Semtech (SMTC) risk factors, FY2026 10-K

Risks Relating to Macroeconomic and Industry Conditions

1. 01A growing concentration of demand in AI-related semiconductors may increase our exposure to cyclical industry trends and competitive pressures, which may adversely affect our results of operationsNew
2. 02During industry downturns, the cyclical nature of the industry we operate in may limit our ability to maintain or increase net sales and operating results33% rewritten
3. 03The average selling prices of products in our markets have historically decreased rapidly and will likely do so in the future, which could harm our revenue and gross margins25% rewritten
4. 04Disruptions in U.S. government operations and funding could have a material adverse effect on our business, financial condition and results of operations55% rewritten
5. 05uninsured funds in the future in the event of the closure of other banks or financial institutions, or may not do so in a timely fashionNew

Risks Relating to Production Operations and Services

1. 06Our ability to increase product sales and revenue may be constrained by the manufacturing capacity of our suppliers
2. 07Our products may be found to be defective, liability claims may be asserted against us and we may not have sufficient liability insurance
3. 08Obsolete inventories as a result of changes in demand for our products and changes in the life cycles of our products could adversely affect our business, operating results and financial condition
4. 09Business interruptions, such as natural disasters, acts of violence and the outbreak of contagious diseases, could harm our business and have a material adverse effect on our operations
5. 10We depend on mobile network operators to promote and offer acceptable wireless data services

Risks Relating to Research and Development, Engineering, Intellectual Property and New Technologies

1. 11We may be unsuccessful in developing and selling new products, which is central to our objective of maintaining and expanding our business
2. 12Our customers require our products to undergo a lengthy and expensive qualification process without any assurance of product sales
3. 13Our products may fail to meet new industry standards or requirements and the efforts to meet such industry standards or requirements could be costly 23% rewritten
4. 14Unfavorable or uncertain conditions in the 5G infrastructure market may cause fluctuations in our rate of revenue growth or financial results27% rewritten
5. 15We may be unable to adequately protect our intellectual property rights
6. 16We may be found to infringe on the intellectual property rights of others or be required to enter into intellectual property licenses on unfavorable terms
7. 17If we enter into royalty-paying licenses to intellectual property, we may be unable to pass the costs of the royalties through to our customers. In addition, we may be subject to disputes with licensors with respect to the calculation of the royalties we have paid under such licenses
8. 18We must commit resources to product production prior to receipt of purchase commitments and could lose some or all of the associated investment
9. 19We intend to continue to invest in research and development, including the integration and use of AI, but we may be unable to make the substantial investments that are required to remain competitive in our business
10. 20We may need to transition to smaller geometry process technologies and achieve higher levels of design integration to remain competitive and may experience increased costs and delays in this transition or fail to efficiently implement this transition
11. 21Certain 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

Risks Relating to International Operations

1. 22We are subject to export restrictions and laws affecting trade and investments, which may limit our ability to sell to certain customers48% rewritten
2. 23the complexity and cost of compliance with our export control program requirements, including the need to satisfy additional customer-specific requirementsNew
3. 24We sell and trade with customers outside the U.S., which subjects our business to increased risks
4. 25A substantial portion of our sales is derived from China and adverse changes to general economic conditions in China could have a material and adverse impact on our sales and financial results33% rewritten
5. 26Our foreign currency exposures may change over time as the level of activity in foreign markets grows and could have an adverse impact upon financial results35% rewritten
6. 27We may be subject to increased tax liabilities and an increased effective tax rate if we need to remit funds held by our subsidiaries outside the U.S33% rewritten

Risks Relating to Sales, Marketing and Competition

1. 28We receive a significant portion of our revenues from a small number of customers and the loss of any one of these customers or failure to collect a receivable from them could adversely affect our business
2. 29The volatility of customer demand limits our ability to predict future levels of sales and profitability
3. 30Most of our authorized distributors, which collectively represent a significant portion of our net sales, can terminate their contract with us with little or no notice. The termination of a distributor could negatively impact our business, including net sales and accounts receivable
4. 31Our inability to effectively control the sales of our products on the gray market could have a material adverse effect on us
5. 32Competition from new or established IoT, cloud services and wireless services companies, or from those with greater resources, may prevent us from increasing or maintaining our market and could result in price reductions and/or loss of business, resulting in reduced revenues and gross margins

Risks Relating to Governmental Regulations

1. 33Changes in government trade policies, including the imposition of new or higher tariffs or additional export controls or licensing requirements, could have an adverse impact on our business or the business of our customers, which may materially adversely affect our business operations, sales or gross margins41% rewritten
2. 34Certain of our products and services are subject to laws and regulations in the U.S., Canada, the European Union and other regions in which we operate
3. 35We are subject to government regulations and other standards that impose operational and reporting requirements79% rewritten
4. 36that may be inconsistent with comparable U.S. law, requiring us to re-evaluate and amend our compliance programs, policies and initiativesNew
5. 37Our failure to comply with any applicable environmental regulations could result in a range of consequences, including fines, suspension of production, excess inventory, sales limitations, and criminal and civil liabilities
6. 38The processing of user data (including personal information) could give rise to liabilities or additional costs as a result of laws, governmental regulations and mobile network operator and other customer requirements or differing views of individuals’ privacy rights
7. 39Certain of our customers and suppliers require us to comply with their codes of conduct, which may include certain restrictions that may substantially increase our cost of doing business as well as have an adverse effect on our operating efficiencies, operating results and financial condition
8. 40Our operating results could be adversely affected as a result of changes in our effective tax rates, the adoption of new U.S. or foreign tax legislation or exposure to additional tax liabilities, or by material differences between our forecasted annual effective tax rates and actual tax rates28% rewritten
9. 41We may be subject to taxation and review of our compliance with income, value-added and other sales-type tax regulations in other jurisdictions which could negatively affect our operations
10. 42Corporate responsibility, specifically related to environmental, social and governance ("ESG") matters, may impose additional costs and expose us to new risks

Risks Relating to our Business Strategies, Integration, Personnel and Other Operations

1. 43Our business and growth depend on our ability to attract and retain qualified personnel, including our management team and other key personnel, and the inability to attract, hire, integrate, train, retain, or motivate specialized technical and management personnel could harm our business and growth73% rewritten
2. 44We have encountered and expect to continue encountering difficulties that have adversely impacted, and likely will continue to adversely impact, our ability to realize the anticipated benefits from the Sierra Wireless AcquisitionNew
3. 45We rely on certain critical information systems for the operation of our business and a disruption in our information systems, including those related to cybersecurity, could adversely affect our business operations50% rewritten
4. 46We face risks associated with companies we have acquired in the past and may acquire in the future, as well as risks associated with any divestitures of previously acquired companies or our businesses or product lines71% rewritten
5. 47We have publicly announced our intention to divest our cellular module business, which represents a substantial portion of our IoT Systems and Connectivity segment. The divestiture process may take many months or longer to complete and could disrupt normal business operations in several waysNew
6. 48Our senior management team and board of directors must devote substantial time and attention to the divestiture process, which could detract from our core semiconductor businesses and other strategic initiativesNew
7. 49We have incurred substantial impairment charges, and we may be required to recognize additional impairment charges in the future, which could have an adverse effect on our financial condition and operating results30% rewritten
8. 50The costs associated with our indemnification of certain customers, distributors, and other parties could be higher in future periods

Risks Relating to our Indebtedness

1. 51Our indebtedness could adversely affect our business, financial condition, and results of operations
2. 52Restrictive and financial covenants in the Credit Agreement governing our credit facilities may restrict our ability to pursue our business strategies, and any violation of one or more of these covenants could have a material adverse effect on our financial condition and results of operations
3. 53The accounting method for the Notes could adversely affect our financial condition and results61% rewritten
4. 54Conversion of the Notes may dilute the ownership interest of our stockholders or may otherwise depress the price of our common stock
5. 55Certain provisions in the indentures governing the Notes may delay or prevent an otherwise beneficial takeover attempt of us
6. 56The Convertible Note Hedge Transactions and Warrants transactions may affect the trading price of our common stock
7. 57We are subject to counterparty risk with respect to the Convertible Note Hedges