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– Risks associated with cybersecurity, intellectual property and litigation
−Removed: – Risks related to the effects of COVID-19 and other potential future public health crises, pandemics or similar events
– Risks related to legal, regulatory, accounting, tax and compliance matters
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Uncertainty about global economic conditions could result in customers postponing purchases of our products and services in response to tighter credit, unemployment, negative financial news and/or declines in income or asset values and other macroeconomic factors, which could have a material negative effect on demand for our products and services and, accordingly, on our business, results of operations or financial condition.
−Removed: For example, current global financial markets continue to reflect uncertainty, which has been affected by the COVID-19 pandemic and the ongoing military conflict between Russia and Ukraine.
+Added: For example, current global financial markets continue to reflect uncertainty, including recent bank failures in the United States, the ongoing military conflict between Russia and Ukraine and the COVID-19 pandemic.
Given these uncertainties, there could be further disruptions to the global economy, financial markets and consumer confidence.
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If we issue equity or convertible debt securities to raise additional funds, our existing shareholders may experience dilution and the new equity or debt securities may have rights, preferences and privileges senior to those of our then-existing shareholders.
−Removed: If we incur additional debt, it may
−Removed: impose financial and operating covenants that could restrict the operations of our business.
+Added: If we incur additional debt, it may impose financial and operating covenants that could restrict the operations of our business.
In a rising interest rate environment, debt financing will become more expensive and may have higher transactional and servicing costs.
−Removed: In addition, our existing indebtedness may limit our ability to obtain additional financing in the future.
+Added: In addition, our existing
+Added: indebtedness may limit our ability to obtain additional financing in the future.
The potential inability to obtain adequate funding from debt or capital sources in the future could force us to self-fund strategic initiatives or even forego certain opportunities, which in turn could potentially harm our performance.
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• the burden of complying with foreign and international laws and treaties.
−Removed: For example, the United States has imposed significant tariffs on Chinese-made goods, which the Biden administration has previously indicated will largely remain in place.
+Added: For example, the United States has imposed significant tariffs on Chinese-made goods, which the Biden administration has largely left in place.
The tariffs imposed on Chinese goods, among other potential countries and any corresponding tariffs from China or such other countries in response has, and may in the future, negatively impact demand and/or increase the costs for our products.
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In order to manage our growth and business strategy effectively relative to the uncertain pace of adoption, we must continue to:
−Removed: • maintain, expand, construct and purchase adequate manufacturing facilities and equipment, as well as secure sufficient third-party manufacturing resources, to meet customer demand, including specifically the expansion of our Silicon Carbide capacity with the opening of a state-of-the-art, automated 200mm capable Silicon Carbide device fabrication facility, an expansion of our materials factory in Durham, North Carolina, and the future construction of a new materials manufacturing facility in Siler City, North Carolina;
−Removed: • manage an increasingly complex supply chain (including managing the impacts of ongoing supply constraints in the semiconductor industry) that has the ability to supply an increasing number of raw materials, subsystems and finished products with the required specifications and quality, and deliver on time to our manufacturing facilities, our third-party manufacturing facilities, our logistics operations, or our customers;
+Added: • maintain, expand, construct and purchase adequate manufacturing facilities and equipment, as well as secure sufficient third-party manufacturing resources, to meet customer demand, including specifically the expansion of our Silicon Carbide capacity with the opening of a state-of-the-art, automated 200mm capable Silicon Carbide device fabrication facility in New York, an expansion of our materials factory in Durham, North Carolina, the construction of a new materials manufacturing facility in Siler City, North Carolina, and the planned construction of a new 200mm capable Silicon Carbide device fabrication facility in Saarland, Germany;
+Added: • meet our production commitments to our customers, including those customers who provide us with capacity reservation deposits or similar payments;
+Added: • manage an increasingly complex supply chain (including managing the impacts of ongoing supply constraints in the semiconductor industry and meeting purchase commitments under take-or-pay arrangements with certain suppliers) that has the ability to supply an increasing number of raw materials, subsystems and finished products with the required specifications and quality, and deliver on time to our manufacturing facilities, our third-party manufacturing facilities, our logistics operations, or our customers;
• expand the capability of our information systems to support a more complex business, such as our current implementation of a new company-wide enterprise resource planning (ERP) system;
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• be successful in securing design-ins across our end markets, including automotive applications;
−Removed: • realize our expected local, state and federal government incentives, including capital investment reimbursements, property tax reimbursements and sales tax exemptions from state, county and local governments, refundable income tax credits and capital grants through the CHIPS Act, and the successful application, receipt and potential sale of any tax credits we may receive under the Inflation Reduction Act;
+Added: • realize our expected local, state and federal government incentives, including capital investment reimbursements, property tax reimbursements and sales tax exemptions from state, county and local governments;
+Added: • confirm our eligibility for and receive the expected benefits from refundable income tax credits and capital grants through the CHIPS Act, and receive and potentially sell any tax credits for which we may apply under the Inflation Reduction Act;
• expand research and development, sales and marketing, technical support, distribution capabilities, manufacturing planning and administrative functions;
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There are also inherent execution risks in starting up a new factory or expanding production capacity, whether one of our own factories or that of our contract manufacturers, as well as risks to moving production to different contract manufacturers, that could increase costs and reduce our operating results.
−Removed: In the fourth quarter of fiscal 2022, we opened a new Silicon Carbide device fabrication facility in Marcy, New York to complement the materials factory expansion underway at our United States campus headquarters in Durham, North Carolina.
+Added: In the fourth quarter of fiscal 2022, we opened a new Silicon Carbide
+Added: device fabrication facility in Marcy, New York to complement the materials factory expansion underway at our United States campus headquarters in Durham, North Carolina.
We also commenced work on our new materials manufacturing facility in Siler City, North Carolina in the first quarter of fiscal 2023.
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We continue to prepare for production using 200mm substrates and if we are unable to make this transition in a timely or cost-effective manner, our results could be negatively impacted.
+Added: Our results of operations, financial condition and business could be harmed if we are unable to balance customer demand and capacity.
+Added: As customer demand for our products changes, we must be able to adjust our production capacity to meet demand.
+Added: We are continually taking steps to address our manufacturing capacity needs for our products.
+Added: Currently, we are focusing on increasing production capacity.
+Added: If we are not able to increase our production capacity at our targeted rate, if there are unforeseen costs associated with increasing our capacity levels, or if we are unable to obtain advanced semiconductor manufacturing equipment in a timely manner, we may not be able to achieve our financial targets.
+Added: We may be unable to build or qualify new capacity on a timely basis to meet customer demand and customers may fulfill their orders with one of our competitors instead.
+Added: In addition, as we introduce new products and change product generations, we must balance the production and inventory of prior generation products with the production and inventory of new generation products, whether manufactured by us or our contract manufacturers, to maintain a product mix that will satisfy customer demand and mitigate the risk of incurring cost write-downs on the previous generation products, related raw materials and tooling.
+Added: Significant or prolonged shortages or delivery delays of our products to our customers could delay their manufacturing and negatively impact our relationships with these customers.
+Added: Due to the proportionately high fixed cost nature of our business (such as facility costs), if demand does not materialize at the rate forecasted, we may not be able to scale back our manufacturing expenses or overhead costs quickly enough to correspond to the lower than expected demand.
+Added: This could result in lower margins and adversely impact our business and results of operations.
+Added: Additionally, if product demand decreases or we fail to forecast demand accurately, our results may be adversely impacted due to higher costs resulting from lower factory utilization, causing higher fixed costs per unit produced.
+Added: Changes in product demand from our customers' forecasts may also cause variability in our supply costs if significant adjustments are needed to our forecasted or committed procurement and supply plans.
+Added: Further, we may be required to recognize impairments on our long-lived assets or recognize excess inventory write-off charges, or excess capacity charges, which would have a negative impact on our results of operations.
+Added: With the opening of our new Silicon Carbide device fabrication facility in Marcy, New York, we may experience increased pressure on margins during the period when production begins but before the facility is at full utilization.
+Added: Additionally, our large upfront investment in the facility to increase capacity does not guarantee we will need the capacity and we may experience lower than expected capacity once the facility is in production, which could result in further margin pressures.
+Added: In addition, our efforts to improve quoted delivery lead-time performance may result in corresponding reductions in order backlog.
+Added: A decline in backlog levels could result in more variability and less predictability in our quarter-to-quarter revenue and operating results.
Our operating results are substantially dependent on the acceptance of new products.
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• our ability to introduce new products in a timely and cost-effective manner;
−Removed: • our ability to secure volume purchase orders related to new products;
• achievement of technology breakthroughs required to make commercially viable products;
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• our ability to develop repeatable processes to manufacture new products in sufficient quantities, with the desired specifications and at competitive costs;
+Added: • our ability to secure volume purchase orders related to new products;
• our customers’ ability to develop competitive products incorporating our products;
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If any of these or other similar factors becomes problematic, we may not be able to deliver and introduce new products in a timely or cost-effective manner.
−Removed: Our results of operations, financial condition and business could be harmed if we are unable to balance customer demand and capacity.
−Removed: As customer demand for our products changes, we must be able to adjust our production capacity to meet demand.
−Removed: We are continually taking steps to address our manufacturing capacity needs for our products.
−Removed: Currently, we are focusing on increasing production capacity.
−Removed: If we are not able to increase our production capacity at our targeted rate, if there are unforeseen costs associated with increasing our capacity levels, or if we are unable to obtain advanced semiconductor manufacturing equipment in a timely manner, we may not be able to achieve our financial targets.
−Removed: We may be unable to build or qualify new capacity on a timely basis to meet customer demand and customers may fulfill their orders with one of our competitors instead.
−Removed: In addition, as we introduce new products and change product generations, we must balance the production and inventory of prior generation products with the production and inventory of new generation products, whether manufactured by us or our contract manufacturers, to maintain a product mix that will satisfy customer demand and mitigate the risk of incurring cost write-downs on the previous generation products, related raw materials and tooling.
−Removed: Significant or prolonged shortages or delivery delays of our products to our customers could delay their manufacturing and negatively impact our relationships with these customers.
−Removed: Due to the proportionately high fixed cost nature of our business (such as facility costs), if demand does not materialize at the rate forecasted, we may not be able to scale back our manufacturing expenses or overhead costs quickly enough to correspond to the lower than expected demand.
−Removed: This could result in lower margins and adversely impact our business and results of operations.
−Removed: Additionally, if product demand decreases or we fail to forecast demand accurately, our results may be adversely impacted due to higher costs resulting from lower factory utilization, causing higher fixed costs per unit produced.
−Removed: Further, we may be required to recognize impairments on our long-lived assets or recognize excess inventory write-off charges, or excess capacity charges, which would have a negative impact on our results of operations.
−Removed: With the opening of our new Silicon Carbide device fabrication facility in Marcy, New York, we may experience increased pressure on margins during the period when production begins but before the facility is at full utilization.
−Removed: Additionally, our large upfront investment in the facility to increase capacity does not guarantee we will need the capacity and we may experience lower than expected capacity once the facility is in production, which could result in further margin pressures.
−Removed: In addition, our efforts to improve quoted delivery lead-time performance may result in corresponding reductions in order backlog.
−Removed: A decline in backlog levels could result in more variability and less predictability in our quarter-to-quarter revenue and operating results.
We face risks relating to our suppliers, including that we rely on a number of key sole source and limited source suppliers, are subject to high price volatility on certain commodity inputs, variations in parts quality, and raw material consistency and availability, and rely on independent shipping companies for delivery of our products.
We depend on a number of sole source and limited source suppliers for certain raw materials, components, services and equipment used in manufacturing our products, including key materials and equipment used in critical stages of our manufacturing processes.
−Removed: Although alternative sources generally exist for these items, qualification of many of these alternative sources could take up to six months or longer.
+Added: Although alternative sources generally exist for these items, qualification of many of these alternative
+Added: sources could take up to six months or longer.
Where possible, we attempt to identify and qualify alternative sources for our sole and limited source suppliers.
−Removed: We generally purchase these sole or limited source items with purchase orders, and we have limited guaranteed supply arrangements with such suppliers.
+Added: We generally purchase these sole or limited source items with purchase orders, and we have limited guaranteed supply arrangements with such suppliers, including take-or-pay arrangements.
Some of our sources can have variations in attributes and availability which can affect our ability to produce products in sufficient volume or quality.
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Additionally, general shortages in the marketplace of certain raw materials or key components may adversely impact our business.
−Removed: In the past, we have
−Removed: experienced decreases in our production yields when suppliers have varied from previously agreed upon specifications or made other modifications we do not specify, which impacted our cost of revenue.
+Added: In the past, we have experienced decreases in our production yields when suppliers have varied from previously agreed upon specifications or made other modifications we do not specify, which impacted our cost of revenue.
Additionally, the inability of our suppliers to access capital efficiently could cause disruptions in their businesses, thereby negatively impacting ours.
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The distributors’ internal target inventory levels vary depending on market cycles and a number of factors within each distributor over which we have very little, if any, control.
−Removed: Distributors also have the ability to shift business to different manufacturers
−Removed: within their product portfolio based on a number of factors, including new product availability and performance.
+Added: Distributors also have the ability to shift business to different manufacturers within their product portfolio based on a number of factors, including new product availability and performance.
Similarly, we have the ability to add, consolidate, or remove distributors.
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If we choose to enter into such strategic transactions, we face certain risks including:
+Added: • the inability to realize the expected benefits, both from a timing and amount perspective, from our ongoing and planned capacity expansions, including the construction of a new materials manufacturing facility in Siler City, North Carolina and the planned construction of a new 200mm capable Silicon Carbide device fabrication facility in Saarland, Germany;
• the failure of an acquired business, investee or joint venture to meet our performance and financial expectations;
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Failure to obtain a necessary license or develop an alternative solution could cause us to incur substantial liabilities and costs and to suspend the manufacture of affected products.
−Removed: Risks related to the effects of COVID-19 and other potential future public health crises, pandemics or similar events
−Removed: We may be subject to volatility and uncertainty in customer demand, supply chains, worldwide economies and financial markets resulting from the COVID-19 pandemic or other outbreak of infectious disease or similar public health threat.
−Removed: We have significant manufacturing operations in the United States and contract manufacturing agreements in Asia, which were affected by the COVID-19 pandemic and the measures to try to contain it.
−Removed: We initially experienced some limited disruptions in supply from some of our suppliers, although the disruptions to date have not been significant.
−Removed: At some of our contract manufacturers in Asia, which include captive lines and contract packaging facilities, we have experienced, and may experience in the future, some disruptions in supply from containment measures.
−Removed: The emergence of fast-spreading variants and the potential waning effectiveness of vaccines have introduced renewed uncertainty into whether additional measures will be implemented to combat the spread of COVID-19.
−Removed: Restrictions on access to our manufacturing facilities or on our support operations or workforce, or similar limitations for our vendors and suppliers, and restrictions or disruptions of transportation, such as reduced availability of air transport, port closures, and increased border controls or closures, could limit our ability to meet customer demand, lead to increased costs and have a material adverse effect on our financial condition and results of operations.
−Removed: The COVID-19 pandemic has significantly increased economic and demand uncertainty.
−Removed: These uncertainties also make it more difficult for us to assess the quality of our product order backlog and to estimate future financial results.
−Removed: The COVID-19 pandemic initially caused an economic slowdown, and the continued spread of COVID-19 and its variants could contribute to or exacerbate a global economic slowdown or recession, which could have a material adverse effect on demand for our products and on our financial condition and results of operations.
−Removed: The spread of COVID-19 and its variants has caused us to modify our business practices.
−Removed: We may take further actions as may be required by government authorities or that we determine are in the best interests of our employees, customers, partners, and suppliers.
−Removed: There is no certainty that such measures will be sufficient to mitigate the risks posed by the virus and its variants, and our ability to perform critical functions could be harmed.
−Removed: In addition, in light of concerns about the spread of COVID-19 and its variants, our workforce has at times been operating at reduced levels at our manufacturing facilities and at the facilities of some of our contract manufacturers, which may continue to have an adverse impact on our ability to timely meet future customer orders.
−Removed: The duration of the business disruption and related financial impact of the COVID-19 pandemic cannot be reasonably estimated at this time.
−Removed: However, it may materially affect our ability to obtain raw materials, manage input costs, manage customer credit risk, manufacture products or deliver inventory in a timely manner, and it also may impair our ability to meet customer demand for products, result in lost sales, additional costs, or penalties, or damage our reputation.
−Removed: The extent to which COVID-19, its variants or an outbreak of any other infectious disease will further impact our operations and results will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19 and its variants, the efficacy and effectiveness of vaccines, and the actions to contain the virus or treat its impact, among others.
Risks related to legal, regulatory, accounting, tax and compliance matters
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Various jurisdictions in which we do business have implemented, or in the future could implement or amend, restrictions on emissions of carbon dioxide or other greenhouse gases, limitations or restrictions on water use, regulations on energy management and waste management, and other climate change-based rules and regulations, which may increase our expenses and adversely affect our operating results.
−Removed: We expect increased worldwide
−Removed: regulatory activity relating to climate change in the future.
+Added: We expect increased worldwide regulatory activity relating to climate change in the future.
Future compliance with these laws and regulations may adversely affect our business and results of operations.
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General risk factors
+Added: We may be subject to volatility and uncertainty in customer demand, supply chains, worldwide economies and financial markets resulting from the COVID-19 pandemic or other outbreak of infectious disease or similar public health threat.
+Added: We have significant manufacturing operations in the United States and contract manufacturing agreements in Asia, which were affected by the COVID-19 pandemic and the measures to try to contain it.
+Added: We initially experienced some limited disruptions in supply from some of our suppliers, although the disruptions to date have not been significant.
+Added: At some of our contract manufacturers in Asia, which include captive lines and contract packaging facilities, we have experienced, and may experience in the future, some disruptions in supply from containment measures.
+Added: The emergence of fast-spreading variants and the potential waning effectiveness of vaccines have introduced renewed uncertainty into whether additional measures will be implemented to combat the spread of COVID-19.
+Added: Restrictions on access to our manufacturing facilities or on our support operations or workforce, or similar limitations for our vendors and suppliers, and restrictions or disruptions of transportation, such as reduced availability of air transport, port closures, and increased border controls or closures, could limit our ability to meet customer demand, lead to increased costs and have a material adverse effect on our financial condition and results of operations.
+Added: The COVID-19 pandemic has significantly increased economic and demand uncertainty.
+Added: These uncertainties also make it more difficult for us to assess the quality of our product order backlog and to estimate future financial results.
+Added: The COVID-19 pandemic initially caused an economic slowdown, and the continued spread of COVID-19 and its variants could contribute to or exacerbate a global economic slowdown or recession, which could have a material adverse effect on demand for our products and on our financial condition and results of operations.
+Added: The spread of COVID-19 and its variants has caused us to modify our business practices.
+Added: We may take further actions as may be required by government authorities or that we determine are in the best interests of our employees, customers, partners, and suppliers.
+Added: There is no certainty that such measures will be sufficient to mitigate the risks posed by the virus and its variants, and our ability to perform critical functions could be harmed.
+Added: In addition, in light of concerns about the spread of COVID-19 and its variants, our workforce has at times been operating at reduced levels at our manufacturing facilities and at the facilities of some of our contract manufacturers, which may continue to have an adverse impact on our ability to timely meet future customer orders.
+Added: The duration of the business disruption and related financial impact of the COVID-19 pandemic cannot be reasonably estimated at this time.
+Added: However, it may materially affect our ability to obtain raw materials, manage input costs, manage customer credit risk, manufacture products or deliver inventory in a timely manner, and it also may impair our ability to meet customer demand for products, result in lost sales, additional costs, or penalties, or damage our reputation.
+Added: The extent to which COVID-19, its variants or an outbreak of any other infectious disease will further impact our operations and results will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19 and its variants, the efficacy and effectiveness of vaccines, and the actions to contain the virus or treat its impact, among others.
Catastrophic events and disaster recovery may disrupt business continuity.
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Historically, our common stock has experienced substantial price volatility, particularly as a result of significant fluctuations in our revenue, earnings and margins over the past few years, and variations between our actual financial results and the published expectations of analysts.
−Removed: For example, the closing price per share of our common stock on the New York Stock Exchange ranged from a low of $58.67 to a high of $122.07 during the twelve months ended December 25, 2022.
+Added: For example, the closing price per share of our common stock on the New York Stock Exchange ranged from a low of $58.67 to a high of $122.07 during the twelve months ended March 26, 2023.
If our future operating results or margins are below the expectations of stock market analysts or our investors, our stock price will likely decline.
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We have outstanding debt which could materially restrict our business and adversely affect our financial condition, liquidity and results of operations.
−Removed: As of December 25, 2022, our indebtedness consisted of $575.0 million aggregate principal amount of the 2026 Notes, $750.0 million aggregate principal amount of the 2028 Notes and $1,750.0 million aggregate principal amount of the 2029 Notes (collectively, the Outstanding Notes) and potential borrowings from our revolving line of credit.
−Removed: Our ability to pay interest and repay the principal for any outstanding indebtedness under our line of credit and the Outstanding Notes is dependent upon our ability to manage our business operations and generate sufficient cash flows to service such debt.
+Added: As of March 26, 2023, our indebtedness consisted of $575.0 million aggregate principal amount of the 2026 Notes, $750.0 million aggregate principal amount of the 2028 Notes and $1,750.0 million aggregate principal amount of the 2029 Notes (collectively, the Outstanding Notes) and potential borrowings from our revolving line of credit.
+Added: Our ability to pay interest and
+Added: repay the principal for any outstanding indebtedness under our line of credit and the Outstanding Notes is dependent upon our ability to manage our business operations and generate sufficient cash flows to service such debt.
There can be no assurance that we will be able to manage any of these risks successfully.
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In any such action where the NCBCA specifies the division or county wherein the action must be brought, the action shall be brought in such division or county.
−Removed: Our amended and restated bylaws also provide that, notwithstanding the foregoing, (x) the provisions described above will not apply to suits brought to enforce any liability or duty created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction, and (y) unless we consent in writing to the selection of an alternative forum, the federal district courts shall, to the fullest extent permitted by law, be the exclusive forum for the resolution of any complaint asserting a cause of action against Wolfspeed or any director, officer, employee, or agent of Wolfspeed and arising under the Securities Act.
+Added: Our amended and restated bylaws also provide that,
+Added: notwithstanding the foregoing, (x) the provisions described above will not apply to suits brought to enforce any liability or duty created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction, and (y) unless we consent in writing to the selection of an alternative forum, the federal district courts shall, to the fullest extent permitted by law, be the exclusive forum for the resolution of any complaint asserting a cause of action against Wolfspeed or any director, officer, employee, or agent of Wolfspeed and arising under the Securities Act.
If a court were to find the choice of forum provision contained in our amended and restated bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, results of operations, and financial condition.
7 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.