ALPHA & OMEGA SEMICONDUCTOR LTD Management’s Discussion and Analysis of Financial Condition and Results of Operations (Form 10-K)

You should read the following discussion of the financial condition and results
of our operations in conjunction with our consolidated financial statements and
the notes to those statements included elsewhere in this annual report. Our
consolidated financial statements contained in this annual report are prepared
in accordance with U.S. GAAP.

Overview

We are a designer, developer and global supplier of a broad portfolio of power
semiconductors. Our portfolio of power semiconductors includes approximately
2,500 products, and has grown significantly with the introduction of over 130
new products in the fiscal year ended June 30, 2022, and over 160 new products
in each of the fiscal year ended June 30, 2020 and 2019, respectively. Our teams
of scientists and engineers have developed extensive intellectual properties and
technical knowledge that encompass major aspects of power semiconductors, which
we believe enables us to introduce and develop innovative products to address
the increasingly complex power requirements of advanced electronics. We have an
extensive patent portfolio that consists of 888 patents and 62 patent
applications in the United States as of June 30, 2022. We also have a total of
936 foreign patents, which primarily were based on our research and development
efforts through June 30, 2022. We differentiate ourselves by integrating our
expertise in technology, design and advanced manufacturing and packaging to
optimize product performance and cost. Our portfolio of products targets
high-volume applications, including personal computers, graphic cards, game
consoles, flat panel TVs, home appliances, power tools, smart phones, battery
packs, consumer and industrial motor controls and power supplies for TVs,
computers, servers and telecommunications equipment.

Our business model leverages global resources, including research and
development and manufacturing in the United States and Asia. Our sales and
technical support teams are localized in several growing markets. We operate an
8-inch wafer fabrication facility located in Hillsboro, Oregon, or the Oregon
Fab, which is critical for us to accelerate proprietary technology development,
new product introduction and improve our financial performance. To meet the
market demand for the more mature high volume products, we also utilize the
wafer manufacturing capacity of selected third party foundries. For assembly and
test, we primarily rely upon our in-house facilities in China. In addition, we
utilize subcontracting partners for industry standard packages. We believe our
in-house packaging and testing capability provides us with a competitive
advantage in proprietary packaging technology, product quality, cost and sales
cycle time.

On March 29, 2016, we formed the JV Company with the Chongqing Funds, for the
purpose of constructing and operating the Chongqing Fab in the LiangJiang New
Area of Chongqing, China. The Chongqing Fab is being built in phases. As of
December 1, 2021, we owned 50.9%, and the Chongqing Funds owned 49.1% of the
equity interest in the JV Company. The JV Company was accounted under the
provisions of the consolidation guidance since we had controlling financial
interest until December 1, 2021.

Effective December 1, 2021, we entered into a share transfer agreement ("STA")
with a third-party investor (the "Investor"), pursuant to which we sold to the
Investor approximately 2.1% of outstanding equity interest held by us in the JV
Company for an aggregate purchase price of RMB 108 million or approximately
$16.9 million. The STA contained customary representations, warranties and
covenants. The Transaction was closed on December 2, 2021. As a result of the
Transaction, as of the Closing Date, our equity interest in the JV Company
decreased from 50.9% to 48.8%. Also, our right to designate directors on the
board of JV Company was reduced to three (3) out of seven (7) directors, from
four (4) directors prior to the Transaction. As of December 2, 2021, we no
longer have a controlling financial interest in the JV Company under generally
accepted accounting principles. Loss of control is deemed to have occurred when,
among other things, a parent company owns less than a majority of the
outstanding common stock in the subsidiary, lacks a controlling financial
interest in the subsidiary and, is unable to unilaterally control the subsidiary
through other means such as having, or the ability to obtain or represent, a
majority of the subsidiary's board of directors. All of these loss of control
factors were present for us as of December 2, 2021. Accordingly, since December
2, 2021, we have deconsolidated the JV Company in our Consolidated Financial
Statements and accounted for our investment in the JV Company using the equity
method of accounting.

On December 24, 2021, we entered into a share transfer agreement with another
third-party investor, pursuant to which we sold to this investor 1.1% of
outstanding equity interest held by us in the JV Company for an aggregate
purchase price of RMB 60 million or approximately $9.4 million based on the
currency exchange rate as of December 24, 2021. In addition, on December 30,
2021, the JV Company adopted an employee equity incentive plan and issued an
equity interest equivalent to 3.99% of the JV Company to exchange in cash. As a
result, we owned 45.8% of the equity interest in the JV Company as of December
31, 2021.

On January 26, 2022, the JV Company completed a financing transaction pursuant
to the Financing Agreement between the JV Company and certain New Investors.
Under the Financing Agreement, the New Investors purchased newly issued equity
interest of the JV Company for a total purchase price of RMB 509 million (or
approximately $80 million based on the currency
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exchange rate at January 26, 2022) (the investment”). After the closing of the Investment, the percentage of outstanding JV Company the Company’s beneficial ownership interest was reduced to 42.2%.

We reduced our ownership of the JV Company to below 50% to increase the
flexibility of the JV Company to raise capital to fund its future expansion.
Following the Transaction and the successful ramp up to its Phase I target run
rate in the September quarter of 2021, as planned, the JV Company commenced an
effort to raise up to $200 million of additional capital, including an $80
million round that was completed on January 26, 2022 through private funding for
its Phase II expansion. In addition to immediate private funding rounds, the JV
Company is also contemplating an eventual listing on the Science and Technology
Innovation Board, or STAR Market, of the Shanghai Stock Exchange. The
Transaction assists the JV Company in meeting certain regulatory listing
requirements. A potential STAR Market listing may take several years to
consummate and there is no guarantee that such listing by the JV Company will be
successful or will be completed in a timely manner, or at all. In addition, the
JV Company will continue to provide us with significant level of foundry
capacity to enable us to develop and manufacture our products. On July 12, 2022,
the current shareholders of the JV Company entered into a shareholders contract,
pursuant to which the JV Company provided us a monthly wafer production capacity
guarantee, subject to future increase when the JV Company's production capacity
reaches certain goal.

During the fiscal year ended June 30, 2022, we continued our diversification
program by developing new silicon and packaging platforms to expand our
serviceable available market, or SAM and offer higher performance products. Our
metal-oxide-semiconductor field-effect transistors, or MOSFET, and power IC
product portfolio expanded significantly. Our high performance products and
deepened customer relationships with our OEM and ODM customers have contributed
to the achievement of our record high revenue of $777.6 million for the fiscal
year 2022, a 18.4% growth compared to the last fiscal year.

Impact of COVID-19 Pandemic to our Business
Our business operations have been impacted by the global COVID-19 pandemic and
the resulting economic downturn. Numerous governmental jurisdictions, including
the States of California, Oregon and Texas in the U.S. and countries throughout
the Asia Pacific region have imposed various restrictions on commercial
activities, resulting in business closures, work stoppages, labor shortage,
disruptions to ports, vaccine mandates and other shipping infrastructure, border
closures, thereby negatively impacting our customers, suppliers, distributors,
employees, offices, and the entire semiconductor ecosystem.

As a result of the COVID-19 pandemic and changing consumer behaviors due to
various government restrictions and the growing trend to provide remote-working
options by employers, we have experienced shifting market trends, including an
increasing demand in markets for notebooks, personal computing ("PC"), gaming
devices and other products. While we have benefited from the increasing demand
for PC related products, there is no guarantee that this trend will continue,
and such increasing demand may discontinue or decline if government authorities
relax or terminate COVID-19 related restrictions and consumer behaviors change
in response to the reopening of certain economic activities. In an effort to
protect the health and safety of our employees and to comply with various
government and regulatory guidelines, we also took proactive actions to adopt
policies and protocols at our locations around the world, including social
distancing guidelines, vaccine and testing protocols.

Since the start of the second quarter of calendar year 2021, there have been
increasing availability and administration of vaccines against COVID-19, as well
as an easing of restrictions on social, business, travel, and government
activities and functions, and a gradual resumption of economic activities and
consumer spending in our industries. However, infection rates continued to
fluctuate in various regions and new strains of the virus remain a risk,
including a surge of COVID-19 cases and hospitalization due to the spread of
Omicron variants in late 2021 and early 2022. During the first half of calendar
year 2022, COVID-19 cases and hospitalization rate continued to decline and
governments in various jurisdictions, including the U.S. and Europe, have lifted
various restrictions and limitations on economic activities. At the same time,
however, new variants of COVID-19 continued to emerge and contributed to recent
rise of infection rates in various jurisdictions in which we operate, including
China and U.S. Furthermore, we may be subject to the ongoing global impacts
resulting from the pandemic, including disruption of the product supply chains,
shortages of semiconductor components, and delays in shipments, product
development, and product launches and rising inflation rates.

In April 2022, the operations of our two packaging and testing facilities in
Shanghai, China were suspended due to a strict lockdown of the city imposed by
the local government in response to surging COVID cases. Our facilities in
Shanghai were required to shut down and production was halted beginning in early
April. Transportation suspension in and out of Shanghai also interrupted the
shipping of raw materials and finished parts to and from our facilities. We
received permission to reopen our facilities partially in early May. We
gradually ramped up production at these facilities in May and returned to normal
operation in June 2022. The suspension of our Shanghai facilities, and the
subsequent partial resumption of production,
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reduced our ability to complete orders from our customers in a timely manner,
which adversely affected our revenue and results of operation for the three
months ended June 30, 2022. We cannot guarantee that the Shanghai government
will not impose similar restrictions and lockdown in the future, and any such
restrictions and lockdown will adversely affect our operations and financial
performance.

The full extent of the longer-term impact of the COVID-19 pandemic on our
operational and financial performance is uncertain and will depend on many
factors outside our control, including, without limitation, the timing, extent,
trajectory and duration of the pandemic; the availability, distribution and
effectiveness of vaccines; the spread of new variants of COVID-19; the continued
and renewed imposition of protective public safety measures, including local and
regional lockdown and quarantines; the disruption of global supply chain; and
the impact of the pandemic on the global economy and demand for consumer
products. Although we are unable to predict the full impact and duration of the
COVID-19 pandemic on our business, we are actively managing our business
operations and financial expenditures in response to continued uncertainty.

Other factors affecting our performance

In addition to the COVID-19 pandemic and related events described above, our performance is affected by several key factors, including the following:

The global, regional economic and PC market conditions: Because our products
primarily serve consumer electronic applications, any significant change in
global and regional economic conditions could materially affect our revenue and
results of operations. A significant amount of our revenue is derived from sales
of products in the PC markets, such as notebooks, motherboards and notebook
battery packs, therefore a substantial decline or downturn in the PC market
could have a material adverse effect on our revenue and results of operations.
The PC markets have experienced a modest global decline in recent years due to
continued growth of demand in tablets and smart phones, worldwide economic
conditions and the industry inventory correction which had and may continue to
have a material impact on the demand for our products. However, we recently have
experienced a significant increase of demand in PC market due to the impact of
the COVID-19 pandemic and resulting shift in market trend and consumer
behaviors. We cannot predict whether and how long this trend will continue due
to the uncertainty and unpredictability of COVID-19 pandemic. A decline of the
PC market may have a negative impact on our revenue, factory utilization, gross
margin, our ability to resell excess inventory, and other performance measures.
We have executed and continue to execute strategies to diversify our product
portfolio, penetrate other market segments, including the consumer,
communications and industrial markets, and improve gross margins and profit by
implementing cost control measures. While making efforts to reduce our reliance
on the computing market, we continue to support our computing business and
capitalize on the opportunities in this market with a more focused and
competitive PC product strategy to gain market share.

Manufacturing costs and capacity availability: Our gross margin is affected by a
number of factors including our manufacturing costs, utilization of our
manufacturing facilities, the product mixes of our sales, pricing of wafers from
third party foundries and pricing of semiconductor raw materials. Capacity
utilization affects our gross margin because we have certain fixed costs at our
Shanghai facilities and our Oregon Fab. If we are unable to utilize our
manufacturing facilities at a desired level, our gross margin may be adversely
affected. For example, in April 2022, the operations of our packaging and
testing facilities in Shanghai, China were suspended due to a strict lockdown of
the city imposed by the local government in response to surging COVID cases. The
facilities were required to be shut down and production was halted since early
April. Transportation suspension in and out of Shanghai also interrupted the
shipping of raw materials and finished parts to and from our facilities. We
received permission to reopen our facilities partially in early May. We
gradually ramped up production at these facilities in May and returned to normal
operation in June 2022. However, there is no guarantee that additional
restrictions and lockdown will not be reimposed by the government, which is
outside of our control, and any extension of the lockdown will continue to have
a negative impact on our results of operation and financial condition. In
addition, from time to time, we may experience wafer capacity constraints,
particularly at third party foundries, that may prevent us from meeting fully
the demand of our customers. For example, the recent global shortage of
semiconductor manufacturing capacity has provided us with both challenges and
opportunities in the market, and highlighted the importance of maintaining
sufficient and independent in-house manufacturing capabilities to meet
increasing customer demands. While we can mitigate these constraints by
increasing and re-allocating capacity at our own fab, we may not be able to do
so quickly or at sufficient level, which could adversely affect our financial
conditions and results of operations. In addition, we recently commenced a plan
to enhance the manufacturing capability and capacity of our Oregon Fab by
investing in new equipment and expanding our factory facilities, which we expect
will have a positive impact on our future new product development and revenue,
particularly during the period of global shortage of capacity. The expansion is
expected to be completed in the fiscal quarter ending March 31, 2023. We also
rely substantially on the JV Company to provide foundry capacity to manufacture
our products, therefore it is critical that we maintain continuous access to
such capacity, which may not be available at sufficient level or at a pricing
terms favorable to us because of lack of control over the JV Company's
operation. As a result of sales of our JV Company equity interests and issuance
of additional equity interests by the JV Company to third-party investors in
financing transactions, our
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equity interest in the JV Company was reduced to 42.2%, which reduced our
control and influence over the JV Company. While we continue to maintain a
business relationship with the JV Company to ensure uninterrupted supply of
manufacturing capacity, and we are currently negotiating a foundry agreement for
the JV Company to provide guarantee level of capacity, the JV Company may take
actions or make decisions that adversely impact our ability to access required
capacity, and our lack of control and influence may prevent us from eliminating
or mitigating such risk.

Erosion and fluctuation of average selling price: Erosion of average selling
prices of established products is typical in our industry. Consistent with this
historical trend, we expect our average selling prices of existing products to
decline in the future. However, in the normal course of business, we seek to
offset the effect of declining average selling price by introducing new and
higher value products, expanding existing products for new applications and new
customers and reducing the manufacturing cost of existing products. These
strategies may cause the average selling price of our products to fluctuate
significantly from time to time, thereby affecting our financial performance and
profitability.

Product introductions and customers' product requirements: Our success depends
on our ability to introduce products on a timely basis that meet or are
compatible with our customers' specifications and performance requirements. Both
factors, timeliness of product introductions and conformance to customers'
requirements, are equally important in securing design wins with our customers.
As we accelerate the development of new technology platforms, we expect to
increase the pace at which we introduce new products and seek and acquire design
wins. If we were to fail to introduce new products on a timely basis that meet
customers' specifications and performance requirements, particularly those
products with major OEM customers, and continue to expand our serviceable
markets, then we would lose market share and our financial performance would be
adversely affected.

Distributor ordering patterns, customer demand and seasonality: Our distributors
place purchase orders with us based on their forecasts of end customer demand,
and this demand may vary significantly depending on the sales outlook and market
and economic conditions of end customers. Because these forecasts may not be
accurate, channel inventory held at our distributors may fluctuate
significantly, which in turn may prompt distributors to make significant
adjustments to their purchase orders placed with us. As a result, our revenue
and operating results may fluctuate significantly from quarter to quarter. In
addition, because our products are used in consumer electronics products, our
revenue is subject to seasonality. Our sales seasonality is affected by numerous
factors, including global and regional economic conditions as well as the PC
market conditions, revenue generated from new products, changes in distributor
ordering patterns in response to channel inventory adjustments and end customer
demand for our products and fluctuations in consumer purchase patterns prior to
major holiday seasons. In recent periods, broad fluctuations in the
semiconductor markets and the global and regional economic conditions, in
particular the decline of the PC market conditions, have had a more significant
impact on our results of operations than seasonality. Furthermore, our revenue
may be impacted by the level of demand from our major customers due to factors
outside of our control. If these major customers experience significant decline
in the demand of their products, encounter difficulties or defects in their
products, or otherwise fail to execute their sales and marketing strategies
successfully, it may adversely affect our revenue and results of operations.

Main income statement items

The following text describes the main items presented in our Consolidated Statements of Income:

Revenue

We generate revenue primarily from the sale of power semiconductors, consisting
of power discretes and power ICs. Historically, a majority of our revenue has
been derived from power discrete products. Because our products typically have
three-year to five-year life cycles, the rate of new product introduction is an
important driver of revenue growth over time. We believe that expanding the
breadth of our product portfolio is important to our business prospects, because
it provides us with an opportunity to increase our total bill-of-materials
within an electronic system and to address the power requirements of additional
electronic systems. In addition, a small percentage of our total revenue is
generated by providing packaging and testing services to third parties through
one of our subsidiaries.

Our product revenue is reported net of the effect of the estimated stock
rotation returns and price adjustments that we expect to provide to our
distributors. Stock rotation returns are governed by contract and are limited to
a specified percentage of the monetary value of products purchased by the
distributor during a specified period. At our discretion or upon our direct
negotiations with the original design manufacturers ("ODMs") or original
equipment manufacturers ("OEMs"), we may elect to grant special pricing that is
below the prices at which we sold our products to the distributors. In these
situations, we will grant price adjustments to the distributors reflecting such
special pricing. We estimate the price adjustments for inventory at the
distributors based on factors such as distributor inventory levels, pre-approved
future distributor selling prices, distributor margins and demand for our
products.
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Cost of Goods Sold

Our cost of goods sold primarily consists of costs associated with semiconductor
wafers, packaging and testing, personnel, including share-based compensation
expense, overhead attributable to manufacturing, operations and procurement, and
costs associated with yield improvements, capacity utilization, warranty and
valuation of inventories. As the volume of sales increases, we expect cost of
goods sold to increase. While our utilization rates cannot be immune to the
market conditions, our goal is to make them less vulnerable to market
fluctuations. We believe our market diversification strategy and product growth
will drive higher volume of manufacturing which will improve our factory
utilization rates and gross margin in the long run.

Operating Expenses

Our operating expenses consist of research and development, and selling, general
and administrative expenses. We expect our operating expenses as a percentage of
revenue to fluctuate from period to period as we continue to exercise cost
control measures in response to the declining PC market as well as align our
operating expenses to the revenue level.

Research and development costs. Our research and development expenses primarily include salaries, bonuses, benefits, stock-based compensation expenses, expenses associated with new product prototypes, travel expenses, fees for engineering services provided by subcontractors and external consultants, depreciation of software and design tools, depreciation of equipment and overheads. We continue to invest in the development of new technologies and products using our own manufacturing and packaging facilities, as this is essential to our long-term success. We are also evaluating appropriate levels of investment and remain focused on introducing new products to improve our competitiveness. We expect our research and development expenses to fluctuate from time to time.

Selling, general and administrative expenses. Our selling, general and
administrative expenses consist primarily of salaries, bonuses, benefits,
share-based compensation expense, product promotion costs, occupancy costs,
travel expenses, expenses related to sales and marketing activities,
amortization of software, depreciation of equipment, maintenance costs and other
expenses for general and administrative functions as well as costs for outside
professional services, including legal, audit and accounting services. We expect
our selling, general and administrative expenses to fluctuate in the near future
as we continue to exercise cost control measures.

income tax expense

We are subject to income taxes in various jurisdictions. Significant judgment
and estimates are required in determining our worldwide income tax expense. The
calculation of tax liabilities involves dealing with uncertainties in the
application of complex tax regulations of different jurisdictions globally. We
establish accruals for potential liabilities and contingencies based on a more
likely than not threshold to the recognition and de-recognition of uncertain tax
positions. If the recognition threshold is met, the applicable accounting
guidance permits us to recognize a tax benefit measured at the largest amount of
tax benefit that is more likely than not to be realized upon settlement with a
taxing authority. If the actual tax outcome of such exposures is different from
the amounts that were initially recorded, the differences will impact the income
tax and deferred tax provisions in the period in which such determination is
made. Changes in the location of taxable income (loss) could result in
significant changes in our income tax expense.

We record a valuation allowance against deferred tax assets if it is more likely
than not that a portion of the deferred tax assets will not be realized, based
on historical profitability and our estimate of future taxable income in a
particular jurisdiction. Our judgments regarding future taxable income may
change due to changes in market conditions, changes in tax laws, tax planning
strategies or other factors. If our assumptions and consequently our estimates
change in the future, the deferred tax assets may increase or decrease,
resulting in corresponding changes in income tax expense. Our effective tax rate
is highly dependent upon the geographic distribution of our worldwide profits or
losses, the tax laws and regulations in each geographical region where we have
operations, the availability of tax credits and carry-forwards and the
effectiveness of our tax planning strategies.

WE Tax Cuts and Jobs Act, enacted December 22, 2017

On December 22, 2017, the United States enacted tax reform legislation through
the Tax Cuts and Jobs Act ("the Tax Act"), which significantly changes the
existing U.S. tax laws, including, but not limited to, (1) a reduction in the
corporate tax rate from 35% to 21%, (2) a shift from a worldwide tax system to a
territorial system, (3) eliminating the corporate alternative minimum tax (AMT)
and changing how existing AMT credits can be realized, (4) bonus depreciation
that will allow for full
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expensing of qualified property, (5) creating a new limitation on deductible
interest expense and (6) changing rules related to uses and limitations of net
operating loss carryforwards created in tax years beginning after December 31,
2017.

The Company is not currently subject to the Base Erosion and Anti-Abuse (BEAT)
tax, which is a tax imposed on certain entities who make payments to their non
U.S. affiliates, where such payments reduce the U.S. tax base . The BEAT tax is
imposed at a rate of 10% on Adjusted Taxable Income, excluding certain payments
to foreign related entities. It is an incremental tax over and above the
corporate income tax and is recorded as a period cost. It is possible that this
tax could be applicable in future periods, which would cause an increase to the
effective tax rate and cash taxes.

WE Coronavirus Aid, Relief and Economic Security Act” (“CARES Act”), signed into law
March 27, 2020

On March 27, 2020, the United States enacted the CARES Act, which made the
changes to existing U.S. tax laws, including, but not limited to, (1) allowing
U.S. federal net operating losses originated in the 2018, 2019 or 2020 tax years
to be carried back five years to recover taxes paid based upon taxable income in
the prior five years, (2) eliminated the 80% of taxable income limitation on net
operating losses for the 2018, 2019 and 2020 tax years (the 80% limitation will
be reinstated for tax years after 2020), (3) accelerating the refund of prior
year alternative minimum tax credits, (4) modifying the bonus depreciation for
qualified improvement property and (5) modifying the limitation on deductible
interest expense.

As a result of the ability to carryback net operating losses from the June 2018
and June 2019 years to the June 2015 to June 2017 tax years, net operating
losses which were previously tax-effected using the current 21% U.S. federal tax
rate were revalued to the U.S. tax rates in effect for the June 2015 to June
2017 tax years due to the ability of receiving tax refunds for the taxes paid in
these years. Accordingly, we reported a discrete tax benefit of $1.1 million in
the third quarter of fiscal year 2020 related to the re-measurement of the net
operating losses that could be realized via the new net operating loss carryback
provisions.

WE Consolidated Appropriations Act 2021 (“CAA 2021”), enacted December 27, 2020

On December 27, 2020, the United States enacted the Consolidated Appropriations
Act, 2021, which made changes to existing U.S. tax laws. There was no material
impact of the tax law changes included in the Consolidated Appropriations Act,
2021 to the Company.

‘US Bailout Act 2021’ signed into law March 11, 2021

On March 11, 2021, the United States enacted the American Rescue Plan Act of
2021, which made changes to existing U.S. tax laws. There was no material impact
of the tax law changes included in the American Rescue Plan Act of 2021 to the
Company.

“The Chip and Science Act of 2022”, signed into law August 2, 2022

In August 2022 the U.S. enacted the Chip and Science Act of 2022 (the Chips
Act). The Chips Act provides incentives to semiconductor chip manufacturers in
the United States, including providing manufacturing investment credits of 25%
for investments in semiconductor manufacturing property placed in service after
December 31, 2022, for which construction begins before January 1, 2027.
Property investments qualify for the 25% credit if, among other requirements,
the property is integral to the operation of an advanced manufacturing facility,
defined as having a primary purpose of manufacturing semiconductors or
semiconductor manufacturing equipment. Currently, we are evaluating the impact
of the Chips Act to us.


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Operating results

The following tables set forth our results of operations and as a percentage of
revenue for the fiscal years ended June 30, 2022, 2021 and 2020. Our historical
results of operations are not necessarily indicative of the results for any
future period.
                                                                                           Year Ended June 30,
                                                2022               2021               2020                2022                 2021                 2020
                                                              (in thousands)                                              (% of revenue)
Revenue                                     $ 777,552          $ 656,902          $ 464,909                100.0  %             100.0  %             100.0  %
Cost of goods sold (1)                        508,996            452,359            362,178                 65.5  %              68.9  %              77.9  %
Gross profit                                  268,556            204,543            102,731                 34.5  %              31.1  %              22.1  %
Operating expenses:
Research and development (1)                   71,259             62,953             51,252                  9.2  %               9.6  %              11.0  %
Selling, general and administrative (1)        95,259             77,514             64,816                 12.3  %              11.8  %              13.9  %
Impairment of privately-held investment             -                  -                600                    -  %                 -  %               0.1  %
Total operating expenses                      166,518            140,467            116,668                 21.5  %              21.4  %              25.0  %
Operating income (loss)                       102,038             64,076            (13,937)                13.0  %               9.7  %              (2.9) %

Other income (loss), net                          999              2,456             (1,229)                 0.1  %               0.4  %              (0.3) %
Interest expenses, net                         (3,920)            (6,308)            (2,743)                (0.5) %              (1.0) %              (0.6) %
Gain on deconsolidation of the JV Company     399,093                  -                  -                 51.3  %                 -  %                 -  %
Loss on changes of equity interest in the
JV Company, net                                (3,140)                 -                  -                 (0.4) %                 -  %                 -  %
Net income (loss) before income taxes         495,070             60,224            (17,909)                63.5  %               9.1  %              (3.8) %
Income tax expense                             39,258              3,935                348                  5.0  %               0.6  %               0.1  %
Net income (loss) before loss from equity
method investment                             455,812             56,289            (18,257)                58.5  %               8.5  %              (3.9) %
Equity method investment loss from equity
investee                                        2,629                  -                  -                  0.3  %                 -  %                 -  %
Net income (loss)                             453,183             56,289            (18,257)                58.2  %               8.5  %              (3.9) %
Net income (loss) attributable to
noncontrolling interest                            20             (1,827)           (11,661)                 0.0  %              (0.3) %              (2.5) %
Net income (loss) attributable to Alpha and
Omega Semiconductor Limited                 $ 453,163          $  58,116          $  (6,596)                58.2  %               8.8  %              (1.4) %

(1) Includes stock-based compensation expense as follows:

                                                                   Year Ended June 30,
                                           2022          2021          2020         2022        2021       2020
                                                    (in thousands)                        (% of revenue)
  Cost of goods sold                    $  5,125      $  1,756      $  1,530         0.7  %     0.3  %     0.3  %
  Research and development                 7,049         5,352         2,895         0.9  %     0.8  %     0.6  %
  Selling, general and administrative     19,150         8,216         6,029         2.5  %     1.3  %     1.3  %
                                        $ 31,324      $ 15,324      $ 10,454         4.1  %     2.4  %     2.2  %



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Revenue

  The following is a summary of revenue by product type:

                                    Year Ended June 30,                                                                  Change
                         2022               2021               2020                              2022                                              2021
                                       (in thousands)                           (in thousands)       (in percentage)              (in thousands)       (in percentage)
Power discrete       $ 545,135          $ 482,718          $ 391,941          $        62,417                     12.9  %       $        90,777                     23.2  %
Power IC               220,882            161,726             66,360                   59,156                     36.6  %                95,366                    143.7  %
Packaging and
testing services        11,535             12,458              6,608                     (923)                    (7.4) %                 5,850                     88.5  %
                     $ 777,552          $ 656,902          $ 464,909          $       120,650                     18.4  %       $       191,993                     41.3  %


Fiscal 2022 vs 2021

Total revenue was $777.6 million for fiscal year 2022, an increase of $120.7
million, or 18.4%, as compared to $656.9 million for fiscal year 2021. The
increase was primarily due to an increase of $62.4 million in sales of power
discrete products and an increase of $59.2 million in sales of power IC
products. The increase in power discrete and power IC product sales was
primarily due to a 21.0% increase in average selling price as compared to last
fiscal year due to a shift in product mix, partially offset by a 2.1% decrease
in unit shipments. The decrease in revenue of packaging and testing services for
the fiscal year 2022 as compared to last fiscal year was primarily due to
decreased demand. During fiscal year 2022, we accelerated the development of new
technology platforms which allowed us to introduce 49 medium and high voltage
MOSFET products, targeting primarily the industrial markets and communication
marketing, and 7 module products primarily for the consumer markets, as well as
14 low voltage MOSFET products primarily for the computing and communication
markets. In addition, we introduced 69 Power IC new products for computing
applications, communication and consumer markets.

Financial year 2021 vs 2020

Total revenue was $656.9 million for fiscal year 2021, an increase of $192.0
million, or 41.3%, as compared to $464.9 million for fiscal year 2020. The
increase was primarily due to an increase of $90.8 million in sales of power
discrete products and an increase of $95.4 million in sales of power IC
products. The increase in power discrete and power IC product sales was
primarily due to a 23.0% increase in unit shipments and a 14.5% increase in
average selling price due to a shift in product mix as compared to last fiscal
year. The increase in revenue of packaging and testing services for the fiscal
year 2021 as compared to last fiscal year was primarily due to increased demand.

Cost of goods sold and gross profit

                                           Year Ended June 30,                                                                  Change
                                2022               2021               2020                              2022                                              2021
                                              (in thousands)                           (in thousands)       (in percentage)              (in thousands)       (in percentage)
Cost of goods sold          $ 508,996          $ 452,359          $ 362,178          $        56,637                     12.5  %       $        90,181                     24.9  %
 Percentage of revenue           65.5  %            68.9  %            77.9  %

Gross profit                $ 268,556          $ 204,543          $ 102,731          $        64,013                     31.3  %       $       101,812                     99.1  %
 Percentage of revenue           34.5  %            31.1  %            22.1  %



Fiscal 2022 vs 2021

Cost of goods sold was $509.0 million for fiscal year 2022, an increase of $56.6
million, or 12.5%, as compared to $452.4 million for fiscal year 2021. The
increase was primarily due to 18.4% increase in revenue. Gross margin increased
by 3.4 percentage points to 34.5% for the fiscal year 2022, as compared to 31.1%
for the fiscal year 2021. The increase in gross margin was primarily due to
better product mix during the fiscal year ended June 30, 2022. We expect our
gross margin to continue to fluctuate in the future as a result of variations in
our product mix, semiconductor wafer and raw material pricing, manufacturing
labor cost and general economic and PC market conditions.

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Financial year 2021 vs 2020

Cost of goods sold was $452.4 million for fiscal year 2021, an increase of $90.2
million, or 24.9%, as compared to $362.2 million for fiscal year 2020. The
increase was primarily due to 41.3% increase in revenue. Gross margin increased
by 9.0 percentage points to 31.1% for the fiscal year 2021, as compared to 22.1%
for the fiscal year 2020. Our JV Company continued its ramp during the fiscal
year 2021, which resulted in an increase in the capacity utilization and
contributed to the increase in gross margin.

Research and development costs

                                          Year Ended June 30,                                                                 Change
                                2022              2021              2020                              2022                                             2021
                                             (in thousands)                         (in thousands)       (in percentage)              (in thousands)       (in percentage)
Research and development     $ 71,259          $ 62,953          $ 51,252          $        8,306                     13.2  %       $        11,701                     22.8  %



Fiscal 2022 vs 2021

Research and development expenses were $71.3 million for fiscal year 2022, an
increase of $8.3 million, or 13.2%, as compared to $63.0 million for fiscal year
2021. The increase was primarily attributable to a $6.8 million increase in
employee compensation and benefit expense mainly due to higher bonus accrual,
increased headcount and annual merit increase, a $1.7 million increase in
share-based compensation expense due to an increase in stock awards granted, a
$0.2 million increase in depreciation expenses, and a $0.2 million increase in
professional fees, partially offset by a $0.8 million decrease in product
prototyping engineering expense as a result of decreased engineering activities.
We continue to evaluate and invest resources in developing new technologies and
products utilizing our own fabrication and packaging facilities. We believe the
investment in research and development are important to meet our strategic
objectives.

Financial year 2021 vs 2020

Research and development expenses were $63.0 million for fiscal year 2021, an
increase of $11.7 million, or 22.8%, as compared to $51.3 million for fiscal
year 2020. The increase was primarily attributable to a $4.0 million increase in
employee compensation and benefit expense mainly due to higher bonus accrual, a
$4.2 million increase in product prototyping engineering expense as a result of
increased engineering activities, a $2.5 million increase in share-based
compensation expense due to higher stock awards price, and a $0.5 million
increase in facility expenses as a result of higher office rental expenses and
higher utility costs.

Selling, general and administrative expenses

                                              Year Ended June 30,                                                                 Change
                                    2022              2021              2020                              2022                                              2021
                                                 (in thousands)                          (in thousands)       (in percentage)              (in thousands)       (in percentage)
Selling, general and
administrative                   $ 95,259          $ 77,514          $ 64,816          $        17,745                     22.9  %       $        12,698                     19.6  %



Fiscal 2022 vs 2021

Selling, general and administrative expenses were $95.3 million for fiscal year
2022, an increase of $17.7 million, or 22.9%, as compared to $77.5 million for
fiscal year 2021. The increase was primarily attributable to a $8.6 million
increase in employee compensation and benefits expenses mainly due to increased
headcount, annual merit increase, higher bonus expenses and increased employee
and business insurance expenses, as well as $10.9 million increase in
share-based compensation expense due to increase in stock award granted,
partially offset by a $2.2 million decrease in legal expense related to the
government investigation.

Financial year 2021 vs 2020

Selling, general and administrative expenses were $77.5 million for fiscal year
2021, an increase of $12.7 million, or 19.6%, as compared to $64.8 million for
fiscal year 2020. The increase was primarily attributable to a $13.2 million
increase in
                                       54
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employee compensation and benefits expenses, mainly due to increased headcount,
higher bonus expenses and increased employee insurance expenses, as well as $2.2
million increase in share-based compensation expense due to higher stock rewards
price. The increase was partially offset by a $1.9 million decrease in legal
expense related to the government investigation, and a $0.9 million decrease in
business travel expenses as a result of the COVID-19 pandemic.

Depreciation of private investments

                                           Year Ended June 30,                                                               Change
                                   2022             2021            2020                             2022                                              2021
                                              (in thousands)                        (in thousands)       (in percentage)              (in thousands)       (in percentage)
Impairment of privately-held
investment                      $     -          $     -          $  600          $             -                        -  %       $          (600)                   100.0  %


During the fiscal year 2020, we recorded an other-than-temporary impairment
charge for our investment of $0.6 million in a privately-held start-up company.
As of June 30, 2022 and 2021, we have remaining a privately-held investment of
$0.1 million.

Other income (loss), net

                                     Year Ended June 30,                                                               Change
                           2022             2021             2020                              2022                                              2021
                                        (in thousands)                        (in thousands)       (in percentage)             (in thousands)       (in percentage)

Other income (loss), net $999 $2,456 ($1,229) ($1,457)

                   (59.3) %       $        3,685            

(299.8)%

Other income (losses), net less $1.5 million in fiscal 2022 compared to the prior fiscal year, mainly due to the increase in foreign exchange loss resulting from the depreciation of the RMB against the US dollar.

Other income (losses), net increased by $3.7 million in fiscal 2021 compared to fiscal 2020 was primarily due to a lower foreign exchange loss due to the appreciation of the RMB against the US dollar.

Interest expense, net

                                       Year Ended June 30,                                                                 Change
                             2022              2021              2020                              2022                                             2021
                                          (in thousands)                         (in thousands)       (in percentage)              (in thousands)       (in percentage)
Interest expense, net     $ (3,920)         $ (6,308)         $ (2,743)         $        2,388                    (37.9) %       $        (3,565)                   130.0  %


Interest expense was primarily related to bank borrowings. Interest expense
decreased by $2.4 million in fiscal year 2022 as compared to the prior fiscal
year primarily because of deconsolidation of the JV Company in December 2021.
Interest expense increased by $3.6 million in fiscal year 2021 as compared to
the fiscal year 2020 primarily due to an increase in bank borrowings as well as
to a reduction in the interest refund from the Chinese government to the JV
Company.

Gain on deconsolidation of JV Company and Gain/loss on changes in participation in the JV Company

Effective December 1, 2021, we entered into the STA with the Investor, pursuant
to which we sold to the Investor approximately 2.1% of outstanding equity
interest held by us in the JV Company for an aggregate purchase price of RMB 108
million or approximately $16.9 million. The STA contained customary
representations, warranties and covenants. The Transaction was closed on
December 2, 2021. As a result of the Transaction, as of the Closing Date, our
equity interest in the JV Company decreased from 50.9% to 48.8%. Also, our right
to designate directors on the board of JV Company was reduced to three (3) out
of seven (7) directors, from four (4) directors prior to the Transaction. We no
longer have a controlling financial interest in the JV Company under generally
accepted accounting principles. Loss of control is deemed to have occurred when,
among other things, a parent company owns less than a majority of the
outstanding common stock in the subsidiary, lacks a controlling financial
interest in the subsidiary and, is unable to unilaterally control the subsidiary
through
                                       55
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other means such as having, or the ability to obtain, a majority of the
subsidiary's board of directors. All of these loss of control factors were
present for us as of December 2, 2021. Accordingly, since December 2, 2021, AOS
has accounted for its investment in the JV Company using the equity method of
accounting. On December 24, 2021, we entered into a share transfer agreement
with another third-party investor, pursuant to which we sold to this investor
1.1% of outstanding equity interest held by us in the JV Company for an
aggregate purchase price of RMB 60 million or approximately $9.4 million. In
addition, the JV Company adopted an employee equity incentive plan and issued an
equity interest equivalent to 3.99% of the JV Company to exchange in cash. As a
result, the Company owned 45.8% of the equity interest in the JV Company as of
December 31, 2021. On January 26, 2022, the JV Company completed a financing
transaction pursuant to the Financing Agreement between the JV Company and
certain New Investors. Under the Financing Agreement, the New Investors
purchased newly issued equity interest of the JV Company for a total purchase
price of RMB 509 million (or approximately $80 million based on the currency
exchange rate as of January 26, 2022). Following the closing of the Investment,
the percentage of outstanding JV Company equity interest beneficially owned by
us was reduced to 42.2%.

During the fiscal year ended June 30, 2022, we recorded a gain of $399.1 million
on deconsolidation of the JV Company, and a $3.1 million of loss on changes of
equity interest in the JV Company.

We account for our investment in the JV Company as an equity method investment
and report our equity in earnings or loss of the JV Company on a three-month lag
due to an inability to timely obtain financial information of the JV Company.
For the fiscal year ended June 30, 2022 using lag reporting, we recorded $2.6
million of its equity in loss of the JV Company.


Income tax expense

                                     Year Ended June 30,                                                               Change
                            2022              2021            2020                             2022                                              2021
                                        (in thousands)                        (in thousands)       (in percentage)             (in thousands)       (in percentage)
Income tax expense       $ 39,258          $ 3,935          $  348          $        35,323                    897.7  %       $        3,587                  1,030.7  %



Fiscal 2022 vs 2021

Income tax expense for fiscal years 2022 and 2021 was $39.3 million and $3.9
million, respectively. Income tax expense increased by $35.3 million, or 897.7%
in fiscal year 2022 as compared to fiscal year 2021. The income tax expense of
$39.3 million for the year ended June 30, 2022 included a $33.5 million discrete
tax expense related to the Company's $396.0 million of income from the sale of
equity interest in a joint venture and the related deconsolidation gain as the
Company changed from the consolidation method of accounting to the equity method
of accounting. In addition, we recorded a tax benefit of $0.4 million from other
discrete income tax items. The income tax expense of $3.9 million for the year
ended June 30, 2021 included a $0.3 million discrete tax benefit. Excluding the
discrete income tax items ($396.0 million of income from the sale of equity
interest in a joint venture and the related deconsolidation gain as well as
other discrete items), the effective tax rate for the years ended June 30, 2022
and 2021 was 6.3% and 7.1%, respectively. The changes in the tax expense and
effective tax rate between the periods resulted primarily from the Company
reporting pretax book income of $495.0 million ($99.0 million of pretax book
income plus the $396.0 million of income from the sale of equity interest in a
joint venture and the related deconsolidation gain) for the year ended June 30,
2022 as compared to a pretax book income of $60.2 million for the year ended
June 30, 2021 as well as changes in the mix of earnings in various geographic
jurisdictions between the current year and the same period of last year.

Financial year 2021 vs 2020

Income tax expense for fiscal years 2021 and 2020 was $3.9 million and $0.3
million, respectively. Income tax expense increased by $3.6 million in fiscal
year 2021 as compared to fiscal year 2020, primarily due to an approximate $80
million increase in pretax book income in fiscal 2021 (in which we reported a
pretax book income of $60.2 million) vs. fiscal 2020 (in which we reported
pretax book loss of $17.9 million). Excluding discrete income tax items, the
effective tax rate for the current fiscal year was 7.1%, compared to (9.6%) for
the prior fiscal year. The changes in the effective tax rate and tax expense
between the fiscal years resulted primarily from changes in the mix of earnings
in various geographic jurisdictions between the current fiscal year and prior
fiscal year.


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Cash and capital resources

Our primary need for liquidity and capital resources is to maintain sufficient working capital to support our operations and to invest adequate capital expenditures to grow our business. To date, we fund our operations and capital expenditures primarily through funds generated from operations and borrowings under our term loans, finance leases and other debt agreements.

On August 18, 2021, Jireh Semiconductor Incorporated ("Jireh") entered into a
term loan agreement with a financial institution (the "Bank") in an amount up to
$45.0 million for the purpose of expanding and upgrading the Company's
fabrication facility located in Oregon. The obligation under the loan agreement
is secured by substantially all assets of Jireh and guaranteed by the Company.
The agreement has a 5.5 year term and matures on February 16, 2027. Jireh is
required to make consecutive quarterly payments of principal and interest. The
loan accrues interest based on adjusted London Interbank Offered Rate ("LIBOR")
plus the applicable margin based on the outstanding balance of the loan. This
agreement contains customary restrictive covenants and includes certain
financial covenants that the Company is required to maintain. Jireh drew down
$45.0 million on February 16, 2022. As of June 30, 2022, Jireh was in compliance
with these covenants and the outstanding balance of this loan was $45.0 million.

In October 2019, the Company' subsidiary in China entered into a line of credit
facility with Bank of Communications Limited in China. This line of credit
matured on February 14, 2021 and was based on the China Base Rate multiplied by
1.05, or 4.99% on October 31, 2019. The purpose of the credit facility is to
provide short-term borrowings. The Company could borrow up to approximately RMB
60.0 million or $8.5 million based on the currency exchange rate between the RMB
and the U.S. Dollar on October 31, 2019. In September 2021, this line of credit
was renewed with maximum borrowings up to RMB 140.0 million with the same terms
and a maturity date of September 18, 2022. During the three months ended
December 31, 2021, the Company borrowed RMB 11.0 million, or $1.6 million, at an
interest rate of 3.85% per annum, with principal due on November 18, 2022. As of
June 30, 2022, there was $1.6 million outstanding balance under the loan.

On November 16, 2018, the Company' subsidiary in China entered into a line of
credit facility with Industrial and Commercial Bank of China. The purpose of the
credit facility was to provide short-term borrowings. The Company could borrow
up to approximately RMB 72.0 million or $10.3 million based on currency exchange
rate between RMB and U.S. Dollar on November 16, 2018. The RMB 72.0 million
consisted of RMB 27.0 million for trade borrowings with a maturity date of
December 31, 2021, and RMB 45.0 million for working capital borrowings or trade
borrowings with a maturity date of September 13, 2022. During the three months
ended December 31, 2021, the Company borrowed RMB 5.0 million, or $0.8 million,
at an interest rate of 3.7% per annum, with principal due on September 12, 2022.
As of June 30, 2022, the total outstanding balance of this loan was $0.5
million.

In September 2021, Jireh Semiconductor Incorporated ("Jireh") entered into a
financing arrangement agreement with a company ("Lender") for the lease and
purchase of a machinery equipment manufactured by a supplier. The total purchase
price of this machinery equipment was euro 12.0 million, or $12.8 million based
on the currency exchange rate between the euro and U.S. Dollar on June 30, 2022.
In April 2021, Jireh made a down payment of euro 6.0 million, representing 50%
of the total purchase price of the equipment, to the supplier. In June 2022, the
equipment was delivered to Jireh after Lender paid 40% of the total purchase
price, for euro 4.8 million, to the supplier on behalf of Jireh. Based on the
terms of the agreement between Jireh and Lender, after the installation and
configuration of the equipment for its intended use, Lender will make the
remaining 10% payment for the total purchase price and reimburse Jireh for the
down payment made to the supplier. By that time, the title of the equipment will
be transferred to Lender. This agreement has a 5 years term, after which Jireh
has the option to purchase the equipment for $1. Jireh is required to make a
monthly payment of interest at an implied interest rate of 4.75% per annum to
Lessor. Principal payment is required to be paid monthly after the completion of
the title transfer. The financing arrangement is secured by this machinery
equipment which had the carrying amount of $12.8 million as of June 30, 2022. As
of June 30, 2022, the outstanding balance of this debt financing was
$5.0 million.

On August 9, 2019, one of the Company' wholly-owned subsidiaries (the
"Borrower") entered into a factoring agreement with the Hongkong and Shanghai
Banking Corporation Limited ("HSBC"), whereby the Borrower assigns certain of
its accounts receivable with recourse. This factoring agreement allowed the
Borrower to borrow up to 70% of the net amount of its eligible accounts
receivable of the Borrower with a maximum amount of $30.0 million. The interest
rate was based on one month London Interbank Offered Rate ("LIBOR") plus 1.75%
per annum. The Company was the guarantor for this agreement. The Company is
accounting for this transaction as a secured borrowing under the Transfers and
Servicing of Financial Assets guidance. In addition, any cash held in the
restricted bank account controlled by HSBC had a legal right of offset against
the borrowing. This agreement, with certain financial covenants required, had no
expiration date. On August 11, 2021, the Borrower signed an agreement with HSBC
to decrease the borrowing maximum amount to $8.0 million with certain financial
covenants required. Other terms remain the same. The Borrower was in compliance
with these covenants as of June 30, 2022. As of June 30, 2022, there was no
outstanding balance and the Company had unused credit of approximately $8.0
million.

                                       57
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On May 1, 2018, Jireh entered into a loan agreement with the Bank that provided
a term loan in an amount of $17.8 million. The obligation under the loan
agreement is secured by certain real estate assets of Jireh and guaranteed by
the Company. The loan has a five-year term and matures on June 1, 2023.
Beginning June 1, 2018, Jireh made consecutive monthly payments of principal and
interest to the Bank. The outstanding principal shall accrue interest at a fixed
rate of 5.04% per annum on the basis of a 360-day year. The loan agreement
contains customary restrictive covenants and includes certain financial
covenants that require the Company to maintain, on a consolidated basis,
specified financial ratios. In August 2021, Jireh signed an amendment of this
loan with the Bank to modify the financial covenants requirement to align with
the new term loan agreement entered into on August 18, 2021 discussed above. The
amendment was accounted for as a debt modification and no gain or loss was
recognized. The Company was in compliance with these covenants as of June 30,
2022. As of June 30, 2022, the outstanding balance of the term loan was $14.2
million.

On August 15, 2017, Jireh entered into a credit agreement with the Bank that
provided a term loan in an amount up to $30.0 million for the purpose of
purchasing certain equipment for the fabrication facility located in Oregon. The
obligation under the credit agreement is secured by substantially all assets of
Jireh and guaranteed by the Company. The credit agreement has a five-year term
and matures on August 15, 2022. In January 2018 and July 2018, Jireh drew down
on the loan in the amount of $13.2 million and $16.7 million, respectively.
Beginning in October 2018, Jireh is required to pay to the Bank on each payment
date, the outstanding principal amount of the loan in monthly installments. The
loan accrues interest based on an adjusted LIBOR as defined in the credit
agreement, plus specified applicable margin in the range of 1.75% to 2.25%,
based on the outstanding balance of the loan. The credit agreement contains
customary restrictive covenants and includes certain financial covenants that
require the Company to maintain, on a consolidated basis, specified financial
ratios and fixed charge coverage ratio. In August 2021, Jireh signed an
amendment of this loan with the Bank to modify the financial covenants
requirement to align with the new term loan agreement entered into on August 18,
2021, discussed above. The amendment was accounted for as a debt modification
and no gain or loss was recognized. The Company was in compliance with these
covenants as of June 30, 2022. As of June 30, 2022, the outstanding balance of
the term loan was $1.9 million.

In September 2017, the board of directors approved a repurchase program (the
"Repurchase Program") that allowed us to repurchase our common shares from the
open market pursuant to a pre-established Rule 10b5-1 trading plan or through
privately negotiated transactions up to an aggregate of $30.0 million. The
amount and timing of any repurchases under the Repurchase Program depend on a
number of factors, including but not limited to, the trading price, volume,
availability of our common shares and the amount of available cash reserve.
Shares repurchased under this program are accounted for as treasury shares and
the total cost of shares repurchased is recorded as a reduction of shareholders'
equity. During fiscal year 2022, 2021 and 2020, we did not repurchase any shares
pursuant to the repurchase program. As of June 30, 2022, the Company had
repurchased an aggregate of 6,784,648 shares for a total cost of $67.3 million,
at an average price of $9.92 per share, excluding fees and related expenses,
since inception of the program. No repurchased shares have been retired. Of the
6,784,648 repurchased shares, 167,395 shares with a weighted average repurchase
price of $10.06 per share, were reissued at an average price of $5.00 per share
for option exercises and vested restricted stock units ("RSU"). As of June 30,
2022, $13.4 million remain available under the share repurchase program.

The Chinese government imposes certain currency exchange controls on cash
transfers out of China. Regulations in China permit foreign owned entities to
freely convert the Renminbi into foreign currency for transactions that fall
under the "current account," which includes trade related receipts and payments,
interests, and dividend payments. Accordingly, subject to the review and
verification of the underlying transaction documents and supporting documents by
the account banks in China, our Chinese subsidiaries may use Renminbi to
purchase foreign exchange currency for settlement of such "current account"
transactions without the pre-approval from China's State Administration of
Foreign Exchange (SAFE) or its provincial branch. Pursuant to applicable
regulations, foreign-invested enterprises in China may pay dividends only out of
their accumulated profits, if any, determined in accordance with Chinese
accounting standards and regulations. In calculating accumulated profits,
foreign-invested enterprises in China are required to allocate at least 10% of
their profits each year, if any, to fund the equity reserve account unless the
reserve has reached 50% of the registered capital of the enterprises. While SAFE
approval is not statutorily required for eligible dividend payments to the
foreign parent, in practice, before making the dividend payment, the account
bank may seek SAFE's opinion with respect to a dividend payment if the payment
involves a relatively large amount, which may delay the dividend payment
depending on the then overall status of cross-border payments and receipts of
China.

Transactions that involve conversion of Renminbi into foreign currency in
relation to foreign direct investments and provision of debt financings in China
are classified as "capital account" transactions. Examples of "capital account"
transactions include repatriations of investments by foreign owners and
repayments of loan principal to foreign lenders. "Capital account" transactions
require prior approval from SAFE or its provincial branch or an account bank
delegated by SAFE to convert a remittance into a foreign currency, such as U.S.
dollars, and transmit the foreign currency outside of China. As a result of this
and other restrictions under PRC laws and regulations, our China subsidiaries
are restricted in their ability to transfer a portion of their net assets to us,
and such restriction may adversely affect our ability to generate sufficient
liquidity to fund our operations or other expenditures. As of June 30, 2022 and
2021, such restricted portion amounted to approximately
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$92.4 million and $209.9 million, or 10.8% and 50.4%, of our total consolidated
net assets attributable to the Company, respectively. The decrease of restricted
net assets was primarily from deconsolidation of the JV Company in China.

We believe that our current cash and cash equivalents and cash flows from
operations will be sufficient to meet our anticipated cash needs, including
working capital and capital expenditures, for at least the next twelve months.
In addition, we recently commenced an investment plan to expand the
manufacturing capacity and upgrade the operational capabilities of our Oregon
Fab. We intend to fund the costs by a combination of cash reserve, bank loans
and equipment leases. In the long-term, we may require additional capital due to
changing business conditions or other future developments, including any
investments or acquisitions we may decide to pursue. If our cash is insufficient
to meet our needs, we may seek to raise capital through equity or debt
financing. The sale of additional equity securities could result in dilution to
our shareholders. The incurrence of indebtedness would result in increased debt
service obligations and may include operating and financial covenants that would
restrict our operations. We cannot be certain that any financing will be
available in the amounts we need or on terms acceptable to us, if at all.

Cash, cash equivalents and restricted cash

As of June 30, 2022 and 2021, we had $314.7 million and $204.8 million of cash,
cash equivalents and restricted cash, respectively. Our cash, cash equivalents
and restricted cash primarily consisted of cash on hand, restricted cash and
short-term bank deposits with original maturities of three months or less. Of
the $314.7 million and $204.8 million cash and cash equivalents, $212.6 million
and $134.6 million, respectively, were deposited with financial institutions
outside the United States.

The following table presents our cash flows from operating, investing and financing activities for the periods indicated:

                                                                               Year Ended June 30,
                                                                    2022               2021              2020
                                                                                 (in thousands)
Net cash provided by operating activities                       $ 218,865          $ 128,744          $ 62,315
Net cash used in investing activities                            (130,822)           (72,539)          (60,849)
Net cash provided by (used in) financing activities                21,854            (18,991)           37,651

Effect of changes in exchange rates on cash, cash equivalents and restricted cash

                                                   (59)             4,895              (708)

Net increase in cash, cash equivalents and restricted cash

                                                            $ 109,838   

$42,109 $38,409

Cash flow from operating activities

Net cash provided by operating activities of $218.9 million for fiscal year 2022
resulted primarily from net income of $453.2 million, non-cash charges of $287.6
million and net change in assets and liabilities providing net cash of $53.3
million. The non-cash charges of $287.6 million included depreciation and
amortization expenses of $42.9 million, share-based compensation expense of
$31.3 million, gain on deconsoidation of the JV Company of $399.1 million, loss
on changes of equity interest in the JV Company, net of $3.1 million, deferred
income tax on deconsolidation and changes of equity interest in the JV Company
of $30.0 million, loss on equity investment of $2.6 million, and net deferred
income taxes of $1.6 million. The net change in assets and liabilities providing
net cash of $53.3 million was primarily due to $76.4 million increase in accrued
and other liabilities, income taxes payable on deconsolidation and changes of
equity interest in the JV company of $3.5 million, other payable on equity
investee of $48.2 million, and $23.8 million increase in accounts payable
primarily due to timing of payment, partially offset by $30.1 million increase
in accounts receivable due to timing of billings and collection of payments,
$57.4 million increase in inventories, $9.4 million increase in other current
and long-term assets primarily due to decrease in advance payments to suppliers,
and $1.7 million decrease in income taxes payable.

Net cash provided by operating activities of $128.7 million for fiscal year 2021
resulted primarily from net income of $56.3 million, non-cash charges of $70.0
million and net change in assets and liabilities providing net cash of $2.5
million. The non-cash charges of $70.0 million included depreciation and
amortization expenses of $52.7 million, share-based compensation expense of
$15.3 million, loss on disposal of property and equipment of $0.4 million, and
net deferred income taxes of $1.6 million. The net change in assets and
liabilities providing net cash of $2.5 million was primarily due to $48.5
million increase in accrued and other liabilities and $1.7 million increase in
income taxes payable, partially offset by $22.5 million increase in accounts
receivable due to timing of billings and collection of payments, $18.8 million
increase in inventories, $5.8 million increase in other current and long-term
assets primarily due to decrease in advance payments to suppliers, and $0.5
million decrease in accounts payable primarily due to timing of payments.
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Net cash provided by operating activities of $62.3 million for fiscal year 2020
resulted primarily from net loss of $18.3 million, non-cash charges of $56.1
million and net change in assets and liabilities providing net cash of $24.4
million. The non-cash charges of $56.1 million included depreciation and
amortization expenses of $45.1 million, share-based compensation expense of
$10.5 million, impairment of our investment in a privately-held start-up company
of $0.6 million, gain on disposal of property and equipment of $0.1 million, and
net deferred income taxes of $0.1 million. The net change in assets and
liabilities providing net cash of $24.4 million was primarily due to $27.3
million decrease in other current and long-term assets primarily due to increase
in advance payments to suppliers, $11.0 million decrease in accounts receivable
due to timing of billings and collection of payments, and $11.0 million increase
in accrued and other liabilities, partially offset by $22.8 million increase in
inventories, $1.8 million decrease in accounts payable primarily due to timing
of payments, and $0.3 million decrease in income taxes payable.

Cash flow from investing activities

Net cash used in investing activities of $130.8 million for the fiscal year 2022
was primarily attributable to $138.0 million purchases of property and
equipment, and $20.7 million deconsolidation of cash and cash equivalents of the
JV Company, partially offset by $1.4 million government grant related to
equipment in the JV Company, $26.3 million proceeds from sale of equity interest
in the JV Company and $0.1 million proceeds from sale of property and equipment.

Net cash used in investing activities of $72.5 million for the fiscal year 2021
was primarily attributable to $72.7 million purchases of property and equipment,
which was partially offset by $0.1 million government grant related to equipment
in the JV Company.

Net cash used in investing activities of $60.8 million for the fiscal year 2020
was primarily attributable to $62.4 million purchases of property and equipment,
which was partially offset by $1.3 million government grant related to equipment
in the JV Company and $0.3 million of proceeds from sale of property and
equipment.

Cash flow from financing activities

Net cash used in financing activities of $21.9 million for the fiscal year 2022
was primarily attributable to $64.3 million of proceeds from borrowings and $6.1
million of proceeds from exercises of share options and issuance of shares under
the ESPP, partially offset by $8.6 million in common shares acquired to settle
withholding tax related to vesting of restricted stock units, $4.2 million in
payments of capital lease obligations, and $35.7 million in repayments of
borrowings.

Net cash used in financing activities of $19.0 million for the fiscal year 2021
was primarily attributable to $6.9 million in common shares acquired to settle
withholding tax related to vesting of restricted stock units, $16.5 million in
payments of capital lease obligations, and $66.6 million in repayments of
borrowings, partially offset by $65.9 million of proceeds from borrowings and
$5.1 million of proceeds from exercises of share options and issuance of shares
under the ESPP.

Net cash provided by financing activities of $37.7 million for the fiscal year
2020 was primarily attributable to $96.2 million of proceeds from borrowings,
and $3.4 million of proceeds from exercises of share options and issuance of
shares under the ESPP, partially offset by $1.5 million in common shares
acquired to settle withholding tax related to vesting of restricted stock units,
$11.0 million in payments of capital lease obligations, and $49.4 million in
repayments of borrowings.


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Contractual obligations

Our contractual obligations from June 30, 2022 are the following:

                                                                                  Payments Due by Period
                                                                      Less than                                               More than
                                                     Total              1 year           1-3 years          3-5years           5 years
                                                                                      (in thousands)
Bank borrowings                                   $  68,218          $  25,638          $  19,951          $ 22,395          $     234

Finance leases                                        5,318                993              2,166             2,159                  -
Operating leases                                     29,141              5,206              7,275             6,323             10,337
Capital commitments with respect to property and
equipment                                            63,438             63,438                  -                 -                  -
Purchase commitments with respect to inventories
and others                                           89,863             89,863                  -                 -                  -

Total contractual obligations                     $ 255,978          $ 185,138          $  29,392          $ 30,877          $  10,571


As of June 30, 2022, we had recorded liabilities of $2.0 million for uncertain
tax positions and $0.2 million for potential interest and penalties, which are
not included in the above table because we are unable to reliably estimate the
amount of payments in individual years that would be made in connection with
these uncertain tax positions.

Commitments

See Note 15 of the Notes to the Consolidated Financial Statements contained in this Annual Report on Form 10-K for a description of the covenants.

Off-balance sheet arrangements

From June 30, 2022we had no material off-balance sheet arrangements within the meaning of Section 303(a)(4)(ii) of Regulation SK.

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Significant Accounting Policies and Estimates

The preparation of our consolidated financial statements requires us to make
estimates, judgments and assumptions that affect the reported amounts of assets,
liabilities, revenue and expenses. To the extent there are material differences
between these estimates and actual results, our consolidated financial
statements will be affected. On an ongoing basis, we evaluate the estimates,
judgments and assumptions including those related to stock rotation returns,
price adjustments, allowance for doubtful accounts, valuation of inventories,
warranty accrual, income taxes, leases, equity method investment, share-based
compensation, recoverability of and useful lives for property, plant and
equipment and intangible assets, as well as economic implications of the
COVID-19 pandemic.

Revenue recognition

We determine revenue recognition through the following steps: (1) identification
of the contract with a customer; (2) identification of the performance
obligations in the contract; (3) determination of the transaction price; (4)
allocation of the transaction price to the performance obligations in the
contract; and (5) recognition of revenue when, or as, a performance obligation
is satisfied. We recognize revenue at a point in time when product is shipped to
the customer, net of estimated stock rotation returns and price adjustments to
certain distributors. We present revenue net of sales taxes and any similar
assessments. Our standard payment terms range from 30 to 60 days.

We sell our products primarily to distributors, who in turn sell our products
globally to various end customers. Our revenue is net of the effect of the
variable consideration relating to estimated stock rotation returns and price
adjustments that we expect to provide to certain distributors. Stock rotation
returns are governed by contract and are limited to a specified percentage of
the monetary value of the products purchased by distributors during a specified
period. We estimate provision for stock rotation returns based on historical
returns and individual distributor agreements. We also provide special pricing
to certain distributors primarily based on volume, to encourage resale of our
products. We estimate the expected price adjustments at the time the revenue is
recognized based on distributor inventory levels, pre-approved future
distributor selling prices, distributor margins and demand for our products. If
actual stock rotation returns or price adjustments differ from our estimates,
adjustments may be recorded in the period when such actual information is known.
Allowance for price adjustments is recorded against accounts receivable and
provision for stock rotation is recorded in accrued liabilities on the
consolidated balance sheets.

Our performance obligations relate to contracts with a duration of less than one
year. We elected to apply the practical expedient provided in ASC 606, "Revenue
from Contracts with Customers". Therefore, we are not required to disclose the
aggregate amount of transaction price allocated to performance obligations that
are unsatisfied or partially unsatisfied at the end of the reporting period.

We recognize the incremental direct costs of obtaining a contract, which consist
of sales commissions, when control over the products they relate to transfers to
the customer. Applying the practical expedient, we recognize commissions as
expense when incurred, as the amortization period of the commission asset we
would have otherwise recognized is less than one year.

Revenue from packaging and testing services is recognized at some point when the service products are shipped to the customer.

Investment using the equity method

We use the equity method of accounting when we have the ability to exercise
significant influence, but not control, as determined in accordance with general
accepted accounting principles, over the operating and financial policies of the
investee. Effective December 2, 2021, we reduced our equity interest in the JV
Company, which resulted in deconsolidation of our investment in the JV Company.
As a result, beginning December 2, 2021, we record our investment under equity
method of accounting. Due to difficulties in obtaining accurate financial
information from the JV Company in a timely manner, we record our share of
earnings or losses of such affiliate on a one quarter lag. Therefore, our share
of losses of the JV Company for the period from December 2, 2021 to March 31,
2022 was recorded in our Consolidated Statement of Operations for the fiscal
year ended June 30, 2022. We recognize and disclose intervening events at the JV
Company in the lag period that could materially affect our consolidated
financial statements.

We record our interest in the net earnings of our equity method investees, along
with adjustments for unrealized profits or losses on intra-entity transactions
and amortization of basis differences, within earnings or loss from equity
interests in the Consolidated Statements of Income. Profits or losses related to
intra-entity sales with its equity method investees are eliminated until
realized by the investor and investee. Basis differences represent differences
between the cost of the investment and the underlying equity in net assets of
the investment and are generally amortized over the lives of the related assets
that gave rise to them. Equity method goodwill is not amortized or tested for
impairment; instead the equity method investment is tested for impairment. We
review for impairment whenever factors indicate that the carrying amount of the
                                       62
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investment might not be recoverable. In such a case, the decrease in value is
recognized in the period the impairment occurs in the Condensed Consolidated
Statements of Income.

Valuation of inventories

We carry inventories at the lower of cost (determined on a first-in, first-out
basis) or net realizable value. Cost primarily consists of semiconductor wafers
and raw materials, labor, depreciation expenses and other manufacturing expenses
and overhead, and packaging and testing fees paid to third parties if
subcontractors are used. Valuation of inventories is based on our periodic
review of inventory quantities on hand as compared with our sales forecasts,
historical usage, aging of inventories, production yield levels and current
product selling prices. If actual market conditions are less favorable than
those forecasted by us, additional future inventory write-downs may be required
that could adversely affect our operating results. Adjustments to inventory,
once established are not reversed until the related inventory has been sold or
scrapped. If actual market conditions are more favorable than expected and the
products that have previously been written down are sold, our gross margin would
be favorably impacted.

Accounting for income taxes

We are subject to income taxes in a number of jurisdictions. We must make
certain estimates and judgments in determining income tax expense for financial
statement purposes. These estimates and judgments occur in the calculation of
tax credits, benefits and deductions, and in the calculation of certain tax
assets and liabilities which arise from differences in the timing of recognition
of revenue and expense for tax and financial statement purposes, as well as
interest and penalties related to uncertain tax positions. There are many
transactions and calculations for which the ultimate tax determination is
uncertain during the ordinary course of business. We establish accruals for
certain tax contingencies based on estimates of whether additional taxes may be
due. While the final tax outcome of these matters may differ from the amounts
that were initially recorded, such differences will impact the income tax and
deferred tax provisions in the period in which such determination is made. As a
result, significant changes to these estimates may result in an increase or
decrease to our tax provision in a subsequent period.

Significant management judgment is also required in determining whether deferred
tax assets will be realized in full or in part. When it is more likely than not
that all or some portion of specific deferred tax assets such as net operating
losses or foreign tax credit carryforwards will not be realized, a valuation
allowance must be established for the amount of the deferred tax assets that
cannot be realized. We consider all available positive and negative evidence on
a jurisdiction-by-jurisdiction basis when assessing whether it is more likely
than not that deferred tax assets are recoverable. We consider evidence such as
our past operating results, the existence of cumulative losses in recent years
and our forecast of future taxable income. We will maintain a partial valuation
allowance equal to the state research and development credit carryforwards until
sufficient positive evidence exists to support reversal of the valuation
allowance.

We have not provided for withholding taxes on the undistributed earnings of our
foreign subsidiaries because we intend to reinvest such earnings indefinitely.
However, we have recorded a deferred tax liability of $29.6 million at June 30,
2022 related to our investment in the JV Company. As of June 30, 2022, the
cumulative amount of undistributed earnings of our foreign subsidiaries
considered permanently reinvested was $314.7 million. The determination of the
unrecognized deferred tax liability on these earnings is not practicable. Should
we decide to remit this income to the Bermuda parent company in a future period,
our provision for income taxes may increase materially in that period.

The Financial Accounting Standards Board ("FASB") has issued guidance which
clarifies the accounting for income taxes by prescribing a minimum probability
threshold that a tax position must meet before a financial statement benefit is
recognized. The minimum threshold is defined as a tax position that is more
likely than not to be sustained upon examination by the applicable taxing
authority, including resolution of any related appeals or litigation processes,
based on the technical merits of the position. The tax benefit to be recognized
is measured as the largest amount of benefit that is greater than fifty percent
likely to be realized upon ultimate settlement. The calculation of our tax
liabilities involves dealing with uncertainties in the application of complex
tax law and regulations in a multitude of jurisdictions. Although the guidance
on the accounting for uncertainty in income taxes prescribes the use of a
recognition and measurement model, the determination of whether an uncertain tax
position has met those thresholds will continue to require significant judgment
by management. If the ultimate resolution of tax uncertainties is different from
what is currently estimated, a material impact on income tax expense could
result.

Our provision for income taxes is subject to volatility and could be adversely
impacted by changes in earnings or tax laws and regulations in various
jurisdictions. We are subject to the continuous examination of our income tax
returns by the
                                       63
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Internal Revenue Service and other tax authorities. We regularly assess the
likelihood of adverse outcomes resulting from these examinations to determine
the adequacy of our provision for income taxes. There can be no assurance that
the outcomes from these continuous examinations will not have an adverse effect
on our operating results and financial condition. To the extent that the final
tax outcome of these matters is different than the amounts recorded, such
differences will impact the provision for income taxes in the period in which
such determination is made. The provision for income taxes includes the impact
of changes to reserves, as well as the related net interest and penalties.

Stock-based compensation expense

We maintain an equity-settled, share-based compensation plan to grant restricted
share units and stock options. We recognize share-based compensation expense
based on the estimated fair value of the awards, using the accelerated
attribution method. The fair value of restricted share units is based on the
fair value of the Company's common share on the date of grant. For restricted
stock awards subject to market conditions, the fair value of each restricted
stock award is estimated at the date of grant using the Monte-Carlo pricing
model. Share-based compensation expense is significant to the consolidated
financial statements and is calculated using our best estimates, which involve
inherent uncertainties and the application of management's judgment. The
Black-Scholes option valuation model requires the input of subjective
assumptions, including the expected term and stock price volatility. In
addition, judgment is also required in estimating the number of stock-based
awards that are expected to be forfeited. Forfeitures are estimated based on
historical experience at the time of grant. Changes in estimated forfeitures are
recognized in the period of change and impact the amount of stock compensation
expenses to be recognized in future periods, which could be material if actual
results differ significantly from estimates.

Recently issued accounting pronouncements

  See Note 1 of the Notes to the consolidated financial statements under Item 15
in this Annual Report on Form 10-K for a full description of recent accounting
pronouncements, including the expected dates of adoption and estimated effects
on results of operations and financial condition.


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