Monolithic Power Systems 10Q 2021 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 000-51026

Monolithic Power Systems, Inc.

(Exact name of registrant as specified in its charter)

Delaware

77-0466789

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification Number)

5808 Lake Washington Blvd. NE, Kirkland, Washington 98033

(Address of principal executive offices)(Zip Code)

(425) 296-9956

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol		Name of each exchange on which registered
Common Stock, par value $0.001 per share		MPWR		The NASDAQ Global Select Market

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

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

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

Large accelerated filer ☒	Accelerated filer ☐	Non-accelerated filer ☐
Smaller reporting company ☐	Emerging growth company ☐

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

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

There were 46,093,000 shares of the registrant’s common stock issued and outstanding as of November 1, 2021.

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MONOLITHIC POWER SYSTEMS, INC.

TABLE OF CONTENTS		PAGE
PART I. FINANCIAL INFORMATION		4
ITEM 1.	FINANCIAL STATEMENTS (Unaudited)	4
	CONDENSED CONSOLIDATED BALANCE SHEETS	4
	CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS	5
	CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME	6
	CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY	7
	CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS	8
	NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	9
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	24
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	32
ITEM 4.	CONTROLS AND PROCEDURES	32
PART II. OTHER INFORMATION		32
ITEM 1.	LEGAL PROCEEDINGS	32
ITEM1A.	RISK FACTORS	32
ITEM 6.	EXHIBITS	51

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

MONOLITHIC POWER SYSTEMS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except par value)

(unaudited)

	September 30,		December 31,
	2021		2020
ASSETS
Current assets:
Cash and cash equivalents	$	226,091	$	334,944
Short-term investments		515,947		260,169
Accounts receivable, net		79,859		66,843
Inventories		208,062		157,062
Other current assets		34,535		22,980
Total current assets		1,064,494		841,998
Property and equipment, net		340,060		281,528
Goodwill		6,571		6,571
Deferred tax assets, net		17,726		18,556
Other long-term assets		67,050		59,838
Total assets	$	1,495,901	$	1,208,491

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	72,092	$	38,169
Accrued compensation and related benefits		75,815		45,840
Other accrued liabilities		79,756		62,960
Total current liabilities		227,663		146,969
Income tax liabilities		41,019		37,062
Other long-term liabilities		64,506		57,873
Total liabilities		333,188		241,904
Commitments and contingencies
Stockholders’ equity:
Common stock and additional paid-in capital: $0.001 par value; shares authorized: 150,000; shares issued and outstanding: 46,091 and 45,267, respectively		769,858		657,701
Retained earnings		381,193		298,746
Accumulated other comprehensive income		11,662		10,140
Total stockholders’ equity		1,162,713		966,587
Total liabilities and stockholders’ equity	$	1,495,901	$	1,208,491

See accompanying notes to unaudited condensed consolidated financial statements.

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MONOLITHIC POWER SYSTEMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per-share amounts)

(unaudited)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Revenue	$	323,522	$	259,422	$	871,294	$	611,409
Cost of revenue		137,211		116,382		379,709		274,329
Gross profit		186,311		143,040		491,585		337,080
Operating expenses:
Research and development		49,468		37,717		136,113		95,346
Selling, general and administrative		56,291		43,503		164,982		116,550
Litigation expense		3,421		1,841		6,645		6,264
Total operating expenses		109,180		83,061		307,740		218,160
Income from operations		77,131		59,979		183,845		118,920
Other income, net		793		2,494		6,411		5,980
Income before income taxes		77,924		62,473		190,256		124,900
Income tax expense		9,154		6,907		20,904		3,412
Net income	$	68,770	$	55,566	$	169,352	$	121,488

Net income per share:
Basic	$	1.50	$	1.24	$	3.70	$	2.72
Diluted	$	1.44	$	1.18	$	3.55	$	2.59
Weighted-average shares outstanding:
Basic		45,970		44,970		45,754		44,737
Diluted		47,852		46,955		47,772		46,819

See accompanying notes to unaudited condensed consolidated financial statements.

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MONOLITHIC POWER SYSTEMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

(unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020
Net income	$	68,770		$	55,566		$	169,352		$	121,488
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments		(371	)		6,936			2,592			5,072
Change in unrealized gain (loss) on available-for-sale securities, net of tax of $32, $30, $177 and $(321), respectively		(268	)		(368	)		(1,070	)		2,888
Other comprehensive income (loss), net of tax		(639	)		6,568			1,522			7,960
Comprehensive income	$	68,131		$	62,134		$	170,874		$	129,448

See accompanying notes to unaudited condensed consolidated financial statements.

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MONOLITHIC POWER SYSTEMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except per-share amounts)

(unaudited)

								Accumulated
	*Common Stock and*							*Other*			*Total*
	*Additional Paid-in Capital*				*Retained*			*Comprehensive*			*Stockholders*’
Three Months Ended September 30, 2021	*Shares*		*Amount*		*Earnings*			*Income*			*Equity*
Balance as of July 1, 2021		45,917	$	733,672	$	341,382		$	12,301		$	1,087,355
Net income		-		0		68,770			0			68,770
Other comprehensive loss		-		0		0			(639	)		(639	)
Dividends and dividend equivalents declared ($0.60 per share)		-		0		(28,959	)		0			(28,959	)
Common stock issued under the employee equity incentive plan		167		2,227		0			0			2,227
Common stock issued under the employee stock purchase plan		7		2,377		0			0			2,377
Stock-based compensation expense		-		31,582		0			0			31,582
Balance as of September 30, 2021		46,091	$	769,858	$	381,193		$	11,662		$	1,162,713

								Accumulated
	*Common Stock and*							*Other*			*Total*
	*Additional Paid-in Capital*				*Retained*			*Comprehensive*			*Stockholders*’
Three Months Ended September 30, 2020	*Shares*		*Amount*		*Earnings*			*Income (Loss)*			*Equity*
Balance as of July 1, 2020		44,911	$	605,165	$	247,864		$	(4,084	)	$	848,945
Net income		-		0		55,566			0			55,566
Other comprehensive income		-		0		0			6,568			6,568
Dividends and dividend equivalents declared ($0.50 per share)		-		0		(23,777	)		0			(23,777	)
Common stock issued under the employee equity incentive plan		173		2,347		0			0			2,347
Common stock issued under the employee stock purchase plan		12		1,927		0			0			1,927
Stock-based compensation expense		-		22,993		0			0			22,993
Balance as of September 30, 2020		45,096	$	632,432	$	279,653		$	2,484		$	914,569

								Accumulated
	*Common Stock and*							*Other*		*Total*
	*Additional Paid-in Capital*				*Retained*			*Comprehensive*		*Stockholders*’
Nine Months Ended September 30, 2021	*Shares*		*Amount*		*Earnings*			*Income*		*Equity*
Balance as of January 1, 2021		45,267	$	657,701	$	298,746		$	10,140	$	966,587
Net income		-		0		169,352			0		169,352
Other comprehensive income		-		0		0			1,522		1,522
Dividends and dividend equivalents declared ($1.80 per share)		-		0		(86,905	)		0		(86,905	)
Common stock issued under the employee equity incentive plan		807		15,147		0			0		15,147
Common stock issued under the employee stock purchase plan		17		4,670		0			0		4,670
Stock-based compensation expense		-		92,340		0			0		92,340
Balance as of September 30, 2021		46,091	$	769,858	$	381,193		$	11,662	$	1,162,713

								Accumulated
	*Common Stock and*							*Other*			*Total*
	*Additional Paid-in Capital*				*Retained*			*Comprehensive*			*Stockholders*’
Nine Months Ended September 30, 2020	*Shares*		*Amount*		*Earnings*			*Income (Loss)*			*Equity*
Balance as of January 1, 2020		43,616	$	549,517	$	229,450		$	(5,476	)	$	773,491
Net income		-		0		121,488			0			121,488
Other comprehensive income		-		0		0			7,960			7,960
Dividends and dividend equivalents declared ($1.50 per share)		-		0		(71,285	)		0			(71,285	)
Common stock issued under the employee equity incentive plan		1,452		16,457		0			0			16,457
Common stock issued under the employee stock purchase plan		28		3,819		0			0			3,819
Stock-based compensation expense		-		62,639		0			0			62,639
Balance as of September 30, 2020		45,096	$	632,432	$	279,653		$	2,484		$	914,569

See accompanying notes to unaudited condensed consolidated financial statements.

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MONOLITHIC POWER SYSTEMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

	Nine Months Ended September 30,
	2021			2020
Cash flows from operating activities:
Net income	$	169,352		$	121,488
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		20,376			13,785
Amortization of premium on available-for-sale securities		3,231			1,984
Gain on deferred compensation plan investments		(2,640	)		(1,420	)
Deferred taxes, net		1,004			3,400
Stock-based compensation expense		92,282			62,581
Other		(8	)		15
Changes in operating assets and liabilities:
Accounts receivable		(13,033	)		(40,826	)
Inventories		(50,968	)		(20,533	)
Other assets		(14,051	)		(6,376	)
Accounts payable		30,032			19,811
Accrued compensation and related benefits		30,030			21,780
Income tax liabilities		4,088			(1,805	)
Other accrued liabilities		22,109			14,271
Net cash provided by operating activities		291,804			188,155
Cash flows from investing activities:
Purchases of property and equipment		(76,849	)		(44,129	)
Purchases of short-term investments		(354,171	)		(270,797	)
Proceeds from maturities and sales of short-term investments		94,192			182,355
Proceeds from sales of long-term investments		400			250
Contributions to deferred compensation plan, net		(1,917	)		(1,116	)
Purchases of intangible assets		(793	)		0
Net cash used in investing activities		(339,138	)		(133,437	)
Cash flows from financing activities:
Property and equipment purchased on extended payment terms		(2,049	)		(4,437	)
Proceeds from common stock issued under the employee equity incentive plan		15,147			16,457
Proceeds from common stock issued under the employee stock purchase plan		4,670			3,819
Dividends and dividend equivalents paid		(80,725	)		(65,477	)
Net cash used in financing activities		(62,957	)		(49,638	)
Effect of change in exchange rates		1,431			1,432
Net increase (decrease) in cash, cash equivalents and restricted cash		(108,860	)		6,512
Cash, cash equivalents and restricted cash, beginning of period		335,071			173,076
Cash, cash equivalents and restricted cash, end of period	$	226,211		$	179,588
Supplemental disclosures for cash flow information:
Cash paid for taxes	$	16,217		$	1,036
Non-cash investing and financing activities:
Liability accrued for property and equipment purchases	$	7,144		$	9,355
Liability accrued for dividends and dividend equivalents	$	31,911		$	26,429

See accompanying notes to unaudited condensed consolidated financial statements.

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MONOLITHIC POWER SYSTEMS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been prepared by Monolithic Power Systems, Inc. (the “Company” or “MPS”) in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been condensed or omitted in accordance with these accounting principles, rules and regulations. The information in this report should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on March 1, 2021.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the Company’s financial position, results of operations and cash flows for the interim periods presented. The financial statements contained in this Quarterly Report on Form 10-Q are not necessarily indicative of the results that may be expected for the year ending December 31, 2021 or for any other future periods.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and reported amounts of revenue and expenses during the reporting period. Significant estimates and assumptions used in these condensed consolidated financial statements primarily include those related to revenue recognition, inventory valuation, valuation of share-based awards, contingencies and income tax valuation allowances. Actual results could differ from these estimates and assumptions, and any such differences may be material to the Company’s condensed consolidated financial statements.

The COVID-19 pandemic did not materially and adversely impact the Company's overall operating results or business operations during the three and nine months ended September 30, 2021. As of the date of issuance of these condensed consolidated financial statements, the Company is not aware of any specific event or circumstance related to the COVID-19 pandemic that would require management to update the significant estimates and assumptions used in the preparation of the condensed consolidated financial statements, as compared to those disclosed in the Annual Report on Form 10-K for the year ended December 31, 2020. As new events continue to evolve and additional information becomes available, any changes to these estimates and assumptions will be recognized in the condensed consolidated financial statements as soon as they become known.

Recently Adopted Accounting Pronouncement

In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which eliminates certain exceptions related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The standard also clarifies and simplifies other aspects of the accounting for income taxes. The standard became effective for annual reporting periods beginning after December 15, 2020. The standard is generally applied prospectively, with certain exceptions. The Company adopted the standard in the first quarter of 2021 and the adoption did not have a material impact on its condensed consolidated financial statements.

2. REVENUE RECOGNITION

Revenue from Product Sales

The Company generates revenue primarily from product sales, which include assembled and tested integrated circuits (“ICs”), as well as dies in wafer form. These product sales accounted for 96% and 97% of the Company’s total revenue for the three months ended September 30, 2021 and 2020, respectively, and 96% and 98% of the Company’s total revenue for the nine months ended September 30, 2021 and 2020, respectively. The remaining revenue primarily includes royalty revenue from licensing arrangements and revenue from wafer testing services performed for third parties, which have not been significant in all periods presented. See Note 7 for the disaggregation of the Company’s revenue by geographic regions and by product families.

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The Company sells its products primarily through third-party distributors, value-added resellers, original equipment manufacturers (“OEMs”), original design manufacturers (“ODMs”) and electronic manufacturing service (“EMS”) providers. For the three months ended September 30, 2021 and 2020, 89% and 75%, respectively, of the Company’s product sales were made through distribution arrangements. For the nine months ended September 30, 2021 and 2020, 89% and 79%, respectively, of the Company’s product sales were made through distribution arrangements. These distribution arrangements contain enforceable rights and obligations specific to those distributors and not the end customers. Purchase orders, which are generally governed by sales agreements or the Company's standard terms of sale, set the final terms for unit price, quantity, shipping and payment agreed by both parties. The Company considers purchase orders to be the contracts with customers. The unit price as stated on the purchase orders is considered the observable, stand-alone selling price for the arrangements.

The Company recognizes revenue when it satisfies a performance obligation by transferring control of the promised goods or services to its customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. The Company excludes taxes assessed by government authorities, such as sales taxes, from revenue.

Product sales consist of a single performance obligation that the Company satisfies at a point in time. The Company recognizes product revenue from distributors and direct end customers when the following events have occurred: (a) the Company has transferred physical possession of the products, (b) the Company has a present right to payment, (c) the customer has legal title to the products, and (d) the customer bears significant risks and rewards of ownership of the products. In accordance with the shipping terms specified in the contracts, these criteria are generally met when the products are shipped from the Company’s facilities (such as the “Ex Works” shipping term) or delivered to the customers’ locations (such as the “Delivered Duty Paid” shipping term).

Under certain consignment agreements, revenue is not recognized when the products are shipped and delivered to be held at customers’ designated locations because the Company continues to control the products and retain ownership, and the customers do not have an unconditional obligation to pay. The Company recognizes revenue when the customers consume the products from the consigned inventory locations or, in some cases, after a 60-day period from the delivery date has passed, at which time control transfers to the customers and the Company invoices them for payment.

Variable Consideration

The Company accounts for price adjustment and stock rotation rights as variable consideration that reduces the transaction price and recognizes that reduction in the same period the associated revenue is recognized. Four U.S.-based distributors have price adjustment rights when they sell the Company’s products to their end customers at a price that is lower than the distribution price invoiced by the Company. When the Company receives claims from the distributors that products have been sold to the end customers at the lower price, the Company issues the distributors credit memos for the price adjustments. The Company estimates 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. Other U.S. distributors and non-U.S. distributors, which make up the majority of the Company’s total sales to distributors, do not have price adjustment rights. The Company records a credit against accounts receivable for the estimated price adjustments, with a corresponding reduction to revenue.

Certain distributors have limited stock rotation rights that permit the return of a small percentage of the previous six months’ purchases in accordance with the contract terms. The Company estimates 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. The Company records a liability for the stock rotation reserve, with a corresponding reduction to revenue. In addition, the Company recognizes an asset for product returns which represents the right to recover products from the customers related to stock rotations, with a corresponding reduction to cost of revenue.

Contract Balances

Accounts Receivable:

The Company records a receivable when it has an unconditional right to receive consideration after the performance obligations are satisfied. As of September 30, 2021 and December 31, 2020, accounts receivable totaled $79.9 million and $66.8 million, respectively. The Company's accounts receivable are short-term, with standard payment terms generally ranging from 30 to 90 days. The Company does not require its customers to provide collateral to support accounts receivable. The Company assesses the collectability by reviewing accounts receivable on a customer-by-customer basis. To manage credit risk, management performs ongoing credit evaluations of the customers’ financial condition, monitors payment performance, and assesses current economic conditions, as well as reasonable and supportable forecasts of future economic conditions, that may affect collectability of the outstanding receivables. For certain high-risk customers, the Company requires standby letters of credit or advance payment prior to shipments of goods. The Company did not recognize any write-offs of accounts receivable in any of the periods presented. As of September 30, 2021 and December 31, 2020, the Company did not record any allowance for credit losses.

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Contract Liabilities:

For certain customers located in Asia, the Company requires cash payments two weeks before the products are scheduled to be shipped to the customers. The Company records these payments received in advance of performance as customer prepayments within current accrued liabilities. As of September 30, 2021 and December 31, 2020, customer prepayments totaled $6.7 million and $7.2 million, respectively. The decrease in the customer prepayment balance for the nine months ended September 30, 2021 resulted from a decrease in unfulfilled customer orders for which the Company has received payments. For the nine months ended September 30, 2021, the Company recognized $7.1 million of revenue that was included in the customer prepayment balance as of December 31, 2020.

Practical Expedients

The Company has elected the practical expedient to expense sales commissions as incurred because the amortization period would have been one year or less.

The Company’s standard payment terms generally require customers to pay 30 to 90 days after the Company satisfies the performance obligations. For those customers who are required to pay in advance, the Company satisfies the performance obligations generally within a quarter. The Company has elected not to determine whether contracts with customers contain significant financing components.

The Company’s unsatisfied performance obligations primarily include products held in consignment arrangements and customer purchase orders for products that the Company has not yet shipped. Because the Company expects to fulfill these performance obligations within one year, the Company has elected not to disclose the amount of these remaining performance obligations.

3. STOCK-BASED COMPENSATION

2014 Equity Incentive Plan

In April 2013, the Board of Directors adopted the 2014 Equity Incentive Plan (the “2014 Plan”), which the Company's stockholders approved in June 2013. In October 2014, the Board of Directors approved certain amendments to the 2014 Plan. The amended 2014 Plan became effective on November 13, 2014 and provided for the issuance of up to 5.5 million shares. In April 2020, the Board of Directors further amended and restated the amended 2014 Plan (the “Amended and Restated 2014 Plan”), which the Company's stockholders approved in June 2020. The Amended and Restated 2014 Plan became effective on June 11, 2020 and provides for the issuance of up to 10.5 million shares. The Amended and Restated 2014 Plan will expire on June 11, 2030. As of September 30, 2021, 5.6 million shares remained available for future issuance under the Amended and Restated 2014 Plan.

Stock-Based Compensation Expense

The Company recognized stock-based compensation expenses as follows (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Cost of revenue	$	922	$	707	$	2,622	$	1,906
Research and development		6,646		5,334		19,564		14,666
Selling, general and administrative		24,004		16,934		70,096		46,009
Total stock-based compensation expense	$	31,572	$	22,975	$	92,282	$	62,581
Tax benefit related to stock-based compensation (1)	$	488	$	512	$	1,299	$	1,450

(1)	Amount reflects the tax benefit related to stock-based compensation recorded for equity awards that are expected to generate tax deductions when they vest in future periods.

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Restricted Stock Units (“RSUs”)

The Company’s RSUs include time-based RSUs, RSUs with performance conditions (“PSUs”), RSUs with market conditions (“MSUs”), and RSUs with both market and performance conditions (“MPSUs”). Vesting of awards with performance conditions or market conditions is subject to the achievement of pre-determined performance goals and the approval of such achievement by the Compensation Committee of the Board of Directors (the “Compensation Committee”). All awards include service conditions which require continued employment with the Company. A summary of RSU activity is presented in the table below (in thousands, except per-share amounts):

	Time-Based RSUs					PSUs and MPSUs					MSUs					Total
	Number of Shares			Weighted- Average Grant Date Fair Value Per Share		Number of Shares			Weighted- Average Grant Date Fair Value Per Share		Number of Shares			Weighted- Average Grant Date Fair Value Per Share		Number of Shares			Weighted- Average Grant Date Fair Value Per Share
Outstanding at January 1, 2021		161		$	151.62		1,390		$	132.60		1,554		$	40.40		3,105		$	87.42
Granted		43		$	375.33		365	(1)	$	352.37		0		$	0		408		$	354.79
Vested		(60	)	$	142.13		(504	)	$	91.73		(243	)	$	23.57		(807	)	$	74.95
Forfeited		(9	)	$	199.05		(12	)	$	100.25		(9	)	$	68.48		(30	)	$	118.31
Outstanding at September 30, 2021		135		$	223.71		1,239		$	214.52		1,302		$	43.33		2,676		$	131.68

(1)	Amount reflects the number of awards that may ultimately be earned based on management’s probability assessment of the achievement of performance conditions at each reporting period.

The intrinsic value related to vested RSUs was $76.8 million and $45.9 million for the three months ended September 30, 2021 and 2020, respectively. The intrinsic value related to vested RSUs was $297.7 million and $267.8 million for the nine months ended September 30, 2021 and 2020, respectively. As of September 30, 2021, the total intrinsic value of all outstanding RSUs was $1.3 billion, based on the closing stock price of $484.68. As of September 30, 2021, unamortized compensation expense related to all outstanding RSUs was $186.7 million with a weighted-average remaining recognition period of approximately two years.

Cash proceeds from vested PSUs with a purchase price requirement totaled $15.1 million and $16.5 million for the nine months ended September 30, 2021 and 2020, respectively.

Time-Based RSUs:

For the nine months ended September 30, 2021, the Compensation Committee granted 43,000 RSUs with service conditions to non-executive employees and non-employee directors. The RSUs generally vest over four years for employees and one year for directors, subject to continued service with the Company.

2021 PSUs:

In February 2021, the Compensation Committee granted 80,000 PSUs to the executive officers, which represent a target number of shares that can be earned subject to the achievement of two sets of performance goals (“2021 Executive PSUs”). For the first goal, the executive officers can earn up to 300% of the target number of the 2021 Executive PSUs based on the achievement of the Company’s average two-year (2021 and 2022) revenue growth rate compared against the analog industry’s average two-year revenue growth rate as published by the Semiconductor Industry Association. 50% of the 2021 Executive PSUs will vest in the first quarter of 2023 if the pre-determined revenue goal is met during the performance period. The remaining 2021 Executive PSUs will vest over the following two years on a quarterly basis. For the second goal, the executive officers can earn an additional 100% of the target number of the 2021 Executive PSUs based on the achievement of certain environmental objectives under the environmental, social and governance (“ESG”) initiatives with a performance period through December 31, 2023. The 2021 Executive PSUs related to the ESG goal will fully vest upon achievement of the goal, but no earlier than December 31, 2022. All vested shares related to the ESG goal will be subject to a post-vesting sales restriction period of one year. Assuming the achievement of the highest level of the performance goals, the total stock-based compensation cost for the 2021 Executive PSUs is $114.4 million.

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In February 2021, the Compensation Committee granted 14,000 PSUs to certain non-executive employees, which represent a target number of shares that can be earned subject to the achievement of the Company’s 2022 revenue goals for certain regions or product line divisions, or based on the achievement of the Company’s average two-year (2021 and 2022) revenue growth rate compared against the analog industry’s average two-year revenue growth rate as published by the Semiconductor Industry Association (“2021 Non-Executive PSUs”). The maximum number of shares that an employee can earn is either 200% or 300% of the target number of the 2021 Non-Executive PSUs, depending on the job classification of the employee. 50% of the 2021 Non-Executive PSUs will vest in the first quarter of 2023 if the pre-determined performance goals are met during the performance period. The remaining 2021 Non-Executive PSUs will vest over the following two years on an annual or quarterly basis. Assuming the achievement of the highest level of performance goals, the total stock-based compensation cost for the 2021 Non-Executive PSUs is $12.2 million.

The 2021 Executive PSUs and the 2021 Non-Executive PSUs contain a purchase price feature, which requires the employees to pay the Company $30 per share upon vesting of the shares. The $30 purchase price requirement is deemed satisfied and waived if the average stock price for 20 consecutive trading days at any time between the grant date and December 31, 2022 is $30 higher than the grant date stock price of $374.57. This market condition was achieved in the third quarter of 2021. The Company determined the grant date fair value of the 2021 Executive PSUs and the 2021 Non-Executive PSUs using a Monte Carlo simulation model with the following assumptions: stock price of $374.57, simulation term of 4.0 years, expected volatility of 41.4%, risk-free interest rate of 0.3%, and expected dividend yield of 0.6%. In addition, the grant date fair value for the 2021 Executive PSUs subject to the ESG goal included an illiquidity discount of 9.8% to account for the post-vesting sales restrictions.

2004 Employee Stock Purchase Plan (“ESPP”)

For the three months ended September 30, 2021 and 2020, 7,000 and 12,000 shares, respectively, were issued under the ESPP. For the nine months ended September 30, 2021 and 2020, 17,000 and 28,000 shares, respectively, were issued under the ESPP. As of September 30, 2021, 4.5 million shares were available for future issuance under the ESPP.

The intrinsic value of the shares issued was $1.0 million and $1.5 million for the three months ended September 30, 2021 and 2020, respectively. The intrinsic value of the shares issued was $2.4 million and $2.5 million for the nine months ended September 30, 2021 and 2020, respectively. As of September 30, 2021, the unamortized expense was $0.6 million, which will be recognized through the first quarter of 2022. The Black-Scholes model was used to value the employee stock purchase rights with the following weighted-average assumptions:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020
Expected term (in years)		0.5			0.5			0.5			0.5
Expected volatility		43.0	%		66.4	%		43.2	%		48.9	%
Risk-free interest rate		0.1	%		0.1	%		0.1	%		0.8	%
Dividend yield		0.5	%		0.7	%		0.6	%		0.9	%

Cash proceeds from the shares issued under the ESPP were $4.7 million and $3.8 million for the nine months ended September 30, 2021 and 2020, respectively.

4. BALANCE SHEET COMPONENTS

Inventories

Inventories consist of the following (in thousands):

	September 30,		December 31,
	2021		2020
Raw materials	$	17,254	$	25,503
Work in process		112,922		77,100
Finished goods		77,886		54,459
Total	$	208,062	$	157,062

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Other Current Assets

Other current assets consist of the following (in thousands):

	September 30,		December 31,
	2021		2020
RSU tax withholding proceeds receivable	$	16,075	$	12,504
Prepaid expense		10,638		5,032
Accrued interest receivable		4,094		1,914
Assets for product returns		2,059		1,684
Other		1,669		1,846
Total	$	34,535	$	22,980

Other Long-Term Assets

Other long-term assets consist of the following (in thousands):

	September 30,		December 31,
	2021		2020
Deferred compensation plan assets	$	50,641	$	46,146
Operating lease right-of-use (“ROU”) assets		6,292		3,719
Prepaid expense		2,256		2,340
Debt investment		2,501		2,861
Equity investment in a privately held company		3,215		3,400
Other		2,145		1,372
Total	$	67,050	$	59,838

Other Accrued Liabilities

Other accrued liabilities consist of the following (in thousands):

	September 30,		December 31,
	2021		2020
Dividends and dividend equivalents	$	32,044	$	26,435
Stock rotation and sales returns		7,695		6,005
Accrued purchases of property and equipment		1,033		5,841
Income tax payable		3,884		3,755
Customer prepayments		6,690		7,238
Commissions		1,347		1,107
Operating lease liabilities		2,425		1,406
Warranty		17,776		6,895
Other		6,862		4,278
Total	$	79,756	$	62,960

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Other Long-Term Liabilities

Other long-term liabilities consist of the following (in thousands):

	September 30,		December 31,
	2021		2020
Deferred compensation plan liabilities	$	52,707	$	48,280
Dividend equivalents		8,444		7,871
Operating lease liabilities		3,355		1,693
Other		0		29
Total	$	64,506	$	57,873

5. LEASES

Lessee

The Company has operating leases primarily for administrative and sales and marketing offices, manufacturing operations and research and development facilities, employee housing units and certain equipment. These leases have remaining lease terms from less than a year to five years. Some of these leases include options to renew the lease term for up to two years or on a month-to-month basis. The Company does not have finance lease arrangements.

As of September 30, 2021 and December 31, 2020, operating lease ROU assets totaled $6.3 million and $3.7 million, respectively. As of September 30, 2021 and December 31, 2020, operating lease liabilities totaled $5.8 million and $3.1 million, respectively. The following tables summarize certain information related to the leases (in thousands, except percentages):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Lease costs:
Operating lease costs	$	623	$	364	$	1,694	$	1,093
Other		140		87		387		235
Total lease costs	$	763	$	451	$	2,081	$	1,328

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	612	$	394	$	1,622	$	1,097
ROU assets obtained in exchange for new operating lease liabilities	$	793	$	0	$	4,477	$	1,796

	September 30,			December 31,
	2021			2020
Weighted-average remaining lease term (in years)		3.0			2.7
Weighted-average discount rate		2.1	%		2.7	%

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As of September 30, 2021, the maturities of the lease liabilities were as follows (in thousands):

2021 (remaining three months)	$	664
2022		2,342
2023		1,505
2024		834
2025		645
Thereafter		8
Total remaining lease payments		5,998
Less: imputed interest		(218	)
Total lease liabilities	$	5,780
Reported as:
Current liabilities	$	2,425
Long-term liabilities	$	3,355

As of September 30, 2021, the Company had operating leases that have not yet commenced with future lease obligations of $4.2 million. The leases are expected to commence in the fourth quarter of 2021 with contractual lease terms ranging from two to five years.

Lessor

The Company owns certain office buildings and leases a portion of these properties to third parties under arrangements that are classified as operating leases. These leases have remaining lease terms ranging from less than one year to five years. Some of these leases include options to renew the lease term for up to five years.

For the three months ended September 30, 2021 and 2020, income related to lease payments was $0.7 million and $0.5 million, respectively. For the nine months ended September 30, 2021 and 2020, income related to lease payments was $1.7 million and $1.3 million, respectively. As of September 30, 2021, future income related to lease payments was as follows (in thousands):

2021 (remaining three months)	$	594
2022		2,293
2023		1,621
2024		631
2025		110
Thereafter		21
Total	$	5,270

6. NET INCOME PER SHARE

Basic net income per share is computed by dividing net income by the weighted-average number of common shares outstanding for the period. Diluted net income per share reflects the potential dilution that would occur if outstanding securities or other contracts to issue common stock were exercised or converted into common shares, and calculated using the treasury stock method. Contingently issuable shares, including equity awards with performance conditions or market conditions, are considered outstanding common shares and included in the basic net income per share as of the date that all necessary conditions to earn the awards have been satisfied. Prior to the end of the contingency period, the number of contingently issuable shares included in the diluted net income per share is based on the number of shares, if any, that would be issuable under the terms of the arrangement at the end of the reporting period.

The Company’s RSUs contain forfeitable rights to receive cash dividend equivalents, which are accumulated and paid to the employees when the underlying RSUs vest. Dividend equivalents accumulated on the underlying RSUs are forfeited if the employees do not fulfill the requisite service requirement and, as a result, the awards do not vest. Accordingly, these awards are not treated as participating securities in the net income per share calculation.

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The following table sets forth the computation of basic and diluted net income per share (in thousands, except per-share amounts):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Numerator:
Net income	$	68,770	$	55,566	$	169,352	$	121,488

Denominator:
Weighted-average outstanding shares - basic		45,970		44,970		45,754		44,737
Effect of dilutive securities		1,882		1,985		2,018		2,082
Weighted-average outstanding shares - diluted		47,852		46,955		47,772		46,819

Net income per share:
Basic	$	1.50	$	1.24	$	3.70	$	2.72
Diluted	$	1.44	$	1.18	$	3.55	$	2.59

Anti-dilutive common stock equivalents were not material in any of the periods presented.

7. SEGMENT, SIGNIFICANT CUSTOMERS AND GEOGRAPHIC INFORMATION

The Company operates in 1 reportable segment that includes the design, development, marketing and sale of high-performance, semiconductor-based power electronics solutions for the computing and storage, automotive, industrial, communications and consumer markets. The Company’s chief operating decision maker is its Chief Executive Officer, who reviews financial information presented on a consolidated basis for purposes of allocating resources and evaluating financial performance. The Company derives a majority of its revenue from sales to customers located outside North America, with geographic revenue based on the customers’ ship-to locations.

The Company sells its products primarily through third-party distributors and value-added resellers, and directly to OEMs, ODMs and EMS providers. The following table summarizes those customers with sales equal to 10% or more of the Company's total revenue:

	Three Months Ended September 30,						Nine Months Ended September 30,
Customer	2021			2020			2021			2020
Distributor A		24	%		22	%		26	%		23	%
Distributor B		15	%		11	%		16	%		*
Distributor C		12	%		*			*			*
Direct customer A		*			14	%		*			11	%

* Represents less than 10%.

The Company’s agreements with these third-party customers were made in the ordinary course of business and may be terminated with or without cause by these customers with advance notice. Although the Company may experience a short-term disruption in the distribution of its products and a short-term decline in revenue if its agreement with any of the distributors was terminated, the Company believes that such termination would not have a material adverse effect on its financial statements because it would be able to engage alternative distributors, resellers and other distribution channels to deliver its products to end customers within a short period following the termination of the agreement with the distributor.

The following table summarizes those customers with accounts receivable equal to 10% or more of the Company’s total accounts receivable:

	September 30,			December 31,
Customer	2021			2020
Distributor A		17	%		24	%
Distributor B		18	%		21	%
Value-added reseller A		15	%		13	%
Direct customer A		*			10	%

* Represents less than 10%.

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The following is a summary of revenue by geographic regions (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
Country or Region	2021		2020		2021		2020
China	$	184,796	$	157,215	$	509,072	$	375,708
Taiwan		47,048		40,782		125,756		79,644
Europe		21,328		14,255		62,498		40,770
South Korea		24,442		20,935		62,721		44,452
Southeast Asia		14,820		11,854		38,506		32,256
Japan		20,944		9,433		47,546		25,079
United States		10,091		4,880		24,935		13,298
Other		53		68		260		202
Total	$	323,522	$	259,422	$	871,294	$	611,409

The following is a summary of revenue by product family (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
Product Family	2021		2020		2021		2020
DC to DC	$	307,368	$	247,561	$	827,605	$	580,549
Lighting Control		16,154		11,861		43,689		30,860
Total	$	323,522	$	259,422	$	871,294	$	611,409

The following is a summary of long-lived assets by geographic regions (in thousands):

	September 30,		December 31,
Country	2021		2020
China	$	192,485	$	151,752
United States		113,310		101,768
Taiwan		19,187		18,797
Other		15,078		9,211
Total	$	340,060	$	281,528

8. COMMITMENTS AND CONTINGENCIES

Product Warranties

The Company generally provides one to two-year warranties against defects in materials and workmanship and will repair the products, provide replacements at no charge to customers or issue a refund. As they are considered assurance-type warranties, the Company does not account for them as separate performance obligations. Warranty reserve requirements are generally based on a specific assessment of the products sold with warranties when a customer asserts a claim for warranty or a product defect.

The changes in warranty reserves are as follows (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020
Balance at beginning of period	$	10,873		$	1,174		$	6,895		$	1,139
Warranty provision for product sales		7,757			3,324			12,954			4,364
Settlements made		(770	)		(254	)		(1,739	)		(760	)
Unused warranty provision		(84	)		(345	)		(334	)		(844	)
Balance at end of period	$	17,776		$	3,899		$	17,776		$	3,899

Purchase Commitments

The Company has outstanding purchase commitments with its suppliers and other parties that require the future purchases of goods or services, which primarily consist of wafer and other inventory purchases, assembly and other manufacturing services, construction or purchases of property and equipment, and license arrangements. As of September 30, 2021, the Company’s outstanding purchase obligations totaled approximately $197.8 million.

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Litigation

The Company is a party to actions and proceedings in the ordinary course of business, including potential litigation initiated by its stockholders, challenges to the enforceability or validity of its intellectual property, claims that the Company’s products infringe on the intellectual property rights of others, and employment matters. These proceedings often involve complex questions of fact and law and may require the expenditure of significant funds and the diversion of other resources to prosecute and defend. The Company defends itself vigorously against any such claims. As of September 30, 2021, there were no material pending legal proceedings to which the Company was a party.

9. CASH, CASH EQUIVALENTS, INVESTMENTS AND RESTRICTED CASH

The following is a summary of the Company’s cash, cash equivalents and debt investments (in thousands):

	September 30,		December 31,
	2021		2020
Cash	$	212,622	$	300,609
Money market funds		13,469		34,335
Certificates of deposit		139,361		0
Corporate debt securities		369,094		249,671
Commercial paper		0		2,999
U.S. treasuries and government agency bonds		7,492		7,499
Auction-rate securities backed by student-loan notes		2,501		2,861
Total	$	744,539	$	597,974

	September 30,		December 31,
	2021		2020
Reported as:
Cash and cash equivalents	$	226,091	$	334,944
Short-term investments		515,947		260,169
Debt investment within other long-term assets		2,501		2,861
Total	$	744,539	$	597,974

The following table summarizes the contractual maturities of the short-term and long-term available-for-sale investments as of September 30, 2021 (in thousands):

	Amortized Cost		Fair Value
Due in less than 1 year	$	113,987	$	114,265
Due in 1 - 5 years		401,166		401,682
Due in greater than 5 years		2,620		2,501
Total	$	517,773	$	518,448

Gross realized gains and losses recognized on the sales of available-for-sale investments were not material for any of the periods presented.

The following tables summarize the unrealized gain and loss positions related to the available-for sale investments (in thousands):

	September 30, 2021
	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Money market funds	$	13,469	$	0	$	0		$	13,469
Certificates of deposit		139,361		0		0			139,361
Corporate debt securities		368,298		1,122		(326	)		369,094
U.S. treasuries and government agency bonds		7,494		1		(3	)		7,492
Auction-rate securities backed by student-loan notes		2,620		0		(119	)		2,501
Total	$	531,242	$	1,123	$	(448	)	$	531,917

	December 31, 2020
	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Money market funds	$	34,335	$	0	$	0		$	34,335
Corporate debt securities		247,591		2,177		(97	)		249,671
Commercial paper		2,999		0		0			2,999
U.S. treasuries and government agency bonds		7,499		2		(2	)		7,499
Auction-rate securities backed by student-loan notes		3,020		0		(159	)		2,861
Total	$	295,444	$	2,179	$	(258	)	$	297,365

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The following tables present information about the available-for-sale investments that had been in a continuous unrealized loss position for less than 12 months and for greater than 12 months (in thousands):

	September 30, 2021
	Less than 12 Months					Greater than 12 Months					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Corporate debt securities	$	190,629	$	(326	)	$	0	$	0		$	190,629	$	(326	)
U.S. treasuries and government agency bonds		5,992		(3	)		0		0			5,992		(3	)
Auction-rate securities backed by student-loan notes		0		0			2,501		(119	)		2,501		(119	)
Total	$	196,621	$	(329	)	$	2,501	$	(119	)	$	199,122	$	(448	)

	December 31, 2020
	Less than 12 Months					Greater than 12 Months					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Corporate debt securities	$	59,144	$	(97	)	$	0	$	0		$	59,144	$	(97	)
U.S. treasuries and government agency bonds		5,998		(2	)		0		0			5,998		(2	)
Auction-rate securities backed by student-loan notes		0		0			2,861		(159	)		2,861		(159	)
Total	$	65,142	$	(99	)	$	2,861	$	(159	)	$	68,003	$	(258	)

An impairment exists when the fair value of an investment is less than its amortized cost basis. As of September 30, 2021 and December 31, 2020, the Company did not consider the impairment of its investments to be a result of credit losses. The Company typically invests in highly rated securities, with the primary objective of minimizing the potential risk of principal loss. The Company’s investment policy generally requires securities to be investment grade and limits the amount of credit exposure to any one issuer. When evaluating a debt security for impairment, management reviews factors such as the Company’s intent to sell, or whether it will more likely than not be required to sell, the security before recovery of its amortized cost basis, the extent to which the fair value of the security is less than its cost, the financial condition of the issuer and the credit quality of the investment.

The Company’s auction-rate securities are backed by pools of student loans supported by guarantees by the U.S. Department of Education. The underlying maturities of these securities are up to 25 years. The Company has received all scheduled interest payments on a timely basis pursuant to the terms and conditions of the securities. The Company does not intend to sell these securities, and it is more likely than not that the Company will not be required to sell these securities, before recovery of its amortized cost basis. To date, the Company has redeemed $40.7 million, or 94% of the original portfolio in these auction-rate securities, at par without any realized losses.

Non-Marketable Equity Investment

In November 2020, the Company made an equity investment in a privately held Swiss company (the “Investee”) that is accounted for under the measurement alternative. One member of the Company’s Board of Directors is an executive officer of a company that has a commercial relationship with the Investee. In addition, the Company’s Chief Executive Officer has a personal investment in the Investee. As of September 30, 2021 and December 31, 2020, the Company’s investment in the Investee, which is denominated in CHF, had a carrying value of $3.2 million and $3.4 million, respectively. The Company did not record any impairment or adjustments resulting from observable price changes for the three and nine months ended September 30, 2021.

Restricted Cash

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported on the Condensed Consolidated Balance Sheets to the amounts reported on the Condensed Consolidated Statements of Cash Flows (in thousands):

	September 30,		December 31,
	2021		2020
Cash and cash equivalents	$	226,091	$	334,944
Restricted cash included in other long-term assets		120		127
Total cash, cash equivalents and restricted cash reported on the Condensed Consolidated Statements of Cash Flows	$	226,211	$	335,071

As of September 30, 2021 and December 31, 2020, restricted cash included a security deposit that is set aside in a bank account and cannot be withdrawn by the Company under the terms of a lease agreement. The restriction will end upon the expiration of the lease.

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10. FAIR VALUE MEASUREMENTS

The following tables summarize the fair value of the financial assets measured on a recurring basis (in thousands):

	September 30, 2021
	Total		Level 1		Level 2		Level 3
Money market funds	$	13,469	$	13,469	$	0	$	0
Certificates of deposit		139,361		0		139,361		0
Corporate debt securities		369,094		0		369,094		0
U.S. treasuries and government agency bonds		7,492		0		7,492		0
Auction-rate securities backed by student-loan notes		2,501		0		0		2,501
Mutual funds and money market funds under deferred compensation plan		29,919		29,919		0		0
Total	$	561,836	$	43,388	$	515,947	$	2,501

	December 31, 2020
	Total		Level 1		Level 2		Level 3
Money market funds	$	34,335	$	34,335	$	0	$	0
Corporate debt securities		249,671		0		249,671		0
Commercial paper		2,999		0		2,999		0
U.S. treasuries and government agency bonds		7,499		0		7,499		0
Auction-rate securities backed by student-loan notes		2,861		0		0		2,861
Mutual funds and money market funds under deferred compensation plan		26,924		26,924		0		0
Total	$	324,289	$	61,259	$	260,169	$	2,861

●	Level 1 —includes instruments with quoted prices in active markets for identical assets.

●

Level 2 —includes instruments for which the valuations are based upon quoted market prices in active markets involving similar assets or inputs other than quoted prices that are observable for the assets. The market inputs used to value these instruments generally consist of market yields, recently executed transactions, broker/dealer quotes or alternative pricing sources with reasonable levels of price transparency. Pricing sources may include industry standard data providers, security master files from large financial institutions, and other third-party sources used to determine a daily market value.

●	Level 3 —includes instruments for which the valuations are based on inputs that are unobservable and significant to the overall fair value measurement.

Redemptions and changes in the fair value of the auction-rate securities classified as Level 3 assets were not material for the three and nine months ended September 30, 2021.

11. DEFERRED COMPENSATION PLAN

The following table summarizes the deferred compensation plan balances on the Condensed Consolidated Balance Sheets (in thousands):

	September 30,		December 31,
	2021		2020
Deferred compensation plan asset components:
Cash surrender value of corporate-owned life insurance policies	$	20,722	$	19,222
Fair value of mutual funds and money market funds		29,919		26,924
Total	$	50,641	$	46,146

Deferred compensation plan assets reported in:
Other long-term assets	$	50,641	$	46,146

Deferred compensation plan liabilities reported in:
Accrued compensation and related benefits (short-term)	$	282	$	155
Other long-term liabilities		52,707		48,280
Total	$	52,989	$	48,435

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12. OTHER INCOME, NET

The components of other income, net, are as follows (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020
Interest income	$	3,050		$	2,311		$	8,102		$	7,073
Amortization of premium on available-for-sale securities		(1,305	)		(863	)		(3,231	)		(1,984	)
Gain (loss) on deferred compensation plan investments		(399	)		1,598			2,640			1,420
Foreign currency exchange loss		(171	)		(759	)		(544	)		(889	)
Other		(382	)		207			(556	)		360
Total	$	793		$	2,494		$	6,411		$	5,980

13. INCOME TAXES

The income tax provision or benefit for interim periods is generally determined using an estimate of the Company’s annual effective tax rate and adjusted for discrete items, if any, in the relevant period. Each quarter the estimate of the annual effective tax rate is updated, and if the Company’s estimated tax rate changes, a cumulative adjustment is made.

The income tax expense for the three months ended September 30, 2021 was $9.2 million, or 11.7% of pre-tax income. The income tax expense for the nine months ended September 30, 2021 was $20.9 million, or 11.0% of pre-tax income. The effective tax rates differed from the federal statutory rate primarily due to foreign income from the Company’s subsidiaries in Bermuda and China being taxed at lower statutory tax rates, the impact of federal tax credits from research and development activities, and excess tax benefits from stock-based compensation. The decrease in the effective tax rates relative to the federal statutory rate was partially offset by the inclusion of the global intangible low-taxed income (“GILTI”) tax.

The income tax expense for the three months ended September 30, 2020 was $6.9 million, or 11.1% of pre-tax income. The income tax expense for the nine months ended September 30, 2020 was $3.4 million, or 2.7% of pre-tax income. The effective tax rates differed from the federal statutory rate primarily due to excess tax benefits from stock-based compensation, and foreign income from the Company’s subsidiaries in Bermuda and China being taxed at lower statutory tax rates. The decrease in the effective tax rates relative to the federal statutory rate was partially offset by the inclusion of the GILTI tax.

The Company’s uncertain tax positions relate to the allocation of income and deductions among its global entities and to the determination of the research and development tax credit. Various events, some of which cannot be predicted, such as clarification of tax law by administrative or judicial means, may occur and would require the Company to increase or decrease its reserves and effective income tax rate over the next twelve months. However, it is not possible to determine either the magnitude or the range of increases or decreases at this time.

14. ACCUMULATED OTHER COMPREHENSIVE INCOME

The following table summarizes the changes in accumulated other comprehensive income (in thousands):

	Unrealized Gains (Loss) on Available- for-Sale Securities			Foreign Currency Translation Adjustments			Total
Balance as of January 1, 2021	$	1,601		$	8,539		$	10,140
Other comprehensive loss before reclassifications		(754	)		(2,474	)		(3,228	)
Amounts reclassified from accumulated other comprehensive income		(24	)		0			(24	)
Tax effect		124			0			124
Net current period other comprehensive loss		(654	)		(2,474	)		(3,128	)
Balance as of March 31, 2021		947			6,065			7,012
Other comprehensive income (loss) before reclassifications		(169	)		5,437			5,268
Tax effect		21			0			21
Net current period other comprehensive income (loss)		(148	)		5,437			5,289
Balance as of June 30, 2021		799			11,502			12,301
Other comprehensive loss before reclassifications		(287	)		(371	)		(658	)
Amounts reclassified from accumulated other comprehensive income		(13	)		0			(13	)
Tax effect		32			0			32
Net current period other comprehensive loss		(268	)		(371	)		(639	)
Balance as of September 30, 2021	$	531		$	11,131		$	11,662

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The amounts reclassified from accumulated other comprehensive income were recorded in other income, net, on the Condensed Consolidated Statements of Operations.

15. DIVIDENDS AND DIVIDEND EQUIVALENTS

Cash Dividend Program

The Company has a dividend program approved by the Board of Directors, pursuant to which the Company intends to pay quarterly cash dividends on its common stock. Based on the Company’s historical practice, stockholders of record as of the last business day of the quarter are entitled to receive the quarterly cash dividends when and if declared by the Board of Directors, which are payable to the stockholders in the following month. The Board of Directors declared the following cash dividends (in thousands, except per-share amounts):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Dividend declared per share	$	0.60	$	0.50	$	1.80	$	1.50
Total amount	$	27,606	$	22,508	$	82,501	$	67,239

As of September 30, 2021 and December 31, 2020, accrued dividends totaled $27.6 million and $22.6 million, respectively.

The declaration of any future cash dividends is at the discretion of the Board of Directors and will depend on, among other things, the Company’s financial condition, results of operations, capital requirements, business conditions, and other factors that the Board of Directors may deem relevant, as well as a determination that cash dividends are in the best interests of the stockholders.

The Company anticipates that cash used for future dividend payments will come from its domestic cash, cash generated from ongoing U.S. operations, and cash repatriated from its Bermuda subsidiary. The Company also anticipates that earnings from other foreign subsidiaries will continue to be indefinitely reinvested.

Cash Dividend Equivalent Rights

The Company's RSUs contain rights to receive cash dividend equivalents, which entitle employees who hold RSUs to the same dividend value per share as holders of common stock. The dividend equivalents are accumulated and paid to the employees when the underlying RSUs vest. Dividend equivalents accumulated on the underlying RSUs are forfeited if the employees do not fulfill the requisite service requirement and, as a result, the awards do not vest. As of September 30, 2021 and December 31, 2020, accrued dividend equivalents totaled $12.9 million and $11.7 million, respectively.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that have been made pursuant to and in reliance on the provisions of the Private Securities Litigation Reform Act of 1995. These statements include, among others, statements concerning:

•

the above-average industry growth of product and market areas that we have targeted,

•

our plan to increase our revenue through the introduction of new products within our existing product families as well as in new product categories and families,

•

our belief that we may incur significant legal expenses that vary with the level of activity in each of our current or future legal proceedings,

•

the effect that liquidity of our investments has on our capital resources,

•

the continuing application of our products in the computing and storage, automotive, industrial, communications and consumer markets,

•

estimates of our future liquidity requirements,

•

the cyclical nature of the semiconductor industry,

•

the effects of the COVID-19 pandemic on the global economy, the semiconductor industry and our business,

•

protection of our proprietary technology,

•

business outlook for the remainder of 2021 and beyond,

•

the factors that we believe will impact our business, operations and financial condition, as well as our ability to achieve revenue growth,

•

the percentage of our total revenue from various end markets,

•

our ability to identify, acquire and integrate companies, businesses and products, and achieve the anticipated benefits from such acquisitions and integrations,

•

the impact of various tax laws and regulations on our income tax provision, financial position and cash flows,

•

our plan to repatriate cash from our subsidiary in Bermuda,

•

our intention and ability to pay future cash dividends and dividend equivalents, and

•

the factors that differentiate us from our competitors.

In some cases, words such as “would,” “could,” “may,” “should,” “predict,” “potential,” “targets,” “continue,” “anticipate,” “expect,” “intend,” “plan,” “believe,” “seek,” “estimate,” “project,” “forecast,” “will,” the negative of these terms or other variations of such terms and similar expressions relating to the future identify forward-looking statements. All forward-looking statements are based on our current outlook, expectations, estimates, projections, beliefs and plans or objectives about our business and our industry, including our expectations regarding the potential impacts of the COVID-19 pandemic on our business. These statements are not guarantees of future performance and are subject to risks and uncertainties. Actual events or results could differ materially and adversely from those expressed in any such forward-looking statements. Risks and uncertainties that could cause actual results to differ materially include those set forth throughout this Quarterly Report on Form 10-Q and, in particular, in the section entitled “Item 1A. Risk Factors.” Except as required by law, we disclaim any duty to, and undertake no obligation to, update any forward-looking statements, whether as a result of new information relating to existing conditions, future events or otherwise or to release publicly the results of any future revisions we may make to forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. Readers are cautioned not to place undue reliance on such statements, which speak only as of the date of this Quarterly Report on Form 10-Q. Readers should carefully review future reports and documents that we file from time to time with the SEC, such as our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and any Current Reports on Form 8-K.

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Overview

We are a global company that provides high-performance, semiconductor-based power electronics solutions. Incorporated in 1997, our core strengths include deep system-level and applications knowledge, strong analog design expertise and innovative proprietary process technologies. These combined strengths enable us to deliver highly integrated monolithic products that offer energy-efficient, cost-effective, easy-to-use solutions for systems found in computing and storage, automotive, industrial, communications and consumer applications. Our mission is to reduce total energy consumption in our customers’ systems with green, practical and compact solutions. We believe that we differentiate ourselves by offering solutions that are more highly integrated, smaller in size, more energy-efficient, more accurate with respect to performance specifications and, consequently, more cost-effective than many competing solutions. We plan to continue to introduce new products within our existing product families, as well as in new innovative product categories.

We operate in the cyclical semiconductor industry where there is seasonal demand for certain products. We are not immune from current and future industry downturns, but we have targeted product and market areas that we believe have the ability to offer above average industry performance over the long term.

We work with third parties to manufacture and assemble our ICs. This has enabled us to limit our capital expenditures and fixed costs, while focusing our engineering and design resources on our core strengths.

Following the introduction of a product, our sales cycle generally takes a number of quarters after we receive an initial customer order for a new product to ramp up. Typical lead times for orders are generally 16 to 26 weeks. These factors, combined with the fact that orders in the semiconductor industry can typically be cancelled or rescheduled without significant penalty to the customer, make the forecasting of our orders and revenue difficult.

We derive most of our revenue from sales through distribution arrangements and direct sales to customers in Asia, where our products are incorporated into end-user products. Our revenue from direct or indirect sales to customers in Asia was 90% and 93% for the three months ended September 30, 2021 and 2020, respectively, and 90% and 91% for the nine months ended September 30, 2021 and 2020, respectively. We derive a majority of our revenue from the sales of our DC to DC converter products which serve the computing and storage, automotive, industrial, communications and consumer markets. We believe our ability to achieve revenue growth will depend, in part, on our ability to develop new products, enter new market segments, gain market share, manage litigation risk, diversify our customer base and continue to secure manufacturing capacity.

Impact of COVID-19 on Our Business

Our primary focus is to continue to execute our business plan and mitigate the effect of the COVID-19 pandemic on our financial position and operations, while actively taking all necessary precautions to ensure the safety of our employees, our suppliers and our customers. The pandemic did not materially and adversely impact our overall operating results or business operations during the three and nine months ended September 30, 2021. Some of the key developments and initiatives we implemented since the outbreak of the COVID-19 pandemic in March 2020 include, but are not limited to, the following:

●	Employees:

Our top priority during the pandemic is protecting the health and safety of our employees. As governments continue to institute new guidelines on commercial operations, we continue to monitor new developments and work to ensure our compliance while also maintaining business continuity for essential operations. In the U.S. and certain international locations, we continue to implement work-from-home arrangements in accordance with local regulations. To date, we believe these arrangements have contributed to the health and safety of our employees and allowed us to successfully maintain business operations and customer relations.

●	Facilities and Supply Chain:

Our manufacturing facilities in China, Taiwan and South Korea are fully operational and have experienced minimal disruptions, as we continue to follow the proper guidance issued by governmental authorities. In addition, we have not experienced any major supply chain disruptions as a result of the pandemic.

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●	Customers:

Overall, we did not experience an adverse impact on customer demand during the first nine months of 2021 as a result of the pandemic. Our revenue increased in all of our end markets compared to the same period in 2020. Furthermore, there were no significant delays in payments by our customers. However, we cannot provide assurance that we will not experience a material and adverse impact on customer demand for the remainder of 2021 as a result of the pandemic.

●	Liquidity and Capital Resources:

Our cash and investment balances remain strong and we continue to generate positive operating cash flows. We believe we have sufficient liquidity to satisfy our cash needs as we manage through the current uncertain environment. However, we will continue to monitor, evaluate and take action, as necessary, to preserve adequate liquidity to support our business for the remainder of 2021.

We are actively working with our stakeholders, including customers, suppliers and employees, to address the impact of the pandemic. We will continue to monitor the situation, to assess further possible implications to our business, supply chain and customers, and to take actions in an effort to mitigate adverse consequences. However, we cannot reasonably estimate the duration and severity of the pandemic or its ultimate impact on the global economy, the semiconductor industry and our business. A prolonged economic slowdown as a result of the pandemic could materially and adversely impact our business, results of operations and financial condition for the remainder of 2021 and beyond.

Cybersecurity Risk Management

We are committed to protecting our information technology (“IT”) assets, including computers, systems, corporate networks and sensitive data, from unauthorized access or attack. We have established an internal global IT policy handbook as well as IT security management control procedures designed to cover the following key areas:

●	Create information security awareness and define responsibilities among our employees and business partners;
●	Implement controls to identify IT risks and monitor the use of our systems and information resources;
●	Establish key policies and processes to adequately and timely respond to security threats;
●	Maintain disaster recovery and business continuity plans; and
●	Ensure compliance with applicable laws and regulations regarding the management of information security.

We require all new employees to attend an IT security training orientation. In addition, on an as-needed basis, our IT team provides trainings and updates to employees related to our policies and procedures.

Our IT Steering Committee, which consists of our senior management and IT team, meets on a regular basis to review initiatives and projects to improve IT security, as well as resources and budgets for our cybersecurity compliance and education efforts. We plan to complete the ISO 27001 certification, a globally recognized information security standard, by the end of 2021.

Our Audit Committee of the Board of Directors, which consists of three independent members, is responsible for the oversight of our cybersecurity risk program. On a regular basis, the Audit Committee reviews reports and updates from our Chief Financial Officer and IT senior management about major risk exposures, their potential impact on our business operations, and management’s strategies to assess, monitor and mitigate those risks. The Audit Committee also provides updates of their oversight and findings to the Board of Directors.

We believe we have adequate resources and sufficient policies, procedures and oversight in place to identify and manage our IT security risks to our business operations. To date, we have not experienced any material information security breaches or incurred significant operating expenses related to information security breaches.

Critical Accounting Policies and Estimates

In preparing our condensed consolidated financial statements in accordance with GAAP, we are required to make estimates, assumptions and judgments that affect the amounts reported in our financial statements and the accompanying disclosures. Estimates and judgments used in the preparation of our condensed consolidated financial statements are, by their nature, uncertain and unpredictable, and depend upon, among other things, many factors outside of our control, including demand for our products, economic conditions and other current and future events, such as the impact of the COVID-19 pandemic. As of the date of issuance of these condensed consolidated financial statements, we are not aware of any specific event or circumstance that would require our management to update the significant estimates and assumptions used in the preparation of the condensed consolidated financial statements, as compared to those disclosed in the Annual Report on Form 10-K for the year ended December 31, 2020. As new events continue to evolve and additional information becomes available, any changes to these estimates and assumptions will be recognized in the condensed consolidated financial statements as soon as they become known. Actual results could differ from these estimates and assumptions, and any such differences may be material to our condensed consolidated financial statements.

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Results of Operations

The table below sets forth the data on the Condensed Consolidated Statements of Operations as a percentage of revenue:

	Three Months Ended September 30,								Nine Months Ended September 30,
	2021				2020				2021				2020
	(in thousands, except percentages)
Revenue	$	323,522	100.0	%	$	259,422	100.0	%	$	871,294	100.0	%	$	611,409	100.0	%
Cost of revenue		137,211	42.4			116,382	44.9			379,709	43.6			274,329	44.9
Gross profit		186,311	57.6			143,040	55.1			491,585	56.4			337,080	55.1
Operating expenses:
Research and development		49,468	15.3			37,717	14.5			136,113	15.6			95,346	15.6
Selling, general and administrative		56,291	17.4			43,503	16.8			164,982	18.9			116,550	19.1
Litigation expense		3,421	1.0			1,841	0.7			6,645	0.8			6,264	1.0
Total operating expenses		109,180	33.7			83,061	32.0			307,740	35.3			218,160	35.7
Income from operations		77,131	23.9			59,979	23.1			183,845	21.1			118,920	19.4
Other income, net		793	0.2			2,494	1.0			6,411	0.7			5,980	1.0
Income before income taxes		77,924	24.1			62,473	24.1			190,256	21.8			124,900	20.4
Income tax expense		9,154	2.8			6,907	2.7			20,904	2.4			3,412	0.5
Net income	$	68,770	21.3	%	$	55,566	21.4	%	$	169,352	19.4	%	$	121,488	19.9	%

Revenue

The following table summarizes our revenue by end market:

	Three Months Ended September 30,													Nine Months Ended September 30,
End Market	2021		% of Revenue			2020		% of Revenue			Change			2021		% of Revenue			2020		% of Revenue			Change
	(in thousands, except percentages)
Computing and storage	$	98,601		30.5	%	$	75,301		29.0	%		30.9	%	$	253,819		29.1	%	$	191,345		31.3	%		32.6	%
Automotive		54,416		16.8			28,512		11.0			90.9	%		147,982		17.0			69,603		11.4			112.6	%
Industrial		52,185		16.1			30,658		11.8			70.2	%		135,296		15.5			82,487		13.5			64.0	%
Communications		44,687		13.8			54,705		21.1			(18.3)	%		118,215		13.6			112,670		18.4			4.9	%
Consumer		73,633		22.8			70,246		27.1			4.8	%		215,982		24.8			155,304		25.4			39.1	%
Total	$	323,522		100.0	%	$	259,422		100.0	%		24.7	%	$	871,294		100.0	%	$	611,409		100.0	%		42.5	%

Revenue for the three months ended September 30, 2021 was $323.5 million, an increase of $64.1 million, or 24.7%, from $259.4 million for the three months ended September 30, 2020. Overall unit shipments increased by 22% and average sales prices increased by approximately 2% compared to the same period in 2020. The increase in average sales prices was primarily driven by favorable changes in product mix with more sales coming from products with higher unit prices.

For the three months ended September 30, 2021, revenue from the computing and storage market increased $23.3 million, or 30.9%, from the same period in 2020. This increase was primarily driven by strength in the high-performance notebook and storage markets. Revenue from the automotive market increased $25.9 million, or 90.9%, from the same period in 2020. This increase was primarily driven by sales growth for infotainment, lighting and advanced driver assistance system applications. Revenue from the industrial market increased $21.5 million, or 70.2%, from the same period in 2020. This increase was primarily driven by higher sales in power source and security products. Revenue from the communications market decreased $10.0 million, or 18.3%, from the same period in 2020. The decrease was primarily due to higher networking product sales during the three months ended September 30, 2020, as certain China-based customers requested shipments previously scheduled for future dates be fulfilled in the quarter. Revenue from the consumer market increased $3.4 million, or 4.8%, from the same period in 2020. This increase was primarily driven by increased sales for appliances, which was partially offset by decreased sales for gaming and mobile devices.

Revenue for the nine months ended September 30, 2021 was $871.3 million, an increase of $259.9 million, or 42.5%, from $611.4 million for the nine months ended September 30, 2020. Overall unit shipments increased by 28% and average sales prices increased by approximately 11% compared to the same period in 2020. The increase in average sales prices was primarily driven by favorable changes in product mix with more sales coming from products with higher unit prices.

For the nine months ended September 30, 2021, revenue from the computing and storage market increased $62.5 million, or 32.6%, from the same period in 2020. This increase was primarily driven by strength in the high-performance notebook and storage markets. Revenue from the automotive market increased $78.4 million, or 112.6%, from the same period in 2020. This increase was primarily driven by sales growth for infotainment, lighting and advanced driver assistance system applications. In addition, the automotive market was negatively impacted by the COVID-19 pandemic during the second quarter of 2020, which resulted in temporary production shutdowns by certain OEMs. Revenue from the industrial market increased $52.8 million, or 64.0%, from the same period in 2020. This increase was primarily driven by higher sales in power source and security products. Revenue from the communications market increased $5.5 million, or 4.9%, from the same period in 2020. This increase was primarily driven by increased wireless product sales. Revenue from the consumer market increased $60.7 million, or 39.1%, from the same period in 2020. This increase was primarily driven by increased sales for appliances, gaming and mobile devices.

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Cost of Revenue and Gross Margin

Cost of revenue primarily consists of costs incurred to manufacture, assemble and test our products, as well as warranty costs, inventory-related and other overhead costs, and stock-based compensation expenses.

	Three Months Ended September 30,									Nine Months Ended September 30,
	2021			2020			Change			2021			2020			Change
	(in thousands, except percentages)
Cost of revenue	$	137,211		$	116,382			17.9	%	$	379,709		$	274,329			38.4	%
As a percentage of revenue		42.4	%		44.9	%					43.6	%		44.9	%
Gross profit	$	186,311		$	143,040			30.3	%	$	491,585		$	337,080			45.8	%
Gross margin		57.6	%		55.1	%					56.4	%		55.1	%

Cost of revenue was $137.2 million, or 42.4% of revenue, for the three months ended September 30, 2021, and $116.4 million, or 44.9% of revenue, for the three months ended September 30, 2020. The $20.8 million increase in cost of revenue was primarily due to a 22% increase in overall unit shipments, which was partially offset by the impact of a 2% decrease in the average direct cost of units shipped. The increase in cost of revenue was also driven by an increase in warranty expenses, which was partially offset by a one-time benefit of $4.0 million from a litigation settlement.

Gross margin was 57.6% for the three months ended September 30, 2021, compared with 55.1% for the three months ended September 30, 2020. The increase in gross margin was mainly driven by increased sales of products with higher margins, lower manufacturing overhead costs and a one-time benefit of $4.0 million from a litigation settlement as a percentage of revenue, which was partially offset by an increase in warranty expenses as a percentage of revenue.

Cost of revenue was $379.7 million, or 43.6% of revenue, for the nine months ended September 30, 2021, and $274.3 million, or 44.9% of revenue, for the nine months ended September 30, 2020. The $105.4 million increase in cost of revenue was primarily due to a 28% increase in overall unit shipments and an 8% increase in the average direct cost of units shipped. The increase in cost of revenue was also driven by an increase in manufacturing overhead costs, warranty expenses and inventory write-downs, which was partially offset by a one-time benefit of $4.0 million from a litigation settlement.

Gross margin was 56.4% for the nine months ended September 30, 2021, compared with 55.1% for the nine months ended September 30, 2020. The increase in gross margin was mainly driven by a favorable product mix, lower manufacturing overhead costs and a one-time benefit of $4.0 million from a litigation settlement as a percentage of revenue, which was partially offset by higher warranty expenses as a percentage of revenue.

Research and Development (“R&D”)

R&D expenses primarily consist of salary and benefit expenses, bonuses, stock-based compensation and deferred compensation for design and product engineers, expenses related to new product development and supplies, and facility costs.

	Three Months Ended September 30,									Nine Months Ended September 30,
	2021			2020			Change			2021			2020			Change
	(in thousands, except percentages)
R&D expenses	$	49,468		$	37,717			31.2	%	$	136,113		$	95,346			42.8	%
As a percentage of revenue		15.3	%		14.5	%					15.6	%		15.6	%

R&D expenses were $49.5 million, or 15.3% of revenue, for the three months ended September 30, 2021, and $37.7 million, or 14.5% of revenue, for the three months ended September 30, 2020. The $11.8 million increase in R&D expenses was primarily due to an increase of $5.7 million in cash compensation expenses, which include salary, benefits and bonuses, an increase of $1.9 million in new product development expenses, and an increase of $1.3 million in stock-based compensation expenses, which were mainly associated with performance-based equity awards. Our R&D headcount was 1,059 employees as of September 30, 2021, compared with 920 employees as of September 30, 2020.

R&D expenses were $136.1 million, or 15.6% of revenue, for the nine months ended September 30, 2021, and $95.3 million, or 15.6% of revenue, for the nine months ended September 30, 2020. The $40.8 million increase in R&D expenses was primarily due to an increase of $16.6 million in cash compensation expenses, which include salary, benefits and bonuses, an increase of $7.6 million in new product development expenses, and an increase of $4.9 million in stock-based compensation expenses, which were mainly associated with performance-based equity awards.

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Selling, General and Administrative (“SG&A”)

SG&A expenses primarily include salary and benefit expenses, bonuses, stock-based compensation and deferred compensation for sales, marketing and administrative personnel, sales commissions, travel expenses, facilities costs, and professional service fees.

	Three Months Ended September 30,									Nine Months Ended September 30,
	2021			2020			Change			2021			2020			Change
	(in thousands, except percentages)
SG&A expenses	$	56,291		$	43,503			29.4	%	$	164,982		$	116,550			41.6	%
As a percentage of revenue		17.4	%		16.8	%					18.9	%		19.1	%

SG&A expenses were $56.3 million, or 17.4% of revenue, for the three months ended September 30, 2021, and $43.5 million, or 16.8% of revenue, for the three months ended September 30, 2020. The $12.8 million increase in SG&A expenses was primarily due to an increase of $7.1 million in stock-based compensation expenses, which were mainly associated with performance-based equity awards, and an increase of $6.3 million in cash compensation expenses, which include salary, benefits and bonuses. The increase was partially offset by an increase of $1.2 million in income related to changes in the value of the deferred compensation plan liabilities. Our SG&A headcount was 649 employees as of September 30, 2021, compared with 552 employees as of September 30, 2020.

SG&A expenses were $165.0 million, or 18.9% of revenue, for the nine months ended September 30, 2021, and $116.6 million, or 19.1% of revenue, for the nine months ended September 30, 2020. The $48.4 million increase in SG&A expenses was primarily due to an increase of $24.1 million in stock-based compensation expenses, which were mainly associated with performance-based equity awards, and an increase of $17.9 million in cash compensation expenses, which include salary, benefits and bonuses.

Litigation Expense

Litigation expense was $3.4 million for the three months ended September 30, 2021, compared with $1.8 million for the three months ended September 30, 2020. The increase was due to an increase in litigation activity related to ongoing patent infringement and other matters.

Litigation expense was $6.6 million for the nine months ended September 30, 2021, compared with $6.3 million for the nine months ended September 30, 2020. The increase was due to an increase in litigation activity related to ongoing patent infringement and other matters.

Other Income, Net

Other income, net, was $0.8 million for the three months ended September 30, 2021, compared with other income, net, of $2.5 million for the three months ended September 30, 2020. The decrease was primarily due to an increase of $2.0 million in expenses related to changes in the value of the deferred compensation plan investments, which was partially offset by an increase of $0.7 million in interest income primarily as a result of higher investment balances and higher yield on certain investments.

Other income, net, was $6.4 million for the nine months ended September 30, 2021, compared with other income, net, of $6.0 million for the nine months ended September 30, 2020. The increase was primarily due to an increase of $1.2 million in income related to changes in the value of the deferred compensation plan investments and an increase of $1.0 million in interest income primarily as a result of higher investment balances and higher yield on certain investments, which was partially offset by an increase of $1.2 million in amortization of the premium on available-for-sale securities.

Income Tax Expense

The income tax provision or benefit for interim periods is generally determined using an estimate of our annual effective tax rate and adjusted for discrete items, if any, in the relevant period. Each quarter the estimate of the annual effective tax rate is updated, and if our estimated tax rate changes, a cumulative adjustment is made.

The income tax expense for the three months ended September 30, 2021 was $9.2 million, or 11.7% of pre-tax income. The income tax expense for the nine months ended September 30, 2021 was $20.9 million, or 11.0% of pre-tax income. The effective tax rates differed from the federal statutory rate primarily due to foreign income from our subsidiaries in Bermuda and China being taxed at lower statutory tax rates, the impact of federal tax credits from research and development activities, and excess tax benefits from stock-based compensation. The decrease in the effective tax rates relative to the federal statutory rate was partially offset by the inclusion of the GILTI tax.

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The income tax expense for the three months ended September 30, 2020 was $6.9 million, or 11.1% of pre-tax income. The income tax expense for the nine months ended September 30, 2020 was $3.4 million, or 2.7% of pre-tax income. The effective tax rates differed from the federal statutory rate primarily due to excess tax benefits from stock-based compensation, and foreign income from our subsidiaries in Bermuda and China being taxed at lower statutory tax rates. The decrease in the effective tax rates relative to the federal statutory rate was partially offset by the inclusion of the GILTI tax

Liquidity and Capital Resources

	September 30,			December 31,
	2021			2020
	(in thousands, except percentages)
Cash and cash equivalents	$	226,091		$	334,944
Short-term investments		515,947			260,169
Total cash, cash equivalents and short-term investments	$	742,038		$	595,113
Percentage of total assets		49.6	%		49.2	%

Total current assets	$	1,064,494		$	841,998
Total current liabilities		(227,663	)		(146,969	)
Working capital	$	836,831		$	695,029

As of September 30, 2021, we had cash and cash equivalents of $226.1 million and short-term investments of $515.9 million, compared with cash and cash equivalents of $334.9 million and short-term investments of $260.2 million as of December 31, 2020. As of September 30, 2021, $137.7 million of cash and cash equivalents and $293.2 million of short-term investments were held by our international subsidiaries. For the nine months ended September 30, 2021, we repatriated $70 million of cash from our Bermuda subsidiary to the U.S. We may repatriate additional cash from our Bermuda subsidiary to fund our expenditures in future periods. We anticipate that earnings from other foreign subsidiaries will continue to be indefinitely reinvested.

The significant components of our working capital are cash and cash equivalents, short-term investments, accounts receivable, inventories and other current assets, reduced by accounts payable, accrued compensation and related benefits, and other accrued liabilities. As of September 30, 2021, we had working capital of $836.8 million, compared with working capital of $695.0 million as of December 31, 2020. The $141.8 million increase in working capital was due to a $222.5 million increase in current assets, which was partially offset by an $80.7 million increase in current liabilities. The increase in current assets was primarily due to an increase in short-term investments, accounts receivable and inventories, which was partially offset by a decrease in cash and cash equivalents. The increase in current liabilities was due to an increase in accounts payable, accrued compensation and related benefits and other accrued liabilities.

Summary of Cash Flows

The following table summarizes our cash flow activities:

	Nine Months Ended September 30,
	2021			2020
	(in thousands)
Net cash provided by operating activities	$	291,804		$	188,155
Net cash used in investing activities		(339,138	)		(133,437	)
Net cash used in financing activities		(62,957	)		(49,638	)
Effect of change in exchange rates		1,431			1,432
Net increase (decrease) in cash, cash equivalents and restricted cash	$	(108,860	)	$	6,512

For the nine months ended September 30, 2021, net cash provided by operating activities was $291.8 million, primarily due to our net income adjusted for certain non-cash items, including depreciation and amortization and stock-based compensation, and a net increase of $8.2 million from the changes in our operating assets and liabilities. The increase in accounts receivable was driven by increased sales and timing of shipments during the three months ended September 30, 2021. The increase in inventories was primarily driven by an increase in wafer and die inventories to meet current demand and future growth. The increase in accounts payable was primarily driven by increased inventory purchases to meet future demand. The increase in other accrued liabilities was primarily due to an increase in warranty expenses and deferred compensation liabilities. For the nine months ended September 30, 2020, net cash provided by operating activities was $188.2 million, primarily due to our net income adjusted for certain non-cash items, including depreciation and amortization and stock-based compensation, and a net decrease of $13.7 million from the changes in our operating assets and liabilities. The increase in accounts receivable was driven by increased sales during the three months ended September 30, 2020. The increase in inventories was primarily driven by an increase in wafer and die inventories to meet current demand and future growth. The increase in accounts payable was primarily driven by increased inventory purchases to meet future demand.

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For the nine months ended September 30, 2021, net cash used in investing activities was $339.1 million, primarily due to net purchases of short-term investments of $260.0 million and purchases of property and equipment of $76.8 million. For the nine months ended September 30, 2020, net cash used in investing activities was $133.4 million, primarily due to purchases of property and equipment of $44.2 million and net purchases of short-term investments of $88.4 million.

For the nine months ended September 30, 2021, net cash used in financing activities was $63.0 million, primarily reflecting $80.7 million used to pay dividends to our stockholders and dividend equivalents to our employees who hold RSUs, which was partially offset by $19.8 million of cash proceeds from the vesting of RSUs and the issuance of shares through our ESPP. For the nine months ended September 30, 2020, net cash used in financing activities was $49.6 million, primarily reflecting $65.5 million used to pay dividends to our stockholders and dividend equivalents to our employees who hold RSUs, which was partially offset by $20.3 million of cash proceeds from the vesting of RSUs and the issuance of shares through our ESPP.

We anticipate that cash used for future dividends and dividend equivalent payments, as well as payments for the one-time deemed repatriation transition tax and other expenditures, will come from our domestic cash, cash generated from ongoing U.S. operations, and cash repatriated from our Bermuda subsidiary. Earnings from other foreign subsidiaries will continue to be indefinitely reinvested.

Although consequences of any economic uncertainty could adversely affect our liquidity and capital resources in the future, and cash requirements may fluctuate based on the timing and extent of many factors such as those discussed above, we currently believe that cash generated from operations, together with the liquidity provided by existing cash balances and short-term investments, will be sufficient to satisfy our liquidity requirements for the next 12 months.

In the future, in order to strengthen our financial position, respond to adverse developments, changes in our circumstance or unforeseen events or conditions, or fund our growth, we may need to discontinue paying dividends and dividend equivalents, and may need to raise additional funds by any one or a combination of the following: issuing equity securities, issuing debt or convertible debt securities, incurring indebtedness secured by our assets, or selling certain product lines and/or portions of our business. Accordingly, we cannot ensure that we will continue to pay dividends and dividend equivalents in the future, and there can be no guarantee that we will be able to raise additional funds on terms acceptable to us, or at all.

From time to time, we have engaged in discussions with third parties concerning capital investments and potential acquisitions of product lines, technologies, businesses and companies, and we continue to consider potential investments and acquisition candidates. Any such transactions could involve the issuance of a significant number of new equity securities, assumptions of debt, and/or payment of cash consideration. We may also be required to raise additional funds to complete any such investments or acquisitions, through either the issuance of equity and debt securities or incurring indebtedness secured by our assets. If we raise additional funds or acquire businesses or technologies through the issuance of equity securities or convertible debt securities, our existing stockholders may experience significant dilution.

Contractual Obligations

Our outstanding purchase commitments represent our obligations with our suppliers and other parties that require the future purchases of goods or services, which primarily consist of wafer and other inventory purchases, assembly and other manufacturing services, construction or purchases of property and equipment, and license arrangements. As of September 30, 2021, the outstanding balance under our purchase commitments was $197.8 million.

Under the U.S. Tax Cuts and Jobs Act enacted in December 2017 (the “2017 Tax Act”), we have a transition tax liability which represents a one-time, mandatory deemed repatriation tax imposed on previously deferred foreign earnings. As permitted by the 2017 Tax Act, we elected to pay the tax liability in installments on an interest-free basis through 2025. As of September 30, 2021, the outstanding liability was $16.8 million.

Our other long-term obligations include long-term liabilities reflected on our Condensed Consolidated Balance Sheets, which primarily consist of the deferred compensation plan liabilities and accrued dividend equivalents. As of September 30, 2021, the outstanding long-term obligations were $64.5 million.

Other contractual obligations have not changed significantly from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2020.

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Off-Balance Sheet Arrangements

As of September 30, 2021, we had no off-balance sheet arrangements as defined in Item 303(a)(4) of the SEC’s Regulation S-K.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

For a discussion of market risks, refer to Item 7A, “Quantitative and Qualitative Disclosures about Market Risk” in our Annual Report on Form 10-K for the year ended December 31, 2020. During the three and nine months ended September 30, 2021, there were no material changes or developments that would materially alter the market risk assessment performed as of December 31, 2020.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15(e) and Rule 15d-15(e) under the Securities Exchange Act of 1934 as of the end of the period covered by this Quarterly Report on Form 10-Q.

Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of September 30, 2021, our disclosure controls and procedures are designed at a reasonable assurance level and are effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the quarter ended September 30, 2021, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

As a result of the COVID-19 pandemic, we continue to implement work-from-home arrangements in accordance with local shelter-in-place orders and other governmental restrictions in the United States and certain international locations during the three months ended September 30, 2021. We have reviewed our financial reporting process and business continuity plans in order to mitigate the impact to our control environment, operating procedures, and data. We believe that our internal controls over financial reporting continue to be effective.

Limitations on Effectiveness of Controls and Procedures

In designing and evaluating the disclosure controls and procedures, management recognizes that any set of controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are a party to actions and proceedings in the ordinary course of business, including potential litigation initiated by our stockholders, challenges to the enforceability or validity of our intellectual property, claims that our products infringe on the intellectual property rights of others, and employment matters. These proceedings often involve complex questions of fact and law and may require the expenditure of significant funds and the diversion of other resources to prosecute and defend. We defend ourselves vigorously against any such claims. As of September 30, 2021, there were no material pending legal proceedings to which we were a party.

ITEM 1A. RISK FACTORS

Our business involves numerous risks and uncertainties. You should carefully consider the risks described below, together with all of the other information in this Quarterly Report on Form 10-Q and other filings with the SEC in evaluating our business. If any of the following risks actually occur, our business, financial condition, operating results, and growth prospects would likely be materially and adversely affected. In such an event, the trading price of our common stock could decline, and you could lose all or part of your investment in our common stock. Our past financial performance should not be considered to be a reliable indicator of future performance, and investors should not use historical trends to anticipate results or trends in future periods. These risks involve forward-looking statements and our actual results may differ substantially from those discussed in these forward-looking statements.

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Risk Factors Summary

The following summary description sets forth an overview of the material risks we are exposed to in the normal course of our business activities. The summary does not purport to be complete and is qualified in its entirety by reference to the full risk factor discussion immediately following this summary description. We encourage you to read the full risk factor discussion carefully.

Our revenue and expenses are difficult to predict, have varied significantly in the past and will continue to fluctuate significantly in the future due to numerous risks and uncertainties, many of which are beyond our control. As a result, we may not be profitable on a quarterly or annual basis. Our business, results of operations and financial condition, as well as your investment in our common stock, could be materially and adversely affected by any of the following material risks:

•	the effect of epidemics and pandemics, such as the COVID-19 pandemic, on our business;

•	changes in general economic conditions in the countries where our products are sold or used, particularly in China;

•	our dependence on the Asian markets for our customer base and our significant manufacturing operations in China, which may expose us to political, cultural, regulatory, economic, foreign currency and operational risks;

•	the impact of extensive Chinese government regulation on us and our manufacturing partners;

•	changes in international trade policy, such as tariffs on imports of foreign goods and regulations restricting the export of goods and services, between the U.S. and China;

•	adverse movements in foreign exchange rates, including the Renminbi;

•	our ability to experience growth rates comparable to past years;

•	changes in general demand for electronic products as a result of worldwide macroeconomic conditions, and the seasonality and variability in the end markets that we serve;

•	our ability to accurately forecast sales and expenses due to the nature of our business as a component supplier;

•	our and our competitors’ ability to timely develop and introduce new products, and the acceptance of our new products in the marketplace;

•	our dependency on a limited number of customers, including distributors, for a significant portion of our revenue;

•	potential product liability risks due to defects or failures to meet specifications;

•	lengthy sales cycles for our products balanced against the fixed nature of a substantial portion of our expenses;

•	availability of adequate manufacturing capacity from our suppliers, and our ability to increase product sales and revenue in spite of capacity issues;

•	increases in unanticipated costs as a result of increasing manufacturing capacity;

•	our dependency on third-party suppliers for wafer purchases and potential increases in prices for wafers due to general capacity shortages;

•	our ability to deliver products on a timely basis due to disruptions in our relationships with assembly and test subcontractors;

•	our ability to manage our inventory levels, including the levels of inventory held by our distributors;

•	increases in manufacturing costs due to commodity price increases;

•	the highly cyclical nature of the semiconductor industry, and increased competition due to industry consolidation;

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•	competition from companies with greater financial and technological resources and customers developing products internally;

•	the impact of system upgrades, cyber attacks or other system security, data protection and privacy breaches on our business operations;

•	our significant investment of resources on research and development;

•	our ability to realize the anticipated benefits of any business acquisitions and other strategic investments;

•	risks associated with financial reporting, including the impact of new tax laws on our tax provision and tax planning;

•	our failure to comply with various governmental laws and regulations;

•	our ability to successfully defend ourselves in legal proceedings and protect our intellectual property, and the significant increase in legal expenses as a result of such proceedings;

•	the loss of key personnel; and

•	risks associated with owning our stock, including volatility in our trading price due to our business and financial performance, analyst downgrades, elimination of our dividend program, and dilution from issuance of additional shares.

Risks Associated with Global Pandemics on Our Business

The effects of global pandemics such as COVID-19 could adversely affect our business, results of operations and financial condition.

We face various risks related to epidemics and pandemics, including the global outbreak of COVID-19 first identified in December 2019. In March 2020, the World Health Organization characterized the COVID-19 outbreak as a pandemic. Since then, governments around the world have imposed various mandatory measures and the private sectors have taken actions in an effort to combat the spread of the disease, such as travel restrictions, quarantines and business shutdowns. In addition, the U.S. government has declared a state of emergency or similar disaster declaration, and many states, including Washington and California where we have substantial operations, have enacted shelter-in-place or similar restrictive orders. These events have led to significant disruptions and uncertainties in the global economy and in the financial markets, which could materially and adversely affect our financial condition and results of operations. Uncertainties regarding the economic impact of the pandemic is likely to result in sustained market turmoil and could adversely impact the semiconductor industry, which could in turn negatively and materially impact our business, financial condition and results of operations.

The extent of the impact of the pandemic on our operational and financial performance will depend on numerous evolving developments, including the duration and magnitude of the pandemic, and the effects on our customers, employees, suppliers and other partners, all of which are uncertain and difficult to predict at this time. The ongoing outbreak could exacerbate the adverse impact on our business, which may include:

•	unpredictability in demand, pricing and costs for our products, and losses of significant contracts or key customers as a result of a global economic downturn caused by the pandemic;

•	our ability to accurately forecast our results of operation, including products sales and market demand for our products;

•	negative impacts on our business operations, including reductions or delays in production levels, qualification activities with our customers, and valuation of our inventory due to changes in forecasted demand and our outlook on market conditions;

•	disruptions to our distribution channels and supply chain in connection with the sourcing of materials from geographic areas that have been impacted by the pandemic;

•	facility closures and increased costs resulting from work-from-home and other measures we have enacted at certain of our locations around the world to mitigate the impact of the pandemic and protect our employees' health and well-being; and

•	losses on our investments due to defaults on payments by the issuers, write-offs of our accounts receivable due to defaults and insolvency, or significant delays in payments by our customers.

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We are working with our stakeholders, including customers, suppliers and employees, to address the impact of this global pandemic. We continue to monitor the situation, to assess further possible implications to our business, supply chain and customers, and to take actions in an effort to mitigate adverse consequences. The resumption of normal business operations may be delayed or constrained by lingering effects of the pandemic (including limitations imposed by governmental authorities on our ability to return to normal operating practices). These effects, alone or taken together, could have a material adverse impact on our business, results of operations or financial condition.

Risks Associated with Our Significant Operations in Asia, in Particular China

Our business has been and may be significantly impacted by worldwide economic conditions, in particular changing economic conditions in China.

In recent years, global credit and financial markets experienced disruptions, and may experience disruptions in the future, including diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates, and uncertainty about economic stability. Economic uncertainty affects businesses such as ours in a number of ways, making it difficult to accurately forecast and plan our future business activities. The tightening of credit in financial markets may lead consumers and businesses to postpone spending, which may cause our customers to cancel, decrease or delay their existing and future orders with us. In addition, financial difficulties experienced by our suppliers or distributors could result in product delays, increased accounts receivable defaults and inventory challenges. Volatility in the credit markets could severely diminish liquidity and capital availability.

Demand for our products is a function of the health of the economies in the United States, Europe, China and the rest of Asia. We cannot predict the timing, strength or duration of any economic disruptions, such as those resulting from the COVID-19 pandemic, or subsequent economic recovery worldwide, in our industry, or in the different markets that we serve. We also may not accurately assess the impact of changing market and economic conditions on our business and operations. These and other economic factors have had, and may in the future have, a material adverse effect on demand for our products and on our financial condition and operating results.

In particular, since we have significant operations in China, our business development plans, results of operations and financial condition may be materially and adversely affected by significant political, social and economic developments in China. A slowdown in economic growth in China could adversely impact our customers, prospective customers, suppliers, distributors and partners in China, which could have a material adverse effect on our results of the operations and financial condition. There is no guarantee that economic downturns, whether actual or perceived, any further decrease in economic growth rates or an otherwise uncertain economic outlook in China will not occur or persist in the future, that they will not be protracted, or that governments will respond adequately to control and reverse such conditions, any of which could materially and adversely affect our business, financial condition and results of operations.

We derive most of our revenue from direct or indirect sales to customers in Asia and have significant operations in Asia, which may expose us to political, cultural, regulatory, economic, foreign exchange, and operational risks.

We derive most of our revenue from customers located in Asia through direct sales or indirect sales through distribution arrangements and value-added reseller agreements with parties located in Asia. As a result, we are subject to increased risks due to this geographic concentration of business and operations. For both the three and nine months ended September 30, 2021, 90% of our revenue was from customers in Asia. There are risks inherent in doing business in Asia, and internationally in general, including:

•	changes in, or impositions of, legislative or regulatory requirements, including tax laws in the U.S. and in the countries in which we manufacture or sell our products, and government action to restrict our ability to sell to foreign customers where sales of products may require export license;

•	trade restrictions, including restrictions imposed by the United States on trading with parties in foreign countries;

•	currency exchange rate fluctuations impacting intra-company transactions;

•	the fluctuations in the value of the U.S. Dollar relative to other foreign currencies, which could affect the competitiveness of our products;

•	transportation delays;

•	changes in tax regulations in China that may impact our tax status in Chengdu, Hangzhou and other regions where we have significant operations;

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•	tariffs imposed by China and the United States that may impact our sales;

•	export controls, trade and economic sanctions and regulations, and other regulatory or contractual limitations on our ability to sell or develop our products in China;

•	multi-tiered distribution channels that lack visibility to end customer pricing and purchase patterns;

•	international political relationships and threats of war;

•	terrorism and threats of terrorism;

•	epidemics and illnesses, such as the COVID-19 pandemic;

•	work stoppages and infrastructure problems due to adverse weather conditions or natural disasters;

•	work stoppages related to employee dissatisfaction;

•	economic, social and political instability;

•	longer accounts receivable collection cycles and difficulties in collecting accounts receivables;

•	enforcing contracts generally; and

•	less effective protection of intellectual property and contractual arrangements.

If we fail to expand our customer base and significantly reduce the geographic concentration of our customers, we will continue to be subject to the foregoing risks, which could materially and adversely affect our business, financial condition and results of operations.

We and our manufacturing partners are or will be subject to extensive Chinese government regulation, and the benefit of various incentives from Chinese governments that we and our manufacturing partners receive may be reduced or eliminated, which could increase our costs or limit our ability to sell products and conduct activities in China.

We have manufacturing and testing facilities in China and most of our manufacturing partners are located in China. The Chinese government has broad discretion and authority to regulate the technology industry in China. Additionally, China’s government has implemented policies from time to time to regulate economic expansion in China. It exercises significant control over China’s economic growth through the allocation of resources, controlling payment of foreign currency-denominated obligations, setting monetary policy and providing preferential treatment to particular industries or companies. Since the legal system in China continues to rapidly evolve, the interpretations of many laws and regulations are not always uniform and enforcement of these laws and regulations involves uncertainties. Any new laws or regulations related to, among other things, foreign investment and manufacturing could have a material adverse effect on our ability to operate our business in China.

Personal privacy, cyber security, and data protection are becoming increasingly significant issues in China. To address these issues, the Standing Committee of the National People’s Congress promulgated the Cyber Security Law of the People’s Republic of China (the “Cyber Security Law”), which took effect on June 1, 2017. The Cyber Security Law sets forth various requirements relating to the collection, use, storage, disclosure and security of data, among other things. On June 10, 2021, the National People’s Congress passed the Data Security Law of the People’s Republic of China (the “Data Security Law”), which became effective on September 1, 2021. The Data Security Law is the first comprehensive data security legislation in China, which becomes a key supplement to the Cyber Security Law and aims to regulate a wide range of issues in relation to the collection, storage, processing, use, provision, transaction and publication of any kind of data. Various Chinese agencies are expected to issue additional regulations in the future to define these requirements more precisely. These requirements may increase our costs of compliance. We cannot assure you that we will be able to comply with all of these regulatory requirements. Any failure to comply with the Cyber Security Law, the Data Security Law or the relevant regulations and policies could result in further cost and liability to us and could adversely affect our business and results of operations. Additionally, increased costs to comply with, and other burdens imposed by, the Cyber Security Law, the Data Security Law or relevant regulations and policies that are applicable to the businesses of our suppliers, vendors and other service providers, as well as our customers, could adversely affect our business and results of operations.

Any additional new regulations or the amendment or modification of previously implemented regulations could require us and our manufacturing partners to change our business plans, increase our costs, or limit our ability to sell products and conduct activities in China, which could adversely affect our business and operating results.

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The Chinese government and provincial and local governments also have provided, and continue to provide, various incentives to encourage the development of the semiconductor industry in China. Such incentives include tax rebates, reduced tax rates, favorable lending policies and other measures, some or all of which may be available to our manufacturing partners and to us with respect to our facilities in China. Any of these incentives could be reduced or eliminated by governmental authorities at any time. Any such reduction or elimination of incentives currently provided to us and our manufacturing partners could adversely affect our business and operating results.

There are inherent risks associated with the operation of our manufacturing and testing facilities in China, which could increase product costs or cause a delay in product shipments.

We have manufacturing and testing facilities in China. We face the following risks, among others, with respect to our operations in China:

•	inability to hire and maintain a qualified workforce;

•	inability to maintain appropriate and acceptable manufacturing controls; and

•	higher than anticipated overhead and other costs of operation.

If we are unable to maintain our facilities in China at fully operational status with qualified workers, appropriate manufacturing controls and reasonable cost levels, we may incur higher costs than our current expense levels, which would affect our gross margins. In addition, if capacity restraints result in significant delays in product shipments, our business and results of operations would be adversely affected.

We are subject to export laws, trade policies and restrictions including international tariffs that could materially and adversely affect our business and results of operations.

As a global company headquartered in the United States, we are subject to U.S. laws and regulations that could limit and restrict the export of some of our products and services and may restrict our transactions with certain customers, business partners and other persons, including, in certain cases, dealings with or between our employees and subsidiaries. In certain circumstances, export control and economic sanctions regulations may prohibit the export of certain products, services and technologies, and in other circumstances we may be required to obtain an export license before exporting the controlled item. Compliance with these laws and regulations has not materially limited our operations or our sales, but could materially limit them in the future, which would materially and adversely affect our business and results of operations. We maintain an export compliance program but there are risks that the compliance controls could be circumvented, exposing us to legal liabilities. We must also comply with export restrictions and laws imposed by other countries affecting trade and investments. Although these restrictions and laws have not materially restricted our operations in the recent past, there is a significant risk that they could do so in the future, which would materially and adversely affect our business and results of operations. In addition, U.S. laws and regulations and sanctions, or threat of sanctions, that could limit and restrict the export of some of our products and services to our customers may also encourage our customers to develop their own solutions to replace our products, or seek to obtain a greater supply of similar or substitute products from our competitors that are not subject to these restrictions, which could materially and adversely affect our business, financial condition and results of operations.

Since the beginning of 2018, there has been increasing rhetoric, in some cases coupled with legislative or executive action, from several U.S. and foreign leaders regarding tariffs against foreign imports of certain materials. More specifically, there have been several rounds of U.S. tariffs on Chinese goods taking effect in the past few years, some of which prompted retaliatory Chinese tariffs on U.S. goods. The institution of trade tariffs both globally and between the U.S. and China specifically carries the risk of negatively affecting both countries’ overall economic condition. If these tariffs continue or additional new tariffs are imposed in the future, they could have a negative impact on us as we have significant operations in China and the U.S.

Fluctuations in the value of the U.S. Dollar relative to other foreign currencies, including the Renminbi, may adversely affect results of operations.

Our manufacturing and packaging suppliers are and will continue to be primarily located in China for the foreseeable future. If the value of the Renminbi rises against the U.S. Dollar, there could be an increase in our manufacturing costs relative to competitors who have manufacturing facilities located in the U.S., which could adversely affect our operations. In addition, our sales are primarily denominated in the U.S. Dollar. If the value of the U.S Dollar rises against other currencies, it may adversely affect the demand for our products in international markets, which could negatively impact our business and results of operations.

We incur foreign currency exchange gains or losses related to the timing of payments for transactions between the U.S. and our foreign subsidiaries, which are reported in interest and other income in the statements of operations. Fluctuations in the value of the U.S. Dollar relative to the foreign currencies could increase the amount of foreign currency exchange losses we record, which could have an adverse impact on our results of operations.

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Risks Associated with Product Demand and Sales

We may not experience growth rates comparable to past years.

In the past, our revenue increased significantly in certain years due to increased sales of certain of our products. We are subject to numerous risks and factors that could cause a decrease in our growth rates compared to past periods, including increased competition, loss of certain of our customers, unfavorable changes in our operations, reduced global electronics demand, a deterioration in market conditions, end-customer market downturn, market acceptance and penetration of our current and future products, and litigation. A material decrease in our growth rates could adversely affect our stock price and results of operations.

If demand for our products declines in the major end markets that we serve, our revenue will decrease and our results of operations and financial condition would be materially and adversely affected.

We believe that the application of our products in the computing and storage, automotive, industrial, communications and consumer markets will continue to account for the majority of our revenue. If the demand for our products declines in the major end markets that we serve, our revenue will decrease and our results of operations and financial condition would be materially and adversely affected. In addition, as technology evolves, the ability to integrate the functionalities of various components, including our discrete semiconductor products, onto a single chip and/or onto other components of systems containing our products increases. Should our customers require integrated solutions that we do not offer, demand for our products could decrease, and our business, financial condition and results of operations would be materially and adversely affected.

Due to the nature of our business as a component supplier, we may have difficulty both in accurately predicting our future revenue and appropriately managing our expenses.

Because we provide components for end products and systems, demand for our products is influenced by our customers’ end product demand. As a result, we may have difficulty in accurately forecasting our revenue and expenses. Our revenue depends on the timing, size, and speed of commercial introductions of end products and systems that incorporate our products, all of which are inherently difficult to forecast, as well as the ongoing demand for previously introduced end products and systems. In addition, demand for our products is influenced by our customers’ ability to manage their inventory. Our sales to distributors are subject to higher volatility because they service demand from multiple levels of the supply chain which, in itself, is inherently difficult to forecast, all of which may be exacerbated by the adverse effects of the COVID-19 pandemic. If our customers, including distributors, do not manage their inventory correctly or misjudge their customers’ demand, our shipments to and orders from our customers may vary significantly on a quarterly basis, which could reduce our revenue and adversely affect our financial condition and results of operations.

We may be unsuccessful in developing and selling new products with margins similar to or better than what we have experienced in the past, which would impact our overall gross margin and financial performance.

Our success depends on products that are differentiated in the market, which result in gross margins that have historically been above industry averages. Should we fail to improve our gross margin in the future, and accordingly develop and introduce sufficiently differentiated products that result in higher gross margins than industry averages, our business, financial condition and results of operations could be materially and adversely affected.

We may be unsuccessful in developing and selling new products or in penetrating new markets required to maintain or expand our business.

Our competitiveness and future success depend on our ability to design, develop, manufacture, assemble, test, market, and support new products and enhancements on a timely and cost-effective basis. A fundamental shift in technologies in any of our product markets could have a material adverse effect on our competitive position within these markets. Our failure to timely develop new technologies or to react quickly to changes in existing technologies could materially delay our development of new products, which could result in product obsolescence, decreased revenue, and/or a loss of market share to competitors.

As we develop new product lines, we must adapt to market conditions that are unfamiliar to us, such as competitors and distribution channels that are different from those we have known in the past. Some of our new product lines require us to re-equip our labs to test parameters we have not tested in the past. If we are unable to adapt rapidly to these new and additional conditions, we may not be able to successfully penetrate new markets.

The success of a new product depends on accurate forecasts of long-term market demand and future technological developments, as well as on a variety of specific implementation factors, including:

•	timely and efficient completion of process design and device structure improvements;

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•	timely and efficient implementation of manufacturing, assembly, and test processes;

•	the ability to secure and effectively utilize fabrication capacity in different geometries;

•	product performance;

•	product availability;

•	product quality and reliability; and

•	effective marketing, sales and service.

To the extent that we fail to timely introduce new products or to quickly penetrate new markets, our business, financial condition and results of operations could be materially and adversely affected.

We depend on a limited number of customers, including distributors, for a significant percentage of our revenue.

Historically, we have generated most of our revenue from a limited number of customers, including distributors. For example, sales to our largest distributor accounted for 24% and 26% of our total revenue for the three and nine months ended September 30, 2021, respectively. We continue to rely on a limited number of customers for a significant portion of our revenue. Because we rely on a limited number of customers for significant percentages of our revenue, a decrease in demand or significant pricing pressure for our products from any of our major customers for any reason (including due to competition, market conditions, catastrophic events or otherwise) could have a materially adverse impact on our business, financial condition and results of operations.

We receive a significant portion of our revenue from distribution arrangements, value-added resellers and direct customers, and the loss of any one of these distributors, value-added resellers or direct customers or failure to collect a receivable from them could adversely affect our financial position and results of operations.

We market our products through distribution arrangements and value-added resellers, and through our direct sales and applications support organization to customers that include OEMs, ODMs and EMS providers. Receivables from our customers are generally not secured by any type of collateral and are subject to the risk of being uncollectible. Sales to our largest distributor accounted for 24% and 26% of our total revenue for the three and nine months ended September 30, 2021, respectively. Significant deterioration in the liquidity or financial condition of any of our major customers or any group of our customers could have a material adverse impact on the collectability of our accounts receivable and our future operating results.

Moreover, we believe a high percentage of our products are eventually sold to a number of OEMs. Although we communicate with OEMs in an attempt to achieve “design wins,” which are decisions by OEMs and/or ODMs to incorporate our products, we do not have purchase commitments from these end users. Therefore, there can be no assurance that the OEMs and/or ODMs will continue to incorporate our ICs into their products. OEM technical specifications and requirements can change rapidly, and we may not have products that fit new specifications from an end customer for whom we have had previous design wins. We cannot be certain that we will continue to achieve design wins from large OEMs, that our direct customers will continue to be successful in selling to the OEMs, or that the OEMs will be successful in selling products which incorporate our ICs. The loss of any significant customer, any material reduction in orders by any of our significant customers or by their OEM customers, the cancellation of a significant customer order, or the cancellation or delay of a customer’s or an OEM’s significant program or product could reduce our revenue and adversely affect our financial condition and results of operations.

Our products must meet specifications, and undetected defects and failures may occur, which may cause customers to return or stop buying our products and may expose us to product liability risk.

Our customers generally establish demanding specifications for quality, performance, and reliability that our products must meet. ICs as complex as ours often encounter development delays and may contain undetected defects or failures when first introduced or after commencement of commercial shipments, which might require product replacement or recall. Further, our third-party manufacturing processes or changes thereof, or raw material used in the manufacturing processes may cause our products to fail. We have from time to time in the past experienced product quality, performance or reliability problems. Our standard warranty period is generally one to two years, which exposes us to significant risks of claims for defects and failures. If defects and failures occur in our products, we could experience lost revenue, increased costs, including warranty expense and costs associated with customer support, cancellations or rescheduling of orders or shipments, and product returns or discounts, any of which would harm our operating results.

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In addition, product liability claims may be asserted by our customers. Although we currently have insurance, there can be no assurance that we have obtained a sufficient amount of insurance coverage or that asserted claims will be within the scope of coverage. Our insurance providers could deny or challenge these claims, and as a result, reimbursement to us is not guaranteed or could be delayed. If coverage is denied, we may not have sufficient resources to pay for these claims. Furthermore, due to recent changes in the insurance industry, we may experience a significant increase in premiums and therefore decide to self-insure, which may not meet the expectations or requirements of certain customers. All of these factors could have a material and adverse impact on our business, financial condition and results of operations.

Because of the lengthy sales cycles for our products and the fixed nature of a significant portion of our expenses, we may incur substantial expenses before we earn associated revenue and may not ultimately achieve our forecasted sales for our products.

The introduction of new products presents significant business challenges because product development plans and expenditures may be made up to two years or more in advance of any sales. It generally takes us up to 12 months or more to design and manufacture a new product prototype. Only after we have a prototype do we introduce the product to the market and begin selling efforts in an attempt to achieve design wins. This sales process requires us to expend significant sales and marketing resources without any assurance of success. Volume production of products that use our ICs, if any, may not be achieved for an additional period of time after an initial sale. Sales cycles for our products are lengthy for a number of reasons, including:

•	our customers usually complete an in-depth technical evaluation of our products before they place a purchase order;

•	the commercial adoption of our products by OEMs and ODMs is typically limited during the initial release of their product to evaluate product performance and consumer demand;

•	our products must be designed into our customers’ products or systems; and

•	the development and commercial introduction of our customers’ products incorporating new technologies are frequently delayed.

As a result of our lengthy sales cycles, we may incur substantial expenses before we earn associated revenue because a significant portion of our operating expenses is relatively fixed and based on expected revenue. The lengthy sales cycles of our products also make forecasting the volume and timing of orders difficult. In addition, the delays inherent in lengthy sales cycles raise additional risks that customers may cancel or change their orders. Our sales are made by purchase orders. Because industry practice allows customers to reschedule or cancel orders on relatively short notice, backlog is not always a good indicator of our future sales. If customer cancellations or product changes occur, we could lose anticipated sales and not have sufficient time to reduce our inventory and operating expenses.

Risks Associated with Supply and Manufacturing

Our ability to increase product sales and revenue may be constrained by the manufacturing capacity of our suppliers.

Although we provide our suppliers with rolling forecasts of our production requirements, their ability to provide wafers to us is limited by the available capacity, particularly capacity in the geometries we require, at the facilities in which they manufacture wafers for us. For example, we believe the strong increase in industry-wide demand for electronic equipment for remote work arrangements as a result of the COVID-19 pandemic has resulted, and will continue to result, in capacity shortages of our suppliers. As a result, this lack of capacity has at times constrained our product sales and revenue growth. In addition, an increased need for capacity to meet internal demands or demands of other customers could cause our suppliers to reduce capacity available to us. Our suppliers may also require us to pay amounts in excess of contracted or anticipated amounts for wafer deliveries or require us to make other concessions in order to acquire the wafer supply necessary to meet our customer requirements. If our suppliers extend lead times, limit supplies or the types of capacity we require, or increase prices due to capacity constraints or other factors, our revenue and gross margin may materially decline. We may also be required to increase the prices of our products in order to remain profitable, which could result in a loss of customers. In addition, if we experience supply delays or limitations, our customers may reduce their purchase levels with us and/or seek alternative solutions to meet their demand, which could materially and adversely impact our business and results of operations. Delays in increasing third-party manufacturing capacity may also limit our ability to meet customer demand.

There may be unanticipated costs associated with adding to or supplementing our third-party suppliers’ manufacturing capacity.

We anticipate that future growth of our business will require increased manufacturing capacity on the part of third-party supply foundries, assembly shops, and testing facilities for our products. In order to facilitate such growth, we may need to enter into strategic transactions, investments and other activities. Such activities are subject to a number of risks, including:

•	the costs and expense associated with such activities;

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•	the availability of modern foundries to be developed, acquired, leased or otherwise made available to us or our third-party suppliers;

•	the ability of foundries and our third-party suppliers to obtain the advanced equipment used in the production of our products;

•	delays in bringing new foundry operations online to meet increased product demand; and

•	unforeseen environmental, engineering or manufacturing qualification problems relating to existing or new foundry facilities, including delays in qualification of new foundries by our customers.

These and other risks may affect the ultimate cost and timing of any expansion of our third-party suppliers’ capacity. If our manufacturing costs increase, we may be required to raise the prices for our products to remain profitable, which could result in a loss of customers.

We currently depend on third-party suppliers to provide us with wafers for our products. If any of our wafer suppliers are acquired, become insolvent or capacity constrained, or are otherwise unable to provide us sufficient wafers at acceptable yields and at anticipated costs, our revenue and gross margin may decline or we may not be able to fulfill our customer orders.

We have a supply arrangement with certain suppliers for the production of wafers. Should any of our suppliers be acquired or become insolvent or capacity constrained, we may not be able to fulfill our customer orders, which would likely cause a decline in our revenue.

While certain aspects of our relationship with these suppliers are contractual, many important aspects of this relationship depend on our suppliers’ continued cooperation and our management of the supplier relationships. Our relationships could also be negatively impacted by changes in control or changes in the management team of the suppliers. In addition, the fabrication of ICs is a highly complex and precise process. Problems in the fabrication process can cause a substantial percentage of wafers to be rejected or numerous ICs on each wafer to be non-functional. This could potentially reduce yields. The failure of our suppliers to supply us wafers at acceptable yields could prevent us from fulfilling our customer orders for our products and would likely cause a decline in our revenue.

Further, as is common in the semiconductor industry, our customers may reschedule or cancel orders on relatively short notice. If our customers cancel orders after we submit a committed forecast to our suppliers for the corresponding wafers, we may be required to purchase wafers that we may not be able to resell, which would adversely affect our financial condition, results of operations and cash flows.

We might not be able to deliver our products on a timely basis if our relationships with our assembly and test subcontractors are disrupted or terminated.

We do not have direct control over product delivery schedules or product quality because all of our products are assembled by third-party subcontractors and a portion of our testing is currently performed by third-party subcontractors. Also, due to the amount of time typically required to qualify assembly and test subcontractors, we could experience delays in the shipment of our products if we were forced to find alternate third parties to assemble or test our products. In addition, events such as global economic crises and the COVID-19 pandemic may materially impact our assembly suppliers’ ability to operate. Any future product delivery delays or disruptions in our relationships with our subcontractors could have a material adverse effect on our financial condition, results of operations and cash flows.

We purchase inventory in advance based on expected demand for our products, and if demand is not as expected, we may have insufficient or excess inventory, which could adversely impact our financial position.

As a fabless semiconductor company, we purchase our inventory from third-party manufacturers in advance of selling our products. We place orders with our manufacturers based on existing and expected orders from our customers for particular products. While most of our contracts with our customers and distributors include lead time requirements and cancellation penalties that are designed to protect us from misalignment between customer orders and inventory levels, we must nonetheless make some predictions when we place orders with our manufacturers. In the event that our predictions are inaccurate due to unexpected increases in orders or unavailability of product within the timeframe that is required, we may have insufficient inventory to meet our customer demands. In addition, a perceived negative trend in market condition could lead us to decrease the manufacturing volume of our products to avoid excess inventory. If we inaccurately assessed the market conditions for our products, we would have insufficient inventory to meet our customer demands. In the event that we order products that we are unable to sell due to a decrease in orders, unexpected order cancellations, injunctions due to patent litigation, or product returns, we may have excess inventory which, if not sold, may need to be written down or would result in a decrease in our revenue in future periods as the excess inventory at our distributors is sold. If any of these situations were to arise, it could have a material impact on our business, financial condition and results of operations.

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The price and availability of commodities (e.g., gold, copper and silicon) may adversely impact our ability to deliver our products in a timely and cost-effective manner, and may adversely affect our business and results of operations.

Our products incorporate commodities such as gold, copper and silicon. An increase in the price or a decrease in the availability of these commodities and similar commodities that we use could negatively impact our business and results of operations.

Risks Associated with Industry Dynamics and Competition

The highly cyclical nature of the semiconductor industry, which has produced significant and sometimes prolonged downturns, could materially and adversely affect our financial condition and results of operations.

Historically, the semiconductor industry has been highly cyclical and, at various times, has experienced significant downturns and wide fluctuations in supply and demand. These conditions have caused significant variances in product demand and production capacity, as well as rapid erosion of average selling prices. The industry may experience severe or prolonged downturns in the future, which could result in downward pressure on the price of our products as well as lower demand for our products. Because significant portions of our expenses are fixed in the short term or incurred in advance of anticipated sales, we may not be able to decrease our expenses in a timely manner to offset any sales shortfall. Any significant or prolonged downturns could have a material adverse effect on our business, financial condition and results of operations.

Industry consolidation may lead to increased competition and may harm our operating results.

In recent years, there has been a trend toward semiconductor industry consolidation. We expect this trend to continue as companies attempt to improve the leverage of growing research and development costs, strengthen or hold their market positions in an evolving industry, or become unable to continue operations unless they find an acquirer or consolidate with another company. In addition, companies that are strategic alliance partners in some areas of our business may acquire or form alliances with our competitors, thereby reducing their business with us. We believe that semiconductor industry consolidation may result in stronger competitors that are better able to compete as sole-source vendors for customers. This could lead to more variability in our operating results and could have a material adverse effect on our business, financial condition and results of operations.

We may face competition from customers developing products internally.

Our customers generally have substantial technological capabilities and financial resources. Some customers have traditionally used these resources to develop their own products internally. The future prospects for our products in these markets are dependent in part upon our customers' acceptance of our products as an alternative to their internally developed products. Future sales prospects also are dependent upon acceptance of third-party sourcing for products as an alternative to in-house development. Customers may in the future continue to use internally developed components. They may also decide to develop or acquire components, technologies or products that are similar to, or that may be substituted for, our products. If our customers fail to accept our products as an alternative, if they develop or acquire the technology to develop such components internally rather than purchase our products, or if we are otherwise unable to develop or maintain strong relationships with them, our business, financial condition and results of operations could be materially and adversely affected.

We compete against many companies with substantially greater financial and other resources, and our market share may be reduced if we are unable to respond to our competitors effectively.

The analog and mixed-signal semiconductor industry is highly competitive, and we expect competitive pressures to continue. Our ability to compete effectively and to expand our business will depend on our ability to continue to recruit applications and design talent, our ability to introduce new products, and our ability to maintain the rate at which we introduce these new products. We compete with domestic and non-domestic semiconductor companies, many of which have substantially greater financial and other resources with which to pursue engineering, manufacturing, marketing, and distribution of their products. We are in direct and active competition, with respect to one or more of our product lines, with many manufacturers of such products, of varying size and financial strength. The number of our competitors has grown due to the expansion of the market segments in which we participate.

We cannot assure you that our products will continue to compete favorably, or that we will be successful in the face of increasing competition from new products and enhancements introduced by existing competitors or new companies entering this market, which would materially and adversely affect our results of operations and our financial condition.

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Risks Associated with Information Technology and Cybersecurity

Implementation of an enterprise resource planning (“ERP”) or other information technology systems could result in significant disruptions to our operations.

From time to time, we may implement new ERP software solutions or upgrade existing systems. Implementation of these solutions and systems is highly dependent on coordination of system providers and internal business teams. We may experience difficulties as we transition to these new or upgraded systems and processes, including system downtime causing interruptions in business operations. In addition, transitioning to these new systems requires significant capital investments and personnel resources. Difficulties in implementing new or upgraded information systems or any significant system failures could disrupt our operations, which could have a material adverse effect on our capital resources, financial condition or results of operations.

System security risks, data protection or privacy breaches, cyber attacks and systems integration issues could disrupt our internal operations and/or harm our reputation, and any such disruption or harm could cause a reduction in our expected revenue, increase our expenses, negatively impact our results of operation or otherwise adversely affect our stock price.

Experienced hackers may be able to penetrate our network security and misappropriate or compromise our confidential and proprietary information, create system disruptions or cause shutdowns. The costs to us to eliminate or alleviate cyber or other security problems, bugs, viruses, worms, malicious software programs and security vulnerabilities could be significant, and our efforts to address these problems may not be successful and could result in interruptions and delays that may impede our sales, manufacturing, distribution, financial reporting or other critical functions.

In the ordinary course of business, we store sensitive data on our internal systems, network and servers, such as proprietary business and financial information, and confidential data pertaining to our customers, suppliers and business partners. The secure maintenance of sensitive information on our networks and the protection features of our solutions are both critical to our operations and business strategy. We devote significant resources to network security, data encryption, and other security measures to protect our systems and data. However, these security measures cannot provide absolute security. Although we make significant efforts to maintain the security and integrity of our systems and solutions, any destructive or intrusive breach could compromise our networks, creating system disruptions or slowdowns, and the information stored on our networks could be accessed, publicly disclosed, lost or stolen. The increase in remote working arrangements during the COVID-19 pandemic has also heightened our potential exposure to cyber attacks, which could put the sensitive proprietary and financial information we store on our internal systems at risk. If any of these types of security breaches were to occur and we were unable to protect sensitive data, our relationships with our business partners and customers could be materially damaged, our reputation could be materially harmed, and we could be exposed to a risk of litigation and possible significant liability.

Portions of our IT infrastructure also may experience interruptions, delays or cessations of service or produce errors in connection with systems integration or migration work that takes place from time to time. We may not be successful in implementing new systems and transitioning data, which could cause business disruptions and our remediation efforts may be expensive, time consuming, disruptive and resource-intensive. Such disruptions could adversely impact our ability to fulfill orders and interrupt other processes. Delayed sales or lost customers resulting from these disruptions could adversely affect our financial results, stock price and reputation.

Effective May 25, 2018, the European Union (“EU”) implemented the General Data Protection Regulation (“GDPR”), a broad data protection framework that expands the scope of current EU data protection law to non-European Union entities that process, or control the processing of, the personal information of EU subjects. The GDPR allows for the imposition of fines and corrective action on entities that improperly use or disclose the personal information of EU subjects, including through a data security breach. The State of California enacted the California Consumer Privacy Act of 2018 (“CCPA”), effective on January 1, 2020, which contains requirements similar to GDPR for the handling of personal information of California residents. China’s Data Security Law became effective on September 1, 2021, which is expected to have a deep impact on data processing activities and business operations in China and activities outside China if those activities would be detrimental to the national security or public interest of China or the lawful rights and interests of any Chinese citizen or organization.

Our failure to fully comply with GDPR, CCPA, the Data Security Law and other laws could lead to significant fines and require onerous corrective action. In addition, data security breaches experienced by us could result in the loss of trade secrets or other intellectual property, public disclosure of sensitive commercial data, and the exposure of personally identifiable information (including sensitive personal information) of our employees, customers, suppliers and others.

Unauthorized use or disclosure of, or access to, any personal information maintained by us or on our behalf, whether through breach of our systems, breach of the systems of our suppliers or vendors by an unauthorized party, or through employee error, theft or misuse, or otherwise, could harm our business. If any such unauthorized use or disclosure of, or access to, such personal information was to occur, our operations could be seriously disrupted, and we could be subject to demands, claims and litigation by private parties, and investigations, related actions, and penalties by regulatory authorities. In addition, we could incur significant costs in notifying affected persons and entities and otherwise complying with the multitude of foreign, federal, state and local laws and regulations relating to the unauthorized access to, or use or disclosure of, personal information. Finally, any perceived or actual unauthorized access to, or use or disclosure of, such information could harm our reputation, substantially impair our ability to attract and retain customers and have an adverse impact on our business, financial condition and results of operations.

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Risks Associated with Strategic Investments and Initiatives

Our success depends on our investment of significant resources in research and development. We may have to invest more resources in research and development than anticipated, which could increase our operating expenses and negatively impact our operating results.

Our success depends on us investing significant amounts of resources into research and development. We expect to have to continue to invest heavily in research and development in the future in order to continue to innovate and introduce new products in a timely manner and increase our revenue and profitability. If we have to invest more resources in research and development than we anticipate, we could see an increase in our operating expenses which may negatively impact our operating results. Also, if we are unable to properly manage and effectively utilize our research and development resources, we could see material adverse effects on our business, financial condition and operating results.

In addition, if new competitors, technological advances by existing competitors, our entry into new markets, or other competitive factors require us to invest significantly greater resources than anticipated in our research and development efforts, our operating expenses would increase. If we are required to invest significantly greater resources than anticipated in research and development efforts without a corresponding increase in revenue, our operating results could decline. 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. In order to remain competitive, we anticipate that we will continue to devote substantial resources to research and development, and we expect these expenses to increase in absolute dollars in the foreseeable future due to the increased complexity and the greater number of products under development.

We may not realize the anticipated benefits of any company or business that we acquire. In addition, acquisitions could result in diluting the ownership interests of our stockholders, reduce our cash balances, and cause us to incur debt or to assume contingent liabilities, which could adversely affect our business.

As a part of our business strategy, from time to time we review acquisition prospects that would complement our current product offerings, enhance our design capability or offer other competitive opportunities. As a result of completing acquisitions, we could use a significant portion of our available cash, cash equivalents and short-term investments, issue equity securities that would dilute current stockholders’ percentage ownership, or incur substantial debt or contingent liabilities. Such actions could impact our operating results and the price of our common stock.

In addition, we may be unable to identify or complete prospective acquisitions for various reasons, including competition from other companies in the semiconductor industry, the valuation expectations of acquisition candidates and applicable antitrust laws or related regulations. If we are unable to identify and complete acquisitions, we may not be able to successfully expand our business and product offerings.

We cannot guarantee that any future acquisitions will improve our results of operations or that we will otherwise realize the anticipated benefits of any acquisitions. In addition, if we are unsuccessful in integrating any acquired company or business into our operations or if integration is more difficult than anticipated, we may experience disruptions that could harm our business and result in our failure to realize the anticipated benefits of the acquisitions. Some of the risks that may adversely affect our ability to integrate or realize any anticipated benefits from the acquired companies, businesses or assets include those associated with:

•	unexpected losses of key employees or customers of the acquired companies or businesses;

•	conforming the acquired company’s standards, processes, procedures and controls with our operations;

•	coordinating new product and process development;

•	hiring additional management and other critical personnel;

•	increasing the scope, geographic diversity and complexity of our operations;

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•	difficulties in consolidating facilities and transferring processes and know-how;

•	difficulties in the assimilation of acquired operations, technologies or products;

•	the risk of undisclosed liabilities of the acquired businesses and potential legal disputes with founders or stockholders of acquired companies;

•	our inability to commercialize acquired technologies;

•	the risk that the future business potential as projected is not realized and as a result, we may be required to take an impairment charge related to goodwill or acquired intangibles that would impact our profitability;

•	difficulties in assessing the fair value of earn-out arrangements;

•	diversion of management’s attention from other business concerns; and

•	adverse effects on existing business relationships with customers.

Risks Associated with Financial Reporting

The complexity of calculating our tax provision may result in errors that could result in restatements of our financial statements.

Due to the complexity associated with the calculation of our tax provision, including the effects of the 2017 Tax Act and the enactment of other tax laws, we engage third-party tax advisors to assist us in the calculation. If we or our tax advisors fail to resolve or fully understand certain issues that we may have had in the past and issues that may arise in the future, we could be subject to errors, which, if material, would result in us having to restate our financial statements. Restatements are generally costly and could adversely impact our results of operations, damage our reputation, and/or have a negative impact on the trading price of our common stock.

Changes in effective tax rates or adverse outcomes resulting from examination of our income tax returns could adversely affect our results of operations.

Our future effective tax rates could be adversely affected by earnings being lower than anticipated in countries where we have lower statutory rates and higher than anticipated in countries where we have higher statutory rates, by changes in the valuation of our deferred tax assets, or by changes in tax laws such as the 2017 Tax Act, regulations, accounting principles or interpretations thereof and discrete items. In addition, we are subject to potential future examinations of our income tax returns by the Internal Revenue Service (“IRS”) and tax authorities in various jurisdictions where we have business operations. We assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision for income taxes. There can be no assurance that the outcomes from any examinations will not have an adverse effect on our financial condition and results of operations.

Our international operations subject us to potentially significant tax consequences, which could adversely affect our results of operations.

We conduct our international operations through wholly-owned subsidiaries, branches and representative offices and report our taxable income in various jurisdictions worldwide based upon our business operations in those jurisdictions. Such corporate structures are subject to complex transfer pricing and other local regulations administered by taxing authorities in various jurisdictions. The relevant taxing authorities may disagree with our determinations as to the income and expenses attributable to specific jurisdictions. If such a disagreement were to occur, and our positions were not sustained, we could be required to pay additional taxes, interest and penalties, resulting in higher effective tax rates, reduced cash flows and lower overall profitability of our operations. Additionally, our future worldwide tax rate and financial position may be affected by changes in the relevant tax laws, interpretation of such tax laws or the influence of certain tax policy efforts of the European Union and the Organization for Economic Co-operation and Development.

We face risks in connection with our internal control over financial reporting.

Effective internal control over financial reporting is necessary for us to provide reliable and accurate financial reports. If we cannot provide reliable financial reports or prevent fraud or other financial misconduct, our business and operating results could be harmed. Our failure to implement and maintain effective internal control over financial reporting could result in a material misstatement of our financial statements or otherwise cause us to fail to meet our financial reporting obligations. This, in turn, could result in a loss of investor confidence in the accuracy and completeness of our financial reports, which could have an adverse effect on our results of operations and/or have a negative impact on the trading price of our common stock, and could subject us to stockholder litigation. In addition, we cannot assure you that we will not in the future identify material weaknesses in our internal control over financial reporting that we have not discovered to date, which may impact the reliability of our financial reporting and financial statements.

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Risks Associated with Regulatory Compliance, Intellectual Property Protection and Litigation

We are subject to anti-corruption laws in the jurisdictions in which we operate, including the U.S. Foreign Corrupt Practices Act (the “FCPA”). Our failure to comply with these laws could result in penalties which could harm our reputation and have a material adverse effect on our business, financial condition and results of operations.

We are subject to the FCPA, which generally prohibits companies and their intermediaries from making improper payments to foreign officials for the purpose of obtaining or keeping business and/or other benefits, along with various other anti-corruption laws. Although we have implemented policies and procedures designed to ensure that we, our employees and other intermediaries comply with the FCPA and other anti-corruption laws to which we are subject, there is no assurance that such policies or procedures will work effectively all of the time or protect us against liability under the FCPA or other laws for actions taken by our employees and other intermediaries with respect to our business or any businesses that we may acquire. We have significant operations in Asia, which place us in frequent contact with persons who may be considered “foreign officials” under the FCPA, resulting in an elevated risk of potential FCPA violations. If we are not in compliance with the FCPA and other laws governing the conduct of business with government entities (including local laws), we may be subject to criminal and civil penalties and other remedial measures, which could have a material adverse impact on our business, financial condition, results of operations and liquidity. Any investigation of any potential violations of the FCPA or other anti-corruption laws by the U.S. or foreign authorities could harm our reputation and have an adverse impact on our business, financial condition and results of operations.

Our business is subject to various governmental laws and regulations, and compliance with these regulations may impact our revenue and cause us to incur significant expense. If we fail to maintain compliance with applicable regulations or obtain government licenses and approvals for our desired international trading activities or technology transfers, we may be forced to recall products and cease their distribution, and we could be subject to civil or criminal penalties.

Our business is subject to various significant laws and other legal requirements imposed by the U.S. and other countries we conduct business with, including export control laws such as the Export Administration Act, the Export Administration Regulations and other laws, regulations and requirements governing international trade and technology transfer. These laws and regulations are complex, change frequently and have generally become more stringent over time. We may be required to incur significant expense to comply with these regulations or to remedy violations of these regulations. In addition, if our customers fail to comply with these regulations, we may be required to suspend sales to these customers, which could negatively impact our results of operations. We must conform the manufacture and distribution of our products to various laws and adapt to regulatory requirements in many countries as these requirements change. If we fail to comply with these requirements in the manufacture or distribution of our products, we could be required to pay civil penalties, face criminal prosecution and, in some cases, be prohibited from distributing our products commercially until the products are brought into compliance.

Environmental laws and regulations could cause a disruption in our business and operations.

We are subject to various state, federal and international laws and regulations governing the environment, including those restricting the presence of certain substances in electronic products and making manufacturers of those products financially responsible for the collection, treatment, recycling and disposal of certain products. Such laws and regulations have been passed in several jurisdictions in which we operate, including various European Union member countries and countries in Asia. There can be no assurance that similar laws and regulations will not be implemented in other jurisdictions resulting in additional costs, possible delays in delivering products, and even the discontinuance of existing and planned future products if the cost were to become prohibitive.

If we are unsuccessful in legal proceedings brought against us or any of our customers, we could be prevented from selling many of our products and/or be required to pay substantial damages. An unfavorable outcome or an additional award of damages, attorneys’ fees or an injunction could cause our revenue to decline significantly and could severely harm our business and operating results.

From time to time we are a party to various legal proceedings. If we are not successful in litigation that could be brought against us or our customers, we could be ordered to pay monetary fines and/or damages. If we are found liable for willful patent infringement, damages could be significant. We and/or our customers could also be prevented from selling some or all of our products. Moreover, our customers and end users could decide not to use our products, and our products and our customers’ accounts payable to us could be seized. Finally, interim developments in these proceedings could increase the volatility in our stock price as the market assesses the impact of such developments on the likelihood that we will or will not ultimately prevail in these proceedings.

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Given our inability to control the timing and nature of significant events in our legal proceedings that either have arisen or may arise, our legal expenses are difficult to forecast and may vary substantially from our publicly disclosed forecasts with respect to any given quarter, which could contribute to increased volatility in our stock price and financial condition.

Historically, we have incurred significant expenses in connection with various legal proceedings that vary with the level of activity in the proceeding. It is difficult for us to forecast our legal expenses for any given quarter, which adversely affects our ability to forecast our expected results of operations in general. We may also be subject to unanticipated legal proceedings, which would result in us incurring unexpected legal expenses. If we fail to meet the expectations of securities or industry analysts as a result of unexpected changes in our legal expenses, our stock price could be materially impacted.

Future legal proceedings may divert our financial and management resources.

The semiconductor industry is characterized by frequent claims of infringement and litigation regarding patent and other intellectual property rights. Patent infringement is an ongoing risk, in part because other companies in our industry could have patent rights that may not be identifiable when we initiate development efforts. Litigation may be necessary to enforce our intellectual property rights, and we may have to defend ourselves against additional infringement claims. Such litigation is very costly. In the event any third party makes a new infringement claim against us or our customers, we could incur additional ongoing legal expenses. In addition, in connection with these legal proceedings, we may be required to post bonds to defend our intellectual property rights in certain countries for an indefinite period of time, until such dispute is resolved. If our legal expenses materially increase or exceed anticipated amounts, our capital resources and financial condition could be adversely affected. Further, if we are not successful in any of our intellectual property defenses, our financial condition could be adversely affected and our business could be harmed. Our management team may also be required to devote a great deal of time and effort to these legal proceedings, which could divert management’s attention from focusing on our operations and adversely affect our business.

Failure to protect our proprietary technologies or maintain the right to certain technologies may negatively affect our ability to compete.

We rely heavily on our proprietary technologies. Our future success and competitive position depend in part upon our ability to obtain and maintain protection of certain proprietary technologies used in our products. We pursue patents for some of our new products and unique technologies, and we also rely on a combination of nondisclosure agreements and other contractual provisions, as well as our employees’ commitment to confidentiality and loyalty, to protect our technology, know-how and processes. Despite the precautions we take, it may be possible for unauthorized third parties to copy aspects of our current or future technologies or products, or to obtain and use information that we regard as proprietary. We intend to continue to protect our proprietary technologies, including through patents. However, there can be no assurance that the steps we take will be adequate to protect our proprietary rights, that our patent applications will lead to issued patents, that others will not develop or patent similar or superior products or technologies, or that our patents will not be challenged, invalidated or circumvented by others. Furthermore, the laws of the countries in which our products are or may be developed, manufactured or sold may not protect our products and intellectual property rights to the same extent as laws in the United States. Our failure to adequately protect our proprietary technologies could materially harm our business.

Risks Associated with Human Capital Management

The loss of any of our key personnel or the failure to attract or retain specialized technical and management personnel could affect our operations or impair our ability to grow our business.

Our future success depends upon our ability to attract and retain highly qualified technical and managerial personnel. We are particularly dependent on the continued services of our key executives, including Michael Hsing, our President and Chief Executive Officer, who founded our company and developed our proprietary process technology. In addition, personnel with highly skilled analog and mixed-signal design engineering expertise are scarce and competition for personnel with these skills is intense. There can be no assurance that we will be able to retain existing key employees or that we will be successful in attracting, integrating or retaining other highly qualified personnel with critical capabilities in the future. If we are unable to retain the services of existing key employees or are unsuccessful in attracting new highly qualified employees quickly enough to meet the demands of our business, including design cycles, our business could be harmed. Furthermore, if we lose key personnel, the search for a qualified replacement and the transition could interrupt our operations as the search could take us longer than expected and divert management resources, and the newly hired employee could take longer than expected to integrate into the team.

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If we fail to retain key employees in our sales, applications, finance and legal staff or to make continued improvements to our internal systems, particularly in the accounting and finance area, our business may suffer.

If we fail to continue to adequately staff our sales, applications, financial and legal staff, maintain or upgrade our business systems and maintain internal control that meet the demands of our business, our ability to operate effectively will suffer. The operation of our business also depends upon our ability to retain these employees, as these employees hold a significant amount of institutional knowledge about us and our products, and, if they were to terminate their employment, our sales and internal control over financial reporting could be adversely affected.

Risks Associated with Ownership of Our Stock

The future trading price of our common stock could be subject to wide fluctuations in response to a variety of factors.

The future trading price of our common stock is likely to be highly volatile and could be subject to wide fluctuations in response to various factors, many of which are beyond our control, including:

•	actual or anticipated results of operations and financial performance;

•	general economic, industry and market conditions worldwide;

•	our ability to outperform the market and outperform at a level that meets or exceeds our investors’ expectations;

•	whether our guidance meets the expectations of our investors;

•	the breath and liquidity of the market for our common stock;

•	the inclusion, exclusion or deletion of our common stock from any major trading indices, such as the S&P 500 Index;

•	developments generally affecting the semiconductor industry;

•	commencement of or developments relating to our involvement in litigation;

•	investor perceptions of us and our business strategies;

•	changes in securities analysts’ expectations or our failure to meet those expectations;

•	actions by institutional or other large stockholders;

•	terrorist acts or acts of war;

•	epidemics and pandemics, such as the COVID-19 pandemic;

•	trading activity in our common stock, including short positions;

•	actual or anticipated manufacturing capacity limitations;

•	developments with respect to intellectual property rights;

•	introduction of new products by us or our competitors;

•	our sale of common stock or other securities in the future;

•	conditions and trends in technology industries;

•	our loss of key customers;

•	changes in market valuation or earnings of our competitors;

•	any mergers, acquisitions or divestitures of assets undertaken by us;

•	government debt default;

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•	changes in corporate tax laws;

•	government policies and regulations on international trade policies and restrictions, including tariffs on imports of foreign goods;

•	export controls, trade and economic sanctions and regulations, and other regulatory or contractual limitations on our ability to sell or develop our products in certain foreign markets, particularly in China;

•	our ability to obtain governmental licenses and approvals for international trading activities or technology transfers, including export licenses;

•	ratings published by third-party organizations with respect to our environmental, social and governance compliance efforts;

•	our ability to develop new products, enter new market segments, gain market share, manage litigation risk, diversify our customer base and successfully secure manufacturing capacity;

•	our ability to increase our gross margins;

•	our ability to accurately forecast future demand for our products;

•	market reactions to guidance from other semiconductor companies or third-party research groups;

•	market reactions to merger and acquisition activities in the semiconductor industry, and rumors or expectations of further consolidation in the industry;

•	investments in sales and marketing resources to enter new markets;

•	costs of increasing wafer capacity and qualifying additional third-party wafer fabrication facilities;

•	cyber attacks or other system security, data protection and privacy breaches;

•	our ability to pay quarterly cash dividends to stockholders; and

•	changes in the estimation of the future size and growth rate of our markets.

In addition, the stock market often experiences substantial volatility that may be unrelated to the operating performance of particular companies. These broad market fluctuations may adversely affect the trading price of our common stock.

If securities or industry analysts downgrade our stock or do not continue to publish research or reports about our business, our stock price and trading volume could decline.

The trading market for our common stock will depend, in part, on the research and reports that industry or securities analysts publish about us or our business. We do not have any control over these analysts. If one or more of the analysts who cover us downgrade our stock, our stock price would likely decline. If one or more of these analysts cease coverage of us or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.

Short positions in our stock could have a substantial impact on the trading price of our stock.

Historically, there have been “short” positions in our common stock. The anticipated downward pressure on our stock price due to actual or anticipated sales of our stock by some institutions or individuals who engage in short sales of our common stock could cause our stock price to decline. Such stock price decreases could encourage further short-sales that could place additional downward pressure on our stock price. This could lead to further increases in the existing short position in our common stock and cause volatility in our stock price. The volatility of our stock may cause the value of a stockholder’s investment to decline rapidly. Additionally, if our stock price declines, it may be more difficult for us to raise capital and may have other adverse effects on our business.

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There can be no assurance that we will continue to declare cash dividends at all or in any particular amounts.

We have a dividend program approved by our Board of Directors, pursuant to which we intend to pay quarterly cash dividends on our common stock. The declaration of any future cash dividends is at the discretion of our Board of Directors and will depend on, among other things, our financial condition, results of operations, capital requirements, business conditions, and other factors that our Board of Directors may deem relevant, as well as a determination that cash dividends are in the best interests of our stockholders. Our dividend payments may change from time to time, and we cannot provide assurance that we will continue to declare dividends at all or in any particular amounts. A reduction in or elimination of our dividend payments could have a negative effect on the price of our common stock.

If we issue additional shares of stock in the future, it may have a dilutive effect on our stockholders.

We may issue additional shares of common stock in the future in order to raise additional capital to fund our global operations or in connection with an acquisition. We also issue restricted stock units (“RSUs”) to employees, which convert into shares of common stock upon vesting. Any issuance of our common stock may result in immediate dilution to our stockholders. In addition, the issuance of a significant amount of our common stock may result in additional regulatory requirements, such as stockholder approval.

General Risk Factors

Our worldwide operations are subject to political, economic and health risks and natural disasters, which could have a material adverse effect on our business operations.

Our offices in California and Washington, the production facilities of our third-party wafer suppliers, our IC testing and manufacturing facilities, a portion of our assembly and research and development activities, and certain other critical business operations are located in or near seismically active regions and are subject to periodic earthquakes. We do not maintain earthquake insurance and could be materially and adversely affected in the event of a major earthquake. Much of our revenue, as well as our manufacturers and assemblers, are concentrated in Asia, particularly in China. Such concentration increases the risk that other natural disasters, labor strikes, terrorism, war, political unrest, epidemics and pandemics, and/or health advisories could disrupt our operations. For example, the COVID-19 pandemic has resulted in disruptions in business operations and other global economic activities. Any of these events may cause disruptions and have a material adverse impact on our business and results of operations.

In addition, we rely heavily on our internal information and communications systems and on systems or support services from third parties to manage our operations efficiently and effectively. Any of these are subject to failure due to a natural disaster or other disruptions. System-wide or local failures that affect our information processing could have material adverse effects on our business, financial condition and results of operations.

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ITEM 6. EXHIBITS

Exhibit No.	Description
31.1	Certification of Chief Executive Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH	Inline XBRL Taxonomy Extension Schema Document
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

* This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that Section, nor shall it be deemed incorporated by reference in any filings under the Securities Act of 1933 or the Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation language in any filings.

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MONOLITHIC POWER SYSTEMS, INC

SIGNATURES

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

	MONOLITHIC POWER SYSTEMS, INC.

Dated: November 8, 2021

	/s/ T. Bernie Blegen
	T. Bernie Blegen
	Chief Financial Officer
	(Duly Authorized Officer and Principal Financial and Accounting Officer)

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Monolithic Power Systems (MPWR) 10-Q2021 Q3 Quarterly report

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