SILICON LABORATORIES INC.

Silicon Laboratories Inc. is a leader in secure, intelligent wireless technology for a more connected world, providing analog-intensive, mixed-signal solutions for the Internet of Things (IoT) across industrial, commercial, home, and life applications. The IoT market requires interaction between the analog and digital worlds, driving demand for mixed-signal circuits, and the company has spent over two decades simplifying radio frequency design from silicon to cloud. The company's semiconductor devices leverage standard complementary metal oxide semiconductor (CMOS) technology, which enables smaller, more cost-effective, and energy-efficient solutions, and its products integrate complex mixed-signal functions that are frequently performed by numerous discrete components in competing products into a single chip, chipset, or system-on-chip.

The company competes with Espressif, Infineon, MediaTek, Microchip, Nordic Semiconductor, NXP, Qualcomm, Renesas, STMicroelectronics, Synaptics, Telink, Texas Instruments and others. Key competitive advantages include analog and RF design expertise in CMOS, mixed-signal, firmware, and system design expertise, microcontroller and system-on-a-chip design expertise, software expertise including multiprotocol connectivity and real-time operating systems for the IoT, module integration and wireless design expertise, silicon-to-cloud security integration expertise, and a broad understanding of systems technology and trends. The company believes its design-win process, coupled with intellectual property protection, promotes relatively longer product life cycles and high barriers to entry for competitive products.

The company generates revenue predominately through sales of its mixed-signal products, selling through a direct sales force and a network of independent sales representatives and distributors. Direct and distribution customers buy on an individual purchase order basis rather than pursuant to long-term agreements. During fiscal 2025, 71% of revenue was derived from distributors ¹, and 49% of revenue was derived from the company's two largest distributors ². The company considers the end customer as its customer, even when products are sold through distributors or contract manufacturers.

The company groups its products as Industrial & Commercial or Home & Life based on target markets. Industrial & Commercial products address industrial IoT applications such as industrial automation and control, smart metering, smart street lighting, renewable energy, electric vehicle supply equipment, industrial wearables, industrial equipment, and smart agriculture, as well as commercial IoT applications like smart buildings, access controls, asset tracking, smart lighting, electronic shelf labels, theft protection, power tools, and enterprise access points. Home & Life products address the smart home market with applications including home cameras, locks, gateways, residential lighting, window shades, HVAC, appliances, switches, sensors, security panels, and smart smoke/CO detectors, and the connected health market with applications including diabetes management, consumer health and fitness wearables, elderly care, patient monitoring, and activity tracking. In fiscal 2025, Industrial & Commercial revenue was $444.9 million ³ and Home & Life revenue was $339.9 million ⁴.

The company's wireless microcontroller portfolio includes EFM32, EFM8, 8051, wireless MCUs and wireless SoCs based on Bluetooth, sub-GHz proprietary technologies, Thread, Wi-Fi, Zigbee, and Z-Wave technologies. The Series 2 portfolio, introduced in 2019, focused on updatable device security, and the Series 3 portfolio, which released its first product in 2025, leverages the 22 nm process node to provide greater compute, interoperability, and energy efficiency. The company also provides wireless modules based on Bluetooth, sub-GHz, Thread, Wi-Fi, Zigbee, and Z-Wave, and its products are supported by Simplicity Studio, which provides one-click access to design tools, documentation, software, and support resources.

On February 4, 2026, the company entered into an Agreement and Plan of Merger with Texas Instruments Incorporated, pursuant to which each share of common stock will be cancelled and converted into the right to receive $231.00 in cash ⁵, without interest. The Merger is expected to close in the first half of 2027, subject to customary closing conditions including stockholder approval and regulatory approvals. During fiscal 2025, the company repurchased no shares of common stock ⁶. Research and development expenses were $353.2 million ⁷ in fiscal 2025, representing 45.0% of revenues ⁸.

Revenues increased $200.4 million ⁹ in fiscal 2025 compared to fiscal 2024, reaching $784.8 million ¹⁰ versus $584.4 million ¹¹ in the prior year, due to increased revenues from both Industrial & Commercial and Home & Life products. Gross margin increased to 58.2% ¹² in fiscal 2025 compared to 53.4% ¹³ in fiscal 2024. Operating loss in fiscal 2025 was $70.5 million ¹⁴ compared to operating loss of $165.5 million ¹⁵ in fiscal 2024. Net loss was $64.9 million ¹⁶ in fiscal 2025 compared to net loss of $191.0 million ¹⁷ in fiscal 2024. Net cash provided by operating activities was $95.7 million ¹⁸ during fiscal 2025.

The Series 3 portfolio, which released its first product in 2025, leverages the 22 nm process node to provide greater compute, interoperability, and energy efficiency for even more advanced workloads, representing a key growth vector for addressing more demanding IoT applications. The company continues to invest in security-specific research and development to address a dynamic threat landscape, emerging regulatory requirements, and evolving customer security and privacy needs, with a focus on silicon-to-cloud security integration expertise that simplifies customer adoption of security features engineered into its silicon chips.

The company is focused on the growth of the IoT market, which depends on the ongoing evolution and adoption of industry standards to permit devices to connect and communicate with each other. The company's products support emerging applications like Matter and Amazon Sidewalk, designed to streamline customer adoption while providing functionality that reinforces privacy, simplicity, and performance. The company also continues to target growth in smart home, connected health, industrial IoT, and commercial IoT markets, with applications including electronic shelf labels, smart lighting, and renewable energy solutions.

Gross margin increased to 58.2% ¹⁹ in fiscal 2025 compared to 53.4% ²⁰ in fiscal 2024, primarily as indirect and overhead expenses decreased as a percentage of revenues. The company may experience variations in average selling prices, with increases occurring during periods of increased demand that may be short-lived and could be accompanied by higher product costs. Declines in average selling prices create downward pressure on gross margin and may be offset by introducing higher margin new products, reducing costs of existing products through improved design, achieving lower production costs from wafer suppliers and third-party assembly and test subcontractors, achieving lower production costs per unit as a result of improved yields, or reducing logistics costs.

The company relies on third-party semiconductor fabricators in Asia, and to a lesser extent the United States and Europe, to manufacture silicon wafers, and on third parties in Asia to assemble, package, and in most cases test these devices. The company currently partners primarily with Taiwan Semiconductor Manufacturing Co. (TSMC) and Semiconductor Manufacturing International Corporation (SMIC) to manufacture the majority of its semiconductor wafers. During fiscal 2025, most units shipped were tested by offshore third-party test subcontractors, and the company expects that utilization of offshore third-party test subcontractors will remain substantial during fiscal 2026.

Research and development expenses were $353.2 million ²¹ in fiscal 2025, or 45.0% of revenues ²². Purchases of property and equipment were $29.9 million ²³ during fiscal 2025. The company did not repurchase any shares of its common stock during fiscal 2025 ²⁴ and has never declared or paid any cash dividends on its common stock, currently intending to retain any future earnings to fund the operation and expansion of the business. As of January 3, 2026, the company had a $400 million ²⁵ revolving credit facility with no amounts outstanding ²⁶.

The company faces headwinds from macroeconomic conditions including inflationary pressure, high interest rates, geopolitical tension, and uncertainty regarding international trade relations and trade policy, including tariffs. The company experienced declines in revenues as customers slowed purchases to reduce existing inventories in a softening market, and there continues to be uncertainty regarding the imposition of additional tariffs and trade restrictions by the U.S. and other jurisdictions. The company also faces risks from global or industry-specific shortages of memory components or other key components necessary for customers' products, as the memory market has experienced supply imbalances and the industry is currently experiencing a global shortage of certain memory components as a result of AI-driven demand.

The company faces constraints from the cyclical nature of the semiconductor industry, which has been subject to significant fluctuations characterized by diminished product demand, production overcapacity, high inventory levels, and accelerated erosion of average selling prices during downturns. The company believes the semiconductor industry recently suffered a downturn due in large part to adverse macroeconomic conditions, including a slowdown in overall GDP performance and factory activity in certain regions, higher levels of customer inventory, the impact of tariffs on trade relations, and greater overall uncertainty regarding the economy. Additionally, the company's reliance on third-party foundries, assembly, and test subcontractors concentrated in Taiwan and the Pacific Rim region exposes it to risks from natural disasters, political unrest, or geopolitical changes, including tensions between China and Taiwan.

The company faces material risks related to the pending Merger with Texas Instruments, including the possibility that the Merger may not be completed within the expected time frame or at all, which could adversely affect the business and stock price, and the company may be required to pay a termination fee of $259 million ²⁷ under specified circumstances. The company relies on third-party foundries TSMC and SMIC to manufacture the majority of its semiconductor wafers, and geopolitical changes in China-Taiwan relations could disrupt operations and severely impact the company's ability to manufacture products. The company is subject to risks from tariffs, trade restrictions, and other barriers to international trade, with 91% ²⁸ of revenues derived from outside the United States in fiscal 2025 and revenue attributed to China based on shipped-to location of 33% ²⁹. The company faces intense competition from companies with significantly greater resources, including Espressif, Infineon, MediaTek, Microchip, Nordic Semiconductor, NXP, Qualcomm, Renesas, STMicroelectronics, Synaptics, Telink, and Texas Instruments, which could decrease prices, reduce sales, and lower gross profit. The company has identified a need for a valuation allowance against deferred tax assets in the U.S. and Singapore due to recent operating losses and uncertainty around future economic conditions, with a valuation allowance of $81.1 million ³⁰ as of January 3, 2026.

Management's message emphasizes the company's position as a leader in secure, intelligent wireless technology for a more connected world, with a focus on its integrated hardware and software platform, intuitive development tools, industry-leading ecosystem, and robust support. The company highlights the pending Merger with Texas Instruments, which was unanimously approved by the board of directors, with each share to be converted into the right to receive $231.00 in cash ³¹, expected to close in the first half of 2027. Key strategic priorities include the continued development of the Series 3 portfolio leveraging the 22 nm process node, investment in security-specific research and development, and focus on the IoT market with products supporting emerging applications like Matter and Amazon Sidewalk.