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What changed in ALPHA & OMEGA SEMICONDUCTOR Ltd's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of ALPHA & OMEGA SEMICONDUCTOR Ltd'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.

+391 added−457 removedSource: 10-K (2023-08-29) vs 10-K (2022-09-20)

Top changes in ALPHA & OMEGA SEMICONDUCTOR Ltd's 2023 10-K

391 paragraphs added · 457 removed · 309 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

103 edited+18 added−43 removed67 unchanged
Biggest changeIn addition, on December 30, 2021, the JV Company adopted an employee equity incentive plan and issued an equity interest equivalent to 3.99% of the JV Company in exchange for cash. As a result, the Company owned 45.8% of the equity interest in the JV Company as of December 31, 2021.
Biggest changeSuch reduction reflects (i) the sale by the Company of approximately 2.1% of the outstanding JV equity interest which resulted in the deconsolidation of the JV Company, (ii) additional sale by the Company of approximately 1.1% of outstanding JV equity interest in December 2021, (iii) the adoption of an employee equity incentive plan and the issuance of additional equity interest equivalent to 3.99% of the JV Company to investors in exchange for cash in December 2021, and (iv) issuance of additional equity interest of the JV to investors in January 2022.
Our ability to compete depends on a number of factors, including: • our success in expanding and diversifying our serviceable markets, and our ability to develop technologies and product solutions for these markets; • our capability to quickly develop and introduce proprietary technology and best-in-class products; • the performance and cost-effectiveness of our products relative to that of our competitors; • our ability and capacity to manufacture, package and deliver products in large volume on a timely basis at a competitive price; • our success in utilizing new and proprietary technologies to offer products and features previously not available in the marketplace; • our ability to recruit and retain analog semiconductor designers and application engineers; and • our ability to protect our intellectual property.
Our ability to compete depends on a number of factors, including: • success in expanding and diversifying our serviceable markets, and our ability to develop technologies and product solutions for these markets; • capability to quickly develop and introduce proprietary technology and best-in-class products; • performance and cost-effectiveness of our products relative to that of our competitors; • ability and capacity to manufacture, package and deliver products in large volume on a timely basis at a competitive price; • success in utilizing new and proprietary technologies to offer products and features previously not available in the marketplace; • ability to recruit and retain analog semiconductor designers and application engineers; and • ability to protect our intellectual property.
Both ISO9001 and IATF16949:2016 are sets of criteria and procedures established by International Organization of Standardization for developing a fundamental quality management system and focusing on continuous improvement, defect prevention and the reduction of variation and waste. Our products are also in compliance with Restrictions on the use of Hazardous Substances, or RoHS 3.0.
Both ISO9001 and IATF16949:2016 are sets of criteria and procedures established by the International Organization of Standardization for developing a fundamental quality management system and focusing on continuous improvement, defect prevention and the reduction of variation and waste. Our products are also in compliance with Restrictions on the use of Hazardous Substances, or RoHS 3.0.
While we focus our patent efforts in the United States, we file corresponding foreign patent applications in other jurisdictions, such as China and Taiwan, when filing is justified by cost and strategic importance. The patents are increasingly important to remain competitive in our industry, and a strong patent portfolio will facilitate the entry of our products into new markets.
While we focus our patent efforts in the United States, we file corresponding foreign patent applications in other jurisdictions, such as China and Taiwan, when filing is justified by cost and strategic importance. The patents are increasingly 9 important to remain competitive in our industry, and a strong patent portfolio will facilitate the entry of our products into new markets.
Our sales seasonality is affected by a number of factors, including global and regional economic conditions as well as the PC market conditions, revenue generated from new products, changes in distributor ordering patterns in response to channel inventory adjustments and end customer demand for our products and fluctuations in consumer purchase patterns prior to major holiday seasons.
Our sales seasonality is affected by a number of factors, including global and regional economic conditions as well as the PC market condition, revenue generated from new products, changes in distributor ordering patterns in response to channel inventory adjustments and end customer demand for our products and fluctuations in consumer purchase patterns prior to major holiday seasons.
Although supplies for raw materials used by us are currently adequate, shortages could occur in various essential materials due to interruption of supply or increased demand in the industry. 10 Intellectual property rights Intellectual property is a critical component of our business strategy, and we intend to continue to invest in the growth, maintenance and protection of our intellectual property portfolio.
Although supplies for raw materials used by us are currently adequate, shortages could occur in various essential materials due to interruption of supply or increased demand in the industry. Intellectual property rights Intellectual property is a critical component of our business strategy, and we intend to continue to invest in the growth, maintenance and protection of our intellectual property portfolio.
IDMs exercise full control over the implementation of process technologies and have maximum flexibility in setting priorities for their production and delivery schedules. At the other end of the spectrum are completely-outsourced fabless semiconductor companies, which rely entirely on off-the-shelf technologies and processes provided by their manufacturing partners.
IDMs exercise full control over the implementation of process technologies and have maximum flexibility in setting priorities for production and delivery schedules. At the other end of the spectrum are completely-outsourced fabless semiconductor companies, which rely entirely on off-the-shelf technologies and processes provided by manufacturing partners.
To improve our process technology, we continue to develop and enhance our expertise in device physics in order to better understand the physical characteristics of materials and the interactions among these materials during the manufacturing process. New products and new technology platforms: We also invest significantly in the development of new technology platforms and introduction of new products.
To improve our process technology, we continue to develop and enhance our expertise in device physics in order to better understand the physical characteristics of materials and the interactions among these materials during the manufacturing process. New products and new technology platforms: We invest significantly in the development of new technology platforms and introduction of new products.
We intend to strengthen our existing relationships and form new ones with both OEMs and ODMs by aligning our product development efforts with their product requirements, increasing the number of our products used within their systems, and leveraging our relationships to penetrate their other products.
We intend to strengthen our existing relationships and form new ones with both OEMs and ODMs by aligning our product development efforts with their product requirements, thereby increasing the number of our products used within their systems, and leveraging relationships to penetrate other products.
Liang joined our company in August 2004 as our Corporate Controller. Prior to joining us, Mr. Liang held various positions at 13 PricewaterhouseCoopers LLP, or PwC, from 1995 to 2004, including Audit Manager in PwC’s San Jose office. Mr.
Liang joined our company in August 2004 as our Corporate Controller. Prior to joining us, Mr. Liang held various positions at PricewaterhouseCoopers LLP, or PwC, from 1995 to 2004, including Audit Manager in PwC’s San Jose office. Mr.
In addition, analog semiconductors tend to have a longer product life cycle because original design manufacturers, or ODMs and original equipment manufacturers, or OEMs typically design the analog portions of a system to span multiple generations of their products.
In addition, analog semiconductors tend to have a longer product life cycle because original design manufacturers, or ODMs and original equipment manufacturers, or OEMs typically design the analog portions of a system to span multiple generations of products.
Because power management affects all electronic systems, we believe that developing a wide portfolio of products enables us to target new applications in addition to expanding our share of power management needs served within existing applications.
Because power management affects all electronic systems, we believe that developing a wide portfolio of products enables us to target new applications in addition to expanding our share of power management needs within existing applications.
In contrast, our newer Power IC and IGBT products, used mostly in the power supply, home appliance and industrial applications, require a more extended design and marketing timeline and thus have a longer sales cycle.
In contrast, our newer Power IC and IGBT 6 products, used mostly in the power supply, home appliance and industrial applications, require a more extended design and marketing timeline and thus have a longer sales cycle.
We differentiate ourselves by integrating our expertise in technology, design, and advanced packaging to optimize product performance and cost. Our portfolio of products targets high-volume applications, including portable computers, graphics cards, flat panel TVs, home appliances, power tools, smart phones, battery packs, consumer and industrial motor controls and power supplies for TVs, computers, servers and telecommunications equipment.
We differentiate ourselves by integrating our expertise in technology, design, and advanced packaging to optimize product performance and cost. Our portfolio of products targets high-volume applications, including portable computers, graphics cards, home appliances, power tools, smart phones, battery packs, consumer and industrial motor controls and power supplies for TVs, computers, servers and telecommunications equipment.
During the fiscal year ended June 30, 2022, we continued our diversification strategy by developing new silicon and packaging platforms to expand our serviceable available market, or SAM, and offer higher performance products. Our metal-oxide-semiconductor field-effect transistors, or MOSFET, portfolio expanded significantly across a full range of voltage applications.
During the fiscal year ended June 30, 2023, we continued our diversification strategy by developing new silicon and packaging platforms to expand our serviceable available market, or SAM, and offer higher performance products. Our metal-oxide-semiconductor field-effect transistors, or MOSFET, portfolio expanded significantly across a full range of voltage applications.
As part of the enhanced process, we have also conducted extensive risk assessment on export control compliance and implemented training programs for our employees. Executive Officers The following table lists the names, ages and positions of our executive officers as of August 15, 2022. There are no family relationships between any executive officer, except that Mr. Stephen C.
As part of the enhanced process, we have also conducted extensive risk assessment on export control compliance and implemented training programs for our employees. Executive Officers The following table lists the names, ages and positions of our executive officers as of August 15, 2023. There are no family relationships between any executive officer, except that Mr. Stephen C.
In addition, we are refocusing our research and development efforts to respond more directly to market demand by designing and developing new products based on feedback from our customers, which also allows us to reduce time-to-market and sales cycles. Leverage global business model for cost-effective growth We intend to continue to leverage our global resources and regional strengths.
In addition, we are focusing our research and development efforts to respond more directly to market demand by designing and developing new products based on feedback from our customers, which also allows us to reduce time-to-market and sales cycles. Leverage global business model for cost-effective growth We intend to continue to leverage our global resources and regional strengths.
We are also subject to SEC rules that require diligence, disclosure and reporting on whether certain minerals and metals, known as conflict minerals, used in our products originate from the Democratic Republic of Congo and adjoining countries. As of June 30, 2022, 2021 and 2020, we were in compliance with the related conflict minerals rule.
We are also subject to SEC rules that require diligence, disclosure and reporting on whether certain minerals and metals, known as conflict minerals, used in our products originate from the Democratic Republic of Congo and adjoining countries. As of June 30, 2023, 2022 and 2021, we were in compliance with the related conflict minerals rule.
With advances in semiconductor technology, the functionality and performance of semiconductors have generally increased over time, while size and cost have generally decreased. These advances have led to a proliferation of more complex semiconductors being used in a wide variety of consumer, computing, communications and industrial markets and have contributed to the growth of the semiconductor industry.
The functionality and performance of semiconductors have generally increased over time, while size and cost have generally decreased. These advances have led to a proliferation of more complex semiconductors being used in a wide variety of consumer, computing, communications and industrial markets and have contributed to the growth of the semiconductor industry.
In addition, we have engaged nationally-recognized outside compensation consulting firms to independently evaluate the appropriateness and effectiveness of compensation for our executives and other officers and to provide benchmarks for executive compensation as compared to peer companies. The health and safety of our employees are paramount to our company.
In addition, we have engaged nationally-recognized outside independent compensation 10 consulting firms to independently evaluate the appropriateness and effectiveness of compensation for our executives and other officers and to provide benchmarks for executive compensation as compared to peer companies. The health and safety of our employees are paramount to our company.
In general, under our agreements with distributors, they have limited rights to return unsold merchandise, subject to time and volume limitations. As of June 30, 2022, 2021 and 2020, our two largest distributors were WPG Holdings Limited, or WPG, and Promate Electronic Co. Ltd., or Promate.
In general, under our agreements with distributors, they have limited rights to return unsold merchandise, subject to time and volume limitations. As of June 30, 2023, 2022 and 2021, our two largest distributors were WPG Holdings Limited, or WPG, and Promate Electronic Co. Ltd., or Promate.
Our Type C smart load switch product line has also expanded as it offers reverse blocking capability, designed to protect applications against high voltage exposure. 5 The following table lists our product families and the principal end uses of our products: Product Family Description Product Categories within Product Type Typical Application Power Discretes Low on-resistance switch used for routing current and switching voltages in power control circuits High power switches used for power circuits DC-DC for CPU/GPU DC-AC conversion AC-DC conversion Load switching Motor control Battery protection Power factor correction Smart phone chargers, battery packs, notebooks, desktop and servers, data centers, base stations, graphics card, game boxes, TVs, AC adapters, power supplies, motor control, power tools, E-vehicles, white goods and industrial motor drives, UPS systems, solar inverters and industrial welding Power ICs Integrated devices used for power management and power delivery DC-DC Buck conversion DC-DC Boost conversion Smart load switching DrMOS power stage Flat panel displays, TVs, Notebooks, graphic cards, servers, DVD/Blu-Ray players, set-top boxes, and networking equipment Analog power devices used for circuit protection and signal switching Transient voltage protection Analog switch Electromagnetic interference filter Notebooks, desktop PCs, tablets, flat panel displays, TVs, smart phones, and portable electronic devices Power discrete products Power discretes are used across a wide voltage and current spectrum, requiring them to operate efficiently and reliably under harsh conditions.
Our Type C smart load switch product line has also expanded as it offers reverse blocking capability, designed to protect applications against high voltage exposure. 4 The following table lists our product families and the principal end uses of our products: Product Family Description Product Categories within Product Type Typical Application Power Discretes Low on-resistance switch used for routing current and switching voltages in power control circuits High power switches used for power circuits DC-DC for CPU/GPU DC-AC conversion AC-DC conversion Load switching Motor control Battery protection Power factor correction Smart phone chargers, battery packs, notebooks, desktop and servers, data centers, base stations, graphics card, game boxes, TVs, AC adapters, power supplies, motor control, power tools, E-vehicles, white goods and industrial motor drives, UPS systems, solar inverters and industrial welding Power ICs Integrated devices used for power management and power delivery DC-DC Buck conversion DC-DC Boost conversion Smart load switching DrMOS power stage Flat panel displays, TVs, Notebooks, graphic cards, servers, DVD/Blu-Ray players, set-top boxes, and networking equipment Analog power devices used for circuit protection and signal switching Transient voltage protection Analog switch Electromagnetic interference filter Notebooks, desktop PCs, tablets, flat panel displays, TVs, smart phones, and portable electronic devices Power discrete products Power discretes are used across a wide voltage and current spectrum, requiring high efficiency and reliability under harsh conditions.
As our strength is in our people, we invest significantly in our employees by providing a wide range of training and development opportunities, including mentoring, coaching, attendance at external seminars and professional conferences, and regular in-house training sessions on specific topics.
As our strength is in our people, we invest significantly in our employees by providing a wide range of training and development opportunities, including mentoring, coaching, tuition reimbursement, attendance at external seminars and professional conferences, and regular in-house training sessions on specific topics.
Increase direct relationships and product penetration with OEM and ODM customers We have developed direct relationships with key OEMs who are responsible for branding, designing and marketing a broad array of electronic products, as well as ODMs who have traditionally been responsible for manufacturing these products.
Increase direct relationships and product penetration with OEM and ODM customers We have developed direct relationships with key OEMs that are responsible for branding, designing and marketing a broad array of electronic products, as well as ODMs that have traditionally been responsible for manufacturing these products.
On March 29, 2016, the Company entered into a joint venture contract (the “JV Agreement”) with two investment funds owned by the Municipality of Chongqing (the “Chongqing Funds”), pursuant to which the Company and the Chongqing Funds formed a joint venture, (the “JV Company”), for the purpose of constructing and operating a power semiconductor packaging, testing and 12-inch wafer fabrication facility (the “Chongqing Fab”) in the LiangJiang New Area of Chongqing, China (the “JV 1 Transaction”).
On March 29, 2016, we entered into a joint venture contract (the “JV Agreement”) with two investment funds owned by the Municipality of Chongqing (the “Chongqing Funds”), pursuant to which the Company and the Chongqing Funds formed a joint venture, (the “JV Company”), for the purpose of constructing and operating a power semiconductor packaging, testing and 12-inch wafer fabrication facility in the Liangjiang New Area of Chongqing, China (the “JV Transaction”).
We continue to invest in developing new technologies and products utilizing our own fabrication and packaging facilities as it is critical to our long-term success. We also evaluate appropriate investment levels and stay focused on new product introductions to improve our competitiveness. We have research and development teams in Silicon Valley (Sunnyvale, California), Oregon, Taiwan, and China.
We continue to invest in developing new technologies and products utilizing our own fabrication and packaging facilities as it is critical to our long-term success. We also evaluate appropriate investment levels and stay focused on new product introductions to improve our competitiveness. We have research and development teams in Silicon Valley (Sunnyvale, California), Oregon, Texas, Arizona, Korea, Taiwan, and China.
Our process engineers work closely with our design team to deploy and implement our proprietary manufacturing processes at our Oregon Fab, and more recently, at the Chongqing Fab as well as the third-party foundries that fabricate our wafers.
Our process engineers work closely with our design team to deploy and implement our proprietary manufacturing processes at our Oregon Fab, the Chongqing Fab as well as the third-party foundries that fabricate our wafers.
Our medium voltage MOSFETs provide optimized performance with high efficiency, high robustness and high reliability, and are widely used in applications such as TV backlighting, telecom power supplies, and industrial applications. We expanded our high voltage 600V and 700V MOSFET portfolio based on our aMOS5 technology platform to address robust consumer and industrial applications.
Our medium voltage MOSFETs provide optimized performance with high efficiency, high robustness and high reliability, and are widely used in applications such as TV backlighting, telecom power supplies, and industrial applications. We expanded our high voltage 600V and 700V MOSFET portfolio based on our aMOS5 technology platform in order to address demanding consumer and industrial applications.
Typically, our sales cycle for all products comprises of the following steps: • identification of a customer design opportunity; • qualification of the design opportunity by our FAEs through comparison of the power requirements against our product portfolio; • provision of a product sample to the end customer to be included in the customer's pre-production model with the goal of being included in the final bill of materials; and • placement by the customer, or through its distributor, of a full production order as the end customer increases to full volume production.
Typically, our sales cycle for all products comprises the following steps: • identification of a customer design opportunity; • qualification of the design opportunity by our FAEs through comparison of the power requirements against our product portfolio; • delivery of a product sample to the end customer to be included in the customer's pre-production model with the goal of being included in the final bill of materials; and • placement by the customer, or through its distributor, of a full production order as the end customer transitions to full volume production.
We plan to further expand and align our technical marketing and application support teams along with our sales team to better understand and address the needs of our end customers and their end-market applications, in particular for those with the new technology platforms developed in this past year and in the future.
We will further expand and align our technical marketing and application support teams along with our sales team to better understand and address the needs of end customers and end-market applications, in particular for those with the new technology platforms developed in this past year and in the future.
Power ICs can be implemented by incorporating all necessary power functions either on one piece of silicon or multiple silicon chips encapsulated into a single device. Additionally, the advancement in semiconductor packaging technology enables increased power density and shrinking form factors.
Power ICs can be implemented by incorporating all necessary power functions either on one piece of silicon or multiple silicon chips encapsulated into a single device. Additionally, advancements in semiconductor packaging technology enables increased power density and shrinking form factors.
Backlog Our sales are made primarily pursuant to standard purchase orders from distributors and direct customers. The amount of backlog to be shipped during any period depends on various factors, and all orders are subject to cancellation or modification, usually with no penalty to customers.
Backlog Our sales are made primarily pursuant to standard purchase orders from distributors and direct customers. The amount of backlog to be shipped during any period depends on different factors, and all orders are subject to cancellation or modification, 7 usually with no penalty to customers.
We train our managers to become good stewards for our employees, balancing the need of quality of life and performance results. We believe that these efforts contribute to the growth of our employees, as more than 50% of our managerial positions are filled through promotions of existing employees.
We train our managers to become good stewards for our employees, balancing the need for quality of life with performance results. We believe that these efforts contribute to the growth and well-being of our employees, as more than 50% of our managerial positions are filled through promotions of existing employees.
We believe our in-house packaging and testing capability provides us with a competitive advantage in proprietary packaging technology, product quality, costs and sales cycle time.
We believe our in-house packaging and testing capability provides us with a competitive advantage in proprietary packaging technology, product quality, cost and sales cycle time.
In addition, the SEC maintains a website (www.sec.gov) that contains reports, proxy statements, and other information that we file electronically. 14
In addition, the SEC maintains a website (www.sec.gov) that contains reports, proxy statements, and other information that we file electronically. 12
We plan to further expand the breadth of our product portfolio to increase our total bill-of-materials within an electronic system and to address the power requirements of additional electronic systems. Our product portfolio currently consists of approximately 2,500 products and we have introduced over 130 new products in this past fiscal year.
We plan to further expand the breadth of our product portfolio to increase our total bill-of-materials within an electronic system and to address the power requirements of additional electronic systems. Our product portfolio currently consists of approximately 2,600 products and we have introduced over 60 new products in this past fiscal year.
Distributors and customers We have established direct relationships with key OEMs, including Dell Inc., Hewlett-Packard Company, LG Electronics, Inc. and Samsung Group, most of whom we serve through our distributors and ODMs. In addition, based on our historical design win activities, our power semiconductors are also incorporated into products sold to many other leading OEMs.
Distributors and customers We have established direct relationships with key OEMs, including Dell Inc., Hewlett-Packard Company, Samsung Group, and Stanley Black & Decker, Inc., most of whom we serve through our distributors and ODMs. In addition, based on our historical design win activities, our power semiconductors are also incorporated into products sold to many other leading OEMs.
We have also entered into intellectual property licensing agreements with other companies, including On Semiconductor Corp. and Giant Semiconductor Corporation, to use selected third-party technology for the development of our products, although we do not believe our business is dependent to any significant degree on any individual third-party license agreement. We have a license agreement with STMicroelectronics International N.V.
We have also entered into intellectual property licensing agreements with other companies, including On Semiconductor Corp. and Giant Semiconductor Corporation, to use selected third-party technology for the development of our products, although we do not believe our business is dependent to any significant degree on any individual third-party license agreement.
Our ODM customers include Compal Electronics, Inc., Foxconn, Quanta Computer Incorporated, Pegatron, Wistron Corporation and AOC International. In order to take advantage of the expertise of end-customer fulfillment logistics and shorter payment cycles, we sell most of our products through distributors.
Our ODM customers include Compal Electronics, Inc., Foxconn, Quanta Computer Incorporated, Wistron Corporation and Delta Electronics. In order to take advantage of the expertise of end-customer fulfillment logistics and shorter payment cycles, we sell most of our products through distributors.
Our major competitors in power discretes include Infineon Technologies AG, MagnaChip Semiconductor Corporation, ON Semiconductor Corp., STMicroelectronics N.V., Toshiba Corporation, Diodes Incorporated and Vishay Intertechnology, Inc. Our major competitors for our power ICs include Global Mixed-mode Technology Inc., Monolithic Power Systems, Inc., ON Semiconductor Corp., Richtek Technology Corp., Semtech Corporation, Texas Instruments Inc. and Vishay Intertechnology, Inc.
Our major competitors in power discretes include Infineon Technologies AG, ON Semiconductor Corp., STMicroelectronics N.V., Toshiba Corporation, Diodes Incorporated and Vishay Intertechnology, Inc. Our major competitors for our power ICs include Monolithic Power Systems, Inc., ON Semiconductor Corp., Richtek Technology Corp., Semtech Corporation, Texas Instruments Inc. and Vishay Intertechnology, Inc.
Our manufacturing operations in China and our manufacturing facility in Oregon are certified to the ISO9001 and IATF16949:2016. These Quality Management System certifications are in recognition of our quality assurance standards.
Our manufacturing operations in China and our manufacturing facility in Oregon are certified to the ISO9001 and IATF16949:2016. These Quality Management System certifications represent a recognition of our high quality assurance standards.
This has been accelerated by more regulations governing energy efficiency in many end applications. Analog semiconductors The semiconductor industry is segmented into analog and digital. Analog semiconductors process light, sound, motion, radio waves and electrical currents and voltages. In contrast, digital semiconductors process binary signals represented by a sequence of ones and zeros.
Regulations governing energy efficiency have accelerated this process in many applications. Analog semiconductors The semiconductor industry is segmented into analog and digital. Analog semiconductors process light, sound, motion, radio waves and electrical currents and voltages. In contrast, digital semiconductors process binary signals represented by a sequence of ones and zeros.
Our Nominating and Corporate Governance Committee leads the effort in recruiting qualified directors to serve on our Board, and we are in compliance with applicable diversity laws. Our employees appreciate and value the strength of our people-oriented culture and the benefits the workplace diversity brings. We commit to a fair and living wage for all employees.
Our Nominating and Corporate Governance Committee leads the effort in recruiting qualified directors to serve on our Board. Our employees appreciate and value the strength of our people-oriented culture and the benefits our workplace diversity brings. We commit to a fair and living wage for all employees.
Our group of dedicated packaging engineers focuses on smaller form factors, and higher power output with efficient heat dissipation and cost-effectiveness. We have invested resources to develop and enhance our proprietary packaging technologies, including the establishment of our in-house packaging and testing facilities.
Our group of dedicated packaging engineers focuses on smaller form factors, and higher power output with efficient heat dissipation and cost-effectiveness. We have invested resources in developing and enhancing our proprietary packaging technologies, including the establishment of our in-house packaging and testing facilities.
Research and development Because we view technology as a competitive advantage, we invest significant time and capital in research and development to address the technology intensive needs of our end customers. Our research and development expenditures for the fiscal years of 2022, 2021 and 2020 were $71.3 million, $63.0 million and $51.3 million, respectively.
Research and development We view technology as a competitive advantage, and we invest significant time and capital in research and development to address the technology-intensive needs of our end customers. Our research and development expenditures for the fiscal years of 2023, 2022 and 2021 were $88.1 million, $71.3 million and $63.0 million, respectively.
The proliferation of computer and consumer electronics, such as notebooks, tablets, smart phones, flat panel displays and portable media players created the need for sophisticated power management to improve power efficiency and extend battery life. The evolution of these products is characterized by increased functionality, thinner or smaller form factors and decreasing prices.
The proliferation of computer and consumer electronics, such as notebooks, tablets, smart phones, flat panel displays and portable media players created the need for sophisticated power management that increases power efficiency and extends battery life. The evolution of these products is characterized by increased functionality, thinner and smaller form factors and decreasing prices.
Our Power IC and low voltage (5V-40V) MOSFET products address this market. In the area of AC-DC power supplies for electronic equipment, data centers and servers, the market is characterized by a continuous demand for energy conservation through higher efficiency, which is driving the need for our medium voltage (40V-400V) and high voltage (500V-1000V) MOSFET products.
Our Power IC and low voltage (5V-40V) MOSFET products address these markets. In the area of AC-DC power supplies for electronic 2 equipment, data centers and servers, the market is characterized by a continuous demand for energy conservation through higher efficiency, which drives the market for our medium voltage (40V-400V) and high voltage (500V-1000V) MOSFET products.
While OEMs typically focus their design efforts on their flagship products, as the industry has evolved, ODMs are increasingly responsible for designing portions, or entire systems, of the products they manufacture for the OEMs. In addition, several ODMs are beginning to design, manufacture and brand their own proprietary products which they sell directly to consumers.
While OEMs typically focus design efforts on flagship products, ODMs are increasingly responsible for designing portions, or entire systems, of the products they manufacture for OEMs. In addition, several ODMs are beginning to design, manufacture and brand their own proprietary products which are sold directly to consumers.
We believe that our efforts to develop innovative packaging technologies will continue to provide new and cost-effective solutions with higher power density to our customers. During the fiscal year ended June 30, 2022, we continued our diversification strategies by developing new silicon and packaging platforms to expand our SAM and offer higher performance products.
Our efforts to develop innovative packaging technologies continues to provide new and cost-effective solutions with higher power density to our customers. During the fiscal year ended June 30, 2023, we continued our diversification strategies by developing new silicon and packaging platforms to expand our SAM and offer higher performance products.
As of June 30, 2022, we had 888 patents issued in the United States, of which 881 were based on our research and development efforts and 7 were acquired, and these patents are set to expire between 2022 and 2041.
As of June 30, 2023, we had 918 patents issued in the United States, of which 911 were based on our research and development efforts and 7 were acquired, and these patents are set to expire between 2023 and 2041.
Sales to WPG and Promate accounted for 39.7% and 24.6% of our revenue, respectively, for the fiscal year ended June 30, 2022, 35.4% and 28.7% of our revenue, respectively, for the fiscal year ended June 30, 2021, and 35.5% and 29.3% of our revenue, respectively, for fiscal year ended June 30, 2020, respectively.
Sales to WPG and Promate accounted for 35.6% and 21.6% of our revenue, respectively, for the fiscal year ended June 30, 2023, 39.7% and 24.6% of our revenue, respectively, for the fiscal year ended June 30, 2022, and 35.4% and 28.7% of our revenue, respectively, for fiscal year ended June 30, 2021, respectively.
Please refer to Exhibit 21.1 to this Form 10-K for a complete list of our subsidiaries. Our industry Semiconductors are electronic devices that perform a variety of functions, such as converting or controlling signals, processing data and delivering or managing power.
We have incorporated various wholly-owned subsidiaries in different jurisdictions. Please refer to Exhibit 21.1 to this Form 10-K for a complete list of our subsidiaries. Our industry Semiconductors are electronic devices that perform a variety of functions, such as converting or controlling signals, processing data and delivering or managing power.
Our portfolio of power semiconductors includes approximately 2,500 products, and has grown significantly with the introduction of over 130 new products in the fiscal year ended June 30, 2022, and over 160 new products in each of the fiscal years ended June 30, 2021 and 2020, respectively.
Our portfolio of power semiconductors includes approximately 2,600 products, and has grown significantly with the introduction of over 60 new products in the fiscal year ended June 30, 2023, and over 130 and 160 new products in the fiscal year ended June 30, 2022 and 2021, respectively.
We have an extensive patent portfolio that consists of 888 patents and 62 patent applications in the United States as of June 30, 2022. We also have a total of 936 foreign patents, which were based primarily on our research and development efforts through June 30, 2022.
We have an extensive patent portfolio that consists of 918 patents and 45 patent applications in the United States as of June 30, 2023. We also have a total of 980 foreign patents, which were based primarily on our research and development efforts through June 30, 2023.
Power ICs, sometimes referred to as power management ICs, perform power delivery and power management functions, such as controlling and regulating voltage and current and controlling power discrete devices. The growth of the power semiconductor market in recent years has several key drivers.
Power ICs, sometimes referred to as power management ICs, perform power delivery and power management functions, such as controlling and regulating voltage and current and controlling power discrete devices. The power semiconductor market has been driven by several key factors in recent years.
Our power discretes products consist primarily of low, medium and high voltage power MOSFETs. Our low voltage MOSFET series is based on our proprietary silicon and package technologies, with deep application know-how in various markets. We have precisely defined technology platforms to address different requirements from various applications.
Our low voltage MOSFET series is based on our proprietary silicon and package technologies, with deep application know-how in various markets. We have precisely defined technology platforms to address different requirements from various applications.
However, we believe that we can compete effectively through our integrated and innovative technology platform and design capabilities, including our strong and extensive patent portfolio, strategic global business model, expanding suites of new products, diversified and broad customer base, and excellent on-the-ground support and quick time to market for our products. 8 Seasonality As we provide power semiconductors used in consumer electronic products, our business is subject to seasonality.
However, we believe that we can compete effectively through our integrated and innovative technology platform and design capabilities, including our strong and extensive patent portfolio, strategic global business model, expanding suites of new products, diversified and broad customer base, and excellent on-the-ground support and quick time to market for our products.
These foreign patents will expire in the years between 2023 and 2041. In addition, as of June 30, 2022, we had a total of 185 patent applications, of which 62 patents were pending in the United States, 76 patents were pending in China, 36 patents were pending in Taiwan and 11 patents were pending in other countries.
These foreign patents will expire in the years between 2023 and 2041. In addition, as of June 30, 2023, we had a total of 159 patent applications, of which 45 patents were pending in the United States, 81 patents were pending in China, 22 patents were pending in Taiwan and 11 patents were pending in other countries.
We also had a total of 936 foreign patents, including 433 Chinese patents, 460 Taiwanese patents, 24 Korean patents, 4 Hong Kong patents, 5 Philippine patents, 8 Japanese patents, 1 Europe patent and 1 India patent as of June 30, 2022. Substantially all of our foreign patents were based on our research and development efforts.
We also had a total of 980 foreign patents, including 446 Chinese patents, 489 Taiwanese patents, 24 Korean patents, 4 Hong Kong patents, 5 Philippine patents, 8 Japanese patents, 2 Europe patent and 2 India patent as of June 30, 2023. Substantially all of our foreign patents were based on our research and development efforts.
Our in-house and wholly-owned packaging and testing facilities are located in Shanghai, China which handle most of our packaging and testing requirements for our products. In addition, the JV Company handles a portion of our packaging and testing requirement.
The final tested products are then shipped to our distributors or customers. Our in-house and wholly-owned packaging and testing facilities are located in Shanghai, China which handle most of our packaging and testing requirements for our products. In addition, the JV Company handles a portion of our packaging and testing requirement.
We operate an 8-inch wafer fabrication facility located in Hillsboro, Oregon (the "Oregon fab"), which is critical for us to accelerate proprietary technology development, new product introduction and improve our financial performance. Recently we expanded and upgraded our manufacturing capabilities at the Oregon Fab. The expansion is expected to be completed in the fiscal quarter ending March 31, 2023.
We operate an 8-inch wafer fabrication facility located in Hillsboro, Oregon (the "Oregon fab"), which is critical for us to accelerate proprietary technology development, new product introduction and improve our financial performance. We also expanded and upgraded our manufacturing capabilities at the Oregon Fab in 2023.
Once designed into an 2 application, the analog portion is rarely modified because even a slight change to the analog portion can cause unexpected interactions with other components, resulting in system instability. Power semiconductors Power semiconductors are a subset of the analog semiconductor sector with their own set of characteristics unique to system power architecture and function.
Once designed into an application, the analog portion is rarely modified because even small changes to the analog portion can trigger unanticipated consequences in other components, resulting in system instability. Power semiconductors Power semiconductors are a subset of the analog semiconductor sector with their own set of characteristics unique to system power architecture and function.
Due to this wide applicability across diverse end-market applications, we market general purpose MOSFETs that are used in multiple applications as well as MOSFETs targeted for specific applications. Our current power discrete product line includes industry standard trench MOSFETs, SRFETs, XSFET, electrostatic discharge, protected MOSFETs, high and mid-voltage MOSFETs and IGBTs.
Due to the diverse nature of end-market applications, we market both general purpose MOSFETs that are used in multiple applications as well as application specific MOSFETs. Our current power discrete product line includes industry standard trench MOSFETs, SRFETs, XSFET, electrostatic discharge, protected MOSFETs, high and mid-voltage MOSFETs and IGBTs.
Chang focused on product research and development in various management positions at General Electric Company from 1974 to 1987. Dr. Chang received his B.S. in electrical engineering from National Cheng Kung University, Taiwan, and M.S. and Ph.D. in electrical engineering from the University of Missouri. Stephen C. Chang has been serving as our President since January 2021.
Chang focused on product research and development in various management positions at General Electric Company from 1974 to 1987. Dr. Chang received his B.S. in electrical engineering from National Cheng Kung University, Taiwan, and M.S. and Ph.D. in electrical engineering from the University of Missouri.
Human Capital Resources As of June 30, 2022, we had 2,451 employees, of whom 753 were located in the United States, 1,527 were located in China, and 171 were located in other parts of the world. None of our employees is represented by a collective bargaining agreement.
Human Capital Resources As of June 30, 2023, we had 2,468 employees, of whom 781 were located in the United States, 1,502 were located in China, and 185 were located in other parts of the world. None of our employees is represented by a collective bargaining agreement.
Wafer fabrication Our Oregon Fab allows us to accelerate the development of our technology and products, as well as to provide better service to our customers. We allocate our wafer production between our in-house facility and third-party foundries.
Operations The manufacture of our products is divided into two major steps: wafer fabrication and packaging and testing. Wafer fabrication Our Oregon Fab allows us to accelerate the development of our technology and products, as well as to provide better service to our customers. We allocate our wafer production between our in-house facility and third-party foundries.
This model also provides quicker response to our customer demands, enhances relationships with strategic customers, and provides flexibility in capacity management and geographic diversification of our wafer supply chain.
This model also allows us to respond more quickly to our customer demands, enhances relationships with strategic customers, provides flexibility in capacity management, and enables geographic diversification of our wafer supply chain.
Our in-house manufacturing capability allows us to retain a higher level of control over the development and application of our proprietary process technology, thereby reducing certain operational risks and costs associated with utilizing third-party foundries.
Our in-house manufacturing capability allows us to retain a higher level of control over the development and application of our proprietary process technology, thereby reducing certain supply chain and operational risks.
Prior to that, Mr. Chang served in various management positions including Executive Vice President of Product Line Management, Senior VP of Marketing, VP of the MOSFET Product Line, and Senior Director of Product Marketing. Mr.
Chang previously served as the Company’s President from January 2021 to February 2023. Prior to that, Mr. Chang served in various management positions, including Executive Vice President of Product Line Management, Senior VP of Marketing, VP of the MOSFET Product Line, and Senior Director of Product Marketing. Mr.
Leverage our power semiconductor expertise to drive new technology platforms We believe that the ever-increasing demand for power efficiency in power semiconductors requires expertise in and a deep understanding of the interrelationship among device physics, process technologies, design and packaging. We also believe that engineers with experience and understanding of these multiple disciplines are in great demand but short supply.
Leverage our power semiconductor expertise to drive new technology platforms We believe that the ever-increasing demand for power efficiency in power semiconductors requires expertise in and a deep understanding of the interrelationship among device physics, process technologies, design and packaging.
To meet the market demand for more mature high-volume products, we also utilize the wafer manufacturing capacity of selected third party foundries. For assembly and test, we primarily rely upon our in-house facilities in China. In addition, we utilize subcontracting partners for industry standard packages.
To meet the market demand for the more mature high volume products, we also utilize the wafer manufacturing capacity of selected third party foundries. We utilize both in house assembly and test facilities in China as well as subcontractors for industry standard packages.
We have established quality assurance procedures that are intended to control quality throughout the manufacturing process, including qualifying new parts for production at each packaging facility, conducting root cause analysis, testing for lots with process defects and implementing containment and preventive actions. The final tested products are then shipped to our distributors or customers.
After packaging, all devices are tested in accordance with our specifications and substandard or defective devices are rejected. We have established quality assurance procedures that are intended to control quality throughout the manufacturing process, including qualifying new parts for production at each packaging facility, conducting root cause analysis, testing for lots with process defects and implementing containment and preventive actions.
We also require our subcontractors, including foundries and assembly houses, to meet ISO 14001 standards. We believe that we have adopted pollution control measures for the effective maintenance of environmental protection standards consistent with the requirements applicable to the semiconductor industry in China and the U.S.
We believe that we have adopted pollution control measures for the effective maintenance of environmental protection standards consistent with the requirements applicable to the semiconductor industry in China and the U.S.
Within this context, we believe that we are well positioned to be a leader in providing total power management solutions because of our extensive pool of experienced scientists and engineers and our strong IP portfolio.
We also 3 believe that engineers with experience and understanding of these multiple disciplines are in great demand but short supply. Within this context, we believe that we are well positioned to be a leader in providing total power management solutions because of our extensive pool of experienced scientists and engineers and our strong IP portfolio.
We recently commenced a plan to enhance the manufacturing capability and capacity of our Oregon Fab by investing in new equipment and expanding our factory facilities, which we expect will have a positive impact on our future new 3 product development and revenue, particularly during the period of global shortage of capacity.
In addition, we enhanced the manufacturing capability and capacity of our Oregon Fab by investing in new equipment and expanding factory facilities, which we expect will have a positive impact on our future new product development and revenue.
The Chongqing Fab is being built in phases. As of December 1, 2021, the Company owned 50.9%, and the Chongqing Funds owned 49.1% of the equity interest in the JV Company. The JV Company was accounted under the provisions of the consolidation guidance since the Company had controlling financial interest until December 1, 2021.
As of December 1, 2021, we owned 50.9%, and the Chongqing Funds owned 49.1%, of the equity interest in the JV Company. The Joint Venture 1 was accounted under the provisions of the consolidation guidance since we had controlling financial interest until December 1, 2021. As of December 2, 2021, we ceased having control over the JV Company.
As a technology company, we will continue our significant investment in research and development in our low voltage, medium voltage, and high voltage power discretes, IGBT and power modules and power ICs by developing new technology platforms and new products that allow for better product performance, more efficient packages and higher levels of integration. 9 Operations The manufacture of our products is divided into two major steps: wafer fabrication and packaging and testing.
As a technology company, we will continue our significant investment in research and development in our low voltage, medium voltage, and high voltage power discretes, IGBT and power modules and power ICs by developing new technology platforms and new products that allow for improved product performance, higher efficiency packages and higher levels of integration.
While we have made progress in our diversification and expansion into additional applications, we continue to support and grow our PC business by expanding bill-of-material content, gaining market share, and acquiring new customers.
Although our largest end-market is the personal computing (“PC”) market, we have successfully diversified our business by expanding into other markets, including consumer, communications, and industrial markets. While we have made progress in our diversification and expansion into additional applications, we continue to support and grow our PC business by expanding bill-of-material content, gaining market share, and acquiring new customers.
Chang is a son of Dr. Mike F. Chang. Name Age Position Mike F. Chang, Ph.D. 77 Chairman of the Board and Chief Executive Officer Stephen C.
Chang is a son of Dr. Mike F. Chang. 11 Name Age Position Stephen C. Chang 46 Chief Executive Officer and Director Mike F.
We also keep our employees engaged and informed by providing periodic all-staff communications, and semi-annual performance reviews to ensure that efforts and results are aligned with our business and strategic corporate objectives.
We also keep our employees engaged and informed by providing periodic all-staff communications, and semi-annual performance reviews to ensure that efforts and results are aligned with our business and strategic corporate objectives. We value feedback from our employees and promote an open-door policy which encourages employees to have regular conversations with their managers to share feedback and express concerns.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

73 edited+20 added−59 removed230 unchanged
Biggest changeRisk Factor Summary • Risks Related to Our Business • Our business operations and financial performance may be adversely affected by the COVID-19 pandemic and related events. • The decline of personal computing (“PC”) markets may have a material adverse effect on our results of operations. • Our strategy of diversification into different market segments may not succeed according to our expectations. • Our operating results may fluctuate from period to period due to many factors, which may make it difficult to predict our future performance. • Geopolitical and economic conflicts between United States and China may adversely affect our business. • Our revenue may fluctuate significantly from period to period due to ordering patterns from our distributors and seasonality. • We may not be able to introduce or develop new and enhanced products that meet or are compatible with our customer’s product requirements in a timely manner. • We may not win sufficient designs, or our design wins may not generate sufficient revenue for us to maintain or expand our business. • Our success depends upon the ability of our OEM end customers to successfully sell products incorporating our products. • The operation of our Oregon Fab subjects us to additional risks and the need for additional capital expenditures which may negatively impact our results of operations. • We may not be able to successfully develop our digital power business. • Defects and poor performance in our products could result in loss of customers, decreased revenue, unexpected expenses and loss of market share. • If we do not forecast demand for our products accurately, we may experience product shortages, delays in product shipment, excess product inventory, or difficulties in planning expenses, which will adversely affect our business and financial condition. • We face intense competition and may not be able to compete effectively which could reduce our revenue and market share. • Our reliance on third-party semiconductor foundries to manufacture our products subjects us to risks. • Our operation of two wholly-owned packaging and testing facilities are subject to risks that could adversely affect our business and financial results. • Our reliance on distributors to sell a substantial portion of our products subjects us to a number of risks. • We have made and may continue to make strategic acquisitions of other companies, assets or businesses and these acquisitions introduce significant risks and uncertainties. • If we are unable to obtain raw materials in a timely manner or if the price of raw materials increases significantly, production time and product costs could increase, which may adversely affect our business. • We may not be able to accurately estimate provisions at fiscal period end for price adjustment and stock rotation rights under our agreements with distributors, and our failure to do so may impact our operating results. 15 • We depend on the continuing services of our senior management team and other key personnel, and if we lose a member of our senior management or are unable to successfully retain, recruit and train key personnel, our ability to develop and market our products could be harmed. • Failure to protect our patents and our other proprietary information could harm our business and competitive position. • Intellectual property disputes could result in lengthy and costly arbitration, litigation or licensing expenses or prevent us from selling our products. • The DOJ government investigation and evolving export control regulations may adversely affect our financial performance and business operations. • We may be adversely affected by any disruption in our information technology systems. • Global or regional economic, political and social conditions could adversely affect our business and operating results. • Our business operations could be significantly harmed by natural disasters or global epidemics. • Our insurance may not cover all losses, including losses resulting from business disruption or product liability claims. • Our international operations subject our company to risks not faced by companies without international operations. • If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results or prevent fraud. • We are subject to the risk of increased income taxes and changes in existing tax rules. • Our debt agreements include financial covenants that may limit our ability to pursue business and financial opportunities and subject us to risk of default. • The imposition of U.S. corporate income tax on our Bermuda parent and non-U.S. subsidiaries could adversely affect our results of operations. • We may be classified as a passive foreign investment company (“PFIC”), which could result in adverse U.S. federal income tax consequences for U.S. holders. • The average selling prices of products in our markets have historically decreased rapidly and will likely do so in the future, which could harm our revenue and gross margins. • We may be adversely affected by the cyclicality of the semiconductor industry.
Biggest changeRisk Factor Summary Risks Related to Our Business • We may be adversely affected by the macroeconomic conditions and cyclicality of the semiconductor industry. • The decline of personal computing (“PC”) markets may have a material adverse effect on our results of operations. • Our strategy of diversification into different market segments may not succeed according to our expectations. • Our operating results may fluctuate from period to period due to many factors, which may make it difficult to predict our future performance. • Geopolitical and economic conflicts between United States and China may adversely affect our business. • Our lack of control over the JV Company may adversely affect our operations. • Our revenue may fluctuate significantly from period to period due to ordering patterns from our distributors and seasonality. • We may not be able to introduce or develop new and enhanced products that meet or are compatible with our customer’s product requirements in a timely manner. • We may not win sufficient designs, or our design wins may not generate sufficient revenue for us to maintain or expand our business. • Our success depends upon the ability of our OEM end customers to successfully sell products incorporating our products. • The operation of our Oregon Fab subjects us to additional risks and the need for additional capital expenditures which may negatively impact our results of operations. • Defects and poor performance in our products could result in loss of customers, decreased revenue, unexpected expenses and loss of market share. • If we do not forecast demand for our products accurately, we may experience product shortages, delays in product shipment, excess product inventory, or difficulties in planning expenses, which will adversely affect our business and financial condition. • We face intense competition and may not be able to compete effectively which could reduce our revenue and market share. • Our reliance on third-party semiconductor foundries to manufacture our products subjects us to risks. • Our reliance on distributors to sell a substantial portion of our products subjects us to a number of risks. • We have made and may continue to make strategic acquisitions of other companies, assets or businesses and these acquisitions introduce significant risks and uncertainties. • If we are unable to obtain raw materials in a timely manner or if the price of raw materials increases significantly, production time and product costs could increase, which may adversely affect our business. • We may not be able to accurately estimate provisions at fiscal period end for price adjustment and stock rotation rights under our agreements with distributors, and our failure to do so may impact our operating results. • Our operation of two wholly-owned packaging and testing facilities are subject to risks that could adversely affect our business and financial results. • We may be adversely affected by any disruption in our information technology systems. • We depend on the continuing services of our senior management team and other key personnel. • Failure to protect our patents and our other proprietary information could harm our business and competitive position. 13 • Intellectual property disputes could result in lengthy and costly arbitration, litigation or licensing expenses or prevent us from selling our products. • The DOJ government investigation and evolving export control regulations may adversely affect our financial performance and business operations. • Global or regional economic, political and social conditions could adversely affect our business and operating results. • Our business operations could be significantly harmed by natural disasters or global epidemics. • Our insurance may not cover all losses, including losses resulting from business disruption or product liability claims. • Our international operations subject our company to risks not faced by companies without international operations. • If we fail to maintain an effective internal control environment as well as adequate control procedures over our financial reporting, investor confidence may be adversely affected thereby affecting the value of our stock price. • We are subject to the risk of increased income taxes and changes in existing tax rules. • Our debt agreements include financial covenants that may limit our ability to pursue business and financial opportunities and subject us to risk of default. • The imposition of U.S. corporate income tax on our Bermuda parent and non-U.S. subsidiaries could adversely affect our results of operations. • We may be classified as a passive foreign investment company (“PFIC”), which could result in adverse U.S. federal income tax consequences for U.S. holders. • The average selling prices of products in our markets have historically decreased rapidly and will likely do so in the future, which could harm our revenue and gross margins.
These factors include, among others: • a deterioration in general demand for electronic products, particularly the PC market, as a result of global or regional financial crises and associated macro-economic slowdowns, and/or the cyclicality of the semiconductor industry; • a deterioration in business conditions at our distributors and /or end customers; • adverse general economic conditions in the countries where our products are sold or used; • the emergence and growth of markets for products we are currently developing; • our ability to successfully develop, introduce and sell new or enhanced products in a timely manner and the rate at which our new products replace declining orders for our older products; • the anticipation, announcement or introduction of new or enhanced products by us or our competitors; • changes in the selling prices of our products and in the relative mix in the unit shipments of our products, which have different average selling prices and profit margins; • the amount and timing of operating costs and capital expenditures, including expenses related to the maintenance and expansion of our business operations and infrastructure; • the announcement of significant acquisitions, disposition or partnership arrangements; • the ramp-up progress and operation of the JV Company, and announcement of significant transactions involving the JV Company; • changes in the utilization of our in-house manufacturing capacity; • supply and demand dynamics and the resulting price pressure on the products we sell; 20 • the unpredictable volume and timing of orders, deferrals, cancellations and reductions for our products, which may depend on factors such as our end customers' sales outlook, purchasing patterns and inventory adjustments based on general economic conditions or other factors; • changes in laws and regulations affecting our business operations; • changes in costs associated with manufacturing of our products, including pricing of wafer, raw materials and assembly services; • announcement of significant share repurchase programs; • our concentration of sales in consumer applications and changes in consumer purchasing patterns and confidence; and • the adoption of new industry standards or changes in our regulatory environment.
These factors include, among others: • a deterioration in general demand for electronic products, particularly the PC market, as a result of global or regional financial crises and associated macro-economic slowdowns, and/or the cyclicality of the semiconductor industry; • a deterioration in business conditions at our distributors and /or end customers; • adverse general economic conditions in the countries where our products are sold or used; • the emergence and growth of markets for products we are currently developing; • our ability to successfully develop, introduce and sell new or enhanced products in a timely manner and the rate at which our new products replace declining orders for our older products; • the anticipation, announcement or introduction of new or enhanced products by us or our competitors; • changes in the selling prices of our products and in the relative mix in the unit shipments of our products, which have different average selling prices and profit margins; • the amount and timing of operating costs and capital expenditures, including expenses related to the maintenance and expansion of our business operations and infrastructure; • the announcement of significant acquisitions, disposition or partnership arrangements; • the ramp-up progress and operation of the JV Company, and announcement of significant transactions involving the JV Company; • changes in the utilization of our in-house manufacturing capacity; • supply and demand dynamics and the resulting price pressure on the products we sell; • the unpredictable volume and timing of orders, deferrals, cancellations and reductions for our products, which may depend on factors such as our end customers' sales outlook, purchasing patterns and inventory adjustments based on general economic conditions or other factors; • changes in laws and regulations affecting our business operations; • changes in costs associated with manufacturing of our products, including pricing of wafer, raw materials and assembly services; • announcement of significant share repurchase programs; • our concentration of sales in consumer applications and changes in consumer purchasing patterns and confidence; and • the adoption of new industry standards or changes in our regulatory environment.
Any claim of intellectual property infringement against us may require us to: • incur substantial legal and personnel expenses to defend the claims or to negotiate for a settlement of claims; 29 • pay substantial damages or settlement to the party claiming infringement; • refrain from further development or sale of our products; • attempt to develop non-infringing technology, which may be expensive and time consuming, if possible at all; • enter into costly royalty or license agreements that might not be available on commercially reasonable terms or at all; • cross-license our technology with a competitor to resolve an infringement claim, which could weaken our ability to compete with that competitor; and • indemnify our distributors, end customers, licensees and others from the costs of and damages of infringement claims by our distributors, end customers, licensees and others, which could result in substantial expenses for us and damage our business relationships with them.
Any claim of intellectual property infringement against us may require us to: • incur substantial legal and personnel expenses to defend the claims or to negotiate for a settlement of claims; • pay substantial damages or settlement to the party claiming infringement; • refrain from further development or sale of our products; • attempt to develop non-infringing technology, which may be expensive and time consuming, if possible at all; • enter into costly royalty or license agreements that might not be available on commercially reasonable terms or at all; • cross-license our technology with a competitor to resolve an infringement claim, which could weaken our ability to compete with that competitor; and • indemnify our distributors, end customers, licensees and others from the costs of and damages of infringement claims by our distributors, end customers, licensees and others, which could result in substantial expenses for us and damage our business relationships with them.
To manage this diversification effectively, we will need to take various actions, including: • enhancing management information systems, including forecasting procedures; • further developing our operating, administrative, financial and accounting systems and controls; • managing our working capital and sources of financing; • maintaining close coordination among our engineering, accounting, finance, marketing, sales and operations organizations; • retaining, training and managing our employee base; • enhancing human resource operations and improving employee hiring and training programs; • realigning our business structure to more effectively allocate and utilize our internal resources; • improving and sustaining our supply chain capability; and • managing both our direct and distribution sales channels in a cost-efficient and competitive manner.
To manage this diversification effectively, we will need to take various actions, including: • enhancing management information systems, including forecasting procedures; • further developing our operating, administrative, financial and accounting systems and controls; • managing our working capital and sources of financing; 15 • maintaining close coordination among our engineering, accounting, finance, marketing, sales and operations organizations; • retaining, training and managing our employee base; • enhancing human resource operations and improving employee hiring and training programs; • realigning our business structure to more effectively allocate and utilize our internal resources; • improving and sustaining our supply chain capability; and • managing both our direct and distribution sales channels in a cost-efficient and competitive manner.
Many of our competitors have competitive advantages over us, including: • significantly greater financial, technical, research and development, sales and marketing and other resources, enabling them to invest substantially more resources than us to respond to the adoption of new or emerging technologies or changes in customer requirements; • greater brand recognition and longer operating histories; • larger customer bases and longer, more established relationships with distributors or existing or potential end customers, which may provide them with greater reliability and information regarding future trends and requirements that may not be available to us; • the ability to provide greater incentives to end customers through rebates, and marketing development funds or similar programs; 25 • more product lines, enabling them to bundle their products to offer a broader product portfolio or to integrate power management functionality into other products that we do not sell; • greater ability and more resources to influence and participate in the regulatory and legislative process for more favorable laws and regulations; and • captive manufacturing facilities, providing them with guaranteed access to manufacturing facilities in times of global semiconductor shortages.
Many of our competitors have competitive advantages over us, including: • significantly greater financial, technical, research and development, sales and marketing and other resources, enabling them to invest substantially more resources than us to respond to the adoption of new or emerging technologies or changes in customer requirements; • greater brand recognition and longer operating histories; 20 • larger customer bases and longer, more established relationships with distributors or existing or potential end customers, which may provide them with greater reliability and information regarding future trends and requirements that may not be available to us; • the ability to provide greater incentives to end customers through rebates, and marketing development funds or similar programs; • more product lines, enabling them to bundle their products to offer a broader product portfolio or to integrate power management functionality into other products that we do not sell; • greater ability and more resources to influence and participate in the regulatory and legislative process for more favorable laws and regulations; and • captive manufacturing facilities, providing them with guaranteed access to manufacturing facilities in times of global semiconductor shortages.
Our OEM end customers may not successfully sell their products for a variety of reasons, including: • general global and regional economic conditions; • late introduction or lack of market acceptance of their products; • lack of competitive pricing; • shortage of component supplies; • excess inventory in the sales channels into which our end customers sell their products; • changes in the supply chain; and • changes as a result of regulatory restrictions applicable to China-exported products.
Our OEM end customers may not successfully sell their products for a variety of reasons, including: 18 • general global and regional economic conditions; • late introduction or lack of market acceptance of their products; • lack of competitive pricing; • shortage of component supplies; • excess inventory in the sales channels into which our end customers sell their products; • changes in the supply chain; and • changes as a result of regulatory restrictions applicable to China-exported products.
Furthermore, as our products are typically sold at prices much lower than the cost of the equipment or other devices incorporating our products, any defective, inefficient or poorly performing products, or improper use by customers of power components, may give rise to warranty and product liability claims against us that exceed any revenue or profit we 24 receive from the affected products.
Furthermore, as our products are typically sold at prices much lower than the cost of the equipment or other devices incorporating our products, any defective, inefficient or poorly performing products, or improper use by customers of power components, may give rise to warranty and product liability claims against us that exceed any revenue or profit we receive from the affected products.
If we are unable to obtain raw materials in a timely manner or if the price of raw materials increases significantly, production time and product costs could increase, which may adversely affect our business. 27 Our fabrication and packaging processes depend on raw materials such as silicon wafers, gold, copper, molding compound, petroleum and plastic materials and various chemicals and gases.
If we are unable to obtain raw materials in a timely manner or if the price of raw materials increases significantly, production time and product costs could increase, which may adversely affect our business. Our fabrication and packaging processes depend on raw materials such as silicon wafers, gold, copper, molding compound, petroleum and plastic materials and various chemicals and gases.
In addition, we do not have “key person” life insurance policies covering any member of our management team or other key personnel. The loss of any of these individuals or our inability to attract or retain qualified personnel, including engineers and others, could adversely affect our product introductions, overall business growth prospects, results of operations and financial condition.
In addition, we do not have “key person” life insurance policies covering any member of 24 our management team or other key personnel. The loss of any of these individuals or our inability to attract or retain qualified personnel, including engineers and others, could adversely affect our product introductions, overall business growth prospects, results of operations and financial condition.
We face a number of other significant risks associated with outsourcing fabrication, including: • limited control over delivery schedules, quality assurance and control and production costs; • discretion of foundries to reduce deliveries to us on short notice, allocate capacity to other customers that may be larger or have long-term customer or preferential arrangements with foundries that we use; • unavailability of, or potential delays in obtaining access to, key process technologies; • limited warranties on wafers or products supplied to us; • damage to equipment and facilities, power outages, equipment or materials shortages that could limit manufacturing yields and capacity at the foundries; • potential unauthorized disclosure or misappropriation of intellectual property, including use of our technology by the foundries to make products for our competitors; 26 • financial difficulties and insolvency of foundries; and • acquisition of foundries by third parties.
We face a number of other significant risks associated with outsourcing fabrication, including: • limited control over delivery schedules, quality assurance and control and production costs; • discretion of foundries to reduce deliveries to us on short notice, allocate capacity to other customers that may be larger or have long-term customer or preferential arrangements with foundries that we use; • unavailability of, or potential delays in obtaining access to, key process technologies; • limited warranties on wafers or products supplied to us; 21 • damage to equipment and facilities, power outages, equipment or materials shortages that could limit manufacturing yields and capacity at the foundries; • potential unauthorized disclosure or misappropriation of intellectual property, including use of our technology by the foundries to make products for our competitors; • financial difficulties and insolvency of foundries; and • acquisition of foundries by third parties.
These new laws require Bermuda and Cayman companies carrying on one or more “relevant activity” (including: banking, insurance, fund management, financing, leasing, headquarters, shipping, distribution and service center, intellectual property or holding company) to maintain a substantial economic presence in Bermuda and Cayman Islands in order to comply with the economic substance requirements.
These new laws require Bermuda and Cayman companies carrying on one or more “relevant activity” (including: banking, insurance, fund management, 28 financing, leasing, headquarters, shipping, distribution and service center, intellectual property or holding company) to maintain a substantial economic presence in Bermuda and Cayman Islands in order to comply with the economic substance requirements.
Our success depends upon our ability to develop and introduce new and enhanced products that meet or are compatible with our customer’s specifications, performance standards and other product requirements in a timely 22 manner. The development of new and enhanced products involves highly complex processes, and at times we have experienced delays in the introduction of new products.
Our success depends upon our ability to develop and introduce new and enhanced products that meet or are compatible with our customer’s specifications, performance standards and other product requirements in a timely manner. The development of new and enhanced products involves highly complex processes, and at times we have experienced delays in the introduction of new products.
Following the G7 announcement, the OECD/G20 Inclusive Framework announced on July 1, 2021 broad agreement on the two pillars, and released a proposal, which has been endorsed by over 32 130 jurisdictions, for a global minimum tax rate of at least 15% for large multinational corporations on a jurisdiction-by-jurisdiction basis.
Following the G7 announcement, the OECD/G20 Inclusive Framework announced on July 1, 2021 broad agreement on the two pillars, and released a proposal, which has been endorsed by over 130 jurisdictions, for a global minimum tax rate of at least 15% for large multinational corporations on a jurisdiction-by-jurisdiction basis.
Any future economic downturn or recession in the global economy in general and, in particular, on the economies in China, Taiwan and other countries where we market and sell our products, will have an adverse effect on our results of operations. 30 Our business operations could be significantly harmed by natural disasters or global epidemics.
Any future economic downturn or recession in the global economy in general and, in particular, on the economies in China, Taiwan and other countries where we market and sell our products, will have an adverse effect on our results of operations. Our business operations could be significantly harmed by natural disasters or global epidemics.
If such changes occur, we may be required to reduce shipments to certain Asian customers, adjust our business practices and incur additional costs to implement new export control compliance procedures, policies and programs, each of which will adversely affect our financial conditions and results of operations.
If such 26 changes occur, we may be required to reduce shipments to certain Asian customers, adjust our business practices and incur additional costs to implement new export control compliance procedures, policies and programs, each of which will adversely affect our financial conditions and results of operations.
Similarly, during periods of unexpected increase in customer demand, we may not be able to ramp up production quickly to meet these demands, which may lead to the loss of significant revenue opportunities. The manufacturing processes of a fabrication facility are complex and subject to 23 interruptions.
Similarly, during periods of unexpected increase in customer demand, we may not be able to ramp up production quickly to meet these demands, which may lead to the loss of significant revenue opportunities. The manufacturing processes of a fabrication facility are complex and subject to interruptions.
The average selling prices of products in our markets have historically decreased rapidly and will likely do so in the future, which could harm our revenue and gross margins. As is typical in the semiconductor industry, the average selling price of a particular product has historically declined significantly over the life of the product.
The average selling prices of products in our markets have historically decreased rapidly and will likely do so in the future, which could harm our revenue and gross margins. 19 As is typical in the semiconductor industry, the average selling price of a particular product has historically declined significantly over the life of the product.
Any litigation or arbitration regarding patents or other intellectual property could be costly and time consuming and could divert our management and key personnel from our business operations. We have in the past and may from time to time in the future become involved in litigation that requires our management to commit significant resources and time.
Any litigation or arbitration regarding patents or other intellectual property could be costly and time consuming and could divert our management and key personnel from our business operations. We have in the past and may from time 25 to time in the future become involved in litigation that requires our management to commit significant resources and time.
Reductions in our average selling prices to one customer could also impact our average selling prices to all customers. A decline in average selling prices would harm our gross margins for a particular product. If not offset by sales of other 33 products with higher gross margins, our overall gross margins may be adversely affected.
Reductions in our average selling prices to one customer could also impact our average selling prices to all customers. A decline in average selling prices would harm our gross margins for a particular product. If not offset by sales of other products with higher gross margins, our overall gross margins may be adversely affected.
The reduction of our equity ownership of the JV Company is part of a plan to enable the JV Company to raise capital more easily and to facilitate a future public listing on the Science and Technology Innovation Board, or STAR Market, of 21 the Shanghai Stock Exchange (the “China IPO”).
The reduction of our equity ownership of the JV Company is part of a plan to enable the JV Company to raise capital more easily and to facilitate a future public listing on the Science and Technology Innovation Board, or STAR Market, of the Shanghai Stock Exchange (the “China IPO”).
Our normal seasonality cycle has also been impacted by the COVID-19 pandemic and related events, making it more difficult to predict and determine a more consistent seasonality trend.
Our normal seasonality cycle has also been impacted by the recent COVID-19 pandemic and related events, making it more difficult to predict and determine a more consistent seasonality trend.
Substantial uncertainties exist with respect to the interpretation and implementation of PRC Foreign Investment Law and how it may impact the viability of our current corporate structure, corporate governance and business operations.
Uncertainties exist with respect to the interpretation and implementation of PRC Foreign Investment Law and how it may impact the viability of our current corporate structure, corporate governance and business operations.
In the past, we also experienced ransomware attacks on our information technology system. In April, 2022, we became aware of a cybersecurity incident involving unauthorized access to one of the Company's email account, resulting in unauthorized payments. We recorded a loss of $1.5 million due to the incident for the three months ended March 31, 2022.
In the past, we also experienced ransomware attacks on our information technology system. In April, 2022, we became aware of a cybersecurity incident involving unauthorized access to one of the Company's email accounts, resulting in unauthorized payments. We recorded a loss of $1.5 million due to the incident for the three months ended March 31, 2022.
The Negative List has been updated twice in 35 June 2020 for year 2021 and December 2021 for year 2022. The current effective Negative List took effect on January 1, 2022. Since the Foreign Investment Law was newly enacted, uncertainties still exist in relation to its interpretation and implementation.
The Negative List has been updated twice in June 2020 for year 2021 and December 2021 for year 2022. The current effective Negative List took effect on January 1, 2022. 31 Since the Foreign Investment Law was newly enacted, uncertainties still exist in relation to its interpretation and implementation.
In calculating accumulated profits, foreign investment enterprises in China are required to allocate at least 10% of their accumulated profits each year, if any, to fund certain reserve funds unless these reserves have reached 50% of the registered capital of the enterprises.
In calculating accumulated profits, foreign investment enterprises in China are required to allocate 10% of their accumulated profits each year, if any, to fund certain reserve funds unless these reserves have reached 50% of the registered capital of the enterprises.
Successful acquisitions and alliances in the semiconductor industry are difficult to accomplish because they require, among other things, efficient integration and aligning of product offerings and manufacturing operations and coordination of sales and marketing and research and development efforts.
Successful acquisitions and alliances in the semiconductor industry are difficult to accomplish because they require, among other factors, efficient integration and aligning of product offerings and manufacturing operations and coordination of sales and marketing and research and development efforts.
It is doubtful whether courts in Bermuda will enforce judgments obtained in other jurisdictions, including the U.S., against us or our directors or officers under the securities laws of those jurisdictions or entertain actions in Bermuda against us or our directors or officers under the securities laws of other jurisdictions. 39
It is doubtful whether courts in Bermuda will enforce judgments obtained in other jurisdictions, including the U.S., against us or our directors or officers under the securities laws of those jurisdictions or entertain actions in Bermuda against us or our directors or officers under the securities laws of other jurisdictions. 35
Any of these jurisdictions may assert that we have 31 unpaid taxes. Our effective tax rate was 7.9%, 6.5% and (1.9)% for the fiscal years ended June 30, 2022, 2021 and 2020, respectively.
Any of these jurisdictions may assert that we have unpaid taxes. Our effective tax rate was 30.1%, 7.9% and 6.5% for the fiscal years ended June 30, 2023, 2022 and 2021, respectively.
However, we must make a separate determination for each taxable year as to whether we are a PFIC after the close of each taxable year and we cannot assure you that we will not be a PFIC for our 2022 taxable year or any future taxable year.
However, we must make a separate determination for each taxable year as to whether we are a PFIC after the close of each taxable year and we cannot assure you that we will not be a PFIC for our June 30, 2023 taxable year or any future taxable year.
Our revenue from the PC markets accounted for approximately 44.5%, 42.5% and 41.1% of our total revenue for the years ended June 30, 2022, 2021 and 2020, respectively. The increasing popularity of smaller, mobile computing devices such as tablets and smart phones with touch interfaces is rapidly changing the PC markets both in the United States and abroad.
Our revenue from the PC markets accounted for approximately 35.2%, 44.5% and 42.5% of our total revenue for the years ended June 30, 2023, 2022 and 2021, respectively. The increasing popularity of smaller, mobile computing devices such as tablets and smart phones with touch interfaces is rapidly changing the PC markets both in the United States and abroad.
We expect to continue to rely in part on third party foundries to meet our wafer requirements. Although we use several independent foundries, our primary third-party foundry is HHGrace, which manufactured 10.3%, 11.5% and 12.7% of the wafers used in our products for the fiscal years ended June 30, 2022, 2021 and 2020, respectively.
We expect to continue to rely in part on third party foundries to meet our wafer requirements. Although we use several independent foundries, our primary third-party foundry is HHGrace, which manufactured 9.6%, 10.3% and 11.5% of the wafers used in our products for the fiscal years ended June 30, 2023, 2022 and 2021, respectively.
We estimate the allowance for price adjustment based on factors such as distributor inventory levels, pre-approved future distributor selling prices, distributor margins and demand for our products. Our estimated allowances for price adjustments, which we offset against accounts receivable from distributors, were $18.7 million and $12.4 million at June 30, 2022 and 2021, respectively.
We estimate the allowance for price adjustment based on factors such as distributor inventory levels, pre-approved future distributor selling prices, distributor margins and demand for our products. Our estimated allowances for price adjustments, which we offset against accounts receivable from distributors, were $40.0 million and $18.7 million at June 30, 2023 and 2022, respectively.
In addition, the operation of our packaging and testing facilities is subject to a number of risks, including the following: • unavailability of equipment, whether new or previously owned, at acceptable terms and prices; • facility equipment failure, power outages or other disruptions; • shortage of raw materials, including packaging substrates, copper, gold and molding compound; • failure to maintain quality assurance and remedy defects and impurities; 18 • changes in the packaging requirements of customers; • our limited experience in operating a high-volume packaging and testing facility; and • operation stoppage due to the city-wide COVID-19 lockdown.
In addition, the operation of our packaging and testing facilities is subject to a number of risks, including the following: 23 • unavailability of equipment, whether new or previously owned, at acceptable terms and prices; • facility equipment failure, power outages or other disruptions; • shortage of raw materials, including packaging substrates, copper, gold and molding compound; • failure to maintain quality assurance and remedy defects and impurities; • changes in the packaging requirements of customers; • our limited experience in operating a high-volume packaging and testing facility; and • operation stoppage due to the city-wide lockdown in response to public health emergencies or pandemics.
Since the formation of the JV Company, we have retained control over the business operation of the JV Company through our majority equity ownership and board representation.
At the formation of the JV Company, we retained control over the business operation of the JV Company through our majority equity ownership and board representation.
Department of Justice commenced an investigation into the Company’s compliance with export control regulations relating to its business transactions with Huawei and its affiliates (“Huawei”), which were added to the “Entity List” by the Department of Commerce (“DOC”) in May 2019.
Department of Justice commenced an investigation into the Company’s compliance with export control regulations relating to its business transactions with Huawei and its affiliates (“Huawei”), which were added to the “Entity List” by the Department of Commerce (“DOC”) in May 2019. The Company is cooperating fully with federal authorities in the investigation.
As of June 30, 2022, we owned 888 issued U.S. patents expiring between 2022 and 28 2041 and had 62 pending patent applications with the United States Patent and Trademark Office. In addition, we own patents and have filed patent applications in several jurisdictions outside of the U.S, including China, Taiwan, Japan and Korea.
As of June 30, 2023, we owned 918 issued U.S. patents expiring between 2023 and 2041 and had 45 pending patent applications with the United States Patent and Trademark Office. In addition, we own patents and have filed patent applications in several jurisdictions outside of the U.S, including China, Taiwan, Japan and Korea.
As a result of these and other restrictions under PRC laws and regulations, our China subsidiaries are restricted in their abil ity to transfer a portion of their net assets to the parent. Such restricted portion amounted to approximat ely $92.4 million, or 10.8% of our total consolidated net assets attributed to the Company as of June 30, 2022.
As a result of these and other restrictions under PRC laws and regulations, our China subsidiaries are restricted in their abil ity to transfer a portion of their net assets to the parent. Such restricted portion amounted to approximat ely $93.2 million, or 10.5% of our total consolidated net assets attributed to the Company as of June 30, 2023.
The M&A Rules and certain other PRC regulations establish complex procedures for some acquisitions of Chinese companies by foreign investors, which could make it more difficult for us to pursue growth through acquisitions in China. 36 The Regulations on Mergers and Acquisitions of Domestic Companies by Foreign Investors, or the M&A Rules, adopted by six PRC regulatory agencies in August 2006 and amended in 2009, and some other regulations and rules concerning mergers and acquisitions established additional procedures and requirements that could make merger and acquisition activities by foreign investors more time consuming and complex, including requirements in some instances that the Ministry of Commerce ("MOC") be notified in advance of any change-of-control transaction in which a foreign investor takes control of a PRC domestic enterprise.
The Regulations on Mergers and Acquisitions of Domestic Companies by Foreign Investors, or the M&A Rules, adopted by six PRC regulatory agencies in August 2006 and amended in 2009, and some other regulations and rules concerning mergers and acquisitions established additional procedures and requirements that could make merger and acquisition activities by foreign investors more time consuming and complex, including requirements in some instances 32 that the Ministry of Commerce ("MOC") be notified in advance of any change-of-control transaction in which a foreign investor takes control of a PRC domestic enterprise.
Our estimated liabilities for stock rotation at June 30, 2022 and 2021 were $4.8 million and $3.9 million, respectively. Our estimates for these allowances and accruals may be inaccurate.
Our estimated liabilities for stock rotation at June 30, 2023 and 2022 were $5.6 million and $4.8 million, respectively. Our estimates for these allowances and accruals may be inaccurate.
In the past, we experienced a significant reduction in the demand for our products due to the declining PC markets, which had negatively impacted our revenue, profitability and gross margin.
In the past prior to the commencement of the COVID-19 pandemic, we experienced a significant reduction in the demand for our products due to the declining PC markets, which negatively impacted our revenue, profitability and gross margin.
Legal Proceeding. 38 If securities or industry analysts do not publish research or reports about our business, or if they adversely change their recommendations regarding our common shares or if our operating results do not meet their expectations, the trading price of our common shares could decline.
Legal Proceeding. 34 If securities or industry analysts adversely change their recommendations regarding our common shares or if our operating results do not meet their expectations, the trading price of our common shares could decline. The market price of our common shares is influenced by the research and reports that industry or securities analysts publish about us or our business.
We have made and may continue to make strategic acquisitions of other companies, assets or businesses and these acquisitions introduce significant risks and uncertainties. In order to position ourselves to take advantage of growth opportunities, we have made, and may continue to make, strategic acquisitions, mergers, partnership and alliances that involve significant risks and uncertainties.
In order to position ourselves to take advantage of growth opportunities, we have made, and may continue to make, strategic acquisitions, mergers, partnership, joint ventures and alliances that involve significant risks and uncertainties.
Demand for our products from our end customers fluctuates depending on their sales outlooks and market and economic conditions. Accordingly, our distributors place purchase orders with us based on their forecasts of end customer demand.
Our revenue may fluctuate significantly from period to period due to ordering patterns from our distributors and seasonality. Demand for our products from our end customers fluctuates depending on their sales outlooks and market and economic conditions. Accordingly, our distributors place purchase orders with us based on their forecasts of end customer demand.
In connection with this investigation, DOC requested the Company to suspend shipments of its products to Huawei, and the Company complied with such request. The Company has not shipped any product to Huawei since December 31, 2019. The Company is currently working with DOC to resolve this issue and requested DOC to grant permission to reinstate shipments to Huawei.
In connection with this investigation, DOC previously requested the Company to suspend shipments of its products to Huawei. The Company complied with such request, and the Company has not shipped any product to Huawei after December 31, 2019. The Company continues to work with DOC to resolve this issue.
While we have implemented additional measures to enhance our security protocol to protect our system and intend to do so in response to any threats, there is no guarantee that future attacks would be thwarted or prevented.
Any cybersecurity breach and financial loss may also have a negative impact on our internal control over financial reporting. While we have implemented additional measures to enhance our security protocol to protect our system and intend to do so in response to any threats, there is no guarantee that future attacks would be thwarted or prevented.
Our strategy of diversification into different market segments may not succeed according to our expectations and may expose us to new risks and place significant strains on our management, operational, financial and other resources. 19 As part of the growth strategy to diversify our product portfolio and in response to the decline of the PC markets, we have been developing new technologies and products designed to penetrate into other markets and applications, including merchant power supplies, flat panel TVs, smart phones, tablets, gaming consoles, lighting, datacom, telecommunications, home appliances and industrial motor controls.
As part of the growth strategy to diversify our product portfolio and in response to the decline of the PC markets, we have been developing new technologies and products designed to penetrate into other markets and applications, including merchant power supplies, flat panel TVs, smart phones, tablets, gaming consoles, lighting, datacom, telecommunications, home appliances and industrial motor controls.
Risks Related to Doing Business in China • China’s economic, political and social conditions, as well as government policies, could affect our business and growth. • Changes in China’s laws, legal protections or government policies on foreign investment in China may harm our business. • The continuing potential for new or additional tariffs on imported goods from China could adversely affect our business operations. • Substantial uncertainties exist with respect to the interpretation and implementation of PRC Foreign Investment Law and how it may impact us. • Limitations on our ability to transfer funds to our China subsidiaries could adversely affect our ability to expand our operations, make investments that could benefit our businesses and otherwise fund and conduct our business. • China's currency exchange control and government restrictions on investment repatriation may impact our ability to transfer funds outside of China. • The M&A Rules and certain other PRC regulations establish complex procedures for some acquisitions of Chinese companies by foreign investors, which could make it more difficult for us to pursue growth through acquisitions in China. • Our results of operations may be negatively impacted by fluctuations in foreign currency exchange rates between U.S. dollar and Chinese Yuan, or RMB. • PRC labor laws may adversely affect our results of operations. • Relations between Taiwan and China could negatively affect our business, financial condition and operating results and, therefore, the market value of our common shares. • Risks Related to Our Corporate Structure and Our Common Shares. 16 • Our share price may be volatile and you may be unable to sell your shares at or above the purchase price, if at all. • If securities or industry analysts do not publish research or reports about our business, or if they adversely change their recommendations regarding our common shares or if our operating results do not meet their expectations, the trading price of our common shares could decline. • Anti-takeover provisions in our bye-laws could make an acquisition of us more difficult and may prevent attempts by our shareholders to replace or remove our current management. • We are a Bermuda company and the rights of shareholders under Bermuda law may be different from U.S. laws.
Risks Related to Doing Business in China • China’s economic, political and social conditions, as well as government policies, could affect our business and growth. • Changes in China’s laws, legal protections or government policies on foreign investment in China may harm our business. • The continuing potential for new or additional tariffs on imported goods from China could adversely affect our business operations. • Uncertainties exist with respect to the interpretation and implementation of PRC Foreign Investment Law and how it may impact us. • Limitations on our ability to transfer funds to our China subsidiaries could adversely affect our ability to expand our operations, make investments that could benefit our businesses and otherwise fund and conduct our business. • China's currency exchange control and government restrictions on investment repatriation may impact our ability to transfer funds outside of China. • The M&A Rules and certain other PRC regulations establish complex procedures for some acquisitions of Chinese companies by foreign investors, which could make it more difficult for us to pursue growth through acquisitions in China. • Our results of operations may be negatively impacted by fluctuations in foreign currency exchange rates between U.S. dollar and Chinese Yuan, or RMB. • PRC labor laws may adversely affect our results of operations. • Relations between Taiwan and China could negatively affect our business, financial condition and operating results and, therefore, the market value of our common shares.
Risks Related to Doing Business in China China's economic, political and social conditions, as well as government policies, could affect our business and growth. Our financial results have been, and are expected to continue to be, affected by the economy in China. If China’s economy is slowing down, it may negatively affect our business operation and financial results.
Our financial results have been, and are expected to continue to be, affected by the economy in China. If China’s economy is slowing down, it may negatively affect our business operation and financial results.
For example, geopolitical disputes and increased tensions between China and its neighboring countries in which we conduct business could make it more difficult for us to coordinate and manage our international operations in such countries. 34 Changes in China's laws, legal protections or government policies on foreign investment in China may harm our business.
For example, geopolitical disputes and increased tensions between China and its neighboring countries in which we conduct business could make it more difficult for us to coordinate and manage our international operations in such countries.
See “Risk Factors- Our business operation and financial performance may be adversely affected by the COVID-19 pandemic and related events.” If we are unable to introduce or develop new and enhanced products that meet or are compatible with our customer’s product requirements in a timely manner, it may harm our business, financial position and operating results.
If we are unable to introduce or develop new and enhanced products that meet or are compatible with our customer’s product requirements in a timely manner, it may harm our business, financial position and operating results.
Our industry is highly cyclical and is characterized by constant and rapid technological change such as the introduction of smart phones and tablets that contributed to the decline in the PC market, product obsolescence and price erosion, evolving standards, uncertain product life cycles and wide fluctuations in product supply and demand.
The semiconductor market is also highly cyclical and is characterized by constant and rapid technological change such as product obsolescence and price erosion, evolving standards, uncertain product life cycles and wide fluctuations in product supply and demand.
The trading price of our common shares on The NASDAQ Global Select Market ranged from a low of $24.40 to high of $65.72 from July 1, 2021 to June 30, 2022. At July 31, 2022, the trading price of our common shares was $42.01.
The trading price of our common shares on The NASDAQ Global Select Market ranged from a low of $23.36 to high of $44.89 from July 1, 2022 to June 30, 2023. At July 31, 2023, the trading price of our common shares was $32.88.
Based on the current and anticipated valuation of our assets and the composition of our income and assets, we do not expect to be considered a PFIC, for U.S. federal income tax purposes for the foreseeable future.
We may be classified as a passive foreign investment company (“PFIC”), which could result in adverse U.S. federal income tax consequences for U.S. holders. 29 Based on the current and anticipated valuation of our assets and the composition of our income and assets, we do not expect to be considered a PFIC, for U.S. federal income tax purposes for the foreseeable future.
Regulations and rules on foreign investments in China impose restrictions on the means that a foreign investor like us may apply to facilitate corporate transactions we may undertake.
These laws and regulations frequently change, and their interpretation and enforcement involve uncertainties that could limit the legal protections available to us. Regulations and rules on foreign investments in China impose restrictions on the means that a foreign investor like us may apply to facilitate corporate transactions we may undertake.
There is no guarantee that the JV Company will be able to obtain financing on favorable terms, or at all, and any such failure may negatively impact our ability to access its wafer manufacturing capacity.
There is no guarantee that the JV Company will be able to obtain financing on favorable terms, or at all, and any such failure may negatively impact our ability to access its wafer manufacturing capacity. 17 Any of the foregoing risks could materially reduce the expected return of our investment in the JV Transaction and adversely affect our business operations, our financial performance and the trading price of our shares.
Furthermore, there is no guarantee that we will be able to identify a viable target for strategic acquisition, and we may incur significant costs and resources in such effort that may not result in a successful acquisition. In addition, we may also issue equity securities to pay for future acquisitions or alliances, which could be dilutive to existing shareholders.
Also we may incur significant costs in efforts that may not result in a successful acquisitions. 22 In addition, we may also issue equity securities to pay for future acquisitions or alliances, which could be dilutive to existing shareholders.
The market price of our common shares is influenced by the research and reports that industry or securities analysts publish about us or our business. There is no guarantee that these analysts will understand our business and results, or that their reports will be accurate or correctly predict our operating results or prospects.
There is no guarantee that these analysts will understand our business and results, or that their reports will be accurate or correctly predict our operating results or prospects.
If we were treated as a PFIC for any taxable year during which a U.S. holder held common shares, certain adverse U.S. federal income tax consequences could apply for such U.S. holder.
If we were treated as a PFIC for any taxable year during which a U.S. holder held common shares, certain adverse U.S. federal income tax consequences could apply for such U.S. holder. Risks Related to Doing Business in China China's economic, political and social conditions, as well as government policies, could affect our business and growth.
Our business and corporate transactions, including our operations through the JV Company, are subject to laws and regulations applicable to foreign investment in China as well as laws and regulations applicable to foreign-invested enterprises. These laws and regulations frequently change, and their interpretation and enforcement involves uncertainties that could limit the legal protections available to us.
Changes in China's laws, legal protections or government policies on foreign investment in China may harm our business. 30 Our business and corporate transactions, including our operations through the JV Company, are subject to laws and regulations applicable to foreign investment in China as well as laws and regulations applicable to foreign-invested enterprises.
Therefore, comparing our operating results on a period-to-period basis may not be meaningful, and you should not rely on our past results as an indication of our future performance.
Therefore, comparing our operating results on a period-to-period basis may not be meaningful, and you should not rely on our past results as an indication of our future performance. 16 Geopolitical and economic conflicts between United States and China may adversely affect our business Geopolitical conflicts and tensions between the United States and China have threatened and destabilized trading relationships and economic activities between the two countries.
Risks Related to Our Corporate Structure and Our Common Shares Our share price may be volatile and you may be unable to sell your shares at or above the purchase price, if at all.
Therefore, factors affecting military, political or economic relationship between China and Taiwan could have an adverse effect on our business, financial condition and operating results. Risks Related to Our Corporate Structure and Our Common Shares Our share price may be volatile and you may be unable to sell your shares at or above the purchase price, if at all.
The difficulties of integration and alignment may be increased by the necessity of coordinating geographically separated organizations, the complexity of the technologies being integrated and aligned and the necessity of integrating personnel with disparate business backgrounds and combining different corporate cultures.
The difficulties of integration and alignment may be increased by the necessity of coordinating geographically separated organizations, the complexity of the technologies being integrated and aligned and the necessity of integrating personnel with dissimilar business backgrounds. Furthermore, there is no guarantee that we will be able to identify viable targets for strategic acquisition.
Geopolitical and economic conflicts between United States and China may adversely affect our business Geopolitical conflicts and tensions between the United States and China have threatened and destabilized trading relationships and economic activities between the two countries. Because we have significant operations in both countries, such conflicts and tensions may negatively impact our business.
Because we have significant operations in both countries, such conflicts and tensions may negatively impact our business.
An outbreak of avian flu or H1N1 flu in the human population, or another similar health crisis, such as the recent COVID-19 pandemic, could adversely affect the economies and financial markets of many countries, particularly in Asia.
An outbreak of avian flu or H1N1 flu in the human population, or another similar health crisis could adversely affect the economies and financial markets of many countries, particularly in Asia. Moreover, any related disruptions to transportation or the free movement of persons could hamper our operations and force us to close our offices temporarily.
Using a foundry with which we have no established relationship could expose us to potentially unfavorable pricing, unsatisfactory quality or insufficient capacity allocation.
Using a foundry with which we have no established relationship could expose us to potentially unfavorable pricing, unsatisfactory quality or insufficient capacity allocation. We also rely on third-party foundries to effectively implement certain of our proprietary technology and processes and also require their cooperation in developing new fabrication processes.
Employees who waive such vacation time at the request of employers must be compensated for three times their normal salaries for each waived vacation day.
Employees who waive such vacation time at the request of employers must be compensated for three times their normal salaries for each waived vacation day. This mandated paid-vacation regulation, coupled with the trend of increasing compensation, may result in increase in our employee-related costs and expenses and decrease in our profit margins.
This mandated paid-vacation regulation, coupled with the trend of increasing compensation, may result in increase in our employee-related costs and expenses and decrease in our profit margins. 37 Relations between Taiwan and China could negatively affect our business, financial condition and operating results and, therefore, the market value of our common shares. Taiwan has a unique international political status.
Relations between Taiwan and China could negatively affect our business, financial condition and operating results and, therefore, the market value of our common shares. 33 Taiwan has a unique international political status. China does not recognize the sovereignty of Taiwan.
For example, a significant decline in our market share or sales orders may negatively impact our factory utilization and reduce our ability to achieve profitability. In April 2022, the operations of our packaging and testing facilities in Shanghai, China were suspended due to a strict lockdown of the city imposed by the local government in response to surging COVID cases.
For example, a significant decline in our market share or sales orders may negatively impact our factory utilization and reduce our ability to achieve profitability.
While these attacks did not have a material adverse effect on our business operation or results of operations, they caused temporary disruptions and interfered with our operations. Any cybersecurity breach and financial loss may also have a negative impact on our internal control over financial reporting.
The Company believes that it has not incurred other damages and losses based on the conclusion of the full investigation. While these attacks did not have a material adverse effect on our business operation or results of operations, they caused temporary disruptions and interfered with our operations.
Two distributors, WPG and Promate, collectively accounted for 64.3%, 64.1% and 64.8% of our revenue for the fiscal years ended June 30, 2022, 2021 and 2020, respectively. Our agreements with Promate and WPG were renewed in July 2017 and are automatically renewed for each one-year period continuously unless terminated earlier pursuant to the provisions in the agreements.
Two distributors, WPG and Promate, collectively accounted for 57.2%, 64.3% and 64.1% of our revenue for the fiscal years ended June 30, 2023, 2022 and 2021, respectively.
Our inability to continue such shipment may negatively impact our revenue and financial performance, particularly if we are not able to acquire new customers to offset the loss of shipments to Huawei. The ongoing government investigations into our export control compliance also subject us to a number of financial and business risks.
The ongoing government investigations into our export control compliance also subject us to a number of financial and business risks.
A substantial number of our key customers and some of our essential sales and engineering personnel are located in Taiwan, and we have a large number of operational personnel and employees located in China. Therefore, factors affecting military, political or economic relationship between China and Taiwan could have an adverse effect on our business, financial condition and operating results.
Although significant economic and cultural relations have been established during recent years between Taiwan and China, relations have often been strained. A substantial number of our key customers and some of our essential sales and engineering personnel are located in Taiwan, and we have a large number of operational personnel and employees located in China.
Any such tax could materially and adversely affect our results of operations. We may be classified as a passive foreign investment company (“PFIC”), which could result in adverse U.S. federal income tax consequences for U.S. holders.
Any such tax could materially and adversely affect our results of operations.
Removed
Any of the following risks and uncertainties may be exacerbated by the impacts of the COVID-19 pandemic and related events.
Added
Risks Related to Our Corporate Structure and Our Common Shares • Our share price may be volatile and you may be unable to sell your shares at or above the purchase price, if at all. 14 • If securities or industry analysts do not publish research or reports about our business, or if they adversely change their recommendations regarding our common shares or if our operating results do not meet their expectations, the trading price of our common shares could decline. • Anti-takeover provisions in our bye-laws could make an acquisition of us more difficult and may prevent attempts by our shareholders to replace or remove our current management. • We are a Bermuda company and the rights of shareholders under Bermuda law may be different from U.S. laws.
Removed
Risks Related to Our Business Our business operations and financial performance may be adversely affected by the COVID-19 pandemic and related events. Our business operations have been impacted by the global COVID-19 pandemic and the resulting economic downturn.
Added
Risks Related to Our Business Our operating results and financial conditions are affected by downturns in the semiconductor industry, changes in end-market demand and other macro-economic trends.
Removed
Numerous governmental jurisdictions, including the States of California, Oregon and Texas in the U.S. and countries throughout the Asia Pacific region have imposed various restrictions on commercial activities, resulting in business closures, work stoppages, labor shortage, disruptions to ports, vaccine mandates and other shipping infrastructure, border closures, thereby negatively impacting our customers, suppliers, distributors, employees, offices, and the entire semiconductor ecosystem.
Added
The semiconductor industry periodically experiences significant economic downturns characterized by diminished product and end-market demand, production overcapacity, excess inventory, which can result in rapid significant decline in shipment and sales, which may harm our operating results and financial condition.
Removed
As a result of the COVID-19 pandemic and changing consumer behaviors due to various government restrictions and the growing trend to provide remote-working options by employers, we have experienced shifting market trends, including an increasing demand in markets for notebooks, PCs, gaming devices and other products.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe following table sets forth the location, size and primary use of our principal properties that are material to our business operations: Location Square Footage Primary Use 475 Oakmead Parkway Sunnyvale, California, USA 94085 57,000 Research and development, marketing, sales and administration 3131 Northeast Brookwood Parkway Hillsboro, Oregon, USA 97124 252,950 Wafer fabrication facility Building 8/9, No. 91, Lane 109, Rongkang Road, Songjiang District, Shanghai, China 201614 206,179 Packaging and testing, manufacturing support Building B1, Dongkai Industrial Park, Songjiang Export Process Zone, Area B, Songjiang, Shanghai, China 201614 250,198 Packaging and testing, manufacturing support We believe that our current facilities are adequate and that additional space will be available on commercially reasonable terms for the foreseeable future. 41
Biggest changeThe following table sets forth the location, size and primary use of our principal properties that are material to our business operations: Location Square Footage Primary Use 475 Oakmead Parkway Sunnyvale, California, USA 94085 57,000 Research and development, marketing, sales and administration 3131 Northeast Brookwood Parkway Hillsboro, Oregon, USA 97124 252,950 Wafer fabrication facility Building 8/9, No. 91, Lane 109, Rongkang Road, Songjiang District, Shanghai, China 201614 191,540 Packaging and testing, manufacturing support Building B1, Dongkai Industrial Park, Songjiang Export Process Zone, Area B, Songjiang, Shanghai, China 201614 250,198 Packaging and testing, manufacturing support We believe that our current facilities are adequate and that additional space will be available on commercially reasonable terms for the foreseeable future. 37
Item 2. Properties As of July 31, 2022, our primary U.S. facility, which houses our research and design function, as well as elements of marketing and administration, is located in Sunnyvale, California. We conduct our manufacturing, research and development, sales and marketing and administration in Asia and North America.
Item 2. Properties As of July 31, 2023, our primary U.S. facility, which houses our research and design function, as well as elements of marketing and administration, is located in Sunnyvale, California. We conduct our manufacturing, research and development, sales and marketing and administration in Asia and North America.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeDOC has not informed the Company of any specific timeline or schedule under which DOC will provide a response to the Company’s request. We have in the past, and may from time to time in the future, become involved in legal proceedings arising from the normal course of business activities.
Biggest changeWe have in the past, and may from time to time in the future, become involved in legal proceedings arising from the normal course of business activities. The semiconductor industry is characterized by frequent claims and litigation, including claims regarding patent and other intellectual property rights as well as improper hiring practices.
In connection with this investigation, DOC previously requested the Company to suspend shipments of its products to Huawei. The Company complied with such request, and the Company has not shipped any product to Huawei after December 31, 2019.
In connection with this investigation, DOC previously requested the Company to suspend shipments of its products to Huawei. The Company complied with such request, and the Company has not shipped any product to Huawei after December 31, 2019. The Company continues to work with DOC to resolve this issue.
The semiconductor industry is characterized by frequent claims and litigation, including claims regarding patent and other intellectual property rights as well as improper hiring practices. Irrespective of the validity of such claims, we could incur significant costs in the defense thereof or could suffer adverse effects on its operations. Item 4. Mine Safety Disclosures Not Applicable. 42 PART II
Irrespective of the validity of such claims, we could incur significant costs in the defense thereof or could suffer adverse effects on its operations. Item 4. Mine Safety Disclosures Not Applicable. 38 PART II
The Company continues to work with DOC to resolve this issue and requested DOC to grant permission to reinstate the Company’s shipments to Huawei. As part of this process and in response to DOC’s request, the Company provided certain documents and materials relating to the Company’s supply chain and shipment process to DOC, and DOC is currently reviewing this matter.
As part of this process and in response to DOC’s request, the Company provided certain documents and materials relating to the Company’s supply chain and shipment process to DOC, and DOC is currently reviewing this matter. DOC has not informed the Company of any specific timeline or schedule under which DOC will complete its review.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 42 Part II. 43 Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 43 Item 6. [Reserved] 45 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 46 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 65 Item 8.
Biggest changeItem 4. Mine Safety Disclosures 38 Part II. 39 Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 39 Item 6. [Reserved] 41 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 42 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 62 Item 8.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeShares repurchased under this program are accounted for as treasury shares and the total cost of shares repurchased is recorded as a reduction of shareholders' equity. During the fourth quarter of fiscal year 2022, the Company did not repurchase any shares under the Repurchase Program. As of June 30, 2022, we had $13.4 million available under this repurchase program. 44
Biggest changeShares repurchased under this program are accounted for as treasury shares and the total cost of shares repurchased is recorded as a reduction of shareholders' equity. During the fourth quarter of fiscal year 2023, the Company repurchased 441,269 shares under the Repurchase Program. As of June 30, 2023, there were no availability under this repurchase program, which is now terminated.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers In September 2017, the board of directors approved a repurchase program (the “Repurchase Program”) that allowed the Company to repurchase its common shares from the open market pursuant to a pre-established Rule 10b5-1 trading plan or 43 through privately negotiated transactions up to an aggregate of $30.0 million.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers In September 2017, the board of directors approved a repurchase program (the “Repurchase Program”) that allowed the Company to repurchase its common shares from the open market pursuant to a pre-established Rule 10b5-1 trading plan or through privately negotiated transactions up to an aggregate of $30.0 million.
The amount and timing of any repurchases under the Repurchase Program depend on a number of factors, including but not limited to, the trading price, volume and availability of the Company’s common shares. There is no guarantee that such repurchases under the Repurchase Program will enhance the value of our shares.
The amount and timing of any repurchases under 39 the Repurchase Program depend on a number of factors, including but not limited to, the trading price, volume and availability of the Company’s common shares. There is no guarantee that such repurchases under the Repurchase Program will enhance the value of our shares.
Share Performance Graph The following graph compares the total cumulative shareholder return on our common shares with the total cumulative return of the NASDAQ Composite Index and the Philadelphia Semiconductor Index for the last five fiscal years ended June 30, 2022, assuming an investment of $100 at the beginning of such period and the reinvestment of any dividends.
Share Performance Graph The following graph compares the total cumulative shareholder return on our common shares with the total cumulative return of the NASDAQ Composite Index and the Philadelphia Semiconductor Index for the last five fiscal years ended June 30, 2023, assuming an investment of $100 at the beginning of such period and the reinvestment of any dividends.
As of July 31, 2022, there were approximately 160 holders of record of our common shares, not including those shares held in a street or nominee name. Dividend Policy We have never declared or paid cash dividends on our common shares.
As of July 31, 2023, there were approximately 147 holders of record of our common shares, not including those shares held in a street or nominee name. Dividend Policy We have never declared or paid cash dividends on our common shares.
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The following table sets for the share repurchases under this program during the fourth quarter of fiscal year 2023.
Added
Period Total Number of Shares (or Units) Purchased Average Price Paid per Share (or Unit) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Be Purchased Under the Plans or Programs April 1, 2023 to April 30, 2023 374,379 $ 24.37 374,379 — May 1, 2023 to May 31, 2023 66,890 $ 24.40 66,890 — Jun 1, 2023 to June 30, 2023 — $ — — — Total repurchase during the three months ended June 30, 2023 441,269 $ 24.37 441,269 $ — 40

Item 7. Management's Discussion & Analysis

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

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Biggest changeYear Ended June 30, 2022 2021 2020 2022 2021 2020 (in thousands) (% of revenue) Revenue $ 777,552 $ 656,902 $ 464,909 100.0 % 100.0 % 100.0 % Cost of goods sold (1) 508,996 452,359 362,178 65.5 % 68.9 % 77.9 % Gross profit 268,556 204,543 102,731 34.5 % 31.1 % 22.1 % Operating expenses: Research and development (1) 71,259 62,953 51,252 9.2 % 9.6 % 11.0 % Selling, general and administrative (1) 95,259 77,514 64,816 12.3 % 11.8 % 13.9 % Impairment of privately-held investment — — 600 — % — % 0.1 % Total operating expenses 166,518 140,467 116,668 21.5 % 21.4 % 25.0 % Operating income (loss) 102,038 64,076 (13,937) 13.0 % 9.7 % (2.9) % Other income (loss), net 999 2,456 (1,229) 0.1 % 0.4 % (0.3) % Interest expenses, net (3,920) (6,308) (2,743) (0.5) % (1.0) % (0.6) % Gain on deconsolidation of the JV Company 399,093 — — 51.3 % — % — % Loss on changes of equity interest in the JV Company, net (3,140) — — (0.4) % — % — % Net income (loss) before income taxes 495,070 60,224 (17,909) 63.5 % 9.1 % (3.8) % Income tax expense 39,258 3,935 348 5.0 % 0.6 % 0.1 % Net income (loss) before loss from equity method investment 455,812 56,289 (18,257) 58.5 % 8.5 % (3.9) % Equity method investment loss from equity investee 2,629 — — 0.3 % — % — % Net income (loss) 453,183 56,289 (18,257) 58.2 % 8.5 % (3.9) % Net income (loss) attributable to noncontrolling interest 20 (1,827) (11,661) 0.0 % (0.3) % (2.5) % Net income (loss) attributable to Alpha and Omega Semiconductor Limited $ 453,163 $ 58,116 $ (6,596) 58.2 % 8.8 % (1.4) % (1) Includes share-based compensation expense as follows: Year Ended June 30, 2022 2021 2020 2022 2021 2020 (in thousands) (% of revenue) Cost of goods sold $ 5,125 $ 1,756 $ 1,530 0.7 % 0.3 % 0.3 % Research and development 7,049 5,352 2,895 0.9 % 0.8 % 0.6 % Selling, general and administrative 19,150 8,216 6,029 2.5 % 1.3 % 1.3 % $ 31,324 $ 15,324 $ 10,454 4.1 % 2.4 % 2.2 % 52 Revenue The following is a summary of revenue by product type: Year Ended June 30, Change 2022 2021 2020 2022 2021 (in thousands) (in thousands) (in percentage) (in thousands) (in percentage) Power discrete $ 545,135 $ 482,718 $ 391,941 $ 62,417 12.9 % $ 90,777 23.2 % Power IC 220,882 161,726 66,360 59,156 36.6 % 95,366 143.7 % Packaging and testing services 11,535 12,458 6,608 (923) (7.4) % 5,850 88.5 % $ 777,552 $ 656,902 $ 464,909 $ 120,650 18.4 % $ 191,993 41.3 % Fiscal 2022 vs 2021 Total revenue was $777.6 million for fiscal year 2022, an increase of $120.7 million, or 18.4%, as compared to $656.9 million for fiscal year 2021.
Biggest changeYear Ended June 30, 2023 2022 2021 2023 2022 2021 (in thousands) (% of revenue) Revenue $ 691,321 $ 777,552 $ 656,902 100.0 % 100.0 % 100.0 % Cost of goods sold (1) 491,785 508,996 452,359 71.1 % 65.5 % 68.9 % Gross profit 199,536 268,556 204,543 28.9 % 34.5 % 31.1 % Operating expenses: Research and development (1) 88,146 71,259 62,953 12.8 % 9.2 % 9.6 % Selling, general and administrative (1) 88,861 95,259 77,514 12.8 % 12.3 % 11.8 % Total operating expenses 177,007 166,518 140,467 25.6 % 21.5 % 21.4 % Operating income 22,529 102,038 64,076 3.3 % 13.0 % 9.7 % Other income (loss), net (1,730) 999 2,456 (0.3) % 0.1 % 0.4 % Interest expense, net (1,087) (3,920) (6,308) (0.2) % (0.5) % (1.0) % Gain on deconsolidation of the JV Company — 399,093 — — % 51.3 % — % Loss on changes of equity interest in the JV Company, net — (3,140) — — % (0.4) % — % Net income before income taxes 19,712 495,070 60,224 2.8 % 63.5 % 9.1 % Income tax expense 5,937 39,258 3,935 0.9 % 5.0 % 0.6 % Net income before loss from equity method investment 13,775 455,812 56,289 1.9 % 58.5 % 8.5 % Equity method investment loss from equity investee (1,411) (2,629) — (0.1) % (0.3) % — % Net income 12,364 453,183 56,289 1.8 % 58.2 % 8.5 % Net income (loss) attributable to noncontrolling interest — 20 (1,827) 0.0 % 0.0 % (0.3) % Net income attributable to Alpha and Omega Semiconductor Limited $ 12,364 $ 453,163 $ 58,116 1.8 % 58.2 % 8.8 % (1) Includes share-based compensation expense as follows: Year Ended June 30, 2023 2022 2021 2023 2022 2021 (in thousands) (% of revenue) Cost of goods sold $ 5,851 $ 5,125 $ 1,756 0.8 % 0.7 % 0.3 % Research and development 9,437 7,049 5,352 1.4 % 0.9 % 0.8 % Selling, general and administrative 22,200 19,150 8,216 3.2 % 2.5 % 1.3 % $ 37,488 $ 31,324 $ 15,324 5.4 % 4.1 % 2.4 % 48 Revenue The following is a summary of revenue by product type: Year Ended June 30, Change 2023 2022 2021 2023 2022 (in thousands) (in thousands) (in percentage) (in thousands) (in percentage) Power discrete $ 458,795 $ 545,135 $ 482,718 $ (86,340) (15.8) % $ 62,417 12.9 % Power IC 218,620 220,882 161,726 (2,262) (1.0) % 59,156 36.6 % Packaging and testing services 3,979 11,535 12,458 (7,556) (65.5) % (923) (7.4) % License and development services 9,927 — — 9,927 100.0 % — — % $ 691,321 $ 777,552 $ 656,902 $ (86,231) (11.1) % $ 120,650 18.4 % Year Ended June 30, Change 2023 2022 2021 2023 2022 (in thousands) (in thousands) (in percentage) (in thousands) (in percentage) Computing $ 243,286 $ 345,855 $ 279,150 $ (102,569) (29.7) % $ 66,705 23.9 % Consumer 180,753 160,808 145,346 19,945 12.4 % 15,462 10.6 % Communication 103,218 110,356 97,395 (7,138) (6.5) % 12,961 13.3 % Power Supply and Industrial 150,158 149,000 122,553 1,158 0.8 % 26,447 21.6 % Packaging and testing services 3,979 11,533 12,458 (7,554) (65.5) % (925) (7.4) % License and development services 9,927 — — 9,927 100.0 % — — % $ 691,321 $ 777,552 $ 656,902 $ (86,231) (11.1) % $ 120,650 18.4 % Fiscal 2023 vs 2022 Total revenue was $691.3 million for fiscal year 2023, a decrease of $86.2 million, or 11.1%, as compared to $777.6 million for fiscal year 2022.
Our research and development expenses consist primarily of salaries, bonuses, benefits, share-based compensation expense, expenses associated with new product prototypes, travel expenses, fees for engineering services provided by outside contractors and consultants, amortization of software and design tools, depreciation of equipment and overhead costs.
Research and development expenses. Our research and development expenses consist primarily of salaries, bonuses, benefits, share-based compensation expense, expenses associated with new product prototypes, travel expenses, fees for engineering services provided by outside contractors and consultants, amortization of software and design tools, depreciation of equipment and overhead costs.
We account for our investment in the JV Company as an equity method investment and report our equity in earnings or loss of the JV Company on a three-month lag due to an inability to timely obtain financial information of the JV Company.
We account for our investment in the JV Company as an equity method investment and report our equity in earnings or loss of the JV Company on a three-month lag due to our inability to timely obtain financial information of the JV Company.
Cash flows from financing activities Net cash used in financing activities of $21.9 million for the fiscal year 2022 was primarily attributable to $64.3 million of proceeds from borrowings and $6.1 million of proceeds from exercises of share options and issuance of shares under the ESPP, partially offset by $8.6 million in common shares acquired to settle withholding tax related to vesting of restricted stock units, $4.2 million in payments of capital lease obligations, and $35.7 million in repayments of borrowings.
Net cash used in financing activities of $21.9 million for the fiscal year 2022 was primarily attributable to $64.3 million of proceeds from borrowings and $6.1 million of proceeds from exercises of share options and issuance of shares under the ESPP, partially offset by $8.6 million in common shares acquired to settle withholding tax related to vesting of restricted stock units, $4.2 million in payments of capital lease obligations, and $35.7 million in repayments of borrowings.
Cash flows from investing activities Net cash used in investing activities of $130.8 million for the fiscal year 2022 was primarily attributable to $138.0 million purchases of property and equipment, and $20.7 million deconsolidation of cash and cash equivalents of the JV Company, partially offset by $1.4 million government grant related to equipment in the JV Company, $26.3 million proceeds from sale of equity interest in the JV Company and $0.1 million proceeds from sale of property and equipment.
Net cash used in investing activities of $130.8 million for the fiscal year 2022 was primarily attributable to $138.0 million purchases of property and equipment, and $20.7 million deconsolidation of cash and cash equivalents of the JV Company, partially offset by $1.4 million government grant related to equipment in the JV Company, $26.3 million proceeds from sale of equity interest in the JV Company and $0.1 million proceeds from sale of property and equipment.
Tax Cuts and Jobs Act, Enacted December 22, 2017 On December 22, 2017, the United States enacted tax reform legislation through the Tax Cuts and Jobs Act (“the Tax Act”), which significantly changes the existing U.S. tax laws, including, but not limited to, (1) a reduction in the corporate tax rate from 35% to 21%, (2) a shift from a worldwide tax system to a territorial system, (3) eliminating the corporate alternative minimum tax (AMT) and changing how existing AMT credits can be realized, (4) bonus depreciation that will allow for full 50 expensing of qualified property, (5) creating a new limitation on deductible interest expense and (6) changing rules related to uses and limitations of net operating loss carryforwards created in tax years beginning after December 31, 2017.
Tax Cuts and Jobs Act", Enacted December 22, 2017 On December 22, 2017, the United States enacted tax reform legislation through the Tax Cuts and Jobs Act (“the Tax Act”), which significantly changes the existing U.S. tax laws, including, but not limited to, (1) a reduction in the corporate tax 45 rate from 35% to 21%, (2) a shift from a worldwide tax system to a territorial system, (3) eliminating the corporate alternative minimum tax (AMT) and changing how existing AMT credits can be realized, (4) bonus depreciation that will allow for full expensing of qualified property, (5) creating a new limitation on deductible interest expense and (6) changing rules related to uses and limitations of net operating loss carryforwards created in tax years beginning after December 31, 2017.
Gain on deconsolidation of the JV Company and Gain/loss on changes of equity interest in the JV Company Effective December 1, 2021, we entered into the STA with the Investor, pursuant to which we sold to the Investor approximately 2.1% of outstanding equity interest held by us in the JV Company for an aggregate purchase price of RMB 108 million or approximately $16.9 million.
Gain on deconsolidation of the JV Company and Gain/loss on changes of equity interest in the JV Company 51 Effective December 1, 2021, we entered into the STA with the Investor, pursuant to which we sold to the Investor approximately 2.1% of outstanding equity interest held by us in the JV Company for an aggregate purchase price of RMB 108 million or approximately $16.9 million.
Loss of control is deemed to have occurred when, among other things, a parent company owns less than a majority of the outstanding common stock in the subsidiary, lacks a controlling financial interest in the subsidiary and, is unable to unilaterally control the subsidiary through other means such as having, or the ability to obtain or represent, a majority of the subsidiary’s board of directors.
Loss of control is deemed to have occurred when, among other things, a parent company owns less than a majority of the outstanding common stock in the subsidiary, lacks a controlling financial interest in the subsidiary and, is unable to unilaterally control the subsidiary through other means such as having, or the ability to obtain, a majority of the subsidiary’s board of directors.
The income tax expense of $39.3 million for the year ended June 30, 2022 included a $33.5 million discrete tax expense related to the Company’s $396.0 million of income from the sale of equity interest in a joint venture and the related deconsolidation gain as the Company changed from the consolidation method of accounting to the equity method of accounting.
The income tax expense of $39.3 million for the year ended June 30, 2022 included a $33.5 million discrete tax expense related to the Company’s $396.0 million 52 of income from the sale of equity interest in a joint venture and the related deconsolidation gain as the Company changed from the consolidation method of accounting to the equity method of accounting.
The minimum threshold is defined as a tax position that is more likely than not to be sustained upon examination by the applicable taxing authority, including resolution of any related appeals or litigation processes, based on the technical merits of the position.
The minimum threshold is defined as a tax position that is more likely than not to be sustained upon examination by the applicable taxing authority, including resolution of any related appeals or litigation processes, based on the technical 60 merits of the position.
The Chongqing Fab is being built in phases. As of December 1, 2021, we owned 50.9%, and the Chongqing Funds owned 49.1% of the equity interest in the JV Company. The JV Company was accounted under the provisions of the consolidation guidance since we had controlling financial interest until December 1, 2021.
The Chongqing Fab was being built in phases. As of December 1, 2021, we owned 50.9%, and the Chongqing Funds owned 49.1% of the equity interest in the JV Company. The JV Company was accounted under the provisions of the consolidation guidance since we had controlling financial interest until December 1, 2021.
We are subject to the continuous examination of our income tax returns by the 63 Internal Revenue Service and other tax authorities. We regularly assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision for income taxes.
We are subject to the continuous examination of our income tax returns by the Internal Revenue Service and other tax authorities. We regularly assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision for income taxes.
As a result of sales of our JV Company equity interests and issuance of additional equity interests by the JV Company to third-party investors in financing transactions, our 48 equity interest in the JV Company was reduced to 42.2%, which reduced our control and influence over the JV Company.
As a result of sales of our JV Company equity interests and issuance of additional equity interests by the JV Company to third-party investors in financing transactions, our equity interest in the JV Company was reduced to 42.2%, which reduced our control and influence over the JV Company.
Interest expense decreased by $2.4 million in fiscal year 2022 as compared to the prior fiscal year primarily because of deconsolidation of the JV Company in December 2021.
Interest expense decreased by $2.4 million in fiscal year 2022 as compared to the fiscal year 2021 primarily because of deconsolidation of the JV Company in December 2021.
On August 15, 2017, Jireh entered into a credit agreement with the Bank that provided a term loan in an amount up to $30.0 million for the purpose of purchasing certain equipment for the fabrication facility located in Oregon. The obligation under the credit agreement is secured by substantially all assets of Jireh and guaranteed by the Company.
On August 15, 2017, Jireh entered into a credit agreement with the Bank that provided a term loan in an amount up to $30.0 million for the purpose of purchasing certain equipment for the fabrication facility located in Oregon. The obligation under the credit agreement was secured by substantially all assets of Jireh and guaranteed by the Company.
The Company is accounting for this transaction as a secured borrowing under the Transfers and Servicing of Financial Assets guidance. In addition, any cash held in the restricted bank account controlled by HSBC had a legal right of offset against the borrowing. This agreement, with certain financial covenants required, had no expiration date.
The Company is accounting for this transaction as a secured borrowing under the Transfers and Servicing of Financial Assets guidance. In addition, any cash held in the restricted bank account controlled by HSBC has a legal right of offset against the borrowing. This agreement, with certain financial covenants required, has no expiration date.
Recently Issued Accounting Pronouncements See Note 1 of the Notes to the consolidated financial statements under Item 15 in this Annual Report on Form 10-K for a full description of recent accounting pronouncements, including the expected dates of adoption and estimated effects on results of operations and financial condition. 64
Recently Issued Accounting Pronouncements See Note 1 of the Notes to the consolidated financial statements under Item 15 in this Annual Report on Form 10-K for a full description of recent accounting pronouncements, including the expected dates of adoption and estimated effects on results of operations and financial condition. 61
Profits or losses related to intra-entity sales with its equity method investees are eliminated until realized by the investor and investee. Basis differences represent differences between the cost of the investment and the underlying equity in net assets of the investment and are generally amortized over the lives of the related assets that gave rise to them.
Profits or losses related to intra-entity sales with the equity method investee are eliminated until realized by the investor or investee. Basis differences represent differences between the cost of the investment and the underlying equity in net assets of the investment and are generally amortized over the lives of the related assets that gave rise to them.
At our discretion or upon our direct negotiations with the original design manufacturers (“ODMs”) or original equipment manufacturers (“OEMs”), we may elect to grant special pricing that is below the prices at which we sold our products to the distributors. In these situations, we will grant price adjustments to the distributors reflecting such special pricing.
At our discretion or upon our direct negotiations with the original design manufacturers (“ODMs”) or original equipment manufacturers (“OEMs”), we may elect to grant special pricing that is below the prices at which we sold our products to the distributors. In certain situations, we will grant price adjustments to the distributors reflecting such special pricing.
A significant amount of our revenue is derived from sales of products in the PC markets, such as notebooks, motherboards and notebook battery packs, therefore a substantial decline or downturn in the PC market could have a material adverse effect on our revenue and results of operations.
A significant amount of our revenue is derived from sales of products in the PC markets, such as notebooks, motherboards and notebook battery packs. Therefore, a substantial decline in the PC market could have a material adverse effect on our revenue and results of operations.
On August 11, 2021, the Borrower signed an agreement with HSBC to decrease the borrowing maximum amount to $8.0 million with certain financial covenants required. Other terms remain the same. The Borrower was in compliance with these covenants as of June 30, 2022.
On August 11, 2021, the Borrower signed an agreement with HSBC to decrease the borrowing maximum amount to $8.0 million with certain financial covenants required. Other terms remain the same. The Borrower was in compliance with these covenants as of June 30, 2023.
The increase was primarily due to 18.4% increase in revenue. Gross margin increased by 3.4 percentage points to 34.5% for the fiscal year 2022, as compared to 31.1% for the fiscal year 2021. The increase in gross margin was primarily due to better product mix during the fiscal year ended June 30, 2022.
Gross margin increased by 3.4 percentage points to 34.5% for the fiscal year 2022, as compared to 31.1% for the fiscal year 2021. The increase in gross margin was primarily due to better product mix during the fiscal year ended June 30, 2022.
In calculating accumulated profits, foreign-invested enterprises in China are required to allocate at least 10% of their profits each year, if any, to fund the equity reserve account unless the reserve has reached 50% of the registered capital of the enterprises.
In calculating accumulated profits, foreign-invested enterprises in China are required to allocate 10% of their profits each year, if any, to fund the equity reserve account unless the reserve has reached 50% of the registered capital of the enterprises.
We continue to evaluate and invest resources in developing new technologies and products utilizing our own fabrication and packaging facilities. We believe the investment in research and development are important to meet our strategic objectives.
We continue to evaluate and invest resources in developing new technologies and products utilizing our own fabrication and packaging facilities. We believe the investment in research and development is important to meet our strategic objectives.
The non-cash charges of $287.6 million included depreciation and amortization expenses of $42.9 million, share-based compensation expense of $31.3 million, gain on deconsoidation of the JV Company of $399.1 million, loss on changes of equity interest in the JV Company, net of $3.1 million, deferred income tax on deconsolidation and changes of equity interest in the JV Company of $30.0 million, loss on equity investment of $2.6 million, and net deferred income taxes of $1.6 million.
The non-cash charges of $287.6 million included depreciation and amortization expenses of $42.9 million, share-based compensation expense of $31.3 million, gain on deconsoidation of the JV Company of $399.1 million, loss on changes of equity interest in the JV Company, net of $3.1 million, deferred income tax on deconsolidation and changes of equity interest in 56 the JV Company of $30.0 million, equity method investment loss from equity investee of $2.6 million, and net deferred income taxes of $1.6 million.
The changes in the tax expense and effective tax rate between the periods resulted primarily from the Company reporting pretax book income of $495.0 million ($99.0 million of pretax book income plus the $396.0 million of income from the sale of equity interest in a joint venture and the related deconsolidation gain) for the year ended June 30, 2022 as compared to a pretax book income of $60.2 million for the year ended June 30, 2021 as well as changes in the mix of earnings in various geographic jurisdictions between the current year and the same period of last year.
The changes in the tax expense and effective tax rate between the periods resulted primarily from the Company reporting pretax book income of $19.7 million for the year ended June 30, 2023 as compared to a pretax book income of $495.0 million ($99.0 million of pretax book income plus the $396.0 million of income from the sale of equity interest in a joint venture and the related deconsolidation gain) for the year ended June 30, 2022 as well as changes in the mix of earnings in various geographic jurisdictions between the current year and the same period of last year.
On August 18, 2021, Jireh Semiconductor Incorporated (“Jireh”) entered into a term loan agreement with a financial institution (the “Bank”) in an amount up to $45.0 million for the purpose of expanding and upgrading the Company’s fabrication facility located in Oregon. The obligation under the loan agreement is secured by substantially all assets of Jireh and guaranteed by the Company.
On August 18, 2021, Jireh entered into a term loan agreement with a financial institution (the "Bank") in an amount up to $45.0 million for the purpose of expanding and upgrading the Company’s fabrication facility located in Oregon. The obligation under the loan agreement is secured by substantially all assets of Jireh and guaranteed by the Company.
We record our interest in the net earnings of our equity method investees, along with adjustments for unrealized profits or losses on intra-entity transactions and amortization of basis differences, within earnings or loss from equity interests in the Consolidated Statements of Income.
We record our interest in the net earnings of the equity method investee, along with adjustments for unrealized profits or losses on intra-entity transactions and amortization of basis differences, within earnings or loss from equity interests in the Consolidated Statements of Operations.
In August 2021, Jireh signed an amendment of this loan with the Bank to modify the financial covenants requirement to align with the new term loan agreement entered into on August 18, 2021, discussed above. The amendment was accounted for as a debt modification and no gain or loss was recognized.
In August 2021, Jireh signed an amendment of this loan with the Bank to modify the financial covenants requirement to align with the new term loan agreement entered into on August 18, 2021, discussed above. The amendment was accounted for as a debt modification and no gain or loss was recognized. The loan was fully paid off in September, 2022.
On July 12, 2022, the current shareholders of the JV Company entered into a shareholders contract, pursuant to which the JV Company provided us a monthly wafer production capacity guarantee, subject to future increase when the JV Company’s production capacity reaches certain goal.
On July 12, 2022, the current shareholders of the JV Company entered into a shareholders contract, pursuant to which the JV Company provided us with a monthly wafer production capacity guarantee, subject to future increase when the JV Company’s production capacity reaches certain specified level.
We expect our operating expenses as a percentage of revenue to fluctuate from period to period as we continue to exercise cost control measures in response to the declining PC market as well as align our operating expenses to the revenue level. Research and development expenses.
Operating expenses Our operating expenses consist of research and development, and selling, general and administrative expenses. We expect our operating expenses as a percentage of revenue to fluctuate from period to period as we continue to exercise cost control measures in response to the declining PC market as well as align our operating expenses to the revenue level.
On August 9, 2019, one of the Company’ wholly-owned subsidiaries (the “Borrower”) entered into a factoring agreement with the Hongkong and Shanghai Banking Corporation Limited (“HSBC”), whereby the Borrower assigns certain of its accounts receivable with recourse.
On August 9, 2019, one of the Company's wholly-owned subsidiaries (the "Borrower") entered into a factoring agreement with the Hongkong and Shanghai Banking Corporation Limited (“HSBC”), whereby the Borrower assigns certain of its 54 accounts receivable with recourse.
The credit agreement has a five-year term and matures on August 15, 2022. In January 2018 and July 2018, Jireh drew down on the loan in the amount of $13.2 million and $16.7 million, respectively.
The credit agreement had a five-year term and matured on August 15, 2022. In January 2018 and July 2018, Jireh drew down on the loan in the amount of $13.2 million and $16.7 million, respectively.
During the three months ended December 31, 2021, the Company borrowed RMB 11.0 million, or $1.6 million, at an interest rate of 3.85% per annum, with principal due on November 18, 2022. As of June 30, 2022, there was $1.6 million outstanding balance under the loan.
During the three months ended December 31, 2021, the Company borrowed RMB 11.0 million, or $1.6 million, at an interest rate of 3.85% per annum, with principal due on November 18, 2022. As of June 30, 2023, there was no outstanding balance and this loan was expired.
During the three months ended December 31, 2021, the Company borrowed RMB 5.0 million, or $0.8 million, at an interest rate of 3.7% per annum, with principal due on September 12, 2022. As of June 30, 2022, the total outstanding balance of this loan was $0.5 million.
During the three months ended December 31, 2021, the Company borrowed RMB 5.0 million, or $0.8 million, at an interest rate of 3.7% per annum, with principal due on September 12, 2022. As of June 30, 2023, there was no outstanding balance and this loan was expired.
On an ongoing basis, we evaluate the estimates, judgments and assumptions including those related to stock rotation returns, price adjustments, allowance for doubtful accounts, valuation of inventories, warranty accrual, income taxes, leases, equity method investment, share-based compensation, recoverability of and useful lives for property, plant and equipment and intangible assets, as well as economic implications of the COVID-19 pandemic.
On an ongoing basis, we evaluate the estimates, judgments and assumptions including those related to stock rotation returns, price adjustments, allowance for doubtful accounts, valuation of inventories, warranty accrual, income taxes, leases, equity method investment, share-based compensation, recoverability of and useful lives for property, plant and equipment and intangible assets.
This factoring agreement allowed the Borrower to borrow up to 70% of the net amount of its eligible accounts receivable of the Borrower with a maximum amount of $30.0 million. The interest rate was based on one month London Interbank Offered Rate (“LIBOR”) plus 1.75% per annum. The Company was the guarantor for this agreement.
This factoring agreement allows the Borrower to borrow up to 70% of the net amount of its eligible accounts receivable of the Borrower with a maximum amount of $30.0 million. The interest rate is based on one month London Interbank Offered Rate ("LIBOR") plus 1.75% per annum. The Company is the guarantor for this agreement.
The outstanding principal shall accrue interest at a fixed rate of 5.04% per annum on the basis of a 360-day year. The loan agreement contains customary restrictive covenants and includes certain financial covenants that require the Company to maintain, on a consolidated basis, specified financial ratios.
Jireh made consecutive monthly payments of principal and interest to the Bank. The outstanding principal shall accrue interest at a fixed rate of 5.04% per annum on the basis of a 360-day year. The loan agreement contains customary restrictive covenants and includes certain financial covenants that require the Company to maintain, on a consolidated basis, specified financial ratios.
Equity method goodwill is not amortized or tested for impairment; instead the equity method investment is tested for impairment. We review for impairment whenever factors indicate that the carrying amount of the 62 investment might not be recoverable.
Equity method goodwill is not amortized or tested for impairment. Instead the total equity method investment balance, including equity method goodwill, is tested for impairment. We review for impairment whenever factors indicate that the carrying amount of the investment might not be recoverable.
In addition, we recently commenced a plan to enhance the manufacturing capability and capacity of our Oregon Fab by investing in new equipment and expanding our factory facilities, which we expect will have a positive impact on our future new product development and revenue, particularly during the period of global shortage of capacity.
In addition, we enhanced the manufacturing capability and capacity of our Oregon Fab by investing in new equipment and expanding our factory facilities, which we expect will have a positive impact on our future new product development and revenue, particularly during the period of global shortage of capacity.
The decrease in revenue of packaging and testing services for the fiscal year 2022 as compared to last fiscal year was primarily due to decreased demand.
The decrease in revenue from packaging and testing services for the fiscal year 2023 as compared to last fiscal year was primarily due to decreased demand.
This agreement contains customary restrictive covenants and includes certain financial covenants that the Company is required to maintain. Jireh drew down $45.0 million on February 16, 2022. As of June 30, 2022, Jireh was in compliance with these covenants and the outstanding balance of this loan was $45.0 million.
This agreement contains customary restrictive covenants and includes certain financial covenants that the Company is required to maintain. Jireh drew down $45.0 million on February 16, 2022 with the first payment of principal beginning in October 2022. As of June 30, 2023, Jireh was in compliance with these covenants and the outstanding balance of this loan was $38.3 million.
Therefore, our share of losses of the JV Company for the period from December 2, 2021 to March 31, 2022 was recorded in our Consolidated Statement of Operations for the fiscal year ended June 30, 2022. We recognize and disclose intervening events at the JV Company in the lag period that could materially affect our consolidated financial statements.
And our share of losses of the JV Company for the period of April 1, 2022 to March 31, 2023 was recorded in our Consolidated Statement of Operations for the fiscal year ended June 30, 2023. We recognize and disclose intervening events at the JV Company in the lag period that could materially affect our consolidated financial statements.
For the fiscal year ended June 30, 2022 using lag reporting, we recorded $2.6 million of its equity in loss of the JV Company.
For the fiscal year ended June 30, 2023 and June 30, 2022 using lag reporting, we recorded $1.4 million and 2.6 million of its equity in loss of the JV Company, respectively.
During fiscal year 2022, we accelerated the development of new technology platforms which allowed us to introduce 49 medium and high voltage MOSFET products, targeting primarily the industrial markets and communication marketing, and 7 module products primarily for the consumer markets, as well as 14 low voltage MOSFET products primarily for the computing and communication markets.
During fiscal year 2023, we accelerated the development of new technology platforms which allowed us to introduce 19 medium and high voltage MOSFET products, targeting primarily the industrial markets and communication marketing, and 6 module products primarily for the consumer markets, as well as 4 low voltage MOSFET products primarily for the computing and communication markets.
However, we have recorded a deferred tax liability of $29.6 million at June 30, 2022 related to our investment in the JV Company. As of June 30, 2022, the cumulative amount of undistributed earnings of our foreign subsidiaries considered permanently reinvested was $314.7 million. The determination of the unrecognized deferred tax liability on these earnings is not practicable.
However, we have recorded a deferred tax liability of $27.9 million at June 30, 2023 related to our investment in the JV Company. As of June 30, 2023, the cumulative amount of undistributed earnings of our foreign subsidiaries considered permanently reinvested was $374 million. The determination of the unrecognized deferred tax liability on these earnings is not practicable.
In addition, on December 30, 2021, the JV Company adopted an employee equity incentive plan and issued an equity interest equivalent to 3.99% of the JV Company to exchange in cash. As a result, we owned 45.8% of the equity interest in the JV Company as of December 31, 2021.
In addition, the JV Company adopted an employee equity incentive plan and issued an equity interest equivalent to 3.99% of the JV Company in exchange for cash. As a result of these two transactions, the Company owned 45.8% of the equity interest in the JV Company as of December 31, 2021.
We have an extensive patent portfolio that consists of 888 patents and 62 patent applications in the United States as of June 30, 2022. We also have a total of 936 foreign patents, which primarily were based on our research and development efforts through June 30, 2022.
We have an extensive patent portfolio that consists of 918 patents and 45 patent applications in the United States as of June 30, 2023. We also have a total of 980 foreign patents, which primarily were based on our research and development efforts through June 30, 2023.
The net change in assets and liabilities providing net cash of $24.4 million was primarily due to $27.3 million decrease in other current and long-term assets primarily due to increase in advance payments to suppliers, $11.0 million decrease in accounts receivable due to timing of billings and collection of payments, and $11.0 million increase in accrued and other liabilities, partially offset by $22.8 million increase in inventories, $1.8 million decrease in accounts payable primarily due to timing of payments, and $0.3 million decrease in income taxes payable.
The net change in assets and liabilities providing net cash of $2.5 million was primarily due to $48.5 million increase in accrued and other liabilities and $1.7 million increase in income taxes payable, partially offset by $22.5 million increase in accounts receivable due to timing of billings and collection of payments, $18.8 million increase in inventories, $5.8 million increase in other current and long-term assets primarily due to decrease in advance payments to suppliers, and $0.5 million decrease in accounts payable primarily due to timing of payments.
The agreement has a 5.5 year term and matures on February 16, 2027. Jireh is required to make consecutive quarterly payments of principal and interest. The loan accrues interest based on adjusted London Interbank Offered Rate (“LIBOR”) plus the applicable margin based on the outstanding balance of the loan.
The agreement has a 5.5 years term and matures on February 16, 2027. Jireh is required to make consecutive quarterly payments of principal and interest. The loan accrues interest based on adjusted LIBOR plus the applicable margin based on the outstanding balance of the loan.
Other income (loss), net Year Ended June 30, Change 2022 2021 2020 2022 2021 (in thousands) (in thousands) (in percentage) (in thousands) (in percentage) Other income (loss), net $ 999 $ 2,456 $ (1,229) $ (1,457) (59.3) % $ 3,685 (299.8) % Other income (loss), net decreased by $1.5 million in fiscal year 2022 as compared to the last fiscal year primarily due to increase in foreign currency exchange loss as a result of the depreciation of RMB against USD.
Other income (loss), net Year Ended June 30, Change 2023 2022 2021 2023 2022 (in thousands) (in thousands) (in percentage) (in thousands) (in percentage) Other income (loss), net $ (1,730) $ 999 $ 2,456 $ (2,729) (273.2) % $ (1,457) (59.3) % Other income (loss), net decreased by $2.7 million in fiscal year 2023 as compared to the last fiscal year primarily due to increase in foreign currency exchange loss as a result of the depreciation of RMB against USD.
The credit agreement contains customary restrictive covenants and includes certain financial covenants that require the Company to maintain, on a consolidated basis, specified financial ratios and fixed charge coverage ratio.
The credit agreement contained customary restrictive covenants and included certain financial covenants that required the Company to maintain, on a consolidated basis, specified financial ratios and fixed charge coverage ratio.
Property investments qualify for the 25% credit if, among other requirements, the property is integral to the operation of an advanced manufacturing facility, defined as having a primary purpose of manufacturing semiconductors or semiconductor manufacturing equipment.
Property investments qualify for the 25% credit if, among other requirements, the property is integral to the operation of an advanced manufacturing facility, defined as having a primary purpose of manufacturing semiconductors or semiconductor manufacturing equipment. Currently, we are evaluating the impact of the Chips Act to us.
Dollar on November 16, 2018. The RMB 72.0 million consisted of RMB 27.0 million for trade borrowings with a maturity date of December 31, 2021, and RMB 45.0 million for working capital borrowings or trade borrowings with a maturity date of September 13, 2022.
The RMB 72.0 million consists of RMB 27.0 million for trade borrowings with a maturity date of December 31, 2021, and RMB 45.0 million for working capital borrowings or trade borrowings with a maturity date of September 13, 2022.
Following the closing of the Investment, the percentage of outstanding JV Company equity interest beneficially owned by the Company was reduced to 42.2%. We reduced our ownership of the JV Company to below 50% to increase the flexibility of the JV Company to raise capital to fund its future expansion.
Following the closing of the January 26, 2022 Investment, the percentage of outstanding JV equity interest beneficially owned by the Company was reduced to 42.2% at both June 30, 2022 and 2023. 42 We reduced our ownership of the JV Company to below 50% to increase the flexibility of the JV Company to raise capital to fund its future expansion.
Our portfolio of power semiconductors includes approximately 2,500 products, and has grown significantly with the introduction of over 130 new products in the fiscal year ended June 30, 2022, and over 160 new products in each of the fiscal year ended June 30, 2020 and 2019, respectively.
Our portfolio of power semiconductors includes approximately 2,600 products, and has grown significantly with the introduction of over 60 new products in the fiscal year ended June 30, 2023, and over 130 and 160 new products in the fiscal year ended June 30, 2022 and 2021, respectively.
The provision for income taxes includes the impact of changes to reserves, as well as the related net interest and penalties. Share-based compensation expense We maintain an equity-settled, share-based compensation plan to grant restricted share units and stock options. We recognize share-based compensation expense based on the estimated fair value of the awards, using the accelerated attribution method.
The provision for income taxes includes the impact of changes to reserves, as well as the related net interest and penalties. Share-based compensation expense We maintain an equity-settled, share-based compensation plan to grant restricted share units and stock options.
Net cash used in financing activities of $19.0 million for the fiscal year 2021 was primarily attributable to $6.9 million in common shares acquired to settle withholding tax related to vesting of restricted stock units, $16.5 million in payments of capital lease obligations, and $66.6 million in repayments of borrowings, partially offset by $65.9 million of proceeds from borrowings and $5.1 million of proceeds from exercises of share options and issuance of shares under the ESPP.
Cash flows from financing activities Net cash used in financing activities of $29.6 million for the fiscal year 2023 was primarily attributable to $6.4 million in common shares acquired to settle withholding tax related to vesting of restricted stock units, $0.8 million in payments of capital lease obligations, $26.6 million in repayments of borrowings, and $13.4 million of payments for repurchase of common shares, partially offset by $8.6 million of proceeds from borrowings and $9.0 million of proceeds from exercises of share options and issuance of shares under the ESPP.
Under the Financing Agreement, the New Investors purchased newly issued equity interest of the JV Company for a total purchase price of RMB 509 million (or approximately $80 million based on the currency 46 exchange rate as of January 26, 2022) (the "Investment").
Under the Investment Agreement, the New Investors purchased newly issued equity interest of the JV Company, representing approximately 7.82% of post-transaction outstanding equity interests of the JV Company, for a total purchase price of RMB 509 million (or approximately USD 80 million based on the currency exchange rate as of January 26, 2022) (the “Investment”).
"Capital account" transactions require prior approval from SAFE or its provincial branch or an account bank delegated by SAFE to convert a remittance into a foreign currency, such as U.S. dollars, and transmit the foreign currency outside of China.
Examples of “capital account” transactions include repatriations of investments by foreign owners and repayments of loan principal to foreign lenders. "Capital account" transactions require prior approval from SAFE or its provincial branch or an account bank delegated by SAFE to convert a remittance into a foreign currency, such as U.S. dollars, and transmit the foreign currency outside of China.
In October 2019, the Company’ subsidiary in China entered into a line of credit facility with Bank of Communications Limited in China. This line of credit matured on February 14, 2021 and was based on the China Base Rate multiplied by 1.05, or 4.99% on October 31, 2019. The purpose of the credit facility is to provide short-term borrowings.
In October 2019, one of the Company's subsidiaries in China entered into a line of credit facility with Bank of Communications Limited in China. This line of credit matured on February 14, 2021 and was based on the China Base Rate multiplied by 1.05, or 4.99% on October 31, 2019.
On November 16, 2018, the Company’ subsidiary in China entered into a line of credit facility with Industrial and Commercial Bank of China. The purpose of the credit facility was to provide short-term borrowings. The Company could borrow up to approximately RMB 72.0 million or $10.3 million based on currency exchange rate between RMB and U.S.
In September 2022, one of the Company's subsidiaries in China entered into a line of credit facility with Industrial and Commercial Bank of China. The purpose of the credit facility was to provide working capital borrowings. The Company could borrow up to approximately RMB 72.0 million or $10.3 million based on currency exchange rate between RMB and U.S.
The Chinese government imposes certain currency exchange controls on cash transfers out of China. Regulations in China permit foreign owned entities to freely convert the Renminbi into foreign currency for transactions that fall under the “current account,” which includes trade related receipts and payments, interests, and dividend payments.
Regulations in China permit foreign owned entities to freely convert the Renminbi into foreign currency for transactions that fall under the “current account,” which includes trade related receipts and payments, interests, and dividend payments.
In addition to immediate private funding rounds, the JV Company is also contemplating an eventual listing on the Science and Technology Innovation Board, or STAR Market, of the Shanghai Stock Exchange. The Transaction assists the JV Company in meeting certain regulatory listing requirements.
The JV Company is also contemplating an eventual listing on the Science and Technology Innovation Board, or STAR Market, of the Shanghai Stock Exchange. The reduction of our ownership assists the JV Company in meeting certain regulatory listing requirements.
Income tax expense Year Ended June 30, Change 2022 2021 2020 2022 2021 (in thousands) (in thousands) (in percentage) (in thousands) (in percentage) Income tax expense $ 39,258 $ 3,935 $ 348 $ 35,323 897.7 % $ 3,587 1,030.7 % Fiscal 2022 vs 2021 Income tax expense for fiscal years 2022 and 2021 was $39.3 million and $3.9 million, respectively.
Income tax expense Year Ended June 30, Change 2023 2022 2021 2023 2022 (in thousands) (in thousands) (in percentage) (in thousands) (in percentage) Income tax expense $ 5,937 $ 39,258 $ 3,935 $ (33,321) (84.9) % $ 35,323 897.7 % Fiscal 2023 vs 2022 Income tax expense for fiscal years 2023 and 2022 was $5.9 million and $39.3 million, respectively.
Interest expense, net Year Ended June 30, Change 2022 2021 2020 2022 2021 (in thousands) (in thousands) (in percentage) (in thousands) (in percentage) Interest expense, net $ (3,920) $ (6,308) $ (2,743) $ 2,388 (37.9) % $ (3,565) 130.0 % Interest expense was primarily related to bank borrowings.
Interest expense, net Year Ended June 30, Change 2023 2022 2021 2023 2022 (in thousands) (in thousands) (in percentage) (in thousands) (in percentage) Interest expense, net $ (1,087) $ (3,920) $ (6,308) $ 2,833 (72.3) % $ 2,388 (37.9) % Interest expense was primarily related to bank borrowings.
The fair value of restricted share units is based on the fair value of the Company's common share on the date of grant. For restricted stock awards subject to market conditions, the fair value of each restricted stock award is estimated at the date of grant using the Monte-Carlo pricing model.
For restricted stock awards subject to market conditions, the fair value of each restricted stock award is estimated at the date of grant using the Monte-Carlo pricing model. The fair value of stock options is estimated on the date of grant using the Black-Scholes option valuation model.
While SAFE approval is not statutorily required for eligible dividend payments to the foreign parent, in practice, before making the dividend payment, the account bank may seek SAFE’s opinion with respect to a dividend payment if the payment involves a relatively large amount, which may delay the dividend payment depending on the then overall status of cross-border payments and receipts of China.
While SAFE approval is not statutorily required for eligible dividend payments to the foreign parent, in practice, before making the dividend payment, the account bank may seek SAFE’s opinion with respect to a dividend payment if the payment involves a relatively large amount, which may delay the dividend payment depending on the then overall status of cross-border payments and receipts of China. 55 Transactions that involve conversion of Renminbi into foreign currency in relation to foreign direct investments and provision of debt financings in China are classified as “capital account” transactions.
Fiscal 2021 vs 2020 Research and development expenses were $63.0 million for fiscal year 2021, an increase of $11.7 million, or 22.8%, as compared to $51.3 million for fiscal year 2020.
Fiscal 2022 vs 2021 Research and development expenses were $71.3 million for fiscal year 2022, an increase of $8.3 million, or 13.2%, as compared to $63.0 million for fiscal year 2021.
Off-Balance Sheet Arrangements As of June 30, 2022, we had no material off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K. 61 Critical Accounting Policies and Estimates The preparation of our consolidated financial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses.
Off-Balance Sheet Arrangements As of June 30, 2023, we had no off-balance sheet arrangements. 58 Critical Accounting Policies and Estimates The preparation of our consolidated financial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses.
Income tax expense increased by $35.3 million, or 897.7% in fiscal year 2022 as compared to fiscal year 2021.
Fiscal 2022 vs 2021 Income tax expense for fiscal years 2022 and 2021 was $39.3 million and $3.9 million, respectively. Income tax expense increased by $35.3 million, or 897.7% in fiscal year 2022 as compared to fiscal year 2021.
The increase in power discrete and power IC product sales was primarily due to a 23.0% increase in unit shipments and a 14.5% increase in average selling price due to a shift in product mix as compared to last fiscal year.
The decrease in power discrete and power IC product sales was primarily due to a 30.1% decrease in unit shipments, offset by a 26.9% increase in average selling price as compared to last fiscal year due to a shift in product mix.
The following table shows our cash flows from operating, investing and financing activities for the periods indicated: Year Ended June 30, 2022 2021 2020 (in thousands) Net cash provided by operating activities $ 218,865 $ 128,744 $ 62,315 Net cash used in investing activities (130,822) (72,539) (60,849) Net cash provided by (used in) financing activities 21,854 (18,991) 37,651 Effect of exchange rate changes on cash, cash equivalents and restricted cash (59) 4,895 (708) Net increase in cash, cash equivalents and restricted cash $ 109,838 $ 42,109 $ 38,409 Cash flows from operating activities Net cash provided by operating activities of $218.9 million for fiscal year 2022 resulted primarily from net income of $453.2 million, non-cash charges of $287.6 million and net change in assets and liabilities providing net cash of $53.3 million.
The following table shows our cash flows from operating, investing and financing activities for the periods indicated: Year Ended June 30, 2023 2022 2021 (in thousands) Net cash provided by operating activities $ 20,473 $ 218,865 $ 128,744 Net cash used in investing activities (109,630) (130,822) (72,539) Net cash provided by (used in) financing activities (29,611) 21,854 (18,991) Effect of exchange rate changes on cash, cash equivalents and restricted cash (280) (59) 4,895 Net increase (decrease) in cash, cash equivalents and restricted cash $ (119,048) $ 109,838 $ 42,109 Cash flows from operating activities Net cash provided by operating activities of $20.5 million for fiscal year 2023 resulted primarily from net income of $12.4 million, non-cash charges of $80.9 million and net change in assets and liabilities providing net cash of $72.8 million.
A decline of the PC market may have a negative impact on our revenue, factory utilization, gross margin, our ability to resell excess inventory, and other performance measures.
A prolonged and extended downturn in the semiconductor industry would have a substantial impact on our operating results and financial conditions. A decline of the PC market may have a negative impact on our revenue, factory utilization, gross margin, our ability to resell excess inventory, and other performance measures.
In addition, we introduced 69 Power IC new products for computing applications, communication and consumer markets. Fiscal 2021 vs 2020 Total revenue was $656.9 million for fiscal year 2021, an increase of $192.0 million, or 41.3%, as compared to $464.9 million for fiscal year 2020.
In addition, we introduced 40 Power IC new products for computing applications, communication and consumer markets. Fiscal 2022 vs 2021 Total revenue was $777.6 million for fiscal year 2022, an increase of $120.7 million, or 18.4%, as compared to $656.9 million for fiscal year 2021.
Packaging and testing services revenue is recognized at a point in time upon shipment of serviced products to the customer. Equity method investment We use the equity method of accounting when we have the ability to exercise significant influence, but not control, as determined in accordance with general accepted accounting principles, over the operating and financial policies of the investee.
Equity method investment We use the equity method of accounting when we have the ability to exercise significant influence, but not control, as determined in accordance with general accepted accounting principles, over the operating and financial policies of the investee.
Selling, general and administrative expenses Year Ended June 30, Change 2022 2021 2020 2022 2021 (in thousands) (in thousands) (in percentage) (in thousands) (in percentage) Selling, general and administrative $ 95,259 $ 77,514 $ 64,816 $ 17,745 22.9 % $ 12,698 19.6 % Fiscal 2022 vs 2021 Selling, general and administrative expenses were $95.3 million for fiscal year 2022, an increase of $17.7 million, or 22.9%, as compared to $77.5 million for fiscal year 2021.
Selling, general and administrative expenses 50 Year Ended June 30, Change 2023 2022 2021 2023 2022 (in thousands) (in thousands) (in percentage) (in thousands) (in percentage) Selling, general and administrative $ 88,861 $ 95,259 $ 77,514 $ (6,398) (6.7) % $ 17,745 22.9 % Fiscal 2023 vs 2022 Selling, general and administrative expenses were $88.9 million for fiscal year 2023, a decrease of $6.4 million, or 6.7%, as compared to $95.3 million for fiscal year 2022.
Net cash used in investing activities of $60.8 million for the fiscal year 2020 was primarily attributable to $62.4 million purchases of property and equipment, which was partially offset by $1.3 million government grant related to equipment in the JV Company and $0.3 million of proceeds from sale of property and equipment.
Cash flows from investing activities Net cash used in investing activities of $109.6 million for the fiscal year 2023 was primarily attributable to $110.4 million purchases of property and equipment, partially offset by $0.6 million government grant related to equipment and $0.2 million in proceeds from sale of property and equipment.
Research and development expenses Year Ended June 30, Change 2022 2021 2020 2022 2021 (in thousands) (in thousands) (in percentage) (in thousands) (in percentage) Research and development $ 71,259 $ 62,953 $ 51,252 $ 8,306 13.2 % $ 11,701 22.8 % Fiscal 2022 vs 2021 Research and development expenses were $71.3 million for fiscal year 2022, an increase of $8.3 million, or 13.2%, as compared to $63.0 million for fiscal year 2021.
Research and development expenses Year Ended June 30, Change 2023 2022 2021 2023 2022 (in thousands) (in thousands) (in percentage) (in thousands) (in percentage) Research and development $ 88,146 $ 71,259 $ 62,953 $ 16,887 23.7 % $ 8,306 13.2 % Fiscal 2023 vs 2022 Research and development expenses were $88.1 million for fiscal year 2023, an increase of $16.9 million, or 23.7%, as compared to $71.3 million for fiscal year 2022.
On January 26, 2022, the JV Company completed a financing transaction pursuant to the Financing Agreement between the JV Company and certain New Investors.
On January 26, 2022, the JV Company completed a financing transaction pursuant to a corporate investment agreement (the “Investment Agreement”) between the JV Company and certain third-party investors (the “New Investors”).

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeAs of June 30, 2022, we had $68.0 million outstanding under our loan and $4.7 million outstanding under our capital leases, which were subject to fluctuations in interest rates. For the year ended June 30, 2022, a hypothetical 10% increase in the interest rate could result in $0.2 million additional annual interest expense.
Biggest changeAs of June 30, 2023, we had $49.8 million outstanding under our loan and $4.1 million outstanding under our financing leases, which were subject to fluctuations in interest rates. For the year ended June 30, 2023, a hypothetical 10% increase in the interest rate could result in $0.3 million additional annual interest expense.
We estimate that a 10% increase or decrease in the costs of raw materials subject to commodity price risk, such as gold, would decrease or increase our current year's net earnings by $0.7 million, assuming that such changes in our costs have no impact on the selling prices of our products and that we have no pending commitments to purchase metals at fixed prices. 65
We estimate that a 10% increase or decrease in the costs of raw materials subject to commodity price risk, such as gold, would decrease or increase our current year's net earnings by $0.6 million, assuming that such changes in our costs have no impact on the selling prices of our products and that we have no pending commitments to purchase metals at fixed prices. 62
For our subsidiaries which use the local currency as the functional currency, including the JV Company, the results and financial position are translated into U.S. dollar using exchange rates at balance sheet dates for assets and liabilities and using average exchange rates for income and expenses items.
For our subsidiaries which use the local currency as the functional currency, the results and financial position are translated into U.S. dollar using exchange rates at balance sheet dates for assets and liabilities and using average exchange rates for income and expenses items.

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