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Item 1. Business

2026-03-12 compared with 2025-03-13 · 93 added, 299 removed, 54 unchanged (88% of the section changed)

Pixelworks is a leading provider of high-performance and power-efficient visual processing semiconductor and software solutions that enable consistently high-quality and authentic viewing experiences in a wide variety of applications.

We define our primary target markets as Mobile (smartphone and tablet), Home & Enterprise (projectors, personal video recorders ("PVR"), and over-the-air ("OTA") streaming devices), and Cinema (creation, remastering, and delivery of digital video content).

Previously we classified our primary target markets as Mobile, Projector, Video Delivery and Cinema, but have since aggregated the Projector and Video Delivery categories into one market called "Home & Enterprise".

Pixelworks has been a pioneer in visual processing technology for over 20 years.

We were one of the first companies to commercially launch a video System on Chip ("SoC") capable of deinterlacing 1080i HDTV signals and one of the first companies with a commercial dual-channel 1080i deinterlacer integrated circuit.

We launched one of the industry’s first single-chip SoCs for digital projection.

We were the first company to integrate motion estimation / motion compensation technology ("MEMC") as a mobile-optimized solution for smartphones.

In 2019, we introduced our Hollywood award-winning TrueCut Motion TM® video platform, the industry’s first motion grading technology that allows fine tuning of motion appearance in cinematic content.

Our core visual processing technology intelligently processes digital images and video from a variety of sources and optimizes the content for a superior viewing experience.

Rapid growth in video and gaming consumption, combined with the move towards bright, high resolution, high frame rate and high refresh rate displays, especially in mobile, is increasing the demand for our solutions.

Our technologies can be applied across a wide range of applications:

cinema theaters, low-power mobile tablets, smartphones, streaming devices, and digital projectors for the home, school, or the workplace.

Our products are designed and optimized for power, cost, bandwidth, viewer experience, and overall system performance, according to the requirements of the specific application.

On occasion, we have also licensed our technology.

During 2021, we engaged in a strategic plan to re-align our Mobile and Home & Enterprise businesses to improve their focus on their Asia-centered customers and employee stakeholders (the "Strategic Plan").

One of our Chinese subsidiaries, Pixelworks Semiconductor Technology (Shanghai) Co., Ltd.

(or "PWSH"), now operates these businesses as a full profit-and-loss center underneath Pixelworks.

In connection with this Strategic Plan, the Company and PWSH closed three separate financing transactions in 2021 and 2022, which are further described in "Note 15:

Redeemable Non-Controlling Interest and Equity Interest of PWSH Sold to Employees" and "Note 16:

Non-Controlling Interest", below.

PWSH has a branch office located in Shenzhen, China (Pixelworks Semiconductor Technology (Shanghai) Co.

Shenzhen Branch Office No.

1), which is primarily for sales and customer support for PWSH, and a subsidiary located in Hong Kong (Pixelworks Hong Kong Limited), which has no employees and is used for distribution of PWSH products.

Pixelworks has an additional subsidiary in China (Frame Shadow Technology (Shanghai) Co., Ltd.

(formerly called Mucheng Huai Management Consulting (Shanghai) Co., Ltd)) which is a research and development center for our TrueCut business.

This subsidiary does not operate under PWSH, but rather is owned by Pixelworks through our Oregon limited liability company, Pixelworks Semiconductor Technology Company, LLC.

More than a majority of our operations are in China, but our executive officers and all of our directors but one are located in the United States (and he resides in Singapore).

We are neither a PRC operating company nor do we conduct our operations in China through the use of variable interest entities.

Pixelworks, Inc.

(the “Company” or “Pixelworks”) provides industry-leading content creation, video delivery and display processing solutions, and technology that enable highly authentic viewing experiences with superior visual quality across all screens, from cinema to smartphone and beyond.

Pixelworks has been delivering image processing innovations to leading providers of consumer electronics, professional displays, and video streaming services for more than 20 years.

On January 6, 2026 (the “Closing Date”), the Company completed the previously announced sale (the “Sale”) of all of the shares of common stock of Pixelworks Semiconductor Technology (Shanghai) Co., Ltd.

(“PWSH”) held by Pixelworks Semiconductor Technology Company, LLC, a wholly owned subsidiary of the Company (“Pixelworks LLC”), to Tiansui Xinyuan Technology (Shanghai) Co., Ltd.

(the “Buyer”).

The terms of the Sale were set forth in a Purchase Agreement dated as of October 15, 2025 (the “Purchase Agreement”), among the Company, PWSH, Pixelworks LLC, all other shareholders of PWSH except VeriSilicon Microelectronics (Shanghai) Co., Ltd.

(each, a “Selling Shareholder"), and the Buyer.

Each Selling Shareholder and VeriSilicon Microelectronics (Shanghai) Co., Ltd.

(collectively, the “Minority Shareholders”) and Pixelworks LLC also entered into Support Agreements (the “Support Agreements”), and Pixelworks LLC, PWSH and each of the Minority Shareholders entered into a Termination and Release Agreement (the “Release Agreement”), in each case dated October 14, 2025.

On the Closing Date:

(i) Pixelworks LLC transferred to the Minority Shareholders shares of PWSH capital stock representing a total of approximately 29% of the total outstanding shares of PWSH capital stock;

(ii) the Selling Shareholders sold and transferred all of their PWSH shares to the Buyer;

(iii) Pixelworks LLC sold and transferred its remaining shares of PWSH capital stock, representing approximately 49% of the total outstanding shares of PWSH capital stock, to the Buyer;

and (iv) the Buyer paid the Company approximately RMB 357 million, or approximately $51.0 million in U.S.

dollars, net of transaction costs and withholding taxes paid in China.

The remaining transaction expenses incurred by the Company in connection with the Sale, not including compensation that has been paid to the Company’s executive officers and other employees, totaled approximately $1.0 million in U.S.

Additionally, approximately RMB 8.7 million, or approximately $1.2 million in U.S.

dollars, is being held in an escrow account to be released upon the resolution of certain tax matters in China.

The foregoing references to certain provisions of the Purchase Agreement, the Support Agreements and the Release Agreement are not complete and are subject to and qualified in their entirety by reference to the Purchase Agreement filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission (the “SEC”) on October 15, 2025 (the “October 15 8-K”), the Amendment Agreement filed as Exhibit 10.2 to the October 15 8-K, and the form of Support Agreement, together with the form of Termination and Release Agreement attached to the form of Support Agreement as Exhibit A, filed as Exhibit 10.3 to the October 15 8-K.

The Company’s definitive proxy statement filed with the SEC on October 27, 2025, includes additional information under the heading “Principal Terms and Conditions of the Purchase Agreement”, which description is incorporated herein by reference.

As a result of the Sale, Pixelworks no longer operates a semiconductor business, which included the businesses that it previously described as “Mobile” (smartphone and tablet) and “Home & Enterprise” (projectors, personal video recorders, and over-the-air streaming devices).

Following the Sale, the Company is focused on developing and licensing cinematic visualization solutions, including its flagship TrueCut Motion TM platform.

For more information regarding the events leading up to the Sale, and about the Mobile and Home & Enterprise businesses, see Item 1 under the heading “Overview” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024, filed with the SEC on March 13, 2025 (the “ 2024 10-K ”).

Pixelworks has one remaining subsidiary in China, Frame Shadow Technology (Shanghai) Co., Ltd.

(formerly called Mucheng Huai Management Consulting (Shanghai) Co., Ltd), which is a research and development center.

Our executive officers and all of our directors are located in the United States.

Our auditor is Grant Thornton LLP, with headquarters in Chicago, Illinois.

The Holding Foreign Companies Accountable Act, as amended by the Consolidated Appropriations Act, 2023, and related regulations, therefore do not apply to our Company.

As part of the Strategic Plan we intended to qualify PWSH to file an application for an initial public offering on the Shanghai Stock Exchange’s Science Technology Innovation Board, known as the STAR Market (such initial public offering on the STAR Market, the “Listing,” and such application, an "IPO application"), a lengthy process that involves several reviews by various government agencies of China, such as the Shanghai Stock Exchange (“SSE”) and the China Securities Regulatory Commission (“CSRC”).

The market conditions and regulatory requirements continue to not be conducive to a successful listing by PWSH.

We continue to believe that the Listing could have many benefits, including improved access to new capital markets and the funding of PWSH’s growth worldwide, and thus remain prepared to re-engage with the various government agencies of China and our advisors involved in a Listing once those conditions and requirements sufficiently improve.

There is no guarantee that PWSH will be approved for a Listing at any point in the future.

The Listing of PWSH would not change the status of PXLW as a U.S.

public company.

Pixelworks continues to work with Morgan Stanley as financial advisor to assist with reviewing potential alternative strategic options specific to inbound interest in the Pixelworks Shanghai subsidiary.

We target three key markets with our products and services:

Mobile, Home & Enterprise, and Cinema.

Our Mobile market category is composed of smartphones and tablets.

The user experience with mobile video and gaming is a key driver of growth in the smartphone and tablet market.

Smartphones and tablets pose a number of unique challenges as mobile display systems.

Digital video content is available in a wide range of resolutions and frame rates.

Power is of primary importance, impacting form factor, cost, and performance.

As these systems have added more functionality, new features have had to compete for battery life, internal bandwidth, and space.

The addition of high-resolution and high refresh rate displays has further increased the burden on these resources.

The challenges of playing low resolution and frame rate content on a high resolution and frame rate display and of rendering high resolution and frame rate mobile games in a power-efficient way are limiting the users’ visual experience on mobile video and gaming.

Our Mobile solutions are designed improve this user experience.

Using the same visual processing technology in a mobile device that was developed for large screen TVs is neither feasible nor desirable.

The visual processing pipelines used in TVs consume many watts of power and would be unsuitable for battery powered systems.

In TVs, the size constraints on electronics are significantly less stringent when compared to mobile systems.

To furnish the Mobile market with appropriate solutions, we have taken a holistic, system-wide view and re-invented its visual processing technology to fit within the mobile constraints of battery life, bandwidth, form factor, performance, and use cases.

This approach has enabled us to create technology that meets the power and size requirements of mobile as well as enabling low power but high frame rate, high resolution and high dynamic range video and gaming experiences.

The burgeoning global gaming market is dominated by the smartphone segment.

The vast majority of gamers worldwide play games on a smartphone (June 2020 Ericsson Mobility Report).

PC-grade AAA/Cinematic games are being deployed for smartphones.

These games require more intensive visual processing, including higher frame rate, resolution, photorealistic, picture quality and responsiveness.

Cost, size and power limit the rendering capabilities of mobile application processors, which are not keeping up with the sophistication of mobile games.

Furthermore, battery life and thermal challenges remain difficult to overcome.

Our visual processor solutions enable the most popular mobile games to achieve previously impossible visual experiences and battery life.

As 5G network coverage rapidly expands worldwide, the availability of 5G chipsets targeting smartphones should continue to reinvigorate market growth given the increased speed and lower latency of the wireless connections.

In addition, service providers in some countries will also utilize 5G networks to provide fixed wireless broadband.

We further believe our compelling Mobile visual processing functionality, combined with 5G capability, may help motivate consumers to replace their 3G and 4G phones at a faster rate than occurred in the past.

Finally, a new smartphone category has emerged as top vendors have previewed foldable smartphones which serve as a phone, and a mini tablet when unfolded.

As prices for this capability inevitably come down, and further competition emerges, we believe this new category, along with the rollout of 5G networks, can strengthen the Mobile device market.

Home & Enterprise

Our Home & Enterprise market category is composed of digital projection and video delivery devices and applications.

Digital Projection

Increasingly affordable price points are driving continued adoption of digital projectors in business and education, as well as among consumers.

Technology improvements are helping to reduce the size and weight of projection devices while increasing their performance.

Projector models range from larger units designed to be permanently installed in a conference hall or other venue to ultra-portable devices weighing fewer than two pounds for maximum portability.

The feature set of projection systems differs from that of a typical large-screen flat panel display such as a TV.

This is primarily because the projector is a sharing and collaboration device while the TV is designed for direct consumption of content.

The digital projection market serves several different areas such as business, education, and home theater.

Business users employ multimedia projectors to display both still and video presentation materials from PCs and other sources.

Requirements for the business market include portability, compatibility with multiple software and hardware applications, and features that ensure simple operation.

In education environments ranging from elementary schools to university campuses, projectors help teachers integrate media-rich instruction into classrooms.

Home theater projector systems can drive large-screen displays for content consumption where flat panel displays are either economically not viable or physically incompatible for use.

Consistent with the trends of other consumer products, digital projectors are increasingly incorporating networking capabilities that enable the sharing of video and other content among multiple devices.

This, in turn, is enabling new use models for digital projection in both the education and business environments.

For example, one teacher can present the same material simultaneously in multiple classrooms, and students in different classrooms can display and discuss their work.

Such connectivity allows instant access to content and sharing of content, which promotes interaction and collaboration among dispersed groups.

In the business setting, this connectivity enables teleconferencing and the seamless sharing of content for more effective meetings.

Video Delivery

With the acquisition of ViXS Systems Inc.

in August 2017, we expanded both our market presence and product portfolio.

The video industry continues to evolve and adopt new video standards such as High Efficiency Video Coding, 4K Ultra HD and HDR.

The technical and processing demands of these standards are complex and play directly into our core competencies.

Our technologies for video delivery are highly integrated, low power, and provide high quality video processing, allowing seamless connectivity between devices while maintaining end-to-end content security.

With the advent of digital video, it has become possible to deliver video to consumers in an ever-increasing number of ways.

Traditional delivery mechanisms, such as over the air broadcasts, cable, satellite, DVDs, and Blu-ray, are being supplemented with Internet streaming and download services.

With these new video delivery options comes the ability to offer more services and improved quality.

High-resolution (UHD/4K), sustained bitrate decoding (100Mbit), and advanced video formats (HDR10, HDR10+) are key requirements for advanced personal video recorder ("PVR") products sold in the Japanese market, where consumers rate video quality as a key acquisition criteria.

The advanced PVR market in Japan is transitioning from 2K to UHD/4K formats and supports new broadcast technologies, like Advanced Digital Satellite Broadcast ("ADSB") in Japan.

Our Cinema market category is composed of applications and services for content creation, remastering and video streaming for cinematic video.

Following the Sale, we have an intellectual property portfolio of 56 patents issued and 6 patents pending related to the visual display of digital image data.

We are focusing our research and development efforts on developing video algorithms that improve quality and enable the delivery of highly authentic viewing experiences with superior visual quality, across all screens – from cinema to smartphone and beyond.

We seek to expand our technology portfolio through internal development and co-development with business partners, and we continually evaluate acquisition opportunities and other ways to leverage our technology into other high-value markets.

Prior to the Sale, the Company focused on its Mobile and Home & Enterprise markets.

For more information about the Mobile and Home & Enterprise markets, see Item 1 under the heading “Key Markets” in the 2024 10-K .

Following the Sale, the Company is focused on what it calls the Cinematic market.

Our Cinematic market category is composed of applications and services for content creation, remastering and video streaming, and display of cinematic video.

Our Cinematic solutions expand the creative palette for filmmakers and ensure the correct presentation of creative intent across screens.

In recent years, the trend towards brighter, high dynamic range ("HDR")-capable screens, larger screen sizes and higher resolutions has amplified artifacts such as judder and strobing and caused the filmed shutter speed to appear faster and more choppy than intended.

Furthermore, the mismatch between the 24 frame per second rate that is the standard for cinema and the higher screen refresh rates used on home entertainment screens creates additional artifacts, that all together degrade the viewing experience and are no longer faithful to creative intent.

Furthermore, the mismatch between the 24 frame per second rate that is the standard for cinema and the higher screen refresh rates used in some Premium Large Format theaters and on home entertainment screens creates additional artifacts that further degrade the viewing experience and are no longer faithful to creative intent.

Our TrueCut Motion platform is the industry’s first solution to give filmmakers the ability to cinematically fine-tune motion blur, judder, and frame-rate appearance and can be used as part of the creative process to empower filmmakers to shoot at any frame-rate and then deliver a cinematically tuned, broader set of motion and frame rate appearances.

TrueCut technology preserves artistic intent across screens, from theaters to TVs to smartphones.

TrueCut Motion technology preserves artistic intent across all screens, from theaters to TVs to smartphones to augmented and virtual reality devices.

Core Products and Technology

Core Products

Our products include the following:

Semiconductor Hardware (integrated circuits or “ICs”)

• Visual Processor ICs for mobile devices

• ImageProcessor SoCs for digital projectors

• Transcoder ICs for media players, set-top-box recorders

Software and Platform Licensing

• Pixelworks Pro display processing software for smartphones

• TrueCut Motion grading, content creation and distribution tools and device certification

Currently the vast majority of our revenue is generated from the sale of the following ICs.

• ImageProcessor ICs.

Our ImageProcessor ICs include embedded microprocessors, digital signal processing technology and software that control the operations and signal processing within high-end display systems.

We have continued to refine the architectures for optimal performance, manufacturing our products on process technologies that align with our customers’ requirements.

Additionally, we provide a software development environment and operating system that enables our customers to more quickly develop and customize the "look and feel" of their products.

• Visual Processor ICs.

Products in this category work with a mobile application processor to enhance the performance or feature set of the overall display solution.

Our Visual Processor ICs can be used with many popular mobile application processors (such as from Qualcomm Incorporated and MediaTek Inc.) to help original equipment manufacturers (“OEMs”) enhance their smartphone or tablet products.

In addition, we provide a software development kit to our gaming eco-system partners (including publishers of AAA mobile games) that enables the use of our Rendering Accelerator technology in our visual processors to improve game performance and reduce overall system power while playing high frame rate mobile games.

• Transcoder ICs.

Our Transcoder ICs include embedded microprocessors, digital signal processing technology and software that control the operations and signal processing for converting multiple bitrates, resolutions and codecs to provide bandwidth efficient video transmissions based on industry standard protocols.

Our transcoder technology allows for single, dual and even quad streaming solutions for OTA products.

Like our other ICs, we have continued to refine the architectures for optimal performance, manufacturing our products on process technologies that align with our customers’ requirements.

Additionally, we provide a software development environment that enables our customers to more quickly develop and customize their products.

Revenue is also derived from the following software and platform licensing products, which are included in the Engineering services, license and other revenue category:

• Pixelworks Pro Software.

Our Pro Software is a software development environment that enables our customers to more quickly develop and customize the “look and feel” of their mobile products by use of various features, such as absolute color accuracy, HDR tone mapping, SDR-to-HDR conversion, and others.

Customers can use our Pro Software on the application processor or in connection with our visual processor products.

Prior to the Sale, the Company’s core products consisted of Semiconductor Hardware and Software products developed and sold by the Company.

For more information about the Semiconductor Hardware and Software Products, see Item 1 under the heading “Core Products” in the 2024 10-K .

Following the Sale, the Company is focused on our TrueCut Motion Platform and developing other cinematic visualization solutions.

TrueCut Motion Platform

Our TrueCut Motion content creation tools provide filmmakers with the ability to dial in a motion look on a shot-by-shot basis.

We provide motion grading services that use these tools as a service, and the tools are also available for license.

For content finishing, specific to certain displays, TrueCut Motion will pre-process the content in order to ensure playback according to the original creative intent.

For display makers and brands, we provide the certification services, support, and IP licensing necessary to play back TrueCut Motion processed content, and the right to use the TrueCut Motion brand.

For clarity, in the table below we describe the relationship between our products and the markets and applications that each serves.

Market Product or Service (revenue type) Application

Visual processors (Sales of ICs)

For smartphones and tablets

For use of our technology or software in smartphones and tablets

Home & Enterprise Image processors (Sales of ICs) For projectors to be used by businesses, in educational settings and for home entertainment

Transcoder ICs (Sales of ICs)

For OEMs and ODMs who design personal video recorder (PVR) products and Over the Air products (OTA) for the consumer electronics segment

Engineering services and Other

Related to our IP streaming applications for PVR and OTA applications and technical support services

Cinema Engineering services and Other

Related to content creation, remastering and video streaming of cinematic content processed with our content creation tools, such as TrueCut® Motion

Our TrueCut Motion content creation software tools provide filmmakers with the ability to customize a motion look on a shot-by-shot basis.

We provide motion grading services that use these tools, which are also available for license.

For content finishing, specific to certain displays, our TrueCut Motion product may be used to pre-process the content in order to ensure playback according to the original creative intent.

For display makers and brands, we provide the certification services, support, and IP licensing necessary to play back TrueCut Motion content, and the right to use the TrueCut Motion brand.

Prior to the Sale, our core technology supported the Mobile and Home & Enterprise businesses.

For a description of the technology supporting our products in the Mobile and Home & Enterprise businesses, see “Technology” in the 2024 10-K .

Following the Sale, the Company is focused on the technology described below with respect to our Cinematic business.

Evolution of Display Technology and The Performance Gap

Display technologies have recently begun to transition from an era of higher resolutions, response times, and frame rates, with lower power and thinner form factors, to one focused on higher contrast, brightness, and more colors.

In mobile devices, Apple Inc.

("Apple") has brought wide color gamut to many of their devices, including the iPhone, iPad Pro, MacBook Pro and iMac.

These devices deliver the same color gamut used in digital cinema theaters ("DCI-P3").

Meanwhile, TV manufacturers including Samsung Electronics Co., Ltd.

Display technologies continue to evolve to enable higher resolutions, faster response times and frame rates, higher contrast, increased brightness, and deeper and richer colors.

Many smartphones, tablets and PC displays now can display video in High Dynamic Range (HDR) using the same DCI-P3 color gamut used in digital cinema theaters.

Television manufacturers, including Samsung Electronics Co., Ltd.

("Samsung"), TCL Technology, Sony Group Corporation (“Sony”), and LG Electronics, Inc.

(“LG”) are bringing high contrast, high brightness, or HDR TVs based on organic light emitting diodes (“OLED”) and local-dimming liquid crystal display (“LCD”) panels to the living room.

Furthermore, most premium and high-tier smartphones and tablets from Apple, Samsung, Sony, LG, and Huawei Technologies Co., Ltd now include HDR as a standard feature.

Hardware improvements in color and contrast are of little value without content that can take advantage of them.

In fact, a significant gap now exists between the vast majority of video content available to consumers and these emerging display devices.

• Contrast and Brightness:

Almost all movies available to consumers today use the “Rec.709” ITU standard format.

This format defines brightness levels up to around 100 “nits” (a standard measure of brightness), whereas HDR TVs are five to ten times brighter, from 540 nits upwards.

Most mobile devices support over 400 nits and sometimes over 1000 nits of peak brightness.

• Color Gamut:

DCI-P3 has a 25% larger color gamut than Rec.709.

• Frame Rate:

TVs commonly display at 120 frames per second (120 Hz) and up to 240 Hz on more sophisticated higher-end models.

All premium tier mobile displays were launched in 2023 with 120 Hz screens, which are quickly cascading down to lower price points.

Some of the gaming smartphones now have displays that run at up to 144 Hz.

• Resolution:

TVs have achieved 4k resolutions (3840x2160) and mobile devices today can achieve up to 1440x3240 resolution, and while some content is available in 4k resolution, most movies are only available in FHD or HD resolutions, which is typically 1920x1080 and 1280x720, respectively.

Content formats are evolving to take advantage of these display improvements.

For example, Dolby Laboratories, Inc.

(“Dolby”) introduced the “Dolby Vision™” format for movies and devices, in order to allow consumers to realize the benefits of HDR and wide color gamut.

The industry standards body Society of Motion Picture & Television Engineers released a format specification known as “HDR10” that similarly bridges the gap in contrast and color between content and devices.

The Ultra-HD Blu-ray disk format and streaming services such as Netflix and Amazon Video now support 4k HDR, aided by improved compression standards such as H.265.

Managing many content formats across a rapidly evolving range of displays is a significant and growing challenge.

Older content tends to not get upgraded to the newer formats, yet consumers expect all content to display correctly.

As the number of content formats grow, the technology of video processing becomes increasingly complex.

Delivering the intent of the content creator requires sophisticated algorithms and hardware circuits.

Frame-rate and motion incompatibilities require a significantly higher level of processing and more sophisticated algorithms in order to avoid creating new problems.

For example, Hollywood movies, TV shows, and other premium content are usually authored at 24 frames per second or 24 Hz.

(“LG”), bring to the living room high resolution HDR TVs that deliver high contrast and high brightness using organic light emitting diode (“OLED”) and local-dimming liquid crystal display (“LCD”) panels.

Movie exhibitors are now offering a different sort of theatrical experience by providing Premium Format theaters such as IMAX, Dolby Cinema, AMC PRIME, Laser, and XL, Cinemark XD, Marcus Theaters UltraScreen DLX, and others.

These enhanced theaters use much larger screens, superior 4K laser projection, and other technologies to provide brighter, bigger and more colorful displays than standard theaters.

Finally, a new product category of virtual and augmented reality technology, such as Meta AI and Ray Ban glasses and Apple VisionPro headsets, enables a 3D visual experience that is more immersive to the user.

This evolution of display technology outpaces that of mainstream content formats, creating a quality gap that makes it difficult to provide a consistent experience across the varied platforms.

For example, movies, TV shows, and other premium content are usually authored at 24 frames per second, or 24 Hz.

At this frame rate, the brain can easily notice the transition from one frame to the next.

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This stop-start motion is perceived by the brain as judder, jitter or strobing, reducing the visible clarity and fidelity of objects in motion and distracting from the main subject of the content.

Most TVs today include frame-rate conversion chips, but many reviewers complain about artifacts such as halos, breakup in the image and the so-called “soap opera effect”.

Unfortunately, without frame-rate conversion, the video can appear to have judder and blur at levels that have increased substantially as a result of the improvements in contrast, color and detail.

Additionally, when a motion sequence is played on a digital display device, the new updated frame is drawn over the top of the still visible previous frame.

This “hold” effect is perceived by the brain as motion blur.

There are numerous causes of motion blur.

There are other causes of motion blur as well.

The materials used in constructing pixels on the display take a finite amount of time to transition from one state to another.

If this time is too long, the image does not update swiftly and motion sequences seem to smear or blur.

Judder and motion blur artifacts are more noticeable on bright, large screen, high contrast displays.

Our advanced visual processing technology provides OEMs with solutions that avoid or minimize these artifacts and help realize the potential of their investment in high-resolution displays.

This gap between display capabilities and available content brings significant challenges to video display device manufacturers.

Sophisticated visual processing is required to accurately reproduce the intended video on today’s displays.

We help bridge this gap between the display capabilities and available content with our visual processors and software, as well as with our TrueCut® Motion platform for content creators, distributors and display brands.

These judder and motion blur artifacts are even more noticeable on bright, large screen, high contrast displays, and the displays themselves offer only mitigation that leads to other troublesome and distracting artifacts.

Television manufacturers attempt to solve judder and blur by including frame-rate conversion in the TV hardware, but many reviewers complain about new artifacts that are created, such as halos, breakup in the image and the so-called “soap opera effect”.

But without frame-rate conversion, the judder and blur are substantially worsened by HDR, 4K and other improvements in contrast, color and detail.

Pixelworks was a pioneer of frame rate conversion technology and, prior to the Sale, was well known as the picture-quality leader in display processors for mobile and 3LCD projection devices.

In contrast, Pixelworks’s TrueCut technology, including its flagship TrueCut Motion platform, addresses the problem at the source, providing controls to the creator and technology and a format to distributors and exhibitors that ensures a consistent presentation of titles across all display devices that remains true to the creator’s intended look.

Our TrueCut Motion platform provides creators, distributors, and display brands with a solution to mitigate judder and motion blur while staying true to creative intent, thereby providing the consumer with true cinematic content on whatever display they choose.

Our Technology:

Bridging the Gap Between Device and Content While Preserving Creative Intent

Our core technologies are a portfolio of advanced video algorithms and intellectual property to address the many challenges posed by digital video.

We believe our technologies can significantly improve video quality and will become increasingly important as the popularity of video content consumption grows, and pixel densities, screen size and image quality increase.

Our products are designed with a flexible architecture that allows us to combine algorithms and functional blocks of digital and mixed signal circuitry.

Accordingly, our technologies can be implemented across multiple products or in combinations within single products and can be applied to a broad range of applications, including smartphones, tablets, and projectors.

The majority of our products include one or more of our technologies to provide optimal high-quality visual processing solutions to our customers, regardless of screen size.

Our core visual processing technologies include:

• MotionEngine® MEMC .

Our proprietary MEMC technology significantly improves the performance and viewing experience of any screen by addressing problems such as judder and motion blur.

Our TrueCut Motion platform was developed using advanced video algorithms, motion appearance training data, and other intellectual property to address the challenges posed by motion in digital video due to the quality gap.

We believe our technologies can significantly improve video quality while retaining the creator’s intended visual presentation and will become increasingly important as the popularity of video content consumption continues to grow and expand to new and different devices with differing pixel densities, screen sizes and image quality.

Our TrueCut Motion platform leverages our proprietary MotionEngine® motion estimation/motion compensation (“MEMC”) algorithms that we developed over many years for our display processors.

This technology significantly improves the handling of judder and motion blur.

Unlike competitive solutions it also reduces halo effects that are a typical byproduct of MEMC technology in general.

Halos are objectionable blurred regions that surround moving objects as the MEMC algorithms try to reconstruct missing image data caused by the concealing and revealing of objects as they pass over or behind one another.

Halos are objectionable blurred regions that surround moving objects as the algorithms try to reconstruct missing image data caused by the concealing and revealing of objects as they pass over or behind one another.

Removing halos dramatically improves image quality and is of particular importance on high-resolution and bright displays where artifacts become more visible.

• AI Based Display Processing.

This technology dramatically improves video and image quality and sets a new standard for picture quality on both LCD and OLED mobile displays with a new AI-driven architecture and dynamic refresh rate support for up to 144 Hz.

Its lightweight AI display inferencing augments the Company’s knowledge base, numerous real time inputs, and fuzzy logic IP to adaptively and intelligently optimize overall picture quality for video, games, and photos at low power, including real time SDR-to-HDR conversion and AI adaptive display.

• Advanced Scaling.

As display resolutions continue to increase, there is a need to convert lower resolution content to higher resolution in order to display content properly.

With the latest wave of high-resolution displays, the quality and quantity demands of scaling have increased significantly.

Artifacts become more noticeable on these types of displays as they distract from the realism effect.

In addition, with the availability of high-resolution content lagging behind the availability of high-resolution displays, high-quality scaling is required to ensure these new high resolution displays (such as 4K) do not suffer when compared to lesser resolution displays of the same size.

Our advanced scaling is designed to ensure that up-conversion of lower resolution content is of the highest quality in maintaining the fidelity of image.

• Mobile Visual Processing.

We have developed innovative visual processing solutions that are designed to optimize power consumption for mobile devices.

Beyond MEMC and advanced scaling, these mobile solutions provide the kind of improvements in color, contrast, sharpness, and de-blur that are currently only found in high quality TVs today.

Furthermore, this technology can reduce system power consumption and extend battery life.

• Transcoding/Decoding .

Digital Delivery forms the bulk of not just video content, but all internet bandwidth today.

However, throughout the entire chain from inception to consumption, there are multiple variations in bitrate, resolution, and codecs used for both audio and video.

Transcoding is a fundamental technology used throughout this pipeline that leads to moving pictures viewed on TVs and mobile devices.

The XCODE family of ASICs has enabled many devices within this pipeline, from the racks in some service providers all the way down to the home user watching broadcast OTA TV on a smartphone.

XCODE technology provides solutions that deliver UHD Blu-ray PVRs with capability of transcoding recorded content suitable for viewing on smartphones.

The technology supports today’s broadcast standards, such as ATSC 1.0, DVB/T/T2/S/S2, ISDB/T/S, and ADSB and is scalable to support upcoming broadcast standards such as ATSC 3.0.

• SDR to HDR Conversion.

UHD video has standardized on a technology known as HDR to deliver higher dynamic range content.

This has resulted in several competing HDR deployments like HDR10, HLG and HDR10+ with support by multiple industry giants.

Our HDR conversion technology can not only convert between SDR (Standard Dynamic Range) and HDR10, it can also convert among HDR10, HLG and HDR10+, solving an interconnectivity problem between content formatted in one HDR format and display devices that support a different HDR format.

• Rendering Accelerator (IRX).

We have developed technology that is enabled via a software development kit used by gaming content makers to allow their games to leverage the resources and features of our most current visual processing technology to improve the user experience with high frame rate, high resolution games while reducing overall system power consumption.

• TrueCut Motion Grading and Pre-processing.

Through our end-to-end platform, filmmakers determine the motion look and their creative intent at the source.

Their creative intent is preserved through a certified distribution and playback platform all the way to the final presentation to viewers.

The TrueCut Motion platform is an end-to-end solution that enables “motion grading” by the creator during the production and post-production process.

Through motion grading, filmmakers determine the motion look and their creative intent at the source.

This creative intent is preserved through a certified distribution and playback platform all the way to the final presentation to viewers in a theatrical or home entertainment setting, on consumer devices that are reviewed and certified by us.

This approach provides a closer relationship between the filmmaker and the viewer than has been previously possible.

Customers, Sales and Marketing

The key focus of our global sales and marketing strategy for our IC products is to achieve design wins with industry leading branded manufacturers in our target markets and to continue building strong customer relationships.

Once a design win has been achieved, sales and marketing efforts are focused on building long-term mutually beneficial business relationships with our customers by providing superior technology and reducing their costs, which complements our customers’ product development objectives and meets their expectations for price-performance and time to market.

Marketing efforts are focused on building market-leading brand awareness and preference for our solutions.

We utilize direct sales and marketing resources in Japan, China and Taiwan.

In addition to sales and marketing representatives, we have field application engineers who provide technical expertise and assistance to manufacturing customers on final product development.

Our global distribution channel is multi-tiered and involves both indirect and direct distribution channels.

Indirect Distribution Channels

• We have indirect distribution relationships through our distributors.

Distributors are resellers in local markets who provide engineering support and stock our semiconductors in direct relation to specific manufacturing customer orders.

Our distributors often have valuable and established relationships with our end customers, and in certain countries it is customary to sell to distributors.

While a distributor's payment to us is not dependent upon the distributor’s ability to resell the product or to collect from the end customer, our distributors may provide longer payment terms to end customers than those we would offer.

Sales to distributors accounted for 47% and 66% of revenue in 2024 and 2023 respectively.

One of our distributors, Upstar Technology Limited represented more than 10% of revenue in each of 2024 and 2023, and accounted for more than 10% of accounts receivable as of December 31, 2024 and December 31, 2023.

One of our distributors, Tokyo Electron Device limited represented more than 10% of accounts receivable as of December 31, 2024.

No other distributor accounted for more than 10% of revenue in 2024 and 2023 or represented more than 10% of accounts receivable as of December 31, 2024 or 2023.

Direct Distribution Channels

We have direct distributor relationships in Japan, China and Taiwan.

• We have established direct relationships with companies that manufacture high-end display systems.

Revenue through direct relationships accounted for 53% and 34% of total revenue in 2024 and 2023, respectively.

We have direct relationships with companies falling into the following three classifications:

• Integrators .

Integrators are OEMs who build display devices based on specifications provided by branded suppliers.

• Branded Manufacturers .

Branded manufacturers are globally recognized manufacturers who develop display device specifications and manufacture, market and distribute display devices either directly or through resellers to end-users.

• Branded Suppliers .

Branded suppliers are globally recognized suppliers who develop display device specifications and then source them from integrators, typically in Asia, and distribute them either directly or through resellers to end-users.

End Customers

Revenue attributable to our top five end customers together represented 88% and 87% of revenue in 2024 and 2023, respectively.

End customers include customers who purchase directly from us as well as customers who purchase products indirectly through distributors.

Sales to Seiko Epson Corporation represented more than 10% of revenue in each of 2024 and 2023, and accounted for more than 10% of accounts receivable as of December 31, 2024 and 2023.

Sales to Guangdong OPPO Mobile Telecommunications Corporation, Ltd.

accounted for more than 10% of revenue in each of 2024 and 2023.

No other end customer accounted for more than 10% of revenue in 2024 or 2023 or represented more than 10% of accounts receivable as of December 31, 2024 or 2023.

TrueCut Products

The sales and marketing of our TrueCut products differs in approach from that of our IC products.

The TrueCut platform includes a mix of services and licensing that is targeted at all levels of the creation, finishing, and distribution of cinematic or streaming digital video.

For a description of the IC Products sold by the Company prior to the Sale, see Item 1 under the heading “IC Products” in the 2024 10-K .

Following the Sale, the Company no longer sells any IC Products.

TrueCut Motion Products

The TrueCut Motion platform includes a mix of services and licensing that is targeted at all levels of the creation, finishing, and distribution of theatrical or streaming digital video.

For our TrueCut Motion content creation tools we seek to work directly with filmmakers, providing motion grading services, or the tools are also available for license.

For content finishing, specific to certain displays, TrueCut Motion will pre-process the content in order to ensure playback according to the original creative intent.

For content finishing, specific to certain displays, the TrueCut Motion tools pre-process the content in order to ensure playback according to the original creative intent.

For display makers and brands, we provide the certification services, support, and IP licensing necessary to play back TrueCut Motion processed content, and the right to use the TrueCut Motion brand.

We do not use distributors for our TrueCut products.

Revenue from our TrueCut products is thus far not material, and therefore we include all such revenue in our Engineering services, license and other category for the Mobile market.

Our business is subject to seasonality related to the markets we serve and the location of our customers.

We have typically experienced higher revenue from the digital projector component of the Home & Enterprise market in the third quarter, and lower revenue in the first quarter, as our Japanese customers reduce inventories in anticipation of their March 31 fiscal year end.

We have typically experienced higher revenue from the mobile market in the fourth quarter, and lower revenue in the first quarter, as mobile phone OEMs ramp production in advance of Chinese New Year.

For a description of the seasonal nature of our Mobile and Home & Enterprise products prior to the Sale, see Item 1 under the heading “Seasonality” in the 2024 10-K .

Sales in the Cinematic market were not material in 2025 or 2024.

Geographic Distribution of Sales

Sales outside the U.S.

accounted for approximately 98.3% and 99.7% of revenue in 2024 and 2023 respectively.

Prior to the Sale, substantially all of the Company’s sales were in the Mobile and Home & Enterprise market outside the U.S.

Sales in the Cinematic market were not material in 2025 or 2024.

Financial information regarding our domestic and foreign operations is presented in "Note 14.

Segment Information" in Part II, Item 8 of this Annual Report on Form 10-K.

Our sales are made pursuant to customer purchase orders for delivery of standard products.

The volume of product actually purchased by our customers, as well as shipment schedules, are subject to frequent revisions that reflect changes in both the customers’ needs and product availability.

In light of industry practice and our own experience, we do not believe that backlog as of any particular date is indicative of future results.

The vast majority of our revenue is derived from sales of integrated circuits within the intensely competitive semiconductor industry.

Further, the markets for higher performance display and projection devices, including the markets for mobile devices, digital projectors and other applications demanding high quality video, are characterized by rapid technological change, evolving industry standards, compressed product life cycles and declining average selling prices.

We believe the principal competitive factors in our markets include product performance, time to market, cost, functional versatility provided by software, customer relationships and reputation, patented innovative designs, levels of product integration, compliance with industry standards and system design cost.

We believe we compete favorably with respect to these factors.

Our current products face competition from developers of application processors and specialized display controllers designed by merchant chip vendors, our customers, potential customers and display panel vendors.

Additionally, new alternative display processing technologies and industry standards may emerge that compete with technologies we offer.

We also compete with specialized and diversified electronics and semiconductor companies that offer display processors or scaling components including:

Actions Microelectronics Co., Ltd., ARM Holdings PLC, Dolby Laboratories, Inc., EGiS Technology Inc., HiSilicon Technologies Co., Ltd., i-Chips Technology Inc., Lattice Semiconductor Corporation, MediaTek Inc., Novatek Microelectronics Corp., NVIDIA Corporation, Qualcomm Incorporated, Realtek Semiconductor Corp., Socionext Inc., Solomon Systech (International) Ltd., STMicroelectronics N.V., Sunplus Technology Co., Ltd., Synaptics Incorporated, Texas Instruments Incorporated, Unisoc Communications, Inc., and other companies.

Potential and current competitors may include diversified semiconductor manufacturers and the semiconductor divisions or affiliates of some of our customers, including:

Apple Inc., Broadcom Inc., LG Electronics, Inc., MegaChips Corporation, Mitsubishi Digital Electronics America, Inc., NEC Corporation, Panasonic Corporation, Samsung Electronics Co., Ltd., Socionext Inc., ON Semiconductor Corporation, Seiko Epson Corporation, Sharp Corporation, Sony Group Corporation, and Toshiba America, Inc.

In addition, start-up companies may seek to compete in our markets.

For information regarding the impact of backlog on the financials of the Company prior to the Sale, see Item 1 under the heading “Backlog” in the 2024 10-K .

Sales in the Cinematic market do not have a backlog.

For information regarding competition in the Mobile and Home & Enterprise businesses applicable to the Company prior to the Sale, see Item 1 under the heading “Competition” in the 2024 10-K .

Although TrueCut Motion is the first motion grading solution for the cinematic market, competitive solutions could arise rapidly.

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Research and Development

Research and development efforts are focused on the development of our solutions for the Mobile, Home & Enterprise and Cinema markets.

Our development efforts are focused on pursuing higher levels of video performance, integration and new features in order to provide our customers with solutions that enable them to introduce market leading products and help lower final systems costs.

We have invested, and expect to continue to invest, significant resources in research and development activities.

Our research and development expenses were $31.3 million and $30.9 million in 2024 and 2023, respectively.

During 2023, we received reimbursements related to a co-development arrangement with a customer for costs incurred in connection with our development of an IC product.

As a result of the reimbursements, our overall research and development expense was reduced by $3.2 million in 2023.

There were no reductions to research and development expense related to co-development arrangements in 2024.

For information regarding the Company’s research and development prior to the Sale, see Item 1 under the heading “Research and Development” in the 2024 10-K .

Research and development efforts are focused on the development of our solutions for the Cinematic market.

Our development efforts are focused on pursuing higher levels of video performance in order to provide our customers with solutions that enable them to better preserve creative intent while delivering content to a myriad of display devices, from the basic to the most cutting-edge.

Manufacturing

Within the semiconductor industry we are known as a "fabless" company, meaning that we do not manufacture the semiconductors that we design and develop, but instead contract with a limited number of foundries and assembly and test vendors to produce all of our wafers and for completion of finished products.

The fabless approach allows us to concentrate our resources on product design and development where we believe we have greater competitive advantages.

See "Risk Factors" in Part I, Item 1A of this Annual Report on Form 10-K for information on risks related to our manufacturing strategy and processes.

Our TrueCut products do not require manufacturing, since they are based on IP, software, and services.

For information regarding manufacturing in our Mobile and Home & Enterprise products prior to the Sale, see Item 1 under the heading “Manufacturing” in the 2024 10-K .

Because our TrueCut products are based on IP, software, and services, they do not require manufacturing.

Intellectual Property

We use a combination of nondisclosure agreements and patent, copyright, trademark and trade secret laws to protect the algorithms, design and architecture of our technology.

As of December 31, 2024, we held 261 patents and have 14 patent applications pending, compared to 280 patents and 18 patent applications pending as of December 31, 2023.

The patents we hold relate generally to improvements in the visual display of digital image data including, but not limited to, improvements in image scaling, image correction, automatic image optimization and video signal processing for digital displays, and in large part, are implemented in our core technologies and products.

For information regarding the Company’s intellectual property prior to the Sale, see Item 1 under the heading “Intellectual Property” in the 2024 10-K .

Following the Sale, we use a combination of nondisclosure agreements and patent, copyright, trademark and trade secret laws to protect the algorithms, design and architecture of our technology.

Following the Sale, we hold 56 patents and have 6 patent applications pending.

The patents we hold generally relate to improvements in the visual display of digital image data including, but not limited to, improvements in motion estimation/motion compensation, motion grading, image scaling, image correction, automatic image optimization and video signal processing for digital displays, and in large part, are implemented in our core technologies and products.

and foreign patents are generally enforceable for 20 years from the date they were filed.

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and, thus, make the possibility of piracy of our technology and products more likely in these countries.

The semiconductor industry is characterized by vigorous protection of intellectual property rights, which have resulted in significant and often protracted and expensive litigation.

We, our customers or our foundries from time to time may be notified of claims that we may be infringing patents or other intellectual property rights owned by third parties.

Litigation by or against us relating to patent infringement or other intellectual property matters could result in significant expense to us and divert the efforts of our technical and management personnel, whether or not such litigation results in a determination favorable to us.

In the event of an adverse result in any such litigation, we could be required to pay substantial damages, cease the manufacture, use and sale of infringing products, expend significant resources to develop non-infringing technology, discontinue the use of certain processes or obtain licenses to the infringing technology.

We may not be able to settle any alleged patent infringement claim through a cross-licensing arrangement.

In the event any third party made a valid claim against us, our customers or our foundries, and a license was not made available to us on terms that are acceptable to us or at all, we would be adversely affected.

See "Risk Factors" in Part I, Item 1A, and "Note 11.

Commitments and Contingencies" in Part II, Item 8 of this Annual Report on Form 10-K for information on various risks related to intellectual property.

Environmental Matters

Environmental laws and regulations are complex, change frequently and have tended to become more stringent over time.

We have incurred, and may continue to incur, significant expenditures to comply with these laws and regulations and we may incur additional capital expenditures and asset impairments to ensure that our products and our vendors’ products are in compliance with these regulations.

We would be subject to significant penalties for failure to comply with these laws and regulations.

See "Risk Factors" in Part I, Item 1A of this Annual Report on Form 10-K for information on various environmental risks.

As of December 31, 2025, we had a total of 163 employees, the majority of which were full-time, compared to 196 employees as of December 31, 2024.

Following the Sale and the restructuring related to the Sale, we will have a total of approximately 23 full-time employees.

Corporate Information

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Availability of Securities and Exchange Commission Filings

We make available through our website our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports and any filings filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act of 1934, free of charge as soon as reasonably practicable after we electronically file or furnish such material with the Securities and Exchange Commission ("SEC").

We make available through our website our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports and any filings filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, free of charge, as soon as reasonably practicable after we electronically file or furnish such material with the SEC.

Our Internet address is www.pixelworks.com .

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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