What changed in this filing

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Item 1. Legal Proceedings

2022-08-09 compared with 2022-05-03 · 31 added, 33 removed, 478 unchanged (12% of the section changed)

61 unchanged sentences

Changes in our operations in response to COVID-19 and employee illnesses resulting from the pandemic have resulted in, and may continue to result in, a reduction in qualification activities with customers and a reduction in production levels, and may further result in a reduction in sales to our customers and product development efforts.

In addition, there may be incremental costs related to business continuity initiatives, which cannot be avoided or alleviated through succession planning, employees working remotely or teleconferencing technologies as well as inefficiencies, delays, and increased costs resulting from our efforts to mitigate the impact and spread of COVID-19 through the changes in our operations which we have enacted at certain of our locations around the world in an effort to protect our employees’ health and well-being (including the implementation of work-from-home policies, social-distancing measures, modified work schedules and shifts, the suspension of employee travel, and limits on

the number of employees attending in-person meetings and the number of people permitted to be present at our facilities at any one time);

19 through the changes in our operations which we have enacted at certain of our locations around the world in an effort to protect our employees’ health and well-being (including the implementation of work-from-home policies, social-distancing measures, modified work schedules and shifts, the suspension of employee travel, and limits on the number of employees attending in-person meetings and the number of people permitted to be present at our facilities at any one time);

Management focus on mitigating the impact of the COVID-19 pandemic, which has required and will continue to require a substantial investment of time and resources across our enterprise, which has resulted and can be expected to continue to result in a diversion of management attention and resources;

19 unchanged sentences

Operating costs have increased and may continue to increase further as a result of supply chain disruptions in connection with the sourcing of components, materials, equipment, engineering support, and services, labor shortages and other cost increases due to the COVID-19 pandemic and related government restrictions on travel and business operations.

We may also experience production delays, disruptions and cost increases due to the worldwide shortage of semiconductor components as a result of sharp increases in demand for semiconductor products in general.

We have also experienced, and may continue to experience, production delays, disruptions and cost increases due to the worldwide shortage of semiconductor components as a result of sharp increases in demand for semiconductor products in general.

These risks may be heightened because we obtain some of the components and subassemblies included in our systems from a limited group of suppliers and do not have long-term contracts with many of our suppliers.

2 unchanged sentences

If such a supplier is unable or unwilling to manufacture and deliver components to us on the time schedule and of the quality or quantity that we require, we may be forced to seek to engage an additional or replacement supplier or redesign our product to use alternative components, which could result in additional expenses and delays in product development or shipment of product to our customers.

Disruption or termination of the supply of components has delayed and could continue to delay shipments of some of our systems.

Disruption or termination of the supply of components has delayed and could continue to delay

shipments of some of our systems.

Such delays may damage our customer relationships and reduce our sales.

From time to time in the past, we have experienced temporary difficulties, and supply chain disruptions and logistics and shipping challenges caused by the COVID-19 pandemic and related restrictions on movement and business operations are currently causing difficulties and delays, in receiving shipments from our suppliers.

The lead-time required for shipments of some of our

components can be greater than six months.

The lead-time required for shipments of some of our components can be greater than six months.

In addition, the lead time required to qualify new suppliers for lasers and certain optics could be as long as a year, and the lead time required to qualify new suppliers of other components could be as long as nine months.

In some cases, we may need to purchase components in advance of receiving customer orders for product.

If we are unable to accurately predict our component needs, or if our component supply is disrupted, as it has been due to supply chain disruptions, logistics difficulties and shipping delays due to the COVID-19 pandemic, we may miss market opportunities by not being able to meet the demand for our systems.

If we are unable to accurately predict our component needs, or if our component supply is disrupted, as it has been due to supply chain disruptions, logistics difficulties and shipping delays due to the COVID-19 pandemic and global electronic component shortages, we may miss market opportunities by not being able to meet the demand for our systems.

Further, a significant increase in the price of one or more of these components or subassemblies could seriously harm our results of operations and cash flows.

26 unchanged sentences

If we overestimate our customers’ requirements, we may have excess inventory, which could lead to obsolete inventory and unexpected costs.

Conversely, if we underestimate our customers’ requirements, or if we experience sustained disruptions to our supply chain or shipping delays, including those we are currently experiencing due to the COVID-19 pandemic, we may have inadequate inventory, which could lead to foregone revenue opportunities, loss of potential market share and damage to customer relationships as product deliveries may not be made on a timely basis, disrupting our customers’ production schedules.

Conversely, if we underestimate our customers’ requirements, or if we experience sustained disruptions to our supply chain or shipping delays, including those we continue to experience due to the COVID-19 pandemic, we may have inadequate inventory, which could lead to foregone revenue opportunities, loss of potential market share and damage to customer relationships as product deliveries may not be made on a timely basis, disrupting our customers’ production schedules.

In response to anticipated long lead times to obtain inventory and materials from outside suppliers and foundries, we periodically order materials in advance of customer demand.

This advance ordering has in the past and may in the future result in excess inventory levels or unanticipated inventory write-downs if expected orders fail to materialize, or other factors make our products less saleable.

This advance ordering has in the past and may in the future result in excess

inventory levels or unanticipated inventory write-downs if expected orders fail to materialize, or other factors make our products less saleable.

In addition, any significant future cancellation or deferral of product orders could adversely affect our revenue and margins, increase inventory write-downs due to obsolete inventory, and adversely affect our operating results and stock price.

30 unchanged sentences

As a result, any prolonged disruption in the operations of our manufacturing facilities could seriously harm our ability to satisfy our customer order deadlines.

Shelter-in-place orders and other measures, including work-from-home and social distancing policies implemented during the COVID-19 pandemic to protect employees, have resulted in reduced workforce availability at product manufacturing sites and

reduced output at some of our vendors and suppliers.

Restrictions on our access to or operation of manufacturing facilities or on our support operations or workforce, or similar limitations for our vendors and suppliers, may impact our ability to meet customer demand and could have a material adverse effect on our financial condition and results of operations.

24 unchanged sentences

We may experience difficulties or delays in our development efforts with respect to new systems, and we may not ultimately be successful in our product enhancement efforts to improve and advance products or in responding effectively to technological change, as not all research and development activities result in viable commercial products.

In addition, we cannot provide assurance that we will be able to develop new products for the most opportunistic new markets and applications.

In addition, we cannot provide assurance that we will be able to develop new products for the most opportunistic new

markets and applications.

Any significant delay in releasing new systems could cause our products to become obsolete, adversely affect our reputation, give a competitor a first-to-market advantage or cause a competitor to achieve greater market share.

1 unchanged sentence

They may be able to develop products comparable or superior to those that we offer or may adapt more quickly to new technologies or evolving customer requirements.

In particular, we currently are developing additional product enhancements that we believe will address future customer requirements, but we may fail in a timely manner

to complete the development or introduction of these additional product enhancements successfully, or these product enhancements may not achieve market acceptance or be competitive.

In particular, we currently are developing additional product enhancements that we believe will address future customer requirements, but we may fail in a timely manner to complete the development or introduction of these additional product enhancements successfully, or these product enhancements may not achieve market acceptance or be competitive.

Further, customers that may otherwise desire to purchase our products from us and purchase other products from our competitors may nevertheless purchase competing products from our competitors rather than purchase our products due to a variety of reasons, including to gain favor or volume pricing from our competitors.

23 unchanged sentences

If we fail to adequately protect our intellectual property, it will give our competitors a significant advantage.

We own or have licensed a number of patents relating to our metrology, lithography, wafer and macro-defect inspection systems, including both embedded and application software, and have filed applications for additional patents.

We own or have licensed a number of patents relating to our metrology, lithography, wafer and macro-defect

inspection systems, including both embedded and application software, and have filed applications for additional patents.

Any of our pending patent applications may be rejected, and we may be unable to develop additional proprietary technology that is patentable in the future.

2 unchanged sentences

In addition to patent protection, we rely upon copyrights for protection of our proprietary software and documentation, trademarks for protection of our brand and source of goods, and trade secrets for protection of our confidential and proprietary information and technology.

However, we can give no assurance that our copyrights will be upheld or will successfully deter infringement by

third parties.

However, we can give no assurance that our copyrights will be upheld or will successfully deter infringement by third parties.

We routinely enter into confidentiality agreements with our employees and other third parties.

30 unchanged sentences

As part of our business, we store our data and certain data about our customers, vendors and employees in our information technology system.

capital and other resources to alleviate the problem, as well as incur significant costs and liabilities, including due to litigation, indemnity obligations, damages for contract breach, penalties for violation of applicable laws or regulations, and costs for remediation and other incentives offered to customers.

If there is a breach as a result of third-party action, employee error, malfeasance, break-ins or otherwise, of our security measures designed to protect this information and prevent data loss and other security breaches, and someone obtains unauthorized access to our customers’, vendors’ or employees’ data, we could face loss of business, regulatory investigations or court orders, our reputation could be severely damaged, we could be required to expend significant capital and other resources to alleviate the problem, as well as incur significant costs and liabilities, including due to litigation, indemnity obligations, damages for contract breach, penalties for violation of applicable laws or regulations, and costs for remediation and other incentives offered to customers.

In December 2021, a vulnerability was reported for the widely used Java logging library, Apache Log4j 2.

27 unchanged sentences

Each of our products also competes with products that use different metrology, inspection or lithography techniques.

Some of our competitors have greater financial, engineering, manufacturing and marketing resources, broader product offerings and service capabilities and larger installed customer bases than we do.

Some of our competitors have greater financial,

engineering, manufacturing and marketing resources, broader product offerings and service capabilities and larger installed customer bases than we do.

As a result, these competitors may be able to respond more quickly to new or emerging technologies or market developments by devoting greater resources to the development, promotion and sale of products, which, in turn, could impair sales of our products.

1 unchanged sentence

Many of our customers and potential customers in the semiconductor device manufacturing industry are large companies that require global support and service for their semiconductor capital equipment.

We believe that our global support and

service infrastructure is sufficient to meet the needs of our customers and potential customers.

We believe that our global support and service infrastructure is sufficient to meet the needs of our customers and potential customers.

However, some of our competitors have more extensive infrastructures than we do, which could place us at a disadvantage when competing for the business of global semiconductor device manufacturers.

25 unchanged sentences

Department of Commerce imposed new export controls on the transfer of many U.S.

products and technologies, including many commercial-grade electronics, to “military end users” or for “military end use” in China, which may include many Chinese commercial companies that sell products to or do business with the Chinese military.

products and technologies, including many commercial-grade electronics, to “military end users” or for “military end use” in

China, which may include many Chinese commercial companies that sell products to or do business with the Chinese military.

Likewise, since May 2019, the U.S.

1 unchanged sentence

content or rely on U.S.

and a large number of its overseas affiliates, including Ningbo Semiconductor International Corporation (NSIC) and SJ Semiconductor (Jiangyin) Corporation.

software or technology, to Huawei Technologies Co., Ltd., and a large number of its overseas affiliates, including HiSilicon, followed by a comparable action in December of 2020, related to Semiconductor Manufacturing International Corporation (SMIC) and a large number of its overseas affiliates, including Ningbo Semiconductor International Corporation (NSIC) and SJ Semiconductor (Jiangyin) Corporation.

It is possible that the U.S.

31 unchanged sentences

However, if the Russia-Ukraine conflict escalates and/or the U.S.

and other jurisdictions impose additional sanctions on Russia and its supporters, there could be a disruption to the global economy and/or supply chains that could adversely affect our business.

and other jurisdictions impose additional sanctions on Russia and its supporters, there could be a disruption to the global economy and/or

supply chains that could adversely affect our business.

For example, components used in certain of our products use raw materials that are sourced from Russia and Ukraine;

4 unchanged sentences

Language and other cultural differences may also inhibit our sales and marketing efforts and create internal communication problems among our U.S.

and foreign research

and development teams, increasing the difficulty of managing multiple remote locations performing various development, quality assurance, and yield ramp analysis projects.

and foreign research and development teams, increasing the difficulty of managing multiple remote locations performing various development, quality assurance, and yield ramp analysis projects.

Currency fluctuations may impact our international sales or expose us to exchange rate risk.

37 unchanged sentences

The Organization for Economic Co-operation and Development (“OECD”), released guidance covering various topics, including country-by-country reporting, definitional changes to permanent establishment and Base Erosion and Profit Shifting (“BEPS”), an initiative that aims to standardize and modernize global tax policy.

Depending on the final form of guidance adopted by OECD members and legislation ultimately enacted, if any, there may be significant consequences for us due to our

international business activities, including, but not limited to, an increase in our tax uncertainty and adverse effects on our provision for income taxes.

Depending on the final form of guidance adopted by OECD members and legislation ultimately enacted, if any, there may be significant consequences for us due to our international business activities, including, but not limited to, an increase in our tax uncertainty and adverse effects on our provision for income taxes.

Turmoil or fluctuations in the credit markets and the financial services industry may negatively impact our business, results of operations, financial condition or liquidity, and our factoring arrangements may expose us to additional risks.

9 unchanged sentences

In addition to the potential adverse effects on our business operations of such an event, we are committed to maintaining safe working conditions for our employees and sourcing, manufacturing, and distributing our products in a responsible and environmentally friendly manner, and any failure on our part to do so may cause reputational harm for the Company.

Customer and investor focus on our environmental, social and governance responsibility practices and policies, and related regulatory requirements, may make our supply chain more complex, and any failure to comply with customer or investor guidelines or applicable laws and regulations may adversely affect our relationship with customers and investors or our reputation and results of operations.

or investor guidelines or applicable laws and regulations may adversely affect our relationship with customers and investors or our reputation and results of operations.

There is an increasing focus on corporate environmental, social and governance (“ESG”) responsibility in the semiconductor industry, particularly with OEMs that manufacture consumer electronics.

48 unchanged sentences

If our customers have difficulties in obtaining capital or financing, this could result in lower sales.

Customers with liquidity issues could also

result in an increase in bad debt expense.

Customers with liquidity issues could also result in an increase in bad debt expense.

These conditions could also affect our key suppliers, which could affect their ability to supply parts and result in delays of our customer shipments.

34 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Legal Proceedings