SIMO 20-F
Silicon Motion Technology CORP (SIMO)
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| REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered | ||
| four ordinary shares |
* |
, but only in connection with the listing on the Nasdaq Global Select Market of American Depositary Shares, or ADSs, each representing four ordinary shares. |
| ☒ | Accelerated filer | ☐ | ||||
Non-accelerated filer |
☐ | Emerging growth company |
| |
International Financial Reporting Standards as issued by the International Accounting Standards Board ☐ |
Other ☐ |
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EXPLANATORY NOTE
Unless otherwise indicated, references in this annual report on Form 20-F (this “annual report”) to:
| • | “ADRs” are to the American depositary receipts that evidence our ADSs; |
| • | “ADSs” are to our American depositary shares, each of which represents four of our ordinary shares; |
| • | “CAGR” is to compound annual growth rate; |
| • | “China” or “PRC” are to the People’s Republic of China, excluding the special administrative regions of Hong Kong and Macau; |
| • | “Korea” is to the Republic of Korea, or South Korea; |
| • | “Nasdaq” is to the Nasdaq Global Select Stock Market; |
| • | “NT dollar,” “NT dollars” or “NT$” are to New Taiwan dollars, the legal currency of Taiwan; |
| • | “ROC” or “Taiwan” are to the Republic of China, the official name of Taiwan; |
| • | “SEC” is to the U.S. Securities and Exchange Commission; |
| • | “shares” or “ordinary shares” are to our ordinary shares, US$0.01 par value per share; |
| • | “U.S. GAAP” is to generally accepted accounting principles in the United States; |
| • | “U.S. dollar,” “U.S. dollars” or “US$” are to United States dollars, the legal currency of the United |
| • | States; and |
| • | “we,” “us,” “our company,” the “Company,” “our,” “SMTC” and “Silicon Motion” are to Silicon |
Motion Technology Corporation and its subsidiaries.
“Silicon Motion” and its logo (a three-dimensional cube depiction of the letters “SM”), “NANDSustain,” “NANDXtend,” “SSDLifeGuard,” “SSDLifeSaver,” “TurboMLC,” “FerriSSD,” “Ferri-eMMC,” “Ferri-UFS,” the Ferri logo, the powered by SiliconMotion logo, “InstantView,” “MonTitan,” the MonTitan logo, the Shannon Systems logo, “PCIe-RAID,” “Bigtera,” the Bigtera logo, “VirtualStor,” “CloudStor,” and “StorVisor” are our trademarks or registered trademarks. We may also refer to trademarks of other corporations and organizations in this annual report.
Unless otherwise indicated, our financial information presented in this annual report has been prepared in accordance with U.S. GAAP.
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This annual report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which are subject to the “safe harbor” created by those sections. These forward- looking statements include statements regarding our financial position; our expectations concerning future operations, margins, profitability, liquidity and capital resources; our business strategy and other plans and objectives for future operations; the outcome of arbitration related to the Transaction (as defined under Item 4, “Information on the Company”); and all other statements that are not historical facts. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “thinks,” “estimates,” “seeks,” “predicts,” “potential,” and similar expressions. Although we believe that these statements are based on reasonable assumptions, they are subject to numerous factors, risks and uncertainties, including, but are not limited to, those identified under “Risk Factors” and elsewhere in this annual report that could cause actual results and performance to be materially different from those described or implied in these forward-looking statements. Given these factors, risks and uncertainties, you should not place undue reliance on these forward-looking statements. Also, these forward-looking statements represent our estimates and assumptions only as of the date of this annual report. Except as required by law, we assume no obligation to update these forward-looking statements, even if new information becomes available in the future.
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PART I
| ITEM 1. | IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS |
Not applicable.
| ITEM 2. | OFFER STATISTICS AND EXPECTED TIMETABLE |
Not applicable.
| ITEM 3. | KEY INFORMATION |
| A. | [Reserved] |
| B. | Capitalization and Indebtedness |
Not applicable.
| C. | Reasons for the Offer and Use of Proceeds |
Not applicable.
| D. | Risk Factors |
Our business, operations and financial results are subject to various risks and uncertainties, including those described below, that could adversely affect our business, financial condition, results of operations and cash flows and lead to a decline in the trading price of our ADSs. You should carefully consider the risks described below before making an investment decision. The risks described below do not identify all risks that we face. Our operations could also be affected by factors that are not presently known to us or that we currently consider to be immaterial to our operations. Due to risks and uncertainties, known and unknown, our past financial results may not be a reliable indicator of future performance and historical trends should not be used to anticipate results or trends in future periods. You should also refer to the other information set forth in this annual report, including in our consolidated financial statements.
Summary of Risk Factors
Below is a summary of the principal risks we face, followed by a more detailed description of the risk factors being set forth in summary fashion.
Risks Related to our Business
| • | Our results of operations are subject to substantial quarterly and annual fluctuations due to several factors that could adversely affect our business and the price of our ADSs. |
| • | We are subject to the cyclical nature of the semiconductor industry, which has been subject to significant fluctuations. |
| • | Our profitability depends on our ability to respond to rapid technological changes in the semiconductor industry. |
| • | The demand for our products depends in part on the market conditions for the end-use applications of our products. Fluctuations in demand for our products or a market decline in any of these industries could have a material adverse effect on our results of operations. |
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| • | We depend on a few large customers for a significant portion of our revenues and a loss of some of these customers would result in the loss of a significant portion of our revenues. |
| • | Our international operations involve inherent risks, which could result in harm to our business and materially impair our future growth, including factors such as government trade restrictions, entity list restrictions, sanctions, tariffs and quotas. |
| • | NAND industry cyclicality could adversely affect our growth and profitability. |
| • | If we fail to accurately anticipate and respond to market trends or fail to develop and introduce new or enhanced products to address these trends on a timely basis, our ability to attract and retain customers could be impaired and our competitive position could be harmed. |
| • | Our gross margin and results of operations may be adversely affected in the future by multiple factors, including decreases in average selling prices of products over time, increased raw material costs, including NAND components, higher manufacturing costs, and shifts in our product mix. |
| • | Our ability to source and secure raw materials and components, including NAND memory, to manufacture controllers and solid-state drives (“SSD”). |
| • | Our SSD solutions product performance could continue to adversely affect our results of operations. |
| • | We rely on independent semiconductor foundries and subcontractors for the fabrication, assembly and testing of our integrated circuits (“ICs”), and any limitation of their available capacity to us or failure to fulfill our orders satisfactorily could damage our relationships with our customers, decrease our sales or limit our ability to grow our business. |
| • | Failure to protect our intellectual property or maintain the rights to certain other technologies may negatively impact our ability to compete. |
| • | Failure to successfully defend against intellectual property lawsuits brought against us may adversely affect our business. |
| • | Our products must meet exacting 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 and risks of indemnification against defects in our products. |
| • | We rely on third parties to provide services necessary for the operation of our business. Any failure of one or more of our vendors, suppliers or manufacturers to provide these services could have a material adverse effect on our business. |
| • | The constant growth and development of technology, including the increased use of artificial intelligence (“AI”), presents risks and challenges to our operations that could give rise to legal or regulatory action, damage our reputation or otherwise materially harm our business. |
| • | Our business, financial condition and results of operations could be adversely impacted by the political and economic conditions of the countries in which we conduct business and operate and in which our products are used and sold. |
| • | We face substantial risks associated with doing business in Taiwan because of tense regional geopolitical risk with China. |
| • | The enactment of legislation implementing changes in the taxation of international business activities, the adoption of other tax reform policies or changes in tax legislation or policies could materially impact our financial position and results of operations. |
Risks Relating to Our Corporate Structure and Governance
| • | The loss of any of our key personnel or the failure to attract or retain specialized technical or management personnel could impair our ability to grow our business. |
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| • | Any failure to achieve and maintain effective internal controls could have a material adverse effect on our business, results of operations and the market price of our ADSs. |
| • | Our business is subject to various governmental regulations, and compliance with these regulations may cause us to incur significant expense. |
Risks Related to the ADSs
| • | Our stock price has been, and may continue to be, volatile, which could result in investors losing all or part of their investments. |
| • | We are a foreign private issuer within the meaning of the rules under the Exchange Act, and as such we are exempt from certain provisions applicable to United States domestic public companies. |
| • | We may lose our foreign private issuer status in the future, which could result in significant additional costs and expenses to us. |
| • | If we are characterized as a passive foreign investment company, U.S. holders of our ADSs may experience adverse tax consequences. |
| • | Holders of our ordinary shares and ADSs may experience dilution if we issue restricted stock units or other forms of Company equity to employees or sell additional equity or equity-linked securities. |
Risks Related to our Business
Our results of operations are subject to substantial quarterly and annual fluctuations due to several factors that could adversely affect our business and the price of our ADSs.
Our operating results have fluctuated in the past and are likely to fluctuate in the future. These fluctuations may occur on a quarterly and on an annual basis and are due to several factors, many of which are beyond our control, including, but not limited to:
| • | business conditions, including downturns in market segments, such as the computing and mobile markets, in which we operate, or in global and regional economies; |
| • | the availability and pricing of third-party semiconductor foundry, assembly, packaging and testing services, including their yield, and related raw materials; |
| • | significant reduction, changes in timing or cancellation of customer orders; |
| • | regional and global inflationary pressures; |
| • | changes in our customers’ sales outlook, purchasing patterns and inventory adjustments; |
| • | the loss of a design-win or key customer; |
| • | competitive and pricing pressures, including new product introductions and other actions taken by competitors; |
| • | availability and cost of NAND flash used in our and our customer’s products; |
| • | changes in our product mix, especially relating to the sales and changes in cost of our NAND flash controllers and SSD solutions, and their effect on our gross margin; |
| • | the unpredictable consequences of public health emergencies, such as pandemics and natural or man-made disasters; |
| • | inventory impairment uncertainties relating to the effects of volatile NAND flash price and excess inventory; |
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| • | our ability to develop, market and transition to volume production of new or enhanced products in a cost-effective and timely manner; |
| • | changes in the timing and number of tape-outs and other significant research and development (“R&D”) expenses; |
| • | the imposition of tariffs and the threat of increased or retaliatory tariffs; |
| • | competitive pressure to attract, retain and motivate a highly skilled workforce, including R&D personnel; |
| • | intellectual property disputes; and |
| • | changes in our effective tax rate. |
These and other factors make it difficult for us to forecast and could materially adversely affect our quarterly or annual operating results. We could fail to achieve the operating targets that we have announced, such as revenue growth, gross margin, and operating margin. In addition, our operating results in the future may be below the expectations of securities analysts or investors, which would likely cause the market price of our ADSs to decline. Any variations in our period-to-period performance may also cause the market price of our ADSs to decline. Accordingly, you should not rely on the results of any prior periods as a reliable indicator of our future operating performance.
We are subject to the cyclical nature of the semiconductor industry, which has been subject to significant fluctuations.
The semiconductor industry is highly cyclical and is characterized by constant and rapid technological change, rapid product obsolescence and price erosion, evolving standards, short product life cycles and wide fluctuations in product supply and demand. The industry has experienced significant fluctuations, often connected with, or in anticipation of, maturing product cycles and new product introductions of both semiconductor companies’ and their customers’ products and fluctuations in general economic conditions. Deteriorating general worldwide economic conditions, including reduced economic activity, increasing tariffs, escalating trade wars, geopolitical risks, concerns about credit and inflation, increased interest rates, increased energy costs, decreased consumer confidence, reduced corporate profits, decreased spending and similar adverse business conditions, would make it very difficult for our customers, our suppliers, and us to accurately forecast and plan future business activities and could cause U.S. and foreign businesses to slow spending on our products. We cannot predict the timing, strength, or duration of any economic slowdown or economic recovery. If the economy or markets in which we operate deteriorate, our business, financial condition, and results of operations would likely be materially and adversely affected.
Downturns have been characterized by diminished product demand, production overcapacity, high inventory levels and accelerated erosion of average selling prices. Upturns have been characterized by increased product demand, limited supply of NAND and production capacity constraints created by increased competition for access to third-party foundry, assembly and test capacity. We are dependent on the availability of such capacity to manufacture, assemble and test our products. None of our third-party foundry, assembly or test subcontractors have provided assurances that adequate capacity will always be available to us.
Inflation and inflationary pressures as well as fluctuations in interest rates could have an adverse effect on our business, financial condition, results of operations and cash flows.
Increasing or high inflation rates could adversely affect our business by increasing the cost of raw materials, energy, labor and transportation of goods. Current or future efforts by governments in locations where we operate to stimulate the economy may increase the risk of significant inflation. In the event of an increase in rates of inflation, we may seek to increase the sales prices of our solutions to maintain satisfactory profits. Such increases
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in prices may not be accepted by our customers and may not be sufficient to compensate us for the negative impact of inflation. Inflation might also reduce disposable income on a macro basis, eroding savings values, which could affect the demand for products that contain our solutions. High inflation rates may also result in unexpected and unbudgeted cost increases and may require changes to our planned investments. If we are not able to offset the effects of increased inflation, it could have a negative effect on our business, financial condition and profitability, results of operations and cash flows.
As a result of inflationary pressure and macroeconomic instability, various governments may adopt monetary policies that will lead to higher interest rates. Higher interest rates may adversely affect our financing costs, including the costs of our current debt and leasing payments. There is no assurance that we will be able to effectively mitigate the interest rate risk, even after utilizing certain financing instruments. Further, in higher interest rate environments, our customers may reduce their overall investment in product development by cutting their capital expenditures and R&D expenses. Such reductions in capital expenditures and R&D expenses by our customers may reduce the amount of business that we receive from them and adversely affect our results of operations.
We are subject to order and shipment uncertainties and our results of operations could be materially adversely affected if we are unable to accurately forecast customer demand.
We have limited sales visibility as our customers typically do not provide us with firm, long-term purchase commitments. Additionally, our customers may have limited sales visibility due to the rapidly changing nature of the global economy, NAND supply and demand dynamics and the markets in which devices using our products are sold.
Substantially all our sales are made on a purchase order basis, which permits our customers to cancel, change or delay their product purchase commitments with little or no notice to us and often without penalty to them, which limits our ability to accurately forecast sales and maintain adequate inventory levels, manufacturing capacity and operating infrastructure requirements. Our customers, most of whom are NAND flash makers and module makers, face difficulties in predicting demand for their storage devices using our products, which could result in the procurement forecast provided to us changing at short notice. The majority of our customers are building storage devices such as SSDs used in (i) personal computers (“PCs”) and other client devices, (ii) embedded MultiMediaCard (“eMMC”), (iii) universal flash storage (“UFS”), (iv) mobile embedded storage used primarily in smartphones and other smart devices, and (v) SSD solutions for enterprise servers, data center equipment, automotive and industrial equipment and are dependent on original equipment manufacturers (“OEMs”) of these devices accurately anticipating end-consumer demand, which has historically been difficult and subject to unpredictable deviations from past sales patterns. Also, since a significant portion of our quarterly sales, especially from module maker customers targeting channel markets, are from orders received and fulfilled in that quarter, our visibility as to expected orders from these customers in subsequent periods and for any extended period of time is limited. The multiple layers of forecasts from other customers and from their customers may introduce other errors into our estimates of anticipated sales.
To ensure the availability of our products for our customers, we generally instruct our foundries to begin manufacturing our products based on forecasts provided by these customers in advance of receiving purchase orders and procure NAND for our SSD solutions products. However, these forecasts do not represent binding purchase commitments, and sales of our products are only recognized when they are shipped with ownership transferred to the customer. As a result, we incur inventory and manufacturing costs in advance of anticipated revenue. Because demand for our products may not materialize, manufacturing based on forecasts subjects us to risks of high inventory carrying costs and increased obsolescence and may increase our costs. If we overestimate customer demand for our products or if purchase orders are cancelled or shipments delayed, we may end up with excess or obsolete inventory, which could have a material and adverse effect on our financial results. The risk of obsolescence and/or excess inventory is heightened for devices designed for consumer electronics due to short product lifecycles for these types of products. Conversely, if we underestimate demand or if insufficient
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manufacturing capacity is available, we may not have sufficient product inventory, which could lead to missed revenue opportunities, loss of market share, damages to our customer relationships and other harm to our business. In addition, any future significant cancellations or deferrals of product orders or the return of previously sold products could materially and adversely affect our profit margins, increase product obsolescence and restrict our ability to fund our operations.
Because many of our expenses are fixed in the short-term or are incurred in advance of anticipated sales, we may not be able to decrease our expenses in a timely manner to offset any shortfall of sales, or expand our R&D and other operating infrastructure in a timely manner to capture anticipated business opportunities. If we expand our business operations and demand for our products does not increase as we may have projected, our operating results could be affected by our higher operating expense levels. Conversely, if we maintain or reduce our business operations and related expenses in accordance with our projections and demand for our products increases more than expected, our operating results could be affected by lost business opportunities, less competitive economies of scale, and damaged relationships with our customers.
Our profitability depends on our ability to respond to rapid technological changes in the semiconductor industry.
The semiconductor industry is characterized by rapid increases in the diversity and complexity of semiconductors. As a result, we expect that we will need to continually offer more sophisticated packaging and testing technologies and processes to respond to competitive industry conditions and customer requirements.
We dedicate substantial efforts to R&D and continue to develop new products in anticipation of future demand. However, there is no assurance that the launch of any new product will be successful or that we will be able to produce enough of these products to meet market demand. If we fail to develop, or obtain access to, advanced technologies or processes or respond effectively to industry developments, we may become less competitive and less profitable. In addition, advances in technology typically lead to declining average selling prices for semiconductors packaged or tested with older technologies or processes. As a result, if we cannot reduce the costs associated with our services, the profitability of a given service and our overall profitability may decrease over time.
The demand for our products depends in part on the market conditions for the end-use applications of our products. Fluctuations in demand for our products or a market decline in any of these industries could have a material adverse effect on our results of operations.
Industry-wide fluctuations in the PC and smartphone markets could have a material adverse effect on our operating results. A large portion of our controller sales are for the PC and smartphone markets, both of which are mature and have experienced flat-to-declining sales trends because of market saturation and longer replacement cycles.
As SSDs become widely adopted across PCs and client devices, and UFS becomes standard in smartphones and tablets, we anticipate that demand growth for client SSD and UFS controllers will slow and potentially decline due to short-term fluctuations in demand and pricing, before eventually plateauing. Smartphones and tablets have in recent years cannibalized the sale of PCs and it is possible smartphones and tablets could be replaced by other types of mobile computing and communications devices, and these changes could also lead to unfavorable demand for our products.
The market for storage devices using NAND flash components has experienced rapid technological changes, could be subject to industry consolidation and could face competition from new technologies. NAND flash technology will continue to evolve rapidly with continued cost reductions, which could lead to new types of solid-state storage devices, new applications and new categories of customers and market segments where we could be comparatively disadvantaged. The market for solid-state storage devices is relatively fragmented with
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many suppliers that include NAND flash makers, module makers and OEMs, and if the market were to consolidate, a trend experienced by other parts of the semiconductor and storage industries, we could face changing demand for our products, replacement of our products by those of our competitors or internal captive sources and reduced market opportunities. If solid state storage devices were to use other types of non-volatile memory technologies other than NAND flash and we do not have relevant and competitive controller technology, our addressable market for controllers could shrink.
The market for controllers is composed of the merchant market and captive market. We are an independent merchant supplier of controllers to NAND flash maker, module maker and OEM customers. All the major NAND flash makers also have internal captive sources of controllers. The merchant market for controllers could shrink if the NAND flash makers were to expand their usage of captive sources of controllers. In the past, our operating results were negatively affected when NAND flash customers chose to insource controllers.
We may pursue acquisitions, investments and dispositions, which could adversely affect our results of operations. Further, we may not be successful in pursuing mergers and acquisitions. Any mergers or acquisitions we make may lead to a diversion of management resources.
Our growth strategy includes the acquisition of, and investment in, businesses that offer complementary products, services and technologies, augment our market coverage, or enhance our technological capabilities. Our investments over the last decade, include Kinara (previously known as Deep Vision, Inc.), BIWIN Storage Technology Corp. (referred to herein as “BIWIN”), and Shenzhen Techwinsemi Technology Co. (referred to herein as “TWSC”). In the future, we may not be able to identify suitable acquisition or investment opportunities, or to consummate any such transactions. In pursuing such acquisitions or investment opportunities, we may face competition from other companies in the semiconductor industry. In addition, our original estimates and assumptions used in assessing any transaction may be inaccurate and we may not realize the expected financial or strategic benefits of any such transaction.
Any acquisition we may undertake involves risks and uncertainties, such as unexpected delays, challenges and related expenses, and the associated diversion of management’s attention. We may become subject to legal proceedings relating to the acquisition and the integration of acquired businesses may not be successful. The integration of an acquired business involves significant challenges, including, among others: potential disruption of our business, diversion of management’s attention from daily operations and the pursuit of other opportunities, incurring significant restructuring charges and amortization expense, assuming liabilities and ongoing lawsuits, potential impairment of acquired goodwill and other intangible assets, increasing our expenses and working capital requirements, and implementing our management information systems, operating systems and internal controls for the acquired operations. In addition, our due diligence process may fail to identify significant issues with the acquired company’s products, financial disclosures, accounting practices, legal, tax and other contingencies and compliance with local laws and regulations. These difficulties may be complicated by factors such as the size of the business or entity acquired, geographic and cultural differences, lack of experience operating in the industry or geographic markets of the acquired business, potential loss of key employees and customers, the potential for deficiencies in internal controls at the acquired or combined business, performance problems with the acquired business’ technology, exposure to unanticipated liabilities of the acquired business, insufficient revenue to offset increased expenses associated with the acquisition, adverse tax consequences and our potential inability to achieve the growth prospects or synergies expected from any such acquisition. Failure to manage and successfully integrate the acquisitions we make, or to improve sales and margins of the acquired businesses, could materially harm our business, operating results and margins.
Any future acquisitions we make may require debt or equity financing, which, in the case of debt financing, would increase our leverage and interest expenses, and in the case of equity financing, would be dilutive to our existing stockholders. As it relates to debt financing, we may not obtain financing on terms and conditions that are favorable to us, or at all. Acquisitions made with cash would reduce our cash reserves.
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From time to time, we may also seek to divest or wind down portions of our business, either acquired or otherwise, or we may exit investments, each of which could materially affect our cash flows and results of operations. In addition, any such disposition could result in disruptions to other parts of our business, potential loss of employees or customers, or exposure to unanticipated liabilities or ongoing obligations to us following any such disposition. For example, in connection with such disposition, we may enter into transition services agreements or agree to provide certain indemnities to the purchaser, which may result in additional expenses and may adversely affect our financial condition and results of operations.
We depend on a few large customers for a significant portion of our revenues and a loss of some of these customers would result in the loss of a significant portion of our revenues.
We derived a substantial portion of our revenue from sales to a relatively small number of customers. As a result, the loss of any significant customer could materially and adversely affect our financial condition and results of operations. Sales to our five largest customers represented approximately 61%, 66% and 66% of our net revenue in 2023, 2024 and 2025, respectively. Sales to our customers constituting more than 10% of our net revenue represented, in the aggregate, 45%, 57% and 58% of our net revenue in 2023, 2024 and 2025, respectively. Our customers constituting more than 10% of our net revenue were (i) Micron, SK Hynix and AFASTOR in 2023, (ii) Micron, Kioxia, PHISEMI and AFASTOR in 2024 and (iii) PHISEMI, Kioxia, AFASTOR, and Micron in 2025. The identities of our largest customers and their respective contributions to our net revenue may vary from period to period.
We expect that we will continue to depend on a relatively limited number of customers for a substantial portion of our net sales and our ability to maintain good relationships with these customers will be important to the ongoing success of our business. We cannot assure you that revenues generated from these customers, individually or in the aggregate, will reach or exceed historical levels in any future period. Our failure to meet the demands of these customers could lead to cancellation or reduction of businesses from these customers. In addition, any loss, cancellation or reduction of businesses from, significant change in scheduled deliveries to, or decrease in the prices of products sold to any of these customers could significantly reduce our revenues and adversely affect our financial condition and operating results. Moreover, any difficulty in collecting outstanding amounts due from our customers particularly customers who place large orders, would harm our financial performance. In addition, if our relationships with our largest customers are disrupted for any reason, it could have a significant impact on our business.
Our international operations involve inherent risks which could result in harm to our business and materially impair our future growth, including factors such as government trade restrictions, entity list restrictions, sanctions, tariffs and quotas.
The majority of our products are marketed and sold around the world, including primarily in China, Japan, Singapore, and Taiwan, and our corporate operations are primarily located in Taiwan. Two outside foundries, primarily Taiwan Semiconductor Manufacturing Company (“TSMC”), and secondarily Semiconductor Manufacturing International Corporation (“SMIC”), fabricate our semiconductors. Accordingly, we are subject to the risks generally associated with global trade and doing business abroad, which include foreign laws and regulations, varying consumer preferences across geographic regions, political unrest, disruptions or delays in cross-border shipments and changes in economic conditions in countries in which our products are manufactured or where we sell products.
In addition, our business, financial position, results of operations, cash flows or prospects could be materially, adversely affected by changes in tariffs, trade agreements, trade sanctions or other trade restrictions imposed or agreed to by governments. Trade restrictions, including withdrawal from or modification of existing trade agreements, negotiation of new trade agreements, and imposition of new (and retaliatory) tariffs against certain countries or covering certain products have the potential to adversely impact demand for our products, our costs, customers, suppliers and/or the U.S. or foreign economies or certain sectors thereof in which we
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compete, and impair our ability to expand our business by offering new technologies and products. The Trump administration has imposed and/or increased tariffs on imported goods from several geographic regions, including certain East Asian nations where we operate. The imposition of such tariffs and the threat of additional increases and/or retaliatory tariffs may strain international trade relations or impact our costs. It remains unclear what, and the timing of, future actions may be taken by the U.S. federal government or other governments with respect to international trade agreements, the imposition or removal of tariffs on goods imported into or exported from the U.S., the creation or removal of barriers to trade, tax policy related to international commerce, or other trade matters, and the impact of those actions on the cost of products we purchase and sell. Trade restrictions, and changes in or uncertainty surrounding global trade policies, may adversely impact our competitive position, businesses, financial condition, results of operations and cash flows. See “We face substantial risks associated with doing business in Taiwan because of tense regional geopolitical risk with China” below. This includes, for example, packaging, product content, labor and international trade regulations, such as the U.S. Export Administration Regulations and sanctions against Huawei and other companies, and applicable executive orders. These laws, regulations and orders are complex, change frequently and with limited notice, have generally become more stringent over time and have intensified as U.S.-China geopolitical tensions worsen. Any changes to or the addition of companies and entities that are subject to the U.S. Export Administration Regulations and international trade regulations could have a significant impact to our revenue and growth. In addition, if our customers fail to comply with these regulations and laws, we may be required to suspend sales to these customers, which could damage our reputation and negatively impact our results of operations.
Also, disease outbreaks, pandemics, terrorist acts and political or military conflicts have increased the risks of doing business globally. These factors, among others, could affect our ability to manufacture products or procure materials, our ability to import products, our ability to ship our products globally, our ability to sell products in international markets and our cost of doing business. See “Our business, financial condition and results of operations could be adversely impacted by the political and economic conditions of the countries in which we conduct business and operate and in which our products are used and sold” below. If any of these or other factors make the conduct of business in a particular country undesirable, unprofitable or impractical, our business and financial results could be adversely affected and our prospects for growth in those markets could be materially impaired. In addition, many of our imported products are subject to duties, tariffs or quotas that affect the cost and quantity of various types of goods imported. Any country in which our products are produced, imported or sold may eliminate, adjust or impose new quotas, duties, tariffs, safeguard or protectionist measures, anti- dumping duties, cargo restrictions to prevent terrorism, restrictions on the transfer of currency, climate change legislation, product safety regulations or other charges or restrictions, any of which could have an adverse effect on our business, results of operations, financial condition and the price of our ADSs.
NAND industry cyclicality could adversely affect our growth and profitability.
The NAND industry is highly capital intensive and regularly experiences cycles of shortages and excess supply and related rapid increases and sharp decreases in NAND component prices. The price of SSDs, eMMC and UFS devices, in which NAND accounts for a significant portion of material cost, could also increase and decrease with NAND component prices. Decreasing prices for SSDs could trigger stronger market demand for these devices as well as controllers used in them, and conversely, increasing prices for SSDs could cause demand for these devices as well as controllers used in them to fall, which could negatively affect our sales and profitability.
Additionally, during periods of NAND shortages, our sales and profitability could be negatively affected in other ways, including, but are not limited to: (i) our module maker and OEM storage customers may not be able to procure sufficient supplies of NAND components, which could lead to reduced demand for our controllers; (ii) we may not be able to procure sufficient supplies of NAND components for our Ferri industrial SSDs, which could lead to reduced sales of our SSD solutions, and furthermore, to higher cost of procured NAND components and reduced SSD solutions profitability; (iii) NAND manufacturers may divert NAND supply away from their own storage products that use our controllers towards other customers or products that do not use our controllers,
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and our sales could be reduced; and (iv) the higher cost of NAND components may lower end-product demand in the PC, smartphone and other electronic products markets due to higher overall costs.
During periods of NAND excess supply when NAND prices are falling sharply, our sales and profitability could also be negatively affected, including, but not limited to: (i) NAND manufacturers facing reduced demand for NAND components and storage devices may temporarily build NAND inventory instead of selling at lower prices, and this may cause a reduction in controller demand; (ii) module maker customers that are exposed to volatile NAND pricing conditions may temporarily become more cautious in procuring NAND components, which could lead to reduced levels of controller procurement and storage device production; (iii) OEMs may temporarily limit procurement of storage devices in expectation of procuring more at a later date and at a lower price, which could restrain storage device and associated controller procurement; and (iv) NAND vendor and module maker customers that are under margin pressure because of falling NAND prices may seek price concessions from their controller suppliers.
If we fail to accurately anticipate and respond to market trends or fail to develop and introduce new or enhanced products to address these trends on a timely basis, our ability to attract and retain customers could be impaired and our competitive position could be harmed.
Our success depends to a significant extent on the development, qualification, implementation and acceptance of new product designs and improvements that provide value to our customers. Our ability to develop, qualify and distribute, and have manufactured, new products and related technologies to meet evolving industry requirements, at prices acceptable to our customers and on a timely basis are significant factors in determining our competitiveness in our target markets. For example, for our products addressing the SSD market, we must successfully identify customer requirements and design, develop and produce products on time that compete effectively as to price, functionality and performance. We sell products in markets that are characterized by rapid technological change, evolving industry standards, frequent new product introductions, smaller process geometries and other factors. We cannot assure you that our efforts to execute our product roadmap will result in innovative products and technologies that provide value to our customers. If we fail to or are delayed in developing, qualifying or shipping new products or technologies that provide value to our customers, and address these new trends and adjust our business accordingly, we may lose competitive positioning, which could cause us to lose market share and require us to discount the selling prices of our products. Although we make substantial investments in R&D, we cannot be certain that we will be able to develop and successfully bring to market new products and technologies on a timely basis or that they will be well-received by our customers. Moreover, our investments in new products and technologies involve certain risks and uncertainties and could disrupt our ongoing business. New investments may not generate sufficient revenue, may incur unanticipated liabilities, and may divert our limited resources and distract management from our current operations. We cannot be certain that our ongoing investments in new products and technologies will be successful, will meet our expectations and will not adversely affect our reputation, financial condition and operating results.
We believe that our future success depends on our ability to develop and introduce new technologies and products for new applications to generate new sources of revenue to replace, or build upon, existing product revenue for applications that are mature or in secular decline. If we are not able to repeatedly introduce, in successive years, new products for new applications that ship in volume, our revenue will likely not grow and may decline significantly and rapidly. In the past, we were able to successfully grow our revenue by adding, over time, successive categories of new controller technologies for new applications, such as memory card and flash drive controllers for external storage, eMMC and UFS mobile embedded memory controllers for smartphones and SSD controllers for PCs and other client devices. If we are unable to successfully expand our sales of SSD controllers for data center and enterprise applications, our prospects for continued revenue growth could be adversely affected.
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Our gross margin and results of operations may be adversely affected in the future by multiple factors, including decreases in average selling prices of products over time, increased raw material costs, including NAND components, higher manufacturing costs, and shifts in our product mix.
Our gross margin is highly dependent on product mix, especially the mix of higher gross margin controller sales, and lower gross margin SSD solutions sales. A shift in sales mix away from our higher margin products could adversely affect our gross profitability as a percentage of sales and could also adversely affect our operating profitability. The primary elements of our controller cost of sales are IC fabrication at our foundries, assembly and testing, and in contrast, the primary cost of sales of our SSD solutions, which are primarily our Ferri SSDs and enterprise and server boot drives, is NAND flash components. Our SSD solutions gross margin is lower than our controller gross margin because these products are generally less differentiated, and we have limited ability to mark-up the cost of NAND flash components that we procure.
The controllers we develop and sell are used for high volume applications and their average selling prices have historically decreased over time, and we believe that it is possible they may also fall in the future. We may experience period-to-period fluctuations in future operating results if our average selling prices decline. We may be forced to reduce the average unit price of our products in response to new product introductions by our competitors, competitive pricing pressures and other factors. Also, we often provide large customers with volume-related, price-discount incentives relating to their orders of specific products; if customer procurements that benefit from these incentives scale significantly, they could lead to downward pressure on our gross margins. The mobile and computing devices markets are extremely competitive, which may result in rapidly declining average selling prices of electronic devices and components, such as those made by us, and create downward pressure on our average selling prices and operating results. To maintain acceptable operating results, we will need to develop and introduce new products and product enhancements on a timely basis and continue to reduce our costs. If we are unable to offset any reductions in our average selling prices by increasing our sales volumes or reducing corresponding production costs or if we fail to develop and introduce new products and enhancements on a timely basis, our sales and operating results will be materially and adversely affected.
For our SSD solutions business, we procure NAND memory and assemble with our controllers to form our Ferri product line. The pricing of this product line is dependent on the market cost of the NAND memory components. If we cannot pass the increase in NAND costs on to our customers, then our gross margin will be materially impacted. Also, if we cannot procure NAND memory in sufficient quantities to fulfill our customers’ demand, our ability to continue to grow revenue may be materially impacted.
We have changed our commercial arrangement with a few of our SSD solutions customers to a NAND consignment arrangement, where our customers procure and maintain ownership of the NAND flash components used in the SSD solutions that we design and build for them, and the gross margins of these types of sales are higher than the sales of typical SSD solutions products where we are responsible for procuring NAND flash components. We cannot assure you that in the future, we can increase the proportion of SSD solutions sales using a NAND consignment arrangement and if more sales are conducted using a NAND consignment arrangement, that it would lead to improvements in our operating results.
Our ability to source and secure raw materials and components, including NAND memory, to manufacture controllers and SSDs
Our ability to manufacture and deliver our products depends on obtaining adequate supplies of raw materials, components and finished goods from third-party suppliers, including NAND memory and other semiconductor components. Global supply chain disruptions, limited manufacturing capacity, allocation decisions by suppliers, transportation delays, geopolitical developments, trade restrictions, tariffs, natural disasters, labor shortages, inflationary pressures, quality issues, supplier financial distress or other factors beyond our control could reduce the availability of, or increase the cost of, these materials and components. In addition, certain components may be available from a limited number of sources, which could heighten supply risk.
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If we are unable to obtain sufficient supplies on commercially reasonable terms, or at all, we may experience production delays, be unable to meet customer demand or incur higher manufacturing costs. Any prolonged shortage of raw materials, or significant increases in their cost, could adversely affect our business, results of operations and financial condition.
Our SSD solutions product performance could continue to adversely affect our results of operations.
We are primarily a fabless semiconductor company focused on NAND flash controllers and the sales of these controllers account for a significant majority of our overall sales. In addition, we also sell SSD solutions, mostly Ferri industrial SSDs. If we are able to expand the sales of our SSD solutions, we cannot provide assurance that expanded sales of these products will not negatively affect our gross margin and operating margin, which could negatively affect the market price of our ADSs. Furthermore, even if we are able to sell our SSD solutions to customers profitably, our return on invested capital for SSD solutions will likely be materially lower than our corporate average primarily because of lower product profitability and higher investments, mainly for working capital necessary for financing NAND and other inventory, and this could negatively affect our overall financial return and the market price of our ADSs.
Our SSD solutions are modules, software and appliances, which are different from our primary controller products, which are ICs and have different financial characteristics. Our SSD solutions gross margin is materially lower than our controller gross margin because these products are generally less differentiated and, in the case of our Ferri, where NAND flash components are the majority of the cost of sales, we have limited ability to mark-up the cost of NAND flash components that we procure. We are also subject to NAND price volatility with our Ferri; because of rapidly falling NAND prices, we wrote-down US$3.9 million of NAND components and SSDs in inventory in 2023, US$0.3 million in 2024 and US$0.3 million in 2025. We cannot assure you that in the future our results of operations will not be negatively affected by further NAND component and SSD inventory write-downs.
We rely on independent semiconductor foundries and subcontractors for the fabrication, assembly and testing of our ICs, and any limitation of their available capacity to us or failure to fulfill our orders satisfactorily could damage our relationships with our customers, decrease our sales or limit our ability to grow our business.
We do not own or operate semiconductor fabrication facilities. Instead, we rely on third parties to manufacture our semiconductors. Two outside foundries, primarily TSMC, and secondarily SMIC, fabricate our semiconductors. As a result, we face several significant risks, including wafer cost, availability of wafers and other raw materials, manufacturing capacity, quality assurance, manufacturing yields and production costs, control over delivery schedules and product quality, control of our intellectual property, labor availability or strikes and actions taken by third-party contractors that breach our agreements.
The ability of each foundry to provide us with semiconductors is limited by its available capacity and access to wafers, and the ability of each subcontractor to assemble and test our products is limited by available capacity and access to substrates and other raw materials. We do not have long-term agreements with any of these foundries and subcontractors and we place our orders based on our customers’ purchase orders and sales forecasts. However, the foundries and subcontractors can allocate capacity to the fabrication, assembly and testing of the products of their other customers and reduce deliveries to us on short notice or increase the price they charge us. It is possible that other foundry and subcontractor customers that are larger and better financed than we are, or have long-term agreements with these foundries and subcontractors, may induce these foundries and subcontractors to reallocate capacity to them which could impair our ability to secure manufacturing, assembly and testing capacity that we need for our products. Other factors that could materially adversely affect our business and results of operation include, but are not limited to, our foundries and subcontractors being unable to secure the necessary raw materials from their suppliers, such as packaging component shortages, including T-Glass substrate, experience power outages, lack sufficient capacity to manufacture our products or
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suffer other disruption or reduction in efficiency. If our foundries fail to deliver fabricated silicon wafers of satisfactory quality in the volume and at the price we require, or if our assembly and testing subcontractors fail to efficiently and accurately assemble and test our products, we will be unable to meet our customers’ demand for our products or to sell those products at an acceptable profit margin, which would have a material and adverse effect on our sales and margins and damage our customer relationships.
In addition, interruptions to the wafer manufacturing processes caused by a natural disaster or human error could result in partial or complete disruption in supply until manufacturing is re-started or we are able to shift manufacturing to another fabrication facility. It may not be possible to obtain sufficient capacity or comparable production costs at another foundry. Migrating our design methodology to a new third-party foundry could involve increased costs, resources and development time comparable to a new product development effort. Any reduction in the supply of semiconductors for our products could significantly delay our ability to ship our products and potentially have negative effects on our relationships with existing customers and our results of operations. In addition, if our subcontractors terminate their relationships with us, we would be required to qualify new subcontractors, which could take at least six months, resulting in unforeseen operating problems, and our operating results may be materially and adversely affected.
The potential shortages of key packaging components, including T-Glass substrates, could affect our ability to build SSD ICs and solutions, posing a material risk to our ability to meet customer demand. If substrate availability becomes constrained, we may experience delays in finished goods production, impacting customer delivery commitments as well as margin pressure from limited supply. This could reduce our flexibility in responding to customer requirements. While we continue to work closely with suppliers to improve supply visibility and pursue alternate sourcing or contingency options, any prolonged shortage could negatively affect our ability to supply customers consistently and in expected volumes.
The manufacture of semiconductors is a highly complex process. Minor deviations in the manufacturing process can cause substantial decreases in yield. In some situations, such deviations may cause production to be suspended. The foundries that manufacture our semiconductors have from time to time experienced lower than anticipated manufacturing yields, including yields for our semiconductors, typically during the production of new products or architectures or during the installation and start-up and ramp-up of new process technologies or equipment. If the foundries that manufacture our semiconductors do not achieve planned yields, our product costs could increase and product availability would decrease.
After the wafer fabrication processes, our wafers are shipped to our assembly and testing subcontractors. We have a system to maximize consistent product quality, reliability and yield that involves our quality assurance team working closely with subcontractors in the various phases of the assembly and testing processes. Our supplier quality management includes procedures such as processes to pre-qualify our manufacturing suppliers and subcontractors. If our subcontractors do not achieve planned product quality, reliability and yield during the assembly and testing processes, our product cost could increase, product availability could decrease, or our customers may not accept products manufactured for them.
Failure to protect our intellectual property or maintain the rights to certain other technologies may negatively impact our ability to compete.
We believe that the protection of our intellectual property rights and continued access to certain third-party technology are and will continue to be important to the success of our business. We rely on a combination of patent, copyright, trademark and trade secret laws and restrictions on disclosure to protect our intellectual property rights. We also enter into confidentiality or license agreements with our employees, business partners and other third parties, and have implemented procedures to control access to and distribution of our documentation and other proprietary information. Despite these efforts, we cannot assure you that these measures will provide meaningful protection of our intellectual property rights. Further, these agreements do not prevent others from independently developing technologies that are equivalent to or superior to our technology. In
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addition, unauthorized parties may attempt to copy or otherwise obtain and use our proprietary technology. Monitoring unauthorized use of our technology is difficult and we cannot be certain that the steps we have taken will prevent unauthorized use of our technology, particularly in foreign countries such as Taiwan and China where the laws may not protect our proprietary rights as fully as do the laws of the United States. In addition, if the foundries that manufacture our semiconductors lose control of our intellectual property, it could be more difficult for us to take remedial measures because our foundries are located in countries that do not have the same protection for intellectual property that is provided in the United States. Also, some of our contracts, including license agreements, are subject to termination upon certain types of change-of-control transactions.
As of April 7, 2026, we have 3,276 patents and 1,035 pending applications worldwide. We cannot be certain that patents will be issued as a result of our pending applications, nor can we be certain that any issued patents would protect or benefit us or give us adequate protection from competing products. For example, issued patents may be circumvented or challenged and declared invalid or unenforceable or provide only limited protection for our technologies. We also cannot be certain that others will not design around our patented technology, independently develop our unpatented proprietary technology or develop effective competing technologies on their own.
Failure to successfully defend against intellectual property lawsuits brought against us may adversely affect our business.
Companies in and related to the semiconductor industry often aggressively protect and pursue their intellectual property rights. From time to time, we have received, and may continue to receive, notices that claim we have infringed upon, misappropriated or misused other parties’ proprietary rights. Moreover, in the past we have been involved in litigation with parties that claimed that we infringed their patents or misappropriated or misused their trade secrets. In addition, we or our customers may be sued by other parties that claim that our products have infringed their patents or misappropriated or misused their trade secrets, or that may seek to invalidate one or more of our patents. An adverse determination in any of these types of disputes could prevent us from manufacturing or selling some of our products, increase our costs of revenue and expose us to significant liability. Any of these claims may materially and adversely affect our business, financial condition and results of operations. For example, in a patent or trade secret action, a court could issue a preliminary or permanent injunction that would require us or our customer(s) to withdraw or recall certain products from the market or redesign certain products offered for sales or under development. We may also be liable for damages for past infringement and royalties for future use of certain technologies. See “Item 8. Legal Proceedings” below.
In addition, any litigation to defend ourselves against claims that we have infringed the intellectual property rights of others, could, regardless of the ultimate outcome, materially and adversely affect our operating results by requiring us to incur significant legal expenses and diverting the resources of the Company and the attention of our management team.
Because the markets in which we operate are highly competitive and many of our competitors have greater resources than we have, we cannot be certain that our products will compete favorably in the marketplace.
We face competition from several competitors, including Microchip and Phison, our flash memory customers and smaller merchant suppliers in China. We expect to face competition in the future from our current and potential competitors. In addition, some of our flash memory customers could develop products and technologies that replace their need for our products or otherwise reduce their demand for our products.
Some of our current and potential competitors have longer operating histories, greater name recognition, access to larger customer bases and significantly greater financial, sales and marketing, manufacturing, distribution, technical and other resources than we have. As a result, they may be able to respond more quickly to changing customer demands or to devote greater resources to the development, promotion and sales of their products than we can. Our current and potential competitors may develop and introduce new products that will be
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priced lower, provide superior performance or achieve greater market acceptance than our products. For our SSD solutions, if we are unable to procure sufficient supplies of NAND flash components and at terms that enable our products to be competitive in terms of price or develop technologically competitive products, our customers may seek to purchase SSD solutions from other suppliers.
Our products must meet exacting 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 and risks of indemnification against defects in our products.
Our products are complex and may contain undetected hardware or software defects or failures, especially when first introduced or when new versions are released. These errors could cause us to incur significant re-engineering costs, divert the attention of our engineering personnel from other important product development efforts and materially affect our customer relations and business reputation. If we deliver products with errors or defects, our credibility and the market acceptance and sales of our products could be harmed. Defects could also lead to liability for defective products as a result of lawsuits against us or against our customers. We have agreed to indemnify some of our customers in some circumstances against liability from defects in our products. A successful warranty or product liability claim could require us to make significant payments.
Our intellectual property indemnification practices may adversely impact our business.
We may be required to indemnify our customers and our third-party intellectual property providers for certain costs and damages of intellectual property infringement in circumstances where our products are a factor in creating infringement exposure. In the contracts under which we sell semiconductor products, we may have agreed to indemnify our customers against losses arising out of claims of unauthorized use of intellectual property. In some of our licensing agreements, we have agreed to indemnify the licensee against losses arising out of or related to our conduct or services. We cannot assure you that claims for indemnification will not be made or that these claims would not have a material and adverse effect on our business, operating results or financial condition.
We are exposed to potential impairment on investments.
We have made investments in equity securities with an aggregate value of approximately US$29.7 million as of December 31, 2025. If the companies that we invested in are unable to execute their plans and succeed in their respective markets, we may not benefit from such investments, and we could potentially lose the amounts we invested. We evaluate our investment portfolio on a regular basis to determine if impairments have occurred. If the operations of any businesses in which we have invested decline significantly, we could incur impairment charges that could have a material impact on our results of operations.
We are subject to cybersecurity risks.
Historically, we have experienced immaterial cyberattacks of varying degrees on our technology infrastructure and systems and, as a result, unauthorized parties have obtained in the past, and may in the future obtain, access to our computer systems and networks. The technology infrastructure and systems of our customers, suppliers, vendors and partners may also experience such attacks. Cyberattacks are external and internal threats that include, but are not limited to, malware, phishing, advanced persistent threats, denial of service attacks, malicious software downloads, insider security breaches, and hardware and software vulnerabilities. We believe cyberattack attempts are increasing not only in number but also in scope and that perpetrators of cyberattacks continue to develop increasingly sophisticated systems and means to not only attack systems and damage data but also evade detection or obscure their activities.
We have controls and policies and recovery systems to minimize business disruptions in place and will continue to review and enhance our capabilities and upgrade our protective solutions to guard against emerging
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threats, detect malicious or unauthorized activities. If efforts to breach our infrastructure and systems are successful or we are unable to protect against these risks, we could suffer interruptions, delays, or cessation of operations of our systems, and loss or misuse of proprietary or confidential information, intellectual property, or sensitive or personal information. Breaches of our infrastructure and systems could also cause our customers and other affected third parties to suffer loss or misuse of proprietary or confidential information, intellectual property, or sensitive or personal information, and could harm our relationships with customers and other third parties. As a result, we could experience additional costs, indemnification claims, litigation, and damage to our brand and reputation. All these consequences could harm our reputation and our business and materially and adversely affect our operating results and financial condition.
We are increasingly incorporating AI and machine learning technologies into our business operations and product offerings. The use of AI introduces unique cybersecurity risks, including adversarial attacks such as prompt injection, data poisoning, and model extraction that could compromise the integrity and reliability of our systems. There are also risks associated with the potential leakage of sensitive data, proprietary code, or intellectual property through the use of generative AI tools or services by our employees or third-party service providers. As the regulatory landscape surrounding AI continues to evolve, any failure to manage the ethical, legal, and security challenges associated with AI could result in regulatory investigations, legal liabilities, and significant reputational harm.
We outsource selected business functions to third parties, including third parties to manufacture our semiconductors. We take steps to monitor and regulate the performance of the independent third parties to whom we delegate selected functions. While we evaluate the information security programs and defenses of such third parties, we cannot be certain that our evaluations will identify all or any potential information security weaknesses, or that such third parties’ information security protocols are or will be sufficient to withstand or adequately respond to a cyberattack or other information security incident.
We rely on third parties to provide services necessary for the operation of our business. Any failure of one or more of our vendors, suppliers or manufacturers to provide these services could have a material adverse effect on our business.
Arrangements with third-party service providers may make our operations vulnerable if vendors fail to satisfy their obligations to us resulting from their performance, changes in their own operations, financial condition, or other matters outside of our control. The expanding role of third-party providers may also require changes to our existing operations and the adoption of new procedures and processes for retaining and managing these providers, as well as redistributing responsibilities as needed. Effective management, development and implementation of our outsourcing strategies are important to our business and strategy. If there are delays or difficulties in enhancing business processes or our third-party providers do not perform as anticipated, we may not fully realize on a timely basis the anticipated economic and other benefits of the outsourcing projects or other relationships we enter into with key vendors, which could result in substantial costs, divert management’s attention from other strategic activities, negatively affect employee morale or create other operational or financial problems for us. Terminating, transitioning or renegotiating arrangements with key vendors or failure to renegotiate on favorable terms could result in additional costs and a risk of operational delays, potential errors and possible control issues resulting from the termination or during the transition or renegotiation phase.
The constant growth and development of technology, including the increased use of AI, presents risks and challenges to our operations that could give rise to legal or regulatory action, damage our reputation or otherwise materially harm our business.
Emerging technology is a consistent subject of new laws or regulations and evolving interpretations and applications of laws and regulations. If we fail to comply with these laws, we may be subject to penalties, fines or criminal or civil liability. The development and use of AI presents new risks and challenges that can impact our operations if we incorporate AI into our operations, or if used by our third-party vendors. While we aim to
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develop and use AI responsibly and attempt to mitigate ethical and legal issues presented by its use, we may ultimately be unsuccessful in identifying or resolving issues before they arise. AI technologies are complex and rapidly evolving and the technologies that we develop or use may ultimately be flawed. Moreover, AI technology is subject to rapidly evolving domestic and international laws and regulations, which could impose significant costs and obligations on the Company.
For example, in the United States, there has been uncertainty regarding the applicable regulations that will apply to the development and use of AI technologies. In January 2025, the Trump administration rescinded Executive Order 14110, which had been issued by the Biden administration to govern the safe and trustworthy development and use of AI technologies. The Trump administration subsequently issued Executive Order 14179 (Removing Barriers to American Leadership in Artificial Intelligence), which, among other things, directed certain federal agencies to develop action plans to “sustain and enhance America’s global AI dominance” and to review and, where possible, rescind agency guidance and rulemaking issued pursuant to the prior Biden administration executive order. Since then, the Trump administration has continued to take further actions relating to AI, including issuing additional executive orders relating to AI in education and other sectors, and directing the Office of Science and Technology Policy to coordinate agency AI priorities through a formal AI Action Plan. The Trump administration has signaled a broadly deregulatory posture toward AI, favoring industry-led innovation over prescriptive federal rulemaking. The Trump administration may continue to issue new executive orders, rescind existing federal policies, or implement other rulemaking relating to AI technologies in the future, and the regulatory environment at the federal level remains subject to significant uncertainty and change.
At the state level, a growing number of U.S. states have enacted or are actively considering AI-specific legislation. States including California, Colorado, Illinois, and Texas have introduced or passed laws addressing automated decision-making, algorithmic discrimination, AI transparency, and the use of AI in employment and consumer contexts. Compliance with a patchwork of differing state-level AI requirements could impose significant operational and legal burdens on the Company.
Emerging regulations may pertain to data privacy, data protection, and the ethical use of AI, as well as clarifying intellectual property considerations. In particular, the legal status of AI-generated content under U.S. copyright law remains unsettled. The U.S. Copyright Office has issued guidance indicating that AI-generated works without sufficient human authorship may not be eligible for copyright protection, and a number of significant cases involving AI training data and AI-generated outputs are currently pending before U.S. courts. These developments could affect our ability to protect AI-generated outputs or expose us to liability in connection with the use of third-party content in training AI models.
Our use of AI could give rise to legal or regulatory action, increased scrutiny or liability, damage our reputation or otherwise materially harm our business. Additionally, if we fail to keep pace with rapidly evolving AI technological developments, our competitive position and business results may be negatively impacted.
Our business, financial condition and results of operations could be adversely impacted by the political and economic conditions of the countries in which we conduct business and operate and in which our products are used and sold.
A substantial portion of our business is conducted outside of the United States and, as a result, we are subject to foreign business, political and economic risks. Most of our ICs are manufactured, assembled and tested by third parties located in China and Taiwan. We generated 91%, 98% and 99% of our revenue in 2023, 2024 and 2025, respectively, from sales to customers outside the United States, and for the year ended December 31, 2025, 79% of our revenue was from sales in three jurisdictions China, Japan and Singapore. Our controller R&D is conducted primarily in Taiwan and our SSD solutions R&D is conducted in both China and Taiwan. Most of our corporate functions are located in Taiwan. These operations are directly influenced by the political and economic conditions of the country in which they are located. We do not expect the portion of our business located outside of the United States to change in the future.
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Accordingly, we are subject to risks associated with international operations, including but not limited to:
| • | international economic and political conditions, such as political tensions between countries in which we do business (please refer to “Risk Factors — We face substantial risks associated with doing business in Taiwan because of tense regional geopolitical risk with China.”); |
| • | unexpected changes in, or impositions of, legislative or regulatory requirements; |
| • | complying with a variety of foreign laws; |
| • | differing legal standards with respect to protection of intellectual property and employment practices; |
| • | cultural differences in the conduct of business; |
| • | inadequate local infrastructure that could result in business disruptions; |
| • | trade issues related to export or import restrictions, trade sanctions, entity lists, tariffs, quotas and other trade barriers and restrictions, including those related to the ongoing trade disputes between China and the U.S.; |
| • | financial risks such as longer payment cycles and difficulty in collecting accounts receivable; |
| • | adverse taxes rules, regulations and penalties; and |
| • | other factors beyond our control such as nature disasters, terrorism, civil unrest, war, including conflicts in the Middle East, threats to the Strait of Hormuz and global energy supply routes, and the ongoing Russia-Ukraine War, and pandemics, epidemics and other health emergencies. |
As a result of having global operations, the sudden disruption of our supply chain and/or disruption of the manufacture of our customer’s products caused by events outside of our control could impact our results of operations by impairing our ability to timely and efficiently deliver our products.
Although our reporting currency is the U.S. dollar, and the majority of our sales and cost of sales in the last three years are denominated in the U.S. dollar, most of our operating expenses are denominated in the NT dollar, and to a lesser extent, the Chinese yuan and U.S. dollar. Any unfavorable changes in foreign exchange rates could adversely affect, or cause fluctuations in, our results of operations. We do not currently engage in currency hedging activities.
Severe weather, natural disasters, pandemics, epidemics, acts of war or terrorism or other external events could have significant effects on our business.
We operate primarily in regions of the world, including Taiwan, China and California that are susceptible to earthquakes. In the past, these regions had experienced severe earthquakes that caused significant property damage and loss of life, although we did not suffer any material impact on our business. The occurrence of earthquakes is unpredictable, and a major earthquake and consequent disruptive events could severely disrupt the normal operations of our business and have a material and adverse effect on our financial condition and operating results.
Severe weather and natural disasters, including hurricanes, tornados, wildfires, droughts and floods, epidemics and pandemics, acts of war or terrorism or other external events could have a significant effect on our ability to conduct business. Such disasters could disrupt our operations or the operations of customers or third parties on which we rely.
Our response to climate change, our climate change strategies, policies and disclosure, and/or our ability to achieve any climate-related goals or commitments that we may make (which are subject to risks and uncertainties, many of which are outside of our control) could result in reputational harm as a result of negative public sentiment, regulatory scrutiny, litigation and reduced investor and stakeholder confidence.
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Failure to meet the rapidly changing corporate citizenship and sustainability expectations or standards, or achieve our related goals, could adversely affect our business, results of operations, financial condition or stock price.
There are rapidly changing discussions and regulations surrounding environmental matters, social investments and diversity, equity and inclusion (often referred to as “ESG” initiatives and programs). In recent years, investor advocacy groups and certain institutional investors have placed increasing importance on sustainability, and we may not succeed in our achievement of our initiatives or goals. Increased ESG related compliance costs could result in increases to our overall operational costs. Failure to adapt to or comply with regulatory requirements or investor or stakeholder expectations and standards could negatively impact our reputation, our ability to do business with certain partners, and our ADS price.
In the U.S., the regulatory landscape governing ESG-related disclosure and reporting has undergone significant change. In March 2024, the SEC adopted climate-related disclosure rules; however, those rules were promptly stayed pending judicial review. In March 2025, the SEC announced that it would withdraw its defense of the rules, effectively abandoning them, reflecting a broader shift in the federal government’s approach to mandatory ESG-related disclosure. At the same time, the Trump administration has taken steps to scale back or eliminate a number of federal diversity, equity, and inclusion (“DEI”) programs and has encouraged private sector companies to reduce or eliminate their own DEI initiatives, including through executive orders directing federal agencies to investigate and take action against what the administration characterizes as unlawful DEI practices in the private sector. As a result, the federal regulatory environment for ESG matters has shifted materially toward deregulation, though state-level requirements and international frameworks may continue to impose obligations on the Company.
At the same time, there also exists “anti-ESG” sentiment in certain of our markets, and we may face reduced revenue, reputational harm, market restrictions or legal actions if we are targeted by governmental entities, groups or influential individuals who disagree with our public positions on social or environmental issues. Conversely, we may also face reputational harm, loss of customers or employees, or legal challenges from stakeholders who believe that we have not gone far enough in our commitment to ESG-related initiatives, or who object to any reduction or modification of our existing ESG programs in response to political or regulatory pressure. These competing pressures create significant uncertainty regarding the appropriate scope and public positioning of our ESG initiatives, and we may be unable to satisfy all relevant stakeholders simultaneously.
We face substantial risks associated with doing business in Taiwan because of tense regional geopolitical risk with China.
Most of our business operations are in Taiwan, a self-governing democracy, with a unique international political status, that is claimed by China and receives security from the United States under the Taiwan Relations Act. China asserts that Taiwan is part of China, seeks the unification of Taiwan and has not ruled out the use of force to achieve this. China is also increasingly assertive in the region and claims sovereignty over much of the South China Sea south of Taiwan and has unilaterally established an Air Defense Identification Zone (“ADIZ”) in the East China Sea north of Taiwan. The United States does not recognize China’s ADIZ and conducts regular freedom of navigation operations in the areas claimed by China. In 2016, China dismissed the United Nation’s Permanent Court of Arbitration ruling against it in its claims to the South China Sea. Tensions between Taiwan and China and between the United States and China have increased in recent years.
A majority of our employees and a significant portion of our R&D and corporate functions are based in Taiwan. We also operate a R&D center in Shanghai, and China is one of the largest markets for our products. In addition, all of our foundries and assembly and testing subcontractors are located in either Taiwan or China. Accordingly, our business and results of operations and the market price of our ADSs may be affected by any deterioration in the relationship between Taiwan and China. Although there are significant economic ties between Taiwan and China, in recent years China has taken a more aggressive posture towards Taiwan, including
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the suspension of cross-straits communications channels in 1996, regular intrusion by Chinese military aircraft into Taiwan airspace, the sailing of naval ships around Taiwan waters, the conduct of military exercises close to Taiwan, and exclusion of Taiwan from international organizations such as the World Health Organization.
Furthermore, our principal executive offices are in Hong Kong. Previous pro-democracy protests and COVID-19 containment activities have affected our Hong Kong operations and China’s national security law for Hong Kong has reduced its autonomy and could lead to further repercussions from the United States, Taiwan and other countries and may affect our operations in the future.
Past and recent developments in relations between Taiwan and China have on occasion depressed the market prices of the securities of Taiwanese companies or companies with significant business activities in Taiwan. We cannot assure you that any contentious situation between Taiwan and China will always resolve in maintaining the current status quo or remain peaceful. Relations between Taiwan and China, potential confrontations between the United States and China and other factors affecting military, political, social or economic conditions in Taiwan and Hong Kong could have a material adverse effect on our financial condition and results of operations, as well as the market price and the liquidity of our ADSs.
The enactment of legislation implementing changes in the taxation of international business activities, the adoption of other tax reform policies or changes in tax legislation or policies could materially impact our financial position and results of operations.
Legislation is introduced from time to time to reform the taxation of international business activities. The Organisation for Economic Co-operation and Development (OECD) has released guidance covering various topics, including country-by-country reporting, definitional changes to permanent establishment and guidelines in determining arm’s length transfer pricing. This guidance is collectively referred to as Base Erosion and Profit Shifting (“BEPS”) an initiative that aims to standardize and modernize global tax policy. Depending on legislation ultimately enacted in connection with this guidance by jurisdictions in which we operate, there may be significant consequences for us due to our large international business activities. For example, adoption of BEPS by foreign jurisdictions in which we operate could result in changes to tax policies, including transfer- pricing policies that could ultimately impact our tax liabilities to foreign jurisdictions. If any of these proposals are enacted into law, or if other international, consensus-based tax policies and principles are amended or implemented, they could have material adverse consequences on the amount of tax we pay and thereby on our financial position and results of operations. It is likely that new legislation enacted by several governments of countries in which we operate could lead to higher operating and tax expenses for our business in the near future.
We are subject to risks associated with the development and construction of our office building.
In February 2021, the Company won a bid with a third party to build an office building in Taipei, Taiwan and executed a property development agreement in May 2021, with property development costs expected to be approximately US$101 million. We received the construction license in September 2025, and we expect to complete construction of the building by the end of 2029. Following its completion, we will have approximately 107,870 square feet of office building space and 10,833 square feet of land. We may encounter unanticipated occurrences or conditions during construction that may increase the expense of these projects. We may also encounter unanticipated delays in the construction of the new buildings and local government approvals for the projects may be delayed. We will also be required to comply with applicable environmental regulations in connection with such development. We are financing these construction projects from our cash balance, which could limit alternative deployments of capital. The construction of the building will increase our fixed assets significantly and could reduce our return on invested capital. After the office building has been constructed, we may consider sale and leaseback arrangements if favorable terms can be obtained. See “Item 4 — Facilities” below.
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Risks Relating to Our Corporate Structure and Governance
The loss of any of our key personnel or the failure to attract or retain specialized technical or management personnel could impair our ability to grow our business.
We rely heavily on the services of our key employees, including Wallace C. Kou, our President and Chief Executive Officer. In addition, our engineers and other highly skilled personnel are a significant asset and are the source of our technological and product innovations. We believe our future success will depend upon our ability to attract and retain skilled managerial, engineering and sales and marketing personnel. The competition for such personnel, particularly engineering personnel, is intense in our industry. We may not be successful in attracting and retaining engineering personnel to support our anticipated growth. These personnel are required to design and develop ICs, including firmware, and to introduce product enhancements for use in future applications. Despite the incentives we provide, our current employees may not continue to work for us, and if additional personnel are required for our operations, we may not be able to obtain the services of additional personnel necessary for our growth. In addition, we do not maintain “key person” life insurance for any of our senior executives or other key employees. The loss of any of our key employees or our inability to attract or retain qualified personnel, including engineers, could delay the development and introduction of, and have an adverse effect on our ability to sell our products as well as have an adverse effect on our overall growth. In addition, if any other members of our senior management or any of our other key personnel depart, join a competitor or form a competing company, we may not be able to replace them easily and we may lose customers, business partners, key professionals and staff members. Substantially all our senior executives and key personnel have entered into confidentiality and non-disclosure agreements. In the event of a dispute between any of our senior executives or key personnel and our operating companies in Taiwan and other foreign countries, we cannot assure you the extent, if any, to which certain provisions in these confidentiality and non-disclosure agreements may be enforceable in Taiwan or other foreign countries due to the constantly evolving nature of such legal systems’ enforcement and interpretation of these types of agreements.
Any failure to achieve and maintain effective internal controls could have a material adverse effect on our business, results of operations and the market price of our ADSs.
We are subject to reporting obligations under securities laws of the United States. The SEC, as required by Section 404 of the Sarbanes-Oxley Act of 2002, adopted rules requiring every public company to include in its annual report management’s assessment of the effectiveness of the company’s internal controls over financial reporting. In addition, an independent registered public accounting firm must attest to and report on the effectiveness of the company’s internal controls over financial reporting as applicable.
Our management and independent registered public accounting firm have concluded that our internal controls over financial reporting as of December 31, 2025 were effective. However, we cannot assure you that in the future we or our independent registered public accounting firm will not identify material weakness during the audit process or for other reasons. In addition, because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. As a result, if we fail to maintain effective internal controls over financial reporting or should we be unable to prevent or detect material misstatements due to error or fraud on a timely basis, investors could lose confidence in the reliability of our consolidated financial statements, which in turn could harm our business and results of operations, negatively impact the market price of our ADSs and harm our reputation.
Our business is subject to various governmental regulations, and compliance with these regulations may cause us to incur significant expense.
We are subject to various state, federal and international laws and regulations governing the environment, including restricting the presence of certain substances in electronic products. In addition, we are also subject to various industry requirements restricting the presence of certain substances in electronic products. Although our
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management systems are designed to maintain compliance, we cannot assure you that we have been or will be, at all times, in complete compliance with such laws and regulations. If we violate or fail to comply with any of them, a range of consequences could result, including fines, import/export restrictions, sales limitations, criminal and civil liabilities or other sanctions.
Recently there has been increased focus on environmental protection and social responsibility initiatives, which are subject to change, can be unpredictable, and may be difficult for us to comply with, given the complexity of our supply chain and our significant outsourced manufacturing. We are required to implement various standards or processes due to the adoption of rules or regulations that result from these initiatives, such as the SEC rules on the disclosure of the use of “conflict minerals.” If we are unable to comply, or ensure that our suppliers or contract manufacturers comply, with such standards or processes, customers may stop purchasing from us, which could adversely affect our sales and results of operations.
Risks Related to the ADSs
Our stock price has been, and may continue to be, volatile, which could result in investors losing all or part of their investments.
Since we completed our initial public offering in June 2005, the market price of our ADSs has been and likely will continue to be highly volatile and could be subject to wide fluctuations in response to numerous factors, including but are not limited to the following:
| • | actual or anticipated variations in our quarterly operating results or those of our competitors, customers, or NAND flash vendors; |
| • | Actual or anticipated changes to our outlook or expected operating results or those of our competitors, customers, or NAND flash vendors; |
| • | actual or anticipated changes in NAND flash supply and demand dynamics; |
| • | actual or anticipated changes in our market share or the market share of our competitors; |
| • | the commencement or results of litigation or arbitration; |
| • | short selling or market manipulation activities; |
| • | announcements by us, our competitors, our customers, or their other suppliers of new products or technological innovations; |
| • | changes in financial estimates or recommendations by securities analysts; |
| • | business interruptions resulting from geopolitical actions, including war and terrorism, natural disasters, including earthquakes, typhoons, floods and fires, epidemics, outbreaks of an infectious disease or similar events; |
| • | the payment or non-payment of cash dividends at the discretion of our board of directors; |
| • | the announcement and implementation of share repurchase programs; |
| • | announcements by us or our competitors of significant acquisitions, divestitures or partnerships; |
| • | actual or anticipated changes to trade issues related to export or import restrictions, trade sanctions, entity lists, tariffs, quotas and other trade barriers and restrictions, including those related to the ongoing trade disputes between China and the U.S.; and |
| • | actual or anticipated changes in the global economic or industry outlook. |
Many of these factors are beyond our control and may negatively impact the market price of our ADSs, regardless of our performance. In addition, the stock market in general, and the market for technology and semiconductor companies in particular, have been highly volatile. Furthermore, the trading price of our ADSs
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may be adversely affected by third parties trying to drive down the market price. Short sellers and others, some of whom post anonymously on social media, may be positioned to profit if our stock declines and their activities can negatively affect our stock price. These broad market and industry factors may seriously harm the market price of our ADSs, regardless of our operating performance. Our ADSs may not trade at the same price levels as that of other semiconductor and technology companies, and shares of semiconductor and technology companies, in general, may not sustain their current market prices. These fluctuations as well as general economic, political, and market conditions may have an adverse effect on the market price of our ADSs.
There can be no assurance that we will declare cash dividends in the future in any amount or at all.
Since November 2015, except subject to certain suspensions, our board of directors has typically declared dividends annually, with payments made in four quarterly installments. The decision to continue declaring dividends, if any, and their timing and amount, depends on, among other things, that the dividend payment is in the best interests of our shareholders, business visibility, our results of operations, capital availability and future capital requirements, financial condition, statutory requirements, and other factors that our board of directors may deem relevant and any dividend declaration is at the discretion of our board of directors. Our dividend payments may change from time to time, and we cannot provide assurance that we will continue to declare dividends, if at all or in any amount. A reduction in or elimination of our dividend payments could have a negative effect on our share price.
We are a foreign private issuer within the meaning of the rules under the Exchange Act, and as such we are exempt from certain provisions applicable to United States domestic public companies.
Because we are a foreign private issuer under the Exchange Act, we are exempt from certain provisions of the securities laws and regulations in the United States that apply to U.S. domestic issuers, including:
| • | the rules under the Exchange Act requiring the filing of annual reports on Form 10-K, quarterly reports on Form 10-Q or current reports on Form 8-K with the SEC; |
| • | the sections of the Exchange Act regulating the solicitation of proxies, consents, or authorizations in respect of a security registered under the Exchange Act; |
| • | the sections of the Exchange Act requiring persons who beneficially own more than 10% of our equity securities to file public reports of their stock ownership and trading activities and liability for our officers, directors and greater than 10% shareholders who profit from trades made in a short period of time; and |
| • | the selective disclosure rules by issuers of material nonpublic information under Regulation FD. |
We will be required to file an annual report on Form 20-F within four months of the end of each fiscal year. In addition, we intend to publish our results on a quarterly basis through press releases, distributed pursuant to the rules and regulations of the Nasdaq. Press releases relating to financial results and material events will also be furnished to the SEC on Form 6-K. However, the information we are required to file with or furnish to the SEC will be less extensive and less timely than that required to be filed with the SEC by U.S. domestic issuers. As a result, you may not be afforded the same protections or information that would be made available to you were you investing in a U.S. domestic issuer.
We may lose our foreign private issuer status in the future, which could result in significant additional costs and expenses to us.
As discussed above, we are a foreign private issuer, and therefore, we are not required to comply with all the periodic disclosure and current reporting requirements of the Exchange Act. The determination of foreign private issuer status is made annually on the last business day of an issuer’s most recently completed second fiscal quarter. In the future, we would lose our foreign private issuer status if (1) more than 50% of our outstanding
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voting securities are owned by U.S. residents and (2) a majority of our directors or executive officers are U.S. citizens or residents, or we fail to meet additional requirements necessary to avoid the loss of foreign private issuer status. If we lose our foreign private issuer status, we will be required to file with the SEC periodic reports and registration statements on U.S. domestic issuer forms, which are more detailed and extensive than the forms available to a foreign private issuer. We will also have to comply with U.S. federal proxy requirements, and our officers, directors and greater than 10% shareholders will become subject to the short-swing profit disclosure and recovery provisions of Section 16 of the Exchange Act. In addition, we will lose our ability to rely upon exemptions from certain corporate governance requirements under the listing rules of the Nasdaq. As a U.S. listed public company that is not a foreign private issuer, we will incur significant additional legal, accounting and other expenses that we will not incur as a foreign private issuer.
If we are characterized as a passive foreign investment company, U.S. holders of our ADSs may experience adverse tax consequences.
Based on the present and projected composition of our income and valuation of our assets, we believe we are not currently classified as a passive foreign investment company (“PFIC”) for U.S. federal income tax purposes. We will generally be classified as a PFIC for any taxable year in which either (a) at least 75% of our gross income is passive income or (b) at least 50% of the value (determined on the basis of a quarterly average) of our assets is attributable to assets that produce or are held for the production of passive income. If we are characterized as a PFIC, U.S. holders of our ADSs may experience adverse tax consequences. See “Item 10. Additional Information — Taxation — United States Federal Income Taxation.”
Holders of our ordinary shares and ADSs may experience dilution if we issue restricted stock units or other forms of Company equity to employees or sell additional equity or equity-linked securities.
We periodically issue equity awards in the form of restricted stock units that are convertible into shares of the Company’s ordinary shares upon vesting on a one-for-one basis. Therefore, the issuance of such equity awards may have a dilutive effect on the holders of outstanding ordinary shares and ADSs. In addition, the issuance of additional equity or equity-linked securities may result in additional dilution to our shareholders.
| ITEM 4. | INFORMATION ON THE COMPANY |
Introduction
Silicon Motion was originally incorporated under the name Silicon Motion Technology Corporation in the Cayman Islands in January 2005. In April 2005, we acquired Silicon Motion, Inc., a Taiwan corporation (“SMI Taiwan”). Originally SMI Taiwan was known as Feiya Technology Corporation (“Feiya”), a Taiwan corporation, which was incorporated in April 1997. Feiya changed its name to SMI Taiwan, in August 2002, after acquiring Silicon Motion, Inc., a California corporation (“SMI USA”), which was incorporated in November 1995. Feiya was originally a flash memory products company and SMI USA was a graphics processor company. Silicon Motion is incorporated in the Cayman Islands and operates under Cayman Islands laws with our principal executive office located in Hong Kong.
We are a global leader in developing NAND flash controllers for SSDs and other solid state storage devices. We have over 20 years of experience developing specialized processor ICs that manage NAND components and deliver market leading, high-performance storage solutions widely used in enterprise and hyperscale data centers, PCs, smartphones and commercial and industrial applications. We have one of the broadest portfolios of controller intellectual property developed from our deep understanding of NAND characteristics, which enables us to design unique, highly optimized configurable IC’s plus related firmware controller platforms and complete turnkey controller solutions. In the last ten years, we have shipped over six billion NAND flash controllers. More NAND flash components, including current and up-coming generations of flash produced by Kioxia, Micron, Samsung, SK Hynix (and Hynix’s subsidiary, Solidigm), Sandisk and Yangtze Memory Technologies Corp. (“YMTC”), are supported by Silicon Motion controllers than any other company. Our customers include NAND flash makers, module makers, hyperscalers and OEMs.
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We are a leading supplier of SSD controllers used in PCs and other client devices and leading merchant supplier of eMMC/UFS controllers used in smartphones and Internet of things (“IoT”) devices. We also leverage our controller expertise to supply specialized small single-chip form factor SSDs for industrial, commercial and automotive applications. We market our controllers for PCs and eMMC/UFS under the “SiliconMotion” brand and its logo, “FerriSSD,” “Ferri-UFS” and “Ferri-eMMC” for storage solutions, and “MonTitan” for enterprise SSD controller.
Our principal executive offices are located at Flat C, 19/F, Wing Cheong Commercial Building, Nos 19-25 Jervois Street, Hong Kong. The address of our United States operating subsidiary, SMI USA, is 690 N. McCarthy Blvd., Suite 200, Milpitas, California 95035. The address of our Taiwan operating subsidiary, SMI Taiwan, is 8/F, #36 Taiyuan St., Jhubei, Hsinchu 30265, Taiwan. Our ADSs, each representing four of our ordinary shares, have been listed and traded on Nasdaq since June 2005. Our website address is www.siliconmotion.com. The information on our website should not be deemed to be part of this annual report. Additionally, the SEC maintains a website at www.sec.gov that contains reports, proxy and information statements, and other information, as applicable, regarding registrants that make electronic filings with the SEC using its EDGAR system.
Please refer to “Operating and Financial Review and Prospects — Liquidity and Capital Resources” in Item 5 below for a discussion of our capital expenditures in the past three years.
Termination of the Merger Agreement with MaxLinear
On May 5, 2022, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with MaxLinear, Inc., a Delaware Corporation (“MaxLinear”), and Shark Merger Sub, an exempted company with limited liability incorporated under the law of the Cayman Islands and a wholly owned subsidiary of MaxLinear, pursuant to which the Company agreed to be acquired by MaxLinear (collectively, the “Transaction”). On August 31, 2022, shareholders at the Company’s Extraordinary General Meeting of Shareholders approved the Transaction.
On July 26, 2023, the Company and MaxLinear received antitrust approval from the State Administration for Market Regulation of the People’s Republic of China (“SAMR Approval”). Shortly after receiving SAMR Approval, the Company received notice from MaxLinear of its purported termination of the Merger Agreement. MaxLinear did not provide any factual basis for its purported termination, and the Company believes its actions constituted a willful and material breach of the Merger Agreement. The Company has filed a claim in the Singapore International Arbitration Centre (the “SIAC”), which is the venue for dispute resolution under the Merger Agreement, and is currently pursuing payment of the termination fee of US$160 million, together with further substantial damages, interest and costs. Under the SIAC Arbitration Rules, all matters relating to the proceedings are confidential.
Significant Subsidiaries of the Company
Below is a list of significant subsidiaries of the Company. All subsidiaries are wholly owned.
| Name of Entity |
Jurisdiction of Incorporation | |
| Silicon Motion, Inc. | Taiwan | |
| Silicon Motion Technology (Macao) Ltd. | Macau | |
| Silicon Motion Technology (HK) Ltd. | Hong Kong |
Our Market and Products
We focus primarily on designing, developing and marketing: (i) NAND flash controllers for solid state storage devices, primarily SSDs used in data centers, PCs and other client devices and eMMC and UFS mobile
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embedded storage used in smartphones and IoT devices and (ii) SSD solutions, primarily small form-factor specialized SSDs used in industrial, commercial and automotive applications. In 2023, 55% to 60% of our net sales were of SSD controllers, 25% to 30% were eMMC and UFS controllers and 5% to 10% were SSD solutions. In 2024, 50% to 55% of our net sales were of SSD controllers, 35% to 40% were eMMC and UFS controllers and 5% to 10% were SSD solutions. In 2025, 45% to 50% of our net sales were of SSD controllers, 40% to 45% were eMMC and UFS controllers and 0% to 5% were SSD solutions. We generated 91%, 98% and 99% of our revenue in 2023, 2024 and 2025, respectively, from sales outside the United States, and for the year ended December 31, 2025, 79% of our revenue was from sales in three jurisdictions China, Japan and Singapore.
NAND Flash Controllers
We offer a broad range of controllers for developing different categories of solid-state storage devices that are used in a wide variety of applications. We provide controllers for computing-grade SSDs used in PCs and other client devices, enterprise-grade SSDs used in data centers, eMMC and UFS mobile embedded storage used in smartphones and IoT devices, enterprise-grade SSDs used in enterprise and hyperscale data centers, flash memory cards and flash drives used as expandable storage and specialized SSDs used in industrial, commercial and automotive applications. For most of these applications, we offer customers controllers, which are designed for a range of different price-performance trade-offs that enable the targeting of different market segments, such as value-line, mainstream and premium. Our controllers are a combination of ICs and firmware and are offered as configurable platforms or turnkey solutions, which provide customers with options to customize products to achieve desired differentiation or focus on fast time-to-market. Since SSDs and mobile embedded storage products are defined by continuously evolving industry standards such as those relating to, but are not limited to, the Peripheral Component Interconnect Express, or PCIe, host interface, nonvolatile memory express, or NVMe, data transfer protocol and UFS storage specification, we provide controllers for the latest versions of these industry standards and design our solutions for customers to build storage devices with competitive product performance and compatibility with host devices. Our controllers are also designed to support the majority of the latest and next generations of NAND flash components manufactured by vendors such as Kioxia, Micron, Samsung, SK Hynix (and Hynix’s subsidiary, Solidigm), Sandisk and YMTC, which enable customers to have wide choices of components for developing and building storage devices. Controllers integrate technologies that are critical to their functionality and these include advanced error correction codes, or ECC, and digital signal processing, or DSP, engines for ensuring data reliability and sophisticated wear-leveling algorithms for maximizing the usable life of NAND flash components. We may also incorporate other technologies in our controllers such as encryption, power-loss protection, multimedia digital rights management and active temperature monitoring.
Enterprise Products
We are expanding our business into the enterprise market through the development of PCIe (our MonTitan controllers and boot drive controllers and solutions) and Serial Advanced Technology Attachment (SATA) SSD controllers. These new products have been developed given the rapid adoption of NAND in enterprise storage driven by AI and other high-performance applications. Our MonTitan products leverage Quad-Level Cell (QLC) and Triple-Layer Cell (TLC) NAND flash to target the growing markets for enterprise-class storage solutions, evolving “compute” requirements and high density warm storage (nearline SSD) in AI infrastructure. In high performance, high capacity QLC SSDs, our MonTitan solutions offer significant advantages over hard disk drives (HDDs) in performance, reduced size and lower power requirements to cloud service providers, hyperscalers, large enterprises and other customers. Our TLC-based MonTitan SSD solutions target high-performance, lower latency caching for the rapidly increasing demands within AI datacenters. As with our consumer products, our MonTitan controllers have been developed to support flash manufactured by key NAND manufacturers, allowing our customers to choose which components work best for their enterprise-class storage devices.
In addition to our MonTitan suite of enterprise-class storage controllers, we have developed boot drive storage controllers and full solutions to address the growing opportunity in AI network accelerators, switches and
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other devices. As hyperscalers and enterprise customers expand server deployments, boot SSDs are becoming increasingly critical given the need for higher performance, improved power efficiency, enterprise-class security and reliable performance. We are expanding our boot drive portfolios leveraging PCIe and SATA as the market is increasingly a strategic focus for Silicon Motion.
SSD Solutions
We use our unique controller technology to develop Ferri SSD and enterprise boot drive solutions that pair our controllers with NAND memory components. Our FerriSSDs, Ferri-eMMCs, and Ferri-UFS products are highly reliable industrial-, commercial- and automotive-grade single-chip SSDs, which are developed for a wide-range of embedded applications that require high data rate, small form factor and compliance with industry standards. Our enterprise boot drives are developed for a wide-range of embedded storage requirements of server, enterprise and networking equipment, critical in data centers, AI infrastructure and enterprise solutions. We offer customers firmware customization for performance tuning as a value-added service.
Our Customers
We sell our products to NAND flash makers, module makers and OEMs worldwide that service multiple markets including computing, data center, mobile, automotive and industrial markets. Most of our high — performance flash memory storage controllers are supplied to NAND flash manufacturers. We are a leading supplier of SSD controllers used in PCs, mobile phones, data centers, automotive and other client devices and a leading merchant supplier of eMMC and UFS controllers used in smartphones and IoT devices. Sales to our five largest customers represented approximately 61%, 66% and 66% of our net revenue in 2023, 2024 and 2025, respectively. Sales to our customers constituting more than 10% of our net revenue represented, in the aggregate, 45%, 57% and 58% of our net revenue in 2023, 2024 and 2025, respectively. Our customers constituting more than 10% of our net revenue were (i) Micron, SK Hynix and AFASTOR in 2023, (ii) Micron, Kioxia, PHISEMI and AFASTOR in 2024 and (iii) PHISEMI, Kioxia, AFASTOR, and Micron in 2025. The identities of our largest customers and their respective contributions to our net revenue may vary from period to period.
The majority of our customers purchase our products through purchase orders, as opposed to entering into long-term contracts with us. The price for our products is typically agreed upon at the time a purchase order is placed.
Sales and Marketing
We market and sell our products worldwide through a combination of direct sales personnel and independent electronics distributors. Our direct sales personnel are strategically located near our NAND flash manufacturer, leading technology OEM and modular maker customers in Taiwan, Korea, China, the United States, and Japan. Approximately 65% of our sales in 2023, 65% of our sales in 2024, and 53% of our sales in 2025 were attributable to our direct sales force while the remainder was attributable to distributors.
To supplement our direct sales, we have independent electronics distributors and sales representatives located throughout the world. We selected these distributors and sales representatives based on their ability to provide effective field sales, marketing communications and technical support for our products to our customers.
Our marketing group focuses on our product strategy, product development road maps, new product introduction process, demand assessment, competitive analysis and product marketing. We seek to work with potential and existing customers early in their design process to best match our products to their needs, and more broadly, to ensure that product development activities, product launches, and on-going demand and supply planning occur in a well-managed, timely basis in coordination with our R&D, operations, and sales groups, as well as our customers and distributors. We also attend industry tradeshows and technical conferences to promote
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our products and solutions, maintain close contact with our existing customers to assess demand, and keep current with industry trends. Our participation in industry standards associations, such as the Institute of Electrical and Electronics Engineers (“IEEE”), the Joint Electron Device Engineering Council (JEDEC), NVM Express, and Open Compute Project (OCP) helps us monitor the latest industry developments and promote our corporate profile. Our marketing group also works with our sales teams to identify new business opportunities.
We also have field application engineers (“FAEs”), who provide technical support and assistance to existing and potential customers in designing, testing and qualifying systems that incorporate our products. Our FAE organization is segmented by product and market to support our customers.
Research and Development
Our future success depends on our ability to introduce improvements to our existing products and to develop new products that deliver cost-effective solutions for both existing and new markets. Our R&D efforts are directed largely to both the development of algorithms and other technological building blocks necessary for managing NAND flash and the use of these technological building blocks to develop a wide variety of NAND flash controller solutions, which are ICs with embedded firmware, that can manage most available NAND flash components and are used to create different classes of solid state storage devices, such as enterprise-grade SSDs used in enterprise applications and data centers, client SSDs used in PCs and other client devices, eMMC and UFS embedded storage for smartphones and IoT devices. We have assembled a core team of engineers who have experience in the areas of firmware, digital and mixed-signal IC design and system-level architecture. Our R&D expenses consist primarily of employee salaries and related benefits including stock-based compensation, tape-out and related project expenses and intellectual property and software licensing costs. We expense R&D expenditures as they are incurred.
Our primary R&D centers are located in Hsinchu and Taipei, Taiwan and Shanghai, China. Our facilities in Hsinchu and Taipei focus primarily on our NAND flash controller products, and our facilities in Shanghai focus primarily on specific product requirements of our customers in China.
Our R&D activities broaden and strengthen our portfolio of intellectual property, including patents and trade secrets. As of April 7, 2026, we have 3,276 patents and 1,035 pending applications worldwide, and we will continue to actively pursue the filing of additional patent applications in important jurisdictions.
Our R&D expenses were approximately US$174.4 million, US$217.8 million, and US$262.7 million for the years ended December 31, 2023, 2024 and 2025, respectively.
Manufacturing
We design and develop our products and electronically transfer our proprietary designs to independent foundries for the manufacturing and processing of silicon wafers. Once the wafers are manufactured, they are then shipped to third-party assembly and testing subcontractors. Individual IC dies are diced from wafers, assembled into finished chips and undergo several stages of testing before delivery to our customers. For certain products, we also ship bare dies to our customers. We believe that our strategy of outsourcing wafer fabrication, packaging and testing enables us to benefit from the R&D efforts of leading manufacturers without having to commit our own substantial capital investments. Our fabless business model also provides us with the flexibility to engage vendors who offer services that best complement our products and technologies.
Wafer fabrication. TSMC and SMIC are currently our primary foundries that manufacture most of our semiconductors. We use their fabs in Taiwan and China to fabricate our devices using CMOS process technology, primarily with process nodes from 6 to 55 nanometers. We regularly evaluate the benefits and feasibility, on a product-by-product basis, of migrating to more cost-efficient or high-performance low-power manufacturing process technologies.
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Assembly and testing. Following wafer fabrication, our wafers are shipped to our assembly and test subcontractors where they are probed, singulated into individual dies, assembled into packaged chips, and undergo the process of electronic final testing. To minimize cost and reduce turn-around time, our products are designed to use low cost, industry standard packages and can be tested with widely available automatic testing equipment. We currently engage companies such as Siliconware Precision Industries Ltd. (SPIL), Powertech Technology Inc. (PTI), Advanced Semiconductor Engineering. (ASE), Orient Semiconductor Electronics Limited (OSE), Huatian Technology. (HT), Tongfu Microelectronics Co., Ltd. (TF), King Yuan Electronics Corp. (KYEC) and YoungTek Electronics Corp. (YTEC) as our primary subcontractors for the assembly and testing of our products. We have dedicated teams of manufacturing engineers who maintain control over this process from the early stages of manufacturing. Our engineers work closely with our subcontractors to develop product testing and packaging programs to ensure these programs meet our product specifications, thereby maintaining our ownership of the functional and parametric performance of our semiconductors.
Quality and reliability assurance. We have designed and implemented a quality assurance system that provides the framework for continual improvement of products, processes and customer service. To ensure consistent product quality, reliability and yield, our quality assurance teams perform reliability engineering, quality control, International Organization for Standardization (“ISO”) system development, document control, subcontractor quality management and customer engineering services to closely monitor the overall process from IC design to after-sale customer support. We rely on in-depth simulation studies, testing and practical application testing to validate and verify our products. We emphasize a strong supplier quality management practice in which our manufacturing suppliers and subcontractors are pre-qualified by our quality assurance teams. Our suppliers are required to have a quality management system, certified to ISO 9000 standard as a minimum requirement. Our operations have been ISO 9001 certified since 1999.
Competition
We face competition from multiple competitors, including Microchip and Phison, our flash memory customers’ internal captive developments and small Chinese merchant controller suppliers.
The markets for our products are intensely competitive, and are characterized by rapid technological change, evolving industry standards, frequent new product introductions and pricing pressures. Competition has intensified due to the increasing demand for higher levels of performance at competitive prices. We expect competition to intensify further as current competitors continue to strengthen the depth and breadth of their product offerings and additionally, our competitors in China have benefited from the government’s semiconductor localization policies. We believe that our ability to compete successfully in the rapidly evolving markets for our products depends on several factors, including, but not limited to:
| • | the performance, features, quality and price of our products; |
| • | the timing and success of new product introductions by us, our customers and our competitors; |
| • | emergence, rate of adoption and acceptance of new industry standards; |
| • | our ability to obtain adequate foundry capacity at competitive prices; and |
| • | the number and nature of our competitors in specific market sub-segments. |
While our ability to effectively compete depends in large part on our ability to protect our intellectual property, we believe that our technical expertise, customer support capabilities, and ability to introduce new products in a timely and cost-effective manner will be important factors in maintaining our competitive position.
We expect increased competition in the future from emerging or established companies, customers or other third parties, any of which could acquire significant market share. See “Risk Factors — Because the markets in which we operate are highly competitive and many of our competitors have greater resources than we have, we cannot be certain that our products will compete favorably in the marketplace” in Item 3 above.
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Seasonality
See “Risk Factors — Our results of operations are subject to substantial quarterly and annual fluctuations due to several factors that could adversely affect our business and the price of our ADSs,” “Risk Factors — We are subject to the cyclical nature of the semiconductor industry, which has been subject to significant fluctuations,” and “Risk Factors — NAND industry cyclicality could adversely affect our growth and profitability” in Item 3 above and “Operating and Financial Review and Prospects — Principal Factors Affecting Our Results of Operations” in Item 5 below.
Intellectual Property
Our success and future revenue growth depend, in part, on our ability to protect our intellectual property. We rely on a portfolio of intellectual property rights, registered in the United States, Taiwan, and other countries, including patents, copyrights and trademark registrations, trade secret laws, contractual provisions, licenses, and other methods to protect our intellectual property.
As of April 7, 2026, we have 3,276 patents and 1,035 pending applications worldwide. There can be no assurance that patents will ever be issued with respect to these pending applications. Furthermore, it is possible that any patents held by us may be invalidated, circumvented, challenged or licensed to others. In addition, there can be no assurance that such patents will provide us with competitive advantages or adequately safeguard our proprietary rights. While we continue to file new patent applications with respect to our recent developments, existing patents are granted for prescribed time periods and will expire at various times in the future. We expect to continue to file patent applications where appropriate to protect our proprietary technologies.
Companies in the semiconductor industry have frequently demonstrated a readiness to commence litigation based on allegations of patent and other intellectual property infringement. From time to time, third parties may assert infringement claims against us. We may not prevail in any such litigation or may not be able to license patents from third parties on commercially reasonable terms, if at all. Litigation, regardless of the outcome, is likely to result in substantial cost and diversion of our resources, including our management’s time. Any such litigation could materially adversely affect us. In addition, in the contracts under which we sell semiconductor products, we may have agreed to indemnify our customers against losses arising out of claims of unauthorized use of intellectual property.
We intend to protect our intellectual property rights vigorously, but there can be no assurance that our efforts will be successful. In addition, the laws of other countries in which our products are sold may not protect our products and intellectual property rights to the same extent as the laws of the United States.
We claim copyright and trademark protection for proprietary documentation for our products and a variety of branding marks, respectively. We have registered “Silicon Motion” and its logo (a three-dimensional cube depiction of the letters “SM”), “NANDSustain,” “NANDXtend,” “SSDLifeGuard,” “SSDLifeSaver,” “TurboMLC,” “FerriSSD,” “Ferri-eMMC,” “Ferri-UFS,” the Ferri logo, the powered by SiliconMotion logo, “InstantView,” “MonTitan,” the MonTitan logo, the Shannon Systems logo, “PCIe-RAID,” “Bigtera,” the Bigtera logo, “VirtualStor,” “CloudStor,” and “StorVisor” as trademarks in the United States, Taiwan and/or other countries.
We also attempt to protect our trade secrets and other proprietary information through agreements with our customers, suppliers, employees and consultants and other customary security measures.
We have entered into license agreements with third-party intellectual property vendors for wafer fabrication tool libraries, semiconductor IP core, computer aided design tools and software.
Facilities
As of the date of this annual report, we occupy facilities totaling approximately 753,200 square feet, excluding parking space, which house our management and administration, operations, R&D and sales and
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marketing departments. Of our facilities, approximately 565,200 square feet are owned and approximately 188,000 square feet are occupied under leases. In February 2021, the Company won a bid with a third party to build an office building in Taipei, Taiwan and executed a property development agreement in May 2021. We received the construction license in September 2025. In April 2026, the Company broke ground at this site and began construction work. We expect to complete construction of the building by the end of 2029. Following its completion, we will have approximately 107,870 square feet of office building space and 10,833 square feet of land. See “Risk Factor — We are subject to risks associated with the development and construction of our office buildings” in Item 3 above. As of the date of this annual report, the table below lists the location of our operating facilities.
| Location |
Primary Use |
Approximate Square Footage | ||
| Hsinchu, Taiwan |
R&D, management & administration | 182,400 | ||
| Hsinchu, Taiwan |
Office building (Office) | 391,800 | ||
| Taipei, Taiwan |
R&D, sales & marketing | 116,900 | ||
| Shanghai, China |
R&D, sales & marketing | 21,700 | ||
| Shenzhen, China |
Sales & marketing | 18,400 | ||
| Milpitas, California |
Sales & marketing, management | 13,300 | ||
| Others (1) |
Sales & marketing, management | 8,700 |
| (1) | Korea; Macau; Hong Kong; Yokohama, Japan; and Beijing, China |
Leases covering our current facilities expire at varying dates, generally within the next five years. We anticipate no difficulty in retaining occupancy through lease renewals, month-to-month occupancy or replacing the leased facilities with equivalent facilities. As of December 31, 2025, lease obligations covering our current facilities totaled US$14.1 million, of which US$2.6 million were short-term.
Government Regulation
See “Risk Factors — Our business is subject to various governmental regulations, and compliance with these regulations may cause us to incur significant expense” in Item 3 above.
| ITEM 4A. | UNRESOLVED STAFF COMMENTS |
None.
| ITEM 5. | OPERATING AND FINANCIAL REVIEW AND PROSPECTS |
The following discussion of our financial condition and results of operations is based upon and should be read in conjunction with our consolidated financial statements and the related notes included in this annual report. This discussion may contain forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under the caption “Risk Factors” included in Item 3 of this annual report. See “Special Note Regarding Forward-Looking Statements.”
Overview
We are a global leader in developing NAND flash controllers for SSDs and other solid state storage devices. We have over 20 years of experience developing specialized processor ICs that manage NAND components and deliver market leading, high-performance storage solutions widely used in enterprise and hyperscale data centers, PCs, smartphones and commercial and industrial applications. We have one of the broadest portfolios of controller intellectual property developed from our deep understanding of NAND characteristics, which enables us to design both unique, highly optimized configurable IC plus related firmware controller platforms and
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complete turnkey controller solutions. In the last 10 years, we have shipped over six billion NAND flash controllers. More NAND flash components, including current and up-coming generations of flash produced by Kioxia, Micron, Samsung, SK Hynix (and its subsidiary Solidigm), Sandisk and YMTC, are supported by Silicon Motion controllers than any other company. Our customers include NAND flash makers, module makers, hyperscalers and OEMs.
We are a leading supplier of SSD controllers used in PCs and other client devices and leading merchant supplier of eMMC/UFS controllers used in smartphones and IoT devices and increasingly into enterprise and data center storage solutions. We also leverage our controller expertise to supply specialized small single-chip form factor SSDs for industrial, commercial and automotive applications. We market our PC and eMMC/UFS controllers under the “SMI” brand, our enterprise controllers under the “MonTitan” brand and single-chip SSDs under the “FerriSSD,” “Ferri-eMMC,” and “Ferri-UFS” brands.
Summary of Consolidated Financial Results
Summary of the year ended December 31, 2025 is as follows:
| • | Total revenue increased by 10% to US$885.6 million from US$803.6 million in the prior year. |
| • | Gross profit as a percentage of revenue increased by 2.4% points to 48.3% from 45.9% in the prior year. |
| • | Total operating expenses increased by 20.4% to US$334.5 million from US$277.9 million in the prior year. |
| • | Operating profit increased by 2.4% to US$93.0 million from US$90.9 million in the prior year. |
| • | Income tax expense as a percentage of income before income tax decreased to 12.5% from 16.9% in the prior year. |
| • | Diluted earnings per ADS increased by 37.6% to US$3.64 from US$2.65 in the prior year. |
Principal Factors Affecting Our Results of Operations
Net sales. Our net sales consist primarily of sales of our products, after deducting sales discounts and allowances for returns.
Our net sales are denominated primarily in U.S. dollars. The percentages of our net sales by currency for the periods indicated are set forth in the following table:
| Year Ended December 31, | ||||||||||||
| 2023 | 2024 | 2025 | ||||||||||
| Currency |
||||||||||||
| U.S. dollars |
98 | % | 99 | % | 100 | % | ||||||
| Chinese yuan |
2 | % | 1 | % | — | |||||||
The length of our sales cycle, from the day purchase orders are received until products are shipped to customers, is dependent on the availability of our product inventories as well as NAND flash components for our SSD solutions products. If we do not have sufficient inventories on hand to meet customer demands, approximately three months are generally required from the day purchase orders are received until finished goods are manufactured and shipped to customers. This cycle can take up to six months during times when capacity at independent foundries is being fully utilized. The potential delays inherent in the manufacturing process increase the risk that we may not be able to fulfill a customer’s order on time. All our sales are made by purchase orders. Because our practice, which is consistent with industry practice, allows customers to reschedule orders on relatively short notice, order backlog may not be a good indicator of our future sales.
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Because most of our semiconductor solutions are designed for the mobile and computing devices markets, we expect our business to be subject to seasonality, with higher net sales generally in the second half of each year, when customers place orders to meet increased demand during year-end holiday seasons. However, changing market and business conditions, including foundry wafer supply shortages, as well as changing product mix in recent years could make future assessments of the impact of seasonal factors on our business difficult.
Cost of sales. Our cost of sales consists primarily of the following costs:
| • | cost of wafer fabrication; |
| • | assembly, testing and shipping costs of our semiconductors; |
| • | personnel and equipment costs associated with manufacturing support; |
| • | quality assurance; |
| • | cost of raw materials, including NAND flash component for certain products; and |
| • | write-down of inventory. |
We engage independent foundries for the manufacturing and subcontractors for the assembly and testing of our semiconductors. Our manufacturing cost is subject to the cyclical supply and demand conditions typical of the semiconductor industry. Our cost per wafer generally fluctuates with the availability of capacity at independent foundries. We believe that our cost of sales is substantially variable in nature.
Research and development expenses. Our R&D expenses consist primarily of employee salaries and related costs, stock-based compensation, tape-out and related project expenses and intellectual property and software licensing costs. We expense R&D expenditures as they are incurred.
Sales and marketing expenses. Our sales and marketing expenses consist primarily of employee salaries and related costs, stock-based compensation expense, commissions paid to independent distributors and costs for our advertising and promotional activities.
General and administrative expenses. Our general and administrative expenses consist primarily of employee salaries and related costs, stock-based compensation expense, insurance premiums, professional fees and allowance for doubtful accounts.
Accounting for stock-based compensation. We grant restricted stock units to our employees and members of our board of directors. The value of our restricted stock units is expensed over the vesting period and based on the grant date share price, less the present value of expected dividends during the vesting period, discounted at a risk-free interest rate.
Non-operating income and expenses. Our non-operating income and expenses include unrealized holding gain on investment, interest from deposited cash, gains or losses on foreign exchange rates, disposal of investment and other non-operating income and expenses not categorized above. We conduct an assessment on the value of our long-term investments quarterly and make corresponding write-downs as required to the value of the long- term investments.
Provision for income taxes. We must make certain estimates and judgments in determining income tax expenses for financial statement purposes. These estimates and judgments occur in the calculation of tax credits, benefits, deductions and allowance, and in the calculation of certain tax assets and liabilities, which arise from differences in the timing of recognition of revenue and expense for tax and financial statement purposes, as well as the interest and penalties related to uncertain tax positions.
We have operations in several countries, which include Taiwan, China, Hong Kong, Macau and the United States and determine income taxes for each of the jurisdictions where we operate.
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Critical Accounting Estimates
Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with U.S. GAAP.
The preparation of our consolidated financial statements requires us to make estimates and judgments that affect the reported amount of assets, liabilities, net sales and expenses, and related disclosure of contingent assets and liabilities. We base our estimates and judgments on our historical experience, knowledge of current conditions and our beliefs of what could occur in the future considering available information. Because our estimates may vary in each situation, our actual results may differ from our estimates under different assumptions and conditions.
Our management considers the following factors in reviewing our consolidated financial statements:
| • | the selection of critical accounting policies; and |
| • | the judgments and other uncertainties affecting the application of those critical accounting policies. |
The use of accounting estimates, the judgments and other uncertainties affecting the application of such estimates and the sensitivity of reported results to changes in conditions and assumptions are factors to be considered when reviewing our consolidated financial statements. See Note 2—Summary of Significant Accounting Policies to our consolidated financial statements for the disclosure of those accounting estimates.
Critical accounting estimates are defined as those accounting estimates made in accordance with U.S. GAAP that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our financial condition or results of operations. We believe the following are our critical accounting estimates:
Inventory valuation. We value inventories at the lower of cost or net realizable value for raw materials, work-in-process and finished goods. Inventories are recorded at standard cost and adjusted to the approximate weighted-average cost at the balance sheet date. We assess net realizable value of the inventory for estimated obsolescence or unmarketable inventory based upon management’s assumptions about future demand and market conditions. In estimating reserves for obsolescence, we primarily evaluate estimates based on the timing of the introduction of new products and the quantities remaining of old products and provide reserves for inventory on hand in excess of the estimated demand. Estimated losses on slow-moving items are recognized and included in the allowance for losses. We wrote down US$7.9 million, US$6.1 million and US$1.4 million in 2023, 2024 and 2025, respectively, for estimated obsolete or unmarketable inventory, with write-downs in 2023, 2024 and 2025 primarily related to the value of NAND components and SSDs in inventory affected by rapidly falling NAND prices and the restructuring of our underperforming product lines.
We have not made any material changes in the accounting methodology used to evaluate obsolescence or unmarketable inventory during the last three fiscal years. However, if actual results are not consistent with our estimates and assumptions used to calculate inventory write-downs, we may be exposed to inventory write- downs that could be material. If we have experienced significant industry fluctuations, maturing product cycles and new product introductions of both semiconductor companies’ and their customers’ products and fluctuations in general economic conditions, we may be exposed to future obsolescence or unmarketable inventory.
Accounting for income taxes. In preparing our consolidated financial statements, we are required to estimate our income taxes in each of the jurisdictions in which we operate. We are tax residents in numerous taxing jurisdictions around the world and have identified our major tax jurisdictions as Taiwan, Hong Kong, Macau and China with statutory tax rates of 20%, 16.5%, 12% and 25%, respectively, and estimate our actual current tax exposure together with assessed temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included within our
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consolidated balance sheet. We must then assess the likelihood that our deferred tax assets will be recovered from future taxable income within the relevant jurisdiction and, to the extent we believe that recovery is not likely, we must establish a valuation allowance. The total amount of valuation allowance as of December 31, 2023, 2024 and 2025 was US$23.1 million, US$27.8 million and US$31.4 million, respectively. We provide for a valuation allowance to the extent we believe that it is more likely than not that the deferred tax assets will not be recovered from future taxable income. Realization of future tax benefits related to the deferred tax assets is dependent on many factors, including our ability to generate taxable income within the period during which the temporary differences reverse, the outlook for the economic environment in which we operate, and the overall future industry outlook. Should we determine that we would not be able to realize all or part of our net deferred tax asset in the future, an additional allowance for the deferred tax asset would be charged to income in the period the determination was made.
We utilize a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon ultimate settlement. The total amount of unrecognized tax benefits as of December 31, 2023, 2024 and 2025 was US$43.8 million, US$43.6 million and US$35.3 million, respectively. As of December 31, 2024 and 2025, US$6.8 million and US$6.3 million, respectively, of interest and penalties were accrued. Fiscal years 2020 through 2025 remain subject to examination by the U.S. Internal Revenue Service and other foreign tax jurisdictions. The ultimate outcome of tax matters may differ from our estimates and assumptions. Unfavorable settlement of any particular issue would require the use of cash and could result in increased income tax expense. Favorable resolution could result in reduced income tax expense. Within the next 12 months, we do not expect that our unrecognized tax benefits would change significantly. See Note 11 to our consolidated financial statements for further information regarding changes in unrecognized tax benefits during 2025.
Legal Contingencies. From time to time, we are involved in legal actions or other third-party assertions arising in the ordinary course of business. There can be no assurance these actions or other third-party assertions will be resolved without costly litigation, in a manner that does not adversely impact our financial position, results of operations or cash flows or without requiring royalty payments in the future, which may adversely impact gross margins. We record a liability when it is probable that a loss has been incurred and the amount can be reasonably estimated. In determining the probability of a loss and consequently, determining a reasonable estimate, management is required to use significant judgment. Given the uncertainties associated with any litigation, the actual outcome can be different than our estimates and could adversely affect our results of operations, financial position and cash flows. See “Item 8. Legal Proceedings”.
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Results of Operations
The following table sets forth our statements of operations as a percentage of net sales for the periods indicated:
| Year Ended December 31, | ||||||||||||
| 2023 | 2024 | 2025 | ||||||||||
| Net sales |
100.0 | % | 100.0 | % | 100.0 | % | ||||||
| Cost of sales |
57.7 | 54.1 | 51.7 | |||||||||
|
|
|
|
|
|
|
|||||||
| Gross profit |
42.3 | 45.9 | 48.3 | |||||||||
|
|
|
|
|
|
|
|||||||
| Operating expenses: |
||||||||||||
| Research and development |
27.3 | 27.1 | 29.7 | |||||||||
| Sales and marketing |
4.2 | 3.4 | 3.9 | |||||||||
| General and administrative |
4.4 | 3.9 | 4.2 | |||||||||
| Loss from settlement of litigation |
0.2 | 0.2 | — | |||||||||
|
|
|
|
|
|
|
|||||||
| Total operating expenses |
36.1 | 34.6 | 37.8 | |||||||||
|
|
|
|
|
|
|
|||||||
| Operating income |
6.2 | 11.3 | 10.5 | |||||||||
|
|
|
|
|
|
|
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| Non-operating income (expenses): |
||||||||||||
| Unrealized holding gain on investments |
1.3 | 0.1 | 2.1 | |||||||||
| Gain on sale of investments |
0.0 | 0.0 | 2.3 | |||||||||
| Interest income |
1.9 | 1.8 | 1.1 | |||||||||
| Foreign exchange gain (loss), net |
0.1 | 0.2 | (0.2 | ) | ||||||||
| Other income, net |
0.0 | 0.0 | 0.0 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total non-operating income (expenses) |
3.3 | 2.1 | 5.3 | |||||||||
|
|
|
|
|
|
|
|||||||
| Income before income taxes |
9.5 | 13.4 | 15.8 | |||||||||
| Income tax expense |
1.3 | 2.3 | 2.0 | |||||||||
|
|
|
|
|
|
|
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| Net income |
8.2 | % | 11.1 | % | 13.8 | % | ||||||
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Comparison of Year Ended December 31, 2025 to Year Ended December 31, 2024
Net sales.
| Years Ended December 31 | ||||||||||||||||||||||||
| 2024 | 2025 | |||||||||||||||||||||||
| US$ | % of net sales | US$ | % of net sales | US$ change | % change | |||||||||||||||||||
| (in thousands, except percentage data) | ||||||||||||||||||||||||
| Net sales |
||||||||||||||||||||||||
| Mobile Storage |
796,365 | 99 | 877,195 | 99 | 80,830 | 10 | ||||||||||||||||||
| Others |
7,187 | 1 | 8,432 | 1 | 1,245 | 17 | ||||||||||||||||||
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|
|
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| Net sales |
803,552 | 100 | 885,627 | 100 | 82,075 | 10 | ||||||||||||||||||
In 2025, our net sales increased by 10% year-over-year to approximately US$885.6 million, primarily due to the continuing new products and new customers ramp and increase in market share with NAND makers, module makers and OEM customers. Our mobile storage revenue increased by 10% year-over-year primarily because of an increase in sales of eMMC and UFS controllers, partially offset by a decline in sales of SSD controllers and SSD solutions. Our SSD controller sales decreased in the range of 0% to 5% year-over-year to account for 45% to 50% of revenue, a lower percentage of net sales than the prior year, eMMC plus UFS controller sales increased in the range of 20% to 25% year-over-year to account for 40% to 45% of revenue, a higher percentage of net sales than the prior year, and SSD solutions sales decreased in the range of 10% to 15% year-over-year to account for 0% to 5% of revenue, a lower percentage of net sales than the prior year.
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Gross profit
| Years Ended December 31 | ||||||||||||||||||||||||
| 2024 | 2025 | |||||||||||||||||||||||
| US$ | % of net sales | US$ | % of net sales | US$ change | % change | |||||||||||||||||||
| (in thousands, except percentage data) | ||||||||||||||||||||||||
| Gross profit |
368,765 | 46 | 427,509 | 48 | 58,744 | 16 | ||||||||||||||||||
Gross profit as a percentage of net sales increased to 48% in 2025 as compared to 46% in 2024 primarily because of new projects and our ability to efficiently scale new products. Our gross profit, excluding obsolete and unmarketable inventory write-downs, as a percentage of revenue increased from 47% in 2024 to 48% in 2025.
Research and development expenses
| Years Ended December 31 | ||||||||||||||||||||||||
| 2024 | 2025 | |||||||||||||||||||||||
| US$ | % of net sales | US$ | % of net sales | US$ change | % change | |||||||||||||||||||
| (in thousands, except percentage data) | ||||||||||||||||||||||||
| Salary and benefits |
107,248 | 14 | 142,161 | 16 | 34,913 | 33 | ||||||||||||||||||
| Stock-based compensation |
11,284 | 1 | 17,874 | 2 | 6,590 | 58 | ||||||||||||||||||
| Other research and development |
99,290 | 12 | 102,683 | 12 | 3,393 | 3 | ||||||||||||||||||
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| Research and development |
217,822 | 27 | 262,718 | 30 | 44,896 | 21 | ||||||||||||||||||
Our R&D expenses increased by 21% year-over-year to approximately US$262.7 million in 2025 primarily due to investing heavily in next generation solutions and significant employee additions. Salary and benefits increased by 33% year-over-year to approximately US$142.2 million in 2025 primarily because of expanded headcounts. Stock-based compensation increased by 58% year-over-year to approximately US$17.9 million. Other R&D expenses increased by 3% year-over-year to approximately US$102.7 million in 2025.
Sales and marketing expenses
| Years Ended December 31 | ||||||||||||||||||||||||
| 2024 | 2025 | |||||||||||||||||||||||
| US$ | % of net sales | US$ | % of net sales | US$ change | % change | |||||||||||||||||||
| (in thousands, except percentage data) | ||||||||||||||||||||||||
| Salary and benefits |
16,647 | 2 | 19,760 | 2 | 3,113 | 19 | ||||||||||||||||||
| Stock-based compensation |
1,954 | — | 3,428 | — | 1,474 | 75 | ||||||||||||||||||
| Other sales and marketing |
8,849 | 1 | 11,195 | 2 | 2,346 | 27 | ||||||||||||||||||
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| Sales and marketing |
27,450 | 3 | 34,383 | 4 | 6,933 | 25 | ||||||||||||||||||
Our sales and marketing expenses increased by 25% year-over-year to approximately US$34.4 million in 2025. Salary and benefits increased by 19% year-over-year to approximately US$19.8 million in 2025. Stock- based compensation increased by 75% year-over-year to approximately US$3.4 million in 2025. Other sales and marketing expenses increased by 27% year-over-year to approximately US$11.2 million.
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General and administrative expenses
| Years Ended December 31 | ||||||||||||||||||||||||
| 2024 | 2025 | |||||||||||||||||||||||
| US$ | % of net sales | US$ | % of net sales | US$ change | % change | |||||||||||||||||||
| (in thousands, except percentage data) | ||||||||||||||||||||||||
| Salary and benefits |
11,215 | 2 | 12,090 | 1 | 875 | 8 | ||||||||||||||||||
| Stock-based compensation |
3,407 | — | 4,570 | — | 1,163 | 34 | ||||||||||||||||||
| Other general and administrative |
16,732 | 2 | 20,711 | 3 | 3,979 | 24 | ||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| General and administrative |
31,354 | 4 | 37,371 | 4 | 6,017 | 19 | ||||||||||||||||||
Our general and administrative expenses increased by 19% year-over-year to approximately US$37.4 million in 2025. Salary and benefits increased by 8% year-over-year to approximately US$12.1 million in 2025. Stock-based compensation increased by 34% year-over-year to approximately US$4.6 million in 2025. Other general and administrative expenses increased by 24% year-over-year to approximately US$20.7 million in 2025, primarily because of legal, financial advisory and other fees related to dispute expenses in connection with arbitration of the terminated Merger Agreement.
Stock-based compensation
The following table presents details of total stock-based compensation that is included in each functional line item in our consolidated statements of income:
| Years Ended December 31 | ||||||||||||||||||||||||
| 2024 | 2025 | |||||||||||||||||||||||
| US$ | % of net sales | US$ | % of net sales | US$ change | % change | |||||||||||||||||||
| (in thousands, except percentage data) | ||||||||||||||||||||||||
| Cost of sales |
311 | — | 411 | — | 100 | 32 | ||||||||||||||||||
| Research and development |
11,284 | 1 | 17,874 | 2 | 6,590 | 58 | ||||||||||||||||||
| Sales and marketing |
1,954 | — | 3,428 | — | 1,474 | 75 | ||||||||||||||||||
| General and administrative |
3,407 | — | 4,570 | — | 1,163 | 34 | ||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total stock-based compensation |
16,956 | 1 | 26,283 | 2 | 9,327 | 55 | ||||||||||||||||||
See Note 13 to our consolidated financial statements for a discussion of activity related to stock-based awards.
Loss from settlement of litigation. We accrued US$1,250 thousand to settle legal litigations in 2024.
Unrealized holding gain on investment. We recognized a gain of US$0.5 million and US$18.4 million for the net change in fair value of the investments in equity securities in 2024 and 2025, respectively.
Gain from disposal of long-term investment. We recognized a gain from disposal of BIWIN of US$58 thousand and Kinara of US$21.1 million in 2024 and 2025, respectively.
Interest income. Our interest income decreased to approximately US$9.7 million for the year ended December 31, 2025 from approximately US$14.5 million for the year ended December 31, 2024 due to less interest rates.
Foreign exchange gain (loss), net. For the year ended December 31, 2025, we realized a foreign exchange loss of US$2.1 million, compared with a gain of US$1.4 million for the year ended December 31, 2024. We do not engage in any hedging activities.
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Income tax expense. Income tax expense was approximately US$17.5 million for the year ended December 31, 2025 compared to an income tax expense of approximately US$18.2 million for the year ended December 31, 2024.
Net income. Net income was approximately US$122.6 million for the year ended December 31, 2025 compared to a net income of approximately US$89.2 million for the year ended December 31, 2024.
Comparison of Year Ended December 31, 2024 to Year Ended December 31, 2023
For the discussion covering the comparison between the years ended December 31, 2024 and 2023, please refer to “Item 5” of our annual report on Form 20-F for the year ended December 31, 2024 filed with the SEC on April 30, 2025.
Liquidity and Capital Resources
As of December 31, 2025, we had approximately US$201.8 million in cash and cash equivalents, a decrease of US$74.2 million from December 31, 2024. We maintain our cash balances in bank deposits and in money market instruments. We do not engage in any currency hedging activities.
We believe the cash we expect to generate from operating activities will be sufficient to meet our anticipated working capital needs, capital expenditures, and other commitments for at least the next 12 months and into the foreseeable future. Our future capital requirements will depend on many factors, including the level of our net sales, the increasing procurement of NAND to service customer demand for our SSD solutions products, the timing and extent of spending to support product development efforts, the expansion of sales and marketing activities, the timing of introductions of new products, the costs to ensure access to adequate manufacturing capacity, the continuing market acceptance of our products, and construction of our Taipei office buildings. We could be required, or could elect, to seek additional funding through public or private equity or debt financing, and additional funds may not be available on terms acceptable to us or at all.
The following table sets forth a summary of our cash flows for the periods indicated:
| Year Ended December 31, | ||||||||||||
| 2023 | 2024 | 2025 | ||||||||||
| US$ | US$ | US$ | ||||||||||
| (in thousands) | ||||||||||||
| Consolidated Cash Flow Data: |
||||||||||||
| Net cash provided by operating activities |
149,083 | 77,095 | 61,360 | |||||||||
| Net cash used in investing activities |
(49,085 | ) | (44,089 | ) | (27,403 | ) | ||||||
| Net cash used in financing activities |
(16,690 | ) | (67,255 | ) | (91,512 | ) | ||||||
| Depreciation and amortization |
21,810 | 25,331 | 30,174 | |||||||||
| Capital expenditures |
(50,313 | ) | (44,351 | ) | (55,065 | ) | ||||||
Operating activities
Our net cash provided by operating activities was approximately US$61.4 million for the year ended December 31, 2025, compared to net cash provided by operating activities of approximately US$77.1 million and US$149.1 million during 2024 and 2023, respectively.
For the year ended December 31, 2025, cash flows provided by operations of US$61.4 million resulted primarily from our net income of US$122.6 million and the following reasons:
| • | Our net income includes substantial non-cash charges, namely US$30.2 million of depreciation and amortization and US$26.3 million of stock-based compensation. |
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| • | Net working capital increased by US$78.2 million. Inventories increased by US$215.2 million, notes and accounts receivable decreased by US$22.2 million, notes and accounts payable increased by US$17.0 million, income tax payable increased by US$9.3 million, and other assets net of other liabilities provided US$88.5 million of cash. |
For the year ended December 31, 2024, cash flow provided by operations of US$77.1 million resulted primarily from our net income of US$89.2 million and the following reasons:
| • | Our net income includes substantial non-cash charges, namely US$25.3 million of depreciation and amortization and US$17.0 million of stock-based compensation. |
| • | Net working capital increased by US$53.2 million. Inventories decreased by US$4.9 million, notes and accounts receivable increased by US$39.0 million, notes and accounts payable decreased by US$37.8 million, income tax payable increased by US$5.6 million, and other assets net of other liabilities provided US$13.1 million of cash. |
Investing activities
Our net cash used in investing activities was approximately US$27.4 million for the year ended December 31, 2025, compared to net cash used in investing activities of approximately US$44.1 million for the year ended December 31, 2024. In 2025, we paid US$33.8 million for the routine purchase of software, design tools and other items, and US$21.3 million for building construction in Hsinchu and received US$27.6 million for the disposal of Kinara.
Our net cash used in investing activities was approximately US$44.1 million for the year ended
December 31, 2024, compared to net cash used in investing activities of approximately US$49.1 million for the year ended December 31, 2023. In 2024, we paid US$28.0 million for the routine purchase of software, design tools and other items, and US$16.3 million for building construction in Hsinchu.
Financing activities
Our net cash used in financing activities was approximately US$91.5 million for the year ended December 31, 2025, compared to net cash used in financing activities of approximately US$67.3 million for the year ended December 31, 2024. Our cash used in financing activities in 2025 consists primarily of US$67.2 million of dividend payments and US$24.3 million for share repurchases.
Our net cash used in financing activities was approximately US$67.3 million for the year ended December 31, 2024, compared to net cash used in financing activities of approximately US$16.7 million for the year ended December 31, 2023. Our cash used in financing activities in 2024 consists primarily of US$67.3 million of dividend payments.
Capital Return to Shareholders
Dividend. On October 28, 2024 and October 27, 2025, we announced an annual cash dividend of US$2.00 per ADS to be paid in four quarterly installments of US$0.50 per ADS, we paid US$67.3 million and US$67.2 million to shareholders in 2024 and 2025, respectively.
The declaration and payment of future cash dividends is subject to our board of directors’ continuing discretion and determination that the payment of dividends is in the best interests of our shareholders and is in compliance with all laws and agreements applicable to the declaration and payment of cash dividends.
Share Repurchase. On February 6, 2025, our board of directors authorized a share repurchase program to repurchase up to US$50 million of our ADSs over a 6-month period. In the year ended December 31, 2025, we repurchased approximately 426 thousand ADSs for US$24.3 million at an average price of US$57.04 per ADS.
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Share repurchases are made in the open market or according to other methods in compliance with SEC Rule 10b-18 under the Exchange Act, subject to market conditions, applicable legal requirements and other factors. Share repurchase plans announced do not obligate us to acquire any particular amount of ADSs and may be suspended at any time at our discretion.
Cash Requirements
Our material cash requirements include the following contractual and other obligations:
Operating Leases. Operating lease obligations represent the undiscounted remaining lease payments primarily for our leased property and equipment, see Note 14 to our consolidated financial statements. As of December 31, 2025, these obligations totaled US$14.1 million, of which US$2.6 million was short-term.
Office Building Construction. In September 2018, the Company paid US$58.9 million to acquire land in Hsinchu, Taiwan intended for its future Taiwan headquarters building. Construction began in January 2021, and as of December 31, 2025, the project, with a capitalized cost of US$67.0 million, completed in 2025. In addition, we won a bid with a third party to build an office building in Taipei, and we entered into a property development agreement in May 2021. We received the construction license in September 2025 and the development cost is expected to be approximately US$101 million. We expect to complete construction of the building by the end of 2029.
Tax Liability. Tax liability represents the provision for income tax and uncertain tax position recognized, see Note 11 to our consolidated financial statements. As of December 31, 2025, short-term taxes liabilities totaled US$22.4 million. We decreased long-term taxes liabilities of US$8.3 million related to uncertain tax positions as of December 31, 2025. At this time, we are unable to make a reasonably reliable estimate of the timing of payments in individual years beyond 12 months due to uncertainties in the timing and outcome of a potential tax audit.
Recent Accounting Pronouncements
Please refer to Note 2 to the consolidated financial statements.
| ITEM 6. | DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES |
Directors and Senior Management
Members of our board of directors are elected by our shareholders. Our board of directors consists of nine directors. Members of our senior management are appointed by, and serve at the discretion of, our board of directors. The following table sets forth information regarding our directors and senior management members as of the date of this annual report.
| Name |
Age | Position | ||||
| James Chow |
75 | Chairman of the Board | ||||
| Wallace C. Kou |
67 | President, Chief Executive Officer and Managing Director | ||||
| Steve Chen |
54 | Director | ||||
| Tsung-Ming Chung |
76 | Director | ||||
| Lien-Chun Liu |
68 | Director | ||||
| Han-Ping D. Shieh |
72 | Director | ||||
| Kenneth Kuan-Ming Lin |
73 | Director | ||||
| Cain Lin |
64 | Director | ||||
| Jason Tsai |
53 | Chief Financial Officer | ||||
| Nelson Duann |
57 | Senior VP of Client & Automotive Storage Business and Director | ||||
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Senior Management Members and Directors
James Chow, Chairman of the Board of Directors
Mr. Chow has served as the Chairman of our board of directors since April 2005. Mr. Chow has been the Chairman of Concord Financial Co., Ltd. since 1993. Concord Financial Co., Ltd. is an investment holding company. Mr. Chow has an MBA from Columbia University.
Wallace C. Kou, President, Chief Executive Officer, Managing Director
Mr. Kou founded Silicon Motion in 1995 and has been our President and Chief Executive Officer since our founding. Prior to founding Silicon Motion, Mr. Kou was the Vice President and Chief Architect at the Multimedia Products Division of Western Digital Corporation, which developed graphics processors for notebook PCs and was sold to Philips Semiconductor in 1995. Before Western Digital, Mr. Kou worked for Wyse Technology. Mr. Kou has a BS in Electrical & Control Engineering from the National Chiao Tung University in Taiwan and an MS in Electrical & Computer Engineering from the University of California at Santa Barbara.
Steve Chen, Director
Mr. Chen joined our board of directors in 2012. Mr. Chen is the chairman of Mercuries Co., Ltd. Mr. Chen has dual M. Eng. from Cornell University.
Tsung-Ming Chung, Director
Mr. Chung joined our board of directors in June 2005. Mr. Chung is currently the Chairman of Dynapack International Technology Corp., a leading provider of battery packs for notebook PCs, tablets, and battery backup units (BBUs) for data centers. From 1985 to 2000, Mr. Chung was an audit partner at Arthur Andersen. He also serves as a director of Far East International Bank and previously served as a director of Fubon Hyundai Life Insurance Corporation until March 2024. Mr. Chung has a BA in Business Administration from the National Taiwan University and an MBA from the National Cheng-chi University in Taiwan.
Lien-Chun Liu, Director
Ms. Liu joined our board of directors in June 2005. She serves on the board of the International Council of Women, on the board of supervisors of Concord VIII Venture Capital Co., Ltd. and on the board of directors of New Tamsui Golf Course. She was formerly a research fellow at the Taiwan Research Institute and served on the board of supervisors of China Television Corp. from 2000 to 2004. Ms. Liu has a BA from Wellesley College and a JD from Boston College Law School.
Han-Ping D. Shieh, Director
Mr. Shieh joined our board of directors in 2014. He is Life Chair Professor at National Yang MingChiao Tung University (NYCU) in Taiwan, a life fellow of the IEEE, a fellow of Optical Society of America (OSA) and the Society for Information Display (SID), and a board member of Dynapack International Tech. Corp., and Focal Tech Inc. Mr. Shieh received his Ph D in Electrical and Computer Engineering from Carnegie Mellon University in 1987. He joined National Chiao Tung University (NCTU) as a professor in 1992 and was previously a Research Staff Member at the IBM Thomas J. Watson Research Center. He was the Dean of the College of Electrical and Computer Engineering and a Senior Vice President of NCTU and a Vice Chancellor of the University System of Taiwan.
Kenneth Kuan-Ming Lin, Director
Mr. Lin joined our board of directors in September 2018. Mr. Lin was previously a director on our board from 2009 to 2014. Mr. Lin is the Chairman of Premier Capital Management Corp., and Ruby Tech Corp., the
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Chief Executive Officer of SINOCON Industrial Standards Foundation and Deputy Secretary-General of Cross-Strait CEO Summit. He was previously the Chairman of Taiwan Venture Capital Association and Taiwan Private Equity Association. Mr. Lin has a BS in Electrical Engineering from the National Taiwan University.
Cain Lin, Director
Mr. Lin joined our board of directors in December 2023. Mr. Lin is the Managing Director of Cedar Capital Inc., and he formerly served on the board of directors of Auras Technology Co., Ltd. Mr. Lin has over 35 years of experience in the semiconductor and venture capital industries in executive-level roles and holds a BA in Electronic Engineering from National Chen Kung University in Taiwan, an MBA from Santa Clara University, and an MS in Electronic Engineering from the University of Florida.
Jason Tsai, Chief Financial Officer
Mr. Tsai joined us as VP of IR and Finance in September 2023, became our interim Chief Financial Officer in April 2024 and was appointed as our Chief Financial Officer in October 2024. He has over 25 years of experience in strategic finance, corporate strategy, investor relations, and Wall Street. His corporate experience spans from software (SaaS) to hardware and semiconductors and prior to rejoining Silicon Motion, Mr. Tsai was Head of IR at Zendesk, Synaptics and Silicon Motion (2008 – 2019) as well as over a decade as a Wall Street equity research analyst. Mr. Tsai holds a BA in Economics and Molecular and Cell Biology from UC Berkeley.
Nelson Duann, Senior VP of Client & Automotive Storage Business and Director
Mr. Duann became our Senior Vice President of Client & Automotive Storage in December 2023, after serving as Senior Vice President of Marketing and R&D for mobile storage since November 2018. In this role, he oversees product planning, major OEM business development and OEM project management for the Company’s client SSD controllers, mobile controllers, Ferri products and expandable controllers. He joined Silicon Motion in August 2007 as a product marketing director and R&D team leader. Having served with Silicon Motion since 2007, Mr. Duann has nearly 25 years of experience in product design, development, and marketing in the semiconductor industry. Mr. Duann was most recently leading Silicon Motion’s marketing and R&D efforts and has played a key role in leading the company’s OEM business for mobile storage and SSD controller solutions, helping to introduce these products and growing them into the market leaders in these markets today. Prior to Silicon Motion, he worked for Sun Microsystems focusing on UltraSPARC microprocessor projects. Mr. Duann has an MS in Communications Engineering from National Chiao Tung University in Taiwan and an MS in Electrical Engineering from Stanford University.
There is no arrangement or understanding with major shareholders, customers, suppliers or others pursuant to which any person referred to above was selected as a director or member of senior management. There are no family relationships among any of our directors or senior management members.
Board Practices
Board Committees
Our board of directors has established an audit committee, a compensation committee, and a nominating and corporate governance committee.
Audit Committee. The audit committee is responsible for, including, but is not limited to, reviewing the financial information that will be provided to shareholders and others; reviewing the systems of internal controls that management and the board of directors have established; appointing, retaining and overseeing the performance of independent registered public accounting firms; overseeing our accounting and financial reporting processes, the audits of our consolidated financial statements and the internal control over financial
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reporting; pre-approving audit and permissible non-audit and non-assurance services provided by independent registered public accounting firms; and overseeing cybersecurity risk management. Mr. Tsung-Ming Chung, Ms. Lien-Chun Liu, and Mr. Cain Lin are members of our audit committee. Our board of directors has determined that Mr. Tsung-Ming Chung, the Chairman of the audit committee, is the committee’s “audit committee financial expert” under applicable SEC rules and an independent director under Nasdaq listing standards.
Compensation Committee. The compensation committee is responsible for, including, but is not limited to, reviewing the performance and development of management in achieving corporate goals and objectives and assuring that our senior executives are compensated effectively in a manner consistent with our strategy, competitive practice and the requirements of the appropriate regulatory bodies. The compensation committee also administers the Company’s Incentive-Based Compensation Recovery Policy (the “Clawback Policy”). This committee oversees, reviews and administers all of our compensation, equity and employee benefit plans and programs. Ms. Lien-Chun Liu, Mr. Steve Chen, and Mr. Cain Lin are members of our compensation committee, with Mr. Chen serving as the Chairman of the compensation committee.
Nominating and Corporate Governance Committee. The nominating and corporate governance committee is responsible for, including, but are not limited to, overseeing, reviewing and making periodic recommendations concerning our corporate governance policies, and for recommending to the full board of directors, candidates for election to the board of directors. Ms. Lien-Chun Liu, Mr. Steve Chen, and Mr. Cain Lin are members of our nominating and corporate governance committee, with Ms. Liu serving as the Chairman of the nominating and corporate governance committee.
Our board of directors has adopted a code of conduct and ethics (the “Code of Ethics”), which is applicable to all our directors, officers (which includes members of senior management), and employees. Our Code of Ethics is posted on our website at https://www.siliconmotion.com/company/corporate-citizenship-files/ Silicon_Motion_Code_of_Ethics.pdf.
Duties of Directors
Under Cayman Islands law, our directors have a duty to act honestly, in good faith and with a view to the best interests of our company and for a proper purpose. A director must exercise the skill and care of a reasonably diligent person having both – (a) the general knowledge, skill and experience that may reasonably be expected of a person carrying out the same functions as are carried out by that director in relation to the company (an objective test), and (b) if greater, the general knowledge, skill and experience that that director actually possesses (a subjective test). In fulfilling their duty of care to our company, our directors must ensure compliance with our memorandum and articles of association. Our Company has the right to seek damages if a duty owed by our directors is breached. In certain limited exceptional circumstances, a shareholder may have the right to seek damages in the name of our company if a duty owed by our directors is breached. Our board of directors has all the powers necessary for managing, and for directing and supervising, our business affairs. The functions and powers of our board of directors include, among other things:
| • | convening shareholders’ meetings and reporting its work to shareholders at such meetings; |
| • | implementing shareholders’ resolutions; |
| • | determining our business plans and investment proposals; |
| • | formulating our profit distribution plans and loss recovery plans; |
| • | determining our debt and finance policies and proposals for the increase or decrease in our share capital and the issuance of debentures; |
| • | formulating our major acquisition and disposition plans, and plans for merger, division or dissolution; |
| • | proposing amendments to our amended and restated memorandum and articles of association; and |
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| • | exercising any other powers conferred by the shareholders or under our amended and restated memorandum and articles of association. |
Terms of Directors and Senior Management
Our amended and restated articles of association provide that, at each annual general meeting, one-third of our directors for the time being (or, if their number is not a multiple of three, the number nearest to but not greater than one-third) shall retire from office by rotation provided that the chairman of our board of directors, and/or the managing director of our company shall not, whilst holding such office, be subject to retirement by rotation nor to be taken into account in determining the number of directors to retire.
The directors to retire by rotation shall include any director who wishes to retire and not offer him/herself for re-election. Any further directors to retire shall be those of the other directors subject to retirement by rotation who have been longest in office since their last re-election or appointment so that as between persons who became or were last re-elected directors on the same day those to retire will (unless they otherwise agree among themselves) be determined by lot. Any director appointed pursuant to article 86(2) or appointed by the directors pursuant article 86(3) will not be taken into account in determining which particular directors or the number of directors who are to retire by rotation.
The directors have the power to appoint any person as a director either to fill a casual vacancy on the board of directors or as an addition to the existing board of directors. Any director so appointed shall hold office only until the next following annual general meeting of our company and shall then be eligible for re-election.
Two of our seven directors are currently subject to re-election at our next annual general meeting of shareholders.
Our officers, including members of senior management, are appointed by and serve at the discretion of our board of directors.
Limitation on Liability and Other Indemnification Matters
Cayman Islands law does not limit the extent to which a company’s memorandum and articles of association may provide for indemnification of officers (which includes members of senior management) and directors, except to the extent any such provision may be held by the Cayman Islands courts to be contrary to public policy, such as to provide indemnification against civil fraud or the consequences of committing a crime. Under our amended and restated articles of association, our company is authorized to indemnify its directors, secretary and other officers (which includes members of senior management) for the time being and the liquidator or trustees (if any) for the time being acting in relation to any of the affairs of our Company and everyone of them, and everyone of their heirs, executors and administrators, from and against all actions, costs, charges, losses, damages and expenses which they or any of them, their or any of their heirs, executors or administrators, shall or may incur or sustain by or by reason of any act done, concurred in or omitted in or about the execution of their duty or supposed duty, in their respective offices or trusts provided that any such indemnity shall not extend to any matter in respect of any fraud, dishonesty, willful misconduct or bad faith which may attach to them. Our amended and restated articles of association contains a provision by which its shareholders waive any claim or right of action that they may have, whether individually or by or in the right of our company, against any director on account of any action taken by such director, or the failure of such director to take any action in the performance of his or her duties with or for our company, except in respect of any fraud or dishonesty of such director.
Compensation of Directors and Senior Management
Under Cayman Islands law, we are not required to disclose compensation paid to our senior management on an individual basis and we have not otherwise publicly disclosed this information elsewhere.
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For the year ended December 31, 2025, the aggregate compensation to our directors and senior management members was approximately US$2.71 million. In 2025, under the 2025 Incentive Plan (the “2025 Plan”), we granted restricted stock units to our directors and senior management members as a group to acquire an aggregate of 182,000 ordinary shares. The restricted stock units granted to our senior management members and non-executive directors are subject to the same vesting conditions as those of our employees. As of December 31, 2025, the total amount set aside as an estimate by us to provide pension, retirement or similar benefits to our members of senior management (we do not provide any such benefits to our directors in such capacities) was in the aggregate amount of approximately US$0.19 million.
Service Contracts
We currently do not have service contracts with our directors.
Share-Based Compensation Plan and Option Grants
2015 Incentive Plan
On June 3, 2015, the board of directors adopted the 2015 Plan. The 2015 Plan reserved 20,000,000 ordinary shares for issuance upon exercise of stock options and restricted stock units. The 2015 Plan provides for the grant of stock options, stock bonuses, restricted stock awards, restricted stock units and stock appreciation rights to our employees (including members of senior management), directors and consultants.
2025 Incentive Plan
On June 4, 2025, the board of directors adopted the 2025 Plan. The 2025 Plan reserved 20,000,000 ordinary shares for issuance upon exercise of stock options and restricted stock units. The 2025 Plan provides for the grant of stock options, stock bonuses, restricted stock awards, restricted stock units and stock appreciation rights to our employees (including members of senior management), directors and consultants.
Share Reserve. The aggregate number of ordinary shares that may be issued pursuant to awards granted under the 2025 Plan may not exceed 20,000,000.
The following types of shares issued under the 2025 Plan may again become available for the grant of new awards under the 2025 Plan: restricted stock issued under the 2025 Plan that is forfeited or repurchased by us prior to it becoming fully vested; shares withheld for taxes; shares tendered to us to pay the exercise price of an option; and shares subject to awards issued under the 2025 Plan that have expired or otherwise terminated without having been exercised in full.
Administration. The board of directors will administer the 2025 Plan and may delegate this authority to administer the 2025 Plan to a committee. Currently, the board of directors delegated the administration of the 2025 Plan to the compensation committee. Subject to the terms of the 2025 Plan, the plan administrator, which is our board of directors or its authorized committee, determines recipients, grant dates, the amounts and types of stock awards to be granted and the terms and conditions of the stock awards, including the period of their exercisability and vesting. Subject to certain limitations, the plan administrator will also determine the exercise price of options granted, the purchase price for restricted stock and restricted stock units, and, if applicable, the strike price for stock appreciation rights.
Capitalization adjustments. In the event of a dividend or other distribution (whether in the form of cash, ordinary shares, other securities, or other property), recapitalization, stock split, reorganization, merger, consolidation, exchange of our ordinary shares or our other securities, or other change in our corporate structure, the board of directors may adjust the number and class of shares that may be delivered under the 2025 Plan and the number, class and price of the shares covered by each outstanding stock award.
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Changes in control. In the event of a change in control of the Company, all outstanding options and other awards under the 2025 Plan may be assumed, continued or substituted for by any surviving or acquiring entity. If the surviving or acquiring entity elects not to assume, continue or substitute for such awards, the vesting of such awards held by award holders whose service with us or any of our affiliates has not terminated will be accelerated and such awards will be fully vested and exercisable immediately prior to the consummation of such transaction, and the stock awards shall automatically terminate upon consummation of such transaction if not exercised prior to such event.
Future amendments and termination. The board of directors may amend (subject to shareholder approval if required by applicable law), suspend or terminate the 2025 Plan at any time. The 2025 Plan will terminate pursuant to its terms on June 4, 2035.
Supplemental Equity-Linked Incentive Program
On July 29, 2024, our board of directors approved and adopted a Supplemental Equity-Linked Incentive Program (the “2024 Supplemental Program”), which became effective on September 5, 2024.
The 2024 Supplemental Program is formed for the purpose of long-term savings and financial management, and it is established as the Employee Welfare Savings Association of Silicon Motion, Inc. (the “Savings Association”), where members collectively oversee and manage the Savings Association’s welfare savings funds entrusted to CTBC Bank Co., Ltd. (the “Trustee”). The Savings Association will hold the stock of Silicon Motion for all members, who are regular salaried employees of the Company and its subsidiaries who have completed at least three months of continuous employment, but does not include fixed-term contract staff, part-time employees, or interns, in a long-term manner using a dollar-cost averaging approach and will enable all members to share in the positive outcomes of the operational growth of the Company. The aim is to accumulate personal wealth and retain talent in the Company.
Employees
The following table sets forth the number of our employees categorized by function as of the dates indicated.
| As of December 31, | ||||||||||||
| 2023 | 2024 | 2025 | ||||||||||
| Management and administration |
118 | 123 | 130 | |||||||||
| Operations |
42 | 38 | 40 | |||||||||
| R&D |
1,229 | 1,490 | 1,667 | |||||||||
| Sales and marketing |
157 | 168 | 172 | |||||||||
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|
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|
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| Total |
1,546 | 1,819 | 2,009 | |||||||||
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As of December 31, 2025, we had 2,009 total employees, including 1,757 in Taiwan, 34 in the United States, 196 in China, 12 in Korea, and 10 in Japan. Of our total employees, 1,837 are engineers.
We do not have any collective bargaining arrangements with our employees and consider our relations with our employees to be good.
Share Ownership
Under U.S. securities law, a person is deemed a “beneficial owner” of a security if the person possesses or shares voting power, including the power to vote or direct the voting of the security, or investment power, including the power to dispose of or direct the disposition of the security, or otherwise has the right to receive the economic benefits of ownership. A person is also deemed to be the beneficial owner of any securities of which
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that person has a right to acquire beneficial ownership within 60 days. Under these rules, more than one person may be deemed a beneficial owner of securities as to which such person has no economic interest. There were 135,631,340 of our ordinary shares outstanding as of March 31, 2026.
Unless otherwise indicated below, to our knowledge, all persons named in the table have sole voting and investment power with respect to their shares. To our knowledge, none of the shareholders in this table is a broker-dealer or is affiliated with a broker-dealer.
Unless otherwise indicated in the footnotes to the table, the address of each individual listed in the table is c/o Silicon Motion Technology Corporation, Flat C, 19/F, Wing Cheong Commercial Building, Nos 19-25 Jervois Street, Hong Kong.
The following table sets forth information with respect to the beneficial ownership of our ordinary shares as of March 31, 2026, less otherwise indicated in the footnotes, by each of our directors and members of senior management:
| Ordinary shares beneficially owned |
ADSs Beneficially Owned |
% | ||||||||||
| Senior Management and Directors: |
||||||||||||
| James Chow |
1,663,666 | 415,916 | 1.2 | |||||||||
| Wallace C. Kou |
1,944,856 | 486,214 | 1.4 | |||||||||
| Steve Chen |
111,200 | 27,800 | * | |||||||||
| Tsung-Ming Chung |
30,000 | 7,500 | * | |||||||||
| Lien-Chun Liu |
295,480 | 73,870 | * | |||||||||
| Han-Ping D. Shieh |
34,623 | 8,655 | * | |||||||||
| Kenneth Kuan-Ming Lin |
42,000 | 10,500 | * | |||||||||
| Cain Lin |
20,000 | 5,000 | * | |||||||||
| Jason Tsai (1) |
193,000 | 48,250 | * | |||||||||
| Nelson Duann |
66,800 | 16,700 | * | |||||||||
| * | Less than one percent |
| (1) | Includes 185,400 ordinary shares (or 46,350 ADSs) held by the Tsai Family Living Trust Dated 10/09/2007, of which Jason Tsai and his spouse are co-trustees and beneficiaries. Jason Tsai disclaims beneficial ownership except to the extent of his pecuniary interest therein. |
Disclosure of a Registrant’s Action to Recover Erroneously Awarded Compensation
There was no erroneously awarded compensation that was required to be recovered pursuant to our Clawback Policy during the fiscal year ended December 31, 2025.
Clawback Policy
The Company maintains a policy required by the rules of Nasdaq and the SEC providing that, subject to certain exemptions provided by the rules of Nasdaq and the SEC, in the event that the Company is required to prepare an accounting restatement, it will recover incentive based-compensation received by any current or former executive officer that was based upon the attainment of a financial reporting measure that was erroneously awarded during the three-year period preceding the date that the restatement was required.
| ITEM 7. | MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS |
As of March 31, 2026, there were 135,631,340 of our ordinary shares outstanding. The Bank of New York Mellon (the “Depositary Bank”), the depositary under our ADS deposit agreement, has advised us that as of March 31, 2026, we had 33,842,664 ADSs outstanding, representing 135,370,656 ordinary shares.
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The following table sets forth information with respect to the beneficial ownership of more than 5% of our ordinary shares as of March 31, 2026:
| Identity of person or group |
Number of ordinary shares owned |
Percentage Owned |
||||||
| FMR LLC |
13,593,468 | (1) | 10 | % | ||||
| (1) | According to a Schedule 13G filed with the SEC on December 5, 2025, Abigail P. Johnson is a Director, the Chairman and the Chief Executive Officer of FMR LLC, and Ms. Johnson may be deemed to have dispositive power over the securities held by the FMR LLC. FMR LLC’s principal address is 245 Summer Street, Boston, Massachusetts 02210. |
To our knowledge, we are not owned or controlled, directly or indirectly, by another corporation, by any foreign government or by any other natural or legal persons, severally or jointly.
No holder of our ordinary shares has preferential voting rights.
Related Party Transactions
No related party transactions occurred since January 1, 2022.
| ITEM 8. | FINANCIAL INFORMATION |
Consolidated Financial Statements
See “Item 18. Financial Statements” and pages F-1 through F-30 of this annual report.
Legal Proceedings
As an active operating company, we are subject to certain legal proceedings and claims, either asserted or unasserted, which arise in the ordinary course of business. Although the outcome of such proceedings and claims cannot be predicted with certainty, management does not believe that the outcome of any of these matters will have a material adverse effect on our business, results of operations, financial position or cash flows. Any litigation, however, involves potential risk and potentially significant litigation costs, and therefore there can be no assurance that any litigation which is now pending or which may arise in the future would not have such material adverse effect on our business, financial position, results of operations or cash flows.
On October 5, 2023, the Company filed a claim in the SIAC against MaxLinear for breaching the Merger Agreement. In the arbitration, the Company is seeking payment of the termination fee of US$160 million, together with further substantial damages, interests, and costs. Following hearings conducted in October 2025 and March 2026, the arbitration proceedings have concluded, and the parties are awaiting the issuance of the final award. If the Company succeeds in its claims, MaxLinear will likely be ordered to pay the Company’s legal fees and the costs of the arbitration. If the Company does not succeed in some or all of its claims and/or in defending the counterclaim, it may be ordered to pay some or all of MaxLinear’s legal fees and the costs of the arbitration. The quantum of the legal fees and costs to be paid by either party will be decided by the tribunal. No assurance can be given that if an award is granted in the Company’s favor, that the award can be collected or that the Company will not be required to take further measures to be able to collect the award. Under the SIAC Arbitration Rules, all matters relating to the proceedings are confidential.
On August 31, 2023, a Silicon Motion ADS holder (the “Plaintiff”) filed a putative class action complaint in the United States District Court for the Southern District of California, captioned Water Island Event-Driven Fund v. MaxLinear, Inc., No. 23-cv-01607 (S.D. Cal.), asserting claims against MaxLinear and two of its officers (the “MaxLinear Defendants”) for alleged violations of (i) Section 10(b) of the Exchange Act and Rule 10b-5
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promulgated thereunder and (ii) Section 20(a) of the Exchange Act, in connection with alleged false and misleading statements made by the MaxLinear Defendants between June 6, 2023 and July 26, 2023 concerning MaxLinear’s intent to consummate the Merger Agreement. On August 28, 2024, the court dismissed the complaint against the MaxLinear Defendants without prejudice for lack of standing. On September 18, 2024, the Plaintiff filed an amended complaint against the MaxLinear Defendants, and also added Silicon Motion and two of our officers, Messrs. Kou and Lai (the “Silicon Motion Defendants”), asserting substantially similar claims under the Exchange Act. The complaint seeks compensatory damages, including interest, costs and expenses, and such other equitable or injunctive relief that the court deems appropriate. The Silicon Motion Defendants filed a motion to dismiss the amended complaint on November 25, 2024, as did the MaxLinear Defendants. The U.S. District Court granted the Silicon Motion Defendants’ motion to dismiss all claims asserted against them with prejudice on July 15, 2025. The Plaintiff appealed the dismissal of their claims to the United States Court of Appeals for the Ninth Circuit on August 8, 2025. The Silicon Motion Defendants believe that the claims asserted against them are without merit and intend to continue to defend themselves vigorously on appeal.
Dividend Policy
See “Risk Factors — There can be no assurance that we will declare cash dividends in the future in any particular amounts or at all” in Item 3 above.
Significant Changes
No significant changes have occurred since the date of our audited consolidated financial statements.
| ITEM 9. | THE OFFER AND LISTING |
Our ADSs, each representing four of our ordinary shares, have been listed on Nasdaq since June 30, 2005. Our ADSs trade under the symbol “SIMO.” Nasdaq is the principal trading market for our ADSs, which are not listed on any other exchanges in or outside the United States.
| ITEM 10. | ADDITIONAL INFORMATION |
Memorandum and Articles of Association
The information called for by Item 10.B of Form 20-F (“Memorandum and Articles of Association”) is incorporated by reference to the information under the heading “Description of Share Capital” in our Registration Statement on Form F-1, as amended (Registration Number 333-125673) and as filed with the SEC on June 9, 2005.
Material Contracts
We have not entered into any material contracts within the past two fiscal years other than in the ordinary course of business and other than those described in Item 4, “Information on the Company” or elsewhere in this annual report.
Exchange Controls
There are currently no exchange control regulations or currency restrictions in the Cayman Islands.
Taxation
United States Federal Income Taxation
The following discussion summarizes certain U.S. federal income tax consequences to a U.S. Holder, as defined below, who purchases our ADSs and ordinary shares. This discussion assumes that investors will hold
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their ADSs or ordinary shares as capital assets (generally, property held for investment). This discussion does not discuss all aspects of U.S. federal income taxation which may be important to particular investors in light of their individual circumstances, including investors subject to special taxation, such as:
| • | banks and financial institutions; |
| • | brokers and dealers in securities or currencies; |
| • | insurance companies; |
| • | tax-exempt organizations and retirement plans; |
| • | grantor trusts; |
| • | S corporations; |
| • | persons holding ADSs or ordinary shares as part of hedging, conversion, constructive sale, straddle or other integrated transactions; |
| • | persons who acquired their ordinary shares upon the exercise of employee stock options or otherwise as compensation; |
| • | persons who have elected the mark-to-market method of accounting; |
| • | persons who own 10% or more of our ADSs or shares; |
| • | real estate investment trusts or regulated investment companies; |
| • | U.S. persons whose “functional currency” is not the U.S. dollar; |
| • | certain former citizens or long-term residents of the United States; and |
| • | Non-U.S. Holders (as defined below). |
This discussion is based in part on representations by the Depositary Bank and assumes that each obligation under the deposit agreement and any related agreement will be performed in accordance with its terms. Furthermore, the discussion below is based upon the provisions of the Internal Revenue Code of 1986, as amended (the “Code”), and U.S. Treasury regulations, rulings and judicial decisions hereunder as of the date hereof. Such authorities are subject to change, possibly on a retroactive basis, which may result in U.S. federal income tax consequences different from those discussed below.
A person considering an investment in our ADSs or ordinary shares is urged to consult its tax advisor concerning U.S. federal, state, local and non-U.S. income and other tax consequences.
A U.S. Holder is a beneficial owner of ADSs or ordinary shares that is for U.S. federal income tax purposes:
| • | a citizen or resident individual of the United States; |
| • | a corporation or other entity taxable as a corporation created or organized in or under the laws of the United States, any state thereof, or the District of Columbia; |
| • | an estate the income of which is subject to U.S. federal income taxation, regardless of its source; or |
| • | a trust if it is subject to the primary supervision of a court within the United States and one or more U.S. persons have the authority to control all substantial decisions of the trust or has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person. |
A beneficial owner of ADSs or ordinary shares that is not a U.S. Holder is referred to herein as a “Non-U.S. Holder.” If a partnership or limited liability company treated as a partnership for U.S. federal income tax purposes holds ADSs or ordinary shares, the tax treatment of a partner or member will generally depend on the status of the partner or member and the activities of the partnership or such limited liability company. A partner of a partnership or a member of such a limited liability company holding ADSs or ordinary shares is urged to consult its tax advisors regarding an investment in our ADSs or ordinary shares.
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ADSs. In general, for U.S. federal income tax purposes, a U.S. Holder of ADSs will be treated as the owner of the underlying ordinary shares that are represented by such ADSs. Deposits and withdrawals of ordinary shares in exchange for ADSs will not be subject to U.S. federal income taxation.
Distributions on ADSs or ordinary shares. Unless the passive foreign investment company rules, as discussed below, apply, the gross amount of the distributions in respect of the ADSs or ordinary shares will be subject to tax as dividend income to the extent of our current and accumulated earnings and profits, as determined under U.S. federal income tax principles. Subject to certain limitations, dividends paid to non-corporate U.S. Holders, including individuals, may be eligible for a reduced rate of taxation if we are deemed to be a “qualified foreign corporation” for U.S. federal income tax purposes, provided that such holder satisfies certain holding period requirements with respect to the ownership of our ADSs or ordinary shares. Subject to the exceptions discussed below, a corporation is a qualified foreign corporation if it is:
| • | a foreign corporation that is eligible for the benefits of a comprehensive income tax treaty with the United States that includes an exchange of information program; or |
| • | a foreign corporation if its stock with respect to which a dividend is paid or its ADSs backed by such stock are readily tradable on an established securities market within the United States. |
The Cayman Islands is not a party to any double tax treaty with the United States. A foreign corporation (even if it is described above) does not constitute a qualified foreign corporation if, for the taxable year in which the dividend is paid or the preceding taxable year, the foreign corporation is or was a passive foreign investment company. Although we believe that we are a qualified foreign corporation because the ADSs will be traded on an established U.S. securities market and as discussed below, we believe that we were not a passive foreign investment company for our 2025 tax year, no assurance can be given in this regard. In addition, our status as a qualified foreign corporation may change. A U.S. Holder that exchanges its ADSs for ordinary shares may not be eligible for the reduced rate of taxation on dividends if the ordinary shares are not deemed to be readily tradable on an established securities market within the United States.
Dividends will be includable in a U.S. Holder’s gross income on the date actually or constructively received by the Depositary Bank, in the case of ADSs or, in the case of ordinary shares, by such U.S. Holder. These dividends will not be eligible for the dividends-received deduction generally allowed to U.S. corporations in respect of dividends received from other U.S. corporations.
To the extent we pay dividends on the ADSs or ordinary shares in a currency other than the U.S. dollar, the U.S. dollar value of such dividends should be calculated by reference to the exchange rate prevailing on the date of actual or constructive receipt of the dividend, regardless of whether the foreign currency is converted into U.S. dollars at that time. If the foreign currency is converted into U.S. dollars on the date of actual or constructive receipt of such dividends, the tax basis of the U.S. Holder in such foreign currency will be equal to its U.S. dollar value on that date and, as a result, the U.S. Holder generally should not be required to recognize any foreign currency exchange gain or loss. Dividends paid in respect of the ADSs or ordinary shares generally will be treated as income from sources outside the United States.
To the extent that the amount of any distribution exceeds our current and accumulated earnings and profits, the distribution will first be treated as a tax-free return of capital, causing a reduction in the adjusted basis of the ADSs or ordinary shares, and the balance in excess of adjusted basis will be taxed as capital gain.
Sale, exchange or other disposition of ADSs or ordinary shares. Unless the passive foreign investment company rules, as discussed below, apply, upon the sale, exchange or other disposition of ADSs or ordinary shares a U.S. Holder generally will recognize capital gain or loss equal to the difference between the amount realized upon the sale, exchange or other disposition and the adjusted tax basis of the U.S. Holder in the ADSs or ordinary shares. The capital gain or loss generally will be long-term capital gain or loss if, at the time of sale, exchange or other disposition, the U.S. Holder has held the ADS or ordinary share for more than one year. Net
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long-term capital gains of non-corporate U.S. Holders, including individuals, are generally eligible for preferential rates of taxation. The deductibility of capital losses is subject to limitations. Any gain or loss that a U.S. Holder recognizes generally will be treated as gain or loss from sources within the United States for U.S. foreign tax credit limitation purposes.
Additional tax on net investment income. An additional 3.8% federal income tax may be assessed on net investment income (including dividends, other distributions, and gain realized on the sale of ADSs or ordinary shares) earned by certain U.S. Holders.
Passive foreign investment company rules. In general, we will be classified as a passive foreign investment company for any taxable year in which either (a) at least 75% of our gross income is passive income or (b) at least 50% of the value (determined on the basis of a quarterly average) of our assets is attributable to assets that produce or are held for the production of passive income. For this purpose, passive income generally includes dividends, interest, royalties, rents (other than rents and royalties derived in the active conduct of a trade or business and not derived from a related person), annuities and gains from assets that produce passive income. If we own directly or indirectly at least 25% by value of the equity shares of another corporation, we will be treated for purposes of the passive foreign investment company tests as owning a proportionate share of the assets of the other corporation, and as receiving directly a proportionate share of the other corporation’s income.
We believe, based on our present and projected composition of our income and valuation of our assets, we were not classified as a passive foreign investment company for U.S. federal income tax purposes for our 2025 tax year, although no assurance can be given in this regard. Whether we are a passive foreign investment company for any particular taxable year is determined on an annual basis and will depend on the composition of our income and assets, including goodwill. The calculation of goodwill will be based, in part, on the then market value of our capital stock, which is subject to fluctuation. Accordingly, there can be no assurance that we will not be classified as a passive foreign investment company in the current or any future taxable year.
If we are a passive foreign investment company for any taxable year during which a U.S. Holder has an equity interest in our company, then the company will continue to be treated as a passive foreign investment company with respect to such U.S. Holder for all succeeding taxable years during which the hold ADS or ordinary shares in the company. Accordingly, unless the U.S. Holder makes a mark-to-market election as discussed below, such U.S. Holder will be subject to special tax rules in any future taxable year regardless of whether we are classified as a passive foreign investment company in such future years with respect to (a) “excess distributions” and (b) gain from the disposition of stock. Excess distributions are defined generally as the excess of the amount received with respect to the equity interests in the taxable year over 125% of the average annual distributions received in the shorter of either the three previous years or a U.S. Holder’s holding period before the taxable year and must be allocated ratably to each day of the U.S. Holder’s holding period. The amount allocated to the current taxable year or any year before we became a passive foreign investment company will be included as ordinary income in a U.S. Holder’s gross income for that year. The amount allocated to other prior taxable years will be taxed as ordinary income at the highest rate in effect for a U.S. Holder in that prior year and the tax is subject to an interest charge at the rate applicable to deficiencies in income taxes. The entire amount of any gain realized upon the sale or other disposition of the equity interests will be treated as an excess distribution made in the year of sale or other disposition and as a consequence will be treated as ordinary income and, to the extent allocated to years prior to the year of sale or disposition with respect to which we were a passive foreign investment company, will be subject to the interest charge described above.
In certain circumstances, instead of being subject to the excess distribution rules discussed above, a U.S. Holder may make an election to include gain on the ADSs or ordinary shares of a passive foreign investment company as ordinary income under a mark-to-market method, provided that the ADSs or ordinary shares are regularly traded on a qualified exchange. Under current law, the mark-to-market election is only available for ADSs or ordinary shares that are regularly traded within the meaning of U.S. Treasury regulations on certain designated U.S. exchanges and foreign exchanges that meet trading, listing, financial disclosure and other
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requirements to be treated as a qualified exchange under applicable U.S. Treasury regulations. The Nasdaq Stock Market is a qualified exchange. The ordinary shares may not be eligible for mark-to-market treatment under the foregoing rule even if the ADSs otherwise satisfy the applicable requirement.
If a U.S. Holder makes a mark-to-market election, the U.S. Holder will include each year as ordinary income, rather than capital gain, the excess, if any, of the fair market value of the U.S. Holder’s ADSs or ordinary shares at the end of the taxable year over such U.S. Holder’s adjusted basis in the ADSs (or ordinary shares, if applicable) and will be permitted an ordinary loss in respect of the excess, if any, of the adjusted basis of these ADSs or ordinary shares over their fair market value at the end of the taxable year, but only to the extent of the net amount previously included in income as a result of the mark-to-market election. A U.S. Holder’s basis in the ADSs or ordinary shares will be adjusted to reflect any such income or loss amounts. Any gain or loss on the sale of the ADSs or ordinary shares will be ordinary income or loss, except that this loss will be ordinary loss only to the extent of the previously included net mark-to-market gain.
If we are treated as a passive foreign investment company with respect to a U.S. Holder then, under certain circumstances such U.S. Holder must file Internal Revenue Service Form 8621 for their interest in the Company.
A U.S. Holder is urged to consult its tax advisor concerning the U.S. federal income tax consequences of an investment in our ADSs or ordinary shares if we are or become a passive foreign investment company, including the possibility of making a mark-to-market election.
Information Reporting and Back-up Withholding. The Foreign Account Tax Compliance Act (“FATCA”) generally requires that individuals that hold certain specified foreign financial assets worth in excess of certain thresholds of US$50,000 or more, depending on the individual’s circumstances, report such ownership to the IRS using IRS Form 8938. The definition of specified foreign financial assets includes not only financial accounts maintained in foreign financial institutions, but also, unless held in accounts maintained by a financial institution, any stock or security issued by a non-U.S. person, any financial instrument or contract held for investment that has an issuer or counterparty other than a U.S. person and any interest in a foreign entity. A U.S. Holder may be subject to this reporting requirement unless such holder’s ADSs or ordinary shares are held in an account at a domestic financial institution. The penalty for failing to file Form 8938 is substantial.
U.S. holders generally are subject to information reporting requirements with respect to dividends on, or proceeds from the disposition of, our ordinary shares. In addition, a U.S. holder may be subject, under certain circumstances, to backup withholding at a rate of up to 24% with respect to dividends paid on, or proceeds from the disposition of, our ordinary shares unless the U.S. holder provides proof of an applicable exemption or correct taxpayer identification number, and otherwise complies with the applicable requirements of the backup withholding rules. A U.S. holder of our ordinary shares who provides an incorrect taxpayer identification number may be subject to penalties imposed by the IRS. Amounts withheld under the backup withholding rules are not an additional tax and may be refunded or credited against the U.S. holder’s U.S. federal income tax liability, provided the required information is timely furnished to the IRS.
Cayman Islands Taxation
The Cayman Islands currently levy no taxes on individuals or corporations based upon profits, income, gains or appreciation and there is no taxation in the nature of inheritance tax or estate duty. There are no other taxes likely to be material to our company levied by the Government of the Cayman Islands except for stamp duties that may be applicable on instruments executed in, or after execution brought within the jurisdiction of, the Cayman Islands. The Cayman Islands are a party to a double tax treaty entered into with the United Kingdom in 2010 but otherwise is not party to any double tax treaties. No stamp duty is payable in the Cayman Islands on transfers of shares of Cayman Islands companies, except those which hold interests in land in the Cayman
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Islands. There are no exchange control regulations or currency restrictions in the Cayman Islands. We have, pursuant to the Tax Concessions Act of the Cayman Islands, obtained an undertaking that:
| • | no law which is enacted in the Cayman Islands imposing any tax to be levied on profits or income or gains or appreciation applies to us or our operations; and |
| • | the aforesaid tax or any tax in the nature of estate duty or inheritance tax are not payable on or in respect of our ordinary shares, debentures or other obligations of our company. |
The undertaking that we have obtained is for a period of 20 years from April 25, 2025.
The Cayman Islands, together with several other non-European Union jurisdictions, have introduced legislation aimed at addressing concerns raised by the Council of the European Union as to offshore structures engaged in certain activities which attract profits without real economic activity. With effect from January 1, 2019, the International Tax Co-operation (Economic Substance) Act (As Revised) (the “Substance Act”) came into force in the Cayman Islands introducing certain economic substance requirements for in-scope Cayman Islands entities which are engaged in certain “relevant activities,” which in the case of exempted companies incorporated before January 1, 2019, will apply in respect of financial years commencing July 1, 2019, onwards. As our company is a Cayman Islands company, compliance obligations include filing annual notifications, which need to state whether our company is carrying out any relevant activities and if so, whether our company has satisfied economic substance tests to the extent required under the Substance Act. As it is a new regime, it is anticipated that the Substance Act will evolve and be subject to further clarification and amendments. See “Risk Factor — The enactment of legislation implementing changes in the taxation of international business activities, the adoption of other tax reform policies or changes in tax legislation or policies could materially impact our financial position and results of operations” in Item 3 above.
Documents on Display
We have previously filed with the SEC our registration statement on Form F-6 under the Securities Act with respect to our ADSs.
All information filed with the SEC can be obtained over the internet at the SEC’s website at www.sec.gov. We are subject to the periodic reporting and other informational requirements of the Exchange Act. Under the Exchange Act, we are required to file reports and other information with the SEC. Specifically, we are required to file annually a Form 20-F no later than four months after the close of each fiscal year, which is December 31. As a foreign private issuer, we are exempt from the rules under the Exchange Act prescribing the furnishing and content of quarterly reports and proxy statements, and our officers, directors, and principal shareholders are exempt from the reporting and short-swing profit recovery provisions of Section 16 of the Exchange Act.
| ITEM 11. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
Interest rate risk. Our exposure to changes in interest rates is limited to interest income generated by our cash deposited with banks and short-term investments maintained in principal protected notes. We have not entered into any interest rate swap transactions. We do not believe that a 1% change in interest rates would have a significant impact on our operations.
Foreign currency risk. The majority of our revenue, cost of sales, accounts receivable, inventory and accounts payable are denominated in U.S. dollars. The majority of our operating expense relating to salaries and benefits and accounts payable related to these expenses are denominated in foreign currencies, primarily the NT dollar. Fluctuations in currency exchange rates could harm our business in the future. We do not utilize foreign exchange derivatives contracts to protect against changes in foreign exchange rates.
Also refer to “Risk Factors — Our business, financial condition and results of operations could be adversely impacted by the political and economic conditions of the countries in which we conduct business and operate and in which our products are used and sold” in Item 3 above.
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Investment Risk. We have minority stake equity investments in Cashido, Vastview, BIWIN, and TWSC companies related to the semiconductor and other technology industries. These investments, with the exception of BIWIN and TWSC, are privately-held companies accounted for under the measurement alternative method. This is because our ownership is less than 20%, and we do not have the ability to exercise significant influence over the operations of these companies. As of December 31, 2025 and 2024, these investments in privately-held companies had a carrying value of nil and US$6.5 million, respectively. BIWIN is listed on the Shanghai Stock Exchange and TWSC is listed on the Shenzhen Stock Exchange. We had an unrealized holding gain of US$18.4 million and US$0.5 million in 2025 and 2024, respectively. Based on a sensitivity analysis performed as of December 31, 2025 and 2024, a hypothetical adverse price change of 10% would have decreased our non-operating income by approximately US$3.0 million and US$1.1 million in 2025 and 2024, respectively. We monitor these investments for impairment and make appropriate reductions in carrying value when an impairment is deemed to be other than temporary. There were no impairments losses for the years ended on December 31, 2024 and 2025.
| ITEM 12. | DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES |
Fees and Charges by ADS Holders. The following table summarizes the fees and charges that holders of our ADSs, which are evidenced by the ADRs, may have to pay to the Depositary Bank pursuant to the ADS deposit agreement:
| Type of Service |
Associated Fee or Charge | |
| For the execution and delivery of ADRs upon deposit or substitution of the deposited shares evidenced by the ADSs, share distributions or the exercise of subscription rights to purchase additional ADSs | Up to US$5.00 per 100 ADS (or portion thereof) | |
| For the surrender of ADRs upon withdrawing deposited shares represented by ADRs, including upon termination of the deposit agreement | Up to US$5.00 per 100 ADS (or portion thereof) | |
| For distribution of any cash dividends made on the deposited shares represented by the ADRs | Up to US$0.02 per ADS (or portion thereof) | |
| For distribution of any dividends in securities, other than in ordinary shares, made on the deposited shares represented by ADRs | Up to US$5.00 per 100 ADS (or portion thereof) | |
| General depositary services | Up to US$0.02 per ADS (or portion thereof) per calendar year, except where a fee has already been charged for a cash distribution during that calendar year, as provided above | |
| Fees and expenses of the Depositary Bank | As incurred by the Depositary Bank and billed to the ADS holders | |
In addition, the ADS holders will be responsible for any tax or other governmental charge that becomes payable by the Depositary Bank or the custodian with respect to any ADRs or any deposited share represented by any ADR. The Depositary Bank may deduct the amount of any such taxes or other governmental charges from any dividends or other distributions or may sell for the account of an ADS holder any part or all of the deposited shares represented by that holders’ ADRs for the payment of any such tax or other governmental charged owed.
The Depositary Bank collects its fees for delivery and surrender of ADSs directly from ADS holders depositing shares or surrendering ADSs for the purpose of withdrawal or from intermediaries acting for them. The Depositary Bank collects fees for making distributions to ADS holders by deducting those fees from the
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amounts distributed or by selling a portion of distributable property to pay the fees. The Depositary Bank may collect its annual fee for depositary services by deductions from cash distributions or by directly billing ADS holders or by charging the book-entry system accounts of participants acting for them. The Depositary Bank may generally refuse to provide fee-attracting services until its fees for those services are paid.
Fees and Payments by the Depositary Bank. The Depositary Bank has agreed to pay us 90% of the issuance fees (less the Depositary Bank’s custody expenses), cancellation fees (less the Depositary Bank’s custody expenses), depositary servicing fees (less any expenses, including charges of the Depositary Bank or central securities depositories) and dividend fees (less any expenses incurred by the Depositary Bank relating to the collection of such cash dividend fees) collected by the Depositary Bank during each subsequent contract year effective as of July 8, 2019. The Depositary Bank has further agreed to reimburse us for certain standard out-of-pocket administrative and maintenance and registered ADS holder service expenses, including, but not limited to, annual report delivery, dividend fund remittance, dividend payment notification, proxy service coordination, record date notification, registered ADS holder transfers and reporting and certain of our other expenses incurred in connection with maintaining and promoting our ADS program. The amount of annual reimbursements is subject to certain limits. For the year ended December 31, 2025, the Depositary Bank owed us a reimbursement of US$0.6 million, net of withholding tax, for our expenses incurred in connection with maintaining and promoting our ADS program, which was paid in full in September 2025. Any non-standard out-of-pocket administration and maintenance fees and expenses, including, but not limited to, reasonable legal fees and expenses incurred by the Depositary Bank and any expenses incurred by the Depositary Bank for the servicing of non-registered ADS holders and for special services, each of which is subject to our prior written consent, must be paid by us.
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PART II
| ITEM 13. | DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES |
Not applicable.
| ITEM 14. | MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS |
Not applicable.
| ITEM 15. | CONTROLS AND PROCEDURES |
Disclosure Controls and Procedures
We performed an evaluation of the effectiveness of our disclosure controls and procedures as of December 31, 2025. Disclosure controls and procedures are designed to ensure that the information required to be disclosed in the reports that we file or submit under the Exchange Act, including this annual report, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. The evaluation was performed with the participation of our key corporate senior management, and under the supervision of our Chief Financial Officer (“CFO”), Jason Tsai, and our President and Chief Executive Officer (“CEO”), Wallace Kou. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable, rather than absolute, assurances of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the foregoing, our management, including our CEO and CFO, concluded that our disclosure controls and procedures were effective as of December 31, 2025.
Management’s Report on Internal Control over Financial Reporting
Our management, including our CEO and CFO, is responsible for establishing and maintaining adequate internal control over financial reporting, as defined under Exchange Act Rules 13a-15(f) and 15d-15(f). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with U.S. GAAP. Internal control over financial reporting includes those policies and procedures that: (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with U.S. GAAP, and that our receipts and expenditures are being made only in accordance with appropriate authorizations; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the consolidated financial statements.
Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2025, based on the criteria set forth in the Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Their assessment included an evaluation of the design of our internal control over financial reporting and testing of the operational effectiveness of our internal control over financial reporting. Based on that assessment, our management concluded that as of December 31, 2025, the Company’s internal control over financial reporting was effective.
Deloitte & Touche, the independent registered public accounting firm that audited our consolidated financial statements included in this annual report has issued an attestation report regarding internal control over financial reporting.
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Changes in Internal Control over Financial Reporting
During 2025, no change to our internal control over financial reporting occurred that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitations on Effectiveness of Controls
All internal control systems no matter how well designed and implemented have inherent limitations. Even systems determined to be effective may not prevent or detect misstatements or fraud and can only provide reasonable assurance with respect to disclosure and financial statement presentation and reporting. Additionally, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changed conditions and the degree of compliance with the policies or procedures may deteriorate.
Attestation Report of the Independent Registered Public Accounting Firm
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of
Silicon Motion Technology Corporation
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Silicon Motion Technology Corporation and subsidiaries (the “Company”) as of December 31, 2025, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements as of and for the year ended December 31, 2025, of the Company and our report dated April 30, 2026, expressed an unqualified opinion on those consolidated financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the U.S. Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
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accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Deloitte & Touche
Taipei, Taiwan
Republic of China
April 30, 2026
| ITEM 16. | [RESERVED] |
| ITEM 16A. | AUDIT COMMITTEE FINANCIAL EXPERT |
Our board of directors has determined that Mr. Tsung-Ming Chung, the Chairman of our audit committee, is an “audit committee financial expert” under applicable SEC rules and an independent director under Nasdaq listing standards.
| ITEM 16B. | CODE OF ETHICS |
Our board of directors has adopted the Code of Ethics applicable to all of our directors, officers (which includes members of senior management), and employees, including our CEO and our CFO, consistent with the requirements of Nasdaq. For further information, see our Code of Ethics posted on our website (https://www.siliconmotion.com/company/corporate-citizenship-files/Silicon_Motion_Code_of_Ethics.pdf) . We intend to post on our website all disclosures that are required by the rules and regulations of the SEC or by Nasdaq rules concerning any amendments to, or waivers from, any provision of our Code of Ethics.
| ITEM 16C. | PRINCIPAL ACCOUNTANT FEES AND SERVICES |
Deloitte & Touche has acted as the independent registered public accountants of our Company and its subsidiaries for fiscal years 2024 and 2025. The following table sets forth the aggregate fees by categories specified below in connection with certain professional services rendered by Deloitte & Touche for the periods indicated.
| 2024 | 2025 | |||||||
| US$ | US$ | |||||||
| (in thousands) | ||||||||
| Audit Fees (1) |
906 | 912 | ||||||
| Audit-Related Fees (2) |
— | — | ||||||
| Tax Fees (3) |
266 | 224 | ||||||
| All Other Fees (4) |
— | — | ||||||
| Total |
1,172 | 1,136 | ||||||
| (1) | Audit Fees. This category includes the audit and review of our annual financial statements and services that are normally provided by the independent auditors in connection with regulatory filings or engagements, |
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| advice provided on audit and accounting matters that arise during, or as a result of, the audits or the reviews of interim financial statements, audit procedures related to reviews of offering documents, registration statements and issuance of comfort letters. |
| (2) | Audit-Related Fees. These are the fees billed for the assurance, and related services that are reasonably related to the performance of the audit or review of the Company’s financial statements. There were no audit-related fees billed during the fiscal years ended December 31, 2025, or 2024. |
| (3) | Tax Fees. This category consists of professional services rendered by Deloitte & Touche for tax compliance and tax advice. The services for the fees disclosed in this category include tax return preparation and technical tax advice. |
| (4) | All other fees. This category includes professional services associated with other advisory services rendered by Deloitte & Touche. |
Our audit committee is responsible for the retention of our independent registered public accounting firm, which currently is Deloitte & Touche. Our audit committee has adopted its own rules of procedure, in the form of an audit committee charter. The audit committee’s rules of procedure provide for a process with respect to the prior approval of all non-audit services to be performed by our independent auditors. Our audit committee reports to our board of directors regarding the scope and results of our annual audits, compliance with our accounting and financial policies and management’s procedures and policies related to the adequacy of our internal accounting controls.
In fiscal year 2025, our audit committee approved all of the audit services provided by Deloitte & Touche and the other services provided by Deloitte & Touche.
| ITEM 16D. | EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES |
Not applicable.
| ITEM 16E. | PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS |
None.
| ITEM 16F. | CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT |
Not applicable.
| ITEM 16G. | CORPORATE GOVERNANCE |
We are incorporated in the Cayman Islands and our corporate governance practices are governed by applicable Cayman Islands law. In addition, because our ADSs are listed on Nasdaq, we are subject to Nasdaq corporate governance requirements. Nasdaq Listing Rule 5615(a)(3) permits foreign private issuers like us to follow “home country practice” with respect to certain corporate governance matters, such as, for example, our establishment in 2025 of our 2025 Plan. The Company has elected to be exempt from the Nasdaq Rule 5635(c), which provides that shareholder approval is required prior to the issuance of securities when a stock option or purchase plan is to be established or materially amended or other equity compensation arrangement made or materially amended, pursuant to which stock may be acquired by officers, directors, employees or consultants, subject to certain exceptions. We are committed to a high standard of corporate governance. As such, we endeavor to comply with the Nasdaq corporate governance practices and believe that we are currently in compliance with Nasdaq corporate governance practices that are applicable to foreign private issuers.
| ITEM 16H. | MINE SAFETY DISCLOSURE. |
Not applicable.
| ITEM 16I. | DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS. |
Not applicable.
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I TEM 16J. |
I NSIDER TRADING POLICIES . |
I TEM 16K. |
C YBERSECURITY . |
Table of Contents
PART III
| ITEM 17. | FINANCIAL STATEMENTS |
Not applicable.
| ITEM 18. | FINANCIAL STATEMENTS |
Our consolidated financial statements are included in this annual report at pages F-1 through F-30.
| ITEM 19. | EXHIBITS |
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| Exhibit |
Description | |
| 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 With Embedded Linkbase Documents. | |
| 104 | Cover Page formatted as Inline XBRL and contained in Exhibit 101. | |
| * | Filed herewith. |
| ** | Furnished herewith. |
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SIGNATURES
The registrant hereby certifies that it meets all the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.
| SILICON MOTION TECHNOLOGY CORPORATION | ||
| By: | /s/ Wallace C. Kou | |
| Wallace C. Kou, President and Chief Executive Officer | ||
Date: April 30, 2026
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| F-2 | ||||
| F-4 | ||||
| F-5 | ||||
| F-6 | ||||
| F-7 | ||||
| F-8 | ||||
| F-9 |
| • | We obtained an understanding of the Company’s methodology for determining inventory that is obsolete or unmarketable and the key assumptions and judgments made as part of the process, including the forecasted demand. |
| • | We tested the effectiveness of controls over the review of the provision for obsolete or unmarketable inventories based on the Company’s methodology, including management’s evaluation of the inventory aging and the forecasted demand. |
| • | We tested the accuracy and completeness of the underlying data management utilized in evaluating inventory aging of the obsolescence reserve on a sampling basis. |
| • | We evaluated the reasonableness of the Company’s methodology and key assumptions and judgments the Company used to estimate the net realizable value of inventory by performing the following: |
| • | We compared the inventory level to forecasted product demand, historical sales, and subsequent sales. |
| • | We performed peer analysis and industry analysis to evaluate the reasonableness of the trend of the forecasted product demand. |
| • | We performed corroborating inquiries with the personnel responsible for sales forecasting to evaluate the reasonableness of the product demand forecasts. |
| • | We made inquiries of various personnel in the Company including, but not limited to, finance and operations personnel about the expected timing of the introduction of new products. |
| • | We tested the mathematical accuracy of management’s calculations. |
| • | We evaluated whether there is an existence of contradictory evidence based on the information obtained from the Company’s internal communications to management, press releases, and industry reports, as well as our observations and inquires as to changes within the business. |
December 31 |
||||||||
2024 |
2025 |
|||||||
US$ |
US$ |
|||||||
| ASSETS |
||||||||
| Current Assets |
||||||||
| Cash and cash equivalents |
||||||||
| Accounts receivable, net |
||||||||
| Inventories |
||||||||
| Restricted assets-current |
||||||||
| Prepaid expenses and other current assets |
||||||||
| |
|
|
|
|||||
| Total current assets |
||||||||
| Long-term investments |
||||||||
| Property and equipment, net |
||||||||
| Deferred income tax assets, net |
||||||||
| Operating lease assets |
||||||||
| Other assets |
||||||||
| |
|
|
|
|||||
| Total assets |
||||||||
| |
|
|
|
|||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY |
||||||||
| Current Liabilities |
||||||||
| Notes and accounts payable |
||||||||
| Income tax payable |
||||||||
| Refund liabilities |
||||||||
| Accrued expenses and other current liabilities |
||||||||
| |
|
|
|
|||||
| Total current liabilities |
||||||||
| Other long-term liabilities |
||||||||
| |
|
|
|
|||||
| Total liabilities |
||||||||
| |
|
|
|
|||||
| Commitments and Contingencies (Note 15) |
||||||||
| Shareholders’ Equity |
||||||||
| Ordinary Shares at US$ |
||||||||
| Authorized: |
||||||||
| Issued and outstanding: |
||||||||
| Additional paid-in capital |
||||||||
| Accumulated other comprehensive income |
||||||||
| Retained earnings |
||||||||
| |
|
|
|
|||||
| Total shareholders’ equity |
||||||||
| |
|
|
|
|||||
| Total liabilities and shareholders’ equity |
||||||||
| |
|
|
|
|||||
Year Ended December 31 |
||||||||||||
2023 |
2024 |
2025 |
||||||||||
US$ |
US$ |
US$ |
||||||||||
| NET SALES |
||||||||||||
| COST OF SALES |
||||||||||||
| |
|
|
|
|
|
|||||||
| GROSS PROFIT |
||||||||||||
| |
|
|
|
|
|
|||||||
| OPERATING EXPENSES |
||||||||||||
| Research and development |
||||||||||||
| Sales and marketing |
||||||||||||
| General and administrative |
||||||||||||
| Loss from settlement of litigation |
||||||||||||
| |
|
|
|
|
|
|||||||
| Total operating expenses |
||||||||||||
| |
|
|
|
|
|
|||||||
| OPERATING INCOME |
||||||||||||
| |
|
|
|
|
|
|||||||
| NON-OPERATING INCOME (EXPENSES) |
||||||||||||
| Unrealized holding gain on investment |
||||||||||||
| Gain from disposal of long-term investment |
||||||||||||
| Interest income |
||||||||||||
| Foreign exchange gain (loss), net |
( |
) | ||||||||||
| Other income |
||||||||||||
| |
|
|
|
|
|
|||||||
| Total non-operating income (expenses) |
||||||||||||
| |
|
|
|
|
|
|||||||
| INCOME BEFORE INCOME TAX |
||||||||||||
| INCOME TAX EXPENSE |
||||||||||||
| |
|
|
|
|
|
|||||||
| NET INCOME |
||||||||||||
| |
|
|
|
|
|
|||||||
| EARNINGS PER ORDINARY SHARE: |
||||||||||||
| Basic |
||||||||||||
| |
|
|
|
|
|
|||||||
| Diluted |
||||||||||||
| |
|
|
|
|
|
|||||||
| WEIGHTED AVERAGE ORDINARY SHARES OUTSTANDING |
||||||||||||
| Basic (Thousands) |
||||||||||||
| |
|
|
|
|
|
|||||||
| Diluted (Thousands) |
||||||||||||
| |
|
|
|
|
|
|||||||
| EARNINGS PER ADS (one ADS equals four ordinary shares): |
||||||||||||
| Basic |
||||||||||||
| |
|
|
|
|
|
|||||||
| Diluted |
||||||||||||
| |
|
|
|
|
|
|||||||
| WEIGHTED AVERAGE ADS OUTSTANDING |
||||||||||||
| Basic (Thousands) |
||||||||||||
| |
|
|
|
|
|
|||||||
| Diluted (Thousands) |
||||||||||||
| |
|
|
|
|
|
|||||||
Year Ended December 31 |
||||||||||||
2023 |
2024 |
2025 |
||||||||||
US$ |
US$ |
US$ |
||||||||||
| NET INCOME |
||||||||||||
| |
|
|
|
|
|
|||||||
| OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX EFFECT OF NIL |
||||||||||||
| Change in net foreign currency translation adjustments |
( |
) | ( |
) | ||||||||
| Change in deferred pension gain |
||||||||||||
| |
|
|
|
|
|
|||||||
| OTHER COMPREHENSIVE INCOME (LOSS) |
( |
) | ( |
) | ||||||||
| |
|
|
|
|
|
|||||||
| TOTAL COMPREHENSIVE INCOME |
||||||||||||
| |
|
|
|
|
|
|||||||
Ordinary Share |
Additional Paid-in Capital |
Accumulated Other Comprehensive Income (Loss) |
Retained Earnings |
Treasury Stock |
Total Shareholders’ Equity |
|||||||||||||||||||||||
Shares |
Amount |
|||||||||||||||||||||||||||
(thousands) |
US$ |
US$ |
US$ |
US$ |
US$ |
US$ |
||||||||||||||||||||||
| BALANCE, JANUARY 1, 2023 |
||||||||||||||||||||||||||||
| Net income |
— | — | — | — | — | |||||||||||||||||||||||
| Other comprehensive loss |
— | — | — | ( |
) | — | — | ( |
) | |||||||||||||||||||
| Stock-based compensation expenses |
— | — | — | — | — | |||||||||||||||||||||||
| Issuance of ordinary shares upon exercise of restricted stock units |
( |
) | — | — | — | ( |
) | |||||||||||||||||||||
| Dividends declared (US$ |
— | — | — | — | ( |
) | — | ( |
) | |||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| BALANCE, DECEMBER 31, 2023 |
||||||||||||||||||||||||||||
| Net income |
— | — | — | — | — | |||||||||||||||||||||||
| Other comprehensive loss |
— | — | — | ( |
) | — | — | ( |
) | |||||||||||||||||||
| Stock-based compensation expenses |
— | — | — | — | — | |||||||||||||||||||||||
| Issuance of ordinary shares upon exercise of restricted stock units |
( |
) | — | — | — | ( |
) | |||||||||||||||||||||
| Dividends declared (US$ |
— | — | — | — | ( |
) | — | ( |
) | |||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| BALANCE, DECEMBER 31, 2024 |
||||||||||||||||||||||||||||
| Net income |
— | — | — | — | — | |||||||||||||||||||||||
| Other comprehensive income |
— | — | — | — | — | |||||||||||||||||||||||
| Stock-based compensation expenses |
— | — | — | — | — | |||||||||||||||||||||||
| Issuance of ordinary shares upon exercise of restricted stock units |
( |
) | — | — | — | ( |
) | |||||||||||||||||||||
| Share repurchase |
— | — | — | — | — | ( |
) | ( |
) | |||||||||||||||||||
| Treasury stock retired |
( |
) | ( |
) | ( |
) | — | ( |
) | — | ||||||||||||||||||
| Dividends declared (US$ |
— | — | — | — | ( |
) | — | ( |
) | |||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| BALANCE, DECEMBER 31, 2025 |
||||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Year Ended December 31 |
||||||||||||
2023 |
2024 |
2025 |
||||||||||
US$ |
US$ |
US$ |
||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES |
||||||||||||
| Net income |
||||||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||||||
| Depreciation and amortization |
||||||||||||
| Loss on modification of lease |
||||||||||||
| Unrealized holding gain on investment |
( |
) | ( |
) | ( |
) | ||||||
| Stock-based compensation |
||||||||||||
| Gain from disposal of long-term investment |
( |
) | ( |
) | ||||||||
| Loss (gain) on disposal of property and equipment |
( |
) | ||||||||||
| Deferred income taxes |
( |
) | ( |
) | ||||||||
| Changes in operating assets and liabilities: |
||||||||||||
| Accounts receivable |
( |
) | ||||||||||
| Inventories |
( |
) | ||||||||||
| Prepaid expenses and other current assets |
( |
) | ( |
) | ( |
) | ||||||
| Other assets |
( |
) | ( |
) | ( |
) | ||||||
| Notes and accounts payable |
( |
) | ||||||||||
| Refund liabilities |
( |
) | ||||||||||
| Accrued expenses and other current liabilities |
( |
) | ||||||||||
| Lease liabilities |
( |
) | ||||||||||
| Income tax payable |
( |
) | ||||||||||
| Other liabilities |
( |
) | ||||||||||
| |
|
|
|
|
|
|||||||
| Net cash provided by operating activities |
||||||||||||
| |
|
|
|
|
|
|||||||
| CASH FLOWS FROM INVESTING ACTIVITIES |
||||||||||||
| Purchase of long-term investments |
( |
) | ||||||||||
| Proceeds from disposal of long-term investments |
||||||||||||
| Purchase of property and equipment |
( |
) | ( |
) | ( |
) | ||||||
| Proceeds from disposal of properties |
||||||||||||
| |
|
|
|
|
|
|||||||
| Net cash used in investing activities |
( |
) | ( |
) | ( |
) | ||||||
| |
|
|
|
|
|
|||||||
| CASH FLOWS FROM FINANCING ACTIVITIES |
| |||||||||||
| Dividends paid |
( |
) | ( |
) | ( |
) | ||||||
| Share repurchase |
( |
) | ||||||||||
| |
|
|
|
|
|
|||||||
| Net cash used in financing activities |
( |
) | ( |
) | ( |
) | ||||||
| |
|
|
|
|
|
|||||||
| NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH |
( |
) | ( |
) | ||||||||
| EFFECT OF EXCHANGE RATE CHANGES |
( |
) | ( |
) | ||||||||
| CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, BEGINNING OF YEAR |
||||||||||||
| |
|
|
|
|
|
|||||||
| CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, END OF YEAR |
||||||||||||
| |
|
|
|
|
|
|||||||
| SUPPLEMENTAL INFORMATION |
||||||||||||
| Income taxes paid |
||||||||||||
| |
|
|
|
|
|
|||||||
| NON-CASH INVESTING AND FINANCING ACTIVITIES: |
||||||||||||
| Unpaid purchase of property and equipment included in accounts payable and accrued liabilities |
||||||||||||
| |
|
|
|
|
|
|||||||
| Dividend declared included in accrued expenses and accrued liabilities |
||||||||||||
| |
|
|
|
|
|
|||||||
Fair Value Measurements at December 31, 2025 |
||||||||||||||||
Level 1 |
Level 2 |
Level 3 |
Total |
|||||||||||||
Items measured at fair value on a recurring basis: |
||||||||||||||||
Assets |
||||||||||||||||
Long-term investments: |
||||||||||||||||
Marketable equity investments |
$ | $ | ||||||||||||||
Fair Value Measurements at December 31, 2024 |
||||||||||||||||
Level 1 |
Level 2 |
Level 3 |
Total |
|||||||||||||
Items measured at fair value on a recurring basis: |
||||||||||||||||
Assets |
||||||||||||||||
Long-term investments: |
||||||||||||||||
Marketable equity investments |
$ | $ | ||||||||||||||
Year Ended December 31, 2023 |
Year Ended December 31, 2024 |
Year Ended December 31, 2025 |
||||||||||||||||||||||||||||||||||
US$ |
US$ |
US$ |
||||||||||||||||||||||||||||||||||
Foreign currency items |
Defined benefit pension plans |
Accumulated other comprehensive income (loss) |
Foreign currency items |
Defined benefit pension plans |
Accumulated other comprehensive income (loss) |
Foreign currency items |
Defined benefit pension plans |
Accumulated other comprehensive income (loss) |
||||||||||||||||||||||||||||
| Beginning balance |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||||
| Current-period change |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Ending balance |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
December 31 |
||||||||
2024 |
2025 |
|||||||
US$ |
US$ |
|||||||
Cash and deposits in bank |
||||||||
Time deposits |
||||||||
Repurchase agreements |
||||||||
Total cash and cash equivalents |
||||||||
Restricted cash |
||||||||
December 31 |
||||||||
2024 |
2025 |
|||||||
US$ |
US$ |
|||||||
Trade accounts receivable |
||||||||
Allowance for doubtful accounts |
( |
) | ( |
) | ||||
Year Ended December 31 |
||||||||||||
2023 |
2024 |
2025 |
||||||||||
US$ |
US$ |
US$ |
||||||||||
Allowances for doubtful accounts |
||||||||||||
Balance, beginning of year |
||||||||||||
Additions (reversals) charged to expense, net |
( |
) | ( |
) | ( |
) | ||||||
Balance, end of year |
||||||||||||
December 31 |
||||||||
2024 |
2025 |
|||||||
US$ |
US$ |
|||||||
Finished goods |
||||||||
Work in process |
||||||||
Raw materials |
||||||||
Percentage of Ownership |
December 31 |
|||||||||||||||
2024 |
2025 |
2024 |
2025 |
|||||||||||||
US$ |
US$ |
|||||||||||||||
Non-marketable equity securities: |
||||||||||||||||
(Cashido) |
% | % | — | — | ||||||||||||
Vastview Technology, Corp. (Vastview) |
% | % | — | — | ||||||||||||
Kinara, Inc (Kinara) |
% | % | ||||||||||||||
Marketable equity securities: |
||||||||||||||||
BIWIN Storage Technology Corp. (BIWIN) |
% | % | ||||||||||||||
Shenzhen Techwinsemi Technology Corp (TWSC) |
% | % | ||||||||||||||
December 31 |
||||||||
2024 |
2025 |
|||||||
US$ |
US$ |
|||||||
Cost: |
||||||||
Land |
||||||||
Buildings |
||||||||
Machinery and equipment |
||||||||
Furniture and fixtures |
||||||||
Leasehold and buildings improvement |
||||||||
Software |
||||||||
Total |
||||||||
Accumulated depreciation: |
||||||||
Buildings |
||||||||
Machinery and equipment |
||||||||
Furniture and fixtures |
||||||||
Leasehold and buildings improvement |
||||||||
Software |
||||||||
Prepayment and construction in progress |
||||||||
Year Ended December 31 |
||||||||
2024 |
2025 |
|||||||
US$ |
US$ |
|||||||
Refund liabilities |
||||||||
Balance, beginning of year |
||||||||
Additions |
||||||||
Actual sales return and discount |
( |
) | ( |
) | ||||
Balance, end of year |
||||||||
December 31 |
||||||||
2024 |
2025 |
|||||||
US$ |
US$ |
|||||||
Wages and bonus |
||||||||
Dividends |
||||||||
License fees and royalties |
||||||||
Research and development payable |
||||||||
Fixture |
||||||||
Lease liabilities – current portion |
||||||||
Equipment |
||||||||
Professional fees |
||||||||
Contract liabilities |
||||||||
Construction payment due |
||||||||
Others |
||||||||
Year Ended December 31 |
||||||||||||
2023 |
2024 |
2025 |
||||||||||
US$ |
US$ |
US$ |
||||||||||
Cayman |
( |
) | ( |
) | ( |
) | ||||||
Income recorded in Hong Kong |
||||||||||||
Income from other foreign operations |
||||||||||||
Income before taxes |
||||||||||||
Year Ended December 31 |
||||||||||||
2023 |
2024 |
2025 |
||||||||||
US$ |
US$ |
US$ |
||||||||||
Current taxes: |
||||||||||||
Hong Kong taxes — current |
||||||||||||
Foreign taxes — current |
||||||||||||
Total current taxes |
||||||||||||
Deferred taxes: |
||||||||||||
Hong Kong taxes — deferred |
||||||||||||
Foreign taxes — deferred |
( |
) | ( |
) | ||||||||
Total deferred taxes |
( |
) | ( |
) | ||||||||
Income tax expense |
||||||||||||
Effective tax rate |
% | % | % | |||||||||
2025 |
||||||||
US$ |
% |
|||||||
Tax at Hong Kong Statutory Rate |
||||||||
Other Jurisdiction Tax Effects |
||||||||
Cayman Islands |
||||||||
Statutory tax rate difference between Hong Kong and Cayman Islands |
( |
) | ( |
) | ||||
Nontaxable or nondeductible items |
||||||||
Other |
||||||||
Macau |
||||||||
Statutory tax rate difference between Hong Kong and Macau |
( |
) | ( |
) | ||||
Other |
( |
) | ( |
) | ||||
China |
||||||||
Statutory tax rate difference between Hong Kong and China |
||||||||
Tax Credits |
( |
) | ( |
) | ||||
Changes in Valuation Allowances |
||||||||
Other |
( |
) | ( |
) | ||||
U.S. |
||||||||
Statutory tax rate difference between Hong Kong and U.S. |
( |
) | ( |
) | ||||
Changes in Valuation Allowances |
||||||||
Other |
||||||||
Other Foreign Jurisdictions |
||||||||
Statutory tax rate difference between Hong Kong and Other Foreign Jurisdictions |
||||||||
Other |
||||||||
Changes in Unrecognized Tax Benefits |
( |
) | ( |
) | ||||
Provision for income taxes and effective tax rate |
||||||||
2023 |
2024 |
|||||||
US$ |
US$ |
|||||||
Tax expense at Cayman statutory rate |
— | — | ||||||
Differences between Cayman and other statutory tax rates |
||||||||
Permanent differences |
||||||||
Temporary differences |
( |
) | ( |
) | ||||
Alternative minimum tax |
||||||||
Income tax on undistributed earnings |
||||||||
Net changes in income tax credit |
( |
) | ( |
) | ||||
Net changes in valuation allowance of deferred income tax assets |
||||||||
Net operating loss carryforwards |
( |
) | ||||||
Liabilities related to unrealized tax benefits |
( |
) | ||||||
Adjustment of prior years’ taxes and others |
( |
) | ( |
) | ||||
Income tax expense |
||||||||
Year ended December 31, 2025 |
||||
US$ |
||||
Hong Kong |
||||
Macau |
||||
Others |
||||
Total income tax paid, net of refunds |
||||
December 31 |
||||||||
2024 |
2025 |
|||||||
US$ |
US$ |
|||||||
Stock-based compensation |
||||||||
Allowance for sales return |
||||||||
Inventory reserve |
||||||||
Foreign currency translation |
( |
) | ||||||
Property and equipment |
( |
) | ( |
) | ||||
Investment tax credits |
||||||||
Net operating loss carryforwards |
||||||||
Others |
||||||||
Valuation allowance |
( |
) | ( |
) | ||||
Net deferred tax assets |
||||||||
Year Ended December 31 |
||||||||||||
2023 |
2024 |
2025 |
||||||||||
US$ |
US$ |
US$ |
||||||||||
Balance, beginning of year |
||||||||||||
Increases in tax positions taken in current year |
||||||||||||
Decrease in tax position taken in prior year primarily related to the resolution of tax audit |
( |
) | ( |
) | ( |
) | ||||||
Balance, end of year |
||||||||||||
Tax Jurisdiction |
Tax Years | |
China |
||
Hong Kong |
||
Taiwan |
||
United States |
2023 |
2024 |
2025 |
||||||||||||||||||||||
Dividends Per Share (US$) |
Amount (in US$ thousand) |
Dividends Per Share (US$) |
Amount (in US$ thousand) |
Dividends Per Share (US$) |
Amount (in US$ thousand) |
|||||||||||||||||||
First quarter |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||
Second quarter |
||||||||||||||||||||||||
Third quarter |
||||||||||||||||||||||||
Fourth quarter |
||||||||||||||||||||||||
| $ | $ | $ | ||||||||||||||||||||||
Unit (in Thousands) |
||||
Available for grant at January 1, 2023 |
||||
Restricted stock units granted |
( |
) | ||
Restricted stock units forfeited |
||||
Available for grant at December 31, 2023 |
||||
Restricted stock units granted |
( |
) | ||
Restricted stock units forfeited |
||||
Available for grant at December 31, 2024 |
||||
Authorized-2025 Plan |
||||
Terminated-2015 Plan |
( |
) | ||
Restricted stock units granted |
( |
) | ||
Restricted stock units forfeited |
||||
Available for grant at December 31, 2025 |
||||
Number of Non-vested Stock Units (in Thousands) |
Weighted Average Grant Date Fair Value (US$) |
Weight Average Remaining Recognition Period (Years) |
||||||||||
Non-vested at January 1, 2023 |
||||||||||||
Restricted stock units granted |
||||||||||||
Restricted stock units vested |
( |
) | ||||||||||
Restricted stock units forfeited |
( |
) | ||||||||||
Non-vested at December 31, 2023 |
||||||||||||
Restricted stock units granted |
||||||||||||
Restricted stock units vested |
( |
) | ||||||||||
Restricted stock units forfeited |
( |
) | ||||||||||
Non-vested at December 31, 2024 |
||||||||||||
Restricted stock units granted |
||||||||||||
Restricted stock units vested |
( |
) | ||||||||||
Restricted stock units forfeited |
( |
) | ||||||||||
Non-vested at December 31, 2025 |
||||||||||||
Year Ended December 31 |
||||||||||||
2023 |
2024 |
2025 |
||||||||||
US$ |
US$ |
US$ |
||||||||||
Cost of sales |
||||||||||||
Research and development |
||||||||||||
Sales and marketing |
||||||||||||
General and administrative |
||||||||||||
Operating Lease Obligations |
||||
Fiscal Year: |
||||
2026 |
$ | |||
2027 |
||||
2028 |
||||
2029 |
||||
2030 |
||||
2031 and thereafter |
||||
Total |
||||
Less imputed interest |
||||
Present value of lease liabilities |
||||
| $ | ||||
2023 |
2024 |
2025 |
||||||||||
US$ |
US$ |
US$ |
||||||||||
Net sales |
||||||||||||
Less: |
||||||||||||
Product costs (1) |
||||||||||||
Stock-compensation and related payroll expense |
||||||||||||
Integrated Circuit design related costs |
||||||||||||
Depreciation and amortization |
||||||||||||
Income tax expense |
||||||||||||
Dispute related expenses |
||||||||||||
Other operating expenses (2) |
||||||||||||
Interest income |
( |
) | ( |
) | ( |
) | ||||||
Other segment items (3) |
( |
) | ( |
) | ( |
) | ||||||
Net income |
||||||||||||
| (1) | Product costs primarily include material, labor and other product related costs, excluding the other categories above. |
| (2) | Other operating expenses primarily include facilities expenses, sales promotion expenses, professional service expenses and other expenses. |
| (3) | Other segment items primarily include unrealized holding gain on investment, gain from disposal of long-term investment, foreign exchange gain or loss, interest expense and other income, net as reported in our consolidated statements of income. |
Year Ended December 31 |
||||||||||||
2023 |
2024 |
2025 |
||||||||||
US$ |
US$ |
US$ |
||||||||||
Taiwan |
||||||||||||
China |
||||||||||||
Others |
||||||||||||
Year Ended December 31 |
||||||||||||
2023 |
2024 |
2025 |
||||||||||
US$ |
US$ |
US$ |
||||||||||
Mobile Storage |
||||||||||||
Others |
||||||||||||
Year Ended December 31 |
||||||||||||
2023 |
2024 |
2025 |
||||||||||
US$ |
US$ |
US$ |
||||||||||
China |
||||||||||||
Japan |
||||||||||||
Singapore |
||||||||||||
Taiwan |
||||||||||||
Korea |
||||||||||||
United States |
||||||||||||
Others |
||||||||||||
Year Ended December 31 |
||||||||||||||||||||||||
2023 |
2024 |
2025 |
||||||||||||||||||||||
US$ |
% |
US$ |
% |
US$ |
% |
|||||||||||||||||||
PHISEMI |
* | * | ||||||||||||||||||||||
Kioxia |
* | * | ||||||||||||||||||||||
AFASTOR |
||||||||||||||||||||||||
Micron |
||||||||||||||||||||||||
SK Hynix |
* | * | * | * | ||||||||||||||||||||
| * | Less than 10% |