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Part IV
Table of Contents

UNITED STATESSECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K
(Mark
One)

ý

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 29, 2018
oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period fromtoCommission file number: 000-29823

SILICON LABORATORIES INC.
(Exact name of registrant as specified in its charter)
Delaware(State or other jurisdiction ofincorporation or organization)

74-2793174(I.R.S. Employer
Identification No.)

400 West Cesar Chavez, Austin, Texas(Address of principal executive offices)

78701(Zip Code)(512) 416-8500(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each className of exchange on which registered

Common Stock, $0.0001 par value

The NASDAQ Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ý
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. o

Yes
Yes

o
ý

No
No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days. ý Yes o No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 ofRegulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ý
Yes o No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will
not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or
any amendment to this Form 10-K. ýIndicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an
emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" inRule 12b-2 of the Exchange Act.
Large accelerated filer ý

Accelerated filer oNon-accelerated filer oSmaller reporting company oEmerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new orrevised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o

Yes

ý

No

The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common
equity was last sold as of the last business day of the registrant's most recently completed second fiscal quarter (June 29, 2018) was approximately $4.2 billion(assuming, for this purpose, that only directors and officers are deemed affiliates).
There were 43,088,623 shares of the registrant's common stock issued and outstanding as of January 21, 2019.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the registrant's 2018 Annual Meeting of Stockholders are incorporated by reference into Part III of this Form 10-K.

Table of Contents
Table of Contents
Page
NumberPart I
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.

Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures

2
13
28
28
29
29

Item 5.

Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchasesof Equity Securities
Selected Financial DataManagement's Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures about Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information

30
32
33
45
46
46
46
47

Part II

Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Part III
Item 10.
Item 11.
Item 12.

48
48

Item 13.
Item 14.

Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accounting Fees and Services

Item 15.
Item 16.

Exhibits and Financial Statement Schedules
Form 10-K Summary

49
51

48
48
48

Part IV

Cautionary Statement
Except for the historical financial information contained herein, the matters discussed in this report on Form 10-K (as well as documents incorporated hereinby reference) may be considered "forward-looking" statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Such forward-looking statements include declarations regarding the intent, belief or current expectations of Silicon
Laboratories Inc. and its management and may be signified by the words "believe," "estimate," "expect," "intend," "anticipate," "plan," "project," "will" or similar
language. You are cautioned that any such forward-looking statements are not guarantees of future performance and involve a number of risks and uncertainties.
Actual results could differ materially from those indicated by such forward-looking statements. Factors that could cause or contribute to such differences include
those discussed under "Risk Factors" and elsewhere in this report. Silicon Laboratories disclaims any intention or obligation to update or revise any forwardlooking statements, whether as a result of new information, future events or otherwise.
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Part I
Item 1.

Business

General
Silicon Laboratories Inc. is a leading provider of silicon, software and solutions for a smarter, more connected world. Our award-winning technologies are
shaping the future of the Internet of Things (IoT), Internet infrastructure, industrial automation, consumer and automotive markets. Our world-class engineering
team creates products focused on performance, energy savings, connectivity and simplicity.
Our primary semiconductor products are mixed-signal integrated circuits (ICs), which are electronic components that convert real-world analog signals, suchas sound and radio waves, into digital signals that electronic products can process. Our mixed-signal ICs leverage standard complementary metal oxide
semiconductor (CMOS), a low cost, widely available process technology. Use of CMOS technology enables smaller, more cost-effective and energy-efficientsolutions. Our expertise in analog-intensive, mixed-signal IC design in CMOS allows us to develop new and innovative products that are highly integrated,
simplifying our customers' designs and improving their time-to-market.
Industry Background
The pervasiveness of connectivity and mobile devices is driving semiconductor consumption. Intelligence is being added to electronic systems to enable
Internet connectivity, power efficiency and an improved user experience. This in turn is increasing the demand for bandwidth, requiring more infrastructure to
support higher performance networks. The nearly ubiquitous availability of Internet access and the increasing intelligence of electronic devices and mobility areenabling what is called the Internet of Things, a term that describes the exponential increase in IP-enabled devices connected to the Internet.
These trends require more and more interaction between the analog world we live in and the digital world of computing, which is driving the need for analogintensive, mixed-signal circuits in a wide range of electronic products. Traditional mixed-signal designs relied upon solutions built with numerous, complex
discrete analog and digital components. While these traditional designs provide the required functionality, they are often inefficient and inadequate for use inmarkets where size, cost, power consumption and performance are increasingly important product differentiators. To improve their competitive position,
electronics manufacturers must reduce the cost and complexity of their systems and enable new features or functionality to differentiate themselves from theircompetitors.
Simultaneously, these manufacturers face accelerating time-to-market demands and must rapidly adapt to evolving industry standards and new technologies.
Because analog-intensive, mixed-signal design expertise is difficult to find, these manufacturers increasingly are turning to third parties, like us, to provide
advanced mixed-signal solutions. Mixed-signal design requires specific expertise and relies on creative, experienced engineers to deliver solutions that optimize
speed, power and performance, despite the noisy digital environment, and within the constraints of standard manufacturing processes. The development of thisdesign expertise typically requires years of practical analog design experience under the guidance of a senior engineer, and engineers with the required level ofskill and expertise are in short supply.
Many IC solution providers lack sufficient analog expertise to develop compelling mixed-signal products. As a result, manufacturers of electronic devices
value providers that can supply them with mixed-signal solutions offering greater functionality, smaller size and lower power requirements at a reduced cost andshorter time-to-market.
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Products
We provide analog-intensive, mixed-signal solutions for use in a variety of electronic products in a broad range of applications for the IoT including
connected home and security, industrial, smart energy, consumer, automotive and lighting applications. We are a supplier of wireless connectivity solutions for the
IoT based on Zigbee®, sub-GHz proprietary technologies, Bluetooth®, Z-Wave®, Thread, and Wi-Fi®.
We provide a wide range of timing and isolation products for infrastructure applications including high-performance clocks and oscillators for networking
equipment, data centers and wireless base stations, as well as digital isolators and current sensors for industrial power supplies, motor control, solar inverters andhybrid-electric vehicles. We also provide broadcast products, such as TV tuners and demodulators and automotive radio tuners, and access products including
subscriber line interface circuits for voice over IP (VoIP), embedded modems, and Power over Ethernet (PoE) power source equipment and powered device ICs.
Our products integrate complex mixed-signal functions that are frequently performed by numerous discrete components in competing products into a single
chip or chipset. By doing so, we create products that, when compared to many competing products, offer the following benefits:•

Require less printed circuit board (PCB) space;•

Reduce the use of external components lowering the system cost and simplifying design;•

Offer superior performance improving our customers' end products;•

Provide increased reliability and manufacturability, improving customer yields; and/or•

Reduce system power requirements enabling smaller form factors and/or longer battery life.

We group our products into the following categories:•

Internet of Things products, which include our microcontroller (MCU), wireless and sensor products;•

Broadcast products, which include our broadcast consumer and automotive products;•

Infrastructure products, which include our timing products (clocks and oscillators), and isolation devices; and•Access products, which include our Voice over IP (VoIP) products, embedded modems and Power over Ethernet (PoE) devices.
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The following table summarizes the diverse product areas and applications for the various products that we have introduced to customers:
Product Areas and Description
Internet of Things Products

Applications

Microcontrollers and Wireless Products
We offer a family of products ideal for embedded systems that include energy
friendly 8-bit mixed-signal microcontrollers, 32-bit wireless MCUs and ultralow-power 32-bit MCUs based on scalable ARM® Cortex-M0+/M3/M4 cores,
as well as wireless connectivity devices such as our multiprotocol WirelessGecko system-on-chip (SoC) devices. Our wireless modules provide flexible,
highly integrated products that meet demanding requirements and can be used inmany applications. Our wireless connectivity solutions for the IoT are based on
Zigbee, sub-GHz proprietary technologies, Bluetooth, Z-Wave, Thread and WiFi. Our EFM32™, EFM8™, 8051, wireless MCUs and wireless SoCs aresupported by Simplicity Studio™, which provides one-click access to design
tools, documentation, software and support resources. We also offer a Micrium®
real-time operating system (RTOS) to help simplify software development for
IoT applications by coordinating and prioritizing multiprotocol connectivity,
SoC peripherals and other system-level activities. Our broad portfolio addresses
a variety of target markets, including smart home, commercial (building
automation and retail) and industrial (smart energy, factory automation, smart
cities).

• Home automation• Security systems• Smart lighting• Smart metering• Wearables• Industrial automation and control• Consumer electronics• Medical instrumentation• Automotive sensors and controls• Electronic test and measurement
equipment• White goods• Remote controls

Sensors
Our sensor products include optical sensors (proximity, ambient light gesturesand heart rate monitoring), as well as relative humidity (RH) / temperature
sensors and Hall effect magnetic sensors. These devices leverage our mixedsignal capability to provide high accuracy, process technology to improve
performance and lower power consumption than competing parts.

• Consumer health & fitness (wearables)• Smart home sensing• Industrial controls• Toys and consumer electronics• Monitors and lavatory controls• Consumer medical

Infrastructure Products
Timing Devices
Robust demand for bandwidth is driving the deployment of next-generation
Internet infrastructure equipment to deliver higher speed, higher capacity andmore flexible networks. This transition puts unique requirements on the clocks
and oscillators used to provide timing and synchronization for the equipment
responsible for switching, transporting, processing and storing network traffic.
To meet this need, we provide low-jitter, frequency-flexible, mass-customizabletiming solutions that accelerate development time, minimize cost and improvesystem reliability. Our high-performance "clock-tree-on-a-chip" products offer
highly integrated single-chip IC solutions for clock synthesis and jitter
attenuation, offering superior jitter performance and frequency flexibility forhigh data rate applications.

• Optical networking• Telecommunications• Data communications• Switches/routers• Industrial• Servers and storage• Mobile fronthaul and backhaul• Wireless base stations• Small cells• Broadcast video

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Product Areas and Description
Isolation Products
Our digital isolation techniques enable customers to deploy more energy
efficient power solutions that meet isolation safety standards and solve difficult
electronic noise issues. Systems such as data center servers, cellular basestations, uninterruptable power supplies and electric vehicles require
increasingly energy efficient power solutions. Electric motors used in electricvehicles, pumps, HVAC compressors, fans and automated machinery need moresophisticated and efficient digital controls. Our isolation technology enables
customers to address these demanding requirements. Products include multichannel isolators, isolated drivers, isolated power converters and mixed-signal
devices that simplify design, improve reliability, minimize noise emissions andreduce system cost

Applications• Industrial control and automation
systems• Cloud, datacenter and telecom power
supplies• Electric vehicle charging stations• Solar inverters• Hybrid / Electric automotive drive
trains• Motor control• High power audio• Test and measurement equipment

Broadcast Products
Broadcast Consumer
Our single-chip hybrid TV tuners and analog TV demodulators leverage ourproven digital low-IF architecture and exceed the performance of traditional
discrete TV tuners, enabling TV makers worldwide to deliver improved picture
quality and better reception for both analog and digital broadcasts. Our small,
low-power and high-performance single and dual digital video demodulators
support DVB-T/T2, DVB-S/S2/S2X, DVB-C/C2, and/or ISDB-T in a single chipand are ideal for equipment receiving digital terrestrial, satellite and/or cable
services. Our AM/FM, HD Radio™ and DAB/DAB+ receivers deliver acomplete radio solution from antenna input to audio output in a single chip. The
broadcast audio products are based on an innovative digital architecture thatenables significant improvements in performance, which translates to a better
consumer experience, while reducing system cost and board space for ourcustomers.

• Integrated digital televisions (iDTV)• Free-to-Air (FtA) or pay-TV set-top
boxes• PVR/DVD/Blu-Ray/HDD video
recorders• PC-TV applications• AM/FM clock radios• DAB digital radios• HD Radio digital radios• Home theater systems• Portable audio devices• MP3/digital media players

Broadcast Automotive
Our high-performance solutions for car audio systems include high-fidelity radio
ICs that improve the end user experience, reduce system cost and offer the latest
digital radio technologies like DAB/DAB+ and HD Radio. Our scalable
architecture enables infotainment system suppliers to leverage their investments
across multiple product lines ranging from entry-level car radios to cutting-edge
multi-tuner, multi-antenna radios for premium vehicles.

• Automotive OEM infotainment
systems• Aftermarket car radios• Navigation/GPS devices

Access Products
ProSLIC® Subscriber Line Interface Circuits for VoIP
Our ProSLIC provides the analog subscriber line interface on the source end of
the telephone which generates dial tone, busy tone, caller ID and ring signal. Our
offerings are well suited for the market for Voice over IP telephony applications
deployed over cable, DSL, optical and wireless fixed terminal networks.

• Voice functionality for cable, DSL and
optical digital modems and terminal
adapters• VoIP residential gateways• Wireless local loop remote accesssystems• PBXs5

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Product Areas and Description
ISOmodem® Embedded Modems
Our ISOmodem embedded modems leverage innovative silicon direct accessarrangement (DAA) technology and a digital signal processor (DSP) to deliver a
globally compliant, compact analog modem for embedded applications.

Applications• Fax machines and multi-function
printers• Point of sale (POS) terminals• Security systems• Industrial monitoring• Remote medical monitoring

Power over Ethernet
Our PoE power source equipment and powered device ICs offer highly
differentiated solutions with a reduced total bill of materials (BOM) and
improved performance and reliability. Our solutions offer a higher level ofintegration not available with competing solutions.

• Enterprise networking routers andswitches• Wireless access points (WAP)• VoIP phones• POS terminals• Security cameras

Revenues during fiscal 2018, 2017 and 2016 were generated predominately by sales of our mixed-signal products. The following summarizes our revenue by
product category (in thousands):
2018

Internet of Things
Infrastructure
BroadcastAccess
Revenues

Fiscal Year2017

$ 463,838 $ 395,012 $
199,478
152,158
141,412
152,980
63,53968,717$ 868,267 $ 768,867 $2016

314,614
147,677
157,746
77,589697,626

Customers, Sales and Marketing
We market our products through our direct sales force and through a network of independent sales representatives and distributors. Direct and distributor
customers buy on an individual purchase order basis, rather than pursuant to long-term agreements.
We consider our customer to be the end customer purchasing either directly from a distributor, a contract manufacturer or us. During fiscal 2018, our ten
largest end customers accounted for 20% of our revenues. We had no customer that represented more than 10% of our revenues during this period. An end
customer purchasing through a contract manufacturer typically instructs such contract manufacturer to obtain our products and incorporate such products withother components for sale by such contract manufacturer to the end customer. Although we sell the products to, and are paid by distributors and contract
manufacturers, we refer to such end customer as our customer. Two of our distributors who sell directly to our customers, Arrow Electronics and Edom
Technology, each represented 21% and 17% of our revenues during fiscal 2018, respectively. There were no contract manufacturers that accounted for 10% ormore of revenues for fiscal 2018. During fiscal 2018, we consolidated our distribution relationships to a single global distributor, Arrow Electronics. We are
maintaining our extensive network of regional distributor partners and etailers to complement our single global distributor partner.
We maintain numerous sales offices in Asia, the Americas and Europe. Revenue is attributed to a geographic area based on the shipped-to location. The
percentage of our revenues derived from outside of the United States was 83% in fiscal 2018. For further information regarding our revenues and long-lived assets
by geographic area, see Note 18, Segment Information , to the Consolidated Financial Statements.
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Our direct sales force is comprised of many sales professionals who possess varied levels of responsibility and experience, including directors, country
managers, regional sales managers, district sales managers, strategic account managers, field sales engineers and sales representatives. We also utilize independent
sales representatives and distributors to generate sales of our products. We have relationships with many independent sales representatives and distributors
worldwide whom we have selected based on their understanding of the mixed-signal marketplace and their ability to provide effective field sales applications
support for our products.
Our marketing efforts are targeted at both identified industry leaders and emerging market participants. Direct marketing activities are supplemented by afocused marketing communications effort that seeks to raise awareness of our company and products. Our public relations efforts are focused on leading trade andbusiness publications. Our external website is used to deliver corporate and product information. We also pursue targeted advertising in key trade publications andwe have a cooperative marketing program that allows our distributors and representatives to promote our products to their local markets in conjunction with theirown advertising activities. Finally, we maintain a presence at strategic trade shows and industry events. These activities, in combination with direct sales activities,
help drive demand for our products.
Due to the complex and innovative nature of our products, we employ experienced applications engineers who work closely with customers and distributors to
support the design-win process, and can significantly accelerate the customer's time to market. A design win occurs when a customer has designed our ICs into its
product architecture and ordered product from us. A considerable amount of effort to help a customer incorporate our ICs into its products is typically required
prior to any sale. In many cases, our innovative ICs require significantly different implementations than existing approaches and, therefore, successful
implementations may require extensive communication with potential customers. The amount of time required to achieve a design win can vary substantiallydepending on a customer's development cycle, which can be relatively short (such as three months) or very long (such as two years) based on a wide variety ofcustomer factors. Not all design wins ultimately result in revenue, or may result in less revenue than expected. However, once a completed design architecture has
been implemented and produced in high volumes, our customers are reluctant to significantly alter their designs due to this extensive design-win process. We
believe this process, coupled with our intellectual property protection, promotes relatively longer product life cycles for our products and high barriers to entry forcompetitive products, even if such competing products are offered at lower prices. Our close collaboration with our customers provides us with knowledge ofderivative product ideas or completely new product line offerings that may not otherwise arise in other new product discussions.
Research and Development
Through our research and development efforts, we leverage experienced analog and mixed-signal engineering talent and expertise to create new ICs that
integrate functions typically performed less efficiently by multiple discrete components. This integration generally results in lower costs, smaller die sizes, lower
power demands and enhanced price/performance characteristics. We attempt to reuse successful techniques for integration in new applications where similar
benefits can be realized. We believe that we have attracted many of the best engineers in our industry. We believe that reliable and precise analog and mixed-signal
ICs can only be developed by teams of engineers who have significant analog experience and are familiar with the intricacies of designing these ICs forcommercial volume production. The development of test methodologies is just one example of a critical activity requiring experience and know-how to enable therapid release of a new product for commercial success. We have accumulated a vast set of trade secrets that allow us to pursue innovative approaches to mixedsignal problems that are difficult for competitors to duplicate. We highly value our engineering talent and strive to maintain a very high bar when bringing new
recruits to the company.
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Research and development expenses were $238.3 million, $209.5 million and $199.7 million in fiscal 2018, 2017 and 2016, respectively.
Technology
Our product development process facilitates the design of highly-innovative, analog-intensive, mixed-signal ICs. Our engineers' deep knowledge of existingand emerging standards and performance requirements helps us to assess the technical feasibility of a particular IC. We target areas where we can provide
compelling product improvements. Once we have solved the primary challenges, our field application engineers continue to work closely with our customers'
design teams to maintain and develop an understanding of our customers' needs, allowing us to formulate derivative products and refined features.
In providing mixed-signal ICs for our customers, we believe our key competitive advantages are:•Analog and RF design expertise in CMOS;•

Mixed-signal, firmware and system design expertise;•

Microcontroller and system on a chip design expertise;•

Software expertise, including multiprotocol connectivity and real-time operating systems for the IoT;•

Module integration and wireless design expertise; and•Our broad understanding of systems technology and trends.

To fully capitalize on these advantages, we have assembled a world-class development team with exceptional analog and mixed-signal design expertise led byaccomplished senior engineers.
Analog and RF Design Expertise in CMOS
We believe that our most significant core competency is world-class analog and RF design capability. Additionally, we strive to design substantially all our
ICs in standard CMOS processes. Most of our product designs now incorporate some type of RF in CMOS technology. While it is often significantly more difficult
to design analog ICs in CMOS, CMOS provides multiple benefits versus existing alternatives, including significantly reduced cost, reduced technology risk andgreater worldwide foundry capacity. CMOS is the most commonly used process technology for manufacturing digital ICs and as a result is most likely to be used
for the manufacturing of ICs with finer line geometries. These finer line geometries can enable smaller and faster ICs. By designing our ICs in CMOS, we enable
our products to benefit from this trend towards finer line geometries, which allows us to integrate more digital functionality into our mixed-signal ICs.
Designing analog and mixed-signal ICs is significantly more complicated than designing standalone digital ICs. While advanced software tools exist to help
automate digital IC design, there are far fewer tools for advanced analog and mixed-signal IC design. In many cases, our analog circuit design efforts begin at thefundamental transistor level. We believe that we have a demonstrated ability to design the most difficult analog and RF circuits using standard CMOS
technologies.
Mixed-Signal, Firmware and System Design Expertise
We consider the partitioning of a circuit to be a proprietary and creative design technique. Deep systems knowledge allows us to use our mixed-signal and RF
in CMOS design expertise to maximize the price/performance characteristics of both the analog and digital functions and allow our ICs to work in an optimized
manner to accomplish particular tasks. Generally, we attempt to move analog functions into the digital domain as quickly as possible, creating system efficiencies
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performance. These patented approaches require our advanced signal processing and systems expertise. We then leverage our firmware know-how to change the'personality' of our devices, optimizing features and functions needed by various markets we serve. For example, our wireless SoC devices for IoT applications
integrate both digital and analog domains in a single chip. The SoCs combine ARM Cortex-M processor cores, a variety of digital and analog peripherals,
hardware cryptography accelerators, and analog-intensive multiprotocol radio transceivers. This system integration at the chip level leverages our deep expertise in
mixed-signal and RF design, and low-power wireless MCU architectures pioneered for more than a decade.
Microcontroller and System on a Chip Design Expertise
We have the talent and circuit integration methodologies required to combine precision analog, high-speed digital, flash memory and in-system
programmability into a single, monolithic CMOS integrated circuit. Our microcontroller products are designed to capture an external analog signal, convert it to adigital signal, compute digital functions on the stream of data and then communicate the results through a standard digital interface. The ability to develop standard
products with the broadest possible customer application base while being cost efficient with the silicon area of the monolithic CMOS integrated circuit requires akeen sense of customer value and engineering capabilities. Additionally, to manage the wide variety of signals on a monolithic piece of silicon including electricalnoise, harmonics and other electronic distortions requires a fundamental knowledge of device physics and accumulated design expertise.
Software Expertise
Our software expertise allows us to develop products for markets where intelligent data capture, high-performance processing and communication are
increasingly important product differentiators. The software we have developed to address these markets enables machine-to-machine communications, providing
intelligence to electronic systems. Our products integrate high-performance, low-power wireless and microcontroller ICs with reliable and scalable software into a
flexible and robust networking platform.
The demand for low-power, small-footprint wireless technology is accelerating as more and more IP-enabled end points are being connected to the IoT. Our
software enables a broad range of power-sensitive applications for the IoT, including smart energy, home automation, security and other connected products. We
believe that the combination of our software and IC design expertise differentiates us from many of our competitors.
As the IoT continues to mature, a new class of embedded applications is emerging, presenting feature-rich and task-intensive use cases. This growing
complexity is driving the need for real-time operating systems to help simplify software development for IoT applications by coordinating and prioritizing
multiprotocol connectivity, SoC peripherals and other system-level activities. In addition to being able to manage numerous application tasks, an RTOS enhances
scalability, and makes complex applications predictable and reliable. To address these application needs, we acquired Micrium, an embedded RTOS provider.
Micrium has established itself as a reliable, high performance and trusted RTOS software platform, with an installed base that has grown to millions of devices.
Module Integration and Wireless Design Expertise
The market for wireless modules has grown as customers search for solutions that provide turnkey wireless connectivity to their products. The development ofmodules is difficult due to stringent requirements, including high levels of integration, programmability, performance, reliability, security and power efficiency. In
addition, designs must meet numerous wireless standards deployed in various environments and serving diverse requirements.
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Our combined expertise in IC design and software development allows us to engineer modules that provide robust, high-performance connections inchallenging wireless environments. We have developed wireless modules based on numerous wireless standards, including Z-Wave, Bluetooth, Zigbee, Thread,
Wi-Fi and sub-GHz. We believe our demonstrated proficiency in the design of modules provides our customers with significant advantages such as fast time tomarket, reduced development cost, global wireless certifications and software reuse.
Understanding of Systems Technology and Trends
Our focused expertise in mixed-signal ICs is the result of the breadth of engineering talent we have assembled with experience working in analog-intensive
CMOS design for a wide variety of applications. This expertise, which we consider a competitive advantage, is the foundation of our in-depth understanding of thetechnology and trends that impact electronic systems and markets. Our expertise includes:•

Isolation, which is critical for existing and emerging industrial applications and telecom networks;•

Frequency synthesis, which is core technology for wireless and clocking applications;•Integration, which enables the elimination of discrete components in a system; and•Signal processing and precision analog, which forms the heart of consumer, industrial, medical and automotive electronics applications.

Our understanding of the role of analog/digital interfaces within electronic systems, standards evolution, and end market drivers enables us to identify productdevelopment opportunities and capitalize on market trends.
Manufacturing
As a fabless semiconductor company, we conduct IC design and development in our facilities and electronically transfer our proprietary IC designs to thirdparty semiconductor fabricators who process silicon wafers to produce the ICs that we design. Our IC designs typically use industry-standard CMOS
manufacturing process technology to achieve a level of performance normally associated with more expensive special-purpose IC fabrication technology. We
believe the use of CMOS technology facilitates the rapid production of our ICs within a lower cost framework. Our IC production employs submicron process
geometries which are readily available from leading foundry suppliers worldwide, thus increasing the likelihood that manufacturing capacity will be available
throughout our products' life cycles. We currently partner with Taiwan Semiconductor Manufacturing Co. (TSMC) and Semiconductor Manufacturing
International Corporation (SMIC) to manufacture the majority of our semiconductor wafers. We believe that our fabless manufacturing model significantly reduces
our capital requirements and allows us to focus our resources on design, development and marketing of our ICs.
Once the silicon wafers have been produced, they are shipped directly to our third-party assembly subcontractors. The assembled ICs are then moved to thefinal testing stage. This operation can be performed by the same contractor that assembled the IC, other third-party test subcontractors or within our internal
facilities prior to shipping to our customers. During fiscal 2018, most of our units shipped were tested by offshore third-party test subcontractors. We expect that
our utilization of offshore third-party test subcontractors will remain substantial during fiscal 2019.
Backlog
We include in backlog accepted product purchase orders from customers and worldwide distributor stocking orders. Product orders in our backlog are subject
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cancellation at the option of the purchaser typically without penalty. Our backlog may fluctuate significantly depending upon customer order patterns which may,in turn, vary considerably based on rapidly changing business circumstances. Accordingly, we do not believe that our backlog at any time is necessarily
representative of actual sales for any succeeding period.
Competition
The markets for semiconductors generally, and for analog and mixed-signal ICs in particular, are intensely competitive. We anticipate that the market for our
products will continually evolve and will be subject to rapid technological change. We believe the principal competitive factors in our industry are:
• Product size;• Level of integration;• Product capabilities;• Reliability;• Price;• Performance;• Power requirement;• Customer support;• Reputation;• Ability to rapidly introduce new products to market;• Intellectual property; and• Software.

We believe that we are competitive with respect to these factors, particularly because our ICs typically are smaller in size, are highly integrated, achieve highperformance specifications at lower price points than competitive products and are manufactured in standard CMOS which generally enables us to supply them ona relatively rapid basis to customers to meet their product introduction schedules. However, disadvantages we face include our relatively short operating history incertain of our markets and the need for customers to redesign their products and modify their software to implement our ICs in their products.
Due to our diversified product portfolio and the numerous markets and applications we serve, we target a relatively large number of competitors. We competewith Analog Devices, Broadcom, Cypress, IDT, Infineon, Maxim Integrated Products, MaxLinear, Microchip, Nordic Semiconductor, NXP Semiconductors,
Qualcomm, Renesas, STMicroelectronics, Synaptics, Texas Instruments and others. We expect to face competition in the future from our current competitors, othermanufacturers and designers of semiconductors and start-up semiconductor design companies. Our competitors may also offer bundled solutions offering a more
complete product, which may negatively impact our competitive position despite the technical merits or advantages of our products. In addition, our customers
could develop products or technologies internally that would replace their need for our products and would become a source of competition. We could also facecompetition from module makers or other systems suppliers that may include mixed-signal components in their products that could eliminate the need for our ICs.
Many of our competitors and potential competitors have longer operating histories, greater name recognition, access to larger customer bases, complementary
product offerings, and significantly greater financial, sales and marketing, manufacturing, distribution, technical and other resources than us. Current and potential
competitors have established or may establish financial and strategic relationships between themselves or with our existing or potential customers, resellers orother third parties. Accordingly, it is possible that new competitors or alliances among competitors could emerge and rapidly acquire significant market share.
Intellectual Property
Our future success depends in part upon our proprietary technology. We seek to protect our technology through a combination of patents, copyrights, trade
secrets, trademarks and confidentiality procedures. As of December 29, 2018, we had approximately 1,730 issued or pending United States and foreign patents.
There can be no assurance that patents will ever be issued with respect to our patent applications. Furthermore, it is possible that any patents held by us may beinvalidated, circumvented,
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challenged or licensed to others. In addition, there can be no assurance that such patents will provide us with competitive advantages or adequately safeguard our
proprietary rights. While we continue to file new patent applications with respect to our recent developments, existing patents are granted for prescribed time
periods and will expire at various times in the future.
We claim copyright protection for proprietary documentation for our products. We have filed for registration, or are in the process of filing for registration,
the visual images of certain ICs with the U.S. Copyright Office. We have registered the "Silicon Labs" logo and a variety of other product and product familynames as trademarks in the United States and selected foreign jurisdictions. All other trademarks, service marks or trade names appearing in this report are theproperty of their respective owners. We also attempt to protect our trade secrets and other proprietary information through agreements with our customers,
suppliers, employees and consultants, and through other customary security measures. We intend to protect our rights vigorously, but there can be no assurance
that our efforts will be successful. In addition, the laws of other countries in which our products are sold may not protect our products and intellectual property
rights to the same extent as the laws of the United States.
While our ability to effectively compete depends in large part on our ability to protect our intellectual property, we believe that our technical expertise andability to introduce new products in a timely manner will be an important factor in maintaining our competitive position.
Many participants in the semiconductor and electronics industries have a significant number of patents and have frequently demonstrated a readiness tocommence litigation based on allegations of patent and other intellectual property infringement. From time to time, third parties may assert infringement claims
against us. We may not prevail in any such litigation or may not be able to license any valid and infringed patents from third parties on commercially reasonable
terms, if at all. Litigation, regardless of the outcome, is likely to result in substantial cost and diversion of our resources, including our management's time. Anysuch litigation could materially adversely affect us.
Our licenses include industry standard licenses with our vendors, such as wafer fabrication tool libraries, third-party core libraries, computer-aided design
applications and business software applications.
Employees
As of December 29, 2018, we employed 1,505 people. Our success depends on the continued service of our key technical and senior management personnel
and on our ability to continue to attract, retain and motivate highly skilled analog and mixed-signal engineers. The competition for such personnel is intense. We
have never had a work stoppage and none of our U.S. employees are represented by a labor organization. We consider our employee relations to be good.
Environmental Regulation
Federal, state and local regulations impose various environmental controls on the storage, use, discharge and disposal of certain chemicals and gases used in
the semiconductor industry. Our compliance with these laws and regulations has not had a material impact on our financial position or results of operations.
Available Information
Our website address is www.silabs.com. Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to
those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are available through the investor relations page of our
website free of charge as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission(SEC). Our website and the information contained therein or connected thereto are not intended to be incorporated into this Annual Report on Form 10-K.
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Item 1A. Risk Factors
Risks Related to our BusinessWe may not be able to maintain our historical growth and may experience significant period-to-period fluctuations in our revenues and operating results,
which may result in volatility in our stock price
Although we have generally experienced revenue growth in our history, we may not be able to sustain this growth. We may also experience significant periodto-period fluctuations in our revenues and operating results in the future due to a number of factors, and any such variations may cause our stock price to fluctuate.
In some future period our revenues or operating results may be below the expectations of public market analysts or investors. If this occurs, our stock price may
drop, perhaps significantly.
A number of factors, in addition to those cited in other risk factors applicable to our business, may contribute to fluctuations in our revenues and operating
results, including:•

The timing and volume of orders received from our customers;•

The timeliness of our new product introductions and the rate at which our new products may cannibalize our older products;•

The rate of acceptance of our products by our customers, including the acceptance of new products we may develop for integration in the products
manufactured by such customers, which we refer to as "design wins";•

The time lag and realization rate between "design wins" and production orders;•

The demand for, and life cycles of, the products incorporating our mixed-signal solutions;•

The rate of adoption of mixed-signal products in the markets we target;•

Deferrals or reductions of customer orders in anticipation of new products or product enhancements from us or our competitors or other providersof mixed-signal ICs;•

Changes in product mix;•

The average selling prices for our products could drop suddenly due to competitive offerings or competitive predatory pricing;•

The average selling prices for our products generally decline over time;•

Changes in market standards;•

Impairment charges related to inventory, equipment or other long-lived assets;•

The software used in our products, including software provided by third parties, may not meet the needs of our customers;•

Our customers may not be able to obtain other components such as capacitors (which are currently in short supply) that they need to incorporate inconjunction with our products, leading to potential downturn in the demand for our products;•

Significant legal costs to defend our intellectual property rights or respond to claims against us; and•The rate at which new markets emerge for products we are currently developing or for which our design expertise can be utilized to develop
products for these new markets.

The markets for consumer electronics, for example, are characterized by rapid fluctuations in demand and seasonality that result in corresponding fluctuationsin the demand for our products that13

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are incorporated in such devices. Additionally, the rate of technology acceptance by our customers results in fluctuating demand for our products as customers are
reluctant to incorporate a new IC into their products until the new IC has achieved market acceptance. Once a new IC achieves market acceptance, demand for the
new IC can quickly accelerate to a point and then level off such that rapid historical growth in sales of a product should not be viewed as indicative of continued
future growth. In addition, demand can quickly decline for a product when a new IC product is introduced and receives market acceptance. Due to the various
factors mentioned above, the results of any prior quarterly or annual periods should not be relied upon as an indication of our future operating performance.
If we are unable to develop or acquire new and enhanced products that achieve market acceptance in a timely manner, our operating results and competitive
position could be harmed
Our future success will depend on our ability to develop or acquire new products and product enhancements that achieve market acceptance in a timely andcost-effective manner. The development of mixed-signal ICs is highly complex, and we have at times experienced delays in completing the development andintroduction of new products and product enhancements. Successful product development and market acceptance of our products depend on a number of factors,
including:•

Requirements of customers;•

Accurate prediction of market and technical requirements;•

Timely completion and introduction of new designs;•

Timely qualification and certification of our products for use in our customers' products;•

Commercial acceptance and volume production of the products into which our ICs will be incorporated;•

Availability of foundry, assembly and test capacity;•

Achievement of high manufacturing yields;•

Quality, price, performance, power use and size of our products;•

Availability, quality, price and performance of competing products and technologies;•

Our customer service, application support capabilities and responsiveness;•

Successful development of our relationships with existing and potential customers;•

Technology, industry standards or end-user preferences; and•Cooperation of third-party software providers and our semiconductor vendors to support our chips within a system.

We cannot provide any assurance that products which we recently have developed or may develop in the future will achieve market acceptance. We haveintroduced to market or are in development of many products. If our products fail to achieve market acceptance, or if we fail to develop new products on a timely
basis that achieve market acceptance, our growth prospects, operating results and competitive position could be adversely affected. The growth of the IoT market isdependent on the adoption of industry standards to permit devices to connect and communicate with each other. If the industry cannot agree on a common set ofstandards, then the growth of the IoT market may be slower than expected.
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Our research and development efforts are focused on a limited number of new technologies and products, and any delay in the development, or abandonment,of these technologies or products by industry participants, or their failure to achieve market acceptance, could compromise our competitive position
Our products serve as components and solutions in electronic devices in various markets. As a result, we have devoted and expect to continue to devote alarge amount of resources to develop products based on new and emerging technologies and standards that will be commercially introduced in the future. Researchand development expense during fiscal 2018 was $238.3 million, or 27.5% of revenues. A number of companies are actively involved in the development of these
new technologies and standards. Should any of these companies delay or abandon their efforts to develop commercially available products based on newtechnologies and standards, our research and development efforts with respect to these technologies and standards likely would have no appreciable value. In
addition, if we do not correctly anticipate new technologies and standards, or if the products that we develop based on these new technologies and standards fail toachieve market acceptance, our competitors may be better able to address market demand than we would. Furthermore, if markets for these new technologies andstandards develop later than we anticipate, or do not develop at all, demand for our products that are currently in development would suffer, resulting in lower salesof these products than we currently anticipate.
Significant litigation over intellectual property in our industry may cause us to become involved in costly and lengthy litigation which could adversely affectour business
The semiconductor and software industries have experienced significant litigation involving patents and other intellectual property rights. From time to time,
third parties, including non-practicing entities, allege intellectual property infringement by our products, our customers' products, or products using technologies orcommunications standards used in our industry. We also receive communications from customers or suppliers requesting indemnification for allegations brought
against them by third parties. Some of these allegations have resulted, and may result in the future, in our involvement in litigation. We have certain contractual
obligations to defend and indemnify our customers from certain infringement claims. We also have been involved in litigation to protect our intellectual property
rights in the past and may become involved in such litigation again in the future.
Given the unpredictable nature of litigation and the complexity of the technology, we may not prevail in any such litigation. Legal proceedings could subject
us to significant liability, invalidate our proprietary rights, or harm our businesses and our ability to compete. Legal proceedings initiated by us to protect our
intellectual property rights could also result in counterclaims or countersuits against us. Any litigation, regardless of its outcome or merit, could be time-consuming
and expensive to resolve and could divert our management's time and attention. Intellectual property litigation also could force us to take specific actions,
including:•Cease using, selling or manufacturing certain products, services or processes;•

Attempt to obtain a license, which license may require the payment of substantial royalties or may not be available on reasonable terms or at all;•Incur significant costs, time delays and lost business opportunities to develop alternative technologies or redesign products; or•Pursue legal remedies with third parties to enforce our indemnification rights, which may not adequately protect our interests.

Any acquisitions we make could disrupt our business and harm our financial condition
As part of our growth and product diversification strategy, we continue to evaluate opportunities to acquire other businesses, intellectual property or
technologies that would complement our current
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offerings, expand the breadth of our markets or enhance our technical capabilities. On April 18, 2018, we acquired the Z-Wave business from Sigma Designs. Thisacquisition and other acquisitions that we have made and may make in the future entail a number of risks that could materially and adversely affect our businessand operating results, including:•

Problems integrating the acquired operations, technologies or products with our existing business and products;•

Diversion of management's time and attention from our core business;•

Need for financial resources above our planned investment levels;•

Difficulties in retaining business relationships with suppliers and customers of the acquired company;•

Risks associated with entering markets in which we lack prior experience;•

Risks associated with the transfer of licenses of intellectual property;•

Increased operating costs due to acquired overhead;•Tax issues associated with acquisitions;•

Acquisition-related disputes, including disputes over earn-outs and escrows;•

Potential loss of key employees of the acquired company; and•Potential impairment of related goodwill and intangible assets.

Future acquisitions also could cause us to incur debt or contingent liabilities or cause us to issue equity securities that could negatively impact the ownership
percentages of existing shareholders.
We may be unable to protect our intellectual property, which would negatively affect our ability to compete
Our products rely on our proprietary technology, and we expect that future technological advances made by us will be critical to sustain market acceptance ofour products. Therefore, we believe that the protection of our intellectual property rights is and will continue to be important to the success of our business. We rely
on a combination of patent, copyright, trademark and trade secret laws and restrictions on disclosure to protect our intellectual property rights. We also enter into
confidentiality or license agreements with our employees, consultants, intellectual property providers and business partners, and control access to and distributionof our documentation and other proprietary information. Despite these efforts, unauthorized parties may attempt to copy or otherwise obtain and use ourproprietary technology. Monitoring unauthorized use of our technology is difficult, and we cannot be certain that the steps we have taken will prevent unauthorized
use of our technology, particularly in foreign countries where the laws may not protect our proprietary rights as fully as in the United States. We cannot be certainthat patents will be issued as a result of our pending applications nor can we be certain that any issued patents would protect or benefit us or give us adequate
protection from competing products. For example, issued patents may be circumvented or challenged and declared invalid or unenforceable. We also cannot becertain that others will not develop effective competing technologies on their own.
Failure to manage our distribution channel relationships could impede our future growth
The future growth of our business will depend in large part on our ability to manage our relationships with current and future distributors and sales
representatives, develop additional channels for the distribution and sale of our products and manage these relationships. During fiscal 2018, 71% of our revenue
was derived from distributors. As we execute our indirect sales strategy, we must manage the potential conflicts that may arise with our direct sales efforts. For
example, conflicts with
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a distributor may arise when a customer begins purchasing directly from us rather than through the distributor. The inability to successfully execute or manage amulti-channel sales strategy could impede our future growth. In addition, relationships with our distributors often involve the use of price protection and inventory
return rights. This often requires a significant amount of sales management's time and system resources to manage properly. Because we consolidated our
distribution relationships to a single global distributor, Arrow Electronics, in fiscal 2018, termination of the relationship with Arrow Electronics, either by us or by
Arrow Electronics, could result in a temporary or permanent loss of revenue. If Arrow Electronics fails to effectively market and sell our products in fullcompliance with applicable laws, or if we are unable to maintain our existing relationship with Arrow Electronics, we may not be able to find a distributor with thescale and resources of Arrow Electronics, maintain existing levels of international revenue or realize expected long-term international revenue growth. We may not
be successful in finding suitable alternative global distributors on satisfactory terms, or at all, and this could adversely affect our ability to effectively sell oursolutions in certain geographical locations or to certain end customers.
We depend on a limited number of customers for a significant portion of our revenues, and the loss of, or a significant reduction in orders from, any key
customer could significantly reduce our revenues
The loss of any of our key customers, or a significant reduction in sales to any one of them, would significantly reduce our revenues and adversely affect ourbusiness. During fiscal 2018, our ten largest customers accounted for 20% of our revenues. Some of the markets for our products are dominated by a small numberof potential customers. Therefore, our operating results in the foreseeable future will continue to depend on our ability to sell to these dominant customers, as wellas the ability of these customers to sell products that incorporate our IC products. In the future, these customers may decide not to purchase our products at all,purchase fewer products than they did in the past or alter their purchasing patterns, particularly because:•

We do not have material long-term purchase contracts with our customers;•

Substantially all of our sales to date have been made on a purchase order basis, which permits our customers to cancel, change or delay productpurchase commitments with little or no notice to us and without penalty;•

Some of our customers may have efforts underway to actively diversify their vendor base which could reduce purchases of our products; and•Some of our customers have developed or acquired products that compete directly with products these customers purchase from us, which could
affect our customers' purchasing decisions in the future.

Our customers regularly evaluate alternative sources of supply in order to diversify their supplier base, which increases their negotiating leverage with us andprotects their ability to secure these components. We believe that any expansion of our customers' supplier bases could have an adverse effect on the prices we areable to charge and volume of product that we are able to sell to our customers, which would negatively affect our revenues and operating results.
We are subject to increased inventory risks and costs because we build our products based on forecasts provided by customers before receiving purchase orders
for the products
In order to ensure availability of our products for some of our largest customers, we start the manufacturing of our products in advance of receiving purchaseorders based on forecasts provided by these customers. However, these forecasts do not represent binding purchase commitments and we do not recognize sales forthese products until they are shipped to the customer. As a result, we incur inventory and manufacturing costs in advance of anticipated sales. Because demand forour17Table of Contents
products may not materialize, manufacturing based on forecasts subjects us to increased risks of high inventory carrying costs, increased obsolescence andincreased operating costs. These inventory risks are exacerbated when our customers purchase indirectly through contract manufacturers or hold component
inventory levels greater than their consumption rate because this causes us to have less visibility regarding the accumulated levels of inventory for such customers.
A resulting write-off of unusable or excess inventories would adversely affect our operating results.
Our products are complex and may contain errors which could lead to liability, an increase in our costs and/or a reduction in our revenues
Our products are complex and may contain errors, particularly when first introduced and/or when new versions are released. Our products are increasingly
designed in more complex processes, including higher levels of software and hardware integration in modules and system-level solutions and/or include elements
provided by third parties which further increase the risk of errors. We rely primarily on our in-house testing personnel to design test operations and procedures todetect any errors or vulnerabilities prior to delivery of our products to our customers.
Should problems occur in the operation or performance of our products, we may experience delays in meeting key introduction dates or scheduled delivery
dates to our customers. These errors could also cause significant re-engineering costs, the diversion of our engineering personnel's attention from our productdevelopment efforts and cause significant customer relations and business reputation problems. Any defects could result in refunds, product replacement, productrecall or other liability. Any of the foregoing could impose substantial costs and harm our business.
Product liability, data breach or cyber liability claims may be asserted with respect to our products. Many of our products focus on wireless connectivity andthe IoT market and such connectivity may make these products particularly susceptible to cyber-attacks. Our products are typically sold at prices that are
significantly lower than the cost of the end-products into which they are incorporated. A defect, failure or vulnerability in our product could cause failure in ourcustomer's end-product, so we could face claims for damages that are disproportionately higher than the revenues and profits we receive from the products
involved. Furthermore, product liability risks are particularly significant with respect to medical and automotive applications because of the risk of serious harm tousers of these end-products. There can be no assurance that any insurance we maintain will sufficiently protect us from such claims.
We rely on third parties to manufacture, assemble and test our products and the failure to successfully manage our relationships with our manufacturers andsubcontractors would negatively impact our ability to sell our products
We do not have our own wafer fab manufacturing facilities. Therefore, we rely on third-party vendors to manufacture the products we design. We also
currently rely on Asian third-party assembly subcontractors to assemble and package the silicon chips provided by the wafers for use in final products.
Additionally, we rely on these offshore subcontractors for a substantial portion of the testing requirements of our products prior to shipping. We expect utilizationof third-party subcontractors to continue in the future.
The cyclical nature of the semiconductor industry drives wide fluctuations in available capacity at third-party vendors. On occasion, we have been unable toadequately respond to unexpected increases in customer demand due to capacity constraints and, therefore, were unable to benefit from this incremental demand.
We may be unable to obtain adequate foundry, assembly or test capacity from our third-party subcontractors to meet our customers' delivery requirements even if
we adequately forecast customer demand.
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There are significant risks associated with relying on these third-party foundries and subcontractors, including:•

Failure by us, our customers or their end customers to qualify a selected supplier;•Potential insolvency of the third-party subcontractors;•

Reduced control over delivery schedules and quality;•

Limited warranties on wafers or products supplied to us;•

Potential increases in prices or payments in advance for capacity;•

Increased need for international-based supply, logistics and financial management;•

Their inability to supply or support new or changing packaging technologies; and•Low test yields.

We typically do not have long-term supply contracts with our third-party vendors which obligate the vendor to perform services and supply products to us fora specific period, in specific quantities, and at specific prices. Our third-party foundry, assembly and test subcontractors typically do not guarantee that adequate
capacity will be available to us within the time required to meet demand for our products. In the event that these vendors fail to meet our demand for whateverreason, we expect that it would take up to 12 months to transition performance of these services to new providers. Such a transition may also require qualificationof the new providers by our customers or their end customers.
Most of the silicon wafers for the products that we have sold were manufactured either by TSMC or SMIC. Our customers typically complete their own
qualification process. If we fail to properly balance customer demand across the existing semiconductor fabrication facilities that we utilize or are required by our
foundry partners to increase, or otherwise change the number of fab lines that we utilize for our production, we might not be able to fulfill demand for our products
and may need to divert our engineering resources away from new product development initiatives to support the fab line transition, which would adversely affectour operating results.
Our customers require our products to undergo a lengthy and expensive qualification process without any assurance of product sales
Prior to purchasing our products, our customers require that our products undergo an extensive qualification process, which involves testing of the products inthe customer's system as well as rigorous reliability testing. This qualification process may continue for six months or longer. However, qualification of a productby a customer does not ensure any sales of the product to that customer. Even after successful qualification and sales of a product to a customer, a subsequent
revision to the product or software, changes in the IC's manufacturing process or the selection of a new supplier by us may require a new qualification process,which may result in delays and in us holding excess or obsolete inventory. After our products are qualified, it can take an additional six months or more before thecustomer commences volume production of components or devices that incorporate our products. Despite these uncertainties, we devote substantial resources,
including design, engineering, sales, marketing and management efforts, toward qualifying our products with customers in anticipation of sales. If we areunsuccessful or delayed in qualifying any of our products with a customer, such failure or delay would preclude or delay sales of such product to the customer,
which may impede our growth and cause our business to suffer.
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We are a global company, which subjects us to additional business risks including logistical and financial complexity, political instability and currency
fluctuations
We have established international subsidiaries and have opened offices in international markets to support our activities in Asia, the Americas and Europe.
This has included the establishment of a headquarters in Singapore for non-U.S. operations. The percentage of our revenues derived from outside of the UnitedStates was 83% during fiscal 2018. We may not be able to maintain or increase global market demand for our products. Our international operations are subject toa number of risks, including:•Complexity and costs of managing international operations and related tax obligations, including our headquarters for non-U.S. operations in
Singapore;•Protectionist laws and business practices, including trade restrictions, tariffs, quotas and other trade barriers, particularly with respect to China-U.S.
trade policies;•

Difficulties related to the protection of our intellectual property rights in some countries;•

Multiple, conflicting and changing tax and other laws and regulations that may impact both our international and domestic tax and other liabilities
and result in increased complexity and costs, including the impact of the Tax Cuts and Jobs Act;•

Longer sales cycles;•Greater difficulty in accounts receivable collection and longer collection periods;•

High levels of distributor inventory subject to price protection and rights of return to us;•

Political and economic instability;•

Greater difficulty in hiring and retaining qualified personnel; and•The need to have business and operations systems that can meet the needs of our international business and operating structure.

To date, substantially all of our sales to international customers and purchases of components from international suppliers have been denominated in U.S.
dollars. As a result, an increase in the value of the U.S. dollar relative to foreign currencies could make our products more expensive for our internationalcustomers to purchase, thus rendering our products less competitive. Similarly, a decrease in the value of the U.S. dollar could reduce our buying power withrespect to international suppliers.
Our inability to manage growth could materially and adversely affect our business
Our past growth has placed, and any future growth of our operations will continue to place, a significant strain on our management personnel, systems andresources. We anticipate that we will need to implement a variety of new and upgraded sales, operational and financial enterprise-wide systems, information
technology infrastructure, procedures and controls, including the improvement of our accounting and other internal management systems to manage this growthand maintain compliance with regulatory guidelines, including Sarbanes-Oxley Act requirements. To the extent our business grows, our internal management
systems and processes will need to improve to ensure that we remain in compliance. We also expect that we will need to continue to expand, train, manage andmotivate our workforce. All of these endeavors will require substantial management effort, and we anticipate that we will require additional management personnel
and internal processes to manage these efforts and to plan for the succession from time to time of certain persons who have been key management and technicalpersonnel. If we are unable to effectively manage our expanding global operations, including our international headquarters in Singapore, our business could bematerially and adversely affected.
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Our products incorporate technology licensed from third parties
We incorporate technology (including software) licensed from third parties in our products. We could be subjected to claims of infringement regardless of ourlack of involvement in the development of the licensed technology. Although a third-party licensor is typically obligated to indemnify us if the licensed technology
infringes on another party's intellectual property rights, such indemnification is typically limited in amount and may be worthless if the licensor becomes insolvent.
See Significant litigation over intellectual property in our industry may cause us to become involved in costly and lengthy litigation which could seriously harm
our business. Furthermore, any failure of third-party technology to perform properly would adversely affect sales of our products incorporating such technology.
We are subject to risks relating to product concentration
We derive a substantial portion of our revenues from a limited number of products, and we expect these products to continue to account for a large percentage
of our revenues in the near term. Continued market acceptance of these products, is therefore, critical to our future success. In addition, substantially all of our
products that we have sold include technology related to one or more of our issued U.S. patents. If these patents are found to be invalid or unenforceable, ourcompetitors could introduce competitive products that could reduce both the volume and price per unit of our products. Our business, operating results, financial
condition and cash flows could therefore be adversely affected by:•

A decline in demand for any of our more significant products;•

Failure of our products to achieve continued market acceptance;•

Competitive products;•

New technological standards or changes to existing standards that we are unable to address with our products;•

A failure to release new products or enhanced versions of our existing products on a timely basis; and•The failure of our new products to achieve market acceptance.

We are subject to credit risks related to our accounts receivable
We do not generally obtain letters of credit or other security for payment from customers, distributors or contract manufacturers. Accordingly, we are notprotected against accounts receivable default or bankruptcy by these entities. Our ten largest customers or distributors represent a substantial majority of our
accounts receivable. If any such customer or distributor, or a material portion of our smaller customers or distributors, were to become insolvent or otherwise notsatisfy their obligations to us, we could be materially harmed.
We depend on our key personnel to manage our business effectively in a rapidly changing market, and if we are unable to retain our current personnel andhire additional personnel, our ability to develop and successfully market our products could be harmed
We believe our future success will depend in large part upon our ability to attract and retain highly skilled managerial, engineering, sales and marketing
personnel. We believe that our future success will be dependent on retaining the services of our key personnel, developing their successors and certain internal
processes to reduce our reliance on specific individuals, and on properly managing the transition of key roles when they occur. There is currently a shortage of
qualified personnel with significant experience in the design, development, manufacturing, marketing and sales of analog and mixed-signal products. In particular,
there is a shortage of engineers who are familiar with the21Table of Contents
intricacies of the design and manufacturability of analog elements, and competition for such personnel is intense. Our key technical personnel represent asignificant asset and serve as the primary source for our technological and product innovations. We may not be successful in attracting and retaining sufficientnumbers of technical personnel to support our anticipated growth. The loss of any of our key employees or the inability to attract or retain qualified personnel bothin the United States and internationally, including engineers, sales, applications and marketing personnel, could delay the development and introduction of, andnegatively impact our ability to sell, our products.
Any dispositions could harm our financial condition
Any disposition of a product line would entail a number of risks that could materially and adversely affect our business and operating results, including:•Diversion of management's time and attention from our core business;•

Difficulties separating the divested business;•

Risks to relations with customers who previously purchased products from our disposed product line;•

Reduced leverage with suppliers due to reduced aggregate volume;•

Risks related to employee relations;•Risks associated with the transfer and licensing of intellectual property;•

Security risks and other liabilities related to the transition services provided in connection with the disposition;•

Tax issues associated with dispositions; and•Disposition-related disputes, including disputes over earn-outs and escrows.

Our stock price may be volatile
The market price of our common stock has been volatile in the past and may be volatile in the future. The market price of our common stock may besignificantly affected by the following factors:•

Actual or anticipated fluctuations in our operating results;•

Changes in financial estimates by securities analysts or our failure to perform in line with such estimates;•

Changes in market valuations of other technology companies, particularly semiconductor companies;•

Announcements by us or our competitors of significant technical innovations, acquisitions, strategic partnerships, joint ventures or capitalcommitments;•

Introduction of technologies or product enhancements that reduce the need for our products;•

The loss of, or decrease in sales to, one or more key customers;•

A large sale of stock by a significant shareholder;•

Dilution from the issuance of our stock in connection with acquisitions;•

The addition or removal of our stock to or from a stock index fund;•Departures of key personnel;•

The required expensing of stock awards; and22

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The required changes in our reported revenue and revenue recognition accounting policy under ASC Topic 606, Revenue from Contracts with
Customers .

The stock market has experienced extreme volatility that often has been unrelated to the performance of particular companies. These market fluctuations may
cause our stock price to fall regardless of our performance.
Most of our current manufacturers, assemblers, test service providers, distributors and customers are concentrated in the same geographic region, which
increases the risk that a natural disaster, epidemic, labor strike, war or political unrest could disrupt our operations or sales
Most of our foundries and several of our assembly and test subcontractors' sites are located in Taiwan and most of our other foundry, assembly and test
subcontractors are located in the Pacific Rim region. In addition, many of our customers are located in the Pacific Rim region. The risk of earthquakes in Taiwan
and the Pacific Rim region is significant due to the proximity of major earthquake fault lines in the area. Earthquakes, tsunamis, fire, flooding, lack of water orother natural disasters, an epidemic, political unrest, war, labor strikes or work stoppages in countries where our semiconductor manufacturers, assemblers and test
subcontractors are located, likely would result in the disruption of our foundry, assembly or test capacity. There can be no assurance that alternate capacity could
be obtained on favorable terms, if at all.
A natural disaster, epidemic, labor strike, war or political unrest where our customers' facilities are located would likely reduce our sales to such customers.
North Korea's recent geopolitical maneuverings, including nuclear weapons and long-range missile testing, have created unrest. Such unrest could create economic
uncertainty or instability, could escalate to war or otherwise adversely affect South Korea and our South Korean customers and reduce our sales to such customers,
which would materially and adversely affect our operating results. In addition, a significant portion of the assembly and testing of our products occurs in South
Korea. Any disruption resulting from these events could also cause significant delays in shipments of our products until we are able to shift our manufacturing,assembling or testing from the affected subcontractor to another third-party vendor.
The semiconductor manufacturing process is highly complex and, from time to time, manufacturing yields may fall below our expectations, which could resultin our inability to satisfy demand for our products in a timely manner and may decrease our gross margins due to higher unit costs
The manufacturing of our products is a highly complex and technologically demanding process. Although we work closely with our foundries and assemblers
to minimize the likelihood of reduced manufacturing yields, we have from time to time experienced lower than anticipated manufacturing yields. Changes inmanufacturing processes or the inadvertent use of defective or contaminated materials could result in lower than anticipated manufacturing yields or unacceptableperformance deficiencies, which could lower our gross margins. If our foundries fail to deliver fabricated silicon wafers of satisfactory quality in a timely manner,
we will be unable to meet our customers' demand for our products in a timely manner, which would adversely affect our operating results and damage ourcustomer relationships.
We depend on our customers to support our products, and some of our customers offer competing products
We rely on our customers to provide hardware, software, intellectual property indemnification and other technical support for the products supplied by ourcustomers. If our customers do not provide the required functionality or if our customers do not provide satisfactory support for their products, the demand forthese devices that incorporate our products may diminish or we may otherwise be materially adversely affected. Any reduction in the demand for these devices
would significantly reduce our revenues.
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In certain products, some of our customers offer their own competitive products. These customers may find it advantageous to support their own offerings in
the marketplace in lieu of promoting our products.
Our convertible senior notes could adversely affect our operating results and financial condition
Upon conversion, our convertible senior notes may be settled in cash, shares of our common stock or a combination of cash and shares, at our election. We
intend to settle the principal amount of the notes in cash. If we do not have adequate cash available, we may not be able to settle the principal amount in cash. In
such case, we will be required to settle the principal amount in stock, which would result in immediate, and likely material, dilution to the ownership interests ofour existing stockholders. Any sales in the public market of our common stock issuable upon such conversion could adversely affect prevailing market prices ofour common stock.
Following any conclusion that we no longer have the ability to settle the convertible senior notes in cash, we will be required on a going forward basis tochange our accounting policy for earnings per share from the treasury stock method to the if-converted method. Earnings per share may be lower under the ifconverted method as compared to the treasury stock method.
The principal balance of the convertible senior notes was separated into liability and equity components, which were recorded initially at fair value. The
excess of the principal amount of the liability component over its carrying amount represents the debt discount, which is accreted to interest expense over the termof the notes using the effective interest method. Accordingly, we will report higher interest expense because of the recognition of both the debt discountamortization and the notes' coupon interest.
Our debt could adversely affect our operations and financial condition
We believe we have the ability to service our debt, but our ability to make the required payments thereunder when due depends upon our future performance,
which will be subject to general economic conditions, industry cycles and other factors affecting our operations, including risk factors described herein, many ofwhich are beyond our control. Our credit facility also contains covenants, including financial covenants. If we breach any of the covenants under our credit facility
and do not obtain appropriate waivers, then, subject to any applicable cure periods, our outstanding indebtedness thereunder could be declared immediately due
and payable.
We could seek to raise additional debt or equity capital in the future, but additional capital may not be available on terms acceptable to us, or at all
We believe that our existing cash, cash equivalents, investments and credit under our credit facility will be sufficient to meet our working capital needs,
capital expenditures, investment requirements and commitments for at least the next 12 months. However, our ability to borrow further under the credit facility isdependent upon our ability to satisfy various conditions, covenants and representations. It is possible that we may need to raise additional funds to finance ouractivities or to facilitate acquisitions of other businesses, products, intellectual property or technologies. We believe we could raise these funds, if needed, by
selling equity or debt securities to the public or to selected investors. In addition, even though we may not need additional funds, we may still elect to sell
additional equity or debt securities or obtain credit facilities for other reasons. However, we may not be able to obtain additional funds on favorable terms, or at all.
If we decide to raise additional funds by issuing equity or convertible debt securities, the ownership percentages of existing shareholders would be reduced.
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We have limited resources compared to some of our current and potential competitors and we may not be able to compete effectively and increase market share
Some of our current and potential competitors have longer operating histories, significantly greater resources and name recognition and a larger base ofcustomers than we have. As a result, these competitors may have greater credibility with our existing and potential customers. They also may be able to adopt moreaggressive pricing policies and devote greater resources to the development, promotion and sale of their products than we can to ours. In addition, some of ourcurrent and potential competitors have already established supplier or joint development relationships with the decision makers at our current or potential
customers. These competitors may be able to leverage their existing relationships to discourage their customers from purchasing products from us or persuade themto replace our products with their products. Our competitors may also offer bundled solutions offering a more complete product despite the technical merits oradvantages of our products. These competitors may elect not to support our products which could complicate our sales efforts. These and other competitive
pressures may prevent us from competing successfully against current or future competitors, and may materially harm our business. Competition could decrease
our prices, reduce our sales, lower our gross margins and/or decrease our market share.
Provisions in our charter documents and Delaware law could prevent, delay or impede a change in control of us and may reduce the market price of ourcommon stock
Provisions of our certificate of incorporation and bylaws could have the effect of discouraging, delaying or preventing a merger or acquisition that a
stockholder may consider favorable. For example, our certificate of incorporation and bylaws provide for:•The division of our Board of Directors into three classes to be elected on a staggered basis, one class each year;•

The ability of our Board of Directors to issue shares of our preferred stock in one or more series without further authorization of our stockholders;•

A prohibition on stockholder action by written consent;•

Elimination of the right of stockholders to call a special meeting of stockholders;•

A requirement that stockholders provide advance notice of any stockholder nominations of directors or any proposal of new business to beconsidered at any meeting of stockholders; and•A requirement that a supermajority vote be obtained to amend or repeal certain provisions of our certificate of incorporation.

We also are subject to the anti-takeover laws of Delaware which may discourage, delay or prevent someone from acquiring or merging with us, which may
adversely affect the market price of our common stock.
Risks related to our industry
We are subject to the cyclical nature of the semiconductor industry, which has been subject to significant fluctuations
The semiconductor industry is highly cyclical and is characterized by constant and rapid technological change, rapid product obsolescence and price erosion,
evolving standards, short product life cycles and wide fluctuations in product supply and demand. The industry has experienced significant fluctuations, often
connected with, or in anticipation of, maturing product cycles and new product introductions of both semiconductor companies' and their customers' products andfluctuations in general economic conditions. Deteriorating general worldwide economic conditions, including
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reduced economic activity, concerns about credit and inflation, increased energy costs, decreased consumer confidence, reduced corporate profits, decreased
spending and similar adverse business conditions, would make it very difficult for our customers, our vendors, and us to accurately forecast and plan futurebusiness activities and could cause U.S. and foreign businesses to slow spending on our products. We cannot predict the timing, strength, or duration of any
economic slowdown or economic recovery. If the economy or markets in which we operate deteriorate, our business, financial condition, and results of operations
would likely be materially and adversely affected.
Downturns have been characterized by diminished product demand, production overcapacity, high inventory levels and accelerated erosion of average selling
prices. We believe the semiconductor industry is currently suffering a downturn due in large part to adverse macroeconomic conditions, characterized by aslowdown in overall GDP performance and factory activity in certain regions, particularly in China , higher levels of customer inventory, the impact of tariffs on
trade relations, and greater overall uncertainty regarding the economy. This downturn has had, and may continue to have, a material adverse effect on our businessand operating results.
Upturns have been characterized by increased product demand and production capacity constraints created by increased competition for access to third-party
foundry, assembly and test capacity. We are dependent on the availability of such capacity to manufacture, assemble and test our products. None of our third-party
foundry, assembly or test subcontractors have provided assurances that adequate capacity will be available to us.
The average selling prices of our products could decrease rapidly which may negatively impact our revenues and gross margins
We may experience substantial period-to-period fluctuations in future operating results due to the erosion of our average selling prices. We have reduced theaverage unit price of our products in anticipation of or in response to competitive pricing pressures, new product introductions by us or our competitors and otherfactors. If we are unable to offset any such reductions in our average selling prices by increasing our sales volumes, increasing our sales content per application or
reducing production costs, our gross margins and revenues will suffer. To maintain our gross margin percentage, we will need to develop and introduce new
products and product enhancements on a timely basis and continually reduce our costs. Our failure to do so could cause our revenues and gross margin percentage
to decline.
Competition within the numerous markets we target may reduce sales of our products and reduce our market share
The markets for semiconductors in general, and for mixed-signal products in particular, are intensely competitive. We expect that the market for our products
will continually evolve and will be subject to rapid technological change. In addition, as we target and supply products to numerous markets and applications, weface competition from a relatively large number of competitors. We compete with Analog Devices, Broadcom, Cypress, IDT, Infineon, Maxim Integrated
Products, MaxLinear, Microchip, Nordic Semiconductor, NXP Semiconductors, Qualcomm, Renesas, STMicroelectronics, Synaptics, Texas Instruments andothers. We expect to face competition in the future from our current competitors, other manufacturers and designers of semiconductors, and start-up semiconductor
design companies. As the markets for communications products grow, we also may face competition from traditional communications device companies. These
companies may enter the mixed-signal semiconductor market by introducing their own products or by entering into strategic relationships with or acquiring otherexisting providers of semiconductor products. In addition, large companies may restructure their operations to create separate companies or may acquire new
businesses that are focused on providing the types of products we produce or acquire our customers.
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We may be the victim of business disruptions and security breaches, including cyber-attacks, which could lead to liability or could damage our reputation andfinancial results
Information technology system and/or network disruptions, regardless of the cause, but including acts of sabotage, error, or other actions, could harm thecompany's operations. Failure to effectively prevent, detect, and recover from security breaches, including cyber-attacks, could result in the misuse of company
assets, disruption to the company, diversion of management resources, regulatory inquiries, legal claims or proceedings, reputational damage, loss of sales andother costs to the company. We routinely face attacks that attempt to breach our security protocols, gain access to or disrupt our computerized systems or steal
proprietary company, customer, partner or employee information. These attacks are sometimes successful. These attacks may be due to security breaches,
employee error, theft, malfeasance, phishing schemes, ransomware, faulty password or data security management, or other irregularities. The theft, loss,
destruction, unavailability or misuse of personal or business data collected, used, stored or transferred by us to run our business could result in increased security
costs or costs related to defending legal claims. Industrial espionage, theft or loss of our intellectual property data could lead to counterfeit products or harm thecompetitive position of our products and services. Costs to implement, test and maintain measures to promote compliance with applicable privacy and data security
laws as well as to protect the overall security of our system could be significant. Attempted or successful attacks against our products and services could damage
our reputation with customers or users and reduce demand for our products and services.
Changes in the Privacy and Data Security/Protection Laws Could Have an Adverse Effect on our Operations
Federal, state and international privacy-related or data protection laws and regulations could have an adverse effect on our operations. Complying with theselaws and the possibility of proceedings against us by governmental entities or others in relation to these laws could increase operational costs. In May 2018, theEuropean Union's General Data Protection Regulation ("GDPR") went into effect, replacing the EU's 1995 Data Protection Directive. The costs of compliance with
the GDPR and the potential for fines and penalties in the event of a breach of the GDPR may have an adverse effect on our operations.
We may be subject to information technology failures that could damage our reputation, business operations and financial condition
We rely on information technology for the effective operation of our business. Our systems are subject to damage or interruption from a number of potential
sources, including natural disasters, accidents, power disruptions, telecommunications failures, acts of terrorism or war, computer viruses, theft, physical orelectronic break-ins, cyber-attacks, sabotage, vandalism, or similar events or disruptions. Our security measures may not detect or prevent such security breaches.
Any such compromise of our information security could result in the theft or unauthorized publication or use of our confidential business or proprietary
information, result in the unauthorized release of customer, supplier or employee data, result in a violation of privacy or other laws, expose us to a risk of litigation
or damage our reputation. In addition, our inability to use or access information systems at critical points in time could unfavorably impact the timely and efficient
operation of our business, which could negatively affect our business and operating results.
Third parties with which we conduct business, such as foundries, assembly and test contractors, distributors and customers, have access to certain portions of
our sensitive data. In the event that these third parties do not properly safeguard our data that they hold, security breaches could result and negatively impact our
reputation, business operations and financial results.
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Our products must conform to industry standards and technology in order to be accepted by end users in our markets
Generally, our products comprise only a part of a device. All components of such devices must uniformly comply with industry standards in order to operate
efficiently together. We depend on companies that provide other components of the devices to support prevailing industry standards. Many of these companies are
significantly larger and more influential in affecting industry standards than we are. Some industry standards may not be widely adopted or implemented
uniformly, and competing standards may emerge that may be preferred by our customers or end users. If larger companies do not support the same industry
standards that we do, or if competing standards emerge, market acceptance of our products could be adversely affected which would harm our business.
Products for certain applications are based on industry standards that are continually evolving. Our ability to compete in the future will depend on our ability
to identify and ensure compliance with these evolving industry standards. The emergence of new industry standards could render our products incompatible withproducts developed by other suppliers. As a result, we could be required to invest significant time and effort and to incur significant expense to redesign our
products to ensure compliance with relevant standards. If our products are not in compliance with prevailing industry standards for a significant period of time, we
could miss opportunities to achieve crucial design wins.
Our pursuit of necessary technological advances may require substantial time and expense. We may not be successful in developing or using new technologies
or in developing new products or product enhancements that achieve market acceptance. If our products fail to achieve market acceptance, our growth prospects,
operating results and competitive position could be adversely affected.
Customer demands and new regulations related to conflict-free minerals may adversely affect us
The Dodd-Frank Wall Street Reform and Consumer Protection Act imposes new disclosure requirements regarding the use of "conflict" minerals mined fromthe Democratic Republic of Congo and adjoining countries in products, whether or not these products are manufactured by third parties. These new requirements
could affect the pricing, sourcing and availability of minerals used in the manufacture of semiconductor devices (including our products). There will be additionalcosts associated with complying with the disclosure requirements, such as costs related to determining the source of any conflict minerals used in our products. Our
supply chain is complex and we may be unable to verify the origins for all metals used in our products. We may also encounter challenges with our customers andstockholders if we are unable to certify that our products are conflict free.
Item 1B.

Unresolved Staff Comments

None.
Item 2.

Properties

Our corporate headquarters, housing engineering, sales and marketing, administration and test operations, is located in Austin, Texas. Our headquarters
facilities consist of two buildings, which we own, that are located on land which we have leased through 2099. The buildings contain approximately 441,000
square feet of floor space, of which approximately 129,000 square feet were leased to other tenants. In addition to these properties, we lease smaller facilities invarious locations in the United States, Australia, Canada, China, Denmark, Finland, France, Germany, Hungary, India, Italy, Japan, Norway, Singapore, South
Korea, Taiwan and the United Kingdom for engineering, sales and marketing, administrative and manufacturing support activities. We believe that these facilities
are suitable and adequate to meet our current operating needs.
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Item 3.

Legal Proceedings

Information regarding legal proceedings is provided in Note 11, Commitments and Contingencies , to the Consolidated Financial Statements. Suchinformation is incorporated by reference herein.
Item 4.

Mine Safety Disclosures

Not applicable.
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Part II
Item 5.

Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information and Holders
Our registration statement (Registration No. 333-94853) under the Securities Act of 1933, as amended, relating to our initial public offering of our common
stock became effective on March 23, 2000. Our common stock is quoted on the NASDAQ National Market (NASDAQ) under the symbol "SLAB". The tablebelow shows the high and low per-share sales prices of our common stock for the periods indicated, as reported by NASDAQ. As of January 21, 2019, there were
67 holders of record of our common stock.
High

Fiscal Year 2017
First Quarter
Second Quarter
Third Quarter
Fourth Quarter$

Fiscal Year 2018
First Quarter
Second Quarter
Third Quarter
Fourth Quarter

Low

75.60 $ 63.15
78.45
66.85
81.95
66.35
96.93
80.17

$ 101.20 $ 84.48
110.7085.96
108.15
90.50
93.73
73.13

Dividend Policy
We have never declared or paid any cash dividends on our common stock and we currently do not intend to pay cash dividends. We currently expect to retain
any future earnings to fund the operation and expansion of our business.
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Stock Performance Graph
The graph depicted below shows a comparison of cumulative total stockholder returns for an investment in Silicon Laboratories Inc. common stock, the
NASDAQ Composite Index and the PHLX Semiconductor Index.

Company / Index

Silicon Laboratories Inc.
NASDAQ Composite
PHLX Semiconductor Sector Total Return Index

12/28/13

01/03/15

01/02/16

12/31/16

12/30/17

12/29/18$ 100.00 $ 112.18 $ 114.62 $ 153.48 $ 208.50 $ 185.36$ 100.00 $ 115.10 $ 123.34 $ 134.27 $ 174.07 $ 167.82$ 100.00 $ 131.84 $ 129.76 $ 180.79 $ 254.08 $ 237.11(1)

The graph assumes that $100 was invested in our common stock and in each index at the market close on December 28, 2013, and that all
dividends were reinvested. No cash dividends have been declared on our common stock.

(2)

Stockholder returns over the indicated period should not be considered indicative of future stockholder returns.
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Issuer Purchases of Equity Securities
The following table summarizes repurchases of our common stock during the three months ended December 29, 2018 (in thousands, except per shareamounts):

Total Numberof Shares
Purchased

PeriodAverage Price
Paid per
Share

Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs

Approximate
Dollar Value of
Shares that May
Yet Be Purchased
Under the Plans
or Programs

September 30, 2018 - October 27, 2018

— $

—

— $

175,733

October 28, 2018 - November 24, 2018

177 $

84.78

177 $

160,733

November 25, 2018 - December 29, 2018
Total

— $
177 $

—
84.78

— $
177

160,733

In October 2018, the Board of Directors increased the share repurchase amount for the October 2017 program from $100 million to $200 million and extended
the termination date from December 2018 to December 2019. The program allows for repurchases to be made in the open market or in private transactions,
including structured or accelerated transactions, subject to applicable legal requirements and market conditions.
Item 6.

Selected Financial Data

Please read this selected consolidated financial data in conjunction with "Management's Discussion and Analysis of Financial Condition and Results ofOperations," our Consolidated Financial Statements and the notes to those statements included in this Form 10-K.
2018 (1)Fiscal Year
2017
2016
2015
(in thousands, except per share data)

2014

Consolidated Statements of Income Data
Revenues
Operating income
Net income$$$

868,267 $
85,208 $83,591 $768,867 $
84,974 $47,092 $697,626 $
66,277 $61,494 $644,826 $32,234 $29,586 $620,704
51,421
38,021$$

1.94 $
1.90 $

1.11 $
1.09 $

1.47 $
1.45 $

0.70 $
0.69 $

0.88
0.87

Earnings per share:
Basic
DilutedConsolidated Balance Sheet Data
Cash, cash equivalents and investments
Working capital
Total assets
Long-term obligations
Total stockholders' equity(1)$

619,581 $ 769,704 $ 300,263 $ 250,112 $ 342,614
681,793785,317351,156
280,819
365,223
1,624,354
1,535,082
1,081,844
1,011,463
1,042,561
412,219
419,741
115,191
108,028
121,191
1,067,290
953,016
826,958
761,114758,056

In fiscal 2018, we adopted Accounting Standards Codification (ASC) Topic 606, Revenue from Contracts with Customers . We elected themodified retrospective method of adoption. Prior periods have not been adjusted. See Note 2, Significant Accounting Policies , to theConsolidated Financial Statements for additional information.
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Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of financial condition and results of operations should be read in conjunction with the Consolidated Financial
Statements and related notes thereto included elsewhere in this report. This discussion contains forward-looking statements. Please see the "Cautionary Statement"and "Risk Factors" above for discussions of the uncertainties, risks and assumptions associated with these statements. Our fiscal year-end financial reporting
periods are a 52- or 53-week fiscal year that ends on the Saturday closest to December 31. Fiscal 2018, 2017 and 2016 were 52-week years and ended on
December 29, 2018, December 30, 2017 and December 31, 2016, respectively.
Overview
We are a leading provider of silicon, software and solutions for a smarter, more connected world. Our award-winning technologies are shaping the future of
the Internet of Things (IoT), Internet infrastructure, industrial automation, consumer and automotive markets. Our world-class engineering team creates products
focused on performance, energy savings, connectivity and simplicity. Our primary semiconductor products are mixed-signal integrated circuits (ICs), which areelectronic components that convert real-world analog signals, such as sound and radio waves, into digital signals that electronic products can process.
As a fabless semiconductor company, we rely on third-party semiconductor fabricators in Asia, and to a lesser extent the United States and Europe, tomanufacture the silicon wafers that reflect our IC designs. Each wafer contains numerous die, which are cut from the wafer to create a chip for an IC. We rely on
third parties in Asia to assemble, package, and, in most cases, test these devices and ship these units to our customers. Testing performed by such third parties
facilitates faster delivery of products to our customers (particularly those located in Asia), shorter production cycle times, lower inventory requirements, lower
costs and increased flexibility of test capacity.
Our expertise in analog-intensive, high-performance, mixed-signal ICs and software enables us to develop highly differentiated solutions that address multiple
markets. We group our products into the following categories:•

Internet of Things products, which include our microcontroller (MCU), wireless and sensor products;•

Broadcast products, which include our broadcast consumer and automotive products;•

Infrastructure products, which include our timing products (clocks and oscillators), and isolation devices; and•Access products, which include our Voice over IP (VoIP) products, embedded modems and Power over Ethernet (PoE) devices.

The sales cycle for our ICs can be as long as 12 months or more. An additional three to six months or more are usually required before a customer ships asignificant volume of devices that incorporate our ICs. Due to this lengthy sales cycle, we typically experience a significant delay between incurring research anddevelopment and selling, general and administrative expenses, and the corresponding sales. Consequently, if sales in any quarter do not occur when expected,
expenses and inventory levels could be disproportionately high, and our operating results for that quarter and, potentially, future quarters would be adversely
affected. Moreover, the amount of time between initial research and development and commercialization of a product, if ever, can be substantially longer than thesales cycle for the product. Accordingly, if we incur substantial research and development costs without developing a commercially successful product, ouroperating results, as well as our growth prospects, could be adversely affected.
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Because many of our ICs are designed for use in consumer products such as televisions, set-top boxes, radios and wearables, we expect that the demand forour products will be typically subject to some degree of seasonal demand. However, rapid changes in our markets and across our product areas make it difficult for
us to accurately estimate the impact of seasonal factors on our business.
Current Period Highlights
Revenues increased $99.4 million in fiscal 2018 compared to fiscal 2017, primarily due to increased revenues from our IoT and Infrastructure products offset
by decreased revenues from our Access and Broadcast products. Gross margin increased $67.2 million during the same period due primarily to increased productsales. Gross margin as a percent of revenues increased to 60.1% in fiscal 2018 compared to 59.1% in fiscal 2017 primarily due to variations in product mix.
Operating expenses increased $67.0 million in fiscal 2018 compared to fiscal 2017 due primarily to increased personnel-related expenses, amortization of
intangible assets and acquisition-related costs. Operating income in fiscal 2018 was $85.2 million compared to $85.0 million in fiscal 2017.
We ended fiscal 2018 with $613.8 million in cash, cash equivalents and short-term investments. Net cash provided by operating activities was $173.5 million
during fiscal 2018. Accounts receivable was $73.2 million at December 29, 2018, representing 31 days sales outstanding (DSO). Inventory was $75.0 million at
December 29, 2018, representing 79 days of inventory (DOI). In fiscal 2018, we repurchased 0.4 million shares of our common stock for $39.3 million.
Through acquisitions and internal development efforts, we have continued to diversify our product portfolio and introduce new products and solutions withadded functionality and further integration. On April 18, 2018, we acquired the Z-Wave business of Sigma Designs, Inc. Z-Wave is an IoT technology for smart
home solutions. See Note 8, Acquisitions , to the Consolidated Financial Statements for additional information.
In fiscal 2018, we introduced the next-generation Z-Wave® 700 on the Wireless Gecko platform, a comprehensive hardware and software connectivity
solution for the smart home; a jointly developed LTE-M expansion kit featuring the Digi International Digi XBee3™ pre-certified cellular modem and a SiliconLabs Gecko microcontroller; Wireless Xpress modules that deliver Bluetooth and Wi-Fi connectivity with no software development necessary; new any-frequency
clocks combining the clock IC and a quartz crystal reference inside the same package; timing solutions to meet the high-performance requirements of 56G/112G
SerDes clocking applications; new multiprotocol software for our Wireless Gecko portfolio, enabling Bluetooth Low Energy (LE) connectivity with sub-GHz IoT
devices; a proven reference design for ITU-T G.8262-compliant Synchronous Ethernet (SyncE) applications; a multiprotocol mesh networking solution for the IoT
jointly created with Wirepas; low-power PCI Express® (PCIe®) Gen 4 clock buffers for 1.5 V and 1.8 V applications; two new Power over Ethernet (PoE)
Powered Device (PD) families for a wide range of IoT applications; new Tiny Gecko MCUs that extend battery life for IoT connected devices; and a new Wi-Fi
portfolio to simplify the design of power-sensitive, battery-operated Wi-Fi products. We plan to continue to introduce products that increase the content we provide
for existing applications, thereby enabling us to serve markets we do not currently address and expand our total available market opportunity.
During fiscal 2018, 2017 and 2016, we had no customer that represented more than 10% of our revenues. In addition to direct sales to customers, some of ourend customers purchase products indirectly from us through distributors and contract manufacturers. An end customer purchasing through a contract manufacturer
typically instructs such contract manufacturer to obtain our products and incorporate such products with other components for sale by such contract manufacturer
to the end customer. Although we actually sell the products to, and are paid by, the distributors and contract manufacturers, we refer to such end customer as ourcustomer. Two of our distributors who sell to our customers, Arrow Electronics and Edom Technology, each represented 21% and 17% of our revenues
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during fiscal 2018. Edom, Avnet and Arrow, each represented 19%, 14% and 12% of our revenues during fiscal 2017, and 17%, 13% and 11% of our revenues
during fiscal 2016, respectively. There were no contract manufacturers that accounted for more than 10% of our revenues in fiscal 2018, 2017 or 2016. During
fiscal 2018, we consolidated our distribution relationships to a single global distributor, Arrow Electronics. We are maintaining our extensive network of regional
distributor partners and etailers to complement our single global distributor partner.
The percentage of our revenues derived from outside of the United States was 83% in fiscal 2018, 85% in fiscal 2017 and 86% in fiscal 2016. All of ourrevenues to date have been denominated in U.S. dollars. We believe that a majority of our revenues will continue to be derived from customers outside of theUnited States.
Results of Operations
The following describes the line items set forth in our Consolidated Statements of Income:Revenues. Revenues are generated predominately by sales of our products. Our revenues are subject to variation from period to period due to the volume of
shipments made within a period, the mix of products we sell and the prices we charge for our products.
Cost of Revenues. Cost of revenues includes the cost of purchasing finished silicon wafers processed by independent foundries; costs associated withassembly, test and shipping of those products; costs of personnel and equipment associated with manufacturing support, logistics and quality assurance; costs ofsoftware royalties, other intellectual property license costs and certain acquired intangible assets; and an allocated portion of our occupancy costs. Our grossmargin as a percentage of revenue fluctuates depending on product mix, manufacturing yields, inventory valuation adjustments, average selling prices and otherfactors.
Research and Development. Research and development expense consists primarily of personnel-related expenses, including stock-based compensation, as
well as new product masks, external consulting and services costs, equipment tooling, equipment depreciation, amortization of intangible assets, and an allocatedportion of our occupancy costs. Research and development activities include the design of new products, refinement of existing products and design of test
methodologies to ensure compliance with required specifications.
Selling, General and Administrative. Selling, general and administrative expense consists primarily of personnel-related expenses, including stock-based
compensation, as well as an allocated portion of our occupancy costs, sales commissions to independent sales representatives, applications engineering support,
professional fees, legal fees and promotional and marketing expenses.
Interest Income and Other, Net. Interest income and other, net reflects interest earned on our cash, cash equivalents and investment balances, foreign
currency remeasurement adjustments and other non-operating income and expenses.
Interest Expense. Interest expense consists of interest on our short and long-term obligations, including our convertible senior notes and credit facility.
Interest expense on our convertible senior notes includes contractual interest, amortization of the debt discount and amortization of debt issuance costs.
Provision (Benefit) for Income Taxes. Provision (benefit) for income taxes includes both domestic and foreign income taxes at the applicable tax rates
adjusted for non-deductible expenses, research and development tax credits and other permanent differences.
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Table of Contents
The following table sets forth our Consolidated Statements of Income data as a percentage of revenues for the periods indicated:2018

Revenues
Cost of revenues
Gross margin
Operating expenses:
Research and development
Selling, general and administrative
Operating expenses
Operating income
Other income (expense):
Interest income and other, net
Interest expense
Income before income taxes
Provision (benefit) for income taxes
Net income

Fiscal Year
2017

2016

100.0%
39.9
60.1

100.0%
40.9
59.1

100.0%
39.6
60.4

27.5
22.8
50.3
9.8

27.2
20.8
48.0
11.1

28.6
22.3
50.9
9.5

0.8
(2.3)
8.3
(1.3)
9.6%

0.8
(1.9)
10.0
3.9
6.1%

0.1
(0.4)
9.2
0.4
8.8%

Comparison of Fiscal 2018 to Fiscal 2017
Revenues
Fiscal Year
2018
2017

(in millions)Internet of Things
Infrastructure
BroadcastAccess
Total

Change$ 463.8 $ 395.0 $ 68.8
199.5
152.2
47.3
141.4
153.0
(11.6)
63.6
68.7
(5.1)
$ 868.3 $ 768.9 $ 99.4%
Change17.4%
31.1%(7.6)%(7.5)%
12.9%

The change in revenues in fiscal 2018 was due primarily to:•

Increased revenues of $68.8 million for our IoT products, due primarily to increased demand for our wireless products and the addition of revenues
from an acquisition.

•

Increased revenues of $47.3 million for our Infrastructure products, due primarily to increased demand for our isolation and timing products.

•

Decreased revenues of $11.6 million for Broadcast products, due primarily to decreases in the market for our consumer products.

•

Decreased revenues of $5.1 million for our Access products, due primarily to decreased demand for our VoIP products and decreases in the market
for such products.

Unit volumes of our products increased by 11.5% and average selling prices increased by 1.1% compared to fiscal 2017. The average selling prices of our
products may fluctuate significantly from period to period due to changes in product mix and other factors. In general, as our products become more mature, we
expect to experience decreases in average selling prices. We anticipate that newly announced, higher priced, next generation products and product derivatives willoffset some of these decreases.
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Table of Contents
Gross Margin
Fiscal Year(in millions)2018

Gross margin
Percent of revenue$ 521.4
60.1%

2017

Change$ 454.2 $
59.1%

67.2
1.0%

The increased dollar amount of gross margin in fiscal 2018 was due to increases in gross margin of $42.8 million for our Internet of Things products and$34.6 million for our Infrastructure products, offset by decreases in gross margin of $8.5 million for our Broadcast products and $1.7 million for our Accessproducts. Gross margin increased in fiscal 2018 due primarily to increased product sales. Gross margin in fiscal 2018 included $6.1 million in acquisition-related
charges for the fair value write-up associated with acquired inventory. Gross margin as a percent of revenues increased in fiscal 2018 primarily due to a higher mixof Infrastructure products sold.
We may experience declines in the average selling prices of certain of our products. This creates downward pressure on gross margin as a percentage ofrevenues and may be offset to the extent we are able to introduce higher margin new products and gain market share with our products; reduce costs of existingproducts through improved design; achieve lower production costs from our wafer suppliers and third-party assembly and test subcontractors; achieve lower
production costs per unit as a result of improved yields throughout the manufacturing process; or reduce logistics costs.
Research and Development
Fiscal Year(in millions)

Research and development
Percent of revenue

2018

2017

$ 238.3
27.5%$ 209.5
27.2%

Change$28.8%
Change13.8%

The increase in research and development expense in fiscal 2018 was primarily due to increases of $16.5 million for personnel-related expenses, including
costs associated with increased headcount and an acquisition, and $7.2 million for the amortization of intangible assets. We expect that research and development
expense will increase in absolute dollars in the first quarter of 2019 compared to the fourth quarter of 2018.
Selling, General and Administrative
Fiscal Year(in millions)2018

Selling, general and administrative
Percent of revenue$ 197.8
22.8%

2017

Change$ 159.7 $
20.8%

38.1

%
Change23.9%

The increase in selling, general and administrative expense in fiscal 2018 was primarily due to increases of $23.6 million for personnel-related expenses,
including costs associated with increased headcount and an acquisition, $3.6 million for the amortization of intangible assets and $3.4 million for acquisitionrelated costs. We expect that selling, general and administrative expense will increase in absolute dollars in the first quarter of 2019 compared to the fourth quarterof 2018.
Interest Income and Other, Net
Interest income and other, net in fiscal 2018 was $6.6 million compared to $6.1 million in fiscal 2017. The increase in interest income and other, net in fiscal
2018 was primarily due to increased37

Table of Contentsinterest income earned as a result of higher market interest rates and higher investment balances, offset by a net loss of $1.8 million recorded in connection withfair value adjustments to an equity investment.
Interest Expense
Interest expense in fiscal 2018 was $19.7 million compared to $14.1 million in fiscal 2017. The increase in interest expense in fiscal 2018 was primarily due
to increased interest expense of $3.8 million on our convertible debt, including amortization of the debt discount and debt issuance costs, as a result of recording afull year of interest expense in fiscal 2018 versus a partial year in fiscal 2017. In addition, interest expense in fiscal 2017 was lower than fiscal 2018 due to a
$2.0 million gain recorded in fiscal 2017 in connection with the termination of our interest rate swap agreement.
Provision (Benefit) for Income Taxes
Fiscal Year
2018
2017

(in millions)

Provision (benefit) for income taxes
Effective tax rate

Change$ (11.4)$ 29.8 $ (41.2)(15.8)%
38.8%

The effective tax rate for fiscal 2018 decreased from fiscal 2017 primarily due to a reduction in the U.S. federal statutory rate as well as the inclusion of onetime tax impacts recorded in 2017 from the enactment of the Tax Cuts and Jobs Act. The effective tax rate in 2018 further decreased from fiscal 2017 primarily asa result two discrete 2018 items: the SAB 118 (defined below) discrete benefit related to the transition tax calculation as well as the impact of a change of U.S.
method of tax accounting for recognizing revenue. This overall decrease in the effective tax rate was offset by a decrease in the Company's foreign tax rate benefit.
The effective tax rates for each of the periods presented differ from the U.S. federal statutory tax rates of 21% and 35%, respectively, due to the amount ofincome earned in foreign jurisdictions where the tax rate may be higher or lower than the federal statutory tax rate, as well as other permanent items including
research and development tax credits, and the tax effects of stock-based compensation.
Comparison of Fiscal 2017 to Fiscal 2016
Revenues
Fiscal Year
2017
2016

(in millions)Internet of Things
BroadcastInfrastructure
Access
Total

Change$ 395.0 $ 314.6 $
153.0
157.7
152.2
147.7
68.7
77.6
$ 768.9 $ 697.6 $

80.4
(4.7)
4.5
(8.9)
71.3

%
Change25.6%(3.0)%
3.0%(11.4)%
10.2%

The change in revenues in fiscal 2017 was due primarily to:•

Increased revenues of $80.4 million for our IoT products, due primarily to increased demand for our wireless products.

•

Decreased revenues of $4.7 million for Broadcast products, due primarily to decreases in the market for our consumer products offset by increased
demand for our automotive products.
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Increased revenues of $4.5 million for our Infrastructure products, due primarily to increased demand for our isolation products offset by decreased
demand for our timing products and decreased patent sale revenue of $5.0 million in fiscal 2016 with no patents sales in fiscal 2017.

•

Decreased revenues of $8.9 million for our Access products, due primarily to decreased demand for our VoIP products and decreases in the market
for such products.

Unit volumes of our products increased by 21.0% and average selling prices decreased by 8.5% compared to fiscal 2016.
Gross Margin
Fiscal Year(in millions)2017

Gross margin
Percent of revenue

2016$ 454.2
59.1%

Change$ 421.5 $
60.4%

32.7
(1.3)%The increased dollar amount of gross margin in fiscal 2017 was due to increases in gross margin of $45.0 million for our IoT products and $1.4 million for ourInfrastructure products, offset by decreases in gross margin of $7.0 million for our Broadcast products and $6.7 million for our Access products. Gross marginincreased in fiscal 2017 due primarily to increased product sales. Gross margin as a percent of revenues decreased in fiscal 2017 primarily due to variations in
product mix. Gross margin in fiscal 2016 included $5.0 million from the sale of patents, which had no associated cost of revenues.
Research and Development
Fiscal Year
2017
2016

(in millions)

Research and development
Percent of revenue

Change$ 209.5 $ 199.7 $
27.2%
28.6%

9.8

%
Change4.9%

The increase in research and development expense in fiscal 2017 was primarily due to increases of $12.6 million for personnel-related expenses, including
costs associated with increased headcount and acquisitions. The increase in research and development expense in fiscal 2017 was offset in part by a decrease of$2.3 million for new product introduction costs. The decrease in research and development expense as a percent of revenues in fiscal 2017 was due to our increased
revenues.
Selling, General and Administrative
Fiscal Year(in millions)2017

Selling, general and administrative
Percent of revenue$ 159.7
20.8%

2016

Change$ 155.5 $
22.3%

4.2

%
Change2.7%

The increase in selling, general and administrative expense in fiscal 2017 was primarily due to an increase of $6.1 million for personnel-related expenses,
including costs associated with increased headcount and acquisitions. The increase in selling, general and administrative in fiscal 2017 was offset in part by adecrease of $1.4 million for legal fees, primarily related to litigation. The decrease in selling, general and administrative expense as a percent of revenues in fiscal
2017 was due to our increased revenues.
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Interest Income and Other, Net
Interest income and other, net in fiscal 2017 was $6.1 million compared to $0.8 million in fiscal 2016. The increase in interest income and other, net in fiscal
2017 was primarily due to increased interest income earned as a result of higher market interest rates and higher cash, cash equivalents and short-term investments
balances.
Interest Expense
Interest expense in fiscal 2017 was $14.1 million compared to $2.6 million in fiscal 2016. The increase in interest expense in fiscal 2017 was primarily due toincreased interest expense of $14.6 million on our convertible debt, including amortization of the debt discount and debt issuance costs. The increase in interest
expense was offset in part by a $2.0 million gain recorded in connection with the termination of our interest rate swap agreement.
Provision (Benefit) for Income Taxes
Fiscal Year
2017
2016

(in millions)

Provision (benefit) for income taxes
Effective tax rate

$ 29.838.8%

Change$ 3.0 $
4.7%

26.8

On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the "Tax Act"). The
effective tax rate for fiscal 2017 increased from fiscal 2016 primarily due to the impacts from the Tax Act including a one-time transition tax of $54.4 million on
unrepatriated earnings of foreign subsidiaries as well as tax expense of $21.8 million related to the revaluation of our deferred tax assets and liabilities due to the
reduction of the U.S. corporate tax rate from 35% to 21% under the Tax Act. These increases in tax expense were partially offset by the release of a deferred tax
liability related to future foreign earnings expected under our intercompany cost-sharing arrangement of $39.4 million, as well as a decrease in the valuation
allowance established on federal research and development tax credits of $10.5 million.
The effective tax rates for each of the periods presented differ from the U.S. federal statutory tax rate of 35% due to the amount of income earned in foreign
jurisdictions where the tax rate may be lower than the federal statutory rate, and other permanent items including research and development tax credits andnondeductible compensation expenses. In addition, the effective tax rate for fiscal 2017 was also impacted by certain one-time effects as a result of the enactmentof U.S. tax reform.
Business Outlook
The following represents our business outlook for the first quarter of fiscal 2019.
Income Statement Item

Estimate

Revenues$183 million to $193 million

Gross margin

60.0%

Operating expenses$114.0 million

Effective tax rate

10.0%

Diluted loss per share$(0.11) to $(0.01)
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Liquidity and Capital Resources
Our principal sources of liquidity as of December 29, 2018 consisted of $613.8 million in cash, cash equivalents and short-term investments, of whichapproximately $487.0 million was held by our U.S. entities. The remaining balance was held by our foreign subsidiaries. Our cash equivalents and short-term
investments consisted of government debt securities, which include agency bonds, municipal bonds, U.S. government securities and variable-rate demand notes;
corporate debt securities, which include asset-backed securities, corporate bonds and commercial paper; and money market funds. Our long-term investments
consisted of auction-rate securities.
Operating Activities
Net cash provided by operating activities was $173.5 million during fiscal 2018, compared to net cash provided of $189.5 million during fiscal 2017.
Operating cash flows during fiscal 2018 reflect our net income of $83.6 million, adjustments of $114.7 million for depreciation, amortization, stock-based
compensation and deferred income taxes, and a net cash outflow of $24.8 million due to changes in our operating assets and liabilities.
Net cash provided by operating activities was $189.5 million during fiscal 2017, compared to net cash provided of $128.9 million during fiscal 2016.
Operating cash flows during fiscal 2017 reflect our net income of $47.1 million, adjustments of $70.4 million for depreciation, amortization, stock-based
compensation and deferred income taxes, and a net cash inflow of $72.0 million due to changes in our operating assets and liabilities.
Accounts receivable increased to $73.2 million at December 29, 2018 from $71.4 million at December 30, 2017. The increase in accounts receivable resulted
primarily from normal variations in the timing of collections and billings. Our average DSO was 31 days at December 29, 2018 and 32 days at December 30, 2017.
Inventory increased to $75.0 million at December 29, 2018 from $73.1 million at December 30, 2017. A portion of the increase was due to inventory acquired
from the Z-Wave business acquisition. Our inventory level is primarily impacted by our need to make purchase commitments to support forecasted demand andvariations between forecasted and actual demand. Our DOI was 79 days at December 29, 2018 and 81 days at December 30, 2017.
Investing Activities
Net cash used in investing activities was $197.0 million during fiscal 2018, compared to net cash used of $374.3 million during fiscal 2017. The decrease in
cash outflows was principally due to an increase of $420.1 million in net sales and maturities of marketable securities, offset by an increase of $224.6 million in net
payments for the acquisition of businesses. See Note 8, Acquisitions , to the Consolidated Financial Statements for additional information.
Net cash used in investing activities was $374.3 million during fiscal 2017, compared to net cash used of $49.6 million during fiscal 2016. The increase in
cash outflows was principally due to an increase of $318.6 million in net purchases of marketable securities and an increase of $8.6 million in net payments for theacquisition of businesses.
We anticipate capital expenditures of approximately $22 to $24 million for fiscal 2019. Additionally, as part of our growth strategy, we expect to evaluate
opportunities to invest in or acquire other businesses, intellectual property or technologies that would complement or expand our current offerings, expand thebreadth of our markets or enhance our technical capabilities.
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Financing Activities
Net cash used in financing activities was $48.8 million during fiscal 2018, compared to net cash provided of $313.0 million during fiscal 2017. The decreasein cash inflows was principally due to $389.5 million in net proceeds from the issuance of long-term debt during fiscal 2017 and an increase of $39.3 million for
repurchases of our common stock during fiscal 2018, offset by a decrease of $72.5 million in payments on debt. In October 2018, the Board of Directors increased
the share repurchase amount for the October 2017 program from $100 million to $200 million and extended the termination date from December 2018 to
December 2019.
Net cash provided by financing activities was $313.0 million during fiscal 2017, compared to net cash used of $52.3 million during fiscal 2016. The increasein cash inflows was principally due to $389.5 million in net proceeds from the issuance of long-term debt and a decrease of $40.5 million for repurchases of ourcommon stock, offset by an increase of $67.5 million in payments on debt.
Our debt facilities include $400 million principal amount convertible senior notes (the "Notes") and a $300 million revolving credit facility. On March 6,
2017, we completed a private offering of the Notes. The Notes bear interest semi-annually at a rate of 1.375% per year and will mature on March 1, 2022, unlessrepurchased, redeemed or converted at an earlier date. In connection with our offering of the Notes, we entered into an amendment to our credit agreement andpaid off the then remaining balance of $72.5 million. We have an option to increase the size of the borrowing capacity of the revolving credit facility by up to an
aggregate of $200 million in additional commitments, subject to certain conditions. See Note 10, Debt , to the Consolidated Financial Statements for additional
information.
Our future capital requirements will depend on many factors, including the rate of sales growth, market acceptance of our products, the timing and extent ofresearch and development projects, potential acquisitions of companies or technologies and the expansion of our sales and marketing activities. We believe ourexisting cash, cash equivalents, investments and credit under our Credit Facility are sufficient to meet our capital requirements through at least the next 12 months,
although we could be required, or could elect, to seek additional funding prior to that time. We may enter into acquisitions or strategic arrangements in the future
which also could require us to seek additional equity or debt financing.
Contractual Obligations
The following table summarizes our contractual obligations as of December 29, 2018 (in thousands):
Total

Long-term debt obligations (1)Interest on long-term debt obligations (2)Operating lease obligations (3)Purchase obligations (4)Other long-term obligations (5)
(1)

2019

Payments due by period
2020
2021
2022

2023

Thereafter$ 400,000 $— $— $— $ 400,000 $— $$ 20,427 $ 6,250 $ 5,927 $ 5,500 $
2,750 $
— $$ 24,221 $ 5,287 $ 4,746 $ 4,051 $3,485 $ 2,810 $$ 49,326 $ 49,256 $
70 $
— $
— $
— $
$ 26,755 $— $ 4,679 $— $2,884 $ 4,789 $

—
—
3,842
—
14,403Long-term debt obligations represent the principal portion of our convertible senior notes (the "Notes"). The Notes mature on March 1,
2022, unless repurchased, redeemed or converted at an earlier date.
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Table of Contents(2)Interest on our long-term debt obligations primarily represents contractual interest on the Notes, which bear interest semi-annually at a rateof 1.375% per year. Interest excludes non-cash amortization of the debt discount and debt issuance costs.

(3)

Operating lease obligations include amounts for leased facilities.

(4)

Purchase obligations include contractual arrangements in the form of purchase orders with suppliers where there is a fixed non-cancelable
payment schedule or minimum payments due with a reduced delivery schedule.

(5)

Other long-term obligations primarily represent non-current income taxes and software license obligations.
We are unable to make a reasonably reliable estimate as to when or if cash settlement with taxing authorities will occur for our
unrecognized tax benefits. Therefore, our liability of $2.1 million for unrecognized tax benefits is not included in the table above. See
Note 17, Income Taxes, to the Consolidated Financial Statements for additional information.

Off-Balance Sheet Arrangements
As of December 29, 2018, we had no significant off-balance sheet arrangements.
Critical Accounting Policies and Estimates
The preparation of financial statements and accompanying notes in conformity with U.S. generally accepted accounting principles requires that we makeestimates and assumptions that affect the amounts reported. Changes in facts and circumstances could have a significant impact on the resulting estimated amounts
included in the financial statements. We believe the following critical accounting policies affect our more complex judgments and estimates.
Inventory valuation —We assess the recoverability of inventories through the application of a set of methods, assumptions and estimates. In determining net
realizable value, we write down inventory that may be slow moving or have some form of obsolescence, including inventory that has aged more than 12 months.
We also adjust the valuation of inventory when its manufacturing cost exceeds the estimated selling price less costs of completion, disposal and transportation. We
assess the potential for any unusual customer returns based on known quality or business issues and write-off inventory losses for scrap or non-saleable material.
Inventory not otherwise identified to be written down is compared to an assessment of our 12-month forecasted demand. The result of this methodology iscompared against the product life cycle and competitive situations in the marketplace to determine the appropriateness of the resulting inventory levels. Demandfor our products may fluctuate significantly over time, and actual demand and market conditions may be more or less favorable than those that we project. In theevent that actual demand is lower or market conditions are worse than originally projected, additional inventory write-downs may be required.
Impairment of goodwill and other long-lived assets —We review long-lived assets which are held and used, including fixed assets and purchased intangible
assets, for impairment whenever changes in circumstances indicate that the carrying amount of the assets may not be recoverable. Such evaluations compare thecarrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset over its expected useful life and are significantly impacted
by estimates of future prices and volumes for our products, capital needs, economic trends and other factors which are inherently difficult to forecast. If the asset isconsidered to be impaired, we record an impairment charge equal to the amount by which the carrying value of the asset exceeds its fair value determined by either
a quoted market price, if any, or a value determined by utilizing a discounted cash flow technique.
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We test our goodwill for impairment annually as of the first day of our fourth fiscal quarter and in interim periods if certain events occur indicating that thecarrying value of goodwill may be impaired. The goodwill impairment test is a two-step process. The first step of the impairment analysis compares our fair value
to our net book value. In determining fair value, the accounting guidance allows for the use of several valuation methodologies, although it states quoted market
prices are the best evidence of fair value. If the fair value is less than the net book value, the second step of the analysis compares the implied fair value of ourgoodwill to its carrying amount. If the carrying amount of goodwill exceeds its implied fair value, we recognize an impairment loss equal to that excess amount.
Acquired intangible assets —When we acquire a business, a portion of the purchase price is typically allocated to identifiable intangible assets, such as
acquired technology and customer relationships. Fair value of these assets is determined primarily using the income approach, which requires us to project future
cash flows and apply an appropriate discount rate. We amortize intangible assets with finite lives over their expected useful lives. Our estimates are based uponassumptions believed to be reasonable but which are inherently uncertain and unpredictable. Assumptions may be incomplete or inaccurate, and unanticipated
events and circumstances may occur. Incorrect estimates could result in future impairment charges, and those charges could be material to our results of operations.
Revenue recognition —We recognize revenue when control of the promised goods or services is transferred to customers, in an amount that reflects theconsideration we expect to be entitled to in exchange for those goods or services. In order to achieve this core principle, we apply a five-step process. As part ofthis process, we analyze the performance obligations in a customer contract and estimate the consideration we expect to receive. The evaluation of performanceobligations requires that we identify the promised goods and services in the contract. For contracts that contain more than one promised good and service, we thenmust determine whether the promises are capable of being distinct and if they are separately identifiable from other promises in the contract. Additionally, for oursales to distributors, we must estimate the impact that price adjustments and rights of return will have on consideration. We make these estimates based on
available information, including recent sales activity and pricing data. If our evaluation of performance obligations is incorrect, we may recognize revenue sooner
or later than is appropriate. If our estimates of consideration are inaccurate, we may recognize too much or too little revenue in a period.
Stock-based compensation —We recognize the fair-value of stock-based compensation transactions in the Consolidated Statements of Income. The fair valueof our full-value stock awards (with the exception of market-based performance awards) equals the fair market value of our stock on the date of grant. The fairvalue of our market-based performance awards is estimated at the date of grant using a Monte-Carlo simulation. The fair value of our stock option and employee
stock purchase plan grants is estimated at the date of grant using the Black-Scholes option pricing model. In addition, we are required to estimate the expected
forfeiture rate of our stock grants and only recognize the expense for those shares expected to vest. If our actual experience differs significantly from theassumptions used to compute our stock-based compensation cost, or if different assumptions had been used, we may have recorded too much or too little stockbased compensation cost. See Note 14, Stock-Based Compensation , to the Consolidated Financial Statements for additional information.
Income taxes —We are required to calculate income taxes in each of the jurisdictions in which we operate. This process involves calculating the actual current
tax liability together with assessing temporary differences in recognition of income (loss) for tax and accounting purposes. These differences result in deferred tax
assets and liabilities, which are included in our Consolidated Balance Sheet. We record a valuation allowance when it is more likely than not that some portion or
all of the deferred tax assets will not be realized. In assessing the need for a valuation allowance, we are required to estimate the amount of expected future taxable
income. Judgment is inherent in this process and differences between the estimated and actual taxable income could result in a material impact on our Consolidated
Financial Statements.
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We recognize liabilities for uncertain tax positions based on a two-step process. The first step requires us to determine whether the weight of available
evidence indicates that the tax position has met the threshold for recognition. Therefore, we must evaluate whether it is more likely than not that the position will
be sustained on audit, including resolution of any related appeals or litigation processes. The second step requires us to measure the tax benefit of the tax position
taken, or expected to be taken, in an income tax return as the largest amount that is more than 50% likely of being realized upon ultimate settlement. Thismeasurement step is inherently complex and requires subjective estimations of such amounts to determine the probability of various possible outcomes. We reevaluate the uncertain tax positions each quarter based on factors including, but not limited to, changes in facts or circumstances, changes in tax law, expirations ofstatutes of limitation, effectively settled issues under audit, and new audit activity. Such a change in recognition or measurement would result in the recognition ofa tax benefit or an additional charge to the tax provision in the period.
Although we believe the measurement of our liabilities for uncertain tax positions is reasonable, no assurance can be given that the final outcome of thesematters will not be different than what is reflected in the historical income tax provisions and accruals. If additional taxes are assessed as a result of an audit or
litigation, they could have a material effect on our income tax provision and net income in the period or periods for which that determination is made. We operate
within multiple taxing jurisdictions and are subject to audit in these jurisdictions. These audits can involve complex issues which may require an extended periodof time to resolve and could result in additional assessments of income tax. We believe adequate provisions for income taxes have been made for all periods.
Recent Accounting Pronouncements
Recent accounting pronouncements which we believe may materially impact the judgments and uncertainties in the application of our accounting policies aredescribed below. See Note 2, Significant Accounting Policies , to the Consolidated Financial Statements for additional information.
In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-02, Leases , which was
subsequently amended in 2018 by ASU 2018-10, ASU 2018-11 and ASU 2018-20 (collectively, Topic 842). The core principle of Topic 842 is that a lessee should
recognize the assets and liabilities that arise from leases. For operating leases, a lessee is required to recognize a right-of-use asset and a lease liability, initiallymeasured at the present value of the lease payments, in the statement of financial position. Topic 842 is effective for fiscal years beginning after December 15,
2018, including interim periods within those fiscal years. We will elect an optional transition method to account for the impact of the adoption with a cumulativeeffect adjustment in the period of adoption and will not restate prior periods. We expect to elect certain practical expedients permitted under the transition
guidance. We are substantially complete with our evaluation of the effect that the adoption of this ASU will have on our financial statements. We believe that mostof our operating lease commitments will be subject to the new standard. In connection with the adoption of ASC 842, we expect to recognize additional right-ofuse assets and operating lease liabilities of $20.8 million on December 30, 2018.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Interest Income
Our investment portfolio includes cash, cash equivalents, short-term investments and long-term investments. Our main investment objectives are thepreservation of investment capital and the maximization of after-tax returns on our investment portfolio. Our interest income is sensitive to changes in the generallevel of U.S. interest rates. A 100 basis point decline in yield on our investment portfolio holdings as of December 29, 2018 and December 30, 2017 would
decrease our future annual interest income by approximately $5.6 million and $7.1 million, respectively. We believe that our45Table of Contents
investment policy, which defines the duration, concentration, and minimum credit quality of the allowable investments, meets our investment objectives.
Interest Expense
We are exposed to interest rate fluctuations in the normal course of our business, including through our Credit Facility. The interest rate on the Credit Facility
consists of a variable-rate of interest and an applicable margin. While we have drawn from the Credit Facility in the past, we have no borrowings as ofDecember 29, 2018. If we borrow from the Credit Facility in the future, we will again be exposed to interest rate fluctuations.
Foreign currency exchange rate risk
We are exposed to foreign currency exchange rate risk primarily through assets, liabilities and operating expenses of our subsidiaries denominated incurrencies other than the U.S. dollar. Our foreign subsidiaries are considered to be extensions of the U.S. parent. The functional currency of the foreign subsidiaries
is the U.S. dollar. Accordingly, gains and losses resulting from remeasuring transactions denominated in currencies other than U.S. dollars are recorded in theConsolidated Statements of Income. We use foreign currency forward contracts to manage exposure to foreign exchange risk. Gains and losses on foreign currency
forward contracts are recognized in earnings in the same period during which the hedged transaction is recognized.
Investments in Auction-rate Securities
As of December 29, 2018, we held $6.0 million par value auction-rate securities, all of which have experienced failed auctions because sell orders exceeded
buy orders. We are unable to predict if these funds will become available before their maturity dates. Additionally, if we determine that an other-than-temporary
decline in the fair value of any of our available-for-sale auction-rate securities has occurred, we may be required to adjust the carrying value of the investments
through an impairment charge.
Item 8.

Financial Statements and Supplementary Data

The Financial Statements and supplementary data required by this item are included in Part IV, Item 15 of this Form 10-K and are presented beginning on
page F-1.
Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.
Item 9A. Controls and Procedures
We have performed an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer (CEO) and
Chief Financial Officer (CFO), of the effectiveness of our disclosure controls and procedures, as defined in Rule 13a-15(e) under the Securities Exchange Act of1934 (the Exchange Act). Based on that evaluation, our management, including our CEO and CFO, concluded that our disclosure controls and procedures wereeffective as of December 29, 2018 to provide reasonable assurance that information required to be disclosed by us in the reports filed or submitted by us under the
Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. Such disclosure controls andprocedures include controls and procedures designed to ensure that information required to be disclosed is accumulated and communicated to our management,
including our CEO and CFO, to allow timely decisions regarding required disclosures. There was no change in our internal controls
46

Table of Contents
during the fiscal quarter ended December 29, 2018 that materially affected, or is reasonably likely to materially affect, our internal controls over financial
reporting.
Management's Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control system was designed
to provide reasonable assurance to our management and Board of Directors regarding the preparation and fair presentation of published financial statements.
Our management assessed the effectiveness of our internal control over financial reporting as of December 29, 2018. In making this assessment, it used thecriteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework (2013
framework). Based on our assessment we concluded that, as of December 29, 2018, our internal control over financial reporting is effective based on those criteria.
Our independent registered public accounting firm, Ernst & Young LLP, issued an attestation report on our internal control over financial reporting. This
report appears on page F-1.
Item 9B.

Other Information

None.
47

Table of Contents
Part III
Certain information required by Part III is omitted from this report because we intend to file a definitive Proxy Statement pursuant to Regulation 14A (the"Proxy Statement") no later than 120 days after the end of the fiscal year covered by this report, and certain information to be included therein is incorporated
herein by reference.
Item 10.

Directors, Executive Officers and Corporate Governance

The information required by this Item is incorporated by reference to the Proxy Statement under the sections captioned "Proposal One: Election of Directors,""Executive Compensation," "Section 16(a) Beneficial Ownership Reporting Compliance" and "Code of Ethics."
Item 11.

Executive Compensation

The information under the caption "Executive Compensation" and "Proposal One: Election of Directors" appearing in the Proxy Statement, is incorporated
herein by reference.
Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information under the caption "Ownership of Securities" and "Equity Compensation Plan Information" appearing in the Proxy Statement is incorporated
herein by reference.
Item 13.

Certain Relationships and Related Transactions, and Director Independence

The information under the caption "Certain Relationships and Related Transactions, and Director Independence" appearing in the Proxy Statement isincorporated herein by reference.
Item 14.

Principal Accounting Fees and Services

The information under the caption "Proposal Two: Ratification of Appointment of Independent Registered Public Accounting Firm" appearing in the Proxy
Statement is incorporated herein by reference.
48

Table of Contents
Part IV
Item 15.
(a)Exhibits and Financial Statement Schedules

1. Financial Statements
Index
Page

2.

Report of independent registered public accounting firm

F-1

Report of independent registered public accounting firm

F-2

Consolidated Balance Sheets at December 29, 2018 and December 30, 2017

F-3

Consolidated Statements of Income for the fiscal years ended December 29, 2018, December 30, 2017 and December 31,
2016

F-4

Consolidated Statements of Comprehensive Income for the fiscal years ended December 29, 2018, December 30, 2017 andDecember 31, 2016

F-5

Consolidated Statements of Changes in Stockholders' Equity for the fiscal years ended December 29, 2018, December 30,
2017 and December 31, 2016

F-6

Consolidated Statements of Cash Flows for the fiscal years ended December 29, 2018, December 30, 2017 andDecember 31, 2016

F-7

Notes to Consolidated Financial Statements

F-8

Schedules
Schedule II—Valuation and Qualifying Accounts

All other schedules have been omitted since the information required by the schedule is not applicable, or is not present in amounts sufficient torequire submission of the schedule, or because the information required is included in the Consolidated Financial Statements and notes thereto.
3.

Exhibits

The exhibits listed on the accompanying index to exhibits immediately following the Consolidated Financial Statements are filed as part of, or hereby
incorporated by reference into, this Form 10-K.
49

Table of Contents(b)Exhibits
Exhibit
Number2.1*

Agreement and Plan of Merger, dated December 7, 2017, by and among Silicon Laboratories Inc., Seguin Merger
Subsidiary, Inc. and Sigma Designs, Inc. (filed as Exhibit 2.1 to the Form 8-K filed on December 8, 2017).

3.1*

Form of Fourth Amended and Restated Certificate of Incorporation of Silicon Laboratories Inc. (filed as Exhibit 3.1
to the Registration Statement on Form S-1 (Securities and Exchange Commission File No. 333-94853) (the "IPO
Registration Statement")).

3.2*

Fourth Amended and Restated Bylaws of Silicon Laboratories Inc. (filed as Exhibit 3.2 to the Form 8-K filed on
January 27, 2017).

4.1*

Specimen certificate for shares of common stock (filed as Exhibit 4.1 to the IPO Registration Statement).

4.2*

Indenture between Silicon Laboratories Inc. and Wilmington Trust, National Association, as trustee, dated March 6,2017 (filed as Exhibit 4.1 to the Form 8-K filed on March 6, 2017).

4.3*

Form of 1.375% Convertible Senior Note due 2022 (filed as Exhibit 4.2 to the Form 8-K filed on March 6, 2017).

10.1*+ Form of Indemnification Agreement between Silicon Laboratories Inc. and each of its directors and executive
officers (filed as Exhibit 10.1 to the IPO Registration Statement).
10.2*

Credit Agreement, dated July 31, 2012, by and among Silicon Laboratories Inc., the subsidiaries of the borrower
identified therein, Bank of America, N.A., Wells Fargo Bank, National Association, and Regions Bank (filed as
Exhibit 10.1 to the Form 8-K filed August 1, 2012).

10.3*

First Amendment to Credit Agreement, dated July 24, 2015, by and among Silicon Laboratories Inc., thesubsidiaries of the borrower identified therein, Wells Fargo Bank, National Association, Citibank, N.A., Regions
Bank, Bank of America, N.A. and the lenders party thereto (filed as Exhibit 10.1 to the Form 8-K filed on July 29,2015).

10.4*

Second Amendment to Credit Agreement, dated February 27, 2017, by and among Silicon Laboratories Inc., thesubsidiaries of the borrower identified therein, Wells Fargo Bank, National Association and the lenders party
thereto (filed as Exhibit 10.1 to the Form 8-K filed on February 27, 2017).

10.5*

Security and Pledge Agreement, dated July 31, 2012, by and among Silicon Laboratories Inc., with the other parties
identified as "Obligors" (as defined therein) and such other parties that may become Obligors thereunder after thedate thereof, and Bank of America, N.A (filed as Exhibit 10.2 to the Form 8-K filed August 1, 2012).

10.6*+ Silicon Laboratories Inc. 2009 Stock Incentive Plan, as amended and restated on April 20, 2017 (filed as
Exhibit 10.1 to the Form 10-Q filed on July 26, 2017).
10.7*+ Silicon Laboratories Inc. 2009 Employee Stock Purchase Plan, as amended and restated on April 20, 2017 (filed as
Exhibit 10.2 to the Form 10-Q filed on July 26, 2017).
10.8*+ Form of Restricted Stock Units Grant Notice and Global Restricted Stock Units Award Agreement under
Registrant's 2009 Stock Incentive Plan, as amended and restated (filed as Exhibit 10.7 to the Form 10-K filed on
February 1, 2017).
50

Table of Contents
Exhibit
Number

10.9*+ Form of Market Stock Units Grant Notice and Global Market Stock Units Award Agreement under Registrant's
2009 Stock Incentive Plan, as amended and restated (filed as Exhibit 10.8 to the Form 10-K filed on February 1,2017).
10.10*+ Form of Stock Option Grant Notice and Global Stock Option Award Agreement under Registrant's 2009 Stock
Incentive Plan, as amended and restated (filed as Exhibit 10.9 to the Form 10-K filed on February 1, 2017).
10.11*+ Form of Performance Stock Units Grant Notice and Global PSU Award Agreement under Registrant's 2009 Stock
Incentive Plan, as amended and restated (filed as Exhibit 10.10 to the Form 10-K filed on February 1, 2017).
10.12*

Purchase Agreement between Silicon Laboratories Inc. and Goldman, Sachs & Co. and Wells Fargo Securities,
LLC, as representatives of the several initial purchasers named therein, dated February 28, 2017 (filed as
Exhibit 10.1 to the Form 8-K filed on March 6, 2017).

10.13*+ CEO Change in Control Agreement dated October 23, 2018 between Silicon Laboratories Inc. and G. Tyson Tuttle(filed as Exhibit 10.1 to the Form 8-K filed on October 24, 2018).
10.14*+ Silicon Laboratories Inc. Form of Change in Control Agreement (filed as Exhibit 10.2 to the Form 8-K filed on
October 24, 2018).
10.15*+ Silicon Laboratories Inc. 2019 Bonus Plan (filed as Exhibit 10.1 to the Form 8-K filed on January 28, 2019).
21
23.1
24

Item 16.

Subsidiaries of the Registrant.
Consent of Independent Registered Public Accounting Firm.
Power of Attorney (included on signature page to this Form 10-K).

31.1

Certification of the Principal Executive Officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002.

31.2

Certification of the Principal Financial Officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002.

32.1

Certification as required by Section 906 of the Sarbanes-Oxley Act of 2002.

101.INSXBRL Instance Document

101.SCHXBRL Taxonomy Extension Schema Document

101.CALXBRL Taxonomy Extension Calculation Linkbase Document

101.LABXBRL Taxonomy Extension Label Linkbase Document

101.PREXBRL Taxonomy Extension Presentation Linkbase Document

101.DEFXBRL Taxonomy Extension Definition Linkbase Document*

Incorporated herein by reference to the indicated filing.

+

Management contract or compensatory plan or arrangement

Form 10-K Summary

None.
51

Table of Contents
SCHEDULE IISILICON LABORATORIES INC.
VALUATION AND QUALIFYING ACCOUNTS

Valuation Allowance forDeferred Tax Assets

Balance at
Beginning of
PeriodYear ended December 29, 2018Year ended December 30, 2017
Year ended December 31, 2016$$$

Additions
Charged to
Expenses

6,518 $
12,361 $10,264 $52

Additions
Charged to
OtherAccounts(in thousands)

435 $2,110 $
2,715 $

Deductions— $1,732 $
— $Balance at
End of Period(1,978) $(9,685) $(618) $

4,975
6,518
12,361

Table of Contents
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalfby the undersigned, thereunto duly authorized, in Austin, Texas, on January 30, 2019.
SILICON LABORATORIES INC.
By:/s/ G. TYSON TUTTLE
G. Tyson Tuttle
President and Chief Executive Officer

POWER OF ATTORNEYKNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints G. Tyson Tuttle and John C.
Hollister and each of them, acting individually, as his or her attorney-in-fact, each with full power of substitution and resubstitution, for him or her and in his or her
name, place and stead, in any and all capacities, to sign any and all amendments to this annual report on Form 10-K and other documents in connection herewith
and therewith, and to file the same, with all exhibits thereto, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, andeach of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection herewith and therewith andabout the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact andagents, or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant
and in the capacities and on the dates indicated:Name/s/ NAVDEEP S. SOOCH

Title

Date

Chairman of the Board

January 30, 2019

President, Chief Executive Officer and Director(Principal Executive Officer)

January 30, 2019

Senior Vice President and Chief Financial Officer(Principal Financial Officer and Principal
Accounting Officer)

January 30, 2019

Director

January 30, 2019

Navdeep S. Sooch/s/ G. TYSON TUTTLE
G. Tyson Tuttle/s/ JOHN C. HOLLISTERJohn C. Hollister/s/ WILLIAM G. BOCK
William G. Bock53

Table of ContentsName/s/ JACK R. LAZAR

Title

Date

Director

January 30, 2019

Director

January 30, 2019

Director

January 30, 2019

Director

January 30, 2019

Director

January 30, 2019

Director

January 30, 2019

Jack R. Lazar/s/ GREGG LOWE
Gregg Lowe/s/ NINA RICHARDSON
Nina Richardson/s/ SUMIT SADANA
Sumit Sadana/s/ WILLIAM P. WOOD
William P. Wood/s/ CHRISTY WYATT
Christy Wyatt
54

Table of Contents
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders of Silicon Laboratories Inc.
Opinion on Internal Control over Financial Reporting
We have audited Silicon Laboratories Inc.'s internal control over financial reporting as of December 29, 2018, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our
opinion, Silicon Laboratories Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 29, 2018,
based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidatedbalance sheets of Silicon Laboratories Inc. as of December 29, 2018 and December 30, 2017, and the related consolidated statements of income, comprehensive
income, stockholders' equity and cash flows for each of the three years in the period ended December 29, 2018, and the related notes and financial statement
schedule listed in the Index at Item 15(a) and our report dated January 30, 2019 expressed an unqualified opinion thereon.
Basis for Opinion
The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness ofinternal control over financial reporting included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is toexpress an opinion on the Company's internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB andare required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing andevaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary
in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting andthe preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control overfinancial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect thetransactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation offinancial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only inaccordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection ofunauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance withthe policies or procedures may deteriorate.
/s/ Ernst & Young LLPAustin, Texas
January 30, 2019
F-1

Table of Contents
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders of Silicon Laboratories Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Silicon Laboratories Inc. (the Company) as of December 29, 2018 and December 30, 2017,
the related consolidated statements of income, comprehensive income, stockholders' equity and cash flows for each of the three years in the period ended
December 29, 2018, and the related notes and financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the "consolidated financial
statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 29,
2018 and December 30, 2017, and the results of its operations and its cash flows for each of the three years in the period ended December 29, 2018, in conformity
with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's
internal control over financial reporting as of December 29, 2018, based on criteria established in Internal Control-Integrated Framework issued by the Committeeof Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated January 30, 2019 expressed an unqualified opinion thereon.
Adoption of ASU No. 2014-09
As discussed in Note 2 to the consolidated financial statements, the Company changed its method of accounting for revenue from sales to distributors in 2018
due to the adoption of ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) .
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial
statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company inaccordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures toassess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Suchprocedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating theaccounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believethat our audits provide a reasonable basis for our opinion.
/s/ Ernst & Young LLP
We have served as the Company's auditor since 1996.
Austin, Texas
January 30, 2019
F-2

Table of Contents
Silicon Laboratories Inc.
Consolidated Balance Sheets(In thousands, except per share data)
December 29,
2018

AssetsCurrent assets:
Cash and cash equivalents
Short-term investments
Accounts receivable, net
Inventories
Prepaid expenses and other current assets
Total current assets
Property and equipment, net
Goodwill
Other intangible assets, net
Other assets, net
Total assets
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable
Deferred revenue and returns liability
Deferred income on shipments to distributors
Other current liabilities
Total current liabilities
Convertible debt
Other non-current liabilities
Total liabilities
Commitments and contingencies
Stockholders' equity:
Preferred stock—$0.0001 par value; 10,000 shares authorized; no shares issued
Common stock—$0.0001 par value; 250,000 shares authorized; 43,088 and 42,707 sharesissued and outstanding at December 29, 2018 and December 30, 2017, respectively
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss
Total stockholders' equity
Total liabilities and stockholders' equity$

197,043 $
269,366
416,779
494,657
73,19471,367
74,972
73,13264,65039,120826,638
947,642
139,049
127,682
397,344288,227
170,832
83,14490,491
88,387$ 1,624,354 $ 1,535,082$

41,171 $22,494—
81,180144,845354,771
57,448557,064—

38,851—
50,11573,359162,325
341,879
77,862582,066—

4
4
107,517
102,862
961,343
851,307(1,574)(1,157)
1,067,290
953,016$ 1,624,354 $ 1,535,082

The accompanying notes are an integral part of these Consolidated Financial Statements.
F-3

December 30,
2017Table of Contents
Silicon Laboratories Inc.
Consolidated Statements of Income(In thousands, except per share data)
December 29,
2018

Revenues
Cost of revenues
Gross margin
Operating expenses:
Research and development
Selling, general and administrative
Operating expenses
Operating income
Other income (expense):
Interest income and other, net
Interest expense
Income before income taxes
Provision (benefit) for income taxes
Net income
Earnings per share:
Basic
Diluted$Weighted-average common shares outstanding:
Basic
DilutedYear Ended
December 30,
2017868,267 $
346,868
521,399

768,867 $
314,676
454,191

697,626
276,122421,504

238,347
197,844436,191
85,208

209,491
159,726
369,217
84,974

199,744
155,483
355,227
66,277$

6,647(19,694)
72,161(11,430)
83,591 $

6,057(14,128)
76,90329,81147,092 $806(2,587)64,496
3,002
61,494$$

1.94 $
1.90 $

1.11 $
1.09 $

1.47
1.45

43,15944,04442,44643,332

The accompanying notes are an integral part of these Consolidated Financial Statements.
F-4

December 31,
2016

41,71342,376

Table of Contents
Silicon Laboratories Inc.
Consolidated Statements of Comprehensive Income(In thousands)
December 29,
2018

Net income$

Year Ended
December 30,
2017

December 31,
2016

83,591 $47,092 $61,494

Other comprehensive income (loss), before tax:
Net changes to available-for-sale securities:
Unrealized gains (losses) arising during the period
Reclassification for losses included in net income

376
49

(729)
—

(179)
—

Net changes to cash flow hedges:
Unrealized gains (losses) arising during the period
Reclassification for (gains) losses included in net income
Other comprehensive income (loss), before tax

(953)
316
(212)

—
(1,808)(2,537)

1,466
249
1,536

Provision (benefit) for income taxes

(45)

(888)

537

Other comprehensive income (loss)(167)(1,649)999

83,424 $45,443 $62,493Comprehensive income$

The accompanying notes are an integral part of these Consolidated Financial Statements.
F-5

Table of Contents
Silicon Laboratories Inc.
Consolidated Statements of Changes in Stockholders' Equity(In thousands)
Common Stock
Additional
NumberPar
Paid-Inof Shares
Value
CapitalBalance as of January 2, 2016
Net income
Other comprehensive income (loss)
Stock issuances, net of shares withheld fortaxes
Income tax benefit (shortfall) from stockbased awards
Repurchases of common stock
Stock-based compensation
Balance as of December 31, 2016
Cumulative effect of adoption of accounting
standard
Net income
Other comprehensive income (loss)
Stock issuances, net of shares withheld fortaxes
Stock-based compensation
Convertible debt issuance
Balance as of December 30, 2017
Cumulative effect of adoption of accounting
standard
Net income
Other comprehensive income (loss)
Stock issuances, net of shares withheld fortaxes
Repurchases of common stock
Stock-based compensation
Balance as of December 29, 2018

41,727 $4 $Retained
Earnings

Accumulated
Other
Comprehensive
Income (Loss)

13,868 $ 747,749 $Total
Stockholders'Equity(507) $

761,114

—
—

—
—

—
—

61,494——
999

61,494
999

1,055

—

6,346

—

—

6,346

—
(893)
—
41,889———4(2,061)(33,299)
39,60924,463—(7,244)—801,999———492(2,061)(40,543)
39,609826,958

—
—
—

—
—
—

—
—
—

2,216
47,092———(1,649)2,216
47,092(1,649)818——
42,707———
4(3,938)44,80937,528102,862———
851,307———(1,157)(3,938)44,80937,528953,016

—
—
—

—
—
—

—
—
—

26,44583,591
—

(250)
—
(167)

26,19583,591
(167)

815
(434)
—
43,088 $—(6,180)——(39,276)——
50,111—
4 $ 107,517 $ 961,343 $—(6,180)—(39,276)—
50,111(1,574) $ 1,067,290

The accompanying notes are an integral part of these Consolidated Financial Statements.
F-6

Table of Contents
Silicon Laboratories Inc.
Consolidated Statements of Cash Flows(In thousands)
December 29,
2018

Operating Activities
Net income
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation of property and equipment
Amortization of other intangible assets and other assets
Amortization of debt discount and debt issuance costs
Stock-based compensation expense
Income tax shortfall from stock-based awards
Deferred income taxes
Changes in operating assets and liabilities:
Accounts receivable
Inventories
Prepaid expenses and other assets
Accounts payable
Other current liabilities and income taxes
Deferred income, deferred revenue and returns liability
Other non-current liabilities
Net cash provided by operating activities

December 31,
2016

83,591 $47,092 $61,494

15,912
44,102
12,89250,077—(8,210)14,76627,246
10,14644,752—(26,452)

13,216
27,715—39,628(1,671)(4,087)

3,931
7,660
(4,960)
5,952(21,828)(6,202)(9,375)173,5423,234(13,416)
25,266(468)
61,924
4,453(9,022)
189,52146(6,093)(3,568)
263
2,879
9,713
(10,625)
128,910Investing Activities
Purchases of available-for-sale investments
Sales and maturities of available-for-sale investments
Purchases of property and equipment
Purchases of other assets
Acquisitions of businesses, net of cash acquired
Net cash used in investing activities(395,904)
474,129(24,462)(11,063)(239,729)(197,029)(636,363)
294,452(12,252)(4,960)(15,168)(374,291)(185,231)
161,921(10,927)(8,801)(6,546)(49,584)

Financing Activities
Proceeds from issuance of long-term debt, net
Payments on debt
Repurchases of common stock
Payment of taxes withheld for vested stock awards
Proceeds from the issuance of common stock
Payment of acquisition-related contingent consideration
Net cash provided by (used in) financing activities——(39,276)(19,483)
13,303(3,380)(48,836)

389,468(72,500)—(15,753)
11,815—313,030—(5,000)(40,543)(10,561)
13,299(9,500)(52,305)$(72,323)
269,366
197,043 $

128,260
141,106
269,366 $27,021
114,085
141,106$$

6,227 $
20,599 $3,859 $
8,929 $

2,222
11,185

$

— $

— $

4,181

Increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Supplemental Disclosure of Cash Flow Information:
Interest paid
Income taxes paid
Supplemental Disclosure of Non-Cash Activity:
Stock issued in business combination$

Year Ended
December 30,
2017

The accompanying notes are an integral part of these Consolidated Financial Statements.
F-7

Table of Contents
Silicon Laboratories Inc.
Notes to Consolidated Financial Statements
December 29, 2018
1. Description of Business
Silicon Laboratories Inc. (the "Company"), a Delaware corporation, is a leading provider of silicon, software and solutions for a smarter, more connectedworld. Our award-winning technologies are shaping the future of the Internet of Things (IoT), Internet infrastructure, industrial automation, consumer andautomotive markets. Within the semiconductor industry, the Company is known as a "fabless" company meaning that the integrated circuits (ICs) incorporated inits products are manufactured by third-party foundry semiconductor companies.
2. Significant Accounting Policies
Basis of Presentation and Principles of Consolidation
The Company prepares financial statements on a 52- or 53-week fiscal year that ends on the Saturday closest to December 31. Fiscal 2018, 2017 and 2016 had
52 weeks and ended on December 29, 2018, December 30, 2017 and December 31, 2016, respectively. The accompanying Consolidated Financial Statements
include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated inconsolidation.
Foreign Currency Transactions
The Company's foreign subsidiaries are considered to be extensions of the U.S. Company. The functional currency of the foreign subsidiaries is the U.S.
dollar. Accordingly, gains and losses resulting from remeasuring transactions denominated in currencies other than U.S. dollars are included in interest income andother, net in the Consolidated Statements of Income.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to makeestimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Among the significant estimates affecting thefinancial statements are those related to inventories, goodwill, acquired intangible assets, other long-lived assets, revenue recognition, stock-based compensationand income taxes. Actual results could differ from those estimates, and such differences could be material to the financial statements.
Adoption of New Revenue Accounting Standard
The Company adopted Accounting Standards Codification (ASC) Topic 606, Revenue from Contracts with Customers , on December 31, 2017, the first dayof its fiscal year ended December 29, 2018. The Company elected the modified retrospective method of adoption which only applies to those contracts which were
not completed as of December 31, 2017. Prior periods have not been adjusted. In connection with its adoption of ASC 606, the Company recorded a cumulativeeffect adjustment toF-8

Table of Contents
Silicon Laboratories Inc.
Notes to Consolidated Financial Statements
December 29, 2018 (Continued)
2. Significant Accounting Policies (Continued)
retained earnings of $26.2 million on December 31, 2017. The following reflects the material changes recorded in connection with the cumulative-effectadjustment (in thousands):
Financial Statement Line Item

Increase(Decrease)

Accounts receivable, net
Prepaid expenses and other current assets
Other assets, net
Deferred revenue and returns liability
Deferred income on shipments to distributors
Other current liabilities
Retained earnings

$
230
$
7,579
$ (2,282)$ 27,806$ (50,115)$
1,641$ 26,195

The following presents the amounts by which financial statement line items were affected in the current period due to the adoption of ASC 606 (in thousands):
Increase(Decrease)
Year Ended
December 29,
2018

Financial Statement Line Item*
Consolidated Statements of Income

Revenues
Cost of revenues
Net income
Earnings per share:
Basic
Diluted$$$12,943
4,234
6,610

$
$

0.15
0.15

Consolidated Balance Sheet**

December 29,
2018

Prepaid expenses and other current assets
Goodwill
Other assets, net
Deferred revenue and returns liability
Deferred income on shipments to distributors
Other current liabilities
Retained earnings

$
$
$
$
$
$
$

5,953
(2,842)(4,464)
22,494(60,789)
4,282
32,805*

Excludes line items that were not materially affected by the Company's adoption of ASC 606. The adoption had no impact to cash
provided by or used in net operating, investing or financing activities in the Consolidated Statements of Cash Flows.

**

Balance sheet line item amounts include the cumulative-effect adjustment recorded on December 31, 2017.

The primary impact of the Company's adoption of ASC 606 resulted from the acceleration of the timing of revenue recognition on sales to distributors. The
Company previously deferred revenue andF-9

Table of Contents
Silicon Laboratories Inc.
Notes to Consolidated Financial Statements
December 29, 2018 (Continued)
2. Significant Accounting Policies (Continued)
cost of revenue on such sales until the distributors sold the product to the end customers. The Company now recognizes revenue at the time of sale to the
distributor provided all other revenue recognition criteria have been met. The Company records a right of return asset and a returns liability in place of the deferredincome on shipments to distributors previously recorded under ASC 605.
Fair Value of Financial Instruments
The fair values of the Company's financial instruments are recorded using a hierarchical disclosure framework based upon the level of subjectivity of the
inputs used in measuring assets and liabilities. The three levels are described below:
Level 1—Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.
Level 2—Inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3—Inputs are unobservable for the asset or liability and are developed based on the best information available in the circumstances, which might
include the Company's own data.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash deposits, certificates of deposit, money market funds and investments in debt securities with original maturities ofninety days or less when purchased.
Investments
The Company's investments typically have original maturities greater than ninety days as of the date of purchase and are classified as either available-for-saleor trading securities. Investments in available-for-sale securities are reported at fair value, with unrealized gains and losses, net of tax, recorded as a component ofaccumulated other comprehensive loss in the Consolidated Balance Sheet. Investments in trading securities are reported at fair value, with both realized andunrealized gains and losses recorded in interest income and other, net in the Consolidated Statement of Income. Investments in which the Company has the ability
and intent, if necessary, to liquidate in order to support its current operations (including those with contractual maturities greater than one year from the date ofpurchase) are classified as short-term.
The Company reviews its available-for-sale investments as of the end of each reporting period for other-than-temporary declines in fair value based on thespecific identification method. The Company considers various factors in determining whether an impairment is other-than-temporary, including the severity andduration of the impairment, changes in underlying credit ratings, forecasted recovery, its intent to sell or the likelihood that it would be required to sell theinvestment before its anticipated recovery in market value and the probability that the scheduled cash payments will continue to be made. When the Company
concludes that an other-than-temporary impairment has occurred, the Company assesses whether it intends to sell the security or if it is more likely than not that it
will be required to sell the security before recovery. If either of these two conditions is met, the Company recognizes a charge in earnings equal to the entire
difference between the security's amortized cost basis and its fair value. If the Company does not intend to sell a security and it is not more likely than
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Table of Contents
Silicon Laboratories Inc.
Notes to Consolidated Financial Statements
December 29, 2018 (Continued)
2. Significant Accounting Policies (Continued)
not that it will be required to sell the security before recovery, the unrealized loss is separated into an amount representing the credit loss, which is recognized inearnings, and the amount related to all other factors, which is recorded in accumulated other comprehensive loss.
In addition, the Company has made equity investments in non-publicly traded companies. Equity investments in which the Company does not have control,
but has the ability to exercise significant influence over operating and financial policies, are accounted for using the equity method. The Company's proportionate
share of income or loss is recorded in interest income and other, net in the Consolidated Statement of Income. All other non-marketable equity investments arerecorded at cost minus impairment, if any, plus or minus changes resulting from qualifying observable price changes. Prior to fiscal 2018, all other non-marketable
equity investments were accounted for using the cost method. The Company periodically reviews its equity investments for other-than-temporary declines in fairvalue based on the specific identification method and writes down investments to their fair values when it determines that an other-than-temporary decline has
occurred.
Derivative Financial Instruments
The Company uses derivative financial instruments to manage certain exposures to the variability of foreign currency exchange rates and interest rates. The
Company's objective is to offset increases and decreases in expenses resulting from these exposures with gains and losses on the derivative contracts, thereby
reducing volatility of earnings. The Company does not use derivative contracts for speculative or trading purposes. The Company recognizes derivatives, on agross basis, in the Consolidated Balance Sheet at fair value. Cash flows from derivatives are classified according to the nature of the cash receipt or payment in theConsolidated Statement of Cash Flows.
Cash flow hedges used by the Company include foreign currency forward contracts and interest rate swap agreements. Foreign currency forward contracts areused to reduce the earnings impact that exchange rate fluctuations have on operating expenses denominated in currencies other than the U.S. dollar. Interest rate
swap agreements are used to manage exposure to interest rate risks.
The Company also uses foreign currency forward contracts to reduce the earnings impact that exchange rate fluctuations have on non-U.S. dollar balance
sheet exposures. The Company does not apply hedge accounting to these foreign currency forward contracts.
Inventories
Inventories are stated at the lower of cost, determined using the first-in, first-out method, or net realizable value. The Company writes down the carrying valueof inventory to net realizable value for estimated obsolescence or unmarketable inventory based upon assumptions about the age of inventory, future demand andmarket conditions. Inventory impairment charges establish a new cost basis for inventory and charges are not subsequently reversed to income even if
circumstances later suggest that increased carrying amounts are recoverable.
Property and Equipment
Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is computed using the straight-line method over the useful lives of
the assets ranging from three to ten
F-11Table of Contents
Silicon Laboratories Inc.
Notes to Consolidated Financial Statements
December 29, 2018 (Continued)
2. Significant Accounting Policies (Continued)
years. Leasehold improvements are depreciated over the lease term or their useful life, whichever is shorter.
The Company owns the facilities it had previously leased for its headquarters in Austin, Texas. The buildings are located on land which is leased through2099 from a third party. The rents for these ground leases were prepaid for the term of the leases by the previous lessee. The buildings and leasehold interest in
ground leases are being depreciated on a straight-line basis over their estimated useful lives of 40 years and 86 years, respectively.
Business Combinations
The Company records business combinations using the acquisition method of accounting and, accordingly, allocates the fair value of purchase consideration
to the assets acquired and liabilities assumed based on their fair values at the acquisition date. The excess of the fair value of purchase consideration over the fairvalue of the assets acquired and liabilities assumed is recorded as goodwill. The results of operations of the businesses acquired are included in the Company's
consolidated results of operations beginning on the date of the acquisition.
Long-Lived Assets
Purchased intangible assets are stated at cost, net of accumulated amortization, and are amortized using the straight-line method over their estimated useful
lives, ranging from three to twelve years. Fair values are determined primarily using the income approach, in which the Company projects future expected cash
flows and applies an appropriate discount rate.
Long-lived assets "held and used" by the Company are reviewed for impairment whenever events or changes in circumstances indicate that their net bookvalue may not be recoverable. When such factors and circumstances exist, the Company compares the projected undiscounted future cash flows associated with therelated asset or group of assets over their estimated useful lives against their respective carrying amounts. Impairment, if any, is based on the excess of the carrying
amount over the fair value of those assets and is recorded in the period in which the determination was made.
The carrying value of goodwill is reviewed at least annually by the Company for possible impairment. The goodwill impairment test is a two-step process.
The first step of the impairment analysis compares the fair value of the reporting unit to the net book value of the reporting unit. In determining fair value, several
valuation methodologies are allowed, although quoted market prices are the best evidence of fair value. If the results of the first step demonstrate that the net bookvalue is greater than the fair value, the Company must proceed to step two of the analysis. Step two of the analysis compares the implied fair value of goodwill toits carrying amount. If the carrying amount of goodwill exceeds its implied fair value, an impairment loss is recognized equal to that excess. The Company tests
goodwill for impairment annually as of the first day of its fourth fiscal quarter and in interim periods if events occur that would indicate that the carrying value of
goodwill may be impaired.
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Table of Contents
Silicon Laboratories Inc.
Notes to Consolidated Financial Statements
December 29, 2018 (Continued)
2. Significant Accounting Policies (Continued)
Revenue Recognition
Revenue is recognized when control of the promised goods or services is transferred to customers, in an amount that reflects the consideration the Company
expects to be entitled to in exchange for those goods or services.
Performance Obligations
Substantially all of the Company's contracts with customers contain a single performance obligation, the sale of mixed-signal integrated circuit (IC) products.
Such sales represent a single performance obligation because the sale is one type of good (e.g., an IC) or includes multiple goods that are neither capable of being
distinct nor separable from the other promises in the contract (e.g., an IC embedded with software). This performance obligation is satisfied when control of the
product is transferred to the customer, which typically occurs upon delivery. Unsatisfied performance obligations primarily represent contracts for products with
future delivery dates and with an original expected duration of one year or less. As allowed under ASC 606, the Company has opted to not disclose the amount of
unsatisfied performance obligations as these contracts have original expected durations of less than one year.
The Company's products carry a one-year replacement warranty. The replacement warranty promises customers that delivered products are as specified in thecontract (an "assurance-type warranty"). Therefore, the Company accounts for such warranties under ASC 460, Guarantees , and not as a separate performanceobligation.
Transaction Price
The transaction price reflects the Company's expectations about the consideration it will be entitled to receive from the customer and may include fixed orvariable amounts. Fixed consideration primarily includes sales to direct customers and sales to distributors in which both the sale to the distributor and the sale tothe end customer occur within the same reporting period. Variable consideration includes sales in which the amount of consideration that the Company will receiveis unknown as of the end of a reporting period. Such consideration primarily includes sales made to distributors under agreements allowing certain rights of return,referred to as stock rotation, and credits issued to the distributor due to price protection. Stock rotation allows distributors limited levels of returns and is based on
the distributor's prior purchases. Price protection represents price discounts granted to certain distributors and is based on negotiations on sales to end customers.
The Company estimates variable consideration at the most likely amount to which it expects to be entitled. Included in the transaction price estimate areamounts in which it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variableconsideration is subsequently resolved. The estimate is based on information available to the Company, including recent sales activity and pricing data. The
Company applies a constraint to its variable consideration estimate which considers both the likelihood of a return and the amount of a potential price concession.
Variable consideration that does not meet revenue recognition criteria is deferred. The Company records a right of return asset in prepaid expenses and othercurrent assets for the costs of distributor
F-13

Table of Contents
Silicon Laboratories Inc.
Notes to Consolidated Financial Statements
December 29, 2018 (Continued)
2. Significant Accounting Policies (Continued)
inventory not meeting revenue recognition criteria. A corresponding deferred revenue and returns liability amount is recorded for unrecognized revenue associatedwith such costs.
Contract Balances
Accounts receivable represents the Company's unconditional right to receive consideration from its customer. Payments are typically due within 30 days of
invoicing and do not include a significant financing component. To date, there have been no material impairment losses on accounts receivable. There were nomaterial contract assets or contract liabilities recorded on the Consolidated Balance Sheet in any of the periods presented.
Shipping and Handling
Shipping and handling costs are classified as a component of cost of revenues in the Consolidated Statements of Income.
Stock-Based Compensation
The Company has stock-based compensation plans, which are more fully described in Note 14, Stock-Based Compensation . The Company accounts for thoseplans using a fair-value method and recognizes the expense in its Consolidated Statement of Income.
Research and Development
Research and development costs are expensed as incurred. Research and development expense consists primarily of personnel-related expenses, including
stock-based compensation, as well as new product masks, external consulting and services costs, equipment tooling, equipment depreciation, amortization of
intangible assets, and an allocated portion of our occupancy costs. Assets purchased to support the Company's ongoing research and development activities arecapitalized when related to products which have achieved technological feasibility or have an alternative future use, and are amortized over their estimated useful
lives.
Advertising
Advertising costs are expensed as incurred. Advertising expenses were $1.9 million, $1.4 million and $1.6 million in fiscal 2018, 2017 and 2016, respectively.
Income Taxes
The Company accounts for income taxes using the asset and liability method whereby deferred tax asset and liability account balances are determined basedon differences between the financial reporting and the tax bases of assets and liabilities and are measured using the enacted tax laws and related rates that will be ineffect when the differences are expected to reverse. These differences result in deferred tax assets and liabilities, which are included in the Company's Consolidated
Balance Sheet. The Company then assesses the likelihood that the deferred tax assets will be realized. A valuation allowance is established against deferred tax
assets to the extent the Company believes that it is more likely than not that the deferred tax assets will not be realized, taking into consideration the level of
F-14

Table of Contents
Silicon Laboratories Inc.
Notes to Consolidated Financial Statements
December 29, 2018 (Continued)
2. Significant Accounting Policies (Continued)
historical taxable income and projections for future taxable income over the periods in which the temporary differences are deductible.
Uncertain tax positions must meet a more-likely-than-not threshold to be recognized in the financial statements and the tax benefits recognized are measured
based on the largest benefit that has a greater than 50% likelihood of being realized upon final settlement. See Note 17, Income Taxes , for additional information.
Recent Accounting Pronouncements
In February 2018, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2018-02, Income Statement—
Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. This ASU allows areclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. The
Company early adopted this ASU on December 31, 2017. The adoption did not have a material impact on its financial statements.
In August 2017, the FASB issued ASU No. 2017-12 , Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities.
The objectives of this ASU are to improve the financial reporting of hedging relationships to better portray the economic results of an entity's risk management
activities in its financial statements and to make certain targeted improvements to simplify the application of the hedge accounting guidance in current GAAP. ThisASU is effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. The Company early adopted this ASU on
December 31, 2017. The adoption did not have a material impact on its financial statements.
In January 2017, the FASB issued ASU No. 2017-04 , Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. ThisASU eliminates Step 2 from the goodwill impairment test, which previously measured an impairment loss by comparing the implied fair value of goodwill with its
carrying amount. Instead, an entity should recognize an impairment charge for the amount by which the carrying value exceeds the reporting unit's fair value, notto exceed the total amount of goodwill allocated to that reporting unit. This ASU is effective for annual or any interim goodwill impairment tests in fiscal years
beginning after December 15, 2019. The Company is currently evaluating the effect of the adoption of this ASU, but anticipates that the adoption will not have amaterial impact on its financial statements.
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial
Instruments. This ASU requires instruments measured at amortized cost to be presented at the net amount expected to be collected. Entities are also required torecord allowances for available-for-sale debt securities rather than reduce the carrying amount. This ASU is effective for fiscal years beginning after December 15,
2019, including interim periods within those fiscal years. The Company expects that the adoption will not have a material impact on its financial statements.
In February 2016, the FASB issued ASU No. 2016-02, Leases , which was subsequently amended in 2018 by ASU 2018-10, ASU 2018-11 and ASU 2018-20(collectively, Topic 842). The core principle of Topic 842 is that a lessee should recognize the assets and liabilities that arise from leases. For operating
F-15

Table of Contents
Silicon Laboratories Inc.
Notes to Consolidated Financial Statements
December 29, 2018 (Continued)
2. Significant Accounting Policies (Continued)
leases, a lessee is required to recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments, in the statement offinancial position. Topic 842 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company will
elect an optional transition method to account for the impact of the adoption with a cumulative-effect adjustment in the period of adoption and will not restate priorperiods. The Company expects to elect certain practical expedients permitted under the transition guidance. The Company is substantially complete with its
evaluation of the effect that the adoption of this ASU will have on its financial statements. The Company believes that most of its operating lease commitments
will be subject to the new standard. In connection with the adoption of ASC 842, the Company expects to recognize additional right-of-use assets and operatinglease liabilities of $20.8 million on December 30, 2018.
3. Earnings Per Share
The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share data):
December 29,
2018

Net income
Shares used in computing basic earnings per share$

Effect of dilutive securities:
Stock-based awards
Shares used in computing diluted earnings per share
Earnings per share:
Basic
Diluted$$Year Ended
December 30,
2017

December 31,
2016

83,591 $43,15947,092 $42,446

61,494
41,713885
44,044886
43,332663
42,376

1.94 $
1.90 $

1.11 $
1.09 $

1.47
1.45

The Company intends to settle the principal amount of its convertible senior notes in cash and any excess value in shares in the event of a conversion.
Accordingly, shares issuable upon conversion of the principal amount have been excluded from the calculation of diluted earnings per share. If the market value ofthe notes under certain prescribed conditions exceeds the conversion amount, the excess is included in the denominator for the computation of diluted earnings per
share using the treasury stock method. For fiscal 2018, approximately 0.1 million shares were included in the denominator for the calculation of diluted earnings
per share. For fiscal 2017, no such shares were included in the denominator for the calculation of diluted earnings per share. See Note 10, Debt , to theConsolidated Financial Statements for additional information.
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Table of Contents
Silicon Laboratories Inc.
Notes to Consolidated Financial Statements
December 29, 2018 (Continued)
4. Fair Value of Financial Instruments
The following summarizes the valuation of the Company's financial instruments (in thousands). The tables do not include either cash on hand or assets andliabilities that are measured at historical cost or any basis other than fair value.

Description

Assets:Cash equivalents:
Money market funds
Corporate debt securities
Government debt securities
Total cash equivalents

Fair Value Measurements
at December 29, 2018 Using
Quoted Prices inSignificant Other
Active Markets for
Observable
Identical Assets
Inputs(Level 1)(Level 2)

Total

74,990 $—9,338
84,328 $— $18,820—18,820 $— $ 74,990—
18,820—9,338— $ 103,148$

48,141 $—48,141 $99,211 $269,427
368,638 $— $ 147,352—
269,427— $ 416,779

Other assets, net:Auction rate securities
Total

$
$

— $
— $

— $
— $

Total

$

132,469 $387,458 $Short-term investments:
Government debt securities
Corporate debt securities
Total short-term investments$

Significant
Unobservable
Inputs(Level 3)

$

$

F-17

5,759 $
5,759 $

5,759
5,759

5,759 $ 525,686

Table of Contents
Silicon Laboratories Inc.
Notes to Consolidated Financial Statements
December 29, 2018 (Continued)
4. Fair Value of Financial Instruments (Continued)

Description

Assets:Cash equivalents:
Money market funds
Corporate debt securities
Government debt securities
Total cash equivalents

Fair Value Measurements
at December 30, 2017 Using
Quoted Prices inSignificant Other
Active Markets for
Observable
Identical Assets
Inputs(Level 1)(Level 2)

Total

106,047 $—
53,615
159,662 $— $11,231
1,453
12,684 $— $ 106,047—
11,231—55,068— $ 172,346$

94,575 $—94,575 $228,247 $
171,835
400,082 $— $ 322,822—
171,835— $ 494,657

Other assets, net:Auction rate securities
Total

$
$

— $
— $

— $
— $

Total

$

254,237 $412,766 $Short-term investments:
Government debt securities
Corporate debt securities
Total short-term investments$

Significant
Unobservable
Inputs(Level 3)$$

5,681 $
5,681 $

5,681
5,681

5,681 $ 672,684

Valuation methodology
The Company's cash equivalents and short-term investments that are classified as Level 2 are valued using non-binding market consensus prices that arecorroborated with observable market data; quoted market prices for similar instruments in active markets; or pricing models, such as a discounted cash flow model,
with all significant inputs derived from or corroborated with observable market data. Investments classified as Level 3 are valued using a discounted cash flow
model. The assumptions used in preparing the discounted cash flow model include estimates for interest rates, amount of cash flows, expected holding periods ofthe securities and a discount to reflect the Company's inability to liquidate the securities. The Company's derivative instruments are valued using discounted cash
flow models. The assumptions used in preparing the valuation models include foreign exchange rates, forward and spot prices for currencies, and market
observable data of similar instruments.
Available-for-sale investments
The Company's investments are reported at fair value, with unrealized gains and losses, net of tax, recorded as a component of accumulated othercomprehensive loss in the Consolidated Balance Sheet.
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Table of Contents
Silicon Laboratories Inc.
Notes to Consolidated Financial Statements
December 29, 2018 (Continued)
4. Fair Value of Financial Instruments (Continued)
The following summarizes the contractual underlying maturities of the Company's available-for-sale investments at December 29, 2018 (in thousands):
Cost

Due in one year or lessDue after one year through ten years
Due after ten years

Fair Value$ 338,623 $ 337,910
169,058
168,657
19,36019,119$ 527,041 $ 525,686

The available-for-sale investments that were in a continuous unrealized loss position, aggregated by length of time that individual securities have been in acontinuous loss position, were as follows (in thousands):
Less Than 12 Months
Gross
Fair
Unrealized
Value
Losses

As of December 29, 2018

Government debt securities
Corporate debt securities
Auction rate securities

As of December 30, 2017

Government debt securities
Corporate debt securities
Auction rate securities$

13,278 $112,699—$ 125,977 $(10) $ 88,696 $(273)
76,310—5,759(283) $ 170,765 $Less Than 12 Months
Gross
Fair
Unrealized
Value
Losses$ 244,880 $
151,149—$ 396,029 $12 Months or Greater
Gross
Fair
Unrealized
Value
Losses

Fair
Value

Gross
Unrealized
Losses(583) $ 101,974 $(448)
189,009(241)
5,759(1,272) $ 296,742 $12 Months or Greater
Gross
Fair
Unrealized
Value
Losses(931) $ 3,027 $(447)
11,578—
5,681(1,378) $ 20,286 $

Total

(593)
(721)
(241)
(1,555)

Total
Fair
Value

Gross
Unrealized
Losses(15) $ 247,907 $(73)
162,727(319)
5,681(407) $ 416,315 $

(946)
(520)
(319)
(1,785)

The gross unrealized losses as of December 29, 2018 and December 30, 2017 were due primarily to changes in market interest rates and the illiquidity of theCompany's auction-rate securities. The Company's auction-rate securities have been illiquid since 2008 when auctions for the securities failed because sell orders
exceeded buy orders. These securities have a contractual maturity date of 2046. The Company is unable to predict if these funds will become available before theirmaturity date.
The Company considers the declines in market value of its marketable securities investment portfolio to be temporary in nature. When evaluating an
investment for other-than-temporary impairment, the Company reviews factors such as the severity and duration of the impairment, changes in underlying credit
ratings, forecasted recovery, the Company's intent to sell or the likelihood that it would be required to sell the investment before its anticipated recovery in market
value and the probability that the scheduled cash payments will continue to be made. As of December 29, 2018, the Company has determined that no other-thantemporary impairment losses existed.
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Table of Contents
Silicon Laboratories Inc.
Notes to Consolidated Financial Statements
December 29, 2018 (Continued)
4. Fair Value of Financial Instruments (Continued)
At December 29, 2018 and December 30, 2017, there were no material unrealized gains associated with the Company's available-for-sale investments.
Level 3 fair value measurements
The following summarizes quantitative information about Level 3 fair value measurements.
Auction rate securities
Fair Value at
December 29, 2018(000s)$5,759Valuation Technique

Weighted
Average

Unobservable Input

Discounted cash flow

Estimated yield

3.23%

Expected holding period

10 years

Estimated discount rate

3.76%

The Company has followed an established internal control procedure used in valuing auction rate securities. The procedure involves the analysis of valuation
techniques and evaluation of unobservable inputs commonly used by market participants to price similar instruments, and which have been demonstrated toprovide reasonable estimates of prices obtained in actual market transactions. Outputs from the valuation process are assessed against various market sources when
they are available, including marketplace quotes, recent trades of similar illiquid securities, benchmark indices and independent pricing services. The technique andunobservable input parameters may be recalibrated periodically to achieve an appropriate estimation of the fair value of the securities.
Significant changes in any of the unobservable inputs used in the fair value measurement of auction rate securities in isolation could result in a significantly
lower or higher fair value measurement. An increase in expected yield would result in a higher fair value measurement, whereas an increase in expected holding
period or estimated discount rate would result in a lower fair value measurement. Generally, a change in the assumptions used for expected holding period is
accompanied by a directionally similar change in the assumptions used for estimated yield and discount rate.
The following summarizes the activity in Level 3 financial instruments for the years ended December 29, 2018 and December 30, 2017 (in thousands):
AssetsYear Ended
December 29,
December 30,
2018
2017

Auction Rate Securities

Beginning balance
Gain included in other comprehensive income (loss)
Ending balance

$
$
F-20

5,681 $
78
5,759 $

5,196
485
5,681

Table of Contents
Silicon Laboratories Inc.
Notes to Consolidated Financial Statements
December 29, 2018 (Continued)
4. Fair Value of Financial Instruments (Continued)
Liabilities
Year Ended
December 30,
2017

Contingent Consideration (1)Beginning balanceIssuesReclassification to acquisition-related liabilities
Gain recognized in selling, general and administrative expenses
Ending balance
(1)

$

$

—
3,829
(3,380)(449)—

In connection with the acquisition of Zentri, the Company recorded contingent consideration based on fiscal 2017 revenue from certain
Zentri products.

Fair values of other financial instruments
The Company's debt is recorded at cost, but is measured at fair value for disclosure purposes. The fair value of the Company's convertible senior notes isdetermined using observable market prices. The notes are traded in less active markets and are therefore classified as a Level 2 fair value measurement. As of
December 29, 2018 and December 30, 2017, the fair value of the convertible senior notes was $419.0 million and $466.2 million, respectively.
The Company's other financial instruments, including cash, accounts receivable and accounts payable, are recorded at amounts that approximate their fairvalues due to their short maturities.
5. Derivative Financial Instruments
The Company uses derivative financial instruments to manage certain exposures to the variability of foreign currency exchange rates and interest rates. The
Company's objective is to offset increases and decreases in expenses resulting from these exposures with gains and losses on the derivative contracts, thereby
reducing volatility of earnings.
Cash Flow Hedges
Foreign Currency Forward Contracts
The Company uses foreign currency forward contracts to reduce the earnings impact that exchange rate fluctuations have on operating expenses denominatedin currencies other than the U.S. dollar. Changes in the fair value of the contracts are recorded in accumulated other comprehensive loss in the Consolidated
Balance Sheet and subsequently reclassified into earnings in the period during which the hedged transaction is recognized. The reclassified amount is reported in
the same financial statement line item as the hedged item. If the foreign currency forward contracts are terminated or can no longer qualify as hedging instruments
prior to maturity, the fair value of the contracts recorded in accumulated other comprehensive loss may be recognized in the Consolidated Statement of Income
based on an assessment of the contracts at the time of termination.
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Table of Contents
Silicon Laboratories Inc.
Notes to Consolidated Financial Statements
December 29, 2018 (Continued)
5. Derivative Financial Instruments (Continued)
The Company entered into foreign currency forward contracts in March 2018 for a portion of its forecasted operating expenses denominated in the Norwegian
Krone. As of December 29, 2018, the contracts had maturities of one to twelve months and an aggregate notional value of $8.8 million. Losses expected to bereclassified into earnings in the next 12 months were not material. The fair value of the contracts, contract losses recognized in other comprehensive income andamounts reclassified from accumulated other comprehensive loss into earnings were not material for any of the periods presented.
Interest Rate Swaps
The Company entered into an interest rate swap agreement with an original notional value of $72.5 million in connection with its Credit Facility in July 2016.
The Company terminated the swap agreement on March 6, 2017, which resulted in the reclassification of $1.8 million of unrealized gains that were previously
recorded in accumulated other comprehensive loss into earnings during fiscal 2017.
Non-designated Hedges
Foreign Currency Forward Contracts
The Company uses foreign currency forward contracts to reduce the earnings impact that exchange rate fluctuations have on non-U.S. dollar balance sheet
exposures. The Company recognizes gains and losses on the foreign currency forward contracts in interest income and other, net in the Consolidated Statement of
Income in the same period as the remeasurement loss and gain of the related foreign currency denominated asset or liability. The Company does not apply hedge
accounting to these foreign currency forward contracts.
As of December 30, 2017, the Company held one foreign currency forward contract denominated in the Norwegian Krone with a notional value of$2.4 million. The fair value of the contract was not material as of December 30, 2017.
The before-tax effect of derivative instruments not designated as hedging instruments was as follows (in thousands):

Gain (Loss) Recognized in Income

December 29,
2018

Foreign currency forward contracts$

Year Ended
December 30,
2017

105 $
F-22

December 31,
2016(207) $

Location(92) Interest income and other, net

Table of Contents
Silicon Laboratories Inc.
Notes to Consolidated Financial Statements
December 29, 2018 (Continued)
6. Balance Sheet Details
The following tables show the details of selected Consolidated Balance Sheet items (in thousands):
Accounts Receivable, Net
December 29,
2018

Accounts receivable
Allowance for doubtful accounts$$

December 30,
201773,832 $(638)
73,194 $72,005(638)
71,367

Inventories
December 29,
2018

Work in progress
Finished goods$$

December 30,
201750,983 $23,98974,972 $46,69826,434
73,132

Property and Equipment
December 29,
2018

Buildings and improvements
Equipment
Computers and purchased software
Leasehold interest in ground leases
Leasehold improvements
Furniture and fixtures$

Accumulated depreciation$

December 30,
2017

109,025 $
62,89542,487
23,84012,006
7,794
258,047(118,998)
139,049 $96,196
59,836
37,59823,840
10,483
5,691
233,644(105,962)
127,682

Other Current Liabilities
December 29,
2018

Accrued compensation and benefits
Accrued price protection credits
Other

$

$
F-23

December 30,
201737,113 $12,03332,034
81,180 $33,631
8,239
31,48973,359

Table of Contents
Silicon Laboratories Inc.
Notes to Consolidated Financial Statements
December 29, 2018 (Continued)
6. Balance Sheet Details (Continued)
Other Non-current Liabilities
December 29,
2018

Non-current tax liabilities
Other

$
$

December 30,
201721,576 $35,87257,448 $39,196
38,666
77,862

7. Risks and Uncertainties
Financial Instruments
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash equivalents, investments,
accounts receivable, notes receivable and derivatives. The Company places its cash equivalents and investments primarily in municipal bonds, money market
funds, corporate bonds, variable-rate demand notes, U.S. government securities, agency securities, asset-back securities, certificates of deposit, commercial paper,auction-rate securities and international government bonds. Concentrations of credit risk with respect to accounts receivable are primarily due to customers withlarge outstanding balances. The Company's customers that accounted for greater than 10% of accounts receivable consisted of the following:
December 29,
2018

Arrow Electronics
Edom Technology
Avnet
*

12%
10%
—

December 30,
2017

14%
*
16%

Less than 10% of accounts receivable

The Company performs periodic credit evaluations of its customers' financial condition and generally requires no collateral from its customers. The Company
provides an allowance for potential credit losses based upon the expected collectibility of such receivables. Losses have not been significant for any of the periods
presented.
The Company holds three notes receivable from two privately held companies. The total carrying value of the notes was $2.4 million as of December 29,
2018, which was recorded in other assets, net in the Consolidated Balance Sheet.
The Company holds two equity investments in privately held companies. One investment is accounted for using the equity method and had a carrying value of$4.1 million as of December 29, 2018. The second investment is recorded at cost minus impairment and had a carrying value of $2.0 million as of December 29,
2018. In fiscal 2018, the Company reduced the carrying value of the second investment by $1.8 million, which was recorded in interest income and other, net in theConsolidated Statements of Income. Both investments were recorded in other assets, net in the Consolidated Balance Sheet.
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Table of Contents
Silicon Laboratories Inc.
Notes to Consolidated Financial Statements
December 29, 2018 (Continued)
7. Risks and Uncertainties (Continued)
As a result of its use of derivative instruments, the Company is exposed to the risk that its counterparties will fail to meet their contractual obligations. To
mitigate this counterparty credit risk, the Company has a policy to enter into contracts with only selected major financial institutions. The Company periodicallyreviews and re-assesses the creditworthiness of such counterparties based on a variety of factors.
Distributor Advances
On sales to distributors, the Company's payment terms often require the distributor to initially pay amounts owed to the Company for an amount in excess of
their ultimate cost. The Company's sales price to its distributors may be higher than the amount that the distributors will ultimately owe the Company because
distributors often negotiate price reductions after purchasing the product from the Company and such reductions are often significant. These negotiated pricediscounts are not granted until the distributor sells the product to the end customer, which may occur after the distributor has paid the original invoice amount to
the Company. Payment of invoices prior to receiving an associated discount can have an adverse impact on the working capital of the Company's distributors.
Accordingly, the Company has entered into agreements with certain distributors whereby it advances cash to the distributors to reduce the distributor's working
capital requirements. The advance amounts are based on the distributor's inventory balance, and are adjusted quarterly. Such amounts are recorded in prepaid
expenses and other current assets in the Consolidated Balance Sheet. The terms of these advances are set forth in binding legal agreements and are unsecured, bearno interest on unsettled balances and are due upon demand. The agreements governing these advances can be cancelled by the Company at any time.
Suppliers
A significant portion of the Company's products are fabricated by Taiwan Semiconductor Manufacturing Co. (TSMC) or Semiconductor Manufacturing
International Corporation (SMIC). The inability of TSMC or SMIC to deliver wafers to the Company on a timely basis could impact the production of theCompany's products for a substantial period of time, which could have a material adverse effect on the Company's business, financial condition, results ofoperations and cash flows.
Customers
The Company sells directly to end customers, distributors and contract manufacturers. Although the Company actually sells the products to, and is paid by,
distributors and contract manufacturers, the Company refers to the end customer as its customer. None of the Company's end customers or
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Table of Contents
Silicon Laboratories Inc.
Notes to Consolidated Financial Statements
December 29, 2018 (Continued)
7. Risks and Uncertainties (Continued)
contract manufacturers accounted for greater than 10% of revenue during fiscal 2018, 2017 or 2016. The Company's distributors that accounted for greater than
10% of revenue consisted of the following:
December 29,
2018

Arrow Electronics
Edom Technology
Avnet*

Year Ended
December 30,
2017

21%
17%
*

December 31,
2016

12%
19%
14%

11%
17%
13%

Less than 10% of revenue

8. Acquisitions
Z-WaveOn April 18, 2018, the Company completed the acquisition of the Z-Wave business from Sigma Designs, Inc. for $243 million in cash. Z-Wave is an Internetof Things (IoT) technology for smart home solutions.
This strategic acquisition expands the Company's IoT connectivity portfolio in the connected home market, while further scaling the Company's engineering
team. These factors contributed to a purchase price that was in excess of the fair value of the net assets acquired and, as a result, the Company recorded goodwill.
A portion of the goodwill is deductible for tax purposes. The purchase price was allocated as follows (in thousands):

AmountIntangible assets:
In-process research and development
Developed technology
Customer relationships
Trademarks$

20,90069,87525,0009,900
125,675
2,841
5,311
15,581
329
109,117
2,587(3,306)(8,918)(6,648)$ 242,569

Cash and cash equivalents
Accounts receivable
Inventory
Other current assets
Goodwill
Other non-current assets
Accounts payable
Other current liabilities
Other non-current liabilities
Total purchase price

Weighted-Average
Amortization Period(Years)Not amortized
7
4
7

​​

​

​

​

F-26

Table of Contents
Silicon Laboratories Inc.
Notes to Consolidated Financial Statements
December 29, 2018 (Continued)
8. Acquisitions (Continued)
In-process research and development (IPR&D) represents acquired smart home technology that had not been completed as of the acquisition date. The fairvalue of IPR&D was determined using the income approach. The discount rate applied to the projected cash flows was 15.0%, which reflects the engineering andtechnical risks related to the projects. The allocation of the purchase price is preliminary and subject to change, based on the finalization of income tax matters.
Revenues attributable to the Z-Wave business from the date of acquisition to December 29, 2018 were $37.0 million. The Company recorded approximately$4.9 million of acquisition-related costs in selling, general and administrative expenses during fiscal 2018.
The following unaudited pro forma financial information presents combined results of operations for each of the periods presented, giving effect to theacquisition as if it had been completed on January 1, 2017. The pro forma financial information includes charges for the fair value write-up associated withacquired inventory, adjustments for amortization expense of acquired intangible assets and tax-related expenses. The pro forma results of operations are presented
for informational purposes only and are not necessarily indicative of the results of operations that would have been achieved if the acquisition had taken place on
January 1, 2017 or of results that may occur in the future (in thousands, except per share data):
Year Ended
December 29,
December 30,
2018
2017
(Unaudited)

Revenues
Net income$$

882,109 $87,874 $824,009
27,958

Earnings per share:
Basic
Diluted$$2.04 $
2.00 $

0.66
0.65

ZentriOn January 20, 2017, the Company acquired Zentri, Inc., a private company. Zentri is an innovator in low-power, cloud-connected Wi-Fi technologies for the
IoT. The Company acquired Zentri for approximately $18.1 million, including initial cash consideration of approximately $14.3 million, and potential additional
consideration with an estimated fair value of approximately $3.8 million at the date of acquisition.
The purchase price was allocated as follows: intangible assets—$6.7 million; goodwill—$12.1 million; and other net liabilities—$0.7 million. The goodwill is
not deductible for tax purposes. Pro forma information related to this acquisition has not been presented because it would not be materially different from amounts
reported.
Micrium
On October 3, 2016, the Company acquired Micrium, a private company. Micrium is a supplier of real-time operating system (RTOS) software for the IoT.
The Company acquired Micrium for approximately $12.4 million, consisting of approximately $8.2 million in cash and $4.2 million in stock consideration. An
additional approximately $1.0 million in stock consideration was accounted for as a transaction separate from the business combination based on its economic
substance and will be recorded as post-combination compensation expense over four years.
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Table of Contents
Silicon Laboratories Inc.
Notes to Consolidated Financial Statements
December 29, 2018 (Continued)
8. Acquisitions (Continued)
The purchase price was allocated as follows: intangible assets—$9.5 million; goodwill—$3.4 million; and other net liabilities—$0.5 million. A portion of the
goodwill is deductible for tax purposes. Pro forma information related to this acquisition has not been presented because it would not be materially different fromamounts reported.
Energy Micro
On July 1, 2013, the Company acquired Energy Micro. In fiscal 2016, the Company entered into an agreement which settled the amount of the earn-out to be
paid for fiscal 2015 through 2018. The total settlement amount was approximately $16.0 million (in lieu of potential payments of up to $26.7 million) and was paid
on May 11, 2016.
9. Goodwill and Other Intangible Assets
Goodwill
The following summarizes the activity in goodwill for the years ended December 29, 2018 and December 30, 2017 (in thousands):
Year Ended
December 29,
December 30,
2018
2017

Beginning balance
Additions due to business combinations
Ending balance$$

288,227 $109,117397,344 $

276,130
12,097288,227

Other Intangible Assets
The gross carrying amount and accumulated amortization of other intangible assets are as follows (in thousands):
Weighted-Average
Amortization
Period(Years)Core and developed technology
Customer relationships
Patents
Trademarks
Total

8
5
—
7
8

December 29, 2018
Gross
AmountAccumulated
Amortization$ 237,265 $
46,890—12,310$ 296,465 $​December 30, 2017
Gross
AmountAccumulated
Amortization(102,116) $ 161,700 $(21,075)
25,470—3,000(2,442)
3,690(125,633) $ 193,860 $(89,442)(16,180)(2,750)(2,344)(110,716)​​​

Gross intangible assets increased $125.7 million in fiscal 2018 for assets added due to the acquisition of Z-Wave business. This increase was offset by$23.1 million due to the removal of fully amortized assets.
Amortization expense related to intangible assets for fiscal 2018, 2017 and 2016 was $38.0 million, $27.1 million and $27.3 million, respectively. The
estimated aggregate amortization expense for
F-28

Table of Contents
Silicon Laboratories Inc.
Notes to Consolidated Financial Statements
December 29, 2018 (Continued)
9. Goodwill and Other Intangible Assets (Continued)
intangible assets subject to amortization for each of the five succeeding fiscal years is as follows (in thousands):
Fiscal Year

2019
2020
2021
2022
2023

$ 39,222
36,72732,337
24,206
18,286

10. Debt
1.375% Convertible Senior Notes
On March 6, 2017, the Company completed a private offering of $400 million principal amount convertible senior notes (the "Notes"). The Notes bear interest
semi-annually at a rate of 1.375% per year and will mature on March 1, 2022, unless repurchased, redeemed or converted at an earlier date. The Company used
$72.5 million of the proceeds to pay off the then remaining balance under its credit agreement.
The Notes are convertible at an initial conversion rate of 10.7744 shares of common stock per $1,000 principal amount of the Notes, or approximately
4.3 million shares of common stock, which is equivalent to a conversion price of approximately $92.81 per share. The conversion rate is subject to adjustment
under certain circumstances. Holders may convert the Notes under the following circumstances: during any calendar quarter after the calendar quarter ended onJune 30, 2017 if the closing price of the Company's common stock for at least 20 trading days in the 30 consecutive trading days ending on the last trading day ofthe preceding calendar quarter is greater than or equal to 130% of the conversion price of the Notes; during the five business day period after any ten consecutive
trading day period (the "measurement period") in which the trading price per $1,000 principal amount of notes for each trading day of the measurement period wasless than 98% of the product of the closing sale price of our common stock and the conversion rate on each such trading day; if specified distributions or corporate
events occur; if the Notes are called for redemption; or at any time after December 1, 2021. The Company may redeem all or any portion of the Notes, at its option,
on or after March 6, 2020, if the last reported sale price of the Company's common stock has been at least 130% of the conversion price then in effect for at least
20 trading days during any 30 consecutive trading day period. Upon conversion, the Notes may be settled in cash, shares of the Company's common stock or a
combination of cash and shares, at the Company's election.
The principal balance of the Notes was separated into liability and equity components, and was recorded initially at fair value. The excess of the principal
amount of the liability component over its carrying amount represents the debt discount, which is amortized to interest expense over the term of the Notes using theeffective interest method. The carrying amount of the liability component was estimated by discounting the contractual cash flows of similar non-convertible debt
at an appropriate market rate at the date of issuance.
The Company incurred debt issuance costs of approximately $10.6 million, which was allocated to the liability and equity components in proportion to theallocation of the proceeds. The costs allocatedF-29

Table of Contents
Silicon Laboratories Inc.
Notes to Consolidated Financial Statements
December 29, 2018 (Continued)
10. Debt (Continued)
to the liability component are being amortized as interest expense over the term of the Notes using the effective interest method.
The carrying amount of the Notes consisted of the following (in thousands):
December 29,
2018

Liability component
Principal
Unamortized debt discountUnamortized debt issuance costs
Net carrying amount
Equity component
Net carrying amount$

December 30,
2017$

400,000 $(39,298)(5,931)
354,771 $

400,000(50,499)(7,622)
341,879$

57,735 $57,735The liability component of the Notes is recorded in convertible debt on the Consolidated Balance Sheet. The equity component of the Notes is recorded inadditional paid-in capital. The effective interest rate for the liability component was 4.75%. As of December 29, 2018, the remaining period over which the debt
discount and debt issuance costs will be amortized was 3.2 years.
Interest expense related to the Notes was comprised of the following (in thousands):
Year Ended
December 29,
December 30,
2018
2017

Contractual interest expense
Amortization of debt discount
Amortization of debt issuance costs$$

5,500 $
11,202
1,690
18,392 $

4,492
8,816
1,330
14,638Credit Facility
In connection with the Company's offering of the Notes, it and certain of its domestic subsidiaries (the "Guarantors") amended its existing credit agreement
and paid off the then remaining balance of $72.5 million. The amended agreement (the "Credit Facility") consists of a $300 million revolving credit facility with amaturity date of July 24, 2020. The Credit Facility includes a $25 million letter of credit sublimit and a $10 million swingline loan sublimit. The Company also has
an option to increase the size of the borrowing capacity by up to an aggregate of $200 million in additional commitments, subject to certain conditions.
The revolving credit facility, other than swingline loans, will bear interest at the Eurodollar rate plus an applicable margin or, at the option of the Company, abase rate (defined as the highest of the Wells Fargo prime rate, the Federal Funds rate plus 0.50% and the Eurodollar Base Rate plus 1.00%) plus an applicablemargin. Swingline loans accrue interest at the base rate plus the applicable margin for base rate loans. The applicable margins for the Eurodollar rate loans range
from 1.25% to 2.00%
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Table of Contents
Silicon Laboratories Inc.
Notes to Consolidated Financial Statements
December 29, 2018 (Continued)
10. Debt (Continued)
and for base rate loans range from 0.25% to 1.00%, depending in each case, on the leverage ratio as defined in the Credit Facility.
The Credit Facility contains various conditions, covenants and representations with which the Company must be in compliance in order to borrow funds andto avoid an event of default, including financial covenants that the Company must maintain a leverage ratio (funded debt/EBITDA) of no more than 3.00 to 1 and aminimum fixed charge coverage ratio (EBITDA/interest payments, income taxes and capital expenditures) of no less than 1.25 to 1. As of December 29, 2018, theCompany was in compliance with all covenants of the Credit Facility. The Company's obligations under the Credit Facility are guaranteed by the Guarantors andare secured by a security interest in substantially all assets of the Company and the Guarantors.
11. Commitments and Contingencies
Operating Leases
The Company leases certain facilities under operating lease agreements that expire at various dates through 2027. Some of these arrangements containrenewal options and require the Company to pay taxes, insurance and maintenance costs.
Rent expense under operating leases was $6.0 million, $5.5 million and $4.7 million for fiscal 2018, 2017 and 2016, respectively. The minimum annual future
rentals under the terms of these leases as of December 29, 2018 are as follows (in thousands):
Fiscal Year

2019
2020
2021
2022
2023
Thereafter
Total minimum lease payments

$

5,287
4,746
4,051
3,485
2,810
3,842
$ 24,221

Investment Commitment
The Company has committed to invest up to $10.0 million in a limited partnership, of which approximately $4.3 million was funded through December 29,
2018.
Patent Litigation—Cresta Technology
On January 28, 2014, Cresta Technology Corporation ("Cresta Technology"), a Delaware corporation, filed a lawsuit against the Company in the UnitedStates District Court in the District of Delaware, alleging infringement of three United States Patents (the "Cresta Patents"). On July 16, 2014, the Company filed alawsuit against Cresta Technology in the United States District Court in the Northern District of California alleging infringement of six United States Patents.
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Table of Contents
Silicon Laboratories Inc.
Notes to Consolidated Financial Statements
December 29, 2018 (Continued)
11. Commitments and Contingencies (Continued)
Cresta Technology declared bankruptcy in 2016 and the Cresta patents and the Delaware lawsuit were acquired by Crespe LLC.
On September 17, 2018, the Company and Crespe LLC settled all matters. The Company received a non-material payment from Crespe LLC. There was no
payment from the Company and the Company received a full license to the Cresta Patents and dismissal of all claims.
Patent Litigation—Bandspeed
On June 21, 2018, Bandspeed, LLC ("Bandspeed"), a Texas limited liability company, filed a lawsuit against the Company in the United States District Courtof the Western District of Texas, Austin Division, alleging infringement of eight United States Patents. On November 9, 2018, the Company and Bandspeed settled
all matters, and the Court ordered a dismissal on November 19, 2018. The Company made a non-material payment to Bandspeed and received a full license to thealleged patents and dismissal of all claims.
Other
The Company is involved in various other legal proceedings that have arisen in the normal course of business. While the ultimate results cannot be predictedwith certainty, the Company does not expect them to have a material adverse effect on its Consolidated Financial Statements.
12. Stockholders' Equity
Common Stock
The Company issued 0.8 million shares of common stock during fiscal 2018.
Share Repurchase Programs
The Board of Directors authorized the following share repurchase programs (in thousands):

Program Authorization Date

October 2017
January 2017
August 2015*

Program
Termination
Date

ProgramAmountDecember 2019
December 2017
December 2016

$ 200,000*$ 100,000$ 100,000

In October 2018, the Board of Directors increased the share repurchase amount for the October 2017 program from $100 million to$200 million and extended the termination date from December 2018 to December 2019.

These programs allow for repurchases to be made in the open market or in private transactions, including structured or accelerated transactions, subject toapplicable legal requirements and market conditions. The Company repurchased 0.4 million shares of its common stock for $39.3 million during fiscal 2018. The
Company did not repurchase any shares of its common stock during fiscal 2017. The
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Silicon Laboratories Inc.
Notes to Consolidated Financial Statements
December 29, 2018 (Continued)
12. Stockholders' Equity (Continued)
Company repurchased 0.9 million shares of its common stock for $40.5 million during fiscal 2016. These shares were retired upon repurchase.
Reclassifications From Accumulated Other Comprehensive Loss
The following table summarizes the effect on net income from reclassifications out of accumulated other comprehensive loss (in thousands):

Reclassification

December 29,
2018

Losses on available-for-sales securities to:Interest income and other, net$

Gains (losses) on cash flow hedges to:Interest income and other, net
Interest expense

Income tax (expense) benefit
Total gains (losses) reclassified$

Year ended
December 30,2017(49) $

December 31,
2016

— $

—

(316)
—
(365)

—
1,808
1,808

—
(249)
(249)

77
(288) $

(633)
1,175 $

87
(162)

Income Tax Allocated to the Components of Other Comprehensive Income (Loss)
The income tax effects of the components of other comprehensive income (loss) were as follows (in thousands):
December 29,
2018

Income tax (expense) benefit on:

Net changes to available-for-sale securities:
Unrealized gains (losses) arising during the period
Reclassification for losses included in net income$

Net changes to cash flow hedges:
Unrealized gains (losses) arising during the period
Reclassification for gains (losses) included in net income$
F-33

Year ended
December 30,
2017

December 31,
2016(79) $
(10)

255 $
—

63
—

200
(66)
45 $

—
633
888 $

(513)
(87)
(537)

Table of Contents
Silicon Laboratories Inc.
Notes to Consolidated Financial Statements
December 29, 2018 (Continued)
13. Revenues
The Company groups its revenues into four categories, based on the markets and applications in which its products may be used. The following disaggregates
the Company's revenue by product category (in thousands):
December 29,
2018

Internet of Things
Infrastructure
BroadcastAccess$$(1)

Year Ended
December 30,
2017 (1)463,838 $
199,478
141,41263,539868,267 $December 31,
2016 (1)395,012 $
152,158
152,980
68,717
768,867 $

314,614
147,677
157,746
77,589697,626

Under the modified retrospective method, prior period amounts have not been adjusted.

A portion of the Company's sales are made to distributors under agreements allowing certain rights of return and/or price protection related to the final selling
price to the end customers. These factors impact the timing and uncertainty of revenues and cash flows. The Company recognized revenue of $24.3 million during
fiscal 2018 from performance obligations that were satisfied in previous reporting periods. The following disaggregates the Company's revenue by sales channel(in thousands):
December 29,
2018

Distributors
Direct customers

$
$

(1)

Year Ended
December 30,
2017 (1)618,989 $249,278868,267 $December 31,
2016 (1)547,419 $
221,448
768,867 $471,622226,004
697,626

Under the modified retrospective method, prior period amounts have not been adjusted.

14. Stock-Based Compensation
In fiscal 2009, the stockholders of the Company approved the 2009 Stock Incentive Plan (the "2009 Plan") and the 2009 Employee Stock Purchase Plan (the"2009 Purchase Plan"). In fiscal 2017, the stockholders of the Company approved amendments to both the 2009 Plan and the 2009 Purchase Plan. These
amendments authorized additional shares of common stock for issuance, to comply with changes in applicable law, improve the Company's corporate governanceand to implement other best practices.
2009 Stock Incentive Plan
Under the 2009 Plan, the following may be granted: stock options, stock appreciation rights, performance shares, performance stock units, restricted stock
units (RSUs), restricted stock awards (RSAs), performance-based awards and other awards (collectively, all such grants are referred to as "awards"). The fiscal
2017 amendments to the 2009 Plan created a single share pool. All awards now deduct one share from the 2009 Plan shares available for issuance for each share
granted. Awards
F-34

Table of Contents
Silicon Laboratories Inc.
Notes to Consolidated Financial Statements
December 29, 2018 (Continued)
14. Stock-Based Compensation (Continued)
granted under the 2009 Plan generally contain vesting provisions ranging from three to four years. The exercise price of stock options offered under the 2009 Plan
may not be less than 100% of the fair market value of a share of our common stock on the date of grant. To the extent awards granted under the 2009 Planterminate, expire or lapse for any reason, or are settled in cash, shares subject to such awards will again be available for grant.
2000 Stock Incentive Plan
In fiscal 2000, the Company's Board of Directors and stockholders approved the 2000 Plan. The 2000 Plan contains programs for (i) the discretionary grantingof stock options to employees, non-employee board members and consultants for the purchase of shares of the Company's common stock, (ii) the discretionaryissuance of common stock directly (as granted under direct issuance shares in RSAs and RSUs), (iii) the granting of special below-market stock options to
executive officers and other highly compensated employees of the Company for which the exercise price can be paid using payroll deductions and (iv) the
automatic issuance of stock options to non-employee board members. The discretionary issuance of common stock, RSUs and stock options generally containvesting provisions ranging from three to eight years. If permitted by the Company, stock options can be exercised immediately and, similar to the direct issuanceshares, are subject to repurchase rights which generally lapse in accordance with the vesting schedule. The repurchase rights provide that upon certain defined
events, the Company can repurchase unvested shares at the price paid per share. The term of each stock option is no more than ten years from the date of grant.
Stock Grants and Modifications
The Company granted to its employees 0.6 million, 0.7 million and 1.3 million shares of full value awards and 0.0 million, 0.0 million, and 0.2 million stock
options from the 2009 Plan during fiscal 2018, 2017 and 2016, respectively.
The Company recorded $0.9 million in selling, general and administrative expense during fiscal 2016 in connection with the modifications of certain equity
awards. The modifications were pursuant to three employee terminations in fiscal 2016. There were no other significant modifications made to any stock grants
during fiscal 2018, 2017 or 2016.
Included in the full value awards granted under the 2009 Plan in fiscal 2018, 2017 and 2016 were a total of 41 thousand, 54 thousand and 65 thousand marketbased stock awards, respectively. The awards, also known as market stock units (MSUs), provide the rights to acquire a number of shares of common stock for no
cash consideration based upon achievement of specified levels of market conditions. The requisite service period for these MSUs is also the vesting period, whichis generally three years. The performance criteria of the MSUs measure the difference between the total stockholders' return of the Company against that of the
PHLX Semiconductor Sector Total Return Index.
Also included in the full value awards granted under the 2009 Plan during fiscal 2018, 2017 and 2016 were 41 thousand, 54 thousand and 65 thousand
performance-based stock awards, respectively. The awards, also known as PSUs, provide for the rights to acquire a number of shares of common stock for no cash
consideration based upon the achievement of specified revenue objectives during the year. The requisite service period for these PSUs is approximately three years
from the date of grant.
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Table of Contents
Silicon Laboratories Inc.
Notes to Consolidated Financial Statements
December 29, 2018 (Continued)
14. Stock-Based Compensation (Continued)
2009 Employee Stock Purchase Plan
The rights to purchase common stock granted under the 2009 Purchase Plan are intended to be treated as either (i) purchase rights granted under an "employee
stock purchase plan," as that term is defined in Section 423(b) of the Internal Revenue Code (the "423(b) Plan"), or (ii) purchase rights granted under an employee
stock purchase plan that is not subject to the terms and conditions of Section 423(b) of the Internal Revenue Code (the "Non-423(b) Plan"). The Company willretain the discretion to grant purchase rights under either the 423(b) Plan or the Non-423(b) Plan. Eligible employees may purchase a limited number of shares of
the Company's common stock at no less than 85% of the fair market value of a share of common stock at prescribed purchase intervals during an offering period.
Each offering period will be comprised of a series of one or more successive and/or overlapping purchase intervals and has a maximum term of 24 months. During
fiscal 2018, 2017 and 2016, the Company issued 223 thousand, 239 thousand and 224 thousand shares, respectively, under the 2009 Purchase Plan to its
employees. The weighted-average fair value for purchase rights granted in fiscal 2018 under the 2009 Purchase Plan was $22.59 per share.
Accounting for Stock-Based Compensation
Stock-based compensation costs are based on the fair values on the date of grant for stock awards and stock options and on the date of enrollment for theemployee stock purchase plans. The fair values of stock awards (such as RSUs, PSUs and RSAs) are estimated based on their intrinsic values. The fair values of
MSUs are estimated using a Monte Carlo simulation. The fair values of stock options and employee stock purchase plans are estimated using the Black-Scholes
option-pricing model.
The Black-Scholes valuation calculation requires the Company to estimate key assumptions such as future stock price volatility, expected terms, risk-freerates and dividend yield. Expected stock price volatility is based upon a combination of both historical volatility and implied volatility derived from traded options
on the Company's stock in the marketplace. Expected term is derived from an analysis of historical exercises and remaining contractual life of options. The riskfree rate is based on the U.S. Treasury yield curve in effect at the time of grant. The Company has never paid cash dividends and does not currently intend to pay
cash dividends, thus it has assumed a 0% dividend yield.
The Monte Carlo simulation used to calculate the fair value of the MSUs simulates the present value of the potential outcomes of future stock prices of theCompany and the Philadelphia Semiconductor Sector Total Return Index over the requisite service period. The projection of stock prices are based on the risk-freerate of return, the volatilities of the stock price of the Company and the Index, and the correlation of the stock price of the Company with the Index.
The Company estimates potential forfeitures of stock grants and adjusts compensation cost recorded accordingly. The estimate of forfeitures will be adjusted
over the requisite service period to the extent that actual forfeitures differ, or are expected to differ, from such estimates. Changes in estimated forfeitures arerecognized through a cumulative catch-up adjustment in the period of change and will also impact the amount of stock-based compensation expense to berecognized in future periods.
The fair values of stock options and RSUs are amortized as compensation expense on a straight-line basis over the vesting period of the grants. The fair values
of RSAs are fully expensed in
F-36

Table of Contents
Silicon Laboratories Inc.
Notes to Consolidated Financial Statements
December 29, 2018 (Continued)
14. Stock-Based Compensation (Continued)
the period of grant, when shares are immediately issued with no vesting restrictions. The fair values of MSUs are amortized as compensation expense on a straightline basis over the performance and service periods of the grants. The fair values of PSUs are amortized as compensation expense on a straight-line basis over the
performance period when the performance is probable of achievement, and over the remaining service periods thereafter. Compensation expense recognized isshown in the operating activities section of the Consolidated Statements of Cash Flows.
The fair values estimated from the Black-Scholes option-pricing model for ESPP and stock options granted were calculated using the following assumptions:
December 29,
2018

Employee Stock Purchase Plan

Expected volatility
Risk-free interest rate %Expected term (in months)
Dividend yield

30%
2.4%
9
—

December 29,
2018

Stock Options

Expected volatility
Risk-free interest rate %Expected term (in years)
Dividend yield

—
—
—
—

Year Ended
December 30,
2017

28%
1.1%
8
—

Year Ended
December 30,
2017

—
—
—
—

December 31,
2016

30%
0.6%
15
—

December 31,
2016

32%
1.3%
5.4
—

The fair values estimated from Monte Carlo simulation for MSUs were calculated using the following assumptions:
December 29,
2018

MSUs

Expected volatility
Risk-free interest rate %Expected term (in years)
Dividend yield

29%
2.4%
2.9
—
F-37

Year Ended
December 30,
2017

31%
1.6%
2.9
—

December 31,
2016

30%
0.9%
2.9
—

Table of Contents
Silicon Laboratories Inc.
Notes to Consolidated Financial Statements
December 29, 2018 (Continued)
14. Stock-Based Compensation (Continued)
A summary of stock-based compensation activity with respect to fiscal 2018 follows:

Shares(000s)

Stock Options

WeightedAverage
Exercise
Price

Weighted-Average
Remaining
Contractual
Term(In Years)

Aggregate
Intrinsic
Value(000s)

Outstanding at December 30, 2017
Exercised
Outstanding at December 29, 2018170 $(33) $
137 $

38.88
36.45
39.47

7.1 $

5,327

Vested at December 29, 2018 and expected to vest

83 $

40.39

7.1 $

3,154

Exercisable at December 29, 2018

50 $

37.88

7.1 $

2,031

WeightedAverage
Purchase
Price

Weighted-Average
Remaining
Vesting Term
(In Years)

Aggregate
Intrinsic
Value(000s)

RSAs and RSUs

Shares(000s)

Outstanding at December 30, 2017
Granted
Vested or issued
Cancelled or forfeited
Outstanding at December 29, 2018

1,523 $
522 $(730) $
(97) $
1,218 $—————

0.86 $ 95,620

Outstanding at December 29, 2018 and expected to vest

1,147 $—

0.86 $ 90,008

Shares(000s)

PSUs and MSUs

WeightedAverage
Purchase
Price

Weighted-Average
Remaining
Vesting Term
(In Years)

Aggregate
Intrinsic
Value(000s)

Outstanding at December 30, 2017
GrantedEarned or issued
Cancelled or forfeited
Outstanding at December 29, 2018

259 $
81 $
(37) $(21) $
282 $

—
—
—
—
—

1.1 $ 22,164

Outstanding at December 29, 2018 and expected to vest

249 $

—

1.1 $ 19,615

The following summarizes the Company's weighted average fair value at the date of grant:
December 29,
2018

Per grant of RSAs and RSUs
Per grant of PSUs and MSUs
Per grant of stock options

$
$
$
F-38

Year Ended
December 30,
201793.75 $
97.53 $
— $December 31,
201672.85 $
78.40 $
— $

40.55
32.23
40.38

Table of Contents
Silicon Laboratories Inc.
Notes to Consolidated Financial Statements
December 29, 2018 (Continued)
14. Stock-Based Compensation (Continued)
The following summarizes the Company's stock-based payment and stock option values (in thousands):

Intrinsic value of stock options exercised
Intrinsic value of RSUs that vested
Grant date fair value of RSUs that vested
Intrinsic value of MSUs that vested
Grant date fair value of MSUs that vested

December 29,
2018

Year Ended
December 30,
2017

December 31,
2016

$
$
$
$
$

$
$
$
$
$

$
$
$
$
$

1,952
68,012
37,720
3,562
1,788

2,174
53,09332,449
687
633

2,560
36,50239,853——

The Company received cash of $13.3 million for the issuance of common stock, and paid $19.5 million for shares withheld for taxes, during fiscal 2018. The
Company issues shares from the shares reserved under its stock plans upon the exercise of stock options, vesting of RSUs, PSUs and MSUs, and purchases throughemployee stock purchase plans. The Company does not currently expect to repurchase shares from any source to satisfy such obligation.
The following table presents details of stock-based compensation costs recognized in the Consolidated Statements of Income (in thousands):
December 29,
2018

Cost of revenues
Research and development
Selling, general and administrative$

Income tax benefit$

Year Ended
December 30,
2017

1,238 $
23,867
24,97250,077
8,890
41,187 $December 31,
2016

1,090 $
21,771
21,89144,752
11,07333,679 $1,070
19,573
18,98539,628
8,496
31,132The decrease in income tax benefit in fiscal 2018 was due to the reduced current and future deductibility of executive stock compensation as a result of the
Tax Cuts and Jobs Act. The increase in income tax benefit in fiscal 2017 was primarily due to the recognition of excess tax benefits in connection with theCompany's adoption of ASU 2016-09, offset in part by an adjustment in the deferred tax asset due to the recent tax reform. The Company had approximately$65.4 million of total unrecognized compensation costs related to granted stock options and awards as of December 29, 2018 that are expected to be recognizedover a weighted-average period of approximately 1.9 years. There were no significant stock-based compensation costs capitalized into assets in any of the periods
presented.
F-39

Table of Contents
Silicon Laboratories Inc.
Notes to Consolidated Financial Statements
December 29, 2018 (Continued)
14. Stock-Based Compensation (Continued)
As of December 29, 2018, the Company had reserved shares of common stock for future issuance as follows (in thousands):
2009 Stock Incentive Plan
2009 Employee Stock Purchase Plan
Total shares reserved

2,343
985
3,328

15. Employee Benefit Plan
The Company maintains a defined contribution or 401(k) Plan for its qualified U.S. employees. Participants may contribute a percentage of theircompensation on a pre-tax basis, subject to a maximum annual contribution imposed by the Internal Revenue Code. The Company may make discretionary
matching contributions as well as discretionary profit-sharing contributions to the 401(k) Plan. The Company contributed $3.7 million, $3.5 million and$3.4 million to the 401(k) Plan during fiscal 2018, 2017 and 2016, respectively.
16. Related Party Transactions
On July 1, 2013, Geir Førre joined the Company as senior vice president. Mr. Førre was chief executive officer of Energy Micro, until it was acquired by theCompany. Mr. Førre was the beneficial owner of approximately 30% of the Energy Micro equity. In fiscal 2016, the Company entered into an agreement which
settled the amount of the earn-out to be paid for fiscal 2015 through 2018. Under this agreement, Mr. Førre received approximately $4.8 million.
Alf-Egil Bogen served on the Company's board of directors from October 17, 2013 to April 21, 2016. Mr. Bogen was chief marketing officer of Energy
Micro, until it was acquired by the Company. Mr. Bogen was the beneficial owner of approximately 2% of the Energy Micro equity. Under the settlementagreement, Mr. Bogen received approximately $0.3 million that was paid for fiscal 2015 through 2018 earn-out.
17. Income Taxes
The Tax Cuts and Jobs Act (the Act) was enacted in the U.S. on December 22, 2017. The Act reduced the U.S. federal corporate income tax rate to 21% from
35%, required companies to pay a one-time Transition Tax on earnings of certain foreign subsidiaries that were previously tax deferred and created new taxes oncertain foreign-sourced earnings. In 2017 and the first nine months of 2018, the Company recorded provisional amounts for certain enactment-date effects of the
Act by applying the guidance in Staff Accounting Bulletin No. 118 or "SAB 118" because it had not yet completed the enactment-date accounting for these effects.
In 2017, the Company recorded tax expense related to the enactment-date effects of the Act that included recording the one-time Transition Tax liability related toundistributed earnings of certain foreign subsidiaries that were not previously taxed, the revaluation of deferred tax assets and liabilities and other deferred tax
impacts. In 2018, certain discrete adjustments to provisional amounts were recorded. The changes to the 2017 enactment-date provisional amounts decreased theeffective tax rate in 2018 by (6.2)%.
F-40

Table of Contents
Silicon Laboratories Inc.
Notes to Consolidated Financial Statements
December 29, 2018 (Continued)
17. Income Taxes (Continued)
SAB 118 measurement period
The Company applied the guidance in SAB 118 when accounting for the enactment-date effects of the Act in 2017 and throughout 2018. At December 30,
2017, the Company had not completed its accounting for the enactment-date income tax effects of the Act under ASC 740, Income Taxes , specifically for thefollowing aspects: remeasurement of deferred tax assets and liabilities, one-time Transition Tax, its indefinite reinvestment assertion and its accounting policy for
global intangible low-taxed income. As of December 29, 2018, the Company has now completed its accounting for all of the enactment-date income tax effects of
the Act. As further discussed below, during 2018, the Company recognized a benefit of $4.5 million to the provisional amounts recorded at December 30, 2017 andincluded these adjustments as a component of income tax expense from continuing operations.
One-time Transition Tax
The one-time Transition Tax is based on the Company's total post-1986 earnings and profits (E&P), which were previously deferred from U.S. income tax
under U.S. tax law. The Company recorded a provisional amount for its one-time Transition Tax liability for each of its foreign subsidiaries, resulting in a
Transition Tax cost of $54.4 million, which after offset by tax attributes resulted in a total provisional Transition Tax liability of $42.6 million at December 30,
2017.
Upon further analysis of the Act, Notices and Regulations issued and proposed by the U.S. Department of the Treasury and the Internal Revenue Service, theCompany finalized its calculations of the Transition Tax liability during 2018. The Company decreased its December 30, 2017 provisional amount by $6.1 million,
which is included as a component of income tax expense from continuing operations. The Company elected to pay the Transition Tax over the eight-year period
provided in the Act. As of December 29, 2018, the unpaid balance of its Transition Tax obligation is $21.6 million, which is payable between April 2022 and April
2025.
Deferred tax assets and liabilities
As of December 30, 2017, the Company remeasured certain deferred tax assets and liabilities based on the tax rates at which they were expected to reverse in
the future (which was generally 21%), by recording a net provisional benefit of $28.1 million. This included the release of a deferred tax liability for future foreignearnings generated by one of the Company's foreign subsidiaries upon resolution of the Altera case of $39.4 million as well as the release of approximately$10.5 million of valuation allowances with corresponding deferred tax benefits. These benefits were offset by the revaluation of the Company's net deferred tax
asset and a corresponding increase to deferred tax expense of $21.8 million. Upon further analysis of certain aspects of the Act and refinement of its calculations
during the 12 months ended December 29, 2018, the Company reduced its provisional benefit by $1.0 million, which is included as a component of income tax
expense from continuing operations.
Global intangible low-taxed income (GILTI)The Act subjects a U.S. shareholder to tax on GILTI earned by certain foreign subsidiaries. The FASB Staff Q&A, Topic 740, No. 5, Accounting for Global
Intangible Low-Taxed Income , states that an
F-41

Table of Contents
Silicon Laboratories Inc.
Notes to Consolidated Financial Statements
December 29, 2018 (Continued)
17. Income Taxes (Continued)
entity can make an accounting policy election to either recognize deferred taxes for temporary basis differences expected to reverse as GILTI in future years or toprovide for the tax expense related to GILTI in the year the tax is incurred as a period expense.
Because the Company was still evaluating the GILTI provisions as of December 30, 2017, no GILTI-related deferred amounts were recorded in 2017. After
further consideration in the current year, the Company has elected to account for GILTI as a period cost in the year the tax is incurred.
Indefinite reinvestment assertion
Beginning in 2018, the Act provides for a 100% dividends received deduction for dividends received from 10-percent owned foreign corporations by U.S.
corporate shareholders, subject to a one-year holding period. Although dividend income is now generally exempt from U.S. federal income tax in the hands of U.S.
corporate shareholders, companies must still apply the guidance of ASC 740-30-25-18 to account for the tax consequences of outside basis differences and othertax impacts of their investments in non-U.S. subsidiaries. As the Company was still evaluating how the Act would impact the Company's existing indefinite
reinvestment assertion as of December 30, 2017, no deferred tax impacts for this item were recorded.
Upon further analysis, the Company has modified its unremitted earnings assertion both historically and on a go-forward basis to exclude the net book incomeof its Singapore subsidiary from the indefinite reinvestment assertion. As a result, the Company has accrued a deferred tax liability of $0.6 million associated withthe state tax cost of remitting these earnings which is included as a component of income tax expense from continuing operations.
Income before income taxes includes the following components (in thousands):
December 29,
2018

Domestic
Foreign$$
F-42

Year Ended
December 30,
2017

19,777 $52,384
72,161 $December 31,
2016

9,700 $
67,20376,903 $4,313
60,18364,496

Table of Contents
Silicon Laboratories Inc.
Notes to Consolidated Financial Statements
December 29, 2018 (Continued)
17. Income Taxes (Continued)
The provision (benefit) for income taxes consists of the following (in thousands):
December 29,
2018

Current:
Domestic
Foreign
Total Current$

Deferred:
Domestic
Foreign
Total Deferred
Provision (benefit) for income taxes$

Year Ended
December 30,
2017

December 31,
2016(8,843) $5,888(2,955)48,947 $
7,077
56,024

2,639
4,421
7,060

(8,978)503(8,475)(11,430) $(25,760)(453)(26,213)29,811 $(2,430)(1,628)(4,058)3,002

The reconciliation of the federal statutory tax rate to the Company's effective tax rate is as follows:
December 29,
2018

Federal statutory rate
Foreign tax rate benefit
Research and development tax credits
GILTI and Subpart F income
Nondeductible (nontaxable) foreign expenses
State tax expense
Release of prior year unrecognized tax benefits
Excess officer compensation
Other tax effects of equity compensation
Change in cost-sharing treatment of stock-based
compensation
Excess tax benefit of stock-based compensation
Change in prior period valuation allowanceTransition tax on unremitted foreign earnings
Revaluation of deferred tax balances
Other deferred tax impacts of tax reform
Other
Effective Tax Rate
F-43

Year Ended
December 30,
2017

December 31,
2016

21.0%
(12.9)
(9.8)
4.3
3.9
1.5
(2.7)
2.4
(0.4)

35.0%
(25.4)
(4.5)
1.4
1.1
0.9
(0.6)
1.5
(2.2)

35.0%
(22.6)
(4.1)
1.4
(4.0)
0.6
(1.7)
1.4
(1.5)

(2.2)
(5.9)
(2.5)
(8.4)
0.3
(3.1)
(1.3)
(15.8)%

5.2
(5.6)
(1.3)
70.8
28.2
(64.8)
(0.9)
38.8%

(0.5)
—
(0.6)
—
—
—
1.3
4.7%

Table of Contents
Silicon Laboratories Inc.
Notes to Consolidated Financial Statements
December 29, 2018 (Continued)
17. Income Taxes (Continued)
The effective tax rate for fiscal 2018 decreased from fiscal 2017 primarily due to the reduction in the U.S. federal statutory rate as well as the inclusion of onetime tax impacts recorded in 2017 from the enactment of the Act. This decrease in the effective tax rate was offset by a decrease in the Company's foreign tax rate
benefit.
The effective tax rate for fiscal 2017 increased from fiscal 2016 primarily due to the one-time Transition Tax on unrepatriated earnings of certain foreignsubsidiaries as a result of the enactment of the Act. Additional tax expense was also recognized for the revaluation of the Company's deferred tax assets andliabilities due to the change in the federal tax rate from 35% to 21%. These increases in tax expense were partially offset by the release of a deferred tax liability
related to future foreign earnings expected under the Company's intercompany cost-sharing arrangement, as well as a decrease in the valuation allowanceestablished on federal research and development tax credits.
On July 27, 2015, the U.S. Tax Court issued an opinion in Altera Corp. v. Commissioner which concluded that related parties in an intercompany cost-sharing
arrangement are not required to share expenses related to stock-based compensation. In February 2016, the U.S. Internal Revenue Service appealed the decision to
the U.S Court of Appeals for the Ninth Circuit (the "Ninth Circuit"). On July 24, 2018, the Ninth Circuit reversed the 2015 decision of the U.S. Tax Court;
however, on August 7, 2018, the Ninth Circuit withdrew its July 2018 decision to allow time for a reconstituted panel to confer on the appeal. On October 16,
2018, a rehearing was held, however, no decision has been made by the Ninth Circuit. Although the U.S. Treasury has not withdrawn the requirement to include
stock-based compensation from its regulations, based on the facts and circumstances of the Tax Court Case, the Company continues to reflect a tax benefit in its
financial statements based on the expectation that the Tax Court decision will be upheld on appeal. As of the end of fiscal 2018, the Company's financial
statements reflect a net deferred tax asset of $27.2 million for this position. The Company will continue to monitor ongoing developments and potential impacts to
its Consolidated Financial Statements.
The Company's operations in Singapore are subject to reduced tax rates through June 30, 2024, as long as certain conditions are met. Without the impact of
the one-time Transition Tax, the income tax benefit from the reduced Singapore tax rate reflected in earnings was approximately $5.4 million (representing $0.12
per diluted share) in fiscal 2018, approximately $11.0 million (representing $0.25 per diluted share) in fiscal 2017 and approximately $7.7 million (representing$0.18 per diluted share) in fiscal 2016.
Deferred Income Taxes
Deferred tax assets and liabilities are recorded for the estimated tax impact of temporary differences between the tax basis and book basis of assets andliabilities. Significant components of the
F-44Table of Contents
Silicon Laboratories Inc.
Notes to Consolidated Financial Statements
December 29, 2018 (Continued)
17. Income Taxes (Continued)
Company's deferred taxes as of December 29, 2018 and December 30, 2017 are as follows (in thousands):
December 29,
2018

Deferred tax assets:
Net operating loss carryforwards
Research and development tax credit carryforwards
Stock-based compensation
Depreciation and amortization
Capitalized research and development
Deferred income on shipments to distributors
Expected future cost-sharing adjustment
Accrued liabilities and other$Less: Valuation allowance

Deferred tax liabilities:
Acquired intangible assets
Depreciation and amortization
Convertible debt
Prepaid expenses and other
Net deferred tax assets$

December 30,
20179,973 $
12,500
4,360
7,799
2,521
5,824
25,257
7,737
75,971(4,975)70,996

12,925
12,322
5,256
—
3,468
7,070
21,582
6,999
69,622(6,518)
63,104

20,656
4,604
8,080
2,142
35,48235,514 $13,884
1,274
10,351
1,421
26,93036,174As of December 29, 2018, the Company had federal net operating loss and research and development tax credit carryforwards of approximately $32.7 million
and $1.9 million, respectively, as a result of the Silicon Clocks, Spectra Linear and Ember acquisitions. These carryforwards expire in fiscal years 2020 through2031. Recognition of these loss and credit carryforwards is subject to an annual limit, which may cause them to expire before they are used.
As of December 29, 2018, the Company had foreign net operating loss carryforwards of approximately $1.9 million as a result of the Energy Microacquisition. These loss carryforwards do not expire and recognition is not subject to an annual limit.
The Company also had state loss, state tentative minimum tax credit, and state research and development tax credit carryforwards of approximately$43.8 million, $0.1 million, and $13.5 million, respectively. A portion of these loss and credit carryforwards was generated by the Company and a portion was
acquired through the Integration Associates, Silicon Clocks, Spectra Linear, Ember and Zentri acquisitions. Certain of these carryforwards expire in fiscal years
2019 through 2036, and others do not expire. Recognition of some of these loss and credit carryforwards is subject to an annual limit, which may cause them toexpire before they are used.
F-45

Table of Contents
Silicon Laboratories Inc.
Notes to Consolidated Financial Statements
December 29, 2018 (Continued)
17. Income Taxes (Continued)
A valuation allowance is established against a deferred tax asset when it is more likely than not that the deferred tax asset will not be realized. As of
December 29, 2018, the Company maintains a valuation allowance with respect to certain deferred tax assets relating to state research and development tax credit
and state net operating loss carryforwards.
At the end of fiscal 2018, undistributed earnings of certain of the Company's foreign subsidiaries of approximately $105 million are intended to bepermanently reinvested outside the U.S. Accordingly, no provision for foreign withholding tax and state income taxes associated with a distribution of theseearnings has been made. Determination of the amount of the unrecognized deferred tax liability on these unremitted earnings is not practicable.
Uncertain Tax Positions
The following table summarizes the activity related to gross unrecognized tax benefits (in thousands):
December 29,
2018

Beginning balance
Additions based on tax positions related to current year
Additions based on tax positions related to prior years
Reductions for tax positions as a result of a lapse of theapplicable statute of limitations
Ending balance$$Year Ended
December 30,
2017

December 31,
2016

3,187 $
630
115

3,054 $
456
114

3,610
439
99

(1,896)2,036 $

(437)
3,187 $

(1,094)
3,054

As of December 29, 2018, December 30, 2017 and December 31, 2016, the Company had gross unrecognized tax benefits, inclusive of interest, of$2.1 million, $3.2 million and $3.0 million, respectively, of which $2.1 million, $3.2 million and $2.2 million, respectively, would affect the effective tax rate if
recognized.
The Company recognizes interest and penalties related to unrecognized tax benefits in the provision for income taxes. These amounts were not material for
fiscal years 2018, 2017 and 2016.
The Norwegian Tax Administration ("NTA") has completed its examination of the Company's Norwegian subsidiary for income tax matters relating to fiscal
years 2013, 2014, 2015 and 2016. The Company received a final assessment from the NTA in December 2017 concerning an adjustment to its 2013 taxable income
related to the pricing of an intercompany transaction. The Company is currently appealing the assessment. Since the original assessment was issued, the NTA has
reduced its assessment. The revised adjustment to the pricing of the intercompany transaction results in approximately $16.2 million additional Norwegian income
tax. The Company disagrees with the NTA's assessment and believes the Company's position on this matter is more likely than not to be sustained. The Company
plans to exhaust all available administrative remedies, and if unable to resolve thisF-46

Table of Contents
Silicon Laboratories Inc.
Notes to Consolidated Financial Statements
December 29, 2018 (Continued)
17. Income Taxes (Continued)
matter through administrative remedies with the NTA, the Company plans to pursue judicial remedies. The NTA may request an advance payment ofapproximately $9 million during the appeal process.
The Company believes that it has accrued adequate reserves related to all matters contained in tax periods open to examination. Should the Company
experience an unfavorable outcome in the NTA matter, however, such an outcome could have a material impact on its financial statements.
Tax years 2014 through 2018 remain open to examination by the major taxing jurisdictions in which the Company operates. The Company is not currently
under audit in any major taxing jurisdiction.
The Company believes it is reasonably possible that the gross unrecognized tax benefits will not decrease in the next 12 months.
18. Segment Information
The Company has one operating segment, mixed-signal analog intensive products, consisting of numerous product areas. The Company's chief operating
decision maker is considered to be its Chief Executive Officer. The chief operating decision maker allocates resources and assesses performance of the businessand other activities at the operating segment level.
The Company groups its products into four categories, based on the markets and applications in which the products may be used. See Note 13, Revenues , fora summary of the Company's revenue by product category.
Revenue is attributed to a geographic area based on the shipped-to location. The following summarizes the Company's revenue by geographic area (inthousands):
December 29,
2018

United States
China
Rest of world
Total

$

$

Year Ended
December 30,
2017

149,385 $344,255
374,627
868,267 $December 31,
2016

112,574 $
307,748
348,545768,867 $

94,583291,974
311,069
697,626

The following summarizes the Company's property and equipment, net by geographic area (in thousands):
December 29,
2018

United States
Rest of world
Total

$
$
F-47

December 30,
2017

128,622 $
10,427139,049 $

119,746
7,936
127,682

Table of Contents
Supplementary Financial Information (Unaudited)
Quarterly financial information for fiscal 2018 and 2017 is as follows. All quarterly periods reported here had 13 weeks (in thousands, except per shareamounts):
FourthQuarter

Fiscal 2018
Third
SecondQuarter
QuarterFirst
Quarter

Revenues
Gross margin
Operating income
Net income$ 215,534 $ 230,243 $ 217,106 $ 205,384
130,243
135,627
131,292
124,237
18,362
25,13018,001
23,715$ 15,145 $ 27,761 $ 14,280 $ 26,405

Earnings per share:
Basic
Diluted$$0.35 $
0.35 $

FourthQuarter

0.64 $
0.63 $

0.33 $
0.32 $

Fiscal 2017
Third
SecondQuarter
Quarter

0.61
0.60

First
Quarter

Revenues
Gross margin
Operating income
Net income (loss)$ 201,018 $ 198,723 $ 190,098 $ 179,028
119,264
116,574
113,192
105,161
26,39024,96820,934
12,682$ (4,852) $ 19,949 $ 16,569 $ 15,426

Earnings (loss) per share:
Basic
Diluted$$(0.11) $(0.11) $0.47 $
0.46 $

0.39 $
0.38 $

0.37
0.36

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Exhibit 21
Subsidiaries of the Registrant
Organized Under Law Of

Silicon Laboratories Australia Pty Ltd.
Silicon Laboratories Tecnologia Brasil Ltda.
Silicon Laboratories Canada Inc.
Shenzhen Silicon Laboratories Technology Co. Ltd.
Silicon Laboratories Denmark Aps
Silicon Laboratories Finland Oy
Silicon Laboratories France SAS
Silicon Laboratories GmbH
Silicon Laboratories Asia Pacific, Limited
Silicon Laboratories Hungary Korlátolt Felelősségű Társaság
Silicon Laboratories Semiconductors India Private Limited
Silicon Laboratories Italy, S.r.l.
Silicon Laboratories Y.K.
Silicon Laboratories Norway AS
Silicon Laboratories International Pte. Ltd.
Silicon Laboratories UK Limited
Telegesis (UK) Limited
Silicon Labs Spectra, Inc.
Silicon Laboratories Technology, LLC
Silicon Labs Ember, Inc.
Zentri, Inc.
Z-Wave Alliance, LLC.
Micrium LLC

Australia
BrazilCanadaChina
Denmark
FinlandFranceGermany
Hong Kong
Hungary
India
Italy
Japan
NorwaySingapore
United Kingdom
United Kingdom
State of California
State of Delaware
State of Delaware
State of Delaware
State of Delaware
State of Florida

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Exhibit 21
Subsidiaries of the Registrant

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Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the Registration Statements (Form S-8 Nos. 333-39528, 333-45682, 333-60794, 333-83844, 333-104771,
333-112324, 333-122845, 333-131700, 333-140862, 333-149104, 333-158938, 333-195558, and 333-219454) pertaining to the stock incentive and employee stock
purchase plans of Silicon Laboratories Inc. of our reports dated January 30, 2019, with respect to the consolidated financial statements and schedule of Silicon
Laboratories Inc., and the effectiveness of internal control over financial reporting of Silicon Laboratories Inc., included in this Annual Report (Form 10-K) for the
fiscal year ended December 29, 2018.
/s/ Ernst & Young LLPAustin, Texas
January 30, 2019

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Exhibit 23.1
Consent of Independent Registered Public Accounting Firm

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Exhibit 31.1
Certification to the Securities and Exchange Commission
by Registrant's Chief Executive Officer, as required by Section 302
of the Sarbanes-Oxley Act of 2002
I, G. Tyson Tuttle, certify that:1.

I have reviewed this report on Form 10-K of Silicon Laboratories Inc.;

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.

The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange
Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for theregistrant and have:

5.

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within thoseentities, particularly during the period in which this report is being prepared;b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;c)

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectivenessof the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andd)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal
quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect,
the registrant's internal control over financial reporting; andThe registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process, summarize and report financial information; andb)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control
over financial reporting.

Date: January 30, 2019/s/ G. TYSON TUTTLE
G. Tyson Tuttle
President and Chief Executive Officer(Principal Executive Officer)

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Exhibit 31.1
Certification to the Securities and Exchange Commission by Registrant's Chief Executive Officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002

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Exhibit 31.2
Certification to the Securities and Exchange Commission
by Registrant's Chief Financial Officer, as required by Section 302
of the Sarbanes-Oxley Act of 2002
I, John C. Hollister, certify that:1.

I have reviewed this report on Form 10-K of Silicon Laboratories Inc.;

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.

The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange
Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for theregistrant and have:

5.

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within thoseentities, particularly during the period in which this report is being prepared;b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;c)

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectivenessof the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andd)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal
quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect,
the registrant's internal control over financial reporting; andThe registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process, summarize and report financial information; andb)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control
over financial reporting.

Date: January 30, 2019/s/ JOHN C. HOLLISTERJohn C. Hollister.
Senior Vice President and Chief Financial Officer(Principal Financial Officer)

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Exhibit 31.2
Certification to the Securities and Exchange Commission by Registrant's Chief Financial Officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002

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Exhibit 32.1
Certification of Chief Executive Officer and Chief Financial Officer
Pursuant to 18 U.S.C. § 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, each of the undersigned officers of Silicon Laboratories Inc. (the"Company") hereby certify that:(i) the accompanying Annual Report on Form 10-K of the Company for the fiscal year ended December 29, 2018 as filed with the Securities andExchange Commission (the "Report") fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Actof 1934; and(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to
the Securities Exchange Commission or its staff upon request.
Date: January 30, 2019/s/ G. TYSON TUTTLE
G. Tyson Tuttle
President and Chief Executive Officer/s/ JOHN C. HOLLISTERJohn C. Hollister
Senior Vice President and Chief Financial Officer

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Exhibit 32.1
Certification of Chief Executive Officer and Chief Financial Officer