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What changed in POWER INTEGRATIONS INC's 10-K — 2022 vs 2023

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

+225 added−228 removedSource: 10-K (2024-02-12) vs 10-K (2023-02-07)

Top changes in POWER INTEGRATIONS INC's 2023 10-K

225 paragraphs added · 228 removed · 183 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

66 edited+13 added−5 removed73 unchanged
Biggest changeInformation About Our Executive Officers As of January 31, 2023, our executive officers, who were appointed by and serve at the discretion of our board of directors, were as follows: ​ ​ ​ ​ ​ Name Position With Power Integrations Age Balu Balakrishnan President, Chief Executive Officer and Director 68 Douglas Bailey Vice President, Marketing 56 Radu Barsan Vice President, Technology 70 Sunil Gupta Vice President, Operations 50 David “Mike” Matthews (1) Vice President, Product Development 58 Sandeep Nayyar Vice President, Finance and Chief Financial Officer 63 Yang Chiah Yee Vice President, Worldwide Sales 56 Clifford Walker Vice President, Corporate Development 71 (1) On February 6, 2023, Mr.
Biggest changeInformation About Our Executive Officers As of January 31, 2024, our executive officers, who were appointed by and serve at the discretion of our board of directors, were as follows: ​ ​ ​ ​ ​ Name Position With Power Integrations Age Balu Balakrishnan President, Chief Executive Officer and Director 69 Douglas Bailey Vice President, Marketing 57 Radu Barsan Vice President, Technology 71 Sunil Gupta Vice President, Operations 51 David “Mike” Matthews Chief Technical Officer 59 Sandeep Nayyar Vice President, Finance and Chief Financial Officer 64 Clifford Walker Vice President, Corporate Development 72 Yang Chiah Yee Vice President, Worldwide Sales 57 Balu Balakrishnan has served as president, chief executive officer and as a director of Power Integrations since January 2002; he has also served as chairman of the board since May 2023.
We also hold trademarks in the U.S. and various other geographies including Taiwan, Korea, Hong Kong, China, United Kingdom, Europe, Japan, India, Brazil and Russia. We regard as proprietary some equipment, processes, information and knowledge that we have developed and used in the design and manufacture of our products.
We also hold trademarks in the U.S. and various other geographies including Taiwan, Korea, Hong Kong, China, United Kingdom, Europe, Japan, India, Brazil, Russia and Switzerland. We regard as proprietary some equipment, processes, information and knowledge that we have developed and used in the design and manufacture of our products.
Market Category Primary Applications Communications ​ Mobile-phone chargers, adapters for routers, cordless phones, broadband modems, voice-over-IP phones, other network and telecom gear Computer ​ Desktop PCs and monitors, servers, adapters for tablets and notebook computers, other computer peripherals Consumer ​ Major and small appliances, air conditioners and other comfort appliances, TVs and set-top boxes, video-game consoles Industrial ​ Industrial controls, LED lighting, utility meters, motor controls, uninterruptible power supplies, battery-powered tools, networked thermostats, power strips and other “smart home” devices, industrial motor drives, renewable energy systems, electric locomotives, electric passenger cars and commercial vehicles, high-voltage DC transmission systems 8 Table of Contents Sales, Distribution and Marketing We sell our products to original equipment manufacturers, or OEMs, and merchant power-supply manufacturers through our direct sales staff and a worldwide network of independent sales representatives and distributors.
Market Category Primary Applications Communications ​ Mobile-phone chargers, adapters for routers, cordless phones, broadband modems, voice-over-IP phones, other network and telecom gear Computer ​ Desktop PCs and monitors, servers, adapters for tablets and notebook computers, other computer peripherals Consumer ​ Major and small appliances, air conditioners and other comfort appliances, TVs and set-top boxes, video-game consoles Industrial ​ Industrial controls, LED lighting, utility meters, motor controls, uninterruptible power supplies, battery-powered tools, networked thermostats, power strips and other “smart home” devices, industrial motor drives, renewable energy systems, electric locomotives, electric passenger cars and commercial vehicles, high-voltage DC transmission systems ​ Sales, Distribution and Marketing We sell our products to original equipment manufacturers, or OEMs, and merchant power-supply manufacturers through our direct sales staff and a worldwide network of independent sales representatives and distributors.
The ethnic makeup of our U.S. workforce is approximately as follows: 63% Asian; 27% white; 6% Hispanic or Latino; 4% other. Innovation is the lifeblood of our company, and we depend on our people to sustain our competitive advantage. To attract and retain talented employees, we offer competitive compensation with generous comprehensive benefits for employees and dependents (including domestic partners).
The ethnic makeup of our U.S. workforce is approximately as follows: 62% Asian; 27% white; 6% Hispanic or Latino; 4% other. Innovation is the lifeblood of our company, and we depend on our people to sustain our competitive advantage. To attract and retain talented employees, we offer competitive compensation with generous comprehensive benefits for employees and dependents (including domestic partners).
For example, our InnoSwitch™ ICs integrate circuitry from the secondary, or low-voltage, side of AC-DC power supplies, whereas earlier product families integrated circuitry only on the primary, or high-voltage side. In 2019 we began incorporating proprietary gallium-nitride (GaN) transistors in some our products, enabling a higher level of energy efficiency than ICs with silicon transistors.
For example, our InnoSwitch™ ICs integrate circuitry from the secondary, or low-voltage, side of AC-DC power supplies, whereas earlier product families integrated circuitry only on the primary, or high-voltage side. In 2019 we began incorporating our proprietary GaN transistors in some our products, enabling a higher level of energy efficiency than ICs with silicon transistors.
In addition to the environmental benefits of reduced energy usage, our energy-saving technologies provide a number of benefits to our customers; these include helping them meet the increasingly stringent efficiency standards now in effect for many electronic products, and enabling the elimination of bulky heatsinks used to dissipate the heat produced by wasted electricity.
In addition to the environmental and economic benefits of reduced energy usage, our energy-saving technologies provide a number of benefits to our customers; these include helping them meet the increasingly stringent efficiency standards now in effect for many electronic products, and enabling the elimination of bulky, costly heatsinks used to dissipate the heat produced by wasted electricity.
Item 1. Business. Overview We design, develop and market analog and mixed-signal integrated circuits (ICs) and other electronic components and circuitry used in high-voltage power conversion. Our products are used in power converters that convert electricity from a high-voltage source to the type of power required for a specified downstream use.
Item 1. Business. Overview We design, develop and market analog and mixed-signal integrated circuits (“ICs”) and other electronic components and circuitry used in high-voltage power conversion. Our products are used in power converters that convert electricity from a high-voltage source to the type of power required for a specified downstream use.
Nayyar served in a succession of financial roles including vice president of finance at Quantum Corporation, a computer storage company. Mr. Nayyar also worked for five years in the public-accounting field at Ernst & Young LLP. Mr. Nayyar is a Certified Public Accountant, Chartered Accountant and has a Bachelor of Commerce from the University of Delhi, India. Since 2014, Mr.
Nayyar served in a succession of financial roles including vice president of finance at Quantum Corporation, a computer storage company. Mr. Nayyar also worked for five years in the public-accounting field at Ernst & Young LLP. Mr. Nayyar is a Certified Public Accountant, Chartered Accountant and has a Bachelor of Commerce from the University of Delhi, India. Mr.
The CEC standards were implemented nationwide in the United States in July 2008 as a result of the Energy Independence and Security Act of 2007 (EISA); these federal standards were tightened in 2016. Similar standards for external power supplies took effect in the European Union in 2010 as part of the EU’s EcoDesign Directive for Energy-Related Products.
The CEC standards were implemented nationwide in the United States in July 2008 as a result of the Energy Independence and Security Act of 2007 (“EISA”); these federal standards were tightened in 2016. Similar standards for external power supplies took effect in the European Union in 2010 as part of the EU’s EcoDesign Directive for Energy-Related Products.
We have sales offices in the United States, United Kingdom, Germany, Italy, India, China, Japan, South Korea, the Philippines, Singapore and Taiwan.
We have sales offices in the United States, United Kingdom, Germany, Italy, India, China, Japan, South Korea, the Philippines, Canada, Singapore and Taiwan.
Yee served in various senior sales roles at Atmel Corporation, a semiconductor designer and manufacturer of microcontroller and memory chips before its acquisition by Microhip Technology, Inc. Mr. Yee’s earlier experience includes senior sales roles at Xilinx Inc. and Memec LLC focusing on the Asia-Pacific region. Mr.
Yee served in various senior sales roles at Atmel Corporation, a semiconductor designer and manufacturer of microcontroller and memory chips before its acquisition by Microchip Technology, Inc. Mr. Yee’s earlier experience includes senior sales roles at Xilinx Inc. and Memec LLC focusing on the Asia-Pacific region. Mr.
It is our policy to ensure equal employment opportunity for all applicants and employees without regard to prohibited considerations of race, color, religion, sex (including pregnancy, gender identity and sexual orientation), national origin, age, disability or genetic information, marital status or any other classification protected by applicable local, state or federal laws.
It is our policy to ensure equal employment opportunity for all applicants and employees without regard to prohibited considerations of race, color, religion, sex (including pregnancy, gender identity and sexual orientation), national origin, age, disability or genetic information, marital status or any other classification protected by applicable 11 Table of Contents local, state or federal laws.
We offer health, dental and vision insurance, covering 86% of the cost of employee health insurance in 2022, flexible spending accounts for healthcare and child-care expenses, matching 401(k) contributions (at a rate of 50% of the employee contribution, up to a maximum of 4% of the employee’s eligible compensation), employee stock plans, paid vacation and family leave, life and disability insurance, flu vaccinations, tuition reimbursement, charitable gift matching, health-and-wellness programs designed to promote physical well-being and other mental health services.
We offer health, dental and vision insurance, covering 85% of the cost of employee health insurance in 2023, flexible spending accounts for healthcare and child-care expenses, matching 401(k) contributions (at a rate of 50% of the employee contribution, up to a maximum of 4% of the employee’s eligible compensation), employee stock plans, paid vacation and family leave, life and disability insurance, flu vaccinations, tuition reimbursement, charitable gift matching, health-and-wellness programs designed to promote physical well-being and other mental health services.
These devices, consisting primarily of copper wire wound around an iron core, tend to be bulky and heavy, and typically waste a substantial amount of electricity. In the 1970s, the availability of high-voltage discrete semiconductors enabled the development of a new generation of power supplies known as switched-mode power supplies, or switchers.
These devices, consisting primarily of copper wire wound around an iron core, tend to be bulky and heavy, and typically waste a substantial amount of electricity. In the 1970s, the availability of high-voltage discrete 5 Table of Contents semiconductors enabled the development of a new generation of power supplies known as switched-mode power supplies, or switchers.
We utilize both proprietary and standard IC packages for assembly. Some of the materials used in our packages and certain aspects of the assembly process are specific to our products. We require our assembly manufacturers to use high-voltage molding compounds which are more difficult 9 Table of Contents to process than industry standard molding compounds.
We utilize both proprietary and standard IC packages for assembly. Some of the materials used in our packages and certain aspects of the assembly process are specific to our products. We require our assembly manufacturers to use high-voltage molding compounds which are more difficult to process than industry standard molding compounds.
We currently address AC-DC applications with power outputs up to approximately 500 watts, gate-driver applications ranging from a few kilowatts up to gigawatts, and motor-drive applications up to approximately 400 watts. Through our research and development efforts, we seek to introduce more advanced products for these markets offering higher levels of integration and performance compared to earlier products.
We currently address AC-DC applications with power outputs up to approximately 500 watts, gate-driver applications ranging approximately 100 kilowatts up to gigawatts, and motor-drive applications up to approximately 400 watts. Through our research and development efforts, we seek to introduce more advanced products for these markets offering higher levels of integration and performance compared to earlier products.
Much like discrete power supplies, discrete gate drivers tend to be highly complex, requiring a large number of components and a great deal of design expertise. 5 Table of Contents Our Highly Integrated Approach In 1994 we introduced TOPSwitch, the industry’s first cost-effective high-voltage IC for switched-mode AC-DC power supplies.
Like discrete power supplies, discrete gate drivers tend to be highly complex, requiring a large number of components and a great deal of design expertise. Our Highly Integrated Approach In 1994 we introduced TOPSwitch, the industry’s first cost-effective high-voltage IC for switched-mode AC-DC power supplies.
We also provide extensive hands-on design support as well as online design tools, such as our PI Expert design software, that further reduce time-to-market and product development risks. ● Energy Efficiency Our patented EcoSmart technology, introduced in 1998, improves the energy efficiency of electronic devices during normal operation as well as standby and “no-load” conditions.
We also provide extensive hands-on design support as well as online design tools, such as our PI Expert design software, that further reduce time-to-market and product development risks. ● Energy Efficiency Our EcoSmart technology improves the energy efficiency of electronic devices during normal operation as well as standby and “no-load” conditions.
Since that time we have introduced a wide range of products (such as our TinySwitch, LinkSwitch and Hiper families) to increase the level of integration and improve upon the functionality of the original TOPSwitch, and to broaden the range of power levels we can address.
Since then we have introduced a wide range of products (such as our TinySwitch, LinkSwitch and Hiper families) to increase the level of integration and improve upon the functionality of the original TOPSwitch, and to broaden the range of power levels we can address.
Approximately 99% of eligible U.S. employees participate in our 401(k) plan, and 68% of eligible employees participated in the most recent offering period of our employee stock purchase plan. These benefits, combined with our culture of innovation and sustainable growth, contribute to below-average employee turnover relative to our industry and an average tenure of nearly 7 years.
Approximately 97% of eligible U.S. employees participate in our 401(k) plan and 70% of eligible employees participated in the most recent offering period of our employee stock purchase plan. These benefits, combined with our culture of innovation and sustainable growth, contribute to below-average employee turnover relative to our industry and an average tenure of nearly 7 years.
Direct sales to OEMs and merchant power supply manufacturers represented approximately 30%, 25% and 25% of our net product revenues in 2022, 2021 and 2020, respectively, while sales to distributors accounted for the remainder in each of the corresponding years.
Direct sales to OEMs and merchant power supply manufacturers represented approximately 31%, 30% and 25% of our net product revenues in 2023, 2022 and 2021, respectively, while sales to distributors accounted for the remainder in each of the corresponding years.
Our ClampZero ICs, introduced in 2021 alongside the GaN-based InnoSwitch4-CZ family of ICs, further enhance efficiency by recovering power losses associated with the high switching frequency of GaN transistors.
Our ClampZero ICs, introduced in 2021 alongside the GaN-based InnoSwitch4-CZ family of 7 Table of Contents ICs, further enhance efficiency by recovering power losses associated with the high switching frequency of GaN transistors.
Our ICs and gate drivers drastically reduce the complexity and component count of power converters compared to typical discrete designs by integrating many of the functions otherwise performed by numerous discrete electronic components, and by eliminating (or reducing the size and cost of) additional components through innovative system design.
Our products drastically reduce the complexity and component count of power converters compared to typical discrete designs by integrating many of the functions otherwise performed by numerous discrete electronic components, and by eliminating (or reducing the size and cost of) additional components through innovative system design.
This market consists 7 Table of Contents of an extremely broad range of applications including mobile-device chargers, consumer appliances, utility meters, LCD monitors, main and standby power supplies for desktop computers and TVs, and numerous other consumer and industrial applications, as well as LED lighting.
This market consists of an extremely broad range of applications including mobile-device chargers, consumer appliances, utility meters, LCD monitors, main and standby power supplies for desktop computers, servers and TVs, and numerous other consumer and industrial applications, as well as LED lighting.
Prior to 2010 our addressable market consisted of AC-DC applications with up to about 50 watts of output, a served available market (SAM) opportunity of approximately $1.5 billion. Since that time we have expanded our SAM to approximately $4 billion through a variety of means.
Prior to 2010 our addressable market consisted of AC-DC applications with up to about 50 watts of output, a served available market (“SAM”) opportunity of approximately $1.5 billion. Since then we have expanded our SAM to approximately $4 billion through a variety of means.
We also offer high-voltage gate drivers—either standalone ICs or circuit boards containing ICs, electrical isolation components and other circuitry—used to operate high-voltage switches such as insulated-gate bipolar transistors (IGBTs) and silicon-carbide (SiC) MOSFETs.
We also offer high-voltage gate drivers—either standalone ICs or circuit boards containing ICs, electrical isolation components and other circuitry—used to operate high-voltage switches such as insulated-gate bipolar transistors (“IGBTs”) and silicon-carbide (“SiC”) MOSFETs.
Since 1998, our AC-DC power-conversion ICs have featured our EcoSmart technology which drastically reduces standby power waste. We have sold more than 20 billion ICs featuring EcoSmart technology, resulting in estimated savings of more than 160 billion kilowatt-hours of standby power worldwide.
Since 1998, our AC-DC power-conversion ICs have featured our EcoSmart technology which drastically reduces standby power waste. We have sold more than 20 billion ICs featuring EcoSmart technology, resulting in estimated savings of more than 175 terawatt-hours of standby power worldwide.
These engineers have expertise in high-voltage device structure and process technology, analog and digital IC design, system architecture and packaging. Intellectual Property and Other Proprietary Rights We use a combination of patents, trademarks, copyrights, trade secrets and confidentiality procedures to protect our intellectual-property rights. In 2022 we received 26 U.S. and 35 foreign patents.
These engineers have expertise in high-voltage device structure and process technology, analog and digital IC design, system architecture and packaging. Intellectual Property and Other Proprietary Rights We use a combination of patents, trademarks, copyrights, trade secrets and confidentiality procedures to protect our intellectual-property rights. In 2023, we received 17 U.S. and 48 foreign patents.
In most cases, this conversion entails, among other functions, converting alternating current (AC) to direct current (DC) or vice versa, reducing or increasing the voltage, and regulating the output voltage and/or current according to the customer’s specifications.
In most cases, this conversion entails, among other functions, converting alternating current (“AC”) to direct current (“DC”) or vice versa, reducing or increasing the voltage, and regulating the output voltage and/or current according to the customer’s specifications.
Our top ten customers, including distributors that resell to OEMs and merchant power supply manufacturers, accounted for approximately 76%, 78% and 62% of net revenues in 2022, 2021 and 2020, respectively. In 2022, 2021, and 2020 two customers, both distributors, each accounted for more than 10% of revenues.
Our top ten customers, including distributors that resell to OEMs and merchant power supply manufacturers, accounted for approximately 80%, 76% and 78% of net revenues in 2023, 2022 and 2021, respectively. In 2023, three customers each accounted for more than 10% of revenues, in 2022 and 2021, two customers, both distributors, each accounted for more than 10% of revenues.
Also, our GaN transistor technology, introduced in 2019, offers substantially higher levels of active-mode efficiency compared to traditional silicon-based switches, while our BridgeSwitch motor-driver ICs enable efficiency of up to 98.5 percent, not only minimizing waste but also eliminating the need for heatsinks in many applications, which in turn reduces cost and weight. ● Wide Power Range and Scalability Products in our current IC families can address AC-DC power supplies with output power up to approximately 500 watts as well as some high-voltage DC-DC applications; our high-voltage gate drivers are used in applications with power levels as high as one gigawatt, while our motor-driver ICs address BLDC applications up to about 400 watts.
Our proprietary GaN transistor technology, introduced in 2019, offers substantially higher levels of active-mode efficiency compared to traditional silicon switches, while our BridgeSwitch motor-driver ICs enable efficiency of up to 98.5%, not only minimizing waste but also eliminating the need for heatsinks in many applications, which in turn reduces cost and weight. ● Wide Power Range and Scalability Products in our current IC families can address AC-DC power supplies with output power up to approximately 500 watts as well as some high-voltage DC-DC applications; our high-voltage gate drivers are used in applications with power levels ranging from approximately 100 kilowatts to gigawatts, while our motor-driver ICs address BLDC 6 Table of Contents applications up to about 400 watts.
These combinations of switches and drivers are used for power conversion in high-power applications (i.e., power levels ranging from a few kilowatts up to gigawatts) such as industrial motors, solar- and wind-power systems, electric vehicles (EVs) and high-voltage DC transmission systems.
These combinations of switches and drivers are used for power conversion in high-power applications (i.e., power levels ranging from approximately 100 kilowatts up to gigawatts) such as industrial motors, solar- and wind-power systems, EVs and high-voltage DC transmission systems.
As of December 31, 2022, 6% of our worldwide employees were foreign nationals, defined as individuals requiring employment visas in the countries where they are employed. Women comprise approximately 26% of our total U.S. workforce and 33% of our non-technical U.S. workforce.
As of December 31, 2023, 6% of our worldwide employees were foreign nationals, defined as individuals requiring employment visas in the countries where they are employed. Women comprise approximately 24% of our total U.S. workforce and 34% of our non-technical U.S. workforce.
The table below provides the approximate mix of our net sales by end market: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, End Market 2022 ​ 2021 ​ 2020 Communications ​ 21 % ​ 30 % ​ 30 % Computer 10 % ​ 10 % ​ 7 % Consumer 33 % ​ 32 % ​ 33 % Industrial 36 % ​ 28 % ​ 30 % ​ Our products are used in a vast range of power-conversion applications in the above-listed end-market categories.
The table below provides the approximate mix of our net sales by end market: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, End Market 2023 ​ 2022 ​ 2021 Communications ​ 29 % ​ 21 % ​ 30 % Computer 12 % ​ 10 % ​ 10 % Consumer 27 % ​ 33 % ​ 32 % Industrial 32 % ​ 36 % ​ 28 % ​ 8 Table of Contents Our products are used in a vast range of power-conversion applications in the above-listed end-market categories.
In 2016 we introduced the SCALE-iDriver TM family of ICs, broadening the range of gate-driver applications we can address, and in 2018 we introduced our BridgeSwitch™ motor-driver ICs, addressing BLDC motors, as described above.
In 2016 we introduced the SCALE-iDriver TM family of ICs, broadening the range of gate-driver applications we can address, and in 2018 we introduced our BridgeSwitch™ motor-driver ICs for BLDC motors.
As of December 31, 2022, we held 343 U.S. and 329 foreign patents. Both U.S. and foreign patents have expiration dates ranging from 2023 to 2042. While our patent portfolio as a whole is important to the success of our business, we are not materially dependent upon any single patent.
As of December 31, 2023, we held 300 U.S. and 349 foreign patents. Both U.S. and foreign patents have expiration dates ranging from 2024 to 2044. While our patent portfolio as a whole is important to the success of our business, we are not materially dependent upon any single patent.
In 2010, the EU EcoDesign Directive implemented standards limiting standby power consumption on a wide range of electronic products. The limit was reduced by 50 percent beginning in 2013, with many products now limited to 500 milliwatts of standby usage; further tightening of the standards is under consideration.
In 2010, the EU EcoDesign Directive implemented standards limiting standby power consumption on a wide range of electronic products. The limit was reduced by 50 percent beginning in 2013, with many products now limited to 500 milliwatts of standby usage; the EU standards are scheduled to tighten further beginning in 2025.
These items are also available in print to 11 Table of Contents any stockholder who requests them by calling (408) 414-9200.
These items are also available in print to any stockholder who requests them by calling (408) 414-9200.
Mike Matthews has served as our vice president of product development since August 2012. Mr. Matthews joined Power Integrations in 1992, managing our European application engineering group and then our European sales organization as managing director of Power Integrations (Europe). He has led our product-definition team since 2000, serving as director of strategic marketing prior to assuming his current role.
Matthews joined Power Integrations in 1992, managing our European application engineering group and then our European sales organization as managing director of Power Integrations (Europe). He led our product-definition team from 2000 through 2023, serving as director of strategic marketing until 2012 and then as vice president of product of development prior to assuming his current role.
We have since introduced a range of other product families, expanding the range of power-supply applications we can serve and enhancing our competitiveness in applications that we already addressed . In 2012 we expanded our addressable market to include high-voltage gate drivers.
We have since introduced a range of other product families, expanding the range of power-supply applications we can serve and enhancing our competitiveness in applications we already addressed . In 2012 we expanded our addressable market to include high-voltage gate drivers, and in 2018 we introduced our BridgeSwitch motor-driver ICs for BLDC motors.
Power supplies incorporating our products are used with all manner of electronic products including mobile phones, computing and networking equipment, appliances, electronic utility meters, battery-powered tools, industrial controls, and “home-automation,” or “internet of things” applications such as networked thermostats, power strips and security devices.
Power supplies incorporating our products are used with all manner of electronic products including mobile phones, computing and networking equipment, appliances, electronic utility meters, battery-powered tools, industrial controls, and “home-automation,” or “internet of things” applications such as networked thermostats, power strips and security devices. Variations of our power-supply ICs are used for high-voltage power conversion in electric vehicles (“EVs”).
Balakrishnan was employed by National Semiconductor Corporation. Douglas Bailey has served as our vice president of marketing since November 2004. From March 2001 to April 2004, he served as vice president of marketing at ChipX, a structured ASIC company.
Balakrishnan served as vice president of engineering and marketing. Prior to joining Power Integrations in 1989, Mr. Balakrishnan was employed by National Semiconductor Corporation. Douglas Bailey has served as our vice president of marketing since November 2004. From March 2001 to April 2004, he served as vice president of marketing at ChipX, a structured ASIC company.
We also supply high-voltage LED drivers, which are AC-DC ICs specifically designed for lighting applications that utilize light-emitting diodes, and motor-driver ICs addressing brushless DC (BLDC) motors used in refrigerators, HVAC systems, ceiling fans and other consumer-appliance and light commercial applications.
We also supply high-voltage LED drivers, which are AC-DC ICs specifically designed for lighting applications that utilize light-emitting diodes, and motor-driver ICs for brushless DC (“BLDC”) motors used in consumer appliances, HVAC systems, ceiling fans and a variety of industrial applications.
Mr. Gupta joined Intersil in 2012 as its Vice President, Quality and Reliability. Prior to joining Intersil, Mr. Gupta was the Director of Worldwide Customer Quality 12 Table of Contents Engineering at Qualcomm, and prior to Qualcomm Mr. Gupta spent 16 years at National Semiconductor in wafer fab operations and quality.
Mr. Gupta joined Intersil in 2012 as its Vice President, Quality and Reliability. Prior to joining Intersil, Mr. Gupta was the Director of Worldwide Customer Quality Engineering at Qualcomm, and prior to Qualcomm Mr. Gupta spent 16 years at National Semiconductor in wafer fab operations and quality. Mike Matthews has served as our chief technical officer since February 2023. Mr.
In response to concerns about the environmental impact of carbon emissions, policymakers have taken action to promote energy efficiency. For example, the ENERGY STAR® program and the European Union Code of Conduct encourage manufacturers of electronic devices to comply with voluntary energy-efficiency specifications. In 2007 the California Energy Commission (CEC) implemented mandatory efficiency standards for external power supplies.
For example, the ENERGY STAR® program and the European Union Code of Conduct encourage manufacturers of electronic devices to comply with voluntary energy-efficiency specifications. In 2007 the California Energy Commission (“CEC”) implemented mandatory efficiency standards for external power supplies.
From January 2000 to April 2001, he was vice president of engineering and strategic marketing. From September 1997 to January 2000, he was vice president of engineering and new business development. From September 1994 to September 1997, Mr. Balakrishnan served as vice president of engineering and marketing. Prior to joining Power Integrations in 1989, Mr.
He served as president and chief operating officer from April 2001 to January 2002. From January 2000 to April 2001, he was vice president of engineering and strategic marketing. From September 1997 to January 2000, he was vice president of engineering and new business development. From September 1994 to September 1997, Mr.
Radu Barsan has served as our vice president of technology since January 2013, leading our foundry engineering, technology development and quality organizations. Prior to joining Power Integrations, Dr. Barsan served as chairman and CEO at Redfern Integrated Optics, Inc., a supplier of single frequency narrow linewidth lasers, modules, and subsystems, from 2001 to 2013.
Prior to joining Power Integrations, Dr. Barsan served as chairman and CEO at Redfern Integrated Optics, Inc., a supplier of single frequency narrow linewidth lasers, modules, and subsystems, from 2001 to 2013.
Also, our gate-driver products are critical components in energy-efficient DC motor drives, high-voltage DC transmission systems, solar and wind energy systems and electric transportation applications. 4 Table of Contents ● Increase the size of our addressable market.
Also, our gate-driver products are critical components in energy-efficient DC motor drives, solar- and wind-power systems, efficient high-voltage DC transmission systems (including transmission of energy from renewable energy installations to the power grid), and low-emissions transportation applications such as electric locomotives. ● Increase the size of our addressable market.
Our motor-driver ICs compete with power modules from such companies as ON Semiconductor, Infineon, STMicroelectronics, Mitsubishi and Sanken as well as discrete designs from a wide range of other suppliers. Generally, our products enable customers to design power converters with total bill-of-materials costs similar to those of competing alternatives.
Our motor-driver ICs compete with power modules from such companies as ON Semiconductor, Infineon, STMicroelectronics, Mitsubishi and Sanken as well as discrete designs from a wide range of other suppliers.
Manufacturing We contract with three foundries for the manufacture of the vast majority of our silicon wafers: (1) Lapis Semiconductor Co., Ltd., or Lapis, (formerly OKI Electric Industry), (2) Seiko Epson Corporation, or Epson and (3) X-FAB Semiconductor Foundries AG, or X-FAB.
We attempt to protect our trade secrets and other proprietary information through non-disclosure agreements, proprietary-information agreements with employees and consultants, and other security measures. 9 Table of Contents Manufacturing We contract with three foundries for the manufacture of the vast majority of our silicon wafers: (1) Lapis Semiconductor Co., Ltd., or Lapis, (formerly OKI Electric Industry), (2) Seiko Epson Corporation, or Epson and (3) X-FAB Semiconductor Foundries AG, or X-FAB.
In December 2022 we were certified by Great Place to Work® based on the results of an anonymous survey of employees, in which 82% of employees stated that Power Integrations is a great place to work.
In 2022 and 2023 we were certified by Great Place to Work® based on the results of an anonymous survey of employees; in the 2023 survey, 85% of employees stated that Power Integrations is a great place to work, compared to an average of 57% for U.S. companies according to Great Place to Work.
Walker served as vice president of Reach Software Corporation, a software company. From December 1993 to September 1994, Mr. Walker served as president of Morgan Walker International, a consulting company.
Walker served as vice president of Reach Software Corporation, a software company. From December 1993 to September 1994, Mr. Walker served as president of Morgan Walker International, a consulting company. Yang Chiah Yee has served as our vice president, worldwide sales since June 2021. From March 2018 to June 2021, Mr.
In 2022 we launched PowerPros ℠ , a live online video support service that enables power-supply designers to talk directly with members of our applications engineering team 24 hours a day, six days a week, anywhere in the world. Our market-penetration strategy also includes capitalizing on the importance of energy efficiency and renewable energy in the power conversion market.
In 2022 we launched PowerPros ℠ , a live online video support service that 4 Table of Contents enables power-supply designers to talk directly with members of our applications engineering team 24 hours a day, six days a week, anywhere in the world. ● Capitalize on efforts to reduce carbon emissions by providing products that contribute to improved energy efficiency and increased use of renewable energy.
His earlier experience includes serving as business management and marketing consultant for Sapiential Prime, Inc., director of sales and business unit manager for 8x8, Inc., and serving in application engineering management for IIT, Inc. and design engineering roles with LSI Logic, Inmos, Ltd. and Marconi.
His earlier experience includes serving as business management and marketing consultant for Sapiential Prime, Inc., director of sales and business unit manager for 8x8, Inc., and serving in application engineering management for IIT, Inc. and design engineering roles with LSI Logic, Inmos, Ltd. and Marconi. 12 Table of Contents Radu Barsan has served as our vice president of technology since January 2013, leading our foundry engineering, technology development and quality organizations.
Competition Competing alternatives to our high-voltage ICs for the power-supply market include monolithic and hybrid ICs from companies such as STMicroelectronics, Infineon Technologies and Sanken Electric Company, as well as PWM-controller chips paired with discrete high-voltage silicon or GaN transistors; such controller chips are produced by a large number of vendors, including those listed above as well as such companies as NXP Semiconductors, Diodes Inc., On-Bright Electronics, MediaTek Inc., Southchip Semiconductor and Renesas Electronics.
Competition Competing alternatives to our high-voltage ICs for the power-supply market include monolithic and hybrid ICs from companies such as STMicroelectronics, Infineon Technologies and Sanken Electric Company, as well as PWM-controller chips paired with discrete high-voltage silicon or GaN transistors.
Nayyar has served as a director and audit-committee chairman of Smart Global Holdings, Inc., a manufacturer of specialty memory solutions; and was the lead independent director from 2021 to 2022. Yang Chiah Yee has served as our vice president, worldwide sales since June 2021. From March 2018 to June 2021, Mr.
Nayyar serves as a director and audit-committee chairman of Smart Global Holdings, Inc., a manufacturer of specialty memory solutions since his appointment in 2014. He was the lead independent director from 2021 to 2022. Clifford Walker has served as our vice president, corporate development since June 1995. From September 1994 to June 1995, Mr.
In fact, a 2015 study by the National Resources Defense Council found that devices that are “always-on” but inactive may be causing as much as $19 billion in annual energy waste in the United States alone. 6 Table of Contents Lighting is another major source of energy waste.
In fact, a 2015 study by the National Resources Defense Council found that devices that are “always-on” but inactive may be causing as much as $19 billion in annual energy waste in the United States alone. In response to concerns about the environmental impact of carbon emissions, policymakers have taken action to promote energy efficiency.
Under the terms and conditions of sale, our liability is limited generally to either a credit equal to the purchase price or replacement of the defective part.
Warranty We generally warrant that our products will substantially conform to the published specifications for 12 months from the date of shipment. Under the terms and conditions of sale, our liability is limited generally to either a credit equal to the purchase price or replacement of the defective part.
Yee received a bachelor of engineering degree from Nanyang Technological Institute at the National University of Singapore, and holds a graduate diploma in marketing management from the Singapore Institute of Management. Clifford Walker has served as our vice president, corporate development since June 1995. From September 1994 to June 1995, Mr.
Yee received a bachelor of engineering degree from Nanyang Technological Institute at the National University of Singapore, and holds a graduate diploma in marketing management from the Singapore Institute of Management. 13 Table of Contents
Human Capital As of December 31, 2022, we employed 831 full-time personnel across 14 countries with 370, or 45% of the total, residing in North America, while 55% resided offshore comprising 334 in the Asia-Pacific region and 127 across Europe.
Risk Factors in this Annual Report on Form 10-K under “Risks Related to Laws and Regulations.” Human Capital As of December 31, 2023, we employed 819 full-time personnel across 14 countries with 361, or 44% of the total, residing in North America, while 56% resided offshore comprising 334 in the Asia-Pacific region and 124 across Europe.
This support includes hands-on design assistance as well as a range of design tools and documentation such as software and reference designs.
This support includes hands-on design assistance as well as a range of design tools and documentation such as software and reference designs. We also believe that our record of product quality and history of delivering products to our customers on a timely basis serve as additional competitive advantages.
Our trade secrets include a high-volume production process used in the manufacture of our high-voltage ICs. We attempt to protect our trade secrets and other proprietary information through non-disclosure agreements, proprietary-information agreements with employees and consultants, and other security measures.
Our trade secrets include a high-volume production process used in the manufacture of our high-voltage ICs.
Our products bring a number of important benefits to the power-conversion market compared with less advanced alternatives, including reduced component count and design complexity, smaller size, higher reliability and reduced time-to-market. Our products also reduce the energy consumption of power converters during normal use and in “standby” operation, when the end product is not in use.
Our products also reduce the energy consumption of power converters during normal use and in “standby” operation, when the end product is not in use.
Since then, we have introduced a variety of new products utilizing GaN technology and we expect to address a wider range of applications with GaN-based products in the years ahead. We intend to continue expanding our SAM in the years ahead through all of the means described above.
We are currently developing new products incorporating these technologies, which we believe will enable us to address higher-power applications than we address with our current range of products and therefore further expand our SAM. We intend to continue expanding our SAM in the years ahead through all of the means described above.
Plans to eliminate incandescent bulbs have also been announced or enacted in other geographies such as Canada, Australia and Europe. In December 2019 the government of China published new efficiency standards for room air conditioners, which took effect in July 2020.
The EISA legislation also required substantial improvements in the efficiency of lighting technologies, effectively resulting in the phase-out of most incandescent light sources and increased adoption of LED-lighting technology. In December 2019 the government of China published new efficiency standards for room air conditioners, which took effect in July 2020.
For example, our EcoSmart™ technology drastically reduces the amount of energy consumed by electronic products when they are not in use, helping our customers comply with regulations that seek to curb this so-called “standby” energy consumption.
For example: our EcoSmart™ technology drastically reduces the amount of energy consumed by electronic products when they are plugged in but not in use; our PowiGaN™ gallium-nitride (“GaN”) transistors reduce energy consumption compared to silicon transistors; and our BridgeSwitch™ motor-driver ICs provide highly efficient power conversion for BLDC motors in appliances and industrial applications.
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Less than 5% of the energy consumed by traditional incandescent light bulbs is converted to light, while the remainder is wasted as heat.
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Our power-conversion products are distinguished by their “system-level” nature; that is, they incorporate into a single product numerous elements of a power-conversion system including a high-voltage transistor, drivers, advanced control circuitry and, in some cases, a communication link connecting the primary (i.e., input) and secondary (i.e., output) sides of the power converter while maintaining safety isolation to protect the end user from exposure to high voltage.
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The Alliance to Save Energy estimated in 2007 that a conversion to efficient lighting technologies such as compact fluorescent bulbs and LEDs could save as much as $18 billion worth of electricity and 158 million tons of carbon dioxide emissions per year in the United States alone.
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Alternatively, a power converter can be designed and assembled using discrete components purchased from a variety of suppliers.
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The EISA legislation also required substantial improvements in the efficiency of lighting technologies; the manufacture and sale of most incandescent bulbs has been illegal in the United States since 2014, while rules adopted in 2022 by the U.S. government are expected to result in the phase-out of additional categories of inefficient bulbs.
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Our system-level products offer a number of important benefits compared with discrete designs, including: reduced design complexity; smaller size; lower component count, which in turn results in higher reliability and easier sourcing of components; reduced time-to-market; and more efficient use of engineering resources.
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We also believe that our record of product quality and history of delivering products to our customers on a timely basis serve as additional competitive advantages. 10 Table of Contents Warranty We generally warrant that our products will substantially conform to the published specifications for 12 months from the date of shipment.
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By reducing component count, circuit-board size and the need for heatsinks, our products also contribute to a reduction in materials usage and electronic waste.
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Matthews assumed a new role as Chief Technology Officer. See Part I, Item 9B in this Annual Report on Form 10-K. ​ Balu Balakrishnan has served as president and chief executive officer and as a director of Power Integrations since January 2002. He served as president and chief operating officer from April 2001 to January 2002.
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In its 2019 World Energy Outlook , the International Energy Agency estimated that more than two-thirds of the reduction in carbon-dioxide (“CO2”) emissions needed to achieve the “Sustainable Development Scenario” of the United Nations Sustainable Development Agenda is to come from improved energy efficiency and increased use of renewable energy.
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Energy savings enabled by our products help our customers comply with regulations that seek to curb energy consumption in support of reducing CO2 emissions.
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Since then, we have introduced a variety of new products utilizing GaN technology, as well as new generations of our GaN technology capable of supporting higher voltages (as high as 1250 volts).
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In 2023 we announced new versions of our InnoSwitch products incorporating GaN transistors with higher voltage ratings of 900 volts and 1250 volts; earlier GaN products feature transistors rated at 750 volts.
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Such controller chips are produced by a large number of vendors, including those listed above as well as others including NXP Semiconductors, Diodes Inc., On-Bright Electronics, MediaTek Inc., Renesas Electronics and, in recent years, an increasing number of Chinese suppliers such as Southchip Semiconductor, Chipown Microelectronics and Hangzhou Silan Microelectronics Co.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

40 edited+12 added−9 removed65 unchanged
Biggest changeSome of the factors that could affect our operating results include the following: ● the demand for our products declining in the major end markets we serve, which may occur due to competitive factors, supply-chain fluctuations, rising inflation or other changes in macroeconomic conditions; 13 Table of Contents ● reliance on international sales activities for a substantial portion of our net revenues; ● the volume and timing of orders received from customers; ● our products are sold through distributors, which limits our direct interaction with our end customers, which reduces our ability to forecast sales and increases the complexity of our business; ● interruptions in our information technology systems; ● competitive pressures on selling prices; ● we face risks related to the Novel Coronavirus pandemic (COVID-19), which has disrupted and may again disrupt our operations, including our manufacturing, research and development, and sales and marketing activities, which could have a material adverse impact on our business, financial condition, operating results and cash flows; ● risks associated with our supply chain including, the volume, cost and timing of delivery of orders placed by us with our wafer foundries and assembly subcontractors, and their ability to procure materials; ● our ability to attract and retain qualified personnel; ● the ability of our products to penetrate additional markets; ● our ability to develop and bring to market new products and technologies on a timely basis; ● the lengthy timing of our sales cycle; ● earthquakes, fire, pandemics or other disasters; ● undetected defects and failures in meeting the exact specifications required by our products; ● fluctuations in exchange rates, particularly the exchange rate between the U.S. dollar and the Japanese yen, the Euro and the Swiss franc; ● the inability to adequately protect or enforce our intellectual property rights; ● expenses we are required to incur (or choose to incur) in connection with our intellectual property litigations; ● changes in tax rules and regulations, changes in interpretation of tax rules and regulations, or unfavorable assessments from tax audits may increase the amount of taxes we are required to pay; ● changes in environmental laws and regulations, including with respect to energy consumption and climate change; ● uncertainties arising out of economic consequences of current and potential military actions, such as Russia’s invasion of Ukraine, or terrorist activities and associated political instability; ● risks associated with acquisitions and strategic investments; ● our ability to successfully integrate, or realize the expected benefits from, our acquisitions; and ● continued impact of changes in securities laws and regulations, including potential risks resulting from our evaluation of our internal controls over financial reporting.
Biggest changeSome of the factors that could affect our operating results include the following: ● the demand for our products declining in the major end markets we serve, which may occur due to competitive factors, supply-chain fluctuations, rising inflation or other changes in macroeconomic conditions; ● reliance on international sales activities for a substantial portion of our net revenues; ● the volume and timing of orders received from customers; ● our products are sold through distributors, which limits our direct interaction with our end customers, which reduces our ability to forecast sales and increases the complexity of our business; ● the ability of our products to penetrate additional markets; ● our ability to develop and bring to market new products and technologies on a timely basis; ● failure, disruption, security breaches, or other incidents impacting our information technology infrastructure or information management systems; ● interruptions in our information technology systems; ● competitive pressures on selling prices; ● we face risks related to the Novel Coronavirus pandemic (“COVID-19”), which has disrupted and may again disrupt our operations, including our manufacturing, research and development, and sales and marketing activities, which could have a material adverse impact on our business, financial condition, operating results and cash flows; ● risks associated with our supply chain including, the volume, cost and timing of delivery of orders placed by us with our wafer foundries and assembly subcontractors, and their ability to procure materials; ● our ability to attract and retain qualified personnel; ● the lengthy timing of our sales cycle; ● earthquakes, fire, pandemics or other disasters; ● undetected defects and failures in meeting the exact specifications required by our products; ● fluctuations in exchange rates, particularly the exchange rate between the U.S. dollar and the Japanese yen, the Euro and the Swiss franc; ● the inability to adequately protect or enforce our intellectual property rights; ● expenses we are required to incur (or choose to incur) in connection with our intellectual property litigations; ● changes in tax rules and regulations, changes in interpretation of tax rules and regulations, or unfavorable assessments from tax audits may increase the amount of taxes we are required to pay; 14 Table of Contents ● changes in environmental laws and regulations, including with respect to energy consumption and climate change; ● uncertainties arising out of economic consequences of current and potential military actions, including current on-going conflicts in Ukraine and the Middle East, or terrorist activities and associated political instability; ● risks associated with acquisitions and strategic investments; ● our ability to successfully integrate, or realize the expected benefits from, our acquisitions; and ● continued impact of changes in securities laws and regulations, including potential risks resulting from our evaluation of our internal controls over financial reporting.
These disruptions may continue to adversely affect not only our sales and marketing activities, product development, manufacturing and product shipments which could negatively impact our ability to meet customer commitments but also our customers’ ability to manufacture their products, which could continue to reduce their demand for our products.
These disruptions may adversely affect not only our sales and marketing activities, product development, manufacturing and product shipments which could negatively impact our ability to meet customer commitments but also our customers’ ability to manufacture their products, which could reduce their demand for our products.
Selling through distributors reduces our ability to forecast sales and increases the complexity of our business, requiring us to: ● manage a more complex supply chain; ● monitor the level of inventory of our products at each distributor, and 15 Table of Contents ● monitor the financial condition and credit-worthiness of our distributors, many of which are located outside of the United States and are not publicly traded.
Selling through distributors reduces our ability to forecast sales and increases the complexity of our business, requiring us to: ● manage a more complex supply chain; ● monitor the level of inventory of our products at each distributor, and ● monitor the financial condition and credit-worthiness of our distributors, many of which are located outside of the United States and are not publicly traded.
Our operations are subject to income and transaction taxes in the United States and in multiple foreign jurisdictions and to review or audit by the U.S. Internal Revenue Service (IRS) and state, local and foreign tax authorities.
Our operations are subject to income and transaction taxes in the United States and in multiple foreign jurisdictions and to review or audit by the U.S. Internal Revenue Service (“IRS”) and state, local and foreign tax authorities.
Any serious disruption in the supply of wafers from Epson, Lapis and X-FAB could harm our business. We estimate that it 16 Table of Contents would take 12 to 24 months from the time we identified an alternate manufacturing source to produce wafers with acceptable manufacturing yields in sufficient quantities to meet our needs.
Any serious disruption in the supply of wafers from Epson, Lapis and X-FAB could harm our business. We estimate that it would take 12 to 24 months from the time we identified an alternate manufacturing source to produce wafers with acceptable manufacturing yields in sufficient quantities to meet our needs.
Not only does the volume of units ordered by particular customers vary substantially from period to period, but also purchase orders received from particular customers often vary substantially from early oral estimates provided by those customers for planning purposes. In addition, customer orders can be canceled or rescheduled without significant penalty to the customer.
Not only does the volume of units ordered by particular customers vary substantially from period to period, but also purchase orders received from particular customers often vary substantially from early oral estimates provided by those customers for planning purposes. In addition, customer 15 Table of Contents orders can be canceled or rescheduled without significant penalty to the customer.
We cannot assure that we will continue to work successfully with Epson, Lapis and X-FAB in the future, and that the wafer foundries’ capacity will meet our needs. Additionally, one or more of these wafer foundries could seek an early termination of our wafer supply agreements.
We cannot assure that we will continue to work successfully with Epson, Lapis and X-FAB in the future, and that the wafer foundries’ capacity will meet our needs. 17 Table of Contents Additionally, one or more of these wafer foundries could seek an early termination of our wafer supply agreements.
International sales involve a number of risks to us, including: ● tariffs, protectionist measures and other trade barriers and restrictions; ● potential insolvency of international distributors and representatives; ● reduced protection for intellectual property rights in some countries; ● the impact of recessionary environments and inflation in the United States and other economies where we do business; ● global, regional, and local economic and political conditions, including, but not limited to, social, economic, political, and supply chain instability related to the uncertainty regarding relationships among the international community as a whole, as well as related to armed conflicts that exist, or in the future could exist, in various parts of the world; ● the burdens of complying with a variety of foreign and applicable U.S.
International sales involve a number of risks to us, including: ● tariffs, protectionist measures and other trade barriers and restrictions; ● potential insolvency of international distributors and representatives; ● reduced protection for intellectual property rights in some countries; ● the impact of recessionary environments and inflation in the United States and other economies where we do business; ● global, regional, and local economic and political conditions, including, but not limited to, social, economic, political, and supply chain instability related to the uncertainty regarding relationships among the international community as a whole including potential risks stemming from tensions between China and Taiwan and between China and Western countries, as well as related to armed conflicts that exist, or in the future could exist, in various parts of the world; ● the burdens of complying with a variety of foreign and applicable U.S.
Demand for end products incorporating our products has been highly cyclical over time and has been impacted by economic downturns; our recent results have been impacted by economic conditions including 14 Table of Contents inflation and the effects of anti-COVID measures in China.
Demand for end products incorporating our products has been highly cyclical over time and has been impacted by economic downturns; our recent results have been impacted by economic conditions including inflation and the effects of anti-COVID measures in China.
Sales to customers outside of the United States of America account for, and have accounted for a large portion of our net revenues, including approximately 96% for the year ended December 31, 2022 and 98% of our net revenues for the years ended December 31, 2021 and 2020, respectively.
Sales to customers outside of the United States of America account for, and have accounted for a large portion of our net revenues, including approximately 98%, 96% and 98% of our net revenues for the years ended December 31, 2023, 2022 and 2021, respectively.
Specifically, our top ten customers, including distributors, accounted for 76%, 78% and 62% of our net revenues in each of the years ended December 31, 2022, 2021 and 2020, respectively. However, a significant portion of these revenues are attributable to sales of our products through distributors of electronic components.
Specifically, our top ten customers, including distributors, accounted for 80%, 76% and 78% of our net revenues in each of the years ended December 31, 2023, 2022 and 2021, respectively. However, a significant portion of these revenues are attributable to sales of our products through distributors of electronic components.
Thus, even if we are successful in these lawsuits, the benefits of this success may fail to outweigh the significant legal costs we will have incurred.
Thus, even if 19 Table of Contents we are successful in these lawsuits, the benefits of this success may fail to outweigh the significant legal costs we will have incurred.
This evolution may result in continuing uncertainty regarding compliance matters and additional costs necessitated by ongoing revisions to our disclosure and governance practices. 20 Table of Contents ​ Item 1B. Unresolved Staff Comments. Not applicable. ​
This evolution may result in continuing uncertainty regarding compliance matters and additional costs necessitated by ongoing revisions to our disclosure and governance practices. ​ Item 1B. Unresolved Staff Comments. Not applicable. ​
Sales to distributors accounted for approximately 70%, 75% and 75% of net revenues in the years ended December 31, 2022, 2021 and 2020, respectively.
Sales to distributors accounted for approximately 69%, 70% and 75% of net revenues in the years ended December 31, 2023, 2022 and 2021, respectively.
Our current patents may or may not inhibit our competitors from getting any benefit from an expired patent. Our U.S. patents have expiration dates ranging from 2023 to 2040.
Our current patents may or may not inhibit our competitors from getting any benefit from an expired patent. Our U.S. patents have expiration dates ranging from 2024 to 2044.
Our primary supply arrangements for the production of wafers are with Epson, Lapis and X-FAB. Our contracts with these suppliers expire on varying dates, with the earliest to expire in December 2025. Although some aspects of our relationships with Lapis, X-FAB and Epson are contractual, many important aspects of these relationships depend on their continued cooperation.
Our contracts with these suppliers expire on varying dates, with the earliest to expire in December 2025. Although some aspects of our relationships with Lapis, X-FAB and Epson are contractual, many important aspects of these relationships depend on their continued cooperation.
The failure to obtain necessary licenses and other rights, and/or litigation arising out of infringement claims could cause us to lose market share and harm our business. As our patents expire, we will lose intellectual property protection previously afforded by those patents.
Costly litigation may be necessary to enforce our intellectual property rights or to defend us against claimed infringement. The failure to obtain necessary licenses and other rights, and/or litigation arising out of infringement claims could cause us to lose market share and harm our business. As our patents expire, we will lose intellectual property protection previously afforded by those patents.
Acquisitions involve numerous risks, including but not limited to: ● inability to realize anticipated benefits, which may occur due to any of the reasons described below, or for other unanticipated reasons; ● the risk of litigation or disputes with customers, suppliers, partners or stockholders of an acquisition target arising from a proposed or completed transaction; ● impairment of acquired intangible assets and goodwill as a result of changing business conditions, technological advancements or worse-than-expected performance, which would adversely affect our financial results; and ● unknown, underestimated and/or undisclosed commitments, liabilities or issues not discovered in our due diligence of such transactions.
Acquisitions involve numerous risks, including but not limited to: ● inability to realize anticipated benefits, which may occur due to any of the reasons described below, or for other unanticipated reasons; ● the risk of litigation or disputes with customers, suppliers, partners or stockholders of an acquisition target arising from a proposed or completed transaction; ● impairment of acquired intangible assets and goodwill as a result of changing business conditions, technological advancements or worse-than-expected performance, which would adversely affect our financial results; and ● unknown, underestimated and/or undisclosed commitments, liabilities or issues not discovered in our due diligence of such transactions. 20 Table of Contents We also in the future may have strategic relationships with other companies, which may decline in value and/or not meet desired objectives.
We face risks related to the Novel Coronavirus pandemic (COVID-19), which has disrupted and may again disrupt our operations, including our manufacturing, research and development, and sales and marketing activities, which could have a material adverse impact on our business, financial condition, operating results and cash flows .
We face risks related to global health crises, such as the COVID-19 pandemic, which have disrupted and may again disrupt our operations, including our manufacturing, research and development, and sales and marketing activities, which could have a material adverse impact on our business, financial condition, operating results and cash flows .
If power requirements for applications in which our products are currently utilized go outside the cost-effective range of our products, some of these alternative technologies can be used more cost effectively.
If the price of competing solutions decreases significantly, the cost effectiveness of our products will be adversely affected. If power requirements for applications in which our products are currently utilized go outside the cost-effective range of our products, some of these alternative technologies can be used more cost effectively.
We have made, and in the future intend to make, acquisitions of other businesses and with these acquisitions there is a risk that integration difficulties may cause us not to realize expected benefits.
Our inability to successfully integrate, or realize the expected benefits from, our acquisitions could adversely affect our results. We have made, and in the future intend to make, acquisitions of other businesses and with these acquisitions there is a risk that integration difficulties may cause us not to realize expected benefits.
Our business as well as the business of our suppliers, customers and distributors have been and may continue to be adversely impacted by the world-wide response to COVID-19 such as public health measures, travel restrictions, business shutdowns, border closures, delivery and freight delays and other disruptions.
Our business as well as the business of our suppliers, customers and distributors was impacted by the COVID-19 pandemic and may in the future be adversely impacted by the world-wide response to any further global health crises. Such impacts include public health measures, travel restrictions, business shutdowns, border closures, delivery and freight delays and other disruptions.
Our products are generally incorporated into a customer’s products at the design stage. However, customer decisions to use our products, commonly referred to as design wins, can often require us to expend significant research and development and sales and marketing resources without any assurance of success.
However, customer decisions to use our products, commonly referred to as design wins, can often require us to expend significant research and development and sales and marketing resources without any assurance of success. These significant research and development and sales and marketing resources often precede volume sales, if any, by a year or more.
The semiconductor industry is subject to environmental regulations, particularly those that control and restrict the sourcing, use, transportation, storage, and disposal of certain mineral, chemicals, and materials used in the 19 Table of Contents semiconductor manufacturing process.
The inability to accurately determine our customers’ strategies could increase our inventory costs related to obsolescence. The semiconductor industry is subject to environmental regulations, particularly those that control and restrict the sourcing, use, transportation, storage, and disposal of certain mineral, chemicals, and materials used in the semiconductor manufacturing process.
These significant research and development and sales and marketing resources often precede volume sales, if any, by a year or more. The value of any design win will largely depend upon the commercial success of the customer’s product. We cannot assure that we will continue to achieve design wins or that any design win will result in future revenues.
The value of any design win will largely depend upon the commercial success of the customer’s product. We cannot assure that we will continue to achieve design wins or that any design win will result in future revenues.
We cannot assure that the steps we have taken to protect our intellectual property will be adequate to prevent misappropriation, or that others will not develop competitive technologies or products.
We cannot assure that the steps we have taken to protect our intellectual property will be adequate to prevent misappropriation, or that others will not develop competitive technologies or products. From time to time, we have received, and we may receive in the future, communications alleging possible infringement of patents or other intellectual property rights of others.
The high-voltage power supply industry is intensely competitive and characterized by significant price sensitivity. Our products face competition from alternative technologies, such as linear transformers, discrete switcher power supplies, and other integrated and hybrid solutions. If the price of competing solutions decreases significantly, the cost effectiveness of our products will be adversely affected.
Intense competition in the high-voltage power supply industry may lead to a decrease in our average selling price and reduced sales volume of our products. The high-voltage power supply industry is intensely competitive and characterized by significant price sensitivity. Our products face competition from alternative technologies, such as linear transformers, discrete switcher power supplies, and other integrated and hybrid solutions.
We cannot assure that we will be able to overcome the marketing or technological challenges necessary to penetrate additional markets. To the extent that a competitor penetrates additional markets before we do, or takes market share from us in our existing markets, our net revenues and financial condition could be materially adversely affected.
To the extent that a competitor penetrates additional markets before we do, or takes market share from us in our existing markets, our net revenues and financial condition could be materially adversely affected. If our efforts to enhance existing products and introduce new products are not successful, we may not be able to generate demand for our products .
Any significant system or network disruption, including but not limited to new system implementations, computer viruses, security breaches, or energy blackouts could have a material adverse impact on our operations, sales and operating results. We have implemented measures to manage our risks related to such disruptions, but such disruptions could still occur and negatively impact our operations and financial results.
We rely on the efficient and uninterrupted operation of complex information technology systems and networks to operate our business. Any significant system or network disruption, including but not limited to new system implementations, computer viruses, security breaches, or energy blackouts could have a material adverse impact on our operations, sales and operating results.
ICs as complex as those we sell often encounter development delays and may contain undetected defects or failures when first introduced or after commencement of commercial shipments. We have from time to time in the past experienced product quality, performance or reliability problems.
Our customers generally establish demanding specifications for quality, performance and reliability, and our products must meet these specifications. ICs as complex as those we sell often encounter development delays and may contain undetected defects or failures when first introduced or after commencement of commercial shipments.
Any interruption in our ability, or that of our major suppliers, to continue operations could delay the development and shipment of our products and have a substantial negative impact on our financial results.
Any interruption in our ability, or that of our major suppliers, to continue operations could delay the development and shipment of our products and have a substantial negative impact on our financial results. 18 Table of Contents Our products must meet exacting specifications, and undetected defects and failures may occur which may cause customers to return or stop buying our products and/or impose significant costs to us.
Changing environmental regulations and the timetable to implement them continue to impact our customers’ demand for our products. Currently we have limited visibility into our customers’ strategies to implement these changing environmental regulations into their business. The inability to accurately determine our customers’ strategies could increase our inventory costs related to obsolescence.
Changes in environmental laws and regulations, including with respect to energy consumption and climate change, may have a negative impact on our business . Changing environmental regulations and the timetable to implement them continue to impact our customers’ demand for our products. Currently we have limited visibility into our customers’ strategies to implement these changing environmental regulations into their business.
We also in the future may have strategic relationships with other companies, which may decline in value and/or not meet desired objectives. The success of these strategic relationships depends on various factors over which we may have limited or no control and requires ongoing and effective cooperation with strategic partners.
The success of these strategic relationships depends on various factors over which we may have limited or no control and requires ongoing and effective cooperation with strategic partners. Moreover, these relationships are often illiquid, such that it may be difficult or impossible for us to monetize such relationships.
Furthermore, the risk of state-supported and geopolitically motivated cybersecurity incidents may increase due to geopolitical instability. In addition, we may incur additional costs to remedy any damages caused by these disruptions or security breaches. Intense competition in the high-voltage power supply industry may lead to a decrease in our average selling price and reduced sales volume of our products.
We have implemented measures to manage our risks related to such disruptions, but such disruptions could still occur and negatively impact our operations and financial results. Furthermore, the risk of state-supported and geopolitically motivated cybersecurity incidents may increase due to geopolitical instability. In addition, we may incur additional costs to remedy any damages caused by these disruptions or security breaches.
This could adversely impact our revenues and profits. Any failure to manage these complexities could disrupt or reduce sales of our products and unfavorably impact our financial results. Interruptions in our information technology systems could adversely affect our business. We rely on the efficient and uninterrupted operation of complex information technology systems and networks to operate our business.
This could adversely impact our revenues and profits. Any failure to manage these complexities could disrupt or reduce sales of our products and unfavorably impact our financial results. If our products do not penetrate additional markets, our business will not grow as we expect.
In addition, customers may defer or return orders for existing products in response to the introduction of new products.
In addition, customers may defer or return orders for existing products in response to the introduction of new products. When a potential liability exists we will maintain reserves for customer returns, however we cannot assure that these reserves will be adequate.
Furthermore, changes to the taxation of undistributed foreign earnings could change our future intentions regarding reinvestment of such earnings. As of December 31, 2022, we are currently subject to an ongoing audit with the California Franchise Tax Board for the tax years 2018 and 2019.
As of December 31, 2023, we are currently subject to an ongoing audit with the California Franchise Tax Board for the tax years 2018 and 2019. The foregoing items could have a material effect on our business, cash flow, results of operations or financial conditions.
All of these effects could have a material adverse effect on our customer relationships, operating results, cash flows, financial condition and have a negative impact on our stock price. We depend on third-party suppliers to provide us with wafers for our products and if they fail to provide us sufficient quantities of wafers, our business may suffer .
We depend on third-party suppliers to provide us with wafers for our products and if they fail to provide us sufficient quantities of wafers, our business may suffer . Our primary supply arrangements for the production of wafers are with Epson, Lapis and X-FAB.
The effects of the pandemic have resulted in a significant economic downturn in local and global economies, as well as a significant downturn in financial markets, and the continuing pandemic could result in further significant economic downturns which may result in reduced end-customer demand and materially impact our revenues.
The COVID-19 pandemic caused a significant economic downturn in local and global economies and in financial markets. Any future global health crisis could have similar economic consequences which may result in reduced demand for our products and have a material adverse effect on our revenues, customer relationships, operating results, cash flows, financial condition and stock price.
We do not have long-term employment contracts with, and we do not have in place key person life insurance policies on, any of our employees. If our products do not penetrate additional markets, our business will not grow as we expect. We believe that our future success depends in part upon our ability to penetrate additional markets for our products.
We do not have long-term employment contracts with, and we do not have in place key person life insurance policies on, any of our employees. Because the sales cycle for our products can be lengthy, we may incur substantial expenses before we generate significant revenues, if any. Our products are generally incorporated into a customer’s products at the design stage.
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If our efforts to enhance existing products and introduce new products are not successful, we may not be able to generate demand for our products .
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We believe that our future success depends in part upon our ability to penetrate additional markets for our products. We cannot assure that we will be able to overcome the marketing or technological challenges necessary to penetrate additional markets.
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When a potential liability exists we will maintain reserves for customer returns, however we cannot assure that these reserves will be adequate. 17 Table of Contents Because the sales cycle for our products can be lengthy, we may incur substantial expenses before we generate significant revenues, if any.
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Any failure, disruption or security breach or incident otherwise impacting our information technology infrastructure or information management systems could have an adverse impact on our business and operations. Cyber-attacks have become increasingly more prevalent and much harder to detect, defend against or prevent.
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Our products must meet exacting specifications, and undetected defects and failures may occur which may cause customers to return or stop buying our products and/or impose significant costs to us. Our customers generally establish demanding specifications for quality, performance and reliability, and our products must meet these specifications.
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As the frequency of cyber-attacks and resulting breaches reported by other businesses and governments increases, we expect to continue to devote significant resources to improve and maintain our IT infrastructure. We have incurred and may in the future incur significant costs in order to implement, maintain and/or update security systems we believe are necessary to protect our IT infrastructure.
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From time to time, we have received, and we may receive in the future, 18 Table of Contents communications alleging possible infringement of patents or other intellectual property rights of others. Costly litigation may be necessary to enforce our intellectual property rights or to defend us against claimed infringement.
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As the techniques used to obtain unauthorized access or to sabotage systems change frequently and are often not recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventive measures.
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Recently enacted U.S. tax legislation has significantly changed the taxation of U.S.-based multinational corporations, by, among other things, reducing the U.S. corporate income tax rate, adopting elements of a territorial tax system, assessing a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred, and the creation of new taxes on certain foreign-sourced earnings.
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A breakdown in existing controls and procedures around our cyber-security environment may prevent us from detecting, reporting or responding to cyber incidents in a timely manner and could have a material adverse 16 Table of Contents effect on our financial position and value of our stock.
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The legislation as initially enacted was unclear in some respects and has required interpretations and implementing regulations by the Internal Revenue Service, as well as state tax authorities, and the legislation has been subject to amendments and technical corrections. Further amendments and technical corrections may occur, any of which could lessen or increase certain adverse impacts of the legislation.
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We cannot guarantee that our implemented processes for IT and risk mitigation measures will be effective for IT systems under our control. Furthermore, we rely on products and services provided by third-party suppliers to operate certain critical business systems.
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A significant portion of our earnings are earned by our subsidiaries outside the U.S. Changes to the taxation of certain foreign earnings resulting from the newly enacted U.S. tax legislation, along with the state tax impact of these changes and potential future cash distributions, may have an adverse effect on our effective tax rate.
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We cannot guarantee that third parties and infrastructure in our supply chain or our partners’ supply chains have not been or will not be compromised or that they do not or will not in the future contain exploitable defects or bugs that could result in a breach of or disruption to our IT infrastructure, including our products and services, or the third-party information technology systems that support our services.
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The foregoing items could have a material effect on our business, cash flow, results of operations or financial conditions. Changes in environmental laws and regulations, including with respect to energy consumption and climate change, may have a negative impact on our business .
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We have limited insight into the data privacy or security practices of third-party service providers. Our ability to monitor these third parties’ information security practices is limited, and they may not have adequate information security measures in place.
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Moreover, these relationships are often illiquid, such that it may be difficult or impossible for us to monetize such relationships. Our inability to successfully integrate, or realize the expected benefits from, our acquisitions could adversely affect our results.
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If one of our third-party suppliers suffers a security breach, our response may be limited or more difficult because we may not have direct access to their systems, logs and other information related to the security breach. Interruptions in our information technology systems could adversely affect our business.
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We have from time to time in the past experienced product quality, performance or reliability problems.
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The European Union (“EU”) member states formally adopted the EU’s Pillar Two Directive, which was established by the Organization for Economic Cooperation and Development, and which generally provides for a 15 per cent minimum effective tax rate for multinational corporations, in all jurisdictions in which they operate.
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While we do not anticipate that this will have a material impact on our tax provision or effective tax rate, we will continue to monitor the evolving tax legislation in the jurisdictions in which we operate.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings. Information with respect to this item may be found in Note 13, Legal Proceedings and Contingencies, in our Notes to Consolidated Financial Statements included later in this Annual Report on Form 10-K, which information is incorporated here by reference. ​ Item 4. Mine Safety Disclosures. Not applicable. PART II
Biggest changeItem 3. Legal Proceedings. Information with respect to this item may be found in Note 13, Legal Proceedings and Contingencies, in our Notes to Consolidated Financial Statements included later in this Annual Report on Form 10-K, which information is incorporated here by reference. ​ Item 4. Mine Safety Disclosures. Not applicable. 23 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeOff-Balance-Sheet Arrangements As of December 31, 2022 and 2021, we did not have any off-balance-sheet arrangements or relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which are typically established for the purpose of facilitating off-balance-sheet arrangements or other contractually narrow or limited purposes.
Biggest changeOff-Balance-Sheet Arrangements As of December 31, 2023 and 2022, we did not have any off-balance-sheet arrangements or relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which are typically established for the purpose of facilitating off-balance-sheet arrangements or other contractually narrow or limited purposes. 32 Table of Contents Contractual Obligations As of December 31, 2023, we had the following non-cancelable contractual obligations: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Payments Due by Period ​ ​ ​ ​ ​ Less than 1 ​ ​ ​ ​ ​ ​ ​ ​ ​ (In thousands) Total Year 1 - 3 Years 4 - 5 Years Over 5 Years Operating lease obligations (1) ​ $ 11,239 ​ $ 3,168 ​ $ 5,617 ​ $ 2,211 ​ $ 243 Purchase obligations (2) ​ $ 41,585 ​ $ 41,585 ​ $ — ​ $ — ​ $ — (1) Operating lease obligations represent undiscounted non-cancelable remaining lease payments.
Sources of cash also included a $19.9 million decrease in accounts receivable and $7.3 million decrease in prepaid expenses and other assets.
Sources of cash also included a $19.9 million decrease in accounts receivable and a $7.3 million decrease in prepaid expenses and other assets.
Cash from Investing Activities Our investing activities in the year ended December 31, 2022 generated $78.3 million of cash, consisting primarily of $116.3 million from sales and maturities of marketable securities, net of purchases, and proceeds of $1.2 million from the sale of an office building, partially offset by $39.2 million for purchases of property and equipment, primarily production-related machinery and equipment.
Our investing activities in the year ended December 31, 2022 generated $78.3 million of cash, consisting primarily of $116.3 million from sales and maturities of marketable securities, net of purchases, and proceeds of $1.2 million from the sale of an office building, partially offset by $39.2 million for purchases of property and equipment, primarily production-related machinery and equipment.
All else being equal, a 10% change in the value of the U.S. dollar compared to the Japanese yen would eventually result in a corresponding change in our gross margin of approximately 1%; this sensitivity may increase or decrease depending on the percentage of our wafer supply that we purchase from Japanese suppliers.
All else being equal, a 10% change in the value of the U.S. dollar compared to the Japanese yen would eventually result in a corresponding change in our gross margin of approximately 1.5%; this sensitivity may increase or decrease depending on the percentage of our wafer supply that we purchase from Japanese suppliers.
Business Overview We design, develop and market analog and mixed-signal integrated circuits (ICs) and other electronic components and circuitry used in high-voltage power conversion. Our products are used in power converters that convert electricity from a high-voltage source to the type of power required for a specified downstream use.
Business Overview We design, develop and market analog and mixed-signal integrated circuits (“ICs”) and other electronic components and circuitry used in high-voltage power conversion. Our products are used in power converters that convert electricity from a high-voltage source to the type of power required for a specified downstream use.
Cash from Financing Activities Our financing activities in the year ended December 31, 2022, resulted in a $346.4 million net use of cash.
Our financing activities in the year ended December 31, 2022, resulted in a $346.4 million net use of cash.
The Credit Agreement terminates on June 7, 2026; all advances under the revolving line of credit will become due on such date, or earlier in the event of a default. As of December 31, 2022 and 2021, we had no advances outstanding under the Credit Agreement.
The Credit Agreement terminates on June 7, 2026; all advances under the revolving line of credit will become due on such date, or earlier in the event of a default. As of December 31, 2023 and 2022, we had no advances outstanding under the Credit Agreement.
Accordingly, as of December 31, 2022, our worldwide cash and marketable securities are available to fund capital allocation needs, including capital and internal investments, acquisitions, stock repurchases and/or dividends without incurring significant U.S. federal income taxes.
Accordingly, as of December 31, 2023, our worldwide cash and marketable securities are available to fund capital allocation needs, including capital and internal investments, acquisitions, stock repurchases and/or dividends without incurring significant U.S. federal income taxes.
Because our industry is intensely price-sensitive, our gross margin (gross profit divided by net revenues) is subject to change based on the relative pricing of solutions that compete with ours. Variations in product mix, end-market mix and customer mix can also cause our gross margin to fluctuate.
Because our industry is intensely price-sensitive, our gross margin (gross profit divided by net revenues) is subject to change based on the relative pricing of solutions that compete with ours. Variations in product mix, end-market mix 26 Table of Contents and customer mix can also cause our gross margin to fluctuate.
Gross profit. Gross profit is net revenues less cost of revenues. Our cost of revenues consists primarily of the purchase of wafers from our contracted foundries, the assembly, packaging and testing of our products by sub-contractors, product testing performed in our own facility, overhead associated with the management of our supply chain and the amortization of acquired intangible assets.
Our cost of revenues consists primarily of the purchase of wafers from our contracted foundries, the assembly, packaging and testing of our products by sub-contractors, product testing performed in our own facility, overhead associated with the management of our supply chain and the amortization of acquired intangible assets. Gross margin is gross profit divided by net revenues.
The Credit Agreement was amended on June 7, 2021, to provide an alternate borrowing rate as a replacement for LIBOR and extend the termination date from April 30, 2022 to June 7, 2026, with all other terms remaining the same.
The Credit Agreement was amended on June 7, 2021, to provide an alternate borrowing rate as a replacement for LIBOR and extend the termination date from April 30, 2022 to 30 Table of Contents June 7, 2026, with all other terms remaining the same.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Our common stock trades on the Nasdaq Global Select Market under the symbol “POWI”. As of January 31, 2023, there were approximately 61 stockholders of record.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Our common stock trades on the Nasdaq Global Select Market under the symbol “POWI”. As of January 31, 2024, there were approximately 60 stockholders of record.
We also offer high-voltage gate drivers, either standalone ICs or circuit boards containing ICs, electrical isolation components and other circuitry, used to operate high-voltage switches such as insulated-gate bipolar transistors (IGBTs) and silicon-carbide (SiC) MOSFETs.
We also offer high-voltage gate drivers—either standalone ICs or circuit boards containing ICs, electrical isolation components and other circuitry—used to operate high-voltage switches such as insulated-gate bipolar transistors (“IGBTs”) and silicon-carbide (“SiC”) MOSFETs.
We expect international sales to continue to account for a large portion of our net revenues for the foreseeable future. Sales to distributors accounted for 70%, 75% and 75% of our net revenues in 2022, 2021 and 2020, respectively, with direct sales to OEMs and merchant power supply manufacturers accounting for the remainder in each of the corresponding years.
We expect international sales to continue to account for a large portion of our net revenues for the foreseeable future. Sales to distributors accounted for 69% and 70% of our net revenues in 2023 and 2022, respectively, with direct sales to OEMs and merchant power supply manufacturers accounting for the remainder in each of the corresponding years.
Authorization of future stock repurchase programs is at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements and business conditions as well as other factors. Capital Expenditures Cash paid for property and equipment in the year ended December 31, 2022 was $39.2 million.
Authorization of future stock repurchase programs is at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements and business conditions as well as other factors. Capital Expenditures Cash paid for property and equipment in the year ended December 31, 2023 was $20.9 million.
In most cases, this conversion entails, among other functions, converting alternating current (AC) to direct current (DC) or vice versa, reducing or increasing the voltage, and regulating the output voltage and/or current according to the customer’s specifications.
In most cases, this conversion entails, among other functions, converting alternating current (“AC”) to direct current (“DC”) or vice versa, reducing or increasing the voltage, and regulating the output voltage and/or current according to the customer’s specifications.
The following table compares other income for the years ended December 31, 2022, 2021 and 2020: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (dollars in millions) 2022 ​ Change ​ 2021 ​ Change ​ 2020 Other income $ 3.0 ​ ​ 179.9 % ​ $ 1.1 ​ (77.4) % ​ $ 4.8 ​ Other income increased in 2022 due primarily to an increase in interest income resu lting from higher yields earned on our investments .
The following table compares other income for the years ended December 31, 2023, 2022 and 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (dollars in millions) 2023 ​ Change ​ 2022 ​ Change ​ 2021 Other income $ 10.8 ​ ​ 259.9 % ​ $ 3.0 ​ 179.9 % ​ $ 1.1 ​ Other income increased in 2023 due primarily to an increase in interest income resu lting from higher yields earned on our investments .
The following table compares the provision for income taxes for the years ended December 31, 2022, 2021 and 2020: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (dollars in millions) 2022 ​ Change ​ 2021 ​ Change ​ 2020 Provision for income taxes $ 12.6 ​ ​ 7.3 % ​ $ 11.7 ​ ​ 187.7 % ​ $ 4.1 ​ Effective tax rate ​ 6.9 % ​ ​ ​ ​ 6.7 % ​ ​ ​ ​ 5.4 % In 2022, 2021 and 2020, the effective tax rate was lower than the statutory U.S. federal income-tax rates of 21% due to the geographic distribution of our world-wide earnings in lower tax jurisdictions, the impact of federal research tax credits and the recognition of excess tax benefits related to share-based compensation.
The following table compares the provision for income taxes for the years ended December 31, 2023, 2022 and 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (dollars in millions) 2023 ​ Change ​ 2022 ​ Change ​ 2021 Provision (benefit) for income taxes $ (9.8) ​ ​ (178.2) % ​ $ 12.6 ​ ​ 7.3 % ​ $ 11.7 ​ Effective tax rate ​ (21.4) % ​ ​ ​ ​ 6.9 % ​ ​ ​ ​ 6.7 % In 2023 and 2022, the effective tax rate was lower than the statutory U.S. federal income-tax rates of 21% due to the geographic distribution of our world-wide earnings in lower tax jurisdictions, the impact of federal research tax credits and the recognition of excess tax benefits related to share-based compensation.
Results of Operations The following table sets forth statement of income data as a percentage of net revenues for the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2022 ​ 2021 ​ 2020 Net revenues ​ 100.0 % ​ 100.0 % ​ 100.0 % Cost of revenues 43.7 ​ 48.7 ​ 50.1 ​ Gross profit 56.3 ​ 51.3 ​ 49.9 ​ Operating expenses: ​ ​ ​ ​ ​ ​ Research and development 14.4 ​ 12.1 ​ 16.7 ​ Sales and marketing 9.6 ​ 8.6 ​ 11.2 ​ General and administrative 4.4 ​ 5.7 ​ 7.6 ​ Other operating expenses, net 0.2 ​ — ​ — ​ Total operating expenses 28.6 ​ 26.4 ​ 35.5 ​ Income from operations 27.7 ​ 24.9 ​ 14.4 ​ Other income 0.5 ​ 0.2 ​ 1.0 ​ Income before income taxes 28.2 ​ 25.1 ​ 15.4 ​ Provision for income taxes 2.0 ​ 1.7 ​ 0.8 ​ Net income 26.2 % ​ 23.4 % ​ 14.6 % ​ Comparison of Years Ended December 31, 2022, 2021 and 2020 Net revenues.
Results of Operations The following table sets forth statement of income data as a percentage of net revenues for the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2023 ​ 2022 ​ 2021 Net revenues ​ 100.0 % ​ 100.0 % ​ 100.0 % Cost of revenues 48.5 ​ 43.7 ​ 48.7 ​ Gross profit 51.5 ​ 56.3 ​ 51.3 ​ Operating expenses: ​ ​ ​ ​ ​ ​ Research and development 21.6 ​ 14.4 ​ 12.1 ​ Sales and marketing 14.5 ​ 9.6 ​ 8.6 ​ General and administrative 7.5 ​ 4.4 ​ 5.7 ​ Other operating expenses, net — ​ 0.2 ​ — ​ Total operating expenses 43.6 ​ 28.6 ​ 26.4 ​ Income from operations 7.9 ​ 27.7 ​ 24.9 ​ Other income 2.4 ​ 0.5 ​ 0.2 ​ Income before income taxes 10.3 ​ 28.2 ​ 25.1 ​ Provision (benefit) for income taxes (2.2) ​ 2.0 ​ 1.7 ​ Net income 12.5 % ​ 26.2 % ​ 23.4 % ​ Comparison of Years Ended December 31, 2023 and 2022 Net revenues.
Although power supplies using our products are designed and distributed worldwide, most of these power supplies are manufactured by our customers in Asia. As a result, sales to this region accounted for approximately 75%, 83% and 81% of our net revenues in 2022, 2021 and 2020, respectively.
Although power supplies using our products are designed and distributed worldwide, most of these power supplies are manufactured by our customers in Asia. As a result, sales to this region accounted for approximately 84% and 75% of our net revenues in 2023 and 2022, respectively.
As of December 31, 2022 we also had approximately $3.0 million classified as long-term income taxes payable related to the estimated one-time transition tax from the enactment of the Tax Act which will be payable in three remaining annual installments.
As of December 31, 2023 we also had approximately $1.7 million classified as long-term income taxes payable related to the estimated one-time transition tax from the enactment of the Tax Act which will be payable in three remaining annual installments.
Stock Repurchases Over the years our board of directors has authorized the use of funds to repurchase shares of our common stock, including $80.0 million in October 2018, $50.0 million in both April and October 2021, $100.0 million in January 2022, $50.0 million in February 2022, $75.0 million in April 2022 and $100.0 million in October 2022 with repurchases to be 29 Table of Contents executed according to pre-defined price/volume guidelines.
Stock Repurchases Over the years our board of directors has authorized the use of funds to repurchase shares of our common stock, including $100.0 million in January 2022, $50.0 million in February 2022, $75.0 million in April 2022 and $100.0 million in October 2022 with repurchases to be executed according to pre-defined price/volume guidelines.
Management’s Discussion and Analysis of Financial Condition and Results of Operations. The following discussion and analysis has been prepared as an aid to understanding our financial condition and results of our operations. It should be read in conjunction with the consolidated financial statements and the notes to those statements included elsewhere in this Annual Report on Form 10-K.
The following discussion and analysis has been prepared as an aid to understanding our financial condition and results of our operations. It should be read in conjunction with the consolidated financial statements and the notes to those statements included elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements that involve risks and uncertainties.
We base our estimates on historical facts and various other assumptions that we believe to be reasonable at the time the estimates are made. Actual results could differ from those estimates. Our critical accounting policies are as follows: ● revenue recognition.
We base our estimates on historical facts and various other assumptions that we believe to be reasonable at the time the estimates are made. Actual results could differ from those estimates. Our critical accounting policies are as follows: ● revenue recognition; ● estimating write-downs for excess and obsolete inventory.
Our actual results could differ materially from those contained in these forward-looking statements due to a number of factors, including those discussed in Part I, Item 1A “Risk Factors” and elsewhere in this Annual Report on Form 10-K.
See “Cautionary Note Regarding Forward-Looking Statements” at the beginning of this Form 10-K. Our actual results could differ materially from those contained in these forward-looking statements due to a number of factors, including those discussed in Part I, Item 1A “Risk Factors” and elsewhere in this Annual Report on Form 10-K.
Sales and marketing (S&M) expenses consist primarily of employee-related expenses, including salaries and stock-based compensation, and commissions to sales representatives, as well as 26 Table of Contents amortization of acquired intangible assets and facilities expenses, including expenses associated with our regional sales and support offices.
Sales and marketing expenses. Sales and marketing (“S&M”) expenses consist primarily of employee-related expenses, including salaries and stock-based compensation, and commissions to sales representatives, as well as amortization of acquired intangible assets and facilities expenses, including expenses associated with our regional sales and support offices.
Power supplies incorporating our products are used with all manner of electronic products including mobile phones, computing and networking equipment, appliances, electronic utility meters, battery-powered tools, industrial controls, and “home-automation,” or “internet of things” applications such as networked thermostats, power strips and security devices.
Power supplies incorporating our products are used with all manner of electronic products including mobile phones, computing and networking equipment, appliances, electronic utility meters, battery-powered tools, industrial controls, and “home-automation,” or “internet of things” applications such as networked thermostats, power strips and security devices. Variations of our power-supply ICs are used for high-voltage power conversion in electric vehicles (“EVs”).
In January, February, April and October 2022, our board of directors authorized the use of an additional $100.0 million, $50.0 million, $75.0 million and $100.0 million, respectively, for the repurchase of our common stock, with repurchases to be executed according to pre-defined price/volume guidelines. As of December 31, 2022, we had approximately $81.3 million available for future stock repurchases.
In October 2022, our board of directors authorized the use of an additional $100.0 million for the repurchase of our common stock, with repurchases to be executed according to pre-defined price/volume guidelines. As of December 31, 2023, we had approximately $26.0 million available for future stock repurchases.
Authorization of future stock-repurchase programs is at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements and business conditions as well as other factors.
Authorization of future stock-repurchase programs is at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements and business conditions as well as other factors. There is no expiration date on the plan or the amount currently authorized.
We face global macroeconomic challenges and risks including the effects of the conflict in Ukraine, potential risks stemming from tensions 23 Table of Contents between China and Taiwan, the COVID-19 pandemic, volatility in exchange rates, cyclical demand patterns common for our industry, inflation, tariffs and other risks associated with the global trade environment.
We face global macroeconomic challenges and risks including the effects of the conflicts in Ukraine and the Middle East, potential risks stemming from tensions between China and Taiwan and between China and Western countries, health crises such as the COVID-19 pandemic, volatility in exchange rates, cyclical demand patterns common for our industry, inflation, tariffs and other risks associated with the global trade environment.
These combinations of switches and drivers are used for power conversion in high-power applications (i.e., power levels ranging from a few kilowatts up to gigawatts) such as industrial motors, solar- and wind-power systems, electric vehicles (EVs) and high-voltage DC transmission systems. Our net revenues were $651.1 million, $703.3 million and $488.3 million in 2022, 2021 and 2020, respectively.
These combinations of switches and drivers are used for power conversion in high-power applications (i.e., power levels ranging from approximately 100 kilowatts up to gigawatts) such as industrial motors, solar- and wind-power systems, EVs and high-voltage DC transmission systems. Our net revenues were $444.5 million and $651.1 million in 2023 and 2022, respectively.
As of December 31, 2022, 2021 and 2020, we had working capital, defined as current assets less current liabilities, of approximately $466.7 million, $614.5 million and $538.7 million, respectively.
As of December 31, 2023 and 2022, we had working capital, defined as current assets less current liabilities, of approximately $462.7 million and $466.7 million, respectively.
We also supply high-voltage LED drivers, which are AC-DC ICs specifically designed for lighting applications that utilize light-emitting diodes, and motor-driver ICs addressing brushless DC (BLDC) motors used in refrigerators, HVAC systems, ceiling fans and other consumer-appliance and light commercial applications.
We also supply high-voltage LED drivers, which are AC-DC ICs specifically designed for lighting applications that utilize light-emitting diodes, and motor-driver ICs for brushless DC (“BLDC”) motors used in consumer appliances, HVAC systems, ceiling fans and a variety of industrial applications.
Cash from Operating Activities Our operating activities generated cash of $215.3 million, $230.9 million and $125.6 million in the years ended December 31, 2022, 2021 and 2020, respectively. We generate cash primarily from operating activities in the ordinary course of business.
Cash from Operating Activities Our operating activities generated cash of $65.8 million and $215.3 million in the years ended December 31, 2023 and 2022, respectively. We generate cash primarily from operating activities in the ordinary course of business.
The following table compares R&D expenses for the years ended years ended December 31, 2022, 2021 and 2020: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (dollars in millions) 2022 ​ Change ​ 2021 ​ Change ​ 2020 R&D expenses $ 93.9 ​ 10.6 % ​ $ 84.9 ​ 3.9 % ​ $ 81.7 ​ Headcount (at period end) ​ ​ 310 ​ ​ ​ ​ ​ ​ 304 ​ ​ ​ ​ ​ ​ 280 ​ ​ R&D expenses increased in 2022 compared to 2021 due to higher salary and related expenses driven by increased headcount, increased equipment-related expenses and product-development costs partially offset by decreased stock-based compensation expense related to performance-based awards.
The following table compares R&D expenses for the years ended years ended December 31, 2023, 2022 and 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (dollars in millions) 2023 ​ Change ​ 2022 ​ Change ​ 2021 R&D expenses $ 96.1 ​ 2.3 % ​ $ 93.9 ​ 10.6 % ​ $ 84.9 ​ Headcount (at period end) ​ ​ 282 ​ ​ ​ ​ ​ ​ 310 ​ ​ ​ ​ ​ ​ 304 ​ ​ R&D expenses increased in 2023 compared to 2022 primarily due to increased stock-based compensation expense, higher salaries and related expenses due to annual salary increases and increased equipment-related expenses, partially offset by lower product development costs.
The following table summarizes repurchases of our common stock during the fourth quarter of fiscal 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Number of ​ Approximate Dollar Value ​ ​ ​ ​ ​ Shares Purchased ​ that May Yet be ​ Total ​ Average ​ as Part of ​ Repurchased Under the ​ Number of ​ Price Paid ​ Publicly Announced ​ Plans or Program Period Shares Purchased ​ Per Share ​ Plans or Programs ​ (In millions) October 1, 2022 to October 31, 2022 — ​ ​ — ​ — ​ $ 100.0 November 1, 2022 to November 30, 2022 193,589 ​ $ 69.40 ​ 193,589 ​ $ 86.6 December 1, 2022 to December 31, 2022 72,898 ​ $ 72.84 ​ 72,898 ​ $ 81.3 Total 266,487 ​ ​ ​ ​ 266,487 ​ ​ ​ ​ 21 Table of Contents Performance Graph ( 1 ) The following graph shows the cumulative total return on an investment of $100 in cash on December 31, 2017, through December 31, 2022, in our common stock, the Nasdaq Composite Index, the Nasdaq Electronic Components Index and the PHLX Semiconductor Sector Index (SOX) and assuming that all dividends were reinvested.
The following table summarizes repurchases of our common stock during the fourth quarter of fiscal 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Number of ​ Approximate Dollar Value ​ ​ ​ ​ ​ Shares Purchased ​ that May Yet be ​ Total ​ Average ​ as Part of ​ Repurchased Under the ​ Number of ​ Price Paid ​ Publicly Announced ​ Plans or Program Period Shares Purchased ​ Per Share ​ Plans or Programs ​ (In millions) October 1, 2023 to October 31, 2023 464,903 ​ $ 69.83 ​ 464,903 ​ $ 41.0 November 1, 2023 to November 30, 2023 215,080 ​ $ 69.63 ​ 215,080 ​ $ 26.0 December 1, 2023 to December 31, 2023 — ​ ​ — ​ — ​ $ 26.0 Total 679,983 ​ ​ ​ ​ 679,983 ​ ​ ​ ​ 24 Table of Contents Performance Graph ( 1 ) The following graph shows the cumulative total return on an investment of $100 in cash on December 31, 2018, through December 31, 2023, in our common stock, the Nasdaq Composite Index and the PHLX Semiconductor Sector Index (SOX) and assuming that all dividends were reinvested.
Financing activities consisted primarily of $25.1 million for the payment of dividends to stockholders and $2.6 million for the repurchase of our common stock, partially offset by proceeds of $10.5 million from the issuance of common stock, including the exercise of employee stock options and the issuance of shares through our employee stock purchase plan.
Financing activities consisted primarily of $55.3 million for the repurchase of our common stock and $44.0 million for the payment of dividends to stockholders, partially offset by proceeds of $6.2 million from the issuance of common stock through our employee stock purchase plan.
Our financing activities in the year ended December 31, 2021, resulted in a $98.8 million net use of cash.
Cash from Financing Activities Our financing activities in the year ended December 31, 2023, resulted in a $93.0 million net use of cash.
The table below compares G&A expenses for the years ended December 31, 2022, 2021 and 2020: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (dollars in millions) 2022 ​ Change ​ 2021 ​ Change ​ 2020 G&A expenses $ 28.9 ​ (27.5) % ​ $ 39.8 ​ 8.0 % ​ $ 36.9 ​ Headcount (at period end) ​ ​ 72 ​ ​ ​ ​ ​ ​ 70 ​ ​ ​ ​ ​ ​ 68 ​ G&A expenses decreased in 2022 due to lower stock-based compensation expense related to performance-based awards and lower patent-litigation expenses.
The table below compares G&A expenses for the years ended December 31, 2023, 2022 and 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (dollars in millions) 2023 ​ Change ​ 2022 ​ Change ​ 2021 G&A expenses $ 33.2 ​ 15.0 % ​ $ 28.9 ​ (27.5) % ​ $ 39.8 ​ Headcount (at period end) ​ ​ 79 ​ ​ ​ ​ ​ ​ 72 ​ ​ ​ ​ ​ ​ 70 ​ G&A expenses increased in 2023 primarily due to higher salaries and related expenses driven by increased headcount and increased stock-based compensation expense related to performance-based awards.
In determining the transaction price, we consider ship and debit price adjustments to be variable consideration. At the time revenue is recognized on sales to distributors, future ship and debit price adjustments are unknown and therefore subject to uncertainty.
After we verify that the claim was pre-approved, we issue a credit memo to the distributor for the ship-and-debit claim. In determining the transaction price, we consider ship-and-debit price adjustments to be variable consideration. At the time revenue is recognized on sales to distributors, future ship-and-debit price adjustments are unknown and therefore subject to uncertainty.
General and administrative expenses. General and administrative (G&A) expenses consist primarily of employee-related expenses, including salaries and stock-based compensation expenses for administration, finance, human resources and general management, as well as consulting, professional services, legal and auditing expenses.
These increases were partially offset by decreased commissions expense. General and administrative expenses. General and administrative (“G&A”) expenses consist primarily of employee-related expenses, including salaries and stock-based compensation expenses for administration, finance, human resources and general management, as well as consulting, professional services, legal and auditing expenses.
We expect to fund these capital expenditures with cash on hand as well as cash provided by future operations. Other Information Our cash, cash equivalents and investment balances may change in future periods due to changes in our planned cash outlays, including changes in incremental costs such as direct and integration costs related to future acquisitions.
Other Information Our cash, cash equivalents and investment balances may change in future periods due to changes in our planned cash outlays, including changes in incremental costs such as direct and integration costs related to future acquisitions.
The following table compares gross profit and gross margin for the years ended December 31, 2022, 2021 and 2020: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (dollars in millions) 2022 ​ Change ​ 2021 ​ Change ​ 2020 Gross profit $ 366.9 ​ 1.7 % ​ $ 360.6 ​ 48.1 % ​ $ 243.6 ​ Gross margin ​ 56.3 % ​ ​ ​ 51.3 % ​ ​ ​ 49.9 % Our gross margin increased in 2022 as compared to 2021 due to a combination of factors, including a more favorable end-market mix, with a greater percentage of sales coming from higher-margin market categories and manufacturing efficiencies including the benefit of higher unit volumes on our manufacturing costs per unit.
The following table compares gross profit and gross margin for the years ended December 31, 2023, 2022 and 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (dollars in millions) 2023 ​ Change ​ 2022 ​ Change ​ 2021 Gross profit $ 229.0 ​ (37.6) % ​ $ 366.9 ​ 1.7 % ​ $ 360.6 ​ Gross margin ​ 51.5 % ​ ​ ​ 56.3 % ​ ​ ​ 51.3 % Our gross margin decreased in 2023 as compared to 2022 due to a combination of factors, including a less favorable end-market mix, with a greater percentage of revenues coming from lower-margin end markets and applications and reduced production volumes, which impacted our manufacturing costs per unit.
The following table compares sales and marketing expenses for the years ended December 31, 2022, 2021 and 2020: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (dollars in millions) 2022 ​ Change ​ 2021 ​ Change ​ 2020 Sales and marketing expenses ​ $ 62.6 ​ 2.9 % ​ $ 60.8 ​ 11.6 % ​ $ 54.5 ​ Headcount (at period end) ​ ​ 320 ​ ​ ​ ​ ​ ​ 280 ​ ​ ​ ​ ​ ​ 265 ​ ​ S&M expenses increased in 2022 compared to 2021 due to higher salary and related expenses from the expansion of headcount and increases in travel and trade shows.
The following table compares sales and marketing expenses for the years ended December 31, 2023, 2022 and 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (dollars in millions) 2023 ​ Change ​ 2022 ​ Change ​ 2021 Sales and marketing expenses ​ $ 64.6 ​ 3.2 % ​ $ 62.6 ​ 2.9 % ​ $ 60.8 ​ Headcount (at period end) ​ ​ 317 ​ ​ ​ ​ ​ ​ 320 ​ ​ ​ ​ ​ ​ 280 ​ ​ 29 Table of Contents S&M expenses increased in 2023 compared to 2022 primarily due to higher salaries and related expenses, increased travel and trade show expenses, and increased stock-based compensation expense.
The reserve for ship and debit claims increased by $11.6 million between December 31, 2022 and December 31, 2021, primarily due to higher inventory levels held by distributors and expected ship and debit claims related to such inventory. Historically, actual price adjustments for ship and debit claims relative to those estimated when determining the transaction price have not materially differed.
The reserve for ship-and-debit 27 Table of Contents claims decreased by $17.2 million between December 31, 2023 and December 31, 2022, primarily due to lower inventory levels held by distributors. Historically, actual price adjustments for ship-and-debit claims have not materially differed from those estimated when determining the transaction price.
(2) Purchase obligations represent commitments to our suppliers and other parties for the purchases of goods and services, which primarily consist of wafer and other inventory purchases, assembly and other manufacturing services, and purchases of property and equipment. 30 Table of Contents In addition to operating lease and purchase obligations, we have a contractual obligation related to income tax as of December 31, 2022, which primarily comprises unrecognized tax benefits of approximately $23.4 million, and was classified as contra deferred tax assets or long-term income taxes payable in our consolidated balance sheet.
In addition to operating lease and purchase obligations, we have a contractual obligation related to income tax as of December 31, 2023, which primarily comprises unrecognized tax benefits of approximately $16.4 million, and was classified as contra deferred tax assets or long-term income taxes payable in our consolidated balance sheet.
Our gross profit, defined as net revenues less cost of revenues, was $366.9 million or 56% of net revenues in 2022, compared to $360.6 million or 51% of net revenues in 2021, and $243.6 million or 50% of net revenues in 2020.
Our gross profit, defined as net revenues less cost of revenues, was $229.0 million or 52% of net revenues in 2023, compared to $366.9 million or 56% of net revenues in 2022.
In 2020, we repurchased 63 thousand shares for approximately $2.6 million. In 2021, we repurchased 0.9 million shares for approximately $73.9 million. In 2022, we repurchased 3.8 million shares for $311.1 million, leaving $81.3 million in funds authorized as of December 31, 2022.
In 2022, we repurchased 3.8 million shares for $311.1 million, leaving $81.3 million in funds authorized as of December 31, 2022. In 2023, we repurchased 0.8 million shares for $55.3 million, leaving $26.0 million in funds authorized as of December 31, 2023.
Sources of cash also included a $9.1 million decrease in prepaid expenses and other assets, primarily driven by taxes refunded , a $5.7 million increase in accounts payable (excluding payables related to property and equipment) and a $4.1 million increase in taxes payable and accrued liabilities, in each case due to the timing of payments.
These sources of cash were partially offset by a $27.7 million increase in inventories due to softening demand during the year, a $18.2 million decrease in taxes payable and accrued liabilities, a $5.4 million decrease in accounts payable (excluding payables related to property and equipment) due to timing of payments and a $1.2 million increase in prepaid expenses and other assets.
The following customers represented 10% or more of our net revenues for the respective years: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Customer 2022 ​ 2021 ​ 2020 Avnet 31 % ​ 30 % ​ 19 % Honestar Technologies Co., Ltd. ​ 11 % ​ 16 % ​ 11 % No other customers accounted for 10% or more of net revenues during these years.
The following customers represented 10% or more of our net revenues for the respective years: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Customer 2023 ​ 2022 ​ 2021 Avnet 27 % ​ 31 % ​ 30 % Honestar Technologies Co., Ltd. ​ 18 % ​ 11 % ​ 16 % Salcomp Group 10 % ​ * ​ ​ * ​ * Total customer revenue was less than 10% of net revenues.
The declaration of any future cash dividend is at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements, business conditions and other factors, as well as a determination that cash dividends are in the best interest of our stockholders.
In October 2023, our board of directors raised the cash dividend with the declaration of five cash dividends of $0.20 per share to be paid to stockholders of record at the end of the fourth quarter in 2023 (in lieu of the $0.19 per share announced in February 2023) and at the end of each quarter in 2024. 31 Table of Contents The declaration of any future cash dividend is at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements, business conditions and other factors, as well as a determination that cash dividends are in the best interest of our stockholders.
The stockholder return shown on the graph below is not necessarily indicative of future performance, and we do not make or endorse any predictions as to future stockholder returns. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Company/Index 12/31/2017 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 Power Integrations, Inc. ​ 100.00 ​ 83.68 ​ 136.94 ​ 228.39 ​ 260.65 ​ 203.05 Nasdaq Composite 100.00 ​ 97.16 ​ 132.81 ​ 192.47 ​ 235.15 ​ 158.65 PHLX Semiconductor (SOX) ​ 100.00 ​ 93.95 ​ 153.39 ​ 235.71 ​ 336.71 ​ 219.26 Nasdaq Electronic Components 100.00 ​ 86.61 ​ 129.69 ​ 185.86 ​ 275.79 ​ 177.31 (1) This Section is not “soliciting material,” is not deemed “filed” with the SEC and is not to be incorporated by reference in any filing of Power Integrations under the Securities Act of 1933, as amended, or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing. ​ Item 6. [Reserved ] 22 Table of Contents Item 7.
The stockholder return shown on the graph below is not necessarily indicative of future performance, and we do not make or endorse any predictions as to future stockholder returns. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Company/Index 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 Power Integrations, Inc. ​ 100.00 ​ 163.64 ​ 272.93 ​ 311.49 ​ 242.66 ​ 280.41 Nasdaq Composite 100.00 ​ 136.69 ​ 198.10 ​ 242.03 ​ 163.28 ​ 236.17 PHLX Semiconductor (SOX) ​ 100.00 ​ 163.26 ​ 250.87 ​ 358.37 ​ 233.37 ​ 389.74 (1) This Section is not “soliciting material,” is not deemed “filed” with the SEC and is not to be incorporated by reference in any filing of Power Integrations under the Securities Act of 1933, as amended, or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing. ​ Item 6. [Reserved ] 25 Table of Contents Item 7.
Our investing activities in the year ended December 31, 2020 resulted in a $28.3 million net use of cash, consisting primarily of $41.7 million from purchases of marketable securities, net of sales and maturities, and $70.6 million for purchases of property and equipment, primarily machinery and equipment for use in the manufacture of our products and a building for our design center in Germany.
Cash from Investing Activities Our investing activities in the year ended December 31, 2023 resulted in a $14.2 million net use of cash, consisting primarily of $20.9 million for purchases of property and equipment, primarily production-related machinery and equipment, partially offset by $6.7 million from sales and maturities of marketable securities, net of purchases.
This amount consisted of a $2.9 million expense stemming from the settlement of our litigation with Opticurrent LLC (refer to Note 13, Legal Proceedings and Contingencies , in our Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K ), offset by receipt of a $1.7 million distribution related to the bankruptcy liquidation of SemiSouth Laboratories, Inc.’s of which we were a creditor as a result of investments made in SemiSouth in 2011.
This amount consisted of a $2.9 million expense resulting from the settlement of our litigation with Opticurrent LLC on May 16, 2022, in which we agreed to pay Opticurrent $2.9 million to end all outstanding legal disputes, partially offset by receipt of a $1.7 million distribution related to the bankruptcy liquidation of SemiSouth Laboratories, Inc., of which we were a creditor as a result of investments made in SemiSouth in 2011.
In January 2022, our board of directors raised the quarterly cash dividend an additional $0.03 per share with the declaration of four cash dividends of $0.18 per share (in lieu of the $0.15 per share announced in October 2021) to be paid to stockholders of record at the end of each quarter in 2022.
Dividends In January 2022, our board of directors declared dividends of $0.18 per share to be paid to stockholders of record at the end of each quarter in 2022.
At the time the distributor invoices its customer or soon thereafter, the distributor submits a “ship and debit” price adjustment claim to us to adjust the distributor’s cost from the standard price to the pre-approved lower price. After we verify that the claim was pre-approved, we issue a credit memo to the distributor for the ship and debit claim.
Frequently, distributors need to sell at a price lower than the standard distribution price in order to win business. At the time the distributor invoices its customer or soon thereafter, the distributor submits a “ship-and-debit” price adjustment claim to us to adjust the distributor’s cost from the standard price to the pre-approved lower price.
In order to achieve that core principle, we apply the following five-step approach: (1) identify the contract with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when a performance obligation is satisfied. 24 Table of Contents Sales to most distributors are made under terms allowing certain price adjustments and limited rights of return (known as “stock rotation”) of our products held in their inventory or upon sale to their end customers.
In order to achieve that core principle, we apply the following five-step approach: (1) identify the contract with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when a performance obligation is satisfied.
International sales represented approximately 96%, 98% and 98% of net revenues in 2022, 2021 and 2020, respectively. Our business and financial performance depends significantly on worldwide economic conditions.
Our top ten customers, including distributors that resell to OEMs and merchant power supply manufacturers, accounted for approximately 80% and 76% of net revenues in 2023 and 2022, respectively. International sales represented approximately 98% and 96% of net revenues in 2023 and 2022, respectively. Our business and financial performance depends significantly on worldwide economic conditions.
Our gross margin increased in 2022 due to a combination of factors, including a more favorable end-market mix, with a greater percentage of sales coming from higher-margin market categories and manufacturing efficiencies including the benefit of higher unit volumes on our manufacturing costs per unit .
Our gross margin decreased in 2023 due to a combination of factors, including reduced production volumes, which impacted our manufacturing costs per unit, as well as a less favorable end-market mix, with a greater percentage of revenues coming from lower-margin end markets and applications .
As of December 31, 2022, we had non-cancelable commitments of $1.1 million for the purchase of property and equipment. We expect capital expenditures in fiscal 2023 to be primarily for machinery and equipment for use in the manufacture of our products to support future growth.
We expect capital expenditures in fiscal 2024 to be primarily for machinery and equipment for use in the manufacture of our products to support future growth. We expect to fund these capital expenditures with cash on hand as well as cash provided by future operations.
Our gross margin increased in 2021 as compared to 2020 as manufacturing efficiencies were partially offset by an unfavorable change in end-market mix. Research and development expenses. Research and development (R&D) expenses consist primarily of employee-related expenses including salaries and stock-based compensation, as well as expensed material and facility costs associated with the development of new processes and products.
Research and development expenses. Research and development (“R&D”) expenses consist primarily of employee-related expenses including salaries and stock-based compensation, as well as expensed material and facility costs associated with the development of new processes and products. We also record R&D expenses for prototype wafers related to new products until the products are released to production.
Net revenues consist of revenues from product sales, which are calculated net of returns and allowances. In 2022, revenues decreased by $52.1 million as compared to 2021, primarily driven by the communications end-market category reflecting lower global demand for smartphones.
Net revenues consist of revenues from product sales, which are calculated net of returns and allowances. Revenues from all four end-market categories decreased in 2023 compared to the prior year.
In 2021, revenues increased by $215.0 million compared to 2020 reflecting the strong demand conditions then prevalent across the semiconductor industry, as well as market-share gains for our products in a broad range of applications including consumer appliances, advanced chargers for mobile devices such as smartphones, tablets and notebook computers, and a range of industrial applications including home-and-building automation, electronic utility meters, battery-operated tools and broad-based industrial applications . 25 Table of Contents Our approximate net revenue mix by end-markets served in 2022, 2021 and 2020 is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ End Market 2022 ​ 2021 ​ 2020 Communications ​ 21 % ​ 30 % ​ 30 % Computer 10 % ​ 10 % ​ 7 % Consumer 33 % ​ 32 % ​ 33 % Industrial 36 % ​ 28 % ​ 30 % ​ Sales to customers outside of the United States were $625.6 million, $686.0 million and $477.3 million in 2022, 2021 and 2020, respectively, representing 96% of net revenues in 2022, and 98% of net revenues in both 2021 and 2020.
Our approximate net revenue mix by end-markets served in 2023, 2022 and 2021 is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ End Market 2023 ​ 2022 ​ 2021 Communications ​ 29 % ​ 21 % ​ 30 % Computer 12 % ​ 10 % ​ 10 % Consumer 27 % ​ 33 % ​ 32 % Industrial 32 % ​ 36 % ​ 28 % ​ 28 Table of Contents Sales to customers outside of the United States were $435.9 million and $625.6 million in 2023 and 2022, respectively, representing 98% and 96% of net revenues in 2023 and 2022, respectively.
Liquidity and Capital Resources We had $353.8 million in cash, cash equivalents and short-term marketable securities at December 31, 2022 compared to $530.4 million at December 31, 2021 and $449.2 million at December 31, 2020.
For additional details, refer to Note 11, Provision for Income Taxes , in our Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K. Liquidity and Capital Resources We had $311.6 million in cash, cash equivalents and short-term marketable securities at December 31, 2023 compared to $353.8 million at December 31, 2022.
In 2020, our net income was $71.2 million, which included non-cash expenses of $30.9 million of stock-based compensation, $23.7 million of depreciation and $4.4 million of intangibles amortization.
In 2023, our net income was $55.7 million, we also incurred $35.2 million of depreciation, $28.5 million of stock-based compensation and $2.2 million of intangibles amortization partially offset by a $9.2 million increase in deferred income taxes. Sources of cash also included a $6.6 million decrease in accounts receivable.
Income earned in other foreign jurisdictions was not material. We have not been granted any incentivized tax rates and do not 27 Table of Contents operate under any tax holidays in any jurisdiction. For additional details, refer to Note 11, Provision for Income Taxes , in our Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K.
The primary jurisdiction from which our foreign earnings are derived is the Cayman Islands, which is a non-taxing jurisdiction. Income earned in other foreign jurisdictions was not material. We have not been granted any incentivized tax rates and do not operate under tax holidays in any jurisdiction.
Additionally, in 2022 and 2021, our effective tax rate was favorably impacted by a discrete item associated with the release of an unrecognized tax benefit. These benefits were offset by U.S. tax on foreign income, known as global intangible low-taxed income. The primary jurisdiction from which our foreign earnings are derived is the Cayman Islands, which is a non-taxing jurisdiction.
In 2023, the rate was further favorably impacted by the release of $7.6 million of reserves related to federal uncertain tax positions as the statute of limitations for review of these positions expired. These benefits were partially offset by U.S. tax on foreign income, known as global intangible low-taxed income.
G&A expenses increased in 2021 due to higher stock-based compensation expense related to performance-based awards partially offset by lower patent-litigation expenses . Other operating expenses, net. Other operating expenses, net was $1.1 million in fiscal 2022.
These increases were partially offset by recovery of bad debt and lower professional services expenses. Other operating expenses, net. Other operating expenses, net was $1.1 million in fiscal 2022.
Removed
In both April 2021 and October 2021, our board of directors authorized the use of $50.0 million for the repurchase of our common stock, with repurchases to be executed according to pre-defined price/volume guidelines .
Added
Management’s Discussion and Analysis of Financial Condition and Results of Operations. This section of this Form 10-K generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022.
Removed
The PHLX Semiconductor Sector Index (SOX) has replaced the Nasdaq Electronic Components Index in this analysis as we believe the PHLX Semiconductor Sector Index (SOX) is a more relevant comparison for our business. Data from the Nasdaq Electronic Components Index has been included through December 31, 2022.
Added
Discussions of 2021 items and year-to-year comparisons between 2022 and 2021 are not included in this Form 10-K, and can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022.
Removed
This discussion contains forward-looking statements that involve risks and uncertainties. See “Cautionary Note Regarding Forward-Looking Statements” at the beginning of this Form 10-K.
Added
Revenues from all four end-market categories decreased in 2023 compared to the prior year.
Removed
The decrease in revenues in 2022 was primarily driven by the communications end-market category, in which revenues fell by 36%, reflecting lower global demand for smartphones.
Added
We believe that demand for our products has been negatively affected by an array of macroeconomic and geopolitical factors including reduced consumer spending in response to inflation and higher interest rates, softer housing markets, weaker demand for mobile phones, general economic weakness in China, the conflicts in Ukraine and the Middle East, and a shift in consumer spending toward travel and services following a period of elevated spending on goods during the COVID-19 pandemic.
Removed
More broadly, we observed a deterioration in demand as the year progressed, reflecting a range of macroeconomic and cyclical factors, including: lower demand for products such as smartphones, computers and appliances following a period of strong demand during the COVID-19 pandemic, and a shift in consumer spending in favor of services rather than goods as the pandemic waned; measures implemented in China to control the spread of COVID-19, which affected consumer demand in China as well as the ability of some of our customers to manufacture their products; the impact of inflation on consumer spending; economic downturns in local and global economies; a build-up in the supply chain of inventory of our products, and of intermediate and finished products containing our products.
Added
We believe these factors have exacerbated the effects of a cyclical downturn in the semiconductor industry; such downturns are commonly experienced in our industry following periods of strong growth during which supply chain participants tend to accumulate excess inventories.
Removed
The latter effect was driven by the efforts of supply-chain participants to overcome component shortages that developed during the pandemic, with the abrupt slowdown in demand leading to oversupply of inventory.
Added
Total operating expenses in 2023 were $193.9 million, an increase of $7.4 million as compared to 2022 due to: higher stock-based compensation expenses reflecting a lower-than-usual level of such expenses in the prior year; higher salary- and benefit-related expenses reflecting annual salary increases and higher costs associated with employee health insurance and other benefits.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

8 edited+0 added−0 removed8 unchanged
Biggest change(Lapis) we have wafer supply agreements based in U.S. dollars; however, our agreements with Epson and Lapis also allow 31 Table of Contents for mutual sharing of the impact of the exchange rate fluctuation between Japanese yen and the U.S. dollar.
Biggest change(“Lapis”) we have wafer supply agreements based in U.S. dollars; however, our agreements with Epson and Lapis also allow for mutual sharing of the impact of the exchange rate fluctuation between Japanese yen and the U.S. dollar.
To minimize market risk, we invest in high-credit quality issuers and, by policy, limit the amount of credit exposure to any one issuer, and therefore if market interest rates were to increase or decrease by 10% from interest rates as of December 31, 2022 or December 31, 2021, the increase or decrease in the fair market value of our portfolio on these dates would not have been material.
To minimize market risk, we invest in high-credit quality issuers and, by policy, limit the amount of credit exposure to any one issuer, and therefore if market interest rates were to increase or decrease by 10% from interest rates as of December 31, 2023 or December 31, 2022, the increase or decrease in the fair market value of our portfolio on these dates would not have been material.
As of December 31, 2022, our primary transactional currency was the U.S. dollar; in addition, we hold cash in Swiss francs and euros to fund the operation of our Swiss subsidiary. Cash balances held in foreign countries are subject to local banking laws and may bear higher or lower risk than cash deposited in the United States.
As of December 31, 2023, our primary transactional currency was the U.S. dollar; in addition, we hold cash in Swiss francs and euros to fund the operation of our Swiss subsidiary. Cash balances held in foreign countries are subject to local banking laws and may bear higher or lower risk than cash deposited in the United States.
At December 31, 2022 and 2021, we held primarily cash equivalents and short-term investments with fixed interest rates. We do not hold any instruments for trading purposes. Our investment securities are subject to market interest rate risk and will vary in value as market interest rates fluctuate.
At December 31, 2023 and 2022, we held primarily cash equivalents and short-term investments with fixed interest rates. We do not hold any instruments for trading purposes. Our investment securities are subject to market interest rate risk and will vary in value as market interest rates fluctuate.
All else being equal, a 10% change in the value of the U.S. dollar compared to the Japanese yen would eventually result in a corresponding change in our gross margin of approximately 1%; this sensitivity may increase or decrease depending on the percentage of our wafer supply that we purchase from some of our Japanese suppliers and could subject our gross profit and operating results to the potential for material fluctuations. ​ 32 Table of Contents
All else being equal, a 10% change in the value of the U.S. dollar compared to the Japanese yen would eventually result in a corresponding change in our gross margin of approximately 1.5%; this sensitivity may increase or decrease depending on the percentage of our wafer supply that we purchase from some of our Japanese suppliers and could subject our gross profit and operating results to the potential for material fluctuations. ​ 34 Table of Contents
As of December 31, 2022 and 2021, we did not have an open foreign currency hedge program utilizing foreign currency forward exchange contracts. With two of our major suppliers, Seiko Epson Corporation (Epson) and ROHM Lapis Semiconductor Co., Ltd.
As of December 31, 2023 and 2022, we did not have an open foreign currency hedge program utilizing foreign currency forward exchange contracts. With two of our major suppliers, Seiko Epson Corporation (“Epson”) and ROHM Lapis Semiconductor Co., Ltd.
This sensitivity analysis applies a change in the U.S. dollar value of 5% and 10%. ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2022 (in thousands of USD) 5% 10% Swiss franc and euro foreign exchange impact ​ $ 120 ​ $ 241 ​ The foreign exchange rate fluctuation between the U.S. dollar versus the Swiss franc and euro is recorded in other income in our consolidated statements of income.
This sensitivity analysis applies a change in the U.S. dollar value of 5% and 10%. ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2023 (in thousands of USD) 5% 10% Swiss franc and euro foreign exchange impact ​ $ 125 ​ $ 250 ​ The foreign exchange rate fluctuation between the U.S. dollar versus the Swiss franc and euro is recorded in other income in our consolidated statements of income.
The following represents the potential impact on our pretax income from a change in the value of the U.S. dollar compared to the Swiss franc and euro as of December 31, 2022.
The following represents the potential impact on our pretax income from a change in the value of the U.S. 33 Table of Contents dollar compared to the Swiss franc and euro as of December 31, 2023.

Other POWI 10-K year-over-year comparisons