Company: AOSL
Filing Date: 2025-08-28
Form Type: 10-K
Source: 0001628280-25-041297
Chunk: 97

Company: ALPHA & OMEGA SEMICONDUCTOR Ltd
Filing Date: 2025-08-28
Form: 10-K
Item: Item 1A
Chunk 97
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 may extend lead times, limit supplies or increase prices due to capacity constraints or other factors.  If the prices of these raw materials rise significantly, we may be unable to pass on the increased cost to our customers.  Our results of operations could be adversely affected if we are unable to obtain adequate supplies of raw materials in a timely manner or at reasonable price.  In addition, from time to time, we may need to reject raw materials because they do not meet our specifications or the sourcing of such materials do not comply with our conflict mineral policies, resulting in potential delays or declines in output.  Furthermore, problems with our raw materials may give rise to compatibility or performance issues in our products, which could lead to an increase in customer returns or product warranty claims.  Errors or defects may arise from raw materials supplied by third parties that are beyond our detection or control, which could lead to additional customer returns or product warranty claims that may adversely affect our business and results of operations.

We may not be able to accurately estimate provisions at fiscal period end for price adjustment and stock rotation rights under our agreements with distributors, and our failure to do so may impact our operating results.

We sell a majority of our products to distributors under arrangements allowing price adjustments and returns under stock rotation programs, subject to certain limitations.  As a result, we are required to estimate allowances for price adjustments and stock rotation for our products as inventory at distributors at each reporting period end.

We estimate the allowance for price adjustment based on factors such as distributor inventory levels, forecasted distributor selling prices, distributor margins and demand for our products.  Our estimated allowances for price adjustments, which we offset against accounts receivable from distributors, were $40.8 million and $41.7 million at June 30, 2025 and 2024, respectively.

Our accruals for stock rotation are estimated based on historical returns and individual distributor agreement, and stock rotation rights, which are recorded as accrued liabilities on our consolidated balance sheets, are contractually capped based on 

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the terms of each individual distributor agreement.  Our estimated liabilities for stock rotation at June 30, 2025 and 2024 were $6.2 million and $4.7 million, respectively.

Our estimates for these allowances and accruals may be inaccurate.  If we subsequently determine that any allowance and accrual based on our estimates is insufficient, we may be required to increase the size of our allowances and accrual in future periods, which would adversely affect our results of operations and financial condition.