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Item 1A. Risk Factors

2024-04-24 compared with 2023-10-25 · 406 added, 322 removed, 641 unchanged (53% of the section changed)

This Quarterly Report on Form 10-Q, or Form 10-Q, including any information that may be incorporated by reference herein, contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, referred to as the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, referred to as the Exchange Act.

In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expect,” “plan,” “intend,” “forecast,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “continue” or the negative of these terms or other comparable terminology.

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We encourage investors to review these factors carefully.

We may from time to time make additional written and oral forward-looking statements, including statements contained in our filings with the SEC.

We may from time to time make additional written and oral forward-looking statements, including statements contained in our filings with the Securities and Exchange Commission or SEC.

However, we do not undertake to update any forward-looking statement that may be made from time to time by or on behalf of us, whether as a result of new information, future events, or otherwise, except as required by law.

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Risks Relating to the Terminated Merger with Silicon Motion

• The termination of the Merger Agreement and any arbitration or other dispute with Silicon Motion in connection with the Merger Agreement could cause us to incur substantial costs, may divert management’s attention from our business and could otherwise adversely affect our business, financial results and operations.

• If we are required to pay any damages from legal proceedings related to the termination of the Merger Agreement with Silicon Motion or any alleged breaches of the Merger Agreement that we are required to pay, or any amounts we agree to pay in any settlement, the amount could be significant and require us to draw down on all our existing lines of credit and use our cash resources, which may not be sufficient to cover any payments to Silicon Motion and could have a material adverse effect on our business, operating results, and financial condition.

• The termination of the Merger Agreement and the related legal proceedings have caused us to incur substantial costs, may divert management’s attention from our business and could otherwise adversely affect our business, financial results and operations.

• If we are required to pay any damages in connection with legal proceedings related to the termination of the Merger Agreement with Silicon Motion, including for any alleged breaches of the Merger Agreement, or if we agree to make any payments in any settlement of legal proceedings related to the termination of the Merger Agreement, the amount of such damages or payments could be significant and require us to draw down on all our existing lines of credit and use our cash resources, which may not be sufficient to satisfy any damages or payments and could have a material adverse effect on our business, operating results, and financial condition.

We expect that we may not be able to obtain financing on favorable terms if at all or raise additional capital for any such payments.

Risks Related to Our Business

• Intense and increasing competition could have a material adverse effect on our revenue, any revenue growth rate and market share.

• Global economic conditions, including factors such as high inflation or a recession, could continue to adversely affect our business, financial condition and operating results.

Risks Relating to Our Business

• We face intense competition and expect competition to increase in the future, which could have a material adverse effect on our revenue, revenue growth rate, if any, and market share.

• Global economic conditions, including factors such as high inflation or a potential recession, could continue to adversely affect our business, financial condition, and results of operations.

• We are subject to the cyclical nature of the semiconductor industry.

• A significant variance in our operating results or rates of growth, if any, could lead to substantial volatility in our stock price.

We may not sustain our current level of revenue, which has declined, and/or manage future growth effectively.

• A significant variance in our operating results or rates of growth, if any, could continue to lead to substantial volatility in our stock price.

Our revenue has declined, and we may not sustain our current level of revenue, which has declined, and/or manage future growth effectively.

The impact of excess inventory in the channel has continued to influence our customers’ expected demand for certain of our products.

• Our business, financial condition and results of operations could continue to be adversely affected by geopolitical and economic tensions among countries in which we conduct business, including between the United States and China, among other countries.

• Our business, financial condition and results of operations could continue to be adversely affected by military conflicts, geopolitical and economic tensions among or with countries in which we conduct business, including between the United States and China, Israel (and its conflict with Iran), and among other countries.

For example, as more entities are added to restricted export control lists, or as semiconductor technology exports to other countries are further controlled, our need to seek authorization from the U.S.

government may impact our ability to do business.

• Increased tariffs, export controls, or the imposition of additional trade barriers could have a material adverse effect on our revenues and operating results.

• Increasing geopolitical tensions between the United States and China may lead to additional export controls or restrictions with respect to customers and business partners located in China or other jurisdictions.

We will lose sales if we are unable to obtain or retain government authorization to export certain of our products or technology or if export licenses are delayed, denied, or revoked, and we will be subject to legal and regulatory consequences for any noncompliance with applicable laws.

• We also are subject to risks associated with international geopolitical conflicts involving the U.S.

and other governments such as China and Russia.

• The loss of, or a significant reduction in orders from major customers has had and could continue to have a material adverse effect on our revenue and operating results.

• Average selling prices of our products could decrease rapidly, which could have a material adverse effect on our profit.

government may impact our ability to do business and/or the speed with which we can deliver, if at all.

• We also are subject to risks associated with international geopolitical and military conflicts.

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• Changes in trade policies among the United States and other countries, in particular the imposition of new or higher tariffs, could place pressure on our average selling prices as our customers seek to offset the impact of increased tariffs on their own products.

Increased tariffs or the imposition of other barriers to international trade could decrease demand and have a material adverse effect on our revenues and operating results.

• We will lose sales if we are unable to obtain or retain government authorization to export certain of our products or technology or if such authorizations are revoked.

In addition, we will be subject to legal and regulatory consequences if we do not comply with applicable export control laws and regulations.

• We depend on a limited number of customers for a substantial portion of our revenue, and the loss of, or a significant reduction in orders from major customers has had and could continue to have a material adverse effect on our revenue and operating results.

• Any legal proceedings or claims against us could be costly and time-consuming to defend and could harm our reputation regardless of the outcome.

• We have been and may in the future be subject to information technology failures, including security breaches, cyber-attacks, design defects or system failures, that could disrupt our operations, damage our reputation and adversely affect our business, operations, and financial results.

• Average selling prices of our products have and could decrease in the future, which could have a material adverse effect on our revenue and gross margins.

• If we fail to penetrate new applications and markets, our revenue, revenue growth rate, if any, and financial condition could be materially and adversely affected.

• Development delays and consolidation trends in our industry could adversely affect our future revenues and results.

• We may be unable to make the substantial R&D investments that are required to remain competitive.

• Unforeseen delays or expenses caused by undetected defects or bugs in our products could reduce the market acceptance of our new products, damage our reputation and adversely affect our operating costs.

• We must be able to attract, train and retain qualified personnel and senior management, or our business, financial conditions, results of operations and prospects could suffer.

• If we fail to timely develop and introduce new or enhanced products, our ability to attract and retain customers and compete could be harmed.

• A significant portion of our revenue is attributable to demand for our products in markets for broadband solutions, and development delays and consolidation trends among cable and satellite Pay-TV and broadband operators could adversely affect our future revenues and operating results.

• We may be unable to make the substantial productive research and development investments that are required to remain competitive in our business.

• The complexity of our products could result in unforeseen delays or expenses caused by undetected defects or bugs, which could reduce the market acceptance of our new products, damage our reputation with current or prospective customers and adversely affect our operating costs.

• Our operating results are subject to substantial quarterly and annual fluctuations and have fluctuated in the past and may fluctuate significantly due to a number of factors that could adversely affect our business and our stock price.

• If we fail to develop and introduce new or enhanced products on a timely basis, our ability to attract and retain customers could be impaired and our competitive position could be harmed.

• We are subject to order and shipment uncertainties, and differences between our estimates of customer demand and product mix and our actual results could continue to negatively affect our inventory levels, sales and operating results.

• We may have difficulty accurately predicting our future revenue and appropriately budgeting our expenses particularly as we seek to enter new markets where we may not have prior experience.

• Customers require us to undergo a lengthy and expensive qualification process which does not assure product sales.

• Our customers require our products and our third-party contractors to undergo a lengthy and expensive qualification process which does not assure product sales.

• We incur significant expenditures to win business and customer product plan cancellations may adversely affect our results of operations.

• A failure to maintain compliance with governmental regulations could have a material adverse effect on our business.

• We have been and may be subject to future information technology failures, including security breaches and cyber-attacks, that could disrupt our operations and adversely affect our business, operations, and financial results.

• We are subject to a variable amount of interest on the principal balance of our credit agreements and could continue to be adversely impacted by rising interest rates in the future as we satisfy our underlying interest and principal payment obligations.

Our loan agreements contain financial and operational covenants that could adversely affect our operational freedom or ability to pursue strategic transactions that we would otherwise consider to be in the best interests of stockholders, including obtaining additional indebtedness to finance such transactions.

In addition, rising interest rates may make it more difficult for us, our customers, and our distributors to obtain financing and service their interest and debt obligations, which in turn has an impact on customer demand for our products and our distributors' business.

• If we are unable to attract, train and retain qualified personnel and senior management, our business, financial condition, results of operations and prospects could suffer.

• We are subject to a variable amount of interest on the principal balance of our credit agreements and could continue to be adversely impacted by rising interest rates in the future.

Such indebtedness adversely affects our operating results and cash-flows, as we satisfy our underlying interest and principal payment obligations and contains financial and operational covenants that could adversely affect our operational freedom or ability to pursue strategic transactions that we would otherwise consider to be in the best interests of stockholders, including obtaining additional indebtedness to finance such transactions.

In addition, rising interest rates may make it more difficult for us, our customers, and our distributors to obtain financing and service our respective interest and debt obligations, which in turn has an impact on customer demand for our products and our distributors’ business.

• We are subject to governmental laws, regulations and other legal obligations related to privacy, data protection, and cybersecurity.

• Our products must conform to industry standards in order to be accepted by end users in our markets.

• We may, from time to time, make additional business acquisitions or investments, which involve significant risks.

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Risks Relating to Intellectual Property

• We have settled in the past intellectual property litigation, and are currently facing and may in the future face claims of intellectual property infringement, which could be time-consuming, costly to defend or settle and result in the loss of significant rights.

• If we are unable to protect our significant amount of intellectual property, our business could be adversely affected.

• We have settled in the past intellectual property litigation and may in the future face additional claims of intellectual property infringement.

Any current or future litigation could be time-consuming, costly to prosecute, defend or settle and result in damages and/or the loss of significant rights.

• If we are unable to protect our intellectual property, our business could be adversely affected.

• We face risks related to security vulnerabilities in our products.

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Risks Relating to Reliance on Third Parties

• Failure to manage our relationships with, or negative impacts from, third parties could adversely affect our ability to market and sell our products.

• A lack of long-term supply contracts, and any supply disruption could have a material adverse effect on our business.

• Failure to manage our relationships with our third-party contractors successfully, or impacts from volatility in global supply, natural disasters, public health crises, or other labor stoppages in the regions where such contractors operate, could adversely affect our ability to market and sell our products.

• Should any of our distributors cease or be forced to stop distributing our products, our business would suffer.

• A lack of long-term supply contracts, and any supply disruption, including as a result of government restrictions, could have a material adverse effect on our business.

• Any failure of third parties to provide services and technology could have a material adverse effect on our business.

Risks Relating to Our Common Stock

• Our senior management team may use our available cash and cash equivalents in ways with which you may not agree or in ways which may not yield a return.

• Anti-takeover provisions in our charter and under Delaware law could make an acquisition of us more difficult.

• Our share price may be volatile as a result of various factors.

• Our management team may use our available cash and cash equivalents in ways with which you may not agree or in ways which may not yield a return.

• Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of us more difficult, limit attempts by our stockholders to replace or remove our current management and limit the market price of our common stock.

• Any future decisions to reduce or discontinue purchasing our common stock, after we resume such purchasing, pursuant to our stock repurchase programs could cause the market price for our common stock to decline.

Risks Relating to our Terminated Merger with Silicon Motion

The termination of the Merger Agreement and any arbitration or other dispute with Silicon Motion in connection with the Merger Agreement could cause us to incur substantial costs, may divert management’s attention from our business and could otherwise adversely affect our business, financial results and operations.

We terminated the Merger Agreement on July 26, 2023.

The termination of the Merger Agreement and the related legal proceedings have caused us to incur substantial costs, may divert management’s attention from our business and could otherwise adversely affect our business, financial results and operations.

We terminated the Merger Agreement on July 26, 2023 and notified Silicon Motion that we are relieved of our obligation to close the merger.

Silicon Motion has challenged the validity of that termination.

On August 16, 2023, Silicon Motion delivered to a notice to us, which Silicon Motion publicly disclosed, that it was purporting to terminate the Merger Agreement and that Silicon Motion would be commencing an arbitration before the Singapore International Arbitration Centre to seek damages from us arising from our alleged breaches of the Merger Agreement.

On August 16, 2023, Silicon Motion delivered to us a notice, which Silicon Motion publicly disclosed, that it was purporting to terminate the Merger Agreement and that Silicon Motion would be commencing an arbitration before the Singapore International Arbitration Centre to seek damages from us arising from our alleged breaches of the Merger Agreement.

On October 5, 2023, Silicon Motion filed a Notice of Arbitration with the Singapore International Arbitration Centre alleging that we breached the Merger Agreement.

Additionally, a class action lawsuit has been filed against us and certain of our current officers, and potential plaintiffs may file additional lawsuits related to the previously contemplated merger.

Additionally, on August 31, 2023, a Silicon Motion stockholder filed a class action complaint against us and certain of our current officers alleging that we materially misrepresented the likelihood the merger would close.

Other potential plaintiffs may file additional lawsuits related to the previously contemplated merger.

See Part II, Item 1 (Legal Proceedings) of this report for more information on the Silicon Motion arbitration and the class action lawsuit.

We intend to vigorously defend against any legal proceedings related to the merger and the termination of the Merger Agreement and any alleged breaches of the Merger Agreement, but due to the uncertainties inherent in any legal proceedings, we cannot predict the outcome of any legal proceedings.

We intend to vigorously defend against these legal proceedings and any alleged breaches of the Merger Agreement, but due to the uncertainties inherent in any legal proceedings, we cannot predict the outcome of any legal proceedings.

Legal proceedings are time-consuming, and may divert management’s attention from our business.

Legal proceedings are also expensive and could result in substantial costs to us, including any damages we are required to pay and costs associated with the indemnification of directors and officers.

Please refer to the Risk Factor entitled “If we are required to pay any damages from legal proceedings related to the termination of the Merger Agreement with Silicon Motion or any alleged breaches of the Merger Agreement that we are required to pay, or any amounts we agree to pay in any settlement, the amount could be significant and require us to draw down on all our existing lines of credit and use our cash resources, which may not be sufficient to cover any payments to Silicon Motion and could have a material adverse effect on our business, operating results, and financial condition.

Please refer to the Risk Factor entitled “If we are required to pay any damages in connection with legal proceedings related to the termination of the Merger Agreement with Silicon Motion, including for any alleged breaches of the Merger Agreement, or if we agree to make any payments in any settlement of legal proceedings related to the termination of the Merger Agreement, the amount of such damages or payments could be significant and require us to draw down on all our existing lines of credit and use our cash resources, which may not be sufficient to satisfy any damages or payments and could have a material adverse effect on our business, operating results, and financial condition.

We expect that we may not be able to obtain financing on favorable terms if at all or raise additional capital for any such payments.

Even if we are able to finance such payments through the incurrence of additional indebtedness, any material increase in our indebtedness would adversely affect our operating results and cash-flows as we satisfy our underlying interest and principal payment obligations.

Even if we are able to finance such payments through the incurrence of additional indebtedness, any material increase in our indebtedness would adversely affect our operating results and cash-

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flows as we satisfy our underlying interest and principal payment obligations.

Issuing additional shares of our common stock, if material, will result in dilution of existing shares outstanding.

Any loan agreement is also expected to contain financial and operational covenants that would adversely affect our operational freedom or ability to pursue strategic transactions that we would otherwise consider to be in the best interests of stockholders, including obtaining additional indebtedness to finance such transactions.

We have already incurred, and expect to continue to incur, substantial costs in connection with the previously pending merger and the termination of the Merger Agreement and the dispute with Silicon Motion.

Aside from any damages or settlement amounts we may be required to pay, these costs are primarily associated with the fees of our financial advisors, accountants, lenders, and legal counsel and, with limited exceptions relating to a portion of our financial advisor fees.

We have already incurred, and expect to continue to incur, substantial costs in connection with the previously pending merger, the termination of the Merger Agreement, and the related legal proceedings.

Aside from any damages or settlement amounts we may be required to pay, these costs are primarily associated with the fees of our financial advisors, accountants, lenders, and legal counsel.

Since the merger has been terminated, we will have received little or no benefit in respect of such costs incurred.

Since the merger has been terminated, we may experience negative reactions from the financial markets and our suppliers, customers, customer prospects, and employees.

We may also experience negative reactions from the financial markets and our suppliers, customers, customer prospects, and employees with regard to legal proceedings related to the termination of the Merger Agreement.

Any of these factors could have a material adverse effect on our business, operating results, and financial condition or on the trading price of our common stock.

If we are required to pay any damages from legal proceedings related to the termination of the Merger Agreement with Silicon Motion or any alleged breaches of the Merger Agreement that we are required to pay, or any amounts we agree to pay in any settlement, the amount could be significant and require us to draw down on all our existing lines of credit and use our cash resources, which may not be sufficient to cover any payments to Silicon Motion and could have a material adverse effect on our business, operating results, and financial condition.

If we are required to pay any damages in connection with legal proceedings related to the termination of the Merger Agreement with Silicon Motion, including for any alleged breaches of the Merger Agreement, or if we agree to make any payments in any settlement of legal proceedings related to the termination of the Merger Agreement, the amount of such damages or payments could be significant and require us to draw down on all our existing lines of credit and use our cash resources, which may not be sufficient to satisfy any damages or payments and could have a material adverse effect on our business, operating results, and financial condition.

We expect that we may not be able to obtain financing on favorable terms if at all or raise additional capital for any such payments.

Even if we are able to finance such payments through the incurrence of additional indebtedness, any material increase in our indebtedness will adversely affect our operating results and cash-flows as we satisfy our underlying interest and principal payment obligations.

Issuing additional shares of our common stock, if material, will result in dilution of existing shares outstanding.

If we are required to pay damages from legal proceedings related to the termination of the Merger Agreement or alleged breaches of the Merger Agreement, or we agree to pay amounts in settlement, the amount could be significant and require us to draw down on all our existing lines of credit and use our cash resources, which may not be sufficient to cover any payments to Silicon Motion and could have a material adverse effect on our business, operating results, and financial condition.

If we are required to pay any damages in connection with legal proceedings related to the termination of the Merger Agreement, including for any alleged breaches of the Merger Agreement, or if we agree to make any payments in any settlement of legal proceedings related to the termination of the Merger Agreement, the amount of such damages or payments could be significant and require us to draw down on all our existing lines of credit and use our cash resources, which may not be sufficient to satisfy any damages or payments and could have a material adverse effect on our business, operating results, and financial condition.

We expect that we may not be able to obtain financing on favorable terms if at all or raise additional capital for any such payments.

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Accordingly, outstanding indebtedness could adversely affect our operational freedom or ability to pursue strategic transactions that we would otherwise consider to be in the best interests of stockholders.

Specifically, if we are required to pay damages from legal proceedings related to the termination of the Merger Agreement or alleged breaches of the Merger Agreement, or we agree to pay amounts in settlement, and we finance all or a portion of the payment of damages through the incurrence of additional indebtedness, any materially increased indebtedness could have important consequences to investors in our common stock, including the following:

Specifically, if we are required to pay damages in connection with legal proceedings related to the termination of the Merger Agreement, including for alleged breaches of the Merger Agreement, or if we agree to make any payments in any settlement of legal proceedings related to the termination of the Merger Agreement, and we finance all or a portion of the payment of damages through the incurrence of additional indebtedness, any materially increased indebtedness could have important consequences to investors in our common stock, including the following:

• our ability to obtain any necessary financing in the future for working capital, capital expenditures, debt service requirements, or other purposes may be limited or financing may be unavailable;

• rising interest rates may make it more difficult for us, our customers, and our distributors to obtain financing and service our respective interest and debt obligations, which in turn has an impact on customer demand for our products as well as the business of our distributors;

• we could be subject to substantial variable interest rate risk because our interest rate under term loans typically vary based on a fixed margin over an indexed rate (such as for the Initial Term Loan under the June 23, 2021 Credit Agreement) or an adjusted base rate.

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• we could be subject to substantial variable interest rate risk because our interest rate under term loans typically varies based on a fixed margin over an indexed rate (such as for the Initial Term Loan under the June 23, 2021 Credit Agreement) or an adjusted base rate.

If interest rates were to continue to increase substantially, and we incur additional indebtedness, it would adversely affect our operating results and could affect our ability to service the indebtedness;

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Large semiconductor companies resulting from industry consolidation could enjoy substantial market power, which they could exert through, among other things, aggressive pricing that could adversely affect our customer relationships, revenues, margins and profitability.

In addition, we expect the internal resources of large, integrated original equipment manufacturers, or OEMs, may continue to enter our markets.

Increased competition could result in price pressure, reduced profitability and loss of market share, any of which could materially and adversely affect our business, revenue, revenue growth rates, if any, and operating results.

In addition, we expect the internal resources of large, integrated OEMs may continue to enter our markets.

Increased competition has resulted in price pressure, decreased demand, reduced revenue and profitability, and loss of market share, any of which could in the future materially and adversely affect our business, revenue, revenue growth rates, if any, and operating results.

As our products are integrated into a variety of communications and industrial platforms, our competitors range from large, international merchant semiconductor companies offering a wide range of semiconductor products to smaller companies specializing in narrow markets, to internal or vertically integrated engineering groups within certain of our customers.

Our primary merchant semiconductor competitors include Broadcom Inc., Qualcomm Incorporated, Realtek Semiconductor Corp., Nokia Corp., Skyworks Solutions, Inc., Altera Corporation, Credo Semiconductor Inc., MediaTek, Inc., Marvell Technology Group Ltd., MACOM Technology Solutions Holdings, Inc., Texas Instruments Incorporated, Analog Devices, Inc., Renesas Electronics Corporation, and Microchip Technology Inc.

Our primary merchant semiconductor competitors include Broadcom Inc., Qualcomm Incorporated, Realtek Semiconductor Corp., Skyworks Solutions, Inc., Credo Semiconductor Inc., MediaTek, Inc., Marvell Technology Group Ltd., MACOM Technology Solutions Holdings, Inc., Texas Instruments Incorporated, Analog Devices, Inc., Renesas Electronics Corporation, Microchip Technology Inc.

and Semtech Corporation.

It is quite likely that competition in the markets in which we participate will increase in the future as existing competitors improve or expand their product offerings.

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Many of our competitors have substantially greater financial and other resources with which to withstand similar adverse economic or market conditions in the future.

Moreover, the competitive landscape is changing as a result of intense consolidation within our industry as some of our competitors have merged with or been acquired by other competitors, and other competitors have begun to collaborate with each other, which could result in significant changes to the competitive landscape.

Moreover, the competitive landscape is changing as a result of intense

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consolidation within our industry as some of our competitors have merged with or been acquired by other competitors, and other competitors have begun to collaborate with each other, which could result in significant changes to the competitive landscape.

In addition, changes in government trade policies, including the imposition of tariffs and export restrictions, could limit our ability to sell our products to certain customers and adversely affect our ability to compete successfully.

These developments may materially and adversely affect our current and future target markets and our ability to compete successfully in those markets.

Global economic conditions, including factors such as high inflation or a recession, could continue to adversely affect our business, financial condition, and results of operations.

Inflation and uncertainty in customer demand and the worldwide economy has continued, and we expect to experience continued volatility in our sales and revenues.

In particular, we believe an economic slowdown and inventory oversupply will continue to add volatility in managing the business.

Global economic conditions, including factors such as high inflation or a potential recession, could continue to adversely affect our business, financial condition, and results of operations.

Inflation and uncertainty in customer demand and the worldwide economy has continued, and we have experienced and could continue to experience a decline in our sales and revenues in the future.

In particular, we believe an economic slowdown and inventory oversupply will continue to add to volatility in managing the business.

In addition, inventory oversupply could potentially lead to more inventory write-downs, including charges for any excess or obsolete inventory which could negatively impact our gross margins.

Our products are incorporated in numerous consumer devices, and demand for such products will ultimately be driven by consumer demand for products such as televisions, personal computers, automobiles, cable modems, and set-top boxes.

Our products are incorporated in numerous consumer devices, and demand for such products is ultimately driven by consumer demand for products such as televisions, personal computers, automobiles, and cable modems.

Many of these purchases are discretionary.

Global economic volatility and economic volatility in the specific markets in which the devices that incorporate our products are ultimately sold, including the impacts of current high rates of inflation and recession, can cause extreme difficulties for our customers and third-party vendors in accurately forecasting and planning future business activities.

Global economic volatility and economic volatility in the specific markets in which the devices that incorporate our products are ultimately sold, including the impacts of current high rates of inflation and a potential recession, can cause extreme difficulties for our customers and third-party vendors in accurately forecasting and planning future business activities.

If banks and financial institutions with whom we have banking relationships enter receivership or become insolvent in the future, we may be unable to access, and we may lose, some or all of our existing cash, cash equivalents and investments to the extent those funds are not insured or otherwise protected by the FDIC.

This unpredictability could cause our customers to delay or reduce their capital expenditures and spending on our products, which would delay and lengthen sales cycles and negatively affect the overall demand for our products.

This unpredictability has and could continue to cause our customers to delay or reduce their capital expenditures and spending on our products, which would delay and lengthen sales cycles and negatively affect the overall demand for our products.

Worsening economic instability could continue to result in a cancellation of such orders or otherwise adversely affect spending for information technology and limit our ability to forecast future demand for our products, which could reduce expected revenues or result in a write-down of any excess or obsolete inventory.

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The semiconductor industry is highly cyclical and is characterized by constant and rapid technological change, rapid product obsolescence and price erosion, evolving standards, short product life cycles and wide fluctuations in product supply and demand.

The current downturn, or any future downturns, has and may in the future result in diminished product demand, production overcapacity, high inventory levels and accelerated erosion of our average selling prices.

The current downturn, which was aggravated by certain factors such as high interest rates and excess channel inventory, has resulted in, or any future downturns may result in, diminished product demand, production overcapacity, high inventory levels and accelerated erosion of our average selling prices.

Furthermore, any future upturn in the semiconductor industry could result in increased competition for access to third-party foundry and assembly capacity.

We are dependent on the availability of this capacity to manufacture and assemble all of our products.

None of our third-party foundry or assembly contractors has provided assurances that adequate capacity will be available to us in the future.

None of our third-party foundry or assembly

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contractors has provided assurances that adequate capacity will be available to us in the future.

A significant downturn or upturn could have a material adverse effect on our business and operating results.

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The impact of excess inventory in the channel has continued to influence our customers’ expected demand for certain of our products.

Our net revenue decreased from $829.7 million in the nine months ended September 30, 2022 to $567.9 million in the nine months ended September 30, 2023 and the decline in net revenue could continue in future periods.

Our net revenue decreased from $248.4 million in the three months ended March 31, 2023, to $95.3 million in the three months ended March 31, 2024, and the decline in net revenue could continue in future periods.

Among other factors, the decrease is as a result of macroeconomic conditions impacting customer demand.

Prior to 2023, our net revenues grew to $1.1 billion for the year ended December 31, 2022.

We currently expect that revenue will fluctuate in the future, from period-to-period, consistent with the cyclical nature of our industry, and we may experience further decline in revenue due to current macroeconomic conditions impacting customer demand for various products.

Further, the impact of excess inventory in the channel has continued to influence our customers’ expected demand for certain of our products.

We currently expect that revenue will fluctuate in the future, from period-to-period, consistent with the cyclical nature of our industry, and we could experience further decline in revenue in the future due to current macroeconomic conditions impacting customer demand for various products.

Further, the impact of excess inventory in the channel has continued to influence our customers’ expected demand for some of our products.

In addition, in the first quarter of 2024, we completed notifications to remaining affected employees regarding the Workforce Reductions to align our operational needs with the changes in macroeconomic conditions and the demand environment.

We may not realize, in full or in part, the anticipated benefits, savings and improvements from the reduction of our workforce if our revenue continues to decline.

If we are unable to realize the expected operational efficiencies and cost savings from our reduction of our workforce, our operating results and financial condition would be adversely affected.

You should not rely on our operating results for any prior quarterly or annual periods as an indication of our future operating performance.

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• recruit, hire, train and manage additional qualified engineers for our research and development activities, especially in the positions of design engineering, product and test engineering and applications engineering;

• add sales personnel and expand customer engineering support offices;

• implement and improve our administrative, financial and operational systems, procedures and controls;

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If we are unable to resume and manage our growth effectively, we may not be able to take advantage of market opportunities or develop new products and we may fail to satisfy customer requirements, maintain product quality, execute our business plan, or respond to competitive pressures.

Our business, financial condition and results of operations could continue to be adversely affected by the geopolitical and economic tensions among countries in which we conduct business, including between the United States and China, among other countries.

Our business, financial condition and results of operations could continue to be adversely affected by military conflicts, geopolitical and economic tensions among or with countries in which we conduct business, including between the United States and China, Israel (and its conflict with Iran), and among other countries.

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We sell our products throughout the world.

Products shipped to Asia accounted for 74% of our net revenue in the nine months ended September 30, 2023.

In addition, as of September 30, 2023, approximately 79% of our employees are located outside of the United States.

Products shipped to Asia accounted for 59% of our net revenue in the three months ended March 31, 2024.

In addition, as of March 31, 2024, approximately 77% of our employees are located outside of the United States.

The majority of our products are manufactured, assembled and tested in Asia, and our major distributors are located in Asia.

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• changes in political, regulatory, legal or economic conditions;

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• geopolitical conflicts and tensions, especially as between the United States and China, that could destabilize trading relationships and economic activity;

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• disruptions of capital and trading markets;

• changes in import or export licensing requirements, including as a result of ongoing armed conflict and geopolitical tensions among the United States, China, Russia, Ukraine and other countries;

• changes in import and/or export control restrictions and regulations by governments, such as changes to licensing requirements or other anti-diversion enforcement measures, as a result of ongoing armed conflict and geopolitical tensions among the United States, China, Russia, Ukraine, Iran, Israel and other countries;

• transportation delays;

• civil disturbances or political instability;

• other unpredictable geopolitical turmoil, including terrorism, war or political or military coups, including the current conflict in Israel and any obligations of our Israeli employees to perform military service;

• public health emergencies, such as an outbreak of COVID-19;

• other unpredictable geopolitical turmoil, including terrorism, war or political or military coups, including the current conflict in Israel and continued escalation of Israel’s conflict with Iran;

• differing employment practices and labor standards;

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• changes in tax laws;

• public health emergencies, such as another outbreak of COVID-19 or other communicable disease;

• currency fluctuations relating to our international operating activities;

• difficulty in obtaining distribution and support.

In addition to a significant portion of our wafer supply coming from Taiwan, Singapore, and China, substantially all of our products undergo packaging and final testing in Taiwan, Singapore, China, South Korea, and Thailand.

Any conflict or uncertainty in these countries, including due to natural disaster, public health or safety concerns, could have a material adverse effect on our business, financial condition and results of operations.

In addition to a significant portion of our wafer supply coming from Taiwan, Singapore, China and South Korea, substantially all of our products undergo packaging and final testing in Taiwan, Singapore, China, South Korea, Malaysia, and Thailand.

Any conflict or uncertainty in these countries, including due to geopolitical conditions, natural disasters, public health or safety concerns, could have a material adverse effect on our business, financial condition and results of operations.

In addition, if the government of any country in which our products are manufactured or sold sets technical standards for products manufactured in or imported into their country that are not widely shared, it may lead some of our customers to suspend imports of their products into that country, require manufacturers in that country to manufacture products with different technical standards and disrupt cross-border manufacturing relationships which, in each case, could have a material adverse effect on our business, financial condition and results of operations.

We also are subject to risks associated with international geopolitical and military conflicts.

Our business has been impacted and may continue to be impacted by geopolitical conditions such as international trade wars (including between the United States and China), the military conflict in Israel, including the recent escalation in its conflict with Iran, the Russia-Ukraine conflict, and increased political tensions in Russia, Europe, the Middle East and Asia.

Currently, significant uncertainty surrounds the future trade relationships among the United States, China, and Russia.

government continues to make significant changes in U.S.

trade policies that could negatively affect our business.

Additionally, policies made by other countries, such as China and Russia or their allies, could also negatively impact our business.

In a number of cases, compliance with these policies has required us to take actions adverse to our business.

Beginning in May 2019, we ceased normal business operations with entities affiliated with Huawei Technologies Co., Ltd., and certain other entities following an amendment to the EAR which added these entities to the Entity List for acting contrary to the national security or foreign policy of the United States.

We obtained export licenses for certain transactions with these entities.

As noted above, export licenses can be revoked or BIS could choose not to renew such licenses, which would halt the currently-approved licensed activities.

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In September 2020, we further restricted business operations with additional entities affiliated with Huawei when the BIS again amended the EAR to add such entities to the Entity List.

Since October 2022, the United States government has taken steps to restrict the export of certain advanced semiconductor products and technology to the People’s Republic of China and/or certain companies located in China due to national security and human rights concerns.

In October 2022, BIS announced additional restrictions on products and/or technology destined for use in the People’s Republic of China, including additional export controls and/or requirements on (1) certain advanced computing integrated circuits, computer commodities that contain such integrated circuits and certain semiconductor manufacturing items;

(2) products and/or technologies that may be destined for facilities capable of producing certain advanced node integrated circuits;

and (3) transactions involving items for supercomputer and semiconductor manufacturing end uses.

In October 2023, BIS announced additional restrictions on the export of certain advanced semiconductors and semiconductor manufacturing technology to China, primarily focused on integrated circuits with military, data center, or artificial intelligence applications.

Pursuant to those October 2023 export control amendments, various categories of integrated circuits are now subject to export licensing and export control restrictions for export or reexport to China and certain other countries.

We have confirmed that some of our products are subject to these new controls.

BIS also announced restrictions on exports to (1) companies headquartered in China or whose ultimate parent company is headquartered in China or Macau, and (2) end users in certain countries of concern, in order to prevent diversion of controlled products or technology to China.

The United States government has also continued to add Chinese entities to the Entity List.

We regularly monitor changes to applicable export control regulations to assess the impact to our business, if any.

To date, none of our material customers located in China has been added to the Entity List or other restricted party list.

The BIS continues to add many new entities to the Entity List and Unverified List.

As noted above, our ability to sell or distribute products or technology will be limited if BIS further amends the EAR to add restrictions against parties who are or may be our customers.

We are required to obtain special licenses to conduct business with entities on the Entity List and to conduct additional diligence and recordkeeping, including obtaining user statements from entities on the Unverified List.

Failure to obtain any required license would likely result in a loss of business and a corresponding negative impact on our financial position and results of operations.

We cannot predict what actions may ultimately be taken with respect to trade relations between the United States and China or other countries, which products may be subject to such actions or what actions may be taken by other countries in retaliation.

In response to the United States tightening export controls on China, China has instituted restrictions of its own that affect U.S.

companies and may impact us and related entities.

We have experienced weakening demand in China, and such future developments related to U.S.-China relations may also have an impact on our supply chain.

Additionally, the geopolitical developments in relations between Taiwan and China could affect the supply of our products from Taiwan, including from Taiwan Semiconductor Manufacturing Company, Limited, or TSMC.

Such developments could include restriction on the export of products from Taiwan to China and/or restriction on the import of Taiwanese-origin products into China.

We believe direct impacts of the economic sanctions against Russia and the military conflict in Ukraine are currently limited to volatility in the prices of metals used by our outsourced semiconductor assembly and test, or OSAT, supply chain, in particular around the supply of palladium, for which Russia is the top producer in the world, as well as increased fuel costs, which has global impact on transportation costs, including the shipping and delivery of our products.

However, the magnitude of such price volatility on our business and its duration is uncertain and cannot be reasonably estimated at this time.

We currently do not sell product in Russia, or sell product to distributors for resale in Russia.

The ongoing military conflict in Israel, and the recent escalation in Israel’s conflict with Iran, has resulted in our employees located in Israel having to perform military service and/or being negatively impacted by violence or political instability, which could interrupt business and increase costs associated with relocating employees, engaging with alternative third-party contractors or hiring additional employees outside of Israel.

The United States has also imposed additional sanctions on Iran in response to attacks on Israel by Iran.

As the conflict and its escalation continues, we cannot provide assurances that our business will not be impacted in the future.

We cannot provide assurances that we will not face disruptions of distribution arrangements in the future, including through the imposition of governmental prohibitions on selling our products to particular customers, further sanctions on Russia or other countries, and/or increases in costs of certain raw materials and transportation that will also adversely affect our revenues and operating results.

Loss of a key distributor or customer under similar circumstances could have a material adverse effect on our business, revenues and operating results.

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Changes in trade policies among the United States and other countries, in particular the imposition of new or higher tariffs, could place pressure on our average selling prices as our customers seek to offset the impact of increased tariffs on their own products.

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We believe that increases in tariffs on imported goods or the failure to resolve current international trade disputes could further decrease demand and have a material adverse effect on our business and operating results.

Furthermore, compliance with export controls and implementation of additional tariffs can increase compliance costs and further affect our business and operating results.

Furthermore, compliance with export controls and implementation of additional tariffs may increase compliance costs and further affect our business and operating results.

We will lose sales if we are unable to obtain or retain government authorization to export certain of our products or technology related to the development or production of our products or if such authorizations are revoked, and we will be subject to legal and regulatory consequences if we do not comply with applicable export control laws and regulations.

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Certain of our products and technologies are subject to the EAR, which may require a license authorization from BIS prior to the shipment or sharing of certain products and technologies with certain end users or destinations.

Such approval may be delayed, denied, or even revoked after initially being granted, depending on one or more factors including the type of product or technology at issue, the intended end use, the identity of the end user, the identity of other companies involved in the production process, and whether a license exception might apply.

Such approval may be delayed, denied, or even revoked after initially being granted by BIS, depending on one or more factors including the type of product or technology at issue, the intended end use, the identity of the end user, the identity of other companies involved in the production process, and whether a license exception might apply, among others.

We are subject to similar export controls regulations in other jurisdictions where we operate, including the European Union, Singapore, and Taiwan, among others.

Export control laws, regulations, and orders are complex, change frequently and with limited or no notice, have generally become more stringent over time and have intensified as U.S.-China geopolitical tensions worsen.

Since October 2022, the United States has announced export control restrictions on a number of entities based in China due to national security concerns and additional, potentially more severe, restrictions may be possible.

Since October 2022, the United States has announced export control restrictions on a number of entities based in China due to national security and human rights concerns and additional more severe restrictions may be possible.

The addition of new entities to restricted party lists can further increase the scope of export restrictions applicable to our business.

The United States has also announced measures intended to further restrict the export of certain advanced semiconductor products and technology, as well as products that incorporate those advanced semiconductor products, to the People’s Republic of China, or China, and/or certain companies located in China due to national security and human rights concerns, including the imposition of new license requirements for certain semiconductor technologies.

Failure to obtain required export licenses for our products or the placement of one or more of our customers on any restricted parties lists could significantly reduce our revenue and harm our business.

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Obtaining export licenses can be difficult, costly and time-consuming and we may not always be successful in obtaining necessary export licenses.

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We currently have licenses from BIS that permit certain of our transactions with two restricted parties, but those licenses may be revoked at any time or denied for renewal when the license expires.

One of the Company's third party foundry partners, Semiconductor Manufacturing International Corporation, or SMIC, was added to the BIS Entity list in December 2020.

As a result of that Entity List listing, we must obtain export licenses from BIS for the export or reexport to SMIC of any technology for the development or production (fabrication) of the Company's products.

One of our third party foundry partners, Semiconductor Manufacturing International Corporation, or SMIC, was added to the BIS Entity list in December 2020.

As a result of that Entity List listing, we must obtain export licenses from BIS for the export or reexport to SMIC of any technology for the development or production (fabrication) of our products.

Although we have obtained export licenses in order to have SMIC manufacture certain products for us, those export licenses could be revoked at any time.

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On June 8, 2023, BIS closed out its review of our voluntary self-disclosure without monetary or other penalties and with the issuance of a “warning letter.”

We also are subject to risks associated with international geopolitical conflicts involving the U.S.

and other governments such as China and Russia.

Our business has been impacted and may continue to be impacted by geopolitical conditions such as international trade wars (including between the United States and China), the conflict in Israel, the Russia-Ukraine conflict, and increased political tensions in Russia, Europe and Asia.

Currently, significant uncertainty surrounds the future trade relationships among the United States, China, and Russia.

government continues to make significant changes in U.S.

trade policies that could negatively affect our business.

Additionally, policies made by other countries, such as China and Russia, could also negatively impact our business.

In a number of cases, compliance with these policies has required us to take actions adverse to our business.

We obtained export licenses for certain transactions with these entities.

As noted above, export licenses can be revoked or BIS could choose not to renew such licenses, which would halt the currently-approved licensed activities.

In September 2020, we further restricted business operations with additional entities affiliated with Huawei when the BIS again amended the EAR to add such entities to the Entity List.

In October 2022, BIS announced additional restrictions on products and/or technology destined for use in the People’s Republic of China, including additional export controls and/or requirements on (1) certain advanced computing integrated circuits (ICs), computer commodities that contain such ICs and certain semiconductor manufacturing items;

(2) products and/or technologies that may be destined for facilities capable of producing certain advanced node ICs;

and (3) transactions involving items for supercomputer and semiconductor manufacturing end uses.

In October 2023, BIS announced additional restrictions on the export of certain advanced semiconductors and semiconductor manufacturing technology to China, primarily focused on ICs with military, data center, or artificial intelligence (AI) applications.

those October 2023 export control amendments, which become effective on November 17, 2023, various categories of

integrated circuits, which were not covered by the October 2022 amendments, are now subject to export licensing and export

control restrictions for export or reexport to China and certain other countries.

We are currently analyzing whether any of our

products may be subject to those new export control restrictions and requirements.

BIS also announced restrictions on exports to (1) companies headquartered in China or Macau, and (2) end users in certain countries of concern, in order to prevent diversion of controlled products or technology to China.

The United States government has also continued to add Chinese entities to the Entity List, most recently on October 18, 2023 when BIS added 13 Chinese entities to the Entity List.

We regularly monitor changes to applicable export control regulations to assess the impact to our business, if any.

To date, no material customer of MaxLinear located in China has been added to the Entity List or other restricted party list.

The BIS continues to add many new entities to the Entity List and Unverified List.

As noted above, our ability to sell or distribute products or technology will be limited if BIS further amends the EAR to add restrictions against parties who are or may be our customers.

Failure to obtain any required license would likely result in a loss of business and a corresponding negative impact on our financial position and results of operations.

In response to the United States tightening export controls on China, China has instituted restrictions of its own that affect U.S.

companies and may impact MaxLinear and related entities.

We have experienced weakening demand in China, and such future developments related to U.S.-China relations may also have an impact on our supply chain.

However, the magnitude of such price volatility on our business and its duration is uncertain and cannot be reasonably estimated at this time.

The Company does not currently sell product in Russia, or sell product to distributors for resale in Russia.

We cannot provide assurances that similar disruptions of distribution arrangements in the future, the imposition of governmental prohibitions on selling our products to particular customers, further sanctions on Russia or other countries, and/or increases in costs of certain raw materials and transportation will not also adversely affect our revenues and operating results.

Loss of a key distributor or customer under similar circumstances could have a material adverse effect on our business, revenues and operating results.

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We depend on a limited number of customers for a substantial portion of our revenue, and the loss of, or a significant reduction in orders from, one or more of our major customers has had and could continue to have a material adverse effect on our revenue and operating results.

In the nine months ended September 30, 2023, one customer accounted for 11% of our net revenue, and our ten largest customers collectively accounted for 55% of our net revenue, of which distributor customers accounted for 11% of our net revenue.

In the nine months ended September 30, 2023, we have experienced a decrease in customer demand, and consequently a reduction in orders, primarily due to macroeconomic factors and excess inventory in the channel following the industry-wide supply shortage in 2021 and 2022.

Our customers include electronics distributors, module makers, OEMs and ODMs, which incorporate our products in a wide range of electronic devices.

Revenue is also generated from sales of intellectual property and consideration under intellectual property agreements.

The recipients of such intellectual property are also referred to as the Company’s customers.

In the three months ended March 31, 2024, two customers accounted for 36% of our net revenue, and our ten largest customers collectively accounted for 75% of our net revenue, of which distributor customers accounted for 19% of our net revenue.

In the three months ended March 31, 2024, we have continued to experience a decrease in customer demand, and consequently a reduction in orders, primarily due to macroeconomic factors and excess inventory in the channel following the industry-wide supply shortage in 2021 and 2022.

We expect that our operating results for the foreseeable future will continue to show a substantial percentage of sales dependent on a relatively small number of customers.

In the future, these customers may decide not to purchase our products at all, may purchase fewer products than they did in the past, or may defer or cancel purchases or otherwise alter their purchasing patterns.

In the future, these customers may decide, as they have at times before, not to purchase our products at all, may purchase fewer products than they did in the past, or may defer or cancel purchases or otherwise alter their purchasing patterns.

While we are entitled to consideration under intellectual property sales agreements, which consideration has been and could be material, we may not receive such consideration in the future.

Factors that could affect our revenue from these large customers include the following:

• substantially all of our sales to date have been made on a purchase order basis, which permits our customers to cancel, change or delay product purchase commitments with little or no notice to us and without penalty;

• macroeconomic and business factors influencing such customers’ demand for our products, including excess inventory in the channel;

• substantially all of our sales to date have been made on a purchase order basis, and we do not have long-term product purchase commitments with our customers;

• some of our customers have sought or are seeking relationships with current or potential competitors which may affect their purchasing decisions;

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• technological changes in our markets could lead to substantial volatility in our revenues based on product transitions, and particularly in our broadband markets, we face risks based on changes in the way consumers are accessing and using broadband and cable services, which could affect operator demand for our products;

• any decrease in revenue generated by the recipient of intellectual property under certain intellectual property sale agreements, including due to any inability to enforce our intellectual property rights as described in the section “Risks Relating to Intellectual Property” under the risk factor “ We utilize a significant amount of intellectual property in our business.

If we are unable to protect our intellectual property, our business could be adversely affected .”

In addition, delays in development could impair our relationships with our strategic customers and negatively impact sales of the products under development.

Moreover, it is possible that our customers may develop their own products or adopt a competitor’s solution for products that they currently buy from us.

If that happens, our sales would decline and our business, financial condition and results of operations could be materially and adversely affected.

Our relationship with customers could also be impaired by our sale of patents.

For example, our customers could be subject to patent infringement based on patents we divested to the extent that our customers also source components from our competitors.

When this occurs, our sales have previously and could in the future decline and/or our market share has previously and may in the future be reduced or smaller than anticipated and our business, financial condition and results of operations could be materially and adversely affected.

Our relationship with customers has been and could continue to be impaired by our sale of patents.

For example, our customers are and could be subject to patent infringement based on patents we divested to the extent that our customers also source components from our competitors, such as those referenced in Part II, Item 1 (Legal Proceedings) of this report.

Our relationships with some customers may deter other potential customers who compete with these customers from buying our products.

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The loss of a key customer, a reduction in sales to any key customer or our inability to attract new significant customers could seriously impact our revenue and materially and adversely affect our results of operations.

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A significant portion of our revenues are from sales of product to distributors, who then resell our product.

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In addition, the current situation relating to trade with China and governmental and regulatory concerns relating to specific Chinese companies continue to remain fluid and unpredictable.

Products shipped to mainland China accounted for 12% of our net revenue during the nine months ended September 30, 2023 compared to 16% during the nine months ended September 30, 2023.

Products shipped to mainland China accounted for less than 10% of our net revenue during the three months ended March 31, 2024, compared to 16% during the three months ended March 31, 2023.

Our current and future operating results could be materially and adversely affected by limitations on our ability to sell to one or more Chinese customers, as described in the section “Risks Related to Our Business” under the risk factor “ We are also subject to risks associated with international geopolitical conflicts involving the U.S.

and other governments such as China and Russia ”, and by tariffs and other trade barriers that may be implemented by governmental authorities.

Average selling prices of our products could decrease rapidly, which would have a material adverse effect on our revenue and gross margins.

We may experience substantial period-to-period fluctuations in future operating results due to the erosion of our average selling prices.

Any legal proceedings or claims against us could be costly and time-consuming to defend and could harm our reputation regardless of the outcome.

In addition to the legal proceedings referenced in Part II, Item 1 - Legal Proceedings of this report, we are subject to legal proceedings and claims that arise in the ordinary course of business, including intellectual property, product liability, employment, class action, customer claims, whistleblower and other litigation claims, and governmental and other regulatory investigations and proceedings and we may not be successful in such proceedings.

In addition, we have implemented a reduction in force and the attendant layoffs has resulted and could result in the risk of claims being made by or on behalf of affected employees.

Such matters can be time-consuming, divert management’s attention and resources, cause us to incur significant expenses or liability, or require us to change our business practices.

In addition, the expense of litigation and the timing of this expense from period to period are difficult to estimate, subject to change, and could adversely affect our financial condition and results of operations.

Because of the potential risks, expenses, and uncertainties of litigation, we may, from time to time, settle disputes, even where we have meritorious claims or defenses, by agreeing to settlement agreements.

Any of the foregoing could adversely affect our business, financial condition, and results of operations.

We have been and may in the future be subject to information technology failures, including security breaches, cyber-attacks, design defects or system failures, that could disrupt our operations, damage our reputation and adversely affect our business, operations, and financial results.

We rely on our information technology systems for the effective operation of our business and for the secure maintenance and storage of confidential data relating to our business and third-party businesses.

In June 2020, we announced a security incident resulting from a Maze ransomware attack affecting certain but not all operational systems within our information technology infrastructure.

Because we did not satisfy the attacker’s monetary demands, on June 15, 2020, the attacker released online certain proprietary information obtained from our network.

In response, our internal information technology team, supplemented by a leading cyber defense firm, took steps aimed at containing and assessing this incident, including implementing enhanced security controls aimed at protecting our information technology systems.

Since that event, security breaches and incidents, computer malware and computer hacking attacks have continued to become more prevalent and sophisticated.

These threats are constantly evolving, making it increasingly difficult to successfully defend against or implement adequate preventive measures.

We experience cyber-attacks of varying degrees on our technology infrastructure and systems and notwithstanding our defensive measures, experienced programmers, hackers, state actors, or others may be able to penetrate our security controls through attacks such as phishing, impersonating authorized users, ransomware, viruses, worms and other malicious software programs, software supply chain attacks, exploitation of design flaws, bugs and other security weaknesses and vulnerabilities, covert introduction of malware to computers and networks, including those using techniques that change frequently or may be disguised or difficult to detect, or designed to remain dormant until a triggering event or that may continue undetected for an extended period of time.

Geopolitical tensions or conflicts may create heightened risk of cyber-attacks and attackers have used artificial intelligence and machine learning to launch more automated, targeted and coordinated attacks against targets.

Businesses we acquire may increase the scope and complexity of our information technology systems, and this may increase our risk exposure to cyber-attack when there are difficulties integrating diverse legacy systems that support operations for the acquired businesses.

Our information technology infrastructure also includes products and services provided by third parties, and these providers can experience breaches of their systems and products, or provide inadequate updates or support, which can impact the security of our systems and our proprietary or confidential information.

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A cybersecurity incident or other compromise of our information technology systems could result in unauthorized publication or misuse of confidential business or proprietary information belonging to us, a customer, supplier, employee or other third party, including personal data, result in violations of privacy or other laws, expose us to a risk of litigation, cause us to incur direct losses if attackers initiate wire transfers or access our bank or investment accounts, or damage our reputation.

More generally, any theft, loss, misuse, or other unauthorized processing of any confidential business or proprietary information, including personal data, collected, used, stored, transferred, or otherwise processed by us or on our behalf could result in significantly increased costs, expenses, damage to our reputation, and claims, litigation, demands, and regulatory investigations or other proceedings.

The cost and operational consequences of implementing further data protection measures either as a response to specific breaches or incidents or as a result of evolving risks could be significant.

In addition, our inability to use or access our information systems at critical points in time could adversely affect the timely and efficient operation of our business.

Any delayed sales, significant costs or lost customers resulting from these technology failures could adversely affect our business, operations and financial results.

We also may face difficulties or delays in identifying and remediating and otherwise responding to any security breach or incident.

From time-to-time, we upgrade software that we use in our business, including our enterprise resource planning, or ERP, system.

Our business may be disrupted if our software does not work as planned or if we experience issues relating to any implementation, or accessing our software as has happened in a previous cybersecurity attack, in which case we may be unable to timely or accurately prepare financial reports, make payments to our suppliers and employees, or ship to, invoice and collect from our customers.

We may be subject to supply chain attacks where threat actors attempt to inject malicious code into our products thus infecting our products and the systems of our customers.

Any such supply chain attack could have magnified damages to our business as a direct result of the attack as well as due to a loss of credibility or reputation with our customers.

Such attempts are increasing in number and in technical sophistication, and if successful, expose us and the affected parties to risk of loss or misuse of proprietary or confidential information or disruptions of our business operations, including our manufacturing operations.

Third parties with which we conduct business, such as foundries, assembly and test contractors, and distributors, have access to certain portions of our sensitive data, and we rely on third parties to store and otherwise process data for us.

We are dependent on the information security systems of these third parties and they face substantial security risks similar to those outlined above.

Any security breaches or incidents or other unauthorized access by third parties to the systems of our suppliers, service providers, or other third parties with access to our sensitive data, or the existence of computer viruses, ransomware or other malicious code in their data, software, or hardware, could result in disruptions or failures of systems used in our business, payments to fraudulent bank accounts, and expose us to a risk of loss, misappropriation, unavailability and other unauthorized processing of information.

Any of the foregoing, or the perception any of them has occurred, could have a material adverse impact on our business, operations and financial results.

Additionally, we cannot be certain that our insurance coverage will be adequate or otherwise protect us with respect to claims, expenses, fines, penalties, business loss, data loss, litigation, regulatory actions, or other impacts arising from any of the security breaches or incidents outlined above, or that such coverage will continue to be available on acceptable terms or at all.

Any of these results could adversely affect our business, operations and financial results, potentially in a material manner.

Average selling prices of our products have and could decrease in the future, which could have a material adverse effect on our revenue and gross margins.

We have and may in the future experience substantial period-to-period fluctuations in our operating results due to erosion of our average selling prices.

From time to time, we have reduced the average unit price of our products due to competitive pricing pressures, new product introductions by us or our competitors, and for other reasons, and we expect that we will have to do so again in the future.

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In addition, under certain of our agreements with key distributors, we provide protection for reductions in selling prices of the distributors’ inventory, which could have a material adverse effect on our operating results if the selling prices for those products fell dramatically.

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If we fail to penetrate new applications and markets, our revenue, revenue growth rate, if any, and financial condition could be materially and adversely affected.

We sell a significant portion of our products to manufacturers of cable broadband voice and data modems and gateways, Pay-TV set-top boxes and gateways into cable and satellite operator markets, satellite outdoor units or LNB’s, optical modules for long-haul and metro telecommunications markets, and RF transceivers and modem solutions for wireless infrastructure

We sell a significant portion of our products to manufacturers of cable broadband voice and data modems and gateways, satellite outdoor units, optical modules for long-haul and metro telecommunications markets, and RF transceivers and modem solutions for wireless infrastructure markets.

Our product offerings also include broadband data access, power management and interface technologies which are ubiquitous functions in new and existing markets such as wireless and wireline communications infrastructure, broadband access, industrial, enterprise network, and automotive applications.

We have further expanded our product offerings to include Wi-Fi, ethernet and broadband gateway processor systems-on-chip, or SoCs, and intellectual property that utilizes patented machine learning techniques to improve signal integrity and power efficiency in SoCs, ASICs, and field-programmable gate arrays, or FPGAs, used in next-generation communication and artificial intelligence systems.

We have further expanded our product offerings to include Wi-Fi, ethernet and broadband gateway processor SoCs and intellectual property that utilizes patented machine learning techniques to improve signal integrity and power efficiency in SoCs, ASICs, and field-programmable gate arrays, or FPGAs, used in next-generation communication and artificial intelligence systems.

Our future revenue growth, if any, will depend in part on our ability to further penetrate into, and expand beyond, these markets with analog, digital and mixed-signal solutions targeting the markets for Wi-Fi and broadband, high-speed optical interconnects for data center, metro, and long-haul optical modules, telecommunications wireless infrastructure, and cable DOCSIS 3.1 network infrastructure products.

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If any of these markets do not develop as we currently anticipate, or if we are unable to penetrate them successfully, it could materially and adversely affect our revenue and revenue growth rate, if any.

Broadband data modems and gateways and Pay-TV and satellite set-top boxes and video gateways continue to represent a significant North American and European revenue generator.

The North American and European Pay-TV market is dominated by only a few OEMs, including Technicolor SA, Commscope Holding Company, Inc., Hitron Technologies, Inc., Compal Broadband Networks Inc., Humax Co., Ltd., and Samsung Electronics Co., Ltd.

These OEMs are large multinational corporations with substantial negotiating power relative to us and are undergoing significant consolidation.

Broadband data modems and gateways and video gateways continue to represent a significant North American and European revenue generator.

The North American and European Pay-TV market is dominated by a few OEMs, including Vantiva SA, Commscope Holding Company, Inc., Hitron Technologies Inc., Compal Broadband Networks, Inc., Humax Co., Ltd., and Samsung Electronics Co., Ltd.

These OEMs are large multinational corporations with negotiating power relative to us and are undergoing significant consolidation.

Securing design wins with any of these companies requires a substantial investment of our time and resources.

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A significant portion of our revenue is attributable to demand for our products in markets for broadband solutions, and development delays and consolidation trends among cable and satellite Pay-TV and broadband operators could adversely affect our future revenues and operating results.

For the nine months ended September 30, 2023 and 2022, revenue directly attributable to broadband applications accounted for approximately 30% and 47% of our net revenue, respectively.

We have experienced a decrease in broadband net revenue of $224.2 million for the nine months ended September 30, 2023, as compared to the nine months ended September 30, 2022, and the decline in revenue could continue in future periods.

Delays in the development of, or unexpected developments in, the broadband markets, including international macroeconomic headwinds, could have an adverse effect on order activity by original equipment manufacturers in these markets and, as a result, on our business, revenue, operating results and financial condition.

For the three months ended March 31, 2024 and 2023, revenue directly attributable to broadband applications accounted for approximately 35% and 33% of our net revenue, respectively.

We have experienced a decrease in broadband net revenue of $48.6 million for the three months ended March 31, 2024, as compared to the three months ended March 31, 2023, and the decline in revenue could continue in future periods.

Delays in the development of, or unexpected developments in, the broadband markets, including international macroeconomic headwinds, could have an adverse effect on order activity by OEMs in these markets and, as a result, on our business, revenue, operating results and financial condition.

In addition, consolidation trends among Pay-TV and broadband operators may continue, which could delay or lead to cancellations of major spending programs and have a material adverse effect on our future operating results and financial condition.

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We may be unable to make the substantial and productive research and development investments that are required to remain competitive in our business.

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Many of our products originated with our research and development efforts, which we believe have provided us with a significant competitive advantage.

For nine months ended September 30, 2023 and 2022, our research and development expense was $204.3 million and $222.7 million, respectively.

For three months ended March 31, 2024, and 2023, our research and development expense was $64.8 million and $67.3 million, respectively.

While we are closely monitoring our current research and development expenses, we expect our research and development expenses to increase in future years when we return to expanding our product portfolio and enhancing existing products.

We monitor such expenditures as part of our strategy of devoting focused research and development efforts on the development of innovative and sustainable product platforms.

We are committed to investing in new product development internally in order to stay competitive in our markets and plan to maintain research and development and design capabilities for new solutions in advanced semiconductor process nodes such as 16nm and 5nm and beyond, as well as to address challenges of capturing and processing high quality broadband communications and high-speed optical interconnect signals.

However, we do not know whether we will have sufficient resources to maintain the level of investment in research and development required to remain competitive as semiconductor process nodes continue to shrink and become increasingly complex.

In addition, we cannot assure you that the technologies that are the focus of our research and development expenditures will become commercially successful.

Furthermore, we currently receive grants from certain non-U.S.

governments, but those grants and any future grants may not be available to us in the future.

The complexity of our products could result in unforeseen delays or expenses caused by undetected defects or bugs, which could reduce the market acceptance of our new products, damage our reputation with current or prospective customers and adversely affect our operating costs.

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Further, our business liability insurance may be inadequate, may not cover the claims, and future coverage may be unavailable on acceptable terms, which could adversely impact our financial results.

If we are unable to attract, train and retain qualified personnel and senior management, our business, financial condition, results of operations and prospects could suffer.

Our future success depends on our ability to retain, attract and motivate qualified personnel, including our management, sales and marketing and finance teams, and especially our design and technical staff.

We do not know whether we will be able to attract and retain the required and desirable personnel as we continue to pursue our business strategy.

Historically, we have encountered difficulties in hiring and retaining qualified engineers because there is a limited pool of engineers with the expertise required in our field.

Competition for these personnel is intense in the semiconductor industry.

As the source of our technological and product innovations, our design and technical personnel represent a significant asset.

In addition, in making employment decisions, particularly in the high-technology industry, job candidates often consider the value of the stock-based compensation they are to receive in connection with their employment.

We have experienced fluctuations, including declines, in the market price of our stock, and reductions in force which could adversely affect our ability to attract, motivate or retain key employees.

In addition, our future performance also depends on the continued services and continuing contributions of our senior management to execute our business plan and to identify and pursue new opportunities and product innovations.

Our employment arrangements with our employees do not generally require that they continue to work for us for any specified period, and therefore, they could terminate their employment with us at any time.

The loss of the services of one or more of our key employees, especially our management and key design and technical personnel, or our inability to retain, attract and motivate qualified design and technical and other personnel, could have a material adverse effect on our business, financial condition and results of operations.

Our future success also depends on the continued contributions of our senior management team and other key personnel.

None of our senior management team or other key personnel is bound by written employment contracts to remain with us for a specified period.

In addition, we have not entered into non-compete agreements with members of our senior management team or other key personnel, except in limited circumstances (e.g., in connection with the acquisition of other companies).

We are fortunate that many members of our senior management team have long tenures with us, but from time to time we also have been required to recruit new members of senior management.

With respect to recruitment and retention of senior management, we need to ensure that our compensation programs provide sufficient recruitment and retention incentives as well as incentives to achieve our long-term strategic business and financial objectives.

We expect competition for individuals with our required skill sets, particularly technical and engineering skills, to remain intense even in weak global macroeconomic environments.

The loss of any member of our senior management team or other key personnel could harm our ability to implement our business strategy and respond to the rapidly changing market conditions in which we operate.

Our operating results are subject to substantial quarterly and annual fluctuations and have fluctuated in the past and may fluctuate significantly due to a number of factors that could adversely affect our business and our stock price.

Our revenue and operating results have fluctuated in the past and are likely to fluctuate in the future.

For example, our revenue declined from $248.4 million for the three months ended March 31, 2023, to $95.3 million for the three months ended March 31, 2024 and revenue could continue to decline.

These fluctuations may occur on a quarterly and on an annual basis and are due to a number of factors, many of which are beyond our control.

These factors include, among others:

• seasonality or cyclical fluctuations in our markets;

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• overall demand volatility for semiconductor solutions across a diverse range of communications, industrial and multi-market applications;

• changes in end-user demand for the products manufactured and sold by our customers;

• the receipt, reduction or cancellation of significant orders by customers;

• fluctuations in the levels of component inventories held by our customers;

• the gain or loss of significant customers;

• market acceptance of our products and our customers’ products;

• our ability to develop, introduce, and market new products and technologies on a timely basis;

• size and timing of any consideration received under our intellectual property sale agreements;

• the availability and cost of products from our suppliers;

• the timing and extent of operating expenses, including costs related to product development and personnel compensation and benefits;

• new product announcements and introductions by us or our competitors;

• incurrence of research and development and related new product expenditures;

• government actions, by the United States, China or other countries, that impose barriers or restrictions that would impact our ability to sell or ship products to customers;

• currency fluctuations;

• fluctuations in manufacturing yields of integrated circuits;

• significant warranty claims, including those not covered by our suppliers;

• changes in our product mix or customer mix;

• potential indemnification claims, including those arising as a result of our contractual arrangements or intellectual property disputes;

• intellectual property disputes;

• timing and extent of product development costs;

• loss of key personnel or inability to attract, retain and motivate qualified skilled workers;

• impairment of long-lived assets, including masks and production equipment;

• the effects of competitive pricing pressures, including decreases in average selling prices of our products.

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For example, we often experience flat to declining revenue in the first quarter of each fiscal year and increasing revenue in the second quarter of each fiscal year.

Our historical growth may have reduced the impact of seasonal or cyclical factors that might have influenced our business to date.

If our growth rate continues to slow, seasonal or cyclical variations in our operations may become more pronounced over time and may materially affect our business, financial condition, results of operations and prospects.

These factors are difficult to forecast, and these, as well as other factors, could materially adversely affect our quarterly or annual operating results.

We typically are required to incur substantial development costs in advance of a prospective sale with no certainty that we will ever recover these costs.

A substantial amount of time may pass between a design win and the generation of revenue related to the expenses previously incurred, which can potentially cause our operating results to fluctuate significantly from period to period.

In addition, a significant amount of our operating expenses are relatively fixed in nature due to our significant sales, research and development costs.

Any failure to adjust spending or our operations quickly enough to compensate for a revenue shortfall could magnify its adverse impact on our results of operations.

If we fail to develop and introduce new or enhanced products on a timely basis, our ability to attract and retain customers could be impaired and our competitive position could be harmed.

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Our failure to anticipate or timely develop new or enhanced products or technologies in response to technological shifts has resulted, and could in the future, result in decreased revenue and our competitors winning more competitive bid processes, known as “design wins.” In particular, we may experience difficulties with product design, manufacturing, marketing or certification that could delay or prevent our development, introduction or marketing of new or enhanced products.

If we fail to introduce new or enhanced products that meet the needs of our customers or penetrate new markets in a timely fashion, we will lose market share and our operating results will be adversely affected.

If we fail or are slow to introduce new or enhanced products that meet the needs of our customers or penetrate new markets in a timely fashion, as has happened previously or in the future, we will lose market share and our operating results will be adversely affected.

In particular, we believe that we will need to develop new products in part to respond to changing dynamics and trends in our end user markets, including (among other trends) consolidation among cable and satellite operators, potential industry shifts away from the hardware devices and other technologies that incorporate certain of our products, advances in artificial intelligence, and changes in consumer television viewing habits and how consumers access and receive broadcast content and digital broadband services.

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however, we cannot provide any assurances that we will accurately predict the direction in which our markets will evolve or that we will be able to develop, market, or sell new products that respond to such changes successfully or in a timely manner, if at all.

We are subject to order and shipment uncertainties, and differences between our estimates of customer demand and product mix and our actual results has negatively affected our inventory levels, sales and operating results.

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We are subject to order and shipment uncertainties, and differences between our estimates of customer demand and product mix and our actual results could continue to negatively affect our inventory levels, sales and operating results.

Our revenue is generated on the basis of shipments of products under purchase orders with our customers rather than long-term purchase commitments.

In addition, our customers can cancel purchase orders or defer the shipments of our products under certain circumstances.

In addition, our customers can and have requested to cancel purchase orders or defer the shipments of our products under certain circumstances.

Our products are manufactured using a silicon foundry according to our estimates of customer demand, which requires us to make separate demand forecast assumptions for every customer, each of which may introduce significant variability into our aggregate estimate.

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Also, as customer lead times continue to improve, we have seen and expect to continue to see a more normalized demand-planning horizon.

While we expect inventory to remain elevated in the near term, we expect that channel inventory will continue to decline over the coming quarters.

While we expect inventory to remain elevated in the near term, we expect that channel inventory will continue to decline thereafter.

Moreover, because our target markets are relatively new, many of our customers have difficulty accurately forecasting their product requirements and estimating the timing of their new product introductions, which ultimately affects their demand for our products.

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Some of these differences have been material which has led to and could continue to lead to excess inventory or product shortages and revenue and margin forecasts above those we were actually able to achieve.

These differences may occur in the future, and the adverse impact of these differences between forecasts and actual results could grow if we are successful in selling in and expanding the customer base for our products.

These differences may occur in the future, and the adverse impact of these differences between forecasts and actual results could grow if we are not successful in expanding the customer base for our products.

In addition, the rapid pace of innovation in our industry could render significant portions of our inventory obsolete.

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If we are unsuccessful or delayed in qualifying any of our products with a customer, sales of this product to the customer may be precluded or delayed, which may result in a decrease in our revenue and cause our business to suffer.

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Winning business is subject to lengthy competitive selection processes that require us to incur significant expenditures.

Even if we begin a product design, customers may decide to cancel or change their product plans, which could cause us to generate no revenue from a product and adversely affect our results of operations.

We are focused on securing design wins to develop RF receivers and RF receiver SoCs, MoCA and G.hn SoCs, DBS-ODU SoCs, physical medium devices for optical modules, interface and power management devices, and SoC solutions targeting infrastructure opportunities within the telecommunications, wireless, industrial and multimarket and Wi-Fi and broadband operator markets for use in our customers’ products.

We are focused on securing design wins to develop RF receivers and RF receiver SoCs, MoCA and G.hn SoCs, DBS-ODU SoCs, physical medium devices for optical modules, interface and power management devices, and SoC solutions targeting infrastructure opportunities within the telecommunications, wireless, industrial and multi-market and Wi-Fi and broadband operator markets for use in our customers’ products.

These selection processes typically are lengthy and can require us to incur significant design and development expenditures and dedicate scarce engineering resources in pursuit of a single customer opportunity.

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Our customers generally take a considerable amount of time to evaluate our products.

The typical time from early engagement by our sales force to actual product introduction runs from nine to twelve months for the consumer market, to as much as 18 to 24 months for the satellite markets, and 36 months or longer for industrial, wired and wireless infrastructure markets.

The typical time from early engagement by our sales force to actual product introduction runs from nine to twelve months for the broadband and communications market, and 36 months or longer for industrial, wired and wireless infrastructure markets.

The delays inherent in these lengthy sales cycles increase the risk that a customer will decide to cancel, curtail, reduce or delay its product plans, causing us to lose anticipated sales.

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If we were unable to generate revenue after incurring substantial expenses to develop any of our products, our business would suffer.

Our revenue and operating results have fluctuated in the past and are likely to fluctuate in the future.

These fluctuations may occur on a quarterly and on an annual basis and are due to a number of factors, many of which are beyond our control.

These factors include, among others:

• seasonality or cyclical fluctuations in our markets;

• changes in end-user demand for the products manufactured and sold by our customers;

• the receipt, reduction or cancellation of significant orders by customers;

• fluctuations in the levels of component inventories held by our customers;

• the gain or loss of significant customers;

• market acceptance of our products and our customers’ products;

• our ability to develop, introduce, and market new products and technologies on a timely basis;

• the timing and extent of operating expenses, including product development costs;

• new product announcements and introductions by us or our competitors;

• incurrence of research and development and related new product expenditures;

• government actions, by the United States, China or other countries, that impose barriers or restrictions that would impact our ability to sell or ship products to customers;

• currency fluctuations;

• fluctuations in IC manufacturing yields;

• significant warranty claims, including those not covered by our suppliers;

• changes in our product mix or customer mix;

• potential indemnification claims, including those arising as a result of our contractual arrangements or intellectual property disputes;

• intellectual property disputes;

• loss of key personnel or inability to attract, retain and motivate qualified skilled workers;

• impairment of long-lived assets, including masks and production equipment;

• the effects of competitive pricing pressures, including decreases in average selling prices of our products.

These factors are difficult to forecast, and these, as well as other factors, could materially adversely affect our quarterly or annual operating results.

We typically are required to incur substantial development costs in advance of a prospective sale with no certainty that we will ever recover these costs.

In addition, a significant amount of our operating expenses are relatively fixed in nature due to our significant sales, research and development costs.

Any failure to adjust spending or our operations quickly enough to compensate for a revenue shortfall could magnify its adverse impact on our results of operations.

Our business is subject to various international and U.S.

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The costs of complying with these laws (including the costs of any investigations, remediation, auditing and monitoring) could adversely affect our current or future business.

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As indicated elsewhere in this report, we do a substantial portion of our business in Asia and particularly in China.

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Compliance with these laws and regulations may also result in the loss of revenue.

In October 2022, we restricted shipments and exports to certain major Chinese technology companies, including a semiconductor foundry and OSAT providers.

Since October 2022, we have restricted shipments and exports to certain major Chinese technology companies, including a semiconductor foundry and OSAT providers.

While we intend to continue to conduct our businesses in compliance with all applicable laws, including laws relating to export controls and anti-corruption, it is possible that the nature of our business and customers could result in a review of our relationships and practices by regulatory authorities.

At times, we may discover issues that we bring to the attention of the relevant government agencies, as we did on March 3, 2023, when we submitted a comprehensive voluntary self-disclosure to BIS regarding the potential EAR violation described above and other potential export control violations.

We could incur increased administrative and legal costs in order to remediate any potential compliance gaps or violations, to respond to any inquiries, or in connection with the preparation and submission of any voluntary self-disclosures to the government agencies, as appropriate.

Although the March 2023 voluntary self-disclosure to BIS resulted in a warning letter, we could incur increased administrative and legal costs in order to remediate any potential compliance gaps or violations, to respond to any inquiries, or in connection with the preparation and submission of any voluntary self-disclosures to the government agencies, as appropriate.

Any failure to comply with applicable laws could adversely affect our business and operating results.

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If we fail to adequately address any of these rules or regulations, our business could be harmed.

We must conform the manufacture and distribution of our semiconductors to various laws and adapt to regulatory requirements in all countries as these requirements change.

In addition, climate change and new or revised rules and regulations related thereto, including regulations with respect to greenhouse gas emissions and regulations enacted by the SEC and recent legislation enacted in California, may impact our business in numerous ways.

Climate change and its effects could lead to further increases in raw material prices or their reduced availability due to, for example, increased frequency and severity of extreme weather events and any supply chain disruptions resulting therefrom, and could cause increased incidence of disruption to the production and distribution of our products and an adverse impact on consumer demand and spending.

In recent months, there have been substantial legislative and regulatory developments on climate-related issues, including proposed, issued and implemented legislation and rulemakings that would require companies to assess and/or disclose climate metrics, risks, opportunities, policies and practices.

For example, on March 6, 2024, the SEC adopted rules mandating climate-related disclosures that would require increased climate change-related disclosure in our periodic reports and other filings with the SEC for fiscal year 2025 and beyond, which were stayed on April 4, 2024.

The potential impact to us of these legislative and regulatory developments is uncertain at this time, although we expect that the emerging legal and regulatory requirements on climate-related issues will result in additional compliance and may require us to spend or add significant resources and divert management attention.

We cannot be sure that we will be able to successfully adapt our operations in response to any climate-related changes or comply with any increased reporting obligations in a cost-effective manner, and our business, financial condition and results of operations could be materially and adversely affected.

We must also conform the manufacture and distribution of our semiconductors to various laws and adapt to regulatory requirements in all countries as these requirements change.

If we fail to comply with these requirements in the manufacture or distribution of our products, we could be required to pay civil penalties, face criminal prosecution and, in some cases, be prohibited from distributing our products in commerce until the products or component substances are brought into compliance.

In June 2020, we announced a security incident resulting from a Maze ransomware attack affecting certain but not all operational systems within our information technology infrastructure.

Because we did not satisfy the attacker’s monetary demands, on June 15, 2020, the attacker released online certain proprietary information obtained from our network.

Since that time, our internal information

technology team, supplemented by a leading cyber defense firm, took steps aimed at containing and assessing this incident, including implementing enhanced security controls aimed at protecting our information technology systems.

Since that event, security breaches and incidents, computer malware and computer hacking attacks have continued to become more prevalent and sophisticated.

These threats are constantly evolving, making it increasingly difficult to successfully defend against or implement adequate preventive measures.

We experience cyber-attacks of varying degrees on our technology infrastructure and systems and notwithstanding our defensive measures, experienced programmers, hackers or state actors may be able to penetrate our security controls through attacks such as phishing, impersonating authorized users, ransomware, viruses, worms and other malicious software programs, software supply chain attacks, exploitation of design flaws, bugs and other security weaknesses and vulnerabilities, covert introduction of malware to computers and networks, including those using techniques that change frequently or may be disguised or difficult to detect, or designed to remain dormant until a triggering event or that may continue undetected for an extended period of time.

A cybersecurity incident or other compromise of our information technology systems could result in unauthorized publication of confidential business or proprietary information belonging to us, a customer, supplier, employee or other third party, including personal data, result in violations of privacy or other laws, expose us to a risk of litigation, cause us to incur direct losses if attackers initiate wire transfers or access our bank or investment accounts, or damage our reputation.