Item 1A. Risk Factors.
Investment in our common stock involves risks, which you should consider carefully, as well as the other information contained in this Annual Report. These disclosures reflect our beliefs and opinions regarding factors that could materially and adversely affect us in the future. References to past events are provided by way of example only and are not intended to be a complete listing or a representation as to whether or not such factors have occurred in the past or their likelihood of occurring in the future. If any of these risks occurs or increases in scope or severity, our business, financial condition and results of operations could be materially harmed. In that event, the trading price of our common stock might decline, and you might lose all or part of your investment. You should also refer to the other information contained in this Annual Report, including our consolidated financial statements and the related notes. Additional risks and uncertainties not presently known to us or not believed by us to be material may also negatively impact us.
Risks Related to Our Business and Industry
Downturns or volatility in general economic conditions could have a material adverse effect on our business, financial condition, results of operations and liquidity.
Our net sales, gross margin, and profitability depend significantly on general economic conditions and the demand for products in the markets in which our customers compete. Weaknesses in the global economy and financial markets, including as a result of a recession and/or changes in government trade policies, such as the imposition of export restrictions and tariffs, may lead to lower demand for products that incorporate our solutions, particularly in the automotive and industrial markets. Additionally, an overall decline in end-user demand can affect our customers’ demand for our products and increase the likelihood of customers canceling or deferring existing orders. Our net sales, financial condition and results of operations could be negatively affected by such actions.
Volatile and uncertain economic conditions, as well as inflationary pressures that remain above historical levels, can adversely impact sales, gross margin and profitability and make it difficult for us to accurately forecast and plan our future business activities. In addition, uncertainty surrounding international trade policy and regulations as well as trade disputes and protectionist measures could have an adverse effect on consumer confidence and spending. To the extent favorable economic conditions do not materialize or take longer to materialize than expected, we have faced and may continue to face an oversupply of our products and excess inventory. This could result in charges for excess and obsolete inventory, or in the case of excess inventory held by our customers, reduce the number of products purchased by our customers as they digest inventory. Conversely, if we underestimate customer demand, we may fail to meet customer needs, which could impair our customer relationships. In addition, any disruption in the credit markets, including as a result of a recession, could impede our access to capital, which could be further adversely affected if we are unable to obtain or maintain favorable credit ratings. If we have limited access to additional financing sources, we may be required to defer capital expenditures or seek other sources of liquidity, which may not be available to us on acceptable terms or at all. Similarly, if our suppliers or customers face challenges in obtaining credit or other financial difficulties, they may be unable to provide the materials we need to manufacture or purchase our products. All of these factors related to global economic conditions beyond our control could adversely impact our business, financial condition, results of operations and liquidity.
We face intense competition and may not be able to compete effectively, which could reduce our market share and decrease our net sales and profitability.
We participate in intensely competitive end markets in the global semiconductor industry. Our competitive landscape includes rapid technological change in product design and manufacturing, continuous declines in ASPs, and customers who make purchase decisions based on a mix of factors that vary by customer and by market. Our ability to compete in this environment depends on many factors, including our ability to identify emerging markets and technology trends in an accurate and timely manner, introduce new and innovative products, implement new manufacturing and IC development technologies at a sustainable pace, maintain the performance and quality of our products, and manufacture our products in a cost-effective manner.
Often, we compete against larger companies that possess substantial financial, technical, development, engineering, manufacturing, including wafer fabrication capabilities, and marketing resources. Varying combinations of these resources provide advantages to these competitors, such as the rapid implementation of AI strategies for developing products and service offerings, which may enable them to influence industry trends and the pace at which they adapt to those trends. As the industry rapidly adopts and embeds AI across development, manufacturing and service workflows, our competitors may shorten product cycles and accelerate feature delivery. Any failure to keep pace with these AI-enabled capabilities could harm our competitive position and revenue. A strong competitive response from one or more competitors to our marketplace efforts, or a shift in customer preferences to competitors’ products, could result in more rapid pricing pressure than anticipated, increased sales and marketing expense, and/or market share loss. In addition, certain countries have implemented initiatives to build domestic semiconductor supply chains, including government incentives to local competitors and tools that may restrict foreign suppliers, which could place us at a competitive disadvantage or cause our customers to seek domestic alternatives to our products. Our supply chain strategies for competing in such countries may not fully eliminate the competitive disadvantages that we face. To the extent our profitability is negatively impacted by competitive pressures, our business, financial condition, results of operations and growth prospects may be adversely affected. Further, international trade policy and regulations, trade disputes, protectionist measures, and tariffs, could make our OEM and other end customers’ products less attractive relative to those of competitors, that may not be subject to such tariffs, potentially reducing demand for our solutions.
We rely on a limited number of third-party semiconductor wafer fabrication facilities and a limited number of suppliers of other materials, and the failure of any of these suppliers to supply wafers or other materials on a timely basis could harm our business and our financial results.
We currently rely on a limited number of third-party wafer fabrication facilities for the fabrication of semiconductor wafers used in the manufacture of our IC products, primarily United Microelectronics Corporation (“UMC”), Polar, Tower Semiconductor Ltd. (“Tower”) and Taiwan Semiconductor Manufacturing Company (“TSMC”), and we purchase a number of key manufacturing materials and components from single or limited sources. We depend on these foundries and other sources to meet our production needs. These foundries have limited production capacities with little ability to quickly expand capacity. From time to time, we have encountered shortages and delays in obtaining wafers and other components and materials as well as export restrictions on certain components and materials, and we may encounter additional shortages, delays and restrictions in the future. For example, recent foreign export restrictions from China on certain rare-earth elements, metals and magnets, including samarium, used in our applications and in end-user products have disrupted our ability to reliably source materials, and constrained global supply could restrict our ability to manufacture certain products. Such restrictions may make it difficult or impossible for us to compete with other semiconductor manufacturers that are able to obtain sufficient quantities of such materials from China or other sources. Additionally, two of our third-party wafer fabrication facilities are located in Taiwan, a location where earthquakes are commonplace, and geopolitical changes in China-Taiwan relations could disrupt their operations. If we cannot supply our products due to a lack of components, are unable to source materials, such as samarium or other rare-earth metals, from other suppliers, to redesign products with other components in a timely manner, or OEMs or our other customers are unable to access the materials they need to produce the end products that our applications are used in, our business will be significantly harmed. We do not have long-term contracts with some of our suppliers and third-party manufacturers. As a result, any such supplier or third-party manufacturer can discontinue supplying components or materials to us at any time and without penalty. Moreover, we depend on the quality of the wafers and other components and materials that they supply to us, over which we have limited control. Our suppliers’ abilities to meet our requirements could be impaired or interrupted by factors beyond their control, such as global market conditions, changes in tariffs or other trade regulations, climate change, natural disasters or other disruptions. Our suppliers may also face their own operational challenges, such as labor shortages or raw material cost increases, which could be passed on to us or disrupt their ability to supply us with necessary materials. If any of our suppliers is unable or unwilling to deliver us products and we are unable to identify alternative suppliers for such materials or components on a timely basis, our operations may be adversely affected. Even if we identify alternative suppliers, we could experience delays in testing, evaluating and validating materials or products of such alternative suppliers or products we obtain through outsourcing. Qualifying new contract manufacturers, including semiconductor foundries, is time-consuming and might result in unforeseen manufacturing and operations problems. Further, financial or other difficulties faced by our suppliers, or significant changes in demand for the components or materials they use in the products they supply to us, could limit the availability of those products, components or materials to us. We are also subject to potential delays in our suppliers' development of key components, which may affect our ability to introduce new products. Any of these problems or delays could damage our relationships with customers, adversely affect our reputation, business, financial condition, results of operations and ability to grow our business.
Failure to adjust our purchase commitments and inventory management based on changing market conditions or customer demand could result in an inability to meet customer demand or additional charges for obsolete or excess inventories or non-cancellable purchase commitments or reduced sales in periods when customers digest excess inventory.
We make significant decisions, including determining the levels of business that we will seek and accept, production schedules, levels of reliance on outsourced contract manufacturing, personnel needs and other resource requirements, based on our estimates of customer requirements. The short-term nature of many customer commitments and the possibility of rapid changes in demand for their products reduce our ability to accurately estimate future requirements of our customers. On occasion, our customers may require rapid increases in production, and we may not have sufficient capacity at any given time to meet our customers’ demands. Conversely, downturns in the semiconductor industry may cause our customers to significantly reduce the number of products ordered from us as they digest excess inventory. These risks are compounded by our customers’ own supply chain challenges; if our customers are unable to source other critical components from different suppliers, they may delay or cancel their product builds, which in turn reduces their demand for our products. Because many of our sales, research and development and manufacturing expenses are relatively fixed, a reduction in customer demand has resulted, and may continue to result, in a decrease in our gross margins and operating income.
Further, we base operating decisions and enter into purchase commitments on the basis of anticipated net sales trends, which can be unpredictable. Changes in forecasts or order timing or unreliable forecasts from customers expose us to risks of inventory shortages or excess inventory. Some of our purchase commitments are not cancellable, and in some cases we are required to recognize a charge representing the amount of material or capital equipment purchased or ordered, which exceeds our actual requirements. For example, we have noncancellable purchase commitments with vendors and “take-or-pay” agreements with certain of our third-party wafer fabrication partners under which we are required to purchase a minimum number of wafers per year or face financial penalties. These types of commitments and agreements have reduced and may continue to reduce our ability to adjust our inventory to address declining market demands. In prior quarters, we and other semiconductor companies have experienced downturns in market demand, which caused us to record substantive charges for excess and obsolete inventories and forced us to incur other inventory-related charges. If net sales in future periods fall substantially below our expectations, or if we fail to accurately forecast changes in demand mix, we could again be required to record substantial charges for obsolete or excess inventories or noncancellable purchase commitments. Further, during a
market upturn we may not be able to purchase sufficient supplies or components to meet increasing product demand, which could prevent us from taking advantage of opportunities and maximizing our net sales. Any failure to adjust our supply chain volume, secure sufficient supply from third-party vendors, including semiconductor wafer suppliers, or estimate customer demand could have a material adverse effect on our net sales, business, financial condition and results of operations.
The cyclical nature of the semiconductor industry may limit our ability to maintain or improve our net sales and profitability.
The semiconductor industry, including the analog segment in which we compete, is highly cyclical and is prone to significant downturns from time to time. Cyclical downturns can result from a variety of market forces, which can result in significant declines in analog semiconductor demand. Downturns have been characterized by diminished product demand, production overcapacity, high inventory levels and accelerated erosion of ASPs. Recent downturns in the semiconductor industry had been attributed to a variety of factors, including weakness in demand and pricing for semiconductors across applications, ongoing trade disputes among the United States and China, and excess inventory. To the extent that current levels of investment in AI-related infrastructure, products or end-market demand reflect expectations that are not ultimately realized, or if customer spending related to AI moderates, is delayed, or declines faster than anticipated, the semiconductor industry could experience an accelerated or more pronounced downturn. Downturns directly impact our business, and any prolonged or significant future downturns in the semiconductor industry could have a material adverse effect on our business, financial condition and results of operations. Conversely, significant upturns can cause us to be unable to satisfy demand in a timely and cost-efficient manner and could result in increased competition for access to third-party foundry and assembly capacity. In the event of such an upturn, we may not be able to expand our workforce and operations in a sufficiently timely manner, procure adequate resources and raw materials, including semiconductor wafers from our third-party wafer manufacturing partners, and other critical components, such as memory components, at reasonable costs, or locate suitable third-party suppliers or other third-party subcontractors to respond effectively to changes in demand for our existing or new products, and our business, financial condition and results of operations could be materially and adversely affected.
Substantial portions of our sales are made to automotive industry suppliers. Downturns or disruptions in the automotive market or industry have harmed, and in the future could significantly harm, our financial results.
Our customers that supply various systems and components to automotive OEMs accounted for 70.6%, 73.8%, and 72.4% of our total net sales in fiscal years 2026, 2025, and 2024, respectively. This concentration of sales exposes us to the risks associated with the automotive market and automotive industry. For example, our anticipated future growth is highly dependent on the increased adoption of automotive technologies, including ADAS and xEV powertrain vehicles, which traditionally have had increased sensor and power product content. A downturn in the automotive market or prolonged disruption could delay automakers’ plans to introduce new vehicles with these features, which would negatively impact the demand for our products and the ability to grow our business. Disruptions in the automotive industry due to changes in tariffs or other trade regulations could have a material adverse effect on our business. For example, in March 2025, the United States Government released a proclamation adjusting tariffs on automobiles and automobile parts into the United States. Such tariffs, as well as any potential retaliatory tariffs, could substantially disrupt the automotive market or industry and in turn have a material adverse effect on our business. Such tariffs could make our OEM and end customers’ products less attractive relative to their competitors' products, which may not be subject to similar tariffs.
Acquisitions of other companies or technologies, may create additional risks, including risks associated with our ability to successfully integrate these acquisitions into our business.
We have acquired other companies as part of our growth strategy, and we continue to consider future acquisitions of or strategic investments in other companies, or their technologies or products, to improve our market position, broaden our technological capabilities, and expand our product offerings. Acquiring companies or technologies involves a number of risks, including, but not limited to: the potential disruption of our ongoing business; the increased costs incurred to finance acquisitions and the allocation of capital to fund acquisitions being diverted from other operational priorities, such as research and development; unexpected costs or incurring unknown liabilities; the diversion of management resources from other strategic and operational issues; difficulty in developing, manufacturing and marketing the products of a newly acquired company within the anticipated costs and timeframe; the inability to retain key employees of the acquired businesses; difficulties relating to integrating the operations and personnel of the acquired businesses; adverse effects on our existing customer relationships or existing customer relationships of acquired businesses; the potential incompatibility of the acquired business or their customers; issues not discovered during our due diligence that could impact our assumptions concerning the status of and prospects for the products and technologies of the acquired business; and acquired intangible assets, including goodwill, becoming impaired as a result of technological advancements or worse-than-expected performance of the acquired business. If we are unable to successfully address any of these risks, our business could be harmed.
Our gross margins may be adversely affected by decreases in average selling prices of our products, increases in input costs and shifts in product, customer or channel mix.
The market for our products is generally characterized by declining ASPs, resulting from factors such as increased competition, overcapacity, the amount of inventory held by our customers, the introduction of new products and increased unit volumes. Further, our overall gross margins have fluctuated period to period as a result of shifts in product mix, customer mix and channel mix, as gross margins on individual products typically fluctuate over the product’s life cycle. We have experienced, and in the future may experience, substantial period-to-period fluctuations in operating results due to these factors. ASPs may decrease in the future in response to
introduction of new products by us or our competitors, or due to other factors, such as customer pricing pressures. To sustain profitable operations, we must continually reduce costs for our existing products and rapidly develop and introduce new products with enhanced features that can be sold initially at higher ASPs. Failure to do so could cause our net sales and gross margins to decline, which would negatively affect our financial condition and results of operations and could significantly harm our business.
We may be unable to reduce the cost of our products sufficiently to enable us to compete with others. Our cost reduction efforts may not allow us to keep pace with competitive pricing pressures given the increased cost of certain materials, such as semiconductor wafers, memory chips and raw materials like gold and copper, the increased cost of which adversely affects our gross margins. Additionally, when a product is in high demand, we may have to source a portion of materials from higher-cost providers, which may decrease our overall gross margin. Further, tariffs on imported raw materials and components essential to our manufacturing processes could lead to higher production costs that we may be unable to pass on to customers, thereby negatively affecting our gross margins. We maintain an infrastructure of facilities and human resources in several locations around the world and, as a result, have limited ability to reduce our operating costs. Accordingly, to remain competitive, we must continually reduce the cost of manufacturing our products through design and engineering changes. We cannot assure you we will be successful in redesigning our products and bringing them to market in a timely manner, or that any redesign will result in sufficient cost reductions to allow us to reduce the price of our products to remain competitive or maintain or improve our gross margins. If a product does not meet our gross margin targets, we may be forced to stop design or production of the product, regardless of where it is in the development or sales stage. To the extent we cannot reduce our product prices and remain competitive or are forced to discontinue development or sales of low margin products, our net sales will likely decline, resulting in further pressure on our gross margins, which could have a material adverse effect on our business, financial condition, results of operations and our ability to grow our business.
If we encounter sustained yield problems or other delays at our third-party wafer fabrication facilities or in the final assembly and test of our products, we may lose sales and damage our customer relationships.
The manufacture of our products, including the fabrication of semiconductor wafers, and the assembly and testing of our products, are complex and sensitive to many factors, including levels of contaminants in the manufacturing environment, difficulties in the wafer fabrication process or other issues that can cause a substantial portion of the components on a wafer to be nonfunctional. These problems may be difficult to detect at an early stage of the manufacturing process and often are time-consuming and expensive to correct. On occasion, we have experienced problems in achieving acceptable yields at our third-party wafer fabrication partners, resulting in delays in the availability of components. Moreover, an increase in the rejection rate of products during the quality control process before, during or after manufacture and/or shipping of such products, results in lower yields and margins. Further, changes in manufacturing processes required due to changes in product specifications, changing customer needs and the introduction of new product lines have historically materially reduced our manufacturing yields, causing low or negative margins on such products. Poor manufacturing yields over a prolonged period could adversely affect our ability to deliver our products on a timely basis and harm our customer relationships, which could have a material adverse effect on our business, financial condition and results of operations.
Our quarterly net sales and operating results are difficult to predict accurately and may fluctuate significantly from period to period. As a result, we may fail to meet the expectations of investors, which could cause our stock price to decline.
We operate in a highly dynamic industry, and our future operating results could be subject to significant fluctuations, particularly on a quarterly basis. Our quarterly net sales and operating results have fluctuated significantly in the past and may continue to vary from quarter to quarter due to a number of factors, many of which are not within our control. In addition, investor expectations regarding emerging technology trends, including AI and data centers, and our positioning relative to those trends, may contribute to heightened volatility in our stock price, whether or not such expectations are ultimately realized. Although some of our customers provide us with non-binding forecasts of their future requirements for our products, a significant percentage of our net sales in each fiscal quarter is dependent on sales that are booked and shipped during that fiscal quarter, and are typically attributable to a large number of orders from diverse customers and markets. As a result, accurately forecasting our operating results in any fiscal quarter is difficult. If our operating results do not meet expectations of securities analysts and investors, our stock price may decline. Additional factors that can contribute to fluctuations in our operating results include the timing of customer qualification of our products and commencement of volume sales by our customers of systems that include our products, product rates of return or price concessions in excess of those expected or forecasted, as well as the other risk factors identified in this section of our Annual Report.
We may experience a delay in generating or recognizing revenues for various reasons. Open orders at the start of each quarter are typically lower than expected net sales for that quarter and are generally cancellable or reschedulable with minimal notice. Thus, we depend on obtaining orders during each quarter for shipment in that quarter to achieve our net sales objectives, and failure to fulfill such orders by the end of a quarter may adversely affect our operating results. Further, our customer agreements typically provide that the customer may delay scheduled delivery dates and cancel orders within specified timeframes without significant penalty. Because we base our operating expenses on anticipated revenue trends and a high percentage of our expenses are fixed in the short term, any delay in generating or recognizing forecasted net sales or changes in levels of our customers’ forecasted demand could adversely impact our business, financial condition and results of operations. Due to our limited ability to reduce expenses, in the event our revenues decline or net sales do not meet our expectations, it is likely that in some future quarters our operating results will decrease from the previous quarter or fall below the expectations of securities analysts and investors. As a result of these factors, our operating results may vary significantly from quarter to quarter. Accordingly, we believe that period-to-period comparisons of our results of operations should not
solely be relied upon as indications of future performance. Any shortfall in net sales or net income compared to a previous quarter or to levels expected by the investment community could cause a decline in the trading price of our stock.
Our dependence on our manufacturing operations in the Philippines exposes us to certain risks that may harm our business.
We rely heavily on the manufacturing operations at AMPI, which operates as our primary internal assembly and testing facility. We depend on AMPI for our sensor and power products, and if this facility suspends operations, our ability to assemble and test our products could be materially impaired. Further, any disruption in operations at AMPI could adversely affect our ability to meet customer demand in a timely manner, or at all, which would lead to a reduction in our net sales and may adversely affect our reputation and customer relationships, potentially resulting in longer-term harm to our business. In addition, an earthquake, fire, flood or other natural or man-made disaster, as well as a pandemic, epidemic or other outbreak of infectious disease, strikes, political or civil unrest, energy shortages, or any number of other factors beyond our control could also disable the facility, causing catastrophic losses. Although we supplement the assembly capabilities at AMPI with other external or independent assembly subcontractors throughout Asia, if our manufacturing operations at AMPI are disrupted, it could take additional time and cost for us to resume manufacturing at another location, which could materially harm our manufacturing efficiency and capacity, delay production and shipments and result in costly expenditures to repair or replace this facility. We have established or invested in alternative manufacturing facilities and may in the future be required to establish or invest in additional alternative manufacturing facilities. Such attempts to establish or invest in alternative manufacturing facilities, could increase our costs, reduce our profitability, and limit our ability to maintain competitive prices for our products. Only a few alternative manufacturing facilities have the capability to assemble and test our most advanced and complex products, and if we are forced to engage such alternative manufacturing facilities, we may encounter difficulties and incur additional costs. Thus, we cannot guarantee that we will be able to manage the risks and challenges associated with our dependence on AMPI, and any failure to do so could have a material adverse effect on our business, financial condition and results of operations.
A significant portion of our net sales are generated through distributors, which subjects us to certain risks.
We sell our products worldwide through multiple sales channels, including through our direct sales force, distributors and independent sales representatives, which resell our products to numerous end customers. A significant portion of our net sales are made to distributors, which were approximately 55.0%, 50.7% and 52.9% of our net sales in fiscal years 2026, 2025 and 2024. Sales to our largest, non-affiliated distributor accounted for 9.4%, 9.3% and 10.2% of our net sales in fiscal years 2026, 2025 and 2024, respectively. The impairment or termination of our relationships with our distributors, or the failure of these parties to diligently sell our products, could materially and adversely affect our ability to generate revenue and profits. Additionally, if our distributors are unable to accurately forecast end customer demand for our products, we may purchase more or fewer parts than necessary or incur costs for canceling, postponing or expediting delivery of parts. Our purchases or commitments to purchase inventory are based on, among other things, our distributors’ forecasts of end customer demand. We have experienced, and may in the future experience, situations where such demand does not materialize as forecasted, where inventory is rendered obsolete by the rapid pace of technological change, or where customers reduce, delay, or cancel orders. Some of these factors have resulted in, and may in the future result in, excess or obsolete inventory charges. Conversely, if we need to rapidly increase our business and manufacturing capacity to meet increases in our distributors’ forecasted demand, this could strain our manufacturing and supply chain operations and negatively impact our working capital. Because our distributors control the relationships with end customers, if our relationship with any distributor ends, we could also lose our relationships with their customers. In addition, because our distributors do not sell our products exclusively, they may focus their sales efforts and resources on other products that produce better margins or greater commissions for them or are incorporated into a broader strategic relationship with one of their other suppliers. Because we do not control the sales representatives and other employees of our distributors, we cannot guarantee that our sales processes, regulatory compliance and other priorities will be consistently communicated and executed. Further, we may not have staff in one or more of the locations covered by our distributors, which makes it particularly difficult for us to monitor their performance. Our efforts to mitigate risks associated with noncompliance by our distributors may not be successful, and there remains a risk that our distributors will not comply with regulatory requirements or our requirements and policies. Actions by our distributors' sales representatives and other employees could result in flat or declining sales in a given geographic area, reputational harm to us or our products, or legal liability, any of which could have an adverse effect on our business, financial condition and results of operations. Additionally, the operation of local laws and our agreements with our distributors could make it difficult for us to replace a distributor we feel is underperforming.
Events beyond our control impacting us, our key suppliers, our manufacturing partners or other third-party suppliers of components, materials or subassemblies incorporated into the same end products as our devices could have an adverse effect on our business, financial condition, results of operations and cash flows.
Our ability to make, transport and sell products in coordination with our suppliers, customers (including OEMs), distributors and third-party manufacturers or other subcontractors is critical to our success. Damage or disruption to either our or our key suppliers or manufacturing partners’ supply, manufacturing or distribution capabilities resulting from energy shortages, weather, freight carrier availability, climate change, natural disaster, disease, fire, explosion, cyber-attacks, terrorism, pandemics, epidemics or other outbreaks of infectious disease, war, strikes, civil unrest, repairs or enhancements at facilities manufacturing or distributing our products or other reasons could impair our ability to manufacture, sell, and deliver products on a timely basis or at all. Climate change may also increase the frequency or intensity of certain of these risks, as well as contribute to various chronic changes (such as sea-level rise or changes to meteorological and hydrological patterns) that may result in similar risks. In addition to general economic conditions, impacts of other
macroeconomic events, such as valuation concerns related to AI Technologies, continued inflation and labor market concerns, public health crises, geopolitical tensions or conflicts and risks, and uncertainties in global financial markets, could materially adversely impact our operations or those of our suppliers, third party distributors and sub-contractors.
Because our products are components that are incorporated into our customers’ end products alongside semiconductors, electronic components, subassemblies, raw materials and other inputs supplied by numerous third parties over whom we have no control, our business is also exposed to disruptions affecting those other suppliers and the broader electronics supply chain, even when our own supply, manufacturing and distribution capabilities are unaffected. Many of the end products into which our sensor, power and motor driver ICs are designed, including automobiles, industrial equipment, data center infrastructure, consumer electronics and clean energy systems, cannot be completed, shipped or sold by our customers unless all required components are available in the necessary quantities and on the required schedule. As a result, a shortage, allocation, quality issue, recall, cyber incident, geopolitical disruption, trade restriction, labor action, insolvency or other disruption affecting any other critical component or input, such as memory or logic semiconductors, microcontrollers, power discretes, passive components, connectors, printed circuit boards, substrates, displays, batteries, wire harnesses, rare-earth elements, minerals or magnets subject to export restrictions, or other specialty raw materials, could cause our customers to delay, reduce, reschedule or cancel orders for our products, draw down inventory of our products in lieu of placing new orders, or suspend or curtail production of the end products into which our devices are incorporated. These dynamics may be magnified by our customers’ just-in-time manufacturing practices, lean inventory strategies, dual-sourcing requirements and contractual commitments to their own customers. We typically have limited visibility into our customers’ full bills of materials and into the supply chains of other component suppliers, which limits our ability to anticipate, plan for or mitigate the impact of such third-party disruptions. The effects of these disruptions on our business may lag the underlying event by one or more quarters as inventory is consumed and orders are rescheduled and may persist for an extended period after the underlying event resolves. For example, export restrictions on rare-earth magnets imposed by China in 2025 caused certain automotive manufacturers to pause or reduce vehicle production, and similar disruptions affecting the supply of critical inputs to our customers’ end products could reduce demand for our products even where our own deliveries continue uninterrupted.
In particular, the escalation of armed conflict involving the United States, Israel and Iran beginning in early 2026 has heightened risks to our business. Disruption of key Middle East maritime shipping corridors, including the Strait of Hormuz, has increased freight costs and transit times and could delay or interrupt the supply of raw materials, components and packaging materials sourced from or routed through the affected region, including for our fabs, other suppliers and third-party suppliers of components incorporated into the same end products as our devices. Related surges in global energy prices have also affected energy costs in countries where we maintain significant manufacturing operations, including the Philippines, which has declared a state of energy emergency. Increased energy costs or supply constraints at our facilities could reduce production capacity or cause delays. The conflict may prompt expanded sanctions and export control measures that could restrict our ability to transact with counterparties or expose us to regulatory risk. Because our operations are downstream in the global supply chain, the effects of these disruptions, and any further escalation, may lag the underlying events and persist beyond any resolution or de-escalation of the conflict itself.
Other companies in our industry may be affected differently by natural disasters, climate change or other disruptions depending on the location and concentration of their suppliers, operations and customers. In addition, many of our competitors are larger companies with more substantial financial and other resources and, as a result, may be better able to plan for, withstand or otherwise mitigate the effects of any such disruption. While we may take steps to plan for or address the occurrence of any such event, we cannot guarantee that we will be successful. Our failure to take adequate steps to reduce the likelihood or mitigate the potential impact of such events, or to effectively manage such events if they occur, particularly when a wafer or packaging component is sourced from a limited number of locations or suppliers, could adversely affect our business, financial condition, results of operations and cash flows and/or require additional resources to restore our supply chain.
If we fail in a timely and cost-effective manner to develop new product features or new products that address customer preferences and achieve market acceptance, our operating results could be adversely affected.
Our customers seek new products with more features and functionality at a lower cost, and our success relies heavily on our ability to continue to develop and market to our customers new and innovative products and improvements of existing products, including those that may incorporate, or are based or developed using, software or AI Technologies. To respond to new and evolving customer demands, achieve strong market share and keep pace with new technological, processing and other developments, we must continually introduce new and innovative products into the market. Although we strive to respond to customer preferences and industry expectations in the development of our products, we may not be successful in developing, introducing or commercializing any new or enhanced products on a timely basis or at all. Further, if initial sales volumes for new or enhanced products do not reach anticipated levels within the time periods we expect, we may be required to engage in additional marketing efforts to promote such products and the costs of developing and commercializing such products may be higher than we predict. Moreover, new and enhanced products may not perform as expected. We may encounter lower manufacturing yields and longer delivery schedules in commencing volume production of new products that we introduce, which could increase costs and disrupt supply of such products.
A fundamental shift in technologies, particularly one that impacts magnetic or power ICs, the regulatory climate or demand patterns and preferences in our existing product markets or the product markets of our customers or end-users could make our current products obsolete or more expensive relative to alternatives, prevent or delay the introduction of new products or enhancements to our
existing products or render our products irrelevant to our customers’ needs. If our new product development efforts fail to align with our customers' needs, including due to circumstances outside of our control, such as a fundamental shift in product markets of our customers and end users or regulatory changes, our business, financial condition and results of operations could be adversely affected.
We depend on growth in the end markets that use our products. Any slowdown in such growth, including as a result of volatility in demand for emerging technologies or changes in government incentives, could adversely affect our financial results.
Our continued success will depend in large part on general economic growth and growth within our target markets in the automotive and industrial sectors. Factors affecting these markets, including reductions in sales of our customers’ products, deterioration of our customers’ financial condition, insufficient customer resources dedicated to promoting and commercializing their products, the inability of our customers to adapt to changing technological demands, design flaws in customer products, the effects of catastrophic and other disruptive events, and increased supply chain, manufacturing or production costs could seriously harm our customers and, as a result, harm us. Additionally, our products may be used in AI infrastructure, including data centers, robotics and factory automation, and our ability to capitalize on this trend is subject to significant risks and uncertainties. The market for AI applications is still developing, and demand for products that support AI Technologies may be unpredictable and vary significantly. If the growth of AI infrastructure is constrained by factors such as power availability, utility limitations, shifts in customer budgets or a collapse in AI demand, demand for our offerings could be lower than we currently expect. Further, our failure to develop and offer the solutions that our AI-focused customers demand in a timely manner, commercialize new technologies used in AI data centers, or adapt to a shift in data center design could result in a loss of market share, unanticipated costs and inventory obsolescence. Moreover, expectations and front-loaded investment related to AI Technologies may increase the magnitude and volatility of semiconductor industry cycles, making downturns more abrupt, and if customer spending on AI Technologies moderates, is delayed, or declines more rapidly than anticipated, we could face a more pronounced downturn.
In addition, end-user demand for certain HEVs, BEVs and green energy products often depends on the availability of rebates, tax credits and other financial incentives. The reduction, modification, expiration or elimination of such incentives across various global jurisdictions could reduce end-user demand and thus affect our customers’ demand for our products. For example, the adoption rate of xEVs is sensitive to the total cost of ownership relative to ICE vehicles, which can be significantly impacted by fluctuations in global fuel prices and the varying availability or sunsetting of government subsidies in key markets. If gas prices are low or if governmental financial incentives for new and used xEVs are reduced or eliminated more rapidly than anticipated, end-user demand for our products could slow, which could adversely affect our business, financial condition and results of operations. If anticipated demand in the end market for automobiles with higher sensor and power product content, industrial data center, robotics and the other growth markets in which we compete does not materialize or match our projections, it would adversely affect demand for our products from customers and impact our ability to execute our growth strategy.
The loss of one or more significant customers could have a material adverse effect on our business and results of operations.
The loss of or a significant reduction in business with one or more significant customers, particularly in the automotive market, could have a material adverse effect on our net sales and, in turn, on our overall business, financial condition and results of operations.
Our ability to identify, enter and expand in new markets may be unsuccessful, and our investments in these opportunities may not generate expected returns, which could adversely affect our business and financial results.
As part of our growth strategy, we seek to expand our addressable markets by identifying and entering both new geographic markets and increasing the number and types of applications our products can be used in. For example, we are increasing investment in and pursuing opportunities in applications such as AI, medical devices and robotics, and in geographic markets where we have not historically had a strong presence. Our future success depends in part on our ability to successfully identify these opportunities, make the necessary investments to pursue them, overcome marketing and technological challenges, and ultimately generate and expand revenue and achieve appropriate margins from these efforts. Our ability to generate significant revenue from new markets and product applications will depend on various factors, including: the development and growth rate of these markets; the ability of our technologies and product solutions to address the specific needs, price and performance requirements of customers and end users in these markets; our ability to provide solutions that offer advantages in terms of performance, quality, reliability, and value-added features compared with alternative solutions and competitive offerings; the ability to adapt to market conditions, distribution channels, and customer relationships that may be unfamiliar to us; the timely and efficient completion of product development, manufacturing, assembly, and test processes suitable for these markets; and the effectiveness of our marketing, sales, and support efforts in these new areas. Many potential customers in these markets may have well-established relationships with competitive suppliers. Our ongoing success will require us to offer compelling alternatives at competitive costs. The markets for certain of these products may develop slower than anticipated, or not at all, or could utilize competing technologies. If we are unable to adapt rapidly to such conditions, or if we fail to timely introduce new products or penetrate these markets successfully, our investments may not generate expected returns, our sales growth could be impeded, and our business, financial condition, and results of operations could be adversely affected.
The nature of the design win process requires us to incur expenses without any guarantee that research and development efforts will generate net sales, and even if design wins are secured, such design wins may not generate timely or sufficient net sales or margins, which could adversely affect our financial results.
We focus on winning competitive bid selection processes, called “design wins,” to develop products for use in our customers’
products. Our future sales are highly dependent on our continued success at winning design mandates. These lengthy selection processes may require us to incur significant expenditures and dedicate valued engineering resources to the development of new products without any assurance that we will achieve design wins. If we incur such expenditures and fail to be selected in the bid selection process, our operating results may be adversely affected. Further, because of the significant costs associated with qualifying new suppliers, customers are likely to use the same or enhanced versions of semiconductor products from existing suppliers across a number of similar and successor products for a lengthy period of time. As a result, if we fail to secure initial design wins, we may lose the opportunity to make future sales of those products to that customer. Failure to achieve initial design wins may weaken our position in future competitive selection processes because we may not be perceived as an industry leader.
Even if we succeed in securing design wins, we may not generate timely or sufficient net sales or margins from those wins, as a substantial period of time generally elapses before we generate meaningful net sales relating to such products for which we secure design wins, if such sales are realized at all. The reasons for this delay may include: changing customer requirements, resulting in an extended development cycle for the product; delay in the volume production ramp up of customer products into which we design solutions; delay or cancellation of customers’ product development plans; competitive pressures to reduce our product selling price; the discovery of product design flaws, defects, errors or bugs; lower than expected customer acceptance of solutions designed for customers’ products; lower than expected market acceptance of customers’ products; and higher manufacturing costs than anticipated. If we do not continue to achieve design wins in the short term, we may not be able to achieve expected net sales levels associated with these design wins. If we experience delays in achieving such sales levels, our operating results could be adversely affected. Moreover, even if a customer selects our product, we cannot guarantee that this will result in any sales of our products, as the customer may ultimately change or cancel its product plans, or our customers’ efforts to market and sell its product may not be successful.
Changes in government trade policies, including the imposition of export restrictions and tariffs or retaliatory measures in response to such actions, could limit our ability to sell products to certain customers or limit demand from certain customers, which may materially and adversely affect our sales and results of operations.
The U.S. or foreign governments may take or threaten to take administrative, legislative or regulatory action that could materially interfere with our ability to sell products in certain countries and/or to certain customers. For example, the United States and China have imposed export restrictions related to certain semiconductors, and a number of tariffs and other restrictions on items imported or exported between the United States and China and may propose or threaten to impose additional tariffs in the future. While a recent U.S. Supreme Court decision limited the President’s authority to impose certain broad-based tariffs under the International Emergency Economic Powers Act (IEEPA), the risk of tariffs and other trade restrictions remains, as this ruling does not affect other legal authorities, such as those permitting tariffs on national security grounds. We cannot predict what actions may ultimately be taken with respect to export restrictions, tariffs or trade relations between the United States and China or other countries, what products may be subject to such actions, or what actions may be taken by other countries in retaliation.
Further, since we manufacture products outside the United States, new or increased tariffs on certain goods imported into the United States, if adopted or reinstated, could have a disproportionate impact on our business and make our products more expensive and less competitive in domestic markets. The U.S. Department of Commerce is conducting an ongoing investigation into whether imports of semiconductors, semiconductor manufacturing equipment and their derivative products threaten to impair U.S. national security. Following completion of the investigation, the President may decide to impose additional tariffs on these or other products under Section 232 of the Trade Expansion Act of 1962 or other legal authorities, the scope, timing and magnitude of which are highly uncertain and not within our control. Further, changes in U.S. trade policy could trigger retaliatory actions by affected countries, which could impose restrictions on our ability to do business in or with affected countries or prohibit, reduce or discourage purchases of our products by foreign customers, leading to increased costs of components contained in our products, increased costs of manufacturing our products, and higher prices for our products in foreign markets. For example, there are risks that foreign governments may require the use of local suppliers, mandate local partnerships, or provide incentives favoring domestic suppliers in their respective markets. Moreover, changes in tariffs and trade restrictions can be announced with little or no advance notice. The adoption and expansion of tariffs or other trade restrictions, increasing trade tensions, or other changes in governmental policies related to taxes, tariffs, trade agreements or policies, are difficult to predict, which makes attendant risks difficult to anticipate and mitigate. Further, changes in U.S. foreign policy or trade agreements may impact our supply chain, manufacturing and distribution of our products, as suppliers face increased costs and logistical challenges, which could result in delays in product delivery and increased inventory costs. Changes in, and responses to, U.S. trade policy could reduce the competitiveness of our products and cause our sales to decline, which could materially and adversely impact our business, financial condition and results of operations.
Warranty claims, customer quality claims, product liability claims and product recalls could harm our business, results of operations and financial condition.
We face an inherent business risk of exposure to warranty and product liability claims if products fail to perform as expected or any such failure is alleged to result in bodily injury, death, and/or property damage. Further, if any of our designed products are alleged to be defective, we may be required to participate in their recalls. In addition, our customers, particularly automotive and industrial OEMs and their tier-one suppliers, increasingly assert quality-related claims against us seeking recovery of costs incurred as a result of actual or alleged non-conformance of our products. Customers frequently seek to recover these claimed amounts through charge-backs, set-offs against amounts otherwise owed to us, or contractual indemnification, cost-sharing or quality-incentive provisions. The amounts
sought in connection with such claims may substantially exceed the purchase price of the affected products, and resolution of such claims often requires investigation, the outcome of which is inherently uncertain and may be costly. Some OEMs expect suppliers to warrant their products for longer periods of time and are increasingly looking to them for contribution when faced with product liability claims or recalls. For example, some of our products are used in automotive safety systems, the failure of which could lead to injury or death. We carry various commercial liability policies, including umbrella/excess policies which provide some protection against product liability exposure. However, a successful warranty or product liability claim against us in excess of our available insurance coverage and established reserves, or a requirement that we participate in a product recall, could have adverse effects on our business results. In the future, it is possible we will not be able to obtain insurance coverage in the amounts and for the risks we seek at policy costs and terms we desire. Further, if our products fail to perform as expected or a failure of our products results in a recall or in significant customer quality claims, our reputation may be damaged, we may lose existing or future design wins and customers may reduce their allocation of business to us, which could make it more difficult for us to sell our products to existing and prospective customers and could materially and adversely affect our business, results of operations and financial condition.
Our dependence on international customers and operations also subjects us to a range of other additional regulatory, operational, financial and political risks that could adversely affect our financial results.
For fiscal years 2026, 2025 and 2024, approximately 89.7%, 87.2% and 85.8%, respectively, of our net sales were to customers outside of the United States. In addition, a substantial majority of our products are assembled and tested at facilities outside of the United States. Our principal assembly and test facility is located in the Philippines at AMPI. We also rely on several other wafer fabrication manufacturing partners located throughout Asia. Any conflict or uncertainty in this region, including public health or safety concerns, climate change or natural disasters, could have a material adverse effect on our business, financial condition and results of operations. Further, conducting business outside the United States subjects us to numerous risks and challenges, including:
changes in a specific country’s or region’s political, regulatory or economic conditions;
a pandemic, epidemic or other outbreak of an infectious disease, which may cause us or our distributors, vendors and/or customers to temporarily suspend operations in the affected city or country;
compliance with a wide variety of domestic and foreign laws, regulations and policies (including those of municipalities or provinces where we have operations) and unexpected changes in those laws and regulatory requirements, including uncertainties regarding taxes, social insurance contributions and other payroll taxes and fees to governmental entities, climate-related disclosures, tariffs, quotas, export controls, export licenses and other trade barriers or restrictions;
unanticipated restrictions on our ability to sell to foreign customers where sale of products and provision of services may require export licenses or are prohibited by government action, unfavorable foreign exchange controls and currency exchange rates;
the risk of substantial penalties and litigation related to violations of a wide variety of laws, treaties and regulations, including labor regulations and anti-corruption regulations;
difficulties and costs of staffing and managing international operations across different geographic areas and cultures;
potential political, legal and economic instability, armed conflict, and civil unrest in the countries in which we and our customers, suppliers and contract manufacturers are located, such as macroeconomic weakness related to trade and political disputes between the United States and China, tensions across the Taiwan Strait, the current conflict between Russia and Ukraine and the ongoing conflict involving the United States, Israel, Iran and other nations in the Middle East;
difficulty and costs of maintaining effective data security;
inadequate protection of intellectual property;
transportation and other supply chain delays and disruptions;
nationalization and expropriation;
restrictions on the transfer of funds to and from foreign countries, including withholding taxes and other potentially negative tax consequences;
unfavorable and/or changing foreign tax treaties and policies; and
increased exposure to general market and economic conditions outside of the U.S.
These factors, individually or in combination, could impair our ability to effectively operate one or more of our foreign facilities or deliver our products, result in unexpected and material expenses, or cause an unexpected decline in the demand for our products in certain countries or regions. Our failure to manage the risks and challenges associated with our international business and operations could have a material adverse effect on our business.
We may lose sales if we are unable to obtain government authorization to export certain technology for our products, and we will be subject to legal and regulatory consequences if we do not comply with applicable export control laws and regulations.
Exports to certain manufacturers of technology relating to our products are subject, or could be subject in the future, to export controls imposed by the U.S. government and administered by the U.S. Departments of State and Commerce. In certain instances, these regulations may require pre-shipment authorization from the administering department. For products subject to the Export Administration Regulations, administered by the Department of Commerce’s Bureau of Industry and Security, the requirement for a
license is dependent on the type and end use of the product, the final destination, the identity of the end user and whether a license exception might apply. In recent years, the Bureau of Industry and Security has announced export control regulations applicable to the sale of U.S. semiconductor technology in China (collectively, the “BIS Regulations”). The BIS Regulations place limitations on the ability of companies to export certain semiconductor chips, as well as chipmaking equipment, by requiring companies to obtain licenses to export such products and equipment into China or other designated countries. Certain of our competitors may be exempt from the BIS Regulations by virtue of being non-U.S. manufacturers. Any expansion of the scope of the BIS Regulations, including an increase in the number of companies subject to such regulations or the addition of one or more of our significant customers, could have a material impact on our net sales. We have evaluated and selectively pursued export licenses and authorizations, but there can be no assurances that we will obtain such licenses or authorizations on a timely or cost-effective basis or at all. Products developed and manufactured in our foreign locations are subject to export controls of the applicable foreign nation. Obtaining export licenses can be difficult, costly and time-consuming, and we may not always be successful in obtaining necessary export licenses. Our failure to obtain required import or export approval for our products or limitations on our ability to manufacture or sell our products imposed by these laws may harm our international and domestic revenues. Noncompliance with these laws could have negative consequences, including government investigations, penalties and reputational harm. The absence of comparable restrictions on competitors in other countries may adversely affect our competitive position. Failure to obtain export licenses for technology relating to our products or having one or more of our customers be restricted from receiving exports from us could significantly reduce our net sales and materially and adversely affect our business, financial condition and results of operations.
Changing currency exchange rates may adversely affect our business, financial condition, results of operations and cash flows.
We have operations and assets in the U.S. as well as foreign jurisdictions and prepare our consolidated financial statements in U.S. dollars, but a portion of our earnings and expenditures are denominated in other currencies. Therefore, we must translate our foreign assets, liabilities, revenue and expenses into U.S. dollars at applicable exchange rates. Consequently, fluctuations in the value of foreign currencies relative to the U.S. dollar may negatively affect the value of these items in our financial statements. In addition, since many of our sales in foreign jurisdictions are denominated in U.S. dollars, a decrease in the value of foreign currencies relative to the U.S. dollar may effectively increase the price of our products in the currency of the jurisdiction in which the sale took place and may result in our products becoming too expensive for non-U.S. customers who do not conduct their business in U.S. dollars. Further, currency exchange rates can be volatile, and such currency fluctuations may make it difficult for us to predict our results of operations. It is possible that government policy changes and uncertainty about such changes could increase currency exchange rate fluctuations. If we fail to manage our foreign currency exposure adequately, we may suffer losses in the value of our net foreign currency investment, and our business, financial condition, results of operations and cash flows may be negatively affected.
Our ability to raise capital in the future may be limited and could prevent us from executing our growth strategy.
Our ability to operate and expand our business depends on the availability of adequate capital, which in turn depends on cash flow generated by our business and the availability of borrowings under our credit facilities and other debt, equity or other applicable financing arrangements. We believe that our existing cash resources and our access to the capital markets will be sufficient to finance our continued operations, growth strategy, and planned capital expenditures for at least the next 12 months. However, we have based this estimate on our current operating plans and expectations, which are subject to change, and cannot assure you that our existing resources will be sufficient to meet our future liquidity needs. We may require additional capital to respond to business opportunities, challenges, acquisitions or other strategic transactions and/or unforeseen circumstances. The timing and amount of our working capital and capital expenditure requirements may vary significantly depending on numerous factors, including: market acceptance of our products; the need to adapt to changing technologies and technical requirements; the existence of opportunities for expansion; and access to and availability of sufficient management, technical, marketing and financial personnel. In addition, it is possible that government policy changes and uncertainty about such changes could increase market volatility, which may lead to adverse changes in the availability, terms and cost of capital.
If our capital resources are insufficient to satisfy our liquidity requirements, we may seek to sell additional equity securities or debt securities or obtain debt financing. The sale of additional equity securities or convertible debt securities would result in additional dilution to our stockholders. Additional debt would result in increased expenses and could result in covenants that would restrict our operations and our ability to incur additional debt or engage in other capital-raising activities. Interest rates may remain elevated or rise, making the cost of incurring new debt obligations more expensive to the Company. There is no assurance that financing, if required, will be available in amounts or on terms acceptable to us, if at all. If we are unable to obtain adequate financing or financing on terms satisfactory to us, when we require it, our ability to continue to grow and support our business and respond to business opportunities and challenges could be significantly limited.
Our indebtedness may limit our flexibility to operate our business and adversely affect our financial health and competitive position.
As of March 27, 2026, we had $285.0 million in aggregate principal amount of debt outstanding under our 2026 Refinanced Loans (as defined herein), no debt outstanding under our revolving credit facility and $256.0 million of additional borrowings available thereunder. To service this indebtedness, and any additional indebtedness or other long-term obligations we may incur in the future, we need to generate sufficient levels of cash from our operating activities. Our ability to generate cash is subject, in part, to our ability to successfully execute our business strategy, as well as general economic, financial, competitive, regulatory and other factors beyond our control. We cannot assure you that our business will be able to generate sufficient levels of cash from operations or that future borrowing
or financing will be available to us in an amount sufficient to enable us to service our indebtedness and fund our other liquidity needs. To the extent we are required to use cash from operations or the proceeds of any future financing to service our indebtedness instead of funding working capital, capital expenditures or other general corporate purposes, we will be less able to plan for, or react to, changes in our business, industry and in the economy generally. This will place us at a competitive disadvantage compared to our competitors that have less indebtedness.
In addition, the 2023 Revolving Credit Agreement contains, and any agreements evidencing or governing other future indebtedness may also contain, certain covenants that limit our and our restricted subsidiaries’ ability to engage in certain transactions that may be in our long-term best interests. Subject to certain limited exceptions, these covenants include limitations on additional indebtedness, liens, various fundamental changes, dividends and distributions, investments (including acquisitions), transactions with affiliates, asset sales, prepayment of junior financing, changes in business and other limitations customary in senior secured credit facilities. Further, we are required to maintain a Total Net Leverage Ratio (as defined in the 2023 Revolving Credit Agreement) of no more than 4.00 to 1.00 at the end of each fiscal quarter, which may, subject to certain limitations, be increased to 4.50 to 1.00 for any quarter in which an acquisition in excess of $500.0 million is conducted and for the three subsequent quarters. Our ability to comply with these covenants may be affected by events and factors beyond our control. If we were to breach one or more covenants, the administrative agent with the consent of, or at the request of, the holders of more than 50% in principal amounts of the loans and commitments, may terminate the commitments and accelerate the maturity of the loans and enforce certain other remedies. The occurrence of any of these events could have a material adverse effect on our business, financial condition and results of operations.
In addition, we may be able to incur significant additional indebtedness in the future. While the 2023 Revolving Credit Agreement generally restricts our and our restricted subsidiaries’ ability to incur additional indebtedness, these restrictions are subject to important and significant exceptions and limitations. Also, these agreements generally do not prohibit us from incurring obligations that do not constitute indebtedness as defined therein. To the extent that we incur additional indebtedness or such other obligations, the risks associated with our indebtedness described above could increase.
We depend on key and highly skilled personnel to operate our business, and if we are unable to retain our current personnel and hire additional personnel, our ability to achieve our long-term strategic business and financial objectives and execute our business plan could be harmed, which in turn could adversely affect our financial results.
Our success depends upon the continued services of our executive officers, managers and skilled personnel, including our development engineers. From time to time, including over the past year, we have experienced changes in our executive management team and other key personnel, which is disruptive to our business. Generally, our employees, including executive management are not bound by obligations 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. Moreover, our employees, including executive management, are generally not subject to non-competition agreements. Given these limitations, we may not be able to continue to attract, retain and motivate the qualified personnel necessary for our business. In addition, we recruit from a limited pool of engineers with expertise in analog mixed-signal semiconductor design, and the competition for such personnel can be intense. As we expand into markets that we have not traditionally served, our future growth and success will depend on hiring key employees with expertise in these industries. Our future performance depends on the continued services and continuing contributions of our executive management to execute our business plan and to identify and pursue new opportunities and product innovations. The loss of one or more of our executive officers or other key personnel or our inability to locate suitable or qualified replacements could be significantly detrimental to our operations or product development efforts and could have a material adverse effect on our business, financial condition and results of operations. We also must attract and retain highly qualified personnel, including certain foreign nationals who are not U.S. citizens or permanent residents, many of whom are highly skilled and constitute an important part of our U.S. workforce, particularly in the areas of engineering and product development. Our ability to hire and retain these employees and their ability to remain and work in the U.S. are impacted by laws, regulations, policies, procedures and enforcement practices of various government agencies. Changes in immigration laws, regulations, policies or procedures may adversely affect our ability to hire or retain such workers, increase our operating expenses and negatively impact our ability to deliver our products and services, any of which would adversely affect our business, financial condition and results of operations.
Future sales of our common stock by large stockholders, or the possibility of such sales, may cause the trading price of our common stock to decline.
Future sales of substantial amounts of our common stock in the public market by our largest stockholders, or the perception that these sales could occur, could cause the market price of our common stock to decline and impair our ability to raise capital through the sale of additional shares.
Our business and operating results could be harmed as the result of undertaking restructuring activities.
We have initiated and implemented strategies to reduce costs, including workforce reductions and office closures, and incurred related restructuring costs in anticipation of realizing cost savings in the future. We may not realize, in full or in part, the anticipated benefits, savings and improvements from the reductions of our workforce and other restructuring activities if our revenue and profits decline beyond our current projections. Any future restructuring would require substantial management time and attention and may divert management from other important work. If we are unable to effectively manage or efficiently implement these strategies and/or restructuring initiatives, we may not realize the expected operational efficiencies and cost savings of such strategies and initiatives, and
our operating results and financial condition would be adversely affected as a result.
Risks Related to our Information Technology, Intellectual Property (“IP”), AI Technologies, and Data Security and Privacy
If we are unable to protect our proprietary technology and inventions, our ability to compete successfully and our financial results could be adversely impacted.
We seek to protect our proprietary technology and inventions, particularly those relating to the design of our products, through the use of patents. As of March 27, 2026, we owned approximately 1,860 active patents, including 1,005 U.S. patents (with expiration dates between 2026 and 2044), with approximately 440 pending patent applications, including 250 U.S. patent applications. Maintenance of patent portfolios, particularly outside of the U.S., is expensive, and the process of seeking patent protection is lengthy and costly. While we intend to maintain our patents supporting our products and to continue to prosecute our currently pending patent applications and file future patent applications when appropriate, the value of these actions may not exceed their expense. Existing patents and those that may be issued from any pending or future applications may be subject to challenges, invalidation or circumvention, and the rights granted under our patents may not provide us with meaningful protection or any commercial advantage. In addition, the protection afforded under the patent laws of one country may not be the same as that in other countries. This means, for example, that our right to exclusively commercialize a product in those countries where we have patent rights for that product can vary on a country-by-country basis. We also may not have the same scope of patent protection in every country where we do business. Additionally, it is difficult and costly to monitor the use of our IP. It may be the case that our IP is already being infringed, and infringement may occur in the future without our knowledge. The difficulty and failure to identify any violations of our IP rights could materially and adversely affect our business, financial condition and result of operations and hurt our competitive advantage.
Our use of AI Technologies in product development and software coding presents additional IP risks, including uncertainty regarding the protectability of AI-generated inventions and code, potential infringement claims arising from AI-generated outputs substantially similar to third-party or open-source materials, and possible third-party provider rights in code generated using their tools. See “Risk Factors—We are exposed to risks related to the use of AI Technologies by us and others.” We also seek to protect our proprietary technology and inventions, particularly those relating to our manufacturing processes, as trade secrets. Under the trade secret laws of both the United States and applicable non-U.S. countries, protection of our proprietary information as trade secrets requires us to take steps to prevent unauthorized disclosure to third parties or misappropriation by third parties. While we require our officers, employees, consultants, distributors, and existing and prospective customers to sign confidentiality agreements and take security measures to protect unauthorized disclosure and misappropriation of our trade secrets, we cannot assure or predict that these measures will be sufficient. The semiconductor industry is generally subject to high employee turnover, so the risk of trade secret misappropriation may be amplified. If any of our trade secrets are subject to unauthorized disclosure or are otherwise misappropriated by third parties, our competitive position may be materially and adversely affected.
Our ability to compete successfully depends in part on our ability to commercialize our products without infringing the patent, trade secret or other IP rights of others.
Our competitors and other third parties actively seek to protect their technology and inventions with patents and trade secrets. We have no means of knowing the content of patent applications filed by third parties until they are published. It is also difficult and costly to continuously monitor the IP portfolios of our competitors to ensure our technologies do not violate the IP rights of any third parties. Patent assertion entities are common in the semiconductor industry, which is characterized by frequent litigation regarding patent and other IP rights. From time to time, we receive communications from third parties that allege that our products or technologies infringe their patent or other IP rights, and we may receive more or similar communications in the future. Lawsuits or other proceedings resulting from allegations of infringement, including claims arising from our use of AI Technologies in our development process, could subject us to significant liability for damages, invalidate our proprietary rights and adversely affect our business. If a third party succeeds in asserting a valid claim against us or our customers, we could be forced to do one or more of the following: discontinue selling, importing or using certain technologies that contain the allegedly infringing IP, which could cause us to stop manufacturing certain products; seek to develop non-infringing technologies, which may be infeasible; incur significant legal expenses; pay substantial monetary damages to the party whose IP rights we may be found to be infringing; or seek licenses for the infringed technology that may not be available on commercially reasonable terms, if at all. If a third party causes us to discontinue the use of any of our technologies, we could be required to design around those technologies, which could be costly and time-consuming and have an adverse effect on our financial results. Any significant impairments of our IP rights from any litigation we face could materially and adversely impact our business, financial condition, results of operations and our ability to compete in our industry.
Cybersecurity incidents that we or our critical third-party service providers experience could irreparably damage our reputation and business and materially affect our operating results and financial condition.
We rely on computer systems, hardware, software, technology infrastructure and online sites and networks for both internal and external operations (collectively, “IT Systems”) that are critical to our business. We own and manage some of these IT systems but also rely on third parties for a range of IT Systems and other products and services. In conducting our business, we routinely collect and store sensitive data, including proprietary technology and information and personal information related to our business and our customers, suppliers and business partners, as well as proprietary technology and information owned by our customers (collectively, “Confidential Information”). The secure processing, maintenance and transmission of Confidential Information is critical to our operations and
business strategy. We face numerous, evolving cybersecurity risks that threaten the confidentiality, integrity and availability of our IT Systems and Confidential Information. We and our third-party service providers are exposed to a range of cyberattack vectors, including computer viruses, malware (including ransomware), illegal hacking, criminal fraud or impersonation, acts of vandalism or terrorism, employee or contractor error or malfeasance, social engineering or phishing, or software-related errors, bugs or other vulnerabilities. We and certain of our service providers have experienced and will continue to experience cyberattacks and other incidents to varying degrees. While to date no incidents have materially impacted our operations or results, there is no guarantee that material incidents will not occur in the future. Security measures that we, our third-party service providers and our customers have implemented cannot detect or prevent all cybersecurity attacks, disruptions or security breaches. Our scanning tools regularly identify vulnerabilities in our and third-party software used in our IT environment, but we cannot comprehensively apply patches or mitigate all vulnerabilities before a threat actor exploits them. There can also be no assurance that our cybersecurity risk management program, including our policies, controls or procedures, will be fully implemented, complied with or effective in protecting our IT Systems and Confidential Information.
Threat actors are increasingly sophisticated and using techniques and tools that circumvent controls, evade detection and remove forensic evidence, including the use of AI and machine learning to launch more automated, convincing, targeted and coordinated attacks, which means that effectively anticipating, containing and recovering from attacks and incidents in a timely manner is and will continue to be challenging, and may require us to incur material costs. Any attack, breach or misuse of Confidential Information, whether experienced by us or a third-party service provider or in our supply chain, could materially harm our reputation by deterring existing or prospective customers from using our products and applications, increasing our operating expenses in order to contain and remediate the incident, exposing us to unbudgeted or uninsured liability, disrupting our operations, diverting management focus away from other priorities, increasing our regulatory and litigation (including class action) exposure, and/or resulting in the imposition of material penalties and fines under state, federal and foreign laws. Any such incidents could irreparably damage our reputation and business, which could have a material adverse effect on our results of operations. While we maintain various insurance policies, we cannot be certain that any or all cybersecurity or privacy-related losses or costs will be covered in whole or in part by our policies. Risks associated with our and our employees’ use of AI Technologies are further described under ‘Risk Factors—We are exposed to risks related to the use of AI Technologies by us and others.’
We are exposed to risks related to the use of AI Technologies by us and others.
We are increasingly incorporating AI tools and capabilities into our business operations, including our chip design lifecycle, manufacturing operations, and administrative functions, which subjects us to significant competitive, legal, regulatory, and other risks. Our competitors may be more successful in their development of AI Technologies, including by developing superior products or improving their operations. Our use of AI Technologies may also expose us to risks related to the loss of confidential information or IP rights, IP infringement or misappropriation, data privacy, cybersecurity, and the unauthorized use of Company data. In particular, if the models underlying the AI Technologies we use are poorly designed, trained on inadequate, biased or improperly licensed data, deployed without sufficient governance, or affected by defects or cybersecurity threats, the performance of our products and services and our reputation could suffer, and we could incur liability under applicable law or contract.
We use third-party AI Technologies in our operations, and our ability to continue to use such technologies at the scale we need may depend on access to specific third-party software and infrastructure. If any such third-party AI Technologies become incompatible with the other technologies we use in our business or unavailable for use (including due to service disruptions or outages beyond our control), or if the providers of such models unfavorably change their terms or terminate their relationship with us, our operations could be materially adversely affected. Additionally, the jurisdictions in which we operate have adopted and may adopt laws and regulations related to AI, which could cause us to incur greater compliance costs, limit our use of AI Technologies, or subject us to legal liabilities. See “Risk Factors—Risks Related to Regulatory Compliance.”
We are subject to governmental regulation and other legal obligations, particularly related to privacy, data protection and information security, and consumer protection laws across different markets where we conduct our business. Our actual or perceived failure to comply with such obligations could harm our business.
In the United States and other jurisdictions in which we operate, we are subject to various consumer protection, data privacy and information security laws and related regulations. These laws and regulations impose significant compliance requirements in relation to our IT Systems and Confidential Information, and in some instances, expose us to private rights of action and statutory damages for certain types of events. A serious breach of such laws or regulations may expose us to material litigation, fines, civil and/or criminal penalties, adverse publicity resulting in significant customer loss, and/or require us to change our business practices in a manner that materially impacts our financial condition. As a U.S.-based company operating in many countries around the world, we are subject not only to U.S. federal and varying U.S. state privacy, data protection, information security, and consumer protection laws and regulations, but also to numerous foreign laws and regulations, including the EU General Data Protection Regulation and the Data Security Law of the People’s Republic of China. Complying with these laws and regulations is costly and time-consuming, and as these laws and regulations are being interpreted broadly and in potentially conflicting ways by global regulators, we are subject to increased compliance obligations and regulatory scrutiny, litigation and reputational risks, which could have a material adverse impact on our operations and financial results. Additionally, restrictions on the collection, use, sharing or disclosure of personal information or additional requirements and liability for security and data integrity could require us to modify our solutions and features, possibly in a material manner, and limit our ability to develop new products and features.
Risks Related to Regulatory Compliance
Failure to comply with the large body of laws and regulations to which we are subject could adversely impact our business.
We are subject to regulation by various governmental agencies in the United States and other jurisdictions in which we operate. These laws and regulations include: antitrust regulatory activities; consumer protection laws; AI, data privacy and cybersecurity laws; import/export regulatory activities; product safety regulatory activities; worker health and safety; environmental protection; employment matters; and tax and other regulations in each of the areas in which we conduct business. In certain jurisdictions, regulatory requirements in one or more of these areas may be more stringent than or inconsistent with those of the United States, which could force us to incur greater compliance costs, while also exposing us to increased litigation or other risks. Any material increase in our costs as a result could have a material adverse effect on our business, financial condition, results of operations and liquidity. In the area of employment matters, noncompliance with applicable regulations or requirements could subject us to investigations, sanctions, enforcement actions, fines, damages, penalties, or injunctions. In certain instances, former employees have brought claims against us, and we expect that we will encounter similar actions against us in the future. An adverse outcome in any such litigation could require us to pay damages, attorneys’ fees and costs. Such enforcement actions could have a materially adverse effect on our business. If any governmental sanctions are imposed, or if we do not prevail in any possible civil or criminal litigation, our business, financial condition and results of operations could be materially and adversely affected. In addition, responding to any action will likely result in a significant diversion of management’s attention and resources and an increase in professional fees.
Our use of AI subjects us to a legal framework that is rapidly evolving and our failure to monitor and comply with the laws and regulations to which we are or may become subject could have a material adverse effect on our business and operations.
The legal and regulatory framework governing AI Technologies is rapidly evolving in the United States, the European Union and other jurisdictions in which we conduct business, with certain existing regimes (such as data privacy laws) already regulating aspects of AI and additional AI-specific laws and regulations enacted or under consideration. These laws and regulations, as well as related enforcement practices and judicial interpretations, may be amended, rescinded, enjoined or applied in ways we cannot predict, which could increase our compliance costs, limit our use of AI Technologies or expose us to legal liability.
Our failure to comply with anti-corruption and anti-bribery laws could subject us to penalties and other adverse consequences.
Anti-bribery and anti-corruption laws in jurisdictions in which we do business generally prohibit companies and their intermediaries from making improper payments to government officials for the purpose of obtaining or retaining business. These laws and regulations can be subject to varying interpretations and enforcement practices, increasing the risk of unintentional non-compliance. Our policies mandate compliance with these anti-bribery laws, and we train our staff on anti-bribery laws and have established procedures and controls to monitor internal and external compliance. However, there can be no assurance that our internal controls and procedures will protect us from reckless or criminal acts committed by our employees or agents, nor do we have third-party attestation to the effectiveness of our internal controls related to fraud and corruption. There can be no guarantee that our efforts will prevent violations or allegations of violations, which could result in costly investigations, civil or criminal penalties, and reputational damage and which could have a material adverse effect on our business and operating results.
In order to comply with environmental and occupational health and safety laws and regulations, we may need to modify our activities or incur substantial costs, and such laws and regulations, including any failure to comply with such laws and regulations, could subject us to substantial costs, liabilities, obligations and fines, or require our suppliers to alter their processes.
The semiconductor industry is subject to a variety of international, federal, state, local and non-U.S. laws and regulations governing pollution, environmental protection and occupational health and safety, including those relating to hazardous and toxic materials, product composition, and the investigation and cleanup of contaminated sites, including sites we currently or formerly owned or operated, due to the release of hazardous materials, regardless of whether we caused such release. In addition, we may be strictly liable for joint and several costs associated with investigation and remediation of sites at which we have arranged for the disposal of hazardous wastes if such sites become contaminated, even if we fully comply with applicable environmental laws and regulations. Failure to comply with such laws and regulations could subject us to significant fines or other civil or criminal costs, obligations, sanctions or property damage or personal injury claims, or suspension of our facilities’ operating permits. Compliance with current or future environmental and occupational health and safety laws and regulations could restrict our ability to expand our business or require us to modify processes or incur other substantial expenses which could harm our business. In the event of an incident involving hazardous materials, we could be liable for damages, and such liability could exceed the amount of any liability insurance coverage and the resources of our business. In addition, in the event of the discovery of contaminants or the imposition of clean up obligations for which we are responsible, we may be required to take remedial or other measures which could have a material adverse effect on our business, financial condition and results of operations. In response to environmental concerns, some customers and government agencies impose requirements for the elimination and/or labeling of hazardous substances, such as lead (which is widely used in soldering connections in the process of semiconductor packaging and assembly), in electronic equipment, as well as requirements related to the take-back of products discarded by customers. For example, the EU adopted its RoHS, which prohibits, with specified exceptions, the sale in the EU market of electrical and electronic equipment containing more than agreed levels of lead or other hazardous materials, and China has enacted similar regulations. Globally, environmental and occupational health and safety laws and regulations have tended to become more stringent over time, causing a need to redesign technologies, imposing greater compliance costs and increasing risks and penalties
associated with violations, which could seriously harm our business.
General Risks
We could be subject to changes in tax rates or the adoption of new tax legislation, whether in or out of the United States, or could otherwise have exposure to additional tax liabilities, which could adversely affect our results of operations or financial condition.
As a multinational business, we are subject to income and other taxes in both the U.S. and various foreign jurisdictions. Changes to tax laws or regulations in such jurisdictions, or in the interpretation of such laws or regulations, could significantly increase our effective tax rate and reduce our cash flow from operating activities, and otherwise adversely affect our financial condition. For example, in October 2021, a global consortium of countries agreed to establish a new framework for international tax reform, including a new global minimum tax of 15% (“Pillar Two Minimum Tax”). In December 2022, European Union member states voted unanimously to implement rules for the Pillar Two Minimum Tax. Since implementation, many member states have enacted minimum tax legislation and others, including non-EU members, are considering similar law changes. In general, if a jurisdiction has an effective income tax rate (“ETR”) below 15%, the Pillar Two Minimum Tax may impute an additional alternative minimum “top-up tax.” The Company is subject to the Pillar Two Minimum Tax rules. If Pillar Two proposals are enacted into law in the U.S. or other countries in which we operate, it is possible that such proposals could increase our tax uncertainty and may adversely affect our provision for income taxes in the future. The Financial Accounting Standards Board considers the Pillar Two Minimum Tax an alternative minimum tax; therefore, deferred tax assets and liabilities are not recognized or adjusted for any estimated future effects. In addition, recently enacted U.S. federal tax legislation, such as the One Big Beautiful Bill Act (the “OBBB”), has modified U.S. corporate income tax, including provisions related to the Corporate Alternative Minimum Tax (“CAMT”). Future changes in our financial results, business operations or in the interpretation and implementation of the OBBB could result in a CAMT liability in subsequent periods. Moreover, the U.S. or other jurisdictions may consider novel tax proposals in the future, such as the imposition of value-based fees or taxes on patents or other IP that could increase our operating costs and have a material and adverse impact on our business. Other factors or events, including business combinations and investment transactions, changes in the valuation of our deferred tax assets and liabilities, adjustments to taxes upon finalization of various tax returns or as a result of deficiencies asserted by taxing authorities, increases in expenses not deductible for tax purposes, changes in available tax credits, changes in transfer pricing methodologies, other changes in the apportionment of our income and other activities among tax jurisdictions, and changes in tax rates, could also increase our ETR and/or valuation of our deferred tax assets and liabilities.
Our tax filings are subject to review or audit by the U.S. Internal Revenue Service (the “IRS”) and state, local and foreign taxing authorities. We exercise significant judgment in determining our worldwide provision for taxes and, in the ordinary course of our business, there may be transactions and calculations where the proper tax treatment is uncertain. We may also be liable for taxes in connection with businesses we acquire. Our determinations are not binding on the IRS or any other taxing authorities, and accordingly the final determination in an audit or other proceeding may be materially different than the treatment reflected in our tax provisions, accruals and returns. An assessment of additional taxes because of an audit could have a material adverse effect on our business, financial condition, results of operations and cash flows.
Failure to comply with requirements to maintain effective internal control over financial reporting could have a material adverse effect on our business and stock price.
We have significant requirements for financial reporting and internal controls. If we are unable to maintain appropriate internal financial reporting controls and procedures, it could cause us to fail to meet our reporting obligations on a timely basis, result in material misstatements in our consolidated financial statements and adversely affect our operating results. In addition, we are required, pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 (“Section 404”), to furnish a report by our management on, among other things, the effectiveness of our internal control over financial reporting. This assessment needs to include disclosure of any material weaknesses identified by our management in our internal control over financial reporting. The rules governing the standards that must be met for our management to assess our internal control over financial reporting are complex and require significant documentation and testing. Testing and maintaining internal controls may divert our management’s attention from other matters that are important to our business. In addition, pursuant to Section 404, we are required to include in the annual reports that we file with the SEC an attestation report on our internal control over financial reporting issued by our independent registered public accounting firm, and the costs and burdens of complying with Section 404 could be significant.
Sustained inflation could have a material adverse effect on our business, financial condition, results of operations and liquidity.
Inflation rates in the markets in which we operate have remained elevated, and this may continue in the future or inflation rates may increase. Inflation has caused and may continue to cause us to experience higher costs, including higher labor costs, cost of raw materials such as gold, wafer and other costs for supplier materials, and transportation and energy costs. Due to inflation, our suppliers have raised prices and may continue to do so, and in the competitive markets in which we operate, we may not be able to make corresponding price increases to preserve our gross margins and profitability. If inflation rates remain elevated or rise for a sustained period of time, they could have a material adverse effect on our business, financial condition, results of operations and liquidity.
