What changed in this filing

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Item 1. Business

2021-02-03 compared with 2020-01-29 · 100 added, 34 removed, 309 unchanged (30% of the section changed)

6 unchanged sentences

Use of CMOS technology enables smaller, more cost-effective and energy-efficient solutions.

Our expertise in analog-intensive, mixed-signal IC design in CMOS allows us to develop new and innovative products that are highly integrated, simplifying our customers’ designs and improving their time-to-market.

Our software expertise allows us to develop products for markets where intelligent data capture, high-performance processing and communication are increasingly important product differentiators.

We also focus design and engineering efforts on technologies that simplify and accelerate adoption by customers of security features engineered into our silicon chips.

Our expertise in analog-intensive, mixed-signal IC design in CMOS and software development allows us to develop new and innovative products that are highly integrated and secure, simplifying our customers’ designs and improving their time-to-market.

Industry Background

The pervasiveness of connectivity and mobile devices is driving semiconductor consumption.

Intelligence is being added to electronic systems to enable Internet connectivity, power efficiency, monitoring our health, safety and consumption of precious resources and an improved user experience.

Intelligence is being added to electronic systems to enable internet connectivity, power efficiency, monitoring of health, safety and consumption of precious resources and an improved user experience.

This in turn is increasing the demand for bandwidth, requiring more infrastructure to support higher performance networks.

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Traditional mixed-signal designs relied upon solutions built with numerous, complex discrete analog and digital components.

While these traditional designs provide the required functionality, they are often inefficient and inadequate for use in markets where size, cost, power consumption and performance are increasingly important product differentiators.

While these traditional designs provide the required functionality, they are often inefficient and inadequate for use in markets where size, cost, power consumption, performance and security are increasingly important product differentiators.

To improve their competitive position, electronics manufacturers must reduce the cost and complexity of their systems and enable new features or functionality to differentiate themselves from their competitors.

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We are a supplier of wireless connectivity solutions for the IoT based on Zigbee®, sub-GHz proprietary technologies, Bluetooth®, Z-Wave®, Thread, and Wi-Fi®.

We provide a wide range of timing and isolation products for infrastructure applications including high-performance clocks and oscillators for networking equipment, data centers, servers and storage, wireless base stations, and automotive applications, as well as digital isolators and current sensors for industrial control and automation, power supplies, electric vehicles and battery management, solar inverters and motor control.

We are also developing commercial and smart city wireless connectivity solutions using the Wi-SUN open LPWAN protocol.

We provide a wide range of timing and isolation products for infrastructure applications including high-performance clocks and oscillators for networking equipment, data centers, servers and storage, wireless base stations, and automotive applications, as well as digital isolators and current sensors for industrial control and automation, power supplies, electric vehicles, battery management, solar inverters and motor control.

We also provide broadcast products for applications such as TVs, set-top boxes and automotive infotainment systems, and access products including subscriber line interface circuits for voice over IP (VoIP), embedded modems, and Power over Ethernet (PoE) power source equipment and powered device ICs.

We have continued to diversify our product portfolio and introduce new products and solutions through both organic investment and acquisitions.

Mergers and acquisitions are an important part of our growth strategy.

In April 2020, we acquired the Wi-Fi and Bluetooth business of Redpine Signals for approximately $317 million in cash.

We believe the acquisition will accelerate our roadmap for Wi-Fi and Bluetooth silicon and software solutions.

Our products integrate complex mixed-signal functions that are frequently performed by numerous discrete components in competing products into a single chip, chipset or system-on-chip (SoC).

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We group our products into the following categories:

● Internet of Things products, which include wireless, microcontroller (MCU) and sensor products;

● Broadcast products, which include broadcast consumer and automotive products;

● Infrastructure products, which include timing products (clocks and oscillators), and isolation devices;

● Access products, which include Voice over IP (VoIP) products, embedded modems and Power over Ethernet (PoE) devices.

● Internet of Things products, which include wireless connectivity, microcontroller (MCU) and sensor products;

● Infrastructure and automotive products, which include timing products (clocks and oscillators);

power products (isolation and PoE devices);

broadcast products (consumer and automotive radio devices);

and access products (VoIP products and embedded modems).

We have combined our previous product groups, Infrastructure, Broadcast and Access, into the Infrastructure and automotive product group.

Prior periods were retrospectively adjusted.

The following table summarizes the diverse product areas and applications for the various products that we have introduced to customers:

15 unchanged sentences

- Commercial building automation

- Patient Monitoring

- Connected Medical Products

- Smart Appliances

- Access control

- HVAC control

- Consumer electronics

9 unchanged sentences

- Consumer medical

Infrastructure Products

Infrastructure and Automotive Products

Timing Devices

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- Optical networking

- Switches/routers

- Telecommunications

- Data center

- Switches/routers

- Servers and storage

- Mobile fronthaul and backhaul

- Wireless base stations

- Mobile fronthaul, midhaul and backhaul

- Small cells

14 unchanged sentences

- Test and measurement equipment

Broadcast Products

Broadcast Consumer

13 unchanged sentences

- MP3/digital media players

Broadcast Automotive

Our high-performance automotive infotainment solutions include hybrid Software Defined Radio (SDR) tuners, data receivers and digital radio coprocessors that improve the end user experience, reduce system cost, and support all major digital radio standards, including DAB/DAB+, HD Radio and DRM.

Our scalable architecture enables automotive infotainment system suppliers to leverage their investments across multiple product lines ranging from entry-level car radios to cutting-edge multi-tuner, multi-antenna radios for premium vehicles.

- Automotive OEM infotainment systems

- Aftermarket car radios

- Navigation/GPS devices

Access Products

ProSLIC® Subscriber Line Interface Circuits for VoIP

4 unchanged sentences

- Wireless local loop remote access systems

Broadcast Automotive

- Automotive OEM infotainment systems

- Aftermarket car radios

- Navigation/GPS devices

Product Areas and Description

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Internet of Things

Infrastructure

Infrastructure and automotive

The Company has combined its previous product groups, Infrastructure, Broadcast and Access, into the Infrastructure and automotive product group.

Prior periods were retrospectively adjusted.

Customers, Sales and Marketing

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Although we sell the products to, and are paid by distributors and contract manufacturers, we refer to such end customer as our customer.

Two of our distributors who sell directly to our customers, Arrow Electronics and Edom Technology, each represented 26% and 20% of our revenues during fiscal 2019, respectively.

Three of our distributors who sell to our customers, Arrow Electronics, Edom Technology and Sekorm, each represented 26%, 22% and 11% of our revenues during fiscal 2020, respectively.

We maintain numerous sales offices in Asia, the Americas and Europe.

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The percentage of our revenues derived from outside of the United States was 90% in fiscal 2020.

For further information regarding our revenues and long-lived assets by geographic area, see Note 18, Segment Information , to the Consolidated Financial Statements.

Our direct sales force is comprised of many sales professionals who possess varied levels of responsibility and experience, including directors, country managers, regional sales managers, district sales managers, strategic account managers, field sales engineers and sales representatives.

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In addition to being able to manage numerous application tasks, an RTOS enhances scalability, and makes complex applications predictable and reliable.

To address these application needs, we acquired Micrium, an embedded RTOS provider.

To address these application needs, in 2016 we acquired Micrium, an embedded RTOS provider.

Micrium has established itself as a reliable, high performance and trusted RTOS software platform, with an installed base that has grown to millions of devices.

40 unchanged sentences

We expect that our utilization of offshore third-party test subcontractors will remain substantial during fiscal 2021.

The impacts of the COVID-19 pandemic on our suppliers are uncertain, evolving and dependent on numerous unpredictable factors outside of our control.

If our suppliers experience closures or reductions in their capacity utilization levels in the future, we may have difficulty sourcing materials necessary to fulfill production requirements.

Disruptions to our business and supply chain (and the business and supply chains of our customers) could cause significant delays in shipments of our products until we are able to shift our manufacturing, assembling or testing from the affected subcontractor to another third-party vendor.

Capacity is currently limited at certain of our third-party foundry, assembly and test subcontractors due to a spike in semiconductor demand

We include in backlog accepted product purchase orders from customers and worldwide distributor stocking orders.

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Due to our diversified product portfolio and the numerous markets and applications we serve, we target a relatively large number of competitors.

We compete with AltoBeam, Analog Devices, Aura, Broadcom, Cypress, Dialog, Espressif, Infineon, Maxim Integrated Products, MaxLinear, MediaTek, Microchip, Nordic Semiconductor, NXP, Qualcomm, Rafael, Renesas, STMicroelectronics, Synaptics, Telink, Texas Instruments and others.

We compete with AltoBeam, Analog Devices, Aura, Broadcom, Dialog, Espressif, Infineon, Maxim Integrated Products, MaxLinear, MediaTek, Microchip, Nordic Semiconductor, NXP, Qualcomm, Rafael, Renesas, STMicroelectronics, Synaptics, Telink, Texas Instruments and others.

We expect to face competition in the future from our current competitors, other manufacturers and designers of semiconductors and start-up semiconductor design companies.

8 unchanged sentences

We seek to protect our technology through a combination of patents, copyrights, trade secrets, trademarks and confidentiality procedures.

As of December 28, 2019, we had approximately 1,771 issued or pending United States and foreign patents.

As of January 2, 2021, we had approximately 1,771 issued or pending United States and foreign patents.

Patents generally have a term of twenty years from the date they are filed.

As our patent portfolio has been built over time, the remaining terms of the individual patents in our patent portfolio vary.

There can be no assurance that patents will ever be issued with respect to our patent applications.

17 unchanged sentences

Our licenses include industry standard licenses with our vendors, such as wafer fabrication tool libraries, third-party core libraries, computer-aided design applications and business software applications.

As of December 28, 2019, we employed 1,545 people.

Our success depends on the continued service of our key technical and senior management personnel and on our ability to continue to attract, retain and motivate highly skilled analog and mixed-signal engineers.

The competition for such personnel is intense.

We have never had a work stoppage and none of our U.S.

employees are represented by a labor organization.

We consider our employee relations to be good.

Environmental Regulation

Federal, state and local regulations impose various environmental controls on the storage, use, discharge and disposal of certain chemicals and gases used in the semiconductor industry.

Human Capital

Our success depends on our ability to continue to attract, retain and motivate qualified employees, particularly highly skilled analog and mixed-signal engineers and senior management personnel.

We strive to meet this objective by offering competitive compensation and benefits in a diverse, inclusive and safe workplace, with opportunities for our employees to grow and develop in their careers.

As of January 2, 2021, we employed 1,838 people, of whom more than 60% are in engineering roles.

Women represent approximately 20% of our workforce and men represent approximately 80%.

We are a multi-national and multi-ethnic workforce, with sites and employees in more than a dozen countries.

We are committed to fostering a diverse and inclusive workplace that attracts and retains exceptional talent.

We actively promote diversity in our recruitment, development and promotion practices.

These principles are also reflected in our employee training, in particular with respect to our policies against harassment, discrimination and the elimination of bias in the workplace.

We hold our employees to high performance standards and our compensation plans are designed to deliver competitive base pay and attractive incentive opportunities.

Our benefits programs are tailored to the various countries in which we operate.

We benchmark for market practices, and regularly review our compensation and benefit programs against the market to ensure they remain competitive.

We support a high-performance culture through learning and development solutions aligned with our strategic priorities.

Our approach is business-centric, accessible and inclusive.

Employees continuously collaborate and share their expertise through an internal training program consisting of classes and workshops that help strengthen technical and professional skills and advance careers.

We also host university professors and external speakers to broaden knowledge, trigger creativity and inspire innovation.

Our e-learning libraries and on-demand training videos allow employees to absorb information at their own pace and share their recommendations with co-workers.

Employees are invited to attend our annual two-day technical symposium featuring peer-reviewed presentations showcasing our internal technical achievements and talks from outside experts to educate and inspire our workforce.

Our talent development programs provide employees with the resources they need to help achieve their career goals, build management skills and lead their organizations.

We regularly review succession plans and focus on promoting internal talent to help grow our employees’ careers.

We believe that our future success will be dependent on retaining the services of our key personnel, developing their successors and properly managing the transition of key roles when they occur.

Our key technical personnel represent a significant asset and serve as the primary source for our technological and product innovations.

We use employee surveys to better understand and improve the employee experience and identify opportunities to continually strengthen our work philosophy.

We use employee feedback to drive and improve processes and ensure a deep understanding of our culture and vision among our employees.

We believe the development of our company culture, along with competitive compensation, career growth and development opportunities have helped increase employee tenure and reduce voluntary turnover.

During fiscal 2020, our voluntary employee turnover rate was less than 10%.

The health and safety of our employees is of utmost important to us.

We offer comprehensive benefits to protect the health of our employees and their families as well as their way of life.

We provide our employees and their families with access to a variety of innovative, flexible and convenient health and wellness programs that support their physical and mental health by providing tools and resources to help them improve or maintain their health status.

In response to the COVID-19 pandemic, we implemented a response plan that we believe was in the best interest of our employees and the communities in which we operate.

This included largely transitioning our global workforce to a remote work model, while implementing additional safety measures for essential employees continuing critical on-site work.

Corporate Social Responsibility

As a global corporate citizen, we are committed to environmental sustainability, operational excellence, and support for people and communities around the world.

We strive to minimize resource use and reduce the environmental impact of our production process by designing smaller and more energy-efficient products, conserving energy and precious resources, and investing in sustainable technologies.

We believe that sharing our success with the community is also a key component of our corporate value to “do the right thing.” Our philanthropy program provides financial, volunteer and in-kind support to organizations that have made a difference in improving the quality of life throughout the world, including those promoting diversity, inclusion and social justice.

Actions we have taken in pursuit of these commitments include:

Environmental Programs

● Adopted and require our suppliers to support the Responsible Business Alliance® (RBA®) Code of Conduct;

● Prioritized qualified suppliers who are socially and environmentally progressive;

● Demanded excellence in our quality and environmental performance, as demonstrated through our extensive product and process qualification commitments, including ISO 9001 Quality Management System and ISO 14001 Environmental Management System;

Social Programs

● Donated a portion of our annual profits to charitable organizations;

● Provided corporate matching for employee donations to qualified nonprofit organizations;

● Offered 24 hours of paid time off per year for employees to volunteer in their communities;

● Signed an open letter to take actions that advance racial justice, denounce racism and commit to real, sustained action and progress.

As part of that effort, we granted $100 thousand to a collaborative nonprofit project that funds five racial justice organizations and provides the infrastructure for advocacy, volunteering and education;

● Provided financial grants to organizations offering STEM education programs for at-risk students;

● Engaged in community service projects in our communities globally and donated to relief efforts when disasters occur.

Governmental Regulations

We are subject to international, federal, state and local regulations that are customary to businesses in the semiconductor industry.

Such regulations include:

● The Restriction of Hazardous Substances Directive (“RoHS”), which restricts the use of certain hazardous substances in electrical and electronic equipment;

● General Data Protection Regulation (“GDPR”), which provides guidelines for the collection and processing of personal information from individuals who live in the European Union;

Foreign Corrupt Practices Act ("FCPA"), which prohibits companies and their individual officers from influencing foreign officials with any personal payments or rewards;

● Conflict minerals reporting, which imposes disclosure requirements regarding the use of “conflict” minerals mined from the Democratic Republic of Congo and adjoining countries in products.

Our compliance with these laws and regulations has not had a material impact on our financial position or results of operations.

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

What changed 10-K

Item 1. Business