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Item 1A. Risk Factors

2024-11-26 compared with 2023-11-21 · 119 added, 94 removed, 305 unchanged (41% of the section changed)

Set forth below and elsewhere in this report and in other documents we file with the Securities and Exchange Commission (SEC) are descriptions of certain risks and uncertainties that could cause our actual results to differ materially from the results contemplated by the forward-looking statements in this report.

Set forth below and elsewhere in this report are descriptions of certain risks and uncertainties that could cause our actual results to differ materially from the results contemplated by the forward-looking statements in this report.

Additional risks and uncertainties not presently known to us or that we presently deem less significant may also adversely affect our business.

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As a result of our international operations, our business, financial condition and results of operations could be negatively impacted by, among others, the following factors:

• political, legal and economic changes, crises or instability and civil unrest that may impact markets in which we do business, such as macroeconomic weakness related to trade and political disputes between the United States and China, tensions across the Taiwan Strait that may adversely affect our operations in Taiwan, our customers and the technology industry supply chain, and the ongoing conflicts between Israel and Hamas and between Russia and Ukraine;

• political, legal and economic changes, crises or instability and civil unrest that may impact markets in which we do business, such as macroeconomic weakness related to trade and political disputes between the United States and Europe or China, tensions across the Taiwan Strait that may adversely affect our operations in Taiwan, our customers and the technology industry supply chain, and the ongoing conflicts between Russia and Ukraine and in Israel and the Middle East;

• compliance requirements of customs and export regulations, including the Export Administration Regulations and the International Traffic and Arms Regulations;

• currency conversion risks and exchange rate and interest rate fluctuations, including the potential impact of elevated interest rates;

• instability of global credit and financial markets due to adverse macroeconomic conditions such as rising inflation, high interest rates, bank failures and slower economic growth or recession that could, among other impacts, affect our ability to access external financing sources on acceptable terms or lead to financial difficulties or uncertainty of our customers, suppliers and distributors exposing us to late payments, cancelled orders and inventory challenges;

• instability of global credit and financial markets due to adverse macroeconomic conditions such as elevated inflation, high interest rates, bank failures and slower economic growth or recession that could, among other impacts, affect our ability to timely access external financing sources on acceptable terms or lead to financial difficulties or uncertainty of our customers, suppliers and distributors exposing us to late payments, cancelled orders and inventory challenges;

• trade policy, commercial, travel, export or taxation disputes or restrictions, import or export tariffs, changes to export classifications or other restrictions imposed by the U.S.

government or by the governments of the countries in which we do business, particularly with respect to China;

• sanctions imposed by governments in countries in which we do business, including those imposed on Russia by, among others, the European Union, the United States and the United Kingdom in response to the ongoing conflict between Russia and Ukraine, which sanctions restrict a wide range of trade and financial dealings with Russian and Russian persons, as well as with certain regions in Ukraine;

• complex, varying and changing government regulations and legal standards and requirements, particularly with respect to tax, price protection, competition practices, export control, customs, immigration, anti-boycott, data privacy, cyber and product security, sustainability, climate and other ESG matters, intellectual property, anti-corruption, including the Foreign Corrupt Practices Act, and environmental compliance;

• sanctions imposed by governments in countries in which we do business;

• complex, varying and changing government regulations and legal standards and requirements, particularly with respect to tax, price protection, competition practices, export control, customs, immigration, anti-boycott, AI, data privacy, cyber and product security, sustainability, climate and other ESG matters, intellectual property, anti-corruption, including the Foreign Corrupt Practices Act, and environmental compliance;

• economic disruption from terrorism and threats of terrorism and the response to them by the United States and its allies;

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For example, changes in U.S.-China relations, the political environment or international trade policies could result in further revisions to laws or regulations or their interpretation and enforcement, increased taxation, trade sanctions, the imposition of import or export duties and tariffs, restrictions on imports or exports, currency revaluations or retaliatory actions, which have had and may continue to have an adverse effect on our business plans and operating results.

The incoming administration has

indicated that it intends to impose or significantly increase tariffs on imports to the United States, which could exacerbate many of these issues.

In addition, expanded export restrictions limit our ability to sell to certain Chinese companies and to third parties that do business with those companies.

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We are continuing to evaluate the impact of these restrictions on our business, but these actions may have direct and indirect adverse impacts on our revenues and results of operations in China and elsewhere.

In addition, our success in the Chinese markets may be adversely affected by China’s continuously evolving policies, laws and regulations, including those relating to antitrust, cybersecurity, data protection and data privacy, the environment, indigenous innovation and the promotion of a domestic semiconductor industry and intellectual property rights and enforcement and protection of those rights.

In addition, our success may be adversely affected by China’s continuously evolving policies, laws and regulations, including those relating to imports and exports, antitrust, AI, cybersecurity, data protection and data privacy, the environment, indigenous innovation, the promotion of a domestic semiconductor industry, intellectual property rights and enforcement and protection of those rights.

The markets for semiconductor products are cyclical, and increased production may lead to overcapacity and lower prices, and conversely, we may not be able to satisfy unexpected demand for our products.

The cyclical nature of the semiconductor industry has resulted in periods when demand for our products has increased or decreased rapidly.

The demand for our products may vary based on market conditions in our major end markets.

Demand in these end markets can fluctuate significantly based upon, for example, consumer spending, consumer preferences, the development of new technologies and macroeconomic conditions.

If we overbuild inventory in a period of decreased demand, or we expand our operations and workforce too rapidly or procure excessive resources in anticipation of increased demand for our products, and that demand does not materialize at the pace at which we expect, or declines, our operating results may be adversely affected as a result of underutilization of capacity, charges related to obsolete inventory, asset impairment or inventory write-downs, increased operating expenses or reduced margins.

For example, we have experienced, and may in the future experience, periods of customer inventory adjustments that may adversely affect our operating results.

For example, we have experienced, and may in the future experience, periods of customer inventory adjustments and other customer behaviors that may adversely affect our operating results.

Further, any capacity expansions by us or other semiconductor manufacturers could also lead to overcapacity in our target markets which could lead to price erosion that could adversely impact our operating results.

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Our manufacturing processes require availability of certain raw materials and supplies.

Limited or delayed access to these items could adversely affect our results of operations.

Limited or delayed access to these items, including as a result of, global trade issues, supply chain constraints, difficulties obtaining import or export licenses, natural disasters, public health emergencies or changes in or new laws or regulations, could adversely affect our results of operations.

In certain instances, one of our vendors may be the sole source of highly specialized processing services or materials.

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We market and sell our products directly and through third-party distributors.

There is a risk that our products may be diverted from our authorized distribution channels and sold on the “gray market” in ways that are not in accordance with our established agreements, controls, policies and procedures.

In the past, certain of our products have been, and there is a risk that our products may continue to be, diverted from our authorized distribution channels and sold on the “gray market” in ways that are not in accordance with our established agreements, controls, policies and procedures.

Purchasers that acquire our products via the gray market or through other unauthorized channels may resell or otherwise use our products for purposes for which they were not intended or that may be contrary to our ethical, legal and regulatory obligations.

Organizations may also purchase counterfeit or substandard products, including products that have been altered, mishandled or damaged, or purchase used products presented as new, each of which could result in damage to property or persons.

In addition, governments and regulatory bodies may inquire into our processes to mitigate risks related to product diversion.

For example, during 2024, we participated in an inquiry from the U.S.

Senate Permanent Subcommittee on Investigations related to the unauthorized misuse of U.S.

chips in Russian weapon systems.

As new challenges and information arise, our processes and policies will evolve, and we may be required to incur additional costs to continue to enhance our compliance efforts, which may include costs associated with distributor audits or responding to inquiries from governments and regulatory bodies.

These situations could have a material adverse effect on our reputation and business and operating results.

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As a result, we could forgo revenue opportunities, potentially lose market share and damage our customer relationships, all of which could materially and adversely affect our business, financial condition and results of operations.

Our operating results are dependent on the performance of independent distributors.

Sales to third-party distributors accounted for approximately 58% of our revenue in the year ended November 2, 2024.

These independent distributors generally represent product lines offered by several companies and thus could reduce their sales efforts for our products.

Further, our distributors could terminate their representation of us with little advance notice.

In addition, we generally do not require letters of credit from our distributors, including our largest distributor, and are not protected against accounts receivable default or declarations of bankruptcy by these distributors.

Our inability to collect open accounts receivable could adversely affect our operating results.

Termination of a significant distributor or a group of distributors, whether at our initiative or the distributor’s initiative or through consolidation in the distribution industry, could disrupt our business, and if we are unable to find suitable replacements with the appropriate scale and resources, our operating results could be adversely affected.

We are required to estimate the effects of returns and allowances provided to distributors and record revenue at the time of sale to the distributor.

If our estimates of such credits and rights are materially understated, it could cause subsequent adjustments that negatively impact our revenues and gross profits in a future period.

Our future success depends upon our ability to execute our business strategy, continue to innovate, improve our existing products, design, develop, produce and market new products and identify and enter new markets.

Our future success significantly depends on our ability to execute our business strategy, continue to innovate, improve our existing products, and design, develop, produce and market innovative new products and system-level solutions, including those that may incorporate, or are based upon, software or artificial intelligence technology.

Our future success significantly depends on our ability to execute our business strategy, continue to innovate, improve our existing products and design, develop, produce and market innovative new products and system-level solutions, including those that may incorporate, or are based upon, software or AI technology.

Product design, development, innovation and enhancement is often a complex, time-consuming and costly process involving significant investment in research and development with no assurance of return on investment.

There can be no assurance that we will be able to develop and introduce new and improved products in a timely or efficient manner or that new and improved products, if developed, will achieve market acceptance.

Our products generally must conform to various evolving and sometimes competing industry standards, which may adversely affect our ability to compete in certain markets or require us to incur significant costs.

Our products generally must conform to various evolving and sometimes competing industry and regulatory standards, which may adversely affect our ability to compete in certain markets or require us to incur significant costs.

In addition, our customers generally impose very high quality and reliability standards on our products, which often change and may be difficult or costly to satisfy.

Any inability to satisfy customer quality and reliability standards or comply with industry standards and technical requirements may adversely affect demand for our products and our results of operations.

Any inability to satisfy customer quality and reliability standards or comply with industry and regulatory standards and technical requirements may adversely affect demand for our products and our results of operations.

Our growth is also dependent on our ability to identify and penetrate new markets where we have limited experience yet require significant investments, resources and technological advancements in order to compete effectively, and there can be no assurance that we will achieve success in these markets.

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Our future revenue, gross margins, operating results, net income and earnings per share are difficult to predict and may be materially affected by a number of factors, including:

• the effects of adverse economic conditions in the markets in which we sell our products, including inflationary pressures, which has resulted, and may continue to result, in increased interest rates, fuel prices, wages and other costs;

• the effects of adverse economic or geopolitical conditions in the markets in which we sell our products, including inflationary pressures, which has resulted, and may continue to result, in increased interest rates, fuel prices, wages and other costs;

• changes in customer demand or order patterns for our products or for end products that incorporate our products;

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• changes in geographic, product or customer mix;

• changes in our effective tax rates or new or revised tax legislation in the United States, Ireland or worldwide;

• changes in our effective tax rates, adverse tax decisions or new or revised tax legislation in the United States, Ireland or worldwide;

• the effects of issued, threatened or retaliatory government sanctions, trade barriers or economic restrictions;

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and changes in import and export regulations, including restrictions on exports to certain companies or to third parties that do business with such companies, export classifications, or duties and tariffs, including with respect to China;

• the timing of new product announcements or introductions by us, our customers or our competitors and the market acceptance of such products;

• the timing of new product announcements or introductions, including products that may incorporate, or are based upon, software or AI technology, by us, our customers or our competitors and the market acceptance of such products;

• pricing decisions and competitive pricing pressures;

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• a decline in infrastructure spending by foreign governments, including China;

• a decline in the U.S.

• political changes in the United States, including those related to the incoming administration and executive offices of the U.S.

government, a decline in the U.S.

government defense budget, changes in spending or budgetary priorities, a prolonged U.S.

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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.

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 United States, including entities associated with well-funded efforts by foreign governments to create indigenous semiconductor industries.

From time to time, governments around the world may provide incentives or make other investments that could benefit and give competitive advantages to our competitors.

For example, in August 2022, the United States government enacted the CHIPS and Science Act of 2022 to provide financial incentives to the U.S.

For example, in August 2022, the CHIPS and Science Act of 2022 (CHIPS Act) was signed into law to provide financial incentives to the U.S.

semiconductor industry.

Government incentives, including any that may be offered in connection with the CHIPS Act, may not be available to us on acceptable terms or at all.

If our competitors can benefit from such government incentives and we cannot, it could strengthen our competitors' relative position and have a material adverse effect on our business.

Existing or new competitors may develop products or technologies that more effectively address the demands of our customers and markets with enhanced performance, features and functionality, lower power requirements, greater levels of integration or lower cost.

Government incentives, including any that may be offered in connection with the CHIPS Act, may not be available to us on acceptable terms or at all, and to the extent that the incoming administration modifies or repeals the CHIPS Act, the availability of any such incentives may be even less certain.

Further, such programs typically require companies to adhere to various performance obligations, which we may not achieve.

If our competitors can benefit from such government incentives and we cannot, it could strengthen our competitors’ relative position and have a material adverse effect on our reputation and business.

In addition, as we seek to expand our business, including the design and production of products and services for developing and emerging markets, we may encounter increased competition from our current and new competitors.

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The competition for these employees is intense and the labor market is tight.

The loss of key personnel or the inability to attract, timely hire and retain key employees with critical technical skills to achieve our strategy, including as a result of changes to immigration policies, could cause business disruptions, increased expenses to address any disruptions and could have a material adverse effect on our business.

The loss of key personnel or the inability to attract, timely hire and retain key employees with critical technical skills to achieve our strategy, including as a result of changes to immigration policies, and the increased uncertainty surrounding such policies in light of the incoming administration’s expected immigration agenda, could cause business disruptions, increased expenses to address any disruptions and could have a material adverse effect on our business.

We believe that a critical contributor to our success to date has been our corporate culture, which we have built to foster innovation, teamwork and employee satisfaction.

As we grow, including from the integration of employees and businesses acquired in connection with previous or future acquisitions, we may find it difficult to maintain important aspects of our corporate culture, which could negatively affect our ability to retain and recruit personnel who are essential to our future success.

As we grow, including from the integration of employees and businesses

acquired in connection with previous or future acquisitions, we may find it difficult to maintain important aspects of our corporate culture, which could negatively affect our ability to retain and recruit personnel who are essential to our future success.

We do not maintain any key person life insurance policy on any of our officers or other employees.

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Further, if orders or forecasts for products that meet a customer’s unique requirements are canceled or unrealized, we may be left with an inventory of unsaleable products, causing potential inventory write-offs, and hindering our ability to recover our costs.

The foregoing risks may be exacerbated in times of macroeconomic uncertainty, including as a result of rising inflation, high interest rates, bank failures and slower economic growth or recession.

The foregoing risks may be exacerbated in times of macroeconomic uncertainty, including as a result of elevated inflation, high interest rates, bank failures and slower economic growth or recession.

Incorrect forecasts, or reductions, cancellations or delays in orders for our products, could adversely affect our operating results.

Our operating results are dependent on the performance of independent distributors.

A significant portion of our sales are through independent global and regional distributors that are not under our control.

These independent distributors generally represent product lines offered by several companies and thus could reduce their sales efforts for our products or they could terminate their representation of us.

We generally do not require letters of credit from our

distributors, including our largest distributor, and are not protected against accounts receivable default or declarations of bankruptcy by these distributors.

Our inability to collect open accounts receivable could adversely affect our operating results.

We are required to estimate the effects of returns and allowances provided to distributors and record revenue at the time of sale to the distributor.

If our estimates of such credits and rights are materially understated, it could cause subsequent adjustments that negatively impact our revenues and gross profits in a future period.

Our semiconductor products are complex and we may be subject to warranty, indemnity or product liability claims, which could result in significant costs and damage to our reputation and adversely affect customer relationships, the market acceptance of our products and our operating results.

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Failures in our products and services or in the products of our customers could result in damage to our reputation for reliability and increase our legal or financial exposure to third parties.

Certain of our products and services, including those that may incorporate, or are based upon, software or artificial intelligence technology, could also contain security vulnerabilities, defects, bugs and errors, which could also result in significant data losses, security breaches and theft of intellectual property.

Certain of our products and services, including those that may incorporate, or are based upon, software or AI technology, could also contain security vulnerabilities, defects, bugs and errors, which could also result in significant data losses, security breaches and theft of intellectual property.

We generally warrant that our products will meet their published specifications, and that we will repair or replace defective products, for one year from the date title passes from us to the customer.

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This instability could result in manufacturing delays and product shortages, which could have a material adverse effect on our operating results.

Risk Related to Acquisitions and Strategic Transactions

Our acquisition of Maxim involves a number of risks that could adversely affect our business, financial condition and operating results, and we may not realize the financial and strategic goals we anticipate.

In August 2021, we completed our acquisition of Maxim, which we refer to as the acquisition or the merger.

The ultimate success of the merger will depend on, among other things, the ability to continue to combine the two businesses in a manner that facilitates growth opportunities.

Further, there are a large number of processes, policies, procedures, operations, technologies and systems that must continue to be integrated in connection with the ongoing integration of Maxim’s business.

The combined company has and may continue to incur ongoing restructuring, integration and other costs associated with combining the operations of the two companies in connection with the merger.

It is possible that the ongoing integration process could result in the loss of customers, the disruption of ongoing businesses, inconsistencies in standards, controls, procedures and policies, unexpected integration issues, higher than expected integration costs and an overall integration process that takes longer than originally anticipated and actual growth, if achieved, may be lower than what we expect and may take longer to achieve than anticipated.

There can be no assurances that the two businesses can be integrated successfully in a way

that maximizes the combined business to the fullest extent.

If we are not able to successfully achieve our objectives, the benefits of the merger may not be fully realized or may take longer to achieve than expected.

Risks Related to Acquisitions and Strategic Transactions

To remain competitive, we may need to invest in or acquire other companies, purchase or license technology from third parties, or enter into other strategic transactions in order to introduce new products or enhance our existing products.

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

We may not be able to find businesses that have the technology or resources we need and, if we find such businesses, we may not be able to invest in, purchase or license the technology or resources on commercially favorable terms or at all.

We may not be able to identify businesses that have the technology or resources we need and, if we find such businesses, we may not be able to invest in, purchase or license the technology or resources on commercially favorable terms or at all.

Acquisitions, investments and technology licenses are challenging to complete for a number of reasons, including difficulties in identifying potential targets, the cost of potential transactions, competition among prospective buyers and licensees, the need for regulatory approvals, and difficulties related to integration efforts.

In addition, investments in companies are subject to a risk of a partial or total loss of our investment.

Both in the United States and abroad, governmental regulation of acquisitions, including antitrust and other regulatory reviews and approvals, has become more complex, increasing the costs and risks of undertaking and consummating significant acquisitions.

In order to finance a potential transaction, we may need to raise additional funds by issuing securities or borrowing money.

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• diversion of management’s attention in connection with both negotiating the transaction and integrating the acquired assets and businesses;

• difficulty or delay integrating acquired technologies, operations, systems, infrastructure and personnel with our existing businesses;

• difficulty or delay integrating acquired technologies, operations, processes, policies, procedures, systems, technologies, infrastructure and personnel with our existing businesses;

• strain on managerial and operational resources as management oversees larger or more complex operations;

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If we are unable to successfully address these risks, we may not realize some or all of the expected benefits of our acquisitions, which may have an adverse effect on our business strategy, plans and operating results.

Risks Related to Cyber, Intellectual Property, Legal and Regulatory

Our computer systems and networks may be subject to attempted security breaches and other cyber incidents and a significant disruption in, or breach in security of, our information technology systems or certain products could materially and adversely affect our business or reputation.

Risks Related to Cyber, Artificial Intelligence, Intellectual Property, Legal and Regulatory

Our computer systems and networks are subject to attempted security breaches and other cyber incidents and a significant disruption in, or breach in security of, our information technology systems or certain products could materially and adversely affect our business or reputation.

We rely on information technology systems throughout our company to keep financial records and customer data, process orders, manage inventory, coordinate shipments to customers, maintain confidential and proprietary information, assist in semiconductor engineering and other technical activities and operate other critical functions such as internet connectivity, network communications and email.

In addition, we provide our confidential and proprietary information to our strategic partners in certain cases, who may maintain such information on their information technology systems.

While in the past we have experienced cybersecurity attacks and incidents, we believe that they have not had a material impact on our business.

Our security measures or those of our third-party service providers or strategic partners may not detect or prevent security breaches, cyberattacks, defects, bugs or errors.

Further, geopolitical tensions or conflicts may escalate the volume and sophistication of cyberattacks, thereby making it more difficult to detect, mitigate and defend against them.

We and our third-party service providers or strategic partners may be subject to security breaches of information technology systems or certain products caused by viruses, illegal break-ins or hacking, sabotage, other cyberattacks or acts of vandalism by third parties or our employees or contractors.

In the event of a breach, our operations may be disrupted, our proprietary information or that of our employees, contractors, partners, customers, suppliers or other third parties may be misappropriated, and we could be exposed to potential liability,

litigation, and regulatory action, as well as the loss of existing or potential customers, damage to our reputation and other financial loss.

Further, geopolitical tensions and conflicts have escalated the volume and sophistication of cyberattacks.

Because the tactics and techniques used by threat actors to obtain unauthorized access to or sabotage systems change frequently and, in some cases, are not recognized until they are launched or even later, we may be unable to anticipate these techniques or to implement adequate preventative measures in advance, and security breaches may remain undetected for an extended period of time.

Our use of AI may also increase vulnerability to cybersecurity risks, including through unauthorized use or misuse of AI tools and bad inputs or logic or the introduction of malicious code incorporated into AI

generated code.

AI and machine learning also may be used for certain cybersecurity attacks, improving or expanding the existing capabilities of threat actors in manners we cannot predict at this time, resulting in greater risks of security incidents and breaches.

We and our third-party service providers or strategic partners are susceptible to security breaches of information technology systems or certain products and other incidents such as unauthorized access, supply-chain attacks, exfiltration or destruction of data, disruption of service, viruses or other malicious code, illegal break-ins or hacking, sabotage, phishing attempts and other forms of social engineering, malware, ransomware and other forms of cyber extortion and similar events.

These threats may come from cybercriminals, cyberterrorists and hacktivists, nation-state and nation-state-supported actors (including advanced persistent threat intrusions) and computer hackers.

They also may result from the malicious or accidental acts of our employees, contractors or third-party providers.

In the event of unauthorized access to, or a security breach of, our systems or those of our third-party service providers or strategic partners, our operations may be disrupted and our proprietary information or that of our employees, contractors, partners, customers, suppliers or other third parties may be misappropriated.

In the event of a cybersecurity attack or incident, we could be exposed to potential liability, litigation, and regulatory action, as well as the loss of existing or potential customers, damage to our reputation and other financial loss.

In addition, the cost and operational consequences of responding to breaches and implementing remediation measures could be significant.

Furthermore, the continuing and evolving threat of cyberattacks has resulted in increased regulatory focus and we may be required to invest significant additional resources to comply with evolving cybersecurity regulations.

For example, the SEC adopted rules requiring the disclosure of cybersecurity incidents that we determine to be “material,” to be made within four business days of such determination, which can be complex, requiring a number of assumptions based on several factors.

It is possible that the SEC may not agree with our determinations, which could result in fines, civil litigation or damage to our reputation.

Our information technology systems and those of our third-party service providers and strategic partners may also be susceptible to damage, disruptions or shutdowns due to power outages, hardware failures, telecommunication failures, user errors, catastrophes or other unforeseen events.

If we were to experience a prolonged disruption in the information technology systems that involve our internal communications or our interactions with customers or suppliers, it could result in the loss of sales and customers and significant incremental costs, which could adversely affect our business.

A prolonged disruption in the information technology systems that involve our internal communications or our interactions with customers or suppliers, could result in the loss of sales and customers and significant incremental costs, which could adversely affect our business.

We face risks related to the use of AI in our business operations, products and services.

We are increasingly incorporating AI capabilities into the development of technologies and our business operations and into our products and services.

The development and deployment of AI involves significant competitive, legal, regulatory and other risks.

The implementation of AI is costly, requires a significant amount of data and there can be no assurance that AI will enhance our products or services or be beneficial to our business, including our efficiency or profitability.

In addition, we face significant competition from other companies that are incorporating AI into their products and technologies.

These other companies may incorporate AI in products or technologies that are similar to, or that customers perceive as superior to, our technologies or are more cost-effective to develop and deploy.

AI technology is complex and rapidly evolving, and if we are unable to innovate quickly enough to keep pace with these rapid technological developments, our business could be harmed.

AI technology may also give rise to significant legal and regulatory liability.

Governments around the world have adopted, and may continue to adopt, laws and regulations related to AI, including the European Union’s AI Act, and several U.S.

government agencies have increased investigations and enforcement efforts related to the use of AI technology, which could increase our compliance costs and limit our ability to use AI in the development of our products and services.

While the incoming administration has signaled that AI policy will be a priority, the scope and impact of any such policies cannot yet be determined.

In addition, the use of AI in the development of our products and services, or by our customers in end products that incorporate our products, could cause loss of intellectual property, or subject us to risks related to intellectual property infringement or misappropriation, data privacy or cybersecurity.

AI algorithms or training methodologies may also be flawed, and datasets may contain irrelevant, insufficient or biased information.

Further, AI technology has many applications, and our products could be used in applications that are not in accordance with our controls, policies and procedures.

Any failure or perceived failure by us to comply with any legal or regulatory requirement could subject us to legal liabilities, damage our reputation or otherwise adversely affect our business.

We may be unable to adequately protect our proprietary intellectual property rights, which may limit our ability to compete effectively.

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We primarily rely on patent, mask work, copyright, trademark and trade secret laws, as well as nondisclosure agreements, information security practices and other methods, to protect our proprietary information, technologies and processes.

Despite our efforts to protect our intellectual property, it is possible that competitors or other unauthorized third parties may obtain or disclose our confidential information, reverse engineer or copy our technologies, products or processes, make unlicensed copies or engage in unapproved distributions of our technology for unauthorized uses, or otherwise misappropriate our intellectual property.

Despite our efforts to protect our intellectual property, it is possible that competitors or other unauthorized parties may obtain or disclose our confidential information, reverse engineer or copy our technologies, products or processes, make unlicensed copies or engage in unapproved distributions of our technology for unauthorized uses, or otherwise misappropriate our intellectual property.

Moreover, the laws of foreign countries in which we design, manufacture, market and sell our products may afford little or no effective protection of our intellectual property.

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In the United States, California enacted the CCPA that requires covered companies to provide additional disclosures and data rights to data subjects, including employees.

The CCPA went into effect on January 1, 2020.

The California Privacy Rights Act (CPRA), which will become enforceable in March 2024, expands the CCPA and establishes the California Privacy Protection Agency to enforce Californians’ privacy rights under the CCPA.

The California Privacy Rights Act expands the CCPA and establishes the California Privacy Protection Agency to enforce Californians’ privacy rights under the CCPA.

Since the CCPA was enacted, other states, including Virginia and Colorado, have enacted or are in the process of enacting comprehensive privacy schemes.

The costs of compliance with, and other burdens imposed by, the GDPR, CCPA and similar laws may limit the use and adoption of our products and services and require us to incur substantial compliance costs, which could have an adverse impact on our business.

Further, our product offerings in the digital healthcare solutions space, which include the collection and

processing of sensitive personal information, subject us to heightened requirements under data privacy laws, such as the Health Insurance Portability and Accountability Act.

Further, our product offerings in the digital healthcare solutions space, which include the collection and processing of sensitive personal information, subject us to heightened requirements under data privacy laws, such as the Health Insurance Portability and Accountability Act.

Given that the scope, interpretation and application of these laws and regulations are often uncertain and may be in conflict across jurisdictions, it is possible that these obligations may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another and may conflict with other rules or our practices.

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We are occasionally involved in litigation, administrative proceedings, and regulatory proceedings, which could be costly to resolve and could require us to redesign products, pay significant royalties or fines or refrain from engaging in specific conduct.

From time to time, we are involved in various legal, administrative and regulatory proceedings, claims, demands and investigations relating to our business, including inquiries from and discussions with government entities regarding the compliance of our contracting and sales practices with laws and regulations, which may result in claims with respect to commercial, product liability, intellectual property, cybersecurity, privacy, data protection, antitrust, breach of contract, employment, class action, whistleblower, mergers and acquisitions and other matters.

From time to time, we are involved in various legal, administrative and regulatory proceedings, claims, demands and investigations relating to our business, including inquiries from and discussions with government entities regarding the compliance of our contracting and sales practices with laws and regulations, which may result in claims, fines or penalties with respect to commercial, product liability, intellectual property, AI, cybersecurity, privacy, data protection, antitrust, breach of contract, employment, class action, whistleblower, mergers and acquisitions and other matters.

We could also be subject to litigation or arbitration disputes arising under our contractual obligations, customer indemnity, warranty or product liability claims, or other matters that could lead to significant costs and expenses as we defend those claims or pay damage awards.

For example, in March 2022, a putative class action was filed in the Court of Chancery of the State of Delaware against us and the former directors of Maxim as described in Part I, Item 3, “ Legal Proceedings .”

Further, the semiconductor industry is characterized by frequent claims and litigation involving patent and other intellectual property rights.

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There is an increasing focus from regulators, investors, customers, employees and potential talent, as well as other stakeholders, concerning ESG matters, including climate change and sustainability, human rights, support for local communities, Board of Directors’ and employee diversity, human capital management, employee health and safety practices, product quality, worker rights, supply chain management and corporate governance and transparency.

If our ESG practices fail to meet the expectations of investors, customers, employees or other stakeholders’ evolving standards, our reputation, brand and employee retention may be negatively impacted, and our customers and suppliers may be unwilling to continue to do business with us.

If our ESG practices fail to meet our or the evolving expectations of investors, customers, employees or other stakeholders, our reputation, brand and employee retention may be negatively impacted, and our customers and suppliers may be unwilling to continue to do business with us.

Current and prospective investors are increasingly utilizing ESG data to inform their decisions, including investment and voting decisions, using a multitude of evolving score and rating frameworks.

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In addition, our operations may be interrupted or restricted by the phase-out or ban of certain substances, materials or processes, which may impact the sourcing, supply and pricing of materials used in manufacturing our products.

For example, several jurisdictions have sought or may seek to restrict the use of per- and polyfluoroalkyl substances (PFAS), which may be found in process chemicals, parts, components and other materials used in semiconductor manufacturing and have limited technically and commercially feasible alternatives.

Any such restriction in our ability to access supplies may adversely affect our results of operations.

Further, public attention to environmental and social responsibility remains high, and our customers routinely include stringent environmental and other standards in their contracts with us.

Changes in EHS laws, regulations or customer requirements may require us to invest in equipment or make manufacturing process or material changes, all of which could adversely affect our business, financial condition and results of operations.

In addition, we use hazardous and other regulated materials that subject us to risks of strict liability for damages caused by potential or actual releases of such materials.

It is expected that there will be changes to EHS laws or regulations by the incoming administration, but the impacts of any such changes on us are not currently known.

Changes in EHS laws or regulations, uncertainties about those laws or regulations, or customer requirements may require us to invest in equipment, make manufacturing process or material changes or re-assess current and planned expenditures and initiatives, any of which could adversely affect our business, financial condition and results of operations.

In addition, we use hazardous and other regulated materials that subject us to risks of liability for damages caused by potential or actual releases of such materials.

Any failure to control such materials adequately or to comply with existing or future EHS statutory or regulatory standards, requirements or contractual obligations could result in any of the following, each of which could have a material adverse effect on our business and operating results:

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Our failure to address, or the appearance of our failure to address, issues that give rise to reputational risk, including those described in this Risk Factors section, could significantly harm our reputation and our brands.

We may be subject to reputational risks and our brand loyalty may decline if others adopt the same or confusingly similar marks in an effort to misappropriate and profit on our brand name and do not provide the same level of quality as is delivered by our solutions and

It may also limit our ability to be seen as an employer of choice when competing for highly skilled employees and repairing our reputation and brands may be difficult, time-consuming, and expensive.

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Our effective tax rate reflects the applicable tax rate in effect in the various tax jurisdictions around the world where our income is earned.

Our effective tax rate for the fiscal year ended October 28, 2023 was below the U.S.

Our effective tax rate for the fiscal year ended November 2, 2024 was below the U.S.

federal statutory rate of 21%.

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any adverse resolution of ongoing tax audits or adverse rulings from taxing authorities worldwide;

changes in the valuation of our deferred tax assets and liabilities;

in the valuation of our deferred tax assets and liabilities;

adjustments to income taxes upon finalization of various tax returns;

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Any significant increase in our future effective tax rate could adversely impact our net income during future periods.

Compliance with tax legislation may require the collection of information not regularly produced by us, and therefore necessitate the use of estimates in our Consolidated Financial Statements and the exercise of significant judgment in accounting for its provisions.

As regulations and guidance evolve with respect to tax legislation, and as more information is gathered and analyzed, our results may differ from previous estimates and may materially affect our Consolidated Financial Statements.

Tax legislation and regulation may require the collection of information not regularly produced by us, and therefore necessitate the use of estimates in our Consolidated Financial Statements and the exercise of significant judgment in accounting for its provisions, which may subject us to additional tax liability, tax examination and other risks.

As regulations and guidance evolve with respect to tax legislation and regulation, and as more information is gathered and analyzed, our results may differ from previous estimates and may materially affect our Consolidated Financial Statements.

Further, we are subject to, and are under tax examination and audit in various jurisdictions, including an IRS income tax audit for the fiscal years ended October 30, 2021, November 2, 2019 (fiscal 2019) and November 3, 2018;

a pre-Acquisition IRS income tax audit for Maxim Integrated Products, Inc.’s (Maxim) fiscal years ended June 27, 2015 through August 26, 2021;

and various U.S.

state and local tax audits and international audits, including an Irish corporate tax audit for fiscal 2019.

Such jurisdictions may assess additional income tax against us.

The final determination of tax audits or any administrative appeals relating thereto could be materially different from our income tax provisions and accruals.

The ultimate result of any current or future audit could have a material adverse effect on our results of operations and cash flows in the period or periods for which that determination is made.

We are also subject to laws and regulations in various jurisdictions that determine how much profit has been earned and when it is subject to taxation in that jurisdiction.

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Corporate tax reform, anti-base-erosion rules and tax transparency continue to be high legislative or regulatory priorities in many jurisdictions.

Changes in laws and regulations regarding these matters, including those that align to or are associated with the Organization for Economic Cooperation and Development's Base Erosion and Profit Shifting Actions Plans, could impact the jurisdictions where we are deemed to earn income, which could in turn adversely affect our tax liability and results of operations.

Changes in laws and regulations regarding these matters could impact the jurisdictions where we are deemed to earn income, which could in turn adversely affect our tax liability and results of operations.

For example, the Organization for Economic Cooperation and Development’s (OECD) Base Erosion and Profit Sharing Plans, which implement a minimum global effective tax rate of 15%, will apply to us beginning in fiscal year 2025.

We continue to monitor potential impacts related to this legislation as countries implement it and the OECD provides additional guidance.

As additional jurisdictions enact such legislation, our effective tax rate and cash tax payments could increase.

Risks Related to Financial Markets, Indebtedness and Capital Return

We have substantial existing indebtedness and the ability to incur significant additional indebtedness, which could limit our operations and our use of our cash flow and negatively impact our credit ratings.

As of October 28, 2023, we had approximately $6.9 billion in outstanding indebtedness, including $0.5 billion of short-term commercial paper.

As of November 2, 2024, we had approximately $7.6 billion in outstanding indebtedness, including $0.5 billion of short-term commercial paper.

In addition, we had the ability to incur approximately $2.0 billion of additional indebtedness in direct borrowings under our outstanding commercial paper facility based on amounts available under our unsecured revolving credit facility that were not being used to backstop our outstanding commercial paper balance.

Our leverage could have negative consequences, including increasing our vulnerability to adverse economic and industry conditions, limiting our ability to obtain additional financing and limiting our ability to acquire new products and technologies through strategic acquisitions.

Further, on October 5, 2021, we issued $500 million aggregate principal amount of floating rate senior notes (Floating Rate Notes).

Our Floating Rate Notes and our net interest expense is exposed to changes in market interest rates and will increase as market interest rates rise.

Further, our net interest expense is exposed to changes in market interest rates.

We may also incur additional debt, including debt with variable interest rates, in the future, which would exacerbate these risks.

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Such measures might not be sufficient to enable us to service our debt, which could negatively impact our financial results.

In addition, we may not be able to obtain any such financing, refinancing or

complete a sale of assets on economically favorable terms.

In addition, we may not be able to obtain any such financing, refinancing or complete a sale of assets on economically favorable terms.

In the case of financing or refinancing, favorable interest rates will depend on conditions in the debt capital markets.

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For example, we entered into a revolving credit agreement on June 23, 2021, which, as amended, contains a sustainability-linked pricing component, which provides for interest rate and facility fee reductions or increases based on meeting or missing targets related to environmental sustainability, specifically greenhouse gas emissions and renewable energy usage.

For calendar year 2022, we were within the threshold range for greenhouse gas emissions and exceeded the target threshold for renewable energy usage related to this sustainability-linked pricing component.

For calendar year 2023, we exceeded the target thresholds for greenhouse gas emissions and renewable energy usage related to this sustainability-linked pricing component, which resulted in immaterial adjustments to administrative and interest fees due under the facility.

On October 5, 2021, we issued $750 million sustainability-linked senior notes (Sustainability-Linked Senior Notes).

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cash requirements.

We require a substantial amount of cash in the United States for operating requirements, stock repurchases, cash dividends and acquisitions.

However, we require a substantial amount of cash in the United States for operating requirements, stock repurchases, cash dividends and acquisitions.

If we are not able to meet our U.S.

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General Risk Factors

Our results of operations could be affected by natural disasters or other catastrophic events in the locations in which we operate.

Our results of operations could be affected by natural disasters or other catastrophic events in the locations in which we or our key partners operate.

We, like many companies in the semiconductor industry, rely on supplies, services, internal manufacturing capacity, wafer fabrication foundries and other subcontractors in locations around the world that are susceptible to natural disasters and other significant disruptions.

Earthquakes, fires, tsunamis, flooding, public health emergencies or other catastrophic events may disrupt local semiconductor-related businesses and adversely affect manufacturing capacity, availability and cost of key raw materials, utilities and equipment, and availability of key services, including transport of our products worldwide.

Earthquakes, fires, tsunamis, extreme precipitation and flooding, public health emergencies or other catastrophic events may disrupt local semiconductor-related businesses and adversely affect manufacturing capacity, availability and cost of key raw materials, utilities and equipment, and availability of key services, including transport of our products worldwide.

Our insurance may not adequately cover losses resulting from such disruptions.

Any prolonged inability to utilize one of our manufacturing facilities, or those of our subcontractors or third-party wafer fabrication foundries, as a result of fire, flood, natural disaster, unavailability of utilities or otherwise, could result in a temporary or permanent loss of customers for affected products, which could have a material adverse effect on our results of operations and financial condition.

In addition, global

climate change may result in certain natural disasters or other severe weather events occurring more frequently or with greater intensity, such as drought, wildfires, storms, sea-level rise, extreme temperatures and flooding, and could disrupt the availability of water necessary for the operation of our fabrication facilities.

Any prolonged inability to utilize one of our manufacturing facilities, or those of our subcontractors or third-party wafer fabrication foundries, or to access key raw materials, utilities and equipment as a result of fire, flood, natural disaster, unavailability of utilities or otherwise, could result in a temporary or permanent loss of customers for affected products, which could have a material adverse effect on our results of operations and financial condition.

In addition, global climate change may result in certain natural disasters or other severe weather events occurring more frequently or with greater intensity, such as drought, wildfires, storms, sea-level rise, extreme temperatures and flooding, and could disrupt the availability of water necessary for the operation of our fabrication

The long-term effects of climate change on the global economy and the semiconductor industry in particular are unclear, but could be severe.

The extent to which the novel strain of the coronavirus (COVID-19) pandemic will adversely affect our business, financial condition and results of operations is uncertain.

The COVID-19 pandemic created significant worldwide uncertainty, volatility and economic disruption and impacted our workforce and operations, the operations of our customers, those of our respective vendors and suppliers and the global capital markets.

During the course of the pandemic, many of the countries in which we operate took and may continue to take measures to address the pandemic, which at times has resulted and may continue to result in disruptions at some of our manufacturing operations and facilities, including restrictions on our access to facilities.

We may also be required to take actions as may be required by government authorities or that we determine are in the best interests of our employees, customers, partners, and suppliers, which may cause disruption to our business.

The COVID-19 pandemic could also cause further disruption in our supply chain and customer demand, and could adversely affect the ability of our customers to perform, including in making timely payments to us, which could further impact our business, financial condition and results of operations.

To the extent the COVID-19 pandemic adversely affects our business, results of operations, financial condition and cash flows, it may also heighten many of the other risks described in this “Risk Factors” section.

Our stock price may be volatile.

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• negative media publicity targeting us or our suppliers, customers or competitors.

The stock market has historically experienced volatility, especially within the semiconductor industry, that often has been unrelated to the performance of particular companies, such as the response to rising inflation and increasing interest rates.

These market fluctuations may cause our stock price to fall regardless of our operating results.

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Regardless of the individual’s reasons for such purchases or sales, securities analysts and investors could view such transactions as positive or negative indicators and our stock price could be adversely affected as a result.

UNRESOLVED STAFF COMMENTS

CYBERSECURITY

Not applicable.

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What changed 10-K

Item 1A. Risk Factors