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What changed in Monolithic Power Systems's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Monolithic Power Systems'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.

+311 added−305 removedSource: 10-K (2024-02-29) vs 10-K (2023-02-24)

Top changes in Monolithic Power Systems's 2023 10-K

311 paragraphs added · 305 removed · 241 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

41 edited+8 added−7 removed43 unchanged
Biggest changeThe following table is a summary of the various end market applications for our products, and those markets’ contribution as a percentage of our total revenue: Percentage of Total Revenue End Markets Applications 2022 2021 2020 Storage and computing Storage applications, enterprise notebooks, computers and printers 25.3 % 21.2 % 21.4 % Enterprise Data Data center and workstation computing 14.0 % 9.6 % 8.6 % Automotive Infotainment, digital cockpits and connectivity applications 16.7 % 16.9 % 12.9 % Industrial Power sources, smart meters, security applications and industrial automation 12.2 % 15.3 % 14.2 % Communications 5G and satellite communications infrastructure applications 14.0 % 13.6 % 16.8 % Consumer Home appliances, gaming consoles, smart TVs, mobile devices, lighting, monitors, stereos, set-top boxes and chargers 17.8 % 23.4 % 26.1 % 5 Table of Contents Product Families Our proprietary process technologies enable us to design and deliver smaller, single-chip power management ICs.
Biggest changeThe following table is a summary of the various end market applications for our products, and those markets’ contribution as a percentage of our total revenue: Percentage of Total Revenue End Markets Applications 2023 2022 2021 Storage and computing Storage applications, commercial notebooks, and graphics cards 27.0 % 25.3 % 21.2 % Automotive Advanced driver assistance systems, infotainment, digital cockpit, USB connectors, body electronics, and lighting applications 21.7 % 16.7 % 16.9 % Enterprise Data Cloud-based CPU server applications, and server artificial intelligence (“AI”) applications 17.7 % 14.0 % 9.6 % Consumer Home appliances, gaming, smart TVs, lighting, monitors, and stereos 12.9 % 17.8 % 23.4 % Communications 4G and 5G infrastructure, satellite communications, and other wireless applications 11.3 % 14.0 % 13.6 % Industrial Power sources, industrial meter, security applications, and other industrial equipment 9.4 % 12.2 % 15.3 % 5 Table of Contents Product Families Our proprietary process and packaging technologies enable us to design and deliver smaller, single-chip power management ICs.
Risk Factors” for further discussion of material risks related to government policies and regulations on environmental laws, international trade policies and restrictions, including tariffs on imports of foreign goods and regulations restricting the export of goods and services between the U.S. and China. 8 Table of Contents Human Capital Our performance is substantially dependent on the performance of our executive officers and key employees.
Risk Factors” for further discussion of material risks related to government policies and regulations on environmental laws, international trade policies and restrictions, including tariffs on imports of foreign goods and regulations restricting the export of goods and services between the U.S. and China. 8 Table of Contents Human Capital Management Our performance is substantially dependent on the performance of our executive officers and key employees.
We are in direct and active competition, with respect to one or more of our product lines, with several manufacturers of such products, of varying size and financial strength. We consider our primary competitors to include Analog Devices, Infineon Technologies, NXP Semiconductors, ON Semiconductor, Power Integrations, Renesas Electronics, ROHM Semiconductor, Semtech and Texas Instruments.
We are in direct and active competition, with respect to one or more of our product lines, with several manufacturers of such products, of varying size and financial strength. We consider our primary competitors to include Analog Devices, Infineon Technologies, NXP Semiconductors, ON Semiconductor, Power Integrations, Renesas Electronics, ROHM Semiconductor, Semtech, STMicroelectronics and Texas Instruments.
These features are important to our customers as they result in fewer components that need to be produced and consumed, a smaller form factor, more accurate regulation of voltages, lower power consumption and, ultimately, lower system cost, increased reliability and lower carbon emissions through the elimination of many discrete components and power devices.
These features are important to our customers as they are designed to result in fewer components that need to be produced and consumed, a smaller form factor, more accurate regulation of voltages, lower power consumption and, ultimately, lower system cost, increased reliability and lower carbon emissions through the elimination of many discrete components and power devices.
Xiao has held several executive positions, including Foundry Manager and Senior Vice President of Operations. Before joining MPS, from June 2000 to May 2001, Mr. Xiao was Engineering Account Manager at Chartered Semiconductor Manufacturing, Inc. Prior to that, Mr. Xiao spent six years as the Manager of Process Integration Engineering at Fairchild Imaging Sensors. Mr.
Xiao has held several executive positions, including Foundry Manager and Senior Vice President of Operations. Before joining MPS, from June 2000 to May 2001, Mr. Xiao was Engineering Account Manager at Chartered Semiconductor Manufacturing, Inc. Prior to that, Mr. Xiao spent six years as Manager of Process Integration Engineering at Fairchild Imaging Sensors. Mr.
Our efforts to comply with these government regulations could have material impacts on our capital expenditures and operating expenses, revenue, resource allocation, competitive position, or financial condition, though the magnitude and duration of such impacts are uncertain and difficult to quantify. Refer to “Item 1A.
Our efforts to comply with these government regulations could have material impacts on our capital expenditures and operating expenses, revenue, resource allocation, operations, competitive position, or financial condition, though the magnitude and duration of such impacts are uncertain and difficult to quantify. Refer to “Item 1A.
In contrast to many fabless semiconductor companies, which utilize standard process technologies and design rules established by their foundry partners, we have developed our own proprietary process technologies and collaborate with our foundry partners to install our technologies on their equipment in their facilities for use on our behalf.
In contrast to many fabless semiconductor companies, which utilize standard process technologies and design rules established by their foundry partners, we have developed our own proprietary process and packaging technologies and collaborate with our foundry partners to install our technologies on their equipment in their facilities for use on our behalf.
This close collaboration and control over the manufacturing process has historically resulted in favorable yields and product performance for our ICs. We currently contract with several suppliers to manufacture our wafers in foundries located in China, Taiwan and South Korea.
This close collaboration and control over the manufacturing process has historically resulted in favorable yields and product performance for our ICs. We currently contract with several suppliers to manufacture our wafers in foundries located in China, Taiwan, South Korea and Singapore.
In addition, in response to market conditions, we may slow the rate of manufacturing our products, which could result in insufficient inventory levels if we underestimate the demand for our products. 6 Table of Contents Research and Development We have assembled a qualified team of engineers primarily in China, Taiwan, the United States, Spain, Switzerland, Germany, and Hungary, with core competencies in analog and mixed-signal design.
In addition, in response to market conditions, we may slow the rate of manufacturing our products, which could result in insufficient inventory levels and reduced sales if we underestimate the demand for our products. 6 Table of Contents Research and Development We have assembled a qualified team of engineers primarily in China, the United States, Taiwan, Spain, Switzerland, Hungary, Portugal and Germany with core competencies in analog and mixed-signal design.
Our principal executive office is located in Kirkland, Washington. We have over 3,200 employees worldwide, with locations in Asia (primarily in China, India, Japan, South Korea, Singapore and Taiwan), Europe (primarily in France, Germany, Hungary, Italy, Spain, Switzerland and the United Kingdom) and the United States. Industry Overview Semiconductors comprise the basic building blocks of electronic systems and equipment.
Our principal executive office is located in Kirkland, Washington. We have over 3,500 employees worldwide, with locations in Asia (primarily in China, India, Japan, Singapore, South Korea and Taiwan), Europe (primarily in France, Germany, Hungary, Italy, Portugal, Spain, Switzerland and the United Kingdom) and the United States. Industry Overview Semiconductors comprise the basic building blocks of electronic systems and equipment.
However, there is no assurance that our products will continue to compete favorably or that we will be successful in the face of increasing competition from new products and enhancements introduced by existing competitors or new companies entering this market. In addition, there has recently been a high level of consolidation in the semiconductor industry.
However, there is no assurance that our products will continue to compete favorably or that we will be successful in the face of increasing competition from new products and enhancements introduced by existing competitors or new companies entering our markets. In addition, there has recently been a high level of consolidation in the semiconductor industry.
End Markets and Applications We design and develop our products for the storage and computing, enterprise data, automotive, industrial, communications and consumer markets, with the storage and computing market representing the largest portion of our revenue in 2022.
End Markets and Applications We design and develop our products for the storage and computing, enterprise data, automotive, industrial, communications and consumer markets, with the storage and computing market representing the largest portion of our revenue in 2023.
Our product families are differentiated with respect to their high degree of integration and strong levels of accuracy, power efficiency, quality and longevity, making them cost-effective and more sustainable relative to many competing solutions. Our key product families include the following: Direct Current ( “ DC ” ) to DC Products.
Our product families are differentiated from those of our competitors with respect to their high degree of integration and strong levels of accuracy, power efficiency, quality and longevity, making them cost-effective and more sustainable relative to many competing solutions. Our key product families include the following: Direct Current ( “ DC ” ) to DC Products.
Our issued patents are scheduled to expire at various times through December 2042. Our patents are material to our business, but we do not rely on any one particular patent for our success.
Our issued patents are scheduled to expire at various times through December 2043. Our patents are material to our business, but we do not rely on any one particular patent for our success.
In the area of circuit design and implementation, our initiatives include expanding our portfolio of products and adding new features to our products. In the area of process technologies, we are investing in research and development resources to provide leading-edge analog power processes for our next generation of integrated circuits.
In the area of circuit design and implementation, our initiatives include expanding our portfolio of products and adding new features to our products. In the area of process technologies, we are investing in research and development resources to provide leading-edge analog power processes for our next generation of ICs.
If these or future acquisitions are successful, competition may intensify and our competitors may have additional resources to compete against us. We operate in the cyclical semiconductor industry. While we are not immune from industry downturns, we have targeted product and market areas that we believe have the ability to offer above average industry performance over the long term.
If these or future acquisitions are successful, competition may intensify and our competitors may have additional resources to compete against us. We operate in the cyclical semiconductor industry. While we are subject to industry downturns, we have targeted product and market areas that we believe have the ability to offer above average industry performance over the long term.
Tseng holds Master of Laws degrees from the University of California at Berkeley and the Chinese Culture University in Taipei. 9 Table of Contents
Tseng holds Master of Laws degrees from the University of California at Berkeley and the Chinese Culture University in Taipei. 10 Table of Contents
Item 1. Business General Monolithic Power Systems, Inc. (“MPS”) is a fabless company with a global footprint that provides high-performance, semiconductor-based power electronic solutions. Incorporated in 1997, our three core strengths include deep system-level knowledge, strong semiconductor expertise, and innovative proprietary technologies in the areas of semiconductor processes, system integration, and packaging.
Item 1. Business General Monolithic Power Systems, Inc. (“MPS”) is a fabless global company that provides high-performance, semiconductor-based power electronics solutions. Incorporated in 1997, our three core strengths include deep system-level knowledge, strong semiconductor design expertise, and innovative proprietary technologies in the areas of semiconductor processes, system integration, and packaging.
These combined advantages enable us to deliver reliable, compact, and monolithic solutions found in storage and computing, enterprise data, automotive, industrial, communications and consumer applications. Our mission is to reduce energy and material consumption to improve all aspects of quality of life.
These combined advantages enable us to deliver reliable, compact, and monolithic solutions found in storage and computing, enterprise data, automotive, industrial, communications and consumer applications. Our mission is to reduce energy and material consumption to improve all aspects of quality of life and create a sustainable future.
Government regulations can be complex and are subject to change in the future, and accordingly, we are unable to assess the possible effect of compliance with future requirements.
Government regulations and import/export controls can be complex and are subject to change in the future, and accordingly, we are unable to assess the possible effect of compliance with future requirements.
Our products are principally positioned as achieving lower power loss and enabling significant reductions in circuit board space and shrinking or eliminating many passive components that are otherwise needed by competitors’ offerings. In addition, the life cycles of our products are typically over 10 years, reducing the manufacturing needs and associated carbon emissions associated with production of replacement products.
Our products are principally positioned to achieve lower power loss and enable significant reductions in circuit board space by shrinking or eliminating many passive components that are otherwise needed by competitors’ offerings. In addition, the life cycles of our products are typically over 10 years, reducing the manufacturing needs and associated carbon emissions associated with the production of replacement products.
In general, we have elected to pursue patent protection for aspects of our circuit and device designs that we believe are patentable and to protect our manufacturing process technologies by maintaining those process technologies as trade secrets. As of December 31, 2022, we had 1,557 patents/applications issued or pending, of which 546 patents have been issued in the United States.
In general, we have elected to pursue patent protection for aspects of our circuit and device designs that we believe are patentable and to protect our manufacturing process technologies by maintaining those process technologies as trade secrets. As of December 31, 2023, we had 1,701 patents/applications issued or pending, of which 585 patents have been issued in the United States.
The Lighting Control product family accounted for 5% of our total revenue in each of 2022, 2021 and 2020. In the future, we plan to continue to introduce new products within our existing product families, as well as in new innovative product categories.
The Lighting Control product family accounted for 6% of our total revenue in 2023 and 5% of our total revenue in both 2022 and 2021. In the future, we plan to continue to introduce new products within our existing product families, as well as in new innovative product categories.
The DC to DC product family accounted for 95% of our total revenue in each of 2022, 2021 and 2020. Lighting Control Products. Lighting control ICs are used in backlighting and general illumination products.
The DC to DC product family accounted for 94% of our total revenue in 2023 and 95% of our total revenue in both 2022 and 2021. Lighting Control Products. Lighting control ICs are used in backlighting and general illumination products.
Our ability to achieve revenue growth will depend in part upon our ability to continue to innovate while fulfilling our customers’ evolving needs, enter new market segments, gain market share, grow in regions outside of China, Taiwan and other Asian markets, expand our customer base and continue to secure manufacturing capacity.
Our ability to achieve revenue growth will depend in part upon our ability to continue to innovate while fulfilling our customers’ evolving needs, enter new market segments, obtain design wins, grow our sales to customers in regions outside China, Taiwan and other Asian markets, expand our customer base and continue to secure manufacturing capacity.
Once our silicon wafers have been produced, they are shipped to our facilities in Chengdu, China for wafer sort, which is a testing process performed to identify non-functioning dies. Our semiconductor products are then assembled and packaged by independent subcontractors in China and Malaysia.
Once our silicon wafers have been produced, they are shipped to the facilities in China, Taiwan, and Singapore that we and our partners utilize for wafer sort, which is a testing process performed to identify non-functioning dies. Our semiconductor products are then assembled and packaged by independent subcontractors in China, Taiwan and Malaysia.
Information About Executive Officers Information regarding our executive officers as of February 24, 2023 is as follows: Name Age Position Michael Hsing 63 President, Chief Executive Officer and Director Bernie Blegen 65 Vice President and Chief Financial Officer Deming Xiao 60 President of Asia Operations Maurice Sciammas 63 Senior Vice President of Worldwide Sales and Marketing Saria Tseng 52 Vice President, Strategic Corporate Development, General Counsel and Corporate Secretary Michael Hsing has served on our Board of Directors and has served as our President and Chief Executive Officer since founding MPS in August 1997.
Information About Executive Officers Information regarding our executive officers as of February 29, 2024 is as follows: Name Age Position Michael Hsing 64 President, Chief Executive Officer and Director Bernie Blegen 66 Executive Vice President and Chief Financial Officer Deming Xiao 61 Executive Vice President and President of Asia Operations Maurice Sciammas 64 Executive Vice President and Senior Vice President of Worldwide Sales and Marketing Saria Tseng 53 Executive Vice President, Strategic Corporate Development, General Counsel and Corporate Secretary Michael Hsing has served as the chairman of our Board of Directors and has served as our President and Chief Executive Officer since founding MPS in August 1997.
We often build inventory in advance based on our forecast of future customer orders. This subjects us to certain risks, most notably the possibility that sales will not meet our forecast, which could lead to inventories in excess of demand.
Typical supply chain lead times for orders are generally 16 to 26 weeks. We often build inventory in advance based on our forecast of future customer orders. This subjects us to certain risks, most notably the possibility that sales will not meet our forecast, which could lead to inventories in excess of demand.
Customers, Sales and Marketing We sell our products through third-party distributors, value-added resellers and directly to original equipment manufacturers (“OEMs”), original design manufacturers (“ODMs”), electronic manufacturing service (“EMS”) providers and other end customers.
Once we secure our product positioning through our technical sales and applications engineers’ efforts, we then sell our products through third-party distributors, value-added resellers and directly to original equipment manufacturers (“OEMs”), original design manufacturers (“ODMs”), electronic manufacturing service (“EMS”) providers and other end customers.
Available Information Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports that are filed or furnished pursuant to Sections 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, are available free of charge.
We also offer free exercise classes, strength training and yoga in some of our offices. 9 Table of Contents Available Information Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports that are filed or furnished pursuant to Sections 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, are available free of charge.
ODMs typically design and manufacture electronic products on behalf of OEMs, and EMS providers typically provide manufacturing services for OEMs and other electronic product suppliers. Sales to our largest distributor accounted for 24% of our total revenue in 2022, 26% in 2021, and 24% in 2020.
ODMs typically design and manufacture electronic products on behalf of OEMs, and EMS providers typically provide manufacturing services for OEMs and other electronic product suppliers. In 2023, our three largest distributors accounted for 26%, 19% and 10% of our total revenue. In 2022, our two largest distributors accounted for 24% and 19% of our total revenue.
We also make available on our website the charters for our audit committee, compensation committee, and nominating and corporate governance committee, our code of ethics, our director voting policy and our code of social responsibility.
We also make available on our website the charters for our audit committee, compensation committee, and nominating and corporate governance committee, our code of ethics, our director voting policy and our code of social responsibility. In addition, we will disclose on our website any amendments to, or waivers from, our code of ethics.
Because orders in backlog are subject to cancellation or postponement, and backlog at any particular date is not necessarily representative of actual sales for any succeeding period, we believe that our backlog is not necessarily a reliable indicator of future revenue. Typical supply chain lead times for orders are generally 16 to 26 weeks.
Our backlog consists of orders that we have received from customers which have not yet shipped. Because orders in backlog are subject to cancellation or postponement, and backlog at any particular date is not necessarily representative of actual sales for any succeeding period, we believe that our backlog is not necessarily a reliable indicator of future revenue.
In addition, we intend to disclose on our website any amendments to, or waivers from, our codes of business conduct, our code of social responsibility and our report on environment, social responsibility and governance. Information contained on our website is not a part of this Annual Report on Form 10-K.
We also disclose on our website our report on environment, social responsibility and governance. Information contained on our website is not a part of this Annual Report on Form 10-K.
The assembled ICs are then sent either for final testing at our Chengdu facilities, or to other turnkey providers who perform final testing based on our standards prior to shipping to our customers. Our manufacturing facilities in Chengdu, China, enable us to benefit from shorter manufacturing cycle times and lower labor and overhead costs.
The assembled ICs are then sent for final testing to the facilities in China, Taiwan and Malaysia that we and our partners utilize prior to shipping to our customers. The manufacturing facilities we utilize in Asia enable us to benefit from shorter manufacturing cycle times and lower labor and overhead costs.
Our products typically require a highly technical sales and applications engineering effort where we assist our customers in the design and use of our products in their application. We maintain a staff of applications engineers who work directly with our customers’ engineers in the development of their systems’ electronics containing our products.
We maintain a staff of applications engineers who work directly with our customers’ engineers in the development of their systems’ electronics containing our products.
Because our sales are primarily billed and payable in United States dollars, our sales are generally not subject to fluctuating currency exchange rates. However, because a majority of our revenue is attributable to sales to customers in Asia, changes in the relative value of the dollar may create pricing pressures for our products.
However, because a majority of our revenue is attributable to sales to customers in Asia, changes in the relative value of the dollar may create pricing pressures for our products. In 2023, 2022 and 2021, our revenue from sales to customers in Asia was 87%, 86% and 90%, respectively. Our sales are made primarily pursuant to standard individual purchase orders.
No other distributors or end customers accounted for more than 10% of our full-year, total revenue in any of the periods presented. Current distribution agreements with several of our major distributors provide that each distributor has the non-exclusive right to sell and use its best efforts to promote and develop a market for our products.
Current distribution agreements with several of our major distributors provide that each distributor has the non-exclusive right to sell and shall use its best efforts to promote and develop a market for our products. These agreements provide that payment for purchases from us will generally occur within 30 to 90 days from the date of invoice.
As of December 31, 2022, we employed 3,247 employees primarily in Asia, Europe, South America and the United States, compared with 2,773 employees as of December 31, 2021.
Our future success depends, in part, on our ability to attract, train, retain, and motivate highly qualified technical and managerial personnel, and there can be no assurance we will be successful. As of December 31, 2023, we employed 3,564 employees primarily in Asia, Europe, South America and the United States, compared with 3,247 employees as of December 31, 2022.
DC to DC ICs are used to convert and control voltages within a broad range of electronic systems, such as portable electronic devices, wireless LAN access points, computers and notebooks, monitors, infotainment applications and medical equipment.
DC to DC ICs are used to convert and control voltages within a broad range of electronic systems, such as cloud-based CPU servers, server AI applications, storage applications, commercial notebooks, digital cockpit, power sources, home appliances, 4G and 5G infrastructure and satellite communications applications.
In addition to our largest distributor, one distributor accounted for 19% of our total revenue in 2022, two distributors accounted for 15% and 10% of our total revenue in 2021, and one distributor accounted for 11% of our total revenue in 2020.
In 2021, our three largest distributors accounted for 26%, 15% and 10% of our total revenue. No other distributors or end customers accounted for more than 10% of our full-year, total revenue in any of the periods presented.
Removed
These agreements provide that payment for purchases from us will generally occur within 30 to 90 days from the date of invoice. In addition, we allow for limited stock rotation in certain agreements. We have sales offices in China, India, Japan, South Korea, Singapore, Taiwan, the United States and throughout Europe.
Added
Customers, Sales and Marketing We have sales offices in China, India, Japan, Singapore, South Korea, Taiwan, the United States and throughout Europe. Our products typically require a highly technical sales and applications engineering effort where we assist our customers in the design and use of our products in their application.
Removed
In 2022, 2021 and 2020, our revenue from sales to customers in Asia was 86%, 90% and 91%, respectively. Our sales are made primarily pursuant to standard individual purchase orders. Our backlog consists of orders that we have received from customers which have not yet shipped.
Added
In addition, we allow for limited stock rotation in certain agreements. Because our sales are primarily billed and payable in United States dollars, our sales are generally not subject to fluctuating currency exchange rates.
Removed
In recent years, these controls, tariffs, regulations, and restrictions have had, and we believe may continue to have, a material impact on our business, including our ability to sell products and to manufacture or source components.
Added
Certain employees are subject to collective bargaining agreements and we believe that we have good relations with these employees. We have never experienced an employee-based work stoppage or strike.
Removed
Our future success depends, in part, on our ability to attract, train, retain, and motivate highly qualified technical and managerial personnel. We may not be successful in attracting and retaining such personnel. Our employees are not represented by a collective bargaining organization, and we have never experienced a work stoppage or strike.
Added
We strive to maintain a culture that encourages innovation and create a workplace that values diverse backgrounds, a healthy and safe environment, and professional growth opportunities. • We continue to recruit new talent from a diverse candidate pool through various university recruitment programs and employment websites targeting underrepresented groups. We provide unconscious bias training to promote an environment of inclusivity.
Removed
Competition for talent in the semiconductor industry is strong, and compensation is critical to our recruiting and retention philosophy, especially given our rapid growth and our need to attract talented employees with a broad range of skills. Our total compensation packages are competitive, fair, and structured to encourage employees to invest in our future.
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We do not tolerate discrimination of any kind and have adopted policies for reporting concerns or violations. • We are an equal-opportunity employer, and we make employment decisions based on merit and business needs.
Removed
Our employee benefits programs include a combination of supplemental benefits including paid time off for holidays and vacations, health insurance and other plan benefits. We are an equal-opportunity employer, and we make employment decisions based on merit and business needs. We are committed to providing a healthy and safe environment for all our workers.
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Our total compensation packages are competitive, fair, and structured to encourage employees to invest in our future. • We provide employees with access to various learning tools and resources to explore their interests and develop their business skills and knowledge. • We have occupational health and safety management systems and environmental management plans in place.
Removed
Our Worker Health and Safety Plan is certified to ISO 45001 standards, the world’s voluntary, international standard for occupational health and safety. We believe that certifying to these standards enables our company to provide safe and healthy workplaces by preventing work-related injury and health issues.
Added
They include our standards for chemical and hazardous waste management, rules on use of personal protective equipment, and safety training plans. Our largest testing facilities in Chengdu, China are ISO 14001 and ISO 45001 certified. • We support the well-being of our employees. In certain offices, we offer onsite flu shot clinics and other annual health checkups and workshops.
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Our largest facilities have amenities including fitness centers, sports courts and private rooms for nursing.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

139 edited+41 added−24 removed124 unchanged
Biggest changeOur business, results of operations and financial condition, as well as your investment in our common stock, could be materially and adversely affected by any of the following material risks: • our dependence on the markets in Asia for our customer base, which may expose us to political, cultural, regulatory, economic, foreign currency and operational risks; • changes in general economic conditions in the countries where our products are sold or used, particularly those in China; • the impact of extensive Chinese government regulations, reduction or elimination of incentives, and uncertainties with respect to China’s legal system, on us and our manufacturing partners and suppliers; • changes in international trade policy, such as tariffs on imports of foreign goods and regulations restricting the export of goods and services, between the U.S. and China; • political and other risks in Taiwan and Hong Kong due to their tense relationships with China; • adverse movements in foreign exchange rates, including the Renminbi; • our ability to experience growth rates comparable to past years; • changes in general demand for electronic products in the end markets that we serve; • our ability to accurately forecast sales and expenses due to the nature of our business as a component supplier; • our ability to timely develop and introduce new products, and the acceptance of our new products in the marketplace; • our dependency on a limited number of customers, including distributors and value-added resellers, for a significant portion of our revenue; • potential product liability risks due to defects or failures to meet specifications; • lengthy sales cycles for our products balanced against the fixed nature of a substantial portion of our expenses; • availability of adequate manufacturing capacity from our suppliers, and our ability to increase product sales and revenue in spite of capacity issues; • increases in unanticipated costs as a result of increasing manufacturing capacity; 10 Table of Contents • our dependency on third-party suppliers for wafer purchases and potential increases in prices for wafers due to general capacity shortages; • our ability to deliver products on a timely basis despite disruptions in our relationships with assembly and test subcontractors; • our ability to manage our inventory levels, including the levels of inventory held by our distributors; • increases in manufacturing costs due to commodity price increases; • the highly cyclical nature of the semiconductor industry, and increased competition due to industry consolidation; • competition from companies with greater financial and technological resources and customers developing products internally; • the impact of system upgrades, cyberattacks or other system security, data protection and privacy breaches on our business operations; • the impact of various U.S. and international laws and regulations regarding data protection on our business operations; • our significant investment of resources in research and development, that may not result in increased future sales; • our ability to realize the anticipated benefits of any business acquisitions and other strategic investments; • risks associated with financial reporting, including the impact of new tax laws on our tax provision and tax planning; • our failure to comply with various governmental laws and regulations, including those related to environmental, social and governance (“ESG”) initiatives; • our ability to successfully defend ourselves in legal proceedings and protect our intellectual property, and the significant increase in legal expenses as a result of such proceedings; • the loss of key personnel; • risks associated with owning our stock, including volatility in our trading price due to our business and financial performance, analyst downgrades, failure to meet our own or analyst expectations, changes to our dividend program, and dilution from issuance of additional shares; • the effect of epidemics and pandemics, such as the COVID-19 pandemic, on our business; and • climate crises and other natural disasters, health risks, and economic and geopolitical uncertainties, including the Russia-Ukraine conflict. 11 Table of Contents Risks Associated with Our Significant Operations in Asia, Particularly in China We derive most of our revenue from direct or indirect sales to customers in Asia and have significant operations in Asia, which may expose us to political, cultural, regulatory, economic, foreign exchange, and operational risks.
Biggest changeDollar relative to other currencies, including the Renminbi; • our reliance on key suppliers in China, which may expose us to political, cultural, regulatory, economic, foreign currency, operational and capacity shortage risks; • our ability to achieve growth rates or financial performance comparable to past years; • changes in general demand for electronic products in the end markets that we serve; • our ability to accurately forecast sales and expenses due to the nature of our business as a component supplier; • our ability to timely develop and introduce new products, and the acceptance of our new products in the marketplace; • our dependency on a limited number of customers, including distributors and value-added resellers, for a significant portion of our revenue; • potential product liability risks due to defects or failures to meet specifications; • lengthy sales cycles for our products balanced against the fixed nature of a substantial portion of our expenses; • availability of adequate manufacturing capacity from our suppliers, and our ability to increase product sales in spite of capacity issues; 11 Table of Contents • increases in unanticipated costs as a result of increasing manufacturing capacity; • our dependency on third-party suppliers for wafer purchases and potential increases in prices for wafers due to general capacity shortages; • our ability to deliver products on a timely basis despite disruptions in our relationships with assembly and test subcontractors; • our ability to manage our inventory levels, including the levels of inventory held by our distributors; • increases in manufacturing costs due to commodity price increases; • the highly cyclical nature of the semiconductor industry, and increased competition due to industry consolidation; • competition from companies with greater financial and technological resources, and customers developing products internally; • the impact of system upgrades, cyberattacks or other system security, data protection and privacy breaches on our business operations; • the impact of various U.S. and international laws and regulations regarding data protection on our business operations; • our significant investment of resources in research and development that may not result in increased future sales; • our ability to realize the anticipated benefits of any business acquisitions and other strategic investments; • the impact of new tax laws on our tax provision and tax planning; • risks in connection with our internal control over financial reporting and the identified material weakness; • our failure to comply with various governmental laws and regulations related to environmental, social and governance (“ESG”) initiatives or our failure to meet our own ESG goals and targets; • our ability to successfully defend ourselves in legal proceedings and protect our intellectual property, and the significant increase in legal expenses as a result of such proceedings; • the loss of key personnel; • risks associated with owning our stock, including volatility in our trading price due to our business and financial performance, analyst downgrades, failure to meet our own or analyst expectations, changes to our stock repurchase or dividend program, and dilution from issuance of additional shares; • health risks, climate crises and other natural disasters; and • financial market, economy and geopolitical uncertainties. 12 Table of Contents Risks Associated with Our Significant Operations in Asia, Particularly in China We derive most of our revenue from direct or indirect sales to customers in Asia and have significant operations in Asia, which may expose us to political, cultural, regulatory, economic, foreign exchange, and operational risks.
In addition, U.S. laws and regulations and sanctions, or threat of sanctions, that could limit and restrict the export of some of our products and services to our customers may also encourage our customers to develop their own solutions to replace our products, or seek to obtain a greater supply of similar or substitute products from our competitors that are not subject to these restrictions, which could materially and adversely affect our business, financial condition and results of operations.
In addition, U.S. laws and regulations and sanctions, or threat of sanctions, that could limit or restrict the export of some of our products and services may also encourage our customers to develop their own solutions to replace our products, or seek to obtain a greater supply of similar or substitute products from our competitors that are not subject to these restrictions, which could materially and adversely affect our business, financial condition and results of operations.
Significant deterioration in the liquidity or financial condition of any such major customers or any group of our customers could have a material adverse impact on the collectability of our accounts receivable and our future operating results.
Significant deterioration in the liquidity or financial condition of any such major customers or any group of our customers could have a material adverse impact on the collectability of our accounts receivable and our future financial condition and operating results.
From time to time, we have experienced product quality, performance or reliability problems. Our standard warranty period is generally one to two years, which exposes us to significant risks of claims for defects and failures.
From time to time, we have experienced product quality, performance or reliability problems. Our standard warranty period is generally one or two years, which exposes us to significant risks of claims for defects and failures.
Such activities are subject to a number of risks, including: • the costs and expense associated with such activities, including requirements to make long-term purchase commitments and upfront cash deposits to our suppliers; • the availability of modern foundries to be developed, acquired, leased or otherwise made available to us or our third-party suppliers; • the ability of foundries and our third-party suppliers to obtain the advanced equipment used in the production of our products; • delays in identifying and negotiating agreements with new foundries and suppliers; and • environmental, engineering or manufacturing qualification problems relating to existing or new foundry facilities, including delays in qualification of new foundries by our customers.
Such activities are subject to a number of risks, including: • the costs and expense associated with such activities, including requirements to make long-term purchase commitments including upfront cash deposits to our suppliers; • the availability of modern foundries to be developed, acquired, leased or otherwise made available to us or our third-party suppliers; • the ability of foundries and our third-party suppliers to obtain the advanced equipment used in the production of our products; • delays in identifying and negotiating agreements with new foundries and suppliers; and • environmental, engineering or manufacturing qualification problems relating to existing or new foundry facilities, including delays in qualification of new foundries by our customers.
If any of our wafer suppliers are acquired, become insolvent or capacity constrained, or are otherwise unable to provide us sufficient wafers at acceptable yields and at anticipated costs, our revenue and gross margin may decline or we may not be able to fulfill our customer orders. We have supply arrangements with certain suppliers for the production of wafers.
If any of our wafer suppliers are acquired, become insolvent or capacity constrained, or are otherwise unable to provide us sufficient wafers at acceptable yields or at anticipated costs, our revenue and gross margin may decline or we may not be able to fulfill our customer orders. We have supply arrangements with certain suppliers for the production of wafers.
The GDPR allows for the imposition of fines and corrective action on entities that improperly use, disclose or secure the personal data of EU subjects, including through a data security breach. In addition, an increasing number of states in the U.S. have enacted laws containing similar requirements to GDPR for businesses collecting or processing personal data.
The GDPR allows for the imposition of fines and corrective action on entities that improperly use, disclose or secure the personal data of EU subjects, including through a data security breach. In addition, an increasing number of states in the U.S. have enacted laws containing similar requirements to the GDPR for businesses collecting or processing personal data.
Our dividend payments may change from time to time, and we cannot provide assurance that we will continue to declare dividends at all or in any particular amounts. A reduction in or elimination of our dividend payments could have a negative effect on the price of our common stock and on the return achieved by our stockholders.
Our dividend payments may change from time to time, and we cannot provide assurance that we will continue to declare dividends in any particular amounts or at all. A reduction in or elimination of our dividend payments could have a negative effect on the price of our common stock and on the return achieved by our stockholders.
Bribery Act and other anti-corruption laws to which we are subject, there is no assurance that such policies or procedures will work effectively all of the time or protect us against liability under these laws for actions taken by our employees and other intermediaries with respect to our business or any businesses that we may acquire.
Bribery Act and other anti-corruption laws to which we are subject, there is no assurance that such policies or procedures will work effectively all the time or protect us against liability under these laws for actions taken by our employees and other intermediaries with respect to our business or any businesses that we may acquire.
The U.S. and other regions where we conduct business in have been and may continue to be affected by conflicts that could, among other things, disrupt our supply chain, and impact customer demands and component prices. For example, the U.S. and other countries have recently imposed economic sanctions and export control measures on Russia due to the conflict in Ukraine.
The U.S. and other regions where we conduct business have been and may continue to be affected by conflicts that could, among other things, disrupt our supply chain, and impact customer demands and component prices. For example, the U.S. and other countries have imposed economic sanctions and export control measures on Russia due to the conflict in Ukraine.
In the event that our predictions are inaccurate due to unexpected increases in orders or unavailability of products within the timeframe that is required, we may have insufficient inventory to meet our customers’ demands. In addition, a perceived negative trend in market conditions could lead us to decrease the manufacturing volume of our products to avoid excess inventory.
In the event that our predictions are inaccurate due to unexpected increases in orders or unavailability of products within the timeframe that is required, we may have insufficient inventory to meet our customers’ demands. In addition, a negative trend in market conditions could lead us to decrease the manufacturing volume of our products to avoid excess inventory.
If these tariffs continue or additional new tariffs are imposed in the future, they could have a negative impact on us as we have significant operations in China and the U.S. Additionally, the imposition of tariffs is dependent upon the classification of goods under the U.S. Harmonized Tariff System (“HTS”) and the country of origin of the goods.
If these tariffs continue or additional tariffs are imposed in the future, they could have a negative impact on us as we have significant operations in China and the U.S. Additionally, the imposition of tariffs is dependent upon the classification of goods under the U.S. Harmonized Tariff System (“HTS”) and the country of origin of the goods.
We derive most of our revenue from customers located in Asia through direct sales or indirect sales through distribution arrangements and value-added reseller agreements with parties located in Asia. As a result, we are subject to significant risks due to this geographic concentration of business and operations.
We derive most of our revenue from customers located in Asia through direct sales or indirect sales under distribution arrangements and value-added reseller agreements with parties located in Asia. As a result, we are subject to significant risks due to this geographic concentration of business and operations.
We receive a significant portion of our revenue from distribution arrangements, and value-added resellers, and the loss of any one of these distributors, value-added resellers or direct customers or failure to collect a receivable from them could adversely affect our financial position and results of operations.
We receive a significant portion of our revenue from distribution arrangements and value-added resellers, and the loss of any one of these distributors, value-added resellers or direct customers, or failure to collect a receivable from them could materially and adversely affect our financial position and results of operations.
In addition, if we are unsuccessful in integrating any acquired company or business into our operations or if integration is more difficult than anticipated, we may experience disruptions that could harm our business and result in our failure to realize the anticipated benefits of the acquisitions.
In addition, if we are unsuccessful in integrating Axign, or any acquired company or business into our operations, or if integration is more difficult than anticipated, we may experience disruptions that could harm our business and result in our failure to realize the anticipated benefits of the acquisitions.
There are risks inherent in doing business in Asia, and internationally in general, including: • changes in, or impositions of, legislative or regulatory requirements or restrictions, including tax and trade laws in the U.S. and in the countries in which we manufacture or sell our products, and government action to restrict our ability to sell to foreign customers where sales of products may require export licenses; • trade restrictions imposed by the U.S. related to goods imported from regions in China with records of forced labor and other human rights issues; • currency exchange rate fluctuations impacting intercompany transactions; • the fluctuations in the value of the U.S.
There are risks inherent in doing business in Asia, and internationally in general, including: • changes in, or impositions of, legislative or regulatory requirements or restrictions, including tax and trade laws in the U.S. and in the countries in which we manufacture or sell our products, and governmental action to restrict our ability to sell to foreign customers where sales of products may require export licenses; • trade restrictions imposed by the U.S. related to goods imported from regions in China with records of forced labor and other human rights issues; • currency exchange rate fluctuations impacting intercompany transactions; • fluctuations in the value of the U.S.
Unauthorized use or disclosure of, or access to, any personal information maintained by us or on our behalf, whether through breach of our systems, breach of the systems of our suppliers or vendors by an unauthorized party, or through employee error, theft or misuse, or otherwise, could harm our business.
Unauthorized use or disclosure of, or access to, any personal information maintained by us or on our behalf, whether through breach of our systems, breach of the systems of our suppliers by an unauthorized party, or through employee error, theft or misuse, or otherwise, could harm our business.
We may have to invest more resources in research and development than anticipated, which could increase our operating expenses and negatively impact our operating results. Our success depends on us investing significant amounts of resources into research and development.
We may have to invest more resources in research and development than anticipated, which could increase our operating expenses and negatively impact our operating results. Our success depends on us investing significant amounts of resources in research and development.
The operation of our business also depends upon our ability to retain these employees, as these employees hold a significant amount of institutional knowledge about us and our products and, if they were to terminate their employment, our sales, operations and internal control over financial reporting could be adversely affected. 25 Table of Contents Risks Associated with Ownership of Our Stock The future trading price of our common stock could be subject to wide fluctuations in response to a variety of factors.
The operation of our business also depends upon our ability to retain these employees, as they hold a significant amount of institutional knowledge about us and our products and, if they were to terminate their employment, our sales, operations and internal control over financial reporting could be adversely affected. 26 Table of Contents Risks Associated with Ownership of Our Stock The future trading price of our common stock could be subject to wide fluctuations in response to a variety of factors.
Some of the risks that may adversely affect our ability to integrate or realize any anticipated benefits from the acquired companies, businesses or assets include those associated with: • unexpected losses of key employees or customers of the acquired companies or businesses; • integrating the acquired company’s standards, processes, procedures and controls with our operations; • coordinating new product and process development; 22 Table of Contents • hiring additional management and other critical personnel; • increasing the scope, geographic diversity and complexity of our operations; • difficulties in consolidating facilities and transferring processes and know-how; • difficulties in the assimilation of acquired operations, technologies or products; • the risk of undisclosed liabilities of the acquired businesses and potential legal disputes with founders or stockholders of acquired companies; • our inability to commercialize acquired technologies; • the risk that the future business potential as projected is not realized and as a result, we may be required to take an impairment charge related to goodwill or acquired intangibles that would impact our profitability; • difficulties in assessing the fair value of earn-out arrangements; • diversion of management’s attention from other business concerns; and • adverse effects on existing business relationships with customers.
Some of the risks that may adversely affect our ability to integrate or realize any anticipated benefits from the acquired companies, businesses or assets include those associated with: • unexpected losses of key employees or customers of the acquired companies or businesses; • integrating the acquired company’s standards, processes, procedures and controls with our operations; • coordinating new product and process development; 23 Table of Contents • hiring additional management and other critical personnel; • increasing the scope, geographic diversity and complexity of our operations; • difficulties in consolidating facilities and transferring processes and know-how; • difficulties in the assimilation of acquired operations, technologies or products; • undisclosed liabilities of the acquired businesses and potential legal disputes with founders or stockholders of acquired companies; • our inability to commercialize acquired technologies; • the projected business potential is not realized and as a result, we may be required to take an impairment charge related to goodwill or acquired intangibles that would impact our profitability; • difficulties in assessing the fair value of earn-out arrangements; • diversion of management’s attention from other business concerns; and • adverse effects on existing business relationships with customers.
We cannot be certain that we will continue to achieve design wins from large OEMs, that our direct customers will continue to be successful in selling to the OEMs, or that the OEMs will be successful in selling products which incorporate our ICs.
We cannot be certain that we will continue to achieve design wins from large OEMs, that our customers will continue to be successful in selling to the OEMs, or that the OEMs will be successful in selling products which incorporate our ICs.
If our customers, including distributors, do not manage their inventory correctly or misjudge their customers’ demand, our shipments to and orders from our customers may vary significantly on a quarterly basis, and we may have difficulty forecasting our expenses and inventory levels, which could reduce our revenue, result in inventory write offs, and adversely affect our financial condition and results of operations.
If our customers, including distributors, reduce their orders from us, do not manage their inventory correctly or misjudge their customers’ demand, our shipments to and orders from our customers may vary significantly or decline on a quarterly basis, and we may have difficulty forecasting our expenses and inventory levels, which could reduce our revenue, result in inventory write offs, and adversely affect our financial condition and results of operations.
An increase in the price or a decrease in the availability of these commodities and similar commodities that we use could negatively impact our business and results of operations. 19 Table of Contents Risks Associated with Industry Dynamics and Competition The highly cyclical nature of the semiconductor industry, which has resulted in significant and sometimes prolonged downturns, could materially and adversely affect our financial condition and results of operations.
An increase in the price or a decrease in the availability of these commodities and similar commodities that we use could negatively impact our business and results of operations. 20 Table of Contents Risks Associated with Industry Dynamics and Competition The highly cyclical nature of the semiconductor industry, which has resulted in significant and sometimes prolonged downturns, could materially and adversely affect our financial condition and results of operations.
If we fail to expand our customer base and significantly reduce the geographic concentration of our customers, we will continue to be subject to the foregoing risks, which could materially and adversely affect our business, financial condition and results of operations. 12 Table of Contents Our business has been and may be significantly impacted by worldwide economic conditions, in particular changing economic conditions in China.
If we fail to expand our customer base and significantly reduce the geographic concentration of our customers, we will continue to be subject to the foregoing risks, which could materially and adversely affect our business, financial condition and results of operations. 13 Table of Contents Our business has been and may be significantly impacted by worldwide economic conditions, in particular changing economic conditions in China.
These uncertainties may impede our ability to enforce contracts in China and could materially and adversely affect our business and results of operations. Furthermore, China’s legal system is based in part on government policies and internal rules, some of which are not published on a timely basis, or at all, and may have retroactive effect.
These uncertainties may impede our ability to enforce contracts in China and could materially and adversely affect our business and results of operations. Furthermore, China’s legal system is based in part on government policies and internal rules, some of which are not published on a timely basis, or at all, and may have retroactive effects.
We may be unsuccessful in developing and selling new products with margins similar to, or better than, what we have experienced in the past, which would impact our overall gross margin and financial performance. Our success depends on our development and sale of products that are differentiated in the market, with gross margins that have historically been above industry averages.
We may be unsuccessful in developing and selling new products with margins similar to, or better than, what we have experienced in the past, which could impact our overall gross margin and financial performance. Our success depends on our development and sale of products that are differentiated in the market, with gross margins that have historically been above industry averages.
Dollar relative to other foreign currencies, including the Renminbi, may adversely affect our results of operations. Several of our manufacturing and other suppliers are and will continue to be primarily located in China for the foreseeable future. In connection with the global economic downturn, there has been an increased level of global currency fluctuation and volatility.
Dollar relative to other foreign currencies, including the Renminbi, may adversely affect our results of operations. Many of our manufacturing and other suppliers are and will continue to be primarily located in China for the foreseeable future. In connection with the global economic downturn, there has been an increased level of global currency fluctuation and volatility.
All of these factors could have a material and adverse impact on our business, financial condition and results of operations. 17 Table of Contents Because of the lengthy sales cycles for our products and the fixed nature of a significant portion of our expenses, we may incur substantial expenses before we earn associated revenue and may not ultimately achieve our forecasted sales for our products.
All of these factors could have a material and adverse impact on our business, financial condition and results of operations. 18 Table of Contents Because of the lengthy sales cycles for our products and the fixed nature of a significant portion of our expenses, we may incur substantial expenses before we earn associated revenue and may not ultimately achieve our forecasted sales for our products.
We compete with domestic and non-domestic semiconductor companies, many of which have substantially greater financial and other resources with which to pursue engineering, manufacturing, marketing, and distribution of their products, and, in some cases, may have a broader number of product offerings that enable them to more effectively market and sell to customers and engage sales partners.
We compete with domestic and foreign semiconductor companies, many of which have substantially greater financial and other resources with which to pursue engineering, manufacturing, marketing, and distribution of their products, and, in some cases, may have a broader number of product offerings that enable them to more effectively market and sell to customers and engage sales partners.
As a result of completing acquisitions, we could use a significant portion of our available cash, cash equivalents and short-term investments, issue equity securities that would dilute current stockholders’ percentage ownership, or incur substantial debt or contingent liabilities. Such actions could impact our operating results and the price of our common stock.
As a result of completing acquisitions, we could use a significant portion of our available cash, cash equivalents and short-term investments, issue equity securities that would dilute current stockholders’ percentage ownership, or incur substantial debt or contingent liabilities. Such actions could impact our financial condition, operating results and the price of our common stock.
Because significant portions of our expenses are fixed in the short term or incurred in advance of anticipated sales, we may not be able to decrease our expenses in a timely manner to offset any sales shortfall. Any significant or prolonged downturns could have a material adverse effect on our business, financial condition and results of operations.
Because significant portions of our expenses are fixed in the short term or incurred in advance of anticipated sales, we may not be able to decrease our expenses in a timely manner to offset any sales shortfall. Any significant or prolonged downturns would have a material adverse effect on our business, financial condition and results of operations.
In addition, companies that are strategic alliance partners in some areas of our business may acquire or form alliances with our competitors, thereby reducing their business with us. We believe that semiconductor industry consolidation may result in stronger competitors that are better able to compete as sole-source vendors of multiple products for customers.
In addition, companies that are strategic alliance partners in some areas of our business may acquire or form alliances with our competitors, thereby reducing their business with us. We believe that semiconductor industry consolidation may result in stronger competitors that are better able to compete as sole-source suppliers of multiple products for customers.
Due to the sensitive political climate these regulations created, there are increasing risks that the national security law may trigger sanctions or other forms of restrictions by foreign governments including the U.S., which could affect companies conducting business in Hong Kong.
Due to the sensitive political climate these regulations created, there are increasing risks that this China’s national security law may trigger sanctions or other forms of restrictions by foreign governments including the U.S., which could affect companies conducting business in Hong Kong.
In addition, any new or amended laws and regulations related to, among other things, foreign investment and manufacturing could have a material adverse effect on our business and our ability to operate our business in China. From time to time, we may have to resort to administrative and court proceedings to enforce our legal rights.
In addition, any new or amended laws and regulations related to, among other things, foreign investments and manufacturing could have a material adverse effect on our business and our ability to operate business in China. From time to time, we may have to resort to administrative and court proceedings to enforce our legal rights.
As we develop new product lines, we must adapt to market conditions that are unfamiliar to us, such as competitors and distribution channels that are different from those we have known in the past. Some of our new product lines require us to re-equip our labs to test parameters we have not tested in the past.
As we develop new product lines, we must adapt to market conditions that may be unfamiliar to us, such as competitors and distribution channels that are different from those we have known in the past. Some of our new product lines require us to re-equip our labs to test parameters we have not tested in the past.
Such incidents could subject us to significant monetary damages, regulatory enforcement actions and/or criminal prosecution, and cause us to lose clients and their related revenue in the future. Risks Associated with Strategic Investments and Initiatives Our success depends on our investment of significant resources in research and development.
Such incidents could subject us to significant monetary damages, regulatory enforcement actions and/or criminal prosecution, and cause us to lose customers and their related revenue in the future. Risks Associated with Strategic Investments and Initiatives Our success depends on our investment of significant resources in research and development.
Any additional new regulations or the amendment of previously implemented regulations could require us and our manufacturing partners and suppliers to change our business plans, increase our costs, or limit our ability to sell products and conduct activities in China, which could adversely affect our business and operating results.
Any additional regulations or the amendment of previously implemented regulations could require us and our manufacturing partners and suppliers to change our business plans, increase our costs, or limit our ability to sell products and conduct business activities in China, which could materially and adversely affect our business and operating results.
We are subject to U.S. laws and regulations that could limit and restrict the export of some of our products and services and may restrict our transactions with certain customers, business partners and other persons, including, in certain cases, dealings with or between our employees and subsidiaries.
We are subject to U.S. laws and regulations that could limit and restrict the export of some of our products and services and may restrict our transactions with certain customers, business partners and other individuals, including, in certain cases, dealings with or between our employees and subsidiaries.
We purchase inventory in advance based on expected demand for our products, and if demand is not as expected, we may have insufficient or excess inventory, which could adversely impact our financial position. As a fabless semiconductor company, we purchase our inventory from third-party manufacturers in advance of selling our products.
We purchase inventory in advance based on expected demand for our products, and if demand is not as expected, we may have insufficient or excess inventory, which could adversely impact our financial position. As a fabless semiconductor company, we purchase our inventory from third-party manufacturers.
We are in direct and active competition, with respect to one or more of our product lines, with many manufacturers of such products, of varying size and financial strength. The number of our competitors has grown due to the expansion of the market segments in which we participate.
We are in direct and active competition, with respect to one or more of our product lines, with many manufacturers of varying size and financial strength. The number of our competitors has grown due to the expansion of the market segments in which we participate.
We are subject to numerous risks and factors that could cause a decrease in our growth rates compared to past periods, including increased competition, loss of certain of our customers, unfavorable changes in our operations, reduced global electronics demand, a deterioration in market conditions including as a result of the global economic downturn, end-customer market downturn, market acceptance and penetration of our current and future products, and litigation.
We are subject to numerous risks and factors that could cause a decrease in our growth rates, or a decline in revenue compared to past periods, including increased competition, loss of certain of our customers, unfavorable changes in our operations, reduced global electronics demand, a deterioration in market conditions including as a result of the global economic downturn, end-customer market downturn, market acceptance and penetration of our current and future products, and litigation.
If any such unauthorized use or disclosure of, or access to, such personal information was to occur, our operations could be seriously disrupted, and we could be subject to demands, claims and litigation by private parties, and investigations, related actions, and penalties by regulatory authorities.
If any such unauthorized use or disclosure of, or access to, such personal information was to occur, our operations could be seriously disrupted, and we could be subject to demands, claims and litigation by private parties, and investigations and penalties by regulatory authorities.
We have significant operations in Asia, which place us in frequent contact with persons who may be considered “foreign officials” under the FCPA or other anti-corruption laws, resulting in an elevated risk of potential violations.
We have significant operations in Asia, which place us in frequent contact with individuals who may be considered “foreign officials” under the FCPA or other anti-corruption laws, resulting in an elevated risk of potential violations.
Such unpredictability towards our contractual, property and procedural rights and any failure to quickly respond to changes in the regulatory environment in China could adversely affect our business and impede our ability to continue our operations and proceed with our future business plans in China. 14 Table of Contents We are subject to export laws, trade policies and restrictions including international tariffs that could materially and adversely affect our business and results of operations.
Such unpredictability towards our contractual, property and procedural rights and any failure to quickly respond to changes in the regulatory environment in China could materially and adversely affect our business and impede our ability to continue our operations and proceed with our business plans in China. 15 Table of Contents We are subject to export laws, trade policies and restrictions including international tariffs that could materially and adversely affect our business and results of operations.
In addition, we could incur significant costs in notifying affected persons and entities and otherwise complying with the multitude of foreign, federal, state and local laws and regulations relating to the unauthorized access to, or use or disclosure of, personal information.
In addition, we could incur significant costs in notifying affected individuals and entities and otherwise complying with the multitude of foreign, federal, state and local laws and regulations relating to the unauthorized access to, or use or disclosure of, personal information.
ICs as complex as ours often encounter development delays and may contain undetected defects or failures when first introduced or after commencement of commercial shipments, which might require product replacement or recall. Further, our third-party manufacturing processes or changes thereto, or changes in the raw material used in the manufacturing processes may cause our products to fail.
ICs as complex as ours often encounter development delays and may contain undetected defects or failures when first introduced or after commencement of commercial shipments, which might require product replacement or recall. Further, our third-party manufacturing processes or changes thereto, or changes in the materials used in the manufacturing processes may cause our products to fail.
Because industry practice allows customers to reschedule or cancel orders on relatively short notice, backlog is not always a good indicator of our future sales. If customer cancellations or product changes occur, we could lose anticipated sales and not have sufficient time to reduce our inventory and operating expenses.
Because industry practice allows customers to reschedule or cancel orders on relatively short notice, backlog is not always a good indicator of our future sales. If customer cancellations or purchase order changes occur, we could lose anticipated sales and not have sufficient time to reduce our inventory and operating expenses.
We cannot assure you that our products will continue to compete favorably, or that we will be successful in the face of increasing competition from new products and enhancements introduced by existing competitors or new companies entering this market, which would materially and adversely affect our results of operations and our financial condition.
We cannot guarantee that our products will continue to compete favorably, or that we will be successful in the face of increasing competition from new products and enhancements introduced by existing competitors or new companies entering this market, which would materially and adversely affect our results of operations and our financial condition.
We believe that the application of our products in the storage and computing, enterprise data, automotive, industrial, communications and consumer markets will continue to account for the majority of our revenue.
We believe that the application of our products in the storage and computing, enterprise data, automotive, industrial, communication and consumer markets will continue to account for the majority of our revenue.
If the value of the Renminbi rises against the U.S. Dollar, there could be an increase in our manufacturing costs relative to competitors who have manufacturing facilities located outside of China, which could adversely affect our operations. In addition, our sales are primarily denominated in the U.S. Dollar.
If the value of the Renminbi rises against the U.S. Dollar, there could be an increase in our manufacturing costs relative to competitors who have manufacturing facilities located outside China, which could adversely affect our financial results and operations. In addition, our sales are primarily denominated in the U.S. Dollar. If the value of the U.S.
We market our products through distribution arrangements and value-added resellers, and through our direct sales and applications support organization to customers that include OEMs, ODMs and EMS providers. Receivables from our customers are generally not secured by any type of collateral and are subject to the risk of being uncollectible.
We market our products through distribution arrangements and value-added resellers, and through our direct sales to customers that include OEMs, ODMs and EMS providers. Receivables from our customers are generally not secured by any type of collateral and are subject to the risk of being uncollectible.
The future trading price of our common stock is likely to be highly volatile and could be subject to wide fluctuations in response to various factors, many of which are beyond our control, including: • actual or anticipated results of operations and financial performance, including our ability to accurately forecast future demand for our products; • actual or anticipated manufacturing capacity limitations; • our ability to develop new products, enter new market segments, gain market share, manage litigation risk, diversify our customer base and successfully secure manufacturing capacity; • our ability to maintain or increase our gross margins; • costs of increasing wafer capacity and qualifying additional third-party wafer fabrication facilities; • our loss of key customers; • investments in sales and marketing resources to enter new markets; • commencement of or developments relating to litigation; • cyberattacks or other system security, data protection and privacy breaches; • the inclusion, exclusion or deletion of our common stock from any major trading indices, such as the S&P 500 Index; • our sale of common stock or other securities in the future; • any mergers, acquisitions or divestitures of assets undertaken by us; • our ability to obtain governmental licenses and approvals for international trading activities or technology transfers, including export licenses; • our ability to meet or exceed the guidance that we provide to our investors and analysts; • our ability to pay quarterly cash dividends to stockholders; • our ability to meet or exceed our, our investors’ or analysts’ expectations; • market reactions to guidance from other semiconductor companies or third-party research groups; • market reactions to merger and acquisition activities in the semiconductor industry, and rumors or expectations of further consolidation in the industry; • investor perceptions of us and our business strategies; • the breadth and liquidity of the market for our common stock; 26 Table of Contents • trading activity in our common stock, including short positions; • actions by institutional or other large stockholders; • changes in the estimation of the future size and growth rate of our markets; • introduction of new products by us or our competitors; • general economic, industry and market conditions worldwide, including the global economic downturn; • developments generally affecting the semiconductor industry; • terrorist acts or acts of war, including the ongoing conflict between Ukraine and Russia; • epidemics and pandemics, such as developments and restrictions with respect to the COVID-19 pandemic; • developments with respect to intellectual property rights; • conditions and trends in technology industries; • changes in market valuation or earnings of our competitors; • government debt default; • changes in corporate tax laws; • government policies and regulations on international trade policies and restrictions, including tariffs on imports of foreign goods; • export controls, trade and economic sanctions and regulations, and other regulatory or contractual limitations on our ability to sell or develop our products in certain foreign markets, particularly in China; • ratings published by third-party organizations with respect to our ESG compliance efforts; • our compliance with regulatory mandates focusing on ESG issues; and • our performance against the ESG guidelines set by institutional stockholders and customers, and our ability to meet or exceed their expectations.
The trading price of our common stock has been, and is likely to continue to be, highly volatile and could be subject to wide fluctuations in response to various factors, many of which are beyond our control, including: • actual or anticipated results of operations and financial performance, including our ability to accurately forecast future demand for our products; • actual or anticipated manufacturing capacity limitations; • our ability to develop new products, enter new market segments, gain market share, manage litigation risk, diversify our customer base and successfully secure manufacturing capacity; • our ability to maintain or increase our gross margins; • costs of increasing wafer capacity and qualifying additional third-party wafer fabrication facilities; • our loss of key customers; • investments in sales and marketing resources to enter new markets; • commencement of or developments relating to litigation; • cyberattacks or other system security, data protection and privacy breaches; • the inclusion, exclusion or deletion of our common stock from any major trading indices, such as the S&P 500 Index; • our sale of common stock or other securities in the future; • any mergers, acquisitions or divestitures of assets undertaken by us; • our ability to obtain governmental licenses and approvals for international trading activities or technology transfers, including export licenses; • our ability to meet or exceed the guidance that we provide to our investors and analysts; • our ability to continue the stock repurchase program and pay quarterly cash dividends to stockholders; • our ability to meet or exceed our, our investors’ or analysts’ expectations; • market reactions to guidance from other semiconductor companies or third-party research groups; • market reactions to merger and acquisition activities in the semiconductor industry, and rumors or expectations of further consolidation in the industry; • investor perceptions of us and our business strategies; • the breadth and liquidity of the market for our common stock; 27 Table of Contents • trading activity in our common stock, including short positions; • actions by institutional or other large stockholders; • changes in the estimation of the future size and growth rate of our markets; • introduction of new products by us or our competitors; • general economic, industry and market conditions worldwide, including any global economic downturn; • developments generally affecting the semiconductor industry; • terrorist acts or acts of war, including the ongoing Ukraine-Russia and Middle East conflicts; • epidemics and pandemics; • developments with respect to intellectual property rights; • conditions and trends in technology industries; • changes in market valuation or earnings of our competitors; • government debt default; • changes in corporate tax laws; • government policies and regulations on international trade policies and restrictions, including tariffs on imports of foreign goods; • export controls, trade and economic sanctions and regulations, and other regulatory or contractual limitations on our ability to sell or develop our products in certain foreign markets, particularly in China; • ratings published by third-party organizations with respect to our ESG compliance efforts; • our compliance with regulatory mandates focusing on ESG issues, including climate risks and social initiatives; and • our performance against the ESG guidelines set by institutional stockholders and customers, and our ability to meet or exceed their expectations.
We may not be successful in implementing new systems and transitioning data, which could cause business disruptions and our remediation efforts may be expensive, time consuming, disruptive and resource-intensive. Such disruptions could adversely impact our ability to fulfill orders and interrupt other processes.
We may not be successful in implementing new systems and transitioning data, which could cause business disruptions and our remediation efforts may be expensive, time consuming, disruptive and resource-intensive. Such disruptions could adversely impact our ability to fulfill orders in a timely manner and interrupt other processes.
Although such measures have not significantly affected our business or operations, future developments could adversely affect our operating results and financial condition. 28 Table of Contents
Although such measures have not significantly affected our business or operations, future developments could adversely affect our operating results and financial condition. 29 Table of Contents
Should we fail to improve our gross margin in the future, and accordingly develop and introduce sufficiently differentiated products that result in higher gross margins than industry averages, our business, financial condition and results of operations could be materially and adversely affected.
Should we fail to improve or maintain our gross margins in the future, and accordingly develop and introduce sufficiently differentiated products that result in higher gross margins than industry averages, our business, financial condition and results of operations could be materially and adversely affected.
The analog and mixed-signal semiconductor industry is highly competitive, and we expect competitive pressures to continue. Our ability to compete effectively and to expand our business will depend on our ability to continue to recruit applications and design talent, our ability to introduce new products, and our ability to maintain the rate at which we introduce these new products.
The analog and mixed-signal semiconductor industry is highly competitive, and we expect competitive pressures to continue. Our ability to compete effectively and to expand our business will depend on our ability to continue to recruit application engineers and design talent, introduce new products, and maintain the rate at which we introduce these new products.
If we fail to retain key employees in our sales, applications, finance and legal functions or to make continued improvements to our internal systems, our business may suffer.
If we fail to retain key employees in our sales, engineering, finance and legal functions or to make continued improvements to our internal systems, our business may suffer.
Privacy, cyber security, and data protection are becoming increasingly significant issues in China and other countries. To address these issues, the Standing Committee of the National People’s Congress promulgated the Cyber Security Law of the People’s Republic of China (the “Cyber Security Law”), which took effect on June 1, 2017.
Privacy, cyber security, and data protection are becoming increasingly significant issues. To address these issues, the Standing Committee of the National People’s Congress promulgated the Cyber Security Law of the People’s Republic of China (the “Cyber Security Law”), which took effect on June 1, 2017.
In addition, if capacity restraints result in significant delays in product shipments, our business and results of operations would be adversely affected. 13 Table of Contents We and our manufacturing partners and suppliers are or will be subject to extensive Chinese government regulations, and the benefit of various incentives from Chinese governments that we and our manufacturing partners and suppliers receive may be reduced or eliminated, which could increase our costs or limit our ability to sell products and conduct activities in China.
In addition, if capacity restraints result in significant delays in product shipments, our business and results of operations would be materially and adversely affected. 14 Table of Contents We and many of our manufacturing partners and suppliers are subject to extensive Chinese government regulations, and the benefit of various incentives from Chinese governments that we and many of our manufacturing partners and suppliers receive may be reduced or eliminated, which could increase our costs or limit our ability to sell products and conduct activities in China.
In addition, from time to time, governments may provide subsidies or make other investments that could give competitive advantages to many semiconductor companies. For example, in August 2022, the U.S. enacted the U.S. CHIPS and Science Act of 2022 (the “CHIPS Act”), which, among other things, provides funding to increase domestic production and research and development in the semiconductor industry.
In addition, from time to time, governments may provide subsidies or make other investments that could give competitive advantages to many semiconductor companies. For example, in August 2022, the U.S. enacted the CHIPS Act, which, among other things, provides funding to increase domestic production and research and development in the semiconductor industry.
While certain aspects of our relationships with these suppliers are contractual, many important aspects of our relationships depend on our suppliers’ continued cooperation and our management of the supplier relationships. Our relationships could also be negatively impacted by changes in control or changes in the management team of the suppliers.
While certain aspects of our relationships with these suppliers are contractual, many important aspects of our relationships depend on our suppliers’ continued cooperation and our management of such relationships with the suppliers. Our relationships could be negatively impacted by changes in control or changes in the management team of the suppliers.
Risks Associated with Regulatory Compliance, Intellectual Property Protection and Litigation We are subject to anti-corruption laws in the jurisdictions in which we operate, including the U.S. Foreign Corrupt Practices Act (the “ FCPA ” ) and the U.K. Bribery Act.
Risks Associated with Regulatory Compliance, Intellectual Property Protection and Litigation We are subject to anti-corruption laws in the jurisdictions in which we operate, including the U.S. Foreign Corrupt Practices Act (the “FCPA”) and the U.K. Bribery Act.
Any of these incentives could be reduced or eliminated by governmental authorities at any time, which could adversely affect our business and operating results. Uncertainties with respect to China ’ s legal system, including uncertainties regarding the enforcement of laws, and sudden or unexpected changes in policies, laws and regulations in China could adversely affect our operations.
Any of these incentives could be reduced or eliminated by governmental authorities at any time, which could materially and adversely affect our business and operating results. Uncertainties with respect to China’s legal system, including uncertainties regarding the enforcement of laws, and sudden or unexpected changes in policies, laws and regulations in China could materially and adversely affect our operations.
Additionally, if our stock price declines, it may be more difficult for us to raise capital and may have other adverse effects on our business. There can be no assurance that we will continue to declare cash dividends at all or in any particular amounts.
Additionally, if our stock price declines, it may be more difficult for us to raise capital and may have other adverse effects on our business. 28 Table of Contents There can be no assurance that we will continue to declare cash dividends in any particular amounts or at all.
It exercises significant control over China’s economic growth through the allocation of resources, controlling payment of foreign currency-denominated obligations, setting monetary policy and providing preferential treatment to particular industries or companies.
It exercises significant control over China’s economy through the allocation of resources, controlling payment of foreign currency-denominated obligations, setting monetary policy and providing preferential treatment to particular industries or companies.
Delayed sales or a loss of customers resulting from these disruptions could adversely affect our financial results, stock price and reputation.
Delayed sales or a loss of customers resulting from these disruptions could adversely affect our financial results and reputation.
In addition, events such as the COVID-19 pandemic, the Russia-Ukraine conflict and supply chain disruptions may materially impact our assembly suppliers’ ability to operate. Any future product delivery delays or disruptions in our relationships with our subcontractors could have a material adverse effect on our financial condition, results of operations and cash flows.
In addition, events such as the Russia-Ukraine conflict, the Middle East conflict and supply chain disruptions may materially impact our assembly suppliers’ ability to operate. Any future product delivery delays or disruptions in our relationships with our subcontractors could have a material adverse effect on our financial condition, results of operations and cash flows.
If we are unable to maintain our facilities in China at fully operational status with qualified workers, appropriate manufacturing controls and reasonable cost levels, we may incur higher costs than our current expense levels, which would affect our gross margins.
If we are unable to maintain our facilities in China at full operational status with qualified workers, appropriate manufacturing controls and reasonable cost levels, we may incur costs higher than our current expense levels, which would affect our gross margins and operating expenses.
In certain circumstances, export control and economic sanctions regulations may prohibit the export of certain products, services and technologies, and in other circumstances we may be required to obtain an export license before exporting the controlled item.
In certain circumstances, export controls and economic sanctions may prohibit the export of certain products, services and technologies, and in other circumstances we may be required to obtain an export license before exporting the controlled item.
If we are unable to adapt rapidly to these new and additional conditions, we may not be able to successfully penetrate new markets.
If we are unable to adapt rapidly to these new conditions, we may not be able to successfully penetrate new markets.
Furthermore, the laws of the countries in which our products are or may be developed, manufactured or sold may not protect our products and intellectual property rights to the same extent as laws in the United States. Our failure to adequately protect our proprietary technologies could materially harm our business.
Furthermore, the laws of the countries in which our products are or may be developed, manufactured or sold may not protect our products and intellectual property rights to the same extent as laws in the U.S. Our failure to adequately protect our proprietary technologies could materially harm our business.
If we are required to invest significantly greater resources than anticipated in research and development efforts without a corresponding increase in revenue, our operating results could decline.
If we are required to invest significantly greater resources than anticipated in research and development efforts without a corresponding increase in revenue, our operating results could be harmed.
Given its recent passage, there is significant uncertainty in how regulators will interpret and enforce the law, but it contains provisions that allow substantial government oversight and include fines for failure to obtain required approval from China’s cyber and data protection regulators for cross-border transfers of personal data. 21 Table of Contents Effective May 25, 2018, the European Union (“EU” ) implemented the General Data Protection Regulation (“GDPR” ), a broad data protection framework that expands the scope of current EU data protection law to non-European Union entities that process, or control the processing of, the personal data of EU subjects.
There is significant uncertainty in how regulators will interpret and enforce the law, and it contains provisions that allow substantial government oversight and include fines for failure to obtain required approval from China’s cyber and data protection regulators for cross-border transfers of personal data. 22 Table of Contents Effective May 25, 2018, the European Union (“EU”) implemented the General Data Protection Regulation (“GDPR”), a broad data protection framework that expands the scope of EU data protection law to non-European Union entities that process, or control the processing of, the personal data of EU subjects.
We are subject to increasing regulatory and reporting standards related to ESG matters, which could increase our expenses. Recently, there has been an increase in public awareness from regulators, investors and other key stakeholders focusing on ESG compliance efforts, including those related to environmental sustainability and social responsibility.
We are subject to increasing regulatory and reporting standards related to ESG matters, which could increase our expenses. In recent years, there has been an increase in public awareness and requirements from regulators, investors, customers and other key stakeholders focusing on ESG compliance efforts, including those related to environmental sustainability and social responsibility.
The success of a new product depends on accurate forecasts of long-term market demand and future technological developments, as well as on a variety of specific implementation factors, including: • timely and efficient completion of process design and device structure improvements; • timely and efficient implementation of manufacturing, assembly, and test processes; • the ability to secure and effectively utilize fabrication capacity in different geometries; • product performance; • product availability; 16 Table of Contents • product quality and reliability; and • effective marketing, sales and service.
The success of a new product depends on accurate forecasts of long-term market demand and future technological developments, as well as on a variety of other factors, including: • timely and efficient completion of process design and device structure improvements; • timely and efficient implementation of manufacturing, assembly, and test processes; • the ability to secure and effectively utilize fabrication capacity in different geometries; • product performance; • product availability and pricing; 17 Table of Contents • product quality and reliability; and • effective marketing, sales and services.
As a result, we may not be aware of our violation of any of these policies and rules until sometime after the violation may have occurred.
As a result, we may not be aware of our violation of any of these policies and rules until some time after the violation may have occurred.
We cannot predict the timing, strength or duration of any economic disruptions, such as those resulting from the COVID-19 pandemic, the global economic downturn or the Russia-Ukraine conflict, or subsequent economic recovery worldwide, in our industry, or in the different markets that we serve.
We cannot predict the timing, strength or duration of any economic disruptions, such as those resulting from the global economic downturn, the Russia-Ukraine conflict, the Middle East conflict or subsequent economic recovery worldwide, in our industry, or in the different markets that we serve.
If we are not able to accurately predict new end markets to serve or if the demand for our products declines in our current major end markets, our revenue will decrease and our results of operations and financial condition would be materially and adversely affected.
If we are not able to accurately predict new end markets to serve or if the demand for our products declines in certain of our current major end markets, our revenue would decrease compared to prior year periods and our results of operations and financial condition would be materially and adversely affected.
We do not maintain earthquake insurance and could be materially and adversely affected in the event of a major earthquake. Much of our revenue, as well as our manufacturers and assemblers, are concentrated in Asia, particularly in China.
We do not maintain earthquake insurance and could be materially and adversely affected in the event of a major earthquake. Much of our revenue, as well as our manufacturing and assembly partners, are concentrated in Asia, particularly in China.
We must also comply with export restrictions and laws imposed by other countries affecting trade and investments. Although these restrictions and laws have not materially restricted our operations in the recent past, there is a significant risk that they could do so in the future, which would materially and adversely affect our business and results of operations.
We must also comply with export restrictions and laws imposed by other countries affecting trade and investments. Although these restrictions and laws have not materially restricted our operations in the past, they could do so in the future, which would materially and adversely affect our business and results of operations.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe believe that our existing facilities are adequate for our current operations.
Biggest changeWe believe that our existing facilities are suitable for our current operations.
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Properties The following table summarizes our significant properties as of December 31, 2022: Approximate Building Location Square Footage Primary Use Owned: United States: Kirkland, Washington 70,000 Principal executive office, research and development, sales and marketing Livonia, Michigan 40,000 Sales and marketing, research and development San Jose, California 106,000 Research and development, sales and marketing, administrative International: Barcelona, Spain 12,000 Research and development, sales and marketing, administrative Chengdu, China 200,000 Research and development, administrative Chengdu, China 60,000 Manufacturing operations Chengdu, China 451,000 Manufacturing operations, research and development, administrative Ettenheim, Germany 57,000 Sales and marketing Hangzhou, China 68,000 Research and development Shanghai, China 16,000 Sales and marketing Shenzhen, China 8,000 Sales and marketing Taipei, Taiwan 47,000 Sales and marketing, research and development, administrative Leased: Barcelona, Spain 12,000 Research and development Chengdu, China 235,000 Manufacturing operations, inventory warehouse Hsinchu, Taiwan 34,000 Research and development We also lease other sales and marketing, and research and development offices in Asia, Europe and the United States.
Added
Properties As of December 31, 2023, our owned and leased facilities in excess of 10,000 square feet consisted of: United States Other Countries Total (in square feet) Owned facilities 216,000 923,000 1,139,000 Leased facilities - 290,000 290,000 Total facilities 216,000 1,213,000 1,429,000 We also lease other sales and marketing, and research and development offices in Asia, Europe and the United States.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeThese proceedings often involve complex questions of fact and law and may require the expenditure of significant funds and the diversion of other resources to prosecute and defend. We intend to defend ourselves vigorously against any such claims. As of December 31, 2022 , there were no material pending legal proceedings to which we were a party.
Biggest changeThese proceedings often involve complex questions of fact and law and may require the expenditure of significant funds and the diversion of other resources to prosecute and defend. We defend ourselves vigorously against any such claims. As of December 31, 2023 , there were no material pending legal proceedings to which we were a party.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe declaration of any future cash dividends is at the discretion of our Board of Directors and will depend on, among other things, our financial condition, results of operations, capital requirements, business conditions and other factors that our Board of Directors may deem relevant, as well as a determination that cash dividends are in the best interests of the stockholders.
Biggest changeThe declaration of any future cash dividends is at the discretion of our Board of Directors and will depend on, among other things, our financial condition, results of operations, capital requirements, business conditions and other factors that our Board of Directors may deem relevant, as well as a determination that cash dividends are in the best interests of the stockholders. 32 Table of Contents Stock Performance Graph The following graph compares the cumulative five-year total return on our common stock relative to the cumulative total returns of the Nasdaq Composite Index and the PHLX Semiconductor Sector Index.
The information contained in this stock performance graph section shall not be deemed to be “ soliciting material, ” or “ filed ” or incorporated by reference in future filings with the SEC, or subject to the liabilities of Section 18 of the Securities Exchange Act of 1934, except to the extent that we specifically incorporate it by reference into a document filed under the Securities Act of 1933 or the Securities Exchange Act of 1934. 30 Table of Contents
The information contained in this stock performance graph section shall not be deemed to be “ soliciting material, ” or “ filed ” or incorporated by reference in future filings with the SEC, or subject to the liabilities of Section 18 of the Securities Exchange Act of 1934, except to the extent that we specifically incorporate it by reference into a document filed under the Securities Act of 1933 or the Securities Exchange Act of 1934. 33 Table of Contents
An investment of $100 is assumed to have been made in our common stock on December 31, 2017 and its performance relative to the performance of a similar investment in the two indexes is shown through December 31, 2022, assuming the reinvestment of dividends. Historic stock performance is not indicative of future performance.
An investment of $100 is assumed to have been made in our common stock on December 31, 2018, and its performance relative to the performance of a similar investment in the two indexes is shown through December 31, 2023, assuming the reinvestment of dividends. Historic stock performance is not indicative of future performance.
Item 5. Market for Registrant ’ s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Common Stock Information Our common stock is traded on the Nasdaq Global Select Market under the symbol “MPWR.” Holders of Common Stock As of February 17, 2023, there were 58 registered holders of record of our common stock.
Item 5. Market for Registrant ’ s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Common Stock Information Our common stock is traded on the Nasdaq Global Select Market under the symbol “MPWR”. Holders of Common Stock As of February 22, 2024, there were 68 registered holders of record of our common stock.
A substantially greater number of holders of our common stock are “street name” or beneficial holders, whose shares are held by banks, brokers and other financial institutions on their behalf. Dividend Policy We currently have a dividend program approved by our Board of Directors, pursuant to which we intend to pay quarterly cash dividends on our common stock.
A substantially greater number of holders of our common stock are “street name” or beneficial holders, whose shares are held by banks, brokers and other financial institutions on their behalf.
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Stock Performance Graph The following graph compares the cumulative five-year total return on our common stock relative to the cumulative total returns of the Nasdaq Composite Index and the PHLX Semiconductor Sector Index.
Added
Issuer Purchases of Equity Securities In October 2023, our Board of Directors approved a stock repurchase program authorizing us to repurchase up to $640.0 million in the aggregate of our common stock through October 29, 2026. Shares are retired upon repurchase.
Added
We repurchased approximately 7,000 shares of our common stock for an aggregate purchase price of $3.7 million during the year ended December 31, 2023. Stock repurchases under the program may be made through open market repurchases, privately negotiated transactions or other structures in accordance with applicable state and federal securities laws, at times and in amounts as management deems appropriate.
Added
The timing and the number of any repurchased common stock will be determined by our management based on the evaluation of market conditions, legal requirements, stock price, and other factors. The repurchase program does not obligate us to purchase any particular number of shares and may be suspended, modified, or discontinued at any time without prior notice.
Added
The following table represents details of our stock repurchase transactions during the fourth quarter of 2023: Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Program Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (in thousands, except per share amounts) November 1, 2023 – November 30, 2023 5 $ 505.65 5 $ 637,465 December 1, 2023 – December 31, 2023 2 $ 603.15 2 $ 636,259 Total 7 $ 533.45 7 Dividend Policy We currently have a dividend program approved by our Board of Directors, pursuant to which we intend to pay quarterly cash dividends on our common stock.

Item 7. Management's Discussion & Analysis

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

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Biggest changeResults of Operations The following table summarizes our results of operations: Year Ended December 31, 2022 2021 2020 (in thousands, except percentages) Revenue $ 1,794,148 100.0 % $ 1,207,798 100.0 % $ 844,452 100.0 % Cost of revenue 745,596 41.6 522,339 43.2 378,498 44.8 Gross profit 1,048,552 58.4 685,459 56.8 465,954 55.2 Operating expenses: Research and development 240,171 13.4 190,627 15.8 137,598 16.3 Selling, general and administrative 273,595 15.2 226,190 18.7 161,670 19.1 Litigation expense, net 8,001 0.4 6,225 0.6 7,804 1.0 Total operating expenses 521,767 29.0 423,042 35.1 307,072 36.4 Operating income 526,785 29.4 262,417 21.7 158,882 18.8 Other income (expense), net (1,848 ) (0.1 ) 9,802 0.8 10,460 1.3 Income before income taxes 524,937 29.3 272,219 22.5 169,342 20.1 Income tax expense 87,265 4.9 30,196 2.5 4,967 0.6 Net income $ 437,672 24.4 % $ 242,023 20.0 % $ 164,375 19.5 % 34 Table of Contents Revenue The following table summarizes our revenue by end market: Year Ended December 31, Change From From % of % of % of 2021 to 2020 to End Market 2022 Revenue 2021 Revenue 2020 Revenue 2022 2021 (in thousands, except percentages) Storage and Computing $ 452,594 25.3 % $ 255,933 21.2 % $ 180,293 21.4 % 76.8 % 42.0 % Enterprise Data 251,415 14.0 116,345 9.6 72,884 8.6 116.1 % 59.6 % Automotive 300,016 16.7 204,335 16.9 108,966 12.9 46.8 % 87.5 % Industrial 219,179 12.2 184,784 15.3 119,603 14.2 18.6 % 54.5 % Communications 251,452 14.0 164,091 13.6 142,326 16.8 53.2 % 15.3 % Consumer 319,492 17.8 282,310 23.4 220,380 26.1 13.2 % 28.1 % Total $ 1,794,148 100.0 % $ 1,207,798 100.0 % $ 844,452 100.0 % 48.5 % 43.0 % Revenue for the year ended December 31, 2022 was $1,794.1 million, an increase of $586.3 million, or 48.5%, from $1,207.8 million for the year ended December 31, 2021.
Biggest changeResults of Operations The following table summarizes our results of operations: Year Ended December 31, 2023 2022 2021 (in thousands, except percentages) Revenue $ 1,821,072 100.0 % $ 1,794,148 100.0 % $ 1,207,798 100.0 % Cost of revenue 799,953 43.9 745,596 41.6 522,339 43.2 Gross profit 1,021,119 56.1 1,048,552 58.4 685,459 56.8 Operating expenses: Research and development 263,643 14.5 240,171 13.4 190,627 15.8 Selling, general and administrative 275,740 15.1 281,596 15.6 232,415 19.3 Total operating expenses 539,383 29.6 521,767 29.0 423,042 35.1 Operating income 481,736 26.5 526,785 29.4 262,417 21.7 Other income (expense), net 24,105 1.3 (1,848 ) (0.1 ) 9,802 0.8 Income before income taxes 505,841 27.8 524,937 29.3 272,219 22.5 Income tax expense 78,467 4.3 87,265 4.9 30,196 2.5 Net income $ 427,374 23.5 % $ 437,672 24.4 % $ 242,023 20.0 % 36 Table of Contents Revenue The following table summarizes our revenue by end market: Year Ended December 31, End Market 2023 % of Revenue 2022 % of Revenue 2021 % of Revenue (in thousands, except percentages) Storage and Computing $ 491,139 27.0 % $ 452,594 25.3 % $ 255,933 21.2 % Enterprise Data 322,980 17.7 251,415 14.0 116,345 9.6 Automotive 394,665 21.7 300,016 16.7 204,335 16.9 Industrial 172,717 9.4 219,179 12.2 184,784 15.3 Communications 204,911 11.3 251,452 14.0 164,091 13.6 Consumer 234,660 12.9 319,492 17.8 282,310 23.4 Total $ 1,821,072 100.0 % $ 1,794,148 100.0 % $ 1,207,798 100.0 % Revenue for the year ended December 31, 2023 was $1,821.1 million, an increase of $27.0 million, or 1.5%, from $1,794.1 million for the year ended December 31, 2022.
Dividends We currently have a dividend program approved by our Board of Directors, pursuant to which we intend to pay quarterly cash dividends on our common stock.
We currently have a dividend program approved by our Board of Directors, pursuant to which we intend to pay quarterly cash dividends on our common stock.
Income Tax Expense The income tax expense for the year ended December 31, 2022 was $87.3 million, or 16.6% of pre-tax income. The effective tax rate was lower than the federal statutory rate primarily due to foreign income from our subsidiaries in Bermuda and China being taxed at lower statutory tax rates, and excess tax benefits from stock-based compensation.
The income tax expense for the year ended December 31, 2022 was $87.3 million, or 16.6% of pre-tax income. The effective tax rate was lower than the federal statutory rate of 21% primarily due to foreign income from our subsidiaries in Bermuda and China being taxed at lower statutory tax rates, and excess tax benefits from stock-based compensation.
Likewise, should it be determined that additional amounts of the net deferred tax assets will not be realized in the future, an adjustment to increase the deferred tax assets valuation allowance will be charged to income in the period such determination is made. 33 Table of Contents Contingencies We record a contingent liability related to pending legal and regulatory proceedings when it is probable that a loss has been incurred and the amount is reasonably estimable.
Likewise, should it be determined that additional amounts of the net deferred tax assets will not be realized in the future, an adjustment to increase the deferred tax assets valuation allowance will be charged to income in the period such determination is made. 35 Table of Contents Contingencies We record a contingent liability related to pending legal and regulatory proceedings when it is probable that a loss has been incurred and the amount is reasonably estimable.
Four U.S.-based distributors have price adjustment rights when they sell our products to their end customers at a price that is lower than the distribution price invoiced by us. When we receive claims from the distributors that products have been sold to the end customers at the lower price, we issue the distributors credit memos for the price adjustments.
Certain U.S.-based distributors have price adjustment rights when they sell our products to their end customers at a price that is lower than the distribution price invoiced by us. When we receive claims from the distributors that products have been sold to the end customers at the lower price, we issue the distributors credit memos for the price adjustments.
Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth under “Part I, Item 1A. Risk Factors” and elsewhere in this Annual Report on Form 10-K.
Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those set forth under “Part I, Item 1A. Risk Factors” and elsewhere in this Annual Report on Form 10-K.
Discussions of 2020 results and year-to-year comparisons between 2021 and 2020 that are omitted in this Annual Report on Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on February 25, 2022.
Discussions of 2021 results and year-to-year comparisons between 2022 and 2021 that are omitted in this Annual Report on Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on February 24, 2023.
We derive most of our revenue from sales through distribution arrangements and direct sales to customers in Asia, where our products are incorporated into end-user products. Our revenue from direct or indirect sales to customers in Asia was 86%, 90% and 91% for the years ended December 31, 2022, 2021 and 2020, respectively.
We derive most of our revenue from sales through distribution arrangements and direct sales to customers in Asia, where our products are incorporated into end-user products. Our revenue from direct or indirect sales to customers in Asia was 87%, 86% and 90% for the years ended December 31, 2023, 2022 and 2021, respectively.
Cash Requirements Although consequences of economic uncertainty and macroeconomic conditions and other factors could adversely affect our liquidity and capital resources in the future, and cash requirements may fluctuate based on the timing and extent of many factors such as those discussed above, we believe that our balances of cash, cash equivalents and short-term investments of $737.9 million as of December 31, 2022, along with cash generated by ongoing operations, will be sufficient to satisfy our liquidity requirements for the next 12 months and beyond.
Cash Requirements Although consequences of economic uncertainty and macroeconomic conditions and other factors could adversely affect our liquidity and capital resources in the future, and cash requirements may fluctuate based on the timing and extent of many factors such as those discussed above, we believe that our balances of cash, cash equivalents and short-term investments of $1,108.5 million as of December 31, 2023, along with cash generated by ongoing operations, will be sufficient to satisfy our liquidity requirements for the next 12 months and beyond.
In August 2022, the CHIPS Act and the Inflation Reduction Act of 2022 (the “IRA”) were enacted and signed into law, which did not have a material impact on our income tax provisions, results of operations or financial condition for the year ending December 31, 2022.
In August 2022, the CHIPS Act and the Inflation Reduction Act of 2022 (the “IRA”) were enacted and signed into law, which did not have a material impact on our income tax provisions, results of operations or financial condition for the years ended December 31, 2023 or 2022.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion should be read in conjunction with the consolidated financial statements and related notes which appear under Item 8 in this Annual Report on Form 10-K. This discussion and analysis contain, in addition to historical information, forward-looking statements that include risks and uncertainties.
Item 7. Management ’ s Discussion and Analysis of Financial Condition and Results of Operations The following discussion should be read in conjunction with the consolidated financial statements and related notes which appear under Item 8 in this Annual Report on Form 10-K. This discussion and analysis contain, in addition to historical information, forward-looking statements that involve risks and uncertainties.
Based on our historical practice, stockholders of record as of the last business day of the quarter are entitled to receive the quarterly cash dividends when and if declared by the Board of Directors, which are payable to the stockholders in the following month. As of December 31, 2022, accrued dividends totaled $35.3 million.
Based on our historical practice, stockholders of record as of the last business day of the quarter are entitled to receive the quarterly cash dividends when and if declared by the Board of Directors, which are payable to the stockholders in the following month. As of December 31, 2023, accrued dividends totaled $47.9 million.
As of December 31, 2022 and 2021, we had a valuation allowance of $20.3 million and $19.5 million, respectively, attributable to management’s determination that it is more likely than not that certain deferred tax assets will not be fully realized.
As of December 31, 2023 and 2022, we had a valuation allowance of $35.0 million and $20.3 million, respectively, attributable to management’s determination that it is more likely than not that certain deferred tax assets will not be fully realized.
Estimates and judgments used in the preparation of our financial statements are, by their nature, uncertain and unpredictable, and depend upon, among other things, many factors outside of our control, including demand for our products, economic conditions and other current and future events, such as macroeconomic factors, including the impact of the COVID-19 pandemic, the global economic downturn and the Russia-Ukraine conflict.
Estimates and judgments used in the preparation of our financial statements are, by their nature, uncertain and unpredictable, and depend upon, among other things, many factors outside of our control, including demand for our products, economic conditions and other current and future events, such as macroeconomic factors, including the impact of the 2023 banking crisis, global economic downturn, Russia-Ukraine conflict and the Middle East conflict.
Operating Leases Operating lease obligations represent the undiscounted remaining lease payments primarily for our leased facilities and equipment. As of December 31, 2022, these obligations totaled $3.8 million, of which $2.1 million was short-term.
Operating Leases Operating lease obligations represent the undiscounted remaining lease payments primarily for our leased facilities and equipment. As of December 31, 2023, these obligations totaled $7.9 million, of which $2.3 million was short-term.
Research and Development ( “ R&D ” ) R&D expenses primarily consist of salary and benefit expenses, bonuses, stock-based compensation and deferred compensation for design and product engineers, expenses related to new product development and supplies, and facility costs.
Research and Development ( “ R&D ” ) R&D expenses primarily consist of cash compensation and benefits, stock-based compensation and deferred compensation for design and product engineers, expenses related to new product development and supplies, and facility costs.
Other Income (Expense), Net Other expense, net, was $1.8 million for the year ended December 31, 2022, compared with other income, net, of $9.8 million for the year ended December 31, 2021.
Other Income (Expense), Net Other income, net, was $24.1 million for the year ended December 31, 2023, compared with other expense, net, of $1.8 million for the year ended December 31, 2022.
Tax Cuts and Jobs Act enacted in December 2017 (“2017 Tax Act”) . As permitted by the 2017 Tax Act, we have elected to pay the tax liability in installments on an interest-free basis through 2025. As of December 31, 2022, the remaining liability totaled $14.8 million, of which $3.7 million was short-term.
Tax Cuts and Jobs Act enacted in December 2017 (the “2017 Tax Act”) . As permitted by the 2017 Tax Act, we have elected to pay the tax liability in installments on an interest-free basis through 2025. As of December 31, 2023, the remaining liability totaled $11.1 million, of which $4.9 million was short-term.
In February 2023, our Board of Directors approved an increase in the quarterly cash dividend from $0.75 per share to $1.00 per share, which amount will be paid on April 14, 2023 to all stockholders of record as of the close of business on March 31, 2023.
In February 2024, our Board of Directors approved an increase in the quarterly cash dividend from $1.00 per share to $1.25 per share, which amount will be paid on April 15, 2024 to all stockholders of record as of the close of business on March 29, 2024.
Recent Accounting Pronouncements See Note 1 of the Notes to Consolidated Financial Statements regarding accounting pronouncements not yet adopted as of December 31, 2022.
Recent Accounting Pronouncements See Note 1 of the Notes to Consolidated Financial Statements regarding a recently adopted accounting pronouncement and recent accounting pronouncements not yet adopted as of December 31, 2023.
We operate in the cyclical semiconductor industry. We are not immune from industry downturns, but we have targeted product and market areas that we believe have the ability to offer above average industry performance over the long term.
We are subject to industry downturns, but we have targeted product and market areas that we believe have the ability to offer above average industry performance over the long term.
Cost of Revenue and Gross Margin Cost of revenue primarily consists of costs incurred to manufacture, assemble and test our products, as well as warranty costs, inventory-related and other overhead costs, and stock-based compensation expenses.
This decrease was a result of broad market weakness across all segments. Cost of Revenue and Gross Margin Cost of revenue primarily consists of costs incurred to manufacture, assemble and test our products, as well as warranty costs, inventory-related and other overhead costs, and stock-based compensation expenses.
The increase in gross margin was mainly driven by lower warranty expenses as a percentage of revenue and a favorable product mix.
The decrease in gross margin was mainly driven by product mix, partially offset by lower inventory write-downs and warranty expenses as a percentage of revenue.
Year Ended December 31, Change From 2021 to From 2020 to 2022 2021 2020 2022 2021 (in thousands, except percentages) R&D expenses $ 240,171 $ 190,627 $ 137,598 26.0 % 38.5 % As a percentage of revenue 13.4 % 15.8 % 16.3 % R&D expenses were $240.2 million, or 13.4% of revenue, for the year ended December 31, 2022, and $190.6 million, or 15.8% of revenue, for the year ended December 31, 2021.
Year Ended December 31, 2023 2022 2021 (in thousands, except percentages) R&D expenses $ 263,643 $ 240,171 $ 190,627 As a percentage of revenue 14.5 % 13.4 % 15.8 % R&D expenses were $263.6 million, or 14.5% of revenue, for the year ended December 31, 2023, and $240.2 million, or 13.4% of revenue, for the year ended December 31, 2022.
As of December 31, 2022, total estimated future unconditional purchase commitments to all suppliers and other parties were $1.1 billion, of which $455.4 million was short-term. Transition Tax Liability The transition tax liability represents the one-time, mandatory deemed repatriation tax imposed on previously deferred foreign earnings under the U.S.
As of December 31, 2023, total estimated future unconditional purchase commitments to all suppliers and other parties, net of the $120.0 million prepayment, were $699.7 million, of which $367.8 million was classified as short-term. 39 Table of Contents Transition Tax Liability The transition tax liability represents the one-time, mandatory deemed repatriation tax imposed on previously deferred foreign earnings under the U.S.
We believe our ability to achieve revenue growth will depend, in part, on our ability to develop new products, enter new market segments, gain market share, manage litigation risk, diversify our customer base and continue to secure manufacturing capacity. Impact of COVID-19 on Our Business The COVID-19 pandemic has had, and continues to have, a significant impact around the world.
We believe our ability to achieve revenue growth will depend, in part, on our ability to develop new products, enter new market segments, gain market share, manage litigation risk, diversify our customer base and continue to secure manufacturing capacity.
Macroeconomic Conditions and Recent Regulations During 2022, the semiconductor industry faced a number of macro-economic challenges including the impact of supply chain capacity constraints, wide swings in customer demand, rising inflation, increased interest rates, and fluctuations in currency rates. We remain cautious in light of changing macroeconomic conditions and will continue to monitor potential impact on our operations.
Macroeconomic Conditions and Recent Regulations During 2023, the semiconductor industry faced, and continues to face, a number of macro-economic challenges including reduced consumer spending, fluctuations in demand for semiconductors, rising inflation, increased interest rates, and fluctuations in currency rates. We remain cautious in light of continued challenging macroeconomic conditions and will continue to monitor the potential impact on our operations.
See Note 11 of the Notes to Consolidated Financial Statements for further discussion. 36 Table of Contents Liquidity and Capital Resources December 31, 2022 2021 (in thousands, except percentages) Cash and cash equivalents $ 288,607 $ 189,265 Short-term investments 449,266 535,817 Total cash, cash equivalents and short-term investments $ 737,873 $ 725,082 Percentage of total assets 35.8 % 45.7 % Total current assets $ 1,410,619 $ 1,124,852 Total current liabilities (263,400 ) (226,944 ) Working capital $ 1,147,219 $ 897,908 As of December 31, 2022, we had cash and cash equivalents of $288.6 million and short-term investments of $449.3 million, compared with cash and cash equivalents of $189.3 million and short-term investments of $535.8 million as of December 31, 2021.
See Note 11 of the Notes to Consolidated Financial Statements for further discussion. 38 Table of Contents Liquidity and Capital Resources December 31, 2023 2022 (in thousands, except percentages) Cash and cash equivalents $ 527,843 $ 288,607 Short-term investments 580,633 449,266 Total cash, cash equivalents and short-term investments $ 1,108,476 $ 737,873 Percentage of total assets 45.5 % 35.8 % Total current assets $ 1,819,499 $ 1,410,619 Total current liabilities (235,035 ) (263,400 ) Working capital $ 1,584,464 $ 1,147,219 As of December 31, 2023, we had cash and cash equivalents of $527.8 million and short-term investments of $580.6 million, compared with cash and cash equivalents of $288.6 million and short-term investments of $449.3 million as of December 31, 2022.
Year Ended December 31, Change From 2021 to From 2020 to 2022 2021 2020 2022 2021 (in thousands, except percentages) Cost of revenue $ 745,596 $ 522,339 $ 378,498 42.7 % 38.0 % As a percentage of revenue 41.6 % 43.2 % 44.8 % Gross profit $ 1,048,552 $ 685,459 $ 465,954 53.0 % 47.1 % Gross margin 58.4 % 56.8 % 55.2 % Cost of revenue was $745.6 million, or 41.6% of revenue, for the year ended December 31, 2022, and $522.3 million, or 43.2% of revenue, for the year ended December 31, 2021.
Year Ended December 31, 2023 2022 2021 (in thousands, except percentages) Cost of revenue $ 799,953 $ 745,596 $ 522,339 As a percentage of revenue 43.9 % 41.6 % 43.2 % Gross profit $ 1,021,119 $ 1,048,552 $ 685,459 Gross margin 56.1 % 58.4 % 56.8 % Cost of revenue was $800.0 million, or 43.9% of revenue, for the year ended December 31, 2023, and $745.6 million, or 41.6% of revenue, for the year ended December 31, 2022.
The increase in revenue was primarily due to increases in the average selling prices resulting primarily from the sale of higher value products and increases in shipment volume. For the year ended December 31, 2022, revenue from the storage and computing market increased $196.7 million, or 76.8%, from the same period in 2021.
The increase in revenue was primarily due to increases in the average selling prices resulting primarily from product mix, partially offset by lower shipment volume. For the year ended December 31, 2023, revenue from the storage and computing market increased $38.5 million, or 8.5%, from the same period in 2022.
The increase in other expense was primarily due to an increase of $11.2 million in expense related to changes in the value of deferred compensation plan investments and an increase of $4.4 million in charitable contributions, which was partially offset by an increase of $3.0 million in net interest income.
The increase in other income was primarily due to an increase of $18.6 million in net interest income as a result of higher interest rates, and an increase of $15.1 million in income related to changes in the value of deferred compensation plan investments, partially offset by an increase of $9.0 million in charitable contributions.
Revenue Recognition We account for price adjustments and stock rotation rights as variable consideration that reduces the transaction price, and recognize that reduction in the same period the associated revenue is recognized.
We believe the following critical accounting policies reflect our more significant judgments used in the preparation of our consolidated financial statements. Revenue Recognition We account for price adjustments and stock rotation rights as variable consideration that reduces the transaction price and recognize that reduction in the same period the associated revenue is recognized.
Summary of Cash Flows The following table summarizes our cash flow activities: Year Ended December 31, 2022 2021 2020 (in thousands) Net cash provided by operating activities $ 246,674 $ 320,010 $ 267,803 Net cash used in investing activities (12,510 ) (378,886 ) (39,177 ) Net cash used in financing activities (128,785 ) (90,206 ) (71,557 ) Effect of change in exchange rates (6,039 ) 3,400 4,926 Net increase (decrease) in cash, cash equivalents and restricted cash $ 99,340 $ (145,682 ) $ 161,995 For the year ended December 31, 2022, the $73.3 million decrease in cash provided by operating activities compared to the prior period was primarily due to changes in operating assets and liabilities, in particular, inventories and prepaid wafer purchases, partially offset by an increase of $195.6 million in net income and an increase of $37.5 million in stock-based compensation expenses.
Summary of Cash Flows The following table summarizes our cash flow activities: Year Ended December 31, 2023 2022 2021 (in thousands) Net cash provided by operating activities $ 638,213 $ 246,674 $ 320,010 Net cash used in investing activities (178,726 ) (12,510 ) (378,886 ) Net cash used in financing activities (183,725 ) (128,785 ) (90,206 ) Effect of change in exchange rates (3,310 ) (6,039 ) 3,400 Net increase (decrease) in cash, cash equivalents and restricted cash $ 272,452 $ 99,340 $ (145,682 ) For the year ended December 31, 2023, the $391.5 million increase in cash provided by operating activities compared to the prior period was primarily due to decreased inventory purchases, decreased prepaid wafer expenses, increased accounts receivable collections and other changes in working capital.
This increase was primarily driven by strong sales growth for storage applications and enterprise notebooks. Revenue from the enterprise data market increased $135.1 million, or 116.1%, from the same period in 2021. This increase was primarily due to higher sales of our power management solutions for cloud-based CPU and GPU server applications.
This increase was primarily driven by increased sales of products for notebooks. Revenue from the enterprise data market increased $71.6 million, or 28.5%, from the same period in 2022. This increase was primarily due to higher sales of our power management solutions for AI applications.
Revenue from the automotive market increased $95.7 million, or 46.8%, from the same period in 2021. This increase was primarily due to increased sales of our highly integrated applications supporting automated driver assistance systems, digital cockpits and connectivity. Revenue from the industrial market increased $34.4 million, or 18.6%, from the same period in 2021.
Revenue from the automotive market increased $94.6 million, or 31.5%, from the same period in 2022. This increase was primarily driven by increased sales of our highly integrated applications supporting advanced driver assistance systems, body electronics and the digital cockpit. Revenue from the industrial market decreased $46.5 million, or 21.2%, from the same period in 2022.
As of December 31, 2022, $253.8 million of cash and cash equivalents and $270.4 million of short-term investments were held by our international subsidiaries. We have and may continue to repatriate cash from our Bermuda subsidiary to fund our expenditures in future periods. We anticipate that earnings from other foreign subsidiaries will continue to be indefinitely reinvested.
We may repatriate additional cash from our Bermuda subsidiary to fund our expenditures in future periods. We anticipate that earnings from other foreign subsidiaries will continue to be indefinitely reinvested.
Year Ended December 31, Change From 2021 to From 2020 to 2022 2021 2020 2022 2021 (in thousands, except percentages) SG&A expenses $ 273,595 $ 226,190 $ 161,670 21.0 % 39.9 % As a percentage of revenue 15.2 % 18.7 % 19.1 % SG&A expenses were $273.6 million, or 15.2% of revenue, for the year ended December 31, 2022, and $226.2 million, or 18.7% of revenue, for the year ended December 31, 2021.
Year Ended December 31, 2023 2022 2021 (in thousands, except percentages) SG&A expenses $ 275,740 $ 281,596 $ 232,415 As a percentage of revenue 15.1 % 15.6 % 19.3 % SG&A expenses were $275.7 million, or 15.1% of revenue, for the year ended December 31, 2023, and $281.6 million, or 15.6% of revenue, for the year ended December 31, 2022.
To date, we do not believe we have experienced any material information security breaches and have not incurred significant operating expenses related to information security breaches. 32 Table of Contents Critical Accounting Policies and Estimates Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”).
We will continue to monitor any changes or developments to export control laws, trade regulations and other trade requirements, or interpretations thereof and are committed to complying with all applicable trade laws, regulations and other requirements. 34 Table of Contents Critical Accounting Policies and Estimates Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”).
For the year ended December 31, 2022, the $366.4 million decrease in cash used in investing activities compared to the prior period was primarily due to a $331.2 million decrease in purchases of short-term investments and a $35.6 million decrease in capital expenditures.
For the year ended December 31, 2023, the $166.2 million increase in cash used in investing activities compared to the prior period was primarily due to an increase of $518.9 million in purchases of investments, partially offset by an increase of $340.4 million in sales of investments.
Other Long-Term Obligations Other long-term obligations primarily include payments for deferred compensation plan liabilities and accrued dividend equivalents. As of December 31, 2022, these obligations totaled $71.7 million. 38 Table of Contents
Other Long-Term Obligations Other long-term obligations primarily include payments for deferred compensation plan liabilities and accrued dividend equivalents. As of December 31, 2023, these obligations totaled $83.1 million. Acquisition On January 3, 2024, we acquired Axign, a Dutch company for $33.8 million in cash.
Our material cash requirements include the following contractual and other obligations: Purchase Obligations Purchase obligations represent our obligations with our suppliers and other parties that require the purchases of goods or services, which primarily consist of wafer and other inventory purchases, assembly and other manufacturing services, construction of manufacturing and R&D facilities, purchases of production and other equipment, and license arrangements.
Our material cash requirements include the following contractual and other obligations: Purchase Obligations Purchase obligations represent commitments to our suppliers and other parties requiring the purchases of goods or services.
The $223.3 million increase in cost of revenue was primarily due to increased shipment volume, product mix, increases in manufacturing overhead costs and increased input cost. Gross margin was 58.4% for the year ended December 31, 2022, compared with 56.8% for the year ended December 31, 2021.
The $54.4 million increase in cost of revenue was primarily driven by product mix, partially offset by lower inventory write-downs and warranty expenses. Gross margin was 56.1% for the year ended December 31, 2023, compared with 58.4% for the year ended December 31, 2022.
The effective tax rate was lower than the federal statutory rate primarily due to foreign income from our subsidiaries in Bermuda and China being taxed at lower statutory tax rates. The decrease in the effective tax rate relative to the federal statutory rate was partially offset by the inclusion of the GILTI tax.
The effective tax rate was lower than the federal statutory rate of 21% primarily due to foreign income from our subsidiaries in Bermuda and China being taxed at lower statutory tax rates and a return to provision true-up adjustment which primarily resulted from a calculation refinement of our capitalization of research and experimental expenditures under Section 174 of the Internal Revenue Code (the “IRC”).
The increase was partially offset by a $4.7 million benefit related to changes in the value of deferred compensation plan liabilities.
This decrease was partially offset by a $10.1 million increase in expenses related to changes in the value of the deferred compensation plan liabilities, and an $8.2 million increase consisting mostly of travel related expenses, third party service expenses and software licensing fees.
Overview We are a fabless company with a global footprint that provides high-performance, semiconductor-based power electronic solutions. Incorporated in 1997, our three core strengths include deep system-level knowledge, strong semiconductor expertise, and innovative proprietary technologies in the areas of semiconductor processes, system integration, and packaging.
Founded in 1997 by our CEO Michael Hsing, MPS has three core strengths: deep system-level knowledge, strong semiconductor design expertise, and innovative proprietary technologies in the areas of semiconductor processes, system integration, and packaging.
Our R&D headcount was 1,328 employees as of December 31, 2022, compared with 1,087 employees as of December 31, 2021. 35 Table of Contents Selling, General and Administrative ( “ SG&A ” ) SG&A expenses primarily include salary and benefit expenses, bonuses, stock-based compensation and deferred compensation for sales, marketing and administrative personnel, sales commissions, travel expenses, facilities costs, and professional service fees.
This increase was partially offset by an $8.1 million decrease in cash compensation expenses, which was driven by decreased bonuses. 37 Table of Contents Selling, General and Administrative ( “ SG&A ” ) SG&A expenses primarily include cash compensation and benefits, stock-based compensation and deferred compensation for sales, marketing and administrative personnel, sales commissions, travel expenses, facilities costs, third party service fees and litigation expenses.
The implications of macroeconomic events on our business, results of operations and overall financial position remain uncertain. There also have been recent changes to export control laws, trade regulations and other trade requirements. As of December 31, 2022 and through the date we filed this Annual Report, there have been a number of additional trade restrictions introduced.
The extent and duration of the direct and indirect impact of macroeconomic events on our business, results of operations and overall financial position remain uncertain and depend on future developments. We closely monitor changes to export control laws, trade regulations and other trade requirements.
In May 2022, we entered into a long-term supply agreement in order to secure manufacturing production capacity for silicon wafers over a four-year period. As of December 31, 2022, the Company had made prepayments under this agreement of $170.0 million.
Our purchase obligations primarily consist of wafer and other inventory purchases, assembly and other manufacturing services, construction of manufacturing and R&D facilities, purchases of production and other equipment, and license arrangements. In May 2022, we entered into a long-term supply agreement in order to secure manufacturing production capacity for silicon wafers over a four-year period.
This increase was primarily due to higher sales in applications for smart meters and industrial automation. Revenue from the communications market increased $87.4 million, or 53.2%, from the same period in 2021. The increase was primarily due to higher sales of products for both 5G and satellite communications infrastructure applications.
This decrease primarily reflected lower sales in applications for industrial automation, security and power sources. Revenue from the communications market decreased $46.5 million, or 18.5%, from the same period in 2022. The decrease was a result of lower 4G and 5G infrastructure sales. Revenue from the consumer market decreased $84.8 million, or 26.6%, from the same period in 2022.
The decrease in the effective tax rate relative to the federal statutory rate was partially offset by the inclusion of the global intangible low-taxed income (“GILTI”) tax. The income tax expense for the year ended December 31, 2021 was $30.2 million, or 11.1% of pre-tax income.
The decrease in the effective tax rate relative to the federal statutory rate was partially offset by the inclusion of the global intangible low-taxed income (“GILTI”) tax, the addition of a valuation allowance against China deferred tax assets arising from the indefinite extension of the R&D super deduction policy in China, and excess tax benefits from stock-based compensation.
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These combined advantages enable us to deliver reliable, compact, and monolithic solutions found in storage and computing, enterprise data, automotive, industrial, communications and consumer applications. Our mission is to reduce energy and material consumption to improve all aspects of quality of life.
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Overview We are a fabless global company that provides high-performance, semiconductor-based power electronics solutions. MPS’s mission is to reduce energy and material consumption to improve all aspects of quality of life and create a sustainable future.
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We believe that we differentiate ourselves by offering solutions that are more highly integrated, smaller in size, more energy-efficient, more accurate with respect to performance specifications and, consequently, more cost-effective than many competing solutions. We plan to continue to introduce new products within our existing product families, as well as in new innovative product categories.
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These combined advantages are designed to enable MPS to deliver reliable, compact, and monolithic solutions that are highly energy-efficient, cost-effective, and environmentally responsible while providing a consistent return on investment to our stockholders. We operate in the cyclical semiconductor industry.
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Our primary focus is to continue to execute our business plan and mitigate the effect of the COVID-19 pandemic on our financial position and operations, while actively taking all necessary precautions to ensure the safety of our employees, our suppliers and our customers.
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As of December 31, 2023 and through the date we filed this Annual Report, no existing or newly introduced restrictions have had a material impact on our revenue and operations.
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The pandemic did not have a material adverse impact on our overall operating results or business operations for the year ended December 31, 2022. In 2022, China has continued to experience outbreaks, specifically in Shanghai and Chengdu where we have business operations and where many of our customers and suppliers are located.
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The $23.5 million increase in R&D expenses was primarily due to a $20.9 million increase in new product development expenses, a $5.6 million increase in expenses related to changes in the value of deferred compensation plan liabilities and a $1.8 million increase in depreciation.
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Local governments have implemented, and may continue to implement, strict measures including quarantines, shutdowns and other business restrictions, which have resulted in logistics challenges throughout China. Although these strict measures and the disruptions, as a result thereof, did not have a material adverse impact on our operations in 2022, we will continue to monitor and evaluate future developments.
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The $5.9 million decrease in SG&A expenses was driven by a $12.4 million decrease in stock-based compensation expenses, an $8.8 million decrease in cash compensation expenses driven by decreased bonuses, and a $3.1 million decrease in litigation expenses.
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However, we cannot reasonably estimate the potential effect of these measures on the global economy, the semiconductor industry and our business. We have worked, and are continuing to actively work, with our stakeholders, including customers, suppliers and employees, to address the impact of the pandemic.
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Income Tax Expense The income tax expense for the year ended December 31, 2023 was $78.5 million, or 15.5% of pre-tax income.
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We will continue to monitor the situation, to assess further possible implications to our business, supply chain and customers, and to take actions in an effort to mitigate adverse consequences to the extent feasible.
Added
The decrease in the effective tax rate relative to the federal statutory rate was partially offset by the inclusion of the GILTI tax. In December 2023, the Bermuda Corporate Income Tax Act of 2023 (the “Bermuda CIT Act”) was enacted and signed into law.
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A prolonged economic slowdown as a result of the pandemic, or otherwise, could materially and adversely impact our business, results of operations and financial condition for 2023 and beyond. 31 Table of Contents Russia-Ukraine Conflict As the Russia-Ukraine conflict continues to evolve, we are closely monitoring the impact of future developments on our business, supply chain, employees, customers and other business partners.
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The Bermuda CIT Act includes a 15% corporate income tax (“CIT”) applicable to Bermuda businesses that are multinational enterprise (“MNE”) groups with annual revenue of €750M or more beginning in 2025.
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Our total revenue in Russia has historically not been material and we have stopped shipping to customers in Russia. All accounts receivable balances from our customers in Russia have been paid.
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The Bermuda CIT Act also includes an Economic Transition Adjustment (“ETA”) that requires MNE’s to revalue their assets and liabilities, excluding goodwill, at their fair value as of September 30, 2023. There is an election to opt out of the ETA.
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To date, those restrictions have had an immaterial impact on our revenue and operations. We will continue to monitor any changes to export control laws, trade regulations and other trade requirements and are committed to complying with all applicable trade laws, regulations and other requirements.
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As the Bermuda CIT Act is not effective until January 1, 2025, we are evaluating whether or not to adopt this ETA. Based on information available, we have not recorded any changes to income tax expense related to the Bermuda CIT Act as of December 31, 2023.
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Cybersecurity Risk Management We are committed to protecting our IT assets, including computers, systems, corporate networks and sensitive data, from unauthorized access or attack.
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As of December 31, 2023, $369.9 million of cash and cash equivalents and $528.0 million of short-term investments were held by our international subsidiaries. For the year ended December 31, 2023, we repatriated $140 million of cash from our Bermuda subsidiary to the U.S. with minimal tax impact. The proceeds are primarily used to fund our ongoing business operations.
Removed
We have established an internal global IT policy handbook as well as IT security management control procedures designed to: ● Create information security awareness and define responsibilities among our employees and business partners; ● Implement controls to identify IT risks and monitor the use of our systems and information resources; ● Establish key policies and processes to adequately and timely respond to security threats; ● Maintain disaster recovery and business continuity plans; and ● Ensure compliance with applicable laws and regulations regarding the management of information security.
Added
For the year ended December 31, 2023, the $54.9 million increase in cash used in financing activities compared to the prior period was primarily due to a $47.9 million increase in dividend and dividend equivalent payments.
Removed
We require all new employees to attend an IT security training orientation. In addition, on a regular basis, our IT team updates training materials related to our policies and procedures and shares news and articles related to cybersecurity awareness, both of which are stored on our intranet and available to all employees.
Added
As of December 31, 2023, we had remaining prepayments under this agreement of $120.0 million reported in other long-term assets on the Consolidated Balance Sheet.
Removed
We also currently maintain an insurance policy that provides certain coverage for losses we incur due to data breaches and other cybersecurity incidents.
Added
Capital Return to Stockholders In October 2023, our Board of Directors approved a new stock repurchase program authorizing us to repurchase up to $640.0 million in the aggregate of our common stock through October 29, 2026. Shares are retired upon repurchase.
Removed
Our IT Steering Committee, which consists of our senior management and IT team, meets on a regular basis to review initiatives and projects to improve IT security, as well as resources and budgets for our cybersecurity compliance and education efforts. In 2021, we completed the ISO 27001 certification, a globally recognized information security standard.
Added
We repurchased approximately 7,000 shares of our common stock for an aggregate purchase price of $3.7 million during the year ended December 31, 2023. As of December 31, 2023, $636.3 million remained available for future repurchases under the program.

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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 changeInvestments in debt securities are classified as available-for-sale, which are reported at fair value with the unrealized gains or losses being included in accumulated other comprehensive income (loss) on the Consolidated Balance Sheets.
Biggest changeInvestments in debt securities are classified as available-for-sale, which are reported at fair value with the unrealized gains or losses being included in accumulated other comprehensive loss on the Consolidated Balance Sheets.
Such guidelines include security type, credit quality and maturity and are intended to limit market risk by restricting our investments to high quality debt instruments with relatively short-term maturities. Based on our investment positions as of December 31, 2022, the impact of changes in interest rates on our interest income was immaterial.
Such guidelines include security type, credit quality and maturity and are intended to limit market risk by restricting our investments to high quality debt instruments with relatively short-term maturities. Based on our investment positions as of December 31, 2023, the impact of changes in interest rates on our interest income was immaterial.
Gains or losses from the remeasurement and settlement of the balances are reported in other income (expense), net, on the Consolidated Statements of Operations. Fluctuations in foreign currency exchange rates have not had a material impact on our results of operations for the periods presented. 39 Table of Contents
Gains or losses from the remeasurement and settlement of the balances are reported in other income (expense), net, on the Consolidated Statements of Operations. Fluctuations in foreign currency exchange rates have not had a material impact on our results of operations for the periods presented. 40 Table of Contents
Based on our investment positions as of December 31, 2022, a hypothetical 100 basis point increase in interest rates would result in a $3.2 million decline in the fair value of our investments. Any losses resulting from such interest rate changes would only be realized if we sold the investments prior to maturity.
Based on our investment positions as of December 31, 2023, a hypothetical 100 basis point increase in interest rates would result in a $4.5 million decline in the fair value of our investments. Any losses resulting from such interest rate changes would only be realized if we sold the investments prior to maturity.

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