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Changing the Company’s operations in accordance with new or changed restrictions on international trade can be expensive, time-consuming and disruptive to the Company’s operations.
Such restrictions can be announced with little or no advance notice and the Company may not be able to effectively mitigate all adverse impacts from such measures.
For example, tensions between governments, including the U.S. and China, have in the past led to tariffs and other
Changing the Company’s operations in accordance with new or changed restrictions on international trade can be expensive, time-consuming and disruptive to the Company’s operations.
Such restrictions can be announced with little or no advance notice and the Company may not be able to effectively mitigate all adverse impacts from such measures.
For example, tensions between governments, including the U.S. and China, have in the past led to tariffs and other restrictions being imposed on the Company’s business.
If disputes and conflicts further escalate in the future, actions by governments in response could be significantly more severe and restrictive and could materially adversely affect the Company’s business.
The Company has a minority market share in the global smartphone, personal computer and tablet markets.
The Company faces substantial competition in these markets from companies that have significant technical, marketing, distribution and other resources, as well as established hardware, software and digital content supplier relationships.
In addition, some of the Company’s competitors have broader product lines, lower-priced products and a larger installed base of active devices.
Competition has been particularly intense as competitors have aggressively cut prices and lowered product margins.
Many of the Company’s competitors seek to compete primarily through aggressive pricing and very low cost structures, and by imitating the Company’s products and infringing on its intellectual property.
Effective intellectual property protection is not consistently available in every country in which the Company operates.
If the Company is unable to continue to develop and sell innovative new products with attractive margins or if competitors infringe on the Company’s intellectual property, the Company’s ability to maintain a competitive advantage could be materially adversely affected.
Defects can also exist in components and products the Company purchases from third parties.
Component defects could make the Company’s products unsafe and create a risk of environmental or property damage and personal injury.
These risks may increase as the Company’s products are introduced into specialized applications, including health.
In addition, the Company’s service offerings can have quality issues and from time to time experience outages, service slowdowns or errors.
As a result, from time to time the Company’s services have not performed as anticipated and may not meet customer expectations.
There can be no assurance the Company will be able to detect and fix all issues and defects in the hardware, software and services it offers.
Failure to do so can result in widespread technical and performance issues affecting the Company’s products and services.
In addition, the Company can be exposed to product liability claims, recalls, product replacements or modifications, write-offs of inventory, property, plant and equipment or intangible assets, and significant warranty and other expenses, including litigation costs and regulatory fines.
Quality problems can also adversely affect the experience for users of the Company’s products and services, and result in harm to the Company’s reputation, loss of competitive advantage, poor market acceptance, reduced demand for products and services, delay in new product and service introductions and lost sales.
The Company is exposed to the risk of write-downs on the value of its inventory and other assets, in addition to purchase commitment cancellation risk.
The Company records a write-down for product and component inventories that have become obsolete or exceed anticipated demand, or for which cost exceeds net realizable value.
The Company also accrues necessary cancellation fee reserves for orders of excess products and components.
The Company reviews long-lived assets, including capital assets held at its suppliers’ facilities and inventory prepayments, for impairment whenever events or circumstances indicate the assets may not be recoverable.
If the Company determines that an impairment has occurred, it records a write-down equal to the amount by which the carrying value of the asset exceeds its fair value.
Although the Company believes its inventory, capital assets, inventory prepayments and other assets and purchase commitments are currently recoverable, there can be no assurance the Company will not incur write-downs, fees, impairments and other charges given the rapid and unpredictable pace of product obsolescence in the industries in which the Company competes.
The Company’s minority market share in the global smartphone, personal computer and tablet markets can make developers less inclined to develop or upgrade software for the Company’s products and more inclined to devote their resources to developing and upgrading software for competitors’ products with larger market share.
When developers focus their efforts on these competing platforms, the availability and quality of applications for the Company’s devices can suffer.