TTM Technologies Inc

Digital transformation and innovation · Technology obsolescence and evolution

If we are unable to adapt our design and production processes in response to rapid technological change and process development, we may not be able to compete effectively. The markets for our products and manufacturing services are characterized by rapidly changing technology and continual implementation of new designs and production processes. Our future success highly depends on our ability to maintain and enhance our technological capabilities, design and manufacture products that meet changing customer needs, and successfully anticipate or respond to technological changes on a cost-effective and timely basis.

Cybersecurity and data protection · Insider threats and access controls

In addition, some of our employees work remotely, including while traveling for business, which increases our cybersecurity risk, creates data accessibility concerns, and makes us more susceptible to security breaches or business disruptions. Our information systems, as well as those of our customers and business partners, may be subject to unauthorized access by hackers or breached due to operator error, malfeasance, or other system disruptions.

Cybersecurity and data protection · Third party data security and vendors

In the ordinary course of our business, we collect and store sensitive data in our data centers and on our networks, including intellectual property, our proprietary and confidential business information and that of our customers, suppliers and business partners, and personally identifiable information of our employees. Our operations could also be materially disrupted if our vendors experience such outages or breaches.

Digital transformation and innovation · Technology implementation and upgrades

Issues arising during the upgrade of our enterprise resource planning system could affect our operating results and ability to manage our business effectively. We are continuing the process of upgrading our ERP to enhance operating efficiencies and provide more effective management of our business operations. We are investing significant financial and personnel resources into this project. However, there is no assurance that the system upgrade will meet our current or future business needs or that it will operate as designed.

Economic and market conditions · Economic recession and downturns

The current uncertainty in the worldwide economic environment together with other unfavorable changes in economic conditions, such as higher inflation, interest rate increases, labor shortages, and market volatility, may negatively impact consumer confidence and spending in the industries where we operate. These and other uncertain economic conditions may negatively impact revenue, earnings, and demand for our products.

Geopolitical and trade · International conflicts and tensions

The conflict between Russia and Ukraine and in other global regions has contributed to volatility in the global economy and markets and ongoing geopolitical instability and is likely to have further global economic consequences, including ongoing disruptions of the global supply chain and energy markets. The effects of the conflict have contributed to significant volatility in credit and capital markets, spikes in energy prices, changes in laws and regulations that may affect our business, sanctions or counter‑sanctions, and increased cybersecurity threats and concerns.

Geopolitical and trade · Political instability and government changes

Our operations in Asia subject us to risks and uncertainities relating to the local laws and regulations and adverse effects of political tensions that arise from time to time with China. The government of China is adopting evolving policies regarding foreign and domestic trade. No assurance can be given that the government of China will continue to pursue policies that allow for open trade with foreign countries, that such policies will be successful if pursued, or that such policies will not be significantly altered from time to time.

Economic and market conditions · Market volatility and financial crises

Uncertainty, volatility, or adverse changes in the global economy could lead to a significant decline in demand for the end products manufactured by our customers, which, in turn, could result in a decline in the demand for our products and increased pressure to reduce our prices. These adverse global economic conditions could also increase the cost and decrease the availability of potential sources of financing and increase our exposure to losses from bad debts.

Geopolitical and trade · Regulatory and policy uncertainty

Despite progress in developing its legal system, certain countries in Asia do not have a comprehensive and highly developed system of laws, particularly with respect to foreign investment activities and foreign trade. Enforcement of existing and future laws and contracts is uncertain, and implementation and interpretation thereof may be inconsistent. As the legal system develops, the promulgation of new laws, changes to existing laws, and the preemption of local regulations by national laws may adversely affect foreign investors.

Geopolitical and trade · Government funding and budget changes

A significant portion of our revenues is derived from products and services that are ultimately sold to the U.S. federal government by our OEM and EMS customers and is therefore affected by, among other things, the federal government budget process. The termination or failure to fund one or more significant defense programs or contracts by the U.S. federal government could have a material adverse effect on our business, financial condition, and results of operations.

Legal and litigation · Employment and labor law compliance

We are subject to risks relating to significant international operations, including but not limited to: managing international operations and longer payment cycles; imposition of governmental controls, unstable regulatory environments, and government or political unrest; limitations on imports or exports and/or increases in duties and taxation levied on our products; inflation or changes in political and economic conditions; labor unrest, rising wages, difficulties in staffing, geographical labor shortages, and compliance with employment laws.

Tax and financial reporting · Transfer pricing and international tax

Many countries are considering implementing or have implemented legislation to align their tax law with guidance proposed by the OECD. In particular, the OECD's Pillar Two proposes a global minimum tax of 15% on a country-by-country basis for multinational enterprises (MNEs) which have annual global revenue exceeding Euro (EUR) 750 million. The implementation of Pillar Two, which became effective in many countries on January 1, 2024, in countries in which we operate may adversely impact our effective tax rates.

Legal and litigation · Intellectual property disputes

Furthermore, there is a risk that we may infringe on the intellectual property rights of others. As is the case with many other companies in the PCB industry, we periodically receive communications from third parties asserting patent rights over our products. Irrespective of the validity or the successful assertion of such claims, we could incur costs in either defending or settling any intellectual property disputes alleging infringement.

Supply chain and procurement · Supplier operation and dependance

We rely on suppliers and equipment manufacturers for the timely delivery of raw materials, components, equipment, and spare parts used in manufacturing our products. If a raw material supplier or equipment manufacturer experiences disruptions to their supply chain or operations, or otherwise fails to satisfy our product quality standards, or if the prices or availability of raw materials change, it could harm our ability to purchase new manufacturing equipment, service the equipment we have, or timely produce our products.

Human capital and workforce · Labor relations and union negotiations

Strikes or labor disputes with our unionized employees, primarily in China, may adversely affect our ability to conduct our business. If we are unable to reach agreement with any of our unionized work groups on future negotiations regarding the terms of their collective bargaining agreements, we may be subject to work interruptions or stoppages. Any of these events could be disruptive to our operations and could result in negative publicity, loss of contracts, and a decrease in revenues.

Human capital and workforce · Talent acquisition and retention

Rising labor costs and labor shortages, including due to pandemics and other disasters, employee strikes, and other labor‑related disruptions may materially adversely affect our business, financial condition, and results of operations. Our business is labor intensive, utilizing large numbers of engineering and manufacturing personnel. There is uncertainty with rising labor costs and labor shortages.

International and currency · Foreign exchange and currency exposure

A portion of our cash, other assets, and liabilities is held in currencies other than the U.S. dollar. Changes in exchange rates among other currencies and the U.S. dollar will affect the value of these assets or liabilities and could negatively impact the amount of cash available to fund operations or repay debt. Additionally, we have revenues and costs denominated in currencies other than the U.S. dollar, primarily the RMB and the MYR. Fluctuations in the exchange rates between the U.S. dollar and the RMB and/or the MYR could result in increases in our costs or decreases in our revenues.

Market and investment · Asset valuation and impairment

We periodically evaluate whether events and circumstances have occurred, such that the potential for reduced expectations for future cash flows coupled with further decline in the market price of our stock and market capitalization may indicate that the remaining balance of goodwill and definite-lived intangible assets may not be recoverable. If forecasts and assumptions used to support the realizability of our long-lived assets change in the future, it could result in significant impairment charges.

Market position and competition · Pricing pressure and margin compression

Some of our competitors and potential competitors have advantages over us, including: greater financial and manufacturing resources that can be devoted to the development, production, and sale of their products; more established and broader sales and marketing channels; preferred vendor status with existing and potential customers; more manufacturing facilities worldwide, some of which are closer in proximity to OEMs and/or located in countries with lower production costs.

Market position and competition · Competitive pressure and market share loss

Competition in the PCB and worldwide electronics market is intense, and we could lose market share, or our profit margins may decrease, if we are unable to maintain our current competitive position in end markets using our quick-turn, high-technology, and high-mix manufacturing services. The PCB industry is intensely competitive, highly fragmented, and rapidly changing. We expect competition to continue, which could result in price reductions, reduced gross margins, and loss of market share.