Item 1A. Risk Factors
ITEM 1A. RISK FACTORS
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.
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. and other countries where we have operations. 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. Such orders or restrictions have resulted in business closures, work stoppages, slowdowns and delays in commercial activities, unprecedented
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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.
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. 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. 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. 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. 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. 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:
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the economic recession and deteriorating financial market in the U.S. 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;
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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;
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widespread COVID-19 disease could damage the health of our employees and management team, which may disrupt our business operations;
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the value of our common shares may decline significantly as a result of factors outside of our control, such as stock market volatility, which will cause our shareholders to lose their investment.
The impact of the COVID-19 pandemic is highly uncertain and subject to change. We cannot predict when this pandemic will end and when related governmental orders and restrictions will be eased or lifted. 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. 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.
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Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.