What changed in this filing

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Item 1. Business

2020-11-24 compared with 2019-11-26 · 189 added, 161 removed, 97 unchanged (78% of the section changed)

Company Overview

Company Overview, Strategy and Mission

Analog Devices, Inc.

(we, Analog Devices or the Company) is a leading global high-performance analog technology company.

Since our inception in 1965, we have focused on solving our customers’ toughest signal processing engineering challenges and playing a fundamental role in efficiently converting, conditioning, and processing real-world phenomena such as temperature, pressure, sound, light, speed, and motion into electrical signals to be used in a wide array of electronic applications.

We produce innovative products and technologies that accurately and securely sense, measure, connect, interpret and power, allowing our customers to intelligently bridge the physical and digital domains.

We design, manufacture, and market a broad portfolio of solutions, including integrated circuits (ICs), algorithms, software, and subsystems that leverage high-performance analog, mixed-signal, and digital signal processing technologies.

Our fusion of cutting-edge sensors, data converters, amplifiers and linear products, radio frequency (RF) ICs, power management products, and other signal processing products with deep industry expertise allows us to create robust technology platforms that meet a broad spectrum of customer and market needs.

As new generations of applications evolve - such as autonomous vehicles, 5G networks, intelligent factories, and smart healthcare devices - the demand for Analog Devices’ high-performance analog signal processing and digital signal processing (DSP) products and technologies is increasing.

We focus on key strategic markets such as industrial, automotive, consumer, and communications where our signal processing technology is often a critical differentiator in our customers’ products.

Used by more than 125,000 end customers worldwide, our products are used in many different types of electronic applications including:

• Factory and process automation systems • Medical imaging equipment

• Instrumentation, test and measurement systems • Vital signs monitoring devices

• Aerospace and defense applications • Wireless infrastructure equipment

• Semi-autonomous and autonomous vehicle safety systems • Networking and optical equipment

• Automotive infotainment systems • Portable consumer devices

• Powertrains for gas and electric vehicles • Professional audio and video devices

We were incorporated in Massachusetts in 1965.

Our headquarters are near Boston, in Norwood, Massachusetts.

In addition, we have manufacturing facilities in the United States, Ireland and Southeast Asia.

(we, Analog Devices or the Company) is a leading global high-performance analog technology company dedicated to solving our customers' most complex engineering challenges.

We play a critical role at the intersection of the physical and digital world by providing the building blocks to sense, measure, interpret, connect and power.

We design, manufacture, test and market a broad portfolio of solutions, including integrated circuits (ICs), software and subsystems that leverage high-performance analog, mixed-signal and digital signal processing technologies.

Our comprehensive product portfolio, deep domain expertise and advanced manufacturing capabilities extend across high-performance precision and high-speed mixed-signal, power management and processing technologies – including data converters, amplifiers, power management, radio frequency (RF) ICs, digital signal processors (DSP) and other sensors.

The Third Wave of Information and Communications Technology, as we refer to it at Analog Devices, is characterized by ubiquitous sensing, hyper-scale and edge computing and pervasive connectivity.

These technological trends are driving a continuous evolution of new generations of applications that are increasing the demand for Analog Devices’ high-performance analog, mixed-signal, power and RF ICs.

We have positioned our business to capitalize on the secular growth opportunities across our markets and to deliver innovative solutions.

Central to our strategy is our focus on challenges that our customers have across the most impactful application areas.

That is built around the following three key priorities, which will continue to drive our long-term success:

• Efficient use of capital.

Research and development (R&D) is critical to continue our cycle of innovation-driven success.

We target the most attractive opportunities, particularly across our business-to-business (B2B) markets including Industrial, Automotive and Communications.

We are also deeply committed to extracting value from our recent acquisitions to complement our R&D and drive long-term value creation.

Through the development of cutting-edge innovations and our ability to solve difficult problems across a broad array of applications, we generate significant cash flow and are deeply committed to delivering strong shareholder returns.

• Deepening customer-centricity.

We possess a broad range of product portfolios, applications expertise, and manufacturing capabilities in high-performance power management and precision and high-speed signal processing technologies.

At the same time, our engineering talent continues to be an important competitive differentiator in the semiconductor space.

We strive to be the destination for the world's best engineering talent with a team of more than 7,600 engineers.

Together, our products and our engineering talent enable us to partner with our customers, leveraging our analog domain expertise and receiving the full benefit of our technology capabilities to develop complete and innovative solutions.

• Capitalizing on secular trends.

We are positioned to capitalize on important secular growth trends, including Industry 4.0, 5G communications networks, data center connectivity, electric vehicles, in-cabin experience, digital healthcare and space, as we are well-aligned with the key B2B markets driving this increase in data and we will continue to be a critical partner in the collection, creation and communication of our customers’ edge data.

In addition to driving organic growth, our strategy involves expansion through the acquisition of businesses, assets or technologies that allow us to complement our existing product offerings, expand our market coverage, increase our engineering talent or enhance our technological capabilities.

For example, we have executed on this strategy through:

• the acquisition of Hittite Microwave Corporation in the fiscal year ended November 1, 2014, which strengthened our market leadership in high-performance RF and broadened our portfolio across the entire frequency spectrum from DC to 100 gigahertz;

• the acquisition of Linear Technology Corporation (Linear) in the fiscal year ended October 28, 2017, which added high-performance power management and additional precision signal processing to our portfolio, expanding and diversifying our offerings to deliver more complete solutions.

In the fiscal year ended October 31, 2020 (fiscal 2020), we announced the proposed acquisition of Maxim Integrated Products, Inc.

(Maxim), which, if completed, will strengthen Analog Devices as an analog semiconductor leader.

Specifically, the combination would increase our global scale and enhance our depth of domain expertise and engineering capabilities, enabling us to offer more complete solutions, serve more customers and capture a larger share of an estimated $60 billion total addressable market.

As a global company, we are also passionately driven to be a leading corporate citizen, creating a better tomorrow for all our stakeholders.

We believe we have a responsibility to engineer a more sustainable future and we strive to make a positive

impact on our society and our planet.

We are focused on reducing our carbon footprint and our impact on the environment today, while striving to deliver a positive environmental impact for the future.

Our goal is to make meaningful progress on environmental regeneration efforts and partner with our customers to help them solve their sustainability challenges.

We leverage our expertise to develop new solutions to help restore natural resources, regenerate the quality of our biosphere and reduce carbon emissions.

We are also committed to helping our employees thrive by building programs within our company that enhance our diverse and accepting workplace culture, while also broadening the availability of education, training and employment opportunities to communities across the globe.

The Company also maintains an active role in developing solutions and participating in efforts that address serious climate and societal problems that impact our employees, our communities and our planet.

In addition, in fiscal 2020, we established the Analog Devices Foundation to formalize our philanthropy and charitable giving.

We were incorporated in Massachusetts in 1965 with corporate headquarters in the Boston, Massachusetts area.

In 2020, we moved our corporate headquarters from our facility in Norwood, Massachusetts to Wilmington, Massachusetts.

The expanded facility in Wilmington features state of the art laboratories, design and manufacturing and cross-functional group collaboration space, while maintaining our commitment to environmental sustainability through the use of green building materials and solar panels, among other things.

In addition, we have manufacturing facilities primarily in the United States, Ireland and Southeast Asia.

Our common stock is listed on the Nasdaq Global Select Market under the symbol ADI and is included in the Standard & Poor’s 500 Index.

Acquisition of Linear Technology Corporation

On March 10, 2017 (Acquisition Date), we completed the acquisition of Linear Technology Corporation (Linear), an independent manufacturer of high performance analog integrated circuits.

The total consideration paid to acquire Linear was approximately $15.8 billion, consisting of $11.1 billion in cash financed through existing cash on hand, net proceeds from bridge and term loan facilities and proceeds received from the issuance of senior unsecured notes, $4.6 billion from the issuance of our common stock and $0.1 billion of consideration related to the replacement of outstanding equity awards held by Linear employees.

The acquisition of Linear is referred to as the Acquisition.

Available Information

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In addition, we intend to disclose on our website any amendments to, or waivers from, our code of business conduct and ethics that are required to be publicly disclosed pursuant to rules of the SEC or Nasdaq.

Industry Background

Semiconductor components are the electronic building blocks used in electronic systems and equipment.

These components are classified as either discrete devices, such as individual transistors or ICs, in which a number of transistors and other elements are combined to form a more complicated electronic circuit.

ICs may be divided into two general categories, digital and analog.

Digital circuits, such as memory devices and microprocessors, generally process on-off electrical signals, represented by binary digits, “1” and “0.” In contrast, analog ICs monitor, condition, amplify or transform continuous analog signals associated with physical properties, such as temperature, pressure, weight, light, sound or motion, and play an important role in bridging between real world phenomena and a variety of electronic systems.

Analog ICs also provide voltage regulation and power control to electronic systems.

Principal Products

We design, manufacture and market a broad line of high-performance ICs that incorporate analog, mixed-signal and digital signal processing technologies.

Semiconductor components are the building blocks used in electronic systems and equipment.

These components are classified as either discrete devices, such as individual transistors, or as ICs, in which a number of transistors and other elements are combined to form a more complicated electronic circuit.

Our ICs are designed to address a wide range of real-world signal processing applications.

We sell our ICs to tens of thousands of end customers worldwide, many of whom use products spanning our core technologies in a wide range of applications.

Our IC product portfolio includes both general-purpose products used by a broad range of customers and applications, as well as application-specific products designed for specific clusters of customers in key target markets.

We sell our ICs to more than 125,000 end customers worldwide, many of whom use products spanning our core technologies in a wide range of applications.

Our IC product portfolio includes both general-purpose products used by a broad range of customers and applications, as well as application-specific products designed for specific target markets.

By using readily available, high-performance, general-purpose products in their systems, our customers can reduce the time they need to bring new products to market.

Given the high cost of developing more customized ICs, our standard products often provide a cost-effective solution for many low to medium volume applications.

More specifically, our analog ICs monitor, condition, amplify or transform continuous analog signals associated with physical properties, such as temperature, pressure, weight, light, sound or motion, and play an important role in bridging real world phenomena to a variety of electronic systems.

Analog ICs also provide voltage regulation and power control to electronic systems.

We also focus on working with leading customers to design application-specific solutions.

We begin with our existing core technologies, which leverage our data conversion, amplification, RF and microwave, microelectromechanical systems (MEMS), power management and DSP capabilities, and devise a solution to more closely meet the needs of a specific customer or group of customers.

Because we have already developed the core technology platform for our general-purpose products, we can create application-specific solutions quickly.

We produce and market a broad range of ICs and operate in one reportable segment based on the aggregation of eight operating segments.

The ICs sold by each of our operating segments are manufactured using similar semiconductor manufacturing processes and raw materials in either our own production facilities or by third-party wafer fabricators using proprietary processes.

Our ICs are sold to customers globally through a direct sales force, third-party distributors, independent sales representatives and via our website.

Our technology offerings are aligned with the predominant markets served in order to facilitate decision making throughout our organization.

Analog Products

We begin with our existing core technologies, which leverage our data conversion, amplification, RF and microwave, microelectromechanical systems (MEMS), power management and DSP capabilities, and devise solutions that more closely meet the needs of a specific customer or group of customers.

Because we have already developed the core technology platform for our general-purpose products, we can create application-specific solutions quickly and efficiently.

Our analog and mixed-signal IC technology has been the foundation of our business for over five decades, and we are one of the world’s largest suppliers of high-performance analog ICs.

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We believe that the principal advantages these products have as compared to competitors’ products include higher accuracy, higher speed, lower cost per function, smaller size, lower power consumption and fewer components, resulting in improved performance and reliability.

Our product portfolio includes several thousand analog ICs, many of which can have several hundred customers.

Our product portfolio includes several thousand analog ICs, many of which can have several hundred end customers.

Our analog ICs typically have long product life cycles.

Our analog IC customers include original equipment manufacturers (OEMs) and customers who build electronic subsystems for integration into larger systems.

Our product offerings include more than 45,000 SKUs that can be aggregated into the following general categories:

• Converters —We are a leading supplier of data converter products.

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Our converter products combine sampling rates and accuracy with the low noise, power, price and small package size required by industrial, automotive, consumer, and communications electronics.

Amplifiers/Radio Frequency (RF) and Microwave — We are also a leading supplier of high-performance amplifiers.

Amplifiers are used to condition analog signals.

• Amplifiers/Radio Frequency (RF) and Microwave —We are also a leading supplier of high-performance amplifiers which are used to condition analog signals.

High performance amplifiers emphasize the performance dimensions of speed and precision.

Within this product portfolio we provide precision, instrumentation, high speed, intermediate frequency/RF/microwave, broadband, and other amplifiers.

Our analog product line also includes a broad portfolio of high performance RF and microwave ICs covering the entire RF signal chain, from industry-leading stand-alone RF function blocks such as phase locked loops, frequency synthesizers, mixers, modulators, demodulators, and power detectors, to highly integrated broadband and short-range single chip transceiver solutions.

Our analog product line also includes a broad portfolio of high-performance RF and microwave ICs covering the entire RF signal chain.

Our high-performance RF and microwave ICs support the high-performance requirements of cellular infrastructure and a broad range of applications in our target markets, including instrumentation, aerospace and automotive.

• Power Management & Reference —Power management and reference products, which include functions such as power conversion, driver monitoring, sequencing and energy management, provide efficient solutions for power management and conversion applications in the automotive, communications, industrial and high-end consumer markets.

From portable consumer devices to automobiles to high end data centers, the performance and efficiency of modern electronic products is increasingly limited by their power supply systems.

Our high-performance power ICs include powerful performance, integration and software design simulation tools to provide fast and accurate power supply designs.

Other Analog — Our analog technology portfolio is comprised of sensor and actuator products, including products based on MEMS technology.

• Sensors & Actuators —Our analog technology portfolio is comprised of sensor and actuator products, including products based on MEMS technology.

MEMS technology enables us to build extremely small sensors that incorporate an electromechanical structure and the supporting analog circuitry for conditioning signals obtained from the sensing element.

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In addition to sensor products, our other analog product category includes isolators that enable designers to implement isolation in designs without the cost, size, power, performance, and reliability constraints found with optocouplers.

Our isolators have been designed into hundreds of applications, such as universal serial bus isolation in patient monitors, where it allows hospitals and physicians to adopt the latest advances in computer technology to supervise patient health and wirelessly transmit medical records.

In smart metering applications, our isolators provide reliable electrostatic discharge performance that helps reduce meter tampering.

Likewise, in satellites, where any malfunction can be catastrophic, our isolators help protect the power system while enabling designers to achieve small form factors.

Digital Signal Processing and System Products

Digital Signal Processing products (DSPs) are optimized for high-speed numeric calculations, which are essential for instantaneous, or real-time, processing of digital data generated, in most cases, from analog to digital signal conversion.

• Digital Signal Processing and System Products (DSPs) — DSPs are optimized for high-speed numeric calculations, which are essential for instantaneous, or real-time, processing of digital data generated, in most cases, from analog to digital signal conversion.

Our DSPs are designed to be fully programmable and to efficiently execute specialized software programs, or algorithms, associated with processing digitized real-time, real-world data.

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Our DSPs are designed in families of products that share common architectures and therefore can execute the same software across a range of products.

We support these products with easy-to-use development tools, which are designed to reduce our customers’ product development costs and time-to-market.

Our customers use our products to solve a wide range of signal processing challenges across our core market and segment focus areas within the industrial, automotive, consumer and communications end markets.

In many cases, DSPs are embedded with mixed signal functionality to provide System on Chip (SOC) integrated solutions, combining that analog and digital signal processing circuitry to provide a complete signal chain for demanding applications.

Markets and Applications

The breakdown of our November 2, 2019 (fiscal 2019) revenue by end market is set out in the table below.

Sales Channel

We sell our products globally to more than 125,000 end customers through a direct sales force, third-party distributors, independent sales representatives and via our website.

We have direct sales offices, sales representatives and/or distributors in over 50 countries outside North America.

We support our worldwide sales efforts through our website and with extensive promotional programs that include editorial coverage and paid advertising in online and printed trade publications, webinars, social media and communities, promotional and training videos, direct mail programs, technical seminars and participation in trade shows.

We publish, share and distribute technical content such as data sheets, application guides and catalogs.

We maintain a staff of field application engineers who aid customers in incorporating our products into their products.

In addition, we offer a variety of web-based tools that ease product selection and aid in the design process for our customers.

We believe distributors provide a cost-effective means of reaching a broad range of customers while providing efficient logistics services.

From time to time, we may add or terminate distributors in specific geographies, or move customers to a direct support or fulfillment model as we deem appropriate given our strategies, the level of distributor business activity and distributor performance and financial condition.

These distributors typically maintain an inventory of our products.

Some of them also sell products that compete with our products, including those for which we are an alternate source.

We make sales to distributors under agreements that allow certain distributors to receive price adjustment credits and to return qualifying products for credit, as determined by us, in order

to reduce the amounts of slow-moving, discontinued or obsolete product from their inventory.

These agreements limit such returns to a certain percentage of our shipments to that distributor during the prior quarter.

In addition, certain distributors are allowed to return unsold products if we terminate the relationship with the distributor.

Additional information relating to our revenue and customer concentration is set forth in Note 2l, Concentrations of Risk ;

Note 2n, Revenue Recognition ;

and Note 4, Industry, Segment and Geographic Information , of the Notes to Consolidated Financial Statements contained in Part II, Item 8 of this Annual Report on Form 10-K.

We typically do not have long-term sales contracts with our customers.

In some of our markets where end-user demand may be particularly volatile and difficult to predict, some customers place orders that require us to manufacture product and have it available for shipment, even though the customer is unwilling to make a binding commitment to purchase all, or even any, of the product.

In other instances, we manufacture product based on forecasts of customer demand.

As a result, we may incur inventory and manufacturing costs in advance of anticipated sales and are subject to the risk of cancellation of orders leading to a sharp reduction of sales and backlog.

Further, those orders or forecasts may be for products that meet the customer’s unique requirements so that those canceled orders would, in addition, result in an inventory of unsaleable products, resulting in potential inventory write-offs.

As a result of lengthy manufacturing cycles for some of our products that are subject to these uncertainties, the amount of unsaleable product could be substantial.

The breakdown of our annual revenue by end market is set out in the table below:

End Market* Percent of Fiscal 2020 Revenue

Percent of Fiscal 2019 Revenue

Percent of Fiscal 2018 Revenue

Industrial 53% 50 % 51 %

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Automotive 14% 16 % 16 %

The following describes some of the characteristics of, and customer products within, our major end markets:

Consumer 11% 13 % 15 %

*The sum of the individual percentages may not equal 100% due to rounding.

The following describes some of the characteristics of, and customer products within, our major end markets of Industrial, Communications, Automotive and Consumer:

Industrial — Our industrial market includes the following sectors:

Industrial Automation and Instrumentation — Our industrial automation applications generally require ICs that offer performance greater than that available from commodity-level ICs but generally do not have production volumes that warrant custom ICs.

Industrial Automation and Instrumentation — Advances in automation and instrumentation are driving significant enhancements in efficiency and productivity.

We provide solutions that enable greater flexibility, automation and digitization of manufacturing and other industrial settings.

Our industrial automation applications generally require ICs that offer performance greater than that available from commodity-level ICs but generally do not have production volumes that warrant custom ICs.

There is a trend towards development of products focused on particular sub-applications, which incorporate combinations of analog, mixed-signal, and DSP ICs to achieve the necessary functionality.

Our instrumentation customers differentiate themselves by using the highest performance analog and mixed-signal ICs available.

Our industrial and instrumentation market includes applications such as:

Our automation and instrumentation customers are differentiated through the use of the highest performance analog and mixed-signal ICs available.

Our automation and instrumentation market includes applications such as:

• Process control systems • Oscilloscopes

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As such, we also sell products in the form of SiPs (system in package), printed circuit board assemblies, modules, and subsystems.

Customer products include:

Customer products include applications such as:

• Navigation systems • Radar systems

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• Communication systems • Electronic surveillance and countermeasures

Energy Management — The desire to improve energy efficiency, conservation, reliability, and cleanliness is driving investments in electric vehicle charging infrastructure, renewable energy, power transmission and distribution systems, electric meters, and other innovative areas.

The common characteristic behind these efforts is the addition of sensing, measurement, and communication technologies to electrical infrastructure.

Our offerings include both standard and application-specific products and are used in applications such as:

• Utility meters • Wind turbines

• Electric vehicle charging infrastructure • Solar inverters

• Substation relays and automation equipment • Building energy automation/control

Healthcare — The healthcare market is calling for increased access to better and more affordable care.

Healthcare — The healthcare market is evolving in response to the need for increased access to better and more affordable care, as well as a growing focus on preventative healthcare and the need to better manage chronic conditions.

To help achieve this, we are collaborating with customers and partners on innovative solutions that are designed to achieve better outcomes for patients and physicians at reduced costs for all.

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hypertension and diabetes • Point-of-care diagnostics

Energy Management — The global drive towards improved energy efficiency, conservation, reliability and cleanliness is driving investments in electrification across many different application areas, including electric vehicle charging infrastructure, renewable energy, power transmission and distribution systems, electric meters and other innovative areas.

The common characteristic behind these efforts is the addition of sensing, measurement and communication technologies to electrical infrastructure.

Our offerings include both standard and application-specific products and are used in applications such as:

• Utility meters • Wind turbines

• Electric vehicle charging infrastructure • Solar inverters

• Substation relays and automation equipment • Building energy automation/control

Communications — The development of broadband, wireless and internet infrastructures around the world has created an important market for our communications products.

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The need for higher speed and reduced power consumption, coupled with more reliable, bandwidth-efficient communications, creates demand for our products, which are used in the full spectrum of signal processing for data, video, voice and machine-to-machine communications.

In wireless and broadband communication applications, our products are incorporated into:

• Cellular basestation equipment • Optical and cable networking equipment for data center and service providers

In wireless and wireline communication applications, our products are incorporated into:

• Cellular base station equipment • Optical and cable networking equipment for data center and carrier providers

• Microwave backhaul systems • Satellite and terrestrial broadband access equipment

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Specifically, we have developed products used in applications such as:

Infotainment Electrification Autonomous, ADAS & Safety

• Car audio, voice processing and connectivity • Hybrid electric / electric vehicles • High performance 24GHz & 77/79GHz RADAR systems

• Video processing and connectivity • Battery monitoring and management systems • High resolution LIDAR systems

• Inertial MEMS solutions for mission critical navigation, stability and safety systems

• Car audio, voice processing and connectivity • Inertial MEMS solutions for mission critical navigation, stability and safety systems

• Video processing and connectivity • Battery monitoring and management systems

Consumer — To address the market demand for state of the art personal and professional entertainment systems and the consumer demand for high quality user interfaces, music, movies and photographs, we have developed analog, digital and mixed-signal solutions that meet the rigorous cost and time-to-market requirements of the consumer electronics market.

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• Portable devices (smart phones, tablets and wearable devices) for media and vital signs motoring applications • Prosumer audio/video equipment

See Note 4, Industry, Segment and Geographic Information, of the Notes to Consolidated Financial Statements contained in Item 8 of this Annual Report on Form 10-K for further information about our products by end market.

Patents and Other Intellectual Property Rights

We seek to establish and maintain our proprietary rights in our technology and products through the use of patents, copyrights, mask works, trademarks and trade secrets.

We have a program to file applications for and obtain patents, copyrights, mask works and trademarks in the United States and in selected foreign countries where we believe filing for such protection is appropriate.

We also seek to maintain our trade secrets and confidential information by nondisclosure policies and through the use of appropriate confidentiality agreements.

We have obtained a substantial number of patents and trademarks in the United States and in other countries.

As of November 2, 2019, we held approximately 3,490 U.S.

patents and approximately 693 non-provisional pending U.S.

patent applications with expiration dates ranging from 2019 through 2039.

There can be no assurance, however, that the rights obtained can be successfully enforced against infringing products in every jurisdiction.

While our patents, copyrights, mask works, trademarks and trade secrets provide some advantage and protection, we believe our competitive position and future success is largely determined by such factors as the system and application knowledge, innovative skills, technological expertise and management ability and experience of our personnel;

the range and success of new products being developed by us;

our market brand recognition and ongoing marketing efforts;

and customer service and technical support.

It is generally our policy to seek patent protection for significant inventions that may be patented, though we may elect, in certain cases, not to seek patent protection even for significant inventions, if we determine other protection, such as maintaining the invention as a trade secret, to be more advantageous.

We also have trademarks that are used in the conduct of our business to distinguish genuine Analog Devices products, and we maintain cooperative advertising programs to promote our brands and identify products containing genuine Analog Devices components.

Sales Channels

We sell our products globally through a direct sales force, third-party distributors, independent sales representatives and via our website.

We have direct sales offices, sales representatives and/or distributors in over 50 countries outside North America.

We publish, share and distribute technical content such as data sheets, application guides and catalogs.

We maintain a staff of field application engineers who aid customers in incorporating our products into their products.

In addition, we offer a variety of web-based tools that ease product selection and aid in the design process for our customers.

We derived approximately 57% of our fiscal 2019 revenue from sales made to distributors.

We believe distributors provide a cost-effective means of reaching a broad range of customers while providing efficient logistics services.

These distributors typically maintain an inventory of our products.

Some of them also sell products that compete with our products, including those for which we are an alternate source.

We make sales to distributors under agreements that allow certain distributors to receive price adjustment credits and to return qualifying products for credit, as determined by us, in order to reduce the amounts of slow-moving, discontinued or obsolete product from their inventory.

These agreements limit such returns to a certain percentage of our shipments to that distributor during the prior quarter.

In addition, certain distributors are allowed to return unsold products if we terminate the relationship with the distributor.

Additional information relating to our sales to distributors is set forth in Note 2n, Revenue Recognition, of the Notes to Consolidated Financial Statements contained in Item 8 of this Annual Report on Form 10-K.

Our primary distributors are Arrow Electronics (Arrow) and Macnica, Inc.

They, like our other distributors, are not end customers, but rather serve as a channel of sale to many end users of our products.

Revenue from products sold to Arrow accounted for 30%, 28% and 14% of net revenues in fiscal 2019, 2018 and 2017, respectively.

Revenue from products sold to Macnica accounted for 10% of net revenues in fiscal 2019 and less than 10% in other periods presented.

In fiscal 2017, sales to Apple, Inc., one of our end customers, accounted for approximately 12% of net revenues.

No other single end customer accounted for 10% or more of net revenues in fiscal years 2019, 2018 and 2017.

International sales accounted for approximately 66%, 63% and 60% of our net revenues in fiscal years 2019, 2018 and 2017, respectively, and are based on the geographic location of the distributors or OEMs who purchased our products.

Sales to customers during our first fiscal quarter may be lower than other quarters due to plant shutdowns at some of our customers during the holiday season.

See Note 4, Industry, Segment and Geographic Information , of the Notes to Consolidated Financial Statements contained in Part II, Item 8 of this Annual Report on Form 10-K for further information about our products by end market.

We believe that competitive performance in the marketplace for signal processing products depends upon multiple factors, including technological innovation, strength of brand, diversity of product portfolio, product performance, technical support, delivery capabilities, customer service quality, reliability and price, with the relative importance of these factors varying among products, markets, and customers.

We compete with a number of semiconductor companies in markets that are highly competitive.

Many companies have sufficient financial, manufacturing, technical, sales and marketing resources to develop and market products that compete with our products.

Some of our competitors may have more advantageous supply or development relationships with our current and potential customers or suppliers.

Our competitors also include both emerging companies selling specialized products in markets we serve and companies outside of the U.S., including entities associated with well-funded efforts by foreign governments to create indigenous semiconductor industries.

Our competitors include but are not limited to:

• Broadcom Inc.

• Monolithic Power Systems, Inc.

• Infineon Technologies AG • NXP Semiconductors N.V.

• Maxim Integrated Products, Inc.

• Texas Instruments Inc.

• Microchip Technology Inc.

We believe that our technical innovation emphasizing product performance and reliability, supported by our commitment to strong customer service and technical support, enables us to make a fundamental difference to our customers’ competitiveness in our chosen markets.

Our sales are subject to a varying degree of seasonality.

Historically, sales to customers during our first fiscal quarter may be lower than other quarters due to plant shutdowns at some of our customers during the holiday season.

In general, the seasonality for any specific period of time has not had a material impact on our results of operations.

In addition, as explained in our risk factors contained in Item 1A of this Annual Report on Form 10-K, our revenue is more likely to be influenced on a quarter to quarter basis by cyclicality in the semiconductor industry.

Production and Raw Materials

We believe that a number of factors should be used to assess future customer demand, including backlog, macroeconomic trends, customer insights and current customer bookings as compared to billings (book-to-bill) ratio.

We define backlog to mean firm orders from a customer or distributor with a requested delivery date within thirteen weeks.

However, backlog may be impacted by the tendency of customers to rely on shorter lead times available from suppliers, including us, in periods of depressed demand.

In periods of increased demand, there is a tendency towards longer lead times that has the effect of increasing backlog and, in some instances, we may not have manufacturing capacity sufficient to fulfill all orders.

In addition, as is customary in the semiconductor industry, we allow most orders to be canceled or deliveries to be delayed by customers without significant penalty, while also allowing certain distributors to receive price adjustment credits and to return qualifying products for credit, as determined by us, in order to reduce the amounts of slow-moving, discontinued or obsolete product from their inventory.

Production Resources

Monolithic IC components are manufactured in a sequence of semiconductor production steps that include wafer fabrication, wafer testing, dicing the wafer into individual “chips,” or dice, assembly of the dice into packages and electrical testing of the devices in final packaged form.

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and Limerick, Ireland and also on a mix of proprietary and non-proprietary processes at third-party wafer fabricators.

We currently source approximately half of our wafer requirements annually from third-party wafer fabrication foundries, such as Taiwan Semiconductor Manufacturing Company (TSMC) and others, typically where deep-submicron lithography capabilities and/or large manufacturing capacity is required.

We operate an assembly and wafer sort facility in Penang, Malaysia, and test facilities in the Philippines and Singapore.

We currently source approximately half of our wafer requirements annually internally and the other half from third-party wafer fabrication foundries, such as Taiwan Semiconductor Manufacturing Company (TSMC) and others, typically where deep-submicron lithography capabilities and/or large manufacturing capacity is required.

In addition, we operate an assembly and wafer sort facility in Penang, Malaysia, and test facilities in the Philippines and Singapore.

We also make extensive use of third-party subcontractors for the assembly and testing of our products.

Capital spending was approximately $275 million in fiscal 2019, compared with approximately $255 million in fiscal 2018 and $204 million in fiscal 2017.

We expect capital expenditures for the fiscal year ending October 31, 2020 (fiscal 2020) to be slightly below 4% of fiscal 2020 revenue.

Our products require a wide variety of components, raw materials and external foundry services, most of which we purchase from third-party suppliers.

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Although we have experienced shortages of components, materials and external foundry services from time to time, these items have generally been available to us as needed.

Backlog at the end of fiscal 2019 and fiscal 2018 was approximately $1.0 billion and $1.4 billion, respectively;

however, as explained below, we believe that our backlog at any time should not be used as an indication of future revenue.

We define backlog as of a particular date to mean firm orders from a customer or distributor with a requested delivery date within thirteen weeks.

Backlog is impacted by the tendency of customers to rely on shorter lead times available from suppliers, including us, in periods of depressed demand.

As is customary in the semiconductor industry, we allow most orders to be canceled or deliveries to be delayed by customers without significant penalty.

In addition, we allow certain distributors to receive price adjustment credits and to return qualifying products for credit, as determined by us, in order to reduce the amounts of slow-moving, discontinued or obsolete product from their inventory.

We typically do not have long-term sales contracts with our customers.

In other instances, we manufacture product based on forecasts of customer demand.

As a result, we may incur inventory and manufacturing costs in advance of anticipated sales and are subject to the risk of cancellation of orders leading to a sharp reduction of sales and backlog.

As a result of lengthy manufacturing cycles for some of our products that are subject to these uncertainties, the amount of unsaleable product could be substantial.

Government Contracts

Less than 5% of our fiscal 2019, fiscal 2018, and fiscal 2017 revenue was attributable to sales to the U.S.

government and U.S.

government contractors and subcontractors.

Our government contract business is predominantly in the form of negotiated, firm, fixed-price subcontracts.

Most of these contracts and subcontracts contain standard provisions relating to termination at the election of the U.S.

An element of our business strategy involves expansion through the acquisition of businesses, assets, products or technologies that allow us to complement our existing product offerings, expand our market coverage, increase our engineering workforce or enhance our technological capabilities.

From time to time, we consider acquisitions that may strengthen our business.

On March 10, 2017, we completed the acquisition of Linear.

Additional information relating to our acquisition activities during fiscal 2019, fiscal 2018 and fiscal 2017 is set forth in Note 6, Acquisitions, of the Notes to Consolidated Financial Statements contained in Item 8 of this Annual Report on Form 10-K.

We compete with a number of semiconductor companies in markets that are highly competitive.

Our competitors include but are not limited to:

• Broadcom Inc.

• Monolithic Power Systems, Inc.

• Infineon Technologies AG • NXP Semiconductors N.V.

• Maxim Integrated Products, Inc.

• Texas Instruments Inc.

• Microchip Technology Inc.

Environment, Health and Safety

Patents and Intellectual Property Rights

We seek to establish and maintain our proprietary rights in our technology and products through the use of patents, copyrights, mask works, trademarks and trade secrets.

We also seek to maintain our trade secrets and confidential information by nondisclosure policies and through the use of appropriate confidentiality agreements.

We have obtained a substantial number of patents and trademarks in the United States and in other countries.

As of October 31, 2020, we held approximately 3,629 U.S.

patents and approximately 693 non-provisional pending U.S.

patent applications with expiration dates ranging from 2020 through 2040.

There can be no assurance, however, that the rights obtained can be successfully enforced against infringing products in every jurisdiction.

the range and success of new products being developed by us;

our market brand recognition and ongoing marketing efforts;

and customer service and technical support.

Environmental, Health and Safety Compliance

We are committed to protecting the environment and the health and safety of our employees, customers and the public.

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Our EHS management systems in all of our facilities are certified to ISO 14001:2015 for environmental management, and all of our facilities conform to ISO 45001 for occupational health and safety.

We are a member of the Responsible Business Alliance (RBA), which was formerly known as the Electronic Industry Citizenship Coalition (EICC).

Our Sustainability Report, first published in 2009, states our commitment to reducing Greenhouse gas (GHG) emissions, conserving resources by consuming less energy and water, complying with our code of business conduct and ethics, and applying fair labor standards, among other things.

We are not including the information contained in our Sustainability Report in, or incorporating it by reference into this Annual Report on Form 10-K.

Our industrial hygiene surveillance program minimizes and prevents exposures in the workplace and reduces the risk of specific diseases.

We use two industry standard metrics to assess injury performance and trends worldwide.

All legacy Analog Devices' sites have ISO 45001 health and safety certification, while sites acquired as part of our acquisition of Linear are working towards certification to the same standard.

Our manufacturing facilities are subject to numerous and increasingly strict federal, state, local and foreign EHS laws and regulations, particularly with respect to the transportation, storage, handling, use, emission, discharge and disposal of certain chemicals used or produced in the semiconductor manufacturing process.

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Any failure by us to comply with applicable environmental laws, regulations and contractual obligations could result in fines, suspension of production, the need to alter manufacturing processes and legal liability.

As of November 2, 2019, we employed approximately 16,400 individuals worldwide.

Our future success depends in large part on the continued service of our key technical and senior management personnel, and on our ability to continue to attract, retain and motivate qualified employees, particularly those highly-skilled engineers involved in the design, development, support and manufacture of new and existing products and processes.

We believe that relations with our employees are good;

however, the competition for such personnel is intense, and the loss of key personnel could have a material adverse impact on our results of operations and financial condition.

We are a member of the Responsible Business Alliance, which was formerly known as the Electronic Industry Citizenship Coalition.

Our Corporate Responsibility Report (CRR) states our commitment to reducing Greenhouse gas emissions, conserving resources by consuming less energy and water, complying with our code of business conduct and ethics, and applying fair labor standards, among other things.

We are not including the information contained in our CRR in, or incorporating it by reference into, this Annual Report on Form 10-K.

The CRR is available on our website at www.analog.com/sustainability.

Human Capital and Empowerment

Our company was founded on the principle that people are our greatest asset.

Our future success depends in large part on the continued service of our key technical and senior management personnel, and on our ability to continue to attract, retain and motivate qualified employees, particularly highly-skilled engineers involved in the design, development, support and manufacture of new and existing products and processes.

In order for us to attract the best talent, we aim to offer challenging work in an environment that enables our employees to learn, grow and reach their full potential.

Core to our empowerment strategy is embracing diversity and building a culture of inclusion across the organization.

We are working to achieve this by expanding the diversity of our workforce, creating growth and development opportunities for our employees, embracing different perspectives and fostering an inclusive work environment for all.

As noted in "Environmental, Health and Safety Compliance" above, we published our annual CRR which details our sustainability efforts, operations efficiency, employee engagement, and governance, and also provides a look at the state of our organization and overview of some of the initiatives we have launched to drive continuous improvements across diversity and inclusion.

As of October 31, 2020, we had approximately 15,900 full-time employees, of whom approximately 7,600 are in engineering roles where our employees share a passion for solving customers' most complex problems.

Approximately 58% of our workforce is male and 42% female.

Our senior leadership team is 84% male and 16% female, while manager roles are approximately 79% male and 21% female.

For fiscal 2020 our voluntary employee turnover rate was approximately 4.1%.

Our human capital resource objectives include identifying, recruiting, retaining, incentivizing and integrating our existing and future employees.

We strive to attract and retain the most talented employees in the industry and across the globe by offering competitive compensation and benefits that support their health, financial and emotional well-being.

Our compensation philosophy is based on rewarding each employee’s individual contributions and striving to achieve equal pay for equal work regardless of gender, race or ethnicity.

We use a combination of fixed and variable pay including base salary, bonuses, performance awards and stock-based compensation.

The principal purposes of our equity incentive plans are to attract, retain and motivate selected employees and directors through the granting of stock-based compensation awards.

We offer employees benefits that vary by country and are designed to meet or exceed local laws and to be competitive in the marketplace.

Examples of benefits offered in the U.S.

include a 401(k) plan with employer contributions;

health benefits;

life, business travel and disability insurance;

additional voluntary insurance;

paid time off and parental leave;

education assistance;

paid counseling assistance;

backup child and adult care;

adoption support;

and family college planning.

For further information concerning our equity incentive plans, see Note 3, Stock-based Compensation and Shareholders' Equity , of the Notes to Consolidated Financial Statements contained in Part II, Item 8 of this Annual Report on Form 10-K.

We conduct annual assessments that review department goals to identify talent needs, assess how each division is positioned from a talent perspective, review the current state of talent vitality for each division, review key talent segments and prioritize actions to identify and develop talent.

We encourage all employees to never stop learning through the 70-20-10 philosophy.

We believe that by employees growing through career experiences (70%), learning from others (20%) and education (10%), they can continue to further their own growth and development.

We offer employees access to various internal and external formal training and development courses to support individual development.

We regularly review succession plans and focus on promoting internal talent to help grow our employees' careers.

In order to ensure that we are meeting our human capital objectives we frequently utilize employee surveys to understand the effectiveness of our employee and compensation programs and where we can improve across the company.

Our latest survey completed in fiscal 2020 had a participation rate of over 80% of all our employees and the survey results indicated that we excel in areas including initiative, empowerment, opportunities to learn and grow and overall culture.

Our dual focus of being a great place to work and providing industry-leading benefits and work culture has led to strong employee satisfaction and pride that has been recognized across the globe, as evidenced with the following awards:

Forbes America’s Best Employers List (2019, 2018), Forbes Global 2000:

World’s Best Employer List (2019, 2018) and The Boston Globe’s Top Places to Work (2019, 2018, 2017).

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 1. Business