What changed in this filing

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Item 1. Business

2023-10-20 compared with 2022-10-14 · 146 added, 140 removed, 191 unchanged (60% of the section changed)

At SGH, we power growth and expand possibilities by continually investing in our people, innovation and new opportunities.

Our diverse lines of businesses ‒ across computing, memory and LED lighting solutions ‒ all focus on serving customers by delivering engineer-driven technology solutions to specialty end markets.

SGH serves as a foundation and a support for each of our businesses, while also empowering them to deliver their own unique solutions to their customers so unlock avenues for growth and technological advancement.

At SGH, we design, build and manage high-performance, high-availability enterprise solutions that help our customers solve for the future.

Across our computing, memory and LED lines of business, we focus on serving our customers by providing deep technical knowledge and expertise, custom design engineering, build-to-order flexibility and a commitment to best-in-class quality.

Our Business Lines

Since our inception over 30 years ago, SGH has grown into a diversified group of businesses focused on the design and manufacture of specialty solutions for the computing, memory and LED markets.

Our success is based on a customer-focused approach characterized by a commitment to quality, advanced technical expertise, quick time-to-market, build-to-order flexibility and excellence in customer service.

We have accelerated our growth by completing five acquisitions since 2018.

In connection with our acquisition of Cree LED in 2021, we reorganized the Company into three lines of business:

Memory Solutions, Intelligent Platform Solutions (“IPS”) and LED Solutions.

More recently, on August 29, 2022, we announced the completion of our acquisition of Stratus Technologies, Inc., a global leader in simplified, protected and autonomous computing solutions in the data center and at the Edge, which will operate as a part of IPS.

In addition to driving growth organically and through acquisitions, we use the SGH operating system to support and drive operational efficiency and performance.

Over the last five years, SGH has evolved from a memory module company into a diversified business focused on providing high-performance, high-availability solutions to enterprise customers in markets such as computing, memory and LED end markets.

Through our customer-centered approach, we are committed to delivering the highest quality product and services, ensuring efficient time-to-market and build-to-order flexibility, offering advanced technical expertise and providing excellent customer service.

As part of this transformation, SGH has completed five acquisitions since 2018.

Upon acquiring Cree LED in 2021, we restructured the company into three lines of business:

Intelligent Platform Solutions (“IPS”), Memory Solutions and LED Solutions.

More recently, in August 2022, we acquired Stratus Technologies, Inc.

(“Stratus”), a leading provider of high-availability, fault-tolerant computing platforms, software and services, to expand our IPS offerings at the edge and at the core.

In June 2023, we announced an agreement to divest a majority stake in our Brazil business, which manufactures standards-based memory products for consumer electronics sold in Brazil.

The completion of this transaction will further refine our focus on advanced solutions for enterprise customers.

SGH is unified by our operating system, which supports and drives operational efficiency and performance.

SGH’s operating system incorporates best practices to ensure our business lines are empowered to deliver for our customers consistently and efficiently.

Our employees are the key to our success.

SGH has a diverse workforce of approximately 3,600 employees across the globe who are focused on innovation and customer satisfaction.

At SGH, our people are our greatest asset.

We understand that diverse, inclusive and equitable workplaces require continuous and intentional actions to achieve success.

As of the end of fiscal year 2023, SGH employed approximately 3,000 employees worldwide, with a majority of our employees in China, Malaysia and the United States.

Acquisition of Stratus Technologies

On August 29, 2022, we completed the acquisition of Storm Private Holdings I Ltd., a Cayman Islands exempted company (“Stratus Holding Company” and together with its subsidiaries, “Stratus Technologies”).

At the closing, SGH paid a cash purchase price of $225 million, subject to certain adjustments.

In addition, the seller has the right to receive, and SGH will

be obligated to pay, contingent consideration (if any) of up to $50 million (the “Earn-Out”) based on the gross profit performance of the Stratus business during the first full 12 fiscal months of Stratus following the closing.

The Earn-Out, if any, will be payable in cash, ordinary shares of SGH, or a mix of cash and SGH Shares, at SGH’s election.

At the closing, we paid a cash purchase price of $225 million, subject to certain adjustments.

In addition, the seller has the right to receive, and we are obligated to pay, contingent consideration of up to $50 million (the “Stratus Earnout”) based on the gross profit performance of the Stratus business during the first full 12 fiscal months of Stratus following the closing.

Stratus is a global leader in simplified, protected and autonomous computing platforms and services in the data center and at the Edge.

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See “PART II – Item 8.

Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Subsequent Events – Acquisition of Stratus Technologies.”

The outbreak of coronavirus disease 2019 (“COVID-19”) has resulted in substantial loss of life, economic disruption and government intervention worldwide.

While we have not yet experienced significant disruptions of our operations as a result of the COVID-19 pandemic, the pandemic resulted in reduced sales volumes of certain product lines since early calendar 2020.

COVID-19 also disrupted our product development, marketing and corporate development activities, and has more recently affected our supply chain.

Our recently acquired LED Business experienced similar impacts from the pandemic from early in calendar 2020.

If these conditions continue, or if we have an outbreak in any of our facilities, sales volumes may be negatively impacted and we may, among other issues, experience, in any or all product lines, delays in product development, a decreased ability to support our customers, disruptions in sales and manufacturing activities and overall reduced productivity each of which could have a negative impact on our ability to meet customer commitments and on our revenue and profitability.

The reduction of investment in new capacity due to the pandemic, coupled with strong demand to expand delivery and logistics, internet and cloud services as well as a rebound in economic conditions and general demand at a pace faster than expected, has resulted in significant supply shortages that may impact our ability to manufacture products for our customers and may result in rising prices of the materials we need to manufacture our products.

We may not be able to pass on these rising costs to our customers which could result in a negative impact to our gross margins.

Furthermore, if there is a significant outbreak or if travel restrictions or stay-at-home or work remote or from home conditions or other governmental or voluntary restrictions relating to the COVID-19 pandemic significantly impact our suppliers’ ability to manufacture or deliver raw materials or provide key components or services, we could experience more delays or reductions in our ability to manufacture and ship products to our customers.

While certain segments of our customer base are experiencing strong demand, the pandemic may negatively impact the demand for other segments for our customer base or those customers’ ability to manufacture their products, which could reduce their demand for our products or services.

Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Business Acquisitions – Stratus Technologies.”

Divestiture of SMART Brazil

On June 13, 2023, we entered into an agreement to sell an 81% interest in SMART Modular Technologies Brasil – Indústria e Comercio de Componentes Ltda.

(“SMART Brazil”) to Lexar Europe B.V.

(“Lexar Europe”), an affiliate of Shenzhen Longsys Electronics Co.

Ltd., for approximately $205 million.

The transaction is expected to close at the end of calendar year 2023 or beginning of calendar year 2024, subject to required regulatory approvals and satisfaction of customary closing conditions.

SMART Brazil operates as a stand-alone business which assembles and tests modules for electronics manufacturers that sell devices to Brazilian consumers.

In line with our strategic priorities, the majority divestiture of our standards-based, commodity module business in Brazil will enable us to focus on our strategy of delivering high-performance, high availability solutions to our enterprise customers.

This transaction also strengthens our financial position, enabling us to increase our strategic investments into domestic research and development and U.S.-based production of advanced technologies.

Presentation of SMART Brazil as Discontinued Operations :

In accordance with authoritative guidance under U.S.

GAAP, we concluded that our SMART Brazil operations met held-for-sale and discontinued operations accounting criteria as of the end of fiscal year 2023.

Accordingly, we have presented the balance sheets, results of operations and cash flows of SMART Brazil in this Annual Report on Form 10-K, including in the accompanying consolidated financial statements and notes, as discontinued operations for all periods presented.

SMART Brazil was previously reported as part of our Memory Solutions segment.

Unless otherwise noted, discussion within this Annual Report on Form 10-K relates to our continuing operations.

See “PART II – Item 8.

Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Divestiture of SMART Brazil.”

While the ongoing effects of the COVID-19 outbreak have stabilized, the COVID-19 pandemic (“COVID-19”) has resulted in substantial loss of life, economic disruption and government intervention worldwide.

As a result, we have experienced fluctuating sales volumes of certain product lines since early calendar 2020.

It also disrupted our product development, marketing and corporate development activities.

We are unable to accurately predict the full impact that COVID-19 will continue to have.

For example, we may, among other issues, experience, in any or all product lines, delays in product development, a decreased ability to support our customers, disruptions in sales and manufacturing activities and overall reduced productivity, each of which could have a negative impact on our ability to meet customer commitments and on our revenue and profitability.

While initially we did not experience a major disruption in our supply chain as a result of COVID-19, we cannot guarantee that such downstream effects will not impact us in the future.

We are unable to accurately predict the impact that COVID-19 will have in future periods due to various uncertainties and future developments, including the evolution and severity of the disease, the occurrence of other epidemics, the imposition of related public health measures and travel and business restrictions or other actions that may be taken by governmental authorities in an effort to contain or treat the virus, all of which, together with the disruptions and other factors discussed above, could have a material adverse effect on our customer relationships, operating results, cash flows and financial condition and have a negative impact on our share price.

Our Products and Services

Memory Solutions

Our Memory Solutions group provides high performance and reliable memory solutions through the design, development and advanced packaging of leading-edge to extended lifecycle products.

These specialty products are tailored to meet customer-specific requirements across networking and communications, enterprise storage, computing, including desktop, notebook and server applications, smartphones, datacenter and other vertical markets.

These products are marketed to OEMs and to commercial and government customers.

The Memory Solutions group also offers SMART Supply Chain Services, which provides customized, integrated supply chain services to enable our customers to better manage supply chain planning and execution, reduce costs and increase productivity.

Our Memory Solutions business line enables high-performance, high-availability computing solutions through the design, development and advanced packaging of specialty memory and storage solutions.

Products include dynamic random access memory (“DRAM”) modules, solid-state/flash storage and other advanced memory solutions critical to networking and telecom, data analytics, artificial intelligence (“AI”) and machine learning (“ML”).

Our Memory Solutions group also offers SMART Supply Chain Services, which provides customized, integrated supply chain services to enable our customers to better manage supply chain planning and execution, reduce costs and increase productivity.

Our Memory Solutions group had net sales of $443.3 million, $551.7 million and $486.2 million in 2023, 2022 and 2021, respectively.

SMART Modular Technologies

SMART Modular Technologies focuses on the design and manufacture of application-specific memory products, technical support and value-added testing services that differ from the core focus of standard memory module providers.

We collaborate closely with our global OEM customers throughout their design process and across multiple projects to create solutions for demanding applications with differentiated requirements, such as specific form factors, higher density, lower power, specific firmware or greater durability and reliability compared to standard solutions.

We target opportunities where we believe we can be a primary supplier of longer-lifecycle solutions to OEM customers for diverse and growing end markets within the industrial, government, networking and communications and enterprise storage and computing markets

as well as other vertical markets.

Through its brand, SMART Modular Technologies, Memory Solutions has been helping customers enable high performance computing through the design, development and advanced packaging of specialty memory solutions for over 30 years.

Our robust portfolio ranges from today’s leading edge technologies to standard and legacy DRAM and Flash storage products.

We provide standard, ruggedized and custom memory and storage solutions that meet the needs of diverse applications in high-growth markets.

We collaborate closely with our global original equipment manufacturer (“OEM”) customers throughout their design process and across multiple projects to create solutions for demanding applications with differentiated requirements, such as specific form factors, higher density, lower power, specific firmware or greater durability and reliability compared to standard solutions.

In this business, we offer an extensive portfolio of approximately 2,000 products available in standard and rugged formats.

We offer an extensive lineup of dynamic random access memory (“DRAM”) modules utilizing a wide range of DRAM technologies from legacy synchronous DRAM to double data rate (“DDR”), DDR2, DDR3 and leading-edge, high-performance DDR4 and DDR5 DRAM devices.

Our offerings include an extensive lineup of DRAM modules utilizing a wide range of DRAM technologies from legacy synchronous DRAM to double data rate (“DDR”), DDR2, DDR3 and leading-edge, high-performance DDR4 and DDR5 DRAM devices.

These technologies are incorporated into standard memory, enterprise memory and hybrid memory solutions in standard and rugged formats.

These modules encompass a broad range of form factors and functions, including dual in-line memory modules (“DIMMs”), nonvolatile DIMMs, load reduced DIMMs, registered DIMMs, unbuffered DIMMs, small outline dual in-line memory modules and mini-DIMMs and XR-DIMMs for industrial and government, networking and communications, enterprise storage and computing and other vertical markets.

These modules encompass a broad range of form factors and functions, including dual in-line memory modules (“DIMMs”), nonvolatile DIMMs, differential DIMM (“DDIMM”), load reduced DIMMs, registered DIMMs, unbuffered DIMMs, small outline dual in-line memory modules and mini-DIMMs for industrial, government, networking and communications, enterprise storage and computing and other vertical markets.

These memory modules come in configurations of up to 288 pins and densities of up to 128 gigabytes.

We support leading-edge and emerging interconnect standards such as OpenCAPI with our Differential DIMM (“DDIMM”).

We support leading-edge and emerging interconnect standards such as Compute Express Link TM (“CXL TM ”).

We utilize advanced printed circuit board and device packaging and stacking technologies to achieve cost-effective, high-density solutions.

Our products are designed to meet the quality requirements of enterprise class systems pursuant to stringent specifications required by various high-speed applications.

We work closely with our customers to develop solutions that incorporate application-specific requirements.

Our products are designed into our customers’ applications for industrial, networking and communications, enterprise storage and computing, government and other vertical markets.

We also design and manufacture embedded and removable Flash memory products in a variety of form factors and capacities incorporated into storage and hybrid memory solutions in standard and rugged formats.

Our wide range of Flash memory products includes solid-state drives (“SSDs”), Serial Advanced Technology Attachment (“SATA”) and PCIe NVMe products in 2.5" enclosures, M.2 and other module form factors.

Our wide range of Flash memory products includes solid-state drives (“SSDs”), Serial Advanced Technology Attachment (“SATA”) and peripheral component interconnect express (“PCIe”) NVMe products in 2.5" enclosures, M.2 and other module form factors.

We also offer Flash component products such as embedded MultiMediaCard (“eMMC”) and embedded and removable products in USB, CompactFlash and SD and microSD Card configurations.

Our Flash capabilities include application-specific and customized firmware development.

In Brazil, we have established a leading market position, as measured by market share, where we are the largest in-country manufacturer of memory modules and our products are designed and qualified by OEM customers for desktops, notebooks, servers and smartphones.

In this market, we process imported wafers and die and we cut, package and test them to create embedded Multi Chip Packages (“eMCP”), DRAM modules and other DRAM and Flash-based products.

We have a strategic, long-term relationship with a global memory wafer supplier that has provided us with a stable source of competitively priced wafers for the Brazil market.

The relationship also provides our supplier with access to that market through our in-country infrastructure and capabilities.

Our Memory Solutions segment also offers Zero Failure Rate (“Zefr TM ”) memory modules to support powerful high-performance computing (“HPC”) platforms that process massive amounts of data.

Zefr is a screening process performed on OEM original memory modules or SMART Modular built memory modules to deliver ultra-high reliability for demanding workloads.

SMART Supply Chain Services

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We tailor our supply chain service offerings to meet the specific needs of our customers to enable our customers to manage supply chain planning and execution, which reduces costs and increases productivity.

Our supply chain services are based on our proprietary software platform that we develop, which is then integrated with our customers’ respective procurement management systems as well as our suppliers’ distribution management systems.

Our supply chain services are based on our proprietary software platform that we develop, which is then

integrated with our customers’ respective procurement management systems as well as our suppliers’ distribution management systems.

Our global footprint allows us to provide these services to customers and their manufacturing partners in many regions of the world and our global inventory management capabilities allow us to manage a vast array of customer and supplier part numbers across worldwide manufacturing and logistics hubs, helping our customers minimize inventory levels while maintaining reliable delivery and availability of supply.

Intelligent Platform Solutions

Our Intelligent Platform Solutions group (“IPS”) operates under the Penguin Solutions™ umbrella brand and includes the Penguin Computing™ and Penguin Edge™ product brands.

Penguin Computing offers specialized platform solutions for high-performance computing (“HPC”), artificial intelligence (“AI”), machine learning (“ML”) and advanced modeling for technology research.

We provide these leading-edge solutions to customers in the government, hyperscale, energy, financial services and education markets.

Penguin Edge offers edge computing solutions for embedded and wireless applications, specializing in high-performance products for a wide range of customers in retail, government, telecommunications, health care, smart city and industrial applications.

Our Intelligent Platform Solutions business line offers high-performance, high-availability/fault-tolerant integrated computing platforms and services for AI, accelerated computing, ML and the internet of things (“IoT”) that span the continuum of edge, core and cloud.

Within our IPS business line are two operating brands – Penguin Solutions™, the umbrella brand for Penguin Computing™ and Penguin Edge™ products, and Stratus®.

Penguin Computing focuses on technical computing for core and cloud environments via industry-leading HPC and AI solutions.

Penguin Edge offers edge computing solutions for embedded and wireless applications, specializing in high-performance products for customers in government, health care, industrial and telecommunications applications.

Stratus provides simplified, protected and autonomous fault tolerant computing solutions in the data center and at the Edge through hardware, software and services offerings.

We provide these leading-edge solutions to customers in the education, energy, financial services, government, hyperscale and manufacturing markets.

IPS had net sales of $749.7 million, $441.0 million and $344.8 million in 2023, 2022 and 2021, respectively.

Penguin Computing

Through Penguin Computing, we provide a robust portfolio of hardware (including solutions based on the Open Compute Project (“OCP”)) and software products and services offerings.

Our solutions are comprised of servers, software, integrated turn-key clusters, enterprise-grade storage and networking, all available as hardware and software or cloud-based solutions via Penguin-On-Demand (“POD”).

Our product offering includes our Open Compute Tundra Extreme Scale products to solve technical and density challenges.

We also provide turn-key storage solutions that provide power and flexibility with hardware optimized for software-defined storage.

Our rackmount servers and graphics processing unit (“GPU”) accelerated computing platforms give customers powerful tools to implement their AI and ML advanced modeling and HPC applications.

Complementing our compute, storage and networking hardware solutions is our Scyld Software line of cloud and cluster management software.

Through Penguin Computing, we provide a robust portfolio of hardware (including solutions based on the Open Compute Project (“OCP”)), software products and services offerings.

Our solutions are comprised of servers, software, integrated turn-key clusters, enterprise-grade storage and networking (available as hardware and software) and cloud-based solutions via Penguin-On-Demand (“POD”).

Our product offering includes our OCP-inspired Tundra Extreme Scale products to solve technical compute and density challenges.

Our rackmount servers and graphics processing unit (“GPU”) accelerated computing platforms provide customers powerful tools focused on the development and implementation of AI, ML advanced modeling and HPC applications.

Complementing our compute, storage and networking hardware solutions is our Scyld ClusterWare® line of cloud and cluster management software.

These products provide advanced capabilities for management of HPC clusters from department-level systems to supercomputers.

In addition, our products and services enable customers to provide their own HPC cloud with remote access via our proprietary browser-based Virtual Desktop Infrastructure (“VDI”) solution.

Our services offering include solution design, deployment services, software automation and managed services.

Our portfolio includes solution design, build, deployment and management, software automation and managed services.

The Penguin Edge product portfolio is a combination of SMART Embedded Computing (“SMART EC”) and SMART Wireless Computing (“SMART Wireless”) operating under the unified Penguin Edge product brand.

Penguin Edge products include system-on-modules (“SoMs”), single board computers (“SBCs”), peripheral component interconnect express (“PCIe”) accelerators and application-ready platforms including bladed edge servers.

Penguin Edge products include system-on-modules (“SoMs”), single board computers (“SBCs”), PCIe accelerators and application-ready platforms including bladed edge servers.

These solutions extend insight, intelligence and analytical capabilities closer to where the data is generated, optimizing a range of use cases across industries and rugged environments.

Target markets for Penguin Edge solutions include network edge computing, government, telecommunications infrastructure and manufacturing applications, as well as Internet of Things (“IoT”) endpoint applications such as smart city, digital health, digital signage and smart buildings.

Target markets for Penguin Edge solutions include network edge computing, government, telecommunications infrastructure and manufacturing applications, as well as IoT endpoint applications such as smart city, digital health, digital signage and smart buildings.

During the second quarter of 2023, we initiated a plan pursuant to which we intend to wind down manufacturing and discontinue the sale of legacy products offered through Penguin Edge by approximately the end of calendar 2024.

See “PART II – Item 8.

Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Intangible Assets and Goodwill – Impairment of Penguin Edge Goodwill.”

Through Stratus, we provide for the continuous availability of business-critical applications by delivering zero-touch computing platforms that are simple to deploy and maintain, protected from interruptions and threats, and autonomous.

For 40 years, Stratus has provided reliable and redundant computing, allowing global Fortune 500 companies and small-to-medium sized businesses to securely and remotely turn data into actionable intelligence at the Edge, data center and cloud – driving uptime and efficiency.

As a result, IT and operational technology professionals across financial services, telecom,

oil and gas, transportation, healthcare, retail and industrial automation rely on Stratus’ platforms and services to achieve greater productivity, efficiency, safety, security, sustainability and peace of mind.

Our high-availability and fault-tolerant platforms include Stratus ztC® Edge, a secure, purpose-built, highly automated computing platform for resource constrained and remote locations and rugged environments;

Stratus ftServer®, a fully integrated, fault-tolerant computing platform for complex software workloads;

Stratus ftServer® V series, a market leader for continuously available processing of high volume, highly sensitive transactions leveraging Stratus’ VOS (“Virtual Operating System”);

and Stratus everRun®, a flexible software only option for ensuring fault tolerance of third party hardware.

These platforms are backed by dedicated and expert customer, professional and managed services.

LED Solutions

Our LED Solutions group offers a broad portfolio of application-optimized LEDs focused on improving on lumen density, intensity, efficacy, optical control and reliability.

Our LED Solutions group offers a broad portfolio of application-optimized LEDs focused on improving lumen density, intensity, efficacy, optical control and/or reliability.

Backed by expert design assistance and superior sales support, our LED products enable our customers to develop and market LED-based products for lighting, video screens and specialty lighting applications.

Our LED Solutions group had net sales of $403.2 million in 2022 and $224.6 million in the second half of 2021.

Our LED Solutions group was formed after the closing of our acquisition of the LED Business from Cree in March 2021 offers products under the CreeLED® brand.

For over 30 years, CreeLED has been a leader in LED lighting technology, offering new and differentiated LED solutions to a broad base of customers across multiple market segments.

CreeLED solutions include CreeLED chips and components.

Our CreeLED chip products include blue and green LED chips based on gallium nitride (“GaN”) and related materials.

Our LED Solutions group, which was formed after the closing of our acquisition of Cree LED in March 2021, offers products under the CreeLED® brand.

Our LED Solutions group had net sales of $248.3 million, $403.2 million and $224.6 million in 2023, 2022 and 2021, respectively.

For over 30 years, Cree LED has been a leader in LED lighting technology, offering innovative and differentiated LED solutions to a broad base of customers across multiple market segments.

The Cree LED product offering includes both chips and packaged LED components.

Our Cree LED chip products include blue and green LED chips based on gallium nitride (“GaN”) and related materials.

LED chips are used in a number of applications and are currently available in a range of brightness levels, wavelengths (colors) and sizes.

Products using our blue and green LED chips are featured in a variety of applications including automotive, video screens, gaming displays, heart rate monitor and function indicator lights.

Customers also combine our blue LED chips with phosphors to create white LEDs, which are used in various applications for indoor and outdoor illumination, full-color display screens, liquid crystal display (“LCD”) backlighting, a variety of medical and industrial applications, automotive interior lighting and indicators, headlamps, daytime running lights and directional indicators.

Our CreeLED components include packaged LED products, from our XLamp®, J Series® and high brightness product lines.

Customers also combine our blue LED chips with phosphors to create white LEDs, which are used in various applications for indoor and outdoor illumination, a variety of medical and industrial applications, automotive interior lighting and indicators, headlamps and daytime running lights.

Our Cree LED XLamp®, J Series® and high brightness product lines feature packaged LED components.

Our XLamp and J series LED components are designed to meet a broad range of market needs for lighting applications, including general illumination (both indoor and outdoor applications), portable, architectural, signal and transportation lighting.

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Our SMD LED component products are available in a full range of colors designed to meet a broad range of market needs, including video, signage, general illumination, transportation, gaming and specialty lighting.

Our through-hole packaged LED component products are available in a full range of colors primarily designed for the signage market and provide users with color and brightness consistency across a wide viewing area.

Our through-hole packaged LED component products are available in a full range of colors primarily designed for the signage market.

Manufacturing and Test

We have manufacturing facilities in Atibaia, Brazil;

Newark and Fremont, California;

and Penang, Malaysia, which are all certified in one or more of the following:

We have manufacturing facilities in Newark and Fremont, California and Penang, Malaysia, all of which are certified in one or more of the following:

ISO 9001:2015, ISO 14001:2015 and ISO 45001:2018.

We also have a manufacturing facility in Huizhou, China, which is ISO9001:2015, ISO14001:2015 and IATF16949:2016 certified.

In addition, in early fiscal 2022, we began manufacturing operations in our Manaus, Brazil facility.

We also have a test and integration facility in Tempe, Arizona for our Penguin Edge portfolio of products.

Additionally, we are a member of the Responsible Business Alliance (“RBA”) and our manufacturing facilities in Brazil, Malaysia and California are compliant with the RBA Code of Conduct, which is increasingly a business requirement of our customers.

In addition, have a test and integration facility in Tempe, Arizona for our Penguin Edge portfolio of products.

Additionally, we are a member of the Responsible Business Alliance (“RBA”) and our manufacturing facilities in Malaysia and California are compliant with the RBA Code of Conduct, which is increasingly a business requirement of our customers.

We believe that our manufacturing operations for Memory Solutions have benefited from our many years of design experience and our existing library of proven designs which stress high manufacturability and quality.

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While we do not own or operate wafer fabrication facilities, we have capabilities for subsequent stages of the product manufacturing cycle.

Our manufacturing capabilities in Atibaia, Brazil and Huizhou, China receive unmounted integrated circuits and LED chips in wafer or discrete chip form from third-party wafer fabrication facilities, preparing and packaging the die into semiconductor and LED components, testing the components and, in some cases, assembling components on substrates or printed circuit boards to make modules, multi-chip packages and LED products.

Through our investments and experience, we have developed expertise in semiconductor and LED technology and advanced manufacturing and test that allows us to manufacture semiconductor products with shrinking geometries, increasing complexity and broader levels of performance and, for LED products, brighter, more efficient and lower cost LED chips and components for a broad range of lighting applications.

We have made significant capital investments to further expand our manufacturing and test capabilities and operate at an even higher level of efficiency.

Within IPS, we have utilized two primary methods of fulfilling demand for products:

building products to order and configuring products to order, in each case using components and subassemblies we acquire from a wide range of vendors.

In our manufacturing facilities in Huizhou, China, we receive LED chips from third-party wafer

fabrication facilities, prepare and package die into LED components, test components and, in some cases, assemble components on substrates or printed circuit boards to manufacture LED products.

Through our investments and experience, we have developed expertise in LED technology which allow for LED products that provide brighter, more efficient and lower cost LED chips and components for a broad range of lighting applications.

Within IPS, we have utilized three primary methods of fulfilling demand for products:

using third-party contract manufacturers, building products to order and configuring products to order, in each case using components and subassemblies we acquire from a wide range of vendors.

For Stratus, we primarily use third-party manufacturers for most products, with some minor assembly for certain product lines in our Ireland facility.

For Penguin Computing products, we have developed capabilities for design and development of large scale systems and dense HPC and AI clusters that have significant power and cooling requirements with manufacturing and test for our HPC products being done in Fremont, California.

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These practices enable us to reduce the occurrence of early life failures and weak module fallout which can save our customers from the often significant expenses associated with replacing products that fail after their field deployment.

We believe our customers rely on us as a strategic supplier due to our application-specific products, quality, technical support;

our global footprint;

and our ability to provide locally manufactured products.

We believe our customers rely on us as a strategic supplier due to our high-performance, high-availability, application-specific products, quality, technical support and our global footprint.

We also provide customized, integrated supply chain services to certain customers to assist them in the management and execution of their procurement and distribution processes.

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Our sales are made primarily pursuant to customer purchase orders and are not based on long-term supply agreements.

We sell our products and solutions directly to a diversified base of local and global OEM, enterprise and government customers.

In our Memory Solutions group, we sell to OEM customers in industrial, government, networking and communications, enterprise storage, computing and mobile, as well as other vertical markets.

In IPS, we sell Penguin Computing products to government and enterprise customers in financial services, energy, hyperscale and education markets.

We sell our products and solutions both directly and through third-party channels to a diversified base of local and global OEM, enterprise and government customers.

In our Memory Solutions group, we sell to OEM customers in industrial, government, networking and communications and enterprise storage, as well as other vertical markets.

In IPS, we sell Stratus products and services through direct sales and third-party channels, including distributors, value-added resellers, independent software vendors and systems integrators around the world.

We sell Penguin Computing products to government and enterprise customers in financial services, energy, hyperscale and education markets.

We sell Penguin Edge products to OEM customers, system integrators and through distribution to government, telecommunications infrastructure, industrial, network edge computing and transportation markets as well as in IoT endpoint applications such as smart city, digital health, digital signage and smart buildings markets.

Stratus end user customers represent industries including financial services, telecom, oil and gas, transportation, healthcare, retail and industrial automation.

Our LED Solutions group sells LED chips and components to manufacturers and electronic component distributors.

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Similar to other global semiconductor component suppliers, our LED Solutions business has historically experienced, and in the future may experience, seasonally lower sales during the earlier part of the calendar year.

In 2022, 2021 and 2020, sales to our ten largest end customers (including sales to contract manufacturers or ODMs at the direction of such end customers) accounted for 65%, 65% and 66% of total net sales, respectively.

In 2023, 2022 and 2021, sales to our ten largest end customers (including sales to contract manufacturers or original design manufacturers (“ODMs”) at the direction of such end customers) accounted for 60%, 62% and 59% of total net sales, respectively.

See “PART II – Item 8.

Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Concentrations.”

To address the needs of our customers, we have developed and maintained relationships with leading suppliers located in Asia, Europe and the Americas.

To address the needs of our customers, we have developed and maintained relationships with leading suppliers and contract manufacturers located in Asia, Europe and the Americas.

Our semiconductor suppliers include many of the world’s largest memory manufacturers including Samsung Semiconductor, Inc., Micron Technology, Inc., SK hynix, Inc.

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as well as providers of subsystems including Intel and Giga-Byte Technology Co., Ltd.;

networking products including Artista Networks, Inc.

networking products including Arista Networks, Inc.

and suppliers of software products.

Our contract manufacturers include NEC Corporation, Advantech Co., Ltd.

and Celestica Inc.

We frequently work jointly with our suppliers in bidding for customers’ design-in opportunities.

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Our LED Solutions business has a number of supply agreements with third-party providers for LED chips in wafer or discrete form.

The COVID-19 pandemic, as well as general economic conditions, has resulted in significant supply shortages in the overall supply chain.

These shortages may impact our ability to manufacture products for our customers and may result in rising prices of the materials we need to manufacture our products.

General economic conditions, as well as COVID-19, have resulted in significant supply shortages in the overall supply chain.

These shortages have impacted and may in the future impact our ability to manufacture products for our customers and may result in rising prices of the materials we need to manufacture our products.

Many of these issues relate to reduced investment in capacity by our suppliers, as well as local government policies that have affected the ability of employees of our suppliers to work.

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Sales, Support and Marketing

We primarily sell our products directly to global OEMs and to enterprise, government and other end customers located across North America, Latin America, Asia and Europe.

We sell our products both directly and through third-party channels to global OEMs and to enterprise, government and other end customers located across North America, Asia and Europe.

Our sales and marketing efforts are conducted through an integrated process incorporating our direct sales force, e-commerce, customer service representatives and our on-site field application engineers (“FAE”) with a network of independent sales representatives, distributors, integrators and resellers.

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Irvine, California;

Maynard, Massachusetts;

Newark, California;

Tempe, Arizona and Tewksbury, Massachusetts) and in Atibaia, Brazil;

Huizhou, China;

Bangalore and Kochi, India;

Tempe, Arizona and Tewksbury, Massachusetts) and in Huizhou, China;

Bangalore, India;

New Taipei City, Taiwan;

Penang, Malaysia;

and Seongnam-City, South Korea.

and Penang, Malaysia.

Our research and development activities are focused on driving innovation in our products and services as well as continuous process improvement for our procurement, test and manufacturing.

Our product development in Memory Solutions includes innovations for next generation DRAM products, including DDR5, mobile DRAM, hybrid memories such as hybrid volatile and non-volatile DRAM (“NVDIMM”), emerging interconnect standards such as Compute Express Link (CXL), enterprise memory and Flash-based products, such as eMMC and eMCP, as well as associated firmware development.

Our research and product development for IPS includes server selection and occasional design;

Our product development in Memory Solutions includes innovations for next generation DRAM products, including DDR5, mobile DRAM, hybrid memories such as hybrid volatile and non-volatile DRAM (“NVDIMM”), emerging interconnect standards such as CXL, enterprise memory and Flash-based products, as well as associated firmware development.

Our research and product development for IPS includes high availability server architecture and design, high availability software development including virtualization, operating systems and systems management;

server selection and occasional design;

designs to enable integration of racks and clusters;

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Our engineering team is focused on firmware development, systems engineering and integration, system and platform validation and applications and product and reliability engineering for new products.

In addition, in order to take advantage of local regulations and government incentive programs for the growing mobile memory market in Brazil, we have invested substantial financial and management resources to expand our Brazil research and development capabilities to enable us to develop a broad offering of Flash-based products for the local market.

Our advanced engineering and design capabilities allow us to address our customers’ increasingly complex needs.

We design our products to be compatible with existing industry standards and, where appropriate, develop and promote new standards or provide custom solutions to meet customers’ requirements.

An important aspect of our research and

development effort is understanding the challenges presented by our customers’ requirements and addressing them by utilizing our industry knowledge, proprietary technologies and technical expertise.

An important aspect of our research and development effort is understanding the challenges presented by our customers’ requirements and addressing them by utilizing our industry knowledge, proprietary technologies and technical expertise.

By working closely with our customers and suppliers, we are able to deliver technically advanced products designed to meet customer-specific needs with competitive solutions to satisfy our customers’ memory, storage;

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Research and development expense was $90.6 million, $77.5 million and $59.9 million in 2023, 2022 and 2021, respectively.

As of August 26, 2022, we had 440 research and development personnel worldwide.

As of August 25, 2023, we had approximately 370 research and development personnel worldwide.

Our diversified businesses compete with numerous global and local companies.

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Within Memory Solutions, we compete against memory module providers, and to a lesser extent, large memory semiconductor manufacturers that utilize a portion of their capacity to manufacture memory modules.

In Brazil, other than the large, global semiconductor manufacturers, our competitors are generally much smaller in scale than we are in terms of revenue and capabilities for manufacturing and for research and development.

To a lesser degree, we compete with companies that import DRAM and Flash components and products.

Within our IPS Penguin Computing business, we compete primarily with global manufacturers of HPC and AI products and services.

Within our IPS Stratus business, we primarily compete with manufacturers of enterprise servers and industrial computers.

For our Penguin Computing business, we compete primarily with global manufacturers of HPC and AI products and services.

For Penguin Edge products, we primarily compete with makers of ruggedized computer boards and systems as well as makers of edge computing devices, SoMs and SBCs.

Within our LED Solutions business, we compete with companies that manufacture and/or sell nitride-based LED chips and those manufacturers of LED components concentrated primarily in indoor and outdoor commercial lighting;

specialty lighting, including torch lamps (flashlights), horticulture, color-changing architectural lighting;

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• Memory semiconductor manufacturers that also manufacture DRAM modules and Flash products;

• Local Brazil manufacturers of DRAM modules and Flash products and manufacturers of memory integrated circuits;

• A broad set of companies in supply chain services, including distributors and third party logistics providers;

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• LED product manufacturers;

• Enterprise IT server vendors;

• Manufacturers of industrial computers.

Some of our global competitors are large international companies that have substantially greater financial, technical, marketing, distribution and other resources, as well as greater name recognition and longer-standing relationships with customers and suppliers than we do.

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Intellectual property is an important aspect of our business, and we actively seek to protect and leverage our intellectual property to promote our business interests.

For example, as of August 26, 2022, we owned or exclusively licensed

approximately 1,858 patents that expire from 2022 to 2040 and had 220 pending patent applications.

For example, as of August 25, 2023, we owned or exclusively licensed approximately 1,874 patents that expire from 2023 to 2042 and had 269 pending patent applications.

We continually review our development efforts to assess the existence and patentability of new intellectual property, which we actively seek to protect as appropriate.

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At SGH, we put people first, nurturing a culture that supports creativity and growth.

We value our employees, and we understand the importance of their development.

We value our employees, and we understand the importance of their contribution and personal development.

We believe that at the best workplaces, employees feel inspired, engaged, valued and included.

As part of our “people first” mindset, we invest in key initiatives including, but not limited to, talent development, diversity and inclusion and physical and mental health.

As of August 26, 2022, we had approximately 3,600 full-time employees (excluding contractors) in locations across the globe, including, among others, the United States, China, Malaysia and Brazil.

As part of our “people first” mindset, we are dedicated to driving our people strategy which includes developing our talent, maintaining an engaged workforce and offering programs and rewards that attract and retain the best talent.

At the core of our people strategy is a commitment to ensuring our workforce represents the diversity of our communities and that we maintain a safe and inclusive culture.

As of August 25, 2023, we had approximately 3,000 full-time employees (excluding contractors) in locations across the globe, including, among others, the United States, China and Malaysia.

We have never experienced a work stoppage in any of our locations worldwide, and we consider our employee relations to be good.

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At all locations, we provide our employees with performance assessments and evaluations.

Where applicable, employees also have access to coaching programs, as well as job specific training.

We also provide our employees with training on workplace culture and enrichment through our learning platform, covering topics such as harassment, creating healthy work environments, inclusion and global ethics and compliance.

We place a priority on identifying key talent throughout the organization and providing development and coaching opportunities for them through our newly adopted annual talent calibration and succession planning process.

We also provide employees with access to technical and leadership training and training on workplace culture and enrichment, covering topics such as harassment, creating healthy work environments, inclusion and global ethics and compliance.

Diversity, Equity and Inclusion

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Through this policy, we articulate people-oriented and fair treatment principles in the recruitment, promotion, performance evaluation, compensation, training and retirement of all employees.

We are committed to creating a working environment with equal opportunity employment so that workers are treated with fairness and respect.

In the coming years, we look forward to expanding on our strategy to nurture a diverse and inclusive environment by focusing on initiatives such as employee resource groups and recruiting more diverse leadership.

We have established a Global Diversity Council (“GDC”) that focuses on creating a working environment with equal opportunity employment so that workers are treated with fairness and respect.

The GDC enables us to expand on our strategy to nurture a diverse and inclusive environment by focusing on initiatives such as employee resource groups and recruiting more diverse leadership.

Wellness, Health and Safety

We strive to provide and maintain a safe work environment, as well as to promote overall wellness among employees.

We prioritize employee wellbeing throughout our operations as well as through wellness programs.

We prioritize employee well-being throughout our operations as well as through wellness programs.

Our wellness program is supported by a committee that focuses on providing information and events throughout the year on health, financial and mental well-being.

We also support mental health and wellness through our Employee Assistance Program, which offers free and confidential counseling and support for our employees and members of their households.

In 2020, as the global pandemic impacted every person, we made it a priority to ensure that our employees and their families were safe and healthy.

offices in Newark, Fremont and Tempe, we provided free weekly COVID-19 testing to all employees, as well as diligently maintained contact tracing to track and prevent spread.

In Penang, Malaysia, automated temperature and facial recognition systems were implemented to ensure that all on-site employees are healthy and protected.

For our essential employees who worked on-site at our facilities, we took additional measures to ensure their ongoing health and safety.

We distributed and trained users on the correct use of personal protective equipment (PPE) and maintained social distancing, sanitization and employee awareness and communication.

Compensation and Benefits

We offer compensation and benefits programs designed to motivate and reward our employees.

Our bonus program both links employee compensation to SGH’s business performance and includes a focus on individual performance.

We offer compensation and benefits programs designed to motivate and reward our employees through our pay-for-performance philosophy.

We are committed to paying market competitive wages to attract key talent and ensure pay equality across our diverse workforce.

Our bonus program links employee compensation to SGH’s business performance.

We also offer an Employee Stock Purchase Plan, equity compensation, retirement benefits and, in the United States, a 401(k) match program.

Brazil Local Manufacturing Requirements and Incentives

The Brazilian government has a long history of utilizing local manufacturing requirements to promote job creation, sustain economic growth and increase the competitiveness of various domestic industries.

These requirements have been important in the development of numerous industries in Brazil, including automotive, oil and gas, aerospace and healthcare.

Beginning in 1991, local manufacturing regulations were introduced to vitalize Brazil’s IT industry as government programs began to be implemented to incentivize manufacturers to establish and expand their operations in Brazil and to incentivize OEMs to apply and utilize locally manufactured components for their products.

Since 2011, we have participated in a number of government investment incentive programs.

In connection with these programs, we have recognized financial credits as a reduction of certain research and development expenses.

In 2022, 2021 and 2020, we reduced our operating expenses as a result of these incentive programs by $17.3 million, $30.0 million and $6.4 million, respectively.

The financial credits available through the incentive program are currently set to expire in December 2026.

The elimination of or a reduction in the incentives for local manufacturing, or our inability to secure the benefits of these regulations, could significantly reduce the demand for, and the profit margins on, our products in Brazil.

See “Item 1A.

Risk Factors – Risks Related to Our International Operations – We depend on Brazil markets for a significant portion of our sales” and “– Our success in part depends on incentives in Brazilian laws for local manufacturing of electronics products.

The elimination of or a reduction in the incentives for local manufacturing, or our inability to secure the benefits of these regulations, could significantly reduce our profitability for products in Brazil.”

Environmental Regulations

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In addition, as part of the acquisition of Cree’s LED business, we acquired facilities in China, which could present similar issues.

unanticipated events will not arise in the future and give rise to material environmental liabilities and related costs which could have a material adverse effect on our business, financial condition and results of operations.

We cannot be certain that identification of presently unidentified environmental conditions, more vigorous enforcement by regulatory agencies, enactment of more stringent laws and regulations or other unanticipated events will not arise in the future and give rise to material environmental liabilities and related costs which could have a material adverse effect on our business, financial condition and results of operations.

Available Information

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We make available, free of charge through our website, our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, and amendments to those reports, filed or furnished pursuant to Sections 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after they have been electronically filed with, or furnished to, the SEC.

The public may read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F.

Street, NE, Washington, DC 20549.

The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.

The SEC maintains an internet site (http://www.sec.gov) that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC.

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

What changed 10-K

Item 1. Business