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

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Paragraph-level year-over-year comparison of SITIME Corp'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.

+357 added−331 removedSource: 10-K (2024-02-26) vs 10-K (2023-02-27)

Top changes in SITIME Corp's 2023 10-K

357 paragraphs added · 331 removed · 259 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

75 edited+16 added−9 removed52 unchanged
Biggest changeOur solutions offer low sensitivity to electromagnetic energy, mechanical shock, vibration, airflow, temperature gradients and power supply noise. • Flexible integration : Our MEMS resonators and clock ICs allow a wide range of packaging and integration methodologies to support various levels of size, cost, and electrical, thermal, and mechanical performance. • Leveraged product development : Our solutions employ different combinations of MEMS and circuit components, enabling us to generate a vast number of custom part numbers, including over 40,000 unique part numbers shipped as of December 31, 2022. • Rapid time to market : Our solutions can typically be delivered within weeks of initial customer order and configuration, enabling us to reduce our end customers’ time to market.
Biggest changeOur solutions offer low sensitivity to electromagnetic energy, mechanical shock, vibration, airflow, temperature gradients and power supply noise. • Flexible integration : Our MEMS resonators and clock ICs allow a wide range of packaging and integration methodologies to support various levels of size, cost, and electrical, thermal, and mechanical performance.
Unlike most clock IC vendors, we do not rely on quartz vendors to provide the quartz resonator clock reference that is required for their clock ICs to function. Our expertise creates supply chain advantages for us, and importantly, enables us to design and build complete timing systems that result in performance advantages, providing a complete solution to the customer.
Unlike most clock IC vendors, we do not rely on quartz vendors to provide the quartz resonator clock reference that is required for their clock ICs to function. Our expertise creates supply chain advantages for us and most importantly, enables us to design and build complete timing systems that result in performance advantages, providing a complete solution to the customer.
More complex electronic systems require advanced timing solutions that may integrate a variety of resonators, oscillators, and clock ICs. The complexity of these timing solutions increases significantly when the performance requirements of the systems that use them increase, such as electronic systems required to support the 5G communication network infrastructure.
More complex electronic systems require advanced timing solutions that may integrate a variety of oscillators, clock ICs, and resonators. The complexity of these timing solutions increases significantly when the performance requirements of the systems that use them increase, such as electronic systems required to support the 5G communication network infrastructure.
We intend to continue to broaden our product portfolio by offering additional varieties of oscillators, expanding our business in standalone resonators, and expanding into the clock IC market. • Continue to attract and acquire new customers .
We intend to continue to broaden our product portfolio by offering additional varieties of oscillators, expanding into the clock IC market and expanding our business in standalone resonators. • Continue to attract and acquire new customers .
Research and Development We believe that our future success depends on our ability to introduce enhancements on our existing products and to develop new products for both existing and new markets. As a result, a significant majority of our operating expenses has been allocated towards this effort.
Research and Development We believe that our future success depends on our ability to introduce enhancements to our existing products and to develop new products for both existing and new markets. As a result, a significant majority of our operating expenses has been allocated towards this effort.
Our smaller customers can select the optimum timing solution for their needs by working directly with our distributors or by shopping on our online store, SiTimeDirect™. 6 We operate a fabless business model, where we outsource manufacturing to semiconductor industry suppliers, which allows us to focus on, and excel in, the design, marketing, and sales of our products.
Our smaller customers can select the optimum timing solution for their needs by working directly with our distributors or by shopping on our online store, SiTimeDirect™. We operate a fabless business model, where we outsource manufacturing to semiconductor industry suppliers, which allows us to focus on, and excel in, the design, marketing, and sales of our products.
Our research and development efforts are focused primarily on MEMS and advanced clock IC design and advanced system-level integration for precision timing solutions. We have assembled a core team of experienced engineers and systems designers who conduct research and development activities in the United States, the Netherlands, Malaysia, Finland, Japan, Taiwan, and Ukraine.
Our research and development efforts are focused primarily on MEMS and advanced clock IC design and advanced system-level integration for Precision Timing solutions. We have assembled a core team of experienced engineers and systems designers who conduct research and development activities in the United States, the Netherlands, Malaysia, Finland, Japan, Taiwan, Ukraine, and India.
Industrial equipment, ranging from factory machinery to diagnostic equipment, is often exposed to environments characterized by temperature fluctuation, mechanical shocks, vibration, and electromagnetic interference. We believe our precision timing solutions can perform better than legacy quartz-based solutions in demanding industrial environments and with lower power consumption and 8 higher reliability.
Industrial equipment, ranging from factory machinery to diagnostic equipment, is often exposed to environments characterized by temperature fluctuation, mechanical shocks, vibration, and electromagnetic interference. We believe our Precision Timing solutions can perform better than legacy quartz-based solutions in demanding industrial environments and with lower power consumption and higher reliability.
Companies that we primarily compete with include, but are not limited to, Abracon, LLC, Daishinku Corporation, Kyocera Corporation, Microchip Technology Inc., Murata Manufacturing Co., Ltd, Nihon Dempa Kogoyo., Ltd., Rakon Limited, Renesas Electronics Corporation, Seiko Epson Corporation, Skyworks Solutions, Inc., Texas Instruments Incorporated, and TXC Corporation.
Companies that we primarily compete with include, but are not limited to, Abracon, LLC, Daishinku Corporation, Diodes Incorporated, Kyocera Corporation, Microchip Technology Inc., Murata Manufacturing Co., Ltd, Nihon Dempa Kogoyo., Ltd., Rakon Limited, Renesas Electronics Corporation, Seiko Epson Corporation, Skyworks Solutions, Inc., Texas Instruments Incorporated, and TXC Corporation.
Our products have been designed into over 300 applications across our target markets, including communications and enterprise, automotive, industrial, aerospace, mobile, Internet of Things (“IoT”), and consumer. Our current solutions include various types of oscillators, as well as resonators and clock integrated circuits (“ICs”).
Our products have been designed into over 300 applications across our target markets, including communications, datacenter and enterprise, automotive, industrial, aerospace, mobile, Internet of Things (“IoT”), and consumer. Our current solutions include various types of oscillators, as well as clock integrated circuits (“ICs”) and resonators.
In addition, we launched SiTimeDirect, a self-service online store supporting 24/7 sales of SiTime oscillators, shipped to over 30 countries globally. Our expert inside sales team supports a “self-service model” for customers.
In addition, in 2022, we launched SiTimeDirect, a self-service online store supporting 24/7 sales of SiTime oscillators, shipped to over 30 countries globally. Our expert inside sales team supports a “self-service model” for customers.
We plan to continue to apply our MEMS, analog and mixed-signal, and systems expertise, as well as partner with leading technology companies to develop innovative products. 10 • Broaden our product portfolio .
We plan to continue to apply our MEMS, analog and mixed-signal, and systems expertise, as well as partner with leading technology companies to develop innovative products. • Broaden our product portfolio .
For further information concerning our equity 15 incentive plans, see Note 9, Stock-based Compensation, of the Notes to Consolidated Financial Statements contained in Part II, Item 8 of this Annual Report on Form 10-K. We are committed to the health, safety and wellness of our employees.
For further information concerning our equity incentive plans, see Note 8, Stock-based Compensation, of the Notes to Consolidated Financial Statements contained in Part II, Item 8 of this Annual Report on Form 10-K. We are committed to the health, safety, and wellness of our employees.
Beyond the well established strategic account portfolio, we target a broad base of small to mid-size electronics OEMs and ODMs that accelerate growth and market expansion for SiTime. We intend to continue to expand our sales and marketing efforts through increased collaboration with our distributors and contracted sales representatives.
Beyond the well established strategic account portfolio, we target a broad base of small to mid-size electronics OEMs and ODMs that accelerate growth and market expansion for SiTime. We intend to continue to expand our sales and marketing efforts through increased collaboration with our distributors.
This model also allows us to operate with lower capital expenditure investment than other semiconductor companies who own fabs. A fabless infrastructure gives us production flexibility and the ability to scale capacity up and down quickly to meet demand.
This model also allows us to operate with lower capital expenditure investment than other semiconductor companies that own fabs. A fabless infrastructure gives us production flexibility and the ability to scale capacity up and down quickly to meet demand.
Industry Background Key Building Blocks of Timing Solutions Timing solutions comprise of three key product types: resonators, oscillators, and clock ICs. • Resonators are mechanical structures that vibrate at a precise frequency and provide the core accuracy and stability in oscillator systems.
Industry Background Key Building Blocks of Timing Solutions Timing solutions are comprised of three key product types: resonators, oscillators, and clock ICs. • Resonators are mechanical structures that vibrate at a precise frequency and provide the core accuracy and stability in oscillator systems.
Our all-silicon solutions are based on three fundamental areas of expertise: micro-electro-mechanical systems (“MEMS”), analog mixed-signal design capabilities, and advanced system-level integration expertise. This expertise enables us to design silicon MEMS resonators, analog circuits, as well as systems and packaging, and put these all together to deliver a system-level solution that solves customers’ complex timing problems.
Our all-silicon solutions are based on three fundamental areas of expertise: micro-electro-mechanical systems (“MEMS”), analog mixed-signal design capabilities, and advanced system-level integration expertise. These areas of expertise enable us to design silicon MEMS resonators, analog circuits, as well as systems and packaging, and put these all together to deliver a system-level solution that solves customers’ complex timing problems.
In this aspect, we are different than quartz-based providers, who typically have expertise in designing and manufacturing resonators, but usually outsource the analog and packaging. We also have a deep understanding of mechanical, electrical, and thermal properties of materials, which is a key requirement for developing our proprietary MEMS processes.
In this aspect, we are different than quartz-based providers, who typically have expertise in designing and manufacturing resonator components, but usually outsource the analog and packaging. We also have a deep understanding of mechanical, electrical, and thermal properties of materials, which is a key requirement for developing our proprietary MEMS processes.
Our Strategy Our objective is to be the leading provider of precision timing solutions for advanced and challenging applications. Our solutions not only displace existing products by providing improved performance across a range of operational attributes, but also enable next-generation electronic applications by providing high performance at affordable price points.
Our Strategy Our objective is to be the leading provider of Precision Timing solutions for advanced and complex electronics applications. Our solutions not only displace existing products by providing improved performance across a range of operational attributes, but also enable next-generation electronic applications by providing high performance at affordable price points.
This provides design flexibility for the customer, and enabling us to produce a vast number of custom timing products on demand with short lead times. • High quality and reliability : The combination of our materials, design, and manufacturing processes enables us to produce high quality products with long-term reliability.
This provides design flexibility for the customer, and enabling us to produce a vast number of custom timing products on demand with short lead times. 9 Table of Contents • High quality and reliability : The combination of our materials, design, and manufacturing processes enables us to produce high quality products with long-term reliability.
Based on the sell-through information provided to us from distributors who identify end customers, we believe that the majority of our products sold to Pernas and Quantek are in turn incorporated into products of Apple Inc.
Based on the sell-through information provided to us from distributors who identify end customers, we believe that the majority of our products sold to Pernas and Quantek are in turn incorporated into products of Apple Inc. (“Apple”), our largest end customer.
Our precision timing solutions are designed to be resilient to environmental stressors. For the communications and enterprise market, our precision timing solutions provide high performance and resilience in dense, less-controlled environments that experience extreme conditions.
Our Precision Timing solutions are designed to be resilient to harsh environmental stressors. For the communications, datacenter and enterprise market, our products provide high performance and resilience in dense, less-controlled environments that experience extreme conditions.
We subject our third-party manufacturing contractors to rigorous qualification requirements to meet the high quality and reliability standards required of our products. We carefully qualify each of our partners and their processes before applying the technology to our products.
We subject our third-party manufacturing contractors to rigorous qualification requirements to meet the high quality and reliability standards required of our products. We carefully qualify each of our partners and their processes 12 Table of Contents before applying the technology to our products.
Our issued patents and pending patent applications generally relate to our MEMS fabrication process, MEMS resonators, circuits, packaging, and oscillator systems. In addition to our own intellectual property, we also use third-party licenses for certain technologies embedded in our MEMS solutions.
Our issued patents and pending patent applications generally relate to our MEMS fabrication process, MEMS resonators, circuits, packaging, and oscillator systems. In addition to our own intellectual property, we also use third-party licenses for certain technologies, including some that are embedded in our MEMS solutions.
As of December 31, 2022, we had 211 full-time equivalent employees supporting research and development efforts worldwide (representing approximately 56% of our total employee base). Intellectual Property We rely primarily on patent, copyright, trademark, and trade secret laws, as well as confidentiality and non-disclosure agreements, and other contractual protections, to protect our technologies and proprietary know-how.
As of December 31, 2023, we had 181 full-time equivalent employees supporting research and development efforts worldwide (representing approximately 47% of our total employee base). Intellectual Property We rely primarily on patent, copyright, trademark, and trade secret laws, as well as confidentiality and non-disclosure agreements, and other contractual protections, to protect our technologies and proprietary know-how.
For the aerospace market, our solutions provide lower acceleration sensitivity for end products that operate in rugged conditions. For the mobile, IoT and consumer market, our timing solutions have the advantage of offering high performance at optimal power consumption and size, as our customers fit more functionality into smaller devices. Commercial shipments of SiTime’s first oscillator products began in 2006.
For the aerospace market, our solutions provide lower acceleration sensitivity for end products that operate in rugged conditions. For the mobile, IoT and consumer market, our timing solutions have the advantage of offering high performance at optimal power consumption and size, as our customers fit more functionality into smaller devices.
Item 1. Bu siness Overview The ability to accurately measure and reference time has been essential to many of humankind’s greatest inventions and technological advances. Timing technology has continued to evolve over centuries, forming a critical aspect of broader technological advancement.
Item 1. Business Overview The ability to accurately measure and reference time has been essential to humankind’s greatest inventions and technological advances. Timing technology has continued to evolve over centuries, forming a critical aspect of broader technological evolution.
Precision MEMS Timing Solutions Poised to Disrupt the Market In recent years, advances in silicon-based manufacturing and packaging techniques have allowed the development of alternatives to quartz crystal technology. We believe that MEMS is an ideal technology for resonator design.
These limitations impact the precision and quality of the timing signal in harsh conditions. Precision MEMS Timing Solutions Poised to Disrupt the Market In recent years, advances in silicon-based manufacturing and packaging techniques have allowed the development of alternatives to quartz crystal technology. We believe that MEMS is an ideal technology for resonator design.
Timing is the heartbeat of digital electronic systems, ensuring that the system runs smoothly and reliably by providing and distributing clock signals to various critical components such as CPUs, communication and interface chips, and radio frequency components.
Timing is the heartbeat of digital electronic systems, ensuring that the system runs smoothly and reliably by providing and distributing clock signals to various critical components such as central processing units, communication and interface ICs, and radio frequency components.
Pernas directly accounted for 20%, 24%, and 26% of our revenue for the years ended December 31, 2022, 2021, and 2020, respectively, Arrow directly accounted for 17%, 14%, and 15% of our revenue for the years ended December 31, 2022, 2021, and 2020, respectively and Quantek directly accounted for 12%, 10%, and 18% of our revenue for the years ended December 31, 2022, 2021, and 2020, respectively.
Pernas directly accounted for 20%, 20%, and 24% of our revenue for the years ended December 31, 2023, 2022, and 2021, respectively, Arrow directly accounted for 18%, 17%, and 14% of our revenue for the years ended December 31, 2023, 2022, and 2021, respectively and Quantek directly accounted for 13%, 12%, and 10% of our revenue for the years ended December 31, 2023, 2022, and 2021, respectively.
(“Apple”), our largest end customer. 12 As a result, we believe revenue attributable to our largest end customer accounted for approximately 20%, 22%, and 40% of our revenue for the years ended December 31, 2022, 2021, and 2020, respectively.
As a result, we believe revenue attributable to our largest end customer accounted for approximately 21%, 20%, and 22% of our revenue for the years ended December 31, 2023, 2022, and 2021, respectively.
Upon the completion of processing at the foundry, we use third-party contractors for packaging, assembly, and testing, including Advanced Semiconductor Engineering, Inc. (“ASE”), Carsem (M) Sdn Bhd. (“Carsem”), and United Test and Assembly Center Ltd. (“UTAC”) in Taiwan, Malaysia, and Thailand, respectively, as well 13 as Daishinku Corp.
Upon the completion of processing at the foundry, we use third-party contractors for packaging, assembly, and testing, including Advanced Semiconductor Engineering, Inc. (“ASE”) in Taiwan, Carsem (M) Sdn Bhd. (“Carsem”) in Malaysia, United Test and Assembly Center Ltd.
Other than Pernas, Quantek, and Arrow, no other single direct customer accounted for more than 10% of our revenue in the years ended December 31, 2022, 2021, and 2020.
Sabre directly accounted for 10%, 6%, and 4% of our revenue for the years ended December 31, 2023, 2022, and 2021, respectively. Other than Pernas, Quantek, Arrow and Sabre, no other single direct customer accounted for more than 10% of our revenue in the years ended December 31, 2023, 2022, and 2021.
The programmability of our product platforms enables us to generate solutions quickly to customer specifications. 11 Today, we primarily supply oscillator products that comprise a MEMS resonator and an analog mixed-signal IC that are integrated into a package.
The programmability of our product platforms enables us to generate solutions quickly to customer specifications. We are well established with our core offering of oscillator products that comprise a MEMS resonator and an analog mixed-signal IC that are integrated into a package.
The initial term of the supply agreement is for ten years through February 2027 and automatically renews unless terminated by either party with three years’ advance notice beginning in February 2024. Other than Bosch, we do not have long-term supply agreements with most of our third-party manufacturing contractors, and we purchase products on a purchase order basis.
The initial term of the supply agreement is for ten years through February 2027 and automatically renews. Other than Bosch, we do not have long-term supply agreements with most of our third-party manufacturing contractors, and we purchase products on a purchase order basis.
To maximize MEMS first-silicon success, we have also developed our own MEMS simulation tools. We are also different in that our MEMS resonators are made using semiconductor technology, while the quartz suppliers use quartz crystal material.
To maximize MEMS first-silicon success, we have also developed our own MEMS simulation tools. We are also different in that our MEMS resonators are made using semiconductor technology which has significant benefits in features, performance, manufacturing, and cost, while the quartz suppliers use quartz crystal material.
In addition, as electronic systems become more complex, feature-rich, and robust, they require more sophisticated timing systems that can seamlessly integrate a variety of resonators, oscillators, and clock ICs in various system-level combinations. This seamless integration is more difficult with legacy quartz systems. These limitations impact the precision and quality of the timing signal in harsh conditions.
In addition, as electronic systems become more complex, feature-rich, and robust, they require more sophisticated timing systems that can seamlessly integrate a variety of oscillators, clock ICs, and resonators in various system-level combinations. This 7 Table of Contents seamless integration is more difficult with legacy quartz systems.
In addition, we believe that outsourcing many of our manufacturing and assembly activities provides us with the flexibility needed to respond to new market opportunities and scale for customer demand, simplifies our operations, and significantly reduces our capital commitments.
This outsourced manufacturing approach allows us to focus our resources on the design, sale, and marketing of our products. In addition, we believe that outsourcing many of our manufacturing and assembly activities provides us with the flexibility needed to respond to new market opportunities and scale for customer demand, simplifies our operations, and significantly reduces our capital commitments.
Corporate Information We were incorporated in Delaware on December 3, 2003. Our principal executive offices are located at 5451 Patrick Henry Drive, Santa Clara, California 95054, and our telephone number is (408) 328-4400. Our corporate website address is www.sitime.com.
We consider relations with our employees to be good and have never experienced a work stoppage. Corporate Information We were incorporated in Delaware on December 3, 2003. Our principal executive offices are located at 5451 Patrick Henry Drive, Santa Clara, California 95054, and our telephone number is (408) 328-4400. Our corporate website address is www.sitime.com.
Many of these devices need to package a significant amount of electronics in a limited battery-powered and size-constrained form factor, while still requiring high performance and high accuracy.
These devices range from smartphones and personal wearable devices to electronics embedded in appliances and industrial machinery. Many of these devices need to package a significant amount of electronics in a limited battery-powered and size-constrained form factor, while still requiring high performance and high accuracy.
We strive to attract and retain the most talented employees in the industry and across the globe by offering competitive compensation and benefits that support their health, financial, and emotional well-being. Our compensation philosophy is based on rewarding each employee’s individual contributions. We use a combination of fixed and variable pay including base salary, bonuses, performance awards and stock-based compensation.
We strive to attract and retain the most talented employees in the industry and across the globe by offering competitive compensation and benefits that support their health, financial, and emotional well-being. Our compensation philosophy is based on rewarding each employee’s individual contributions.
As of December 31, 2022, we had 99 issued U.S. patents, expiring generally between 2026 and 2039, and 43 pending U.S. patent applications (including 12 provisional applications). We also had three foreign issued patents expiring in 2036 and four pending foreign patent applications.
As of December 31, 2023, we had 119 issued U.S. patents, expiring generally between 2026 and 2040, and 42 pending U.S. patent applications (including 13 provisional applications). We also had four foreign issued patents expiring in 2036 and four pending foreign patent applications.
Our ability to combine our MEMS resonators with analog-mixed signal components in a fabless semiconductor supply chain allows us to build full timing solutions from the ground up, enabling our customers to focus on their core expertise. 9 Our flexible and programmable precision timing solutions offer the following benefits: • High performance : Our portfolio of MEMS-based precision timing products allows us to provide our customers with high performance solutions across a wide range of attributes including stability over temperature, vibration, phase jitter, and other metrics. • Small size : Our solutions have a small footprint and package size, optimizing the end customer’s board area.
Our flexible and programmable Precision Timing solutions offer the following benefits: • High performance : Our portfolio of MEMS-based Precision Timing products allows us to provide our customers with high performance solutions across a wide range of attributes including stability over temperature, vibration, phase jitter, and other metrics. • Small size : Our solutions have a small footprint and package size, optimizing the end customer’s board area.
(“Pernas”), Arrow Electronics, Inc. (“Arrow”), and Quantek Technology Corporation (“Quantek”), three of our distributor customers, each directly accounted for more than 10% of our revenue in the years ended December 31, 2022, 2021, and 2020.
(“Arrow”), and Quantek Technology Corporation (“Quantek”), three of our distributor customers, each directly accounted for more than 10% of our revenue in the years ended December 31, 2023, 2022, and 2021. Additionally, Sabre Technologies Pte. Ltd ("Sabre") directly accounted for 11 Table of Contents more than 10% of our revenue for the year ended December 31, 2023.
Examples of benefits offered in the U.S. include: a 401(k) plan with employer contributions; health benefits; life, business travel and disability insurance; additional voluntary insurance; paid time off and parental leave; and paid counseling assistance.
We offer employees benefits that vary by country and are designed to meet or exceed local laws and to be competitive in the marketplace. Examples of benefits offered in the U.S. include: a 401(k) plan with employer contributions; health benefits; life, business travel, and disability insurance; additional voluntary insurance; paid time off and parental leave; and paid counseling assistance.
Key elements of our strategy include: • Extend our leadership in precision timing . We intend to continue driving innovation in the timing market and working with our ecosystem partners to help set the timing standards of the future. Through this and other efforts, we expect to enable customers to create reference architectures and purchase complete solutions.
Key elements of our strategy include: • Extend our leadership in Precision Timing . SiTime pioneered the Precision Timing category, and we intend to continue driving innovation in the timing market and working with our ecosystem partners to help set the timing standards of the future.
Timing solutions based on MEMS technology are manufactured using semiconductor processes in fabrication plants with high capacity, allowing for cost-effective high-volume manufacturing. 7 Significant Market Opportunity for Precision Timing Solutions According to Dedalus Consulting - 2019 Frequency Control Components Global Markets, End-Users, Applications & Competitors: Analysis & Forecasts and our estimates, the global timing market is expected to grow to $10.1 billion by 2024.
Significant Market Opportunity for Precision Timing Solutions According to Dedalus Consulting - 2019 Frequency Control Components Global Markets, End-Users, Applications & Competitors: Analysis & Forecasts and our estimates, the global timing market is expected to grow to $10.1 billion by 2024.
Based on the production schedules of key customers, our products typically see stronger revenue in the second half of our fiscal year. However, this was not the case in 2022 and there can be no assurance that this trend will occur in future years.
Based on the production schedules of key customers, our products typically see stronger revenue in the second half of our fiscal year. However, there can be no assurance that this trend will occur in future years. Manufacturing We operate a fabless business model and use third-party foundries and assembly and test contractors to manufacture, assemble, and test our semiconductor products.
We work closely with our end customers throughout their design cycles and are able to develop long-term relationships as our technology becomes embedded in their products. As a result, we believe our products are well-positioned to be designed into their current systems and we are well-positioned to develop next generation solutions for their future products. Pernas Electronics Co., Ltd.
As a result, we believe our products are well-positioned to be designed into their current systems and we are well-positioned to develop next generation solutions for their future products. Pernas Electronics Co., Ltd. (“Pernas”), Arrow Electronics, Inc.
Dedalus Consulting estimates that oscillators and standalone resonators will represent approximately $5.0 billion and $4.0 billion total addressable markets, respectively, in 2024. Based on our internal estimates, we believe clock ICs represent an approximate $1.0 billion total addressable market.
Dedalus Consulting estimates that oscillators and standalone resonators will represent approximately $5.0 billion and $4.0 billion total addressable markets, respectively, in 2024. Based on our internal estimates, we believe clock ICs represent an approximate $1.0 billion total addressable market. The Opportunity for Advanced Solutions From high-performance network infrastructure equipment to low-power battery-operated devices, Precision Timing solutions enable virtually all electronics.
We encourage periodic and meaningful conversations between managers and employees, including discussions regarding feedback, alignment of goals, and professional development. We encourage all employees to continue learning and provide learning opportunities as well as internal opportunities for cross functional work to support this. We regularly review succession plans and focus on promoting internal talent to help grow our employees' careers.
We encourage periodic and meaningful conversations between managers and employees, including discussions regarding feedback, alignment of goals, and professional development. We encourage all employees to continue learning and provide learning opportunities as well as internal opportunities for cross functional work to support this. All employees receive training, including in the prevention of sexual harassment and abusive conduct in the workplace.
In addition, we intend to expand our international operations, and effective patent, copyright, trademark, and trade secret, and other intellectual property protection may not be available or may be limited in some foreign countries. 14 The semiconductor industry is characterized by vigorous protection and pursuit of intellectual property rights and positions, which has resulted in protracted and expensive litigation for many companies.
In addition, we intend to expand our international operations, and effective patent, copyright, trademark, and trade secret, and other intellectual property protection may not be available or may be limited in some foreign countries.
We also worked with our employees worldwide to minimize any disruption to our operations and business as a result of Russia’s invasion of Ukraine. In response to the COVID-19 pandemic, we implemented safety measures designed to protect our employees.
We also worked with our employees worldwide to minimize any disruption to our operations and business as a result of Russia’s invasion of Ukraine. We regularly review our employees and assess the needs of the business to identify our talent needs.
(“Daishinku”), UTAC, Hana Semiconductor (Ayutthaya) Co., Ltd, and ASE for ceramic packaging for some of our products. • Warehousing . Our products are warehoused at our outsourced semiconductor assembly and test facilities located in Malaysia, Taiwan, and Thailand.
(“UTAC”) in Thailand, Hana Semiconductor (Ayutthaya) Co., Ltd in Thailand, Daishinku Corp ("Daishinku") in Japan, and STATS ChipPAC Pte Ltd. in Singapore. • Warehousing . Our products are warehoused at our outsourced semiconductor assembly and test facilities located in Malaysia, Taiwan, and Thailand.
Our Products Our precision timing products are designed to address a wide range of applications across a broad array of end markets. Our product portfolio encompasses oscillators, clock ICs, and resonators.
These benefits may include shorter lead times, higher quality and reliability, and therefore lower cost of ownership for the end customer. 10 Table of Contents Our Products Our Precision Timing products are designed to address a wide range of applications across a broad array of end markets. Our product portfolio encompasses oscillators, clock ICs, and resonators.
In addition to differentiating our solutions based on technical features and value, we also intend to provide value to our customers on business metrics by leveraging our fabless semiconductor infrastructure. These benefits may include shorter lead times, higher quality and reliability, and therefore lower cost of ownership for the end customer.
In addition to differentiating our solutions based on technical features and value, we also intend to provide value to our customers on business metrics by leveraging our fabless semiconductor infrastructure.
We have in the past received, and we may in the future receive, communications alleging liability for damages or challenging the validity of our intellectual property or proprietary rights. Any litigation, regardless of success or merit, could cause us to incur substantial expenses, reduce our sales, and divert the efforts of our management and other personnel.
Any litigation, regardless of success or merit, could cause us to incur substantial expenses, reduce our sales, and divert the efforts of our management and other personnel.
Our trade secrets could be disclosed to our competitors or others may independently develop substantially equivalent technologies or otherwise gain access to our trade secrets. Trade secrets can be difficult to protect and some courts inside and outside of the United States are less willing or unwilling to protect trade secrets.
Trade secrets can be difficult to protect and some courts inside and outside of the United States are less 13 Table of Contents willing or unwilling to protect trade secrets.
MEMS technology is also inherently well-suited to produce timing solutions that are small, and offer high performance, resilience and programmability.
MEMS technology is also inherently well-suited to produce timing solutions that are small, and offer high performance, resilience and programmability. Timing solutions based on MEMS technology are manufactured using semiconductor processes in fabrication plants with high capacity, allowing for cost-effective high-volume manufacturing.
As electronics evolve to deliver higher performance levels, even in increasingly challenging environments, while also being more complex and space-constrained, we believe they will require more sophisticated timing solutions, and precision timing, a category that SiTime created, fills this need. We are a leading provider of precision timing solutions to the global electronics industry.
As electronics evolve to deliver higher performance levels, even in increasingly challenging environments, while also being more complex and size-constrained, we believe they will require more sophisticated semiconductor-based timing solutions that cannot be developed in legacy quartz crystal-based technologies.
We also offer what we consider to be leading solutions across a range of attributes, including Allan deviation, power supply noise rejection, temperature-sensing resolution, and integrated phase jitter. • Advanced system-level integration : We have extensive know-how in integrating various timing components into elegant system-level solutions.
We also offer what we consider to be leading solutions across a range of attributes, including Allan deviation, power supply noise rejection, temperature-sensing resolution, and integrated phase jitter. • MEMS resonators : We pioneered the silicon MEMS timing industry with the MEMS First®, EpiSeal®, and TempFlat® processes and technologies.
We do not believe there will be any significant impact upon expiration of these patents. We generally control access to and use of our confidential information and trade secrets through the use of internal and external controls, including contractual protections with employees, contractors, and customers.
We generally control access to and use of our confidential information and trade secrets through the use of internal and external controls, including contractual protections with employees, contractors, and customers. We rely in part on the laws of the United States and international laws to protect our work.
As of December 31, 2022, we had 377 full-time equivalent employees located in the United States, France, Malaysia, the Netherlands, Taiwan, Japan, Finland and Ukraine, including 211 in research and development, 136 in sales, general, and administrative, and 30 in operations. We consider relations with our employees to be good and have never experienced a work stoppage.
As of December 31, 2023, we had 382 full-time equivalent employees located in locations including the United States, France, Malaysia, the Netherlands, Taiwan, Japan, Finland, Ukraine, Germany, South Korea, and India, including 181 in research and development, 145 in sales, general, and administrative, and 56 in operations.
For example, we have a license to certain patents from Bosch relating to the design and manufacture of MEMS-based timing applications. The patent rights obtained under the license agreement expire between 2021 and 2029, and the license agreement expires upon expiration of the last patent licensed under the agreement.
For example, we have a license to certain patents from Bosch relating to the design and manufacture of MEMS-based timing applications and a license to certain intellectual property of Aura relating to our clock products.
Quartz-based solutions can be impacted by vibrating forces acting on the whole system. Precision timing devices are well-suited for these applications, as they provide up to 50 times better acceleration sensitivity under vibration than comparable quartz-based solutions.
Precision Timing devices are well-suited for these applications, as they provide up to 50 times better acceleration sensitivity under vibration than comparable quartz-based solutions. 8 Table of Contents Mobile, IoT and Consumer The growing reliance on mobile devices and the IoT revolution has enabled the proliferation of billions of internet-connected devices in industrial and consumer applications.
We believe our MEMS resonators are easy to integrate into silicon-based oscillators and clock ICs, and allow us to develop tightly-integrated precision timing solutions. • Oscillators and Clock ICs : We have a dedicated analog and mixed-signal engineering team focused on the most complex challenges related to oscillators and clock ICs.
We believe our MEMS resonators are easy to integrate into silicon-based oscillators and clock ICs, and allow us to develop tightly-integrated Precision Timing solutions. • Advanced system-level integration : We have extensive know-how in integrating various timing components into elegant system-level solutions.
Our Solutions and Technology Our precision timing solutions comprise: • MEMS resonators : We pioneered the silicon MEMS timing industry with the MEMS First®, EpiSeal®, and TempFlat® processes and technologies. These manufacturing processes have allowed the hermetically-sealed resonator die to be housed in industry-standard, low-cost plastic packages.
These manufacturing processes have allowed the hermetically-sealed resonator die to be housed in industry-standard, low-cost plastic packages. These processes and technologies improve resonator stability, increase quality and reliability, and decrease aging effects.
We rely in part on the laws of the United States and international laws to protect our work. All employees and consultants are required to execute confidentiality agreements in connection with their employment and consulting relationships with us.
All employees and consultants are required to execute confidentiality agreements in connection with their employment and consulting relationships with us. We also require them to agree to disclose and assign to us all inventions conceived or made in connection with the employment or consulting relationship.
The Opportunity for Advanced Solutions From high-performance network infrastructure equipment to low-power battery-operated devices, precision timing solutions enable virtually all electronics. The complexity of such timing solutions increases significantly with the performance requirements of the systems in which they are used.
The complexity of such timing solutions increases significantly with the performance requirements of the systems in which they are used.
Other reports estimate ranges of one to 10 gigabytes per second.” Communications infrastructure equipment used in wireless base stations, wired infrastructure equipment, enterprise networks, and cloud data centers must provide high performance and stability in demanding environments, which may include temperature fluctuations, mechanical shocks, and vibration.
Below are some examples of end markets in which we believe our silicon-based timing is enabling or has the potential to enable, greater functionality than legacy solutions: Communications, Datacenter, and Enterprise Communications infrastructure equipment used in wireless base stations, wired infrastructure equipment, enterprise networks, cloud data centers, and artificial intelligence infrastructure must provide high performance and stability in demanding environments, which may include temperature fluctuations, mechanical shocks, and vibration.
We also require them to agree to disclose and assign to us all inventions conceived or made in connection with the employment or consulting relationship. However, we cannot guarantee that we have entered into such agreements with every such party and we may not have adequate remedies in case of a breach of any such agreements.
However, we cannot guarantee that we have entered into such agreements with every such party and we may not have adequate remedies in case of a breach of any such agreements. Our trade secrets could be disclosed to our competitors or others may independently develop substantially equivalent technologies or otherwise gain access to our trade secrets.
The principal purposes of our equity incentive plans are to attract, retain, and motivate selected employees through the granting of stock-based compensation awards. We offer employees benefits that vary by country and are designed to meet or exceed local laws and to be competitive in the marketplace.
We use a combination of fixed 14 Table of Contents and variable pay including base salary, bonuses, performance awards, and stock-based compensation. The principal purposes of our equity incentive plans are to attract, retain, and motivate selected employees through the granting of stock-based compensation awards.
We design each key building block of the timing system, from MEMS resonators to oscillator circuits to clock ICs.
We design each key building block of the timing system, from MEMS resonators to oscillator circuits to clock ICs. Our ability to combine our MEMS resonators with analog-mixed signal components in a fabless semiconductor supply chain allows us to build full timing solutions from the ground up, enabling our customers to focus on their core expertise.
Historically, our revenue has been substantially delivered from sales of oscillator systems across our target end markets. In addition to oscillator systems, we have expanded our products to include clock IC and timing sync solutions. We seek to expand our presence in our end markets across all product categories.
We believe that the total timing market is approximately $10 billion in size. Since our founding, we have focused on transforming this market with compelling solutions that solve difficult timing problems. Historically, our revenue has been substantially delivered from sales of oscillator systems across our target end markets.
The following table illustrates our current portfolio of promoted products by target end market: Our Customers We primarily sell our precision timing products to distributors, who in turn sell our products to our end customers. We also sell products directly to some of our end customers.
SiTime is now a key provider of all differentiated products in timing – oscillators, clocks, and resonators combined with depth in engineering expertise in Precision Timing solutions. We sell our products through distributors, who in turn sell to our end customers. We also sell products directly to some of our end customers.
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We sell our products primarily through distributors, who in turn sell to our end customers. We also sell products directly to some of our end customers. Based on sell-through information provided by our distributors, we believe the majority of our end customers are headquartered in the U.S.
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Precision timing, a category that SiTime created ("Precision Timing"), fills this need with the performance, power, size, and cost that is required by these new applications. We are a leading provider of Precision Timing solutions to the global electronics industry.
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As a subset of the broader timing market, the market for MEMS timing devices is projected to grow from approximately $0.25 billion in 2021 to $1.5 billion by 2027, representing a compound annual growth rate of approximately 35%, according to the "Status of The MEMS Industry 2022" report from Yole Intelligence, part of Yole Group, that was published in 2022.
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Since our IPO in 2019, we’ve grown from 60 to 150 unique products and the price of our highest-value oscillator has grown manyfold. In addition to oscillators, we have expanded our product portfolio to include clock IC and timing synchronization solutions.
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Below are some examples of end markets in which we believe our silicon-based timing is enabling or has the potential to enable, greater functionality than legacy solutions: Communications and Enterprise According to Gartner, “Recent reports on 5G pilots and testing have identified a wide range of projected data throughput speeds ranging from 10 times up to 1,000 times faster than 4G.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeFactors relating to our business that may contribute to fluctuations in our operating results include the following factors, as well as other factors described elsewhere in this report: • macroeconomic conditions; • cyclical fluctuations in the semiconductor market; 20 • customer demand and product life cycles; • the receipt, reduction, or cancellation of, or changes in the forecasts or timing of, orders by customers; • fluctuations in the levels of inventories held by our distributors or end customers; • the gain or loss of significant customers; • supply chain disruptions, delays, shortages, and capacity limitations; • market acceptance of our products and our customers’ products; • our ability to develop, introduce, and market new products and technologies on a timely basis; • the timing and extent of product development costs; • new product announcements and introductions by us or our competitors; • our research and development costs and related new product expenditures and our ability to achieve cost reductions in a timely or predictable manner; • seasonality and fluctuations in sales by product manufacturers that incorporate our precision timing solutions into their products; • end-market demand into which we have limited insight, including cyclicality, seasonality, and the competitive landscape; • the impact of the COVID-19 pandemic on our business, suppliers, and customers; • fluctuations in our manufacturing yields; • significant warranty claims, including those not covered by our suppliers; • new accounting pronouncements or changes in existing accounting standards; • loss of one or more of our executive officers or other key employees; and • changes in our pricing, product cost, and product mix.
Biggest changeFactors relating to our business that may contribute to fluctuations in our operating results include the following factors, as well as other factors described elsewhere in this report: • macroeconomic conditions; • cyclical fluctuations in the semiconductor market; • customer demand and product life cycles; • the receipt, reduction, or cancellation of, or changes in the forecasts or timing of, orders by customers; • fluctuations in the levels of inventories held by our distributors or end customers; • the gain or loss of significant customers; • changes in our pricing, product cost, and product mix; • supply chain disruptions, delays, shortages, and capacity limitations; • market acceptance of our products and our customers’ products; • our ability to develop, introduce, and market new products and technologies on a timely basis; • the timing and extent of product development costs; • new product announcements and introductions by us or our competitors; • our research and development costs and related new product expenditures and our ability to achieve cost reductions in a timely or predictable manner; 17 Table of Contents • seasonality and fluctuations in sales by product manufacturers that incorporate our Precision Timing solutions into their products; • end-market demand into which we have limited insight, including cyclicality, seasonality, and the competitive landscape; • socioeconomic or political conditions in the countries where we operate or where our products are sold or used; • the impact of any pandemic, epidemic, or outbreak of disease, including the emergence of new variants of the COVID-19 pandemic, on our business, suppliers, and customers; • fluctuations in our manufacturing yields; • significant warranty claims, including those not covered by our suppliers; • new accounting pronouncements or changes in existing accounting standards; and • loss of one or more of our executive officers or other key employees; As a result of these and other factors, you should not rely on the results of any prior quarterly or annual periods, or any historical trends reflected in such results, as indications of our future revenue or operating performance.
In the event that these or future tariffs are imposed on imports of our products or on our third-party suppliers, or that China or other countries take retaliatory trade measures in response to existing or future tariffs or other trade restrictions, or that the United States imposes further restrictions on trade with China, our business may be impacted, and we may be required to raise prices or make changes to our operations, or we may not be able to sell our products to customers in China, any of which could materially harm our revenue or operating results.
In the event that future tariffs are imposed on imports of our products or on our third-party suppliers, or that China or other countries take retaliatory trade measures in response to existing or future tariffs or other trade restrictions, or that the United States imposes further restrictions on trade with China, our business may be impacted, and we may be required to raise prices or make changes to our operations, or we may not be able to sell our products to customers in China, any of which could materially harm our revenue or operating results.
Alternatively, if a court were to find these provisions of our bylaws inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business, 37 financial condition, and results of operations and result in a diversion of the time and resources of our management and board of directors.
Alternatively, if a court were to find these provisions of our bylaws inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business, financial condition, and results of operations and result in a diversion of the time and resources of our management and board of directors.
Poor production yields from the foundries that we employ, or defects, 28 integration issues, or other performance problems in our solutions could significantly harm our customer relationships and financial results and give rise to financial or other damages to our customers. Any product liability claim brought against us, even if unsuccessful, would likely be time-consuming and costly to defend.
Poor production yields from the foundries that we employ, or defects, integration issues, or other performance problems in our solutions could significantly harm our customer relationships and financial results and give rise to financial or other damages to our customers. Any product liability claim brought against us, even if unsuccessful, would likely be time-consuming and costly to defend.
If additional financing is not available when required or is not available on acceptable terms, we may have to scale back our operations or limit our production activities, and we may not be able to expand our business, develop or enhance our solutions, take 29 advantage of business opportunities, or respond to competitive pressures, which could negatively impact our revenue and the competitiveness of our products.
If additional financing is not available when required or is not available on acceptable terms, we may have to scale back our operations or limit our production activities, and we may not be able to expand our business, develop or enhance our solutions, take advantage of business opportunities, or respond to competitive pressures, which could negatively impact our revenue and the competitiveness of our products.
As a result of our international focus, we face numerous challenges and risks, including: • complexity and costs of managing international operations, including manufacturing, assembly, and testing of our products and associated costs; • geopolitical and military conflicts, including the effects of Russia’s invasion of Ukraine; • economic instability, including the effects of rising inflation and increased interest rates; • limited protection for, and vulnerability to theft of, our intellectual property rights, including our trade secrets; 19 • compliance with local laws and regulations and unanticipated changes in local laws and regulations, including tax laws and regulations; • trade and foreign exchange restrictions and higher tariffs, including the ongoing trade tensions between the U.S. and China that has resulted in higher tariffs on certain semiconductor products; • timing and availability of import and export licenses and other governmental approvals, permits, and licenses, including export classification requirements; • foreign currency fluctuations and exchange losses relating to our international operating activities; • restrictions imposed by the U.S. government or foreign governments on our ability to do business with certain companies or in certain countries as a result of international political conflicts or the COVID-19 pandemic and the complexity of complying with those restrictions; • transportation delays and other consequences of limited local infrastructure, and disruptions, such as large scale outages or interruptions of service from utilities or telecommunications providers; • difficulties in staffing international operations; • changes in immigration policies which may impact our ability to hire personnel; • local business and cultural factors that differ from our normal standards and practices; • differing employment practices and labor relations; • requirements in foreign countries which may impact availability of personnel, such as mandatory military service in countries such as Ukraine; • heightened risk of terrorist acts; • regional health issues and the impact of public health epidemics on employees and the global economy, such as the worldwide COVID-19 pandemic; • power outages and natural disasters; and • travel, work-from-home or other restrictions or stoppages, like those imposed by governments around the world as a result of the COVID-19 pandemic.
As a result of our international focus, we face numerous challenges and risks, including: • complexity and costs of managing international operations, including manufacturing, assembly, and testing of our products and associated costs; • geopolitical and military conflicts, including the effects of Russia’s invasion of Ukraine; • economic instability, including the effects of rising inflation and increased interest rates; • limited protection for, and vulnerability to theft of, our intellectual property rights, including our trade secrets; • compliance with local laws and regulations and unanticipated changes in local laws and regulations, including tax laws and regulations; • trade and foreign exchange restrictions and higher tariffs, including the ongoing trade tensions between the U.S. and China that has resulted in higher tariffs on certain semiconductor products and increased trade restrictions; 19 Table of Contents • timing and availability of import and export licenses and other governmental approvals, permits, and licenses, including export classification requirements; • foreign currency fluctuations and exchange losses relating to our international operating activities; • restrictions imposed by the U.S. government or foreign governments on our ability to do business with certain companies or in certain countries as a result of international political conflicts and the complexity of complying with those restrictions; • transportation delays and other consequences of limited local infrastructure, and disruptions, such as large scale outages or interruptions of service from utilities or telecommunications providers; • difficulties in staffing international operations; • changes in immigration policies which may impact our ability to hire personnel; • local business and cultural factors that differ from our normal standards and practices; • differing employment practices and labor relations; • requirements in foreign countries which may impact availability of personnel, such as mandatory military service in countries such as Ukraine, Taiwan, and Finland; • heightened risk of terrorist acts; • regional health issues and the impact of public health epidemics on employees and the global economy, such as the worldwide COVID-19 pandemic; • power outages and natural disasters; and • travel, work-from-home or other restrictions or stoppages, like those imposed by governments around the world as a result of the COVID-19 pandemic.
In addition, forecasts provided by customers or their affiliates or contract manufacturers may change or may later prove to have been inaccurate which could make demand for our products difficult for us to predict and could expose us to the risks of inventory shortages or excess inventory and materially harm our results of operations.
In addition, forecasts provided by customers, end customers, or their affiliates or contract manufacturers may change or may later prove to have been inaccurate which could make demand for our products difficult for us to predict and could expose us to the risks of inventory shortages or excess inventory and materially harm our results of operations.
A portion of our operations is located outside of the United States, which subjects us to additional risks, including increased complexity and costs of managing international operations and geopolitical instability. We outsource the fabrication and assembly of all of our products to third parties that are primarily located in Germany and Asia.
A significant portion of our operations is located outside of the United States, which subjects us to additional risks, including increased complexity and costs of managing international operations and geopolitical instability. We outsource the fabrication and assembly of all of our products to third parties that are primarily located in Germany and Asia.
Our target customer and product markets may not grow or develop as we currently expect, and if we fail to penetrate new markets and scale successfully within those markets, our revenue and financial condition would be harmed. Our target markets include the communications and enterprise, automotive, industrial, aerospace, and mobile, IoT, and consumer markets.
Our target customer and product markets may not grow or develop as we currently expect, and if we fail to penetrate new markets and scale successfully within those markets, our revenue and financial condition would be harmed. Our target markets include the communications, datacenter, and enterprise, automotive, industrial, aerospace, and mobile, IoT, and consumer markets.
If we complete acquisitions, we may not achieve the combined revenue, cost synergies, or other benefits from the acquisition that we anticipate, strengthen our competitive position, or achieve our other goals in a timely manner, or at all, and these acquisitions may be viewed negatively by our customers, financial markets, or investors.
If we complete acquisitions, we may not achieve the combined revenue, cost synergies, or other benefits from the acquisition that we anticipate, strengthen our competitive position, or achieve our other strategic goals in a timely manner, or at all, and these acquisitions may be viewed negatively by our customers, financial markets, or investors.
If we increase operations in other currencies in the future, we may experience foreign exchange gains or losses due to the volatility of other currencies compared to the U.S. dollar. Certain of our employees are located in Malaysia, the Netherlands, Taiwan, Japan, Korea, Germany, Finland, France, and Ukraine.
If we increase operations in other currencies in the future, we may experience foreign exchange gains or losses due to the volatility of other currencies compared to the U.S. dollar. Certain of our employees are located in Malaysia, the Netherlands, Taiwan, Japan, Korea, Germany, Finland, France, Ukraine, and India.
Companies that we primarily compete with include, but are not limited to, Abracon LLC, Daishinku Corporation, Kyocera Corporation, Microchip Technology Inc., Murata Manufacturing Co., Ltd., Nihon Dempa Kogyo Co., Ltd., Rakon Limited, Renesas Electronics Corporation, Seiko Epson Corporation, Skyworks Solutions, Inc., Texas Instruments Incorporated, and TXC Corporation.
Companies that we primarily compete with include, but are not limited to, Abracon LLC, Daishinku Corporation, Diodes Incorporated, Kyocera Corporation, Microchip Technology Inc., Murata Manufacturing Co., Ltd., Nihon Dempa Kogyo Co., Ltd., Rakon Limited, Renesas Electronics Corporation, Seiko Epson Corporation, Skyworks Solutions, Inc., Texas Instruments Incorporated, and TXC Corporation.
As long as MegaChips continues to be our largest stockholder, it will continue to have significant influence over us. 35 For example, as long as MegaChips continues to hold a significant or the largest ownership position in our outstanding common stock, MegaChips may have the ability to affect the outcome of any stockholder vote during this period.
As long as MegaChips continues to be our largest stockholder, it will continue to have significant influence over us. For example, as long as MegaChips continues to hold a significant or the largest ownership position in our outstanding common stock, MegaChips may have the ability to affect the outcome of any stockholder vote during this period.
Our amended and restated certificate of incorporation and bylaws include provisions that: • authorize our board of directors to issue, without further action by the stockholders, shares of undesignated preferred stock with terms, rights, and preferences determined by our board of directors that may be senior to our common stock; • require that any action to be taken by our stockholders be effected at a duly called annual or special meeting and not by written consent; • specify that special meetings of our stockholders can be called only by our board of directors, the Chairman of our board of directors, or our Chief Executive Officer; • establish an advance notice procedure for stockholder proposals to be brought before an annual meeting, including proposed nominations of persons for election to our board of directors; • establish that our board of directors is divided into three classes, with each class serving three-year staggered terms; • prohibit cumulative voting in the election of directors; • provide that our directors may be removed only for cause; • provide that vacancies on our board of directors may be filled by a majority of directors then in office, even if less than a quorum; and • require the approval of our board of directors or the holders of at least 66 2/3% of our outstanding shares of capital stock to amend our bylaws and certain provisions of our certificate of incorporation.
Our amended and restated certificate of incorporation and bylaws include provisions that: • authorize our board of directors to issue, without further action by the stockholders, shares of undesignated preferred stock with terms, rights, and preferences determined by our board of directors that may be senior to our common stock; • require that any action to be taken by our stockholders be effected at a duly called annual or special meeting and not by written consent; • specify that special meetings of our stockholders can be called only by our board of directors, the Chairman of our board of directors, or our Chief Executive Officer; • establish an advance notice procedure for stockholder proposals to be brought before an annual meeting, including proposed nominations of persons for election to our board of directors; • establish that our board of directors is divided into three classes, with each class serving three-year staggered terms; • prohibit cumulative voting in the election of directors; 37 Table of Contents • provide that our directors may be removed only for cause; • provide that vacancies on our board of directors may be filled by a majority of directors then in office, even if less than a quorum; and • require the approval of our board of directors or the holders of at least 66 2/3% of our outstanding shares of capital stock to amend our bylaws and certain provisions of our certificate of incorporation.
If we were to become involved in securities litigation, it could subject us to substantial costs, divert resources and the attention of management from our business, and adversely affect our business, financial condition, and results of operations. Item 1B. Unresolved Staff Comments. None 38
If we were to become involved in securities litigation, it could subject us to substantial costs, divert resources and the attention of management from our business, and adversely affect our business, financial condition, and results of operations. Item 1B. Unresolved Staff Comments. None
Moreover, there could be public announcements of the results of hearings, motions, or other interim proceedings or developments and 34 if securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our common stock.
Moreover, there could be public announcements of the results of hearings, motions, or other interim proceedings or developments and if securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our common stock.
If we do not continue to achieve design wins in the short term, our revenue in the following years will deteriorate. Further, a significant portion of our revenue in any period may depend on a single product design win with a large customer.
If we do not continue to achieve design wins in the short term, our revenue in the following years may deteriorate. Further, a significant portion of our revenue in any period may depend on a single product design win with a large customer.
We do not have employment agreements with our 27 executive officers or other key personnel that require them to continue to work for us for any specified period and, therefore, they could terminate their employment with us at any time.
We do not have employment agreements with our executive officers or other key personnel that require them to continue to work for us for any specified period and, therefore, they could terminate their employment with us at any time.
If any future proceedings result in an adverse outcome, we could be required to: • cease the manufacture, use or sale of the applicable products, processes, or technology; • pay substantial damages for infringement by us or our customers; • expend significant resources to develop non-infringing products, processes, or technology, which may not be successful; • license technology from the third-party claiming infringement, which license may not be available on commercially reasonable terms, or at all; • cross-license our technology to a competitor to resolve an infringement claim, which could weaken our ability to compete with that competitor; • lose the opportunity to license our technology to others or to collect royalty payments based upon successful protection and assertion of our intellectual property rights against others; or • pay substantial damages to our customers or end users to discontinue their use of or to replace infringing technology sold to them with non-infringing technology, if available.
If any future proceedings result in an adverse outcome, we could be required to: • cease the manufacture, use or sale of the applicable products, processes, or technology; • pay substantial damages for infringement by us or our customers; • expend significant resources to develop non-infringing products, processes, or technology, which may not be successful; • license technology from the third-party claiming infringement, which license may not be available on commercially reasonable terms, or at all; • cross-license our technology to a competitor to resolve an infringement claim, which could weaken our ability to compete with that competitor; 35 Table of Contents • lose the opportunity to license our technology to others or to collect royalty payments based upon successful protection and assertion of our intellectual property rights against others; or • pay substantial damages to our customers or end users to discontinue their use of or to replace infringing technology sold to them with non-infringing technology, if available.
We updated the Section 382 analysis through December 31, 2022 and concluded there have not been any additional ownership changes as defined under Section 382 since the June 16, 2020 follow-on offering. We may experience ownership changes in the future as a result of subsequent shifts in our stock ownership, some of which may be outside of our control.
We updated the Section 382 analysis through December 31, 2023 and concluded there have not been any additional ownership changes as defined under Section 382 since the June 16, 2020 follow-on offering. We may experience ownership changes in the future as a result of subsequent shifts in our stock ownership, some of which may be outside of our control.
Further, adverse economic conditions may also result in a higher rate of losses on our accounts receivables due to credit defaults. As a result, global macroeconomic conditions have had and may continue to have a material adverse effect on our business, results of operations, and financial condition. We are subject to the cyclical nature of the semiconductor industry.
Further, adverse economic conditions may also result in a higher rate of losses on our accounts receivable due to credit defaults. As a result, global macroeconomic conditions have had and may continue to have a material adverse effect on our business, results of operations, and financial condition. We are subject to the cyclical nature of the semiconductor industry.
In addition, we are unable to predict what future tax reform may be proposed or enacted or what effect such changes would have on our business, but any changes, to the extent they are brought into tax legislation, regulations, policies, or practices, could increase our effective tax rates in the countries where we have operations and have an adverse effect on our overall tax rate, along with increasing the complexity, burden and cost of tax compliance, all of which could impact our business, financial condition, and results of operations.
In addition, we are unable to predict what future tax reform may be proposed or enacted or what effect such changes would have on our business, but any changes, to the extent they are brought into tax legislation, regulations, policies, or practices, could increase our effective tax rates in the countries where we have operations and have 31 Table of Contents an adverse effect on our overall tax rate, along with increasing the complexity, burden and cost of tax compliance, all of which could impact our business, financial condition, and results of operations.
Our failure to anticipate or timely develop new or enhanced products or technologies in response to changing market demand, whether due to technological shifts or otherwise, could result in the loss of customers and decreased revenue and have an adverse effect on our business, financial condition, and results of operations.
Our failure to anticipate or develop new or enhanced products or technologies in a timely manner in response to changing market demand, whether due to technological shifts or otherwise, could result in the loss of customers and decreased revenue and have an adverse effect on our business, financial condition, and results of operations.
If we are unable to maintain our relationship with Bosch or TSMC, our ability to produce high-quality products could suffer, which in turn could harm our business, financial condition, and results of operations. We currently primarily rely on Advanced Semiconductor Engineering, Inc. (“ASE”), Carsem (M) Sdn. Bhd. (“Carsem”), and United Test and Assembly Center Ltd.
If we are 18 Table of Contents unable to maintain our relationship with Bosch or TSMC, our ability to produce high-quality products could suffer, which in turn could harm our business, financial condition, and results of operations. We currently primarily rely on Advanced Semiconductor Engineering, Inc. (“ASE”), Carsem (M) Sdn. Bhd. (“Carsem”), and United Test and Assembly Center Ltd.
Based on our review of our customers annually and as of December 31, 2022 , substantially all of which are large distributors, OEMs, and system manufacturers, we had $0.1 million and $0.1 million in allowance for credit losses as of December 31, 2022 and December 31, 2021, respectively.
Based on our review of our customers annually and as of December 31, 2023, substantially all of which are large distributors, OEMs, and system manufacturers, we had $0.1 million and $0.1 million in allowance for credit losses as of December 31, 2023 and December 31, 2022, respectively.
If we fail to attract new personnel or fail to retain or motivate our current personnel, our business and future growth prospects could be adversely affected. Our company culture has contributed to our success and if we cannot maintain this culture as we grow, our business could be harmed.
If we fail to attract new personnel or fail to retain or motivate our current personnel, our business and future growth prospects could be adversely affected. Our company culture has contributed to our success and if we cannot maintain this culture, our business could be harmed.
We currently rely on Bosch for our MEMS fabrication, and TSMC for our analog circuits fabrication, and any disruption in their supply of wafers or any increases in their wafer or materials prices could adversely affect our gross margins and our ability to meet customer demands in a timely manner, or at all, and lead to reduced revenue.
We currently rely on Bosch for our MEMS fabrication, and primarily on TSMC for our analog circuits fabrication, and any disruption in the supply of wafers or any increases in the wafer or materials prices could adversely affect our gross margins and our ability to meet customer demands in a timely manner, or at all, and lead to reduced revenue.
As a result, if we fail to 21 introduce new or enhanced products that meet the needs of our customers or penetrate new markets in a timely fashion, and our designs do not gain acceptance, we will lose market share and our competitive position.
As a result, if we fail to introduce new or enhanced products that meet the needs of our customers or penetrate new markets in a timely manner, and our designs do not gain acceptance, we will lose market share and our competitive position.
In addition, approximately 88%, 94%, and 93% of our revenue for the years ended December 31, 2022, 2021, and 2020, respectively, was from distributors with ship-to locations outside the United States, although we believe the majority of our end customers are based in the U.S. based on sell-through information provided by these distributors.
In addition, approximately 86%, 88%, and 94% of our revenue for the years ended December 31, 2023, 2022, and 2021, respectively, was from distributors with ship-to locations outside the United States, although we believe the majority of our end customers are based in the U.S. based on sell-through information provided by these distributors.
We also had a follow-on offering on June 16, 2020, which resulted in greater than 50% change under Section 382. We completed an updated Section 382 analysis based on this new change event and determined that it will not prohibit us from eventually utilizing our carryforwards.
We also had a follow-on offering on June 16, 2020, which resulted in greater than 50% change under Section 382. We completed an updated Section 382 analysis based on this new change event and determined 33 Table of Contents that it will not prohibit us from eventually utilizing our carryforwards.
Macroeconomic events such as rising inflation, recession, equity market volatility, geopolitical tensions, war, declines in income or asset values, decreased spending, changes to fuel and other energy costs, public health crises, supply chain disruptions, trade restrictions and sanctions, and the COVID-19 pandemic have caused economic volatility, which has and may continue to harm our business, financial condition, and results of operations, and may cause an extended downturn in the worldwide economy, which would further harm our business, financial condition and results of operations.
Macroeconomic events such as rising inflation, recession, equity market volatility, geopolitical tensions, war, declines in income or asset values, decreased spending, changes to fuel and other energy costs, public health crises, supply chain disruptions, trade restrictions and sanctions, and global banking concerns have caused economic volatility, which has and may continue to harm our business, financial condition, and results of operations, and may cause an extended downturn in the worldwide economy, which would further harm our business, financial condition and results of operations.
Item 1A. Ris k Factors. Risks Related to Our Business and Our Industry Global macroeconomic conditions have harmed and may continue to harm our business. We are a global company and therefore our business, results of operations and financial condition are impacted by global macroeconomic conditions.
Item 1A. Risk Factors. Risks Related to Our Business and Our Industry Global macroeconomic conditions have harmed and may continue to harm our business. We are a global company and therefore our business, results of operations, and financial condition are impacted by global macroeconomic conditions.
Based on our shipment information, we believe that revenue attributable to our ten largest end customers accounted for 47%, 49% and 58% of our revenue for the years ended December 31, 2022, 2021, and 2020, respectively.
Based on our shipment information, we believe that revenue attributable to our ten largest end customers accounted for 49%, 47% and 49% of our revenue for the years ended December 31, 2023, 2022, and 2021, respectively.
Our gross margins may fluctuate due to a number of factors, including customer and product mix, market acceptance of our new products, timing and seasonality of the end-market demand, yield, wafer pricing, packaging, and testing costs, competitive pricing dynamics, the impact of the COVID-19 pandemic, and geographic and market pricing strategies.
Our gross margins may fluctuate due to a number of factors, including customer and product mix, market acceptance of our new products, timing and seasonality of the end-market demand, yield, wafer pricing, packaging, and testing costs, competitive pricing dynamics, and geographic and market pricing strategies.
For instance, we continue to see increases in our manufacturing costs in fiscal year 2023 due to industry wide increases in costs.
For instance, we continued to see increases in our manufacturing costs in fiscal year 2023 due to industry wide increases in costs.
In the event of a major earthquake, hurricane, flooding, or other catastrophic event such as fire, power loss, telecommunications failure, cyber-attack, war, terrorist attack, political, social, or economic unrest, or disease outbreak, such as the COVID-19 pandemic, we may be unable to continue our operations and may endure system interruptions, reputational harm, delays in our product development, breaches of data security, or loss of critical data, any of which could have an adverse effect on our future results of operations.
In the event of a major earthquake, hurricane, flooding, or other catastrophic event, including with respect to climate change, such as fire, power loss, telecommunications failure, cyber-attack, war, terrorist attack, political, social, or economic unrest, pandemic, epidemic, health crisis, or disease outbreak, such as the COVID-19 pandemic, we may be unable to continue our operations and may endure system interruptions, reputational harm, delays in our product development, breaches of data security, or loss of critical data, any of which could have an adverse effect on our future results of operations.
Although we carry product liability insurance, this insurance is subject to significant deductibles and may not adequately cover our costs arising from defects in our products or otherwise. 25 Defects in our products or failures to meet product specifications could harm our relationships with our customers and damage our reputation.
Although we carry product liability insurance, this insurance is subject to significant deductibles and may not adequately cover our costs arising from defects in our products or otherwise. 24 Table of Contents Defects in our products or failures to meet product specifications could harm our relationships with our customers and damage our reputation.
Under the CARES Act, which was signed into law in 2020, an NOL from a tax year beginning in 2018, 2019 or 2020 can be carried back five years and would not be subject to the 80%-of-income limitation if they are exhausted during the five-year carryback period or during 2018, 2019 or 2020.
Under the Coronavirus Aid, Relief, and Economic Security Act, which was signed into law in 2020, an NOL from a tax year beginning in 2018, 2019 or 2020 can be carried back five years and would not be subject to the 80%-of-income limitation if they are exhausted during the five-year carryback period or during 2018, 2019 or 2020.
The trading price and volume of our common stock is likely to be volatile and could fluctuate significantly in response to numerous factors, many of which are beyond our control, including: • macroeconomic conditions, • actual or anticipated fluctuations in our results of operations due to, among other things, changes in customer demand, product life cycles, pricing, ordering patterns, and unforeseen operating costs; • the financial projections we may provide to the public, any changes in these projections, or our failure to meet these projections; • announcements with respect to developments, status, and impact on us, our competition, our constituents, and our suppliers of the COVID 19 global pandemic; • failure of securities analysts to initiate or maintain coverage of us, changes in financial estimates or ratings by any securities analysts who follow us, or our failure to meet these estimates or the expectations of investors; • announcements by our significant customers of changes to their product offerings, business plans, or strategies; • announcements by us or our competitors of significant technical innovations, acquisitions, strategic partnerships, joint ventures, or capital commitments; • changes in operating performance and stock market valuations of other technology companies generally, or those in the semiconductor industry; • timing and seasonality of the end-market demand; • cyclical fluctuations in the semiconductor market; • price and volume fluctuations in the overall stock market from time to time, including as a result of trends in the economy as a whole; • actual or anticipated developments in our business or our competitors’ businesses or the competitive landscape generally; • new laws or regulations or new interpretations of existing laws or regulations applicable to our business; • any major change in our management; • lawsuits threatened or filed against us; and • other events or factors, including those resulting from war, incidents of terrorism, the COVID-19 pandemic, or responses to these events.
The trading price and volume of our common stock is likely to be volatile and could fluctuate significantly in response to numerous factors, many of which are beyond our control, including: • macroeconomic conditions, • actual or anticipated fluctuations in our results of operations due to, among other things, changes in customer demand, product life cycles, pricing, ordering patterns, and unforeseen operating costs; • the financial projections we may provide to the public, any changes in these projections, or our failure to meet these projections; • failure of securities analysts to initiate or maintain coverage of us, changes in financial estimates or ratings by any securities analysts who follow us, or our failure to meet these estimates or the expectations of investors; • announcements by our significant customers of changes to their product offerings, business plans, or strategies; 38 Table of Contents • announcements by us or our competitors of significant technical innovations, acquisitions, strategic partnerships, joint ventures, or capital commitments; • changes in operating performance and stock market valuations of other technology companies generally, or those in the semiconductor industry; • timing and seasonality of the end-market demand; • cyclical fluctuations in the semiconductor market; • price and volume fluctuations in the overall stock market from time to time, including as a result of trends in the economy as a whole; • actual or anticipated developments in our business or our competitors’ businesses or the competitive landscape generally; • new laws or regulations or new interpretations of existing laws or regulations applicable to our business; • any major change in our management; • lawsuits threatened or filed against us; and • other events or factors, including those resulting from geopolitical activities, war, incidents of terrorism, natural disasters, pandemics, or responses to these events.
Any downturns in the semiconductor industry could harm our business, financial condition, and results of operations. In the last few years, the semiconductor industry experienced an upturn. Any significant upturn in the semiconductor industry could result in increased competition for access to third-party foundry and assembly capacity.
Any downturns in the semiconductor industry could harm our business, financial condition, and results of operations. Any significant upturn in the semiconductor industry could result in increased competition for access to third-party foundry and assembly capacity.
Our competitors range from large, international companies offering a wide 26 range of timing products to smaller companies, including start-ups, specializing in narrow market verticals.
Our competitors range 25 Table of Contents from large, international companies offering a wide range of timing products to smaller companies, including start-ups, specializing in narrow market verticals.
Our top three distributors by revenue together accounted for approximately 49%, 48%, and 59% of our revenue for the years ended December 31, 2022, 2021, and 2020, respectively.
Our top three distributors by revenue together accounted for approximately 51%, 49%, and 48% of our revenue for the years ended December 31, 2023, 2022, and 2021, respectively.
Although we maintain a qualification and performance surveillance process and we believe that sources of supply for engineered materials, raw materials, and components are generally adequate, it is difficult to predict what effects shortages or price increases may have in the future.
Although we maintain a qualification and performance surveillance process and we believe that sources of supply for engineered materials, raw materials, and components are generally adequate, it is difficult to predict what effects limited or delayed availability, or price increases 28 Table of Contents may have in the future.
This agreement continues until either party terminates for material breach. Under this agreement, we have agreed to develop and deliver new products to this end customer at its request, provided it also meets our business purposes, and have agreed to indemnify it for intellectual property infringement or any injury or damages caused by our products.
Under this agreement, we have agreed to develop and deliver new products to this end customer at its request, provided it also meets our business purposes, and have agreed to indemnify it for intellectual property infringement or any injury or damages caused by our products.
The terms of any financing arrangements may include negative covenants or other restrictions on our business that could impair our operational flexibility and would also require us to incur additional interest expense.
Any required financing may not be available on terms acceptable to us, or at all. The terms of any financing arrangements may include negative covenants or other restrictions on our business that could impair our operational flexibility and would also require us to incur additional interest expense.
Changes in export or import laws or sanctions policies also may adversely impact our operations, delay the introduction and sale of our products in international markets, or, in some cases, prevent the export or import of our products and technology to certain countries, regions, governments, persons, or entities altogether, which could adversely affect our business, financial condition, and results of operations. 30 Changes in environmental laws or regulations, including conflict minerals rules, could impair our ability to compete in international markets.
Changes in export or import laws or sanctions policies also may adversely impact our operations, delay the introduction and sale of our products in international markets, or, in some cases, prevent the export or import of our products and technology to certain countries, regions, governments, persons, or entities altogether, which could adversely affect our business, financial condition, and results of operations.
Further, if our target customer markets, including the 5G communications or IoT and mobile markets, do not grow or develop in ways that we currently expect, demand for our technology may not materialize as expected, which would also negatively impact our business, financial condition, and results of operations.
Further, if our target customer markets do 21 Table of Contents not grow or develop in ways that we currently expect, demand for our technology may not materialize as expected, which would also negatively impact our business, financial condition, and results of operations.
We believe that the success of our business depends more on proprietary technology, information and processes, and know-how than on our patents or trademarks. Much of our proprietary information and technology related to manufacturing processes is not patented and may not be patentable.
We do not believe there will be any significant impact upon expiration of these patents. We believe that the success of our business depends more on proprietary technology, information and processes, and know-how than on our patents or trademarks. Much of our proprietary information and technology related to manufacturing processes is not patented and may not be patentable.
There are currently a number of industry-wide supply constraints affecting the supply of analog circuits manufactured by certain foundries, including TSMC, and affecting outsourced semiconductor assembly and test providers (“OSATs”), which in the past has limited and may in the future limit our ability to fully satisfy an increase in demand for some of our products.
In 2021 and the first half of 2022 there were a number of industry-wide supply constraints affecting the supply of analog circuits manufactured by certain foundries, including TSMC, and affecting outsourced semiconductor assembly and test providers (“OSATs”), which limited our ability to fully satisfy an increase in demand for some of our products.
If we are unable to negotiate volume discounts or otherwise purchase wafers at favorable prices and in sufficient quantities in a timely manner, our ability to ship our solutions to our customers on time and in the quantity required could be adversely affected, which in turn could cause an unanticipated decline in our sales, harm to our customer relationships, and our gross margins to be adversely affected. 18 To ensure continued wafer supply, we may be required to establish alternative wafer supply sources, which could require significant expenditures and limit our negotiating leverage.
If we are unable to negotiate volume discounts or otherwise purchase wafers at favorable prices and in sufficient quantities in a timely manner, our ability to ship our solutions to our customers on time and in the quantity required could be adversely affected, which in turn could cause an unanticipated decline in our sales, harm to our customer relationships, and our gross margins to be adversely affected.
The COVID-19 pandemic has impacted our workforce and the operations of our customers and suppliers. In response to the ongoing COVID-19 pandemic and related government measures, we implemented safety measures to protect our employees and contractors at our locations around the world. The effects of the ongoing COVID-19 pandemic on our business are evolving and difficult to predict.
The COVID-19 pandemic impacted our workforce and the operations of our customers and suppliers. In response to the COVID-19 pandemic and related government measures, we implemented safety measures to protect our employees and contractors at our locations around the world.
We anticipate revenue attributable to this customer will fluctuate from period to period. Although we sell our products to this customer through distributors on a purchase order basis, including Pernas Electronics Co., Ltd. (“Pernas”), Arrow Electronics, Inc. (“Arrow”), and Quantek Technology Corporation (“Quantek”), we have a development and supply agreement, which provides a general framework for certain transactions with Apple.
Although we sell our products to this customer through distributors on a purchase order basis, including Pernas Electronics Co., Ltd. (“Pernas”), Arrow Electronics, Inc. (“Arrow”), and Quantek Technology Corporation (“Quantek”), we have a development and supply agreement, which provides a general framework for certain transactions with Apple. This agreement continues until either party terminates for material breach.
If political tensions between China and Taiwan were to increase further, it could disrupt our business and adversely affect our financial condition and results of operations given that we rely primarily on TSMC in Taiwan for our analog circuits.
For example, we rely on TSMC in Taiwan for the fabrication of our analog circuits and have engineering personnel in Taiwan and sales force personnel in China. If political tensions between China and Taiwan were to increase further, it could disrupt our business and adversely affect our financial condition and results of operations.
As a result, MegaChips will have the ability to exert significant influence over many matters affecting us, either through its board representative or as a stockholder, including: • determinations with respect to our business plans and policies, including the appointment and removal of our officers; • any determinations with respect to mergers and other business combinations; • our acquisition or disposition of assets; • our financing activities; • the allocation of business opportunities that may be suitable for us and MegaChips; • the payment of dividends on our common stock; and • the number of shares available for issuance under our stock plans.
As a result, MegaChips will have the ability to exert significant influence over many matters affecting us, either through its board representative or as a stockholder, including: • determinations with respect to our business plans and policies, including the appointment and removal of our officers; • any determinations with respect to mergers and other business combinations; • our acquisition or disposition of assets; • our financing activities; • the allocation of business opportunities that may be suitable for us and MegaChips; • the payment of dividends on our common stock; and • the number of shares available for issuance under our stock plans. 36 Table of Contents MegaChips’ significant ownership position may discourage transactions involving a change of control of us, including transactions in which other holders of our common stock might otherwise receive a premium for their shares over the then current market price.
We may be unable to predict the timing or development of trends in our target markets with any accuracy. If we fail to accurately predict market requirements or market demand for these solutions, our business will suffer.
We may be unable to predict the timing or development of trends in our target markets with any accuracy. If we fail to accurately predict market requirements or market demand for these solutions, our business will suffer. A market shift towards an industry standard that we may not support could significantly decrease the demand for our solutions.
Our revenue in recent periods may not be indicative of future performance and our revenue may fluctuate over time. Our recent revenue should not be considered indicative of our future performance. Our revenue was $283.6 million, $218.8 million, and $116.2 million for the years ended December 31, 2022, 2021, and 2020, respectively.
Our revenue in previous periods may not be indicative of future performance and our revenue may fluctuate over time. Our revenue has fluctuated over time. Our revenue was $144.0 million, $283.6 million, and $218.8 million for the years ended December 31, 2023, 2022, and 2021, respectively.
If such an impermissible use of our intellectual property or trade secrets were to occur, our ability to sell our solutions at competitive prices may be adversely affected and our business, financial condition, and results of operations could be adversely affected. 33 The legal standards relating to the validity, enforceability, and scope of protection of intellectual property rights are uncertain and evolving.
If such an impermissible use of our intellectual property or trade secrets were to occur, our ability to sell our solutions at competitive prices may be adversely affected and our business, financial condition, and results of operations could be adversely affected.
As of December 31, 2022, we had 99 issued U.S. patents, expiring generally between 2026 and 2039 and 43 pending U.S. patent applications (including 12 provisional applications). We also had three foreign issued patents expiring in 2036 and four pending foreign patent applications.
As of December 31, 2023, we had 119 issued U.S. patents, expiring generally between 2026 and 2040 and 42 pending U.S. patent applications (including 13 provisional applications). We also had four foreign issued patents expiring in 2036 and four pending foreign patent applications.
In addition, we conduct research and development activities in the United States, Japan, the Netherlands, Taiwan, Ukraine and Finland. We also conduct marketing and administrative functions in the United States, Japan, the Netherlands, China, Taiwan, Malaysia, and Ukraine. Certain of the critical functions for our business are performed in locations outside of the United States.
In addition, we conduct research and development activities in locations including the United States, Japan, the Netherlands, Taiwan, Ukraine, Finland, and India. We also conduct marketing and administrative functions in the United States, Japan, the Netherlands, China, Taiwan, Malaysia, Ukraine, and India. Members of our sales force are located in various locations outside of the United States.
Complying with such laws and regulations may be time-consuming and require additional resources, and could therefore adversely affect our business, financial condition, and results of operations. Breaches or other disruptions of our security systems may damage our reputation and adversely affect our business.
Complying with such laws and regulations may be time-consuming and require additional resources, and could therefore adversely affect our business and results of operations.
These net operating loss and U.S. federal tax credit carryforwards could expire unused and/or be unavailable to offset future income tax liabilities.
The U.S. federal research and development tax credit carryforwards begin to expire in 2025 and the state research and development tax credit carryforwards carry forward indefinitely. These net operating loss and U.S. federal tax credit carryforwards could expire unused and/or be unavailable to offset future income tax liabilities.
As of December 31, 2022, we had U.S. federal, state and foreign net operating loss (“NOL”), carryforwards of approximately $213.3 million, $65.3 million and $1.7 million, respectively, and U.S. federal and state research and development tax credit carryforwards of approximately $3.9 million and $3.6 million, respectively.
As of December 31, 2023, we had U.S. federal, state and foreign net operating loss (“NOL”), carryforwards of approximately $230.2 million, $83.7 million and $1.7 million, respectively, and U.S. federal and state research and development tax credit carryforwards of approximately $3.9 million and $3.6 million, respectively. The U.S. federal, state, and the foreign NOL carryforwards begin to expire in 2028.
We expect our revenue to fluctuate in the future primarily based on the volume of shipments of our products and average selling price ("ASP") changes. Though our ASP increased in 2022 compared to 2021, we may not be able to sustain ASP increases in the future.
We expect our revenue to fluctuate in the future primarily based on the volume of shipments of our products and average selling price ("ASP") changes.
Our ability to make acquisitions and successfully integrate personnel, technologies, or operations of any acquired business is unproven.
In the future, we may acquire other businesses, products, or technologies. Our ability to make acquisitions and successfully integrate personnel, technologies, or operations of any acquired business is unproven.
Our systems are not fully redundant and depending on the severity of the damage or interruption, our disaster recovery plans may be inadequate or ineffective.
Our systems are not fully redundant and depending on the severity of the damage or interruption, our disaster recovery plans may be inadequate or ineffective. These events could also damage our reputation, and result in increased costs or loss of sales.
We cannot assure you that the steps we have taken will prevent unauthorized use of our intellectual property, or that others will not develop technologies similar or superior to our technology or design around our intellectual property. Our failure to effectively protect our intellectual property could reduce the value of our technology in licensing arrangements or in cross-licensing negotiations.
We cannot assure you that the steps we have taken will prevent 34 Table of Contents unauthorized use of our intellectual property, or that others will not develop technologies similar or superior to our technology or design around our intellectual property.
If financing is not available when required or is not available on acceptable terms, it could harm our liquidity position and we may have to scale back our operations or limit our production activities, which in turn would harm our business, operating results, and financial condition.
If financing is not available when required or is not available on acceptable terms, it could harm our liquidity position and we may have to scale back our operations or limit our production activities, which in turn would harm our business, operating results, and financial condition. 29 Table of Contents If significant tariffs or other trade restrictions are placed on our products or third-party suppliers, our revenue and results of operations may be materially harmed.
We depend on third parties for our wafer fabrication, assembly, packaging, and testing operations, which exposes us to certain risks that may harm our business. We operate an outsourced manufacturing business model. As a result, we rely on third parties for all of our manufacturing operations, including wafer fabrication, assembly, packaging, and testing.
Fluctuations in our revenue and operating results could cause our stock price to decline and, as a result, you may lose some or all of your investment. We depend on third parties for our wafer fabrication, assembly, packaging, and testing operations, which exposes us to certain risks that may harm our business. We operate an outsourced manufacturing business model.
State, federal, and foreign laws and regulations related to privacy, data use, and security could adversely affect us. We are subject to state and federal laws and regulations related to privacy, data use, and security.
State, federal, and foreign laws and regulations and other legal obligations related to privacy, data protection, and data security could adversely affect us.
In addition, such arrangements may provide for exclusivity periods during which we may only sell specified products or technologies to that particular customer. Any failure to timely develop commercially successful products under such arrangements as a result of any of these and other challenges could have a material adverse effect on our business, results of operations, and financial condition.
Any failure to develop commercially successful products under such arrangements in a timely manner as a result of any of these and other challenges could have a material adverse effect on our business, results of operations, and financial condition.
In addition, we also rely on contractual protections with our customers, suppliers, distributors, employees, and consultants, and we implement security measures designed to protect our trade secrets and know-how.
Our failure to effectively protect our intellectual property could reduce the value of our technology in licensing arrangements or in cross-licensing negotiations. In addition, we also rely on contractual protections with our customers, suppliers, distributors, employees, and consultants, and we implement security measures designed to protect our trade secrets and know-how.
These third-party manufacturers often serve customers that are larger than us or require a greater portion of their services, which may decrease our relative importance and negotiating leverage with these third parties.
Except for our agreement with Bosch for MEMS wafers, we do not have any long-term supply agreements with any of our other manufacturing suppliers. These third-party manufacturers often serve customers that are larger than us or require a greater portion of their services, which may decrease our relative importance and negotiating leverage with these third parties.
The market price of our common stock could decline as a result of substantial sales of our common stock, particularly sales by our directors, executive officers, and significant stockholders, including MegaChips, or the perception in the market that holders of a large number of shares intend to sell their shares. 36 Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of us more difficult, limit attempts by our stockholders to replace or remove our current management and limit the market price of our common stock.
The market price of our common stock could decline as a result of substantial sales of our common stock, particularly sales by our directors, executive officers, and significant stockholders, including MegaChips, or the perception in the market that holders of a large number of shares intend to sell their shares.
As we grow our business, our revenue may fluctuate in future periods due to a number of reasons, which may include macroeconomic conditions, slowing demand for our products, increasing competition, the impact of the COVID-19 pandemic, a decrease in the growth of our overall market or market saturation, or our failure to capitalize on growth opportunities. 24 If we are unable to manage our growth effectively, we may not be able to execute our business plan and our operating results could suffer.
As we grow our business, our revenue may fluctuate in future periods due to a number of reasons, which may include macroeconomic conditions, slowing demand for 23 Table of Contents our products, increasing competition, a decrease in the growth of our overall market or market saturation, or our failure to capitalize on growth opportunities.
These events could also damage our reputation, and result in increased costs or loss of sales. 32 We might not be able to utilize a significant portion of our net operating loss carryforwards and research and development tax credit carryforwards.
We might not be able to utilize a significant portion of our net operating loss carryforwards and research and development tax credit carryforwards.
The semiconductor industry is highly cyclical and is characterized by constant and rapid technological change, rapid product obsolescence, price erosion, evolving standards, short product life cycles, and wide fluctuations in product supply and demand.
The semiconductor industry is highly cyclical and is characterized by constant and rapid technological change, rapid product obsolescence, price erosion, evolving standards, short product life cycles, and wide fluctuations in product supply and demand. From time to time, these factors, together with changes in macroeconomic conditions, can cause significant upturns and downturns in the semiconductor industry, and in our business.
MegaChips owns 5,000,000 shares of our common stock, representing approximately 23.0% of our outstanding common stock as of December 31, 2022.
MegaChips owns 4,700,000 shares of our common stock, representing approximately 20.7% of our outstanding common stock as of December 31, 2023.
However, our customers may change their purchase orders and demand forecasts at any time with limited notice due in part to fluctuating end-market demand, which can sometimes lead to price renegotiations.
Although on average selling prices of our products have increased over time as we introduce higher end products, the average selling prices of our individual products generally decrease over time. Our customers may change their purchase orders and demand forecasts at any time with limited notice due in part to fluctuating end-market demand, which can sometimes lead to price renegotiations.
If significant tariffs or other trade restrictions are placed on our products or third-party suppliers, our revenue and results of operations may be materially harmed. Most of our revenue has been from sales of products to distributors with ship-to locations outside of the United States. Many of our third-party suppliers are located outside of the United States.
Most of our revenue has been from sales of products to distributors with ship-to locations outside of the United States. Many of our third-party suppliers are located outside of the United States.
Although we use multiple third-party supplier sources, we depend on these third parties to supply us with material of a requested quantity in a timely manner that meets our standards for yield, cost, and manufacturing quality. The manufacturing processes of our third-party suppliers for our products require specialized technology that requires certain raw and engineered materials.
As a result, we rely on third parties for all of our manufacturing operations, including wafer fabrication, assembly, packaging, and testing. Although we use multiple third-party supplier sources, we depend on these third parties to supply us with material of a requested quantity in a timely manner that meets our standards for yield, cost, and manufacturing quality.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe also lease offices in Michigan, Japan, Malaysia, the Netherlands, Taiwan, Finland, and Ukraine. We do not own any real property. We believe that our leased facilities are adequate to meet our current needs and that additional facilities will be available on commercially reasonable terms for lease to meet future needs.
Biggest changeWe believe that our leased facilities are adequate to meet our current needs and that additional facilities will be available on commercially reasonable terms for lease to meet future needs.
Item 2. Pr operties. Our principal executive offices are located in a leased facility in Santa Clara, California, consisting of approximately 50,400 square feet of office space under lease that expires in March 2027. This facility accommodates our principal engineering, sales, marketing, operations, finance, and administrative activities.
Item 2. Properties. Our principal executive offices are located in a leased facility in Santa Clara, California, consisting of approximately 50,400 square feet of office space under lease that expires in March 2027. This facility accommodates our principal engineering, sales, marketing, operations, finance, and administrative activities.
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Outside of the United States, we also lease facilities in various international locations that are used for research and development, sales, business development, operations, and administrative support. These international facilities are mainly located in Japan, Malaysia, the Netherlands, Taiwan, and Ukraine. We do not own any real property.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeWe are not currently a party to any legal proceedings the outcome of which, if determined adversely to us, would individually or in the aggregate have a material adverse effect on our business, financial condition, and results of operations. Item 4. Mine Safe ty Disclosures. Not applicable 39 PART II
Biggest changeWe are not currently a party to any legal proceedings the outcome of which, if determined adversely to us, would individually or in the aggregate have a material adverse effect on our business, financial condition, and results of operations. 40 Table of Contents Item 4. Mine Safety Disclosures. Not applicable 41 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe stockholder return shown in the graph below is not necessarily indicative of, nor is it intended to forecast, the potential future performance of our common stock, and we do not make or endorse any predictions as to future stockholder returns. 40 Base Period December 31, December 31, December 31, December 31, Company Name/Index 11/21/2019 2019 2020 2021 2022 SiTime Corporation 100.00 150.89 662.31 1,731.01 601.30 Nasdaq composite index 100.00 105.22 151.13 183.46 122.73 Philadelphia Semiconductor index 100.00 109.24 165.10 233.06 149.55 41 Item 6. [R e served] 42
Biggest changeThe stockholder return shown in the graph below is not necessarily indicative of, nor is it intended to forecast, the potential future performance of our common stock, and we do not make or endorse any predictions as to future stockholder returns. 42 Table of Contents Company Name/Index Base Period 11/21/2019 December 31, 2019 December 31, 2020 December 31, 2021 December 31, 2022 December 31, 2023 SiTime Corporation 100.00 150.89 662.31 1,731.01 601.30 722.37 Nasdaq composite index 100.00 105.22 151.13 183.46 122.73 176.03 Philadelphia Semiconductor index 100.00 109.24 165.10 233.06 149.55 246.61 43 Table of Contents Item 6. [Reserved] 44 Table of Contents
The following line graph compares for the period beginning November 21, 2019, the initial trading date of our common stock on the Nasdaq Global Market, and ending on December 31, 2022, the last day of our fiscal year, the cumulative total stockholder return for our common stock, the Nasdaq Composite Index and Philadelphia Semiconductor Index and assumes reinvestment of any dividends.
The following line graph compares for the period beginning November 21, 2019, the initial trading date of our common stock on the Nasdaq Global Market, and ending on December 31, 2023, the last day of our fiscal year, the cumulative total stockholder return for our common stock, the Nasdaq Composite Index and Philadelphia Semiconductor Index and assumes reinvestment of any dividends.
Item 5. Market for Registrant’s Common Equity, Related Stock holder Matters and Issuer Purchases of Equity Securities. Market Information for Common Stock Our common stock has been quoted on the Nasdaq Global Market under the symbol “SITM” since our initial public offering in November 2019. Prior to that time, there was no public market for our common stock.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information for Common Stock Our common stock has been quoted on the Nasdaq Global Market under the symbol “SITM” since our initial public offering in November 2019. Prior to that time, there was no public market for our common stock.
As of February 9, 2023, there were 20 holders of record (not including beneficial holders of stock held in street names) of our common stock. Dividend Policy We have never paid any cash dividends on our common stock.
As of February 15, 2024, there were 28 holders of record (not including beneficial holders of stock held in street names) of our common stock. Dividend Policy We have never paid any cash dividends on our common stock.

Item 7. Management's Discussion & Analysis

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

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Biggest changeYear Ended December 31, Change 2022 vs 2021 2022 2021 2020 $ % (in thousands, except percentage) Revenue $ 283,605 $ 218,808 $ 116,156 $ 64,797 30 % Cost of revenue 100,643 79,346 58,224 21,297 27 % Gross profit 182,962 139,462 57,932 43,500 31 % Operating expenses: Research and development 90,288 52,104 31,652 38,184 73 % Selling, general and administrative 76,532 54,515 34,893 22,017 40 % Total operating expenses 166,820 106,619 66,545 60,201 56 % Income (loss) from operations 16,142 32,843 (8,613 ) (16,701 ) (51 %) Interest income 7,291 — — 7,291 100 % Other expense, net (97 ) (488 ) (758 ) 391 (80 %) Income (loss) before income taxes 23,336 32,355 (9,371 ) (9,019 ) (28 %) Income tax expense (82 ) (78 ) (1 ) (4 ) 5 % Net income (loss) attributable to common stockholders and comprehensive income $ 23,254 $ 32,277 $ (9,372 ) $ (9,023 ) (28 %) A discussion of changes in our results of operations from fiscal 2020 to fiscal 2021 has been omitted from this Form 10-K, but may be found in “Item 7.
Biggest changeYear Ended December 31, Change 2023 vs 2022 2023 2022 2021 $ % (in thousands, except percentage) Revenue $ 143,993 $ 283,605 $ 218,808 $ (139,612) (49 %) Cost of revenue 61,905 100,643 79,346 (38,738) (38 %) Gross profit 82,088 182,962 139,462 (100,874) (55 %) Operating expenses: Research and development 97,589 90,288 52,104 7,301 8 % Selling, general and administrative 83,971 76,532 54,515 7,439 10 % Acquisition related costs 7,728 — — 7,728 n/a Total operating expenses 189,288 166,820 106,619 22,468 13 % Income (loss) from operations (107,200) 16,142 32,843 (123,342) (764 %) Interest income 26,958 7,291 — 19,667 270 % Other expense, net (141) (97) (488) (44) 45 % Income (loss) before income taxes (80,383) 23,336 32,355 (103,719) (444 %) Income tax expense (152) (82) (78) (70) 85 % Net income (loss) attributable to common stockholders and comprehensive income $ (80,535) $ 23,254 $ 32,277 $ (103,789) (446 %) A discussion of changes in our results of operations from fiscal 2021 to fiscal 2022 has been omitted from this Annual Report on Form 10-K, but may be found in “Part II, Item 7.
Our precision timing solutions are the heartbeat of our customers’ electronic systems, providing the timing functionality that is needed for electronics to operate reliably and correctly. We provide solutions that are differentiated by high performance, high resilience, and high reliability, along with programmability, small size, and low power consumption.
Our Precision Timing solutions are the heartbeat of our customers’ electronic systems, providing the timing functionality that is needed for electronics to operate reliably and correctly. We provide Precision Timing solutions that are differentiated by high performance, high resilience, and high reliability, along with programmability, small size, and low power consumption.
In May 2022, the Company entered into a Sales Agreement ("Sales Agreement") with Stifel, Nicolaus & Company, Incorporated ("Stifel"), under which we may offer and sell from time to time at our sole discretion, up to an aggregate of 800,000 shares of our common stock, par value $0.0001 per share, through Stifel as our sales agent.
In May 2022, we entered into a Sales Agreement ("Sales Agreement") with Stifel, Nicolaus & Company, Incorporated ("Stifel"), under which we may offer and sell from time to time at our sole discretion, up to an aggregate of 800,000 shares of our common stock, par value $0.0001 per share, through Stifel as our sales agent.
If 44 we fail to anticipate or respond to technological shifts or market demands, or to timely develop new or enhanced products or technologies in response to the same, it could result in decreased revenue and the loss of our design wins to our competitors. Pricing, Product Cost, and Product Mix The ASPs of our products vary significantly.
If we fail to anticipate or respond to technological shifts or market demands, or to timely develop new or enhanced products or technologies in response to the same, it could result in decreased revenue and the loss of our design wins to our competitors. Pricing, Product Cost, and Product Mix The ASPs of our products vary significantly.
In February 2021, we completed a follow-on public offering, in which we issued and sold 1,500,000 shares of our common stock, resulting in net proceeds to us of $181.6 million after deducting underwriting discounts and commissions and deferred offering costs.
In February 2021, we completed a follow-on public offering, in which we issued and sold 1,500,000 shares of our common stock, resulting in net proceeds to us of $181.6 million after deducting underwriting discounts and commissions and offering costs.
In November 2021, we completed a follow-on public offering, in which we issued and sold 1,300,000 shares of our common stock, resulting in net proceeds to us of $279.0 million after deducting underwriting discounts and commissions and deferred offering costs.
In November 2021, we completed a follow-on public offering, in which we issued and sold 1,300,000 shares of our common stock, resulting in net proceeds to us of $279.0 million after deducting underwriting discounts and commissions and offering costs.
Our research and development expense consists primarily of personnel costs, which include stock-based compensation, pre-production engineering mask costs, software license and intellectual property expenses, design tools and prototype-related expenses, facility costs, supplies, professional and consulting fees, and allocated overhead costs, which may be offset by non-recurring engineering contra-expenses recorded in certain periods.
Our research and development expense consists primarily of personnel costs, which include stock-based compensation, as well as pre-production engineering mask costs, software license and intellectual property expenses, design tools and prototype-related expenses, facility costs, supplies, professional and consulting fees, and allocated overhead costs, which may be offset by non-recurring engineering contra-expenses recorded in certain periods.
We believe that some of our customers built up inventory in our products in 2022 to overcome the industry-wide supply constraints that occurred in the previous periods and that the macroeconomic events in 2022 have led to reduced demand for our customers' products, which led to an inventory buildup at some of our customers and their affiliates, partners and contract manufacturers, which has adversely affected sales of our products.
We believe that some of our customers built up inventory of our products in 2022 to overcome the industry-wide supply constraints that occurred in the previous periods and that the macroeconomic events in 2022 and 2023 led to reduced demand for our customers' products, which led to an inventory buildup at some of our customers and their affiliates, partners and contract manufacturers, which has adversely affected sales of our products.
We perform detailed reviews of the net realizable value of inventories, both on hand as well as for inventories that we are committed to purchase at the end of each reporting period. We write-down the inventory value for estimated deterioration, excess, obsolete and other factors based on management’s assessment of future demand and market conditions of our inventory.
We perform detailed reviews of the net realizable value of inventories, both on hand as well as for inventories that we are committed to purchase at the end of each reporting period. We write-down the inventory value for estimated deterioration, excess, obsolete and other factors based on management’s assessment of future demand of our inventory.
The changes in operating assets and liabilities resulted in cash provided primarily due to higher accounts receivable due 49 to timing of shipments, an increase in inventories as we managed our inventory levels, higher prepaid expenses and other assets related to advance payments to suppliers for inventory and royalties, higher accrued expenses and other liabilities due to timing of payments, offset by an increase in accounts payable.
The changes in operating assets and liabilities resulted in cash provided primarily due to higher accounts receivable due to timing of shipments, an increase in inventories as we managed our inventory levels, higher prepaid expenses and other assets related to advance payments to suppliers for inventory and royalties, offset by an increase in accounts payable and lower accrued expenses and other liabilities due to timing of payments.
For additional discussion please see Part I, Item 1A Risk Factors of this report, especially the risk factor titled “Our gross margins may fluctuate due to a variety of factors, which could negatively impact our results of operations and our financial condition.” Operating Expenses Our operating expenses consist of research and development, sales and marketing, and general and administrative expenses.
For additional discussion please see Part I, Item 1A "Risk Factors" of this report, especially the risk factor titled “Our gross margins may fluctuate due to a variety of factors, which could negatively impact our results of operations and our financial condition.” Operating Expenses Our operating expenses consist of research and development, sales and marketing, general and administrative expenses, and acquisition related costs.
Customer Demand and Product Life Cycles Once customers design our precision timing solutions into their products, we closely monitor all aspects of their demand cycle, including the initial design phase, prototype production, volume production, and inventories, as well as end-market demand, including seasonality, cyclicality, and the competitive landscape.
Customer Demand and Product Life Cycles Once customers design our Precision Timing solutions into their products, we closely monitor all aspects of their demand cycle, including the initial design phase, prototype production, volume production, and inventories, as well as end- 46 Table of Contents market demand, including seasonality, cyclicality, and the competitive landscape.
For our largest accounts, dedicated sales personnel work with the end customer to ensure that our solutions fully address the end customer’s timing needs. Our smaller customers can select the optimum timing solution for their needs by working directly with our distributors or by shopping on our online store, SiTimeDirect™.
For our largest accounts, dedicated sales personnel work with the end customer to ensure that our solutions fully address the end customer’s timing needs. Our smaller customers can select the optimum timing solution for 45 Table of Contents their needs by working directly with our sales personnel or our distributors or by shopping on our online store, SiTimeDirect ™ .
At December 31, 2022 and 2021, we had research and development tax credit carryforwards of approximately $3.9 million and $3.9 million, respectively for U.S. federal income tax purposes and $3.6 million and 48 $3.6 million, respectively for state income tax purposes.
At December 31, 2023 and 2022, we had research and development tax credit carryforwards of approximately $3.9 million and $3.9 million, respectively for U.S. federal income tax purposes and $3.6 million and $3.6 million, respectively for state income tax purposes.
We also sell products directly to some of our end customers. Our sales are made pursuant to standard purchase orders which may be cancelled, reduced, or rescheduled, with little or no notice. We recognize product revenue upon shipment when we satisfy our performance obligations as evidenced by the transfer of control of our products to customers.
Our sales are made pursuant to standard purchase orders which may be cancelled, reduced, or rescheduled, with little or no notice. We recognize product revenue upon shipment when we satisfy our performance obligations as evidenced by the transfer of control of our products to customers.
We cannot predict the duration or timing of any downturn or upturn in the semiconductor industry. 45 Results of Operations The following table summarizes our results of operations for the periods presented.
We cannot predict the duration or timing of any downturn or upturn in the semiconductor industry. 47 Table of Contents Results of Operations The following table summarizes our results of operations for the periods presented.
The Company intends to use the net proceeds from the shares of common stock offered and sold to primarily replenish funds expended to satisfy anticipated tax withholding and remittance obligations related to the net settlement upon vesting of restricted stock unit awards (“RSU”) granted to employees under the equity incentive plans.
The Company used the net proceeds from the shares of common stock offered and sold to replenish funds expended to satisfy tax withholding and remittance obligations related to the net settlement upon vesting of restricted stock unit awards (“RSU”) granted to employees under the equity incentive plans.
Our capital expenditures for property and equipment have primarily been for general business purposes, including machinery and equipment, leasehold improvements, acquired software, internally developed software used in production and support of our products, computer equipment used internally, and production masks to manufacture our products. In 2022, cash used in investing activities was $560.1 million.
Our capital expenditures for property and equipment have primarily been for general business purposes, including machinery and equipment, leasehold improvements, acquired software, internally developed software used in production and support of our products, computer equipment used internally, and production masks to manufacture our products. In 2023, cash used in investing activities was $36.7 million.
International sales represented approximately 88%, 94%, and 93% of net revenues in 2022, 2021, and 2020, respectively. 46 Cost of Revenue, Gross Profit, and Gross Margin Cost of revenue consists of wafers acquired from third-party foundries, assembly, packaging, and test cost of our products paid to third-party contract manufacturers, and personnel and other costs associated with our manufacturing operations.
International sales represented approximately 86%, 88%, and 94% of net revenues in 2023, 2022, and 2021, respectively. 48 Table of Contents Cost of Revenue, Gross Profit, and Gross Margin Cost of revenue consists of wafers acquired from third-party foundries, assembly, packaging, and test cost of our products paid to third-party contract manufacturers, and personnel and other costs associated with our manufacturing operations.
In addition, macroeconomic events such as rising inflation, fear of recession, equity market volatility, geopolitical tensions, war, decreased consumer spending, lower demand for electronic products following a period of strong demand during the COVID-19 pandemic, supply chain disruptions, and the COVID-19 pandemic measures implemented in China, 43 harmed sales of our products and results of operations in 2022 and we expect will continue to do so in 2023.
In 2022 and 2023 macroeconomic events such as rising inflation, fear of recession, equity market volatility, geopolitical tensions, war, decreased consumer spending, lower demand for electronic products following a period of strong demand during the COVID-19 pandemic, supply chain disruptions, and the COVID-19 pandemic measures implemented in China, harmed sales of our products and results of operations.
For additional discussion please see Part I, Item 1A Risk Factors of this report, especially the risk factor titled “Global macroeconomic conditions have harmed and may continue to harm our business” and “Our revenue and operating results may fluctuate from period to period, which could cause our stock price to fluctuate.” Impact of COVID-19 on our Business The COVID-19 pandemic continued to impact our workforce and the operations of our customers and suppliers during 2022.
For additional discussion please see Part I, Item 1A "Risk Factors" of this report, especially the risk factor titled “Global macroeconomic conditions have harmed and may continue to harm our business” and “Our revenue and operating results may fluctuate from period to period, which could cause our stock price to fluctuate.” Impact of COVID-19 on our Business The COVID-19 pandemic impacted our workforce and the operations of our customers and suppliers during 2022, however in 2023 it did not have a material impact on our workforce or, to our knowledge, the operations of our customers or suppliers.
There have been a number of industry-wide supply constraints affecting the supply of analog circuits manufactured by certain foundries, including Taiwan Semiconductor Manufacturing Company, and affecting outsourced semiconductor assembly and test providers.
In 2020 and 2021 there were a number of industry-wide supply constraints affecting the supply of analog circuits manufactured by certain foundries, including Taiwan Semiconductor Manufacturing Company, and affecting outsourced semiconductor assembly and test providers.
The changes in operating assets and liabilities resulted in cash provided primarily due to higher accounts receivables due to timing of shipments and an increase in inventories as we managed our inventory levels, partially offset by lower prepaid expenses and other current assets related to advance payments to suppliers for inventory and higher accounts payable and accrued expenses and other liabilities due to timing of payments.
The changes in operating assets and liabilities resulted in cash provided primarily due to lower accounts receivable due to timing of shipments offset by an increase in inventories as we managed our inventory levels, higher prepaid expenses and other assets, lower accrued expenses and other liabilities due to timing of payments and a decrease in accounts payable.
Year Ended December 31, Change 2022 vs 2021 2022 2021 2020 $ % (in thousands except percentage) Income tax expense $ (82 ) $ (78 ) $ (1 ) $ (4 ) 5% Liquidity and Capital Resources As of December 31, 2022 and 2021, we had cash and cash equivalents of $34.6 million and $559.5 million, respectively.
Year Ended December 31, Change 2023 vs 2022 2023 2022 2021 $ % (in thousands except percentage) Income tax expense $ (152) $ (82) $ (78) $ (70) 85% Liquidity and Capital Resources As of December 31, 2023 and 2022, we had cash and cash equivalents of $9.5 million and $34.6 million, respectively.
A fabless infrastructure gives us production flexibility and the ability to scale capacity up and down quickly to meet demand. Our programmable architecture also plays a key role in ensuring optimal production flexibility, as it allows us to offer shorter lead times and the ability to meet custom requirements more easily.
Our programmable architecture also plays a key role in ensuring optimal production flexibility, as it allows us to offer shorter lead times and the ability to meet custom requirements more easily.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Form 10-K for fiscal 2021 filed with the Securities and Exchange Commission on February 25, 2022. Revenue We derive revenue primarily from sales of precision timing solutions to distributors who in turn sell to our end customers.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Form 10-K for fiscal 2022 filed with the SEC on February 27, 2023. Revenue We derive revenue primarily from sales of Precision Timing solutions to distributors who in turn sell to our end customers. We also sell products directly to some of our end customers.
We believe that this inventory buildup will negatively impact the sales of our products until such inventory buildup is reduced. The inventory buildup at some of our customers and their affiliates, partners, and contract manufacturers could result in significant decreases in our sales, margins, and could materially harm our results of operations.
We believe that this inventory buildup will negatively impact the sales of our products until such inventory buildup is reduced and could result in decreases in our sales and margins, and could materially harm our results of operations.
During the year ended December 31, 2022, we sold 225,334 shares of our common stock under the Sales Agreement at a weighted average price of $150.78 per share resulting in net proceeds to us of $33.0 million, after deducting underwriting discounts and commissions and deferred offering costs. Our purchase obligations primarily include design and simulation licenses.
During the year ended December 31, 2023, we sold 400,000 shares of our common stock under the Sales Agreement at a weighted average price of $115.06 per share resulting in net proceeds to us of $44.8 million, after deducting underwriting discounts and commissions and offering costs. Our purchase obligations primarily include design and simulation licenses.
We believe that the effects of the industry-wide supply constraints on other timing device suppliers contributed in part to our revenue and gross margin growth in 2021 and the first half of 2022, however, we do not expect be able to sustain these revenue and gross margin increases in 2023.
We believe that the effects of the industry-wide supply constraints on other timing device suppliers contributed in part to our revenue and gross margin growth in 2021 and the first half of 2022.
All such payments were offset by $149.0 million proceeds from the maturity of held to maturity investments. In 2021, cash used in investing activities was $33.8 million. We paid $30.9 million largely to purchase test and other manufacturing equipment to support the increase in demand of our products and other property and equipment for general business purposes.
We paid $31.8 million largely to purchase test and other manufacturing equipment to support the increase in demand of our products and other property and equipment for general business purposes. We paid $3.9 million to purchase intangible assets in software licenses. All such payments were offset by $149.0 million proceeds from the maturity of held to maturity investments.
At December 31, 2022 and 2021, we had federal NOL carry-forwards of approximately $213.3 million and $259.6 million, respectively, state NOL carry-forwards of approximately $65.3 million and $64.5 million, respectively, and foreign NOL carry-forwards of approximately $1.7 million and $2.3 million, respectively. These federal, state, and foreign net operating loss carry-forwards will expire beginning in 2025, 2028, and 2028, respectively.
At December 31, 2023 and 2022, we had federal NOL carry-forwards of approximately $230.2 million and $213.3 million, respectively, state NOL carry-forwards of approximately $83.7 million 50 Table of Contents and $65.3 million, respectively, and foreign NOL carry-forwards of approximately $1.7 million and $1.7 million, respectively. These federal, state, and foreign net operating loss carry-forwards will expire beginning in 2028.
However, we expect our research and development expense to fluctuate as a percentage of revenue from period to period depending on the timing of these expenses. 47 Research and development expense increased by $38.2 million, or 73%, for the year ended December 31, 2022 compared to the same period in 2021, primarily due to ongoing new product related expenses of $14.2 million, an increase in stock-based compensation expense of $13.5 million, higher personnel costs of $13.0 million due to increased headcount, and an increase in depreciation and amortization of lab equipment and licenses of $2.6 million, offset by an increase of non-recurring engineering contra-expense recognized of $6.6 million.
However, we expect our research and development expense to fluctuate as a percentage of revenue from period to period depending on the timing of these expenses. 49 Table of Contents Research and development expense increased by $7.3 million, or 8%, for the year ended December 31, 2023 compared to the same period in 2022, primarily due to an increase in stock-based compensation expense of $7.7 million, a decrease in non-recurring engineering contra-expense recognized of $5.1 million, an increase in depreciation and amortization of lab equipment and licenses of $2.7 million, and higher personnel costs of $1.4 million due to increased headcount, partially offset by lower engineering spend towards ongoing new product development of $9.5 million.
Selling, general and administrative expense increased by $22.0 million, or 40%, for the year ended December 31, 2022 compared to the same period in 2021, primarily due to higher stock-based compensation expense of $13.4 million, higher consulting fees of $5.1 million, higher personnel costs of $1.9 million related to increased headcount, and higher advertising spend of $0.8 million.
Selling, general and administrative expense increased by $7.4 million, or 10%, for the year ended December 31, 2023 compared to the same period in 2022, primarily due to higher stock-based compensation expense of $10.8 million, higher personnel costs of $1.0 million related to increased headcount, partially offset by $2.4 million reduction in sales commission payouts due to lower sales, lower consulting fees of $1.0 million, and lower advertising spend of $0.7 million.
If variable considerations are anticipated to exceed historical experience, we may adjust our sales returns allowance accordingly to properly reflect our net revenue.
Our customers have limited return rights under our contracts with them. If variable considerations are anticipated to exceed historical experience, we may adjust our sales returns allowance accordingly to properly reflect our net revenue.
During the year ended December 31, 2022, we sold 225,334 shares of our common stock under the Sales Agreement resulting in net proceeds to us of $33.0 million, after deducting underwriting discounts and commissions of $0.7 million and deferred offering costs of $0.2 million.
During the year ended December 31, 2023, we sold 400,000 shares of our common stock under the Sales Agreement resulting in net proceeds to us of $44.8 million, after deducting underwriting discounts and commissions of $0.9 million and offering costs of $0.3 million.
We measure revenue based on the amount of consideration we expect to be entitled to in exchange for products. Year Ended December 31, Change 2022 vs 2021 2022 2021 2020 $ % (in thousands except percentage) Revenue $ 283,605 $ 218,808 $ 116,156 $ 64,797 30 % Revenue increased by $64.8 million, or 30%, for 2022 compared to 2021.
We measure revenue based on the amount of consideration we expect to be entitled to in exchange for products. Year Ended December 31, Change 2023 vs 2022 2023 2022 2021 $ % (in thousands except percentage) Revenue $ 143,993 $ 283,605 $ 218,808 $ (139,612) (49 %) Revenue decreased by $139.6 million, or 49%, for 2023 compared to 2022.
Variable consideration is estimated and reflected as an adjustment to the transaction price. Depending on the terms of the contract, variable consideration is estimated using either the expected value approach or the most likely value approach.
We measure revenue based on the amount of consideration we expect to be entitled to in exchange for products. Variable consideration is estimated and reflected as an adjustment to the transaction price. Depending on the terms of the contract, variable consideration is estimated using either the expected value approach or the most likely value approach.
Year Ended December 31, Change 2022 vs 2021 2022 2021 2020 $ % (in thousands except percentage) Interest income $ 7,291 $ — $ — $ 7,291 n/a Other expense (97 ) (488 ) (758 ) 391 (80 %) Total interest income and other expense, net $ 7,194 $ (488 ) $ (758 ) $ 7,682 n/a Interest income and other expense increased $7.7 million for the year ended December 31, 2022 compared to the same period in 2021, primarily related to higher interest income earned on short term investments and net unrealized gain on foreign exchange rates due to increased activities in our foreign subsidiaries and favorable exchange rate fluctuations.
Year Ended December 31, Change 2023 vs 2022 2023 2022 2021 $ % (in thousands except percentage) Interest income $ 26,958 $ 7,291 $ — $ 19,667 270% Other expense, net (141) (97) (488) (44) 45 % Total interest income and other expense, net $ 26,817 $ 7,194 $ (488) $ 19,623 273% Interest income and other expense, net increased $19.6 million for the year ended December 31, 2023 compared to the same period in 2022, primarily related to higher interest income earned on short term investments and net unrealized loss on foreign exchange rates due to increased activities in our foreign subsidiaries and unfavorable exchange rate fluctuations.
We paid $2.9 million to purchase intangible assets. Financing Activities Our financing activities have primarily consisted of proceeds from issuance of shares and withholding of taxes on restricted stock units.
Financing Activities Our financing activities have primarily consisted of proceeds from issuance of shares and withholding of taxes on restricted stock units.
Any prolonged or significant downturn in the semiconductor industry generally could adversely affect our business and reduce demand for our products and otherwise harm our business, financial condition and results of operations. In the last few years, the semiconductor industry experienced an upturn.
Any prolonged or significant downturn in the semiconductor industry generally could adversely affect our business and reduce demand for our products and otherwise harm our business, financial condition and results of operations. Any significant upturn in the semiconductor industry could result in increased competition for access to third-party foundry and assembly capacity.
In the event that we need to borrow funds or issue additional equity, we cannot provide any assurance that any such additional financing will be available on terms acceptable to us, if at all. If we are unable to raise additional capital when we need it, it would harm our business, results of operations and financial condition.
In the event that we need to borrow funds or issue additional equity, we cannot provide any assurance that any such additional financing will be available on terms acceptable to us, if at all.
As of December 31, 2022 we also held $529.5 million of short-term investments in held-to-maturity securities which consisted of treasury bills. Our principal use of cash is to fund our operations and to support growth.
As of December 31, 2023 we also held $518.7 million of short-term investments in held-to-maturity securities which consisted of Treasury Bills. Our principal use of cash is to fund our operations, to support growth through capital investments, and to acquire complementary businesses, products, services, or technologies in the future.
Income Tax Expense Income tax expense consists primarily of state income taxes and income taxes in certain foreign jurisdictions in which we conduct business.
Income Tax Expense Income tax expense consists primarily of state income taxes and income taxes in certain foreign jurisdictions in which we conduct business. The income tax expense in foreign jurisdictions was higher due to increased operational activities in our foreign entities.
Our top ten direct customers, including distributors, accounted for approximately 74%, 76% and 80% of net revenues in 2022, 2021, and 2020, respectively. In 2022, 2021, and 2020, three customers, which are distributors of our products, each accounted for more than 10% of our net revenues.
Four customers in 2023 and three customers each in 2022, and 2021, which are distributors of our products, each accounted for more than 10% of our net revenues.
Year Ended December 31, Change 2022 vs 2021 2022 2021 2020 $ % (in thousands except percentage) Cost of Revenue $ 100,643 $ 79,346 $ 58,224 $ 21,297 27 % Gross Profit 182,962 139,462 57,932 43,500 31 % Gross Margin 65 % 64 % 50 % Gross profit increased by $43.5 million in the year ended December 31, 2022 compared to the same period in 2021.
Year Ended December 31, Change 2023 vs 2022 2023 2022 2021 $ % (in thousands except percentage) Cost of Revenue $ 61,905 $ 100,643 $ 79,346 $ (38,738) (38 %) Gross Profit 82,088 182,962 139,462 (100,874) (55 %) Gross Margin 57 % 65 % 64 % Gross profit decreased by $100.9 million in the year ended December 31, 2023 compared to the same period in 2022.
We determine variable consideration at the end of each reporting period, which consists primarily of price adjustments and product returns by estimating the amount of consideration we expect to receive from our customers based on historical experience. Our distributors have limited return rights under our contracts with them.
We determine variable consideration at the end of each reporting period, which consists primarily of price adjustments and product returns by estimating the amount of consideration we expect to receive from our customers based on historical experience. Adjustments for the variable consideration has been in the range of 2% to 4% on a quarterly basis for the current year.
We paid $673.4 million to purchase short-term investments in held-to-maturity securities. We paid $31.8 million largely to purchase test and other manufacturing equipment to support the increase in demand of our products and other property and equipment for general business purposes. We paid $3.9 million to purchase intangible assets in software licenses.
We paid $1,046.4 million to purchase short-term investments in held-to-maturity securities and $39.0 million for the acquisition of certain assets and the exclusive license to certain intellectual property from Aura. We paid $8.9 million largely to purchase test and other manufacturing equipment to support our operations and other property and equipment for general business purposes.
Year Ended December 31, Change 2022 vs 2021 2022 2021 2020 $ % (in thousands except percentage) Operating Expenses: Research and development $ 90,288 $ 52,104 $ 31,652 $ 38,184 73 % Selling, general and administrative 76,532 54,515 34,893 22,017 40 % Total operating expenses $ 166,820 $ 106,619 $ 66,545 $ 60,201 56 % Research and Development Our research and development efforts are focused on the design and development of precision timing solutions.
Year Ended December 31, Change 2023 vs 2022 2023 2022 2021 $ % (in thousands except percentage) Operating Expenses: Research and development $ 97,589 $ 90,288 $ 52,104 $ 7,301 8 % Selling, general and administrative 83,971 76,532 54,515 7,439 10 % Acquisition related costs 7,728 — — 7,728 n/a Total operating expenses $ 189,288 $ 166,820 $ 106,619 $ 22,468 13 % Research and Development Our research and development efforts are focused on the design and development of Precision Timing solutions.
The net proceeds from the Sales Agreement were offset by tax withholdings paid on behalf of employees for net share settlement of $37.6 million.
The net proceeds from the Sales Agreement were offset by tax withholdings paid on behalf of employees for net share settlement of $37.6 million. Critical Accounting Estimates Our consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles.
In 2021, net cash provided by operating activities of $59.1 million was primarily due to net income of $32.3 million and non-cash expenses of $39.9 million, partially offset by a change in operating assets and liabilities of $13.1 million, non-cash expenses were mainly related to depreciation and amortization and stock-based compensation expense.
In 2022, net cash provided by operating activities of $39.8 million was primarily due to net income of $23.3 million and depreciation and amortization, stock-based compensation expense, and net change in unrealized interest on held to maturity investments of $67.5 million, partially offset by a change in operating assets and liabilities of $51.0 million.
In addition to oscillator systems, we have expanded our products to include clock IC and timing sync solutions. We seek to expand our presence in our end markets across all product categories. We sell our products primarily through distributors, who in turn sell to our end customers. We also sell products directly to some of our end customers.
Historically, our revenue has been substantially delivered from sales of oscillator systems across our target end markets. In addition to oscillators, we have expanded our product portfolio to include clock IC and timing sync solutions. We seek to expand our presence in our end markets across all product categories.
We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances. We evaluate our estimates and assumptions on an ongoing basis. Actual results may differ from these estimates. To the extent that there are material differences between these estimates and our actual results, our future financial statements will be affected.
Actual results may differ from these estimates. To the extent that there are material differences between these estimates and our actual results, our future financial statements will be affected. The critical accounting policies requiring estimates, assumptions, and judgments that we believe have the most significant impact on our consolidated financial statements are described below.
The MD&A contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act that involve risks and uncertainties, which are discussed under Item 1A. Overview We are a leading provider of precision timing solutions to the global electronics industry.
The MD&A contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act that involve risks and uncertainties, which are discussed under Part I, Item 1A. Overview The ability to accurately measure and reference time has been essential to many of humankind’s greatest inventions and technological advances.
Based on sell-through information provided by our distributors, we believe the majority of our end customers are based in the U.S. We leverage our global network of distributors to address the broad set of end markets we serve.
We sell our products primarily through distributors, who in turn sell to our end customers. We also sell products directly to some of our end customers. We leverage our global network of distributors to address the broad set of end markets we serve.
For information about our contractual obligations refer to "Note 5 - Lease" and “Note 9 – Commitments and Contingencies” of the Notes to Consolidated Financial Statements. We expect to continue our investing activities, primarily in the purchase of property and equipment and capitalized software, to support research and development, sales and marketing, product support, and administrative staff.
We expect to continue our investing activities to support growth, primarily through the purchase of property and equipment, intellectual property licenses, and capitalized software, to support research and development, sales and marketing, product support, and administrative staff.
Gross profit increased $49.9 million mainly from an increase in ASPs of our products and $2.7 million from the reversal of a customer rebate. This increase was offset by higher other manufacturing and overhead costs of $6.1 million. Gross margin was higher by 1% in the year ended December 31, 2022 compared to the same period in 2021.
Gross profit decreased $104.2 million mainly from lower revenue. This decrease was partially offset by lower other manufacturing and overhead costs of $3.3 million. Gross margin was lower by 8% in the year ended December 31, 2023 compared to the same period in 2022.
We recognize product revenue, at a point in time, upon shipment when we satisfy our performance obligations as evidenced by the transfer of control of our products to customers. We measure revenue based on the amount of consideration we expect to be entitled to in exchange for products.
Revenue Recognition We derive our revenue from product sales primarily to distributors, who in turn sell to original equipment manufacturers or other end customers. We recognize product revenue, at a point in time, upon shipment when we satisfy our performance obligations as evidenced by the transfer of control of our products to customers.
We operate a fabless business model, allowing us to focus on the design, sales, and marketing of our products, quickly scale production, and significantly reduce our capital expenditures. This model also allows us to operate with lower capital expenditure investment than other semiconductor companies who own fabs.
We operate a fabless business model, allowing us to focus on the design, sales, and marketing of our products, quickly scale production, and significantly reduce our capital expenditures by using the semiconductor industry manufacturing infrastructure. A fabless infrastructure gives us production flexibility and the ability to scale capacity up and down quickly to meet demand.
Critical Accounting Estimates Our consolidated financial statements have been prepared in accordance with GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosures.
The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances. We evaluate our estimates and assumptions on an ongoing basis.
The following table summarizes our cash flows for the periods indicated: Year Ended December 31, 2022 2021 2020 (in thousands) Net cash provided by operating activities $ 39,752 $ 59,078 $ 16,604 Net cash used in investing activities (560,088 ) (33,788 ) (7,793 ) Net cash provided by (used in) financing activities (4,522 ) 460,646 1,296 Net increase (decrease) in cash and cash equivalents $ (524,858 ) $ 485,936 $ 10,107 Operating Activities In 2022, net cash provided by operating activities of $39.8 million was primarily due to net income of $23.3 million and non-cash expenses of $67.5 million, partially offset by a change in operating assets and liabilities of $51.0 million.
If we are unable to raise additional capital when we need it, it would harm our business, results of operations and financial condition. 51 Table of Contents The following table summarizes our cash flows for the periods indicated: Year Ended December 31, 2023 2022 2021 (in thousands) Net cash provided by operating activities $ 8,056 $ 39,752 $ 59,078 Net cash used in investing activities (36,660) (560,088) (33,788) Net cash provided by (used in) financing activities 3,469 (4,522) 460,646 Net increase (decrease) in cash and cash equivalents $ (25,135) $ (524,858) $ 485,936 Operating Activities In 2023, net cash provided by operating activities of $8.1 million was primarily due to net loss of $80.5 million and a change in operating assets and liabilities of $4.3 million, offset by depreciation and amortization, stock-based compensation expense, net change in unrealized interest on held to maturity securities, change in fair value of sales based earnout liability and acquisition consideration payable for a total of $92.9 million.
The industry experienced a significant downturn during past adverse macroeconomic events such as global recessions, and we are currently experiencing a decrease in demand for our products. Downturns in the semiconductor industry have been characterized by diminished product demand, production overcapacity, high inventory levels, and accelerated erosion of average selling prices.
From time to time, these factors, together with changes in macroeconomic conditions, can cause significant upturns and downturns in the semiconductor industry, and in our business. Downturns in the semiconductor industry have been characterized by diminished product demand, production overcapacity, high inventory levels, and accelerated erosion of average selling prices.
Our products have been designed into over 300 applications across our target markets, including communications and enterprise, automotive, industrial, aerospace, mobile, IoT and consumer. In 2022, we advanced our technology, expanded our product portfolio, increased our worldwide workforce, and generated a significant increase in revenue and profit.
Our products have been designed into over 300 applications across our target markets, including communications, datacenter and enterprise, automotive, industrial, aerospace, mobile, IoT and consumer. Our current solutions include various types of oscillators, as well as clock integrated circuits ("ICs"), and resonators.
During the year ended December 31, 2021 we completed follow-on public offerings, in which we issued and sold 2,800,000 shares of common stock resulting in net proceeds of $460.6 million, consisting of proceeds from issuance of shares of $461.3 million net of underwriting commissions and discounts of $21.7 million and deferred offering costs of $0.6 million.
The net proceeds from the Sales Agreement were offset by tax withholdings paid on behalf of employees for net share settlement of $41.3 million. 52 Table of Contents During the year ended December 31, 2022, we sold 225,334 shares of our common stock under the Sales Agreement resulting in net proceeds to us of $33.0 million, after deducting underwriting discounts and commissions of $0.7 million and offering costs of $0.2 million.
We consider many factors when evaluating and estimating its tax positions and tax benefits, which may require periodic adjustments and which may not accurately anticipate actual outcomes. 51 Recent Accounting Pronouncements See Note 2 to our consolidated financial statements under Item 8 for information regarding recently issued accounting pronouncements.
Recent Accounting Pronouncements See Note 1 to our consolidated financial statements under Part II, Item 8 for information regarding recently issued accounting pronouncements.
Interest Income and Other Expense Interest income and other expense consists primarily of interest expense on our outstanding debt, interest income on our cash balances, and foreign exchange gains and losses. See Note 7 to our consolidated financial statements under Item 8 for more information about our debt.
We may incur incremental costs in 2024 and beyond related to the Aura transaction. Interest Income and Other Expense, net Interest income and other expense consists primarily of interest income on our cash balances, and foreign exchange gains and losses.
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We saw continued strong revenue growth, increased gross margins and positive operating cash flow, but decreased operating margins. Our revenue has historically been subject to some seasonal variation. Based on the production schedules of key customers, our products typically see stronger revenue in the second half of our fiscal year.
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Timing technology has continued to evolve over centuries, forming a critical aspect of broader technological evolution. Timing is the heartbeat of digital electronic systems, ensuring that the system runs smoothly and reliably by providing and distributing clock signals to various critical components such as central processing units, communication and interface ICs, and radio frequency components.
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However, this was not the case in 2022 and there can be no assurance that this trend will occur in future years. Revenue grew 30% from $218.8 million in 2021 to $283.6 million in 2022.
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As electronics evolve to deliver higher performance levels, even in increasingly challenging environments, while also being more complex and size-constrained, we believe they will require more semiconductor-based sophisticated timing solutions that cannot be developed in legacy quartz crystal-based technologies.
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Gross margins increased from 64% in 2021 to 65% in 2022, while operating margins decreased from a 15% income in 2021 to a 6% income in 2022. Commercial shipments of SiTime's first oscillator products began in 2006. Historically, our revenue has been substantially delivered from sales of oscillator systems across our target end markets.
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Precision timing, a category that we created (“Precision Timing”), fills this need with the performance, power, size, and cost that is required by these new applications. We are a leading provider of Precision Timing solutions to the global electronics industry.
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We were acquired by MegaChips in 2014 and were a wholly-owned subsidiary of MegaChips, a fabless semiconductor company based in Japan and traded on the Tokyo Stock Exchange, until November 25, 2019. On November 25, 2019, we completed the initial public offering of shares of our common stock.
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Our all-silicon solutions are based on three fundamental areas of expertise: micro-electro-mechanical systems (“MEMS”), analog mixed-signal design capabilities, and advanced system-level integration expertise. At the heart of our Precision Timing solutions are our MEMS, analog/mixed-signal, and systems technologies.
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In June 2020, we completed a follow-on public offering, in which we issued and sold 1,525,000 shares of our common stock and MegaChips sold 2,500,000 shares of our common stock held by it.
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We have a deep understanding of mechanical, electrical, and thermal properties of materials, which is a key requirement for developing our proprietary MEMS processes. To maximize MEMS first-silicon success, we have also developed our own MEMS simulation tools.
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In February 2021, we completed an additional follow-on public offering, in which we issued and sold 1,500,000 shares of our common stock and MegaChips sold 1,500,000 shares of our common stock held by it.
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Our analog/mixed-signal die are developed using industry-standard processes and deliver high levels of performance using programmable phase-locked loops, temperature sensors, regulators, data converters, drivers and other building blocks. In 2023, we advanced our technology and expanded our product portfolio, including with the closing of an agreement with Aura Semiconductor Pvt.
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In November 2021 we completed a follow-on public offering, in which we issued and sold 1,300,000 shares of our common stock and MegaChips sold 1,000,000 shares of our common stock held by it.
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Ltd. and certain of its affiliated entities (together, “Aura”) in December 2023 for the acquisition of certain assets and an exclusive license to certain intellectual property from Aura. The agreement provides that the intellectual property underlying the license from Aura will be delivered on an ongoing and periodic basis through July 2025.
Removed
During the year ended December 31, 2022, we sold 225,334 shares of our common stock under the Sales Agreement. MegaChips continues to be our largest stockholder and held approximately 23.0% of our common stock as of December 31, 2022.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeSuch interest-earning instruments carry a degree of interest rate risk. During the year ended December 31, 2022 we generated $7.3 million in interest income due to higher cash, cash equivalents and short-term investment balances, and rising interest rates.
Biggest changeDuring the year ended December 31, 2023 we generated $27.0 million in interest income due to higher cash, cash equivalents and short-term investment balances, and rising interest rates. We do not enter into investments for trading or speculative purposes and have not used any derivative financial instruments to manage our interest rate risk exposure.
Our expenses are generally denominated in the currencies in which our operations are located, which is primarily in the United States and, to a lesser extent, in Malaysia, the Netherlands, France, Taiwan, Japan, Finland, Korea, Germany and Ukraine.
Our expenses are generally denominated in the currencies in which our operations are located, which is primarily in the United States and, to a lesser extent, in Malaysia, the Netherlands, France, Taiwan, Japan, Finland, Korea, Germany, Ukraine, and India.
Item 7A. Quantitative and Qualitati ve Disclosures About Market Risk. Foreign Currency Risk Substantially all of our revenue is denominated in U.S. dollars.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk. Foreign Currency Risk Substantially all of our revenue is denominated in U.S. dollars.
The effect of a hypothetical 10% change in foreign currency exchanges rates applicable to our business would not have a material impact on our historical consolidated financial statements. We do not currently have a hedging policy with respect to foreign currency exchange risk.
As of December 31, 2023, the effect of a hypothetical 10% change in foreign currency exchanges rates applicable to our business would not have had a material impact on our historical consolidated financial statements. We do not currently have a hedging policy with respect to foreign currency exchange risk.
Interest Rate Risk We had cash and cash equivalents of $34.6 million and $559.5 million as of December 31, 2022 and 2021, respectively, consisting of bank deposits, money market funds, and treasury bills. We also had short-term investments in held-to-maturity securities of $529.5 million consisting of treasury bills as of December 31, 2022.
Interest Rate Risk We had cash and cash equivalents of $9.5 million as of December 31, 2023 consisting of bank deposits, money market funds, and Treasury Bills. We also had short-term investments in held-to-maturity securities of $518.7 million consisting of Treasury Bills as of December 31, 2023. Such interest-earning instruments carry a degree of interest rate risk.
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We do not enter into investments for trading or speculative purposes and have not used any derivative financial instruments to manage our interest rate risk exposure. The effect of a hypothetical 10% change in interest rates applicable to our business would not have a material impact on our historical consolidated financial statements. 52
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As of December 31, 2023, a hypothetical 10% increase or decrease in market interest rates would change the fair value and related interest income on our interest-earning instruments of $518.7 million, by an increase or decrease of approximately $2.7 million for the twelve months ended December 31, 2023. 54 Table of Contents

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