−Removed: Item 1A of Part I of our Annual Report on Form 10-K for the year ended June 30, 2019, filed with the SEC on August 23, 2019 , contains risk factors identified by the Company.
+Added: Item 1A of Part I of our Annual Report on Form 10-K for the year ended June 30, 2020, filed with the SEC on September 2, 2020 , contains risk factors identified by the Company.
Except as noted below, there have been no material changes to the risk factors we previously disclosed in our filings with the SEC.
Our operations could also be affected by additional factors that are not presently known to us or by factors that we currently consider immaterial to our business.
−Removed: Our business operation and financial performance are adversely affected by the COVID-19 pandemic and related events.
+Added: Our business operation and financial performance may be adversely affected by the COVID-19 pandemic and related events.
We are subject to risks related to the global pandemic associated with the COVID-19 disease, which has spread globally from China to the U.S.
1 unchanged sentence
Numerous governmental jurisdictions, including the States of California, Oregon and Texas and countries throughout the Asia Pacific region, have imposed “stay-at-home” orders, quarantines, travel bans and similar governmental orders and restrictions to control the spread of COVID-19.
−Removed: Such orders or restrictions have resulted in business closures, work stoppages, slowdowns and delays in commercial activities, unprecedented and widespread unemployment, disruptions to ports and other shipping infrastructure, border closures, and other travel or health-related restrictions, thereby negatively impacting our customers, suppliers, distributors, employees, offices, and the entire semiconductor ecosystem.
−Removed: As a result of the COVID-19 pandemic and the global economic downturn, we have experienced a significant decline in the demand for our products, as our customers reduce orders in response to slowdown in consumer spending and shifting market trends.
−Removed: We expect such reduction of demand will negatively impact our revenue and results of operations in the foreseeable future.
−Removed: While we are implementing measures to enhance our marketing and sales opportunities, there is no
−Removed: guarantee that such measures will succeed and be sufficient to mitigate the loss of demand.
−Removed: While we have experienced increasing demand in the markets for notebooks, PCs and gaming devices as more consumers are staying at and working from home, there is no guarantee that this trend will continue, and such increasing demand may discontinue as government authorities relax Covid-19 related restrictions.
−Removed: Furthermore, we are experiencing difficulties and logistical challenges in our manufacturing activities as various “stay-at-home” orders.
−Removed: Our JV Company has slowed ramp-up activities in response to the reduced demand, which may cause delay and disruption to our timeline to reach full production for the 12” fabrication facility in Chongqing, China.
+Added: Such orders or restrictions have resulted in business closures, work stoppages, slowdowns and delays in commercial activities, unprecedented
+Added: and widespread unemployment, disruptions to ports and other shipping infrastructure, border closures, and other travel or health-related restrictions, thereby negatively impacting our customers, suppliers, distributors, employees, offices, and the entire semiconductor ecosystem.
+Added: As a result of the COVID-19 pandemic and changing consumer behaviors due to “stay-at-home” restrictions, we have experienced shifting market trends, including an increasing demand in the markets for notebooks, PCs and gaming devices and decreasing demand for mobile phone and industrial related products.
+Added: While we have recently benefited from the increasing demand of PC related products, there is no guarantee that this trend will continue, and such increasing demand may discontinue as government authorities relax COVID-19 related restrictions.
+Added: Furthermore, as the COVID-19 pandemic continues and global economic downturn and high unemployment persist, consumer spending may slow down substantially, in which case we may experience a significant decline of customer orders for our products, including those designed for PC-related applications, and such decline will adversely affect our financial conditions and results of operations.
+Added: While we are implementing measures to enhance our marketing and sales opportunities, there is no guarantee that such measures will succeed and be sufficient to mitigate the rapidly shifting market demand.
+Added: Furthermore, we are experiencing and may continue to experience supply chain challenges in our manufacturing activities as a result of various government-imposed restrictions and limitations.
+Added: Our JV Company has also slowed ramp-up activities, which may cause delay and disruption to our timeline to reach full production for the 12” fabrication facility in Chongqing, China, and we recently adjusted our timeline for reaching our target Phase I run rate to the quarter ending September 30, 2021.
In addition to the impact on our financial performance and manufacturing process, we are subject to the following risks resulting from the COVID-19 pandemic and related events:
−Removed: the economic recession and deteriorating financial market resulting from the COVID-19 pandemic may make it more difficult for us to obtain credit and secure debt financing on terms favorable to us, or at all, and we may not be able to comply with financial covenants in our existing credit agreements or service our existing debt if we do not generate sufficient cash flow from our operations;
+Added: the economic recession and deteriorating financial market in the U.S.
+Added: and globally resulting from the COVID-19 pandemic may make it more difficult for us to obtain credit and secure debt financing on terms favorable to us, or at all, and we may not be able to comply with financial covenants in our existing credit agreements or service our existing debt if we do not generate sufficient cash flow from our operations;
we may encounter difficulties and disruptions in communication and coordination among our employees, partners, customers and others, which may reduce our productivity and interfere with our ability to serve our customers;
2 unchanged sentences
The impact of the COVID-19 pandemic is highly uncertain and subject to change.
−Removed: We cannot predict when this pandemic will end and when related governmental orders and restrictions will be eased or lifted, and any extension or prolonged implementation of these restrictions will further adversely affect our business, customers and financial results.
+Added: We cannot predict when this pandemic will end and when related governmental orders and restrictions will be eased or lifted.
+Added: While some government authorities recently have permitted some reopening of businesses and approved gradual easing of various restrictions, many businesses may decide not to open fully or at all due to ongoing concerns with safety at the workplace, and there is no guarantee that governmental orders will not be re-imposed or modified to reinstate prior restrictions if the COVID-19 pandemic continues or caseloads deteriorate.
+Added: Any extension or prolonged implementation of these restrictions will further adversely affect our business, customers and financial results.
Even after such orders and restrictions are eased or lifted, the severe economic harm inflicted upon the jurisdictions and areas in which we operate may last for an extended period of time and continue to adversely affect our business and financial performance, and there is no guarantee that we will be able to act quickly and effectively to return to our normal operations.
−Removed: The current government investigation and evolving export control regulations may adversely affect our financial performance and business operations.
−Removed: As previously disclosed in the Company's Form 10-Q for the quarter ended December 31, 2019, the U.S.
−Removed: Department of Justice commenced an investigation into the Company’s compliance with export control regulations relating to its business transactions with Huawei and its affiliates (“Huawei”), which were added to the “Entity List” by the Department of Commerce (“DOC”) in May 2019.
−Removed: In connection with this investigation, DOC requested the Company to suspend shipments of its products to Huawei and the Company complied with such request, and the Company has not shipped any product to Huawei after December 31, 2019.
−Removed: The Company is currently working with DOC to resolve this issue.
−Removed: There is no guarantee that DOC will agree to permit us to resume shipment to Huawei on a timely basis, or at all, and DOC’s decision may be influenced by factors beyond our control, such as shifting political dynamics and macro-economic relationship between the U.S.
−Removed: and China and current rulemaking process regarding export control regulations.
−Removed: Our inability to continue such shipment may negatively impact our revenue and financial performance, particularly if are not able to acquire new customers to offset the loss of shipment to Huawei.
−Removed: The ongoing government investigations into our export control compliance also subject us to a number of financial and business risks.
−Removed: We expect to incur significant costs and expenses, including legal fees, in connection with our effort to respond to the government investigation, as well as additional legal fees for defending securities class actions resulting from public disclosure of the government investigation.
−Removed: Such additional costs will adversely affect our profitability and margin.
−Removed: While the Company has purchased a D&O insurance policy which may reimburse a portion of such fees and expenses, there is no guarantee that such policy is sufficient to reduce our costs or that reimbursement can be obtained on a timely basis.
−Removed: Furthermore, the management has diverted its resources and time in response to the investigation, and they may not be able to fully engage with the core operation and objectives of our business activities.
−Removed: Finally, while we are fully cooperating with the government in the investigation, we are not able to predict its timing and outcome.
−Removed: In the event that the government decides to bring enforcement action against us, it will result in a material adverse effect on our business operations, financial conditions, and our reputation.
−Removed: We are also expecting that the U.S.
−Removed: export control regulations to evolve and change in response to the political and economic tension between the U.S.
−Removed: and China, including potential new export control regulations that may impose additional restrictions on our ability to continue to do business with certain customers in China and Asia.
−Removed: If such changes occur, we may
−Removed: be required to reduce shipment to certain Asian customers, adjust our business practices and incur additional costs to implement new export control compliance procedures, policies and programs, each of which will adversely affect our financial conditions and results of operations.
−Removed: The continuing potential for new or additional tariffs on imported goods from China could adversely affect our business operations.
−Removed: The United States entered into what is described as “Phase 1” trade agreement with China on January 15, 2020, which reduces some existing tariffs that had been imposed and defers proposed increases of the tariff rate on an additional $250 billion of Chinese goods from 25% to 30% that had been planned for October 15, 2019, and proposed 15% tariffs on an additional $160 billion of a wide range of goods and materials imported from China to be effective December 15, 2019.
−Removed: Under the Phase 1 agreement, existing 25% tariffs previously imposed on $250 billion of Chinese goods will remain in place, while a 15% tariff on another $120 billion of Chinese goods has been reduced to 7.5%.
−Removed: These goods, absent exemptions, may include products and applications, including consumer electronics, that incorporate our power discrete and power IC products.
−Removed: In response, China has imposed tariffs on certain American products, some of which are being reduced as part of the Phase 1 agreement and China may take additional actions if additional U.S.
−Removed: tariffs are reduced or imposed.
−Removed: While in view of the COVID-19 pandemic, U.S.
−Removed: importers were allowed in April 2020 to defer payment of certain U.S.
−Removed: tariffs for 90 days, those tariffs remain in place.
−Removed: The continuing trade war has had significant adverse effects on world trade and the world economy.
−Removed: In view of ongoing discussions between the Chinese and U.S.
−Removed: governments on a second phase agreement, the ultimate level of tariffs, the ultimate scope of them, and whether or how the proposed additional tariffs will impact our business is uncertain.
−Removed: We believe that the imposition of additional tariffs by the U.S.
−Removed: government on products incorporating our power semiconductors could deter our U.S.
−Removed: customers from purchasing our products originating from China.
−Removed: If so, this could reduce demand for our power semiconductor products or result in pricing adjustments that would lower our gross margin, which could have a material adverse effect on our business and results of operations.
−Removed: We may be adversely affected by any disruption in our information technology systems.
−Removed: Our operations are dependent upon our information technology systems, which encompass all of our major business functions across offices internationally.
−Removed: We rely upon such information technology systems to manage and replenish inventory, complete and track customer orders, coordinate sales activities across all of our products and services, maintain vital data and information, perform financial and accounting tasks and manage and perform various administrative and human resources functions.
−Removed: A substantial disruption in our information technology systems for any extended time period (arising from, for example, system capacity limits from unexpected increases in our volume of business, outages or delays in our service) could result in delays in receiving inventory and supplies or filling customer orders and adversely affect our customer service and relationships.
−Removed: Our systems might be damaged or interrupted by natural or man−made events or by computer viruses, physical or electronic break−ins, cyber-attacks and similar disruptions affecting the global Internet.
−Removed: In addition, in the past few years, widespread ransomware attacks in the U.S.
−Removed: and elsewhere have affected many companies, and we also experienced such ransomware attacks on our information technology system during the past year.
−Removed: While such attacks did not have a material adverse effect on our business operation, it caused temporary disruptions and interfered with our operations.
−Removed: While we intend to implement additional measures to enhance our security protocol to protect our system, there is no guarantee that future attacks can be thwarted or prevented, and failure to do so may increase our cost of operations and adversely affect our business operations and results of operations.
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.