What changed in this filing

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Item 1. Business

2021-08-17 compared with 2020-08-18 · 119 added, 139 removed, 260 unchanged (50% of the section changed)

We provide advanced optical packaging and precision optical, electro-mechanical and electronic manufacturing services to original equipment manufacturers (“OEMs”) of complex products such as optical communication components, modules and sub-systems,

industrial lasers, automotive components, medical devices and sensors.

We offer a broad range of advanced optical and electro-mechanical capabilities across the entire manufacturing process, including process design and engineering, supply chain management, manufacturing, complex printed circuit board assembly, advanced packaging, integration, final assembly and testing.

Although we focus primarily on low-volume

production of a wide variety of high complexity products, which we refer to as “low-volume,

we also have the capability to accommodate high-volume production.

Although we focus primarily on low-volume production of a wide variety of high complexity products, which we refer to as “low-volume, high-mix,” we also have the capability to accommodate high-volume production.

Based on our experience with and positive feedback from our customers, we believe we are a global leader in providing these services to the optical communications, industrial lasers and automotive markets.

Our customer base includes companies in complex industries that require advanced precision manufacturing capabilities such as optical communications, industrial lasers, automotive components and sensors.

Our customers in these industries support a growing number of end-markets,

including automotive, biotechnology, communications, materials processing, medical devices, metrology and semiconductor processing.

Our customers in these industries support a growing number of end-markets, including automotive, biotechnology, communications, materials processing, medical devices, metrology and semiconductor processing.

Our total revenues for the year ended June 25, 2021 (“fiscal year 2021”) increased by $237.5 million, or 14.5%, from $1.64 billion for the year ended June 26, 2020 (“fiscal year 2020”) to $1.88 billion for fiscal year 2021.

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• optical communications devices, such as:

selective switching products, such as reconfigurable optical add-drop

multiplexers (“ROADMs”), optical amplifiers, modulators and other optical components and modules that collectively enable network managers to route voice, video and data communications traffic through fiber optic cables at various wavelengths, speeds, and over various distances;

• selective switching products, such as reconfigurable optical add-drop multiplexers (“ROADMs”), optical amplifiers, modulators and other optical components and modules that collectively enable network managers to route voice, video and data communications traffic through fiber optic cables at various wavelengths, speeds, and over various distances;

• tunable lasers, transceivers, and transponders that eliminate, at a significant cost savings to the service provider, the need to stock individual fixed wavelength optical transceivers and transponders used in voice and data communications networks;

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• solid state, diode-pumped, gas and fiber lasers (collectively referred to as “industrial lasers”) used across a broad array of industries, including semiconductor processing (wafer inspection, wafer dicing, wafer scribing), biotechnology and medical device (DNA sequencing, flow cytometry, hematology, antibody detection), metrology (instrumentation, calibration, inspection), and material processing (metal, polymer, textile drilling and cutting, annealing, marking, engraving, and welding);

sensors, including differential pressure, micro-gyro, fuel and other sensors that are used in automobiles, and non-contact

temperature measurement sensors for the medical industry.

fused quartz, and synthetic fused silica glass products (collectively referred to as “customized glass”).

• sensors, including differential pressure, micro-gyro, fuel and other sensors that are used in automobiles, and non-contact temperature measurement sensors for the medical industry.

We also design and fabricate application-specific crystals, lenses, prisms, mirrors, laser components and substrates (collectively referred to as “customized optics”) and other custom and standard borosilicate, clear fused quartz, and synthetic fused silica glass products (collectively referred to as “customized glass”).

We incorporate our customized optics and glass into many of the products we manufacture for our OEM customers, and we also sell customized optics and glass in the merchant market.

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Our dedicated process and design engineers, who have a deep knowledge in materials sciences and physics, are able to tailor our service offerings to accommodate our customers’ complex engineering assignments.

Our range of capabilities, from the design of customized optics and glass through process engineering and testing of finished assemblies, provides us with a knowledge base that we believe often leads to improvements in our customers’ product development cycles, manufacturing cycle times, quality and reliability, manufacturing yields and end product costs.

We offer an efficient, technologically advanced and flexible manufacturing infrastructure designed to enable the scale production of low-volume,

products, as well as high-volume products.

customers’ product development cycles, manufacturing cycle times, quality and reliability, manufacturing yields and end product costs.

We offer an efficient, technologically advanced and flexible manufacturing infrastructure designed to enable the scale production of low-volume, high-mix products, as well as high-volume products.

We specialize in complex prototype and new product introduction services, with specialized resources to meet customers’ quick-turn printed circuit board assembly (“PCBA”) and early stage manufacturing requirements.

We have a dedicated engineering team to support the advanced optical packaging needs of our customers’ cutting edge products, which allows them to accelerate development and time-to-market

for such products.

We often provide a “factory-within-a-factory”

manufacturing environment to safeguard our customers’ intellectual property by physically segregating certain key employees and manufacturing space from the resources we use for other customers.

We also provide our customers with a customized software platform to monitor all aspects of the manufacturing process, enabling our customers to remotely access our databases to monitor yields, inventory positions, work-in-progress

status and vendor quality data in real time.

We have a dedicated engineering team to support the advanced optical packaging needs of our customers’ cutting edge products, which allows them to accelerate development and time-to-market for such products.

We often provide a “factory-within-a-factory” manufacturing environment to safeguard our customers’ intellectual property by physically segregating certain key employees and manufacturing space from the resources we use for other customers.

We believe there is no other manufacturing services provider with a similar breadth and depth of optical and electro-mechanical engineering and process technology capabilities that does not directly compete with its customers in their end-markets.

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Recent Developments Related to COVID-19

In the quarter ended March 27, 2020, the effects of the global COVID-19

pandemic impacted us in several ways and created various challenges.

At the onset of the pandemic, our PRC subsidiary, which manufactures custom optics components for us and other customers at its facility in Fuzhou, China, experienced a prolonged temporary closure following its customary eight-day

Chinese Lunar New Year holiday in January 2020.

In accordance with the Chinese government’s official efforts to mitigate the spread of COVID-19,

our PRC subsidiary, along with other businesses in various parts of the country, delayed resumption of operations following the holiday closures for approximately two weeks.

Furthermore, because of the restrictions in place on travel in China during this period, many of our employees were unable to return from their holiday travel as planned, resulting in fewer than 90% of our employees being able to return to work at our PRC subsidiary before early March.

The global COVID-19 pandemic has impacted us in several ways and created various challenges.

In accordance with the Chinese government’s official efforts to mitigate the spread of COVID-19, our PRC subsidiary, along with other businesses in various parts of the country, delayed resumption of operations following the holiday closures for approximately two weeks.

Furthermore, because of the restrictions in place on travel in the PRC during this period, many of our employees were unable to return from their holiday travel as planned, resulting in fewer than 90% of our employees being able to return to work at our PRC subsidiary before early March 2020.

Our other global manufacturing facilities also have been affected by various government restrictions put in place to slow the spread of COVID-19.

In Thailand, the government declared a national state of emergency effective March 26, 2020 and required the closure of various businesses, in particular retail establishments, and passed measures restricting movement and activities in Thailand.

While our operations in Thailand have not been suspended, we have implemented a number of safety protocols to allow our operations in our facilities there to continue in accordance with government regulations.

With the exception of our facility in Santa Clara, California, which closed for approximately one week beginning in late March before reopening in early April as a previously classified “essential business,” our facilities in the United States of America (“U.S.”),

including in New Jersey, and in the United Kingdom (“U.K.”) have remained open while adhering to the local government restrictions and orders implemented in March 2020, including “shelter-in-place”

orders and social distancing guidelines.

With the exception of our facility in Santa Clara, California, which closed for approximately one week beginning in late March 2020 before reopening in early April 2020 as a previously classified “essential business,” our facilities in the U.S., including in New Jersey, and in the U.K.

have remained open while adhering to the local government restrictions including social distancing guidelines.

During the three months ended June 25, 2021, several countries where we have manufacturing facilities, including Thailand, the PRC, the U.S.

and the U.K., experienced a surge in the number of COVID-19 cases.

In Thailand, we have recently experienced an increase in the number of employees who have tested positive for COVID-19.

We have responded by taking additional actions based on recommendations from local authorities.

These actions include leave of absence for affected employees and their close contacts, stringent contact tracing, enhanced safe distancing measures, and arrangements for the vaccination of our employees in Thailand.

Although we did not experience any significant disruptions in our operations or decrease in customer demand during the three months ended June 25, 2021, any worsening of the pandemic may result in more stringent measures being implemented by the local authorities, such as shutting down of our manufacturing facilities, which will have a significant negative impact on our operations.

The health and well-being of our employees continues to be our top priority.

Over the past several months, we have implemented significant precautionary measures throughout our worldwide operations to ensure our employees and their families remain safe, such as mandatory temperature detection at building entrances, rigorous and regular facility and equipment disinfection, and mandatory personal protective equipment protocols, including (1) the wearing of face masks throughout our factories at all times, (2) distributing our employees across shifts to better maintain safe personal distances, (3) isolating incoming parts and materials for a week or more prior to unpacking, or applying extreme heat to them to kill potential viruses, (4) directing our non-factory

personnel to work remotely, and (5) restricting all non-employee

visits to our campuses.

During the six months ended June 26, 2020, we also experienced a shift in the demand for our services, with some customers canceling, decreasing or delaying orders and other customers accelerating and increasing orders.

However, the most significant effect of COVID-19

on our operations has been the disruption of our supply chain, including significant fluctuations in the availability of parts and materials necessary to manufacture our products for our customers.

While we were able to mitigate some of these issues by quickly identifying and securing alternative sources, these mitigation efforts, combined with our employee safety initiatives, negatively impacted our gross margins due to the associated costs and expenses.

For more information, see “Item 7, Management’s Discussion & Analysis of Financial Condition and Results of Operations.”

In early 2020, we implemented significant precautionary measures throughout our worldwide operations to ensure our employees and their families remain safe.

Such measures include mandatory temperature detection at building entrances, rigorous and regular facility and equipment disinfection, and mandatory personal protective equipment protocols, including (1) the wearing of face masks throughout our factories at all times;

(2) distributing our employees across shifts to better maintain safe personal distances;

(3) isolating incoming parts and materials for a week or more prior to unpacking, or applying extreme heat to kill potential viruses;

(4) directing our non-factory personnel to work remotely;

and (5) restricting all non-employee visits to our campuses.

Given the unprecedented human, and economic impact of the COVID-19 pandemic globally, the extraordinary economic short-term uncertainty resulting therefrom, and the evolving and differing national strategies for dealing with COVID-19, it is challenging to provide a forward-looking disclosure.

However, despite the uncertainty and concern about the

global economy and the health of various industries, we believe it is important to share some relevant perspectives as we continue to assess the impacts of COVID-19 on our business in the future:

• With work-from-home protocols in place around the world, global demand for internet bandwidth has grown and we believe it will continue to grow.

Because the next-generation telecom and datacom products we manufacture for our customers are important to expanding network capacity, we believe such growth in bandwidth demand will have a positive impact on our business in the long-term.

• While we believe that the long-term growth outlook for the markets we serve has not been significantly impacted, in the short-term we are likely to continue to see regional downward demand adjustments, especially if the COVID-19 outbreak intensifies or returns in various geographic areas as was the case at the end of our third quarter in fiscal year 2020.

• We expect we will continue to experience disruptions in our supply chain and the availability of parts and materials will continue to fluctuate, especially if the COVID-19 outbreak intensifies or returns in various geographic areas.

However, we believe we can mitigate these disruptions by continuing to identify and secure alternative sources.

• A significant portion of our costs is variable and, because of this, we can adjust manufacturing costs relatively quickly to respond to the changing demand of our customers.

However, because parts and materials account for the largest portion of our costs, in combination with the supply chain issues noted above and, to a lesser extent, the expenses associated with the safety and health protocols we have implemented across our global operations, our gross margins will continue to be negatively affected for the foreseeable future.

• The safety and health of our employees is and will remain a key priority, and we will continue to follow robust safety protocols in all of our facilities.

To this end, we have arranged for the vaccination of our employees in Thailand in the first quarter of fiscal year 2022.

• Given our $547.9 million in cash, cash equivalents and short-term investments, and our total debt of approximately $39.5 million, as of June 25, 2021, we believe we are in a solid position from a capital and financial resources perspective.

We expect that current cash and cash equivalent balances and short-term investments, and cash flows generated from operations will be sufficient to meet our domestic and international working capital needs and other capital and liquidity requirements for at least the next 12 months.

Industry Background

Optical Communications

Many optical communications OEMs have reduced internal manufacturing capacity and transitioned to a low-cost

and more efficient manufacturing base.

Many optical communications OEMs have reduced internal manufacturing capacity and transitioned to a low-cost and more efficient manufacturing base.

By outsourcing production to third parties, OEMs are better able to concentrate their efforts and resources on what they believe are their core strengths, such as research and development, and sales and marketing.

Additionally, outsourcing production often allows OEMs to reduce product costs, improve quality, access advanced process design and manufacturing technologies and achieve accelerated time-to-market

and time-to-volume

Additionally, outsourcing production often allows OEMs to reduce product costs, improve quality, access advanced process design and manufacturing technologies and achieve accelerated time-to-market and time-to-volume production.

The principal barrier to the trend towards outsourcing in the optics industry has been the shortage of third-party manufacturing partners with the necessary optical process capabilities and robust intellectual property protection.

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Industrial Lasers, Sensors and Others

The optical and electro-mechanical process technologies used in the optical communications market also have applications in other similarly complex end-markets

that require advanced precision manufacturing capabilities, such as automotive, industrial lasers, medical devices, and sensors.

These markets are substantially larger than the optical communications components and modules market.

The optical and electro-mechanical process technologies used in the optical communications market also have applications in other similarly complex end-markets that require advanced precision manufacturing capabilities, such as automotive, industrial lasers, medical devices, and sensors.

These markets are substantially larger than the optical

communications components and modules market.

Growth in the industrial lasers, medical, and sensors markets is expected to be driven by demand for:

industrial laser applications across a growing number of end-markets,

particularly in semiconductor processing, biotechnology, metrology and materials processing;

precision, non-contact

and low power requirement sensors, particularly in automotive, medical and industrial end-markets;

• industrial laser applications across a growing number of end-markets, particularly in semiconductor processing, biotechnology, metrology and materials processing;

• precision, non-contact and low power requirement sensors, particularly in automotive, medical and industrial end-markets;

• lower cost products used on both enterprise and consumer levels.

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Our Competitive Strengths

We believe we have succeeded in providing differentiated services to the optical communications, industrial lasers, medical, and sensors industries due to our long-term focus on optical and electro-mechanical process technologies, strategic alignment with our customers and our commitment to total customer satisfaction.

More specifically, our key competitive strengths include:

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• complex printed circuit board assembly;

customized software tools for low-volume,

manufacturing;

manufacturing systems;

• customized software tools for low-volume, high-mix manufacturing;

• turn-key manufacturing systems;

• fiber metallization and lensing;

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• Efficient, Flexible and Low-Cost Process Engineering and Manufacturing Platform:

We enable our customers to transition their production to an efficient and flexible manufacturing platform that is specialized for the production of optics and similarly complex products and is located in a low-cost

We believe our advanced manufacturing technologies, coupled with our broad engineering capabilities, give us the ability to identify opportunities to improve our customers’ manufacturing processes and provide meaningful production cost benefits.

We have also developed a series of customized software tools that we believe provide us with a specialized ability to manage the unique aspects of low-volume,

Customizable Factory-Within-a-Factory

Production Environment:

We have also developed a series of customized software tools that we believe provide us with a specialized ability to manage the unique aspects of low-volume, high-mix production.

• Customizable Factory-Within-a-Factory Production Environment:

We offer our customers exclusive engineering teams and manufacturing space for production.

We call this concept of segregating production by customer a “factory-within-a-factory.”

We believe our approach maximizes intellectual property protection and provides greater opportunities to reduce cost and improve time to market for our customers’ products.

We call this concept of segregating production by customer a “factory-within-a-factory.” We believe our approach maximizes intellectual property protection and provides greater opportunities to reduce cost and improve time to market for our customers’ products.

• Vertical Integration Targeting Customized Optics and Glass:

We believe our capabilities in the design and fabrication of high-value customized optics and glass are complementary to our manufacturing services.

Specifically, these capabilities enable us to strategically align our business to our customers’ needs by streamlining our customers’ product development process and reducing the number of suppliers in our customers’ manufacturing supply chains.

manufacturing supply chains.

Also, we use these customized optics and glass products in certain of the components, modules and subsystems we manufacture, which enables us to shorten time to market and reduce the cost for our customers.

We believe this level of vertical integration positions us to capitalize on further opportunities to cross-sell our design and fabrication capabilities.

Supply Chain Management:

We have created a proprietary set of automated manufacturing resource planning tools designed specifically to address the unique inventory management demands of “low-volume,

manufacturing.

Over the years, we have developed strong relationships with thousands of suppliers and implemented inventory management strategies with many of them, which enables us to obtain inventory on an as-needed

basis and provide on-site

stocking programs.

• Turn-Key Supply Chain Management:

We have created a proprietary set of automated manufacturing resource planning tools designed specifically to address the unique inventory management demands of “low-volume, high-mix” manufacturing.

We believe our deep expertise, relationships and capabilities in supply chain and materials management often allows us to further reduce costs and cycle times for our customers.

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• Evaluate Potential Strategic Alternatives such as Acquisitions and Joint Ventures:

We will continue to evaluate opportunities to further expand our manufacturing capabilities and diversify our end-markets

through the evaluation of various acquisition and joint venture opportunities around the globe.

We will continue to evaluate opportunities to further expand our manufacturing capabilities and diversify our end-markets through the evaluation of various acquisition and joint venture opportunities around the globe.

• Broaden Our Client Base Geographically:

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as an NPI center in the heart of Silicon Valley and Fabrinet Israel as an NPI center in Israel’s “Startup Village.” These NPI centers serve as business development arms with an emphasis on new business generation, helping our customers with design for manufacturability and then transferring those programs to Thailand for volume manufacturing.

Equipped with state-of-the-art

surface mount and advanced optical packaging technologies and infrastructure, and with close proximity to a large portion of our customer base, these centers help to accelerate customer NPI and provide seamless access and future transfer to the low-cost

manufacturing base in Thailand.

Equipped with state-of-the-art surface mount and advanced optical packaging technologies and infrastructure, and with close proximity to a large portion of our customer base, these centers help to accelerate customer NPI and provide seamless access and future transfer to the low-cost manufacturing base in Thailand.

Service Offerings

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Printed circuit board assembly involves attaching electronic components, such as integrated circuits, capacitors, receivers, transceivers and other components and modules to printed circuit boards.

We employ a variety of mounting and assembly technologies, including SMT, PTH and ACT, press-fit,

and other connection processes that are focused on miniaturization and increasing the density of component placement on printed circuit boards.

We employ a variety of mounting and assembly technologies, including SMT, PTH and ACT, press-fit, and other connection processes that are focused on miniaturization and increasing the density of component placement on printed circuit boards.

These technologies, which support the needs of our customers to provide greater functionality in smaller products, include chip-scale packaging, ball grid array, direct chip attach and high density interconnect.

We perform in-circuit,

functional and environmental testing of printed circuit board assemblies to verify all components are properly inserted, attached and the electrical circuits are complete, and that the board or assembly operates in accordance with its final design and manufacturing specifications.

We perform in-circuit, functional and environmental testing of printed circuit board assemblies to verify all components are properly inserted, attached and the electrical circuits are complete, and that the board or assembly operates in accordance with its final design and manufacturing specifications.

Dedicated New Product Introduction

We are committed to providing NPI capabilities designed to ensure that our customers’ products get to market as quickly as possible.

strong engineering services in process design, prototyping, design for manufacturability (“DFM”) and test at these locations gives customers a full suite of NPI services for quick-turn PCBA to box-build

to full system assembly.

Co-locating strong engineering services in process design, prototyping, design for manufacturability (“DFM”) and test at these locations gives customers a full suite of NPI services for quick-turn PCBA to box-build to full system assembly.

Stringent IP protection protocols are strictly enforced throughout the entire process, safeguarding our customers’ intellectual property.

Our NPI sites are outfitted with state-of-the-art

production equipment that mirrors the equipment used in our low-cost

manufacturing facilities, ensuring a fast, smooth transition to a low-cost

production environment once the product is qualified.

Our NPI sites are outfitted with state-of-the-art production equipment that mirrors the equipment used in our low-cost manufacturing facilities, ensuring a fast, smooth transition to a low-cost production environment once the product is qualified.

Qualifications

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This requires a close working relationship with our customer to optimize processes and identify alternative sources for materials to improve efficiency, yields and cost.

Design and process improvements may include reducing the number of parts, simplifying the assembly process, eliminating non-value

add operations, using standard materials and optimizing manufacturing lines.

Design and process improvements may include reducing the number of parts, simplifying the assembly process, eliminating non-value add operations, using standard materials and optimizing manufacturing lines.

Supply Chain and Inventory Management

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We have created a proprietary set of automated manufacturing resource planning tools to manage our inventory.

We have also implemented inventory management strategies with certain suppliers that enable us to use inventory on an as-needed

basis and provide on-site

stocking programs.

We have also implemented inventory management strategies with certain suppliers that enable us to use inventory on an as-needed basis and provide on-site stocking programs.

Quality Control

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• Medical Optics:

Includes mirrors, lenses, filters, waveplates, windows, and prisms incorporated into various medical equipment products.

Includes mirrors, lenses, filters, wave plates, windows, and prisms incorporated into various medical equipment products.

• Storage Optics:

Includes mirrors, polarizing beam splitters or PBS, and waveplates incorporated into optical storage products.

Includes mirrors, polarizing beam splitters or PBS, and wave plates incorporated into optical storage products.

• Surveying Optics:

Includes penta prisms, corner cubes, and T-Windows

incorporated into precision surveying products.

Includes penta prisms, corner cubes, and T-Windows incorporated into precision surveying products.

• Telecom Optics:

Includes lenses (such as spherical, a-spherical,

and cylindrical), waveplates, mirrors, prisms, filters and YVO4 crystals used for telecommunications applications.

Includes lenses (such as spherical,a-spherical,C-lens,and cylindrical), wave plates, mirrors, prisms, filters and YVO4 crystals used for telecommunications applications.

• Telecommunication Subassemblies:

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Our reliability laboratory enables us to test the degree to which our results and specifications conform to our customers’ requirements.

Through the reliability laboratory, we are able to perform most of the tests required by industry standards, including damp heat, thermal aging, thermal shock, temperature cycling, shock and vibration, accelerated life testing and stress screening.

Through the reliability laboratory, we are able to perform most of the

tests required by industry standards, including damp heat, thermal aging, thermal shock, temperature cycling, shock and vibration, accelerated life testing and stress screening.

The reliability laboratory is critical to verification of root cause failure analysis.

• Optical and Mechanical Material and Process Analysis:

material and process laboratory analyzes materials to support incoming inspection, process development, process monitoring, failure analysis and verification of compliance with the applicable environmental standards.

Our in-house material and process laboratory analyzes materials to support incoming inspection, process development, process monitoring, failure analysis and verification of compliance with the applicable environmental standards.

• Precision Optical Fiber and Electro-Mechanical Assembly:

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Many optical component package designs require metallized fiber and some designs also require lensing at the tip of the fiber.

We have in-house

capabilities that enable us to produce these products at a low cost, with short lead times and high quality.

We have in-house capabilities that enable us to produce these products at a low cost, with short lead times and high quality.

• Fiber Handling and Fiber Alignment:

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• Crystal Growth and Processing:

Our crystal growth technology produces non-linear

optical crystals and crystals used in laser applications.

Our crystal growth technology produces non-linear optical crystals and crystals used in laser applications.

Our processing capabilities include dicing, grinding, polishing and inspection with high dimension, tolerance and surface quality.

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Therefore, we expect a significant percentage of our total revenues will continue to come from a small number of customers.

During fiscal years 2020 and 2019, we had three customers and one customer, respectively, that contributed 10% or more of our total revenues.

During each of fiscal years 2021 and 2020, we had three customers that each contributed 10% or more of our total revenues.

During fiscal year 2021, Cisco Systems Inc., Lumentum Operations LLC and Infinera Corporation contributed 13.9%, 13.6% and 11.6%, respectively, of our total revenues.

During fiscal year 2020, Lumentum Operations LLC, Acacia Communications, Inc.

and Infinera Corporation contributed 19.0%, 10.2% and 10.0%, respectively, of our total revenues.

During fiscal year 2019, Lumentum Operations LLC contributed 20% of our total revenues.

The production of optical devices is characterized by a lengthy qualification process.

In particular, the qualification and field testing of the products that we produce for our customers may take three to six months or

longer to complete.

Generally, we must qualify our production process with our customers, and the products that we manufacture must also meet the product quality requirements of our customers’ customers.

In particular, the qualification and field testing of the products that we produce for our customers may take three to six months or longer to complete.

we must qualify our production process with our customers, and the products that we manufacture must also meet the product quality requirements of our customers’ customers.

While most of our customers do not purchase our services until they qualify the services and satisfactorily complete factory audits and vendor evaluations, we typically produce a test run of their products to demonstrate that the products we produce will meet their qualification standards in advance of receiving an order.

As part of this process, our engineers work closely with the customer’s design and procurement teams.

We believe that the rigorous product transfer and qualification processes, and the close relationships that we develop with our customers during those processes, results in greater visibility into product life cycles and longer-term customer engagements.

We believe that the rigorous product transfer and qualification processes, and the close relationships that we develop with our customers during those processes, result in greater visibility into product life cycles and longer-term customer engagements.

We are substantially dependent on orders we receive and fill on a short-term basis.

Although we often receive a 12-month

forecast from our customers, our customer contracts do not provide any assurance of future sales, and sales are typically made pursuant to individual purchase orders that have short lead times and are subject to revision or cancellation.

Although we often receive a 12-month forecast from our customers, our customer contracts do not provide any assurance of future sales, and sales are typically made pursuant to individual purchase orders that have short lead times and are subject to revision or cancellation.

Because of the possibility of changes in delivery or acceptance schedules, cancellations of orders, returns or price reductions, we do not believe that backlog is a reliable indicator of our future revenues.

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We have historically experienced supply shortages resulting from various causes, including reduced yields by our suppliers, which have prevented us from manufacturing products for our customers in a timely manner.

While we continually undertake programs to strengthen our supply chain, we are experiencing, and expect for the foreseeable future to continue to experience, strain on our supply chain, as well as periodic supplier problems.

We have incurred, and expect to continue to incur for the foreseeable future, costs to address these problems.

While we continually undertake programs to strengthen our supply chain, we are experiencing, and expect to experience for the foreseeable future, strain on our supply chain, as well as periodic supplier problems.

We have incurred, and expect to incur for the foreseeable future, costs to address these problems.

We have an extensive quality management system that focuses on continual process improvement and achieving high levels of customer satisfaction.

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We hold the following additional certifications:

ANSI ESD S20.20 for

facilities and manufacturing process control, in compliance with ESD standard;

ANSI ESD S20.20 for facilities and manufacturing process control, in compliance with ESD standard;

Transported Asset Protection Association, or TAPA, for Logistic Security Management System;

for Corporate Social Responsibility in Thailand.

and CSR-DIW for Corporate Social Responsibility in Thailand.

In the European Union, we are required to maintain certain ISO certifications in order to sell our precision optical, electro-mechanical and electronic manufacturing services and we must undergo periodic inspections by regulatory bodies to obtain and maintain these certifications.

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• our engineering and prototyping capabilities;

our ability to strengthen and broaden our engineering services and know-how

to participate in the growth of emerging technologies;

• our ability to strengthen and broaden our engineering services and know-how to participate in the growth of emerging technologies;

• our ability to deliver on-time;

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• our responsiveness and flexibility.

Competitors in the market for optical manufacturing services include Benchmark Electronics, Inc., Celestica Inc., Sanmina-SCI

Corporation, Jabil Circuit, Inc.

Competitors in the market for optical manufacturing services include Benchmark Electronics, Inc., Celestica Inc., Sanmina-SCI Corporation, Jabil Circuit, Inc.

and Venture Corporation Limited, as well as the internal manufacturing capabilities of our customers.

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Our success depends, in part, on our ability to protect our customers’ intellectual property.

We license various technologies from our customers on a non-exclusive,

royalty-free, non-transferable

basis for the sole purpose of allowing us to manufacture products for those customers in accordance with their specifications.

We license various technologies from our customers on a non-exclusive, royalty-free, non-transferable basis for the sole purpose of allowing us to manufacture products for those customers in accordance with their specifications.

We have no rights to disclose, use, sublicense or sell this licensed technology for any other purpose.

The duration of these licenses is limited to the duration of the underlying supply or manufacturing agreement.

To meet the demands of certain customers, we created a factory-within-a-factory

manufacturing environment that physically separates the manufacturing sites from one another.

To meet the demands of certain customers, we created a factory-within-a-factory manufacturing environment that physically separates the manufacturing sites from one another.

Some customers, for example, demand anonymity at our facilities while other customers require additional security measures such as biometric devices to safeguard their segregated manufacturing areas.

We regard our own manufacturing process technologies and customized optics and glass designs as proprietary intellectual property.

We own any process engineering technology independently developed in-house

by our technical staff.

We own any process engineering technology independently developed in-house by our technical staff.

As part of our manufacturing services, to the extent we utilize our own manufacturing process technologies in the manufacture of our customers’ products, we grant our customers a royalty-free license to these process engineering technologies for the purpose of allowing our customers to make their products.

Any process engineering or other improvements that we develop in connection with the improvement or optimization of a process for the manufacturing of a customer’s products are immediately assigned to that customer.

To protect our proprietary rights, we rely largely upon a combination of trade secrets, non-disclosure

agreements and internal security systems.

To protect our proprietary rights, we rely largely upon a combination of trade secrets, non-disclosure agreements and internal security systems.

Historically, patents have not played a significant role in the protection of our proprietary rights.

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Fabrinet was incorporated under the laws of the Cayman Islands in August 1999 and commenced business operations in January 2000.

We have seventeen direct and indirect subsidiaries, all of which are wholly-owned.

As the parent company, we enter into contracts directly with our customers while some of our subsidiaries, namely Casix, Inc., FBN New Jersey Manufacturing, Inc., Fabrinet West, Inc., and Fabrinet UK Limited, each enter into sales contracts or purchase orders directly with their customers.

We have inter-company agreements with Fabrinet Co., Ltd.

and FBN New Jersey Manufacturing, Inc., whereby each provides manufacturing services to us.

We also have inter-company agreements with Fabrinet USA, Inc.

and Fabrinet Pte., Ltd.

to provide us certain administrative and business development services.

As of June 26, 2020, we employed approximately 11,506 full-time employees worldwide, including approximately 11,193 employees in manufacturing operations and 313 employees in business development and general and administrative functions.

We have fifteen direct and indirect subsidiaries, all of which are wholly-owned.

As the parent company, we enter into contracts directly with our customers while some of our subsidiaries in the PRC, the U.S.

enter into sales contracts or purchase orders directly with their customers.

We have inter-company agreements with certain of our subsidiaries in Thailand, the U.S.

and Germany to provide manufacturing services to us, and we have inter-company agreements with certain of our subsidiaries in the U.S.

and Singapore to provide certain administrative and business development services to us.

Human Capital Resources

Our workforce is distributed globally over eight countries.

As of June 25, 2021, we employed approximately 12,189 full-time employees worldwide, with approximately 11,895 employees located in the Asia-Pacific region, 183 employees located in North America, and 111 employees located in Europe or the Middle East.

Of our total workforce, approximately 11,877 employees were involved in manufacturing operations and 312 employees were involved in business development and general and administrative functions.

None of our employees are represented by a labor union.

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We consider our relations with our employees to be positive.

We are committed to promoting diversity and inclusion in the workplace, developing our employees and supporting our employees’ well-being and safety.

To ensure diversity within our workforce we advertise job openings and source candidates broadly to attract a diverse candidate pool.

We also monitor hiring, termination and pay practices to ensure compliance with established regulations across the world, and we track and report internally on key talent metrics including talent pipeline, employee promotions, employee turnover, and engagement of our employees.

We provide employee career guidance and counseling through established employee development and training opportunities.

We have taken a wide variety of measures to protect the health and well-being of our employees, suppliers, and customers during the COVID-19 pandemic.

We made substantial modifications to employee travel policies and implemented office closures so non-essential employees could work remotely.

At our manufacturing facilities, we implemented mandatory temperature detection at building entrances, rigorous and regular facility and equipment disinfection, and mandatory personal protective equipment protocols, including (1) the wearing of face masks throughout our factories at all times;

(2) distributing our employees across shifts to better maintain safe personal distances;

(3) isolating incoming parts and materials for a week or more prior to unpacking, or applying extreme heat to kill potential viruses;

(4) directing our non-factory personnel to work remotely;

and (5) restricting all non-employee visits to our campuses.

We also made arrangements for our employees in Thailand to receive COVID-19 vaccines beginning in the first quarter of fiscal year 2022.

Available Information

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The information posted on our website is not incorporated into this Annual Report on Form 10-K.

Our Annual Report on Form 10-K,

Quarterly Reports on Form 10-Q,

Current Reports on Form 8-K

and amendments to reports filed or furnished pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended, are available free of charge through the “Investors” section of our website as soon as reasonably practicable after we electronically file such material with, or furnish it to, the U.S.

Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to reports filed or furnished pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended, are available free of charge through the “Investors” section of our website as soon as reasonably practicable after we electronically file such material with, or furnish it to, the U.S.

Securities and Exchange Commission (“SEC”).

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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