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QUALCOMM, INC.

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QUALCOMM INC/DE MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

04/27/2022 | 04:08pm EDT
This information should be read in conjunction with the condensed consolidated
financial statements and the notes thereto included in "Part I, Item 1" of this
Quarterly Report and with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" for the fiscal year ended September 26,
2021 contained in our 2021 Annual Report on Form 10-K.

This Quarterly Report (including but not limited to this section titled
Management's Discussion and Analysis of Financial Condition and Results of
Operations) contains forward-looking statements. Words such as "expects,"
"anticipates," "intends," "plans," "believes," "seeks," "estimates," "may,"
"will," "would" and similar expressions or variations of such words are intended
to identify forward-looking statements, but are not the exclusive means of
identifying forward-looking statements in this Quarterly Report. Additionally,
statements concerning future matters such as our future business, prospects,
results of operations, financial condition or research and development or
technology investments; new or enhanced products, services or technologies;
emerging industries or business models; design wins or product launches;
industry, market, business, product, technology, commercial, competitive or
consumer trends, including seasonality; the 5G transition; our expectations
regarding future demand or supply conditions; strategic investments or
acquisitions, and the anticipated timing or benefits thereof; potential impacts
of the COVID-19 pandemic, legal or regulatory matters, U.S./China trade or
national security tensions or vertical integration by our customers;
competition; and other statements regarding matters that are not historical are
also forward-looking statements.

Although forward-looking statements in this Quarterly Report reflect our good
faith judgment, such statements can only be based on facts and factors currently
known by us. Consequently, forward-looking statements are inherently subject to
risks and uncertainties and actual results and outcomes may differ materially
from the results and outcomes discussed in or anticipated by the forward-looking
statements. Factors that could cause or contribute to such differences in
results and outcomes include without limitation those discussed under the
heading "Risk Factors" below, as well as those discussed elsewhere in this
Quarterly Report. Readers are urged not to place undue reliance on these
forward-looking statements, which speak only as of the date of this Quarterly
Report. We undertake no obligation to revise or update any forward-looking
statements in order to reflect any event or circumstance that may arise after
the date of this Quarterly Report. Readers are urged to carefully review and
consider the various disclosures made in this Quarterly Report, which attempt to
advise interested parties of the risks and factors that may affect our business,
financial condition, results of operations and prospects.

Second Quarter Fiscal 2022 Overview and Other Recent Events


Revenues for the second quarter of fiscal 2022 were $11.2 billion, an increase
of 41% compared to the year ago quarter, with net income of $2.9 billion, an
increase of 67% compared to the year ago quarter. Highlights from the second
quarter of fiscal 2022 and other recent events included:

•QCT revenues increased by 52% in the second quarter of fiscal 2022 compared to
the year ago quarter, primarily due to an increase in average selling prices and
favorable mix toward higher-tier 5G products in handsets, along with higher IoT
revenues.

•On October 4, 2021, we and SSW Partners entered into a definitive agreement to
acquire Veoneer, Inc. (Veoneer). The transaction closed on April 1, 2022. We
funded substantially all of the total cash consideration payable in the
transaction, which was approximately $4.7 billion (inclusive of approximately
$4.6 billion for amounts paid in respect of Veoneer's outstanding capital stock
and equity awards and amounts to be paid to settle Veoneer's outstanding
convertible senior notes due 2024; and the $110 million termination fee paid to
Magna in the first quarter of fiscal 2022), in exchange for (i) the Arriver
business and (ii) the right to receive a majority of the proceeds upon the sale
of the Non-Arriver businesses by SSW Partners. We intend to incorporate
Arriver's computer vision, drive policy and driver assistance technologies into
our Snapdragon automotive platform to deliver an integrated software SoC ADAS
(advanced driver assistance systems) platform for automakers and Tier-1
automotive suppliers. SSW Partners retained Veoneer's Tier-1 automotive supplier
businesses, which it intends to sell in one or more transactions. We will
consolidate the Non-Arriver businesses starting from the Closing Date until such
businesses are sold by SSW Partners. Additional information related to this
acquisition is included in this Quarterly Report in "Notes to Condensed
Consolidated Financial Statements, Note 7. Acquisitions."

Our Business and Operating Segments


We develop and commercialize foundational technologies and products used in
mobile devices and other wireless products. We derive revenues principally from
sales of integrated circuit products and licensing our intellectual property,
including patents and other rights.
                                       21
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We are organized on the basis of products and services and have three reportable
segments. We conduct business primarily through our QCT (Qualcomm CDMA
Technologies) semiconductor business and our QTL (Qualcomm Technology Licensing)
licensing business. Our QSI (Qualcomm Strategic Initiatives) reportable segment
makes strategic investments. We also have nonreportable segments, including QGOV
(Qualcomm Government Technologies), our cloud AI inference processing initiative
and other technology and service initiatives.

Our reportable segments are operated by QUALCOMM Incorporated and its direct and
indirect subsidiaries. QTL is operated by QUALCOMM Incorporated, which owns the
vast majority of our patent portfolio. Substantially all of our products and
services businesses, including QCT, and substantially all of our engineering and
research and development functions, are operated by Qualcomm Technologies, Inc.
(QTI), a wholly-owned subsidiary of QUALCOMM Incorporated, and QTI's
subsidiaries. Neither QTI nor any of its subsidiaries has any right, power or
authority to grant any licenses or other rights under or to any patents owned by
QUALCOMM Incorporated.

Seasonality. Many of our products and much of our intellectual property are
incorporated into consumer wireless devices, which are subject to seasonality
and other fluctuations in demand. Our revenues have historically fluctuated
based on consumer demand for devices, as well as on the timing of
customer/licensee device launches and/or innovation cycles (such as the
transition to the next generation of wireless technologies). This has resulted
in fluctuations in QCT revenues in advance of and during device launches
incorporating our products and in QTL revenues when licensees' sales occur.
These trends may or may not continue in the future. Further, the trends for QTL
have been, and may in the future be, impacted by disputes and/or resolutions
with licensees and/or governmental investigations or proceedings.

Results of Operations

Revenues (in millions)
                                      Three Months Ended                          Six Months Ended
                            March 27,      March 28,                    March 27,      March 28,
                              2022            2021         Change         2022           2021         Change
Equipment and services     $   9,417      $    6,239      $ 3,178      $  18,098      $  12,681      $ 5,417
Licensing                      1,747           1,696           51          3,770          3,489          281
                           $  11,164      $    7,935      $ 3,229      $  21,868      $  16,170      $ 5,698


Second quarter 2022 vs. 2021
The increase in revenues in the second quarter of fiscal 2022 was primarily due
to:
+  $3.2 billion in higher equipment and services revenues from our QCT segment

First six months 2022 vs. 2021
The increase in revenues in the first six months of fiscal 2022 was primarily
due to:
+  $5.4 billion in higher equipment and services revenues and $158 million in
higher licensing revenues from our QCT segment
+  $125 million in higher licensing revenues from our QTL segment

Costs and Expenses (in millions, except percentages)

                                        Three Months Ended                                       Six Months Ended
                          March 27,          March 28,                            March 27,          March 28,
                             2022               2021             Change              2022               2021             Change
Cost of revenues         $   4,648          $   3,432          $  1,216          $   8,951          $   6,921          $  2,030
Gross margin                    58  %              57  %                                59  %              57  %


Second quarter and first six months 2022 vs. 2021
Gross margin percentage increased in the second quarter and first six months of
fiscal 2022 primarily due to:
+  increase in QCT gross margin
-  decrease in higher margin QTL licensing revenues in proportion to QCT
revenues
                                       22
--------------------------------------------------------------------------------
                                     Three Months Ended                         Six Months Ended
                            March 27,      March 28,                  March 27,      March 28,
                              2022           2021         Change        2022           2021         Change
Research and development   $  2,034       $  1,780       $  254      $  3,963       $  3,433       $  530
% of revenues                    18  %          22  %                      18  %          21  %


Second quarter 2022 vs. 2021
The increase in research and development expenses in the second quarter of
fiscal 2022 was primarily due to:
+  $233 million increase driven by higher costs related to the development of
wireless and integrated circuit technologies (including 5G and application
processor technologies), primarily driven by an increase in employee-related
expenses
+  $65 million increase in share-based compensation expense
-  $44 million decrease in expenses driven by revaluation of our deferred
compensation plan obligation on lower relative stock market performance (which
resulted in a corresponding increase in net losses on deferred compensation plan
assets within investment and other income, net due to the revaluation of the
related assets)

First six months 2022 vs. 2021
The increase in research and development expenses in the first six months of
fiscal 2022 was primarily due to:
+  $430 million increase driven by higher costs related to the development of
wireless and integrated circuit technologies (including 5G and application
processor technologies), primarily driven by an increase in employee-related
expenses
+  $156 million increase in share-based compensation expense
-  $55 million decrease in expenses driven by revaluation of our deferred
compensation plan obligation on lower relative stock market performance

                                             Three Months Ended                                         Six Months Ended
                               March 27,          March 28,                             March 27,          March 28,
                                 2022                2021              Change              2022               2021              Change

Selling, general and
administrative               $      624          $     557          $      67          $   1,232          $   1,124          $     108
% of revenues                         6  %               7  %                                  6  %               7  %

Second quarter 2022 vs. 2021 The increase in selling, general and administrative expenses in the second quarter of fiscal 2022 was primarily due to a $27 million increase in employee-related expenses.


First six months 2022 vs. 2021
The increase in selling, general and administrative expenses in the first six
months of fiscal 2022 was primarily due to:
+  $91 million increase in employee-related expenses
+  $27 million increase in acquisition-related expenses
+  $23 million increase in sales and marketing expenses
-  $50 million decrease in expenses driven by revaluation of our deferred
compensation plan obligation on lower relative stock market performance
                                       23
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Interest Expense and Investment and Other (Expense) Income, Net (in millions)
                                            Three Months Ended                                         Six Months Ended
                              March 27,           March 28,                             March 27,           March 28,
                                2022                2021              Change              2022                2021              Change
Interest expense            $      137          $      141          $     (4)         $      275          $      283          $     (8)

Investment and other
(expense) income, net
Interest and dividend
income                      $       20          $       22          $     (2)         $       37          $       42          $     (5)
Net (losses) gains on
marketable securities             (240)                (85)             (155)               (223)                 33              (256)
Net (losses) gains on other
investments                        (21)                176              (197)                 73                 209              (136)
Net (losses) gains on
deferred compensation plan
assets                             (43)                 23               (66)                (30)                 77              (107)
Impairment losses on other
investments                        (20)                (15)               (5)                (21)                (16)               (5)

Net losses on derivative
instruments                         (5)                (17)               12                 (19)                 (7)              (12)
Equity in net earnings of
investees                           10                  12                (2)                 17                  11                 6

Net gains (losses) on
foreign currency
transactions                         1                 (12)               13                   8                 (26)               34
                            $     (298)         $      104          $   (402)         $     (158)         $      323          $   (481)


Net losses on marketable securities for the three and six months ended March 27,
2022 was primarily driven by the change in fair value of certain of our QSI
marketable equity investments in early or growth stage companies. The fair
values of these investments have been and may continue to be subject to
increased volatility. Net gains on other investments for the three and six
months ended March 28, 2021 was driven primarily by realized gains resulting
from the sale of certain of our QSI non-marketable investments.

Income Tax Expense (in millions, except percentages)


The following table summarizes the primary factors that caused our income tax
provision to differ from the expected income tax provision at the U.S. federal
statutory rate:

                                                         Three Months Ended                        Six Months Ended
                                                  March 27,               March 28,          March 27,          March 28,
                                                    2022                     2021               2022               2021
Expected income tax provision at federal
statutory tax rate                              $     719                $     447          $   1,531          $     994
Benefit from foreign-derived intangible income
(FDII) deduction                                     (203)                    (115)              (344)              (189)
Excess tax benefit associated with share-based
awards                                                (27)                     (22)              (215)              (184)
Benefit related to the research and development
tax credit                                            (46)                     (39)              (104)               (98)
Foreign currency losses (gains) related to
foreign withholding tax receivable                     36                       33                 48                (46)
Audit settlement with Internal Revenue Service          -                       55                  -                 55

Other                                                  10                        8                 40                (17)
   Income tax expense                           $     489                $     367          $     956          $     515
Effective tax rate                                     14  %                    17  %              13  %              11  %


We estimate our annual effective income tax rate to be 14% for fiscal 2022,
which is lower than the U.S. federal statutory rate, primarily due to a
significant portion of our income qualifying for preferential treatment as FDII
at a 13% effective tax rate, excess tax benefits associated with share-based
awards and benefits from our federal research and development tax credit.
                                       24
--------------------------------------------------------------------------------

Pursuant to U.S. tax law, beginning in fiscal 2023, we are required to
capitalize and amortize domestic research and development expenditures over five
years and foreign research and development expenditures over fifteen years
(currently, such expenditures are deducted as incurred). If this requirement is
not delayed or repealed, our cash flows from operations will be adversely
affected due to significantly higher cash tax payments. However, since the
resulting deferred tax asset will be established at the statutory rate of 21%
(rather than the effective tax rate of 13% to 16% after considering FDII),
capitalization will favorably affect our provision for income taxes and results
of operations. The adverse cash flow impact and favorable tax provision impact
will diminish in future years as capitalized research and development
expenditures continue to amortize.

The current U.S. presidential administration and Congress have proposed to
increase U.S. tax rates, including reducing the benefit of the FDII deduction.
Substantially all of our income is taxable in the U.S., of which a significant
portion qualifies for preferential treatment as FDII. If such proposals are
enacted into law, our provision for income taxes, results of operations and cash
flows would be adversely (potentially materially) affected.

Segment Results


The following should be read in conjunction with our financial results for the
second quarter of fiscal 2022 for each reportable segment included in this
Quarterly Report in "Notes to Condensed Consolidated Financial Statements, Note
6. Segment Information."

QCT Segment (in millions, except percentages)

                                               Three Months Ended                                        Six Months Ended
                                March 27,          March 28,                              March 27,         March 28,
                                   2022               2021              Change              2022              2021              Change
Revenues
Handsets (1)                   $   6,325          $   4,065          $    2,260          $ 12,307          $  8,281          $   4,026
RFFE (2)                           1,160                903                 257             2,292             1,964                328
Automotive (3)                       339                240                  99               595               452                143
IoT (internet of things) (4)       1,724              1,073                 651             3,201             2,117              1,084
Total revenues                 $   9,548          $   6,281          $    3,267          $ 18,395          $ 12,814          $   5,581
EBT (5)                        $   3,340          $   1,584          $    1,756          $  6,455          $  3,503          $   2,952
EBT as a % of revenues                35  %              25  %           10 points             35  %             27  %           8 points

(1) Includes revenues from products sold for use in mobile handsets, excluding RFFE (radio frequency front-end) components.


(2) Includes all revenues from sales of 4G, 5G sub-6 and 5G millimeter wave RFFE
products (a substantial portion of which are sold for use in mobile handsets)
and excludes radio frequency transceiver components.

(3) Includes revenues from products sold for use in automobiles, including telematics, connectivity and digital cockpit.

(4) Primarily includes products sold for use in the following industries and applications: consumer (including computing, voice and music and XR), edge networking (including mobile broadband and wireless access points) and industrial (including handhelds, retail, transportation and logistics and utilities).

(5) Earnings (loss) before income taxes.


Substantially all of QCT's revenues consist of equipment and services revenues,
which were $9.4 billion and $6.2 billion in the second quarter of fiscal 2022
and 2021, respectively, and $18.0 billion and $12.6 billion in the first six
months of fiscal 2022 and 2021, respectively. QCT handsets, automotive and IoT
revenues mostly relate to sales of our Snapdragon platforms (which include
processors and modems), stand-alone Mobile Data Modems, radio frequency
transceiver, power management and wireless connectivity integrated chipsets.

Second quarter 2022 vs. 2021
The increase in QCT revenues in the second quarter of fiscal 2022 was primarily
due to:
+  higher handsets revenues, primarily driven by $2.0 billion in higher revenues
per chipset, which was primarily due to increases in average selling prices and
favorable mix toward higher-tier 5G products, particularly from major OEMs as we
gained additional share
+  higher RFFE revenues, primarily driven by an increase in demand for 4G/5G
products from major OEMs
+  higher automotive revenues, primarily driven by an increase in demand for
digital cockpit products
+  higher IoT revenues across consumer, edge networking and industrial products,
driven by a $373 million increase in demand, with the remaining increase of $278
million primarily due to favorable mix
                                       25
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QCT EBT as a percentage of revenues increased in the second quarter of fiscal
2022 primarily due to:
+  higher revenues
+  higher gross margin percentage, primarily driven by higher average selling
prices and favorable mix toward higher-tier 5G products, partially offset by
higher product costs
-  higher operating expenses, primarily driven by higher research and
development expenses

First six months 2022 vs. 2021
The increase in QCT revenues in the first six months of fiscal 2022 was
primarily due to:
+  higher handsets revenues, primarily driven by $3.9 billion in higher revenues
per chipset, which was primarily due to increases in average selling prices and
favorable mix toward higher-tier 5G products, particularly from major OEMs as we
gained additional share
+  higher RFFE revenues, primarily driven by an increase in demand for 4G/5G
products from major OEMs
+  higher automotive revenues, primarily driven by an increase in demand for
digital cockpit products
+  higher IoT revenues across consumer, edge networking and industrial products,
driven by a $554 million increase in demand, with the remaining increase of $530
million primarily due to favorable mix

QCT EBT as a percentage of revenues increased in the first six months of fiscal
2022 primarily due to:
+  higher revenues
+  higher gross margin percentage, primarily driven by higher average selling
prices and favorable mix toward higher-tier 5G products, partially offset by
higher product costs
-  higher operating expenses, primarily driven by higher research and
development expenses

QTL Segment (in millions, except percentages)

                                       Three Months Ended                   

Six Months Ended

                             March 27,      March 28,                     March 27,      March 28,
                               2022           2021          Change          2022           2021         Change

   Licensing revenues       $  1,580       $  1,614       $     (34)     $  3,398       $  3,273       $  125

   EBT                         1,154          1,191             (37)        2,560          2,461           99

EBT as a % of revenues 73 % 74 % -1 point

    75  %          75  %           -


Second quarter 2022 vs. 2021
The decrease in QTL licensing revenues in the second quarter of fiscal 2022 was
due to:
-  $91 million decrease in estimated sales of 3G/4G/5G-based multimode products
-  $31 million in lower royalty revenues recognized related to devices sold in
prior periods
+  $88 million increase in estimated revenues per unit, which was primarily
driven by favorable mix, including 5G

QTL EBT as a percentage of revenues decreased in the second quarter of fiscal 2022 primarily due to lower revenues.


First six months 2022 vs. 2021
The increase in QTL licensing revenues in the first six months of fiscal 2022
was primarily due to:
+  $197 million increase in estimated revenues per unit, which was primarily
driven by favorable mix, including 5G
-  $66 million decrease in estimated sales of 3G/4G/5G-based multimode products

QTL EBT as a percentage of revenues remained flat in the first six months of
fiscal 2022.

QSI Segment (in millions)
                                         Three Months Ended                                           Six Months Ended
                          March 27,           March 28,                               March 27,            March 28,
                             2022               2021               Change               2022                 2021               Change

Equipment and services
revenues                 $       6          $       10          $      (4)         $      14             $       19          $      (5)

EBT                           (269)                 98               (367)              (147)                   256               (403)


Second quarter and first six months 2022 vs. 2021
The decrease in QSI EBT in the second quarter and first six months of fiscal
2022 was primarily due to a $353 million and $389 million increase,
respectively, in net losses on investments, which was primarily driven by the
change in fair value of certain of our marketable equity investments in early or
growth stage companies. The fair values of these investments have been and may
continue to be subject to increased volatility.
                                       26
--------------------------------------------------------------------------------

Looking Forward


In the coming years, we expect consumer demand for 3G/4G/5G multimode and 5G
products and services to continue to ramp around the world as we continue to
transition from 3G/4G multimode and 4G products and services. We believe that 5G
will continue to drive adoption of certain technologies that are already
commonly used in smartphones by industries and applications beyond mobile
handsets, such as automotive and IoT. We believe it is important that we remain
a leader in 5G technology development, standardization, intellectual property
creation and licensing, and a leading developer and supplier of 5G integrated
circuit products in order to sustain and grow our business long-term.

As we look forward to the next several quarters, our business may be impacted by the following key items:


•We expect QCT revenues to continue to be favorably impacted for the remainder
of the fiscal year compared to the prior year, reflecting continued strength
across handsets, RFFE, automotive and IoT revenue streams.

•While we and the semiconductor industry continue to experience capacity
constraints, we have entered into several, and we may enter into additional,
multi-year capacity purchase commitments with certain suppliers of our
integrated circuit products in an effort to secure commitments for future
supply, which we expect will allow us to continue to realize benefits from
increased demand for integrated circuit products, particularly from higher-tier
5G products from major OEMs. Despite these realized benefits, there continues to
be supply chain complexities and challenges that have prevented, and we expect
will continue to prevent, us from securing supply to fully realize the benefits
of increased customer demand.

•We expect commercial 5G network deployments and device launches will continue.


•We expect our research and development costs will increase compared to the
prior year, primarily due to increased investment towards advancements in 5G and
application processor technologies and certain other long-term initiatives, as
well as an increase in share-based compensation expense.

•We expect continued intense competition, particularly in China.


•Current U.S./China trade relations and/or national security protection policies
may negatively impact our business, growth prospects and results of operations.
See "Risk Factors" in this Quarterly Report, including the Risk Factor titled "A
significant portion of our business is concentrated in China, and the risks of
such concentration are exacerbated by U.S./China trade and national security
tensions."

The degree to which the COVID-19 pandemic impacts our business, financial
condition and results of operations will depend on future developments, which
are highly uncertain. See "Risk Factors" in this Quarterly Report, specifically
the Risk Factor titled "The coronavirus (COVID-19) pandemic had an adverse
effect on our business and results of operations, and may continue to impact us
in the future."

Further, we currently do not expect a significant impact on our results of
operations in the future due to Russia's invasion of Ukraine, as we have minimal
business in Russia and Ukraine, both directly and indirectly. See "Risk Factors"
in this Quarterly Report, specifically the Risk Factor titled "We operate in the
highly cyclical semiconductor industry, which is subject to significant
downturns. We are also susceptible to declines in global, regional and local
economic conditions generally. Our stock price and financial results are subject
to substantial quarterly and annual fluctuations due to these dynamics, among
others."

In addition to the foregoing business and market-based matters, we continue to
devote resources to working with and educating participants in the wireless
industry and governments as to the benefits of our licensing program and our
extensive technology investments in promoting a highly competitive and
innovative wireless industry. However, we expect that certain companies may be
dissatisfied with the need to pay reasonable royalties for the use of our
technologies and not welcome the success of our licensing program in enabling
new, highly cost-effective competitors to their products. Accordingly, such
companies and/or governments or regulators may continue to challenge our
business model in various forums throughout the world.

Further discussion of risks related to our business is provided in the section titled "Risk Factors" included in this Quarterly Report.

                                       27
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Liquidity and Capital Resources


Our principal sources of liquidity are our existing cash, cash equivalents and
marketable securities, cash generated from operations and cash provided by our
debt programs. The following tables present selected financial information
related to our liquidity at March 27, 2022 and September 26, 2021 and for the
first six months of fiscal 2022 and 2021 (in millions):

                                                         March 27,          

September 26,

                                                            2022                 2021                Change
Cash and cash equivalents                               $   7,173          $        7,116          $     57
Marketable securities                                       4,373                   5,298              (925)
    Cash, cash equivalents and marketable securities    $  11,546          $       12,414          $   (868)


                                                               Six Months Ended
                                                   March 27,       March 28,
                                                      2022            2021          Change

Net cash provided by operating activities $ 4,755 $ 6,086 $ (1,331)

     Net cash used by investing activities              (638)         

(3,034) 2,396

     Net cash used by financing activities            (4,044)         

(3,788) (256)



Cash, cash equivalents and marketable securities. The net decrease in cash, cash
equivalents and marketable securities was primarily due to $2.1 billion in
payments to repurchase shares of our common stock, $1.5 billion in cash
dividends paid, $1.1 billion in capital expenditures, $562 million in payments
of tax withholdings related to the vesting of share-based awards and $288
million in cash paid for acquisitions and other investments. This was partially
offset by net cash provided by operating activities, which was negatively
impacted by advanced payments of $1.6 billion made to suppliers of our
integrated circuit products under certain multi-year capacity commitments, as
well as $1.6 billion of net changes in other operating assets and liabilities,
consisting of increased working capital requirements, including higher inventory
and related operating liabilities to support QCT demand, an increase in accounts
receivable as a result of higher revenues (net of an increase in amounts accrued
for customer incentive arrangements recorded as a reduction to accounts
receivable) and the timing of payments related to payroll, benefits and other
liabilities. We currently expect our working capital requirements to increase in
the near term to support QCT demand.

Capital Return Program. On October 12, 2021, we announced a new $10.0 billion
stock repurchase program. This was in addition to the then remaining authority
of $0.9 billion under the previous program. The stock repurchase programs have
no expiration date. During the second quarter of fiscal 2022, we utilized the
remaining repurchase authority under the previous program and began repurchases
under the new program. In the first six months of fiscal 2022, we repurchased
and retired 14 million shares of our common stock for $2.1 billion, before
commissions. At March 27, 2022, $9.1 billion remained authorized for repurchase
under our stock repurchase program. Our stock repurchase program is subject to
periodic evaluations to determine when and if repurchases are in the best
interests of our stockholders, and we may accelerate, suspend, delay or
discontinue repurchases at any time.

On March 9, 2022, we announced a 10% increase in our quarterly dividend per
share of common stock from $0.68 to $0.75, which is effective for dividends
payable after March 24, 2022. In the first six months of fiscal 2022, we paid
cash dividends totaling $1.5 billion, or $1.36 per share. On April 13, 2022, we
announced a cash dividend of $0.75 per share on our common stock, payable on
June 23, 2022 to stockholders of record as of the close of business on June 2,
2022. We currently intend to continue to use cash dividends as a means of
returning capital to stockholders, subject to capital availability and our view
that cash dividends are in the best interests of our stockholders, among other
factors.

Debt. At March 27, 2022, we had $15.5 billion of principal floating- and
fixed-rate notes outstanding, $1.5 billion of which matures in May 2022 and $1.5
billion of which matures in January 2023. The remaining debt has maturity dates
in 2024 through 2050. We have an unsecured commercial paper program, which
provides for the issuance of up to $4.5 billion of commercial paper. Net
proceeds from this program are used for general corporate purposes. At March 27,
2022, we had $500 million of commercial paper outstanding. We also have a
Revolving Credit Facility, which provides for unsecured revolving facility
loans, swing line loans and letters of credit in an aggregate amount of up to
$4.5 billion, which expires on December 8, 2025. At March 27, 2022, no amounts
were outstanding under the Revolving Credit Facility. We expect to issue debt in
the future. The amount and timing of such debt will depend on a number of
factors, including but not limited to maturities of our existing debt,
acquisitions and strategic investments, favorable and/or acceptable interest
rates and changes in corporate income tax law. Additional information regarding
our outstanding debt is provided in "Notes to Consolidated Financial Statements,
Note 6. Debt" in our 2021 Annual Report on Form 10-K and in this Quarterly
Report in "Notes to Condensed Consolidated Financial Statements, Note 2.
Composition of Certain Financial Statement Items."
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Income Taxes. Pursuant to U.S. tax law, beginning in fiscal 2023, we are
required to capitalize and amortize domestic research and development
expenditures over five years and foreign research and development expenditures
over fifteen years (currently, such expenditures are deducted as incurred). If
this requirement is not delayed or repealed, our cash flows from operations will
be adversely affected due to significantly higher cash tax payments. Additional
information regarding our income taxes is provided in this Quarterly Report in
"Notes to Condensed Consolidated Financial Statements, Note 3. Income Taxes."

Acquisitions. In October 2021, we and SSW Partners entered into a definitive
agreement to acquire Veoneer. The transaction closed on April 1, 2022, and we
funded substantially all of the total cash consideration of approximately $4.7
billion (inclusive of approximately $4.6 billion for amounts paid in respect of
Veoneer's outstanding capital stock and equity awards and amounts to be paid to
settle Veoneer's outstanding convertible senior notes due 2024; and the $110
million termination fee paid to Magna in the first quarter of fiscal 2022). We
have the right to receive a majority of the proceeds upon the sale of the
Non-Arriver businesses by SSW Partners, and we have agreed to provide certain
funding of approximately $300 million to the Non-Arriver businesses while SSW
Partners seeks a buyer(s). Additional information related to this acquisition is
included in this Quarterly Report in "Notes to Condensed Consolidated Financial
Statements, Note 7. Acquisitions." We expect to continue making strategic
investments and acquisitions, the amounts of which could vary significantly, to
open new opportunities for our technologies, obtain development resources, grow
our patent portfolio or pursue new businesses.

Long-term Capacity Commitments. We have entered into several, and we may enter
into additional, multi-year capacity purchase commitments with certain suppliers
of our integrated circuit products. In the first six months of fiscal 2022, we
made $1.6 billion in advance payments related to certain obligations under these
purchase agreements, which were included within other assets and other current
assets at March 27, 2022. Additional information regarding long-term capacity
commitments and other purchase obligations is provided in "Notes to Consolidated
Financial Statements, Note 7. Commitments and Contingencies" in our 2021 Annual
Report on Form 10-K.

Additional Capital Requirements. Expected working and other capital requirements
are described in our 2021 Annual Report on Form 10-K in "Part II, Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations." At March 27, 2022, other than for the changes disclosed in the
"Notes to Condensed Consolidated Financial Statements" and "Liquidity and
Capital Resources" in this Quarterly Report, there have been no other material
changes to our expected working and other capital requirements described in our
2021 Annual Report on Form 10-K.

Further, regulatory authorities in certain jurisdictions have investigated our
business practices and instituted proceedings against us and they or other
regulatory authorities may do so in the future. Additionally, certain of our
direct and indirect customers and licensees have pursued, and they or others may
in the future pursue, litigation, arbitration or other strategies against us
related to our business. Unfavorable resolutions of one or more of these matters
have had and could in the future have a material adverse effect on our business,
revenues, results of operations, financial condition and cash flows. See "Notes
to Condensed Consolidated Financial Statements, Note 5. Commitments and
Contingencies" and "Risk Factors" in this Quarterly Report.

We believe, based on our current business plan and the facts and factors known
by us, our cash, cash equivalents and marketable securities, our expected cash
flow generated from operations and our expected financing activities will
satisfy our working and other capital requirements for at least the next 12
months and thereafter for the foreseeable future. See "Risk Factors" in this
Quarterly Report.

Risk Factors

You should consider each of the following factors in evaluating our business and
our prospects, any of which could negatively impact our business, results of
operations, cash flows and financial condition, and require significant
management time and attention. Further, the risks and uncertainties described
below are not the only ones we face. Additional risks and uncertainties not
presently known to us or that we currently consider immaterial may also
negatively impact our business, results of operations, cash flows and financial
condition, and require significant management time and attention. In such cases,
the trading price of our common stock could decline. You should also consider
the other information set forth in this Quarterly Report in evaluating our
business and our prospects, including but not limited to our financial
statements and the related notes, and "Part I, Item 2. Management's Discussion
and Analysis of Financial Condition and Results of Operations." References to
"and," "or" and "and/or" should be read to include the others, as appropriate.

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RISKS RELATED TO THE CORONAVIRUS (COVID-19) PANDEMIC

The coronavirus (COVID-19) pandemic had an adverse effect on our business and results of operations, and may continue to impact us in the future.


The rapid, global spread of COVID-19 and the fear it created resulted in
significant economic uncertainty, significant declines in business and consumer
confidence and global demand in the wireless industry (among others) and a
global economic slowdown, which negatively affected our financial results over
certain periods. Specifically, throughout most of calendar 2020 and into early
calendar 2021, the decline in demand for smartphones and other consumer devices
sold by our customers or licensees resulted in decreased demand for our
integrated circuit products (which are incorporated into such devices) and a
decrease in the royalties we earned on the licensing of our intellectual
property (which is dependent upon the number of such devices sold that utilize
our intellectual property). The emergence and spread of new variants of
COVID-19, and spikes in COVID-19 cases in various geographic regions, continues
to create uncertainty as to when and to what extent normal business, economic
and social activity and conditions will resume.

The COVID-19 pandemic also caused us to modify our workforce practices, such as
having the vast majority of our employees work from home. We are beginning to
open our offices globally, and we intend to operate in a "hybrid" working
environment. We could be negatively affected in the future if, among others, a
significant number of our employees, or employees who perform critical
functions, become ill and/or are quarantined as the result of exposure to
COVID-19, or if government policies restrict the ability of those employees to
perform their critical functions. Further, our efforts to reopen our offices
safely may not be successful, could expose our employees, customers, licensees
and partners to health risks and us to associated liability, and could result in
disruptions among our employees. See also the Risk Factor titled "We may not be
able to attract and retain qualified employees, and our attempts to fully reopen
our offices and operate under a hybrid working environment may not be
successful."

The COVID-19 pandemic could impact our business, results of operations and
financial condition in the future as described above, and/or through delayed,
reduced or cancelled customer orders; disruptions or delays in our supply chain;
the inability of our customers or licensees to purchase or pay for our products
or technologies; the insolvency of key suppliers, customers or licensees; delays
in reporting or payments from our customers or licensees; or failures by other
counterparties. The degree to which the COVID-19 pandemic impacts our future
business, results of operations and financial condition will depend on future
developments, which are uncertain, including but not limited to the duration of
the pandemic; spikes in COVID-19 cases in various geographic regions; the
emergence, spread and severity of new variants of COVID-19; the availability,
adoption and efficacy of vaccines or other medical treatments for COVID-19; and
government responses and other actions to limit the spread of COVID-19 or to
mitigate the negative economic effects of the pandemic (including potential
increases in corporate tax rates or other tax obligations to pay for stimulus
and other actions that have been and may in the future be taken as a result of
the pandemic). We are similarly unable to predict the extent to which the
pandemic impacts our customers, licensees, suppliers and other partners and
their financial conditions, but adverse effects on these parties could also
adversely affect us. For example, in response to the rising COVID-19 infections,
China has imposed lockdowns in certain parts of the country, which may
negatively impact manufacturing and/or supply chains, as well as consumer demand
for devices incorporating our products. Finally, the COVID-19 pandemic may make
it harder for management to estimate the future performance of our business. To
the extent the COVID-19 pandemic adversely affects our business, results of
operations and financial condition, it may also have the effect of exacerbating
the other risks discussed in this "Risk Factors" section.

RISKS RELATED TO OUR OPERATING BUSINESSES


We derive a significant portion of our revenues from a small number of customers
and licensees, and particularly from their sale of premium tier devices. If
revenues derived from these customers or licensees decrease or the timing of
such revenues fluctuates, our business and results of operations could be
negatively affected.

We derive a significant portion of our revenues from a small number of customers
and licensees, and particularly from their sale of premium tier devices, and we
expect this trend to continue in the foreseeable future. Our industry is
experiencing and may continue to experience concentration of device share among
a few companies, particularly at the premium tier, contributing to this trend.
Certain Chinese OEMs continue to grow their device share in China and are
increasing their device share in regions outside of China, and we derive a
significant portion of our revenues from a small number of these OEMs as well.
See also "Notes to Condensed Consolidated Financial Statements, Note 2.
Composition of Certain Financial Statement Items - Concentrations."

In addition, a number of our largest integrated circuit customers have
developed, are developing or may develop their own integrated circuit products,
or may choose our competitors' integrated circuit products, which they have in
the past utilized, currently utilize and may in the future utilize in some (or
all) of their devices, rather than our products, which could
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significantly reduce the revenues we derive from these customers. See also the
Risk Factor titled "Our business, particularly our semiconductor business, may
suffer as a result of our customers vertically integrating (i.e., developing
their own integrated circuit products)."

Further, political actions, including trade and/or national security protection
policies, or other actions by governments, particularly the U.S. and Chinese
governments, have in the past, currently are and could in the future limit or
prevent us from transacting business with certain of our customers, limit,
prevent or discourage those customers from transacting business with us, or make
it more expensive to do so, any of which could also significantly reduce the
revenues we derive from these customers. See also the Risk Factor titled "A
significant portion of our business is concentrated in China, and the risks of
such concentration are exacerbated by U.S./China trade and national security
tensions."

In addition, we spend a significant amount of engineering and development time,
funds and resources in understanding our key customers' feedback and/or
specifications and attempt to incorporate such input into our product launches
and technologies. These efforts may not require or result in purchase
commitments from such customers or we may have lower purchases from such
customers than expected, and consequently, we may not achieve the anticipated
revenues from these efforts, or these efforts may result in non-recoverable
costs.

The loss of any one of our significant customers, a reduction in the purchases
of our products by such customers or the cancellation of significant purchases
by any of these customers, whether due to the use of their own integrated
circuit products or our competitors' integrated circuit products, government
restrictions, a decline in global, regional or local economic conditions or
otherwise, would reduce our revenues and could harm our ability to achieve or
sustain expected results of operations, and a delay of significant purchases,
even if only temporary, would reduce our revenues in the period of the delay.
Any such reduction in revenues would also impact our cash resources available
for other purposes, such as research and development.

Further, the concentration of device share among a few companies, and the
corresponding purchasing power of these companies, may result in lower prices
for our products which, if not accompanied by a sufficient increase in the
volume of purchases of our products, could have an adverse effect on our
revenues and margins. In addition, the timing and size of purchases by our
significant customers may be impacted by the timing of such customers' new or
next generation product introductions, over which we have no control, and the
timing and success of such introductions may cause our revenues and results of
operations to fluctuate.

Apple purchases our MDM (or thin modem) products, which do not include our
integrated application processor technology, and which have lower revenue and
margin contributions than our combined modem and application processor products.
Consequently, to the extent Apple takes device share from our customers who
purchase our integrated modem and application processor products, our revenues
and margins may be negatively impacted.

Our industry has also experienced slowing growth in the premium-tier device
segment due to, among other factors, a maturing premium-tier smartphone industry
in which demand is increasingly driven by new product launches and innovation
cycles. A reduction in sales of premium-tier devices, a reduction in sales of
our premium-tier integrated circuit products (which have a higher revenue and
margin contribution than our lower-tier integrated circuit products), or a shift
in share away from OEMs that utilize our premium-tier products, would reduce our
revenues and margins and may harm our ability to achieve or sustain expected
financial results. Any such reduction in revenues would also impact our cash
resources available for other purposes, such as research and development.

Further, while our product and revenue diversification strategies have resulted
in an increasing portion of our revenues coming from outside of mobile handsets,
e.g., from industries such as automotive and IoT, certain product categories
within those industries may in themselves be subject to high levels of customer
concentration.

Although we have more than 300 licensees, we derive a significant portion of our
licensing revenues from a limited number of licensees, which includes a number
of Chinese OEMs. In the event that one or more of our significant licensees fail
to meet their reporting and payment obligations, or we are unable to renew or
modify one or more of their license agreements under similar terms as their
existing agreements, our revenues, results of operations and cash flows would be
adversely impacted. Moreover, the future growth and success of our core
licensing business will depend in part on the ability of our licensees to
develop, introduce and deliver high-volume products that achieve and sustain
customer acceptance. We do not have control over the product development, sales
efforts or pricing of products by our licensees, and our licensees might not be
successful. Reductions in sales of our licensees' products, or reductions in the
average selling prices of wireless devices sold by our licensees without a
sufficient increase in the volumes of such devices sold, would generally have an
adverse effect on our licensing revenues.
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Our business, particularly our semiconductor business, may suffer as a result of our customers vertically integrating (i.e., developing their own integrated circuit products).


Certain of our largest integrated circuit customers (for example, Samsung)
develop their own integrated circuit products, which they have in the past
utilized, and currently utilize, in certain of their devices and may in the
future utilize in some (or all) of their devices, rather than our products (and
they have and may continue to sell their integrated circuit products to third
parties, discretely or together with certain of their other products, in
competition with us).

Apple has utilized modem products of one of our competitors in some of its
devices rather than our products, and solely utilized one of our competitors'
products in several of its prior device launches. In April 2019, we entered into
a multi-year chipset supply agreement with Apple and began shipping modems under
this agreement in the third quarter of fiscal 2020. In December 2019, Apple
acquired Intel's modem assets and is developing its own modem products using
these assets. Accordingly, Apple is expected to use its own modem products,
rather than our products, in some or all of its future devices.

Similarly, we derive a significant portion of our revenues from Chinese OEMs.
Certain of our customers in China have developed, and others may in the future
develop, their own integrated circuit products and use such integrated circuit
products in their devices rather than our integrated circuit products, including
due to pressure from or policies of the Chinese government (whose Made in China
2025 campaign targets 70% semiconductor self-sufficiency by 2025), concerns over
losing access to our integrated circuit products as a result of actual,
threatened or potential U.S. or Chinese government actions or policies,
including trade protection or national security policies, or other reasons. See
also the Risk Factor titled "A significant portion of our business is
concentrated in China, and the risks of such concentration are exacerbated by
U.S./China trade and national security tensions."

In addition, supply/capacity constraints within the semiconductor industry may
further incentivize our integrated circuit customers to vertically integrate in
an effort to secure additional control over their supply chains.

If some or all of our largest customers and/or the largest smartphone OEMs
utilize their own integrated circuit/modem products in some (or all) of their
devices rather than our products, our business, revenues, results of operations,
cash flows and financial position could be materially adversely impacted. See
also the Risk Factor titled "We derive a significant portion of our revenues
from a small number of customers and licensees, and particularly from their sale
of premium tier devices. If revenues derived from these customers or licensees
decrease or the timing of such revenues fluctuates, our business and results of
operations could be negatively affected."

A significant portion of our business is concentrated in China, and the risks of
such concentration are exacerbated by U.S./China trade and national security
tensions.

We derive a significant portion of our revenues from Chinese OEMs, and from
non-Chinese OEMs that utilize our integrated circuit products in their devices
and sell those devices into China, which has the largest number of smartphone
users in the world. We also source certain critical integrated circuit products
from suppliers in China.

Due to various factors, including pressure, encouragement or incentives from, or
policies of, the Chinese government (including its Made in China 2025 campaign),
concerns over losing access to our integrated circuit products as a result of
actual, threatened or potential U.S. or Chinese government actions or policies,
including trade protection or national security policies, or other reasons, some
of our Chinese integrated circuit customers have developed, and others may in
the future develop, their own integrated circuit products and use such
integrated circuit products in their devices, or use our competitors' integrated
circuit products in their devices, rather than our products, which could
materially harm our business, revenues, results of operations, cash flows and
financial position. See also the Risk Factor titled "Our business, particularly
our semiconductor business, may suffer as a result of our customers vertically
integrating (i.e., developing their own integrated circuit products)."

Political actions, including trade protection and national security policies of
the U.S. and Chinese governments, such as tariffs, bans or placing companies on
restricted entity lists, have in the past, currently are and could in the future
limit or prevent us from transacting business with certain of our Chinese
customers or suppliers, limit, prevent or discourage certain of our Chinese
customers or suppliers from transacting business with us, or make it more
expensive to do so. Given our revenue concentration in China, if, due to actual,
threatened or potential U.S. or Chinese government actions or policies: we were
further limited in, or prohibited from, selling our integrated circuit products
to Chinese OEMs; our non-Chinese OEM customers were limited in, or prohibited
from, selling devices into China that incorporate our integrated circuit
products; Chinese OEMs develop and use their own integrated circuit products or
use our competitors' integrated circuit products in some (or all) of their
devices rather than our integrated circuit products; Chinese tariffs on our
integrated circuit products or on devices which incorporate our integrated
circuit products made purchasing such products or devices more expensive to
Chinese OEMs or Chinese consumers; or our Chinese licensees delay or cease
making payments of license fees they owe us,
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our business, revenues, results of operations, cash flows and financial position
could be materially harmed. Similarly, if, due to U.S. or Chinese government
actions or policies, we were limited in or prohibited from obtaining critical
integrated circuit products from our suppliers in China, our business, revenues,
results of operations, cash flows and financial position could be materially
harmed. See also the Risk Factor titled "We derive a significant portion of our
revenues from a small number of customers and licensees, and particularly from
their sale of premium tier devices. If revenues derived from these customers or
licensees decrease or the timing of such revenues fluctuates, our business and
results of operations could be negatively affected."

Finally, government policies in China that regulate the amount and timing of
funds that may flow out of the country have impacted and may continue to impact
the timing of our receipt of, and/or ability to receive, payments from our
customers and licensees in China, which may negatively impact our cash flows.

RISKS RELATED TO NEW INITIATIVES


Our growth depends in part on our ability to extend our technologies and
products into new and expanded product areas, and industries and applications
beyond mobile handsets. Our research, development and other investments in these
new and expanded product areas, industries and applications, and related
technologies and products, as well as in our existing technologies and products,
and new technologies, may not generate operating income or contribute to future
results of operations that meet our expectations.

While we continue to invest significant resources toward advancements primarily
in support of 4G- and 5G-based technologies, we also invest in new and expanded
product areas, and industries and applications beyond mobile handsets, by
utilizing our existing technical and business expertise and through acquisitions
or other strategic transactions.

In particular, our future growth depends in part on new and expanded product
areas, such as RFFE, and industries and applications beyond mobile handsets,
such as automotive and IoT; our ability to develop leading and cost-effective
technologies and products for these new and expanded product areas, industries
and applications; and third parties incorporating our technologies and products
into devices used in these product areas, industries and applications.
Accordingly, we intend to continue to make substantial investments in these new
and expanded product areas, industries and applications, and in developing new
products and technologies for these product areas, industries and applications.
Our growth also depends significantly on our ability to develop and patent 5G
technologies, and to develop and commercialize products using 5G technologies.

However, our research, development and other investments in these new and
expanded product areas, industries and applications, and corresponding
technologies and products, as well as in our existing technologies and products
and new technologies in mobile handsets, may not succeed because, among other
reasons: we may not be issued patents on the technologies we develop; the
technologies we develop may not be incorporated into relevant standards; new and
expanded product areas, industries and applications beyond mobile handsets, and
consumer demand therein, may not develop or grow as anticipated; we may be
unable to attract or retain employees with the necessary skills in such new and
expanded product areas, industries and applications; our strategies or the
strategies of our customers, licensees or partners may not be successful;
alternate technologies or products may be better or may reduce the advantages we
anticipate from our investments; competitors' technologies or products may be
more cost effective, have more capabilities or fewer limitations or be brought
to market faster than our new technologies or products; we may not be able to
develop, or our competitors may have more established and/or stronger, customer,
vendor, distributor or other channel relationships; and competitors may have
longer operating histories in industries and applications that are new to us. We
may also underestimate the costs of, or overestimate the future revenues or
margins that could result from, these investments, and these investments may
not, or may take many years to, generate material returns.

Further, the automotive industry is subject to long design-in time frames, long
product life cycles and a high degree of regulatory and safety requirements,
necessitating suppliers to the industry to comply with stringent qualification
processes, very low defect rates and high reliability standards, all of which
results in significant barriers to entry and increased costs.

In addition, in order to successfully extend our technologies and products into
new and expanded product areas, and industries and applications beyond mobile
handsets, we may need to transition to new business models and transform aspects
of our organization, and we may not be successful in doing so.

If we are not successful in extending our technologies and products into new and
expanded product areas, and industries and applications beyond mobile handsets,
if our new technologies and products are not successful, or if we are not
successful in the time frames we anticipate, we may incur significant costs and
asset impairments, our business and revenues may not grow or grow as
anticipated, our revenues and margins may be negatively impacted, our stock
price may decline and our reputation may be harmed.
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We may engage in acquisitions and other strategic transactions or make
investments, or be unable to consummate planned strategic acquisitions, which
could adversely affect our results of operations or fail to enhance stockholder
value.

We engage in acquisitions and other strategic transactions, including joint
ventures, and make investments, which we believe are important to the future of
our business, with the goal of maximizing stockholder value. We routinely
acquire businesses and other assets, including patents, technology and other
intangible assets, enter into joint ventures or other strategic transactions,
and purchase minority equity interests in or make loans to companies, including
those that may be private and early-stage. Our strategic activities are
generally focused on opening or expanding opportunities for our products and
technologies and supporting the design and introduction of new products (or
enhancing existing products) for mobile handsets, and for new industries and
applications beyond mobile handsets. Many of our strategic activities entail a
high degree of risk and require the use of significant amounts of capital, and
investments may not become liquid for several years after the date of the
investment, if at all. Our strategic activities may not be successful, generate
financial returns or result in increased adoption or continued use of our
technologies or products. We may underestimate the costs or overestimate the
benefits, including product, revenue, cost and other synergies and growth
opportunities that we expect to realize, and we may not achieve those benefits.
In some cases, we may be required to consolidate or record our share of the
earnings or losses of companies in which we have acquired ownership or variable
interests. In addition, we have in the past recorded, and may in the future
record, impairment or other charges related to our strategic activities. Any
losses or impairment charges that we incur related to strategic activities will
have a negative impact on our results of operations and financial condition, and
we may continue to incur new or additional losses related to strategic assets or
investments that we have not fully impaired or exited.

Achieving the anticipated benefits of business acquisitions depends in part upon
our ability to integrate the businesses in an efficient and effective manner and
achieve anticipated synergies, and we may not be successful in these efforts.
Such integration is complex and time consuming and involves significant
challenges, including, among others: retaining key employees; successfully
integrating new employees, facilities, technology, products, processes,
operations (including supply and manufacturing operations), sales and
distribution channels, business models and business systems; retaining customers
and suppliers of the businesses; consolidating research and development
operations; minimizing the diversion of management's attention from ongoing
business matters; consolidating corporate and administrative infrastructures;
and managing the increased scale, complexity and globalization of our business,
operations and employee base. We may not derive any commercial value from
associated technologies or products or from future technologies or products
based on these technologies, and we may be subject to liabilities that are not
covered by indemnification protection that we may obtain, and we may become
subject to litigation. Additionally, we may not be successful in entering or
expanding into new sales or distribution channels, business or operational
models, geographic regions, industries and applications served by or adjacent to
the associated businesses or in addressing potential new opportunities that may
arise out of our strategic acquisitions.

If we do not achieve the anticipated benefits of business acquisitions or other
strategic activities, our business and results of operations may be adversely
affected, and we may not enhance stockholder value by engaging in these
transactions.

Many of our acquisitions and other strategic investments require approval by the
United States and/or foreign government agencies. Certain agencies in the past
have, and may in the future, deny the transaction or fail to approve in a timely
manner, resulting in us not realizing the anticipated benefits of the proposed
transaction. Future acquisitions or other strategic investments may be more
difficult, complex or expensive to the extent that our reputation for our
ability to consummate acquisitions has been harmed. Further, if U.S./China
relations remain strained, our ability to consummate any transaction that would
require approval from the relevant regulatory agency(ies) in China may be
severely impacted. In addition, acquisitions that we have completed could
subsequently be reviewed and/or challenged by government agencies, which could
result in fines, penalties or other liability, or requirements to divest all or
a portion of an acquired business.

RISKS RELATED TO SUPPLY AND MANUFACTURING


We depend on a limited number of third-party suppliers for the procurement,
manufacture, assembly and testing of our products manufactured in a fabless
production model. If we fail to execute supply strategies that provide supply
assurance, technology leadership and reasonable margins, our business and
results of operations may be harmed. We are also subject to order and shipment
uncertainties that could negatively impact our results of operations.

We primarily utilize a fabless production model, which means that we do not own
or operate foundries for the production of silicon wafers from which our
integrated circuits are made. Other than the facilities we own that manufacture
certain of our RFFE modules and RF (radio frequency) filter products, we rely on
third-party suppliers to perform the manufacturing and assembly, and most of the
testing, of our integrated circuits. Our suppliers are also responsible for the
procurement of most of the raw materials used in the production of our
integrated circuits. There are a limited number of such third-party suppliers,
and even fewer who are capable of manufacturing at the leading process
technology nodes or who are willing to operate at
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older process technology nodes. The semiconductor manufacturing foundries that
supply our products are primarily located in Asia, as are our primary warehouses
where we store finished goods for fulfillment of customer orders.

The following issues related to our third-party suppliers could have an adverse effect on our ability to meet customer demand and negatively impact our revenues, business operations, profitability and cash flows:

•demand for integrated circuits that exceeds suppliers' capacity to meet that demand;

•a reduction, interruption, delay or limitation in our product supply sources;

•a failure or inability by our suppliers to procure raw materials or allocate adequate raw materials for our products;


•an inability to procure or utilize raw materials, components or products from
our suppliers due to government prohibitions or restrictions on transactions
with certain countries and/or companies, and alternative suppliers, raw material
sources or raw materials are not available or not available in acceptable time
frames or upon acceptable terms;

•a failure by our suppliers to allocate adequate manufacturing, assembly or test capacity for our products;

•our suppliers' failure or inability to react to shifts in product demand or an increase in raw material or component prices;

•our suppliers' failure or inability to develop or maintain, or a delay in developing or building out, manufacturing capacity for leading process technologies, including transitions to smaller geometry process technologies;

•the loss of a supplier or the failure or inability of a supplier to meet performance, quality or yield specifications or delivery schedules;

•additional expense or production delays as a result of qualifying a new supplier and commencing volume production or testing in the event of a loss of, or a decision to add or change, a supplier;


•natural disasters, the effects of climate change or geopolitical conflicts
impacting our suppliers and their manufacturing foundries or assembly, test or
other facilities;

•health crises, including epidemics or pandemics such as the COVID-19 pandemic, and government and business responses thereto, which impact our suppliers, including as a result of quarantines or closures;

•cyber-attacks on our suppliers' information technology (IT) systems, including those related to their manufacturing foundries or assembly, test or other facilities; and


•trade or national security protection policies, particularly U.S. or Chinese
government policies, that limit or prevent us from transacting business with
suppliers of critical integrated circuit products, or that limit or prevent such
suppliers from transacting business with us or from procuring materials,
machinery or technology necessary to manufacture goods for us.

We rely on sole- or limited-source suppliers for certain products, which may
exacerbate the risks identified above, and subject us to other significant
risks, including poor product performance and reduced control over delivery
schedules, manufacturing capability and yields, quality assurance, quantity and
costs. While we have established and may in the future establish alternate
suppliers for certain products, these suppliers may require significant amounts
of time and levels of support to bring such products to production, both of
which may increase for complex or leading process technologies. As a result, we
may invest a significant amount of effort and resources and incur higher costs
to support and maintain such alternate suppliers. Further, the elimination or
limitation of a foundry supplier's ability to manufacture components or products
for us due to trade or national security protection policies could increase our
vulnerability to sole- or limited-source arrangements and limit or prevent us
from procuring critical components or products from those suppliers. Future
consolidation of foundry suppliers could also increase our vulnerability to
sole- or limited-source arrangements and reduce our suppliers' willingness to
negotiate pricing, which could negatively impact our ability to achieve cost
reductions, increase our manufacturing costs and limit the amount of capacity
available to us. Our arrangements with our suppliers may obligate us to incur
costs to manufacture, assemble and test our products that do not decrease at the
same rate as decreases in pricing to our customers. Our ability, and that of our
suppliers, to develop or maintain leading process technologies, including
transitions to smaller geometry process technologies (which adds risk to
manufacturing yields and reliability), and to effectively compete with the
manufacturing processes and performance of our competitors, could impact our
ability to introduce new products and meet customer demand, could increase our
costs (possibly decreasing our margins) and could subject us to the risk of
excess inventories. Any of the above could negatively impact our business,
results of operations and cash flows.
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Although we have long-term contracts with our suppliers, some of these contracts
do not provide for long-term capacity commitments. To the extent we do not have
firm commitments from our suppliers over a specific time period or for any
specific quantity, our suppliers may allocate, and in the past have allocated,
capacity to the manufacture, assembly and testing of products for their other
customers (including our competitors) while reducing or limiting capacity to
manufacture, assemble or test our products, and such capacity may be limited
based on our suppliers' ability and willingness to invest in the capital
required to manufacture in the leading process technologies. Our suppliers or
potential alternate suppliers may also manufacture their own integrated circuits
that compete with our products. Such suppliers have in the past allocated and
may again allocate raw materials and manufacturing capacity to their own
products and reduce or limit the production of our products. To the extent we do
obtain long-term capacity commitments, we may incur additional costs related to
those commitments or make non-refundable payments for capacity commitments that
are not used. Further, certain of our suppliers have in the past attempted, and
may in the future attempt, to unilaterally reduce their capacity commitments to
us. Accordingly, capacity for our products may not be available when we need it.
Finally, we may not receive reasonable pricing, manufacturing or delivery terms
from our suppliers, and our ability to obtain favorable terms may be diminished
during times of high demand and/or limited manufacturing capacity for integrated
circuit products.

We cannot guarantee that the actions of our suppliers will not cause disruptions
in our operations that could harm our ability to meet our delivery obligations
to our customers or increase our cost of sales. To the extent we are unable to
obtain adequate supply to meet our delivery obligations, we may be obligated to
make payments to our customers for such shortfalls. Currently, the global
semiconductor industry is experiencing demand for integrated circuits that
exceeds the industry's capacity to meet that demand. Our ability to meet
increased demand for our products has been and may continue to be limited due to
the inability to obtain the additional manufacturing, assembly and test capacity
necessary to fully meet such demand. If we are unable to fully meet customer
demand, this could result in lost sales opportunities, reduced revenue growth
and harm to our customer relationships. These issues may be exacerbated if
customers overstate their expected demand requirements in order to procure
additional supply, which could negatively impact our ability to forecast and to
allocate supply appropriately among our customers. These issues may also be
exacerbated with respect to our platform solutions, which already entail a great
deal of complexity due to differing lead-times, technologies and suppliers for
each integrated circuit product included in such solutions.

Additionally, we place orders with our suppliers using our and our customers'
forecasts of demand for our products, which are based on a number of assumptions
and estimates. As we move to smaller geometry process technologies, the
manufacturing lead-time increases. As a result, the orders we place with our
suppliers are generally only partially covered by commitments from our
customers. If we, or our customers, overestimate demand, or if demand is
impacted by factors outside of our or our customers' control, and such demand is
not covered by a binding commitment from our customers, we may experience
increased excess or obsolete inventory, which would negatively impact our
results of operations.

See also the Risk Factor below titled "There are numerous risks associated with
the operation and control of our manufacturing facilities, including a higher
portion of fixed costs relative to a fabless model; environmental compliance and
liability; impacts related to climate change; exposure to natural disasters,
health crises and cyber-attacks; timely supply of equipment and materials; and
various manufacturing issues" as similar risks, as well as additional risks, may
be applicable to our third-party suppliers' manufacturing facilities, which
could result in disruptions to our business or additional costs to us, and
negatively impact our results of operations.

There are numerous risks associated with the operation and control of our
manufacturing facilities, including a higher portion of fixed costs relative to
a fabless model; environmental compliance and liability; impacts related to
climate change; exposure to natural disasters, health crises and cyber-attacks;
timely supply of equipment and materials; and various manufacturing issues.

We own and operate various facilities that manufacture certain of our RFFE
modules and RF filter products. Manufacturing facilities are characterized by a
higher portion of fixed costs relative to a fabless model. We may be faced with
a decline in the utilization rates of our manufacturing facilities due to
decreases in demand for our products, including in less favorable industry
environments, or due to our failure to win and/or retain designs with OEMs. As a
result, from time to time our manufacturing facilities operate at lower capacity
levels, while the fixed costs associated with such facilities continue to be
incurred, resulting in lower gross profit.

We are subject to many complex environmental, health and safety laws,
regulations and rules in each jurisdiction in which we operate our manufacturing
(and research and development) facilities. The regulatory landscape in these
areas continues to evolve, and we anticipate additional laws, regulations and
rules in the future. In particular, new, or changes in, environmental and
climate change laws, regulations or rules, including relating to greenhouse gas
emissions, could lead to new or additional investments in production processes
and could increase environmental compliance expenditures. In addition, certain
environmental laws impose strict, and in certain circumstances joint and
several, liability on current or
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previous owners or operators of real property, or parties who arranged for
hazardous substances to be sent to disposal or treatment facilities, for the
cost of investigation, removal or remediation of hazardous substances. As a
result, we may incur clean-up costs in connection with any such removal or
remediation efforts, as well as other third-party claims in connection with
contaminated sites. In addition, we could be held liable for consequences
arising out of human exposure to hazardous substances or other environmental
damage. If we, or companies or facilities we acquire or have acquired, in the
past failed or in the future fail to comply with any such laws and regulations,
then we could incur regulatory penalties, fines and legal liabilities;
suspension of production; significant compliance requirements; alteration of our
manufacturing, assembly or test processes; restriction on our ability to modify
or expand our facilities; damage to our reputation; and restrictions on our
operations or sales. We are also required to obtain and maintain environmental
permits from governmental authorities for certain of our operations. We cannot
make assurances that we will at all times be in compliance with such laws,
regulations, rules and permits. See also the risk factor titled "Our business
may suffer due to the impact of, or our failure to comply with, the various
existing, new or amended laws, regulations, policies or standards to which we
are subject."

Climate change concerns and the potential resulting environmental impact may
result in new environmental, health and safety laws and regulations that may
affect us, our suppliers and our customers. Such laws or regulations could cause
us to incur additional direct costs for compliance, including costs associated
with changes to manufacturing processes or the procurement of raw materials used
in manufacturing processes, as well as increased indirect costs resulting from
our customers, suppliers or both incurring additional compliance costs that are
passed on to us. These costs may adversely impact our results of operations and
financial condition. In addition, climate change could cause certain natural
disasters, such as drought, wildfires, storms, flooding or rising sea levels, to
occur more frequently or with greater intensity, which could pose physical risks
to our manufacturing facilities or our suppliers' facilities, could disrupt the
availability of water necessary for the operation of our manufacturing
facilities or our suppliers' facilities, and could increase or decrease
temperatures resulting in increased operating costs and/or business disruption.

We have manufacturing facilities in Asia and Europe. If tsunamis, flooding,
earthquakes, volcanic eruptions, drought or other natural disasters, effects of
climate change or geopolitical conflicts, were to damage, destroy or disrupt our
manufacturing facilities, it could disrupt our operations, cease or delay
production and shipments of inventory and result in costly repairs, replacements
or other costs and lost business. In addition, natural disasters, effects of
climate change or geopolitical conflicts may result in disruptions in
transportation, distribution channels and supply chains and significant
increases in the prices of raw materials. Further, health crises, including
epidemics or pandemics, such as the COVID-19 pandemic, and government and
business responses thereto, could affect our manufacturing facilities, including
by resulting in quarantines and/or closures, which would result in disruptions
to and potential closures of our manufacturing operations. Our manufacturing
operations could also be disrupted by cyber-attacks on our IT systems, as
described in the Risk Factor below titled "Our business and operations could
suffer in the event of security breaches of our IT systems, or other
misappropriation of our technology, intellectual property or other proprietary
or confidential information."

Our manufacturing operations depend on securing raw materials and other supplies
in adequate quality and quantity in a timely manner from multiple suppliers, and
in some cases, we rely on a limited number of suppliers, including in some cases
sole suppliers, particularly in Asia. There may be cases where supplies of raw
materials and other products are interrupted or limited by natural disaster,
geopolitical conflict, accident or some other event affecting a supplier or
source of raw materials; supply is suspended due to quality or other issues;
there is a shortage of supply due to a rapid increase in demand; and/or we or
our suppliers are prohibited from utilizing certain raw materials, or products
or components that incorporate such raw materials, due to government
restrictions related to the countries from which such raw materials originate,
and acceptable alternative suppliers, raw materials or raw materials sources are
not available or not available in acceptable time frames or upon acceptable
terms, among others, which could impact production and prevent us from supplying
our products to our customers. If the supply-demand balance is disrupted, it may
considerably increase costs of manufacturing due to increased prices we pay for
raw materials. From time to time, suppliers may extend lead times, limit amounts
supplied to us or increase prices due to capacity constraints or other factors.
Additionally, supply and costs of raw materials may be negatively impacted by
trade and/or national security protection policies, such as tariffs, or actions
by governments that limit or prevent us from transacting business with certain
countries or companies or that limit or prevent certain companies from
transacting business with us, or trade tensions, particularly with countries in
Asia. Further, it may be difficult or impossible to substitute one piece of
equipment for another or replace one type of material with another. A failure by
our suppliers to deliver our requirements could result in disruptions to our
manufacturing operations.

Our manufacturing processes are highly complex, require advanced and costly
equipment and must be continuously modified to improve yields and performance.
Difficulties in the production process can reduce yields or interrupt
production, and as a result, we may not be able to deliver our products or do so
in a timely, cost-effective or competitive manner. Further, to remain
competitive and meet customer demand, we may be required to improve our
facilities and process technologies and
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carry out extensive research and development, each of which may require investment of significant amounts of capital and may have a material adverse effect on our results of operations, cash flows and financial condition.


From time to time, we begin to purchase equipment to meet expected customer
demand in advance of any purchase orders or long-term purchase commitments.
Further, we typically begin manufacturing our products using our or our
customers' forecasts of demand for our products, which are based on a number of
assumptions and estimates and may not be covered by long-term purchase
commitments. As a result, we may incur increased inventory and manufacturing
costs and/or record impairment charges to the extent anticipated sales
ultimately do not materialize or are lower than expected. If we or our customers
overestimate demand, or if demand is impacted by factors outside of our or our
customers' control such as the COVID-19 pandemic or trade or national security
protection policies, and such demand is not covered by a binding commitment from
our customers, we may experience higher inventory carrying and operating costs
and/or increased excess or obsolete inventory, which would negatively impact our
results of operations.

RISKS RELATED TO CYBERSECURITY OR MISAPPROPRIATION OF OUR CRITICAL INFORMATION

Our business and operations could suffer in the event of security breaches of our IT systems, or other misappropriation of our technology, intellectual property or other proprietary or confidential information.


Third parties regularly attempt to gain unauthorized access to our IT systems,
and many such attacks are increasingly more sophisticated. These attacks, which
might be related to industrial, corporate or other espionage, criminal hackers
or state-sponsored intrusions, include trying to covertly introduce malware to
our computers and networks, including those in our manufacturing operations,
exploiting vulnerabilities in hardware, software or other IT infrastructure and
impersonating authorized users, among others. We may also be subject to
ransom-style cyber-attacks, which could impact our IT systems and cause
widespread disruption to our business, including our manufacturing operations,
and expose our confidential or propriety information. Third parties that store
and/or process our confidential information, or that provide products, software
or services used in our IT infrastructure (including applications), may be
subject to similar attacks, which could also result in malware being introduced
into our IT infrastructure, e.g., through the third parties' software and/or
software updates. Such attacks could result in the misappropriation, theft,
misuse, disclosure, loss or destruction of the technology, intellectual
property, or the proprietary, confidential or personal information, of us or our
employees, customers, licensees, suppliers or other third parties, as well as
damage to or disruptions in our IT systems. We believe that we have a robust
cybersecurity program that is aligned to international cybersecurity frameworks,
and that we leverage industry best practices across people, processes and
technologies in an attempt to mitigate cybersecurity threats. However, we may
not be able to anticipate, detect, repel or implement effective preventative
measures against all cybersecurity threats, particularly because the techniques
used are increasingly sophisticated and constantly evolving. As part of our
cybersecurity program, we seek to identify and remediate vulnerabilities in our
IT systems and software (including third party software used in our IT systems)
that could be exploited by hackers or other malicious actors. However, we may
not be aware of all such vulnerabilities, and we may fail to identify and/or
remediate such vulnerabilities before they are exploited. Attempts to gain
unauthorized access to our IT systems or other attacks have in the past, in
certain instances and to certain degrees, been successful (but have not caused
significant harm), and may in the future be successful, and in some cases, we
might be unaware of an incident or its magnitude and effects.

In addition, employees and former employees, in particular former employees who
become employees of our competitors, customers, licensees or other third
parties, including state actors, have in the past and may in the future
misappropriate, wrongfully use, publish or provide to our competitors,
customers, licensees or other third parties, including state actors, our
technology, intellectual property or other proprietary or confidential
information. This risk is exacerbated as competitors for talent, particularly
engineering talent, increasingly attempt to hire our employees. See also the
Risk Factor titled "We may not be able to attract and retain qualified
employees, and our attempts to fully reopen our offices and operate under a
hybrid working environment may not be successful." Similarly, we provide access
to certain of our technology, intellectual property and other proprietary or
confidential information to our direct and indirect customers and licensees and
certain of our consultants, who have in the past and may in the future
wrongfully use such technology, intellectual property or information, or
wrongfully disclose such technology, intellectual property or information to
third parties, including our competitors or state actors. We also provide access
to certain of our technology, intellectual property and other proprietary or
confidential information to certain of our joint venture partners, including
those affiliated with state actors and including in foreign jurisdictions where
ownership restrictions may require us to take a minority ownership interest in
the joint venture. Such joint venture partners may wrongfully use such
technology, intellectual property or information, or wrongfully disclose such
technology, intellectual property or information to third parties, including our
competitors or state actors. Our technology, intellectual property and other
proprietary or confidential information that we have provided to customers,
licensees or other business partners could also be wrongfully obtained by third
parties through cyber-attacks on such customers', licensees' or other business
partners' IT systems.
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The misappropriation, theft, misuse, disclosure, loss or destruction of the
technology, intellectual property, or the proprietary, confidential or personal
information, of us or our employees, customers, licensees, suppliers or other
third parties, could harm our competitive position, reduce the value of our
investment in research and development and other strategic initiatives, cause us
to lose business, damage our reputation, subject us to legal or regulatory
proceedings, cause us to incur other loss or liability and otherwise adversely
affect our business. We expect to continue to devote significant resources to
the security of our IT systems, and our technology, intellectual property and
proprietary and confidential information.

Further, China has implemented, and other countries or regions may implement,
cybersecurity laws that require our overall IT security environment to meet
certain standards and/or be certified. Such laws may be complex, ambiguous and
subject to interpretation, which may create uncertainty regarding compliance. As
a result, our efforts to comply with such laws may be expensive and may fail,
which could adversely affect our business, results of operations and cash flows.
In addition, our contracts with certain of our customers will require us to
obtain cybersecurity certifications for our IT systems. Failure to obtain or
maintain the necessary cybersecurity certifications could result in loss of
future revenues, damage to our customer relationships and reputation, and a
shift of business to our competitors.

RISKS RELATED TO HUMAN CAPITAL MANAGEMENT


We may not be able to attract and retain qualified employees, and our attempts
to fully reopen our offices and operate under a hybrid working environment may
not be successful.

Our future success depends upon the continued service of our executive officers
and other key management and technical personnel, and on our ability to continue
to identify, attract, retain and motivate them. Implementing our business
strategy requires specialized engineering and other talent, as our revenues are
highly dependent on technological and product innovations. In addition, in order
to extend our business into certain new and expanded product areas and
industries and applications beyond mobile handsets, we need to attract, retain
and motivate engineering and other technical personnel with specialized skills
in these areas, and these skills are in high demand among our competitors. The
market for employees in our industry is extremely competitive, and competitors
for talent, particularly engineering talent, increasingly attempt to hire, and
to varying degrees have been successful in hiring, our employees or employment
candidates, including by establishing or expanding local offices near our
headquarters in San Diego, California. Further, the increased availability of
remote working arrangements, largely driven by the COVID-19 pandemic, has
expanded the pool of companies that can compete for our employees and employment
candidates. A number of such competitors for talent are significantly larger
than us and are able to offer compensation in excess of what we are able to
offer or other benefits that we generally do not offer, such as the ability to
permanently work from home. Further, existing immigration laws make it more
difficult for us to recruit and retain highly skilled foreign national graduates
of universities in the United States, making the pool of available talent even
smaller. If we are unable to attract and retain qualified employees, our
business may be harmed.

The COVID-19 pandemic caused us to modify our workforce practices, including
having the vast majority of our employees work from home. As we reopen our
offices, we intend to operate under a "hybrid" working environment, meaning that
the majority of our employees will have the flexibility to work remotely at
least some of the time for the foreseeable future. The hybrid working
environment may impair our ability to maintain our collaborative and innovative
culture, and may cause disruptions among our employees, including decreases in
productivity, challenges in communications between on-site and off-site
employees and, potentially, employee dissatisfaction and attrition. If our
attempts to safely reopen our offices and operate under a hybrid working
environment are not successful, our business could be adversely impacted.

RISKS SPECIFIC TO OUR LICENSING BUSINESS

The continued and future success of our licensing programs requires us to continue to evolve our patent portfolio and to renew or renegotiate license agreements that are expiring.


We own a very strong portfolio of issued and pending patents related to 3G, 4G,
5G and other technologies. It is critical that we continue to evolve our patent
portfolio, particularly in 5G. If we do not maintain a strong portfolio that is
applicable to current and future standards, products and services, our future
licensing revenues could be negatively impacted.

Our patent license agreements in effect that generate a significant portion of
our licensing revenues are effective for a specified term. To receive royalties
after the expiration date of the specified term, we will need to extend or
modify such license agreements or enter into new license agreements with such
licensees. We might not be able to extend or modify license agreements, or enter
into new license agreements, in the future without negatively affecting the
material terms and conditions of our license agreements with such licensees, and
such modifications or new agreements may negatively impact our revenues. In some
circumstances, we may extend, modify or enter into new license agreements as a
result of arbitration or litigation, and terms imposed by arbitrators or courts
may be less favorable to us than existing terms, and may impact the
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financial or other terms of license agreements not subject to the litigation or
arbitration. If there is a delay in extending, modifying or entering into a new
license agreement with a licensee, there would be a delay in our ability to
recognize revenues related to that licensee's product sales. Further, if we are
unable to reach agreement on such modifications or new agreements, it could
result in patent infringement litigation with such licensees.

Efforts by some original equipment manufacturers (OEMs) to avoid paying fair and
reasonable royalties for the use of our intellectual property may require the
investment of substantial management time and financial resources and may result
in legal decisions or actions by governments, courts, regulators or agencies,
Standards Development Organizations (SDOs) or other industry organizations that
harm our business.

From time to time, companies initiate various strategies to attempt to
negotiate, renegotiate, reduce and/or eliminate their need to pay royalties to
us for the use of our intellectual property. These strategies have included: (i)
litigation, often alleging infringement of patents held by such companies,
patent misuse, patent exhaustion, patent invalidity or unenforceability of our
patents or licenses, alleging that we do not license our patents on fair,
reasonable and nondiscriminatory (FRAND) terms, or alleging some form of unfair
competition or competition law violation; (ii) taking positions contrary to our
understanding (and/or the plain language) of their contracts with us; (iii)
appeals to governmental authorities; (iv) collective action, including working
with wireless operators, standards bodies, other like-minded companies and
organizations, on both formal and informal bases, to adopt intellectual property
policies and practices that could have the effect of limiting returns on
intellectual property innovations; (v) lobbying governmental regulators and
elected officials for the purpose of seeking the reduction of royalty rates or
the base on which royalties are calculated, seeking to impose some form of
compulsory licensing or weakening a patent holder's ability to enforce its
rights or obtain a fair return for such rights; and (vi) attempts by licensees
to shift their royalty obligation to their suppliers in order to lower the
wholesale (i.e., licensee's) selling price on which the royalty is calculated.

In addition, certain licensees have disputed, underreported, underpaid, not
reported or not paid royalties owed to us under their license agreements or
reported to us in a manner that is not in compliance with their contractual
obligations, and certain companies have yet to enter into or have delayed
entering into or renewing license agreements with us for their use of our
intellectual property, and they or others may engage in such behavior in the
future. The fact that one or more licensees dispute, underreport, underpay, do
not report or do not pay royalties owed to us may encourage other licensees to
take similar actions or not renew their existing license agreements, and may
encourage other licensees or unlicensed companies to delay entering into, or to
not enter into, new license agreements. Further, to the extent such licensees
and companies increase their device share, the negative impact of their
underreporting, underpayment, non-payment or non-reporting on our business,
revenues, results of operations, cash flows and financial condition will be
exacerbated.

We have been in the past and are currently subject to various litigation and/or
governmental investigations and proceedings. Certain of these matters are
described in this Quarterly Report in "Notes to Condensed Consolidated Financial
Statements, Note 5. Commitments and Contingencies." We may become subject to
other litigation or governmental investigations or proceedings in the future.
Additionally, certain of our direct and indirect customers and licensees have
pursued, and others may in the future pursue, litigation or arbitration against
us related to our business. Unfavorable resolutions of one or more of these
matters have had and could in the future have a material adverse effect on our
business, revenues, results of operations, cash flows and financial condition.
See also the Risk Factors below titled "Changes in our patent licensing
practices, whether due to governmental investigations, legal challenges or
otherwise, could adversely impact our business and results of operations" and
"Our business may suffer as a result of adverse rulings in governmental
investigations or proceedings."

In addition, in connection with our participation in SDOs, we, like other patent
owners, generally have made contractual commitments to such organizations to
license those of our patents that would necessarily be infringed by
standard-compliant products as set forth in those commitments (referred to as
standard-essential patents). Some manufacturers and users of standard-compliant
products advance interpretations of these commitments that are adverse to our
licensing business, including interpretations that would limit the amount of
royalties that we could collect on the licensing of our standard-essential
patent portfolio.

Further, some third parties have proposed significant changes to existing
intellectual property policies for implementation by SDOs and other industry
organizations with the goal of significantly devaluing standard-essential
patents. For example, some have put forth proposals which would require a
maximum aggregate intellectual property royalty rate for the use of all
standard-essential patents owned by all of the member companies to be applied to
the selling price of any product implementing the relevant standard. They have
further proposed that such maximum aggregate royalty rate be apportioned to each
member company with standard-essential patents based upon the number of
standard-essential patents held by such company. Others have proposed that
injunctions should not be an available remedy for infringement of
standard-essential patents and have made proposals that could severely limit
damage awards and other remedies by courts for
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patent infringement (e.g., by limiting the base upon which the royalty rate may
be applied). A number of these strategies are purportedly based on
interpretations of the policies of certain SDOs concerning the licensing of
patents that are or may be essential to industry standards and on our (or other
companies') alleged failure to abide by these policies.

Some SDOs, courts and governmental agencies have adopted, and may in the future
adopt, some or all of these interpretations or proposals in a manner adverse to
our interests, including in litigation to which we may not be a party. Further,
SDOs in certain countries may attempt to modify widely accepted standards and
claim the resulting standard as their own.

We expect that such proposals, interpretations and strategies will continue in
the future, and if successful, our business model would be harmed, either by
limiting or eliminating our ability to collect royalties (or by reducing the
royalties we can collect) on all or a portion of our standard-essential patent
portfolio, limiting our return on investment with respect to new technologies,
limiting our ability to seek injunctions against infringers of our
standard-essential patents, constraining our ability to make licensing
commitments when submitting our technologies for inclusion in future standards
(which could make our technologies less likely to be included in such standards)
or forcing us to work outside of SDOs or other industry groups to promote our
new technologies, and our revenues, results of operations and cash flows could
be negatively impacted. In addition, the legal and other costs associated with
asserting or defending our positions have been and may in the future be
significant. We expect that such challenges, regardless of their merits, will
continue into the foreseeable future and will require the investment of
substantial management time and financial resources.

Changes in our patent licensing practices, whether due to governmental investigations, legal challenges or otherwise, could adversely impact our business and results of operations.


As described in the Risk Factor below titled "Our business may suffer as a
result of adverse rulings in governmental investigations or proceedings," we
have been in the past, currently are and may in the future be subject to various
governmental investigations and/or legal proceedings challenging our patent
licensing practices. Certain of these matters are described in this Quarterly
Report in "Notes to Condensed Consolidated Financial Statements, Note 5.
Commitments and Contingencies." We believe that one intent of certain of these
governmental investigations and legal proceedings has been to reduce the amount
of royalties that licensees are required to pay to us for their use of our
intellectual property.

If we were required to reduce the royalty rates in our patent license
agreements, our revenues, earnings and cash flows would be negatively impacted
absent a sufficient increase in the volume of sales of devices upon which
royalties are paid. Similarly, if we were required to reduce the base on which
our royalties are calculated, our revenues, results of operations and cash flows
would be negatively impacted unless there was a sufficient increase in the
volume of sales of devices upon which royalties are paid or we were able to
increase our royalty rates to offset the decrease in revenues resulting from
such lower royalty base (assuming the absolute royalty dollars were below any
relevant royalty caps).

If we were required to grant patent licenses to chipset manufacturers (which
could lead to implementing a more complex, multi-level licensing structure in
which we license certain portions of our patent portfolio to chipset
manufacturers and other portions to OEMs), we would incur additional transaction
costs, which may be significant, and we could incur delays in recognizing
revenues until license negotiations were completed. In addition, our licensing
revenues and earnings would be negatively impacted if we were not able to
obtain, in the aggregate, equivalent revenues under such a multi-level licensing
structure.

If we were required to sell chipsets to OEMs that do not have a license to our
patents, our licensing program could be negatively impacted by patent exhaustion
claims raised by such unlicensed OEMs (i.e., claims that our sale of chipsets to
such OEMs forecloses us from asserting any patents substantially embodied by the
chipsets against such OEMs). Such sales could provide OEMs with a defense in the
event we asserted our patents against them to obtain licensing revenue for those
patents. This could have a material adverse effect on our licensing program and
our results of operations, cash flows and financial condition.

To the extent that we were required to implement any of these licensing and/or
business practices, including by modifying or renegotiating our existing license
agreements or pursuing other commercial arrangements, we would incur additional
transaction costs, which may be significant, we could incur delays in
recognizing revenues until license negotiations were completed, and our
business, revenues, results of operations, cash flows and financial condition
could be harmed. The impact of any such changes to our licensing practices could
vary widely and by jurisdiction, depending on the specific outcomes and the
geographic scope of such outcomes. In addition, if we were required to make
modifications to our licensing practices in one jurisdiction, licensees or
governmental agencies in other jurisdictions may attempt to obtain similar
outcomes for themselves or for such other jurisdictions, as applicable, which
could result in increased legal costs and further harm to our business,
revenues, results of operations, cash flows and financial condition.
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RISKS RELATED TO REGULATORY AND LEGAL CHALLENGES

Our business may suffer as a result of adverse rulings in governmental investigations or proceedings.


We have been in the past and currently are subject to various governmental
investigations and proceedings. Certain of these matters are described in this
Quarterly Report in "Notes to Condensed Consolidated Financial Statements, Note
5. Commitments and Contingencies." Key allegations or findings in those matters
include or have in the past included, among others: that we violate FRAND
licensing commitments by refusing to grant licenses to chipset manufacturers;
that our royalty rates are too high; that the base on which our royalties are
calculated should be something less than the wholesale (i.e., licensee's)
selling price of the applicable device (minus certain permitted deductions);
that we unlawfully require customers to execute a patent license before we sell
them cellular modem chipsets; that we have entered into exclusive agreements
with chipset customers that foreclose competition; that we leverage our position
in baseband chipsets in the RFFE space; and that we violate antitrust laws and
engage in anticompetitive conduct and unfair methods of competition. We may
become subject to other litigation or governmental investigations or proceedings
in the future.

Unfavorable resolutions of one or more of these matters have had and could in
the future have a material adverse effect on our business, revenues, results of
operations, cash flows and financial condition. Depending on the matter, various
remedies that could result from an unfavorable resolution include, among others:
the loss of our ability to enforce one or more of our patents; injunctions;
monetary damages, fines or other orders to pay money; the issuance of orders to
cease certain conduct or modify our business practices, such as requiring us to
reduce our royalty rates, reduce the base on which our royalties are calculated,
grant patent licenses to chipset manufacturers, sell chipsets to unlicensed OEMs
or modify or renegotiate some or all of our existing license agreements; and
determinations that some or all of our license agreements are invalid or
unenforceable. In addition, a governmental body in a particular country or
region may successfully assert and impose remedies with effects that extend
beyond the borders of that country or region. If some or all of our license
agreements are declared invalid or unenforceable and/or we are required to
renegotiate these license agreements, we may not receive, or may not be able to
recognize, some or any licensing or royalty revenues under the impacted license
agreements unless and until we enter into new license agreements; and even
licensees whose license agreements are not impacted may demand to renegotiate
their agreements or invoke the dispute resolution provision in their agreements,
and we may not be able to recognize some or any revenues under such agreements.
The renegotiation of license agreements could result in terms that are less
favorable to us than existing terms, or lead to arbitration or litigation to
resolve the licensing terms, which could also be less favorable to us than
existing terms, and each of which could take months or possibly years. Licensees
may underreport, underpay, not report or not pay royalties owed to us pending
the conclusion of such negotiations, arbitration or litigation. In addition, we
may be sued for alleged overpayments of past royalties paid to us, including
private antitrust actions seeking treble damages under U.S. antitrust laws. The
occurrence of any of the above could have a material adverse effect on our
business, revenues, results of operations, cash flows and financial condition,
and our stock price could decline, possibly significantly, in which case we may
have to significantly cut costs and other uses of cash, including in research
and development, significantly impairing our ability to maintain product and
technology leadership and invest in next generation technologies. Further,
depending on the breadth and severity of the circumstances above, we may have to
reduce, suspend or eliminate our capital return programs, and our ability to
timely pay our indebtedness may be impacted.

These challenges have required, and may in the future require, the investment of significant management time and attention and have resulted, and may in the future result, in significant legal costs.

RISKS RELATED TO INDUSTRY DYNAMICS AND COMPETITION

Our revenues depend on our customers' and licensees' sales of products and services based on CDMA, OFDMA and other communications technologies, including 5G, and customer demand for our products based on these technologies.


We develop, patent and commercialize technology and products based on CDMA,
OFDMA and other communications technologies, which are primarily wireless. We
depend on our customers and licensees to develop devices and services based on
these technologies to drive consumer demand for new 3G/4G and 3G/4G/5G multimode
and single-mode devices, and to establish the selling prices for such devices.
Further, the timing of our shipments of our products is dependent on the timing
of our customers' and licensees' deployments of new devices and services based
on these technologies. Increasingly, we also depend on operators of wireless
networks, our customers and licensees and other third parties to incorporate
these technologies into new device types and into industries and applications
beyond mobile handsets, such as automotive and IoT, among others.

We have historically been successful during wireless technology transitions,
including 3G, 4G and now 5G. Commercial deployments of 5G networks and devices
have begun and will continue. However, the timing and scale of such deployments,
in certain regions, have been and may in the future be delayed due to the
COVID-19 pandemic or for other reasons that are beyond our control.
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Our revenues and growth in revenues could be negatively impacted, our business
may be harmed and our substantial investments in these technologies may not
provide us an adequate return, if: our customers' and licensees' revenues and
sales of products, particularly premium-tier products, and services using these
technologies, and average selling prices of such products, decline due to, for
example, the maturity of smartphone penetration in developed regions, including
China; we do not continue to maintain our intellectual property and technical
leadership in 5G, including in ongoing 5G standardization efforts; we are unable
to drive the adoption of our products into networks and devices, including
devices beyond mobile handsets; or consumers' rates of replacement of
smartphones and other devices decline.

Our industry is subject to intense competition in an environment of rapid technological change. Our success depends in part on our ability to adapt to such change and compete effectively; and such change and competition could result in decreased demand for our products and technologies or declining average selling prices for our products or those of our customers or licensees.


Our products and technologies face significant competition. Competition may
intensify as our current competitors expand their product offerings, improve
their products or reduce the prices of their products as part of a strategy to
maintain existing business and customers or attract new business and customers,
as new opportunities develop, and as new competitors enter the industry.
Competition in wireless communications is affected by various factors that
include, among others: OEM concentrations; vertical integration; competition in
certain geographic regions; government intervention or support of national
industries or competitors; the ability to maintain product differentiation in
light of evolving industry standards and speed of technological change
(including the transition to smaller geometry process technologies and the
demand for always on, always connected capabilities); access to capacity in the
supply chain; and value-added features that drive selling prices and consumer
demand for new 3G/4G and 3G/4G/5G multimode and single-mode devices.

We anticipate that additional competitors will introduce products as a result of
growth opportunities in wireless communications, the trend toward global
expansion by foreign and domestic competitors, and technological and public
policy changes. Additionally, the semiconductor industry has experienced and may
continue to experience consolidation, which could result in significant changes
to the competitive landscape. For example, if any key supplier of technologies
and intellectual property to the semiconductor industry was sold to one of our
competitors, it could negatively affect our ability to procure or license such
technologies and intellectual property in the future, at all or upon acceptable
terms, which could have wide-ranging impacts on our business and operations.

We expect that our future success will depend on, among other factors, our ability to:


•differentiate our integrated circuit products with innovative technologies
across multiple products and features (e.g., modem, RFFE, including millimeter
wave (mmWave), graphics and other processors, camera and connectivity) and with
smaller geometry process technologies that drive both performance and lower
power consumption;

•develop and offer integrated circuit products at competitive cost and price points and to effectively cover all geographic regions and all device tiers;


•continue to be a leader in mobile, and drive the adoption of our technologies
and integrated circuit products, including RFFE, into the most popular device
models and across a broad spectrum of devices in mobile, such as smartphones,
tablets, laptops and other mobile computing devices;

•increase or accelerate adoption of our technologies and products in industries and applications outside of mobile handsets, including automotive and IoT;

•maintain or accelerate demand for our integrated circuit products at the premium device tier, while also driving the adoption of our products into high, mid- and low-tier devices across all regions;


•remain a leader in 5G (and 4G) technology development, standardization,
intellectual property creation and licensing, and develop, commercialize and
remain a leading supplier of 5G (and 4G) integrated circuit products, including
RFFE products;

•maintain access to sufficient capacity in the supply chain relative to our competitors to meet customer demand;

•create standalone value and contribute to the success of our existing businesses through acquisitions, joint ventures and other strategic transactions, and by developing customer, licensee, vendor, distributor and other channel relationships in new industries and applications;


•identify potential acquisition targets that will grow or sustain our business
or address strategic needs, reach agreement on terms acceptable to us, close the
transactions and effectively integrate these new businesses, products,
technologies and employees;
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•provide leading products and technologies to OEMs, high level operating systems
(HLOS) providers, operators, cloud providers and other industry participants as
competitors, new industry entrants and other factors continue to affect the
industry landscape;

•be a preferred partner and sustain preferred relationships providing integrated
circuit products that support multiple operating system and infrastructure
platforms to industry participants that effectively commercialize new devices
using these platforms; and

•continue to develop brand recognition to effectively compete against better
known companies in computing and other consumer driven segments and to deepen
our presence in significant emerging regions and China.

We compete with many different semiconductor companies, ranging from
multinational companies with integrated research and development, manufacturing,
sales and marketing organizations across a broad spectrum of product lines, to
companies that are focused on a single application, industry or standard
product, including those that produce products for mobile handsets, automotive
and IoT, among others. Most of these competitors compete with us with respect to
some, but not all, of our businesses or product lines. Companies that design
integrated circuits based on CDMA, OFDMA, Wi-Fi or their derivatives are
generally competitors or potential competitors. Examples (some of which are
strategic partners of ours in other areas) include Broadcom, MediaTek, Nvidia,
NXP Semiconductors, Qorvo, Samsung, Skyworks, Texas Instruments and UNISOC
(formally known as Spreadtrum Communications). Some of these current and
potential competitors may have advantages over us that include, among others:
motivation by our customers in certain circumstances to use our competitors'
integrated circuit products, to utilize their own internally-developed
integrated circuit products and/or sell such products to others, or to utilize
alternative technologies; lower cost structures or a willingness and ability to
accept lower prices or lower margins for their products, particularly in China;
foreign government support of other technologies, competitors or OEMs that sell
devices that do not contain our integrated circuit products; better known brand
names; ownership and control of manufacturing facilities and greater expertise
in manufacturing processes; more extensive relationships with local distribution
companies and OEMs in certain geographic regions (such as China); more
experience in industries and applications beyond mobile handsets (such as
automotive and IoT); and a more established presence in certain regions.

In addition, certain of our largest integrated circuit customers have in the
past utilized, currently utilize and may in the future utilize our competitors'
integrated circuit products in some (or all) of their devices, rather than our
products. Further, certain of those customers have developed, are developing or
may develop their own integrated circuit products (effectively making them
competitors), which they have in the past utilized, currently utilize and may in
the future utilize in some (or all) of their devices, rather than our products.
See also the Risk Factor titled "Our business, particularly our semiconductor
business, may suffer as a result of our customers vertically integrating (i.e.,
developing their own integrated circuit products)."

Further, political actions, including trade and/or national security protection
policies, or other actions by governments, particularly the U.S. and Chinese
governments, have in the past, currently are and could in the future limit or
prevent us from transacting business with certain of our customers or suppliers;
limit, prevent or discourage certain of our customers or suppliers from
transacting business with us; or make it more expensive to do so. This could
advantage our competitors by enabling them with increased sales, economies of
scale, operating income and/or cash flows, and/or enabling critical technology
transfer, allowing them to increase their investments in technology development,
research and development, and commercialization of products. See also the Risk
Factor titled "A significant portion of our business is concentrated in China,
and the risks of such concentration are exacerbated by U.S./China trade and
national security tensions."

Further, certain of our competitors develop and sell multiple components
(including integrated circuit products) for use in devices and sell those
components together to OEMs. Our competitors' sales of multiple components put
us (and our discrete integrated circuit products) at a competitive disadvantage.
Certain of our competitors also develop and sell infrastructure equipment for
wireless networks and can optimize their integrated circuit products to perform
on such networks to a degree that we are not able to, which again puts us at a
competitive disadvantage.

Competition in any or all product tiers may result in the loss of business or
customers, which would negatively impact our business, revenues, results of
operations, cash flows and financial condition. Such competition may also reduce
average selling prices for our chipset products or the products of our customers
and licensees. Certain of these dynamics are particularly pronounced in emerging
regions and China where competitors may have lower cost structures or may have a
willingness and ability to accept lower prices or lower margins on their
products. Reductions in the average selling prices of our chipset products,
without a corresponding increase in volumes, would negatively impact our
revenues, and without corresponding decreases in average unit costs, would
negatively impact our margins. In addition, reductions in the average selling
prices of our licensees' products, unless offset by an increase in volumes,
would generally decrease total royalties payable to us, negatively impacting our
licensing revenues.
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RISKS RELATED TO PRODUCT DEFECTS OR SECURITY VULNERABILITIES

Failures in our products, or in the products of our customers or licensees, including those resulting from security vulnerabilities, defects or errors, could harm our business.


Our products (including for purposes of this Risk Factor, related software) are
complex and may contain defects, errors or security vulnerabilities, or
experience failures or unsatisfactory performance, due to any number of issues,
including issues in materials, design, fabrication, packaging and/or use within
a system. Development of products in new domains of technology, such as the
transition to 5G, and the migration to integrated circuit technologies with
smaller geometric feature sizes, increases complexity and adds risk to
manufacturing yields and reliability, and increases the likelihood of product
defects, errors or security vulnerabilities. Defects, errors, security
vulnerabilities or other unintended functionality could also be introduced into
our products by cyber-attacks or other actions by malicious actors, either
directly or through third-party products or software used in our products or IT
infrastructure (including applications). Further, because of the complexity of
our products, defects, errors or security vulnerabilities might only be detected
when the products are in use. Risks associated with product or technology
defects, errors or security vulnerabilities are exacerbated by the fact that our
customers typically integrate our products into consumer and other devices.

The use of devices containing our products to interact with untrusted systems or
otherwise access untrusted content creates a risk of exposing the system
hardware and software in those devices to malicious attacks. Further, security
vulnerabilities in our products or the technologies we use could expose our
customers, or end users of our customers' products, to hackers or other
unscrupulous third parties who develop and deploy malware that could attack our
products or our customers' products or IT infrastructure. Such attacks could
result in the disruption of our customers' businesses or the misappropriation,
theft, misuse, disclosure, loss or destruction of the technology or intellectual
property, or the proprietary, confidential or personal information, of our
customers, their employees or the end users of our customers' devices. While we
continue to focus on this issue and take measures to safeguard our products from
cybersecurity threats, device capabilities continue to evolve, enabling more
elaborate functionality and applications, and increasing the risk of security
failures, and techniques used to perpetrate cybersecurity attacks are
increasingly sophisticated and constantly evolving. See also the Risk Factor
titled "Our business and operations could suffer in the event of security
breaches of our IT systems, or other misappropriation of our technology,
intellectual property or other proprietary or confidential information."

Our products may be responsible for critical functions in our customers'
products and networks. Failure of our products to perform to specifications, or
other product defects, errors or security vulnerabilities, could lead to
substantial damage to the products we sell to our customers, the devices into
which our products are integrated and the end users of such devices, and,
potentially, to our customers' IT infrastructure. Such defects, errors or
security vulnerabilities could give rise to significant costs, including costs
related to developing solutions, recalling products, repairing or replacing
defective products, writing down defective inventory, or indemnification
obligations under our agreements, and could result in the loss of sales and
divert the attention of our engineering personnel from our product development
efforts. In addition, defects, errors or security vulnerabilities in our
products could result in failure to achieve market acceptance, a loss of design
wins, a shifting of business to our competitors, and litigation or regulatory
action against us, and could harm our reputation, our relationships with
customers and partners and our ability to attract new customers, as well as the
perceptions of our brand. Other potential adverse impacts of product defects,
errors or security vulnerabilities include shipment delays, write-offs of
property, plant and equipment and intangible assets, and losses on unfavorable
purchase commitments. In addition, defects, errors or security vulnerabilities
in the products of our customers or licensees could cause a delay or decrease in
demand for the products into which our products are integrated, and thus for our
products.

In addition, the occurrence of defects, errors or security vulnerabilities may
give rise to product liability claims, particularly if such defects, errors or
security vulnerabilities in our products or the technology we use, or the
products into which they are integrated, result in personal injury or death, and
could result in significant costs, expenses and losses. If a product liability
claim is brought against us, the cost of defending the claim could be
significant, and could divert the attention of our technical and management
personnel and harm our business, even if we are successful. We may be named in
product liability claims even if there is no evidence that our products caused
the damage in question, and even though we may have indemnity from our
customers, and such claims could result in significant costs and expenses.
Further, our business liability insurance may be inadequate, or future coverage
may be unavailable on acceptable terms, which could adversely impact our
financial results. The above is exacerbated by the fact that our products may be
used, and perform critical functions, in various high-risk applications such as:
automobiles, including autonomous driver assistance programs; cameras and
artificial intelligence, including home and enterprise security; home
automation, including smoke and noxious gas detectors; medical condition
monitoring; location and asset tracking and management, including wearables for
child safety and elderly health; robotics, including public safety drones and
autonomous municipality vehicles; and extended reality (XR) for treatment of
phobias or PTSD, early detection of disorders or special needs, among others.
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Accordingly, defects, errors or security vulnerabilities in our products or the
technologies we use could have an adverse impact on us, on our customers and the
end users of our customers' products. If any of these risks materialize, there
could be a material adverse effect on our business, results of operations and
financial condition.

RISKS RELATED TO INTELLECTUAL PROPERTY


The enforcement and protection of our intellectual property may be expensive,
could fail to prevent misappropriation or unauthorized use of our intellectual
property, could result in the loss of our ability to enforce one or more
patents, and could be adversely affected by changes in patent laws, by laws in
certain foreign jurisdictions that may not effectively protect our intellectual
property and by ineffective enforcement of laws in such jurisdictions.

We rely primarily on patent, copyright, trademark and trade secret laws, as well
as nondisclosure and confidentiality agreements, international treaties and
other methods, to protect our intellectual property, including our patent
portfolio. Policing unauthorized use of our products, technologies and
intellectual property is difficult and time consuming. The steps we have taken
have not always prevented, and we cannot be certain the steps we will take in
the future will prevent, the misappropriation or unauthorized use of our
products, technologies or intellectual property, particularly in foreign
countries where the laws may not protect our rights as fully or as readily as
U.S. laws or where the enforcement of such laws may be lacking or ineffective.
See also the Risk Factor titled "Our business and operations could suffer in the
event of security breaches of our IT systems, or other misappropriation of our
technology, intellectual property or other proprietary or confidential
information."

Some industry participants who have a vested interest in devaluing patents in
general, or standard-essential patents in particular, have mounted attacks on
certain patent systems, increasing the likelihood of changes to established
patent laws. We cannot predict with certainty the long-term effects of any
potential changes. In the United States, there is continued discussion regarding
potential patent law changes, and there is current and potential future
litigation regarding patents, the outcomes of which could be detrimental to our
licensing business. Further, the laws in certain foreign countries in which our
patents are or may be licensed, or our products are or may be manufactured or
sold, including certain countries in Asia, may not protect our intellectual
property rights to the same extent as the laws in the United States. In
addition, we cannot be certain that the laws and policies of any country or the
practices of any standards bodies, foreign or domestic, with respect to
intellectual property enforcement or licensing or the adoption of standards,
will not be changed in the future in ways that are detrimental to our licensing
program or to the sale or use of our products or technologies.

We have had and may in the future have difficulty in certain circumstances in
protecting or enforcing our intellectual property and contracts, including
collecting royalties for use of our patent portfolio due to, among others:
refusal by certain licensees to report and pay all or a portion of the royalties
they owe to us; policies or political actions of governments, including trade
protection and national security policies; challenges to our licensing practices
under competition laws; adoption of mandatory licensing provisions by foreign
jurisdictions; failure of foreign courts to recognize and enforce judgments of
contract breach and damages issued by courts in the United States; and
challenges before competition agencies to our licensing business or the pricing
and integration of additional features and functionality into our chipset
products. See also the Risk Factors titled "Efforts by some original equipment
manufacturers (OEMs) to avoid paying fair and reasonable royalties for the use
of our intellectual property may require the investment of substantial
management time and financial resources and may result in legal decisions or
actions by governments, courts, regulators or agencies, Standards Development
Organizations (SDOs) or other industry organizations that harm our business" and
"Our business may suffer as a result of adverse rulings in governmental
investigations or proceedings."

We have engaged in litigation and arbitration in the past and may need to
further litigate or arbitrate in the future to enforce our contract and
intellectual property rights, protect our trade secrets or determine the
validity and scope of proprietary rights of others. As a result of any such
litigation or arbitration, we could lose our ability to enforce one or more
patents, portions of our license agreements could be determined to be invalid or
unenforceable (which may in turn result in other licensees either not complying
with their existing license agreements or initiating litigation or arbitration),
license terms (including but not limited to royalty rates for the use of our
intellectual property) could be imposed that are less favorable to us than
existing terms, and we could incur substantial costs. Any action we take to
enforce our contract or intellectual property rights could be costly and could
absorb significant management time and attention, which, in turn, could
negatively impact our results of operations and cash flows. Further, even a
positive resolution to our enforcement efforts may take time to conclude, which
may reduce our revenues and cash resources available for other purposes, such as
research and development, in the periods prior to conclusion.

Additionally, although our license agreements generally provide us with the
right to audit the books and records of licensees, audits can be expensive, time
consuming, incomplete and subject to dispute. Further, certain licensees may not
comply with the obligation to provide full access to their books and records. To
the extent we do not aggressively enforce our
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rights under our license agreements, licensees may not comply with their
existing license agreements, and to the extent we do not aggressively pursue
unlicensed companies to enter into license agreements with us for their use of
our intellectual property, other unlicensed companies may not enter into license
agreements.

See also the Risk Factors titled "Efforts by some original equipment
manufacturers (OEMs) to avoid paying fair and reasonable royalties for the use
of our intellectual property may require the investment of substantial
management time and financial resources and may result in legal decisions or
actions by governments, courts, regulators or agencies, Standards Development
Organizations (SDOs) or other industry organizations that harm our business" and
"Our business and operations could suffer in the event of security breaches of
our IT systems, or other misappropriation of our technology, intellectual
property or other proprietary or confidential information."

Claims by other companies that we infringe their intellectual property could adversely affect our business.


From time to time, companies have asserted, and may again assert, patent,
copyright or other intellectual property claims against our products or products
using our technologies or other technologies used in our industry. These claims
have resulted and may again result in our involvement in litigation, and we are
currently involved in such litigation, including those described in this
Quarterly Report in "Notes to Condensed Consolidated Financial Statements, Note
5. Commitments and Contingencies." We may not prevail in such litigation given,
among other factors, the complex technical issues and inherent uncertainties in
intellectual property litigation. If any of our products were found to infringe
another company's intellectual property, we could be subject to an injunction or
be required to redesign our products, or to license such intellectual property
or pay damages or other compensation to such other company (any of which could
be costly). If we are unable to redesign our products, license such intellectual
property used in our products or otherwise distribute our products (e.g.,
through a licensed supplier), we could be prohibited from making and selling our
products. Similarly, our suppliers could be found to infringe another company's
intellectual property, and such suppliers could then be enjoined from providing
products or services to us.

In any potential dispute involving us and another company's patents or other
intellectual property, our chipset foundries, semiconductor assembly and test
providers and customers could also become the targets of litigation. We are
contingently liable under certain product sales, services, license and other
agreements to indemnify certain customers, chipset foundries and semiconductor
assembly and test service providers against certain types of liability and
damages arising from qualifying claims of patent infringement by products sold
by us, or by intellectual property provided by us to our chipset foundries and
semiconductor assembly and test service providers. Reimbursements under
indemnification arrangements could have an adverse effect on our results of
operations and cash flows. Furthermore, any such litigation could severely
disrupt the supply of our products and the businesses of our chipset customers
and their customers, which in turn could harm our relationships with them and
could result in a decline in our chipset sales or a reduction in our licensees'
sales, causing a corresponding decline in our chipset or licensing revenues. Any
claims, regardless of their merit, could be time consuming to address, result in
costly litigation, divert the efforts of our technical and management personnel
and/or cause product release or shipment delays, any of which could have an
adverse effect on our results of operations and cash flows.

We may continue to be involved in litigation and may have to appear in front of
administrative bodies (such as the United States International Trade Commission)
to defend against patent assertions against our products by companies, some of
whom are attempting to gain competitive advantage or leverage in licensing
negotiations. We may not be successful in such proceedings, and if we are not,
the range of possible outcomes is very broad and may include, for example,
monetary damages or fines or other orders to pay money, royalty payments,
injunctions on the sale of certain of our integrated circuit products (or on the
sale of our customers' devices using such products) or the issuance of orders to
cease certain conduct or modify our business practices. Further, a governmental
body in a particular country or region may assert, and may be successful in
imposing, remedies with effects that extend beyond the borders of that country
or region. In addition, a negative outcome in any such proceeding could severely
disrupt the business of our customers and their wireless operator customers,
which in turn could harm our relationships with them and could result in a
decline in our chipset sales or a reduction in our licensees' sales, causing
corresponding declines in our chipset or licensing revenues.

Our use of open source software may harm our business.


Certain of our software and our suppliers' software may contain or may be
derived from "open source" software, and we have seen, and believe that we will
continue to see, customers request that we develop products, including software
associated with our integrated circuit products, that incorporate open source
software elements and operate in an open source environment, which, under
certain open source licenses, may offer accessibility to a portion of our
products' source code and may expose our related intellectual property to
adverse licensing conditions. Licensing of such software may impose certain
obligations on us if we were to distribute derivative works of that software.
For example, these obligations may require us to make source code for the
derivative works available to our customers in a manner that allows them to make
such source code
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available to their customers or license such derivative works under a particular
type of license that is different than what we customarily use to license our
software. Furthermore, in the course of product development, we may make
contributions to third-party open source projects that could subject our
intellectual property to adverse licensing conditions. For example, to encourage
the growth of a software ecosystem that is interoperable with our products, we
may need to contribute certain implementations under the open source licensing
terms that govern such projects, which may adversely impact our associated
intellectual property. Developing open source products, while adequately
protecting the intellectual property upon which our licensing program depends,
may prove burdensome and time-consuming under certain circumstances, thereby
placing us at a competitive disadvantage, and we may not adequately protect our
intellectual property. Also, our use and our customers' use of open source
software may subject our products and our customers' products to governmental
and third-party scrutiny and delays in product certification, which could cause
customers to view our products as less desirable than our competitors' products.

GENERAL RISK FACTORS


We operate in the highly cyclical semiconductor industry, which is subject to
significant downturns. We are also susceptible to declines in global, regional
and local economic conditions generally. Our stock price and financial results
are subject to substantial quarterly and annual fluctuations due to these
dynamics, among others.

The semiconductor industry is highly cyclical, volatile, subject to downturns
and characterized by constant and rapid technological change, price erosion,
evolving technical standards, frequent new product introductions, short product
life cycles and fluctuations in product supply and demand. Periods of downturns
have been characterized by diminished demand for end-user products, high
inventory levels, excess or obsolete inventory adjustments, underutilization of
manufacturing capacity, changes in revenue mix and erosion of average selling
prices. We expect our business to continue to be subject to such cyclical
downturns. Consequently, our revenues may decline, and our results of operations
and financial condition may be adversely impacted.

A decline in global, regional or local economic conditions or a slow-down in
economic growth, particularly in geographic regions with high concentrations of
wireless voice and data users or high concentrations of our customers or
licensees, could also have adverse, wide-ranging effects on our business and
financial results, including: a decrease in demand for our products and
technologies; a decrease in demand for the products and services of our
customers or licensees; the inability of our suppliers to deliver on their
supply commitments to us, our inability to supply our products to our customers
and/or the inability of our customers or licensees to supply their products to
end users; the insolvency of key suppliers, customers or licensees; delays in
reporting or payments from our customers or licensees; failures by
counterparties; and/or negative effects on wireless device inventories. In
addition, our customers' and licensees' ability to purchase or pay for our
products and intellectual property and network operators' ability to upgrade
their wireless networks could be adversely affected, potentially leading to a
reduction, cancellation or delay of orders for our products. Acts of war,
terrorism or other geopolitical conflicts may also result in or contribute to
declining economic conditions, disruptions to global supply chains and increased
volatility in financial markets, among other effects. Further, inflationary
pressure may increase our costs, including employee compensation costs, reduce
demand for our products or those of our customers or licensees due to increased
prices of those products, or result in employee attrition to the extent our
compensation does not keep up with inflation, particularly if our competitors'
compensation does.

Our stock price and financial results have fluctuated in the past and are likely
to fluctuate in the future. Factors that may have a significant impact on the
market price of our stock and our financial results include those identified
above and throughout this Risk Factors section, as well as: volatility of the
stock market in general and technology and semiconductor companies in
particular; announcements concerning us, our suppliers, our competitors or our
customers or licensees; and variations between our actual financial results or
guidance and expectations of securities analysts or investors, among others. In
the past, securities class action litigation has been brought against companies
following periods of volatility in the market price of their securities, among
other reasons. We are and may in the future be the target of securities
litigation. Securities litigation could result in substantial uninsured costs
and divert management's attention and our resources. Certain legal matters,
including certain securities litigation brought against us, are described in
this Quarterly Report in "Notes to Condensed Consolidated Financial Statements,
Note 5. Commitments and Contingencies."

Our business may suffer due to the impact of, or our failure to comply with, the
various existing, new or amended laws, regulations, policies or standards to
which we are subject.

Our business and products, and those of our customers and licensees, are subject
to various laws, rules and regulations globally, as well as government policies
and the specifications of international, national and regional communications
standards bodies (collectively, Regulations). These include, among others,
Regulations related to: patent licensing practices; antitrust, competition and
competitive business practices; the flow of funds out of certain countries
(e.g., China);
                                       48
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cybersecurity; imports and exports, such as the U.S. Export Administration
Regulations administered by the U.S. Department of Commerce; protection of
intellectual property; trade and trade protection including tariffs; foreign
policy and national security; environmental protection (including climate
change), health and safety; supply chain, responsible sourcing, including the
use of conflict minerals, and human rights; spectrum availability and license
issuance; adoption of standards; taxation; privacy and data protection; labor,
employment and human capital; corporate governance; public disclosure; and
business conduct. Compliance with, or changes in the interpretation of, existing
Regulations, the adoption of new Regulations, changes in the oversight of our
activities by governments or standards bodies, or rulings in court, regulatory,
administrative or other proceedings relating to such Regulations, among others,
could have an adverse effect on our business and results of operations. See also
the Risk Factors titled "Our business may suffer as a result of adverse rulings
in governmental investigations or proceedings," "Changes in our patent licensing
practices, whether due to governmental investigations, legal challenges or
otherwise, could adversely impact our business and results of operations," "A
significant portion of our business is concentrated in China, and the risks of
such concentration are exacerbated by U.S./China trade and national security
tensions," "There are numerous risks associated with the operation and control
of our manufacturing facilities, including a higher portion of fixed costs
relative to a fabless model; environmental compliance and liability; impacts
related to climate change; exposure to natural disasters, health crises and
cyber-attacks; timely supply of equipment and materials; and various
manufacturing issues," and "Tax liabilities could adversely affect our results
of operations."

Regulations are complex and changing (which may create uncertainty regarding
compliance), are subject to varying interpretations, and their application in
practice may evolve over time. As a result, our efforts to comply with
Regulations may fail, particularly if there is ambiguity as to how they should
be applied in practice. Failure to comply with any Regulation may adversely
affect our business, results of operations and cash flows. New Regulations, or
evolving interpretations thereof, may cause us to incur higher costs as we
revise current practices, policies or procedures; may divert management time and
attention to compliance activities; and may negatively impact our ability to
conduct business in certain jurisdictions.

There are risks associated with our debt.


Our outstanding debt and any additional debt we incur may have negative
consequences on our business, including, among others: requiring us to use cash
to pay the principal of and interest on our debt, thereby reducing the amount of
cash available for other purposes; limiting our ability to obtain additional
financing for working capital, capital expenditures, acquisitions, stock
repurchases, dividends, general corporate or other purposes; and limiting our
flexibility in planning for, or reacting to, changes in our business, industries
or the market. Our ability to make payments of principal and interest on our
indebtedness depends upon our future performance, which is subject to economic
and political conditions, industry cycles and financial, business and other
factors, many of which are beyond our control. If we are unable to generate
sufficient cash flow from operations to service our debt, we may be required to,
among other things: refinance or restructure all or a portion of our debt;
reduce or delay planned capital or operating expenditures; reduce, suspend or
eliminate our dividend payments and/or our stock repurchase program; or sell
selected assets. Such measures might not be sufficient to enable us to service
our debt. In addition, any such refinancing, restructuring or sale of assets
might not be available on economically favorable terms or at all, and if
prevailing interest rates at the time of any such refinancing or restructuring
are higher than our current rates, interest expense related to such refinancing
or restructuring would increase. Further, if there are adverse changes in the
ratings assigned to our debt securities by credit rating agencies, our borrowing
costs, our ability to access debt financing in the future and the terms of such
debt could be adversely affected.

Tax liabilities could adversely affect our results of operations.


We are subject to income taxes in the United States and numerous foreign
jurisdictions. Significant judgment is required in determining our provision for
income taxes. We regularly are subject to examination of our tax returns and
reports by taxing authorities in the United States federal jurisdiction and
various state and foreign jurisdictions, most notably in countries where we earn
a routine return and the tax authorities believe substantial value-add
activities are performed, as well as countries where we own intellectual
property. The final determination of tax audits and any related legal
proceedings could materially differ from amounts reflected in our income tax
provisions and accruals. In such case, our income tax provision, results of
operations and cash flows in the period or periods in which that determination
is made could be negatively affected.

Tax rules may change in a manner that adversely affects our future reported
results of operations or the way we conduct our business. Most of our income is
taxable in the United States with a significant portion qualifying for
preferential treatment as FDII (foreign-derived intangible income). Beginning in
fiscal 2027, the effective tax rate for FDII increases from 13% to 16%. Further,
if U.S. tax rates increase and/or the FDII deduction is eliminated or reduced,
both of which have been proposed by the current U.S. presidential administration
and Congress, our provision for income taxes, results of operations and cash
flows would be adversely (potentially materially) affected. Also, if our
customers move manufacturing operations to the United States, our FDII deduction
may be reduced.
                                       49

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Further changes in the tax laws of foreign jurisdictions could arise as a result
of the base erosion and profit shifting (BEPS) project that was undertaken by
the Organization for Economic Co-operation and Development (OECD). The OECD,
which represents a coalition of member countries, recommended changes to
numerous long-standing tax principles related to transfer pricing and continues
to develop new proposals including allocating greater taxing rights to countries
where customers are located and establishing a minimum tax on global income.
These changes, as adopted by countries, may increase tax uncertainty and may
adversely affect our provision for income taxes, results of operations and cash
flows.

© Edgar Online, source Glimpses

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