What changed in this filing

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Item 1A. Risk Factors

2022-04-27 compared with 2021-10-27 · 46 added, 41 removed, 400 unchanged (18% 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;

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● 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.

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This has included the establishment of a headquarters in Singapore for non-U.S.

During the nine months ended October 2, 2021, the percentage of our revenues derived from outside of the United States was 87% (and the revenue associated with end customers in China was 24%, and revenue attributed to China based on shipped-to location was 45%).

During the three months ended April 2, 2022, the percentage of our revenues derived from outside of the United States was 84% (and the revenue associated with end customers in China was 18%, and revenue attributed to China based on shipped-to location was 38%).

We may not be able to maintain or increase global market demand for our products.

3 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.

8 unchanged sentences

● Political and economic instability;

● Risks that demand and the supply chain may be adversely affected by military conflict (including between Russia and Ukraine), terrorism, sanctions or other geopolitical events globally;

● Greater difficulty in hiring and retaining qualified personnel;

8 unchanged sentences

As a result, we have devoted and expect to continue to devote a large amount of resources to develop products based on new and emerging technologies and standards that will be commercially introduced in the future.

Research and development expense during the nine months ended October 2, 2021 was $201.5 million, or 39.3% of revenues.

Research and development expense during the three months ended April 2, 2022 was $77.5 million, or 33.2% of revenues.

A number of companies are actively involved in the development of these new technologies and standards.

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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, Broadcom, Espressif, Infineon, MediaTek, Microchip, Nordic Semiconductor, NXP, Qualcomm, 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.

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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.

28 unchanged sentences

● The timeliness of our new product introductions and the rate at which our new products may cannibalize our older products;

● The rate of acceptance of our products by our customers, including the acceptance of new products we may develop for integration in the products manufactured by such customers, which we refer to as "design wins";

● The time lag and realization rate between “design wins” and production orders ;

17 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.

In addition, the risk of cyber-attacks has increased in connection with the military conflict between Russia and Ukraine and the resulting geopolitical conflict.

In light of those and other geopolitical events, nation-state actors or their supporters may launch retaliatory cyber-attacks, and may attempt to cause supply chain and other third-party service provider disruptions, or take other geopolitically motivated retaliatory actions that may disrupt our business operations, result in data compromise, or both.

Nation-state actors have in the past carried out, and may in the future carry out, cyber-attacks to achieve their aims and goals, which may include espionage, information operations, monetary gain, ransomware, disruption, and destruction.

In February 2022, the U.S.

Cybersecurity and Infrastructure Security Agency issued a “Shields Up” alert for American organizations noting the potential for Russia’s cyber-attacks on Ukrainian government and critical infrastructure organizations to impact organizations both within and beyond the United States, particularly in the wake of sanctions imposed by the United States and its allies.

These circumstances increase the likelihood of cyber-attacks and/or security breaches.

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.

corporate managed networks during the ongoing COVID-19 pandemic and potentially continuing working remotely even after the COVID-19 pandemic has subsided.

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.

In the past, 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 the nine months ended October 2, 2021, 81% of our revenue was derived from distributors (and 59% of our revenue was derived from our three largest distributors).

During the three months ended April 2, 2022, 82% of our revenue was derived from distributors (and 49% of our revenue was derived from our two largest distributors).

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

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To the extent our business grows, our internal management systems and processes will need to improve to ensure that we remain in compliance.

We also expect that we will need to continue to expand, train, manage and

motivate our workforce.

We also expect that we will need to continue to expand, train, manage and motivate our workforce.

All of these endeavors will require substantial management effort, and we anticipate that we will require additional management personnel and internal processes to manage these efforts and to plan for the succession from time to time of certain persons who have been key management and technical personnel.

13 unchanged sentences

Any dispositions could harm our financial condition

On April 22, 2021, we entered into an Asset Purchase Agreement pursuant to which Skyworks Solutions has agreed to acquire certain assets, rights, and properties, and assume certain liabilities, comprising our infrastructure and automotive business for $2.75 billion in cash.

On April 22, 2021, we entered into an Asset Purchase Agreement to sell our infrastructure and automotive business to Skyworks Solutions Inc for $2.75 billion in cash.

The transaction closed on July 26, 2021.

112 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 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.

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

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

With our adoption of ASU 2020-06 in fiscal 2022, the principal balance of the 2025 Notes is no longer separated between liability and equity components.

This resulted in an increase to the carrying value of our convertible debt, representing the unamortized debt discount, with an offsetting reduction in stockholders’ equity.

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.

11 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-Q

Item 1A. Risk Factors