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 August 30, 2021, 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.
Disruptions, damages or destructions to our manufacturing facilities, machinery and equipment may materially and adversely affect our business operations
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The success of our business depends on the continuing operations of our Oregon fab and our Chongqing fabrication facility operated by the JV Company. The operations of our fabrication facilities may be affected by various factors, including: (i) fire, flood or power failure at our production facilities or the buildings adjacent to our production sites; (ii) breakdown of machinery and equipment at our production facilities; or (iii) scheduled maintenance of our machinery and equipment. The occurrence of any unanticipated or prolonged disruptions, damage or destruction to our production facilities and machinery and equipment may affect our ability to produce and deliver products to our customers in a timely manner, which may adversely affect our business operation and financial results.
Our operations at our Chongqing fabrication facility operated by the JV Company are subject to operational risks, including but not limited to disruption of water or power supply and breakdown or malfunction of our machinery, which could result in delay, temporary suspension, permanent, partial or complete shut-downs of our production. For example, the recent electric power shortage in China prompted some local government to impose rationing of power supply that may result in factory shutdown due lack of continuous supply of electrical power. Additionally, local governments in certain provinces in China have raised prices or extended peak-demand periods during which prices are higher to address the issue and others have announced plans to do so in the future, which could increase the cost of power supplies.
Although our Chongqing fabrication facility has not experienced significant power supply disruption and is currently not subject to rationing of power supply, we cannot assure you that the government authorities will not enforce power restriction or shutdowns on the facility in the future. In the event that we become subject to such restrictions, we may be required to suspend or cease the production activities which may adversely affect our production schedule and the ability to fulfill the customer’s orders which in turn, adversely affect our business and financial condition. In addition, as a result of disruption to our operations, our production volume and the utilization rate of our production plants may be affected, which may result in a drop in our gross profit margin and profitability.
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