Reportable Segments As of
• Lighting Products • Power and RF Products Reportable segments are components of an entity that have separate financial data that the entity's Chief Operating Decision Maker (CODM) regularly reviews when allocating resources and assessing performance. Our CODM is the Chief Executive Officer. The Company's CODM reviews gross profit as the lowest and only level of segment profit. As such, all items below gross profit in the consolidated statements of income must be included to reconcile the consolidated gross profit to the Company's consolidated income before income taxes. For financial results by reportable segment, please refer to Note 13, "Reportable Segments" in our consolidated financial statements included in Item 8 of this Annual Report. 27
Table of Contents
Industry Dynamics and Trends There are a number of industry factors that affect our business which include, among others: • Overall Demand for Products and Applications using LEDs. Our potential
for growth depends significantly on the adoption of LEDs within the
general lighting market and our ability to affect this rate of
adoption. Although LED lighting has grown in recent years, adoption of
LEDs for general lighting is relatively new, still limited, and faces
significant challenges before widespread adoption. Demand also
fluctuates based on various market cycles, a continuously evolving LED
industry supply chain, and demand dynamics in the market. These uncertainties make demand difficult to forecast for us and our customers.
• Intense and Constantly Evolving Competitive Environment. Competition in
the LED and lighting industry is intense. Many companies have made
significant investments in LED development and production equipment.
Traditional lighting companies and new entrants are investing in LED-based lighting products as LED adoption has gained momentum. Traditional lighting companies have taken steps to try and limit access
to their sales channels, including lighting agents and distributors.
Product pricing pressures exist as market participants often undertake
pricing strategies to gain or protect market share, increase the
utilization of their production capacity and open new applications to
LED-based solutions. To remain competitive, market participants must continuously increase product performance and reduce costs. To address these competitive pressures, we have invested in R&D activities to
support new product development to deliver higher levels of performance
and lower costs to differentiate our products in the market.
• Technological Innovation and Advancement. Innovations and advancements
in LED, power and RF technologies continue to expand the potential
commercial application for our products particularly in the general illumination, power electronics and wireless markets. However, new technologies or standards could emerge, or improvements could be made in existing technologies, that could reduce or limit the demand for our products in certain markets.