Company: AOSL
Filing Date: 2025-02-06
Form Type: 10-Q
Source: 0001387467-25-000017
Chunk: 94

Company: ALPHA & OMEGA SEMICONDUCTOR Ltd
Filing Date: 2025-02-06
Form: 10-Q
Item: Item 8
Chunk 94
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 proprietary SiC technology and to provide 24-months of engineering and development services for a total fee of $45.0 million, consisting of an upfront fee and milestone payments of $18.0 million, $6.8 million and $9.0 million paid to us in the March 2023, July 2023 and February 2024, respectively, with the remaining amount to be paid upon the achievement of specified engineering services and product milestones.  The license and development fee is determined to be one performance obligation and is recognized over the 24 months during which we perform the engineering and development services.  We use the input method to measure progression of the transfer of services.  During the three and six months ended December 31, 2024, we recorded $5.4 million and $11.0 million of license and development revenue, respectively, and during the three and the six months ended December 31, 2023, we recorded $5.5 million and $11.1 million of license and development revenue, respectively.  As of December 31, 2024, we had recorded a total of $42.2 million of license and development revenue.  When our performance under the contract precedes our receipt of consideration from the customer, and the receipt of consideration is conditional upon factors other than the passage of time, a contract asset is recorded.  We also entered an accompanying supply agreement to provide limited wafer supply to the customer.

Cost of goods sold

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

Operating expenses

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

Research and development expenses. Our research and development expenses consist primarily of salaries, bonuses, benefits