What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2023-02-17 compared with 2022-02-23 · 174 added, 114 removed, 301 unchanged (49% of the section changed)

3 unchanged sentences

Additional risks and uncertainties not presently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, and operating results.

Continuing effects from the COVID-19 pandemic and containment measures, and related impacts to economic and operating conditions, may further affect the volatility or degree of known and unknown risks.

Effects from global health, business, or political events, and the related impacts to economic and operating conditions, may further affect the volatility or degree of known and unknown risks.

Risk Factor Summary

Factors Related to Economic, Legal, Regulatory & Political Business Conditions

The impact of the COVID-19 pandemic on our business.

Economic, legal, regulatory, political, and business conditions related to our global business.

The impact of tariffs, trade sanctions or similar actions on our business.

The impact of pandemics or widespread global health problems on our business.

Factors Related to Manufacturing our Products

The concentration of subcontractors that we rely on to supply and fabricate silicon wafers for our semiconductor products.

Our achievement of continued yield improvement.

The impacts of shortages in, or increased costs of, wafers and other materials.

Geopolitical exposure of our subcontractors that we rely on to supply silicon wafers, packaging, and testing to manufacture our semiconductor products.

Our achievement of continued yield and quality improvements to meet our internal cost and customer quality goals, and the potential impact of shortages in, or increased costs of, wafers and other materials.

Potential warranty claims and other costs related to our products.

1 unchanged sentence

Fluctuations in our revenue and margins caused by the intellectual property licensing component of our business strategy.

Material fluctuations in our revenue and gross margins caused by our sale of patents and intermittent significant licensing transactions.

Material fluctuations in our revenue and gross margins caused by intermittent sales of patents and significant licensing transactions.

The impact of actual and potential litigation and unfavorable results of legal proceedings on our business.

Variability in our share of adopter fees and royalties for the HDMI standard as a result of our evolving participation in the HDMI standard.

Variability in our share of royalties for the HDMI standard as a result of our evolving participation in the HDMI standard.

Our ability to protect our new and existing intellectual property rights.

Factors Related to Overall General Business & Operations

Proper functioning of our internal processes and information technology systems, including in response to data breaches, cyber-attacks, or cyber-fraud.

Factors Related to Overall Business & Operations

Proper functioning of our information technology systems, including in response to data breaches, cyber-attacks, or cyber-fraud.

The impact of climate change on our business.

Goodwill impairments and other impairments under U.S.

2 unchanged sentences

Exposure to unanticipated tax consequences as a result of changes in effective tax rates, tax laws and our global organizational structure and operations.

Weakness in our internal control over financial reporting.

Weakness in our internal control over financial reporting and business processes.

Our ability to compete with others to attract and retain key personnel, and any loss of, or inability to attract, such personnel.

10 unchanged sentences

Accounting requirements related to sales through our distribution channel.

Factors Related to Strategic Transactions

General Risk Factors

Our operations are subject to the effects of rising inflation and recessionary concerns.

Disruptions to our worldwide operations and supply chain due to natural or human-induced disasters.

The trading price of our common stock has been and may continue to be subject to volatility.

Disruption in and impacts of acquisitions, divestitures, strategic investments and strategic partnerships on our business.

Factors Related to Economic, Legal, Regulatory & Political Business Conditions

The ongoing COVID-19 pandemic could adversely affect our business, results of operations, and financial condition in a material way.

The COVID-19 pandemic continues to mutate and affect the populations of the United States as well as many countries around the world.

The outbreak has resulted in significant governmental measures to control the spread of the COVID-19 variants, including, among others, restrictions on travel, manufacturing and the movement of employees in many regions of the world, and the imposition of remote or work-from-home mandates in many of the countries in which we operate, including the United States and the Philippines.

The majority of our products are manufactured, assembled, and tested by third parties in Asia.

We also have other operations in China, the Philippines, and the United States.

In addition, we rely on third party vendors for certain logistics and shipping operations throughout the world, including in Malaysia, Singapore, South Korea, Japan, and Taiwan.

As remote and work-from-home conditions in our offices continue, we face new challenges, including the integration of new employees, current employees moving to new geographies and time zones, and uncertainty with respect to future work arrangements.

Due to these and other challenges and uncertainties related to the makeup and structure of our workforce and workplace, we may experience delays in product development, a decreased ability to support our customers, reduced design win activity, and overall lack of productivity.

Pandemics and epidemics such as the current COVID-19 outbreak or other widespread public health problems could negatively impact our business.

If, for example, the COVID-19 pandemic continues to progress in ways that significantly disrupt the manufacture, shipment, and buying patterns of our products or the products of our customers, this may materially negatively impact our operating results, including revenue, gross margins, operating margins, cash flows and other operating results, and our overall business.

Disruptions to manufacturing and shipping could also constrain our supplies, leading to operational delays, disruptions and, potentially, inflation.

Our customers may also experience closures of their manufacturing facilities or inability to obtain other components, either of which could negatively impact demand for our solutions.

The COVID-19 pandemic has negatively impacted the overall economy and, as a result of the foregoing, could negatively impact our operating results and may do so in a material way.

In particular, the COVID-19 pandemic may increase or change the severity of our other risks reported in this Annual Report on Form 10-K, including that:

Our subcontractor suppliers who manufacture silicon wafers, packaging and testing to deliver our semiconductor products may be unable to meet delivery expectations to meet customer demand;

Our distributors and customers may experience adverse performance and any reduction in the use of our products by our end customers could harm our sales and significantly decrease our revenue;

The semiconductor industry could experience a cyclical downturn, which could cause a meaningful reduction in demand for our products and adversely affect our operating results;

Countries may adopt tariffs and trade sanctions or similar actions;

We may be delayed in our development and introduction of new products that achieve customer and market acceptance;

Our operations may be disrupted if employees are unavailable due to illness, risk of illness, travel restrictions, work from home requirements, or other factors that may limit our access to key personnel or critical skills, or reduce productivity;

Shortages in or increased costs for silicon wafers, packaging materials, testing and shipping could adversely impact our gross margin and lead to reduced revenue;

We may experience difficulty in maintaining the uninterrupted operation of our information technology systems, or be exposed to increased risk of a cyber-security incident or fraud, due to an increased reliance on remote work;

We may incur impairments of goodwill and other assets as required under U.S.

Our outstanding indebtedness could reduce our strategic flexibility and liquidity and may have other adverse effects on our results of operations.

The impact of COVID-19 may exacerbate the risk factors listed in this Annual Report on Form 10-K, or cause them to change in importance.

Developments related to the pandemic and to vaccine rollout have been rapidly changing, and additional impacts and risks may arise that we are not aware of or able to appropriately respond to currently.

The ultimate impact of the COVID-19 pandemic on our operations and financial performance depends on many factors that are not within our control, including, but not limited, to:

governmental, business, and individuals’

actions that have been and continue to be taken in response to the pandemic;

general economic uncertainty in key global markets;

volatility in financial markets, labor markets, and supply chains;

global economic conditions and levels of economic growth;

and the pace of recovery when the COVID-19 pandemic subsides.

As of the filing of this Annual Report, the extent to which the COVID-19 pandemic will affect our business continues to be highly uncertain and dependent on future developments that are inherently unpredictable, which makes forecasting demand and providing guidance especially difficult.

Accordingly, our expectations are subject to change without warning and investors are cautioned not to place undue reliance on them.

Our global business operations expose us to various economic, legal, regulatory, political, and business risks, which could impact our business, operating results and financial condition.

4 unchanged sentences

and rely on international service providers for inventory management, order fulfillment, and direct sales logistics.

Our domestic and international business activities are subject to economic, political and regulatory risks, including volatility in the financial markets;

Worldwide political and economic conditions may create uncertainties that could adversely affect our business.

For example, the continuing military conflict between Ukraine and Russia, as well as the financial and trade-related restrictions associated with Russia and Belarus and economic sanctions on certain individuals and entities in Russia and Belarus, may further disrupt global supply chains and could result in shortages of key materials that our suppliers and foundry partners require to satisfy our needs.

Additionally, the U.S.

government announced new controls regarding semiconductor- and supercomputer-related products and new restrictions affecting U.S.

persons’

ability to send certain chips and chip-related technology and software to China without an export license.

These controls may also impact the global supply chain and could result in shortages of key materials that our suppliers and foundry partners require to satisfy our needs.

Any deterioration in the relations between Taiwan and China, and other factors affecting military, political or economic conditions in Taiwan or elsewhere in Asia, could adversely impact our third-party manufacturing partners and suppliers located in the region, which could disrupt our business operations.

Countries in Europe and Asia have proposed, or recently adopted, significant increases in their military budgets and the outbreak of new, or expansion of current, military conflicts could adversely affect our business.

Furthermore, adverse macroeconomic conditions, such as rising inflation and labor shortages, may affect demand for our products or increase our product or labor costs, negatively impacting our revenues, gross margins, and overall financial results.

Our domestic and international business activities are subject to economic, political and regulatory risks, including:

increased inflation;

volatility in financial markets;

fluctuations in consumer liquidity;

9 unchanged sentences

labor regulations;

labor markets;

disruptions to labor markets;

import and export regulations;

7 unchanged sentences

and instability or fluctuations in currency exchange rates, any of which could lead to decreased demand for our products or a change in our results of operation.

Uncertainty about future political and economic conditions makes it difficult for us to forecast operating results and to make decisions about future investments.

Any or all of these factors could adversely affect our financial condition and results of operations in the future.

The COVID-19 pandemic prompted precautionary government regulations limiting certain travel and business as well as precautionary business measures, such as those we adopted, like remote work-from-home operations for many employees.

The COVID-19 pandemic and related responses have exacerbated many of the risks listed above, including but not limited to, causing fluctuations in consumer liquidity and volatility in financial markets, increases in inflation, interruptions in transportation and infrastructure, and disruptions to labor markets.

Although our business has not been materially impacted by supply chain constraints, inflation, or labor market disruptions due to the COVID-19 pandemic, the pandemic may still lead to events outside of our control which could have a material adverse impact on our business, operating results, and financial condition.

Additionally, in the future, the operations of customers and of the Company may be affected by this and similar public health matters.

Although our business has not been materially impacted by supply chain constraints, inflation, or labor market disruptions, events outside of our control could have a material adverse impact on our business, operating results, and financial condition in the future.

Uncertainty about future political and economic conditions makes forecasting demand and providing guidance difficult.

Accordingly, our expectations are subject to change without warning and investors are cautioned not to place undue reliance on them.

If we fail to comply with the many laws and regulations to which we are subject, both within the United States and internationally, we may be subject to significant fines, penalties or liabilities for noncompliance, which could harm our business and financial results.

For example, effective May 2018, the European Union adopted the General Data Protection Regulation (“GDPR”), which established new requirements regarding the handling of personal data and non-compliance monetary penalties of up to the higher of 20 million Euros or 4% of worldwide revenue.

California also recently adopted the California Consumer Privacy Act (“CCPA”), which imposes significant fines and penalties for violations.

In November 2020, California voters approved the California Privacy Rights Act, which extends and expands the CCPA.

Effective January 2020, California adopted the California Consumer Privacy Act (“CCPA”), which imposes significant fines and penalties for violations.

Additionally, the California Privacy Rights Act, which extends and expands the CCPA, became effective January 2023.

Other states in the United States have proposed, and in certain cases enacted, legislation similar to the CCPA.

1 unchanged sentence

We anticipate that our efforts to comply with evolving laws and regulations addressing privacy, data protection, and cybersecurity will be a rigorous and time-intensive process that may increase our cost of doing business and may require us to change our policies and practices.

Additionally, as a public company, we are subject to the requirements of federal securities laws, requirements of the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the rules and regulations of the SEC, and the listing standards of the Nasdaq Stock Market.

Noncompliance with these requirements could result in penalties, fines, liabilities, or reputational harm, which could harm our business or financial results.

Any inability or perceived inability to adequately comply with applicable laws or regulations could result in claims, demands, and litigation by private actors or governmental authorities, investigations and other proceedings by governmental authorities, injunctive relief, fines, penalties, and other liabilities, any of which may harm our reputation and market position and could adversely affect our business, financial condition, and results of operations.

15 unchanged sentences

government may add additional Chinese companies to its restricted entity list or impose additional licensing requirements that we may be unable to meet in a timely manner or at all.

Additionally, in October 2022 the U.S.

government announced new controls regarding semiconductor- and supercomputer-related products and new restrictions affecting U.S.

persons’

ability to send certain chips and chip-related technology and software to China without an export license, which may impact the global supply chain and could negatively affect our business.

Where license requirements are imposed, there can be no assurance that the U.S.

1 unchanged sentence

Future sanctions similar to those imposed in the past and to those recently imposed could adversely affect our ability to earn revenue from these and similar customers.

In addition, the imposition of sanctions on customers in China may cause those customers to seek domestic alternatives to our products and those of other United States semiconductor companies.

In addition, the imposition of sanctions or other restrictions on customers in China may cause those customers to seek domestic alternatives to our products and those of other United States semiconductor companies.

Further, the Chinese government has developed an unreliable entity list, which limits the ability of companies on the list to engage in business with Chinese customers.

1 unchanged sentence

If any of our other customers or suppliers become subject to sanctions or other regulatory scrutiny, if our customers are affected by tariffs or other government trade restrictions, or if we become subject to retaliatory regulatory measures, our business and financial condition could be adversely affected.

Pandemics or other widespread public health problems could adversely affect our business, results of operations, and financial condition in a material way.

Pandemics, epidemics or other widespread public health problems, such as the ongoing COVID-19 pandemic, could negatively impact our business.

Outbreaks have, and could again, result in significant government measures to control the spread of disease, including, among others, restrictions on travel, manufacturing, and the movement of employees.

If, for example, pandemics were to occur in ways that significantly disrupt the manufacture, shipment, and buying patterns of our products or the products of our customers, this may materially negatively impact our operating results, including revenue, gross margins, operating margins, cash flows and other operating results, and our overall business.

Disruptions to manufacturing and shipping could also constrain our supplies, leading to operational delays, disruptions and inflationary pressures.

Our customers may also experience closures of their manufacturing facilities or inability to obtain other components, either of which could negatively impact demand for our solutions.

For example, the spread and impact of the COVID-19 pandemic throughout Asia and other jurisdictions in which we operate continues to fluctuate and its impacts remain uncertain.

The majority of our products are manufactured, assembled, and tested by third parties in Asia.

In addition, we also have other operations in China, the Philippines, and the United States.

We rely on third party vendors for certain logistics and shipping operations throughout the world, including in Malaysia, Singapore, South Korea, Japan, and Taiwan.

Recently, China relaxed government restrictions related to controlling the spread of COVID-19, which may result in disruptions to our manufacturing, supply chain and operations.

The ultimate impact of a pandemic on our operations and financial performance depends on many factors that are not within our control, including, but not limited, to:

governmental, business, and individuals’

general economic uncertainty in key global markets;

volatility in financial markets, labor markets, and supply chains;

global economic conditions and levels of economic growth;

and the pace of recovery when the pandemic subsides.

Pandemics may negatively impact the overall economy and, as a result of the foregoing, could negatively impact our operating results and may do so in a material way.

In particular, pandemics or other widespread public health problems may increase or change the severity of our other risks reported in this Annual Report on Form 10-K.

Factors Related to Manufacturing our Products

We rely on a concentrated number of subcontractors to supply and fabricate silicon wafers and to perform assembly and test operations for our semiconductor products.

We rely on subcontractors to supply and fabricate silicon wafers and to perform assembly and test operations for our semiconductor products.

If they are unable to do so on a timely and cost-effective basis in sufficient quantities and using competitive technologies, we may incur significant costs or delays.

We rely on a concentrated number of independent foundries in Asia to supply and fabricate silicon wafers for our semiconductor products, including Samsung Semiconductor, United Microelectronics Corporation, Taiwan Semiconductor Manufacturing, and Seiko Epson.

Our success is dependent upon our ability to successfully partner with our foundry and OSAT partners and their ability to produce wafers and finished semiconductor products with competitive prices and performance attributes, including smaller process geometries, which ability may be impacted by labor market disruptions and rising inflation.

We rely on foundries in Japan, Korea and Taiwan to supply and fabricate silicon wafers for our semiconductor products, including Taiwan Semiconductor Manufacturing, Samsung Semiconductor, United Microelectronics Corporation, and Seiko Epson.

We rely on our OSATs in Malaysia, Taiwan and Japan to support the packaging and test of our products, including Advanced Semiconductor Engineering and Amkor Technology. 

Our success is dependent upon our ability to successfully partner with our foundry and OSAT suppliers and their ability to produce wafers and finished semiconductor products with competitive prices and performance attributes, including smaller process geometries, which ability may be impacted by labor market disruptions and rising inflation.

Establishing, maintaining and managing multiple foundry and OSAT relationships requires the investment of management resources and costs.

If we fail to maintain our foundry and OSAT relationships, if these partners do not provide facilities and support for our development efforts, if they are insolvent or experience financial difficulty, if their operations are interrupted by the COVID-19 pandemic, or if we elect or are required to change foundries or OSATs, we may incur significant costs and delays.

If we fail to maintain our foundry and OSAT relationships, if these partners do not provide facilities and support for our development efforts, if they are insolvent or experience financial difficulty, if their operations are interrupted by the ongoing COVID-19 pandemic, or if we elect or are required to change foundries or OSATs, we may incur significant costs and delays.

If our foundry or OSAT partners are unable to, or do not, manufacture sufficient quantities of our products at acceptable yields, we may be required to allocate the affected products among our customers, prematurely limit or discontinue the sales of certain products, or incur significant costs to transfer products to other foundries or OSATs, which could adversely affect our customer relationships and operating results.

Our margins are dependent on our achieving continued yield improvement.

We rely on obtaining yield improvements and corresponding cost reductions in the manufacture of existing products and on introducing new products that incorporate advanced features and other price/performance factors that enable us to increase revenues while maintaining acceptable margins.

To the extent that such cost reductions and new product introductions do not occur in a timely manner, because of inflation, increases in personnel costs, employee turnover, or other factors, or that our products do not achieve market acceptance or market acceptance at acceptable pricing, our forecasts of future revenue, financial condition, and operating results could be materially adversely affected.

Shortages in, or increased costs of, wafers and materials could adversely impact our gross margins and lead to reduced revenues.

Worldwide manufacturing capacity for silicon wafers is relatively inelastic.

Our margins are dependent on our achieving continued yield and quality improvements, cost reductions, and the supply and cost of wafers and materials .

We rely on obtaining yield, quality, productivity, and logistic improvements and corresponding cost reductions in the manufacture of existing products and on introducing new products that incorporate advanced features and other price/performance factors that enable us to increase revenues while maintaining acceptable margins.

To the extent that such cost reductions and new product introductions do not occur in a timely manner, because of inflation, increases in personnel costs, employee turnover, or other factors, or that our products do not achieve market acceptance or market acceptance at acceptable pricing, our margins, operating results, and financial condition could be materially adversely affected.

Furthermore, worldwide manufacturing capacity for our products may be impacted by many factors which may impact availability and cost.

If the demand for silicon wafers or assembly material exceeds market supply, or if suppliers increase prices to cover the cost of rising inflation, our supply of silicon wafers or assembly material could quickly become limited or prohibitively expensive.

We typically have short-term wafer supply agreements that do not ensure long-term supply or allocation commitments.

A shortage in manufacturing capacity could hinder our ability to meet product demand and therefore reduce our revenue.

In addition, silicon wafers constitute a material portion of our product cost.

If we are unable to purchase wafers at favorable prices, due to supply constraints, inflation, or other factors, our financial condition and results of operations will be adversely affected.

Silicon wafers constitute a material portion of our product cost, and if we are unable to purchase wafers at favorable prices, due to supply constraints, inflation, or other factors, our margins, results of operations, and financial condition may be adversely affected.

We may be subject to warranty claims and other costs related to our products.

In general, we warrant our products for varying lengths of time against non-conformance to our specifications and certain other defects.

Because our products, including hardware, software, and intellectual property cores, are highly complex and increasingly incorporate advanced technology, our quality assurance programs may not detect all defects, whether these are specific manufacturing defects affecting individual products or these are systematic defects that could affect numerous shipments.

Inability to detect a defect could result in a diversion of our engineering resources from product development efforts, increased engineering expenses to remediate the defect, and increased costs due to customer accommodation or inventory impairment charges.

Our inability to detect a defect could result in a diversion of our engineering resources from product development efforts, increased engineering expenses to remediate the defect, and increased costs due to customer accommodation or inventory impairment charges.

On occasion, we have also repaired or replaced certain components, made software fixes, or refunded the purchase price or license fee paid by our customers due to product or software defects.

Our insurance may be unavailable or inadequate to protect against these issues.

Our insurance may be inadequate to protect against these issues.

If there are significant product defects, the costs to remediate such defects, net of reimbursed amounts from our vendors, if any, or to resolve warranty claims may adversely affect our financial condition and results of operations and may harm our reputation.

18 unchanged sentences

From time to time, we are subject to various legal proceedings and claims that arise out of the ordinary conduct of our business.

Certain claims may not yet be resolved, including but not limited to any that are discussed under " Note 15 - Contingencies " contained in the Notes to Consolidated Financial Statements, and additional claims may arise in the future.

Certain claims may not yet be resolved, including but not limited to any that are discussed under Note 15 - Contingencies to our Consolidated Financial Statements in Part II, Item 8 of this report, and additional claims may arise in the future.

Results of legal proceedings cannot be predicted with certainty.

1 unchanged sentence

Should we fail to prevail in certain matters or enter into a material settlement, we may be faced with significant monetary damages or injunctive relief against us that could materially and adversely affect our financial condition and operating results and certain portions of our business.

Our participation in the HDMI standard is evolving.

We no longer act as agent for the HDMI standard, and our share of adopter fees and royalties for the HDMI standard is subject to variability.

We acted as agent of the HDMI consortium until December 31, 2016 and were responsible for promoting and administering the specification.

We received all of the adopter fees paid by adopters of the HDMI specification in connection with our role as agent.

In September 2016, the Founders of the HDMI consortium, of which we are a member, amended the Founders Agreement resulting in changes to our role as agent for the HDMI consortium and to the model for sharing adopter fee revenues.

Under the terms of the agreement, our role as the agent was terminated effective January 1, 2017 and a new independent entity was appointed to act as the new HDMI licensing agent with responsibility for licensing and the distribution of royalties among Founders.

As a result of the amended model for sharing adopter fee revenue, we are entitled to a share of the adopter fees paid by parties adopting the HDMI standard.

Our participation in the HDMI standard is evolving, and our share of adopter fees and royalties for the HDMI standard is subject to variability.

We share HDMI royalties with the other HDMI Founders based on an allocation formula, which is reviewed generally every three years.

In the fourth quarter of fiscal 2019, the HDMI Founders adopted a new agreement covering the five-year period beginning January 1, 2018.

The HDMI Founders are currently negotiating a new agreement covering the next sharing period beginning January 1, 2023.

The amount of our portion of the royalty allocation is dependent on the royalties generated by adopter sales of royalty-bearing HDMI technology, which are subject to variability in economic trends particularly in the market for consumer electronics.

If we are unable to adequately protect our new and existing intellectual property rights, our financial results and our ability to compete effectively may suffer.

Our success depends in part on our proprietary technology and we rely upon patent, copyright, trade secret, mask work, and trademark laws to protect our intellectual property.

If we are unable to adequately protect our new and existing intellectual property rights globally, our financial results and our ability to compete effectively may suffer.

Our success depends in part on our proprietary technology and we rely upon patent, copyright, trade secret, mask work, and trademark laws to protect our intellectual property globally.

We intend to continue to protect our proprietary technology, however, we may be unsuccessful in asserting our intellectual property rights or such rights may be invalidated, violated, circumvented, or challenged.

4 unchanged sentences

Any infringement claim, indemnification claim, or impairment or loss of use of our intellectual property could materially adversely affect our financial condition and results of operations.

Factors Related to Overall General Business & Operations

Our business depends on the proper functioning of internal processes and information technology systems.

A failure of these processes and systems, data breaches, cyber-attacks, or cyber-fraud may cause business disruptions, compromise our intellectual property or other sensitive information, or result in losses.

Factors Related to Overall Business & Operations

Our business depends on the proper functioning of information technology systems.

A failure of these systems, data breaches, cyber-attacks, or cyber-fraud may cause business disruptions, compromise our intellectual property or other sensitive information, or result in losses.

We rely on various information technology ("IT") networks and systems to manage our operations, including financial reporting, and we regularly make changes to improve them as necessary by periodically implementing new, or upgrading or enhancing existing, operational and IT systems, procedures, and controls.

8 unchanged sentences

If the technical solution or end user training are inadequate, it could limit our ability to manufacture and ship products as planned.

We have various systems that remain that may be nearing the end of their useful life or vendor support, which will ultimately need to be replaced.

Moreover, the proper functioning of the internal processes that the IT systems and networks support relies on qualified employees.

Competition for qualified employees has generally increased across the economy in the United States, which, if we experience employee turnover, could lead to disruptions in our processes, inadequate end user training or difficulty updating our IT systems and networks.

We maintain sensitive data on our networks and the networks of our business partners and third-party providers, including proprietary and confidential information relating to our intellectual property, personnel, and business, and that of our customers and third-party providers.

We maintain sensitive data on our networks and on the networks of our business partners and third-party providers, including proprietary and confidential information relating to our intellectual property, personnel, and business, and that of our customers and third-party providers.

Companies have been increasingly subject to a wide variety of security incidents, cyber-attacks, hacking, phishing, malware, ransomware, and other attempts to gain unauthorized access to systems or data, or to engage in fraudulent behavior.

Cyber-attacks have become more prevalent, sophisticated and much harder to detect and defend against and it is often difficult to anticipate or detect such incidents on a timely basis and to assess the damage caused by them.

In addition, our agreements with third-party providers, including but not limited to the liability limitations and insurance provisions contained in such agreements, may be inadequate to cover the liability, if any, associated with any security breaches.

Increasing geopolitical tensions or conflicts have also created, and may continue to create, a heightened risk of cyberattacks.

Our policies and security measures cannot guarantee security, and our information technology infrastructure, including our networks and systems, may be vulnerable to security breaches and incidents, cyber-attacks, or fraud.

15 unchanged sentences

The successful assertion of one or more large claims against us that exceed available insurance coverage, or the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could have a material adverse effect on our business, including our financial condition, operating results, and reputation.

Climate change may have a long-term impact on our business.

Climate-related risks are inherent wherever our business is conducted.

Global climate change is causing, and is projected to continue to cause, an increase in the frequency and intensity of certain natural disasters and adverse weather, such as drought, wildfires, storms, sea-level rise, flooding, heat waves, and cold waves, occurring more frequently or with greater intensity.

Such extreme events are driving changes in market dynamics, stakeholder expectations, and local, national and international climate change policies and regulations, any of which could result in disruptions to us, our suppliers, vendors, customers and logistics hubs, and may impact employees’

abilities to commute or to work from home effectively.

These disruptions could make it more difficult and costly for us to deliver our products and services, obtain components or other supplies through our supply chain, maintain, or resume operations or perform other critical corporate functions, and could reduce customer demand for our products and services.

The increasing concern over climate change could also result in transition risks such as shifting customer preferences and increased regulatory requirements.

Changing customer preferences may result in increased expectations regarding our solutions, products, and services, including the use of packaging materials and other components in our products and their environmental impact.

These expectations may cause us to incur additional costs or make other changes to our operations to respond to them, which could adversely affect our financial results.

If we fail to manage transition risks and customer expectations in an effective manner, customer demand for our solutions, products, and services could diminish, and our profitability could suffer.

Concerns over climate change, as well as the adoption of new laws or regulations, may also impact market dynamics and may result in shifts in customer expectations, preferences, or requirements, which may require us to change our practices or incur increased costs or adversely impact customer demand for our products and services.

Additionally, concerns over climate change have resulted in, and are expected to continue to result in, the adoption of legal and regulatory requirements designed to address climate change, as well as legal and regulatory requirements requiring certain climate-related disclosures.

Where new laws or regulations are more stringent than current legal or regulatory requirements, we may experience increased compliance burdens and costs to meet such obligations.

Climate change also may reduce the availability or increase the cost of insurance for these negative impacts of natural disasters by contributing to an increase in the incidence and severity of such natural disasters.

Ultimately, the impacts of climate change, whether involving physical risks (such as disruptions resulting from climate-related events or rising sea levels) or transition risks (such as regulatory changes, changes in market dynamics or increased operating costs, including the cost of insurance) are expected to be widespread and unpredictable and may materially adversely affect our business and financial results.

We regularly test for goodwill and other impairments as required under U.S.

3 unchanged sentences

For purposes of testing goodwill for impairment, the Company currently operates as one reporting unit:

the core Lattice ("Core") business, which includes intellectual property and semiconductor devices.

We had no impairment charges in fiscal years 2021, 2020, or 2019.

Impairment charges related to amortizable intangible assets from the Silicon Image acquisition totaled approximately $12.5 million in fiscal 2018.

the core Lattice business, which includes intellectual property and semiconductor devices.

There were no impairment charges to goodwill or amortizable intangible assets in fiscal years 2022, 2021, or 2020.

There is no certainty that future impairment tests will indicate that goodwill or amortizable intangible assets will be deemed recoverable.

3 unchanged sentences

These accounting principles are subject to interpretation by the American Institute of Certified Public Accountants, the SEC and various bodies formed to interpret and create accounting rules and regulations.

Changes in these rules, such as the adoption of ASC 842 - Leases in fiscal 2019, has had a material effect on our financial results and affected portions of our business differently.

Future changes to these rules, or in the guidance relating to interpretation and adoption of the rules, could have a significant effect on our financial results and could affect portions of our business differently.

Changes in these rules have occurred in the past and future changes to these rules, or in the guidance relating to interpretation and adoption of the rules, could have a material effect on our financial results and could affect portions of our business differently.

Accounting standards also require us to make estimates and assumptions in connection with the preparation of our financial statements, and any changes to those estimates and assumptions could adversely affect our results of operations, cash flows and financial condition.

Changes in effective tax rates, tax laws and our global organizational structure and operations could expose us to unanticipated tax consequences.

5 unchanged sentences

Furthermore, various levels of government are focused on tax reform and other legislative actions to increase tax revenue.

The current U.S.

administration has various proposals that, if enacted, would increase U.S.

federal income taxes on corporations.

Further changes in the tax laws of foreign jurisdictions could arise as a result of the base erosion and profit shifting project undertaken by the Organisation for Economic Co-operation and Development, which represents a coalition of member countries and recommended changes to numerous long-standing tax principles.

We also may be impacted by changes in the tax laws of the United States and foreign jurisdictions.

President Biden signed into law the Inflation Reduction Act of 2022 (“IRA”) on August 16, 2022 and the CHIPS and Science Act of 2022 on August 9, 2022.

These laws implement new tax provisions, including a 1% excise tax on certain stock repurchases made by publicly traded corporations after December 31, 2022, and provide for various incentives and tax credits.

The Organisation for Economic Co-operation and Development, which represents a coalition of member countries, recommended changes to numerous long-standing tax principles, including a 15% global minimum tax.

If implemented by taxing authorities, such changes, as well as changes in taxing jurisdictions’

1 unchanged sentence

In addition, future effective tax rates could be affected by changes in the valuation of deferred tax assets and liabilities.

Weakness in our internal control over financial reporting could adversely affect our business and financial results.

Weakness in our internal control over financial reporting and business processes could adversely affect our business and financial results.

We are required to maintain internal controls over financial reporting.

We review these controls regularly and deficiencies may be identified from time t o time.

For example, during the quarter ended December 28, 2019, we evaluated and remediated certain deficiencies in our information technology controls over system access and no material weakness existed at the end of the period.

I n the future, we may identify material weaknesses in our internal controls over financial reporting.

Any failure to maintain an effective system of internal controls over financial reporting could limit our ability to report our financial results accurately and timely, which could adversely affect our business, financial results, and stock price.

We must also maintain high quality business processes.

We rely on our business processes to, among other things, coordinate with our suppliers, manage our supply chain efficiently, manufacture high quality products and comply with various laws and regulations.

Any failure to maintain high quality business processes, or to effectively adjust our business processes to changing circumstances and needs, could limit our ability to meet our business’

needs, which could adversely affect our business, financial results, and stock price.

We compete with others to attract and retain key personnel, and any loss of, or inability to attract, such personnel could adversely affect our ability to compete effectively.

3 unchanged sentences

If we lose existing qualified personnel or are unable to hire new qualified personnel, as needed, we could have difficulty competing in our highly competitive and innovative environment.

We may have failed to adequately insure against certain risks and, as a result, our financial condition and results may be adversely affected.

Our insurance may not adequately cover certain risks and, as a result, our financial condition and results may be adversely affected.

We carry insurance customary for companies in our industry, including, but not limited to, liability, property, and casualty;

workers' compensation;

cyber liability;

and business interruption insurance.

6 unchanged sentences

Our outstanding indebtedness could reduce our strategic flexibility and liquidity and may have other adverse effects on our results of operations.

As of January 1, 2022, we had approximately $158.8 million outstanding under a credit agreement, dated May 17, 2019 (the “Current Credit Agreement”).

Our obligations under the Current Credit Agreement are guaranteed by our U.S.

subsidiaries, and include a requirement to pay quarterly installments of approximately $4.4 million with the remaining balance due upon maturity in May 2024.

As of December 31, 2022, we had approximately $130 million outstanding in revolving loans under an amended and restated credit agreement, dated September 1, 2022 (the “2022 Credit Agreement”).

Our obligations under the 2022 Credit Agreement are guaranteed by certain of our U.S.

subsidiaries meeting materiality thresholds set forth in the 2022 Credit Agreement, and the revolving loans under the 2022 Credit Agreement may be repaid and reborrowed at our discretion, with any remaining outstanding principal amount due and payable on the maturity date of the revolving loan facility on September 1, 2027.

Our ability to meet our debt service obligations depends upon our operating and financial performance, which is subject to general economic and competitive conditions and to financial, business and other factors affecting our operations, many of which are beyond our control.

1 unchanged sentence

Prevailing economic conditions and global credit markets could adversely impact our ability to sell material assets, restructure or refinance our debt on terms acceptable to us, or at all, or we may not be able to restructure or refinance our debt without incurring significant additional fees and expenses.

The Current Credit Agreement contains customary affirmative and negative covenants, including covenants limiting the ability of the Company to, among other things, incur debt, grant liens, undergo certain fundamental changes, make investments, make certain restricted payments, dispose of assets, enter into transactions with affiliates, and enter into burdensome agreements, in each case, subject to limitations and exceptions set forth in the Current Credit Agreement.

We are also required to maintain compliance with a total leverage ratio and an interest coverage ratio, in each case, determined in accordance with the terms of the Current Credit Agreement.

The 2022 Credit Agreement contains customary affirmative and negative covenants, including covenants limiting the ability of the Company and our subsidiaries to, among other things, incur debt, grant liens, undergo certain fundamental changes, make investments, make certain restricted payments, dispose of assets, enter into transactions with affiliates, and enter into burdensome agreements, in each case, subject to limitations and exceptions set forth in the 2022 Credit Agreement.

We are also required to maintain compliance with a total net leverage ratio and an interest coverage ratio, in each case, determined in accordance with the terms of the 2022 Credit Agreement. 

The amount and terms of our indebtedness, as well as our credit rating, could have important consequences, including the following:

59 unchanged sentences

These problems may include:

delays in software or hardware development timelines;

schedule delays or defects in software or hardware development deliverables;

prolonged inability to obtain wafers or packaging materials with competitive performance and cost attributes;

3 unchanged sentences

or delays in stabilizing manufacturing processes or ramping up volume for new products.

If our third-party supply chain providers were to reduce or discontinue services for us or their operations are disrupted as a result of a fire, earthquake, act of terrorism, political unrest, governmental uncertainty, war, disease, or other natural disaster or catastrophic event, weak economic conditions, inflation, labor market disruptions, or any other reason, our financial condition and results of operations could be adversely affected.

If our third-party supply chain providers were to reduce or discontinue services for us or their operations are disrupted as a result of a fire, earthquake, act of terrorism, political unrest, governmental uncertainty, war, disease, or other natural disaster or catastrophic event, weak economic conditions, inflation, recession, labor market disruptions, or any other reason, our financial condition and results of operations could be adversely affected.

Factors Related to Our Sales and Revenue

4 unchanged sentences

We have significant outstanding receivables with our top distributors, and expect our distributors to generate a significant portion of our revenue in the future.

Any adverse change to our relationships or agreements with our distributors or a failure by one or more of our distributors to perform its obligations to us could have a material impact on our business, including a reduction in our access to certain end customers or our ability to sell our products.

If our relationships with any material customers were to diminish, if these customers were to develop their own solutions or adopt alternative solutions or competitors' solutions, if any one or more of our concentrated groups of customers were to experience significantly adverse financial conditions, including as a result of inflation or labor market disruptions, or if as a result of trade disputes or sanctions these customers were restricted from purchasing our products, our results could be adversely affected.

Any adverse change to our relationships or agreements with our distributors, a failure by one or more of our distributors to perform its obligations to us, or consolidation in the distribution industry could have a material impact on our business, including a reduction in our access to certain end customers, or our ability to sell our products.

If our relationships with any material customers were to diminish, if these customers were to develop their own solutions or adopt alternative solutions or competitors' solutions, if any one or more of our concentrated groups of customers were to experience significantly adverse financial conditions, including as a result of inflation, economic slowdown or recession, or labor market disruptions, or if as a result of trade disputes or sanctions these customers were restricted from purchasing our products, our results could be adversely affected.

In addition, the inability of customers to obtain credit, the insolvency of one or more customers, or tariffs applicable to our customers’

1 unchanged sentence

Any of these effects could impact our ability to effectively manage inventory levels and collect receivables, require additional restructuring actions, and decrease our revenue and profitability.

The nature of our business and length of our sales cycle makes our revenue, gross margin and net income subject to fluctuation and difficult to accurately predict.

A number of factors, including how products are manufactured to support end markets, yield, wafer pricing, cost of packaging raw materials, product mix, market acceptance of our new products, competitive pricing dynamics, product quality, geographic and/or end market mix, and pricing strategies, can cause our revenue, gross margins and net income to fluctuate significantly either positively or negatively from period to period.

The nature of our business and length of our sales cycle makes our revenue, gross margin, net income, and inventory subject to fluctuation and difficult to accurately predict.

A number of factors, including how products are manufactured to support end markets, yield, wafer pricing, cost of packaging raw materials, product mix, market acceptance of our new products, competitive pricing dynamics, product quality, geographic and/or end market mix, and pricing strategies, can cause our revenue, gross margins, net income, and inventory to fluctuate significantly either positively or negatively from period to period.

We have limited visibility into the demand for our products, particularly new products, because demand for our products depends upon our products being designed into our end customers' products and those products achieving market acceptance.

3 unchanged sentences

We may incur these expenses without generating revenue from our products to offset the expenses.

While our sales cycles are typically long, our average product life cycles tend to be short as a result of the rapidly changing technology environment in which we operate.

Our inventory levels may be higher than historical norms, from time to time, due to inventory build decisions aimed at meeting expected demand from a single large customer, reducing direct material cost or enabling responsiveness to expected demand.

While our sales cycles are typically long, our average product life cycles can be short as a result of the rapidly changing technology environment in which we operate.

From time to time, our inventory levels may be higher than historical norms due to inventory build decisions aimed at meeting expected demand, ramping for new products, reducing direct material cost, or enabling responsiveness to expected demand.

In the event the expected demand does not materialize, or if our short sales cycle does not generate sufficient revenue, we may be subject to incremental excess and obsolescence costs.

1 unchanged sentence

The difficulty in forecasting future sales weakens our ability to project our inventory requirements, which could result, and in the past has resulted, in inventory write-downs or failure to meet customer product demands in a timely manner.

While we may give guidance, the difficulty in forecasting revenues as well as the relative customer and product mix of those revenues limits our ability to provide accurate forward-looking revenue and gross margin guidance.

While we may issue guidance, difficulty in forecasting financial performance, relative customer and product mix, and the unpredictability of unknown variables and their impact on our financial performance may impair the accuracy of our forward-looking financial measures.

Accounting requirements related to sales through our distribution channel could result in our reporting revenue in excess of demand.

5 unchanged sentences

Any failure to manage these challenges could disrupt or reduce sales of our products and unfavorably impact our financial results.

Factors Related to Strategic Transactions

General Risk Factors

Our operations are subject to the effects of inflationary pressures and recessionary concerns.

Global economic conditions have recently experienced historically high levels of inflation, and there is increasing concern about the potential for recession.

Recent inflation is primarily believed to be the result of the economic impacts from the ongoing COVID-19 pandemic, including the global supply chain disruptions, strong economic recovery and associated widespread demand for goods, and government stimulus packages, among other factors.

For instance, global supply chain disruptions have resulted in shortages in materials and services.

Such shortages have resulted in inflationary cost increases for labor, materials, and services across the economy, and could continue to cause costs to increase as well as scarcity of certain products.

If the inflation rate continues to increase, it will affect our expenses.

To the extent inflation results in rising interest rates and has other adverse effects on the market, including the possibility of recession, it may adversely affect our consolidated financial condition and results of operations.

Business disruptions could seriously harm our future revenue, cash flows, and financial condition and increase our costs and expenses.

Our worldwide operations and supply chain could be disrupted by natural or human-induced disasters including, but not limited to, earthquakes, tsunamis, or floods;

hurricanes, cyclones, or typhoons;

fires, or other extreme weather conditions;

power or water shortages;

telecommunications failures;

materials scarcity and price volatility;

manufacturing equipment failures;

IT system failures;

cybersecurity attacks;

data breaches;

medical epidemics or pandemics (such as COVID-19);

terrorist acts, civil unrest, military actions, conflicts, or wars;

or other natural or man-made disasters or catastrophic events.

The occurrence of any of these business disruptions could adversely affect our competitive position and result in significant losses, decrease demand for our products, seriously harm our revenue, profitability and financial condition, increase our costs and expenses, make it difficult or impossible to provide services or deliver products to our customers or to receive components from our suppliers, create delays and inefficiencies in our supply chain, result in the need to impose employee travel restrictions, and require substantial expenditures and recovery time in order to fully resume operations.

The impacts and frequency of any of the above could furthermore be exacerbated by climate change, particularly in countries where we, or our suppliers or customers, operate that have limited infrastructure and disaster recovery resources.

Our operations and those of our significant suppliers and distributors could be adversely affected if manufacturing, logistics, or other operations in key locations, including logistics hubs in Asia, are disrupted for any reason, such as those described above or other economic, business, labor, environmental, public health, regulatory or political reasons.

In addition, even if our operations are unaffected or recover quickly, if our customers cannot timely resume their own operations due to a catastrophic event, they may reduce or cancel their orders, or these events could otherwise result in a decrease in demand for our products.

Although it is impossible to completely predict the occurrences or consequences of any such events, forecasting disruptive events and building additional resiliency into our operations accordingly will become an increasing business imperative.

The trading price of our common stock has been and may continue to be subject to volatility in response to a variety of factors.

Our common stock has experienced substantial price volatility in the past and may continue to do so in the future.

Additionally, the technology industry and the stock market as a whole has experienced extreme volatility that often has been unrelated to the performance of particular companies.

The trading price of our common stock may fluctuate widely due to various factors, including, but not limited to, actual or anticipated fluctuations in our financial condition and operating results;

changes in financial estimates by us or financial or other market estimates and ratings by securities and other analysts;

our ability to develop new products, enter new market segments, gain market share, manage cyber-security and litigation risk, diversify our customer base, and successfully secure manufacturing capacity;

news regarding our products or products of our competitors;

any mergers, acquisitions or divestitures of assets undertaken by us;

inflationary conditions, interest rate changes, and recessionary concerns;

regulatory changes to international trade policies, economic sanctions, or export controls, such as new licensing requirements for exporting certain chip-related technology to China;

terrorist acts or acts of war, including the ongoing conflict between Ukraine and Russia;

epidemics and pandemics, such as developments and restrictions with respect to the COVID-19 pandemic;

trading activity in our common stock, including stock repurchases, actions by institutional or other large stockholders, or our inclusion in market indices;

or general economic, industry, and market conditions worldwide.

The volatility of our stock may cause the value of a stockholder’s investment to change rapidly.

Investors in our common stock may not realize any return on their investment in us and may lose some or all of their investment.

Additionally, if our stock price declines, it may be more difficult for us to raise capital and may have other adverse effects on our business.

Stock price fluctuations could impact the value of our equity compensation, which could affect our ability to recruit and retain employees.

Volatility in the trading price of our common stock could also result in the filing of securities class action litigation matters, which could result in substantial costs and the diversion of management time and resources.

For these reasons, investors should not rely on recent or historical trends to predict future trading prices of our common stock, financial condition, results of operations, or cash flows.

Acquisitions, divestitures, strategic investments and strategic partnerships could disrupt our business and adversely affect our financial condition and operating results.

10 unchanged sentences

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