What changed in this filing

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Item 1. Business

2026-03-17 compared with 2025-03-14 · 59 added, 52 removed, 512 unchanged (18% of the section changed)

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However, certain chips may become too hot or perform their function too slowly if silicon is used as the base material.

In addition, optoelectronic applications, such as LED lighting and chip-based lasers, do not use silicon substrates because they require a wave form frequency that cannot be achieved using silicon.

In addition, optoelectronic applications, such as LED lighting and chip-based lasers, do not use silicon substrates because they require a waveform frequency that cannot be achieved using silicon.

Alternative or specialty materials are used to replace silicon as the preferred base in these situations.

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Data centers use InP devices for high-speed optical data transmission.

We believe the growth of AI applications will increase the need for high-speed data transfer which may lead to an increase in InP substrate demand from such data centers.

We believe the growth of AI applications is increasing the need for high-speed data transfer, which may enable a growing increase in InP substrate demand for such data centers.

Currently, InP substrates are being used in certain consumer products, including proximity sensors and other sensors in mobile devices.

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Semi-conducting GaAs substrates are also used in making industrial lasers.

GaAs wafers could also be used for making vertical cavity surface emitting lasers (VCSELs) for facial recognition and micro-LEDs targeting improved screen technology.

GaAs wafers could also be used for making vertical cavity surface emitting lasers (VCSELs) for facial recognition.

Ge substrates are used in applications such as solar cells for space and terrestrial photovoltaic applications.

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• Used when growing epitaxial layers in Molecular Beam Epitaxy (MBE) reactors

All of our substrate products and raw material products are manufactured in the People’s Republic of China (PRC or China) by our PRC subsidiaries and PRC joint ventures material companies.

All of our substrate products and raw material products are manufactured in the People’s Republic of China (PRC or China) by our PRC subsidiaries and PRC joint ventures.

The PRC generally has favorable costs for facilities and labor compared with comparable facilities in the United States, Europe or Japan.

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In the event of industry-wide supply shortages we believe our vertically integrated supply chain strategy will be even more advantageous.

Our raw material companies produce materials, including raw gallium (4N Ga), high purity gallium (6N and 7N Ga), starting material for InP, arsenic, germanium, germanium dioxide, pyrolytic boron nitride (pBN) crucibles, and boron oxide (B2O3).

One company does recycling of our scrap materials.

We have board representation in all of these raw material companies.

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We purchase portions of the materials produced by these companies for our own use and they sell the remainder of their production to third parties.

In 2015, the Beijing city government announced its decision to move most of its offices into the district where our original manufacturing facility is currently located (the Tongzhou district) and the Beijing city government has moved thousands of government employees into this district.

In 2015, the Beijing city government announced its decision to move most of its offices to the Tongzhou district where our original manufacturing facility is currently located.

The Beijing city government has moved thousands of government employees into this district.

The government has constructed showcase tower buildings and overseen the establishment of new apartment complexes, retail stores and restaurants.

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For reasons of manufacturing efficiency, we elected to also move part of our germanium manufacturing line.

Our indium phosphide manufacturing line, as well as various administrative and sales functions, remain primarily at our original site.

Our indium phosphide manufacturing line, as well as various administrative and sales functions, remain primarily at our original site, in Beijing.

New customer qualifications and expanding capacity as needed require us to continue to diligently address the many details that arise at each of our sites.

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In the past, we have experienced such intervention or influence by the PRC government and a change in the rules and regulations in China when we were instructed by the Beijing municipal government to relocate part of our manufacturing facility in Beijing and expect that such intervention or influence or change in the rules and regulations in China could occur in the future.

In the ordinary course of business, our PRC subsidiaries and PRC joint ventures require permits and licenses to operate in the PRC.

Such permits and licenses include permits to use hazardous materials in manufacturing operations.

From time to time, the PRC government issues new regulations, which may require additional actions on the part of our PRC subsidiaries and PRC joint ventures to comply.

For example, on February 27, 2015, the China State Administration of Work Safety updated its list of hazardous substances.

The previous list, which was published in 2002, did not restrict the materials that we use in our wafers.

The new list added gallium arsenide.

As a result of the newly published list, we

were required to seek additional permits.

In the ordinary course of business, our PRC subsidiaries and PRC joint ventures apply for permits as required.

Any such intervention or influence or change in the rules and regulations in China could result in a material change in our PRC operations and/or the value of our common stock or cause the value of such securities to significantly decline or be worthless.

In September 2018, the United States announced a list of thousands of categories of goods that became subject to Section 301 tariffs when imported into the United States from China.

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On March 4, 2025, the United States further increased the tariff on imports of many products, including our wafer substrates, to 70%.

We have little or no germanium exports to the U.S.

In 2024, 8% of our total worldwide revenue was from sales in North America, primarily in the U.S.

Indium phosphide substrates are the primary revenue generator derived from imports into the U.S.

This revenue has been impacted by additional tariffs imposed by the United States and by export controls implemented by China.

As such, in 2025, only approximately 2% of our revenue was generated by sales to customers in North America.

On February 20, 2026, the U.S.

Supreme Court invalidated many of the global tariffs previously imposed under the International Emergency Economic Powers Act of 1977 (the "IEEPA") and the U.S.

Customs and Border Protection subsequently announced that IEEPA-based tariff provisions would be terminated effective February 24, 2026.

However, tariffs imposed under other authorities, including Section 232 of the Trade Expansion Act of 1962 and Section 301 of the Trade Act of 1974, remain in effect, and the U.S.

government has indicted that it may pursue additional or replacement tariffs under alternative legal authorities, including temporary measures under Section 122 of the Trade Act of 1974.

If maintained, these announced new tariffs, as well as related measures that could be taken by other countries and the potential escalation of trade disputes, could affect our business and results of operations.

We continue to monitor developments closely, including pending legal challenges to certain tariff authorities, updated guidance from regulators, retaliatory measures, resolution of trade agreements and ongoing negotiations with additional trade partners.

We have little or no germanium imports into the U.S.

and historically a relatively small value of imports of gallium arsenide wafers into the U.S.

Our primary revenue generator derived from imports into the U.S.

is indium phosphide substrates.

While Tongmei has generally received the required permits for exports to countries in Asia and Europe, our U.S.

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in addition to commercial applications they have significant levels of military involvement.

As such, no permits for gallium arsenide to the U.S.

As such, no permits for the export of gallium arsenide to the U.S.

have yet been approved.

On February 4, 2025, China added indium phosphide substrates to its export control list.

As a result, the three wafer substrate product lines manufactured by Tongmei all require permits from China’s Ministry of Commerce before they can be exported from China.

As a result, the three wafer substrate product families manufactured by Tongmei all require permits from China’s Ministry of Commerce before they can be exported from China.

InP export permits represent the most significant challenge we currently face.

The portal to apply for exports of indium phosphide from China opened in March 2025 and we immediately began to submit our applications.

On June 11, 2025, Tongmei was informed that it had satisfied the applicable requirements for a permit to export indium phosphide and received its initial export permits from the Ministry of Commerce of the People’s Republic of China to resume shipping indium phosphide substrates to certain customers in Europe and Japan.

While we have received some permits as of the date of this report, we cannot predict when a permit application will be reviewed and approved.

On December 27, 2025, the Standing Committee of the National People’s Congress of China (“NPC”) passed amendments to the Foreign Trade Law of the People’s Republic of China, which expands the scope of trade policy controls and response mechanisms and enhancing the Chinese government’s authority and policy tools in managing foreign trade.

The fluidity of the export permit requirements and ongoing lack of surety creates anxiety for us and for our customers.

To our knowledge, indium phosphide is rarely used in military applications and we can reasonably expect that export permits to ship our indium phosphide substrates to the U.S.

will be granted.

But since the requirement is new it will take at least several months from February 4, 2025 to have early applications processed.

However, the timing for receiving permits remains uncertain, unclear and beyond our control.

We are actively monitoring and following up on the status of our applications.

In the ordinary course of business, our PRC subsidiaries and PRC joint ventures require permits and licenses to operate in the PRC.

Such permits and licenses include permits to use hazardous materials in manufacturing operations.

From time to time, the PRC government issues new regulations, which may require additional actions on the part of our PRC subsidiaries and PRC joint ventures to comply.

For example, on February 27, 2015, the China State Administration of Work Safety updated its list of hazardous substances.

The previous list, which was published in 2002, did not restrict the materials that we use in our wafers.

The new list added gallium arsenide.

Another example of a change in the rules and regulations in China occurred in 2015 when we were instructed by the Beijing municipal government to relocate part of our manufacturing facility in Beijing.

We have created a vertically integrated supply chain and transfer cash through our corporate structure in three ways.

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For the years ended December 31, 2025, 2024 and 2023, the aggregate dividends paid to the Company, directly or to an intermediate entity within our corporate structure, by our PRC subsidiaries and PRC raw material joint ventures were approximately $0.9 million, $2.4 million and $4.3 million, respectively.

For years ended December 31, 2024 and 2023, no dividends were paid to minority shareholders by our PRC subsidiaries and PRC raw material joint ventures.

For the years ended December 31, 2025 and 2024, no dividends were paid to minority shareholders by our PRC subsidiaries and PRC raw material joint ventures.

In the year ended December 31, 2025, we continued the settlement of amounts owed under our transfer pricing arrangements in the ordinary course of business.

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We have cash management policies that dictate the amount of such funding.

We are subject to a number of unique legal and operational risks associated with our corporate structure, any of which could result in a material change in our operations and/or the value of our common stock or cause the value of

such securities to significantly decline or be worthless.

Please carefully read the “Risk Factors” in this Annual Report on Form 10-K in Item 1A below, including Category III, “Risks Related to International Aspects of Our Business”.

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Joint venture raw material companies in China bring certain risks.

● Risks exist in utilizing our new gallium arsenide manufacturing sites efficiently.

The Chinese central government is increasingly aware of air pollution and other forms of environmental pollution and their reform efforts can impact our manufacturing, including intermittent mandatory shutdowns.

Shutdowns or underutilizing our manufacturing facilities may result in declines in our gross margins.

● Enhanced trade tariffs, import restrictions, export restrictions, Chinese regulations or other trade barriers may materially harm our business.

Escalating and volatile trade tariffs, import restrictions, export restrictions, Chinese regulations or other trade barriers may materially harm our business.

If China places restrictions on freight and transportation routes and on ports of entry and departure this could result in shipping delays or increased costs for shipping.

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On December 15, 2022, the PCAOB vacated its 2021 determinations that the positions taken by authorities in the PRC and Hong Kong prevented it from inspecting and investigating completely registered public accounting firms headquartered in those jurisdictions.

completely inspected by the PCAOB” under the section entitled “Risk Factors” in Item 1A below for further information on risks related to our foreign operations and dependence.

See “Although the audit report is prepared by an independent registered public accounting firm that is currently inspected fully by the PCAOB, there is no guarantee that future audit reports will be prepared by an independent registered public accounting firm that is completely inspected by the PCAOB” under the section entitled “Risk Factors” in Item 1A below for further information on risks related to our foreign operations and dependence.

We were incorporated in California in December 1986 and reincorporated in Delaware in May 1998.

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Data centers use InP devices for high-speed optical data transmission.

We believe the growth of AI applications will increase the need for high speed data transfer, which may lead to an increase in InP substrate demand from such data centers.

We believe the growth of AI applications will increase the need for high speed data transfer, which may enable a growing increase in InP substrate demand for such data centers.

Currently, InP substrates are being used in certain consumer products, including proximity sensors and other sensors in mobile devices.

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Further, we believe we can be the dominant supplier in the emerging 6-inch diameter market.

Already, our InP substrates have reached production in at least two well-known consumer products.

Also, one of our largest data center upgrade customers works closely with us as a partner.

Our advantages increase with

larger diameters, which the industry is starting to demand, and we believe our superior technology will converge with new demands from data centers that are driven by AI applications, additional consumer application wins and other data center and 5G/telecom applications .

Our advantages increase with larger diameters, which the industry is starting to demand, and we believe our superior technology will converge with new demands from data centers that are driven by AI applications, additional consumer application wins and other data center and 5G/telecom applications .

New facilities, equipment and added capacity .

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Although current customers and prospective customers previously viewed our relocation process as a risk, we believe our success in managing this process now positions us as the “go to” supplier with a state of the art manufacturing line, a proven ability to add capacity and a commitment to continuous improvement .

Key provider of low defect density GaAs wafer substrates .

In recent years customer demand for low etch pit density (“EPD”) GaAs wafer substrates has increased.

The most recent example is the requirement for 8-inch wafers GaAs.

The requirement of low EPD is a barrier to entry and we believe there are a limited number of potential substrate providers that can meet this requirement, including AXT.

We believe the quality of our low EPD wafers will enable us to support new applications and generate additional revenue.

We believe that we are the only compound semiconductor substrate supplier to have a position in raw materials .

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and China capital markets presents a strong position to our customers and gives us an advantage over our competitors.

For example, in December 2025, AXT completed an offering on the Nasdaq and raised gross proceeds of approximately $100 million before deducting underwriting discounts, commissions and other offering expenses.

Low-cost manufacturing operation in China.

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Our primary competitors have their major manufacturing operations in Germany or Japan .

● Key provider of low defect density GaAs wafer substrates .

In recent years customer demand for low etch pit density (“EPD”) GaAs wafer substrates has increased.

The most recent example is the requirement for 8-inch wafers GaAs.

The requirement of low EPD is a barrier to entry and we believe there are a limited number of potential substrate providers that can meet this requirement, including AXT.

We believe the quality of our low EPD wafers will enable us to support new applications and generate additional revenue.

Proprietary process technology drives manufacturing.

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We intend to promote our technological strengths by showcasing our success in developing larger diameter wafers.

Our 8-inch GaAs product has

crossed several milestones and is now shipping in small quantities.

Our 8-inch GaAs product has crossed several milestones and is now shipping in small quantities.

Our 6-inch InP is now desired by some key customers.

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Some customers require recycling programs.

● Showcase our new facilities.

With travel restrictions largely removed, we plan to host more customers that tour our facilities.

We had several very positive visits in 202 4 and plan to increase the number of visits in 202 5 .

Strengthen our raw materials supply chain.

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Increase manufacturing efficiencies.

The recent industry-wide inventory corrections and reduced manufacturing volumes impacted our manufacturing efficiencies.

We will seek to continue to leverage our China-based manufacturing advantages by increasing efficiencies in our manufacturing methods, systems and processes.

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Each of these materials has unique properties that determine the best device and/or circuit applications.

As a result of their special high electron mobility combined with their direct ban-gap properties, both InP and GaAs wafers have enjoyed dominant roles in the production of light-emitting diodes (LEDs), solid-state lasers and power amplifiers for mobile phones, to name a few applications.

As a result of their special high electron mobility combined with their direct band-gap properties, both InP and GaAs wafers have enjoyed dominant roles in the production of light-emitting diodes (LEDs), solid-state lasers and power amplifiers for mobile phones, to name a few applications.

Ge wafers, on the other hand, have played a key role in the manufacturing of special solar cells known as triple junction solar cells (TJSCs) for space and terrestrial power generation.

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We have at times sold a significant portion of our products in any particular period to a limited number of customers.

No customer represented more than 10% of our revenue for the years ended December 31, 2024 and 2023 and o ne customer represented 15% of our revenue for the year ended December 31, 2022.

No customer represented more than 10% of our revenue for the years ended December 31, 2025, 2024 and 2023.

Our top five customers, although not the same five customers for each period, represented 29% of our revenue for the year 2025, 30% of our revenue for 2024 and 25% of our revenue for 2023.

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We believe our teams are fully capable of moving the process technology forward.

We also engage third party firms or individuals on specific projects.

Our consolidated subsidiaries conduct research and development, focusing on gallium alloys, gallium refinement and pyrolytic boron nitride crucibles used in high temperature crystal growth.

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customer technical support;

● performance;

ability to quickly add InP capacity;

product performance;

meeting customer specifications.

● manufacturing capacity.

Our ability to compete in target markets also depends on factors such as:

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To date, we have been issued 198 patents that relate to our VGF products and processes;

139 in China, 13 in the United States, 8 in Japan, 4 in Taiwan, 4 in the European Union, and 2 in Germany.

153 in China, 22 in the United States, 8 in Japan, 5 in Taiwan, 6 in the European Union, 2 in Germany, 1 in France, and 1 in Korea.

Patents have a protected life of 20 years (or 10 years for utility model patents in China) from their filing dates.

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In some cases we may consider filing divisional, continuation or continuation-in-part of the existing patents for additional claims.

We have several patent applications pending in China, United States, and rest of the world.

We have several patent applications pending in China, United States, and other countries and areas.

Furthermore, in aggregate, our consolidated raw material companies have been issued 130 patents in China, including 34 patents issued to JinMei, 80 patents issued to BoYu and 15 patents issued to ChaoYang XinMei High Purity Semiconductor Materials Co., Ltd.

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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 1. Business