What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2022-02-02 compared with 2021-02-03 · 39 added, 39 removed, 401 unchanged (16% of the section changed)

4 unchanged sentences

The impacts of the COVID-19 pandemic, or a similar public health crisis, on our business, customers, suppliers, employees, markets and financial results and condition are uncertain, evolving and dependent on numerous unpredictable factors outside of our control, including:

● The duration and impact of a global economic recession or depression that could further reduce demand and/or pricing for our products;

● The duration and impact of a global economic recession or depression that could reduce demand and/or pricing for our products;

● Disruptions to our business and supply chain (and the business and supply chains of our customers) in connection with the sourcing of materials, equipment and engineering support, and services from geographic areas impacted by the public health crisis, including disruptions caused by illnesses, quarantines and restrictions on people’s ability to work, office and factory closures, disruptions to ports and other shipping infrastructure, border closures, and other travel or health-related restrictions;

6 unchanged sentences

● Investment-related risks, including difficulties in liquidating investments due to current market conditions and adverse investment performance.

There can be no assurance that any decrease in sales resulting from the COVID-19 pandemic will be offset by increased sales in subsequent periods.

Even after the COVID-19 pandemic has subsided, we may continue to experience materially adverse impacts to our business as a result of its global economic impact, including any recession, economic downturn or increased unemployment that has occurred or may occur in the future.

There can be no assurance that any decrease in sales resulting from the COVID-19 pandemic or a similar public health crisis will be offset by increased sales in subsequent periods.

Even after the COVID-19 pandemic or a similar public health crisis has subsided, we may continue to experience materially adverse impacts to our business as a result of its global economic impact, including any recession, economic downturn or increased unemployment that has occurred or may occur in the future.

An extended period of global supply chain and economic disruption could materially affect our business, results of operations, access to sources of liquidity and financial condition.

22 unchanged sentences

● Protectionist laws and business practices, including trade restrictions, tariffs, export controls, quotas and other trade barriers, including China-U.S.

trade policies and the potential effects of Brexit;

trade policies;

● Trade tensions, geopolitical uncertainty, or governmental actions, including those arising from the trade dispute between the U.S.

27 unchanged sentences

In addition, as we target and supply products to numerous markets and applications, we face competition from 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 compete with Broadcom, Espressif, Infineon, MediaTek, Microchip, Nordic Semiconductor, NXP, Qualcomm, 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.

5 unchanged sentences

Therefore, we rely on third-party vendors to manufacture the products we design.

We also currently rely on Asian third-party assembly subcontractors to assemble and package the silicon chips provided by the wafers for use in final products.

We also currently rely on third-party assembly subcontractors in Asia to assemble and package the silicon chips provided by the wafers for use in final products.

Additionally, we rely on these offshore subcontractors for a substantial portion of the testing requirements of our products prior to shipping.

5 unchanged sentences

As a result, we have recently experienced longer lead times at certain third-party foundry subcontractors.

In addition, use of subcontractors outside of China has increased due to U.S.-China trade concerns.

This is resulting in competing demand for capacity at our suppliers.

48 unchanged sentences

Due to the various factors mentioned above, the results of any prior quarterly or annual periods should not be relied upon as an indication of our future operating performance.

The average selling prices of our products could decrease rapidly which may negatively impact our revenues and gross profit

We may experience substantial period-to-period fluctuations in future operating results due to the erosion of our average selling prices.

We have reduced the average unit price of our products in anticipation of or in response to competitive pricing pressures, new product introductions by us or our competitors and other factors.

If we are unable to offset any such reductions in our average selling prices by increasing our sales volumes, increasing our sales content per application or reducing production costs, our gross profit and revenues will suffer.

To maintain our gross profit, we will need to develop and introduce new products and product enhancements on a timely basis and continually reduce our costs.

Our failure to do so could cause our revenues and gross profit to decline.

We may be the victim of business disruptions and security breaches, including cyber-attacks, which could lead to liability or could damage our reputation and financial results

Information technology system and/or network disruptions, regardless of the cause, but including acts of sabotage, error, or other actions, could harm the company’s operations.

Failure to effectively prevent, detect, and recover from security breaches, including cyber-attacks, could result in the misuse of company assets, disruption to the company, diversion of management resources, regulatory inquiries, legal claims or proceedings, reputational damage, loss of sales and other costs to the company.

We routinely face attacks that attempt to breach our security protocols, gain access to or disrupt our computerized systems or steal proprietary company, customer, partner or employee information.

These attacks are sometimes successful.

These attacks may be due to security breaches, employee error, theft, malfeasance, phishing schemes, ransomware, faulty password or data security management, or other irregularities.

The theft, loss, destruction, unavailability or misuse of personal or business data collected, used, stored or transferred by us to run our business could result in increased security costs or costs related to defending legal claims.

Industrial espionage, theft or loss of our intellectual property data could lead to counterfeit products or harm the competitive position of our products and services.

Costs to implement, test and maintain measures to promote compliance with applicable privacy and data security laws as well as to protect the overall security of our system have been and are expected to continue to be significant.

Attempted or successful attacks against our products and services could damage our reputation with customers or users and reduce demand for our products and services.

Additionally, there is an increased risk that we may experience cybersecurity-related events such as COVID-19 themed phishing attacks and other security challenges as a result of most of our employees and our service providers working remotely from non-corporate managed networks during the ongoing COVID-19 pandemic and potentially continuing working remotely even after the COVID-19 pandemic has subsided.

We depend on our key personnel to manage our business effectively in a rapidly changing market, and if we are unable to retain our current personnel and hire additional personnel, our ability to develop and successfully market our products could be harmed

44 unchanged sentences

Future acquisitions also could cause us to incur debt or contingent liabilities or cause us to issue equity securities that could negatively impact the ownership percentages of existing shareholders.

We may be the victim of business disruptions and security breaches, including cyber-attacks, which could lead to liability or could damage our reputation and financial results

Information technology system and/or network disruptions, regardless of the cause, but including acts of sabotage, error, or other actions, could harm the company’s operations.

We routinely face attacks that attempt to breach our security protocols, gain access to or disrupt our computerized systems or steal proprietary company, customer, partner or employee information.

These attacks are sometimes successful.

These attacks may be due to security breaches, employee error, theft, malfeasance, phishing schemes, ransomware, faulty password or data security management, or other irregularities.

Industrial espionage, theft or loss of our intellectual property data could lead to counterfeit products or harm the competitive position of our products and services.

Costs to implement, test and maintain measures to promote compliance with applicable privacy and data security laws as well as to protect the overall security of our system could be significant.

Attempted or successful attacks against our products and services could damage our reputation with customers or users and reduce demand for our products and services.

The average selling prices of our products could decrease rapidly which may negatively impact our revenues and gross profit

We may experience substantial period-to-period fluctuations in future operating results due to the erosion of our average selling prices.

We have reduced the average unit price of our products in anticipation of or in response to competitive pricing pressures, new product introductions by us or our competitors and other factors.

To maintain our gross profit, we will need to develop and introduce new products and product enhancements on a timely basis and continually reduce our costs.

Our failure to do so could cause our revenues and gross profit to decline.

Failure to manage our distribution channel relationships could impede our future growth

The future growth of our business will depend in large part on our ability to manage our relationships with current and future distributors and sales representatives, develop additional channels for the distribution and sale of our products and manage these relationships.

During fiscal 2020, 78% of our revenue was derived from distributors.

During fiscal 2021, 81% of our revenue was derived from distributors (and 58% of our revenue was derived from our three largest distributors).

As we execute our indirect sales strategy, we must manage the potential conflicts that may arise with our direct sales efforts.

3 unchanged sentences

This often requires a significant amount of sales management’s time and system resources to manage properly.

Because we consolidated our distribution relationships to a single global distributor, Arrow Electronics, in fiscal 2018, termination of the relationship with Arrow Electronics, either by us or by Arrow Electronics, could result in a temporary or permanent loss of revenue.

If Arrow Electronics fails to effectively market and sell our products in full compliance with applicable laws, or if we are unable to maintain our existing relationship with Arrow Electronics, we may not be able to find a distributor with the scale and resources of Arrow Electronics, maintain existing levels of international revenue or realize expected long-term international revenue growth.

We may not be successful in finding suitable alternative global distributors on satisfactory terms, or at all, and this could adversely affect our ability to effectively sell our solutions in certain geographical locations or to certain end customers.

We do not have long-term commitments from our customers

64 unchanged sentences

Any dispositions could harm our financial condition

Any disposition of a product line would entail a number of risks that could materially and adversely affect our business and operating results, including:

On April 22, 2021, we entered into an Asset Purchase Agreement pursuant to which Skyworks Solutions, Inc.

agreed to acquire certain assets, rights, and properties, and assume certain liabilities, comprising our infrastructure and automotive business for $2.75 billion in cash.

The transaction closed on July 26, 2021.

This disposition and any other disposition of a business or product line would entail a number of risks that could materially and adversely affect our business and operating results, including:

● Diversion of management’s time and attention from our core business;

3 unchanged sentences

● Risks related to employee relations;

● Risks that the disposition is not completed on the expected timeline, or at all;

● Risks associated with the transfer and licensing of intellectual property;

● Risks that we do not realize the anticipated benefits from the disposition;

● Risks from third-party claims arising out of the disposition;

● Security risks and other liabilities related to the transition services provided in connection with the disposition;

101 unchanged sentences

Our convertible senior notes could adversely affect our operating results and financial condition

Upon conversion, our convertible senior notes may be settled in cash, shares of our common stock or a combination of cash and shares, at our election.

We intend to settle the principal amount of the notes in cash.

If we do not have adequate cash available, we may not be able to settle the principal amount in cash.

In such case, we will be required to settle the principal amount in stock, which would result in immediate, and likely material, dilution to the ownership interests of our existing stockholders.

On January 1, 2022, a condition regarding early conversion of our 2025 convertible senior notes (the “2025 Notes”) was met, and as a result, holders may convert their notes at any time during the quarter ending March 31, 2022.

On January 2, 2022, we irrevocably elected cash settlement for the principal amount of the 2025 Notes.

If we do not have adequate cash available to settle the principal amount of the 2025 Notes, we could seek to raise additional funds through debt or equity capital.

However, additional funds may not be available on terms acceptable to us, or at all.

We intend to settle any excess value in shares in the event of a conversion.

Shares issued to settle any excess value may result in immediate, and potentially material, dilution to the ownership interests of our existing stockholders.

Any sales in the public market of our common stock issuable upon such conversion could adversely affect prevailing market prices of our common stock.

Following any conclusion that we no longer have the ability to settle the convertible senior notes in cash, we will be required on a going forward basis to change our accounting policy for earnings per share from the treasury stock method to the if-converted method.

Earnings per share may be lower under the if-converted method as compared to the treasury stock method.

The principal balance of the convertible senior notes was separated into liability and equity components, which were recorded initially at fair value.

The excess of the principal amount of the liability component over its carrying amount represents the debt discount, which is accreted to interest expense over the term of the notes using the effective interest method.

Accordingly, we will report higher interest expense because of the recognition of both the debt discount amortization and the notes’ coupon interest.

On January 6, 2021, we issued a notice of redemption for the remaining $140.6 million principal amount of our 2022 convertible senior notes.

The redemption will occur on March 22, 2021, unless earlier converted.

Accordingly, we have reported higher interest expense because of the recognition of both the debt discount amortization and the notes’ coupon interest.

Our debt could adversely affect our operations and financial condition

25 unchanged sentences

● The required expensing of stock awards;

● The required changes in our reported revenue and revenue recognition accounting policy under ASC Topic 606, Revenue from Contracts with Customers .

● Reporting revenue under ASC Topic 606, Revenue from Contracts with Customers .

The stock market has experienced extreme volatility that often has been unrelated to the performance of particular companies.

12 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.

What changed 10-K

Item 1A. Risk Factors