What changed in this filing

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Item 1A. Risk Factors

2025-08-28 compared with 2024-08-23 · 135 added, 109 removed, 607 unchanged (29% of the section changed)

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Risks Related to Our Business

• We may be adversely affected by the macroeconomic conditions and cyclicality of the semiconductor industry.

• Our operating results and financial conditions are affected by downturns in the semiconductor industry, changes in end-market demand and other macro-economic trends.

• The decline of personal computing (“PC”) markets may have a material adverse effect on our results of operations.

• Our strategy of diversification into different market segments may not succeed according to our expectations.

• Our strategy of diversification into different market segments may not succeed according to our expectations and may expose us to new risks and place significant strains on our management, operational, financial and other resources.

• Our operating results may fluctuate from period to period due to many factors, which may make it difficult to predict our future performance.

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• The operation of our Oregon Fab subjects us to additional risks and the need for additional capital expenditures which may negatively impact our results of operations.

• Defects and poor performance in our products could result in loss of customers, decreased revenue, unexpected expenses and loss of market share.

• Defects and poor performance in our products could result in loss of customers, decreased revenue, unexpected expenses and loss of market share, and we may face warranty and product liability claims arising from defective products.

• The average selling prices of products in our markets have historically decreased rapidly and will likely do so in the future, which could harm our revenue and gross margins.

• If we do not forecast demand for our products accurately, we may experience product shortages, delays in product shipment, excess product inventory, or difficulties in planning expenses, which will adversely affect our business and financial condition.

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• Our lack of control over the JV Company may adversely affect our operations.

• Our recent sale of equity interest in the JV Company is subject to certain closing conditions, and if the conditions are not met, we may not receive a portion or any of the cash proceeds from the sale.

• Our reliance on distributors to sell a substantial portion of our products subjects us to a number of risks.

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• Intellectual property disputes could result in lengthy and costly arbitration, litigation or licensing expenses or prevent us from selling our products.

• The DOC government investigation and evolving export control regulations may adversely affect our financial performance and business operations.

• Evolving export control regulations may adversely affect our financial performance and business operations.

• Global or regional economic, political and social conditions could adversely affect our business and operating results.

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federal income tax consequences for U.S.

• The average selling prices of products in our markets have historically decreased rapidly and will likely do so in the future, which could harm our revenue and gross margins.

• Changes in our United States federal income tax classification, or that of our subsidiaries, could result in adverse tax consequences to our 10% or greater U.S.

shareholders.

• Changes in tariffs and international trade policies affecting imports and exports may have a material adverse effect on our business operations and financial performance.

Risks Related to Doing Business in China

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and China may result in increased tariffs on imported goods from China could adversely affect our business operations.

• Uncertainties exist with respect to the interpretation and implementation of PRC Foreign Investment Law and how it may impact the viability of our current corporate structure, corporate governance and business operations.

• Our China subsidiaries’ current corporate structure and business operations may be affected by the Foreign Investment Law of the PRC.

• Limitations on our ability to transfer funds to our China subsidiaries could adversely affect our ability to expand our operations, make investments that could benefit our businesses and otherwise fund and conduct our business.

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• Our results of operations may be negatively impacted by fluctuations in foreign currency exchange rates between U.S.

dollar and Chinese Yuan, or RMB.

dollar and Chinese Yuan ("RMB").

• PRC labor laws may adversely affect our results of operations.

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The semiconductor market is also highly cyclical and is characterized by constant and rapid technological change such as product obsolescence and price erosion, evolving standards, uncertain product life cycles and wide fluctuations in product supply and demand.

Since mid-2022, we have experienced an industry-wide decline of customer demand for semiconductor products due primarily to the build-up of excess inventory prior to the cessation of the COVID-19 pandemic.

This decline has negatively affected our recent financial performance in 2023.

While we expect some recovery of the macroeconomic trend by the end of 2023 and early 2024, there is no guarantee that it will occur and a prolonged and extended downturn in the semiconductor industry will have a substantial impact on our operating results and financial conditions.

More recently, we have observed the impact of certain government regulations, such as tariffs or other related trade regulation, that can negatively affect the global semiconductor markets and cause a decline for the demand of our products.

In addition, the broader semiconductor industry experienced a decline in calendar year 2023 with some recovery in 2024, but there is no guarantee that further recovery will occur and a prolonged and extended downturn in the semiconductor industry will have a substantial impact on our operating results and financial conditions.

The decline of personal computing (“PC”) markets may have a material adverse effect on our results of operations.

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While we experienced a surge of demand in the PC market as a result of the COVID-19 pandemic and related events, such demand has returned to normal level and declined due to an industry-wide inventory correction and the ensuing downturn in the semiconductor industry from late 2022 to the end of 2023 and early 2024.

While we believe the negative impact of inventory correction has gradually subsided in mid-2024, we cannot predict how and when the market will be fully recovered.

While we believe the negative impact of inventory correction has gradually subsided since mid-2024 and early 2025, we cannot predict how and when the market will be fully recovered.

We have implemented measures and strategies to mitigate the effect of such a downturn.

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• the unpredictable volume and timing of orders, deferrals, cancellations and reductions for our products, which may depend on factors such as our end customers’ sales outlook, purchasing patterns and inventory adjustments based on general economic conditions or other factors;

• changes in laws and regulations affecting our business operations;

• changes in laws and regulations affecting our business operations, including trade regulations and tariffs;

• changes in costs associated with manufacturing of our products, including pricing of wafer, raw materials and assembly services;

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Geopolitical and economic conflicts between United States and China may adversely affect our business.

Geopolitical conflicts and tensions between the United States and China have threatened and destabilized trading relationships and economic activities between the two countries.

Geopolitical conflicts and tensions between the United States and China have threatened trading relationships and economic activities between the two countries.

Because we have significant operations in both countries, such conflicts and tensions may negatively impact our business.

At various times during recent years, the United States and China have had disagreements over political and economic issues, including, but not limited to, the recent imposition of tariffs by the U.S.

on goods imported from China and to the U.S.

on goods imported from China or sourced from China and imposition of retaliatory tariffs and other countermeasures (like government investigations, sanctions, etc.) by China, as well as the U.S.

government’s efforts to restrict transfer and sharing of technologies, including semiconductor technologies, between the two countries.

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Our sales seasonality is affected by a number of factors, including global and regional economic conditions as well as the PC market conditions, revenue generated from new products, changes in distributor ordering patterns in response to channel inventory adjustments and end customer demand for our products and fluctuations in consumer purchase patterns prior to major holiday seasons.

In recent year, broad fluctuations in the semiconductor markets and the global economic conditions, in particular the decline of the PC market conditions, as well as the COVID-19 pandemic, have had a more significant impact on our results of operations, than seasonality, and have made it difficult to assess the impact of seasonal factors on our business.

In recent year, broad fluctuations in the semiconductor markets and the global economic conditions, in particular the decline of the PC market conditions, have had a more significant impact on our results of operations, than seasonality, and have made it difficult to assess the impact of seasonal factors on our business.

If we are unable to introduce or develop new and enhanced products that meet or are compatible with our customer’s product requirements in a timely manner, it may harm our business, financial position and operating results.

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Since many of our products are designed for specific applications, we must frequently develop new and enhanced products jointly with our customers.

In the past, we have encountered product compatibility issues with a major OEM that has negatively impacted our financial results, and although we have resolved fully such issues with the OEM, there is no guarantee that the same compatibility issues will not occur in the future with other OEMs.

In the past, we have encountered product compatibility issues with a major OEM that have negatively impacted our financial results, and although we have resolved fully such issues with the OEM, there is no guarantee that the same compatibility issues will not occur in the future with other OEMs.

In addition, our Tier 1 customers often have stringent standards and strict requirements that must be met before our products can be sold, which may create challenges and difficulties in our product development efforts.

If we are unable to develop or acquire new products that meet or are compatible with our customer’s specification and other product requirements in a timely manner, we may lose revenue or market share with our customers, which could have a material adverse effect on our business, financial position and operating results.

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We invest significant capital and resources to compete with other power semiconductor companies to win competitive bids for our products in selection processes, known as “design wins.” Our effort to obtain design wins may detract from or delay the completion of other important development projects, impair our relationships with existing end customers and negatively impact sales of products under development.

In addition, we cannot be assured that these

efforts would result in a design win, that our product would be incorporated into an end customer's initial product design, or that any such design win would lead to production orders and generate sufficient revenue.

In addition, we cannot be assured that these efforts would result in a design win, that our product would be incorporated into an end customer’s initial product design, or that any such design win would lead to production orders and generate sufficient revenue.

Furthermore, even after we have qualified our products with a customer and made sales, subsequent changes to our products, manufacturing processes or suppliers may require a new qualification process, which may result in delay and excess inventory.

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It can also be potentially dangerous as defective power components, or improper use of our products by customers, may lead to power overloads, which could result in explosion or fire.

Any actual or perceived errors, defects or poor performance in our products could result in the replacement or recall of our products, shipment delays, rejection of our products, damage to our reputation, lost revenue, diversion of our engineering personnel from our product development efforts in order to address or remedy any defects

and increases in customer service and support costs, all of which could have a material adverse effect on our business and operations.

Furthermore, as our products are typically sold at prices much lower than the cost of the equipment or other devices incorporating our products, any defective, inefficient or poorly performing products, or improper use by customers of power components, may give rise to warranty and product liability claims against us that exceed any revenue or profit we receive from the affected products.

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We manufacture our products according to our estimates of customer demand.

This process requires us to make numerous forecasts and assumptions relating to the demand of our end customers, channel inventory, and general market conditions.

This process requires us to make numerous forecasts and assumptions relating to the demand of our end customers, channel inventory, and general market

Because we sell most of our products to distributors, who in turn sell to our end customers, we have limited visibility as to end customer demand.

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Our main competitors are primarily headquartered in the United States, Japan, Taiwan and Europe.

Our major competitors for our power discretes include Infineon Technologies AG, Magnachip Semiconductor Corporation, ON Semiconductor Corp., STMicroelectronics N.V., Toshiba Corporation, Diodes Incorporated and Vishay Intertechnology, Inc.

Our major competitors for our power ICs include Global Mixed-mode Technology Inc., Monolithic Power Systems, Inc., ON Semiconductor Corp., Richtek Technology Corp., Semtech Corporation, Texas Instruments Inc.

Our major competitors in power discretes include Infineon Technologies AG, ON Semiconductor Corp., STMicroelectronics N.V., Toshiba Corporation, Diodes Incorporated and Vishay Intertechnology, Inc.

Our major competitors for our power ICs include Monolithic Power Systems, Inc., ON Semiconductor Corp., Richtek Technology Corp., Semtech Corporation, Texas Instruments Inc.

and Vishay Intertechnology, Inc..

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We expect to continue to rely in part on third party foundries to meet our wafer requirements.

Although we use several independent foundries, our primary third-party foundry is HHGrace, which manufactured 3.8%, 9.6% and 10.3% of the wafers used in our products for the fiscal years ended June 30, 2024, 2023 and 2022, respectively.

If any third-party foundry does not provide competitive pricing or is not able to meet our required capacity for any reason, we may not be able to obtain the required capacity to manufacture our products timely or efficiently.

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The JV Company is our subcontractor that provides us with foundry capacity to develop and manufacture our products and to enhance our market position in China.

While we retained control over the JV Company from inception of 2021, we lost control over the JV Company in December 2021 as our equity interest in the JV Company has been diluted through the issuances of additional equity securities by the JV Company and other transactions.

While we retained control over the JV Company from inception to 2021, we lost control over the JV Company in December 2021 as our equity interest in the JV Company has been diluted through the issuances of additional equity securities by the JV Company and other transactions.

In July 2025, we entered into an equity transfer agreement with a strategic investor to sell approximately 20.3% of outstanding equity interest in the JV Company.

As of June 30, 2025, our interest in the JV Company was 39.2%.

Because we no longer have a controlling interest in the JV Company, the JV Company is operating and will continue to operate more independently, and our influence on all aspects of the JV Company’s business operations will be diminished.

Accordingly, we might not be able to prevent the JV Company from taking actions adverse to our interests.

For example, while we remain a major customer of the JV Company, the JV Company may decide to enter into business relationships with other customers and allocate foundry capacities to such customers, which may prevent us from securing a desirable or sufficient level of manufacturing capacity for our products.

Although the JV Company has previously agreed to provide us with a guaranteed capacity on a monthly basis, such guarantee has expired and we are in the process of negotiating a new arrangement with the JV Company to provide us with capacity.

There is no guarantee that we will be successful in renewing the capacity agreement, and even if we do, there is no guarantee that we will obtain favorable pricing or service terms, or that such capacity will be sufficient, which may adversely affect our results of operations.

while we remain a major customer of the JV Company, the JV Company may decide to enter into business relationships with other customers and allocate foundry capacities to such customers, which may prevent us from securing a desirable or sufficient level of manufacturing capacity for our products.

Although the JV Company has agreed to provide us with a specified level of monthly wafer production capacity, there is no guarantee that such capacity will be sufficient, which may adversely affect our results of operations.

Our lack of control over the JV Company may also make it more difficult for us to execute our broader business strategies in China, including our R&D, sales and marketing, product innovation efforts and protection of intellectual property rights, because the JV Company may decide not to cooperate with us in these matters.

In addition, while we expect to achieve a financial return for our investment in the JV Company as a result of the China IPO, the China IPO process is complex, time-consuming and subject to a number of risks and there is no guarantee that the China IPO will be completed in a timely manner, or at all, and the JV Company’s failure to close the China IPO will negatively affect our investment in the JV Company.

In order to fund its capital expenditures and cost of operation, the JV Company has incurred a significant amount of indebtedness from third-party lenders under several loan and lease financing agreements, some of which are secured by substantially all of the assets of the JV Company.

If the JV Company is not able to generate sufficient cash flow to make

payments under these loans, the JV Company may be in default, which will adversely affect its ability to continue operations and provide foundry services to us.

If the JV Company is not able to generate sufficient cash flow to make payments under these loans, the JV Company may be in default, which will adversely affect its ability to continue operations and provide foundry services to us.

In addition, the JV Company requires additional funding to continue its operations and to refinance its existing indebtedness.

There is no guarantee that the JV Company will be able to obtain financing on favorable terms, or at all, and any such failure may negatively impact our ability to access its wafer manufacturing capacity.

Any of the foregoing risks could materially reduce the expected return of our investment in the JV Transaction and adversely affect our business operations, our financial performance and the trading price of our shares.

Any of the foregoing risks could materially reduce the expected return of our investment in the JV Company and adversely affect our business operations, our financial performance and the trading price of our shares.

Our recent sale of equity interest in the JV Company is subject to certain closing conditions, and if the conditions are not met, we may not receive a portion or any of the cash proceeds under the equity transfer agreement and we may be required to unwind the transaction, which will adversely affect our financial results and reputation.

On July 14, 2025, we entered into an equity transfer agreement with a third-party strategic investor to sell approximately 20.3% of outstanding equity interest in the JV Company for an aggregate cash consideration of $150 million to be paid in four installments, subject to satisfaction of certain conditions.

Such conditions include, among other things, shareholder approval by the JV Company and certain registrations, approvals by government authorities and closing of additional investment by the strategic investor in the JV Company’s equity, which are outside of our control.

For a more detailed description of the installment payments and related conditions, please see Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations – Overview .

We cannot be certain that these conditions will be satisfied on a timely basis, including those conditions that are outside of our control.

If these conditions are not met by the deadlines as set forth in the equity transfer agreement, we may be exposed to significant risks, including failure to receive a portion or any of the cash proceeds from the sale, which may adversely affect our ability to continue investment in technology, R&D projects and acquisition of assets complimentary to our business operations.

Furthermore, failure to meet these conditions may require the parties to terminate and unwind the transaction, which will adversely affect our reputation, business operations and stock price.

Our reliance on distributors to sell a substantial portion of our products subjects us to a number of risks.

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In order to position ourselves to take advantage of growth opportunities, we have made, and may continue to make, strategic acquisitions, mergers, partnership, joint ventures and alliances that involve significant risks and uncertainties.

Successful acquisitions and alliances in the semiconductor industry are difficult to accomplish because they require, among other factors, efficient integration and aligning of product offerings and manufacturing operations and coordination of sales and marketing and research and development efforts.

We may also seek to establish partnerships, joint ventures and acquisition of assets in various foreign jurisdictions where we may not have significant operating experience.

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As a result, we are required to estimate allowances for price adjustments and stock rotation for our products as inventory at distributors at each reporting period end.

Our ability to reliably estimate these allowances enables us to recognize revenue upon delivery of goods to distributors instead of upon resale of goods by distributors to end customers.

We estimate the allowance for price adjustment based on factors such as distributor inventory levels, forecasted distributor selling prices, distributor margins and demand for our products.

Our estimated allowances for price adjustments, which we offset against accounts receivable from distributors, were $40.8 million and $41.7 million at June 30, 2025 and 2024, respectively.

Our accruals for stock rotation are estimated based on historical returns and individual distributor agreement, and stock rotation rights, which are recorded as accrued liabilities on our consolidated balance sheets, are contractually capped based on the terms of each individual distributor agreement.

the terms of each individual distributor agreement.

Our estimated liabilities for stock rotation at June 30, 2025 and 2024 were $6.2 million and $4.7 million, respectively.

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If we subsequently determine that any allowance and accrual based on our estimates is insufficient, we may be required to increase the size of our allowances and accrual in future periods, which would adversely affect our results of operations and financial condition.

Our operation of two wholly-owned packaging and testing facilities are subject to risks that could adversely affect our business and financial results.

We have two wholly-owned packaging and testing facilities located in Shanghai, China that handle most of our packaging and testing requirements.

The operation of high-volume packaging and testing facilities and implementation of our advanced packaging technology are complex and demand a high degree of precision and may require modification to improve yields and product performance.

Our operations of one wholly-owned packaging and testing facility are subject to risks that could adversely affect our business and financial results.

We have one wholly-owned packaging and testing facility located in Shanghai, China that handles the majority of our packaging and testing requirements.

The operation of high-volume packaging and testing facility and implementation of our advanced packaging technology are complex and demand a high degree of precision and may require modification to improve yields and product performance.

We have committed substantial resources to ensure that our packaging and testing facilities operate efficiently and successfully, including the acquisition of equipment and raw materials, and training and management of a large number of technical personnel and employees.

Due to the fixed costs associated with operating our own packaging and testing facilities, if we are unable to utilize our in-house facilities at a desirable level of production, our gross margin and results of operations may be adversely affected.

Due to the fixed costs associated with operating our own packaging and testing facilities, if we are unable to utilize our in-house facility at a desirable level of production, our gross margin and results of operations may be adversely affected.

For example, a significant decline in our market share or sales orders may negatively impact our factory utilization and reduce our ability to achieve profitability.

In addition, the operation of our packaging and testing facilities is subject to a number of risks, including the following:

In addition, the operation of our packaging and testing facility is subject to a number of risks, including the following:

• unavailability of equipment, whether new or previously owned, at acceptable terms and prices;

• facility equipment failure, power outages or other disruptions;

• shortage of raw materials, including packaging substrates, copper, gold and molding compound;

• shortage of raw materials, including copper, gold and molding compound;

• failure to maintain quality assurance and remedy defects and impurities;

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• compliance with local and regional legal and regulatory requirements;

• operation stoppage due to the city-wide lockdown in response to public health emergencies or pandemics.

• unexpected customs, tax and other government audits and investigations concerning related party transactions, transfer pricing arrangements, IP license and royalty payments, etc.

Any of the foregoing risks could adversely affect our capacity to package and test our products, which could delay shipment of our products, result in higher expenses, reduce revenue, damage our relationships with customers and otherwise adversely affect our business, results of operations, financial condition and prospects.

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• others independently developing similar proprietary information and techniques, gaining authorized or unauthorized access to our intellectual property rights, disclosing such technology or designing around our patents;

• the possibility that any patent or registered trademark owned by us may not be enforceable or may be invalidated, circumvented or otherwise challenged in one or more countries may limit our competitive advantages;

• the possibility that any patent or registered trademark owned by us may not be enforceable or may be invalidated, circumvented or otherwise challenged in one or more countries, which may limit our competitive advantages;

• uncertainty as to whether patents will be issued from any of our pending or future patent applications with the scope of the claims sought by us, if at all;

• intellectual property laws and confidentiality laws may not adequately protect our intellectual property rights, including, for example, in China where enforcement of China intellectual property-related laws have historically been less effective, primarily because of difficulties in enforcement and low damage awards.

• the possibility that intellectual property laws and confidentiality laws may not adequately protect our intellectual property rights, including, for example, in China where enforcement of China intellectual property-related laws have historically been less effective, primarily because of difficulties in enforcement and low damage awards.

We also rely on customary contractual protection with our customers, suppliers, distributors, employees and consultants, and we implement security measures to protect our trade secrets.

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As is typical in the semiconductor industry, we or our customers have received and may continue to receive claims of infringement from time to time or otherwise become aware of potentially relevant patents or other intellectual property rights held by other parties that may cover some of our technology, products and services or those of our end customers.

The semiconductor industry is characterized by vigorous protection and pursuit of intellectual property rights which has resulted in protracted and expensive arbitration and litigation for many companies.

semiconductor industry is characterized by vigorous protection and pursuit of intellectual property rights which has resulted in protracted and expensive arbitration and litigation for many companies.

Patent litigation has increased in recent years due to increased assertions made by intellectual property licensing entities or non-practicing entities and increasing competition and overlap of product functionality in our markets.

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Any intellectual property claim or litigation against us harm our business, results of operations, financial condition and prospects.

The current government investigation by Department of Commerce (“DOC”) and evolving export control regulations may adversely affect our business operations.

As previously disclosed, the Company has continued to respond to inquiries and requests for documents and information from Department of Commerce (“DOC”) in connection with an investigation into the Company’s export control practices and DOC is currently reviewing this matter.

DOC has not informed the Company of any specific timeline or schedule under which DOC will complete its review.

The ongoing government investigations into our export control compliance also subject us to a number of financial and business risks.

We expect to incur significant costs and expenses, including legal fees, in connection with our effort to respond to the government investigation.

Furthermore, the management has diverted its resources and time in response to the investigation, and might not be able to fully engage with the core operation and objectives of our business activities.

Finally, while we are fully cooperating with the government in the investigation, we are not able to predict its timing and outcome.

In the event that the government decides to bring enforcement action or impose fines against us, it will result in a material adverse effect on our business operations, our financial conditions and our reputation.

We also expect that the U.S.

Evolving export control regulations may adversely affect our business operations.

We expect that the U.S.

export control regulations to evolve and change in response to the political and economic tension between the U.S.

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Historically, these regions have been vulnerable to natural disasters and other risks, such as earthquakes, fires and floods, which may disrupt the local economy and pose physical risks to our property.

We also have sales offices located in Taiwan and Japan where similar natural disasters and other risks may disrupt the local economy and pose physical risks

to our operations.

We also have sales offices located in Taiwan and Japan where similar natural disasters and other risks may disrupt the local economy and pose physical risks to our operations.

We are not currently covered by insurance against business disruption caused by earthquakes.

In addition, we currently do not have redundant, multiple site capacity in the event of a natural disaster or other catastrophic event.

In addition, we

currently do not have redundant, multiple site capacity in the event of a natural disaster or other catastrophic event.

In the event of such an occurrence, our business would suffer.

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We are subject to the risk of increased income taxes and changes in existing tax rules.

We conduct our business in multiple jurisdictions, including Hong Kong, Macau, the U.S., China, Taiwan, South Korea, Japan, India and Germany.

We conduct our business in multiple jurisdictions, including Hong Kong, Macau, the U.S., China, Taiwan, South Korea, Japan, India, the United Kingdom and Germany.

The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations in various taxing jurisdictions.

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Congress, the EU, the OECD, and other government agencies in jurisdictions where we and our affiliates do business have had an extended focus on issues related to the taxation of multinational corporations.

One example is the OECD’s initiative in the area of “base erosion and profit shifting,” or “BEPS”.

Many countries have implemented or begun to implement legislation and other guidance to align their international tax rules with the OECD’s BEPS recommendations.

In addition, the OECD has been working on an extension of the BEPS project, being referred to as “BEPS 2.0”, which focuses on two “pillars” of reform.

Pillar 1 is focused on global profit allocation and changing where large multinational corporations pay taxes, and pillar 2 includes a global minimum tax rate.

The OECD published detailed blueprints of its proposals for pillar 1 and pillar 2 on October 14, 2020.

In 2021, the OECD announced that more than 140 member jurisdictions (including the United States and Bermuda) have politically committed to potential changes to the international corporate tax system, including enacting a minimum tax rate of at least 15% as part of the OECD's "Pillar Two" initiative.

During December 2022, the European Union reached agreement on the introduction of a minimum tax directive requiring member states to enact local legislation.

We will continue to monitor countries' laws with respect to the OECD model rules and the Pillar Two global minimum tax.

We do not believe Pillar Two has any material effect on us at this time, and the effects of any future legislation in this area are not yet reasonably estimable, but if such legislation is enacted in the future, it could have a material effect on our provision for income taxes, our financial results, and our earnings and cash flows.

As a result of the focus on the taxation of multinational corporations, the tax laws in the countries in which we and our affiliates do business could change on a prospective or retroactive basis, and any such changes could adversely affect us.

Our parent company is incorporated under the laws of Bermuda and is subject to Bermuda law with respect to taxation.

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As we have previously disclosed, the Government of Bermuda announced in December 2023 that it enacted the Corporate Income Tax Act 2023, potentially imposing a 15% corporate income tax (CIT) on Bermuda companies that are within the scope of the CIT, that will be effective for tax years beginning on or after January 1, 2025.

In particular, the CIT applies to multinational companies with annual revenue of 750 million Euros or more in the consolidated financial

statements of the ultimate parent entity for at least two of the four fiscal years immediately preceding the fiscal year when the CIT may apply.

The Company is not in a position to determine whether the annual revenues may meet and/or cross the 750 million Euro threshold for at least two of the four fiscal years immediately preceding the fiscal year when CIT may apply.

In particular, the CIT applies to multinational companies with annual revenue of 750 million Euros or more in the consolidated financial statements of the ultimate parent entity for at least two of the four fiscal years immediately preceding the fiscal year when the CIT may apply.

The Company did not generate more than 750 million Euro revenue in any of the four fiscal years before the tax year starting July 1, 2025.

The Company continues to monitor and assess if and when it may be within the scope of the CIT.

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As we continue to grow our business and expand our operations, we expect to incur additional indebtedness, including loan agreement or equipment leases, in order to fund such capital expenditures.

These restrictions may limit our ability to pursue business and financial opportunities that are available or beneficial to us in response to changing and competitive economic environment, which may have an adverse effect on our financial conditions.

financial conditions.

In addition, a breach of any of these financial covenants, if not waived by the lenders, could trigger an event of default under the debt agreements, which may result in the acceleration of our indebtedness or the loss of our collateral used to secure such indebtedness.

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shareholders.

The Tax Act may have changed the consequences to U.S.

The Tax Cuts and Jobs Act of 2017 (the “Tax Act”) may have changed the consequences to U.S.

shareholders that own, or are considered to own, as a result of the attribution rules, 10% or more of the voting power or value of the stock of a non-U.S.

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Federal tax law applicable to owners of CFCs.

Changes in tariffs and international trade policies affecting imports and exports may have a material adverse effect on our business operations and financial performance.

recently proposed the implementation of a range of new tariffs and significant increases to existing tariffs.

In response to such tariffs announced by the U.S., a number of other countries, including Japan and Korea, entered into new trade deals with the United States, which set certain reduced tariff rates.

The specific terms of these deals still need to be further defined and implemented.

Other countries, like China, are still in ongoing negotiations with the U.S.

regarding tariffs, and it is unclear what the final tariff rate may be.

Additionally, there is a pending investigation in the United States into the national security impact of imports of semiconductors and semiconductor manufacturing equipment, which may result in tariffs on such imports from all countries.

There is thus still significant uncertainty about future U.S.

tariff rates, and we cannot predict whether, and to what extent, current tariffs will continue or U.S.

trade policies will change in the future.

Such uncertainties and risks may negatively affect our ability to enter into new business transactions with partners, vendors and

customers because of the lack of clarity on the economic benefits of such transactions.

Significant increase in U.S.

tariffs may increase the costs of materials, goods and components that we purchase from suppliers from other countries for the manufacturing and distribution of our products, which may adversely affect our financial performance.

Also, we may not be able to mitigate the impact of tariffs by identifying and securing alternative sources in the U.S.

for similar materials, goods and components at comparable qualities or more favorable prices.

Furthermore, tariffs, or the threat of tariffs or increased tariffs, could have a significant negative impact on our business relationships with customers, suppliers and partners in Asia, including China, Hong Kong, Taiwan, Korea and Japan.

Any significant changes in trade policies and tariffs may also affect the business operations of our customers, suppliers and partners, which may cause them to take actions or make decisions that adversely affect our business operations and results of operations.

Risks Related to Doing Business in China

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The Chinese economy has been transitioning from a planned economy to a more market-oriented economy.

Although in recent years the China government has implemented measures emphasizing the utilization of market forces for economic reform, the reduction of state ownership of productive assets and the establishment of corporate governance in business enterprises, the China government continues to retain significant control over the business and productive assets in China.

Although in recent years the Chinese government has implemented measures emphasizing the utilization of market forces for economic reform, the reduction of state ownership of productive assets and the establishment of corporate governance in business enterprises, the Chinese government continues to retain significant control over the business and productive assets in China.

Any changes in China’s government policy or China’s political, economic and social conditions, or in relevant laws and regulations, may adversely affect our current or future business, results of operations or financial condition.

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Our ability to successfully expand our business operations in China depends on a number of factors, including macroeconomic and other market conditions, and credit availability from lending institutions.

In response to the recent global and Chinese economic recession, the China government has promulgated several measures aimed at expanding credit and stimulating economic growth.

We cannot assure you that the various macroeconomic measures, monetary policies and economic stimulus package adopted by the China government to guide economic growth will be effective in maintaining or sustaining the growth rate of the Chinese economy.

If measures adopted by the China government fail to achieve further growth in the Chinese economy, it may adversely affect our growth, business strategies and operating results.

In response to the recent global and Chinese economic recession, the Chinese government has promulgated several measures aimed at expanding credit and stimulating economic growth.

We cannot assure you that the various macroeconomic measures, monetary policies and economic stimulus package adopted by the Chinese government to guide economic growth will be effective in maintaining or sustaining the growth rate of the Chinese economy.

If measures adopted by the Chinese government fail to achieve further growth in the Chinese economy, it may adversely affect our growth, business strategies and operating results.

In addition, changes in political and social conditions of China may adversely affect our ability to conduct our business in the region.

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In addition, the Chinese legal system is based in part on government policies and internal rules, some of which are not published on a timely basis or at all, that may have a retroactive effect.

As a result, we may not be aware of our violation of these policies and rules until sometime after the violation.

As a result, we may not be aware of our violation of these policies and rules

until sometime after the violation.

If any of our past operations are deemed to be non-compliant with Chinese law, we may be subject to penalties and our business and operations may be adversely affected.

For instance, under Special Administrative Measures (Negative List) for Foreign Investment Access, some industries are categorized as sectors which are restricted or prohibited for foreign investment.

As the Negative List is updated every year, there can be no assurance that the China government will not change its policies in a manner that would render part or all of our business to fall within the restricted or prohibited categories.

If we cannot obtain approval from relevant authorities to engage in businesses which become prohibited or restricted for foreign investors, we may be forced to sell or restructure a business which has become restricted or prohibited for foreign investment.

Furthermore, the China government has broad discretion in dealing with violations of laws and regulations, including levying fines, revoking business and other licenses and requiring actions necessary for compliance.

Furthermore, the Chinese government has broad discretion in dealing with violations of laws and regulations, including levying fines, revoking business and other licenses and requiring actions necessary for compliance.

In particular, licenses and permits issued or granted to us by relevant governmental bodies may be revoked at a later time by higher regulatory bodies.

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imposes new or increased tariffs.

Since February 2025, the current U.S.

administration has proposed to increase the total tariff level for imported Chinese goods significantly, and additional tariff increases could be imposed as the trade tensions between the two countries continue to heighten.

On February 1, 2025, the United States imposed additional tariffs of 10% on all Chinese-origin goods, which was increased to 20% on March 4, 2025.

On April 2, 2025, the U.S.

announced that it was imposing a 34% “reciprocal tariff” on top of the existing 20%, raising the tariff on Chinese goods to 54% (which stacks on top of preexisting tariffs of 7.5%-100% on most Chinese-origin goods imposed under previous U.S.

administrations).

On April 9, 2025, China responded to U.S.

tariff threats by hiking its levies on U.S.

imports from 34% to 84%, and the U.S.

then increased new tariffs on Chinese goods to 125%.

On April 11, 2025, the U.S.

announced that semiconductors would be exempt from the reciprocal tariffs, but this exemption does not impact the 20% tariff imposed in March.

Later that same day, in a further retaliatory move, China increased tariffs on U.S.

imports to 125%.

On May 12, 2025, the U.S.

and China agreed to temporarily suspend most tariffs on each other’s goods for a 90-day period (“the 90-day truce”) in trade talks in Geneva.

After the Geneva meetings, the new US tariffs on Chinese goods were reduced from 145% to 30%, while China’s retaliatory tariffs dropped from 125% to 10%.

On August 11, 2025, the 90-day truce was extended until November 10, 2025 while the countries continue to engage in negotiations.

The continuing trade tensions could have significant adverse effects on world trade and the world economy.

While the two countries have negotiated and entered into agreements to gradually reduce certain tariffs, it’s unclear whether those agreements will significantly reduce the tariffs affecting our business operations.

The ultimate level of tariffs, the ultimate scope of them, and whether or how any proposed additional tariffs will impact our business is uncertain.

While the two countries are having trade talks, including the London trade talk in June and Stockholm trade talk in late July, the ultimate level of tariffs, the ultimate scope of them, and whether or how any proposed additional tariffs will impact our business is uncertain.

We believe that the imposition of additional tariffs by the U.S.

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If so, this would 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.

Uncertainties exist with respect to the interpretation and implementation of PRC Foreign Investment Law and how it may impact the viability of our current corporate structure, corporate governance and business operations.

Further, we cannot predict what additional actions, if any, may be taken with respect to tariffs or trade relations between the United States and China, or what actions may be taken by the China in retaliation.

The adoption and expansion of trade restrictions, the occurrence of a trade war, or other governmental action related to tariffs, trade agreements or related policies have the potential to adversely impact our supply chain, access to equipment, our costs and our product margins.

Our China subsidiaries’ current corporate structure and business operations may be affected by the Foreign Investment Law of the PRC.

On March 15, 2019, the National People’s Congress of the PRC promulgated the Foreign Investment Law, which took effect on January 1, 2020, and replaced the existing laws regulating foreign investment in China, namely, the Sino-foreign Equity Joint Venture Enterprise Law, the Sino-foreign Cooperative Joint Venture Enterprise Law and the Wholly Foreign-invested Enterprise Law, together with their implementation rules and ancillary regulations.

The Foreign Investment Law embodies a PRC regulatory trend to rationalize its foreign investment regulatory regime in line with prevailing international practice and the legislative efforts to unify the corporate legal requirements for both foreign and domestic investments.

The Foreign Investment Law establishes the basic framework for the access, promotion, protection and administration of foreign investments in China in view of investment protection and fair competition.

The Foreign Investment Law establishes the basic framework for the access, promotion, protection and administration of foreign

investments in China in view of investment protection and fair competition.

For example, treatment of foreign investors on a national level will be no less favorable than the treatment received by domestic investors unless such investments fall within a “negative list”.

On June 28, 2018, the National Development and Reform Commission (the “NDRC”) and the Ministry of Commerce of the PRC (the “MOC”) published the Special Administrative Measures for Market Access of Foreign Investment (Negative List) (2018 Edition), which identifies specific sectors where foreign investors will be subject to special administrative measures.

The Negative List has been updated three times in June 2019, June 2020 and December 2021.

The current effective Negative List (2021 Edition) took effect on January 1, 2022.

Since the Foreign Investment Law was newly enacted, uncertainties still exist in relation to its interpretation and implementation.

For example, the Foreign Investment Law provides that foreign invested enterprises established according to the existing laws regulating foreign investment may maintain their structure and corporate governance within a five-year transition period, which means that we may be required to adjust the structure and corporate governance of certain of our China subsidiaries in such transition period.

Failure to take timely and appropriate

measures to cope with any of these or similar regulatory compliance challenges could materially and adversely affect our current corporate structure, corporate governance and business operations.

In addition, under the newly enacted Foreign Investment Law, foreign investors or the foreign invested enterprise should report investment information on the principle of necessity.

The Negative List has been updated a few times since its enactment in 2018 and the current effective Negative List (2024 Edition) took effect on November 1, 2024.

The PRC Foreign Investment Law provides that foreign-invested entities operating in “restricted” or “prohibited” industries will require market entry clearance and other approvals from relevant PRC government authorities.

As the Negative List is updated from time to time, there can be no assurance that the China government will not change its policies in a manner that would render part or all of our business to fall within the restricted or prohibited categories.

If future laws, administrative regulations or provisions mandate further actions to be taken by companies with respect to our business operation, we may face substantial uncertainties as to whether we can complete such actions in a timely manner, or at all.

Failure to take timely and appropriate measures to cope with any of these or similar regulatory compliance challenges could materially and adversely affect our current corporate structure, corporate governance and business operations.

In addition, under the Foreign Investment Law, foreign investors or the foreign invested enterprise should report investment information on the principle of necessity.

Any company found to be non-complaint with such investment information reporting obligation might be potentially subject to fines or administrative liabilities.

Limitations on our ability to transfer funds to our China subsidiaries could adversely affect our ability to expand our operations, make investments that could benefit our businesses and otherwise fund and conduct our business.

The transfer of funds from us to our China subsidiaries, either as a shareholder loan or as an increase in registered capital, is subject to registration with or approval by the China's governmental authorities, including the State Administration of Foreign Exchange, (SAFE), the State Administration for Market Regulation (SAMR), and/or the relevant examination and approval authority.

Our subsidiaries may also experience difficulties in converting our capital contributions made in foreign currencies into RMB due to changes in the China's foreign exchange control policies.

The transfer of funds from us to our China subsidiaries, either as a shareholder loan or as an increase in registered capital, is subject to registration with or approval by the Chinese governmental authorities, including the State Administration of Foreign Exchange (SAFE), the State Administration for Market Regulation (SAMR), and/or the relevant examination and approval authority.

Our subsidiaries may also experience difficulties in converting our capital contributions made in foreign currencies into RMB due to changes in China’s foreign exchange control policies.

Therefore, it may be difficult to change capital expenditure plans once the relevant funds have been remitted from us to our China subsidiaries.

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China’s currency exchange control and government restrictions on investment repatriation may impact our ability to transfer funds outside of China.

A significant portion of our business is conducted in China where the currency is the Renminbi.

Regulations in China permit foreign owned entities to freely convert the Renminbi into foreign currency for transactions that fall under the “current account,” which includes trade related receipts and payments, interest and dividends.

Accordingly, our Chinese subsidiaries may use Renminbi to purchase foreign exchange for settlement of such “current account” transactions without pre-approval.

A significant portion of our business is conducted in China where the currency is the RMB.

Regulations in China permit foreign owned entities to freely convert the RMB into foreign currency for transactions that fall under the “current account,” which includes trade related receipts and payments, interest and dividends.

Accordingly, our Chinese subsidiaries may use RMB to purchase foreign exchange for settlement of such “current account” transactions without pre-approval.

However, pursuant to applicable regulations, foreign‑invested enterprises in China may pay dividends only out of their accumulated profits, if any, determined in accordance with Chinese accounting standards and regulations.

A Chinese company must pay 10% of its annual after-tax profits into the statutory reserve fund to fund the statutory reserve fund unless it has reached 50% of the registered capital of the company.

A Chinese company must pay 10% of its annual after-tax profits to fund its statutory reserve fund unless it has reached 50% of the registered capital of the company.

Where the accumulative amount of the company’s statutory reserve is not enough to make up for the losses of the previous year, the current year’s profits must first be used to make up for the losses before the statutory reserve is accrued.

Other transactions that involve conversion of Renminbi into foreign currency are classified as “capital account” transactions;

Other transactions that involve conversion of RMB into foreign currency are classified as “capital account” transactions;

examples of “capital account” transactions include repatriations of investment by or loans to foreign owners, or direct equity investments in a foreign entity by a China domiciled entity.

“Capital account” transactions require prior approval from, or registration with China's State Administration of Foreign Exchange (SAFE) or its provincial branch or its authorized banks to convert a remittance into a foreign currency, such as U.S.

“Capital account” transactions require prior approval from, or registration with SAFE or its provincial branch or its authorized banks to convert a remittance into a foreign currency, such as U.S.

dollars, and transmit the foreign currency outside of China.

As a result of these and other restrictions under PRC laws and regulations, our China subsidiaries are restricted in their abil ity to transfer a portion of their net assets to the parent.

As a result of these and other restrictions under Chinese laws and regulations, our China subsidiaries are restricted in their abil ity to transfer a portion of their net assets to the parent.

Such restricted portion amounted to approximat ely $93.9 million, or 11.4% of our total consolidated net assets attributed to the Company as of June 30, 2025.

We have no assurance that the relevant Chinese governmental authorities in the future will not limit further or eliminate the ability of our China subsidiaries to purchase foreign currencies and transfer such funds to us to meet our liquidity or other business needs.

We have no assurance

that the relevant Chinese governmental authorities in the future will not limit further or eliminate the ability of our China subsidiaries to purchase foreign currencies and transfer such funds to us to meet our liquidity or other business needs.

Any inability to access funds in China, if and when needed for use by the Company outside of China, could have a material and adverse effect on our liquidity and our business.

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The Regulations on Mergers and Acquisitions of Domestic Companies by Foreign Investors, or the M&A Rules, adopted by six PRC regulatory agencies in August 2006 and amended in 2009, and some other regulations and rules concerning mergers and acquisitions established additional procedures and requirements that could make merger and acquisition activities by foreign investors more time consuming and complex, including requirements in some instances that the Ministry of Commerce (“MOC”) be notified in advance of any change-of-control transaction in which a foreign investor takes control of a PRC domestic enterprise.

Moreover, the Anti-Monopoly Law requires that the MOC shall be

notified in advance of any concentration of undertaking if certain thresholds are triggered.

Moreover, the Anti-Monopoly Law requires that the MOC shall be notified in advance of any concentration of undertaking if certain thresholds are triggered.

In addition, the security review rules issued by the MOC that became effective in September 2011 specify that mergers and acquisitions by foreign investors that raise “national defense and security” concerns and mergers and acquisitions through which foreign investors may acquire de facto control over domestic enterprises that raise “national security” concerns are subject to strict review by the MOC, and the rules prohibit any activities attempting to bypass a security review, including by structuring the transaction through a proxy or contractual control arrangement.

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Our results of operations may be negatively impacted by fluctuations in foreign currency exchange rates between U.S.

dollar and Chinese Yuan, or RMB.

dollar and RMB.

dollars is our main functional currency and our revenue and a significant portion of our operating expenses are denominated in U.S.

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PRC labor laws may adversely affect our results of operations.

The PRC government promulgated the Labor Contract Law of the PRC, effective on January 1, 2008, which was amended on December 28, 2012 and the amended law became effective on July 1, 2013, to govern the establishment of employment relationships between employers and employees, and the conclusion, performance, termination of and the amendment to employment contracts.

The Chinese government promulgated the Labor Contract Law of the PRC, effective on January 1, 2008, which was amended on December 28, 2012 and the amended law became effective on July 1, 2013, to govern the establishment of employment relationships between employers and employees, and the conclusion, performance, termination of and the amendment to employment contracts.

The Labor Contract Law imposes greater liabilities on employers and significantly affects the cost of an employer’s decision to reduce its workforce.

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In order to attract and retain skilled personnel, we may need to increase the compensation of our employees.

Compensation may, also, increase as inflationary pressure increases in China.

may, also, increase as inflationary pressure increases in China.

In addition, under the Regulations on Paid Annual Leave for Employees, which became effective on January 1, 2008, employees who have served more than one year for a specific employer are entitled to a paid vacation ranging from 5 to 15 days, depending on length of service.

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Although significant economic and cultural relations have been established during recent years between Taiwan and China, relations have often been strained.

A substantial number of our key customers and some of our essential sales and

engineering personnel are located in Taiwan, and we have a large number of operational personnel and employees located in China.

A substantial number of our key customers and some of our essential sales and engineering personnel are located in Taiwan, and we have a large number of operational personnel and employees located in China.

Therefore, factors affecting military, political or economic relationship between China and Taiwan could have an adverse effect on our business, financial condition and operating results.

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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.

What changed 10-K

Item 1A. Risk Factors