−Removed: You should consider each of the following factors in evaluating our business and our prospects.
−Removed: However, the risks and uncertainties described below are not the only ones we face.
+Added: You should consider each of the following factors in evaluating our business and our prospects, any of which could negatively impact our business, results of operations, cash flows and financial condition, and require significant management time and attention.
+Added: Further, the risks and uncertainties described below are not the only ones we face.
Additional risks and uncertainties not presently known to us or that we currently consider immaterial may also negatively impact our business, results of operations, cash flows and financial condition, and require significant management time and attention.
−Removed: In that case, the trading price of our common stock could decline.
+Added: In such cases, the trading price of our common stock could decline.
You should also consider the other information set forth in this Annual Report in evaluating our business and our prospects, including but not limited to our financial statements and the related notes, and “Part II, Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations.” References to “and,” “or” and “and/or” should be read to include the others, as appropriate.
−Removed: RISKS RELATED TO THE CORONAVIRUS (COVID-19) PANDEMIC
−Removed: The coronavirus (COVID-19) pandemic had an adverse effect on our business and results of operations, and may continue to impact us in the future.
−Removed: The rapid, global spread of COVID-19 and the fear it created resulted in significant economic uncertainty, significant declines in business and consumer confidence and global demand in the wireless industry (among others) and a global economic slowdown, which resulted in a global recession.
−Removed: Specifically, throughout most of calendar 2020 and into early calendar 2021, the decline in demand for smartphones and other consumer devices sold by our customers or licensees resulted in decreased demand for our integrated circuit products (which are incorporated into such devices) and a decrease in the royalties we earned on the licensing of our intellectual property (which is dependent upon the number of such devices sold that utilize our intellectual property).
−Removed: The COVID-19 pandemic could impact our business, results of operations and financial condition in the future through delayed, reduced or cancelled customer orders;
−Removed: disruptions or delays in our supply chain;
−Removed: the inability of our customers or licensees to purchase or pay for our products or technologies;
−Removed: the insolvency of key suppliers, customers or licensees;
−Removed: delays in reporting or payments from our customers or licensees;
−Removed: or failures by other counterparties.
−Removed: Additionally, federal, state or foreign governments may in the future increase corporate tax rates, increase employer payroll tax obligations and/or otherwise change tax laws to pay for stimulus and other actions that have been and may in the future be taken as a result of the COVID-19 pandemic.
−Removed: The COVID-19 pandemic also caused us to modify our workforce practices, such as having the vast majority of our employees working from home.
−Removed: We could be negatively affected in the future if, among others, a significant number of our employees, or employees who perform critical functions, become ill and/or are quarantined as the result of exposure to COVID-19, or if government policies restrict the ability of those employees to perform their critical functions.
−Removed: Further, our efforts to reopen our offices safely may not be successful, could expose our employees, customers, licensees and partners to health risks and us to associated liability, and could result in disruptions among our employees.
−Removed: See also the Risk Factor titled “ We may not be able to attract and retain qualified employees, and our attempts to fully reopen our offices and operate under a hybrid working environment may not be successful.
−Removed: The degree to which the COVID-19 pandemic impacts our future business, results of operations and financial condition will depend on future developments, which are uncertain, including but not limited to the duration, spread and severity of the pandemic;
−Removed: the availability, adoption and efficacy of vaccines;
−Removed: the emergence, spread and severity of new variants of COVID-19, and the protection afforded by vaccines against such variants;
−Removed: government responses and other actions to mitigate the spread of and to treat COVID-19;
−Removed: and when and to what extent normal business, economic and social activity and conditions resume.
−Removed: We are similarly unable to predict the extent to which the pandemic impacts our customers, licensees, suppliers and other partners and their financial conditions, but adverse effects on these parties could also adversely affect us.
−Removed: Finally, the COVID-19 pandemic may make it harder for management to estimate the future performance of our business.
−Removed: To the extent the COVID-19 pandemic adversely affects our business, results of operations and financial condition, it may also have the effect of exacerbating the other risks discussed in this “Risk Factors” section.
RISKS RELATED TO OUR OPERATING BUSINESSES
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Significant Accounting Policies - Concentrations.”
−Removed: In addition, a number of our largest integrated circuit customers have developed, are developing or may develop their own integrated circuit products, or may choose our competitors’ integrated circuit products, which they have in the past utilized, currently utilize and may in the future utilize in some (or all) of their devices, rather than our products, which could
−Removed: significantly reduce the revenues we derive from these customers.
+Added: In addition, a number of our largest integrated circuit customers have developed, are developing or may develop their own integrated circuit products, or may choose our competitors’ integrated circuit products, which they have in the past utilized, currently utilize and may in the future utilize in some or all of their devices, rather than our products, which could significantly reduce the revenues we derive from these customers.
See also the Risk Factor titled “ Our business, particularly our semiconductor business, may suffer as a result of our customers vertically integrating (i.e., developing their own integrated circuit products) .”
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These efforts may not require or result in purchase commitments from such customers or we may have lower purchases from such customers than expected, and consequently, we may not achieve the anticipated revenues from these efforts, or these efforts may result in non-recoverable costs.
−Removed: The loss of any one of our significant customers, a reduction in the purchases of our products by such customers or the cancellation of significant purchases by any of these customers, whether due to the use of their own integrated circuit products or our competitors’ integrated circuit products, government restrictions, the COVID-19 pandemic or otherwise, would reduce our revenues and could harm our ability to achieve or sustain expected results of operations, and a delay of significant purchases, even if only temporary, would reduce our revenues in the period of the delay.
+Added: The loss of any one of our significant customers, a reduction in the purchases of our products by any of these customers or the cancellation of significant purchases by any of these customers, whether due to the use of their own integrated circuit products or our competitors’ integrated circuit products, government restrictions, a decline in global, regional or local economic conditions, a decline in consumer demand, elevated inventory levels at our customers or otherwise, would reduce our revenues and could harm our ability to achieve or sustain expected results of operations.
+Added: A delay of significant purchases, even if only temporary, would reduce our revenues in the period of the delay.
Any such reduction in revenues would also impact our cash resources available for other purposes, such as research and development.
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Our industry has also experienced slowing growth in the premium-tier device segment due to, among other factors, a maturing premium-tier smartphone industry in which demand is increasingly driven by new product launches and innovation cycles.
−Removed: A reduction in sales of premium-tier devices, a reduction in sales of our premium-tier integrated circuit products (which have a higher revenue and margin contribution than our lower-tier integrated circuit products), or a shift in share away from OEMs that utilize our premium-tier products, would reduce our revenues and margins and may harm our ability to achieve or sustain expected financial results.
+Added: A reduction in sales of premium-tier devices, a reduction in sales of our premium-tier integrated circuit products (which have a higher revenue and margin contribution than our lower-tier integrated circuit products), or a shift in share away
+Added: from OEMs that utilize our premium-tier products, would reduce our revenues and margins and may harm our ability to achieve or sustain expected financial results.
Any such reduction in revenues would also impact our cash resources available for other purposes, such as research and development.
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Apple has utilized modem products of one of our competitors in some of its devices rather than our products, and solely utilized one of our competitors’ products in several of its prior device launches.
−Removed: In April 2019, we entered into a multi-year chipset supply agreement with Apple and began shipping modems under this agreement in the third quarter of fiscal 2020.
−Removed: In December 2019, Apple acquired Intel’s modem assets and is developing its own modem products using these assets.
−Removed: Accordingly, Apple is expected to use its own modem products, rather than our products, in some (or all) of its future devices.
+Added: In December 2019, Apple acquired Intel’s modem assets and is developing its own modem products using those assets.
+Added: Accordingly, we expect Apple to use its own modem products, rather than our products, in some or all of its future devices.
Similarly, we derive a significant portion of our revenues from Chinese OEMs.
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or Chinese government actions or policies, including trade protection or national security policies, or other reasons.
−Removed: In addition, supply/capacity constraints within the semiconductor industry may further incentivize our integrated circuit customers to vertically integrate in an effort to secure additional control over their supply chains.
+Added: See also the Risk Factor titled “ A significant portion of our business is concentrated in China, and the risks of such concentration are exacerbated by U.S./China trade and national security tensions.
+Added: In addition, periodic supply/capacity constraints within the semiconductor industry may further incentivize our integrated circuit customers to vertically integrate in an effort to secure additional control over their supply chains.
If some or all of our largest customers and/or the largest smartphone OEMs utilize their own integrated circuit/modem products in some or all of their devices rather than our products, our business, revenues, results of operations, cash flows and financial position could be materially adversely impacted.
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Due to various factors, including pressure, encouragement or incentives from, or policies of, the Chinese government (including its Made in China 2025 campaign), concerns over losing access to our integrated circuit products as a result of actual, threatened or potential U.S.
−Removed: or Chinese government actions or policies, including trade protection or national security policies, or other reasons, some of our Chinese integrated circuit customers have developed, and others may in the future develop, their own integrated circuit products and use such integrated circuit products in their devices, or use our competitors’ integrated circuit products in their devices, rather than our products.
+Added: or Chinese government actions or policies, including trade protection or national security policies, or other reasons, some of our Chinese integrated circuit customers have developed, and others may in the future develop, their own integrated circuit products and use such integrated circuit products in their devices, or use our competitors’ integrated circuit products in their devices, rather than our products, which could materially harm our business, revenues, results of operations, cash flows and financial position.
+Added: See also the Risk Factor titled “ Our business, particularly our semiconductor business, may suffer as a result of our customers vertically integrating (i.e., developing their own integrated circuit products).”
Political actions, including trade protection and national security policies of the U.S.
−Removed: and Chinese governments, such as tariffs, bans or placing companies on restricted entity lists, have in the past, currently are and could in the future limit or prevent us from transacting business with certain of our Chinese customers or suppliers, limit, prevent or discourage certain of our Chinese customers or suppliers from transacting business with us, or make it more expensive to do so.
+Added: and Chinese governments, such as tariffs, bans or placing companies on restricted entity lists, have in the past, currently are and could in the future limit or
+Added: prevent us from transacting business with certain of our Chinese customers or suppliers, limit, prevent or discourage certain of our Chinese customers or suppliers from transacting business with us, or make it more expensive to do so.
Given our revenue concentration in China, if, due to actual, threatened or potential U.S.
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we were further limited in, or prohibited from, selling our integrated circuit products to Chinese OEMs;
−Removed: if our non-Chinese OEM customers were limited in, or prohibited from, selling devices into China that incorporate our integrated circuit products;
−Removed: if Chinese OEMs develop and use their own integrated circuit products or use our competitors’ integrated circuit products in some (or all) of their devices rather than our integrated circuit products;
−Removed: if Chinese tariffs on our integrated circuit products or on devices which incorporate our integrated circuit products made purchasing such products or devices more expensive to Chinese OEMs or Chinese consumers;
−Removed: or if our Chinese licensees delay or cease making payments of license fees they owe us, our business, revenues, results of operations, cash flows and financial position could be materially harmed.
+Added: our non-Chinese OEM customers were limited in, or prohibited from, selling devices into China that incorporate our integrated circuit products;
+Added: Chinese OEMs develop and use their own integrated circuit products or use our competitors’ integrated circuit products in some or all of their devices rather than our integrated circuit products;
+Added: Chinese tariffs on our integrated circuit products or on devices which incorporate our integrated circuit products made purchasing such products or devices more expensive to Chinese OEMs or Chinese consumers;
+Added: or our Chinese licensees delay or cease making payments of license fees they owe us, our business, revenues, results of operations, cash flows and financial position could be materially harmed.
Similarly, if, due to U.S.
or Chinese government actions or policies, we were limited in or prohibited from obtaining critical integrated circuit products from our suppliers in China, our business, revenues, results of operations, cash flows and financial position could be materially harmed.
+Added: See also the Risk Factor titled “ We derive a significant portion of our revenues from a small number of customers and licensees, and particularly from their sale of premium tier devices.
+Added: If revenues derived from these customers or licensees decrease or the timing of such revenues fluctuates, our business and results of operations could be negatively affected .”
Finally, government policies in China that regulate the amount and timing of funds that may flow out of the country have impacted and may continue to impact the timing of our receipt of, and/or ability to receive, payments from our customers and licensees in China, which may negatively impact our cash flows.
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Our research, development and other investments in these new and expanded product areas, industries and applications, and related technologies and products, as well as in our existing technologies and products, and new technologies, may not generate operating income or contribute to future results of operations that meet our expectations.
−Removed: While we continue to invest significant resources toward advancements primarily in support of 4G- and 5G-based technologies, we also invest in new and expanded product areas, and industries and applications beyond mobile handsets, by utilizing our existing technical and business expertise and through acquisitions or other strategic transactions.
−Removed: In particular, our future growth depends in part on new and expanded product areas, such as RFFE, and industries and applications beyond mobile handsets, such as automotive and IoT;
+Added: While we continue to invest significant resources toward advancements primarily in support 5G-based technologies, we also invest in new and expanded product areas, and industries and applications beyond mobile handsets, by utilizing our existing technical and business expertise and through acquisitions or other strategic transactions.
+Added: In particular, our future growth depends in part on new and expanded product areas, and industries and applications beyond mobile handsets, such as automotive and IoT;
our ability to develop leading and cost-effective technologies and products for these new and expanded product areas, industries and applications;
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Our growth also depends significantly on our ability to develop and patent 5G technologies, and to develop and commercialize products using 5G technologies.
−Removed: However, our research, development and other investments in these new and expanded product areas, industries and applications, and corresponding technologies and products, as well as in our existing, technologies and products and new technologies, such as 5G, use of licensed, shared and unlicensed spectrum and convergence of cellular and Wi-Fi, may not succeed because, among other reasons:
+Added: However, our research, development and other investments in these new and expanded product areas, industries and applications, and corresponding technologies and products, as well as in our existing technologies and products and new technologies in mobile handsets, may not succeed because, among other reasons:
we may not be issued patents on the technologies we develop;
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our strategies or the strategies of our customers, licensees or partners may not be successful;
−Removed: alternate technologies may be better or may reduce the advantages we anticipate from our investments;
+Added: alternate technologies or products may be better or may reduce the advantages we anticipate from our investments;
competitors’ technologies or products may be more cost effective, have more capabilities or fewer limitations or be brought to market faster than our new technologies or products;
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Further, the automotive industry is subject to long design-in time frames, long product life cycles and a high degree of regulatory and safety requirements, necessitating suppliers to the industry to comply with stringent qualification processes, very low defect rates and high reliability standards, all of which results in significant barriers to entry and increased costs.
+Added: If our products fail to perform to specifications, compete with the product quality of our competitors or meet quality and/or regulatory standards of a particular industry or application (including product safety and information security standards, which may differ by region, geography and industry, and which are particularly stringent in the automotive industry), we may be unable to successfully expand our business in that industry or application, and our growth could be limited.
In addition, in order to successfully extend our technologies and products into new and expanded product areas, and industries and applications beyond mobile handsets, we may need to transition to new business models and transform aspects of our organization, and we may not be successful in doing so.
−Removed: If our new technologies and products are not successful, or are not successful in the time frames we anticipate, we may incur significant costs and asset impairments, our business and revenues may not grow or grow as anticipated, our revenues and margins may be negatively impacted, our stock price may decline and our reputation may be harmed.
+Added: If we are not successful in extending our technologies and products into new and expanded product areas, and industries and applications beyond mobile handsets, if our new technologies and products are not successful, or if we are not successful in the time frames we anticipate, we may incur significant costs and asset impairments, our business and revenues may not grow or grow as anticipated, our revenues and margins may be negatively impacted, our stock price may decline and our reputation may be harmed.
We may engage in acquisitions and other strategic transactions or make investments, or be unable to consummate planned strategic acquisitions, which could adversely affect our results of operations or fail to enhance stockholder value.
We engage in acquisitions and other strategic transactions, including joint ventures, and make investments, which we believe are important to the future of our business, with the goal of maximizing stockholder value.
−Removed: From time to time, we acquire businesses and other assets, including patents, technology and other intangible assets, enter into joint ventures or other strategic transactions and purchase minority equity interests in or make loans to companies, including those that may be private and early-stage.
−Removed: Our strategic activities are generally focused on opening or expanding opportunities for our products and technologies and supporting the design and introduction of new products (or enhancing existing products) for mobile handsets, and for new industries and applications beyond mobile handsets.
+Added: We routinely acquire businesses and other assets, including patents, technology and other intangible assets, enter into joint ventures or other strategic transactions, and purchase minority equity interests in or make loans to companies, including those that may be private and early-stage.
+Added: Our strategic activities are generally focused on opening or expanding opportunities for our products and technologies and supporting the design and introduction of new products (or enhancing existing products) for mobile handsets, and for industries and applications beyond mobile handsets.
Many of our strategic activities entail a high degree of risk and require the use of significant amounts of capital, and investments may not become liquid for several years after the date of the investment, if at all.
−Removed: Our strategic activities may not generate financial returns or result in increased adoption or continued use of our technologies or products.
+Added: Our strategic activities may not be successful, generate financial returns or result in increased adoption or continued use of our technologies or products.
We may underestimate the costs or overestimate the benefits, including product, revenue, cost and other synergies and growth opportunities that we expect to realize, and we may not achieve those benefits.
−Removed: In some cases, we may be required to consolidate or record our share of the earnings or losses of companies in which we have acquired ownership interests.
+Added: In some cases, we may be required to consolidate or record our share of the earnings or losses of companies in which we have acquired ownership or variable interests.
In addition, we have in the past recorded, and may in the future record, impairment or other charges related to our strategic activities.
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We may not derive any commercial value from associated technologies or products or from future technologies or products based on these technologies, and we may be subject to liabilities that are not covered by indemnification protection that we may obtain, and we may become subject to litigation.
−Removed: Additionally, we may not be successful in entering or expanding into new sales or
−Removed: distribution channels, business or operational models, geographic regions, industries and applications served by or adjacent to the associated businesses or in addressing potential new opportunities that may arise out of our strategic acquisitions.
+Added: Additionally, we may not be successful in entering or expanding into new sales or distribution channels, business or operational models, geographic regions, industries and applications served by or adjacent to the associated businesses or in addressing potential new opportunities that may arise out of our strategic acquisitions.
If we do not achieve the anticipated benefits of business acquisitions or other strategic activities, our business and results of operations may be adversely affected, and we may not enhance stockholder value by engaging in these transactions.
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Certain agencies in the past have, and may in the future, deny the transaction or fail to approve in a timely manner, resulting in us not realizing the anticipated benefits of the proposed transaction.
−Removed: Future acquisitions or other strategic investments may be more difficult, complex or expensive to the extent that our reputation for our ability to consummate acquisitions has been harmed.
+Added: Future acquisitions or other strategic investments may be more difficult, complex or expensive to the extent that our reputation for our ability to consummate acquisitions has been or is in the future harmed.
Further, if U.S./China relations remain strained, our ability to consummate any transaction that would require approval from the relevant regulatory agency(ies) in China may be severely impacted.
+Added: In addition, acquisitions that we have completed could subsequently be reviewed and/or challenged by government agencies, which could result in fines, penalties or other liability, or requirements to divest all or a portion of an acquired business.
RISKS RELATED TO SUPPLY AND MANUFACTURING
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Our suppliers are also responsible for the procurement of most of the raw materials used in the production of our integrated circuits.
−Removed: There are a limited number of such third-party suppliers, and even fewer who are capable of manufacturing at the leading process technology nodes or who are willing to operate at older process technology nodes.
−Removed: The semiconductor manufacturing foundries that supply our products are primarily located in Asia, as are our primary warehouses where we store finished goods for fulfillment of customer orders.
+Added: There are a limited number of such third-party suppliers, and even fewer who are capable of manufacturing at the leading process technology nodes or who are willing to operate at older process technology nodes necessary for certain of our integrated circuit products.
+Added: The semiconductor manufacturing
+Added: foundries that supply our products are primarily located in Asia, as are the primary warehouses where we store finished goods for fulfillment of customer orders.
The following issues related to our third-party suppliers could have an adverse effect on our ability to meet customer demand and negatively impact our revenues, business operations, profitability and cash flows:
−Removed: • a reduction, interruption, delay or limitation in our product supply sources;
−Removed: • a failure by our suppliers to procure raw materials or allocate adequate raw materials for our products;
+Added: • our suppliers’ failure or inability to react to shifts in product demand, including situations where demand for integrated circuits exceeds suppliers’ capacity to meet that demand;
+Added: • a failure or inability by our suppliers to procure raw materials or allocate adequate raw materials for our products, or an increase in prices for raw materials or components;
• an inability to procure or utilize raw materials, components or products from our suppliers due to government prohibitions or restrictions on transactions with certain countries and/or companies, and alternative suppliers, raw material sources or raw materials are not available or not available in acceptable time frames or upon acceptable terms;
• a failure by our suppliers to allocate adequate manufacturing, assembly or test capacity for our products;
−Removed: • our suppliers’ inability to react to shifts in product demand or an increase in raw material or component prices;
−Removed: • our suppliers’ inability to develop or maintain, or a delay in developing or building out, manufacturing capacity for leading process technologies, including transitions to smaller geometry process technologies;
−Removed: • the loss of a supplier or the inability of a supplier to meet performance, quality or yield specifications or delivery schedules;
+Added: • our suppliers’ failure or inability to develop or maintain, or a delay in developing or building out, manufacturing capacity for leading process technologies, including transitions to smaller geometry process technologies;
+Added: • the loss of a supplier or the failure or inability of a supplier to meet performance, quality or yield specifications or delivery schedules;
• additional expense or production delays as a result of qualifying a new supplier and commencing volume production or testing in the event of a loss of, or a decision to add or change, a supplier;
−Removed: • natural disasters, the effects of climate change or geopolitical conflicts impacting our suppliers;
+Added: • natural disasters, the effects of climate change, acts of war or other geopolitical conflicts impacting the regions in which our suppliers and their manufacturing foundries or assembly, test or other facilities are located;
• health crises, including epidemics or pandemics, such as the COVID-19 pandemic, and government and business responses thereto, which impact our suppliers, including as a result of quarantines or closures;
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or Chinese government policies, that limit or prevent us from transacting business with suppliers of critical integrated circuit products, or that limit or prevent such suppliers from transacting business with us or from procuring materials, machinery or technology necessary to manufacture goods for us;
−Removed: While we have established alternate suppliers for certain technologies, there are a limited number of such suppliers, and even fewer who are capable of operating at the leading process technology nodes or who are willing to operate at older process technology nodes.
+Added: • any other reduction, interruption, delay or limitation in our product supply sources.
We rely on sole- or limited-source suppliers for certain products, which may exacerbate the risks identified above, and subject us to other significant risks, including poor product performance and reduced control over delivery schedules, manufacturing capability and yields, quality assurance, quantity and costs.
−Removed: To the extent we have established or in the future establish alternate suppliers, these suppliers may require significant amounts of time and levels of
−Removed: support to bring such technologies to production, both of which may increase for complex or leading process technologies.
+Added: While we have established and may in the future establish alternate suppliers for certain products, these suppliers may require significant amounts of time and levels of support to bring such products to production, both of which may increase for complex or leading process technologies.
As a result, we may invest a significant amount of effort and resources and incur higher costs to support and maintain such alternate suppliers.
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Our suppliers or potential alternate suppliers may also manufacture their own integrated circuits that compete with our products.
−Removed: Such suppliers have in the past and could again elect to allocate raw materials and manufacturing capacity to their own products and reduce or limit the production of our products.
−Removed: Accordingly, capacity for our products may not be available when we need it.
+Added: Such suppliers have in the past allocated and may again allocate raw materials and manufacturing capacity to their own products and reduce or limit the production of our
To the extent we do obtain long-term capacity commitments, we may incur additional costs related to those commitments or make non-refundable payments for capacity commitments that are not used.
−Removed: In addition, we may not receive reasonable pricing, manufacturing or delivery terms from our suppliers, and our ability to obtain favorable terms may be diminished during times of high demand and/or limited manufacturing capacity for integrated circuit products.
+Added: Further, certain of our suppliers have in the past attempted, and may in the future attempt, to unilaterally reduce their capacity commitments to us.
+Added: Accordingly, capacity for our products may not be available when we need it.
+Added: Finally, we may not receive reasonable pricing, manufacturing or delivery terms from our suppliers, and our ability to obtain favorable terms may be diminished during times of high demand and/or limited manufacturing capacity for integrated circuit products.
We cannot guarantee that the actions of our suppliers will not cause disruptions in our operations that could harm our ability to meet our delivery obligations to our customers or increase our cost of sales.
To the extent we are unable to obtain adequate supply to meet our delivery obligations, we may be obligated to make payments to our customers for such shortfalls.
−Removed: Currently, the global semiconductor industry is experiencing demand for integrated circuits that exceeds the industry’s capacity to meet that demand.
−Removed: Our ability to meet increased demand for our products has been and may continue to be limited due to the inability to obtain the additional manufacturing, assembly and test capacity necessary to fully meet such demand.
+Added: Recently, the global semiconductor industry experienced demand for integrated circuits that exceeded the industry’s capacity to meet that demand.
+Added: Our ability to meet increased demand for our products has been and may in the future be limited due to the inability to obtain the additional manufacturing, assembly and test capacity necessary to fully meet such demand.
If we are unable to fully meet customer demand, this could result in lost sales opportunities, reduced revenue growth and harm to our customer relationships.
These issues may be exacerbated if customers overstate their expected demand requirements in order to procure additional supply, which could negatively impact our ability to forecast and to allocate supply appropriately among our customers.
−Removed: These issues may also be exacerbated with respect to our platform solutions, which already entail a great deal of complexity due to differing lead-times, technologies and suppliers for each integrated circuit product included in such solutions.
−Removed: Additionally, we place orders with our suppliers using our and our customers’ forecasts of demand for our products, which are based on a number of assumptions and estimates.
+Added: The above issues may also be exacerbated with respect to our platform solutions, which already entail a great deal of complexity due to differing lead-times, technologies and suppliers for each integrated circuit product included in such solutions.
+Added: Additionally, our suppliers have in the past and may in the future increase their prices during periods of capacity constraints, or for other reasons, thus increasing our costs.
+Added: While capacity constraints have largely abated, we continue to see price increases from certain of our key semiconductor manufacturing suppliers which, without corresponding increases in the prices of our products, would negatively impact our margins.
+Added: We place orders with our suppliers using our and our customers’ forecasts of demand for our products, which are based on a number of assumptions and estimates.
As we move to smaller geometry process technologies, the manufacturing lead-time increases.
As a result, the orders we place with our suppliers are generally only partially covered by commitments from our customers.
−Removed: If we, or our customers, overestimate demand, or if demand is impacted by factors outside of our or our customers’ control, and such demand is not covered by a binding commitment from our customers, we may experience increased excess or obsolete inventory, which would negatively impact our results of operations.
+Added: If we, or our customers, overestimate demand, or if demand is impacted by factors outside of our or our customers’ control, and such demand is not covered by a binding commitment from our customers, we may experience increased excess or obsolete inventory or reserve charges, which would negatively impact our results of operations.
+Added: Further, to the extent our customers procure supply of our integrated circuit products beyond their current needs (i.e., build up inventory of our integrated circuit products), whether due to concerns over supply, overestimating demand and/or a decline in macroeconomic conditions, or otherwise, they may not purchase expected quantities of our products in subsequent quarters, which may negatively impact our revenues, results of operations and cash flows in such quarters.
See also the Risk Factor below titled “There are numerous risks associated with the operation and control of our manufacturing facilities, including a higher portion of fixed costs relative to a fabless model;
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impacts related to climate change;
−Removed: exposure to natural disasters, health crises and cyber-attacks;
+Added: exposure to natural disasters, health crises, geopolitical conflicts and cyber-attacks;
timely supply of equipment and materials;
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impacts related to climate change;
−Removed: exposure to natural disasters, health crises and cyber-attacks;
+Added: exposure to natural disasters, health crises, geopolitical conflicts and cyber-attacks;
timely supply of equipment and materials;
and various manufacturing issues.
−Removed: We own and operate various facilities that manufacture certain of our RFFE modules and RF filter products.
−Removed: Manufacturing facilities are characterized by a higher portion of fixed costs relative to a fabless model.
−Removed: We may be faced with a decline in the utilization rates of our manufacturing facilities due to decreases in demand for our products, including in less favorable industry environments, or due to our failure to win and/or retain designs with OEMs.
−Removed: During such periods, our
−Removed: manufacturing facilities could operate at lower capacity levels, while the fixed costs associated with such facilities would continue to be incurred, resulting in lower gross profit.
−Removed: We are subject to many complex environmental, health and safety laws, regulations and rules in each jurisdiction in which we operate our R&D and manufacturing facilities.
+Added: We operate various facilities that manufacture certain of our RFFE modules and RF filter products.
+Added: Our manufacturing facilities are characterized by a higher portion of fixed costs relative to a fabless model.
+Added: We may be faced with a decline in the utilization rates of our manufacturing facilities due to decreases in demand for our products, including in less favorable industry or macroeconomic environments, or due to our failure to win and/or retain designs with OEMs.
+Added: As a result, from time to time our manufacturing facilities operate at lower capacity levels, while the fixed costs associated with such facilities continue to be incurred, resulting in lower gross profit.
+Added: Due to the factors above, we are currently experiencing, and expect to continue to experience in the near term, such underutilization of capacity at our manufacturing facilities.
+Added: We are subject to many complex environmental, health and safety laws, regulations and rules in each jurisdiction in which we operate our manufacturing (and research and development) facilities.
The regulatory landscape in these areas continues to evolve, and we anticipate additional laws, regulations and rules in the future.
−Removed: In particular, new, or changes in, environmental and climate change laws, regulations or rules, including relating to GHG emissions, could lead to new or additional investments in production processes and could increase environmental compliance expenditures.
+Added: In particular, new, or changes in, environmental and climate change laws, regulations or rules, including relating to greenhouse gas emissions, could lead to new or additional investments in production processes and could increase environmental compliance expenditures.
In addition, certain environmental laws impose strict, and in certain circumstances joint and several, liability on current or previous owners or operators of real property, or parties who arranged for hazardous substances to be sent to disposal or treatment facilities, for the cost of investigation, removal or remediation of hazardous substances.
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In addition, we could be held liable for consequences arising out of human exposure to hazardous substances or other environmental damage.
−Removed: If we, or companies or facilities we acquire or have acquired, in the past failed or in the future fail to comply with any such laws and regulations, then we could incur regulatory penalties, fines, and legal liabilities;
+Added: If we, or companies or facilities we acquire or have acquired, in the past failed or in the future fail to comply with any such laws and regulations, then we could incur regulatory penalties, fines and legal
suspension of production;
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These costs may adversely impact our results of operations and financial condition.
−Removed: In addition, climate change could cause certain natural disasters, such as drought, wildfires, storms, flooding or rising sea levels, to occur more frequently or with greater intensity, which could pose physical risks to our manufacturing facilities or our suppliers’ facilities, could disrupt the availability of water necessary for the operation of our manufacturing facilities or our suppliers’ facilities, and could increase or decrease temperatures resulting in increased operating costs and/or business disruption.
−Removed: We have manufacturing facilities in Asia and Europe.
−Removed: If tsunamis, flooding, earthquakes, volcanic eruptions, drought or other natural disasters, effects of climate change or geopolitical conflicts, were to damage, destroy or disrupt our manufacturing facilities, it could disrupt our operations, delay production and shipments of inventory and result in costly repairs, replacements or other costs.
−Removed: In addition, natural disasters, effects of climate change or geopolitical conflicts may result in disruptions in transportation, distribution channels and supply chains, and significant increases in the prices of raw materials.
+Added: In addition, climate change could cause certain natural disasters, such as drought, wildfires, storms, flooding or rising sea levels, to occur more frequently or with greater intensity, which could pose physical risks to our manufacturing facilities or our suppliers’ facilities, could disrupt the availability of water necessary for the operation of such facilities, and could increase or decrease temperatures resulting in increased operating costs and/or business disruption.
+Added: We have manufacturing facilities in Asia and Europe, and the primary warehouses where we store finished goods are located in Asia.
+Added: If tsunamis, flooding, earthquakes, volcanic eruptions, drought or other natural disasters, effects of climate change, acts of war or other geopolitical conflicts were to damage, destroy or disrupt any of these facilities, it could disrupt our operations, cease or delay production and shipments of inventory and result in costly repairs, replacements or other costs and lost business.
+Added: In addition, natural disasters, effects of climate change, acts of war or other geopolitical conflicts may result in disruptions in transportation, distribution channels and supply chains and significant increases in the prices of raw materials.
Further, health crises, including epidemics or pandemics, such as the COVID-19 pandemic, and government and business responses thereto, could affect our manufacturing facilities, including by resulting in quarantines and/or closures, which would result in disruptions to and potential closures of our manufacturing operations.
Our manufacturing operations could also be disrupted by cyber-attacks on our IT systems, as described in the Risk Factor below titled “Our business and operations could suffer in the event of security breaches of our IT systems, or other misappropriation of our technology, intellectual property or other proprietary or confidential information.”
−Removed: Our manufacturing operations depend on securing raw materials and other supplies in adequate quality and quantity in a timely manner from multiple suppliers, and in some cases, we rely on a limited number of suppliers, including in some cases sole suppliers, particularly in Asia.
−Removed: There may be cases where supplies of raw materials and other products are interrupted by disaster, accident or some other event at a supplier;
+Added: Our manufacturing operations depend on securing raw materials, equipment and other supplies in adequate quality and quantity in a timely manner from multiple suppliers, and in some cases, we rely on a limited number of suppliers, including in some cases sole suppliers, particularly in Asia.
+Added: There may be cases where supplies of raw materials, equipment and other products are interrupted or limited by natural disaster, geopolitical conflict, accident or some other event affecting a supplier or source of raw materials;
supply is suspended due to quality or other issues;
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From time to time, suppliers may extend lead times, limit amounts supplied to us or increase prices due to capacity constraints or other factors.
−Removed: Additionally, supply and costs of raw materials may be negatively impacted by trade and/or national security protection policies, such as tariffs, or actions by governments that limit or prevent us from transacting business with certain countries or companies or that limit or prevent certain companies from transacting business with us, or trade tensions, particularly with countries in Asia.
+Added: Additionally, supply and costs of raw materials, equipment and other products may be negatively impacted by trade and/or national security protection policies, such as tariffs, or actions by governments that limit or prevent us from transacting business with certain countries or companies or that limit or prevent certain companies from transacting business with us, or trade tensions, particularly with countries in Asia.
Further, it may be difficult or impossible to substitute one piece of equipment for another or replace one type of material with another.
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Difficulties in the production process can reduce yields or interrupt production, and as a result, we may not be able to deliver our products or do so in a timely, cost-effective or competitive manner.
−Removed: Further, to remain competitive and meet customer demand, we may be required to improve our facilities and process technologies and
−Removed: carry out extensive research and development, each of which may require investment of significant amounts of capital and may have a material adverse effect on our results of operations, cash flows and financial condition.
−Removed: Finally, we typically begin manufacturing our products using our or our customers’ forecasts of demand for our products, which are based on a number of assumptions and estimates and may not be covered by long-term purchase commitments.
−Removed: As a result, we incur inventory and manufacturing costs in advance of anticipated sales, which sales ultimately may not materialize or may be lower than expected.
−Removed: If we or our customers overestimate demand, or if demand is impacted by factors outside of our or our customers’ control such as the COVID-19 pandemic or trade or national security protection policies, that is not under a binding commitment from our customers, we may experience higher inventory carrying and operating costs and/or increased excess or obsolete inventory, which would negatively impact our results of operations
+Added: Further, to remain competitive and meet customer demand, we may be required to improve our facilities and process technologies and carry out extensive research and development, each of which may require investment of significant amounts of capital and may have a material adverse effect on our results of operations, cash flows and financial condition.
+Added: From time to time, we begin to purchase equipment to meet expected customer demand in advance of any purchase orders or long-term purchase commitments.
+Added: Further, we typically begin manufacturing our products using our or our customers’ forecasts of demand for our products, which are based on a number of assumptions and estimates and may not be covered by long-term purchase commitments.
+Added: As a result, we may incur increased inventory and manufacturing costs and/or record impairment charges to the extent anticipated sales ultimately do not materialize or are lower than expected.
+Added: If we or our customers overestimate demand, or if demand is impacted by factors outside of our or our customers’ control, and such demand is not covered by a binding commitment from our customers, we may experience higher inventory carrying and operating costs and/or increased excess or obsolete inventory or reserve charges, which would negatively impact our results of operations.
RISKS RELATED TO CYBERSECURITY OR MISAPPROPRIATION OF OUR CRITICAL INFORMATION
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Third parties regularly attempt to gain unauthorized access to our IT systems, and many such attacks are increasingly more sophisticated.
−Removed: The perception that the COVID-19 pandemic has made companies’ IT systems more vulnerable has increased the already significant volume of such attacks.
−Removed: These attacks, which might be related to industrial, corporate or other espionage, criminal hackers or state-sponsored intrusions, include trying to covertly introduce malware to our computers and networks, including those in our manufacturing operations, and impersonating authorized users, among others.
−Removed: We may also be subject to ransom-style cyber-attacks, which could impact our IT systems and cause widespread disruption to our business, including our manufacturing operations, and expose our confidential or propriety information.
−Removed: Third parties that store and/or process our confidential information, or that provide products, software or services used in our IT infrastructure (including applications), may be subject to similar attacks, which could also result in malware being introduced into our IT infrastructure, e.g., through the third parties’ software updates.
+Added: These attacks, which might be related to industrial, corporate or other espionage, criminal hackers or state-sponsored intrusions, include trying to covertly introduce malware to our computers and networks, including those in our manufacturing operations, exploiting vulnerabilities in hardware, software or other IT infrastructure and impersonating authorized users, among others.
+Added: We are also subject to ransom-style cyber-attacks, which could expose our confidential or proprietary information, request payment of money and/or impact our IT systems and cause widespread disruption to our business, including our manufacturing operations.
+Added: Third parties that store and/or process our confidential information, or that provide products, software or services used in our IT infrastructure (including applications), may be subject to similar attacks, which could also result in malware being introduced into our IT infrastructure, e.g., through the third parties’ software and/or software updates.
Such attacks could result in the misappropriation, theft, misuse, disclosure, loss or destruction of the technology, intellectual property, or the proprietary, confidential or personal information, of us or our employees, customers, licensees, suppliers or other third parties, as well as damage to or disruptions in our IT systems.
We believe that we have a robust cybersecurity program that is aligned to international cybersecurity frameworks, and that we leverage industry best practices across people, processes and technologies in an attempt to mitigate cybersecurity threats.
−Removed: However, we may not be able to anticipate, detect, repel or implement effective preventative measures against all cybersecurity threats, particularly because the techniques used are increasingly sophisticated and constantly evolving.
+Added: However, we cannot anticipate, detect, repel or implement fully effective preventative measures against all cybersecurity threats, particularly because the techniques used are increasingly sophisticated and constantly evolving.
+Added: As part of our cybersecurity program, we seek to identify and remediate vulnerabilities in our IT systems and software (including third party software used in our IT systems) that could be exploited by hackers or other malicious actors.
+Added: However, we may not be aware of all such vulnerabilities, and we may fail to identify and/or remediate such vulnerabilities before they are exploited.
Attempts to gain unauthorized access to our IT systems or other attacks have in the past, in certain instances and to certain degrees, been successful (but have not caused significant harm), and may in the future be successful, and in some cases, we might be unaware of an incident or its magnitude and effects.
−Removed: In addition, employees and former employees, in particular former employees who become employees of our competitors, customers, licensees or other third parties, including state actors, have in the past and may in the future misappropriate, use, publish or provide to our competitors, customers, licensees or other third parties, including state actors, our technology, intellectual property or other proprietary or confidential information.
+Added: In addition, employees and former employees, in particular former employees who become employees of our competitors, customers, licensees or other third parties, including state actors, have in the past and may in the future misappropriate, wrongfully use, publish or provide to our competitors, customers, licensees or other third parties, including state actors, our technology, intellectual property or other proprietary or confidential information.
This risk is exacerbated as competitors for talent, particularly engineering talent, increasingly attempt to hire our employees.
−Removed: See also the Risk Factor titled “We may not be able to attract and retain qualified employees, and our attempts to fully reopen our offices and operate under a hybrid working environment may not be successful.” Similarly, we provide access to certain of our technology, intellectual property and other proprietary or confidential information to our direct and indirect customers and licensees and certain of our consultants, who have in the past and may in the future wrongfully use such technology, intellectual property or information, or wrongfully disclose such technology, intellectual property or information to third parties, including our competitors or state actors.
+Added: See also the Risk Factor titled “We may not be able to attract and retain qualified employees, and our attempts to operate under a hybrid work model may not be successful.” Similarly, we provide access to certain of our technology, intellectual property and other proprietary or confidential information to our direct and indirect customers and licensees and certain of our consultants, who have in the past and may in the future wrongfully use such technology, intellectual property or information, or wrongfully disclose such technology, intellectual property or information to third parties, including our competitors or state actors.
We also provide access to certain of our technology, intellectual property and other proprietary or confidential information to certain of our joint venture partners, including those affiliated with state actors and including in foreign jurisdictions where ownership restrictions may require us to take a minority ownership interest in the joint venture.
Such joint venture partners may wrongfully use such technology, intellectual property or information, or wrongfully disclose such technology, intellectual property or information to third parties, including our competitors or state actors.
+Added: Our technology, intellectual property and other proprietary or confidential information that we have provided to customers, licensees or other business partners could also be wrongfully obtained by third parties through cyber-attacks on such customers’, licensees’ or other business partners’ IT systems.
The misappropriation, theft, misuse, disclosure, loss or destruction of the technology, intellectual property, or the proprietary, confidential or personal information, of us or our employees, customers, licensees, suppliers or other third parties, could harm our competitive position, reduce the value of our investment in research and development and other strategic initiatives, cause us to lose business, damage our reputation, subject us to legal or regulatory proceedings, cause us to incur other loss or liability and otherwise adversely affect our business.
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As a result, our efforts to comply with such laws may be expensive and may fail, which could adversely affect our business, results of operations and cash flows.
+Added: In addition, our contracts with certain of our customers require us to obtain cybersecurity certifications for our IT systems.
+Added: Failure to obtain or maintain the necessary cybersecurity certifications could result in loss of future revenues, damage to our customer relationships and reputation, and a shift of business to our competitors.
RISKS RELATED TO HUMAN CAPITAL MANAGEMENT
−Removed: We may not be able to attract and retain qualified employees, and our attempts to fully reopen our offices and operate under a hybrid working environment may not be successful.
+Added: We may not be able to attract and retain qualified employees, and our attempts to operate under a hybrid work model may not be successful.
Our future success depends upon the continued service of our executive officers and other key management and technical personnel, and on our ability to continue to identify, attract, retain and motivate them.
Implementing our business strategy requires specialized engineering and other talent, as our revenues are highly dependent on technological and product innovations.
−Removed: In addition, in order to extend our business into certain new and expanded product areas and/or industries and applications beyond mobile handsets, we will be required to attract, retain and motivate engineering and other technical personnel with specialized skills in these areas, and these skills are in high demand among our competitors.
+Added: In addition, in order to extend our business into certain new and expanded product areas and industries and applications beyond mobile handsets, we need to attract, retain and motivate engineering and other technical personnel with specialized skills in these areas, and these skills are in high demand among our competitors.
The market for employees in our industry is extremely competitive, and competitors for talent, particularly engineering talent, increasingly attempt to hire, and to varying degrees have been successful in hiring, our employees or employment candidates, including by establishing or expanding local offices near our headquarters in San Diego, California.
−Removed: Further, the increased availability of remote working arrangements, largely driven by the COVID-19 pandemic, has expanded the pool of companies that can compete for our employees and employment candidates.
−Removed: A number of such competitors for talent are significantly larger than us and are able to offer compensation in excess of what we are able to offer or other benefits that we generally do not offer, such as the ability to permanently work from home.
+Added: Further, the increased availability of remote working arrangements has expanded the pool of companies that can compete for our employees and employment candidates.
+Added: A number of such competitors for talent are significantly larger than us and/or offer compensation in excess of what we offer or other benefits that we generally do not offer, such as the ability to permanently work from home.
Further, existing immigration laws make it more difficult for us to recruit and retain highly skilled foreign national graduates of universities in the United States, making the pool of available talent even smaller.
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The COVID-19 pandemic caused us to modify our workforce practices, including having the vast majority of our employees work from home.
−Removed: As we reopen our offices, we intend to operate under a “hybrid” working environment, meaning that the majority of our employees will have the flexibility to work remotely at least some of the time, for the foreseeable future.
−Removed: The hybrid working environment may impair our ability to maintain our collaborative and innovative culture, and may cause disruptions among our employees, including decreases in productivity, challenges in communications between on-site and off-site employees and, potentially, employee dissatisfaction and attrition.
−Removed: If our attempts to safely reopen our offices and operate under a hybrid working environment are not successful, our business could be adversely impacted.
+Added: While we have generally reopened our offices, we are currently operating under a hybrid work model, meaning that the majority of our employees have the flexibility to work remotely at least some of the time.
+Added: The hybrid work model may impair our ability to maintain our collaborative and innovative culture, and may cause disruptions among our employees, including decreases in productivity, challenges in communications between on-site and off-site employees and, potentially, employee dissatisfaction and attrition.
+Added: Further, any future attempt to transition away from the hybrid work model to more stringent on-site work requirements may result in employee dissatisfaction and attrition.
+Added: If we fail to retain key employees or maintain employee productivity as a result of the hybrid work model or an attempt to return to more on-site work, our business could be adversely impacted.
RISKS SPECIFIC TO OUR LICENSING BUSINESS
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If we do not maintain a strong portfolio that is applicable to current and future standards, products and services, our future licensing revenues could be negatively impacted.
−Removed: Our patent license agreements in effect that constitute a significant portion of our licensing revenues are effective for a specified term.
+Added: Our patent license agreements in effect that generate a significant portion of our licensing revenues are effective for a specified term.
To receive royalties after the expiration date of the specified term, we will need to extend or modify such license agreements or enter into new license agreements with such licensees.
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We have been in the past and are currently subject to various litigation and/or governmental investigations and proceedings.
−Removed: Certain of these matters are described more fully in this Annual Report in “Notes to Consolidated Financial Statements, Note 7.
+Added: Certain of these matters are described in this Annual Report in “Notes to Consolidated Financial Statements, Note 7.
Commitments and Contingencies.” We may become subject to other litigation or governmental investigations or proceedings in the future.
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Unfavorable resolutions of one or more of these matters have had and could in the future have a material adverse effect on our business, revenues, results of operations, cash flows and financial condition.
−Removed: See also the Risk Factors below titled “Changes in our patent licensing practices, whether due to governmental investigations, legal challenges or otherwise, could adversely impact our business and results of operations” and “Our business may suffer as a result of adverse rulings in governmental investigations or proceedings.”
+Added: See also the Risk Factors below titled “Changes in our patent licensing practices, whether due to governmental investigations, legal challenges or otherwise, could adversely impact our business and results of operations” and “Our business may suffer as a result of adverse rulings in governmental investigations or proceedings or other legal proceedings.”
In addition, in connection with our participation in SDOs, we, like other patent owners, generally have made contractual commitments to such organizations to license those of our patents that would necessarily be infringed by standard-compliant products as set forth in those commitments (referred to as standard-essential patents).
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Changes in our patent licensing practices, whether due to governmental investigations, legal challenges or otherwise, could adversely impact our business and results of operations.
−Removed: As described in the Risk Factor below titled “ Our business may suffer as a result of adverse rulings in governmental investigations or proceedings, ” we have been in the past and may in the future be subject to various governmental investigations and legal proceedings challenging our patent licensing (or chipset sales) practices.
−Removed: We are currently subject to certain governmental investigations and/or legal proceedings described more fully in this Annual Report in “Notes to Consolidated Financial Statements, Note 7.
+Added: As described in the Risk Factor below titled “ Our business may suffer as a result of adverse rulings in governmental investigations or proceedings or other legal proceedings, ” we have been in the past, currently are and may in the future be subject to various governmental investigations and/or legal proceedings challenging our patent licensing practices.
+Added: Certain of these matters are described in this Annual Report in “Notes to Consolidated Financial Statements, Note 7.
Commitments and Contingencies.” We believe that one intent of certain of these governmental investigations and legal proceedings has been to reduce the amount of royalties that licensees are required to pay to us for their use of our intellectual property.
If we were required to reduce the royalty rates in our patent license agreements, our revenues, earnings and cash flows would be negatively impacted absent a sufficient increase in the volume of sales of devices upon which royalties are paid.
−Removed: Similarly, if we were required to reduce the base on which our royalties are calculated, our revenues, results of operations and cash flows would be negatively impacted unless there was a sufficient increase in the volume of sales of devices upon which royalties are paid or we were able to increase our royalty rates to offset the decrease in revenues resulting from such lower royalty base (assuming the absolute royalty dollars were below any relevant royalty caps).
+Added: Similarly, if we were required to reduce the base on which our royalties are calculated (e.g., license at the chipset level rather than at the device level), our revenues, earnings and cash flows would be negatively impacted unless there was a sufficient increase in the volume of sales of devices upon which royalties are paid or we were able to increase our royalty rates to offset the decrease in revenues resulting from such lower royalty base (assuming the absolute royalty dollars were below any relevant royalty caps).
If we were required to grant patent licenses to chipset manufacturers (which could lead to implementing a more complex, multi-level licensing structure in which we license certain portions of our patent portfolio to chipset manufacturers and other portions to OEMs), we would incur additional transaction costs, which may be significant, and we could incur delays in recognizing revenues until license negotiations were completed.
In addition, our licensing revenues and earnings would be negatively impacted if we were not able to obtain, in the aggregate, equivalent revenues under such a multi-level licensing structure.
−Removed: If we were required to sell chipsets to OEMs that do not have a license to our patents, our licensing program could be negatively impacted by patent exhaustion claims raised by such unlicensed OEMs (i.e., claims that our sale of chipsets to such OEMs forecloses us from asserting any patents substantially embodied by the chipsets against such OEMs).
−Removed: Such sales would provide OEMs with a defense in the event we asserted our patents against them to obtain licensing revenue for those patents.
−Removed: This could have a material adverse effect on our licensing program and our results of operations, cash flows and financial condition.
−Removed: To the extent that we were required to implement any of these new licensing and/or business practices, including by modifying or renegotiating our existing license agreements or pursuing other commercial arrangements, we would incur additional transaction costs, which may be significant, we could incur delays in recognizing revenues until license negotiations were completed, and our business, revenues, results of operations, cash flows and financial condition could be harmed.
+Added: If we were required to sell chipsets to OEMs that do not have a license to our patents, our licensing programs could be negatively impacted by patent exhaustion claims raised by such unlicensed OEMs (i.e., claims that our sale of chipsets to such OEMs forecloses us from asserting any patents substantially embodied by the chipsets against such OEMs).
+Added: Such sales could provide OEMs with a defense in the event we asserted our patents against them to obtain licensing revenue for those patents.
+Added: This could have a material adverse effect on our licensing programs and our results of operations, cash flows and financial condition.
+Added: To the extent that we were required to implement any of these licensing and/or business practices, including by modifying or renegotiating our existing license agreements or pursuing other commercial arrangements, we would incur additional transaction costs, which may be significant, we could incur delays in recognizing revenues until license negotiations were completed, and our business, revenues, results of operations, cash flows and financial condition could be harmed.
The impact of any such changes to our licensing practices could vary widely and by jurisdiction, depending on the specific outcomes and the geographic scope of such outcomes.
−Removed: In addition, if we were required to make modifications to our licensing practices in one jurisdiction, licensees or governmental agencies in other jurisdictions may attempt to obtain similar outcomes for themselves or for such other jurisdictions, as applicable, which would result in increased legal costs.
+Added: In addition, if we were required to make modifications to our licensing practices in one jurisdiction, licensees or governmental agencies in other jurisdictions may attempt to obtain similar outcomes for themselves or for such other jurisdictions, as applicable, which could result in increased legal costs and further harm to our business, revenues, results of operations, cash flows and financial condition.
RISKS RELATED TO REGULATORY AND LEGAL CHALLENGES
−Removed: Our business may suffer as a result of adverse rulings in governmental investigations or proceedings.
−Removed: We have been in the past and are currently subject to various governmental investigations and proceedings.
−Removed: Certain of these matters are described more fully in this Annual Report in “Notes to Consolidated Financial Statements, Note 7.
+Added: Our business may suffer as a result of adverse rulings in governmental investigations or proceedings or other legal proceedings.
+Added: We have been in the past and currently are subject to various governmental investigations and proceedings.
+Added: Certain of these matters are described in this Annual Report in “Notes to Consolidated Financial Statements, Note 7.
Commitments and Contingencies.” Key allegations or findings in those matters include or have in the past included, among others:
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If some or all of our license agreements are declared invalid or unenforceable and/or we are required to renegotiate these license agreements, we may not receive, or may not be able to recognize, some or any licensing or royalty revenues under the impacted license agreements unless and until we enter into new license agreements;
−Removed: and even licensees whose license agreements are not impacted may demand to renegotiate their agreements or invoke the dispute resolution provision in their agreements, and we may not be able to recognize some or any licensing or royalty revenues under such agreements.
−Removed: The renegotiation of license agreements could result in terms that are less favorable to us than existing terms, or lead to arbitration or litigation to resolve the licensing terms, which could also be less favorable to us than existing terms, and each of which could take months or possibly years.
+Added: and even licensees whose license agreements are not impacted may demand to renegotiate their agreements or invoke the dispute resolution provision in their agreements, and we may not be able to recognize some or any revenues under such agreements.
+Added: The renegotiation of license agreements could result in terms that are less favorable to us than existing terms, or lead to arbitration or litigation to resolve the licensing terms, which could also be less favorable to us than existing terms, and each of which could take months or years.
Licensees may underreport, underpay, not report or not pay royalties owed to us pending the conclusion of such negotiations, arbitration or litigation.
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antitrust laws.
−Removed: The occurrence of any of the above could have a material adverse effect on our business, revenues, results of operations, cash flows and financial condition, and our stock price could decline, possibly significantly, in which case we may have to significantly cut costs and other uses of cash, including in research and development, significantly impairing our ability to maintain product and technology leadership and invest in
−Removed: next generation technologies.
+Added: The occurrence of any of the above could have a material adverse effect on our business, revenues, results of operations, cash flows and financial condition, and our stock price could decline, possibly significantly, in which case we may have to
+Added: significantly cut costs and other uses of cash, including in research and development, significantly impairing our ability to maintain product and technology leadership and invest in next generation technologies.
Further, depending on the breadth and severity of the circumstances above, we may have to reduce, suspend or eliminate our capital return programs, and our ability to timely pay our indebtedness may be impacted.
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We develop, patent and commercialize technology and products based on CDMA, OFDMA and other communications technologies, which are primarily wireless.
−Removed: We depend on our customers and licensees to develop devices and services based on these technologies with value-added features to drive consumer demand for new 3G/4G and 3G/4G/5G multimode devices, as well as 4G single-mode devices, and to establish the selling prices for such devices.
+Added: We depend on our customers and licensees to develop devices and services based on these technologies to drive consumer demand for new 3G/4G/5G multimode and single-mode devices, and to establish the selling prices for such devices.
Further, the timing of our shipments of our products is dependent on the timing of our customers’ and licensees’ deployments of new devices and services based on these technologies.
Increasingly, we also depend on operators of wireless networks, our customers and licensees and other third parties to incorporate these technologies into new device types and into industries and applications beyond mobile handsets, such as automotive and IoT, among others.
−Removed: We have historically been successful during wireless technology transitions, including 3G, 4G and now 5G.
−Removed: Commercial deployments of 5G networks and devices have begun and will continue.
−Removed: However, the timing and scale of such deployments, in certain regions, have been and may in the future be delayed due to the COVID-19 pandemic.
+Added: Commercial deployments of 5G networks and devices have begun and are expected to continue for the foreseeable future.
+Added: However, the timing and scale of such deployments, in certain regions, have been delayed due to the COVID-19 pandemic and may be further delayed for reasons that are beyond our control.
Our revenues and growth in revenues could be negatively impacted, our business may be harmed and our substantial investments in these technologies may not provide us an adequate return, if:
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we are unable to drive the adoption of our products into networks and devices, including devices beyond mobile handsets;
−Removed: or consumers’ rates of replacement of smartphones and other computing devices decline.
+Added: or consumers’ rates of replacement of smartphones and other devices decline.
Our industry is subject to intense competition in an environment of rapid technological change.
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government intervention or support of national industries or competitors;
−Removed: the ability to maintain product differentiation as the result of evolving industry standards and speed of technological change (including the transition to smaller geometry process technologies and the demand for always on, always connected capabilities);
+Added: the ability to maintain product differentiation in light of evolving industry standards and speed of technological change (including the transition to smaller geometry process technologies and the demand for always on, always connected capabilities);
access to capacity in the supply chain;
−Removed: and value-added features that drive selling prices and consumer demand for new 3G/4G and 3G/4G/5G multimode devices, as well as 3G and 4G single-mode devices.
+Added: and value-added features that drive selling prices and consumer demand for new 3G/4G/5G multimode and single-mode devices.
We anticipate that additional competitors will introduce products as a result of growth opportunities in wireless communications, the trend toward global expansion by foreign and domestic competitors, and technological and public policy changes.
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We expect that our future success will depend on, among other factors, our ability to:
−Removed: • differentiate our integrated circuit products with innovative technologies across multiple products and features (e.g., modem, radio frequency front-end (RFFE), including millimeter wave (mmWave), graphics and other processors, camera and connectivity) and with smaller geometry process technologies that drive both performance and lower power consumption;
−Removed: • develop and offer integrated circuit products at competitive cost and price points to effectively cover all geographic regions and all device tiers;
+Added: • differentiate our integrated circuit products with innovative technologies across multiple products and features (e.g., modem, RFFE, including millimeter wave (mmWave), graphics and other processors, camera and connectivity) and with smaller geometry process technologies that drive both performance and lower power consumption;
+Added: • develop and offer integrated circuit products at competitive cost and price points and to effectively cover all geographic regions and all device tiers;
• continue to be a leader in mobile, and drive the adoption of our technologies and integrated circuit products, including RFFE, into the most popular device models and across a broad spectrum of devices in mobile, such as smartphones, tablets, laptops and other mobile computing devices;
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• maintain or accelerate demand for our integrated circuit products at the premium device tier, while also driving the adoption of our products into high, mid- and low-tier devices across all regions;
−Removed: • remain a leader in 5G (and 4G) technology development, standardization, intellectual property creation and licensing, and develop, commercialize and remain a leading supplier of 5G (and 4G) integrated circuit products, including RFFE products;
+Added: • remain a leader in 5G technology development, standardization, intellectual property creation and licensing, and develop, commercialize and remain a leading supplier of 5G integrated circuit products, including RFFE products;
• maintain access to sufficient capacity in the supply chain relative to our competitors to meet customer demand;
• create standalone value and contribute to the success of our existing businesses through acquisitions, joint ventures and other strategic transactions, and by developing customer, licensee, vendor, distributor and other channel relationships in new industries and applications;
−Removed: • identify potential acquisition targets that will grow or sustain our business or address strategic needs, reach agreement on terms acceptable to us, close the transactions and effectively integrate these new businesses, products and technologies;
+Added: • identify potential acquisition targets that will grow or sustain our business or address strategic needs, reach agreement on terms acceptable to us, close the transactions and effectively integrate these new businesses, products, technologies and employees;
• provide leading products and technologies to OEMs, high level operating systems (HLOS) providers, operators, cloud providers and other industry participants as competitors, new industry entrants and other factors continue to affect the industry landscape;
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• continue to develop brand recognition to effectively compete against better known companies in computing and other consumer driven segments and to deepen our presence in significant emerging regions and China.
−Removed: We compete with many different semiconductor companies, ranging from multinational companies with integrated research and development, manufacturing, sales and marketing organizations across a broad spectrum of product lines, to companies that are focused on a single application, industry or standard product, including those that produce products for mobile handsets, automotive and IoT, among others.
+Added: We compete with many different semiconductor companies, ranging from multinational companies with integrated research and development, manufacturing, sales and marketing organizations across a broad spectrum of product lines, to companies that are focused on a single application, industry or standard product, including those that produce products for mobile handsets, automotive or IoT, among others.
Most of these competitors compete with us with respect to some, but not all, of our businesses or product lines.
Companies that design integrated circuits based on CDMA, OFDMA, Wi-Fi or their derivatives are generally competitors or potential competitors.
−Removed: Examples (some of which are strategic partners of ours in other areas) include Broadcom, MediaTek, Nvidia, NXP Semiconductors, Qorvo, Samsung, Skyworks, Texas Instruments and UNISOC (formally known as Spreadtrum Communications).
+Added: Examples (some of which are strategic partners of ours in other areas) include Apple, Broadcom, MediaTek, Nvidia, NXP Semiconductors, Qorvo, Samsung, Skyworks, Texas Instruments and UNISOC.
Some of these current and potential competitors may have advantages over us that include, among others:
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ownership and control of manufacturing facilities and greater expertise in manufacturing processes;
+Added: the development and sale of infrastructure equipment for wireless networks, which may enable such competitors to better optimize their integrated circuit products for performance on those networks;
more extensive relationships with local distribution companies and OEMs in certain geographic regions (such as China);
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Further, certain of those customers have developed, are developing or may develop their own integrated circuit products (effectively making them competitors), which they have in the past utilized, currently utilize and may in the future utilize in some or all of their devices, rather than our products.
−Removed: See also the Risk Factor titled “ Our business, particularly our semiconductor business, may suffer as a result of our customers vertically integrating (i.e., developing their own integrated circuit products) .” Further, political actions, including trade and/or national security protection policies, or other actions by governments, particularly the U.S.
−Removed: and Chinese governments, have in the past, currently are and could in the future limit or prevent us from transacting business with certain of our customers or suppliers, limit, prevent or discourage certain of our customers or suppliers from transacting business with us, or make it more expensive to do so.
−Removed: This could advantage our competitors by enabling them with increased sales, economies of scale, operating income and/or cash flows and/or enable critical technology transfer, allowing them to increase their investments in technology development, research and development and commercialization of products.
+Added: See also the Risk Factor titled “ Our business, particularly our semiconductor business, may suffer as a result of our customers vertically integrating (i.e., developing their own integrated circuit products) .”
+Added: Further, political actions, including trade and/or national security protection policies, or other actions by governments, particularly the U.S.
+Added: and Chinese governments, have in the past, currently are and could in the future limit or prevent us from transacting business with certain of our customers or suppliers;
+Added: limit, prevent or discourage certain of our customers or suppliers from transacting business with us;
+Added: or make it more expensive to do so.
+Added: This could advantage our competitors by enabling them with increased sales, economies of scale, operating income and/or cash flows, and/or enabling critical technology transfer, allowing them to increase their investments in technology development, research and development, and commercialization of products.
See also the Risk Factor titled “ A significant portion of our business is concentrated in China, and the risks of such concentration are exacerbated by U.S./China trade and national security tensions.
−Removed: ” Further, certain of our competitors develop and sell multiple components (including integrated circuit products) for use in devices and sell those components together to OEMs.
−Removed: Our competitors’ sales of multiple components put us (and our discrete integrated circuit products) at a competitive disadvantage.
−Removed: Certain of our competitors also develop and sell infrastructure equipment for wireless networks and can optimize their integrated circuit products to perform on such networks to a degree that we are not able to, which again puts us at a competitive disadvantage.
Competition in any or all product tiers may result in the loss of business or customers, which would negatively impact our business, revenues, results of operations, cash flows and financial condition.
Such competition may also reduce average selling prices for our chipset products or the products of our customers and licensees.
−Removed: Certain of these dynamics are particularly pronounced in emerging regions and China where competitors may have lower cost structures or may have a
−Removed: willingness and ability to accept lower prices or lower margins on their products.
−Removed: Reductions in the average selling prices of our chipset products, without a corresponding increase in volumes, would negatively impact our revenues, and without corresponding decreases in average unit costs, would negatively impact our margins.
+Added: Certain of these dynamics are particularly pronounced in emerging regions and China where competitors may have lower cost structures or may have a willingness and ability to accept lower prices or lower margins on their products.
+Added: Reductions in the average selling prices of our chipset products, without a corresponding increase in volumes, would negatively impact our revenues, and without
+Added: corresponding decreases in average unit costs, would negatively impact our margins.
In addition, reductions in the average selling prices of our licensees’ products, unless offset by an increase in volumes, would generally decrease total royalties payable to us, negatively impacting our licensing revenues.
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Failures in our products, or in the products of our customers or licensees, including those resulting from security vulnerabilities, defects or errors, could harm our business.
−Removed: Our products (including for purposes of this Risk Factor, related software) are complex and may contain defects, errors or security vulnerabilities, or experience failures or unsatisfactory performance, due to any number of issues, including issues in materials, design, fabrication, packaging and/or use within a system.
−Removed: Development of products in new domains of technology, such as the transition to 5G, and the migration to integrated circuit technologies with smaller geometric feature sizes, increases complexity and adds risk to manufacturing yields and reliability, and increases the likelihood of product defects, errors or security vulnerabilities.
+Added: Our products are complex and may contain defects, errors or security vulnerabilities, or experience failures or unsatisfactory performance, due to any number of issues, including issues in materials, design, fabrication, packaging and/or use within a system.
+Added: Development of products in new domains of technology, and the migration to integrated circuit technologies with smaller geometric feature sizes, increases complexity and adds risk to manufacturing yields and reliability, and increases the likelihood of product defects, errors or security vulnerabilities.
Defects, errors, security vulnerabilities or other unintended functionality could also be introduced into our products by cyber-attacks or other actions by malicious actors, either directly or through third-party products or software used in our products or IT infrastructure (including applications).
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Our products may be responsible for critical functions in our customers’ products and networks.
−Removed: Failure of our products to perform to specifications, or other product defects, errors or security vulnerabilities, could lead to substantial damage to the products we sell to our customers, the devices into which our products are integrated and the end users of such devices, and, potentially, to our customers’ IT infrastructure.
+Added: Failure of our products to perform to specifications, meet certain regulatory or industry standards (including product safety and information security standards, which may differ by region, geography and industry, and which are particularly stringent in the automotive industry), or other product defects, errors or security vulnerabilities, could lead to substantial damage to the products we sell to our customers, the devices into which our products are integrated and the end users of such devices, and potentially to our customers’ IT infrastructure.
Such defects, errors or security vulnerabilities could give rise to significant costs, including costs related to developing solutions, recalling products, repairing or replacing defective products, writing down defective inventory or indemnification obligations under our agreements, and could result in the loss of sales and divert the attention of our engineering personnel from our product development efforts.
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In addition, the occurrence of defects, errors or security vulnerabilities may give rise to product liability claims, particularly if such defects, errors or security vulnerabilities in our products or the technology we use, or the products into which they are integrated, result in personal injury or death, and could result in significant costs, expenses and losses.
−Removed: If a product liability claim is brought against us, the cost of defending the claim could be significant, and could divert the efforts of our technical and management personnel and harm our business, even if we are successful.
+Added: If a product liability claim is brought against us, the cost of defending the claim could be significant, and could divert the attention of our technical and management personnel and harm our business, even if we are successful.
We may be named in product liability claims even if there is no evidence that our products caused the damage in question, and even though we may have indemnity from our customers, and such claims could result in significant costs and expenses.
−Removed: Further, our business liability insurance may be inadequate, or future coverage may be unavailable on acceptable terms, which could adversely impact our financial results.
−Removed: The above is exacerbated by the fact that our products may be used, and perform critical functions, in various high-risk applications such as (i) automobiles, including autonomous driver assistance programs;
−Removed: (ii) cameras and artificial intelligence, including home and enterprise security;
−Removed: (iii) home automation, including smoke and noxious gas detectors;
−Removed: (iv) medical condition monitoring;
−Removed: (v) location and asset tracking and management, including wearables for child safety and elderly health;
−Removed: (vi) robotics, including public safety drones and autonomous municipality vehicles;
−Removed: and (vii) extended reality (XR) for treatment of phobias or PTSD, early detection of disorders or special needs, among others.
+Added: We may also be required to indemnify and/or defend our customers from product liability claims relating to our products.
+Added: Further, our business liability insurance may be inadequate, may not cover the claims, and future coverage may be unavailable on acceptable terms, which could adversely impact our financial results.
+Added: The above is exacerbated by the fact that our products may be used, and perform critical functions, in various high-risk applications such as:
+Added: automobiles, including ADAS/AD functions;
+Added: cameras and artificial intelligence, including home and enterprise security;
+Added: home automation, including smoke and noxious gas detectors;
+Added: medical condition monitoring;
+Added: location and asset tracking and management, including wearables for child safety and elderly health;
+Added: robotics, including public safety drones and autonomous municipality vehicles;
+Added: and extended reality (XR) for treatment of phobias or PTSD, early detection of disorders or special needs, among others.
Accordingly, defects, errors or security vulnerabilities in our products or the technologies we use could have an adverse impact on us, on our customers and the end users of our customers’ products.
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Policing unauthorized use of our products, technologies and intellectual property is difficult and time consuming.
−Removed: The steps we have taken have not always prevented, and we cannot be certain the steps we will take in the future will prevent, the misappropriation or unauthorized use of our products, technologies or intellectual property, particularly in foreign countries where the laws may not protect our rights as fully or as readily as U.S.
+Added: The steps we have taken have not always prevented, and we cannot be certain the steps we take in the future will prevent, the misappropriation or unauthorized use of our products, technologies or intellectual property, particularly in foreign countries where the laws may not protect our rights as fully or as readily as U.S.
laws or where the enforcement of such laws may be lacking or ineffective.
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Some industry participants who have a vested interest in devaluing patents in general, or standard-essential patents in particular, have mounted attacks on certain patent systems, increasing the likelihood of changes to established patent laws.
−Removed: In the United States, there is continued discussion regarding potential patent law changes and current and potential future litigation regarding patents, the outcomes of which could be detrimental to our licensing business.
−Removed: The laws in certain foreign countries in which our products are or may be manufactured or sold, including certain countries in Asia, may not protect our intellectual property rights to the same extent as the laws in the United States.
We cannot predict with certainty the long-term effects of any potential changes.
−Removed: In addition, we cannot be certain that the laws and policies of any country or the practices of any standards bodies, foreign or domestic, with respect to intellectual property enforcement or licensing or the adoption of standards, will not be changed in the future in a way detrimental to our licensing program or to the sale or use of our products or technologies.
+Added: In the United States, there is continued discussion regarding potential patent law changes, and there is current and potential future litigation regarding patents, the outcomes of which could be detrimental to our licensing business.
+Added: Further, the laws in certain foreign countries in which our patents are or may be licensed, or our products are or may be manufactured or sold, including certain countries in Asia, may not protect our intellectual property rights to the same extent as the laws in the United States.
+Added: In addition, we cannot be certain that the laws and policies of any country or the practices of any standards bodies, foreign or domestic, with respect to intellectual property enforcement or licensing or the adoption of standards, will not be changed in the future in ways that are detrimental to our licensing programs or to the sale or use of our products or technologies.
We have had and may in the future have difficulty in certain circumstances in protecting or enforcing our intellectual property and contracts, including collecting royalties for use of our patent portfolio due to, among others:
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failure of foreign courts to recognize and enforce judgments of contract breach and damages issued by courts in the United States;
−Removed: and challenges before competition agencies to our licensing business and the pricing and integration of additional features and functionality into our chipset products.
−Removed: See also the Risk Factors titled “ Efforts by some original equipment manufacturers (OEMs) to avoid paying fair and reasonable royalties for the use of our intellectual property may require the investment of substantial management time and financial resources and may result in legal decisions or actions by governments, courts, regulators or agencies, Standards Development Organizations (SDOs) or other industry organizations that harm our business ” and “ Our business may suffer as a result of adverse rulings in governmental investigations or proceedings .”
+Added: and challenges before competition agencies to our licensing business or the pricing and integration of additional features and functionality into our chipset products.
+Added: See also the Risk Factors titled “ Efforts by some original equipment manufacturers (OEMs) to avoid paying fair and reasonable royalties for the use of our intellectual property may require the investment of substantial management time and financial resources and may result in legal decisions or actions by governments, courts, regulators or agencies, Standards Development Organizations (SDOs) or other industry organizations that harm our business ” and “ Our business may suffer as a result of adverse rulings in governmental investigations or proceedings or other legal proceedings .”
We have engaged in litigation and arbitration in the past and may need to further litigate or arbitrate in the future to enforce our contract and intellectual property rights, protect our trade secrets or determine the validity and scope of proprietary rights of others.
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To the extent we do not aggressively enforce our rights under our license agreements, licensees may not comply with their existing license agreements, and to the extent we do not aggressively pursue unlicensed companies to enter into license agreements with us for their use of our intellectual property, other unlicensed companies may not enter into license agreements.
−Removed: Similarly, we provide access to certain of our intellectual property and proprietary and confidential business information to our direct and indirect customers and licensees, who have in the past and may in the future wrongfully use such intellectual property and information or wrongfully disclose such intellectual property and information to third parties, including our competitors.
−Removed: See also the Risk Factor titled “ Efforts by some original equipment manufacturers (OEMs) to avoid paying fair and reasonable royalties for the use of our intellectual property may require the investment of substantial management time and financial resources and may result in
−Removed: legal decisions or actions by governments, courts, regulators or agencies, Standards Development Organizations (SDOs) or other industry organizations that harm our business .”
+Added: See also the Risk Factors titled “ Efforts by some original equipment manufacturers (OEMs) to avoid paying fair and reasonable royalties for the use of our intellectual property may require the investment of substantial management time and financial resources and may result in legal decisions or actions by governments, courts, regulators or agencies, Standards Development Organizations (SDOs) or other industry organizations that harm our business ” and “Our business and
+Added: operations could suffer in the event of security breaches of our IT systems, or other misappropriation of our technology, intellectual property or other proprietary or confidential information.”
Claims by other companies that we infringe their intellectual property could adversely affect our business.
−Removed: From time to time, companies have asserted, and may again assert, patent, copyright or other intellectual property claims against our products or products using our technologies or other technologies used in our industry.
−Removed: These claims have resulted and may again result in our involvement in litigation.
−Removed: We may not prevail in such litigation given, among other factors, the complex technical issues and inherent uncertainties in intellectual property litigation.
+Added: From time to time, companies have asserted, and may again assert, patent, copyright or other intellectual property claims against us relating to our technologies or products, including those we have acquired from other companies.
+Added: These claims have resulted and may again result in our involvement in litigation, and we are currently involved in such litigation, including those described in this Annual Report in “Notes to Consolidated Financial Statements, Note 7.
+Added: Commitments and Contingencies.” We may not prevail in such litigation given, among other factors, the complex technical issues and inherent uncertainties in intellectual property litigation.
If any of our products were found to infringe another company’s intellectual property, we could be subject to an injunction or be required to redesign our products, or to license such intellectual property or pay damages or other compensation to such other company (any of which could be costly).
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Furthermore, any such litigation could severely disrupt the supply of our products and the businesses of our chipset customers and their customers, which in turn could harm our relationships with them and could result in a decline in our chipset sales or a reduction in our licensees’ sales, causing a corresponding decline in our chipset or licensing revenues.
−Removed: Any claims, regardless of their merit, could be time consuming to address, result in costly litigation, divert the efforts of our technical and management personnel or cause product release or shipment delays, any of which could have an adverse effect on our results of operations and cash flows.
+Added: Any claims, regardless of their merit, could be time consuming to address, result in costly litigation, divert the efforts of our technical and management personnel and/or cause product release or shipment delays, any of which could have an adverse effect on our results of operations and cash flows.
We may continue to be involved in litigation and may have to appear in front of administrative bodies (such as the United States International Trade Commission) to defend against patent assertions against our products by companies, some of whom are attempting to gain competitive advantage or leverage in licensing negotiations.
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Further, a governmental body in a particular country or region may assert, and may be successful in imposing, remedies with effects that extend beyond the borders of that country or region.
−Removed: In addition, a negative outcome in any such proceeding could severely disrupt the business of our chipset customers and their wireless operator customers, which in turn could harm our relationships with them and could result in a decline in our chipset sales or a reduction in our licensees’ sales, causing corresponding declines in our chipset or licensing revenues.
−Removed: Certain legal matters, which may include certain claims by other companies that we infringe their intellectual property, are described more fully in this Annual Report in “Notes to Consolidated Financial Statements, Note 7.
−Removed: Commitments and Contingencies.”
+Added: In addition, a negative outcome in any such proceeding could severely disrupt the business of our customers and their wireless operator customers, which in turn could harm our relationships with them and could result in a decline in our chipset sales or a reduction in our licensees’ sales, causing corresponding declines in our chipset or licensing revenues.
Our use of open source software may harm our business.
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For example, to encourage the growth of a software ecosystem that is interoperable with our products, we may need to contribute certain implementations under the open source licensing terms that govern such projects, which may adversely impact our associated intellectual property.
−Removed: Developing open source products, while adequately protecting the intellectual property upon which our licensing program depends, may prove burdensome and time-consuming under certain circumstances, thereby placing us at a competitive disadvantage, and we may not adequately protect our intellectual property.
+Added: Developing open source products, while adequately protecting the intellectual property upon which our licensing programs depends, may prove burdensome and time-consuming under certain circumstances, thereby placing us at a competitive disadvantage, and we may not adequately protect our intellectual property.
Also, our use and our customers’ use of open source software may subject our products and our customers’ products to governmental and third-party scrutiny and delays in product certification, which could cause customers to view our products as less desirable than our competitors’ products.
GENERAL RISK FACTORS
+Added: The COVID-19 pandemic, or a similar health crisis, may impact our business or results of operations in the future.
+Added: The COVID-19 pandemic resulted in significant economic uncertainty, significant declines in business and consumer confidence and global demand in the wireless industry (among others) and a global economic slowdown, which negatively affected our financial results over certain periods.
+Added: Specifically, throughout most of calendar 2020 and into early calendar 2021, the decline in demand for smartphones and other consumer devices sold by our customers or licensees resulted in decreased demand for our integrated circuit products and a decrease in the royalties we earned on the licensing of our intellectual property.
+Added: Similarly, during calendar 2022, spikes in COVID-19 cases in certain parts of China have led the Chinese government to impose lockdowns, which have adversely affected consumer demand in the region and may continue to impact demand in the future.
+Added: The COVID-19 pandemic also caused us to modify our workforce practices, such as having the vast majority of our employees work from home.
+Added: While we have generally reopened our offices and are currently operating under a hybrid work model, we could be negatively affected in the future if, among others, a significant number of our employees, or employees who perform critical functions, become ill and/or are quarantined as the result of exposure to COVID-19, or a similar health crisis, or if government policies restrict the ability of those employees to perform their critical functions.
+Added: See also the Risk Factor titled “ We may not be able to attract and retain qualified employees, and our attempts to operate under a hybrid work model may not be successful.
+Added: The COVID-19 pandemic, or a similar health crisis that may arise in the future, could impact our business, results of operations and financial condition in the manner described above, and/or through delayed, reduced or cancelled customer orders;
+Added: disruptions or delays in our supply chain;
+Added: the inability of our customers or licensees to purchase or pay for our products or technologies;
+Added: the insolvency of key suppliers, customers or licensees;
+Added: delays in reporting or payments from our customers or licensees;
+Added: or failures by other counterparties.
+Added: The degree to which the COVID-19 pandemic, or a similar health crisis, may impact our future business, results of operations and financial condition will depend on future developments, which are uncertain, including but not limited to the duration of the pandemic or other health crisis;
+Added: spikes in cases in various geographic regions;
+Added: the emergence, spread and severity of new virus or disease variants;
+Added: the availability, adoption and efficacy of vaccines or other medical treatments;
+Added: and government responses and other actions to limit the spread of the virus or disease or to mitigate resulting negative economic effects.
+Added: We are similarly unable to predict the extent to which COVID-19 or similar health crisis may impact our customers, licensees, suppliers and other partners and their financial conditions, but adverse effects on these parties could also adversely affect us.
+Added: To the extent the COVID-19 pandemic or a similar health crisis adversely affects our business, results of operations or financial condition, it may also have the effect of exacerbating the other risks discussed in this “Risk Factors” section.
We operate in the highly cyclical semiconductor industry, which is subject to significant downturns.
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The semiconductor industry is highly cyclical, volatile, subject to downturns and characterized by constant and rapid technological change, price erosion, evolving technical standards, frequent new product introductions, short product life cycles and fluctuations in product supply and demand.
−Removed: Periods of downturns have been characterized by diminished demand for end-user products, high inventory levels, excess or obsolete inventory adjustments, underutilization of manufacturing capacity, changes in revenue mix and erosion of average selling prices.
+Added: Periods of downturns have been characterized by diminished demand for end-user products, high inventory levels, excess or obsolete inventory adjustments or reserves, underutilization of manufacturing capacity, changes in revenue mix and erosion of average selling prices.
We expect our business to continue to be subject to such cyclical downturns.
−Removed: Consequently, our revenues may decline, and our results of operations and financial condition may be adversely impacted.
−Removed: A decline in global, regional or local economic conditions or a slow-down in economic growth, particularly in geographic regions with high concentrations of wireless voice and data users or high concentrations of our customers or licensees, could also have adverse, wide-ranging effects on our business and financial results, including:
+Added: During such downturns, our revenues may decline, and our results of operations and financial condition may be adversely impacted.
+Added: We are currently seeing and expect to continue to see weakness in the macroeconomic environment (negatively impacting consumer demand for smartphones and other devices that incorporate our products and technologies) and elevated inventory levels at our customers (negatively impacting the volume of chipsets they purchase from us until such inventory is depleted).
+Added: Until these conditions improve, we expect that both of these dynamics will have a negative impact on our revenues, results of operations and cash flows.
+Added: A decline in global, regional or local economic conditions, such as we are currently seeing, or a slow-down in economic growth, particularly in geographic regions with high concentrations of wireless voice and data users or high concentrations of our customers or licensees, could also have adverse, wide-ranging effects on our business and financial results, including:
a decrease in demand for our products and technologies;
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In addition, our customers’ and licensees’ ability to purchase or pay for our products and intellectual property and network operators’ ability to upgrade their wireless networks could be adversely affected, potentially leading to a reduction, cancellation or delay of orders for our products.
+Added: Acts of war, terrorism or other geopolitical conflicts may also result in or contribute to declining economic conditions, disruptions to global supply chains and increased volatility in financial markets, among other effects.
+Added: Further, inflationary pressure may increase our costs, including employee compensation costs, reduce demand for our products or those of our customers or licensees due to increased prices of those products, or result in employee attrition to the extent our compensation does not keep up with inflation, particularly if our competitors’ compensation does.
Our stock price and financial results have fluctuated in the past and are likely to fluctuate in the future.
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volatility of the stock market in general and technology and semiconductor companies in particular;
−Removed: announcements concerning us, our suppliers, our competitors or our customers or licensees;
+Added: announcements concerning us, our suppliers, our competitors or our customers or licensees, including any announcement concerning the initiation of, or any developments in, any lawsuit or governmental investigation or proceeding against us;
and variations between our actual financial results or guidance and expectations of securities analysts or investors, among others.
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Securities litigation could result in substantial uninsured costs and divert management’s attention and our resources.
−Removed: Certain legal matters, including certain securities litigation brought against us, are described more fully in this Annual Report in “Notes to Consolidated Financial Statements, Note 7.
+Added: Certain legal matters, including certain securities litigation brought against us, are described in this Annual Report in “Notes to Consolidated Financial Statements, Note 7.
Commitments and Contingencies.”
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Our business and products, and those of our customers and licensees, are subject to various laws, rules and regulations globally, as well as government policies and the specifications of international, national and regional communications standards bodies (collectively, Regulations).
−Removed: These include, among others:
−Removed: Regulations affecting patent licensing practices;
+Added: These include, among others, Regulations related to:
+Added: patent licensing practices;
antitrust, competition and competitive business practices;
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cybersecurity;
−Removed: import and export regulations such as the U.S.
+Added: imports and exports, such as the U.S.
Export Administration Regulations administered by the U.S.
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public disclosure;
−Removed: or business conduct.
−Removed: Compliance with, or changes in the interpretation of, existing Regulations, the adoption of new Regulations, changes in the oversight of our activities by governments or standards bodies, or rulings in court, regulatory, administrative or other proceedings relating to such Regulations, including, among others, could have an adverse effect on our business and results of operations.
−Removed: See also the Risk Factors titled “ Our business may suffer as a result of adverse rulings in governmental investigations or proceedings,” “ Changes in our patent licensing practices, whether due to governmental investigations, legal challenges or otherwise, could adversely impact our business and results of operations,” “A significant portion of our business is concentrated in China, and the risks of such concentration are exacerbated by U.S./China trade and national security tensions,” “ There are numerous risks associated with the operation and control of our manufacturing facilities, including a higher portion of fixed costs relative to a fabless model;
+Added: automotive industry safety and quality standards;
+Added: and business conduct.
+Added: Compliance with, or changes in the interpretation of, existing Regulations, the adoption of new Regulations, changes in the oversight of our activities by governments or standards bodies, or rulings in court, regulatory, administrative or other proceedings relating to such Regulations, among others, could have an adverse effect on our business and results of operations.
+Added: See also the Risk Factors titled “ Our business may suffer as a result of adverse rulings in governmental investigations or proceedings or other legal proceedings,” “ Changes in our patent licensing practices, whether due to governmental investigations, legal challenges or otherwise, could adversely impact our business and results of operations,” “A significant portion of our business is concentrated in China, and the risks of such concentration are exacerbated by U.S./China trade and national security tensions,” “ There are numerous risks associated with the operation and control of our manufacturing facilities, including a higher portion of fixed costs relative to a fabless model;
environmental compliance and liability;
impacts related to climate change;
−Removed: exposure to natural disasters, health crises and cyber-attacks;
+Added: exposure to natural disasters, health crises, geopolitical conflicts and cyber-attacks;
timely supply of equipment and materials;
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Failure to comply with any Regulation may adversely affect our business, results of operations and cash flows.
−Removed: New Regulations, or evolving interpretations thereof, may cause us to incur higher costs as we revise current practices, policies or procedures and may divert management time and attention to compliance activities.
+Added: New Regulations, or evolving interpretations thereof, may cause us to incur higher costs as we revise current practices, policies or procedures;
+Added: may divert management time and attention to compliance activities;
+Added: and may negatively impact our ability to conduct business in certain jurisdictions.
There are risks associated with our debt.
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Our ability to make payments of principal and interest on our indebtedness depends upon our future performance, which is subject to economic and political conditions, industry cycles and financial, business and other factors, many of which are beyond our control.
−Removed: If we are unable to generate sufficient cash flow from operations to service our debt, we may be required to, among other things:
+Added: If we are unable to generate sufficient cash flow from operations to service our debt, we may be required to, among others:
refinance or restructure all or a portion of our debt;
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Significant judgment is required in determining our provision for income taxes.
−Removed: We regularly are subject to examination of our tax returns and reports by taxing authorities in the United States federal jurisdiction and various state and foreign jurisdictions, most notably in countries where we earn a routine return and the tax authorities believe substantial value-add activities are performed, as well as countries where we own intellectual property.
+Added: We regularly are subject to examination of our tax returns and reports by taxing authorities in the United States federal jurisdiction and various state and foreign jurisdictions, most notably in
+Added: countries where we earn a routine return and the tax authorities believe substantial value-add activities are performed, as well as countries where we own intellectual property.
The final determination of tax audits and any related legal proceedings could materially differ from amounts reflected in our income tax provisions and accruals.
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Tax rules may change in a manner that adversely affects our future reported results of operations or the way we conduct our business.
−Removed: In response to the 2017 Tax Cuts and Jobs Act and to better align our profits with our activities, we implemented certain restructuring in fiscal 2018 and 2019.
−Removed: After our restructuring, most of our income is taxable in the United States with a significant portion qualifying for preferential treatment as FDII (foreign-derived intangible income).
+Added: Most of our income is taxable in the United States with a significant portion qualifying for preferential treatment as FDII (foreign-derived intangible income).
Beginning in fiscal 2027, the effective tax rate for FDII increases from 13% to 16%.
Further, if U.S.
−Removed: tax rates increase and/or the FDII deduction is eliminated or reduced, both of which have been proposed by the current U.S.
−Removed: presidential administration and Congress, our provision for income taxes, results of operations and cash flows would be adversely (potentially materially) affected beginning as early as the first quarter of fiscal 2022.
+Added: tax rates increase and/or the FDII deduction is eliminated or reduced, our provision for income taxes, results of operations and cash flows would be adversely (potentially materially) affected.
Also, if our customers move manufacturing operations to the United States, our FDII deduction may be reduced.
−Removed: We have tax incentives in Singapore that require we meet specified employment and other criteria.
−Removed: Although our profit in Singapore has declined as a result of our 2018 restructuring and such tax incentives were not significant beginning in fiscal 2019, failure to meet these incentive requirements through March 2022 could require us to refund previously realized material tax benefits for 2017 and 2018.
Further changes in the tax laws of foreign jurisdictions could arise as a result of the base erosion and profit shifting (BEPS) project that was undertaken by the Organization for Economic Co-operation and Development (OECD).
3 unchanged sentences
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.