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

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Paragraph-level year-over-year comparison of NXP Semiconductors'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.

+283 added−309 removedSource: 10-K (2024-02-22) vs 10-K (2023-03-01)

Top changes in NXP Semiconductors's 2023 10-K

283 paragraphs added · 309 removed · 222 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

85 edited+18 added−15 removed58 unchanged
Biggest changeThe follow-up survey had a participation rate of approximately 80% and the responses to all questions were more favorable than those provided on the previous survey. In particular, 94% of our employees felt that safety concerns are a high priority for NXP and 98% of employees felt that safety starts with them.
Biggest changeIn 2022, as a follow-up to a previous survey, we conducted a global survey on employee safety, inquiring about opportunities for improvement and asking employees about their comfort level when raising safety concerns. The follow-up survey had a participation rate of approximately 80% and the responses to all questions were more favorable than those provided on the previous survey.
Our sales and marketing strategy focuses on key defined verticals in Automotive, Mobile, Industrial & IoT and Communication Infrastructure, deepening our relationship with our top OEMs and electronic manufacturing service customers, expanding our reach to our mass market customers, startups and our distribution partners and becoming their preferred supplier, which we believe assists us in reducing sales volatility in challenging markets.
Our sales and marketing strategy focuses on key defined verticals in Automotive, Industrial & IoT, Communication Infrastructure, and Mobile deepening our relationship with our top OEMs and electronic manufacturing service customers, expanding our reach to our mass market customers, startups and our distribution partners and becoming their preferred supplier, which we believe assists us in reducing sales volatility in challenging markets.
To outpace market growth we invest in research and development to extend or create leading market positions, with an emphasis on fast growing sizable market segments, such as ADAS, in-vehicle networks and power management, as well as Edge computing to support the successful deployment in the IoT with our cross-over processing technology, but also in emerging markets, such as massive MIMO in RF Power and mmWave for 5G.
With the intent to outpace market growth we invest in research and development to extend or create leading market positions, with an emphasis on fast growing sizable market segments, such as ADAS, in-vehicle networks and power management, as well as Edge computing to support the successful deployment in the IoT with our cross-over processing technology, but also in emerging markets, such as massive MIMO in RF Power and mmWave for 5G.
Our new i.MX RT crossover processors are built using applications processors chassis, delivering a high level of integration, high speed peripherals, enhanced security, and engines for enhanced user experience (for example, 2D/3D graphics), but powered by a low-power MCU core running a real-time operating system like Amazon Free RTOS or Zephyr RTOS.
Our i.MX RT crossover processors are built using applications processors chassis, delivering a high level of integration, high speed peripherals, enhanced security, and engines for enhanced user experience (for example, 2D/3D graphics), but powered by a low-power MCU core running a real-time operating system like Amazon Free RTOS or Zephyr RTOS.
In power amplification, as more bandwidth and higher frequencies are needed, we observe an increasing adoption of GaN technology because of its higher power output and efficiency. Workplaces are evolving from offices to homes, and consumers and enterprises need to adapt to changing working conditions, leading to increasing demand for better digital communication capabilities and digital content.
In power amplification, as more bandwidth and higher frequencies are needed, we observe an increasing adoption of GaN technology because of its higher power output and efficiency. 5 Workplaces are evolving from offices to homes, and consumers and enterprises need to adapt to changing working conditions, leading to increasing demand for better digital communication capabilities and digital content.
Our i.MX family of processors are designed in conjunction with a broad suite of additional products including power management solutions, audio codecs, touch sensors and accelerometers to provide full systems solutions across a wide range of operating systems and applications. Our i.MX 8 and 9 families are the latest generations of our general purpose application processors.
Our i.MX family of processors are designed in conjunction with a broad suite of additional products including power management solutions, audio codecs, touch sensors and accelerometers to 6 provide full systems solutions across a wide range of operating systems and applications. Our i.MX 8 and 9 families are the latest generations of our general purpose application processors.
Due to the high degree of regulatory scrutiny and safety requirements, the automotive semiconductor market is characterized by stringent qualification processes, zero defect quality processes, functionally safe design architecture, high reliability, extensive design-in timeframes and long product life cycles, which results in significant barriers to entry. ii.
Due to the high degree of regulatory scrutiny and safety requirements, the automotive semiconductor market is characterized by stringent qualification processes, zero defect quality processes, functionally safe design architecture, high reliability, extensive design-in timeframes and long product life cycles, which results in significant barriers to entry. 4 ii.
We purchase most of our raw materials on the basis of fixed price contracts. Over the past two years, semiconductor supply chains have been constrained. As a result, there has been a tendency towards longer term supply contracts with suppliers in exchange for capacity.
We purchase most of our raw materials on the basis of fixed price contracts. 9 Over the past two years, semiconductor supply chains have been constrained. As a result, there has been a tendency towards longer term supply contracts with suppliers in exchange for capacity.
Intellectual Property The creation and use of intellectual property is a key aspect of our strategy to differentiate ourselves in the marketplace. We seek to protect our proprietary technologies by obtaining patents, trademarks, domain names, 10 retaining trade secrets and defending, enforcing and utilizing our intellectual property rights, where appropriate.
Intellectual Property The creation and use of intellectual property is a key aspect of our strategy to differentiate ourselves in the marketplace. We seek to protect our proprietary technologies by obtaining patents, trademarks, domain names, retaining trade secrets and defending, enforcing and utilizing our intellectual property rights, where appropriate.
In Automotive, our 6 S32x Automotive Processing Platform offers scalability across products and multiple application domains based on Arm Cortex-A, Cortex-R, and Cortex-M cores with Automotive Safety Integrity Level (ASIL-D) capabilities with software compatibility from the MCU’s to SoC’s. iii.
In Automotive, our S32x Automotive Processing Platform offers scalability across products and multiple application domains based on Arm Cortex-A, Cortex-R, and Cortex-M cores with Automotive Safety Integrity Level (ASIL-D) capabilities with software compatibility from the MCU’s to SoC’s. iii.
Wireless infrastructure applications and many general wireless applications are served with III-V technology LNAs. Advanced SiGe technology is utilized in LNAs designed for wireless communication, cellular, consumer, automotive and industrial applications. vii. Security Controllers NXP is the market leader in security controller ICs.
Wireless infrastructure applications and many general wireless applications are served with III-V technology LNAs. Advanced SiGe 7 technology is utilized in LNAs designed for wireless communication, cellular, consumer, automotive and industrial applications. vii. Security Controllers NXP is the market leader in security controller ICs.
Our security controller ICs are embedded in smart cards (ePassports, electronic ID credentials, payment cards and transportation cards), as well as in consumer electronic and smart devices, for example in smartphones, tablets and wearables. These security controller ICs 7 are suited for applications demanding the highest security and reliability.
Our security controller ICs are embedded in smart cards (ePassports, electronic ID credentials, payment cards and transportation cards), as well as in consumer electronic and smart devices, for example in smartphones, tablets and wearables. These security controller ICs are suited for applications demanding the highest security and reliability.
Talent Development and Investing in the Future NXP is committed to a 70/20/10 continuous learning model, including mechanisms for learning through on-the-job experiences (70%), learning through others (20%), and learning through education (10%).
Development and Investing in the Future NXP is committed to a 70/20/10 continuous learning model, including mechanisms for learning through on-the-job experiences (70%), learning through others (20%), and learning through education (10%).
No OEM for which we had direct sales to accounted for more than 10% of our revenue in 2022 or 2021. Research and Development We believe that our future success depends on our ability to both improve our existing products and to develop new products for both existing and new markets.
No OEM for which we had direct sales to accounted for more than 10% of our revenue in 2023 or 2022. Research and Development We believe that our future success depends on our ability to both improve our existing products and to develop new products for both existing and new markets.
We also believe that our commitment to our internship programs and university partnerships are a key contributor to developing the new generation of talent, including engineers in our industry and company, and provide a pipeline of recent college graduates into our talent pool.
We also believe that our commitment to our internship programs and university partnerships are key contributors to developing the new generation of talent, including engineers in our industry and company, and provide a pipeline of recent college graduates into our talent pool.
Manufacturing We manufacture integrated circuits and discrete semiconductors through a combination of wholly owned manufacturing facilities, a manufacturing facility operated jointly with another semiconductor company and third-party foundries and assembly and test subcontractors. We manage our manufacturing assets together through one centralized organization to ensure we realize scale benefits in asset utilization, purchasing volumes and overhead leverage across businesses.
Manufacturing We manufacture semiconductors through a combination of wholly owned manufacturing facilities, a manufacturing facility operated jointly with another semiconductor company and third-party foundries and assembly and test subcontractors. We manage our manufacturing assets together through one centralized organization to ensure we realize scale benefits in asset utilization, purchasing volumes and overhead leverage across businesses.
We have long-standing customer relationships with most of our customers. Our 10 largest OEM end customers, some of whom are supplied by distributors, in alphabetical order, are Apple, Aptiv, Bosch, Continental, Denso, Harman Auto, Hyundai, Samsung, Visteon, and Vitesco. We also have a strong position with our distribution partners, including our three largest, Arrow, Avnet and WT Micro.
We have long-standing customer relationships with most of our customers. Our 10 largest OEM end customers, some of whom are supplied by distributors, in alphabetical order, are Apple, Aptiv, Bosch, Continental, Denso, Hyundai, LGE Automotive, Samsung, Visteon, and Vitesco. We also have a strong position with our distribution partners, including our three largest, Arrow, Avnet and WT Micro.
Our diversity, equality and inclusion approach is centered around • Ensuring leadership commitment and accountability; • Building and sustaining a qualified and diverse talent pipeline and equitable processes; and • Fostering an inclusive culture and a sense of belonging to attract and retain the best talent.
Our diversity, equality and inclusion approach is centered around • Leadership commitment and ownership; • Building and sustaining a qualified and diverse talent pipeline and equitable processes; and • Fostering an inclusive culture and a sense of belonging to attract and retain the best talent.
DL are those team members directly involved in manufacturing our products, while IDL consists of individual contributors, managers and executives in other functions such as research and development (R&D) and selling, as well as general and administrative (SG&A). At December 31, 2022, we had approximately 34,500 employees, which includes approximately 1,500 employees in our joint venture.
DL are those team members directly involved in manufacturing our products, while IDL consists of individual contributors, managers and executives in other functions such as research and development (R&D) and selling, general and administrative roles (SG&A). At December 31, 2023, we had approximately 34,200 employees, which includes approximately 1,500 employees in our joint venture.
In IoT, growth is driven by the increasing use of high-performance edge and media devices (e.g., home entertainment, connected home assistants, home control and security) and low power IoT nodes (e.g. smart home, hearables, health trackers) where NXP scalable solutions across the entire embedded processing spectrum are ideally suited.
In IoT, growth is driven by the increasing use of high-performance edge and media devices (e.g., home entertainment, connected home assistants, home and building control and security) and low power IoT nodes where NXP scalable solutions across the entire embedded processing spectrum are ideally suited.
The technology is gaining momentum thanks to wider chipset availability, adoption across various devices by multiple brands, and the formation of a strong UWB ecosystem across the whole supply chain and NXP is well positioned in this market. iv.
The technology is gaining momentum thanks to wider chipset availability, adoption across various devices by multiple brands, and the formation of a strong UWB ecosystem across the whole supply chain where NXP is well positioned. iv.
Our revenue is primarily the sum of our direct sales to OEMs plus our distributors’ resale of NXP products. Avnet accounted for 20% of our revenue in 2022 and 18% in 2021. No other distributor accounted for greater than 10% of our revenue.
Our revenue is primarily the sum of our direct sales to OEMs plus our distributors’ resale of NXP products. Avnet accounted for 21% of our revenue in 2023 and 20% in 2022. No other distributor accounted for greater than 10% of our revenue.
Sievers, are as follows: Name Age Position Kurt Sievers 53 Executive director, president and chief executive officer Bill Betz 45 Executive vice president and chief financial officer Christopher Jensen 53 Executive vice president and chief human resources officer Ron Martino 57 Executive vice president sales Andrew Micallef 58 Executive vice president global operations Jennifer Wuamett 57 Executive vice president, general counsel, corporate secretary and chief sustainability officer Human Capital At NXP, our diverse and talented employees, referred to as team members, drive the innovation that sets our company apart and fuels our success in the market.
Sievers, are as follows: Name Age Position Kurt Sievers 54 Executive director, president and chief executive officer Bill Betz 46 Executive vice president and chief financial officer Christopher Jensen 54 Executive vice president and chief human resources officer Ron Martino 58 Executive vice president and chief sales officer Andrew Micallef 59 Executive vice president and chief operations and manufacturing officer Jennifer Wuamett 58 Executive vice president, general counsel, corporate secretary and chief sustainability officer Human Capital At NXP, our diverse and talented employees, referred to as team members, drive the innovation that sets our company apart and fuels our success in the market.
While we present gender representation data by men and women, we acknowledge this is not fully encompassing of all gender identities. 13 2025 Diversity, Equality, & Inclusion Goals 40% Women in Overall Global Workforce 30% Women in Global Indirect Labor Workforce 20% Women in Executive Positions* 25% Women in R&D Positions 50% Minority Representation in the United States * 2022 Diversity, Equality, & Inclusion Performance 37% 25% 16% 19% 51% * Executive positions are defined as individuals at the level of Vice President and above.
While we present gender representation data by men and women, we acknowledge this is not fully encompassing of all gender identities. 2025 Diversity, Equality, & Inclusion Goals 40% Women in Overall Global Workforce 30% Women in Global Indirect Labor Workforce 20% Women in Executive Positions* 25% Women in R&D Positions 50% Minority Representation in the United States * 2023 Diversity, Equality, & Inclusion Performance 36% 25% 16% 20% 52% * Executive positions are defined as individuals at the level of Vice President and above.
Most of our assembly and test activities are maintained in-house. 8 The following table shows selected key information with respect to our major front-end and back-end facilities: Site Ownership Wafer sized used Line widths used (vm) Technology/Products (Microns) Front-end Singapore (SSMC)¹⁾ 61.2 % 8” 0.14-0.25 CMOS, eNVM, Power, BCDMOS, RF Nijmegen, the Netherlands 100 % 8” 0.14-1.00 CMOS, BCDMOS, RF, Power MOSFET Austin (Oak Hill), United States 100 % 8” 0.25-1.50 CMOS, Sensors, RF, Power MOSFET Chandler, United States 100 % 8” 0.18-0.50 CMOS, eNVM, BCDMOS Chandler RF, United States 100 % 6” 0.25-0.40 GaN Austin (Ed Bluestein), United States 100 % 8” 0.09-0.18 CMOS, eNVM, BCDMOS, Radar Back-end Kaohsiung, Taiwan 100 % — — NFC, Automotive Car-access, In-Vehicle Networking, Micro-controllers, ADAS (Radar), Analog, Mixed-Signal and Power Bangkok, Thailand 100 % — — Automotive In-Vehicle Networking and Sensors, Analog, RFID, Banking and e-Passport modules, Power Management Kuala Lumpur, Malaysia 100 % — — Micro-processors, ADAS/Radar, Micro-controllers, Advanced Audio Processor, Sensors, Power Management, Analog and Mixed Signal, RF devices Tianjin, China 100 % — — Micro-processors, Micro-controllers, Power Management, Battery Management, Analog and Mixed Signal 1) Joint venture with TSMC; we are entitled to 60% of the joint venture’s annual capacity.
The following table shows selected key information with respect to our major front-end and back-end facilities: Site Ownership Wafer sized used Line widths used (vm) Technology/Products (Microns) Front-end Singapore (SSMC)¹⁾ 61.2 % 8” 0.14-0.25 CMOS, eNVM, Power, BCDMOS, RF Nijmegen, the Netherlands 100 % 8” 0.14-1.00 CMOS, BCDMOS, RF, Power MOSFET Austin (Oak Hill), United States 100 % 8” 0.25-1.50 CMOS, Sensors, RF, Power MOSFET Chandler, United States 100 % 8” 0.18-0.50 CMOS, eNVM, BCDMOS Chandler RF, United States 100 % 6” 0.25-0.40 GaN Austin (Ed Bluestein), United States 100 % 8” 0.09-0.18 CMOS, eNVM, BCDMOS, Radar Back-end Kaohsiung, Taiwan 100 % — — NFC, Automotive Car-access, In-Vehicle Networking, Micro-controllers, ADAS (Radar), Analog, Mixed-Signal and Power Bangkok, Thailand 100 % — — Automotive In-Vehicle Networking and Sensors, Analog, RFID, Banking and e-Passport modules, Power Management Kuala Lumpur, Malaysia 100 % — — Micro-processors, ADAS/Radar, Micro-controllers, Advanced Audio Processor, Sensors, Power Management, Analog and Mixed Signal, RF devices Tianjin, China 100 % — — Micro-processors, Micro-controllers, Power Management, Battery Management, Analog and Mixed Signal 1) Joint venture with TSMC.
Item 1. Business Company Overview NXP Semiconductors N.V. is a global semiconductor company and a long-standing supplier in the industry, with over 60 years of innovation and operating history. For the year ended December 31, 2022, we generated revenue of $13,205 million, compared to $11,063 million for the year ended December 31, 2021.
Item 1. Business Company Overview NXP Semiconductors N.V. is a global semiconductor company and a long-standing supplier in the industry, with over 70 years of innovation and operating history. For the year ended December 31, 2023, we generated revenue of $13,276 million, compared to $13,205 million for the year ended December 31, 2022.
The four end markets are Automotive, Industrial & IoT, Mobile, and Communication Infrastructure & Other. 3 Automotive Industrial & IoT Mobile Comm Infra & Other Core Applications ADAS Electrification Vehicle Networks Secure Car Access eCockpit Body Comfort & Convenience Powertrain Smart Home Edge Nodes Factory and Building Automation Home Entertainment Power and Energy Smart Appliances Medical Smart Retail Smartphones Wearables Mobile Accessories Wireless Basestations Network & Security Banking Cards Government ID documents Transit Cards RFID Tagging Key Growth Drivers Radar systems Domain and zonal processors Electrification systems Secure connected Edge solutions Smart home and industrial automation Connectivity and crossover processors UWB mobile access solutions RF Power Systems i.
The four end markets are Automotive, Industrial & IoT, Mobile, and Communication Infrastructure & Other. 3 Automotive Industrial & IoT Mobile Comm Infra & Other Core Applications ADAS Electrification Vehicle Networks Secure Car Access eCockpit Body Comfort & Convenience Powertrain Smart Home Edge Nodes Factory and Building Automation Home Entertainment Power and Energy Smart Appliances Medical Smart Retail Smartphones Wearables Mobile Accessories Wireless Basestations Network & Security Banking Cards Government ID documents Transit Cards RFID Tagging Key Growth Drivers Radar systems Software Defined Vehicle, incl.
In addition to obtaining our own patents and other intellectual property rights, we have entered into licensing agreements and other arrangements authorizing us to use intellectual property rights, confidential technical information, software and other technology owned by third parties. We also engage, in certain instances, in licensing and selling of certain of our technology, patents and other intellectual property rights.
In addition to obtaining our own patents and other intellectual property rights, we have entered into licensing agreements and other arrangements authorizing us to use intellectual property rights, confidential 11 technical information, software and other technology owned by third parties.
We work to create developmental opportunities for our team members through stretch assignments, project roles, cross-functional interactions, cross-geography engagements, and both temporary and longer-term job rotations – all of which are used to stimulate core skill and leadership competency development, to provide on-the-job learning experience, and to fuel career growth.
We work to create developmental opportunities for our team members through stretch assignments, project roles, cross-functional interactions, cross-geography engagements, and both temporary and longer-term job rotations – all of which are used to stimulate core skills, develop leadership competency and fuel career growth.
Using a blend of internally designed and externally sourced courses and learning resources, we offer our team members around the globe a variety of training programs that provide real-time learning opportunities in support of key business processes, requirements and initiatives. We also provide a library of on-demand skills development and microlearning resources to all our team members.
Using a blend of internally designed and externally sourced courses and learning resources, we offer our global team members a variety of training programs in support of key business processes, requirements and initiatives. We also provide a library of on-demand resources for skills development and microlearning to all our team members.
We hold ourselves accountable to our values by ensuring they are reflected in all of our talent programs, including hiring, learning and development, performance evaluation, recognition, rewards, and promotions. 12 To assess and improve engagement, NXP regularly conducts our global Winning Culture Survey, which is administered by a third party to ensure confidentiality.
We hold ourselves accountable to our values by ensuring they are reflected in all of our talent programs, including talent acquisition, enabling performance, rewards and recognition, communications, development, assessment and succession. To assess and improve engagement, NXP regularly conducts our global Winning Culture Survey, which is administered by a third party to ensure confidentiality.
Our NXP global workforce spans three regions encompassing 30+ countries and includes more than 11,000 team members dedicated to research and development of our products and solutions (representing 34% of our NXP workforce and 56% of our IDL workforce). Corporate Values and Team Member Engagement NXP's values are our fundamental beliefs and guiding principles.
Our NXP global workforce spans three regions encompassing 30+ countries and includes approximately 12,000 team members dedicated to the research and development of our products and solutions (representing 36% of our NXP workforce and 57% of our IDL workforce). Corporate Values and Team Member Engagement NXP's values are our fundamental beliefs and guiding principles.
Our product solutions are used in a wide range of end market applications including: automotive, industrial & Internet of Things (IoT), mobile, and communication infrastructure. We engage with leading global original equipment manufacturers (OEMs) and sell products in all major geographic regions. Our legal name is NXP Semiconductors N.V. and our commercial name is “NXP” or “NXP Semiconductors”.
Our product solutions are used in a wide range of end market applications including: automotive, industrial & Internet of Things (IoT), mobile, and communication infrastructure. We engage with leading global original equipment manufacturers (OEMs) and sell products in all major geographic regions.
We also have employee-lead worker’s councils in various countries that provide input and oversight to many of the decisions made on behalf of employees. Climate and Environment As part of our commitment to reducing emissions and conserving the earth’s natural resources, we have made the environment a key pillar in our Sustainability Policy and corporate strategy.
We also have employee-lead worker’s councils in various countries that provide input and oversight to many of the decisions made on behalf of employees. Climate and Environment Protecting the environment is a key pillar in our Sustainability Policy and corporate strategy because we recognize the need to conserve the earth’s natural resources and reduce emissions.
Reducing carbon emissions (global net zero emission commitments) will likely also be a key growth driver with large transformations expected of our energy systems. Factories and homes will need to rely much more on renewable energy (e.g., solar, wind) and increase efficient use of energy. The way we generate and store energies will likely be more distributed.
We expect that carbon emissions reduction efforts (e.g., global net zero emission commitments) will also be a key growth driver with large transformations expected of our energy systems. Factories, buildings and homes will need to rely much more on renewable energy (e.g., solar, wind) and increase efficient use of energy.
Semiconductor content per vehicle continues to increase due to government regulation of safety and emissions, standardization of higher-end options across a greater number of vehicle classes as well as consumer demand for greater fuel efficiency, advanced safety, multimedia applications and connectivity.
We expect such consumer demands will lead to new vehicle architectures and eventually to software defined vehicles (SDV). Semiconductor content per vehicle continues to increase due to government regulation of safety and emissions, standardization of higher-end options across a greater number of vehicle classes as well as consumer demand for greater fuel efficiency, advanced safety, multimedia applications and connectivity.
In addition, we are asked to deliver full system capabilities which include multiple NXP devices and enabling software. This requires in-depth knowledge of specific applications in target markets in order to develop robust system solutions and qualified customer support resources. Seasonality Historically, our net revenue does not display consistent or predictable seasonal patterns.
This requires in-depth knowledge of specific applications in target markets in order to develop robust system solutions and qualified customer support resources. Seasonality Historically, our net revenue does not display consistent or predictable seasonal patterns.
Information about our Executive Officers 11 The names, ages and positions as of March 1, 2023, of our executive officers, including our chief executive officer, Mr.
Information about our Executive Officers The names, ages and positions as of February 22, 2024, of our executive officers, including our chief executive officer, Mr.
The Industrial & IoT market is highly fragmented with a diverse collection of products and applications such as factory automation, smart home, smart appliances, home entertainment, smart retail, power and energy and medical electronics. 4 Growth in the Industrial market is driven by the replacement of traditional mechanical equipment by smart, energy-saving and connected electronic equipment using various sensors, processors, connectivity, analog and security chipsets that align well with NXP’s ability to provide a complete range of processing, connectivity and secure solutions.
Growth in the Industrial market is driven by the replacement of traditional mechanical equipment by smart, energy-saving and connected electronic equipment using various sensors, processors, connectivity, analog and security chipsets that align well with NXP’s ability to provide a complete range of processing, connectivity and secure solutions.
Last but not least, many consumers want their cars to be service oriented, hyper-connected, configurable and upgradeable, in the same way as they are used to with their smartphones.
In the same way, strict emissions regulations as well as consumer willingness for energy efficient cars are accelerating the penetration of electrification. Last but not least, many consumers want their cars to be service oriented, hyper-connected, configurable and upgradeable, in the same way as they are used to with their smartphones.
To support our diversity, equality and inclusion approach and demonstrate our commitment to transparency and accountability, we have established the aspirational 2025 diversity, equality and inclusion goals listed below to improve global gender representation and minority race and ethnicity representation in the United States.
Each ERG has defined mission/vision statements and goals, as well as executive oversight and sponsorship. To support our diversity, equality and inclusion approach and demonstrate our commitment to transparency and accountability, we have established the aspirational 2025 diversity, equality and inclusion goals listed below to improve gender representation globally and minority race and ethnicity representation in the United States.
In addition, we invest a few percent of our total research and development expenditures in research activities that develop fundamental new technologies or product categories that could contribute significantly to our company's growth in the future.
In addition, we invest a few percent of our total research and development expenditures in research activities that develop fundamental new technologies or product categories that could contribute significantly to our company's growth in the future. 10 We annually perform a fundamental review of our business portfolio and our related new product and technology development opportunities in order to decide on changes in the allocation of our research and development resources.
We recognize the importance of diversity, equality, and inclusion and respect the unique talents, experiences, backgrounds, cultures and ideas of our team members.
We recognize the value of the unique talents, experiences, backgrounds, cultures and ideas of our diverse team members.
Our back-end manufacturing facilities test and package many different types of products using a wide variety of processes. To optimize flexibility, we use shared technology platforms for our back-end assembly operations.
This broad technology portfolio enables us to meet increasing demand from customers for system solutions, which require a variety of technologies. 8 Our back-end manufacturing facilities test and package many different types of products using a wide variety of processes. To optimize flexibility, we use shared technology platforms for our back-end assembly operations.
The basis on which we compete varies across end markets and geographic regions. This includes competing on the basis of our ability to develop new products and the underlying intellectual property in a timely manner to meet customer requirements in terms of product features, quality, performance, warranty, availability and cost.
This includes competing on the basis of our ability to develop new products and the underlying intellectual property in a timely manner to meet customer requirements in terms of product features, quality, performance, warranty, availability and cost. In addition, we are asked to deliver full system capabilities which include multiple NXP devices and enabling software.
Each of the megatrends involve new functions and each new function requires new technologies. The path to full autonomy is driving the increase of driver assistance systems in the car already today.
We believe three mega-trends will drive the semiconductor content increase in the future: Autonomous driving, electrification and the software defined vehicle. Each of the megatrends involve new functions and each new function requires new technologies. The path to full autonomy is driving the increase of driver assistance systems in the car already today.
They speak to how we operate, engage, develop and value our team members, and push the boundaries of creativity and innovation.
They speak about how we operate, engage with and develop our team members, and push the boundaries of creativity and innovation. Our values rest on a strong foundation of trust and respect.
Despite the decline in vehicles sales and production in 2020 due to the outbreak of the COVID-19 and the moderate growth in 2021 and 2022 due to the global supply crisis, the increase in semiconductor content per vehicle continued. We believe three mega-trends will drive the semiconductor content increase in the future: Autonomous driving, electrification and the service oriented car.
Despite the decline in vehicles sales and production in 2020 due to the outbreak of the COVID-19 and the moderate growth in 2021 and 2022 due to the global supply crisis, the increase in semiconductor content per vehicle continued. In 2023, the supply chain crisis eased and vehicle production rebounded to the level of 2019.
Competition We compete with many different semiconductor companies on a global basis, including with both integrated device manufacturers (“IDMs”) as well as fabless companies. Nearly all our competitors invest extensively in research and development, manufacturing, sales and marketing capabilities across a broad spectrum of product lines. Many of our competitors are focused on single applications or market segments.
Nearly all our competitors invest extensively in research and development, manufacturing, sales and marketing capabilities across a broad spectrum of product lines. Many of our competitors are focused on single applications or market segments. Most of our competitors compete with us with respect to some, but not all, of our product lines.
Our wafer fabs produce semiconductors with line widths ranging from 90 nanometers to 3 microns for integrated circuits and 0.5 microns to greater than 4 microns for discretes. This broad technology portfolio enables us to meet increasing demand from customers for system solutions, which require a variety of technologies.
Our wafer fabs produce semiconductors with line widths ranging from 90 nanometers to 3 microns for integrated circuits and 0.5 microns to greater than 4 microns for discretes.
We provide highly integrated ARM-based i.MX application processors with integrated audio, video and graphics capability that are optimized for low-power and high-performance applications.
Our products focus on consumer devices, industrial applications and automotive applications, like driver information systems, ADAS and vehicle networking that require processing and multimedia capabilities. We provide highly integrated ARM-based i.MX application processors with integrated audio, video and graphics capability that are optimized for low-power and high-performance applications.
The energy ecosystem needs to develop and ensure smart, efficient and reliable power delivery.
The way we generate and store energies will likely be more distributed. The energy ecosystem needs to develop and ensure smart, efficient and reliable power delivery.
We are a trusted, long-term supplier of MCUs to many of our customers, especially in the automotive, smartcards, industrial and consumer markets. Our MCU product portfolio ranges from 8-bit products to higher performance 16-bit and 32-bit products with on-board flash memory. Our portfolio is highly scalable, and is coupled with our extensive software and design tools.
Our MCU product portfolio ranges from 8-bit products to higher performance 16-bit and 32-bit products with on-board flash memory. Our portfolio is highly scalable, and is coupled with our extensive software and design tools. This enables our customers to design-in and deploy our MCU families, leveraging a consistent software development environment.
Most of our competitors compete with us with respect to some, but not all, of our product lines. Our primary key public competitors in alphabetical order include, but are not limited to, Analog Devices Inc., Infineon Technologies AG, Intel Corp., Marvell Technology, Mediatek Inc., Microchip Technology Inc., NVIDIA Corp., Qualcomm Incorporated, Renesas Electronics Corp., STMicroelectronics NV and Texas Instruments Incorporated.
Our primary key public competitors in alphabetical order include, but are not limited to, Analog Devices Inc., Broadcom Inc., Infineon Technologies AG, Microchip Technology Inc., Qualcomm Inc., Renesas Electronics Corp., STMicroelectronics NV and Texas Instruments Inc. The basis on which we compete varies across end markets and geographic regions.
Further digitalization of governmental services, the trend towards secure contactless payment and the need to improve tracking, traceability and authentication of products are driving demand across these applications. Products We offer customers a broad portfolio of semiconductor products, including microcontrollers, application processors, communication processors, connectivity chipsets, analog and interface devices, RF power amplifiers, security controllers and sensors.
Products We offer customers a broad portfolio of semiconductor products, including microcontrollers, application processors, communication processors, connectivity chipsets, analog and interface devices, RF power amplifiers, security controllers and sensors.
Additional information about our environmental strategy, targets, and metrics is included in our Corporate Sustainability Report, and can be found on our website 2 . 1 The contents of our Corporate Sustainability Report are referenced for general information only and are not incorporated by reference in this Form 10-K.
By working to minimize the environmental impact of our products in the 1 The contents of our Corporate Sustainability Report are referenced for general information only and are not incorporated by reference into, and do not form a part of, this Form 10-K.
This enables our customers to design-in and deploy our MCU families, leveraging a consistent software development environment. Due to the scalability of our portfolio we are able to help future-proof our customer’s products as their systems evolve, becoming more complex or requiring greater processing capabilities over time.
Due to the scalability of our portfolio we are able to help future-proof our customer’s products as their systems evolve, becoming more complex or requiring greater processing capabilities over time. For automotive applications, our microcontrollers deliver the required reliability, security and functional safety to address current and future automotive challenges.
NXP’s compensation programs are designed to attract the best talent and drive performance across all areas of our diverse workforce. NXP is committed to managing all reward-based compensation programs, including merit increases, incentive program payouts and long-term incentive awards, to deliver on our pay-for-performance philosophy. Rewarding performance is a critical foundation for our overall compensation program.
We empower leaders to recognize both individual and team accomplishments through a variety of compensation programs. Rewarding performance is a critical element of our overall program. NXP is committed to managing all reward-based compensation programs, including merit increases, short-term incentives and long-term equity incentive awards, to deliver on our pay-for-performance philosophy.
Advances in semiconductor technology have increased the functionality and performance of semiconductors, improving their features and power consumption characteristics while reducing their size and cost. These advances have resulted in growth of semiconductors and electronic content across a diverse array of products. The semiconductor market totaled $574.1 billion in 2022.
These advances have resulted in growth of semiconductors and electronic content across a diverse array of products. The semiconductor market totaled $527 billion in 2023.
For break-through technologies and new market opportunities, we look at the strategic fit and synergies with the rest of our portfolio and the size of the potential addressable market. Overall, we allocate our research and development to maintain a healthy mix of emerging growth and mature businesses.
For products targeting established markets, we evaluate our research and development expenditures based on clear business need and risk assessments. For break-through technologies and new market opportunities, we look at the strategic fit and synergies with the rest of our portfolio and the size of the potential addressable market.
Meanwhile, billions of connected devices exchange more and more data, leading to strong demand for device edge and cloud processing solutions. 5 Finally, in secure edge identification solutions, NXP has extensive experience providing customers with solutions for applications demanding the highest security and reliability (ePassports, eID credentials, transportation & payment cards and RFID solutions).
Finally, in secure edge identification solutions, NXP has extensive experience providing customers with solutions for applications demanding the highest security and reliability (ePassports, eID credentials, transportation & payment cards and RFID solutions). Further digitalization of governmental services, the trend towards secure contactless payment and the need to improve tracking, traceability and authentication of products are driving demand across these applications.
We focus on driving team member engagement; building thought leadership; embracing diversity, equity and inclusion; providing competitive and fair compensation and benefits; enabling talent development and growth opportunities; investing in future talent; focusing on team member retention; and giving back to our communities. NXP’s workforce includes direct labor (DL) and indirect labor (IDL).
Across the globe, we have policies and programs to attract and maintain the best talent, with a specific focus on team member engagement, thought leadership, diversity, equity and inclusion, compensation and benefits, development and growth opportunities, future talent, team member retention and community outreach. 12 NXP’s workforce includes direct labor (DL) and indirect labor (IDL).
NXP Employee Resource Groups (ERGs) enable our culture and inclusive work environment, as we work to ensure diversity of thought throughout our company and bring unique perspectives and skills to help those in our communities. Today, we have nine primary ERGs, with representation in Asia, Europe, Mexico and the United States.
NXP Employee Resource Groups (ERGs) help foster NXP’s innovation and growth culture by promoting an inclusive work environment and bring unique perspectives and skills to help those in our communities. Today, we have nine primary ERGs which are open to all team members and include representation in Asia, Europe and North America.
NXP continues to contribute resources focused on driving cultural awareness across the Company, which is spearheaded by NXP’s Vice President and Head of Diversity, Equality and Inclusion. The Human Resources and C ompensation Committee of our Board provides oversight of our policies, programs and initiatives focusing on human capital management, including workforce diversity, equality and inclusion .
Our Diversity & Inclusion Council serves as an advocate, resource and governing entity to advance NXP’s global, strategic diversity, equality and inclusion initiatives. The Human Resources and C ompensation Committee of our Board provides oversight of our policies, programs and initiatives focusing on human capital management, including workforce diversity, equality and inclusion .
For more information, see our 2023 Proxy Statement and the ESG Goals section in the Corporate Sustainability Report 1 . Employee Health and Safety We are committed to the safety of our employees, and we continuously assess safety risks globally to ensure workplace risks are mitigated.
Since 2022, we have linked a portion of our executive and employee compensation to our ESG Goals. For more information, see our 2024 Proxy Statement and the ESG Goals section in the Corporate Sustainability Report 1 .
We monitor developments of global legislation by tracking current discussions, timelines, and the likelihood of new implementations. During the design and development of our new product solutions, we emphasize these potential requirements to coincide with new product introductions.
We stay informed about changes in global legislation, by tracking current discussions, timelines and the likelihood of new implementations, and include these potential legislative requirements when we plan for new product introductions.
Application Processors Application processors consist of a computing core with embedded memory and special-purpose hardware and software for secure multimedia applications such as graphics and video. Our products focus on consumer devices, industrial applications and automotive applications, like driver information systems, ADAS and vehicle networking that require processing and multimedia capabilities.
Our S32x Automotive Processing Platform offers scalability across products and multiple application domains with S32K MCU’s based on Arm Cortex-M cores with Automotive Safety Integrity Level (ASIL-D) capabilities. ii. Application Processors Application processors consist of a computing core with embedded memory and special-purpose hardware and software for secure multimedia applications such as graphics and video.
Except as specifically noted elsewhere in this Form 10-K, the contents of our 2023 Proxy Statement are referenced here for general information only and are not incorporated by reference in this Form 10-K. 2 The contents of our website, our Corporate Sustainability Report, and our Sustainability Policy are referenced for general information only and are not incorporated by reference in this Form 10-K. 15 Available Information Our main corporate website address is www.nxp.com.
Except as specifically noted elsewhere in this Form 10-K, the contents of our 2024 Proxy Statement are referenced here for general information only and are not incorporated by reference into, and do not form a part of, this Form 10-K. 15 early stages of their development, we enable sustainable, green technologies that benefit both our company and our customers.
Microcontrollers We have been a provider of MCU solutions for more than 40 years. MCUs integrate all of the major components of a computing system onto a single semiconductor device. Typically, this includes a programmable processor core, memory, interface circuitry and other components. MCUs provide the digital logic, or intelligence, for electronic applications, controlling electronic equipment or analyzing sensor inputs.
Typically, this includes a programmable processor core, memory, interface circuitry and other components. MCUs provide the digital logic, or intelligence, for electronic applications, controlling electronic equipment or analyzing sensor inputs. We are a trusted, long-term supplier of MCUs to many of our customers, especially in the automotive, smartcards, industrial and consumer markets.
We invite team members to share their feedback on a variety of factors, including engagement, strategy, culture, leadership, continuous improvement, collaboration, execution, ownership, work environment, support and diversity, equality and inclusion. Insights from our survey equip us to improve the team member experience as well as our policies and processes.
NXP is committed to actively listening to team members and solicits feedback on a variety of factors, including engagement, strategy, culture, leadership, innovation, growth, continuous improvement, collaboration, ownership, work environment, ethics, sustainability and diversity, equality and inclusion. In 2023, 90% of team members participated in the survey.
Semiconductors vary significantly depending upon the specific function or application of the end product in which the semiconductor is used and the customer who is deploying it. Semiconductors also vary on a number of technical characteristics including the degree of integration, level of customization, programmability and the process technology utilized to manufacture the semiconductor.
Semiconductors also vary on a number of technical characteristics including the degree of integration, level of customization, programmability and the process technology utilized to manufacture the semiconductor. Advances in semiconductor technology have increased the functionality and performance of semiconductors, improving their features and power consumption characteristics while reducing their size and cost.
We were incorporated in the Netherlands in 2006 as a Dutch public company with limited liability (naamloze vennootschap). Our corporate seat is in Eindhoven, the Netherlands. Our principal executive office is at High Tech Campus 60, 5656 AG Eindhoven, the Netherlands, and our telephone number is +31 40 2729999.
Our legal name is NXP Semiconductors N.V. and our commercial name is “NXP” or “NXP Semiconductors.” We were incorporated in the Netherlands in 2006 and are a Dutch public company with limited liability (naamloze vennootschap). Our corporate seat is in Eindhoven, the Netherlands.
Our purpose is bringing together bright minds to create breakthrough technologies that make the connected world better, safer, and more secure. This purpose is reinforced by our values of innovation, expertise, collaboration, ownership and growth built on a foundation of trust and respect. Across the globe, we have policies and programs to attract and maintain the best talent possible.
Our purpose is bringing together bright minds to create breakthrough technologies that make the connected world better, safer, and more secure.
Our registered agent in the United States is NXP USA, Inc., 6501 William Cannon Dr. West, Austin, Texas 78735, United States of America, phone number +1 512 9338214. Semiconductor Market Overview Semiconductors perform a broad variety of functions within electronic products and systems, including processing data, sensing, storing information and converting or controlling electronic signals.
Semiconductor Market Overview Semiconductors perform a broad variety of functions within electronic products and systems, including processing data, sensing, storing information and converting or controlling electronic signals. Semiconductors vary significantly depending upon the specific function or application of the end product in which the semiconductor is used and the customer who is deploying it.
We also have broad-based programs targeting all team members ensuring that we are retaining our talent over the longer term. Diversity, Equality and Inclusion At NXP, the foundation of our values is trust and respect to ensure our inclusive culture.
We continue to drive programs centered around retention actions for strategic roles and top-performing talent as well as broad-based programs targeting all team members. 13 Diversity, Equality and Inclusion At NXP, inclusion is key to living our core values which are built on a core foundation of trust and respect.
We are certified to the ISO 45001 Occupational Health and Safety Management System, and have developed robust safety programs and initiatives to safeguard our workforce. In 2022, as a follow-up to a previous survey, we conducted a global survey on employee safety, inquiring about opportunities for improvement and asking employees about their comfort level when raising safety concerns.
Employee Health and Safety We are committed to the safety of our employees, and we continuously assess safety risks globally to ensure workplace risks are mitigated. We are certified to the ISO 45001 Occupational Health and Safety Management System, and have developed robust safety programs and initiatives to safeguard our workforce.
From an operational perspective, all of our manufacturing facilities continue to operate around the world in accordance with guidance issued by local and national government authorities. 9 Sales, Marketing and Customers We market our products and solutions worldwide to a variety of OEMs, contract manufacturers and distributors.
From an operational perspective, all of our manufacturing facilities continue to operate around the world in accordance with guidance issued by local and national government authorities. On January 9, 2024, NXP acquired shares in the newly founded European Semiconductor Manufacturing Company (ESMC) GmbH, in Dresden, Germany. ESMC is 70% owned by TSMC, with Bosch, Infineon, and NXP each owning 10%.
We continue to focus on hiring, developing, and retaining team members across all global sites to meet our 2025 representation goals. In a competitive hiring market, our overall employee population grew by 11% in 2022.
We saw an increase in the representation of women in R&D positions, but remained flat or slightly under the prior year results in the other categories. We continue to focus on hiring, developing, and retaining team members across all global sites to meet our 2025 representation goals.
Through our partnerships with universities across the world, we fund and support advanced research programs and projects that demonstrate our commitment to investing in the future of not only technology, but also students' knowledge and skills.
Through our partnerships with universities across the world, we fund and support advanced research programs and projects that demonstrate our commitment to invest in people as well as technology. 14 Compensation and Benefits We provide team members with total rewards packages consisting of base salary and short-term incentives as well as equity-based long-term incentives for team members with long-term potential.
Risk Factors for a discussion of potential global environmental risks that may adversely affect our business operations, such as climate change or natural disasters. Our commitment to enabling a smarter, more sustainable world goes beyond our operations, and includes developing innovative product solutions that support the sustainability goals and objectives of our stakeholders.
In support of this, we set company-wide aspirational targets intended to optimize our use of resources, minimize waste and continuously improve. See Part I, Item 1A. Risk Factors for a discussion of potential global environmental risks that may adversely affect our business operations, such as climate change or natural disasters.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThe price of our common stock historically has been volatile. The price of our common stock may fluctuate significantly. The stock market in recent years has experienced significant price and volume fluctuations that have often been unrelated to the operating performance of companies.
Biggest changeThe stock market in recent years has experienced significant price and volume fluctuations that have often been unrelated to the operating performance of companies. The market price for our common stock has varied between a high of $238.27 on December 15, 2023 and a low of $153.10 on January 5, 2023 in the twelve-month period ending on December 31, 2023.
The instability may have a negative effect on our business, financial condition and operations via our customers and global supply chain and volatility in energy prices and the financial markets; • potential terrorist attacks; • epidemics and pandemics, such as the coronavirus outbreak, which may adversely affect our workforce, as well as our suppliers and customers; • geopolitical tension and disputes and resulting adverse changes in government policies, especially those affecting global trade and investment.
The instability may have a negative effect on our business, financial condition and operations via our customers and global supply chain and volatility in energy prices and the financial markets; • potential terrorist attacks; • epidemics and pandemics, such as the coronavirus outbreak, which may adversely affect our workforce, as well as our suppliers and customers; • geopolitical tension and disputes, as well as, resulting adverse changes in government policies, especially those affecting global trade and investment.
In order to obtain a judgment which is enforceable in the Netherlands, the claim must be relitigated before a competent court of the Netherlands; the relevant Netherlands court has discretion to attach such weight to a judgment of the courts of the United States as it deems appropriate; based on case law, the courts of the Netherlands may be expected to recognize and grant permission for enforcement of a judgment of a court of competent jurisdiction in the United States without re-examination or relitigation of the substantive matters adjudicated thereby, provided that (i) the relevant court in the United States had jurisdiction in the matter in accordance with standards which are generally accepted internationally; (ii) the proceedings before that court complied with principles of proper procedure; (iii) recognition and/or enforcement of that judgment does not conflict with the public policy of the Netherlands; and (iv) recognition and/or enforcement of that judgment is not irreconcilable with a decision of a Dutch court rendered between the same parties or with an earlier decision of a foreign court rendered between the same parties in a dispute that is about the same subject matter and that is based on the same cause, provided that earlier decision can be recognized in the Netherlands.
In order to obtain a judgment which is enforceable in the Netherlands, the claim must be relitigated before a competent court of the Netherlands; the relevant Netherlands court has discretion to attach such weight to a judgment of the courts of the United States as it deems appropriate; based on case law, the courts of the Netherlands may be expected to recognize and grant permission for enforcement of a judgment of a court of competent jurisdiction in the United States without re-examination or relitigation of the substantive matters adjudicated thereby, provided that (i) the relevant court in the United States had jurisdiction in the matter in 26 accordance with standards which are generally accepted internationally; (ii) the proceedings before that court complied with principles of proper procedure; (iii) recognition and/or enforcement of that judgment does not conflict with the public policy of the Netherlands; and (iv) recognition and/or enforcement of that judgment is not irreconcilable with a decision of a Dutch court rendered between the same parties or with an earlier decision of a foreign court rendered between the same parties in a dispute that is about the same subject matter and that is based on the same cause, provided that earlier decision can be recognized in the Netherlands.
The market price of our common stock is likely to continue to be volatile and subject to significant price and volume fluctuations for many reasons, including in response to the risks 28 described in this section, changes in our dividend or share repurchase policies, variations between our actual financial results or guidance and expectations of securities analysts or investors or for reasons unrelated to our operations, such as reports by industry analysts, investor perceptions or negative announcements by our customers, competitors, peer companies or suppliers regarding their own performance, or announcements by our competitors of significant contracts, strategic partnerships, joint ventures, joint marketing relationships or capital commitments, the passage of legislation or other regulatory developments affecting us or our industry, as well as industry conditions and general financial, economic and political instability.
The market price of our common stock is likely to continue to be volatile and subject to significant price and volume fluctuations for many reasons, including in response to the risks described in this section, changes in our dividend or share repurchase policies, variations between our actual financial results or guidance and expectations of securities analysts or investors or for reasons unrelated to our operations, such as reports by industry analysts, investor perceptions or negative announcements by our customers, competitors, peer companies or suppliers regarding their own performance, or announcements by our competitors of significant contracts, strategic partnerships, joint ventures, joint marketing relationships or capital commitments, the passage of legislation or other regulatory developments affecting us or our industry, as well as industry conditions and general financial, economic and political instability.
Impairment may result from, among other things, a sustained decrease in share price, deterioration in performance, adverse market conditions, adverse changes in applicable laws or regulations, including changes that restrict the activities of or affect the products 18 and services we sell, challenges to the validity of certain registered intellectual property, reduced sales of certain products incorporating intellectual property and a variety of other factors.
Impairment may result from, among other things, a sustained decrease in share price, deterioration in performance, adverse market conditions, adverse changes in applicable laws or regulations, including changes that restrict the activities of or affect the products and services we sell, challenges to the validity of certain registered intellectual property, reduced sales of certain products incorporating intellectual property and a variety of other factors.
In addition, Russia’s recent invasion of Ukraine has led to sanctions, export controls and other penalties being levied by the United States, European Union and other countries against Russia, Belarus, the Crimea Region of Ukraine, the so-called Donetsk People’s Republic, and the so-called Luhansk People’s Republic. Additional potential sanctions and penalties have also been proposed and/or threatened.
In addition, Russia’s invasion of Ukraine has led to sanctions, export controls and other penalties being levied by the United States, European Union and other countries against Russia, Belarus, the Crimea Region of Ukraine, the so-called Donetsk People’s Republic, and the so-called Luhansk People’s Republic. Additional potential sanctions and penalties have also been proposed and/or threatened.
Moreover, third parties can release information regarding potential vulnerabilities of our products before mitigations are available. This, in turn, could lead to attempted or successful exploits, adversely affect our ability to introduce mitigations, or otherwise harm our business and reputation. Our business has suffered, and could in the future suffer, from manufacturing problems.
Moreover, third parties can release information regarding potential 20 vulnerabilities of our products before mitigations are available. This, in turn, could lead to attempted or successful exploits, adversely affect our ability to introduce mitigations, or otherwise harm our business and reputation. Our business has suffered, and could in the future suffer, from manufacturing problems.
An explanation of the significance of such rating may be obtained from such rating agency. There can be no assurance that such credit ratings will remain in effect for any given period of time or that such ratings will not be lowered, suspended or withdrawn entirely by the rating agencies, if, in each rating agency’s judgment, 27 circumstances so warrant.
An explanation of the significance of such rating may be obtained from such rating agency. There can be no assurance that such credit ratings will remain in effect for any given period of time or that such ratings will not be lowered, suspended or withdrawn entirely by the rating agencies, if, in each rating agency’s judgment, circumstances so warrant.
Any inability on our part to adequately protect our intellectual property may have a material adverse effect on our business, financial condition and results of operations. We may become party to intellectual property claims or litigation that could cause us to incur substantial costs, pay substantial damages or prohibit us from selling our products.
Any inability on our part to adequately protect our intellectual property may have a material adverse effect on our business, financial condition and results of operations. 25 We may become party to intellectual property claims or litigation that could cause us to incur substantial costs, pay substantial damages or prohibit us from selling our products.
The failure of these suppliers to perform under these agreements or an unexpected reduction in demand for these products could result in a material adverse effect on our business, financial condition and results of operations. Disruptions in our relationships with any one of our key customers could adversely affect our business.
The failure of these suppliers to perform under these agreements or an unexpected reduction in demand for these products could result in a material adverse effect on our business, financial condition and results of operations. 21 Disruptions in our relationships with any one of our key customers could adversely affect our business.
Such breaches could result in, for example, unauthorized access to, disclosure, misuse, loss, or destruction of our, our customer, or other third party data or systems, theft of sensitive or confidential data including personal information (including personal data about our employees, customers or other third parties) and intellectual property, system disruptions, and denial of service.
Such breaches could result in, for example, unauthorized access to, disclosure, misuse, loss, or 24 destruction of our, our customer, or other third party data or systems, theft of sensitive or confidential data including personal information (including personal data about our employees, customers or other third parties) and intellectual property, system disruptions, and denial of service.
If any of the following international business risks were to materialize or become worse, they could have a material adverse effect on our business, financial condition and results of operations: • negative economic developments in economies around the world and the instability of governments and international trade arrangements, such as the increase of barriers to international trade including the imposition of tariffs on imports by the United States and China, the withdrawal of the United Kingdom from the European Union, enhanced export controls on certain products and sanctions on certain industry sectors and parties and the sovereign debt crisis in certain European countries; • social and political instability in a number of countries around the world, including continued hostilities and civil unrest in the Middle East and the armed conflict in Ukraine.
If any of the following international business risks were to materialize or become worse, they could have a material adverse effect on our business, financial condition and results of operations: • negative economic developments in economies around the world and the instability of governments and international trade arrangements, such as the increase of barriers to international trade including the imposition of tariffs on imports by the United States and China, the withdrawal of the United Kingdom from the European Union, enhanced export controls on certain products and sanctions on certain industry sectors and parties and the sovereign debt crisis in certain European countries; • social and political instability in a number of countries around the world, including continued hostilities in the Middle East and the armed conflict in Ukraine.
The foregoing risks could have a material adverse effect on our business. 25 Risks related to our corporate structure United States civil liabilities may not be enforceable against us. We are incorporated under the laws of the Netherlands and substantial portions of our assets are located outside of the United States.
The foregoing risks could have a material adverse effect on our business. Risks related to our corporate structure United States civil liabilities may not be enforceable against us. We are incorporated under the laws of the Netherlands and substantial portions of our assets are located outside of the United States.
In addition, the occurrence of such defects may give rise to product liability and warranty claims, including liability for damages caused by such defects. If we release defective products into the market, our reputation could suffer and we may 19 lose sales opportunities and incur liability for damages.
In addition, the occurrence of such defects may give rise to product liability and warranty claims, including liability for damages caused by such defects. If we release defective products into the market, our reputation could suffer and we may lose sales opportunities and incur liability for damages.
We may, in the future, experience manufacturing difficulties or permanent or temporary loss of manufacturing capacity due 20 to the preceding or other risks. Any such event could have a material adverse effect on our business, financial condition and results of operations.
We may, in the future, experience manufacturing difficulties or permanent or temporary loss of manufacturing capacity due to the preceding or other risks. Any such event could have a material adverse effect on our business, financial condition and results of operations.
Furthermore, global privacy legislation, enforcement, and policy activity, such as the EU General Data Privacy Regulation, are rapidly expanding and creating a complex regulatory 22 compliance environment. Costs to comply with and implement these privacy-related and data protection measures could be significant.
Furthermore, global privacy legislation, enforcement, and policy activity, such as the EU General Data Privacy Regulation, are rapidly expanding and creating a complex regulatory compliance environment. Costs to comply with and implement these privacy-related and data protection measures could be significant.
We are also required to obtain environmental permits from governmental authorities for certain of our operations. We cannot assure you that we have been or will be at all times in complete compliance with such laws, regulations and permits.
We are also required to obtain environmental permits from governmental authorities for certain of our operations. We cannot assure you that we have been or 23 will be at all times in complete compliance with such laws, regulations and permits.
We may not obtain patent protection or secure other intellectual property rights in all the countries in which we operate, and under the laws of such countries, 24 patents and other intellectual property rights may be or become unavailable or limited in scope.
We may not obtain patent protection or secure other intellectual property rights in all the countries in which we operate, and under the laws of such countries, patents and other intellectual property rights may be or become unavailable or limited in scope.
We determine the taxes we are required to pay based on our interpretation of the applicable tax laws and regulations in the jurisdictions in which we operate. We may be subject to unfavorable changes in the respective tax laws and regulations to which we are subject.
We are required to pay taxes in multiple jurisdictions. We determine the taxes we are required to pay based on our interpretation of the applicable tax laws and regulations in the jurisdictions in which we operate. We may be subject to unfavorable changes in the respective tax laws and regulations to which we are subject.
Accordingly, the success of our business depends to a significant extent on our ability to develop new technologies and products that are 16 ultimately successful in the market.
Accordingly, the success of our business depends to a significant extent on our ability to develop new technologies and products that are ultimately successful in the market.
If flooding, a large earthquake, volcanic eruption or, extreme weather event or other natural disaster were to directly damage, destroy or disrupt our manufacturing facilities, it could disrupt our operations, delay new production and shipments of existing inventory or result in costly repairs, replacements or other costs, all of which would negatively impact our business.
If flooding, heavy precipitation, a large earthquake, volcanic eruption or, extreme weather event or other natural disaster were to directly damage, destroy or disrupt our manufacturing facilities, it could disrupt our operations, delay new production and shipments of existing inventory or result in costly repairs, replacements or other costs, all of which would negatively impact our business.
The impact of future negotiations and consultation processes with employee representatives could have a material impact on our financial results.
The impact of future negotiations and consultation processes with employee 19 representatives could have a material impact on our financial results.
Risks related to our indebtedness Our debt obligations expose us to risks that could adversely affect our financial condition, which could adversely affect our results of operations. 26 As of December 31, 2022, we had outstanding indebtedness with an aggregate principal amount of $11,250 million.
Risks related to our indebtedness Our debt obligations expose us to risks that could adversely affect our financial condition, which could adversely affect our results of operations. As of December 31, 2023, we had outstanding indebtedness with an aggregate principal amount of $11,250 million.
Environmental and other disasters, such as flooding, large earthquakes, volcanic eruptions or nuclear or other disasters, or a combination thereof may negatively impact our business.
Environmental and other disasters, such as flooding, heavy precipitation large earthquakes, volcanic eruptions or nuclear or other disasters, or a combination thereof may negatively impact our business.
As of December 31, 2022, we had recognized a net accrued benefit liability of $335 million, representing the unfunded benefit obligations of our defined pension plans. The funding status and the liabilities and costs of maintaining these defined benefit pension plans may be impacted by financial market developments.
As of December 31, 2023, we had recognized a net accrued benefit liability of $392 million, representing the unfunded benefit obligations of our defined pension plans. The funding status and the liabilities and costs of maintaining these defined benefit pension plans may be impacted by financial market developments.
Sustained geopolitical tensions could lead to long-term changes in global trade and technology supply chains and decoupling of global trade networks; • volatility in foreign currency exchange rates, in particular with respect to the U.S. dollar, and transfer restrictions, in particular in mainland China; and • threats that our operations or property could be subject to nationalization and expropriation.
Sustained geopolitical tensions, such as the current geopolitical tensions involving China and Taiwan, could lead to long-term changes in global trade and technology supply chains and decoupling of global trade networks; 18 • volatility in foreign currency exchange rates, in particular with respect to the U.S. dollar, and transfer restrictions, in particular in mainland China; and • threats that our operations or property could be subject to nationalization and expropriation.
Due to the uncertainty inherent in litigation, it is difficult to predict the final outcome. An adverse outcome might affect our results of operations. We and certain of our businesses are involved as plaintiffs or defendants in legal proceedings in various matters.
Legal proceedings covering a range of matters are pending in various jurisdictions. Due to the uncertainty inherent in litigation, it is difficult to predict the final outcome. An adverse outcome might affect our results of operations. We and certain of our businesses are involved as plaintiffs or defendants in legal proceedings in various matters.
As a result, we are subject to environmental, data privacy, labor and health and safety laws and regulations in each jurisdiction in which we operate. We are also required to obtain environmental permits and other authorizations or licenses from governmental authorities for certain of our operations.
As a result, we are subject to environmental, data privacy, AI technologies, disclosure and reporting (including reporting of ESG-related data), labor and health and safety laws and regulations in each jurisdiction in which we operate. We are also required to obtain environmental permits and other authorizations or licenses from governmental authorities for certain of our operations.
In addition, governments are increasingly imposing restrictions on foreign investment in semiconductor businesses and technology, such as the Dutch foreign investment control regime, that may limit our ability to execute strategic acquisitions, investments and alliances, any of which could have a material adverse effect on our business. Legal proceedings covering a range of matters are pending in various jurisdictions.
In addition, governments are increasingly imposing restrictions on foreign investment in semiconductor businesses and technology, such as the Dutch foreign investment control regime, that may limit our ability to execute strategic acquisitions, investments and alliances, any of which could have a material adverse effect on our business.
Meeting evolving industry requirements and introducing new products to the market in a timely manner and at prices that are acceptable to our customers are significant factors in determining our competitiveness and success.
Meeting evolving industry requirements, including the increasing use of AI and machine learning technologies, and introducing new products to the market in a timely manner and at prices that are acceptable to our customers are significant factors in determining our competitiveness and success.
In the past, following periods of market volatility, shareholders have instituted securities class action litigation. If we were involved in securities litigation, it could have a substantial cost and divert resources and the attention of executive management from our business regardless of the outcome of such litigation. We may have fluctuations in the amount and frequency of our stock repurchases.
If we were involved in securities litigation, it could have a substantial cost and divert resources and the attention of executive management from our business regardless of the outcome of such litigation. 28 We may have fluctuations in the amount and frequency of our stock repurchases.
Risks related to regulatory or legal challenges As our business is global, we need to comply with laws and regulations in countries across the world. We operate globally, with manufacturing, assembly and testing facilities in several continents, and we market our products globally.
We cannot predict the economic impact, if any, of natural disasters or climate change. 22 Risks related to regulatory or legal challenges As our business is global, we need to comply with laws and regulations in countries across the world. We operate globally, with manufacturing, assembly and testing facilities in several continents, and we market our products globally.
There is increasing concern that climate change is occurring that may cause a rising number of natural disasters with potentially dramatic effects on human activity. We cannot predict the economic impact, if any, of natural disasters or climate change.
There is increasing concern that climate change is occurring that may cause a rising number of natural disasters with potentially dramatic effects on human activity.
Changes in environmental regulations could increase our production and operational costs, which could adversely affect our results of operations and financial condition. Risks related to cybersecurity and IT systems 23 Interruptions in our information technology systems could adversely affect our business.
Changes in environmental regulations could increase our production and operational costs, which could adversely affect our results of operations and financial condition. Risks related to cybersecurity and IT systems Interruptions in our information technology systems could adversely affect our business. We rely on the efficient and uninterrupted operation of complex information technology applications, systems and networks to operate our business.
If we cannot advance our process technologies or improve our efficiencies to a degree sufficient to maintain required margins, we will no longer be able to make a profit from the sale of these products.
Usually, this must be accomplished through improvements in process technology, production efficiencies and efficient procurement pricing. If we cannot advance our process technologies or improve our efficiencies to a degree sufficient to maintain required margins, we will no longer be able to make a profit from the sale of these products.
For example, import and export regulations, such as the U.S. Export Administration Regulations administered by the U.S. Department of Commerce, are complex, change frequently, have generally become more stringent over time and have intensified in recent years. In October 2022, the U.S. imposed restrictions on the export of US-regulated products and technology to certain mainland Chinese technology companies.
For example, import and export regulations, such as the U.S. Export Administration Regulations administered by the U.S. Department of Commerce, are complex, change frequently, have generally become more stringent over time and have intensified in recent years.
This could have a material adverse effect on our business, financial condition and results of operations. 21 Certain natural disasters, such as flooding, large earthquakes, volcanic eruptions or nuclear or other disasters, may negatively impact our business. Climate change may cause a rising number of natural disasters that could negatively affect our operations.
Certain natural disasters, such as flooding, heavy precipitation, large earthquakes, volcanic eruptions or nuclear or other disasters, may negatively impact our business. Climate change may cause a rising number of natural disasters that could negatively affect our operations.
We rely on the efficient and uninterrupted operation of complex information technology applications, systems and networks to operate our business. The reliability and security of our information technology infrastructure and software, and our ability to expand and continually update technologies in response to our changing needs is critical to our business.
The reliability and security of our information technology infrastructure and software, and our ability to expand and continually update technologies in response to our changing needs is critical to our business.
Moreover, if we terminate any activities or operations, including strategic alliances or joint ventures, we may face adverse actions from the local governmental agencies providing such subsidies to us. In particular, such government agencies could seek to recover such subsidies from us and they could cancel or reduce other subsidies we receive from them.
Moreover, if we terminate any activities or operations, including strategic alliances or joint ventures, we may face adverse actions from the local governmental agencies providing such subsidies to us.
Beginning in the third quarter of 2020, demand rebounded across all end markets more quickly than anticipated and accelerated through the third quarter of 2022, resulting in our inability to fully satisfy customer demand.
Beginning in the third quarter of 2020, demand rebounded across all end markets more quickly than anticipated and accelerated through the third quarter of 2022, resulting in our inability to fully satisfy customer demand. In 2008 and 2009, Europe, the United States and international markets experienced increased volatility and instability related to the global financial crisis.
Should reductions in our manufacturing costs fail to keep pace with reductions in market prices for the products we sell, this could have a material adverse effect on our business, financial condition and results of operations. 17 Risks related to our business operations In many of the market segments in which we compete, we depend on winning selection processes, and failure to be selected could adversely affect our business in those market segments.
Should reductions in our manufacturing costs fail to keep pace with reductions in market prices for the products we sell, this could have a material adverse effect on our business, financial condition and results of operations.
As part of the OECD framework to implement a minimum tax rate, the EU has adopted a directive on ensuring a global minimum level of taxation for multinational companies, also known as Pillar 2, to become 29 effective in 2024. It is anticipated that other countries will also introduce Pillar 2 legislation.
As part of the OECD framework to implement a minimum tax rate, the EU has adopted a directive on ensuring a global minimum level of taxation for multinational companies, also known as Pillar 2, to become effective in 2024. The Dutch government has enacted new legislation in response to and based on such EU directive.
If customers do not purchase products made specifically for them, we may not be able to resell such products to other customers or may not be able to require the customers who have ordered these products to pay a cancellation fee. The foregoing risks could have a material adverse effect on our business, financial condition and results of operations.
If customers do not purchase products made specifically for them, we may not be able to resell such products to other customers or may not be able to require the customers who have ordered these products to pay a cancellation fee.
If we do not comply with the covenants in our debt agreements or fail to generate sufficient cash to service and repay our debt, it could adversely affect our operating results and our financial condition.
Despite our level of indebtedness, we may still incur significantly more debt, which could further exacerbate the risks described above and affect our ability to service and repay our debt. 27 If we do not comply with the covenants in our debt agreements or fail to generate sufficient cash to service and repay our debt, it could adversely affect our operating results and our financial condition.
In the event of a future decline in global economic conditions, our business, financial condition and results of operations could be materially adversely affected, and the resulting economic decline might disproportionately affect the markets in which we participate, further exacerbating a decline in our results of operations. The semiconductor industry is highly competitive.
In the event of a future decline in global economic conditions, our business, financial condition and results of operations could be materially adversely affected, and the resulting economic decline might disproportionately affect the markets in which we participate, further exacerbating a decline in our results of operations. 2 The contents of our website, our Corporate Sustainability Report, and our Sustainability Policy are referenced for general information only and are not incorporated by reference into, and do not form a part of, this Form 10-K. 16 The semiconductor industry is highly competitive.
Actual or anticipated changes or downgrades in our credit ratings, including any announcement that our ratings are under further review for a downgrade, could affect our market value and/or increase our corporate borrowing costs. General risk factors The coronavirus (COVID-19) pandemic and measures taken in response have adversely impacted the Company's financial condition and results of operations.
Actual or anticipated changes or downgrades in our credit ratings, including any announcement that our ratings are under further review for a downgrade, could affect our market value and/or increase our corporate borrowing costs. General risk factors The price of our common stock historically has been volatile. The price of our common stock may fluctuate significantly.
If this trend continues, in order to continue profitably supplying these products, we must reduce our production and procurement costs in line with the lower revenue we can expect to generate per unit. Usually, this must be accomplished through improvements in process technology, production efficiencies and efficient procurement pricing.
In turn, historically demand for older technology falls, causing the price at which such products can be sold to drop, in some cases precipitously. If this trend continues, in order to continue profitably supplying these products, we must reduce our production and procurement costs in line with the lower revenue we can expect to generate per unit.
In the current environment, there are numerous and evolving risks to cybersecurity and privacy, including criminal hackers, state-sponsored intrusions, industrial espionage, employee malfeasance, and human or technological error. Computer hackers and others routinely attempt to breach the security of technology products, services, and systems, and those of customers, suppliers, and some of those attempts may be successful.
Computer hackers and others routinely attempt to breach the security of technology products, services, and systems, and those of customers, suppliers, and some of those attempts may be successful.
Product life cycles are relatively short, and as a result, products tend to be replaced by more technologically advanced substitutes on a regular basis. In turn, historically demand for older technology falls, causing the price at which such products can be sold to drop, in some cases precipitously.
One of the results of the rapid innovation in the semiconductor industry is that pricing pressure, especially on products containing older technology, can be intense. Product life cycles are relatively short, and as a result, products tend to be replaced by more technologically advanced substitutes on a regular basis.
The semiconductor industry is historically characterized by continued price erosion, especially after a product has been on the market. One of the results of the rapid innovation in the semiconductor industry is that pricing pressure, especially on products containing older technology, can be intense.
The foregoing risks could have a material adverse effect on our business, financial condition and results of operations. 17 The semiconductor industry is historically characterized by continued price erosion, especially after a product has been on the market.
These initiatives include recommendations and proposals that, if enacted in countries in which we and our affiliates do business, could adversely affect us and our affiliates. We are exposed to a number of different tax uncertainties, which could have an impact on our results. We are required to pay taxes in multiple jurisdictions.
It is anticipated that other countries will also introduce Pillar 2 legislation. These initiatives include recommendations and proposals that, if enacted in countries in which we and our affiliates do business, could adversely affect us and our affiliates. In addition, the Dutch government has enacted legislation to curtail exemptions on taxing share repurchases to become effective in 2025.
Removed
Beginning in the third quarter of 2022, we have seen a slowdown, primarily in our more consumer exposed end markets of IoT and Mobile versus the prior year with a significant degree of uncertainty for the near-term demand trends.
Added
In addition, AI and machine learning are still in early stages, and the introduction and incorporation of AI technologies may result in unintended consequences or other new or expanded risks and liabilities.
Removed
In 2008 and 2009, Europe, the United States and international markets experienced increased volatility and instability related to the global financial crisis.
Added
Such risks may include (i) adverse impacts from deficient, inaccurate, or biased AI recommendations, (ii) AI technologies the company develops and adopts may become obsolete earlier than planned, and there can be no assurance that the company will realize the desired or anticipated benefits, (iii) use of AI applications could increase the risk of cybersecurity incidents, such as through unintended or inadvertent transmission of proprietary or sensitive information, or (iv) any laws, regulations or industry standards adopted in response to the emergence of AI may be burdensome.
Removed
Despite our level of indebtedness, we may still incur significantly more debt, which could further exacerbate the risks described above and affect our ability to service and repay our debt.
Added
Risks related to our business operations In many of the market segments in which we compete, we depend on winning selection processes, and failure to be selected could adversely affect our business in those market segments.
Removed
The COVID-19 pandemic, or a similar global health crisis, may continue to impact us in the future. The COVID-19 outbreak has significantly increased economic and demand uncertainty.
Added
In such event that we don't meet the subsidies grant conditions, such government agencies could seek to recover such subsidies from us and they could cancel or reduce other subsidies we receive from them. This could have a material adverse effect on our business, financial condition and results of operations.
Removed
We experienced a significant decline in revenue in the first half of 2020 related to the COVID-19 outbreak and then a swift rebound in demand beginning in the third quarter of 2020 and accelerating through the fourth quarter of 2021.
Added
In October 2022, the U.S. imposed restrictions on the export of US-regulated products and technology to certain mainland Chinese technology companies and in October 2023, the Department of Commerce’s revisited these controls, proposing further refinements, and is moving toward final rule making.
Removed
The situation remains uncertain and the continued spread of COVID-19 or variants of COVID-19 may result in economic slowdown or disruptions to our supply chain in one or more geographic areas in which we operate, including the possibility that it could lead to a global recession.
Added
Compliance with, or changes in the interpretation of, existing regulations, the adoption of new regulations, changes in the oversight of our activities by governments or standard bodies or rulings in court, regulatory, administrative or other proceedings relating to such regulations, among others, could have an adverse effect on our business and results of operations.
Removed
Specifically, in the last quarter of 2022 we experienced an unexpected decrease in demand in mainland China due to the increased COVID-19 infection rate. Risks related to a slowdown or recession are described in our risk factor titled “Significantly increased volatility and instability and unfavorable economic conditions may adversely affect our business” above.
Added
We believe that we have a robust cybersecurity program that is aligned to international cybersecurity frameworks, and that we leverage industry best practices across people, processes and technologies in an attempt to mitigate cybersecurity threats.
Removed
The spread of COVID-19 caused us to modify our business practices (including employee travel, employee work locations, and cancellation of physical participation in meetings, events and conferences), and we may reinstitute these and additional measures as may be required by government authorities or that we determine are in the best interests of our employees, customers, partners, and suppliers.
Added
However, we cannot always anticipate, detect, repel or implement fully effective preventative measures against all cybersecurity threats, particularly because the techniques used are increasingly sophisticated and constantly evolving. In the current environment, there are numerous and evolving risks to cybersecurity and privacy, including criminal hackers, state-sponsored intrusions, industrial espionage, employee malfeasance, and human or technological error.
Removed
The degree to which COVID-19, or a similar global health crisis, adversely impacts our future results will depend on future developments, which are highly uncertain and cannot be predicted, including, but not limited to, the duration and spread of the outbreak, its severity, the actions to contain the virus or treat its impact, and how quickly and to what extent normal economic and operating conditions can resume.
Added
In the past, following periods of market volatility, shareholders have instituted securities class action litigation.
Removed
To the extent the COVID-19 pandemic, or a similar global health crisis, adversely affects our business, results of operations, financial condition and cash flows, it may also heighten many of the other risks described in Part I, Item 1A Risk Factors.
Added
If such legislation is not amended or repealed, this will lead to an additional out of pocket tax payment associated with future share repurchases.
Removed
We previously identified a material weakness in our internal control related to ineffective information technology general controls and if we fail to maintain an effective system of internal control in the future, this could result in loss of investor confidence and adversely impact our stock price.
Added
In addition, the U.S. may enact legislation that would allow a tax payer to deduct domestic R&D expenses in the year that they are expensed, which would adversely affect our tax rate, while beneficial for our cash position. 29 We are exposed to a number of different tax uncertainties, which could have an impact on our results.
Removed
Internal controls related to the operation of technology systems are critical to maintaining adequate internal control over financial reporting.
Removed
We reported in our Annual Report on Form 10-K as of December 31, 2021, a material weakness in our internal control over financial reporting associated with ineffective information technology general controls (ITGCs) in the areas of user access, change-management and IT operations over certain information technology (IT) systems that support the Company’s financial reporting processes.
Removed
During 2022, we completed the remediation measures related to the material weakness and concluded that our internal control over financial reporting was effective as of December 31, 2022. Completion of remediation does not provide assurance that our remediation or other controls will continue to operate properly.
Removed
If we are unable to maintain effective internal control over financial reporting or disclosure controls and procedures, our ability to record, process and report financial information accurately, and to prepare financial statements within required time periods could be adversely affected, which could subject us to litigation or investigations requiring management resources and payment of legal and other expenses, negatively affect investor confidence in our financial statements and adversely impact our stock price.
Removed
The market price for our common stock has varied between a high of $234.90 on January 4, 2022 and a low of $132.08 on October 13, 2022 in the twelve-month period ending on December 31, 2022.

Item 2. Properties

Properties — owned and leased real estate

1 edited+0 added−0 removed1 unchanged
Biggest changeItem 2. Properties The Company's headquarters are located in Eindhoven, the Netherlands. As of March 1, 2023, the Company operates owned manufacturing facilities primarily in the United States, Netherlands, Malaysia, China, Thailand and Taiwan, as well as in Singapore (SSMC) together with our joint venture partner TSMC.
Biggest changeItem 2. Properties The Company's headquarters are located in Eindhoven, the Netherlands. As of February 22, 2024, the Company operates owned manufacturing facilities primarily in the United States, Netherlands, Malaysia, China, Thailand and Taiwan, as well as in Singapore (SSMC) together with our joint venture partner TSMC.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+0 added−0 removed1 unchanged
Biggest changeMine Safety Disclosures Not applicable. 30 Part II
Biggest changeMine Safety Disclosures Not applicable. 31 Part II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

7 edited+0 added−1 removed0 unchanged
Biggest changeDividends Per Common Share The following table presents the quarterly dividends on our common stock for the periods indicated: 2022 2021 First Quarter 0.845 0.5625 Second Quarter 0.845 0.5625 Third Quarter 0.845 0.5625 Fourth Quarter 0.845 0.5625 On January 30, 2023, the board of directors of NXP approved a 20 percent increase in the quarterly cash dividend to $1.014 per ordinary share to be paid in cash on April 5, 2023 to shareholders of record as of March 15, 2023.
Biggest changeDividends Per Common Share The following table presents the quarterly dividends on our common stock for the periods indicated: 2023 2022 First Quarter 1.014 0.845 Second Quarter 1.014 0.845 Third Quarter 1.014 0.845 Fourth Quarter 1.014 0.845 We currently expect to continue to pay dividends in the future.
(2) Reflects shares surrendered by participants to satisfy tax withholding obligations in connection with the Company's equity programs. 31 Company Performance The following graph shows a comparison, since December 31, 2017 of cumulative total return for NXP, the Standard & Poor's 500 Index, and the Philadelphia Stock Exchange Semiconductor Index.
(2) Reflects shares surrendered by participants to satisfy tax withholding obligations in connection with the Company's equity programs. 32 Company Performance The following graph shows a comparison, since December 31, 2018 of cumulative total return for NXP, the Standard & Poor's 500 Index, and the Philadelphia Stock Exchange Semiconductor Index.
The graph assumes $100 (not in millions) invested on December 31, 2017 in our common stock and each of the indices. Item 6. [Reserved]
The graph assumes $100 (not in millions) invested on December 31, 2018 in our common stock and each of the indices. Item 6. [Reserved]
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The Company's common stock is traded on the Nasdaq stock market under the symbol NXPI. On February 22, 2023 there were 15 shareholders of record and 730,850 beneficial shareholders of our common stock.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The Company's common stock is traded on the Nasdaq stock market under the symbol NXPI. On February 14, 2024 there were 18 shareholders of record and 884,874 beneficial shareholders of our common stock.
We currently expect to continue to pay dividends in the future. Issuer Purchases of Equity Securities Our Board has approved the purchase of shares from participants in NXP's equity programs to satisfy participants' tax withholding obligations and this authorization will remain in effect until terminated by the Board.
Issuer Purchases of Equity Securities Our Board has approved the purchase of shares from participants in NXP's equity programs to satisfy participants' tax withholding obligations and this authorization will remain in effect until terminated by the Board. In January 2022, the Board approved the repurchase of shares up to a maximum of $2 billion (the "2022 Share Repurchase Program").
The following table provides a summary of share repurchase activity during the three months ended December 31, 2022: Period Total Number of Shares Purchased Average Price Paid per Share Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number of Shares That May Yet Be Purchased Under the Plans or Program (1) Number of Shares Purchased as Trade for Tax (2) October 3, 2022 – November 6, 2022 2,620,196 $147.71 2,065,200 16,600,635 554,996 November 7, 2022 – December 4, 2022 318,794 $161.66 209,500 14,454,957 109,294 December 5, 2022 – December 31, 2022 221,381 $163.56 220,800 15,418,236 581 Total 3,160,371 2,495,500 664,871 (1) Represents the number of shares that may be purchased under the remaining dollar repurchase authorizations noted above, calculated based on the share closing price at the end of the respective monthly period.
The following table provides a summary of share repurchase activity during the three months ended December 31, 2023: Period Total Number of Shares Purchased Average Price Paid per Share Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number of Shares That May Yet Be Purchased Under the Plans or Program (1) Number of Shares Purchased as Trade for Tax (2) October 2, 2023 – November 5, 2023 1,229,305 $182.10 658,033 9,432,436 571,272 November 6, 2023 – December 3, 2023 656,622 $191.19 467,659 7,882,258 188,963 December 4, 2023 – December 31, 2023 382,185 $221.78 382,120 6,689,633 65 Total 2,268,112 1,507,812 760,300 (1) Represents the number of shares that may be purchased under the remaining dollar repurchase authorizations noted above, calculated based on the share closing price at the end of the respective monthly period.
In January 2022, the Board approved the repurchase of shares up to a maximum of $2 billion (the "2022 Share Repurchase Program"). At December 31, 2022, there was approximately $437 million remaining for the repurchase of shares under the 2021 Share Repurchase Program and $2 billion remaining under the 2022 Share Repurchase Program.
At December 31, 2023, there was approximately $1,536 million remaining under the 2022 Share Repurchase Program.
Removed
In March 2021, the Board approved the repurchase of shares up to a maximum of $2 billion (the "2021 Share Repurchase Program"), and in August 2021, the Board increased the 2021 Share Repurchase Program authorization by $2 billion, for a total of $4 billion approved for the repurchase of shares under the 2021 Share Repurchase Program.

Item 7. Management's Discussion & Analysis

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

73 edited+32 added−55 removed62 unchanged
Biggest changeSelling, general and administrative (SG&A) costs primarily consist of personnel salaries and wages (including share based compensation and other variable compensation), communication and IT related costs, fixed-asset related costs and sales and marketing costs (including travel expenses). • SG&A costs for the year-ended December 31, 2022 increased by $110 million, or 11.5%, when compared to last year mainly due to: + higher professional services; + higher legal expense; + higher travel expenses; and - lower variable compensation costs. • Amortization of acquisition-related intangible assets decreased by $83 million, or 14.0%, when compared to last year driven by: - certain intangibles became fully amortized during 2021; and - an impairment charge in 2021 as a result of the discontinuation of an IPR&D project.
Biggest change($ in millions, unless otherwise stated) 2023 2022 % change Research and development 2,418 $ 2,148 12.6 % As a percentage of revenue 18.2 % 16.3 % 1.9 ppt R&D costs for the year-ended December 31, 2023 increased by $270 million, or 12.6%, when compared to last year primarily driven by higher personnel-related costs of $269 million (including engineer salaries and wages of $169 million, higher restructuring costs of $59 million, mainly personnel related costs for specific targeted actions under new global programs, and higher share-based compensation costs of $27 million), partly offset by higher received government assistance due to subsidies and R&D tax credits of $33 million. • Selling, general and administrative Selling, general and administrative (SG&A) costs primarily consist of personnel salaries and wages (including share based compensation and other variable compensation), communication and IT related costs, fixed-asset related costs and sales and marketing costs (including travel expenses).
(3) On May 1, 2020, we issued $500 million aggregate principal amount of 2.7% Senior Unsecured Notes due 2025, $500 million aggregate principal amount of 3.15% Senior Unsecured Notes due 2027 and $1 billion aggregate principal amount of 3.4% Senior Unsecured Notes due 2030.
(2) On May 1, 2020, we issued $500 million aggregate principal amount of 2.7% Senior Unsecured Notes due 2025, $500 million aggregate principal amount of 3.15% Senior Unsecured Notes due 2027 and $1 billion aggregate principal amount of 3.4% Senior Unsecured Notes due 2030.
The estimate of variable consideration is not constrained because the Company has extensive experience with these contracts. Revenue is recognized when control of the product is transferred to the customer (i.e., when the Company’s performance obligation is satisfied), which typically occurs at shipment.
The estimate of variable consideration is not typically constrained because the Company has extensive experience with these contracts. Revenue is recognized when control of the product is transferred to the customer (i.e., when the Company’s performance obligation is satisfied), which typically occurs at shipment.
Our most critical accounting estimates include: • the valuation of inventory, which impacts gross margin; • the assessment of recoverability of goodwill, identified intangible assets and tangible fixed assets, which impacts gross margin or operating expenses when we record asset impairments or accelerate their depreciation or amortization; 48 • revenue recognition, which impacts our results of operations; • the recognition of current and deferred income taxes (including the measurement of uncertain tax positions), which impacts our provision for income taxes; • the assumptions used in the determination of postretirement benefit obligations, which impacts operating expenses; • the assumptions used in the determination of share based compensation, which impacts gross margin and operating expenses; and • the recognition and measurement of loss contingencies, which impacts gross margin or operating expenses when we recognize a loss contingency or revise the estimates for a loss contingency.
Our most critical accounting estimates include: • the valuation of inventory, which impacts gross margin; • the assessment of recoverability of goodwill, identified intangible assets and tangible fixed assets, which impacts gross margin or operating expenses when we record asset impairments or accelerate their depreciation or amortization; • revenue recognition, which impacts our results of operations; • the recognition of current and deferred income taxes (including the measurement of uncertain tax positions), which impacts our provision for income taxes; • the assumptions used in the determination of postretirement benefit obligations, which impacts operating expenses; • the assumptions used in the determination of share based compensation, which impacts gross margin and operating expenses; and • the recognition and measurement of loss contingencies, which impacts gross margin or operating expenses when we recognize a loss contingency or revise the estimates for a loss contingency.
The Company’s policy is to estimate such price adjustments using the most likely method based on rolling historical experience rates, as well as a prospective view of products and pricing in the distribution channel for distributors who participate in our 50 volume rebate incentive program.
The Company’s policy is to estimate such price adjustments using the most likely method based on rolling historical experience rates, as well as a prospective view of products and pricing in the distribution channel for distributors who participate in our volume rebate incentive program.
Impairment losses, if any, are based 49 on the excess of the carrying amount over the fair value of those assets. Long-lived assets to be disposed of by sale are reported at the lower of their carrying amounts or their estimated fair values less costs to sell and are not depreciated.
Impairment losses, if any, are based on the excess of the carrying amount over the fair value of those assets. Long-lived assets to be disposed of by sale are reported at the lower of their carrying amounts or their estimated fair values less costs to sell and are not depreciated.
Share-based compensation cost for restricted share units (“RSUs”) with time-based vesting is measured based on the closing fair market value of our common stock on the date of the grant, reduced by the present value of the estimated expected future dividends, and then multiplied by the 51 number of RSUs granted.
Share-based compensation cost for restricted share units (“RSUs”) with time-based vesting is measured based on the closing fair market value of our common stock on the date of the grant, reduced by the present value of the estimated expected future dividends, and then multiplied by the number of RSUs granted.
MD&A is organized as follows: • Overview - Overall analysis of financial and other highlights to provide context for the MD&A • Results of Operations - An analysis of our financial results • Financial Condition, Liquidity and Capital Resources - An analysis of changes in our balance sheets and cash flows and a discussion of our financial condition and potential sources of liquidity • Critical Accounting Estimates - Accounting estimates that management believes are the most important to understanding the assumptions and judgments incorporated in our financial results and forecasts • Use of Certain Non-GAAP Financial Measures - A discussion of the non-GAAP measures used 32 NXP has one reportable segment representing the entity as a whole.
MD&A is organized as follows: • Overview - Overall analysis of financial and other highlights to provide context for the MD&A • Results of Operations - An analysis of our financial results • Financial Condition, Liquidity and Capital Resources - An analysis of changes in our balance sheets and cash flows and a discussion of our financial condition and potential sources of liquidity • Critical Accounting Estimates - Accounting estimates that management believes are the most important to understanding the assumptions and judgments incorporated in our financial results and forecasts • Use of Certain Non-GAAP Financial Measures - A discussion of the non-GAAP measures used 33 NXP has one reportable segment representing the entity as a whole.
Other than the Subsidiary Obligors, none of the 46 Company’s subsidiaries (together the “Non-Guarantor Subsidiaries”) guarantee the Notes. The Company consolidates the Subsidiary Obligors in its consolidated financial statements and each of the Subsidiary Obligors are wholly owned subsidiaries of the Company.
Other than the Subsidiary Obligors, none of the Company’s subsidiaries (together the “Non-Guarantor Subsidiaries”) guarantee the Notes. The Company consolidates the Subsidiary Obligors in its consolidated financial statements and each of the Subsidiary Obligors are wholly owned subsidiaries of the Company.
In January 2022, the board of directors approved the additional repurchase of shares up to a maximum of $2 billion (the "2022 Share Repurchase Program").
In January 2022, 39 the board of directors approved the additional repurchase of shares up to a maximum of $2 billion (the "2022 Share Repurchase Program").
Net debt is a non-GAAP financial measure and represents total debt (short-term and long-term) after deduction of cash and cash equivalents.
Net debt is a non-GAAP financial measure and represents total debt (short-term and long-term) after deduction of cash and cash equivalents and short-term deposits.
Under the terms of our joint venture agreement with TSMC, a portion of this cash can be distributed by way of a dividend to us, but 38.8% of the dividend will be paid to our joint venture partner. During 2022 and 2021, no dividend was declared.
Under the terms of our joint venture agreement with TSMC, a portion of this cash can be distributed by way of a dividend to us, but 38.8% of the dividend will be paid to our joint venture partner. During 2023 and 2022, no dividend was declared.
Based on past performance and current expectations, we believe that our current available sources of funds (including cash and cash equivalents, RCF Agreement, plus anticipated cash generated from operations) will be adequate to finance our operations, working capital requirements, capital expenditures and potential dividends for at least the next year.
Based on past performance and current expectations, we believe that our current available sources of funds (including cash and cash equivalents, short-term deposits, RCF Agreement, plus anticipated cash generated from operations) will be adequate to finance our operations, working capital requirements, capital expenditures and potential dividends for at least the next year.
From time to time, we engage in discussions with third parties regarding potential acquisitions of, or investments in, businesses, technologies and product lines. Any such transaction could require significant use of our cash and cash equivalents, or require us to arrange for new debt and equity financing to fund the transaction.
From time to time, we engage in discussions with third parties regarding potential acquisitions of, or investments in, businesses, technologies and product lines. Any such transaction could require significant use of our cash and cash equivalents and short term deposits, or require us to arrange for new debt and equity financing to fund the transaction.
We expect operating cash outflows to remain elevated as we make payments under these purchase agreements. • Amounts related to future lease payments for operating lease obligations at December 31, 2022 totaled $295 million, with $63 million expected to be paid within the next 12 months. • The Company enters into certain technology license arrangements which are used in conjunction with research and development activities for product development.
We expect operating cash outflows to remain elevated as we make payments under these purchase agreements. • Amounts related to future lease payments for operating lease obligations at December 31, 2023 totaled $299 million, with $64 million expected to be paid within the next 12 months. • The Company enters into certain technology license arrangements which are used in conjunction with research and development activities for product development.
Discussions of 2020 items and year-to-year comparisons between 2021 and 2020 that are not included in this 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 fiscal year ended December 31, 2021 as filed with the SEC on February 24, 2022.
Discussions of 2021 items and year-to-year comparisons between 2022 and 2021 that are not included in this 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 fiscal year ended December 31, 2022 as filed with the SEC on March 1, 2023.
This section of this Form 10-K generally discusses 2022 and 2021 items and year-to-year comparisons between 2022 and 2021.
This section of this Form 10-K generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022.
We expect to maintain similar levels of capital expenditures as a percentage of revenue in 2023, to support current and future manufacturing and production capacity needs. • Our research and development expenditures were $2,148 million in 2022 and $1,936 million in 2021, and we expect to maintain similar levels of investment in research and development as a percentage of revenue in 2023.
We expect to maintain similar levels of capital expenditures as a percentage of revenue in 2024, to support current and future manufacturing and production capacity needs. • Our research and development expenditures were $2,418 million in 2023 and $2,148 million in 2022, and we expect to maintain similar levels of investment in research and development as a percentage of revenue in 2024.
GILTI is recognized as a current period expense when incurred. Results Relating to Equity-accounted Investees Results relating to equity-accounted investees amounted to a loss of $1 million in 2022, whereas in 2021, results relating to equity-accounted investees amounted to a loss of $2 million.
GILTI is recognized as a current period expense when incurred. Results Relating to Equity-accounted Investees Results relating to equity-accounted investees amounted to a loss of $7 million in 2023, whereas in 2022 results relating to equity-accounted investees amounted to a loss of $1 million.
Taking into account the available undrawn amount of the RCF Agreement of $2,500 million, we had access to $6,345 million of liquidity as of December 31, 2022.
Taking into account the available undrawn amount of the RCF Agreement of $2,500 million, we had access to $6,771 million of liquidity as of December 31, 2023.
Purchase commitments for inventory materials are generally restricted to a forecasted time-horizon as mutually agreed upon between the parties. This forecasted time-horizon can vary for different suppliers. As of December 31, 2022, the Company had purchase commitments of $3,672 million, of which $1,187 million is expected to be paid in the next 12 months.
Purchase commitments for inventory materials are generally restricted to a forecasted time-horizon as mutually agreed upon between the parties. This forecasted time-horizon can vary for different suppliers. As of December 31, 2023, the Company had purchase commitments of $4,184 million, of which $1,026 million is expected to be paid in the next 12 months.
During the fiscal year-ended December 31, 2021, NXP repurchased 20.6 million shares for a total of approximately $4 billion under the trade for tax and 2019 and 2021 Share Repurchase Programs, and during the fiscal year-ended December 31, 2022, NXP repurchased 8.3 million shares, for a total of approximately $1.4 billion under the trade for tax and 2021 Share Repurchase Program.
During the fiscal year-ended December 31, 2022, NXP repurchased 8.3 million shares, for a total of approximately $1.4 billion under the trade for tax and 2021 Share Repurchase Program and during the fiscal year-ended December 31, 2023, NXP repurchased 5.5 million shares, for a total of approximately $1 billion under the trade for tax 2021 and 2022 Share Repurchase Program.
Long-term Debt As of December 31, 2022 and 2021, we had outstanding debt of: 43 ($ in millions) December 31, 2021 Accrual/release Original Issuance/Debt Discount and Debt Issuance Cost Debt Exchanges/ Repurchase/ New Borrowings December 31, 2022 U.S. dollar-denominated 4.625% senior unsecured notes due June 2023 (1) 898 2 (900) — U.S. dollar-denominated 4.875% senior unsecured notes due March 2024 (2) 997 1 — 998 U.S. dollar-denominated 2.7% senior unsecured notes due May 2025 (3) 498 — — 498 U.S. dollar-denominated 5.35% senior unsecured notes due March 2026 (2) 498 — — 498 U.S. dollar-denominated 3.875% senior unsecured notes due June 2026 (4) 747 1 — 748 U.S. dollar-denominated 3.15% senior unsecured notes due May 2027 (3) 497 1 — 498 U.S. dollar-denominated 4.4% senior unsecured notes due June 2027 (7) — — 496 496 U.S. dollar-denominated 5.55% senior unsecured notes due December 2028 (2) 497 — — 497 U.S. dollar-denominated 4.3% senior unsecured notes due June 2029 (4) 993 — — 993 U.S. dollar-denominated 3.4% senior unsecured notes due May 2030 (3) 993 1 — 994 U.S. dollar-denominated 2.5% senior unsecured notes due May 2031 (5) 992 1 — 993 U.S. dollar-denominated 2.65% senior unsecured notes due Feb 2032 (6) 992 — — 992 U.S. dollar-denominated 5% senior unsecured notes due Jan 2033 (7) — 1 988 989 U.S. dollar-denominated 3.25% senior unsecured notes due May 2041 (5) 987 1 — 988 U.S. dollar-denominated 3.125% senior unsecured notes due Feb 2042 (6) 492 — — 492 U.S. dollar-denominated 3.25% senior unsecured notes due Nov 2051 (6) 491 — — 491 10,572 9 584 11,165 RCF Agreement (8) — — — — Total long-term debt 10,572 9 584 11,165 (1) On May 23, 2016, we issued $900 million aggregate principal amount of 4.625% Senior Unsecured Notes due 2023.
Long-term Debt As of December 31, 2023 and 2022, we had outstanding debt of: 42 ($ in millions) December 31, 2022 Accrual/release Original Issuance/Debt Discount and Debt Issuance Cost Debt Exchanges/ Repurchase/ New Borrowings December 31, 2023 U.S. dollar-denominated 4.875% senior unsecured notes due March 2024 (1) 998 2 — 1,000 U.S. dollar-denominated 2.7% senior unsecured notes due May 2025 (2) 498 1 — 499 U.S. dollar-denominated 5.35% senior unsecured notes due March 2026 (1) 498 1 — 499 U.S. dollar-denominated 3.875% senior unsecured notes due June 2026 (3) 748 — — 748 U.S. dollar-denominated 3.15% senior unsecured notes due May 2027 (2) 498 — — 498 U.S. dollar-denominated 4.4% senior unsecured notes due June 2027 (6) 496 1 — 497 U.S. dollar-denominated 5.55% senior unsecured notes due December 2028 (1) 497 — — 497 U.S. dollar-denominated 4.3% senior unsecured notes due June 2029 (3) 993 1 — 994 U.S. dollar-denominated 3.4% senior unsecured notes due May 2030 (2) 994 — — 994 U.S. dollar-denominated 2.5% senior unsecured notes due May 2031 (4) 993 1 — 994 U.S. dollar-denominated 2.65% senior unsecured notes due Feb 2032 (5) 992 1 — 993 U.S. dollar-denominated 5% senior unsecured notes due Jan 2033 (6) 989 1 — 990 U.S. dollar-denominated 3.25% senior unsecured notes due May 2041 (4) 988 1 — 989 U.S. dollar-denominated 3.125% senior unsecured notes due Feb 2042 (5) 492 — — 492 U.S. dollar-denominated 3.25% senior unsecured notes due Nov 2051 (5) 491 — — 491 11,165 10 — 11,175 RCF Agreement (7) — — — — Total long-term debt 11,165 10 — 11,175 (1) On December 6, 2018, we issued $1,000 million aggregate principal amount of 4.875% Senior Unsecured Notes due 2024, $500 million aggregate principal amount of 5.35% Senior Unsecured Notes due 2026 and $500 million aggregate principal amount of 5.55% Senior Unsecured Notes due 2028.
For repurchases of shares in 2021 and 2022, the board of directors made use of the authorizations renewed by the AGM on June 17, 2019, May 27, 2020, May 26, 2021 and June 1, 2022, respectively.
For repurchases of shares in 2022 and 2023, the board of directors made use of the authorizations renewed by the AGM on May 26, 2021, June 1, 2022 and May 24, 2023, respectively.
Capital return The common stock repurchase activity was as follows: ($ in millions, unless otherwise stated) 2022 2021 Shares repurchased 8,330,021 20,628,901 Cost of shares repurchased 1,429 4,015 Average price per share $171.59 $194.63 Under Dutch corporate law and our articles of association, NXP may acquire its own shares if the general meeting of shareholders has granted the board of directors the authority to effect such acquisitions.
Capital return The common stock repurchase activity was as follows: ($ in millions, unless otherwise stated) 2023 2022 Shares repurchased 5,460,135 8,330,021 Cost of shares repurchased 1,049 1,429 Average price per share $192.16 $171.59 Under Dutch corporate law and our articles of association, NXP may acquire its own shares if the general meeting of shareholders has granted the board of directors the authority to effect such acquisitions.
Cash flows Our cash and cash equivalents in 2022 increased by $1,027 million (excluding the effect of changes in exchange rates on our cash position of $(12) million) as follows: ($ in millions) Year ended December 31, 2022 2021 Net cash provided by (used for) operating activities 3,895 3,077 Net cash (used for) provided by investing activities (1,249) (934) Net cash provided by (used for) financing activities (1,619) (1,585) Increase (decrease) in cash and cash equivalents 1,027 558 • Cash Flow from Operating Activities For the year-ended December 31, 2022 our operating activities provided $3,895 million in cash.
Cash flows Our cash and cash equivalents in 2023 increased by $15 million (excluding the effect of changes in exchange rates on our cash position of $2 million) as follows: ($ in millions) Year ended December 31, 2023 2022 Net cash provided by (used for) operating activities 3,513 3,895 Net cash (used for) provided by investing activities (1,508) (1,249) Net cash provided by (used for) financing activities (1,990) (1,619) Increase (decrease) in cash and cash equivalents 15 1,027 • Cash Flow from Operating Activities For the year-ended December 31, 2023 our operating activities provided $3,513 million in cash.
Under our Quarterly Dividend Program, interim dividends of $0.5625 per ordinary share were paid on April 5, July 6, October 6, 2021; and January 6, 2022, and dividends of $0.845 per ordinary share were paid on April 6, July 6, October 6, 2022; and January 6, 2023. 2022 2021 Dividends declared (per share) 3.38 2.25 Dividends declared (in millions) 885 606 Debt Our total debt, inclusive of aggregate principal, unamortized discounts, premiums, debt issuance costs and fair value adjustments, amounted to $11,165 million as of December 31, 2022, an increase of $593 million compared to December 31, 2021 ($10,572 million).
Under our Quarterly Dividend Program, interim dividends of $0.845 per ordinary share were paid on April 6, July 6, October 6, 2022 and January 6, 2023; and dividends of $1.014 were paid on April 5, July 6, October 5, 2023 and January 5, 2024. 2023 2022 Dividends declared (per share) 4.056 3.380 Dividends declared (in millions) 1,048 885 Debt Our total debt, inclusive of aggregate principal, unamortized discounts, premiums, debt issuance costs and fair value adjustments, amounted to $11,175 million as of December 31, 2023, an increase of $10 million compared to December 31, 2022 ($11,165 million).
We continue to generate strong positive operating cash flows, and we currently use cash to fund operations, meet working capital requirements, for capital expenditures and for potential common stock repurchases, dividends and strategic investments.
Financial Condition, Liquidity and Capital Resources We derive our liquidity and capital resources primarily from our cash flows from operations. We continue to generate strong positive operating cash flows, and we currently use cash to fund operations, meet working capital requirements, for capital expenditures and for potential common stock repurchases, dividends and strategic investments.
This was primarily the result of net income of $2,833 million, adjustments to reconcile the net income of $1,410 million and changes in operating assets and liabilities of $(372) million.
This was primarily the result of net income of $2,822 million, adjustments to reconcile the net income of $1,265 million and changes in operating assets and liabilities of $(594) million.
(5) On May 11, 2021, we issued $1,000 million aggregate principal amount of 2.5% Senior Unsecured Notes due 2031 and $1,000 million aggregated principal amount of 3.25% Senior Unsecured Notes due 2041. 44 (6) On November 30, 2021, we issued $1,000 million aggregate principal amount of 2.65% Senior Unsecured Notes due 2032, $500 million aggregate principal amount of 3.125% Senior Unsecured Notes due 2042 and $500 million aggregated principal amount of 3.25% Senior Unsecured Notes due 2051.
(5) On November 30, 2021, we issued $1,000 million aggregate principal amount of 2.65% Senior Unsecured Notes due 2032, $500 million aggregate principal amount of 3.125% Senior Unsecured Notes due 2042 and $500 million aggregated principal amount of 3.25% Senior Unsecured Notes due 2051. 43 (6) On May 16, 2022, we issued $500 million aggregate principal amount of 4.4% Senior Unsecured Notes due 2027 and $1,000 million aggregate principal amount of 5% Senior Unsecured Notes due 2033.
As with repurchases of our shares, it is our standard practice to request our annual general meeting of shareholders (the “AGM”) every year to renew this authorization for a period of 18 months from the AGM.
As with repurchases of our shares, it is our standard practice to request our annual general meeting of shareholders (the “AGM”) every year to renew this authorization for a period of 18 months from the AGM. The board of directors did not make use of the authorization during the fiscal year-ended December 31, 2023.
For sales where return rights exist, the Company has determined, based on historical data, that only a very small percentage of the sales of this type to distributors is actually returned. Repurchase agreements with OEMs or distributors are not entered into by the Company.
For sales where return rights exist, the Company has determined, based on historical data, that only a small percentage of the sales of this type to distributors is actually returned.
Revenue in the Communication Infrastructure & Other end market was $2,006 million, an increase of $258 million or 14.8% versus the year ago period.
Revenue in the Communication Infrastructure & Other end market was $2,114 million, an increase of $108 million or 5.4% versus the year ago period.
As of December 31, 2022, the Company had outstanding fixed-rate notes with varying maturities for an aggregate principal amount of $11,250 million (collectively the “Notes”), with $0 payable within 12 months.
As of December 31, 2023, the Company had outstanding fixed-rate notes with varying maturities for an aggregate principal amount of $11,250 million (collectively the “Notes”), with $1,000 million payable within 12 months. Future interest payments associated with the Notes total $3,135 million, with $402 million payable within 12 months.
This was partially offset by higher interest income of $57 million as a result of higher interest rates, and lower debt extinguishment costs in 2022 versus 2021 of $4 million. 38 Benefit (Provision) for Income Taxes We recorded an income tax expense of $529 million for the year-ended December 31, 2022, which reflects an effective tax rate of 15.7% compared to a expense of $272 million (12.5%) for the year-ended December 31, 2021. 2022 2021 $ % $ % Statutory income tax in the Netherlands 868 25.8 545 25.0 Rate differential local statutory rates versus statutory rate of the Netherlands (80) (2.4) (42) (1.9) Net change in valuation allowance — — (20) (0.9) Non-deductible expenses/losses 56 1.7 53 2.5 Netherlands tax incentives (113) (3.4) (69) (3.2) Foreign tax incentives (266) (7.9) (163) (7.5) Changes in estimates of prior years’ income taxes (2) (0.1) (21) (1.0) Sale of non-deductible goodwill — — — — Withholding taxes 8 0.3 (8) (0.4) Other differences 58 1.7 (3) (0.1) Effective tax rate 529 15.7 272 12.5 The effective tax rate reflects the impact of tax incentives, a portion of our earnings being taxed in foreign jurisdictions at rates different than the Netherlands statutory tax rate, changes in estimates of prior years' income taxes, change in valuation allowance and non-deductible expenses, sale of non-deductible goodwill and withholding taxes.
Benefit (Provision) for Income Taxes We recorded an income tax expense of $523 million for the year-ended December 31, 2023, which reflects an effective tax rate of 15.6% compared to an expense of $529 million (15.7%) for the year-ended December 31, 2022. 2023 2022 $ % $ % Statutory income tax in the Netherlands 865 25.8 868 25.8 Rate differential local statutory rates versus statutory rate of the Netherlands (77) (2.3) (80) (2.4) Net change in valuation allowance (3) (0.1) — — Non-deductible expenses/losses 60 1.8 56 1.7 Netherlands tax incentives (111) (3.3) (113) (3.4) Foreign tax incentives (251) (7.5) (266) (7.9) Changes in estimates of prior years’ income taxes (17) (0.5) (2) (0.1) Withholding taxes 13 0.4 8 0.3 Other differences 44 1.3 58 1.7 Effective tax rate 523 15.6 529 15.7 The effective tax rate reflects the impact of tax incentives, a portion of our earnings being taxed in foreign jurisdictions at rates different than the Netherlands statutory tax rate, changes in estimates of prior years' income taxes, change in valuation allowance non-deductible expenses and withholding taxes.
Net cash used for investing activities amounted to $934 million for the year-ended December 31, 2021 and principally consisted of the cash outflows for capital expenditures of $767 million, $132 million for the purchase of identified intangible assets, $33 million for the purchase of equipment leased to others, $23 million purchases of interests in businesses (net of cash acquired), and $8 million purchase of investments, partly offset by proceeds of $10 million from insurance recoveries received for equipment damage, $10 million from proceeds from return of equity investments and $8 million from proceeds from sale of investments. • Cash Flow from Financing Activities Net cash used for financing activities was $1,619 million for the year-ended December 31, 2022 compared to $1,585 million for the year-ended December 31, 2021.
Net cash used for investing activities amounted to $1,249 million for the year-ended December 31, 2022 and principally consisted of the cash outflows for capital expenditures of $1,063 million, $159 million for the purchase of identified intangible assets, $5 million for the purchase of equipment leased to others, $27 million purchases of interests in businesses (net of cash acquired), and $20 million purchase of investments, partly offset 44 by $10 million from proceeds from return of equity investments and $13 million from proceeds from sale of investments. • Cash Flow from Financing Activities Net cash used for financing activities was $1,990 million for the year-ended December 31, 2023.
Sales to most distributors are made under programs common in the semiconductor industry whereby distributors receive certain price adjustments to meet individual competitive opportunities.
Repurchase agreements with OEMs or distributors are not entered into by the Company. 48 Sales to most distributors are made under programs common in the semiconductor industry whereby distributors receive certain price adjustments to meet individual competitive opportunities.
When aggregating all end markets together, and reviewing sales channel performance, business transacted through direct OEM and EMS customers was $1,397 million, an increase of 8.1% versus the year ago period. NXP's third party distribution partners was $1,876 million, an increase of 9.8%. From a geographic perspective, revenue increased across all regions.
When aggregating all end markets together, and reviewing sales channel performance, NXP’s third party distribution partners was $2,078 million, an increase of $202 million or 10.8% versus the year ago period. Business transacted through direct OEM and EMS customers was $1,310 million, a decrease of $87 million or 6.2% versus the year ago period.
Impairment or disposal of identified long-lived assets We perform reviews of long-lived assets including property, plant and equipment, and intangible assets subject to amortization, whenever facts and circumstances indicate that the useful life is shorter than what we had originally estimated or that the carrying amount of assets may not be recoverable.
We did not recognize any impairment charges for goodwill in the years presented, as our annual impairment testing indicated that the fair value exceeded the recorded value for the respective reporting unit. 47 Impairment or disposal of identified long-lived assets We perform reviews of long-lived assets including property, plant and equipment, and intangible assets subject to amortization, whenever facts and circumstances indicate that the useful life is shorter than what we had originally estimated or that the carrying amount of assets may not be recoverable.
These assumptions include discount rate, expected long-term rate of return on plan assets and rates of increase in compensation costs determined based on current market conditions, historical information and consultation with and input from our actuaries. Changes in the key assumptions can have a significant impact to the projected benefit obligations, funding requirements and periodic pension cost incurred.
These assumptions include discount rate, expected long-term rate of return on plan assets and rates of increase in compensation costs determined based on current market conditions, historical information and consultation with and input from our actuaries.
Some of our accounting policies require us to make difficult and subjective judgments, often as a result of the need to make estimates regarding matters that are inherently uncertain.
The methods, estimates, and judgments that we use in applying our accounting policies have a significant impact on the results that we report in our Consolidated Financial Statements. Some of our accounting policies 46 require us to make difficult and subjective judgments, often as a result of the need to make estimates regarding matters that are inherently uncertain.
Results of Operations The following table presents the composition of operating income for the years ended December 31, 2022 and December 31, 2021. 33 ($ in millions, unless otherwise stated) 2022 2021 Revenue 13,205 11,063 % nominal growth 19.4 28.5 Gross profit 7,517 6,067 Research and development (2,148) (1,936) Selling, general and administrative (SG&A) (1,066) (956) Amortization of acquisition-related intangible assets (509) (592) Other income 3 0 Operating income 3,797 2,583 Revenue Revenue for the year-ended December 31, 2022 was $13,205 million compared to $11,063 million for the year-ended December 31, 2021, an increase of $2,142 million or 19.4% year-on-year, with growth in all of the Company’s end markets.
($ in millions, unless otherwise stated) 2023 2022 Revenue 13,276 13,205 % nominal growth 0.5 19.4 Gross profit 7,553 7,517 Research and development (2,418) (2,148) Selling, general and administrative (SG&A) (1,159) (1,066) Amortization of acquisition-related intangible assets (300) (509) Other income (15) 3 Operating income 3,661 3,797 Revenue Revenue for the year-ended December 31, 2023 was $13,276 million compared to $13,205 million for the year-ended December 31, 2022, an increase of $71 million or 0.5% year-on-year.
Cash As of December 31, 2022, our cash balance was $3,845 million, an increase of $1,015 million compared to December 31, 2021 ($2,830 million), of which $227 million (2021, $208 million) was held by SSMC, our consolidated joint venture company with TSMC.
Cash and short-term deposits As of December 31, 2023, our cash and short-term deposit balance was $4,271 million, an increase of $426 million compared to December 31, 2022 ($3,845 million), of which $214 million (2022, $227 million) was held by SSMC, our consolidated joint venture company with TSMC.
Summarized Statements of Income ($ in millions) December 31, 2022 Revenue 7,674 Gross Profit 3,883 Operating income 1,406 Net income 542 Summarized Balance Sheets As of ($ in millions) December 31, 2022 Current assets 3,740 Non-current assets 11,572 Total assets 15,312 Current liabilities 1,067 Non-current liabilities 11,528 Total liabilities 12,595 Obligor's Group equity 2,717 Total liabilities and Obligor's Group equity 15,312 NXP Semiconductors N.V. is the head of a fiscal unity for the corporate income tax and VAT that contains the most significant Dutch wholly-owned group companies.
Summarized Statements of Income ($ in millions) December 31, 2023 Revenue 8,064 Gross Profit 4,075 Operating income 1,508 Net income 715 45 Summarized Balance Sheets As of ($ in millions) December 31, 2023 Current assets 4,298 Non-current assets 11,773 Total assets 16,071 Current liabilities 2,005 Non-current liabilities 10,566 Total liabilities 12,571 Obligor's Group equity 3,500 Total liabilities and Obligor's Group equity 16,071 NXP Semiconductors N.V. is the head of a fiscal unity for the corporate income tax and VAT that contains the most significant Dutch wholly-owned group companies.
The following is a reconciliation of net debt to the most directly comparable GAAP measure, total debt, as adjusted for our cash and cash equivalents our net debt was calculated as follows: ($ in millions) 2022 2021 Long-term debt 11,165 10,572 Short-term debt — — Total debt 11,165 10,572 Less: cash and cash equivalents (3,845) (2,830) Net debt 7,320 7,742 52 We understand that, although net debt is used by investors and securities analysts in their evaluation of companies, this concept has limitations as an analytical tool and it should not be used as an alternative to any other measure in accordance with U.S.
We believe this measure provides investors with useful supplemental information about the financial performance of our business, enables comparison of financial results between periods where certain items may vary independent of business performance, and allows for greater transparency with respect to calculating our net leverage. 50 The following is a reconciliation of net debt to the most directly comparable GAAP measure, total debt, as adjusted for our cash and cash equivalents our net debt was calculated as follows: ($ in millions) 2023 2022 Long-term debt 10,175 11,165 Short-term debt 1,000 — Total debt 11,175 11,165 Less: cash and cash equivalents (3,862) (3,845) Less: short-term deposits (409) — Net debt 6,904 7,320 We understand that, although net debt is used by investors and securities analysts in their evaluation of companies, this concept has limitations as an analytical tool and it should not be used as an alternative to any other measure in accordance with U.S.
(4) On June 18, 2019, we issued $750 million of 3.875% Senior Unsecured Notes due 2026 and $1 billion of 4.3% Senior Unsecured Notes due 2029.
(3) On June 18, 2019, we issued $750 million of 3.875% Senior Unsecured Notes due 2026 and $1 billion of 4.3% Senior Unsecured Notes due 2029. (4) On May 11, 2021, we issued $1,000 million aggregate principal amount of 2.5% Senior Unsecured Notes due 2031 and $1,000 million aggregated principal amount of 3.25% Senior Unsecured Notes due 2041.
The financial information of the Obligor Group includes sales executed through a Non-Guarantor Subsidiary single-billing entity as a sales agent on behalf of an entity in the Obligor Group. The Obligor Group has sales to non-guarantors (2022: $813 million). The Obligor Group has amounts due from equity financing (2022: $5,210) and due to debt financing (2022: $2,629) with non-guarantor subsidiaries.
The financial information of the Obligor Group includes sales executed through a Non-Guarantor Subsidiary single-billing entity as a sales agent on behalf of an entity in the Obligor Group. The Obligor Group has sales to non-guarantors (2023: $792 million).
We may from time to time continue to seek to retire or purchase our outstanding debt through cash purchases and/or exchanges, in open market purchases, privately negotiated transactions or otherwise. See the discussion in Part II, Item 7. Financial Condition, Liquidity and Capital Resources above.
(7) On August 26, 2022, we entered into a $2.5 billion unsecured revolving credit facility agreement. We may from time to time continue to seek to retire or purchase our outstanding debt through cash purchases and/or exchanges, in open market purchases, privately negotiated transactions or otherwise. See the discussion in Part II, Item 7.
GAAP requires our management to make judgments, assumptions and estimates that affect the amounts reported in our Consolidated Financial Statements and the accompanying notes. Our management bases its estimates and judgments on historical experience, current economic and industry conditions and on various other factors that are believed to be reasonable under the circumstances.
Our management bases its estimates and judgments on historical experience, current economic and industry conditions and on various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.
Exchange Offers On April 14, 2022, we initiated a registered exchange offering of our outstanding Senior Unsecured Notes for new issues of substantially identical registered debt securities (the “Exchange Offers”). The Exchange Offers 42 expired on May 16, 2022, at which time substantially all of the Notes were exchanged for registered senior unsecured notes.
The Exchange Offers expired on May 16, 2022, at which time substantially all of the Notes were exchanged for registered senior unsecured notes.
Risk Factors . 2022 Financing Activities Revolving Credit Facility On August 26, 2022, NXP B.V., together with NXP Funding LLC, amended and restated its revolving credit agreement entered into on June 11, 2019. The amended and restated revolving credit agreement provides for $2.5 billion of senior unsecured revolving credit commitments and is scheduled to mature on August 26, 2027.
Risk Factors . 2023 Financing Activities There were no significant financing activities during 2023. 41 2022 Financing Activities Revolving Credit Facility On August 26, 2022, NXP B.V., together with NXP Funding LLC, amended and restated its revolving credit agreement entered into on June 11, 2019.
Revenue by end market was as follows: ($ in millions, unless otherwise stated) 2022 2021 Increase/(decrease) % Automotive 6,879 5,493 1,386 25.2 % Industrial & IoT 2,713 2,410 303 12.6 % Mobile 1,607 1,412 195 13.8 % Communication Infrastructure & Other 2,006 1,748 258 14.8 % Revenue 13,205 11,063 2,142 19.4 % Revenue by sales channel was as follows: ($ in millions, unless otherwise stated) 2022 2021 Increase/(decrease) % Distributors 7,261 6,325 936 14.8 % OEM/EMS 5,775 4,587 1,188 25.9 % Other 169 151 18 11.9 % Revenue 13,205 11,063 2,142 19.4 % 34 Revenue by geographic region, which is based on the customer’s shipped-to location, was as follows: ($ in millions, unless otherwise stated) 2022 2021 Increase/(decrease) % China 1) 4,700 4,180 520 12.4 % APAC, excluding China 4,165 3,471 694 20.0 % EMEA (Europe, the Middle East and Africa) 2,582 2,036 546 26.8 % Americas 1,758 1,376 382 27.8 % Revenue 13,205 11,063 2,142 19.4 % 1) China includes Mainland China and Hong Kong n Automotive n Mobile n Distributors n Other n Industrial & IoT n Comm Infra & Other n OEM/EMS The year-on-year increase in revenue is driven by a combination of higher average selling prices across all of our end markets and ongoing customer demand.
Revenue by end market was as follows: ($ in millions, unless otherwise stated) 2023 2022 Increase/(decrease) % Automotive 7,484 6,879 605 8.8 % Industrial & IoT 2,351 2,713 (362) (13.3) % Mobile 1,327 1,607 (280) (17.4) % Communication Infrastructure & Other 2,114 2,006 108 5.4 % Revenue 13,276 13,205 71 0.5 % Revenue by sales channel was as follows: ($ in millions, unless otherwise stated) 2023 2022 Increase/(decrease) % Distributors 7,195 7,261 (66) (0.9) % OEM/EMS 5,963 5,775 188 3.3 % Other 118 169 (51) (30.2) % Revenue 13,276 13,205 71 0.5 % 35 Revenue by geographic region, which is based on the customer’s shipped-to location, was as follows: ($ in millions, unless otherwise stated) 2023 2022 Increase/(decrease) % China 1) 4,366 4,700 (334) (7.1) % APAC, excluding China 3,741 4,165 (424) (10.2) % EMEA (Europe, the Middle East and Africa) 3,096 2,582 514 19.9 % Americas 2,073 1,758 315 17.9 % Revenue 13,276 13,205 71 0.5 % 1) China includes Mainland China and Hong Kong n Automotive n Mobile n Distributors n Other n Industrial & IoT n Comm Infra & Other n OEM/EMS The year-to-date change in revenue was due to a combination of higher average selling prices, offset by lower shipment volumes.
Non-controlling Interests Non-controlling interests are related to the third-party share in the results of consolidated companies, predominantly SSMC.
Non-controlling Interests Non-controlling interests are related to the third-party share in the results of consolidated companies, predominantly SSMC. Their share of non-controlling interests amounted to a profit of $25 million for the year-ended December 31, 2023, compared to a profit of $46 million for the year-ended December 31, 2022.
We continue to generate strong operating cash flows, with $3,895 million in cash flows from operations for 2022. We returned $2,244 million to our shareholders during the year in dividends and repurchases of common stock. Our cash position at the end of 2022 was $3,845 million.
We returned $2,059 million to our shareholders during the year in dividends and repurchases of common stock. Our cash and short-term deposit position at the end of 2023 was $4,271 million.
When aggregating all end markets together, and reviewing sales channel performance, business transacted through direct OEM and EMS customers was $5,775 million, an increase of 25.9% versus the year ago period. NXP's third party distribution partners was $7,261 million, an increase of 14.8%. From a geographic perspective, revenue increased across all regions.
When aggregating all end markets together and reviewing sales channel performance, revenues through NXP’s third party distribution partners was $2,078 million, an increase of $131 million or 6.7% compared to the previous period. Revenues through NXP’s third party direct OEM and EMS customers was $1,310 million, a decline of $153 million or 10.5% versus the previous period.
Payments for these technology licenses are made over varying time periods. Outstanding unpaid balances for technology licenses total $260 million as of December 31, 2022, of which $121 million is expected to be paid in the next 12 months. • Cash outflows for capital expenditures were $1,063 million in 2022, compared to $767 million in 2021.
Outstanding unpaid balances for technology licenses total $159 million as of December 31, 2023, of which $127 million is expected to be paid in the next 12 months. • The Company has committed to invest approximately $550 million in the newly founded European Semiconductor Manufacturing Company (ESMC) GmbH, over the coming five years, of which approximately $83 million is expected to be paid in the next 12 months. • Cash outflows for capital expenditures were $827 million in 2023, compared to $1,063 million in 2022.
Financial Income (Expense) ($ in millions) For the years ended December 31, 2022 2021 Interest income 61 4 Interest expense (427) (369) Total interest expense, net (366) (365) Foreign exchange rate results (17) 5 Extinguishment of debt (18) (22) Miscellaneous financing income (expense) and other, net (33) (21) Total other financial income (expense) (68) (38) Total (434) (403) Financial income (expense) was an expense of $434 million in 2022, compared to an expense of $403 million in 2021.
Financial Income (Expense) ($ in millions) For the years ended December 31, 2023 2022 Interest income 187 61 Interest expense (438) (427) Extinguishment of debt — (18) Total other financial income (expense) (58) (50) Total (309) (434) Financial income (expense) was an expense of $309 million in 2023, compared to an expense of $434 million in 2022.
This was primarily the result of net income of $1,906 million, adjustments to reconcile the net income of $1,628 million and changes in operating assets and liabilities of $(437) million.
For the year-ended December 31, 2022 our operating activities provided $3,895 million in cash. This was primarily the result of net income of $2,833 million, adjustments to reconcile the net income of $1,410 million and changes in operating assets and liabilities of $(372) million.
Share-based compensation We recognize compensation expense for all share-based awards based on the grant-date estimated fair values, net of an estimated forfeiture rate. We use the Black-Scholes option pricing model to determine the estimated fair value for certain awards.
For a defined benefit pension plan, the benefit obligation is the projected benefit obligation; for any other postretirement defined benefit plan it is the accumulated postretirement benefit obligation. Share-based compensation We recognize compensation expense for all share-based awards based on the grant-date estimated fair values, net of an estimated forfeiture rate.
Revenue for the fourth quarter, which ended December 31, 2022, was $3,312 million as compared to $3,039 million for the fourth quarter ended December 31, 2021, an increase of $273 million or an increase of 9.0%.
Q4 2023 compared to Q4 2022 Revenue for the three months ended December 31, 2023 was $3,422 million compared to $3,312 million for the three months ended December 31, 2022, an increase of $110 million or 3.3% versus the year ago period.
($ in millions, unless otherwise stated) 2022 % of revenue 2021 % of revenue % change Research and development 2,148 16.3 % 1,936 17.5 % 11.0 % Selling, general and administrative 1,066 8.1 % 956 8.6 % 11.5 % Amortization of acquisition-related intangible assets 509 3.9 % 592 5.4 % (14.0) % Operating expenses 3,723 28.2 % 3,484 31.5 % 6.9 % n R&D n SG&A n Amortization acquisition-related The increase in operating expenses was a result of the following items: Research and development (R&D) costs primarily consist of engineer salaries and wages (including share based compensation and other variable compensation), engineering related costs (including outside services, fixed-asset, IP and other licenses related costs), shared service center costs and other pre-production related expenses. 37 • R&D costs for the year-ended December 31, 2022 increased by $212 million, or 11.0%, when compared to last year driven by: + higher personnel-related costs; + higher professional services; + higher share-based compensation expenses; and - lower variable compensation costs.
Operating Expenses Operating expenses for the year-ended December 31, 2023 totaled $3,877 million, or 29.2% of revenue, compared to $3,723 million, or 28.2% of revenue, for the year-ended December 31, 2022. • Research and development Research and development (R&D) costs primarily consist of engineer salaries and wages (including share based compensation and other variable compensation), engineering related costs (including outside services, fixed-asset, IP and other licenses related costs), shared service center costs and other pre-production related expenses.
On May 27, 2022 we redeemed the $900 million aggregate principal amount of outstanding dollar-denominated 4.625% Senior Unsecured Notes due 2023 in accordance with the terms of the indenture. 2021 Financing Activities 2032, 2042 and 2051 Senior Unsecured Notes On November 30, 2021, NXP B.V., together with NXP USA Inc. and NXP Funding LLC, issued $1 billion of 2.65% Senior Unsecured Notes due 2032, $500 million of 3.125% Senior Unsecured Notes due 2042 and $500 million of 3.25% Senior Unsecured Notes due 2051.
On May 27, 2022 we redeemed the $900 million aggregate principal amount of outstanding dollar-denominated 4.625% Senior Unsecured Notes due 2023 in accordance with the terms of the indenture. Debt Position Short-term Debt As of December 31, 2023, we had $1,000 million short-term debt outstanding (December 31, 2022: no short-term debt outstanding).
The increase is attributed to inflationary effects of increased input costs from suppliers which were passed along to end customers in the form of higher average selling prices and strong customer demand.
The higher average selling prices at 8.1% of revenues or the year-ended December 31, 2023, were a result of increased inflationary input costs from NXP suppliers which were passed along to end customers.
The Company determines the fair value of plan assets based on quoted prices or comparable prices for non-quoted assets. For a defined-benefit pension plan, the benefit obligation is the projected benefit obligation; for any other postretirement defined benefit plan it is the accumulated postretirement benefit obligation.
Changes in the key assumptions can have a significant impact to the projected benefit obligations, funding requirements and periodic pension cost incurred. 49 The Company determines the fair value of plan assets based on quoted prices or comparable prices for non-quoted assets.
Future interest payments associated with the Notes total $3,585 million, with $435 million payable within 12 months. 41 Additional capital requirements We believe our current cash and cash equivalents position, our expected cash flow generated from operations and our expected financing activities will satisfy our working and other capital requirements for at least the next 12 months based on our current business plans.
The Company had a net debt position (see section Use of Certain Non-GAAP Financial Measures) at December 31, 2023 of $6,904 million compared to $7,320 million as of December 31, 2022. 40 Additional capital requirements We believe our current positions in cash and cash equivalents and short-term deposits, together with our expected cash flow generated from operations and our expected financing activities will satisfy our working and other capital requirements for at least the next 12 months based on our current business plans.
Revenue in the Industrial & IoT end market was $2,713 million, an increase of $303 million or 12.6% versus the year ago period.
NXP experienced growth in its Automotive end market of $94 million or 5.2% and Industrial IoT end market of $57 million or 9.4% versus the year ago period.
The release of the valuation allowance in 2021 is due to higher qualifying income compared to 2020 and 2019. • The movement in the withholding taxes in 2022 as compared to 2021 is mainly due to considering more undistributed earnings as indefinitely reinvested in 2021, resulting in a 2021 tax benefit of $17 million. • The other differences tax expense in 2022 is mainly relating to lower excess tax benefits, unfavorable FX-effects and higher taxes due on Global Intangible Low-Taxed Income (GILTI) inclusions in U.S. compared to the same period in 2021.
In 2023, the foreign tax incentives are lower compared to 2022 primarily due to less qualifying investments. 38 • The higher favorable changes in estimates of prior years' income taxes in 2023 is primarily as a result of new guidance released by the Internal Revenue Service to clarify the treatment of specified research and experimental expenditures under Section 174. • The other differences tax expense in 2023 and 2022 are mainly relating to excess tax benefits, unrecognized tax benefits, FX-effects and taxes due on Global Intangible Low-Taxed Income (GILTI) inclusions in U.S.
Other Income (Expense) Other income (expense) includes results from manufacturing service arrangements (“MSA”) and transitional service arrangements (“TSA”) that are put into place when we divest a business or activity, as well as other activity. These arrangements are expected to decrease as the divested business or activity becomes more established.
These arrangements are expected to decrease as the divested business or activity becomes more established. Other income (expense) reflects a loss of $15 million for 2023, compared to an income of $3 million in 2022.
The gross profit percentage for the fourth quarter of 2022 increased to 57.1% from 56.2%, primarily due to the higher revenue in the fourth quarter of 2022 which led to improved utilization and efficiencies, partly offset by higher personnel-related costs and higher supplier costs.
The gross profit percentage for the fourth quarter of 2023 decreased to 56.6% from 57.2% in the third quarter of 2023, primarily due to higher restructuring costs for specific targeted actions under new global restructuring programs in the fourth quarter of 2023.
Additionally, OEM and EMS revenues increased in the China and Europe geographic regions. Gross Profit Gross profit for the year-ended December 31, 2022 was $7,517 million, or 56.9% of revenue, compared to $6,067 million, or 54.8% of revenue, for the year-ended December 31, 2021.
Gross Profit Gross profit for the year-ended December 31, 2023 was $7,553 million, or 56.9% of revenue, compared to $7,517 million, or 56.9% of revenue, with inflationary effects of increased input costs from suppliers passed along to end customer resulting in a relatively flat gross margin year on year.
Adjustments to net income include offsetting non-cash items, such as depreciation and amortization of $1,262 million, share-based compensation of $353 million, amortization of the discount on debt and debt issuance costs of $8 million, a gain on sale of assets of $1 million, a loss on extinguishment of debt of $22 million, a loss on equity securities of $2 million, results relating to equity-accounted investees of $2 million and changes in deferred taxes of $(20) million. • Cash Flow from Investing Activities Net cash used for investing activities amounted to $1,249 million for the year-ended December 31, 2022 and principally consisted of the cash outflows for capital expenditures of $1,063 million, $159 million for the purchase of identified intangible assets, $5 million for the purchase of equipment leased to others, $27 million for purchases of interests in businesses (net of cash acquired) and $20 million for the purchase of investments, partly offset by $10 million from proceeds from return of equity investments and $13 million from proceeds from sale of investments.
Adjustments to net income include offsetting non-cash items, such as depreciation and amortization of $1,106 million, share-based compensation of $411 million, a loss on equity securities of $1 million, results relating to equity-accounted investees of $7 million and changes in deferred taxes of $(267) million.
The growth compared with the previous year period results from higher average selling prices across all of our end markets and strong demand within NXP’s Automotive end market, while the Industrial IoT, Communication Infrastructure & Other and the Mobile end markets experienced slower demand signals versus the year ago period.
From an end market perspective, NXP experienced growth in its Automotive and Communication Infrastructure & Other end markets which were offset by declines in the Industrial IoT and the Mobile end markets versus the year ago period. Revenue in the Automotive end market was $7,484 million, an increase of $605 million or 8.8% versus the year ago period.
Revenue in the Mobile end market was $1,607 million, an increase of $195 million or 13.8% versus the year ago period. The increase in revenue was due to strong adoption of secure mobile wallet solutions, and demand for our advanced analog high-speed interfaces, partly offset by declines in embedded power solutions.
Within the Industrial & IoT end market the year-to-date decline was across the entire product portfolio. Revenue in the Mobile end market was $1,327 million, a decrease of $280 million or 17.4% versus the year ago period. Within the Mobile end market revenue our advanced analog and mobile wallet products caused the decline.
Removed
Overview ($ in millions, unless otherwise stated) Three Months Ended Years Ended December 31, 2022 December 31, 2021 Increase/(decrease) December 31, 2022 December 31, 2021 Increase/(decrease) Revenue 3,312 3,039 273 13,205 11,063 2,142 Gross profit 1,891 1,707 184 7,517 6,067 1,450 Operating income (loss) 980 807 173 3,797 2,583 1,214 Cash flow from operating activities 1,076 785 291 3,895 3,077 818 Total debt 11,165 10,572 593 11,165 10,572 593 Net debt 7,320 7,742 (422) 7,320 7,742 (422) Diluted weighted average number of shares outstanding 261,448 268,545 (7,097) 264,053 275,646 (11,593) Diluted net income per share 2.76 2.24 0.52 10.55 6.79 3.76 Dividends per common share 0.8450 0.5625 0.283 3.38 2.25 1.13 Revenue for 2022 was $13,205 million as compared to the $11,063 million reported in 2021, an increase of $2,142 million or an increase of 19.4% year-on-year.
Added
Overview Revenue for the year-ended ended December 31, 2023 was $13,276 million compared to $13,205 million for the year-ended December 31, 2022, an increase of $71 million or 0.5% year-on-year.
Removed
Our gross profit percentage for 2022 increased to 56.9% from 54.8%, primarily due to the significant higher revenue during 2022, which led to improved utilization and efficiencies, partly offset by higher personnel-related costs and higher supplier costs.
Added
Our gross profit percentage for 2023 and 2022 remained flat at 56.9%, as both revenue and cost of revenue were impacted by inflationary effect of increased input costs which were passed along to end customers. We continue to generate strong operating cash flows, with $3,513 million in cash flows from operations for 2023.
Removed
Of the 19.4% year-on-year revenue increase, approximately 14% is attributable to higher average selling prices and 5% is attributable to product mix and increased sales volume.
Added
Q4 2023 compared to Q3 2023 Revenue for the three months ended December 31, 2023 was $3,422 million compared to $3,434 million for the three months ended October 1, 2023, a decrease of $12 million or 0.3% quarter-on-quarter.
Removed
From an end market perspective, within the automotive end market the year-on-year growth was attributable to advanced analog, automotive processing and radar in support of the secular shift of electrification, advanced driver safety and assistance, and driver connectivity systems.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

4 edited+0 added−0 removed14 unchanged
Biggest changeOur primary foreign currency exposure relates to the U.S. dollar to euro exchange rate. However, our foreign currency exposures also relate, but are not limited, to the Chinese Yuan, the Japanese Yen, the Pound Sterling, the Malaysian Ringgit, the Singapore Dollar, the New Taiwan Dollar, the Thai Baht and the Swiss Franc. 54
Biggest changeOur primary foreign currency exposure relates to the U.S. dollar to euro exchange rate. However, our foreign currency exposures also relate, but are not limited, to the Chinese Yuan, the India Rupee, the Japanese Yen, the Malaysian Ringgit, the Romanian Leu, the Singapore Dollar, the New Taiwan Dollar, the Thai Baht and the Swiss Franc. 52
The Company measures all derivative financial instruments based on fair values derived from market prices of the instruments or from option pricing models, as appropriate and record these as assets or liabilities in the balance sheet. Changes in the fair values are recognized in the statement of operations immediately unless cash flow hedge accounting is applied.
The Company measures all derivative financial instruments based on fair values derived from market 51 prices of the instruments or from option pricing models, as appropriate and record these as assets or liabilities in the balance sheet. Changes in the fair values are recognized in the statement of operations immediately unless cash flow hedge accounting is applied.
If our forecasted operating 53 expenditures for currencies in which we hedge were to decline by 20% and foreign exchange rates were to change unfavorably by 20% in our hedged foreign currency, we would incur a negligible loss.
If our forecasted operating expenditures for currencies in which we hedge were to decline by 20% and foreign exchange rates were to change unfavorably by 20% in our hedged foreign currency, we would incur a negligible loss.
At December 31, 2022 our net asset related to foreign currency forward contracts designated as hedges of foreign currency risk on certain operating expenditure transactions was $2 million.
At December 31, 2023 our net asset related to foreign currency forward contracts designated as hedges of foreign currency risk on certain operating expenditure transactions was $3 million.

Other NXPI 10-K year-over-year comparisons