What changed in SkyWater Technology, Inc's 10-K — 2024 vs 2025

Our Technology-as-a-Service (“TaaS”) model leverages a foundation of proprietary technology, engineering know-how capabilities, and microelectronics manufacturing capacity to co-develop process technology intellectual property (“IP”) with our customers that enables disruptive concepts through our Advanced Technology Services (“ATS”) for diverse microelectronics (integrated circuits (“ICs”)) and related micro- and nanotechnology applications.

In addition to differentiated technology development services, we support customers with volume production of ICs for high-growth markets through our Wafer Services. The combination of semiconductor development and manufacturing services we provide our customers is not available to them from a conventional fab.

In addition, we believe our status as a publicly-traded, U.S.-based, U.S. headquartered pure-play technology foundry with Defense Microelectronics Activity (“DMEA”) Category 1A Trusted Accreditation from the DoD positions us well to provide distinct, competitive advantages to our customers. These advantages include the benefits of enhanced IP security and secure access to a U.S. domestic supply chain.

We primarily focus on serving diversified, high-growth end users in numerous vertical markets, including (1) advanced compute, (2) aerospace and defense (“A&D”), (3) automotive, (4) bio-health, and (5) industrial.

By housing both development and manufacturing in a single operation, we rapidly and efficiently transition newly-developed processes to high-yielding volume production, eliminating the time it would otherwise take to transfer production to a third-party fab.

Through our ATS model, we specialize in co-creating advanced solutions with our customers that directly serve our end markets, such as infrared imaging, superconducting ICs for quantum computing and sensing, Rad-hard complementary metal oxide semiconductor (“CMOS”), integrated photonics, microelectromechanical systems (“MEMS”), technologies for biomedical and imaging applications, and advanced packaging.

Our Wafer Services include the manufacture of silicon-based analog and mixed-signal ICs for our end markets. Our focus on the differentiated analog and CMOS markets supports long product life-cycles and requirements that value performance over cost-efficiencies and leverages our portfolio IP.

Before we began independent operations, our Minnesota fab was owned and operated by Cypress Semiconductor Corporation (“Cypress”), as a captive manufacturing facility for 26 years. We have leveraged Cypress systems, manufacturing technology, and process development capabilities to advance our product offerings.

Our multi-year foundry services agreement with Cypress, which ended in 2020, created a runway for us to operate the foundry at a high utilization rate while continuing to expand and diversify the customer base transferred by Cypress. Cypress was acquired in 2020 by Infineon Technologies AG (“Infineon”).

In 2021, we expanded our operations with the addition of the Center for NeoVation, an advanced packaging facility in Kissimmee, Florida. The facility is operated and maintained by SkyWater through a public-private partnership with Osceola County, Florida which is developing a broader technology and STEM education infrastructure at the same campus where the Center for NeoVation is located.

The purchase price for the Transaction is expected to be approximately $110 million, comprised of a base purchase price for the Transaction of $80 million ($55 million of which will be paid at closing), plus a payment at closing for working capital, estimated to be approximately $30 million, subject to adjustment.

The payment of the remaining $25 million of the base purchase price will be deferred for four years and will be paid by wafer credits under a wafer supply agreement with an affiliate of Seller, which agreement will be executed at the closing of the Transaction pursuant to the Purchase Agreement.

The Transaction is subject to the satisfaction or waiver of certain customary closing conditions, including, among other things: (1) the accuracy of the representations and warranties of each party to the Purchase Agreement; (2) the performance by each party of its obligations and covenants in all material respects; (3) the absence of a material adverse effect between the signing of the Purchase Agreement and the closing of the Transaction; (4) the absence of any applicable order or law prohibiting the Transaction; and (5) obtaining U.S. regulatory approval. 6 Under the Purchase Agreement, the closing of the Transaction shall occur no earlier than May 30, 2025, unless otherwise agreed mutually by the parties.

The Purchase Agreement may be terminated by mutual written agreement of the Company and Seller or by either the Company or Seller in limited circumstances, including, among other things, (i) certain uncured breaches of any representation, warranty, covenant or obligation in the Purchase Agreement by the other party; (ii) failure to complete the Transaction by September 30, 2025; and (iii) the existence of an order by a governmental authority prohibiting the Transaction.

The Company intends to finance the purchase price for the Transaction through debt financing. Our Industry Microelectronics are the enabling technology of the information age and have served as a conduit for the growth of the electronics industry over the past sixty years.

Semiconductors make solid state electronics possible and are vital inputs for products such as computers, communications equipment, military equipment, automobiles, medical equipment, consumer products, industrial automation and control systems, and increasingly a broad array of internet-enabled products and devices.

As electronics have become more sophisticated and integrated, meeting the demand for semiconductors used in these products has required advances in semiconductor design and manufacturing. Semiconductor devices are historically classified as either digital or analog based on the type of signals they process.

Digital semiconductor devices process discrete, binary (“on-off” or “1-0”) electrical signals that are used for computational or data processing functions and that have driven many of the advances in computing and communication in recent years. By contrast, analog devices condition and regulate “real-world” functions such as temperature, pressure, speed, sound and electrical current.

An increasing interest and focus on enabling electronics systems to interact with people has propelled analog processing, a trend which we believe will continue in the future. 7 To process inputs from analog sensors, digital processing is required to convert these signals into meaningful information.

The demand for processing of these analog signals has led to the creation of a semiconductor category known as “mixed-signal,” which processes both analog signals and digital logic. These mixed-signal semiconductors are developed to support the rapidly expanding applications across markets through the emergence of internet of things.

Analog and mixed-signal semiconductors, as well as derivative and adjacent technologies such as rad-hard, discrete power devices, and microelectronics such as superconducting, photonics, and MEMS, require higher levels of customizable functionality and performance than digital devices do.

Since these analog and mixed-signal devices are produced in lower volumes than digital devices, traditional digital high-volume foundries have been generally unwilling to commit engineering resources to the processes and technologies necessary to innovate beyond their standard process offerings.

This has resulted in significant unmet need at a time when demand for these specialty ICs continues to grow due to demand from the A&D, automotive, advanced compute, bio-health, and industrial applications. Rad-hard electronics enable electronic devices to be resistant to malfunctions caused by electromagnetic or particle radiation.

Traditional semiconductor circuit structures are at a higher risk of damage from radiation, especially in high-radiation environments, such as space, medical imaging, nuclear use cases, and high-altitude aircrafts. To modify these circuits to withstand the effects of radiation, manufacturers use extensive development and testing to create circuits that reduce the impact from electromagnetic radiation.

As a result, rad-hard ICs are more expensive than traditional ICs. Consequently, most purchasers of rad-hard ICs are well-funded military and scientific organizations or produce products in high-value markets such as medical devices. Historically, most semiconductor companies were vertically integrated. They performed all major functions including design, manufacturing, test and assembly, and sales and marketing.

These types of semiconductor companies are called integrated device manufacturers, or IDMs. As the complexity of semiconductor designs has increased over the last several decades, semiconductors have become increasingly challenging to manufacture, requiring both sophisticated manufacturing expertise and exponential increases in fab investments.

These requirements have led to the creation of the foundry business model, where the cost of a fab is spread across multiple customers. These economics have driven IDMs to outsource production to foundries and divest their fabs. The industry has therefore matured, consolidated, specialized, and evolved to include the following main supplier categories: • IDMs .

Vertically integrated for all major functions including design, manufacturing, test and assembly, and sales and marketing. Some of these IDMs also provide foundry services to third parties. • Fabless Semiconductor Companies .

Fabless companies primarily focus on designing semiconductors and outsource the manufacturing of their proprietary design to third-party semiconductor foundries or IDMs using their standard manufacturing process technologies. • Pure-play Foundries . Pure-play foundries, such as ours, focus exclusively on providing semiconductor manufacturing based on processes and technologies that are developed for other semiconductor companies to utilize for their respective products.