A. [Reserved] B. Capitalization and Indebtedness Not applicable. C. Reasons for the Offer and Use of Proceeds Not applicable. D. Risk Factors Our business, operations and financial results are subject to various risks and uncertainties, including those described below, that could adversely affect our business, financial condition, results of operations and cash flows and lead to a decline in the trading price of our ADSs. You should carefully consider the risks described below before making an investment decision. The risks described below do not identify all risks that we face. Our operations could also be affected by factors that are not presently known to us or that we currently consider to be immaterial to our operations. Due to risks and uncertainties, known and unknown, our past financial results may not be a reliable indicator of future performance and historical trends should not be used to anticipate results or trends in future periods. You should also refer to the other information set forth in this annual report, including in our consolidated financial statements. Summary of Risk Factors Below is a summary of the principal risks we face, followed by a more detailed description of the risk factors being set forth in summary fashion. Risks Related to our Business • Our results of operations are subject to substantial quarterly and annual fluctuations due to several factors that could adversely affect our business and the price of our ADSs. • We are subject to the cyclical nature of the semiconductor industry, which has been subject to significant fluctuations. • Our profitability depends on our ability to respond to rapid technological changes in the semiconductor industry. • The demand for our products depends in part on the market conditions for the end-use applications of our products. Fluctuations in demand for our products or a market decline in any of these industries could have a material adverse effect on our results of operations. 3 Table of Contents • We depend on a few large customers for a significant portion of our revenues and a loss of some of these customers would result in the loss of a significant portion of our revenues. • Our international operations involve inherent risks, which could result in harm to our business and materially impair our future growth, including factors such as government trade restrictions, entity list restrictions, sanctions, tariffs and quotas. • NAND industry cyclicality could adversely affect our growth and profitability. • If we fail to accurately anticipate and respond to market trends or fail to develop and introduce new or enhanced products to address these trends on a timely basis, our ability to attract and retain customers could be impaired and our competitive position could be harmed. • Our gross margin and results of operations may be adversely affected in the future by multiple factors, including decreases in average selling prices of products over time, increased raw material costs, including NAND components, higher manufacturing costs, and shifts in our product mix. • Our ability to source and secure raw materials and components, including NAND memory, to manufacture controllers and solid-state drives (“SSD”). • Our SSD solutions product performance could continue to adversely affect our results of operations. • We rely on independent semiconductor foundries and subcontractors for the fabrication, assembly and testing of our integrated circuits (“ICs”), and any limitation of their available capacity to us or failure to fulfill our orders satisfactorily could damage our relationships with our customers, decrease our sales or limit our ability to grow our business. • Failure to protect our intellectual property or maintain the rights to certain other technologies may negatively impact our ability to compete. • Failure to successfully defend against intellectual property lawsuits brought against us may adversely affect our business. • Our products must meet exacting specifications and undetected defects and failures may occur, which may cause customers to return or stop buying our products and may expose us to product liability risk and risks of indemnification against defects in our products. • We rely on third parties to provide services necessary for the operation of our business. Any failure of one or more of our vendors, suppliers or manufacturers to provide these services could have a material adverse effect on our business. • The constant growth and development of technology, including the increased use of artificial intelligence (“AI”), presents risks and challenges to our operations that could give rise to legal or regulatory action, damage our reputation or otherwise materially harm our business. • Our business, financial condition and results of operations could be adversely impacted by the political and economic conditions of the countries in which we conduct business and operate and in which our products are used and sold. • We face substantial risks associated with doing business in Taiwan because of tense regional geopolitical risk with China. • The enactment of legislation implementing changes in the taxation of international business activities, the adoption of other tax reform policies or changes in tax legislation or policies could materially impact our financial position and results of operations. Risks Relating to Our Corporate Structure and Governance • The loss of any of our key personnel or the failure to attract or retain specialized technical or management personnel could impair our ability to grow our business. 4 Table of Contents • Any failure to achieve and maintain effective internal controls could have a material adverse effect on our business, results of operations and the market price of our ADSs. • Our business is subject to various governmental regulations, and compliance with these regulations may cause us to incur significant expense. Risks Related to the ADSs • Our stock price has been, and may continue to be, volatile, which could result in investors losing all or part of their investments. • We are a foreign private issuer within the meaning of the rules under the Exchange Act, and as such we are exempt from certain provisions applicable to United States domestic public companies. • We may lose our foreign private issuer status in the future, which could result in significant additional costs and expenses to us. • If we are characterized as a passive foreign investment company, U.S. holders of our ADSs may experience adverse tax consequences. • Holders of our ordinary shares and ADSs may experience dilution if we issue restricted stock units or other forms of Company equity to employees or sell additional equity or equity-linked securities. Risks Related to our Business Our results of operations are subject to substantial quarterly and annual fluctuations due to several factors that could adversely affect our business and the price of our ADSs. Our operating results have fluctuated in the past and are likely to fluctuate in the future. These fluctuations may occur on a quarterly and on an annual basis and are due to several factors, many of which are beyond our control, including, but not limited to: • business conditions, including downturns in market segments, such as the computing and mobile markets, in which we operate, or in global and regional economies; • the availability and pricing of third-party semiconductor foundry, assembly, packaging and testing services, including their yield, and related raw materials; • significant reduction, changes in timing or cancellation of customer orders; • regional and global inflationary pressures; • changes in our customers’ sales outlook, purchasing patterns and inventory adjustments; • the loss of a design-win or key customer; • competitive and pricing pressures, including new product introductions and other actions taken by competitors; • availability and cost of NAND flash used in our and our customer’s products; • changes in our product mix, especially relating to the sales and changes in cost of our NAND flash controllers and SSD solutions, and their effect on our gross margin; • the unpredictable consequences of public health emergencies, such as pandemics and natural or man-made disasters; • inventory impairment uncertainties relating to the effects of volatile NAND flash price and excess inventory; 5 Table of Contents • our ability to develop, market and transition to volume production of new or enhanced products in a cost-effective and timely manner; • changes in the timing and number of tape-outs and other significant research and development (“R&D”) expenses; • the imposition of tariffs and the threat of increased or retaliatory tariffs; • competitive pressure to attract, retain and motivate a highly skilled workforce, including R&D personnel; • intellectual property disputes; and • changes in our effective tax rate. These and other factors make it difficult for us to forecast and could materially adversely affect our quarterly or annual operating results. We could fail to achieve the operating targets that we have announced, such as revenue growth, gross margin, and operating margin. In addition, our operating results in the future may be below the expectations of securities analysts or investors, which would likely cause the market price of our ADSs to decline. Any variations in our period-to-period performance may also cause the market price of our ADSs to decline. Accordingly, you should not rely on the results of any prior periods as a reliable indicator of our future operating performance. We are subject to the cyclical nature of the semiconductor industry, which has been subject to significant fluctuations. The semiconductor industry is highly cyclical and is characterized by constant and rapid technological change, rapid product obsolescence and price erosion, evolving standards, short product life cycles and wide fluctuations in product supply and demand. The industry has experienced significant fluctuations, often connected with, or in anticipation of, maturing product cycles and new product introductions of both semiconductor companies’ and their customers’ products and fluctuations in general economic conditions. Deteriorating general worldwide economic conditions, including reduced economic activity, increasing tariffs, escalating trade wars, geopolitical risks, concerns about credit and inflation, increased interest rates, increased energy costs, decreased consumer confidence, reduced corporate profits, decreased spending and similar adverse business conditions, would make it very difficult for our customers, our suppliers, and us to accurately forecast and plan future business activities and could cause U.S. and foreign businesses to slow spending on our products. We cannot predict the timing, strength, or duration of any economic slowdown or economic recovery. If the economy or markets in which we operate deteriorate, our business, financial condition, and results of operations would likely be materially and adversely affected. Downturns have been characterized by diminished product demand, production overcapacity, high inventory levels and accelerated erosion of average selling prices. Upturns have been characterized by increased product demand, limited supply of NAND and production capacity constraints created by increased competition for access to third-party foundry, assembly and test capacity. We are dependent on the availability of such capacity to manufacture, assemble and test our products. None of our third-party foundry, assembly or test subcontractors have provided assurances that adequate capacity will always be available to us. Inflation and inflationary pressures as well as fluctuations in interest rates could have an adverse effect on our business, financial condition, results of operations and cash flows. Increasing or high inflation rates could adversely affect our business by increasing the cost of raw materials, energy, labor and transportation of goods. Current or future efforts by governments in locations where we operate to stimulate the economy may increase the risk of significant inflation. In the event of an increase in rates of inflation, we may seek to increase the sales prices of our solutions to maintain satisfactory profits. Such increases 6 Table of Contents in prices may not be accepted by our customers and may not be sufficient to compensate us for the negative impact of inflation. Inflation might also reduce disposable income on a macro basis, eroding savings values, which could affect the demand for products that contain our solutions. High inflation rates may also result in unexpected and unbudgeted cost increases and may require changes to our planned investments. If we are not able to offset the effects of increased inflation, it could have a negative effect on our business, financial condition and profitability, results of operations and cash flows. As a result of inflationary pressure and macroeconomic instability, various governments may adopt monetary policies that will lead to higher interest rates. Higher interest rates may adversely affect our financing costs, including the costs of our current debt and leasing payments. There is no assurance that we will be able to effectively mitigate the interest rate risk, even after utilizing certain financing instruments. Further, in higher interest rate environments, our customers may reduce their overall investment in product development by cutting their capital expenditures and R&D expenses. Such reductions in capital expenditures and R&D expenses by our customers may reduce the amount of business that we receive from them and adversely affect our results of operations. We are subject to order and shipment uncertainties and our results of operations could be materially adversely affected if we are unable to accurately forecast customer demand. We have limited sales visibility as our customers typically do not provide us with firm, long-term purchase commitments. Additionally, our customers may have limited sales visibility due to the rapidly changing nature of the global economy, NAND supply and demand dynamics and the markets in which devices using our products are sold. Substantially all our sales are made on a purchase order basis, which permits our customers to cancel, change or delay their product purchase commitments with little or no notice to us and often without penalty to them, which limits our ability to accurately forecast sales and maintain adequate inventory levels, manufacturing capacity and operating infrastructure requirements. Our customers, most of whom are NAND flash makers and module makers, face difficulties in predicting demand for their storage devices using our products, which could result in the procurement forecast provided to us changing at short notice. The majority of our customers are building storage devices such as SSDs used in (i) personal computers (“PCs”) and other client devices, (ii) embedded MultiMediaCard (“eMMC”), (iii) universal flash storage (“UFS”), (iv) mobile embedded storage used primarily in smartphones and other smart devices, and (v) SSD solutions for enterprise servers, data center equipment, automotive and industrial equipment and are dependent on original equipment manufacturers (“OEMs”) of these devices accurately anticipating end-consumer demand, which has historically been difficult and subject to unpredictable deviations from past sales patterns. Also, since a significant portion of our quarterly sales, especially from module maker customers targeting channel markets, are from orders received and fulfilled in that quarter, our visibility as to expected orders from these customers in subsequent periods and for any extended period of time is limited. The multiple layers of forecasts from other customers and from their customers may introduce other errors into our estimates of anticipated sales. To ensure the availability of our products for our customers, we generally instruct our foundries to begin manufacturing our products based on forecasts provided by these customers in advance of receiving purchase orders and procure NAND for our SSD solutions products. However, these forecasts do not represent binding purchase commitments, and sales of our products are only recognized when they are shipped with ownership transferred to the customer. As a result, we incur inventory and manufacturing costs in advance of anticipated revenue. Because demand for our products may not materialize, manufacturing based on forecasts subjects us to risks of high inventory carrying costs and increased obsolescence and may increase our costs. If we overestimate customer demand for our products or if purchase orders are cancelled or shipments delayed, we may end up with excess or obsolete inventory, which could have a material and adverse effect on our financial results. The risk of obsolescence and/or excess inventory is heightened for devices designed for consumer electronics due to short product lifecycles for these types of products. Conversely, if we underestimate demand or if insufficient 7 Table of Contents manufacturing capacity is available, we may not have sufficient product inventory, which could lead to missed revenue opportunities, loss of market share, damages to our customer relationships and other harm to our business. In addition, any future significant cancellations or deferrals of product orders or the return of previously sold products could materially and adversely affect our profit margins, increase product obsolescence and restrict our ability to fund our operations. Because many of our expenses are fixed in the short-term or are incurred in advance of anticipated sales, we may not be able to decrease our expenses in a timely manner to offset any shortfall of sales, or expand our R&D and other operating infrastructure in a timely manner to capture anticipated business opportunities. If we expand our business operations and demand for our products does not increase as we may have projected, our operating results could be affected by our higher operating expense levels. Conversely, if we maintain or reduce our business operations and related expenses in accordance with our projections and demand for our products increases more than expected, our operating results could be affected by lost business opportunities, less competitive economies of scale, and damaged relationships with our customers. Our profitability depends on our ability to respond to rapid technological changes in the semiconductor industry. The semiconductor industry is characterized by rapid increases in the diversity and complexity of semiconductors. As a result, we expect that we will need to continually offer more sophisticated packaging and testing technologies and processes to respond to competitive industry conditions and customer requirements. We dedicate substantial efforts to R&D and continue to develop new products in anticipation of future demand. However, there is no assurance that the launch of any new product will be successful or that we will be able to produce enough of these products to meet market demand. If we fail to develop, or obtain access to, advanced technologies or processes or respond effectively to industry developments, we may become less competitive and less profitable. In addition, advances in technology typically lead to declining average selling prices for semiconductors packaged or tested with older technologies or processes. As a result, if we cannot reduce the costs associated with our services, the profitability of a given service and our overall profitability may decrease over time. The demand for our products depends in part on the market conditions for the end-use applications of our products. Fluctuations in demand for our products or a market decline in any of these industries could have a material adverse effect on our results of operations. Industry-wide fluctuations in the PC and smartphone markets could have a material adverse effect on our operating results. A large portion of our controller sales are for the PC and smartphone markets, both of which are mature and have experienced flat-to-declining sales trends because of market saturation and longer replacement cycles. As SSDs become widely adopted across PCs and client devices, and UFS becomes standard in smartphones and tablets, we anticipate that demand growth for client SSD and UFS controllers will slow and potentially decline due to short-term fluctuations in demand and pricing, before eventually plateauing. Smartphones and tablets have in recent years cannibalized the sale of PCs and it is possible smartphones and tablets could be replaced by other types of mobile computing and communications devices, and these changes could also lead to unfavorable demand for our products. The market for storage devices using NAND flash components has experienced rapid technological changes, could be subject to industry consolidation and could face competition from new technologies. NAND flash technology will continue to evolve rapidly with continued cost reductions, which could lead to new types of solid-state storage devices, new applications and new categories of customers and market segments where we could be comparatively disadvantaged. The market for solid-state storage devices is relatively fragmented with 8 Table of Contents many suppliers that include NAND flash makers, module makers and OEMs, and if the market were to consolidate, a trend experienced by other parts of the semiconductor and storage industries, we could face changing demand for our products, replacement of our products by those of our competitors or internal captive sources and reduced market opportunities. If solid state storage devices were to use other types of non-volatile memory technologies other than NAND flash and we do not have relevant and competitive controller technology, our addressable market for controllers could shrink. The market for controllers is composed of the merchant market and captive market. We are an independent merchant supplier of controllers to NAND flash maker, module maker and OEM customers. All the major NAND flash makers also have internal captive sources of controllers. The merchant market for controllers could shrink if the NAND flash makers were to expand their usage of captive sources of controllers. In the past, our operating results were negatively affected when NAND flash customers chose to insource controllers. We may pursue acquisitions, investments and dispositions, which could adversely affect our results of operations. Further, we may not be successful in pursuing mergers and acquisitions. Any mergers or acquisitions we make may lead to a diversion of management resources. Our growth strategy includes the acquisition of, and investment in, businesses that offer complementary products, services and technologies, augment our market coverage, or enhance our technological capabilities. Our investments over the last decade, include Kinara (previously known as Deep Vision, Inc.), BIWIN Storage Technology Corp. (referred to herein as “BIWIN”), and Shenzhen Techwinsemi Technology Co. (referred to herein as “TWSC”). In the future, we may not be able to identify suitable acquisition or investment opportunities, or to consummate any such transactions. In pursuing such acquisitions or investment opportunities, we may face competition from other companies in the semiconductor industry. In addition, our original estimates and assumptions used in assessing any transaction may be inaccurate and we may not realize the expected financial or strategic benefits of any such transaction. Any acquisition we may undertake involves risks and uncertainties, such as unexpected delays, challenges and related expenses, and the associated diversion of management’s attention. We may become subject to legal proceedings relating to the acquisition and the integration of acquired businesses may not be successful. The integration of an acquired business involves significant challenges, including, among others: potential disruption of our business, diversion of management’s attention from daily operations and the pursuit of other opportunities, incurring significant restructuring charges and amortization expense, assuming liabilities and ongoing lawsuits, potential impairment of acquired goodwill and other intangible assets, increasing our expenses and working capital requirements, and implementing our management information systems, operating systems and internal controls for the acquired operations. In addition, our due diligence process may fail to identify significant issues with the acquired company’s products, financial disclosures, accounting practices, legal, tax and other contingencies and compliance with local laws and regulations. These difficulties may be complicated by factors such as the size of the business or entity acquired, geographic and cultural differences, lack of experience operating in the industry or geographic markets of the acquired business, potential loss of key employees and customers, the potential for deficiencies in internal controls at the acquired or combined business, performance problems with the acquired business’ technology, exposure to unanticipated liabilities of the acquired business, insufficient revenue to offset increased expenses associated with the acquisition, adverse tax consequences and our potential inability to achieve the growth prospects or synergies expected from any such acquisition. Failure to manage and successfully integrate the acquisitions we make, or to improve sales and margins of the acquired businesses, could materially harm our business, operating results and margins. Any future acquisitions we make may require debt or equity financing, which, in the case of debt financing, would increase our leverage and interest expenses, and in the case of equity financing, would be dilutive to our existing stockholders. As it relates to debt financing, we may not obtain financing on terms and conditions that are favorable to us, or at all. Acquisitions made with cash would reduce our cash reserves. 9 Table of Contents From time to time, we may also seek to divest or wind down portions of our business, either acquired or otherwise, or we may exit investments, each of which could materially affect our cash flows and results of operations. In addition, any such disposition could result in disruptions to other parts of our business, potential loss of employees or customers, or exposure to unanticipated liabilities or ongoing obligations to us following any such disposition. For example, in connection with such disposition, we may enter into transition services agreements or agree to provide certain indemnities to the purchaser, which may result in additional expenses and may adversely affect our financial condition and results of operations. We depend on a few large customers for a significant portion of our revenues and a loss of some of these customers would result in the loss of a significant portion of our revenues. We derived a substantial portion of our revenue from sales to a relatively small number of customers. As a result, the loss of any significant customer could materially and adversely affect our financial condition and results of operations. Sales to our five largest customers represented approximately 61%, 66% and 66% of our net revenue in 2023, 2024 and 2025, respectively. Sales to our customers constituting more than 10% of our net revenue represented, in the aggregate, 45%, 57% and 58% of our net revenue in 2023, 2024 and 2025, respectively. Our customers constituting more than 10% of our net revenue were (i) Micron, SK Hynix and AFASTOR in 2023, (ii) Micron, Kioxia, PHISEMI and AFASTOR in 2024 and (iii) PHISEMI, Kioxia, AFASTOR, and Micron in 2025. The identities of our largest customers and their respective contributions to our net revenue may vary from period to period. We expect that we will continue to depend on a relatively limited number of customers for a substantial portion of our net sales and our ability to maintain good relationships with these customers will be important to the ongoing success of our business. We cannot assure you that revenues generated from these customers, individually or in the aggregate, will reach or exceed historical levels in any future period. Our failure to meet the demands of these customers could lead to cancellation or reduction of businesses from these customers. In addition, any loss, cancellation or reduction of businesses from, significant change in scheduled deliveries to, or decrease in the prices of products sold to any of these customers could significantly reduce our revenues and adversely affect our financial condition and operating results. Moreover, any difficulty in collecting outstanding amounts due from our customers particularly customers who place large orders, would harm our financial performance. In addition, if our relationships with our largest customers are disrupted for any reason, it could have a significant impact on our business. Our international operations involve inherent risks which could result in harm to our business and materially impair our future growth, including factors such as government trade restrictions, entity list restrictions, sanctions, tariffs and quotas. The majority of our products are marketed and sold around the world, including primarily in China, Japan, Singapore, and Taiwan, and our corporate operations are primarily located in Taiwan. Two outside foundries, primarily Taiwan Semiconductor Manufacturing Company (“TSMC”), and secondarily Semiconductor Manufacturing International Corporation (“SMIC”), fabricate our semiconductors. Accordingly, we are subject to the risks generally associated with global trade and doing business abroad, which include foreign laws and regulations, varying consumer preferences across geographic regions, political unrest, disruptions or delays in cross-border shipments and changes in economic conditions in countries in which our products are manufactured or where we sell products. In addition, our business, financial position, results of operations, cash flows or prospects could be materially, adversely affected by changes in tariffs, trade agreements, trade sanctions or other trade restrictions imposed or agreed to by governments. Trade restrictions, including withdrawal from or modification of existing trade agreements, negotiation of new trade agreements, and imposition of new (and retaliatory) tariffs against certain countries or covering certain products have the potential to adversely impact demand for our products, our costs, customers, suppliers and/or the U.S. or foreign economies or certain sectors thereof in which we 10 Table of Contents compete, and impair our ability to expand our business by offering new technologies and products. The Trump administration has imposed and/or increased tariffs on imported goods from several geographic regions, including certain East Asian nations where we operate. The imposition of such tariffs and the threat of additional increases and/or retaliatory tariffs may strain international trade relations or impact our costs. It remains unclear what, and the timing of, future actions may be taken by the U.S. federal government or other governments with respect to international trade agreements, the imposition or removal of tariffs on goods imported into or exported from the U.S., the creation or removal of barriers to trade, tax policy related to international commerce, or other trade matters, and the impact of those actions on the cost of products we purchase and sell. Trade restrictions, and changes in or uncertainty surrounding global trade policies, may adversely impact our competitive position, businesses, financial condition, results of operations and cash flows. See “We face substantial risks associated with doing business in Taiwan because of tense regional geopolitical risk with China” below. This includes, for example, packaging, product content, labor and international trade regulations, such as the U.S. Export Administration Regulations and sanctions against Huawei and other companies, and applicable executive orders. These laws, regulations and orders are complex, change frequently and with limited notice, have generally become more stringent over time and have intensified as U.S.-China geopolitical tensions worsen. Any changes to or the addition of companies and entities that are subject to the U.S. Export Administration Regulations and international trade regulations could have a significant impact to our revenue and growth. In addition, if our customers fail to comply with these regulations and laws, we may be required to suspend sales to these customers, which could damage our reputation and negatively impact our results of operations. Also, disease outbreaks, pandemics, terrorist acts and political or military conflicts have increased the risks of doing business globally. These factors, among others, could affect our ability to manufacture products or procure materials, our ability to import products, our ability to ship our products globally, our ability to sell products in international markets and our cost of doing business. See “Our business, financial condition and results of operations could be adversely impacted by the political and economic conditions of the countries in which we conduct business and operate and in which our products are used and sold” below. If any of these or other factors make the conduct of business in a particular country undesirable, unprofitable or impractical, our business and financial results could be adversely affected and our prospects for growth in those markets could be materially impaired. In addition, many of our imported products are subject to duties, tariffs or quotas that affect the cost and quantity of various types of goods imported. Any country in which our products are produced, imported or sold may eliminate, adjust or impose new quotas, duties, tariffs, safeguard or protectionist measures, anti- dumping duties, cargo restrictions to prevent terrorism, restrictions on the transfer of currency, climate change legislation, product safety regulations or other charges or restrictions, any of which could have an adverse effect on our business, results of operations, financial condition and the price of our ADSs. NAND industry cyclicality could adversely affect our growth and profitability. The NAND industry is highly capital intensive and regularly experiences cycles of shortages and excess supply and related rapid increases and sharp decreases in NAND component prices. The price of SSDs, eMMC and UFS devices, in which NAND accounts for a significant portion of material cost, could also increase and decrease with NAND component prices. Decreasing prices for SSDs could trigger stronger market demand for these devices as well as controllers used in them, and conversely, increasing prices for SSDs could cause demand for these devices as well as controllers used in them to fall, which could negatively affect our sales and profitability. Additionally, during periods of NAND shortages, our sales and profitability could be negatively affected in other ways, including, but are not limited to: (i) our module maker and OEM storage customers may not be able to procure sufficient supplies of NAND components, which could lead to reduced demand for our controllers; (ii) we may not be able to procure sufficient supplies of NAND components for our Ferri industrial SSDs, which could lead to reduced sales of our SSD solutions, and furthermore, to higher cost of procured NAND components and reduced SSD solutions profitability; (iii) NAND manufacturers may divert NAND supply away from their own storage products that use our controllers towards other customers or products that do not use our controllers, 11 Table of Contents and our sales could be reduced; and (iv) the higher cost of NAND components may lower end-product demand in the PC, smartphone and other electronic products markets due to higher overall costs. During periods of NAND excess supply when NAND prices are falling sharply, our sales and profitability could also be negatively affected, including, but not limited to: (i) NAND manufacturers facing reduced demand for NAND components and storage devices may temporarily build NAND inventory instead of selling at lower prices, and this may cause a reduction in controller demand; (ii) module maker customers that are exposed to volatile NAND pricing conditions may temporarily become more cautious in procuring NAND components, which could lead to reduced levels of controller procurement and storage device production; (iii) OEMs may temporarily limit procurement of storage devices in expectation of procuring more at a later date and at a lower price, which could restrain storage device and associated controller procurement; and (iv) NAND vendor and module maker customers that are under margin pressure because of falling NAND prices may seek price concessions from their controller suppliers. If we fail to accurately anticipate and respond to market trends or fail to develop and introduce new or enhanced products to address these trends on a timely basis, our ability to attract and retain customers could be impaired and our competitive position could be harmed. Our success depends to a significant extent on the development, qualification, implementation and acceptance of new product designs and improvements that provide value to our customers. Our ability to develop, qualify and distribute, and have manufactured, new products and related technologies to meet evolving industry requirements, at prices acceptable to our customers and on a timely basis are significant factors in determining our competitiveness in our target markets. For example, for our products addressing the SSD market, we must successfully identify customer requirements and design, develop and produce products on time that compete effectively as to price, functionality and performance. We sell products in markets that are characterized by rapid technological change, evolving industry standards, frequent new product introductions, smaller process geometries and other factors. We cannot assure you that our efforts to execute our product roadmap will result in innovative products and technologies that provide value to our customers. If we fail to or are delayed in developing, qualifying or shipping new products or technologies that provide value to our customers, and address these new trends and adjust our business accordingly, we may lose competitive positioning, which could cause us to lose market share and require us to discount the selling prices of our products. Although we make substantial investments in R&D, we cannot be certain that we will be able to develop and successfully bring to market new products and technologies on a timely basis or that they will be well-received by our customers. Moreover, our investments in new products and technologies involve certain risks and uncertainties and could disrupt our ongoing business. New investments may not generate sufficient revenue, may incur unanticipated liabilities, and may divert our limited resources and distract management from our current operations. We cannot be certain that our ongoing investments in new products and technologies will be successful, will meet our expectations and will not adversely affect our reputation, financial condition and operating results. We believe that our future success depends on our ability to develop and introduce new technologies and products for new applications to generate new sources of revenue to replace, or build upon, existing product revenue for applications that are mature or in secular decline. If we are not able to repeatedly introduce, in successive years, new products for new applications that ship in volume, our revenue will likely not grow and may decline significantly and rapidly. In the past, we were able to successfully grow our revenue by adding, over time, successive categories of new controller technologies for new applications, such as memory card and flash drive controllers for external storage, eMMC and UFS mobile embedded memory controllers for smartphones and SSD controllers for PCs and other client devices. If we are unable to successfully expand our sales of SSD controllers for data center and enterprise applications, our prospects for continued revenue growth could be adversely affected. 12 Table of Contents Our gross margin and results of operations may be adversely affected in the future by multiple factors, including decreases in average selling prices of products over time, increased raw material costs, including NAND components, higher manufacturing costs, and shifts in our product mix. Our gross margin is highly dependent on product mix, especially the mix of higher gross margin controller sales, and lower gross margin SSD solutions sales. A shift in sales mix away from our higher margin products could adversely affect our gross profitability as a percentage of sales and could also adversely affect our operating profitability. The primary elements of our controller cost of sales are IC fabrication at our foundries, assembly and testing, and in contrast, the primary cost of sales of our SSD solutions, which are primarily our Ferri SSDs and enterprise and server boot drives, is NAND flash components. Our SSD solutions gross margin is lower than our controller gross margin because these products are generally less differentiated, and we have limited ability to mark-up the cost of NAND flash components that we procure. The controllers we develop and sell are used for high volume applications and their average selling prices have historically decreased over time, and we believe that it is possible they may also fall in the future. We may experience period-to-period fluctuations in future operating results if our average selling prices decline. We may be forced to reduce the average unit price of our products in response to new product introductions by our competitors, competitive pricing pressures and other factors. Also, we often provide large customers with volume-related, price-discount incentives relating to their orders of specific products; if customer procurements that benefit from these incentives scale significantly, they could lead to downward pressure on our gross margins. The mobile and computing devices markets are extremely competitive, which may result in rapidly declining average selling prices of electronic devices and components, such as those made by us, and create downward pressure on our average selling prices and operating results. To maintain acceptable operating results, we will need to develop and introduce new products and product enhancements on a timely basis and continue to reduce our costs. If we are unable to offset any reductions in our average selling prices by increasing our sales volumes or reducing corresponding production costs or if we fail to develop and introduce new products and enhancements on a timely basis, our sales and operating results will be materially and adversely affected. For our SSD solutions business, we procure NAND memory and assemble with our controllers to form our Ferri product line. The pricing of this product line is dependent on the market cost of the NAND memory components. If we cannot pass the increase in NAND costs on to our customers, then our gross margin will be materially impacted. Also, if we cannot procure NAND memory in sufficient quantities to fulfill our customers’ demand, our ability to continue to grow revenue may be materially impacted. We have changed our commercial arrangement with a few of our SSD solutions customers to a NAND consignment arrangement, where our customers procure and maintain ownership of the NAND flash components used in the SSD solutions that we design and build for them, and the gross margins of these types of sales are higher than the sales of typical SSD solutions products where we are responsible for procuring NAND flash components. We cannot assure you that in the future, we can increase the proportion of SSD solutions sales using a NAND consignment arrangement and if more sales are conducted using a NAND consignment arrangement, that it would lead to improvements in our operating results. Our ability to source and secure raw materials and components, including NAND memory, to manufacture controllers and SSDs Our ability to manufacture and deliver our products depends on obtaining adequate supplies of raw materials, components and finished goods from third-party suppliers, including NAND memory and other semiconductor components. Global supply chain disruptions, limited manufacturing capacity, allocation decisions by suppliers, transportation delays, geopolitical developments, trade restrictions, tariffs, natural disasters, labor shortages, inflationary pressures, quality issues, supplier financial distress or other factors beyond our control could reduce the availability of, or increase the cost of, these materials and components. In addition, certain components may be available from a limited number of sources, which could heighten supply risk. 13 Table of Contents If we are unable to obtain sufficient supplies on commercially reasonable terms, or at all, we may experience production delays, be unable to meet customer demand or incur higher manufacturing costs. Any prolonged shortage of raw materials, or significant increases in their cost, could adversely affect our business, results of operations and financial condition. Our SSD solutions product performance could continue to adversely affect our results of operations. We are primarily a fabless semiconductor company focused on NAND flash controllers and the sales of these controllers account for a significant majority of our overall sales. In addition, we also sell SSD solutions, mostly Ferri industrial SSDs. If we are able to expand the sales of our SSD solutions, we cannot provide assurance that expanded sales of these products will not negatively affect our gross margin and operating margin, which could negatively affect the market price of our ADSs. Furthermore, even if we are able to sell our SSD solutions to customers profitably, our return on invested capital for SSD solutions will likely be materially lower than our corporate average primarily because of lower product profitability and higher investments, mainly for working capital necessary for financing NAND and other inventory, and this could negatively affect our overall financial return and the market price of our ADSs. Our SSD solutions are modules, software and appliances, which are different from our primary controller products, which are ICs and have different financial characteristics. Our SSD solutions gross margin is materially lower than our controller gross margin because these products are generally less differentiated and, in the case of our Ferri, where NAND flash components are the majority of the cost of sales, we have limited ability to mark-up the cost of NAND flash components that we procure. We are also subject to NAND price volatility with our Ferri; because of rapidly falling NAND prices, we wrote-down US$3.9 million of NAND components and SSDs in inventory in 2023, US$0.3 million in 2024 and US$0.3 million in 2025. We cannot assure you that in the future our results of operations will not be negatively affected by further NAND component and SSD inventory write-downs. We rely on independent semiconductor foundries and subcontractors for the fabrication, assembly and testing of our ICs, and any limitation of their available capacity to us or failure to fulfill our orders satisfactorily could damage our relationships with our customers, decrease our sales or limit our ability to grow our business. We do not own or operate semiconductor fabrication facilities. Instead, we rely on third parties to manufacture our semiconductors. Two outside foundries, primarily TSMC, and secondarily SMIC, fabricate our semiconductors. As a result, we face several significant risks, including wafer cost, availability of wafers and other raw materials, manufacturing capacity, quality assurance, manufacturing yields and production costs, control over delivery schedules and product quality, control of our intellectual property, labor availability or strikes and actions taken by third-party contractors that breach our agreements. The ability of each foundry to provide us with semiconductors is limited by its available capacity and access to wafers, and the ability of each subcontractor to assemble and test our products is limited by available capacity and access to substrates and other raw materials. We do not have long-term agreements with any of these foundries and subcontractors and we place our orders based on our customers’ purchase orders and sales forecasts. However, the foundries and subcontractors can allocate capacity to the fabrication, assembly and testing of the products of their other customers and reduce deliveries to us on short notice or increase the price they charge us. It is possible that other foundry and subcontractor customers that are larger and better financed than we are, or have long-term agreements with these foundries and subcontractors, may induce these foundries and subcontractors to reallocate capacity to them which could impair our ability to secure manufacturing, assembly and testing capacity that we need for our products. Other factors that could materially adversely affect our business and results of operation include, but are not limited to, our foundries and subcontractors being unable to secure the necessary raw materials from their suppliers, such as packaging component shortages, including T-Glass substrate, experience power outages, lack sufficient capacity to manufacture our products or 14 Table of Contents suffer other disruption or reduction in efficiency. If our foundries fail to deliver fabricated silicon wafers of satisfactory quality in the volume and at the price we require, or if our assembly and testing subcontractors fail to efficiently and accurately assemble and test our products, we will be unable to meet our customers’ demand for our products or to sell those products at an acceptable profit margin, which would have a material and adverse effect on our sales and margins and damage our customer relationships. In addition, interruptions to the wafer manufacturing processes caused by a natural disaster or human error could result in partial or complete disruption in supply until manufacturing is re-started or we are able to shift manufacturing to another fabrication facility. It may not be possible to obtain sufficient capacity or comparable production costs at another foundry. Migrating our design methodology to a new third-party foundry could involve increased costs, resources and development time comparable to a new product development effort. Any reduction in the supply of semiconductors for our products could significantly delay our ability to ship our products and potentially have negative effects on our relationships with existing customers and our results of operations. In addition, if our subcontractors terminate their relationships with us, we would be required to qualify new subcontractors, which could take at least six months, resulting in unforeseen operating problems, and our operating results may be materially and adversely affected. The potential shortages of key packaging components, including T-Glass substrates, could affect our ability to build SSD ICs and solutions, posing a material risk to our ability to meet customer demand. If substrate availability becomes constrained, we may experience delays in finished goods production, impacting customer delivery commitments as well as margin pressure from limited supply. This could reduce our flexibility in responding to customer requirements. While we continue to work closely with suppliers to improve supply visibility and pursue alternate sourcing or contingency options, any prolonged shortage could negatively affect our ability to supply customers consistently and in expected volumes. The manufacture of semiconductors is a highly complex process. Minor deviations in the manufacturing process can cause substantial decreases in yield. In some situations, such deviations may cause production to be suspended. The foundries that manufacture our semiconductors have from time to time experienced lower than anticipated manufacturing yields, including yields for our semiconductors, typically during the production of new products or architectures or during the installation and start-up and ramp-up of new process technologies or equipment. If the foundries that manufacture our semiconductors do not achieve planned yields, our product costs could increase and product availability would decrease. After the wafer fabrication processes, our wafers are shipped to our assembly and testing subcontractors. We have a system to maximize consistent product quality, reliability and yield that involves our quality assurance team working closely with subcontractors in the various phases of the assembly and testing processes. Our supplier quality management includes procedures such as processes to pre-qualify our manufacturing suppliers and subcontractors. If our subcontractors do not achieve planned product quality, reliability and yield during the assembly and testing processes, our product cost could increase, product availability could decrease, or our customers may not accept products manufactured for them. Failure to protect our intellectual property or maintain the rights to certain other technologies may negatively impact our ability to compete. We believe that the protection of our intellectual property rights and continued access to certain third-party technology are and will continue to be important to the success of our business. We rely on a combination of patent, copyright, trademark and trade secret laws and restrictions on disclosure to protect our intellectual property rights. We also enter into confidentiality or license agreements with our employees, business partners and other third parties, and have implemented procedures to control access to and distribution of our documentation and other proprietary information. Despite these efforts, we cannot assure you that these measures will provide meaningful protection of our intellectual property rights. Further, these agreements do not prevent others from independently developing technologies that are equivalent to or superior to our technology. In 15 Table of Contents addition, unauthorized parties may attempt to copy or otherwise obtain and use our proprietary technology. Monitoring unauthorized use of our technology is difficult and we cannot be certain that the steps we have taken will prevent unauthorized use of our technology, particularly in foreign countries such as Taiwan and China where the laws may not protect our proprietary rights as fully as do the laws of the United States. In addition, if the foundries that manufacture our semiconductors lose control of our intellectual property, it could be more difficult for us to take remedial measures because our foundries are located in countries that do not have the same protection for intellectual property that is provided in the United States. Also, some of our contracts, including license agreements, are subject to termination upon certain types of change-of-control transactions. As of April 7, 2026, we have 3,276 patents and 1,035 pending applications worldwide. We cannot be certain that patents will be issued as a result of our pending applications, nor can we be certain that any issued patents would protect or benefit us or give us adequate protection from competing products. For example, issued patents may be circumvented or challenged and declared invalid or unenforceable or provide only limited protection for our technologies. We also cannot be certain that others will not design around our patented technology, independently develop our unpatented proprietary technology or develop effective competing technologies on their own. Failure to successfully defend against intellectual property lawsuits brought against us may adversely affect our business. Companies in and related to the semiconductor industry often aggressively protect and pursue their intellectual property rights. From time to time, we have received, and may continue to receive, notices that claim we have infringed upon, misappropriated or misused other parties’ proprietary rights. Moreover, in the past we have been involved in litigation with parties that claimed that we infringed their patents or misappropriated or misused their trade secrets. In addition, we or our customers may be sued by other parties that claim that our products have infringed their patents or misappropriated or misused their trade secrets, or that may seek to invalidate one or more of our patents. An adverse determination in any of these types of disputes could prevent us from manufacturing or selling some of our products, increase our costs of revenue and expose us to significant liability. Any of these claims may materially and adversely affect our business, financial condition and results of operations. For example, in a patent or trade secret action, a court could issue a preliminary or permanent injunction that would require us or our customer(s) to withdraw or recall certain products from the market or redesign certain products offered for sales or under development. We may also be liable for damages for past infringement and royalties for future use of certain technologies. See “Item 8. Legal Proceedings” below. In addition, any litigation to defend ourselves against claims that we have infringed the intellectual property rights of others, could, regardless of the ultimate outcome, materially and adversely affect our operating results by requiring us to incur significant legal expenses and diverting the resources of the Company and the attention of our management team. Because the markets in which we operate are highly competitive and many of our competitors have greater resources than we have, we cannot be certain that our products will compete favorably in the marketplace. We face competition from several competitors, including Microchip and Phison, our flash memory customers and smaller merchant suppliers in China. We expect to face competition in the future from our current and potential competitors. In addition, some of our flash memory customers could develop products and technologies that replace their need for our products or otherwise reduce their demand for our products. Some of our current and potential competitors have longer operating histories, greater name recognition, access to larger customer bases and significantly greater financial, sales and marketing, manufacturing, distribution, technical and other resources than we have. As a result, they may be able to respond more quickly to changing customer demands or to devote greater resources to the development, promotion and sales of their products than we can. Our current and potential competitors may develop and introduce new products that will be 16 Table of Contents priced lower, provide superior performance or achieve greater market acceptance than our products. For our SSD solutions, if we are unable to procure sufficient supplies of NAND flash components and at terms that enable our products to be competitive in terms of price or develop technologically competitive products, our customers may seek to purchase SSD solutions from other suppliers. Our products must meet exacting specifications and undetected defects and failures may occur, which may cause customers to return or stop buying our products and may expose us to product liability risk and risks of indemnification against defects in our products. Our products are complex and may contain undetected hardware or software defects or failures, especially when first introduced or when new versions are released. These errors could cause us to incur significant re-engineering costs, divert the attention of our engineering personnel from other important product development efforts and materially affect our customer relations and business reputation. If we deliver products with errors or defects, our credibility and the market acceptance and sales of our products could be harmed. Defects could also lead to liability for defective products as a result of lawsuits against us or against our customers. We have agreed to indemnify some of our customers in some circumstances against liability from defects in our products. A successful warranty or product liability claim could require us to make significant payments. Our intellectual property indemnification practices may adversely impact our business. We may be required to indemnify our customers and our third-party intellectual property providers for certain costs and damages of intellectual property infringement in circumstances where our products are a factor in creating infringement exposure. In the contracts under which we sell semiconductor products, we may have agreed to indemnify our customers against losses arising out of claims of unauthorized use of intellectual property. In some of our licensing agreements, we have agreed to indemnify the licensee against losses arising out of or related to our conduct or services. We cannot assure you that claims for indemnification will not be made or that these claims would not have a material and adverse effect on our business, operating results or financial condition. We are exposed to potential impairment on investments. We have made investments in equity securities with an aggregate value of approximately US$29.7 million as of December 31, 2025. If the companies that we invested in are unable to execute their plans and succeed in their respective markets, we may not benefit from such investments, and we could potentially lose the amounts we invested. We evaluate our investment portfolio on a regular basis to determine if impairments have occurred. If the operations of any businesses in which we have invested decline significantly, we could incur impairment charges that could have a material impact on our results of operations. We are subject to cybersecurity risks. Historically, we have experienced immaterial cyberattacks of varying degrees on our technology infrastructure and systems and, as a result, unauthorized parties have obtained in the past, and may in the future obtain, access to our computer systems and networks. The technology infrastructure and systems of our customers, suppliers, vendors and partners may also experience such attacks. Cyberattacks are external and internal threats that include, but are not limited to, malware, phishing, advanced persistent threats, denial of service attacks, malicious software downloads, insider security breaches, and hardware and software vulnerabilities. We believe cyberattack attempts are increasing not only in number but also in scope and that perpetrators of cyberattacks continue to develop increasingly sophisticated systems and means to not only attack systems and damage data but also evade detection or obscure their activities. We have controls and policies and recovery systems to minimize business disruptions in place and will continue to review and enhance our capabilities and upgrade our protective solutions to guard against emerging 17 Table of Contents threats, detect malicious or unauthorized activities. If efforts to breach our infrastructure and systems are successful or we are unable to protect against these risks, we could suffer interruptions, delays, or cessation of operations of our systems, and loss or misuse of proprietary or confidential information, intellectual property, or sensitive or personal information. Breaches of our infrastructure and systems could also cause our customers and other affected third parties to suffer loss or misuse of proprietary or confidential information, intellectual property, or sensitive or personal information, and could harm our relationships with customers and other third parties. As a result, we could experience additional costs, indemnification claims, litigation, and damage to our brand and reputation. All these consequences could harm our reputation and our business and materially and adversely affect our operating results and financial condition. We are increasingly incorporating AI and machine learning technologies into our business operations and product offerings. The use of AI introduces unique cybersecurity risks, including adversarial attacks such as prompt injection, data poisoning, and model extraction that could compromise the integrity and reliability of our systems. There are also risks associated with the potential leakage of sensitive data, proprietary code, or intellectual property through the use of generative AI tools or services by our employees or third-party service providers. As the regulatory landscape surrounding AI continues to evolve, any failure to manage the ethical, legal, and security challenges associated with AI could result in regulatory investigations, legal liabilities, and significant reputational harm. We outsource selected business functions to third parties, including third parties to manufacture our semiconductors. We take steps to monitor and regulate the performance of the independent third parties to whom we delegate selected functions. While we evaluate the information security programs and defenses of such third parties, we cannot be certain that our evaluations will identify all or any potential information security weaknesses, or that such third parties’ information security protocols are or will be sufficient to withstand or adequately respond to a cyberattack or other information security incident. We rely on third parties to provide services necessary for the operation of our business. Any failure of one or more of our vendors, suppliers or manufacturers to provide these services could have a material adverse effect on our business. Arrangements with third-party service providers may make our operations vulnerable if vendors fail to satisfy their obligations to us resulting from their performance, changes in their own operations, financial condition, or other matters outside of our control. The expanding role of third-party providers may also require changes to our existing operations and the adoption of new procedures and processes for retaining and managing these providers, as well as redistributing responsibilities as needed. Effective management, development and implementation of our outsourcing strategies are important to our business and strategy. If there are delays or difficulties in enhancing business processes or our third-party providers do not perform as anticipated, we may not fully realize on a timely basis the anticipated economic and other benefits of the outsourcing projects or other relationships we enter into with key vendors, which could result in substantial costs, divert management’s attention from other strategic activities, negatively affect employee morale or create other operational or financial problems for us. Terminating, transitioning or renegotiating arrangements with key vendors or failure to renegotiate on favorable terms could result in additional costs and a risk of operational delays, potential errors and possible control issues resulting from the termination or during the transition or renegotiation phase. The constant growth and development of technology, including the increased use of AI, presents risks and challenges to our operations that could give rise to legal or regulatory action, damage our reputation or otherwise materially harm our business. Emerging technology is a consistent subject of new laws or regulations and evolving interpretations and applications of laws and regulations. If we fail to comply with these laws, we may be subject to penalties, fines or criminal or civil liability. The development and use of AI presents new risks and challenges that can impact our operations if we incorporate AI into our operations, or if used by our third-party vendors. While we aim to 18 Table of Contents develop and use AI responsibly and attempt to mitigate ethical and legal issues presented by its use, we may ultimately be unsuccessful in identifying or resolving issues before they arise. AI technologies are complex and rapidly evolving and the technologies that we develop or use may ultimately be flawed. Moreover, AI technology is subject to rapidly evolving domestic and international laws and regulations, which could impose significant costs and obligations on the Company. For example, in the United States, there has been uncertainty regarding the applicable regulations that will apply to the development and use of AI technologies. In January 2025, the Trump administration rescinded Executive Order 14110, which had been issued by the Biden administration to govern the safe and trustworthy development and use of AI technologies. The Trump administration subsequently issued Executive Order 14179 (Removing Barriers to American Leadership in Artificial Intelligence), which, among other things, directed certain federal agencies to develop action plans to “sustain and enhance America’s global AI dominance” and to review and, where possible, rescind agency guidance and rulemaking issued pursuant to the prior Biden administration executive order. Since then, the Trump administration has continued to take further actions relating to AI, including issuing additional executive orders relating to AI in education and other sectors, and directing the Office of Science and Technology Policy to coordinate agency AI priorities through a formal AI Action Plan. The Trump administration has signaled a broadly deregulatory posture toward AI, favoring industry-led innovation over prescriptive federal rulemaking. The Trump administration may continue to issue new executive orders, rescind existing federal policies, or implement other rulemaking relating to AI technologies in the future, and the regulatory environment at the federal level remains subject to significant uncertainty and change. At the state level, a growing number of U.S. states have enacted or are actively considering AI-specific legislation. States including California, Colorado, Illinois, and Texas have introduced or passed laws addressing automated decision-making, algorithmic discrimination, AI transparency, and the use of AI in employment and consumer contexts. Compliance with a patchwork of differing state-level AI requirements could impose significant operational and legal burdens on the Company. Emerging regulations may pertain to data privacy, data protection, and the ethical use of AI, as well as clarifying intellectual property considerations. In particular, the legal status of AI-generated content under U.S. copyright law remains unsettled. The U.S. Copyright Office has issued guidance indicating that AI-generated works without sufficient human authorship may not be eligible for copyright protection, and a number of significant cases involving AI training data and AI-generated outputs are currently pending before U.S. courts. These developments could affect our ability to protect AI-generated outputs or expose us to liability in connection with the use of third-party content in training AI models. Our use of AI could give rise to legal or regulatory action, increased scrutiny or liability, damage our reputation or otherwise materially harm our business. Additionally, if we fail to keep pace with rapidly evolving AI technological developments, our competitive position and business results may be negatively impacted. Our business, financial condition and results of operations could be adversely impacted by the political and economic conditions of the countries in which we conduct business and operate and in which our products are used and sold. A substantial portion of our business is conducted outside of the United States and, as a result, we are subject to foreign business, political and economic risks. Most of our ICs are manufactured, assembled and tested by third parties located in China and Taiwan. We generated 91%, 98% and 99% of our revenue in 2023, 2024 and 2025, respectively, from sales to customers outside the United States, and for the year ended December 31, 2025, 79% of our revenue was from sales in three jurisdictions China, Japan and Singapore. Our controller R&D is conducted primarily in Taiwan and our SSD solutions R&D is conducted in both China and Taiwan. Most of our corporate functions are located in Taiwan. These operations are directly influenced by the political and economic conditions of the country in which they are located. We do not expect the portion of our business located outside of the United States to change in the future. 19 Table of Contents Accordingly, we are subject to risks associated with international operations, including but not limited to: • international economic and political conditions, such as political tensions between countries in which we do business (please refer to “Risk Factors — We face substantial risks associated with doing business in Taiwan because of tense regional geopolitical risk with China.”); • unexpected changes in, or impositions of, legislative or regulatory requirements; • complying with a variety of foreign laws; • differing legal standards with respect to protection of intellectual property and employment practices; • cultural differences in the conduct of business; • inadequate local infrastructure that could result in business disruptions; • trade issues related to export or import restrictions, trade sanctions, entity lists, tariffs, quotas and other trade barriers and restrictions, including those related to the ongoing trade disputes between China and the U.S.; • financial risks such as longer payment cycles and difficulty in collecting accounts receivable; • adverse taxes rules, regulations and penalties; and • other factors beyond our control such as nature disasters, terrorism, civil unrest, war, including conflicts in the Middle East, threats to the Strait of Hormuz and global energy supply routes, and the ongoing Russia-Ukraine War, and pandemics, epidemics and other health emergencies. As a result of having global operations, the sudden disruption of our supply chain and/or disruption of the manufacture of our customer’s products caused by events outside of our control could impact our results of operations by impairing our ability to timely and efficiently deliver our products. Although our reporting currency is the U.S. dollar, and the majority of our sales and cost of sales in the last three years are denominated in the U.S. dollar, most of our operating expenses are denominated in the NT dollar, and to a lesser extent, the Chinese yuan and U.S. dollar. Any unfavorable changes in foreign exchange rates could adversely affect, or cause fluctuations in, our results of operations. We do not currently engage in currency hedging activities. Severe weather, natural disasters, pandemics, epidemics, acts of war or terrorism or other external events could have significant effects on our business. We operate primarily in regions of the world, including Taiwan, China and California that are susceptible to earthquakes. In the past, these regions had experienced severe earthquakes that caused significant property damage and loss of life, although we did not suffer any material impact on our business. The occurrence of earthquakes is unpredictable, and a major earthquake and consequent disruptive events could severely disrupt the normal operations of our business and have a material and adverse effect on our financial condition and operating results. Severe weather and natural disasters, including hurricanes, tornados, wildfires, droughts and floods, epidemics and pandemics, acts of war or terrorism or other external events could have a significant effect on our ability to conduct business. Such disasters could disrupt our operations or the operations of customers or third parties on which we rely. Our response to climate change, our climate change strategies, policies and disclosure, and/or our ability to achieve any climate-related goals or commitments that we may make (which are subject to risks and uncertainties, many of which are outside of our control) could result in reputational harm as a result of negative public sentiment, regulatory scrutiny, litigation and reduced investor and stakeholder confidence. 20 Table of Contents Failure to meet the rapidly changing corporate citizenship and sustainability expectations or standards, or achieve our related goals, could adversely affect our business, results of operations, financial condition or stock price. There are rapidly changing discussions and regulations surrounding environmental matters, social investments and diversity, equity and inclusion (often referred to as “ESG” initiatives and programs). In recent years, investor advocacy groups and certain institutional investors have placed increasing importance on sustainability, and we may not succeed in our achievement of our initiatives or goals. Increased ESG related compliance costs could result in increases to our overall operational costs. Failure to adapt to or comply with regulatory requirements or investor or stakeholder expectations and standards could negatively impact our reputation, our ability to do business with certain partners, and our ADS price. In the U.S., the regulatory landscape governing ESG-related disclosure and reporting has undergone significant change. In March 2024, the SEC adopted climate-related disclosure rules; however, those rules were promptly stayed pending judicial review. In March 2025, the SEC announced that it would withdraw its defense of the rules, effectively abandoning them, reflecting a broader shift in the federal government’s approach to mandatory ESG-related disclosure. At the same time, the Trump administration has taken steps to scale back or eliminate a number of federal diversity, equity, and inclusion (“DEI”) programs and has encouraged private sector companies to reduce or eliminate their own DEI initiatives, including through executive orders directing federal agencies to investigate and take action against what the administration characterizes as unlawful DEI practices in the private sector. As a result, the federal regulatory environment for ESG matters has shifted materially toward deregulation, though state-level requirements and international frameworks may continue to impose obligations on the Company. At the same time, there also exists “anti-ESG” sentiment in certain of our markets, and we may face reduced revenue, reputational harm, market restrictions or legal actions if we are targeted by governmental entities, groups or influential individuals who disagree with our public positions on social or environmental issues. Conversely, we may also face reputational harm, loss of customers or employees, or legal challenges from stakeholders who believe that we have not gone far enough in our commitment to ESG-related initiatives, or who object to any reduction or modification of our existing ESG programs in response to political or regulatory pressure. These competing pressures create significant uncertainty regarding the appropriate scope and public positioning of our ESG initiatives, and we may be unable to satisfy all relevant stakeholders simultaneously. We face substantial risks associated with doing business in Taiwan because of tense regional geopolitical risk with China. Most of our business operations are in Taiwan, a self-governing democracy, with a unique international political status, that is claimed by China and receives security from the United States under the Taiwan Relations Act. China asserts that Taiwan is part of China, seeks the unification of Taiwan and has not ruled out the use of force to achieve this. China is also increasingly assertive in the region and claims sovereignty over much of the South China Sea south of Taiwan and has unilaterally established an Air Defense Identification Zone (“ADIZ”) in the East China Sea north of Taiwan. The United States does not recognize China’s ADIZ and conducts regular freedom of navigation operations in the areas claimed by China. In 2016, China dismissed the United Nation’s Permanent Court of Arbitration ruling against it in its claims to the South China Sea. Tensions between Taiwan and China and between the United States and China have increased in recent years. A majority of our employees and a significant portion of our R&D and corporate functions are based in Taiwan. We also operate a R&D center in Shanghai, and China is one of the largest markets for our products. In addition, all of our foundries and assembly and testing subcontractors are located in either Taiwan or China. Accordingly, our business and results of operations and the market price of our ADSs may be affected by any deterioration in the relationship between Taiwan and China. Although there are significant economic ties between Taiwan and China, in recent years China has taken a more aggressive posture towards Taiwan, including 21 Table of Contents the suspension of cross-straits communications channels in 1996, regular intrusion by Chinese military aircraft into Taiwan airspace, the sailing of naval ships around Taiwan waters, the conduct of military exercises close to Taiwan, and exclusion of Taiwan from international organizations such as the World Health Organization. Furthermore, our principal executive offices are in Hong Kong. Previous pro-democracy protests and COVID-19 containment activities have affected our Hong Kong operations and China’s national security law for Hong Kong has reduced its autonomy and could lead to further repercussions from the United States, Taiwan and other countries and may affect our operations in the future. Past and recent developments in relations between Taiwan and China have on occasion depressed the market prices of the securities of Taiwanese companies or companies with significant business activities in Taiwan. We cannot assure you that any contentious situation between Taiwan and China will always resolve in maintaining the current status quo or remain peaceful. Relations between Taiwan and China, potential confrontations between the United States and China and other factors affecting military, political, social or economic conditions in Taiwan and Hong Kong could have a material adverse effect on our financial condition and results of operations, as well as the market price and the liquidity of our ADSs. The enactment of legislation implementing changes in the taxation of international business activities, the adoption of other tax reform policies or changes in tax legislation or policies could materially impact our financial position and results of operations. Legislation is introduced from time to time to reform the taxation of international business activities. The Organisation for Economic Co-operation and Development (OECD) has released guidance covering various topics, including country-by-country reporting, definitional changes to permanent establishment and guidelines in determining arm’s length transfer pricing. This guidance is collectively referred to as Base Erosion and Profit Shifting (“BEPS”) an initiative that aims to standardize and modernize global tax policy. Depending on legislation ultimately enacted in connection with this guidance by jurisdictions in which we operate, there may be significant consequences for us due to our large international business activities. For example, adoption of BEPS by foreign jurisdictions in which we operate could result in changes to tax policies, including transfer- pricing policies that could ultimately impact our tax liabilities to foreign jurisdictions. If any of these proposals are enacted into law, or if other international, consensus-based tax policies and principles are amended or implemented, they could have material adverse consequences on the amount of tax we pay and thereby on our financial position and results of operations. It is likely that new legislation enacted by several governments of countries in which we operate could lead to higher operating and tax expenses for our business in the near future. We are subject to risks associated with the development and construction of our office building. In February 2021, the Company won a bid with a third party to build an office building in Taipei, Taiwan and executed a property development agreement in May 2021, with property development costs expected to be approximately US$101 million. We received the construction license in September 2025, and we expect to complete construction of the building by the end of 2029. Following its completion, we will have approximately 107,870 square feet of office building space and 10,833 square feet of land. We may encounter unanticipated occurrences or conditions during construction that may increase the expense of these projects. We may also encounter unanticipated delays in the construction of the new buildings and local government approvals for the projects may be delayed. We will also be required to comply with applicable environmental regulations in connection with such development. We are financing these construction projects from our cash balance, which could limit alternative deployments of capital. The construction of the building will increase our fixed assets significantly and could reduce our return on invested capital. After the office building has been constructed, we may consider sale and leaseback arrangements if favorable terms can be obtained. See “Item 4 — Facilities” below. 22 Table of Contents Risks Relating to Our Corporate Structure and Governance The loss of any of our key personnel or the failure to attract or retain specialized technical or management personnel could impair our ability to grow our business. We rely heavily on the services of our key employees, including Wallace C. Kou, our President and Chief Executive Officer. In addition, our engineers and other highly skilled personnel are a significant asset and are the source of our technological and product innovations. We believe our future success will depend upon our ability to attract and retain skilled managerial, engineering and sales and marketing personnel. The competition for such personnel, particularly engineering personnel, is intense in our industry. We may not be successful in attracting and retaining engineering personnel to support our anticipated growth. These personnel are required to design and develop ICs, including firmware, and to introduce product enhancements for use in future applications. Despite the incentives we provide, our current employees may not continue to work for us, and if additional personnel are required for our operations, we may not be able to obtain the services of additional personnel necessary for our growth. In addition, we do not maintain “key person” life insurance for any of our senior executives or other key employees. The loss of any of our key employees or our inability to attract or retain qualified personnel, including engineers, could delay the development and introduction of, and have an adverse effect on our ability to sell our products as well as have an adverse effect on our overall growth. In addition, if any other members of our senior management or any of our other key personnel depart, join a competitor or form a competing company, we may not be able to replace them easily and we may lose customers, business partners, key professionals and staff members. Substantially all our senior executives and key personnel have entered into confidentiality and non-disclosure agreements. In the event of a dispute between any of our senior executives or key personnel and our operating companies in Taiwan and other foreign countries, we cannot assure you the extent, if any, to which certain provisions in these confidentiality and non-disclosure agreements may be enforceable in Taiwan or other foreign countries due to the constantly evolving nature of such legal systems’ enforcement and interpretation of these types of agreements. Any failure to achieve and maintain effective internal controls could have a material adverse effect on our business, results of operations and the market price of our ADSs. We are subject to reporting obligations under securities laws of the United States. The SEC, as required by Section 404 of the Sarbanes-Oxley Act of 2002, adopted rules requiring every public company to include in its annual report management’s assessment of the effectiveness of the company’s internal controls over financial reporting. In addition, an independent registered public accounting firm must attest to and report on the effectiveness of the company’s internal controls over financial reporting as applicable. Our management and independent registered public accounting firm have concluded that our internal controls over financial reporting as of December 31, 2025 were effective. However, we cannot assure you that in the future we or our independent registered public accounting firm will not identify material weakness during the audit process or for other reasons. In addition, because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. As a result, if we fail to maintain effective internal controls over financial reporting or should we be unable to prevent or detect material misstatements due to error or fraud on a timely basis, investors could lose confidence in the reliability of our consolidated financial statements, which in turn could harm our business and results of operations, negatively impact the market price of our ADSs and harm our reputation. Our business is subject to various governmental regulations, and compliance with these regulations may cause us to incur significant expense. We are subject to various state, federal and international laws and regulations governing the environment, including restricting the presence of certain substances in electronic products. In addition, we are also subject to various industry requirements restricting the presence of certain substances in electronic products. Although our 23 Table of Contents management systems are designed to maintain compliance, we cannot assure you that we have been or will be, at all times, in complete compliance with such laws and regulations. If we violate or fail to comply with any of them, a range of consequences could result, including fines, import/export restrictions, sales limitations, criminal and civil liabilities or other sanctions. Recently there has been increased focus on environmental protection and social responsibility initiatives, which are subject to change, can be unpredictable, and may be difficult for us to comply with, given the complexity of our supply chain and our significant outsourced manufacturing. We are required to implement various standards or processes due to the adoption of rules or regulations that result from these initiatives, such as the SEC rules on the disclosure of the use of “conflict minerals.” If we are unable to comply, or ensure that our suppliers or contract manufacturers comply, with such standards or processes, customers may stop purchasing from us, which could adversely affect our sales and results of operations. Risks Related to the ADSs Our stock price has been, and may continue to be, volatile, which could result in investors losing all or part of their investments. Since we completed our initial public offering in June 2005, the market price of our ADSs has been and likely will continue to be highly volatile and could be subject to wide fluctuations in response to numerous factors, including but are not limited to the following: • actual or anticipated variations in our quarterly operating results or those of our competitors, customers, or NAND flash vendors; • Actual or anticipated changes to our outlook or expected operating results or those of our competitors, customers, or NAND flash vendors; • actual or anticipated changes in NAND flash supply and demand dynamics; • actual or anticipated changes in our market share or the market share of our competitors; • the commencement or results of litigation or arbitration; • short selling or market manipulation activities; • announcements by us, our competitors, our customers, or their other suppliers of new products or technological innovations; • changes in financial estimates or recommendations by securities analysts; • business interruptions resulting from geopolitical actions, including war and terrorism, natural disasters, including earthquakes, typhoons, floods and fires, epidemics, outbreaks of an infectious disease or similar events; • the payment or non-payment of cash dividends at the discretion of our board of directors; • the announcement and implementation of share repurchase programs; • announcements by us or our competitors of significant acquisitions, divestitures or partnerships; • actual or anticipated changes to trade issues related to export or import restrictions, trade sanctions, entity lists, tariffs, quotas and other trade barriers and restrictions, including those related to the ongoing trade disputes between China and the U.S.; and • actual or anticipated changes in the global economic or industry outlook. Many of these factors are beyond our control and may negatively impact the market price of our ADSs, regardless of our performance. In addition, the stock market in general, and the market for technology and semiconductor companies in particular, have been highly volatile. Furthermore, the trading price of our ADSs 24 Table of Contents may be adversely affected by third parties trying to drive down the market price. Short sellers and others, some of whom post anonymously on social media, may be positioned to profit if our stock declines and their activities can negatively affect our stock price. These broad market and industry factors may seriously harm the market price of our ADSs, regardless of our operating performance. Our ADSs may not trade at the same price levels as that of other semiconductor and technology companies, and shares of semiconductor and technology companies, in general, may not sustain their current market prices. These fluctuations as well as general economic, political, and market conditions may have an adverse effect on the market price of our ADSs. There can be no assurance that we will declare cash dividends in the future in any amount or at all. Since November 2015, except subject to certain suspensions, our board of directors has typically declared dividends annually, with payments made in four quarterly installments. The decision to continue declaring dividends, if any, and their timing and amount, depends on, among other things, that the dividend payment is in the best interests of our shareholders, business visibility, our results of operations, capital availability and future capital requirements, financial condition, statutory requirements, and other factors that our board of directors may deem relevant and any dividend declaration is at the discretion of our board of directors. Our dividend payments may change from time to time, and we cannot provide assurance that we will continue to declare dividends, if at all or in any amount. A reduction in or elimination of our dividend payments could have a negative effect on our share price. We are a foreign private issuer within the meaning of the rules under the Exchange Act, and as such we are exempt from certain provisions applicable to United States domestic public companies. Because we are a foreign private issuer under the Exchange Act, we are exempt from certain provisions of the securities laws and regulations in the United States that apply to U.S. domestic issuers, including: • the rules under the Exchange Act requiring the filing of annual reports on Form 10-K, quarterly reports on Form 10-Q or current reports on Form 8-K with the SEC; • the sections of the Exchange Act regulating the solicitation of proxies, consents, or authorizations in respect of a security registered under the Exchange Act; • the sections of the Exchange Act requiring persons who beneficially own more than 10% of our equity securities to file public reports of their stock ownership and trading activities and liability for our officers, directors and greater than 10% shareholders who profit from trades made in a short period of time; and • the selective disclosure rules by issuers of material nonpublic information under Regulation FD. We will be required to file an annual report on Form 20-F within four months of the end of each fiscal year. In addition, we intend to publish our results on a quarterly basis through press releases, distributed pursuant to the rules and regulations of the Nasdaq. Press releases relating to financial results and material events will also be furnished to the SEC on Form 6-K. However, the information we are required to file with or furnish to the SEC will be less extensive and less timely than that required to be filed with the SEC by U.S. domestic issuers. As a result, you may not be afforded the same protections or information that would be made available to you were you investing in a U.S. domestic issuer. We may lose our foreign private issuer status in the future, which could result in significant additional costs and expenses to us. As discussed above, we are a foreign private issuer, and therefore, we are not required to comply with all the periodic disclosure and current reporting requirements of the Exchange Act. The determination of foreign private issuer status is made annually on the last business day of an issuer’s most recently completed second fiscal quarter. In the future, we would lose our foreign private issuer status if (1) more than 50% of our outstanding 25 Table of Contents voting securities are owned by U.S. residents and (2) a majority of our directors or executive officers are U.S. citizens or residents, or we fail to meet additional requirements necessary to avoid the loss of foreign private issuer status. If we lose our foreign private issuer status, we will be required to file with the SEC periodic reports and registration statements on U.S. domestic issuer forms, which are more detailed and extensive than the forms available to a foreign private issuer. We will also have to comply with U.S. federal proxy requirements, and our officers, directors and greater than 10% shareholders will become subject to the short-swing profit disclosure and recovery provisions of Section 16 of the Exchange Act. In addition, we will lose our ability to rely upon exemptions from certain corporate governance requirements under the listing rules of the Nasdaq. As a U.S. listed public company that is not a foreign private issuer, we will incur significant additional legal, accounting and other expenses that we will not incur as a foreign private issuer. If we are characterized as a passive foreign investment company, U.S. holders of our ADSs may experience adverse tax consequences. Based on the present and projected composition of our income and valuation of our assets, we believe we are not currently classified as a passive foreign investment company (“PFIC”) for U.S. federal income tax purposes. We will generally be classified as a PFIC for any taxable year in which either (a) at least 75% of our gross income is passive income or (b) at least 50% of the value (determined on the basis of a quarterly average) of our assets is attributable to assets that produce or are held for the production of passive income. If we are characterized as a PFIC, U.S. holders of our ADSs may experience adverse tax consequences. See “Item 10. Additional Information — Taxation — United States Federal Income Taxation.” Holders of our ordinary shares and ADSs may experience dilution if we issue restricted stock units or other forms of Company equity to employees or sell additional equity or equity-linked securities. We periodically issue equity awards in the form of restricted stock units that are convertible into shares of the Company’s ordinary shares upon vesting on a one-for-one basis. Therefore, the issuance of such equity awards may have a dilutive effect on the holders of outstanding ordinary shares and ADSs. In addition, the issuance of additional equity or equity-linked securities may result in additional dilution to our shareholders.