Standard IP Licensing - these activities include our participation in two consortia for the licensing of ~~activities:~~

~~Standard IP Licensing~~ - these activities include our participation in two consortia for the licensing of HDMI and MHL technologies to customers who adopt the technology into their products and voluntarily report their usage and royalties. The royalties are split between consortiaHDMI and MHL technologies to customers who adopt the technology into their products and voluntarily report their usage and royalties. The royalties are split between consortium members, including us.

IP Core Licensing - some customers need Lattice’s technology for specific functions or features, but for various reasons are not able to use our silicon solutions. In those cases, we may license them IP cores, which they can integrate into their own ASICs. In contrast to the use of consortia, these licensing activities are generally performed internally.

Patent Monetization - we sell certain patents from our portfolio generally for technology that we are no longer actively developing. The revenue from these sales generally consists of upfront payments and potential future royalties.

IP Services - projects and design services for customers who wish to develop specific solutions that harness our proven technology and expertise.


2.	~~IP Core Licensing~~ - some customers need Lattice’s technology for specific functions or features, but for various reasons are not able to use our silicon solutions. In those cases, we may sell them IP cores, which they can integrate into their own ASICs. In contrast to the use of consortia, these licensing activities are generally performed internally.


3.	~~Patent Monetization~~ - we sell certain patents from our portfolio generally for technology that we are no longer actively developing. The revenue from these sales generally consists of upfront payments and potential future royalties.

~~Simplay Labs~~

Simplay Labs develops performance standards, testing services, development tools, and technologies for Mobile and Consumer product manufacturers. We sold certain of our assets comprising Simply Labs to Invecas, Inc. on September 30, 2017 while maintaining a contractual relationship that includes hosting the personnel engaged in the provision of testing services and related assets in various geographies for a term. By partnering with Simplay Labs, manufacturers can reduce the time and cost to market, providing products that are distinguished by reliability and ease of operation while delivering the high-performance HD their customers demand. The products that Simplay Labs tests include televisions, A/V receivers, sound bars, set-top boxes, gaming consoles, and media hubs. Simplay Labs has service centers operating in the United States, South Korea, China, and Taiwan. Simplay’s service centers provide compliance, interoperability and performance testing.

Research and Development

We place a substantial emphasis on new product development, where return on investment is the key driver, and believe that continued investment in research and development is required to maintain and improve our competitive position. Our product development activities emphasize new proprietary products, advanced packaging, enhancement of existing products and process technologies, improvement of software development tools, development of innovative technology standards, and enhanced services. Research and development activities occur primarily in Hillsboro, Oregon; San Jose, California; Shanghai, China; and Muntinlupa City, Philippines.

Research and development expenses were $103.4 million in 2017, $117.5 million in 2016, and $136.9 million in 2015. The decreases in research and development expense is due mainly to the cost reductions realized from the restructuring actions and integration of operations undertaken since the acquisition of Silicon Image, including headcount reductions, site consolidations, and the sales of assets and business units. We believe that a continued commitment to research and development is essential to maintaining product leadership and providing innovative new product offerings and, therefore, we expect to continue to make significant future investments in research and development.

Operations

We do not manufacture our own silicon products. We maintain strategic relationships with large, established semiconductor foundries to source our finished silicon wafers. This strategy allows us to focus our internal resources on product and market development, and eliminates the fixed cost of owning and operating semiconductor manufacturing facilities. We are able to take advantage of the ongoing advanced process technology development efforts of semiconductor foundries, and to choose to apply those technologies when they become most economically beneficial to us and to our customers.

~~Seiko Epson ("Epson") manufactures our 500nm, 350nm, 250nm and 180nm products.~~ Lattice and Fujitsu Limited ("Fujitsu") have entered into agreements pursuant to which Fujitsu manufactures our next generation products on its 130nm, 90nm and 65nm CMOS process technologies, as well as embedded flash memory in these technical nodes. United Microelectronics Corporation ("UMC") manufactures certain of our next generation 40nm products. Taiwan Semiconductor Manufacturing Company Ltd. (“TSMC”) manufactures our acquired ~~Silicon Blue~~SiliconBlue and Silicon Image products. Seiko Epson ("Epson") manufactures our 500nm, 350nm, 250nm and 180nm products.

All of our assembly and volume test operations are performed by outside suppliers. We perform certain test operations as well as reliability and quality assurance processes internally. We have achieved and maintained ISO9001:2015 Quality Management Systems Certification and released a line of products qualified to the AEC-Q100 Reliability Standard.

We rely on third party vendors to provide cost-effective and efficient supply chain services. Among other activities, these outsourced services relate to direct sales logistics, including order fulfillment, inventory management and warehousing, and shipment of inventory to third party distributors.

We perform certain test operations as well as reliability and quality assurance processes internally. We have achieved and maintained ISO9001:2015 Quality Management Systems Certification and released a line of products qualified to the AEC-Q100 Reliability Standard.

Wafer Fabrication

We source silicon wafers from our foundry partners, Fujitsu and Epson in Japan, and TSMC and UMC in Taiwan, pursuant to agreements with each company and their respective affiliates. We negotiate wafer volumes, prices and other terms with our foundry partners and their respective affiliates on a periodic basis.

Assembly

After wafer fabrication and initial testing, we ship wafers to independent subcontractors for assembly. During assembly, wafers are separated into individual die and encapsulated in plastic packages. We have qualified two major assembly partners, ~~ASE~~Advanced Semiconductor Engineering ("ASE") and Amkor Technology ("Amkor') and are second sourced where volume and customer requirements are necessary. All ASE and Amkor manufacturing of our products is in Asia. We negotiate assembly prices, volumes and other terms with our assembly partners and their respective affiliates on a periodic basis.

We currently offer an extensive list of standard products in lead (Pb) free packaging. Our lead-free products meet the European Parliament Directive entitled "Restrictions on the use of Hazardous Substances" ("~~ROHS"~~RoHS"). A select and growing subset of our ROHS compliant products are also offered with a "Halogen Free" material set.

Testing (Sort and Final Test)

We electrically sort test the die on most wafers prior to shipment for assembly. Wafer sort testing is primarily performed ~~mostly~~ by Amkor in Japan and ~~we have a~~our second source King Yuan Electronics Co. (“KYEC”) in ~~KYEC~~ Taiwan. Some legacy products are tested at Unisem Group in Indonesia.

Following assembly, but prior to customer shipment, each product undergoes final testing and quality assurance procedures. Final testing is performed by ASE and Amkor, our assembly partners in Asia.

Sales and Revenue

We generate revenue by monetizing our technology and patents using two go-to-market ~~strategies.~~strategies:

Product and Technology ~~Sales~~Sales: ~~involve~~Involves direct and channel sales of ~~silicon based~~silicon-based products with their associated software solutions and services.

Intellectual Property Licensing and Services: ~~involves either~~Involves the ~~license~~licensing or sale of intellectual property that we have developed, some of which we use in our ~~products.~~products, and certain design services that we may provide.

Seasonality

While we periodically may experience some seasonal trends in the sale of our products, general economic conditions and the cyclical nature of the end markets we serve generally have a greater impact on our business and financial results than seasonal trends.

Backlog

Our backlog consists of orders from distributors and certain OEMs that require delivery within the next year. Historically, our backlog has not been a predictor of future sales or customer demand for the following reasons:

Purchase orders, consistent with common industry practices, can generally be revised or canceled up to 30 days before the scheduled delivery date without significant penalty.

Our backlog for ~~sell-through~~ distributors is valued at list price, which in most cases is substantially higher than the prices ultimately recognized as revenue.

A sizable portion of our revenue comes from our "turns business," where the product is ordered and delivered within the same quarter.

A portion of our revenue arises from ~~vendor managed~~vendor-managed inventory arrangements where the timing and volume of customer utilization is difficult to predict.

Sales and Customers

We primarily sell our products to end customers from Lattice Semiconductor Corporation or our wholly-owned subsidiary, Lattice SG Pte. Ltd. We sell both directly and through a network of independent manufacturers' representatives. Additionally, we sell indirectly through independent ~~sell-in (primarily Japan) and sell-through~~ distributors. We also employ a direct sales management and field applications engineering organization to support our end customers and indirect sales resources. Our end customers are primarily original equipment manufacturers ("OEMs") in the Communications and Computing, Mobile and Consumer, and Industrial and Automotive end markets.

We have agreements with 20 manufacturers' representatives in North America. We have established sales channels in over 44 foreign countries and maintain a network of 10 international sales representatives. A substantial portion of our sales are made through distributors.

We provide global technical support to our end customers with engineering staff based at our headquarters, product development centers and selected field sales offices. We maintain numerous domestic and international field sales offices in major metropolitan areas.

Resale of product by ~~sell-through~~ distributors accounted for approximately ~~66%~~83% of our net revenue in fiscal 2018, approximately 77% of our net revenue in fiscal 2017, and approximately ~~61%~~73% of our net revenue in fiscal ~~2016, and approximately 45% of our net revenue in fiscal 2015, and we~~2016. We expect our distributors to generate a significant portion of our revenue in the future. We depend on our distributors to sell our products to end customers, complete order fulfillment, and maintain sufficient inventory of our products. Our distributors also provide technical support and other value-added services to our end customers. We have two global ~~sell-through~~ distributors. We also have regional distribution in Asia, Japan, Israel, and North America, and we sell through three major on-line distributors.

In fiscal years 2018, 2017, ~~2016,~~ and ~~2015,~~2016, our revenue was broadly distributed across end markets and end customers, with no individual end customer accounting for more than 10% of the total revenue.

Revenue from foreign sales as a percentage of total revenue was ~~87%~~90%, ~~88%~~87%, and ~~92%~~88%, for fiscal 2018, 2017, ~~2016,~~ and ~~2015,~~2016, respectively. We assign revenue to geographies based on ship-to location of the end customer, ~~ship-to address at~~where available, and based upon the ~~point where revenue is recognized. Revenue attributed~~location of the distributor to ~~China for fiscal 2017~~which the product was ~~approximately 50% of total revenue, compared to 44% and 41% in fiscal 2016 and fiscal 2015, respectively~~shipped otherwise (see "Geographic Information" in Note 2221 - Segment and Geographic Information to our Consolidated Financial Statements in Part II, Item 8). In the case of sell-in distributors and OEMs, revenue is typically recognized, and geography is assigned, when products are shipped. In the case of sell-through distributors, revenue is recognized when resale to the end customer occurs and geography is assigned based on the end customer location on the resale reports provided by the distributor. Both foreign and domestic sales are denominated in U.S. dollars.

~~The composition of our revenue by geography, based on ship-to location, is as follows:~~

Year Ended % Change in
(In thousands) December 30, 2017 December 31, 2016 January 2, 2016 2017 2016
Asia $ 277,638
72 % $ 305,093
71 % $ 308,534
76 % (9 ) (1 )
Europe 44,547
12
59,835
14
55,596
14
(26 ) 8
Americas 63,776
16
62,126
15
41,836
10
3
48
Total revenue $ 385,961
100 % $ 427,054
100 % $ 405,966
100 % (10 ) 5

Intellectual Property, Patents, and Licensing

Intellectual Property

We seek to protect our products and technologies primarily through patents, trade secrecy measures, copyrights, mask work protection, trademark registrations, licensing restrictions, confidentiality agreements and other approaches designed to protect proprietary information. There can be no assurance that others may not independently develop competitive technology not covered by our intellectual property rights or that measures we take to protect our technology will be effective.

Patents

We hold numerous United States and international patents and have patent applications pending in the United States and internationally. Our current patents will expire at various times between ~~2018~~2019 and ~~2036,~~2037, subject to our payment of periodic maintenance fees. There can be no assurance that pending or future patent applications will result in issued patents, or that any issued patents will survive challenges to their validity. Although we believe that our patents have value, there can be no assurance that our patents, or any additional patents that may be issued in the future, will provide meaningful protection from competition. We believe that our success will depend primarily upon the technical expertise, experience, and creativity, and the sales and marketing abilities of our personnel.

Patent and other proprietary rights infringement claims are common in our industry. There can be no assurance that, with respect to any claim made against us, we would be able to successfully defend against the claim or that we could obtain a license that would allow us to use the proprietary rights on terms or under conditions that would not harm our business.

Licenses

We have acquired various licenses from third parties to certain technologies that are implemented in IP cores or embedded in our products. Those licenses support our continuing ability to make and sell these products to our customers. While our various licenses are important to our success, we believe our business as a whole is not materially dependent on any particular license, or group of licenses.

Our Team

As of December ~~30, 2017,~~29, 2018, we had ~~834~~754 full-time employees worldwide. We believe that our future success will depend, in part, on our ability to continue to attract and retain highly skilled technical, sales, and management personnel. None of our employees are represented by a collective bargaining agreement. We have never experienced any work stoppages and consider our employee relations to be good.

Corporate Background

Lattice was incorporated in Oregon in 1983 and reincorporated in Delaware in 1985. ~~Our~~In the first quarter of 2019, we relocated our corporate headquarters ~~is located~~to our facility at ~~111 SW Fifth Avenue, Suite 700, Portland,~~5555 NE Moore Court, Hillsboro, Oregon ~~97204, and our~~97124. Our website is www.latticesemi.com. Information contained or referenced on our website is not incorporated by reference into, and does not form a part of, this Annual Report on Form 10-K. Our common stock trades on the NASDAQ Global Select Market under the symbol LSCC.

Reporting Calendar

We report based on a 52 or 53-week fiscal year ending on the Saturday closest to December 31. Our fiscal 2018, 2017, ~~2016,~~ and ~~2015~~2016 were 52-week years that ended December 29, 2018, December 30, 2017, and December 31, ~~2016, and January 2,~~ 2016, respectively. Our fiscal ~~2018~~2019 will be a 52-week year and will end on December ~~29, 2018.~~28, 2019. All references to quarterly or yearly financial results are references to the results for the relevant fiscal period.

Our results for the year ended January 2, 2016 (fiscal 2015) include the results associated with the acquisition of Silicon Image for the approximately 10-month period from March 11, 2015 through January 2, 2016. Results presented for periods prior to fiscal 2015 are those historically reported for Lattice only.

Available Information

We make available, free of charge through the Investor Relations section of our website at www.latticesemi.com, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements and amendments to those reports and statements as soon as reasonably practicable after such materials are electronically filed with, or furnished to, the SEC. You may also obtain free copies of these materials by contacting our Investor Relations Department at ~~111 SW Fifth Ave, Ste. 700, Portland,~~5555 NE Moore Court, Hillsboro, Oregon ~~97204,~~97124, telephone (503) 268-8000. Our SEC filings are also available at the SEC's website at www.sec.gov, and they may be read and copied at the SEC's public reference room at 100 F Street NE, Washington, DC 20549. Information on the operation of the Public Reference Room can be obtained by calling the SEC at 1-800-SEC-0330.www.sec.gov. The content on any website referred to in this filing is not incorporated by reference into this filing unless expressly noted otherwise.

ITEM 1A. Risk Factors

The following risk factors and other information included in this Annual Report should be carefully considered before making an investment decision relating to our common stock. If any of the risks described below occur, our business, financial condition, operating results and cash flows could be materially adversely affected. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations and financial results.

We rely on a ~~limited~~concentrated number of ~~independent suppliers for the manufacture of all of our products~~subcontractors to supply and ~~a failure by our suppliers to provide timely, cost-effective, and quality products could adversely affect our operations and financial results.~~

~~We depend on independent foundries to supply~~fabricate silicon wafers for our semiconductor products. ~~These~~If they are unable to do so on a timely and cost-effective basis in sufficient quantities and using competitive technologies, we may incur significant costs or delays.

We rely on a concentrated number of independent foundries ~~include~~in Asia to supply and fabricate silicon wafers for our semiconductor products, including Fujitsu, ~~in Japan and~~ United Microelectronics Corporation, ~~in Taiwan, which supply the majority of our programmable logic wafers, and~~ Taiwan Semiconductor Manufacturing, ~~which supplies most of~~and Seiko Epson. Our success is dependent upon our ~~HDMI and MHL integrated circuits. We negotiate wafer volumes, prices, and other terms~~ability to successfully partner with our foundry partners and their ~~respective affiliates on a periodic basis typically resulting in short-term agreements which do not ensure long-term supply or allocation commitments. We rely on our foundry partners~~ability to produce wafers with competitive performance ~~attributes.~~attributes and prices. Establishing, maintaining and managing multiple foundry relationships requires the investment of management resources as well as costs. If ~~the~~we fail to maintain our foundry relationships, if our foundry partners do not provide facilities and support for our development efforts, or if we elect or are required to change foundries, ~~that supply~~we may incur significant costs and delays. If our wafers experience manufacturing problems, including unacceptable yields, delays in the realization of the requisite process technologies, or difficulties due to limitations of new and existing process technologies, our operating results could be adversely affected.

~~If for any reason the foundries~~foundry partners are unable to, or do not, manufacture sufficient quantities of our products ~~or continue to manufacture a product for the full life of the product,~~at acceptable yields, we may be required to allocate the affected products among our customers, prematurely limit or discontinue the sales of certain products, or incur significant costs to transfer products to other foundries, ~~and~~which could adversely affect our customer relationships and operating results could be adversely affected. In addition, weak economic conditions may adversely impact the financial health and viability of the foundries and cause them to limit or discontinue their business operations, resulting in shortages of supply and an inability to meet their commitments to us, which could adversely affect our financial condition and operating results.

A disruption of one or more of our foundry partners' operations as a result of a fire, earthquake, act of terrorism, political or labor unrest, governmental uncertainty, war, disease, or other natural disaster or catastrophic event, or any other reason, could disrupt our wafer supply and could adversely affect our operating results.

Establishing, maintaining and managing multiple foundry relationships requires the investment of management resources as well as additional costs. If we fail to maintain our foundry relationships, or elect or are required to change foundries, we will incur significant costs and manufacturing delays. The success of certain of our next generation products is dependent upon our ability to successfully partner with Fujitsu, Taiwan Semiconductor, Seiko Epson, and other foundry partners. If for any reason one or more of our foundry partners does not provide its facilities and support for our development efforts, we may be unable to effectively develop new products in a timely manner.

~~Should a~~Any adverse change in ~~foundry relationships be required, we may be unsuccessful in establishing new foundry relationships for~~ our ~~current~~relationship with our distributors or ~~next generation products, or we may incur substantial cost or manufacturing delays until we form and ramp relationships and migrate products, all of which~~our distributors' performance could ~~adversely affect~~harm our ~~operating results.~~sales.

We depend on ~~distributors to generate~~ a ~~significant portion~~concentrated group of our revenue and complete order fulfillment and any adverse change in our relationship or our distributors' financial health, reduction of selling efforts, or inaccuracy in resale reports could harm our sales or result in misreporting our results.

~~We depend on our~~ distributors to sell our products to end customers, complete order fulfillment, and maintain sufficient inventory of our products. Our distributors also provide technical support and other value-added services to our end customers. ~~Resales through sell-through~~In fiscal 2018, revenue attributable to distributors accounted for ~~66%~~83% of our total revenue, inwith two distributors accounting for 54% of total revenue. In fiscal 2017, distributors accounted for 77% of our total revenue with two distributors accounting for 51% of total revenue. We have significant outstanding receivables with our ~~total revenue in fiscal 2017.~~

Wetop distributors, and expect our distributors to generate a significant portion of our revenue in the future. Any adverse change to our relationships with our distributors or a failure by one or more of our distributors to perform its obligations to us could have a material impact on our business. ~~In addition, a~~A significant reduction of effort by a distributor to sell our products, or a material change in our relationship with one or more distributors, or a reduction in the financial health of our distributors may result in the inability of distributors to effectively perform services on our behalf or pay receivables, reduce our access to certain end customers, ~~and~~or adversely affect our ability to sell our products.

The financial health of our distributors is important to our success. Economic conditions may adversely impact the financial health of one or more of our distributors. This could result in the inability of distributors to finance the purchase of our products or cause the distributors to delay payment of their obligation to us and increase our credit risk. If the financial health of our distributors impairs their performance and we are unable to secure alternate distributors, our financial condition and results of operations may be negatively impacted.

Since we have limited ability to forecast inventory levels of our end customers, it is possible that there may be significant build-up of inventories in the distributor channel, with the OEM or the OEM’s contract manufacturer. Such a buildup could result in a slowdown in orders, requests for returns from customers, or requests to move out planned shipments. This could adversely affect our revenues and profits. Any failure to manage these challenges could disrupt or reduce sales of our products and unfavorably impact our financial results.

~~Based on our assessment of the implementation of Accounting Standards Update (ASU) No. 2014-09,~~ ~~Revenue from Contracts with Customers (Topic 606)~~, we believe the most significant impact of the new standard will be to accelerate the timing of revenue recognition on product shipments to our sell-through distributors. Assuming all other revenue recognition criteria have been met, the new guidance would require us to recognize revenue and costs relating to such sales upon shipment to the distributor - subject to reductions for estimated reserves for price adjustments and returns - rather than upon the ultimate sale by the distributor to its end customer, as is our current practice. The impact of this change will depend primarily on the level of inventory held by sell-through distributors at the beginning and end of each period. To the extent these inventory levels fluctuate significantly, revenue under the new standard could be materially different than that under the current standard.

We depend on the timeliness and accuracy of resale reports from our distributors. Late or inaccurate resale reports could have a detrimental effect on our ability to properly recognize revenue, especially under the new revenue standard, and on our ability to predict future sales.

~~We depend on a concentrated group of customers for a significant portion of our revenues. If any of these customers reduce their use of our products, our revenue could decrease significantly.~~

A significant portion of our revenue depends on sales to a limited number of customers. In fiscal 2017, our largest end customer accounted for approximately 7% of our total revenue, and our top five end customers accounted for approximately 26% of our total revenue. If any of these relationships were to diminish, if these customers were to develop their own solutions or adopt alternative solutions or competitors' solutions, or if our relationship with any future customer which accounts for a significant portion of our revenue were to diminish due to these factors, our results could be adversely affected.

While we strive to maintain strong relationships with our customers, their continued use of our products is frequently reevaluated, as certain of our customers' product life cycles are relatively short and they continually develop new products. The selection process for our products to be included in our customers' new products is highly competitive. There are no guarantees that our products will be included in the next generation of products introduced by these customers. For example, one of our largest customers from the second half of 2016 through the first half of 2017 was a major mobile handset provider. The production volume for this mobile handset peaked in the fourth quarter of fiscal 2016, and the associated revenue stream has declined in subsequent quarters as the end product completes its lifecycle. At this time, there is no guarantee that our products will be included in this provider's next generation handset, nor in any of its other devices. Any significant loss of, or a significant reduction in purchases by, one or more of these customers or their failure to meet their commitments to us, could have an adverse effect on our financial condition and results of operations. If any one or more of our concentrated groups of customers were to experience significantly adverse financial conditions, our financial condition and business could be adversely affected as well.

Our success and future revenue depends on our ability to ~~innovate,~~ develop and introduce new products that achieve customer and market ~~acceptance and to successfully~~acceptance.

We compete in ~~the highly competitive semiconductor industry, and failure to do so could have~~ a ~~material adverse effect on our financial condition and results of operations.~~

The semiconductor industry is highly competitive and many of our direct and indirect competitors have substantially greater financial, technological, manufacturing, marketing, and sales resources. Consolidation in our industry may increasingly mean that our competitors have greater resources, or other synergies, that could put us at a competitive disadvantage. We currently compete directly with companies that have licensed our technology or have developed similar products, as well as numerous semiconductor companies that offer products based on alternative solutions, such as applications processor, application specific standard product, microcontroller, analog, and digital signal processing technologies. Competition from these semiconductor companies may intensify as we offer more products in any of our end markets. These competitors include established, multinational semiconductor companies, as well as emerging companies.

~~The markets in which we compete are~~dynamic environment characterized by rapid technology and product evolution, generally followed by a relatively longer process of ramping up to volume production on advanced technologies. Our markets are also characterized by evolving industry standards, frequent new product introduction, short product life cycles, and increased demand for higher levels of integration and smaller process geometry. Our competitive position and success depends on our ability to innovate, develop, and introduce new products that compete effectively on the basis of price, density, functionality, power consumption, form factor, and performance, and our addressing the evolving needs of the markets we serve. These new products typically are more technologically complex than their predecessors. In addition, we expect revenue related to mature products to decline over time in a normal product life cycle. As a result, we may be increasingly dependent on revenue derived from our newer products.

Our future growth and the success of new product introductions depend upon numerous factors, including:

timely completion and introduction of new product designs;

ability to generate new design opportunities and design wins, including those which result in sales of significant volume;

achievement of necessary volume of production to achieve acceptable cost;

availability of specialized field application engineering resources supporting demand creation and customer adoption of new products;

ability to utilize advanced manufacturing process technologies;

achieving acceptable yields and obtaining adequate production capacity from our wafer foundries and assembly and test subcontractors;

ability to obtain advanced packaging;

availability of supporting software design tools;

utilization of predefined IP logic;

market acceptance of our ~~MHL-enabled~~HDMI-enabled and ~~wireless~~ mobile ~~products, and our 60 GHz wireless~~ products;

customer acceptance of advanced features in our new products;

availability of competing alternative technologies; and

market acceptance of our customers' products.

~~Our~~The failure of any of these factors, among others, could adversely affect our product innovation, development and introduction efforts and our financial condition and results of operations.

Our global business operations expose us to various economic, legal, regulatory, political, and business risks.

We have significant international operations, including foreign sales offices to support our international customers and distributors, which account for the majority of our revenue, and operational and research and development ~~efforts may not be successful;~~sites in China, the Philippines, and other Asian locations. In addition, we purchase our ~~new~~wafers from foreign foundries; have our commercial products ~~MHL-enabled products,~~assembled, packaged, and ~~60GHz wireless products may not achieve market~~tested by subcontractors located outside of the United States; and rely on an international service provider for inventory management, order fulfillment, and direct sales logistics.

These and other integral business activities outside of the United States are subject to the operational challenges, risks and uncertainties associated with conducting business in foreign economic and regulatory environments including trade barriers; political instability, acts of war or ~~customer acceptance;~~terrorism, natural disasters, economic sanctions; weak economic conditions, environmental regulations; labor regulations; import and ~~we may not achieve~~export regulations; tax or freight rates, duties; trade restrictions; interruptions in transportation or infrastructure, changes in trade policies; anti-corruption laws; domestic and foreign governmental regulations; potential vulnerability of and reduced protection for intellectual property; disruptions or delays in production or shipments; and instability or fluctuations in currency exchange rates, any of which could have a material adverse effect on the ~~necessary volume~~operations of production to achieve acceptable cost. Revenue relating to our mature products is expected to decline in the future, which is normal for our product life cycles. As a result, we may be increasingly dependent on revenue derived from our newer products as well as anticipated cost reductions in the manufactureone of our ~~current products. We rely on obtaining yield improvements~~international customers, distributors or service providers and corresponding cost reductions in the manufacture of existing products and on introducing new products that incorporate advanced features and other price/performance factors that enable us to increase revenues while maintaining acceptable margins. To the extent such cost reductions and new product introductions do not occur in a timely manner, or thatcould adversely affect our ~~products do not achieve market acceptance or market acceptance at acceptable pricing, our forecasts of future revenue,~~business, financial condition, and operating results.

If we fail to comply with the many laws and regulations to which we are subject, we may be subject to significant fines, penalties or liabilities for noncompliance, which could harm our business and financial results. For example, effective May 2018, the European Union adopted the General Data Protection Regulation (“GDPR”), which established new requirements regarding the handling of personal data and non-compliance monetary penalties of up to the higher of 20 million Euros or 4% of worldwide revenue. Any inability or perceived inability to adequately comply with applicable laws or regulations, including GDPR, could result in additional cost and liability to our business and could adversely affect our financial condition and results of operations.

Moreover, our financial condition and results of operations could be affected in the event of political instability, including as a result of terrorist activity, U.S. or other military actions, actions against our customers, the United Kingdom referendum in June 2016 (commonly referred to as "Brexit"), or economic crises in countries where our main wafer suppliers, end customers, contract manufacturers, and logistics providers are located.

The semiconductor industry routinely experiences cyclical market patterns and a significant industry downturn could adversely affect our operating results.

Our revenue and gross margin can fluctuate significantly due to downturns in the highly cyclical semiconductor industry. These downturns can be severe and prolonged and can result in price erosion and weak demand for our products. Weak demand for our products resulting from general economic conditions affecting the end markets we serve or the semiconductor industry specifically and reduced spending by our customers can result, and in the past has resulted, in diminished product demand, high inventory levels, erosion of average prices, excess and obsolete inventories and corresponding inventory write-downs. Our expense levels are based, in part, on our expectations of future sales. Many of our expenses, particularly those relating to facilities, capital equipment, and other overhead, are relatively fixed. We might be unable to reduce spending quickly enough to compensate for reductions in sales. Accordingly, shortfalls in sales could adversely affect our operating results. Furthermore, any significant upturn in the semiconductor industry could result in increased competition for access to raw materials and third-party service providers. The dynamics of the markets in which we operate make prediction of and timely reaction to such events difficult. Due to these and other factors, our past results are not reliable predictors of our future results and cyclical changes in the semiconductor industry could adversely affect our operating results.

General economic conditions and deterioration in the global business environment could have a material adverse effect on our business, operating results, and financial condition.

Adverse economic conditions or our customers’ perceptions of the economic environment may negatively affect customer demand for our products and services and result in delayed or decreased spending. Several factors contribute to these weak economic conditions, including volatility in the financial markets, lower levels of consumer liquidity, higher interest rates, price increases for materials and components, and political uncertainty. Weak global economic conditions in the past have resulted in weak demand for our products in certain geographies and had an adverse impact on our results of operations. If global economic conditions weaken, our business could be harmed due to customers or potential customers reducing or delaying orders. In addition, the inability of customers to obtain credit, the insolvency of one or more customers, tariffs applicable to our customers’ products, or the insolvency of key suppliers could result in sales or production delays. Any of these effects could impact our ability to effectively manage inventory levels and collect receivables, require additional restructuring actions, and decrease our revenue and profitability. Uncertainty about future economic conditions makes it difficult for us to forecast operating results and to make decisions about future investments. Any or all of these factors could adversely affect our financial condition and results of operations in the future.

Our business depends on the proper functioning of internal processes and information technology systems, and failure of these processes and systems may cause business disruptions.

We rely on various information technology ("IT") networks and systems to manage our operations, including financial reporting, and we regularly make changes to improve them as necessary by periodically implementing new, or upgrading or enhancing existing, operational and IT systems, procedures, and controls. These systems are supported by subcontractors, and they may also be subject to power and telecommunication outages or other general system failures. The legal, regulatory and contractual environment surrounding information security and data privacy is complex and evolving. We have recently undergone a significant integration and systems implementation that included implementation of a new enterprise resource planning ("ERP") system to standardize our processes worldwide and adopt best-in-class capabilities. We committed significant resources to this new ERP system, which replaced multiple legacy systems. We are focused on realizing the full analytical functionality of this conversion, which is extremely complex, in part, because of the wide range of processes that must be integrated.

During our use of the new ERP system and our other information technology systems, we may experience delays or disruptions in the integration of our new or enhanced systems, procedures, or controls. The policies and security measures established with our new ERP system and other information technology systems may be vulnerable to data breaches, cyber-attacks or fraud. We may also encounter errors in data, an inability to accurately process or record transactions, and security or technical reliability issues. All of these could harm our ability to conduct core operating functions such as processing invoices, shipping and receiving, recording and reporting financial and management information on a timely and accurate basis, and could impact our internal control compliance efforts. If the technical solution or end user training are inadequate, it could limit our ability to manufacture and ship products as planned. We have various systems that remain that may be nearing the end of their useful life or vendor support, which will ultimately need to be replaced. Failure of our IT systems or difficulties or delays in maintaining, managing, and integrating them could adversely affect the Company’s controls and procedures and could impact the Company's ability to perform necessary operations, which could materially adversely ~~affected.~~affect our business.

Data breaches and cyber-attacks and cyber-fraud could compromise our intellectual property or other sensitive information or result in losses.

We maintain sensitive data on our networks and the networks of our business partners and third-party providers, including proprietary and confidential information relating to our intellectual property, personnel, and business, and that of our customers and third-party providers. We believe that companies have been increasingly subject to a wide variety of security incidents, cyber-attacks, hacking, phishing, and other attempts to gain unauthorized access or engage in fraudulent behavior. Cyber-attacks have become more prevalent, sophisticated and much harder to detect and defend against and it is often difficult to anticipate or detect such incidents and to assess the damage caused by them. Our policies and security measures cannot guarantee security, and our information technology infrastructure, including our networks and systems, may be vulnerable to data breaches, cyber-attacks or fraud. In the past, third parties have attempted to penetrate and/or infect our network and systems with malicious software and phishing attacks in an effort to gain access to our network and systems. In addition, we are subject to the risk of third parties falsifying invoices and similar fraud, frequently by obtaining unauthorized access to our vendors’ and business partners’ networks.

In some circumstances, we may partner with third-party providers and provide them with certain sensitive data. If these third parties fail to adopt or adhere to adequate data security practices, or in the event of a breach of their networks, this sensitive data may be improperly accessed, used or disclosed. These data breaches and any unauthorized access or disclosure of sensitive data could compromise our intellectual property, expose sensitive business information and subject us to third party claims.

The increase in cyber-attacks has resulted in an increased focus on cybersecurity by certain government agencies. Cyber-attacks or any investigation or enforcement action related to cybersecurity could cause us to incur significant remediation costs, result in product development delays, disrupt key business operations, and divert attention of management and key information technology resources. In addition, we may incur loss as a result of cyber-fraud, such as those experienced by other companies by making unauthorized payments irrespective of robust internal controls.

Our reputation, brand, and business could be significantly harmed, and we could be subject to third-party claims or governmental penalties in the event of such a security breach.

Our outstanding indebtedness could reduce our strategic flexibility and liquidity and may have other adverse effects on our results of operations.

~~In connection with our acquisition~~As of ~~Silicon Image,~~December 29, 2018, we ~~entered into~~had approximately $263.0 million outstanding under a ~~secured~~ Credit Agreement, ~~providing for a $350 million term loan that matures on~~dated March 10, ~~2021.~~2015 (the “Credit Agreement”). Our obligations under the Credit Agreement are guaranteed by our U.S. ~~subsidiaries. Our obligations~~subsidiaries, and include a requirement to pay quarterly installments of approximately $0.9 million and up to 75% of our annual excess cash flow toward repayment of the ~~facility.~~ facility, with the remaining balance due upon maturity in March 2021. Our ability to meet our debt service obligations depends upon our operating and financial performance, which is subject to general economic and competitive conditions and to financial, business and other factors affecting our operations, many of which are beyond our control. If we are unable to service our debt, we may need to sell material assets, restructure or refinance our debt, or seek additional equity capital. Prevailing economic conditions and global credit markets could adversely impact our ability to sell material assets, restructure or refinance our debt on terms acceptable to us, or at all, or we may not be able to restructure or refinance our debt without incurring significant additional fees and expenses.

The Credit Agreement also contains ~~certain~~ restrictive covenants, including limitations on liens, mergers and consolidations, sales of assets, payment of dividends, and additional indebtedness. The amount and terms of our indebtedness, as well as our credit rating, could have important consequences, including the following:

we may be more vulnerable to economic downturns, less able to withstand competitive pressures, and less flexible in responding to changing business and economic conditions;

our cash flow from operations may be allocated to the payment of outstanding indebtedness, and not to research and development, operations or business growth;

we might not generate sufficient cash flow from operations or other sources to enable us to meet our payment obligations under the facility and to fund other liquidity needs;

our ability to make distributions to our stockholders in a sale or liquidation may be limited until any balance on the facility is repaid in full; and

our ability to incur additional debt, including for working capital, acquisitions, or other needs, is more limited.

If we breach a loan covenant, the lenders could accelerate the repayment of the ~~term loan.~~facility. We might not have sufficient assets to repay ~~such~~our indebtedness upon acceleration. If we are unable to repay or refinance the indebtedness upon acceleration or at maturity, the lenders could initiate a bankruptcy proceeding against us or collection proceedings with respect to our assets and subsidiaries securing the facility, which could materially decrease the value of our common stock.

We depend on a concentrated group of end customers for a significant portion of our revenues. If any of these end customers reduce their use of our products, our revenue could decrease significantly.

A significant portion of our revenue depends on sales to a concentrated number of customers. In fiscal 2018, even though no individual end customer accounted for more than 10% of our total revenue, our top five end customers accounted for approximately 18% of our total revenue. If our relationships with any material customers were to diminish, if these customers were to develop their own solutions or adopt alternative solutions or competitors' solutions, if any one or more of our concentrated groups of customers were to experience significantly adverse financial conditions, or if as a result of trade disputes or sanctions these customers were restricted from purchasing our products, our results could be adversely affected.

In addition, our customer's continued use of our products is frequently reevaluated, as certain of our customers' product life cycles are relatively short and they continually develop new products. The selection process for our products to be included in our customers' new products is highly competitive. There are no guarantees that our products will be included in the next generation of products introduced by these customers.

We may be unable to successfully develop and produce products on smaller geometries.

To remain competitive, we expect to continue to transition our semiconductor products to increasingly smaller nanometer geometries. Continual transition requires new and changes to existing manufacturing process technologies, which could have significantly higher mask and prototyping costs, as well as additional expenditures for engineering design tools. We may determine that we cannot transition on a cost-effective basis; and therefore not offer a competitive product.

In addition to costs, we depend on our relationships with our foundry partners to transition to smaller geometry processes successfully. Our foundry partners are limited by their existing obligations and technological capabilities. We make no assurance that our foundry partners would be able to effectively manage a transition of our products to smaller nanometer geometries in a timely manner, or at all. If we or any of our foundry partners experience significant delays in or fail to efficiently implement a transition to smaller process geometries, we could experience reduced manufacturing yields, delays in product deliveries, and increased expenses, all of which could adversely affect our relationships with our customers and our financial condition and operating results.

Our business could suffer as a result of tariffs and trade sanctions or similar actions.

The imposition by the United States of tariffs, sanctions or other restrictions on goods imported from outside of the United States or countermeasures imposed in response to such government actions could adversely affect our operations or our ability to sell our products globally, which could adversely affect our operating results and financial condition. In 2018, the President of the United States signed an order to impose a tariff on imports from certain countries, including China. The materials subject to these tariffs may impact the cost of raw materials used by our suppliers or in our customers’ products. The imposition of further tariffs by the United States on a broader range of imports, or further retaliatory trade measures taken in response to additional tariffs, could increase costs in our supply chain or reduce demand of our customers’ products, either of which could adversely affect our results of operations.

Our customers or suppliers could also become subject to U.S. regulatory scrutiny or export restrictions. For example, the United States Department of Commerce imposed sanctions on one of our customers in China in 2018, which prevented us from doing business with them until the sanctions were lifted. The U.S. Justice Department filed criminal charges against another of our customers in China and has otherwise taken a negative tone to perceived business practices by this customer and others in China. Revenue from distributors and end customers in China represented approximately 51% of our total revenue in 2018. Future sanctions similar to those imposed in the past could adversely affect our ability to earn revenue from these and similar customers. We cannot predict what impact these and future actions, sanctions or criminal charges could have on our customers or suppliers, and therefore our business. If any of our other customers or suppliers become subject to sanctions or other regulatory scrutiny, or if our customers are affected by tariffs or other government trade restrictions, our business and financial condition could be adversely affected.

We compete against companies that have significantly greater resources than us and numerous other product solutions.

The semiconductor industry is highly competitive and many of our direct and indirect competitors have substantially greater financial, technological, manufacturing, marketing, and sales resources. Consolidation in our industry may increasingly mean that our competitors have greater consolidated resources, or other synergies, that could put us at a competitive disadvantage. We currently compete directly with companies that have licensed our technology or have developed similar products, as well as numerous semiconductor companies that offer products based on alternative solutions, such as applications processor, application specific standard product, microcontroller, analog, and digital signal processing technologies. Competition from these semiconductor companies may intensify as we offer more products in any of our end markets. These competitors include established, multinational semiconductor companies, as well as emerging companies.

The intellectual property licensing component of our business strategy increases our business risk and fluctuation of our ~~revenue.~~revenue and margins.

Our business strategy includes licensing our intellectual property to companies that incorporate it into their ~~respective~~ technologies that address multiple markets, ~~in which we do not directly participate or compete. We also license our intellectual property into~~including markets where we do participate and compete. Our ~~licensing~~Licensing and services revenue may be impacted by the introduction of new technologies by customers in place of the technologies ~~based on our intellectual property,~~we license, changes in the law that may weaken our ability to prevent the use of our patented technology by others, the expiration of our patents, and changes of demand or selling prices for products using licensed patents. We cannot assure that our licensing customers will continue to license our technology on commercially favorable terms or at all, or that these customers will introduce and sell products incorporating our technology, accurately report royalties owed to us, pay agreed upon royalties, honor agreed upon market restrictions, or maintain the confidentiality of our proprietary information, or will not infringe upon or misappropriate our intellectual property. Our intellectual property licensing agreements are complex and may depend upon many factors that require significant judgments, including completion of milestones, allocation of values to delivered items and customer ~~acceptances. Many~~acceptance.

Our sale of ~~these require~~patents and intermittent significant ~~judgments. Additionally, this is a relatively new end market for us, with which we do not yet have extensive experience.~~licensing transactions can cause material fluctuations in our revenue and gross margins.

We have ~~also~~ generated revenue from the sale of certain patents from our portfolio, generally for non-core technology that we are no longer actively developing. While we plan to continue to monetize our patent portfolio through sales of non-core patents, we may not be able to realize adequate interest or prices for those patents. Accordingly, we cannot provide assurance that we will continue to generate revenue from these sales. In addition, although we seek to be strategic in our decisions to sell patents, we might incur reputational harm if a purchaser of our patents sues one of our customers for infringement of the purchased patent, and we might later decide to enter a space that requires the use of one or more of the patents we sold. In addition, as we sell groups of patents, we no longer have the opportunity to further sell or to license those patents and receive a continuing royalty stream.

Our ~~licensing~~Licensing and services revenue fluctuates, sometimes significantly, from period to period because it is heavily dependent on a few key transactions being completed in a given period, the timing of which is difficult to predict and may not match our expectations. Because of its high margin, the ~~licensing~~Licensing and services revenue portion of our overall revenue can have a disproportionate impact on gross profit and profitability. ~~Generating~~In addition, generating revenue from patent sales and intellectual property licenses is a lengthy and complex process that may last beyond the period in which our efforts begin, and the accounting rules governing the recognition of revenue from patent sales and intellectual property licensing transactions are increasingly complex and subject to interpretation. As a result, the amount of license revenue recognized in any period may differ significantly from our expectations.

~~The semiconductor industry routinely experiences cyclical market patterns~~Our products are used across different end markets, and a ~~significant industry~~ downturn in any of these end markets could cause a meaningful reduction in demand for our products.

Our products are used across different end markets, and demand for our products is difficult to predict and may vary within or among our Industrial and Automotive, Communications and Computing, and Mobile and Consumer end markets. Our target markets may not grow or develop as we currently expect, and demand may increase or change in one or more of our end markets, and changes in demand may reduce our revenue, lower our gross margin and effect our operating results. We have experienced concentrations of revenue at certain customers and within certain end markets, and we regularly compete for design opportunities at these customers and within these markets. Any deterioration in these end markets, reductions in the magnitude of revenue streams, our inability to meet design and pricing requirements, or volatility in demand for our products could lead to a reduction in our revenue and adversely affect our operating results.

Our ~~revenue and gross margin can fluctuate significantly due to downturns~~success in ~~the semiconductor industry. These downturns can be severe and prolonged and can result in price erosion and weak demand for~~ our ~~products. Weak demand for our products resulting from general economic conditions affecting the~~ end markets ~~we serve~~depends on many factors, including the strength or the semiconductor industry specifically and reduced spending by our customers can result, and in the past has resulted, in excess and obsolete inventories and corresponding inventory write-downs. The dynamicsfinancial performance of the ~~markets~~companies in ~~which we operate make prediction of and timely reaction to such events difficult. Due to these and other factors,~~ our ~~past results are not reliable predictors of our future results.~~

Our expense levels are based, in part, on our expectations of future sales. Many of our expenses, particularly those relating to facilities, capital equipment, and other overhead, are relatively fixed. We might be unable to reduce spending quickly enough to compensate for reductions in sales. Accordingly, shortfalls in sales could adversely affect our operating results.

~~General economic conditions and deterioration in the global business environment could have a material adverse effect on our business, operating results, and financial condition.~~

Adverse economic conditions or our customers’ perceptions of the economic environment may negatively affect customer demand for our products and services and result in delayed or decreased spending. Weak global economic conditions in the past have resulted in weak demand for our products in certain geographies and had an adverse impact on our results of operations. If global economic conditions weaken, our business could be harmed due to customers or potential customers reducing or delaying orders. In addition, the inability of customers to obtain credit, the insolvency of one or more customers, or the insolvency of key suppliers could result in sales or production delays. Any of these effects could impactend markets, our ability to effectively manage inventory levels and collect receivables, require additional restructuring actions, and decrease our revenue and profitability. Uncertainty about future economic conditions makes it difficult for us to forecast operating results and to make decisions about future investments. Any or all of these factors could adversely affect our financial condition and results of operations in the future.

We may experience difficulties in transitioning to smaller geometry process technologies or in achieving higher levels of design integration, which may result in reduced manufacturing yields, delays intimely meet rapidly changing product ~~deliveries, and increased expenses.~~

To remain competitive, we expect to continue to transition our semiconductor products to increasingly smaller geometries. This requires us to change the manufacturing processes for our products and to redesign some products as well as standard cells and other integrated circuit designs we may use in multiple products. We periodically evaluate the benefits, on a product-by-product basis, of migrating to smaller geometry process technologies to reduce our costs. The transition to lower nanometer geometry process technologies will result in significantly higher mask and prototyping costs, as well as additional expenditures for engineering design tools.

We depend on our relationships with our foundry partners to transition to smaller geometry processes successfully. We make no assurance that our foundry partners will be able to effectively manage the transition in a timely manner, or at all. If we or any of our foundry partners experience significant delays in this transition or fail to efficiently implement this transition, we could experience reduced manufacturing yields, delays in product deliveries, and increased expenses, all of which could adversely affect our relationships with our customersrequirements, market needs, and our ~~financial condition and operating results.~~

~~Foreign sales, accounting for the majority of our revenue, are subject~~ability to ~~various risks associated with selling in international markets, which could have a material adverse effect on our operations, financial condition, and results of operations.~~

We derive the majority of our revenue from sales outside of the United States. Accordingly, if we experience a decline in foreign sales, our operating results could be adversely affected. Our foreign sales are subject to numerous risks, including:

~~changes in local economic conditions;~~

~~currency exchange rate volatility;~~

~~governmental stimulus packages, controls, and trade restrictions;~~

~~governmental policies that promote development and consumption of domestic products;~~

~~export license requirements, foreign trade compliance matters, and restrictions on the use of technology;~~

~~political instability, war, terrorism, or pandemic disease;~~

~~changes in tax rates, tariffs, or freight rates;~~

~~reduced protection for intellectual property rights;~~

~~longer receivable collection periods;~~

~~natural or man-made disasters in the countries where we sell our products;~~

~~interruptions in transportation;~~

~~interruptions in the global communication infrastructure; and~~

~~labor regulations.~~

~~Any of these factors could adversely affect our financial condition and results of operations in the future.~~

We have significant international operations exposing us to various economic, regulatory, political, and business risks, which could have a material adverse effect on our operations, financial condition, and results of operations.

We have significant international operations, including foreign sales offices to support our international customers and distributors, and operational and research and development sites in China, India, the Philippines, and other Asian locations. In addition, we purchase our wafers from foreign foundries; have our commercial products assembled, packaged, and tested by subcontractors located outside of the United States; and rely on an international service provider for inventory management, order fulfillment, and direct sales logistics.

These and other integral business activities outside of the United States are subject to the risks and uncertainties associated with conducting business in foreign economic and regulatory environments including trade barriers; economic sanctions; environmental regulations; import and export regulations; duties and tariffs and other trade restrictions; changes in trade policies; anti-corruption laws; domestic and foreign governmental regulations; potential vulnerability of and reduced protection for intellectual property; disruptions or delays in production or shipments; and instability or fluctuations in currency exchange rates, any of which could have a material adverse effect on our business, financial condition, and operating results. In addition, with the acquisition of Silicon Image, we have increased the operational challenges of conducting our business in and across multiple geographic regions around the world, especially in the face of different business practices, social norms, and legal standards.

Moreover, our financial condition and results of operations could be affected in the event of political instability, including as a result of the United Kingdom referendum on June 23, 2016, in which voters approved an exit from the European Union (commonly referred to as "Brexit"), terrorist activity, U.S. or other military actions, or economic crises in countries where our main wafer suppliers, end customers, contract manufacturers, and logistics providers are located.

The Mobile and Consumer end market is rapidly changing and cyclical, and a downturn in this end market or our failure to accurately predict the frequency, duration, timing, and severity of these cycles could adversely affect our financial condition and results.

With the acquisition of Silicon Image, the Mobile and Consumer end market has increased in importance to us. Revenue from the Mobile and Consumer end market accounted for 28% of our revenue in fiscal 2017. Revenue from the Mobile and Consumer end market consists primarily of revenue from our products designed and used in a broad range of consumer electronics products including smartphones, tablets and e-readers, wearables, accessories such as chargers and docks, Ultra High-Definition (UHD) TVs, Digital SLR cameras, drones, and other connected devices. This market is characterized by rapidly changing requirements and product features and volatility in consumer demand. Our success in this market will depend principally on our ability to:

~~meet the market windows for consumer products;~~

~~predict technology and market trends;~~

~~develop IP cores to meet emerging market needs;~~

~~develop products on a timely basis;~~

maintain ~~multiple~~ design wins across different markets and customers to dampen the effects of market ~~volatility;~~

~~be designed into our customers' products; and~~

~~avoid cancellations or delay of products.~~

volatility. Our inability to accomplish any of the foregoing, or to offset the volatility of ~~this~~the end ~~market~~markets through diversification into other markets, could materially and adversely affect our business, financial condition, and results of operations. ~~Cyclicality~~

Our margins are dependent on our achieving continued yield improvement.

We rely on obtaining yield improvements and corresponding cost reductions in the ~~Mobile~~manufacture of existing products and ~~Consumer~~on introducing new products that incorporate advanced features and other price/performance factors that enable us to increase revenues while maintaining acceptable margins. To the extent such cost reductions and new product introductions do not occur in a timely manner, or that our products do not achieve market acceptance or market acceptance at acceptable pricing, our forecasts of future revenue, financial condition, and operating results could be materially adversely affected.

Shortages in, or increased costs of, wafers and materials could adversely impact our gross margins and lead to reduced revenues.

Worldwide manufacturing capacity for silicon wafers is relatively inelastic. If the demand for silicon wafers or assembly material exceeds market supply, our supply of silicon wafers or assembly material could quickly become limited or prohibitively expensive. We typically have short-term wafer supply agreements that do not ensure long-term supply or allocation commitments. A shortage in manufacturing capacity could hinder our ability to meet product demand and therefore reduce our revenue. In addition, silicon wafers constitute a material portion of our product cost. If we are unable to purchase wafers at favorable prices, our financial condition and results of operations will be adversely affected.

The nature of our business and length of our sales cycle makes our revenue, gross margin and net income subject to fluctuation and difficult to accurately predict.

A number of factors, including how products are manufactured to support end markets, yield, wafer pricing, cost of packaging raw materials, product mix, market acceptance of our new products, competitive pricing dynamics, product quality, geographic and/or end market ~~could periodically result in higher~~mix, and pricing strategies, can cause our revenue, gross margins and net income to fluctuate significantly either positively or ~~lower levels of revenue and revenue concentration with a single or small number of customers. In addition, rapid changes in this market may affect~~negatively from period to period.

We have limited visibility into the demand for our products, ~~and may cause our revenue derived from sales in this market to vary significantly over time, adversely affecting our financial results.~~

~~A downturn in the Communications and Computing end market could cause a meaningful reduction in~~particularly new products, because demand for our products ~~and limit~~depends upon our ~~ability to maintain revenue levels and operating results.~~

Revenue from the Communications and Computing end market accounted for 29% of our revenue in fiscal 2017. Three of our top five programmable logic customers participate primarily in the Communications and Computing end market. In the past, cyclical weakening in demand for programmable logic products from customers in the Communications and Computing end market has adversely affected our revenue and operating results. In addition, telecommunication equipment providers are building network infrastructure for which we compete for product sales. Any deterioration in the Communications and Computing end market,being designed into our end customers' ~~reduction in spending, or a reduction in spending by their~~products and those products achieving market acceptance. During our sales cycle, our customers ~~to support this end market or use of our competitors’ products could lead to a reduction in demand for~~typically test and evaluate our products ~~which could adversely affect~~prior to deciding to include our ~~revenue~~products into the design of their own products, and ~~results~~then require additional time to begin volume production of ~~operations.~~their products. This ~~type of decline impacted our results in the past~~lengthy sales cycle may cause us to incur significant expenses, experience significant production delays and ~~could do so again in the future.~~

to incur additional inventory costs before we receive a customer order that may be delayed or never get placed. A ~~single large~~key strategic customer may ~~be in a position to~~ demand certain ~~functionality, pricing~~design or timing requirements that may detract from or interfere with our normal business activities. If this happens, delays in our normal development schedules could occur, causing our products to miss market windows, thereby reducing the total number of units sold of a particular product.

The products we develop are complex and require significant planning and resources. In the Mobile and Consumer end market, new products are typically introduced early in the year, often in association with key trade shows. In order to meet these deadlines, our customers must complete their product development by year-end, which usually means we must ship sample parts in early spring. If we cannot ship sample parts in early spring, customers may be forced to remove the feature provided by our product, use a competitor’s product, or use an alternate technology in order to meet their timelines. We plan our product development with these market windows in mind, but if we receive requests from a large customer to deployproduction resources to meet their requirements or work on a specific solution, which could cause delays in our normal development ~~path could~~schedule and result in significant investment of our resources or missed opportunities with other potential customers. We may incur these expenses without generating revenue from our products to offset the expenses.

While our sales cycles are typically long, our average product life cycles tend to be ~~delayed, causing~~short as a result of the rapidly changing technology environment in which we operate. Our inventory levels may be higher than historical norms, from time to time, due to inventory build decisions aimed at meeting expected demand from a single large customer, reducing direct material cost or enabling responsiveness to expected demand. In the event the expected demand does not materialize, or if our short sales cycle does not generate sufficient revenue, we may be subject to incremental excess and obsolescence costs.

These factors make it difficult for us to ~~miss sample deadlines~~accurately forecast future sales and ~~therefore~~project quarterly revenues. The difficulty in forecasting future ~~revenues.~~sales weakens our ability to project our inventory requirements, which could result, and in the past has resulted, in inventory write-downs or failure to meet customer product demands in a timely manner. While we may give guidance, the difficulty in forecasting revenues as well as the relative customer and product mix of those revenues limits our ability to provide accurate forward-looking revenue and gross margin guidance.

We ~~rely on information technology systems,~~may experience a disruption of our business activities due to changes in our executive leadership team and ~~failure of these systems to function properly may cause business disruptions.~~

We rely in part on various information technology ("IT") systems to manage our operations, including financial reporting, and we regularly make changes to improve them as necessary by periodically implementing new, or upgrading or enhancing existing, operational and IT systems, procedures, and controls. We have undergone a significant integration and systems implementation following the ~~acquisition of Silicon Image.~~resulting management transitions.

We have recently ~~implemented a~~experienced significant changes to our executive leadership team. In August 2018, the Company's Board of Directors announced the appointment of Jim Anderson as the Company's President and Chief Executive Officer, whose employment commenced September 4, 2018. From September 2018 to January 2019, the Company also announced new ~~enterprise resource planning ("ERP") system~~appointments to ~~standardize~~executive leadership roles in finance, research and development, marketing, sales and operations. This executive leadership transition may result in loss of personnel with deep institutional knowledge and has the potential to disrupt our ~~processes worldwide~~operations and ~~adopt best-in-class capabilities.~~relationships with employees, customers and suppliers. We ~~converted~~must successfully integrate our new management team members within our organization in order to ~~the~~achieve our operating objectives, and these management transitions may temporarily affect our financial performance and results of operations as our new ~~ERP system at the beginning of the second quarter of fiscal 2017. We have committed significant resources~~executive leadership team becomes familiar with our business. In addition, our competitors may seek to use this ~~new ERP system, which replaces multiple legacy systems, and realizing the full functionality of this conversion is extremely complex, in part, because of the wide range of processes~~transition and the ~~multiple legacy systems that must be integrated.~~

Asrelated potential disruptions to gain a ~~result of~~competitive advantage over us. Our future operating results depend substantially upon the ~~conversion process and during our initial use of the new ERP system, we may experience delays or disruptions in the integration~~continued service of our ~~new or enhanced systems, procedures, or controls. We may also encounter errors~~key personnel and in ~~data, an inability to accurately process or record transactions, and security or technical reliability issues. All of these could harm~~significant part upon our ability to ~~conduct core operating functions such as processing invoices, shipping~~attract and ~~receiving, recording and reporting financial and~~retain qualified management ~~information on a timely and accurate basis, and could impact our internal control compliance efforts.~~personnel. If ~~the technical solution or end user training~~we are ~~inadequate, it could limit our ability~~unable to ~~manufacture and ship products as planned.~~

~~These systems are also subject to power and telecommunication outages~~mitigate these or other ~~general system failures. Failure~~similar risks, our business activity could be disrupted, and our financial condition and results of ~~our IT systems or difficulties or delays in managing and integrating them~~operations could ~~impact the company's ability to perform necessary operations, which could~~be materially adversely ~~affect our business.~~affected.

Acquisitions, divestitures, strategic investments and strategic partnerships ~~present risks,~~could disrupt our business and adversely affect our financial condition and operating results.

We may pursue growth opportunities by acquiring complementary businesses, solutions or technologies through strategic transactions, investments or partnerships. The identification of suitable acquisition, strategic investment or strategic partnership candidates can be costly and time consuming and can distract our management team from our current operations. If such strategic transactions require us to seek additional debt or equity financing, we may not ~~realize the goals that were contemplated~~be able to obtain such financing on terms favorable to us or at ~~the time of a transaction.~~

~~On March 10, 2015, we acquired Silicon Image,~~all, and wesuch transaction may ~~make further acquisitions~~adversely affect our liquidity and capital structure. We may also choose to divest certain non-core assets, which divestitures could lead to charges against earnings and may expose us to additional liabilities and risks. Any strategic ~~investments in the future. Acquisitions and strategic investments, including~~transaction might not strengthen our ~~acquisition of Silicon Image, present risks, including:~~

~~our ongoing business may be disrupted and our management's attention may be diverted by investment, acquisition, transition, or integration activities;~~

an acquisition or strategic investment may not perform as well or further our business strategy as we expected, and we may not integrate an acquired company or technology as successfully as we expected;

~~we may incur unexpected costs, claims, or liabilities that we assume from an acquired company or technology or that are otherwise related to an acquisition;~~

~~we may discover adverse conditions post-acquisition that are not covered by representations and warranties;~~

wecompetitive position, may increase some of our risks, ~~such as increasing customer~~and may be viewed negatively by our customers, partners or ~~end product concentration;~~

investors. Even if we successfully complete a strategic transaction, we may ~~have difficulty incorporating~~not be able to effectively integrate the acquired ~~technologies~~business, technology, systems, control environment, solutions, personnel or ~~products with~~operations into our ~~existing product lines;~~

~~we may have higher than anticipated costs in continuing support and development of acquired products, and in general and administrative functions that support such products;~~

~~we may have difficulty integrating and retaining key personnel;~~

~~we may have difficulty integrating~~ business ~~systems, processes, and tools, such as accounting software, inventory management systems,~~ or ~~revenue systems which may have an adverse effect on our business;~~

~~our liquidity and/or capital structure may be adversely impacted;~~

~~our strategic investments may not perform as expected;~~

weglobal tax structure. We may experience unexpected changes in how we are required to account for ~~our acquisitions and~~ strategic ~~investments~~transactions pursuant to U.S. ~~GAAP;~~

GAAP and may not achieve the anticipated benefits of any strategic transaction. We may incur unexpected costs, claims or liabilities that we incur during the strategic transaction or that we assume from the acquired company, or we may discover adverse conditions post acquisition for which we have ~~difficulty integrating acquired entities into our global tax structure with potentially negative impacts on our effective tax rate;~~

~~if the acquisition~~limited or ~~strategic investment does not perform as projected, we might take a charge to earnings due to impaired goodwill;~~

~~we may divest certain assets of acquired businesses, leading to charges against earnings;~~

~~we may experience unexpected negative responses from vendors or customers to the acquisition, which may adversely impact our operations; and~~

~~we may have difficulty integrating the processes and control environment.~~

The occurrence of any of these risks could have a material adverse effect on our business, results of operations, financial condition, or cash flows, particularly in the case of a larger acquisition or several concurrent acquisitions or strategic investments. In addition, we may enter into strategic partnerships with third parties with the goal of gaining access to new and innovative products and technologies. Strategic partnerships pose many of the same risks as acquisitions or investments.no recourse.

We ~~cannot guarantee that~~regularly test for goodwill and other impairments as required under U.S. GAAP, and we ~~will be able to complete any~~may incur future acquisitions or that we will realize any anticipated benefits from any of our past or future acquisitions, strategic investments, or strategic partnerships. We may not be able to find suitable acquisition opportunities that are available at attractive valuations, if at all. A sustained decline in the price of our common stock may make it more difficult and expensive to initiate or complete additional acquisitions on commercially acceptable terms.impairments.

We are required under U.S. GAAP to test goodwill for possible impairment on an annual basis and to test goodwill and long-lived assets, including amortizable intangible assets, for impairment at any other time that circumstances arise indicating the carrying value may not be recoverable. For purposes of testing goodwill for impairment, the Company currently operates as one reporting unit: the core Lattice ("Core") business, which includes intellectual property and semiconductor devices. ~~No impairment charges related to goodwill were recorded in either fiscal year 2017 or 2016, and no impairment charges related to goodwill were recorded for the Core segment in fiscal 2015.~~ Impairment charges related to amortizable intangible assets from the Silicon Image acquisition totaled approximately $12.5 million, $32.4 million, and $7.9 million in fiscal years 2018, 2017, and 2016, respectively. There is no assurance that future impairment tests will indicate that goodwill or amortizable intangible assets will be deemed recoverable. As we continue to review our business operations and test for impairment or in connection with possible sales of assets, we may have impairment charges in the future, which may be ~~material~~material..

~~A number of factors, including our inventory strategy, can impact our gross margins.~~

A number of factors, including how products are manufactured to support the consumer market segment, yield, wafer pricing, cost of packaging raw materials, product mix, market acceptance of our new products, competitive pricing dynamics, geographic and/or end market mix, and pricing strategies, can cause our gross margins to fluctuate significantly either positively or negatively from period to period. In addition, forecasting our gross margins is difficult because a significant portion of our business is based on turns within the same quarter.

Our customers typically test and evaluate our products prior to deciding to design our product into their own products, and then require additional time to begin volume production of those products. This lengthy sales cycle may cause us to experience significant delays and to incur additional inventory costs until we generate revenue from our products. It is possible that we may never generate any revenue from products after incurring significant expenditures.

While our sales cycles are typically long, our average product life cycles tend to be short as a result of the rapidly changing technology environment in which we operate. In addition, our inventory levels may be higher than historical norms, from time to time, due to inventory build decisions aimed at meeting expected demand from a single large customer, reducing direct material cost or enabling responsiveness to expected demand. In the event the expected demand does not materialize, or if our short sales cycle does not generate sufficient revenue, we may be subject to incremental excess and obsolescence costs. In addition, future product cost reductions could impact our inventory valuation, which could adversely affect our operating results.

We and our connectivity customers depend on the availability of certain functions and capabilities within mobile and personal computing operating systems over which we may have no control. New releases of these operating systems may render certain of our products inoperable or may require significant engineering effort to create new device driver software.

Certain portions of our business operate within a market that is dominated by a few key OEMs. These OEMs could play a role in driving the growth of our business or could prevent our growth through deliberate or non-deliberate action. We do not have a presence in the Windows eco-system or in all iOS or Android devices. Our success and ability to grow depend upon our ability to continue to be successful within the iOS and Android eco-systems or gain significant traction within the Windows eco-system. Failure to maintain and grow our presence in these key eco-systems could adversely affect unit volumes.

Further, many of our products depend on the availability of certain functionality in the device operating system, typically Android, Linux, Windows, or iOS. Certain operating system primitives are needed to support video output. We have no control over these operating systems or the companies that produce them, and it is unlikely that we could influence any internal decision these companies make that may have a negative impact on our integrated circuits and their function. Updates to these operating systems that, for example, change the way video is output or remove the ability to output video could materially affect sales of MHL and HDMI integrated circuits.

Products targeted to personal computing or mobile, laptop, or notebook designs often require device driver software to operate. This software is difficult to produce and may require certifications before being released. Failure to produce this software could have a negative impact on our relation with operating system providers and may damage our reputation with end consumers as a quality supplier of products.

~~Shortages in, or increased costs of, wafers and materials could adversely impact our gross margins and lead to reduced revenues.~~

Worldwide manufacturing capacity for silicon wafers is relatively inelastic. If the demand for silicon wafers or assembly material materially exceeds market supply, our supply of silicon wafers or assembly material could quickly become limited. A shortage in manufacturing capacity could hinder our ability to meet product demand and therefore reduce our revenue. In addition, silicon wafers constitute a material portion of our product cost. If we are unable to purchase wafers at favorable prices, our gross margins will be adversely affected.

We depend on independent contractors ~~for most of~~to provide key functions in our ~~assembly~~product development and ~~test services,~~operations, and any disruption of their services, or an increased in cost of these services, could negatively impact our financial condition and results of operations.

We depend on subcontractors to ~~assemble,~~provide cost effective and efficient services in our product development and supply chain functions, including test and ~~ship our products with acceptable quality~~assembly services, software and ~~yield levels.~~ hardware development, support of intellectual property cores, inventory management, order fulfillment and direct sales logistics.

Our operations and operating results may be adversely affected if we experience problems with our subcontractors that impact the delivery of product to our customers. ~~Those~~These problems may include: delays in software or hardware development timelines, prolonged inability to obtain wafers or packaging materials with competitive performance and cost attributes; inability to achieve adequate yields or timely delivery; inability to meet customer timelines or demands, disruption or defects in assembly, test, or shipping services; or delays in stabilizing manufacturing processes or ramping up volume for new products. ~~Economic~~If our third-party supply chain providers were to reduce or discontinue services for us or their operations are disrupted as a result of a fire, earthquake, act of terrorism, political unrest, governmental uncertainty, war, disease, or other natural disaster or catastrophic event, weak economic conditions, may adversely impact the financial health and viability of our subcontractors and result in their inability to meet their commitments to us resulting in product shortages, quality assurance problems, reduced revenue, and/or ~~increased costs which could negatively impact~~any other reason, our financial condition and results of ~~operations.~~

In the past, we have experienced delays in obtaining assembled and tested products and in securing assembly and test capacity commitments from our suppliers. We currently anticipate that our assembly and test capacity commitments are adequate; however, these existing commitments may not be sufficient for us to satisfy customer demand in future periods. We negotiate assembly and test prices and capacity commitments from our contractors on a periodic basis. If any of our assembly or test contractors reduce their capacity commitment or increase their prices, and we cannot find alternative sources, our operating resultsoperations could be adversely affected.

~~We rely on independent software~~Litigation and ~~hardware developers~~unfavorable results of legal proceedings could adversely affect our financial condition and ~~disruption~~operating results.

From time to time we are subject to various legal proceedings and claims that arise out of ~~their services could negatively affect~~the ordinary conduct of our business. Certain claims may not yet be resolved, including but not limited to any that are discussed under Item 3. Legal Proceedings and "Note 19 - Contingencies" contained in the Notes to Consolidated Financial Statements, and additional claims may arise in the future. Results of legal proceedings cannot be predicted with certainty. Regardless of merit or outcome, claims or litigation may be both time-consuming and disruptive to our operations and cause significant expense and diversion of management attention and we may enter into material settlements to avoid these risks. Should we fail to prevail in certain matters or enter into a material settlement, we may be faced with significant monetary damages or injunctive relief against us that could materially and adversely affect our financial ~~results.~~condition and operating results and certain portions of our business.

Changes to financial accounting standards may affect our results of operations and could cause us to change our business practices.

We ~~rely on independent software~~prepare our consolidated financial statements to conform to generally accepted accounting principles in the United States, or U.S. GAAP. These accounting principles are subject to interpretation by the American Institute of Certified Public Accountants, the SEC and ~~hardware developers for~~various bodies formed to interpret and create accounting rules and regulations. Changes in these rules, such as the ~~design, development, supply,~~adoption of ASC 606 - Revenue from Contracts with Customers in fiscal 2018 or ASC 842 - Leases in fiscal 2019, or in the guidance relating to interpretation and ~~support~~adoption of intellectual property cores; design and development software; and certain elements of evaluation boards. As a result, failure or significant delay to complete software or deliver hardware in accordance with our plans, specifications, and agreements could disrupt the release of or introduction of new or existing products, which could be detrimental to the capability of our new or existing products to win designs. Any of these delays or inability to complete the design or developmentrules could have ~~an adverse~~a significant effect on our financial results and could affect portions of our business ~~financial condition,~~differently.

Accounting requirements related to sales through our distribution channel could result in our reporting revenue in excess of demand.

New revenue standards require recognition of revenue based on estimates and may require us to book revenue from distributors that is in excess of actual end customer demand. Since we have limited ability to forecast inventory levels of our end customers, we depend on the timeliness and accuracy of resale reports from our distributors. Late or ~~operating~~inaccurate resale reports could mask significant build-up of inventories in our distribution channel, have a detrimental effect on our ability to properly recognize revenue, and impact our ability to forecast future sales. An inventory build-up in our distribution channel could result in a slowdown in orders, requests for returns from customers, or requests to move out planned shipments. If our distributors do not ultimately sell the inventory and our estimates change, we could be required to materially correct our recognized revenue in a future period, depending on actual results. Any failure to manage these challenges could disrupt or reduce sales of our products and unfavorably impact our financial results.

Our participation in the HDMI ~~and MHL has included our acting as agent for these consortia for which we have been receiving adopter fees.~~standard is evolving. We no longer act as agent for the HDMI standard and ~~there is no guarantee that we will continue to act as agent~~accordingly, our share of adopter fees for the ~~MHL standard. Accordingly, we now receive a reduced share of~~ HDMI ~~adopter fees~~standard is declining and ~~we could in the future lose MHL adopter fees.~~may further decline.

~~Through our wholly owned subsidiary, HDMI Licensing, LLC, we~~We acted as agent of the HDMI consortium until December 31, 2016 and were responsible for promoting and administering the specification. We received all of the adopter fees paid by adopters of the HDMI specification in connection with our role as agent. In September 2016, the ~~founders~~Founders of the HDMI consortium, ~~("Founders"),~~ of which we are a member, amended the Founders Agreement resulting in changes to our role as agent for the HDMI consortium and to the model for sharing adopter fee revenues. Under the terms of the agreement, our role as the agent was terminated effective January 1, 2017 and a new independent entity was appointed to act as the new HDMI licensing agent with responsibility for licensing and the distribution of royalties among Founders. As a result of the amended model for sharing adopter fee revenue, we will be entitled to a reduced share of adopter fees paid by parties adopting the HDMI standard.

In addition, another member of the HDMI consortium asserts that we owe the other HDMI consortium founders their respective shares of any HDMI adopter fees not used by us in the marketing and other activities in furtherance of the HDMI standard from our time as agent. The consortium member has previously indicated its belief that the HDMI founders enjoy a right to these funds but has never pursued such claim. If a determination is made that there were excess adopter fees or if it is determined that we were obligated to share such fees with other consortium members, it could negatively impact our financial position. At this stage of the proceedings, we do not have an estimate of the likelihood or the amount of any financial consequences to us.

We share HDMI royalties with the other HDMI ~~founders~~Founders based on an allocation formula, which is reviewed every three years. ~~The most recent royalty sharing formula covered the period from January 1, 2014 through December 31, 2016, and a new agreement is yet to be signed.~~ Our portion of the royalty allocation has declined for the last several years. In 2015, we received between 24% and 25% of the royalty allocation, while for 2016 and 2017, we received 20% of the royalty allocation. The royalty allocation for ~~2017~~2018 and future years is not yet known but may decline. If the ~~level~~royalty allocation continues to decline, our financial performance could be adversely affected. In addition, delays in the signing of new royalty sharing agreements impacted our timing of revenue recognition and ability to recognize revenue related to the royalties in fiscal 2017. With our adoption of ASU 2014-09, Revenue from Contracts with Customers (Topic 606) ~~as of the beginning of fiscal 2018,~~, we will recognize revenue related to royalties based on estimates of the amounts we will be entitled to receive, and these estimates could differ materiality from actual royalty sharing amounts.

Through our wholly owned subsidiary, MHL, LLC, we act as agent of the MHL specification and are responsible for promoting and administering the specification. As agent, we are entitled to receive license fees paid by adopters of the MHL specification sufficient to reimburse us for the costs we incur to promote and administer the specification. Given the limited number of MHL adopters to date, we do not believe the license fees paid by such adopters will be sufficient to reimburse us for these costs and we make no assurance that the license fees paid by MHL adopters will ever be sufficient to reimburse us the costs we incur as agent of the specification.

~~We currently intend to promote and continue to be involved and actively participate~~Changes in other standard setting initiatives. For example, through Silicon Image’s acquisition of SiBEAM, Inc. in May 2011, it achieved SiBEAM’s prior position as founder and chair of the WirelessHD Consortium. We may decide to license additional elements of our intellectual property to others for use in implementing, developing, promoting, or adopting standards in our target markets, in certain circumstances at little or no cost. This may make it easier for others to compete with us in such markets. In addition, even if we receive license fees or royalties in connection with the licensing of our intellectual property, we make no assurance that such license fees or royalties will compensate us adequately.

~~Our failure to control unauthorized access to our IT systems may cause problems with key business partners or liability.~~

We may be subject to unauthorized access to our IT systems through a security breach or cyber-attack. In the ordinary course of our business, we maintain sensitive data on our networks, including our intellectual property and proprietary or confidential business information relating to our business and that of our customers and business partners. The secure maintenance of this information is critical to our business and reputation. We believe that companies have been increasingly subject to a wide variety of security incidents, cyber-attacks, and other attempts to gain unauthorized access. Cyber-attacks have become more prevalent and much harder to detect and defend against. Our network and storage applications may be subject to unauthorized access by hackers or breached due to operator error, malfeasance, or other system disruptions. It is often difficult to anticipate or immediately detect such incidents and to assess the damage caused by them. In the past, third parties have attempted to penetrate and/or infect our network and systems with malicious software in an effort to gain access to our network and systems.

These data breaches and any unauthorized access or disclosure of our information or intellectual property could compromise our intellectual property and expose sensitive business information. Cyber-attacks could also cause us to incur significant remediation costs, result in product development delays, disrupt key business operations, and divert attention of management and key information technology resources. Our reputation, brand, and business could be significantly harmed, and we could be subject to third party claims in the event of such a security breach.

~~Recent~~effective tax ~~law changes~~rates, tax laws and our global organizational structure and operations could expose us to unanticipated tax consequences.

~~Our legal organizational structure could result~~We are subject to taxation in ~~unanticipated unfavorable tax or~~the United States, Singapore, and other ~~consequences which could have an adverse effect on our financial condition and results of operations.~~countries. We have a global tax structure ~~to more effectively align~~that aligns our corporate structure with our global business operations, ~~including responsibility for sales~~ and purchasing activities. We created new and realigned existing legal entities; completed intercompany sales of rights to intellectual property, inventory, and fixed assets across different tax jurisdictions; and implemented cost-sharing and intellectual property licensing and royalty agreements between our legal entities. Wewe currently operate legal entities in ~~countries where we conduct supply-chain management, design, and sales operations around the world.~~multiple countries. In some countries, we maintain multiple entities for tax or other purposes. ~~In addition, we are currently conducting further restructuring activities following our acquisition~~We may choose to consolidate or integrate certain of ~~Silicon Image as we integrate Silicon Image~~these entities, and ~~its subsidiaries, which include numerous foreign entities, into our existing global tax and corporate structures. These~~these integration activities, changes in tax laws, rates, regulations, future jurisdictional profitability of the Company, ~~and its subsidiaries,~~ and related regulatory interpretations in the countries in which we operate may impact the taxes we pay or tax provision we record, which could adversely affect our results of operations.

~~We are subject to taxation in the United States, Singapore, and other countries. Future~~ In addition, future effective tax rates could be affected by changes in the composition of earnings in countries with differing tax rates, changes in the valuation of deferred tax assets and liabilities, or changes in tax laws. We compute our effective tax rate using actual jurisdictional profits and losses. Changes in the jurisdictional mix of profits and losses may cause fluctuations in the effective tax rate. Adverse changes in tax rates, our tax assets, and tax liabilities could negatively affect our results in the future.liabilities.

We make no assurance as to what taxes we pay or the ability to estimate our future effective tax rate because of, among other things, uncertainty regarding the tax policies of the jurisdictions where we operate. In particular, we anticipate that the Tax Cuts and Jobs Act, enacted December 22, 2017, will impact us. While we are able to quantify or estimate the effects of some of the provisions now in the act, we do not know of all of the rules the Internal Revenue Service ("IRS") will enact to fully implement the tax law changes, or the IRS’ interpretations of the changes. We also continue to analyze and understand the changes and the impacts on us, including the indirect impacts that result from how our industry or we might modify behaviors in a response to the new tax law structure. We also provide no assurance that estimates we provide to quantify the effect of the changes may be accurate.

~~Product quality problems could lead~~

We may be subject to ~~reduced revenue, gross margins,~~warranty claims and ~~net income.~~other costs related to our products.

In general, we warrant our products for varying lengths of time against non-conformance to our specifications and certain other defects. Because our products, including hardware, software, and intellectual property cores, are highly complex and increasingly incorporate advanced technology, our quality assurance programs may not detect all defects, whether manufacturing defects in individual products or systematic defects that could affect numerous shipments. Inability to detect a defect could result in a diversion of our engineering resources from product development efforts, increased engineering expenses to remediate the defect, and increased costs due to customer accommodation or inventory impairment charges. On occasion, we have also repaired or replaced certain components, made software fixes, or refunded the purchase price or license fee paid by our customers due to product or software defects. Our insurance may be unavailable or inadequate to protect against these issues. If there are significant product defects, the costs to remediate such defects, net of reimbursed amounts from our vendors, if any, or to resolve warranty claims may adversely affect our ~~revenue, gross margins,~~financial condition and ~~net income.~~

Weresults of operations and may ~~have difficulty implementing the new revenue recognition requirements.~~

~~Although we have spent considerable time preparing to implement new Accounting Standards Update (ASU) No. 2014-09,~~ ~~Revenue from Contracts with Customers (Topic 606), we do not have extensive experience with the new requirements in practice. The SEC requires us to publish~~harm our financial results in short time frames, which could result in our having difficulty actually implementing the new requirements as intended within the proscribed financial reporting periods. We provide no assurance that our current estimates of the effects of ASU No. 2014-09 contained elsewhere in this Annual Report are accurate.

The nature of our business makes our revenue and gross margin subject to fluctuation and difficult to predict with accuracy, which could have an adverse impact on our business and our ability to provide forward-looking revenue and gross margin guidance.

In addition to the challenging market conditions we may face, we have limited visibility into the demand for our products, particularly new products, because demand for our products depends upon our products being designed into our end customers' products and those products achieving market acceptance. Due to the complexity of our customers' designs, the design to volume production process for many of our customers requires a substantial amount of time, frequently longer than a year. In addition, we are dependent upon "turns," orders received and turned for shipment in the same quarter. These factors make it difficult for us to accurately forecast future sales and project quarterly revenues. The difficulty in forecasting future sales weakens our ability to project our inventory requirements, which could result, and in the past has resulted, in inventory write-downs or failure to meet customer product demands in a timely manner. While we may give guidance, the difficulty in forecasting revenues as well as the relative customer and product mix of those revenues limits our ability to provide accurate forward-looking revenue and gross margin guidance.

~~Reductions in the average selling prices of our products could have a negative impact on our gross margins.~~

The average selling prices of our products generally decline as the products mature or may decline as we compete for market share or customer acceptance in competitive markets. We seek to offset the decrease in selling prices through yield improvement, manufacturing cost reductions, and increased unit sales. We also seek to continue to develop higher value products or product features that increase, or slow the decline of, the average selling price of our products. However, we cannot guarantee that our ongoing efforts will be successful or that they will keep pace with the decline in selling prices of our products, which could ultimately lead to a decline in revenues and have a negative effect on our gross margins.reputation.

If we are unable to adequately protect our new and existing intellectual property rights, our financial results and our ability to compete effectively may suffer.

Our success depends in part on our proprietary technology and we rely upon patent, copyright, trade secret, mask work, and trademark laws to protect our intellectual property. We intend to continue to protect our proprietary technology, however, we may be unsuccessful in asserting our intellectual property rights or such rights may be invalidated, violated, circumvented, or challenged. From time to time, third parties, including our competitors, have asserted against us patent, copyright, and other intellectual property rights to technologies that are important to us. Third parties may attempt to misappropriate our intellectual property through electronic or other means or assert infringement claims against us in the future. Such assertions by third parties may result in costly litigation, indemnity claims, or other legal actions, and we may not prevail in such matters or be able to license any valid and infringed patents from third parties on commercially reasonable terms. This could result in the loss of our ability to import and sell our products or require us to pay costly royalties to third parties in connection with sales of our products. Any infringement claim, indemnification claim, or impairment or loss of use of our intellectual property could materially adversely affect our financial condition and results of operations.

Weakness in our internal control over financial reporting could adversely affect our business and financial results.

In our Annual Report on Form 10-K for the year ended December 30, 2017, we disclosed a material weakness in our internal control over financial reporting related to our risk assessment involving significant unusual transactions. Our management team has developed remediation steps to address such material weakness. Although this material weakness was eliminated by our remediation steps, we may identify a material weakness in our internal control over financial reporting in the future. Any failure to maintain an effective system of internal controls over financial reporting could limit our ability to report our financial results accurately and timely, which could adversely affect our business, financial results and stock price.

A material change in the agreements governing encryption keys we use could place additional restrictions on us, or our distributors or contract manufacturers, which could restrict product shipment or significantly increase the cost to track products throughout the distribution chain.

~~Many of the~~Certain components in our products contain encryption keys used in connection with High Definition Content Protection ~~(HDCP)~~("HDCP"). The regulation and distribution of these encryption keys are controlled through license agreements with Digital Content Protection ~~(DCP)~~("DCP"), a wholly owned subsidiary of Intel Corporation. These license agreements have been modified by DCP from time to time, and such changes could impact us, our distributors, and our customers. An important element of ~~both~~ HDMI ~~and MHL~~ is the ability to implement link protection for high definition ~~(HD)~~("HD"), and more recently, 4K UltraHD, content. We implement various aspects of the HDCP link protection within certain parts we sell. We also, for the benefit of our customers, include the necessary HDCP encryption keys in parts we ship to customers. These encryption keys are provided to us from DCP. We have a specific process for tracking and handling these encryption keys. If DCP changes any of the tracking or handling requirements associated with HDCP encryption keys, we may be required to change our manufacturing and distribution processes, which could adversely affect our manufacturing and distribution costs associated with these products. If we cannot satisfy new requirements for the handling and tracking of encryption keys, we may have to cease shipping or manufacturing certain products.

Our participation in consortia for the development and promotion of industry standards in certain of our target markets, including the HDMI, MHL, and WirelessHD standards, requires us to license some of our intellectual property for free or under specified terms and conditions, which makes it easier for others to compete with us in such markets.

An element of our business strategy includes participating in consortia to establish industry standards in certain of our target markets; promoting and enhancing specifications; and developing and marketing products based on those specifications and future enhancements. We intend to continue participating in consortia that develop and promote the HDMI, MHL, and WirelessHD specifications. In connection with our participation in these consortia, we make certain commitments regarding our intellectual property, in each case with the effect of making certain of our intellectual property available to others, including our competitors, desiring to implement the specification in question. For example, we must license specific elements of our intellectual property to others for use in implementing the HDMI specification, including enhancements, as long as we remain part of the consortium. Also, we must agree not to assert certain necessary patent claims against other members of the MHL consortium, even if those members may have infringed upon those patents in implementing the MHL specification.

Accordingly, certain companies that implement these specifications in their products may use specific elements of our intellectual property to compete with us. Although in the case of the HDMI and MHL consortia, there are annual fees and royalties associated with the adopters’ use of the technology, we make no assurance that our shares of such annual fees and royalties will adequately compensate us for having to license or refrain from asserting our intellectual property. In September 2016, the Founders of the HDMI consortium, of which we are a member, amended the Founders Agreement resulting in changes to our role as agent for the HDMI consortium and to the model for sharing adopter fee revenues. Under the terms of the agreement, our role as the agent was terminated effective January 1, 2017 and a new independent entity was appointed to act as the new HDMI licensing agent with responsibility for licensing and the distribution of royalties among Founders. As a result of the amended model for sharing adopter fee revenue, we will be entitled to a reduced share of adopter fees paid by parties adopting the HDMI standard.

~~Our revenue depends, in part, on the continued adoption and widespread implementation of the HDMI and MHL specifications and the new implementation and adoption of the WirelessHD specifications.~~

Our future revenue depends, in part, upon the continued adoption and widespread implementation of the HDMI, MHL, and WirelessHD specifications. From time to time, competing standards have been established which negatively affect the success of existing standards or jeopardize the creation of new standards. Our failure to continue to drive innovation in the MHL specifications could have an adverse effect on our business going forward.

MHL has not been widely adopted, and if manufacturers who have included MHL in their designs decide that MHL is no longer necessary or cost-effective as a product feature, they could choose to omit the MHL functionality (and our product) from their designs. Such decisions would adversely affect our revenues.

We now have 60GHz wireless technology that we hope will be made widely available and adopted by the marketplace through the efforts of the WirelessHD consortium and incorporated into certain of our future products. As with our HDMI and MHL products and intellectual property, our success with this technology will depend on our ability to introduce first-to-market WirelessHD-enabled semiconductor and intellectual property solutions to our customers and to continue to innovate within the WirelessHD standard. WiGig is an example of a competing 60GHz standard that has been created as an alternative high-bandwidth wireless connectivity solution for the personal computing industry. While the WiGig standard has not been in the market as long as the WirelessHD standard, it does represent a viable alternative to WirelessHD for 60GHz connectivity. If WiGig should gain broader adoption before WirelessHD is adopted, it could negatively impact the adoption of WirelessHD.

As successor-in-interest to Silicon Image, we have granted Intel Corporation certain rights with respect to our intellectual property, which could allow Intel to develop products that compete with ours or otherwise reduce the value of our intellectual property.

Silicon Image entered into a patent cross-license agreement with Intel in which each of them granted the other a license to use the patents filed by the grantor prior to a specified date, except for use related to identified types of products. We believe that the scope of this license to Intel excludes our current products and anticipated future products. Intel could, however, exercise its rights under this agreement to use certain of our patents received in the acquisition of Silicon Image to develop and market other products that compete with ours, without payment to us. Additionally, Intel’s rights to these patents could reduce the value of the patents to any third-party who otherwise might be interested in acquiring rights to use these patents in such products. Finally, Intel could endorse competing products, including a competing digital interface, or develop its own proprietary digital interface. Any of these actions could substantially harm our business and results of operations.

~~Litigation and unfavorable results of legal proceedings could adversely affect our financial condition and operating results.~~

From time to time we are subject to various legal proceedings and claims that arise out of the ordinary conduct of our business. Certain claims are not yet resolved, including those that are discussed under Note 15 contained in the Notes to Consolidated Financial Statements, and additional claims may arise in the future. Results of legal proceedings cannot be predicted with certainty. Regardless of merit, litigation may be both time-consuming and disruptive to our operations and cause significant expense and diversion of management attention and we may enter into material settlements to avoid these risks. Should we fail to prevail in certain matters, we may be faced with significant monetary damages or injunctive relief against us that could materially and adversely affect our financial condition and operating results and certain portions of our business.

We depend upon a third party to provide inventory management, order fulfillment, and direct sales logistics and disruption of these services could adversely impact our business and results of operations.

We rely on a third party vendor to provide cost-effective and efficient supply chain services. Among other activities, these outsourced services relate to direct sales logistics, including order fulfillment, inventory management and warehousing, and distribution of inventory to third party distributors. If our third party supply chain provider were to discontinue services for us or its operations are disrupted as a result of a fire, earthquake, act of terrorism, political unrest, governmental uncertainty, war, disease, or other natural disaster or catastrophic event, or any other reason, our ability to fulfill direct sales orders and distribute inventory timely, cost effectively, or at all, would be hindered, which could adversely affect our business.

We may have failed to adequately insure against certain risks, and, as a result, our financial condition and results may be adversely affected.

We carry insurance customary for companies in our industry, including, but not limited to, liability, property, and casualty; workers' compensation; and business interruption insurance. We also insure our employees for basic medical expenses. In addition, we have insurance contracts that provide director and officer liability coverage for our directors and officers. Other than the specific areas mentioned above, we are self-insured with respect to most other risks and exposures, and the insurance we carry in many cases is subject to a significant policy deductible or other limitation before coverage applies. Based on management's assessment and judgment, we have determined that it is more cost effective to self-insure against certain risks than to incur the insurance premium costs. The risks and exposures for which we self-insure include, but are not limited to, certain natural disasters, certain product defects, certain matters for which we indemnify third parties, political risk, certain theft, patent infringement, and employment practice matters. Should there be a catastrophic loss due to an uninsured event (such as an earthquake) or a loss due to adverse occurrences in any area in which we are self-insured, our financial condition or operating results could be adversely affected.

We compete with others to attract and retain key personnel, and any loss of, or inability to attract, such personnel could adversely affect our ability to compete effectively.

We depend on the efforts and abilities of certain key members of management and other technical personnel. Our future success depends, in part, upon our ability to retain such personnel and attract and retain other highly qualified personnel, particularly product engineers who can respond to market demands and required product innovation. Competition for such personnel is intense and we may not be successful in hiring or retaining new or existing qualified personnel. ~~From~~Additionally, from time to time we have effected restructurings which have eliminated a number of positions. Even if such personnel are not directly affected by the restructuring effort, such terminations can have a negative impact on morale and our ability to attract and hire new qualified personnel in the future. If we lose existing qualified personnel or are unable to hire new qualified personnel, as needed, we could have difficulty competing in our highly-competitive and innovative environment.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

~~Our~~In the first quarter of 2019, we relocated our corporate headquarters from Portland, Oregon to our facility in Hillsboro, Oregon. We lease a 47,800 square foot of space in Hillsboro, Oregon as our corporate headquarters and a research and development facility through November 2022. During 2018, our corporate headquarters and executive office ~~are~~were located in a 23,680 square foot of space leased in Portland, Oregon through March 2025. We ~~also leased a 47,800 square foot of~~plan to fully vacate the space in ~~Hillsboro,~~Portland, Oregon in early 2019 and intend to sublease the vacated space. In San Jose, California, we have 98,874 square feet under lease through September 2016, of which we use 49,579 square feet as a research and development facility, ~~through November 2022. We also currently lease a 98,874~~while we vacated 49,295 square ~~foot research~~feet during the fourth quarter of 2018 and ~~development facility in San Jose, California through September 2026.~~intend to sublease the vacated space.

In Muntinlupa City, Philippines, we lease a total of 48,565 square feet through May 2025 and 1,938 square feet through June 2025 for research and development and operations facilities. In this location, we also ~~lease~~leased another 2,856 square feet through April ~~2018.~~

~~The March 2015 acquisition of Silicon Image added 128,154, 66,385 and 22,507 square feet of leased spaces in Sunnyvale, California, Shanghai, China and Hyderabad, India through June~~ 2018 ~~May 2018 and December 2017, respectively. We terminated the Sunnyvale lease in February 2017 and the Hyderabad lease in September 2017.~~as storage space that has been consolidated into other facilities.

In Shanghai, China, we ~~leased space for 3,212~~lease 68,027 square feet ~~prior to the acquisition of Silicon Image, which we terminated in November 2015.~~through May 2021 for research and development operations. We also owned an 18,869 square foot research and development facility in Shanghai, China, which we sold in August 2017.~~In this location, we also lease another 66,361 square feet through May 2018.~~

We also lease office facilities in multiple other metropolitan locations for our domestic and international sales staff. We believe that our existing facilities are suitable and adequate for our current and foreseeable future needs.

Item 3. Legal Proceedings

On or about December 19, 2018, Steven A.W. De Jaray, Perienne De Jaray and Darrell R. Oswald (collectively, the “Plaintiffs”) commenced an action against the Company and several unnamed defendants in the Multnomah County Circuit Court of the State of Oregon, in connection with the sale of certain products by the Company to defendants in or around 2008. Plaintiffs allege that the Company violated the Lanham Act, engaged in negligence and fraud by failing to disclose to purchaser the export-controlled status of the subject parts. Plaintiffs seek damages of $138 million, treble damages, and other remedies. In January 2019, the Company removed the action to the United States District Court for the District of Oregon. At this stage of the proceedings, the Company does not have an estimate of the likelihood or the amount of any potential exposure to the Company; however, the Company believes that these claims are without merit and intends to vigorously defend the action. See “Litigation and unfavorable results of legal proceedings could adversely affect our financial condition and operating results” in “Risk Factors” in Item 1A of Part I of this Annual Report on Form 10-K.

From time to time, we are exposed to certain asserted and unasserted potential claims. Periodically, we review the status of each significant matter and assess its potential financial exposure. If the potential loss from any claim or legal proceeding is considered probable and a range of possible losses can be estimated, we then accrue a liability for the estimated loss. Legal proceedings are subject to uncertainties, and the outcomes are difficult to predict. Because of such uncertainties, accruals are based only on the best information available at the time. As additional information becomes available, we reassess the potential liability related to pending claims and litigation and may revise estimates.

Item 4. Mine Safety Disclosures

Not applicable.

PART II

Item 5. Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities

Market Information

Our common stock is traded on the NASDAQ Global Select Market under the symbol "LSCC". ~~The following table sets forth the low and high intraday sale prices for our common stock for the last two fiscal years, as reported by NASDAQ.~~

Low High
2017:
First Quarter $ 6.76
$ 7.55
Second Quarter 6.51
7.10
Third Quarter 5.05
7.03
Fourth Quarter 5.14
6.60
2016:
First Quarter $ 4.02
$ 6.67
Second Quarter 4.89
6.47
Third Quarter 5.21
6.69
Fourth Quarter 5.91
7.99

Holders

As of ~~March 2, 2018,~~February 21, 2019, we had approximately ~~240~~227 stockholders of record.

Dividends

The payment of dividends on our common stock is within the discretion of our Board of Directors. We intend to retain earnings to finance our business. We have never paid cash dividends.

Recent Sales of Unregistered Securities

None.

Issuer Purchases of Equity Securities

None.

Comparison of Total Cumulative Stockholder Return

The following graph shows the five-year comparison of cumulative stockholder return on our common stock, the Standard and Poor's (“S&P”) 500 Index and the Philadelphia Semiconductor Index (“PHLX”) from December ~~2012~~2013 through December ~~2017.~~2018. Cumulative stockholder return assumes $100 invested at the beginning of the period in our common stock, the S&P and PHLX. Historical stock price performance is not necessarily indicative of future stock price performance.

Lattice Cumulative Stockholder Return

Item 6. Selected Financial Data


	Year Ended *																			Year Ended (1)
STATEMENT OF OPERATIONS:	December 30, 2017			December 31, 2016				January 2, 2016 **				January 3, 2015				December 28, 2013			STATEMENT OF OPERATIONS:	December 29, 2018				December 30, 2017				December 31, 2016				January 2, 2016 (3)				January 3, 2015 (2)
(In thousands, except per share data)	December 30, 2017						(In thousands, except per share data)	January 2, 2016 **								December 28, 2013				December 29, 2018				December 30, 2017				December 31, 2016				January 2, 2016 (3)				January 3, 2015 (2)
Revenue:				December 31, 2016																			Revenue:
Product	$	356,502		$	390,704			$	369,200			January 3, 2015		$	366,127			$	332,525		Product	$	380,468			$	356,502			$	390,704			$	369,200			$	366,127
Licensing and services	29,459			36,350				36,766				—				—			Licensing and services	18,331				29,459				36,350				36,766				—
Total Revenue	385,961			427,054				405,966				366,127				332,525			Total Revenue	398,799				385,961				427,054				405,966				366,127
Costs and expenses:																			Costs and expenses:
Cost of product revenue	164,657			179,983				184,914				159,940				154,281			Cost of product revenue	179,101				164,657				179,983				184,914				159,940
Cost of licensing and services revenue	4,725			637				1,143				—				—			Cost of licensing and services revenue	259				4,725				637				1,143				—
Research and development	103,357			117,518				136,868				88,079				80,966			Research and development	82,449				103,357				117,518				136,868				88,079
Selling, general, and administrative	90,718			98,602				97,349				73,527				67,144			Selling, general, and administrative	91,054				90,718				98,602				97,349				73,527
Amortization of acquired intangible assets	31,340			33,575				29,580				2,948				2,960			Amortization of acquired intangible assets	17,690				31,340				33,575				29,580				2,948
Restructuring charges	7,196			9,267				19,239				17				388			Restructuring charges	17,349				7,196				9,267				19,239				17
Acquisition related charges	3,781			6,305				22,450				—				—			Acquisition related charges	1,531				3,781				6,305				22,450				—
Impairment of goodwill and acquired intangible assets	32,431			7,866				21,655				—				—			Impairment of goodwill and acquired intangible assets	12,486				32,431				7,866				21,655				—
Gain on sale of building	(4,624		)	—				—				—				—			Gain on sale of building	—				(4,624		)		—				—				—
Total costs and expenses	433,581			453,753				513,198				324,511				305,739			Total costs and expenses	401,919				433,581				453,753				513,198				324,511
(Loss) Income from operations	(47,620		)	(26,699		)		(107,232		)		41,616				26,786
(Loss) income from operations																			(Loss) income from operations	(3,120		)		(47,620		)		(26,699		)		(107,232		)		41,616
Interest expense	(18,807		)	(20,327		)		(18,389		)		(172		)		(152		)	Interest expense	(20,600		)		(18,807		)		(20,327		)		(18,389		)		(172		)
Other (expense) income, net ***	(3,286		)	2,844				(1,072		)		1,497				(148		)
Other (expense) income, net																			Other (expense) income, net	(249		)		(3,286		)		2,844				(1,072		)		1,497
(Loss) income before income taxes	(69,713		)	(44,182		)		(126,693		)		42,941				26,486			(Loss) income before income taxes	(23,969		)		(69,713		)		(44,182		)		(126,693		)		42,941
Income tax expense (benefit)	849			9,917				32,540				(5,639		)		4,165			Income tax expense (benefit)	2,353				849				9,917				32,540				(5,639		)
Net (loss) income	$	(70,562	)	$	(54,099	)		$	(159,233	)		$	48,580			$	22,321		Net (loss) income	$	(26,322	)		$	(70,562	)		$	(54,099	)		$	(159,233	)		$	48,580

Net (loss) income per share:																			Net (loss) income per share:
Basic	$	(0.58	)	$	(0.45	)		$	(1.36	)		$	0.41			$	0.19		Basic	$	(0.21	)		$	(0.58	)		$	(0.45	)		$	(1.36	)		$	0.41
Diluted	$	(0.58	)	$	(0.45	)		$	(1.36	)		$	0.40			$	0.19		Diluted	$	(0.21	)		$	(0.58	)		$	(0.45	)		$	(1.36	)		$	0.40

Shares used in per share calculations:																			Shares used in per share calculations:
Basic	122,677			119,994				117,387				117,708				115,701			Basic	126,564				122,677				119,994				117,387				117,708
Diluted	122,677			119,994				117,387				120,245				117,081			Diluted	126,564				122,677				119,994				117,387				120,245


BALANCE SHEET:	December 30, 2017			December 31, 2016				January 2, 2016				January 3, 2015				December 28, 2013			BALANCE SHEET:	December 29, 2018				December 30, 2017				December 31, 2016				January 2, 2016				January 3, 2015
(In thousands)	December 30, 2017						(In thousands)	January 2, 2016								December 28, 2013				December 29, 2018				December 30, 2017				December 31, 2016				January 2, 2016				January 3, 2015
Cash, cash equivalents, and short-term marketable securities	$	111,797		December 31, 2016			$	116,860			$	January 3, 2015			102,574			$	254,844			$	215,815		Cash, cash equivalents, and short-term marketable securities	$	128,675			$	111,797			$	116,860			$	102,574	$	254,844
Total assets	$	635,961		$	766,883			$	785,920			$	510,530			$	447,876		Total assets	$	623,687			$	635,961			$	766,883			$	785,920			$	510,530
Long term liabilities	$	334,621		$	338,903			$	369,223			$	8,809			$	3,588		Long term liabilities	$	295,812			$	334,621			$	338,903			$	369,223			$	8,809
Total liabilities	$	418,268		$	496,453			$	480,400			$	69,555			$	62,196		Total liabilities	$	365,230			$	418,268			$	496,453			$	480,400			$	69,555
Total stockholders' equity	$	217,693		$	270,430			$	305,520			$	440,975			$	385,680		Total stockholders' equity	$	258,457			$	217,693			$	270,430			$	305,520			$	440,975

* The year ended January 3, 2015 was a 53-week year as compared to the other years presented, which were based on our standard 52-week year.
** Our results for the year ended January 2, 2016 include the results associated with the acquisition of Silicon Image for the approximately 10-month period from
March 11, 2015 through January 2, 2016. Results presented for periods prior to fiscal 2015 are those historically reported for Lattice only.
*** Equity in net loss of an unconsolidated affiliate previously presented separately is now included in Other (expense) income, net for all periods presented.
(see "Reclassifications" in Note 1 - Nature of Operations and Significant Accounting Policies to our Consolidated Financial Statements in Part II, Item 8).
(1)																			Results for periods prior to 2018 are presented in accordance with ASC 605, which was in effect during those fiscal years.
(2)																			The year ended January 3, 2015 was a 53-week year as compared to the other years presented, which were based on our standard 52-week year.
(3)																			Our results for the year ended January 2, 2016 include the results associated with the acquisition of Silicon Image for the approximately 10-month period from March 11, 2015 through January 2, 2016. Results presented for the period prior to fiscal 2015 are those historically reported for Lattice only.



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
þ	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER ~~30, 2017~~29, 2018
	or
¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM __________ TO __________



Delaware	93-0835214
(State of Incorporation)	(I.R.S. Employer Identification Number)
~~111 SW Fifth Ave, Ste 700, Portland, OR~~5555 NE Moore Court, Hillsboro, Oregon	~~97204~~97124-6421
(Address of principal executive offices)	(Zip Code)



(Title of Class)	(Name of each exchange on which registered)
Common Stock, $.01 par value	NASDAQ Global Select Market



Large accelerated filer ¨	Accelerated filer þ	Non-accelerated filer ¨
Smaller reporting company ¨	Emerging growth company ¨



Aggregate market value of voting stock held by non-affiliates of the registrant as of July 1, 2017	$	613,585,307
Number of shares of common stock outstanding as of March 2, 2018	124,210,928



Aggregate market value of voting stock held by non-affiliates of the registrant as of June 29, 2018	$	575,075,952
Number of shares of common stock outstanding as of February 21, 2019	131,598,332



		Page
PART I
Item 1.	Business	4
Item 1A.	Risk Factors	11
Item 1B.	Unresolved Staff Comments	2421
Item 2.	Properties	2421
Item 3.	Legal Proceedings	2422
Item 4.	Mine Safety Disclosures	2422

PART II
Item 5.	Market for Registrant's Common Equity, Related Stockholder Matters, &and Issuer Purchases of Equity Securities	2523
Item 6.	Selected Financial Data	2725
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2826
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	4643
Item 8.	Financial Statements and Supplementary Data	4744
Item 9.	Changes in and Disagreements with Accountants On Accounting and Financial Disclosure	8582
Item 9A.	Controls and Procedures	8582
Item 9B.	Other Information	8683

PART III
Item 10.	Directors, Executive Officers and Corporate Governance	8784
Item 11.	Executive Compensation	8784
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	8784
Item 13.	Certain Relationships and Related Transactions, and Director Independence	8884
Item 14.	Principal Accountant Fees and Services	8884

PART IV
Item 15.	Exhibits	8985
	Signatures	9187



	Year Ended												% Change in
(In thousands)	December 30, 2017				December 31, 2016				January 2, 2016				2017		2016
Asia	$	277,638	72	%	$	305,093	71	%	$	308,534	76	%	(9	)	(1	)
Europe	44,547		12		59,835		14		55,596		14		(26	)	8
Americas	63,776		16		62,126		15		41,836		10		3		48
Total revenue	$	385,961	100	%	$	427,054	100	%	$	405,966	100	%	(10	)	5



	Low		High
2017:
First Quarter	$	6.76	$	7.55
Second Quarter	6.51		7.10
Third Quarter	5.05		7.03
Fourth Quarter	5.14		6.60
2016:
First Quarter	$	4.02	$	6.67
Second Quarter	4.89		6.47
Third Quarter	5.21		6.69
Fourth Quarter	5.91		7.99



Communications and Computing	Mobile and Consumer	Industrial and Automotive	Licensing and Services
Wireless	~~Smartphones~~Smart-phones	Security and Surveillance	IP Royalties
Wireline	Cameras	Machine Vision	Adopter Fees
Data Backhaul	Displays	Industrial Automation	IP Licenses
Client Computing	~~Tablets~~Wearables	Human Computer Interaction	Patent Sales
~~Servers~~Data Center Computing	~~Wearables~~Televisions	Automotive	Testing Services
Data Storage	~~Televisions and~~ Home Theater	Drones	Design Services



*	Results for 2017 and 2016 are presented in accordance with ASC 605, which was in effect during those fiscal years.
**	During the first quarter of 2018, we updated our channel categories to group all forms of distribution into a single channel. Prior periods have been reclassified to match current period presentation.


(In thousands)
Fiscal year	Operating leases (1)		Long-term Debt (2)		Operating leases (1)		Long-term Debt (2)
2018	$	6,310	$	20,027
2019	4,784		41,366		$	7,090	$	23,756
2020	4,860		71,849		6,893		74,331
2021	4,654		219,966		5,452		191,699
2022	4,694		—		4,658		—
2023					4,229		—
Thereafter	14,259		—		9,930		—
	$	39,561	$	353,208	$	38,252	$	289,786


(In thousands, except per share amounts)	Year Ended									(In thousands, except per share amounts)	Year Ended
(unaudited)	December 30, 2017			December 31, 2016			January 2, 2016			(unaudited)	December 29, 2018			December 30, 2017			December 31, 2016

Revenue Reconciliation
GAAP Revenue	$	385,961		$	427,054		$	405,966
Acquisition related deferred revenue effect (1)	—			—			5,187
Non-GAAP Revenue	$	385,961		$	427,054		$	411,153

Gross Margin Reconciliation										Gross Margin Reconciliation
GAAP Gross margin	$	216,579		$	246,434		$	219,909		GAAP Gross margin	$	219,439		$	216,579		$	246,434
Acquisition related net deferred revenue effect (1) (2)	—			—			3,691
Acquisition related inventory fair value effect (3)	—			523			6,078
Inventory adjustment related to restructured operations										Inventory adjustment related to restructured operations	7,829			—			—
Acquisition related inventory fair value effect (1)										Acquisition related inventory fair value effect (1)	—			—			523
Stock-based compensation expense - gross margin	788			888			1,416			Stock-based compensation expense - gross margin	940			788			888
Non-GAAP Gross margin	$	217,367		$	247,845		$	231,094		Non-GAAP Gross margin	$	228,208		$	217,367		$	247,845

Gross Margin % Reconciliation										Gross Margin % Reconciliation
GAAP Gross margin %	56.1		%	57.7		%	54.2		%	GAAP Gross margin %	55.0		%	56.1		%	57.7		%
Cumulative effect of non-GAAP Gross Margin adjustments	0.2		%	0.3		%	2.0		%	Cumulative effect of non-GAAP Gross Margin adjustments	2.2		%	0.2		%	0.3		%
Non-GAAP Gross margin %	56.3		%	58.0		%	56.2		%	Non-GAAP Gross margin %	57.2		%	56.3		%	58.0		%

Operating Expenses Reconciliation										Operating Expenses Reconciliation
GAAP Operating expenses	$	264,199		$	273,133		$	327,141		GAAP Operating expenses	$	222,559		$	264,199		$	273,133
Amortization of acquired intangible assets	(31,340		)	(33,575		)	(29,580		)	Amortization of acquired intangible assets	(17,690		)	(31,340		)	(33,575		)
Restructuring charges	(7,196		)	(9,267		)	(19,239		)	Restructuring charges	(17,349		)	(7,196		)	(9,267		)
Acquisition related charges (4)	(3,781		)	(6,305		)	(22,450		)
Impairment of goodwill and acquired intangible assets	(32,431		)	(7,866		)	(21,655		)
Acquisition related charges (2)										Acquisition related charges (2)	(1,531		)	(3,781		)	(6,305		)
Impairment of acquired intangible assets										Impairment of acquired intangible assets	(11,686		)	(32,431		)	(7,866		)
Stock-based compensation expense - operations	(11,755		)	(15,325		)	(15,934		)	Stock-based compensation expense - operations	(12,706		)	(11,755		)	(15,325		)
Gain on sale of building	4,624			—			—			Gain on sale of building	—			4,624			—
Non-GAAP Operating expenses	$	182,320		$	200,795		$	218,283		Non-GAAP Operating expenses	$	161,597		$	182,320		$	200,795

(Loss) Income from Operations Reconciliation										(Loss) Income from Operations Reconciliation
GAAP Loss from operations	$	(47,620	)	$	(26,699	)	$	(107,232	)	GAAP Loss from operations	$	(3,120	)	$	(47,620	)	$	(26,699	)
Acquisition related net deferred revenue effect (1) (2)	—			—			3,691
Acquisition related inventory fair value effect (3)	—			523			6,078
Inventory adjustment related to restructured operations										Inventory adjustment related to restructured operations	7,829			—			—
Acquisition related inventory fair value effect (1)										Acquisition related inventory fair value effect (1)	—			—			523
Stock-based compensation expense - gross margin	788			888			1,416			Stock-based compensation expense - gross margin	940			788			888
Amortization of acquired intangible assets	31,340			33,575			29,580			Amortization of acquired intangible assets	17,690			31,340			33,575
Restructuring charges	7,196			9,267			19,239			Restructuring charges	17,349			7,196			9,267
Acquisition related charges (4)	3,781			6,305			22,450
Acquisition related charges (2)										Acquisition related charges (2)	1,531			3,781			6,305
Impairment of goodwill and acquired intangible assets	32,431			7,866			21,655			Impairment of goodwill and acquired intangible assets	11,686			32,431			7,866
Stock-based compensation expense - operations	11,755			15,325			15,934			Stock-based compensation expense - operations	12,706			11,755			15,325
Gain on sale of building	(4,624		)	—			—			Gain on sale of building	—			(4,624		)	—
Non-GAAP Income from operations	$	35,047		$	47,050		$	12,811		Non-GAAP Income from operations	$	66,611		$	35,047		$	47,050

(Loss) Income from Operations % Reconciliation										(Loss) Income from Operations % Reconciliation
GAAP Loss from operations %										GAAP Loss from operations %	(0.8		)%	(12.3		)%	(6.3		)%
Cumulative effect of non-GAAP Gross Margin and Operating adjustments										Cumulative effect of non-GAAP Gross Margin and Operating adjustments	17.5		%	21.4		%	17.3		%
Non-GAAP Income from operations %										Non-GAAP Income from operations %	16.7		%	9.1		%	11.0		%

(1)										Fair value adjustment for inventory step-up from purchase accounting.
(1) Fair value adjustment to deferred revenue from purchase accounting
(2) Fair value adjustment to deferred cost of sales from purchase accounting
(3) Fair value adjustment for inventory step-up from purchase accounting
(4) Includes legal fees and outside services that were related to our proposed acquisition by Canyon Bridge Acquisition Company, Inc.
and stock-based compensation and severance costs related to change in control.
(2)										Legal fees and outside services that were related to our proposed acquisition by Canyon Bridge Acquisition Company, Inc.



Reconciliation of U.S. GAAP to Non-GAAP Financial Measures

(In thousands, except per share amounts)	Year Ended
(unaudited)	December 30, 2017			December 31, 2016			January 2, 2016

(Loss) Income from Operations % Reconciliation
GAAP Loss from operations %	(12.3		)%	(6.3		)%	(26.4		)%
Cumulative effect of non-GAAP Gross Margin and Operating adjustments	21.4		%	17.3		%	29.5		%
Non-GAAP Income from operations %	9.1		%	11.0		%	3.1		%

Other (Expense) Income, Net Reconciliation
GAAP Other (expense) income, net	$	(3,286	)	$	2,844		$	(1,072	)
Loss (gain) on sale of assets and business units	1,496			(2,646		)	—
Non-GAAP Other income (expense), net	$	(1,790	)	$	198		$	(1,072	)

Income Tax Expense Reconciliation
GAAP Income tax expense	$	849		$	9,917		$	32,540
Estimated tax effect of non-GAAP adjustments (5)	—			—			(21,030		)
Non-GAAP Income tax expense	$	849		$	9,917		$	11,510

Net (Loss) Income Reconciliation
GAAP Net loss	$	(70,562	)	$	(54,099	)	$	(159,233	)
Acquisition related net deferred revenue effect (1) (2)	—			—			3,691
Acquisition related inventory fair value effect (3)	—			523			6,078
Stock-based compensation expense - gross margin	788			888			1,416
Amortization of acquired intangible assets	31,340			33,575			29,580
Restructuring charges	7,196			9,267			19,239
Acquisition related charges (4)	3,781			6,305			22,450
Impairment of goodwill and acquired intangible assets	32,431			7,866			21,655
Stock-based compensation expense - operating expense	11,755			15,325			15,934
Gain on sale of building	(4,624		)	—			—
Loss (gain) on sale of assets and business units	1,496			(2,646		)	—
Estimated tax effect of non-GAAP adjustments (5)	—			—			21,030
Non-GAAP Net income (loss)	$	13,601		$	17,004		$	(18,160	)

(1) Fair value adjustment to deferred revenue from purchase accounting
(2) Fair value adjustment to deferred cost of sales from purchase accounting
(3) Fair value adjustment for inventory step-up from purchase accounting
(4) Includes legal fees and outside services that were related to our proposed acquisition by Canyon Bridge Acquisition Company, Inc.
and stock-based compensation and severance costs related to change in control.
(5) We calculate non-GAAP tax expense by applying our tax provision model to year-to-date and projected
income after adjusting for non-GAAP items. The difference between calculated values for GAAP and
non-GAAP tax expense has been included as the “Estimated tax effect of non-GAAP adjustments.”



	Page
Consolidated Financial Statements:
Consolidated Balance Sheets	4845
Consolidated Statements of Operations	4946
Consolidated Statements of Comprehensive Loss	5047
Consolidated Statements of Stockholders' Equity	5148
Consolidated Statements of Cash Flows	5249
Notes to Consolidated Financial Statements	5451
Report of Independent Registered Public Accounting Firm	8380


(In thousands)	December 30, 2017		December 31, 2016		$Change		%Change		December 29, 2018		December 30, 2017		$Change			%Change
Inventories	$	79,903	$	79,168	$	735	0.9	%	$	67,096	$	79,903	$	(12,807	)	(16	)%
Months of inventory on hand	5.4		4.3		1.1				4.8		5.4		(0.6		)


(In thousands, except share and par value data)	December 30, 2017			December 31, 2016			December 29, 2018			December 30, 2017
ASSETS
Current assets:
Cash and cash equivalents	$	106,815		$	106,552		$	119,051		$	106,815
Short-term marketable securities	4,982			10,308			9,624			4,982
Accounts receivable, net of allowance for doubtful accounts	55,104			99,637			60,890			55,104
Inventories	79,903			79,168			67,096			79,903
Prepaid expenses and other current assets	16,567			19,035			27,762			16,567
Total current assets	263,371			314,700			284,423			263,371
Property and equipment, net	40,423			49,481			34,883			40,423
Intangible assets, net	51,308			118,863			21,325			51,308
Goodwill	267,514			269,758			267,514			267,514
Deferred income taxes	198			372			215			198
Other long-term assets	13,147			13,709			15,327			13,147
Total assets	$	635,961		$	766,883		$	623,687		$	635,961

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses (includes restructuring)	$	54,405		$	80,933		$	51,763		$	54,405
Accrued payroll obligations	10,416			9,865			9,365			10,416
Current portion of long-term debt	1,508			33,767			8,290			1,508
Deferred income and allowances on sales to sell-through distributors	17,250			32,257
Deferred income and allowances on sales to distributors							—			17,250
Deferred licensing and services revenue	68			728			—			68
Total current liabilities	83,647			157,550			69,418			83,647
Long-term debt	299,667			300,855			251,357			299,667
Other long-term liabilities	34,954			38,048			44,455			34,954
Total liabilities	418,268			496,453			365,230			418,268
Commitments and contingencies (Notes 13 and 20)	—			—
Commitments and contingencies (Notes 13 and 19)							—			—
Stockholders' equity:
Preferred stock, $.01 par value, 10,000,000 shares authorized, none issued and outstanding	—			—			—			—
Common stock, $.01 par value, 300,000,000 shares authorized; 123,895,000 shares issued and outstanding as of December 30, 2017 and 121,645,000 shares issued and outstanding as of December 31, 2016	1,239			1,216
Common stock, $.01 par value, 300,000,000 shares authorized; 129,728,000 shares issued and outstanding as of December 29, 2018 and 123,895,000 shares issued and outstanding as of December 30, 2017							1,297			1,239
Additional paid-in capital	695,768			680,315			736,274			695,768
Accumulated deficit	(477,862		)	(406,945		)	(476,783		)	(477,862		)
Accumulated other comprehensive loss	(1,452		)	(4,156		)	(2,331		)	(1,452		)
Total stockholders' equity	217,693			270,430			258,457			217,693
Total liabilities and stockholders' equity	$	635,961		$	766,883		$	623,687		$	635,961


	Common Stock ($.01 par value)					Paid-in capital			Treasury stock				Accumulated deficit				Accumulated other comprehensive loss							Common Stock ($.01 par value)				Additional Paid-in capital		Accumulated deficit			Accumulated other comprehensive loss
(In thousands, except par value data)	Shares		Amount			Paid-in capital						Total				Shares					Amount						Total	Additional Paid-in capital		Accumulated deficit			Accumulated other comprehensive loss
Balances, January 3, 2015	117,288		$	1,173		$	635,299		Treasury stock			$	Accumulated deficit		—		Accumulated other comprehensive loss		$	(193,613	)		$	(1,884	)	$	440,975
Net loss for 2015	—		—			—			—				(159,233		)		—				(159,233		)
Unrealized loss related to marketable securities, net of tax	—		—			—			—				—				(69		)		(69		)
Recognized loss on redemption of marketable securities, previously unrealized	—		—			—			—				—				442				442
Translation adjustments, net of tax	—		—			—			—				—				(1,243		)		(1,243		)
Common stock issued in connection with the exercise of stock options, ESPP and vested RSUs, net of tax	2,415		25			2,161			—				—				—				2,186
Stock repurchase	—		—			—			(6,970		)		—				—				(6,970		)
Retirement of treasury stock	(1,052	)	(11		)	(6,959		)	6,970				—				—				—
Stock-based compensation expense related to options, ESPP and RSUs	—		—			18,396			—				—				—				18,396
Fair value of partially vested stock options and RSUs assumed in acquisition	—		—			5,139			—				—				—				5,139
Defined benefit pension, net of actuarial losses	—		—			—			—				—				(156		)		(156		)
Redemption of noncontrolling interest, net of previous accretion to redemption value.	—		—			6,053			—				—				—				6,053
Balances, January 2, 2016	118,651		$	1,187		$	660,089		$	—			$	(352,846	)		$	(2,910	)		$	305,520		118,651		$	1,187	$	660,089	$	(352,846	)	$	(2,910	)	$	305,520
Net loss for 2016	—		—			—			—				(54,099		)		—				(54,099		)	—		—		—		(54,099		)	—			(54,099		)
Unrealized loss related to marketable securities, net of tax	—		—			—			—				—				(172		)		(172		)	—		—		—		—			(172		)	(172		)
Recognized loss on redemption of marketable securities, previously unrealized	—		—			—			—				—				79				79			—		—		—		—			79			79
Translation adjustments, net of tax	—		—			—			—				—				(1,303		)		(1,303		)	—		—		—		—			(1,303		)	(1,303		)
Common stock issued in connection with the exercise of stock options, ESPP and vested RSUs, net of tax	2,994		29			4,013			—				—				—				4,042			2,994		29		4,013		—			—			4,042
Stock-based compensation expense related to options, ESPP and RSUs	—		—			16,213			—				—				—				16,213			—		—		16,213		—			—			16,213
Defined benefit pension, net of actuarial losses	—		—			—			—				—				150				150
Defined benefit pension, net of actuarial valuation adjustments																								—		—		—		—			150			150
Balances, December 31, 2016	121,645		$	1,216		$	680,315		$	—			$	(406,945	)		$	(4,156	)		$	270,430		121,645		$	1,216	$	680,315	$	(406,945	)	$	(4,156	)	$	270,430
Net loss for 2017	—		—			—			—				(70,562		)		—				(70,562		)	—		—		—		(70,562		)	—			(70,562		)
Unrealized loss related to marketable securities, net of tax	—		—			—			—				—				(73		)		(73		)	—		—		—		—			(73		)	(73		)
Recognized loss on redemption of marketable securities, previously unrealized	—		—			—			—				—				252				252			—		—		—		—			252			252
Translation adjustments, net of tax	—		—			—			—				—				2,620				2,620			—		—		—		—			2,620			2,620
Common stock issued in connection with the exercise of stock options, ESPP and vested RSUs, net of tax	2,250		23			2,795			—				—				—				2,818			2,250		23		2,795		—			—			2,818
Stock-based compensation expense related to stock options, ESPP and RSUs (1)	—		—			12,658			—				—				—				12,658			—		—		12,658		—			—			12,658
Defined benefit pension, net of actuarial losses	—		—			—			—				—				(95		)		(95		)
Defined benefit pension, net of actuarial valuation adjustments																								—		—		—		—			(95		)	(95		)
Accounting method transition adjustment (2)	—		—			—			—				(355		)		—				(355		)	—		—		—		(355		)	—			(355		)
Balances, December 30, 2017	123,895		$	1,239		$	695,768		$	—			$	(477,862	)		$	(1,452	)		$	217,693		123,895		$	1,239	$	695,768	$	(477,862	)	$	(1,452	)	$	217,693
Net loss for 2018																								—		—		—		(26,322		)	—			(26,322		)
Unrealized gain related to marketable securities, net of tax																								—		—		—		—			41			41
Recognized gain on redemption of marketable securities, previously unrealized																								—		—		—		—			(18		)	(18		)
Translation adjustments, net of tax																								—		—		—		—			(1,271		)	(1,271		)
Common stock issued in connection with the exercise of stock options, ESPP and vested RSUs, net of tax																								5,833		58		26,860		—			—			26,918
Stock-based compensation expense related to stock options, ESPP and RSUs																								—		—		13,646		—			—			13,646
Defined benefit pension, net of actuarial valuation adjustments																								—		—		—		—			369			369
Accounting method transition adjustment (3)																								—		—		—		27,401			—			27,401
Balances, December 29, 2018																								129,728		$	1,297	$	736,274	$	(476,783	)	$	(2,331	)	$	258,457

																			LATTICE SEMICONDUCTOR CORPORATION	CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

	Year Ended									Year Ended
(In thousands)	December 30, 2017			December 31, 2016			January 2, 2016			December 29, 2018			December 30, 2017			December 31, 2016
Cash flows from financing activities:
Restricted stock unit withholdings	$	(3,267	)	$	(3,565	)	$	(3,493	)
Restricted stock unit tax withholdings										$	(2,370	)	$	(3,267	)	$	(3,565	)
Proceeds from issuance of common stock	6,085			7,607			5,679			29,288			6,085			7,607
Net proceeds from issuance of long-term debt	—			—			346,500
Cash paid for debt issuance costs	—			—			(8,283		)
Repayment of debt	(35,429		)	(5,154		)	(2,625		)	(43,759		)	(35,429		)	(5,154		)
Purchase of treasury stock	—			—			(6,970		)
Cash paid to redeem noncontrolling interest	—			—			(867		)
Net cash (used in) provided by financing activities	$	(32,611	)	$	(1,112	)	$	329,941
Net cash used in financing activities										$	(16,841	)	$	(32,611	)	$	(1,112	)
Effect of exchange rate change on cash	$	2,620		$	(1,303	)	$	(1,243	)	$	(1,271	)	$	2,620		$	(1,303	)
Net increase (decrease) in cash and cash equivalents	263			21,946			(31,005		)
Net increase in cash and cash equivalents										12,236			263			21,946
Beginning cash and cash equivalents	106,552			84,606			115,611			106,815			106,552			84,606
Ending cash and cash equivalents	$	106,815		$	106,552		$	84,606		$	119,051		$	106,815		$	106,552

Supplemental cash flow information:
Change in unrealized loss related to marketable securities, net of tax, included in Accumulated other comprehensive loss	$	73		$	172		$	69
Change in unrealized (gain) loss related to marketable securities, net of tax, included in Accumulated other comprehensive loss										$	(41	)	$	73		$	172
Income taxes paid, net of refunds	$	2,387		$	9,359		$	8,339		$	3,054		$	2,387		$	9,359
Interest paid	$	20,649		$	18,159		$	11,071		$	18,607		$	20,649		$	18,159
Accrued purchases of property and equipment	$	588		$	1,028		$	1,277		$	110		$	588		$	1,028
Note receivable resulting from sale of assets and business units	$	3,050		$	—		$	—		$	—		$	3,050		$	—
Transfer of residual temporary equity to additional paid-in capital on redemption of noncontrolling interest	$	—		$	—		$	6,773



Condensed Consolidated Statement of Operations
	Year ended December 29, 2018
(In thousands, except per share data)	As reported under new standard		Adjustments		Pro forma as if previous standard was in effect
Product revenue	380,468		(14,098	)	366,370
Licensing and services revenue	18,331		(1,478	)	16,853
Cost of product revenue	179,101		(6,399	)	172,702
Net loss	(26,322	)	(9,177	)	(35,499	)

Net loss per share, basic and diluted	(0.21	)	(0.07	)	(0.28	)



Condensed Consolidated Balance Sheets
	As of December 29, 2018
(In thousands)	As reported under new standard		Adjustments		Pro forma as if previous standard was in effect
Accounts receivable, net of allowance for doubtful accounts	60,890		6,600		67,490
Inventories	67,096		78		67,174
Prepaid expenses and other current assets	27,762		(9,775	)	17,987
Total assets	623,687		(3,097	)	620,590

Accounts payable and accrued expenses (includes restructuring)	51,763		(1,156	)	50,607
Deferred income and allowances on sales to distributors	—		34,637		34,637
Accumulated deficit	(476,783	)	(36,578	)	(513,361	)
Total liabilities and stockholders' equity	623,687		(3,097	)	620,590



Condensed Consolidated Statement of Cash Flows
	Year ended December 29, 2018
(In thousands)	As reported under new standard		Adjustments		Pro forma as if previous standard was in effect
Cash flows from operating activities:
Net loss	(26,322	)	(9,177	)	(35,499	)
Accounts receivable, net	(3,978	)	(8,408	)	(12,386	)
Inventories	13,177		(448	)	12,729
Prepaid expenses and other assets	(11,667	)	2,260		(9,407	)
Accounts payable and accrued expenses (includes restructuring)	13,325		(1,614	)	11,711
Deferred income and allowances on sales to distributors	—		17,387		17,387



(In thousands)
Balance as of December 31, 2017	$	7,515
Revenues recorded during the period	11,618
Transferred to accounts receivable or collected	(9,990		)
Balance as of December 29, 2018	$	9,143



	Major Class of Revenue	Year Ended *
	(In thousands)	December 29, 2018	December 30, 2017	December 31, 2016
	Product revenue - Distributors	330,719	297,736	310,163
	Product revenue - Direct	49,749	58,766	80,541
	Licensing and services revenue	18,331	29,459	36,350
	Total revenue	398,799	385,961	427,054

	Revenue by Geographical Market	Year Ended *
	(In thousands)	December 29, 2018	December 30, 2017	December 31, 2016
	Asia	298,119	277,638	305,093
	Europe	45,546	44,547	59,835
	Americas	55,134	63,776	62,126
	Total revenue	398,799	385,961	427,054

*	As noted above, amounts in periods prior to fiscal 2018 have not been adjusted under the modified retrospective method of adopting ASC 606 and, therefore, are presented under GAAP in effect during that period.


	Fair value measurements as of								Fair value measurements as of								Fair value measurements as of								Fair value measurements as of
	December 30, 2017								December 31, 2016								December 29, 2018								December 30, 2017
(In thousands)	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Short-term marketable securities	$	4,982	$	4,982	$	—	$	—	$	10,308	$	10,230	$	78	$	—	$	9,624	$	9,624	$	—	$	—	$	4,982	$	4,982	$	—	$	—
Foreign currency forward exchange contracts, net	77		—		77		—		184		—		184		—		53		—		53		—		77		—		77		—
Total fair value of financial instruments	$	5,059	$	4,982	$	77	$	—	$	10,492	$	10,230	$	262	$	—	$	9,677	$	9,624	$	53	$	—	$	5,059	$	4,982	$	77	$	—



(In thousands)	Total
Balance at January 2, 2016	$	4,508
Investment made during fiscal year	1,000
Impairment of cost-basis investment	(1,459		)
Balance at December 31, 2016	4,049
Impairment of cost-basis investment	(1,761		)
Balance at December 30, 2017	$	2,288



		Amount of each
Fiscal Year	Frequency	payment (In thousands)
2017	In the fourth calendar quarter	$	625
2018	At the end of each calendar quarter	$	875
2019	At the end of each calendar quarter	$	1,250


(In thousands)	Severance & related *			Lease termination			Software Contracts & Engineering Tools**			Other			Total			Severance & Related (1)			Lease Termination			Software Contracts & Engineering Tools (2)			Other See note (3) for 2018			Total
Balance at January 3, 2015	$	—		$	43		$	—		$	139		$	182
Restructuring charges	12,861			2,667			3,040			671			19,239
Costs paid or otherwise settled	(9,165		)	(1,705		)	(2,663		)	(810		)	(14,343		)
Balance at January 2, 2016	$	3,696		$	1,005		$	377		$	—		$	5,078		$	3,696		$	1,005		$	377		$	—		$	5,078
Restructuring charges	2,883			2,993			1,903			1,488			9,267			2,883			2,993			1,903			1,488			9,267
Costs paid or otherwise settled	(5,778		)	(2,962		)	(2,255		)	(1,476		)	(12,471		)	(5,778		)	(2,962		)	(2,255		)	(1,476		)	(12,471		)
Balance at December 31, 2016	$	801		$	1,036		$	25		$	12		$	1,874		$	801		$	1,036		$	25		$	12		$	1,874
Restructuring charges	2,484			811			3,066			835			7,196			2,484			811			3,066			835			7,196
Costs paid or otherwise settled	(2,093		)	(977		)	(2,731		)	(822		)	(6,623		)	(2,093		)	(977		)	(2,731		)	(822		)	(6,623		)
Balance at December 30, 2017	$	1,192		$	870		$	360		$	25		$	2,447		$	1,192		$	870		$	360		$	25		$	2,447
Restructuring charges																5,696			7,379			913			3,361			17,349
Costs paid or otherwise settled																(5,074		)	381			(1,055		)	(3,368		)	(9,116		)
Balance at December 29, 2018																$	1,814		$	8,630		$	218		$	18		$	10,680



(1)	Includes employee relocation costs and accelerated stock compensation
(2)	Includes cancellation of contracts, asset impairments, and accelerated depreciation on certain enterprise resource planning and customer relationship management systems
(3)	In fiscal 2018, "Other" activity includes the abandonment of long lived assets related to the restructuring of our agreements with a privately-held investee


(Shares and aggregate intrinsic value in thousands)	Shares		Weighted average exercise price		Weighted average remaining contractual term (years)	Aggregate Intrinsic Value		Shares		Weighted average exercise price		Weighted average remaining contractual term (years)	Aggregate Intrinsic Value
Balance, December 31, 2016	12,566		$	5.70
Balance, December 30, 2017								12,939		$	5.76
Granted	3,732		5.73					843		7.61
Exercised	(1,803	)	5.07					(4,882	)	5.79
Forfeited or expired	(1,556	)	6.00					(2,284	)	5.87
Balance, December 30, 2017	12,939		$	5.77
Vested and expected to vest at December 30, 2017	12,939		$	5.77	4.47	$	3,333
Exercisable, December 30, 2017	6,601		$	5.81	2.87	$	2,485
Balance, December 29, 2018								6,616		$	5.94
Vested and expected to vest at December 29, 2018								6,616		$	5.94	4.26	$	6,788
Exercisable, December 29, 2018								3,122		$	5.70	2.82	$	3,668


(Shares in thousands)	Shares		Weighted average grant date fair value		Shares		Weighted average grant date fair value
Balance, December 31, 2016	3,247		$	5.90
Balance, December 30, 2017					2,766		$	5.85
Granted	1,530		5.83		3,498		8.02
Exercised	(1,478	)	5.95
Vested					(1,124	)	5.97
Forfeited or expired	(533	)	5.84		(728	)	5.90
Balance, December 30, 2017	2,766		$	5.85
Balance, December 29, 2018					4,412		$	7.53



(Shares in thousands)	Unvested		Vested		Total
Balance, December 31, 2016	597		—		597
Granted	475		—		475
Vested	(92	)	92		—
Exercised	—		(9	)	(9	)
Canceled	(273	)	—		(273	)
Balance, December 30, 2017	707		83		790


(In thousands)	Balance at beginning of period		Balance received through acquisition		Charged (Credit) to costs and expenses			Charged (credit) to other accounts			Settlements & write-offs net of recoveries			Balance at end of period		Balance at beginning of period		Charged (Credit) to costs and expenses			Charged (credit) to other accounts			Settlements & write-offs net of recoveries			Balance at end of period
Fiscal year ended December 29, 2018
Valuation allowance for deferred tax assets																209,691		(2,583		)	—			—			207,108
Allowance for doubtful accounts																9,371		1			73			(9,248		)	197
Allowance for warranty expense																255		580			—			(482		)	353
																$	219,317	$	(2,002	)	$	73		$	(9,730	)	$	207,658
Fiscal year ended December 30, 2017
Allowance for deferred taxes	260,687		—		(50,960		)	(36		)	—			209,691
Valuation allowance for deferred tax assets																$	260,687	$	(50,960	)	$	(36	)	$	—		$	209,691
Allowance for doubtful accounts	9,299		—		3			38			31			9,371		9,299		3			38			31			9,371
Allowance for warranty expense	352		—		100			—			(197		)	255		352		100			—			(197		)	255
	$	270,338	$	—	$	(50,857	)	$	2		$	(166	)	$	219,317	$	270,338	$	(50,857	)	$	2		$	(166	)	$	219,317
Fiscal year ended December 31, 2016
Allowance for deferred taxes	$	252,578	$	—	$	7,450		$	659		$	—		$	260,687
Valuation allowance for deferred tax assets																$	252,578	$	7,450		$	659		$	—		$	260,687
Allowance for doubtful accounts	621		—		7,362			2,284			(968		)	9,299		621		7,362			2,284			(968		)	9,299
Allowance for warranty expense	370		—		216			—			(234		)	352		370		216			—			(234		)	352
	$	253,569	$	—	$	15,028		$	2,943		$	(1,202	)	$	270,338	$	253,569	$	15,028		$	2,943		$	(1,202	)	$	270,338
Fiscal year ended January 2, 2016
Allowance for deferred taxes	$	141,215	$	52,481	$	58,658		$	224		$	—		$	252,578
Allowance for doubtful accounts	875		—		(438		)	189			(5		)	621
Allowance for warranty expense	81		136		153			—			—			370
	$	142,171	$	52,617	$	58,373		$	413		$	(5	)	$	253,569



	% of Total Revenue in Year Ended
	December 30, 2017		December 31, 2016		January 2, 2016
Arrow Electronics Inc.	24	%	24	%	20	%
Weikeng Group	27		22		12
All others	15		15		13
All sell-through distributors	66	%	61	%	45	%


(i)	pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;


(ii)	provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and