ACM Research (ACMR) risk factors, FY2024 10-K

Risks Related to International Aspects of Our Business

1. 01Mainland China central government authorities may intervene in, or influence, ACM Shanghai’s mainland China-based operations at any time, and those authorities’ rules and regulations in mainland China can change quickly with little or no advance notice
2. 02We could be adversely affected if we are unable to comply with legislation and regulations regarding improved access to audit and other information and audit inspections of accounting firms, including registered public accounting firms, such as our prior and current audit firms, operating in mainland China
3. 03It may be difficult for overseas regulators to conduct investigations or collect evidence within mainland China
4. 04We conduct substantially all of our operations outside the United States and face risks associated with conducting business in foreign markets
5. 05In particular, the Asian market is extremely competitive, and chip manufacturers may be aggressive in seeking price concessions from suppliers, including chip equipment manufacturers
6. 06Fluctuation in foreign currency exchange rates may adversely affect our results of operations and financial position
7. 07The exacerbation or further continuation of currently challenging global systemic economic and financial conditions could adversely affect our business, results of operations and financial condition

Risks Related to Our Business and Our Industry

1. 08We may require additional capital in the future and we cannot give any assurance that such capital will be available at all or available on terms acceptable to us and, if it is available, additional capital raised by us may dilute holders of Class A common stock
2. 09Our quarterly operating results can be difficult to predict and can fluctuate substantially, which could result in volatility in the price of Class A common stock
3. 10Cyclicality in the semiconductor industry is likely to lead to substantial variations in demand for our products, and as a result our operating results could be adversely affected
4. 11maturing product and technology cycles, excess inventories and declines in general economic conditions. This cyclicality could cause our operating results to decline dramatically from one period to the next
5. 12The chip manufacturing industry is highly concentrated, and we derive most of our revenue from a limited number of customers. A total of four customers accounted for 52.2% of our revenue in 2024, three customers accounted for 45.5%% of our revenue in 2023, and three customers accounted for 43.8% of our revenue in 2022
6. 13Our success will depend on industry chip manufacturers adopting our SAPS, TEBO, Tahoe, ECP, furnace and other technologies
7. 14If our SAPS, TEBO, Tahoe, ECP, furnace and other technologies do not achieve widespread market acceptance, we will not be able to compete effectively
8. 15If we do not continue to enhance our existing tools and achieve market acceptance, we will not be able to compete effectively
9. 16Our success will depend on our ability to identify and enter new product markets
10. 17If we fail to establish and maintain a reputation for credibility and product quality, our ability to expand our customer base will be impaired and our operating results may suffer
11. 18We operate in a highly competitive industry and many of our competitors are larger, better-established, and have significantly greater operating and financial resources than we have
12. 19Our customers do not generally enter into long-term purchase commitments, and they may decrease, cancel or delay their projected purchases at any time
13. 20We may incur significant expenses long before we can recognize revenue from new products, if at all, due to the costs and length of research, development, manufacturing and customer evaluation process cycles
14. 21Our sales cycle is long and unpredictable, which results in variability of our financial performance and may require us to incur high sales and marketing expenses with no assurance that a sale will result, all of which could adversely affect our profitability
15. 22Difficulties in forecasting demand for our tools may lead to periodic inventory shortages or excess spending on inventory items that may not be used
16. 23A failure to prevent inventory shortages or accurately predict customers’ needs could result in decreased revenue and gross margins and harm our business
17. 24If our tools contain defects or do not meet customer specifications, we could lose customers and revenue
18. 25Warranty claims in excess of our estimates could adversely affect our business
19. 26We rely on third parties to manufacture significant portions of our tools and our failure to manage our relationships with these parties could harm our relationships with our customers, increase our costs, decrease our sales and limit our growth
20. 27Our supply chain may be materially adversely impacted due to global events, including any new COVID‑19 outbreaks or other public health issues, transportation delays, and the armed conflict in Ukraine
21. 28Any shortage of components or subassemblies could result in delayed delivery of products to us or in increased costs to us, which could harm our business
22. 29We depend on a limited number of suppliers, including single source suppliers, for critical components and subassemblies, and our business could be disrupted if they are unable to meet our needs
23. 30The success of our business will depend on our ability to manage any future growth
24. 31We are highly dependent on our Chief Executive Officer and President and other senior management and key employees
25. 32Failure to attract and retain qualified personnel could put us at a competitive disadvantage and prevent us from effectively growing our business
26. 33Our ability to utilize certain U.S. and state net operating loss carryforwards may be limited under applicable tax laws
27. 34Acquisitions that we pursue in the future, whether or not consummated, could result in other operating and financial difficulties
28. 35Declines in the semiconductor industry, or the overall world economic conditions on which the industry is significantly dependent, could have a material adverse impact on our results of operations and financial condition

Regulatory Risks

1. 36Our ability to sell our tools to customers in mainland China and certain other countries has been impacted, and will likely continue to be materially and adversely impacted, by export license requirements, other regulatory changes, or other actions taken by the U.S. or other governmental agencies
2. 37These new restrictions have impacted the procurement by ACM Shanghai of certain items from the United States, and of certain items subject to U.S. export controls from outside the United States, for use in manufacturing its products
3. 38There were further export control restrictions imposed in 2024. BIS expanded export controls to limit distribution of high-performance ICs by restricting sales through customer allocations and imposing caps on specific countries
4. 39During the three and twelve months ended December 30, 2023, two prominent exporters of advanced semiconductor manufacturing equipment, the Netherlands and Japan, announced and began to implement plans to join the United States in imposing semiconductor-focused export controls
5. 40Efforts to further tighten semiconductor-related export controls have continued in 2024. In December 2024, the Government of the Netherlands implemented supplemental export controls on certain emerging technology items including sensitive goods, software, and technology related to the semiconductor sector
6. 41Changes in government trade policies could limit the demand for our tools and increase the cost of our tools
7. 42Substantially all of our operations are conducted in mainland China, and a substantial majority of our revenue is sourced from mainland China. Accordingly, our financial condition and results of operations are affected to a significant extent by economic, political and legal development in mainland China
8. 43Certain of our investments may be subject to review by and approval from CFIUS, which may prevent us from taking advantage of investment opportunities that would otherwise be advantageous to our stockholders
9. 44The U.S. Government has implemented an outbound investment review mechanism, which may prevent us from taking advantage of investment opportunities outside the United States that could otherwise be advantageous to our stockholders
10. 45As implemented by the final rule, the new framework would impose notification requirements and prohibitions on specified investments by U.S. persons in the semiconductor and microelectronics sector, quantum information technologies, and artificial intelligence (AI) systems
11. 46Our operations in mainland China and Korea, including the import of components, technology, and activities of U.S. personnel therein, may be further impacted by the addition of ACM Shanghai, ACM Korea and related entities to the BIS Entity List
12. 47In coordination with the new regulations, among other updates, ACM Shanghai and its operating subsidiaries in China and Korea, were added to the Entity List published by BIS. Neither ACM, nor its direct subsidiaries outside of mainland China, were added to the Entity List
13. 48We are subject to government regulation, including import, export, economic sanctions, and anti-corruption laws and regulations, that may limit our sales opportunities, expose us to liability and increase our costs

Risks Related to the STAR Listing of ACM Shanghai

1. 49We may not achieve the results contemplated by our business strategy and our strategy for growth in mainland China may not result in increases in the price of Class A common stock
2. 50ACM Shanghai’s status as a publicly traded company that is controlled, but less than wholly owned, by ACM Research could have an adverse effect on us

Risks Related to Our Intellectual Property and Data Security

1. 51Our success depends on our ability to protect our intellectual property, including our SAPS, TEBO, Tahoe, ECP, furnace and other technologies
2. 52We may be involved in lawsuits to protect or enforce our patents, which could be expensive, time consuming and unsuccessful
3. 53We may not be able to protect our intellectual property rights throughout the world, including mainland China, which could materially, negatively affect our business
4. 54If we are sued for infringing intellectual property rights of third parties, it will be costly and time consuming, and an unfavorable outcome in that litigation could have a material adverse effect on our business
5. 55Because patent applications can take many years to issue, there may be currently pending applications, unknown to us, that may later result in issued patents upon which our products or technologies may infringe. Similarly, there may be issued patents relevant to our products of which we are not aware

Risks Related to Ownership of Class A Common Stock

1. 56The market price of Class A common stock has been and may continue to be volatile, which could result in substantial losses for investors purchasing our shares
2. 57Few if any companies with stock publicly traded in the United States have effected a STAR Market listing of stock of a mainland China-based subsidiary, and it is therefore difficult to predict the effect of the STAR Listing and STAR IPO on the Class A common stock
3. 58If securities or industry analysts do not publish research or reports about us, our business or our market, or if they publish negative evaluations of Class A common stock or the stock of other companies in our industry, the price of our stock and trading volume could decline
4. 59We have never paid and do not intend to pay cash dividends and, consequently, your ability to achieve a return on your investment will depend on appreciation in the price of Class A common stock
5. 60The dual class structure of common stock has the effect of concentrating voting control with our executive officers and directors, including our Chief Executive Officer and President, which will limit or preclude your ability to influence corporate matters
6. 61Delaware law and provisions in our charter and bylaws could make a merger, tender offer or proxy contest difficult, thereby depressing the trading price of Class A common stock
7. 62Our charter designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain litigation that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or stockholders
8. 63We incur increased costs and demands upon management as a result of complying with the laws and regulations affecting public companies which could adversely affect our business, operating results and financial condition
9. 64Short sellers of our stock may be manipulative and may drive down the market price of our Class A common stock
10. 65Our production facilities could be damaged or disrupted by a natural disaster, war, terrorist attacks or other catastrophic events