10-Q

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 March 31, 2023

OR

☐ 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

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 47,423,000 shares of the registrant’s common stock issued and outstanding as of April 28, 2023. 

1

MONOLITHIC POWER SYSTEMS, INC.

Form 10-Q

For the Quarter Ended March 31, 2023

TABLE OF CONTENTS

		PAGE
PART I. FINANCIAL INFORMATION		3
Item 1.	Financial Statements (unaudited)	3
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Operations	4
	Condensed Consolidated Statements of Comprehensive Income	5
	Condensed Consolidated Statements of Stockholders’ Equity	6
	Condensed Consolidated Statements of Cash Flows	7
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	34
Item 4.	Controls and Procedures	34
PART II. OTHER INFORMATION		35
Item 1.	Legal Proceedings	35
Item 1A.	Risk Factors	35
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	54
Item 3.	Defaults Upon Senior Securities	54
Item 4.	Mine Safety Disclosures	54
Item 5.	Other Information	54
Item 6.	Exhibits	55

2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

MONOLITHIC POWER SYSTEMS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except par value)

(unaudited)

	March 31,			December 31,
	2023			2022
ASSETS
Current assets:
Cash and cash equivalents	$	488,972		$	288,607
Short-term investments		428,598			449,266
Accounts receivable, net		184,274			182,714
Inventories		430,830			447,290
Other current assets		89,955			42,742
Total current assets		1,622,629			1,410,619
Property and equipment, net		354,313			357,157
Goodwill		6,571			6,571
Deferred tax assets, net		35,571			35,252
Other long-term assets		207,567			249,286
Total assets	$	2,226,651		$	2,058,885
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	58,001		$	61,461
Accrued compensation and related benefits		101,881			88,260
Other accrued liabilities		155,961			113,679
Total current liabilities		315,843			263,400
Income tax liabilities		56,900			53,509
Other long-term liabilities		77,647			73,374
Total liabilities		450,390			390,283
Commitments and contingencies
Stockholders’ equity:
Common stock and additional paid-in capital: $0.001 par value; shares authorized: 150,000; shares issued and outstanding: 47,411 and 47,107, respectively		1,017,131			975,276
Retained earnings		777,075			716,403
Accumulated other comprehensive loss		(17,945	)		(23,077	)
Total stockholders’ equity		1,776,261			1,668,602
Total liabilities and stockholders’ equity	$	2,226,651		$	2,058,885

See accompanying notes to unaudited condensed consolidated financial statements.

3

MONOLITHIC POWER SYSTEMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per-share amounts)

(unaudited)

	Three Months Ended March 31,
	2023		2022
Revenue	$	451,065	$	377,714
Cost of revenue		192,285		158,834
Gross profit		258,780		218,880
Operating expenses:
Research and development		63,709		54,104
Selling, general and administrative		70,795		68,642
Total operating expenses		134,504		122,746
Operating income		124,276		96,134
Other income (expense), net		5,297		(634	)
Income before income taxes		129,573		95,500
Income tax expense		19,771		15,934
Net income	$	109,802	$	79,566
Net income per share:
Basic	$	2.32	$	1.71
Diluted	$	2.26	$	1.65
Weighted-average shares outstanding:
Basic		47,234		46,424
Diluted		48,655		48,250

See accompanying notes to unaudited condensed consolidated financial statements.

4

MONOLITHIC POWER SYSTEMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

(unaudited)

	Three Months Ended March 31,
	2023		2022
Net income	$	109,802	$	79,566
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments		2,919		(178	)
Change in unrealized gain (loss) on available-for-sale securities, net of tax of $311 and $565, respectively		2,213		(5,400	)
Other comprehensive income (loss), net of tax:		5,132		(5,578	)
Comprehensive income	$	114,934	$	73,988

See accompanying notes to unaudited condensed consolidated financial statements.

5

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 March 31, 2023	Shares		Amount		Earnings			Loss			Equity
Balance as of January 1, 2023		47,107	$	975,276	$	716,403		$	(23,077	)	$	1,668,602
Net income		-		-		109,802			-			109,802
Other comprehensive income		-		-		-			5,132			5,132
Dividends and dividend equivalents declared ($1.00 per share)		-		-		(49,130	)		-			(49,130	)
Common stock issued under the employee equity incentive plan		295		1,110		-			-			1,110
Common stock issued under the employee stock purchase plan		9		3,737		-			-			3,737
Stock-based compensation expense		-		37,008		-			-			37,008
Balance as of March 31, 2023		47,411	$	1,017,131	$	777,075		$	(17,945	)	$	1,776,261

								Accumulated
	Common Stock and							Other			Total
	Additional Paid-in Capital				Retained			Comprehensive			Stockholders’
Three Months Ended March 31, 2022	Shares		Amount		Earnings			Income			Equity
Balance as of January 1, 2022		46,256	$	803,226	$	424,879		$	15,880		$	1,243,985
Net income		-		-		79,566			-			79,566
Other comprehensive loss		-		-		-			(5,578	)		(5,578	)
Dividends and dividend equivalents declared ($0.75 per share)		-		-		(36,601	)		-			(36,601	)
Common stock issued under the employee equity incentive plan		362		2,318		-			-			2,318
Common stock issued under the employee stock purchase plan		7		2,786		-			-			2,786
Stock-based compensation expense		-		39,636		-			-			39,636
Balance as of March 31, 2022		46,625	$	847,966	$	467,844		$	10,302		$	1,326,112

See accompanying notes to unaudited condensed consolidated financial statements. 

6

MONOLITHIC POWER SYSTEMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

	Three Months Ended March 31,
	2023			2022
Cash flows from operating activities:
Net income	$	109,802		$	79,566
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		9,987			9,120
Amortization of premium on available-for-sale securities		260			1,348
(Gain) loss on deferred compensation plan investments		(2,534	)		2,192
Deferred taxes, net		(622	)		(381	)
Stock-based compensation expense		37,009			39,811
Changes in operating assets and liabilities:
Accounts receivable		(1,558	)		(15,506	)
Inventories		16,063			(51,797	)
Other assets		213			(5,916	)
Accounts payable		(880	)		(4,177	)
Accrued compensation and related benefits		13,422			27,382
Income tax liabilities		20,137			16,017
Other accrued liabilities		17,508			9,760
Net cash provided by operating activities		218,807			107,419
Cash flows from investing activities:
Purchases of property and equipment		(8,854	)		(26,877	)
Purchases of investments		(129,321	)		(16,243	)
Maturities and sales of investments		152,698			32,267
Contributions to deferred compensation plan, net		(2,209	)		(760	)
Net cash provided by (used in) investing activities		12,314			(11,613	)
Cash flows from financing activities:
Property and equipment purchased on extended payment terms		(374	)		(528	)
Proceeds from common stock issued under the employee equity incentive plan		1,110			2,318
Proceeds from common stock issued under the employee stock purchase plan		3,737			2,786
Dividends and dividend equivalents paid		(36,725	)		(28,825	)
Net cash used in financing activities		(32,252	)		(24,249	)
Effect of change in exchange rates		1,497			(220	)
Net increase in cash, cash equivalents and restricted cash		200,366			71,337
Cash, cash equivalents and restricted cash, beginning of period		288,729			189,389
Cash, cash equivalents and restricted cash, end of period	$	489,095		$	260,726
Supplemental disclosures for cash flow information:
Cash paid (refund) for income taxes, net	$	(1,300	)	$	244
Non-cash investing and financing activities:
Liability accrued for property and equipment purchases	$	2,482		$	6,122
Liability accrued for dividends and dividend equivalents	$	49,219		$	36,611

See accompanying notes to unaudited condensed consolidated financial statements.

7

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 generally accepted accounting principles 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, 2022, filed with the SEC on  February 24, 2023.

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, 2023 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.

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 99% and 98% of the Company’s total revenue for the three months ended March 31, 2023 and 2022, 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 for the periods presented. See Note 7 for the disaggregation of the Company’s revenue by geographic region and by product family.

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 March 31, 2023 and 2022, 81% and 82% of the Company’s product sales were made through distribution arrangements, respectively. 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).

8

 

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 adjustments 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 prices, 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 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 March 31, 2023 and December 31, 2022, accounts receivable totaled $184.3 million and $182.7 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 or record any allowance for credit losses for the periods presented.

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 both March 31, 2023 and December 31, 2022, customer prepayments totaled $3.6 million. For the three months ended March 31, 2023, the Company recognized $3.2 million of revenue that was included in the customer prepayment balance as of December 31, 2022.

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. For these reasons, the Company has elected not to determine whether contracts with customers contain significant financing components.

9

 

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  March 31, 2023, 4.2 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 March 31,
	2023		2022
Cost of revenue	$	1,147	$	1,307
Research and development		8,614		8,401
Selling, general and administrative		27,248		30,103
Total stock-based compensation expense	$	37,009	$	39,811
Tax benefit related to stock-based compensation (1)	$	423	$	573

(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. Equity awards granted to the Company’s executive officers are subject to the tax deduction limitations set by Section 162(m) of the Internal Revenue Code.

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/market 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, 2023		106		$	327.13		748		$	275.70		1,805		$	126.57		2,659		$	176.50
Granted		27		$	467.62		246	(1)	$	449.22		-		$	-		273		$	450.13
Vested		(16	)	$	279.89		(198	)	$	291.65		(81	)	$	23.57		(295	)	$	217.47
Forfeited		(2	)	$	361.26		(2	)	$	285.23		(5	)	$	139.15		(9	)	$	225.18
Outstanding at March 31, 2023		115		$	365.93		794		$	326.02		1,719		$	131.39		2,628		$	200.37

(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.

10

 

The intrinsic value related to vested RSUs was $141.6 million and $151.7 million for the three months ended March 31, 2023 and 2022, respectively. As of March 31, 2023, the total intrinsic value of all outstanding RSUs was $1.3 billion, based on the closing stock price of $500.54. As of March 31, 2023, unamortized compensation expense related to all outstanding RSUs was $308.0 million with a weighted-average remaining recognition period of approximately three years.

Cash proceeds from vested PSUs with a purchase price requirement totaled $1.1 million and $2.3 million for the three months ended March 31, 2023 and 2022, respectively.

Time-Based RSUs:

For the three months ended March 31, 2023, the Compensation Committee granted 27,000 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.

2023 PSUs:

In February 2023, the Compensation Committee granted 69,000 PSUs to the executive officers, which represent a target number of shares that can be earned based on the degree of achievement of two sets of performance goals (“2023 Executive PSUs”). For the first goal, the executive officers can earn up to 300% of the target number of the 2023 Executive PSUs based on the achievement of the Company’s average three-year (2023 through 2025) revenue growth rate in excess of the analog industry’s average three-year revenue growth rate as published by the Semiconductor Industry Association (the “SIA”). For the second goal, the executive officers can earn up to an additional 200% of the target number of the 2023 Executive PSUs if the Company secures additional manufacturing capacity outside of Mainland China during a three-year performance period. For both goals, a percentage of the 2023 Executive PSUs will fully vest on December 31, 2025 depending on the degree to which the pre-determined goals are met during the performance periods. Assuming the achievement of the highest level of the performance goals, the total stock-based compensation cost for the 2023 Executive PSUs is $156.2 million.

In February 2023, the Compensation Committee granted 13,000 PSUs to certain non-executive employees, which represent a target number of shares that can be earned based on the degree of achievement of the Company’s 2024 revenue goals for certain regions or product line divisions, or based on the degree of achievement of the Company’s average two-year (2023 and 2024) revenue growth rate compared against the analog industry’s average two-year revenue growth rate as published by the SIA (“2023 Non-Executive PSUs”). The maximum number of shares that an employee can earn is either 200% or 300% of the target number of the 2023 Non-Executive PSUs, depending on the job classification of the employee. 50% of the 2023 Non-Executive PSUs will vest in the first quarter of 2025 depending on the degree to which the pre-determined goals are met during the performance period. The remaining 2023 Non-Executive PSUs will vest over the following two years on a quarterly basis. Assuming the achievement of the highest level of performance goals, the total stock-based compensation cost for the 2023 Non-Executive PSUs is $14.2 million.

The 2023 Executive PSUs and the 2023 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 Company's stock price on the last trading day of the performance period is $30 higher than the grant date stock price of $467.62. The Company determined the grant date fair value of the 2023 Executive PSUs and the 2023 Non-Executive PSUs using a Monte Carlo simulation model with the following assumptions: stock price of $467.62, simulation term of four years, expected volatility of 51.0%, risk-free interest rate of 3.9%, and expected dividend yield of 0.9%. There is no illiquidity discount because the awards do not contain any post-vesting sales restrictions.

11

 

2004 Employee Stock Purchase Plan (“ESPP”)

For the three months ended March 31, 2023 and 2022, 9,000 and 7,000 shares, respectively, were issued under the ESPP. As of March 31, 2023, 4.5 million shares were available for future issuance under the ESPP.

The intrinsic value of the shares issued was $0.7 million for both the three months ended March 31, 2023 and 2022. As of March 31, 2023, the unamortized expense was $1.1 million, which will be recognized through the third quarter of 2023. The Black-Scholes model was used to value the employee stock purchase rights with the following weighted-average assumptions:

	Three Months Ended March 31,
	2023			2022
Expected term (in years)		0.5			0.5
Expected volatility		55.8	%		38.1	%
Risk-free interest rate		5.0	%		0.7	%
Dividend yield		0.8	%		0.6	%

Cash proceeds from the shares issued under the ESPP were $3.7 million and $2.8 million for the three months ended March 31, 2023 and 2022, respectively.  

4. BALANCE SHEET COMPONENTS

Inventories 

Inventories consist of the following (in thousands): 

	March 31,		December 31,
	2023		2022
Raw materials	$	131,367	$	126,760
Work in process		126,417		134,071
Finished goods		173,046		186,459
Total	$	430,830	$	447,290

Other Current Assets

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

	March 31,		December 31,
	2023		2022
Prepaid wafer purchase	$	50,000	$	-
RSU tax withholding proceeds receivable		15,997		14,480
Prepaid expenses		9,719		11,045
Accrued interest receivable		3,537		8,752
Other		10,702		8,465
Total	$	89,955	$	42,742

Prepaid wafer purchase of $50.0 million relates to a deposit made to a vendor under a long-term wafer supply agreement. See Note 8 for further details.

12

 

Other Long-Term Assets

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

	March 31,		December 31,
	2023		2022
Prepaid wafer purchase	$	120,000	$	170,000
Deferred compensation plan assets		67,765		63,022
Other		19,802		16,264
Total	$	207,567	$	249,286

Prepaid wafer purchase relates to a deposit made to a vendor under a long-term wafer supply agreement. See Note 8 for further details.

Other Accrued Liabilities

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

	March 31,		December 31,
	2023		2022
Dividends and dividend equivalents	$	54,656	$	42,170
Warranty		19,726		24,082
Stock rotation and sales returns		30,155		14,931
Income tax payable		32,338		15,595
Other		19,086		16,901
Total	$	155,961	$	113,679

As of March 31, 2023, stock rotation and sales returns included a $26.4 million stock rotation reserve, compared with a $14.3 million reserve as of December 31, 2022. The change in the reserve is affected by the timing of returns and the level of inventory in the distribution channel.

Other Long-Term Liabilities

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

	March 31,		December 31,
	2023		2022
Deferred compensation plan liabilities	$	65,678	$	64,863
Dividend equivalents		6,765		6,847
Other		5,204		1,664
Total	$	77,647	$	73,374

13

  

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 one year to eight 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.

The following table summarizes the balances of operating lease right-of-use (“ROU”) assets and liabilities (in thousands):

		March 31,		December 31,
	Financial Statement Line Item	2023		2022
Operating lease ROU assets	Other long-term assets	$	7,820	$	4,288
Operating lease liabilities	Other accrued liabilities	$	2,018	$	2,133
	Other long-term liabilities	$	5,203	$	1,664

The following tables summarize certain information related to the leases (in thousands, except percentages):

	Three Months Ended March 31,
	2023		2022
Lease costs:
Operating lease costs	$	716	$	729
Other		538		367
Total lease costs	$	1,254	$	1,096

	Three Months Ended March 31,
	2023		2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$	864	$	932
ROU assets obtained in exchange for new operating lease liabilities	$	4,545	$	1,010

	March 31,			December 31,
	2023			2022
Weighted-average remaining lease term (in years)		5.3			2.1
Weighted-average discount rate		3.4	%		2.1	%

As of March 31, 2023, the maturities of the lease liabilities were as follows (in thousands):

2023 (remaining nine months)	$	1,756
2024		1,591
2025		1,190
2026		921
2027		929
Thereafter		1,509
Total remaining lease payments		7,896
Less: imputed interest		(675	)
Total lease liabilities	$	7,221

As of March 31, 2023, the Company had no operating leases that had not yet commenced.

14

 

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 three years. Some of these leases include options to renew the lease term for up to five years.

For the three months ended March 31, 2023 and 2022, income related to lease payments was $0.5 million and $0.6 million, respectively. As of March 31, 2023, future income related to lease payments was as follows (in thousands):

2023 (remaining nine months)	$	1,112
2024		613
2025		107
2026		20
Total	$	1,852

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. 

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

	Three Months Ended March 31,
	2023		2022
Numerator:
Net income	$	109,802	$	79,566
Denominator:
Weighted-average outstanding shares - basic		47,234		46,424
Effect of dilutive securities		1,421		1,826
Weighted-average outstanding shares - diluted		48,655		48,250
Net income per share:
Basic	$	2.32	$	1.71
Diluted	$	2.26	$	1.65

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

15

  

7. SEGMENT, SIGNIFICANT CUSTOMERS AND GEOGRAPHIC INFORMATION

The Company operates in one reportable segment that includes the design, development, marketing and sale of high-performance, semiconductor-based power electronic solutions for the storage and computing, enterprise data, 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 March 31,
Customer	2023			2022
Distributor A		20	%		24	%
Distributor B		21	%		18	%
Distributor C		*			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 any termination of the agreement with a distributor.

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

	March 31,			December 31,
Customer	2023			2022
Distributor A		22	%		29	%
Distributor B		23	%		23	%

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

	Three Months Ended March 31,
Country or Region	2023		2022
China	$	225,052	$	206,079
Taiwan		48,833		56,437
South Korea		45,680		40,373
Europe		43,103		25,215
United States		31,017		13,446
Japan		30,815		19,155
Southeast Asia		26,432		16,889
Other		133		120
Total	$	451,065	$	377,714

16

 

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

	Three Months Ended March 31,
Product Family	2023		2022
Direct Current (“DC”) to DC	$	425,181	$	358,849
Lighting Control		25,884		18,865
Total	$	451,065	$	377,714

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

	March 31,		December 31,
Country	2023		2022
China	$	196,790	$	200,508
United States		115,363		113,996
Taiwan		19,812		20,074
Other		22,348		22,579
Total	$	354,313	$	357,157

8. COMMITMENTS AND CONTINGENCIES

Product Warranties

The Company generally provides either one or two year warranty 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 March 31,
	2023			2022
Balance at beginning of period	$	24,082		$	20,989
Warranties issued		362			-
Repairs, replacement and refund		(672	)		(1,380	)
Changes in liability for pre-existing warranties		(4,046	)		4,224
Balance at end of period	$	19,726		$	23,833

Changes in liability for pre-existing warranties result from changes in estimates for warranties issued in prior periods.

Purchase Commitments

The Company has outstanding purchase obligations with its suppliers and other parties that require the future purchases of goods or services. The purchase obligations primarily consist of wafer and other inventory purchases, assembly and other manufacturing services, construction of manufacturing and research and development facilities, purchases of production and other equipment, and license arrangements.

In May 2022, the Company entered into a long-term supply agreement in order to secure manufacturing production capacity for silicon wafers over a four-year period. As of March 31, 2023, the Company had made prepayments under this agreement of $170.0 million, of which $50.0 million was classified as short-term.

Total estimated future unconditional purchase commitments to all suppliers and other parties as of March 31, 2023 were as follows (in thousands):

2023 (remaining nine months)	$	337,545
2024		337,537
2025		353,952
Total	$	1,029,034

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Litigation

The Company is a party to actions and proceedings in the ordinary course of business, including 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. The Company may also be subject to litigation initiated by its stockholders. 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 March 31, 2023, 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): 

	March 31,		December 31,
	2023		2022
Cash	$	447,746	$	273,145
Money market funds		41,226		15,462
Certificates of deposit		131,042		130,467
Corporate debt securities		244,155		292,586
Commercial paper		18,163		17,928
U.S. treasuries and government agency bonds		35,238		8,285
Auction-rate securities backed by student-loan notes		1,516		1,711
Total	$	919,086	$	739,584

	March 31,		December 31,
	2023		2022
Reported as:
Cash and cash equivalents	$	488,972	$	288,607
Short-term investments		428,598		449,266
Investment within other long-term assets		1,516		1,711
Total	$	919,086	$	739,584

The following table summarizes the contractual maturities of the short-term and long-term available-for-sale investments as of March 31, 2023 (in thousands):  

	Amortized Cost		Fair Value
Due in less than 1 year	$	252,449	$	249,803
Due in 1 - 5 years		181,774		178,795
Due in greater than 5 years		1,571		1,516
Total	$	435,794	$	430,114

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

18

 

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

	March 31, 2023
	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Money market funds	$	41,226	$	-	$	-		$	41,226
Certificates of deposit		131,042		-		-			131,042
Corporate debt securities		249,743		39		(5,627	)		244,155
Commercial paper		18,163		-		-			18,163
U.S. treasuries and government agency bonds		35,276		83		(121	)		35,238
Auction-rate securities backed by student-loan notes		1,570		-		(54	)		1,516
Total	$	477,020	$	122	$	(5,802	)	$	471,340

	December 31, 2022
	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Money market funds	$	15,462	$	-	$	-		$	15,462
Certificates of deposit		130,467		-		-			130,467
Corporate debt securities		300,529		18		(7,961	)		292,586
Commercial paper		17,928		-		-			17,928
U.S. treasuries and government agency bonds		8,487		-		(202	)		8,285
Auction-rate securities backed by student-loan notes		1,770		-		(59	)		1,711
Total	$	474,643	$	18	$	(8,222	)	$	466,439

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): 

	March 31, 2023
	Less than 12 Months					Greater than 12 Months					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Corporate debt securities	$	18,084	$	(68	)	$	212,767	$	(5,559	)	$	230,851	$	(5,627	)
U.S. treasuries and government agency bonds		2,878		(5	)		7,383		(116	)		10,261		(121	)
Auction-rate securities backed by student-loan notes		-		-			1,516		(54	)		1,516		(54	)
Total	$	20,962	$	(73	)	$	221,666	$	(5,729	)	$	242,628	$	(5,802	)

	December 31, 2022
	Less than 12 Months					Greater than 12 Months					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Corporate debt securities	$	72,943	$	(973	)	$	202,074	$	(6,988	)	$	275,017	$	(7,961	)
U.S. treasuries and government agency bonds		987		(2	)		7,298		(200	)		8,285		(202	)
Auction-rate securities backed by student-loan notes		-		-			1,711		(59	)		1,711		(59	)
Total	$	73,930	$	(975	)	$	211,083	$	(7,247	)	$	285,013	$	(8,222	)

An impairment exists when the fair value of an investment is less than its amortized cost basis. As of March 31, 2023 and December 31, 2022, 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.

19

 

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 23 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 $41.7 million, or 96% 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. In April 2022, the Company made an investment of CHF 2.0 million in a convertible loan that will convert into additional shares of the Investee. 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 and is on the Investee’s board of directors. As of March 31, 2023 and December 31, 2022, the Company’s investment in the Investee, which is denominated in Swiss Francs, had a carrying value of $5.8 million and $5.4 million, respectively. The Company did not record any impairment or adjustments resulting from observable price changes for the three months ended March 31, 2023.

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):   

	March 31,		December 31,
	2023		2022
Cash and cash equivalents	$	488,972	$	288,607
Restricted cash included in other long-term assets		123		122
Total cash, cash equivalents and restricted cash reported on the Condensed Consolidated Statements of Cash Flows	$	489,095	$	288,729

As of March 31, 2023 and December 31, 2022, 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.

20

  

10. FAIR VALUE MEASUREMENTS

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

	March 31, 2023
	Total		Level 1		Level 2		Level 3
Money market funds	$	41,226	$	41,226	$	-	$	-
Certificates of deposit		131,042		-		131,042		-
Corporate debt securities		244,155		-		244,155		-
Commercial paper		18,163		-		18,163
U.S. treasuries and government agency bonds		35,238		-		35,238		-
Auction-rate securities backed by student-loan notes		1,516		-		-		1,516
Mutual funds and money market funds under deferred compensation plan		47,114		47,114		-		-
Total	$	518,454	$	88,340	$	428,598	$	1,516

	December 31, 2022
	Total		Level 1		Level 2		Level 3
Money market funds	$	15,462	$	15,462	$	-	$	-
Certificates of deposit		130,467		-		130,467		-
Corporate debt securities		292,586		-		292,586		-
Commercial paper		17,928		-		17,928		-
U.S. treasuries and government agency bonds		8,285		-		8,285		-
Auction-rate securities backed by student-loan notes		1,711		-		-		1,711
Mutual funds and money market funds under deferred compensation plan		43,933		43,933		-		-
Total	$	510,372	$	59,395	$	449,266	$	1,711

● 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 periods presented.

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11. DEFERRED COMPENSATION PLAN

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

	March 31,		December 31,
	2023		2022
Deferred compensation plan asset components:
Cash surrender value of corporate-owned life insurance policies	$	20,651	$	19,089
Fair value of mutual funds and money market funds		47,114		43,933
Total	$	67,765	$	63,022
Deferred compensation plan assets reported in:
Other long-term assets	$	67,765	$	63,022
Deferred compensation plan liabilities reported in:
Accrued compensation and related benefits (short-term)	$	4,191	$	118
Other long-term liabilities		65,678		64,863
Total	$	69,869	$	64,981

12. OTHER INCOME (EXPENSE), NET

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

	Three Months Ended March 31,
	2023			2022
Interest income	$	4,808		$	3,461
Amortization of premium on available-for-sale securities		(260	)		(1,348	)
Gain (loss) on deferred compensation plan investments		2,534			(2,192	)
Charitable contributions		(2,000	)		(500	)
Other		215			(55	)
Total	$	5,297		$	(634	)

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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 March 31, 2023 was $19.8 million, or 15.3% of pre-tax income. The effective tax rate was lower than the federal statutory rate of 21% primarily due to foreign income from the Company’s subsidiaries in Bermuda and China being taxed at lower statutory tax rates, and excess tax benefits from stock-based compensation. The decrease in the effective tax rate 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  March 31, 2022 was $15.9 million, or 16.7% of pre-tax income. The effective tax rate was lower than the federal statutory rate of 21% primarily due to foreign income from the Company’s subsidiaries in Bermuda and China being taxed at lower statutory tax rates, and excess tax benefits from stock-based compensation. The decrease in the effective tax rate relative to the federal statutory rate was partially offset by the inclusion of the GILTI tax. 

On August 9, 2022, the U.S. government enacted the U.S. CHIPS and Science Act of 2022 (the “CHIPS Act”) to provide certain financial and tax incentives to the semiconductor industry, primarily for manufacturing activities within the United States. On August 16, 2022, the Inflation Reduction Act of 2022 (the “IRA”) was enacted and signed into law. The IRA, among other things, introduces a new 15% corporate minimum tax, based on adjusted financial statement income of certain large corporations, and imposes a 1% surcharge on stock repurchases. This excise tax was effective January 1, 2023. The Company does not believe the CHIPS Act or the IRA had a material impact on the Company’s income tax provisions, results of operations or financial condition for the three months ended March 31, 2023.  

14. ACCUMULATED OTHER COMPREHENSIVE LOSS

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

	Unrealized Gains (Losses) on Available-for- Sale Securities			Foreign Currency Translation Adjustments			Total
Balance as of January 1, 2023	$	(7,727	)	$	(15,350	)	$	(23,077	)
Other comprehensive income before reclassifications		2,524			2,919			5,443
Tax effect		(311	)		-			(311	)
Net current period other comprehensive income		2,213			2,919			5,132
Balance as of March 31, 2023	$	(5,514	)	$	(12,431	)	$	(17,945	)

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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 March 31,
	2023		2022
Dividend declared per share	$	1.00	$	0.75
Total amount	$	47,330	$	34,908

As of March 31, 2023 and December 31, 2022, accrued dividends totaled $47.3 million and $35.3 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 Company’s 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 March 31, 2023 and December 31, 2022, accrued dividend equivalents totaled $14.1 million and $13.8 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 storage and computing, enterprise data, automotive, industrial, communications and consumer markets;

• estimates of our future liquidity requirements;

• the cyclical nature of the semiconductor industry;

• the effects of macroeconomic factors, including the recent banking crisis, the global economic downturn and the Russia-Ukraine conflict, on the semiconductor industry and our business;

• protection of our proprietary technology;

• business outlook for the remainder of 2023 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 cash dividends and dividend equivalents; and

• the factors that differentiate us from our competitors.

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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, our industry and the global economy, including our expectations regarding the potential impacts of macroeconomic factors, such as the ongoing banking crisis, the global economic downturn and the Russia-Ukraine conflict on the semiconductor industry and our business. These statements are not guarantees of future performance and are subject to significant 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 our Annual Report on Form 10-K including, in particular, in the section entitled “Item 1A. Risk Factors.” Except as required by law, we disclaim any duty, 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 and entail significant risks. 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 fabless company with a global footprint that provides high-performance, semiconductor-based power electronic solutions. Incorporated in 1997, our three core strengths include deep system-level knowledge, strong semiconductor expertise, and innovative proprietary technologies in the areas of semiconductor processes, system integration, and packaging. These combined advantages enable us to deliver reliable, compact, and monolithic solutions found in storage and computing, enterprise data, automotive, industrial, communications and consumer applications. Our mission is to reduce energy and material consumption to improve all aspects of quality of life. 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. While we are not immune from industry downturns, we have targeted product and market areas that we believe have the ability to offer above average industry performance over the long term. Historically, our revenue has generally been higher in the second half of the year than in the first half although various factors, such as market conditions and the timing of key product introductions, could impact this trend.

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 supply chain lead times for orders are generally 16 to 26 weeks. These factors, combined with the fact that our customers can cancel or reschedule orders 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 and indirect sales to customers in Asia was 84% and 90% for the three months ended March 31, 2023 and 2022, respectively. 

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

Macroeconomic Conditions and Recent Regulations

The semiconductor industry faces a number of macro-economic challenges including wide swings in customer demand, rising inflation, increased interest rates, and fluctuations in currency rates. We remain cautious in light of changing macroeconomic conditions and will continue to monitor the potential impact on our operations. The implications of macroeconomic events on our business, results of operations and overall financial position remain uncertain.

We closely monitor changes to export control laws, trade regulations and other trade requirements. To date, no restrictions have had a material impact on our revenue and operations. We will continue to monitor any changes to export control laws, trade regulations and other trade requirements and are committed to complying with all applicable trade laws, regulations and other requirements.

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:

• 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.

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We require all new employees to attend an IT security training orientation. In addition, on a regular basis, our IT team updates training materials related to our policies and procedures and shares news and articles related to cybersecurity awareness, both of which are stored on our intranet and available to all employees. We also currently maintain an insurance policy that provides certain coverage for losses we incur due to data breaches and other cybersecurity incidents.

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. In 2021, we completed the ISO 27001 certification, a globally recognized information security standard.

The Audit Committee of our Board of Directors, which consists of three independent members, is responsible for the oversight of our cybersecurity risk program. At least quarterly, 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 do not believe we have experienced any material information security breaches and have not 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 macroeconomic factors, including the impact of the recent banking crisis and the global economic downturn. Actual results could differ from these estimates and assumptions, and any such differences may be material to our condensed consolidated financial statements. 

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 included in this Report, as compared to those disclosed in the Annual Report on Form 10-K for the year ended December 31, 2022. 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.  

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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 March 31,
	2023				2022
	(in thousands, except percentages)
Revenue	$	451,065	100.0	%	$	377,714		100.0	%
Cost of revenue		192,285	42.6			158,834		42.1
Gross profit		258,780	57.4			218,880		57.9
Operating expenses:
Research and development		63,709	14.1			54,104		14.3
Selling, general and administrative		70,795	15.7			68,642		18.1
Total operating expenses		134,504	29.8			122,746		32.4
Operating income		124,276	27.6			96,134		25.5
Other income (expense), net		5,297	1.1			(634	)	(0.2	)
Income before income taxes		129,573	28.7			95,500		25.3
Income tax expense		19,771	4.4			15,934		4.2
Net income	$	109,802	24.3	%	$	79,566		21.1	%

Revenue

The following table summarizes our revenue by end market:

	Three Months Ended March 31,
End Market	2023		% of Revenue			2022		% of Revenue			Change
	(in thousands, except percentages)
Storage and Computing	$	119,822		26.6	%	$	96,586		25.6	%		24.1	%
Enterprise Data		47,163		10.5			42,509		11.2			10.9	%
Automotive		105,342		23.3			54,546		14.4			93.1	%
Industrial		47,469		10.5			48,538		12.9			(2.2	)%
Communications		67,906		15.1			55,574		14.7			22.2	%
Consumer		63,363		14.0			79,961		21.2			(20.8	)%
Total	$	451,065		100.0	%	$	377,714		100.0	%		19.4	%

Revenue for the three months ended March 31, 2023 was $451.1 million, an increase of $73.4 million, or 19.4%, from $377.7 million for the three months ended March 31, 2022. The increase in revenue was primarily due to increases in the average selling prices resulting primarily from the sale of higher value products.

For the three months ended March 31, 2023, revenue from the storage and computing market increased $23.2 million, or 24.1%, from the same period in 2022. This increase was primarily due to higher sales of storage applications and enterprise notebooks. Revenue from the enterprise data market increased $4.7 million, or 10.9%, from the same period in 2022. This increase was primarily due to higher sales of our power management solutions for cloud-based CPU server applications. Revenue from the automotive market increased $50.8 million, or 93.1%, from the same period in 2022. This increase was primarily due to increased sales of our highly integrated solutions for advanced driver assistance systems, digital cockpit and lighting applications. Revenue from the industrial market decreased $1.1 million, or 2.2%, from the same period in 2022. This decrease was mainly driven by decreased sales of power sources, partially offset by higher sales in applications for smart meters. Revenue from the communications market increased $12.3 million, or 22.2%, from the same period in 2022. This increase primarily reflected higher revenue related to 5G infrastructure and wireless applications. Revenue from the consumer market decreased $16.6 million, or 20.8%, from the same period in 2022. This decrease was primarily driven by lower sales volume in gaming, smart TVs, mobile devices and home appliances.  

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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 March 31,
	2023			2022			Change
	(in thousands, except percentages)
Cost of revenue	$	192,285		$	158,834			21.1	%
As a percentage of revenue		42.6	%		42.1	%
Gross profit	$	258,780		$	218,880			18.2	%
Gross margin		57.4	%		57.9	%

Cost of revenue was $192.3 million, or 42.6% of revenue, for the three months ended March 31, 2023, and $158.8 million, or 42.1% of revenue, for the three months ended March 31, 2022. The $33.5 million increase in cost of revenue resulted from the product mix of higher cost products, which was partially offset by a decrease in warranty expenses.

Gross margin was 57.4% for the three months ended March 31, 2023, compared with 57.9% for the three months ended March 31, 2022. The decrease in gross margin was mainly driven by product mix, which was partially offset by lower 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 March 31,
	2023			2022			Change
	(in thousands, except percentages)
R&D expenses	$	63,709		$	54,104			17.8	%
As a percentage of revenue		14.1	%		14.3	%

R&D expenses were $63.7 million, or 14.1% of revenue, for the three months ended March 31, 2023, and $54.1 million, or 14.3% of revenue, for the three months ended March 31, 2022. The $9.6 million increase in R&D expenses was primarily due to a $6.7 million increase in new product development expenses and higher expenses related to the changes in the value of deferred compensation plan liabilities.

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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, professional service fees and litigation expenses. 

	Three Months Ended March 31,
	2023			2022			Change
	(in thousands, except percentages)
SG&A expenses	$	70,795		$	68,642			3.1	%
As a percentage of revenue		15.7	%		18.1	%

SG&A expenses were $70.8 million, or 15.7% of revenue, for the three months ended March 31, 2023, and $68.6 million, or 18.1% of revenue, for the three months ended March 31, 2022. The $2.2 million increase in SG&A expenses was driven by an increase of $2.6 million in litigation expenses, an increase of $0.8 million in facilities costs, and an increase of $0.7 million in sales commissions and advertising expenses, partially offset by a decrease of $2.4 million in compensation related expenses. 

Other Income (Expense), Net

Other income, net, was $5.3 million for the three months ended March 31, 2023, compared with other expense, net, of $0.6 million for the three months ended March 31, 2022. The increase in other income was primarily due to an increase of $4.7 million in income related to changes in the value of the deferred compensation plan investments and an increase of $2.4 million in net interest income, partially offset by an increase of $1.5 million in charitable contributions.

Income Tax Expense

The income tax provision 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 March 31, 2023 was $19.8 million, or 15.3% of pre-tax income. The effective tax rate was lower than the federal statutory rate of 21% primarily due to foreign income from our subsidiaries in Bermuda and China being taxed at lower statutory tax rates, 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.

The income tax expense for the three months ended March 31, 2022 was $15.9 million, or 16.7% of pre-tax income. The effective tax rate was lower than the federal statutory rate of 21% primarily due to foreign income from our subsidiaries in Bermuda and China being taxed at lower statutory tax rates, and excess tax benefits from stock-based compensation. The decrease in the effective tax rate relative to the federal statutory rate was partially offset by the inclusion of the GILTI tax.

In August 2022, the CHIPS Act and the IRA were enacted and signed into law, neither of which had a material impact on our income tax provisions, results of operations or financial condition for the three months ended March 31, 2023. See Note 13 for further details.

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Liquidity and Capital Resources

	March 31,			December 31,
	2023			2022
	(in thousands, except percentages)
Cash and cash equivalents	$	488,972		$	288,607
Short-term investments		428,598			449,266
Total cash, cash equivalents and short-term investments	$	917,570		$	737,873
Percentage of total assets		41.2	%		35.8	%
Total current assets	$	1,622,629		$	1,410,619
Total current liabilities		(315,843	)		(263,400	)
Working capital	$	1,306,786		$	1,147,219

As of March 31, 2023, we had cash and cash equivalents of $489.0 million and short-term investments of $428.6 million, compared with cash and cash equivalents of $288.6 million and short-term investments of $449.3 million as of December 31, 2022. As of March 31, 2023, $388.1 million of cash and cash equivalents and $274.1 million of short-term investments were held by our international subsidiaries. We have and may continue to repatriate 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.

Summary of Cash Flows

The following table summarizes our cash flow activities:

	Three Months Ended March 31,
	2023			2022
	(in thousands)
Net cash provided by operating activities	$	218,807		$	107,419
Net cash provided by (used in) investing activities		12,314			(11,613	)
Net cash used in financing activities		(32,252	)		(24,249	)
Effect of change in exchange rates		1,497			(220	)
Net increase in cash, cash equivalents and restricted cash	$	200,366		$	71,337

For the three months ended March 31, 2023, the $111.4 million increase in cash provided by operating activities compared to the prior period was primarily due to an increase of $89.1 million in operating assets and liabilities, and an increase of $30.2 million in net income.

For the three months ended March 31, 2023, the $23.9 million increase in cash provided by investing activities compared to the prior period was primarily due to a $120.4 million increase in sales of investments and an $18.0 million decrease in capital expenditures, partially offset by a $113.1 million increase in purchases of investments.

For the three months ended March 31, 2023, the $8.0 million increase in cash used in financing activities compared to the prior period was primarily due to a $7.9 million increase in dividend and dividend equivalent payments.

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 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. 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/or 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. 

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Cash Requirements

Although consequences of economic uncertainty and macroeconomic conditions and other factors could adversely affect our liquidity and capital resources in the future, and our cash requirements may fluctuate based on the timing and extent of many factors such as those discussed above, we believe that our balances of cash, cash equivalents and short-term investments of $917.6 million as of March 31, 2023, along with cash generated by ongoing operations, will be sufficient to satisfy our liquidity requirements for the next 12 months and beyond.

Our material cash requirements include the following contractual and other obligations:

Purchase Obligations

Purchase obligations represent commitments to our suppliers and other parties requiring the purchases of goods or services. Our purchase obligations primarily consist of wafer and other inventory purchases, assembly and other manufacturing services, construction of manufacturing and R&D facilities, purchases of production and other equipment, and license arrangements.

In May 2022, we entered into a long-term supply agreement in order to secure manufacturing production capacity for silicon wafers over a four-year period. As of March 31, 2023, the Company had made prepayments under this agreement of $170.0 million, of which $50.0 million was classified as short-term.

As of March 31, 2023, total estimated future unconditional purchase commitments to all suppliers and other parties were $1.0 billion, of which $406.7 million was classified as short-term.

Transition Tax Liability

The transition tax liability represents the one-time, mandatory deemed repatriation tax imposed on previously deferred foreign earnings under the U.S. Tax Cuts and Jobs Act enacted in December 2017 (the “2017 Tax Act”). As permitted by the 2017 Tax Act, we have elected to pay the tax liability in installments on an interest-free basis through 2025. As of March 31, 2023, the remaining liability totaled $14.8 million, of which $3.7 million was classified as short-term.

Operating Leases

Operating lease obligations represent the undiscounted remaining lease payments primarily for our leased facilities and equipment. As of March 31, 2023, these obligations totaled $7.2 million, of which $2.0 million was classified as short-term.

Dividends

We currently have a dividend program approved by our Board of Directors, pursuant to which we intend to pay quarterly cash dividends on our common stock. Based on our 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. As of March 31, 2023, accrued dividends totaled $47.3 million. 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.

Other Long-Term Obligations

Other long-term obligations primarily include payments for deferred compensation plan liabilities and accrued dividend equivalents. As of March 31, 2023, these obligations totaled $72.4 million.

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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, 2022. During the three months ended March 31, 2023, there were no material changes or developments that would materially alter the market risk assessment performed as of December 31, 2022.

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 March 31, 2023, our disclosure controls and procedures were designed at a reasonable assurance level and were 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

During the quarter ended March 31, 2023, there were no changes in our internal control over financial reporting that would have materially affected, or were reasonably likely to materially affect, our internal control over financial reporting.

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.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

We are a party to actions and proceedings in the ordinary course of business, including 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. We may also be subject to litigation initiated by our stockholders. 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 intend to defend ourselves vigorously against any such claims. As of March 31, 2023, 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.

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 could 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:   

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

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

• the impact of extensive Chinese government regulations, reduction or elimination of incentives, and uncertainties with respect to China’s legal system, on us and our manufacturing partners and suppliers;

• 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;

• political and other risks in Taiwan and Hong Kong due to their tense relationships with China;

• fluctuations in the value of the U.S. Dollar relative to other currencies, including the Renminbi;

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

• changes in general demand for electronic products 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 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 and value-added resellers, for a significant portion of our revenue;

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

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• 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 despite 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;

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

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

• the impact of various U.S. and international laws and regulations regarding data protection on our business operations;

• our significant investment of resources in research and development that may not result in increased future sales;

• 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, including those related to environmental, social and governance (“ESG”) initiatives;

• 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;

• risks associated with owning our stock, including volatility in our trading price due to our business and financial performance, analyst downgrades, failure to meet our own or analyst expectations, changes to our dividend program, and dilution from issuance of additional shares;

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

• risks associated with financial market, economy and geopolitical uncertainties, including the recent banking collapse and the Russia-Ukraine conflict.

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

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 significant risks due to this geographic concentration of business and operations. For the three months ended March 31, 2023, 84% 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 or restrictions, including tax and trade 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 licenses;

• trade restrictions imposed by the U.S. related to goods imported from regions in China with records of forced labor and other human rights issues;

• currency exchange rate fluctuations impacting intercompany transactions;

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

• transportation delays and other supply chain issues;

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

• tariffs imposed by China and the U.S. that may impact our sales;

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

• international political relationships and acts or threats of war;

• terrorism and threats of terrorism;

• adverse weather conditions or other natural disasters that may affect our operations in China and cause work stoppages;

• work stoppages related to employee dissatisfaction;

• economic, social and political instability;

• longer accounts receivable collection cycles;

• 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.

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

Our operations and performance depend significantly on global economic conditions. Adverse macroeconomic conditions, including inflation, slower growth, recession, stagflation, new or increased tariffs and other barriers to trade, tighter credit, higher interest rates, higher unemployment and currency fluctuations can materially adversely affect logistics or demand for our products. For example, for several consecutive quarters, some of our customers have cancelled, decreased or delayed their existing and future orders with us. Volatility in the credit markets could severely diminish our direct and indirect customers’ liquidity and capital availability, which could materially harm our business.

Demand for our products is a function of the health of the economies in the U.S., 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 global economic downturn or the Russia-Ukraine conflict, 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 could 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 nor 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.

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:

• challenges to hire and maintain a qualified workforce;

• natural disasters such as earthquakes, flooding, severe heatwaves or droughts, which could result in prolonged power shortages or water restrictions in our facilities;

• challenges 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 and our manufacturing partners and suppliers are or will be subject to extensive Chinese government regulations, and the benefit of various incentives from Chinese governments that we and our manufacturing partners and suppliers 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 and suppliers are located in China. The Chinese government has broad discretion and authority to regulate the technology industry in China. Additionally, the Chinese 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.

Any additional new regulations or the amendment of previously implemented regulations could require us and our manufacturing partners and suppliers 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.

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

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Uncertainties with respect to China’s legal system, including uncertainties regarding the enforcement of laws, and sudden or unexpected changes in policies, laws and regulations in China could adversely affect our operations.

China’s legal system is a civil law system based on written statutes. Unlike the common law system, prior court decisions under the civil law system may be cited for reference but have limited precedential value. Since China’s legal system continues to rapidly evolve, the interpretations and enforcement of these laws and regulations are not always uniform and involve uncertainties. In addition, any new or amended laws and regulations related to, among other things, foreign investment and manufacturing could have a material adverse effect on our business and our ability to operate our business in China.

From time to time, we may have to resort to administrative and court proceedings to enforce our legal rights. Any administrative and court proceedings in China may be protracted, resulting in substantial costs and diversion of resources and management attention. Since China’s administrative and court authorities have significant discretion in interpreting and implementing statutory provisions and contractual terms, it may be more difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection than those that may be provided in other jurisdictions. These uncertainties may impede our ability to enforce contracts in China and could materially and adversely affect our business and results of operations.

Furthermore, China’s legal system is based in part on government policies and internal rules, some of which are not published on a timely basis, or at all, and may have retroactive effect. As a result, we may not be aware of our violation of any of these policies and rules until some time after the violation may have occurred. Such unpredictability towards our contractual, property and procedural rights and any failure to quickly respond to changes in the regulatory environment in China could adversely affect our business and impede our ability to continue our operations and proceed with our future business plans in China.

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.

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 individuals, 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 our compliance controls could be circumvented, exposing us to legal liabilities, sanctions and restrictions on our business. 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 or restrict the export of some of our products and services to our customers would materially harm our business and 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 that have taken 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, as well as our business and financial results. 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.

Additionally, the imposition of tariffs is dependent upon the classification of goods under the U.S. Harmonized Tariff System (“HTS”) and the country of origin of the goods. Determination of the HTS and the origin of the goods is a technical matter that can be subjective in nature. Accordingly, although we believe our classifications of both HTS and origin are appropriate, there is no certainty that our assessment will be consistent with that of the U.S. government. If the U.S. government does not agree with our determinations, we could be required to pay additional amounts, including potential penalties.

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We face political and other risks conducting business in Taiwan and Hong Kong, particularly due to their tense relationships with China.

We have significant business operations in Taiwan, and many of our manufacturing partners and suppliers are located in Taiwan. Accordingly, our business, financial condition and results of operations may be affected by changes in governmental and economic policies in Taiwan, social instability and diplomatic and social developments in or affecting Taiwan due to its unique international political status. Although significant economic and cultural relations have been established between Taiwan and China, we cannot assure that relations between Taiwan and China will not face political, military or economic uncertainties in the future. Any deterioration in the relations between Taiwan and China, and other factors affecting military, political or economic conditions in Taiwan, could disrupt our business operations and materially and adversely affect our results of operations.

In addition, the Chinese government has promulgated new regulations impacting economic and political stability within Hong Kong where many of our customers are located. Due to the sensitive political climate these regulations created, there are increasing risks that this China's national security law may trigger sanctions or other forms of restrictions by foreign governments including the U.S., which could affect companies conducting business in Hong Kong. It is difficult for us to predict the impact, if any, the implementation of the national security law will have on our business, as such impact will depend on future developments, which are highly uncertain and cannot be predicted.

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

Several of our manufacturing and other suppliers are and will continue to be primarily located in China for the foreseeable future. In connection with the global economic downturn, there has been an increased level of global currency fluctuation and volatility. 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 outside of China, which could adversely affect our financial results and 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 certain transactions, including intercompany transactions between the U.S. and our foreign subsidiaries, that are denominated in currencies other than the functional currencies. Fluctuations in the value of the U.S. Dollar relative to foreign currencies could increase the amount of foreign currency exchange losses we record, which could have an adverse impact on our results of operations.

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 including as a result of the global economic downturn, 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 storage and computing, enterprise data, automotive and consumer markets will continue to account for the majority of our revenue. If we are not able to accurately predict new end markets to serve or if the demand for our products declines in our current major end markets, our revenue will decrease and our results of operations and financial condition would be materially and adversely affected. In addition, as technology evolves, the requirement 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.

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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 expenses and revenue depend 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 macroeconomic factors, including increased inflation, increased interest rates, supply chain disruptions, decreased economic output, fluctuations in currency rates and the Russia-Ukraine conflict. 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, and we may have difficulty forecasting our expenses and inventory levels, which could reduce our revenue, result in inventory write offs, 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 our development and sale of products that are differentiated in the market, with gross margins that have historically been above industry averages. Should we fail to improve or maintain our gross margins 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;

• 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 services. 

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 receive a significant portion of our revenue from distribution arrangements, and value-added resellers, and the loss of any one of these distributors, value-added resellers or of 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. Significant deterioration in the liquidity or financial condition of any such 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. While we could partner with other distributors or value-added resellers to replace any of our customers, the change in business partners could interrupt our operations, cause us to have to identify and qualify new partners, and have a materially adverse impact on our business, financial condition and results of operations.

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Moreover, we believe a high percentage of our products are eventually sold to a number of OEMs and ODMs. Although we communicate with OEMs and/or ODMs 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, even if we secure a design win. 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, energy efficiency 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 thereto, or changes in the raw materials used in the manufacturing processes may cause our products to fail. From time to time, we have 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 a loss of customers and/or a decrease in 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.

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 sufficient 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, 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, particularly as such customers are exposed to economic risks in connection with the global economic downturn. 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.   

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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. 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. 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 increasing 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, both with our current suppliers and with new suppliers. Such activities are subject to a number of risks, including:

• the costs and expense associated with such activities, including requirements to make long-term purchase commitments and upfront cash deposits to our suppliers;

• 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 identifying and negotiating agreements with new foundries and suppliers; and

• 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 supplier capacity. If our manufacturing costs increase, including as a result of inflationary pressure, or we experience supply constraints, we may be required to raise the prices of our products to remain profitable, which could result in a loss of customers. If we are unable to increase or maintain our manufacturing capacity, we may be unable to meet demand, which would harm our revenue and results of operations and may result in a loss of customers as they seek supply from other sources.

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 supply arrangements 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 relationships with these suppliers are contractual, many important aspects of our relationships depend on our suppliers’ continued cooperation and our management of the supplier relationships. Our relationships could 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 and supply of our products. The failure of our suppliers to provide wafers at acceptable yields could prevent us from fulfilling our customer orders for our products and would likely cause a decline in our revenue.  

In addition, adverse macroeconomic conditions, such as inflationary pressures resulting from worldwide supply chain constraints and other factors, have increased, and may continue to increase the prices we pay to our suppliers. As a result of the increased costs, we have raised, and may be required to further raise the prices of our products in order to remain profitable, which could result in a loss of customers and reduced 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.

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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 the Russia-Ukraine conflict, the recent uncertainties on the banking sector and supply chain disruptions 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. 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. Some of our customers and distributors may nevertheless cancel orders as a result of the impacts of the global economic downturn, their own specific business challenges or for other reasons. In the event that our predictions are inaccurate due to unexpected increases in orders or unavailability of products within the timeframe that is required, we may have insufficient inventory to meet our customers’ demands. In addition, a perceived negative trend in market conditions could lead us to decrease the manufacturing volume of our products to avoid excess inventory. If we inaccurately assess market conditions for our products, we would have insufficient inventory to meet our customer demands resulting in lost potential revenue. 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, import/export restrictions 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.

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 resulted in 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 again experience severe or prolonged downturns in the future, which could result in lower demand for our products, downward pressure on the price of our products, and/or increased inventory due to our customers’ delayed production schedule. 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 of multiple products 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.

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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 foreign semiconductor companies, many of which have substantially greater financial and other resources with which to pursue engineering, manufacturing, marketing, and distribution of their products, and, in some cases, may have a broader number of product offerings that enable them to more effectively market and sell to customers and engage sales partners. We are in direct and active competition, with respect to one or more of our product lines, with many manufacturers 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 guarantee 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.

In addition, from time to time, governments may provide subsidies or make other investments that could give competitive advantages to many semiconductor companies. For example, in August 2022, the U.S. enacted the CHIPS Act, which, among other things, provides funding to increase domestic production and research and development in the semiconductor industry. Because we operate a fabless business model, we do not believe we will be eligible for such investments from the U.S. government. Many of our competitors will benefit from the investments, which will help increase their production capacity, shorten their lead time and gain market share. These competitive pressures could materially and adversely affect 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 continue to increase their use of 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 any of these situations were to occur, our business, financial condition and results of operations could be materially and adversely affected.

Risks Associated with IT and Cybersecurity

Implementation of enhanced enterprise resource planning (“ERP”) or other IT 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 may require significant capital investments and personnel resources. Difficulties in implementing new or upgraded information systems or any significant system failures could disrupt our operations and financial reporting, which could have a material adverse effect on our capital resources, financial condition or results of operations. 

Certain software we use is from open source code sources, which, under certain circumstances, may lead to unintended consequences and, therefore, could materially adversely affect our business, financial condition, operating results and cash flow.

We use open source software in connection with certain of our products and services, and we intend to continue to use open source software in the future. From time to time, there have been claims challenging the ownership of open source software against companies that incorporate open source software into their products or services or alleging that these companies have violated the terms of an open source license. As a result, we could be subject to lawsuits by parties claiming ownership of what we believe to be open source software or alleging that we have violated the terms of an open source license. Litigation could be costly for us to defend, have a negative effect on our operating results and financial condition or require us to devote additional research and development resources to change our solutions. In addition, if we were to combine our proprietary software solutions with open source software in certain circumstances, we could, under certain open source licenses, be required to publicly release the source code of our proprietary software solutions, which could harm our business and ability to compete. If we inappropriately use open source software, we may be required to re-engineer our solutions, discontinue the sale of our solutions, release the source code of our proprietary software to the public at no cost or take other remedial actions, which could increase our costs, harm our ability to compete and have a material adverse effect on our business, operating results and financial condition. There is also a risk that open source licenses could be construed in a way that could impose unanticipated conditions or restrictions on our ability to commercialize our solutions, which could adversely affect our business, operating results and financial condition.

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System security risks, data protection or privacy breaches, cyberattacks, systems integration issues and unauthorized use of artificial intelligence (“AI”) tools 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. Maintaining security 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. Remote working arrangements and the Russia-Ukraine conflict have also heightened our potential exposure to cyberattacks, which could put the sensitive data 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 reputation and relationships with our business partners and customers could be materially harmed, and we could be exposed to risks of litigation and possible significant liability.

Portions of our IT infrastructure may also 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 in a timely manner and interrupt other processes. Delayed sales or a loss of customers resulting from these disruptions could adversely affect our financial results, stock price and reputation.

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 individuals 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 and substantially impair our ability to attract and retain customers, which could have an adverse impact on our business, financial condition and results of operations.

Our ability to manage and aggregate data may be limited by the effectiveness of our policies, programs, processes, systems and practices that govern how data is acquired, validated, used, stored, protected, processed and shared. Failure to manage data effectively and to aggregate data in an accurate and timely manner may limit our ability to manage current and emerging risks, as well as to manage changing business needs. While we restrict the use of third-party and open source AI tools, such as ChatGPT, our employees and consultants may use these tools on an unauthorized basis and our partners may use these tools, which poses additional risks relating to the protection of data, including the potential exposure of our proprietary confidential information to unauthorized recipients and the misuse of our or third-party intellectual property. Use of AI tools may result in allegations or claims against us related to violation of third-party intellectual property rights, unauthorized access to or use of proprietary information and failure to comply with open source software requirements. AI tools may also produce inaccurate responses that could lead to errors in our decision-making, product development or other business activities, which could have a negative impact on our business, operating results and financial condition. Our ability to mitigate these risks will depend on our continued effective maintaining, training, monitoring and enforcement of appropriate policies and procedures governing the use of AI tools, and the results of any such use, by us or our partners.

We are subject to various U.S. and international laws, policies and other regulations regarding data protection.

Privacy, cyber security, and data protection are becoming increasingly significant issues. 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. For example, the Personal Information Protection Law (“PIPL”), took effect on November 1, 2021. PIPL is aimed at protecting and controlling the use and transfer of personal data in China. There is significant uncertainty in how regulators will interpret and enforce the law, and it contains provisions that allow substantial government oversight and include fines for failure to obtain required approval from China’s cyber and data protection regulators for cross-border transfers of personal data.

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 EU data protection law to non-European Union entities that process, or control the processing of, the personal data of EU subjects. The GDPR allows for the imposition of fines and corrective action on entities that improperly use, disclose or secure the personal data of EU subjects, including through a data security breach. In addition, an increasing number of states in the U.S. have enacted laws containing similar requirements to GDPR for businesses collecting or processing personal data. For example, the State of California enacted the California Consumer Privacy Act of 2018 (“CCPA”), which was significantly amended by the California Privacy Rights Act, and sets forth comprehensive privacy and security obligations regarding the collection and processing of personal data of eligible California residents. Other states have, or are expected to, enact similar or more expansive legislation regarding the collection and processing of personal data.

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These regulatory requirements may increase our costs of compliance. Any failure to fully comply with the Cyber Security Law, the Data Security Law, PIPL, GDPR, CCPA, and other applicable laws and regulations could lead to significant fines and regulatory corrective actions, along with reputational damage or third-party lawsuits, which could adversely affect our business and results of operations. 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 personal data (including sensitive personal data) of our employees, customers, suppliers and others. Such incidents could subject us to significant monetary damages, regulatory enforcement actions and/or criminal prosecution, and cause us to lose customers and their related revenue in the future.

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 in research and development. We expect to continue investing heavily in research and development in the future in order to keep innovating and introducing new products in a timely manner and increase our revenue and profitability. Increased investments in research and development will increase our operating expenses, which may negatively impact our operating results, and we may not achieve the return on these investments that we anticipate, or be able to reduce such expenses in a timely manner if we experience a downturn in sales. 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 further. 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 be harmed. Many of our competitors have significantly greater resources than we have and are able to invest substantially greater amount into their research and development initiatives than we are, which could harm our ability to innovate and compete. 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/or cause us to incur debt or to assume contingent liabilities, which could adversely affect our business. 

As 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 or other policies, laws or 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;

• integrating 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;

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

• 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.

Alternatively, third parties may be interested in acquiring us. We will continue to consider, evaluate and negotiate any such transactions as our board of directors deems appropriate and in the best interest of our stockholders. Such potential transactions may divert the attention of management, and cause us to incur various costs and expenses in investigating, evaluating and negotiating such transactions, whether or not they are consummated.

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 enactment of new 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 a restatement of 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, 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 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, permanent establishment challenges 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, including in the EU and the Organization for Economic Cooperation and Development.

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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 our reputation and 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, which may impact the reliability of our financial reporting and financial statements. 

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”) and the U.K. Bribery Act. 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, the U.K. Bribery Act and various anti-corruption laws of other jurisdictions, which generally prohibit companies and their intermediaries from making improper payments to foreign officials for the purpose of obtaining or keeping business and/or other benefits. Although we have implemented policies and procedures designed to ensure that we, our employees and other intermediaries comply with the FCPA, the U.K. Bribery Act and other anti-corruption laws to which we are subject, there is no assurance that such policies or procedures will work effectively all the time or protect us against liability under these 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 individuals who may be considered “foreign officials” under the FCPA or other anti-corruption laws, resulting in an elevated risk of potential 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, including restatements of our financial reports, which could have a material adverse impact on our business, financial condition, results of operations and liquidity. Any investigation or allegations 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 in, 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 foreign, federal, state and local laws and regulations that govern 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 EU 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 costs were to become prohibitive.

We are subject to increasing regulatory and reporting standards related to ESG matters, which could increase our expenses.

In recent years, there has been an increase in public awareness from regulators, investors and other key stakeholders focusing on ESG compliance efforts, including those related to environmental sustainability and social responsibility. For example, the SEC has proposed a new rule that requires public companies to provide detailed reporting of their climate-related risks, emissions, and net-zero transition plans, and many of our customers routinely include stringent environmental and other non-standard compliance requirements in their contracts with us. While we are fully committed to making our business sustainable and keeping our stakeholders engaged by maintaining strong ESG strategies, practices, processes, policies and disclosures, there can be no assurance that we will be able to achieve our goals, or that our compliance initiatives will be deemed sufficiently robust by regulators, our stockholders and other key stakeholders. Furthermore, our compliance efforts, including the collection, assessment and reporting of ESG data, are subject to evolving reporting standards and can be costly, complex and time-consuming. In addition, climate change concerns and the potential associated environmental impact could result in the proposal and passage of additional laws and regulations in various jurisdictions that may affect us, our suppliers and customers. Such laws and regulations could cause us to incur additional compliance costs, and failure to comply with the regulatory standards in a timely manner could result in penalties and fines. These operational, legal, compliance and other risks could damage our reputation and materially and adversely affect our business, financial condition and results of operations.

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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 and adversely affected.

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, and in some circumstances our key customers or suppliers, against additional infringement claims. Such litigation is very costly. Further, 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. If we are not successful in any of our intellectual property defenses, we may have to cease production of certain products, design around such technologies, or pay royalty payments, any of which could harm our financial condition and our business. 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, which could 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 U.S. Our failure to adequately protect our proprietary technologies could materially harm our business. 

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, including expenses and damages against our customers. 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. Even if resolved favorably, such proceedings can be very expensive and time consuming, and may divert management’s attention from other business operations.

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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 effectively integrate into the team.

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

If we fail to continue to adequately staff our sales, applications, financial and legal positions, 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, operations 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, including our ability to accurately forecast future demand for our products;

• actual or anticipated manufacturing capacity limitations;

• 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 maintain or increase our gross margins;

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

• our loss of key customers;

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

• commencement of or developments relating to litigation;

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

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

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

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

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

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• our ability to meet or exceed the guidance that we provide to our investors and analysts;

• our ability to pay quarterly cash dividends to stockholders;

• our ability to meet or exceed our, our investors’ or analysts’ expectations;

• 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;

• investor perceptions of us and our business strategies;

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

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

• actions by institutional or other large stockholders;

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

• introduction of new products by us or our competitors;

• general economic, industry and market conditions worldwide, including the global economic downturn and the recent banking crisis;

• developments generally affecting the semiconductor industry;

• terrorist acts or acts of war, including the ongoing conflict between Ukraine and Russia;

• epidemics and pandemics;

• developments with respect to intellectual property rights;

• conditions and trends in technology industries;

• changes in market valuation or earnings of our competitors;

• government debt default;

• 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;

• ratings published by third-party organizations with respect to our ESG compliance efforts;

• our compliance with regulatory mandates focusing on ESG issues; and

• our performance against the ESG guidelines set by institutional stockholders and customers, and our ability to meet or exceed their expectations.

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.

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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 we fail to meet the expectations of these analysts, or 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 decreases and 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.

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 and on the return achieved by our stockholders.

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. 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 require additional regulatory compliance, such as stockholder approval.

General Risk Factors

Our worldwide operations are subject to health risks, climate crises and other 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 earthquakes or other natural disasters, labor strikes, epidemics and pandemics, and/or health advisories could disrupt our operations and have a material adverse impact on our business and results of operations. For example, in 2022, China experienced a severe heatwave during the summer months in the Sichuan province, which resulted in widespread power shortages, rolling backouts and temporary business shutdowns imposed by the local governments. Although we were able to successfully execute our contingency plan and our operations were not materially and adversely disrupted by the events, we cannot guarantee that we will be able to mitigate the operational risks caused by extreme weather conditions or other events in the future.

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. 

Our operations and performance could be materially affected by the financial market, economy and geopolitical uncertainties.

Uncertainties with the financial market could harm our business and operating results. Recently, Silicon Valley Bank, Credit Suisse and other banks have experienced failures or near failures that have disrupted the global financial and credit markets. Although we have not been directly affected by such events or developments because we did not have any cash deposited at any of these banks nor did we hold investments that have been exposed to bank failure, these events could have an extensive ripple effect on the economy that would directly or indirectly affect our business. It is also possible that one or more banks in which we do have deposits or to which our investments are exposed, could fail or have financial difficulty in the future, which could harm our business, liquidity and financial condition. Bank failures, the risk of additional bank failures and government actions in connection therewith, have sparked additional global recession fears, and may result in continuing higher interest rates, decreased credit availability and further global macroeconomic decline. This could significantly decrease demand from end users of the products into which our products are incorporated by our customers, which would materially and adversely affect our business, operating results and financial condition. Furthermore, all these factors have increased the difficulties in accurately predicting our future revenue and expenses. We are also unable to predict the timing, strength or duration of any such potential impact.

Furthermore, worldwide political conditions may create uncertainties that could adversely affect our business. The U.S. and other regions where we conduct business have been and may continue to be affected by conflicts that could, among other things, disrupt our supply chain, and impact customer demands and component prices. For example, the U.S. and other countries have imposed economic sanctions and export control measures on Russia due to the conflict in Ukraine. Although such measures have not significantly affected our business or operations, future developments could adversely affect our operating results and financial condition.

53

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Not applicable.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

54

Item 6. Exhibits

Exhibit No.	Description
10.1 (1)	Letter Agreement with Eileen Wynne.
10.2 (2)	Indemnification Agreement with Eileen Wynne.
10.3	Form of Grant Agreement for grants of Performance Stock Units under the Monolithic Power Systems, Inc. Amended and Restated 2014 Equity Incentive Plan.
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)

(1) Incorporated by reference to Exhibit 10.1 of the Registrant’s current report on Form 8-K (File No. 000-51026), filed with the Securities and Exchange Commission on February 8, 2023.

(2) Incorporated by reference to Exhibit 10.2 of the Registrant’s current report on Form 8-K (File No. 000-51026), filed with the Securities and Exchange Commission on February 8, 2023.

* 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.

55

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: May 5, 2023
	By:	/s/ T. Bernie Blegen
		T. Bernie Blegen
		Chief Financial Officer
		(Duly Authorized Officer and Principal
		Financial and Accounting Officer)

56

EX-10.3

EXHIBIT 10.3

MONOLITHIC POWER SYSTEMS, INC.
AMENDED AND RESTATED 2014 EQUITY INCENTIVE PLAN

PERFORMANCE STOCK UNITS AGREEMENT

Unless otherwise defined herein, the capitalized terms used in this Performance Stock Units Agreement (the “Agreement”) will have the meaning defined in the Monolithic Power Systems, Inc. Amended and Restated 2014 Equity Incentive Plan (the “Plan”).

I. NOTICE OF PERFORMANCE STOCK UNITS GRANT

Name:	_____________
Grant Number:	_____________
Date of Grant:	_____________
Date of Grant Share Price:	_____________
Target Number of Performance Stock Units:	_____________
Maximum Number of Performance Stock Units:	___x the Target Number of Performance Stock Units (__________ Vesting Condition)
Purchase Price per Share:	$
Vesting Schedule:	See Exhibit A
Measurement Period:	January 1, 20__ – December 31, 20__
Issuance Schedule:	Subject to any change on a Capitalization Adjustment and the Participant’s payment of the Purchase Price per Share within two months following the vesting date for the PSUs that become set as a result of satisfying the __________ Vesting Condition (as defined in Exhibit A), one share of Common Stock will be issued for each PSU that vests at the time set forth in this Agreement. Note that, as provided for in Exhibit A, this purchase requirement will not apply if there is a Satisfaction of the Purchase Price Performance Condition (as defined in Exhibit A). If payment is required and the Participant does not pay the Purchase Price per Share for each such vested PSU within two months after the vesting date, the Participant’s rights to those vested PSUs, and the underlying shares of Common Stock and related Dividend Equivalents, will be forfeited on the two month anniversary of such vesting date.

II. TERMS AND CONDITIONS OF PERFORMANCE STOCK UNITS

1.         Grant. The Company has granted to the Participant an Award of performance-based Restricted Stock Units (“Performance Stock Units”) and related Dividend Equivalents. This Award is subject to all of the terms and conditions in this Agreement and the Plan.

2.            Obligations to Pay.

(a)    Performance Stock Units. Each Performance Stock Unit shall be considered a Restricted Stock Unit under the Plan and represents the right to receive one Share (subject to adjustment for changes in capitalization of the Company as provided in the Plan) if it is set by, and entitled to be paid to, the Participant (“vests” or “vesting,” or similar words) as a result of satisfying the __________ Vesting Condition (as defined in Exhibit A), provided that the Participant pays the Purchase Price per Share for each earned Performance Stock Unit within two months after the Vesting Date (as defined in Exhibit A). Note that, as provided for in Exhibit A, this requirement will not apply if there is a Satisfaction of the Purchase Price Performance Condition. Unless and until the Performance Stock Units shall have vested, the Participant shall have no right to payment of any such Performance Stock Units. Furthermore, if payment is required and the Participant does not pay the Purchase Price per Share for the vested Performance Stock Unit within two months after the Vesting Date, the Participant’s rights to that vested Performance Stock Unit, and the underlying share of Common Stock and the compensation payable in respect of the related Dividend Equivalents, will be forfeited on the two month anniversary of the vesting date at no cost to the Company, and the Participant will have no further right to receive the Shares or the payments in respect of Dividend Equivalents. Prior to actual payment of any Performance Stock Units, such Performance Stock Units represent an unsecured obligation of the Company, payable (if at all) only from the general assets of the Company.

(b)    Dividend Equivalents. Each Performance Stock Unit has associated with it one Dividend Equivalent. If and when a Performance Stock Unit vests, the cash payable under this Dividend Equivalent award will become vested. Provided you pay any applicable Purchase Price per Share within two months after the applicable vesting date for the Performance Stock Units, payment of any vested Dividend Equivalents will be made shortly after vesting. If your Performance Stock Units never vest or are otherwise forfeited (including due to failure to timely pay any applicable Purchase Price per Share), your corresponding Dividend Equivalents will immediately expire on the expiration or other forfeiture of the related Performance Stock Units – and you will not be entitled to any payout of regular cash dividends in respect of those forfeited Performance Stock Units. Your Dividend Equivalents will immediately expire on the issuance of the underlying shares subject to the Performance Stock Units that have vested – that is, no additional regular cash dividends that are declared or paid after that date will accrue for those newly vested shares. Instead, your rights to receive any regular cash dividends will be solely as a Company stockholder. Your rights on the Dividend Equivalents are subject to all of the same terms and conditions as apply to your underlying Performance Stock Units in respect of which these Dividend Equivalents are granted.

3.          Vesting Schedule. The Performance Stock Units are subject to both time-based and performance-based vesting conditions as described on Exhibit A. Any Performance Stock Units that fail to satisfy the performance-based vesting conditions by the applicable dates set forth on Exhibit A will be forfeited as of the last day of the Measurement Period (if not earlier). Any Performance Stock Units that fail to satisfy the time-based vesting condition will be forfeited as of the date the Participant ceases to be in Continuous Service for any or no reason. If and when a Performance Stock Unit is forfeited, the related Dividend Equivalents are also immediately forfeited for no consideration.

4.          Issuance/Payment Schedule. Subject to the satisfaction of the withholding obligations described below, if a Performance Stock Unit vests, the Company will issue to the Participant, within 10 days of the applicable Certification Date (as defined on Exhibit A), one Share for such Performance Stock Unit.

5.          Section 409A. This Award is intended to comply with the “short-term deferral” rule set forth in Treasury Regulations Section 1.409A-1(b)(4) and will be construed and administered in such a manner. However, (a) if this Award fails to satisfy the requirements of the short-term deferral rule and is otherwise not exempt from, and therefore deemed to be deferred compensation subject to, Section 409A of the Code, and (b) if the Participant is a “Specified Employee” (within the meaning set forth Section 409A(a)(2)(B)(i) of the Code) as of the date of separation from service (within the meaning of Treasury Regulation Section 1.409A-1(h)), and (c) if a delay in the issuance or payment of the compensation is necessary to avoid the imposition of taxation on the Participant in respect of the compensation under Section 409A of the Code, then the issuance or payment of any compensation that would otherwise be made on the date of the separation from service or within the first six months thereafter will not be made on the originally scheduled dates. Such compensation will instead be issued in a lump sum on the date that is six months and one day after the date of the separation from service, with the balance issued or paid thereafter in accordance with the original vesting and schedule set forth above. Each installment of Shares or cash that vests is a “separate payment” for purposes of Treasury Regulation Section 1.409A-2(b)(2).

6.           Payments after Death. Any distribution or delivery to be made to the Participant under this Agreement shall, if the Participant is then deceased, be made to the Participant’s designated beneficiary, or if no beneficiary survives the Participant, the administrator or executor of Participant’s estate. Any such transferee must furnish the Company with (a) written notice of his or her status as transferee, and (b) evidence satisfactory to the Company to establish the validity of the transfer and compliance with any laws or regulations pertaining to said transfer.

7.          Withholding of Taxes. Notwithstanding any contrary provision of this Agreement, no certificate or book-entry regarding the Shares will be issued to or made in favor of the Participant, and no payments in respect of the Dividend Equivalents will be paid, unless and until the Participant satisfies the Participant’s obligations with respect to the payment of income, employment and other taxes which the Company determines must be withheld with respect to such compensation (the “Withholding Taxes”). The Administrator, in its sole discretion and pursuant to such procedures as it may specify from time to time, hereby permits the Participant to satisfy such tax withholding obligation, in whole or in part, by one or more of the following (without limitation): (a) paying cash; (b) having withholding taken from compensation otherwise due to Participant from the Company; (c) subject to the approval of the independent members of the Board, withholding otherwise deliverable Shares having a fair market value equal to the minimum statutory amount required to be withheld; (d) delivering to the Company already vested and owned Shares having a fair market value equal to the amount required to be withheld; or (e) subject to applicable law, permitting the Participant to enter into a “same day sale” commitment with a broker-dealer that is a member of the Financial Industry Regulatory Authority (a “FINRA Dealer”) whereby the Participant irrevocably elects to sell a portion of the Shares to be delivered and whereby the FINRA Dealer irrevocably commits to forward the proceeds necessary to satisfy the withholding taxes directly to the Company. If the Participant fails to make satisfactory arrangements for the payment of any required tax withholding obligations hereunder within the time necessary for compliance with Treasury Regulations Section 1.409A-1(b)(4), the Participant will permanently forfeit such Performance Stock Units and payments in respect of Dividend Equivalents as of the last day of such compliance period, at no cost to the Company, and the Participant will have no further right to receive Shares, cash or other compensation with respect thereto. Notwithstanding anything in this Agreement to the contrary, if the Participant is a reporting person subject to Section 16 of the Exchange Act, the Participant agrees that, unless otherwise determined by the Committee, the Company shall satisfy all or any portion of the Withholding Taxes relating to this Award by withholding Shares issued or otherwise issuable to the Participant in connection with the Performance Stock Units (and withholding cash from the Dividend Equivalents payable with respect to such Performance Stock Units) with a fair market value (measured as of the date such Shares are issued or such cash is paid to the Participant) equal to the amount of such Withholding Taxes.

8.           Rights as Stockholder. Neither the Participant nor any person claiming under or through the Participant shall have any of the rights or privileges of a stockholder of the Company with respect to the Performance Stock Units or in respect of any Shares deliverable hereunder unless and until certificates representing such Shares shall have been issued and delivered to the Participant or such Shares have been recorded on the records of the Company or its transfer agents or registrars through book-entry.

9.           No Effect on Service. Participant acknowledges and agrees that the vesting of the Performance Stock Units and Dividend Equivalents under this Award is set by the Participant’s Continuous Service through the applicable vesting dates and not through the act of being hired, acquiring Shares or being paid other compensation hereunder. The Participant further acknowledges and agrees that this Agreement, the transactions contemplated hereunder and the vesting schedule set forth herein do not constitute an express or implied promise of the Participant’s Continuous Service for any period, and shall not interfere with the Participant’s right or the right of the Company (or any Parent or Subsidiary employing or retaining the Participant) to terminate the Participant’s status as a Service Provider (and Continuous Service) at any time, with or without cause.

10.          Notices and Electronic Delivery. Any notices provided for in this Agreement or the Plan will be given in writing (including electronically) and will be deemed effectively given on receipt or, in the case of notices delivered by the Company to the Participant, five days after deposit in the U.S. mail, postage prepaid, addressed to the Participant at the last address on file for the Participant with the Company. Any notice to be given to the Company under the terms of this Agreement shall be addressed to the Company, in care of its Chief Financial Officer at Monolithic Power Systems, Inc., __________, at such other address as the Company may hereafter designate in writing. The Company may, in its sole discretion, decide to deliver any documents related to participation in the Plan and this Award by electronic means. By accepting this Award, the Participant consents to receive such documents by electronic delivery and to participate in the Plan through an on-line or electronic system established and maintained by the Company or another third party designated by the Company.

11.         Grant is Not Transferable. Except to the limited extent permitted in the event of the Participant’s death, this grant and the rights and privileges conferred hereby shall not be transferred, assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) and shall not be subject to sale under execution, attachment or similar process. Upon any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of this grant, or any right or privilege conferred hereby, or upon any attempted sale under any execution, attachment or similar process, this grant and the rights and privileges conferred hereby immediately shall become null and void.

12.          Binding Agreement. Subject to the limitation on the transferability of this Award, this Agreement shall be binding upon and inure to the benefit of the heirs, legatees, legal representatives, successors and assigns of the parties hereto.

13.        Additional Conditions to Issuance of Stock. If at any time the Company shall determine, in its discretion, that the listing, registration or qualification of the Shares subject to this Award upon any securities exchange or under any state or federal law, or the consent or approval of any governmental regulatory authority, is necessary or desirable as a condition to the issuance of shares to the Participant (or his or her estate), such issuance shall not occur unless and until such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Company. Where the Company determines that the delivery of the payment of any of the Shares subject to this Award or, if applicable, payments in respect of Dividend Equivalents, shall violate federal securities laws or other Applicable Laws, the Company shall defer delivery or payment until the earliest date at which the Company reasonably anticipates that the delivery or payment shall no longer cause such violation. The Company shall make all reasonable efforts to meet the requirements of any such state or federal law or securities exchange and to obtain any such consent or approval of any such governmental authority.

14.         Plan Governs and Clawback. This Agreement is subject to all terms and provisions of the Plan. In the event of a conflict between one or more provisions of this Agreement and one or more provisions of the Plan, the provisions of the Plan shall govern. The Performance Stock Units (and any compensation paid or Shares issued under the Award) are subject to recoupment in accordance with the Dodd-Frank Wall Street Reform and Consumer Protection Act and any implementing rules, regulations or listing standards based thereon, any clawback policy adopted by the Company and any compensation recovery policy otherwise required by Applicable Law. No recovery of compensation under such a clawback policy will be an event giving rise to a right to voluntarily terminate employment on a resignation for “good reason,” or for a “constructive termination” or any similar term under any plan of or agreement with the Company. The Participant hereby acknowledges receipt or the right to receive a document providing the information required by Rule 428(b)(1) promulgated under the Securities Act, which includes the Plan prospectus. In addition, the Participant acknowledges receipt of the Company’s policy permitting officers and directors to sell shares only during certain “window” periods and the Company’s insider trading policy, in effect from time to time.

15.        Administrator Authority. The Administrator shall have the power to interpret the Plan and this Agreement and to adopt such rules for the administration, interpretation and application of the Plan as are consistent therewith and to interpret or revoke any such rules (including, but not limited to, the determination of whether or not any Performance Stock Units have vested). All actions taken and all interpretations and determinations made by the Administrator in good faith shall be final and binding upon the Participant, the Company and all other interested persons. No member of the Administrator shall be personally liable for any action, determination or interpretation made in good faith with respect to the Plan or this Agreement.

16.         Captions. Captions provided herein are for convenience only and are not to serve as a basis for interpretation or construction of this Agreement.

17.        Severability. In the event that any provision in this Agreement shall be held invalid or unenforceable, such provision shall be severable from, and such invalidity or unenforceability shall not be construed to have any effect on, the remaining provisions of this Agreement.

18.        Modifications to the Agreement. This Agreement constitutes the entire understanding of the parties on the subjects covered. The Participant expressly warrants that the Participant is not accepting this Agreement in reliance on any promises, representations, or inducements other than those contained herein. Modifications to this Agreement that are materially adverse to the Participant can be made only in an express written contract executed by a duly authorized officer of the Company. Notwithstanding anything to the contrary in the Plan or this Agreement, the Company reserves the right to revise this Agreement as it deems necessary or advisable, in its sole discretion and without the consent of the Participant, to implement the clawback provisions of this Agreement, to comply with Section 409A of the Code or to otherwise avoid imposition of any additional tax or income recognition under Section 409A of the Code in connection to this Award of Performance Stock Units.

19.        Effect On Other Employee Benefit Plans. The value of the Performance Stock Units subject to this Agreement will not be included as compensation, earnings, salaries, or other similar terms used when calculating the Participant’s benefits under any employee benefit plan sponsored by the Company or any Affiliate, except as such plan otherwise expressly provides. The Company expressly reserves its rights to amend, modify, or terminate any of the Company’s or any Affiliate’s employee benefit plans.

20.      No Obligation to Minimize Taxes. The Company has no duty or obligation to minimize the tax consequences to the Participant with respect to the Performance Stock Units and will not be liable to the Participant for any adverse tax consequences to the Participant arising in connection with the Performance Stock Units (including the Dividend Equivalents). The Participant is hereby advised to consult with the Participant’s own personal tax, financial and/or legal advisors regarding the tax consequences of the Performance Stock Units and by signing this Agreement, the Participant has agreed that the Agreement has done so or knowingly and voluntarily declined to do so.

21.        Data Privacy. The Company respects the Participant’s privacy. In order to administer the Performance Stock Units, the Company collects and uses certain personal information about Participants, including their prior equity grant information where applicable. If the Participant is a California resident, the Participant should refer to the Company’s California Consumer Privacy Act Notice for more information about the personal information the Company collects about Participants and the purposes for which the Company will use such data.

By the Participant’s signature, the Participant and the Company agree that this Award of Performance Stock Units and the related Dividend Equivalents is granted under and governed by the terms and conditions of the Plan and this Agreement. The Participant has reviewed the Plan and this Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Agreement and fully understands all provisions of the Plan and this Agreement. The Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions relating to the Plan and the Agreement. The Participant further agrees to notify the Company upon any change in the residence address indicated below.

PARTICIPANT:	MONOLITHIC POWER SYSTEMS, INC.
Signature:	Signature:
Name:	Name:

EXHIBIT A

Vesting Conditions for the 20     Performance Stock Units Grant

Performance-Based Vesting Conditions:

[AS APPROVED FROM TIME TO TIME BY THE COMMITTEE]

Purchase Price Performance Condition:

If the Committee determines that on the last trading day of the Measurement Period, the Company’s Fair Market Value per Share is at least $    higher than the Company’s Fair Market Value per Share on the Date of Grant, the requirement to pay the $    Purchase Price per Share will be deemed satisfied and paid (“Satisfaction of the Purchase Price Performance Condition”).

Time-Based Vesting Condition:

● 100% of the number of Performance Stock Units that are set based on satisfying the __________ Vesting Condition and __________ Vesting Condition will vest on the earlier of (1) the last day of the Measurement Period, and (2) if applicable, the date of a Change in Control (in either case, the “Vesting Date”), provided that the Participant remains in Continuous Service through the Vesting Date. The Committee shall certify the level of achievement of the __________ Vesting Condition and __________ Vesting Condition as soon as practicable following the Vesting Date, but in no event later than 90 days following such date (the “Certification Date”). The issuance of shares in respect of the vested Performance Stock Units subject to the __________ Vesting Condition and __________ Vesting Condition will occur at such time as set forth in the Agreement.

● The Performance Stock Units that vest at the end of any specific tranche are compensation for services provided in that tranche only, and are not compensation for services provided at any time prior to the beginning of that tranche, for state income tax purposes. Thus, it is solely the services provided in a given tranche that are necessary to earn the shares that vested at the end of that tranche.  Thereafter, the employee must provide services during the subsequent tranche, if any, for the awards in that tranche to vest.

Treatment on a Change in Control:

If (i) a Change in Control occurs prior to the end of the Measurement Period and (ii) this Award is not assumed as provided in Section 14(c) of the Plan, then the Board will:

● With respect to the __________ Vesting Condition:

o (A) Review actual performance against the __________ Vesting Condition, (B) determine the percentage of achievement (the “_____ Achievement %”) against the __________ Vesting Condition based on actual performance through the last date on or prior to the closing of the Change in Control for which __________ will be available, and (C) multiply the _____ Achievement % by the Target Number of Performance Stock Units subject to this Award to determine the total number of Performance Stock Units under this Award that have been deemed to satisfy the __________ Vesting Condition (the “_____ Credited Units”); and

o Calculate the vesting of the _____ Credited Units with respect to the time-based vesting condition, to be equal to the portion of the _____ Credited Units determined by multiplying (A) the _____ Credited Units by (B) a fraction, (i) the numerator of which is the number of days that have elapsed between the Date of Grant and the last business day prior to the closing of the Change in Control, and (ii) the denominator of which is the total number of days in the time-based vesting period.

● With respect to the __________ Vesting Condition:

o (A) Review actual _____ Metric performance against the __________ Vesting Condition and (B) determine the percentage of achievement (the “_____ Achievement %”) against the __________ Vesting Condition based on actual performance through the last date on or prior to the closing of the Change in Control for which the __________ will be available, and (C) multiply the _____ Achievement % by the Target Number of Performance Stock Units subject to this Award to determine the total number of Performance Stock Units under this Award that have been deemed to satisfy the __________ Vesting Condition (the “_____ Credited Units”); and

o Calculate the vesting of the _____ Credited Units with respect to the time-based vesting condition, to be equal to the portion of the _____ Credited Units determined by multiplying (A) the _____ Credited Units by (B) a fraction, (i) the numerator of which is the number of days that have elapsed between the Date of Grant and the last business day prior to the closing of the Change in Control, and (ii) the denominator of which is the total number of days in the time-based vesting period.

The _____ Credited Units and the _____ Credited Units will be fully vested and no longer subject to a “substantial risk of forfeiture” within the meaning of Treasury Regulations Section 1.409A-1(d) as of the consummation of the Change in Control. Consequently, the issuance of shares in respect of the vested _____ Credited Units and the vested _____ Credited Units will occur at the applicable time set forth in Section 4 of the Agreement.

No _____ Credited Units or _____ Credited Units will be set if the Award is assumed as provided in Section 14(c) of the Plan.

Special Change in Control Definition: Solely for purposes of this Award, a Change in Control shall mean the occurrence of any of the following events:

1. Any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) becomes the “beneficial owner” (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of securities of the Company representing thirty-five percent (35%) or more of the total voting power represented by the Company’s then outstanding voting securities;

2. The consummation of the sale or disposition by the Company of all or substantially all of the Company’s assets;

3. A change in the composition of the Board occurring within a two year period, as a result of which fewer than a majority of the directors are Incumbent Directors. “Incumbent Directors” means directors who either (A) are Directors as of the effective date of the Plan, or (B) are elected, or nominated for election, to the Board with the affirmative votes of at least a majority of the Incumbent Directors at the time of such election or nomination (but will not include an individual whose election or nomination is in connection with an actual or threatened proxy contest relating to the election of directors to the Company); or

4. The consummation of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or its parent) at least sixty-five percent (65%) of the total voting power represented by the voting securities of the Company or such surviving entity or its parent outstanding immediately after such merger or consolidation.

Notwithstanding the foregoing, to the extent issuance or payment of the vested Performance Stock Units would be accelerated due to the Change in Control and this Award constitutes “nonqualified deferred compensation” within the meaning of Section 409A of the Code, the event shall not be considered to be a Change in Control for purposes of this Award unless such event is also a “change in ownership,” a “change in effective control” or a “change in the ownership of a substantial portion of the assets” of the Company within the meaning of Section 409A of the Code.

EX-31.1

Exhibit 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

I, Michael Hsing, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Monolithic Power Systems, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 5, 2023

/s/ Michael Hsing

Michael Hsing

Chief Executive Officer

EX-31.2

Exhibit 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

I, T. Bernie Blegen, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Monolithic Power Systems, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 5, 2023

/s/ T. Bernie Blegen

T. Bernie Blegen

Chief Financial Officer

EX-32.1

Exhibit 32.1

The following certification 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 filing 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.

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

In connection with the Quarterly Report on Form 10-Q of Monolithic Power Systems, Inc., a Delaware corporation, for the quarter ended March 31, 2023 (the “Report”), as filed with the Securities and Exchange Commission, each of the undersigned officers of Monolithic Power Systems, Inc. certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) the accompanying Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Monolithic Power Systems, Inc. for the periods presented therein.

Date: May 5, 2023

/s/ Michael Hsing

Michael Hsing

Chief Executive Officer

Date: May 5, 2023

/s/ T. Bernie Blegen

T. Bernie Blegen

Chief Financial Officer

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Document And Entity Information - shares	3 Months Ended
	Mar. 31, 2023	Apr. 28, 2023
Document Information [Line Items]
Entity Central Index Key	0001280452
Entity Registrant Name	MONOLITHIC POWER SYSTEMS INC
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2022
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Mar. 31, 2023
Document Transition Report	false
Entity File Number	000-51026
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	77-0466789
Entity Address, Address Line One	5808 Lake Washington Blvd. NE
Entity Address, City or Town	Kirkland
Entity Address, State or Province	WA
Entity Address, Postal Zip Code	98033
City Area Code	425
Local Phone Number	296-9956
Title of 12(b) Security	Common Stock, par value $0.001 per share
Trading Symbol	MPWR
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		47,423,000

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Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Current assets:
Cash and cash equivalents	$ 488,972	$ 288,607
Short-term investments	428,598	449,266
Accounts receivable, net	184,274	182,714
Inventories	430,830	447,290
Other current assets	89,955	42,742
Total current assets	1,622,629	1,410,619
Property and equipment, net	354,313	357,157
Goodwill	6,571	6,571
Deferred tax assets, net	35,571	35,252
Other long-term assets	207,567	249,286
Total assets	2,226,651	2,058,885
Current liabilities:
Accounts payable	58,001	61,461
Accrued compensation and related benefits	101,881	88,260
Other accrued liabilities	155,961	113,679
Total current liabilities	315,843	263,400
Income tax liabilities	56,900	53,509
Other long-term liabilities	77,647	73,374
Total liabilities	450,390	390,283
Commitments and contingencies
Stockholders’ equity:
Common stock and additional paid-in capital: $0.001 par value; shares authorized: 150,000; shares issued and outstanding: 47,411 and 47,107, respectively	1,017,131	975,276
Retained earnings	777,075	716,403
Accumulated other comprehensive loss	(17,945)	(23,077)
Total stockholders’ equity	1,776,261	1,668,602
Total liabilities and stockholders’ equity	$ 2,226,651	$ 2,058,885

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Condensed Consolidated Balance Sheets (Unaudited) (Parentheticals) - $ / shares shares in Thousands	Mar. 31, 2023	Dec. 31, 2022
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized (in shares)	150,000	150,000
Common stock, shares issued (in shares)	47,411	47,107
Common stock, shares outstanding (in shares)	47,411	47,107

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Condensed Consolidated Statements of Operations (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Revenue	$ 451,065	$ 377,714
Cost of revenue	192,285	158,834
Gross profit	258,780	218,880
Operating expenses:
Research and development	63,709	54,104
Selling, general and administrative	70,795	68,642
Total operating expenses	134,504	122,746
Operating income	124,276	96,134
Other income (expense), net	5,297	(634)
Income before income taxes	129,573	95,500
Income tax expense	19,771	15,934
Net income	$ 109,802	$ 79,566
Net income per share
Basic (in dollars per share)	$ 2.32	$ 1.71
Diluted (in dollars per share)	$ 2.26	$ 1.65
Weighted-average shares outstanding:
Basic (in shares)	47,234	46,424
Diluted (in shares)	48,655	48,250

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Condensed Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Net income	$ 109,802	$ 79,566
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	2,919	(178)
Change in unrealized gain (loss) on available-for-sale securities, net of tax of $311 and $565, respectively	2,213	(5,400)
Other comprehensive income (loss), net of tax:	5,132	(5,578)
Comprehensive income	$ 114,934	$ 73,988

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Condensed Consolidated Statements of Comprehensive Income (Unaudited) (Parentheticals) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Change in unrealized gain (loss) on available-for-sale securities, tax	$ 311	$ 565

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Condensed Consolidated Statements of Stockholders' Equity (Unaudited) - USD ($) shares in Thousands, $ in Thousands	Common Stock Including Additional Paid in Capital [Member]	Retained Earnings [Member]	AOCI Attributable to Parent [Member]	Total
Balance (in shares) at Dec. 31, 2021	46,256
Balance at Dec. 31, 2021	$ 803,226	$ 424,879	$ 15,880	$ 1,243,985
Net income	0	79,566	0	79,566
Other comprehensive income (loss)	0	0	(5,578)	(5,578)
Dividends and dividend equivalents declared	$ 0	(36,601)	0	(36,601)
Common stock issued under the employee equity incentive plan (in shares)	362
Common stock issued under the employee equity incentive plan	$ 2,318	0	0	2,318
Common stock issued under the employee stock purchase plan (in shares)	7
Common stock issued under the employee stock purchase plan	$ 2,786	0	0	2,786
Stock-based compensation expense	$ 39,636	0	0	39,636
Balance (in shares) at Mar. 31, 2022	46,625
Balance at Mar. 31, 2022	$ 847,966	467,844	10,302	$ 1,326,112
Balance (in shares) at Dec. 31, 2022	47,107			47,107
Balance at Dec. 31, 2022	$ 975,276	716,403	(23,077)	$ 1,668,602
Net income	0	109,802	0	109,802
Other comprehensive income (loss)	0	0	5,132	5,132
Dividends and dividend equivalents declared	$ 0	(49,130)	0	(49,130)
Common stock issued under the employee equity incentive plan (in shares)	295
Common stock issued under the employee equity incentive plan	$ 1,110	0	0	1,110
Common stock issued under the employee stock purchase plan (in shares)	9
Common stock issued under the employee stock purchase plan	$ 3,737	0	0	3,737
Stock-based compensation expense	$ 37,008	0	0	$ 37,008
Balance (in shares) at Mar. 31, 2023	47,411			47,411
Balance at Mar. 31, 2023	$ 1,017,131	$ 777,075	$ (17,945)	$ 1,776,261

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Condensed Consolidated Statements of Stockholders' Equity (Unaudited) (Parentheticals) - $ / shares	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Dividends and dividend equivalents declared per share (in dollars per share)	$ 1.00	$ 0.75

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Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Cash flows from operating activities:
Net income	$ 109,802	$ 79,566
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	9,987	9,120
Amortization of premium on available-for-sale securities	260	1,348
(Gain) loss on deferred compensation plan investments	(2,534)	2,192
Deferred taxes, net	(622)	(381)
Stock-based compensation expense	37,009	39,811
Changes in operating assets and liabilities:
Accounts receivable	(1,558)	(15,506)
Inventories	16,063	(51,797)
Other assets	213	(5,916)
Accounts payable	(880)	(4,177)
Accrued compensation and related benefits	13,422	27,382
Income tax liabilities	20,137	16,017
Other accrued liabilities	17,508	9,760
Net cash provided by operating activities	218,807	107,419
Cash flows from investing activities:
Purchases of property and equipment	(8,854)	(26,877)
Purchases of investments	(129,321)	(16,243)
Maturities and sales of investments	152,698	32,267
Contributions to deferred compensation plan, net	(2,209)	(760)
Net cash provided by (used in) investing activities	12,314	(11,613)
Cash flows from financing activities:
Property and equipment purchased on extended payment terms	(374)	(528)
Proceeds from common stock issued under the employee equity incentive plan	1,110	2,318
Proceeds from common stock issued under the employee stock purchase plan	3,737	2,786
Dividends and dividend equivalents paid	(36,725)	(28,825)
Net cash used in financing activities	(32,252)	(24,249)
Effect of change in exchange rates	1,497	(220)
Net increase in cash, cash equivalents and restricted cash	200,366	71,337
Cash, cash equivalents and restricted cash, beginning of period	288,729	189,389
Cash, cash equivalents and restricted cash, end of period	489,095	260,726
Supplemental disclosures for cash flow information:
Cash paid (refund) for income taxes, net	(1,300)	244
Non-cash investing and financing activities:
Liability accrued for property and equipment purchases	2,482	6,122
Liability accrued for dividends and dividend equivalents	$ 49,219	$ 36,611

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Note 1 - Basis of Presentation

3 Months Ended

Mar. 31, 2023

Notes to Financial Statements

Significant Accounting Policies [Text Block]

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 generally accepted accounting principles 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, 2022, filed with the SEC on  February 24, 2023.

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, 2023 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.

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Note 2 - Revenue Recognition

3 Months Ended

Mar. 31, 2023

Notes to Financial Statements

Revenue from Contract with Customer [Text Block]

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 99% and 98% of the Company’s total revenue for the three months ended March 31, 2023 and 2022, 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 for the periods presented. See Note 7 for the disaggregation of the Company’s revenue by geographic region and by product family.

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 March 31, 2023 and 2022, 81% and 82% of the Company’s product sales were made through distribution arrangements, respectively. 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 adjustments 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 prices, 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 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 March 31, 2023 and December 31, 2022, accounts receivable totaled $184.3 million and $182.7 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 or record any allowance for credit losses for the periods presented.

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 both March 31, 2023 and December 31, 2022, customer prepayments totaled $3.6 million. For the three months ended March 31, 2023, the Company recognized $3.2 million of revenue that was included in the customer prepayment balance as of December 31, 2022.

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. For these reasons, 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.

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Note 3 - Stock-based Compensation

3 Months Ended

Mar. 31, 2023

Notes to Financial Statements

Share-Based Payment Arrangement [Text Block]

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  March 31, 2023, 4.2 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 March 31,
	2023		2022
Cost of revenue	$	1,147	$	1,307
Research and development		8,614		8,401
Selling, general and administrative		27,248		30,103
Total stock-based compensation expense	$	37,009	$	39,811
Tax benefit related to stock-based compensation (1)	$	423	$	573

(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. Equity awards granted to the Company’s executive officers are subject to the tax deduction limitations set by Section 162(m) of the Internal Revenue Code.

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/market 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, 2023		106		$	327.13		748		$	275.70		1,805		$	126.57		2,659		$	176.50
Granted		27		$	467.62		246	(1)	$	449.22		-		$	-		273		$	450.13
Vested		(16	)	$	279.89		(198	)	$	291.65		(81	)	$	23.57		(295	)	$	217.47
Forfeited		(2	)	$	361.26		(2	)	$	285.23		(5	)	$	139.15		(9	)	$	225.18
Outstanding at March 31, 2023		115		$	365.93		794		$	326.02		1,719		$	131.39		2,628		$	200.37

(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 $141.6 million and $151.7 million for the three months ended March 31, 2023 and 2022, respectively. As of March 31, 2023, the total intrinsic value of all outstanding RSUs was $1.3 billion, based on the closing stock price of $500.54. As of March 31, 2023, unamortized compensation expense related to all outstanding RSUs was $308.0 million with a weighted-average remaining recognition period of approximately three years.

Cash proceeds from vested PSUs with a purchase price requirement totaled $1.1 million and $2.3 million for the three months ended March 31, 2023 and 2022, respectively.

Time-Based RSUs:

For the three months ended March 31, 2023, the Compensation Committee granted 27,000 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.

2023 PSUs:

In February 2023, the Compensation Committee granted 69,000 PSUs to the executive officers, which represent a target number of shares that can be earned based on the degree of achievement of two sets of performance goals (“2023 Executive PSUs”). For the first goal, the executive officers can earn up to 300% of the target number of the 2023 Executive PSUs based on the achievement of the Company’s average three-year (2023 through 2025) revenue growth rate in excess of the analog industry’s average three-year revenue growth rate as published by the Semiconductor Industry Association (the “SIA”). For the second goal, the executive officers can earn up to an additional 200% of the target number of the 2023 Executive PSUs if the Company secures additional manufacturing capacity outside of Mainland China during a three-year performance period. For both goals, a percentage of the 2023 Executive PSUs will fully vest on December 31, 2025 depending on the degree to which the pre-determined goals are met during the performance periods. Assuming the achievement of the highest level of the performance goals, the total stock-based compensation cost for the 2023 Executive PSUs is $156.2 million.

In February 2023, the Compensation Committee granted 13,000 PSUs to certain non-executive employees, which represent a target number of shares that can be earned based on the degree of achievement of the Company’s 2024 revenue goals for certain regions or product line divisions, or based on the degree of achievement of the Company’s average two-year (2023 and 2024) revenue growth rate compared against the analog industry’s average two-year revenue growth rate as published by the SIA (“2023 Non-Executive PSUs”). The maximum number of shares that an employee can earn is either 200% or 300% of the target number of the 2023 Non-Executive PSUs, depending on the job classification of the employee. 50% of the 2023 Non-Executive PSUs will vest in the first quarter of 2025 depending on the degree to which the pre-determined goals are met during the performance period. The remaining 2023 Non-Executive PSUs will vest over the following two years on a quarterly basis. Assuming the achievement of the highest level of performance goals, the total stock-based compensation cost for the 2023 Non-Executive PSUs is $14.2 million.

The 2023 Executive PSUs and the 2023 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 Company's stock price on the last trading day of the performance period is $30 higher than the grant date stock price of $467.62. The Company determined the grant date fair value of the 2023 Executive PSUs and the 2023 Non-Executive PSUs using a Monte Carlo simulation model with the following assumptions: stock price of $467.62, simulation term of four years, expected volatility of 51.0%, risk-free interest rate of 3.9%, and expected dividend yield of 0.9%. There is no illiquidity discount because the awards do not contain any post-vesting sales restrictions.

2004 Employee Stock Purchase Plan (“ESPP”)

For the three months ended March 31, 2023 and 2022, 9,000 and 7,000 shares, respectively, were issued under the ESPP. As of March 31, 2023, 4.5 million shares were available for future issuance under the ESPP.

The intrinsic value of the shares issued was $0.7 million for both the three months ended March 31, 2023 and 2022. As of March 31, 2023, the unamortized expense was $1.1 million, which will be recognized through the third quarter of 2023. The Black-Scholes model was used to value the employee stock purchase rights with the following weighted-average assumptions:

	Three Months Ended March 31,
	2023			2022
Expected term (in years)		0.5			0.5
Expected volatility		55.8	%		38.1	%
Risk-free interest rate		5.0	%		0.7	%
Dividend yield		0.8	%		0.6	%

Cash proceeds from the shares issued under the ESPP were $3.7 million and $2.8 million for the three months ended March 31, 2023 and 2022, respectively.  

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Note 4 - Balance Sheet Components

3 Months Ended

Mar. 31, 2023

Notes to Financial Statements

Supplemental Balance Sheet Disclosures [Text Block]

4. BALANCE SHEET COMPONENTS

Inventories 

Inventories consist of the following (in thousands): 

	March 31,		December 31,
	2023		2022
Raw materials	$	131,367	$	126,760
Work in process		126,417		134,071
Finished goods		173,046		186,459
Total	$	430,830	$	447,290

Other Current Assets

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

	March 31,		December 31,
	2023		2022
Prepaid wafer purchase	$	50,000	$	-
RSU tax withholding proceeds receivable		15,997		14,480
Prepaid expenses		9,719		11,045
Accrued interest receivable		3,537		8,752
Other		10,702		8,465
Total	$	89,955	$	42,742

Prepaid wafer purchase of $50.0 million relates to a deposit made to a vendor under a long-term wafer supply agreement. See Note 8 for further details.

Other Long-Term Assets

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

	March 31,		December 31,
	2023		2022
Prepaid wafer purchase	$	120,000	$	170,000
Deferred compensation plan assets		67,765		63,022
Other		19,802		16,264
Total	$	207,567	$	249,286

Prepaid wafer purchase relates to a deposit made to a vendor under a long-term wafer supply agreement. See Note 8 for further details.

Other Accrued Liabilities

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

	March 31,		December 31,
	2023		2022
Dividends and dividend equivalents	$	54,656	$	42,170
Warranty		19,726		24,082
Stock rotation and sales returns		30,155		14,931
Income tax payable		32,338		15,595
Other		19,086		16,901
Total	$	155,961	$	113,679

As of March 31, 2023, stock rotation and sales returns included a $26.4 million stock rotation reserve, compared with a $14.3 million reserve as of December 31, 2022. The change in the reserve is affected by the timing of returns and the level of inventory in the distribution channel.

Other Long-Term Liabilities

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

	March 31,		December 31,
	2023		2022
Deferred compensation plan liabilities	$	65,678	$	64,863
Dividend equivalents		6,765		6,847
Other		5,204		1,664
Total	$	77,647	$	73,374

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Note 5 - Leases

3 Months Ended

Mar. 31, 2023

Notes to Financial Statements

Leases Disclosure [Text Block]

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 one year to eight 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.

The following table summarizes the balances of operating lease right-of-use (“ROU”) assets and liabilities (in thousands):

		March 31,		December 31,
	Financial Statement Line Item	2023		2022
Operating lease ROU assets	Other long-term assets	$	7,820	$	4,288
Operating lease liabilities	Other accrued liabilities	$	2,018	$	2,133
	Other long-term liabilities	$	5,203	$	1,664

The following tables summarize certain information related to the leases (in thousands, except percentages):

	Three Months Ended March 31,
	2023		2022
Lease costs:
Operating lease costs	$	716	$	729
Other		538		367
Total lease costs	$	1,254	$	1,096

	Three Months Ended March 31,
	2023		2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$	864	$	932
ROU assets obtained in exchange for new operating lease liabilities	$	4,545	$	1,010

	March 31,			December 31,
	2023			2022
Weighted-average remaining lease term (in years)		5.3			2.1
Weighted-average discount rate		3.4	%		2.1	%

As of March 31, 2023, the maturities of the lease liabilities were as follows (in thousands):

2023 (remaining nine months)	$	1,756
2024		1,591
2025		1,190
2026		921
2027		929
Thereafter		1,509
Total remaining lease payments		7,896
Less: imputed interest		(675	)
Total lease liabilities	$	7,221

As of March 31, 2023, the Company had no operating leases that had not yet commenced.

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 three years. Some of these leases include options to renew the lease term for up to five years.

For the three months ended March 31, 2023 and 2022, income related to lease payments was $0.5 million and $0.6 million, respectively. As of March 31, 2023, future income related to lease payments was as follows (in thousands):

2023 (remaining nine months)	$	1,112
2024		613
2025		107
2026		20
Total	$	1,852

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Note 6 - Net Income Per Share

3 Months Ended

Mar. 31, 2023

Notes to Financial Statements

Earnings Per Share [Text Block]

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. 

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

	Three Months Ended March 31,
	2023		2022
Numerator:
Net income	$	109,802	$	79,566
Denominator:
Weighted-average outstanding shares - basic		47,234		46,424
Effect of dilutive securities		1,421		1,826
Weighted-average outstanding shares - diluted		48,655		48,250
Net income per share:
Basic	$	2.32	$	1.71
Diluted	$	2.26	$	1.65

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

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Note 7 - Segment, Significant Customers and Geographic Information

3 Months Ended

Mar. 31, 2023

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

7. SEGMENT, SIGNIFICANT CUSTOMERS AND GEOGRAPHIC INFORMATION

The Company operates in one reportable segment that includes the design, development, marketing and sale of high-performance, semiconductor-based power electronic solutions for the storage and computing, enterprise data, 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 March 31,
Customer	2023			2022
Distributor A		20	%		24	%
Distributor B		21	%		18	%
Distributor C		*			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 any termination of the agreement with a distributor.

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

	March 31,			December 31,
Customer	2023			2022
Distributor A		22	%		29	%
Distributor B		23	%		23	%

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

	Three Months Ended March 31,
Country or Region	2023		2022
China	$	225,052	$	206,079
Taiwan		48,833		56,437
South Korea		45,680		40,373
Europe		43,103		25,215
United States		31,017		13,446
Japan		30,815		19,155
Southeast Asia		26,432		16,889
Other		133		120
Total	$	451,065	$	377,714

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

	Three Months Ended March 31,
Product Family	2023		2022
Direct Current (“DC”) to DC	$	425,181	$	358,849
Lighting Control		25,884		18,865
Total	$	451,065	$	377,714

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

	March 31,		December 31,
Country	2023		2022
China	$	196,790	$	200,508
United States		115,363		113,996
Taiwan		19,812		20,074
Other		22,348		22,579
Total	$	354,313	$	357,157

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Note 8 - Commitments and Contingencies

3 Months Ended

Mar. 31, 2023

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

8. COMMITMENTS AND CONTINGENCIES

Product Warranties

The Company generally provides either one or two year warranty 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 March 31,
	2023			2022
Balance at beginning of period	$	24,082		$	20,989
Warranties issued		362			-
Repairs, replacement and refund		(672	)		(1,380	)
Changes in liability for pre-existing warranties		(4,046	)		4,224
Balance at end of period	$	19,726		$	23,833

Changes in liability for pre-existing warranties result from changes in estimates for warranties issued in prior periods.

Purchase Commitments

The Company has outstanding purchase obligations with its suppliers and other parties that require the future purchases of goods or services. The purchase obligations primarily consist of wafer and other inventory purchases, assembly and other manufacturing services, construction of manufacturing and research and development facilities, purchases of production and other equipment, and license arrangements.

In May 2022, the Company entered into a long-term supply agreement in order to secure manufacturing production capacity for silicon wafers over a four-year period. As of March 31, 2023, the Company had made prepayments under this agreement of $170.0 million, of which $50.0 million was classified as short-term.

Total estimated future unconditional purchase commitments to all suppliers and other parties as of March 31, 2023 were as follows (in thousands):

2023 (remaining nine months)	$	337,545
2024		337,537
2025		353,952
Total	$	1,029,034

Litigation

The Company is a party to actions and proceedings in the ordinary course of business, including 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. The Company may also be subject to litigation initiated by its stockholders. 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 March 31, 2023, there were no material pending legal proceedings to which the Company was a party.

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Note 9 - Cash, Cash Equivalents, Investments and Restricted Cash

3 Months Ended

Mar. 31, 2023

Notes to Financial Statements

Financial Instruments Disclosure [Text Block]

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): 

	March 31,		December 31,
	2023		2022
Cash	$	447,746	$	273,145
Money market funds		41,226		15,462
Certificates of deposit		131,042		130,467
Corporate debt securities		244,155		292,586
Commercial paper		18,163		17,928
U.S. treasuries and government agency bonds		35,238		8,285
Auction-rate securities backed by student-loan notes		1,516		1,711
Total	$	919,086	$	739,584

	March 31,		December 31,
	2023		2022
Reported as:
Cash and cash equivalents	$	488,972	$	288,607
Short-term investments		428,598		449,266
Investment within other long-term assets		1,516		1,711
Total	$	919,086	$	739,584

The following table summarizes the contractual maturities of the short-term and long-term available-for-sale investments as of March 31, 2023 (in thousands):  

	Amortized Cost		Fair Value
Due in less than 1 year	$	252,449	$	249,803
Due in 1 - 5 years		181,774		178,795
Due in greater than 5 years		1,571		1,516
Total	$	435,794	$	430,114

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

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

	March 31, 2023
	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Money market funds	$	41,226	$	-	$	-		$	41,226
Certificates of deposit		131,042		-		-			131,042
Corporate debt securities		249,743		39		(5,627	)		244,155
Commercial paper		18,163		-		-			18,163
U.S. treasuries and government agency bonds		35,276		83		(121	)		35,238
Auction-rate securities backed by student-loan notes		1,570		-		(54	)		1,516
Total	$	477,020	$	122	$	(5,802	)	$	471,340

	December 31, 2022
	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Money market funds	$	15,462	$	-	$	-		$	15,462
Certificates of deposit		130,467		-		-			130,467
Corporate debt securities		300,529		18		(7,961	)		292,586
Commercial paper		17,928		-		-			17,928
U.S. treasuries and government agency bonds		8,487		-		(202	)		8,285
Auction-rate securities backed by student-loan notes		1,770		-		(59	)		1,711
Total	$	474,643	$	18	$	(8,222	)	$	466,439

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): 

	March 31, 2023
	Less than 12 Months					Greater than 12 Months					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Corporate debt securities	$	18,084	$	(68	)	$	212,767	$	(5,559	)	$	230,851	$	(5,627	)
U.S. treasuries and government agency bonds		2,878		(5	)		7,383		(116	)		10,261		(121	)
Auction-rate securities backed by student-loan notes		-		-			1,516		(54	)		1,516		(54	)
Total	$	20,962	$	(73	)	$	221,666	$	(5,729	)	$	242,628	$	(5,802	)

	December 31, 2022
	Less than 12 Months					Greater than 12 Months					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Corporate debt securities	$	72,943	$	(973	)	$	202,074	$	(6,988	)	$	275,017	$	(7,961	)
U.S. treasuries and government agency bonds		987		(2	)		7,298		(200	)		8,285		(202	)
Auction-rate securities backed by student-loan notes		-		-			1,711		(59	)		1,711		(59	)
Total	$	73,930	$	(975	)	$	211,083	$	(7,247	)	$	285,013	$	(8,222	)

An impairment exists when the fair value of an investment is less than its amortized cost basis. As of March 31, 2023 and December 31, 2022, 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 23 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 $41.7 million, or 96% 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. In April 2022, the Company made an investment of CHF 2.0 million in a convertible loan that will convert into additional shares of the Investee. 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 and is on the Investee’s board of directors. As of March 31, 2023 and December 31, 2022, the Company’s investment in the Investee, which is denominated in Swiss Francs, had a carrying value of $5.8 million and $5.4 million, respectively. The Company did not record any impairment or adjustments resulting from observable price changes for the three months ended March 31, 2023.

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):   

	March 31,		December 31,
	2023		2022
Cash and cash equivalents	$	488,972	$	288,607
Restricted cash included in other long-term assets		123		122
Total cash, cash equivalents and restricted cash reported on the Condensed Consolidated Statements of Cash Flows	$	489,095	$	288,729

As of March 31, 2023 and December 31, 2022, 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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Note 10 - Fair Value Measurements

3 Months Ended

Mar. 31, 2023

Notes to Financial Statements

Fair Value Disclosures [Text Block]

10. FAIR VALUE MEASUREMENTS

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

	March 31, 2023
	Total		Level 1		Level 2		Level 3
Money market funds	$	41,226	$	41,226	$	-	$	-
Certificates of deposit		131,042		-		131,042		-
Corporate debt securities		244,155		-		244,155		-
Commercial paper		18,163		-		18,163
U.S. treasuries and government agency bonds		35,238		-		35,238		-
Auction-rate securities backed by student-loan notes		1,516		-		-		1,516
Mutual funds and money market funds under deferred compensation plan		47,114		47,114		-		-
Total	$	518,454	$	88,340	$	428,598	$	1,516

	December 31, 2022
	Total		Level 1		Level 2		Level 3
Money market funds	$	15,462	$	15,462	$	-	$	-
Certificates of deposit		130,467		-		130,467		-
Corporate debt securities		292,586		-		292,586		-
Commercial paper		17,928		-		17,928		-
U.S. treasuries and government agency bonds		8,285		-		8,285		-
Auction-rate securities backed by student-loan notes		1,711		-		-		1,711
Mutual funds and money market funds under deferred compensation plan		43,933		43,933		-		-
Total	$	510,372	$	59,395	$	449,266	$	1,711

● 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 periods presented.

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Note 11 - Deferred Compensation Plan

3 Months Ended

Mar. 31, 2023

Notes to Financial Statements

Compensation and Employee Benefit Plans [Text Block]

11. DEFERRED COMPENSATION PLAN

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

	March 31,		December 31,
	2023		2022
Deferred compensation plan asset components:
Cash surrender value of corporate-owned life insurance policies	$	20,651	$	19,089
Fair value of mutual funds and money market funds		47,114		43,933
Total	$	67,765	$	63,022
Deferred compensation plan assets reported in:
Other long-term assets	$	67,765	$	63,022
Deferred compensation plan liabilities reported in:
Accrued compensation and related benefits (short-term)	$	4,191	$	118
Other long-term liabilities		65,678		64,863
Total	$	69,869	$	64,981

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Note 12 - Other Income (Expense), Net

3 Months Ended

Mar. 31, 2023

Notes to Financial Statements

Other Nonoperating Income and Expense [Text Block]

12. OTHER INCOME (EXPENSE), NET

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

	Three Months Ended March 31,
	2023			2022
Interest income	$	4,808		$	3,461
Amortization of premium on available-for-sale securities		(260	)		(1,348	)
Gain (loss) on deferred compensation plan investments		2,534			(2,192	)
Charitable contributions		(2,000	)		(500	)
Other		215			(55	)
Total	$	5,297		$	(634	)

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Note 13 - Income Taxes

3 Months Ended

Mar. 31, 2023

Notes to Financial Statements

Income Tax Disclosure [Text Block]

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 March 31, 2023 was $19.8 million, or 15.3% of pre-tax income. The effective tax rate was lower than the federal statutory rate of 21% primarily due to foreign income from the Company’s subsidiaries in Bermuda and China being taxed at lower statutory tax rates, and excess tax benefits from stock-based compensation. The decrease in the effective tax rate 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  March 31, 2022 was $15.9 million, or 16.7% of pre-tax income. The effective tax rate was lower than the federal statutory rate of 21% primarily due to foreign income from the Company’s subsidiaries in Bermuda and China being taxed at lower statutory tax rates, and excess tax benefits from stock-based compensation. The decrease in the effective tax rate relative to the federal statutory rate was partially offset by the inclusion of the GILTI tax. 

On August 9, 2022, the U.S. government enacted the U.S. CHIPS and Science Act of 2022 (the “CHIPS Act”) to provide certain financial and tax incentives to the semiconductor industry, primarily for manufacturing activities within the United States. On August 16, 2022, the Inflation Reduction Act of 2022 (the “IRA”) was enacted and signed into law. The IRA, among other things, introduces a new 15% corporate minimum tax, based on adjusted financial statement income of certain large corporations, and imposes a 1% surcharge on stock repurchases. This excise tax was effective January 1, 2023. The Company does not believe the CHIPS Act or the IRA had a material impact on the Company’s income tax provisions, results of operations or financial condition for the three months ended March 31, 2023.  

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Note 14 - Accumulated Other Comprehensive Loss

3 Months Ended

Mar. 31, 2023

Notes to Financial Statements

Comprehensive Income (Loss) Note [Text Block]

14. ACCUMULATED OTHER COMPREHENSIVE LOSS

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

	Unrealized Gains (Losses) on Available-for- Sale Securities			Foreign Currency Translation Adjustments			Total
Balance as of January 1, 2023	$	(7,727	)	$	(15,350	)	$	(23,077	)
Other comprehensive income before reclassifications		2,524			2,919			5,443
Tax effect		(311	)		-			(311	)
Net current period other comprehensive income		2,213			2,919			5,132
Balance as of March 31, 2023	$	(5,514	)	$	(12,431	)	$	(17,945	)

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Note 15 - Dividends and Dividend Equivalents

3 Months Ended

Mar. 31, 2023

Notes to Financial Statements

Dividends And Dividend Equivalents [Text Block]

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 March 31,
	2023		2022
Dividend declared per share	$	1.00	$	0.75
Total amount	$	47,330	$	34,908

As of March 31, 2023 and December 31, 2022, accrued dividends totaled $47.3 million and $35.3 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 Company’s 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 March 31, 2023 and December 31, 2022, accrued dividend equivalents totaled $14.1 million and $13.8 million, respectively.    

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Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2023

Accounting Policies [Abstract]

Use of Estimates, Policy [Policy Text Block]

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.

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Note 3 - Stock-based Compensation (Tables)

3 Months Ended

Mar. 31, 2023

Notes Tables

Share-Based Payment Arrangement, Cost by Plan [Table Text Block]

	Three Months Ended March 31,
	2023		2022
Cost of revenue	$	1,147	$	1,307
Research and development		8,614		8,401
Selling, general and administrative		27,248		30,103
Total stock-based compensation expense	$	37,009	$	39,811
Tax benefit related to stock-based compensation (1)	$	423	$	573

Share-Based Payment Arrangement, Restricted Stock and Restricted Stock Unit, Activity [Table Text Block]

	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, 2023		106		$	327.13		748		$	275.70		1,805		$	126.57		2,659		$	176.50
Granted		27		$	467.62		246	(1)	$	449.22		-		$	-		273		$	450.13
Vested		(16	)	$	279.89		(198	)	$	291.65		(81	)	$	23.57		(295	)	$	217.47
Forfeited		(2	)	$	361.26		(2	)	$	285.23		(5	)	$	139.15		(9	)	$	225.18
Outstanding at March 31, 2023		115		$	365.93		794		$	326.02		1,719		$	131.39		2,628		$	200.37

Schedule of Share-Based Payment Award, Employee Stock Purchase Plan, Valuation Assumptions [Table Text Block]

	Three Months Ended March 31,
	2023			2022
Expected term (in years)		0.5			0.5
Expected volatility		55.8	%		38.1	%
Risk-free interest rate		5.0	%		0.7	%
Dividend yield		0.8	%		0.6	%

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Note 4 - Balance Sheet Components (Tables)

3 Months Ended

Mar. 31, 2023

Notes Tables

Schedule of Inventory, Current [Table Text Block]

	March 31,		December 31,
	2023		2022
Raw materials	$	131,367	$	126,760
Work in process		126,417		134,071
Finished goods		173,046		186,459
Total	$	430,830	$	447,290

Schedule of Other Current Assets [Table Text Block]

	March 31,		December 31,
	2023		2022
Prepaid wafer purchase	$	50,000	$	-
RSU tax withholding proceeds receivable		15,997		14,480
Prepaid expenses		9,719		11,045
Accrued interest receivable		3,537		8,752
Other		10,702		8,465
Total	$	89,955	$	42,742

Schedule of Other Assets, Noncurrent [Table Text Block]

	March 31,		December 31,
	2023		2022
Prepaid wafer purchase	$	120,000	$	170,000
Deferred compensation plan assets		67,765		63,022
Other		19,802		16,264
Total	$	207,567	$	249,286

Schedule of Accrued Liabilities [Table Text Block]

	March 31,		December 31,
	2023		2022
Dividends and dividend equivalents	$	54,656	$	42,170
Warranty		19,726		24,082
Stock rotation and sales returns		30,155		14,931
Income tax payable		32,338		15,595
Other		19,086		16,901
Total	$	155,961	$	113,679

Other Noncurrent Liabilities [Table Text Block]

	March 31,		December 31,
	2023		2022
Deferred compensation plan liabilities	$	65,678	$	64,863
Dividend equivalents		6,765		6,847
Other		5,204		1,664
Total	$	77,647	$	73,374

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Note 5 - Leases (Tables)

3 Months Ended

Mar. 31, 2023

Notes Tables

Lessee, Operating Lease, Balance Sheet Information [Table Text Block]

		March 31,		December 31,
	Financial Statement Line Item	2023		2022
Operating lease ROU assets	Other long-term assets	$	7,820	$	4,288
Operating lease liabilities	Other accrued liabilities	$	2,018	$	2,133
	Other long-term liabilities	$	5,203	$	1,664

Lease, Cost [Table Text Block]

	Three Months Ended March 31,
	2023		2022
Lease costs:
Operating lease costs	$	716	$	729
Other		538		367
Total lease costs	$	1,254	$	1,096

	Three Months Ended March 31,
	2023		2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$	864	$	932
ROU assets obtained in exchange for new operating lease liabilities	$	4,545	$	1,010

	March 31,			December 31,
	2023			2022
Weighted-average remaining lease term (in years)		5.3			2.1
Weighted-average discount rate		3.4	%		2.1	%

Lessee, Operating Lease, Liability, to be Paid, Maturity [Table Text Block]

2023 (remaining nine months)	$	1,756
2024		1,591
2025		1,190
2026		921
2027		929
Thereafter		1,509
Total remaining lease payments		7,896
Less: imputed interest		(675	)
Total lease liabilities	$	7,221

Lessor, Operating Lease, Payment to be Received, Maturity [Table Text Block]

2023 (remaining nine months)	$	1,112
2024		613
2025		107
2026		20
Total	$	1,852

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Note 6 - Net Income Per Share (Tables)

3 Months Ended

Mar. 31, 2023

Notes Tables

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

	Three Months Ended March 31,
	2023		2022
Numerator:
Net income	$	109,802	$	79,566
Denominator:
Weighted-average outstanding shares - basic		47,234		46,424
Effect of dilutive securities		1,421		1,826
Weighted-average outstanding shares - diluted		48,655		48,250
Net income per share:
Basic	$	2.32	$	1.71
Diluted	$	2.26	$	1.65

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Note 7 - Segment, Significant Customers and Geographic Information (Tables)

3 Months Ended

Mar. 31, 2023

Notes Tables

Schedules of Concentration of Risk, by Risk Factor [Table Text Block]

	Three Months Ended March 31,
Customer	2023			2022
Distributor A		20	%		24	%
Distributor B		21	%		18	%
Distributor C		*			11	%

	March 31,			December 31,
Customer	2023			2022
Distributor A		22	%		29	%
Distributor B		23	%		23	%

Schedule of Revenue from External Customers Attributed to Foreign Countries by Geographic Area [Table Text Block]

	Three Months Ended March 31,
Country or Region	2023		2022
China	$	225,052	$	206,079
Taiwan		48,833		56,437
South Korea		45,680		40,373
Europe		43,103		25,215
United States		31,017		13,446
Japan		30,815		19,155
Southeast Asia		26,432		16,889
Other		133		120
Total	$	451,065	$	377,714

Revenue from External Customers by Products and Services [Table Text Block]

	Three Months Ended March 31,
Product Family	2023		2022
Direct Current (“DC”) to DC	$	425,181	$	358,849
Lighting Control		25,884		18,865
Total	$	451,065	$	377,714

Schedule of Disclosure on Geographic Areas, Long-Lived Assets in Individual Foreign Countries by Country [Table Text Block]

	March 31,		December 31,
Country	2023		2022
China	$	196,790	$	200,508
United States		115,363		113,996
Taiwan		19,812		20,074
Other		22,348		22,579
Total	$	354,313	$	357,157

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Note 8 - Commitments and Contingencies (Tables)

3 Months Ended

Mar. 31, 2023

Notes Tables

Schedule of Product Warranty Liability [Table Text Block]

	Three Months Ended March 31,
	2023			2022
Balance at beginning of period	$	24,082		$	20,989
Warranties issued		362			-
Repairs, replacement and refund		(672	)		(1,380	)
Changes in liability for pre-existing warranties		(4,046	)		4,224
Balance at end of period	$	19,726		$	23,833

Changes in liability for pre-existing warranties result from changes in estimates for warranties issued in prior periods.

Contractual Obligation, Fiscal Year Maturity [Table Text Block]

2023 (remaining nine months)	$	337,545
2024		337,537
2025		353,952
Total	$	1,029,034

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Note 9 - Cash, Cash Equivalents, Investments and Restricted Cash (Tables)

3 Months Ended

Mar. 31, 2023

Notes Tables

Fair Value, by Balance Sheet Grouping [Table Text Block]

	March 31,		December 31,
	2023		2022
Cash	$	447,746	$	273,145
Money market funds		41,226		15,462
Certificates of deposit		131,042		130,467
Corporate debt securities		244,155		292,586
Commercial paper		18,163		17,928
U.S. treasuries and government agency bonds		35,238		8,285
Auction-rate securities backed by student-loan notes		1,516		1,711
Total	$	919,086	$	739,584

	March 31,		December 31,
	2023		2022
Reported as:
Cash and cash equivalents	$	488,972	$	288,607
Short-term investments		428,598		449,266
Investment within other long-term assets		1,516		1,711
Total	$	919,086	$	739,584

Investments Classified by Contractual Maturity Date [Table Text Block]

	Amortized Cost		Fair Value
Due in less than 1 year	$	252,449	$	249,803
Due in 1 - 5 years		181,774		178,795
Due in greater than 5 years		1,571		1,516
Total	$	435,794	$	430,114

Unrealized Gain (Loss) on Investments [Table Text Block]

	March 31, 2023
	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Money market funds	$	41,226	$	-	$	-		$	41,226
Certificates of deposit		131,042		-		-			131,042
Corporate debt securities		249,743		39		(5,627	)		244,155
Commercial paper		18,163		-		-			18,163
U.S. treasuries and government agency bonds		35,276		83		(121	)		35,238
Auction-rate securities backed by student-loan notes		1,570		-		(54	)		1,516
Total	$	477,020	$	122	$	(5,802	)	$	471,340

	December 31, 2022
	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Money market funds	$	15,462	$	-	$	-		$	15,462
Certificates of deposit		130,467		-		-			130,467
Corporate debt securities		300,529		18		(7,961	)		292,586
Commercial paper		17,928		-		-			17,928
U.S. treasuries and government agency bonds		8,487		-		(202	)		8,285
Auction-rate securities backed by student-loan notes		1,770		-		(59	)		1,711
Total	$	474,643	$	18	$	(8,222	)	$	466,439

Debt Securities, Available-for-Sale, Unrealized Loss Position, Fair Value [Table Text Block]

	March 31, 2023
	Less than 12 Months					Greater than 12 Months					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Corporate debt securities	$	18,084	$	(68	)	$	212,767	$	(5,559	)	$	230,851	$	(5,627	)
U.S. treasuries and government agency bonds		2,878		(5	)		7,383		(116	)		10,261		(121	)
Auction-rate securities backed by student-loan notes		-		-			1,516		(54	)		1,516		(54	)
Total	$	20,962	$	(73	)	$	221,666	$	(5,729	)	$	242,628	$	(5,802	)

	December 31, 2022
	Less than 12 Months					Greater than 12 Months					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Corporate debt securities	$	72,943	$	(973	)	$	202,074	$	(6,988	)	$	275,017	$	(7,961	)
U.S. treasuries and government agency bonds		987		(2	)		7,298		(200	)		8,285		(202	)
Auction-rate securities backed by student-loan notes		-		-			1,711		(59	)		1,711		(59	)
Total	$	73,930	$	(975	)	$	211,083	$	(7,247	)	$	285,013	$	(8,222	)

Restrictions on Cash and Cash Equivalents [Table Text Block]

	March 31,		December 31,
	2023		2022
Cash and cash equivalents	$	488,972	$	288,607
Restricted cash included in other long-term assets		123		122
Total cash, cash equivalents and restricted cash reported on the Condensed Consolidated Statements of Cash Flows	$	489,095	$	288,729

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Note 10 - Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2023

Notes Tables

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis [Table Text Block]

	March 31, 2023
	Total		Level 1		Level 2		Level 3
Money market funds	$	41,226	$	41,226	$	-	$	-
Certificates of deposit		131,042		-		131,042		-
Corporate debt securities		244,155		-		244,155		-
Commercial paper		18,163		-		18,163
U.S. treasuries and government agency bonds		35,238		-		35,238		-
Auction-rate securities backed by student-loan notes		1,516		-		-		1,516
Mutual funds and money market funds under deferred compensation plan		47,114		47,114		-		-
Total	$	518,454	$	88,340	$	428,598	$	1,516

	December 31, 2022
	Total		Level 1		Level 2		Level 3
Money market funds	$	15,462	$	15,462	$	-	$	-
Certificates of deposit		130,467		-		130,467		-
Corporate debt securities		292,586		-		292,586		-
Commercial paper		17,928		-		17,928		-
U.S. treasuries and government agency bonds		8,285		-		8,285		-
Auction-rate securities backed by student-loan notes		1,711		-		-		1,711
Mutual funds and money market funds under deferred compensation plan		43,933		43,933		-		-
Total	$	510,372	$	59,395	$	449,266	$	1,711

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Note 11 - Deferred Compensation Plan (Tables)

3 Months Ended

Mar. 31, 2023

Notes Tables

Schedule of Deferred Compensation Arrangement with Individual, Excluding Share-Based Payments and Postretirement Benefits by Title of Individual and Type of Deferred Compensation [Table Text Block]

	March 31,		December 31,
	2023		2022
Deferred compensation plan asset components:
Cash surrender value of corporate-owned life insurance policies	$	20,651	$	19,089
Fair value of mutual funds and money market funds		47,114		43,933
Total	$	67,765	$	63,022
Deferred compensation plan assets reported in:
Other long-term assets	$	67,765	$	63,022
Deferred compensation plan liabilities reported in:
Accrued compensation and related benefits (short-term)	$	4,191	$	118
Other long-term liabilities		65,678		64,863
Total	$	69,869	$	64,981

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Note 12 - Other Income (Expense), Net (Tables)

3 Months Ended

Mar. 31, 2023

Notes Tables

Schedule of Other Nonoperating Income (Expense) [Table Text Block]

	Three Months Ended March 31,
	2023			2022
Interest income	$	4,808		$	3,461
Amortization of premium on available-for-sale securities		(260	)		(1,348	)
Gain (loss) on deferred compensation plan investments		2,534			(2,192	)
Charitable contributions		(2,000	)		(500	)
Other		215			(55	)
Total	$	5,297		$	(634	)

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Note 14 - Accumulated Other Comprehensive Loss (Tables)

3 Months Ended

Mar. 31, 2023

Notes Tables

Schedule of Accumulated Other Comprehensive Income (Loss) [Table Text Block]

	Unrealized Gains (Losses) on Available-for- Sale Securities			Foreign Currency Translation Adjustments			Total
Balance as of January 1, 2023	$	(7,727	)	$	(15,350	)	$	(23,077	)
Other comprehensive income before reclassifications		2,524			2,919			5,443
Tax effect		(311	)		-			(311	)
Net current period other comprehensive income		2,213			2,919			5,132
Balance as of March 31, 2023	$	(5,514	)	$	(12,431	)	$	(17,945	)

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Note 15 - Dividends and Dividend Equivalents (Tables)

3 Months Ended

Mar. 31, 2023

Notes Tables

Dividends Declared [Table Text Block]

	Three Months Ended March 31,
	2023		2022
Dividend declared per share	$	1.00	$	0.75
Total amount	$	47,330	$	34,908

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Note 2 - Revenue Recognition (Details Textual) - USD ($)	3 Months Ended			12 Months Ended
	Mar. 31, 2023	Mar. 31, 2023	Mar. 31, 2022	Dec. 31, 2022
Lapse Period for Consignment (Day)		60 days
Accounts Receivable, after Allowance for Credit Loss, Current	$ 184,274,000	$ 184,274,000		$ 182,714,000
Contract with Customer, Liability, Revenue Recognized	3,200,000
Minimum [Member]
Contract with Customer, Payment Term (Day)				30 days
Maximum [Member]
Contract with Customer, Payment Term (Day)				90 days
Certain Customers in China [Member]
Contract with Customer, Payment Term Required Prior to Shipping Products (Week)				14 days
Certain Customers in China [Member] | Accrued Liabilities, Current [Member]
Contract with Customer, Liability, Current	$ 3.6	$ 3.6		$ 3,600,000
Product [Member]
Percentage of Revenue		99.00%		98.00%
Product Sales Through Distribution Arrangements [Member] | Customer Concentration Risk [Member] | Revenue Benchmark [Member]
Concentration Risk, Percentage		81.00%	82.00%

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Note 3 - Stock-based Compensation (Details Textual) - USD ($) $ / shares in Units, $ in Thousands		1 Months Ended	3 Months Ended
	Jun. 11, 2020	Feb. 28, 2022	Mar. 31, 2023	Mar. 31, 2022	Nov. 13, 2014
Share Price (in dollars per share)			$ 500.54
Proceeds, Issuance of Shares, Share-Based Payment Arrangement, Excluding Option Exercised			$ 1,110	$ 2,318
Share-Based Compensation Arrangement by Share-Based Payment Award, Equity Instruments Other than Options, Grants in Period (in shares)			273,000
Share-Based Compensation Arrangement by Share-Based Payment Award, Equity Instruments Other than Options, Grants in Period, Weighted Average Grant Date Fair Value (in dollars per share)			$ 450.13
Proceeds from Stock Plans			$ 3,737	2,786
Restricted Stock Units (RSUs) [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award, Equity Instruments Other than Options, Aggregate Intrinsic Value, Vested			141,600	151,700
Share-Based Compensation Arrangement by Share-Based Payment Award, Equity Instruments Other than Options, Aggregate Intrinsic Value, Outstanding			1,300,000
Share-Based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Amount			$ 308,000
Share-Based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Period for Recognition (Year)			3 years
Proceeds, Issuance of Shares, Share-Based Payment Arrangement, Excluding Option Exercised			$ 1,100	$ 2,300
Time-Based RSUs [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award, Equity Instruments Other than Options, Grants in Period (in shares)			27,000
Share-Based Compensation Arrangement by Share-Based Payment Award, Equity Instruments Other than Options, Grants in Period, Weighted Average Grant Date Fair Value (in dollars per share)			$ 467.62
Time-Based RSUs [Member] | Employees [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period (Year)			4 years
Time-Based RSUs [Member] | Director [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period (Year)			1 year
PSU2023 [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Price Per Share Payable Upon Vesting of Equity Instruments Other than Options (in dollars per share)			$ 30
Share-Based Compensation Arrangement by Share-Based Payment Award, Equity Instruments Other than Options, Grants in Period, Weighted Average Grant Date Fair Value (in dollars per share)			$ 467.62
Total number of performance conditions			4
Share-Based Compensation Arrangement by Share-Based Payment Award, Fair Value Assumptions, Expected Volatility Rate			51.00%
Share-Based Compensation Arrangement by Share-Based Payment Award, Fair Value Assumptions, Risk Free Interest Rate			3.90%
Share-Based Compensation Arrangement by Share-Based Payment Award, Fair Value Assumptions, Expected Dividend Rate			0.90%
PSU2023 [Member] | Executive Officer [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award, Equity Instruments Other than Options, Grants in Period (in shares)			69,000
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Maximum Percentage Allowed		300.00%
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Minimum Percentage Allowed			200.00%
Maximum Stock Compensation Costs			$ 156,200
PSU2023 [Member] | Executive Officer [Member] | Vesting First Quarter of 2025 [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights, Percentage			50.00%
PSU2023 [Member] | Non-Executive Employees [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award, Equity Instruments Other than Options, Grants in Period (in shares)			13,000
Maximum Stock Compensation Costs			$ 14,200
PSU2023 [Member] | Non-Executive Employees [Member] | Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Minimum Percentage Allowed			200.00%
PSU2023 [Member] | Non-Executive Employees [Member] | Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Minimum Percentage Allowed			300.00%
The2014 Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized (in shares)					5,500,000
Amended and Restated 2014 Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Additional Shares Authorized (in shares)	10,500,000
Share-Based Compensation Arrangement by Share-Based Payment Award, Number of Shares Available for Grant (in shares)			4,200,000
The 2004 Employee Stock Purchase Plan [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award, Number of Shares Available for Grant (in shares)			4,500,000
Share-Based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Amount			$ 1,100
Stock Issued During Period, Shares, Employee Stock Purchase Plans (in shares)			9,000	7,000
Employee Stock Purchase Plan Shares Issued, Intrinsic Value			$ 700
Proceeds from Stock Plans			$ 3,700	$ 2,800

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Note 3 - Stock-based Compensation - Stock-based Compensation Plan Expenses (Details) - USD ($) $ in Thousands		3 Months Ended
		Mar. 31, 2023	Mar. 31, 2022
Share based compensation expense		$ 37,009	$ 39,811
Tax benefit related to stock-based compensation	[1]	423	573
Cost of Sales [Member]
Share based compensation expense		1,147	1,307
Research and Development Expense [Member]
Share based compensation expense		8,614	8,401
Selling, General and Administrative Expenses [Member]
Share based compensation expense		$ 27,248	$ 30,103

[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. Equity awards granted to the Company’s executive officers are subject to the tax deduction limitations set by Section 162(m) of the Internal Revenue Code.

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Note 3 - Stock-based Compensation - RSU Summary (Details)	3 Months Ended
	Mar. 31, 2023 $ / shares shares
Balance (in shares) | shares	2,659,000
Weighted-Average Grant Date Fair Value Per Share, ending balance (in dollars per share) | $ / shares	$ 176.50
Granted (in shares) | shares	273,000
Weighted-Average Grant Date Fair Value Per Share, granted (in dollars per share) | $ / shares	$ 450.13
Vested (in shares) | shares	(295,000)
Weighted-Average Grant Date Fair Value Per Share, vested (in dollars per share) | $ / shares	$ 217.47
Forfeited (in shares) | shares	(9,000)
Weighted-Average Grant Date Fair Value Per Share, forfeited (in dollars per share) | $ / shares	$ 225.18
Balance (in shares) | shares	2,628,000
Weighted-Average Grant Date Fair Value Per Share, ending balance (in dollars per share) | $ / shares	$ 200.37
Time-Based RSUs [Member]
Balance (in shares) | shares	106,000
Weighted-Average Grant Date Fair Value Per Share, ending balance (in dollars per share) | $ / shares	$ 327.13
Granted (in shares) | shares	27,000
Weighted-Average Grant Date Fair Value Per Share, granted (in dollars per share) | $ / shares	$ 467.62
Vested (in shares) | shares	(16,000)
Weighted-Average Grant Date Fair Value Per Share, vested (in dollars per share) | $ / shares	$ 279.89
Forfeited (in shares) | shares	(2,000)
Weighted-Average Grant Date Fair Value Per Share, forfeited (in dollars per share) | $ / shares	$ 361.26
Balance (in shares) | shares	115,000
Weighted-Average Grant Date Fair Value Per Share, ending balance (in dollars per share) | $ / shares	$ 365.93
PSUs and MPSUs [Member]
Balance (in shares) | shares	748,000
Weighted-Average Grant Date Fair Value Per Share, ending balance (in dollars per share) | $ / shares	$ 275.70
Granted (in shares) | shares	246,000	[1]
Weighted-Average Grant Date Fair Value Per Share, granted (in dollars per share) | $ / shares	$ 449.22
Vested (in shares) | shares	(198,000)
Weighted-Average Grant Date Fair Value Per Share, vested (in dollars per share) | $ / shares	$ 291.65
Forfeited (in shares) | shares	(2,000)
Weighted-Average Grant Date Fair Value Per Share, forfeited (in dollars per share) | $ / shares	$ 285.23
Balance (in shares) | shares	794,000
Weighted-Average Grant Date Fair Value Per Share, ending balance (in dollars per share) | $ / shares	$ 326.02
MSUs [Member]
Balance (in shares) | shares	1,805,000
Weighted-Average Grant Date Fair Value Per Share, ending balance (in dollars per share) | $ / shares	$ 126.57
Granted (in shares) | shares	0
Weighted-Average Grant Date Fair Value Per Share, granted (in dollars per share) | $ / shares	$ 0
Vested (in shares) | shares	(81,000)
Weighted-Average Grant Date Fair Value Per Share, vested (in dollars per share) | $ / shares	$ 23.57
Forfeited (in shares) | shares	(5,000)
Weighted-Average Grant Date Fair Value Per Share, forfeited (in dollars per share) | $ / shares	$ 139.15
Balance (in shares) | shares	1,719,000
Weighted-Average Grant Date Fair Value Per Share, ending balance (in dollars per share) | $ / shares	$ 131.39

[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.

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Note 3 - Stock-based Compensation - Valuation Assumptions (Details) - 2004 Employee Stock Plan [Member] - Employee Stock Purchase Plan [Member]	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Expected term (Year)	6 months	6 months
Expected volatility	55.80%	38.10%
Risk-free interest rate	5.00%	0.70%
Dividend yield	0.80%	0.60%

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Note 4 - Balance Sheet Components (Details Textual) - USD ($) $ in Thousands	Mar. 31, 2023	Jan. 01, 2023	Dec. 31, 2022
Prepaid Wafer Purchase	$ 50,000	$ 50,000	$ 0
Inventory, Stock Rotation Reserve	$ 26,400		$ 14,300

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Note 4 - Balance Sheet Components - Inventories (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Raw materials	$ 131,367	$ 126,760
Work in process	126,417	134,071
Finished goods	173,046	186,459
Total	$ 430,830	$ 447,290

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Note 4 - Balance Sheet Components - Other Current Assets (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Jan. 01, 2023	Dec. 31, 2022
Prepaid wafer purchase	$ 50,000	$ 50,000	$ 0
RSU tax withholding proceeds receivable	15,997		14,480
Prepaid expenses	9,719		11,045
Accrued interest receivable	3,537		8,752
Other	10,702		8,465
Total	$ 89,955		$ 42,742

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Note 4 - Balance Sheet Components - Other Long-term Assets (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Prepaid wafer purchase	$ 120,000	$ 170,000
Deferred compensation plan assets	67,765	63,022
Other	19,802	16,264
Total	$ 207,567	$ 249,286

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Note 4 - Balance Sheet Components - Accrued Liabilities (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Dividends and dividend equivalents	$ 54,656	$ 42,170
Warranty	19,726	24,082
Stock rotation and sales returns	30,155	14,931
Income tax payable	32,338	15,595
Other	19,086	16,901
Total	$ 155,961	$ 113,679

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Note 4 - Balance Sheet Components - Other Long-term Liabilities (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Deferred compensation plan liabilities	$ 65,678	$ 64,863
Dividend equivalents	6,765	6,847
Other	5,204	1,664
Total	$ 77,647	$ 73,374

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Note 5 - Leases (Details Textual) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Lessee, Operating Lease, Lease Not yet Commenced, Future Lease Obligations	$ 0
Operating Lease, Lease Income, Lease Payments	$ 500	$ 600
Minimum [Member]
Lessee, Operating Lease, Remaining Lease Term (Year)	1 year
Lessor, Operating Lease, Remaining Lease Term (Year)	1 year
Maximum [Member]
Lessee, Operating Lease, Remaining Lease Term (Year)	8 years
Lessee, Operating Lease, Renewal Term (Year)	2 years
Lessor, Operating Lease, Remaining Lease Term (Year)	3 years
Lessor, Operating Lease, Renewal Term (Year)	5 years

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Note 5 - Leases - Balance Sheet Information (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Other Long-term Assets [Member]
Operating lease ROU assets	$ 7,820	$ 4,288
Other Accrued Liabilities [Member]
Operating lease liabilities	2,018	2,133
Other Long-term Liabilities [Member]
Operating Lease, Liability, Noncurrent	$ 5,203	$ 1,664

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Note 5 - Leases - Leases Cost (Details) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2023	Dec. 31, 2022
Operating lease costs	$ 716	$ 729
Other	538	367
Total lease costs	1,254	1,096
Operating cash flows for operating leases	864	932
ROU assets obtained in exchange for new operating lease liabilities	$ 4,545	$ 1,010
Weighted-average remaining lease term (in years) (Year)	5 years 3 months 18 days	2 years 1 month 6 days
Weighted-average discount rate	3.40%	2.10%

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Note 5 - Leases - Maturities of Lease Liabilities (Details) $ in Thousands	Mar. 31, 2023 USD ($)
2023 (remaining nine months)	$ 1,756
2024	1,591
2025	1,190
2026	921
2027	929
Thereafter	1,509
Total remaining lease payments	7,896
Less: imputed interest	(675)
Accrued Liabilities and Other Long-term Liabilities [Member]
Total lease liabilities	$ 7,221

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Note 5 - Leases - Maturities of Income Related to Lease Payments (Details) $ in Thousands	Mar. 31, 2023 USD ($)
2023 (remaining nine months)	$ 1,112
2024	613
2025	107
2026	20
Total	$ 1,852

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Note 6 - Net Income Per Share - Net Income Per Share Basic and Diluted (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Net income	$ 109,802	$ 79,566
Weighted-average outstanding shares - basic (in shares)	47,234	46,424
Effect of dilutive securities (in shares)	1,421	1,826
Weighted-average outstanding shares - diluted (in shares)	48,655	48,250
Earnings per share, basic (in dollars per share)	$ 2.32	$ 1.71
Earnings per share, diluted (in dollars per share)	$ 2.26	$ 1.65

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Note 7 - Segment, Significant Customers and Geographic Information (Details Textual)	3 Months Ended
	Mar. 31, 2023
Number of Reportable Segments	1

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Note 7 - Segment, Significant Customers and Geographic Information - Customers with Sales and Accounts Receivable Greater Than 10% (Details) - Customer Concentration Risk [Member]	3 Months Ended		12 Months Ended
	Mar. 31, 2023	Mar. 31, 2022	Dec. 31, 2022
Revenue Benchmark [Member] | Distributor A [Member]
Concentration risk	20.00%	24.00%
Revenue Benchmark [Member] | Distributor B [Member]
Concentration risk	21.00%	18.00%
Revenue Benchmark [Member] | Distributor C [Member]
Concentration risk		11.00%
Accounts Receivable [Member] | Distributor A [Member]
Concentration risk	22.00%		29.00%
Accounts Receivable [Member] | Distributor B [Member]
Concentration risk	23.00%		23.00%

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Note 7 - Segment and Geographic Information - Revenue By Region (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Revenue	$ 451,065	$ 377,714
CHINA
Revenue	225,052	206,079
TAIWAN
Revenue	48,833	56,437
KOREA, REPUBLIC OF
Revenue	45,680	40,373
Europe [Member]
Revenue	43,103	25,215
UNITED STATES
Revenue	31,017	13,446
JAPAN
Revenue	30,815	19,155
South East Asia [Member]
Revenue	26,432	16,889
Other Region [Member]
Revenue	$ 133	$ 120

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Note 7 - Segment, Significant Customers and Geographic Information - Revenue By Product Family (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Revenue	$ 451,065	$ 377,714
DC To DC Products [Member]
Revenue	425,181	358,849
Lighting Control Products [Member]
Revenue	$ 25,884	$ 18,865

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Note 7 - Segment and Geographic Information - Long Lived Assets By Geographic Region (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Long lived assets by region	$ 354,313	$ 357,157
CHINA
Long lived assets by region	196,790	200,508
UNITED STATES
Long lived assets by region	115,363	113,996
TAIWAN
Long lived assets by region	19,812	20,074
Other Region [Member]
Long lived assets by region	$ 22,348	$ 22,579

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Note 8 - Commitments and Contingencies (Details Textual) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Jan. 01, 2023	Dec. 31, 2022
Purchase Obligation, Total	$ 1,029,034
Prepaid Wafer Purchase	$ 50,000	$ 50,000	$ 0
Long-term Supply Agreement [Member]
Purchase Obligation, Total			$ 170,000
Minimum [Member]
Warranty Term (Year)	1 year
Maximum [Member]
Warranty Term (Year)	2 years

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Note 8 - Commitments and Contingencies - Changes in Warranty Reserve (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Balance	$ 24,082	$ 20,989
Warranties issued	362	0
Repairs, replacement and refund	(672)	(1,380)
Changes in liability for pre-existing warranties	(4,046)	4,224
Balance	$ 19,726	$ 23,833

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Note 8 - Commitments and Contingencies - Estimated Future Unconditional Purchase Commitments (Details) $ in Thousands	Mar. 31, 2023 USD ($)
2023 (remaining nine months)	$ 337,545
2024	337,537
2025	353,952
Total	$ 1,029,034

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Note 9 - Cash, Cash Equivalents, Investments and Restricted Cash (Details Textual) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2023	Dec. 31, 2022	Apr. 01, 2022
Other-than-temporary Impairment Loss, Debt Securities, Available-for-sale, Total	$ 0	$ 0
Redemption, Auction Rate Securities to Date	$ 41,700
Percentage of Auction Rate Securities Redeemed at Par Value	96.00%
Equity Securities without Readily Determinable Fair Value, Amount	$ 5,800	$ 5,400	$ 2,000

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Note 9 - Cash, Cash Equivalents, Investments and Restricted Cash - Cash, Cash Equivalents, Short-term and Long-term Investments (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Cash	$ 447,746	$ 273,145
Money market funds	41,226	15,462
Certificates of deposit	131,042	130,467
Commercial paper	18,163	17,928
U.S. treasuries and government agency bonds	35,238	8,285
Total	919,086	739,584
Cash and cash equivalents	488,972	288,607
Short-term investments	428,598	449,266
Investment within other long-term assets	1,516	1,711
Corporate Debt Securities [Member]
Available-for-sale securities	244,155	292,586
Auction Rate Securities [Member]
Available-for-sale securities	$ 1,516	$ 1,711

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Note 9 - Cash, Cash Equivalents, Investments and Restricted Cash - Investment Maturity Classification (Details) $ in Thousands	Mar. 31, 2023 USD ($)
Due in less than 1 year, Amortized cost	$ 252,449
Due in less than 1 year, fair value	249,803
Due in 1 - 5 years, Amortized cost	181,774
Due in 1 - 5 years, fair value	178,795
Due in greater than 5 years, Amortized cost	1,571
Due in greater than 5 years, fair value	1,516
Total, Amortized cost	435,794
Total, fair value	$ 430,114

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Note 9 - Cash, Cash Equivalents, Investments and Restricted Cash - Unrealized Gains and Losses on Investments (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Amortized Cost	$ 477,020	$ 474,643
Unrealized Gains	122	18
Unrealized Losses	(5,802)	(8,222)
Total Fair Value	471,340	466,439
Total Fair Value	471,340	466,439
Money Market Funds [Member]
Amortized Cost	41,226	15,462
Unrealized Gains	0	0
Unrealized Losses	0	0
Total Fair Value	41,226	15,462
Total Fair Value	41,226	15,462
Certificates of Deposit [Member]
Amortized Cost	131,042	130,467
Unrealized Gains	0	0
Unrealized Losses	0	0
Total Fair Value	131,042	130,467
Total Fair Value	131,042	130,467
Corporate Debt Securities [Member]
Amortized Cost	249,743	300,529
Unrealized Gains	39	18
Unrealized Losses	(5,627)	(7,961)
Total Fair Value	244,155	292,586
Total Fair Value	244,155	292,586
Commercial Paper [Member]
Amortized Cost	18,163	17,928
Unrealized Gains	0	0
Unrealized Losses	0	0
Total Fair Value	18,163	17,928
Total Fair Value	18,163	17,928
US Government Agencies Short-Term Debt Securities [Member]
Amortized Cost	35,276	8,487
Unrealized Gains	83	0
Unrealized Losses	(121)	(202)
Total Fair Value	35,238	8,285
Total Fair Value	35,238	8,285
Auction Rate Securities [Member]
Amortized Cost	1,570	1,770
Unrealized Gains	0	0
Unrealized Losses	(54)	(59)
Total Fair Value	1,516	1,711
Total Fair Value	$ 1,516	$ 1,711

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Note 9 - Cash, Cash Equivalents, Investments and Restricted Cash - Continuous Unrealized Loss Position (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Continuous Unrealized Loss Position, Less than 12 Months	$ 20,962	$ 73,930
Continuous Unrealized Loss Position, Less than 12 Months, Accumulated Loss	(73)	(975)
Continuous Unrealized Loss Position, 12 Months or Longer	221,666	211,083
Continuous Unrealized Loss Position, 12 Months or Longer, Accumulated Loss	(5,729)	(7,247)
Unrealized Loss Position, Total	242,628	285,013
Unrealized Loss Position, Accumulated Loss, Total	(5,802)	(8,222)
Corporate Debt Securities [Member]
Continuous Unrealized Loss Position, Less than 12 Months	18,084	72,943
Continuous Unrealized Loss Position, Less than 12 Months, Accumulated Loss	(68)	(973)
Continuous Unrealized Loss Position, 12 Months or Longer	212,767	202,074
Continuous Unrealized Loss Position, 12 Months or Longer, Accumulated Loss	(5,559)	(6,988)
Unrealized Loss Position, Total	230,851	275,017
Unrealized Loss Position, Accumulated Loss, Total	(5,627)	(7,961)
US Treasury and Government Short-Term Debt Securities [Member]
Continuous Unrealized Loss Position, Less than 12 Months	2,878
Continuous Unrealized Loss Position, Less than 12 Months, Accumulated Loss	(5)
Continuous Unrealized Loss Position, 12 Months or Longer	7,383
Continuous Unrealized Loss Position, 12 Months or Longer, Accumulated Loss	(116)
Unrealized Loss Position, Total	10,261
Unrealized Loss Position, Accumulated Loss, Total	(121)
US Government Agencies Short-Term Debt Securities [Member]
Continuous Unrealized Loss Position, Less than 12 Months		987
Continuous Unrealized Loss Position, Less than 12 Months, Accumulated Loss		(2)
Continuous Unrealized Loss Position, 12 Months or Longer		7,298
Continuous Unrealized Loss Position, 12 Months or Longer, Accumulated Loss		(200)
Unrealized Loss Position, Total		8,285
Unrealized Loss Position, Accumulated Loss, Total		(202)
Auction Rate Securities [Member]
Continuous Unrealized Loss Position, Less than 12 Months	0	0
Continuous Unrealized Loss Position, Less than 12 Months, Accumulated Loss	0	0
Continuous Unrealized Loss Position, 12 Months or Longer	1,516	1,711
Continuous Unrealized Loss Position, 12 Months or Longer, Accumulated Loss	(54)	(59)
Unrealized Loss Position, Total	1,516	1,711
Unrealized Loss Position, Accumulated Loss, Total	$ (54)	$ (59)

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Note 9 - Cash, Cash Equivalents, Investments and Restricted Cash - Restricted Cash (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022	Mar. 31, 2022	Dec. 31, 2021
Cash and cash equivalents	$ 488,972	$ 288,607
Restricted cash included in other long-term assets	123	122
Total cash, cash equivalents and restricted cash reported on the Condensed Consolidated Statements of Cash Flows	$ 489,095	$ 288,729	$ 260,726	$ 189,389

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Note 10 - Fair Value Measurements - Financial Assets and Liabilities, Fair Value (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Total Fair Value	$ 471,340	$ 466,439
Assets, fair value	518,454	510,372
Fair Value, Inputs, Level 1 [Member]
Assets, fair value	88,340	59,395
Fair Value, Inputs, Level 2 [Member]
Assets, fair value	428,598	449,266
Fair Value, Inputs, Level 3 [Member]
Assets, fair value	1,516	1,711
Money Market Funds [Member]
Total Fair Value	41,226	15,462
Money Market Funds [Member] | Fair Value, Inputs, Level 1 [Member]
Total Fair Value	41,226	15,462
Money Market Funds [Member] | Fair Value, Inputs, Level 2 [Member]
Total Fair Value	0	0
Money Market Funds [Member] | Fair Value, Inputs, Level 3 [Member]
Total Fair Value	0	0
Certificates of Deposit [Member]
Total Fair Value	131,042	130,467
Certificates of Deposit [Member] | Fair Value, Inputs, Level 1 [Member]
Total Fair Value	0	0
Certificates of Deposit [Member] | Fair Value, Inputs, Level 2 [Member]
Total Fair Value	131,042	130,467
Certificates of Deposit [Member] | Fair Value, Inputs, Level 3 [Member]
Total Fair Value	0	0
Corporate Debt Securities [Member]
Total Fair Value	244,155	292,586
Corporate Debt Securities [Member] | Fair Value, Inputs, Level 1 [Member]
Total Fair Value	0	0
Corporate Debt Securities [Member] | Fair Value, Inputs, Level 2 [Member]
Total Fair Value	244,155	292,586
Corporate Debt Securities [Member] | Fair Value, Inputs, Level 3 [Member]
Total Fair Value	0	0
Commercial Paper [Member]
Total Fair Value	18,163	17,928
Commercial Paper [Member] | Fair Value, Inputs, Level 1 [Member]
Total Fair Value	0	0
Commercial Paper [Member] | Fair Value, Inputs, Level 2 [Member]
Total Fair Value	18,163	17,928
Commercial Paper [Member] | Fair Value, Inputs, Level 3 [Member]
Total Fair Value		0
US Government Agencies Short-Term Debt Securities [Member]
Total Fair Value	35,238	8,285
US Government Agencies Short-Term Debt Securities [Member] | Fair Value, Inputs, Level 1 [Member]
Total Fair Value	0	0
US Government Agencies Short-Term Debt Securities [Member] | Fair Value, Inputs, Level 2 [Member]
Total Fair Value	35,238	8,285
US Government Agencies Short-Term Debt Securities [Member] | Fair Value, Inputs, Level 3 [Member]
Total Fair Value	0	0
Auction Rate Securities [Member]
Total Fair Value	1,516	1,711
Auction Rate Securities [Member] | Fair Value, Inputs, Level 1 [Member]
Total Fair Value	0	0
Auction Rate Securities [Member] | Fair Value, Inputs, Level 2 [Member]
Total Fair Value	0	0
Auction Rate Securities [Member] | Fair Value, Inputs, Level 3 [Member]
Total Fair Value	1,516	1,711
Mutual Fund [Member]
Total Fair Value	47,114	43,933
Mutual Fund [Member] | Fair Value, Inputs, Level 1 [Member]
Total Fair Value	47,114	43,933
Mutual Fund [Member] | Fair Value, Inputs, Level 2 [Member]
Total Fair Value	0	0
Mutual Fund [Member] | Fair Value, Inputs, Level 3 [Member]
Total Fair Value	$ 0	$ 0

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Note 11 - Deferred Compensation Plan - Summary of Deferred Compensation Plan (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Deferred compensation plan assets	$ 67,765	$ 63,022
Deferred compensation plan liabilities	69,869	64,981
Other Long-term Assets [Member]
Deferred compensation plan assets	67,765	63,022
Accrued Compensation and Related Benefits [Member]
Deferred compensation plan liabilities	4,191	118
Other Long-term Liabilities [Member]
Deferred compensation plan liabilities	65,678	64,863
Cash Surrender Value [Member]
Deferred compensation plan assets	20,651	19,089
Mutual Funds and Money Market Funds, Fair Value [Member]
Deferred compensation plan assets	$ 47,114	$ 43,933

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Note 12 - Other Income (Expense), Net - Interest and Other Income Components (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Interest income	$ 4,808	$ 3,461
Amortization of premium on available-for-sale securities	(260)	(1,348)
Gain (loss) on deferred compensation plan investments	2,534	(2,192)
Charitable contributions	(2,000)	(500)
Other	215	(55)
Total	$ 5,297	$ (634)

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Note 13 - Income Taxes (Details Textual) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Income Tax Expense (Benefit)	$ 19,771	$ 15,934
Effective Income Tax Rate Reconciliation, Percent	15.30%	16.70%
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent	21.00%	21.00%

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Note 14 - Accumulated Other Comprehensive Loss - Changes in Accumulated Other Comprehensive Income (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2023 USD ($)
Balance	$ 1,668,602
Balance	1,776,261
AOCI, Accumulated Gain (Loss), Debt Securities, Available-for-Sale, Parent [Member]
Balance	(7,727)
Other comprehensive income before reclassifications	2,524
Tax effect	(311)
Net current period other comprehensive income	2,213
Balance	(5,514)
Accumulated Foreign Currency Adjustment Attributable to Parent [Member]
Balance	(15,350)
Other comprehensive income before reclassifications	2,919
Tax effect	0
Net current period other comprehensive income	2,919
Balance	(12,431)
AOCI Attributable to Parent [Member]
Balance	(23,077)
Other comprehensive income before reclassifications	5,443
Tax effect	(311)
Net current period other comprehensive income	5,132
Balance	$ (17,945)

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Note 15 - Dividends and Dividend Equivalents (Details Textual) - USD ($) $ in Millions	Mar. 31, 2023	Dec. 31, 2022
Dividends Payable, Current	$ 47.3	$ 35.3
Accrued Dividend Equivalents	$ 14.1	$ 13.8

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Note 15 - Dividends and Dividend Equivalents - Cash Dividends (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Dividend declared per share (in dollars per share)	$ 1.00	$ 0.75
Total amount	$ 47,330	$ 34,908