Risk factor changes · QCOM
What changed in Qualcomm's risk factors
Item 1A (Risk Factors) of Qualcomm's FY2025 10-K compared with its FY2024 10-K, sentence by sentence.
47new sentences
118reworded
27removed
310unchanged
New in the latest 10-K 47
- Risk Factors Summary: RISKS RELATED TO OUR OPERATING BUSINESSES We derive a significant portion of our revenues from a small number of customers and licensees, and particularly from their sale of premium-tier handset devices.
- Our business, particularly our semiconductor business, may suffer as a result of our customers vertically integrating (i.e., developing their own integrated circuit products).
- A significant portion of our business is concentrated in China, and the risks of such concentration are exacerbated by U.S./China trade and national security tensions.
- RISKS RELATED TO NEW INITIATIVES Our growth depends in part on our ability to extend our technologies and products into new and expanded product areas, and industries and applications beyond mobile handsets.
- Our research, development and other investments in these new and expanded product areas, industries and applications, and related technologies and products, as well as in our existing technologies and products, and new technologies, may not generate operating income or contribute to future results of operations that meet our expectations.
- We may engage in acquisitions and other strategic transactions or make investments, or be unable to consummate planned strategic acquisitions, which could adversely affect our results of operations or fail to enhance stockholder value.
- If we fail to execute supply strategies that provide supply assurance, technology leadership and reasonable margins, our business and results of operations may be harmed.
- We are also subject to order and shipment uncertainties that could negatively impact our results of operations. 14 There are numerous risks associated with the operation and control of our manufacturing facilities, including a higher portion of fixed costs relative to a fabless model; environmental compliance and liability; impacts related to climate change; exposure to natural disasters, health crises, geopolitical conflicts and cyber-attacks; timely supply of equipment and materials; and various manufacturing issues.
- RISKS RELATED TO HUMAN CAPITAL MANAGEMENT We may not be able to attract or retain qualified employees.
- RISKS SPECIFIC TO OUR LICENSING BUSINESS The continued and future success of our licensing programs requires us to continue to evolve our patent portfolio and to renew or renegotiate license agreements that are expiring.
- Changes in our patent licensing practices, whether due to governmental investigations, legal challenges or otherwise, could adversely impact our business and results of operations.
- RISKS RELATED TO REGULATORY AND LEGAL CHALLENGES Our business may suffer as a result of adverse rulings in governmental investigations or proceedings or other legal proceedings.
- RISKS RELATED TO INDUSTRY DYNAMICS AND COMPETITION Our revenues depend on our customers and licensees sales of products and services based on cellular and other communications technologies, including 5G, and customer demand for our products based on these technologies.
- Our industry is subject to intense competition in an environment of rapid technological change.
- Our success depends in part on our ability to adapt to such change and compete effectively; and such change and competition could result in decreased demand for our products and technologies or declining average selling prices for our products or those of our customers or licensees.
- RISKS RELATED TO PRODUCT DEFECTS OR SECURITY VULNERABILITIES Failures in our products, or in the products of our customers or licensees, including those resulting from security vulnerabilities, defects or errors, could harm our business.
- RISKS RELATED TO INTELLECTUAL PROPERTY The enforcement and protection of our intellectual property may be expensive, could fail to prevent misappropriation or unauthorized use of our intellectual property, could result in the loss of our ability to enforce one or more patents, and could be adversely affected by changes in patent laws, by laws in certain foreign jurisdictions that may not effectively protect our intellectual property and by ineffective enforcement of laws in such jurisdictions.
- Claims by third parties that we infringe their intellectual property could adversely affect our business.
- Our use of open source software may harm our business.
- GENERAL RISK FACTORS We operate in the highly cyclical semiconductor industry, which is subject to significant downturns.
- We are also susceptible to declines in global, regional and local economic conditions generally.
- Our stock price and financial results are subject to substantial quarterly and annual fluctuations due to these dynamics, among others.
- Geopolitical conflicts, natural disasters, pandemics and other health crises, and other factors outside of our control, could significantly disrupt our business. 15 Our business may suffer due to the impact of, or our failure to comply with, the various existing, new or amended laws, regulations, policies or standards to which we are subject.
- There are risks associated with our debt.
- Tax liabilities could adversely affect our results of operations.
- If revenues derived from these customers or licensees decrease or the timing of such revenues fluctuates, our business and results of operations could be negatively affected.
- Additionally, we expect that Apple will increasingly use its own modem products, rather than our products, in its future devices, which will have a significant negative impact on our QCT revenues, results of operations and cash flows.
- The mobile industry has also from time to time experienced declines in sales or slowing growth in the premium-tier device segment.
- In particular, we expect that Apple will increasingly use its own modem products, rather than our products, in its future devices, which will have a significant negative impact on our QCT revenues, results of operations and cash flows.
- Department of Commerce revoked the export license under which we previously sold 4G and certain other integrated circuit products to Huawei, which is one of the largest smartphone OEMs in China.
- Many of our acquisitions and other strategic investments require approval by the United States and/or foreign government agencies.
- We rely on sole- or limited-source suppliers for certain products, which may exacerbate the risks identified above, and subject us to other significant risks, including poor product performance and reduced control over delivery schedules, manufacturing capability and yields, quality assurance, quantity and costs.
- Our customers have from time to time overstated their expected demand requirements, possibly in order to procure additional supply, and may do so in the future.
- This exacerbates the foregoing issues and can negatively impact our ability to forecast and to allocate supply appropriately among our customers.
- Like many companies, we have encountered, and may continue to encounter, intrusions and attempts to gain unauthorized access to our IT systems or other attacks and incidents, and we have had third-party service providers who have encountered intrusions and may continue to encounter intrusions.
- In some cases, we might be unaware of an incident or its magnitude and effects.
- Additionally, increasing use of AI by our employees and in our internal systems may create new attack surfaces or methods for malicious actors, and may increase the risk of unintended or inadvertent transmission of our proprietary or confidential information.
- RISKS RELATED TO REGULATORY AND LEGAL CHALLENGES Our business may suffer as a result of adverse rulings in governmental investigations or proceedings or other legal proceedings.
- Our industry is subject to intense competition in an environment of rapid technological change.
- Companies that provide on-device AI, high-performance and low-power computing and wireless connectivity-based integrated circuit products and/or software are generally competitors or potential competitors.
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- Finally, the intellectual property ownership and license rights, including copyrights and patents, surrounding AI technologies, which we are increasingly building into our product offerings, have not been fully addressed by U.S. or foreign courts, laws or regulations, and the use of AI in the development of our products and services could result in our loss of, or failure to obtain, intellectual property rights, as well as subject us to risks related to intellectual property infringement or misappropriation.
- Additionally, our increasing use of AI technologies for productivity and in our products and services may expose us to copyright infringement or other intellectual property misappropriation claims.
- Similarly, our suppliers could be found to infringe another party s intellectual property, and such suppliers could then be enjoined from providing products or services to us.
- In addition, recent changes in global trade policy, including tariffs and related trade actions announced by the U.S., China and other countries, have resulted in significant volatility in capital markets and increased economic uncertainty.
- The escalation of trade tensions and the implementation of additional trade barriers between the U.S. and its trading partners may have the effect of increasing prices and/or decreasing demand for end-user products incorporating our products (including wireless devices and connected vehicles, among others), and could result in a general economic slowdown or recession, any of which would have an adverse impact on our results of operations and financial condition.
- In addition, tariffs may increase the cost of certain supplies used in our business, which could result in increased operating expenses and reduced margins.
- Finally, continued uncertainty regarding global economic conditions and trade policy may make it harder for management to estimate the future performance of our business.
Reworded 118
Removed words are struck through; added words are highlighted.
- Risk Factors: RISKS RELATED TO OUR OPERATING BUSINESSES We derive a significant portion of our revenues from a small number of customers and licensees, and particularly from their sale of
premiumtierpremium-tier handset devices. - We derive a significant portion of our revenues from a small number of customers and licensees, and particularly from their sale of
premiumtierpremium-tier handset devices, and we expect this trend to continue in the foreseeable future. - Further, political actions, including trade and/or national security protection
policies,policies (for example, tariffs and other controls on imports or exports), or other actions by governments, particularly the U.S. and Chinese governments, have in the past, currently are and could in the future limit or prevent us from transacting business with certain of our customers, limit, prevent or discourage those customers from transacting business with us, or make it more expensive to do so, any of which could also significantly reduce the revenues we derive from these customers. Inaddition,weWe spend a significant amount of engineering and development time, funds and resources in understanding our key customers feedback and/or specifications and attempt to incorporate such input into our product launches and technologies.- These efforts may not require or result in purchase commitments from such customers or we may have lower purchases from such customers than expected, and consequently, we may not achieve the anticipated revenues from these efforts, or these efforts may result in non-recoverable costs.
- The loss of any one of our significant customers, a reduction in the purchases of our products by any of these customers or the cancellation of significant purchases by any of these customers, whether due to the use of their own integrated circuit products or our competitors integrated circuit products, government restrictions, a decline in global, regional or local economic conditions, a decline in consumer demand (or a shift in consumer demand away from new devices in favor of refurbished or secondhand
devices),elevatedinventorylevelsatourcustomersdevices) or otherwise, would reduce our revenues and could harm our ability to achieve or sustain expected results of operations. - Further, the concentration of device share among a few companies, and the corresponding purchasing power of these companies, may result in lower prices for our products, which could have an adverse effect on our revenues and margins.
- Apple purchases our MDM (or thin modem) products, which do not include our integrated application processor technology, and which have lower revenue and margin contributions than our combined modem and application processor
18products. - Consequently, to the extent Apple
takesdevicedevices using our MDM products take share from our customers who purchase our integrated modem and application processor products, our revenues and margins may be negatively impacted. - A reduction in sales of premium-tier devices, a reduction in sales of our premium-tier integrated circuit products (which have a higher revenue and margin contribution than our lower-tier integrated circuit products), a shift in share away from OEMs that utilize our premium-tier products, or a shift in consumer demand in favor of refurbished or secondhand devices, would reduce our revenues and margins and may harm our ability to achieve or sustain expected 16 financial results.
- Although we have
morethan300many licensees, we derive a significant portion of our licensing revenues from a limited number of such licensees, which includes a number of Chinese OEMs. - Certain of our largest mobile handset customers (for example,
Samsung)Apple, Samsung and Xiaomi) develop their own integrated circuit products, which they have in the past utilized,andand/or currently utilize, in certain of theirdevicesandweexpectwillinthefutureutilizeinsomeoralloftheirdevices,ratherthanourproducts(andtheyhaveandmaycontinuetoselltheirintegratedcircuitproductstothirdparties,discretelyortogetherwithcertainoftheirotherproducts,incompetitionwithus).devices. Accordingly,weWe expectAppletouseitssuch customers will in the future utilize their ownmodemproducts,ratherthanourproducts,integrated circuit products in some or all ofitsfuturedevices.their devices, rather than our products.- Certain of our customers in China have developed, and others may in the future develop, their own integrated circuit products and use such integrated circuit products in their devices rather than our
integratedcircuitproducts, including due to pressure from or policies of the Chinese government(whoseMadeinChina2025campaign,announcedin2015,targeted70%(which has prioritized semiconductorself-sufficiencyby2025),self-sufficiency), concerns over losing access to ourintegratedcircuitproducts as a result of actual, threatened or potential U.S. or Chinese government actions or policies, including trade protection or national security policies, or other reasons. - If our customers begin using their own integrated circuit products rather than our products in some or all of their devices, or increase their use of their own integrated circuit products from current levels, our business,
revenues,results of operations, cash flows and financialpositioncondition could be materially adversely impacted. - See also the Risk Factor titled We derive a significant portion of our revenues from a small number of customers and licensees, and particularly from their sale of
premiumtierpremium-tier handset devices. - We derive a significant portion of our revenues from Chinese OEMs, and from non-Chinese OEMs that utilize our
integratedcircuitproducts in devices they sell into China, which has the largest number of smartphone users in the world. - We also source certain critical integrated circuit products from
suppliersinChina.Chinese suppliers. - Due to various factors, including pressure, encouragement or incentives from, or policies of, the Chinese government
(suchasitsMadeinChina2025campaign),(which has prioritized semiconductor self-sufficiency), concerns over losing access to ourintegratedcircuitproducts as a result of actual, threatened or potential U.S. or Chinese government actions or policies, including trade protection or national security policies, or other reasons, some of our customers in China have developed, and others may in the future develop, their own19integrated circuit products and use such integrated circuit products in their devices, or use our competitors integrated circuit products in their devices, rather than our products, which could materially harm our business,revenues,results of operations, cash flows and financialposition.condition. - Political actions, including trade protection and national security policies of the U.S. and Chinese governments, such as tariffs, bans or placing companies on restricted entity lists, have in the past, currently are and could in the future limit or prevent us from transacting business with certain of our Chinese or Chinese-affiliated customers or suppliers, limit, prevent or discourage
certainofourChinesesuch customers or suppliers from transacting business with us, or make it more expensive to do so. - Given our revenue concentration in China, if, due to actual, threatened or potential U.S. or Chinese government actions or policies: we were further limited in, or prohibited from, selling our integrated circuit products to Chinese or Chinese-affiliated customers; our non-Chinese OEM customers were limited in, or prohibited from, selling devices that incorporate our integrated circuit products into China;
- Chinese tariffs on our integrated 17 circuit products or on devices which incorporate our integrated circuit products made purchasing such products or devices more expensive to our Chinese customers or Chinese consumers; or our Chinese licensees delay or cease making payments of
licensefeesroyalties they owe us, our business,revenues,results of operations, cash flows and financialpositioncondition could be materially harmed. - Similarly, if, due to U.S. or Chinese government actions or policies, we were limited in or prohibited from obtaining critical integrated circuit products or manufacturing, assembly or test services from
oursuppliersinChina,Chinese or Chinese-affiliated suppliers, or we or our customers were limited in or prohibited from selling in the United States products containing technologies with Chinese-origin content, our business,revenues,results of operations, cash flows and financialpositioncondition could be materially harmed. - See also the Risk Factors titled We derive a significant portion of our revenues from a small number of customers and licensees, and particularly from their sale of
premiumtierpremium-tier handset devices. OnFor example, in May7,2024, the U.S.Additionally,Accordingly, we do not expect to receive any further product revenues from Huawei, and to the extent that Huawei s devices take share fromChineseOEMs that utilize our products (in China orfromnon-ChineseOEMsthatutilizeourproductsindevicestheysellintoChina,elsewhere), ourrevenues,results of operations and cash flows could be further impacted.- While we continue to invest significant resources toward advancements of foundational technologies, including wireless connectivity, high-performance and low-power computing and on-device
artificialintelligence(AI),AI, we also invest in new and expanded product areas, and industries and applications beyond mobile handsets, by utilizing our existing technical and business expertise and through acquisitions or other strategic transactions. - In particular, our future growth depends in part on our ability to succeed in new and expanded product areas, and industries and applications beyond mobile handsets,
suchasautomotiveincluding in automotive, IoT andIoT;data center; our ability to develop leading and cost-effective technologies and products for these new and expanded product areas, industries and applications; and third parties incorporating our technologies and products into devices used in these product areas, industries and applications. - Our growth also depends significantly on our ability to develop and patent 5G and next-generation wireless technologies, and to develop and commercialize products using these technologies.
- However, our research, development and other investments in these new and expanded product areas, industries and applications, and corresponding technologies and products, as well as in our existing technologies and products and new technologies in mobile handsets, may not succeed because, among other reasons: we may not be issued patents on the technologies we develop; the technologies we develop may not be incorporated into relevant standards; new and expanded product areas, industries and applications beyond mobile handsets, and consumer demand therein, may not develop or grow as anticipated; we may be unable to attract or retain employees with the necessary skills in such new and expanded product areas, industries and applications; our strategies or the strategies of our customers, licensees or partners may not be
20successful; alternate technologies or products may be better or may reduce the advantages we anticipate from our investments; competitors technologies or products may be more cost effective, have more capabilities or fewer limitations or be brought to market faster than our new technologies or products; we may not be able to develop, or our competitors may have more established and/orstronger,stronger customer, vendor, distributor or other channel relationships; and competitors may have longer operating histories in industries and applications that are new to us. - If our products fail to perform to specifications, compete with the product quality of our competitors or meet quality or regulatory standards (including product safety and information security standards, which may differ by region, geography and industry, and which are particularly stringent in the automotive industry) or other standards (including sustainability or other 18 ESG-related standards) of a particular industry or application, we may be unable to successfully expand our business in that industry or application, and our growth could be limited.
- We engage in acquisitions and other strategic
transactions,includingjointventures,andmakeinvestments,whichtransactions that we believe are important to the future of our business. - Our strategic activities are generally focused on furthering our growth and diversification strategy in industries and applications beyond mobile handsets, opening or expanding opportunities for our products and technologies, and supporting the
designdevelopment and introduction of new products(orenhancingexistingproducts)formobilehandsets,andfurtheringourgrowthanddiversificationstrategyinindustriesandapplicationsbeyondmobilehandsets.or services. - Additionally, we may not be successful in entering or expanding into new sales or distribution channels, business or operational models, geographic regions, industries and applications served by or adjacent to the associated businesses or in addressing potential new opportunities that may arise out of our strategic acquisitions.
21ManyofouracquisitionsandotherstrategicinvestmentsrequireapprovalbytheUnitedStatesand/orforeigngovernmentagencies. - In addition, acquisitions that we have completed
couldsubsequentlyhave been and may in the future bereviewedreviewed, investigated and/or challenged by governmentagencies,agencies following completion, which could result in fines, penalties or other liability, or requirements to divest all or a portion of an acquired business. - If we do not achieve the anticipated benefits of business acquisitions or other strategic activities, or if we are unable to consummate acquisitions or strategic investments that we consider important to the future of our business, our business and results of operations may be adversely affected, our growth and diversification strategy may not be successful, our stock price may decline and our reputation may be harmed. 19 RISKS RELATED TO SUPPLY AND MANUFACTURING We depend on a limited number of third-party suppliers for the procurement, manufacture, assembly and testing of our products manufactured in a fabless production model.
- RISKS RELATED TO SUPPLY AND MANUFACTURING We depend on a limited number of third-party suppliers for the procurement, manufacture, assembly and testing of our products manufactured in a fabless production model.
- We primarily utilize a fabless production model, which means that we do not own or operate foundries for the production of silicon wafers from which our integrated
circuitscircuit products are made. - There are a limited number of such third-party suppliers, and even fewer who are capable of manufacturing at the leading process technology nodes, or who are willing to operate at older process technology nodes necessary for certain of our
integratedcircuitproducts. - The following issues related to our third-party suppliers could have an adverse effect on our ability to meet customer demand and negatively impact our revenues, business operations, profitability and cash flows: our suppliers failure or inability to react to shifts in product demand, including situations where demand for integrated circuits exceeds suppliers capacity to meet that demand; a failure or inability by our suppliers to procure raw materials or allocate adequate raw materials for our products, or an increase in prices for raw materials or components; an inability to procure or utilize raw materials, components or products from our suppliers due to government prohibitions or restrictions on transactions with certain countries and/or companies, and alternative suppliers, raw material sources or raw materials are not available or not available in acceptable time frames or upon acceptable terms; a failure by our suppliers to allocate adequate manufacturing, assembly or test capacity for our products; our suppliers failure or inability to develop or maintain, or a delay in developing or building out, manufacturing capacity for leading process technologies, including transitions to smaller geometry process technologies; the loss of a supplier or the failure or inability of a supplier to meet performance, quality or yield specifications or delivery schedules; additional expense or production delays as a result of qualifying a new supplier and commencing volume production or testing in the event of a loss of, or a decision to add or change, a supplier; natural disasters, the effects of climate change, acts of war or other geopolitical conflicts impacting the regions in which our suppliers and their manufacturing foundries or assembly, test or other facilities are located; health crises, including epidemics or pandemics, and government and business responses thereto, which impact our suppliers, including as a result of quarantines or closures; cyber-attacks on our suppliers information technology (IT) systems, including those related to their manufacturing foundries or assembly, test or other facilities; trade or national security protection policies, particularly U.S. or Chinese government policies, that limit or prevent us from transacting business with suppliers of critical integrated circuit
products,products or manufacturing, assembly or test services, or that limit or prevent such suppliers from transacting business with us or from procuring materials, machinery or technology necessary to manufacture goods for us; and any other reduction, interruption, delay or limitation in our product supply sources.22Werelyonsole-orlimited-sourcesuppliersforcertainproducts,whichmayexacerbatetherisksidentifiedabove,andsubjectustoothersignificantrisks,includingpoorproductperformanceandreducedcontroloverdeliveryschedules,manufacturingcapabilityandyields,qualityassurance,quantityandcosts.
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- Our ability, and that of our suppliers, to develop or maintain leading process technologies, including transitions to smaller 20 geometry process technologies (which adds risk to manufacturing yields and reliability), and to effectively compete with the manufacturing processes and performance of our competitors, could impact our ability to introduce new products and meet customer demand, could increase our costs (possibly decreasing our margins) and could subject us to the risk of excess inventories.
- From time to time, the global semiconductor industry experiences demand for integrated circuits that exceeds the industry s capacity to meet that
demand.demand, whether globally, at certain suppliers or on certain process technology nodes. - If we are unable to fully meet customer demand, this could result in lost sales opportunities, reduced revenue growth and harm to our customer
relationships.relationships, and could further incentivize our customers to use our competitors integrated circuit products, or their own integrated circuit products, rather than our products. - We expect
transitionstonewgenerationsofleading process technology nodes to continue to drive product cost increases from certain of our key semiconductor wafer suppliers, which may negatively impact our margins. - Further, to the extent our customers procure supply of our
integratedcircuitproducts beyond their current needs (i.e., build up inventory of ourintegratedcircuitproducts), whether due to concerns over supply, overestimating demand and/or a decline in macroeconomic conditions, or otherwise, they may not purchase expected quantities of our products in subsequent quarters, which may negatively impact ourrevenues,results of operations and cash flows in such quarters. - See also the Risk Factor below titled There are numerous risks associated with the operation and control of our manufacturing facilities, including a higher portion of fixed costs relative to a fabless model; environmental compliance and liability; impacts related to climate change; exposure to natural disasters, health crises, geopolitical conflicts and cyber-attacks; timely supply of equipment and materials; and various manufacturing issues as similar risks may be applicable to
23our third-party suppliers manufacturing facilities, which could result in disruptions to our business or additional costs to us, and negatively impact our results of operations. - As a result, from time to time our manufacturing facilities operate at lower capacity levels, while the fixed costs associated with such facilities continue to be incurred, resulting in lower gross profit. 21 We are subject to many complex environmental, health and safety laws, regulations and rules in each jurisdiction in which we operate our manufacturing and other facilities.
- There may be cases where supplies of raw materials, equipment and other products are interrupted or limited by natural disaster, geopolitical conflict, accident or some other event affecting a supplier or source of raw materials; supply is suspended due to quality or other issues; there is a shortage of supply due to a rapid increase in demand; and/or we or our suppliers are prohibited from utilizing certain raw materials, or products or components that incorporate such raw materials, due to government restrictions related to the countries from which such raw materials originate, and acceptable alternative suppliers, raw materials or raw materials sources are not available or not available in acceptable time frames or upon acceptable terms, among others, which could impact production and prevent us from
24supplying our products to our customers. - Further, to remain competitive and meet customer demand, we may be required to improve our facilities and process technologies and 22 carry out extensive research and development, each of which may require investment of significant amounts of capital and may have a material adverse effect on our results of operations, cash flows and financial condition.
- Although we maintain a cybersecurity program to manage cybersecurity risks, as
morefullydescribed in the Cybersecurity section of this Annual Report, we cannot anticipate, detect, repel orimplementfullyeffectiveguarantee the effectiveness of our preventative measures against all cybersecurity threats, particularly because the techniques used are increasingly sophisticated and constantly evolving. - Similarly, we provide access to certain of our technology, intellectual property and other proprietary or confidential information to our direct and indirect customers and
25licensees and certain of our consultants, who have in the past and may in the future wrongfully use such technology, intellectual property or information, or wrongfully disclose such technology, intellectual property or information to third parties, including our competitors or state actors. - We have also provided and may continue to provide access to certain of our technology, intellectual property and other proprietary or confidential information to certain
ofourjoint venture partners, including those affiliated with state actorsandincludingin foreignjurisdictionswhereownershiprestrictionsmayrequireustotakeaminorityownershipinterestinthejointventure.jurisdictions. - The misappropriation, theft, misuse, disclosure, loss or destruction of the technology, intellectual property, or the proprietary, confidential or personal information, of us or our employees, customers, licensees, suppliers or other third 23 parties, could harm our competitive position, reduce the value of our investment in research and development and other strategic initiatives, cause us to lose business, damage our reputation, subject us to legal or regulatory proceedings, cause us to incur other loss or liability and otherwise adversely affect our business.
- We expect to continue to devote
significantresources to the security of our IT systems, and our technology, intellectual property and proprietary and confidential information. - If we are unable to attract or retain qualified employees
orfailtomaintainemployeeproductivitydue to any of the factors described above or for other reasons, our business could be adversely impacted. - We own a very strong portfolio of issued and pending patents related to
3G,4G,5Gcellular and other technologies. - The patent license agreements that generate a significant portion of our licensing revenues are each effective for a specified term.
- To receive royalties after the expiration
dateof the specified term, we will need to extend or modifysuchthe applicable licenseagreementsagreement or enter into a new licenseagreementsagreement with the applicablelicensees.licensee. - We might not be able to extend or modify such license agreements, or enter into new license agreements,
inthefuturewithout negatively affecting the material terms and conditions of our license agreements with such licensees, and such modifications or new agreements may negatively impact our revenues. - In some circumstances, we may extend, modify or enter into new license agreements as a result of arbitration or litigation, and terms imposed by arbitrators or courts may be less favorable to us than existing
terms,terms and may impact the financial or other terms of license agreements not subject to the litigation or arbitration. - Finally, certain of our license
26agreements contain binding renewal provisions which provide that if the parties are unable to agree upon the terms and conditions of a new license agreement by a specified date, either party may initiate binding arbitration proceedings to establish such terms and conditions, which would become effective immediately after the expiration of the prior agreement. - Efforts by some OEMs to avoid paying fair and reasonable royalties for the use of our intellectual property may require the investment of substantial management time and financial resources and may result in legal decisions or actions by governments, courts, regulators or agencies, Standards Development Organizations (SDOs) or other industry organizations that harm our business.
- Further, to the extent such licensees and companies increase their device share, the negative impact of their underreporting, underpayment, non-payment or non-reporting on our business,
revenues,results of operations, cash flows and financial condition will be exacerbated. - We have been in the
pastandarepast, currently are and may in the future be subject to various litigation and/or governmental investigations andproceedings.proceedings, including certain governmental investigations and legal proceedings challenging our patent licensing practices. - Unfavorable resolutions of one or more of these matters have had and could in the future have a material adverse effect on our business,
revenues,results of operations, cash flows and financial condition. - Further, SDOs in certain countries may attempt to modify widely accepted standards and claim the resulting standard as their
27own. - In addition, governments have in the past and may in the future propose and/or enact policies concerning standard-essential
patents,suchastheEuropeanCommissionsproposedregulationswhichwouldcreateanewregulatoryschemeforstandard-essentialpatents,patents that may have various consequences, some of which may be detrimental, such as by devaluing standard-essential patents or disrupting worldwide technology standards. - We expect that such proposals, interpretations and strategies will continue in the future, and if successful, our business model would be harmed, either by limiting or eliminating our ability to collect royalties (or by reducing the royalties we can collect) on all or a portion of our standard-essential patent portfolio, limiting our return on investment with respect to new 25 technologies, limiting our ability to seek injunctions against infringers of our standard-essential patents, constraining our ability to make licensing commitments when submitting our technologies for inclusion in future standards (which could make our technologies less likely to be included in such standards) or forcing us to work outside of SDOs or other industry groups to promote our new technologies, and our
revenues,business, results ofoperationsandoperations, cash flows and financial condition could be negatively impacted. - As described in the Risk Factor below titled Our business may suffer as a result of adverse rulings in governmental investigations or proceedings or other legal proceedings, we have been in the past, currently are and may in the future be subject to various governmental investigations and/or legal proceedings, including certain governmental investigations and legal proceedings challenging our patent licensing practices.
- To the extent that we were required to implement any of these licensing and/or business practices, including by modifying or renegotiating our existing license agreements or pursuing other commercial arrangements, we would incur additional transaction costs, which may be significant, we could incur delays in recognizing revenues until license negotiations were completed, and our business,
revenues,results of operations, cash flows and financial condition could be harmed. - In addition, if we were required to make modifications to our licensing practices in one jurisdiction, licensees or governmental agencies in other jurisdictions may attempt to obtain similar outcomes for themselves or for such other jurisdictions, as applicable, which could result in increased legal costs and further harm to our business,
revenues,results of operations, cash flows and financial condition.28RISKSRELATEDTOREGULATORYANDLEGALCHALLENGESOurbusinessmaysufferasaresultofadverserulingsingovernmentalinvestigationsorproceedingsorotherlegalproceedings. - Key allegations or findings in
thosesuch matters include or have in the past included, among others: that we violate FRAND licensing commitments by refusing to grant licenses to chipset manufacturers; that our royalty rates are too high; that the base on which our royalties are calculated should be something less than the wholesale (i.e., licensee s) selling price of the applicable device (minus certain permitted deductions); that we unlawfully require customers to execute a patent license before we sell them cellular modem chipsets; that we have entered into exclusive agreements with chipset customers that foreclose competition; that we leverage our position in baseband chipsets in the RFFE space; and that we violate antitrust laws and engage in anticompetitive conduct and unfair methods of competition. - We may become subject to other litigation or governmental investigations or proceedings in the future. 26 Unfavorable resolutions of
oneormoreofthesesuch matters have had and could in the future have a material adverse effect on our business,revenues,results of operations, cash flows and financial condition. - The occurrence of any of the above could have a material adverse effect on our business,
revenues,results of operations, cash flows and financial condition, and our stock price could decline, possibly significantly, in which case we may have to significantly cut costs and other uses of cash, including in research and development, significantly impairing our ability to maintain product and technology leadership and invest in next generation technologies. - RISKS RELATED TO INDUSTRY DYNAMICS AND COMPETITION Our revenues depend on our customers and licensees sales of products and services based on
CDMA,OFDMAcellular and other communications technologies, including 5G, and customer demand for our products based on these technologies. - We develop, patent and commercialize technology and products based on
CDMA,OFDMAcellular and other communications technologies, which are primarily wireless. - Our revenues and growth in revenues could be negatively impacted, our business may be harmed and our substantial investments in these technologies may not provide us an adequate return, if: our customers and licensees sales of products, particularly premium-tier handset products, and services using these technologies, or average selling prices of such products, decline due to, for example, the maturity of smartphone penetration in developed regions, including China; we do not continue to maintain our intellectual property and technical leadership in 5G, including in ongoing 5G standardization efforts, or we fail to establish such leadership in future generations of wireless technology; we are unable to drive the adoption of our products into networks and devices, including devices beyond mobile handsets; consumers rates of replacement of smartphones and other devices decline; or there is a shift in consumer demand away from new devices in favor of refurbished or secondhand devices.
29Ourindustryissubjecttointensecompetitioninanenvironmentofrapidtechnologicalchange. CompetitionmayWe expect this competition to intensify as our current competitors expand their product offerings, improve their products or reduce the prices of their products as part of a strategy to maintain existing business and customers or attract new business and customers, as new opportunities develop, and as new competitors enter the industry.- Competition in the semiconductor industry is affected by various factors that include, among others: OEM concentrations; vertical integration; competition in certain geographic regions; government intervention or support of national industries or competitors; geopolitical tensions, which may drive customer preference toward local suppliers; the ability to maintain product differentiation in light of evolving industry standards and speed of technological change (including the transition to smaller geometry process technologies, the demand for always on, always connected capabilities, the increasing use of AI and machine learning technologies and the need to run complex AI-based applications 27 on devices); access to capacity in the supply chain; and value-added features that drive selling prices and consumer demand for new devices.
- We expect that our future success will depend on, among other factors, our ability to: differentiate our
integratedcircuitproducts with innovative technologies across multiple products and features (e.g., modem,RFFEincludingmillimeterwave(mmWave),on-device AI, graphics and other processors,camera,connectivitycamera andon-deviceAI)connectivity) and with smaller geometry process technologies that drive both performance and lower power consumption; develop and offerintegratedcircuitproducts at competitive cost and price points and to effectively cover all geographic regions and all device tiers; continue to be a leader in mobile, and drive the adoption of our technologies andintegratedcircuitproducts into the most popular device models and across a broad spectrum of devices in mobile, such as smartphones, tablets, PCs and other mobile computing devices; increase or accelerate adoption of our technologies and products in industries and applications outside of mobile handsets, including automotive and IoT; maintain or accelerate demand for ourintegratedcircuitproducts at the premium device tier, while also driving the adoption of our products into high, mid- and low-tier devices across all regions; remain a leader in 5G and next-generation technology development, standardization, intellectual property creation and licensing, and develop, commercialize and remain a leading supplier of5Gintegrated circuitproducts,products based on such technologies, including RFFE products; maintain access to sufficient capacity in the supply chain relative to our competitors to meet customer demand; create standalone value and contribute to the success of our existing businesses through acquisitions, joint ventures and other strategic transactions, and by developing customer, licensee, vendor, distributor and other channel relationships in new industries and applications; identify potential acquisition targets that will grow or sustain our business or address strategic needs, reach agreement on terms acceptable to us, close the transactions and effectively integrate these new businesses, products, technologies and employees; provide leading products and technologies to OEMs, high level operating systems(HLOS)providers, operators, cloud providers and other industry participants as competitors, new industry entrants and other factors continue to affect the industry landscape; be a preferred partner and sustain preferred relationships providing integrated circuit products that support multiple operating system and infrastructure platforms to industry participants that effectively commercialize new devices using these platforms; and continue to develop brand recognition to effectively compete against better known companies in computing and other consumer driven segments and to deepen our presence in significant emerging regions. - We compete with many different semiconductor companies, ranging from multinational companies with integrated research and development, manufacturing, sales and marketing organizations across a broad spectrum of product lines, to companies that are focused on a single application, industry or standard product, including those that produce products for
30mobile handsets, automotive or IoT, among others. - Some of these current and potential competitors may have advantages over us that include, among others: motivation by our customers in certain circumstances to use our competitors integrated circuit products, to utilize their own internally-developed integrated circuit products and/or sell such products to others, or to utilize alternative technologies; lower cost structures or a willingness and ability to accept lower prices or lower margins for their products, particularly in China; foreign government support of other technologies, competitors or OEMs that sell devices that do not contain our
integratedcircuitproducts; better known brand names; ownership and control of manufacturing facilities and greater expertise in manufacturing processes; the development and sale of infrastructure equipment for wireless networks, which may enable such competitors to better optimize their integrated circuit products for performance on those networks; more extensive relationships with local distribution companies 28 and OEMs in certain geographic regions (such as China);moreexperiencelonger operating histories in industries and applications beyond mobile handsets (such asautomotiveautomotive, IoT andIoT);data center), including more established and/or stronger customer, vendor, distributor or other channel relationships in such industries; and a more established presence in certain regions. - Further, certain of those
customers,suchasAppleandSamsung,customers have developed, are developing or may develop their own integrated circuit products (effectively making them competitors), which they have in the past utilized, currently utilize or may in the future utilize in some or all of their devices, rather than our products. - Competition in any or all product areas or device tiers may result in the loss of business or customers, which would negatively impact our business,
revenues,results of operations, cash flows and financial condition. - Development of products in new domains of technology, and the
migrationtransition tointegratedcircuittechnologieswithsmallergeometricfeaturesizes,geometry process technologies, increases complexity and adds risk to manufacturing yields and reliability, and increases the likelihood of product defects, errors or security vulnerabilities. - Such attacks could result in the disruption of our customers businesses or the
31misappropriation, theft, misuse, disclosure, loss or destruction of the technology or intellectual property, or the proprietary, confidential or personal information, of our customers, their employees or the end users of our customers devices. - Such defects, errors or security vulnerabilities could give rise to significant costs, including 29 costs related to developing solutions, recalling products or participating in customer recalls (for example, in the automotive industry), repairing or replacing defective products, writing down defective inventory or indemnification obligations under our agreements, and could result in the loss of sales and divert the attention of our engineering personnel from our product development efforts.
Inaddition,theThe occurrence of defects, errors or security vulnerabilities may also give rise to product liability or other commercial claims, particularly if such defects, errors or security vulnerabilities in our products or the technology we use, or the products into which they are integrated, result in personal injury or death, or customer field actions (for example, in the automotive industry, where such term means automotive product-related service actions or repairs for defects, whether safety-related or not).- Further, our business liability insurance may be
inadequate,inadequate or may not cover the claims, and future coverage may be unavailable on acceptable terms, which could adversely impact our financial results. - The above is exacerbated by the fact that our products may be used, and perform critical functions, in various high-risk
applicationssuchas:applications, including but not limited to: automobiles, including ADAS/AD functions; cameras and artificial intelligence, including home and enterprise security; home automation, including smoke and noxious gas detectors; medical condition monitoring; location and asset tracking and management, including wearables for child safety and elderly health; robotics, including public safety drones and autonomous municipality vehicles; and XR for treatment of phobias or PTSD, early detection of disorders or special needs, among others. SeealsotheRiskFactortitledRISKS RELATED TO CYBERSECURITY OR MISAPPROPRIATION OF OUR CRITICAL INFORMATION Our business and operations could suffer in the event of security breaches of our IT systems, or other misappropriation of our technology, intellectual property or other proprietary or confidential information.- In the United States, Europe (including the United Kingdom), India, China and elsewhere, there is continued discussion regarding potential patent law changes, and there is current and potential future litigation regarding patents, the outcomes of which could be detrimental to our licensing
32business. - See also the Risk Factor
entitledbelow titled Efforts by some OEMs to avoid paying fair and reasonable royalties for the use of our intellectual property may require the investment of substantial management time and financial resources and may result in legal decisions or actions by governments, courts, regulators or agencies, Standards Development Organizations (SDOs) or other industry organizations that harm our business. 24 Efforts by some OEMs to avoid paying fair and reasonable royalties for the use of our intellectual property may require the investment of substantial management time and financial resources and may result in legal decisions or actions by governments, courts, regulators or agencies, Standards Development Organizations (SDOs) or other industry organizations that harm our business. Inaddition,weWe cannot be certain that the laws and policies of any country or the practices of any standardsbodies,body, foreign or domestic, with respect to intellectual property enforcement or licensing or the adoption of standards, will not be changed in the future in ways that are detrimental to our licensing programs or to the sale or use of our products or technologies.- See also the Risk Factors titled Our business and operations could suffer in the event of security breaches of our IT systems, or other misappropriation of our technology, intellectual property or other proprietary or confidential information, Efforts by some OEMs to avoid paying fair and reasonable royalties for the use of our intellectual property may require the investment of substantial management time and financial resources and may result in legal decisions or actions by governments, courts, regulators or agencies, Standards Development Organizations (SDOs) or other industry organizations that harm our
businessbusiness, and Our business may suffer as a result of adverse rulings in governmental investigations or proceedings or other legal proceedings . - We have engaged in litigation and arbitration in the
past,arecurrentlyengagedinlitigation,past and may need to further litigate or arbitrate in the future to enforce our contract and/or intellectual property rights, protect our trade secrets or determine the validity and scope of 30 proprietary rights of others. - Claims by
othercompaniesthird parties that we infringe their intellectual property could adversely affect our business. - From time to time,
companiesthird parties have asserted, and may again assert, patent, copyright, trademark or other intellectual property claims against us relating to our technologies or products, including those we have acquired from other companies. - If any of our products were found to infringe another
companyparty s intellectual property, we could be subject to an injunction or be required to redesign our products, or to license such intellectual property or pay damages or other compensation to such othercompanyparty (any of which could be costly). Similarly,oursupplierscouldbefoundtoinfringeanothercompanysintellectualproperty,andsuchsupplierscouldthenbeenjoinedfromprovidingproductsorservicestous.33In any potential dispute involving us and anothercompanyparty s patents, copyrights, trademarks or other intellectual property, our chipset foundries, semiconductor assembly and test providers and customers could also become the targets of litigation.- Any claims, regardless of their merit, could be time consuming to address, result in costly litigation, divert the efforts of our technical and management personnel, cause product release or shipment delays and/or cause damage to our customer relationships, any of which could have an adverse effect on our results of operations and cash flows.
- We have been and may continue to be involved in litigation
andmayhaveand/or be required to appear in front of administrative bodies (such as the United States International Trade Commission) to defend against patent assertions against our products bycompanies,someofwhomarethird parties, including companies attempting to gain competitive advantage or leverage in licensing negotiations. - We may not be successful in such proceedings, and if we are not, the range of possible outcomes is very broad and may include, for example, monetary damages or fines or other orders to pay money, royalty payments, injunctions on the sale of certain of our
integratedcircuitproducts (or on the sale of our customers devices using such products) or the issuance of orders to cease certain conduct or modify our business practices. - Further, a governmental body in a particular country or region may assert, and may be successful in 31 imposing, remedies with effects that extend beyond the borders of that country or region.
- In addition, a negative outcome in any such proceeding could severely disrupt the business of our
customersandtheirwirelessoperatorcustomers, which in turn could harm our relationships with them and could result in a decline in our chipset sales or a reduction in our licensees sales, causing corresponding declines in our chipset or licensing revenues. - Certain of our software and our suppliers software may contain or may be derived from open source software, and we have seen, and believe that we will continue to see, customers request that we develop products, including software associated with our integrated circuit products, that
incorporateuse open source software elements and operate in an open source environment, which, under certain open source licenses, may offer accessibility to a portion of our products source code and may expose our related intellectual property to adverse licensing conditions. - A decline in global, regional or local economic conditions, or a slow-down in economic growth, particularly in geographic regions with high concentrations of wireless
voiceanddatadevice users or high concentrations of our customers or licensees, could also have adverse, wide-ranging effects on our business and financial results, including: a decrease in demand for our products and technologies; a decrease in demand for the products and services of our customers or licensees; the inability of our suppliers to deliver on their supply commitments to us, our inability to supply our products to our customers and/or the inability of our customers or licensees to supply their products to end users; the insolvency of key suppliers, customers or licensees; delays in reporting or payments from our customers or licensees; failures by counterparties; and/or negative effects on wireless device inventories. - In addition, our customers and licensees ability to purchase or pay for our products and intellectual property and network operators ability to upgrade their wireless networks could be
34adversely affected, potentially leading to a reduction, cancellation or delay of orders for our products. - Factors that may have a significant impact on the market price of our stock and our financial results include those identified above and throughout this Risk Factors section, as well as: volatility of the stock market in general and technology and semiconductor companies in particular; announcements concerning us, our suppliers, our competitors or our customers or licensees, including any announcement concerning the initiation of, or any developments in, any lawsuit or governmental investigation or proceeding against
us;us, or any announcement concerning the implementation of tariffs or other trade restrictions affecting our products or those of our significant customers; and variations between our actual financial results or guidance and 32 expectations of securities analysts or investors, among others. SecuritieslitigationWe have been in the past and may in the future be the target of securities litigation, which could result in substantial uninsured costs and divert management s attention and our resources.- We derive a significant portion of our revenues from Chinese OEMs and from non-Chinese OEMs that utilize our
integratedcircuitproducts in devices they sell into China (which has the largest number of smartphone users in the world); our key suppliers and their manufacturing foundries and assembly, test and other facilities are primarily located in Taiwan and Korea; our manufacturing facilities for RFFE and RF products are located in China, Germany and Singapore; the primary warehouses where we store finished goods for fulfillment of customer orders are located in Singapore; and a significant portion of our workforce (including engineering and other technical personnel) is based in India. - Acts of war, terrorism, geopolitical conflicts, political instability or tensions
such(such as the current geopolitical tensions involving China andTaiwan,Taiwan), natural disasters, the effects of climate change, pandemics or other health crises affecting any of the regions in which we operate, and particularly those in which our customers, suppliers, manufacturing facilities and/or significant portions of our workforce are concentrated, could significantly disrupt our business by, among others: reducing demand for our products and services or end-user devices incorporating our products or intellectual property; impairing our customers or licensees ability to purchase or pay for our products, services or intellectual property; delaying or preventing our suppliers from providing us with critical components or raw materials; delaying or preventing our foundry or semiconductor assembly and test providers from manufacturing, assembling or testing our products; preventing us from manufacturing products or shipping finished products; damaging or destroying inventory; delaying or preventing network operators from upgrading their wireless networks to meet new technology standards; or preventing a significant number of our employees, or employees who perform critical functions, from performing their duties for us. - Department of Commerce; trade and trade protection including tariffs; foreign policy and national security; the flow of funds out of certain countries (e.g., China); automotive industry safety, security and quality standards; environmental protection (including climate change), health and safety; supply chain, responsible sourcing (including the use of conflict minerals) and human rights; spectrum availability and license issuance; adoption of standards; taxation; labor, employment and human capital; corporate governance; public disclosure and reporting (including reporting of
ESG-relatedsustainability-related data); and business conduct. - See also the Risk Factors titled Our business may suffer as a result of adverse rulings in
35governmental investigations or proceedings or other legal proceedings, Changes in our patent licensing practices, whether due to governmental investigations, legal challenges or otherwise, could adversely impact our business and results of operations, A significant portion of our business is concentrated in China, and the risks of such concentration are exacerbated by U.S./China trade and national security tensions, There are numerous risks associated with the operation and control of our manufacturing facilities, including a higher portion of fixed costs relative to a fabless model; environmental compliance and liability; impacts related to climate change; exposure to natural disasters, health crises, geopolitical conflicts and cyber-attacks; timely supply of equipment and materials; and various manufacturing issues, and Tax liabilities could adversely affect our results of operations. - In addition, and especially in developing regulatory areas (for example, AI, privacy and data protection, and
ESG-relatedsustainability-related reporting), Regulations may differ by country 33 or by state within the UnitedStates,States and may be conflicting in certain cases. - Most of our income is taxable in the United States with a significant portion qualifying for preferential treatment as
FDII(foreign-derivedforeign-derived deduction eligible income (FDDEI), formerly known as foreign-derived intangibleincome).income (FDII). Further,ifIf U.S. tax rates increase and/or theFDIIFDDEI deduction is eliminated orreduced,bothofwhichhavebeenproposedbyreduced in thecurrentU.S.presidentialadministration,future, our provision for income taxes, results of operations and cash flows would be adversely affected (potentiallymaterially)affected.materially).- Also, if our customers move manufacturing operations to the United States, our
FDIIFDDEI deduction may be reduced.
Removed since the previous 10-K 27
- The mobile industry has also experienced slowing growth in the premium-tier device segment due to, among other factors, a maturing premium-tier smartphone industry in which demand is increasingly driven by new product launches and innovation cycles.
- Apple has utilized modem products of one of our competitors in some of its devices rather than our products, and solely utilized one of our competitors products in several of its prior device launches.
- In December 2019, Apple acquired Intel s modem assets and is developing its own modem products using those assets.
- For example, we previously sold 4G and other integrated circuit products, including Wi-Fi products, but excluding 5G products, to Huawei under export licenses from the U.S.
- Department of Commerce.
- Department of Commerce informed us that it was revoking our license to export 4G and certain other integrated circuit products to Huawei, effective immediately, and we implemented procedures to immediately comply.
- Accordingly, we do not expect to receive any further product revenues from Huawei.
- Product revenues from Huawei in fiscal 2024, prior to our license being revoked on May 7, 2024, were approximately $560 million.
- These issues may be exacerbated if customers overstate their expected demand requirements in order to procure additional supply, which could negatively impact our ability to forecast and to allocate supply appropriately among our customers.
- We are subject to many complex environmental, health and safety laws, regulations and rules in each jurisdiction in which we operate our manufacturing and other facilities.
- Attempts to gain unauthorized access to our IT systems or other attacks have in the past, in certain instances and to certain degrees, been successful (but have not caused significant harm), and may in the future be successful, and in some cases, we might be unaware of an incident or its magnitude and effects.
- Certain of these matters are described in this Annual Report in Notes to Consolidated Financial Statements, Note 7.
- Commitments and Contingencies.
- We may become subject to other litigation or governmental investigations or proceedings in the future.
- Other jurisdictions may adopt similar regulatory schemes, which could also have such effects.
- Certain of these matters are described in this Annual Report in Notes to Consolidated Financial Statements, Note 7.
- Commitments and Contingencies.
- We may become subject to other litigation or governmental investigations or proceedings in the future.
- Companies that design integrated circuits based on CDMA, OFDMA, Wi-Fi or their derivatives are generally competitors or potential competitors.
- We cannot predict with certainty the long-term effects of any potential changes.
- Further, the laws in certain foreign countries in which our patents are or may be licensed, or our products are or may be manufactured or sold, including certain countries in Asia, may not protect our intellectual property rights to the same extent as the laws in the United States.
- See also the Risk Factors titled Efforts by some OEMs to avoid paying fair and reasonable royalties for the use of our intellectual property may require the investment of substantial management time and financial resources and may result in legal decisions or actions by governments, courts, regulators or agencies, Standards Development Organizations (SDOs) or other industry organizations that harm our business and Our business and operations could suffer in the event of security breaches of our IT systems, or other misappropriation of our technology, intellectual property or other proprietary or confidential information.
- We are and may in the future be the target of securities litigation.
- Certain legal matters, including certain securities litigation brought against us, are described in this Annual Report in Notes to Consolidated Financial Statements, Note 7.
- Commitments and Contingencies.
- Beginning in fiscal 2027, the effective tax rate for FDII increases from 13% to 16%.
- Further, if the requirement to capitalize certain research and development expenditures for federal income tax purposes is changed, as has been proposed by Congress, this would negatively affect our provision for income taxes and results of operations (although it would have a favorable impact on our cash flows from operations due to lower cash tax payments).
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