Monolithic Power Systems (MPWR) 10-K risk factor changes: FY2024 vs FY2023

For the fiscal year ended December 31, [removed: 2023][added: 2024]

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant, based upon the closing price of the common stock on the Nasdaq Global Select Market on June 30, [removed: 2023,] [added: 2024,] was [removed: $16.4] [added: $26.6] billion.*

There were [removed: 48,661,000] [added: 47,866,000] shares of the registrant’s common stock issued and outstanding as of February [removed: 22, 2024.][added: 21, 2025.]

Portions of the registrant’s Proxy Statement for the [removed: 2024] [added: 2025] Annual Meeting of Stockholders are incorporated by reference into Part III of this Annual Report on Form 10-K where indicated.

The Proxy Statement will be filed with the Securities and Exchange Commission within 120 days of the registrant’s fiscal year ended December 31, [removed: 2023.][added: 2024.]

| * | Excludes [removed: 17,279,000] [added: 16,539,000] shares of the registrant’s common stock held by executive officers, directors and stockholders whose ownership exceeds 5% (“affiliates”) of the common stock outstanding at June 30, [removed: 2023.] [added: 2024.] Exclusion of such shares should not be construed to indicate that any such person [removed: possesses the power, direct or indirect, to direct or cause the direction of the management or policies of the registrant] [added: directly] or [removed: that such person] [added: indirectly controls,] is controlled by or [added: is] under common control with the registrant. |

| | [Information about Executive Officers](#infoaboutexec) | [removed: [10](#infoaboutexec)] [added: [9](#infoaboutexec)] |

| Item 1A. | [Risk Factors](#item1a) | [removed: [11](#item1a)] [added: [10](#item1a)] |

| Item 1B. | [Unresolved Staff Comments](#item1b) | [removed: [30](#item1b)] [added: [29](#item1b)] |

| Item 1C. | [Cybersecurity](#item1c) | [removed: [30](#item1c)] [added: [29](#item1c)] |

| Item 2. | [Properties](#item2) | [removed: [31](#item2)] [added: [29](#item2)] |

| Item 3. | [Legal Proceedings](#item3) | [removed: [31](#item3)] [added: [30](#item3)] |

| Item 4. | [Mine Safety Disclosures](#item4) | [removed: [31](#item4)] [added: [30](#item4)] |

| Item 5. | [Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](#item5) | [removed: [32](#item5)] [added: [31](#item5)] |

| Item 6. | [\[Reserved\]](#item6) | [removed: [34](#item6)] [added: [33](#item6)] |

| Item 7. | [Management’s Discussion and Analysis of Financial Condition and Results of Operations](#item7) | [removed: [34](#item7)] [added: [33](#item7)] |

| Item 7A. | [Quantitative and Qualitative Disclosures About Market Risk](#item7a) | [removed: [40](#item7a)] [added: [39](#item7a)] |

| Item 8. | [Financial Statements and Supplementary Data](#item8) | [removed: [41](#item8)] [added: [40](#item8)] |

| Item 9B. | [Other Information](#item9b) | [removed: [73](#item9b)] [added: [74](#item9b)] |

| Item 9C. | [Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](#item9c) | [removed: [73](#item9c)] [added: [74](#item9c)] |

| Item 10. | [Directors, Executive Officers and Corporate Governance](#item10) | [removed: [74](#item10)] [added: [75](#item10)] |

| Item 11. | [Executive Compensation](#item11) | [removed: [74](#item11)] [added: [75](#item11)] |

| Item 12. | [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](#item12) | [removed: [74](#item12)] [added: [75](#item12)] |

| Item 13. | [Certain Relationships and Related Transactions, and Director Independence](#item13) | [removed: [74](#item13)] [added: [75](#item13)] |

| Item 14. | [Principal Accountant Fees and Services](#item14) | [removed: [74](#item14)] [added: [75](#item14)] |

| Item 15. | [Exhibits and Financial Statement Schedules](#item15) | [removed: [75](#item15)] [added: [76](#item15)] |

| Item 16. | [Form 10-K Summary](#summary) | [removed: [77](#summary)] [added: [78](#summary)] |

| | [Signatures](#signatures) | [removed: [78](#signatures)] [added: [79](#signatures)] |

| | • | our [removed: plan] [added: plans] to [added: grow revenue in a diversified way across regions and] increase [removed: our] revenue through the introduction of new products within our existing product families as well as in new product [removed: categories] [added: categories, families] and [removed: families;] [added: segments;] |

| | • | the effects of macroeconomic factors, [removed: including the 2023 banking crisis, the] global economic [removed: downturn, the Russia-Ukraine conflict] [added: uncertainties] and [removed: the Middle East conflict] [added: geopolitical tensions] on the semiconductor industry and our business; |

| | • | the continuing application of our products in the storage and computing, enterprise data, automotive, industrial, communications and consumer [added: end] markets; |

| | • | [added: the] business outlook for [removed: 2024] [added: 2025] and beyond; |

| | • | the expected impact of various [added: U.S. and international] tax laws and regulations on our income tax provision, financial position and cash flows; |

| | • | our plan to repatriate cash from our [removed: subsidiary in Bermuda;] [added: foreign subsidiaries;] |

| | • | our intention and ability to [removed: continue] [added: execute] our stock repurchase program and pay cash dividends and dividend equivalents; [added: and] |

| | • | the factors that differentiate us from our [removed: competitors; and] [added: competitors.] |

[removed: In some cases,] [added: These forward-looking statements generally are identified by the] words [removed: such as] “would,” “could,” “may,” “should,” “predict,” “potential,” “targets,” “continue,” “anticipate,” “expect,” “intend,” “plan,” “believe,” “seek,” “estimate,” “project,” “forecast,” “will,” [removed: the negative of these terms or other variations of such terms] and similar [removed: expressions relating to the future identify forward-looking statements.][added: expressions.]

All forward-looking statements are based on our current outlook, expectations, estimates, projections, beliefs and plans or objectives about our business, our industry and the global economy, including our expectations regarding the potential impacts of macroeconomic factors, [removed: such as the 2023 banking crisis, the] global economic [removed: downturn, the Russia-Ukraine conflict] [added: uncertainties] and [removed: the Middle East conflict] [added: geopolitical tensions] on the semiconductor industry and our business.

Readers should carefully review future reports and documents that we file from time to time with the Securities and Exchange Commission (the “SEC”), such as our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and [removed: any] Current Reports on Form 8-K.

Monolithic Power Systems, Inc. [removed: (“MPS”)] [added: (“MPS,” “we,” or “us”)] is a fabless global company that provides high-performance, semiconductor-based power electronics solutions.

FOR THE FISCAL YEAR ENDED December 31, 2024

We have over 4,000 employees worldwide, with various locations in Asia, Europe and the U.S.

Enterprise data was our largest end market in 2024.

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Our key product families include, but not limited to, the Direct Current (“DC”) to DC, Alternating Current (“AC”) to DC, driver metal-oxide-semiconductor field-effect transistor, power management IC, current limit switch and lighting control products.

In addition, we sell directly to certain original equipment manufacturers (“OEMs”), original design manufacturers (“ODMs”) and end customers.

Our revenue from indirect sales to one customer, which primarily comprised power management solutions for AI applications, was 17% of our total revenue in 2024.

Our revenue from indirect sales to this customer was below 10% in both 2023 and 2022.

Our strategy is to maintain a diversified supply chain.

In some cases, our competitors have a broader number of product offerings that may enable them to more effectively market and sell to customers and engage sales partners.

Certain employees are subject to collective bargaining agreements.

| • | the complexity of certain accounting areas; |

| • | risks in connection with the use of open-source code software; |

| • | economy and geopolitical uncertainties and risks associated with business continuity in the event of natural or other disasters including pandemics, war, climate crises and other natural disasters. |

| • | integration with other components and technologies; |

A relatively small number of distributors account for a significant portion of our revenues.

Specifically, our top three customers, all of which are distributors, accounted for 61%, 55% and 52% of our revenue in each of the years ended December 31, 2024, 2023 and 2022, respectively.

Our revenue from indirect sales to one customer was 17% of our total revenue in 2024.

If we lose a major customer or a major customer changes their products or technologies or chooses to purchase our competitors’ products such that they decrease, or eliminate the amount of our products they purchase, and we are not able to replace such customers with additional orders from existing customers or new customers, this could result in a material adverse impact on our financial condition and results of operations.

Furthermore, we may not be able to maintain or increase sales to our key direct or indirect customers for other reasons, including:

| • | many of our customers have pre-existing or concurrent relationships with our current or potential competitors, including, in some cases, suppliers with a broader array of products than we offer, that may affect our customers’ decisions to purchase our products; |

| • | our customers face intense competition from other manufacturers that do not use our products; |

| • | our customers may be subject to investigations and litigation that could result in injunctive or other relief that negatively impacts sales of their products, which in turn would result in a decrease in demand for our products; and |

| • | our customers regularly evaluate alternative sources of supply in order to diversify their supplier base, which could result in lower sales of our products, and increase their negotiating leverage with us. |

The need for additional manufacturing, assembly and testing involves numerous risks, including:

If we are unable to increase our prices to reflect higher costs, our margins will decrease.

Certain segments of the semiconductor market may also experience significant downturns while other segments are growing.

AI technology may also give rise to significant legal and regulatory liability.

Governments around the world have adopted, and may continue to adopt, laws and regulations related to AI, including the European Union’s AI Act, and several U.S. government agencies have increased investigations and enforcement efforts related to the use of AI technology, which could increase our compliance costs and limit our ability to use AI in the development of our products and in our operations.

While the incoming U.S. administration has signaled that AI policy will be a priority, the scope and impact of any such policies cannot yet be determined.

Any failure or perceived failure by us to comply with any legal or regulatory requirement could subject us to legal liability, damage our reputation or otherwise adversely affect our business.

The Organization for Economic Co-operation and Development (“OECD”) has proposed a global minimum tax of 15% under the Pillar Two framework.

Many countries have already implemented or are taking steps to implement Pillar Two.

It is under each country’s own discretion to adopt Pillar Two.

Many aspects of Pillar Two are effective for tax years beginning in January 2024, with certain impacts to be effective in 2025.

Pillar Two could result in additional tax liability over the regular corporate tax liability in a particular jurisdiction to the extent that the effective tax rate is less than the minimum rate.

The potential impact, if any, to our provision for income taxes, net income, and cash flows could be materially impacted by the implementation of the Pillar Two in our international jurisdictions where we have significant business operations.

In 2024, one of our foreign subsidiaries was granted a ten-year tax incentive, beginning in tax year 2025.

A deferred tax benefit of approximately $1.3 billion, net of $0.1 billion of valuation allowance, was recorded in the year ended December 31, 2024 to reflect the estimated future reductions in cash tax paid in that jurisdiction associated with the incentive.

In January 2025, the OECD released new Administrative Guidance on the application of the Global Anti-Base Erosion Model Rules affecting Pillar Two.

| | • | our ability to adequately remediate our material weakness. |

We have over 3,500 employees worldwide, with locations in Asia (primarily in China, India, Japan, Singapore, South Korea and Taiwan), Europe (primarily in France, Germany, Hungary, Italy, Portugal, Spain, Switzerland and the United Kingdom) and the United States.

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

Our key product families include the following:

The DC to DC product family accounted for 94% of our total revenue in 2023 and 95% of our total revenue in both 2022 and 2021.

_Lighting Control Products._ Lighting control ICs are used in backlighting and general illumination products.

Lighting control ICs for backlighting are used in systems that provide the light source for LCD panels typically found in computers and notebooks, monitors, car navigation systems and televisions.

Backlighting solutions are typically either white light emitting diode lighting sources or cold cathode fluorescent lamps.

The Lighting Control product family accounted for 6% of our total revenue in 2023 and 5% of our total revenue in both 2022 and 2021.

We have sales offices in China, India, Japan, Singapore, South Korea, Taiwan, the United States and throughout Europe.

As of December 31, 2023, we had 1,701 patents/applications issued or pending, of which 585 patents have been issued in the United States.

Our failure to adequately protect our proprietary technologies could materially harm our business.

Certain employees are subject to collective bargaining agreements and we believe that we have good relations with these employees.

| | |

| • | health risks, climate crises and other natural disasters; and |

| • | financial market, economy and geopolitical uncertainties. |

In addition, volatility in the credit markets could severely diminish our customers’ liquidity and capital availability, which could materially harm our business.

Receivables from our customers are generally not secured by any type of collateral and are subject to the risk of being uncollectible.

Such activities are subject to a number of risks, including:

We have supply arrangements with certain suppliers for the production of wafers.

Use of AI tools may result in allegations or claims against us related to violation of third-party intellectual property rights, unauthorized access to or use of proprietary information and failure to comply with open-source software requirements.

Research and development expenses are likely to fluctuate from time to time to the extent we make periodic incremental investments in research and development and these investments may be independent of our level of revenue, which could negatively impact our financial results.

Controls and Procedures of this Annual Report, late in the audit process, a material weakness was identified that existed as of December 31, 2023, regarding ineffective design of the controls related to management’s review and documentation of our inventory demand information and other assumptions used to determine the inventory carrying value adjustments necessary to record such quantities at the lower of their cost or net realizable value.

While we do not believe that this material weakness has impacted the accuracy or reporting of our consolidated financial results, until this material weakness is remediated, or should new material weaknesses arise or be discovered in the future, there is a reasonable possibility that a material misstatement of our interim or annual financial statements will not be prevented or detected on a timely basis.

In addition, we may experience delays in satisfying our reporting obligations to comply with SEC rules and regulations, which could result in investigations and sanctions by regulatory authorities.

Any of these results could adversely affect our business and the value of our common stock.

We are subject to the FCPA, the U.K. Bribery Act and various anti-corruption laws of other jurisdictions, which generally prohibit companies and their intermediaries from making improper payments to foreign officials for the purpose of obtaining or keeping business and/or other benefits.

| • | our loss of key customers; |

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| Total facilities | | | 216,000 | | | | 1,213,000 | | | | 1,429,000 | |

We believe that our existing facilities are suitable for our current operations.

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| November 1, 2023 – November 30, 2023 | | | 5 | | $ | 505.65 | | | 5 | | $ | 637,465 | |

| Total | | | 7 | | $ | 533.45 | | | 7 | | | | |

We derive a majority of our revenue from the sales of our DC to DC converter products which serve the storage and computing, enterprise data, automotive, industrial, communications and consumer markets.

We account for price adjustments and stock rotation rights as variable consideration that reduces the transaction price and recognize that reduction in the same period the associated revenue is recognized.

When we receive claims from the distributors that products have been sold to the end customers at the lower price, we issue the distributors credit memos for the price adjustments.

We estimate the price adjustments using the expected value method based on an analysis of historical claims, at both the distributor and product level, as well as an assessment of any known trends of product sales mix.

We estimate the stock rotation returns using the expected value method based on an analysis of historical returns, and the current level of inventory in the distribution channel.

Overall, our estimates of adjustments to contract price due to variable consideration have been materially consistent with actual results; however, these estimates are subject to management’s judgment and actual provisions could be different from our estimates and current provisions, resulting in future adjustments to our revenue and operating results.