What changed in this filing

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Item 1A. Risk Factors

2022-11-23 compared with 2021-11-24 · 113 added, 113 removed, 386 unchanged (37% of the section changed)

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Risks associated with operating a global business

The effects of the global COVID-19 pandemic continue to adversely affect our business operations.

The global COVID-19 pandemic—including the public health crisis, the measures taken by governments, businesses, and individuals in an effort to limit COVID-19’s spread, and the resulting global supply chain challenges—has adversely affected, and continues to adversely affect, our business operations.

The impacts on our business operations and workforce of the pandemic, including as a result of more contagious variants of the virus that causes COVID-19, and the duration of such impacts, are uncertain, constantly evolving, and difficult to quantify, but have thus far included, or in the future may include, the following:

• We have experienced, and may continue to experience, disruptions to our supply chain and increased costs in connection with the sourcing of materials, components, equipment, assembly and test services, engineering support, shipping and logistics services, and other services, caused in part by the pandemic.

To the extent we are unable to pass these costs on to our customers, we experience reduced profitability.

Given that our customers and suppliers are facing similar supply chain challenges, we expect continued difficulty in forecasting demand and supply needs for the foreseeable future.

As a result of these uncertainties, we have increased, and may continue to increase, our inventory levels and purchase commitments.

• We have recently experienced, and expect to continue experiencing, reduced demand for certain of our products as a result of certain customers’ difficulty to obtain materials, components, and services due to disruptions in such customers’ supply chains.

We may experience large fluctuations in demand for certain of our products, which could be exacerbated by global supply chain challenges or by a continued or deepening global economic downturn or recession caused by the pandemic.

• In April 2020, we suspended our operations in Mexicali, Mexico, for approximately two weeks pursuant to an order by the government of the state of Baja California, Mexico, resulting in a temporary reduction in our production levels.

In the event that our manufacturing operations in Mexicali become subject to significant restrictions or are suspended again, or in the event that one or more of our other facilities is forced to suspend or limit its activities, including, but not limited to, as a result of such operations or activities not being considered to be an “essential” business under applicable laws, regulations, or orders (including “shelter at home” orders or other quarantine-related orders), we may again experience reductions in production levels, which would limit our ability to meet customer demand and impact our operating results.

• Over the course of the pandemic, we have implemented certain measures at our facilities worldwide in an effort to protect our employees’ health and well-being (including social distancing, allowing many employees to work remotely, limiting the number of employees attending meetings, screening employees and visitors when entering facilities, educating employees about the virus and preventative measures, enhancing cleaning protocols, and suspending employee travel), some of which have reduced the overall efficiency of our operations and increased manufacturing costs.

The expected duration of such protective measures, many of which were still in place as of the end of fiscal 2021, remains uncertain, and we may be required to implement additional measures in the future, further impacting our business operations.

In addition, we recently required COVID-19 vaccination of all U.S.-based employees as a condition of employment, subject to certain exemptions, and we may announce additional vaccine mandates in other jurisdictions in the future.

Our implementation of these requirements may result in employee attrition, reduced employee morale, and difficulty securing future labor needs.

• We have experienced, and may continue to experience, reduced production capacity as a result of employee quarantines, absenteeism, and attrition, as well as restrictions on certain of our employees’ ability to work.

Additionally, we may experience negative impacts to our sales, marketing, research and development, and other critical business functions for similar reasons.

• We have experienced, and likely will continue to experience, disruptions to global transportation networks, limiting or delaying our ability, and/or increasing our cost, to send or receive products and materials at one or more of our facilities, including as a result of trade restrictions, border closures, disruptions in the operations of third-party carriers, or carriers’ decisions to prioritize other customers’ orders over ours.

• Significant portions of our sales are concentrated among a limited number of customers.

We may experience negative impacts to our business operations if one or more of these major customers were to significantly decrease its orders for our products due to disruptions to its business operations or other pandemic-related issues.

• Our business operations, as well as the business operations of our customers, suppliers, and other third-party service providers, are subject to frequent and unpredictable changes in the political, regulatory, legal, or economic conditions in the jurisdictions in which they operate.

• The deterioration of worldwide credit and financial markets could limit the ability of our customers to pay for product purchases in a timely manner, or at all.

• In the event we are unable to fulfill our contractual obligations, lawsuits may be threatened or filed against us by customers or other third parties.

In addition, force majeure clauses in our contracts could limit our ability to pursue remedies for certain third-party disruptions and delays.

These effects, alone or taken together, could have a material adverse effect on our business, results of operations, customer and supplier relations, employee relations, cash flows, and financial condition.

The resumption of normal business operations after any such interruptions may be delayed or constrained by lingering effects of the pandemic on our customers, suppliers, and other third-party service providers.

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

The degree to which the pandemic continues to impact us will depend on future developments that are highly uncertain and cannot be predicted, including, but not limited to, the duration and spread of the pandemic, its severity, the actions to contain COVID-19 or treat its impact, the timing and magnitude of the U.S.

government’s economic stimulus efforts, and how quickly and to what extent normal economic and operating conditions resume.

Even after the pandemic has subsided as a public health matter, we may experience material adverse impacts to our business as a result of its adverse impact on the global economy.

The risks of doing business internationally apply to all aspects of our operations.

We derive significant revenues from customers located outside the United States, primarily in countries located in the Asia-Pacific region and Europe.

We have suppliers located outside the United States, and third-party packaging, assembly, and test facilities and foundries located in the Asia-Pacific region.

We also operate our own wafer fabrication facilities in Kadoma, Japan, and Osaka, Japan, as well as packaging, assembly, and test facilities in Singapore and in Mexicali, Mexico (with a substantial majority of our finished products being assembled and tested in our Mexicali facility).

We have suppliers located outside the United States, including third-party packaging, assembly, and test facilities and semiconductor foundries located in the Asia-Pacific region.

We also operate our own wafer fabrication facilities in Osaka, Japan, as well as packaging, assembly, and test facilities in Singapore and in Mexicali, Mexico.

Our international sales and operations are subject to a number of risks inherent in selling and operating in multiple jurisdictions.

These include, but are not limited to, risks regarding:

• Recession or economic downturn globally or in the jurisdictions in which we do business,

• currency controls and currency exchange rate fluctuations, including increases or decreases in commodities prices related to such fluctuations,

• inflation, as well as changes in existing and expected rates of inflation, which may vary across the jurisdictions in which we do business,

• local economic and political conditions, including, but not limited to, social, economic, and political instability related to the uncertainty regarding the relationships between the United States and China, Russia, Mexico, North Korea, Middle Eastern countries, other foreign countries, and the international community at large, and related to the United Kingdom’s withdrawal from the European Union,

• restrictive governmental actions (such as restrictions on transfer of funds, restrictions on individuals’ movement, including travel restrictions, quarantines, lockdowns, and curfews, and trade protection measures, including export duties, quotas, customs duties, border taxes, border closures, increased import or export controls, and tariffs), or actions by non-governmental individuals and groups (such as protests, insurgencies, and organized crime), that could negatively impact trade between, or increase the cost of operating in, the countries in which we do business,

• interest rates, as well as changes in existing and expected interest rates, which may vary across the jurisdictions in which we do business,

• global, regional, and local economic and political conditions, including, but not limited to, social, economic, political, and supply chain instability related to the uncertainty regarding the relationships among the United States, China, Taiwan, Russia, Mexico, North Korea, Middle Eastern countries, other foreign countries, and the international community at large, as well as related to armed conflicts, such as the conflict between Russia and Ukraine, that exist, or in the future could exist, in various jurisdictions around the world,

• restrictive governmental actions (such as restrictions on transfer of funds, restrictions on individuals’ movement, including travel restrictions, quarantines, lockdowns, and curfews, and trade protection measures, including export duties, quotas, customs duties, border taxes, border closures, increased import or export controls, and tariffs), or actions by non-governmental individuals and groups (such as protests, boycotts, insurgencies, organized crime, and general civil unrest), that could negatively impact trade between, or increase the cost of operating in, the countries in which we do business,

• labor market conditions and laws,

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• direct or indirect government actions, subsidies, or policies aimed at supporting local industry,

• the laws and policies of the United States and other countries affecting trade, foreign investment and loans, foreign travel, and import or export licensing requirements,

• the laws and policies of the United States and other countries affecting trade, foreign investment and loans, foreign travel, and import or export licensing requirements, including, but not limited to, prohibitions on certain trade and other activities in China, Russia, Belarus, and portions of Ukraine,

• withdrawal from, or renegotiation of, existing trade agreements by the United States (or other jurisdictions) potentially affecting Mexico, China, and other countries in which we do business,

• changes in current or future tax law or regulations or new interpretations thereof, by federal or state agencies or foreign governments (including changes in certain countries in Europe and elsewhere regarding corporate taxes, transfer pricing, and tax treaty provisions),

• changes in current or future tax law or regulations or new interpretations thereof, by federal or state agencies or foreign governments,

• changes in the effective tax rate as a result of our overall profitability and mix of earnings in countries with differing statutory tax rates,

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Increases in cellular handset prices that negatively impact handset sales can result from changes in regulatory policies or other factors, which could impact the demand for our products.

Limitations or changes in policy on phone subsidies in the United States, South Korea, Japan, China, and other countries may have additional negative impacts on our revenues.

Some of the countries in which we operate and seek to expand are in emerging markets where legal systems may be less developed or familiar to us, potentially impacting our ability to obtain appropriate recourse in the event of a dispute.

Other jurisdictions in which we conduct business have established, or may establish, legal and regulatory regimes that differ materially from United States laws and regulations.

It is costly, time-consuming, and requires significant resources to comply with the numerous, and sometimes conflicting, legal regimes in the jurisdictions in which we conduct business on matters as diverse as anti-corruption, anti-bribery, import/export controls, content requirements, trade restrictions, tariffs, taxation, sanctions, immigration, internal and disclosure control obligations, securities regulation, competition, data privacy and protection (including, but not limited to, the European Union’s General Data Protection Regulation), employment, and labor relations.

Violations of one or more of these legal regimes’ laws and regulations in the conduct of our business could result in significant fines or monetary damages, criminal sanctions against us or our officers, prohibitions on doing business, unfavorable publicity and other reputation damage, restrictions on our ability to process information, and allegations by our clients that we have not performed our contractual obligations.

Violations of one or more of these legal regimes’ laws and regulations in the conduct of our business could result in significant fines, penalties, or monetary damages, criminal sanctions against us or our officers, prohibitions on doing business, unfavorable publicity and other reputation damage, restrictions on our ability to process information, and allegations by our clients that we have not performed our contractual obligations.

The effects of the global COVID-19 pandemic continue to adversely affect our business operations.

To the extent we are unable to pass these costs on to our customers, we experience reduced profitability.

Given that our customers and suppliers are facing similar supply chain challenges, we expect continued difficulty in forecasting demand and supply needs for the foreseeable future.

As a result of these uncertainties, we have increased, and may continue to increase, our inventory levels and purchase commitments.

• We have recently experienced, and expect to continue experiencing, reduced demand for certain of our products as a result of certain customers’ difficulty obtaining materials, components, and services due to disruptions in such customers’ supply chains.

While the government-mandated shutdowns in various regions of China during fiscal 2022 did not directly impact any of our manufacturing facilities, the shutdowns did result in limited supply constraints within our supply chain, as well as significant supply constraints for certain of our customers, which resulted in short-term reductions in such customers’ demand for our products.

We may continue to experience large fluctuations in demand for certain of our products, which could be exacerbated by global supply chain challenges or by a continued or deepening global economic downturn or recession.

• In the event that our manufacturing operations in Mexicali, Mexico, become subject to significant restrictions or are suspended again, as they were for two weeks in April 2020 pursuant to a government order, or in the event that one or more of our other facilities is forced to suspend or limit its activities, we may again experience reductions in production levels, which would limit our ability to meet customer demand and impact our operating results.

• Over the course of the pandemic, we have implemented certain measures at our facilities worldwide in an effort to protect our employees’ health and well-being, some of which have reduced the overall efficiency of our operations and increased manufacturing costs.

Many of our non-manufacturing employees transitioned to working from home on a mandatory or voluntarily basis for a prolonged period of time, and our return-to-office plans have in some cases led to employee attrition.

We expect that pandemic-related changes in workforce patterns may result in additional attrition, difficulty in hiring, and reduced productivity.

• Significant portions of our sales are concentrated among a limited number of customers.

Even after the pandemic has subsided as a public health matter, we may experience material adverse impacts to our business as a result of its adverse impact on the global economy.

We are subject to the risks of doing business in China.

Our success in the Chinese markets may be adversely affected by China’s continuously evolving laws and regulations, including those relating to taxation, import and export tariffs and restrictions, currency controls, environmental regulations, information security, indigenous innovation, and intellectual property rights and enforcement of those rights.

Demand from Chinese customers may be adversely affected by China’s evolving laws and regulations, including those relating to taxation, import and export tariffs and restrictions, currency controls, environmental regulations, information security, indigenous innovation, and intellectual property rights and enforcement of those rights.

Enforcement of existing laws or agreements may be inconsistent, and the potential issuance of new laws and regulations creates uncertainty.

In addition, changes in the political environment, governmental policies, or United States-China relations could result in revisions to laws or regulations or their interpretation and enforcement, exposure of our proprietary intellectual property, increased taxation, restrictions on imports, import duties, or currency revaluations, which could have an adverse effect on our business plans and operating results.

In addition, changes in the political environment, governmental policies, United States-China relations, or China-Taiwan relations could result in revisions to laws or regulations or their interpretation and enforcement, exposure of our proprietary intellectual property, increased taxation, restrictions on imports, import duties, or currency revaluations, any of which could have an adverse effect on our business plans and operating results.

In particular, the imposition by the United States of tariffs on goods imported from China, or deemed to be of Chinese origin, and other government actions that restrict our ability to sell our products to Chinese customers or to manufacture or source components in China, and countermeasures imposed by China in response, could directly or indirectly adversely impact our manufacturing costs, the availability and cost of materials, and the sales of our products in China and elsewhere.

For example, during fiscal 2019, the U.S.

Bureau of Industry and Security of the U.S.

Department of Commerce placed Huawei Technology Co., Ltd., and certain of its affiliates (collectively, “Huawei”), on the Bureau’s Entity List (the “Entity List”), which resulted in our temporarily suspending shipments to Huawei.

Since then, the addition of other entities to the Entity List, together with changes to rules regarding the shipment of foreign direct products, resulted in the renewed suspension of shipments to Huawei as well as the suspension of shipments to other customers.

In the future, we may be prevented from shipping our products to other customers if they are added to the Entity List.

In the absence of further changes to applicable export laws and regulations, we will only be able to sell our products to Huawei and potentially other companies named on the Entity List pursuant to limited export licenses from the U.S.

Department of Commerce.

For example, the U.S.

government has recently expanded export restrictions, and might continue expanding export restrictions, by adding certain Chinese entities to the U.S.

Bureau of Industry and Security’s Entity List (the “Entity List”), which has, and could in the future, limit our ability to sell to certain of those entities and to third parties that do business with those entities.

These restrictions have negatively impacted, and may continue to negatively impact, sales of our products.

In the future, we may be prevented from shipping, or be required to obtain a license to ship, our products to certain customers if they are added to the Entity List.

In addition, geopolitical changes in China-Taiwan relations could disrupt the operations of several companies in Taiwan that are suppliers to, or third-party partners of, the Company, our customers, and our customers’ other suppliers.

Disruption of certain critical operations in Taiwan would adversely affect our ability to manufacture certain products and would likely have substantial negative effects on the entire semiconductor industry.

Further, the evolving labor market and increasing labor unrest in China may have a negative impact on our customers, which would result in a negative impact on our business, results of operations, and financial condition.

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Internal Revenue Code of 1986, as amended, and has had, and may continue to have, a significant impact on our operations.

Beginning in fiscal year 2023, for U.S.

income tax purposes we will be required to capitalize our research and development expenses and amortize them over five or fifteen years, rather than deduct them in the year incurred, which we expect will increase our taxes payable, resulting in reduced cash flows.

Furthermore, on August 16, 2022, the U.S.

government enacted the Inflation Reduction Act, which imposes a corporate alternative minimum tax of 15% on adjusted financial statement income for certain corporations, as well as an excise tax on corporate stock repurchases.

Although we are currently evaluating the impact this law may have, we do expect our effective tax rate to increase in fiscal year 2024.

Because the changes in U.S.

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Changes in our interpretations and assumptions, as well as additional guidance issued under these laws, could increase income tax liabilities and/or reduce certain tax benefits.

In addition, it is uncertain if and to what extent various states will conform to the Tax Reform Act or other changes to tax law.

In addition, it is uncertain if and to what extent various states will conform to changes to tax law.

Future changes in tax laws, regulations, and treaties, or the interpretation thereof, in addition to initiatives related to the Base Erosion and Profit Shifting Project of the Organisation for Economic Co-Operation and Development;

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and other developments could have an adverse effect on the taxation of international businesses, including our own.

Furthermore, countries where we are subject to taxes, including the United States, evaluate their tax policies and rules on a regular basis, and we may see significant changes in legislation and regulations concerning taxation (including as a result of significant changes proposed by the current U.S.

presidential administration, such as increases in the U.S.

federal corporate income tax rate and in the U.S.

taxation of foreign earnings).

Furthermore, countries where we are subject to

taxes, including the United States, evaluate their tax policies and rules on a regular basis, and we may see significant changes in legislation and regulations concerning taxation.

We are unable to predict what tax changes may be enacted in the future or what effect such changes would have on our business, but such changes could affect our effective tax rates in countries where we have operations and could have an adverse effect on our overall tax position in the future, along with increasing the complexity, burden, and cost of tax compliance.

Risks associated with the development, manufacturing, and sale of our products

Our operating results may be adversely affected by quarterly and annual fluctuations and market downturns.

Our operating results may be adversely affected by quarterly and annual fluctuations, market downturns, and recessions.

Our revenues, earnings, and other operating results may fluctuate significantly on a quarterly and annual basis.

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These factors include, among others:

• delays in the widespread deployment of commercial 5G networks or in consumer adoption of 5G-enabled devices,

• delays in the widespread deployment of commercial 5G networks,

• changes in end-user demand for the products manufactured and sold by our customers,

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• actions by government regulators to restrict or delay the availability of sufficient spectrum for wireless technologies, including technologies that utilize unlicensed spectrum and/or shared spectrum,

• changes in consumers’ rates of replacement of smartphones and other devices that utilize our products,

• changes in consumers’ purchasing behaviors, including the rates at which they replace smartphones and other devices that utilize our products,

• changes to promotions, rebates, and discounts offered by carriers in certain geographic regions for smartphones and other devices that utilize our products,

• increasing industry consolidation among our competitors,

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Significant portions of our sales are concentrated among a limited number of customers.

If we lost one or more of these major customers, or if one or more major customers significantly decreased its orders for our products, our business, results of

operations, and financial condition could be materially and adversely impacted, which could adversely affect our stock price.

If we lost one or more of these major customers, or if one or more major customers significantly decreased its orders for our products, our business, results of operations, and financial condition could be materially and adversely impacted, which could adversely affect our stock price.

In each of fiscal 2022, fiscal 2021, and fiscal 2020, one customer accounted for greater than ten percent of our net revenue.

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Also, achieving a design win with a customer does not ensure that we will receive revenue from that customer.

Even after a design win, the customer is not obligated to purchase our products and can choose at any time to reduce or cease use of our products, for example, if its own products are not commercially successful, or for any other reason.

Even after a design win,

the customer is not obligated to purchase our products and can choose at any time to reduce or cease use of our products, for example, if its own products are not commercially successful, or for any other reason.

We may not continue to achieve design wins or to convert design wins into actual sales, and failure to do so could materially and adversely affect our operating results.

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Likewise, lower-than-expected demand could lead to underutilized manufacturing facilities, which could negatively impact our financial results.

While we maintain insurance coverage to mitigate business continuity risks, among other risks, such coverage may be insufficient to cover all losses or all types of claims that may arise.

Due to the highly specialized nature of our manufacturing processes, in the event of a disruption in production at one or more of our facilities for any reason, alternative production capacity would not be immediately available from third-party sources.

These disruptions could have a material adverse effect on our business, results of operations, and financial condition.

Our key facilities include, but are not limited to, our semiconductor wafer fabrication facilities in Newbury Park, California, and Woburn, Massachusetts, our SAW, TC-SAW, and BAW filter wafer fabrication facilities in Kadoma, Japan, and Osaka, Japan, and our assembly and test facilities in Mexicali, Mexico, and in Singapore.

Our key facilities include, but are not limited to, our semiconductor wafer fabrication facilities in Newbury Park, California, and Woburn, Massachusetts, our SAW, TC-SAW, and BAW filter wafer fabrication facilities in Osaka, Japan, and our assembly and test facilities in Mexicali, Mexico, and in Singapore.

We may not be able to maintain and improve manufacturing yields that contribute positively to our gross margin and profitability.

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The difficulty of accurately forecasting manufacturing yields and maintaining cost competitiveness through improving manufacturing yields will continue to be magnified by the increasing process complexity of manufacturing semiconductor products.

manufacturing yields and quality without, in many cases, reaching the longer-term, high-volume manufacturing conducive to higher manufacturing yields and declining costs.

Our manufacturing operations may also face pressures arising from the compression of product life cycles, which may require us to manufacture new products faster and for shorter periods while maintaining acceptable manufacturing yields and quality without, in many cases, reaching the longer-term, high-volume manufacturing conducive to higher manufacturing yields and declining costs.

We are dependent upon third parties for the manufacture, assembly, and testing of our products.

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We may therefore experience difficulties, delays, or additional costs in securing an adequate supply of our products, which could impair our ability to meet our customers’ needs and have a material adverse effect on our operating results.

Although we own and operate assembly and test facilities, we still depend on subcontractors to package, assemble, and test certain of our products at cost-competitive rates.

Although we own and operate assembly and test facilities, as part of our supply resilience and business continuity strategies we still depend on subcontractors to package, assemble, and test certain of our products at cost-competitive rates.

For those assembly and test subcontractors with whom we do not have long-term agreements, we typically procure services on a per-order basis.

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Any problems that we may encounter with the delivery, quality, or cost of our products could damage our customer relationships and materially and adversely affect our business, results of operations, and financial condition.

During fiscal 2022, we entered into long-term capacity reservation and supply agreements with certain third-party foundries.

These agreements may cease to be commercially reasonable if overall market demand or pricing is reduced, and they may have an adverse effect on our operating results in the event our future supply needs are reduced below the minimum order commitments.

Furthermore, even with such agreements, we remain subject to risks that a supplier will be unable to meet its supply commitments, achieve acceptable manufacturing yields, operate or deliver on a timely basis, or provide additional capacity beyond its current contractual commitments to meet our requirements, any of which could adversely affect our ability to satisfy customer obligations.

We are dependent upon third parties for the supply of raw materials and components.

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We may also enter into sole supplier arrangements to meet certain of our raw material or component needs.

While we do not typically rely on a single source of supply for our raw materials, we are currently dependent on a limited number of sole-source suppliers.

While we do not typically rely on a single source of supply for our raw materials, we are currently dependent on a limited number of sole-source suppliers and in the future could become dependent on additional sole-source suppliers.

If we were to lose these sole sources of supply, for any reason, a material adverse effect on our business could result until an alternate source is obtained.

To the extent we enter into additional sole supplier arrangements for any of our raw materials or components, the risks associated with our supply arrangements would be exacerbated.

Furthermore, our entry into capacity

commitments in an attempt to ensure sufficient supply of raw materials and components may result in our obligation to pay above-market prices in the event of a future downward price correction.

Furthermore, our entry into capacity commitments in an attempt to ensure sufficient supply of raw materials and components may result in our obligation to pay above-market prices in the event of a future downward price correction.

We may not be able to effectively operate our business if we are unable to attract and retain qualified personnel.

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We may purchase and manufacture inventory based on estimates of customer demand for our products, which is difficult to predict and may not be accurate.

This difficulty may be compounded when we sell to OEMs indirectly through distributors or contract manufacturers, or both, as our forecasts of demand will then be based on estimates provided by multiple parties.

In addition, our customers and/or distributors may change their inventory practices on short notice for any reason.

The difficulties of forecasting may be compounded when we sell to OEMs indirectly through distributors or contract manufacturers, or both, as our forecasts of demand will then be based on estimates provided by multiple parties.

In addition, our customers and distributors may change their inventory practices on short notice for any reason.

Many of our products are customized to the needs or specifications of a specific customer or have a limited number of potential buyers.

The cancellation or deferral of product orders, the return of previously sold products, or overproduction due to a change in anticipated order volumes could result in us holding excess or obsolete inventory, which could result in inventory write-downs and, in turn, could have a material adverse effect on our financial condition.

On the other hand, customers may require rapid increases in production on short notice, which could result in damaged customer relationships, increased liabilities, or harm to our reputation if we are unable to meet such increases in demand.

The cancellation or deferral of product orders, the return of previously sold products, overproduction due to a change in anticipated order volumes could result in us holding excess or obsolete inventory, which could result in inventory write-downs and, in turn, could have a material adverse effect on our financial condition.

On the other hand, customers may require rapid increases in production on short notice, which could result in damaged customer relationships, increased manufacturing costs, increased liabilities, or harm to our reputation if we are unable to meet such increases in demand.

Some of our customers have implemented vendor-managed inventory, consignment, or similar inventory programs that may result in an increase in the time between manufacture of, and payment for, our products.

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We face a risk that capital needed for our business will not be available when we need it.

To the extent that our existing cash and cash equivalents and cash generated from operations are insufficient to fund our future activities (including, but not limited to, capital expenditures), we may need to raise additional funds through public or private

equity or debt financing.

If unfavorable capital market conditions exist in the event we were to seek additional financing, we may not be able to raise sufficient capital on favorable terms and on a timely basis, if at all.

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In addition, the future growth of our business is likely to require the expansion of our manufacturing facilities, the upgrade of our manufacturing equipment, strategic investments, and/or corporate acquisitions.

The capital required to fund these investments may not be available in the future.

Due in part to our repayment obligations on our outstanding indebtedness, the capital required to fund these investments may not be available in the future.

Risks Related to Acquisitions

We may not achieve the anticipated benefits of the acquisition of the Infrastructure and Automotive business of Silicon Labs.

On July 26, 2021, the Company completed the acquisition of certain assets, rights, and properties, and assumed certain liabilities, comprising Silicon Labs’ Infrastructure and Automotive business.

Achieving the anticipated benefits of the Acquisition is subject to a number of uncertainties, including the Company’s ability to successfully integrate the assets acquired and employees transferred in connection with the Acquisition, as well as the Company’s ability to maintain and/or secure relationships with third-party manufacturing partners in order to meet customer demand for the products acquired in the Acquisition.

Failure to achieve the anticipated benefits of the Acquisition in the expected timeframe or at all could result in increased costs and diversion of management’s time and energy and could materially adversely affect our business, financial condition, and results of operations.

We incurred significant indebtedness in connection with the Acquisition, which could reduce our flexibility to operate our business.

We incurred significant indebtedness in connection with the acquisition of the Infrastructure and Automotive business of Silicon Labs, which could reduce our flexibility to operate our business.

On May 21, 2021, the Company, as borrower, entered into a term credit agreement with various financial institutions, as lenders, and JPMorgan Chase Bank, N.A., as administrative agent, providing for a $1.0 billion Term Loan Facility.

Additionally, on May 26, 2021, the Company issued $500 million of its 0.900% 2023 Notes, $500 million of its 1.800% 2026 Notes, and $500 million of its 3.000% 2031 Notes in a public offering.

The proceeds of the Term Loan Facility and the issuance of Notes were used to finance a portion of the purchase price for the Acquisition.

The proceeds of the Term Loan Facility and the issuance of Notes were used to finance a portion of the purchase price for the Company’s acquisition of certain assets, rights, and properties, and its assumption of certain liabilities, comprising Silicon Labs’ Infrastructure and Automotive business, on July 26, 2021 (the “Acquisition”).

Additionally, on May 21, 2021, the Company entered into the Revolving Credit Agreement with various financial institutions, as lenders, and JPMorgan Chase Bank, N.A., as administrative agent, providing for a $750 million Revolver.

Borrowings under the Revolving Credit Facility will be used for general corporate purposes and working capital needs of the Company and its subsidiaries.

Borrowings under the Revolving Credit Facility could be used for general corporate purposes and working capital needs of the Company and its subsidiaries.

This indebtedness could have the effect, among other things, of reducing our flexibility to respond to changing business and economic conditions.

We also have incurred, and will continue to incur, various costs and expenses associated with our indebtedness.

Our ability to make payments of principal and interest on our indebtedness when due depends upon our future performance, which will be subject to general economic conditions, industry cycles, and financial, business, and other factors affecting our operations, many of which are beyond our control.

The incurrence of this or any additional indebtedness could reduce funds available for working capital, capital expenditures, acquisitions, and other general corporate purposes and may create competitive disadvantages relative to other companies with lower debt levels.

Further, if we do not achieve the anticipated benefits from the Acquisition, our ability to service our indebtedness may be adversely impacted.

Even if we achieve the anticipated benefits from the Acquisition, we may be required to raise substantial additional financing to fund working capital, capital expenditures, acquisitions, or other general corporate purposes.

Our ability to arrange additional financing and make payments of principal and interest on our indebtedness will depend on our future performance, which will be subject to general economic, financial, and business conditions as well as other factors affecting our operations, many of which are beyond our control.

In addition, our credit ratings affect the cost and availability of future borrowings and, accordingly, our cost of capital.

Our ability to arrange additional financing and make payments of principal and interest on our indebtedness when due depends upon our future performance, which will be subject to general economic conditions, industry cycles, and financial, business, and other factors affecting our operations, many of which are beyond our control.

We are exposed to interest rate risk through our Term Loan Facility and Revolving Credit Facility, both of which are subject to variable interest rates, and interest rate increases have led to increased interest payments.

Our existing indebtedness or incurrence of any additional indebtedness could reduce funds available for working capital, capital expenditures, acquisitions, and other general corporate purposes and may create competitive disadvantages relative to other companies with lower debt levels.

In addition, our credit ratings, combined with fluctuating interest rates, affect the cost and availability of future borrowings and, accordingly, our cost of capital.

Our ratings reflect each rating organization’s opinion of our financial strength, operating performance, and ability to meet our debt obligations.

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In addition, some of the agreements contain a financial covenant consisting of a limitation on leverage.

Our ability to

comply with these provisions may be affected by events beyond our control.

Our ability to comply with these provisions may be affected by events beyond our control.

Failure to comply with these covenants could result in an event of default, which, if not cured or waived, could accelerate our repayment obligations.

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• the diversion of management’s attention from other business concerns.

Moreover, integrating acquired organizations and their products and services may be difficult, expensive, time-consuming, and a strain on our resources and our relationship with employees and customers and ultimately may not be successful.

Moreover, integrating acquired organizations and their products and services may be difficult, expensive, time-consuming, and a strain on our resources and our relationships with employees and customers and ultimately may not be successful.

Additionally, in periods following an acquisition, we will be required to evaluate goodwill and acquisition-related intangible assets for impairment.

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Uncertain worldwide economic and political conditions, together with other factors such as the volatility of the financial markets, continue to make it difficult for our customers and for us to accurately forecast and plan future business activities.

In addition, the rapid increase in consumer demand for certain devices and technologies that enable remote work, education, and entertainment as a result of the COVID-19 pandemic could limit future consumer demand for such products.

Uncertainty and economic weakness could result in a market contraction and, as a result, our business, results of operations, and financial condition would likely be materially and adversely affected.

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The wireless communications semiconductor industry, in general, and the other analog markets in which we compete are very competitive, which may cause pricing pressures, decreased gross margins, and rapid loss of market share.

We compete with international and United States semiconductor manufacturers of all sizes in terms of resources and market share, including, but not limited to, Analog Devices, Broadcom, Cirrus Logic, Murata Manufacturing, NXP Semiconductors, Qorvo, and Qualcomm.

We currently face significant competition in our markets and expect that intense price and product competition will continue.

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• access to, and the protection and enforcement of, intellectual property,

• ability to partner with or participate in reference designs of baseband vendors, and

• maintaining access to manufacturing capacity, raw materials, supplies, and services at a competitive cost.

• ability to partner with or participate in reference designs of baseband vendors,

• maintaining access to manufacturing capacity, raw materials, supplies, and services at a competitive cost, and

• the ability to secure government incentives and grants, such as funding available to U.S.

semiconductor manufacturers under the CHIPS and Science Act of 2022.

We might not be able to successfully address these factors.

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The semiconductor industry generally and, in particular, many of the markets into which we sell our products, are highly cyclical and characterized by constant and rapid technological change, continuous product evolution, price erosion, evolving technical standards, short product life cycles (including annual product refreshes in some cases), increasing demand for higher levels of integration, increased miniaturization, reduced power consumption, and wide fluctuations in product supply and demand.

Our operating results depend largely on our ability to continue to cost-effectively introduce new and enhanced products on a timely basis.

Our operating results depend largely on our ability to continue to cost-effectively introduce new and enhanced products on a timely basis, both within our traditional markets and in new, expanded, or adjacent markets.

The successful development and commercialization of semiconductor devices and modules is highly complex and depends on numerous factors, including the ability:

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• to lengthen the time that a particular product is in demand,

• to source and maintain manufacturing materials, and

• to source and maintain manufacturing materials,

• to identify and maintain suppliers with the necessary technology and scale to support the increasing complexity of our manufacturing requirements, and

• to obtain adequate multi-jurisdictional intellectual property protection for our new products.

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We may face similar difficulties, delays, and expenses as we continue to transition our products to smaller geometry processes in the future.

In some instances, we depend on our relationships with our third-party foundries and packaging sub-contractors to transition to smaller geometry processes successfully.

In some instances, we depend on our relationships with our third-party foundries and packaging subcontractors to transition to smaller geometry processes successfully.

Our manufacturing partners may not be able to effectively manage the transition, or we may not be able to maintain our relationships with certain manufacturing partners.

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The verification and reporting requirements, in addition to customer demands for conflict-free sourcing, impose additional costs on us and on our suppliers, and may limit the sources or increase the prices of materials used in our products.

Further, if we are unable to certify that our products are conflict free, we may face challenges with our customers, which could place us at a competitive

disadvantage, and our reputation may be harmed.

Further, if we are unable to certify that our products are conflict free, we may face challenges with our customers, which could place us at a competitive disadvantage, and our reputation may be harmed.

In addition, our customers may begin to require reports on our sourcing of other minerals or substances, which may impact our ongoing operations and increase our operating costs.

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We expect that these and other rapidly changing laws, regulations, policies, interpretations, and expectations, as well as increased enforcement actions by various governmental and regulatory agencies, will continue to increase the cost of our compliance and internal risk management programs and to alter the environment in which we do business, which could have a material adverse effect on our business, results of operations, and financial condition.

If our ESG practices and disclosures do not meet the expectations and standards of our stockholders, customers, and other industry stakeholders, our reputation and business activities may be negatively impacted and our appeal to certain investors may be reduced.

Risks associated with cybersecurity and intellectual property protection

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Security breaches, phishing, spoofing, attempts by others to gain unauthorized access to our information technology systems, networks, and databases, and other cyberattacks continue to become more sophisticated and persistent and are sometimes successful.

These incidents, which might be related to industrial, state-sponsored, and/or economic espionage, or financial cyber extortion or fraud, include covertly introducing malware and spyware to our computers and networks (or to an electronic system operated by a third party for our benefit) and impersonating authorized users, among others.

These incidents, which might be related to industrial, state-sponsored, and/or economic espionage, or financial cyber extortion or fraud, include covertly introducing malware and spyware to our computers, networks, and products (or to an electronic system operated by a third party for our benefit) and impersonating authorized users, among others.

We seek to prevent, detect, and investigate all security incidents and to prevent their recurrence, but in some cases, we might be unaware of an incident or its magnitude, duration, and effects.

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In addition, certain suppliers and other third parties with whom we conduct business, including foundries, assembly and test contractors, and distributors, have been, and are likely to continue to be, subject to cybersecurity incidents, misappropriation efforts, or network disruptions that could jeopardize our proprietary or sensitive data, impact such third parties’ ability to meet their obligations to us, or otherwise negatively impact our ongoing business operations.

G eopolitical tensions or conflicts, such as the ongoing conflict between Russia and Ukraine and the tensions between China and Taiwan, may create a heightened risk of cybersecurity incidents.

We expect to continue devoting significant resources to the security of our information technology systems, networks, and databases, including through the training of our employees and monitoring the security posture of critical third parties who have access to our systems or sensitive data.

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While we maintain insurance coverage to mitigate some of these risks, such coverage may be insufficient to cover all losses or all types of claims that may arise.

Further, China has implemented, and other countries or regions may implement, cybersecurity laws that require companies’ overall information technology security environment to meet certain standards and/or be certified.

Such laws may be complex, ambiguous, and subject to interpretation, which may create uncertainty regarding compliance.

As a result, our efforts to comply with such laws, to the extent applicable, may be expensive and may fail, which could adversely affect our business, results of operations, and cash flows.

In addition, certain of our products contain firmware that incorporates or is derived from “open source” software that generally is made publicly available by its developers or other third parties.

Risks related to the use of open source software include, but are not limited to, the introduction of cybersecurity vulnerabilities into our products or development platforms, our compliance with applicable licensing terms, subjecting certain of our derivative works or software enhancements to public disclosure and/or unfavorable licensing conditions, potential restrictions on our ability to market the firmware associated with our products, and enhanced governmental or other third-party scrutiny of our products.

In order to remain competitive, we must be able to successfully protect our intellectual property rights.

We rely on patent, copyright, trademark, trade secret, and other intellectual property rights and laws, as well as nondisclosure and confidentiality agreements and other methods, to protect our confidential and proprietary technologies, inventions, information, data, devices, algorithms, processes, and other intellectual property.

In addition, we often incorporate the intellectual property of our customers, suppliers, or other third parties into our designs, and we have obligations with respect to the non-use and non-

disclosure of such third-party intellectual property.

In addition, we often incorporate the intellectual property of our customers, suppliers, or other third parties into our designs, and we have obligations with respect to the non-use and non-disclosure of such third-party intellectual property.

From time to time, it may be necessary to engage in litigation or like activities to enforce our intellectual property rights, to protect our trade secrets, or to determine the validity, enforceability, and scope of proprietary rights of others, including our customers.

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We attempt to control access to, and distribution of, our proprietary and confidential information through operational, technological, and legal safeguards.

Despite our efforts, parties, including current and former employees, consultants, customers, licensees, suppliers, vendors, and other third-party affiliates may attempt to copy, disclose, transfer, or obtain access to our information without our authorization.

Despite our efforts, parties, including current and former employees, consultants, customers, licensees, suppliers, vendors, and other third-party affiliates may attempt to copy, disclose, transfer, misappropriate or obtain access to our information without our authorization.

Furthermore, attempts by computer hackers to gain unauthorized access to our systems or information could result in our confidential and/or proprietary information being compromised or our manufacturing and other business operations being interrupted.

While we make reasonable attempts to prevent such unauthorized access or misappropriation, we may be unable to anticipate or detect the methods used, or we may be unable to prevent the release of our confidential and/or proprietary information or that of a third party.

While we make reasonable attempts to prevent such unauthorized access or misappropriation, we may be unable to anticipate, detect, or stop the methods used, or we may be unable to prevent the release of our confidential and/or proprietary information or that of a third party.

We are subject to the risks of licensing third-party intellectual property.

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If licenses to such technology for our current or future products become unavailable or the terms on which they are available become commercially unreasonable, and we cannot otherwise acquire or integrate such technology, our products or our customers’ products could become unmarketable or obsolete, we could lose market share, and our business could be adversely affected.

In such instances, we could also incur substantial unanticipated costs or scheduling delays to develop substitute technology to deliver competitive products.

In such instances, we could also incur substantial unanticipated costs or scheduling delays to develop or acquire substitute technology to deliver competitive products.

These risks are heightened with respect to certain of our products that incorporate increasing amounts of digital circuit content that is subject to third-party intellectual property rights.

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Certain of our products, including “high reliability” solutions, may not be able to perform under stringent operating conditions.

Examples of our “high reliability” solutions include applications intended for the aerospace, automotive, medical, and military markets.

Examples of our “high reliability” solutions include applications intended for the aerospace, automotive, defense, and medical markets.

The potential liabilities associated with these, and similar, provisions in certain of our customer contracts are in some cases capped at significant amounts, and in other cases are uncapped.

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Investigating, analyzing, and/or remediating alleged product defects may divert our technical and other resources from other product development efforts and could result in claims against us by our customers or third parties, including liability for costs associated with product recalls, indemnification claims, product redesigns, or obligations under customer contracts.

If any of our products contain defects, or have reliability, quality, or compatibility problems, our reputation

may be damaged, and we could be subject to liability claims, which could make it more difficult for us to sell our products to existing and prospective customers and could adversely affect our operating results.

If any of our products contain defects, or have reliability, quality, or compatibility problems, our reputation may be damaged, and we could be subject to liability claims, which could make it more difficult for us to sell our products to existing and prospective customers and could adversely affect our operating results.

Furthermore, such losses would not be covered under our existing corporate insurance programs.

In addition, from time to time, we are, and may become, involved in litigation.

In addition, in the event we are unable to fulfill our contractual obligations, lawsuits may be threatened or filed against us by customers or other third parties.

Furthermore, force majeure clauses in our contracts could limit our ability to pursue remedies for certain third-party disruptions and delays.

From time to time, we

are, and may become, involved in litigation.

We are the plaintiff in some of these actions and the defendant in others.

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The semiconductor industry is characterized by vigorous protection, enforcement, and pursuit of intellectual property rights.

From time to time, third parties have asserted and may in the future assert patent, copyright, trademark, and other intellectual property rights against technologies that are important to our business and manufacturing operations and have demanded and may in the future demand that we license their technology or refrain from using it.

Third parties have asserted, and may in the future assert, patent, copyright, trademark, and other intellectual property rights against technologies that are important to our business and manufacturing operations and have demanded and may in the future demand that we license their technology or refrain from using it.

Any litigation to determine the validity of any allegations that our products infringe or may infringe or misappropriate the intellectual property rights of another party, including indemnification claims arising from our contractual obligations to our customers, regardless of their merit or resolution, could be costly and divert the efforts and attention of our management and technical personnel.

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Such fluctuations may be influenced by many factors, including:

• the extent of the impact and duration of the COVID-19 pandemic,

• the volatility of the financial markets,

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• our performance and prospects, and the performance and prospects of our major customers and competitors,

• the extent of the impact of the COVID-19 pandemic,

• our revenue concentrations with relatively few customers,

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• our stock repurchase and dividend activities,

• the timing of our repayment of outstanding indebtedness,

• investor perception of us and the industry in which we operate,

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There can be no assurance that we will continue to declare cash dividends or repurchase our stock.

We intend to pay quarterly cash dividends subject to capital availability and periodic determinations by our Board of Directors that cash dividends are in the best interest of our stockholders.

In addition, from time to time the Board of Directors approves stock repurchase programs, pursuant to which we are authorized to repurchase shares of common stock on the open market or in privately negotiated transactions.

We pay, and intend to continue to pay, quarterly cash dividends, subject to capital availability and periodic determinations made by our Board of Directors that cash dividends are in the best interest of our stockholders.

In addition, from time to time the Board of Directors approves stock repurchase programs, pursuant to which we are authorized to repurchase shares of our common stock on the open market or in privately negotiated transactions.

Future cash dividends and the amount and timing of our stock repurchases may be affected by, among other factors:

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We have certain anti-takeover measures that may affect our common stock.

Our certificate of incorporation, our by-laws, and the Delaware General Corporation Law contain several provisions that would make more difficult an acquisition of control of us in a transaction not approved by our Board of Directors.

Our certificate of incorporation, our by-laws, and the Delaware General Corporation Law contain several provisions that would make it more difficult to acquire control of us in a transaction not approved by our Board of Directors.

Our certificate of incorporation and by-laws include provisions such as:

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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 1A. Risk Factors