Item 1A. Risk Factors
Item 1A.
Risk Factors
Except as set forth below, there have been no material changes to the risk factors set forth in “Risk Factors” in Part I, Item 1A of our Annual Report.
We entered into a Supply Agreement with Samsung Semiconductor with the right to purchase from Samsung Semiconductor for an aggregate of up to $1.5 billion of DRAM and NAND products, subject to certain limitations, and if Samsung Semiconductor breaches or is unable to honor its obligations under the Supply Agreement, our business could be adversely impacted. In addition, the quarterly license fee payments we expect to receive under the Samsung License Agreement are subject to adjustment, reduction, and potential refund obligations, which could reduce the amounts we ultimately retain.
In August 2026, we entered into the Supply Agreement with Samsung Semiconductor for a term of five years, which grants us the right to purchase from Samsung Semiconductor up to $300 million of DRAM and NAND products each year for an aggregate of up to $1.5 billion during the term of the Supply Agreement, subject to certain limitations. There can be no assurance that Samsung Semiconductor will fulfill its obligations under the Supply Agreement. Samsung Semiconductor may breach or fail to honor its obligations under the Supply Agreement for a number of reasons, including as a result of financial difficulties, operational disruptions, changes in its business strategy or priorities, disputes regarding pricing or product specifications, regulatory restrictions (including export controls, sanctions, or trade restrictions) affecting Samsung Semiconductor’s ability to transact with us, or a determination by Samsung Semiconductor that performance under the Supply Agreement is no longer commercially viable. In addition, Samsung Semiconductor may experience manufacturing constraints, production delays, or quality control issues that prevent it from delivering products in accordance with the terms of the Supply Agreement. The Supply Agreement also contains significant limitations on our remedies in the event of Samsung Semiconductor's breach or non-performance. As a result, even if Samsung Semiconductor fails to perform, our ability to recover damages may be substantially limited.
If the Supply Agreement is terminated or if Samsung Semiconductor is otherwise unable or unwilling to supply the products upon our exercise of purchase rights thereunder, we may experience supply shortages for certain of our products, increased lead times and delays in the delivery of our products to customers. We may also be unable to procure substitute products on comparable terms or at all. Any such disruption could adversely affect our ability to satisfy customer demand, result in lost revenue, and cause us to incur additional costs, any of which could have a material adverse effect on our business, results of operations and financial condition.
In addition, under the Samsung License Agreement, the quarterly license fee payments payable by Samsung are calculated based on a revenue-based formula and are subject to a per-quarter cap and to certain adjustment and refund rights that may apply to royalties received in years four and five of the license term. As a result, the aggregate amounts we ultimately receive under the Samsung License Agreement may be less than the maximum amounts payable thereunder. If we fail to receive the amounts expected or due to us pursuant to the Samsung License Agreement, our business, prospects and results of operations and financial condition may be adversely affected.
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