1、?Dear Stockholders,This is my fi rst letter to you as Tesseras President and CEO and there is a lot of exciting news to share.2008 was another year of solid growth for the company.Total revenue was$248.3 million and royalties and license fees were$220.3 million,up 27 percent and 37 percent,respectiv
2、ely,compared to 2007.We spent$61.6 million dollars in 2008 in R&D,fi led for 175 patents,and ended the year with more than 1,500 patents and patent applications,worldwide.We have already added to our application list in 2009.Innovation is not only one of our greatest resources,it is also one of Amer
3、icas greatest renewable resources.We are a nation of inventors,and one key motivator behind Americas innovation“engine”is a strong patent system.Our technology patent portfolio covers a broad range of what we believe are world-class innovations,from chip scale and multi chip packaging through imagin
4、g and optics to thermal management.New Business Segments:Micro-Electronics and Imaging&Optics In early 2009,we aligned our segment reporting to better represent our ongoing activities and products and to provide more transparency for our investors.Our two business segments are Micro-Electronics and
5、Imaging&Optics.Micro-Electronics covers semiconductor packaging,interconnect,components and materials.Its solutions focus on system-level electronic product miniaturization besides chip scale packaging technology.Micro-Electronics includes our?PILR advanced interconnect platform,which is designed to
6、 overcome current interconnect technology limitations such as pitch,profi le,performance,reliability and test capacity.We are also dedicating resources in Micro-Electronics to new developments in thermal management,including electro hydrodynamic(EHD)cooling.In addition,we continue to examine ways,vi
7、a internal R&D or acquisition,to offer our current licensees new and interesting technologies that will extend their relationship with us and enable their continued growth.Imaging&Optics is composed of two elements.The fi rst is our technology licensing business in the imaging and optics market,such
8、 as our wafer-level camera technologies,image sensor packaging,and image enhancement solutions.The second is our product and services business.This includes the manufacture of small form factor micro-optics and our Product Launch Services,which we launched in September of 2008.We plan to deliver sta
9、te-of-the-art imaging solutions such as our OptiML single-element VGA lens through our Product Launch Services directly to manufacturers.2004200520062007200850.0100.0150.0200.0250.0Products and ServicesRoyalties and License FeesPast Production PaymentsAnnual Revenues53.613.16.069.516.58.7106.626.077
10、.1161.034.6220.327.8.242%CAGR$in millionsHenry R.NothhaftPresident and Chief Executive Offi cer?Dear Stockholders,This is my fi rst letter to you as Tesseras President and CEO and there is a lot of exciting news to share.2008 was another year of solid growth for the company.Total revenue was$248.3 m
11、illion and royalties and license fees were$220.3 million,up 27 percent and 37 percent,respectively,compared to 2007.We spent$61.6 million dollars in 2008 in R&D,fi led for 175 patents,and ended the year with more than 1,500 patents and patent applications,worldwide.We have already added to our appli
12、cation list in 2009.Innovation is not only one of our greatest resources,it is also one of Americas greatest renewable resources.We are a nation of inventors,and one key motivator behind Americas innovation“engine”is a strong patent system.Our technology patent portfolio covers a broad range of what
13、 we believe are world-class innovations,from chip scale and multi chip packaging through imaging and optics to thermal management.New Business Segments:Micro-Electronics and Imaging&Optics In early 2009,we aligned our segment reporting to better represent our ongoing activities and products and to p
14、rovide more transparency for our investors.Our two business segments are Micro-Electronics and Imaging&Optics.Micro-Electronics covers semiconductor packaging,interconnect,components and materials.Its solutions focus on system-level electronic product miniaturization besides chip scale packaging tec
15、hnology.Micro-Electronics includes our?PILR advanced interconnect platform,which is designed to overcome current interconnect technology limitations such as pitch,profi le,performance,reliability and test capacity.We are also dedicating resources in Micro-Electronics to new developments in thermal m
16、anagement,including electro hydrodynamic(EHD)cooling.In addition,we continue to examine ways,via internal R&D or acquisition,to offer our current licensees new and interesting technologies that will extend their relationship with us and enable their continued growth.Imaging&Optics is composed of two
17、 elements.The fi rst is our technology licensing business in the imaging and optics market,such as our wafer-level camera technologies,image sensor packaging,and image enhancement solutions.The second is our product and services business.This includes the manufacture of small form factor micro-optic
18、s and our Product Launch Services,which we launched in September of 2008.We plan to deliver state-of-the-art imaging solutions such as our OptiML single-element VGA lens through our Product Launch Services directly to manufacturers.2004200520062007200850.0100.0150.0200.0250.0Products and ServicesRoy
19、alties and License FeesPast Production PaymentsAnnual Revenues53.613.16.069.516.58.7106.626.077.1161.034.6220.327.8.242%CAGR$in millionsHenry R.NothhaftPresident and Chief Executive Offi cerCorporate InformationExecutive Offi cersHenry R.Nothhaft Vice Chairman,President and Chief Executive Offi cerM
20、ichael Anthofer Executive Vice President and Chief Financial Offi cerMichael BereziukExecutive Vice President,Imaging&Optics Bernard J.Cassidy Senior Vice President,General Counsel and SecretaryBoard of DirectorsBruce M.McWilliams,Ph.D.Chairman and Independent ConsultantHenry R.NothhaftVice Chairman
21、,President and Chief Executive Offi cerRobert Boehlke1,2 Retired Executive Vice President and CFO,KLA-Tencor CorporationNicholas E.Brathwaite2 Partner,Riverwood Capital LLCJohn B.Goodrich1,3 Founding Partner,Wilson,Sonsini,Goodrich and Rosati,RetiredAl S.Joseph,Ph.D.Independent ConsultantDavid C.Nag
22、el,Ph.D.2,3Independent ConsultantRobert A.Young,Ph.D.1,3 Managing Director,Mirador Capital LLC 1)Audit Committee 2)Compensation Committee 3)Nominating CommitteeCorporate Headquarters Tessera Technologies,Inc.3025 Orchard Parkway San Jose,CA 95134 Phone:408.321.6000 Fax:408.321.8257 Email: Independen
23、t RegisteredPublic Accounting Firm PricewaterhouseCoopers LLP Ten Almaden Boulevard,Suite 1600 San Jose,CA 95113 Phone:408.817.3700Legal Counsel Latham&Watkins LLP 140 Scott Drive Menlo Park,CA 94025 Phone:650.328.4600Transfer Agent and Registrar Computershare Investors Services P.O.Box 43078 Provid
24、ence,RI 02940 Phone:303.262.0600 Fax:303.262.0700Annual MeetingMay 19,2009,2:30-4:30 p.m.PDT Tessera Technologies,Inc.3025 Orchard Parkway San Jose,CA 95134 Phone:408.321.6000Stock ListingNASDAQ Global Select Market Ticker Symbol:TSRA20002001200220032004200520062007200820040060080010001200140016000I
25、maging&OpticsMirco-Electronics100117521650397611461504159234293347444651801930Worldwide Patents and Applications2008 Accomplishments and Future GoalsTurning back to 2008,we were very active in all areas of our business.We announced seven new Imaging&Optics products in 2008,signed seven new Imaging&O
26、ptics agreements,secured key design wins with existing and new customers,and furthered our development work in emerging technologies that will help build long-term growth,including our?PILR interconnect platform and EHD cooling.We generated$54.2 million in free cash fl ow.This further strengthened o
27、ur balance sheet,as we exited the year with approximately$298.6 million in cash,cash equivalents and investments,and no debt.I would like to note in February of 2009 we signifi cantly added to our cash position as Amkor paid us$64.1million as a result of a successful resolution of a contract dispute
28、.Near term,we are developing our?PILR technology as an attractive alternative for conventional fl ip chip packaging solutions,much of which suffers from substrate and package yield issues as the distance between the contact pads on the chip continues to be reduced.Our?PILR technology has the potenti
29、al to address these challenges while leveraging industry standard fl ip chip processes,materials,equipment and know-how.As a result,our?PILR platform has the potential to reduce the total cost of fl ip chip packages and gain share in this growing market.Near-term focus in Imaging&Optics is to accele
30、rate the adoption of our imaging and optics technologies in digital still cameras,wireless devices,personal computers and other consumer electronics.Long term,our vision is the integration of camera module and optics technologies into what we term“Smart Modules.”These modules will be able to support
31、 a wide range of imaging applications and provide two types of functionality.First,they will capture and display the best possible image with the least amount of effort and expertise.Second,Smart Modules will use an image to trigger an event or series of events,where the actual image may never be di
32、splayed(e.g.gesture control,targeted advertising and security).Innovation and Its ProtectionInnovation would not exist without the strong patent protection currently afforded under United States patent laws and regulations.We believe intellectual property providers have a duty to protect and enforce
33、 their intellectual property rights,in an effi cient,focused manner to yield maximum results.As such,in 2008 we were very active in our U.S.International Trade Commission(ITC)actions and our successful arbitration with Amkor as we continued to defend our intellectual property and worked to ensure a
34、level playing fi eld for our current customers.In mid March of 2009 we dismissed our ITC Investigation No.337-TA-649(Subcon ITC action),to focus our resources on vigorously pursuing swift and favorable enforcement of our patent rights in our ITC Investigation Number 337-TA-630(the DRAM ITC Action)an
35、d our ITC Investigation No.337-TA-605(Wireless ITC action).As I write this,we are awaiting a decision in the Wireless ITC action,the Final Determination by the full ITC commission.As background,in December of 2008,the Administrative Law Judge(ALJ)in this action issued an Initial Determination fi ndi
36、ng our asserted patents are valid but not infringed by the respondents.He concluded that the method we used to prove infringement did not meet the necessary burden of proof.This same methodology was validated by the ITC in our action with Sharp in 2002.Therefore,we petitioned for review of the Initi
37、al Determination,as we believe it is an important policy question for the ITC,namely,whether the methodology that has been accepted should continue to be followed.The full commission agreed to take up review and is scheduled to issue its Final Determination by May 20,2009.In the DRAM ITC action,the
38、ALJ is now scheduled to issue his Initial Determination by July 17,2009.ConclusionIn closing,in 2009 we expect to further our penetration into the Imaging&Optics market and ramp our revenue associated with our image enhancement solutions.Our Micro-Electronics chip scale packaging technology continue
39、s to be used in high volume,in markets such as computing and wireless mobile devices,and our thermal management and packaging and interconnect solutions are gaining market attention.We also anticipate devoting resources to defending our innovation,through appropriate venues as the circumstances warr
40、ant.Innovation without compensation is philanthropy.While we too are facing the headwinds currently brewing in our served markets,we enter this admittedly turbulent time encouraged by our 2008 accomplishments and supported by our solid balance sheet.We remain confi dent about our long-term growth po
41、tential,and I look forward to sharing our future successes with you.Sincerely,Henry R.NothhaftPresident and Chief Executive Offi cerApril 14,2009Corporate InformationExecutive Offi cersHenry R.Nothhaft Vice Chairman,President and Chief Executive Offi cerMichael Anthofer Executive Vice President and
42、Chief Financial Offi cerMichael BereziukExecutive Vice President,Imaging&Optics Bernard J.Cassidy Senior Vice President,General Counsel and SecretaryBoard of DirectorsBruce M.McWilliams,Ph.D.Chairman and Independent ConsultantHenry R.NothhaftVice Chairman,President and Chief Executive Offi cerRobert
43、 Boehlke1,2 Retired Executive Vice President and CFO,KLA-Tencor CorporationNicholas E.Brathwaite2 Partner,Riverwood Capital LLCJohn B.Goodrich1,3 Founding Partner,Wilson,Sonsini,Goodrich and Rosati,RetiredAl S.Joseph,Ph.D.Independent ConsultantDavid C.Nagel,Ph.D.2,3Independent ConsultantRobert A.You
44、ng,Ph.D.1,3 Managing Director,Mirador Capital LLC 1)Audit Committee 2)Compensation Committee 3)Nominating CommitteeCorporate Headquarters Tessera Technologies,Inc.3025 Orchard Parkway San Jose,CA 95134 Phone:408.321.6000 Fax:408.321.8257 Email: Independent RegisteredPublic Accounting Firm Pricewater
45、houseCoopers LLP Ten Almaden Boulevard,Suite 1600 San Jose,CA 95113 Phone:408.817.3700Legal Counsel Latham&Watkins LLP 140 Scott Drive Menlo Park,CA 94025 Phone:650.328.4600Transfer Agent and Registrar Computershare Investors Services P.O.Box 43078 Providence,RI 02940 Phone:303.262.0600 Fax:303.262.
46、0700Annual MeetingMay 19,2009,2:30-4:30 p.m.PDT Tessera Technologies,Inc.3025 Orchard Parkway San Jose,CA 95134 Phone:408.321.6000Stock ListingNASDAQ Global Select Market Ticker Symbol:TSRA20002001200220032004200520062007200820040060080010001200140016000Imaging&OpticsMirco-Electronics100117521650397
47、611461504159234293347444651801930Worldwide Patents and Applications2008 Accomplishments and Future GoalsTurning back to 2008,we were very active in all areas of our business.We announced seven new Imaging&Optics products in 2008,signed seven new Imaging&Optics agreements,secured key design wins with
48、 existing and new customers,and furthered our development work in emerging technologies that will help build long-term growth,including our?PILR interconnect platform and EHD cooling.We generated$54.2 million in free cash fl ow.This further strengthened our balance sheet,as we exited the year with a
49、pproximately$298.6 million in cash,cash equivalents and investments,and no debt.I would like to note in February of 2009 we signifi cantly added to our cash position as Amkor paid us$64.1million as a result of a successful resolution of a contract dispute.Near term,we are developing our?PILR technol
50、ogy as an attractive alternative for conventional fl ip chip packaging solutions,much of which suffers from substrate and package yield issues as the distance between the contact pads on the chip continues to be reduced.Our?PILR technology has the potential to address these challenges while leveragi
51、ng industry standard fl ip chip processes,materials,equipment and know-how.As a result,our?PILR platform has the potential to reduce the total cost of fl ip chip packages and gain share in this growing market.Near-term focus in Imaging&Optics is to accelerate the adoption of our imaging and optics t
52、echnologies in digital still cameras,wireless devices,personal computers and other consumer electronics.Long term,our vision is the integration of camera module and optics technologies into what we term“Smart Modules.”These modules will be able to support a wide range of imaging applications and pro
53、vide two types of functionality.First,they will capture and display the best possible image with the least amount of effort and expertise.Second,Smart Modules will use an image to trigger an event or series of events,where the actual image may never be displayed(e.g.gesture control,targeted advertis
54、ing and security).Innovation and Its ProtectionInnovation would not exist without the strong patent protection currently afforded under United States patent laws and regulations.We believe intellectual property providers have a duty to protect and enforce their intellectual property rights,in an eff
55、i cient,focused manner to yield maximum results.As such,in 2008 we were very active in our U.S.International Trade Commission(ITC)actions and our successful arbitration with Amkor as we continued to defend our intellectual property and worked to ensure a level playing fi eld for our current customer
56、s.In mid March of 2009 we dismissed our ITC Investigation No.337-TA-649(Subcon ITC action),to focus our resources on vigorously pursuing swift and favorable enforcement of our patent rights in our ITC Investigation Number 337-TA-630(the DRAM ITC Action)and our ITC Investigation No.337-TA-605(Wireles
57、s ITC action).As I write this,we are awaiting a decision in the Wireless ITC action,the Final Determination by the full ITC commission.As background,in December of 2008,the Administrative Law Judge(ALJ)in this action issued an Initial Determination fi nding our asserted patents are valid but not inf
58、ringed by the respondents.He concluded that the method we used to prove infringement did not meet the necessary burden of proof.This same methodology was validated by the ITC in our action with Sharp in 2002.Therefore,we petitioned for review of the Initial Determination,as we believe it is an impor
59、tant policy question for the ITC,namely,whether the methodology that has been accepted should continue to be followed.The full commission agreed to take up review and is scheduled to issue its Final Determination by May 20,2009.In the DRAM ITC action,the ALJ is now scheduled to issue his Initial Det
60、ermination by July 17,2009.ConclusionIn closing,in 2009 we expect to further our penetration into the Imaging&Optics market and ramp our revenue associated with our image enhancement solutions.Our Micro-Electronics chip scale packaging technology continues to be used in high volume,in markets such a
61、s computing and wireless mobile devices,and our thermal management and packaging and interconnect solutions are gaining market attention.We also anticipate devoting resources to defending our innovation,through appropriate venues as the circumstances warrant.Innovation without compensation is philan
62、thropy.While we too are facing the headwinds currently brewing in our served markets,we enter this admittedly turbulent time encouraged by our 2008 accomplishments and supported by our solid balance sheet.We remain confi dent about our long-term growth potential,and I look forward to sharing our fut
63、ure successes with you.Sincerely,Henry R.NothhaftPresident and Chief Executive Offi cerApril 14,2009UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington,D.C.20549FORM 10-K(Mark One)ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIESEXCHANGE ACT OF 1934For the fiscal year ended Decemb
64、er 31,2008ORTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIESEXCHANGE ACT OF 1934For the transition period from _ to _Commission File Number:000-50460Tessera Technologies,Inc.(Exact name of registrant as specified in its charter)Delaware16-1620029(State or other jurisdiction of inco
65、rporation or organization)(I.R.S.Employer Identification No.)3025 Orchard ParkwaySan Jose,California 95134(408)321-6000(Address of principal executive offices,including zip code)(Registrants telephone number,including area code)Securities registered pursuant to Section 12(b)of the Act:Title of each
66、className of each exchange on which registeredCommon stock,par value$0.001 per shareThe NASDAQ Global Select MarketSecurities registered pursuant to Section 12(g)of the Act:NoneIndicate by check mark if the registrant is a well-known seasoned issuer,as defined in Rule 405 of the Securities Act.Yes N
67、o Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d)of theSecurities Exchange Act.Yes No Indicate by check mark whether the registrant(1)has filed all reports required to be filed by Section 13 or 15(d)of theSecurities Exchange Act of 193
68、4 during the preceding 12 months(or for such shorter period that the registrant was required tofile such reports),and(2)has been subject to such filing requirements for the past 90 days.Yes No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not con
69、tained herein,and will not be contained,to the best of registrants knowledge,in definitive proxy or information statements incorporated byreference in Part III of this Form 10-K or any amendment to this Form 10-K.Indicate by check mark whether the registrant is a large accelerated filer,an accelerat
70、ed filer,a non-accelerated filer,or asmaller reporting company.See the definitions of“large accelerated filer,”“accelerated filer”and“smaller reportingcompany”in Rule 12b-2 of the Exchange Act.(Check one):Large accelerated filer Accelerated filer Non-accelerated filer (Do not check if a smaller repo
71、rting company)Smaller reporting company Indicate by check mark whether the registrant is a shell company(as defined in Rule 12b-2 of the Securities ExchangeAct).Yes No The aggregate market value of the registrants common stock held by non-affiliates of the registrant as of June 29,2008was$791,399,83
72、4(based on the closing sale price of the registrants common stock as reported on the Nasdaq Global SelectMarket).The number of shares outstanding of the registrants common stock as of February 20,2009 was 48,625,065.DOCUMENTS INCORPORATED BY REFERENCE:Portions of the registrants Proxy Statement for
73、the registrants 2009 Annual Meeting of Stockholders to be held onMay 19,2009 will be filed with the Commission within 120 days after the close of the registrants 2008 fiscal year and areincorporated by reference in Part II and Part III.ANNUAL REPORT ON FORM 10-KFOR THE FISCAL YEAR ENDED DECEMBER 31,
74、2008TABLE OF CONTENTSPagePART IItem 1.Business.1Item 1A.Risk Factors.11Item 1B.Unresolved Staff Comments.28Item 2.Properties.28Item 3.Legal Proceedings.28Item 4.Submission of Matters to a Vote of Security Holders.37PART IIItem 5.Market for Registrants Common Equity,Related Stockholder Matters and Is
75、suer Purchasesof Equity Securities.38Item 6.Selected Financial Data.39Item 7.Managements Discussion and Analysis of Financial Condition and Results of Operations.41Item 7A.Quantitative and Qualitative Disclosures About Market Risk.57Item 8.Financial Statements and Supplementary Data.58Item 9.Changes
76、 in and Disagreements With Accountants on Accounting and FinancialDisclosure.59Item 9A.Controls and Procedures.59Item 9B.Other Information.60PART IIIItem 10.Directors,Executive Officers and Corporate Governance.61Item 11.Executive Compensation.61Item 12.Security Ownership of Certain Beneficial Owner
77、s and Management and Related StockholderMatters.61Item 13.Certain Relationships and Related Transactions,and Director Independence.61Item 14.Principal Accountant Fees and Services.61PART IVItem 15.Exhibits and Financial Statement Schedules.62SignaturesCautionary Statement Regarding Forward-Looking S
78、tatementsThis Annual Report contains forward-looking statements,which are subject to the safe harbor provisionscreated by the Private Securities Litigation Reform Act of 1995.Certain,but not all,of the forward-lookingstatements in this report are specifically identified.The identification of certain
79、 statements as“forward-looking”is not intended to mean that other statements not specifically identified are not forward-looking.All statementsother than statements about historical facts are statements that could be deemed forward-looking statements,including,but not limited to,statements that rela
80、te to our future revenue,product development,demand,acceptance and market share,growth rate,competitiveness,gross margins,levels of research and development(“R&D”),expenditures,the outcome or effects of and expenses related to litigation and administrativeproceedings related to our patents,our inten
81、t to enforce our intellectual property,our ability to license ourintellectual property,tax expenses,cash flows,our ability to liquidate and recover the carrying value of ourinvestments,our managements plans and objectives for our current and future operations,managements plansfor repurchasing Compan
82、y stock pursuant to the authorization of our Board,the levels of customer spending orR&D activities,general economic conditions and the sufficiency of financial resources to support futureoperations,the outcome or effects of and expenses related to litigation and capital expenditures.Words such as“e
83、xpects,”“anticipates,”“plans,”“believes,”“seeks,”“estimates,”“could,”“would,”“may,”“intends,”“targets”and similar expressions or variations of such words are intended to identify forward-looking statements,but arenot the exclusive means of identifying forward-looking statements in this Annual Report
84、.Although forward-looking statements in this Annual Report reflect the good faith judgment of ourmanagement,such statements can only be based on facts and factors currently known by us.Consequently,forward-looking statements are inherently subject to risks,uncertainties,and changes in condition,sign
85、ificance,value and effect,including those discussed below under the heading“Risk Factors”within Item 1A of this reportand other documents we file from time to time with the Securities and Exchange Commission,such as ourquarterly reports on Form 10-Q and our current reports on Form 8-K.Such risks,unc
86、ertainties and changes incondition,significance,value and effect could cause our actual results to differ materially from those expressedherein and in ways not readily foreseeable.Readers are urged not to place undue reliance on these forward-looking statements,which speak only as of the date of thi
87、s Annual Report and are based on information currentlyand reasonably known to us.We undertake no obligation to revise or update any forward-looking statements inorder to reflect any event or circumstance that may arise after the date of this Annual Report.Readers are urgedto carefully review and con
88、sider the various disclosures made in this Annual Report,which attempt to adviseinterested parties of the risks and factors that may affect our business,financial condition,results of operationsand prospects.PART IItem 1.BusinessCorporate InformationTessera Technologies,Inc.(“Tessera”)was founded an
89、d incorporated in the state of Delaware in 1990.Ourprincipal executive offices are located at 3025 Orchard Parkway,San Jose,California 95134.We also haveoffices,research and development and manufacturing facilities in other locations as described below in Item 2Properties.Our telephone number is(408
90、)321-6000.We maintain a website at .The referenceto our website address does not constitute incorporation by reference of the information contained on thiswebsite.Tessera,the Tessera logo,BGA,PILR,OptiML,DigitalOptics,SHELLCASE and FotoNation aretrademarks or registered trademarks of Tessera or its
91、affiliated companies in the United States and othercountries.All other company,brand and product names may be trademarks or registered trademarks of theirrespective companies.In this annual report,the“Company,”“Tessera,”“we,”“us”and“our”refer to Tessera Technologies,Inc.and,for its subsidiaries on a
92、 consolidated basis.Business OverviewTessera is a technology innovator that develops and delivers miniaturization solutions that transformwireless,computing,and consumer electronic products.Our micro-electronics solutions enable smaller,higher-functionality electronic devices and include semiconduct
93、or packaging technologies encompassing interconnectand substrates.Our imaging and optics solutions provide low-cost,high-quality camera functionality inelectronic products and include image sensor packaging,wafer-level optics and wafer-level camera technologies,and image enhancement technologies.We
94、also offer customized micro-optic lenses,from diffractive andrefractive optical elements to integrated micro-optical subassemblies.We license our technologies worldwide,aswell as deliver products based on these technologies,some of which is done to promote the development ofsupply chain infrastructu
95、re.Our patented chip scale packaging(“CSP”)technology and associated CSP substrate technology enable ourcustomers to assemble semiconductor chips into CSPs that are almost as small as the chip itself.Our multi-chippackaging(“MCP”)technology and associated MCP substrate technology extends this capabi
96、lity by enablingmultiple semiconductors to be stacked vertically in a single three-dimensional MCP that occupies almost thesame circuit board area as a CSP.Our technologies allow several semiconductor chips and passive components tobe densely combined in ultra-compact electronics modules.By reducing
97、 the size of the semiconductor packageand shortening electrical connections between the chip and the circuit board,our technologies allow furtherminiaturization and increases in performance and functionality for electronic products.We achieve this withoutsacrificing reliability by allowing movement
98、within the package,thus addressing critical problems associatedwith thermally-induced stress which can occur when packages decrease in size.We license most of our CSP and MCP technology,which includes our BGAsolution,under a licenseagreement that we refer to as Tesseras Compliant Chip(“TCC”)technolo
99、gy license.Our TCC license grants aworldwide royalty-bearing right under the licensed patent claims to assemble,use and sell certain CSPs andMCPs.We generally license semiconductor material suppliers under our Tessera Compliant Mounting Tape(“TCMT”)license.Our TCMT license calls for a one-time licen
100、se fee.We offer a technology license on a worldwide basis for our interconnect technologies that covers ouradvanced package substrate,flexible printed circuit and printed wiring board patents.Our interconnect1technologies include the PILRplatform,which is targeted at the interconnect within semicond
101、uctor packages,substrates,printed circuit boards(“PCBs”)and other electronic components.We have an imaging and optics technology portfolio that includes wafer-level camera technology,wafer-level optics,image sensor packaging and image enhancement technologies,and micro-optical lenses.We offer atechn
102、ology license on a worldwide basis for these technologies,as well as manufacture products.In February2008,we acquired FotoNation,a privately-owned business that develops embedded solutions to improve imagequality and enhance,extend,and simplify camera functionality.Principal technologies include red
103、-eyecorrection,face tracking,smile and blink detection and face beautification.Our Wafer-Level Camera(“WLC”)technology uses our OptiMLWafer-Level Optics(“WLO”)andSHELLCASEMVP image sensor packaging solutions to build camera modules,using reflow compatiblematerials and a wafer stacking and packaging
104、process.This wafer level approach enables manufacturers toachieve economy of scale while producing camera modules that are thin,reliable and cost effective.Our OptiMLimage solutions range from our OptiML Focus and OptiML Zoom to our FotoNationRed and FotoNation FaceTools.Our Digital Optics solutions
105、 utilize semiconductor processes and equipment to manufacture wafer-based custom micro-optics for three main markets:lithography,communications and barcode scanners.Our intellectual property includes approximately 1,560 domestic and internationally issued patents andpatent applications,covering a ra
106、nge of advanced semiconductor packaging,substrate,interconnect and imagingand optics technologies.We have two reportable segments:Intellectual Property and Product and Service.We derive the majority ofour revenues from license fees and royalties associated with our semiconductor packaging technology
107、,with agrowing contribution from our imaging and optics technologies.Our semiconductor packaging technology hasbeen widely adopted and is currently licensed to more than 70 companies,including Intel Corporation,HynixSemiconductor,Inc.,Renesas Technology Co.,Samsung Electronics Co.,Ltd.,Powertech Tec
108、hnology,Inc.,Texas Instruments,Inc.and Toshiba Corporation.We believe that more than 100 companies across thesemiconductor supply chain have invested in the materials,equipment and assembly infrastructure needed tomanufacture products that incorporate our packaging technology.Industry BackgroundPack
109、aged semiconductor chips,which we refer to as semiconductors,are essential components in a broadrange of communications,computing and consumer electronic products.According to the SemiconductorIndustry Association,worldwide semiconductor sales totaled$248.6 billion in 2008.Many electronic productsre
110、quire increasingly complex semiconductors that are smaller and higher-performing,integrate more features andfunctions and are less expensive to produce than previous generations of semiconductors.Satisfying the demandfor these complex semiconductors requires advances in semiconductor design,manufact
111、uring and packagingtechnologies.The disaggregation of the semiconductor industry and the emergence of intellectual property companiesHistorically,most semiconductor companies were vertically integrated and they designed,fabricated,packaged and tested their semiconductors using internally developed s
112、oftware design tools and manufacturingprocesses and equipment.As the cost and skills required for designing and manufacturing complexsemiconductors increased,the semiconductor industry became disaggregated,with companies concentrating onone or more individual stages of the semiconductor development
113、and production process.This disaggregation hasfueled the growth of fabless semiconductor companies,design tool vendors,semiconductor equipmentmanufacturers,third-party semiconductor manufacturers,or foundries,semiconductor assembly,package and testcompanies and intellectual property(IP)companies tha
114、t develop and license technology to others.2While specialization has enabled greater development and manufacturing efficiency,it has also created anopportunity for IP companies that develop and license technology to meet fundamental,industry-widechallenges.These IP companies gain broad adoption of t
115、heir technology throughout the industry by working withcompanies within the semiconductor supply chain to invest in the infrastructure needed to support theirtechnology.This collaboration and investment benefits semiconductor companies by enabling them to bring newtechnology to market faster and mor
116、e cost-effectively,without having to make the investment themselves.Demand for system-level miniaturization and increased performanceMiniaturization of electronic products,or system-level miniaturization,is a significant challenge formanufacturers of electronic products and their suppliers,including
117、 semiconductor companies.Digital stillcameras,wireless devices,personal computers and other consumer electronics are being made smaller withimproved performance and an increasing number of advanced features.Semiconductor companies havetraditionally responded to these challenges by shrinking the size
118、 of the basic semiconductor building block,ortransistor,allowing for more transistors to be integrated on a single chip.For decades,the consistent reduction intransistor size has resulted in higher-performance,lower-cost chips that require less silicon area.In addition,transistors have become small
119、enough to make it economical to combine multiple functions,such as logic,memory and analog,on a single chip,in what is commonly referred to as a system-on-a-chip.Importance of semiconductor packaging and interconnectAlthough the integration of increased functionality on a chip is critical to the min
120、iaturization of electronicproducts,its impact has been limited by packaging and interconnect technology,which has not kept pace with theadvancements achieved by chip integration.Semiconductors are typically assembled in packages that act as thephysical and electrical interface between the chip and t
121、he printed wiring board.The package protects the chipfrom breakage,contamination and stress.In addition,the package enables a chip to be easily tested prior to itsincorporation into a system,enabling high system yields and lowering the total system cost.Traditionalsemiconductor packages are much lar
122、ger than the chip itself and occupy significant printed wiring board andsystem area.Traditional packaging technologies are less capable of accommodating faster semiconductor speedsdue to longer electrical connections.Due to these limitations,traditional semiconductor packages are not wellsuited to m
123、eet the increasing demand for product miniaturization,functionality and performance.Theminiaturization of packaged semiconductors often presents reliability problems because the shorter connectionsare more vulnerable to breakage due to thermally-induced stress and mechanical shock.Overcoming thesepr
124、oblems has been one of the most significant technical challenges in shrinking semiconductor packages to thesize of the chip itself.As a result,in addition to continuing advancements in chip integration,advancedpackaging and interconnect technologies are required to achieve further miniaturization an
125、d higher performancecost-effectively.Growth of imaging and optics creating demand for lower cost production and simpler integrationThe integration and use of optics in volume products has grown dramatically over the last two decades.Miniature cameras have proliferated in mobile wireless devices such
126、 as smart phones and personal computers.Recent trends to increase the functionality and decrease the size of such wireless consumer devices and penetrateadditional markets such as the automotive and security markets present significant challenges to manufacturers ofminiature cameras.In particular,th
127、e explosive growth of the cell phone camera market has created a need fornew techniques to provide a continued path to lowered costs.Consumers and manufacturers of cell phones desireto continually reduce the size of and create thinner phones to free up space for additional functionality.Particularly
128、 in the case of camera modules,there is a significant need for lower cost and lower height.As the costof electronic devices has dropped,optics and optics assembly have become a significant portion of the cost ofcell phone camera modules.In addition,newer image sensors require higher precision optics
129、 to achieve thebenefit of increased resolutions.At the same time,the miniaturization of these devices is creating a need for newways of integrating optics with electronics.Traditional approaches to optics manufacturing have limitations in3their ability to reduce size and cost.Traditional approaches
130、involve bulky and complex optical assemblies,expensive connectors and other components,and labor for assembly and testing,all of which tend to increase thefinal system package size and cost.Conventional approaches to volume optics production involve molding ofplastic or glass,which are time-consumin
131、g and produce small numbers of optics at a time.Glass moldingrequires relatively long cycle times and consequently has a higher cost than plastic molding.As demand foroptics in consumer applications grows,we believe the limitations of conventional approaches will become abarrier to further adoption.
132、Our TechnologyIn our Intellectual Property segment,we license technologies in two key areas:Micro-electronicsincluding semiconductor packaging technologies encompassing interconnect andsubstrates,and thermal management solutionsImaging and Opticsincluding wafer-level camera,wafer-level optics,image
133、sensor packaging andimage enhancement technologiesMicro-electronics TechnologiesIn the early 1990s,Tesseras founders invented packaging technology which is now widely used throughoutthe semiconductor industry.Our innovations include our BGA solution,the industrys first CSP technology.This technology
134、 is widely used today in high volume packaging for a full range of applications,including:high performance dynamic random access memory(“DRAM”)chips,such as Double-Data-Rate twoand Double-Data-Rate three(“DDR2”and“DDR3”)DRAM;Flash memory;static random access memory(“SRAM”);digital signal processors(
135、“DSPs”);andapplication-specific integrated circuits(“ASICs”).We continue to expand upon these packaging technologies.Imaging and Optics TechnologiesAdvancements in imaging and optics technologies are enabling higher quality images in considerablysmaller digital still cameras and other camera-enabled
136、 devices including cell phones,security systems andpersonal computers.Our portfolio of imaging and optics technologies includes:SHELLCASE MVP wafer-level chip-scale packaging(“WLCSP”)technology,used in image sensorpackaging;OptiML WLO technology,which enables the manufacturing and assembly of lens m
137、odules;OptiML WLC technology,which combines OptiML WLO with SHELLCASE MVP technology tomanufacture camera modules at the wafer level;OptiML image enhancement technology,which improve the quality of captured cell phone images:OptiML Zoom solution offers 3X zoom capabilities,OptiML Focus solution enab
138、les a high-quality image to be simultaneously brought into focus,4OptiML UFL solution improves low-light performance;andFotoNation image enhancement technology,which provides a portfolio of in-camera imageenhancement solutions for digital photos:FotoNation Red solution automatically detects and remo
139、ves red-and golden-eye defects,FotoNation FaceTracker solution detects the presence of human faces in pictures.Benefits of our TechnologiesOur technologies provide the following benefits,which are not provided by traditional packaging,imagingand optics technologies:Miniaturization.Our CSP technology
140、 and associated CSP substrate technology enables fully-packagedchips to be almost as small as the chip itself,which permits increased product miniaturization and functionality.Our MCP technology and associated MCP substrate technology extend this benefit by enabling multiplesemiconductors to be stac
141、ked vertically.For example,our technology is broadly used to produce Flash memoryand SRAM devices stacked in a MCP utilized in cell phones.As a result,we believe our MCP technologyenables electronic products to achieve new levels of miniaturization and functionality.Our imaging and opticstechnologie
142、s offer a different approach to manufacturing micro-optics,leveraging technologies and processesoriginally developed for the semiconductor industry.Because these micro-optics are created at the wafer-level,large quantities of micro-optics can be manufactured simultaneously,with great precision and r
143、epeatability.Wafer-based optics provide advantages over conventional optics due to lower cost and lower profile.High performance.Our packaging and interconnect technologies offers shorter electrical connectionsbetween the chip and printed wiring board and between adjacent chips.Shorter connections a
144、llow information tobe more rapidly transferred between the semiconductors and the system,yielding better system performance.OurCSP technology has been widely adopted for use in high-speed memory applications,such as high-performancepersonal computers,network switches and routers,set-top boxes,workst
145、ations and video game consoles,such asthe MicrosoftXbox and Xbox360as well as Sony Playstation2 and Playstation3.High reliability.Our CSP technology addresses the reliability problems of miniaturized semiconductorpackages due to thermally-induced stress and mechanical shock by allowing movement with
146、in the package.Inaddition,our wafer level image sensor packaging technology provides the ability to protect an image sensorwafer from contamination at the wafer level early in the packaging process.Improved image capture and enhancement.Our image solutions improve cell phone image capturewithout the
147、 need for mechanical parts.Combining algorithms with custom lens design,these solutions offerimproved image quality,automatic focus and automatic zoom.We also have a portfolio of in-camera imageenhancement solutions that improve image quality.Our SolutionsWithin our Product and Service segment,we de
148、velop and manufacture imaging and optics solutions.Wemanufacture small form factor micro-optics solutions using our wafer-level processes and equipment,targeted atthree main markets;lithography,communications and barcode scanners.We also provide our customers andpartners with engineering,assembly an
149、d infrastructure services.We made the decision in 2008 to no longerpursue contracts with the government or government agencies.Our StrategyOur objective is to be a leading provider of miniaturization technologies that enable smaller,higher-performing wireless,computing and consumer electronic produc
150、ts,at lower cost.5The following are key elements of our strategy:Expand the market penetration of our current CSP and MCP technologies.Our patented CSP and MCPtechnologies have been incorporated in billions of semiconductors worldwide.As a result of the broad adoptionof our technology and existing i
151、nfrastructure that supports our technologies,we believe that we are wellpositioned to benefit from the substantial growth projected for the CSP and MCP markets.We intend toparticipate by:continuing to target our technology for large,growing product markets such as wireless devices,personal computers
152、 and other consumer electronics;making continued design,process and cost improvements that drive the incorporation of our technologyin new semiconductor applications;andidentifying and approaching companies whose current products potentially incorporate our technology,offering them licenses to our t
153、echnology,and when necessary,defending our innovation and IP to obtaincompensation for the use of our technology consistent with our existing licensing program.Drive the market acceptance of our next generation CSP and MCP technologies.Our next generation CSPand MCP technologies are being developed
154、to enable Tessera to continue to meet the industrys demand for smallform factor,higher functionality and higher reliability in the future.This technology is designed for products inwhich miniaturization and feature integration will continue to be critical,including wireless devices,personalcomputers
155、 and other consumer electronics.We intend to drive the adoption of our next generation CSP and MCPtechnologies by:collaborating with our customers to develop chip-scale and multi-chip packages to meet their specificproduct requirements;capitalizing on the existing materials,equipment and assembly in
156、frastructure that supports our currentCSP and MCP technologies;andcontinuing to reduce the cost of manufacturing semiconductors that incorporate our technology throughinternal development and collaboration with leading semiconductor materials and equipment companies.Raise the profile and drive marke
157、t acceptance of our PILR interconnect platform.Our PILR interconnectplatform is targeted at the interconnect within semiconductor packages,substrates,PCBs and other electroniccomponents.We are developing PILR as a viable alternative to the flip chip packaging technology.We arepromoting the adoption
158、of our PILR platform for flip chip applications through:developing a high performance substrate;andengaging potential users and their preferred substrate suppliers in technology evaluation discussions andlicensing opportunities.Utilize and enhance the infrastructure supporting our technology.We have
159、 collaborated with ourinfrastructure partners to help them develop and make widely available low-cost materials,equipment and assemblycapacity to manufacture products that incorporate our technology.We design new technologies that are compatiblewith this existing infrastructure,which facilitates ado
160、ption of these new technologies.We plan to continue to workwith our infrastructure partners to adopt our technology.Promote the market acceptance of our imaging and optics technologies.Our imaging and opticstechnologies are designed for products in which miniaturization,alignment,and cost are critic
161、al,including digitalstill cameras,wireless devices,personal computers and other consumer electronics.We plan to promote theadoption of our imaging and optics technologies in digital still cameras,wireless devices,personal computers andother consumer electronics by:continuing to target and optimize o
162、ur technologies for attractive product markets;6making continued design,process and cost improvements that incorporate our technology in a range ofwireless devices;andidentifying and approaching companies that we believe could benefit from incorporating our technologyand offering them licenses to ou
163、r technology.Broaden our intellectual property portfolio.We intend to continue to broaden our intellectual propertyportfolio through internal research and development,strategic relationships and acquisitions.We believe this willenhance the competitiveness and size of our current businesses and diver
164、sify into markets and technologies thatcomplement our current businesses.We also intend to continue to utilize our core competency in aggregating andlicensing intellectual property to grow and expand our business.Protect our innovation.One of Americas greatest renewable economic resources is innovat
165、ion.Themotivator behind Americas innovation“engine”is patents,as innovation would not exist without the patentprotection currently afforded under United States patent laws and regulations.We believe it is an IP providersduty to protect and enforce its intellectual property rights.We anticipate conti
166、nuing to devote resources todefending our innovation,through appropriate venues as the circumstances warrant.Reporting SegmentsWe have two reportable segments:Intellectual Property and Product and Service.In addition to thesereportable segments,the Corporate Overhead division includes certain operat
167、ing amounts that are not allocated tothe reportable segments because these operating amounts are not considered in evaluating the operatingperformance of our business segments.Our Intellectual Property segment is primarily focused on licensing technologies in our core markets,including DRAM,Flash,SR
168、AM,DSP,ASIC,micro-controllers,general purpose logic and analog devices andimaging and optics technologies.Key functions of this division include licensing,intellectual propertymanagement and marketing.This segment further focuses on expanding our technology portfolio into areasoutside of our core ma
169、rkets that represent long-term growth opportunities through application of products andtechnologies,research and development of new technologies for high growth markets and applications such aspackaging,imaging,interconnect and materials,and through new partnerships,ventures and acquisitions ofcompl
170、ementary technology.Our Product and Service segment is composed primarily of our Product Division,where small form factormicro-optics are sold to the consumer imaging industry from our wafer-based optics technology which utilizessemiconductor processes and equipment,and our Service Division,which pe
171、rforms research and developmentand drives our production development services revenues.This segment involves solutions to address thechallenges of electronic products miniaturization from a system perspective and wafer-level optics,through theuse of consumer imaging and optics technologies,the dense
172、 interconnection of components,and extensive use ofthree-dimensional packaging technologies.Our segments were determined based upon the manner in which our management views and evaluates ouroperations for the period reported.As our business grows and evolves,our management may change their viewson o
173、ur business operations.Segment information below in Part II,Item 7Managements Discussion andAnalysis of Financial Condition and Results of Operations and in Note 15Segment and GeographicInformation of the Notes to Consolidated Financial Statements is incorporated herein by reference and ispresented
174、in accordance with the Statement of Financial Accounting Standards No.131,“Disclosure aboutSegments of an Enterprise and Related Information.”7CustomersOur technologies are currently licensed to more than 100 companies,including more than 70 companieslicensing our semiconductor packaging technology.
175、All of our revenues are denominated in U.S.dollars.For theyears ended December 31,2008,2007 and 2006,the number of customers that accounted for over 10%ofrevenue was two,two and two,respectively.The following table sets forth sales to customers comprising 10%ormore of total revenues for the periods
176、indicated:Years EndedDecember 31,200820072006Customer A.17%*%*%Customer B.111121Customer C.*12*Customer D.*15*denotes sales comprising less than 10%of total revenues.A significant portion of our revenues are derived from licensees headquartered outside of the United States,principally in Asia and Eu
177、rope,and we expect these revenues will continue to account for a significant portion oftotal revenues in future periods.The table below lists the geographic regions of the headquarters of our customersand the percentage of revenues derived from each region for the periods indicated:Years EndedDecemb
178、er 31,200820072006Asia.55%56%32%USA.23%23%36%Europe.22%21%32%The international nature of our business exposes us to a number of risks,including but not limited to:laws and business practices favoring local companies;increased tax rates;withholding tax obligations on license revenues that we may not
179、be able to offsetfully against our U.S.tax obligations;less effective protection of intellectual property than is afforded to us in the United States or otherdeveloped countries;andinternational terrorism and anti-American sentiment,particularly in the emerging markets.Most of our long-lived assets
180、are located in the United States.In February 2008,we completed theacquisition of FotoNation,which included office and research and development facilities in Romania and Ireland.In February 2007,we completed the acquisition of Eyesquad GmbH,which included intellectual property that isheld in Germany
181、and a research and development facility in Israel.In December 2005 we completed theacquisition of certain assets of Shellcase,Ltd.,which included a research and development facility in Israel andintellectual property that is owned by our subsidiary in Hungary.Sales and MarketingOur sales activities
182、focus primarily on developing direct relationships at the technical,marketing andexecutive management levels with companies in the semiconductor and imaging and optics industry to licenseour technologies and sell our services.We also provide our engineering services to system manufacturers andother
183、optics companies.Marketing activities include identifying and promoting application-based technologiesand identifying major business opportunities for current and future product development.Product marketing8focuses on identifying the needs and product requirements of our customers.Product marketing
184、 also manages thedevelopment of all of our technology throughout the development cycle and creates the required marketingmaterials to assist with the adoption of the technology.Marketing communications focuses on advertising andcommunications that promote the adoption of our technology.Research and
185、DevelopmentWe believe that our success depends in part on our ability to achieve the following goals in a cost-effectiveand timely manner:develop new technologies that meet the changing needs of our customers and their markets;improve our existing technologies to enable growth into new application a
186、reas;andexpand our intellectual property portfolio.Our research and development employees work closely with our sales and marketing employees,as well asour customers and partners,to bring new products incorporating our technology to market in a timely,highquality and cost-efficient manner.We also wo
187、rk closely with material and equipment infrastructure providers toidentify new technologies and improve existing technologies for use in the assembly and manufacture ofsemiconductor packages and camera modules that incorporate our technology.Research,development and otherrelated costs were approxima
188、tely$61.6 million in 2008,$37.5 million in 2007 and$20.1 million in 2006.Through 2008,we had service contracts that involved research and development for commercial entities andgovernment agencies.Our government contracts included terms required by the government that are notcustomary in commercial
189、contracts,including a right of the government to terminate the contract at any time forconvenience of the government.We made the decision in 2008 to focus our efforts on research and developmentthat is better aligned with our long-term growth opportunities for our micro-electronics and imaging and o
190、pticssolutions and no longer pursue contracts with the government or government agencies.See Item 1ARiskFactors,below,for a description of other risks involving government contracts.Our research and development efforts currently focus on three major areas:Chip-scale and multi-chip packaging.Our CSP
191、and MCP efforts focus on developing specifictechnologies for incorporation of existing or new CSP and MCP technologies into new applications,developingprototypes and supporting customers or infrastructure providers with improvements to products for existingapplications.We are developing chip-scale a
192、nd multi-chip packages that could offer higher off-chip wiringdensity,higher density,better signal performance and more functionality per electronic product.Advanced packaging and substrates.Our advanced packaging and substrate development efforts focus onworking with customers to incorporate our te
193、chnology into their next generation products as well as buildingprototypes to demonstrate the benefits of our technology.We are working closely with infrastructure providers toenable availability of manufacturing processes capable of delivering semiconductor packaging solutions.Imaging and optics.Ou
194、r imaging and optics efforts cover the following areas and are located throughoutour worldwide organization:(a)wafer level precision micro-optics,(b)image sensor wafer level packaging andwafer level optics technologies,and(c)image enhancement solutions.We have additional research and development eff
195、orts underway in a number of areas related to theminiaturization of electronic products.Intellectual PropertyWe license most of our CSP and MCP technologies under TCC licenses,which grant a worldwide royalty-bearing right under the licensed patent claims to assemble,use and sell certain CSPs and MCP
196、s.Semiconductormaterial suppliers are licensed under our TCMT license,which requires these licensees to pay us a license fee.9Our future success and competitive advantage depend upon our continued ability to develop and protect ourintellectual property.To protect our intellectual property,we rely on
197、 a combination of patents,trade secrets andtrademarks.We also attempt to protect our trade secrets and other proprietary information through confidentialityagreements with licensees,customers and potential customers and partners,and through proprietary informationagreements with employees and consul
198、tants.Our patents address advanced single and multi-chip and wafer level packaging,micro-optical elements,integrated optical assemblies,image processing algorithms related processes,and complementary technologies.We have made and continue to make considerable investments in expanding and defending o
199、ur patent portfolio.See Item 3 belowLegal Proceedings for a description of material legal proceedings in which we have recentlybeen involved.As of February 20,2009,our intellectual property portfolio included 595 issued U.S.patents and 275 issuedinternational patents.In addition,we have 328 domestic
200、 and 363 international patent applications.Our patentshave expiration dates ranging from March 9,2010 to August 10,2027.In 2008,106 U.S.standard or provisionalpatent applications were filed,along with 69 international patent applications.We continually file new patentapplications for new development
201、s in our technology.There are many countries in which we currently have no issued patents.However,products incorporatingour technology that are sold in jurisdictions where patents have been issued must be licensed,or stem from alicensed source,in order to avoid infringing our intellectual property.C
202、ompetitionAs a developer and licensor of semiconductor packaging and imaging and optics technologies,we competewith other technologies.These competing technologies come principally from the internal design groups of anumber of semiconductor,package assembly,image sensor,lens manufacturer and camera
203、module companies.Many of these companies are licensees,or potential licensees,of ours.Semiconductor companies that have their own package design and manufacturing capabilities include,butare not limited to,Texas Instruments,Inc.,Intel Corporation and the semiconductor divisions of SharpCorporation a
204、nd Samsung Electronics Co.,Ltd.Among the advanced packaging technologies developed by suchcompanies are flip-chip and chip-on-board technologies that compete with our CSP,MCP and interconnecttechnologies,which includes our PILR platform.Our technologies also compete with technologies developedby the
205、 internal design groups of package assembly companies,such as Advanced Semiconductor Engineering,Inc.,Amkor Technology,Inc.and STATS ChipPAC,Inc.We believe the principal competitive factors in the selection of semiconductor package technology bypotential customers are:proven technology;cost;size and
206、 circuit board area;performance;reliability;andavailable infrastructure.We believe that our CSP,MCP and interconnect technologies compete favorably in each of these factorswith other advanced packaging technology solutions.10For imaging and optics,major semiconductor companies producing image sensor
207、s are also developinginternal solutions that may compete with our technology.These semiconductor companies include,but are notlimited to,Omnivision Technologies,Inc.,Micron Technology,Inc.,ST Microelectronics,Inc.,SamsungElectronics Co,Ltd.,and Toshiba Corporation.In addition to semiconductor compan
208、ies,there are several otherlicensing and manufacturing companies,including Anteryon and Heptagon,which are developing imaging andoptics technologies that may compete with ours.EmployeesAs of January 31,2009,we had 417 employees,with 39 in sales,marketing and licensing,281 in researchand development(
209、including employees who perform engineering,assembly and infrastructure services under ourservice agreements with third parties)and 97 in general administration,including general management,information technology,finance and accounting.We have never had a work stoppage among our employees andno pers
210、onnel are represented under collective bargaining agreements other than certain ordinary courseagreements of an employers collective which may bind our Israeli subsidiaries under Israel law.We considerour relations with our employees to be good.Available InformationOur Internet address is .We make a
211、vailable on our internet website,free of charge,ourannual report on Form 10-K,quarterly reports on Form 10-Q,current reports on Form 8-K and any amendmentsto those reports,as soon as reasonably practicable after we electronically file such material with,or furnish it to,the Securities and Exchange C
212、ommission(“SEC”).Our SEC reports can be accessed through the investorrelations section of our website.The information found on our website is not incorporated into this or any otherreport we file with or furnish to the SEC.Item 1A.Risk FactorsOur operations and financial results are subject to vario
213、us risks and uncertainties,including those describedbelow,that could adversely affect our business,financial condition,results of operations,cash flows,and thetrading price of our common stock.We are currently involved in litigation and administrative proceedings involving some of our key patents;an
214、y invalidation or limitation of the scope of our key patents could significantly harm our business.Our patent portfolio contains some patents that are particularly significant to our ongoing revenues andbusiness.As more fully described in Part I,Item 3Legal Proceedings,we are currently involved in l
215、itigationinvolving some of these key patents in the United States.The parties in these legal actions have challenged thevalidity,scope,enforceability and ownership of key patents that we license to generate a substantial portion ofour revenues.In addition,reexamination requests have been filed again
216、st us in the United States Patent andTrademark Office(“PTO”)with respect to certain key patent claims at issue in one or more of our litigation andarbitration proceedings,and oppositions have been filed against us with respect to key patents in the EuropeanPatent Office.Under a reexamination proceed
217、ing and upon completion of the proceeding,the PTO may leave apatent in its present form,narrow the scope of the patent or cancel some or all of the claims of the patent.Asfurther described in Part I,Item 3Legal Proceedings,the PTO issued several Official Actions rejecting ormaintaining earlier rejec
218、tions of many of the claims in certain of our key patents.We are currently asserting thesekey patents and patent claims in certain of our ongoing litigation and administrative proceedings.If the PTOsadverse rulings are upheld on appeal and some or all of the claims of the key patents that are subjec
219、t toreexamination are canceled,our business may be significantly harmed.In addition,counterparties to ourlitigation and administrative proceedings may seek and obtain motions to stay these proceedings based onrejections of claims in the PTO reexaminations,and other courts or tribunals reviewing our
220、legal actions couldmake findings adverse to our interests,even if the PTO actions are not final.11We cannot predict the outcome of any of these proceedings or the myriad procedural and substantive motionsin these proceedings.In the event that there is an adverse ruling in any legal or administrative
221、 proceeding relating tothe infringement,validity,enforceability or ownership of any of our key patents,or if a court or an administrativebody such as the PTO limits the scope of the claims of any of our key patents,we could be prevented fromenforcing or earning future revenues from such key patents,
222、and the likelihood that companies will take newlicenses and that current licensees will continue to agree to pay under their existing licenses could be significantlyreduced.The resulting reduction in license fees and royalties could significantly harm our business,consolidatedfinancial position,resu
223、lts of operations or cash flows,or the trading price of our common stock.Furthermore,regardless of the merits of any claim,the continued maintenance of these legal and administrative proceedings mayresult in substantial legal expenses and could divert our managements time and attention away from our
224、 otherbusiness operations,which could significantly harm our business.Our enforcement proceedings historically havebeen protracted and complex,and we have experienced significant delays in certain of these proceedings.Thecomplexity of our litigations,their disproportionate importance to our business
225、 compared to other companies,thepropensity for delay in patent litigations,and the potential that we may lose particular motions as well as the overalllitigations all could cause significant volatility in our stock price and could materially adversely affect our businessand consolidated financial po
226、sition,results of operations or cash flows.We expect to continue to be involved in material legal proceedings in the future to enforce or protect ourintellectual property rights,including material litigation with existing licensees or strategic partners,which could harm our business.In the past,we h
227、ave found it necessary to litigate to enforce our patents and other intellectual propertyrights,to enforce the terms of our existing license agreements,to protect our trade secrets,to determine thevalidity and scope of the proprietary rights of others or to defend against claims of infringement or i
228、nvalidity.Our current legal actions,as described in Part I,Item 3Legal Proceedings,are examples of significant disputesand litigation that impact our business.We expect to be involved in similar legal proceedings in the future,including proceedings to ensure proper and full payment of royalties by c
229、urrent licensees under the terms of theirlicense agreements.These existing and any future legal actions could cause an existing licensee or strategicpartner to cease making royalty or other payments to us,or to challenge the validity and enforceability of ourpatents or the scope of our license agree
230、ments,and could significantly damage our relationship with suchlicensee or strategic partner.Litigation could also severely disrupt or shut down the business operations of ourlicensees or strategic partners,which in turn would significantly harm our ongoing relations with them and causeus to lose ro
231、yalty revenues.In addition,many semiconductor and package assembly companies maintain theirown internal design groups and have their own package design and manufacturing capabilities.If we believethese groups have designed technologies that infringe upon our intellectual property,and if they subsequ
232、ently failto enter into a license agreement with us or pay for licensed technology,then it may become necessary for us tocommence legal proceedings against them.Litigation stemming from these or other disputes could also harm ourrelationships with other licensees or our ability to gain new customers
233、,who may postpone licensing decisionspending the outcome of the litigation or dispute.In addition,these legal proceedings could be very expensive andmay reduce or eliminate our profits.The costs associated with legal proceedings are typically high,relativelyunpredictable and not completely within ou
234、r control.While we do our best to forecast and control such costs,thecosts may be materially higher than expected,which could adversely affect our operating results.Whether or notdetermined in our favor or ultimately settled,litigation diverts our managerial,technical,legal and financialresources fr
235、om our business operations.Furthermore,an adverse decision in any of these legal actions couldresult in a loss of our proprietary rights,subject us to significant liabilities,require us to seek licenses fromothers,limit the value of our licensed technology or otherwise negatively impact our stock pr
236、ice or our businessand consolidated financial position,results of operations or cash flows.Even if we prevail in our legal actions,significant contingencies will exist to their settlement and final resolution,including the scope of the liability ofeach party,our ability to enforce judgments against
237、the parties,the ability of the parties to make any paymentsowed or agreed upon and the dismissal of the legal action by the relevant court,none of which are completelywithin our control.Parties that may be obligated to pay us royalties could also decide to alter their businessactivities or corporate
238、 structure,which could affect our ability to collect royalties from such parties.12If we fail to protect and enforce our intellectual property rights and our confidential information,ourbusiness will suffer.We rely primarily on a combination of license,development and nondisclosure agreements and ot
239、hercontractual provisions and patent,trademark,trade secret and copyright laws to protect our intellectual propertyrights.If we fail to protect our intellectual property rights,our licensees and others may seek to use ourtechnology without the payment of license fees and royalties,which could weaken
240、 our competitive position,reduce our operating results and increase the likelihood of costly litigation.The growth of our business dependsin large part on our ability to convince third parties of the applicability of our intellectual property to theirproducts,and our ability to enforce our intellect
241、ual property rights against them.In certain instances,we attempt to obtain patent protection for portions of our intellectual property,and ourlicense agreements typically include both issued patents and pending patent applications.If we fail to obtainpatents or if the patents issued to us do not cov
242、er all of the claims included in our patent applications,otherscould use portions of our intellectual property without the payment of license fees and royalties.We also rely on trade secret laws rather than patent laws to protect other portions of our proprietarytechnology.However,trade secrets can
243、be difficult to protect.The misappropriation of our trade secrets or otherproprietary information could seriously harm our business.We protect our proprietary technology and processes,in part,through confidentiality agreements with our employees,consultants,suppliers and customers.We cannotbe certai
244、n that these contracts have not been and will not be breached,that we will be able to timely detectunauthorized use or transfer of our intellectual property,that we will have adequate remedies for any breach orthat our trade secrets will not otherwise become known or be independently discovered by c
245、ompetitors.If we failto use these mechanisms to protect our intellectual property,or if a court fails to enforce our intellectual propertyrights,our business will suffer.We cannot be certain that these protection mechanisms can be successfullyasserted in the future or will not be invalidated or chal
246、lenged.Our revenues may suffer if we cannot continue to license or enforce our intellectual property rights or ifthird parties assert that we violate their intellectual property rights.We rely upon patent,copyright,trademark and trade secret laws in the United States and other countries,and agreemen
247、ts with our employees,customers,suppliers and other parties,to establish and maintain ourintellectual property rights in our technology.However,any of our direct or indirect intellectual property rightscould be challenged,invalidated or circumvented.Further,the laws of certain countries do not prote
248、ct ourproprietary rights to the same extent as do the laws of the United States.Therefore,in certain jurisdictions wemay be unable to protect our technology adequately against unauthorized third-party use,which could adverselyaffect our business.Third parties also may claim that we or our customers
249、are infringing upon their intellectualproperty rights.Even if we believe that such claims are without merit,they can be time-consuming and costly todefend against and will divert managements attention and resources away from our business.Claims ofintellectual property infringement also might require
250、 us to enter into costly settlement or license agreements orpay costly damage awards.Even if we have an agreement that provides for a third party to indemnify us againstsuch costs,the indemnifying party may be unable to perform its contractual obligations under the agreement.Ifwe cannot or do not li
251、cense the infringed intellectual property at all or on reasonable terms,or substitute similartechnology from another source,our business,financial position,results of operations or cash flows could suffer.If the U.S.patent laws and regulations are changed,we could be adversely impacted.Our business
252、relies in part on the uniform and historically consistent application of United States patent lawsand regulations.Changes to these laws and regulations may occur as a result of decisions and actions ofCongress,the PTO,and the courts,including the U.S.Supreme Court.In recent years,certain proposals h
253、avebeen made to change some aspects of the patent laws and PTO rules,and the U.S.Supreme Court has decided anumber of patent cases and continues to actively review more patent cases than it has in the past.Some of these13changes or potential changes may not be advantageous for us,and may make it mor
254、e difficult to obtain adequatepatent protection or to enforce our patents against parties using them without a license or payment of royalties.These changes or potential changes,if passed by Congress or implemented by the Administration,could have adeleterious affect on our licensing program and,the
255、refore,the royalties we can collect.The market for semiconductors and related products is highly concentrated,and we have limitedopportunities to sell our products.The semiconductor industry is highly concentrated in that a small number of semiconductor designers andmanufacturers account for a subst
256、antial portion of the purchases of semiconductor products generally,includingour products and products incorporating technologies that we may acquire.Consolidation in the semiconductorindustry may increase this concentration.Accordingly,we expect that sales of our products,including sales ofproducts
257、 and technologies that we acquire,will be concentrated with a limited number of customers for theforeseeable future.As we acquire new technologies and integrate them into our product line,we will need toestablish new relationships to sell these products.Our financial results depend in significant pa
258、rt on our successin establishing and maintaining relationships with,and effecting substantial sales to,these customers.Even if weare successful in establishing and maintaining such relationships,our financial results will be dependent in largepart on these customerssales and business results.A signi
259、ficant amount of our royalty revenues comes from a few market segments and products,and ourbusiness could be harmed if these market segments or products decline.A significant portion of our royalty revenues comes from the manufacture and sale of packagedsemiconductor chips for DSP,ASSP,ASIC and memo
260、ry.In addition,we derive substantial revenues from theincorporation of our technology into mobile phones.If demand for semiconductors in any one or a combinationof these market segments or products declines,our royalty revenues may be reduced significantly and ourbusiness could be harmed.Moreover,we
261、re such declines to occur,our business could become more cyclical innature.Our revenue is concentrated in a few customers and if we lose any of these customers our revenues maydecrease substantially.We earn a significant amount of our revenues from a limited number of customers.For the year endedDec
262、ember 31,2008,there were two customers that each accounted for 10%or more of total revenue.We expectthat a significant portion of our revenues will continue to come from a limited number of customers for theforeseeable future.If we lose any of these customers,our revenues may decrease substantially.
263、Volume pricing incentives in our TCC licenses with two DRAM manufacturers may slow our DRAMroyalty growth.In 2005,we provided two major DRAM manufacturers with first-mover pricing advantages in respect ofroyalties due us under their respective TCC licenses based on several factors,including volumes.
264、The effect ofthe volume pricing adjustments may be to cause,at certain high shipment volumes and for these two DRAMmanufacturers only,our aggregate annual DRAM royalty revenue to grow less rapidly than annual growth inoverall unit shipments in the DRAM segment.An additional effect may be to cause,de
265、pending on the relativeDRAM market share enjoyed by these two DRAM manufacturers in a given calendar quarter and their royaltypayments within a calendar year,some quarter-to-quarter fluctuations in growth in our revenues from the DRAMsegment.14Some of our license agreements have fixed terms and,in o
266、rder to maintain our relationships with licenseesunder such agreements,we will need to renegotiate some of our existing license agreements in the future.Some of our license agreements have fixed terms.We will need to renegotiate license agreements with fixedterms prior to the expiration of such lice
267、nse agreements and,based on various factors including the technologyand business needs of our licensees,we may not be able to renegotiate such license agreements on similar terms,or at all.In order to maintain existing relationships with some of our licensees,we may be forced to renegotiatelicense a
268、greements on terms that are more favorable to such licensees,which could harm our results ofoperations.If we fail to renegotiate our license agreements we would lose existing licensees and our businesswould be materially adversely affected.Some of our license agreements may convert to fully paid-up
269、licenses at the expiration of their terms,andwe may not receive royalties after that time.We currently have one license agreement that automatically converts to a fully paid-up license after theexpiration of its current term on December 31,2013,provided that the licensee(Texas Instruments)complieswi
270、th all terms and conditions of the license agreement up through its expiration.We also have certain otherlicense agreements that each provide the licensee with the option to extend the current term of their agreementfor an additional five years with royalty payments throughout the expiration of the
271、extended term,whereuponsuch a license automatically converts to a fully paid-up license after the expiration of its extended term.We maynot receive further royalties from licensees for any licensed technology under those agreements if they convert tofully paid-up licenses because such licensees will
272、 be entitled to continue using some,if not all,of our relevantintellectual property under the terms of the license agreements,even if relevant patents are still in effect.Asignificant conversion of our license agreements to fully paid-up licenses could materially harm our results ofoperations follow
273、ing such conversion.We have a royalty-based business model,which is inherently risky.Our long-term success depends on future royalties paid to us by licensees.Royalty payments under our TCClicenses are primarily based upon the number of electrical connections to the semiconductor chip in a packageco
274、vered by our licensed technology.We also have royalty arrangements for TCC and other technologies in whichroyalties are paid based upon a percent of the net sales price or in which royalties are paid on a per package basis.We are dependent upon our ability to structure,negotiate and enforce agreemen
275、ts for the determination andpayment of royalties,as well as upon our licenseescompliance with their agreements.We face risks inherent ina royalty-based business model,many of which are outside of our control,such as the following:the rate of adoption and incorporation of our technology by semiconduc
276、tor manufacturers andassemblers;the extent to which large equipment vendors and materials providers develop and supply tools andmaterials to enable manufacturing using our packaging technology;the demand for products incorporating semiconductors that use our licensed technology;the cyclicality of su
277、pply and demand for products using our licensed technology;the impact of economic downturns;andthe timing of receipt of royalty reports may not meet our revenue recognition criteria resulting influctuation in our results of operations.It is difficult for us to verify royalty amounts owed to us under
278、 our licensing agreements,and this maycause us to lose revenues.The standard terms of our license agreements require our licensees to document the manufacture and sale ofproducts that incorporate our technology and report this data to us on a quarterly basis.Although our standard15license terms give
279、 us the right to audit books and records of our licensees to verify this information,audits can beexpensive,time consuming,flawed and potentially detrimental to our ongoing business relationship with ourlicensees.Our license compliance program randomly audits licensees to independently verify the ac
280、curacy of theinformation contained in their royalty reports in an effort to decrease the likelihood that we will not receive theroyalty revenues to which we are entitled under the terms of our license agreements,but we cannot giveassurances that the random audits will be effective to that end.We mak
281、e significant investments in new products and services that may not be profitable or could limitour revenue growth.We have made and will continue to make significant investments in research,development,and marketingof new technologies,products and services,including wafer level packaging,wafer level
282、 camera and other imagequality enhancement technologies,and PILR packaging technology.Investments in new technologies arespeculative.Commercial success depends on many factors including innovativeness and demand for thetechnology,delays or shortages of materials and equipment,and effective licensing
283、 or product sales.We may notachieve significant revenue from new product and service investments for a number of years,if at all.Moreover,new technologies,products and services may not be profitable,and even if they are profitable,operating marginsfor new products and businesses may not be as high a
284、s the margins we have experienced historically.Competing technologies may harm our business.We expect that our technologies will continue to compete with technologies of internal design groups ofsemiconductor manufacturers,assemblers and electronic and system manufacturers.These internal design grou
285、pscreate their own packaging and optics solutions,and have direct access to their companys technical informationand technology roadmaps,and have capacity,cost and technical advantages over us.If these internal designgroups design around our patents or introduce unique solutions superior to our techn
286、ology,they may not need tolicense our technology.These groups may design technology that is less expensive to implement than ours orprovides products with higher performance or additional features.Many of these groups have substantiallygreater resources,financial or otherwise,than us and lower cost
287、structures,and the inherent advantage of internalaccess to corporate strategies.As a result,they may be able to bring alternative solutions to market more easilyand quickly.For instance,certain flip chip technologies are being used by large semiconductor manufacturersand assemblers for a variety of
288、semiconductors,including processors and memory.Another example of acompetitive technology is the small format lead frame packages that are also gaining popularity.The companiesusing these technologies are utilizing their current lead frame infrastructure to achieve cost-effective results.Wafer-level
289、 packaging is an emerging competitive technology that could also erode chip-scale packaging marketshare as the technology and infrastructure matures.Other examples of competitive technologies are thechip-on-board technique to package image sensors and the system-in-package technology that can integr
290、atemultiple die without chip-scale packaging.In the future,our licensed technologies may also compete with other technologies.These technologies maybe less expensive than ours and provide higher or additional performance.Companies with these competingtechnologies may also have greater resources than
291、 us.Technological change could render our technologiesobsolete,and new,competitive technologies could emerge that achieve broad adoption and adversely affect theuse of our technologies and intellectual property.If we do not create and implement new designs to expand our licensable technology portfol
292、io,ourcompetitive position could be harmed and our operating results adversely affected.We derive a significant portion of our revenues from licenses and royalties from a relatively small numberof key technologies.We plan to devote significant engineering resources in order to develop new packaging
293、andimaging technologies to address the evolving needs of the semiconductor and the consumer and communicationelectronics industries.To remain competitive,we must introduce new technologies or designs in a timely manner16and the market must adopt them.Developments in our technologies are inherently c
294、omplex,and require longdevelopment cycles and a substantial investment before we can determine their commercial viability.We maynot be able to develop and market new technologies in a timely or commercially acceptable fashion.Moreover,our patents will expire in the future.Our currently issued U.S.pa
295、tents expire at various times from March 9,2010 through August 10,2027.We need to develop or acquire successful innovations and obtain new patentsbefore our current patents expire,and our failure to do so could significantly harm our business,financialposition,results of operations or cash flows.If
296、we do not successfully further develop and commercialize the technologies we acquire,or cultivatestrategic relationship that expand our licensable technology portfolio,our competitive position could beharmed and our operating results adversely affected.We also attempt to expand our licensable techno
297、logy portfolio and technical expertise by acquiring andfurther developing new technologies or developing strategic relationships with others.These strategicrelationships may include the right for us to sublicense technology and intellectual property to others.However,we may not be able to acquire or
298、 obtain rights to licensable technology and intellectual property in a timelymanner or upon commercially reasonable terms.Even if we do acquire such rights,some of the technologies weinvest in may be commercially unproven and may not be adopted or accepted by the industry.Moreover,ourresearch and de
299、velopment efforts,and acquisitions and strategic relationships,may be futile if we do notaccurately predict the future needs of the semiconductor,consumer and communication electronics,andconsumer imaging industries.Our failure to acquire new technologies that are commercially viable in thesemicondu
300、ctor,consumer and communication electronics,and consumer imaging industries could significantlyharm our business,financial position,results of operations or cash flows.Failure by our licensees to sell products using our technology could limit our royalty revenue growth.Because we expect a portion of
301、 our future revenues to be derived from licenses and royalties fromsemiconductors that use our licensed technology,our future success depends upon our licensees developing andselling commercially successful products.Any of the following factors could limit our licenseesability to sellproducts that i
302、ncorporate our technology:the willingness and ability of materials and equipment suppliers to produce materials and equipment thatsupport our licensed technology,in a quantity sufficient to enable volume manufacturing;the ability of our licensees to purchase such materials and equipment on a cost-ef
303、fective and timelybasis;the willingness of our licensees and others to make investments in the manufacturing process thatsupports our licensed technology,and the amount and timing of those investments;andour licenseesability to design and assemble packages incorporating our technology that are accep
304、tableto their customers.Because we expect a portion of our future growth to be derived from licenses and royalties from ourimaging and optics technology in consumer electronics,such as digital still cameras,wireless devices,personalcomputers and other consumer electronics,our future success depends
305、upon our licensees developing and sellingproducts that incorporate our technology.Any of the following factors could limit the growth of our imaging andoptics technology:our ability to innovate and provide solutions at lower costs,with improved performance,or with moreenhanced features than our comp
306、etitors;the relevant marketsrate of adoption of our imaging and optics;our ability to license our technologies to significant customers in imaging and optics fields;and17our competitors who may have superior products or solutions which take away market shares or designwins from us.Failure by the sem
307、iconductor industry to adopt next generation high performance DRAM chips thatutilize our packaging technology would significantly harm our business.To date,our packaging technology has been used by several companies for high performance DRAM chips.For example,packaging using our technology is used f
308、or DDR2 DRAM and we currently have licensees,including Samsung Electronics,Co.,Ltd.,Qimonda AG,Hynix Semiconductor Inc.and Micron Technology,Inc.,who are paying royalties for DRAM chips in advanced packages.DRAM manufacturers are also currently developing next generation high performance DRAM chips,
309、including next generation of DDR referred to as DDR3 and DDR4,to meet increasing speed and performancerequirements of electronic products.We believe that these next-generation,high performance DRAM chips willrequire advanced packaging technologies such as CSP.We anticipate that royalties from shipme
310、nts of these next-generation,high performance DRAM chipspackaged using our technology may account for a significant percentage of our future revenues.If semiconductormanufacturers do not continue to adopt next generation,high performance DRAM packages using ourtechnology and find an alternate viable
311、 packaging technology for use with next generation high performanceDRAM chips,or if we do not receive royalties from next generation,high performance DRAM chips that use ourtechnology,our future revenues could be adversely affected.Our technology may be too expensive for certain next generation high
312、 performance DRAM manufacturers,which could significantly reduce the adoption rate of our packaging technology in next generation highperformance DRAM chips.Even if our package technology is selected for at least some of these next generationhigh performance DRAM chips,there could be delays in the i
313、ntroduction of products utilizing these chips thatcould materially affect the amount and timing of any royalty payments that we receive.Other factors that couldaffect adoption of our technology for next generation high performance DRAM products include delays orshortages of materials and equipment a
314、nd the availability of testing services.If our licensees cannot make or delay payments to us due to financial difficulties,or shift their licensedproducts to other companies to lower their royalties to us,our operating results and cash flows could beadversely affected.A number of companies in the se
315、miconductor and consumer electronics industries are facing severefinancial difficulties.As a result,there have been recent bankruptcies and restructuring of companies in theseindustries.Our licensees may also face financial difficulties and may seek insolvency proceedings such asbankruptcy and restr
316、ucturing which may result in their inabilities to make payments to us timely or if at all.Inaddition,our licensees may merge with or may shift the manufacture of licensed products to companies that arenot currently licensees to us.This could make the collection process complex and difficult which co
317、uld adverselyimpact our business,financial condition,results of operations and cash flows.The way we integrate acquired technology into our products may not be accepted by customers.We have devoted,and expect to continue to devote,considerable time and resources to acquiring andintegrating new techn
318、ologies,such as the technologies acquired from Eyesquad GmbH,Digital OpticsCorporation,Shellcase,Ltd.,North Corporation and FotoNation,into our products.However,if customers do notaccept the way we have integrated this technology,they may adopt competing solutions.In addition,as weintroduce new prod
319、ucts,we cannot predict with certainty if and when our customers will transition to those newproducts.If customers fail to accept new or upgraded products incorporating our technologies,our financialposition,results of operations or cash flows could be adversely impacted.18Our services business,inclu
320、ding customization services,may subject us to specific costs and risks that wemay fail to manage adequately and could harm our business.We derive a portion of our revenues from engineering and design services.Among the engineering servicesthat we offer are customized package design and prototyping,m
321、odeling,simulation,failure analysis andreliability testing and related training services.We also offer our customers design services to customize ourtechnologies to incorporate into their products and production processes,enabling our customers to shorten thedevelopment effort and time to market.A n
322、umber of factors,including,among others,the perceived value of ourintellectual property portfolio,our ability to convince customers of the value of our engineering services and ourreputation for performance under our service contracts,could cause our revenues from engineering services todecline,dama
323、ge our reputation,and harm our ability to attract future licensees,which would in turn harm ouroperating results.Under our services contracts we are required to perform certain services,in some cases including deliveringdesigns and prototypes.If we fail to deliver as required under our service contr
324、acts,we could lose revenues andbecome subject to liability for breach of contract.We also provide certain services at or below cost in an effort toincrease the speed and breadth with which the semiconductor industry adopts our technologies.For example,weprovide modeling,manufacturing process trainin
325、g,equipment and materials characterization and other services toassist licensees in designing,implementing,upgrading and maintaining their packaging assembly line.Wefrequently provide these services as a form of training to introduce new licensees to our technology and existingclients to new technol
326、ogies,with the aim that these services will help us to generate revenues in the future.Weneed to monitor these services adequately in order to ensure that we do not incur significant expenses withoutgenerating corresponding revenues.Our failure to monitor these services or our design and prototype s
327、ervicesadequately may harm our business,financial position,results of operations or cash flows.Because our services sometimes involve the delivery of package or lens designs and prototypes,we may besubject to claims that we infringed or induced the infringement of patents and other intellectual prop
328、erty rightsbelonging to others.If such a claim were made,we may have to take a license or stop manufacturing the accusedprototypes,which could cause our services revenues to decrease.If we choose not to take a license,we may besued for infringement,and may incur significant litigation costs in defen
329、ding against the lawsuit.If we are foundto infringe the intellectual property rights of others,we may have to pay damages and could be subject to aninjunction preventing us from continuing to provide the services.Any of these outcomes could harm ourbusiness,financial position,results of operations o
330、r cash flows.Our licensing cycle is lengthy and costly,and our marketing and sales efforts may be unsuccessful.We generally incur significant marketing and sales expenses prior to entering into our license agreements,generating a license fee and establishing a royalty stream from each licensee.The l
331、ength of time it takes toestablish a new licensing relationship can range from six to 18 months or longer for a TCC license and 18 to 24months or longer for an imaging&optics license.As such,we may incur significant losses in any particularperiod before any associated revenue stream begins.We employ
332、 intensive marketing and sales efforts to educate materials suppliers,equipment vendors,licensees,potential licensees and original equipment manufacturers about the benefits of our technologies.Inaddition,even if these companies adopt our technologies,they must devote significant resources to integr
333、ate fullyour technologies into their operations.If our marketing and sales efforts are unsuccessful,then we will not beable to achieve widespread acceptance of our packaging technology.In addition,ongoing litigation could impactour ability to gain new licensees.19We are subject to laws and regulations governing government contracts,and failure to address these lawsand regulations or comply with go
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