit and earnings per share, or unanticipated costs and liabilities.

Acquisitions may involve additional risks, including:

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we may encounter a competitive response, including price competition or intellectual property litigation;

we may encounter difficulties related to required CFIUS approval (see also “—Regulatory and Litigation Risks—Certain of our investments may be subject to review by and approval from CFIUS, which may prevent

us from taking advantage of investment opportunities that would otherwise be advantageous to our stockholders”);

we may encounter difficulties related to required CFIUS approval (see also “-Regulatory Risks-Certain of our investments may be subject to review by and approval from CFIUS, which may prevent us from taking

advantage of investment opportunities that would otherwise be advantageous to our stockholders”);

we may become a party to product liability or intellectual property infringement claims as a result of our sale of the acquired company’s products;

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conditions, which are often unpredictable, have historically impacted customer demand for our products and normal commercial relationships with our customers, suppliers and creditors.

Additionally, in times of economic uncertainty our customers’

budgets for our tools, or their ability to access credit to purchase them, could be adversely affected.

Additionally, in times of economic uncertainty our

customers’ budgets for our tools, or their ability to access credit to purchase them, could be adversely affected.

This would limit their ability to purchase our products and services.

As a result, economic downturns could cause material adverse changes to

our results of operations and financial condition including:

As a result, economic downturns could cause material

adverse changes to our results of operations and financial condition including:

a decline in demand for our products;

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these fluctuations with cost management programs aimed at aligning our expenditures with anticipated revenue streams, which could result in restructuring charges.

Even during periods of reduced revenues, we must continue to invest in research and

development and maintain extensive ongoing worldwide customer service and support capabilities to remain competitive, which may temporarily harm our profitability and other financial results.

We conduct substantially all of our operations outside the United States and face risks associated with conducting business in foreign markets.

Substantially all of our sales in 2021, 2020 and 2019 were made to customers outside the United States.

Our manufacturing center has been located in Shanghai since 2006 and substantially all of

our operations are located in the PRC.

We expect that all of our significant activities will remain outside the United States in the future.

We are subject to a number of risks associated with our international business activities, including:

imposition of, or adverse changes in, foreign laws or regulatory requirements, such as work stoppages and travel restrictions imposed in connection with the COVID-19 pandemic;

the need to comply with the import laws and regulations of various foreign jurisdictions, including a range of U.S.

competition from local suppliers with which potential customers may prefer to do business;

seasonal reduction in business activity, such as during the Lunar New Year in parts of Asia and in other periods in various individual countries;

increased exposure to foreign currency exchange rates;

reduced protection for intellectual property;

longer sales cycles and reliance on indirect sales in certain regions;

increased length of time for shipping and acceptance of our products;

greater difficulty in responding to customer requests for maintenance and spare parts on a timely basis;

greater difficulty in enforcing contracts and accounts receivable collection and longer collection periods;

difficulties in staffing and managing foreign operations and the increased travel, infrastructure and legal and compliance costs associated with multiple international locations;

heightened risk of unfair or corrupt business practices in certain geographies and of improper or fraudulent sales arrangements that may impact financial results and result in restatements of, or

irregularities in, our consolidated financial statements;

responses to such events.

In particular, the Asian market is extremely competitive, and chip manufacturers may be aggressive in seeking price concessions from suppliers, including chip equipment manufacturers.

We may not be successful in developing and implementing policies and strategies that will be effective in managing these risks in each country in which we do business.

Our failure to manage these

risks successfully could adversely affect our business, operating results and financial condition.

Fluctuation in foreign currency exchange rates may adversely affect our results of operations and financial position.

Our results of operations and financial position could be adversely affected as a result of fluctuations in foreign currency exchange rates.

financial statements are denominated in U.S.

dollars, a sizable portion of our costs are denominated in other currencies, principally the Chinese Renminbi and, to a lesser extent, the South Korean Won.

Because many of our raw material purchases are

denominated in Renminbi while the majority of the purchase orders we receive are denominated in U.S.

dollars, exchange rates have a significant effect on our gross margin.

We have not engaged in any foreign currency exchange hedging transactions to

date, and any strategies that we may use in the future to reduce the adverse impact of fluctuations in foreign currency exchange rates may not be successful.

Our foreign currency exposure with respect to assets and liabilities for which we do not

have hedging arrangements could have a material impact on our results of operations in periods when the U.S.

dollar significantly fluctuates in relation to unhedged non-U.S.

currencies in which we transact business.

Even during periods of reduced revenues, we must continue to invest in research

and development and maintain extensive ongoing worldwide customer service and support capabilities to remain competitive, which may temporarily harm our profitability and other financial results.

Regulatory Risks

Our ability to sell our tools to customers in the PRC has been impacted, and will likely continue to be materially and adversely impacted, by export license

requirements, other regulatory changes, or other actions taken by the U.S.

or other governmental agencies.

ACM Shanghai utilizes certain items subject to export controls under the U.S.

Export Administration Regulations (EAR) in manufacturing and supplying its products.

The EAR applies to exports of

commodities, software and technology from the United States, including for use in manufacturing products outside the United States, as well as to certain products manufactured outside the United States that incorporate, or are based on,

designated U.S.

content, software or technology.

The Bureau of Industry and Security of the U.S.

Department of Commerce (BIS), which administers the EAR, recently imposed, and may continue to impose, additional restrictions under the EAR on

certain exports to the PRC, including restrictions targeting the semiconductor manufacturing industry in the PRC.

Many of these restrictions were imposed through licensing requirements with a presumption of denial.

These types of restrictions

may impact the operations of ACM Shanghai.

As part of the new regulations, BIS imposed a series of restrictions on exports of designated products and exports for specified end uses and end users in connection with the supercomputer,

artificial intelligence, integrated circuit (IC) and semiconductor manufacturing sectors in the PRC.

These new restrictions have impacted the procurement by ACM Shanghai of certain items from the U.S.

for use in manufacturing its products and,

depending on the details of the final implementation of these new restrictions and associated licensing policies, will likely continue to limit to an undetermined extent ACM Shanghai’s ability to supply its products to certain end users and for

certain end uses in the PRC.

Alongside these new restrictions, BIS has also continued to designate additional PRC entities, many involved in the semiconductor manufacturing industry, on restricted party lists under the EAR,

such as the Entity List and the Unverified List.

These designations impose licensing requirements for the supply of products to such entities.

In most cases, any items subject to the EAR, including foreign produced products with specified U.S.

content, now require an export license from BIS before they can be supplied to the newly listed PRC entities, regardless of their export classification.

In December 2020, SMIC, one of the largest chip manufacturers in the PRC and one of our key

customers, was one of numerous entities added to the Entity List.

Challenges faced by SMIC and its key suppliers as a result of the listing have indirectly impacted SMIC’s demand for, and ACM Shanghai’s ability to supply, ACM Shanghai

More recently, in October 2022, YMTC, a leading PRC memory chip company and one of our key customers, was added to the Unverified List of the EAR alongside a number of other Chinese entities.

The Unverified List identifies parties for

whom BIS has been unable to confirm their bona fides (i.e., legitimacy and reliability about the end-use and end-user of items subject to the EAR).

Entities listed on the Unverified List are ineligible to receive items subject to the EAR by

means of a license exception if a U.S.

export license is required.

In December 2022, YMTC was moved from the Unverified List to the Entity List.

Challenges faced by YMTC and its key suppliers as a result of the listing could indirectly impact

YMTC’s demand for, or ACM Shanghai’s ability to supply, ACM Shanghai products.

Also in October 2022, BIS announced new rules that significantly expanded U.S.

export controls as applied to advanced IC products, related manufacturing equipment and technology, and

supercomputers, where the destination or ultimate end user is based in the PRC.

In the case of semiconductor manufacturing equipment, the new rules require an export license for the export, re-export, or transfer to or within the PRC of

additional types of semiconductor manufacturing equipment, items for use in manufacturing designated types of semiconductor manufacturing equipment, and semiconductor manufacturing equipment for use at certain IC manufacturing and development

facilities in the PRC.

License applications for these exports are reviewed under a presumption of denial.

In addition, BIS imposed new restrictions by which U.S.

persons anywhere in the world are effectively barred from engaging in certain

activities related to the development and production of semiconductors at PRC fabrication facilities meeting specified criteria, even if no items subject to the EAR are involved.

ACM Shanghai has determined that several of its customers have PRC-based facilities that meet the restricted criteria, and has also determined that several of its products may meet the parameters

of export control classification numbers, or ECCNs, affected by the restrictions.

Accordingly, depending on the details of the final implementation of these new restrictions and associated licensing policies, ACM may not be able to import, or

may face substantial restrictions in importing, parts from the United States to support tool shipments to such facilities, or to be embedded into tools defined by affected ECCNs.

ACM and ACM Shanghai have implemented modifications to their

existing business policies and practices in response to the new restrictions, including by imposing limitations on the activities of their U.S.

persons and their supply chains more broadly to comply with the new regulations.

We believe that as a result of the new restrictions, several ACM Shanghai customers have significantly reduced production and related capital spending at facilities meeting the restricted advanced

node capabilities.

In addition, ACM Shanghai has experienced challenges as the companies in its supply chain adapt their policies to the new regulations.

These factors had an adverse impact on ACM Shanghai’s shipments and sales in the three

months ended December 31, 2022.

We anticipate these factors will continue to have an adverse impact on ACM Shanghai’s shipments and sales in future periods.

We cannot be certain what additional actions the U.S.

government may take with respect to PRC entities, or whether such actions will impact our relationships with our PRC-based customers.

Additional actions could take the form of further revisions to the Entity List or Unverified List, new export restrictions, additional tariffs or other trade restrictions.

It is also possible that other countries could adopt similar

semiconductor-focused export controls to align with the October 2022 U.S.

Press reports indicate that two countries involved in ACM Shanghai’s current supply chain, Japan and the Netherlands, are currently considering similar measures.

The introduction of multilateral semiconductor-focused export controls could further negatively impact ACM Shanghai’s supply chain from potentially affected countries and, indirectly, the ability of our customers in the PRC to scale their

We are unable to predict the duration of the restrictions imposed by the U.S.

government or the effects of any future governmental actions by the U.S.

or other countries that may impact our relationships with our PRC-based

customers, any of which could have a long-term adverse effect on our business, operating results and financial condition.

Changes in government trade policies could limit the demand for our tools and increase the cost of our tools.

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government imposed a round of new or higher tariffs on specified imported products originating from the PRC in response to what the U.S.

government characterizes as unfair trade practices.

government characterized as unfair trade practices.

The PRC government responded to each of these rounds of

tariff changes by imposing new or higher tariffs on specified products imported from the United States.

Higher duties on existing tariffs and further rounds of tariffs have been announced or threatened by U.S.

and PRC leaders.

The imposition of tariffs by the U.S.

and PRC governments and the surrounding economic uncertainty may negatively impact the semiconductor industry, including reducing the demand of fabricators

for capital equipment such as our tools.

Further changes in trade policy, tariffs, additional taxes, restrictions on exports or other trade barriers, or restrictions on supplies, equipment, and raw materials including rare earth minerals, may limit

the ability of our customers to manufacture or sell semiconductors or to make the manufacture or sale of semiconductors more expensive and less profitable, which could lead those customers to fabricate fewer semiconductors and to invest less in

capital equipment such as our tools.

In addition, if the PRC were to impose additional tariffs on raw materials, subsystems or other supplies that we source from the United States, our cost for those supplies would increase.

As a result of any of

the foregoing events, the imposition or new or additional tariffs may limit our ability to manufacture tools, increase our selling and/or manufacturing costs, decrease margins, or inhibit our ability to sell tools or to purchase necessary equipment

and supplies, which could have a material adverse effect on our business, results of operations, or financial conditions.

Our ability to sell our tools to Chinese customers may be restricted by regulatory actions.

The Bureau of Industry and Security of the U.S.

Department of Commerce, or BIS, recently has imposed and may continue to impose additional restrictions,

including licensing requirements, under the Export Administration Regulations, or EAR, with respect to certain PRC companies that impact the supply of U.S.

products and certain non‑U.S.

products incorporating U.S.

content, or that are manufactured

using certain U.S.

technology or software, to such companies and the sourcing of U.S.

items by non-U.S.

companies for use in manufacturing products for such companies.

For example, BIS has recently added a number of PRC entities to the Entity List

under the EAR which means that any items subject to the EAR, including certain non-U.S.

produced products with U.S.

content, require a BIS license for supply to the listed entities.

Among other companies, in December 2020, SMIC, one of the largest

chip manufacturers in the PRC, was added to the Entity List.

Challenges faced by SMIC and its key suppliers as a result of the listing could indirectly impact SMIC’s demand for, or our ability to supply, our products.

We cannot be certain what additional actions the U.S.

government may take with respect to PRC entities, and whether such actions will impact our relationships with our PRC-based customers,

including changes to the Entity List restrictions, other export regulations, tariffs or other trade restrictions, or whether the PRC government may take any actions in response to U.S.

government action that may adversely affect our ability to do

business with our PRC-based customers.

Even in the absence of new restrictions, tariffs or trade actions imposed by the U.S.

or PRC government, our PRC-based customers may take actions to reduce dependence on the supply of products subject to

potential U.S.

trade regulations, including our tools, which could have a material adverse effect on our operating results.

We are unable to predict the duration of the restrictions imposed by the U.S.

government or of any additional governmental

actions that may impact our relationships with our PRC-based customers, any of which could have a long-term adverse effect on our business, operating results and financial condition.

Higher tariffs and additional rounds of tariffs have been suggested or threatened by U.S.

and PRC officials.

The imposition of heightened tariffs on imports by both the U.S.

and PRC governments and the surrounding economic uncertainty may negatively impact the semiconductor industry, including by

reducing the demand of fabricators for capital equipment such as our tools.

Further changes in trade policy, including by tariffs, additional taxes, restrictions on exports or other trade barriers, or restrictions on supplies, equipment, and

raw materials including rare earth minerals, may limit the ability of our customers to manufacture or sell semiconductors or to make the manufacture or sale of semiconductors more expensive and less profitable, which could lead those customers

to fabricate fewer semiconductors and to invest less in capital equipment such as our tools.

In addition, if the PRC were to impose additional tariffs on raw materials, subsystems or other supplies that we source from the United States, our

cost for those supplies would increase.

As a result of any of the foregoing events, the imposition of new or additional tariffs may limit our ability to manufacture tools, increase our selling and/or manufacturing costs, decrease margins, or

inhibit our ability to sell tools or to purchase necessary equipment and supplies, which could have a material adverse effect on our business, results of operations, or financial condition.

Changes in political and economic policies of the PRC government may materially and adversely affect our business, financial condition and results of

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Accordingly, our financial condition and results of operations are

affected to a significant extent by economics, political and legal developments in the PRC.

affected to a significant extent by economic, political and legal developments in the PRC.

The Chinese economy differs from the economies of most developed countries in many respects, including the extent of government involvement, level of development, growth rate, and control of

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improved corporate governance in business enterprises, a substantial portion of productive assets in the PRC are still owned by the government.

In addition, the PRC government continues to play a significant role in regulating industry development

by imposing industrial policies.

The PRC government also exercises significant control over economic growth in the PRC by allocating resources, controlling payment of foreign currency-denominated obligations, setting monetary policy, regulating

financial services and institutions, and providing preferential treatment to particular industries or companies.

In addition, the PRC government continues to play a significant role in regulating industry

development by imposing industrial policies.

The PRC government also exercises significant control over economic growth in the PRC by allocating resources, controlling payment of foreign currency-denominated obligations, setting monetary

policy, regulating financial services and institutions, and providing preferential treatment to particular industries or companies.

While the PRC economy has experienced significant growth in the past three decades, growth has been uneven, both geographically and among various sectors of the economy.

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Some of these measures may benefit the overall PRC economy, but may also have a negative effect on us.

Our financial condition and results of operation

could be materially and adversely affected by government control over capital investments or changes in tax regulations that are applicable to us.

In the past the PRC government has implemented measures to control the pace of economic growth, and

similar measures in the future may cause decreased economic activity, which in turn could lead to a reduction in demand for our products and consequently have a material adverse effect on our businesses, financial condition and results of

Although the PRC government has been implementing policies to develop an independent domestic semiconductor industry supply chain, there is no guaranteed time frame in which these initiatives

will be implemented.

Our financial condition and results of

operation could be materially and adversely affected by government control over capital investments or changes in tax regulations that are applicable to us.

In the past the PRC government has implemented measures to control the pace of economic

growth, and similar measures in the future may cause decreased economic activity, which in turn could lead to a reduction in demand for our products and consequently have a material adverse effect on our businesses, financial condition and

results of operations.

Although the PRC government has been implementing policies to develop an independent domestic semiconductor industry supply chain, there is no guaranteed time frame in which these initiatives will

be implemented.

We cannot guarantee that the implementation of these policies will result in additional revenue to us or that our presence in the PRC will result in support from the PRC government.

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Changes in political and economic policies with respect to the PRC may make it difficult for us to release the benefit of our investments.

On November 12, 2020, then-President Trump issued an executive order, or the Order, establishing a new sanctions program designed to prohibit U.S.

On November 12, 2020, then-U.S.

President Trump issued an executive order, or the Order, establishing a new sanctions program designed to prohibit U.S.

persons from entering into transactions in

certain publicly traded securities, as well as derivatives and securities designed to provide investment exposure to such securities, of any “Communist Chinese military company,” or CCMC, as designated by the U.S.

Department of Defense, or DOD, or

Department of Defense, or DOD,

Secretary of the Treasury.

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persons would be prohibited after a one-year divestment period from the time of designation of the issuer.

A number of PRC issuers have been designated under this

program and more could be added.

A number of PRC issuers have been designated under

this program and more could be added.

On December 3, 2020, SMIC was designated as a CCMC by the DOD, which was subsequently removed as of June 3, 2021.

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commercial relations with CCMC companies other than the securities transactions noted above, certain other export restrictions have been imposed under the Export Administration Regulations on some CCMC companies.

These and any similar future U.S.

These and any similar future

government restrictions on our suppliers or customers may adversely affect our business operations in the PRC, overall company results or our financial condition.

The PRC’s currency exchange control and government restrictions on investment repatriation may impact our ability to transfer funds outside of

the PRC, which could materially and adversely affect our ability to grow, make investments or acquisitions that could benefit our business, otherwise fund and conduct our business, or pay dividends on our common stock.

The PRC’s currency exchange control and government restrictions on investment repatriation may impact our ability to transfer funds outside of the PRC, which

could materially and adversely affect our ability to grow, make investments or acquisitions that could benefit our business, otherwise fund and conduct our business, or pay dividends on our common stock.

We generate substantially all of our revenue through ACM Shanghai, our PRC subsidiary.

PRC statutory laws and regulations permit payments of dividends by ACM Shanghai only out of its retained earnings, which are

determined in accordance with PRC accounting standards and regulations that differ from U.S.

PRC statutory laws and regulations permit payments of dividends by ACM Shanghai only out of its retained

earnings, which are determined in accordance with PRC accounting standards and regulations that differ from U.S.

generally accepted accounting principles.

The PRC regulations and ACM Shanghai’s articles of association require annual appropriations of 10% of net

after-tax profits to be set aside, prior to payment of dividends, as a reserve or surplus fund, which restricts ACM Shanghai’s ability to transfer a portion of its net assets to us.

Such reserved funds can only be used for specific purposes and are

not transferable to ACM in the form of loans, advances or cash dividends.

As a result of these and other restrictions under PRC laws and regulations as well as restrictions under ACM Shanghai’s bank loan agreements, we may be significantly restricted in our ability to transfer a portion of

ACM Shanghai’s net assets to ACM or other subsidiaries of ACM.

We have no assurance that PRC governmental authorities in the future will not limit further or eliminate the ability of ACM Shanghai to purchase foreign currencies and transfer such

funds to ACM to meet its liquidity or other business needs.

Any inability to access funds in the PRC, if and when needed for use outside of the PRC, could have a material and adverse effect on our liquidity and our business.

The PRC regulations and ACM Shanghai’s articles of association require annual

appropriations of 10% of net after-tax profits to be set aside, prior to payment of dividends, as a reserve or surplus fund, which restricts ACM Shanghai’s ability to transfer a portion of its net assets to us.

Such reserved funds can only be

used for specific purposes and are not transferable to ACM in the form of loans, advances or cash dividends.

As a result of these and other restrictions under PRC laws and regulations as well as restrictions under ACM Shanghai’s bank loan agreements, we may be significantly restricted in our ability to

transfer a portion of ACM Shanghai’s net assets to ACM or other subsidiaries of ACM.

We have no assurance that PRC governmental authorities in the future will not limit further or eliminate the ability of ACM Shanghai to purchase foreign

currencies and transfer such funds to ACM to meet its liquidity or other business needs.

Any inability to access funds in the PRC, if and when needed for use outside of the PRC, could have a material and adverse effect on our liquidity and our

Certain of our investments may be subject to review by and approval from CFIUS, which may prevent us from taking advantage of investment opportunities that

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Committee on Foreign Investment in the U.S., or CFIUS.

In the event that CFIUS reviews one or more of the our

In the event that CFIUS reviews one or more of our

investments, there can be no assurances that we will be able to maintain or proceed with such investments on terms acceptable to us.

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likely to require CFIUS review, even in circumstances where other buyers may offer better terms or more consideration.

Government is reportedly considering an outbound investment review mechanism, which may prevent us from taking advantage of investment opportunities

outside the United States that could otherwise be advantageous to our stockholders.

Government is reportedly considering imposing an outbound investment review mechanism similar to CFIUS that would review foreign investments made from the United States.

It is not yet

clear what form the mechanism would take, but reports suggest it could come quickly in the form of an Executive Order, or could be passed as part of legislation from Congress.

In the event that such a review mechanism is implemented, it is

possible that certain of our investments may require review or notification to the U.S.

Government, and could be subject to mitigation or other restrictions.

If implemented, similar to CFIUS reviews, there can be no assurances that we will be

able to maintain or proceed with investments on terms acceptable to us.

Such a mechanism could negatively impact our ability to realize value from certain existing and future investments, including by limiting exit opportunities or causing us

to favor buyers that we believe are lower risk for the possible outbound investment reviews, even in circumstances where other buyers may offer better terms or more consideration.

Furthermore, because the requirements have not yet been

established, the range or extent of possible effects that could flow from such a measure cannot be determined with any degree of certainty at this time.

It is possible that the outbound investment review mechanism could adversely affect our

business, financial condition, and operating results.

We are subject to government regulation, including import, export, economic sanctions, and anti-corruption laws and regulations, that may limit our sales

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Our products are subject to import and export controls in jurisdictions in which we distribute or sell our products.

Import and exports control and economic sanctions laws and regulations include

Import and export controls and economic sanctions laws and regulations include

restrictions and prohibitions on the sale or supply of certain products and on our transfer of parts, components, and related technical information and know-how to certain countries, regions, governments, persons and entities.

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The exportation, re-exportation, transfers within foreign countries and importation of our products, including by our partners, must comply with these laws and regulations, and any violations may result in reputational harm, government

investigations and penalties, and a denial or curtailment of exporting.

investigations and penalties, or a denial or curtailment of exporting privileges.

Complying with export control and sanctions laws for a particular sale may be time consuming, may increase our costs, and may result in the delay or loss of sales

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sanctions or export control laws, or similar laws in other jurisdictions, we and the individuals working for us could incur substantial fines and penalties.

Changes in export, sanctions or

import laws or regulations may delay the introduction and sale of our products in international markets, require us to spend resources to seek necessary government authorizations or to develop different versions of our products, or, in some cases,

prevent the export or import of our products to certain countries, regions, governments, persons or entities, which could adversely affect our business, financial condition and operating results.

Changes in export, sanctions

or import laws or regulations may delay the introduction and sale of our products in international markets, require us to expend resources to seek necessary government authorizations or develop different versions of our products, or, in some

cases, prevent the export or import of our products to certain countries, regions, governments, persons or entities, which could adversely affect our business, financial condition and operating results.

We are subject to various domestic and international anti-corruption laws, such as the U.S.

Foreign Corrupt Practices Act, as well as similar anti-bribery and anti-kickback laws and regulations.

Foreign Corrupt Practices Act, as well as similar anti-bribery and anti-kickback laws and regulations in

the United States and other jurisdictions.

These laws and regulations generally prohibit companies and their intermediaries from offering or making improper payments to non-U.S.

officials for the purpose of obtaining, retaining or directing business.

Our exposure for violating these laws

and regulations increases as our international presence expands and as we increase sales and operations in foreign jurisdictions.

Our auditor, as a registered public accounting firm operating in the PRC, is not permitted to be inspected by the Public Company Accounting Oversight Board,

and consequently investors may be deprived of the benefits of such inspections.

BDO China Shu Lun Pan Certified Public Accountants LLP, or BDO China, is the independent registered public accounting firm that issued the audit report included in this report in connection with

our consolidated financial statements as of, and for the years ended, December 31, 2021, 2020 and 2019.

BDO China, as an auditor of companies that are traded publicly in the United States and a firm registered with the PCAOB is required by the laws

of the United States to undergo regular inspections by the PCAOB to assess its compliance with the laws of the United States and applicable professional standards.

BDO China is located in the PRC.

The PCAOB is currently unable to conduct

inspections of auditors in the PRC without the approval of PRC authorities, and therefore BDO China, like other independent registered public accounting firms operating in the PRC, is currently not inspected by the PCAOB.

In May 2013 the PCAOB announced that it had entered into a Memorandum of Understanding on Enforcement Cooperation with the China Securities Regulatory Commission and the Ministry of Finance of

China pursuant to which the Ministry of Finance established a cooperative framework between the parties for the production and exchange of audit documents relevant to investigations in both the PRC and the United States.

More specifically, the

Memorandum of Understanding provides a mechanism for the parties to request and receive from each other assistance in obtaining documents and information in furtherance of their investigative duties.

In addition the PCAOB is engaged in continuing

discussions with the China Securities Regulatory Commission and the Ministry of Finance to permit joint inspections in the PRC of audit firms that are registered with the PCAOB and to audit PRC companies whose securities are listed on U.S.

The PCAOB’s inspections of firms outside of the PRC have identified deficiencies in audit procedures and quality control procedures, and such deficiencies may be addressed as part of the

inspection process to improve future audit quality.

The inability of the PCAOB to conduct inspections of BDO China with respect to its audit of our consolidated financial statements may make it more difficult for investors to evaluate BDO China’s

audit procedures and quality control procedures by depriving investors of potential benefits from improvements that could have been facilitated by PCAOB inspections.

We could be adversely affected if proposed legislation is adopted regarding improved access to audit and other information and audit inspections of

accounting firms, including registered public accounting firms operating in the PRC such as our auditor, or if Nasdaq’s proposals requiring additional criteria to companies operating in “restrictive markets” become effective.

BDO China, our independent registered public accounting firm, is not inspected by the PCAOB, as described in the preceding risk factor.

We are one of 283 companies named in PCAOB’s list of

“Public Companies that are Audit Clients of PCAOB-Registered Firms from Non-U.S.

Jurisdictions where the PCAOB is Denied Access to Conduct Inspections.”

On March 24, 2021, the SEC adopted interim final amendments to implement congressionally mandated submission and disclosure required of the Holding Foreign Companies Accountable

Act, and on December 2, 2021, the SEC adopted final amendments to finalize rules implementing the submission and disclosures in the Holding Foreign Companies Accountable Act.

These final amendments apply

to registrants that the SEC identifies as having filed an annual report on Form 10-K and other forms with an audit report issued by a registered public accounting firm that is located in a foreign jurisdiction and that the PCAOB has determined it

is unable to inspect or investigate completely because of a position taken by an authority in that jurisdiction.

Any such identified registrant will be required to submit documentation to the SEC establishing that it is not owned or controlled by

a governmental entity in that foreign jurisdiction, and will also require disclosure in the registrant’s annual report regarding the audit arrangements of, and governmental influence on, such a registrant.

These actions are the latest in a series

of recent proposed actions:

In December 2018 the SEC and the PCAOB issued a joint statement highlighting continued challenges faced by U.S.

regulators in their oversight of financial statement audits of U.S.-listed reporting companies

with significant operations in the PRC.

In June 2019 a bipartisan group of lawmakers introduced bills in both houses of the U.S.

Congress that, if passed, would have required the SEC to maintain a list of foreign reporting companies for which the

PCAOB is not able to inspect or investigate an auditor report issued by a foreign public accounting firm.

The proposed Ensuring Quality Information and Transparency for Abroad-Based Listings on our Exchanges Act, also referred to as the

EQUITABLE Act, would have prescribed increased disclosure requirements for these reporting companies and, beginning in 2025, provided for the delisting from U.S.

stock exchanges of reporting companies included on the SEC’s list for three

consecutive years.

In May 2020 Nasdaq requested approval by the SEC of proposals that would impact companies with businesses principally administered in jurisdictions defined as “restrictive markets,” which likely would

encompass the PRC.

These proposals contemplate, among other things, the application of more stringent listing criteria if a listed company’s auditor does not demonstrate a PCAOB inspection record (as is the case with our auditor), employee

expertise and training, or geographic or other resources sufficient to perform the company’s audit satisfactorily.

Examples of more stringent criteria that Nasdaq could apply include requiring:

(a) higher levels of equity, assets, earnings

or liquidity than are otherwise needed;

(b) that any public offering to be underwritten on a firm commitment basis (involving more due diligence by the underwriter);

and (c) the imposition of lock-up restrictions on directors and officers

to allow market mechanisms to determine an appropriate price for shares before the insiders could sell.

Alternatively, Nasdaq could deny continued listing to a company.

In April 2020 the SEC and the PCAOB issued a joint statement highlighting the significant disclosure, financial reporting and other risks associated with emerging market investments, including the PCAOB’s

continued inability to inspect audit work papers of auditors in the PRC.

The Holding Foreign Companies Accountable Act, which became law in December 2020, includes requirements for the SEC to identify

issuers whose audit work is performed by auditors that the PCAOB is unable to inspect or investigate completely because of a restriction imposed by a non-U.S.

authority in the auditor’s local jurisdiction.

The Holding Foreign Companies

Accountable Act also requires that, to the extent that the PCAOB has been unable to inspect an issuer’s auditor for three consecutive years since 2021, the SEC shall prohibit its securities registered in the United States from being

traded on any national securities exchange or over-the-counter market in the United States.

Furthermore, on June 22, 2021, the U.S.

Senate passed the Accelerating Holding Foreign Companies Accountable Act, which, if enacted, would amend

the Holding Foreign Companies Accountable Act to require the SEC to prohibit an issuer’s securities from trading on any national securities exchange or over-the-counter market in the United States if the PCAOB has been unable to inspect

an issuer’s auditor for two consecutive years instead of three.

On September 22, 2021, the PCAOB adopted a final rule implementing the Holding Foreign Companies Accountable Act, which provides a framework for the PCAOB to use when

determining, as contemplated under the Holding Foreign Companies Accountable Act, whether the PCAOB is unable to inspect or investigate completely registered public accounting firms located in a foreign jurisdiction because of a position

taken by one or more authorities in that jurisdiction.

On December 16, 2021, the PCAOB designated China and Hong Kong as jurisdictions where the PCAOB is not allowed to conduct full and complete audit inspections and has identified firms

registered in such jurisdictions, including BDO China Shu Lun Pan Certified Public Accountants LLP, our independent registered public accounting firm.

Pursuant to each annual determination by the PCAOB, the SEC will, on an annual basis,

identify issuers that have used non-inspected audit firms.

It remains unclear what further actions the SEC, the PCAOB or Nasdaq may take to address these issues and what impact those actions

will have on U.S.

companies that have significant operations in the PRC and have securities listed on a U.S.

stock exchange.

Any such actions could materially affect our operations and

stock price, including by resulting in our being de-listed from Nasdaq or being required to engage a new audit firm, which would require significant expense and management time.

Risks Related to Our STAR Market Listing

We may not achieve the results contemplated by our business strategy and our strategy for growth in the PRC may not result in increases in the price of

Class A common stock.

officials for the purpose of obtaining, retaining or directing

Our exposure for violating these laws and regulations increases as our international presence expands and as we increase sales and operations in foreign jurisdictions.

Risks Related to Our STAR Listing

We may not achieve the results contemplated by our business strategy and our strategy for growth in the PRC may not result in increases in the price of Class

A common stock.

We cannot assure you that we will realize any or all of our anticipated benefits of the STAR Listing and the STAR IPO, which may not have the anticipated effects of including the strengthening of

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proceeds in a manner that results in our operating success or with which ACM Research stockholders agree.

Our failure to successfully leverage the completion of the STAR Listing and the STAR IPO to expand our PRC business could result in a decrease

in the price of the Class A common stock, and we cannot assure you that the success of ACM Shanghai will have a an attendant positive effect on the price of the Class A common stock.

Our failure to successfully leverage the completion of the STAR Listing and the STAR IPO to expand our PRC business could result in a

decrease in the price of the Class A common stock, and we cannot assure you that the success of ACM Shanghai will have an attendant positive effect on the price of the Class A common stock.

PRC companies are critical to the global semiconductor industry, and our current business is substantially concentrated in the PRC market.

Our inability

to build, or any delay in growing, our PRC-based operations would materially and adversely limit our operations and operating results, including our revenue growth.

Our inability to build, or any delay in growing, our

PRC-based operations would materially and adversely limit our operations and operating results, including our revenue growth.

ACM Shanghai’s status as a publicly traded company that is controlled, but less than wholly owned, by ACM Research could have an adverse effect on us.

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wholly owned subsidiary of ACM Research.

As the result of actions taken in connection with the STAR Listing and the STAR IPO, ACM Shanghai is no longer a wholly owned subsidiary of ACM Research, and the interests of ACM Shanghai may diverge from

the interests of ACM Research and its other subsidiaries in the future.

We may face conflicts of interest in managing, financing or engaging in transactions with ACM Shanghai, or allocating business opportunities between our subsidiaries, including

future arrangements for operating subsidiaries other than ACM Shanghai to license and use our intellectual property.

As the result of actions taken in connection with the STAR Listing and the STAR IPO, ACM Shanghai is no longer a wholly owned subsidiary of ACM Research, and the interests of ACM Shanghai may diverge

from the interests of ACM Research and its other subsidiaries in the future.

We may face conflicts of interest in managing, financing or engaging in transactions with ACM Shanghai, or allocating business opportunities between our subsidiaries,

including future arrangements for operating subsidiaries other than ACM Shanghai to license and use our intellectual property.

Substantially all of our intellectual property has been developed in the PRC and is owned by ACM Shanghai.

As we expand our global

operations through operating subsidiaries outside of the PRC, those operating subsidiaries may need to license intellectual property from ACM Shanghai in order to operate, and there can be no assurance that conflicts of interest will not preclude

those operating subsidiaries from licensing the required intellectual property from ACM Shanghai on reasonable terms or at all.

expand our global operations through operating subsidiaries outside of the PRC, those operating subsidiaries may need to license intellectual property from ACM Shanghai in order to operate, and there can be no assurance that conflicts of

interest will not preclude those operating subsidiaries from licensing the required intellectual property from ACM Shanghai on reasonable terms or at all.

ACM Research retains majority ownership of ACM Shanghai since the STAR IPO, but ACM Shanghai is managed by a separate board of directors and officers and those directors and officers will owe

fiduciary duties to the various stakeholders of ACM Shanghai, including shareholders other than ACM Research.

In the operation of ACM Shanghai’s business, there may be situations that arise whereby the directors and officers of ACM Shanghai, in the

exercise of their fiduciary duties, take actions that may be contrary to the best interests of ACM Research.

In the operation of ACM Shanghai’s business, there may be situations that arise whereby the directors and officers of ACM Shanghai, in

the exercise of their fiduciary duties, take actions that may be contrary to the best interests of ACM Research.

In the future, ACM Shanghai may issue options, restricted shares and other forms of share-based compensation to its directors, officers and employees, which could dilute ACM Research’s ownership

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STAR Market and the price of ACM Research Class A common stock on Nasdaq could lead to increased volatility, as some investors seek to arbitrage price differences.

Moreover, such volatility could be exacerbated by the fact that ACM Shanghai shares

currently represent substantially all of the assets of ACM Research.

Moreover, such volatility could be exacerbated by the fact that ACM Shanghai

shares currently represent substantially all of the assets of ACM Research.

Risks Related to Our Intellectual Property and Data Security

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other technologies and the design of our Ultra C equipment, as well as our ability to operate without infringing upon the proprietary rights of others.

There can be no assurance that our patent applications will result in additional patents being

issued or that issued patents will afford sufficient protection against competitors with similar technology, nor can there be any assurance that the patents issued will not be infringed, designed around, or invalidated by third parties.

patents may later be found unenforceable or may be modified or revoked in proceedings instituted by third parties before various patent offices or in courts.

The degree of future protection for our intellectual property is uncertain.

protection may be available and may not adequately protect our rights or permit us to gain or keep any competitive advantage.

This failure to properly protect the intellectual property rights relating to our products and technologies could have a

material adverse effect on our financial condition and results of operations.

There can be no assurance that our patent applications will result in additional patents

being issued or that issued patents will afford sufficient protection against competitors with similar technology, nor can there be any assurance that the patents issued will not be infringed, designed around, or invalidated by third parties.

Even issued patents may later be found unenforceable or may be modified or revoked in proceedings instituted by third parties before various patent offices or in courts.

The degree of future protection for our intellectual property is

Only limited protection may be available and may not adequately protect our rights or permit us to gain or keep any competitive advantage.

This failure to properly protect the intellectual property rights relating to our products and

technologies could have a material adverse effect on our financial condition and results of operations.

The patent application process is subject to numerous risks and uncertainties, and there can be no assurance that we or any of our future development partners will be successful in protecting our

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There are situations in which noncompliance can result in abandonment or lapse of a patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction.

In such an event, competitors might be

able to enter the market earlier than would otherwise have been the case.

In such an event, competitors might

be able to enter the market earlier than would otherwise have been the case.

Patent applications may not result in any patents being issued.

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In addition, we rely on the protection of our trade secrets and know-how.

Although we have taken steps to protect our trade secrets and unpatented know-how, including entering into

confidentiality and non-disclosure agreements with third parties and confidential information and inventions agreements with key employees, customers and suppliers, other parties may still obtain this information or may come upon this information

Although we have taken steps to protect our trade secrets and unpatented know-how, including entering into confidentiality

and non-disclosure agreements with third parties and confidential information and inventions agreements with key employees, customers and suppliers, other parties may still obtain this information or may come upon this information

independently.

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unauthorized use, we may be required to file infringement claims, which can be expensive and time consuming.

An adverse result in any litigation or defense proceedings, including our current suits, could put one or more of our patents at risk of

being invalidated, found to be unenforceable or interpreted narrowly and could put our patent applications at risk of not issuing.

An adverse result in any litigation or defense proceedings, including our current suits, could put one or more of our patents at risk

of being invalidated, found to be unenforceable or interpreted narrowly and could put our patent applications at risk of not issuing.

Furthermore, because of the substantial amount of discovery required in connection with intellectual property

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Most of our competitors are larger than we are and have substantially greater resources, and they therefore are likely to be able to sustain the costs of complex patent litigation longer than we could.

adverse outcome in such litigation or proceedings may expose us to loss of our proprietary position.

We may not be able to protect our intellectual property rights throughout the world, including the PRC, which could materially, negatively affect our business.

An adverse outcome in such litigation or proceedings may expose us to loss of our proprietary position.

We may not be able to protect our intellectual property rights throughout the world, including the PRC, which could materially, negatively affect our

Filing, prosecuting and defending patents on our products or proprietary technologies in all countries throughout the world would be prohibitively expensive, and our intellectual property rights

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Accordingly, protection of intellectual property and proprietary rights in the PRC may not be as effective as in the United States or other countries.

result, third parties could illegally use the technologies and proprietary processes that we have developed and compete with us, which could negatively affect any competitive advantage we enjoy, dilute our brand and harm our operating results.

Litigation may be necessary to enforce our intellectual property rights, and given the relative unpredictability of the PRC’s legal system and potential difficulties enforcing a court judgment in the PRC, there is no guarantee litigation would

result in an outcome favorable to us.

As a result, third parties could illegally use the technologies and proprietary processes that we have developed and compete with us, which could negatively affect any competitive advantage we enjoy, dilute our brand and harm our operating

litigation would result in an outcome favorable to us.

Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions.

The legal systems of certain countries, particularly

certain developing countries, do not favor the enforcement of patents and other intellectual property protection, which could make it difficult for us to stop the infringement of our patents or marketing of competing products in violation of our

The legal systems of certain countries, particularly certain

developing countries, do not favor the enforcement of patents and other intellectual property protection, which could make it difficult for us to stop the infringement of our patents or marketing of competing products in violation of our

proprietary rights generally.

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invalidated or interpreted narrowly and our patent applications at risk of not issuing, and could provoke third parties to assert claims against us.

We may not prevail in any lawsuits that we initiate, and the damages or other remedies awarded, if

any, may not be commercially meaningful.

Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license

and may adversely affect our business.

We may not prevail in any lawsuits that we initiate, and the damages or other remedies awarded,

if any, may not be commercially meaningful.

Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or

license and may adversely affect our business.

If we are sued for infringing intellectual property rights of third parties, it will be costly and time consuming, and an unfavorable outcome in that

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Because the techniques used by such computer programmers to access or sabotage networks change frequently and may not be recognized until launched against a target, we may be unable to anticipate these techniques.

have also outsourced a number of our business functions to third-party contractors, including our manufacturers, and our business operations also depend, in part, on the success of our contractors’ own cybersecurity measures.

Additionally, we face

potential heightened cybersecurity risks during the COVID-19 pandemic as our level of dependence on our IT networks and related systems increases, stemming from employees working remotely, and the number of malware campaigns and phishing attacks

preying on the uncertainties surrounding the COVID‑19 pandemic increases.

We have also outsourced a number of our business functions to third-party contractors, including our manufacturers, and our business operations also depend, in part, on the success of our contractors’ own cybersecurity measures.

Additionally,

we face potential heightened cybersecurity risks during the COVID-19 pandemic as our level of dependence on our IT networks and related systems increases, stemming from employees working remotely, and the number of malware campaigns and

phishing attacks preying on the uncertainties surrounding the COVID‑19 pandemic increases.

These heightened cybersecurity risks may increase our vulnerability to cyber-attacks and cause disruptions to our internal control procedures.

Accordingly, if our

cybersecurity systems and those of our contractors fail to protect against unauthorized access, sophisticated cyberattacks and the mishandling of data by our employees and contractors, our ability to conduct our business effectively could be

damaged in a number of ways, including sensitive data regarding our employees or business, including intellectual property and other proprietary data, could be stolen.

Should this occur, we could be subject to significant claims for liability from

our customers and regulatory actions from governmental agencies.

In addition, our ability to protect our intellectual property rights could be compromised and our reputation and competitive position could be significantly harmed.

Consequently, our

financial performance and results of operations could be adversely affected.

Accordingly, if our cybersecurity systems and those of our contractors fail to protect against unauthorized access, sophisticated cyberattacks and the mishandling of data by our employees and contractors, our ability to conduct our business

effectively could be damaged in a number of ways, including sensitive data regarding our employees or business, including intellectual property and other proprietary data, could be stolen.

Should this occur, we could be subject to significant

claims for liability from our customers and regulatory actions from governmental agencies.

In addition, our ability to protect our intellectual property rights could be compromised and our reputation and competitive position could be

significantly harmed.

Consequently, our financial performance and results of operations could be adversely affected.

Risks Related to the COVID‑19 Pandemic

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We have set forth below key risks from the COVID‑19 pandemic that we have identified or experienced to date.

The situation continues to evolve, however, and it is impossible

to predict the effect and ongoing impact of the COVID‑19 pandemic on our business operations and results.

The situation continues to evolve, however, and it is impossible to

predict the effect and ongoing impact of the COVID‑19 pandemic on our business operations and results.

While the quarantine, social distancing and other regulatory measures instituted or recommended in response to COVID‑19 were expected to be

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demand for our products and our customers’ chips and have a material adverse impact on our business, operating results and financial condition.

Substantially all of our operations are located in areas impacted by the COVID‑19 pandemic, and those operations have been, and may continue to be,

adversely affected by the COVID‑19 pandemic.

We conduct substantially all of our product development, manufacturing, support and services in the PRC, and those activities have been directly impacted by the COVID‑19 pandemic and related

restrictions on transportation and public appearances.

We cannot assure you that closures or reductions of our PRC operations or production may not be necessary in upcoming months as the result of business interruptions arising from protective

measures being taken by the PRC and other governmental agencies or of other consequences of the COVID‑19 pandemic.

Our corporate headquarters are located in San Mateo County in the San Francisco Bay area.

The effects of actions taken by local governmental or other agencies may in the future may negatively

impact productivity, disrupt our business and delay timelines, the magnitude of which will depend, in part, on the length and severity of the restrictions and other limitations on our ability to conduct our business in the ordinary course.

The prolonged and broad-based shift to a remote working environment continues to create inherent productivity, connectivity, and oversight challenges and could affect our ability to enhance,

develop and support existing products and services, detect and prevent spam and problematic content, hold product sales and marketing events, and generate new sales leads, among others.

In addition, the changed environment under which we are

operating could have an effect on our internal controls over financial reporting as well as our ability to meet a number of our compliance requirements in a timely or quality manner.

Additional and/or extended, governmental lockdowns, restrictions

or new regulations could significantly impact the ability of our employees and vendors to work productively.

Governmental restrictions have been globally inconsistent and it remains unclear when a return to worksite locations or travel will be

permitted or what restrictions will be in place in those environments.

We may experience increased costs as we continue to maintain our facilities for a safe work environment, in addition to potential effects on our ability to compete effectively

and maintain our corporate culture.

Extended periods of interruption to our corporate, development or manufacturing facilities due to the COVID‑19 pandemic could cause us to lose revenue and market share, which would depress our

financial performance and could be difficult to recapture.

Our business may also be harmed if travel to or from the PRC or the United States continues to be restricted or inadvisable or if members of management and other employees are absent

because they contract the coronavirus, they elect not to come to work due to the illness affecting others in our office or laboratory facilities, or they are subject to quarantines or other governmentally imposed restrictions.

Our global supply chain may be materially adversely impacted due to the COVID‑19 pandemic.

We rely upon the facilities of our global suppliers with operations in the PRC, Japan, Taiwan and the United States to support our business.

We source the substantial majority of our components

The pandemic has resulted in significant governmental measures in many countries being implemented to control the spread of COVID‑19, including restrictions on manufacturing and the movement of employees both in and out of China and

within many regions of the PRC.

As a result of COVID‑19 and the measures designed to contain its spread, our suppliers may not have the materials, capacity, or capability to supply our components according to our schedule and specifications.

Further, there may be logistics issues, including our ability and our supply chain’s ability to quickly ramp up production, and transportation demands that may cause further delays.

Supply chain constraints have intensified due to COVID-19, which

has contributed to global shortages coupled with increased demand in the supply of semiconductors.

If our suppliers’ operations are curtailed, we may need to seek alternate sources of supply, which may be more expensive.

Alternate sources may not

be available or may result in delays in shipments to us from our supply chain and subsequently to our customers, each of which would affect our results of operations.

While the disruptions and restrictions on the ability to travel, quarantines and

temporary closures of the facilities of our suppliers, as well as general limitations on movement in the region, are expected to be temporary, the duration of the production and supply chain disruption, and related financial impact, cannot be

estimated at this time.

Business disruptions

could also negatively affect the sources and availability of components and materials that are essential to the operation of our business.

Moreover, our customers source a range of production equipment, supplies and services from other suppliers

with operations around the world, and any reduction in supply capacity at those customers’ factories due to the COVID‑19 pandemic may reduce or even halt those customers’ production and result in a decrease in the demand for our products.

Substantially all of our operations, as well as significant operations of a number of our key customers, are located in areas of the PRC impacted by the

COVID‑19 pandemic, and our operations have been, and may continue to be, adversely affected by the effects of PRC restrictions imposed as the result of COVID‑19.

We conduct substantially all of our product development, manufacturing, support and services in the PRC, and those activities have been directly impacted by COVID-19 and related restrictions on

transportation and public appearances.

In March 2022 several regions in China began to experience elevated levels of COVID-19 infections, and the PRC government instituted policies to restrict the spread of the virus, which are referred to as

zero-COVID policies.

The policies began with an increase of “spot quarantines,” under which a positive polymerase chain reaction, or PCR, or other tests would result in the quarantining of individual buildings, groups of buildings, or even full

neighborhoods.

The policies were later expanded to full-city restrictions, including in the City of Shanghai, where substantially all of our operations are located.

COVID-19 related restrictions in Shanghai began to limit employee access to,

and logistics activities of, our offices and production facilities in the Pudong district of Shanghai during in the first quarter of 2022, and therefore limited our ability to ship finished products to customers and to produce new products.

Spot quarantines in mid-March 2022 began to impact a number of our employees and led to a closure of our administrative and R&D offices in Zhangjiang in the Pudong district.

A subsequent restriction that encompassed the entire Pudong region

of Shanghai was imposed in late March 2022 and impacted the operation of our Chuansha production facility.

In addition, in December 2022, the PRC government relaxed its zero-COVID policies, which resulted in large scale COVID-19 infections throughout China, including Shanghai.

A significant number of

ACM Shanghai employees were also infected, and in many cases missed work for one or several weeks, which caused administrative and operational challenges in late 2022 and early 2023.

We cannot assure you that illnesses of ACM Shanghai

employees, or of its customers, suppliers or other third parties, may not result in closures, reductions of PRC operations or production, or additional administrative inefficiencies in the upcoming months or quarters.

As the result of COVID-19 related restrictions in Shanghai, ACM Research’s indirect subsidiary ACM Shengwei may be unable to achieve certain performance

milestones required by its Grant Contract for State-owned Construction Land Use Right in Shanghai City, and our liquidity, financial position and business would be adversely affected if ACM Shengwei is subject to penalties or loses its rights

to the use of the granted land and any partially completed facilities on the land.

In 2020 ACM Shanghai, through its wholly-owned subsidiary ACM Shengwei, entered into a Grant Contract for State-owned Construction Land Use Right in Shanghai City (Category of R&D Headquarters

and Industrial Projects), or the Grant Agreement, with the China (Shanghai) Pilot Free Trade Zone Lin-gang Special Area Administration, or the Grantor, in connection with ACM Shengwei’s obtaining of rights to use approximately 43,000 square

meters (10.6 acres) of land in the Lingang Heavy Equipment Industrial Zone of Lin-gang Special Area of China (Shanghai) Pilot Free Trade Zone, or the Land Use Right, for a period of fifty years, commencing on the date of delivery of the land in

July 2020, or the Delivery Date.

In connection with the Land Use Right, ACM Shengwei paid a performance deposit of RMB 12.3 million ($1.9 million) to secure its achievement of certain milestones, consisting of:

(a) the start of

construction within 6 months after the Delivery Date (60% of the performance deposit); (b) the completion of construction within 30 months after the Delivery Date (20% of the performance deposit), or Construction Completion Milestone; and (c)

the start of production within 42 months after the Delivery Date (20% of the performance deposit), or Production Start Milestone.

If the achievement of the Construction Completion Milestone or the Production Start Milestone is delayed or

abandoned, ACM Shengwei may be subject to penalties and may lose its rights to both the use of the granted land and any partially completed facilities on that land.

As a result of COVID-19 related restrictions, ACM Shengwei has experienced delays and did not meet the Construction Completion Milestone.

In December 2022, prior to the Construction Completion

Milestone, ACM Shengwei successfully filed and received a six-month extension with respect to both the Construction Completion Milestone and the Production Start Milestone, which extended such milestones to July 9, 2023 and July 9, 2024,

respectively.

ACM Shengwei expects to receive a new grant agreement, Version 3.0, by the end of March 2023.

There is no guarantee that ACM Shengwei will be able to meet the agreed to timeline, in which the portion of the performance deposit

related to achieving the Construction Completion Milestone or the performance deposit related to achieving the Production Start Milestone may be subject to forfeiture.

Additionally, if achievement of the Construction Completion Milestone is

delayed for more than one year, the Grantor is entitled to terminate the Grant Agreement and take back the Land Use Right, in exchange for a refund of the grant fees for the remaining land use term after deducting the deposit agreed under the

Grant Agreement and refund the deposit related to the Production Start Milestone.

We cannot guarantee that the refund of the fees will reflect fair market value of the Land Use Right or that they would cover the expended costs of ACM Shengwei

with respect to the Grant Agreement and the Land Use Right.

Moreover, loss of the deposit, or more significantly, the Land Use Right could significantly negatively impact our liquidity, financial position and business.

The COVID‑19 pandemic could negatively impact our currently planned projects and investments in the PRC.

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In November 2021 we completed the STAR Listing and STAR IPO with respect to shares of ACM Shanghai, in May

ACM Shanghai, through its wholly owned subsidiary Shengwei Research (Shanghai), Inc., entered into an agreement for a land use right in the Lingang region of Shanghai, and in July 2020 Shengwei Research (Shanghai), Inc.

began a multi-year

construction project for a new 1,000,000 square foot development and production center that will incorporate state-of-the-art manufacturing systems and automation technologies, and will provide floor space to support significantly increase

production capacity and related research and development activities..

2020 ACM Shanghai, through its wholly owned subsidiary ACM Shengwei, entered into an agreement for a land use right in the Lingang region of Shanghai, and in July 2020 ACM Shengwei began a multi-year construction project for a new 1,000,000

square foot development and production center that will incorporate state-of-the-art manufacturing systems and automation technologies, and will provide floor space to support significantly increase production capacity and related research

and development activities.

The extent to which COVID-19 impacts these projects will depend on future developments that are highly uncertain and cannot be predicted.

If the disruptions posed by COVID‑19 and

related government measures, or other matters of global concern, continue for an extensive period of time, our ability to consummate one or both of these planned projects could be materially adversely affected.

If the disruptions posed by COVID‑19 and related government measures, or

other matters of global concern, continue for an extensive period of time, our ability to consummate one or both of these planned projects could be materially adversely affected.

In September 2019 ACM Shanghai entered into a partnership agreement for the purposes of engaging in equity venture capital investments in strategic emerging and high-tech industries with a focus

on the semiconductor industry.

We cannot predict the ongoing effect that the COVID‑19 outbreak in the PRC will have on companies that would otherwise be desirable investments for the partnership, and the outbreak or related governmental actions

could significantly impair the ability of the partnership to identify desirable investments or our ability to realize the anticipated benefits of the partnership.

We cannot predict the ongoing effect that the COVID‑19 pandemic in the PRC will have on companies that would otherwise be desirable investments for the partnership, and the outbreak or related governmental

actions could significantly impair the ability of the partnership to identify desirable investments or our ability to realize the anticipated benefits of the partnership.

Risks Related to Ownership of Class A Common Stock

Our management identified material weaknesses in our internal control over financial reporting

that, if not properly remediated, could result in material misstatements in our consolidated financial statements that could cause investors to lose confidence in our reported financial information and have a negative effect on the trading

price of our stock.

Effective internal control over financial reporting is necessary for us to provide accurate financial information.

The Sarbanes-Oxley Act

requires us to, among other things, evaluate the effectiveness of our internal control over financial reporting as of the end of each fiscal year and to include a management report assessing the effectiveness of our internal control over

financial reporting in our Annual Reports on Form 10-K.

As further discussed in “Item 9A.

Controls and Procedures” of Part II of this report, our internal controls over financial reporting were not effective as of December 31, 2022 due to the

existence of two material weaknesses in such controls.

In connection with the audit of our consolidated financial statements as of, and for the year ended, December 31, 2022, we identified two

material weaknesses in our internal control over financial reporting related to:

(i) the fact that we did not design and maintain effective risk assessment procedures, and monitoring activities, including insufficient

identification and assessment of risks impacting the design, implementation, and operating effectiveness of internal control over financial reporting, and insufficient evaluation and determination as to whether the components of internal

control were present and functioning, and

(ii) the fact that we did not design and maintain effective information technology controls related to (a) user access controls to ensure

appropriate segregation of duties and adequately restrict user and privileged access to financial applications, programs, and data to appropriate personnel, (b) computer operations controls to ensure that critical information is monitored,

and data backups are authorized and monitored, (c) appropriate controls to evaluate automated controls, and (d) appropriate controls to validate the completeness and accuracy of key reports used within controls across substantially all

financial statement areas.

As of December 31, 2022, we determined that the above mentioned material weaknesses had not been remediated.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a

reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

The process of designing and implementing effective internal controls and procedures and

remediating the material weaknesses will be a continual effort that may require us to expend significant resources to establish and maintain a system of controls that is adequate to satisfy our reporting obligations as a public company.

cannot assure you that the measures we take will be sufficient to remediate the material weaknesses or that we will implement and maintain adequate controls over our financial processes and reporting in the future in order to avoid

additional material weaknesses or control or significant deficiencies in our internal control over financing reporting.

If our remediation efforts are not successful or other material weaknesses or control or significant deficiencies occur

in the future, we may be unable to report our financial results accurately or on a timely basis, which could cause our reported financial results to be materially misstated and result in the loss of investor confidence and cause the trading

price of Class A common stock to decline.

Moreover, ineffective controls could significantly hinder our ability to prevent fraud.

For further information, see “Item 9A.

Controls and Procedures” of Part II of this report.

The market price of Class A common stock has been and may continue to be volatile,

which could result in substantial losses for investors purchasing our shares.

Class A common stock only commenced trading on the Nasdaq Global Market, or Nasdaq, on November 3, 2017, and the market price of Class A common stock has been, and could continue to be, subject

to significant fluctuations.

The market price of Class A common stock may fluctuate significantly in response to numerous factors, many of which are beyond our control, including:

The market price of Class A common stock has been, and could continue to be, subject to significant fluctuations.

The market price of Class A common stock may fluctuate significantly in response

to numerous factors, many of which are beyond our control, including:

actual or anticipated fluctuations in our revenue and other operating results;

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expectations of investors;

changes in projections for the chips or chip equipment industries or in the operating performance or expectations and stock market valuations of chip companies, chip equipment companies or technology

companies in general;

changes in projections for the chips or chip equipment industries or in the operating performance or expectations and stock market valuations of chip companies, chip equipment companies or technology companies

changes in operating results;

any changes in the financial projections we may provide to the public, our failure to meet these projections, or changes in recommendations by any securities analysts that elect to follow Class A common

additional shares of Class A common stock being sold into the market by us or our existing stockholders or the anticipation of such sales;

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operating performance of the companies whose stock is experiencing those price and volume fluctuations.

Our stock price may be volatile, and securities class action litigation has often been instituted against companies following

periods of volatility of their stock price.

Any such litigation, if instituted against us, could result in substantial costs and a diversion of our management’s attention and resources.

In the past, following periods of volatility in the overall market and the market price of a particular company’s securities, securities class action litigation has often been instituted against

these companies.

For example, during the quarter ended December 31, 2020, such a suit was filed against our company and certain members of our management team as described in “Item 3.

Legal Proceedings.” Although the suit was dismissed with

prejudice on January 10, 2022, similar litigation in the future could result in substantial costs and a diversion of our management’s attention and resources.

Few if any companies with stock publicly traded in the United States has effected a STAR Market listing of stock of a PRC-based subsidiary, and it is

Further, following periods of volatility in the overall market and the market price of a particular company’s securities, securities class

action litigation has often been instituted against these companies.

Similar litigation may be instituted against us in the future, which could result in substantial costs and a diversion of our management’s attention and resources.

Few if any companies with stock publicly traded in the United States have effected a STAR Market listing of stock of a PRC-based subsidiary, and it is

therefore difficult to predict the effect of the STAR Listing and STAR IPO on the Class A common stock.

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demand could lead to a decrease in the market price for the Class A common stock.

An active trading market for Class A common stock may not be sustained.

Class A common stock has been listed on Nasdaq only since November 3, 2017, and we cannot assure you that an active trading market for Class A common

stock will be sustained or maintained.

The lack of an active market may impair your ability to sell your shares at the time you wish to sell them or at a price that you consider reasonable.

The lack of an active market may also reduce the fair

market value of your shares.

There can be no assurance that we will be able to successfully develop or maintain a liquid market for Class A common stock.

If securities or industry analysts do not publish research or reports about us, our business or our market, or if they publish negative evaluations of Class

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common stock or fails to publish reports about the Class A common stock on a regular basis, we could lose visibility in the financial markets, which in turn could cause the Class A common stock price or trading volume to decline.

Requirements associated with being a public reporting company involve significant ongoing costs and can divert significant company resources and management

We are subject to the reporting requirements of the Securities Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of

Nasdaq, and other rules and regulations of the SEC.

We are working with our legal, independent accounting and financial advisors to identify those areas in which changes should be made to our financial and management control systems to manage our

growth and our obligations as a public reporting company.

These areas include corporate governance, corporate control, disclosure controls and procedures, and financial reporting and accounting systems.

We have made, and will continue to make,

changes in these and other areas.

Compliance with the various reporting and other requirements applicable to public reporting companies will require considerable time, attention of management and financial resources.

In addition, the changes we

make may not be sufficient to allow us to satisfy our obligations as a public reporting company on a timely basis.

The listing requirements of Nasdaq require that we satisfy certain corporate governance requirements relating to director independence, distributing annual and interim reports, stockholder

meetings, approvals and voting, soliciting proxies, conflicts of interest and a code of conduct.

Our management and other personnel will need to devote a substantial amount of time to ensure that we comply with all of these requirements.

reporting requirements, rules and regulations will increase our legal and financial compliance costs and will make some activities more time-consuming and costly.

These reporting requirements, rules and regulations, coupled with the increase in

potential litigation exposure associated with being a public company, could also make it more difficult for us to attract and retain qualified persons to serve as our directors or executive officers, or to obtain certain types of insurance,

including director and officer liability insurance, on acceptable terms.

We have never paid and do not intend to pay cash dividends and, consequently, your ability to achieve a return on your investment will depend on

appreciation in the price of Class A common stock.

We have never paid and do not intend to pay cash dividends and, consequently, your ability to achieve a return on your investment will depend on appreciation

in the price of Class A common stock.

We have never declared or paid cash dividends on our capital stock.

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generally accepted accounting principles.

The PRC regulations

and our subsidiaries’ articles of association require annual appropriations of 10% of net after-tax profits to be set aside, prior to payment of dividends, as a reserve or surplus fund, which restricts our subsidiaries’ ability to transfer a

portion of their net assets to us.

regulations and our subsidiaries’ articles of association require annual appropriations of 10% of net after-tax profits to be set aside, prior to payment of dividends, as a reserve or surplus fund, which restricts our subsidiaries’ ability to

transfer a portion of their net assets to us.

In addition, our subsidiaries’ short-term bank loans restrict their ability to pay dividends to us.

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Class B common stock has twenty votes per share and Class A common stock has one vote per share.

As of February 23, 2022, stockholders who hold shares of Class B

common stock, who consist principally of our executive officers, employees, directors and their respective affiliates, collectively held 65.5% of the voting power of our outstanding capital stock.

Because of the twenty-to-one voting ratio between

Class B and Class A common stock, holders of Class B common stock collectively will continue to control a majority of the combined voting power of Class A common stock and therefore be able to control all matters submitted to our stockholders for

approval so long as the shares of Class B common stock represent at least 4.8% of all outstanding shares of Class A and Class B common stock.

This concentrated control will limit or preclude your ability to influence corporate matters for the

foreseeable future.

This concentrated control could also discourage a potential investor from acquiring Class A common stock due to the limited voting power of such stock relative to the Class B common stock and might harm the market price of Class

A common stock.

As of February 22, 2023, stockholders who hold shares of

Class B common stock, who consist principally of our executive officers, employees, directors and their respective affiliates, collectively held 64% of the voting power of our outstanding capital stock.

Because of the twenty-to-one voting ratio

between Class B and Class A common stock, holders of Class B common stock collectively will continue to control a majority of the combined voting power of Class A common stock and therefore be able to control all matters submitted to our

stockholders for approval so long as the shares of Class B common stock represent at least 4.8% of all outstanding shares of Class A and Class B common stock.

This concentrated control will limit or preclude your ability to influence corporate

matters for the foreseeable future.

market price of Class A common stock.

Because of the market capitalization achieved by Class A common stock during October 2020, our charter no longer contemplates circumstances in which all of the shares of Class B common stock will

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and specific shares of Class B common stock will convert into Class A common stock upon future transfers by the holders of those shares.

The potential conversion of Class B common stock to Class A common stock will have the effect, over time, of

increasing the relative voting power of those holders of Class B common stock who retain their shares in the long term.

The potential conversion of Class B common stock to Class A common stock will have the effect, over time,

of increasing the relative voting power of those holders of Class B common stock who retain their shares in the long term.

Delaware law and provisions in our charter and bylaws could make a merger, tender offer or proxy contest difficult, thereby depressing the trading price of

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in a business combination with an interested stockholder for a period of three years after the person becomes an interested stockholder, even if a change of control would be beneficial to our existing stockholders.

Our charter and bylaws contain

provisions that may make the acquisition of our company more difficult, including the following:

Our charter and bylaws

contain provisions that may make the acquisition of our company more difficult, including the following:

our dual class common stock structure provides holders of Class B common stock with the ability to control the outcome of matters requiring stockholder approval, even if they own significantly less than a

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than 15% of our outstanding voting stock from engaging in certain business combinations with us.

Any provision of our charter or bylaws or Delaware law that has the effect of delaying or deterring a change in control could limit the opportunity for

our stockholders to receive a premium for their shares of Class A common stock, and could also affect the price that some investors are willing to pay for Class A common stock.

Any provision of our charter or bylaws or Delaware law that has the effect of delaying or deterring a change in control could limit the opportunity

for our stockholders to receive a premium for their shares of Class A common stock, and could also affect the price that some investors are willing to pay for Class A common stock.

Our charter designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain litigation that may be initiated by our

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charter may limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or any of our directors, officers, other employees, agents or stockholders, which may discourage lawsuits with respect to such claims.

Alternatively, if a court were to find the choice of forum provision contained in our charter to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could

harm our business, results of operations and financial condition.

Our management team has limited experience managing a public company , including a “large accelerated filer.”

The experience of the current members of our management team in managing a publicly traded company, in particular a company that is a “large accelerated filer,” interacting with public company

investors and complying with the increasingly complex laws pertaining to public companies is limited to their experience with our company since our initial public offering in November 2017.

Our management team may not successfully or efficiently

manage our transition to being a large accelerated filer subject to significant regulatory oversight and reporting obligations under the federal securities laws and the scrutiny of securities analysts and investors.

These obligations and

constituents require significant attention from our management team and could divert their attention away from the day-to-day management of our business, which could materially adversely affect our business, financial condition and operating

We have been a large accelerated filer since December 31, 2020, which has increased our costs and demands on management.

We have been a large accelerated filer since December 31, 2020 and therefore no longer qualify as an “emerging growth company,” as defined in the JOBS Act.

As a large accelerated filer, we are

subject to certain disclosure and compliance requirements that apply to other public companies but did not apply to us prior to December 31, 2020 due to our status as an emerging growth company.

These requirements include, but are not limited to:

the requirement that our independent registered public accounting firm attest to the effectiveness of our internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act of 2002;

compliance with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the

financial statements;

the requirement that we provide full and more detailed disclosures regarding executive compensation;

the requirement that we hold a non-binding advisory vote on executive compensation and obtain stockholder approval of any golden parachute payments not previously approved.

We expect that compliance with the additional requirements of being a “large accelerated filer” will increase our legal and financial compliance costs and cause management and other personnel to

divert attention from operational and other business matters to devote substantial time to public company reporting requirements.

In addition, if we are not able to comply with changing requirements in a timely manner, the market price of Class A

common stock could decline and we could be subject to sanctions or investigations by the stock exchange on which Class A common stock is listed, the SEC, or other regulatory authorities, which would require additional financial and management

We will incur increased costs and demands upon management as a result of complying with the laws and regulations affecting public companies, particularly as

we are no longer an “emerging growth company,” which could adversely affect our business, operating results and financial condition.

As a public company, and particularly as we are no longer an “emerging growth company,” effective as of December 31, 2020, we will continue to incur significant legal, accounting and other

We are subject to the reporting requirements of the Securities and Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, and the rules and regulations of Nasdaq.

These requirements have

increased and will continue to increase our legal, accounting and financial compliance costs and have made and will continue to make some activities more time consuming and costly.

For example, we expect these rules and regulations to make it more

difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to maintain the same or similar coverage.

it may be more difficult for us to attract and retain qualified individuals to serve as our executive officers or on the board of directors, particularly to serve on the audit and compensation committees.

The Sarbanes-Oxley Act requires, among other things, that we assess the effectiveness of our internal control over financial reporting annually and the effectiveness of our disclosure controls

and procedures quarterly.

In particular, beginning with respect to the year ending December 31, 2018, Section 404 of the Sarbanes-Oxley Act, or Section 404, required our management to perform system and process evaluation and testing to allow it to

report on the effectiveness of our internal control over financial reporting.

could harm our business, results of operations and financial condition.

We incur increased costs and demands upon management as a result of complying with the laws and regulations affecting public companies which could adversely

affect our business, operating results and financial condition.

As a public company, we will continue to incur significant legal, accounting and other expenses.

We are subject to the reporting requirements of the Securities and Exchange Act, the Sarbanes-Oxley

Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, and the rules and regulations of Nasdaq.

These requirements have increased and will continue to increase our legal, accounting and financial compliance costs and have made and

will continue to make some activities more time consuming and costly.

For example, we expect these rules and regulations to make it more difficult and more expensive for us to obtain director and officer liability insurance, and we may be

required to accept reduced policy limits and coverage or incur substantially higher costs to maintain the same or similar coverage.

As a result, it may be more difficult for us to attract and retain qualified individuals to serve as our

executive officers or on the board of directors, particularly to serve on the audit and compensation committees.

The Sarbanes-Oxley Act requires, among other things, that we assess the effectiveness of our internal control over financial reporting annually and the effectiveness of our disclosure controls and

procedures quarterly.

In particular, Section 404 of the Sarbanes-Oxley Act, or Section 404, requires our management to perform system and process evaluation and testing to allow it to report on the effectiveness of our internal control over

financial reporting.

Investor perceptions of our company may suffer if deficiencies are found, which could cause a decline in the market price of our stock.

Irrespective of compliance with Section 404, any failure of

our internal control over financial reporting could have a material adverse effect on our stated operating results and harm our reputation.

If we are unable to implement these requirements effectively or efficiently, it could harm our operations,

financial reporting, or financial results and could result in an adverse opinion on our internal controls from our independent registered public accounting firm.

Irrespective of compliance with Section 404, any failure of our internal control over financial reporting could have a material adverse effect on our stated operating results and harm our reputation.

If we are unable to implement these

requirements effectively or efficiently, it could harm our operations, financial reporting, or financial results and could result in an adverse opinion on our internal controls from our independent registered public accounting firm.

“—Our management identified material weaknesses in our internal control over financial reporting that, if not properly remediated, could result in material misstatements in our consolidated financial statements that could cause investors to

lose confidence in our reported financial information and have a negative effect on the trading price of our stock.”

In addition, changing laws, regulations and standards relating to corporate governance and public disclosure are creating uncertainty for public companies, increasing legal and financial

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This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices.

intend to invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expense and a diversion of management’s time and attention from revenue-generating activities

to compliance activities.

If our efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory or governing bodies, regulatory authorities may initiate legal proceedings against us and our business may

We invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expense and a diversion of management’s time and attention from revenue-generating activities to

compliance activities.

may be harmed.

Short sellers of our stock may be manipulative and may drive down the market price of our Class A common stock.

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at a later date to return to the lender.

A short seller hopes to profit from a decline in the value of the securities between the sale of the borrowed securities and the purchase of the replacement shares, as the short seller expects to pay less in

that purchase than it received in the sale.

As it is in the short seller’s interest for the price of the stock to decline, some short sellers publish, or arrange for the publication of, opinions or characterizations regarding the relevant issuer,

its business prospects and similar matters calculated to or which may create negative market momentum, which may permit them to obtain profits for themselves as a result of selling the securities short.

The use of the Internet, social media, and

blogging have allowed short sellers to publicly attack a company’s credibility, strategy and veracity by means of so-called “research reports” that mimic the type of investment analysis performed by legitimate securities research analysts.

with limited trading volumes or substantial retail stockholder bases can be particularly susceptible to higher volatility levels, and can be particularly vulnerable to such short attacks.

A short seller hopes to profit from a decline in the value of the securities between the sale of the borrowed securities and the purchase of the replacement shares, as the short seller expects to pay

less in that purchase than it received in the sale.

As it is in the short seller’s interest for the price of the stock to decline, some short sellers publish, or arrange for the publication of, opinions or characterizations regarding the

relevant issuer, its business prospects and similar matters calculated to or which may create negative market momentum, which may permit them to obtain profits for themselves as a result of selling the securities short.

The use of the Internet,

social media, and blogging have allowed short sellers to publicly attack a company’s credibility, strategy and veracity by means of so-called “research reports” that mimic the type of investment analysis performed by legitimate securities

research analysts.

Issuers with limited trading volumes or substantial retail stockholder bases can be particularly susceptible to higher volatility levels, and can be particularly vulnerable to such short attacks.

Short seller publications are not regulated by any governmental or self-regulatory organization or any other official authority in the United States and are not subject to the certification

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Accordingly, the opinions they express may be based on distortions of actual facts or, in some cases, outright fabrications.

In light of the limited risks involved in publishing

such information, and the significant profits that can be made from running successful short attacks, short sellers will likely continue to issue such reports.

Short-seller publications may create the appearance or perception of wrongdoing, even

when they are not substantiated, and may therefore affect the reputation or perception of our company and management.

While we intend to strongly defend our public filings against any such short seller attacks, in many situations we could be constrained, for example, by principles of freedom of speech,

applicable state law or issues of commercial confidentiality, in the manner in which we are able to proceed against the relevant short seller.

In light of the limited risks involved in

publishing such information, and the significant profits that can be made from running successful short attacks, short sellers will likely continue to issue such reports.

Short-seller publications may create the appearance or perception of

wrongdoing, even when they are not substantiated, and may therefore affect the reputation or perception of our company and management.

While we intend to strongly defend our public filings against any such short seller attacks, in many situations we could be constrained, for example, by principles of freedom of speech, applicable

state law or issues of commercial confidentiality, in the manner in which we are able to proceed against the relevant short seller.

Such short-seller attacks have caused, and may cause in the future, temporary or possibly long term, declines in the market price of Class A common stock and possible litigation initiated against

During the quarter ended December 31, 2020, such a short-seller publication was issued with respect to our company and certain members of the management team, and was referenced by the plaintiffs in the litigation described in “Item 3.

Proceedings.”

Our production facilities could be damaged or disrupted by a natural disaster, war, terrorist attacks or other catastrophic events.

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epidemics, and other events beyond our control such as power loss, telecommunications failures, and uncertainties arising out of armed conflicts or terrorist attacks.

The frequency and intensity of severe weather events are reportedly increasing

throughout the world as part of broader climate changes.

The frequency and intensity of severe weather events are reportedly

increasing throughout the world as part of broader climate changes.

Global weather pattern changes may pose long-term risks of physical impacts to our business.

A substantial majority of our facilities as well as our research and development personnel are

located in the PRC.

A substantial majority of our facilities as well as our research and development

personnel are located in the PRC.

Any catastrophic loss or significant damage to any of our facilities would likely disrupt our operations, delay production, and adversely affect our product development schedules, shipments and revenue.

In addition, any such

catastrophic loss or significant damage could result in significant expense to repair or replace the facility and could significantly curtail our research and development efforts in a particular product area or primary market, which could have a

material adverse effect on our operations and operating results.

addition, any such catastrophic loss or significant damage could result in significant expense to repair or replace the facility and could significantly curtail our research and development efforts in a particular product area or primary

market, which could have a material adverse effect on our operations and operating results.

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