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What changed in ALPHA & OMEGA SEMICONDUCTOR Ltd's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of ALPHA & OMEGA SEMICONDUCTOR Ltd's 2023 and 2024 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 2024 report.

+308 added−344 removedSource: 10-K (2024-08-23) vs 10-K (2023-08-29)

Top changes in ALPHA & OMEGA SEMICONDUCTOR Ltd's 2024 10-K

308 paragraphs added · 344 removed · 248 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

57 edited+15 added−11 removed120 unchanged
Biggest changeDistributors and customers We have established direct relationships with key OEMs, including Dell Inc., Hewlett-Packard Company, Samsung Group, and Stanley Black & Decker, Inc., most of whom we serve through our distributors and ODMs. In addition, based on our historical design win activities, our power semiconductors are also incorporated into products sold to many other leading OEMs.
Biggest changeAlso, we introduced MRigidCSP™ package technology strengthening our battery management MOSFETs. In addition, we announced application-specific EZBuck™ regulator to power 5V system rails. Distributors and customers We have established direct relationships with key OEMs, including Dell Inc., Hewlett-Packard Company, Samsung Group, and Stanley Black & Decker, Inc., most of whom we serve through our distributors and ODMs.
As of December 1, 2021, we owned 50.9%, and the Chongqing Funds owned 49.1%, of the equity interest in the JV Company. The Joint Venture 1 was accounted under the provisions of the consolidation guidance since we had controlling financial interest until December 1, 2021. As of December 2, 2021, we ceased having control over the JV Company.
As of December 1, 2021, we owned 50.9%, and the Chongqing Funds owned 49.1%, of the equity interest in the JV Company. The Joint Venture was accounted under the provisions of the consolidation guidance since we had controlling financial interest until December 1, 1 2021. As of December 2, 2021, we ceased having control over the JV Company.
While we focus our patent efforts in the United States, we file corresponding foreign patent applications in other jurisdictions, such as China and Taiwan, when filing is justified by cost and strategic importance. The patents are increasingly 9 important to remain competitive in our industry, and a strong patent portfolio will facilitate the entry of our products into new markets.
While we focus our patent efforts in the United States, we file corresponding foreign patent applications in other jurisdictions, such as China and Taiwan, when filing is justified by cost and strategic importance. The patents are increasingly important to remain competitive in our industry, and a strong patent portfolio will facilitate the entry of our products into new markets.
The proliferation of computer and consumer electronics, such as notebooks, tablets, smart phones, flat panel displays and portable media players created the need for sophisticated power management that increases power efficiency and extends battery life. The evolution of these products is characterized by increased functionality, thinner and smaller form factors and decreasing prices.
The proliferation of computer and consumer electronics, such as notebooks, tablets, smart phones, flat panel displays and portable media players created the need for sophisticated power management that increases power efficiency and extends battery life. The evolution of these 2 products is characterized by increased functionality, thinner and smaller form factors and decreasing prices.
Our Power IC and low voltage (5V-40V) MOSFET products address these markets. In the area of AC-DC power supplies for electronic 2 equipment, data centers and servers, the market is characterized by a continuous demand for energy conservation through higher efficiency, which drives the market for our medium voltage (40V-400V) and high voltage (500V-1000V) MOSFET products.
Our Power IC and low voltage (5V-40V) MOSFET products address these markets. In the area of AC-DC power supplies for electronic equipment, data centers and servers, the market is characterized by a continuous demand for energy conservation through higher efficiency, which drives the market for our medium voltage (40V-400V) and high voltage (500V-1000V) MOSFET products.
In addition, our distributors and sales representatives assist us in our sales and marketing efforts by identifying potential customers, creating additional demand and promoting our products, in which case we may pay a sales commission. Our sales cycle varies depending on the types of products and can range from six to eighteen months.
In addition, our distributors and sales representatives 6 assist us in our sales and marketing efforts by identifying potential customers, creating additional demand and promoting our products, in which case we may pay a sales commission. Our sales cycle varies depending on the types of products and can range from six to eighteen months.
Accordingly, we intend to leverage our expertise to increase the number of power discrete technology platforms and power IC designs, including future digital power controller products that are currently under development, to expand our product offerings and deliver complete power solutions for our targeted applications.
Accordingly, we intend to leverage our expertise to increase the number of power discrete technology platforms and power IC designs, including future digital power controller products that are currently under development, to expand our product offerings and deliver complete 3 power solutions for our targeted applications.
Backlog Our sales are made primarily pursuant to standard purchase orders from distributors and direct customers. The amount of backlog to be shipped during any period depends on different factors, and all orders are subject to cancellation or modification, 7 usually with no penalty to customers.
Backlog Our sales are made primarily pursuant to standard purchase orders from distributors and direct customers. The amount of backlog to be shipped during any period depends on different factors, and all orders are subject to cancellation or modification, usually with no penalty to customers.
Our Nominating and Corporate Governance Committee leads the effort in recruiting qualified directors to serve on our Board. Our employees appreciate and value the strength of our people-oriented culture and the benefits our workplace diversity brings. We commit to a fair and living wage for all employees.
Our Nominating 10 and Corporate Governance Committee leads the effort in recruiting qualified directors to serve on our Board. Our employees appreciate and value the strength of our people-oriented culture and the benefits our workplace diversity brings. We commit to a fair and living wage for all employees.
In contrast, our newer Power IC and IGBT 6 products, used mostly in the power supply, home appliance and industrial applications, require a more extended design and marketing timeline and thus have a longer sales cycle.
In contrast, our newer Power IC and IGBT products, used mostly in the power supply, home appliance and industrial applications, require a more extended design and marketing timeline and thus have a longer sales cycle.
During the past three years, we have gradually reduced our reliance on third-party foundries and increased allocation of capacity to our Oregon Fab and Chongqing JV Fab.
During the 8 past three years, we have gradually reduced our reliance on third-party foundries and increased allocation of capacity to our Oregon Fab and Chongqing JV Fab.
During the fiscal year ended June 30, 2023, we continued our diversification strategy by developing new silicon and packaging platforms to expand our serviceable available market, or SAM, and offer higher performance products. Our metal-oxide-semiconductor field-effect transistors, or MOSFET, portfolio expanded significantly across a full range of voltage applications.
During the fiscal year ended June 30, 2024, we continued our diversification strategy by developing new silicon and packaging platforms to expand our serviceable available market, or SAM, and offer higher performance products. Our metal-oxide-semiconductor field-effect transistors, or MOSFET, portfolio expanded significantly across a full range of voltage applications.
We are also subject to SEC rules that require diligence, disclosure and reporting on whether certain minerals and metals, known as conflict minerals, used in our products originate from the Democratic Republic of Congo and adjoining countries. As of June 30, 2023, 2022 and 2021, we were in compliance with the related conflict minerals rule.
We are also subject to SEC rules that require diligence, disclosure and reporting on whether certain minerals and metals, known as conflict minerals, used in our products originate from the Democratic Republic of Congo and adjoining countries. As of June 30, 2024, 2023 and 2022, we were in compliance with the related conflict minerals rule.
Our efforts to develop innovative packaging technologies continues to provide new and cost-effective solutions with higher power density to our customers. During the fiscal year ended June 30, 2023, we continued our diversification strategies by developing new silicon and packaging platforms to expand our SAM and offer higher performance products.
Our efforts to develop innovative packaging technologies continues to provide new and cost-effective solutions with higher power density to our customers. During the fiscal year ended June 30, 2024, we continued our diversification strategies by developing new silicon and packaging platforms to expand our SAM and offer higher performance products.
Power ICs can be implemented by incorporating all necessary power functions either on one piece of silicon or multiple silicon chips encapsulated into a single device. Additionally, advancements in semiconductor packaging technology enables increased power density and shrinking form factors.
Power ICs can be implemented by incorporating all necessary power functions either on one piece of silicon or multiple silicon chips encapsulated into a single device. Additionally, advancements in semiconductor packaging technology enable increased power density and shrinking form factors.
We offer competitive compensation and benefits packages for our employees that include a combination of base salary, annual bonus, discretionary bonus for outstanding achievements, an employee share purchase plan, time-based and performance-based long-term equity compensation.
We offer competitive compensation and benefits packages for our employees that include a combination of base salary, annual bonus, discretionary bonus for outstanding achievements, an employee stock purchase plan, time-based and performance-based long-term equity compensation.
Our sales seasonality is affected by a number of factors, including global and regional economic conditions as well as the PC market condition, revenue generated from new products, changes in distributor ordering patterns in response to channel inventory adjustments and end customer demand for our products and fluctuations in consumer purchase patterns prior to major holiday seasons.
Our sales seasonality is affected by a number of factors, including global and regional economic conditions as well as the PC market trends and conditions, revenue generated from new products, changes in distributor ordering patterns in response to channel 7 inventory adjustments and end customer demand for our products and fluctuations in consumer purchase patterns prior to major holiday seasons.
As part of the enhanced process, we have also conducted extensive risk assessment on export control compliance and implemented training programs for our employees. Executive Officers The following table lists the names, ages and positions of our executive officers as of August 15, 2023. There are no family relationships between any executive officer, except that Mr. Stephen C.
As part of the enhanced process, we have also conducted extensive risk assessment on export control compliance and implemented training programs for our employees. Executive Officers The following table lists the names, ages and positions of our executive officers as of August 15, 2024. There are no family relationships between any executive officers, except that Mr. Stephen C.
For example, as part of our market diversification strategy, we have deployed and plan to recruit more, field application engineers, or FAEs, for our new product offerings, who provide real-time and local response to our end customers' needs. FAEs work with our end customers to understand their requirements and resolve technical problems.
For example, as part of our market diversification strategy, we have deployed and plan to recruit more, field application engineers, or FAEs, for our new product offerings, providing real-time and local response to our end customers' needs. FAEs work with our end customers to understand their requirements and resolve technical problems.
Our business model leverages global resources, including research and development and manufacturing in the United States and Asia. Our sales and technical support teams are localized in several growing markets around the world.
Our business model leverages global resources, including research and development and manufacturing in the United States and Asia. Our sales and technical support teams are localized in several growing markets.
Chang, Ph.D ., is the founder of our company and serves as our Executive Chairman. Dr. Chang served as Chief Executive Officer from the founding of our company until March 2023. Prior to establishing our company, Dr.
Chang, Ph.D ., is the founder of our company and serves as our Executive Chairman. Dr. Chang served as Chief Executive Officer since the founding of our company until March 2023. Prior to establishing our company, Dr.
Our power ICs deliver power as well as control and regulate the power management variables, such as the flow of current and level of voltage. Our DrMOS family of products continue to grow as we paired our latest high performance MOSFET silicon with our latest Driver IC technologies.
Our power ICs deliver power as well as control and regulate the power management variables, such as the flow of current and level of voltage. Our DrMOS and smart power stage (SPS) family of products continue to grow as we paired our latest high performance MOSFET silicon with our latest Driver IC and smart driver technologies.
We plan to further expand the breadth of our product portfolio to increase our total bill-of-materials within an electronic system and to address the power requirements of additional electronic systems. Our product portfolio currently consists of approximately 2,600 products and we have introduced over 60 new products in this past fiscal year.
We plan to further expand the breadth of our product portfolio to increase our total bill-of-materials within an electronic system and to address the power requirements of additional electronic systems. Our product portfolio currently consists of approximately 2,700 products and we have introduced over 100 new products in this past fiscal year.
Chang is a son of Dr. Mike F. Chang. 11 Name Age Position Stephen C. Chang 46 Chief Executive Officer and Director Mike F.
Chang is a son of Dr. Mike F. Chang. 11 Name Age Position Stephen C. Chang 47 Chief Executive Officer and Director Mike F.
Our Type C smart load switch product line has also expanded as it offers reverse blocking capability, designed to protect applications against high voltage exposure. 4 The following table lists our product families and the principal end uses of our products: Product Family Description Product Categories within Product Type Typical Application Power Discretes Low on-resistance switch used for routing current and switching voltages in power control circuits High power switches used for power circuits DC-DC for CPU/GPU DC-AC conversion AC-DC conversion Load switching Motor control Battery protection Power factor correction Smart phone chargers, battery packs, notebooks, desktop and servers, data centers, base stations, graphics card, game boxes, TVs, AC adapters, power supplies, motor control, power tools, E-vehicles, white goods and industrial motor drives, UPS systems, solar inverters and industrial welding Power ICs Integrated devices used for power management and power delivery DC-DC Buck conversion DC-DC Boost conversion Smart load switching DrMOS power stage Flat panel displays, TVs, Notebooks, graphic cards, servers, DVD/Blu-Ray players, set-top boxes, and networking equipment Analog power devices used for circuit protection and signal switching Transient voltage protection Analog switch Electromagnetic interference filter Notebooks, desktop PCs, tablets, flat panel displays, TVs, smart phones, and portable electronic devices Power discrete products Power discretes are used across a wide voltage and current spectrum, requiring high efficiency and reliability under harsh conditions.
The following table lists our product families and the principal end uses of our products: Product Family Description Product Categories within Product Type Typical Application Power Discretes Low on-resistance switch used for routing current and switching voltages in power control circuits High power switches used for power circuits DC-DC for CPU/GPU DC-AC conversion AC-DC conversion Load switching Motor control Battery protection Power factor correction Smart phone chargers, battery packs, notebooks, desktop and servers, data centers, base stations, graphics card, game boxes, TVs, AC adapters, power supplies, motor control, power tools, E-vehicles, white goods and industrial motor drives, UPS systems, solar inverters and industrial welding Power ICs Integrated devices used for power management and power delivery DC-DC Buck conversion DC-DC Boost conversion Smart load switching DrMOS power stage Flat panel displays, TVs, Notebooks, graphic cards, servers, DVD/Blu-Ray players, set-top boxes, and networking equipment Analog power devices used for circuit protection and signal switching Transient voltage protection Analog switch Electromagnetic interference filter Notebooks, desktop PCs, tablets, flat panel displays, TVs, smart phones, and portable electronic devices Power discrete products Power discretes are used across a wide voltage and current spectrum, requiring high efficiency and reliability under harsh conditions.
Chang, Ph.D. 78 Executive Chairman and Chairman of the Board Yifan Liang 59 Chief Financial Officer and Corporate Secretary Wenjun Li, Ph.D. 54 Chief Operating Officer Bing Xue, Ph.D. 59 Executive Vice President of Worldwide Sales and Business Development Stephen C. Chang has served as our Chief Executive Officer since March 2023 and as a director since November 2022. Mr.
Chang, Ph.D. 79 Executive Chairman and Chairman of the Board Yifan Liang 60 Chief Financial Officer and Corporate Secretary Wenjun Li, Ph.D. 55 Chief Operating Officer Bing Xue, Ph.D. 60 Executive Vice President of Worldwide Sales and Business Development Stephen C. Chang has served as our Chief Executive Officer since March 2023 and as a director since November 2022. Mr.
Research and development We view technology as a competitive advantage, and we invest significant time and capital in research and development to address the technology-intensive needs of our end customers. Our research and development expenditures for the fiscal years of 2023, 2022 and 2021 were $88.1 million, $71.3 million and $63.0 million, respectively.
Research and development We view technology as a competitive advantage, and we invest significant time and capital in research and development to address the technology-intensive needs of our end customers. Our research and development expenditures for the fiscal years of 2024, 2023 and 2022 were $89.9 million, $88.1 million and $71.3 million, respectively.
Liang joined our company in August 2004 as our Corporate Controller. Prior to joining us, Mr. Liang held various positions at PricewaterhouseCoopers LLP, or PwC, from 1995 to 2004, including Audit Manager in PwC’s San Jose office. Mr.
Liang became our company's corporate controller in August 2004. Prior to joining us, Mr. Liang held various positions at PricewaterhouseCoopers LLP, or PwC, from 1995 to 2004, including Audit Manager in PwC’s San Jose office. Mr.
We have also entered into intellectual property licensing agreements with other companies, including On Semiconductor Corp. and Giant Semiconductor Corporation, to use selected third-party technology for the development of our products, although we do not believe our business is dependent to any significant degree on any individual third-party license agreement.
We have also entered into intellectual property licensing agreements with other companies to use selected 9 third-party technology for the development of our products, although we do not believe our business is dependent to any significant degree on any individual third-party license agreement.
In addition, we have engaged nationally-recognized outside independent compensation 10 consulting firms to independently evaluate the appropriateness and effectiveness of compensation for our executives and other officers and to provide benchmarks for executive compensation as compared to peer companies. The health and safety of our employees are paramount to our company.
In addition, we have engaged nationally-recognized outside independent compensation consulting firms to independently evaluate the appropriateness and effectiveness of compensation for our executives and other officers and to provide benchmarks for executive compensation as compared to peer companies.
In addition, our ability to develop new technology is enhanced by the operation of our own manufacturing facilities in Oregon and Chongqing.
In addition, our ability to develop new technology is enhanced by the operation of our own manufacturing facilities in Oregon and our close partnership with the JV.
Sales to WPG and Promate accounted for 35.6% and 21.6% of our revenue, respectively, for the fiscal year ended June 30, 2023, 39.7% and 24.6% of our revenue, respectively, for the fiscal year ended June 30, 2022, and 35.4% and 28.7% of our revenue, respectively, for fiscal year ended June 30, 2021, respectively.
Sales to WPG and Promate accounted for 46.0% and 25.0% of our revenue, respectively, for the fiscal year ended June 30, 2024, 35.6% and 21.6% of our revenue, respectively, for the fiscal year ended June 30, 2023, and 39.7% and 24.6% of our revenue, respectively, for fiscal year ended June 30, 2022, respectively.
Our portfolio of power semiconductors includes approximately 2,600 products, and has grown significantly with the introduction of over 60 new products in the fiscal year ended June 30, 2023, and over 130 and 160 new products in the fiscal year ended June 30, 2022 and 2021, respectively.
Our portfolio of power semiconductors includes approximately 2,700 products, and has grown with the introduction of over 100 new products in the fiscal year ended June 30, 2024, and over 60 and 130 new products in the fiscal years ended June 30, 2023 and 2022, respectively.
The final tested products are then shipped to our distributors or customers. Our in-house and wholly-owned packaging and testing facilities are located in Shanghai, China which handle most of our packaging and testing requirements for our products. In addition, the JV Company handles a portion of our packaging and testing requirement.
Our in-house and wholly-owned packaging and testing facilities are located in Shanghai, China which handle most of our packaging and testing requirements for our products. In addition, the JV Company handles a portion of our packaging and testing requirement.
Human Capital Resources As of June 30, 2023, we had 2,468 employees, of whom 781 were located in the United States, 1,502 were located in China, and 185 were located in other parts of the world. None of our employees is represented by a collective bargaining agreement.
Human Capital Resources As of June 30, 2024, we had 2,332 employees, of whom 745 were located in the United States, 1,409 were located in China, and 178 were located in other parts of the world. None of our employees is represented by a collective bargaining agreement.
Leverage our power semiconductor expertise to drive new technology platforms We believe that the ever-increasing demand for power efficiency in power semiconductors requires expertise in and a deep understanding of the interrelationship among device physics, process technologies, design and packaging.
Leverage our power semiconductor expertise to drive new technology platforms We believe that the ever-increasing demand for power efficiency in power semiconductors requires expertise in and a deep understanding of the interrelationship among device physics, process technologies, design and packaging. We also believe that engineers with experience and understanding of these multiple disciplines are in great demand but short supply.
As of June 30, 2023, we had 918 patents issued in the United States, of which 911 were based on our research and development efforts and 7 were acquired, and these patents are set to expire between 2023 and 2041.
As of June 30, 2024, we had 930 patents issued in the United States, of which 927 were based on our research and development efforts and 3 were acquired, and these patents are set to expire between 2024 and 2042.
After packaging, all devices are tested in accordance with our specifications and substandard or defective devices are rejected. We have established quality assurance procedures that are intended to control quality throughout the manufacturing process, including qualifying new parts for production at each packaging facility, conducting root cause analysis, testing for lots with process defects and implementing containment and preventive actions.
We have established quality assurance procedures that are intended to control quality throughout the manufacturing process, including qualifying new parts for production at each packaging facility, conducting root cause analysis, testing for lots with process defects and implementing containment and preventive actions. The final tested products are then shipped to our distributors or customers.
We also had a total of 980 foreign patents, including 446 Chinese patents, 489 Taiwanese patents, 24 Korean patents, 4 Hong Kong patents, 5 Philippine patents, 8 Japanese patents, 2 Europe patent and 2 India patent as of June 30, 2023. Substantially all of our foreign patents were based on our research and development efforts.
We also had a total of 1,025 foreign patents, including 468 Chinese patents, 506 Taiwanese patents, 27 Korean patents, 4 Hong Kong patents, 5 Philippine patents, 8 Japanese patents, 3 Europe patent and 4 India patent as of June 30, 2024. Substantially all of our foreign patents were based on our research and development efforts.
We have an extensive patent portfolio that consists of 918 patents and 45 patent applications in the United States as of June 30, 2023. We also have a total of 980 foreign patents, which were based primarily on our research and development efforts through June 30, 2023.
We have an extensive patent portfolio that consists of 930 issued patents and 52 pending patents in the United States as of June 30, 2024. We also have a total of 1,025 foreign patents, which were based primarily on our research and development efforts through June 30, 2024.
These foreign patents will expire in the years between 2023 and 2041. In addition, as of June 30, 2023, we had a total of 159 patent applications, of which 45 patents were pending in the United States, 81 patents were pending in China, 22 patents were pending in Taiwan and 11 patents were pending in other countries.
These foreign patents will expire in the years between 2024 and 2042. In addition, as of June 30, 2024, we had a total of 159 patent applications, of which 52 patents were pending in the United States, 79 patents were pending in China, 23 patents were pending in Taiwan and 5 patents were pending in other countries.
In February 2023, we entered into a license agreement with a customer to license our proprietary SiC technology and to provide 24-months of engineering and development services for a total fee of $45 million, consisting of upfront fees and fees upon the achievement of specified engineering services and product milestones.
In February 2023, we entered into a license agreement with a customer to license our proprietary SiC technology and to provide 24-months of engineering and development services for a total fee of $45 million, consisting of fees of $18.0 million, $6.8 million and $9.0 million paid to us in the March 2023, July 2023 and February 2024, respectively, with the remaining amount to be paid upon the achievement of specified engineering services and product milestones.
We also 3 believe that engineers with experience and understanding of these multiple disciplines are in great demand but short supply. Within this context, we believe that we are well positioned to be a leader in providing total power management solutions because of our extensive pool of experienced scientists and engineers and our strong IP portfolio.
Within this context, we believe that we are well positioned to be a leader in providing total power management solutions because of our extensive pool of experienced scientists and engineers and our strong IP portfolio.
Although our largest end-market is the personal computing (“PC”) market, we have successfully diversified our business by expanding into other markets, including consumer, communications, and industrial markets. While we have made progress in our diversification and expansion into additional applications, we continue to support and grow our PC business by expanding bill-of-material content, gaining market share, and acquiring new customers.
While we have made progress in our diversification and expansion into additional applications, we continue to support and grow our PC business by expanding bill-of-material content, gaining market share, and acquiring new customers.
Through our distributors, we provide products to ODMs who traditionally are contract manufacturers for OEMs. As the industry has evolved, ODMs are increasingly responsible for designing portions, or entire systems, of the products they manufacture for the OEMs. In addition, several ODMs are beginning to design, manufacture and brand their own proprietary products, which they sell directly to consumers.
As the industry has evolved, ODMs are increasingly responsible for designing portions, or entire systems, of the products they manufacture for the OEMs. In addition, several ODMs are beginning to design, manufacture and brand their own proprietary products, which they sell directly to consumers. Our ODM customers include Compal Electronics, Inc., Foxconn, Quanta Computer Incorporated, Wistron Corporation and Delta Electronics.
We operate an 8-inch wafer fabrication facility located in Hillsboro, Oregon (the "Oregon fab"), which is critical for us to accelerate proprietary technology development, new product introduction and improve our financial performance. We also expanded and upgraded our manufacturing capabilities at the Oregon Fab in 2023.
We operate an 8-inch wafer fabrication facility located in Hillsboro, Oregon, or the Oregon Fab, which is critical for us to accelerate proprietary technology development, new product introduction and improve our financial performance. To meet the market demand for the more mature high volume products, we also utilize the wafer manufacturing capacity of selected third party foundries.
We believe our in-house packaging and testing capability provides us with a competitive advantage in proprietary packaging technology, product quality, cost and sales cycle time.
For assembly and test, we primarily rely upon our in-house facilities in China. In addition, we utilize subcontracting partners for industry standard packages. We believe our in-house packaging and testing capability provides us with a competitive advantage in proprietary packaging technology, product quality, cost and sales cycle time.
These companies seek to reduce or eliminate fixed costs by outsourcing both product manufacturing and development of process technologies to third parties. Our model balances between technological advancement and cost effectiveness by using a dedicated in-house technology research and development team to drive rapid new product developments, while utilizing both in-house and third-party foundry capacity for our products.
Our business and operational model is based on achieving a balance between technological advancement and cost effectiveness by using a dedicated in-house technology research and development team to drive rapid new product developments, while utilizing both in-house and third-party foundry capacity for our products.
We differentiate ourselves by integrating our expertise in technology, design, and advanced packaging to optimize product performance and cost. Our portfolio of products targets high-volume applications, including portable computers, graphics cards, home appliances, power tools, smart phones, battery packs, consumer and industrial motor controls and power supplies for TVs, computers, servers and telecommunications equipment.
Our portfolio of products targets high-volume applications, including personal computers, graphic cards, game consoles, flat panel TVs, home appliances, power tools, smart phones, battery packs, consumer and industrial motor controls and power supplies for TVs, computers, servers and telecommunications equipment.
We entered into an agreement with the JV Company for the Chongqing Fab, pursuant to which the JV Company agrees to provide us with a monthly wafer production capacity guarantee, subject to future increase when the JV Company’s production capacity reaches certain specified levels.
On July 12, 2022, we entered into an agreement with the JV Company for the Chongqing Fab, pursuant to which the JV Company committed to provide us with a monthly wafer production capacity until December 2023, and additional commitment to provide wafer capacity after December 2023 if the JV Company’s production capacity reaches certain specified level.
In general, under our agreements with distributors, they have limited rights to return unsold merchandise, subject to time and volume limitations. As of June 30, 2023, 2022 and 2021, our two largest distributors were WPG Holdings Limited, or WPG, and Promate Electronic Co. Ltd., or Promate.
As of June 30, 2024, 2023 and 2022, our two largest distributors were WPG Holdings Limited, or WPG, and Promate Electronic Co. Ltd., or Promate.
Currently our main third-party foundry is Shanghai Hua Hong Grace Electronic Company Limited, ("HHGrace"), or formerly HHNEC, located in Shanghai. HHGrace has been manufacturing wafers for us since 2002.
Currently our main third-party foundry is Shanghai Hua Hong Grace Electronic Company Limited, ("HHGrace") located in Shanghai. HHGrace has been manufacturing wafers for us since 2002. HHGrace manufactured 3.8%, 9.6% and 10.3% of the wafers used in our products for the fiscal years ended June 30, 2024, 2023 and 2022, respectively.
While OEMs typically focus design efforts on flagship products, ODMs are increasingly responsible for designing portions, or entire systems, of the products they manufacture for OEMs. In addition, several ODMs are beginning to design, manufacture and brand their own proprietary products which are sold directly to consumers.
In addition, several ODMs are beginning to design, manufacture and brand their own proprietary products which are sold directly to consumers.
HHGrace manufactured 9.6%, 10.3% and 11.5% of the wafers used in our products for the fiscal years ended June 30, 2023, 2022 and 2021, respectively. 8 Packaging and testing Completed wafers from the foundries are sent to our in-house packaging and testing facilities or to our subcontractors, where the wafers are cut into individual die, soldered to lead frames, wired to terminals and then encapsulated in protective packaging.
Packaging and testing Completed wafers from the foundries are sent to our in-house packaging and testing facilities or to our subcontractors, where the wafers are cut into individual die, soldered to lead frames, wired to terminals and then encapsulated in protective packaging. After packaging, all devices are tested in accordance with our specifications and substandard or defective devices are rejected.
During the fourth quarter of fiscal year of 2023, we released the 600V αMOS7™ Super Junction MOSFETs Family. These devices are designed to meet the high efficiency and high-density needs of servers, workstations, telecom rectifiers, solar Inverters, EV charging, motor drives and industrial power applications.
In addition, we announced innovatively designed double-sided cooling DFN 5x6 package to meet a wide variety of high-performance application requirements. Moreover, we released αMOS5™ 600V FRD 95mohm and 125mohm super junction MOSFET which are designed to meet the high efficiency and high-density needs of servers, workstations, telecom rectifiers, solar Inverters, EV charging, motor drives and industrial power applications.
Our ODM customers include Compal Electronics, Inc., Foxconn, Quanta Computer Incorporated, Wistron Corporation and Delta Electronics. In order to take advantage of the expertise of end-customer fulfillment logistics and shorter payment cycles, we sell most of our products through distributors.
In order to take advantage of the expertise of end-customer fulfillment logistics and shorter payment cycles, we sell most of our products through distributors. In general, under our agreements with distributors, they have limited rights to return unsold merchandise, subject to time and volume limitations.
We continue to expand our EZBuck power IC family with products that feature lower on-resistance, less power consumption, smaller footprint and thermally enhanced packages. While we derive the majority of our revenue from the sale of power discrete products, sale of power ICs continued to gain traction during the past years.
We continue to expand our EZBuck power IC family with products that feature lower on-resistance, less power consumption, smaller footprint and thermally enhanced packages as well. Our smart load switch products have expanded beyond basic load switched to include specialized applications like Type C and eFuse. Success has been driven by increased power density and protection to discrete solutions.
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To meet the market demand for the more mature high volume products, we also utilize the wafer manufacturing capacity of selected third party foundries. We utilize both in house assembly and test facilities in China as well as subcontractors for industry standard packages.
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We differentiate ourselves by integrating our expertise in technology, design and advanced manufacturing and packaging to optimize product performance and cost.
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Power semiconductor suppliers develop and manufacture their products using various approaches which tend to fall across a wide spectrum of balancing cost savings with proprietary technology advantages. At one end of the spectrum are integrated design manufacturers, or IDMs, which own and operate the equipment used in the manufacturing process and design and manufacture products at their in-house facilities.
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In February 2024, the JV Company repurchased certain shares that were previously issued to employees under the employee equity incentive plan, which increased our percentage of equity ownership in the JV Company by 0.54%. As of June 30, 2024, the percentage of outstanding JV equity interest beneficially owned by us was 42.8%.
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IDMs exercise full control over the implementation of process technologies and have maximum flexibility in setting priorities for production and delivery schedules. At the other end of the spectrum are completely-outsourced fabless semiconductor companies, which rely entirely on off-the-shelf technologies and processes provided by manufacturing partners.
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While we no longer control the JV Company, the JV Company continued to provide us with significant level of foundry capacity to enable us to develop and manufacture our products, including a commitment to provide us with a monthly wafer production capacity until December 2023, and additional commitment to provide wafer capacity after December 2023 if the JV Company’s production capacity reaches certain specified level.
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During the third quarter of fiscal year of 2023, we introduced a powerful duo of sink and source switches that can increase the power delivery capability of USB Type-C ports to 140W, paving the way for Type C extended power range (EPR) 5 implementations.
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Although our largest end-market is the personal computing (“PC”) market, we have successfully diversified our business by expanding into other markets, including consumer, communications, and power supply and industrial markets.
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The AOZ13937DI is suited for 28V Type C sinking applications while the AOZ15333DI is capable of Type C sourcing applications. These new switches are suited for 28V Type C EPR implementations in high-performance laptops, personal computers, monitors, docking, and other applications. Also, we introduced an extension to our active bridge driver, AlphaZBL™ family.
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We are also focusing on developing and solidifying relationships with certain Tier 1 customers, whose reputation, resources and market share may enable us to generate more significant sales and design wins. While OEMs typically focus design efforts on flagship products, ODMs are increasingly responsible for designing portions, or entire systems, of the products they manufacture for OEMs.
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The new device in this family is suitable for use in adapters for high-end laptops and televisions, as well as power supplies for Desktops, Game consoles, and Servers. During the second quarter of fiscal year of 2023, we introduced our new industry-leading 650V and 750V SiC MOSFET platform for both industrial and automotive applications.
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Sale of power ICs continued to gain traction during the past years especially with the expansion of our driver and multiphase controller product lines. We introduced higher voltage drivers to expand success beyond PCs to motor drive applications such as power tools and garden equipment.
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The 650V SiC MOSFETs are ideal switching solutions for industrial applications such as solar inverters, motor drives, industrial power supplies, and new energy storage systems, while the AEC-Q101 qualified 750V SiC MOSFET line is targeted for the high-reliability needs in electric vehicle (EV) systems such as the on-board charger (OBC) and the main traction inverter.
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We have also made a major investment in R&D to enter the multiphase controller market in 2020 with the introduction of the Intel IMVP 9.1 controller for notebooks. Since then, AOS has released or is designing in several multiphase controller families serving Intel, AMD and Nvidia.
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Also, we introduced an extension to our compact Smart Motor Module (SMM) family. Available in an ultra-compact, thermally enhanced 3mm x 3mm QFN-18L package, the highly integrated AOZ9530QV SMM is a half-bridge power stage with a slew of features and protections that simplify motor drive designs.
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Introduction of these 4 multiphase controllers has enabled AOS to become a complete solution level provider, across multiple compute platforms from PCs, graphics cards to AI and datacenter.
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The AOZ9530QV SMM is suitable for use in a large number of BLDC fan applications ranging from PC and server fans, seat cooling and home appliances. In addition, we released AONS30300, a 30V MOSFET with low on-resistance. The AONS30300 features a high Safe Operating Area (SOA) capability making it ideally suited for demanding applications such as hot swap and eFuse.
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During the fourth quarter of fiscal year of 2024, we expanded our package portfolio options available for the second generation 650V to 1200V αSiC MOSFETs. These new package selections give designers the added flexibility of multiple system optimization options to further maximize system efficiency while streamlining their manufacturing process.
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While the COVID-19 global health emergency has ended, COVID-19 and other infectious diseases remain a threat to the health and safety of employees. As such, we continue to monitor and follow requirements and guidance related to COVID-19 prevention in the workplace published by applicable public health agencies in various jurisdictions in which we operate.
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We introduced industry’s lowest quiescent power multiphase Vcore solution for computing systems. This new Vcore solution 5 offers low quiescent power in all power states to maximize battery life. Also, we introduced innovatively designed, space-saving half-bridge MOSFET for DC-DC applications. In addition, we introduced ultra-low capacitance TVS diode series.
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In addition, we have policies and procedures in place to respond to COVID-19 infection in the workplace including isolation requirements for employees infected with COVID-19 and close contact individuals. We believe policies and procedures help to ensure the health and safety of our employees.
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This is ideal to protect high-speed serial interfaces that are used in a broad range of electronic systems. Moreover, we introduced a 20V, 7A type-C sourcing protection switch designed to enhance USB type-C efficiency and safety. During the third quarter of fiscal year of 2024, we introduced XSPairFET™ Buck-Boost MOSFET for higher power USB PD 3.1 EPR applications.
Added
This reduces board space and improves power density to achieve the high-efficiency performance goals designers have set for this widely adopted USB-PD Type C application. Also, we announced application-specific EZBuck™ regulator to power intel meteor lake and arrow lake platforms. We launched 3-phase driver IC to increase battery life of cordless power tools and E-mobility.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

80 edited+20 added−25 removed218 unchanged
Biggest changeIn addition, the Chinese legal system is based in part on government policies and internal rules, some of which are not published on a timely basis or at all, that may have a retroactive effect. As a result, we may not be aware of our violation of these policies and rules until sometime after the violation.
Biggest changeRegulations and rules on foreign investments in China impose restrictions on the means that a foreign investor like us may apply to facilitate corporate transactions we may undertake. 30 In addition, the Chinese legal system is based in part on government policies and internal rules, some of which are not published on a timely basis or at all, that may have a retroactive effect.
As part of the growth strategy to diversify our product portfolio and in response to the decline of the PC markets, we have been developing new technologies and products designed to penetrate into other markets and applications, including merchant power supplies, flat panel TVs, smart phones, tablets, gaming consoles, lighting, datacom, telecommunications, home appliances and industrial motor controls.
As part of the growth strategy to diversify our product portfolio and in response to the decline of the PC markets, we have been developing new technologies and products designed to penetrate into other markets and applications, including merchant power supplies, power supplies, flat panel TVs, smart phones, tablets, gaming consoles, lighting, datacom, telecommunications, home appliances and industrial motor controls.
To manage this diversification effectively, we will need to take various actions, including: • enhancing management information systems, including forecasting procedures; • further developing our operating, administrative, financial and accounting systems and controls; • managing our working capital and sources of financing; 15 • maintaining close coordination among our engineering, accounting, finance, marketing, sales and operations organizations; • retaining, training and managing our employee base; • enhancing human resource operations and improving employee hiring and training programs; • realigning our business structure to more effectively allocate and utilize our internal resources; • improving and sustaining our supply chain capability; and • managing both our direct and distribution sales channels in a cost-efficient and competitive manner.
To manage this diversification effectively, we will need to take various actions, including: • enhancing management information systems, including forecasting procedures; • further developing our operating, administrative, financial and accounting systems and controls; 15 • managing our working capital and sources of financing; • maintaining close coordination among our engineering, accounting, finance, marketing, sales and operations organizations; • retaining, training and managing our employee base; • enhancing human resource operations and improving employee hiring and training programs; • realigning our business structure to more effectively allocate and utilize our internal resources; • improving and sustaining our supply chain capability; and • managing both our direct and distribution sales channels in a cost-efficient and competitive manner.
Risk Factor Summary Risks Related to Our Business • We may be adversely affected by the macroeconomic conditions and cyclicality of the semiconductor industry. • The decline of personal computing (“PC”) markets may have a material adverse effect on our results of operations. • Our strategy of diversification into different market segments may not succeed according to our expectations. • Our operating results may fluctuate from period to period due to many factors, which may make it difficult to predict our future performance. • Geopolitical and economic conflicts between United States and China may adversely affect our business. • Our lack of control over the JV Company may adversely affect our operations. • Our revenue may fluctuate significantly from period to period due to ordering patterns from our distributors and seasonality. • We may not be able to introduce or develop new and enhanced products that meet or are compatible with our customer’s product requirements in a timely manner. • We may not win sufficient designs, or our design wins may not generate sufficient revenue for us to maintain or expand our business. • Our success depends upon the ability of our OEM end customers to successfully sell products incorporating our products. • The operation of our Oregon Fab subjects us to additional risks and the need for additional capital expenditures which may negatively impact our results of operations. • Defects and poor performance in our products could result in loss of customers, decreased revenue, unexpected expenses and loss of market share. • If we do not forecast demand for our products accurately, we may experience product shortages, delays in product shipment, excess product inventory, or difficulties in planning expenses, which will adversely affect our business and financial condition. • We face intense competition and may not be able to compete effectively which could reduce our revenue and market share. • Our reliance on third-party semiconductor foundries to manufacture our products subjects us to risks. • Our reliance on distributors to sell a substantial portion of our products subjects us to a number of risks. • We have made and may continue to make strategic acquisitions of other companies, assets or businesses and these acquisitions introduce significant risks and uncertainties. • If we are unable to obtain raw materials in a timely manner or if the price of raw materials increases significantly, production time and product costs could increase, which may adversely affect our business. • We may not be able to accurately estimate provisions at fiscal period end for price adjustment and stock rotation rights under our agreements with distributors, and our failure to do so may impact our operating results. • Our operation of two wholly-owned packaging and testing facilities are subject to risks that could adversely affect our business and financial results. • We may be adversely affected by any disruption in our information technology systems. • We depend on the continuing services of our senior management team and other key personnel. • Failure to protect our patents and our other proprietary information could harm our business and competitive position. 13 • Intellectual property disputes could result in lengthy and costly arbitration, litigation or licensing expenses or prevent us from selling our products. • The DOJ government investigation and evolving export control regulations may adversely affect our financial performance and business operations. • Global or regional economic, political and social conditions could adversely affect our business and operating results. • Our business operations could be significantly harmed by natural disasters or global epidemics. • Our insurance may not cover all losses, including losses resulting from business disruption or product liability claims. • Our international operations subject our company to risks not faced by companies without international operations. • If we fail to maintain an effective internal control environment as well as adequate control procedures over our financial reporting, investor confidence may be adversely affected thereby affecting the value of our stock price. • We are subject to the risk of increased income taxes and changes in existing tax rules. • Our debt agreements include financial covenants that may limit our ability to pursue business and financial opportunities and subject us to risk of default. • The imposition of U.S. corporate income tax on our Bermuda parent and non-U.S. subsidiaries could adversely affect our results of operations. • We may be classified as a passive foreign investment company (“PFIC”), which could result in adverse U.S. federal income tax consequences for U.S. holders. • The average selling prices of products in our markets have historically decreased rapidly and will likely do so in the future, which could harm our revenue and gross margins.
Risk Factor Summary Risks Related to Our Business • We may be adversely affected by the macroeconomic conditions and cyclicality of the semiconductor industry. • The decline of personal computing (“PC”) markets may have a material adverse effect on our results of operations. • Our strategy of diversification into different market segments may not succeed according to our expectations. • Our operating results may fluctuate from period to period due to many factors, which may make it difficult to predict our future performance. • Geopolitical and economic conflicts between United States and China may adversely affect our business. • Our revenue may fluctuate significantly from period to period due to ordering patterns from our distributors and seasonality. • We may not be able to introduce or develop new and enhanced products that meet or are compatible with our customer’s product requirements in a timely manner. • We may not win sufficient designs, or our design wins may not generate sufficient revenue for us to maintain or expand our business. • Our success depends upon the ability of our OEM end customers to successfully sell products incorporating our products. • The operation of our Oregon Fab subjects us to additional risks and the need for additional capital expenditures which may negatively impact our results of operations. • Defects and poor performance in our products could result in loss of customers, decreased revenue, unexpected expenses and loss of market share. • If we do not forecast demand for our products accurately, we may experience product shortages, delays in product shipment, excess product inventory, or difficulties in planning expenses, which will adversely affect our business and financial condition. • We face intense competition and may not be able to compete effectively which could reduce our revenue and market share. • Our reliance on third-party semiconductor foundries to manufacture our products subjects us to risks. • Our lack of control over the JV Company may adversely affect our operations. • Our reliance on distributors to sell a substantial portion of our products subjects us to a number of risks. • We have made and may continue to make strategic acquisitions of other companies, assets or businesses and these acquisitions introduce significant risks and uncertainties. • If we are unable to obtain raw materials in a timely manner or if the price of raw materials increases significantly, production time and product costs could increase, which may adversely affect our business. • We may not be able to accurately estimate provisions at fiscal period end for price adjustment and stock rotation rights under our agreements with distributors, and our failure to do so may impact our operating results. • Our operation of two wholly-owned packaging and testing facilities are subject to risks that could adversely affect our business and financial results. • We may be adversely affected by any disruption in our information technology systems. • We depend on the continuing services of our senior management team and other key personnel. • Failure to protect our patents and our other proprietary information could harm our business and competitive position. 13 • Intellectual property disputes could result in lengthy and costly arbitration, litigation or licensing expenses or prevent us from selling our products. • The DOC government investigation and evolving export control regulations may adversely affect our financial performance and business operations. • Global or regional economic, political and social conditions could adversely affect our business and operating results. • Our business operations could be significantly harmed by natural disasters or global epidemics. • Our insurance may not cover all losses, including losses resulting from business disruption or product liability claims. • Our international operations subject our company to risks not faced by companies without international operations. • If we fail to maintain an effective internal control environment as well as adequate control procedures over our financial reporting, investor confidence may be adversely affected thereby affecting the value of our stock price. • We are subject to the risk of increased income taxes and changes in existing tax rules. • Our debt agreements include financial covenants that may limit our ability to pursue business and financial opportunities and subject us to risk of default. • The imposition of U.S. corporate income tax on our Bermuda parent and non-U.S. subsidiaries could adversely affect our results of operations. • We may be classified as a passive foreign investment company (“PFIC”), which could result in adverse U.S. federal income tax consequences for U.S. holders. • The average selling prices of products in our markets have historically decreased rapidly and will likely do so in the future, which could harm our revenue and gross margins.
Many of our competitors have competitive advantages over us, including: • significantly greater financial, technical, research and development, sales and marketing and other resources, enabling them to invest substantially more resources than us to respond to the adoption of new or emerging technologies or changes in customer requirements; • greater brand recognition and longer operating histories; 20 • larger customer bases and longer, more established relationships with distributors or existing or potential end customers, which may provide them with greater reliability and information regarding future trends and requirements that may not be available to us; • the ability to provide greater incentives to end customers through rebates, and marketing development funds or similar programs; • more product lines, enabling them to bundle their products to offer a broader product portfolio or to integrate power management functionality into other products that we do not sell; • greater ability and more resources to influence and participate in the regulatory and legislative process for more favorable laws and regulations; and • captive manufacturing facilities, providing them with guaranteed access to manufacturing facilities in times of global semiconductor shortages.
Many of our competitors have competitive advantages over us, including: • significantly greater financial, technical, research and development, sales and marketing and other resources, enabling them to invest substantially more resources than us to respond to the adoption of new or emerging technologies or changes in customer requirements; • greater brand recognition and longer operating histories; • larger customer bases and longer, more established relationships with distributors or existing or potential end customers, which may provide them with greater reliability and information regarding future trends and requirements that may not be available to us; • the ability to provide greater incentives to end customers through rebates, and marketing development funds or similar programs; • more product lines, enabling them to bundle their products to offer a broader product portfolio or to integrate power management functionality into other products that we do not sell; • greater ability and more resources to influence and participate in the regulatory and legislative process for more favorable laws and regulations; and • captive manufacturing facilities, providing them with guaranteed access to manufacturing facilities in times of global semiconductor shortages.
We face a number of other significant risks associated with outsourcing fabrication, including: • limited control over delivery schedules, quality assurance and control and production costs; • discretion of foundries to reduce deliveries to us on short notice, allocate capacity to other customers that may be larger or have long-term customer or preferential arrangements with foundries that we use; • unavailability of, or potential delays in obtaining access to, key process technologies; • limited warranties on wafers or products supplied to us; 21 • damage to equipment and facilities, power outages, equipment or materials shortages that could limit manufacturing yields and capacity at the foundries; • potential unauthorized disclosure or misappropriation of intellectual property, including use of our technology by the foundries to make products for our competitors; • financial difficulties and insolvency of foundries; and • acquisition of foundries by third parties.
We face a number of other significant risks associated with outsourcing fabrication, including: • limited control over delivery schedules, quality assurance and control and production costs; • discretion of foundries to reduce deliveries to us on short notice, allocate capacity to other customers that may be larger or have long-term customer or preferential arrangements with foundries that we use; • unavailability of, or potential delays in obtaining access to, key process technologies; • limited warranties on wafers or products supplied to us; • damage to equipment and facilities, power outages, equipment or materials shortages that could limit manufacturing yields and capacity at the foundries; • potential unauthorized disclosure or misappropriation of intellectual property, including use of our technology by the foundries to make products for our competitors; • financial difficulties and insolvency of foundries; and • acquisition of foundries by third parties.
The Regulations on Mergers and Acquisitions of Domestic Companies by Foreign Investors, or the M&A Rules, adopted by six PRC regulatory agencies in August 2006 and amended in 2009, and some other regulations and rules concerning mergers and acquisitions established additional procedures and requirements that could make merger and acquisition activities by foreign investors more time consuming and complex, including requirements in some instances 32 that the Ministry of Commerce ("MOC") be notified in advance of any change-of-control transaction in which a foreign investor takes control of a PRC domestic enterprise.
The Regulations on Mergers and Acquisitions of Domestic Companies by Foreign Investors, or the M&A Rules, adopted by six PRC regulatory agencies in August 2006 and amended in 2009, and some other regulations and rules concerning mergers and acquisitions established additional procedures and requirements that could make merger and acquisition activities by foreign investors more time consuming and complex, including requirements in some instances that the Ministry of Commerce ("MOC") be notified in advance of any change-of-control transaction in which a foreign investor takes control of a PRC domestic enterprise.
Our OEM end customers may not successfully sell their products for a variety of reasons, including: 18 • general global and regional economic conditions; • late introduction or lack of market acceptance of their products; • lack of competitive pricing; • shortage of component supplies; • excess inventory in the sales channels into which our end customers sell their products; • changes in the supply chain; and • changes as a result of regulatory restrictions applicable to China-exported products.
Our OEM end customers may not successfully sell their products for a variety of reasons, including: • general global and regional economic conditions; • late introduction or lack of market acceptance of their products; • lack of competitive pricing; • shortage of component supplies; • excess inventory in the sales channels into which our end customers sell their products; • changes in the supply chain; and • changes as a result of regulatory restrictions applicable to China-exported products.
Any actual or perceived errors, defects or poor performance in our products could result in the replacement or recall of our products, shipment delays, rejection of our products, damage to our reputation, lost revenue, diversion of our engineering personnel from our product development efforts in order to address or remedy any defects and increases in customer service and support costs, all of which could have a material adverse effect on our business and operations.
Any actual or perceived errors, defects or poor performance in our products could result in the replacement or recall of our products, shipment delays, rejection of our products, damage to our reputation, lost revenue, diversion of our engineering personnel from our product development efforts in order to address or remedy any defects 18 and increases in customer service and support costs, all of which could have a material adverse effect on our business and operations.
We invest significant resources to compete with other power semiconductor companies to win competitive bids for our products in selection processes, known as “design wins.” Our effort to obtain design wins may detract from or delay the completion of other important development projects, impair our relationships with existing end customers and negatively impact sales of products under development.
We invest significant capital and resources to compete with other power semiconductor companies to win competitive bids for our products in selection processes, known as “design wins.” Our effort to obtain design wins may detract from or delay the completion of other important development projects, impair our relationships with existing end customers and negatively impact sales of products under development.
In addition, we do not have “key person” life insurance policies covering any member of 24 our management team or other key personnel. The loss of any of these individuals or our inability to attract or retain qualified personnel, including engineers and others, could adversely affect our product introductions, overall business growth prospects, results of operations and financial condition.
In addition, we do not have “key person” life insurance policies covering any member of our management team or other key personnel. The loss of any of these individuals or our inability to attract or retain qualified personnel, including engineers and others, could adversely affect our product introductions, overall business growth prospects, results of operations and financial condition.
Failure to take timely and appropriate measures to cope with any of these or similar regulatory compliance challenges could materially and adversely affect our current corporate structure, corporate governance and business operations. In addition, under the newly enacted Foreign Investment Law, foreign investors or the foreign invested enterprise should report investment information on the principle of necessity.
Failure to take timely and appropriate 31 measures to cope with any of these or similar regulatory compliance challenges could materially and adversely affect our current corporate structure, corporate governance and business operations. In addition, under the newly enacted Foreign Investment Law, foreign investors or the foreign invested enterprise should report investment information on the principle of necessity.
Using a foundry with which we have no established relationship could expose us to potentially unfavorable pricing, unsatisfactory quality or insufficient capacity allocation. We also rely on third-party foundries to effectively implement certain of our proprietary technology and processes and also require their cooperation in developing new fabrication processes.
Using a foundry with which we have no established relationship could expose us to potentially unfavorable pricing, unsatisfactory quality or insufficient capacity allocation. 20 We also rely on third-party foundries to effectively implement certain of our proprietary technology and processes and also require their cooperation in developing new fabrication processes.
Our entry into the commercial markets for high-voltage power semiconductors and other markets as a result of our diversification strategy may subject us to additional and increased risk of disputes or litigation relating to these products. Because of the complexity of the technology involved and the uncertainty of litigation generally, any intellectual property arbitration or litigation involves significant risks.
Our entry into the commercial markets for high-voltage power semiconductors and other markets as a result of our diversification strategy may subject us to additional and increased risk of disputes or litigation relating to these products. 25 Because of the complexity of the technology involved and the uncertainty of litigation generally, any intellectual property arbitration or litigation involves significant risks.
We are subject to the risk of increased income taxes and changes in existing tax rules. We conduct our business in multiple jurisdictions, including Hong Kong, Macau, the U.S., China, Taiwan, South Korea, Japan and Germany. The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations in various taxing jurisdictions.
We are subject to the risk of increased income taxes and changes in existing tax rules. We conduct our business in multiple jurisdictions, including Hong Kong, Macau, the U.S., China, Taiwan, South Korea, Japan, India and Germany. The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations in various taxing jurisdictions.
These new laws require Bermuda and Cayman companies carrying on one or more “relevant activity” (including: banking, insurance, fund management, 28 financing, leasing, headquarters, shipping, distribution and service center, intellectual property or holding company) to maintain a substantial economic presence in Bermuda and Cayman Islands in order to comply with the economic substance requirements.
These new laws require Bermuda and Cayman companies carrying on one or more “relevant activity” (including: banking, insurance, fund management, financing, leasing, headquarters, shipping, distribution and service center, intellectual property or holding company) to maintain a substantial economic presence in Bermuda and Cayman Islands in order to comply with the economic substance requirements.
If the JV Company is not able to generate sufficient cash flow to make payments under these loans, the JV Company may be in default, which will adversely affect its ability to continue operations and provide foundry services to us. In addition, the JV Company requires additional funding to continue its operations and to refinance its existing indebtedness.
If the JV Company is not able to generate sufficient cash flow to make 21 payments under these loans, the JV Company may be in default, which will adversely affect its ability to continue operations and provide foundry services to us. In addition, the JV Company requires additional funding to continue its operations and to refinance its existing indebtedness.
If such 26 changes occur, we may be required to reduce shipments to certain Asian customers, adjust our business practices and incur additional costs to implement new export control compliance procedures, policies and programs, each of which will adversely affect our financial conditions and results of operations.
If such changes occur, we may be required to reduce shipments to certain Asian customers, adjust our business practices and incur additional costs to implement new export control compliance procedures, policies and programs, each of which will adversely affect our financial conditions and results of operations.
Any litigation or arbitration regarding patents or other intellectual property could be costly and time consuming and could divert our management and key personnel from our business operations. We have in the past and may from time 25 to time in the future become involved in litigation that requires our management to commit significant resources and time.
Any litigation or arbitration regarding patents or other intellectual property could be costly and time consuming and could divert our management and key personnel from our business operations. We have in the past and may from time to time in the future become involved in litigation that requires our management to commit significant resources and time.
If we fail to maintain an effective internal control environment as well as adequate control procedures over our financial reporting, investor confidence may be adversely affected thereby affecting the value of our stock price. 27 We are required to maintain proper internal control over our financial reporting and adequate controls related to our disclosures.
If we fail to maintain an effective internal control environment as well as adequate control procedures over our financial reporting, investor confidence may be adversely affected thereby affecting the value of our stock price. We are required to maintain proper internal control over our financial reporting and adequate controls related to our disclosures.
We also have sales offices located in Taiwan and Japan where similar natural disasters and other risks may disrupt the local economy and pose physical risks to our operations. We are not currently covered by insurance against business disruption caused by earthquakes.
We also have sales offices located in Taiwan and Japan where similar natural disasters and other risks may disrupt the local economy and pose physical risks 26 to our operations. We are not currently covered by insurance against business disruption caused by earthquakes.
In addition, we cannot be assured that these efforts would result in a design win, that our product would be incorporated into an end customer's initial product design, or that any such design win would lead to production orders and generate sufficient revenue.
In addition, we cannot be assured that these 17 efforts would result in a design win, that our product would be incorporated into an end customer's initial product design, or that any such design win would lead to production orders and generate sufficient revenue.
Failure to protect our patents and our other proprietary information could harm our business and competitive position. Our success depends, in part, on our ability to protect our intellectual property.
Failure to protect our patents and our other proprietary information could harm our business and competitive position. 24 Our success depends, in part, on our ability to protect our intellectual property.
Moreover, the Anti-Monopoly Law requires that the MOC shall be notified in advance of any concentration of undertaking if certain thresholds are triggered.
Moreover, the Anti-Monopoly Law requires that the MOC shall be 32 notified in advance of any concentration of undertaking if certain thresholds are triggered.
In the past, securities class action litigation has often been brought against a company following periods of volatility in such company's share price. This type of litigation could result in substantial costs and divert our management's attention and resources which could negatively impact our business and financial conditions. See Item 3.
In the past, securities class action litigation has often been brought against a company following periods of volatility in such company's share price. This type of litigation could result in substantial costs and divert our management's attention and resources which could negatively impact our business and financial conditions. See Item 3. Legal Proceeding.
We currently have effective agreements with Promate and WPO to serve as our distributors, and such agreement is renewed automatically for one-year period continuously unless terminated earlier pursuant to the terms of such agreements. We believe that our success will continue to depend upon these distributors.
We currently have effective agreements with Promate and WPG to serve as our distributors, and such agreement is renewed automatically for one-year period continuously unless terminated earlier pursuant to the terms of such agreements. We believe that our success will continue to depend upon these distributors.
Legal Proceeding. 34 If securities or industry analysts adversely change their recommendations regarding our common shares or if our operating results do not meet their expectations, the trading price of our common shares could decline. The market price of our common shares is influenced by the research and reports that industry or securities analysts publish about us or our business.
If securities or industry analysts adversely change their recommendations regarding our common shares or if our operating results do not meet their expectations, the trading price of our common shares could decline. 34 The market price of our common shares is influenced by the research and reports that industry or securities analysts publish about us or our business.
However, we must make a separate determination for each taxable year as to whether we are a PFIC after the close of each taxable year and we cannot assure you that we will not be a PFIC for our June 30, 2023 taxable year or any future taxable year.
However, we must make a separate determination for each taxable year as to whether we are a PFIC after the close of each taxable year and we cannot assure you that we will not be a PFIC for our June 30, 2024 taxable year or any future taxable year.
These factors include, among others: • a deterioration in general demand for electronic products, particularly the PC market, as a result of global or regional financial crises and associated macro-economic slowdowns, and/or the cyclicality of the semiconductor industry; • a deterioration in business conditions at our distributors and /or end customers; • adverse general economic conditions in the countries where our products are sold or used; • the emergence and growth of markets for products we are currently developing; • our ability to successfully develop, introduce and sell new or enhanced products in a timely manner and the rate at which our new products replace declining orders for our older products; • the anticipation, announcement or introduction of new or enhanced products by us or our competitors; • changes in the selling prices of our products and in the relative mix in the unit shipments of our products, which have different average selling prices and profit margins; • the amount and timing of operating costs and capital expenditures, including expenses related to the maintenance and expansion of our business operations and infrastructure; • the announcement of significant acquisitions, disposition or partnership arrangements; • the ramp-up progress and operation of the JV Company, and announcement of significant transactions involving the JV Company; • changes in the utilization of our in-house manufacturing capacity; • supply and demand dynamics and the resulting price pressure on the products we sell; • the unpredictable volume and timing of orders, deferrals, cancellations and reductions for our products, which may depend on factors such as our end customers' sales outlook, purchasing patterns and inventory adjustments based on general economic conditions or other factors; • changes in laws and regulations affecting our business operations; • changes in costs associated with manufacturing of our products, including pricing of wafer, raw materials and assembly services; • announcement of significant share repurchase programs; • our concentration of sales in consumer applications and changes in consumer purchasing patterns and confidence; and • the adoption of new industry standards or changes in our regulatory environment.
These factors include, among others: • a deterioration in general demand for electronic products, particularly the PC market, as a result of global or regional financial crises and associated macro-economic slowdowns, and/or the cyclicality of the semiconductor industry; • a deterioration in business conditions at our distributors and /or end customers; • adverse general economic conditions in the countries where our products are sold or used; • the emergence and growth of markets for products we are currently developing; • our ability to successfully develop, introduce and sell new or enhanced products in a timely manner and the rate at which our new products replace declining orders for our older products; • the anticipation, announcement or introduction of new or enhanced products by us or our competitors; • changes in the selling prices of our products and in the relative mix in the unit shipments of our products, which have different average selling prices and profit margins; • the amount and timing of operating costs and capital expenditures, including expenses related to the maintenance and expansion of our business operations and infrastructure; • the announcement of significant acquisitions, disposition or partnership arrangements; • changes in the utilization of our in-house manufacturing capacity and the availability of manufacturing capacity at third-party foundries and the JV Company; • supply and demand dynamics and the resulting price pressure on the products we sell; • the unpredictable volume and timing of orders, deferrals, cancellations and reductions for our products, which may depend on factors such as our end customers' sales outlook, purchasing patterns and inventory adjustments based on general economic conditions or other factors; • changes in laws and regulations affecting our business operations; • changes in costs associated with manufacturing of our products, including pricing of wafer, raw materials and assembly services; • announcement of significant share repurchase programs; • our concentration of sales in consumer applications and changes in consumer purchasing patterns and confidence; and • the adoption of new industry standards or changes in our regulatory environment.
An outbreak of avian flu or H1N1 flu in the human population, or another similar health crisis could adversely affect the economies and financial markets of many countries, particularly in Asia. Moreover, any related disruptions to transportation or the free movement of persons could hamper our operations and force us to close our offices temporarily.
An outbreak of avian flu or H1N1 flu in the human population, or another similar health crisis similar to the COVID-19 pandemic could adversely affect the economies and financial markets of many countries, particularly in Asia. Moreover, any related disruptions to transportation or the free movement of persons could hamper our operations and force us to close our offices temporarily.
As a result of these and other restrictions under PRC laws and regulations, our China subsidiaries are restricted in their abil ity to transfer a portion of their net assets to the parent. Such restricted portion amounted to approximat ely $93.2 million, or 10.5% of our total consolidated net assets attributed to the Company as of June 30, 2023.
As a result of these and other restrictions under PRC laws and regulations, our China subsidiaries are restricted in their abil ity to transfer a portion of their net assets to the parent. Such restricted portion amounted to approximat ely $93.5 million, or 10.5% of our total consolidated net assets attributed to the Company as of June 30, 2024.
As is typical in the semiconductor industry, we or our customers may receive claims of infringement from time to time or otherwise become aware of potentially relevant patents or other intellectual property rights held by other parties that may cover some of our technology, products and services or those of our end customers.
As is typical in the semiconductor industry, we or our customers have received and may continue to receive claims of infringement from time to time or otherwise become aware of potentially relevant patents or other intellectual property rights held by other parties that may cover some of our technology, products and services or those of our end customers.
Risks Related to Doing Business in China • China’s economic, political and social conditions, as well as government policies, could affect our business and growth. • Changes in China’s laws, legal protections or government policies on foreign investment in China may harm our business. • The continuing potential for new or additional tariffs on imported goods from China could adversely affect our business operations. • Uncertainties exist with respect to the interpretation and implementation of PRC Foreign Investment Law and how it may impact us. • Limitations on our ability to transfer funds to our China subsidiaries could adversely affect our ability to expand our operations, make investments that could benefit our businesses and otherwise fund and conduct our business. • China's currency exchange control and government restrictions on investment repatriation may impact our ability to transfer funds outside of China. • The M&A Rules and certain other PRC regulations establish complex procedures for some acquisitions of Chinese companies by foreign investors, which could make it more difficult for us to pursue growth through acquisitions in China. • Our results of operations may be negatively impacted by fluctuations in foreign currency exchange rates between U.S. dollar and Chinese Yuan, or RMB. • PRC labor laws may adversely affect our results of operations. • Relations between Taiwan and China could negatively affect our business, financial condition and operating results and, therefore, the market value of our common shares.
Risks Related to Doing Business in China • China’s economic, political and social conditions, as well as government policies, could affect our business and growth. • Changes in China’s laws, legal protections or government policies on foreign investment in China may harm our business. • The continuing trade tensions between the U.S. and China may result in increased tariffs on imported goods from China could adversely affect our business operations. • Uncertainties exist with respect to the interpretation and implementation of PRC Foreign Investment Law and how it may impact the viability of our current corporate structure, corporate governance and business operations. • Limitations on our ability to transfer funds to our China subsidiaries could adversely affect our ability to expand our operations, make investments that could benefit our businesses and otherwise fund and conduct our business. • China's currency exchange control and government restrictions on investment repatriation may impact our ability to transfer funds outside of China. • The M&A Rules and certain other PRC regulations establish complex procedures for some acquisitions of Chinese companies by foreign investors, which could make it more difficult for us to pursue growth through acquisitions in China. • Our results of operations may be negatively impacted by fluctuations in foreign currency exchange rates between U.S. dollar and Chinese Yuan, or RMB. • PRC labor laws may adversely affect our results of operations. • Relations between Taiwan and China could negatively affect our business, financial condition and operating results and, therefore, the market value of our common shares.
Our revenue from the PC markets accounted for approximately 35.2%, 44.5% and 42.5% of our total revenue for the years ended June 30, 2023, 2022 and 2021, respectively. The increasing popularity of smaller, mobile computing devices such as tablets and smart phones with touch interfaces is rapidly changing the PC markets both in the United States and abroad.
Our revenue from the PC markets accounted for approximately 43.0%, 35.2% and 44.5% of our total revenue for the years ended June 30, 2024, 2023 and 2022, respectively. The increasing popularity of smaller, mobile computing devices such as tablets and smart phones with touch interfaces is rapidly changing the PC markets both in the United States and abroad.
In the event that the government decides to bring enforcement action against us, it will result in a material adverse effect on our business operations, our financial conditions and our reputation.
In the event that the government decides to bring enforcement action or impose fines against us, it will result in a material adverse effect on our business operations, our financial conditions and our reputation.
We expect to continue to rely in part on third party foundries to meet our wafer requirements. Although we use several independent foundries, our primary third-party foundry is HHGrace, which manufactured 9.6%, 10.3% and 11.5% of the wafers used in our products for the fiscal years ended June 30, 2023, 2022 and 2021, respectively.
We expect to continue to rely in part on third party foundries to meet our wafer requirements. Although we use several independent foundries, our primary third-party foundry is HHGrace, which manufactured 3.8%, 9.6% and 10.3% of the wafers used in our products for the fiscal years ended June 30, 2024, 2023 and 2022, respectively.
In recent year, broad fluctuations in the semiconductor markets and the global economic conditions, in particular the decline of the PC market conditions, have had a more significant impact on our results of operations, than seasonality, and have made it difficult to assess the impact of seasonal factors on our business.
In recent year, broad fluctuations in the semiconductor markets and the global economic conditions, in particular the decline of the PC market conditions, as well as the COVID-19 pandemic, have had a more significant impact on our results of operations, than seasonality, and have made it difficult to assess the impact of seasonal factors on our business.
On June 30, 2019, the National Development and Reform Commission (the “NDRC”) and the Ministry of Commerce of the PRC (the “MOC”) published the Special Administrative Measures for Market Access of Foreign Investment (Negative List), which identifies specific sectors where foreign investors will be subject to special administrative measures.
On June 28, 2018, the National Development and Reform Commission (the “NDRC”) and the Ministry of Commerce of the PRC (the “MOC”) published the Special Administrative Measures for Market Access of Foreign Investment (Negative List) (2018 Edition), which identifies specific sectors where foreign investors will be subject to special administrative measures.
The transfer of funds from us to our China subsidiaries, either as a shareholder loan or as an increase in registered capital, is subject to registration with or approval by the China's governmental authorities, including the State Administration of Foreign Exchange, or SAFE's, or the relevant examination and approval authority.
The transfer of funds from us to our China subsidiaries, either as a shareholder loan or as an increase in registered capital, is subject to registration with or approval by the China's governmental authorities, including the State Administration of Foreign Exchange, (SAFE), the State Administration for Market Regulation (SAMR), and/or the relevant examination and approval authority.
Our estimated liabilities for stock rotation at June 30, 2023 and 2022 were $5.6 million and $4.8 million, respectively. Our estimates for these allowances and accruals may be inaccurate.
Our estimated liabilities for stock rotation at June 30, 2024 and 2023 were $4.7 million and $5.6 million, respectively. Our estimates for these allowances and accruals may be inaccurate.
In addition, the operation of our packaging and testing facilities is subject to a number of risks, including the following: 23 • unavailability of equipment, whether new or previously owned, at acceptable terms and prices; • facility equipment failure, power outages or other disruptions; • shortage of raw materials, including packaging substrates, copper, gold and molding compound; • failure to maintain quality assurance and remedy defects and impurities; • changes in the packaging requirements of customers; • our limited experience in operating a high-volume packaging and testing facility; and • operation stoppage due to the city-wide lockdown in response to public health emergencies or pandemics.
In addition, the operation of our packaging and testing facilities is subject to a number of risks, including the following: 23 • unavailability of equipment, whether new or previously owned, at acceptable terms and prices; • facility equipment failure, power outages or other disruptions; • shortage of raw materials, including packaging substrates, copper, gold and molding compound; • failure to maintain quality assurance and remedy defects and impurities; • changes in the packaging requirements of customers; • compliance with local and regional legal and regulatory requirements; and • operation stoppage due to the city-wide lockdown in response to public health emergencies or pandemics.
We estimate the allowance for price adjustment based on factors such as distributor inventory levels, pre-approved future distributor selling prices, distributor margins and demand for our products. Our estimated allowances for price adjustments, which we offset against accounts receivable from distributors, were $40.0 million and $18.7 million at June 30, 2023 and 2022, respectively.
We estimate the allowance for price adjustment based on factors such as distributor inventory levels, forecasted distributor selling prices, distributor margins and demand for our products. Our estimated allowances for price adjustments, which we offset against accounts receivable from distributors, were $41.7 million and $40.0 million at June 30, 2024 and 2023, respectively.
Two distributors, WPG and Promate, collectively accounted for 57.2%, 64.3% and 64.1% of our revenue for the fiscal years ended June 30, 2023, 2022 and 2021, respectively.
Two distributors, WPG and Promate, collectively accounted for 71.0%, 57.2% and 64.3% of our revenue for the fiscal years ended June 30, 2024, 2023 and 2022, respectively.
As of June 30, 2023, we owned 918 issued U.S. patents expiring between 2023 and 2041 and had 45 pending patent applications with the United States Patent and Trademark Office. In addition, we own patents and have filed patent applications in several jurisdictions outside of the U.S, including China, Taiwan, Japan and Korea.
As of June 30, 2024, we owned 930 issued U.S. patents expiring between 2024 and 2042 and had 52 pending patent applications with the United States Patent and Trademark Office. In addition, we own patents and have filed patent applications in several jurisdictions outside of the U.S, including China, Taiwan, Japan and Korea.
The Negative List has been updated twice in June 2020 for year 2021 and December 2021 for year 2022. The current effective Negative List took effect on January 1, 2022. 31 Since the Foreign Investment Law was newly enacted, uncertainties still exist in relation to its interpretation and implementation.
The Negative List has been updated three times in June 2019, June 2020 and December 2021. The current effective Negative List (2021 Edition) took effect on January 1, 2022. Since the Foreign Investment Law was newly enacted, uncertainties still exist in relation to its interpretation and implementation.
In the past prior to the commencement of the COVID-19 pandemic, we experienced a significant reduction in the demand for our products due to the declining PC markets, which negatively impacted our revenue, profitability and gross margin.
In the past we experienced a significant reduction in the demand for our products due to the declining PC markets, which negatively impacted our revenue, profitability and gross margin.
Any intellectual property claim or litigation against us harm our business, results of operations, financial condition and prospects. The current government investigation and evolving export control regulations may adversely affect our financial performance and business operations. The U.S.
Any intellectual property claim or litigation against us harm our business, results of operations, financial condition and prospects. The current government investigation by Department of Commerce (“DOC”) and evolving export control regulations may adversely affect our business operations.
If customer demand or revenue for a particular period is lower than we expect, we may not be able to proportionately reduce our fixed operating expenses for that period, which would harm our operating results. We face intense competition and may not be able to compete effectively which could reduce our revenue and market share.
If customer demand or revenue for a particular period is lower than we expect, we may not be able to proportionately reduce our fixed operating expenses for that period, which would harm our operating results.
Relations between Taiwan and China could negatively affect our business, financial condition and operating results and, therefore, the market value of our common shares. 33 Taiwan has a unique international political status. China does not recognize the sovereignty of Taiwan.
Relations between Taiwan and China could negatively affect our business, financial condition and operating results and, therefore, the market value of our common shares. Taiwan has a unique international political status. China does not recognize the sovereignty of Taiwan. Although significant economic and cultural relations have been established during recent years between Taiwan and China, relations have often been strained.
While we experienced a surge of demand in the PC market as a result of the COVID-19 pandemic and related events, such demand began to return to normal level with the cessation of the COVID-19 pandemic, and recently declined due to an industry-wide inventory correction and the ensuing downturn in the semiconductor industry.
While we experienced a surge of demand in the PC market as a result of the COVID-19 pandemic and related events, such demand has returned to normal level and declined due to an industry-wide inventory correction and the ensuing downturn in the semiconductor industry from late 2022 to the end of 2023 and early 2024.
Any cybersecurity breach and financial loss may also have a negative impact on our internal control over financial reporting. While we have implemented additional measures to enhance our security protocol to protect our system and intend to do so in response to any threats, there is no guarantee that future attacks would be thwarted or prevented.
While we have implemented additional measures to enhance our security protocol to protect our system and intend to do so in response to any threats, there is no guarantee that future attacks would be thwarted or prevented.
For example, geopolitical disputes and increased tensions between China and its neighboring countries in which we conduct business could make it more difficult for us to coordinate and manage our international operations in such countries.
For example, geopolitical disputes and increased tensions between China and its neighboring countries in which we conduct business could make it more difficult for us to coordinate and manage our international operations in such countries. Changes in China's laws, legal protections or government policies on foreign investment in China may harm our business.
Such reduction also caused the deconsolidation of the JV Company’s financial statements from our Consolidated Financial Statements. Because we no longer have a controlling interest in the JV Company, the JV Company is operating and will continue to operate more independently, and our influence on all aspects of the JV Company’s business operations will be diminished.
Because we no longer have a controlling interest in the JV Company, the JV Company is operating and will continue to operate more independently, and our influence on all aspects of the JV Company’s business operations will be diminished. Accordingly, we might not be able to prevent the JV Company from taking actions adverse to our interests.
The trading price of our common shares on The NASDAQ Global Select Market ranged from a low of $23.36 to high of $44.89 from July 1, 2022 to June 30, 2023. At July 31, 2023, the trading price of our common shares was $32.88.
The trading price of our common shares on The NASDAQ Global Select Market ranged from a low of $19.55 to high of $37.38 from July 1, 2023 to June 30, 2024. At July 31, 2024, the trading price of our common shares was $41.40.
We may be classified as a passive foreign investment company (“PFIC”), which could result in adverse U.S. federal income tax consequences for U.S. holders. 29 Based on the current and anticipated valuation of our assets and the composition of our income and assets, we do not expect to be considered a PFIC, for U.S. federal income tax purposes for the foreseeable future.
Based on the current and anticipated valuation of our assets and the composition of our income and assets, we do not expect to be considered a PFIC, for U.S. federal income tax purposes for the foreseeable future.
PRC labor laws may adversely affect our results of operations. The PRC government promulgated the Labor Contract Law of the PRC, effective on January 1, 2008, as amended, to govern the establishment of employment relationships between employers and employees, and the conclusion, performance, termination of and the amendment to employment contracts.
The PRC government promulgated the Labor Contract Law of the PRC, effective on January 1, 2008, which was amended on December 28, 2012 and the amended law became effective on July 1, 2013, to govern the establishment of employment relationships between employers and employees, and the conclusion, performance, termination of and the amendment to employment contracts.
Any tax rate changes in the tax jurisdictions in which we operate could result in adjustments to our deferred tax assets, if applicable, which would affect our effective tax rate and results of operations.
Our effective tax rate was (138.1)%, 30.1% and 7.9% for the fiscal years ended June 30, 2024, 2023 and 2022, respectively. 27 Any tax rate changes in the tax jurisdictions in which we operate could result in adjustments to our deferred tax assets, if applicable, which would affect our effective tax rate and results of operations.
There is no guarantee that the JV Company will be able to obtain financing on favorable terms, or at all, and any such failure may negatively impact our ability to access its wafer manufacturing capacity. 17 Any of the foregoing risks could materially reduce the expected return of our investment in the JV Transaction and adversely affect our business operations, our financial performance and the trading price of our shares.
There is no guarantee that the JV Company will be able to obtain financing on favorable terms, or at all, and any such failure may negatively impact our ability to access its wafer manufacturing capacity.
We have implemented measures and strategies to mitigate the effect of such a downturn. These measures and strategies may not be sufficient or successful, in which case our operating results may be adversely affected.
While we believe the negative impact of inventory correction has gradually subsided in mid-2024, we cannot predict how and when the market will be fully recovered. We have implemented measures and strategies to mitigate the effect of such a downturn. These measures and strategies may not be sufficient or successful, in which case our operating results may be adversely affected.
Any of the foregoing risks could delay shipment of our products, result in higher expenses and reduced revenue, damage our relationships with customers and otherwise adversely affect our business and operating results. Our reliance on distributors to sell a substantial portion of our products subjects us to a number of risks.
Any of the foregoing risks could delay shipment of our products, result in higher expenses and reduced revenue, damage our relationships with customers and otherwise adversely affect our business and operating results. Our lack of control over the JV Company may adversely affect our operations.
The ongoing government investigations into our export control compliance also subject us to a number of financial and business risks.
The ongoing government investigations into our export control compliance also subject us to a number of financial and business risks. We expect to incur significant costs and expenses, including legal fees, in connection with our effort to respond to the government investigation.
The power semiconductor industry is highly competitive and fragmented. If we do not compete successfully against current or potential competitors, our market share and revenue may decline. Our main competitors are primarily headquartered in the United States, Japan, Taiwan and Europe.
We face intense competition and may not be able to compete effectively which could reduce our revenue and market share. 19 The power semiconductor industry is highly competitive and fragmented. If we do not compete successfully against current or potential competitors, our market share and revenue may decline.
Changes in China's laws, legal protections or government policies on foreign investment in China may harm our business. 30 Our business and corporate transactions, including our operations through the JV Company, are subject to laws and regulations applicable to foreign investment in China as well as laws and regulations applicable to foreign-invested enterprises.
Our business and corporate transactions, including our operations through the JV Company, are subject to laws and regulations applicable to foreign investment in China as well as laws and regulations applicable to foreign-invested enterprises. These laws and regulations frequently change, and their interpretation and enforcement involve uncertainties that could limit the legal protections available to us.
Therefore, factors affecting military, political or economic relationship between China and Taiwan could have an adverse effect on our business, financial condition and operating results. Risks Related to Our Corporate Structure and Our Common Shares Our share price may be volatile and you may be unable to sell your shares at or above the purchase price, if at all.
Risks Related to Our Corporate Structure and Our Common Shares Our share price may be volatile and you may be unable to sell your shares at or above the purchase price, if at all.
Our debt agreements include financial covenants that may limit our ability to pursue business and financial opportunities and subject us to risk of default.
If we become subject to the Bermuda CIT, we may be subject to additional income taxes, which may adversely affect our financial position, results of operations and our overall business. Our debt agreements include financial covenants that may limit our ability to pursue business and financial opportunities and subject us to risk of default.
In the past, we have reduced the average selling prices of our products in anticipation of future competitive pricing pressures, new product introductions by us or our competitors and other factors. We expect that we will have to similarly reduce prices in the future for older generations of products.
As is typical in the semiconductor industry, the average selling price of a particular product has historically declined significantly over the life of the product. In the past, we have reduced the average selling prices of our products in anticipation of future competitive pricing pressures, new product introductions by us or our competitors and other factors.
Our systems might be damaged or interrupted by natural or man−made events or by computer viruses, physical or electronic break−ins, cyber-attacks and similar disruptions affecting the global Internet. In addition, recent widespread ransomware attacks and cybersecurity breaches in the U.S. and elsewhere have affected many companies, including the cybersecurity incident involving SolarWinds Orion in December 2020.
Our systems might be damaged or interrupted by natural or man−made events or by computer viruses, physical or electronic break−ins, cyber-attacks and similar disruptions affecting the global Internet. In the past we have experienced cybersecurity incidents and threats against our information technology systems.
Our major competitors for our power discretes include Infineon Technologies AG, Magnachip Semiconductor Corporation, ON Semiconductor Corp., STMicroelectronics N.V., Toshiba Corporation, Diodes Incorporated and Vishay Intertechnology, Inc. Our major competitors for our power ICs include Global Mixed-mode Technology Inc., Monolithic Power Systems, Inc., ON Semiconductor Corp., Richtek Technology Corp., Semtech Corporation, Texas Instruments Inc. and Vishay Intertechnology, Inc.
Our main competitors are primarily headquartered in the United States, Japan, Taiwan and Europe. Our major competitors for our power discretes include Infineon Technologies AG, Magnachip Semiconductor Corporation, ON Semiconductor Corp., STMicroelectronics N.V., Toshiba Corporation, Diodes Incorporated and Vishay Intertechnology, Inc.
If we were treated as a PFIC for any taxable year during which a U.S. holder held common shares, certain adverse U.S. federal income tax consequences could apply for such U.S. holder. Risks Related to Doing Business in China China's economic, political and social conditions, as well as government policies, could affect our business and growth.
If we were treated as a PFIC for any taxable year during which a U.S. holder held common shares, certain adverse U.S. federal income tax consequences could apply for such U.S. holder. Changes in our United States federal income tax classification, or that of our subsidiaries, could result in adverse tax consequences to our 10% or greater U.S. shareholders.
Costs or payments we may make in connection with warranty and product liability claims or product recalls may adversely affect our financial condition and results of operations.
Costs or payments we may make in connection with warranty and product liability claims or product recalls may adversely affect our financial condition and results of operations. The average selling prices of products in our markets have historically decreased rapidly and will likely do so in the future, which could harm our revenue and gross margins.
We expect to face competition in the future from our competitors, other manufacturers, designers of semiconductors and start-up semiconductor design companies.
Our major competitors for our power ICs include Global Mixed-mode Technology Inc., Monolithic Power Systems, Inc., ON Semiconductor Corp., Richtek Technology Corp., Semtech Corporation, Texas Instruments Inc. and Vishay Intertechnology, Inc. We expect to face competition in the future from our competitors, other manufacturers, designers of semiconductors and start-up semiconductor design companies.
Reductions in our average selling prices to one customer could also impact our average selling prices to all customers. A decline in average selling prices would harm our gross margins for a particular product. If not offset by sales of other products with higher gross margins, our overall gross margins may be adversely affected.
We expect that we will have to similarly reduce prices in the future for older generations of products. Reductions in our average selling prices to one customer could also impact our average selling prices to all customers. A decline in average selling prices would harm our gross margins for a particular product.
Our lack of control over the JV Company may adversely affect our operations. We formed the JV Company in 2016 which consists of a power semiconductor packaging, testing and 12-inch wafer fabrication facility in Chongqing.
We formed the JV Company in 2016 which consists of a power semiconductor packaging, testing and 12-inch wafer fabrication facility in Chongqing. The JV Company is our subcontractor that provides us with foundry capacity to develop and manufacture our products and to enhance our market position in China.
If any of our past operations are deemed to be non-compliant with Chinese law, we may be subject to penalties and our business and operations may be adversely affected. For instance, under Special Administrative Measures (Negative List) for Foreign Investment Access, some industries are categorized as sectors which are restricted or prohibited for foreign investment.
For instance, under Special Administrative Measures (Negative List) for Foreign Investment Access, some industries are categorized as sectors which are restricted or prohibited for foreign investment.
As part of this process and in response to DOC’s request, the Company provided certain documents and materials relating to the Company’s supply chain and shipment process to DOC, and DOC is currently reviewing this matter. DOC has not informed the Company of any specific timeline or schedule under which DOC will complete its review.
As previously disclosed, the Company has continued to respond to inquiries and requests for documents and information from Department of Commerce (“DOC”) in connection with an investigation into the Company’s export control practices and DOC is currently reviewing this matter. DOC has not informed the Company of any specific timeline or schedule under which DOC will complete its review.
The Company believes that it has not incurred other damages and losses based on the conclusion of the full investigation. While these attacks did not have a material adverse effect on our business operation or results of operations, they caused temporary disruptions and interfered with our operations.
While these incidents and attacks did not have a material adverse effect on our business operation or results of operations, they caused temporary disruptions and interfered with our operations. Any cybersecurity breach and financial loss may also have a negative impact on our internal control over financial reporting.
Even if the JV Company agrees to continue allocating sufficient manufacturing capacity to us, we may not be able to negotiate or obtain favorable pricing or service terms, which may increase our expenses and adversely affect our results of operations.
There is no guarantee that we will be successful in renewing the capacity agreement, and even if we do, there is no guarantee that we will obtain favorable pricing or service terms, or that such capacity will be sufficient, which may adversely affect our results of operations.
Although significant economic and cultural relations have been established during recent years between Taiwan and China, relations have often been strained. A substantial number of our key customers and some of our essential sales and engineering personnel are located in Taiwan, and we have a large number of operational personnel and employees located in China.
A substantial number of our key customers and some of our essential sales and 33 engineering personnel are located in Taiwan, and we have a large number of operational personnel and employees located in China. Therefore, factors affecting military, political or economic relationship between China and Taiwan could have an adverse effect on our business, financial condition and operating results.
In December 2021, we relinquished control over the JV Company through a series of transactions, including the sale of a portion of our equity interests in the JV Company and issuance of additional equity interests by the JV Company to raise capital.
While we retained control over the JV Company from inception of 2021, we lost control over the JV Company in December 2021 as our equity interest in the JV Company has been diluted through the issuances of additional equity securities by the JV Company and other transactions.
Any such tax could materially and adversely affect our results of operations.
PRC labor laws may adversely affect our results of operations.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe following table sets forth the location, size and primary use of our principal properties that are material to our business operations: Location Square Footage Primary Use 475 Oakmead Parkway Sunnyvale, California, USA 94085 57,000 Research and development, marketing, sales and administration 3131 Northeast Brookwood Parkway Hillsboro, Oregon, USA 97124 252,950 Wafer fabrication facility Building 8/9, No. 91, Lane 109, Rongkang Road, Songjiang District, Shanghai, China 201614 191,540 Packaging and testing, manufacturing support Building B1, Dongkai Industrial Park, Songjiang Export Process Zone, Area B, Songjiang, Shanghai, China 201614 250,198 Packaging and testing, manufacturing support We believe that our current facilities are adequate and that additional space will be available on commercially reasonable terms for the foreseeable future. 37
Biggest changeThe following table sets forth the location, size and primary use of our principal properties that are material to our business operations: Location Square Footage Primary Use 475 Oakmead Parkway Sunnyvale, California, USA 94085 57,000 Research and development, marketing, sales and administration 3131 Northeast Brookwood Parkway Hillsboro, Oregon, USA 97124 252,950 Wafer fabrication facility Building 1/2 and 8/9, No. 91, Lane 109, Rongkang Road, Songjiang District, Shanghai, China 201614 221,301 Packaging and testing, manufacturing support Building 1,2,3 No.135 Rongkang Road, Songjiang Export Process Zone, Area B, Songjiang, Shanghai,China 201614 250,198 Packaging and testing, manufacturing support We believe that our current facilities are adequate and that additional space will be available on commercially reasonable terms for the foreseeable future. 39
Item 2. Properties As of July 31, 2023, our primary U.S. facility, which houses our research and design function, as well as elements of marketing and administration, is located in Sunnyvale, California. We conduct our manufacturing, research and development, sales and marketing and administration in Asia and North America.
Item 2. Properties As of July 31, 2024, our primary U.S. facility, which houses our research and design function, as well as elements of marketing and administration, is located in Sunnyvale, California. We conduct our manufacturing, research and development, sales and marketing and administration in Asia and North America.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeAs part of this process and in response to DOC’s request, the Company provided certain documents and materials relating to the Company’s supply chain and shipment process to DOC, and DOC is currently reviewing this matter. DOC has not informed the Company of any specific timeline or schedule under which DOC will complete its review.
Biggest changeItem 3. Legal Proceedings As previously disclosed, the Company continues to cooperate with the Department of Commerce (“DOC”) in connection with its ongoing investigation of the Company’s export control practices. DOC has not informed the Company of any specific timeline or schedule under which DOC will complete its review.
Irrespective of the validity of such claims, we could incur significant costs in the defense thereof or could suffer adverse effects on its operations. Item 4. Mine Safety Disclosures Not Applicable. 38 PART II
Irrespective of the validity of such claims, we could incur significant costs in the defense thereof or could suffer adverse effects on its operations. Item 4. Mine Safety Disclosures Not Applicable. 40 PART II
Removed
Item 3. Legal Proceedings As previously disclosed, the DOJ commenced an investigation into the Company’s compliance with export control regulations relating to its business transactions with Huawei and its affiliates (“Huawei”), which were added to the “Entity List” by the DOC in May 2019. The Company is cooperating fully with federal authorities in the investigation.
Removed
The Company has continued to respond to inquiries and requests from DOJ for documents and information relating to the investigation, and the matter is currently pending at DOJ, and DOJ has not provided the Company with any specific timeline or indication as to when the investigation will be concluded or resolved.
Removed
In connection with this investigation, DOC previously requested the Company to suspend shipments of its products to Huawei. The Company complied with such request, and the Company has not shipped any product to Huawei after December 31, 2019. The Company continues to work with DOC to resolve this issue.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 38 Part II. 39 Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 39 Item 6. [Reserved] 41 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 42 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 62 Item 8.
Biggest changeItem 4. Mine Safety Disclosures 40 Part II. 41 Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 41 Item 6. [Reserved] 42 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 43 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 61 Item 8.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeAs of July 31, 2023, there were approximately 147 holders of record of our common shares, not including those shares held in a street or nominee name. Dividend Policy We have never declared or paid cash dividends on our common shares.
Biggest changeAs of July 31, 2024, there were approximately 144 holders of record of our common shares, not including those shares held in a street or nominee name. Dividend Policy We have never declared or paid cash dividends on our common shares.
Share Performance Graph The following graph compares the total cumulative shareholder return on our common shares with the total cumulative return of the NASDAQ Composite Index and the Philadelphia Semiconductor Index for the last five fiscal years ended June 30, 2023, assuming an investment of $100 at the beginning of such period and the reinvestment of any dividends.
Share Performance Graph The following graph compares the total cumulative shareholder return on our common shares with the total cumulative return of the NASDAQ Composite Index and the Philadelphia Semiconductor Index for the last five fiscal years ended June 30, 2024, assuming an investment of $100 at the beginning of such period and the reinvestment of any dividends.
Removed
Purchases of Equity Securities by the Issuer and Affiliated Purchasers In September 2017, the board of directors approved a repurchase program (the “Repurchase Program”) that allowed the Company to repurchase its common shares from the open market pursuant to a pre-established Rule 10b5-1 trading plan or through privately negotiated transactions up to an aggregate of $30.0 million.
Added
Purchases of Equity Securities by the Issuer and Affiliated Purchasers During the fourth quarter of fiscal year 2024, the Company did not repurchase any common shares. 41
Removed
The amount and timing of any repurchases under 39 the Repurchase Program depend on a number of factors, including but not limited to, the trading price, volume and availability of the Company’s common shares. There is no guarantee that such repurchases under the Repurchase Program will enhance the value of our shares.
Removed
Shares repurchased under this program are accounted for as treasury shares and the total cost of shares repurchased is recorded as a reduction of shareholders' equity. During the fourth quarter of fiscal year 2023, the Company repurchased 441,269 shares under the Repurchase Program. As of June 30, 2023, there were no availability under this repurchase program, which is now terminated.
Removed
The following table sets for the share repurchases under this program during the fourth quarter of fiscal year 2023.
Removed
Period Total Number of Shares (or Units) Purchased Average Price Paid per Share (or Unit) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Be Purchased Under the Plans or Programs April 1, 2023 to April 30, 2023 374,379 $ 24.37 374,379 — May 1, 2023 to May 31, 2023 66,890 $ 24.40 66,890 — Jun 1, 2023 to June 30, 2023 — $ — — — Total repurchase during the three months ended June 30, 2023 441,269 $ 24.37 441,269 $ — 40

Item 7. Management's Discussion & Analysis

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

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Biggest changeYear Ended June 30, 2023 2022 2021 2023 2022 2021 (in thousands) (% of revenue) Revenue $ 691,321 $ 777,552 $ 656,902 100.0 % 100.0 % 100.0 % Cost of goods sold (1) 491,785 508,996 452,359 71.1 % 65.5 % 68.9 % Gross profit 199,536 268,556 204,543 28.9 % 34.5 % 31.1 % Operating expenses: Research and development (1) 88,146 71,259 62,953 12.8 % 9.2 % 9.6 % Selling, general and administrative (1) 88,861 95,259 77,514 12.8 % 12.3 % 11.8 % Total operating expenses 177,007 166,518 140,467 25.6 % 21.5 % 21.4 % Operating income 22,529 102,038 64,076 3.3 % 13.0 % 9.7 % Other income (loss), net (1,730) 999 2,456 (0.3) % 0.1 % 0.4 % Interest expense, net (1,087) (3,920) (6,308) (0.2) % (0.5) % (1.0) % Gain on deconsolidation of the JV Company — 399,093 — — % 51.3 % — % Loss on changes of equity interest in the JV Company, net — (3,140) — — % (0.4) % — % Net income before income taxes 19,712 495,070 60,224 2.8 % 63.5 % 9.1 % Income tax expense 5,937 39,258 3,935 0.9 % 5.0 % 0.6 % Net income before loss from equity method investment 13,775 455,812 56,289 1.9 % 58.5 % 8.5 % Equity method investment loss from equity investee (1,411) (2,629) — (0.1) % (0.3) % — % Net income 12,364 453,183 56,289 1.8 % 58.2 % 8.5 % Net income (loss) attributable to noncontrolling interest — 20 (1,827) 0.0 % 0.0 % (0.3) % Net income attributable to Alpha and Omega Semiconductor Limited $ 12,364 $ 453,163 $ 58,116 1.8 % 58.2 % 8.8 % (1) Includes share-based compensation expense as follows: Year Ended June 30, 2023 2022 2021 2023 2022 2021 (in thousands) (% of revenue) Cost of goods sold $ 5,851 $ 5,125 $ 1,756 0.8 % 0.7 % 0.3 % Research and development 9,437 7,049 5,352 1.4 % 0.9 % 0.8 % Selling, general and administrative 22,200 19,150 8,216 3.2 % 2.5 % 1.3 % $ 37,488 $ 31,324 $ 15,324 5.4 % 4.1 % 2.4 % 48 Revenue The following is a summary of revenue by product type: Year Ended June 30, Change 2023 2022 2021 2023 2022 (in thousands) (in thousands) (in percentage) (in thousands) (in percentage) Power discrete $ 458,795 $ 545,135 $ 482,718 $ (86,340) (15.8) % $ 62,417 12.9 % Power IC 218,620 220,882 161,726 (2,262) (1.0) % 59,156 36.6 % Packaging and testing services 3,979 11,535 12,458 (7,556) (65.5) % (923) (7.4) % License and development services 9,927 — — 9,927 100.0 % — — % $ 691,321 $ 777,552 $ 656,902 $ (86,231) (11.1) % $ 120,650 18.4 % Year Ended June 30, Change 2023 2022 2021 2023 2022 (in thousands) (in thousands) (in percentage) (in thousands) (in percentage) Computing $ 243,286 $ 345,855 $ 279,150 $ (102,569) (29.7) % $ 66,705 23.9 % Consumer 180,753 160,808 145,346 19,945 12.4 % 15,462 10.6 % Communication 103,218 110,356 97,395 (7,138) (6.5) % 12,961 13.3 % Power Supply and Industrial 150,158 149,000 122,553 1,158 0.8 % 26,447 21.6 % Packaging and testing services 3,979 11,533 12,458 (7,554) (65.5) % (925) (7.4) % License and development services 9,927 — — 9,927 100.0 % — — % $ 691,321 $ 777,552 $ 656,902 $ (86,231) (11.1) % $ 120,650 18.4 % Fiscal 2023 vs 2022 Total revenue was $691.3 million for fiscal year 2023, a decrease of $86.2 million, or 11.1%, as compared to $777.6 million for fiscal year 2022.
Biggest changeYear Ended June 30, 2024 2023 2022 2024 2023 2022 (in thousands) (% of revenue) Revenue $ 657,274 $ 691,321 $ 777,552 100.0 % 100.0 % 100.0 % Cost of goods sold (1) 485,356 491,785 508,996 73.8 % 71.1 % 65.5 % Gross profit 171,918 199,536 268,556 26.2 % 28.9 % 34.5 % Operating expenses: Research and development (1) 89,940 88,146 71,259 13.7 % 12.8 % 9.2 % Selling, general and administrative (1) 85,734 88,861 95,259 13.0 % 12.8 % 12.3 % Total operating expenses 175,674 177,007 166,518 26.7 % 25.6 % 21.5 % Operating income (loss) (3,756) 22,529 102,038 (0.5) % 3.3 % 13.0 % Other income (loss), net (73) (1,730) 999 — % (0.3) % 0.1 % Interest income (expense), net 1,186 (1,087) (3,920) 0.2 % (0.2) % (0.5) % Gain on deconsolidation of the JV Company — — 399,093 — % — % 51.3 % Loss on changes of equity interest in the JV Company, net — — (3,140) — % — % (0.4) % Net income (loss) before income taxes (2,643) 19,712 495,070 (0.3) % 2.8 % 63.5 % Income tax expense 3,649 5,937 39,258 0.6 % 0.9 % 5.0 % Net income (loss) before loss from equity method investment (6,292) 13,775 455,812 (0.9) % 1.9 % 58.5 % Equity method investment loss from equity investee (4,789) (1,411) (2,629) (0.7) % (0.1) % (0.3) % Net income (loss) (11,081) 12,364 453,183 (1.6) % 1.8 % 58.2 % Net income attributable to noncontrolling interest — — 20 0.0 % 0.0 % 0.0 % Net income (loss) attributable to Alpha and Omega Semiconductor Limited $ (11,081) $ 12,364 $ 453,163 (1.6) % 1.8 % 58.2 % (1) Includes share-based compensation expense as follows: Year Ended June 30, 2024 2023 2022 2024 2023 2022 (in thousands) (% of revenue) Cost of goods sold $ 3,434 $ 5,851 $ 5,125 0.5 % 0.8 % 0.7 % Research and development 5,210 9,437 7,049 0.8 % 1.4 % 0.9 % Selling, general and administrative 12,997 22,200 19,150 2.0 % 3.2 % 2.5 % $ 21,641 $ 37,488 $ 31,324 3.3 % 5.4 % 4.1 % 48 Revenue The following is a summary of revenue by product type: Year Ended June 30, Change 2024 2023 2022 2024 2023 (in thousands) (in thousands) (in percentage) (in thousands) (in percentage) Power discrete $ 426,146 $ 458,795 $ 545,135 $ (32,649) (7.1) % $ (86,340) (15.8) % Power IC 205,778 218,620 220,882 (12,842) (5.9) % (2,262) (1.0) % Packaging and testing services and other 4,119 3,979 11,535 140 3.5 % (7,556) (65.5) % License and development services 21,231 9,927 — 11,304 113.9 % 9,927 100.0 % $ 657,274 $ 691,321 $ 777,552 $ (34,047) (4.9) % $ (86,231) (11.1) % The following is a summary of revenue by end market: Year Ended June 30, Change 2024 2023 2022 2024 2023 (in thousands) (in thousands) (in percentage) (in thousands) (in percentage) Computing $ 282,411 $ 243,286 $ 345,855 $ 39,125 16.1 % $ (102,569) (29.7) % Consumer 106,364 180,753 160,808 (74,389) (41.2) % 19,945 12.4 % Communication 114,186 103,218 110,356 10,968 10.6 % (7,138) (6.5) % Power Supply and Industrial 128,963 150,158 149,000 (21,195) (14.1) % 1,158 0.8 % Packaging and testing services and other 4,119 3,979 11,533 140 3.5 % (7,554) (65.5) % License and development services 21,231 9,927 — 11,304 113.9 % 9,927 100.0 % $ 657,274 $ 691,321 $ 777,552 $ (34,047) (4.9) % $ (86,231) (11.1) % Fiscal 2024 vs 2023 Total revenue was $657.3 million for fiscal year 2024, a decrease of $34.0 million, or 4.9%, as compared to $691.3 million for fiscal year 2023.
Erosion and fluctuation of average selling price : Erosion of average selling prices of established products is typical in our industry. Consistent with this historical trend, we expect our average selling prices of existing products to decline in the future.
Erosion and fluctuation of average selling price : Erosion of average selling prices of established products is typical in our industry. Consistent with this historical trend, we expect our average selling prices of our existing products to decline in the future.
The agreement has a 5.5 years term and matures on February 16, 2027. Jireh is required to make consecutive quarterly payments of principal and interest. The loan accrues interest based on adjusted LIBOR plus the applicable margin based on the outstanding balance of the loan.
The agreement has a term of 5.5 years and matures on February 16, 2027. Jireh is required to make consecutive quarterly payments of principal and interest. The loan accrues interest based on adjusted LIBOR plus the applicable margin based on the outstanding balance of the loan.
We record our interest in the net earnings of the equity method investee, along with adjustments for unrealized profits or losses on intra-entity transactions and amortization of basis differences, within earnings or loss from equity interests in the Consolidated Statements of Operations.
We record our interest in the net earnings of the equity method investee, along with adjustments for unrealized profits or losses on intra-entity transactions and amortization of basis differences, within earnings or loss from equity interests in the Consolidated Statements of Operations.
Tax Cuts and Jobs Act", Enacted December 22, 2017 On December 22, 2017, the United States enacted tax reform legislation through the Tax Cuts and Jobs Act (“the Tax Act”), which significantly changes the existing U.S. tax laws, including, but not limited to, (1) a reduction in the corporate tax 45 rate from 35% to 21%, (2) a shift from a worldwide tax system to a territorial system, (3) eliminating the corporate alternative minimum tax (AMT) and changing how existing AMT credits can be realized, (4) bonus depreciation that will allow for full expensing of qualified property, (5) creating a new limitation on deductible interest expense and (6) changing rules related to uses and limitations of net operating loss carryforwards created in tax years beginning after December 31, 2017.
Tax Cuts and Jobs Act", Enacted December 22, 2017 On December 22, 2017, the United States enacted tax reform legislation through the Tax Cuts and Jobs Act (“the Tax Act”), which significantly changes the existing U.S. tax laws, including, but not limited to, (1) a reduction in the corporate tax rate from 35% to 21%, (2) a shift from a worldwide tax system to a territorial system, (3) eliminating the corporate alternative minimum tax (AMT) and changing how existing AMT credits can be realized, (4) bonus depreciation that will allow for full expensing of qualified property, (5) creating a new limitation on deductible interest expense and (6) changing rules related to uses and limitations of net operating loss carryforwards created in tax years beginning after December 31, 2017.
The increase was primarily attributable to a $3.9 million increase in employee compensation and benefit expense mainly due to increased headcount and higher medical insurance expenses, partially offset by lower vacation accrual and lower bonus accrual, a $2.4 million increase in share-based compensation expense due to an increase in stock awards granted, a $3.6 million increase in depreciation expenses, a $2.2 million increase in allocation, and a $4.8 million increase in product prototyping engineering expense as a result of increased engineering activities.
The increase was primarily attributable to a $3.9 million increase in employee compensation and benefit expense mainly due to increased headcount and higher medical insurance expenses, partially offset by lower vacation accrual and lower bonus accrual, a $2.4 million increase in share-based compensation expense due to an 50 increase in stock awards granted, a $3.6 million increase in depreciation expenses, a $2.2 million increase in allocation expenses, and a $4.8 million increase in product prototyping engineering expense as a result of increased engineering activities.
We also rely substantially on the JV Company to provide foundry capacity to manufacture our products, therefore it is critical that we maintain continuous access to such capacity, which may not be available at sufficient level or at a pricing terms favorable to us because of lack of control over the JV Company’s operation.
We also rely on the JV Company to provide foundry capacity to manufacture our products, therefore it is critical that we maintain continuous access to such capacity, which may not be available at sufficient level or at a pricing terms favorable to us because of lack of control over the JV Company’s operation.
Under the Investment Agreement, the New Investors purchased newly issued equity interest of the JV Company, representing approximately 7.82% of post-transaction outstanding equity interests of the JV Company, for a total purchase price of RMB 509 million (or approximately USD 80 million based on the currency exchange rate as of January 26, 2022) (the “Investment”).
Under the Investment Agreement, the New Investors purchased newly issued equity interest of the JV Company, representing approximately 7.82% of post-transaction outstanding equity interests of the JV Company, for a total purchase price of RMB 43 509 million (or approximately USD 80 million based on the currency exchange rate as of January 26, 2022) (the “Investment”).
The Company is accounting for this transaction as a secured borrowing under the Transfers and Servicing of Financial Assets guidance. In addition, any cash held in the restricted bank account controlled by HSBC has a legal right of offset against the borrowing. This agreement, with certain financial covenants required, has no expiration date.
The Company is accounting for this transaction as a secured borrowing under the Transfers and Servicing of Financial Assets 53 guidance. In addition, any cash held in the restricted bank account controlled by HSBC has a legal right of offset against the borrowing. This agreement, with certain financial covenants required, has no expiration date.
Cost of goods sold Our cost of goods sold primarily consists of costs associated with semiconductor wafers, packaging and testing, personnel, including share-based compensation expense, overhead attributable to manufacturing, operations and procurement, and costs associated with yield improvements, capacity utilization, warranty and valuation of inventories. As the volume of sales increases, we expect cost of goods sold to increase.
Cost of goods sold Our cost of goods sold primarily consists of costs associated with semiconductor wafers, packaging and testing, personnel, including share-based compensation expense, overhead attributable to manufacturing, operations and procurement, and costs associated with yield improvements, capacity utilization, warranty and valuation of inventories. As the volume of sales 45 increases, we expect cost of goods sold to increase.
Both factors, timeliness of product introductions and conformance to customers' requirements, are equally important in securing design wins with our customers. As we accelerate the development of new technology platforms, we expect to increase the pace at which we introduce new products and seek and acquire design wins.
Both factors, timeliness of product introductions and conformance to customers' requirements, are equally important in securing design wins 44 with our customers. As we accelerate the development of new technology platforms, we expect to increase the pace at which we introduce new products and seek and acquire design wins.
Equity method investment income/loss from equity investee We use the equity method of accounting when we have the ability to exercise significant influence, but we do not have control, as determined in accordance with generally accepted accounting principles, over the operating and financial policies of 46 the company.
Equity method investment income/loss from equity investee We use the equity method of accounting when we have the ability to exercise significant influence, but we do not have control, as determined in accordance with generally accepted accounting principles, over the operating and financial policies of the company.
The minimum threshold is defined as a tax position that is more likely than not to be sustained upon examination by the applicable taxing authority, including resolution of any related appeals or litigation processes, based on the technical 60 merits of the position.
The minimum threshold is defined as a tax position that is more likely than not to be sustained upon examination by the applicable taxing authority, including resolution of any related appeals or litigation processes, based on the technical merits of the position.
On December 24, 2021, we entered into a share transfer agreement with another third-party investor, pursuant to which the Company sold to this investor 1.1% of outstanding equity interest held by us in the JV Company.
On December 24, 2021, we entered into a share transfer agreement with another third-party investor, pursuant to which the Company sold to this investor 1.1% of outstanding equity interest held by the Company in the JV Company.
The net change in assets and liabilities providing net cash of $72.8 million was primarily due to $45.5 million decrease in accrued and other liabilities, other payable on equity investee of $17.0 million, and $19.6 million decrease in accounts payable primarily due to timing of payment, $25.2 million increase in inventories, $18.7 million increase in other current and long-term assets primarily due to decrease in advance payments to suppliers, partially offset by $43.3 million decrease in accounts receivable due to timing of billings and collection of payments, $8.1 million increase in deferred revenue, and $2.0 million increase in income taxes payable.
The net change in assets and liabilities using net cash of $72.8 million was primarily due to $45.5 million decrease in accrued and other liabilities, decrease in other payable on equity investee of $17.0 million, and $19.6 million decrease in accounts payable primarily due to timing of payment, $25.2 million increase in inventories, $18.7 million increase in other current and long-term assets primarily due to decrease in advance payments to suppliers, partially offset by $43.3 million decrease in accounts receivable due to timing of billings and collection of payments, $8.1 million increase in deferred revenue, and $2.0 million increase in income taxes payable.
In recent periods, broad fluctuations in the semiconductor markets and the global and regional economic conditions, in particular the decline of the PC market conditions, have had a more significant impact on our results of operations than seasonality. Furthermore, our revenue may be impacted by the level of demand from our major customers due to factors outside of our control.
In recent periods, broad fluctuations in the semiconductor markets and the global and regional economic conditions, in particular the changing PC market conditions, have had a more significant impact on our results of operations than seasonality. Furthermore, our revenue may be impacted by the level of demand from our major customers due to factors outside of our control.
The non-cash charges of $287.6 million included depreciation and amortization expenses of $42.9 million, share-based compensation expense of $31.3 million, gain on deconsoidation of the JV Company of $399.1 million, loss on changes of equity interest in the JV Company, net of $3.1 million, deferred income tax on deconsolidation and changes of equity interest in 56 the JV Company of $30.0 million, equity method investment loss from equity investee of $2.6 million, and net deferred income taxes of $1.6 million.
The non-cash charges of $287.6 million included depreciation and amortization expenses of $42.9 million, share-based compensation expense of $31.3 million, gain on deconsolidation of the JV Company of $399.1 million, loss on changes of equity interest in the JV Company, net of $3.1 million, deferred income tax on deconsolidation and changes of equity interest in the JV Company of $30.0 million, equity method investment loss from equity investee of $2.6 million, and net deferred income taxes of $1.6 million.
The decrease in revenue from packaging and testing services for the fiscal year 2023 as compared to last fiscal year was primarily due to decreased demand.
The decrease in revenue from packaging and testing services for the fiscal year 2023 as compared to last 49 fiscal year was primarily due to decreased demand.
In such a case, the decrease in value is recognized in the period the impairment occurs in the Consolidated Statement of Operations. 47 Operating results The following tables set forth our results of operations and as a percentage of revenue for the fiscal years ended June 30, 2023, 2022 and 2021.
In such a case, the decrease in value is recognized in the period the impairment occurs in the Consolidated Statement of Operations. 47 Operating results The following tables set forth our results of operations and as a percentage of revenue for the fiscal years ended June 30, 2024, 2023 and 2022.
Cash flows from financing activities Net cash used in financing activities of $29.6 million for the fiscal year 2023 was primarily attributable to $6.4 million in common shares acquired to settle withholding tax related to vesting of restricted stock units, $0.8 million in payments of capital lease obligations, $26.6 million in repayments of borrowings, and $13.4 million of payments for repurchase of common shares, partially offset by $8.6 million of proceeds from borrowings and $9.0 million of proceeds from exercises of share options and issuance of shares under the ESPP.
Net cash used in financing activities of $29.6 million for the fiscal year 2023 was primarily attributable to $6.4 million in common shares acquired to settle withholding tax related to vesting of restricted stock units, $0.8 million in payments of finance lease obligations, $26.6 million in repayments of borrowings, and $13.4 million of payments for repurchase of common shares, partially offset by $8.6 million of proceeds from borrowings and $9.0 million of proceeds from exercises of share options and issuance of shares under the ESPP.
License and Development Revenue Recognition In February 2023, we entered into a license agreement with a customer to license our proprietary SiC technology and to provide 24-months of engineering and development services for a total fee of $45 million, consisting of an upfront fee of $18 million and $6.8 million paid to us in March 2023 and July 2023, respectively, with the remaining amount to be paid upon the achievement of specified engineering services and product milestones.
License and Development Revenue Recognition In February 2023, we entered into a license agreement with a customer to license our proprietary SiC technology and to provide 24-months of engineering and development services for a total fee of $45.0 million, consisting of an upfront fee of $18.0 million, $6.8 million and $9.0 million paid to us in March 2023, July 2023 and February 2024, respectively, with the remaining amount to be paid upon the achievement of specified engineering services and product milestones.
The decrease was primarily attributable to a $11.3 million decrease in employee compensation and benefits expenses mainly due to lower bonus expenses accrual and lower vacation accrual, partially offset by increased headcount, higher medical and business insurance expenses, as well as a $1.5 million decrease in cyber security incident, partially offset by a $3.1 million increase in share-based compensation expense due to an increase in stock award granted and the incremental expenses for one of our former officers' equity shares resulting from the modification, a $1.1 million increase in legal expenses, a $0.7 million increase in recruiting and consulting fees, a $1.2 million increase in allocation, and a $0.8 million increase in employee business expenses.
The decrease was primarily attributable to a $11.3 million decrease in employee compensation and benefits expenses mainly due to lower bonus expenses accrual and lower vacation accrual, partially offset by increased headcount, higher medical and business insurance expenses, as well as a $1.5 million decrease in loss incurred in connection with a cyber security incident, partially offset by a $3.1 million increase in share-based compensation expense due to an increase in stock award granted and the incremental expenses for one of our former officers' equity shares resulting from the modification, a $1.1 million increase in legal expenses, a $0.7 million increase in recruiting and consulting fees, a $1.2 million increase in allocation expenses, and a $0.8 million increase in employee business expenses.
On August 9, 2019, one of the Company's wholly-owned subsidiaries (the "Borrower") entered into a factoring agreement with the Hongkong and Shanghai Banking Corporation Limited (“HSBC”), whereby the Borrower assigns certain of its 54 accounts receivable with recourse.
On August 9, 2019, one of the Company's wholly-owned subsidiaries (the “Borrower”) entered into a factoring agreement with the Hongkong and Shanghai Banking Corporation Limited (“HSBC”), whereby the Borrower assigns certain of its accounts receivable with recourse.
Therefore, our share of losses of the 59 JV Company for the period from December 2, 2021 to March 31, 2022 was recorded in our Consolidated Statement of Operations for the fiscal year ended June 30, 2022.
Therefore, our share of losses of the 58 JV Company for the period from December 2, 2021 to March 31, 2022 was recorded in our Consolidated Statement of Operations for the fiscal year ended June 30, 2022.
As a result of the Transaction and other factors, the Company no longer has a controlling financial interest in the JV Company and has determined that the JV Company was deconsolidated from the Company’s Consolidated Financial Statements effective as of the Closing Date.
As a result of the Transaction and other factors, the Company no longer has a controlling financial interest in the JV Company. The JV Company was deconsolidated from the Company’s Consolidated Financial Statements effective as of the Closing Date.
In addition, a small percentage of our total revenue is generated by providing packaging and testing services to third parties through one of our subsidiaries. Our product revenue is reported net of the effect of the estimated stock rotation returns and price adjustments that we expect to provide to our distributors.
In addition, a small percentage of our total revenue is generated by providing packaging and testing services to third parties through one of our in-house facilities. Our product revenue is reported net of the effect of the estimated stock rotation returns and price adjustments that we expect to provide to our distributors.
We also provide special pricing to certain distributors primarily based on volume, to encourage resale of our products. We estimate the expected price adjustments at the time the revenue is recognized based on distributor inventory levels, pre-approved future distributor selling prices, distributor margins and demand for our products.
We also provide special pricing to certain distributors primarily based on volume, to encourage resale of our products. We estimate the expected price adjustments at the time the revenue is recognized based on distributor inventory levels, forecasted future distributor selling prices, distributor margins and demand for our products.
The decrease was primarily due to 11.1% decrease in revenue. Gross margin decreased by 5.6 percentage points to 28.9% for the fiscal year 2023, as compared to 34.5% for the fiscal year 2022. The decrease in gross margin was primarily due to higher material costs and lower unit shipments during the fiscal year ended June 30, 2023.
Gross margin decreased by 5.6 percentage points to 28.9% for the fiscal year 2023, as compared to 34.5% for the fiscal year 2022. The decrease in gross margin was primarily due to higher material costs and lower unit shipments during the fiscal year ended June 30, 2023.
It is an incremental tax over and above the corporate income tax and is recorded as a period cost. It is possible that this tax could be applicable in future periods, which would cause an increase to the effective tax rate and cash taxes. "U.S.
It is an 46 incremental tax over and above the corporate income tax and is recorded as a period cost. It is possible that this tax could be applicable in future periods, which would cause an increase to the effective tax rate and cash taxes.
Off-Balance Sheet Arrangements As of June 30, 2023, we had no off-balance sheet arrangements. 58 Critical Accounting Policies and Estimates The preparation of our consolidated financial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses.
Off-Balance Sheet Arrangements As of June 30, 2024, we had no off-balance sheet arrangements. 57 Critical Accounting Policies and Estimates The preparation of our consolidated financial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses.
The changes in the tax expense and effective tax rate between the periods resulted primarily from the Company reporting pretax book income of $495.0 million ($99.0 million of pretax book income plus the $396.0 million of income from the sale of equity interest in a joint venture and the related deconsolidation gain) for the year ended June 30, 2022 as compared to a pretax book income of $60.2 million for the year ended June 30, 2021 as well as changes in the mix of earnings in various geographic jurisdictions between the current year and the same period of last year. 53 Liquidity and Capital Resources Our principal need for liquidity and capital resources is to maintain sufficient working capital to support our operations and to invest adequate capital expenditures to grow our business.
The changes in the tax expense and effective tax rate between the periods resulted primarily from the Company reporting pretax book income of $19.7 million for the year ended June 30, 2023 as compared to a pretax book income of $495.0 million ($99.0 million of pretax book income plus the $396.0 million of income from the sale of equity interest in a joint venture and the related deconsolidation gain) for the year ended June 30, 2022 as well as changes in the mix of earnings in various geographic jurisdictions between the current year and the same period of last year. 52 Liquidity and Capital Resources Our principal need for liquidity and capital resources is to maintain sufficient working capital to support our operations and to invest adequate capital expenditures to grow our business.
Interest expense decreased by $2.8 million in fiscal year 2023 as compared to the prior fiscal year primarily due to a $3.6 million increase in interest income as a result of higher interest rate, offset by a $0.7 million increase in interest expense as a result of an increase in bank borrowings during the periods.
Interest income (expense), net decreased by $2.8 million in fiscal year 2023 as compared to the fiscal year 2022 primarily due to a $3.6 million increase in interest income as a result of higher interest rate, offset by a $0.7 million increase in interest expense as a result of an increase in bank borrowings during the fiscal year 2023.
During the fiscal year ended June 30, 2023, we recorded $9.9 million of license and development revenue. The amount of contract liability is recorded as deferred revenue on the consolidated balance sheets. In addition, we also entered an accompanying supply agreement to provide limited wafer supply to the customer.
During the fiscal years ended June 30, 2024 and 2023, we recorded $21.2 million and $9.9 million of license and development revenue. The amount of contract liability is recorded as deferred revenue on the consolidated balance sheets. In addition, we also entered an accompanying supply agreement to provide limited wafer supply to the customer.
This agreement contains customary restrictive covenants and includes certain financial covenants that the Company is required to maintain. Jireh drew down $45.0 million on February 16, 2022 with the first payment of principal beginning in October 2022. As of June 30, 2023, Jireh was in compliance with these covenants and the outstanding balance of this loan was $38.3 million.
This agreement contains customary restrictive covenants and includes certain financial covenants that the Company is required to maintain. Jireh drew down $45.0 million on February 16, 2022 with the first payment of principal beginning in October 2022. As of June 30, 2024, Jireh was in compliance with these covenants and the outstanding balance of this loan was $29.2 million.
Cash flows from investing activities Net cash used in investing activities of $109.6 million for the fiscal year 2023 was primarily attributable to $110.4 million purchases of property and equipment, partially offset by $0.6 million government grant related to equipment and $0.2 million in proceeds from sale of property and equipment.
Cash flows from investing activities Net cash used in investing activities of $35.7 million for the fiscal year 2024 was primarily attributable to $37.1 million purchases of property and equipment, partially offset by $1.0 million government grant related to equipment and $0.4 million in proceeds from sale of property and equipment. 55 Net cash used in investing activities of $109.6 million for the fiscal year 2023 was primarily attributable to $110.4 million purchases of property and equipment, partially offset by $0.6 million government grant related to equipment and $0.2 million in proceeds from sale of property and equipment.
Recently Issued Accounting Pronouncements See Note 1 of the Notes to the consolidated financial statements under Item 15 in this Annual Report on Form 10-K for a full description of recent accounting pronouncements, including the expected dates of adoption and estimated effects on results of operations and financial condition. 61
Recently Issued Accounting Pronouncements See Note 1 of the Notes to the consolidated financial statements contained in this Annual Report on Form 10-K for a full description of recent accounting pronouncements, including the expected dates of adoption and estimated effects on results of operations and financial condition. 60
We estimate the price adjustments for inventory at the distributors based on factors such as distributor inventory levels, pre-approved future distributor selling prices, distributor margins and demand for our products.
We estimate the price adjustments for inventory at the distributors based on factors such as distributor inventory levels, forecasted distributor selling prices, distributor margins and demand for our products.
The title of the equipment was transferred to Lender following such payment. The agreement was amended with fixed implied interest rate of 7.51% and monthly payment of principal and interest effective in October 2022. Other terms remain the same. In addition, Jireh purchased hardware for the machine under this financing arrangement. The purchase price of this hardware was $0.2 million.
The agreement was amended with fixed implied interest rate of 7.51% and monthly payment of principal and interest effective in October 2022. Other terms remain the same. In addition, Jireh purchased hardware for the machine under this financing arrangement. The purchase price of this hardware was $0.2 million.
As of June 30, 2023 and 2022, such restricted portion amounted to approximately $93.2 million and $92.4 million, or 10.5% and 10.8%, of our total consolidated net assets attributable to the Company, respectively.
As of June 30, 2024 and 2023, such restricted portion amounted to approximately $93.5 million and $93.2 million, or 10.5% and 10.5%, of our total consolidated net assets attributable to the Company, respectively.
Cash, cash equivalents and restricted cash As of June 30, 2023 and 2022, we had $195.6 million and $314.7 million of cash, cash equivalents and restricted cash, respectively. Our cash, cash equivalents and restricted cash primarily consisted of cash on hand, restricted cash and short-term bank deposits with original maturities of three months or less.
Cash, cash equivalents and restricted cash As of June 30, 2024 and 2023, we had $175.5 million and $195.6 million of cash, cash equivalents and restricted cash, respectively. Our cash, cash equivalents and restricted cash primarily consisted of cash on hand, restricted cash and short-term bank deposits with original maturities of three months or less.
On August 11, 2021, the Borrower signed an agreement with HSBC to decrease the borrowing maximum amount to $8.0 million with certain financial covenants required. Other terms remain the same. The Borrower was in compliance with these covenants as of June 30, 2023.
On August 11, 2021, the Borrower signed an agreement with HSBC to decrease the borrowing maximum amount to $8.0 million with certain financial covenants required. Other terms remain the same. The Borrower was in compliance with these covenants as of June 30, 2024. As of June 30, 2024, there was no outstanding balance of this factoring agreement.
The Company could borrow up to approximately RMB 140 million or $20.6 million based on currency exchange rate between RMB and U.S. Dollar on January 31, 2023 with a maturity date of December 1, 2023. As of June 30, 2023, there was no outstanding balance for this loan.
The Company could borrow up to approximately RMB 72.0 million, or $9.9 million based on currency exchange rate between RMB and U.S. Dollar on June 30, 2024, with a maturity date of December 31, 2024. As of June 30, 2024, there was no outstanding balance for this loan.
We have an extensive patent portfolio that consists of 918 patents and 45 patent applications in the United States as of June 30, 2023. We also have a total of 980 foreign patents, which primarily were based on our research and development efforts through June 30, 2023.
We have an extensive patent portfolio that consists of 930 patents and 52 patent applications in the United States as of June 30, 2024. We also have a total of 1,025 foreign patents, which primarily were based on our research and development efforts through June 30, 2024.
The increase in power discrete and power IC product sales was primarily due to a 21.0% increase in average selling price as compared to last fiscal year due to a shift in product mix, partially offset by a 2.1% decrease in unit shipments.
The decrease in power discrete and power IC product sales was primarily due to a 17.3% decrease in average selling price as compared to last fiscal year due to a shift in product mix, offset by a 12.3% increase in unit shipments.
The financing arrangement is secured by this equipment and other equipment which had the carrying amount of $15.2 million as of June 30, 2023. As of June 30, 2023, the outstanding balance of this debt financing was $11.9 million.
The financing arrangement is secured by this equipment and other equipment which had a carrying amount of $13.6 million as of June 30, 2024. As of June 30, 2024, the outstanding balance of this debt financing was $9.2 million.
A potential STAR Market listing may take several years to consummate and there is no guarantee that such listing by the JV Company will be successful or will be completed in a timely manner, or at all.
The reduction of our ownership assists the JV Company in meeting certain regulatory listing requirements. A potential STAR Market listing may take several years to consummate and there is no guarantee that such listing by the JV Company will be successful or will be completed in a timely manner, or at all.
Our portfolio of power semiconductors includes approximately 2,600 products, and has grown significantly with the introduction of over 60 new products in the fiscal year ended June 30, 2023, and over 130 and 160 new products in the fiscal year ended June 30, 2022 and 2021, respectively.
Our portfolio of power semiconductors includes approximately 2,700 products, and has grown with the introduction of over 100 new products in the fiscal year ended June 30, 2024, and over 60 and 130 new products in the fiscal years ended June 30, 2023 and 2022, respectively.
Research and development expenses Year Ended June 30, Change 2023 2022 2021 2023 2022 (in thousands) (in thousands) (in percentage) (in thousands) (in percentage) Research and development $ 88,146 $ 71,259 $ 62,953 $ 16,887 23.7 % $ 8,306 13.2 % Fiscal 2023 vs 2022 Research and development expenses were $88.1 million for fiscal year 2023, an increase of $16.9 million, or 23.7%, as compared to $71.3 million for fiscal year 2022.
Research and development expenses Year Ended June 30, Change 2024 2023 2022 2024 2023 (in thousands) (in thousands) (in percentage) (in thousands) (in percentage) Research and development $ 89,940 $ 88,146 $ 71,259 $ 1,794 2.0 % $ 16,887 23.7 % Fiscal 2024 vs 2023 Research and development expenses were $89.9 million for fiscal year 2024, an increase of $1.8 million, or 2.0%, as compared to $88.1 million for fiscal year 2023.
Other income (loss), net decreased by $1.5 million in fiscal year 2022 as compared to the last fiscal year primarily due to increase in foreign currency exchange loss as a result of the depreciation of RMB against USD.
Other income (loss), net increased by $2.7 million in fiscal year 2023 as compared to the last fiscal year primarily due to increase in foreign currency exchange loss as a result of the depreciation of RMB against USD.
Examples of “capital account” transactions include repatriations of investments by foreign owners and repayments of loan principal to foreign lenders. "Capital account" transactions require prior approval from SAFE or its provincial branch or an account bank delegated by SAFE to convert a remittance into a foreign currency, such as U.S. dollars, and transmit the foreign currency outside of China.
"Capital account" transactions require prior approval from SAFE or its provincial branch or an account bank delegated by SAFE to convert a remittance into a foreign currency, such as U.S. dollars, and transmit the foreign currency outside of China.
Other income (loss), net Year Ended June 30, Change 2023 2022 2021 2023 2022 (in thousands) (in thousands) (in percentage) (in thousands) (in percentage) Other income (loss), net $ (1,730) $ 999 $ 2,456 $ (2,729) (273.2) % $ (1,457) (59.3) % Other income (loss), net decreased by $2.7 million in fiscal year 2023 as compared to the last fiscal year primarily due to increase in foreign currency exchange loss as a result of the depreciation of RMB against USD.
Other income (loss), net Year Ended June 30, Change 2024 2023 2022 2024 2023 (in thousands) (in thousands) (in percentage) (in thousands) (in percentage) Other income (loss), net $ (73) $ (1,730) $ 999 $ 1,657 (95.8) % $ (2,729) (273.2) % Other income (loss), net decreased by $1.7 million in fiscal year 2024 as compared to the last fiscal year primarily due to decrease in foreign currency exchange loss as a result of the appreciation of RMB against USD.
During fiscal year 2023, we accelerated the development of new technology platforms which allowed us to introduce 19 medium and high voltage MOSFET products, targeting primarily the industrial markets and communication marketing, and 6 module products primarily for the consumer markets, as well as 4 low voltage MOSFET products primarily for the computing and communication markets.
During fiscal year 2024, we accelerated the development of new technology platforms which allowed us to introduce 36 medium and high voltage MOSFET products, targeting primarily the industrial markets and computing marketing, as well as 17 low voltage MOSFET products primarily for the computing market.
Regulations in China permit foreign owned entities to freely convert the Renminbi into foreign currency for transactions that fall under the “current account,” which includes trade related receipts and payments, interests, and dividend payments.
The Chinese government imposes certain currency exchange controls on cash transfers out of China. Regulations in China permit foreign owned entities to freely convert the Renminbi into foreign currency for transactions that fall under the “current account,” which includes trade related receipts and payments, interests, and dividend payments.
Our portfolio of products targets high-volume applications, including personal computers, graphic cards, game consoles, flat panel TVs, home appliances, power tools, smart phones, battery packs, consumer and industrial motor controls and power supplies for TVs, computers, servers and telecommunications equipment. Our business model leverages global resources, including research and development and manufacturing in the United States and Asia.
Our portfolio of products targets high-volume applications, including personal computers, graphic cards, game consoles, flat panel TVs, home appliances, power tools, smart phones, battery packs, consumer and industrial motor controls and power supplies for TVs, computers, servers and telecommunications equipment.
Net cash used in financing activities of $21.9 million for the fiscal year 2022 was primarily attributable to $64.3 million of proceeds from borrowings and $6.1 million of proceeds from exercises of share options and issuance of shares under the ESPP, partially offset by $8.6 million in common shares acquired to settle withholding tax related to vesting of restricted stock units, $4.2 million in payments of capital lease obligations, and $35.7 million in repayments of borrowings.
Cash flows from financing activities Net cash used in financing activities of $9.9 million for the fiscal year 2024 was primarily attributable to $7.7 million in common shares acquired to settle withholding tax related to vesting of restricted stock units, $0.9 million in payments of finance lease obligations, and $11.5 million in repayments of borrowings, partially offset by $10.1 million of proceeds from exercises of share options and issuance of shares under the ESPP.
Selling, general and administrative expenses 50 Year Ended June 30, Change 2023 2022 2021 2023 2022 (in thousands) (in thousands) (in percentage) (in thousands) (in percentage) Selling, general and administrative $ 88,861 $ 95,259 $ 77,514 $ (6,398) (6.7) % $ 17,745 22.9 % Fiscal 2023 vs 2022 Selling, general and administrative expenses were $88.9 million for fiscal year 2023, a decrease of $6.4 million, or 6.7%, as compared to $95.3 million for fiscal year 2022.
Selling, general and administrative expenses Year Ended June 30, Change 2024 2023 2022 2024 2023 (in thousands) (in thousands) (in percentage) (in thousands) (in percentage) Selling, general and administrative $ 85,734 $ 88,861 $ 95,259 $ (3,127) (3.5) % $ (6,398) (6.7) % Fiscal 2024 vs 2023 Selling, general and administrative expenses were $85.7 million for fiscal year 2024, a decrease of $3.1 million, or 3.5%, as compared to $88.9 million for fiscal year 2023.
Income tax expense Year Ended June 30, Change 2023 2022 2021 2023 2022 (in thousands) (in thousands) (in percentage) (in thousands) (in percentage) Income tax expense $ 5,937 $ 39,258 $ 3,935 $ (33,321) (84.9) % $ 35,323 897.7 % Fiscal 2023 vs 2022 Income tax expense for fiscal years 2023 and 2022 was $5.9 million and $39.3 million, respectively.
Income tax expense Year Ended June 30, Change 2024 2023 2022 2024 2023 (in thousands) (in thousands) (in percentage) (in thousands) (in percentage) Income tax expense $ 3,649 $ 5,937 $ 39,258 $ (2,288) (38.5) % $ (33,321) (84.9) % Fiscal 2024 vs 2023 Income tax expense for fiscal years 2024 and 2023 was $3.6 million and $5.9 million, respectively.
While SAFE approval is not statutorily required for eligible dividend payments to the foreign parent, in practice, before making the dividend payment, the account bank may seek SAFE’s opinion with respect to a dividend payment if the payment involves a relatively large amount, which may delay the dividend payment depending on the then overall status of cross-border payments and receipts of China. 55 Transactions that involve conversion of Renminbi into foreign currency in relation to foreign direct investments and provision of debt financings in China are classified as “capital account” transactions.
While SAFE approval is not statutorily required for eligible dividend payments to the foreign parent, in practice, before making the dividend payment, the account bank may seek SAFE’s opinion with respect to a dividend payment if the payment involves a relatively large amount, which may delay the dividend payment depending on the then overall status of cross-border payments and receipts of China.
The net change in assets and liabilities providing net cash of $2.5 million was primarily due to $48.5 million increase in accrued and other liabilities and $1.7 million increase in income taxes payable, partially offset by $22.5 million increase in accounts receivable due to timing of billings and collection of payments, $18.8 million increase in inventories, $5.8 million increase in other current and long-term assets primarily due to decrease in advance payments to suppliers, and $0.5 million decrease in accounts payable primarily due to timing of payments.
The net change in assets and liabilities using net cash of $42.6 million was primarily due to $33.8 million decrease in accrued and other liabilities, $12.5 million increase in inventories, $2.4 million decrease in accounts payable primarily due to timing of payment, $5.5 million decrease in deferred revenue, and $2.0 million decrease in income taxes payable, partially offset by $9.9 million decrease in accounts receivable due to timing of billings and collection of payments, increase in other payable on equity investee of $1.7 million, $1.9 million decrease in other current and long-term assets primarily due to decrease in advance payments to suppliers.
The decrease was primarily due to a decrease of $86.3 million and $2.3 million in sales of power discrete products and power IC products, respectively.
The decrease was primarily due to a decrease of $32.6 million and $12.8 million in sales of power discrete products and power IC products, respectively.
This factoring agreement allows the Borrower to borrow up to 70% of the net amount of its eligible accounts receivable of the Borrower with a maximum amount of $30.0 million. The interest rate is based on one month London Interbank Offered Rate ("LIBOR") plus 1.75% per annum. The Company is the guarantor for this agreement.
This factoring agreement allows the Borrower to borrow up to 70% of the net amount of its eligible accounts receivable of the Borrower with a maximum amount of $30.0 million. The interest rate is based on the Secured Overnight Financing Rate ("SOFR)", plus 2.01% per annum. The Company is the guarantor for this agreement.
Income tax expense decreased by $33.3 million, or 84.9% in fiscal year 2023 as compared to fiscal year 2022.
Fiscal 2023 vs 2022 Income tax expense for fiscal years 2023 and 2022 was $5.9 million and $39.3 million, respectively. Income tax expense decreased by $33.3 million, or 84.9% in fiscal year 2023 as compared to fiscal year 2022.
The changes in the tax expense and effective tax rate between the periods resulted primarily from the Company reporting pretax book income of $19.7 million for the year ended June 30, 2023 as compared to a pretax book income of $495.0 million ($99.0 million of pretax book income plus the $396.0 million of income from the sale of equity interest in a joint venture and the related deconsolidation gain) for the year ended June 30, 2022 as well as changes in the mix of earnings in various geographic jurisdictions between the current year and the same period of last year.
The changes in the tax expense and effective tax rate between the periods resulted primarily from the Company reporting pretax book loss of $2.6 million for the year ended June 30, 2024 as compared to a pretax book income of $19.7 million for year ended June 30, 2023 as well as changes in the mix of earnings in various geographic jurisdictions between the current year and the same period of last year.
A prolonged and extended downturn in the semiconductor industry would have a substantial impact on our operating results and financial conditions. A decline of the PC market may have a negative impact on our revenue, factory utilization, gross margin, our ability to resell excess inventory, and other performance measures.
A decline of the PC market may have a negative impact on our revenue, factory utilization, gross margin, our ability to resell excess inventory, and other performance measures.
The license and development fee is determined to be one performance obligation and is recognized over the 24 months when we perform the engineering and development services. We use the input method to measure progression of the transfer of services. We also entered an accompanying supply agreement to provide limited wafer supply to the customer.
The license and development fee is determined to be one performance obligation and is recognized over the 24 months during which we perform the engineering and development services. We use the input method to measure progression of the transfer of services.
The Chongqing Fab was being built in phases. As of December 1, 2021, we owned 50.9%, and the Chongqing Funds owned 49.1% of the equity interest in the JV Company. The JV Company was accounted under the provisions of the consolidation guidance since we had controlling financial interest until December 1, 2021.
As of December 1, 2021, we owned 50.9%, and the Chongqing Funds owned 49.1% of the equity interest in the JV Company. The Joint Venture was accounted under the provisions of the consolidation guidance since we had controlling financial interests until December 1, 2021. On December 1, 2021 (the “Effective Date”), Alpha & Omega Semiconductor (Shanghai) Ltd.
In September 2022, one of the Company's subsidiaries in China entered into a line of credit facility with Industrial and Commercial Bank of China. The purpose of the credit facility was to provide working capital borrowings. The Company could borrow up to approximately RMB 72.0 million or $10.3 million based on currency exchange rate between RMB and U.S.
In September 2023, China Construction Bank provided a line of credit facility to one of the Company's subsidiaries in China. The purpose of the credit facility is to provide working capital borrowings. The Company could borrow up to approximately RMB 50 million or $6.9 million based on currency exchange rate between RMB and U.S.
In June 2022, the equipment was delivered to Jireh after Lender paid 40% of the total purchase price, for euro 4.8 million, to the supplier on behalf of Jireh. In September 2022, Lender paid the remaining 10% payment for the total purchase price and reimbursed Jireh for the 50% down payment, after the installation and configuration of the equipment.
In April 2021, Jireh made a down payment of Euro 6.0 million, representing 50% of the total purchase price of the equipment, to the supplier. In June 2022, the equipment was delivered to Jireh after Lender paid 40% of the total purchase price, for Euro 4.8 million, to the supplier on behalf of Jireh.
This agreement has a 5 years term, after which Jireh has the option to purchase the equipment for $1. The implied interest rate was 4.75% per annum which was adjustable based on every five basis point increase in 60-month U.S. Treasury Notes, until the final installation and acceptance of the equipment.
The implied interest rate was 4.75% per annum which was adjustable based on every five basis point increase in 60-month U.S. Treasury Notes, until the final installation and acceptance of the equipment. The total purchase price of this equipment was Euro 12.0 million.
The non-cash charges of $70.0 million included depreciation and amortization expenses of $52.7 million, share-based compensation expense of $15.3 million, loss on disposal of property and equipment of $0.4 million, and net deferred income taxes of $1.6 million.
The non-cash charges of $79.4 million included depreciation and amortization expenses of $53.8 million, share-based compensation expense of $21.6 million, equity method investment loss from equity investee of $4.8 million, the net deferred income taxes of $0.9 million, and loss on disposal of property and equipment of $0.1 million.
On July 12, 2022, the current shareholders of the JV Company entered into a shareholders contract, pursuant to which the JV Company provided us with a monthly wafer production capacity guarantee, subject to future increase when the JV Company’s production capacity reaches certain specified level.
On July 12, 2022, the current shareholders of the JV Company entered into a shareholders contract, pursuant to which the JV Company committed to provide us with a monthly wafer production capacity until December 2023, and additional commitment to provide wafer capacity after December 2023 if the JV Company’s production capacity reaches certain specified level.
We will maintain a partial valuation allowance equal to the state research and development credit carryforwards until sufficient positive evidence exists to support reversal of the valuation allowance. We have not provided for withholding taxes on the undistributed earnings of our foreign subsidiaries because we intend to reinvest such earnings indefinitely.
We will maintain a partial valuation allowance equal to the state research and development credit carryforwards until sufficient positive evidence exists to support reversal of the valuation allowance. We intend to reinvest the undistributed earnings of its foreign subsidiaries indefinitely, except for Alpha and Omega Semiconductor (Cayman) Ltd. and AOS International LP.
The following table shows our cash flows from operating, investing and financing activities for the periods indicated: Year Ended June 30, 2023 2022 2021 (in thousands) Net cash provided by operating activities $ 20,473 $ 218,865 $ 128,744 Net cash used in investing activities (109,630) (130,822) (72,539) Net cash provided by (used in) financing activities (29,611) 21,854 (18,991) Effect of exchange rate changes on cash, cash equivalents and restricted cash (280) (59) 4,895 Net increase (decrease) in cash, cash equivalents and restricted cash $ (119,048) $ 109,838 $ 42,109 Cash flows from operating activities Net cash provided by operating activities of $20.5 million for fiscal year 2023 resulted primarily from net income of $12.4 million, non-cash charges of $80.9 million and net change in assets and liabilities providing net cash of $72.8 million.
Of the $175.5 million and $195.6 million cash and cash equivalents, $55.0 million and $108.2 million, respectively, were deposited with financial institutions outside the United States. 54 The following table shows our cash flows from operating, investing and financing activities for the periods indicated: Year Ended June 30, 2024 2023 2022 (in thousands) Net cash provided by operating activities $ 25,710 $ 20,473 $ 218,865 Net cash used in investing activities (35,744) (109,630) (130,822) Net cash provided by (used in) financing activities (9,903) (29,611) 21,854 Effect of exchange rate changes on cash, cash equivalents and restricted cash (126) (280) (59) Net increase (decrease) in cash, cash equivalents and restricted cash $ (20,063) $ (119,048) $ 109,838 Cash flows from operating activities Net cash provided by operating activities of $25.7 million for fiscal year 2024 resulted primarily from net loss of $11.1 million, non-cash charges of $79.4 million and net change in assets and liabilities using net cash of $42.6 million.
Fiscal 2022 vs 2021 Selling, general and administrative expenses were $95.3 million for fiscal year 2022, an increase of $17.7 million, or 22.9%, as compared to $77.5 million for fiscal year 2021.
Fiscal 2023 vs 2022 Selling, general and administrative expenses were $88.9 million for fiscal year 2023, a decrease of $6.4 million, or 6.7%, as compared to $95.3 million for fiscal year 2022.
Following the closing of the January 26, 2022 Investment, the percentage of outstanding JV equity interest beneficially owned by the Company was reduced to 42.2% at both June 30, 2022 and 2023. 42 We reduced our ownership of the JV Company to below 50% to increase the flexibility of the JV Company to raise capital to fund its future expansion.
Following the closing of the January 26, 2022 Investment, the percentage of outstanding JV equity interest beneficially owned by the Company was reduced to 42.2% at June 30, 2022.
Net cash used in financing activities of $19.0 million for the fiscal year 2021 was primarily attributable to $6.9 million in common shares acquired to settle withholding tax related to vesting of restricted stock units, $16.5 million in payments of capital lease obligations, and $66.6 million in repayments of borrowings, partially offset by $65.9 million of proceeds from borrowings and $5.1 million of proceeds from exercises of share options and issuance of shares under the ESPP. 57 Contractual Obligations Our contractual obligations as of June 30, 2023 are as follows: Payments Due by Period Less than More than Total 1 year 1-3 years 3-5years 5 years (in thousands) Recorded liabilities: Bank borrowings $ 49,887 $ 11,472 $ 23,535 $ 14,880 $ — Finance leases 4,768 1,144 2,288 1,336 — Operating leases 29,149 5,452 8,430 6,964 8,303 $ 83,804 $ 18,068 $ 34,253 $ 23,180 $ 8,303 Other: Capital commitments with respect to property and equipment $ 9,711 $ 9,711 $ — $ — $ — Purchase commitments with respect to inventories and others 127,490 127,490 — — — $ 137,201 $ 137,201 $ — $ — $ — Total contractual obligations $ 221,005 $ 155,269 $ 34,253 $ 23,180 $ 8,303 As of June 30, 2023, we had recorded liabilities of $2.5 million for uncertain tax positions and $0.3 million for potential interest and penalties, which are not included in the above table because we are unable to reliably estimate the amount of payments in individual years that would be made in connection with these uncertain tax positions.
Net cash used in financing activities of $21.9 million for the fiscal year 2022 was primarily attributable to $64.3 million of proceeds from borrowings and $6.1 million of proceeds from exercises of share options and issuance of shares under the ESPP, partially offset by $8.6 million in common shares acquired to settle withholding tax related to vesting of restricted stock units, $4.2 million in payments of finance lease obligations, and $35.7 million in repayments of borrowings. 56 Contractual Obligations Our contractual obligations as of June 30, 2024 are as follows: Payments Due by Period Less than More than Total 1 year 1-3 years 3-5years 5 years (in thousands) Recorded liabilities: Bank borrowings $ 38,415 $ 11,664 $ 26,215 $ 536 $ — Finance leases 3,624 1,144 2,289 191 — Operating leases 29,436 6,291 10,001 8,008 5,136 $ 71,475 $ 19,099 $ 38,505 $ 8,735 $ 5,136 Other: Capital commitments with respect to property and equipment $ 6,879 $ 6,879 $ — $ — $ — Purchase commitments with respect to inventories and others 100,807 100,807 — — — $ 107,686 $ 107,686 $ — $ — $ — Total contractual obligations $ 179,161 $ 126,785 $ 38,505 $ 8,735 $ 5,136 As of June 30, 2024, we had recorded liabilities of $3.0 million for uncertain tax positions and $0.5 million for potential interest and penalties, which are not included in the above table because we are unable to reliably estimate the amount of payments in individual years that would be made in connection with these uncertain tax positions.
Fiscal 2022 vs 2021 Research and development expenses were $71.3 million for fiscal year 2022, an increase of $8.3 million, or 13.2%, as compared to $63.0 million for fiscal year 2021.
Fiscal 2023 vs 2022 Research and development expenses were $88.1 million for fiscal year 2023, an increase of $16.9 million, or 23.7%, as compared to $71.3 million for fiscal year 2022.
The decrease in revenue of packaging and testing services for the fiscal year 2022 as compared to last fiscal year was primarily due to decreased demand. 49 Cost of goods sold and gross profit Year Ended June 30, Change 2023 2022 2021 2023 2022 (in thousands) (in thousands) (in percentage) (in thousands) (in percentage) Cost of goods sold $ 491,785 $ 508,996 $ 452,359 $ (17,211) (3.4) % $ 56,637 12.5 % Percentage of revenue 71.1 % 65.5 % 68.9 % Gross profit $ 199,536 $ 268,556 $ 204,543 $ (69,020) (25.7) % $ 64,013 31.3 % Percentage of revenue 28.9 % 34.5 % 31.1 % Fiscal 2023 vs 2022 Cost of goods sold was $491.8 million for fiscal year 2023, a decrease of $17.2 million, or 3.4%, as compared to $509.0 million for fiscal year 2022.
Cost of goods sold and gross profit Year Ended June 30, Change 2024 2023 2022 2024 2023 (in thousands) (in thousands) (in percentage) (in thousands) (in percentage) Cost of goods sold $ 485,356 $ 491,785 $ 508,996 $ (6,429) (1.3) % $ (17,211) (3.4) % Percentage of revenue 73.8 % 71.1 % 65.5 % Gross profit $ 171,918 $ 199,536 $ 268,556 $ (27,618) (13.8) % $ (69,020) (25.7) % Percentage of revenue 26.2 % 28.9 % 34.5 % Fiscal 2024 vs 2023 Cost of goods sold was $485.4 million for fiscal year 2024, a decrease of $6.4 million, or 1.3%, as compared to $491.8 million for fiscal year 2023.
The Financial Accounting Standards Board ("FASB") has issued guidance which clarifies the accounting for income taxes by prescribing a minimum probability threshold that a tax position must meet before a financial statement benefit is recognized.
As of June 30, 2024, the Company has recorded a deferred tax liability of $26.3 million for the basis difference related to our investment in the JV Company. 59 The Financial Accounting Standards Board ("FASB") has issued guidance which clarifies the accounting for income taxes by prescribing a minimum probability threshold that a tax position must meet before a financial statement benefit is recognized.
In February 2023, we entered into a license agreement with a customer to license our proprietary SiC technology and to provide 24-months of engineering and development services for a total fee of $45 million, consisting of an upfront fee of $18 million and 6.8 million paid to us in the March and July 2023, with the remaining amount to be paid upon the achievement of 44 specified engineering services and product milestones.
In February 2023, we entered into a license agreement with a customer to license our proprietary SiC technology and to provide 24-months of engineering and development services for a total fee of $45.0 million.

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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 changeAs of June 30, 2023, we had $49.8 million outstanding under our loan and $4.1 million outstanding under our financing leases, which were subject to fluctuations in interest rates. For the year ended June 30, 2023, a hypothetical 10% increase in the interest rate could result in $0.3 million additional annual interest expense.
Biggest changeAs of June 30, 2024, we had $38.4 million outstanding under our loan and $3.2 million outstanding under our financing leases, which were subject to fluctuations in interest rates. For the year ended June 30, 2024, a hypothetical 10% increase in the interest rate could result in $0.2 million additional annual interest expense.
We estimate that a 10% increase or decrease in the costs of raw materials subject to commodity price risk, such as gold, would decrease or increase our current year's net earnings by $0.6 million, assuming that such changes in our costs have no impact on the selling prices of our products and that we have no pending commitments to purchase metals at fixed prices. 62
We estimate that a 10% increase or decrease in the costs of raw materials subject to commodity price risk, such as gold, would decrease or increase our current year's net earnings by $0.6 million, assuming that such changes in our costs have no impact on the selling prices of our products and that we have no pending commitments to purchase metals at fixed prices. 61

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