SILICON LABORATORIES INC. 10-K

Item 1. Business General Silicon Laboratories Inc. is a leading provider of silicon, software and solutions for a smarter, more connected world. Our award-winning technologies are shaping the future of the Internet of Things (IoT), internet infrastructure, industrial automation, consumer and automotive markets. Our world-class engineering team creates products focused on performance, energy savings, connectivity and simplicity. Our primary semiconductor products are mixed-signal integrated circuits (ICs), which are electronic components that convert real-world analog signals into digital signals that electronic products can process. Our mixed-signal ICs leverage standard complementary metal oxide semiconductor (CMOS), a low cost, widely available process technology. Use of CMOS technology enables smaller, more cost-effective and energy-efficient solutions. 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 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. The nearly ubiquitous availability of internet access and the increasing intelligence of electronic devices and mobility are enabling what is called the Internet of Things, a term that describes the exponential increase in IP-enabled devices connected to the internet. These trends require more and more interaction between the analog world we live in and the digital world of computing, which is driving the need for analog-intensive, mixed-signal circuits in a wide range of electronic products. 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, 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. Simultaneously, these manufacturers face accelerating time-to-market demands and must rapidly adapt to evolving industry standards and new technologies. Because analog-intensive, mixed-signal design expertise is difficult to find, these manufacturers increasingly are turning to third parties, like us, to provide advanced mixed-signal solutions. Mixed-signal design requires specific expertise and relies on creative, experienced engineers to deliver solutions that optimize speed, power and performance, despite the noisy digital environment, and within the constraints of standard manufacturing processes. The development of this design expertise typically requires years of practical analog design experience under the guidance of a senior engineer, and engineers with the required level of skill and expertise are in short supply. Many IC solution providers lack sufficient analog expertise to develop compelling mixed-signal products. As a result, manufacturers of electronic devices value providers that can supply them with mixed-signal solutions offering greater functionality, smaller size and lower power requirements at a reduced cost and shorter time-to-market. Products We provide analog-intensive, mixed-signal solutions for use in a variety of electronic products in a broad range of applications for the IoT including connected home and security, industrial automation and control, smart metering, smart lighting, commercial building automation, consumer electronics, asset tracking and medical instrumentation. 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 are also developing commercial and smart city wireless connectivity solutions using the Wi-SUN open LPWAN protocol. 2 Table of Contents 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). By doing so, we create products that, when compared to many competing products, offer the following benefits: ● Require less printed circuit board (PCB) space; ● Reduce the use of external components lowering the system cost and simplifying design; ● Offer superior performance improving our customers’ end products; ● Provide increased reliability and manufacturability, improving customer yields; and/or ● Reduce system power requirements enabling smaller form factors and/or longer battery life. We group our products into the following categories: ● Internet of Things products, which include wireless connectivity, microcontroller (MCU) and sensor products; and ● 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. 3 Table of Contents The following table summarizes the diverse product areas and applications for the various products that we have introduced to customers: Product Areas and Description Applications Internet of Things Products ​ ​ ​ ​ ​ Microcontrollers and Wireless Products ​ ​ We offer a family of products ideally suited to ultra-low power IoT embedded systems that include energy friendly 8-bit mixed-signal microcontrollers, ultra-low power 32-bit microcontroller and wireless MCU connectivity solutions using the ARM® Cortex-M0+/M3/M4 and newer M33 cores. Single and multi-protocol SoC devices and modules provide flexible, highly integrated solutions designed to meet demanding requirements of IoT applications. Wireless protocols include Zigbee, sub-GHz proprietary, Bluetooth, Z-Wave, Thread and Wi-Fi technologies. Our EFM32™, EFM8™, 8051, wireless MCUs and wireless SoCs are supported by Simplicity Studio™, which provides one-click access to design tools, documentation, software and support resources. In-house protocol stacks and Micrium® real-time operating system (RTOS) help simplify software development for IoT developers by coordinating and prioritizing multiprotocol connectivity, SoC peripherals and other system-level activities. The introduction of our Series 2 portfolio provides a greater focus on updatable device security which is becoming vital to the evolution and success of IoT. We bring enhanced capability to the industry protecting user data, system keys and manufacturer brands from malicious threats both hands-on and internet-based. Our broad portfolio addresses a variety of target markets, including smart home, commercial (building automation and retail) and industrial (smart energy, factory automation, smart cities). ​ - Home automation /security systems - Industrial automation and control - Smart metering - Smart lighting - Commercial building automation - Patient Monitoring - Connected Medical Products - Smart Appliances - Access control - HVAC control - Cameras - Consumer electronics - Asset tracking - Medical instrumentation ​ ​ ​ ​ Sensors ​ ​ Our sensor products include optical sensors (proximity, ambient light gestures and heart rate monitoring), as well as relative humidity (RH) / temperature sensors and Hall effect magnetic sensors. These devices leverage our mixed-signal capability to provide high accuracy, process technology to improve performance and lower power consumption than competing parts. ​ - Consumer health & fitness (wearables) - Smart home sensing - Industrial controls - Toys and consumer electronics - Monitors and lavatory controls - Consumer medical ​ ​ Infrastructure and Automotive Products ​ ​ ​ ​ ​ Timing Devices ​ ​ Robust demand for bandwidth is driving the deployment of next-generation internet infrastructure equipment to deliver higher speed, higher capacity and more flexible networks. This transition puts unique requirements on the clocks and oscillators used to provide timing and synchronization for the equipment responsible for switching, transporting, processing and storing network traffic. To meet this need, we provide low-jitter, frequency-flexible, mass-customizable timing solutions that accelerate development time, minimize cost and improve system reliability. Our high-performance “clock-tree-on-a-chip” products offer highly integrated single-chip IC solutions for clock synthesis and jitter attenuation, offering superior jitter performance and frequency flexibility for high data rate applications. ​ - Optical networking - Switches/routers - Telecommunications - Data center - Servers and storage - Wireless base stations - Mobile fronthaul, midhaul and backhaul - Small cells - Automotive - Industrial - Broadcast video ​ ​ ​ 4 Table of Contents Product Areas and Description Applications ​ ​ ​ Isolation Products ​ ​ Our digital isolation techniques enable customers to deploy more energy efficient power solutions that meet isolation safety standards and solve difficult electronic noise issues. Systems such as data center servers, cellular base stations, uninterruptable power supplies and electric vehicles require increasingly energy efficient power solutions. Electric motors used in electric vehicles, pumps, HVAC compressors, fans and automated machinery need more sophisticated and efficient digital controls. Our isolation technology enables customers to address these demanding requirements. Products include multi-channel isolators, isolated drivers, isolated power converters and mixed-signal devices that simplify design, improve reliability, minimize noise emissions and reduce system cost. ​ - Industrial control and automation systems - Cloud, datacenter and telecom power supplies - Electric vehicle charging and battery management - Solar inverters - Hybrid / Electric automotive drive trains - High power audio - Test and measurement equipment ​ ​ ​ Broadcast Consumer ​ ​ Our single-chip hybrid TV tuners leverage our proven digital low-IF architecture and support all major analog and digital TV standards, including NTSC, PAL/SECAM, ATSC 1.0/3.0, DVB-T2/T/C2/C, ISDB-T and DTMB, enabling TV makers worldwide to deliver improved picture quality and better reception for both analog and digital broadcasts. Our single-chip, low-power and high-performance single- and dual-channel digital video demodulators are ideal for customer premises equipment (CPE) receiving DVB-T/T2, DVB-S/S2/S2X, DVB-C/C2 and/or ISDB-T. Our AM/FM, HD Radio™ and DAB/DAB+ receivers deliver a complete radio solution, from antenna input to audio output, in a single chip. Our broadcast audio products are based on an innovative digital architecture enabling significant improvements in performance, which translates to a better consumer experience, while reducing system cost and board space for our customers. ​ - Worldwide 4K/8K UHD TVs and smart TVs - Free-to-Air (FtA) or pay-TV set-top boxes - PVR/DVD/Blu-Ray/HDD video recorders - PC-TV applications - AM/FM clock radios - DAB digital radios - HD Radio digital radios - Home theater systems - Portable audio devices - MP3/digital media players ​ ​ ​ ProSLIC® Subscriber Line Interface Circuits for VoIP ​ ​ Our ProSLIC provides the analog subscriber line interface on the source end of the telephone which generates dial tone, busy tone, caller ID and ring signal. Our offerings are well suited for the market for Voice over IP telephony applications deployed over cable, DSL, optical and wireless fixed terminal networks. ​ - Voice functionality for cable, DSL and optical digital modems and terminal adapters - VoIP residential gateways - Wireless local loop remote access systems - PBXs ​ ​ ​ 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 ​ ​ ​ 5 Table of Contents Product Areas and Description Applications ​ ​ ​ ISOmodem® Embedded Modems ​ ​ Our ISOmodem embedded modems leverage innovative silicon direct access arrangement (DAA) technology and a digital signal processor (DSP) to deliver a globally compliant, compact analog modem for embedded applications. ​ - Fax machines and multi-function printers - Point of sale (POS) terminals - Security systems - Industrial monitoring - Remote medical monitoring ​ ​ ​ Power over Ethernet ​ ​ Our PoE power source equipment and powered device ICs offer highly differentiated solutions with a reduced total bill of materials (BOM) and improved performance and reliability. Our solutions offer a higher level of integration not available with competing solutions. ​ - Enterprise networking routers and switches - Wireless access points (WAP) - VoIP phones - POS terminals - Security cameras ​ Revenues during fiscal 2020, 2019 and 2018 were generated predominately by sales of our mixed-signal products. The following summarizes our revenue by product category (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year ​ 2020 2019 2018 Internet of Things ​ $ 513,670 ​ $ 488,156 ​ $ 463,838 Infrastructure and automotive ​ 373,007 ​ 349,398 ​ 404,429 ​ ​ $ 886,677 ​ $ 837,554 ​ $ 868,267 ​ 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 We market our products through our direct sales force and through a network of independent sales representatives and distributors. Direct and distribution customers buy on an individual purchase order basis, rather than pursuant to long-term agreements. We consider our customer to be the end customer purchasing either directly from a distributor, a contract manufacturer or us. During fiscal 2020, our ten largest end customers accounted for 20% of our revenues. We had no customer that represented more than 10% of our revenues during this period. An end customer purchasing through a contract manufacturer typically instructs such contract manufacturer to obtain our products and incorporate such products with other components for sale by such contract manufacturer to the end customer. Although we sell the products to, and are paid by distributors and contract manufacturers, we refer to such end customer as our customer. 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. Revenue is attributed to a geographic area based on the shipped-to location. The percentage of our revenues derived from outside of the United States was 90% in fiscal 2020. 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. We also utilize independent sales representatives and distributors to generate sales of our products. We have relationships with many independent sales representatives and distributors worldwide whom we have selected based on their understanding of the mixed-signal marketplace and their ability to provide effective field sales applications support for our products. 6 Table of Contents Our marketing efforts are targeted at both identified industry leaders and emerging market participants. Direct marketing activities are supplemented by a focused marketing communications effort that seeks to raise awareness of our company and products. Our public relations efforts are focused on leading trade and business publications. Our external website is used to deliver corporate and product information. We also pursue targeted advertising in key trade publications and we have a cooperative marketing program that allows our distributors and representatives to promote our products to their local markets in conjunction with their own advertising activities. Finally, we maintain a presence at strategic trade shows and industry events. These activities, in combination with direct sales activities, help drive demand for our products. Due to the complex and innovative nature of our products, we employ experienced applications engineers who work closely with customers and distributors to support the design-win process, and can significantly accelerate the customer’s time to market. A design win occurs when a customer has designed our ICs into its product architecture and ordered product from us. A considerable amount of effort to help a customer incorporate our ICs into its products is typically required prior to any sale. In many cases, our innovative ICs require significantly different implementations than existing approaches and, therefore, successful implementations may require extensive communication with potential customers. The amount of time required to achieve a design win can vary substantially depending on a customer’s development cycle, which can be relatively short (such as three months) or very long (such as two years) based on a wide variety of customer factors. Not all design wins ultimately result in revenue, or may result in less revenue than expected. However, once a completed design architecture has been implemented and produced in high volumes, our customers are reluctant to significantly alter their designs due to this extensive design-win process. We believe this process, coupled with our intellectual property protection, promotes relatively longer product life cycles for our products and high barriers to entry for competitive products, even if such competing products are offered at lower prices. Our close collaboration with our customers provides us with knowledge of derivative product ideas or completely new product line offerings that may not otherwise arise in other new product discussions. Research and Development Through our research and development efforts, we leverage experienced analog and mixed-signal engineering talent and expertise to create new ICs that integrate functions typically performed less efficiently by multiple discrete components. This integration generally results in lower costs, smaller die sizes, lower power demands and enhanced price/performance characteristics. We attempt to reuse successful techniques for integration in new applications where similar benefits can be realized. We believe that we have attracted many of the best engineers in our industry. We believe that reliable and precise analog and mixed-signal ICs can only be developed by teams of engineers who have significant analog experience and are familiar with the intricacies of designing these ICs for commercial volume production. The development of test methodologies is just one example of a critical activity requiring experience and know-how to enable the rapid release of a new product for commercial success. We have accumulated a vast set of trade secrets that allow us to pursue innovative approaches to mixed-signal problems that are difficult for competitors to duplicate. We highly value our engineering talent and strive to maintain a very high bar when bringing new recruits to the company. Research and development expenses were $287.9 million, $257.2 million and $238.3 million in fiscal 2020, 2019 and 2018, respectively. Technology Our product development process facilitates the design of highly-innovative, analog-intensive, mixed-signal ICs. Our engineers’ deep knowledge of existing and emerging standards and performance requirements helps us to assess the technical feasibility of a particular IC. We target areas where we can provide compelling product improvements. Once we have solved the primary challenges, our field application engineers continue to work closely with our customers’ design teams to maintain and develop an understanding of our customers’ needs, allowing us to formulate derivative products and refined features. In providing mixed-signal ICs for our customers, we believe our key competitive advantages are: ● Analog and RF design expertise in CMOS; ● Mixed-signal, firmware and system design expertise; ● Microcontroller and system on a chip design expertise; ● Software expertise, including multiprotocol connectivity and real-time operating systems for the IoT; ● Module integration and wireless design expertise; 7 Table of Contents ● Silicon-to-cloud security integration expertise; and ● Our broad understanding of systems technology and trends. To fully capitalize on these advantages, we have assembled a world-class development team with exceptional analog and mixed-signal design expertise led by accomplished senior engineers. Analog and RF Design Expertise in CMOS We believe that our most significant core competency is world-class analog and RF design capability. Additionally, we strive to design substantially all our ICs in standard CMOS processes. Most of our product designs now incorporate some type of RF in CMOS technology. While it is often significantly more difficult to design analog ICs in CMOS, CMOS provides multiple benefits versus existing alternatives, including significantly reduced cost, reduced technology risk and greater worldwide foundry capacity. CMOS is the most commonly used process technology for manufacturing digital ICs and as a result is most likely to be used for the manufacturing of ICs with finer line geometries. These finer line geometries can enable smaller and faster ICs. By designing our ICs in CMOS, we enable our products to benefit from this trend towards finer line geometries, which allows us to integrate more digital functionality into our mixed-signal ICs. Designing analog and mixed-signal ICs is significantly more complicated than designing standalone digital ICs. While advanced software tools exist to help automate digital IC design, there are far fewer tools for advanced analog and mixed-signal IC design. In many cases, our analog circuit design efforts begin at the fundamental transistor level. We believe that we have a demonstrated ability to design the most difficult analog and RF circuits using standard CMOS technologies. Mixed-Signal, Firmware and System Design Expertise We consider the partitioning of a circuit to be a proprietary and creative design technique. Deep systems knowledge allows us to use our mixed-signal and RF in CMOS design expertise to maximize the price/performance characteristics of both the analog and digital functions and allow our ICs to work in an optimized manner to accomplish particular tasks. Generally, we attempt to move analog functions into the digital domain as quickly as possible, creating system efficiencies without compromising performance. These patented approaches require our advanced signal processing and systems expertise. We then leverage our firmware know-how to change the ‘personality’ of our devices, optimizing features and functions needed by various markets we serve. For example, our wireless SoC devices for IoT applications integrate both digital and analog domains in a single chip. The SoCs combine ARM Cortex-M processor cores, a variety of digital and analog peripherals, hardware cryptography accelerators, and analog-intensive multiprotocol radio transceivers. This system integration at the chip level leverages our deep expertise in mixed-signal and RF design, and low-power wireless MCU architectures pioneered for more than a decade. Microcontroller and System on a Chip Design Expertise We have the talent and circuit integration methodologies required to combine precision analog, high-speed digital, flash memory and in-system programmability into a single, monolithic CMOS integrated circuit. Our microcontroller products are designed to capture an external analog signal, convert it to a digital signal, compute digital functions on the stream of data and then communicate the results through a standard digital interface. The ability to develop standard products with the broadest possible customer application base while being cost efficient with the silicon area of the monolithic CMOS integrated circuit requires a keen sense of customer value and engineering capabilities. Additionally, to manage the wide variety of signals on a monolithic piece of silicon including electrical noise, harmonics and other electronic distortions requires a fundamental knowledge of device physics and accumulated design expertise. Software Expertise Our software expertise allows us to develop products for markets where intelligent data capture, high-performance processing and communication are increasingly important product differentiators. The software we have developed to address these markets enables machine-to-machine communications, providing intelligence to electronic systems. Our products integrate high-performance, low-power wireless and microcontroller ICs with reliable and scalable software into a flexible and robust networking platform. 8 Table of Contents The demand for low-power, small-footprint wireless technology is accelerating as more and more IP-enabled end points are being connected to the IoT. Our software enables a broad range of power-sensitive applications for the IoT, including smart energy, home automation, security and other connected products. We believe that the combination of our software and IC design expertise differentiates us from many of our competitors. As the IoT continues to mature, a new class of embedded applications is emerging, presenting feature-rich and task-intensive use cases. This growing complexity is driving the need for real-time operating systems to help simplify software development for IoT applications by coordinating and prioritizing multiprotocol connectivity, SoC peripherals and other system-level activities. 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, 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. Module Integration and Wireless Design Expertise The market for wireless modules has grown as customers search for solutions that provide turnkey wireless connectivity for their products. The development of modules is difficult due to stringent requirements, including high levels of integration, programmability, performance, reliability, security and power efficiency. In addition, designs must meet numerous wireless standards deployed in various environments and serving diverse requirements. Our combined expertise in IC design and software development allows us to engineer modules that provide robust, high-performance connections in challenging wireless environments. We have developed wireless modules based on numerous wireless standards, including Z-Wave, Bluetooth, Zigbee, Thread, Wi-Fi and sub-GHz. We believe our demonstrated proficiency in the design of modules provides our customers with significant advantages such as fast time to market, reduced development cost, global wireless certifications and software reuse. Silicon-to-Cloud Security Integration Expertise Security is of paramount importance to our customers. More than ever before, device manufacturers and OEMs developing IoT products have specific needs to ensure their solutions are secure. Security is a complex endeavor involving the convergence of multiple integrated hardware and software technologies. IoT products are designed to ensure the devices operate in a trusted and reliable manner, enforce policies as well as protect the confidentiality, authenticity and integrity of data and private information being processed and transmitted. The building blocks are built in hardware based on dedicated IC security components integrated into SoC designs. These specialized security components are designed to enhance cryptographic capabilities and exploit unique physical characteristics of CMOS to establish foundations of trust and enable device identity and assurance. In addition to developing specific security hardware and software capabilities, we also focus design and engineering efforts on technologies that simplify and accelerate adoption by customers of security features engineered into our silicon chips. This is primarily achieved through software tools such as Simplicity Studio and its integration with cloud-based services that simplify implementation, reduce complexity and enable management of security for fleets of devices. Those capabilities are designed to help customers develop products and solutions with chip-to-cloud security integration, enable faster time to market and reduce security defects, risks and losses due to security attacks and incidents. We are creating innovative security solutions that enable customers to develop best-in-class, simple and economical solutions. We will continue investing in security-specific research and development that addresses a dynamic threat landscape, emerging regulatory requirements, and evolving customer security and privacy needs. Understanding of Systems Technology and Trends Our focused expertise in mixed-signal ICs is the result of the breadth of engineering talent we have assembled with experience working in analog-intensive CMOS design for a wide variety of applications. This expertise, which we consider a competitive advantage, is the foundation of our in-depth understanding of the technology and trends that impact electronic systems and markets. Our expertise includes: ● Isolation, which is critical for existing and emerging industrial, hybrid and hybrid-electric applications and telecom networks; ● Frequency synthesis, which is core technology for wireless and clocking applications; ● Integration, which enables the elimination of discrete components in a system; and 9 Table of Contents ● Signal processing and precision analog, which forms the heart of consumer, industrial, medical and automotive electronics applications. Our understanding of the role of analog/digital interfaces within electronic systems, standards evolution, and end market drivers enables us to identify product development opportunities and capitalize on market trends. Manufacturing As a fabless semiconductor company, we conduct IC design and development in our facilities and electronically transfer our proprietary IC designs to third-party semiconductor fabricators who process silicon wafers to produce the ICs that we design. Our IC designs typically use industry-standard CMOS manufacturing process technology to achieve a level of performance normally associated with more expensive special-purpose IC fabrication technology. We believe the use of CMOS technology facilitates the rapid production of our ICs within a lower cost framework. Our IC production employs submicron process geometries which are readily available from leading foundry suppliers worldwide, thus increasing the likelihood that manufacturing capacity will be available throughout our products’ life cycles. We currently partner primarily with Taiwan Semiconductor Manufacturing Co. (TSMC) and Semiconductor Manufacturing International Corporation (SMIC) to manufacture the majority of our semiconductor wafers. We believe that our fabless manufacturing model significantly reduces our capital requirements and allows us to focus our resources on design, development and marketing of our ICs. Once the silicon wafers have been produced, they are shipped directly to our third-party assembly subcontractors. The assembled ICs are then moved to the final testing stage. This operation can be performed by the same contractor that assembled the IC, other third-party test subcontractors or within our internal facilities prior to shipping to our customers. During fiscal 2020, most of our units shipped were tested by offshore third-party test subcontractors. 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 Backlog We include in backlog accepted product purchase orders from customers and worldwide distributor stocking orders. Product orders in our backlog are subject to changes in delivery schedules or cancellation at the option of the purchaser typically without penalty. Our backlog may fluctuate significantly depending upon customer order patterns which may, in turn, vary considerably based on rapidly changing business circumstances. Accordingly, we do not believe that our backlog at any time is necessarily representative of actual sales for any succeeding period. Competition The markets for semiconductors generally, and for analog and mixed-signal ICs in particular, are intensely competitive. We anticipate that the market for our products will continually evolve and will be subject to rapid technological change. We believe the principal competitive factors in our industry are: ● Product size; ● Power requirement; ● Level of integration; ● Customer support; ● Product capabilities; ● Reputation; ● Reliability; ● Ability to rapidly introduce new products to market; ● Price; ● Intellectual property; and ● Performance; ● Software. ​ 10 Table of Contents We believe that we are competitive with respect to these factors, particularly because our ICs typically are smaller in size, are highly integrated, achieve high performance specifications at lower price points than competitive products and are manufactured in standard CMOS which generally enables us to supply them on a relatively rapid basis to customers to meet their product introduction schedules. However, disadvantages we face include our relatively short operating history in certain of our markets and the need for customers to redesign their products and modify their software to implement our ICs in their products. 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, 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. Our competitors may also offer bundled solutions offering a more complete product, which may negatively impact our competitive position despite the technical merits or advantages of our products. In addition, our customers could develop products or technologies internally that would replace their need for our products and would become a source of competition. We could also face competition from module makers or other systems suppliers that may include mixed-signal components in their products that could eliminate the need for our ICs. Many of our competitors and potential competitors have longer operating histories, greater name recognition, access to larger customer bases, complementary product offerings, and significantly greater financial, sales and marketing, manufacturing, distribution, technical and other resources than us. Current and potential competitors have established or may establish financial and strategic relationships between themselves or with our existing or potential customers, resellers or other third parties. Accordingly, it is possible that new competitors or alliances among competitors could emerge and rapidly acquire significant market share. Intellectual Property Our future success depends in part upon our proprietary technology. We seek to protect our technology through a combination of patents, copyrights, trade secrets, trademarks and confidentiality procedures. 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. Furthermore, it is possible that any patents held by us may be invalidated, circumvented, challenged or licensed to others. In addition, there can be no assurance that such patents will provide us with competitive advantages or adequately safeguard our proprietary rights. While we continue to file new patent applications with respect to our recent developments, existing patents are granted for prescribed time periods and will expire at various times in the future. We claim copyright protection for proprietary documentation for our products. We have filed for registration, or are in the process of filing for registration, the visual images of certain ICs with the U.S. Copyright Office. We have registered the “Silicon Labs” logo and a variety of other product and product family names as trademarks in the United States and selected foreign jurisdictions. All other trademarks, service marks or trade names appearing in this report are the property of their respective owners. We also attempt to protect our trade secrets and other proprietary information through agreements with our customers, suppliers, employees and consultants, and through other customary security measures. We intend to protect our rights vigorously, but there can be no assurance that our efforts will be successful. In addition, the laws of other countries in which our products are sold may not protect our products and intellectual property rights to the same extent as the laws of the United States. While our ability to effectively compete depends in large part on our ability to protect our intellectual property, we believe that our technical expertise and ability to introduce new products in a timely manner will be an important factor in maintaining our competitive position. Many participants in the semiconductor and electronics industries have a significant number of patents and have frequently demonstrated a readiness to commence litigation based on allegations of patent and other intellectual property infringement. From time to time, third parties may assert infringement claims against us. We may not prevail in any such litigation or may not be able to license any valid and infringed patents from third parties on commercially reasonable terms, if at all. Litigation, regardless of the outcome, is likely to result in substantial cost and diversion of our resources, including our management’s time. Any such litigation could materially adversely affect us. 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. 11 Table of Contents 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: 12 Table of Contents 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; and ● 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; ● The U.S. Foreign Corrupt Practices Act ("FCPA"), which prohibits companies and their individual officers from influencing foreign officials with any personal payments or rewards; and ● 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. Available Information Our website address is www.silabs.com. Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are available through the investor relations page of our website free of charge as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission (SEC). Our website and the information contained therein or connected thereto are not intended to be incorporated into this Annual Report on Form 10-K. 13 Table of Contents