Broadcom 10-Q 2022-01-30

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(MARK ONE)

For the quarterly period ended January 30, 2022

OR

For the transition period from to

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No þ

As of February 25, 2022, there were 408,281,170 shares of our common stock outstanding.

BROADCOM INC.

Quarterly Report on Form 10-Q

For the Quarterly Period Ended January 30, 2022

TABLE OF CONTENTS

PART I — FINANCIAL INFORMATION

BROADCOM INC.

INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED

BROADCOM INC.

CONDENSED CONSOLIDATED BALANCE SHEETS — UNAUDITED

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

BROADCOM INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS — UNAUDITED

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The following discussion and analysis of the financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q (“Form 10-Q”) and the audited consolidated financial statements and notes thereto and management’s discussion and analysis of financial condition and results of operations for the fiscal year ended October 31, 2021 (“fiscal year 2021”) included in our Annual Report on Form 10-K for fiscal year 2021 (“2021 Annual Report on Form 10-K”). References to “Broadcom,” “we,” “our,” and “us” are to Broadcom Inc. and its consolidated subsidiaries, unless otherwise specified or the context otherwise requires. This Form 10-Q may contain predictions, estimates and other forward-looking statements that involve a number of risks and uncertainties, which are made under the safe harbor provisions of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements may include the potential impact of the COVID-19 pandemic; projections of financial information; statements about historical results that may suggest trends for our business; statements of the plans, strategies and objectives of management for future operations; and statements of expectation or belief regarding future events (including any acquisitions we may make), technology developments, our products, product sales, expenses, liquidity, cash flow and growth rates, customer concentration and relationships, or enforceability of our intellectual property (“IP”) rights. Such statements are based on current expectations, estimates, forecasts and projections of our industry performance and macroeconomic conditions, based on management’s judgment, beliefs, current trends and market conditions, and involve risks and uncertainties that may cause actual results to differ materially from those contained in the forward-looking statements. We derive most of our forward-looking statements from our operating budgets and forecasts, which are based upon many detailed assumptions. While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors, and it is impossible for us to anticipate all factors that could affect our actual results. Accordingly, we caution you not to place undue reliance on these statements. Important factors that could cause actual results to differ materially from our expectations are disclosed under “Risk Factors” in Part II, Item 1A of this Form 10-Q, and in other documents we file from time to time with the Securities and Exchange Commission (the “SEC”). All of the forward-looking statements in this Form 10-Q are qualified in their entirety by reference to the factors listed above and those discussed under the heading “Risk Factors” below. We undertake no intent or obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as otherwise required by law.

Overview

We are a global technology leader that designs, develops and supplies a broad range of semiconductor and infrastructure software solutions. We develop semiconductor devices with a focus on complex digital and mixed signal complementary metal oxide semiconductor based devices and analog III-V based products. We have a history of innovation in the semiconductor industry and offer thousands of products that are used in end products such as enterprise and data center networking, home connectivity, set-top boxes, broadband access, telecommunication equipment, smartphones and base stations, data center servers and storage systems, factory automation, power generation and alternative energy systems, and electronic displays. Our infrastructure software solutions enable customers to plan, develop, automate, manage and secure applications across mainframe, distributed, mobile and cloud platforms. Our portfolio of industry-leading infrastructure and security software is designed to modernize, optimize, and secure the most complex hybrid environments, enabling scalability, agility, automation, insights, resiliency and security. We also offer mission critical fibre channel storage area networking (“FC SAN”) products and related software in the form of modules, switches and subsystems incorporating multiple semiconductor products.

We have two reportable segments: semiconductor solutions and infrastructure software. Our semiconductor solutions segment includes all of our product lines and IP licensing. Our infrastructure software segment includes our mainframe, distributed and cyber security solutions, and our FC SAN business.

Quarterly Highlights

Highlights during the fiscal quarter ended January 30, 2022 include the following:

• We generated $3,486 million of cash from operations.

• We paid $1,764 million in cash dividends.

• We repurchased $2,724 million of common stock.

COVID-19 Update

In response to the ongoing COVID-19 pandemic and the various resulting government directives, we have taken extensive measures to protect the health and safety of our employees and contractors at our facilities. We modified our workplace practices globally, which resulted in some of our employees working remotely for an extended period of time and some of whom are still working remotely. While we have implemented personal safety measures at all of our facilities where our employees are working on site, we may need to modify our business practices and policies. We continue to monitor the implications of the COVID-19 pandemic on our business, as well as our customers’ and suppliers’ businesses.

The demand environment for our semiconductor products was consistent with our expectations for the first quarter of our fiscal year ending October 30, 2022 (“fiscal year 2022”), with continued demand for products and infrastructure as customers invest in technologies and cloud environments to support remote or hybrid tele-work and learning arising from COVID-19, as well as the transition to office re-openings. While we continue to see robust demand in this area and record profitability driven by the supply imbalance, the macroeconomic environment remains uncertain and it may not be sustainable over the longer term. We continue to experience various constraints in our supply chain due to the pandemic, including with respect to wafers and substrates. While supply lead times have stabilized, we continue to have difficulties in obtaining some necessary components and inputs in a timely manner to meet increased demand. To date, the impact of COVID-19 on the demand environment for our software products has been limited.

We have also taken various actions to de-risk our business in light of the ongoing uncertainty and strengthen our balance sheet, including closely managing working capital and our debt instruments.

Overall, in light of the changing nature and continuing uncertainty around the COVID-19 pandemic, our ability to predict the impact of COVID-19 on our business in future periods remains limited. The effects of the pandemic on our business are unlikely to be fully realized, or reflected in our financial results, until future periods.

Critical Accounting Estimates

The preparation of financial statements in accordance with generally accepted accounting principles in the United States requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. We base our estimates and assumptions on current facts, historical experience and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. Our actual financial results may differ materially and adversely from our estimates. Our critical accounting estimates are those that affect our historical financial statements materially and involve difficult, subjective or complex judgments by management. Those estimates include revenue recognition, business combinations, valuation of goodwill and long-lived assets, inventory valuation, income taxes, retirement and post-retirement benefit plan assumptions, stock-based compensation expense, and employee bonus programs.

There were no significant changes in our critical accounting estimates during the fiscal quarter ended January 30, 2022 compared to those previously disclosed in “Critical Accounting Estimates” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the 2021 Annual Report on Form 10-K.

Results of Operations

Fiscal Quarter Ended January 30, 2022 Compared to Fiscal Quarter Ended January 31, 2021

The following table sets forth our results of operations for the periods presented:

Net Revenue

A relatively small number of customers account for a significant portion of our net revenue. Direct sales to WT Microelectronics Co., Ltd., a distributor, accounted for 23% and 19% of our net revenue for the fiscal quarters ended January 30, 2022 and January 31, 2021, respectively.

We believe aggregate sales to our top five end customers, through all channels, accounted for more than 35% of our net revenue for each of the fiscal quarters ended January 30, 2022 and January 31, 2021. We believe aggregate sales to Apple Inc., through all channels, accounted for approximately 25% of our net revenue for each of the fiscal quarters ended January 30, 2022 and January 31, 2021. We expect to continue to experience significant customer concentration in future periods. The loss of, or significant decrease in demand from, any of our top five end customers could have a material adverse effect on our business, results of operations and financial condition.

From time to time, some of our key semiconductor customers place large orders or delay orders, causing our quarterly net revenue to fluctuate significantly. This is particularly true of our wireless products as fluctuations may be magnified by the timing of launches, and seasonal variations in sales, of mobile handsets. The ongoing COVID-19 pandemic and related uncertainties and supply imbalance have caused and may continue to cause our net revenue to fluctuate significantly and impact our results of operations, as discussed above.

The following tables set forth net revenue by segment for the periods presented:

Net revenue from our semiconductor solutions segment increased due to on-going strong demand for our semiconductor products, primarily networking, server storage and broadband products. Net revenue from our infrastructure software segment increased primarily due to higher demand for our mainframe solutions.

Gross Margin

Gross margin was $5,049 million, or 66% of net revenue, for the fiscal quarter ended January 30, 2022 compared to $3,952 million, or 59% of net revenue, for the fiscal quarter ended January 31, 2021. The increase was primarily due to lower amortization of acquisition-related intangible assets and higher profitability within our semiconductor solutions segment.

Research and Development Expense

Research and development expense decreased $5 million for the fiscal quarter ended January 30, 2022 compared to the prior year fiscal period. The decrease was primarily due to lower stock-based compensation expense reflecting the full vesting of certain equity awards and the effects of forfeitures, offset by higher variable employee compensation expense and higher engineering project and material costs.

Selling, General and Administrative Expense

Selling, general and administrative expense decreased $18 million, or 5%, for the fiscal quarter ended January 30, 2022 compared to the prior year fiscal period. The decrease was primarily due to lower acquisition-related costs incurred in the current year fiscal period following the completion of key integration activities.

Amortization of Acquisition-Related Intangible Assets

Amortization of acquisition-related intangible assets recognized in operating expenses decreased $97 million, or 20%, for the fiscal quarter ended January 30, 2022 compared to the prior year fiscal period primarily due to lower amortization of certain intangible assets from our acquisition of CA, Inc.

Restructuring, Impairment and Disposal Charges

Restructuring, impairment and disposal charges recognized in operating expenses decreased $54 million, or 76%, for the fiscal quarter ended January 30, 2022 compared to the prior year fiscal period primarily due to lower employee termination costs in the current year fiscal period following the completion of key restructuring activities from acquisitions.

Stock-Based Compensation Expense

Total stock-based compensation expense was $387 million for the fiscal quarter ended January 30, 2022, compared to $444 million for the prior year fiscal period. The decrease primarily reflects the full vesting of certain equity awards and the effect of forfeitures.

The following table sets forth the total unrecognized compensation cost related to unvested stock-based awards outstanding and expected to vest as of January 30, 2022, which we expect to recognize over the remaining weighted-average service period of 2.8 years.

During the first quarter of fiscal year ended November 3, 2019 (“fiscal year 2019”), our Compensation Committee approved a broad-based program of multi-year equity grants of time- and market-based restricted stock units (the “Multi-Year Equity Awards”) in lieu of our annual employee equity awards historically granted on March 15 of each year. Each Multi-Year Equity Award vests on the same basis as four annual grants made March 15 of each year, beginning in fiscal year 2019, with successive four-year vesting periods. We recognize stock-based compensation expense related to the Multi-Year Equity Awards from the grant date through their respective vesting date, ranging from 4 years to 7 years.

Segment Operating Results

Operating income from our semiconductor solutions segment increased primarily due to on-going strong demand for our semiconductor products, primarily networking, broadband and server storage products and higher profitability across the markets. Operating income from our infrastructure software segment increased primarily due to higher demand for our mainframe solutions.

Unallocated expenses include amortization of acquisition-related intangible assets; stock-based compensation expense; restructuring, impairment and disposal charges; acquisition-related costs; and other costs that are not used in evaluating the results of, or in allocating resources to, our segments. Unallocated expenses decreased 20% for the fiscal quarter ended January 30, 2022 compared to the prior year fiscal period primarily due to lower amortization of acquisition-related intangible assets.

Non-Operating Income and Expenses

Interest expense. Interest expense was $407 million and $570 million for the fiscal quarters ended January 30, 2022 and January 31, 2021, respectively. The decrease was primarily due to losses on extinguishment of debt related to debt transactions in the prior year fiscal period.

Other income (expense), net. Other income (expense), net, includes interest income, gains or losses on investments, foreign currency remeasurement and other miscellaneous items. Other expense, net, was $14 million and other income, net was $117 million for the fiscal quarters ended January 30, 2022 and January 31, 2021, respectively. The decrease was primarily due to changes in investment gains or losses.

Provision for income taxes. The provision for income taxes was $215 million and $6 million for the fiscal quarters ended January 30, 2022 and January 31, 2021, respectively. The increase was primarily due to higher income before income taxes and a shift in the jurisdictional mix of income and expenses. The provision for income taxes for the fiscal quarter ended January 31, 2021 was substantially offset by excess tax benefits from stock-based awards and benefits from lapses of statutes of limitations and audit settlements.

Liquidity and Capital Resources

The following section discusses our principal liquidity and capital resources as well as our principal liquidity requirements and uses of cash. Our cash and cash equivalents are maintained in highly liquid investments with remaining maturities of 90 days or less at the time of purchase. We believe our cash equivalents are liquid and accessible.

Our primary sources of liquidity as of January 30, 2022 consisted of: (i) $10,219 million in cash and cash equivalents, (ii) cash we expect to generate from operations and (iii) available capacity under our $7.5 billion unsecured revolving credit facility (the “Revolving Facility”). In addition, we may also generate cash from the sale of assets and debt or equity financing from time to time.

Our short-term and long-term liquidity requirements primarily arise from: (i) business acquisitions and investments we may make from time to time, (ii) working capital requirements, (iii) research and development and capital expenditure needs, (iv) cash dividend payments (if and when declared by our Board of Directors), (v) interest and principal payments related to our $41,244 million of outstanding indebtedness, (vi) share repurchases, and (vii) payment of income taxes. Our ability to fund these requirements will depend, in part, on our future cash flows, which are determined by our future operating performance and, therefore, subject to prevailing global macroeconomic conditions and financial, business and other factors, some of which are beyond our control. We expect a slight increase in capital expenditures in fiscal year 2022 as compared to fiscal year 2021.

We believe that our cash and cash equivalents on hand, cash flows from operations, and the Revolving Facility will provide sufficient liquidity to operate our business and fund our current and assumed obligations for at least the next 12 months. For additional information regarding our cash requirement from contractual obligations and indebtedness, see Note 10. “Commitments and Contingencies”and Note 6. “Borrowings” in Part I, Item 1 of this Form 10-Q.

From time to time, we engage in discussions with third parties regarding potential acquisitions of, or investments in, businesses, technologies and product lines. Any such transaction, or evaluation of potential transactions, could require significant use of our cash and cash equivalents, or require us to increase our borrowings to fund such transactions. If we do not have sufficient cash to fund our operations or finance growth opportunities, including acquisitions, or unanticipated capital expenditures, our business and financial condition could suffer. In such circumstances, we may also seek to obtain new debt or equity financing. However, we cannot assure you that such additional financing will be available on terms acceptable to us or at all. Our ability to service our senior unsecured notes and any other indebtedness we may incur will depend on our ability to generate cash in the future. We may also elect to sell additional debt or equity securities for reasons other than those specified above.

In addition, we may, at any time and from time to time, seek to retire or purchase our outstanding debt through cash tenders and/or exchanges for equity or debt, in open-market purchases, privately negotiated transactions or otherwise. Such tenders, exchanges or purchases, if any, will be upon such terms and at such prices as we may determine, and will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.

Working Capital

Working capital decreased to $9,054 million at January 30, 2022 from $10,305 million at October 31, 2021. The decrease was primarily attributable to the following:

• Cash and cash equivalents decreased to $10,219 million at January 30, 2022 from $12,163 million at October 31, 2021, primarily due to $2,724 million of common stock repurchases, $1,764 million of dividend payments, $375 million of employee withholding tax payments related to net settled equity awards, and $255 million of debt payments. These decreases were partially offset by $3,486 million in net cash provided by operating activities.

• Other current liabilities increased to $4,378 million at January 30, 2022 from $3,839 million at October 31, 2021, primarily due to increases in contract liabilities and interest payable.

These decreases in working capital were offset in part by the following:

• Employee compensation and benefits decreased to $531 million at January 30, 2022 from $1,066 million at October 31, 2021, primarily due to the timing of employee bonus plan payments.

• Accounts receivable increased to $2,539 million at January 30, 2022 from $2,071 million at October 31, 2021, primarily due to revenue linearity.

• Inventory increased to $1,520 million at January 30, 2022 from $1,297 million at October 31, 2021, primarily due to higher material costs and to support customer demand.

Capital Returns

Pursuant to a $10 billion stock repurchase program authorized by our Board of Directors in December 2021, we repurchased and retired approximately 4 million shares of our common stock at a weighted average price of $622.91 during the fiscal quarter ended January 30, 2022.

During the fiscal quarter ended January 30, 2022 and January 31, 2021, we paid approximately $375 million and $225 million, respectively, in employee withholding taxes due upon the vesting of net settled equity awards. We withheld approximately 1 million shares of common stock from employees in connection with such net share settlements during each of the fiscal quarters ended January 30, 2022 and January 31, 2021.

Cash Flows

Operating Activities

Cash provided by operating activities consisted of net income adjusted for certain non-cash and other items and changes in assets and liabilities. The $373 million increase in cash provided by operations during the fiscal quarter ended January 30, 2022 compared to the prior year fiscal period was due to $1,094 million higher net income, offset by a $122 million decrease in amortization of intangible assets and stock-based compensation and other adjustments, as well as a $599 million decrease resulting from changes in operating assets and liabilities.

Investing Activities

Cash flows from investing activities primarily consisted of cash used for investments and capital expenditures. The $187 million increase in cash used in investing activities during the fiscal quarter ended January 30, 2022 compared to the prior year fiscal period was primarily related to investment purchases.

Financing Activities

Cash flows from financing activities primarily consisted of proceeds and payments related to our stock repurchases, long-term borrowings, dividend payments and employee withholding tax payments related to net settled equity awards. The $4,064 million increase in cash used in financing activities during the fiscal quarter ended January 30, 2022 compared to the prior year fiscal period was primarily due to a $2,724 million increase in common stock repurchases, a $959 million change in net borrowing activities, a $221 million increase in dividend payments and a $150 million increase in employee withholding tax payments related to net settled equity awards.

Accounting Changes and Recent Accounting Standards

For a description of accounting changes and recent accounting standards, including the expected dates of adoption and estimated effects, if any, in our condensed consolidated financial statements, see Note 1. “Overview, Basis of Presentation and Significant Accounting Policies” in Part I, Item 1 of this Form 10-Q.

There have been no material changes in market risk from the information presented in Part II, Item 7A. “Quantitative and Qualitative Disclosures About Market Risk,” in the 2021 Annual Report on Form 10-K.

(a) Evaluation of Disclosure Controls and Procedures. Our management, with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), evaluated the effectiveness of our disclosure controls and procedures as of January 30, 2022. We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act filings is properly and timely recorded, processed, summarized and reported. These disclosure controls and procedures are also intended to ensure that information is accumulated and communicated to our management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosures. Based on this evaluation, our CEO and CFO concluded that, as of January 30, 2022, our disclosure controls and procedures were effective at the reasonable assurance level.

In designing and evaluating our disclosure controls and procedures, our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

(b) Changes in Internal Control over Financial Reporting. There was no change in our internal control over financial reporting identified in connection with the evaluation required by Rules 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Although we have modified our workplace practices globally due to the COVID-19 pandemic, resulting in some of our employees working remotely for an extended period of time and some of whom are still working remotely, this has not meaningfully affected our internal controls over financial reporting. We are continually monitoring and assessing the COVID-19 situation on our internal controls to minimize the impact on their design and operating effectiveness.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

The information set forth under Note 10. “Commitments and Contingencies” included in Part I, Item 1 of this Form 10-Q, is incorporated herein by reference. For additional discussion of certain risks associated with legal proceedings, see “Risk Factors” immediately below.

Our business, operations and financial results are subject to various risks and uncertainties, including those described below, that could adversely affect our business, financial condition, results of operations, cash flows, and the trading price of our common stock and preferred stock. Many of the following risks and uncertainties are, and will continue to be, exacerbated by the COVID-19 pandemic and any worsening of the global business and economic environment as a result. The following material factors, among others, could cause our actual results to differ materially from historical results and those expressed in forward-looking statements made by us or on our behalf in filings with the SEC, press releases, communications with investors and oral statements.

Risk Factors Summary

The following is a summary of the principal risks that could adversely affect our business, operations and financial results.

Risks Related to Our Business

• The ongoing COVID-19 pandemic has disrupted and will likely continue to disrupt normal business activity.

• The majority of our sales come from a small number of customers and a reduction in demand or loss of one or more of our significant customers may adversely affect our business.

• Dependence on contract manufacturing and suppliers of critical components within our supply chain may adversely affect our ability to bring products to market.

• We purchase a significant amount of the materials used in our products from a limited number of suppliers.

• Our business is subject to various governmental regulations and trade restrictions. Compliance with these regulations may cause us to incur significant expense and, if we fail to maintain compliance, we may be forced to cease manufacture and distribution of certain products or subjected to administrative proceedings and civil or criminal penalties.

• Adverse global economic conditions could have a negative effect on us.

• We operate in the highly cyclical semiconductor industry.

• Global political and economic conditions and other factors related to our international operations could adversely affect us.

• We are subject to risks associated with our distributors and other channel partners, including product inventory levels and product sell-through.

• Our dependence on senior management and if we are unable to attract and retain qualified personnel, we may not be able to execute our business strategy effectively.

• We may pursue acquisitions, investments, joint ventures and dispositions, which could adversely affect our results of operations.

• We may be involved in legal proceedings, including IP, securities litigation, and employee-related claims.

• Our operating results are subject to substantial quarterly and annual fluctuations.

• Failure to adjust our manufacturing and supply chain to accurately meet customer demand could adversely affect our results of operations.

• Winning business in the semiconductor solutions industry is subject to a lengthy process that often requires us to incur significant expense, from which we may ultimately generate no revenue.

• Competition in our industries could prevent us from growing our revenue.

• A prolonged disruption of our manufacturing facilities, research and development facilities, warehouses or other significant operations, or those of our suppliers, could have a material adverse effect on us.

• We may be unable to maintain appropriate manufacturing capacity or product yields at our own manufacturing facilities.

• Any failure of our information technology (“IT”) systems or one or more of our corporate infrastructure vendors to provide necessary services could have a material adverse effect on our business.

• Our ability to maintain or improve gross margin.

• Our ability to protect the significant amount of IP in our business.

• Incompatibility of our software products with operating environments, platforms, or third-party products, demand for our products and services could decrease.

• Failure to enter into software license agreements on a satisfactory basis could adversely affect us.

• Licensed third party software used in our products may not be available to us in the future, which may delay product development and production or cause us to incur additional expense.

• Use of open source code sources, which, under certain circumstances could materially adversely affect us.

• We are subject to warranty claims, product recalls and product liability.

• The complexity of our products could result in unforeseen delays or expense or undetected defects or bugs.

• We make substantial investments in research and development and unsuccessful investments could materially adversely affect our business, financial condition and results of operations.

• We collect, use, store, or otherwise process personal information, which subjects us to privacy and data security laws and contractual commitments, and our actual or perceived failure to comply with such laws and commitments could harm our business.

• We are subject to environmental, health and safety laws, which could increase our costs, restrict our operations and require expenditures.

• Social and environmental responsibility regulations, policies and provisions, as well as customer and investor demands, may make our supply chain more complex and may adversely affect our relationships with customers and investors.

• The average selling prices of semiconductor products in our markets have often decreased rapidly and may do so in the future.

• A breach of our security systems may have a material adverse effect on our business.

• Fluctuations in foreign exchange rates could result in losses.

Risks Relating to Taxes

• Changes in tax legislation or policies could materially impact our financial position and results of operations.

• Our corporate income taxes could significantly increase if we are unable to maintain our tax concessions or if our assumptions and interpretations regarding tax laws and concessions prove to be incorrect.

• Our income taxes and overall cash tax costs are affected by a number of factors that could materially, adversely affect financial results.

Risks Relating to Our Indebtedness

• Our substantial indebtedness could adversely affect our financial health and our ability to execute our business strategy.

• The instruments governing our indebtedness impose certain restrictions on our business.

• Servicing our debt requires a significant amount of cash, and we may not have sufficient cash flows from our business to pay our substantial debt.

Risks Relating to Owning Our Common Stock

• Volatility of our stock price could result in substantial losses for our investors as well as class action litigation against us and our management.

• The amount and frequency of our stock repurchases may fluctuate.

• A substantial amount of our stock is held by a small number of large investors.

• There can be no assurance that we will continue to declare cash dividends.

For a more complete discussion of the material risks facing our business, see below.

Risks Related to Our Business

The ongoing COVID-19 pandemic has disrupted and will likely continue to disrupt normal business activity, which may have an adverse effect on our results of operations.

The global spread of COVID-19 and the efforts to control it have disrupted, and reduced the efficiency of, normal business activities in much of the world. The pandemic has resulted in authorities around the world implementing numerous unprecedented measures such as travel restrictions, quarantines, shelter in place orders, factory and office shutdowns and vaccine mandates. These measures have impacted, and will likely continue to impact our workforce and operations, and those of our customers, contract manufacturers (“CMs”), suppliers and logistics providers.

We have been, and expect to continue, experiencing some disruption to parts of our global semiconduc

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None.

EXHIBIT INDEX

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: March 10, 2022