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What changed in Teradyne's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Teradyne'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.

+281 added−318 removedSource: 10-K (2024-02-22) vs 10-K (2023-02-22)

Top changes in Teradyne's 2023 10-K

281 paragraphs added · 318 removed · 205 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeMiR’s products are differentiated by their: • easy programming using a graphical interface which allows users to program the AMR in a few hours; • ease of use, speed of deployment and flexibility in allowing customers to change the task as their demands dictate; • reliable autonomous navigation over large manufacturing and warehouse areas; and • short payback period, on average 12–24 months.
Biggest changeMiR’s products are differentiated by their: • Ease of Use and Speed of Deployment: Our robots are designed for quick deployment and flexibility, allowing customers to adapt tasks based on changing demands. • Safe Operations: Equipped with 360 safety coverage, our robots navigate around static and dynamic obstacles, ensuring safety in busy environments. • Reliable Autonomous Navigation: The MiR robots demonstrate consistent, reliable navigation across large manufacturing and warehouse areas. • Short Payback Period: With an average payback period of 12–24 months, MiR's products provide a swift return on investment.
Competitors in the System Test segment include, among others, Keysight Technologies, Inc., Advantest Corporation, Test Research, Inc. and SPEA S.p.A. Competitors in our Wireless Test segment include, among others, Rohde & Schwarz GmbH & Co. KG, Anritsu Company, Keysight Technologies, Inc., National Instruments Corporation, Welzek and iTest.
Competitors in the System Test segment include, among others, Keysight Technologies, Inc., Advantest Corporation, Test Research, Inc. SPEA S.p.A. and Astronics Corporation. Competitors in our Wireless Test segment include, among others, Rohde & Schwarz GmbH & Co. KG, Anritsu Company, Keysight Technologies, Inc., National Instruments Corporation, Welzek and iTest.
Diversity and Inclusion We believe in fostering a diverse workforce and equitable and inclusive culture in order to build a stronger and more resilient company for our customers, our employees and our communities worldwide.
Diversity and Inclusion We believe in fostering a diverse workforce and equitable and inclusive culture in order to build a stronger and more resilient company for our customers, our investors, our employees and our communities worldwide.
The FLEX Test Platform architecture addresses customer requirements through the following key capabilities: • A high efficiency multi-site architecture that reduces tester overhead such as instrument setup, synchronization and data movement, and signal processing; 3 Table of Contents • The IG-XL™ software operating system which provides fast program development, including instant conversion from single to multi-site test; and • Broad technology coverage by instruments designed to cover the range of test parameters, coupled with a universal slot test head design that allows easy test system reconfiguration to address changing test needs.
The FLEX Test Platform architecture addresses customer requirements through the following key capabilities: • A high efficiency multi-site architecture that reduces tester overhead such as instrument setup, synchronization and data movement, and signal processing; • The IG-XL™ software operating system which provides fast program development, including instant conversion from single to multi-site test; and • Broad technology coverage by instruments designed to cover the range of test parameters, coupled with a universal slot test head design that allows easy test system reconfiguration to address changing test needs.
Competitive Pay and Benefits The primary objective of our compensation program is to provide a compensation and benefits package that will continue to attract, retain, motivate and reward high performing employees who operate in a highly competitive and technologically challenging environment. We seek to achieve this objective by linking a significant portion of compensation to company and business unit performance.
Competitive Pay and Benefits The primary objective of our compensation program is to provide a compensation and benefits package that will continue to attract, retain, motivate and reward high performing employees who operate in a highly competitive and technologically challenging environment. We seek to achieve this objective by linking a meaningful portion of compensation to company and business unit performance.
Continued strengthening of the U.S. dollar would adversely affect Robotics revenue growth in 2023. 2 Table of Contents Our corporate strategy continues to focus on profitably gaining market share in our test businesses through the introduction of differentiated products that target expanding segments and accelerating growth through continued investment in our Robotics businesses.
Strengthening of the U.S. dollar would adversely affect Robotics revenue growth in 2024. 2 Table of Contents Our corporate strategy continues to focus on profitably gaining market share in our test businesses through the introduction of differentiated products that target expanding segments and accelerating growth through continued investment in our Robotics businesses.
We also leverage contractors to provide flexibility for our business and manufacturing needs. As of December 31, 2022, we worked with approximately 300 contractors globally. Since the inception of our business, we have experienced no work stoppages or other labor disturbances.
We also leverage contractors to provide flexibility for our business and manufacturing needs. As of December 31, 2023, we worked with approximately 300 contractors globally. Since the inception of our business, we have experienced no work stoppages or other labor disturbances.
Our automatic test equipment and robotics products and services include: • semiconductor test (“Semiconductor Test”) systems; • storage and system level test (“Storage Test”) systems, defense/aerospace (“Defense/Aerospace”) test instrumentation and systems, and circuit-board test and inspection (“Production Board Test”) systems (collectively these products represent “System Test”); • wireless test (“Wireless Test”) systems; and • robotics (“Robotics”) products.
Our automated test equipment and robotics products and services include: • semiconductor test (“Semiconductor Test”) systems; • storage and system level test (“Storage Test”) systems, defense/aerospace (“Defense/Aerospace”) test instrumentation and systems, and circuit-board test and inspection (“Production Board Test”) systems (collectively these products represent “System Test”); • wireless test (“Wireless Test”) systems; and • robotics (“Robotics”) products.
Regulatory Environment We are subject to various federal, state, and local government laws and regulations relating to international trade, business conduct, the protection of employee health and safety and the environment. We accrue for all known environmental liabilities when it becomes probable that we will incur cleanup costs and those costs can reasonably be estimated.
Regulatory Environment We are subject to various federal, state, and local government laws and regulations relating to international trade, business conduct, the protection of employee health and safety and the environment. 9 Table of Contents We accrue for all known environmental liabilities when it becomes probable that we will incur cleanup costs and those costs can reasonably be estimated.
We plan to continue investing in our growth while balancing capital allocations between returning capital to our shareholders through stock repurchases and dividends and using capital for acquisitions. Investor Information We are a Massachusetts corporation incorporated on September 23, 1960. We are subject to the informational requirements of the Securities Exchange Act of 1934 (“Exchange Act”).
We plan to continue investing in our growth while balancing capital allocations between stock repurchases and dividends and using capital for acquisitions. Investor Information We are a Massachusetts corporation incorporated on September 23, 1960. We are subject to the informational requirements of the Securities Exchange Act of 1934 (“Exchange Act”).
See also “Item 1A: Risk Factors” and Note T: “Operating Segment, Geographic and Significant Customer Information” in Notes to Consolidated Financial Statements. Competition We face significant competition throughout the world in each of our reportable segments. Competitors in the Semiconductor Test segment include, among others, Advantest Corporation and Cohu, Inc.
See also “Item 1A: Risk Factors” and Note T: “Operating Segment, Geographic and Significant Customer Information” in Notes to Consolidated Financial Statements. 6 Table of Contents Competition We face significant competition throughout the world in each of our reportable segments. Competitors in the Semiconductor Test segment include, among others, Advantest Corporation and Cohu, Inc.
Corporate Culture Our core values are conducting business with honesty and integrity, collaborating with our colleagues as a company without doors, and partnering with our customers every step of the way, because customers count on us. 9 Table of Contents We strive to foster a positive work environment that helps employees thrive.
Corporate Culture Our core values are conducting business with honesty and integrity, collaborating with our colleagues as a company without doors, and partnering with our customers every step of the way, because customers count on us. We strive to foster a positive work environment that helps employees thrive.
Our automatic test systems are used to test semiconductors, wireless products, data storage and complex electronics systems in many industries including consumer electronics, wireless, automotive, industrial, computing, communications, and aerospace and defense industries.
Our automated test systems are used to test semiconductors, wireless products, data storage and complex electronics systems in many industries including consumer electronics, wireless, automotive, industrial, computing, communications, and aerospace and defense industries.
System Test Our System Test segment is comprised of three business units: Storage Test, Defense/Aerospace, and Production Board Test. 4 Table of Contents Storage Test The Storage Test business unit addresses the high throughput, automated manufacturing test requirements of hard disk drive (“HDD”) and semiconductor manufacturers. Our HDD products address the client and enterprise storage markets.
System Test Our System Test segment is comprised of three business units: Storage Test, Defense/Aerospace, and Production Board Test. Storage Test The Storage Test business unit addresses the high throughput, automated manufacturing test requirements of hard disk drive (“HDD”) and semiconductor manufacturers. Our HDD products address the client and enterprise storage markets.
The manufacturing activities for our Robotics businesses are done primarily in our production facilities in Denmark and the U.S. Sales to customers outside the United States were 85%, 89%, and 90%, respectively, of our consolidated revenues in 2022, 2021 and 2020. Sales are attributed to geographic areas based on the location of the customer site.
The manufacturing activities for our Robotics businesses are done primarily in our production facilities in Denmark and the U.S. Sales to customers outside the United States were 84%, 85%, and 89%, respectively, of our consolidated revenues in 2023, 2022 and 2021. Sales are attributed to geographic areas based on the location of the customer site.
We sell in these areas predominantly through a direct sales force, except for Robotics products, which are sold 7 Table of Contents principally through distributors. Our manufacturing activities for our test businesses are primarily conducted through subcontractors and outsourced contract manufacturers with significant operations in China and Malaysia.
We sell in these areas predominantly through a direct sales force, except for Robotics products, which are sold principally through distributors. Our manufacturing activities for our test businesses are primarily conducted through subcontractors and outsourced contract manufacturers with significant operations in China and Malaysia.
This enabled our business to more easily create and offer business training courses. We are committed to recruiting and developing talent at the collegiate level to help advance Science, Technology, Engineering and Mathematics (“STEM”) education for the future generation.
This enabled our business to more easily create and offer business training courses. 8 Table of Contents We are committed to recruiting and developing talent at the collegiate level to help advance Science, Technology, Engineering and Mathematics (“STEM”) education for the future generation.
Additionally, we offer reimbursement for educational courses related to an employee’s work or as part of a degree program, including tuition, lab fees and books. We also offer a scholarship program for employees with college-age children and grandchildren. In 2022, almost half of the scholarship recipients were outside of the United States.
Additionally, we offer reimbursement for educational courses related to an employee’s work or as part of a degree program, including tuition, lab fees and books. We also offer a scholarship program for employees with college-age children, step-children and grandchildren. In 2023, approximately half of the scholarship recipients were outside of the United States.
In addition, our CEO and other executives meet with employees wordwide on a frequent basis through exchange meetings and quarterly 10 Table of Contents webcasts. The exchange meetings allow the executives to directly interact with a small group of employees, while the global webcasts enable all employees to engage with senior leaders and ask questions in an open Q&A session.
In addition, our CEO and other executives meet with employees worldwide on a frequent basis through exchange meetings and quarterly webcasts. The exchange meetings allow the executives to directly interact with a small group of employees, while the global webcasts enable all employees to engage with senior leaders and ask questions in an open Q&A session.
Item 1: Business Teradyne, Inc. (“Teradyne”) was founded in 1960 and is a leading global supplier of automated test equipment and robotics solutions. We design, develop, manufacture and sell automatic test systems and robotics products.
Item 1: B usiness Teradyne, Inc. (“Teradyne”) was founded in 1960 and is a leading global supplier of automated test equipment and robotics solutions. We design, develop, manufacture and sell automated test systems and robotics products.
Competitors might independently develop similar technology or exploit our proprietary information and our brands in countries where we lack enforceable intellectual property rights or where enforcement of such rights through the legal system provides an insufficient deterrent. Also, intellectual property protections can lapse or be invalidated through appropriate legal processes.
However, these protections might not be effective in all circumstances. Competitors might independently develop similar technology or exploit our proprietary information and our brands in countries where we lack enforceable intellectual property rights or where enforcement of such rights through the legal system provides an insufficient deterrent. Also, intellectual property protections can lapse or be invalidated through appropriate legal processes.
We have experienced delays in obtaining timely delivery of certain components. These delays have impacted and may continue to impact the manufacturing of certain products and the timing of delivery of those products to our customers. While the majority of our components are available from multiple suppliers, certain items are obtained from sole sources.
These delays have impacted and may continue to impact the manufacturing of certain products and the timing of delivery of those products to our customers. While the majority of our components are available from multiple suppliers, certain items are obtained from sole sources.
We estimate consolidated revenues driven by Qualcomm, a customer of our Semiconductor Test, System Test, and Wireless Test segments, combining direct and indirect sales, accounted for approximately 11% of our consolidated revenues in 2022 and less than 10% in 2021 and 2020.
We estimate consolidated revenues driven by Qualcomm, a customer of our Semiconductor Test, System Test, and Wireless Test segments, combining direct and indirect sales, accounted for approximately 11% of our consolidated revenues in 2022.
As of December 31, 2022, we employed approximately 6,500 employees, of whom approximately 2,000 were employed in the United States and approximately 4,500 were employed outside of the United States. Our largest non-US employee populations are in the Philippines (17%), Denmark (12%), China (11%), Taiwan (6%) and Costa Rica (6%).
As of December 31, 2023, we employed approximately 6,500 employees, of whom approximately 2,000 were employed in the United States and approximately 4,500 were employed outside of the United States. Our largest non-US employee populations are in the Philippines (18%), Denmark (12%), China (10%), Taiwan (7%) and Costa Rica (6%).
We estimate consolidated revenues driven by one OEM customer, of our Semiconductor Test and Wireless Test segments, combining direct sales to that customer with sales to the customer’s OSATs (which include Taiwan Semiconductor Manufacturing Company Ltd.), accounted for less than 10% of our consolidated revenues in 2022, and 19% and 25% of our consolidated revenues in 2021 and 2020, respectively.
We estimate consolidated revenues driven by one OEM customer, of our Semiconductor Test and Wireless Test segments, combining direct sales to that customer with sales to the customer’s OSATs (which include Taiwan Semiconductor Manufacturing Company Ltd.), accounted for approximately 19% of our consolidated revenues in 2021.
See also “Item 1A: Risk Factors.” Backlog At December 31, 2022 and 2021, our backlog of unfilled orders in our four reportable segments was as follows: 2022 2021 (in millions) Semiconductor Test $ 879.6 $ 824.1 System Test 253.0 375.4 Wireless Test 60.0 56.8 Robotics 42.6 28.1 $ 1,235.2 $ 1,284.4 Customers may delay delivery of products or cancel orders suddenly and without advanced notice, subject to possible cancellation penalties.
See also “Item 1A: Risk Factors.” Backlog At December 31, 2023 and 2022, our backlog of unfilled orders in our four reportable segments was as follows: 2023 2022 (in millions) Semiconductor Test $ 822.8 $ 879.6 System Test 223.8 253.0 Robotics 42.3 42.6 Wireless Test 35.7 60.0 $ 1,124.6 $ 1,235.2 Customers may delay delivery of products or cancel orders suddenly and without advanced notice, subject to possible cancellation penalties.
To support this effort, we have a Diversity and Inclusion Charter which was developed by our Diversity, Equity and Inclusion (“DEI”) executive sub-committee and designed to ensure that we build diversity across our workforce. In addition, in 2021, we hired our first DEI program manager and launched an internal DEI website for employees.
To support this effort, we have a Diversity and Inclusion Charter which was developed by our Diversity, Equity and Inclusion (“DEI”) executive sub-committee and designed to ensure that we build diversity across our workforce. Since 2021, we have had a DEI program manager to steer our DEI efforts and maintain an internal DEI website for employees.
We protect our rights in proprietary information, brands and technology through various methods, such as: • patents; • copyrights; • trademarks; • trade secrets; • standards of business conduct and related business practices; and • technology license agreements, software license agreements, non-disclosure agreements, employment agreements, and other agreements. However, these protections might not be effective in all circumstances.
We protect our rights in proprietary information, brands and technology through various methods, such as: • patents; • copyrights; • trademarks; 7 Table of Contents • trade secrets; • standards of business conduct and related business practices; and • technology license agreements, software license agreements, non-disclosure agreements, employment agreements, and other agreements.
The market for our Robotics segment products is dependent on the adoption of new automation technologies by large manufacturers as well as small and medium enterprises (“SMEs”) throughout the world. We expect Robotics sales channel expansion combined with new products to drive growth in 2023.
The market for our Robotics segment products is dependent on the adoption of new automation technologies by large manufacturers as well as small and medium enterprises (“SMEs”) throughout the world.
To make it easier for employees to support charitable activities and magnify the impact of support, we established a formal matching gift program, “Teradyne Cares.” The program matches up to $1,000 per year of an employee’s donations to qualified non-profit organizations. Additionally, advancing education for future generations is a primary initiative at Teradyne.
To make it easier for employees to support charitable activities and magnify the impact of support, we established a formal matching gift program, “Teradyne Gives.” The program matches up to $1,000 per year of an employee’s donations to charities of their choosing, selected from a wide range of qualified non-profit organizations.
Competitors in our Robotics segment include manufacturers of traditional industrial robots such as KUKA Robotics Corporation, ABB, FANUC and Yaskawa Electric Corporation, companies with emerging collaborative robot offerings such as Techman, Doosan, and AUBO Robotics, and manufacturers of autonomous mobile robots such as Omron, Fetch, OTTO Motors, Vecna, Seegrid and Balyo.
Competitors in our Robotics segment include manufacturers of traditional industrial robots such as KUKA Robotics Corporation, ABB, FANUC, Staubli and Yaskawa Electric Corporation, companies with emerging collaborative robot offerings such as Techman, Doosan, Jaka, and AUBO Robotics, and manufacturers of autonomous mobile robots in the material handling space such as Omron, Rockwell Automation, Junion, HikRobot, Agilox, and KION.
OSAT customers, such as Taiwan Semiconductor Manufacturing Company Ltd., often purchase our test systems based upon recommendations from OEMs, IDMs and Fabless companies. In all cases when an OSAT customer purchases a test system from us, we consider the OSAT as the customer since credit risk, title and risk of loss, among other things, are between Teradyne and the OSAT.
In all cases when an OSAT customer purchases a test system from us, we consider the OSAT as the customer since credit risk, title and risk of loss, among other things, are between Teradyne and the OSAT.
Our financial statements are denominated in U.S. dollars. While the majority of our revenues are in U.S. dollars, approximately 70 percent of our Robotics revenue is denominated in foreign currencies. In 2022, the strengthening of the U.S. dollar was a factor in lower than forecasted revenues in our Robotics segment.
While the majority of our revenues are in U.S. dollars, approximately 70 percent of our Robotics sales are denominated in foreign currencies. There was no material impact to our 2023 results due to changes in foreign exchange rates, however, in 2022, the strengthening of the U.S. dollar was a factor in lower than forecasted revenues in our Robotics segment.
Due to possible customer changes in delivery schedules and cancellation of orders, our backlog at any particular date is not necessarily indicative of the actual sales for any succeeding 8 Table of Contents period.
Due to possible customer changes in delivery schedules and cancellation of orders, our backlog at any particular date is not necessarily indicative of the actual sales for any succeeding period. Delays in delivery schedules or cancellations of backlog during any particular period could have a material adverse effect on our business, financial condition or results of operations.
Fast, accurate and cost-effective test capabilities are hallmark features of our Test Station product families. We offer the Test Station in off-line and automated in-line configurations. The automated in-line configurations address the growing requirements for automating production lines for high volume applications, such as automotive electronics, computing, and communications.
Fast, accurate and cost-effective test capabilities are hallmark features of our Test Station product families. We offer the Test Station in off-line and automated in-line configurations.
We have a tradition of amplifying the charitable actions of our employees and responding to the needs of the communities where we work. To support positive change in society, we have donated to organizations fighting for social justice and racial equality.
We have a tradition of amplifying the charitable actions of our employees and responding to the needs of the communities where we work.
We expect that sales of our test products will continue to be concentrated with a limited number of significant customers for the foreseeable future.
We expect that sales of our test products will continue to be concentrated with a limited number of significant customers for the foreseeable future. In 2023, the demand in our Semiconductor Test business continued to be impacted by a correction cycle driven by excess semiconductor inventory, primarily in the mobility segment of the market.
Delays in delivery schedules or cancellations of backlog during any particular period could have a material adverse effect on our business, financial condition or results of operations. Raw Materials Our products contain electronic and mechanical components that are provided by a wide range of suppliers. Some of these components are standard products, while others are manufactured to our specifications.
Raw Materials Our products contain electronic and mechanical components that are provided by a wide range of suppliers. Some of these components are standard products, while others are manufactured to our specifications. We have experienced delays in obtaining timely delivery of certain components.
We also provide our employees with a flexible and adjustable workspace, which includes reviewing ergonomics issues in the workplace, educating employees to self-identify risks and ensuring they have the work environment they need to do their jobs safely and effectively. 11 Table of Contents Throughout the novel coronavirus (COVID-19) pandemic, we have focused on ensuring the health and safety of our employees and providing the resources to effectively work remotely and to work in a safe environment when on site.
Our injury and illness rate is below the industry average. We also provide our employees with a flexible and adjustable workspace, which includes reviewing ergonomics issues in the workplace, educating employees to self-identify risks and ensuring they have the work environment they need to do their jobs safely and effectively.
The broad consumer, automotive and broadband markets have historically driven most of the device volume growth in the semiconductor industry. These markets include mobile phones and tablets, PCs, servers, networking and automotive electronics. These end use markets continue to be drivers for the FLEX Test Platform family of products because they require a wide range of technologies and instrument coverage.
These end use markets continue to be drivers for the FLEX Test Platform family of products because they require a wide range of technologies and instrument coverage.
We support STEM programs at the middle, high school and collegiate level ranging from middle and high school robotics competitions to college scholarships, to underwriting university programs to increase the diversity of STEM graduates worldwide. We also donate test equipment and robots to colleges, universities, and vocational programs.
Additionally, advancing education for future generations is a primary initiative at Teradyne. We seek to increase the diversity of STEM graduates worldwide through our support of STEM programs at the middle, high school and collegiate level. We also donate test equipment and robots to colleges, universities, and vocational programs.
Sales and Distribution In 2021 and 2020, revenues from Taiwan Semiconductor Manufacturing Company Ltd., a customer of our Semiconductor Test segment, accounted for 12% and 15%, respectively, of our consolidated revenues. In each of the years, 2022, 2021 and 2020, our five largest direct customers in aggregate accounted for 26%, 33% and 36% of our consolidated revenues, respectively.
In each of the years, 2023, 2022 and 2021, our five largest direct customers in aggregate accounted for 32%, 26% and 33% of our consolidated revenues, respectively. OSAT customers, such as Taiwan Semiconductor Manufacturing Company Ltd., often purchase our test systems based upon recommendations from OEMs, IDMs and Fabless companies.
Changes in, and responses to, U.S. trade policy could reduce the competitiveness of our products and cause our sales to drop, which could have a material adverse effect on our business, financial condition or results of operations. 12 Table of Contents INFORMATION ABOUT OUR EXECUTIVE OFFICERS Pursuant to General Instruction G (3) of Form 10-K, the following table is included in Part I of this Annual Report on Form 10-K in lieu of being included in the Proxy Statement for the Annual Meeting of Shareholders.
Changes in, and responses to, U.S. trade policy could reduce the competitiveness of our products and cause our sales to drop, which could have a material adverse effect on our business, financial condition or results of operations.
Both our test and robotics businesses may continue to be influenced by supply constraints, which could impact our revenue and costs in 2023. In 2022, inflation had minimal effect on our results. In 2022, we were unable to supply approximately $20 million of revenue in our test businesses for which we had customer demand.
In 2023, inflation had minimal effect on our results. While both our test and robotics businesses may continue to be influenced by supply constraints, which could impact our revenue and costs, we do not anticipate that supply chain constraints will have a material impact on our financial results in 2024. Our financial statements are denominated in U.S. dollars.
We conduct mandatory DEI-related training for our employees worldwide and offer a wide variety of optional DEI-related training courses as well.
We have established programs for recruiting and hiring candidates from various backgrounds and experiences. We have policies regarding gender pay equity and regularly conduct audits of pay equity in the United States. We conduct mandatory DEI-related training for our employees worldwide and offer a wide variety of optional DEI-related training courses as well.
Wireless Test Our Wireless Test business operates under the LitePoint brand name and provides test solutions utilized in the development and manufacturing of wireless devices and modules. The world’s leading makers of smartphones, tablets, notebooks, laptops, peripherals, and Internet-of-Things (“IoT”) devices rely on LitePoint technology to ensure their products get into consumer hands with high quality and high efficiency.
The world’s leading makers of smartphones, laptops, access points, and Internet-of-Things (“IoT”) devices rely on LitePoint equipment to ensure their products get into consumer’s hands with high quality and high efficiency. LitePoint wireless test systems span design verification to high volume manufacturing and are deployed across the entire production chain from wireless chipset suppliers to consumer brands.
While the depth of the slowdown and the timing of the recovery are uncertain, we expect the ramp of 3 nanometer process technology starting in 2023 followed by gate-all-around process technology, increasing multichip packaging, additional device complexity and unit growth will drive additional demand for test over our four year forecast period.
Over the midterm, we expect the ramp of 3 nanometer and gate-all-around process technology, increasing multichip packaging, additional device complexity and unit growth will drive additional demand for Semiconductor Test. Our Robotics segment consists of Universal Robots A/S (“UR”), a leading supplier of collaborative robotic arms, and Mobile Industrial Robots A/S (“MiR”), a leading maker of AMRs for industrial automation.
MiR offers four collaborative autonomous mobile robot models, MiR100, MiR250, MiR600 and MiR1350, each with different payload carrying capacity. MiR 600 and MiR1350 were launched in the fall 2021. All models can be easily integrated into existing production environments.
Launched in fall 2021, MiR600 and MiR1350 are industrial-grade robots with IP52 rating, compliant with ISO 3691-4 safety standards, and TÜV certified. All models can be easily integrated into existing production environments.
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In 2022, the demand in the mobility and compute segments of our Semiconductor Test business was lower due to end market slowdown in these segments as well as a slower technology transition in one of our largest end-markets.
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The depth of this slowdown and the timing of the recovery are uncertain, however, strong automotive and image sensor demand partially offset these declines. The growth of DDR5 and High Bandwidth Memory ("HBM") devices for data center applications continued to drive demand for our products in the memory market in 2023.
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Our Robotics segment consists of Universal Robots A/S (“UR”), a leading supplier of collaborative robotic arms and Mobile Industrial Robots A/S (“MiR”), a leading maker of autonomous mobile robots (“AMRs”) for industrial automation. In September 2022, we merged MiR and AutoGuide, LLC (“AutoGuide”), a maker of high payload AMRs, to become a single supplier of AMRs.
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Demand in the fourth quarter of 2023 increased, tied to introduction of new products and seasonally high demand in Robotics after market softness and the impact of our channel transformation resulted in a weaker than forecasted first half of 2023.
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LitePoint hardware and software wireless test solutions are used in test insertions that span design verification to high volume manufacturing and are deployed across the entire production eco-system from the wireless chipset suppliers to the consumer brands.
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On November 7, 2023, Teradyne and Technoprobe S.p.A (“Technoprobe”), a leader in the design and production of probe cards, announced the establishment of a strategic partnership that will seek to accelerate growth for both companies and enable higher performance semiconductor test interfaces for customers worldwide.
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Wireless devices are often tested at multiple points along the manufacturing process that include insertions at component, system-in-package (“SiP”), module, PCB, SMT and finished product stages. Design verification is an important step in the development process for evaluating product performance prior to starting production.
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As part of the partnership, Teradyne will make an investment of 481.0 million Euros in exchange for a 10% equity investment in Technoprobe and Technoprobe will acquire 100% of Teradyne’s Device Interface Solutions ("DIS") business in exchange for $85.0 million. The transaction is expected to close during the first half of 2024.
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As end market unit volumes have increased, the quantity of units and the amount of data that must be analyzed for a successful product launch continues to grow. LitePoint products provide easy to use, domain specific tools for rapid analysis of product performance. This helps to speed time to market.
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The broad consumer, automotive and broadband markets have historically driven most of the device volume growth in the semiconductor industry. These markets include mobile phones and tablets, PCs, servers, networking 3 Table of Contents and automotive electronics.
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In high volume manufacturing, wireless test enables the calibration of each individual product’s wireless performance to improve range, data throughput and battery life. Testing also verifies product specifications for product quality control.
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The automated in-line configurations address the growing requirements for automating production lines for high volume applications, such as automotive electronics, computing, and communications. 4 Table of Contents Wireless Test Our Wireless Test segment is a business unit run under the LitePoint brand name providing wireless test solutions for silicon validation, wireless module manufacturing, and wireless end device manufacturing.
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As markets become increasingly competitive, product performance and quality provide brand differentiation. 5 Table of Contents Wireless standards can be thought of in three categories: connectivity, cellular and location. Connectivity covers many standards such as Wi-Fi and Bluetooth.
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Design verification involves comprehensive automated testing of small quantities of devices in an R&D lab to ensure the device meets its design targets over a wide range of conditions and scenarios. High Volume manufacturing involves the calibration and testing of each wireless device to ensure the product will deliver the intended customer experience.
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LitePoint’s IQxel products cover emerging Wi-Fi standards such as WiFi 6E and WiFi 7 which makes use of the newly allocated 6-7GHz spectrum. Connectivity also includes a variety of other standards such as Bluetooth Classic, Bluetooth 5.0 and Bluetooth low energy, Zigbee, Z-Wave, NFC, LoRa and others.
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This ensures all the products perform identically in terms of their wireless characteristics. LitePoint equipment serves an ever-expanding number of wireless standards in three segments: connectivity, cellular, and secure ranging. Connectivity encompasses numerous short range unlicensed communication standards. Cellular includes standards operating in licensed spectrum from a few GHz to 10s of GHz (mmWave).
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The IQxel product family’s high performance wireless and multi-device testing economics are aligned with the needs of networking equipment, Internet gateways, IoT products and embedded modules used in smartphones, tablets, and PCs. In 2021, LitePoint introduced the IQxel-MX testing solution for the testing of Wi-Fi devices.
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Finally, secure ranging uses Ultra Wideband (UWB) technology to provide centimeter level positioning with secure data transactions for applications such as “digital keys” and item location (tag type trackers). LitePoint serves these wireless segments with multiple product families. The LitePoint IQxel-MX and IQxel-MW7G series provide leading edge measurement performance for both design validation and high volume manufacturing of connectivity products.
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Another connectivity product, the IQnfc, addresses the use of NFC technology for payments with mobile devices. Cellular standards include 2G, 3G, 4G and the new 5G mobile phone technologies. LitePoint’s IQxstream is a multi-device production test optimized solution for high speed testing of GSM, EDGE, CDMA2000, TD-SCDMA, WCDMA, HSPA+, LTE and 5G technologies.
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The LitePoint IQxstream-5G and IQgig-5G families combine support for 4G and 5G technologies across a wide range of frequencies to serve all the needs of both end user (smartphones) and network infrastructure (small cells and O-RAN) equipment. Finally, the IQgig-UWB+ provides comprehensive certification and manufacturing test support for UWB (802.15.14) products used for secure ranging.
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It is used for calibration and verification of smartphones, tablets, small cell radio units and embedded cellular modules. The IQcell, is a multi-device cellular signaling test solution which enables user experience testing of LTE and 5G cellular devices over-the-air. The IQgig family provides test solutions at the intermediate and millimeter wave frequencies for 5G, proximity radar and 802.11ad.
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Robotics Our Robotics segment is comprised of two business units: Universal Robots and Mobile Industrial Robots. Universal Robots Universal Robots is a leading provider of collaborative robots (cobots) used across various industries, including automotive, food & beverage, metal & machining, electronics, pharmaceutical, and in education.
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Location technologies have traditionally been satellite-based wireless signals such as GPS and GLONASS, which are tested on LitePoint’s connectivity and cellular equipment. A new technology called Ultra-WideBand is being adopted in IoT, automotive and mobile phones. Ultra-WideBand provides finer location capability and is tested on LitePoint’s IQgig-UWB equipment.
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Founded in 2005 and headquartered in Odense, Denmark, Universal Robots aims to create a world where people work with robots, not like robots. Its mission is simple: “ Automation for anyone.
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To complement the test systems, LitePoint offers turnkey test software for over 350 of the most popular wireless chipsets. These optimized solutions provide rapid development of high volume manufacturing solutions with a minimum of engineering effort by customers. Robotics Our Robotics segment is comprised of two business units: Universal Robots and Mobile Industrial Robots.
Added
Anywhere.” Since introducing the world's first commercially viable cobot in 2008, Universal Robots has sold over 75,000 cobots worldwide and has developed a product portfolio reflecting a range of reaches and payloads, including the UR3e, UR5e, UR10e, UR16e, UR20 and UR30 robots.
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Universal Robots Universal Robots is a leading supplier of collaborative robots, which are low-cost, easy-to-deploy and simple-to-program robots that work side by side with production workers to improve quality, increase manufacturing efficiency and decrease manufacturing costs.
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All models are robust, built to withstand a wide range of industrial environments, and can be easily integrated into existing production setups, providing a number of game-changing benefits: • Straightforward programming – UR's intuitive software, PolyScope, enables users to program a cobot easily and have an application up and running within a few hours. • High return on investment – cobots require a lower initial investment than traditional robotics and have an average payback time of 12-18 months. • Versatile deployment – cobots' high degree of flexibility allows customers to change the task and pace of the cobot according to production demands. • Collaborative-capable safety functions – following a risk assessment, most cobots can seamlessly operate alongside employees, assisting with dull, dirty, and dangerous tasks. • Cutting-edge precision engineering – UR's global team of talented engineers creatively tackles customer challenges, ensuring our cobots are rigorously tested and built for demanding industrial tasks.
Removed
Collaborative robots are designed to mimic the motion of a human arm and can be fitted with task specific grippers or end effectors to support a wide range of applications. Universal Robots offers a variety of collaborative robot models, including the UR3, UR5, UR10, UR16 and UR20, each with different weight carrying capacity and arm reach.
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An extensive ecosystem has grown around the company's cobot technology creating innovation, choice for customers and a wide range of components, kits and solutions to suit every application.
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All models are easily integrated into existing production environments.
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UR also provides an all-encompassing customer experience including UR Academy - an award-winning training program, available both online and in person in more than 120 training centers worldwide, and three tiers of service offerings carefully designed to accelerate customer success. 5 Table of Contents Universal Robots has recently established global Centers of Excellence for Welding, Palletizing, and Machine Tending applications.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThe addition of certain of these companies to the entity list has had and will continue to have an adverse impact on our business with these customers. We will take appropriate actions, including filing for licenses with the U.S. Department of Commerce to attempt to minimize the impact of the restrictions on these companies.
Biggest changeWe will take appropriate actions, including filing for licenses with the U.S. Department of Commerce to attempt to minimize the impact of the restrictions on our business. 19 Table of Contents On May 16, 2019, Huawei and 68 of its affiliates, including HiSilicon, were added to the U.S. Department of Commerce Entity List under the EAR.
The following factors could impact future operations: • a worldwide economic slowdown or disruption in the global financial or industrial markets; • cost increases from inflation on materials, employee wages, third party labor, and contract manufacturing; • competitive pressures on selling prices; • our ability to introduce, and the market acceptance of, new products; • changes in product revenues mix resulting from changes in customer demand; 19 Table of Contents • the level of orders received which can be shipped in a quarter because of the tendency of customers to wait until late in a quarter to commit to purchase due to capital expenditure approvals and constraints occurring at the end of a quarter, or the hope of obtaining more favorable pricing from a competitor seeking the business; • engineering and development investments relating to new product introductions, and the expansion of manufacturing, outsourcing and engineering operations in Asia; • provisions for excess and obsolete inventory relating to the lack of demand for and the discontinuance of products; • impairment charges for certain long-lived and intangible assets, and goodwill; • an increase in the leasing of our products to customers; • disruption caused by health pandemics, such as the coronavirus; • the success of sales channel expansion in Robotics; • our ability to expand our global distribution channel for our collaborative and mobile robots; • parallel or multi-site testing which could lead to a decrease in the ultimate size of the market for our semiconductor and electronic test products; and • the ability of our suppliers and subcontractors to meet product quality or delivery requirements needed to satisfy customer orders for our products, especially if consolidated revenues increase.
The following factors could impact future operations: • a worldwide economic slowdown or disruption in the global financial or industrial markets; • cost increases from inflation on materials, employee wages, third party labor, and contract manufacturing; • competitive pressures on selling prices; • our ability to introduce, and the market acceptance of, new products; • changes in product revenues mix resulting from changes in customer demand; • the level of orders received which can be shipped in a quarter because of the tendency of customers to wait until late in a quarter to commit to purchase due to capital expenditure approvals and constraints occurring at the end of a quarter, or the hope of obtaining more favorable pricing from a competitor seeking the business; • engineering and development investments relating to new product introductions, and the expansion of manufacturing, outsourcing and engineering operations in Asia; • provisions for excess and obsolete inventory relating to the lack of demand for and the discontinuance of products; • impairment charges for certain long-lived and intangible assets, and goodwill; • an increase in the leasing of our products to customers; • disruption caused by health pandemics, such as the coronavirus; • the success of sales channel expansion in Robotics; • our ability to expand our global distribution channel for our collaborative and mobile robots; • parallel or multi-site testing which could lead to a decrease in the ultimate size of the market for our semiconductor and electronic test products; and • the ability of our suppliers and subcontractors to meet product quality or delivery requirements needed to satisfy customer orders for our products, especially if consolidated revenues increase.
We have also outsourced certain general and administrative functions to reputable service providers, many of which are in foreign countries, sometimes impacting communication with them because of language and time differences. Their presence in foreign countries also increases the risk they could be exposed to political risk.
We have also outsourced certain general and administrative functions to reputable service providers, many of which are in foreign countries, sometimes impacting communication with them because of language and time differences. Their presence in foreign countries also increases the risk they could be exposed to political and cybersecurity risk.
However, if we are unable to secure manufacturing capacities from our current or new suppliers and contract manufacturers, on acceptable terms or at all, or successfully manage our purchase commitments and inventory for components, our ability to deliver our products to our customers in the desired quantities, at competitive prices or in a timely manner may be negatively impacted for 2023.
However, if we are unable to secure manufacturing capacities from our current or new suppliers and contract manufacturers, on acceptable terms or at all, or successfully manage our purchase commitments and inventory for components, our ability to deliver our products to our customers in the desired quantities, at competitive prices or in a timely manner may be negatively impacted for 2024.
In addition, while we maintain an export compliance program, our compliance controls could be circumvented, exposing us to legal liabilities. We will continue to assess the impact of the new export controls on our business and operations and take appropriate actions, including filing for licenses with the U.S. Department of Commerce, to minimize any disruption.
In addition, while we maintain an export compliance program, our compliance controls could be circumvented, exposing us to legal liabilities. We will continue to assess the impact of these export controls on our business and operations and take appropriate actions, including filing for licenses with the U.S. Department of Commerce, to minimize any disruption.
In addition, in 2022, inflationary pressures contributed to increased costs for product components and wage inflation, which had minimal impact on our cost of products, gross margin and profit for the year. Our supply chain team, and our suppliers, continue to manage numerous supply, production and logistics obstacles.
In addition, in 2023, inflationary pressures contributed to increased costs for product components and wage inflation, which had minimal impact on our cost of products, gross margin and profit for the year. Our supply chain team, and our suppliers, continue to manage numerous supply, production and logistics obstacles.
In addition, such adverse changes in economic conditions, and resulting slowdowns in the market for our products, may, among other things, result in increased price competition for our products, increased risk of excess and obsolete inventories, increased risk in the collectability of our accounts receivable from our customers, potential reserves for doubtful accounts and write-offs of accounts receivable, increased risk of restructuring charges, and higher operating costs as a percentage of revenues, which, in each case and together, adversely affect our operating results.
In addition, such adverse changes in economic conditions, and resulting slowdowns in the market for our products, may, among other things, result in increased price competition for our products, increased risk of excess and obsolete inventories, increased risk in the collectability of our accounts receivable from our customers, potential reserves for credit losses and write-offs of accounts receivable, increased risk of restructuring charges, and higher operating costs as a percentage of revenues, which, in each case and together, adversely affect our operating results.
Our business may suffer if we are unable to attract and retain key employees. Competition for employees with skills we require is intense in the high technology industry. We expect intense competition for employees to continue in 2023. Our success will depend on our ability to attract and retain key technical employees.
Our business may suffer if we are unable to attract and retain key employees. Competition for employees with skills we require is intense in the high technology industry. We expect intense competition for employees to continue in 2024. Our success will depend on our ability to attract and retain key technical employees.
We rely on various information technology networks and systems to process, transmit and store electronic information, including proprietary and confidential data, and to carry out and support a variety of business 22 Table of Contents activities, including manufacturing, research and development, supply chain management, sales and accounting. We have experienced several attempted cyber-attacks of our network.
We rely on various information technology networks and systems to process, transmit and store electronic information, including proprietary and confidential data, and to carry out and support a variety of business activities, including manufacturing, research and development, supply chain management, sales and accounting. We have experienced several attempted cyber-attacks of our network.
Such activities could 26 Table of Contents interfere with our ability to execute our business plans, be costly and time-consuming, disrupt our operations, divert the attention of management, or result in our initiating borrowing or increasing our share repurchase plan or dividend, any of which could have an adverse effect on our business or stock price.
Such activities could interfere with our ability to execute our business plans, be costly and time-consuming, disrupt our operations, divert the attention of management, or result in our initiating borrowing or increasing our share repurchase plan or dividend, any of which could have an adverse effect on our business or stock price.
Our international sales and operations are subject to significant risks and difficulties, including: • unexpected changes in legal and regulatory requirements affecting international markets; • cost increases due to inflation • changes in tariffs and exchange rates; • social, political and economic instability, acts of terrorism and international conflicts; • disruption caused by health pandemics, such as the coronavirus; • difficulties in protecting intellectual property; • difficulties in accounts receivable collection; • cultural differences in the conduct of business; • difficulties in staffing and managing international operations; • compliance with anti-corruption laws; • compliance with data privacy regulations; 15 Table of Contents • compliance with customs and trade regulations; and • compliance with international tax laws and regulations.
Our international sales and operations are subject to significant risks and difficulties, including: • unexpected changes in legal and regulatory requirements affecting international markets; • cost increases due to inflation; • changes in tariffs and exchange rates; • social, political and economic instability, acts of terrorism and international conflicts; 11 Table of Contents • disruption caused by health pandemics; • difficulties in protecting intellectual property; • difficulties in accounts receivable collection; • cultural differences in the conduct of business; • difficulties in staffing and managing international operations; • compliance with anti-corruption laws; • compliance with data privacy regulations; • compliance with customs and trade regulations; and • compliance with international tax laws and regulations.
Risks Associated with Operating a Global Business We are subject to risks of operating internationally. A significant portion of our total revenues is derived from customers outside the United States.
Risks Associated with Operating a Global Business We are subject to risks of operating internationally. A significant portion of our consolidated revenues is derived from customers outside the United States.
Such attempts could result in the misappropriation, theft, misuse, disclosure or loss or destruction of the intellectual property, or the proprietary, confidential or personal information, of Teradyne or our employees, customers, suppliers or other third parties, as well as damage to or disruptions in our information technology networks and systems.
Such attempts could result in the misappropriation, theft, misuse, disclosure or loss or destruction of 18 Table of Contents the intellectual property, or the proprietary, confidential or personal information, of Teradyne or our employees, customers, suppliers or other third parties, as well as damage to or disruptions in our information technology networks and systems.
In addition, we rely on contract manufacturers for certain of our products, and our ability to meet customer orders for those products depends upon the timeliness and quality of the work performed by these subcontractors, over whom we do not exercise any control.
In addition, we rely on contract manufacturers for certain of our products, and our ability to meet customer orders 16 Table of Contents for those products depends upon the timeliness and quality of the work performed by these subcontractors, over whom we do not exercise any control.
Future climate change regulations could result in decreased demand for our products. If we fail to comply with present and future regulations, or are required to perform site remediation, we could be subject to future liabilities or cost, including penalties or the suspension of production.
Future climate change regulations could result in decreased demand for 20 Table of Contents our products. If we fail to comply with present and future regulations, or are required to perform site remediation, we could be subject to future liabilities or cost, including penalties or the suspension of production.
As of December 31, 2022, we have not incurred material costs as a result of the monitoring and remediation steps taken at the Massachusetts and New Hampshire sites.
As of December 31, 2023, we have not incurred material costs as a result of the monitoring and remediation steps taken at the Massachusetts and New Hampshire sites.
The issuance of the Notes and any additional indebtedness, among other things, could: • make it difficult to make payments on this indebtedness and our other obligations; • make it difficult to obtain any necessary future financing for working capital, capital expenditures, debt service requirements or other purposes; • require the dedication of a substantial portion of any cash flows from operations to service for indebtedness, thereby reducing the amount of cash flows available for other purposes, including capital expenditures; and • limit our flexibility in planning for, or reacting to, changes in our business and the industries in which we compete.
Our outstanding and any additional indebtedness, among other things, could: • make it difficult to make payments on this indebtedness and our other obligations; • make it difficult to obtain any necessary future financing for working capital, capital expenditures, debt service requirements or other purposes; • require the dedication of a substantial portion of any cash flows from operations to service for indebtedness, thereby reducing the amount of cash flows available for other purposes, including capital expenditures, and • limit our flexibility in planning for or reacting to changes in our business and the industries in which we complete.
The loss of one or more key or other employees, a decrease in our ability to attract additional qualified employees, or the delay in hiring key personnel could each have a material adverse effect on our business, results of operations or financial condition.
The loss of one or 17 Table of Contents more key or other employees, a decrease in our ability to attract additional qualified employees, or the delay in hiring key personnel could each have a material adverse effect on our business, results of operations or financial condition.
Our failure to comply with financial and other restrictive covenants could result in an event of default, which if not cured or waived, could result in the lenders requiring immediate payment of all outstanding borrowings or foreclosing on collateral pledged to them to secure the indebtedness. Our convertible note hedge and warrant transactions could impact the value of our stock.
Our failure to comply with financial and other restrictive covenants could result in an event of default, which if not cured or waived, could result in the lenders requiring immediate payment of all outstanding borrowings or foreclosing on collateral pledged to them to secure the indebtedness. [3] Our warrant transactions could impact the value of our stock.
In November 2020, we entered into an agreement with the Singapore Economic Development 16 Table of Contents Board which extended our Singapore tax holiday under substantially similar terms to the agreement which expired on December 31, 2020. The new tax holiday is scheduled to expire on December 31, 2025.
In November 2020, we entered into an agreement with the Singapore Economic Development Board which extended our Singapore tax holiday under substantially similar terms to the agreement which expired on December 31, 2020. The new tax holiday is scheduled to expire on December 31, 2025.
If we are unable to generate sufficient cash flows or otherwise obtain funds necessary to make required payments on the Notes or certain of our other obligations, we would be in default under the terms thereof, which would permit the holders of those obligations to accelerate their maturity and also could cause defaults under future indebtedness we may incur.
If we are unable to generate sufficient cash flows or otherwise obtain funds necessary to make required payments on our senior secured revolving credit facility or certain of our other obligations, we would be in default under the terms thereof, which would permit the holders of those obligations to accelerate their maturity and also could cause defaults under future indebtedness we may incur.
As of February 22, 2023, we have not borrowed any funds under this credit facility.
As of February 22, 2024, we have not borrowed any funds under this credit facility.
Also, our suppliers and contract manufacturers have increased their prices, which increased our cost of products. We have been and may continue to be, affected by wage inflation. We also have been, and may continue to attempt to, offset the effect of these inflationary pressures by increasing the prices of our products.
Also, our suppliers and contract manufacturers have increased their prices, which increased our cost of products. We also have been, and may continue to attempt to, offset the effect of these inflationary pressures by increasing the prices of our products.
The global supply shortage of electrical components, including semiconductor chips, continued to impact our supply chain in 2022. As a result, we have experienced, and expect to continue to experience, increases in our lead times and costs for certain components for certain products and delays in the delivery of some orders placed by our customers.
The global supply shortage of electrical components, including semiconductor chips, continued to impact our supply chain in 2023. As a result, we have experienced, and may experience in the future, increases in our lead times and costs for certain components for certain products and delays in the delivery of some orders placed by our customers.
We may discontinue or reduce our quarterly cash dividend or share repurchase program. In January 2014, our Board of Directors initiated a quarterly cash dividend. Since 2014, the Board of Directors has increased our quarterly cash dividend from $0.06 per share to $0.11 per share.
We may discontinue or reduce our quarterly cash dividend or share repurchase program. 13 Table of Contents In January 2014, our Board of Directors initiated a quarterly cash dividend. Since 2014, the Board of Directors has increased our quarterly cash dividend from $0.06 per share to $0.12 per share.
(“Plexus”) to manufacture and test our 20 Table of Contents Magnum products from its facilities in Malaysia and, starting in 2023, also Thailand and ETS family of products from its facility in Malaysia; SAM Meerkat to manufacture and test our storage test family of products from its facilities in Malaysia and Thailand and on other contract manufacturers to manufacture other products.
(“Plexus”) to manufacture and test our Magnum products from its facilities in Malaysia and also Thailand and ETS family of products from its facility in Malaysia; SAM Meerkat to manufacture and test our storage test family of products from its facilities in Malaysia and Thailand and on other contract manufacturers to manufacture other products.
We are taking appropriate actions, including filing license applications and obtaining licenses 24 Table of Contents from the U.S. Department of Commerce. However, we do not expect these actions will mitigate the impact of the regulations on our sales to Huawei, HiSilicon and other suppliers.
These new regulations have impacted our sales to Huawei, HiSilicon and their suppliers. We are taking appropriate actions, including filing license applications and obtaining licenses from the U.S. Department of Commerce. However, we do not expect these actions will mitigate the impact of the regulations on our sales to Huawei, HiSilicon and other suppliers.
The tax savings attributable to the Singapore tax holiday for the years ended December 31, 2022, 2021 and 2020 were $16.0 million or $0.09 per diluted share, $33.3 million or $0.18 per diluted share, and $29.9 million or $0.16 per diluted share, respectively.
The tax savings attributable to the Singapore tax holiday for the years ended December 31, 2023, 2022 and 2021 were $1.4 million or $0.01 per diluted share, $16.0 million or $0.09 per diluted share, and $33.3 million or $0.18 per diluted share, respectively.
However, from time to time, we discover design or manufacturing defects in our products after they have been shipped and, as a 25 Table of Contents result, we have incurred development and remediation costs and settled warranty and product liability claims.
We invest significant resources in the design, manufacturing and testing of our products. However, from time to time, we discover design or manufacturing defects in our products after they have been shipped and, as a result, we have incurred development and remediation costs and settled warranty and product liability claims.
We are subject to paying income taxes in the United States and other countries where we operate. Our effective tax rate is dependent on where our earnings are generated and the tax regulations and the interpretation and judgment of administrative tax or revenue authorities in the United States and other countries.
Our effective tax rate is dependent on where our earnings are generated and the tax regulations and the interpretation and judgment of administrative tax or revenue authorities in the United States and other countries.
We have implemented, if appropriate, operational changes that would mitigate the impact of the retaliatory tariffs. However, notwithstanding our efforts, the retaliatory tariffs or other trade restrictions implemented by China could disrupt our business operations, sales and supply chain and, therefore, have a material adverse effect on our business, financial condition or results of operations.
However, notwithstanding our efforts, the retaliatory tariffs or other trade restrictions implemented by China could disrupt our business operations, sales and supply chain and, therefore, have a material adverse effect on our business, financial condition or results of operations.
We are subject to intense competition. We face significant competition throughout the world in each of our reportable segments. Some of our competitors have substantial financial and other resources to pursue engineering, manufacturing, marketing and distribution of their products. We also face competition from emerging Asian companies and internal development at several of our customers.
We are subject to intense competition. We face significant competition throughout the world in each of our reportable segments. Some of our competitors have substantial financial and other resources to pursue engineering, manufacturing, marketing and distribution of their products.
(“Flex”) to manufacture and test our FLEX and J750 family of products from its facilities in China and, starting in 2022, also Malaysia; Plexus Corp.
(“Flex”) to manufacture and test our FLEX and J750 family of products from its facility in Malaysia; Plexus Corp.
Separately and concurrent with the pricing of the Notes, we entered into warrant transactions with the Option Counterparties (the “Warrant Transactions”) in which we sold net-share-settled (or, at our election subject to certain conditions, cash-settled) warrants to the Option Counterparties. The Warrant Transactions cover, subject to customary anti-dilution adjustments, approximately 14.6 million shares of our common stock.
Separately and concurrent with the pricing of the Notes, we entered into warrant transactions with the Option Counterparties (the “Warrant Transactions”) in which we sold net-share-settled (or, at our election subject to certain conditions, cash-settled) warrants to the Option Counterparties.
However, even with these protections, our IP may still be challenged, invalidated or subject to other infringement actions. While we believe that our IP has value in the aggregate, no single element of our IP is in itself essential. If a significant portion of our IP is invalidated or ineffective, our business could be materially adversely affected.
However, even with these protections, our IP may still be challenged, invalidated or subject to other infringement actions. While we believe that our IP has value in the aggregate, we do not believe that any single element of our IP is in itself essential.
We believe that our technological position depends primarily on the technical competence and creative ability of our engineers. In a rapidly evolving market, such as ours, the development or acquisition of new technologies, commercialization of those technologies into products and market acceptance and customer demand for those products are critical to our success.
In a rapidly evolving market, such as ours, the development or acquisition of new technologies, commercialization of those technologies into products and market acceptance and customer demand for those products are critical to our success.
Correspondingly, our results of operations and our ability to realize projected growth rates in sales and earnings in Robotics could be adversely affected if the U.S. dollar strengthens significantly against foreign currencies. Risks Related to Operations Our operating results are likely to fluctuate significantly.
While the majority of our revenues are in U.S. dollars, approximately 70% of our Robotics revenue in 2023 was denominated in foreign currencies. Correspondingly, our results of operations and our ability to realize projected growth rates in sales and earnings in Robotics could be adversely affected if the U.S. dollar strengthens significantly against foreign currencies.
These new regulations restrict the sale to Huawei and the designated Huawei entities of certain non-U.S. made items, such as semiconductor devices, manufactured for or sold to Huawei entities including HiSilicon under specific, detailed conditions set forth in the new regulations. These new regulations have impacted our sales to Huawei, HiSilicon and their suppliers.
EAR to include additional products that would become subject to export restrictions relating to Huawei entities including HiSilicon. These new regulations restrict the sale to Huawei and the designated Huawei entities of certain non-U.S. made items, such as semiconductor devices, manufactured for or sold to Huawei entities including HiSilicon under specific, detailed conditions set forth in the new regulations.
Additionally, we may fund acquisitions of new businesses, strategic alliances, or joint ventures by utilizing our cash, incurring debt, issuing shares of our common stock, or by other means. We may incur higher tax rates than we expect and may have exposure to additional international tax liabilities and costs.
Additionally, we may fund acquisitions of new businesses, strategic alliances, or joint ventures by utilizing our cash, incurring debt, issuing shares of our common stock, or by other means.
The impact of these new Chinese laws on our business activities in China remains uncertain at this time. We may be subject to product recalls and warranty and product liability claims. We invest significant resources in the design, manufacturing and testing of our products.
The Company is assessing the potential impact of these new Chinese laws and monitoring relevant laws and regulations issued by the Chinese government. The impact of these new Chinese laws on our business activities in China remains uncertain at this time. We may be subject to product recalls and warranty and product liability claims.
Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results. 13 Table of Contents Risks Associated with Teradyne’s Markets Our business is impacted by global and industry-specific economic cycles, which are difficult to predict, and actions we have taken or may take to offset these cycles may not be sufficient.
Risks Associated with Teradyne’s Markets Our business is impacted by global and industry-specific economic cycles, which are difficult to predict, and actions we have taken or may take to offset these cycles may not be sufficient.
Risks Related to Teradyne’s Finances We may not fully realize the benefits of our acquisitions or strategic alliances. In June 2015, we acquired Universal Robots, in 2018, we acquired Energid and MiR and, in 2019, we acquired Lemsys and AutoGuide. We may not be able to realize the benefits of acquiring or successfully growing these businesses.
In addition, the global economic uncertainty following the start of the conflict could impact demand for our products. Risks Related to Teradyne’s Finances We may not fully realize the benefits of our acquisitions or strategic alliances. In June 2015, we acquired Universal Robots, in 2018, we acquired Energid and MiR and, in 2019, we acquired Lemsys and AutoGuide.
Department of Commerce has restricted the access of U.S. origin technologies to certain Chinese semiconductor companies including YMTC and CXMT by adding those companies to the Entity List under U.S. Export Administration Regulations (“EAR”).
Department of Commerce has restricted the access of U.S. origin technologies to certain Chinese semiconductor companies by adding those companies to the Entity List under U.S. Export Administration Regulations (“EAR”). The addition of certain of these companies to the entity list has had and will continue to have an adverse impact on our business with these customers.
Unless terminated earlier by resolution of our Board of Directors, the repurchase program will expire when we have repurchased all shares authorized for repurchase under the share repurchase program. Future cash dividends and share repurchases are subject to the discretion of our Board of Directors and will depend, among other things, upon our earnings, capital requirements and financial condition.
Future cash dividends and share repurchases are subject to the discretion of our Board of Directors and will depend, among other things, upon our earnings, capital requirements and financial condition.
Department of Commerce published new regulations restricting the export to China of advanced semiconductors, supercomputer technology, equipment for the manufacturing of advanced semiconductors and components and technology for the manufacturing in China of certain semiconductor manufacturing equipment. The new restrictions are lengthy and complex. We continue to assess the impact of these regulations on our business.
Department of Commerce published regulations restricting the export to China of advanced semiconductors, supercomputer technology, equipment for the manufacturing of advanced semiconductors and components and technology for the manufacturing in China of certain semiconductor manufacturing equipment. The restrictions impacted our sales to certain companies in China and our manufacturing and development operations in China.
The reduction or elimination of our cash dividend or our share repurchase program could adversely affect the market price of our common stock. We have incurred indebtedness and may incur additional indebtedness.
The reduction or elimination of our cash dividend or our share repurchase program could adversely affect the market price of our common stock. We have incurred indebtedness and may incur additional indebtedness. On May 1, 2020, we entered into a three-year, senior secured revolving credit facility of up to $400.0 million.
We have implemented operational changes that mitigate the impact of the 25% tariff on the import of our impacted products into the United States. As a result, the existing tariff has not had a material adverse effect on our business, financial condition or results of operations.
As a result, the existing tariff has not had a material adverse effect on our business, financial condition or results of operations. The implementation of additional tariffs by the United States could have a material adverse effect on our business, financial condition or results of operations.
A breach of our operational or security systems could negatively affect our business and results of operations.
If a significant portion of our IP is invalidated or ineffective, our business could be materially adversely affected. A breach of our operational or security systems could negatively affect our business and results of operations.
On May 16, 2019, Huawei and 68 of its affiliates, including HiSilicon, were added to the U.S. Department of Commerce Entity List under the EAR. This action by the U.S. Department of Commerce imposed new export licensing requirements on exports, re-exports, and in-country transfers of all U.S. regulated products, software and technology to the designated Huawei entities.
This action by the U.S. Department of Commerce imposed new export licensing requirements on exports, re-exports, and in-country transfers of all U.S. regulated products, software and technology to the designated Huawei entities. On August 17, 2020, the U.S. Department of Commerce published final regulations expanding the scope of the U.S.
Our business operations and supply chain are global and may be disrupted by the implementation of tariffs. In 2018, the United States Trade Representative imposed a 25% tariff on many lists of products, including certain Teradyne products that are made in China and imported into the United States.
In 2018, the United States Trade Representative imposed a 25% tariff on many lists of products, including certain Teradyne products that are made in China and imported into the United States. We have implemented operational changes that mitigate the impact of the 25% tariff on the import of our impacted products into the United States.
New product introductions by competitors could cause a decline in revenues or loss of market acceptance of our products. The market for our products is concentrated, and our business depends, in part, on obtaining orders from a few significant customers.
New product introductions by competitors could cause a decline in revenues or loss of market acceptance of our products.
We estimate consolidated revenues driven by one OEM customer, of our Semiconductor Test and Wireless Test segments, combining direct sales to that customer with sales to the customer’s OSATs (which include Taiwan Semiconductor Manufacturing Company Ltd.), accounted for less than 10% of our consolidated revenues in 2022, and 19% and 25% of our consolidated revenues in 2021 and 2020, respectively. 14 Table of Contents If we fail to develop new technologies to adapt to our customers’ needs and if our customers fail to accept our new products, our revenues will be adversely affected.
We estimate consolidated revenues driven by one OEM customer, of our Semiconductor Test and Wireless Test segments, combining direct sales to that customer with sales to the customer’s OSATs (which include Taiwan Semiconductor Manufacturing Company Ltd.), accounted for 19% of our consolidated revenues in 2021. Customer consolidation could affect our operating results.
In January 2023, our Board of Directors cancelled the 2021 repurchase program and approved a new $2.0 billion share repurchase program. Under the share repurchase program, we may repurchase outstanding shares of our common stock from time to time in the open market and through privately negotiated transactions.
In January 2023, our Board of Directors cancelled the 2021 repurchase program and approved a new $2.0 billion share repurchase program. In 2023, we repurchased $400.5 million of common stock. We intend to repurchase up to $90.0 million in 2024.
Department of Commerce, the Chinese government has passed new laws, including blocking legislation, which may impact our business activities in China. The Company is assessing the potential impact of these new Chinese laws and monitoring relevant laws and regulations issued by the Chinese government.
To the extent the regulations impact actual and potential customers or disrupt the global semiconductor industry, our business and revenues will be adversely impacted. In response to the regulations issued by the U.S. Department of Commerce, the Chinese government has passed new laws, including blocking legislation, which may impact our business activities in China.
The market for our products is concentrated with a limited number of significant customers accounting for a substantial portion of the purchases of test equipment. In each of the years, 2022, 2021 and 2020, our five largest direct customers in aggregate accounted for 26%, 33% and 36% of consolidated revenues, respectively.
In each of the years, 2023, 2022 and 2021, our five largest direct customers in aggregate accounted for 32%, 26% and 33% of consolidated revenues, respectively.
The implementation of additional tariffs by the United States could have a material adverse effect on our business, financial condition or results of operations. In addition to the actions taken by the United States, China has implemented retaliatory tariffs on products made in the United States and imported into China, including certain Teradyne products.
In addition to the actions taken by the United States, China has implemented retaliatory tariffs on products made in the United States and imported into China, including certain Teradyne products. We have implemented, if appropriate, operational changes that would mitigate the impact of the retaliatory tariffs.
These threats are constantly evolving, thereby increasing the difficulty of defending against them or implementing adequate preventative measures.
These threats are constantly evolving and expanding, such as through the increased use of artificial intelligence in our products and expanding remote work opportunities for our employees, thereby increasing the difficulty of defending against them or implementing adequate preventative measures.
There can be no assurance that the loss of suppliers either as a result of financial viability, bankruptcy or otherwise will not have a material adverse effect on our business, results of operations or financial condition. Our operations may be adversely impacted if our outsourced contract manufacturers or service providers fail to perform. We depend on Flex Ltd.
However, we may not be fully able to pass additional costs on to our customers, which could have a negative impact on our results of operations and financial condition. Our operations may be adversely impacted if our outsourced contract manufacturers or service providers fail to perform. We depend on Flex Ltd.
Concurrent with the offering of the Notes, we entered into convertible note hedge transactions (the “Note Hedge Transactions”) with the initial purchasers or their affiliates (the “Option Counterparties”).
On December 12, 2016, we completed a private offering of $460.0 million aggregate principal amount of 1.25% convertible senior unsecured notes (the “Notes”) that matured on December 15, 2023. Concurrent with the offering of the Notes, we entered into convertible note hedge transactions with the initial purchasers or their affiliates (the “Option Counterparties”).
These activities could adversely impact the value of our common stock and the Notes. We may not be able to pay our debt and other obligations. If our cash flows are inadequate to meet our obligations, we could face substantial liquidity problems.
If our cash flows are inadequate to meet our obligations, we could face substantial liquidity problems.
In addition to the specific restrictions impacting our business, the regulations may have an adverse impact on certain actual or potential customers and on the global semiconductor industry. To the extent the regulations impact actual and potential customers or disrupt the global semiconductor industry, our business and revenues will be adversely impacted.
The new rules, which took effect on November 17, 2023, significantly limit the impact of the October 7, 2022 restrictions on our business. However, the regulations may continue to have an adverse impact on certain actual or potential customers and on the global semiconductor industry.
The long-term effects of climate change on the global economy and the semiconductor industry in particular are unclear but could be severe. 21 Table of Contents The global supply shortage of electrical components and inflationary cost increases has impacted our ability to meet customer demand and could adversely affect our business and financial results.
The loss of suppliers either as a result of financial viability, bankruptcy or otherwise could have a material adverse effect on our business, results of operations or financial condition. The global supply shortage of electrical components and inflationary cost increases has impacted our ability to meet customer demand and could adversely affect our business and financial results.
Our operating results are affected by a wide variety of factors that could materially adversely affect revenues or profitability.
A decline in the value of our common stock, including as a result of one or more factors set forth above, may result in substantial losses for our stockholders. Risks Related to Operations Our operating results are likely to fluctuate significantly. Our operating results are affected by a wide variety of factors that could materially adversely affect revenues or profitability.
Any such default could have a material adverse effect on our business, prospects, financial position and operating results.
Any such default could have a material adverse effect on our business, prospects, financial position and operating results. Foreign currency exchange rates and fluctuations in those rates may affect the Company’s ability to realize projected growth rates in its sales and earnings. Our financial statements are denominated in U.S. dollars.
The Warrant Transactions could have a dilutive effect to our common stock to the extent that the market price per share of our common stock, as measured under the terms of the Warrant Transactions, exceeds the applicable strike price of the warrants. 18 Table of Contents The Note Hedge Transactions are expected to reduce the potential dilution to our common stock upon any conversion of the Notes.
The Warrant Transactions could result in increased common stock outstanding to the extent that the market price per share of our common stock, as measured under the terms of the Warrant Transactions, exceeds the applicable strike price of the warrants. We may not be able to pay our debt and other obligations.
Removed
Item 1A: Risk Factors The risks described below are not the only risks that we face.
Added
Item 1A: R isk Factors The risks described below are not the only risks that we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.
Removed
We estimate consolidated revenues driven by Qualcomm, a customer of our Semiconductor Test, System Test, and Wireless Test segments, combining direct and indirect sales to Qualcomm, accounted for approximately 11% of our consolidated revenues in 2022 and less than 10% in 2021 and 2020.
Added
In addition, we are subject to trade regulations imposed by the United States government, which may not impact some of our competitors. We also face competition from emerging Asian companies and internal development at several of our customers.
Removed
On December 12, 2016, we completed a private offering of $460.0 million aggregate principal amount of 1.25% convertible senior unsecured notes (the “Notes”) due December 15, 2023 and received net proceeds, after issuance costs, of approximately $450.8 million, $33.0 million of which was used to pay the net cost, after being partially offset by proceeds from the sale of the warrants, of the convertible note hedge transactions and $50.1 million of which was used to repurchase 2.0 million shares of our common stock.
Added
The market for our products is concentrated, and our business depends, in part, on obtaining orders from a few significant customers. 10 Table of Contents The market for our products is concentrated with a limited number of significant customers accounting for a substantial portion of the purchases of test equipment.
Removed
Holders of the Notes may require us to repurchase the Notes upon the occurrence of certain fundamental changes involving us or the holders may elect to convert into shares of our common stock.
Added
There has been a trend toward customer consolidation in the semiconductor industry through business combinations, including mergers, asset acquisitions and strategic partnerships.
Removed
As of February 22, 2023, one hundred and twenty four holders had converted $424.9 million worth of notes. 17 Table of Contents On May 1, 2020, we entered into a three-year, senior secured revolving credit facility of up to $400.0 million.
Added
If this trend continues, it could make us more dependent on fewer customers who may be able to exert increased pressure on our prices and other contract terms and could increase the portion of our total sales concentration for any single customer.
Removed
The Note Hedge Transactions cover, subject to customary anti-dilution adjustments, the number of shares of our common stock that underlie the Notes, with a strike price equal to the conversion price of the Notes of $31.46. The Note Hedge Transactions cover, subject to customary anti-dilution adjustments, approximately 1.6 million shares of our common stock.
Added
Customer consolidation activity could also reduce the demand for our products and services if such customers streamline research and development or operations, reduce purchases or delay purchasing decisions. These outcomes could negatively impact our operating results and financial condition.
Removed
On November 4, 2021, we made an irrevocable election under the indenture to require the principal portion of the remaining Notes to be settled in cash.
Added
If we fail to develop new technologies to adapt to our customers’ needs or if our customers fail to accept our new products, our revenues will be adversely affected. We believe that our technological position depends primarily on the technical competence and creative ability of our engineers.
Removed
The strike price of the warrants is $39.48 per share.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeIn 2019, we purchased land in Denmark to construct a new building for our Robotics operations. The new building construction is expected to be completed by the first quarter of 2024.
Biggest changeIn 2019, we purchased land in Denmark, approximately 200,000 square feet, to construct a new building for our Robotics operations. The new building construction is expected to be completed by the first half of 2024.
Item 2: Properties We conduct manufacturing, engineering, sales and marketing, service, corporate administration and other operations in various leased and owned facilities throughout the world. We own approximately 720,000 square feet of office space and lease over 1,500,000 square feet of office space.
Item 2: P roperties We conduct manufacturing, engineering, sales and marketing, service, corporate administration and other operations in various leased and owned facilities throughout the world. We own approximately 720,000 square feet of office space and lease approximately 1,500,000 square feet of office space.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3: Legal Proceedings We are subject to legal proceedings, claims and investigations that arise in the ordinary course of business such as, but not limited to, patent, employment, commercial and environmental matters. We believe that we have meritorious defenses against all pending claims and intend to vigorously contest them.
Biggest changeItem 3: L egal Proceedings We are subject to legal proceedings, claims and investigations that arise in the ordinary course of business such as, but not limited to, patent, employment, commercial and environmental matters. We believe that we have meritorious defenses against all pending claims and intend to vigorously contest them.
Added
Item 4: Mine S afety Disclosure 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 changeThe following table includes information with respect to repurchases we made of our common stock during the three months ended December 31, 2022 (in thousands except per share price): Period (a) Total Number of Shares (or Units) Purchased (b) Average Price Paid per Share (or Unit) (c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs (d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that may Yet Be Purchased Under the Plans or Programs October 3, 2022 – October 30, 2022 30 $ 69.41 30 $ 647,918,955 October 31, 2022 – November 27, 2022 1 82.03 — 647,918,955 November 28, 2022 – December 31, 2022 1 92.64 — 647,918,955 32 (1) $ 70.14 (1) 30 (1) Includes approximately two thousand shares at an average price of $83.49 withheld from employees for the payment of taxes.
Biggest changeThe following table includes information with respect to repurchases we made of our common stock during the three months ended December 31, 2023 (in thousands except per share price): Period (a) Total Number of Shares (or Units) Purchased (b) Average Price Paid per Share (or Unit) (c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs (d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that may Yet Be Purchased Under the Plans or Programs October 2, 2023 – October 29, 2023 363 $ 97.65 362 $ 1,615,390 October 30, 2023 – November 26, 2023 185 85.97 185 1,599,497 November 27, 2023 – December 31, 2023 1 93.70 — 1,599,497 549 (1) $ 93.70 (1) 547 (1) Includes approximately two thousand shares at an average price of $94.13 withheld from employees for the payment of taxes.
Item 5: Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities Our common stock is traded on the Nasdaq Global Select Market under the trading symbol “TER.” As of February 17, 2023, there were approximately 1,214 holders of record of shares of our common stock.
Item 5: Market for Registrant’s Common Equity, Rel ated Shareholder Matters and Issuer Purchases of Equity Securities Our common stock is traded on the Nasdaq Global Select Market under the trading symbol “TER.” As of February 22, 2024, there were approximately 1,148 holders of record of shares of our common stock.
Unless terminated by resolution of our Board of Directors, the repurchase program will expire when we have repurchased all shares authorized for repurchase under the share repurchase program.
(3) In January 2023, the Board of Directors cancelled the 2021 repurchase program and approved a new $2.0 billion of common stock. Unless terminated by resolution of our Board of Directors, the repurchase program will expire when we have repurchased all shares authorized for repurchase under the share repurchase program.
Removed
(2) In January 2021, the Board of Directors authorized the repurchase of up to $2.0 billion of common stock. In January 2023, the Board of Directors cancelled the 2021 repurchase program and approved a new $2.0 billion of common stock.
Added
(2) As of January 1, 2023, share repurchases net of share issuances are subject to a 1% excise tax under the Inflation Reduction Act. Excise tax incurred is included as part of the cost basis of shares repurchased in the Condensed Consolidated Statements of Convertible Common Shares and Stockholders' Equity.

Item 7. Management's Discussion & Analysis

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

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Biggest changeIncome (Loss) Before Income Taxes 2022 2021 2021-2022 Change (in millions) Semiconductor Test $ 634.5 $ 977.0 $ (342.5 ) System Test 166.9 163.1 3.8 Wireless Test 66.8 83.5 (16.7 ) Robotics (16.2 ) (8.2 ) (8.0 ) Corporate and Eliminations (1) (11.6 ) (54.5 ) 42.9 $ 840.4 $ 1,161.0 $ (320.6 ) (1) Included in Corporate and Eliminations are interest income, interest expense, net foreign exchange gains (losses), intercompany eliminations, pension and postretirement plan actuarial gains (losses), legal and environmental fees, contingent consideration adjustments, acquisition related charges and compensation and loss on convertible debt conversions in 2021.
Biggest changeOther (income) expense, net decreased by $4.8 million primarily due to the change in pension actuarial gains/losses, from a $25.6 million gain in 2022 to a $2.7 million loss in 2023, partially offset by the change in unrealized gains/losses on equity securities, from a $9.7 million loss in 2022 to a $7.2 million gain in 2023, and a $7.5 million unrealized gain on our call option purchased in connection with our agreement to acquire a 10% investment in Technoprobe S.p.A. 31 Table of Contents Income (Loss) Before Income Taxes 2023 2022 2022-2023 Change (in millions) Semiconductor Test $ 453.3 $ 634.5 $ (181.2 ) System Test 94.1 166.9 (72.8 ) Wireless Test 30.6 66.8 (36.2 ) Robotics (54.3 ) (16.2 ) (38.1 ) Corporate and Eliminations (1) 1.9 (11.6 ) 13.5 $ 525.6 $ 840.4 $ (314.8 ) (1) Included in Corporate and Eliminations are interest income, interest expense, net foreign exchange gains (losses), intercompany eliminations, employee severance, pension and postretirement plan actuarial gains (losses), legal and environmental fees, acquisition and divestiture related expenses, contract termination settlement charge, and an expense for the modification of Teradyne's former chief executive officer's outstanding equity awards.
The increase in operating assets was due to a $140.7 million increase in prepayments and other assets due to prepayments to our contract manufacturers, an $80.8 million increase in inventories, partially offset by a $50.6 million decrease in accounts receivable due to lower sales.
The increase in operating assets was due to a $140.7 million increase in prepayments and other assets due to prepayments to our contract manufacturers, and an $80.8 million increase in inventories, partially offset by a $50.6 million decrease in accounts receivable due to lower sales.
Discount rate and expected return on assets are two assumptions which are important elements of pension plan expense and asset/liability measurement. We evaluate our discount rate and expected rate of return on assets assumptions annually on a plan and country specific basis.
Discount rate and expected return on assets are two assumptions which are important elements of pension plan expense and asset/liability measurement. We evaluate our discount rate and expected rate of return on assets assumptions annually on a plan and country specific basis.
Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations Overview We are a leading global supplier of automated test equipment and robotics products. We design, develop, manufacture and sell automatic test systems and robotics products.
Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations Overview We are a leading global supplier of automated test equipment and robotics products. We design, develop, manufacture and sell automated test systems and robotics products.
Restructuring and Other During the year ended December 31, 2022, we recorded a charge of $14.7 million related to the arbitration claim filed against Teradyne and AutoGuide related to an earn-out dispute, which was settled on March 25, 2022 for $26.7 million, $2.9 million of severance charges primarily in Robotics, and a charge of $2.7 million for an increase in environmental and legal liabilities, partially offset by a $3.4 million gain on sale of an asset.
During the year ended December 31, 2022, we recorded a charge of $14.7 million related to the arbitration claim filed against Teradyne and AutoGuide related to an earn-out dispute which was settled on March 25, 2022 for $26.7 million, $2.9 million of severance charges primarily in Robotics, and a charge of $2.7 million for an increase in environmental and legal liabilities, partially offset by a $3.4 million gain on sale of an asset.
Our automatic test equipment and robotics products and services include: • semiconductor test (“Semiconductor Test”) systems; • storage and system level test (“Storage Test”) systems, defense/aerospace (“Defense/Aerospace”) test instrumentation and systems and circuit-board test and inspection (“Production Board Test”) systems (collectively these products represent “System Test”); • wireless test (“Wireless Test”) systems; and • robotics (“Robotics”) products.
Our automated test equipment and robotics products and services include: • semiconductor test (“Semiconductor Test”) systems; • storage and system level test (“Storage Test”) systems, defense/aerospace (“Defense/Aerospace”) test instrumentation and systems and circuit-board test and inspection (“Production Board Test”) systems (collectively these products represent “System Test”); • wireless test (“Wireless Test”) systems; and • robotics (“Robotics”) products.
The comparison assumes $100.00 was invested on December 31, 2017 in our common stock and in each of the foregoing indices and assumes reinvestment of dividends, if any. Historic stock price performance is not necessarily indicative of future price performance.
The comparison assumes $100.00 was invested on December 31, 2018 in our common stock and in each of the foregoing indices and assumes reinvestment of dividends, if any. Historic stock price performance is not necessarily indicative of future price performance.
In addition, in 2022, inflationary pressures contributed to increased costs for product components and wage inflation, which had minimal impact on our cost of products, gross margin and profit for the year. Our supply chain team, and our suppliers, continue to manage numerous supply, production, and logistics obstacles.
In addition, in the 2023, inflationary pressures contributed to increased costs for product components and wage inflation, which had a minimal impact on our cost of products, gross margin and profit for the year. Our supply chain team, and our suppliers, continue to manage numerous supply, production, and logistics obstacles.
Our automatic test systems are used to test semiconductors, wireless products, data storage and complex electronics systems in many industries including consumer electronics, wireless, automotive, industrial, computing, communications, and aerospace and defense industries.
Our automated test systems are used to test semiconductors, wireless products, data storage and complex electronics systems in many industries including consumer electronics, wireless, automotive, industrial, computing, communications, and aerospace and defense industries.
Mezzanine equity representing unsettled shares value was reduced to zero and additional paid-in capital was reduced by $100.8 million. In accordance with ASU 2020-06, we account for a convertible debt instrument as a single liability measured at its amortized cost, as long as no other features require bifurcation and recognition as derivatives.
Mezzanine equity representing unsettled shares value was reduced to zero and additional paid-in capital was reduced by $100.8 million. In accordance with ASU 2020-06, we account for a 27 Table of Contents convertible debt instrument as a single liability measured at its amortized cost, as long as no other features require bifurcation and recognition as derivatives.
Results of Operations Information pertaining to fiscal year 2020 results of operations, including a year-to-year comparison against fiscal year 2021, was included in our Annual Report on Form 10-K for the year ended December 31, 2021 under Part II, Item 7, “Management’s Discussion and Analysis of Financial Position and Results of Operations,” which was filed with the SEC on February 23, 2022.
Results of Operations Information pertaining to fiscal year 2021 results of operations, including a year-to-year comparison against fiscal year 2022, was included in our Annual Report on Form 10-K for the year ended December 31, 2022 under Part II, Item 7, “Management’s Discussion and Analysis of Financial Position and Results of Operations,” which was filed with the SEC on February 22, 2023.
Our reportable segments accounted for the following percentages of consolidated revenues: 2022 2021 Semiconductor Test 66 % 71 % System Test 15 13 Robotics 13 10 Wireless Test 6 6 100 % 100 % Revenues by country as a percentage of total revenues were as follows (1): 2022 2021 Taiwan 20 % 30 % Korea 17 14 China 16 17 United States 15 11 Europe 9 7 Japan 5 4 Malaysia 5 4 Thailand 4 4 Philippines 4 5 Singapore 3 3 Rest of the World 2 1 100 % 100 % (1) Revenues attributable to a country are based on the location of the customer site.
Our reportable segments accounted for the following percentages of consolidated revenues: 2023 2022 Semiconductor Test 68 % 66 % Robotics 14 13 System Test 13 15 Wireless Test 5 6 100 % 100 % Revenues by country as a percentage of total revenues were as follows (1): 2023 2022 United States 16 % 15 % Korea 15 17 Taiwan 14 20 China 12 16 Japan 11 5 Europe 10 9 Philippines 7 4 Singapore 4 3 Thailand 3 4 Malaysia 3 5 Rest of the World 5 2 100 % 100 % (1) Revenues attributable to a country are based on the location of the customer site.
Continued strengthening of the U.S. dollar would negatively affect Robotics revenue growth in 2023. Our corporate strategy continues to focus on profitably gaining market share in our test businesses through the introduction of differentiated products that target expanding segments and accelerating growth through continued investment in our Robotics businesses.
Continued strengthening of the U.S. dollar would adversely affect Robotics revenue growth in 2024. Our corporate strategy continues to focus on profitably gaining market share in our test businesses through the introduction of differentiated products that target expanding segments and accelerating growth through continued investment in our Robotics businesses.
Plan pension expense estimate for 2023 is based on a 4.95% discount rate and a 4.75% return on assets. Future pension expense or income will depend on future investment performance, changes in future discount rates and various other factors related to the employee population participating in our pension plans.
Plan pension expense estimate for 2024 is based on a 4.75% discount rate and a 4.65% return on assets. Future pension expense or income will depend on future investment performance, changes in future discount rates and various other factors related to the employee population participating in our pension plans.
As of December 31, 2022, total unrecognized compensation expense related to non-vested restricted stock units and options was $61.1 million and is expected to be recognized over a weighted average period of 2.5 years. 42 Table of Contents Performance Graph The following graph compares the change in our cumulative total shareholder return in our common stock with (i) the Standard & Poor’s 500 Index and (ii) the Morningstar Global Semiconductor Equipment & Materials GR USD Industry Group.
As of December 31, 2023, total unrecognized compensation expense related to non-vested restricted stock units and options was $73.7 million and is expected to be recognized over a weighted average period of 2.5 years. 35 Table of Contents Performance Graph The following graph compares the change in our cumulative total shareholder return in our common stock with (i) the Standard & Poor’s 500 Index and (ii) the Morningstar Global Semiconductor Equipment & Materials GR USD Industry Group.
Our Robotics products include collaborative robotic arms and autonomous mobile robots (“AMRs”) used by global manufacturing, logistics and industrial customers to improve quality, increase manufacturing and 28 Table of Contents material handling efficiency and decrease manufacturing and logistics costs.
Our Robotics products include collaborative robotic arms and autonomous mobile robots (“AMRs”) used by global manufacturing, logistics and industrial customers to improve quality, increase manufacturing and material handling efficiency and decrease manufacturing and logistics costs.
Plan is based on the FTSE Pension Index adjusted for the U.S. Plan’s expected cash flows and was 4.95% at December 31, 2022, up from 2.65% at December 31, 2021. We estimate that in 2023, we will recognize approximately $0.4 million of pension expense for the U.S. Plan. The U.S.
Plan is based on the FTSE Pension Index adjusted for the U.S. Plan’s expected cash flows and was 4.75% at December 31, 2023, down from 4.95% at December 31, 2022. We estimate that in 2024, we will recognize approximately $0.2 million of pension expense for the U.S. Plan. The U.S.
We believe that 2.0% was an appropriate rate of return on assets to use for 2022. The December 31, 2022 asset allocation for our U.S. Plan was 94% invested in fixed income securities, 5% invested in equity securities, and 1% invested in other securities.
We believe that 4.75% was an appropriate rate of return on assets to use for 2023. The December 31, 2023 asset allocation for our U.S. Plan was 94% invested in fixed income securities, 5% invested in equity securities, and 1% invested in other securities.
We believe that 2.0% was an appropriate rate of return on assets to use for 2022. The December 31, 2022 asset allocation for our U.S. Plan was 94% invested in fixed income securities, 5% invested in equity securities, and 1% invested in other securities.
We believe that 4.75% was an appropriate rate of return on assets to use for 2023. The December 31, 2023 asset allocation for our U.S. Plan was 94% invested in fixed income securities, 5% invested in equity securities, and 1% invested in other securities.
As of December 31, 2022, our pension plans had no unrecognized pension prior service cost. The assets of the U.S. Plan consist substantially of fixed income securities. U.S. Plan assets have decreased from $149.6 million at December 31, 2021 to $111.8 million at December 31, 2022, while the U.S.
As of December 31, 2023, our pension plans had no unrecognized pension prior service cost. The assets of the U.S. Plan consist substantially of fixed income securities. U.S. Plan assets have increased from $111.8 million at December 31, 2022 to $112.6 million at December 31, 2023, while the U.S.
For the year ended December 31, 2022, our pension income, which includes the U.S. Qualified Pension Plan (“U.S. Plan”), certain qualified plans for non-U.S. subsidiaries, and a U.S. Supplemental Executive Defined Benefit Plan, was approximately $19.7 million. Pension income/expense is calculated based upon a number of actuarial assumptions.
For the year ended December 31, 2023, our pension expense, which includes the U.S. Qualified Pension Plan (“U.S. Plan”), certain qualified plans for non-U.S. subsidiaries, and a U.S. Supplemental Executive Defined Benefit Plan, was approximately $6.8 million. Pension expense is calculated based upon a number of actuarial assumptions.
Changes in operating assets and liabilities used cash of $272.6 million. This was due to a $170.9 million increase in operating assets and a $101.7 million decrease in operating liabilities.
Operating activities during 2022 provided cash of $577.9 million. Changes in operating assets and liabilities used cash of $272.6 million. This was due to a $170.9 million increase in operating assets and a $101.7 million decrease in operating liabilities.
These estimates may change, as new events occur, and additional information is obtained. Actual results could differ significantly from these estimates under different assumptions or conditions. Revenue Recognition In accordance with ASC 606, “ Revenue from Contracts with Customers” (“ASC 606”) , we recognize revenues, when or as control is transferred to a customer.
Actual results could differ significantly from these estimates under different assumptions or conditions. Revenue Recognition In accordance with ASC 606, “ Revenue from Contracts with Customers” (“ASC 606”) , we recognize revenues, when or as control is transferred to a customer.
The following table presents information about these plans as of December 31, 2022 (share numbers in thousands): Plan category Number of securities to be issued upon exercise of outstanding options, warrants and rights Weighted average exercise price of outstanding options, warrants and rights Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column one) Equity plans approved by shareholders 1,505 (1) $ 55.90 8,954 (2) (1) Includes 1,317,544 shares of restricted stock units that are not included in the calculation of the weighted average exercise price.
The following table presents information about these plans as of December 31, 2023 (share numbers in thousands): Plan category Number of securities to be issued upon exercise of outstanding options, warrants and rights Weighted-average exercise price of outstanding options, warrants and rights Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column one) Equity plans approved by shareholders 1,548 (1) $ 94.85 7,863 (2) (1) Includes 1,377,662 shares of restricted stock units that are not included in the calculation of the weighted average exercise price.
In January 2022, May 2022, August 2022 and November 2022, our Board of Directors declared a quarterly cash dividend of $0.11 per share. Total dividend payments in 2022 were $69.7 million. In January 2021, May 2021, August 2021 and November 2021, our Board of Directors declared a quarterly cash dividend of $0.10 per share.
In January 2023, May 2023, August 2023 and November 2023, our Board of Directors declared a quarterly cash dividend of $0.11 per share. Total dividend payments in 2023 were $67.9 million. In January 2022, May 2022, August 2022 and November 2022, our Board of Directors declared a quarterly cash dividend of $0.11 per share.
(2) Consists of 5,060,445 securities available for issuance under the 2006 Equity Plan and 3,893,933 of securities available for issuance under the Employee Stock Purchase Plan. The purpose of the 2006 Equity Plan is to motivate employees, officers and directors by providing equity ownership and compensation opportunities in Teradyne.
(2) Consists of 4,352,428 securities available for issuance under the 2006 Equity Plan and 3,510,784 of securities available for issuance under the Employee Stock Purchase Plan. The purpose of the 2006 Equity Plan is to motivate employees, officers and directors by providing equity ownership and compensation opportunities in Teradyne.
The tax savings attributable to the Singapore tax holiday for the years ended December 31, 2022 and 2021 were $16.0 million or $0.09 per diluted share and $33.3 million or $0.18 per diluted share, respectively.
The tax savings attributable to the Singapore tax holiday for the years ended December 31, 2023 and 2022 were $1.4 million or $0.01 per diluted share and $16.0 million or $0.09 per diluted share, respectively.
Accounting Policies, included in the Notes to Consolidated Financial Statements in this Annual Report. 31 Table of Contents Critical accounting estimates are complex and may require significant judgment by management. Changes to the underlying assumptions may have a material impact on our financial condition and results of operations.
Accounting Policies, included in the Notes to Consolidated Financial Statements in this Annual Report. Critical accounting estimates are complex and may require significant judgment by management. Changes to the underlying assumptions may have a material impact on our financial condition and results of operations. These estimates may change, as new events occur, and additional information is obtained.
We expect operations to continue to be the primary source of cash to operate the business and meet material cash commitments, including any payments of convertible debt principal, our stock repurchase program, our quarterly dividends, our office lease obligations, contractual obligations related to inventory purchases and the construction of new facilities.
As of February 22, 2023, we have not borrowed any funds under the credit facility. 33 Table of Contents We expect operations to continue to be the primary source of cash to operate the business and meet material cash commitments, including any payments of convertible debt principal, our stock repurchase program, our quarterly dividends, our office lease obligations, contractual obligations related to inventory purchases and the construction of new facilities.
In addition, the global economic uncertainty following the invasion, sanctions and Russia’s response to the sanctions could impact demand for our products. Impact of October 7, 2022 U.S. Department of Commerce Regulations on our Business On October 7, 2022, the U.S.
In addition, the global economic uncertainty following the start of the conflict could impact demand for our products. Impact of October 7, 2022 and October 17, 2023 U.S. Department of Commerce Regulations on our Business On October 7, 2022, the U.S.
In 2021, we repurchased 4.8 million shares of common stock for $600.0 million at an average price of $125.74 per share. The cumulative repurchases as of December 31, 2022, under this repurchase program were 12.0 million shares of common stock for $1,352.1 million at an average price per share of $112.44.
In 2022, we repurchased 7.3 million shares of common stock for $752.1 million at an average price of $103.69 per share against the 2021 repurchase program. The cumulative repurchases as of December 31, 2022, under the 2021 repurchase program, were 12.0 million shares of common stock for $1,352.1 million at an average price per share of $112.44.
Cash decreased due to stock repurchases in the amount of $752 million, quarterly cash dividend payments in the amount of $70 million, payments of convertible debt principal in the amount of $67 million partially offset by cash generated by our global operations. Operating activities during 2022 provided cash of $577.9 million.
Cash decreased due to stock repurchases in the amount of $397.2 million, quarterly cash dividend payments in the amount of $67.9 million, and payments of convertible debt principal in the amount of $50.3 million, partially offset by cash generated by our global operations. Operating activities during 2023 provided cash of $585.2 million.
Plan’s expected cash flows and was 4.95% at December 31, 2022, up from 2.65% at December 31, 2021. We estimate that in 2023 we will recognize approximately $0.4 million of pension expense for the U.S. Plan. The U.S.
Plan’s expected cash flows and was 4.75% at December 31, 2023, down from 4.95% at December 31, 2022. We estimate that in 2024 we will recognize approximately $0.2 million of pension expense for the U.S. Plan. The U.S. Plan pension expense estimate for 2024 is based on a 4.75% discount rate and a 4.65% return on assets.
Retirement and Postretirement Plans We recognize net actuarial gains and losses and the change in the fair value of the plan assets in our operating results in the year in which they occur or upon any interim remeasurement of the plans.
The demand forecast is based on assumptions around the product life and customer and market expectations. Retirement and Postretirement Plans We recognize net actuarial gains and losses and the change in the fair value of the plan assets in our operating results in the year in which they occur or upon any interim remeasurement of the plans.
The market for our Robotics segment products is dependent on the adoption of new automation technologies by large manufacturers as well as small and medium enterprises (“SMEs”) throughout the world. We expect Robotics sales channel expansion combined with new products to drive the growth in 2023.
The market for our Robotics segment products is dependent on the adoption of new automation technologies by large manufacturers as well as small and medium enterprises (“SMEs”) throughout the world.
We estimate consolidated revenues driven by Qualcomm, a customer of our Semiconductor Test, System Test and Wireless Test segments, combining direct and indirect sales, accounted for approximately 11% of our consolidated revenues in 2022 and less than 10% in 2021.
In 2023 and 2022, our five largest direct customers in aggregate accounted for 32% and 26% of our consolidated revenues, respectively. We estimate consolidated revenues driven by Qualcomm, a customer of our Semiconductor Test, System Test and Wireless Test segments, combining direct and indirect sales, accounted for approximately 11% of our consolidated revenues in 2022.
This information is incorporated by reference herein. 33 Table of Contents The following table sets forth the percentage of total net revenues included in our consolidated statements of operations: Years Ended December 31, 2022 2021 Percentage of revenues: Revenues: Products 82.1 % 86.3 % Services 17.9 13.7 Total revenues 100.0 100.0 Cost of revenues: Cost of products 33.0 35.1 Cost of services 7.8 5.3 Total cost of revenues (exclusive of acquired intangible assets amortization shown separately below) 40.8 40.4 Gross profit 59.2 59.6 Operating expenses: Selling and administrative 17.7 14.8 Engineering and development 14.0 11.5 Acquired intangible assets amortization 0.6 0.6 Restructuring and other 0.5 0.3 Total operating expenses 32.8 27.2 Income from operations 26.4 32.4 Non-operating (income) expenses: Interest income (0.2 ) (0.1 ) Interest expense 0.1 0.5 Other (income) expense, net (0.2 ) 0.7 Income before income taxes 26.6 31.4 Income tax provision 4.0 4.0 Net income 22.7 % 27.4 % Revenues Revenues for our reportable segments were as follows: 2022 2021 2021-2022 Dollar Change (in millions) Semiconductor Test $ 2,080.6 $ 2,642.3 $ (561.7 ) System Test 469.3 467.7 1.6 Robotics 403.1 375.9 27.2 Wireless Test 201.7 216.9 (15.2 ) Corporate and Eliminations 0.3 — 0.3 $ 3,155.0 $ 3,702.9 $ (547.9 ) 34 Table of Contents The decrease in Semiconductor Test revenues of $561.7 million, or 21.3%, was driven primarily by lower tester sales in mobile and high performance compute processor applications, partially offset by an increase in advance driver assistance systems (“ADAS”) tester sales.
The following table sets forth the percentage of total net revenues included in our consolidated statements of operations: Years Ended December 31, 2023 2022 Percentage of revenues: Revenues: Products 78.3 % 82.1 % Services 21.7 17.9 Total revenues 100.0 100.0 Cost of revenues: Cost of products 33.0 33.0 Cost of services 9.6 7.8 Total cost of revenues (exclusive of acquired intangible assets amortization shown separately below) 42.6 40.8 Gross profit 57.4 59.2 Operating expenses: Selling and administrative 21.6 17.7 Engineering and development 15.6 14.0 Acquired intangible assets amortization 0.7 0.6 Restructuring and other 0.8 0.5 Total operating expenses 38.7 32.8 Income from operations 18.7 26.4 Non-operating (income) expenses: Interest income (1.0 ) (0.2 ) Interest expense 0.1 0.1 Other (income) expense, net — (0.2 ) Income before income taxes 19.6 26.6 Income tax provision 2.9 4.0 Net income 16.8 % 22.7 % 28 Table of Contents Revenues Revenues for our reportable segments were as follows: 2023 2022 2022-2023 Dollar Change (in millions) Semiconductor Test $ 1,818.6 $ 2,080.6 $ (262.0 ) Robotics 375.2 403.1 (27.9 ) System Test 338.2 469.3 (131.1 ) Wireless Test 144.3 201.7 (57.4 ) Corporate and Eliminations — 0.3 (0.3 ) $ 2,676.3 $ 3,155.0 $ (478.7 ) The decrease in Semiconductor Test revenues of $262.0 million, or 12.6%, was driven primarily by lower tester sales for compute and mobility applications.
Of the $15.5 million of total excess and obsolete provisions, $6.7 million was related to Semiconductor Test, $6.4 million was related to Robotics, $1.8 million was related to Wireless Test, and $0.6 million was related to System Test.
Of the $28.4 million of total excess and obsolete provisions, $22.5 million was related to Semiconductor Test, $2.3 million was related to Robotics, $1.9 million was related to System Test, and $1.7 million was related to Wireless Test.
In 2023, we expect to contribute approximately $3.1 million to the U.S. supplemental executive defined benefit pension plan. Contributions to be made in 2023 to certain qualified plans for non-U.S. subsidiaries are based on local statutory requirements and are estimated at approximately $1.3 million.
During 2023, we made contributions of $3.1 million to the U.S. supplemental executive defined benefit pension plan, and $1.0 million to certain qualified plans for non-U.S. subsidiaries. In 2024, we expect to contribute approximately $3.1 million to the U.S. supplemental executive defined benefit pension plan.
Our financial statements are denominated in U.S. dollars. While the majority of our revenues are in U.S. dollars, approximately 70 percent of our Robotics revenue is denominated in foreign currencies. In 2022, the strengthening of the U.S. dollar was a factor in lower than forecasted revenues in our Robotics segment.
While the majority of our revenues are in U.S. dollars, approximately 70 percent of our Robotics revenue is denominated in foreign currencies. There was no material impact to our 2023 results due to changes in foreign exchange rates, however, in 2022, the strengthening of the U.S. dollar was a factor in lower than forecasted revenues in our Robotics segment.
The aggregate number of shares available under the 2006 Equity Plan as of December 31, 2022 was 5,060,445 shares of our common stock.
The aggregate number of shares available under the 2006 Equity Plan as of December 31, 2023 was 4,352,428 shares of our common stock.
Total dividend payments in 2021 were $66.0 million. In January 2021, our Board of Directors approved a repurchase program for up to $2.0 billion of common stock. In 2022, we repurchased 7.3 million shares of common stock for $752.1 million at an average price of $103.69 per share.
Total dividend payments in 2022 were $69.7 million. In January 2023, our Board of Directors cancelled the 2021 repurchase program and approved a new repurchase program for up to $2.0 billion of common stock. In 2023, we repurchased 3.9 million shares of common stock for $397.2 million, which excludes related excise tax, at an average price of $102.47 per share.
We have also sourced components from additional suppliers and multi-sourced and pre-ordered components and finished goods inventory in some cases in an effort to reduce the impact of the adverse supply chain conditions we have experienced.
We have also sourced components from additional suppliers and multi-sourced and pre-ordered components and finished goods inventory in some cases in an effort to reduce the impact of the adverse supply chain conditions we have experienced. Though these mitigation efforts have not had a material impact on our financial results, our continuing efforts may not be successful.
Engineering and Development Engineering and development expenses were as follows: 2022 2021 2021-2022 Change (in millions) Engineering and development $ 440.6 $ 427.6 $ 13.0 Percent of total revenues 14.0 % 11.5 % The increase of $13.0 million in engineering and development expenses was primarily driven by increase in headcount and greater spending in Robotics and Semiconductor Test, partially offset by lower variable compensation.
Engineering and Development Engineering and development expenses were as follows: 2023 2022 2022-2023 Change (in millions) Engineering and development $ 418.1 $ 440.6 $ (22.5 ) Percent of total revenues 15.6 % 14.0 % The decrease of $22.5 million in engineering and development expenses was due to lower variable compensation and lower spending in Semiconductor Test, partially offset by higher spending in Robotics.
Financing activities during 2021 used cash of $1,008.6 million, due to $600.0 million used for the repurchase of 4.8 million shares of common stock at an average price of $125.74 per share, $343.0 million used for the payments of convertible debt principal, $66.0 million used for dividend payments, and $32.3 million used for payments related to net settlement of employee stock compensation awards, partially offset by $32.7 million from the issuance of common stock under employee stock purchase and stock option plans.
Financing activities during 2023 used cash of $501.9 million, due to $397.2 million used for the repurchase of 3.9 million shares of common stock at an average price of $102.47 per share, $67.9 million used for dividend payments, $50.3 million used for the payments of convertible debt principal, and $20.8 million used for payments related to net settlement of employee stock compensation awards, partially offset by $34.3 million from the issuance of common stock under employee stock purchase and stock option plans.
Our purchase obligations were approximately $654.8 million, with $570.3 million expected to be paid within twelve months. 40 Table of Contents Retirement Plans ASC 715-20, “ Compensation—Retirement Benefits—Defined Benefit Plans, ” requires an employer with defined benefit plans or other postretirement benefit plans to recognize an asset or a liability on its balance sheet for the overfunded or underfunded status of the plans as defined by ASC 715-20.
Retirement Plans ASC 715-20, “ Compensation—Retirement Benefits—Defined Benefit Plans, ” requires an employer with defined benefit plans or other postretirement benefit plans to recognize an asset or a liability on its balance sheet for the overfunded or underfunded status of the plans as defined by ASC 715-20.
Capital Resources and Material Cash Requirements Our cash, cash equivalents and marketable securities balance decreased by $495 million in 2022 to $1,005 million.
Capital Resources and Material Cash Requirements Our cash, cash equivalents and marketable securities balance decreased by $68.0 million in 2023 to $937.2 million.
These increases in expense were partially offset by increases in benefits from the U.S. foreign derived intangible income deduction and tax credits. We qualify for a tax holiday in Singapore by fulfilling the requirements of an agreement with the Singapore Economic Development Board under which certain headcount and spending requirements must be met.
We qualify for a tax holiday in Singapore by fulfilling the requirements of an agreement with the Singapore Economic Development Board under which certain headcount and spending requirements must be met.
Plan pension expense estimate for 2023 is based on a 4.95% 32 Table of Contents discount rate and a 4.75% return on assets. Future pension expense or income will depend on future investment performance, changes in future discount rates and various other factors related to the employee population participating in our pension plans.
Future pension expense or income will depend on future investment performance, changes in future discount rates and various other factors related to the employee population participating in our pension plans.
Gross Profit 2022 2021 2021-2022 Dollar / Point Change (in millions) Gross profit $ 1,867.2 $ 2,206.7 $ (339.5 ) Percent of total revenues 59.2 % 59.6 % (0.4 ) Gross profit as a percent of total revenues decreased by 0.4 points, primarily due to higher service costs partially offset by favorable product mix and lower variable compensation.
Gross Profit 2023 2022 2022-2023 Dollar / Point Change (in millions) Gross profit $ 1,536.7 $ 1,867.2 $ (330.5 ) Percent of total revenues 57.4 % 59.2 % (1.8 ) Gross profit as a percent of total revenues decreased by 1.8 points, primarily due to a lower volume, higher spending to strengthen our supply chain, and product mix.
We expect that sales of our test products will continue to be concentrated with a limited number of significant customers for the foreseeable future.
We expect that sales of our test products will continue to be concentrated with a limited number of significant customers for the foreseeable future. In 2023, the demand in our Semiconductor Test business continued to be impacted by a correction cycle driven by excess semiconductor inventory, primarily in the mobility segment of the market.
Our service revenues increased $57.2 million or 11.3% primarily in Semiconductor Test and Storage Test. In 2021, revenues from Taiwan Semiconductor Manufacturing Company Ltd., a customer of our Semiconductor Test segment, accounted for 12% of our consolidated revenues. In 2022 and 2021, our five largest direct customers in aggregate accounted for 26% and 33% of our consolidated revenues, respectively.
Our service revenues increased $16.5 million, or 2.9%, primarily in Semiconductor Test and Storage Test. In 2023, revenues from Texas Instruments Inc., a customer of our Semiconductor Test segment, accounted for 10% of our consolidated revenues. In 2021, revenues from Taiwan Semiconductor Manufacturing Company Ltd., a customer of our Semiconductor Test segment, accounted for 12% of our consolidated revenues.
Equity Compensation Plans In addition to our 1996 Employee Stock Purchase Plan discussed in Note Q: “Stock-Based Compensation” in Notes to Consolidated Financial Statements, we have a 2006 Equity and Cash Compensation Incentive Plan (the “2006 Equity Plan”) under which equity securities are authorized for issuance. The 2006 Equity Plan was initially approved by stockholders on May 25, 2006.
Contributions to be made in 2024 to certain qualified plans for non-U.S. subsidiaries are based on local statutory requirements and are estimated at approximately $1.4 million. 34 Table of Contents Equity Compensation Plans In addition to our 1996 Employee Stock Purchase Plan discussed in Note Q: “Stock-Based Compensation” in Notes to Consolidated Financial Statements, we have a 2006 Equity and Cash Compensation Incentive Plan (the “2006 Equity Plan”) under which equity securities are authorized for issuance.
The breakout of product and service gross profit was as follows: 2022 2021 2021-2022 Dollar / Point Change (in millions) Product gross profit $ 1,549.0 $ 1,896.5 $ (347.5 ) Percent of product revenues 59.8 % 59.3 % 0.5 Service gross profit $ 318.1 $ 310.2 $ 7.9 Percent of service revenues 56.5 % 61.3 % (4.8 ) Service revenues gross profit percentage decreased 4.8% primarily due to lower margins in Semiconductor Test driven by an increase in headcount.
The breakout of product and service gross profit was as follows: 2023 2022 2022-2023 Dollar / Point Change (in millions) Product gross profit $ 1,213.4 $ 1,549.0 $ (335.6 ) Percent of product revenues 57.9 % 59.8 % (1.9 ) Service gross profit $ 323.4 $ 318.1 $ 5.3 Percent of service revenues 55.7 % 56.5 % (0.8 ) Product revenues gross profit percentage decreased by 1.9 points, primarily due to lower volume, higher spending to strengthen our supply chain, and product mix.
On a quarterly basis, we evaluate all inventories for net realizable value. This quarterly process identifies obsolete and excess inventory. Obsolete inventory, which represents items for which there is no demand, is fully reserved. Excess inventory, which represents inventory items that are not expected to be consumed within the forecasted demand window, is written down to estimated net realizable value.
Obsolete inventory, which represents items for which there is no demand, is fully reserved. Excess inventory, which represents inventory items that are not expected to be consumed within the forecasted demand window, is written down to estimated net realizable value. Forecasted demand information is obtained from the sales and marketing groups and incorporates factors such as backlog and future revenues.
This determination is based on an assessment of contractual rights of the contract and the ability of the performance obligation to perform on its own or with readily available resources. In bundled transactions we estimate the standalone selling price of each identified performance obligation and use that estimate to allocate the transaction price among said performance obligations.
This 26 Table of Contents determination is based on an assessment of contractual rights of the contract and the ability of the performance obligation to perform on its own or with readily available resources.
Department of Commerce published new regulations restricting the export to China of advanced semiconductors, supercomputer technology, equipment for the manufacturing of advanced semiconductors and components and technology for the manufacturing in China of certain semiconductor manufacturing equipment. The new restrictions are lengthy and complex. We continue to assess the impact of these regulations on our business.
Department of Commerce published new regulations restricting the export to China of advanced semiconductors, supercomputer technology, equipment for the manufacturing of advanced semiconductors and components and technology for the manufacturing in China of certain semiconductor manufacturing equipment. As previously disclosed, the restrictions impacted Teradyne’s sales to certain companies in China and Teradyne’s manufacturing and development operations in China.
Of the $31.5 million of total excess and obsolete provisions, $21.5 million was related to Semiconductor Test, $4.6 million was related to Wireless Test, $3.7 million was related to Robotics, and $1.7 million was related to System Test. 36 Table of Contents During the year ended December 31, 2021, we recorded an inventory provision of $15.5 million included in cost of revenues, primarily due to downward revisions to previously forecasted demand levels for certain products.
During the year ended December 31, 2023, we recorded an inventory provision of $28.4 million included in cost of revenues, primarily due to downward revisions to previously forecasted demand levels for certain products.
Although we do not have significant operations in Russia, the sanctions and Russia’s response to the sanctions, have impacted our business in other countries and could have a negative impact on our future revenue and supply chain, either of which could adversely affect our business and financial results.
Impact of the Israel-Hamas conflict on our Business The recent Israel-Hamas conflict could have a negative impact on our future revenue and supply chain, either of which could adversely affect our business and financial results.
On May 1, 2020, we entered into a credit agreement providing a three-year, senior secured revolving credit facility of $400 million. On December 10, 2021, the credit agreement was amended to extend the senior secured revolving credit facility to December 10, 2026.
On December 10, 2021, the credit agreement was amended to extend the senior secured revolving credit facility to December 10, 2026. On October 5, 2022, the credit agreement was amended to increase the amount of the credit facility to $750.0 million from $400.0 million.
Both our test and robotics businesses may continue to be influenced by supply constraints, which could impact our revenue and costs in 2023. In 2022, inflation had minimal effect on our results. In 2022, we were unable to supply approximately $20 million of revenue in our test businesses for which we had customer demand.
In 2023, inflation had minimal effect on our results. While both our test and robotics businesses may continue to be influenced by supply constraints, which could impact our revenue and costs, We do not anticipate that supply chain constraints will have a material impact on our financial results in 2024. Our financial statements are denominated in U.S. dollars.
The estimated standalone selling price is determined using all information reasonably available to us, including standalone transactions, market information and other observable inputs. Inventories Inventories are stated at the lower of cost using a standard costing system which approximates cost based on a first-in, first-out basis or net realizable value.
Inventories Inventories are stated at the lower of cost using a standard costing system which approximates cost based on a first-in, first-out basis or net realizable value. On a quarterly basis, we evaluate all inventories for net realizable value. This quarterly process identifies obsolete and excess inventory.
“Debt”, Note I. “Leases”, Note P. “Retirement Plans”, and Note S. “Income Taxes” of Notes to Consolidated Financial Statements in this Annual Report for information about those obligations, which Notes are incorporated by reference into this section.
“Income Taxes” of Notes to Consolidated Financial Statements in this Annual Report for information about those obligations, which Notes are incorporated by reference into this section. Our purchase obligations were approximately $414.4 million, with $379.1 million expected to be paid within twelve months.
Operating activities during 2021 provided cash of $1,098.4 million. Changes in operating assets and liabilities used cash of $98.8 million. This was due to a $227.1 million increase in operating assets and a $128.4 million increase in operating liabilities.
Changes in operating assets and liabilities used cash of $9.6 million. This was due to a $33.2 million decrease in operating assets and a $42.8 million decrease in operating liabilities.
The breakout of product and service revenues was as follows: 2022 2021 2021-2022 Dollar Change (in millions) Product revenues $ 2,591.6 $ 3,196.6 $ (605.0 ) Service revenues 563.5 506.3 57.2 $ 3,155.0 $ 3,702.9 $ (547.9 ) 35 Table of Contents Our product revenues decreased $605.0 million, or 18.9%, primarily due to lower tester sales in Semiconductor Test for mobile and high performance compute processor applications, and a decrease in cellular test product sales in Wireless Test, partially offset by the rise in Robotics revenues driven primarily by elevated demand for collaborative robotic arms and autonomous mobile robots.
The breakout of product and service revenues was as follows: 2023 2022 2022-2023 Dollar Change (in millions) Product revenues $ 2,096.3 $ 2,591.6 $ (495.3 ) Service revenues 580.0 563.5 16.5 $ 2,676.3 $ 3,155.0 $ (478.8 ) 29 Table of Contents Our product revenues decreased $495.3 million, or 19.1%, primarily due to lower tester sales in Semiconductor Test for compute and mobility applications, a decrease in sales in Storage Test of system level and hard disk drive testers, and a decrease in Wireless Test sales of connectivity test products.
We plan to continue investing in our growth while balancing capital allocations between returning capital to our shareholders through stock repurchases and dividends and using capital for acquisitions.
We plan to continue investing in our growth while balancing capital allocations between stock repurchases and dividends and using capital for acquisitions. 25 Table of Contents Supply Chain Constraints and Inflationary Pressures The global supply shortage of electrical components, including semiconductor chips, impacted our supply chain in the first half of 2023.
The increase in the effective tax rate from 2021 to 2022 is primarily attributable to a shift in the geographic distribution of income, which increased the income subject to taxation in higher tax rate jurisdictions relative to lower tax rate jurisdictions, increases in expense from U.S. global low-taxed income and increases in expense 38 Table of Contents from non-deductible officer compensation.
These decreases in expense were partially offset by a shift in the geographic distribution of income, which increased the income subject to taxation in higher tax rate jurisdictions relative to lower tax rate jurisdictions and a reduction in benefit from equity compensation.
The increase in income before income taxes in System Test was primarily due to higher sales in Defense/Aerospace and in Production Board Test, partially offset by a decline in Storage Test sales of system level testers.
The decrease in income before income taxes in Semiconductor Test was driven primarily by lower tester sales for compute and mobility applications. The decrease in income before income taxes in System Test was primarily due to lower sales in Storage Test of system level and hard disk drive testers.
During the years ended December 31, 2022 and 2021, we scrapped $8.8 million and $10.9 million of inventory, respectively, and sold $1.8 million and $2.5 million of previously written-down or written-off inventory, respectively. As of December 31, 2022, we had inventory related reserves for amounts which had been written-down or written-off totaling $136.8 million.
As of December 31, 2023, we had inventory related reserves for amounts which had been written-down or written-off totaling $136.0 million. We have no pre-determined timeline to scrap the remaining inventory.
Our funding policy is to make contributions to our pension plans in accordance with local laws and to the extent that such contributions are tax deductible. During 2022, we made contributions of $3.2 million to the U.S. supplemental executive defined benefit pension plan, and $0.9 million to certain qualified plans for non-U.S. 41 Table of Contents subsidiaries.
Plan’s liability increased from $100.0 million at December 31, 2022 to $101.1 million at December 31, 2023. Our funding policy is to make contributions to our pension plans in accordance with local laws and to the extent that such contributions are tax deductible.
While the depth of the slowdown and the timing of the recovery are uncertain, we expect the ramp of 3 nanometer process technology starting in 2023 followed by gate-all-around process technology, increasing multichip packaging, additional device complexity and unit growth will drive additional demand for test over our four year forecast period.
Over the midterm, we expect the ramp of 3 nanometer and gate-all-around process technology, increasing multichip packaging, additional device complexity and unit growth will drive additional demand for Semiconductor Test. Our Robotics segment consists of Universal Robots A/S (“UR”), a leading supplier of collaborative robotic arms, and Mobile Industrial Robots A/S (“MiR”), a leading maker of AMRs for industrial automation.
While we declared a quarterly cash dividend and authorized a share repurchase program, we may reduce or eliminate the cash dividend or share repurchase program in the future. Future cash dividends and stock repurchases are subject to the discretion of our Board of Directors, which will consider, among other things, our earnings, capital requirements and financial condition.
Future cash dividends and stock repurchases are subject to the discretion of our Board of Directors, which will consider, among other things, our earnings, capital requirements and financial condition. On November 7, 2023, Teradyne announced a strategic partnership with Technoprobe S.p.A including Teradyne's agreement to acquire a 10% equity investment in Technoprobe for 481.0 million Euros.
The change in income before income taxes in Corporate and Eliminations of $42.9 million was due primarily to $28.8 million of losses on convertible debt conversions recognized in 2021 and an increase of $23.4 million in pension actuarial gains in 2022. Income Taxes Income tax expense for 2022 and 2021, totaled $124.9 million and $146.4 million, respectively.
The increase in income before income taxes in Corporate and Eliminations was primarily due to legal settlement charges in 2022 related to litigation for the earn-out dispute in connection with the AutoGuide acquisition, changes in unrealized gains/losses on equity securities and higher interest income. Income Taxes Income tax expense for 2023 and 2022 totaled $76.8 million and $124.9 million, respectively.
The increase in operating assets was due to a $175.8 million increase in prepayments and other assets due to prepayments to our contract manufacturers, a $57.8 million increase in accounts receivable due to greater sales, partially offset by a $6.5 million decrease in inventories.
The decrease in operating assets was due to a $71.0 million decrease in accounts receivable due to lower sales and a $5.3 million decrease in inventories, partially offset by a $43.1 million increase in prepayments and other assets due to prepayments to our contract manufacturers. 32 Table of Contents The decrease in operating liabilities was due to a $57.2 million decrease in deferred revenue and customer advance payments, a $26.9 million decrease in income taxes, a $21.2 million decrease in accrued employee compensation, and $5.5 million of retirement plan contributions, partially offset by a $45.0 million increase in accounts payable, and a $23.0 million increase in other accrued liabilities.
The increase in System Test revenues of $1.6 million, or 0.3%, was primarily due to higher sales in Defense/Aerospace and in Production Board Test, partially offset by a decline in Storage Test sales of system level testers.
The decrease in System Test revenues of $131.1 million, or 27.9%, was primarily due to lower sales in Storage Test of system level and hard disk drive testers. The decrease in Wireless Test revenues of $57.4 million, or 28.5%, was primarily due to a decrease in sales of connectivity test products.
In addition to the specific restrictions impacting our business, the regulations may have an adverse impact on certain actual or potential customers and on the global semiconductor industry. To the extent the regulations impact actual and potential customers or disrupt the global semiconductor industry, our business and revenues will be adversely impacted.
The new rules which took effect on November 17, 2023 significantly limit the impact of the October 7, 2022 restrictions on Teradyne’s business. However, the regulations may continue to have an adverse impact on certain actual or potential customers of Teradyne and on the global semiconductor industry.
Selling and Administrative Selling and administrative expenses were as follows: 2022 2021 2021-2022 Change (in millions) Selling and administrative $ 558.1 $ 547.6 $ 10.5 Percent of total revenues 17.7 % 14.8 % The increase of $10.5 million in selling and administrative expenses was primarily driven by increase in headcount and greater spending in Robotics, partially offset by lower variable compensation.
Selling and Administrative Selling and administrative expenses were as follows: 2023 2022 2022-2023 Change (in millions) Selling and administrative $ 577.3 $ 558.1 $ 19.2 Percent of total revenues 21.6 % 17.7 % The increase of $19.2 million in selling and administrative expenses was primarily due to the charge of $5.9 million related to the modification of Teradyne’s chief executive officer’s outstanding equity awards in connection with his retirement and higher sales and marketing spending in Robotics and Semiconductor Test.
In addition to requesting a license, we are implementing procedures for minimizing the impact of these new regulations on our operations in China, but there is no assurance that these procedures will succeed. See Part II—Item 1A, “Risk Factors,” included herein for updates to our risk factors regarding risks associated with the COVID-19 pandemic, supply chain issues and international conflicts.
To the extent the regulations impact actual and potential customers or disrupt the global semiconductor industry, Teradyne’s business and revenues will be adversely impacted. See Part II—Item 1A, “Risk Factors,” included herein for updates to our risk factors regarding risks associated with supply chain issues, international conflicts, and legal and regulatory compliance.
At this time, the COVID-19 pandemic has not had an impact on our liquidity, but there is no assurance that continued impacts resulting from the pandemic will not have an adverse effect in the future. At December 31, 2022, our future contractual obligations were related to debt, leases, retirement plan liabilities, deferred tax benefits, and purchase obligations. See Note J.
At December 31, 2023, our future contractual obligations were related to debt, leases, retirement plan liabilities, deferred tax benefits, and purchase obligations. See Note J. “Debt”, Note I. “Leases”, Note P. “Retirement Plans”, and Note S.
The effective tax rate for 2022 and 2021 was 14.9% and 12.6%, respectively.
The effective tax rate for 2023 and 2022 was 14.6% and 14.9%, respectively. The decrease in the effective tax rate from 2022 to 2023 is primarily attributable to increases in benefit from tax credits and the U.S. foreign derived intangible income deduction.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeWe perform ongoing credit evaluations of our customers’ financial condition and from time to time may require customers to provide a letter of credit from a bank to secure accounts receivable. There were no customers who accounted for more than 10% of our accounts receivable balance as of December 31, 2022 and December 31, 2021.
Biggest changeConcentrations of credit risk with respect to accounts receivable 36 Table of Contents are limited due to the large number of geographically dispersed customers. We perform ongoing credit evaluations of our customers’ financial condition and from time to time may require customers to provide a letter of credit from a bank to secure accounts receivable.
As of December 31, 2022 and 2021, the analysis indicated that these hypothetical market movements would not have a material effect on our consolidated financial position, results of operations or cash flows. Interest Rate Risk Management We are exposed to potential losses due to changes in interest rates.
As of December 31, 2023 and 2022, the analysis indicated that these hypothetical market movements would not have a material effect on our consolidated financial position, results of operations or cash flows. Interest Rate Risk Management We are exposed to potential losses due to changes in interest rates.
Item 7A: Quantitative and Qualitative Disclosures about Market Risks Concentration of Credit Risk Financial instruments which potentially subject us to concentrations of credit risk consist principally of cash equivalents, marketable securities, forward currency contracts and accounts receivable. Our cash equivalents consist primarily of money market funds invested in U.S. Treasuries and government agencies.
Item 7A: Quantitative and Q ualitative Disclosures about Market Risks Concentration of Credit Risk Financial instruments which potentially subject us to concentrations of credit risk consist principally of cash equivalents, marketable securities, forward currency contracts and accounts receivable. Our cash equivalents consist primarily of money market funds invested in U.S. Treasuries and government agencies.
Our fixed income available-for-sale marketable securities have a minimum rating of AA by one or more of the major credit rating agencies. We place forward currency contracts with high credit-quality financial institutions in order to minimize credit risk exposure. Concentrations of credit risk with respect to accounts receivable are limited due to the large number of geographically dispersed customers.
Our fixed income available-for-sale marketable securities have a minimum rating of AA by one or more of the major credit rating agencies. We place forward currency contracts with high credit-quality financial institutions in order to minimize credit risk exposure.
Market risk for the short and long-term marketable securities was estimated as the potential change in the fair value resulting from a hypothetical change in interest rates for securities contained in the investment portfolio. The potential change in the fair value from changes in interest rates is immaterial as of December 31, 2022 and 2021. 44 Table of Contents http://fasb.org/us-gaap/2022#AmortizationOfIntangibleAssetshttp://fasb.org/us-gaap/2022#DeferredTaxAndOtherLiabilitiesNoncurrenthttp://fasb.org/us-gaap/2022#DeferredTaxAndOtherLiabilitiesNoncurrenthttp://fasb.org/us-gaap/2022#DeferredTaxAndOtherLiabilitiesNoncurrenthttp://fasb.org/us-gaap/2022#DeferredTaxAndOtherLiabilitiesNoncurrenthttp://fasb.org/us-gaap/2022#OtherAssetsNoncurrenthttp://fasb.org/us-gaap/2022#OtherAssetsNoncurrenthttp://fasb.org/us-gaap/2022#OtherAssetsNoncurrenthttp://fasb.org/us-gaap/2022#OtherAssetsNoncurrenthttp://fasb.org/us-gaap/2022#OtherAssetsNoncurrenthttp://fasb.org/us-gaap/2022#NetIncomeLoss
Market risk for the short and long-term marketable securities was estimated as the potential change in the fair value resulting from a hypothetical change in interest rates for securities contained in the investment portfolio. The potential change in the fair value from changes in interest rates is immaterial as of December 31, 2023 and 2022. 37 Table of Contents
These contracts are used to minimize the effect of exchange rate fluctuations associated with the remeasurement of monetary assets and liabilities. We do not engage in currency speculation. We performed a sensitivity analysis assuming a hypothetical 10% fluctuation in foreign exchange rates to the hedging contracts and the underlying exposures described above.
Since the transaction price was agreed to in Euros, this option contract reduces the impact to the purchase price of changes in the Euro to U.S. Dollar exchange rate. We performed a sensitivity analysis assuming a hypothetical 10% fluctuation in foreign exchange rates to the hedging contracts and the underlying exposures described above.
Removed
In addition to market risks described in our Annual Report on Form 10-K, we have an equity price risk related to the fair value of our convertible senior unsecured notes issued in December 2016. In December 2016, Teradyne issued $460 million aggregate principal amount of 1.25% convertible senior unsecured notes (the “Notes”) due December 15, 2023.
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As of December 31, 2023, a customer of our Semiconductor Test segment, Texas Instruments Inc., accounted for 18% of our accounts receivable balance. There were no customers who accounted for more than 10% of our accounts receivable balance as of December 31, 2022.
Removed
As of December 31, 2022, $50.2 million of principal remained outstanding and 43 Table of Contents the Notes had a fair value of $139.0 million.
Added
These contracts are used to minimize the effect of exchange rate fluctuations associated with the remeasurement of monetary assets and liabilities. We also enter into foreign currency forward contracts to hedge the impact of exchange rates on our revenues in Japanese Yen and Taiwan Dollar. These contracts have maturities of less than one year.
Removed
The table below provides a sensitivity analysis of hypothetical 10% changes of Teradyne’s stock price as of the end of the last quarter of 2022 and the estimated impact on the fair value of the Notes.
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We do not engage in currency speculation. On November 7, 2023, in connection with our agreement to acquire 10% investment in Technoprobe S.p.A, we purchased a call option to buy 481.0 million Euros. The expiration date of the option is April 26, 2024.
Removed
The selected scenarios are not predictions of future events, but rather are intended to illustrate the effect such event may have on the fair value of the Notes. The fair value of the Notes is subject to equity price risk due to the convertible feature.
Removed
The fair value of the Notes will generally increase as Teradyne’s common stock price increases and will generally decrease as the common stock price declines in value.
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The change in stock price affects the fair value of the Notes, but does not impact Teradyne’s financial position, cash flows or results of operations due to the fixed nature of the debt obligation.
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Additionally, we carry the Notes at face value less unamortized debt issuance costs on our balance sheet, and we present the fair value for required disclosure purposes only. In connection with the offering of the Notes we also sold warrants.
Removed
The warrants will have a dilutive effect on our earnings per share to the extent that the average market price of our common stock for a given reporting period exceeds the applicable strike price of the warrants.
Removed
Hypothetical Change in Teradyne Stock Price Fair Value Estimated change in fair value Hypothetical percentage increase (decrease) in fair value 10% Increase $ 152,962 $ 13,955 10.0 % No Change 139,007 — — 10% Decrease 125,068 (13,939 ) (10.0 ) See Note J: “Debt” for further information.

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