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What changed in ACM Research, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of ACM Research, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+522 added−604 removedSource: 10-K (2023-12-31) vs 10-K (2022-12-31)

Top changes in ACM Research, Inc.'s 2023 10-K

522 paragraphs added · 604 removed · 423 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

65 edited+8 added−28 removed96 unchanged
Biggest changeOur customers for wet-cleaning and other front-end processing tools have included Shanghai Huali Microelectronics Corporation, together with Huahong Semiconductor Ltd., collectively known as The Shanghai Huahong (Group) Company, Ltd., or The Huali Huahong Group, Semiconductor Manufacturing International Corporation, or SMIC, Shanghai SK Hynix Inc., Yangtze Memory Technologies Co., Ltd., or YMTC, and ChangXin Memory Technologies.
Biggest changeOur front-end customers have included: Shanghai Huali Microelectronics Corporation, together with Huahong Semiconductor Ltd., collectively known as The Shanghai Huahong (Group) Company, Ltd., or The Huali Huahong Group, a leading mainland China-based foundry; Semiconductor Manufacturing International Corporation, or SMIC, a leading mainland China-based foundry; SK Hynix Inc., a leading Korean memory chip company; Yangtze Memory Technologies Co., Ltd., or YMTC, a leading mainland China-based memory chip company, together with one of its subsidiaries; ChangXin Memory Technologies, or CXMT, a leading mainland China-based memory chip company; and SiEn, a leading mainland China-based power-semiconductor chip company.
We will continue to seek to leverage our local presence to address the growing market for semiconductor manufacturing equipment in the region by working closely with regional chip manufacturers to understand their specific requirements, encourage them to adopt our SAPS, TEBO, Tahoe, ECP, furnace and other technologies in our current portfolio, and enable us to design innovative products and solutions to address their needs.
We will continue to seek to leverage our local presence to address the growing market for semiconductor manufacturing equipment in the region by working closely with regional chip manufacturers to understand their specific requirements, encourage them to adopt our SAPS, TEBO, Tahoe, ECP, furnace, Track, PECVD, and other technologies in our current portfolio, and enable us to design innovative products and solutions to address their needs.
Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Our Technology and Product Offerings Wet Cleaning Equipment for Front End Production Processes Chip fabricators can use our single-wafer wet-cleaning tools in numerous steps to improve product yield in the front-end production process, during which individual devices are patterned in a chip prior to being interconnected on a wafer.
Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Our Technology and Prod uct Offerings Wet Cleaning Equipment for Front End Production Processes Chip fabricators can use our single-wafer wet-cleaning tools in numerous steps to improve product yield in the front-end production process, during which individual devices are patterned in a chip prior to being interconnected on a wafer.
Highlights of our SAPS II equipment include: ● compact design, with footprint of 2.65m x 4.10m x 2.85m (WxDxH), requiring limited clean room floor space; ● up to 8 chambers, providing throughput of up to 225 wafers per hour; ● double-sided cleaning capability, with up to 5 cleaning chemicals for process flexibility; ● 2-chemical recycling capability for reduced chemical consumption; ● image wafer detection method for lowering wafer breakage rates; and ● chemical delivery module for delivery of dilute hydrofluoric acid, RCA SC-1 solution, functional de-ionized water and carbon dioxide to each of the chambers.
Highlights of our SAPS II equipment include: 10 Table of Contents • compact design, with footprint of 2.65m x 4.10m x 2.85m (WxDxH), requiring limited clean room floor space; • up to 8 chambers, providing throughput of up to 225 wafers per hour; • double-sided cleaning capability, with up to 5 cleaning chemicals for process flexibility; • 2-chemical recycling capability for reduced chemical consumption; • image wafer detection method for lowering wafer breakage rates; and • chemical delivery module for delivery of dilute hydrofluoric acid, RCA SC-1 solution, functional de-ionized water and carbon dioxide to each of the chambers.
Our particular areas of focus include development of the following: ● new cleaning steps for Ultra C SAPS cleaners for application in logic chips and for DRAM, and 3D NAND technologies. ● new cleaning steps for Ultra C TEBO cleaners for FinFET in logic chips, gates in DRAM, and deep vias in 3D NAND technologies. ● new cleaning steps for Ultra Tahoe cleaners for application in logic chips and for DRAM and 3D NAND technologies. ● new dry technologies such as supercritical CO2 dry and advanced IPA dry for DRAM, and logic technologies. ● new hardware, including new system platforms, new and additional chamber structures and new chemical blending systems; ● new software to integrate new functionalities to improve tool performance; and ● support for the ongoing evaluations and commercialization efforts and product extensions for the newly introduced PECVD and Track product categories.
Our particular areas of focus include development of the following: • new cleaning steps for Ultra C SAPS cleaners for application in logic chips and for DRAM, and 3D NAND technologies. • new cleaning steps for Ultra C TEBO cleaners for FinFET in logic chips, gates in DRAM, and deep vias in 3D NAND technologies. • new cleaning steps for Ultra Tahoe cleaners for application in logic chips and for DRAM and 3D NAND technologies. • new dry technologies such as supercritical CO2 dry and advanced IPA dry for DRAM, and logic technologies. 15 Table of Contents • new hardware, including new system platforms, new and additional chamber structures and new chemical blending systems; • new software to integrate new functionalities to improve tool performance; and • support for the ongoing evaluations and commercialization efforts and product extensions for the newly introduced PECVD and Track product categories.
We added two major new product categories in 2022 with the launch of the Ultra Pmax™ PECVD tool, which is equipped with a proprietary designed chamber, gas distribution unit and chuck, and is intended to provide better film uniformity, reduced film stress, and improved particle performance, and the introduction of the Ultra Track tool, a 300mm process tool that delivers uniform air downflow, fast robot handling and customizable software to address specific customer requirements, and has multiple features that enhance performance across defectivity, throughput, and cost of ownership.
We added two major new product categorie s in 2022 with the launch of the Ultra Pmax™ PECVD tool, which is equipped with a proprietary designed chamber, gas distribution unit and chuck, and is intended to provide better film uniformity, reduced film stress, and improved particle performance, and the introduction of the Ultra Track tool, a 300mm process tool that delivers uniform air downflow, fast robot handling and customizable software to address specific customer requirements, and has multiple features that enhance performance across defectivity, throughput, and cost of ownership.
Substantially all of our integrated tools are built to order at our manufacturing facilities in the Pudong region of Shanghai, which now encompass a total of 236,000 square feet of floor space for production capacity, with leased buildings at our Chuansha campus.
Substantially all of our integrated tools are built to order at our manufacturing facilities in the Pudong region of Shanghai, which now encompass a total o f 236,000 square feet of floor space for production capacity, with leased buildings at our Chuansha campus.
Risk Factors—Risks Related to Our Business and Our Industry—We depend on a limited number of suppliers, including single source suppliers, for critical components and assemblies, and our business could be disrupted if they are unable to meet our needs.” 15 Table of Contents Research and Development We believe that our success depends in part on our ability to develop and deliver breakthrough technologies and capabilities to meet our customers’ ever-more challenging technical requirements.
Risk Factors—Risks Related to Our Business and Our Industry—We depend on a limited number of suppliers, including single source suppliers, for critical components and assemblies, and our business could be disrupted if they are unable to meet our needs.” Research and Development We believe that our success depends in part on our ability to develop and deliver breakthrough technologies and capabilities to meet our customers’ ever-more challenging technical requirements.
We have demonstrated the damage-free cleaning capabilities of TEBO technology on patterned wafers for feature nodes as small as 1xnm (16 to 19 nanometers, or nm), and we have shown TEBO technology can be applied in manufacturing processes for patterned chips with 3D architectures having aspect ratios as high as 60‑to‑1. ● Tahoe technology for cost and environmental savings.
We have demonstrated the damage-free cleaning capabilities of TEBO technology on patterned wafers for feature nodes as small as 1xnm (16 to 19 nanometers, or nm), and we have shown TEBO technology can be applied in manufacturing processes for patterned chips with 3D architectures having aspect ratios as high as 60‑to‑1. 7 Table of Contents • Tahoe technology for cost and environmental savings.
We estimate, based on third-party reports and on customer and other information, that our current product portfolio addresses approximately $16 billion of the 2022 global wafer fab equipment, or WFE, market.
We estimate, based on third-party reports and on customer and other information, that our current product portfolio addresses approximately $16 billion of the 2023 global wafer fab equipment, or WFE, market.
By product line, we estimate an approximately $4.6 billion market opportunity is addressed by our wafer cleaning equipment, $4.3 billion by our Plasma-Enhanced Chemical Vapor Deposition, or PECVD, equipment, $3.2 billion by our furnace equipment, $2.6 billion by our Track equipment, $800 million by our electro-chemical plating, or ECP, equipment, and more than $800 million by our stress-free polishing, advanced packaging, wafer processing, and other processing equipment.
By product line, we estimate an approximately $5.2 billion market opportunity is addressed by our wafer cleaning equipment, $4.3 billion by our Plasma-Enhanced Chemical Vapor Deposition, or PECVD, equipment, $2.2 billion by our furnace equipment, $2.5 billion by our Track equipment, $800 million by our electro-chemical plating, or ECP, equipment, and more than $900 million by our stress-free polishing, advanced packaging, wafer processing, and other processing equipment.
We select these independent representatives based on their ability to provide effective field sales, marketing forecast and technical requirement updates for our products. In the case of representatives, our customers place purchase orders with us directly rather than with the representatives. Our sales have historically been made using purchase orders with agreed technical specifications.
We select these independent representatives based on their ability to provide effective field sales, marketing forecast and technical requirement updates for our products. In the case of representatives, our customers place purchase orders with us directly rather than with the representatives. 14 Table of Contents Our sales have historically been made using purchase orders with agreed technical specifications.
Risk Factors—Risks Related to Our Intellectual Property and Data Security.” Competition The chip equipment industry is characterized by rapid change and is highly competitive throughout the world. We compete with semiconductor equipment companies located around the world, and we may also face competition from new and emerging companies, including new competitors from the PRC.
Risk Factors—Risks Related to Our Intellectual Property and Data Security.” Competition The chip equipment industry is characterized by rapid change and is highly competitive throughout the world. We compete with semiconductor equipment companies located around the world, and we may also face competition from new and emerging companies, including new competitors from mainland China.
Conventional processes have proven ineffective, however, for process nodes of 20nm or less, and we believe the increased yield that can be achieved by using TEBO technology for nodes up to 70nm can more than offset the cost of the additional time in utilizing TEBO technology.
Conventional processes have proven ineffective, however, for process nodes of 20nm or less, and we believe the increased yield that can be achieved by 11 Table of Contents using TEBO technology for nodes up to 70nm can more than offset the cost of the additional time in utilizing TEBO technology.
We will continue to seek to leverage our local presence in the PRC and South Korea through our subsidiaries to address the growing market for semiconductor manufacturing equipment in the region by working closely with regional chip manufacturers to understand their specific requirements, encourage them to adopt our technologies, and enable us to design innovative products and solutions to address their needs.
We will continue to seek to leverage our local presence in mainland China and Korea through our subsidiaries to address the growing market for semiconductor manufacturing equipment in the region by working closely with regional chip manufacturers to understand their specific requirements, encourage them to adopt our technologies, and enable us to design innovative products and solutions to address their needs.
Risk Factors—General—Our production facilities could be damaged or disrupted by a natural disaster, war, terrorist attacks or other catastrophic events.” 19 Table of Contents Concerns about climate change have resulted in various laws and regulations that are intended to limit carbon emissions and address other environmental concerns.
Risk Factors—General—Our production facilities could be damaged or disrupted by a natural disaster, war, terrorist attacks or other catastrophic events.” Concerns about climate change have resulted in various laws and regulations that are intended to limit carbon emissions and address other environmental concerns.
For additional information, see “—Our Technology and Product Offerings—Wet Cleaning Equipment for Front End Production Processes.” Available Information We are required to file annual, quarterly and current reports, proxy statements and other information with the U.S. Securities and Exchange Commission, or the SEC.
For additional information, see “—Our Technology and Product Offerings—Wet Cleaning Equipment for Front End Production Processes.” 18 Table of Contents Available Information We are required to file annual, quarterly and current reports, proxy statements and other information with the U.S. Securities and Exchange Commission, or the SEC.
SAPS Applications SAPS megasonic cleaning technology can be applied during the chip fabrication process to clean wafer surfaces and interconnects. It also can be used to clean, and lengthen the lifetime, of recycled test wafers. 9 Table of Contents Wafer Surfaces.
SAPS Applications SAPS megasonic cleaning technology can be applied during the chip fabrication process to clean wafer surfaces and interconnects. It also can be used to clean, and lengthen the lifetime, of recycled test wafers. Wafer Surfaces.
Our marketing team also has the responsibility to conduct environmental scans, study industry trends and arrange our participation at major trade shows. Manufacturing We conduct a substantial majority of our product development, manufacturing, support and services in the PRC, with additional product development and subsystem production in South Korea.
Our marketing team also has the responsibility to conduct environmental scans, study industry trends and arrange our participation at major trade shows. Manufacturing We conduct a substantial majority of our product development, manufacturing, support and services in mainland China, with additional product development and subsystem production in Korea.
Our modular approach supports a wide range of customer needs and facilitates the adaptation of our model tools for use with the optimal chemicals selected to meet a customer’s requirements.
Our modular approach supports a wide range of 8 Table of Contents customer needs and facilitates the adaptation of our model tools for use with the optimal chemicals selected to meet a customer’s requirements.
The information on our website is not, and shall not be deemed to be, a part hereof or incorporated into this or any of our other filings with the SEC. 20 Table of Contents
The information on our website is not, and shall not be deemed to be, a part hereof or incorporated into this or any of our other filings with the SEC.
We focus our patent filing efforts in the United States, and, when justified by cost and strategic importance, we file corresponding foreign patent applications in strategic jurisdictions such as the European Union, the PRC, Japan, Singapore, South Korea, and Taiwan.
We focus our patent filing efforts in the United States, and, when justified by cost and strategic importance, we file corresponding foreign patent applications in strategic jurisdictions such as the European Union, mainland China, Japan, Singapore, Korea, and Taiwan.
In recent years, the PRC, where our production facilities are located, has undertaken comprehensive sustainability initiatives that are requiring companies to meet new environmental standards and deal with higher energy and other production costs.
In recent years, mainland China, where our production facilities are located, has undertaken comprehensive sustainability initiatives that are requiring companies to meet new environmental standards and deal with higher energy and other production costs.
We have been issued more than 448 patents in the United States, the People’s Republic of China, or PRC, Japan, Singapore, South Korea and Taiwan. We conduct a substantial majority of our product development, manufacturing, support and services in the PRC, with additional product development and subsystem production in South Korea.
We have been issued more than 498 patents in the United States, the People’s Republic of China, or mainland China, Japan, Singapore, Korea and Taiwan. We conduct a substantial majority of our product development, manufacturing, support and services in mainland China, with additional product development and subsystem production in Korea.
Our patent strategy is designed to provide a balance between the need for coverage in our strategic markets and the need to maintain costs at a reasonable level. As of December 31, 2022, we had 41 issued patents, and 29 patents pending, in the United States. These patents carry expiration dates from 2027 through 2037.
Our patent strategy is designed to provide a balance between the need for coverage in our strategic markets and the need to maintain costs at a reasonable level. As of December 31, 2023, we had 64 issued patents, and 29 patents pending, in the United States. These patents carry expiration dates from 2027 through 2038.
Many of the US patents and applications have also been filed internationally, in one or more of the European Union, Japan, PRC, Singapore, South Korea, and Taiwan. Specifically, we own patents in wafer cleaning, electro-polishing and plating, wafer preparation, and other semiconductor processing technologies.
Many of the US patents and applications have also been filed internationally, including one or more of the European Union, Japan, mainland China, Singapore, Korea, and Taiwan. Specifically, we own patents in wafer cleaning, electro-polishing and plating, wafer preparation, and other semiconductor processing technologies.
Ultra ECP map offers improved gap-filling performance for ultra-thin seed layer applications, which is critical for advanced nodes at 28nm, 14nm and beyond. In 2020, 2021 and 2022 we introduced and delivered a range of new tools intended to broaden our revenue opportunity with global semiconductor manufacturers.
Ultra ECP map offers improved gap-filling performance for ultra-thin seed layer applications, which is critical for advanced nodes at 28nm, 14nm and beyond. We have also introduced and delivered a range of new tools intended to broaden our revenue opportunity with global semiconductor manufacturers.
On November 18, 2021, ACM Shanghai successfully completed its initial public offering of shares of ACM Shanghai in the PRC, which we refer to as the STAR IPO, and its shares began trading on the Shanghai Stock Exchange’s Sci-Tech innovAtion boaRd, known as the STAR Market, which we refer to as the STAR Listing, as described under “Item 7.
On November 18, 2021, ACM Shanghai successfully completed its initial public offering of shares of ACM Shanghai in mainland China, which we refer to as the STAR IPO, and its shares began trading on the Shanghai Stock Exchange’s SciTech innovAtion boaRd, known as the STAR Market, which we refer to as the STAR Listing, as described under “Item 7.
Our experience has shown that chip manufacturers in the PRC and throughout Asia demand equipment meeting their specific technical requirements and prefer building relationships with local suppliers.
Our experience has shown that chip manufacturers in mainland China and throughout Asia demand equipment meeting their specific technical requirements and prefer building relationships with local suppliers.
Recruitment, Retention and Benefits To attract and retain qualified employees and key talent, we offer total compensation packages that are competitive with comparable companies, particularly in the PRC and, specifically, Shanghai. We provide training and development programs to our employees, and we have trained many of our key engineers and managers for more than a decade.
To attract and retain qualified employees and key talent, we offer total compensation packages that are competitive with comparable companies, particularly in mainland China and, specifically, Shanghai. We provide training and development programs to our employees, and we have trained many of our key engineers and managers for more than a decade.
We consider our employee relations to be good. 18 Table of Contents We compete in the highly competitive semiconductor equipment industry, with operations principally in the PRC. Attracting, developing, and retaining skilled and experienced employees in research and development, manufacturing, sales and marketing, and other positions is crucial to our ability to compete effectively.
We consider our employee relations to be good. We compete in the highly competitive semiconductor equipment industry, with operations principally in mainland China. Attracting, developing, and retaining skilled and experienced employees in research and development, manufacturing, sales and marketing, and other positions is crucial to our ability to compete effectively.
Substantially all of our tools are built to order at our manufacturing facilities in the Pudong region of Shanghai, which now encompass a total of 236,000 square feet of floor space for production capacity.
Substantially all of our tools are built to order at our manufacturing facilities in the Pudong region of Shanghai, which now encomp ass a total of 236,000 square f eet of floor space for production capacity.
We also employ field application engineers, who are typically co-located with our direct sales teams, to provide technical pre- and post-sale support tours and other assistance to existing and potential customers throughout the customers’ fab planning and production line qualification and fab expansion phases.
We employ direct sales teams in mainland China, the United States, Southeast Asia, and Europe. We also employ field application engineers, who are typically co-located with our direct sales teams, to provide technical pre- and post-sale support and other assistance to existing and potential customers throughout the customers’ fab planning and production line qualification and fab expansion phases.
Of these employees, 1,077 were located in mainland China and the Taiwan region, 119 were located in Korea and 13 were based in the United States. We have never had a work stoppage, and none of our employees are represented by a labor organization or subject to any collective bargaining arrangements.
Of these employees, 1,416 were located in mainland China and the Taiwan region, 159 were located in Korea and 15 were 17 Table of Contents based in the United States. We have never had a work stoppage, and none of our employees are represented by a labor organization or subject to any collective bargaining arrangements.
Our field application engineers are organized by end markets as well as core competencies in hardware, control system, software and process development to support our customers. 14 Table of Contents To supplement our direct sales teams, we have contacts with several independent sales representatives in the PRC, South Korea and Taiwan.
Our field application engineers are organized by end markets as well as core competencies in hardware, control system, software and process development to support our customers. To supplement our direct sales teams, we have contacts with several independent sales representatives in mainland China, Korea and Taiwan.
We have been issued more than 448 patents in the United States, the PRC, Japan, Korea, Singapore and Taiwan. 16 Table of Contents We manufacture advanced single-wafer cleaning systems equipped with our SAPS, TEBO and Tahoe technologies.
We have been issued more than 498 patents in the United States, mainland China, Japan, Korea, Singapore and Taiwan. We manufacture advanced single-wafer cleaning systems equipped with our SAPS, TEBO and Tahoe technologies.
Key competitors for our newly-introduced PECVD and Track products include Lam Research Corporation, Applied Materials, Inc., KINGSEMI Co., Ltd. and Suzho Jingtuo Semiconductor Technology Co., Ltd. 17 Table of Contents Compared to our company, our current and potential competitors may have: ● better established credibility and market reputations, longer operating histories, and broader product offerings; ● significantly greater financial, technical, marketing and other resources, which may allow them to pursue design, development, manufacturing, sales, marketing, distribution and service support of their products; ● more extensive customer and partner relationships, which may position them to identify and respond more successfully to market developments and changes in customer demands; and ● multiple product offerings, which may enable them to offer bundled discounts for customers purchasing multiple products or other incentives that we cannot match or offer.
Compared to our company, our current and potential competitors may have: • better established credibility and market reputations, longer operating histories, and broader product offerings; • significantly greater financial, technical, marketing and other resources, which may allow them to pursue design, development, manufacturing, sales, marketing, distribution and service support of their products; • more extensive customer and partner relationships, which may position them to identify and respond more successfully to market developments and changes in customer demands; • multiple product offerings, which may enable them to offer bundled discounts for customers purchasing multiple products or other incentives that we cannot match or offer.
We may enter into licensing or cross-licensing arrangements with other companies in the future. We cannot assure you that any patents will issue from any of our pending applications. Any rights granted under any of our existing or future patents may not provide meaningful protection or any commercial advantage to us.
We cannot assure you that any patents will issue from any of our pending applications. Any rights granted under any of our existing or future patents may not provide meaningful protection or any commercial advantage to us.
Our customers could become the target of litigation relating to the patent or other intellectual property rights of others. This could trigger technical support and indemnification obligations in some of our customer agreements. These obligations could result in substantial expenses, including the payment by us of costs and damages related to claims of patent infringement.
This could trigger technical support and indemnification obligations in some of our customer agreements. These obligations could result in substantial expenses, including the payment by us of costs and damages related to claims of patent infringement.
Retention of these key employees is critical to secure our future growth and technology development. To assist in employee retention and recruitment, we offer employee housing in the Lingang region of Shanghai in connection with the completion of ACM Shanghai’s housing facility in Lingang, where we are in the process of building a new research and development and production center.
Retention of these key employees is critical to secure our future growth and technology development. To assist in employee retention and recruitment, we offer employee housing in the Lingang region of Shanghai nearby our new research and development and production center.
Our research and development expense totaled $62.2 million or 16.0% of revenue in 2022, $34.2 million or 13.2% of revenue in 2021 and $19.1 million or 12.2% of revenue in 2020.
Our research and development expense totaled $92.7 million or 16.6% of revenue in 2023, $62.2 million or 16.0% of revenue in 2022, and $34.2 million or 13.2% of revenue in 2021.
We may in the future initiate claims or litigation against third parties to determine the validity and scope of proprietary rights of others. In addition, we may in the future initiate litigation to enforce our intellectual property rights or the rights of our customers or to protect our trade secrets.
We may in the future initiate claims or litigation against third parties to determine the validity and scope of proprietary rights of others.
TEBO equipment solves the problem of pattern damage caused by transient cavitation in conventional jet spray and megasonic cleaning processes, providing better particle removal efficiency with limited material loss or roughing.
TEBO equipment solves the problem of pattern damage caused by transient cavitation in conventional jet spray and megasonic cleaning processes, providing better particle 12 Table of Contents removal efficiency with limited material loss or roughing. TEBO equipment is being evaluated by a select group of leading memory and logic chip customers.
We expect to complete construction of the first Lingang manufacturing building and commence initial production in the second half of 2023 timeframe. 8 Table of Contents Our experience has shown that chip manufacturers in the PRC and throughout Asia demand equipment that meets their specific technical requirements and generally prefer to build relationships with local suppliers.
We expect to commence initial operations and production activities at our Lingang facilities in the first half of 2024 timeframe. Our experience has shown that chip manufacturers in mainland China and throughout Asia demand equipment that meets their specific technical requirements and generally prefer to build relationships with local suppliers.
Based on Gartner’s estimates, the total available global market for these equipment segments increased by 7.6% from $20.1 billion in 2021, to $21.6 billion in 2022, and is expected to decrease by 19.6% to $17.4 billion in 2023.
Based on Gartner’s estimates, the total available global market for these equipment segments decreased by 11.4% from $21.2 billion in 2022, to $18.7 billion in 2023, and is expected to decrease by 2.8% to $18.2 billion in 2024.
Cavitation is the formation of bubbles in a liquid, and transient cavitation is a process in which a bubble in fluid implodes or collapses. In conventional megasonic cleaning processes, megasonic energy forms bubbles and then causes those bubbles to implode or collapse, blasting destructive high-pressure, high-temperature micro jets toward the wafer surface.
In conventional megasonic cleaning processes, megasonic energy forms bubbles and then causes those bubbles to implode or collapse, blasting destructive high-pressure, high-temperature micro jets toward the wafer surface.
In 2022, 43.8% of our revenue was derived from three customers: The Huali Huahong Group, a leading PRC-based foundry, accounted for 18.2% of our revenue; SMIC, a leading PRC-based foundry, accounted for 15.6% of our revenue, and YMTC, a leading PRC-based memory chip company, together with one of its subsidiaries, accounted for 10.0% of our revenue.
In 2022, 43.8% of our revenue was derived from three customers: The Huali Huahong Group; accounted for 18.2% of our revenue; SMIC accounted for 15.6% of our revenue, and YMTC accounted for 10.0% of our revenue.
Ltd., a leading PRC-based wafer bumping packaging house that is a subsidiary of JCET Group Co., Ltd.; Nantong Tongfu Microelectronics Co., Ltd., a PRC-based chip assembly and testing company that is a subsidiary of Nantong Fujitsu Microelectronics Co., Ltd.; Nepes Co., Ltd., a semiconductor packaging company based in South Korea which acquired the operations of Deca Technologies’ Philippines manufacturing facility in 2020; and Wafer Works Corporation, a leading PRC-based wafer supplier.
Ltd., a mainland China-based wafer bumping packaging house that is a subsidiary of JCET Group Co., Ltd.; Nantong Tongfu Microelectronics Co., Ltd., a mainland China-based chip assembly and testing company that is a subsidiary of Nantong Fujitsu Microelectronics Co., Ltd.; Nepes Co., Ltd., a semiconductor packaging company based in Korea; and Wafer Works Corporation, a mainland China-based wafer supplier.
These equipment segments are a subset of the total worldwide semiconductor WFE market, which Gartner estimates increased by 8.9% from $92.4 billion in 2021 to $100.5 billion in 2022, and estimates will decrease by 19.0% to $81.5 billion in 2023.
These equipment segments are a subset of the total worldwide semiconductor WFE market, which Gartner estimates decreased by 7.7% from $100.6 billion in 2022 to $92.9 billion in 2023, and estimates will decrease by 1.7% to $91.3 billion in 2024.
For these purposes, SAPS technology includes improved fan filter units that balances intake and exhaust flows, precise temperature and concentration controls that ensure better handling of concentrated acid processes, and two-chemical recycle capability that reduces chemical consumption. 10 Table of Contents SAPS Equipment We offer two principal models of wet wafer cleaning equipment based on our SAPS technology, Ultra C SAPS II and Ultra C SAPS V.
For these purposes, SAPS technology includes improved fan filter units that balances intake and exhaust flows, precise temperature and concentration controls that ensure better handling of concentrated acid processes, and two-chemical recycle capability that reduces chemical consumption.
TEBO equipment is being evaluated by a select group of leading memory and logic chip customers. 12 Table of Contents Each model of TEBO equipment includes: ● an equipment front-end module, or EFEM, which moves wafers from chamber to chamber. ● one or more chamber modules, each equipped with a TEBO megasonic generator system. ● an electrical module to provide power for the tool; and ● a chemical delivery module.
Each model of TEBO equipment includes: • an equipment front-end module, or EFEM, which moves wafers from chamber to chamber. • one or more chamber modules, each equipped with a TEBO megasonic generator system. • an electrical module to provide power for the tool; and • a chemical delivery module. Ultra C TEBO II (released in 2016).
To date, a substantial majority of our sales of single-wafer wet-cleaning equipment for front-end manufacturing have been to customers located in Asia, and we anticipate that a substantial majority of our revenue from these products will continue to come from customers located in this region for the foreseeable future. 7 Table of Contents We have begun to add to our efforts to further address customers in North America, Western Europe and Southeast Asia by expanding our direct sales and services teams and increasing our global marketing activities.
To date, a substantial majority of our sales of single-wafer wet-cleaning equipment for front-end manufacturing have been to customers located in Asia, and we anticipate that a substantial majority of our revenue from these products will continue to come from customers located in this region for the foreseeable future.
Our customers for advanced packaging, and other processing tools have included Jiangyin Changdian Advanced Packaging Co.
Our wafer assembly and packaging customers have included: Jiangyin Changdian Advanced Packaging Co.
Each successive advanced process node has led to finer feature sizes of interconnects such as contacts, which form electrical pathways between a transistor and the first metal layer, and vias, which form electrical pathways between two metal layers. Advanced nodes have also resulted in higher aspect ratios for interconnect structures, with thinner, redesigned metal barriers being used to prevent diffusion.
Each successive advanced process node has led to finer feature sizes of interconnects such as contacts, which form electrical pathways between a transistor and the first metal layer, and vias, which form electrical pathways between two metal layers.
Our Customers Since 2009 we have delivered more than 380 wet cleaning and other front-end processing tools, more than 290 of which were repeat orders or acceptances upon contractual performance obligations having been met and thereby generated revenue to us. The balance of the delivered tools is awaiting customer acceptance should contractual conditions be met.
Our Customers Since 2009 we have delivered more than 765 tools to our customers , more than 650 of which were repeat orders or acceptances upon contractual performance obligations having been met and thereby generated revenue to us.
Revenue from advanced packaging, other processing tools, services and spares totaled $80.3 million, or 20.7% of total revenue in 2022, $57.5 million, or 22.1% of total revenue in 2021, and $20.4 million, or 13.0% of total revenue in 2020. Selling prices for these tools range from $0.5 million to more than $4 million.
Revenue from advanced packaging (excluding ECP), services and spares totaled $50.5 million, or 9.1% of total revenue, in 2023, $38.4 million, or 9.9% of total revenue in 2022, and $37.3 million, or 14.4% of total revenue in 2021. Selling prices for our tools generally range from $0.5 million to more than $5 million.
Nevertheless, any prolonged inability to obtain these components could have an adverse effect on our operating results and could unfavorably impact our customer relationships. Please see “Item 1A.
We purchase some of the components and assemblies that we include in our products from single source suppliers. We believe that we could obtain and qualify alternative sources to supply these components. Nevertheless, any prolonged inability to obtain these components could have an adverse effect on our operating results and could unfavorably impact our customer relationships. Please see “Item 1A.
We are focused on building a strategic portfolio of intellectual property to support and protect our key innovations. Our tools have been developed using our key proprietary technologies: ● Space Alternated Phase Shift, or SAPS, technology for flat and patterned (deep via or deep trench with stronger structure) wafer surfaces.
Our tools have been developed using our key proprietary technologies: • Space Alternated Phase Shift, or SAPS, technology for flat and patterned (deep via or deep trench with stronger structure) wafer surfaces. SAPS technology employs alternating phases of megasonic waves to deliver megasonic energy in a highly uniform manner on a microscopic level.
TEBO Technology, Applications and Equipment TEBO Technology We developed TEBO technology for application in wet wafer cleaning during the fabrication of 2D and 3D wafers with fine feature sizes.
TEBO Technology, Applications and Equipment TEBO Technology We developed TEBO technology for application in wet wafer cleaning during the fabrication of 2D and 3D wafers with fine feature sizes. TEBO technology facilitates effective cleaning even with patterned features too small or fragile to be addressed by conventional jet spray and megasonic cleaning technologies.
We also have filed 11 international patent applications for key TEBO technologies, and 4 for Tahoe, in accordance with the Patent Cooperation Treaty, in anticipation of filing in the U.S. national phase. In addition to the above core technologies, we have technologies for SFP and ECP that are used in certain of our tools.
We have 57 patents granted internationally protecting our SAPS technologies, and we have filed 11 international patent applications for key TEBO technologies, and 5 for Tahoe, in accordance with the Patent Cooperation Treaty. In addition we have patented technologies for SFP and ECP that are embedded in certain tools.
In 2021, 48.9% of our revenue was derived from two customers: The Huali Huahong Group accounted for 28.1% of our revenue; and YMTC, together with one of its subsidiaries, accounted for 20.8% of our revenue.
In 2021, 48.9% of our revenue was derived from two customers: The Huali Huahong Group accounted for 28.1% of our revenue; and YMTC accounted for 20.8% of our revenue. Sales and Marketing We market and sell our products worldwide using a combination of our direct sales force and third-party representatives.
Our U.S. operation includes sales, marketing and services personnel to expand and support major new customer initiatives for the products of ACM Shanghai to additional regions beyond mainland China.
Our operation includes sales, marketing and services personnel in North America, Western Europe and Southeast Asia to expand and support major new customer initiatives for the products of ACM Shanghai to additional regions beyond mainland China. We are focused on building a strategic portfolio of intellectual property to support and protect our key innovations.
Human Capital As of December 31, 2022, we had 1,209 full-time equivalent employees, of whom 110 were in administration, 253 were in manufacturing, 519 were in research and development, and 327 were in sales and marketing and customer services.
Our People As of December 31, 2023, we ha d 1,590 fu ll-time equivalent employees, of whom 139 were in administration, 286 were in manufacturing, 733 were in research and development, and 432 were in sales and marketing and customer services.
The specific processing steps include US Patent Number 8598039 titled “Barrier layer removal method and apparatus,” and US Patent Number 10615073 titled “method for removing barrier layer for minimizing sidewall recess.” To date we have not granted licenses to third parties under the patents described above. Not all of these patents have been implemented in products.
We also have patented technologies in other semiconductor processing areas, including wafer preparation and several specific processing steps. To date we have not granted licenses to third parties under the patents described above. Not all of these patents have been implemented in products. We may enter into licensing or cross-licensing arrangements with other companies in the future.
TEBO technology facilitates effective cleaning even with patterned features too small or fragile to be addressed by conventional jet spray and megasonic cleaning technologies. 11 Table of Contents TEBO technology solves the problems created by transient cavitation in conventional megasonic cleaning processes.
TEBO technology solves the problems created by transient cavitation in conventional megasonic cleaning processes. Cavitation is the formation of bubbles in a liquid, and transient cavitation is a process in which a bubble in fluid implodes or collapses.
Removed
Revenue from wet cleaning and other front-end processing tools totaled $308.5 million, or 79.3% of total revenue in 2022, $202.3 million, or 77.9% of total revenue in 2021, and $136.3 million, or 87.0% of total revenue in 2020. Selling prices for our wet-cleaning and other front-end processing tools range from $0.7 million to more than $5 million.
Added
Revenue from single wafer cleaning, Tahoe and semi-critical cleaning equipment totaled $403.9 million, or 72.4% of total revenue in 2023, $272.9 million, or 70.2% of total revenue in 2022, and $189.2 million, or 72.8% of total revenue in 2021.
Removed
As of December 31, 2022, we have delivered one tool for evaluation to a U.S. lab of a global semiconductor capital equipment vendor, and two tools to the U.S. facility of a major U.S. semiconductor manufacturer. Both of these evaluations are supported by our U.S. services team.
Added
Revenue from ECP (front-end packaging), furnace and other technologies totaled $103.4 million, or 18.5% of total revenue, in 2023, $77.5 million, or 19.9% of total revenue in 2022, and $33.2 million, or 12.8% of total revenue in 2021.
Removed
SAPS technology employs alternating phases of megasonic waves to deliver megasonic energy in a highly uniform manner on a microscopic level.
Added
Advanced nodes have also resulted in higher aspect ratios for interconnect 9 Table of Contents structures, with thinner, redesigned metal barriers being used to prevent diffusion.
Removed
We generate most of our revenue from a limited number of customers as the result of our strategy of initially placing equipment with a small number of leading chip manufacturers that are driving technology trends and key capability implementation.
Added
SAPS Equipment We offer two principal models of wet wafer cleaning equipment based on our SAPS technology, Ultra C SAPS II and Ultra C SAPS V.
Removed
In 2020, 75.8% of our revenue was derived from three customers: The Huali Huahong Group accounted for 36.9% of our revenue; YMTC, together with one of its subsidiaries, accounted for 26.8% of our revenue; and SMIC accounted for 12.1% of our revenue.
Added
The balance of the delivered tools is subject to the customer's acceptance of the tool upon the tool's satisfaction of applicable contractual requirements or subject to the customer's subsequent discretionary commitment to purchase the tool.
Removed
For our back-end wafer assembly and packaging customers, we focus on providing custom-made, differentiated equipment that incorporates a customer’s requested features at a competitive cost of ownership. Our customers for advanced packaging, wafer processing, and other back-end processing tools have included Jiangyin Changdian Advanced Packaging Co.
Added
In 2023, 45.5% of our revenue was derived from three customers: SMIC accounted for 16.7% of our revenue; SiEn accounted for 15.4% of our revenue; and CXMT; accounted for 13.4% of our revenue.
Removed
Ltd., a leading PRC-based wafer bumping packaging house that is a subsidiary of JCET Group Co., Ltd.; Nantong Tongfu Microelectronics Co., Ltd., a PRC-based chip assembly and testing company that is a subsidiary of Nantong Fujitsu Microelectronics Co., Ltd.; Nepes Co., Ltd., a semiconductor packaging company based in South Korea which acquired the operations of Deca Technologies’ Philippines manufacturing facility in 2020; and Wafer Works Corporation, a leading PRC-based wafer supplier.
Added
In addition, we may in the future initiate litigation to enforce our intellectual property rights or the rights of our customers or to protect our trade secrets. 16 Table of Contents Our customers could become the target of litigation relating to the patent or other intellectual property rights of others.
Removed
Sales and Marketing We market and sell our products worldwide using a combination of our direct sales force and third-party representatives. We employ direct sales teams in Asia, Europe and North America, and have located these teams near our customers, primarily in the PRC, South Korea, Taiwan and the United States. Each salesperson has specific local market expertise.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

190 edited+38 added−47 removed269 unchanged
Biggest changeExport Administration Regulations (EAR), thereby impacting our ability to sell our tools to customers in the PRC; • changes in government trade policies that could limit the demand for our tools and increase the cost of our tools; • changes in political and economic policies with respect to the PRC; • the PRC’s currency exchange control and government restrictions on investment repatriation may impact our ability to transfer funds outside of the PRC; Risks Related to Our STAR Listing • our ability to implement our strategy to expand our PRC operations; • our ability to achieve the results contemplated by our business strategy and our strategy for growth in the PRC and expectations related to the STAR Listing; • the effect of ACM Shanghai’s status as a publicly traded company that is controlled, but less than wholly owned, by ACM Research; • our ability to manage potentially inconsistent accounting and disclosure requirements of ACM Research and ACM Shanghai as a result of the STAR Listing; Risks Related to Our Intellectual Property and Data Security • our ability to protect our intellectual property, including in the PRC; • breaches of our cybersecurity systems; Risks Related to the COVID‑19 Pandemic • impacts on our global supply chain due to the COVID-19 pandemic, and our ability to successfully manage the demand, supply, and operational challenges associated with the global semiconductor shortage; • the impact of the COVID-19 pandemic on our currently planned projects and investments in the PRC; Risks Related to Ownership of Class A Common Stock • material weaknesses identified with respect to our internal controls over financial reporting; • the volatility in the market price of Class A common stock; • manipulative short sellers of our stock, which may drive down the market price of our Class A common stock and could result in litigation; • the difficulty to predict the effect of the STAR Listing and STAR IPO on the Class A common stock; • the dual class structure of Class A common stock, which has the effect of concentrating voting control with our executive officers and directors; and • the limited experience of our management team managing a public company. 22 Table of Contents Risks Related to International Aspects of Our Business If any PRC central government authority were to determine that existing PRC laws or regulations require that ACM Shanghai obtain the authority’s permission or approval to continue the listing of ACM Research’s Class A common stock in the United States or if those existing PRC laws and regulations, or interpretations thereof, were to change to require such permission or approval, or if we inadvertently conclude that permissions or approvals are not required, ACM Shanghai may be unable to obtain the required permission or approval or may only be able to obtain such permission or approval on terms and conditions that impose material new restrictions and limitations on operation of ACM Shanghai, either of which could have a material adverse effect on our business, financial condition, results of operations, reputation and prospects and on the trading price of ACM Research Class A common stock, which could decline in value or become worthless.
Biggest changeExport Administration Regulations (EAR), or controls introduced by other countries including Japan and the Netherlands, thereby impacting our ability to sell our tools to customers in these jurisdictions; • changes in government trade policies that could limit the demand for our tools and increase the cost of our tools; • changes in political and economic policies with respect to mainland China; • mainland China’s currency exchange control and government restrictions on investment repatriation may impact our ability to transfer funds outside of mainland China; Risks Related to Our STAR Listing • our ability to implement our strategy to expand our mainland China operations; • our ability to achieve the results contemplated by our business strategy and our strategy for growth in mainland China and expectations related to the STAR Listing; • the effect of ACM Shanghai’s status as a publicly traded company that is controlled, but less than wholly owned, by ACM Research; • our ability to manage potentially inconsistent accounting and disclosure requirements of ACM Research and ACM Shanghai as a result of the STAR Listing; Risks Related to Our Intellectual Property and Data Security • our ability to protect our intellectual property, including in mainland China; • breaches of our cybersecurity systems; Risks Related to Ownership of Class A Common Stock • the volatility in the market price of Class A common stock; • manipulative short sellers of our stock, which may drive down the market price of our Class A common stock and could result in litigation; • the difficulty to predict the effect of the STAR Listing and STAR IPO on the Class A common stock; • the dual class structure of common stock, which has the effect of concentrating voting control with our executive officers and directors; and • the limited experience of our management team managing a public company. 20 Table of Contents Risks Related to International Aspects of Our Business If any mainland China central government authority were to determine that existing mainland China laws or regulations require that ACM Shanghai obtain the authority’s permission or approval to continue the listing of ACM Research’s Class A common stock in the United States or if those existing mainland China laws and regulations, or interpretations thereof, were to change to require such permission or approval, or if we inadvertently conclude that permissions or approvals are not required, ACM Shanghai may be unable to obtain the required permission or approval or may only be able to obtain such permission or approval on terms and conditions that impose material new restrictions and limitations on operation of ACM Shanghai, either of which could have a material adverse effect on our business, financial condition, results of operations, reputation and prospects and on the trading price of ACM Research Class A common stock, which could decline in value or become worthless.
As a result of any of the foregoing events, the imposition of new or additional tariffs may limit our ability to manufacture tools, increase our selling and/or manufacturing costs, decrease margins, or inhibit our ability to sell tools or to purchase necessary equipment and supplies, which could have a material adverse effect on our business, results of operations, or financial condition.
As a result of any of the foregoing events, the imposition of new or additional tariffs may limit our ability to manufacture tools, increase our selling and/or manufacturing costs, decrease margins, or inhibit our ability to sell tools or to purchase necessary equipment and supplies, which could have a material adverse effect on our business, results of operations, or financial condition.
We are subject to a number of risks associated with our international business activities, including: 28 Table of Contents • imposition of, or adverse changes in, foreign laws or regulatory requirements, such as work stoppages and travel restrictions imposed in connection with the COVID-19 pandemic; • the need to comply with the import laws and regulations of various foreign jurisdictions, including a range of U.S. import laws; • potentially adverse tax consequences, including withholding tax rules that may limit the repatriation of our earnings, and higher effective income tax rates in foreign countries where we conduct business; • competition from local suppliers with which potential customers may prefer to do business; • seasonal reduction in business activity, such as during the Lunar New Year in parts of Asia and in other periods in various individual countries; • increased exposure to foreign currency exchange rates; • reduced protection for intellectual property; • longer sales cycles and reliance on indirect sales in certain regions; • increased length of time for shipping and acceptance of our products; • greater difficulty in responding to customer requests for maintenance and spare parts on a timely basis; • greater difficulty in enforcing contracts and accounts receivable collection and longer collection periods; • difficulties in staffing and managing foreign operations and the increased travel, infrastructure and legal and compliance costs associated with multiple international locations; • heightened risk of unfair or corrupt business practices in certain geographies and of improper or fraudulent sales arrangements that may impact financial results and result in restatements of, or irregularities in, our consolidated financial statements; and • general economic conditions, geopolitical events or natural disasters in countries where we conduct our operations or where our customers are located, including political unrest, war, acts of terrorism or responses to such events.
We are subject to a number of risks associated with our international business activities, including: • imposition of, or adverse changes in, foreign laws or regulatory requirements, such as work stoppages and travel restrictions imposed in connection with the COVID-19 pandemic; • the need to comply with the import laws and regulations of various foreign jurisdictions, including a range of U.S. import laws; • potentially adverse tax consequences, including withholding tax rules that may limit the repatriation of our earnings, and higher effective income tax rates in foreign countries where we conduct business; • competition from local suppliers with which potential customers may prefer to do business; • seasonal reduction in business activity, such as during the Lunar New Year in parts of Asia and in other periods in various individual countries; 26 Table of Contents • increased exposure to foreign currency exchange rates; • reduced protection for intellectual property; • longer sales cycles and reliance on indirect sales in certain regions; • increased length of time for shipping and acceptance of our products; • greater difficulty in responding to customer requests for maintenance and spare parts on a timely basis; • greater difficulty in enforcing contracts and accounts receivable collection and longer collection periods; • difficulties in staffing and managing foreign operations and the increased travel, infrastructure and legal and compliance costs associated with multiple international locations; • heightened risk of unfair or corrupt business practices in certain geographies and of improper or fraudulent sales arrangements that may impact financial results and result in restatements of, or irregularities in, our consolidated financial statements; and • general economic conditions, geopolitical events or natural disasters in countries where we conduct our operations or where our customers are located, including political unrest, war, acts of terrorism or responses to such events.
Our financial results in any given quarter can be influenced by a variety of factors, including: • the cyclicality of the semiconductor industry and the related impact on the purchase of equipment used in the manufacture of chips; • the timing of purchases of our tools by chip fabricators, which order types of tools based on multi-year capital plans under which the number and dollar amount of tool purchases can vary significantly from year to year; • the relatively high average selling price of our tools and our dependence on a limited number of customers for a substantial portion of our revenue in any period, whereby the timing and volume of purchase orders or cancellations from our customers could significantly reduce our revenue for that period; • the significant expenditures required to customize our products often exceed the deposits received from our customers; • the lead time required to manufacture our tools; • the timing of recognizing revenue due to the timing of shipment and acceptance of our tools; • our ability to sell additional tools to existing customers; • the changes in customer specifications or requirements; • the length of our product sales cycle; • changes in our product mix, including the mix of systems, upgrades, spare parts and service; • the timing of our product releases or upgrades or announcements of product releases or upgrades by us or our competitors, including changes in customer orders in anticipation of new products or product enhancements; • our ability to enhance our tools with new and better functionality that meet customer requirements and changing industry trends; • constraints on our suppliers’ capacity; • our ability to sell our tools to Chinese customers due to regulatory restrictions, including the addition of our customers to the Entity List; • the ability of other suppliers to provide sufficient quantities of their tools to our Chinese customers which may indirectly impact the production plans of our customers and result in a reduction of demand for our tools; • the timing of investments in research and development related to releasing new applications of our technologies and new products; • delays in the development and manufacture of our new products and upgraded versions of our products and the market acceptance of these products when introduced; • our ability to control costs, including operating expenses and the costs of the components and subassemblies used in our products; • the costs related to the acquisition and integration of product lines, technologies or businesses; and • the costs associated with protecting our intellectual property, including defending our intellectual property against third-party claims or litigation.
Our financial results in any given quarter can be influenced by a variety of factors, including: • the cyclicality of the semiconductor industry and the related impact on the purchase of equipment used in the manufacture of chips; • the timing of purchases of our tools by chip fabricators, which order types of tools based on multi-year capital plans under which the number and dollar amount of tool purchases can vary significantly from year to year; • the relatively high average selling price of our tools and our dependence on a limited number of customers for a substantial portion of our revenue in any period, whereby the timing and volume of purchase orders or cancellations from our customers could significantly reduce our revenue for that period; • the significant expenditures required to customize our products often exceed the deposits received from our customers; • the lead time required to manufacture our tools; 28 Table of Contents • the timing of recognizing revenue due to the timing of shipment and acceptance of our tools; • our ability to sell additional tools to existing customers; • the changes in customer specifications or requirements; • the length of our product sales cycle; • changes in our product mix, including the mix of systems, upgrades, spare parts and service; • the timing of our product releases or upgrades or announcements of product releases or upgrades by us or our competitors, including changes in customer orders in anticipation of new products or product enhancements; • our ability to enhance our tools with new and better functionality that meet customer requirements and changing industry trends; • constraints on our suppliers’ capacity; • our ability to sell our tools to Chinese customers due to regulatory restrictions, including the addition of our customers to the Entity List; • the ability of other suppliers to provide sufficient quantities of their tools to our Chinese customers which may indirectly impact the production plans of our customers and result in a reduction of demand for our tools; • the timing of investments in research and development related to releasing new applications of our technologies and new products; • delays in the development and manufacture of our new products and upgraded versions of our products and the market acceptance of these products when introduced; • our ability to control costs, including operating expenses and the costs of the components and subassemblies used in our products; • the costs related to the acquisition and integration of product lines, technologies or businesses; and • the costs associated with protecting our intellectual property, including defending our intellectual property against third-party claims or litigation.
If we are not able to compete successfully against existing or new competitors, our business, operating results and financial condition will be negatively affected. Our customers do not enter into long-term purchase commitments, and they may decrease, cancel or delay their projected purchases at any time.
If we are not able to compete successfully against existing or new competitors, our business, operating results and financial condition will be negatively affected. Our customers do not generally enter into long-term purchase commitments, and they may decrease, cancel or delay their projected purchases at any time.
Any potential intellectual property claims or litigation commenced against us could: • be time consuming and expensive to defend, whether or not meritorious; 49 Table of Contents • force us to stop selling products or using technology that allegedly infringes the third party’s intellectual property rights; • delay shipments of our products; • require us to pay damages or settlement fees to the party claiming infringement; • require us to attempt to obtain a license to the relevant intellectual property, which may not be available on reasonable terms or at all; • force us to attempt to redesign products that contain the allegedly infringing technology, which could be expensive or which we may be unable to do; • require us to indemnify our customers, suppliers or other third parties for any loss caused by their use of our technology that allegedly infringes the third party’s intellectual property rights; or • divert the attention of our technical and managerial resources.
Any potential intellectual property claims or litigation commenced against us could: • be time consuming and expensive to defend, whether or not meritorious; • force us to stop selling products or using technology that allegedly infringes the third party’s intellectual property rights; • delay shipments of our products; • require us to pay damages or settlement fees to the party claiming infringement; • require us to attempt to obtain a license to the relevant intellectual property, which may not be available on reasonable terms or at all; 46 Table of Contents • force us to attempt to redesign products that contain the allegedly infringing technology, which could be expensive or which we may be unable to do; • require us to indemnify our customers, suppliers or other third parties for any loss caused by their use of our technology that allegedly infringes the third party’s intellectual property rights; or • divert the attention of our technical and managerial resources.
In addition, supply chain constraints have intensified due to a variety of factors, including the ongoing COVID-19 pandemic and the June 2022 truck driver strike in South Korea, where certain of our operations and customers are located.
In addition, supply chain constraints have intensified due to a variety of factors, including the ongoing COVID-19 pandemic and the June 2022 truck driver strike in Korea, where certain of our operations and customers are located.
Any systemic economic or financial crisis could cause revenues for the semiconductor industry as a whole to decline dramatically, which could materially and adversely affect our results of operations. 29 Table of Contents Risks Related to Our Business and Our Industry We may require additional capital in the future and we cannot give any assurance that such capital will be available at all or available on terms acceptable to us and, if it is available, additional capital raised by us may dilute holders of Class A common stock.
Any systemic economic or financial crisis could cause revenues for the semiconductor industry as a whole to decline dramatically, which could materially and adversely affect our results of operations. 27 Table of Contents Risks Related to Our Business and Our Industry We may require additional capital in the future and we cannot give any assurance that such capital will be available at all or available on terms acceptable to us and, if it is available, additional capital raised by us may dilute holders of Class A common stock.
Certain implementation matters related to the scope of, and compliance with, the Order have not yet been resolved, and the ultimate application and enforcement of the Order may change due to, among other things, the change in the U.S. Presidential administration.
Certain implementation matters related to the scope of, and compliance with, the Order have not yet been resolved, and the ultimate application and enforcement of the Order may change due to, among other things, a change in the U.S. Presidential administration.
Although our financial statements are denominated in U.S. dollars, a sizable portion of our costs are denominated in other currencies, principally the Chinese Renminbi and, to a lesser extent, the South Korean Won.
Although our financial statements are denominated in U.S. dollars, a sizable portion of our costs are denominated in other currencies, principally the Chinese Renminbi and, to a lesser extent, the Korean Won.
Moreover, our customers source a range of production equipment, supplies and services from other suppliers with operations around the world, and any reduction in supply capacity at those customers’ factories may reduce or even halt those customers’ production and result in a decrease in the demand for our products. 38 Table of Contents Any shortage of components or subassemblies could result in delayed delivery of products to us or in increased costs to us, which could harm our business.
Moreover, our customers source a range of production equipment, supplies and services from other suppliers with operations around the world, and any reduction in supply capacity at those customers’ factories may reduce or even halt those customers’ production and result in a decrease in the demand for our products. 35 Table of Contents Any shortage of components or subassemblies could result in delayed delivery of products to us or in increased costs to us, which could harm our business.
Legislative and regulatory changes, including changes to agency practice, in the future may negatively impact our ability to realize value from certain existing and future investments, including by limiting exit opportunities or causing us to favor buyers that we believe are less likely to require CFIUS review, even in circumstances where other buyers may offer better terms or more consideration. 45 Table of Contents The U.S.
Legislative and regulatory changes, including changes to agency practice, in the future may negatively impact our ability to realize value from certain existing and future investments, including by limiting exit opportunities or causing us to favor buyers that we believe are less likely to require CFIUS review, even in circumstances where other buyers may offer better terms or more consideration. 42 Table of Contents The U.S.
In such an event, competitors might be able to enter the market earlier than would otherwise have been the case. • Patent applications may not result in any patents being issued. • Patents that may be issued may be challenged, invalidated, modified, revoked, circumvented, found to be unenforceable or otherwise may not provide any competitive advantage. • Our competitors may seek or may have already obtained patents that will limit, interfere with, or eliminate our ability to make, use and sell our potential product candidates. • The PRC and other countries other than the United States may have patent laws less favorable to patentees than those upheld by U.S. courts, allowing foreign competitors a better opportunity to create, develop and market competing product candidates.
In such an event, competitors might be able to enter the market earlier than would otherwise have been the case. • Patent applications may not result in any patents being issued. • Patents that may be issued may be challenged, invalidated, modified, revoked, circumvented, found to be unenforceable or otherwise may not provide any competitive advantage. • Our competitors may seek or may have already obtained patents that will limit, interfere with, or eliminate our ability to make, use and sell our potential product candidates. • Mainland China and other countries other than the United States may have patent laws less favorable to patentees than those upheld by U.S. courts, allowing foreign competitors a better opportunity to create, develop and market competing product candidates.
See also “— If any PRC central government authority were to determine that existing PRC laws or regulations require that ACM Shanghai obtain the authority’s permission or approval to continue the listing of ACM Research’s Class A common stock in the United States or if those existing PRC laws and regulations, or interpretations thereof, were to change to require such permission or approval, ACM Shanghai may be unable to obtain the required permission or approval or may only be able to obtain such permission or approval on terms and conditions that impose material new restrictions and limitations on operation of ACM Shanghai, either of which could have a material adverse effect on our business, financial condition, results of operations, reputation and prospects and on the trading price of ACM Research Class A common stock, which could decline in value or become worthless ” above.
See also “— If any mainland China central government authority were to determine that existing mainland China laws or regulations require that ACM Shanghai obtain the authority’s permission or approval to continue the listing of ACM Research’s Class A common stock in the United States or if those existing mainland China laws and regulations, or interpretations thereof, were to change to require such permission or approval, ACM Shanghai may be unable to obtain the required permission or approval or may only be able to obtain such permission or approval on terms and conditions that impose material new restrictions and limitations on operation of ACM Shanghai, either of which could have a material adverse effect on our business, financial condition, results of operations, reputation and prospects and on the trading price of ACM Research Class A common stock, which could decline in value or become worthless ” above.
We do not believe that our corporate structure or any other matters relating to our business operations currently require that ACM Shanghai obtain any permissions or approvals from the China Securities Regulatory Commission, or CSRC, or any other PRC central government authority in connection with ACM’s listing, or offering for sale in the future, shares of our Class A common stock in the United States.
We do not believe that our corporate structure or any other matters relating to our business operations currently require that ACM Shanghai obtain any permissions or approvals from the China Securities Regulatory Commission, or CSRC, or any other mainland China central government authority in connection with ACM’s listing, or offering for sale in the future, shares of our Class A common stock in the United States.
In the event that we inadvertently conclude that permissions or approvals are not required, or either the CSRC or another PRC central government authority were to determine that existing PRC laws or regulations require that ACM Shanghai obtain the authority’s permission or approval to continue ACM Research’s listing of Class A common stock in the United States or if those existing PRC laws and regulations, or interpretations thereof, were to change to require such permission or approval, ACM Shanghai could be unable to obtain any such permission or approval or could be able to obtain such permission or approval only on terms and conditions that impose material new operating or other restrictions and limitations on ACM Shanghai.
In the event that we inadvertently conclude that permissions or approvals are not required, or either the CSRC or another mainland China central government authority were to determine that existing mainland China laws or regulations require that ACM Shanghai obtain the authority’s permission or approval to continue ACM Research’s listing of Class A common stock in the United States or if those existing mainland China laws and regulations, or interpretations thereof, were to change to require such permission or approval, ACM Shanghai could be unable to obtain any such permission or approval or could be able to obtain such permission or approval only on terms and conditions that impose material new operating or other restrictions and limitations on ACM Shanghai.
If the CAC or other PRC central government authorities should in the future require ACM Shanghai to comply with these or additional, or more restrictive, PRC cybersecurity regulations, it could require ACM Shanghai to make changes to its operations, and any failure to satisfy or delay in meeting such requirements may subject ACM Shanghai to restrictions and penalties imposed by the CAC or other PRC regulatory authorities, which may include regulatory actions, fines and penalties on our operations in the PRC, which could materially harm our business, financial condition, results of operations, reputation and prospects. • Anti-Monopoly .
If the CAC or other mainland China central government authorities should in the future require ACM Shanghai to comply with these or additional, or more restrictive, mainland China cybersecurity regulations, it could require ACM Shanghai to make changes to its operations, and any failure to satisfy or delay in meeting such requirements may subject ACM Shanghai to restrictions and penalties imposed by the CAC or other mainland China regulatory authorities, which may include regulatory actions, fines and penalties on our operations in mainland China, which could materially harm our business, financial condition, results of operations, reputation and prospects. • Anti-Monopoly .
Our charter provides that the Court of Chancery of the State of Delaware will, to the fullest extent permitted by law, be the sole and exclusive forum for: • any derivative action or proceeding brought on our behalf; • any action asserting a claim of breach of a fiduciary duty owed to us, our stockholders, creditors or other constituents by any of our directors, officers, other employees, agents or stockholders; • any action asserting a claim arising under the Delaware General Corporation Law, our charter or bylaws, or as to which the Delaware General Corporation Law confers jurisdiction on the Court of Chancery of the State of Delaware; or • any action asserting a claim that is governed by the internal affairs doctrine.
Our charter provides that the Court of Chancery of the State of Delaware will, to the fullest extent permitted by law, be the sole and exclusive forum for: • any derivative action or proceeding brought on our behalf; 49 Table of Contents • any action asserting a claim of breach of a fiduciary duty owed to us, our stockholders, creditors or other constituents by any of our directors, officers, other employees, agents or stockholders; • any action asserting a claim arising under the Delaware General Corporation Law, our charter or bylaws, or as to which the Delaware General Corporation Law confers jurisdiction on the Court of Chancery of the State of Delaware; or • any action asserting a claim that is governed by the internal affairs doctrine.
The HFCA Act also requires that, to the extent that the PCAOB has been unable to inspect an issuer’s auditor for two consecutive years, the SEC shall prohibit the issuer’s securities registered in the United States from being traded on any national securities exchange or over-the-counter market in the United States. 26 Table of Contents • On March 24, 2021, the SEC adopted interim final amendments to implement congressionally mandated submission and disclosure required of the HFCA Act, and on December 2, 2021, the SEC adopted final amendments to finalize rules implementing the submission and disclosures in the HFCA Act.
The HFCA Act also requires that, to the extent that the PCAOB has been unable to inspect an issuer’s auditor for two consecutive years, the SEC shall prohibit the issuer’s securities registered in the United States from being traded on any national securities exchange or over-the-counter market in the United States. • On March 24, 2021, the SEC adopted interim final amendments to implement congressionally mandated submission and disclosure required of the HFCA Act, and on December 2, 2021, the SEC adopted final amendments to finalize rules implementing the submission and disclosures in the HFCA Act.
Financial and other markets in the United States and worldwide have experienced significant volatility reflecting uncertainty over, among other things, (a) the long-term effects of the expansionary monetary and fiscal policies adopted by the central banks and financial authorities of some of the world’s leading economies, including the United States and the PRC, (b) unrest in Ukraine, the Middle East and Africa, and (c) the rising level of inflation in major industrial countries, including the United States, and worries that efforts to curb inflation may result in an economic recession.
Financial and other markets in the United States and worldwide have experienced significant volatility reflecting uncertainty over, among other things, (a) the long-term effects of the expansionary monetary and fiscal policies adopted by the central banks and financial authorities of some of the world’s leading economies, including the United States and mainland China, (b) unrest in Ukraine, the Middle East and Africa, and (c) the rising level of inflation in major industrial countries, including the United States, and worries that efforts to curb inflation may result in an economic recession.
Alongside these new restrictions, BIS has also continued to designate additional PRC entities, many involved in the semiconductor manufacturing industry, on restricted party lists under the EAR, such as the Entity List and the Unverified List. These designations impose licensing requirements for the supply of products to such entities.
Alongside these new restrictions, BIS has also continued to designate additional China entities, many involved in the semiconductor manufacturing industry, on restricted party lists under the EAR, such as the Entity List and the Unverified List. These designations impose licensing requirements for the supply of products to such entities.
Risks Related to International Aspects of Our Business • if any PRC central government authority were to determine that existing PRC laws or regulations require that ACM Shanghai obtain the authority’s permission or approval to continue the listing of ACM Research’s Class A common stock in the United States or if those existing PRC laws and regulations, or interpretations thereof, were to change to require such permission or approval, or if we inadvertently conclude that permissions or approvals are not required, ACM Shanghai may be unable to obtain the required permission or approval or may only be able to obtain such permission or approval on terms and conditions that impose material new restrictions and limitations on operation of ACM Shanghai, either of which could have a material adverse effect on our business, financial condition, results of operations, reputation and prospects and on the trading price of ACM Research Class A common stock, which could decline in value or become worthless; • PRC central government authorities may intervene in, or influence, ACM Shanghai’s PRC-based operations at any time, and those authorities’ rules and regulations in the PRC can change quickly with little or no advance notice; • the PRC central government may determine to exert additional control over offerings conducted overseas or foreign investment in PRC-based issuers, which could result in a material change in operations of ACM Shanghai and cause significant declines in the value of ACM Research Class A common stock, or make them worthless; • if we are unable to comply with recent and proposed legislation and regulations regarding improved access to audit and other information and audit inspections of accounting firms, including registered public accounting firms, such as our prior audit firm, operating in the PRC, we could be adversely affected; • it may be difficult for overseas regulators to conduct investigations or collect evidence within the PRC; • certain of our assets are located outside of the United States and certain of our directors and officers reside outside of the United States, which may make it difficult for you to enforce your rights based on the U.S. federal securities laws; Risks Related to Our Business and Our Industry • our potential future needs for additional capital that may not be available at all or on terms acceptable to us; • the cyclicality in the semiconductor industry that may lead to substantial variations in demand for our products; • our dependence on a small number of customers for a substantial portion of our revenue; • industry manufacturers of chips adopting our SAPS, TEBO, Tahoe, ECP, furnace and other technologies; • our SAPS, TEBO, Tahoe, ECP, furnace and other technologies not achieving widespread market acceptance; • our ability to continue to enhance our existing single-wafer wet cleaning tools and identifying and entering new product markets; • our ability to establish and maintain a reputation for credibility and product quality; 21 Table of Contents • our ability to expand our customer base; • our long and unpredictable sales cycle, including our incurrence of significant expenses long before we can recognize revenue from new products, if at all; • difficulties in forecasting demand for our tools; • our reliance on third parties to manufacture significant portions of our tools and our ability to manage our relationships with these parties; • any shortage of components or subassemblies, which could result in delayed delivery of products to us or in increased costs to us; • our dependence on a limited number of suppliers, including single source suppliers, for critical components and subassemblies; • our dependence on our Chief Executive Officer and President and other senior management and key employees; Regulatory Risks • regulatory actions limiting our ability and the broader industry to import into the PRC items sourced from the U.S. or otherwise subject to control under the U.S.
Risks Related to International Aspects of Our Business • if any mainland China central government authority were to determine that existing mainland China laws or regulations require that ACM Shanghai obtain the authority’s permission or approval to continue the listing of ACM Research’s Class A common stock in the United States or if those existing mainland China laws and regulations, or interpretations thereof, were to change to require such permission or approval, or if we inadvertently conclude that permissions or approvals are not required, ACM Shanghai may be unable to obtain the required permission or approval or may only be able to obtain such permission or approval on terms and conditions that impose material new restrictions and limitations on operation of ACM Shanghai, either of which could have a material adverse effect on our business, financial condition, results of operations, reputation and prospects and on the trading price of ACM Research Class A common stock, which could decline in value or become worthless; • mainland China central government authorities may intervene in, or influence, ACM Shanghai’s mainland China-based operations at any time, and those authorities’ rules and regulations in mainland China can change quickly with little or no advance notice; • the mainland China central government may determine to exert additional control over offerings conducted overseas or foreign investment in mainland China-based issuers, which could result in a material change in operations of ACM Shanghai and cause significant declines in the value of ACM Research Class A common stock, or make them worthless; • if we are unable to comply with recent and proposed legislation and regulations regarding improved access to audit and other information and audit inspections of accounting firms, including registered public accounting firms, such as our prior and current audit firms, operating in mainland China, we could be adversely affected; 19 Table of Contents • it may be difficult for overseas regulators to conduct investigations or collect evidence within mainland China; • substantially all of our assets are located outside of the United States and certain of our directors and officers reside outside of the United States, which may make it difficult for you to enforce your rights based on the U.S. federal securities laws; Risks Related to Our Business and Our Industry • our potential future needs for additional capital that may not be available at all or on terms acceptable to us; • the cyclicality in the semiconductor industry that may lead to substantial variations in demand for our products; • our dependence on a small number of customers for a substantial portion of our revenue; • industry manufacturers of chips adopting our SAPS, TEBO, Tahoe, ECP, furnace and other technologies; • our SAPS, TEBO, Tahoe, ECP, furnace and other technologies not achieving widespread market acceptance; • our ability to continue to enhance our existing single-wafer wet cleaning tools and identifying and entering new product markets; • our ability to establish and maintain a reputation for credibility and product quality; • our ability to expand our customer base; • our long and unpredictable sales cycle, including our incurrence of significant expenses long before we can recognize revenue from new products, if at all; • difficulties in forecasting demand for our tools; • our reliance on third parties to manufacture significant portions of our tools and our ability to manage our relationships with these parties; • any shortage of components or subassemblies, which could result in delayed delivery of products to us or in increased costs to us; • our dependence on a limited number of suppliers, including single source suppliers, for critical components and subassemblies; • our dependence on our Chief Executive Officer and President and other senior management and key employees; Regulatory Risks • regulatory actions limiting our ability and the broader industry's ability to export into China, as well as other specified countries, items sourced from the U.S. or otherwise subject to control under the U.S.
Many of our current and potential competitors have, among other things: • greater financial, technical, sales and marketing, manufacturing, distribution and other resources; 34 Table of Contents • established credibility and market reputations; • longer operating histories; • broader product offerings; • more extensive service offerings, including the ability to have large inventories of spare parts available near, or even at, customer locations; • local sales forces; and • more extensive geographic coverage.
Many of our current and potential competitors have, among other things: • greater financial, technical, sales and marketing, manufacturing, distribution and other resources; • established credibility and market reputations; • longer operating histories; • broader product offerings; • more extensive service offerings, including the ability to have large inventories of spare parts available near, or even at, customer locations; • local sales forces; and • more extensive geographic coverage.
In addition, the SOP allows the PCAOB to interview and take testimony of personnel associated with the audits that the PCAOB inspects or investigates. • On December 15, 2022, the PCAOB announced that it was able to secure complete access to inspect and investigate PCAOB-registered public accounting firms headquartered in the PRC and Hong Kong in 2022 and vacated its previous December 16, 2021 determination to the contrary.
In addition, the SOP allows the PCAOB to interview and take testimony of personnel associated with the audits that the PCAOB inspects or investigates. • On December 15, 2022, the PCAOB announced that it was able to secure complete access to inspect and investigate PCAOB-registered public accounting firms headquartered in mainland China and Hong Kong in 2022 and vacated its previous December 16, 2021 determination to the contrary.
If the PRC authorities do not allow the PCAOB complete access for inspections and investigations for two consecutive years, the SEC would prohibit trading in the securities of issuers engaging those audit firms, as required under the HFCA Act. • On December 29, 2022, the Consolidated Appropriations Act, 2023, was signed into law by U.S.
If mainland China authorities do not allow the PCAOB complete access for inspections and investigations for two consecutive years, the SEC would prohibit trading in the securities of issuers engaging those audit firms, as required under the HFCA Act. • On December 29, 2022, the Consolidated Appropriations Act, 2023, was signed into law by U.S.
Product development requires significant investments in engineering hours, third-party development costs, prototypes and sample materials, as well as sales and marketing expenses, which will not be recouped if the product launch is unsuccessful. We may fail to predict the needs of other markets accurately or develop new, innovative technologies to address those needs.
Product development requires 31 Table of Contents significant investments in engineering hours, third-party development costs, prototypes and sample materials, as well as sales and marketing expenses, which will not be recouped if the product launch is unsuccessful. We may fail to predict the needs of other markets accurately or develop new, innovative technologies to address those needs.
As it is in the short seller’s interest for the price of the stock to decline, some short sellers publish, or arrange for the publication of, opinions or characterizations regarding the relevant issuer, its business prospects and similar matters calculated to or which may create negative market momentum, which may permit them to obtain profits for themselves as a result of selling the securities short.
As it is in the short seller’s interest for the price of the stock to decline, some short sellers publish, or arrange for the publication of, opinions or characterizations regarding the relevant issuer, its business prospects and similar matters calculated to or which may create 50 Table of Contents negative market momentum, which may permit them to obtain profits for themselves as a result of selling the securities short.
These laws and regulations, which include the Anti-Monopoly Law and the Rules of the Ministry of Commerce on Implementation of Security Review System of Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, impose requirements that in some instances that MOFCOM be notified in advance of, for example, any change-of-control transaction in which a foreign investor takes control of a PRC domestic enterprise.
These laws and regulations, which include the Anti-Monopoly Law and the Rules of the Ministry of Commerce on Implementation of Security Review System of Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, impose requirements that in some instances that MOFCOM be notified in advance of, for example, any change-of-control transaction in which a foreign investor takes control of a mainland China domestic enterprise.
Any such identified registrant will be required to submit documentation to the SEC establishing that it is not owned or controlled by a governmental entity in that foreign jurisdiction and will also require disclosure in the registrant’s annual report regarding the audit arrangements of, and governmental influence on, such a registrant. • Furthermore, on June 22, 2021, the U.S.
Any such identified registrant will be required to submit documentation to the SEC establishing that it is not owned or controlled by a governmental entity in that foreign jurisdiction and will also require disclosure in the registrant’s annual report regarding the audit arrangements of, and governmental influence on, such a registrant. 24 Table of Contents • Furthermore, on June 22, 2021, the U.S.
In addition, the PRC government continues to play a significant role in regulating industry development by imposing industrial policies. The PRC government also exercises significant control over economic growth in the PRC by allocating resources, controlling payment of foreign currency-denominated obligations, setting monetary policy, regulating financial services and institutions, and providing preferential treatment to particular industries or companies.
In addition, the mainland China government continues to play a significant role in regulating industry development by imposing industrial policies. The mainland China government also exercises significant control over economic growth in mainland China by allocating resources, controlling payment of foreign currency-denominated obligations, setting monetary policy, regulating financial services and institutions, and providing preferential treatment to particular industries or companies.
In the event PRC central government authorities were to significantly revise or revamp the current scope and structure of intellectual property protection in the PRC, our ability to protect and enforce our intellectual property rights for our key proprietary technologies may be adversely impacted and competitors may be able to match our technologies and tools in order to compete with us. • Title Defect in Leased Premises .
In the event mainland China central government authorities were to significantly revise or revamp the current scope and structure of intellectual property protection in mainland China, our ability to protect and enforce our intellectual property rights for our key proprietary technologies may be adversely impacted and competitors may be able to match our technologies and tools in order to compete with us. • Title Defect in Leased Premises .
As we expand our global operations through operating subsidiaries outside of the PRC, those operating subsidiaries may need to license intellectual property from ACM Shanghai in order to operate, and there can be no assurance that conflicts of interest will not preclude those operating subsidiaries from licensing the required intellectual property from ACM Shanghai on reasonable terms or at all.
As we expand our global operations through operating subsidiaries outside of mainland China, those operating subsidiaries may need to license intellectual property from ACM Shanghai in order to operate, and there can be no assurance that conflicts of interest will not preclude those operating subsidiaries from licensing the required intellectual property from ACM Shanghai on reasonable terms or at all.
The timing of new product releases also has an impact on seasonality, with the acquisition of manufacturing equipment occurring six to nine months before a new release. 31 Table of Contents Many of these factors are beyond our control, and the occurrence of one or more of them could cause our operating results to vary widely.
The timing of new product releases also has an impact on seasonality, with the acquisition of manufacturing equipment occurring six to nine months before a new release. Many of these factors are beyond our control, and the occurrence of one or more of them could cause our operating results to vary widely.
We believe that as a result of the new restrictions, several ACM Shanghai customers have significantly reduced production and related capital spending at facilities meeting the restricted advanced node capabilities. In addition, ACM Shanghai has experienced challenges as the companies in its supply chain adapt their policies to the new regulations.
We believe that as a result of the October 2022 and October 2023 restrictions, several ACM Shanghai customers have significantly reduced production and related capital spending at facilities meeting the restricted advanced node capabilities. In addition, ACM Shanghai has experienced challenges as the companies in its supply chain adapt their policies to the new regulations.
Some of these measures may benefit the overall PRC economy, but may also have a negative effect on us. Our financial condition and results of operation could be materially and adversely affected by government control over capital investments or changes in tax regulations that are applicable to us.
Some of these measures may benefit the overall mainland China economy, but may also have a negative effect on us. Our financial condition and results of operation could be materially and adversely affected by government control over capital investments or changes in tax regulations that are applicable to us.
The PRC central government may determine to exert additional control over securities offerings conducted overseas and/or foreign investment in PRC-based issuers, which could result in a material adverse change in operations of ACM Shanghai and cause the value of ACM Research Class A common stock to significantly decline or become worthless.
The mainland China central government may determine to exert additional control over securities offerings conducted overseas and/or foreign investment in mainland China-based issuers, which could result in a material adverse change in operations of ACM Shanghai and cause the value of ACM Research Class A common stock to significantly decline or become worthless.
In December 2020, SMIC, one of the largest chip manufacturers in the PRC and one of our key customers, was one of numerous entities added to the Entity List. Challenges faced by SMIC and its key suppliers as a result of the listing have indirectly impacted SMIC’s demand for, and ACM Shanghai’s ability to supply, ACM Shanghai products.
In December 2020, SMIC, one of the largest chip manufacturers in mainland China and one of our key customers, was one of numerous entities added to the Entity List. Challenges faced by SMIC and its key suppliers as a result of the listing have indirectly impacted SMIC’s demand for, and ACM Shanghai’s ability to supply, ACM Shanghai products.
Even though substantially all of the operations of ACM Research are currently conducted through ACM Shanghai, the information disclosed by the two companies will differ, and may differ materially from time to time, due to the distinct, and potentially inconsistent, accounting standards applicable to the two companies and disclosure requirements imposed by securities regulatory authorities, as well as differences in language, culture and expression habit, in composition of investors in the United States and PRC, and in the capital markets of the United States and the PRC. 47 Table of Contents Differing disclosures could lead to confusion or uncertainty among investors in the publicly traded shares of one or both companies.
Even though substantially all of the operations of ACM Research are currently conducted through ACM Shanghai, the information disclosed by the two companies will differ, and may differ materially from time to time, due to the distinct, and potentially inconsistent, accounting standards applicable to the two companies and disclosure requirements imposed by securities regulatory authorities, as well as differences in language, culture and expression habit, in composition of investors in the United States and mainland China, and in the capital markets of the United States and mainland China. 44 Table of Contents Differing disclosures could lead to confusion or uncertainty among investors in the publicly traded shares of one or both companies.
We, including ACM Shanghai, therefore have never solicited any permission or approval from any PRC central government authority, and thus no such permissions or approvals have been received or denied, in connection with ACM Research’s seeking and maintaining the listing of our Class A common stock in the United States.
We, including ACM Shanghai, therefore have never solicited any permission or approval from any mainland China central government authority, and thus no such permissions or approvals have been received or denied, in connection with ACM Research’s seeking and maintaining the listing of our Class A common stock in the United States.
The PRC central government may determine to exert additional control over offerings conducted overseas or foreign investment in PRC-based issuers, which could result in a material change in operations of ACM Shanghai and cause significant declines in the value of ACM Research Class A common stock, or make them worthless.
The mainland China central government may determine to exert additional control over offerings conducted overseas or foreign investment in mainland China-based issuers, which could result in a material change in operations of ACM Shanghai and cause significant declines in the value of ACM Research Class A common stock, or make them worthless.
Under existing PRC laws and regulations, it may be difficult, if not impossible, for ACM Research to be able to receive dividends comprised of funds generated by ACM Shanghai and, even if such dividends can be paid from the PRC to the United States, any such dividends can be paid to ACM Research only if other holders of ACM Shanghai shares receive their pro rata dividends.
Under existing mainland China laws and regulations, it may be difficult, if not impossible, for ACM Research to be able to receive dividends comprised of funds generated by ACM Shanghai and, even if such dividends can be paid from mainland China to the United States, any such dividends can be paid to ACM Research only if other holders of ACM Shanghai shares receive their pro rata dividends.
In the past the PRC government has implemented measures to control the pace of economic growth, and similar measures in the future may cause decreased economic activity, which in turn could lead to a reduction in demand for our products and consequently have a material adverse effect on our businesses, financial condition and results of operations.
In the past the mainland China government has implemented measures to control the pace of economic growth, and similar measures in the future may cause decreased economic activity, which in turn could lead to a reduction in demand for our products and consequently have a material adverse effect on our businesses, financial condition and results of operations.
ACM Research is not a VIE or other special purpose, or shell, company, and its relationship with ACM Shanghai does not involve the types of contractual arrangements existing between a VIE and a PRC-based operating company. ACM Research is a Delaware corporation founded in California in 1998 that formed ACM Shanghai to conduct business operations in the PRC.
ACM Research is not a VIE or other special purpose, or shell, company, and its relationship with ACM Shanghai does not involve the types of contractual arrangements existing between a VIE and a mainland China-based operating company. ACM Research is a Delaware corporation founded in California in 1998 that formed ACM Shanghai to conduct business operations in mainland China.
While detailed interpretation of or implementing rules under Article 177 have yet to be promulgated, the inability for an overseas securities regulator to directly conduct investigation or evidence collection activities within the PRC may further increase difficulties faced by you in protecting your interests.
While detailed interpretation of or implementing rules under Article 177 have yet to be promulgated, the inability for an overseas securities regulator to directly conduct investigation or evidence collection activities within mainland China may further increase difficulties faced by you in protecting your interests.
We may also make investments in certain key suppliers to align our interests with such suppliers. If we seek acquisitions, we may not be able to identify suitable acquisition candidates at prices we consider appropriate. We cannot readily predict the timing or size of our future acquisitions, or the success of any future acquisitions.
We may also make investments in certain key suppliers to align our interests with such suppliers. If we seek acquisitions, we 37 Table of Contents may not be able to identify suitable acquisition candidates at prices we consider appropriate. We cannot readily predict the timing or size of our future acquisitions, or the success of any future acquisitions.
We generate substantially all of our revenue through ACM Shanghai, our PRC subsidiary. PRC statutory laws and regulations permit payments of dividends by ACM Shanghai only out of its retained earnings, which are determined in accordance with PRC accounting standards and regulations that differ from U.S. generally accepted accounting principles.
We generate substantially all of our revenue through ACM Shanghai, our mainland China subsidiary. Mainland China statutory laws and regulations permit payments of dividends by ACM Shanghai only out of its retained earnings, which are determined in accordance with mainland China accounting standards and regulations that differ from U.S. generally accepted accounting principles.
We believe we are one of the first publicly traded U.S. companies to complete an initial public offering of shares of a PRC subsidiary on the STAR Market. As a result, no assurance can be given regarding the effect of the STAR Listing and the STAR IPO on the market price of the Class A common stock.
We believe we are one of the first publicly traded U.S. companies to complete an initial public offering of shares of a mainland China subsidiary on the STAR Market. As a result, no assurance can be given regarding the effect of the STAR Listing and the STAR IPO on the market price of the Class A common stock.
The frequency and intensity of severe weather events are reportedly increasing throughout the world as part of broader climate changes. Global weather pattern changes may pose long-term risks of physical impacts to our business. A substantial majority of our facilities as well as our research and development personnel are located in the PRC.
The frequency and intensity of severe weather events are reportedly increasing throughout the world as part of broader climate changes. Global weather pattern changes may pose long-term risks of physical impacts to our business. A substantial majority of our facilities as well as our research and development personnel are located in mainland China.
It also remains unclear what further actions the SEC, the PCAOB or Nasdaq may take to address these issues and what impact those actions will have on U.S. companies, such as ours, that have significant operations in the PRC and have securities listed on a U.S. stock exchange.
It also remains unclear what further actions the SEC, the PCAOB or Nasdaq may take to address these issues and what impact those actions will have on U.S. companies, such as ours, that have significant operations in mainland China and have securities listed on a U.S. stock exchange.
Moreover, there is doubt whether courts in the PRC would enforce (a) judgments of United States courts against ACM Shanghai, our directors or officers based on the civil liability provisions of the securities laws of the United States or any state, or (b) in original actions brought in the PRC, liabilities against us or any nonresidents based upon the securities laws of the United States or any state.
Moreover, there is doubt whether courts in mainland China would enforce (a) judgments of United States courts against ACM Shanghai, our directors or officers based on the civil liability provisions of the securities laws of the United States or any state, or (b) in original actions brought in mainland China, liabilities against us or any nonresidents based upon the securities laws of the United States or any state.
Our supply chain may be materially adversely impacted due to global events, including continuing COVID‑19 outbreaks, transportation delays and the armed conflict in Ukraine. We rely upon the facilities of our global suppliers with operations in the PRC, Japan, Taiwan and the United States to support our business.
Our supply chain may be materially adversely impacted due to global events, including continuing COVID‑19 outbreaks, transportation delays and the armed conflict in Ukraine. We rely upon the facilities of our global suppliers with operations in mainland China, Japan, Taiwan and the United States to support our business.
PRC-based companies that seek to list their shares in the United States but are subject to PRC restrictions on investments by non-PRC investors sometimes use a special purpose vehicle known as a VIE created in an off-shore jurisdiction such as the Cayman Islands.
Mainland China-based companies that seek to list their shares in the United States but are subject to mainland China restrictions on investments by non-mainland China investors sometimes use a special purpose vehicle known as a VIE created in an off-shore jurisdiction such as the Cayman Islands.
See “—Risks Related to Our Intellectual Property and Data Security— We may not be able to protect our intellectual property rights throughout the world, including the PRC, which could materially, negatively affect our business ” in Item 1A, “Risk Factors” of Part I of this report.
See “—Risks Related to Our Intellectual Property and Data Security— We may not be able to protect our intellectual property rights throughout the world, including mainland China, which could materially, negatively affect our business ” in Item 1A, “Risk Factors” of Part I of this report.
Since 2018, general trade tensions between the United States and the PRC have escalated. See “—Regulatory Risks— Changes in government trade policies could limit the demand for our tools and increase the cost of our tools” in Item 1A, “Risk Factors” of Part I of this report.
Since 2018, general trade tensions between the United States and mainland China have escalated. See “—Regulatory Risks— Changes in government trade policies could limit the demand for our tools and increase the cost of our tools” in Item 1A, “Risk Factors” of Part I of this report.
A number of PRC laws and regulations have established procedures and requirements that could make merger and acquisition activities in China by foreign investors more time consuming and complex.
A number of mainland China laws and regulations have established procedures and requirements that could make merger and acquisition activities in China by foreign investors more time consuming and complex.
To date, beyond the COVID-19-related restrictions in 2022, we have not experienced such intervention or influence by PRC central government authorities or a change in those authorities’ rules and regulations that have had a material impact of ACM Shanghai or ACM Research.
To date, beyond the COVID-19-related restrictions in 2022, we have not experienced such intervention or influence by mainland China central government authorities or a change in those authorities’ rules and regulations that have had a material impact of ACM Shanghai or ACM Research.
To date, ACM Shanghai has not been involved in any investigations on cybersecurity review initiated by the CAC or any related PRC central government authority and has not received any inquiry, notice, warning, or sanction in such respect. However, cybersecurity is increasingly a focus of the PRC central government.
To date, ACM Shanghai has not been involved in any investigations on cybersecurity review initiated by the CAC or any related mainland China central government authority and has not received any inquiry, notice, warning, or sanction in such respect. However, cybersecurity is increasingly a focus of the mainland China central government.
Changes in political and economic policies of the PRC government may materially and adversely affect our business, financial condition and results of operations and may result in our inability to sustain our growth and expansion strategies. Substantially all of our operations are conducted in the PRC, and a substantial majority of our revenue is sourced from the PRC.
Changes in political and economic policies of the mainland China government may materially and adversely affect our business, financial condition and results of operations and may result in our inability to sustain our growth and expansion strategies. Substantially all of our operations are conducted in mainland China, and a substantial majority of our revenue is sourced from mainland China.
ACM Shanghai does not have the concentration of business operators stipulated in the Anti-Monopoly Law, and our operations and activities to date have not otherwise subjected us to restrictive provisions or limitations set forth in applicable PRC laws and regulations govern merger and acquisition activities.
ACM Shanghai does not have the concentration of business operators stipulated in the Anti-Monopoly Law, and our operations and activities to date have not otherwise subjected us to restrictive provisions or limitations set forth in applicable mainland China laws and regulations govern merger and acquisition activities.
PRC authorities will need to ensure that the PCAOB continues to have full access for inspections and investigations in 2023 and beyond. Each year, the PCAOB will determine whether it can inspect and investigate completely audit firms in the PRC and Hong Kong, among other jurisdictions.
Mainland China authorities will need to ensure that the PCAOB continues to have full access for inspections and investigations in 2023 and beyond. Each year, the PCAOB will determine whether it can inspect and investigate completely audit firms in mainland China and Hong Kong, among other jurisdictions.
The exacerbation or further continuation of currently challenging global systemic economic and financial conditions could adversely affect our business, results of operations and financial condition. Any prolonged slowdown in the PRC, United States or global economy may have a negative impact on our business, results of operations and financial condition.
The exacerbation or further continuation of currently challenging global systemic economic and financial conditions could adversely affect our business, results of operations and financial condition. Any prolonged slowdown in mainland China, United States or global economy may have a negative impact on our business, results of operations and financial condition.
These products may compete with our products, and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing. The significant majority of our intellectual property has been developed in the PRC and is owned by ACM Shanghai.
These products may compete with our products, and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing. The significant majority of our intellectual property has been developed in mainland China and is owned by ACM Shanghai.
ACM Shanghai is not subject to the existing restrictions imposed by the Cyber Security Law or the Data Security Law, in part because its business operations do not involve the collection, processing or use of data or information involving personal privacy or private information of customers.
ACM Shanghai is not subject to the existing restrictions imposed by the Cyber Security Law or the Data Security Law, in part because its business operations do not involve the collection, processing or use of data 22 Table of Contents or information involving personal privacy or private information of customers.
However, whether the PCAOB will continue to be able to satisfactorily conduct inspections of PCAOB-registered public accounting firms headquartered in the PRC and Hong Kong is subject to uncertainty and depends on a number of factors out of our, and our auditor’s, control.
However, whether the PCAOB will continue to be able to satisfactorily conduct inspections of PCAOB-registered public accounting firms headquartered in mainland China and Hong Kong is subject to uncertainty and depends on a number of factors out of our, and our auditor’s, control.
We rely on third parties to manufacture most of the subassemblies and supply most of the components used in our tools. Accordingly, we cannot directly control our delivery schedules and quality assurance. This reliance on third parties and lack of control could result in shortages or quality assurance problems.
We rely on third parties to manufacture most of the subassemblies and supply most of the components used 34 Table of Contents in our tools. Accordingly, we cannot directly control our delivery schedules and quality assurance. This reliance on third parties and lack of control could result in shortages or quality assurance problems.
Although the PRC government has implemented measures emphasizing the utilization of market forces for economic reform, the reduction of state ownership of productive assets and the establishment of improved corporate governance in business enterprises, a substantial portion of productive assets in the PRC are still owned by the government.
Although the mainland China government has implemented measures emphasizing the utilization of market forces for economic reform, the reduction of state ownership of productive assets and the establishment of improved corporate governance in business enterprises, a substantial portion of productive assets in mainland China are still owned by the government.
We have no assurance that PRC governmental authorities in the future will not limit further or eliminate the ability of ACM Shanghai to purchase foreign currencies and transfer such funds to ACM to meet its liquidity or other business needs.
We have no assurance that mainland China governmental authorities in the future will not limit further or eliminate the ability of ACM Shanghai to purchase foreign currencies and transfer such funds to ACM to meet its liquidity or other business needs.
Filing, prosecuting and defending patents on our products or proprietary technologies in all countries throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the United States, including the PRC, can be less extensive than those in the United States.
Filing, prosecuting and defending patents on our products or proprietary technologies in all countries throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the United States, including mainland China, can be less extensive than those in the United States.
In addition, our subsidiaries’ short-term bank loans restrict their ability to pay dividends to us. 53 Table of Contents The dual class structure of Class A common stock has the effect of concentrating voting control with our executive officers and directors, including our Chief Executive Officer and President, which will limit or preclude your ability to influence corporate matters.
In addition, our subsidiaries’ short-term bank loans restrict their ability to pay dividends to us. The dual class structure of common stock has the effect of concentrating voting control with our executive officers and directors, including our Chief Executive Officer and President, which will limit or preclude your ability to influence corporate matters.
Although the authorities in the PRC may establish a regulatory cooperation mechanism with the securities regulatory authorities of another country or region to implement cross-border supervision and administration, such cooperation with the securities regulatory authorities in the Unities States may not be efficient in the absence of mutual and practical cooperation mechanism.
Although the authorities in mainland China may establish a regulatory cooperation mechanism with the securities regulatory authorities of another country or region to implement cross-border supervision and administration, such cooperation with the securities regulatory authorities in the Unities States may not be efficient in the absence of mutual and practical cooperation mechanism.
Implementation and enforcement of intellectual property-related laws in the PRC has historically been lacking due primarily to ambiguities in PRC intellectual property law. Accordingly, protection of intellectual property and proprietary rights in the PRC may not be as effective as in the United States or other countries.
Implementation and enforcement of intellectual property-related laws in mainland China has historically been lacking due primarily to ambiguities in mainland China intellectual property law. Accordingly, protection of intellectual property and proprietary rights in mainland China may not be as effective as in the United States or other countries.
Few if any companies with stock publicly traded in the United States have effected a STAR Market listing of stock of a PRC-based subsidiary, and it is therefore difficult to predict the effect of the STAR Listing and STAR IPO on the Class A common stock.
Few if any companies with stock publicly traded in the United States have effected a STAR Market listing of stock of a mainland China-based subsidiary, and it is therefore difficult to predict the effect of the STAR Listing and STAR IPO on the Class A common stock.
These regulations set forth the industries in which foreign investments are encouraged, restricted and prohibited. Industries that are not listed in any of these three categories are generally open to foreign investment unless otherwise specifically restricted by other PRC rules and regulations.
These regulations set forth the industries in which foreign investments are encouraged, restricted and prohibited. Industries that are not listed in any of these three categories are generally open to foreign investment unless otherwise specifically restricted by other mainland China rules and regulations.
It may be difficult for overseas regulators to conduct investigations or collect evidence within the PRC. Stockholder claims or regulatory investigations that are common in the United States generally are difficult to pursue as a matter of law or practicality in the PRC.
It may be difficult for overseas regulators to conduct investigations or collect evidence within mainland China. Stockholder claims or regulatory investigations that are common in the United States generally are difficult to pursue as a matter of law or practicality in mainland China.
As a result of these and other restrictions under PRC laws and regulations as well as restrictions under ACM Shanghai’s bank loan agreements, we may be significantly restricted in our ability to transfer a portion of ACM Shanghai’s net assets to ACM or other subsidiaries of ACM.
As a result of these and other restrictions under mainland China laws and regulations as well as restrictions under ACM Shanghai’s bank loan agreements, we may be significantly restricted in our ability to transfer a portion of ACM Shanghai’s net assets to ACM or other subsidiaries of ACM.
Accordingly, our financial condition and results of operations are affected to a significant extent by economic, political and legal developments in the PRC. The Chinese economy differs from the economies of most developed countries in many respects, including the extent of government involvement, level of development, growth rate, and control of foreign exchange and allocation of resources.
Accordingly, our financial condition and results of operations are affected to a significant extent by economic, political and legal development in mainland China. The Chinese economy differs from the economies of most developed countries in many respects, including the extent of government involvement, level of development, growth rate, and control of foreign exchange and allocation of resources.
We may face conflicts of interest in managing, financing or engaging in transactions with ACM Shanghai, or allocating business opportunities between our subsidiaries, including future arrangements for operating subsidiaries other than ACM Shanghai to license and use our intellectual property. Substantially all of our intellectual property has been developed in the PRC and is owned by ACM Shanghai.
We may face conflicts of interest in managing, financing or engaging in transactions with ACM Shanghai, or allocating business opportunities between our subsidiaries, including future arrangements for operating subsidiaries other than ACM Shanghai to license and use our intellectual property. Substantially all of our intellectual property has been developed in mainland China and is owned by ACM Shanghai.
We cannot assure you, however, that future changes in PRC laws and regulations governing mergers and acquisitions, including activities in the PRC by foreign investors, will not extend or otherwise modify existing requirements, which could materially and adversely affect our PRC-based operations or our ability to expand by investments or acquisitions. • Permits .
We cannot assure you, however, that future changes in mainland China laws and regulations governing mergers and acquisitions, including activities in mainland China by foreign investors, will not extend or otherwise modify existing requirements, which could materially and adversely affect our mainland China-based operations or our ability to expand by investments or acquisitions. • Permits .
For example, our headcount grew by 38% in 2022, 62% in 2021, and 50% in 2020. We will seek to continue to expand our operations in the future, including by adding new offices, locations and employees. Managing our growth has placed and could continue to place a significant strain on our management, other personnel and our infrastructure.
For example, our headcount grew by 32% in 2023, 38% in 2022, and 62% in 2021. We will seek to continue to expand our operations in the future, including by adding new offices, locations and employees. Managing our growth has placed and could continue to place a significant strain on our management, other personnel and our infrastructure.
Regulatory Risks Our ability to sell our tools to customers in the PRC has been impacted, and will likely continue to be materially and adversely impacted, by export license requirements, other regulatory changes, or other actions taken by the U.S. or other governmental agencies. ACM Shanghai utilizes certain items subject to export controls under the U.S.
Regulatory Risks Our ability to sell our tools to customers in mainland China and certain other countries has been impacted, and will likely continue to be materially and adversely impacted, by export license requirements, other regulatory changes, or other actions taken by the U.S. or other governmental agencies. ACM Shanghai utilizes certain items subject to export controls under the U.S.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeIn May 2020 ACM Shanghai, through its wholly owned subsidiary ACM Shengwei, entered into an agreement for a 50-year land use right in the Lingang region of Shanghai. In July 2020 ACM Shengwei began a multi-year construction project for a new development and production center, with the objective of commencing production at the new facility in 2023.
Biggest changeIn addition, we perform sales support, customer service operations, R&D, and production activities from leased facilities in Jiangyin and Wuxi in mainland China and Icheon in Korea. In May 2020 ACM Shanghai, through its wholly owned subsidiary ACM Shengwei, entered into an agreement for a 50-year land use right in the Lingang region of Shanghai.
Item 2. Properties We have occupied our current corporate headquarters in Fremont, California, since February 2008, under a lease that, after an amendment in February 2021, now extends through March 31, 2023. We conduct research and development, and service support operations at ACM Shanghai’s headquarters located in the Zhangjiang Hi Tech Park in Shanghai.
Item 2. Properties We have occupied our current corporate headquarters in Fremont, California, since February 2008, under a lease that, after an amendment in February 2023, now extends through March 31, 2025. We conduct research and development, service support operations and administrative activities at ACM Shanghai’s headquarters located in the Zhangjiang Hi Tech Park in Shanghai.
Our lease currently extends until January 15, 2028. In February 2021, ACM Shanghai entered into an operating lease for a second building located adjacent to the above-mentioned second manufacturing space to provide additional manufacturing space. The lease covers approximately 106,076 square feet of which 100,000 square feet are allocated for production. Our lease currently extends until July 15, 2024.
The lease covers a total of 103,318 square feet, of which 100,000 square feet are allocated for production. Our lease currently extends until January 15, 2028. In February 2021, ACM Shanghai entered into an operating lease for a second building located adjacent to the above-mentioned second manufacturing space to provide additional manufacturing space.
In connection with the Lingang facility project, on October 28, 2020, a wholly owned subsidiary of ACM Shengwei entered into Shanghai Public Rental Housing Overall Pre-Sale Contracts with Shanghai Lingang Industrial Zone Public Rental Housing Construction and Operation Management Co., Ltd. for an aggregate price to us of approximately $40 million.
The planned 1,000,000 square foot facility will incorporate state-of-the-art manufacturing systems and automation technologies and will provide the floor space to support significantly more production capacity and related research and development activities when fully staffed and supplied. 52 Table of Contents In connection with the Lingang facility project, on October 28, 2020, a wholly owned subsidiary of ACM Shengwei entered into Shanghai Public Rental Housing Overall Pre-Sale Contracts with Shanghai Lingang Industrial Zone Public Rental Housing Construction and Operation Management Co., Ltd. for an aggregate price to us of approximately $40 million.
After that ten-year period expires, ACM Shengwei’s subsidiary may use the apartment units as stock of commercial housing and may sell them separately in sets.
After that ten-year period expires, ACM Shengwei’s subsidiary may use the apartment units as stock of commercial housing and may sell them separately in sets. Effective April 1, 2023, we entered an agreement to lease a 10,683 square foot facility in Hillsborough, Oregon beginning April 1, 2023 until August 31, 2030.
We have leased this facility since 2007 and our lease currently extends until December 31, 2024. In January 2018, ACM Shanghai entered into an operating lease for a second manufacturing space located in Shanghai, ten miles from its headquarters. The lease covers a total of 103,318 square feet, of which 100,000 square feet are allocated for production.
The lease covers approximately 106,076 square feet of which 100,000 square feet are allocated for production. Our lease currently extends until July 15, 2024. In July 2022, ACM Shanghai entered into an operating lease for a third building to provide additional manufacturing and warehousing space.
Removed
In July 2022, ACM Shanghai entered into an operating lease for a third building to provide additional manufacturing and warehousing space. In addition, we provide sales support and customer service operations from leased office space in Jiangyin and Wuxi in the PRC and Icheon in South Korea.
Added
We have leased this facility since 2007 and our lease currently extends until December 31, 2024. In the year ended December 31, 2023, ACM Shanghai completed its purchase of facilities in the ZhangJiang free trade zone, part of the Pudong district of Shanghai.
Removed
The planned 1,000,000 square foot facility will incorporate state-of-the-art manufacturing systems and automation technologies and will provide the floor space to support significantly more production capacity and related research and development activities when fully staffed and supplied.
Added
The facilities consist of four buildings for administrative and R&D office use, and, following the expected move-in in the 2024 timeframe, are intended to serve as the corporate headquarters for ACM Shanghai. In January 2018, ACM Shanghai entered into an operating lease for a second manufacturing space located in Shanghai, ten miles from its headquarters.
Removed
On December 15, 2022, ACM Shanghai entered into an agreement with Shanghai Zhangtou Guoju Cultural Development Company, LTD., the seller, and Shanghai United Assets and Equity Exchange Co., LTD., to purchase facilities in the ZhangJiang free trade zone, part of the Pudong district of Shanghai, for an aggregate price of 356.0 million RMB million ($51.1 million).
Added
In July 2020 ACM Shengwei began a multi-year construction project for a new development and production center.
Removed
Subsequent to additional tax payments and other obligations totaling RMB 90.8 million ($13.0 million), ACM Shanghai expects to receive ownership of the facilities in 2023. This facility will serve as the corporate headquarters for ACM Shanghai, consisting of four buildings for administrative and R&D office use.
Added
The facility is being used for our U.S.-based sales and services team to support customer activities in the region.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeRegardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors. As of December 31, 2022, the Company had no outstanding legal proceedings.
Biggest changeRegardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors. As of December 31, 2023, the Company had no outstanding material legal proceedings, other than ordinary routine litigation incidental to the business.
Item 3. Legal Proceedings From time to time we may become involved in other legal proceedings or may be subject to claims arising in the ordinary course of our business.
Item 3. Legal Proceedings From time to time we may become involved in legal proceedings or may be subject to claims arising in the ordinary course of our business.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeSecurities Authorized for Issuance Under Equity Compensation Plans The information required by this item will be set forth in the definitive proxy statement we will file in connection with our 2023 Annual Meeting of Stockholders and is incorporated by reference herein.
Biggest changeSecurities Authorized for Issuance Under Equity Compensation Plans The information required by this item will be set forth in the definitive proxy statement we will file in connection with our 2024 Annual Meeting of Stockholders and is incorporated by reference herein. 53 Table of Contents Sales of Unregistered Securities During the three months ended December 31, 2023, ACM Research issued, pursuant to the exercise of stock options at a per share exercise price of $0.50 per s hare, an aggrega te of 235,581 shares of Class A common stock that were not registered under the Securities Act of 1933.
As of February 22, 2023, there were 5,021,811 shares of Class B common stock held of record by 16 stockholders. We have never declared or paid cash dividends on our capital stock.
As of February 23, 2024, there were 5,021,811 shares of Class B common stock held of record by 16 stockholders. We have never declared or paid cash dividends on our capital stock.
Holders of Common Stock As of February 22, 2023, there were 54,681,261 shares of Class A common stock outstanding held of record by 46 stockholders. The actual number of holders of Class A common stock is substantially greater and includes stockholders who are beneficial owners and whose shares are held of record by banks, brokers, and other financial institutions.
Holders of Common Stock As of February 23, 2024, there we re 56,073,205 shares of Class A common stock outstanding held of record by 46 stockholders. The actual number of holders of Class A common stock is substantially greater and includes stockholders who are beneficial owners and whose shares are held of record by banks, brokers, and other financial institutions.
Sale Date Exercised Shares (Net) October 25, 2022 50,387 November 3, 2022 25,481 November 14, 2022 35,530 November 22, 2022 35,327 December 2, 2022 26,189 December 12, 2022 6,600 Total 179,514 58 Table of Contents Performance Graph The following graph compares the total return of an investment of $100 in cash at the closing price of November 3, 2017, which is the date our common stock first began trading on Nasdaq, through December 31, 2022 for (1) our common stock, (2) the Russell 1000 index, and (3) the Nasdaq Composite Index.
Sale Date Exercised Shares (Net) November 3, 2023 26,821 November 14, 2023 174,776 November 14, 2023 33,984 Total 235,581 Performance Graph The following graph compares the total return of an investment of $100 in cash at the closing price of November 3, 2017, which is the date our common stock first began trading on Nasdaq, through December 31, 2023 for (1) our common stock, (2) the Russell 1000 index, and (3) the Nasdaq Composite Index.
All values assume reinvestment of all dividends. Stockholder returns over the indicated period are based on historical data and are not necessarily indicative of future stockholder returns.
All values assume reinvestment of all dividends. Stockholder returns over the indicated period are based on historical data and are not necessarily indicative of future stockholder returns. COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN Among ACM Research, Inc., the Nasdaq Index, and the Russell 1000 Index
Removed
Sales of Unregistered Securities During the three months ended December 31, 2022, ACM Research issued, pursuant to the exercise of stock options at a per share exercise price of $0.50 per share, an aggregate of 179,514 shares of Class A common stock that were not registered under the Securities Act of 1933.
Removed
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN Among ACM Research, Inc., the Nasdaq Index, and the Russell 1000 Index Base Period Years Ending Company Name/Index 11/3/17 12/29/17 12/31/18 12/31/19 12/31/20 12/31/21 12/31/22 ACM Research, Inc. $ 100 $ 87 $ 180 $ 305 $ 1,343 $ 1,409 $ 382 Russell 1000 Index $ 100 $ 103 $ 97 $ 124 $ 148 $ 157 $ 123 Nasdaq Composite Index $ 100 $ 102 $ 98 $ 133 $ 191 $ 231 $ 155

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeNet cash provided by financing for the year ended December 31, 2022 was $45.9 million, primarily consisting of $44.6 million net proceeds from short and long-term borrowings, and $1.3 million in proceeds from the exercise of stock options. 82 Table of Contents ACM Shanghai, together with its subsidiaries, has short-term and long-term borrowings with five banks, as follows: Lender Agreement Date Maturity Date Annual Interest Rate Maximum Borrowing Amount(1) Amount Outstanding at December 31, 2022 (in thousands) China Everbright Bank July 2021 December 2023 3.00%~3.60% RMB150,000 RMB150,000 $ 21,540 $ 21,540 Bank of Communications August 2022 September 2023 3.50%~3.60% RMB100,000 RMB100,000 $ 14,360 $ 14,360 Bank of China August 2022 August 2023 3.15 % RMB40,000 RMB40,000 $ 5,744 $ 5,744 China Merchants Bank October 2021 September 2023 3.50 % RMB100,000 RMB100,000 $ 14,360 14,360.00 China Merchants Bank November 2020 Repayable by installments and the last installments repay a ble in November 2030 3.95 % RMB128,500 RMB106,303 $ 18,453 $ 15,265 Bank of China June 2021 Repayable by installments and the last installments repay a ble in June 2024 2.60 % RMB10,000 RMB8,500 $ 1,436 $ 1,221 Bank of China September, 2021 Repayable by installments and the last installments repay a ble in September 2021 2.60 % RMB35,000 RMB31,500 $ 5,026 $ 4,523 $ 80,919 $ 77,013 (1) Converted from RMB to dollars as of December 31, 2022.
Biggest changeWe and ACM Shanghai, together with the subsidiaries of ACM Shanghai, have short-term and long-term borrowings with six banks, as follows: 74 Table of Contents Lender Agreement Date Maturity Date Annual Interest Rate Maximum Borrowing Amount(1) Amount Outstanding at December 31, 2023 (in thousands) China CITIC Bank (2) July 2023 Repayable by installments and the last installments repayable in December 2025 4.50 % RMB200,000 RMB100,000 $ 28,240 $ 14,120 China Everbright Bank July 2021 August 2024 3.00 % RMB150,000 RMB17,440 $ 21,180 $ 2,463 Bank of China September 2023 September 2024 2.87 % RMB40,000 RMB40,000 $ 5,648 5536 $ 5,648 China Merchants Bank August 2023 September 2024 3.00 % RMB200,000 RMB153,000 $ 28,240 $ 21,603 China Merchants Bank November 2020 Repayable by installments and the last installments repayable in November 2030 3.95 % RMB128,500 RMB94,633 $ 18,144 $ 13,362 Bank of China June 2021 Repayable by installments and the last installments repayable in June 2024 2.60 % RMB10,000 RMB7,500 $ 1,412 $ 1,059.00 Bank of China September, 2021 Repayable by installments and the last installments repayable in September 2024 2.60 % RMB35,000 RMB28,000 $ 4,942 $ 3,954 Bank of Shanghai December,2022 October 2024 2.85 % RMB100,000 RMB100,000 $ 14,120 $ 14,120 China CITIC Bank August 2023 Repayable by installments and the last installments repayable in August 2025 3.10 % RMB100,000 RMB100,000 $ 14,120 $ 14,120 Industrial Bank of Korea July 2023 July 2024 6.03 % KRW500,000 KRW100,000 $ 386 $ 77 Industrial Bank of Korea December 2023 December 2024 4.27 % KRW2,000,000 KRW2,000,000 $ 1,544 $ 1,544 $ 137,976 $ 92,070 75 Table of Contents (1) Converted from RMB to dollars as of December 31, 2023.
(b) within six years after the Delivery Date, or prior to July 9, 2026, it does not (i) generate a minimum specified amount of annual sales of products manufactured on the granted land or (ii) pay to the PRC at least RMB 157.6 million ($22.2 million) in annual total taxes (including value-added taxes, corporate income tax, personal income taxes, urban maintenance and construction taxes, education surcharges, stamp taxes, and vehicle and shipping taxes) as a result of operations in connection with the granted land.
(b) within six years after the Delivery Date, or prior to July 9, 2026, it does not (i) generate a minimum specified amount of annual sales of products manufactured on the granted land or (ii) pay at least RMB 157.6 million ($22.2 million) in annual total taxes (including value-added taxes, corporate income tax, personal income taxes, urban maintenance and construction taxes, education surcharges, stamp taxes, and vehicle and shipping taxes) as a result of operations in connection with the granted land.
Shipments consist of two components: ● a shipment to a customer of a type of tool that the customer has previously accepted, for which we recognize revenue when the tool is delivered; and ● a shipment to a customer of a type of tool that the customer is receiving and evaluating for the first time, in each case a “first tool,” for which we may recognize revenue at a later date, subject to the customer’s acceptance of the tool upon the tool’s satisfaction of applicable contractual requirements or subject to the costumer’s subsequent discretionary commitment to purchase the tool.
Shipments consist of two components: • a shipment to a customer of a type of tool that the customer has previously accepted, for which we recognize revenue when the tool is delivered; and • a shipment to a customer of a type of tool that the customer is receiving and evaluating for the first time, in each case a “first tool,” for which we may recognize revenue at a later date, subject to the customer’s acceptance of the tool upon the tool’s satisfaction of applicable contractual requirements or subject to the customer’s subsequent discretionary commitment to purchase the tool.
Fabricators of advanced integrated circuits, or chips, can use our wet-cleaning and other front-end processing tools in numerous steps to improve product yield, even at increasingly advanced process nodes. We have designed these tools for use in fabricating foundry, logic and memory chips, including DRAM 3D NAND-flash memory chips, and compound semiconductor chips.
Fabricators of advanced integrated circuits, or chips, can use our wet-cleaning and other front-end processing tools in numerous steps to improve product yield, even at increasingly advanced process nodes. We have designed these tools for use in fabricating foundry, logic and memory chips, including DRAM 3D NAND-flash memory chips, power semiconductor and compound semiconductor chips.
As we expand our customer base, we expect to gain more repeat purchase orders for tools that we have already developed and tested, which will reduce the need for a demonstration phase and shorten the development cycle. ● Evaluation Periods.
As we expand our customer base, we expect to gain more repeat purchase orders for tools that we have already developed and tested, which we believe will reduce the need for a demonstration phase and shorten the development cycle. • Evaluation Periods.
In 2020, 2021 and 2022 we introduced and delivered a range of new tools intended to broaden our revenue opportunity with global semiconductor manufacturers. Product extensions include the Ultra SFP ap tool for advanced packaging solutions, the Ultra C VI 18-chamber single wafer cleaning tool for advanced memory devices, and the Ultra ECP 3d platform for through-silicon-via, or tsv, application.
In 2021, 2022 and 2023 we introduced and delivered a range of new tools intended to broaden our revenue opportunity with global semiconductor manufacturers. Product extensions include the Ultra SFP ap tool for advanced packaging solutions, the Ultra C VI 18-chamber single wafer cleaning tool for advanced memory devices, and the Ultra ECP 3d platform for through-silicon-via, or tsv, application.
Risk Factors—Risks Related to Our Business and Our Industry—Difficulties in forecasting demand for our tools may lead to periodic inventory shortages or excess spending on inventory items that may not be used.” Cost of Revenue Cost of revenue for capital equipment consists primarily of: ● direct costs, which consist principally of costs of tool components and subassemblies purchased from third-party vendors; 66 Table of Contents ● compensation of personnel associated with our manufacturing operations, including stock-based compensation; ● depreciation of manufacturing equipment; ● amortization of costs of software used for manufacturing purposes; ● other expenses attributable to our manufacturing department; and ● allocated overhead for rent and utilities.
Risk Factors—Risks Related to Our Business and Our Industry—Difficulties in forecasting demand for our tools may lead to periodic inventory shortages or excess spending on inventory items that may not be used.” Cost of Revenue Cost of revenue for capital equipment consists primarily of: • direct costs, which consist principally of costs of tool components and subassemblies purchased from third-party vendors; 59 Table of Contents • compensation of personnel associated with our manufacturing operations, including stock-based compensation; • depreciation of manufacturing equipment; • amortization of costs of software used for manufacturing purposes; • other expenses attributable to our manufacturing department; • inventory provision; and • allocated overhead for rent and utilities.
We utilize ASC 606 which was adopted in 2018 set forth in Accounting Standards Update, or ASU, No. 2014-09, Revenue from Contracts with Customers (Topic 606) , of the Financial Accounting Standards Board, or FASB, regarding the recognition, presentation and disclosure of revenue in our financial statements as described below under “—Critical Accounting Estimates—Revenue Recognition.” We offer extended maintenance service contracts to provide services such as trouble-shooting or fine-tuning tools, and installing spare parts, following expiration of applicable initial standard assurance type warranty coverage periods, which for sales to date have extended from 12 to 36 months as described under “—Critical Accounting Estimates—Warranty.” In 2022, 2021 and 2020, we received payments for parts and labor for service activities provided from time to time, but as of December 31, 2022 we had not yet entered into extended maintenance service contracts with respect to the substantial majority of tools for which initial warranty coverage had expired.
We utilize ASC 606 which was adopted in 2018 set forth in Accounting Standards Update, or ASU, No. 2014-09, Revenue from Contracts with Customers (Topic 606) , of the Financial Accounting Standards Board, or FASB, regarding the recognition, presentation and disclosure of revenue in our financial statements as described below under “—Critical Accounting Estimates—Revenue Recognition.” We offer extended maintenance service contracts to provide services such as trouble-shooting or fine-tuning tools, and installing spare parts, following expiration of applicable initial standard assurance type warranty coverage periods, which for sales to date have extended from 12 to 36 months as described under “—Critical Accounting Estimates—Warranty.” In 2023, 2022, and 2021, we received payments for parts and labor for service activities provided from time to time, but as of December 31, 2023 we had not yet entered into extended maintenance service contracts with respect to the substantial majority of tools for whi ch initial warranty coverage had expired.
Contractual Obligations Grant Contract for State-owned Construction Land Use Right in Shanghai City In 2020 ACM Shanghai, through its wholly-owned subsidiary ACM Shengwei, entered into a Grant Contract for State-owned Construction Land Use Right in Shanghai City (Category of R&D Headquarters and Industrial Projects), or the Grant Agreement, with the China (Shanghai) Pilot Free Trade Zone Lin-gang Special Area Administration, or the Grantor.
Contractual Obligations Grant Contract for State-owned Construction Land Use Right in Shanghai City In 2020 ACM Shanghai, through its wholly-owned subsidiary ACM Lingang, entered into a Grant Contract for State-owned Construction Land Use Right in Shanghai City (Category of R&D Headquarters and Industrial Projects), or the Grant Agreement, with the China (Shanghai) Pilot Free Trade Zone Lin-gang Special Area Administration, or the Grantor.
Risk Factors—Risks Related to Our Business and Our Industry—Our customers do not enter into long-term purchase commitments, and they may decrease, cancel or delay their projected purchases at any time.” As our customer base and tool installations continue to grow, we will need to hire additional manufacturing personnel.
Risk Factors—Risks Related to Our Business and Our Industry—Our customers do not generally enter into long-term purchase commitments, and they may decrease, cancel or delay their projected purchases at any time.” As our customer base and tool installations continue to grow, we may need to hire additional manufacturing personnel.
Some of these limitations are: ● adjusted EBITDA excludes depreciation and amortization and, although these are non-cash expenses, the assets being depreciated or amortized may have to be replaced in the future; ● we exclude stock-based compensation expense from adjusted EBITDA and adjusted operating income (loss), although (a) it has been, and will continue to be for the foreseeable future, a significant recurring expense for our business and an important part of our compensation strategy and (b) if we did not pay out a portion of our compensation in the form of stock-based compensation, the cash salary expense included in operating expenses would be higher, which would affect our cash position; 86 Table of Contents ● the expenses and other items that we exclude in our calculation of adjusted EBITDA may differ from the expenses and other items, if any, that other companies may exclude from adjusted EBITDA when they report their operating results; ● adjusted EBITDA does not reflect changes in, or cash requirements for, working capital needs; ● adjusted EBITDA does not reflect interest expense, or the requirements necessary to service interest or principal payments on debt; ● adjusted EBITDA does not reflect income tax expense (benefit) or the cash requirements to pay taxes; ● adjusted EBITDA does not reflect historical cash expenditures or future requirements for capital expenditures or contractual commitments; ● although depreciation and amortization charges are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and adjusted EBITDA does not reflect any cash requirements for such replacements; and ● adjusted EBITDA includes expense reductions and non-operating other income attributable to PRC governmental grants, which may mask the effect of underlying developments in net income, including trends in current expenses and interest expense, and free cash flow includes the PRC governmental grants, the amount and timing of which can be difficult to predict and are outside our control.
Some of these limitations are: • adjusted EBITDA excludes depreciation and amortization and, although these are non-cash expenses, the assets being depreciated or amortized may have to be replaced in the future; • we exclude stock-based compensation expense from adjusted EBITDA and adjusted operating income (loss), although (a) it has been, and will continue to be for the foreseeable future, a significant recurring expense for our business and an important part of our compensation strategy and (b) if we did not pay out a portion of our compensation in the form of stock-based compensation, the cash salary expense included in operating expenses would be higher, which would affect our cash position; • the expenses and other items that we exclude in our calculation of adjusted EBITDA may differ from the expenses and other items, if any, that other companies may exclude from adjusted EBITDA when they report their operating results; • adjusted EBITDA does not reflect changes in, or cash requirements for, working capital needs; • adjusted EBITDA does not reflect interest expense, or the requirements necessary to service interest or principal payments on debt; • adjusted EBITDA does not reflect income tax expense (benefit) or the cash requirements to pay taxes; • adjusted EBITDA does not reflect historical cash expenditures or future requirements for capital expenditures or contractual commitments; • although depreciation and amortization charges are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and adjusted EBITDA does not reflect any cash requirements for such replacements; and • adjusted EBITDA includes expense reductions and non-operating other income attributable to mainland China governmental grants, which may mask the effect of underlying developments in net income, including trends in current expenses and interest expense, and free cash flow includes the mainland China governmental grants, the amount and timing of which can be difficult to predict and are outside our control.
Sales and marketing expense in a given period can be particularly affected by the increase in travel and entertainment expenses associated with the finalization of purchase orders or the installation of tools. 67 Table of Contents Research and Development Research and development expense relates to the development of new products and processes and encompasses our research, development and customer support activities.
Sales and marketing expense in a given period can be particularly affected by the increase in travel and entertainment expenses associated with the finalization of purchase orders or the installation of tools. 60 Table of Contents Research and Development Research and development expense relates to the development of new products and processes and encompasses our research, development and customer support activities.
Market value is determined as the lower of replacement cost and net realizable value, which is the estimated selling price, in the ordinary course of business, less estimated costs to complete or dispose. 71 Table of Contents We assess the recoverability of all inventories quarterly to determine if any adjustments are required.
Market value is determined as the lower of replacement cost and net realizable value, which is the estimated selling price, in the ordinary course of business, less estimated costs to complete or dispose. 63 Table of Contents We assess the recoverability of all inventories quarterly to determine if any adjustments are required.
If the total tax revenue of the project fails to reach 80% of the standard agreed under the Grant Agreement within 1 month after the agreed date of reaching target production, the Grantor is entitled to terminate the Grant Agreement, take back the Land Use Right, and shall refund the Grant Fees for the remaining land use term to ACM Shengwei.
If the total tax revenue of the project fails to reach 80% of the standard agreed under the Grant Agreement within 1 month after the agreed date of reaching target production, the Grantor is entitled to terminate the Grant Agreement, take back the Land Use Right, and shall refund the Grant Fees for the remaining land use term to ACM Lingang.
On December 16, 2021, the PCAOB reported its determination that it was unable to inspect or investigate completely registered public accounting firms headquartered in the PRC and Hong Kong, including BDO China, because of positions taken by PRC authorities in those jurisdictions.
On December 16, 2021, the PCAOB reported its determination that it was unable to inspect or investigate completely registered public accounting firms headquartered in mainland China and Hong Kong, including BDO China, because of positions taken by mainland China authorities in those jurisdictions.
If the Grant Agreement is terminated because of breach of any terms above, the Grantor shall take back the buildings, fixtures and auxiliary facilities on the land area and provide ACM Shengwei with corresponding compensation according to the residual value of the buildings, fixtures and auxiliary facilities when they are taken back.
If the Grant Agreement is terminated because of breach of any terms above, the Grantor shall take back the buildings, fixtures and auxiliary facilities on the land area and provide ACM Lingang with corresponding compensation according to the residual value of the buildings, fixtures and auxiliary facilities when they are taken back.
If the PRC authorities do not allow the PCAOB complete access for inspections and investigations for two consecutive years, the SEC would prohibit trading in the securities of issuers engaging those audit firms, as required under the HFCA Act. Further, on December 29, 2022, the Consolidated Appropriations Act, 2023, was signed into law by U.S.
If the mainland China authorities do not allow the PCAOB complete access for inspections and investigations for two consecutive years, the SEC would prohibit trading in the securities of issuers engaging those audit firms, as required under the HFCA Act. Further, on December 29, 2022, the Consolidated Appropriations Act, 2023, was signed into law by U.S.
If the total tax revenue of the project fails to reach but is no less than 80% of the standard agreed under the Grant Agreement, ACM Shengwei shall pay 20% of the actual shortfall amount of the tax revenue as liquidated damages.
If the total tax revenue of the project fails to reach but is no less than 80% of the standard agreed under the Grant Agreement, ACM Lingang shall pay 20% of the actual shortfall amount of the tax revenue as liquidated damages.
How We Evaluate Our Operations We present information below with respect to four measures of financial performance: ● We define “shipments” of tools to include (a) a “repeat” delivery to a customer of a type of tool that the customer has previously accepted, for which we recognize revenue upon delivery, and (b) a “first-time” delivery of a “first tool” to a customer on an approval basis, for which we may recognize revenue in the future if contractual conditions are met, or if a purchase order is received. ● We define “adjusted EBITDA” as net income excluding interest expense (net), income tax benefit (expense), depreciation and amortization, unrealized (gain) loss on trading securities, and stock-based compensation.
How We Evaluate Our Operations We present information below with respect to four measures of financial performance: • We define “shipments” of tools to include (a) a “repeat” delivery to a customer of a type of tool that the customer has previously accepted, for which we recognize revenue upon delivery, and (b) a “first-time” delivery of a “first tool” to a customer on an approval basis, for which we may recognize revenue in the future if contractual conditions are met, or if a purchase order is received. • We define “adjusted EBITDA” as net income excluding interest expense (net), income tax benefit (expense), depreciation and amortization, unrealized (gain) loss on short-term investments, and stock-based compensation.
See “Forward-Looking Statements and Statistical Data” at page 3 of this report. Please read “Item 1A. Risk Factors” for a discussion of factors that could cause our actual results to differ materially from our expectations Overview ACM Research was incorporated in California in 1998 and redomesticated in Delaware in 2016.
See “Forward-Looking Statements and Statistical Data” at page 3 of this report. Please read “Item 1A. Risk Factors” for a discussion of factors that could cause our actual results to differ materially from our expectations 54 Table of Contents Overview ACM Research was incorporated in California in 1998 and redomesticated in Delaware in 2016.
We define adjusted EBITDA to also exclude restructuring costs, although we have not incurred any such costs to date. ● We define “free cash flow” as net cash provided by operating activities less purchases of property and equipment (net of proceeds from disposals). ● We define “adjusted operating income (loss)” as our income (loss) from operations excluding stock-based compensation.
We define adjusted EBITDA to also exclude restructuring costs, although we have not incurred any such costs to date. • We define “free cash flow” as net cash provided by operating activities less purchases of property and equipment (net of proceeds from disposals). 77 Table of Contents • We define “adjusted operating income (loss)” as our income (loss) from operations excluding stock-based compensation.
Gross Margin We generally expect gross margin to range between 40% and 45% for the foreseeable future, with direct manufacturing costs approximating 50% to 55% of revenue and overhead costs totaling approximately 5% of revenue. We seek to maintain our gross margin by continuing to develop proprietary technologies that avoid pricing pressure for our wet cleaning equipment.
Gross Margin We generally expect gross margin to range between 40% and 45% for the foreseeable future, with direct manufacturing costs approximating 50% to 55% of revenue and overhead costs totaling approximatel y 5% of revenue. We seek to maintain our gross margin by continuing to develop proprietary technologies that avoid pricing pressure for our wet cleaning equipment.
Consistent with our methodology for calculating adjusted EBITDA, we do not adjust free cash flow for the effects of PRC government subsidies, because we take those subsidies into account in incurring expenses and capital expenditures. We do not adjust free cash flow for the effects of time-deposits, which for our internal purposes are considered as largely similar to cash.
Consistent with our methodology for calculating adjusted EBITDA, we do not adjust free cash flow for the effects of mainland China government subsidies, because we take those subsidies into account in incurring expenses and capital expenditures. We do not adjust free cash flow for the effects of time-deposits, which for our internal purposes are considered as largely similar to cash.
We perform strategic planning, marketing, and financial activities at our global corporate headquarters in Fremont, California. ACM Research is neither a PRC operating company nor do we conduct our operations in the PRC through the use of VIEs. We supply advanced, innovative capital equipment developed for the global semiconductor industry.
We perform strategic planning, marketing, and financial activities at our global corporate headquarters in Fremont, California. ACM Research is neither a mainland China operating company nor do we conduct our operations in mainland China through the use of VIEs. We supply advanced, innovative capital equipment developed for the global semiconductor industry.
Each purchase order from a customer for one of our tools contains specific technical requirements intended to ensure, among other things, that the tool will be compatible with the customer’s manufacturing process line. Until a purchase order is received, we do not have a binding purchase commitment.
Each purchase order from a customer for one of our tools contains specific technical requirements intended to ensure, among other things, that the tool will be compatible with the customer’s manufacturing process line. Until a 58 Table of Contents purchase order is received, we do not have a binding purchase commitment.
Grant amounts are recognized in our statements of operations and comprehensive income (loss) as follows: ● Government subsidies relating to current expenses are recorded as reductions of those expenses in the periods in which the current expenses are recorded.
Grant amounts are recognized in our statements of comprehensive income (loss) as follows: • Government subsidies relating to current expenses are recorded as reductions of those expenses in the periods in which the current expenses are recorded.
“First tool” shipments exclude deliveries to customers for which ACM does not have a basis to expect future revenue. Adjusted EBITDA There are a number of limitations related to the use of adjusted EBITDA rather than net income (loss), which is the nearest GAAP equivalent.
“First tool” shipments exclude deliveries to customers for which ACM does not have a basis to expect future revenue. 78 Table of Contents Adjusted EBITDA There are a number of limitations related to the use of adjusted EBITDA rather than net income (loss), which is the nearest GAAP equivalent.
On March 30, 2022, based on this determination, ACM Research was transferred to the SEC’s “Conclusive list of issuers identified under the HFCA.” See “Item 1A.
On March 30, 2022, based on this determination, ACM Research was transferred to the SEC’s “Conclusive list of issuers identified under the HFCAA.” See “Item 1A.
We expect that, for the foreseeable future, research and development expense will increase in absolute dollars as compared to 2022, as we continue to invest in research and development to advance our technologies.
We expect that, for the foreseeable future, research and development expense will increase in absolute dollars as compared to 2023, as we continue to invest in research and development to advance our technologies.
ACM Shengwei shall pay the liquidated damages equal to the same proportion of the Grant Fees as the proportion of the actual shortfall amount of investment in the total agreed investment amount or the investment intensity.
ACM Lingang shall pay the liquidated damages equal to the same proportion of the Grant Fees as the proportion of the actual shortfall amount of investment in the total agreed investment amount or the investment intensity.
On December 15, 2022, the PCAOB announced that it was able to secure complete access to inspect and investigate PCAOB-registered public accounting firms headquartered in the PRC and Hong Kong in 2022 and vacated its previous December 16, 2021 determination to the contrary.
On December 15, 2022, the PCAOB announced that it was able to secure complete access to inspect and investigate PCAOB-registered public accounting firms headquartered in mainland China and Hong Kong in 2022 and vacated its previous December 16, 2021 determination to the contrary.
Restrictions under PRC laws and regulations as well as restrictions under ACM Shanghai’s bank loan agreements, may significantly restrict ACM Shanghai’s ability to transfer a portion of ACM Shanghai’s net assets to ACM Research, other subsidiaries of ACM Research and to holders of ACM Research Class A common stock. See “Item 1A.
Restrictions under mainland China laws and regulations as well as restrictions under ACM Shanghai’s bank loan agreements, may significantly restrict ACM Shanghai’s ability to transfer a portion of ACM Shanghai’s net assets to ACM Research, other subsidiaries of ACM Research and to holders of ACM Research Class A common stock. See “Item 1A.
We intend to retain all available funds and any future earnings to support the operation of and to finance the growth and development of our business and do not anticipate paying any cash dividends in the foreseeable future. Cash Flow Used in Operating Activities.
We intend to retain all available funds and any future earnings to support the operation of and to finance the growth and development of our business and do not anticipate paying any cash dividends in the foreseeable future. 73 Table of Contents Cash Flow Used in Operating Activities.
We do not exclude from adjusted EBITDA expense reductions and non-operating other income attributable to PRC governmental grants because we consider and incorporate the expected amounts and timing of those grants in incurring expenses and capital expenditures.
We do not exclude from adjusted EBITDA expense reductions and non-operating other income attributable to mainland China governmental grants because we consider and incorporate the expected amounts and timing of those grants in incurring expenses and capital expenditures.
Management of ACM Shanghai then assesses which grants and subsidies for which ACM Shanghai may be eligible and submits the relevant application. The decision to award the grant to ACM Shanghai is made by the relevant PRC government agencies based on suitability and the merits of the application.
Management of ACM Shanghai then assesses which grants and subsidies for which ACM Shanghai may be eligible and submits the relevant application. The decision to award the grant to ACM Shanghai is made by the relevant mainland China government agencies based on suitability and the merits of the application.
Neither ACM Research, nor ACM Shanghai or any of our other subsidiaries, has any direct relationship with any PRC government agency, and our anticipated cash needs for the next twelve months neither anticipate, nor require, receipt of any PRC government grants or subsidies.
Neither ACM Research, nor ACM Shanghai or any of our other subsidiaries, has any direct relationship with any mainland China government agency, and our anticipated cash needs for the next twelve months neither anticipate, nor require, receipt of any mainland China government grants or subsidies.
For example, our Ultra C models for SAPS, TEBO and Tahoe solutions use common modular configurations that enable us to create a wet-cleaning tool meeting a customer’s specific requirements, while using pre-existing designs for chamber, electrical, chemical delivery and other modules. 65 Table of Contents Because of the relatively large purchase prices of our tools, customers generally pay in installments.
For example, our Ultra C models for SAPS, TEBO and Tahoe solutions use common modular configurations that enable us to create a wet-cleaning tool meeting a customer’s specific requirements, while using pre-existing designs for chamber, electrical, chemical delivery and other modules. Because of the relatively high purchase prices of our tools, customers generally pay in installments.
Substantially all of our integrated tools are built to order at our manufacturing facilities in the Pudong region of Shanghai, which now encompass a total of 236,000 square feet of floor space for production capacity, with 100,000 square feet having been added in 2021 with the lease of a second building in the Pudong region of Shanghai.
Substantially all of our integrated tools are built to order at our manufacturing facilities in the Pudong region of Shanghai, which now encompass a tota l of 236,000 squ are feet of floor space for production capacity, with 100,000 square feet having been added in 2021 with the lease of a second building in the Pudong region of Shanghai.
Risk Factors—Risks Related to International Aspects of Our Business—We could be adversely affected if we are unable to comply with recent and proposed legislation and regulations regarding improved access to audit and other information and audit inspections of accounting firms operating in the PRC” of this report for more information.
Risk Factors—Risks Related to International Aspects of Our Business—We could be adversely affected if we are unable to comply with recent and proposed legislation and regulations regarding improved access to audit and other information and audit inspections of accounting firms operating in mainland China” of this report for more information.
Allowance for Doubtful Accounts Accounts receivables are reflected in our consolidated balance sheets at their estimated collectible amounts. A substantial majority of our accounts receivable are derived from sales to large multinational semiconductor manufacturers in Asia.
Allowance for Credit Losses Accounts receivables are reflected in our consolidated balance sheets at their estimated collectible amounts. A substantial majority of our accounts receivable are derived from sales to large multinational semiconductor manufacturers in Asia.
ACM Shanghai generally applies for these grants and subsidies through the applicable PRC government agency’s defined processes. Periodically, the public relations department researches the availability of these grants and subsidies through the PRC government agencies with whom ACM Shanghai files business surveys and taxes.
ACM Shanghai generally applies for these grants and subsidies through the applicable mainland China government agency’s defined processes. Periodically, the public relations department researches the availability of these grants and subsidies through mainland China government agencies with whom ACM Shanghai files business surveys and taxes.
We estimate the fair value of the stock options granted with a service period-based condition at the date of grant using the Black-Scholes option pricing model. We estimate the fair value of the stock options granted with a market-based condition at the date of grant using the Monte Carlo simulation model.
We estimate the fair value of the stock options granted with a service period-based condition and/or performance condition at the date of grant using the Black-Scholes option pricing model. We estimate the fair value of the stock options granted with a market-based condition at the date of grant using the Monte Carlo simulation model.
The 2022 amount was especially large due to a significant weakening of the RMB versus the U.S. dollar during the twelve months ended December 31, 2022 together with a more significant RMB-denominated asset balance in 2022 .
The 2022 amount was especially large due to a weakening of the RMB versus the U.S. dollar during the year ended December 31, 2022 together with a more significant RMB-denominated asset balance in 2022.
Contractual penalties in the case of a delay of Construction Completion Milestone : o If ACM Shengwei fails to complete the construction pursuant to the date agreed under the Grant Agreement or any extended completion date approved by the Grantor, ACM Shengwei shall pay 50% of the deposit for timely completion of construction as liquidated damages; o If ACM Shengwei delays the completion for more than six months beyond the date agreed under the Grant Agreement, or beyond any extended completion date approved by the Grantor, it shall pay the total deposit for timely completion of construction as liquidated damages. o If the delay is more than one year, the Grantor is entitled to terminate the Grant Agreement and take back the Land Use Right.
Contractual penalties in the case of a delay of Construction Completion Milestone : ◦ If ACM Lingang fails to complete the construction pursuant to the date agreed under the Grant Agreement or any extended completion date approved by the Grantor, ACM Lingang shall pay 50% of the deposit for timely completion of construction as liquidated damages; ◦ If ACM Lingang delays the completion for more than six months beyond the date agreed under the Grant Agreement, or beyond any extended completion date approved by the Grantor, it shall pay the total deposit for timely completion of construction as liquidated damages. 76 Table of Contents ◦ If the delay is more than one year, the Grantor is entitled to terminate the Grant Agreement and take back the Land Use Right.
If we did not pay out a portion of our compensation in the form of stock-based compensation, the cash salary expense included in operating expenses would be higher and our cash holdings would be less.
If we did not pay out a portion of our compensation in the form of stock-based compensation, the cash salary expense included in 80 Table of Contents operating expenses would be higher and our cash holdings would be less.
These governmental authorities provide significant funding, although ACM Shanghai and ACM Shengwei is also required to invest certain amounts in the projects. 68 Table of Contents The governmental grants contain certain operating conditions, and we are required to go through a government due diligence process once the project is complete.
These governmental authorities provide significant funding, although ACM Shanghai and ACM Shengwei is also required to invest certain amounts in the projects. The governmental grants contain certain operating conditions, and we are required to go through a government due diligence process once the project is complete.
Our cash and cash equivalents at December 31, 2022 were held for working capital purposes and other potential investments. ACM Shanghai, our only direct PRC subsidiary, is, however, subject to PRC restrictions on distributions to equity holders. The use of proceeds raised by the STAR Market IPO, without further approvals, are limited to specific usage.
Our cash and cash equivalents at December 31, 2023 were held for working capital purposes and other potential investments. ACM Shanghai, our only direct mainland China subsidiary, is, however, subject to mainland China restrictions on distributions to equity holders. The use of proceeds raised by the STAR Market IPO, without further approvals, are limited to specific usage.
Risk Factors–Regulatory Risks–The PRC’s currency exchange control and government restrictions on investment repatriation may impact our ability to transfer funds outside of the PRC, which could materially and adversely affect our ability to grow, make investments or acquisitions that could benefit our business, otherwise fund and conduct our business, or pay dividends on our common stock.” For the years ended December 31, 2022 and 2021, with the exception of sales and services-related transfer-pricing payments in the ordinary course of business, no transfers, dividends, or distributions have been made between ACM Research, and its subsidiaries, including ACM Shanghai, or to holders of ACM Research Class A common stock.
Risk Factors–Regulatory Risks–Mainland China’s currency exchange control and government restrictions on investment repatriation may impact our ability to transfer funds outside of mainland China, which could materially and adversely affect our ability to grow, make investments or acquisitions that could benefit our business, otherwise fund and conduct our business, or pay dividends on our common stock.” For the years ended December 31, 2023 and 2022, with the exception of sales and services-related transfer-pricing payments in the ordinary course of business, and dividends paid by ACM Shanghai to ACM Research, no transfers or distributions have been made between ACM Research, and its subsidiaries, including ACM Shanghai, or to holders of ACM Research Class A common stock.
Sales and Marketing Sales and marketing expense consists primarily of: ● compensation of personnel associated with pre- and after-sales support and other sales and marketing activities, including stock-based compensation; ● sales commissions paid to independent sales representatives; ● fees paid to sales consultants; ● cost of trade shows; ● costs of tools built for promotional purposes for current or potential new customers; ● travel and entertainment; and ● allocated overhead for rent and utilities.
Sales and Marketing Sales and marketing expense consists primarily of: • compensation of personnel associated with pre- and after-sales support and other sales and marketing activities, including stock-based compensation; • sales commissions paid to independent sales representatives; • fees paid to sales consultants; • cost of trade shows; • cost of promotional tools to new potential customers; • travel and entertainment; and • allocated overhead for rent and utilities.
If we did not receive the grants, our cash expenses therefore would be lower, and our cash position would not be affected, to the extent we have accurately anticipated the amounts of the grants.
If we did not receive the grants, our cash expenses therefore would be lower, 79 Table of Contents and our cash position would not be affected, to the extent we have accurately anticipated the amounts of the grants.
Stock-based compensation expense, when recognized, is charged to cost of revenue or to the category of operating expense corresponding to the service function of the employee or non-employee. ● We also grant discounts to employees when they subscribe for the new shares of ACM Shanghai, and we account for those stock-based awards in accordance with Accounting Standards Codification, or ASC, Topic 718, Compensation—Stock Compensation PRC Government Research and Development Funding ACM Shanghai has received seven special government grants.
Stock-based compensation expense, when recognized, is charged to cost of revenue or to the category of operating expense corresponding to the service function of the employee or non-employee. • We also grant discounts to employee s when they subscribe for the new shares o f ACM Shanghai, and we account for those stock-based awards in accordance with Accounting Standards Codification, or ASC, Topic 718, Compensation—Stock Compensation Mainland China Government Research and Development Funding ACM Shanghai has received seven special government grants.
If actual results differ from these estimates, this could have a material effect on our financial condition and results of operations. 72 Table of Contents We maintained a partial valuation allowance as of December 31, 2022 with respect to certain net deferred tax assets based on our estimates of recoverability.
If actual results differ from these estimates, this could have a material effect on our financial condition and results of operations. We maintained a partial valuation allowance as of December 31, 2023 with respect to certain net deferred tax assets based on our estimates of recoverability.
Under this method, deferred income tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.
Income Taxes Income taxes are accounted for using the liability method. Under this method, deferred income tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.
For the years ended December 31, 2022, 2021 and 2020, related government subsidies recognized as reductions of relevant expenses in the consolidated statements of operations and comprehensive income (loss) were $1.2 million, $11.3 million, and $2.7 million, respectively. ● Government subsidies related to depreciable assets are credited to income over the useful lives of the related assets for which the grant was received.
For the years ended December 31, 2023, 2022, and 2021, related government subsidies recognized as reductions of relevant expenses in the consolidated statements of comprehensive income (loss) we re $1.7 million, $1.2 million, and $11.3 million, respectively. • Government subsidies related to depreciable assets are credited to income over the useful lives of the related assets for which the grant was received.
Interest and penalties related to uncertain tax positions are recorded in the provision for income tax expense on the consolidated statements of operations. Warranty We have provided standard assurance type warranty coverage on our tools for 12 to 36 months, covering labor and parts necessary to repair a tool during the warranty period.
Interest and penalties related to uncertain tax positions are recorded in the provision for income tax expense on the consolidated statements of comprehensive income (loss). 64 Table of Contents Warranty We have provided standard assurance type warranty coverage on our tools for 12 to 36 months, covering labor and parts necessary to repair a tool during the warranty period.
In addition, the U.S. government imposed new restrictions by which U.S. persons anywhere in the world are effectively barred from engaging in certain activities related to the development and production of semiconductors at PRC fabrication facilities meeting specified criteria, even if no items subject to the EAR are involved.
In addition, the U.S. government imposed new restrictions by which U.S. persons anywhere in the world are effectively barred from engaging in certain activities related to the development and production of certain semiconductors at mainland China fabrication facilities meeting specified criteria, even if no items subject to the U.S. Export Administration Regulations (EAR) are involved.
Some of our research and development has been funded by grants from the PRC government, as described in “—PRC Government Research and Development Funding” below.
Some of our research and development has been funded by grants from the mainland China government, as described in “—mainland China Government Research and Development Funding” below.
As a result, we reflect the portion of our net income allocable to the minority holders of ACM Shanghai shares as net income attributable to non-controlling interests.
We reflect the portion of net income allocable to the minority holders of ACM Shanghai shares as net income attributable to non-controlling interests.
Contractual penalties in the case of a delay of Production Start Milestone : o If ACM Shengwei fails to commence production pursuant to the date agreed under the Grant Agreement or any extended commencement date approved by the Grantor, ACM Shengwei shall pay the total deposit for timely commencement of production as liquidated damages; o If ACM Shengwei fails to commence production pursuant to the extended commencement of production date, the Grantor is entitled to terminate the Grant Agreement and take back the Land Use Right.
Contractual penalties in the case of a delay of Production Start Milestone : ◦ If ACM Lingang fails to commence production pursuant to the date agreed under the Grant Agreement or any extended commencement date approved by the Grantor, ACM Lingang shall pay the total deposit for timely commencement of production as liquidated damages; ◦ If ACM Lingang fails to commence production pursuant to the extended commencement of production date (more than six months beyond the production start milestone), the Grantor is entitled to terminate the Grant Agreement and take back the Land Use Right.
The rules include new export license requirements for exports, re-exports or transfers to or within the PRC of additional types of semiconductor manufacturing items, items for use in manufacturing designated types of semiconductor manufacturing equipment in the PRC, and semiconductor manufacturing equipment for use at certain IC manufacturing and development facilities in the PRC.
The rules included new export license requirements for exports, re-exports or transfers to or within mainland China of additional types of semiconductor manufacturing items, items for use in manufacturing designated types of semiconductor manufacturing equipment in mainland China, and semiconductor manufacturing equipment for use at certain IC manufacturing and development facilities in mainland China.
For the years ended December 31, 2022, 2021 and 2020, related government subsidies recognized as other income in the consolidated statements of operations and comprehensive income (loss) were $0.3 million, $0.2 million, and $0.1 million, respectively.
For the years ended December 31, 2023, 2022, and 2021, related government subsidies recognized as other income in the consolidated statements of comprehensive income (loss) were $0.5 million, $0.3 million, and $0.2 million, respectively.
The grants therefore are recorded as long-term liabilities upon receipt, although we are not required to return any funds ACM Shanghai receives.
The grants therefore are recorded as long-term liabilities upon receipt, 61 Table of Contents although we are not required to return any funds ACM Shanghai receives.
Risk Factors—Regulatory Risks—Our ability to sell our tools to Chinese customers has been impacted, and will likely to be materially and adversely impacted, by export license requirements, other regulatory changes, or other actions taken by the U.S. or other governmental agencies” for more information.
Item 1A – Risk Factors – Regulatory Risks – Our ability to sell our tools to customers in mainland China has been impacted, and will likely continue to be materially and adversely impacted, by export license requirements, other regulatory changes, or other actions taken by the U.S. or other governmental agencies” for more information.
Foreign currency translation adjustment Year Ended December 31, 2022 2021 2020 % Change 2022 v 2021 % Change 2021 v 2020 (in thousands) Foreign currency translation adjustment $ (59,102 ) $ 4,695 $ 10,493 -1358.8 % -55.3 % We recorded a foreign currency translation adjustment of ($59.1 million) for the year ended December 31, 2022, as compared to $4.7 million for 2021, based on the net effect of RMB to dollar exchange rate fluctuations for the period on the converted value of ACM Shanghai’s RMB-denominated balances to U.S. dollar equivalents.
Foreign currency translation adjustment Year Ended December 31, 2023 2022 2021 % Change 2023 v 2022 % Change 2022 v 2021 (in thousands) Foreign currency translation adjustment $ (10,617) $ (59,102) $ 4,695 -82.0 % -1358.8 % We recorded a foreign currency translation adjustment of ($10.6 million) for the year ended December 31, 2023, as compared to $(59.1) million for 2022, based on the net effect of RMB to dollar exchange rate fluctuations for the period on the converted value of ACM Shanghai’s RMB-denominated balances to U.S. dollar equivalents.
Interest income (expense), net, decreased in 2021 compared to 2020, principally as a result of reduced interest income from lower interest rates on reduced cash balances, partly offset by reduced interest expenses incurred from short-term and long-term bank loans.
Interest income (expense), net, increased in 2022 compared to 2021, principally as a result of reduced interest income from lower interest rates on reduced cash balances, offset by increase in interest expenses incurred from short-term and long-term bank loans.
During the year ended December 31, 2022, we funded our technology development and operations principally through our beginning global cash balances, including the cash balances at ACM Shanghai, and borrowings by ACM Shanghai from local financial institutions.
During the year ended December 31, 2023, we funded our technology development and operations principally through our beginning global cash balances, including the cash balances at ACM Shanghai, borrowings by ACM Shanghai from local financial institutions and our loan from China CITIC Bank.
In addition, ACM Shanghai has experienced challenges as the companies in its supply chain adapt their policies to the new regulations. These factors had an adverse impact on ACM Shanghai’s shipments and sales in the three months ended December 31, 2022.
In addition, ACM Shanghai has experienced challenges as the companies in its supply chain adapt their policies to the new regulations. These factors had an adverse impact on ACM Shanghai’s shipments and sales for the twelve months ended December 30, 2023.
The actual product performance and field expense profiles may differ, and in those cases, we adjust our warranty accruals accordingly. As of December 31, 2022 and 2021, we had accrued $8.8 million and $6.6 million, respectively, in liability contingency for potential warranty claims.
The actual product performance and field expense profiles may differ, and in those cases, we adjust our warranty accruals according ly. As of December 31, 2023 and 2022, we had accrued $9.8 million and $8.8 million, respectively, in liability contingency for potential warranty claims.
We realized $3.3 million of other income (expense) in the year ended December 31, 2022, of which $1.7 million was due to gains realized from transactions that resulted from changes in the RMB-to-U.S. dollar exchange rate, as compared to a loss of ($0.6 million) in the corresponding period in 2021.
We realized $1.6 million of other expense in the year ended December 31, 2023, of which $2.0 million was due to loss realized from transactions that resulted from changes in the RMB-to-U.S. dollar exchange rate, as compared to a foreign exchange gain of 1.7 million in the corresponding period in 2022. 68 Table of Contents Other income (expense) increased by $3.3 million in the year ended December 31, 2022, of which $1.7 million was due to gains realized from transactions that resulted from changes in the RMB-to-U.S. dollar exchange rate, as compared to a loss of ($0.6 million) in the corresponding period in 2021.
We will continue to seek to leverage our local presence to address the growing market for semiconductor manufacturing equipment in the region by working closely with regional chip manufacturers to understand their specific requirements, encourage them to adopt our SAPS, TEBO, Tahoe, ECP, furnace, PECVD, Track, and other technologies, and enable us to design innovative products and solutions to address their needs.
We will continue to seek to leverage our local presence to address the growing market for semiconductor manufacturing equipment in the region by working closely with regional chip manufacturers to understand their specific requirements, encourage them to adopt our SAPS, TEBO, Tahoe, ECP, furnace, PECVD, Track, and other technologies, and enable us to design innovative products and solutions to address their needs. 55 Table of Contents Our Independent Registered Public Accounting Firm The U.S.
As described under “—Key Components of Results of Operations—PRC Government Research and Development Funding,” ACM Shanghai has received research and development grants from local and central PRC governmental authorities.
As described under “—Key Components of Results of Operations—mainland China Government Research and Development Funding,” ACM Shanghai has received research and development grants from local and central mainland China governmental author ities.
We conduct a substantial majority of our product development, manufacturing, support and services in the PRC, with additional product development and subsystem production in South Korea.
We conduct a substantial majority of our product development, manufacturing, support and services in mainland China, with additional product development and subsystem production in Korea.
In such case, the Grantor shall refund the Grant Fees for the remaining land use term after deducting the deposit agreed under the Grant Agreement and refund the deposit for timely commencement of production and relevant bank interests in full to ACM Shengwei. • The Production Start Milestone was originally required to be met prior to January 9, 2024.
In such case, the Grantor shall refund the Grant Fees for the remaining land use term after deducting the deposit agreed under the Grant Agreement and refund the deposit for timely commencement of production and relevant bank interests in full to ACM Lingang. • The Production Start Milestone is now required to be met by January 9, 2025.
Without reduction by grant amounts received from PRC governmental authorities (see “—PRC Government Research and Development Funding”), gross research and development expense totaled $63.4million, or 16.3% of total revenue, in the year ended December 31, 2022 as compared to $45.5 million, or 17.5% of revenue, in the corresponding period in 2021.
Without reduction by grant amounts received from mainland China governmental authorities (see “—mainland China Government Research and Development Funding”), gross research and development expense totaled $94.5 million, or 16.9% of total revenue, in the year ended December 31, 2023 as compared to $63.4 million, or 16.3% of revenue, in the corresponding period in 2022.
Our Independent Registered Public Accounting Firm The HFCA Act requires that the PCAOB determine whether it is unable to inspect or investigate completely registered public accounting firms located in a non-U.S. jurisdiction because of a position taken by one or more authorities in any non-U.S. jurisdiction.
Holding Foreign Companies Accountable Act, or the HFCA Act, requires that the Public Company Accounting Oversight Board, or the PCAOB, determine whether it is unable to inspect or investigate completely registered public accounting firms located in a non-U.S. jurisdiction because of a position taken by one or more authorities in any non-U.S. jurisdiction.
Research and development expense represented 16.0% and 13.2% of our revenue in the years ended December 31, 2022 and 2021, respectively.
Research and development expense represented 16.6% and 16.0% of our revenue in the years ended December 31, 2023 and 2022, respectively.
The impact of fluctuations of the RMB to U.S. dollar currency exchange rate on a significant balance of our cash, and cash equivalents held in RMB-denominated accounts (Note 2) contributed to a $33.8 million decline in the value of these items during the year ended December 31, 2022 .
The impact of fluctuations of the RMB to U.S. dollar currency exchange rate on a significant balance of our cash, and cash equivalents held in RMB-denominated accounts (Note 2) contributed t o a $1.7 million decrease in the value of these items during the year ended December 31, 2023.
In 2021, ACM Shanghai was certified as an eligible integrated circuit production enterprise and is entitled to a preferential income tax rate of 12.5% from January 1, 2020 to December 31, 2022. We file income tax returns in the United States and state and foreign jurisdictions.
In 2021, ACM Shanghai was certified as an eligible integrated circuit production enterprise and is entitled to a preferential income tax rate of 12.5% from January 1, 2020 to December 31, 2022.
There were no adjustments made in 2022. 78 Table of Contents Our effective tax rate differs from statutory rates of 21% for U.S. federal income tax purposes and 12.5% to 25% for PRC income tax purposes due to the effects of the valuation allowance and certain permanent differences as it pertains to book-tax differences in the treatment of stock-based compensation and non-U.S. research expenses.
Our effective tax rate differs from statutory rates of 21% for U.S. federal income tax purposes and 12.5% to 25% for mainland China income tax purposes due to the effects of the valuation allowance and certain permanent differences as it pertains to book-tax differences in the treatment of stock-based compensation and non-U.S. research expenses.
A good or service is distinct if the customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer, and the good or service is distinct in the context of the contract.
A good or service is distinct if the customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer, and the good or service is distinct in the context of the contract. Our performance obligations generally include sales of tools and spare parts.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeWe report the impact of foreign exchange fluctuations in the other income (expense) line item of our Consolidated Statements of Operations and Comprehensive Income statements. For 2022, 2021 and 2020, the effect of fluctuations of foreign currencies contributed realized gains (losses) of $1.7 million, ($0.6 million) and ($4.4 million), respectively.
Biggest changeWe report the impact of foreign exchange fluctuations in the other income (expense) line item of our Consolidated Statements of Comprehensive Income statements. For 2023, 2022, and 2021, the effect of fluctuations of foreign currencies contributed realized gains (losses) of $(2.0) million, 1.7 million, and ($0.6 million), respectively.
Adjustments resulting from the translation are recorded in stockholders’ equity as part of accumulated other comprehensive income. The majority of our business is conducted through our ACM Shanghai subsidiary that manufactures and sells our products in various global markets, and we also have operations in South Korea, the Taiwan Region, the United States, and other countries.
Adjustments resulting from the translation are recorded in stockholders’ equity as part of accumulated other comprehensive income. The majority of our business is conducted through our ACM Shanghai subsidiary that manufactures and sells our products in various global markets, and we also have operations in Korea, the Taiwan Region, the United States, and other countries.
As of December 31, 2022, the balance of our long-term borrowings (see note 12 in the Notes to Consolidated Financial Statements included herein under “Item 8. Financial Statements and Supplementary Data.”) carries a fixed interest rated and we may be exposed to fair value interest rate risk.
As of December 31, 2023, the balance of our long-term borrowings (see note 12 in the Notes to Consolidated Financial Statements included herein under “Item 8. Financial Statements and Supplementary Data.”) carries a fixed interest rated and we may be exposed to fair value interest rate risk.
We have implemented policies and procedures to measure, manage, monitor and report risk exposures, which are reviewed regularly by management and the board of directors. We identify risk exposures and monitor and manage such risks on an ongoing basis. 89 Table of Contents
We have implemented policies and procedures to measure, manage, monitor and report risk exposures, which are reviewed regularly by management and the board of directors. We identify risk exposures and monitor and manage such risks on an ongoing basis. 82 Table of Contents
The PRC government imposes significant exchange restrictions on fund transfers out of the PRC that are not related to business operations. To date these restrictions have not had a material impact on us because we have not engaged in any significant transactions that are subject to the restrictions.
The mainland China government imposes significant exchange restrictions on fund transfers out of mainland China that are not related to business operations. To date these restrictions have not had a material impact on us because we have not engaged in any significant transactions that are subject to the restrictions.
Transactions in foreign currencies are initially recorded at the functional currency rate prevailing at the date of the transactions. Any difference between the initially recorded amount and the settlement amount is recorded as a gain or loss on foreign currency transaction in our consolidated statements of operations.
Transactions in foreign currencies are initially recorded at the functional currency rate prevailing at the date of the transactions. Any difference between the initially recorded amount and the settlement amount is recorded as a gain or loss on foreign currency transaction in our consolidated statements of comprehensive income (loss).
In accordance with ASC Topic 830, Foreign Currency Matters , we translate the assets and liabilities into U.S. dollars from RMB using the rate of exchange prevailing at the applicable balance sheet date and the consolidated statements of operations and cash flows are translated at an average rate during the reporting period.
In accordance with ASC Topic 830, Foreign Currency Matters , we translate the assets and liabilities into U.S. dollars from RMB using the rate of exchange prevailing at the applicable balance sheet date and the consolidated statements of comprehensive income (loss) and cash flows are translated at an average rate during the reporting period.
Interest Rate Risk As of December 31, 2022, 2021 and 2020, the balance of our short term bank borrowings (see note 9 in the Notes to Consolidated Financial Statements included herein under “Item 8. Financial Statements and Supplementary Data.”), mature at various dates within the following year and d o not expose us to interest rate risk.
Interest Rate Risk As of December 31, 2023, 2022, and 2021, the balance of our short term bank borrowings (see note 9 in the Notes to Consolidated Financial Statements included herein under “Item 8. Financial Statements and Supplementary Data.”), mature at various dates within the following year and do not expose us to interest rate risk.
Foreign Currency Exchange Risk Our consolidated financial statements are presented in U.S. dollars, which is our reporting currency, while the functional currency of our subsidiaries in the PRC is RMB, and the functional currency of our subsidiary in South Korea is the South Korean Won, or the KRW.
Foreign Currency Exchange Risk Our consolidated financial statements are presented in U.S. dollars, which is our reporting currency, while the functional currency of our subsidiaries in mainland China is RMB, and the functional currency of our subsidiary in Korea is the Korean Won, or the KRW.
For example, because of our significant manufacturing operations in the PRC, a weakening RMB is advantageous and a strengthening RMB is disadvantageous to our financial results. At this time, we have not established a formal hedging policy to attempt to reduce the inherent risks of potential currency fluctuations on our global operations.
For example, because of our significant manufacturing operations in mainland China, a weakening RMB is advantageous and a strengthening RMB is disadvantageous to our financial results. At this time, we have not established a formal hedging 81 Table of Contents policy to attempt to reduce the inherent risks of potential currency fluctuations on our global operations.

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