Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

COVID-19 Risk

There are a number of market risk factors related to the COVID-19 pandemic and associated global economic impacts. We continue to actively evaluate these risks, and have taken reserves and financial positions as of June 27, 2020 that we believe are reasonable based on the information currently available. However, the COVID-19 pandemic and regional shelters-in-place is an unprecedented phenomenon that is continually evolving, and there could be significant changes and/or charges resulting in the future. These market risks include, for example:

In addition, all of the below market risks are heightened in light of the current market situation. Foreign exchange markets could be impacted and cause significant fluctuations in our future expenses. The price of our common stock has fluctuated significantly in the past and global equity markets are experiencing significant volatility following the COVID-19 outbreak. Interest rates have already reduced dramatically since the onset of the outbreak, and our future income from these investments likely will be negatively impacted in the future.

Foreign Exchange Risk

We conduct our business and sell our products to customers primarily in Asia, Europe, and North America. Due to the impact of changes in foreign currency exchange rates between the U.S. Dollar and foreign currencies, for the fiscal years ended June 27, 2020, June 29, 2019, and June 30, 2018, we recorded foreign exchange losses, net of $1.4 million, $0.6 million, and $0.3 million, respectively, in the other income (expense), net in the consolidated statements of operations.

Although we sell primarily in the U.S. Dollar, we have foreign currency exchange risks related to our expenses denominated in currencies other than the U.S. Dollar, principally the Chinese Yuan, Canadian Dollar, Thai Baht, Japanese Yen, UK Pound, Swiss Franc and Euro. The volatility of exchange rates depends on many factors that we cannot forecast with reliable accuracy. In the event our foreign currency denominated assets, liabilities, sales or expenses increase, our operating results may be more greatly affected by fluctuations in the exchange rates of the currencies in which we do business.

Equity Price Risk

We are exposed to equity price risk related to the conversion options embedded in our 2026 Notes and 2024 Notes.

We issued the 2026 Notes in December 2019 and the 2024 Notes in March 2017 with an aggregate principal amount of $1,050 million and $450 million, respectively. Both the 2026 Notes and the 2024 Notes are carried at face value less amortized discount on the consolidated balance sheet. The 2026 Notes and the 2024 Notes bear interest at a rate of 0.50% and 0.25% per year, respectively. Since the Notes bear interest at fixed rates, we have no financial statement risk associated with changes in interest rates. However, the potential value of the shares to be distributed to the holders of our Notes changes when the market price of our stock fluctuates. The 2026 Notes will mature on December 15, 2026, unless earlier repurchased by us or converted pursuant to their terms, at a conversion price of approximately $99.29 per share. The 2024 Notes will mature on March 15, 2024, unless earlier repurchased by us or converted pursuant to their terms, at a conversion price of approximately $60.62 per share.

Interest Rate Fluctuation Ris****k

As of June 27, 2020, we had cash, cash equivalents, and short-term investments of $1,553.8 million. Cash equivalents and short-term investments are primarily comprised of money market funds, treasuries, and highly liquid investment grade fixed income securities. Our investment policy and strategy is focused on the preservation of capital and supporting our liquidity requirements. We do not enter into investments for trading or speculative purposes. As of June 27, 2020, the weighted-average life of our investment portfolio was less than six months.

Our fixed-income portfolio is subject to fluctuations in interest rates, which could affect our results of operations. Based on our investment portfolio balance as of June 27, 2020, a hypothetical increase or decrease in interest rates of 1% (100 basis points) would have resulted in a decrease or an increase in the fair value of our portfolio of approximately $5.4 million, and a hypothetical increase or decrease of 0.50% (50 basis points) would have resulted in a decrease or an increase in the fair value of our portfolio of approximately $2.7 million.

Bank Liquidity Risk

As of June 27, 2020, we had approximately $114.2 million of unrestricted cash (excluding money market funds and U.S. Treasury securities) in operating accounts that are held with domestic and international financial institutions. These cash balances could be lost or become inaccessible if the underlying financial institutions fail or if they are unable to meet the liquidity requirements of their depositors and if they are not supported by the national government of the country in which such financial institution is located. Notwithstanding, to date, we have not incurred any losses and have had full access to our operating accounts. We believe any failures of domestic and international financial institutions could impact our ability to fund our operations in the short term.