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Item 1A. Risk Factors

2024-02-16 compared with 2023-02-17 · 136 added, 117 removed, 358 unchanged (41% of the section changed)

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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.

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.

Effects from global 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

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

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

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

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

Legal and regulatory conditions related to our global business.

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

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Potential warranty claims and other costs related to our products.

Factors Related to Intellectual Property and Litigation

Factors Related to Intellectual Property

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

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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.

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

Goodwill impairments and other impairments under U.S.

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Our failure to adequately foresee and insure against risks related to our business.

Limitations to our flexibility caused by our outstanding indebtedness.

Limitations to our flexibility caused by incurring indebtedness.

Risks relating to the use or application of emerging technologies, including artificial intelligence ("AI")

The impact of climate change and climate change-related policies & regulations on our business.

Factors Related to Our Markets and Product Development

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

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

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

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

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.

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

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

We have significant domestic and international operations.

Our international operations include foreign sales offices to support our international customers and distributors, which account for the majority of our revenue, and operational and research and development sites in China, the Philippines, and other Asian locations.

In addition, we purchase our wafers from foreign foundries;

have our commercial products assembled, packaged, and tested by subcontractors located outside of the United States;

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

and rely on international service providers for a variety of services, including inventory management, lead time management, technical support, factory engagement meetings, and order fulfillment.

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.

For example, the military conflict between Israel and Hamas and the potential for regional expansion, 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.

government has implemented controls regarding semiconductor- and supercomputer-related products and restrictions affecting U.S.

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

These, as well as future controls impacting the semiconductor ecosystem, may 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.

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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.

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.

Other countries outside of the European Union, including the United Kingdom, China, and Brazil, also have enacted robust legislation addressing privacy, data protection, and cybersecurity and providing for substantial penalties for noncompliance.

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.

Our business could suffer as a result of tariffs and trade sanctions or similar actions.

The imposition by the United States of tariffs, sanctions or other restrictions on goods imported from outside of the United States or countermeasures imposed in response to such government actions could adversely affect our operations or our ability to sell our products globally, which could adversely affect our operating results and financial condition.

The materials subject to these tariffs may impact the cost of raw materials used by our suppliers or in our customers’

The imposition of further tariffs by the United States on a broader range of imports, or further retaliatory trade measures taken in response to additional tariffs, could increase costs in our supply chain or reduce demand of our customers’

products, either of which could adversely affect our results of operations.

The materials subject to these tariffs may impact the cost of raw materials used by our suppliers or in our customers’ products.

Our customers or suppliers could also become subject to U.S.

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imposed additional regulatory restrictions on the sale of U.S.

controlled technology to customers in China, including establishing additional licensing requirements for the sale of U.S.-originated technology for certain applications or to companies that participate in the Chinese national security supply chain and limiting the fabrication of devices for certain Chinese companies where U.S.

controlled technology to customers in China.

These restrictions include establishing additional licensing requirements in order to sell U.S.-originated technology for certain applications or to companies that participate in the Chinese national security supply chain.

These restrictions also limit the fabrication of devices for certain Chinese companies where U.S.

technology is involved in the fabrication process.

Furthermore, in August 2020 the U.S.

established additional licensing requirements for one of our China customers and its affiliates that limit any sales of products to that customer or for that customer’s products absent a license.

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.

government announced controls regarding semiconductor- and supercomputer-related products and 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.

These controls and restrictions were revised by the U.S.

government in October 2023 with the intent to further restrict China’s ability to obtain such technology and to enhance U.S.

national security interests.

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

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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.

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

For example, we are subject to federal, state and foreign laws and regulations concerning data privacy and security, including the EU General Data Protection Regulation (“GDPR), and U.S.

state and local laws that govern the privacy and security of information, such as the California Consumer Privacy Act (“CCPA”).

Other countries outside of the European Union, including the United Kingdom and China, also have enacted robust legislation addressing privacy, data protection, and cybersecurity and providing for substantial penalties for noncompliance.

These and other regulatory frameworks are evolving rapidly, and 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.

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

We are also subject to import/export regulations and applicable executive orders.

These laws, regulations, and orders are complex, may change frequently and with limited notice, and have generally and may continue to become more stringent over time.

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.

Pandemics, epidemics or other widespread public health problems could negatively impact our business.

Outbreaks have resulted, 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.

Jurisdictions in which we operate have had varying responses to pandemic and other widespread public health problems and the impact of such responses is difficult to anticipate.

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.

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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’

governmental, business, and individuals’ responses;

general economic uncertainty in key global markets;

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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 ongoing 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 a widespread public health hazard, 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.

Further, our subcontractors are themselves subject to many of the same operational and business risks that we face and describe herein that, if occur and are disruptive to their operations, could adversely affect us.

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

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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.

Factors Related to Intellectual Property and Litigation

Factors Related to Intellectual Property

The intellectual property licensing component of our business strategy increases our business risk and fluctuation of our revenue and margins.

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As a result, the amount of license revenue recognized in any period may differ significantly from our expectations.

Litigation and unfavorable results of legal proceedings could adversely affect our financial condition and operating results.

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 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.

Regardless of merit or outcome, claims or litigation may be both time-consuming and disruptive to our operations and cause significant expense and diversion of management attention and we may enter into material settlements to avoid these risks.

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

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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.

These systems are supported by subcontractors, and they may also be subject to power and telecommunication outages or other general system failures.

Our business depends on the use of information technology systems.

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

We rely on information technology ("IT") networks and systems to collect, process, maintain, use, share, disseminate, and dispose of our information and manage our operations, including financial reporting.

Our IT systems are subject to power and telecommunication outages and other system failures.

Further, despite our current security measures, our IT systems may be vulnerable to cybersecurity threats and suffer cybersecurity incidents.

These systems are also supported by subcontractors and third-party providers who may also be subject to power and telecommunication outages or other general system failures and cybersecurity threats and cybersecurity incidents.

The legal, regulatory and contractual environments surrounding information security, data privacy, and data protection are complex and evolving.

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In the normal course of business, we may implement new or updated IT systems and, as a result, we may experience delays or disruptions in the integration of these systems, or the related procedures or controls.

The policies and security measures established with our IT systems may be vulnerable to security breaches and incidents, cyber-attacks, or fraud.

We may also encounter errors in corruption or loss of data, an inability to accurately process or record transactions, and security or technical reliability issues.

The policies and security measures established with our IT systems may be vulnerable to cybersecurity incidents such as security breaches and cyberattacks, or cyber-fraud.

We may also encounter corruption or loss of data, an inability to accurately process or record transactions, and security or technical reliability issues.

All of these could harm our ability to conduct core operating functions such as processing invoices, shipping and receiving, recording and reporting financial and management information on a timely and accurate basis, and could impact our internal control compliance efforts.

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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.

Companies have been increasingly subject to a wide variety of cybersecurity incidents such as cyberattacks, hacking, phishing, malware, ransomware, and other attempts to gain unauthorized access to systems or data, or to engage in fraudulent behavior.

Cyberattacks 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.

Increasing geopolitical tensions or conflicts have also created, and may continue to create, a heightened risk of cyberattacks, and AI and other evolving technologies may also increase the prevalence and impact of cyberattacks.

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

In the past, third parties have attempted to penetrate and/or infect our network and systems with malicious software and phishing attacks in an effort to gain access to our network and systems.

In addition, we are subject to the risk of third parties falsifying invoices and similar fraud, frequently by obtaining unauthorized access to our vendors’

and business partners’

In addition, we are subject to the risk of third parties falsifying invoices and similar fraud, including by obtaining unauthorized access to our vendors’ and business partners’ networks.

Although past threats and incidents have not resulted in a material adverse effect, we may incur material losses related to cybersecurity and other threats or incidents in the future.

In some circumstances, we may partner with third-party providers and provide them with certain data, including sensitive data, or the ability to access or otherwise process such data.

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If any of our third-party providers fails to adopt or adhere to adequate data security practices, or suffers a security breach or incident, any data, including sensitive data, that we provide them or that they otherwise may access or process for us may be improperly accessed, used, disclosed, modified, lost, destroyed, or rendered unavailable.

Any security breaches or incidents that we or our third-party providers may suffer could compromise our intellectual property, expose sensitive business information and otherwise result in unauthorized access to or disclosure, modification, misuse, loss or destruction of sensitive information.

We may need to expend significant financial and development resources to analyze, correct, eliminate, or work around errors or defects or to eliminate or otherwise address security vulnerabilities, and we and our third-party service providers may face difficulties or delays in identifying or otherwise responding to any potential security breach or incident.

Further, the increase in cyber-attacks has resulted in an increased focus on cybersecurity by certain government agencies.

Any cyber-attack or other security breach or incident that we or our third-party providers may suffer, or the perception that any such attack, breach, or incident has occurred, could result in a loss of customer confidence in our security measures, damage to our brand, reputation, and market position, result in unauthorized access to or disclosure, modification, misuse, loss, corruption, unavailability, or destruction of our data or other sensitive data that we or our third-party providers process or maintain, disrupt normal business operations, require us to spend material resources to investigate or correct any breach or incident and to prevent future security breaches and incidents, expose us to legal claims and liabilities, including litigation, regulatory investigations and enforcement actions, and indemnity obligations, and adversely affect our revenues and operating results.

Further, any such actual or perceived breach or incident, and any claims, demands, litigation, or investigations or enforcement actions related to cybersecurity could cause us to incur significant remediation costs, result in product development delays, disrupt key business operations, and divert attention of management and key information technology resources.

Further, the increase in cyberattacks has resulted in an increased focus on cybersecurity by certain government agencies.

Any cyberattack or other security breach or cybersecurity incident that we or our third-party providers may suffer, or the perception that any such attack, breach, or incident has occurred, could result in a loss of customer confidence in our security measures, damage to our brand, reputation, and market position, result in unauthorized access to or disclosure, modification, misuse, loss, corruption, unavailability, or destruction of our data or other sensitive data that we or our third-party providers process or maintain, disrupt normal business operations, require us to spend material resources to investigate or correct any breach or incident and to prevent future security breaches and incidents, expose us to legal claims and liabilities, including litigation, regulatory investigations and enforcement actions, and indemnity obligations, and adversely affect our revenues and operating results.

In addition, we may incur loss as a result of cyber-fraud, such as those experienced by other companies by making unauthorized payments irrespective of robust internal controls.

Failure or disruptions of our IT systems or difficulties or delays in maintaining, managing, and integrating them could adversely affect our controls and procedures and could impact our ability to perform necessary operations, which could materially adversely affect our business.

We cannot be certain that our insurance coverage will be adequate for data security liabilities incurred and, will cover any indemnification claims against us relating to any incident, that insurance will continue to be available to us on economically reasonable terms, or at all, or that any insurer will not deny coverage as to any future claim.

The costs of maintaining our cybersecurity risk management program, as well as the costs of mitigating cybersecurity risks, are significant and are likely to increase in the future.

These costs include, but are not limited to, maintaining software and services to prevent and detect cybersecurity threats and incidents, retaining the services of cybersecurity providers;

compliance costs arising out of existing and future cybersecurity, data protection and privacy laws and regulations;

and costs related to maintaining redundant networks, data backups and other damage-mitigation measures.

We cannot be certain that our insurance coverage will be adequate for cybersecurity liabilities incurred and, will cover any indemnification claims against us relating to any incident, that insurance will continue to be available to us on economically reasonable terms, or at all, or that any insurer will not deny coverage as to any future claim.

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.

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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’

administrative interpretations, decisions, policies, and positions, could have a material adverse effect on our business, results of operations, or financial condition.

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 implemented tax provisions, including a 1% excise tax on certain stock repurchases made by publicly traded corporations after December 31, 2022, and provided for various incentives and tax credits.

The Organisation for Economic Co-operation and Development, which represents a coalition of member countries, continues to advance proposals with changes to numerous long-standing tax principles, including the introduction of global minimum tax standards.

If implemented by taxing authorities, such changes, as well as changes in taxing jurisdictions’ administrative interpretations, decisions, policies, and positions, could have a material adverse effect on our business, results of operations, or financial condition.

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

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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.

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

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

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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.

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.

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Our future success depends, in part, upon our ability to retain such personnel and attract and retain other highly qualified personnel, particularly product engineers who can respond to market demands and required product innovation.

Competition for such personnel is intense and has been increasing generally throughout the economy, and we may not be successful in hiring or retaining new or existing qualified personnel.

Competition for such personnel has been increasing generally throughout the economy, and we may not be successful in hiring or retaining new or existing qualified personnel.

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.

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Should there be a catastrophic loss due to an uninsured event (such as an earthquake) or a loss due to adverse occurrences in any area in which we are self-insured, our financial condition or operating results could be adversely affected.

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

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”).

We may incur indebtedness which could reduce our strategic flexibility and liquidity and may have other adverse effects on our results of operations.

Our amended and restated credit agreement, dated September 1, 2022 (the “2022 Credit Agreement”) allows us to draw up to $350 million.

While as of December 30, 2023, we had no borrowings outstanding under the 2022 Credit Agreement, the incurrence of indebtedness could impact the Company.

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.

subsidiaries meeting materiality thresholds set forth in the 2022 Credit Agreement, and the revolving loans under the 2022 Credit Agreement may be reborrowed and repaid 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.

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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:

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If we are unable to repay or refinance the indebtedness upon acceleration or at maturity, the lenders could initiate a bankruptcy proceeding against us or collection proceedings with respect to our assets and subsidiaries securing the facility, which could materially decrease the value of our common stock.

Unfavorable or uncertain market conditions and risks relating to the adoption, use or application of emerging technologies, including artificial intelligence ( “ AI ” ), by our customers and in our business, may impact financial results and could result in reputational and financial harm and liability.

The adoption of AI solutions may not develop in the manner or in the time periods we anticipate and as the markets for AI solutions are still developing, demand for these products may be unpredictable and may vary significantly from one period to another.

These factors may adversely impact demand for our AI related products including our products that support AI solutions.

In addition, compliance with government regulations and unfavorable developments with evolving laws and regulations worldwide related to these products and suppliers may increase the costs related to the development of AI products and solutions and limit global adoption, which may also adversely impact demand for our AI related products.

Concerns relating to the responsible use of new and evolving technologies, such as AI, in our and our customers’ products and services may result in reputational and financial harm and liability.

We and our customers are increasingly building AI capabilities into many products and services.

AI poses emerging ethical issues and presents risks and challenges that could affect its adoption, and therefore our business.

If we or our customers enable or offer solutions that draw controversy due to their perceived or actual impact on society, such as AI solutions that have unintended consequences or are controversial, we may experience reputational harm, competitive harm or legal liability.

Additionally, while we restrict the use of third-party and open source AI tools, such as ChatGPT, the internal governance of the adoption of these technologies can be challenging, and our employees and consultants may use these tools on an unauthorized basis and our partners may use these tools, which poses additional risks relating to the protection of data, including the potential exposure of our proprietary confidential information to unauthorized recipients and the misuse of our or third-party intellectual property.

Use of AI tools may result in allegations or claims against us related to violation of third-party intellectual property rights, unauthorized access to or use of proprietary information and failure to comply with open source software requirements.

AI tools may also produce inaccurate responses that could lead to errors in our decision-making, product development or other business activities, which could have a negative impact on our business, operating results and financial condition.

Our ability to mitigate these risks will depend on our continued effective maintaining, training, monitoring and enforcement of appropriate policies and procedures governing the use of AI tools, and the results of any such use, by us or our partners.

Climate change and climate change-related policies and regulations may have a long-term impact on our business.

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

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

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.

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.

These laws could cause us to incur additional direct costs for compliance, as well as indirect costs resulting from our customers, suppliers or both incurring additional compliance costs that are passed on to us.

These legal and regulatory requirements, as well as investor expectations, on corporate environmental and social responsibility practices and disclosure, are subject to change, can be unpredictable, and may be difficult and expensive for us to comply with, given the complexity of our supply chain and our significant outsourced manufacturing.

If we are unable to comply, or are unable to cause our suppliers or subcontractors to comply, with such policies or provisions or meet the requirements of our customers and investors, a customers may stop purchasing products form us or an investor may sell their shares, and may take legal action against us, which could harm our reputation, revenue, and results of operations.

Factors Related to Our Markets and Product Development

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A significant downturn in the industry or in any of these end markets could cause a meaningful reduction in demand for our products and adversely affect our operating results.

Our revenue and gross margin can fluctuate significantly due to downturns in the highly cyclical semiconductor industry.

The semiconductor industry is highly cyclical and subject to downturns, such as we are currently seeing, and our revenue and gross margin can fluctuate significantly due to such downturns.

These downturns can be severe and prolonged and can result in price erosion and weak demand for our products.

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We compete in a dynamic environment characterized by rapid technology and product evolution, generally followed by a relatively longer process of ramping up to volume production on advanced technologies.

Our end customers’

continued use of our products is frequently reevaluated, as certain of our customers' product life cycles are relatively short and they continually develop new products.

Our end customers’ continued use of our products is frequently reevaluated, as certain of our customers' product life cycles are relatively short and they continually develop new products.

The selection process for our products to be included in our customers' new products is highly competitive.

There are no guarantees that our products will be included in the next generation of products introduced by these customers.

Additionally, our markets are also characterized by evolving industry standards and increased demand for higher levels of integration and smaller process geometry.

Our competitive position and success depend on our ability to innovate, develop, and introduce new products that compete effectively on the basis of price, density, functionality, power consumption, form factor, and performance, and our addressing the evolving needs of the markets we serve, among other things.

Additionally, our markets are also characterized by evolving industry standards and increased demand for more features and performance, which requires higher levels of integration and more advanced process technology.

Our competitive position and success depend on our ability to innovate, develop, and introduce new products that compete effectively on the basis of price, density, functionality, power consumption, form factor, and performance, and our ability to address the evolving needs of the markets we serve, among other things.

With increased introduction of new products, we expect revenue related to mature products to decline over time in a normal product life cycle.

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We depend on independent contractors and third parties to provide key services in our product development and operations, and any disruption of their services, or an increase in cost of these services, could negatively impact our financial condition and results of operations.

We depend on subcontractors to provide cost effective and efficient services in our product development and supply chain functions, including test and assembly services, software and hardware development, support of intellectual property cores, inventory management, order fulfillment and direct sales logistics.

Our operations and operating results may be adversely affected if we experience problems with our subcontractors that impact the delivery of product to our customers.

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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, 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.

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, a reduction in a distributor's business volume with 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’

products, could impact our sales.

In addition, the inability of customers to obtain credit, the insolvency of one or more customers, or tariffs applicable to our customers’ products, could impact our sales.

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.

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During our sales cycle, our customers typically test and evaluate our products prior to deciding to include our products into the design of their own products, and then require additional time to begin volume production of their products.

This lengthy sales cycle may cause us to incur significant expenses, which could be exacerbated by rising inflation, experience significant production delays and to incur additional inventory costs before we receive a customer order that may be delayed or never get placed.

This lengthy sales cycle may cause us to incur significant expenses, which could be exacerbated by rising inflation, significant production delays, or additional inventory costs before we receive a customer order that may be delayed or never get placed.

A key strategic customer may demand certain design or production resources to meet their requirements or work on a specific solution, which could cause delays in our normal development schedule and result in significant investment of our resources or missed opportunities with other potential customers.

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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.

Recent inflation caused by global supply chain disruptions, strong economic recovery and associated widespread demand for goods, and government stimulus packages, among other factors, continues to impact our business.

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.

To the extent inflation, or government responses to 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.

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data breaches;

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

medical epidemics or pandemics;

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

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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;

The trading price of our common stock has and may continue to 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;

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

news regarding our products or products of our competitors;

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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;

epidemics and pandemics;

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.

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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.

Litigation and unfavorable results of legal proceedings could adversely affect our financial condition and operating results.

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 14 - 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.

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

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We may incur unexpected costs, claims or liabilities that we incur during the strategic transaction or that we assume from the acquired company, or we may discover adverse conditions post acquisition for which we have limited or no recourse.

Unresolved Staff Comments

We may also be a target for unsolicited acquisition or business combination offers.

Appropriately reviewing and responding to any such offer can be costly and complex, and diverts the efforts and attention of management.

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What changed 10-K

Item 1A. Risk Factors