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In that event, the trading price of our ordinary shares could decline, and you could lose part or all of your investment.
+Added: Summary of Risk Factors
+Added: Our business and our industry is subject to numerous risks and uncertainties, including those described in the following Risk Factors.
+Added: These risks include, but are not limited to, the following:
+Added: The COVID-19 pandemic could adversely affect our business in a material way.
+Added: If our customers do not design our solutions into their product offerings, or if our customers’ product offerings are not commercially successful, our business would suffer.
+Added: If we fail to penetrate new markets, our revenue and financial condition could be harmed.
+Added: Our ability to sell our products to several China customers has been restricted.
+Added: In addition, we are subject to governmental export and import controls that could subject us to liability or impair our ability to compete in international markets, including China.
+Added: Global economic and political conditions, including possible trade tariffs and trade restrictions, may have an impact on our business and financial condition in ways that we currently cannot predict.
+Added: Our primary inventory warehouse is located in Hong Kong and may be affected by recent political, social and economic conditions in Hong Kong.
+Added: Our target markets may not grow or develop as we currently expect and are subject to market risks, any of which could harm our business, revenue and operating results.
+Added: If we fail to develop and introduce new or enhanced solutions on a timely basis, our ability to attract and retain customers could be impaired and our competitive position could be harmed.
+Added: Achieving design wins is subject to lengthy competitive selection processes that require us to incur significant costs.
+Added: Even if we begin a product design, a customer may decide to cancel or change its product plans, resulting in no revenue from such expenditures.
+Added: Our customers may cancel their orders, change production quantities or delay production.
+Added: If we fail to accurately forecast demand for our solutions, revenue shortfalls and/or excess, obsolete or insufficient inventory could result.
+Added: We depend on a limited number of customers and end customers for a significant portion of our revenue.
+Added: If we fail to retain or expand our customer relationships, our revenue could decline.
+Added: We are subject to governmental export and import controls that could subject us to liability or impair our ability to compete in international markets .
+Added: We do not have long-term supply contracts with our third-party manufacturing vendors, and they may not allocate sufficient capacity to us at reasonable prices to meet future demands for our solutions.
+Added: We expect competition to increase in the future, which could have an adverse effect on our revenue and market share.
+Added: Fluctuations in our operating results on a quarterly and annual basis could cause the market price of our ordinary shares to decline.
+Added: While we intend to continue to invest in research and development, we may be unable to make the substantial investments that are required to remain competitive in our business.
+Added: The average selling prices of video and image processing solutions in our target markets have historically decreased over time and will likely do so in the future, which could harm our revenue and gross margins.
+Added: If we do not generate revenue growth, we may not be able to execute our business plan and our operating results could suffer.
+Added: We are subject to the cyclical nature of the semiconductor industry.
+Added: We may have difficulty accurately predicting our future revenue and appropriately budgeting our expenses.
+Added: A substantial portion of our revenue is processed through a single distributor and the loss of this distributor, or our inability to collect from them, may cause disruptions in our shipments, which may adversely affect our operations and financial condition.
+Added: We are subject to risks associated with our distributors' product inventories.
+Added: Deterioration of the financial conditions of our customers could adversely affect our operating results.
+Added: We rely on highly skilled personnel and, if we are unable to hire, retain or motivate key personnel, we may not be able to grow effectively.
+Added: Similarly, the loss of any of our key personnel could seriously harm our business.
+Added: The complexity of our solutions could result in unforeseen delays or expenses from undetected defects, errors or bugs in hardware or software which could reduce the market adoption of our new solutions, damage our reputation with current or prospective customers and adversely affect our operating costs.
+Added: Camera manufacturers incorporate components supplied by multiple third parties, and a supply shortage or delay in delivery of these components could delay orders for our solutions by our customers.
+Added: We outsource our wafer fabrication, assembly and testing operations to third parties, and if these parties fail to produce and deliver our products according to requested demands in specification, quantity, cost and time, our reputation, customer relationships and operating results could suffer.
+Added: We may experience difficulties in transitioning to new wafer fabrication process technologies or in achieving higher levels of design integration, which may result in reduced manufacturing yields, delays in product deliveries and increased costs.
+Added: Third parties’ assertions of infringement of their intellectual property rights could result in our having to incur significant costs and cause our operating results to suffer.
+Added: Any potential dispute involving our patents or other intellectual property could affect our customers, which could trigger our indemnification obligations to them and result in substantial expense to us.
+Added: We are subject to warranty and product liability claims and to product recalls which could adversely affect our business.
+Added: Some of our operations and a significant portion of our customers and our subcontractors are located outside of the United States, which subjects us to additional risks, including increased complexity and costs of managing international operations and geopolitical instability.
+Added: Unfavorable tax law changes, an unfavorable governmental review of our tax returns, changes in our geographical earnings mix or imposition of withholding taxes on repatriated earnings could adversely affect our effective tax rate and our operating results.
+Added: We are subject to numerous regulatory compliance requirements, which are costly to comply with, and our failure to comply with these requirements could harm our business and operating results.
Risks Related to Our Business and Our Industry
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The outbreak has resulted in significant governmental measures being implemented to control the spread of COVID-19, including, among others, shelter in place orders and restrictions on travel, manufacturing and the movement of employees in many regions of the world, as well as responsive measures from businesses.
−Removed: As a result, we have had to impose remote or work from home conditions in many of our offices, including the United States, Italy, Japan and South Korea.
+Added: We have had to impose remote or work from home conditions in many of our offices, including the United States, Italy, Japan and South Korea.
+Added: If remote or work-from-home conditions in any of our offices continue for an extended period of time, we may experience delays in product development, a decreased ability to support our customers, reduced design win activity, and overall lack of productivity.
The majority of our SoCs are manufactured in South Korea and assembled and tested by third parties in Taiwan.
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If any of our third-party manufacturing, assembly and testing partners or our logistics and shipping operations are unable to operate efficiently or at all due to responsive measures to COVID-19, we may experience delays in our supply chain and be unable to meet our customers’ expectations and requirements.
−Removed: If remote or work from home conditions in any of our offices continue for an extended period of time, we may experience delays in product development, a decreased ability to support our customers, reduced design win activity, and overall lack of productivity.
+Added: While we have not yet experienced a major disruption in our supply chain as a result of the COVID-19 pandemic, we are experiencing longer manufacturing times due to shortages of materials used to assemble our products caused in part by COVID-19 that, if such conditions persist or worsen, could impact our ability to meet our customers’ demand for our solutions and negatively impact our revenue.
Similarly, our customers and potential customers may also experience delays in the development of their products, reduced sales activity, decreased ability to support their customers, closures of their manufacturing facilities or inability to obtain other components, as a result of measures implemented to control the spread of COVID-19.
−Removed: COVID-19 has negatively impacted the overall global economy and, as a result of, may negatively impact demand for our customers’ products and, in turn, impact demand for our solutions.
−Removed: If COVID-19 continues to progress in ways that further disrupt the manufacture, shipment and buying patterns of our products or the products of our customers, or further deteriorates the global economy, it may materially negatively impact our operating results for the second half of fiscal 2021 and subsequent periods, including revenue, gross margins, operating margins, cash flows and other operating results and our overall business.
+Added: Such impacts were experienced in the automotive market, and to a lesser degree in the home security and monitoring camera market, in the first and second quarters of 2020 and could occur again.
+Added: COVID-19 has negatively impacted the overall global economy and, as a result, may negatively impact demand for our customers’ products and, in turn, impact demand for our solutions.
+Added: If COVID-19 continues to progress in ways that further disrupt the manufacturing, shipment and buying patterns of our products or the products of our customers, or further deteriorates the global economy, it may materially negatively impact our operating results for the fourth quarter of fiscal year 2021 and subsequent periods, including revenue, gross margins, operating margins, cash flows and other operating results and our overall business.
If our customers do not design our solutions into their product offerings, or if our customers’ product offerings are not commercially successful, our business would suffer.
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In such event, our business and results of operations could be adversely affected.
+Added: We do not have long-term supply contracts with our third-party manufacturing vendors, and they may not allocate sufficient capacity to us at reasonable prices to meet future demands for our solutions.
+Added: The semiconductor industry is subject to intense competitive pricing pressure from customers and competitors.
+Added: Accordingly, any increase in the cost of our solutions, whether by adverse purchase price variances or adverse manufacturing cost variances, will reduce our gross margins and operating profit.
+Added: We currently do not have long-term supply contracts with most of our primary third-party vendors, and we negotiate pricing with our main vendors on a purchase order-by-purchase order basis.
+Added: Therefore, they are not obligated to perform services or supply product to us for any specific period, in any specific quantities, or at any specific price, except as may be provided in a particular purchase order.
+Added: The ability of our foundry vendors to provide us with a product, which is solely sourced at each foundry, is limited by their available capacity, existing obligations and technological capabilities.
+Added: Foundry capacity may not be available when we need it or at reasonable prices.
+Added: None of our third-party foundry or assembly and test vendors have provided contractual assurances to us that adequate capacity will be available to us to meet our anticipated future demand for our solutions.
+Added: Moreover, availability of foundry capacity at our primary foundry vendor has tightened recently, which could limit the volume of products we can produce and/or delay production of new products, both of which would negatively impact our business and operations.
+Added: Similarly, our assembly vendors have recently experienced shortages of certain substrates necessary for the production of our solutions due in part to COVID-19, which has negatively impacted the production time of our devices.
+Added: If these conditions continue for a substantial period or worsen, our ability to meet our anticipated demand for our solutions could be impacted which, in turn, could negatively impact our operations and financial results.
+Added: Our foundry and assembly and test vendors may allocate capacity to the production of other companies’ products while reducing deliveries to us on short notice.
+Added: In particular, other companies that are larger and better financed than we are or that have long-term agreements with our foundry or assembly and test vendors may cause our foundry or assembly and test vendors to reallocate capacity to them, decreasing the capacity available to us.
+Added: Converting or transferring manufacturing from a primary location or supplier to a backup provider could be expensive and would likely take at least two or more quarters.
+Added: There are only a few foundries, including Samsung and Taiwan Semiconductor Manufacturing Co., Ltd., or TSMC, that are currently available for certain advanced process technologies that we utilize or may utilize, such as 10 or 5 nanometer, or nm.
+Added: Accordingly, as we continue to develop solutions in advanced process nodes, we will be increasingly dependent upon such foundries.
+Added: The unavailability of one or both of these foundries could significantly impact our ability to produce our new products or delay production, which would negatively impact our business.
+Added: If, in the future, we enter into arrangements with suppliers that include additional fees to expedite delivery, nonrefundable deposits or loans in exchange for capacity commitments or commitments to purchase specified quantities over extended periods, such arrangements may be costly, reduce our financial flexibility and be on terms unfavorable to us, if we are able to secure such arrangements at all.
+Added: To date, we have not entered into any such arrangements with our suppliers.
+Added: If we need additional foundry or assembly and test subcontractors because of increased demand or the inability to obtain timely and adequate deliveries from our current vendors, we may not be able to do so cost-effectively, if at all.
Our primary inventory warehouse is located in Hong Kong and may be affected by recent political, social and economic conditions in Hong Kong.
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In fiscal year 2020, the customers representing 10% or more of our revenue were Wintech Microelectronics Co., Ltd., or Wintech, the Company’s distributor, and Chicony Electronics Co., Ltd., or Chicony, a direct ODM customer, which accounted for approximately 60% and 18% of total revenue, respectively.
−Removed: For the six months ended July 31, 2020, the customers representing 10% or more of revenue were Wintech and Chicony which accounted for approximately 60% and 17% of total revenue, respectively.
+Added: For the nine months ended October 31, 2020, the customers representing 10% or more of revenue were Wintech and Chicony which accounted for approximately 60% and 17% of total revenue, respectively.
We believe that our operating results for the foreseeable future will continue to depend on sales to a relatively small number of customers and end customers.
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Moreover, because several of our largest OEM customers have a dominant position in their markets, a loss of a significant customer may not be easily replaced.
−Removed: We do not have long-term supply contracts with our third-party manufacturing vendors, and they may not allocate sufficient capacity to us at reasonable prices to meet future demands for our solutions.
−Removed: The semiconductor industry is subject to intense competitive pricing pressure from customers and competitors.
−Removed: Accordingly, any increase in the cost of our solutions, whether by adverse purchase price variances or adverse manufacturing cost variances, will reduce our gross margins and operating profit.
−Removed: We currently do not have long-term supply contracts with most of our primary third-party vendors, and we negotiate pricing with our main vendors on a purchase order-by-purchase order basis.
−Removed: Therefore, they are not obligated to perform services or supply product to us for any specific period, in any specific quantities, or at any specific price, except as may be provided in a particular purchase order.
−Removed: The ability of our foundry vendors to provide us with a product, which is solely sourced at each foundry, is limited by their available capacity, existing obligations and technological capabilities.
−Removed: Foundry capacity may not be available when we need it or at reasonable prices.
−Removed: None of our third-party foundry or assembly and test vendors have provided contractual assurances to us that adequate capacity will be available to us to meet our anticipated future demand for our solutions.
−Removed: Moreover, availability of foundry capacity at our primary foundry vendor has tightened recently, which could limit the volume of products we can produce and/or delay production of new products, both of which would negatively impact our business and operations.
−Removed: Our foundry and assembly and test vendors may allocate capacity to the production of other companies’ products while reducing deliveries to us on short notice.
−Removed: In particular, other companies that are larger and better financed than we are or that have long-term agreements with our foundry or assembly and test vendors may cause our foundry or assembly and test vendors to reallocate capacity to them, decreasing the capacity available to us.
−Removed: Converting or transferring manufacturing from a primary location or supplier to a backup provider could be expensive and would likely take at least two or more quarters.
−Removed: There are only a few foundries, including Samsung and Taiwan Semiconductor Manufacturing Co., Ltd., or TSMC, that are currently available for certain advanced process technologies that we utilize or may utilize, such as 10 or 5 nanometer, or nm.
−Removed: Accordingly, as we continue to develop solutions in advanced process nodes, we will be increasingly dependent upon such foundries.
−Removed: The unavailability of one or both of these foundries could significantly impact our ability to produce our new products or delay production, which would negatively impact our business.
−Removed: If, in the future, we enter into arrangements with suppliers that include additional fees to expedite delivery, nonrefundable deposits or loans in exchange for capacity commitments or commitments to purchase specified quantities over extended periods, such arrangements may be costly, reduce our financial flexibility and be on terms unfavorable to us, if we are able to secure such arrangements at all.
−Removed: To date, we have not entered into any such arrangements with our suppliers.
−Removed: If we need additional foundry or assembly and test subcontractors because of increased demand or the inability to obtain timely and adequate deliveries from our current vendors, we may not be able to do so cost-effectively, if at all.
If we fail to develop and introduce new or enhanced solutions on a timely basis, our ability to attract and retain customers could be impaired and our competitive position could be harmed.
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write-downs of inventory for excess quantities and technological obsolescence;
+Added: impairment of investment or other asset values;
future accounting pronouncements and changes in accounting policies;
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For the twelve months ended January 31, 2020, our revenue increased by 0.4% compared to the same period in fiscal year 2019, and we incurred a net loss of $44.8 million.
−Removed: For the six months ended July 31, 2020, our revenue increased by 1.1% compared to the same period in fiscal year 2020, and we incurred a net loss of $30.2 million.
+Added: For the nine months ended October 31, 2020, our revenue declined 6.2% compared to the same period in fiscal year 2020, and we incurred a net loss of $47.3 million.
We may experience similar fluctuations or declines in revenue or net losses in the future, which would harm our operating results.
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Our research and development expense was $129.7 million, $128.1 million and $115.5 million in fiscal years 2020, 2019 and 2018, respectively.
−Removed: For the six months ended July 31, 2020, our research and development expense was $67.0 million.
+Added: For the nine months ended October 31, 2020, our research and development expense was $103.6 million.
We expect to increase our research and development expenditures as compared to prior periods as part of our strategy of focusing on the development of innovative video and image processing solutions with increased functionality, such as computer vision capabilities, and as we target new markets, such as the automotive OEM and robotics markets.
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In fiscal year 2020, our revenue increased by 0.4% compared to fiscal year 2019.
−Removed: For the six months ended July 31, 2020, our revenue increased by 1.1% compared to the same period in fiscal year 2020, and we incurred a net loss of $30.2 million.
+Added: For the nine months ended October 31, 2020, our revenue declined 6.2% compared to the same period in fiscal year 2020, and we incurred a net loss of $47.3 million.
We continue to invest in the development of new technology and solutions and expect our research and development expenditures to increase compared to prior periods.
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enhance our information technology support for enterprise resource planning and design engineering by adapting and expanding our systems and tool capabilities, and properly training new hires as to their use.
+Added: be able to secure sufficient manufacturing capacity.
We are likely to incur the costs associated with these increased investments earlier than some of the anticipated benefits, and the return on these investments, if any, may be lower, may develop more slowly than we expect or may not materialize.
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If our revenue does not increase as anticipated, we could incur significant losses due to our higher expense levels if we are not able to decrease our expenses in a timely manner to offset any shortfall in future revenue.
+Added: Continued or persistent losses may require us to obtain additional capital that may not be available at reasonable terms.
A substantial portion of our revenue is processed through a single distributor and the loss of this distributor may cause disruptions in our shipments, which may adversely affect our operations and financial condition.
We sell a significant percentage of our solutions through a single distributor, Wintech Microelectronics Co., Ltd., or Wintech, which serves as our non-exclusive sales representative in Asia, other than Japan.
−Removed: Approximately 60%, 58% and 59% of our revenue was derived from sales through Wintech for the fiscal years ended January 31, 2020, 2019 and 2018, respectively, and approximately 60% of our revenue was derived from sales through Wintech for the six months ended July 31, 2020.
+Added: Approximately 60%, 58% and 59% of our revenue was derived from sales through Wintech for the fiscal years ended January 31, 2020, 2019 and 2018, respectively, and approximately 60% of our revenue was derived from sales through Wintech for the nine months ended October 31, 2020.
We anticipate that a significant portion of our revenue will continue to be derived from sales through Wintech in the foreseeable future.
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Deterioration of the financial condition of our distributors or customers could adversely impact our collection of accounts receivable.
+Added: For the nine months ended October 31, 2020, the customers representing 10% or more of revenue and accounts receivable were Wintech and Chicony, which accounted for approximately 60.4% and 17.4% of total revenue, respectively.
+Added: As of October 31, 2020, accounts receivable with Wintech and Chicony were approximately $11.2 million and $9.9 million, respectively.
We regularly review the collectability and creditworthiness of our distributors and customers to determine an appropriate allowance for doubtful receivables.
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Sales to customers in Asia accounted for approximately 90%, 87% and 79% of our total revenue in fiscal years 2020, 2019 and 2018, respectively.
−Removed: For the six months ended July 31, 2020, sales to customers in Asia accounted for approximately 87% of our total revenue.
+Added: For the nine months ended October 31, 2020, sales to customers in Asia accounted for approximately 87% of our total revenue.
Because most of our end customers or their ODM manufacturers are located in Asia, we anticipate that a majority of our future revenue will continue to come from sales to that region.
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Our marketable securities portfolio could experience a decline in market value, which could materially and adversely affect our financial results.
−Removed: As of July 31, 2020, we had approximately $214.0 million in debt security investments.
+Added: As of October 31, 2020, we had approximately $214.4 million in debt security investments.
These investments consisted primarily of money market funds, commercial paper, asset-backed securities, U.S.
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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.