UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
þANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2017
2023
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _____________
Commission file number: 001-38273
image0002.jpg
ACM Research, Inc.
(Exact Name of Registrant as Specified in Its Charter)
Delaware
94-3290283
(State or Other Jurisdiction of Incorporation or Organization)
94-3290283
(I.R.S. EmployeeEmployer Identification No.)
42307 Osgood Road, Suite I, Fremont, California94539
(Address of Principal Executive Offices)(Zip Code)
Registrant’s telephone number, including area code:(510) 445-3700
Securities registered pursuant to Section 12(b) of the Act:
Title of each classEach ClassTrading SymbolName of each exchangeEach Exchange on which registeredRegistered
Class A Common Stock, $0.0001 par value per shareACMRNasdaq GlobalThe NASDAQ Stock Market LLC
Securities registered pursuant to Section 12(g) of the Act:None.
None.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐o No ☑þ
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes☐oNo ☑þ
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑þ No ☐o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data file required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☑þ No ☐
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐
o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer”filer,” “smaller reporting company,” and “smaller reporting“emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐þAccelerated filer ☐o
Non-accelerated file (Do not check if a smaller reporting company) ☐
filer		oSmaller reporting company ☑o
Emerging growth company ☑o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☑o
Indicate by check mark whether the Registrantregistrant has filed a report on and attestation to its management’s assessment of the effectiveness of internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. þ
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. o
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐o No ☑þ
The registrant was not a public company as of theaggregate market value on June 30, 2023 (the last business day of itsthe registrant’s most recently completed second fiscal quarter and therefore cannot calculatequarter) of the aggregate market value of its voting and non-voting common equity held by non-affiliates of the registrant, computed by reference to the $13.08 closing price of the stock on that date, was $637.4 million. The registrant does not have non-voting common equity outstanding.
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of suchthe latest practicable date.
As of March 19, 2018, there were 12,992,768 shares of Class A Common Stock and 2,409,738 shares of Class B Common Stock outstanding.
ClassNumber of Shares Outstanding
Class A Common Stock, $0.0001 par value56,073,205 shares outstanding as of February 23, 2024
Class B Common Stock, $0.0001 par value5,021,811 shares outstanding as of February 23, 2024
Documents Incorporated By Reference
The registrant intends to file a proxy statement pursuant to Regulation 14A within 120 days of the end of the fiscal year ended December 31, 2017.2023. Portions of such proxy statement are incorporated by reference intoin Part III of this Annual Report on Form 10-K.report.


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Table of Contents
TABLETABLE OF CONTENTS
PART I
Business7
6
23
19
51
Item 1C45
Cybersecurity		52
Properties52
45
45
53
45
53
PART II
45
53
Selected Financial Data54
47
48
54
72
81
73
83
107
127
107
ITEM 9B128
Other Information
108
PART III
130
130
PART III
109
130
109
130
109
131
109
131
109
131
PART IV
109
131
109
135
112
136
We conduct ourACM Research, Inc., or ACM Research, is a Delaware corporation founded in California in 1998 to supply capital equipment developed for the global semiconductor industry. Since 2005, ACM Research has conducted its business operations principally through its subsidiary ACM Research (Shanghai), Inc., or ACM Shanghai, a subsidiary oflimited liability corporation formed by ACM Research Inc.,in the People’s Republic of China, or ACM Research.mainland China, in 2005. Unless the context requires otherwise, references in this report to “our company,” “our,” “us,” “we” and similar terms refer to ACM Research, Inc. (including its predecessor prior to its redomestication from California to Delaware in November 2016) and its subsidiaries, including ACM Shanghai, collectively.
Our principal corporate office is located in Fremont, California. We conduct a substantial majority of our product development, manufacturing, support and services in mainland China through ACM Shanghai. We perform, through a subsidiary of ACM Shanghai, additional product development and subsystem production in Korea, and we conduct, through ACM Research, sales and marketing activities focused on sales of ACM Shanghai products in North America, Europe and certain regions in Asia outside mainland China.
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ACM Research is not a mainland China operating company, and we do not conduct our operations in mainland China through the use of a variable interest entity, or VIE, or any other structure designed for the purpose of avoiding mainland China legal restrictions on direct foreign investments in mainland China-based companies. ACM Research has a direct ownership interest in ACM Shanghai as the result of its holding 82.1% of the outstanding shares of ACM Shanghai. Stockholders of ACM Research may never directly own equity interests in ACM Shanghai. We do not believe that our corporate structure or any other matters relating to our business operations require that we obtain any permissions or approvals from the China Securities Regulatory Commission, the Cyberspace Administration of China, or any other mainland China central government authority in order to continue to list shares of Class A common stock of ACM Research on the Nasdaq Global Market. This determination was based on the facts aforementioned and mainland China Company Law, mainland China Securities Law, cybersecurity regulations and other relevant laws, regulations and regulatory requirements in mainland China currently in effect. However, if this determination proves to be incorrect, then it could have a material adverse effect on ACM Research. See “Item IA. Risk Factors—Risks Related to International Aspects of Our Business—If any mainland China central government authority were to determine that existing mainland China laws or regulations require that ACM Shanghai obtain the authority’s permission or approval to continue the listing of ACM Research’s Class A common stock in the United States or if those existing mainland China laws and regulations, or interpretations thereof, were to change to require such permission or approval, ACM Shanghai may be unable to obtain the required permission or approval or may only be able to obtain such permission or approval on terms and conditions that impose material new restrictions and limitations on operation of ACM Shanghai, either of which could have a material adverse effect on our business, financial condition, results of operations, reputation and prospects and on the trading price of ACM Research Class A common stock, which could decline in value or become worthless.”
The business of ACM Shanghai is subject to complex laws and regulations in mainland China that can change quickly with little or no advance notice. To date, beyond the COVID-19-related restrictions in 2022, we have not experienced such intervention or influence by mainland China central government authorities or a change in those authorities’ rules and regulations that have had a material impact on ACM Shanghai or ACM Research.
In addition, in the ordinary course of business, ACM Shanghai is required to obtain certain operating permits and licenses necessary for it to operate in mainland China, including business licenses, certifications relating to quality management standards, import and export-related qualifications from customs, as well as environmental and construction permits, licenses and approvals relating to construction projects. We believe ACM Shanghai has all such required permits and licenses. However, from time to time the mainland China government issues new regulations, which may require additional actions on the part of ACM Shanghai to comply. If ACM Shanghai does not, or is unable to, obtain any such additional permits or licenses, ACM Shanghai may be subjected to restrictions and penalties imposed by the relevant mainland China regulatory authorities, and it could have a material adverse effect on our business, financial condition, results of operations, reputation and prospects and on the trading price of ACM Research Class A common stock, which could decline in value or become worthless.
The following chart depicts our corporate organization as of December 31, 2023:
image (2).jpg

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A detailed description of how cash is transferred through our organization is set forth under "Note 2 — Summary of Significant Accounting Policies - Cash and Cash Equivalents" to the Condensed Consolidated Financial Statements of this report.
The U.S. Holding Foreign Companies Accountable Act, or the HFCA Act, requires that the Public Company Accounting Oversight Board, or the PCAOB, determine whether it is unable to inspect or investigate completely registered public accounting firms located in a non-U.S. jurisdiction because of a position taken by one or more authorities in any non-U.S. jurisdiction. BDO China Shu Lun Pan Certified Public Accountants LLP, or BDO China, had been our independent registered public accounting firm in recent years, including for the year ended December 31, 2021. On June 22, 2021, the U.S. Senate passed the Accelerating Holding Foreign Companies Accountable Act, which was enacted on December 29, 2022 under the Consolidated Appropriations Act, 2023, as further described below. On December 16, 2021, the PCAOB reported its determination that it was unable to inspect or investigate completely registered public accounting firms headquartered in mainland China and Hong Kong, including BDO China, because of positions taken by mainland China authorities in those jurisdictions. On March 30, 2022, based on this determination, ACM Research was transferred to the SEC’s “Conclusive list of issuers identified under the HFCA.” See “Item 1A. Risk Factors—Risks Related to International Aspects of Our Business—We could be adversely affected if we are unable to comply with recent and proposed legislation and regulations regarding improved access to audit and other information and audit inspections of accounting firms operating in mainland China” of this report for more information. Under current regulations, if ACM Research were to be included on this list for two consecutive years due to our independent auditor being located in a jurisdiction that does not allow for PCAOB inspections, the SEC would prohibit trading in our securities and this ultimately could cause our securities to be delisted in the U.S., and their value may significantly decline or become worthless.

On December 15, 2022, the PCAOB announced that it was able to secure complete access to inspect and investigate PCAOB-registered public accounting firms headquartered in mainland China and Hong Kong in 2022 and vacated its previous December 16, 2021 determination to the contrary. However, whether the PCAOB will continue to be able to satisfactorily conduct inspections of PCAOB-registered public accounting firms headquartered in mainland China and Hong Kong is subject to uncertainty and depends on a number of factors out of our, and our auditor’s, control. mainland China authorities will need to ensure that the PCAOB continues to have full access for inspections and investigations in 2023 and beyond. Each year, the PCAOB will determine whether it can inspect and investigate completely audit firms in mainland China and Hong Kong, among other jurisdictions. On December 29, 2022, the Consolidated Appropriations Act, 2023, was signed into law by U.S. President Biden, which, among other things, amended the HFCA Act to reduce the number of consecutive non-inspection years that would trigger the trading prohibition under the HFCA Act from three years to two years (originally such threshold under the HFCA Act was three consecutive years), and so that any foreign jurisdiction could be the reason why the PCAOB does not have complete access to inspect or investigate a company’s public accounting firm (originally the HFCA Act only applied if the PCAOB’s ability to inspect or investigate was due to a position taken by an authority in the jurisdiction where the relevant public accounting firm was located). Therefore, if the mainland China authorities do not allow the PCAOB complete access for inspections and investigations for two consecutive years, the SEC would prohibit trading in the securities of issuers engaging those audit firms, as required under the HFCA Act.
On June 30, 2022, and June 15, 2023, stockholders of ACM Research ratified the appointment of Armanino LLP, or Armanino, as our independent auditor for the years ended December 31, 2022 and 2023, respectively. Armanino was neither headquartered in mainland China or Hong Kong nor was it subject to the determinations announced by the PCAOB on December 16, 2021, which determinations were vacated by the PCAOB on December 15, 2022. On July 21, 2023, we were informed by Armanino, that Armanino would resign as our independent auditor effective as of the earlier of (a) the date we engaged a new independent registered public accounting firm or (b) the filing of our Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2023.

On September 14, 2023, the Audit Committee of the Board of Directors, or the Audit Committee, completed a competitive selection process to select and appoint a new accounting firm to serve as our independent registered public accounting firm commencing with the audit of our financial statements for the fiscal year ended December 31, 2023. As a result of this process, the Audit Committee approved the engagement of Ernst & Young Hua Ming LLP, or E&Y as our independent registered public accounting firm for the fiscal year ended December 31, 2023. The engagement of E&Y became effective on September 20, 2023. E&Y is a PCAOB-registered firm that is headquartered in mainland China; however, we do not believe ACM Research will appear on the “Conclusive list of issuers identified under the HFCAA” for a second consecutive time, as the determinations announced by the PCAOB on December 16, 2021 were vacated by the PCAOB on December 15, 2022.
In addition to the matters discussed above, we are also subject to a number of legal and operational risks associated with our corporate structure, including as the result of a substantial portion of our operations being conducted in mainland
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China. Consequences of any of those risks could result in a material adverse change in our operations or cause the value of ACM Research Class A common stock to significantly decline in value or become worthless. Please carefully read the information included in “Item 1A. Risk Factors”of this report, in particular the risk factors addressing the following issues:
•If any mainland China central government authority were to determine that existing mainland China laws or regulations require that ACM Shanghai obtain the authority’s permission or approval to continue the listing of ACM Research’s Class A common stock in the United States or if those existing mainland China laws and regulations, or interpretations thereof, were to change to require such permission or approval, or if we inadvertently conclude that such permissions or approvals are not required, ACM Shanghai may be unable to obtain the required permission or approval or may only be able to obtain such permission or approval on terms and conditions that impose material new restrictions and limitations on operation of ACM Shanghai, either of which could have a material adverse effect on our business, financial condition, results of operations, reputation and prospects and on the trading price of ACM Research Class A common stock, which could decline in value or become worthless.
•mainland China central government authorities may intervene in, or influence, ACM Shanghai’s mainland China-based operations at any time, and those authorities’ rules and regulations in mainland China can change quickly with little or no advance notice.
•The mainland China central government may determine to exert additional control over offerings conducted overseas or foreign investment in mainland China-based issuers, which could result in a material change in operations of ACM Shanghai and cause significant declines in the value of ACM Research Class A common stock, or make them worthless.
Recent statements and regulatory actions by mainland China central government authorities with respect to the use of VIEs and to data security and anti-monopoly concerns have not affected our ability to conduct our business operations in China. For further information, see “Item 1A. Risk Factors—Risks Related to International Aspects of Our Business”of this report for more information.
For purposes of this report, certain amounts in Renminbi, or RMB, have been translated into U.S. dollars solely for the convenience of the reader. The translations have been made based on the conversion rates published by the State Administration of Foreign Exchange of the People’s Republic of China.
SAPS, TEBO, and ULTRA C, ULTRA Fn, Ultra ECP, Ultra ECP map, and Ultra ECP ap are ourtrademarks of ACM Research. For convenience, these trademarks appear in this report without ™ symbols, but that practice does not mean that ACM Research will not assert, to the fullest extent under applicable law, ACM Research’s rights to the trademarks. This report also contains other companies’ trademarks, registered marks and trade names, which are the property of those companies.
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FORWARD-LOOKING STATEMENTS AND STATISTICAL DATA
Special Note Regarding Forward-Looking Statements
This Annual Report on Form 10-K, or this report contains forward-looking statements that involve risks and uncertainties.within the meaning of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, included in this report regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans and objectives of management are forward-looking statements. In some cases, you can identify forward-looking statements can be identified by terms such as “may,” “might,” “will,” “objective,” “intend,” “should,” “could,” “can,” “would,” “expect,” “believe,” “anticipate,” “project,” “target,” “design,” “estimate,” “predict,” “potential,” “plan” or the negative of these terms, and similar expressions intended to identify forward-looking statements.
These statements reflect our current views with respect to future events and are based on our management’s belief and assumptions and on information currently available to our management. Although we believe that the expectations reflected in these forward-looking statements are reasonable, these statements relate to future events or our future operational or financial performance, and involve known and unknown risks, uncertainties and other factors, including those described or incorporated by reference in “Item 1A. Risk Factors” of Part I of this report, that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Some
The information included under the heading “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Overview,” of Part II of this report contains statistical data and estimates, including forecasts, that are based on information provided by Gartner, Inc., or Gartner, in “Forecast: Semiconductor Wafer Fab Equipment, Worldwide, 4Q23 Update” (December 2023), or the Gartner Report. The Gartner Report represents research opinions or viewpoints that are published, as part of a syndicated subscription service, by Gartner and are not representations of fact. The Gartner Report speaks as of its original publication date (and not as of the keydate of this report), and the opinions expressed in the Gartner Report are subject to change without notice. While we are not aware of any misstatements regarding any of the data presented from the Gartner Report, estimates, and in particular forecasts, involve numerous assumptions and are subject to risks and uncertainties, as well as change based on various factors, that could cause actual results to differ materially from our expectations include:
● 
our expectations regarding our expenses and revenue, our ability to maintain and expand gross profit;
● 
the rate and degree of market acceptance of any of our products, particularlythose expressed in the People’s Republic of China, or the PRC;
● 
the size and growth of the potential markets for our products and our ability to serve those markets;
● 
the progress and costs of developing and commercializing new products;
● 
our expectations regarding competition;
● 
the anticipated trends and challenges in our business and the market in which we operate;
● 
our anticipated growth strategies;
● 
our ability to attract or retain key personnel;
● 
our expectations regarding, and the stability of our, supply chain and manufacturing;
● 
our expectations regarding federal, state and foreign regulatory requirements, including export controls, tax law changes and interpretations, economic sanctions and anti-corruption regulations;
● 
regulatory developments in the United States and foreign countries;
● 
our ability to obtain and maintain intellectual property protection for our products; and
● 
our use of proceeds from this offering and the concurrent private placement.
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data presented below.
Any forward-looking statementsstatement made by us in this report speakspeaks only as of the date of our filing of this report with the Securities and Exchange Commission, or the SEC, and are subject to a number of risks, uncertainties and assumptions described in “Item 1A. Risk Factors” and elsewhere in this report.on which it is made. Except as required by law, we assume no obligation to update these statements publicly or to update the reasons actual results could differ materially from those anticipated in these statements, even if new information becomes available in the future.
ThisYou should read this report, and the documents that we reference in this report and have filed as exhibits to this report, should be read completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.
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Industry and Market Data
Table of Contents
PART I
This report contains statistical data and estimates, including forecasts, that are based on independent industry and government organization publications
Item 1.    Business
Overview
We supply advanced, innovative capital equipment developed for the global semiconductor industry. Fabricators of advanced integrated circuits, or other publicly available information, as well as other information based onchips, can use our internal sources. While we are not aware of any misstatements regarding any third-party data presented in this prospectus, estimates, and in particular forecasts, involve numerous assumptions and are subject to risks and uncertainties as well as change based on various factors, including those discussed under “Item 1A. Risk Factors” and elsewhere in this report. Thesewet-cleaning and other factors could cause resultsfront-end processing tools in numerous steps to differ materially from those expressedimprove product yield, even at increasingly advanced process nodes. We have designed these tools for use in the estimates included in this report.
The following list identifies the sources of certain of the third-party forecastsfabricating foundry, logic and other estimates included in this report, together with the sectionmemory chips, including dynamic random-access memory, or subsection of this report in which that estimate appears. As of the date of our filing of this report with the SEC, each of the following sources was publicly available without charge:
● 
PricewaterhouseCoopers, China’s impact on the semiconductor industry: 2017 update, SeptemberDRAM, and November 2017 (“Business—Industry Background—Growing Influence of the PRC Across the Semiconductor Industry”);
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IC Insights, Inc., Semiconductor Unit Shipments Forecast to Exceed 1 Trillion Devices in 2018, January 25, 2018 (“Business—Industry Background”);
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Semiconductor Industry Association and Nathan Associates, Beyond Borders: The Global Semiconductor Value Chain: How an Interconnected Industry Promotes Innovation and Growth, May 2016 (“Business—Industry Background—Escalating Need for Advanced Chip Manufacturing Equipment”);
● 
Semiconductor Equipment and Materials International, World Fab Forward Report, December 4, 2017 (“Business—Industry Background—Escalating Need for Advanced Chip Manufacturing Equipment”);
● 
International Trade Administration of the United States Department of Commerce, 2016 Top Markets Report Semiconductors and Semiconductor Manufacturing Equipment Country Case Study, July 1, 2016 (“Business—Industry Background—Growing Influence of the PRC Across the Semiconductor Industry”); and
● 
Semiconductor Equipment and Materials International, World Fab Forecast Report, November 2016 (“Business—Our Solutions—China-based operations”).
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PART I
Item 1.Business
Overview
3D NAND-flash memory chips. We also develop, manufacture and sell single-wafer weta range of advanced packaging tools to wafer assembly and packaging customers.
Revenue from single wafer cleaning, Tahoe and semi-critical cleaning equipment which semiconductor manufacturers can usetotaled $403.9 million, or 72.4% of total revenue in numerous manufacturing steps to remove particles, contaminants2023, $272.9 million, or 70.2% of total revenue in 2022, and $189.2 million, or 72.8% of total revenue in 2021. Revenue from ECP (front-end packaging), furnace and other random defects,technologies totaled $103.4 million, or 18.5% of total revenue, in 2023, $77.5 million, or 19.9% of total revenue in 2022, and thereby improve product yield,$33.2 million, or 12.8% of total revenue in fabricating2021. Revenue from advanced integrated circuits,packaging (excluding ECP), services and spares totaled $50.5 million, or chips. Our Ultra C equipment is designed9.1% of total revenue, in 2023, $38.4 million, or 9.9% of total revenue in 2022, and $37.3 million, or 14.4% of total revenue in 2021. Selling prices for our tools generally range from $0.5 million to remove random defects from a wafer surface effectively, without damaging a wafer or its features, even at an increasingly advanced process node (the minimum line width on a chip) of 22 nanometers, or nm, or less. Our equipment ismore than $5 million.
We estimate, based on third-party reports and on customer and other information, that our innovative,current product portfolio addresses approximately $16 billion of the 2023 global wafer fab equipment, or WFE, market. By product line, we estimate an approximately $5.2 billion market opportunity is addressed by our wafer cleaning equipment, $4.3 billion by our Plasma-Enhanced Chemical Vapor Deposition, or PECVD, equipment, $2.2 billion by our furnace equipment, $2.5 billion by our Track equipment, $800 million by our electro-chemical plating, or ECP, equipment, and more than $900 million by our stress-free polishing, advanced packaging, wafer processing, and other processing equipment.
Based on Gartner’s estimates, the total available global market for these equipment segments decreased by 11.4% from $21.2 billion in 2022, to $18.7 billion in 2023, and is expected to decrease by 2.8% to $18.2 billion in 2024. These equipment segments are a subset of the total worldwide semiconductor WFE market, which Gartner estimates decreased by 7.7% from $100.6 billion in 2022 to $92.9 billion in 2023, and estimates will decrease by 1.7% to $91.3 billion in 2024.
We have focused our selling efforts on establishing a referenceable base of leading foundry, logic and memory chip makers, whose use of our products can influence decisions by other manufacturers. We believe this customer base has helped us penetrate the mature chip manufacturing markets and build credibility with additional industry leaders. We have used a “demo-to-sales” process to place evaluation equipment, or “first tools,” with a number of selected customers.
To date, a substantial majority of our sales of single-wafer wet-cleaning equipment for front-end manufacturing have been to customers located in Asia, and we anticipate that a substantial majority of our revenue from these products will continue to come from customers located in this region for the foreseeable future. Our operation includes sales, marketing and services personnel in North America, Western Europe and Southeast Asia to expand and support major new customer initiatives for the products of ACM Shanghai to additional regions beyond mainland China.
We are focused on building a strategic portfolio of intellectual property to support and protect our key innovations. Our tools have been developed using our key proprietary technologies:
•Space Alternated Phase Shift, or SAPS, technology for flat and Timely Energized Bubble Oscillation,patterned (deep via or TEBO, technologies. We developed our proprietary technologies to enable manufacturers to produce chips that reach their ultimate physical limitations while maintaining product yield, which is the percentage of chips on adeep trench with stronger structure) wafer that meet manufacturing specifications.
Since 2007 we have focused our development efforts on developing single-wafer wet cleaning equipment based on differentiated proprietary technology:
● 
Our surfaces. SAPS technology which we introduced in 2009, employs alternating phases of megasonic waves to deliver megasonic energy to flat and patterned wafer surfaces in a highly uniform manner on a microscopic level. We have shown SAPS technology to be more effective than conventional megasonic and jet spray technologies in removing random defects across an entire wafer, as node sizes shrink from 300nm to 45nm, including node sizes, for which jet spray technology has proven to be ineffective.
with increasing relative effectiveness at more advanced production nodes.
● 
Our•Timely Energized Bubble Oscillation, or TEBO, technology which we introduced in March 2016,for patterned wafer surfaces at advanced process nodes. TEBO technology has been developed to provide effective, damage-free cleaning for both conventional two-dimensional, or 2D, and three-dimensional, or 3D, patterned wafers at advanced process nodes. We have demonstrated the damage-free cleaning capabilities of TEBO technology on 3D patterned wafers for feature nodes as small as 16nm.
As of March 19, 2018, we had been issued more than 140 patents in the United States, the People’s Republic of China or the PRC, Japan, Korea, Singapore and Taiwan.
We seek to market our single-wafer wet processing equipment by first establishing a referenceable base of leading logic and memory chip makers, whose use of our products can influence decisions by other manufacturers. Our SAPS technology employs alternating phases of megasonic waves to deliver megasonic energy to flat and patterned wafer surfaces in a highly uniform manner on a microscopic level. We believe this process is helping us penetrate the mature integrated circuit manufacturing markets and build credibility with industry leaders. Since beginning to place evaluation SAPS equipment with a small number of selected customers in 2009, we have worked on equipment improvements and qualification with those customers, who include a leading Korean memory chip company and four leading PRC memory and logic chip foundries. Using a similar “demo-to-sales” process, we have placed TEBO evaluation equipment with a leading PRC foundry and a leading Taiwanese foundry and we recognized revenue from our initial sale of TEBO equipment in 2016. Our revenue from the selected customers’ purchases of single-wafer wet cleaning equipment totaled $19.3 million, or 53.2% of our revenue, in 2017 and $21.5 million, or 78.4% of our total revenue, in 2016.
In 2006 we established our operational center in Shanghai, and we currently conduct substantially all of our development and manufacturing activities in the PRC. Our Shanghai operations position us near potential customers in not only the PRC but also Taiwan, Korea and throughout Asia, giving us increased access to those customers and reducing shipping and manufacturing costs for equipment they purchase. We continue to perform strategic planning and marketing activities in our corporate headquarters in Fremont, California, and we intend to increase the personnel and functions at our Fremont headquarters as part of our plan to expand our market presence in North America and Europe.
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Industry Background
Semiconductors are the foundation of the exponential growth of digital technologies and applications. For more than thirty years, strong demand for personal computers, tablet computers, mobile phones and other digital products has fueled the growth of the semiconductor industry. Today the migration of computing, networking and storage to the cloud and the proliferation of “smart” appliances, buildings, cars and devices—the “Internet of Things”—are driving semiconductor development and manufacturing. IC Insights, Inc. (January 2018) estimates that worldwide semiconductor shipments grew from 103.7 billion units in 1987 to 986.2 billion units in 2017 and will increase at a rate of 9.0% to reach 1.1 trillion units in 2018.
Continuing Demand for Faster, Better, Cheaper Chips
New and enhanced digital applications and products have relied on the development and deployment of progressively faster and more powerful—but ever smaller and less costly—semiconductors known as integrated circuits, or chips. A chip is an array of transistors and other circuit elements built on a wafer of substrate material, typically silicon, with wiring and other interconnects that connect the circuit elements to each other and to outside devices. Chips store and manipulate data in binary form, with the two largest categories of integrated circuits being memory chips, for data storage and retrieval, and logic chips, for computer processing and control.
For a half century the number of transistors that can fit in a given area has roughly doubled every two years, a rate of improvement referred to as “Moore’s Law.” Chip feature sizes have been repeatedly scaled down to pack more transistors in smaller chips. The minimum line width on a chip, known as the node, shrank from 30,000nm in 1963 to 1,000nm in 1989, 90nm in 2003 and 14nm in 2014. A chip today may contain more than thirty billion transistors, with features finer than one ten-thousandth of the diameter of a human hair.
In recent years, however, the rate of chip improvement delivered solely by shrinking feature sizes has slowed. At the 22nm node, transistor and interconnect parameters for conventional chips, in which features are arrayed in 2D structures, begin to approach their critical performance limitations. For example, photolithography, a key chip manufacturing process that projects 193nm laser light through masks to print patterns on a wafer surface, may be unable to create patterning with sufficient resolution and selectivity. Moreover, the feature density and power levels of a 22nm chip may require additional circuit elements, such as special circuitry to correct errors or to track and adapt to performance variations, that occupy chip area and increase cost.
In order to extend Moore’s Law, chip designers and manufacturers are developing and implementing technologies and architectures to transition to advanced chips with 3D structures. Logic chip makers are rapidly adopting use of 3D, fin-shaped Fin Field Effect Transistors, or FinFET, which provide faster switching while consuming less power. For memory chip manufacturers, 3D NAND stacks memory cells to deliver greater capacity at lower cost and 3D cross point, a transistor-less memory cell architecture, is being developed to accelerate processing of massive data sets. EUV lithography is a promising manufacturing technology that could improve patterning capability and increase feature density at nodes of 5nm and beyond by extending photolithography to the extreme ultraviolet wavelength of 13.5nm.
Escalating Need for Advanced Chip Manufacturing Equipment
Manufacturing steps differ for logic and memory chips, but all chips are manufactured in two general processes:
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In the front-end fabrication process, hundreds of copies of functional circuitry are created on a 100–to 300–millimeter, or mm, silicon wafer over a period of 6 to 8 weeks. A sequence of a few hundred complex, repetitive steps forms transistors, other circuit elements and interconnects on the wafer through the deposit and selective removal of successive material layers, using photolithography to create a design, deposition to add layers of materials, etching to remove unwanted exposed materials, and chemical mechanical planarization or CMP to smooth the surface for the next cycle of process steps.
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In the back-end assembly and testing process, a completed wafer from the front-end process is cut into individual “dies.” Each die is tested against specifications and, if compliant, encapsulated in a package that protects the die and supports critical power and electrical connections. The resulting chip is then subjected to final electrical and reliability tests.
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Manufacturing advanced chips at smaller nodes requires a more complex process flow that incorporates enhanced, more expensive capital equipment, or tools, to perform increasingly complex process steps, as well as an increased number of tools to perform a greater number of process steps per wafer. A chip fabrication plant, or fab, may have more than 500 highly specialized tools representing more than 70 categories of equipment, all situated in an environmentally controlled “clean room.” As a result, construction of a new advanced fab can cost between $5 and $10 billion (Semiconductor Industry Association/Nathan Associates, May 2016). Semiconductor Equipment and Materials International or SEMI (December 2017) estimates that worldwide fab tool billings totaled $57.0 billion in 2017 and will reach $63.0 billion by 2017, an increase of 10.5%.
Because of the significant capital expenditures and manufacturing expenses, chip makers focus on improving their yield, which is the percentage of chips on a wafer that conform to specifications. Even with use of precision tools in a controlled manufacturing environment, a substantial number of chips may contain defects and be rejected, directly impacting cost-per-chip and profitability. We estimate that a 1% decrease in yield can reduce annual profits by $30 to $50 million for a fab producing dynamic random-access memory, or DRAM, chips on 100,000 wafers per month—and a 1% yield loss may decrease profits even more for a fab making logic chips, which typically have higher prices. Moreover, lower yield may necessitate greater fab capacity, increasing capital expenditures.
New technologies and architectures introduced in transitioning to more advanced nodes can lead to significant yield loss. We believe chip manufacturers with state-of-the-art, established fabs for process nodes of 22nm or more typically target a yield of 90% or more, but yield can drop to as low as 50% when, for example, a manufacturer migrates to chips incorporating FinFET. To reduce yield loss, a manufacturer transitioning to a more advanced node must implement additional fabrication steps and new process capabilities, which in turn require innovative, reliable front-end tool solutions.
Growing Influence of the PRC Across the Semiconductor Industry
The PRC is both the largest and the fastest-growing market for semiconductors. According to a study by PricewaterhouseCoopers (November 2017), during the ten-year period ending in 2016, the PRC’s semiconductor consumption grew at a CAGR of 12.0% while worldwide consumption increased by only 3.2%, and in 2016 the PRC consumed 58.5% of the world’s semiconductors. The PRC government is implementing focused policies, including state-led investment initiatives, that aim to create and support an independent domestic semiconductor supply chain spanning from design to final system production. The PRC has already made significant progress across the principal semiconductor industry sectors, as shown in the following market information compiled by PricewaterhouseCoopers (September and November 2017):
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The chip design, or “fabless,” industry is the fastest growing segment of the PRC’s semiconductor industry, with revenue increasing from $2.3 billion in 2006 to $24.8 billion in 2016, a CAGR of 26.6%.
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China’s share of worldwide semiconductor manufacturing capacity expanded from 7.3% in 2006 to 14.2% in 2016, and its semiconductor manufacturing revenue increased at a CAGR of 15.4% over the ten-year period ending in 2016.
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China’s semiconductor packaging, assembly and test revenue also grew at a CAGR of 14.2% over the ten-year period ending in 2015.
The PRC’s semiconductor tools industry produced less than 0.5% of the world’s semiconductor manufacturing equipment in 2014 (International Trade Association of U.S. Department of Commerce, July 2016). The PRC’s governmental goals anticipate significant growth in all segments of the domestic semiconductor industry, however, and tool manufacturers with a Chinese presence should experience support from both upstream and downstream Chinese companies in the semiconductor supply chain.
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Emerging Criticality of Wafer Cleaning
In the chip fabrication process, random defects such as particles, residual chemicals and other contaminants can lead directly to yield loss by distorting images for pattern formation in a lithographic step, obstructing deposition of a film, blocking an etch or otherwise impairing chip performance. Random defects can originate from substrate material, tools, fab personnel, clean room air and nearly every other aspect of the manufacturing process. Shapes and sizes of random defects vary widely, and with each decrease in process node, the dimension of the smallest random defect that can cause a chip to fail, known as the “killer defect” size, shrinks.
Chip fabrication includes steps designed to eliminate random defects without collapsing patterns, causing loss of materials or otherwise damaging features. The number of these steps has increased dramatically with chip complexity. Cleaning is now the most frequently repeated step in chip fabrication and may be performed in as many as 200 steps for each wafer. A sub-optimal cleaning process has repeated opportunities to reduce yield by being either insufficiently forceful, which leaves random defects behind, or overly aggressive, which damages the chip. Over the past decade, fabricators seeking to improve cleaning performance have switched from batch processes, in which several wafers are processed at the same time, to single-wafer cleaning tools.
There are two basic types of cleaning methods. Wet cleaning uses liquid chemistry by applying combinations of solvents, acids and water to spray, scrub, etch and dissolve random defects. Dry cleaning uses gas phase chemistry, relying on chemical reactions and techniques such as lasers, aerosols and ozonated chemistries. Wet cleaning typically outperforms dry cleaning in achieving wafer surface cleanliness and smoothness, and it is the standard method for single-wafer cleaning, constituting more than 90% of the cleaning steps in the fabrication process. RCA clean, a standardized process using hot alkaline and acidic hydrogen peroxide solutions, has been the industry standard for wet cleaning for a quarter century.
Wet cleaning’s chemistry has not changed appreciably over the past 25 years, but its implementation has shifted from simple immersion to increasingly sophisticated techniques such as jet spraying and megasonic vibration. Jet spray cleaning shoots high-velocity, tens of micron-sized water droplets at a wafer surface to remove random defects. Megasonic cleaning transmits acoustic waves through a fluid bath to produce, in a process known as transient cavitation, bubble oscillation that dislodges random defects. The cavitation can dislodge defects unreachable by jet spray, but the bubbles collapse quickly and can generate energy that damages wafer features.
As jet spray and megasonic cleaning techniques have continued to develop, chip makers have regularly upgraded from simple tanks with on-off switches to complex, specialized, expensive single-wafer cleaning tools.
Inadequacy of Traditional Single-Wafer Cleaning Technologies
At process nodes of 100nm or more, chips consisted of 2D features and architectures, which made wafer cleaning relatively straightforward. Cleaning was most commonly performed in batch processes using an immersion tool with megasonic energy. Megasonic vibrations transmit at relatively high frequencies and therefore create smaller bubbles that remove more-diminutive defects and that generate lower levels of destructive transient energy when they collapse.
As process nodes shrank below 100nm, equipment manufacturers introduced single-wafer megasonic cleaning tools, which processed wafers one by one, rather than in batches. Because these tools did not deliver energy uniformly across the wafer surface, manufacturers found the tools did not clean wafers thoroughly and evenly and, increasingly as process nodes continued to shrink, led to damage to patterned wafer structures. Equipment makers also began to offer single-wafer cleaning tools that used jet spraying rather than acoustic vibrations. The physical energyof jet spraying enabled these tools to be used with less assertive chemicals, which reduced wafer material loss. Once process nodes reach 45nm, however, the force of jet sprayed water droplets can damage finer chip features and jet spraying can fail to eliminate killer defect-sized contaminants due to its reduced lateral fluid speed as the fluid approaches the wafer surfaces.
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As process nodes continue to shrink to 22nm and less, finer feature sizes and denser, more complex architectures make the cleaning process even more complicated and challenging:
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Random defects are harder to remove as the killer defect size decreases. Smaller random defects are denser and bind to a wafer more strongly than larger contaminants, and additional energy is required to deliver greater levels of necessary force to more minuscule sizes.
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New 3D architectures are often more delicate or fragile than 2D conventional structures. FinFET structures, for example, are relatively tall, thin and deep, which makes them more susceptible to damage or destruction by the physical force of jet sprays and megasonic transient cavitation used in the cleaning process.
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New chip technologies and architectures amplify cleaning challenges. It is, for example, progressively more difficult to remove random defects from the bottom of a chip structure, such as a via, as the “aspect ratio” of the structure’s depth to its width increases. While conventional 2D structures typically have aspect ratios of 3-to-1 or less, FinFET structures have aspect ratios of 10-to-1 currently and are expected to have aspect ratios in excess of 20-to-1 for future process nodes. Moreover, aspect ratios for 3D NAND, 3D cross point and other 3D structures may reach 60-to-1.
Effective, damage-free cleaning poses a significant challenge for manufacturers seeking to fabricate chips in the advanced process nodes available today or introduced in the future, including the 10nm node announced for 2017 and the 7nm node announced for 2018. In order to extend Moore’s law, chip manufacturers must be able to remove ever smaller random defects from not only flat wafer surfaces but also progressively more intricate, finer-featured 3D chip architectures, in each case without incurring damage or material loss that curtails yield and profits. Because fabrication of chips at 22nm or less requires an increasingly complex, specialized process flow, a next-generation single-wafer cleaning tool solution should be designed to be easily tailored to meet a manufacturer’s unique process requirements. The single-wafer cleaning tools should produce less environmentally harmful chemical waste and should be easily accessible to manufacturers in the burgeoning Chinese market.
Our Solutions
We have developed single-wafer wet cleaning equipment that chip manufacturers can use in numerous steps of the fabrication process in order to avoid yield loss at existing and future process nodes. Using our proprietary technologies, we have designed our wet cleaning equipment to remove random defects from chip wafers with fine feature sizes, complex patterning, dense circuit architectures and high aspect ratios more effectively than traditional jet spray and transient megasonic technologies. Key elements of our solutions include:
Differentiated technologies for advanced chips. Our proprietary single-wafer wet cleaning technologies control the power intensity and distribution of megasonic cleaning in order to remove random defects from a wafer surface effectively, without damaging the wafer or its features, even at process nodes of 22nm or less. We developed these technologies to help semiconductor manufacturers produce chips that reach their ultimate physical limitations.
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Flat and patterned wafer surfaces. Our SAPS technology, which we introduced in 2009, employs alternating phases of megasonic waves to deliver megasonic energy to flat and patterned wafer surfaces in a highly uniform manner on a microscopic level. We have shown SAPS technology to be more effective than conventional megasonic and jet spray technologies in removing random defects across an entire wafer as node sizes shrink from 300nm to 45nm, including node sizes less than 50nm in size, for which jet spray technology has proven to be ineffective. Based on their initial mass production experience with SAPS equipment, customers have increased their use of SAPS equipment by adding cleaning steps to the manufacturing processes for advanced chips in order to achieve higher yields and reduce chemical usage.
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High-aspect ratio conventional 2D and advanced 3D patterned wafer surfaces. Our TEBO technology, which we introduced in March 2016, has been developed to provide effective, damage-free cleaning for both conventional 2D and 3D patterned wafers at advanced process nodes. TEBO technology provides multi-parameter control of bubble cavitation during megasonic cleaning by using a sequence of rapid pressure changes to force bubbles to oscillate at controlled sizes, shapes and temperatures. Because the bubbles oscillate instead of imploding or collapsing, TEBO technology avoids the pattern damage caused by transient cavitation in traditional megasonic cleaning processes.with fine feature sizes. We have demonstrated the damage-free cleaning capabilities of TEBO technology on patterned wafers for feature nodes as small as 1xnm (16nm(16 to 19nm)19 nanometers, or nm), and we have shown that TEBO technology can be applied in manufacturing processes for patterned chips with 3D architectures such as FinFET, DRAM, 3D NAND and 3D cross point memory having aspect ratios as high as 60-to-1. We believe TEBO technology can be applied for even smaller process nodes. TEBO tools are currently being evaluated by a selected group of leading memory and logic chip manufacturers.60‑to‑1.
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China-based operations. In 2006 we established our operational center in Shanghai,•Tahoe technology for cost and currently we conduct substantially allenvironmental savings. Tahoe technology delivers high cleaning performance using significantly less sulfuric acid and hydrogen peroxide than is typically consumed by conventional high-temperature single-wafer cleaning tools.
•ECP technology for advanced metal plating. Our Ultra ECP ap, or Advanced Packaging, technology was developed for back-end assembly processes to deliver a more uniform metal layer at the notch area of our developmentwafers prior to packaging. Our Ultra ECP map, or Multi-Anode Partial Plating, technology was developed for front-end wafer fabrication processes to deliver advanced electrochemical copper plating for copper interconnect applications. Ultra ECP map offers improved gap-filling performance for ultra-thin seed layer applications, which is critical for advanced nodes at 28nm, 14nm and manufacturing activities in the PRC. This strategy positions us near potential customers throughout Asia, giving us increased access to those customersbeyond.
We have also introduced and reducing shipping and manufacturing costs for equipment they purchase. SEMI (November 2016) estimates 78%delivered a range of new front-end facilitiestools intended to broaden our revenue opportunity with global semiconductor manufacturers. Product extensions include the Ultra SFP ap tool for advanced packaging solutions, the Ultra C VI 18-chamber single wafer cleaning tool for advanced memory devices, and productionthe Ultra ECP 3d platform for through-silicon-via, or tsv, application. New product lines starting operation from 2017 through 2020 will be constructedinclude the Ultra fn Furnace, our first dry processing tool, and a suite of semi-critical cleaning systems which include single wafer back side cleaning, scrubber, and auto bench cleaning tools.
We added two major new product categories in Asia,2022 with 42% expectedthe launch of the Ultra Pmax™ PECVD tool, which is equipped with a proprietary designed chamber, gas distribution unit and chuck, and is intended to be built inprovide better film uniformity, reduced film stress, and improved particle performance, and the PRC. Our Shanghai location also gives us accessintroduction of the Ultra Track tool, a 300mm process tool that delivers uniform air downflow, fast robot handling and customizable software to a large pooladdress specific customer requirements, and has multiple features that enhance performance across defectivity, throughput, and cost of highly qualified potential employees.ownership.
Extensive intellectual property protection. Since our formation in 1998, weWe have focused on building a strategic portfolio of intellectual property to support and protect our key innovations, including most recently our SAPS and TEBO technologies. As of March 19, 2018, we had been issued more than 140 498 patents in the United States, the PRC,People’s Republic of China, or mainland China, Japan, Singapore, Korea Singapore and Taiwan.
Custom-made wafer assembly packaging solutions. In addition toWe conduct a substantial majority of our product offerings for single-wafer cleaningdevelopment, manufacturing, support and services in mainland China, with additional product development and subsystem production in Korea. Substantially all of our integrated tools are built to order at our manufacturing facilities in the front-end wafer fabrication process, we leveragePudong region of Shanghai, which now encompass a total of 236,000 square feet of floor space for production capacity, with leased buildings at our technology and expertise to provideChuansha campus. In May 2020 ACM Shanghai, through its wholly owned subsidiary Shengwei Research (Shanghai), Inc., or ACM Shengwei, entered into an agreement for a wide range of advanced packaging equipment, such as coaters, developers, photoresist strippers, scrubbers, wet etchers and copper-plating tools, to back-end wafer assembly and packaging factories, particularlyland use right in the PRC. For these offerings, we focus on providing customized equipment with competitive performance, serviceLingang region of Shanghai. In 2020 ACM Shengwei began a multi-year construction project for a new 1,000,000 square foot development and pricing.
Our Strategy
Our objective is to be the leading global provider of a full range of wet cleaning equipment for the manufacture of advanced integrated circuits. To achieve this goal, we are pursuing the following strategies:
Extend technology leadership.We intend to build upon our technology leadershipin wet processing by continuing to developproduction center that will incorporate state-of-the-art manufacturing systems and refine our differentiated SAPS and TEBOautomation technologies and equipmentwill provide floor space to address cleaning challenges presented by the manufacture of increasingly advanced chip nodes. Our investment insupport significantly increased production capacity and related research and development, totaled $5.1 million, or 14.1% ofR&D, activities. We expect to commence initial operations and production activities at our revenue, in 2017 and $3.3 million, or 11.9% of our revenue, in 2016. We will continue to invest in product development and to strengthen our global patent portfolio in strategic jurisdictions.
Establish referenceable customer base. In commercializing our SAPS equipment, we placed evaluation equipment with selected customers, who subsequently purchased additional SAPS equipment to enable them to add more cleaning steps during their manufacturing processes. Using a similar “demo-to-sales” process, we have placed TEBO evaluation equipment with a leading PRC foundry and a leading Taiwanese foundry and we recognized revenue from our initial sale of TEBO equipment in 2016. Based on our market experience, we believe that implementation of our SAPS and TEBO equipment by selected leading memory and logic chip manufacturers will encourage evaluation of our equipment by other manufacturers, who will view the leading companies’ implementation as a validation of our equipment that facilitates a shorter evaluation process.
Leverage local presence to address growing Chinese market. The market for semiconductor manufacturing equipmentLingang facilities in the PRC is expected to grow markedly in the upcoming years. first half of 2024 timeframe.
Our experience has shown that chip manufacturers in the PRCmainland China and throughout Asia demand equipment meetingthat meets their specific technical requirements and generally prefer buildingto build relationships with local suppliers. We established our operations in Shanghai a decade ago, and we will continue to workseek to leverage our local presence in mainland China and Korea through our subsidiaries to address the growing market for semiconductor manufacturing equipment in the region by working closely with regional chip manufacturers in the PRC and throughout Asia to understand their specific requirements, encourage them to adopt our SAPS and TEBO technologies, and enable us to design innovative products and solutions to address their needs.

ContinueOn November 18, 2021, ACM Shanghai successfully completed its initial public offering of shares of ACM Shanghai in mainland China, which we refer to improve performance through operational excellence. We actively manageas the STAR IPO, and its shares began trading on the Shanghai Stock Exchange’s SciTech innovAtion boaRd, known as the STAR Market, which we refer to as the STAR Listing, as described under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Our Technology and Product Offerings
Wet Cleaning Equipment for Front End Production Processes
Chip fabricators can use our business through principles of operational excellence designed to ensure continuous improvement of our key operational and financial metrics. As we increase the breadth of our product offerings and the size of our operations and customer base, we must continue to develop and implement these principlessingle-wafer wet-cleaning tools in order to improve the efficiency and quality of our operations, satisfy our customers’ needs, and meet our financial goals.
Pursue strategic acquisitions and relationships.To complement and accelerate our internal growth, we may pursue acquisitions of businesses, technologies, products or business relationships that will expand the functionality of our products, provide access to new markets or customers, or otherwise complement our existing operations. We also may seek to expand our product and service offerings by entering into business relationships involving additional distribution channels, investments in other enterprises and joint ventures, or similar arrangements. In September 2017, we acquired 20% of the outstanding equity of Ninebell, one of our key subassembly providers.

Our Products and Technologies
We develop, manufacture and sell single-wafer wet cleaning equipment usable at numerous steps of the chip manufacturing process flow to improve product yield for conventional 2Din the front-end production process, during which individual devices are patterned in a chip prior to being interconnected on a wafer. Our wet-cleaning equipment has been developed using our proprietary SAPS, TEBO and advanced 3D patterned chips at small process nodes. Our equipment,Tahoe technologies, which we market and sell under the brand name “Ultra C,” is designedallow our tools to remove random defects from a wafer surface effectively, without damaging thea wafer or its features, even at increasingly advanced process nodes.
After incorporating in 1998, we initially focusednodes (the minimum line widths on developing tools for manufacturing process steps involving the integrationa chip) of ultra-low-K materials and copper. Ultra-low-K materials, which insulate better than silicon, presented opportunities for size scaling and performance improvement, and higher conductivity copper had begun to replace aluminum in forming interconnects. Our early efforts focused in particular on stress-free copper-polishing technology, and we sold tools based on that technology in the early 2000s.
In 2006 we established our operational center in Shanghai. This strategic decision was made to help us establish and build relationships with chip manufacturers in China and throughout Asia, which helps us to understand their requirements and to develop innovative technologies and tools addressing their needs.
In 2007 we began to focus our development efforts on single-wafer wet-cleaning solutions for the front-end fabrication process.22nm or less. We have developed innovative, proprietary technologies that reintroduce megasonic technology to the wafer cleaning process. Our approach is based on our understanding of the shortfalls and limitations of previously existing megasonic cleaning technologies that led to ineffective cleaning and damaged chip features. In 2009 we introduced our proprietary Space Alternated Phase Shift, or SAPS, megasonic technology, which can be applied in flat patterned wafer cleaning at numerous steps during the chip fabrication process. By delivering megasonic energy uniformly across a wafer, SAPS technology eliminates the particle removal inefficiencies that characterized traditional megasonic cleaning technologies. In March 2016 we introduced our proprietary Timely Energized Bubble Oscillation, or TEBO, technology, which can be applied at numerous steps during the fabrication of small node conventional 2D and 3D patterned wafers. By providing multi-parameter control of bubble cavitation during megasonic cleaning, TEBO technology avoids the fine-pattern damage caused by previously existing megasonic cleaning processes.
We have designed our equipment models for SAPS and TEBO solutions usinguse a modular configuration that enables us to create a wet-cleaning tool meeting the specific requirements of a customer, while using pre-existing designs for chamber, electrical, chemical delivery and other modules. Our modular approach supports a wide range of
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customer needs and facilitates the adaptation of our model tools for use with the optimal chemicals selected to meet a customer’s requirements. Our tools are offered principally for use in manufacturing chips from 300mm300 millimeter, or mm, silicon wafers, but we also offer solutions for 150mm and 200mm wafers and for nonstandard substrates, including compound semiconductor, quartz, sapphire, glass and glass.plastics.
In addition to our SAPS Technology, Applications and TEBO tool offerings, we offer a range of custom-made equipment, such as cleaners, coaters, developers, photoresist strippers, wet etchers and copper-plating tools, to back-end wafer assembly and packaging factories, principally in the PRC.Equipment
Space Alternated Phase Shift Cleaning
SAPS Technology
SAPS technology delivers megasonic energy uniformly to every point on an entire wafer by alternating phases of megasonic waves in the gap between a megasonic transducer and the wafer. Radicals for removing random defects are generated in dilute solution, and the radical generation is promoted by megasonic energy. Unlike “stationary” megasonic transducers used byin conventional megasonic cleaning methods, SAPS technology moves or tilts a transducer while a wafer rotates, enabling megasonic energy to be delivered uniformly across all points on the wafer, even if the wafer is warped. The mechanical force of cavitations generated by megasonic energy enhances the mass transfer rate of dislodged random defects and improves particle removal efficiency.
By delivering megasonic energy in a highly uniform manner on a microscopic level, SAPS technology can precisely control the intensity of megasonic energy and can effectively remove random defects of all sizes across the entire wafer in less total cleaning time than conventional megasonic cleaning products, without loss of material or roughing of wafer surfaces. We have conducted trials demonstrating SAPS technology to be more effective than conventional megasonic and jet spray cleaning technologies as defect sizes shrink from 300nm to 45nm.20nm and below. These trials show that SAPsSAPS technology has an even greater relative advantage over conventional jet spray technology whenfor cleaning defects between 50 and 65nm in size, and that SAPs technology continueswe expect the relative benefits of SAPS will continue to be effective for defects of sizes between 45 nm and 50nm, for which jet spray technology has proven to be ineffective.
apply in cleaning even smaller defect sizes.
SAPS Applications
SAPS megasonic cleaning technology can be applied during the chip fabrication process to clean wafer surfaces and interconnects. It also can be used to clean, and lengthen the lifetime, of recycled test wafers.
Wafer Surfaces. SAPS technology can enhance removal of random defects following planarization and deposition, which are among the most important, and most repeated, steps in the fabrication process:
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•Post CMP: Chemical mechanical planarization, or CMP, uses an abrasive chemical slurry following other fabrication processes, such as deposition and etching, in order to achieve a smooth wafer surface in preparation for subsequent processing steps. SAPS technology can be applied following each CMP process to remove residual random defects deposited or formed during CMP.
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•Post Hard Mask Deposition:As part of the photolithographical patterning process, a mask is applied with each deposition of a material layer to prevent etching of material intended to be retained. Hard masks have been developed to etch high aspect-ratio features of advanced chips that traditional masks cannot tolerate. SAPS technology can be applied following each deposition step involving hard masks that use nitride, oxide or carbon basedcarbon-based materials to achieve higher etch selectivity and resolution.
For these purposes, SAPS technology uses environmentally friendly dilute chemicals, reducing chemical consumption. Chemical types include dilute solutions of chemicals used in RCA cleaning, such as dilute hydrofluoric acid and RCA SC-1 solutions, and, for higher quality wafer cleaning, functional de-ionized water produced by dissolving hydrogen,, nitrogen or carbon dioxide in water containing a small amount of chemicals, such as ammonia. Functional water removes random defects by generating radicals, and megasonic excitation can be used in conjunction with functional water to further increase the generation of radicals. Functional water has a lower cost and environmental impact than RCA solutions, and using functional water is more efficient in eliminating random defects than using dilute chemicals or de-ionized water alone. We have shown that SAPS megasonic technology using functional water exhibits high efficiency in removing random defects, especially particles smaller than 65nm, with minimal damage to structures.
Interconnects and Barrier Metals.Metals. Each successive advanced process node has led to finer feature sizes of interconnects such as contacts, which form electrical pathways between a transistor and the first metal layer, and vias, which form electrical pathways between two metal layers. Advanced nodes have also resulted in higher aspect ratios for interconnect
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structures, with thinner, redesigned metal barriers being used to prevent diffusion. SAPS technology can improve the removal of residues and other random defects from interconnects during the chip fabrication process:
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•Post Contact/Via Etch: Wet etching processes are commonly used to create patterns of high-density contacts and vias. SAPS technology can be applied after each such etching process to remove random defects that could otherwise lead to electrical shorts.
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•Pre Barrier MetalBarrier-Metal Deposition: Copper wiring requires metal diffusion barriers at the top of via holes to prevent electrical leakage. SAPS technology can be applied prior to deposition of barrier metal to remove residual oxidized copper, which otherwise would adhere poorly to the barrier and impair performance.
For these applications, SAPS technology uses environmentally friendly dilute chemicals such as dilute hydrofluoric acid, RCA SC-1 solution, ozonated de-ionized water and functional de-ionized water with dissolved hydrogen. These chemical solutions take the place of piranha solution, a high-temperature mixture of sulfuric acid and hydrogen peroxide used by conventional wet wafer cleaning processes. We have shown that SAPS technology exhibits greater efficiency in removing random defects, and lower levels of material loss, than conventional processes, and our chemical solutions are less expensive and more environmentally conscious than piranha solution.
Recycled Test Wafers. In addition to using silicon wafers for chip production, chip manufacturers routinely process wafers through a limited portion of the front-end fabrication steps in order to evaluate the health, performance and reliability of those steps. Manufacturers also use wafers for non-product purposes such as inline monitoring. Wafers used for purposes other than manufacturing revenue products are known as test wafers, and it is typical for twenty to thirty percent of the wafers circulating in a fab to be test wafers. In light of the significant cost of wafers, manufacturers seek to re-use a test wafer for more than one test. As test wafers are recycled, surface roughness and other defects progressively impair the ability of a wafer to complete tests accurately. SAPS technology can be applied to reduce random defect levels of a recycled wafer, enabling the test wafer to be reclaimed for use in additional testing processes. For these purposes, SAPS technology includes improved fan filter units that balances intake and exhaust flows, precise temperature and concentration controls that ensure better handling of concentrated acid processes, and two-chemical recycle capability that reduces chemical consumption.
SAPS Equipment
We currently offer two principal models of wet wafer cleaning equipment based on our SAPS technology, Ultra C SAPS II and Ultra C SAPS V. Each of these models is a single-wafer, serial-processing tool that can beconfigured to customer specifications and, in conjunction with appropriate dilute
chemicals, used to remove random defects from wafer surfaces or interconnects and barrier metals as part of the chip front-end fabrication process or for purposes of recycling test wafers. By combining our megasonic and chemical cleaning technologies, we have designed these tools to remove random defects with greater efficacy and efficiency than conventional wafer cleaning processes, with enhanced process flexibility and reduced quantities of chemicals. Each of our SAPS models was initially built to meet specific requirements of a key customer.
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SAPS II (released in 2011). Highlights of our SAPS models was initially built to meet specific requirements of a key customer. We expect the sales prices of our SAPS tools generally to range between $2.5 million and $5.0 million, although the sales price of a particular tool will vary depending upon the required specifications.II equipment include:
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SAPS II was released in 2011. Its key features include:
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•compact design, with footprint of 2.65m x 4.10m x 2.85m (WxDxH), requiring limited clean room floor space;
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•up to 8 chambers, providing throughput of up to 225 wafers per hour;
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•double-sided cleaning capability, with up to 5 cleaning chemicals for process flexibility;
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•2-chemical recycling capability for reduced chemical consumption;
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•image wafer detection method for lowering wafer breakage rates; and
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•chemical delivery module for delivery of dilute hydrofluoric acid, RCA SC-1 solution, functional de-ionized water and carbon dioxide to each of the chambers.
SAPS V, which was released in 2014, offers increased productivity for chip manufacturers moving to advanced nodes. SAPS V provides all of the features and functionality of SAPS II, upgraded as follows:
SAPS V (released in 2014). SAPS V includes SAPS II features with the following upgrades:
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•compact design, with footprint of 2.55m x 5.1m x 2.85m (WxDxH);
, requiring limited clean room floor space;
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•up to 12 chambers, providing throughput of up to 375 wafers per hour;
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•chemical supply system integrated into mainframe;
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•inline mixing method replaces tank auto-changing,auto changing, reducing process time; and
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•improved drying technology using hot isopropyl alcohol and de-ionized water.
TEBOTechnology, Applications and Equipment
Timely Energized Bubble Oscillation Cleaning
TEBO Technology
We developed TEBO technology for application in wet wafer cleaning during the fabrication of both conventional 2D and 3D patterned wafers with fine feature sizes. TEBO technology facilitates effective cleaning even with patterned features too small or fragile to be addressed by conventional jet spray and megasonic cleaning technologies.
TEBO technology solves the problems created by transient cavitation in conventional megasonic cleaning processes. Cavitation is the formation of bubbles in a liquid, and transient cavitation is a process in which a bubble in fluid implodes or collapses. In conventional megasonic cleaning processes, megasonic energy forms bubbles and then causes those bubbles to implode or collapse, blasting destructive high-pressure, high-temperature micro jets toward the wafer surface. Our internal testing has confirmed that at any level of megasonic energy capable of removing random defects, the sonic energy and mechanical force generated by transient cavitation are sufficiently strong to damage fragile patterned structures with features less than 70nm.
TEBO technology provides multi-parameter control of cavitation by using a sequence of rapid changes in pressure to force a bubble in liquid to oscillate at controlled sizes, shapes and temperatures, rather than implode or collapse. As a result, cavitation remains stable during TEBO megasonic cleaning processes, and a chip fabricator can, using TEBO technology, apply the level of megasonic energy needed to remove random defects without incurring the pattern damage created by transient cavitation in conventional megasonic cleaning.
We have demonstrated the damage-free or low-damage cleaning capabilities of TEBO technology on customers’ patterned wafers as small as 1xnm (16nm to 19nm), and we believe TEBO technology will be applicable in even smaller fabrication process nodes. TEBO technology can be applied in manufacturing processes for conventional 2D chips with fine features and advanced chips with 3D structures, including Fin Field Effect Transistors or FinFET, DRAM, 3D NAND and 3D cross point memory, aswell asand we expect it will be applicable to other 3D architectures that may be developed in the future, such as carbon nanotubes and quantum devices. As a result of the thorough, controlled nature of TEBO processes, cleaning time for TEBO-based solutions may take longer than conventional megasonic cleaning processes. Conventional processes have proven ineffective, however, for process nodes of 20nm or less, and we believe the increased yield that can be achieved by
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using TEBO technology for nodes up to 70nm can more than offset the cost of the additional time in utilizing TEBO technology.
TEBO Applications
At process nodes of 28nm and less, chip makers face escalating challenges in eliminating nanometric particles and maintaining the condition of inside pattern surfaces. In order to maintain chip quality and avoid yield loss, cleaning technologies must control random defects of diminishing killer defect sizes, without roughing or otherwise damaging surfaces of transistors, interconnects or other wafer features. TEBO technology can be applied in numerous steps throughout the manufacturing process flow for effective, damage-free cleaning:
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•Memory Chips: We estimate that TEBO technology can be applied in up to a total of 47as many as 50 steps in the fabrication of a dynamic random-access memory, or DRAM chip, consisting of 8up to 10 steps in cleaning ISO structures, 1920 steps in cleaning buried gates, and 20 steps in cleaning high aspect-ratio storage nodes and stacked films.
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•Logic Chips: In the fabrication process for a logic chip with a FinFET structure, we estimate that TEBO technology can be used in 15 or more cleaning steps.
For purposes of solving inside pattern surface conditions for memory or logic chips, TEBO technology uses environmentally friendly dilute chemicals such as RCA SC-1 and hydrogen gas doped functional water.
TEBO Equipment
We currently offer two models of wet wafer cleaning equipment based on our TEBO technology, Ultra C TEBO II and Ultra C TEBO V. Each of these models is a single-wafer, serial-processing tool that can be configured to customer specifications and, in conjunction with appropriate dilute chemicals, used at numerous manufacturing processing steps for effective, damage-free cleaning of chips at process nodes of 28nm or less. TEBO equipment solves the problem of pattern damage caused by transient cavitation in conventional jet spray and megasonic cleaning processes, providing better particle
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removal efficiency with limited material loss or roughing. TEBO equipment currently is being evaluated by a select group of leading memory and logic chip customers, some of which recently have indicated an intent to move to production. We expect the sales prices of our TEBO tools generally to range between $3.5 million and $6.5 million, although the sales price of a particular tool will vary depending upon the required specifications.
Each model of TEBO equipment includes:
customers.
Each model of TEBO equipment includes:
image06.jpg
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•an equipment front-end module, or EFEM, which moves wafers from chamber to chamber;
chamber.
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•one or more chamber modules, each equipped with a TEBO megasonic generator system;
system.
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•an electrical module to provide power for the tool; and
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•a chemical delivery module.
Ultra C TEBO II was released in 2016. Its key features include:
Ultra C TEBO II (released in 2016). Highlights of our Ultra C TEBO II equipment include:
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•compact design, with footprint of 2.25m x 2.25m x 2.85m (WxDxH);
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•up to 8 chambers with an upgraded transport system and optimized robotic scheduler, providing throughput of up to 300 wafers per hour;
hour.
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•EFEM module consisting of 4 load ports, transfer robot and 1 process robot; and
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•focus on dilute chemicals contributes to environmental sustainability and lower cost of ownership.
Ultra C TEBO V also was introduced in 2016, and its key features include:
Ultra C TEBO V (released in 2016). Highlights of our Ultra C TEBO V equipment include:
image08.jpg
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•footprint of 2.45m x 5.30m x 2.85m (WxDxH); 
.
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•up to 12 chamber modules, providing throughput of up to 300 wafers per hour;
hour.
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•EFEM module consisting of 4 load ports, 1 transfer robot and 1 process robot;robot: and
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•chemical delivery module for delivery of isopropyl alcohol, dilute hydrofluoric acid, RCA SC-1 solution, functional de-ionized water and carbon dioxide to each of the chambers.
Tahoe Overview
Custom-Made Wafer AssemblyOur Ultra-C Tahoe wafer cleaning tool can deliver high cleaning performance using significantly less sulfuric acid and hydrogen peroxide than is typically consumed by conventional high-temperature single-wafer cleaning tools. During normal single-wafer cleaning processes, only a fraction of the acid reacts with the wafer surface, while the majority is wasted as acid spins off the wafer and requires significant cost and effort to be recycled. Tahoe employs a proprietary hybrid approach in which the sulfuric acid cleaning steps are processed in batch mode, and the final stage cleaning are processed with single-wafer cleaning technologies. In addition to providing cost savings resulting from vastly reduced sulfuric acid consumption, Ultra-C Tahoe meets the needs of customers who face increased environmental regulations and demand new, more environmentally friendly tools. We delivered our first Ultra C Tahoe tool to a strategic customer in 2019.
Advanced Packaging Equipment
and other Back-End Processing Tools
We leverage our technology and expertise to provide a range of single-wafer tools for back-end wafer assembly and packaging factories, principally in the PRC.factories. We develop, manufacture and sell a wide range of advanced packaging tools, such as coaters, developers, photoresist strippers, scrubbers, wet etchers and copper-plating tools. We focus on providing custom-made, differentiated equipment that incorporates customer-requested features at a competitive price. The sales prices for these tools generally range between $500,000
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For example, our Ultra C Coater is used in applying photoresist, a light-sensitive material used in photolithography to transfer a pattern from a mask onto a wafer. Coaters typically provide input and $1.0 million,output elevators, shuttle systems and these offerings generated $5.7 million,other devices to handle and transport wafers during the coating process. Unlike most coaters, the Ultra C Coater is fully automated. Based on requests from customers, we developed and incorporated the special function of chamber auto-clean module into the Ultra C Coater, which further differentiates it from other products in the market by reducing or 20.9%,eliminating the cleaning of our revenueshroud in 2016 and $4.2 million, or 13.5%, of our revenue in 2015.
For example, our Ultra C Coater is used in applying photoresist, a light-sensitive material used in photolithography to transfer a pattern from a mask onto a wafer. Coaters typically provide input and output elevators, shuttle systems and other devices to handle and transport wafers during the coating process. Unlike most coaters, the Ultra C Coater is fully automated. In addition, based on requests from customers, we developed and incorporated the special function of chamber auto-clean module into the Ultra C Coater, which further differentiates it from other products in the market.the coater which increases the tool’s continuous production time. The Ultra C Coater is designed to deliver improved throughput and more efficient tool utilization while eliminating particle generation.
Our other advanced packaging tools include: Ultra ECP ap, which delivers a uniform metal layer to finished wafers prior to packaging; Ultra C Developer, which applies liquid developer to selected parts of photoresist to resolve an image; Ultra C PR Megasonic-Assisted Stripper, which removes photoresist; Ultra C Scrubber, which scrubs and cleans wafers; and Ultra C Thin Wafer Scrubber, which addresses a sub-market of cleaning very thin wafers for certain Asian assembly factories; and Ultra C Wet Etcher, which etches silicon wafers and copper and titanium interconnects.
Our Customers
As of December 31, 2017,Since 2009 we have delivered more than 765 tools to our customers had purchased and deployed, more than 30 Ultra C SAPS650 of which were repeat orders or acceptances upon contractual performance obligations having been met and TEBO cleaning tools. Allthereby generated revenue to us. The balance of the delivered tools is subject to the customer's acceptance of the tool upon the tool's satisfaction of applicable contractual requirements or subject to the customer's subsequent discretionary commitment to purchase the tool. To date, substantially all of our sales in 2016 and 2017 wereof equipment for semiconductor-manufacturing have been to customers located in Asia, and we anticipate that a substantial majority of our revenue from these products will continue to come from customers located in this region for the nearforeseeable future. We have increasedbegun to add to our efforts to penetrate the marketsfurther address customers in North America, and Western Europe and we believe we are well positioned to begin generatingSoutheast Asia, by expanding our direct sales in those regions.teams and increasing our global marketing activities.
We generate most of our revenue fromOur front-end customers have included: Shanghai Huali Microelectronics Corporation, together with Huahong Semiconductor Ltd., collectively known as The Shanghai Huahong (Group) Company, Ltd., or The Huali Huahong Group, a limited number of customers as the result of our strategy of initially placing SAPS - and TEBO-based equipment withleading mainland China-based foundry; Semiconductor Manufacturing International Corporation, or SMIC, a small number of leading chip manufacturers that are driving technology trends and key capability implementation. In 2017, 55.2% of our revenue was derived from four customers:mainland China-based foundry; SK Hynix Inc., a leading Korean memory chip company that accounted for 18.1% of our revenue; Shanghai Integrated Circuit Research and Development Centercompany; Yangtze Memory Technologies Co., Ltd., or YMTC, a public research consortia for the Chinese semiconductor industry that accounted for 14.1%leading mainland China-based memory chip company, together with one of our revenue; JiangYin ChangDianits subsidiaries; ChangXin Memory Technologies, or CXMT, a leading mainland China-based memory chip company; and SiEn, a leading mainland China-based power-semiconductor chip company. Our wafer assembly and packaging customers have included: Jiangyin Changdian Advanced Packaging Co. Ltd., a leading PRC foundrymainland China-based wafer bumping packaging house that accounted for 12.8%is a subsidiary of our revenue; and Yangtze Memory TechnologiesJCET Group Co., Ltd.; Nantong Tongfu Microelectronics Co., Ltd., a leading PRC memorymainland China-based chip assembly and testing company that together with oneis a subsidiary of its subsidiaries, accounted 10.2% of our revenue. Nantong Fujitsu Microelectronics Co., Ltd.; Nepes Co., Ltd., a semiconductor packaging company based in Korea; and Wafer Works Corporation, a mainland China-based wafer supplier.

In 2016 99.3%2023, 45.5% of our revenue was derived from fourthree customers: Shanghai Huali Microelectronics Corporation, a leading PRC foundry thatSMIC accounted for 33.7%16.7% of our revenue; Semiconductor Manufacturing International Corporation, a leading PRC foundry thatSiEn accounted for 25.0% of our revenue; SK Hynix Inc. accounted for 24.0%15.4% of our revenue; and JiangYin ChangDian Advanced Packaging Co. Ltd., a leading PRC foundry thatCXMT; accounted for 16.6%13.4% of our revenue. In 2022, 43.8% of our revenue was derived from three customers: The Huali Huahong Group; accounted for 18.2% of our revenue; SMIC accounted for 15.6% of our revenue, and YMTC accounted for 10.0% of our revenue. In 2021, 48.9% of our revenue was derived from two customers: The Huali Huahong Group accounted for 28.1% of our revenue; and YMTC accounted for 20.8% of our revenue.
Based on our market experience, we believe that implementation of our equipment by one of our selected leading companies will attract and encourage other manufacturers to evaluate our equipment, because the leading company’s implementation will serve as validation of our equipment and will enable the other manufacturers to shorten their evaluation processes. We placed our first SAPS-based tool in 2009 as a prototype. We worked closely with the customer for two years in debugging and modifying the tool, and the customer then spent two more years of qualification and running pilot production before beginning volume manufacturing. Our revenue in 2015 included sales of SAPS-based tools following the customer’s completion of its qualification process. We expect that the period from new product introduction to high volume manufacturing will be three years or less in the future. Please see “Item 1A. Risk Factors—Risks Related to Our Business and Our Industry—We depend on a small number of customers for a substantial portion of our revenue, and the loss of, or a significant reduction in orders from, one or more of our major customers could have a material adverse effect on our revenue and operating results. There are also a limited number of potential customers for our products.”
Customers continue to establish joint ventures, alliances and licensing arrangements that have the potential to positively or negatively impact our competitive position and market opportunities. A material reduction in orders from our large customers could adversely affect our results of operations and projected financial condition. Our business depends upon the expenditures of semiconductor manufacturers. Semiconductor manufacturers’ businesses, in turn, depend on many factors, including their financial capability, the current and anticipated market demand for integrated circuits, the global economy and the availability of equipment capacity to support that demand.
Sales and Marketing
We market and sell our products worldwide using a combination of our direct sales force and third-party representatives. We employ direct sales teams in Asia, Europe and North America, and have located these teams near our customers, primarily in the PRC, Korea, Taiwan andmainland China, the United States. Each sales person has specific local market expertise.States, Southeast Asia, and Europe. We also employ field application engineers, who are typically co-located with our direct sales teams, to provide technical pre- and post-sale support tours and other assistance to existing and potential customers throughout the customers’ fab planning and production line qualification and fab expansion phases. Our field application engineers are organized by end markets as well as core competencies in hardware, control system, software and process development to support our customers.
To supplement our direct sales teams, we have contacts with several independent sales representatives in the PRC, Taiwanmainland China, Korea and Korea.Taiwan. We select these independent representatives based on their ability to provide effective field sales, marketing forecast and technical supportrequirement updates for our products. In the case of representatives, our customers place purchase orders with us directly rather than with the representatives.
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Our sales have historically been made using purchase orders with agreed technical specifications. Our sales terms and conditions are generally consistent with industry practice but may vary from customer to customer. We seek to obtain a purchase order threetwo to foursix months ahead of the customer’s desired delivery date. For some customers, we receive a letter of intent three weeks ahead, followed by the corresponding purchase order five weeks ahead of the customer’s desired delivery date. Consistent with industry practice, we allow customers to reschedule or cancel orders at a certain cost to them on relatively short notice. Because of our relatively short delivery period and our practice of permitting rescheduling or cancellation, we believe that backlog is not a reliable indicator of our future revenue.
Our marketing team focuses on our product strategy and technology road maps, product marketing, new product introduction processes, demand assessment and competitive analysis, customer requirement communication and public relations. Our marketing team also has the responsibility to conduct environmental scans, study industry trends and arrange our participation at major trade shows.
Manufacturing
AllWe conduct a substantial majority of our productsproduct development, manufacturing, support and services in mainland China, with additional product development and subsystem production in Korea. Substantially all of our tools are built to order at our facilitymanufacturing facilities in Shanghai. Our manufacturing facility hasthe Pudong region of Shanghai, which now encompass a total of 36,000236,000 square feet, with 8,000 square feetfeet of class 10,000 clean roomfloor space for product assembly and testing, plus 800 square feet of class 1 clean room space for product demonstration purposes. The rest of the area is used for product sub-assembly, component inventory and manufacturing related offices. A class designationproduction capacity.
In May 2020 ACM Shanghai, through its wholly owned subsidiary ACM Shengwei, entered into an agreement for a clean room denotes the number of particles of size 0.5mm or larger permitted per cubic foot of air. Our manufacturing facility is ISO-9000 certified, and we have implemented certain manufacturing science-based factory practices such as constraint management, statistical process control and failure mode and effect analysis methodology.
In each of 2016 and 2017, we sourced approximately one-third of the parts and components ($8.0 million in 2016 and $10.8M in 2017) for our products from Chinese suppliers and the remaining parts and components were sourced from suppliersland use right in the United StatesLingang region of Shanghai. In July 2020 ACM Shengwei began a multi-year construction project for a new development and production center. The planned 1,000,000 square foot facility will incorporate state-of-the-art manufacturing systems and automation technologies and will provide the floor space to a lesser extent, Japansupport significantly more production capacity and Korearelated research and development activities when fully staffed and supplied. See “Item 2. Properties,” of Part I of this report.
Our experience has shown that chip manufacturers in mainland China and throughout Asia demand equipment meeting their specific technical requirements and prefer building relationships with local suppliers. We will continue to seek to leverage our local presence to address the growing market for semiconductor manufacturing equipment in the region by working closely with regional chip manufacturers to understand their specific requirements, encourage them to adopt our SAPS, TEBO, Tahoe, ECP, furnace, Track, PECVD, and other technologies in our current portfolio, and enable us to design innovative products and solutions to address their needs.
We purchase some of the components and assemblies that we include in our products from single source suppliers. We believe that we could obtain and qualify alternative sources to supply these components. Nevertheless, any prolonged inability to obtain these components could have an adverse effect on our operating results and could unfavorably impact our customer relationships. Please see “Item 1A. Risk Factors—Risks Related to Our Business and Our Industry—We depend on a limited number of suppliers, including single source suppliers, for critical components and assemblies, and our business could be disrupted if they are unable to meet our needs.”
Research and Development
We believe that our success depends in part on our ability to develop and deliver breakthrough technologies and capabilities to meet our customers’ ever-more challenging technical requirements. For this reason, we devote significant financial and personnel resources to research and development. Our research and development team is comprised of highly skilled engineers and technologists with extensive experience in megasonic technology, cleaning processes and chemistry, mechanical design, and control system design. As of December 31, 2017, approximately half of our research and development personnel hold advanced technical degrees. To supplement our internal expertise, we also collaborate with external research and development entities such as International SEMATECH, a global consortium of computer chip manufacturers, on specific areas of interests and retain, as technical advisors, several experts in semiconductor technology.
For the foreseeable future we are focusing on enhancing our existing Ultra C SAPS, TEBO, Tahoe, ECP, furnace and TEBOother tools and integrating additional capabilities to meet and anticipate requirements from our existing and potential customers. Our particular areas of focus include development of the following:
● 
•new cleaning steps for Ultra C SAPS cleaners for application in logic chips and for DRAM, and 3D NAND and 3D cross point memory technologies;
technologies.
● 
•new cleaning steps for Ultra C TEBO cleaners for FinFET in logic chips, gates in DRAM, and deep vias in both 3D NAND technologies.
•new cleaning steps for Ultra Tahoe cleaners for application in logic chips and for DRAM and 3D cross point memory technologies;
NAND technologies.
•new dry technologies such as supercritical CO2 dry and advanced IPA dry for DRAM, and logic technologies.
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•new hardware, including new system platforms, new and additional chamber structures and new chemical blending systems; and
● 
•new software to integrate new functionalities to improve tool performance.
performance; and
•support for the ongoing evaluations and commercialization efforts and product extensions for the newly introduced PECVD and Track product categories.

Longer term, we are working on new proprietary process capabilities based on our existing tool hardware platforms. We are also working to integrate our tools with third-party tools in adjacent process areas in the chip manufacturing flow. Without reduction by grant amounts received from PRC governmental authorities (see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Components of Results of Operations—PRC Government Research and Development Funding”), our gross

Our research and development expense totaled $8.6$92.7 million or 23.4%16.6% of revenue in 2017 and $9.52023, $62.2 million or 34.7%16.0% of revenue in 2016.2022, and $34.2 million or 13.2% of revenue in 2021. We intend to continue to invest in research and development to support and enhance our existing cleaning products and to develop future product offerings to build and maintain our technology leadership position.

Intellectual Property
Our success and future revenue growth depend, in part, on our ability to protect our intellectual property. We control access to and use of our proprietary technologies, software and other confidential information through the use of internal and external controls, including contractual protections with employees, consultants, advisors, customers, partners and suppliers. We rely primarily on patent, copyright, trademark and trade secret laws, as well as confidentiality procedures, to protect our proprietary technologies and processes. All employees and consultants are required to execute confidentiality agreements in connection with their employment and consulting relationships with us. We also require them to agree to disclose and assign to us all inventions conceived or made in connection with the employment or consulting relationship.
We have aggressively pursued intellectual property since our founding in 1998. We focus our patent filing efforts in the United States, and, when justified by cost and strategic importance, we file corresponding foreign patent applications in strategic jurisdictions such as the European Union, the PRC,mainland China, Japan, Singapore, Korea, Singapore, and Taiwan. Our patent strategy is designed to provide a balance between the need for coverage in our strategic markets and the need to maintain costs at a reasonable level.
As of December 31, 2017,2023, we had 2064 issued patents, and numerous29 patents pending, applications in the United States. These patents carry expiration dates from 20182027 through 2027.2038. Many of the US patents and applications have also been filed internationally, inincluding one or more of the European Union, PRC, Japan, mainland China, Singapore, Korea, Singapore and Taiwan.
Specifically, we own patents in wafer cleaning, electro-polishing and plating, wafer preparation, and other semiconductor processing technologies.
We have been issued more than 498 patents in the United States, mainland China, Japan, Korea, Singapore and Taiwan.
We currently manufacture advanced single-wafer cleaning systems equipped with our SAPS, TEBO and TEBOTahoe technologies. Our wafer cleaning technologies are protected by US Patent Numbers 8580042, 8671961, 9070723 and 9281177, as well as their corresponding international patents. We have 2257 patents granted internationally protecting our SAPS technologies. We alsotechnologies, and we have filed four11 international patent applications for key TEBO technologies, and 5 for Tahoe, in accordance with the Patent Cooperation Treaty, in anticipation of filing in the U.S. national phase.
Treaty. In addition to the above core technologies, we have patents reflecting innovations in other aspects of wafer cleaning systems, such as cleaning solution recycling and wafer holding and positioning. During a wafer cleaning cycle, multiple cleaning solutions may be sequentially used. Our cleaning solution recycling technology prevents cross-contamination and allows recycling of the cleaning solutions. These innovations are protected by US Patent Numbers 6248222, 6495007, 6749728, 6726823, 6447668 and 7136173, as well as their corresponding international patents.
We havepatented technologies for stress-free polishing, or SFP and electrochemical plating, or ECP that are usedembedded in certain of our tools. SFP is an integral part of the CMP process. Our technology was a breakthrough in electro-chemical-copper-planarization technology when it was first introduced, because it can polish, stress-free, oxidizing tantalum barrier layers used in copper low-K interconnects. Our innovations in SFP and ECP are reflected in US Patent Numbers 6395152, 6837984, 6440295, 6638863, 6391166 and 8518224, and their corresponding international counterparts.
We also have patented technologies in other semiconductor processing areas, such asincluding wafer preparation and someseveral specific processing steps. The wafer preparation technology is covered by US Patent Numbers 8383429 and 9295167. The specific processing steps include US Patent Number 7119008 titled “Integrating metal layers with ultra-low-K dielectrics,” and US Patent Number 8598039 titled “Barrier layer removal method and apparatus.”
To date we have not granted licenses to third parties under the patents described above. Not all of these patents have been implemented in products. We may enter into licensing or cross-licensing arrangements with other companies in the future.
We cannot assure you that any patents will issue from any of our pending applications. Any rights granted under any of our existing or future patents may not provide meaningful protection or any commercial advantage to us. With respect to our other proprietary rights, it may be possible for third parties to copy or otherwise obtain and use our proprietary technology or marks without authorization or to develop similar technology independently.
The semiconductor equipment industry is characterized by vigorous protection and pursuit of intellectual property rights or positions, which have resulted in often protracted and expensive litigation. We may in the future initiate claims or litigation against third parties to determine the validity and scope of proprietary rights of others. In addition, we may in the future initiate litigation to enforce our intellectual property rights or the rights of our customers or to protect our trade secrets.
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Our customers could become the target of litigation relating to the patent or other intellectual property rights of others. This could trigger technical support and indemnification obligations in some of our customer agreements. These obligations could result in substantial expenses, including the payment by us of costs and damages related to claims of patent infringement. In addition to the time and expense required for us to provide support or indemnification to our customers, any such litigation could disrupt the businesses of our customers, which in turn could hurt our relations with our customers and cause the sale of our products to decrease. We do not have any insurance coverage for intellectual property infringement claims for which we may be obligated to provide indemnification.
Additional information about the risks relating to our intellectual property is provided under “Item 1A. Risk Factors—Risks RelatingRelated to Our Intellectual Property.Property and Data Security.”
Competition
The chip equipment industry is characterized by rapid change and is highly competitive throughout the world. We compete with semiconductor equipment companies located around the world, and we may also face competition from new and emerging companies, including new competitors from the PRC.mainland China. We consider our principal competitors to be those companies that provide single-waferwafer cleaning and electrical plating products to the market, including Lam Research Corp.Corporation, NAURA Technology Group Co., DNS Electronics LLC, Tokyo Electron Ltd., SEMES Co. Ltd., Mujin Electronics Co., Ltd., SCREEN SPE USA, LLC (a subsidiary of SCREEN Holdings Co., Ltd.), SEMES Co. Ltd., Tokyo Electron Ltd. and Beijing Sevenstar Science &Kokusai Semiconductor Equipment Corporation. Key competitors for our newly-introduced PECVD and Track products include Lam Research Corporation, Applied Materials, Inc., KINGSEMI Co., Ltd. and Suzhou Jingtuo Semiconductor Technology Co., Ltd.
Compared to our company, our current and potential competitors may have:
● 
•better established credibility and market reputations, longer operating histories, and broader product offerings;
● 
•significantly greater financial, technical, marketing and other resources, which may allow them to pursue design, development, manufacturing, sales, marketing, distribution and service support of their products;
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•more extensive customer and partner relationships, which may position them to identify and respond more successfully to market developments and changes in customer demands; and
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•multiple product offerings, which may enable them to offer bundled discounts for customers purchasing multiple products or other incentives that we cannot match or offer.
The principal competitive factors in our market include:
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•performance of products, including particle removal efficiency, rate of damage to wafer structures, high temperature chemistry, throughput, tool uptime and reliability, safety, chemical waste treatment, and environmental impact;
•gap filling capability, the deposited film thickness uniformity within wafer and wafer to wafer, particle generated on the wafer during the processes;
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•service support capability and spare parts delivery time;
● 
innovation and development of functionality and features that are must-haves for advanced fabrication nodes;
● 
•ability to anticipate customer requirements, especially for advanced process nodes of less than 45nm;
● 
ability to identify new process applications;
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•brand recognition and reputation; and
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•skill and capability of personnel, including design engineers, manufacturing engineers and technicians, application engineers, and service engineers.
In addition, semiconductor manufacturers must make a substantial investment to qualify and integrate new equipment into semiconductor production lines. Some manufacturers have announced they will fabricatebegan fabricating chips for the 10nm5nm node beginning in 20172020 and the 7nm3nm node commencing in 2018, and we have one customer that currently is evaluating implementation of our equipment for both the 10nm and 7nm nodes.2022. Once a semiconductor manufacturer has selected a particular supplier’s equipment and qualified it for production, the manufacturer generally maintains that selection for that specific production application and technology node as long as the supplier’s products demonstrate performance to specification in the installed base. Accordingly, we may experience difficulty in selling to a given manufacturer if that manufacturer has qualified a competitor’s equipment. If, however, that cleaning equipment constrains chip yield, we expect, based on our experience to date, that the manufacturer will evaluate implementing new equipment that cleans more effectively.
Our People
We focus on the high-end fabrication market with advanced nodes, and we believe we compete favorably with respect to the factors described above. Most of our competitors offer single-wafer cleaning products using jet spray technology, which has relatively poor particle removal efficiency for random defects less than 30nm in size and presents increased risk of damage to the fragile patterned architectures of wafers at advanced process nodes. Certain of our competitors offer single-wafer cleaning products with megasonic cleaning capability, but we believe these products, which use conventional megasonic technology, are unable to maintain energy dose uniformity on the entire wafer and often lack the ability to repeat the requisite uniform energy dose wafer to wafer in production, resulting in poor efficiency in removing random defects, longer processing time and greater loss of material. In addition, these conventional megasonic products generate transient cavitation, which results in more incidents of damage to wafer structures with feature sizes of 70nm or less. We design our cleaning tools equipped with our proprietary SAPS and TEBO technologies, which we believe offer better performance, including at advanced process nodes of 22nm or less. Moreover, with our operations based in Shanghai, we are well positioned to take advantage of the Chinese government’s policies to develop an independent domestic semiconductor supply chain.
Employees
As of December 31, 2017,2023, we had 191 full-timehad 1,590 full-time equivalent employees, of whom 22139 were in administration, 50286 were in manufacturing, 80733 were in research and development, and 39 432were in sales and marketing and customer services. Of these employees, 1831,416 were located in mainland China and the PRC, 4Taiwan region, 159 were located in Korea and 415 were
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based in the United States.
We have never had a work stoppage, and none of our employees are represented by a labor organization or subject to any collective bargaining arrangements. We consider our employee relations to be good.
We compete in the highly competitive semiconductor equipment industry, with operations principally in mainland China. Attracting, developing, and retaining skilled and experienced employees in research and development, manufacturing, sales and marketing, and other positions is crucial to our ability to compete effectively. Our ability to recruit and retain such employees depends on a number of factors, including our corporate culture and work environment, informed by our values and behaviors, our corporate philosophy of talent development and career opportunities, and compensation and benefits.
ItemTo attract and retain qualified employees and key talent, we offer total compensation packages that are competitive with comparable companies, particularly in mainland China and, specifically, Shanghai.
We provide training and development programs to our employees, and we have trained many of our key engineers and managers for more than a decade. Retention of these key employees is critical to secure our future growth and technology development. To assist in employee retention and recruitment, we offer employee housing in the Lingang region of Shanghai nearby our new research and development and production center.
Environmental
Severe weather events, including earthquakes, fires, floods, heat waves, hurricanes and other environmental disasters, could pose a threat to our manufacturing and research and development activities through physical damage to our operating facilities or equipment or disruption of power supply or telecommunications infrastructure. The frequency and intensity of severe weather events are reportedly increasing throughout the world as part of broader climate changes. Global weather pattern changes may also pose long-term risks of physical impacts to our business. We maintain disaster recovery and business continuity plans that would be implemented to help us recover in the event of severe weather events that interrupt our business. See “Item 1A. Risk FactorsFactors—General—Our production facilities could be damaged or disrupted by a natural disaster, war, terrorist attacks or other catastrophic events.”
Concerns about climate change have resulted in various laws and regulations that are intended to limit carbon emissions and address other environmental concerns. In recent years, mainland China, where our production facilities are located, has undertaken comprehensive sustainability initiatives that are requiring companies to meet new environmental standards and deal with higher energy and other production costs. Environmental laws and regulations may impose new or unexpected cost either directly through, for example, higher energy costs or indirectly through increased costs of compliance or of failing to comply with these laws and regulations. These laws and regulations might increase the cost of construction, maintenance and operation of our new research and development center and factory in the Lingang region of Shanghai.
We do not currently expect that existing or pending climate change laws and regulations will be material to our results of operations in the foreseeable future. Climate change could, however, have a direct effect on our customer base of semiconductor fabricators, whose operations typically require copious quantities of power and water and a number of chemicals. Chip fabrication operations often result in significant amounts of wastewater, which can contain a number of harmful contaminants, including antimony, arsenic, hydrofluoric acid and hydrogen peroxide, that historically have resulted in groundwater pollution and related violations of environmental laws. Moreover, water and chemical demands for semiconductor fabrication are expected to increase with the production of more advanced chips at smaller process nodes. As a result, some leading chip fabricators have begun to invest in conservation and treatment technologies for water and chemicals.
We have designed some of our tools to require significantly reduced levels of environmentally harmful chemicals, which helps customers face increased environmental laws and regulations. SAPS and TEBO technologies use environmentally friendly dilute chemicals, such as dilute hydrofluoric acid, RCA SC-1 solution, ozonated de-ionized water and functional de-ionized water with dissolved hydrogen. In interconnect and barrier metals applications based on SAPS technology, for example, these chemical solutions take the place of chemicals such as piranha solution, a high-temperature mixture of sulfuric acid and hydrogen peroxide used by conventional wet wafer cleaning processes. Similarly, Tahoe technology delivers high cleaning performance using significantly less sulfuric acid and hydrogen peroxide than is typically consumed by conventional high-temperature single-wafer cleaning tools. For additional information, see “—Our Technology and Product Offerings—Wet Cleaning Equipment for Front End Production Processes.”
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Available Information
We are required to file annual, quarterly and current reports, proxy statements and other information with the U.S. Securities and Exchange Commission, or the SEC. The SEC maintains a website at www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.
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 documents filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, or the Exchange Act, are also available free of charge on our website at www.acmrcsh.com as soon as reasonably practicable after such reports are electronically filed with or furnished to the SEC.
Investors should note that we announce material information to our investors and others using filings with the SEC, press releases, public conference calls, webcasts or our website (www.acmrcsh.com), including news and announcements regarding our financial performance, key personnel, our brands and our business strategy. Information that we post on our corporate website could be deemed material to investors. We encourage investors to review the information we post on these channels. We may from time to time update the list of channels we will use to communicate information that could be deemed material and will post information about any such change on www.acmrcsh.com. The information on our website is not, and shall not be deemed to be, a part hereof or incorporated into this or any of our other filings with the SEC.
Item 1A.    Risk Factors
Investing in Class A common stock involves a high degree of risk. You should consider and read carefully all of the risks and uncertainties described below, as well as other information contained in this report, including the consolidated financial statements and related notes set forth in “Item 1.8. Financial Statements” of Part I above,Statements and Supplementary Data”, before making an investment decision. The occurrence of any of the following risks or additional risks and uncertainties not presently known to us or that we currently believe to be immaterial could materially and adversely affect our business, financial condition, results of operations or cash flows. In any such case, the trading price of Class A common stock could decline, and you may lose all or part of your investment. This report also contains forward-looking statements and estimates that involve risks and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of specific factors, including the risks and uncertainties described below.
RISK FACTOR SUMMARY
Our business is subject to a number of risks, including risks that may prevent us from achieving our business objectives or may adversely affect our business, financial condition, results of operations, cash flows and prospects. The risks are discussed more fully below and include, but are not limited to, the risks summarized below.
Risks Related to International Aspects of Our Business
•if any mainland China central government authority were to determine that existing mainland China laws or regulations require that ACM Shanghai obtain the authority’s permission or approval to continue the listing of ACM Research’s Class A common stock in the United States or if those existing mainland China laws and regulations, or interpretations thereof, were to change to require such permission or approval, or if we inadvertently conclude that permissions or approvals are not required, ACM Shanghai may be unable to obtain the required permission or approval or may only be able to obtain such permission or approval on terms and conditions that impose material new restrictions and limitations on operation of ACM Shanghai, either of which could have a material adverse effect on our business, financial condition, results of operations, reputation and prospects and on the trading price of ACM Research Class A common stock, which could decline in value or become worthless;
•mainland China central government authorities may intervene in, or influence, ACM Shanghai’s mainland China-based operations at any time, and those authorities’ rules and regulations in mainland China can change quickly with little or no advance notice;
•the mainland China central government may determine to exert additional control over offerings conducted overseas or foreign investment in mainland China-based issuers, which could result in a material change in operations of ACM Shanghai andcause significant declines in the value of ACM Research Class A common stock, or make them worthless;
•if we are unable to comply with recent and proposed legislation and regulations regarding improved access to audit and other information and audit inspections of accounting firms, including registered public accounting firms, such as our prior and current audit firms, operating in mainland China, we could be adversely affected;
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•it may be difficult for overseas regulators to conduct investigations or collect evidence within mainland China;
•substantially all of our assets are located outside of the United States and certain of our directors and officers reside outside of the United States, which may make it difficult for you to enforce your rights based on the U.S. federal securities laws;
Risks Related to Our Business and Our Industry
•our potential future needs for additional capital that may not be available at all or on terms acceptable to us;
•the cyclicality in the semiconductor industry that may lead to substantial variations in demand for our products;
•our dependence on a small number of customers for a substantial portion of our revenue;
•industry manufacturers of chips adopting our SAPS, TEBO, Tahoe, ECP, furnace and other technologies;
•our SAPS, TEBO, Tahoe, ECP, furnace and other technologies not achieving widespread market acceptance;
•our ability to continue to enhance our existing single-wafer wet cleaning tools and identifying and entering new product markets;
•our ability to establish and maintain a reputation for credibility and product quality;
•our ability to expand our customer base;
•our long and unpredictable sales cycle, including our incurrence of significant expenses long before we can recognize revenue from new products, if at all;
•difficulties in forecasting demand for our tools;
•our reliance on third parties to manufacture significant portions of our tools and our ability to manage our relationships with these parties;
•any shortage of components or subassemblies, which could result in delayed delivery of products to us or in increased costs to us;
•our dependence on a limited number of suppliers, including single source suppliers, for critical components and subassemblies;
•our dependence on our Chief Executive Officer and President and other senior management and key employees;
Regulatory Risks
•regulatory actions limiting our ability and the broader industry's ability to export into China, as well as other specified countries, items sourced from the U.S. or otherwise subject to control under the U.S. Export Administration Regulations (EAR), or controls introduced by other countries including Japan and the Netherlands, thereby impacting our ability to sell our tools to customers in these jurisdictions;
•changes in government trade policies that could limit the demand for our tools and increase the cost of our tools;
•changes in political and economic policies with respect to mainland China;
•mainland China’s currency exchange control and government restrictions on investment repatriation may impact our ability to transfer funds outside of mainland China;
Risks Related to Our STAR Listing
•our ability to implement our strategy to expand our mainland China operations;
•our ability to achieve the results contemplated by our business strategy and our strategy for growth in mainland China and expectations related to the STAR Listing;
•the effect of ACM Shanghai’s status as a publicly traded company that is controlled, but less than wholly owned, by ACM Research;
•our ability to manage potentially inconsistent accounting and disclosure requirements of ACM Research and ACM Shanghai as a result of the STAR Listing;
Risks Related to Our Intellectual Property and Data Security
•our ability to protect our intellectual property, including in mainland China;
•breaches of our cybersecurity systems;
Risks Related to Ownership of Class A Common Stock
•the volatility in the market price of Class A common stock;
•manipulative short sellers of our stock, which may drive down the market price of our Class A common stock and could result in litigation;
•the difficulty to predict the effect of the STAR Listing and STAR IPO on the Class A common stock;
•the dual class structure of common stock, which has the effect of concentrating voting control with our executive officers and directors; and
•the limited experience of our management team managing a public company.
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Risks Related to International Aspects of Our Business
If any mainland China central government authority were to determine that existing mainland China laws or regulations require that ACM Shanghai obtain the authority’s permission or approval to continue the listing of ACM Research’s Class A common stock in the United States or if those existing mainland China laws and regulations, or interpretations thereof, were to change to require such permission or approval, or if we inadvertently conclude that permissions or approvals are not required, ACM Shanghai may be unable to obtain the required permission or approval or may only be able to obtain such permission or approval on terms and conditions that impose material new restrictions and limitations on operation of ACM Shanghai, either of which could have a material adverse effect on our business, financial condition, results of operations, reputation and prospects and on the trading price of ACM Research Class A common stock, which could decline in value or become worthless.
Mainland China central government authorities have taken steps to preclude, or significantly discourage, certain mainland China companies from listing on U.S. and other exchanges outside mainland China. Investments activities in mainland China by non-mainland China investors are principally governed by the Encouraged Industries Catalog for Foreign Investment (2020 version) and the Special Administrative Measures for Foreign Investment Access (Negative List 2021), both of which were promulgated by mainland China’s Ministry of Commerce, or MOFCOM, and National Development and Reform Commission. These regulations set forth the industries in which foreign investments are encouraged, restricted and prohibited.
Industries that are not listed in any of these three categories are generally open to foreign investment unless otherwise specifically restricted by other mainland China rules and regulations. We believe that our operations do not fall within any industry that is restricted or prohibited under these regulations and that the regulations therefore do not apply to us.
Mainland China-based companies that seek to list their shares in the United States but are subject to mainland China restrictions on investments by non-mainland China investors sometimes use a special purpose vehicle known as a VIE created in an off-shore jurisdiction such as the Cayman Islands. In these structures, a VIE enters into a series of contractual arrangements with mainland China-based operating company and its mainland China-based shareholders that afford those shareholders, rather than the shareholders of the VIE, effective control over the finances and operations of the operating company. The VIE, effectively a shell company, issues share that are listed for trading on a U.S. exchange, but the enterprise is controlled by the legacy mainland China-based shareholders and is subject to mainland China laws and regulations. ACM Research is not a VIE or other special purpose, or shell, company, and its relationship with ACM Shanghai does not involve the types of contractual arrangements existing between a VIE and a mainland China-based operating company. ACM Research is a Delaware corporation founded in California in 1998 that formed ACM Shanghai to conduct business operations in mainland China. ACM Research controls the operations of ACM Shanghai through its direct ownership of ACM Shanghai shares, and it also conducts sales and marketing activities focused on sales of ACM Shanghai products in North America, Europe and certain regions in Asia outside mainland China.
We do not believe that our corporate structure or any other matters relating to our business operations currently require that ACM Shanghai obtain any permissions or approvals from the China Securities Regulatory Commission, or CSRC, or any other mainland China central government authority in connection with ACM’s listing, or offering for sale in the future, shares of our Class A common stock in the United States. We, including ACM Shanghai, therefore have incurrednever solicited any permission or approval from any mainland China central government authority, and thus no such permissions or approvals have been received or denied, in connection with ACM Research’s seeking and maintaining the listing of our Class A common stock in the United States. In the event that we inadvertently conclude that permissions or approvals are not required, or either the CSRC or another mainland China central government authority were to determine that existing mainland China laws or regulations require that ACM Shanghai obtain the authority’s permission or approval to continue ACM Research’s listing of Class A common stock in the United States or if those existing mainland China laws and regulations, or interpretations thereof, were to change to require such permission or approval, ACM Shanghai could be unable to obtain any such permission or approval or could be able to obtain such permission or approval only on terms and conditions that impose material new operating or other restrictions and limitations on ACM Shanghai. In such circumstances, it would materially and adversely affect the value of our Class A common stock, which may decline in value or become worthless. In addition, ACM Shanghai could face sanctions by the CSRC or other mainland China central government authorities or pressure from the mainland China government in various business matters for failure to obtain such permission or approval. Such potential sanctions or pressure may include fines and penalties on ACM Shanghai’s operations in mainland China, limitations on its operating privileges in mainland China, delays in or restrictions on the transfer of proceeds from a public offering of ACM Research securities in the United States to ACM Shanghai, restrictions on or prohibition of the payments or remittance of dividends by ACM Shanghai to ACM Research, or other actions that
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could have a material and adverse effect on our business, financial condition, results of operations, reputation and prospects, as well as the trading price of ACM Research Class A common stock, which could decline in value or become worthless.
Mainland China central government authorities may intervene in, or influence, ACM Shanghai’s mainland China-based operations at any time, and those authorities’ rules and regulations in mainland China can change quickly with little or no advance notice.
The business of ACM Shanghai is subject to complex laws and regulations in mainland China that can change quickly with little or no advance notice. To date, beyond the COVID-19-related restrictions in 2022, we have not experienced such intervention or influence by mainland China central government authorities or a change in those authorities’ rules and regulations that have had a material impact of ACM Shanghai or ACM Research. We cannot assure you, however, that future changes in mainland China laws and regulations will not materially and adversely affect our mainland China-based operations. For example:
•Intellectual Property. Our commercial success depends in part on our ability to obtain and maintain patent and trade secret protection for our intellectual property, including our SAPS, TEBO, Tahoe, ECP, furnace and other technologies and the design of our Ultra C equipment. See “—Risks Related to Our Intellectual Property and Data Security—Our success depends on our ability to protect our intellectual property, including our SAPS, TEBO, Tahoe, ECP, furnace and other technologies.” in Item 1A, “Risk Factors” of Part I of this report. The significant losses sincemajority of our inceptionintellectual property has been developed in mainland China and we are uncertain about our future profitability.
Weis owned by ACM Shanghai. Implementation and enforcement of intellectual property-related laws in mainland China have incurred significant losses since our inceptionhistorically been lacking due primarily to ambiguities in 1998,mainland China intellectual property law. See “—Risks Related to Our Intellectual Property and as of December 31, 2017 we had an accumulated deficit of $10.0 million. Data Security—We may not be able to generate sufficient revenue to achieve and sustain profitability. We expectprotect our costs to increase in future periods,intellectual property rights throughout the world, including mainland China, which could materially, negatively affect our future operating results ifbusiness” in Item 1A, “Risk Factors” of Part I of this report. In the event mainland China central government authorities were to significantly revise or revamp the current scope and structure of intellectual property protection in mainland China, our revenue does not increase. In particular, we expectability to continueprotect and enforce our intellectual property rights for our key proprietary technologies may be adversely impacted and competitors may be able to expend substantial financialmatch our technologies and other resources on:tools in order to compete with us.
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•Title Defect in Leased Premises. We conduct research and development, and service support operations at ACM Shanghai’s headquarters located in the Zhangjiang Hi Tech Park in Shanghai, which ACM Shanghai leases from Zhangjiang Group. Zhangjiang Group has not obtained a certificate of property title for the premises, although it has represented to ACM Shanghai that it has the right to rent the premises to ACM Shanghai. If any adjustment in local regional overall planning of Shanghai, or any other reason, results in the demolition of such premises, the premises could not continue to be leased to ACM Shanghai and the day-to-day production and operation of ACM Shanghai would be materially and adversely affected. See Item 2, “Properties” of Part I of this report.
•COVID-19 Pandemic. We conduct substantially all of our product development, manufacturing, support and services in mainland China, and those activities were directly impacted by COVID-19 and related restrictions on transportation and public appearances, including continued investmentsimplementation by mainland China government authorities of “spot” and full-city quarantines in the city of Shanghai, where substantially all of our researchoperations are located. Furthermore, a number of our key customers have substantial operations based in operations areas of mainland China, including in the City of Shanghai, which required us to defer, in the first quarter of 2022, shipments of finished products to those customers. A significant number of ACM Shanghai employees missed work in late 2022 and development team;
early 2023 for one or several weeks due to COVID-19 related illness following the relaxation of mainland China’s zero-COVID policies in December 2022.
•Data Security. The Standing Committee of the National People’s Congress, or the Standing Committee, has promulgated the Cyber Security Law, which imposes requirements on entities who build and operate mainland China’s internet architecture or provide services in mainland China over the internet, and the Data Security Law, which imposes data security and privacy obligations on entities and individuals carrying out data activities. The Data Security Law also provides for a national security review procedure for data activities that may affect national security and imposes export restrictions on certain data an information. ACM Shanghai is not subject to the existing restrictions imposed by the Cyber Security Law or the Data Security Law, in part because its business operations do not involve the collection, processing or use of data
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sales and marketing, including a significant expansionor information involving personal privacy or private information of our sales organization, both domestically and internationally, building our brand, and providing our single-wafer wet cleaning equipmentcustomers. In addition, ACM Shanghai is subject to oversight by the Cyberspace Administration of China, or the CAC, regarding data security. ACM Shanghai does not collect or maintain personal information except for routine personal information necessary to process payroll payments and other capitalbenefits and emergency contact information, and as a result, ACM Shanghai is not currently subject to significant restrictions or limitations in addressing and managing data security issues and complying with CAC regulations. To date, ACM Shanghai has not been involved in any investigations on cybersecurity review initiated by the CAC or any related mainland China central government authority and has not received any inquiry, notice, warning, or sanction in such respect. However, cybersecurity is increasingly a focus of the mainland China central government. If the CAC or other mainland China central government authorities should in the future require ACM Shanghai to comply with these or additional, or more restrictive, mainland China cybersecurity regulations, it could require ACM Shanghai to make changes to its operations, and any failure to satisfy or delay in meeting such requirements may subject ACM Shanghai to restrictions and penalties imposed by the CAC or other mainland China regulatory authorities, which may include regulatory actions, fines and penalties on our operations in mainland China, which could materially harm our business, financial condition, results of operations, reputation and prospects.
•Anti-Monopoly. A number of mainland China laws and regulations have established procedures and requirements that could make merger and acquisition activities in China by foreign investors more time consuming and complex. These laws and regulations, which include the Anti-Monopoly Law and the Rules of the Ministry of Commerce on Implementation of Security Review System of Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, impose requirements that in some instances that MOFCOM be notified in advance of, for example, any change-of-control transaction in which a foreign investor takes control of a mainland China domestic enterprise. In addition, such Rules specify that mergers and acquisitions by foreign investors that raise “national defense and security” concerns and mergers and acquisitions through which foreign investors may acquire de facto control over domestic enterprises that raise “national security” concerns are subject to strict review by MOFCOM. In February 2021, the Anti-Monopoly Committee of the State Council published the Anti-Monopoly Guidelines for the Internet Platform Economy Sector, which stipulate that any concentration of undertakings involving VIEs is subject to anti-monopoly review. Those Guidelines provide more stringent rules for Internet platform operators, including regulations on the use of data and algorithms, technology and platform to commit abusive acts. The Measures for the Security Review for Foreign Investment, which was promulgated jointly by National Development and Reform Commission and MOFCOM effective January 18, 2021, and the Standing Committee on Amending the Anti-Monopoly Law of the People’s Republic of China, which was promulgated by the Standing Committee effective August 1, 2022, delineated provisions concerning the security review procedures on foreign investment, including the types of investments subject to review and the scopes and procedures of the review. ACM Shanghai does not have the concentration of business operators stipulated in the Anti-Monopoly Law, and our operations and activities to date have not otherwise subjected us to restrictive provisions or limitations set forth in applicable mainland China laws and regulations govern merger and acquisition activities. Among other things, ACM Shanghai’s business operations do not constitute identified “national defense and security” concerns associated with the arms industry, any industry ancillary to the arms industry, or any other field related to national defense security. We cannot assure you, however, that future changes in mainland China laws and regulations governing mergers and acquisitions, including activities in mainland China by foreign investors, will not extend or otherwise modify existing requirements, which could materially and adversely affect our mainland China-based operations or our ability to expand by investments or acquisitions.
•Permits. In the ordinary course of business, ACM Shanghai has obtained all of the permits and licenses it believes are necessary for it to operate in mainland China. ACM Shanghai may be adversely affected, however, by the complexity, uncertainties and changes in mainland China laws and regulations applicable to, or otherwise affecting, the semiconductor equipment industry and related businesses, and any lack of requisite approvals, licenses or permits applicable to ACM Shanghai’s business may have a material adverse effect on its business and results of operations.
•Trade Policies. Since 2018, general trade tensions between the United States and mainland China have escalated. See “—Regulatory Risks—Changes in government trade policies could limit the demand for our tools for evaluation by customers;
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and increase the cost of goods being manufacturedour tools” in Item 1A, “Risk Factors” of Part I of this report. The imposition of tariffs by the U.S. and soldmainland China governments and the surrounding economic uncertainty may negatively impact the semiconductor industry, including by reducing the demand of fabricators for our installed base;
capital
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● equipment such as our tools. Further changes in trade policy, tariffs, additional taxes, restrictions on exports or other trade barriers, or restrictions on supplies, equipment, and raw materials including rare earth minerals, may limit the ability of our customers to manufacture or sell semiconductors or to make the manufacture or sale of semiconductors more expensive and less profitable, which could lead those customers to fabricate fewer semiconductors and to invest less in capital equipment such as our tools. In addition, if mainland China were to impose additional tariffs on raw materials, subsystems or other supplies that we source from the United States, our cost for those supplies would increase. As a result of any of the foregoing events, the imposition of new or additional tariffs may limit our ability to manufacture tools, increase our selling and/or manufacturing costs, decrease margins, or inhibit our ability to sell tools or to purchase necessary equipment and supplies, which could have a material adverse effect on our business, results of operations, or financial condition.
generalMoreover, by imposing industrial policies and administrative expenses, includingother economic measures, such as control of foreign exchange, taxation and foreign investment, the mainland China central government exerts considerable direct and indirect influence on the development of the mainland China economy. Other political, economic and social factors may also lead to further legal and accounting expenses relatedregulatory changes and reforms, which may adversely affect our operations and business development.
The mainland China central government may determine to being a public company.
These investments may notexert additional control over offerings conducted overseas or foreign investment in mainland China-based issuers, which could result in increased revenuea material change in operations of ACM Shanghai and cause significant declines in the value of ACM Research Class A common stock, or growthmake them worthless.
The mainland China central government may determine to exert additional control over securities offerings conducted overseas and/or foreign investment in mainland China-based issuers, which could result in a material adverse change in operations of ACM Shanghai and cause the value of ACM Research Class A common stock to significantly decline or become worthless. See also “—If any mainland China central government authority were to determine that existing mainland China laws or regulations require that ACM Shanghai obtain the authority’s permission or approval to continue the listing of ACM Research’s Class A common stock in the United States or if those existing mainland China laws and regulations, or interpretations thereof, were to change to require such permission or approval, ACM Shanghai may be unable to obtain the required permission or approval or may only be able to obtain such permission or approval on terms and conditions that impose material new restrictions and limitations on operation of ACM Shanghai, either of which could have a material adverse effect on our business. Ifbusiness, financial condition, results of operations, reputation and prospects and on the trading price of ACM Research Class A common stock, which could decline in value or become worthless” above.
We could be adversely affected if we are unable to increasecomply with legislation and regulations regarding improved access to audit and other information and audit inspections of accounting firms, including registered public accounting firms, such as our revenue atprior and current audit firms, operating in mainland China.
We were one of the companies named in the SEC’s “Conclusive list of issuers identified under the HFCAA.” BDO China had been our independent registered public accounting firm in recent years, including for the year ended December 31, 2021, and was not inspected by the PCAOB.

The HFCA Act, which became law in December 2020, includes requirements for the SEC to identify issuers whose audit work is performed by auditors that the PCAOB is unable to inspect or investigate completely because of a rate sufficientrestriction imposed by a non-U.S. authority in any non-U.S. jurisdiction. The HFCA Act also requires that, to offset the expected increaseextent that the PCAOB has been unable to inspect an issuer’s auditor for two consecutive years, the SEC shall prohibit the issuer’s securities registered in the United States from being traded on any national securities exchange or over-the-counter market in the United States.

•On March 24, 2021, the SEC adopted interim final amendments to implement congressionally mandated submission and disclosure required of the HFCA Act, and on December 2, 2021, the SEC adopted final amendments to finalize rules implementing the submission and disclosures in the HFCA Act. These final amendments apply to registrants that the SEC identifies as having filed an Annual Report on Form 10-K (or certain other forms) with an audit report issued by a registered public accounting firm that is located in a foreign jurisdiction and that the PCAOB has determined it is unable to inspect or investigate completely because of a position taken by any non-U.S. authority. Any such identified registrant will be required to submit documentation to the SEC establishing that it is not owned or controlled by a governmental entity in that foreign jurisdiction and will also require disclosure in the registrant’s annual report regarding the audit arrangements of, and governmental influence on, such a registrant.
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•Furthermore, on June 22, 2021, the U.S. Senate passed the Accelerating Holding Foreign Companies Accountable Act, which was enacted under the Consolidated Appropriations Act, 2023, on December 29, 2022, as further described below, and which amended the HFCA Act to require the SEC to prohibit an issuer’s securities from trading on any national securities exchange or over-the-counter market in the United States if the PCAOB has been unable to inspect an issuer’s auditor for two, rather than three, consecutive years. On September 22, 2021, the PCAOB adopted a final rule implementing the HFCA Act, which provides a framework for the PCAOB to use when determining, as contemplated under the HFCA Act, whether the PCAOB is unable to inspect or investigate completely registered public accounting firms located in a foreign jurisdiction because of a position taken by one or more authorities in any non-U.S. jurisdiction.
•On December 16, 2021, the PCAOB designated China and Hong Kong as jurisdictions where the PCAOB was not allowed to conduct full and complete audit inspections and identified firms registered in such jurisdictions, including BDO China. Pursuant to each annual determination by the PCAOB, the SEC will, on an annual basis, identify issuers that have used non-inspected audit firms.
•On March 8, 2022, the SEC published its first “Provisional list of issuers identified under the HFCAA.” Our company was identified on the SEC’s provisional list after we filed our Annual Report on Form 10-K for the year ended December 31, 2021, which included an audit report issued by BDO China.
•On March 30, 2022, our company was transferred to the SEC’s “Conclusive list of issuers identified under the HFCAA.”
•On August 26, 2022, the PCAOB signed a Statement of Protocol, or SOP, Agreement with the CSRC and China’s Ministry of Finance. The SOP, together with two protocol agreements governing inspections and investigation, establishes a specific, accountable framework to make possible complete inspections and investigations by the PCAOB of audit firms based in China and Hong Kong, as required under U.S. law. Pursuant to the fact sheet with respect to the SOP disclosed by the SEC, the PCAOB has sole discretion to select the audit firms, engagements and potential violations that it inspects or investigates and has the ability to transfer information to the SEC in the normal course. PCAOB inspectors and investigators can view all audit documentation without redaction, and the PCAOB can retain any audit information it reviews as needed to support the findings of its inspections and investigations. In addition, the SOP allows the PCAOB to interview and take testimony of personnel associated with the audits that the PCAOB inspects or investigates.
•On December 15, 2022, the PCAOB announced that it was able to secure complete access to inspect and investigate PCAOB-registered public accounting firms headquartered in mainland China and Hong Kong in 2022 and vacated its previous December 16, 2021 determination to the contrary. However, whether the PCAOB will continue to be able to satisfactorily conduct inspections of PCAOB-registered public accounting firms headquartered in mainland China and Hong Kong is subject to uncertainty and depends on a number of factors out of our, and our auditor’s, control. Mainland China authorities will need to ensure that the PCAOB continues to have full access for inspections and investigations in 2023 and beyond. Each year, the PCAOB will determine whether it can inspect and investigate completely audit firms in mainland China and Hong Kong, among other jurisdictions. If mainland China authorities do not allow the PCAOB complete access for inspections and investigations for two consecutive years, the SEC would prohibit trading in the securities of issuers engaging those audit firms, as required under the HFCA Act.
•On December 29, 2022, the Consolidated Appropriations Act, 2023, was signed into law by U.S. President Biden, which, among other things, amended the HFCA Act to reduce the number of consecutive non-inspection years that would trigger the trading prohibition under the HFCA Act from three years to two years (originally such threshold under the HFCA Act was three consecutive years), and so that any foreign jurisdiction could be the reason why the PCAOB does not have complete access to inspect or investigate a company’s public accounting firm (originally the HFCA Act only applied if the PCAOB’s ability to inspect or investigate was due to a position taken by an authority in the jurisdiction where the relevant public accounting firm was located).

Per current regulations, if ACM Research were to appear for two consecutive years on the “Conclusive list of issuers identified under the HFCAA”, the value of our securities may significantly decline or become worthless, and our securities would be prohibited from trading and may eventually be delisted. It also remains unclear what further actions the SEC, the PCAOB or Nasdaq may take to address these issues and what impact those actions will have on U.S. companies, such as ours, that have significant operations in mainland China and have securities listed on a U.S. stock exchange. Any such actions could materially affect our operations and stock price, including by resulting in our being de-listed from Nasdaq or being required to engage a new audit firm, which would require significant expense and management time.

On June 30, 2022, and June 15, 2023, stockholders of ACM Research ratified the appointment of Armanino LLP as our independent auditor for the years ended December 31, 2022 and 2023, respectively. Armanino LLP was neither headquartered in mainland China or Hong Kong nor was it subject to the determinations announced by the PCAOB on December 16, 2021, which determinations were vacated by the PCAOB on December 15, 2022.

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On July 21, 2023, we were informed by Armanino that Armanino would resign as our independent auditor effective as of the earlier of (a) the date we engaged a new independent registered public accounting firm or (b) the filing of our Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2023.

In light of Armanino’s determination, on September 14, 2023, the Audit Committee completed a competitive selection process to select and appoint a new accounting firm to serve as our independent registered public accounting firm commencing with the audit of our financial statements for the fiscal year ending December 31, 2023. As a result of this process, the Audit Committee approved the engagement of E&Y as our independent registered public accounting firm for the fiscal year ending December 31, 2023. The engagement of E&Y became effective on September 20, 2023. E&Y is a PCAOB-registered firm that is headquartered in mainland China; however, we do not believe ACM Research will appear on the “Conclusive list of issuers identified under the HFCAA” for a second consecutive time, as the determinations announced by the PCAOB on December 16, 2021 were vacated by the PCAOB on December 15, 2022.
It may be difficult for overseas regulators to conduct investigations or collect evidence within mainland China.
Stockholder claims or regulatory investigations that are common in the United States generally are difficult to pursue as a matter of law or practicality in mainland China. For example, in mainland China, there are significant legal and other obstacles to providing information needed for regulatory investigations or litigation initiated outside of mainland China. Although the authorities in mainland China may establish a regulatory cooperation mechanism with the securities regulatory authorities of another country or region to implement cross-border supervision and administration, such cooperation with the securities regulatory authorities in the Unities States may not be efficient in the absence of mutual and practical cooperation mechanism. Furthermore, according to Article 177 of the mainland China Securities Law, or Article 177, which became effective in March 2020, no overseas securities regulator is allowed to directly conduct investigation or evidence collection activities within the territory of mainland China. While detailed interpretation of or implementing rules under Article 177 have yet to be promulgated, the inability for an overseas securities regulator to directly conduct investigation or evidence collection activities within mainland China may further increase difficulties faced by you in protecting your interests.
Because substantially all of our assets are located outside of the United States and certain of our directors and officers reside outside of the United States, it may be difficult for you to enforce your rights based on the U.S. federal securities laws against such assets or officers and directors or to enforce a judgment of a United States court against assets or officers and directors in mainland China.
While ACM Research is a Delaware corporation, certain of our officers and directors are nonresidents of the United States, and certain of our assets are located in mainland China, and the operations of ACM Shanghai are conducted in mainland China. It may, therefore, not be possible to effect service of process on such persons in the United States, and it may be difficult to enforce any judgments rendered against them or any of our assets that are located overseas. Moreover, there is doubt whether courts in mainland China would enforce (a) judgments of United States courts against ACM Shanghai, our directors or officers based on the civil liability provisions of the securities laws of the United States or any state, or (b) in original actions brought in mainland China, liabilities against us or any nonresidents based upon the securities laws of the United States or any state.
We conduct substantially all of our operations outside the United States and face risks associated with conducting business in foreign markets.
Substantially all of our sales in 2023, 2022, and 2021 were made to customers outside the United States. Our manufacturing center has been located in Shanghai since 2006 and substantially all of our operations are located in mainland China. We expect that all of our significant activities will remain outside the United States in the future. We are subject to a number of risks associated with our international business activities, including:
•imposition of, or adverse changes in, foreign laws or regulatory requirements, such as work stoppages and travel restrictions imposed in connection with the COVID-19 pandemic;
•the need to comply with the import laws and regulations of various foreign jurisdictions, including a range of U.S. import laws;
•potentially adverse tax consequences, including withholding tax rules that may limit the repatriation of our earnings, and higher effective income tax rates in foreign countries where we conduct business;
•competition from local suppliers with which potential customers may prefer to do business;
•seasonal reduction in business activity, such as during the Lunar New Year in parts of Asia and in other periods in various individual countries;
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•increased exposure to foreign currency exchange rates;
•reduced protection for intellectual property;
•longer sales cycles and reliance on indirect sales in certain regions;
•increased length of time for shipping and acceptance of our products;
•greater difficulty in responding to customer requests for maintenance and spare parts on a timely basis;
•greater difficulty in enforcing contracts and accounts receivable collection and longer collection periods;
•difficulties in staffing and managing foreign operations and the increased travel, infrastructure and legal and compliance costs thenassociated with multiple international locations;
•heightened risk of unfair or corrupt business practices in certain geographies and of improper or fraudulent sales arrangements that may impact financial results and result in restatements of, or irregularities in, our consolidated financial statements; and
•general economic conditions, geopolitical events or natural disasters in countries where we conduct our operations or where our customers are located, including political unrest, war, acts of terrorism or responses to such events.
In particular, the Asian market is extremely competitive, and chip manufacturers may be aggressive in seeking price concessions from suppliers, including chip equipment manufacturers.
We may not be successful in developing and implementing policies and strategies that will be effective in managing these risks in each country in which we do business. Our failure to manage these risks successfully could adversely affect our business, operating results and financial position andcondition.
Fluctuation in foreign currency exchange rates may adversely affect our results of operations willand financial position.
Our results of operations and financial position could be harmedadversely affected as a result of fluctuations in foreign currency exchange rates. Although our financial statements are denominated in U.S. dollars, a sizable portion of our costs are denominated in other currencies, principally the Chinese Renminbi and, to a lesser extent, the Korean Won. Because many of our raw material purchases are denominated in Renminbi while the majority of the purchase orders we receive are denominated in U.S. dollars, exchange rates have a significant effect on our gross margin. We have not engaged in any foreign currency exchange hedging transactions to date, and any strategies that we may use in the future to reduce the adverse impact of fluctuations in foreign currency exchange rates may not be successful. Our foreign currency exposure with respect to assets and liabilities for which we do not have hedging arrangements could have a material impact on our results of operations in periods when the U.S. dollar significantly fluctuates in relation to unhedged non-U.S. currencies in which we transact business.
The exacerbation or further continuation of currently challenging global systemic economic and financial conditions could adversely affect our business, results of operations and financial condition.
Any prolonged slowdown in mainland China, United States or global economy may have a negative impact on our business, results of operations and financial condition. Market reactions to the global outbreak of COVID-19 have negatively affected the world’s financial markets since March 2020, and a continuation of those reactions may cause a potential slowdown of the local, regional and global economy. Financial and other markets in the United States and worldwide have experienced significant volatility reflecting uncertainty over, among other things, (a) the long-term effects of the expansionary monetary and fiscal policies adopted by the central banks and financial authorities of some of the world’s leading economies, including the United States and mainland China, (b) unrest in Ukraine, the Middle East and Africa, and (c) the rising level of inflation in major industrial countries, including the United States, and worries that efforts to curb inflation may result in an economic recession. General inflation, including rising energy prices, interest rates and wages, could adversely impact our business by increasing our operating and borrowing costs as well as limiting the amount of capital available for customers to purchase our products. This economic turmoil has had, and could continue to have, a number of repercussions on our business, including significant decreases in orders from our customers, business slowdowns or cessations at key suppliers resulting in delays in our product deliveries, increased raw material prices leading to increased production costs that we may not be able to achieve or maintain profitability over the long term. Additionally, we may encounter unforeseen operating expenses, difficulties, complications, delayspass onto customers, and other factors that may result in losses in future periods. If our revenue growth does not meet our expectations in future periods, our financial performance may be harmed and we may not achieve or maintain profitabilitybusiness challenges at customers resulting in the future.
We currently have limited revenue and may not be ableinability to regain or maintain profitability.
To date we have only generated limited revenue from salesobtain credit to finance purchases of our products. Our revenue totaled $27.4 million in 2016products or even insolvency, and $36.5 million in 2017. Our revenue was not sufficientcounterparty failures negatively impacting our operations and sales. Any systemic economic or financial crisis could cause revenues for the semiconductor industry as a whole to coverdecline dramatically, which could materially and adversely affect our operating expenses prior to 2015, and our net income decreased to $2.4 million in 2016 from $7.9 million in 2015. In 2017 we incurred an operating lossresults of $0.9 million, as compared to net income of $2.4 million in 2016. Our ability to generate significant revenue and operate profitably depends upon our ability to commercialize our Ultra C single-wafer wet cleaning equipment based on our SAPS and TEBO technologies. Our ability to generate significant product revenue from our current tools or future tool candidates also depends on a number of additional factors, including our ability to:
operations.
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achieve market acceptance of Ultra C equipment based on SAPS technology as well as Ultra C equipment based on TEBO technology;27
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increase our customer base, including the establishment of relationships with companies in the United States;
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continue to expand our supplier relationships with third parties; and
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establish and maintain our reputation for providing efficient on-time delivery of high quality products.
If we failRisks Related to regainOur Business and sustain profitability on a continuing basis, we may be unable to continue our operations at planned levels and be forced to reduce our operations or even shut down.
Our Industry
We may require additional capital in the future and we cannot give any assurance that such capital will be available at all or available on terms acceptable to us and, if it is available, additional capital raised by us may dilute holders of Class A common stock.
We may need to raise funds in the future, depending on many factors, including:
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•our sales growth;
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•the costs of applying our existing technologies to new or enhanced products;
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•the costs of developing new technologies and introducing new products;
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•the costs associated with protecting our intellectual property;
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•the costs associated with our expansion, including capital expenditures and Lingang-related land purchases and deposits, and with increasing our sales and marketing and service and support efforts, and with expanding our geographic operations;
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•our ability to continue to obtain governmental subsidies for developmental projects in the future;
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•future debt repayment obligations; and
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•the number and timing of any future acquisitions.
To the extent that our existing sources of cash, together with any cash generated from operations, are insufficient to fund our activities, we may need to raise additional funds through public or private financings, strategic relationships, or other arrangements. Additional funding may not be available to us on acceptable terms or at all. If adequate funding is not available, we may be required to reduce expenditures, including curtailing our growth strategies and reducing our product development efforts, or to forego acquisition opportunities.
Proceeds received by ACM Shanghai from the initial placements of shares with mainland China investors, from the STAR IPO in connection with the STAR Listing of ACM Shanghai shares on the STAR Market, and from future financing activities undertaken by ACM Shanghai (including follow-on offerings or private placements of shares with mainland China investors), will generally be used to grow and support our mainland China operations. Those proceeds generally are not available for distribution to ACM Research. Under existing mainland China laws and regulations, it may be difficult, if not impossible, for ACM Research to be able to receive dividends comprised of funds generated by ACM Shanghai and, even if such dividends can be paid from mainland China to the United States, any such dividends can be paid to ACM Research only if other holders of ACM Shanghai shares receive their pro rata dividends. As a result, it is unlikely that funds raised or generated by ACM Shanghai will be readily distributable to ACM Research.
If we succeed in raising additional funds through the issuance of equity or convertible securities, then the issuance could result in substantial dilution to existing stockholders. Furthermore, the holders of these new securities or debt may have rights, preferences and privileges senior to those of the holders of Class A common stock. In addition, any preferred equity issuance or debt financing that we may obtain in the future could have restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions.
Our quarterly operating results can be difficult to predict and can fluctuate substantially, which could result in volatility in the price of Class A common stock.
Our quarterly revenue and other operating results have varied in the past and are likely to continue to vary significantly from quarter to quarter. Accordingly, you should not rely upon our past quarterly financial results as indicators of future performance. Any variations in our quarter-to-quarter performance may cause our stock price to fluctuate. Our financial results in any given quarter can be influenced by a variety of factors, including:
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•the cyclicality of the semiconductor industry and the related impact on the purchase of equipment used in the manufacture of integrated circuits, or chips;
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•the timing of purchases of our tools by chip fabricators, which order types of tools based on multi-year capital plans under which the number and dollar amount of tool purchases can vary significantly from year to year;
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•the relatively high average selling price of our tools and our dependence on a limited number of customers for a substantial portion of our revenue in any period, whereby the timing and volume of purchase orders or cancellations from our customers could significantly reduce our revenue for that period;
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•the significant expenditures required to customize our products often exceed the deposits received from our customers;
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•the lead time required to manufacture our tools;
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•the timing of recognizing revenue due to the timing of shipment and acceptance of our tools;
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•our ability to sell additional tools to existing customers;
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•the changes in customer specifications or requirements;
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•the length of our product sales cycle;
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•changes in our product mix, including the mix of systems, upgrades, spare parts and service;
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•the timing of our product releases or upgrades or announcements of product releases or upgrades by us or our competitors, including changes in customer orders in anticipation of new products or product enhancements;
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•our ability to enhance our tools with new and better functionality that meet customer requirements and changing industry trends;
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•constraints on our suppliers’ capacity;
•our ability to sell our tools to Chinese customers due to regulatory restrictions, including the addition of our customers to the Entity List;
● •the ability of other suppliers to provide sufficient quantities of their tools to our Chinese customers which may indirectly impact the production plans of our customers and result in a reduction of demand for our tools;
•the timing of investments in research and development related to releasing new applications of our technologies and new products;
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•delays in the development and manufacture of our new products and upgraded versions of our products and the market acceptance of these products when introduced;
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•our ability to control costs, including operating expenses and the costs of the components and subassemblies used in our products;
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•the costs related to the acquisition and integration of product lines, technologies or businesses; and
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•the costs associated with protecting our intellectual property, including defending our intellectual property against third-party claims or litigation.
Seasonality has played an increasingly important role in the market for chip manufacturing tools. The period of November through February has been a particularly weak period historically for manufacturers of chip tools, in part because capital equipment needed to support manufacturing of chips for the December holidays usually needs to be in the supply chain by no later than October and chip makers in Asia often wait until after Chinese, or Lunar, New Year, which occurs in January or February, before implementing their capital acquisition plans. The timing of new product releases also has an impact on seasonality, with the acquisition of manufacturing equipment occurring six to nine months before a new release.
Many of these factors are beyond our control, and the occurrence of one or more of them could cause our operating results to vary widely. As a result, it is difficult for us to forecast our quarterly revenue accurately. Our results of operations for any quarter may not be indicative of results for future quarters and quarter-to-quarter comparisons of our operating results are not necessarily meaningful. Variability in our periodic operating results could lead to volatility in our stock price. Because a substantial proportion of our expenses are relatively fixed in the short term, our results of operations will suffer if revenue falls below our expectations in a particular quarter, which could cause the price of Class A common stock to decline. Moreover, as a result of any of the foregoing factors, our operating results might not meet our announced guidance or expectations of public market analysts or investors, in which case the price of Class A common stock could decrease significantly.
Cyclicality in the semiconductor industry is likely to lead to substantial variations in demand for our products, and as a result our operating results could be adversely affected.
The chip industry has historically been cyclic and is characterized by wide fluctuations in product supply and demand. From time to time, this industry has experienced significant downturns, often in connection with, or in anticipation of, maturing product and technology cycles, excess inventories and declines in general economic conditions. This cyclicality could cause our operating results to decline dramatically from one period to the next.
Our business depends upon the capital spending of chip manufacturers, which, in turn, depends upon the current and anticipated market demand for chips. During industry downturns, chip manufacturers often have excess manufacturing capacity and may experience reductions in profitability due to lower sales and increased pricing pressure for their products. As a result, chip manufacturers generally sharply curtail their spending during industry downturns and historically have lowered their spending more than the decline in their revenues. If we are unable to control our expenses adequately in response to lower revenue from our customers, our operating results will suffer and we could experience operating losses.
For example, certain industry analysts, such as Gartner, forecast a decline for global WFE investments in 2024 as further described in “Item 1. Business”. We cannot reasonably estimate the duration or impact of such a downturn, and it could have a material adverse effect on our business and the value of our Class A common stock.
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Conversely, during industry upturns we must successfully increase production output to meet expected customer demand. This may require us or our suppliers, including third-party contractors, to order additional inventory, hire additional employees and expand manufacturing capacity. If we are unable to respond to a rapid increase in demand for our tools on a timely basis, or if we misjudge the timing, duration or magnitude of such an increase in demand, we may lose business to our competitors or incur increased costs disproportionate to any gains in revenue, which could have a material adverse effect on our business, results of operations, financial condition or cash flows.
The PRCmainland China government is implementing focused policies, including state-led investment initiatives, that aim to create and support an independent domestic semiconductor supply chain spanning from design to final system production. If these policies, which include loans and subsidies, result in lower demand for equipment than is expected by equipment manufacturers, the resulting overcapacity in the chip manufacturing equipment market could lead to excess inventory and price discounting that could have a material adverse effect on our business and operating results.
We depend on a small number of customers for a substantial portion of our revenue, and the loss of, or a significant reduction in orders from, one or more of our major customers could have a material adverse effect on our revenue and operating results. There are also a limited number of potential customers for our products.
The chip manufacturing industry is highly concentrated, and we derive most of our revenue from a limited number of customers. A total of three customers accounted for 45.5% of our revenue in 2023, three customers accounted for 43.8% of our revenue in 2022, and two customers accounted for 48.9% of our revenue in 2021.
As a consequence of the concentrated nature of our customer base, our revenue and results of operations may fluctuate from quarter to quarter and are difficult to estimate, and any cancellation of orders or any acceleration or delay in anticipated product purchases or the acceptance of shipped products by our larger customers could materially affect our revenue and results of operations in any quarterly period.
We may be unable to sustain or increase our revenue from our larger customers or offset the discontinuation of concentrated purchases by our larger customers with purchases by new or existing customers. We expect a small number of customers will continue to account for a high percentage of our revenue for the foreseeable future and that our results of operations may fluctuate materially as a result of such larger customers’ buying patterns. Thus, our business success depends on our ability to maintain strong relationships with our customers. The loss of any of our key customers for any reason, or a change in our relationship with any of our key customers, including a significant delay or reduction in their purchases, may cause a significant decrease in our revenue, which we may not be able to recapture due to the limited number of potential customers.
We have seen, and may see in the future, consolidation of our customer base. Industry consolidation generally has negative implications for equipment suppliers, including a reduction in the number of potential customers, a decrease in aggregate capital spending and greater pricing leverage on the part of consumers over equipment suppliers. Continued consolidation of the chip industry could make it more difficult for us to grow our customer base, increase sales of our products and maintain adequate gross margins.
Our success will depend on industry chip manufacturers adopting our SAPS, TEBO, Tahoe, ECP, furnace and TEBOother technologies.
To date our strategy for commercializing our tools has been to place them with selected industry leaders in the manufacturing of memory and logic chips, the two largest chip categories, to enable those leading manufacturers to evaluate our technologies, and then leverage our reputation to gain broader market acceptance. In order for these industry leaders to adopt our tools, we need to establish our credibility by demonstrating the differentiated, innovative nature of our SAPS, TEBO, Tahoe, ECP, furnace and TEBOother technologies. Our SAPS technology has been tested and purchased by industry leaders, but has not achieved, and may never achieve, widespread market acceptance. We have initiated a similar commercialization process for our TEBO technology with a selected group of industry leaders. If these leading manufacturers do not agree that our technologies add significant value over conventional technologies or do not otherwise accept and use our tools, we may need to spend a significant amount of time and resources to enhance our technologies or develop new technologies. Even if these leading manufacturers adopt our technologies, other manufacturers may not choose to accept and adopt our tools and our products may not achieve widespread adoption. Any of the above factors would have a material adverse effect on our business, results of operations and financial condition.
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If our SAPS, TEBO, Tahoe, ECP, furnace and TEBOother technologies do not achieve widespread market acceptance, we will not be able to compete effectively.
The commercial success of our tools will depend, in part, on gaining substantial market acceptance by chip manufacturers. Our ability to gain acceptance for our products will depend upon a number of factors, including:
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•our ability to demonstrate the differentiated, innovative nature of our SAPS, TEBO, Tahoe, ECP, furnace and TEBOother technologies and the advantages of our tools over those of our competitors;
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•compatibility of our tools with existing or potential customers’ manufacturing processes and products;
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•the level of customer service available to support our products; and
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•the experiences our customers have with our products.
In addition, obtaining orders from new customers may be difficult because many chip manufacturers have pre-existing relationships with our competitors. Chip manufacturers must make a substantial investment to qualify and integrate wet processing equipment into a chip production line. Due, in part, to the cost of manufacturing equipment and the investment necessary to integrate a particular manufacturing process, a chip manufacturer that has selected a particular supplier’s equipment and qualified that equipment for production typically continues to use that equipment for the specific production application and process node, which is the minimum line width on a chip, as long as that equipment continues to meet performance specifications. Some of our potential and existing customers may prefer larger, more established vendors from which they can purchase equipment for a wider variety of process steps than our tools address. Further, because the cleaning process with our TEBO equipment can be up to five times longer than cleaning processes based on other technologies, we must convince chip manufacturers of the innovative, differentiated nature of our technologies and the benefits associated with using our tools. If we are unable to obtain new customers and continue to achieve widespread market acceptance of our tools, then our business, operations, financial results and growth prospects will be materially and adversely affected.
If we do not continue to enhance our existing single-wafer wet cleaning tools and achieve market acceptance, we will not be able to compete effectively.
We operate in an industry that is subject to evolving standards, rapid technological changes and changes in customer demands. Additionally, if process nodes continue to shrink to ever-smaller dimensions and conventional two-dimensional chips reach their critical performance limitations, the technology associated with manufacturing chips may advance to a point where our Ultra C equipment based on SAPS, TEBO, Tahoe, ECP, furnace and TEBOother technologies becomes obsolete. Accordingly, the future of our business will depend in large part upon the continuing relevance of our technological capabilities, our ability to interpret customer and market requirements in advance of tool deliveries, and our ability to introduce in a timely manner new tools that address chip makers’ requirements for cost-effective cleaning solutions. We expect to spend a significant amount of time and resources developing new tools and enhancing existing tools. Our ability to introduce and market successfully any new or enhanced cleaning equipment is subject to a wide variety of challenges during the tool’s development, including the following:
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•accurate anticipation of market requirements, changes in technology and evolving standards;
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•the availability of qualified product designers and technologies needed to solve difficult design challenges in a cost-effective, reliable manner;
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•our ability to design products that meet chip manufacturers’ cost, size, acceptance and specification criteria, and performance requirements;
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•the ability and availability of suppliers and third-party manufacturers to manufacture and deliver the critical components and subassemblies of our tools in a timely manner;
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•market acceptance of our customers’ products, and the lifecycle of those products; and
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•our ability to deliver products in a timely manner within our customers’ product planning and deployment cycle.
Certain enhancements to our Ultra C equipmentproducts in future periods may reduce demand for our pre-existing tools. As we introduce new or enhanced cleaning tools, we must manage the transition from older tools in order to minimize disruptions in customers’ ordering patterns, avoid excessive levels of older tool inventories and ensure timely delivery of sufficient supplies of new tools to meet customer demand. Furthermore, product introductions could delay purchases by customers awaiting arrival of our new products, which could cause us to fail to meet our expected level of production orders for pre-existing tools.
Our success will depend on our ability to identify and enter new product markets.
We expect to spend a significant amount of time and resources identifying new product markets in addition to the market for cleaning solutions and in developing new products for entry into these markets. Our TEBO technology took eight years to develop, and development of any new technology could require a similar, or even longer, period of time. Product development requires
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significant investments in engineering hours, third-party development costs, prototypes and sample materials, as well as sales and marketing expenses, which will not be recouped if the product launch is unsuccessful. We may fail to predict the needs of other markets accurately or develop new, innovative technologies to address those needs. Further, we may not be able to design and introduce new products in a timely or cost-efficient manner, and our new products may be more costly to develop, may fail to meet the requirements of the market, or may be adopted slower than we expect. If we are not able to introduce new products successfully, our inability to gain market share in new product markets could adversely affect our ability to sustain our revenue growth or maintain our current revenue levels.
If we fail to establish and maintain a reputation for credibility and product quality, our ability to expand our customer base will be impaired and our operating results may suffer.
We must develop and maintain a market reputation for innovative, differentiated technologies and high quality, reliable products in order to attract new customers and achieve widespread market acceptance of our products. Our market reputation is critical because we compete against several larger, more established competitors, many of which supply equipment for a larger number of process steps than we do to a broader customer base in an industry with a limited number of customers. In these circumstances, traditional marketing and branding efforts are of limited value, and our success depends on our ability to provide customers with reliable and technically sophisticated products. If the limited customer base does not perceive our products and services to be of high quality and effectiveness, our reputation could be harmed, which could adversely impact our ability to achieve our targeted growth.
We operate in a highly competitive industry and many of our competitors are larger, better-established, and have significantly greater operating and financial resources than we have.
The chip equipment industry is highly competitive, and we face substantial competition throughout the world in each of the markets we serve. Many of our current and potential competitors have, among other things:
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•greater financial, technical, sales and marketing, manufacturing, distribution and other resources;
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•established credibility and market reputations;
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•longer operating histories;
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•broader product offerings;
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•more extensive service offerings, including the ability to have large inventories of spare parts available near, or even at, customer locations;
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•local sales forces; and
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•more extensive geographic coverage.
These competitors may also have the ability to offer their products at lower prices by subsidizing their losses in wet cleaning with profits from other lines of business in order to retain current or obtain new customers. Among other things, some competitors have the ability to offer bundled discounts for customers purchasing multiple products. Many of our competitors have more extensive customer and partner relationships than we do and may therefore be in a better position to identify and respond to market developments and changes in customer demands. Potential customers may prefer to purchase from their existing suppliers rather than a new supplier, regardless of product performance or features. If we are not able to compete successfully against existing or new competitors, our business, operating results and financial condition will be negatively affected.
We depend on a small number of customers for a substantial portion of our revenue, and the loss of, or a significant reduction in orders from, one of our major customers could have a material adverse effect on our revenue and operating results. There are also a limited number of potential customers for our products.
The chip manufacturing industry is highly concentrated, and we derive a significant portion of our revenue from the sale of our products to a small number of customers. In 2017, 55.2% of our revenue was derived from four customers: SK Hynix Inc., 18.1%; Shanghai Integrated Circuit Research and Development Center Ltd., 14.1%; JiangYin ChangDian Advanced Packaging Co. Ltd., 12.8% and Yangtze Memory Technologies Co., Ltd, 10.2%. In 2016, 99.3% of our revenue was derived from four customers: Shanghai Huali Microelectronics Corporation, 33.7%; Semiconductor Manufacturing International Corporation, 25.0%; SK Hynix Inc., 24.0%; and JiangYin ChangDian Advanced Packaging Co. Ltd., 16.6%. As a consequence of the concentrated nature of our customer base, our revenue and results of operations may fluctuate from quarter to quarter and are difficult to estimate, and any cancellation of orders or any acceleration or delay in anticipated product purchases or the acceptance of shipped products by our larger customers could materially affect our revenue and results of operations in any quarterly period.
We may be unable to sustain or increase our revenue from our larger customers or offset the discontinuation of concentrated purchases by our larger customers with purchases by new or existing customers. We expect a small number of customers will continue to account for a high percentage of our revenue for the foreseeable future and that our results of operations may fluctuate materially as a result of such larger customers’ buying patterns. Thus, our business success depends on our ability to maintain strong relationships with our customers. The loss of any of our key customers for any reason, or a change in our relationship with any of our key customers, including a significant delay or reduction in their purchases, may cause a significant decrease in our revenue, which we may not be able to recapture due to the limited number of potential customers.
We have seen, and may see in the future, consolidation of our customer base. Industry consolidation generally has negative implications for equipment suppliers, including a reduction in the number of potential customers, a decrease in aggregate capital spending and greater pricing leverage on the part of consumers over equipment suppliers. Continued consolidation of the chip industry could make it more difficult for us to grow our customer base, increase sales of our products and maintain adequate gross margins.
Our customers do not generally enter into long-term purchase commitments, and they may decrease, cancel or delay their projected purchases at any time.
In accordance with industry practice, our sales are on a purchase order basis, which we seek to obtain three to four months in advance of the expected product delivery date. Until a purchase order is received, we do not have a binding purchase commitment. Our SAPS and TEBO customers to date have provided us with non-binding one- to two-year forecasts of their anticipated demands, but those forecasts can be changed at any time, without any required notice to us. Because the lead-time needed to produce a tool customized to a customer’s specifications can extend up to six months, we may need to begin production of tools based on non-binding forecasts, rather than waiting to receive a binding purchase order. No assurance can be made that a customer’s forecast will result in a firm purchase order within the time period we expect, or at all.
If we do not accurately predict the amount and timing of a customer’s future purchases, we risk expending time and resources on producing a customized tool that is not purchased by a particular customer, which may result in excess or unwanted inventory, or we may be unable to fulfill an order on the schedule required by a purchase order, which would result in foregone sales. Customers may place purchase orders that exceed forecasted amounts, which could result in delays
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in our delivery time and harm our reputation. In the future a customer may decide not to purchase our tools at all, may purchase fewer tools than it did in the past or may otherwise alter its purchasing patterns, and the impact of any such actions may be intensified given our dependence on a small number of large customers. Our customers make major purchases periodically as they add capacity or otherwise implement technology upgrades. If any significant customers cancel, delay or reduce orders, our operating results could suffer.
We may incur significant expenses long before we can recognize revenue from new products, if at all, due to the costs and length of research, development, manufacturing and customer evaluation process cycles.
We often incur significant research and development costs for products that are purchased by our customers only after much, or all, of the cost has been incurred or that may never be purchased. We allow some new customers, or existing customers considering new products, to evaluate products without any payment becoming due unless the product is ultimately accepted, which means we may invest $1.0 to $2.0 milliona significant amount in manufacturing a tool that may never be accepted and purchased or may be purchased months or even years after production. In the past we have borrowed money in order to fund first-time purchase order equipment and next-generation evaluation equipment. When we completedeliver evaluation equipment, or a first-time sale,“first tool,” we may not recognize revenue or receive payment for up tothe tool for 24 months.months or longer. Even returning customers may take as long as six months to make any payments. If our sales efforts are unsuccessful after expending significant resources, or if we experience delays in completing sales, our future cash flow, revenue and profitability may fluctuate or be materially adversely affected.
Our sales cycle is long and unpredictable, which results in variability of our financial performance and may require us to incur high sales and marketing expenses with no assurance that a sale will result, all of which could adversely affect our profitability.
Our results of operations may fluctuate, in part, because of the resource-intensive nature of our sales efforts and the length and variability of our sales cycle. A sales cycle is the period between initial contact with a prospective customer and any sale of our tools. Our sales process involves educating customers about our tools, participating in extended tool evaluations and configuring our tools to customer-specific needs, after which customers may evaluate the tools. The length of our sales cycle, from initial contact with a customer to the execution of a purchase order, is generally 6 to 24 months. During the sales cycle, we expend significant time and money on sales and marketing activities and make investments in evaluation equipment, all of which lower our operating margins, particularly if no sale occurs or if the sale is delayed as a result of extended qualification processes or delays from our customers’ customers.
The duration or ultimate success of our sales cycle depends on factors such as:
● 
•efforts by our sales force;
● 
•the complexity of our customers’ manufacturing processes and the compatibility of our tools with those processes;
● 
•our customers’ internal technical capabilities and sophistication; and
● 
•our customers’ capital spending plans and processes, including budgetary constraints, internal approvals, extended negotiations or administrative delays.
It is difficult to predict exactly when, or even if, we will make a sale to a potential customer or if we can increase sales to our existing customers. As a result, we may not recognize revenue from our sales efforts for extended periods of time, or at all. The loss or delay of one or more large transactions in a quarter could impact our results of operations for that quarter and any future quarters for which revenue from that transaction is lost or delayed. In addition, we believe that the length of the sales cycle and intensity of the evaluation process may increase for those current and potential customers that centralize their purchasing decisions.
Difficulties in forecasting demand for our tools may lead to periodic inventory shortages or excess spending on inventory items that may not be used.
We need to manage our inventory of components and production of tools effectively to meet changing customer requirements. Accurately forecasting customers’ needs is difficult. Our tool demand forecasts are based on multiple assumptions, including non-binding forecasts received from our customers years in advance, each of which may introduce error into our estimates. Inventory levels for components necessary to build our tools in excess of customer demand may result in inventory write-downs and could have an adverse effect on our operating results and financial condition. Conversely, if we underestimate demand for our tools or if our manufacturing partners fail to supply components we require at the time we need them, we may experience inventory shortages. Such shortages might delay production or
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shipments to customers and may cause us to lose sales. These shortages may also harm our credibility, diminish the loyalty of our channel partners or customers.
A failure to prevent inventory shortages or accurately predict customers’ needs could result in decreased revenue and gross margins and harm our business.
Some of our products and supplies may become obsolete or be deemed excess while in inventory due to rapidly changing customer specifications, changes in product structure, components or bills of material as a result of engineering changes, or a decrease in customer demand. We also have exposure to contractual liabilities to our contract manufacturers for inventories purchased by them on our behalf, based on our forecasted requirements, which may become excess or obsolete. Our inventory balances also represent an investment of cash. To the extent our inventory turns are slower than we anticipate based on historical practice, our cash conversion cycle extends and more of our cash remains invested in working capital. If we are not able to manage our inventory effectively, we may need to write down the value of some of our existing inventory or write off non-saleable or obsolete inventory. Any such charges we incur in future periods could materially and adversely affect our results of operations.
The difficulty in forecasting demand also makes it difficult to estimate our future results of operations and financial condition from period to period. A failure to accurately predict the level of demand for our products could adversely affect our net revenue and net income, and we are unlikely to forecast such effects with any certainty in advance.
If our tools contain defects or do not meet customer specifications, we could lose customers and revenue.
Highly complex tools such as ourours may develop defects during the manufacturing and assembly process. We may also experience difficulties in customizing our tools to meet customer specifications or detecting defects during the development and manufacturing of our tools. Some of these failures may not be discovered until we have expended significant resources in customizing our tools, or until our tools have been installed in our customers’ production facilities. These quality problems could harm our reputation as well as our customer relationships in the following ways:
● 
•our customers may delay or reject acceptance of our tools that contain defects or fail to meet their specifications;
● 
•we may suffer customer dissatisfaction, negative publicity and reputational damage, resulting in reduced orders or otherwise damaging our ability to retain existing customers and attract new customers;
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•we may incur substantial costs as a result of warranty claims or service obligations or in order to enhance the reliability of our tools;
● 
•the attention of our technical and management resources may be diverted;
● 
•we may be required to replace defective systems or invest significant capital to resolve these problems; and
● 
•we may be required to write off inventory and other assets related to our tools.
In addition, defects in our tools or our inability to meet the needs of our customers could cause damage to our customers’ products or manufacturing facilities, which could result in claims for product liability, tort or breach of warranty, including claims from our customers. The cost of defending such a lawsuit, regardless of its merit, could be substantial and could divert management’s attention from our ongoing operations. In addition, if our business liability insurance coverage proves inadequate with respect to a claim or future coverage is unavailable on acceptable terms or at all, we may be liable for payment of substantial damages. Any or all of these potential consequences could have an adverse impact on our operating results and financial condition.
Warranty claims in excess of our estimates could adversely affect our business.

We have provided warranties against manufacturing defects of our tools that range from 12 to 36 months in duration. Our product warranty requires us to provide labor and parts necessary to repair defects. To dateAs of December 31, 2023, we have nothad accrued a significant$9.8 million in liability contingency for potential warranty claims. Warranty claims substantially in excess of our expectations, or significant unexpected costs associated with warranty claims, could harm our reputation and could cause customers to decline to place new or additional orders, which could have a material adverse effect on our business, results of operations and financial condition.
We rely on third parties to manufacture significant portions of our tools and our failure to manage our relationships with these parties could harm our relationships with our customers, increase our costs, decrease our sales and limit our growth.
Our tools are complex and require components and subassemblies having a high degree of reliability, accuracy and performance. We rely on third parties to manufacture most of the subassemblies and supply most of the components used
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in our tools. Accordingly, we cannot directly control our delivery schedules and quality assurance. This reliance on third parties and lack of control could result in shortages or quality assurance problems. In addition, supply chain constraints have intensified due to a variety of factors, including the ongoing COVID-19 pandemic and the June 2022 truck driver strike in Korea, where certain of our operations and customers are located. See also “—Our supply chain may be materially adversely impacted due to global events, including continuing COVID-19 outbreaks, transportation delays and the armed conflict in Ukraine.”These issues and our ability to manage increased demand could delay shipments of our tools, increase our testing or production costs or lead to costly failure claims.
We do not have long-term supply contracts with some of our suppliers, and those suppliers are not obligated to perform services or supply products to us for any specific period, in any specific quantities or at any specific price, except as may be provided in a particular purchase order. In addition, we attempt to maintain relatively low inventories and acquire subassemblies and components only as needed. There are significant risks associated with our reliance on these third-party suppliers, including:
● 
•potential price increases;
● 
•capacity shortages or other inability to meet any increase in demand for our products;
● 
•reduced control over manufacturing process for components and subassemblies and delivery schedules;
● 
•limited ability of some suppliers to manufacture and sell subassemblies or parts in the volumes we require and at acceptable quality levels and prices, due to the suppliers’ relatively small operations and limited manufacturing resources;
● 
•increased exposure to potential misappropriation of our intellectual property; and
● 
•limited warranties on subassemblies and components supplied to us.
Any delays in the shipment of our products due to our reliance on third-party suppliers could harm our relationships with our customers. In addition, any increase in costs due to our suppliers increasing the price they charge us for subassemblies and components or arising from our need to replace our current suppliers that we are unable to pass on to our customers could negatively affect our operating results.
Our supply chain may be materially adversely impacted due to global events, including continuing COVID‑19 outbreaks, transportation delays and the armed conflict in Ukraine.
We rely upon the facilities of our global suppliers with operations in mainland China, Japan, Taiwan and the United States to support our business. We source the substantial majority of our components from Asia, and as a result, our supply chain can be adversely affected by a variety of global events, including COVID-19 restrictions, transportation delays, including those related to the June 2022 truck driver strike in Korea resulting from escalated fuel prices, and the armed conflict in Ukraine. As a result of these types of global events and resulting governmental and business reactions, our suppliers may not have the materials, capacity, or capability to supply our components according to our schedule and specifications. Further, there may be logistics issues, including our ability and our supply chain’s ability to quickly ramp up production, labor issues and transportation demands that may cause further delays. Supply chain constraints have intensified due to COVID-19 and other factors, and may further intensify due to other global events, contributing to existing global shortages coupled with increased demand in the supply of semiconductors. The unavailability of any component or supplier could result in production delays, underutilized facilities, and loss of access to critical raw materials and parts for producing and supporting our tools, and could impact our ongoing capacity expansion and our ability to fulfill our product delivery obligations. If our suppliers’ operations are curtailed, we may need to seek alternate sources of supply, which may be more expensive. Alternate sources may not be available or may result in delays in shipments to us from our supply chain and subsequently to our customers, each of which would affect our results of operations. These types of disruptions and governmental restrictions may also result in the inability of our customers to obtain materials necessary for their full production, which could also result in reduced demand for our products. While disruptions and governmental restrictions, as well as related general limitations on movement around the world, are expected to be temporary, the duration of the production and supply chain disruption, and related financial impact, cannot be estimated at this time. Should the production and distribution closures continue for an extended period of time, the impact on our supply chain could have a material adverse effect on our results of operations and cash flows. Business disruptions could also negatively affect the sources and availability of components and materials that are essential to the operation of our business. Moreover, our customers source a range of production equipment, supplies and services from other suppliers with operations around the world, and any reduction in supply capacity at those customers’ factories may reduce or even halt those customers’ production and result in a decrease in the demand for our products.
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Any shortage of components or subassemblies could result in delayed delivery of products to us or in increased costs to us, which could harm our business.
The ability of our manufacturers to supply our tools is dependent, in part, upon the availability of certain components and subassemblies. Our manufacturers may experience shortages in the availability of such components or subassemblies, which could result in delayed delivery of products to us or in increased costs to us. Any shortage of components or subassemblies or any inability to control costs associated with manufacturing could increase the costs for our products or impair our ability to ship orders in a timely cost-efficient manner. As a result, we could experience cancellation of orders, refusal to accept deliveries or a reduction in our prices and margins, any of which could harm our financial performance and results of operations.
We depend on a limited number of suppliers, including single source suppliers, for critical components and subassemblies, and our business could be disrupted if they are unable to meet our needs.
We depend on a limited number of suppliers for components and subassemblies used in our tools. Certain components and subassemblies of our tools have only been purchased from our current suppliers to date and changing the source of those components and subassemblies may result in disruptions during the transition process and entail significant delay and expense. We rely onon: Product Systems, Inc., or ProSys, as the sole supplier of megasonic transducers, a key subassembly used in our single-wafer cleaning equipment. We also rely onequipment; Ninebell Co., Ltd., or Ninebell, which isas the principal supplier of robotic delivery system subassemblies used in our single-wafer cleaning equipment; and Advanced Electric Co. Inc., as a key supplier of valves used in our single-wafer cleaning equipment. An adverse change to our relationship with ProSys or Ninebellany of these suppliers would disrupt our production of single-wafer cleaning equipment and could cause substantial harm to our business.
With some of these suppliers, we do not have long-term agreements and instead purchase components and subassemblies through a purchase order process. As a result, these suppliers may stop supplying us components and subassemblies, limit the allocation of supply and equipment to us due to increased industry demand or significantly increase their prices at any time with little or no advance notice. Our reliance on a limited number of suppliers could also result in delivery problems, reduced control over product pricing and quality, and our inability to identify and qualify another supplier in a timely manner.
Moreover, some of our suppliers may experience financial difficulties that could prevent them from supplying us with components or subassemblies used in the design and manufacture of our products. In addition, our suppliers, including our sole supplier ProSys, may experience manufacturing delays or shut downs due to circumstances beyond their control, such as labor issues, political unrest or natural disasters. Any supply deficiencies could materially and adversely affect our ability to fulfill customer orders and our results of operations. We have in the past and may in the future, experience delays or reductions in supply shipments, which could reduce our revenue and profitability. If key components or materials are unavailable, our costs would increase and our revenue would decline.
We have depended on PRC governmental subsidies to help fund our technology development since 2008, and our failure to obtain additional subsidies may impede our development of new technologies and may increase our cost of capital, either of which could make it difficult for us to expand our product base.
We received subsidies from local and central governmental authorities in the PRC in 2008, 2009 and 2014. These grants have provided a majority of the funding for our development and commercialization of stress-free polishing and electro copper-plating technologies. If we are unable to obtain similar governmental subsidies for development projects in the future, we may need to raise additional funds through public or private financings, strategic relationships, or other arrangements, which could force us to reduce our efforts to develop technologies beyond SAPS and TEBO. To the extent that we receive a lower level of, or no, governmental subsidies in the future, we may need to raise additional funds through public or private financings, strategic relationships, or other arrangements.
The success of our business will depend on our ability to manage any future growth.
We have experienced rapid growth in our business recently due, in part, to an expansion of our product offerings and an increase in the number of customers that we serve. For example, our headcount grew by 18.7% during 201632% in 2023, 38% in 2022, and by an additional 28.1% during 2017.62% in 2021. We will seek to continue to expand our operations in the future, including by adding new offices, locations and employees. Managing our growth has placed and could continue to place a significant strain on our management, other personnel and our infrastructure. If we are unable to manage our growth effectively, we may not be able to take advantage of market opportunities, develop new products, enhance our technological capabilities, satisfy customer requirements, respond to competitive pressures or otherwise execute our business plan. In addition, any inability to manage our growth effectively could result in operating inefficiencies that could impair our competitive position and increase our costs disproportionately to the amount of growth we achieve. To manage our growth, we believe we must effectively:
● 
•hire, train, integrate and manage additional qualified engineers for research and development activities, sales and marketing personnel, service and support personnel and financial and information technology personnel;
● 
•manage multiple relationships with our customers, suppliers and other third parties; and
● 
•continue to enhance our information technology infrastructure, systems and controls.
Our organizational structure has become more complex, including as a result of the STAR Listing and wethe STAR IPO. We will need to continue to scale and adapt our operational, financial and management controls, as well as our reporting systems and procedures.procedures, at both ACM Research and ACM Shanghai. The continued expansion of our infrastructure will
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require us to commit substantial financial, operational and management resources before our revenue increases and without any assurances that our revenue will increase.
We are highly dependent on our Chief Executive Officer and President and other senior management and key employees, and we currently do not have a permanent Chief Financial Officer.
employees.
Our success largely depends on the skills, experience and continued efforts of our management, technical and sales personnel, including in particular Dr. David H. Wang, ourthe Chair of the Board, Chief Executive Officer and President and founder.In January 2018of ACM Research. All of our senior management are at-will employees, which means either we notified our former Chief Financial Officer ofor the termination of hisemployee may terminate their employment effective January 24, 2018. Our Chief Accounting Officer, who joined us effective January 24, 2018, currently is serving as our interim Chief Financial Officer. We are uncertain as to when we will be able to identify and hire a successor Chief Financial Office, and we may incur significant expense in recruiting and hiring such a successor.at any time. If one or more of our other senior management personnel were unable or unwilling to continue their employment with us, we may not be able to replace them in a timely manner. We may incur additional expensesMoreover, in connection with the STAR Listing and the STAR IPO, ACM Shanghai is now managed by a group of officers separate from those of ACM Research and those officers owe fiduciary duties to recruit and retain qualified replacements.the various stakeholders of ACM Shanghai. We do not currentlyhave employment or retention agreements with, or maintain key person life insurance policies on, any of our employees. Our business may be severely disrupted and our financial condition and results of operations may be materially and adversely affected. In addition, our senior management may join a competitor or form a competing company. All of our senior management are at-will employees, which means either we or the employeemay terminate their employment at any time. The loss of Dr. Wang or other key management personnel, including our former Chief Financial Officer, could significantly delay or prevent the achievement of our business objectives.
Failure to attract and retain qualified personnel could put us at a competitive disadvantage and prevent us from effectively growing our business.
Our future success depends, in part, on our ability to continue to attract and retain highly skilled personnel. There is substantial competition for experienced management, technical and sales personnel in the chip equipment industry. If qualified personnel become scarce or difficult to attract or retain for compensation-related or other reasons, we could experience higher labor, recruiting or training costs. New hires may require significant training and time before they achieve full productivity and may not become as productive as we expect. If we are unable to retain and motivate our existing employees and attract qualified personnel to fill key positions, we may experience inadequate levels of staffing to develop and market our products and perform services for our customers, which could have a negative effect on our operating results.
Our ability to utilize certain U.S. and state net operating loss carryforwards may be limited under applicable tax laws.
As of December 31, 2017,2023, we had net operating loss carryforward amounts, or NOLs, of $20.1$3.3 million for U.S. federal income tax purposes and $536,000$0.6 million for U.S. state income tax purposes. As of December 31, 2022, we had NOLs of $4.4 million for U.S. federal income tax purposes and $0.5 million for U.S. state income tax purposes. As of December 31, 2021, we had NOLs of $56.1 million for U.S. federal income tax purposes and $0.5 million for U.S. state income tax purposes. The federal and state NOLs will expire at various dates beginning in 2019.the future.
Utilization of these NOLs could be subject to a substantial annual limitation if the ownership change limitations under U.S. Internal Revenue Code Sections 382 and 383 and similar U.S. state provisions are triggered by changes in the ownership of our capital stock. Such an annual limitation would result in the expiration of the NOLs before utilization. Our existing NOLs may be subject to limitations arising from previous ownership changes,, including in connection with our initial public offering and concurrent private placement in November 2017, our follow-on public offering in August 2019, and any future follow-on public offerings.equity issuances. Future changes in our stock ownership, some of which are outside of our control, could result in an ownership change. Regulatory changes, such as suspensions on the use of NOLs, or other unforeseen reasons, may cause our existing NOLs to expire or otherwise become unavailable to offset future income tax liabilities. Additionally, U.S. state NOLs generated in one state cannot be used to offset income generated in another U.S. state. For these reasons, we may be limited in our ability to realize tax benefits from the use of our NOLs, even if our profitability would otherwise allow for it.
Acquisitions that we pursue in the future, whether or not consummated, could result in other operating and financial difficulties.
In the future we may seek to acquire additional product lines, technologies or businesses in an effort to increase our growth, enhance our ability to compete, complement our product offerings, enter new and adjacent markets, obtain access to additional technical resources, enhance our intellectual property rights or pursue other competitive opportunities. We may also make investments in certain key suppliers to align our interests with such suppliers. If we seek acquisitions, we
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may not be able to identify suitable acquisition candidates at prices we consider appropriate. We cannot readily predict the timing or size of our future acquisitions, or the success of any future acquisitions.
To the extent that we consummate acquisitions or investments, we may face financial risks as a result, including increased costs associated with merged or acquired operations, increased indebtedness, economic dilution to gross and operating profit and earnings per share, or unanticipated costs and liabilities. Acquisitions may involve additional risks, including:
● 
•the acquired product lines, technologies or businesses may not improve our financial and strategic position as planned;
● 
•we may determine we have overpaid for the product lines, technologies or businesses, or that the economic conditions underlying our acquisition have changed;
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•we may have difficulty integrating the operations and personnel of the acquired company;
● 
•we may have difficulty retaining the employees with the technical skills needed to enhance and provide services with respect to the acquired product lines or technologies;
● 
•the acquisition may be viewed negatively by customers, employees, suppliers, financial markets or investors;
● 
•we may have difficulty incorporating the acquired product lines or technologies with our existing technologies;
● 
•we may encounter a competitive response, including price competition or intellectual property litigation;
•we may encounter difficulties related to required CFIUS approval (see also “-Regulatory Risks-Certain of our investments may be subject to review by and approval from CFIUS, which may prevent us from taking advantage of investment opportunities that would otherwise be advantageous to our stockholders”);
● 
•we may become a party to product liability or intellectual property infringement claims as a result of our sale of the acquired company’s products;
● 
•we may incur one-time write-offs, such as acquired in-process research and development costs, and restructuring charges;
● 
•we may acquire goodwill and other intangible assets that are subject to impairment tests, which could result in future impairment charges;
● 
•our ongoing business and management’s attention may be disrupted or diverted by transition or integration issues and the complexity of managing geographically or culturally diverse enterprises; and
● 
•our due diligence process may fail to identify significant existing issues with the target business.
From time to time, we may enter into negotiations for acquisitions or investments that are not ultimately consummated. These negotiations could result in significant diversion of management time, as well as substantial out-of-pocket costs, any of which could have a material adverse effect on our business, operating results and financial condition.
Future declines in the semiconductor industry, and the overall world economic conditions on which the industry is significantly dependent, could have a material adverse impact on our results of operations and financial condition.
Our business depends on the capital equipment expenditures of chip manufacturers, which in turn depend on the current and anticipated market demand for integrated circuits. With the consolidation of customers within the industry, the chip capital equipment market may experience rapid changes in demand driven both by changes in the market generally and the plans and requirements of particular customers. Global economic and business conditions, which are often unpredictable, have historically impacted customer demand for our products and normal commercial relationships with our customers, suppliers and creditors. Additionally, in times of economic uncertainty our customers’ budgets for our tools, or their ability to access credit to purchase them, could be adversely affected. This would limit their ability to purchase our products and services. As a result, economic downturns could cause material adverse changes to our results of operations and financial condition including:
● 
•a decline in demand for our products;
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•an increase in reserves on accounts receivable due to our customers’ inability to pay us;
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•an increase in reserves on inventory balances due to excess or obsolete inventory as a result of our inability to sell such inventory;
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•valuation allowances on deferred tax assets;
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•restructuring charges;
•asset impairments;
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asset impairments including the potential impairment of goodwill and other intangible assets;
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•a decline in the value of our investments;
● 
•exposure to claims from our suppliers for payment on inventory that is ordered in anticipation of customer purchases that do not come to fruition;
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•a decline in the value of certain facilities we lease to less than our residual value guarantee with the lessor; and
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•challenges maintaining reliable and uninterrupted sources of supply.
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Fluctuating levels of investment by chip manufacturers may materially affect our aggregate shipments, revenue, operating results and earnings. Where appropriate, we will attempt to respond to these fluctuations with cost management programs aimed at aligning our expenditures with anticipated revenue streams, which could result in restructuring charges. Even during periods of reduced revenues, we must continue to invest in research and development and maintain extensive ongoing worldwide customer service and support capabilities to remain competitive, which may temporarily harm our profitability and other financial results.
Regulatory Risks
We conduct substantially allOur ability to sell our tools to customers in mainland China and certain other countries has been impacted, and will likely continue to be materially and adversely impacted, by export license requirements, other regulatory changes, or other actions taken by the U.S. or other governmental agencies.
ACM Shanghai utilizes certain items subject to export controls under the U.S. Export Administration Regulations (EAR) in manufacturing and supplying its products. The EAR applies to exports of our operationscommodities, software and technology from the United States, including for use in manufacturing products outside the United States, and face risks associated with conducting business in foreign markets.
All of our sales in 2016 and 2017 were madeas well as to customers outside the United States. Our manufacturing center has been located in Shanghai, PRC since 2006 and substantially all of our operations are located in the PRC. We expect that all of our significant activities will remaincertain products manufactured outside the United States that incorporate, or are based on, designated U.S. content, software or technology. The Bureau of Industry and Security of the U.S. Department of Commerce (BIS), which administers the EAR, recently imposed, and may continue to impose, additional restrictions under the EAR on certain exports to China, to include Hong Kong and Macau, including restrictions targeting the semiconductor manufacturing industry in China. These types of restrictions may impact the operations of ACM Shanghai.

In October 2022, BIS announced new rules that significantly expanded U.S. export controls as applied to advanced IC products, related manufacturing equipment and technology, and supercomputers, where the destination or ultimate end user is based in mainland China. In the case of semiconductor manufacturing equipment, the new rules require an export license for the export, re-export, or transfer to or within mainland China of additional types of semiconductor manufacturing equipment, items for use in manufacturing designated types of semiconductor manufacturing equipment (along with other items subject to the EAR, for use in the future. Wedevelopment or production of ICs), and semiconductor manufacturing equipment for use at certain IC manufacturing and development facilities in mainland China. In most cases, license applications for these exports are reviewed under a presumption of denial. In addition, BIS imposed new restrictions by which U.S. persons anywhere in the world are effectively barred from engaging in certain activities related to the development and production of semiconductors at mainland China fabrication facilities meeting specified criteria, even if no items subject to the EAR are involved. The October 2022 restrictions were later expanded to include Macau.

These new restrictions have impacted the procurement by ACM Shanghai of certain items from the United States, and of certain items subject to U.S. export controls from outside the United States, for use in manufacturing its products.

In October 2023, BIS further expanded export controls on semiconductors, semiconductor manufacturing items and items for use in manufacturing designated types of semiconductor manufacturing equipment, including through new licensing requirements covering a numberbroader variety of risks associateditems, and an expansion in the geographical scope of the controls.

ACM Shanghai has determined that several of its customers have mainland China-based facilities that meet the restricted criteria set out in the October 2022 and October 2023 rules, and has also determined that several of its products, and/or components for its products, may meet the parameters of export control classification numbers, or ECCNs, affected by the restrictions. ACM and ACM Shanghai have implemented modifications to their existing business policies and practices in response to the October 2022 and October 2023 restrictions, including by imposing limitations on the activities of their U.S. persons and undertaking measures in connection with our international business activities, including:
● 
imposition of, or adverse changes in, foreign laws or regulatory requirements;
● 
the needtheir supply chains more broadly to comply with the new regulations. ACM Shanghai is continuing to assess the impact of the October 2023 changes, together with the October 2022 rules, and will continually adjust or modify its policies and practices as required to comply with these or other related updates. Based on our ongoing review, we believe these regulations may directly impact ACM Shanghai’s ability to meet its future production plans, or indirectly impact the spending plans of ACM Shanghai’s customer base. ACM may not be able to import, lawsor may face substantial restrictions in importing, certain parts from the United States or parts subject to U.S. export controls from outside the United States to support tool shipments to such facilities, or to be embedded into tools defined by affected ECCNs.

We believe that as a result of the October 2022 and regulations of various foreign jurisdictions, including a range of U.S. import laws;
October 2023 restrictions, several ACM Shanghai customers have significantly reduced production and related capital spending at facilities meeting the restricted advanced node capabilities. In addition, ACM Shanghai has experienced challenges as the companies in its supply chain adapt their policies to the new regulations. These factors had an adverse impact on ACM Shanghai’s shipments and sales in the twelve months ended
● 
potentially adverse tax consequences, including withholding tax rules that may limit the repatriation of our earnings, and higher effective income tax rates in foreign countries where we conduct business;39
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December 31, 2023. We anticipate these factors will continue to have an adverse impact on ACM Shanghai’s shipments and sales in future periods, including as a result of any impacts from the October 2023 revisions.
● 
competition from local suppliers with which potential customers may preferAlongside these new restrictions, BIS has also continued to do business;
● 
seasonal reductiondesignate additional China entities, many involved in business activity,the semiconductor manufacturing industry, on restricted party lists under the EAR, such as during Chinese,the Entity List and the Unverified List. These designations impose licensing requirements for the supply of products to such entities. In most cases, any items subject to the EAR, including foreign produced products with specified U.S. content or Lunar, New Yearthat are the product of specified U.S. origin software, technology, or equipment, now require an export license from BIS before they can be supplied to the newly listed China entities, regardless of their export classification. In December 2020, SMIC, one of the largest chip manufacturers in parts of Asiamainland China and in other periods in various individual countries;
● 
increased exposure to foreign currency exchange rates;
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reduced protection for intellectual property;
● 
longer sales cycles and reliance on indirect sales in certain regions;
● 
increased length of time for shipping and acceptanceone of our products;
key customers, was one of numerous entities added to the Entity List. Challenges faced by SMIC and its key suppliers as a result of the listing have indirectly impacted SMIC’s demand for, and ACM Shanghai’s ability to supply, ACM Shanghai products. More recently, in October 2022, YMTC, a leading mainland China memory chip company and one of our key customers, was added to the Unverified List of the EAR alongside a number of other Chinese entities. The Unverified List identifies parties for whom BIS has been unable to confirm their bona fides (i.e., legitimacy and reliability about the end-use and end-user of items subject to the EAR). Entities listed on the Unverified List are ineligible to receive items subject to the EAR by means of a license exception if a U.S. export license is required. In December 2022, YMTC was moved from the Unverified List to the Entity List. Challenges faced by YMTC and its key suppliers as a result of the listing could indirectly impact YMTC’s demand for, or ACM Shanghai’s ability to supply, ACM Shanghai products.

● We cannot be certain what additional actions the U.S. government may take with respect to China entities, or whether such actions will impact our relationships with our mainland China-based customers. Additional actions could take the form of further revisions to the Entity List or Unverified List, new export restrictions, further expansions to the geographic scope of the controls, or additional tariffs or other trade restrictions. It is also possible that other countries could adopt similar semiconductor-focused export controls to align with the October 2022 and October 2023 U.S. actions.
greater difficulty
During the three and twelve months ended December 30, 2023, two prominent exporters of advanced semiconductor manufacturing equipment, the Netherlands and Japan, announced and began to implement plans to join the United States in respondingimposing semiconductor-focused export controls.

On May 23, 2023, the Japanese government issued the final amendment to customer requestsan ordinance implementing new export controls to require licensing for maintenanceexport of certain advanced semiconductor manufacturing equipment, effective as of July 23, 2023.The amendment expands the scope of export controls to prohibit (1) exporting 23 additional categories of items relating to semiconductor manufacturing and spare(2) providing technology relating to manufacturing, development or use of these categories of items, in both cases, without an advance license.While the expanded export controls apply to exports to any jurisdiction, exports to certain jurisdictions, such as the United States, are expected to be permitted by certain types of broad general licenses. However, it remains to be seen whether the Japanese government will authorize any exports of these items to mainland China by a limited general license or specific license, if at all.

Likewise, on September 30, 2023, the Government of the Netherlands published additional export control measures for advanced semiconductor manufacturing equipment. The Regulation on Advanced Semiconductor Manufacturing Equipment entered force on September 1, 2023. From that point on, the export of certain advanced semiconductor manufacturing equipment, as specified in the Annex to the Regulation, is now subject to a national export license authorization requirement by the Dutch Central Import and Export Service.

As a result of the new restrictions, the ability of ACM Shanghai to acquire such parts on a timely basis;
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greater difficulty in enforcing contracts and accounts receivable collection and longer collection periods;
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difficulties in staffing and managing foreign operationsfrom Japan and the increased travel, infrastructureNetherlands to fulfill customer requirements, and legalthe ability of ACM Shanghai’s customers in mainland China to scale their production, could be further negatively impacted by these additional controls. The introduction of additional multilateral semiconductor-focused export controls could further negatively impact ACM Shanghai’s supply arrangements.

We are unable to predict the duration of the restrictions imposed by the U.S. government, Japan and compliance costs associated with multiple international locations;
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heightened riskthe Netherlands or theeffects of unfairany future governmental actions by the U.S., Japan, the Netherlands or corrupt business practices in certain geographies and of improper or fraudulent sales arrangementsother countries that may impact financial results and result in restatementsour relationships with our mainland China-based customers, any of or irregularities in, our consolidated financial statements; and
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general economic conditions, geopolitical events or natural disasters in countries where we conduct our operations or where our customers are located, including political unrest, war, acts of terrorism or responses to such events.
In particular, the Asian market is extremely competitive, and chip manufacturers may be aggressive in seeking price concessions from suppliers, including chip equipment manufacturers.
We may not be successful in developing and implementing policies and strategies that will be effective in managing these risks in each country in which we do business. Our failure to manage these risks successfully could adversely affecthave a long-term adverse effect on our business, operating results and financial condition.
Changes in government trade policies could limit the demand for our tools and increase the cost of our tools.
Fluctuation
General trade tensions between the United States and mainland China escalated beginning in foreign currency exchange rates2018, and have continued to escalate. Since 2018, the U.S. government has imposed new or higher tariffs on specified imported products originating from mainland China in response to what the U.S. government characterized as unfair trade practices. The mainland China
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government responded to each of these rounds of U.S. tariff changes by imposing new or higher tariffs on specified products imported from the United States. Higher tariffs and additional rounds of tariffs have been suggested or threatened by U.S. and mainland China officials. More recently, in late 2023 and early 2024, U.S. officials have suggested potentially targeting Chinese origin legacy semiconductors with additional tariffs. Certain U.S. officials have also called for revocation of, or revisions to, China’s permanent normal trade relations (PNTR) status, which would increase tariffs significantly on goods of Chinese origin. In the event any such increased tariffs take effect, it is possible that the Chinese government could respond with additional tariffs or restrictions.
The imposition of heightened tariffs on imports by both the U.S. and mainland China governments and the surrounding economic uncertainty may adversely affectnegatively impact the semiconductor industry, including by reducing the demand of fabricators for capital equipment such as our resultstools. Further changes in trade policy, including by tariffs, additional taxes, restrictions on exports or other trade barriers, or restrictions on supplies, equipment, and raw materials including rare earth minerals, may limit the ability of operationsour customers to manufacture or sell semiconductors or to make the manufacture or sale of semiconductors more expensive and financial position.
Our results of operationsless profitable, which could lead those customers to fabricate fewer semiconductors and financial position could be adversely affectedto invest less in capital equipment such as our tools. In addition, if mainland China were to impose additional tariffs on raw materials, subsystems or other supplies that we source from the United States, our cost for those supplies would increase. As a result of fluctuations in foreign currency exchange rates. Although our financial statements are denominated in U.S. dollars, a sizable portion of our revenues and costs are denominated in other currencies, primarily the Chinese Renminbi. Because many of our raw material purchases are denominated in Renminbi while the majorityany of the foregoing events, the imposition of new or additional tariffs may limit our ability to manufacture tools, increase our selling and/or manufacturing costs, decrease margins, or inhibit our ability to sell tools or to purchase orders we receive are denominated in U.S. dollars, exchange rates have a significant effect on our gross margin. We have not engaged in any foreign currency exchange hedging transactions to date,necessary equipment and any strategies that we may use in the future to reduce the adverse impact of fluctuations in foreign currency exchange rates may not be successful. Our foreign currency exposure with respect to assets and liabilities forsupplies, which we do not have hedging arrangements could have a material impactadverse effect on our business, results of operations, in periods when the U.S. dollar significantly fluctuates in relation to unhedged non-U.S. currencies in which we transact business.
or financial condition.
Changes in political and economic policies of the PRCmainland China government may materially and adversely affect our business, financial condition and results of operations and may result in our inability to sustain our growth and expansion strategies.
Substantially all of our operations are conducted in the PRC,mainland China, and a substantial majority of our revenue is sourced from the PRC.mainland China. Accordingly, our financial condition and results of operations are affected to a significant extent by economics,economic, political and legal developmentsdevelopment in the PRC.
mainland China.
The Chinese economy differs from the economies of most developed countries in many respects, including the extent of government involvement, level of development, growth rate, and control of foreign exchange and allocation of resources. Although the PRCmainland China government has implemented measures emphasizing the utilization of market forces for economic reform, the reduction of state ownership of productive assets and the establishment of improved corporate governance in business enterprises, a substantial portion of productive assets in the PRCmainland China are still owned by the government. In addition, the PRCmainland China government continues to play a significant role in regulating industry development by imposing industrial policies. The PRCmainland China government also exercises significant control over economic growth in the PRCmainland China by allocating resources, controlling payment of foreign currency-denominated obligations, setting monetary policy, regulating financial services and institutions, and providing preferential treatment to particular industries or companies.
While the PRCmainland China economy has experienced significant growth in the past three decades, growth has been uneven, both geographically and among various sectors of the economy. The PRCmainland China government has implemented various measures to encourage economic growth and guide the allocation of resources. Some of these measures may benefit the overall PRCmainland China economy, but may also have a negative effect on us. Our financial condition and results of operation could be materially and adversely affected by government control over capital investments or changes in tax regulations that are applicable to us. In the past the PRCmainland China government has implemented measures to control the pace of economic growth, and similar measures in the future may cause decreased economic activity, which in turn could lead to a reduction in demand for our products and consequently have a material adverse effect on our businesses, financial condition and results of operations.
Although the PRCmainland China government has been implementing policies to develop an independent domestic semiconductor industry supply chain, there is no guaranteed time frame in which these initiatives will be implemented. We cannot guarantee that the implementation of these policies will result in additional revenue to us or that our presence in the PRCmainland China will result in support from the PRCmainland China government. To the extent that any capital investment or other assistance from the PRCmainland China government is not provided to us, it could be used to promote the products and technologies of our competitors, which could adversely affect our business, operating results and financial condition.
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Changes in political and economic policies with respect to mainland China may make it difficult for us to realize the benefit of our investments.
On November 12, 2020, then-U.S. President Trump issued an executive order, or the Order, establishing a new sanctions program designed to prohibit U.S. persons from entering into transactions in certain publicly traded securities, as well as derivatives and securities designed to provide investment exposure to such securities, of any “Communist Chinese military company,” or CCMC, as designated by the U.S. Department of Defense, or DOD, or the U.S. Secretary of the Treasury. Continued ownership of such securities by U.S. persons would be prohibited after a one-year divestment period from the time of designation of the issuer. A number of mainland China issuers have been designated under this program and more could be added.
On December 3, 2020, SMIC was designated as a CCMC by the DOD, which was subsequently removed as of June 3, 2021. If SMIC had remained on the list at December 3, 2021, ACM Shanghai’s continued possession of SMIC securities could have subjected ACM Shanghai and ACM Research to penalties. Certain implementation matters related to the scope of, and compliance with, the Order have not yet been resolved, and the ultimate application and enforcement of the Order may change due to, among other things, a change in the U.S. Presidential administration.
In addition, SMIC may be designated as a CCMC in the future, or we may seek to conduct business transactions with entities on the CCMC list in the future. Although the Order does not prohibit commercial relations with CCMC companies other than the securities transactions noted above, certain other export restrictions have been imposed under the Export Administration Regulations on some CCMC companies. These and any similar future U.S. government restrictions on our suppliers or customers may adversely affect our business operations in mainland China, overall company results or our financial condition.
Mainland China’s currency exchange control and government restrictions on investment repatriation may impact our ability to transfer funds outside of mainland China, which could materially and adversely affect our ability to grow, make investments or acquisitions that could benefit our business, otherwise fund and conduct our business, or pay dividends on our common stock.
We generate substantially all of our revenue through ACM Shanghai, our mainland China subsidiary. Mainland China statutory laws and regulations permit payments of dividends by ACM Shanghai only out of its retained earnings, which are determined in accordance with mainland China accounting standards and regulations that differ from U.S. generally accepted accounting principles. Mainland China regulations and ACM Shanghai’s articles of association require annual appropriations of 10% of net after-tax profits to be set aside, prior to payment of dividends, as a reserve or surplus fund, which restricts ACM Shanghai’s ability to transfer a portion of its net assets to us. Such reserved funds can only be used for specific purposes and are not transferable to ACM in the form of loans, advances or cash dividends.
As a result of these and other restrictions under mainland China laws and regulations as well as restrictions under ACM Shanghai’s bank loan agreements, we may be significantly restricted in our ability to transfer a portion of ACM Shanghai’s net assets to ACM or other subsidiaries of ACM. We have no assurance that mainland China governmental authorities in the future will not limit further or eliminate the ability of ACM Shanghai to purchase foreign currencies and transfer such funds to ACM to meet its liquidity or other business needs. Any inability to access funds in mainland China, if and when needed for use outside of mainland China, could have a material and adverse effect on our liquidity and our business.
Certain of our investments may be subject to review by and approval from CFIUS, which may prevent us from taking advantage of investment opportunities that would otherwise be advantageous to our stockholders.
Certain of our investments may be subject to review by and approval from the U.S. Committee on Foreign Investment in the U.S., or CFIUS. In the event that CFIUS reviews one or more of our investments, there can be no assurances that we will be able to maintain or proceed with such investments on terms acceptable to us. Additionally, CFIUS may seek to impose limitations on one or more such investments that may prevent us from maintaining or pursuing investment opportunities that we otherwise would have maintained or pursued, which could adversely affect the performance of our investments and thus our overall performance. Certain of our stockholders may be non-U.S. investors, and in the aggregate, may comprise a substantial portion of our net asset value, which may increase the risks of such limitations being imposed in connection with investments pursued or made by us. Legislative and regulatory changes, including changes to agency practice, in the future may negatively impact our ability to realize value from certain existing and future investments, including by limiting exit opportunities or causing us to favor buyers that we believe are less likely to require CFIUS review, even in circumstances where other buyers may offer better terms or more consideration.
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The U.S. Government is reportedly considering an outbound investment review mechanism, which may prevent us from taking advantage of investment opportunities outside the United States that could otherwise be advantageous to our stockholders.
The U.S. Government is reportedly considering imposing an outbound investment review mechanism similar to CFIUS that would review foreign investments made from the United States. It is not yet clear what form the mechanism would take, but reports suggest it could come quickly in the form of an Executive Order, or could be passed as part of legislation from Congress. In the event that such a review mechanism is implemented, it is possible that certain of our investments may require review or notification to the U.S. Government, and could be subject to mitigation or other restrictions. If implemented, similar to CFIUS reviews, there can be no assurances that we will be able to maintain or proceed with investments on terms acceptable to us. Such a mechanism could negatively impact our ability to realize value from certain existing and future investments, including by limiting exit opportunities or causing us to favor buyers that we believe are lower risk for the possible outbound investment reviews, even in circumstances where other buyers may offer better terms or more consideration. Furthermore, because the requirements have not yet been established, the range or extent of possible effects that could flow from such a measure cannot be determined with any degree of certainty at this time. It is possible that the outbound investment review mechanism could adversely affect our business, financial condition, and operating results.
We are subject to government regulation, including import, export, economic sanctions, and anti-corruption laws and regulations, that may limit our sales opportunities, expose us to liability and increase our costs.
Our products are subject to import and export controls in jurisdictions in which we distribute or sell our products. Import and exports controlexport controls and economic sanctions laws and regulations include restrictions and prohibitions on the sale or supply of certain products and on our transfer of parts, components, and related technical information and know-how to certain countries, regions, governments, persons and entities.
Various countries regulate the importation of certain products through import permitting and licensing requirements and have enacted laws that could limit our ability to distribute our products. The exportation, re-exportation, transfers within foreign countries and importation of our products, including by our partners, must comply with these laws and regulations, and any violations may result in reputational harm, government investigations and penalties, andor a denial or curtailment of exporting.exporting privileges. Complying with export control and sanctions laws for a particular sale may be time consuming, may increase our costs, and may result in the delay or loss of sales opportunities. If we are found to be in violation of U.S. sanctions or export control laws, or similar laws in other jurisdictions, we and the individuals working for us could incur substantial fines and penalties. Changes in export, sanctions or import laws or regulations may delay the introduction and sale of our products in international markets, require us to spendexpend resources to seek necessary government authorizations or to develop different versions of our products, or, in some cases, prevent the export or import of our products to certain countries, regions, governments, persons or entities, which could adversely affect our business, financial condition and operating results.
We are subject to various domestic and international anti-corruption laws, such as the U.S. Foreign Corrupt Practices Act, as well as similar anti-bribery and anti-kickback laws and regulations.regulations in the United States and other jurisdictions. These laws and regulations generally prohibit companies and their intermediaries from offering or making improper payments to non-U.S. officials for the purpose of obtaining, retaining or directing business. Our exposure for violating these laws and regulations increases as our international presence expands and as we increase sales and operations in foreign jurisdictions.
Risks Related to Our STAR Listing
We may not achieve the results contemplated by our business strategy and our strategy for growth in mainland China may not result in increases in the price of Class A common stock.
We cannot assure you that we will realize any or all of our anticipated benefits of the STAR Listing and the STAR IPO, which may not have the anticipated effects of including the strengthening of our market position and operations in mainland China. ACM Shanghai continues to have broad discretion in the use of the proceeds from the initial sales of shares to investors and the proceeds from the STAR IPO, and will have similar discretion over the use of proceeds from future financing activities (including follow-on offerings or private placements of shares with mainland China investors). ACM Shanghai may not spend or invest those proceeds in a manner that results in our operating success or with which ACM Research stockholders agree. Our failure to successfully leverage the completion of the STAR Listing and the STAR IPO, and any future financings by ACM Shanghai, to expand our mainland China business could result in a decrease in the
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price of the Class A common stock, and we cannot assure you that the success of ACM Shanghai will have an attendant positive effect on the price of the Class A common stock.
Mainland China companies are critical to the global semiconductor industry, and our current business is substantially concentrated in the mainland China market. Our inability to build, or any delay in growing, our mainland China-based operations would materially and adversely limit our operations and operating results, including our revenue growth.
ACM Shanghai’s status as a publicly traded company that is controlled, but less than wholly owned, by ACM Research could have an adverse effect on us.
In November 2021, we completed the STAR Listing and STAR IPO with respect to shares of ACM Shanghai. ACM Shanghai is our principal operating company and, prior to the STAR Listing process, was a wholly owned subsidiary of ACM Research. As the result of actions taken in connection with the STAR Listing and the STAR IPO, ACM Shanghai is no longer a wholly owned subsidiary of ACM Research, and the interests of ACM Shanghai may diverge from the interests of ACM Research and its other subsidiaries in the future. We may face conflicts of interest in managing, financing or engaging in transactions with ACM Shanghai, or allocating business opportunities between our subsidiaries, including future arrangements for operating subsidiaries other than ACM Shanghai to license and use our intellectual property. Substantially all of our intellectual property has been developed in mainland China and is owned by ACM Shanghai. As we expand our global operations through operating subsidiaries outside of mainland China, those operating subsidiaries may need to license intellectual property from ACM Shanghai in order to operate, and there can be no assurance that conflicts of interest will not preclude those operating subsidiaries from licensing the required intellectual property from ACM Shanghai on reasonable terms or at all.
ACM Research retains majority ownership of ACM Shanghai since the STAR IPO, but ACM Shanghai is managed by a separate board of directors and officers and those directors and officers will owe fiduciary duties to the various stakeholders of ACM Shanghai, including shareholders other than ACM Research. In the operation of ACM Shanghai’s business, there may be situations that arise whereby the directors and officers of ACM Shanghai, in the exercise of their fiduciary duties, take actions that may be contrary to the best interests of ACM Research.
In the future, ACM Shanghai may issue options, restricted shares and other forms of share-based compensation to its directors, officers and employees, which could dilute ACM Research’s ownership in ACM Shanghai. In addition, ACM Shanghai may engage in capital raising activities in the future that could further dilute ACM Research’s ownership interest. For example, on January 25, 2024, we announced that ACM Shanghaiintends to offer up to 43.6 million of its ordinary shares in a private offering to qualified buyers in compliance with the requirements of the China Securities Regulatory Commission, which would constitute up to 10% of ACM Shanghai’s share capital prior to the transaction. If consummated in full, we estimate that our equity interest in ACM Shanghai would decline from 82.1% to approximately 74.6%. The consummation of the proposed transaction is subject to market conditions,the approval of ACM Shanghai’s shareholders, completion of the review process by the Shanghai Stock Exchange, completion of the registration process by the China Securities Regulatory Commission, and other factors. We estimate that if consummated in full, the proposed transaction would generate gross proceeds of up to RMB 4.5 billion ($625 million) to ACM Shanghai, whose management would have broad discretion over the use of such proceeds. It is unlikely that any of such proceeds would be distributed to ACM Research.
ACM Research and ACM Shanghai both are public reporting companies but each is subject to separate, and potentially inconsistent, accounting and disclosure requirements, which may lead to investor confusion or uncertainty that could cause decreased demand for, or fluctuations in the price of, one or both of the companies’ publicly traded shares.
Since ACM Shanghai completed the STAR Listing and the STAR IPO in November 2021, it has been subject to accounting, disclosure and other regulatory requirements of the STAR Market. At the same time, ACM Research remains subject to accounting, disclosure and other regulatory requirements of the SEC and the Nasdaq Global Market, or Nasdaq. As a result, ACM Research and ACM Shanghai periodically will disclose information simultaneously pursuant to differing laws and regulations. Even though substantially all of the operations of ACM Research are currently conducted through ACM Shanghai, the information disclosed by the two companies will differ, and may differ materially from time to time, due to the distinct, and potentially inconsistent, accounting standards applicable to the two companies and disclosure requirements imposed by securities regulatory authorities, as well as differences in language, culture and expression habit, in composition of investors in the United States and mainland China, and in the capital markets of the United States and mainland China.
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Differing disclosures could lead to confusion or uncertainty among investors in the publicly traded shares of one or both companies. Differences between the price of ACM Shanghai shares on the STAR Market and the price of ACM Research Class A common stock on Nasdaq could lead to increased volatility, as some investors seek to arbitrage price differences. Moreover, such volatility could be exacerbated by the fact that ACM Shanghai shares currently represent substantially all of the assets of ACM Research.
Risks Related to Our Intellectual Property and Data Security
Our success depends on our ability to protect our intellectual property, including our SAPS, TEBO, Tahoe, ECP, furnace and other technologies.
Our commercial success depends in part on our ability to obtain and maintain patent and trade secret protection for our intellectual property, including our SAPS, TEBO, Tahoe, ECP, furnace and other technologies and the design of our Ultra C equipment, as well as our ability to operate without infringing upon the proprietary rights of others. There can be no assurance that our patent applications will result in additional patents being issued or that issued patents will afford sufficient protection against competitors with similar technology, nor can there be any assurance that the patents issued will not be infringed, designed around, or invalidated by third parties. Even issued patents may later be found unenforceable or may be modified or revoked in proceedings instituted by third parties before various patent offices or in courts. The degree of future protection for our intellectual property is uncertain. Only limited protection may be available and may not adequately protect our rights or permit us to gain or keep any competitive advantage. This failure to properly protect the intellectual property rights relating to our products and technologies could have a material adverse effect on our financial condition and results of operations.
The patent application process is subject to numerous risks and uncertainties, and there can be no assurance that we or any of our future development partners will be successful in protecting our product candidates by obtaining and defending patents. These risks and uncertainties include the following:
•The U.S. Patent and Trademark Office and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other provisions during the patent process. There are situations in which noncompliance can result in abandonment or lapse of a patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. In such an event, competitors might be able to enter the market earlier than would otherwise have been the case.
•Patent applications may not result in any patents being issued.
•Patents that may be issued may be challenged, invalidated, modified, revoked, circumvented, found to be unenforceable or otherwise may not provide any competitive advantage.
•Our competitors may seek or may have already obtained patents that will limit, interfere with, or eliminate our ability to make, use and sell our potential product candidates.
•Mainland China and other countries other than the United States may have patent laws less favorable to patentees than those upheld by U.S. courts, allowing foreign competitors a better opportunity to create, develop and market competing product candidates.
In addition, we rely on the protection of our trade secrets and know-how. Although we have taken steps to protect our trade secrets and unpatented know-how, including entering into confidentiality and non-disclosure agreements with third parties and confidential information and inventions agreements with key employees, customers and suppliers, other parties may still obtain this information or may come upon this information independently. If any of these events occurs or if we otherwise lose protection for our trade secrets or proprietary know-how, the value of this information may be greatly reduced.
We may be involved in lawsuits to protect or enforce our patents, which could be expensive, time consuming and unsuccessful.
Competitors may infringe upon our patents. If our technologies are adopted, we believe that competitors may try to match our technologies and tools in order to compete. To counter infringement or unauthorized use, we may be required to file infringement claims, which can be expensive and time consuming. An adverse result in any litigation or defense proceedings, including our current suits, could put one or more of our patents at risk of being invalidated, found to be unenforceable or interpreted narrowly and could put our patent applications at risk of not issuing. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during litigation. In addition, any future patent litigation, interference or other administrative proceedings will result in additional expense and distraction of our personnel. Most of
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our competitors are larger than we are and have substantially greater resources, and they therefore are likely to be able to sustain the costs of complex patent litigation longer than we could. An adverse outcome in such litigation or proceedings may expose us to loss of our proprietary position.
We may not be able to protect our intellectual property rights throughout the world, including mainland China, which could materially, negatively affect our business.
Filing, prosecuting and defending patents on our products or proprietary technologies in all countries throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the United States, including mainland China, can be less extensive than those in the United States. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the United States. Consequently, competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and may export otherwise infringing products to territories where we have patent protection but enforcement is not as strong as that in the United States. These products may compete with our products, and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.
The significant majority of our intellectual property has been developed in mainland China and is owned by ACM Shanghai. Implementation and enforcement of intellectual property-related laws in mainland China has historically been lacking due primarily to ambiguities in mainland China intellectual property law. Accordingly, protection of intellectual property and proprietary rights in mainland China may not be as effective as in the United States or other countries. As a result, third parties could illegally use the technologies and proprietary processes that we have developed and compete with us, which could negatively affect any competitive advantage we enjoy, dilute our brand and harm our operating results. Litigation may be necessary to enforce our intellectual property rights, and given the relative unpredictability of mainland China’s legal system and potential difficulties enforcing a court judgment in mainland China, there is no guarantee litigation would result in an outcome favorable to us.
Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents and other intellectual property protection, which could make it difficult for us to stop the infringement of our patents or marketing of competing products in violation of our proprietary rights generally. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing, and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate, and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license and may adversely affect our business.
If we are sued for infringing intellectual property rights of third parties, it will be costly and time consuming, and an unfavorable outcome in that litigation could have a material adverse effect on our business.
Our success depends on our ability to develop, manufacture, market and sell our products without infringing upon the proprietary rights of third parties. Numerous U.S. and foreign-issued patents and pending patent applications owned by third parties exist in the fields in which we are developing products, some of which may contain claims that overlap with the subject matter of our intellectual property. A third party has claimed in the past, and others may claim in the future, that our technology or products infringe their intellectual property. In some instances third parties may initiate litigation against us in an effort to prevent us from using our technology in alleged violation of their intellectual property rights. The risk of such a lawsuit will likely increase as our size and the number and scope of our products increase and as our geographic presence and market share expand.
Any potential intellectual property claims or litigation commenced against us could:
•be time consuming and expensive to defend, whether or not meritorious;
•force us to stop selling products or using technology that allegedly infringes the third party’s intellectual property rights;
•delay shipments of our products;
•require us to pay damages or settlement fees to the party claiming infringement;
•require us to attempt to obtain a license to the relevant intellectual property, which may not be available on reasonable terms or at all;
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•force us to attempt to redesign products that contain the allegedly infringing technology, which could be expensive or which we may be unable to do;
•require us to indemnify our customers, suppliers or other third parties for any loss caused by their use of our technology that allegedly infringes the third party’s intellectual property rights; or
•divert the attention of our technical and managerial resources.
Because patent applications can take many years to issue, there may be currently pending applications, unknown to us, that may later result in issued patents upon which our products or technologies may infringe. Similarly, there may be issued patents relevant to our products of which we are not aware.
Breaches of our cybersecurity systems could degrade our ability to conduct our business operations and deliver products to our customers, result in data losses and the theft of our intellectual property, damage our reputation, and require us to incur significant additional costs to maintain the security of our networks and data.
We increasingly depend upon our information technology systems to conduct our business operations, ranging from our internal operations and product development and manufacturing activities to our marketing and sales efforts and communications with our customers and business partners. Computer programmers may attempt to penetrate our network security, or that of our website, and misappropriate our proprietary information or cause interruptions of our service. Because the techniques used by such computer programmers to access or sabotage networks change frequently and may not be recognized until launched against a target, we may be unable to anticipate these techniques. We have also outsourced a number of our business functions to third-party contractors, including our manufacturers, and our business operations also depend, in part, on the success of our contractors’ own cybersecurity measures. Accordingly, if our cybersecurity systems and those of our contractors fail to protect against unauthorized access, sophisticated cyberattacks and the mishandling of data by our employees and contractors, our ability to conduct our business effectively could be damaged in a number of ways, including sensitive data regarding our employees or business, including intellectual property and other proprietary data, could be stolen. Should this occur, we could be subject to significant claims for liability from our customers and regulatory actions from governmental agencies. In addition, our ability to protect our intellectual property rights could be compromised and our reputation and competitive position could be significantly harmed. Consequently, our financial performance and results of operations could be adversely affected.
Our production facilities could be damaged or disrupted by a natural disaster, war, terrorist attacks or other catastrophic events.
Our manufacturing facilities are subject to risks associated with natural disasters, such as earthquakes, fires, floods tsunami, typhoons and volcanic activity, environmental disasters, health epidemics, and other events beyond our control such as power loss, telecommunications failures, and uncertainties arising out of armed conflicts or terrorist attacks. A substantial majority of our facilities as well as our research and development personnel are located in the PRC. Any catastrophic loss or significant damage to any of our facilities would likely disrupt our operations, delay production, and adversely affect our product development schedules, shipments and revenue. In addition, any such catastrophic loss or significant damage could result in significant expense to repair or replace the facility and could significantly curtail our research and development efforts in a particular product area or primary market, which could have a material adverse effect on our operations and operating results.
Our management and auditors identified a material weakness in our internal control over financial reporting that, if not properly remediated, could result in material misstatements in our consolidated financial statements that could cause investors to lose confidence in our reported financial information and have a negative effect on the trading price of our stock.
Neither we nor BDO China Shu Lun Pan Certified Public Accountants LLP, or BDO China, our independent registered public accounting firm, has performed a comprehensive assessment of our internal control over financial reporting, as defined by the American Institute of Certified Public Accountants, for purposes of identifying and reporting material weaknesses and other control deficiencies. We are not currently required to comply with Section 404 of the Sarbanes-Oxley Act and therefore are not required to assess the effectiveness of our internal control over financial reporting. Further, BDO China has not been engaged to express, nor has it expressed, an opinion on the effectiveness of our internal control over financial reporting.
In connection with its audit of our consolidated financial statements as of, and for the year ended, December 31, 2016, BDO China informed us that it had identified a material weakness in our internal control over financial reporting relating to our lack of sufficient qualified financial reporting and accounting personnel with an appropriate level of expertise to properly address complex accounting issues under accounting principles generally accepted in the United States, or GAAP, and to prepare and review our consolidated financial statements and related disclosures to fulfill GAAP and SEC financial reporting requirements. As of December 31, 2017, we considered we were still in a transitional period to enhance the quality of our accounting and financial reporting function, we determined that the above mentioned material weakness had not been fully remediated. We have taken, and are continuing to take, remedial measures to improve the effectiveness of our controls, including by hiring additional accounting and finance personnel and by engaging outside consulting firms, although we now are also seeking to identify a qualified candidate to succeed our former Chief Financial Officer whose employment terminated effective January 24, 2018.
The existence of material weaknesses is an indication that there is a more than remote likelihood that a material misstatement of our financial statements will not be prevented or detected in a future period, and the process of designing and implementing effective internal controls and procedures will be a continual effort that may require us to expend significant resources to establish and maintain a system of controls that is adequate to satisfy our reporting obligations as a public company. We cannot assure you that the measures we take will be sufficient to remediate the material weakness identified by BDO China or that we will implement and maintain adequate controls over our financial processes and reporting in the future in order to avoid additional material weaknesses or controlled deficiencies in our internal control over financing reporting. If our remediation efforts are not successful or other material weaknesses or control deficiencies occur in the future, we may be unable to report our financial results accurately or on a timely basis, which could cause our reported financial results to be materially misstated and result in the loss of investor confidence and cause the trading price of Class A common stock to decline. Moreover, ineffective controls could significantly hinder our ability to prevent fraud.
Our auditor, as a registered public accounting firm operating in the PRC, is not permitted to be inspected by the Public Company Accounting Oversight Board, and consequently investors may be deprived of the benefits of such inspections.
BDO China is the independent registered public accounting firm that issued the audit report included in this report in connection with our consolidated financial statements as of, and for the years ended, December 31, 2017 and 2016. BDO China, as an auditor of companies that are traded publicly in the United States and a firm registered with the U.S. Public Company Accounting Oversight Board, or PCAOB, is required by the laws of the United States to undergo regular inspections by the PCAOB to assess its compliance with the laws of the United States and applicable professional standards. BDO China is located in the PRC. The PCAOB is currently unable to conduct inspections on auditors in the PRC without the approval of PRC authorities, and therefore BDO China, like other independent registered public accounting firms operating in the PRC, is currently not inspected by the PCAOB.
In May 2013 the PCAOB announced that it had entered into a Memorandum of Understanding on Enforcement Cooperation with the China Securities Regulatory Commission and the Ministry of Finance of China pursuant to which the Ministry of Finance established a cooperative framework between the parties for the production and exchange of audit documents relevant to investigations in both the PRC and the United States. More specifically, the Memorandum of Understanding provides a mechanism for the parties to request and receive from each other assistance in obtaining documents and information in furtherance of their investigative duties. In addition the PCAOB is engaged in continuing discussions with the China Securities Regulatory Commission and the Ministry of Finance to permit joint inspections in the PRC of audit firms that are registered with the PCAOB and to audit PRC companies whose securities are listed on U.S. stock exchanges.
The PCAOB’s inspections of firms outside of the PRC have identified deficiencies in audit procedures and quality control procedures, and such deficiencies may be addressed as part of the inspection process to improve future audit quality. The inability of the PCAOB to conduct inspections of BDO China with respect to its audit of our consolidated financial statements may make it more difficult for investors to evaluate BDO China’s audit procedures and quality control procedures by depriving investors of potential benefits from improvements that could have been facilitated by PCAOB inspections.
Risks Relating to Our Intellectual Property
Our success depends on our ability to protect our intellectual property, including our SAPS and TEBO technologies.
Our commercial success depends in part on our ability to obtain and maintain patent and trade secret protection for our intellectual property, including our SAPS and TEBO technologies and the design of our Ultra C equipment, as well as our ability to operate without infringing upon the proprietary rights of others. There can be no assurance that our patent applications will result in additional patents being issued or that issued patents will afford sufficient protection against competitors with similar technology, nor can there be any assurance that the patents issued will not be infringed, designed around, or invalidated by third parties. Even issued patents may later be found unenforceable or may be modified or revoked in proceedings instituted by third parties before various patent offices or in courts. The degree of future protection for our intellectual property is uncertain. Only limited protection may be available and may not adequately protect our rights or permit us to gain or keep any competitive advantage. This failure to properly protect the intellectual property rights relating to our products and technologies could have a material adverse effect on our financial condition and results of operations.
The patent application process is subject to numerous risks and uncertainties, and there can be no assurance that we or any of our future development partners will be successful in protecting our product candidates by obtaining and defending patents. These risks and uncertainties include the following:
● 
The U.S. Patent and Trademark Office and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other provisions during the patent process. There are situations in which noncompliance can result in abandonment or lapse of a patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. In such an event, competitors might be able to enter the market earlier than would otherwise have been the case.
● 
Patent applications may not result in any patents being issued.
● 
Patents that may be issued may be challenged, invalidated, modified, revoked, circumvented, found to be unenforceable or otherwise may not provide any competitive advantage.
● 
Our competitors may seek or may have already obtained patents that will limit, interfere with, or eliminate our ability to make, use and sell our potential product candidates.
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The PRC and other countries other than the United States may have patent laws less favorable to patentees than those upheld by U.S. courts, allowing foreign competitors a better opportunity to create, develop and market competing product candidates.
In addition, we rely on the protection of our trade secrets and know-how. Although we have taken steps to protect our trade secrets and unpatented know-how, including entering into confidentiality and non-disclosure agreements with third parties and confidential information and inventions agreements with key employees, customers and suppliers, other parties may still obtain this information or may come upon this information independently. If any of these events occurs or if we otherwise lose protection for our trade secrets or proprietary know-how, the value of this information may be greatly reduced.
We may be involved in lawsuits to protect or enforce our patents, which could be expensive, time consuming and unsuccessful.
Competitors may infringe upon our patents. If our technologies are adopted, we believe that competitors may try to match our technologies and tools in order to compete. To counter infringement or unauthorized use, we may be required to file infringement claims, which can be expensive and time consuming. An adverse result in any litigation or defense proceedings, including our current suits, could put one or more of our patents at risk of being invalidated, found to be unenforceable or interpreted narrowly and could put our patent applications at risk of not issuing. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during litigation. In addition, any future patent litigation, interference or other administrative proceedings will result in additional expense and distraction of our personnel. Most of our competitors are larger than we are and have substantially greater resources, and they therefore are likely to be able to sustain the costs of complex patent litigation longer than we could. An adverse outcome in such litigation or proceedings may expose us to loss of our proprietary position.
We may not be able to protect our intellectual property rights throughout the world, which could materially, negatively affect our business.
Filing, prosecuting and defending patents on our products or proprietary technologies in all countries throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the United States, including the PRC, can be less extensive than those in the United States. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the United States. Consequently, competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and may export otherwise infringing products to territories where we have patent protection but enforcement is not as strong as that in the United States. These products may compete with our products, and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.
Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents and other intellectual property protection, which could make it difficult for us to stop the infringement of our patents or marketing of competing products in violation of our proprietary rights generally. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing, and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate, and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license and may adversely affect our business.
If we are sued for infringing intellectual property rights of third parties, it will be costly and time consuming, and an unfavorable outcome in that litigation could have a material adverse effect on our business.
Our success depends on our ability to develop, manufacture, market and sell our products without infringing upon the proprietary rights of third parties. Numerous U.S. and foreign-issued patents and pending patent applications owned by third parties exist in the fields in which we are developing products, some of which may contain claims that overlap with the subject matter of our intellectual property. A third party has claimed in the past, and others may claim in the future, that our technology or products infringe their intellectual property. In some instances third parties may initiate litigation against us in an effort to prevent us from using our technology in alleged violation of their intellectual property rights. The risk of such a lawsuit will likely increase as our size and the number and scope of our products increase and as our geographic presence and market share expand.
Any potential intellectual property claims or litigation commenced against us could:
● 
be time consuming and expensive to defend, whether or not meritorious;
● 
force us to stop selling products or using technology that allegedly infringes the third party’s intellectual property rights;
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delay shipments of our products;
● 
require us to pay damages or settlement fees to the party claiming infringement;
● 
require us to attempt to obtain a license to the relevant intellectual property, which may not be available on reasonable terms or at all;
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force us to attempt to redesign products that contain the allegedly infringing technology, which could be expensive or which we may be unable to do;
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require us to indemnify our customers, suppliers or other third parties for any loss caused by their use of our technology that allegedly infringes the third party’s intellectual property rights; or
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divert the attention of our technical and managerial resources.
Because patent applications can take many years to issue, there may be currently pending applications, unknown to us, that may later result in issued patents upon which our products or technologies may infringe. Similarly, there may be issued patents relevant to our products of which we are not aware.
Risks Related to Ownership of Class A Common Stock
The market price of Class A common stockhas been and may continue to be volatile, which could result in substantial losses for investors purchasing our shares
shares.
Class A common stock only commenced trading on the Nasdaq Global Market, or Nasdaq, on November 3, 2017, and theThe market price of Class A common stock has been, and could continue to be, subject to significant fluctuations. The market price of Class A common stock may fluctuate significantly in response to numerous factors, many of which are beyond our control, including:
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•actual or anticipated fluctuations in our revenue and other operating results;
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•the financial projections we may provide to the public, any changes in these projections or our failure to meet these projections;
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•actions of securities analysts who initiate or maintain coverage of us, changes in financial estimates by any securities analysts who follow our company, or our failure to meet these estimates or the expectations of investors;
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•changes in projections for the chips or chip equipment industries or in the operating performance or expectations and stock market valuations of chip companies, chip equipment companies or technology companies in general;
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•changes in operating results;
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•any changes in the financial projections we may provide to the public, our failure to meet these projections, or changes in recommendations by any securities analysts that elect to follow Class A common stock;
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•additional shares of Class A common stock being sold into the market by us or our existing stockholders or the anticipation of such sales;
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•price and volume fluctuations in the overall stock market, including as a result of trends in the economy as a whole;
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•lawsuits threatened or filed against us;
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•litigation and other developments relating to our patents or other proprietary rights or those of our competitors;
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•developments in new legislation and pending lawsuits or regulatory actions, including interim or final rulings by judicial or regulatory bodies; and
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•general economic trends, including changes in the demand for electronics or information technology or geopolitical events such as war or acts of terrorism, or any responses to such events.
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In recent years, the stock market in general, and Nasdaq in particular, has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to changes in the operating performance of the companies whose stock is experiencing those price and volume fluctuations.
As a newly public company, our stock price may be volatile, and securities class action litigation has often been instituted against companies following periods of volatility of their stock price. Any such litigation, if instituted against us, could result in substantial costs and a diversion of our management’s attention and resources.
In the past, Further, following periods of volatility in the overall market and the market price of a particular company’s securities, securities class action litigation has often been instituted against these companies. ThisSimilar litigation ifmay be instituted against us in the future, which could result in substantial costs and a diversion of our management’s attention and resources.
Few if any companies with stock publicly traded in the United States have effected a STAR Market listing of stock of a mainland China-based subsidiary, and it is therefore difficult to predict the effect of the STAR Listing and STAR IPO on the Class A common stock.
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An active tradingthe first publicly traded U.S. companies to complete an initial public offering of shares of a mainland China subsidiary on the STAR Market. As a result, no assurance can be given regarding the effect of the STAR Listing and the STAR IPO on the market forprice of the Class A common stock. The market price of Class A common stock may be volatile or may decline, for reasons other than the risk and uncertainties described above, as the result of investor negativity or uncertainty with respect to the impact of the STAR Listing and STAR IPO.
ACM Research stockholders were not be sustained.
entitled to purchase ACM Shanghai shares in the pre-STAR Listing placement, and they may have limited opportunities to purchase ACM Shanghai shares now that the STAR Listing and the STAR IPO have been completed. Investors may elect to invest in our business and operations by purchasing ACM Shanghai shares on the STAR Market rather than purchasing ACM Research Class A common stock, has been listed on Nasdaq only since November 3, 2017, and we cannot assure you that an active tradingreduction in demand could lead to a decrease in the market price for the Class A common stock will be sustained or maintained. The lack of an active market may impair your ability to sell your shares at the time you wish to sell them or at a price that you consider reasonable. The lack of an active market may also reduce the fair market value of your shares. There can be no assurance that we will be able to successfully develop or maintain a liquid market for Class A common stock.
We have broad discretion in the use of the net proceeds from our initial public offering and the concurrent private placement, and we may not succeed in using those net proceeds effectively.
In November 2017 we issued and sold 2,233,000 shares of Class A common stock in our initial public offering, or IPO, and an additional 1,333,334 shares of Class A common stock in a private placement, which we refer to as the concurrent private placement. We cannot specify with any certainty the particular uses of the net proceeds that we received from the IPO and the concurrent private placement. Our management has broad discretion in the application of these net proceeds, including working capital and other general corporate purposes, and we may spend or invest these proceeds in a way with which our stockholders disagree. The failure by management to apply these funds effectively could harm our business and financial condition. Pending their use, we may invest the net proceeds in a manner that does not produce income or that loses value.
If securities or industry analysts do not publish research or reports about us, our business or our market, or if they publish negative evaluations of Class A common stock or the stock of other companies in our industry, the price of our stock and trading volume could decline.
The trading market for Class A common stock will depend in part on the research and reports that securities or industry analysts publish about us or our business. If one or more of the analysts who cover us downgrade the Class A common stock or publish inaccurate or unfavorable research about our business, the Class A common stock price would likely decline. In addition, if one or more of these analysts ceases coverage of the Class A common stock or fails to publish reports about the Class A common stock on a regular basis, we could lose visibility in the financial markets, which in turn could cause the Class A common stock price or trading volume to decline.
Requirements associated with being a public reporting company will increase our costs significantly, as well as divert significant company resources and management attention.
We are subject to the reporting requirements of the Securities Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of Nasdaq, and other rules and regulations of the SEC. We are working with our legal, independent accounting and financial advisors to identify those areas in which changes should be made to our financial and management control systems to manage our growth and our obligations as a public reporting company. These areas include corporate governance, corporate control, disclosure controls and procedures, and financial reporting and accounting systems. We have made, and will continue to make, changes in these and other areas. Compliance with the various reporting and other requirements applicable to public reporting companies will require considerable time, attention of management and financial resources. In addition, the changes we make may not be sufficient to allow us to satisfy our obligations as a public reporting company on a timely basis.
The listing requirements of Nasdaq require that we satisfy certain corporate governance requirements relating to director independence, distributing annual and interim reports, stockholder meetings, approvals and voting, soliciting proxies, conflicts of interest and a code of conduct. Our management and other personnel will need to devote a substantial amount of time to ensure that we comply with all of these requirements. The reporting requirements, rules and regulations will increase our legal and financial compliance costs and will make some activities more time-consuming and costly. These reporting requirements, rules and regulations, coupled with the increase in potential litigation exposure associated with being a public company, could also make it more difficult for us to attract and retain qualified persons to serve as our directors or executive officers, or to obtain certain types of insurance, including director and officer liability insurance, on acceptable terms.
We have never paid and do not intend to pay cash dividends and, consequently, your ability to achieve a return on your investment will depend on appreciation in the price of Class A common stock.
We have never declared or paid cash dividends on our capital stock. We currently intend to retain any future earnings to finance the operation and expansion of our business, and we do not expect to declare or pay any dividends in the foreseeable future. Accordingly, you may only receive a return on your investment in Class A common stock if the market price of Class A common stock increases.
Our ability to pay dividends on Class A common stock depends significantly on our receiving distributions of funds from our subsidiaries in the PRC. PRCmainland China. mainland China statutory laws and regulations permit payments of dividends by those subsidiaries only out of their retained earnings, which are determined in accordance with PRCmainland China accounting standards and regulations that differ from U.S. generally accepted accounting principles. The PRCMainland China regulations and our subsidiaries’ articles of association require annual appropriations of 10% of net after-tax profits to be set aside, prior to payment of dividends, as a reserve or surplus fund, which restricts our subsidiaries’ ability to transfer a portion of their net assets to us. In addition, our subsidiaries’ short-term bank loans restrict their ability to pay dividends to us.
The dual class structure of Class A common stock has the effect of concentrating voting control with our executive officers and directors, including our Chief Executive Officer and President, which will limit or preclude your ability to influence corporate matters.

Class B common stock has twenty votes per share and Class A common stock has one vote per share. As of March 19, 2018,February 23, 2024, stockholders who hold shares of Class B common stock, who consist principally of our executive officers,
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employees, directors and their respective affiliates, collectively held 78.8%held 64.2% of the voting power of our outstanding capital stock. Because of the twenty-to-one voting ratio between Class B and Class A common stock, holders of Class B common stock collectively will continue to control a majority of the combined voting power of Class A common stock and therefore be able to control all matters submitted to our stockholders for approval so long as the shares of Class B common stock represent at least 4.8% of all outstanding shares of Class A and Class B common stock. This concentrated control will limit or preclude your ability to influence corporate matters for the foreseeable future. This concentrated control could also discourage a potential investor from acquiring Class A common stock due to the limited voting power of such stock relative to the Class B common stock and might harm the market price of Class A common stock.
Future transfersBecause of the market capitalization achieved by holdersClass A common stock during October 2020, our charter no longer contemplates circumstances in which all of the shares of Class B common stock will result in those shares converting tomandatorily convert into Class A common stock. Instead, all of the Class B common stock generally will convert into Class A common stock subject to limited exceptions.only upon the election of the holders of a majority of the then-outstanding shares of Class B common stock, and specific shares of Class B common stock will convert into Class A common stock upon future transfers by the holders of those shares. The potential conversion of Class B common stock to Class A common stock will have the effect, over time, of increasing the relative voting power of those holders of Class B common stock who retain their shares in the long term.
Substantial future sales of shares by existing stockholders, or the perception that such sales may occur, could cause our stock price to decline.
If our existing stockholders, particularly our directors and executive officers, sell substantial amounts of Class A common stock in the public market, or are perceived by the public market as intending to sell substantial numbers of shares of Class A common stock, the trading price of Class A common stock could decline below the initial public offering price. As of March 19, 2018, only the shares of Class A common stock sold in the IPO and an additional 113,984 shares not subject to lock-up agreements were freely tradable in the public market. Holders of substantially all of the outstanding shares of Class A common stock, including all of our officers and directors, have entered into contractual lock-up agreements with the underwriters of the IPO pursuant to which they have agreed, subject to certain exceptions, not to sell or otherwise transfer any of their common stock or securities convertible into or exchangeable for shares of common stock until May 2, 2018. We and the lead underwriter in the IPO may, however, permit these holders to sell shares prior to the expiration of the lock-up agreements with the underwriters. On May 2, 2018, up to 13,169,506 shares of Class A common stock will be eligible for sale in the public market, including 9,600,558 shares held by directors, executive officers and other affiliates that will be subject to volume and other limitations under Rule 144 under the Securities Act.
Delaware law and provisions in our restated charter and bylaws could make a merger, tender offer or proxy contest difficult, thereby depressing the trading price of Class A common stock.
Our status as a Delaware corporation and the anti-takeover provisions of the Delaware General Corporation Law may discourage, delay, or prevent a change in control by prohibiting us from engaging in a business combination with an interested stockholder for a period of three years after the person becomes an interested stockholder, even if a change of control would be beneficial to our existing stockholders. Our restated charter and bylaws contain provisions that may make the acquisition of our company more difficult, including the following:
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•our dual class common stock structure provides holders of Class B common stock with the ability to control the outcome of matters requiring stockholder approval, even if they own significantly less than a majority of the total number of outstanding shares of Class A and Class B common stock;
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•when the outstanding shares of Class B common stock represent less than a majority of the combined voting power of common stock:
stock;
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•amendments to our restated charter or bylaws will require the approval of two-thirds of the combined vote of our then-outstanding shares of Class A and Class B common stock;
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•vacancies on the board of directors will be able to be filled only by the board and not by stockholders;
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•the board, which currently is not staggered, will be automatically separated into three classes with staggered three-year terms;
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•directors will only be able to be removed from office for cause; and
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•our stockholders will only be able to take action at a meeting and not by written consent;
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•only our chair, our chief executive officer or a majority of our directors is authorized to call a special meeting of stockholders;
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•advance notice procedures apply for stockholders to nominate candidates for election as directors or to bring matters before an annual meeting of stockholders;
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•our restated charter authorizes undesignated preferred stock, the terms of which may be established, and shares of which may be issued, without stockholder approval; and
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•cumulative voting in the election of directors is prohibited.
As a Delaware corporation, we are also subject to provisions of Delaware law, including Section 203 of the Delaware General Corporation Law, which limits the ability of stockholders holding more than 15% of our outstanding voting stock from engaging in certain business combinations with us. Any provision of our charter or bylaws or Delaware law that has the effect of delaying or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of Class A common stock, and could also affect the price that some investors are willing to pay for Class A common stock.
Our restated charter designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain litigation that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or stockholders.
Our restated charter provides that the Court of Chancery of the State of Delaware will, to the fullest extent permitted by law, be the sole and exclusive forum for:
● 
•any derivative action or proceeding brought on our behalf;
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•any action asserting a claim of breach of a fiduciary duty owed to us, our stockholders, creditors or other constituents by any of our directors, officers, other employees, agents or stockholders;
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•any action asserting a claim arising under the Delaware General Corporation Law, our charter or bylaws, or as to which the Delaware General Corporation Law confers jurisdiction on the Court of Chancery of the State of Delaware; or
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•any action asserting a claim that is governed by the internal affairs doctrine.
By becoming a stockholder in our company, you will be deemed to have notice of and have consented to the provisions of our restated charter related to choice of forum. The choice of forum provision in our restated charter may limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or any of our directors, officers, other employees, agents or stockholders, which may discourage lawsuits with respect to such claims. Alternatively, if a court were to find the choice of forum provision contained in our restated charter to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, results of operations and financial condition.
Our management team has limited experience managing a public company.
Prior to the IPO, none of the current members of our management team had experience managing a publicly traded company, interacting with public company investors and complying with the increasingly complex laws pertaining to public companies. Our management team may not successfully or efficiently manage our transition to being a public company subject to significant regulatory oversight and reporting obligations under the federal securities laws and the scrutiny of securities analysts and investors. These new obligations and constituents will require significant attention from our management team and could divert their attention away from the day-to-day management of our business, which could materially adversely affect our business, financial condition and operating results.
We are currently an “emerging growth company,” and the reduced disclosure requirements applicable to emerging growth companies may make Class A common stock less attractive to investors.
We are currently an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act. For so long as we remain an emerging growth company, we are permitted, and intend, to rely on exemptions from certain disclosure requirements that are applicable to other public companies that are not emerging growth companies. These exemptions include reduced disclosure obligations regarding executive compensation and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act and not being required to comply with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements. We cannot predict whether investors will find the Class A common stock less attractive if we rely on these exemptions. If some investors find the Class A common stock less attractive as a result, there may be a less active trading market, and more volatile trading price, for Class A common stock.
We will incur increased costs and demands upon management as a result of complying with the laws and regulations affecting public companies particularly after we are no longer an “emerging growth company,” which could adversely affect our business, operating results and financial condition.
As a public company, and particularly after we cease to be an “emerging growth company,” we will continue to incur significant legal, accounting and other expenses. We are subject to the reporting requirements of the Securities and Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, and the rules and regulations of Nasdaq. These requirements have increased and will continue to increase our legal, accounting and financial compliance costs and have made and will continue to make some activities more time consuming and costly. For example, we expect these rules and regulations to make it more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to maintain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified individuals to serve as our executive officers or on the board of directors, particularly to serve on the audit and compensation committees.
The Sarbanes-Oxley Act requires, among other things, that we assess the effectiveness of our internal control over financial reporting annually and the effectiveness of our disclosure controls and procedures quarterly. In particular, beginning with respect to the year ending December 31, 2018, Section 404 of the Sarbanes-Oxley Act, or Section 404, will requirerequires our management to perform system and process evaluation and testing to allow it to report on the effectiveness of our internal control over financial reporting.
We are currently evaluating our internal controls, identifying and remediating deficiencies in those internal controls and documenting the results of our evaluation, testing and remediation. Please see “—Our management and auditors identified a material weakness in our internal control over financial reporting that, if not properly remediated, could result in material misstatements in our consolidated financial statements that could cause investors to lose confidence in our reported financial information and have a negative effect on the trading price of our stock.”
Investor perceptions of our company may suffer if deficiencies are found, which could cause a decline in the market price of our stock. Irrespective of compliance with Section 404, any failure of our internal control over financial reporting could have a material adverse effect on our stated operating results and harm our reputation. If we are unable to implement these requirements effectively or efficiently, it could harm our operations, financial reporting, or financial results and could result in an adverse opinion on our internal controls from our independent registered public accounting firm.
In addition, changing laws, regulations and standards relating to corporate governance and public disclosure are creating uncertainty for public companies, increasing legal and financial compliance costs and making some activities more time consuming. These laws, regulations and standards are subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We intend to invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expense and a diversion of management’s time and attention from revenue-generating activities to compliance activities. If our efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory or governing bodies, regulatory authorities may initiate legal proceedings against us and our business may be harmed.
Short sellers of our stock may be manipulative and may drive down the market price of our Class A common stock.
Short selling is the practice of selling securities that a seller does not own but rather has borrowed, or intends to borrow, from a third party with the intention of buying identical securities at a later date to return to the lender. A short seller hopes to profit from a decline in the value of the securities between the sale of the borrowed securities and the purchase of the replacement shares, as the short seller expects to pay less in that purchase than it received in the sale. As it is in the short seller’s interest for the price of the stock to decline, some short sellers publish, or arrange for the publication of, opinions or characterizations regarding the relevant issuer, its business prospects and similar matters calculated to or which may create
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negative market momentum, which may permit them to obtain profits for themselves as a result of selling the securities short. The use of the Internet, social media, and blogging have allowed short sellers to publicly attack a company’s credibility, strategy and veracity by means of so-called “research reports” that mimic the type of investment analysis performed by legitimate securities research analysts. Issuers with limited trading volumes or substantial retail stockholder bases can be particularly susceptible to higher volatility levels, and can be particularly vulnerable to such short attacks.
Item 1B:Short seller publications are not regulated by any governmental or self-regulatory organization or any other official authority in the United States and are not subject to the certification requirements imposed by the SEC in Regulation Analyst Certification. Accordingly, the opinions they express may be based on distortions of actual facts or, in some cases, outright fabrications. In light of the limited risks involved in publishing such information, and the significant profits that can be made from running successful short attacks, short sellers will likely continue to issue such reports. Short-seller publications may create the appearance or perception of wrongdoing, even when they are not substantiated, and may therefore affect the reputation or perception of our company and management.
While we intend to strongly defend our public filings against any such short seller attacks, in many situations we could be constrained, for example, by principles of freedom of speech, applicable state law or issues of commercial confidentiality, in the manner in which we are able to proceed against the relevant short seller.
Such short-seller attacks have caused, and may cause in the future, temporary or possibly long term, declines in the market price of Class A common stock and possible litigation initiated against us.
General
Our production facilities could be damaged or disrupted by a natural disaster, war, terrorist attacks or other catastrophic events.
Our manufacturing facilities are subject to risks associated with natural disasters, such as earthquakes, fires, floods tsunami, typhoons and volcanic activity, environmental disasters, health epidemics, and other events beyond our control such as power loss, telecommunications failures, and uncertainties arising out of armed conflicts or terrorist attacks. The frequency and intensity of severe weather events are reportedly increasing throughout the world as part of broader climate changes. Global weather pattern changes may pose long-term risks of physical impacts to our business. A substantial majority of our facilities as well as our research and development personnel are located in mainland China. Any catastrophic loss or significant damage to any of our facilities would likely disrupt our operations, delay production, and adversely affect our product development schedules, shipments and revenue. In addition, any such catastrophic loss or significant damage could result in significant expense to repair or replace the facility and could significantly curtail our research and development efforts in a particular product area or primary market, which could have a material adverse effect on our operations and operating results.
Item 1B.    Unresolved Staff Comments
None.
Item 2: PropertiesItem 1C.    Cybersecurity

Cybersecurity Risk Management and Strategy

We recognize the importance of assessing, identifying, and managing material risks associated with cybersecurity threats, as such term is defined in Item 106(a) of Regulation S-K. These risks include, among other things: operational risks, intellectual property theft, fraud, extortion, harm to employees or customers and violation of data privacy or security laws.
Identifying and assessing cybersecurity risk is integrated into our overall risk management systems and processes.

Cybersecurity risks related to our business, technical operations, privacy and compliance issues are identified and addressed through a multi-faceted approach including third party assessments, internal IT Audit, IT security, governance, risk and compliance reviews. To defend, detect and respond to cybersecurity incidents, we, among other things: conduct proactive privacy and cybersecurity reviews of systems and applications, audit applicable data policies, perform penetration testing using external third-party tools and techniques to test security controls, conduct employee training, monitor emerging laws and regulations related to data protection and information security and implement appropriate changes.

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As part of our risk management process, we conduct application security assessments, vulnerability management, penetration testing, security audits, and ongoing risk assessments. We also maintain a variety of incident response plans that are utilized when incidents are detected. We require employees with access to information systems, including all corporate employees, to undertake data protection and cybersecurity training and compliance programs.

We describe whether and how risks from cybersecurity threats are reasonably likely to materially affect us, including our financial performance and results of operations, under the heading “Breaches of our cybersecurity systems could degrade our ability to conduct our business operations and deliver products to our customers, result in data losses and the theft of our intellectual property, damage our reputation, and require us to incur significant additional costs to maintain the security of our networks and data” in Item 1A, “Risk Factors” of Part I of this report.

Cybersecurity Governance

Cybersecurity is an important part of our risk management processes. Our Audit Committee is responsible for the oversight of risks from cybersecurity threats. Members of the Audit Committee receive reports of any breaches or developments regarding matters of cybersecurity. This includes existing and new cybersecurity risks, status on how management is addressing and/or mitigating those risks, cybersecurity and data privacy incidents (if any) and status on key information security initiatives. Our Audit Committee and Board members may also engage in ad hoc conversations with management on cybersecurity-related news events and discuss any updates to our cybersecurity risk management and strategy programs.

Our cybersecurity risk management and strategy processes are overseen by leaders from our Information Security, Product Security, Compliance and Legal teams. Key individuals have an average of over 15 years of prior work experience in various roles involving information technology, including security, auditing, compliance, systems and programming. These individuals are informed about, and monitor the prevention, mitigation, detection and remediation of cybersecurity incidents through their management of, and participation in, the cybersecurity risk management and strategy processes described above, including the operation of our incident response plan, and report directly or indirectly to the Audit Committee on any appropriate items.

Item 2. Properties

We have occupied our current corporate headquarters in Fremont, California, since February 2008, under a lease that, as amendedafter an amendment in March 2017,February 2023, now extends through March 2019. 31, 2025.
We conduct our research and development, and manufacturing and service support operations in a facility of approximately 60,000 square feet, of which 36,000 square feet is dedicated to manufacturing,and administrative activities at ACM Shanghai’s headquarters located in the Zhangjiang Hi­Hi Tech Park in Shanghai, PRC.Shanghai. We have leased this facility since 2007.2007 and our lease currently extends until December 31, 2024. In the year ended December 31, 2023, ACM Shanghai completed its purchase of facilities in the ZhangJiang free trade zone, part of the Pudong district of Shanghai. The facilities consist of four buildings for administrative and R&D office use, and, following the expected move-in in the 2024 timeframe, are intended to serve as the corporate headquarters for ACM Shanghai.
In January 2018, ACM Shanghai entered into an operating lease for a second manufacturing space located in Shanghai, ten miles from its headquarters. The lease terms and its payment termscovers a total of 103,318 square feet, of which 100,000 square feet are subjectallocated for production. Our lease currently extends until January 15, 2028. In February 2021, ACM Shanghai entered into an operating lease for a second building located adjacent to modification and extension with Zhangjiang Group from timethe above-mentioned second manufacturing space to time.provide additional manufacturing space. The lease with Zhangjiang Group expired on December 31, 2017covers approximately 106,076 square feet of which 100,000 square feet are allocated for production. Our lease currently extends until July 15, 2024. In July 2022, ACM Shanghai entered into an operating lease for a third building to provide additional manufacturing and we are now leasing the property on a month-­to-­month basis as we negotiate the terms of the lease. warehousing space.
In addition, we provideperform sales support, and customer service operations, R&D, and production activities from leased office spacefacilities in Jiangying, PRC,Jiangyin and Wuxi PRC,in mainland China and Icheon in Korea.
In May 2020 ACM Shanghai, through its wholly owned subsidiary ACM Shengwei, entered into an agreement for a 50-year land use right in the Lingang region of Shanghai. In July 2020 ACM Shengwei began a multi-year construction project for a new development and production center. The planned 1,000,000 square foot facility will incorporate state-of-the-art manufacturing systems and automation technologies and will provide the floor space to support significantly more production capacity and related research and development activities when fully staffed and supplied.
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In connection with the Lingang facility project, on October 28, 2020, a wholly owned subsidiary of ACM Shengwei entered into Shanghai Public Rental Housing Overall Pre-Sale Contracts with Shanghai Lingang Industrial Zone Public Rental Housing Construction and Operation Management Co., Ltd. for an aggregate price to us of approximately $40 million. ACM Shengwei’s subsidiary received ownership of the apartment units and corresponding land use rights in January 2022 as part of a pilot project of public rental housing in the “rent before sale” park in the Lingang Industrial Zone. The contracts stipulate that, for a ten-year term, ACM Shengwei’s subsidiary is obligated to manage the apartment units for public rental use in accordance with public rental housing standards and must rent the apartment units to employees of ACM Shanghai and its subsidiaries who work in the Lingang Industrial Zone. After that ten-year period expires, ACM Shengwei’s subsidiary may use the apartment units as stock of commercial housing and may sell them separately in sets.
Effective April 1, 2023, we entered an agreement to lease a 10,683 square foot facility in Hillsborough, Oregon beginning April 1, 2023 until August 31, 2030. The facility is being used for our U.S.-based sales and services team to support customer activities in the region.
Item 3.    Legal Proceedings
From time to time we may become involved in legal proceedings or may be subject to claims arising in the ordinary course of our business. Although the results of litigationthese proceedings and claims cannot be predicted with certainty, we currently believe that the final outcome of these ordinary course matters will not have a material adverse effect on our business, operating results, financial condition or cash flows. Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors. As of December 31, 2023, the Company had no outstanding material legal proceedings, other than ordinary routine litigation incidental to the business.
Item 4:Item 4.    Mine Safety Disclosures
Not applicable.
PARTPART II
Item 5:Item 5.     Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Information Regarding the Trading of Common Stock

The Class A common stock has traded on NASDAQ Global Market under the symbol “ACMR” since November 3, 2017.Prior to that time, there was no public market for the Class A common stock. The table below lists the high and low sales prices of the Class A common stock, as reported by the Nasdaq Global Market.
 
 
High
 
 
Low
 
Fourth Quarter 2017 (from November 3, 2017)
 $8.48 
 $4.91 
The Class B common stock is not listed or traded on any stock exchange.

Holders of Common Stock
As of March 19, 2018,February 23, 2024, there were 136 holders of record ofwere 56,073,205 shares of Class A common stock and 58 holdersoutstanding held of record of shares of Class B common stock.by 46 stockholders. The actual number of holders of Class A common stock is substantially greater and includes stockholders who are beneficial owners and whose shares are held of record by banks, brokers, and other financial institutions.
Dividends
February 23, 2024, there were 5,021,811 shares of Class B common stock held of record by 16 stockholders.
We have never declared or paid cash dividends on our capital stock. We intend to retain all available funds and any future earnings to support the operation of and to finance the growth and development of our business and do not anticipate paying any cash dividends in the foreseeable future. Any future determination to declare cash dividends on Class A and Class common stock will be made at the discretion of the board of directors and will depend on various factors, including our results of operations, financial condition, liquidity requirements, capital requirements, level of indebtedness, contractual restrictions with respect to payment of dividends, restrictions imposed by applicable law, general business conditions and other factors that the board may deem relevant.
Our ability to pay dividends on Class A and Class B common stock depends significantly on our receiving distributions of funds from our subsidiaries in the PRC. PRC statutory laws and regulations permit payments of dividends by those subsidiaries only out of their retained earnings, which are determined in accordance with PRC accounting standards and regulations that differ from U.S. generally accepted accounting principles. The PRC regulations and our subsidiaries’ articles of association require annual appropriations of 10% of net after-tax profits to be set aside, prior to payment of dividends, as a reserve or surplus fund, which restricts our subsidiaries’ ability to transfer a portion of their net assets to us. As of December 31, 2017, no cash was restricted under those PRC regulations or our subsidiaries’ articles because our subsidiaries had never generated net after-tax profits. In addition, our subsidiaries’ short-term bank loans restrict their ability to pay dividends to us.
Securities Authorized for Issuance Under Equity Compensation Plans
The information required by this item will be set forth in the definitive proxy statement we will file in connection with our 20182024 Annual Meeting of Stockholders and is incorporated by reference herein.
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Sales of Unregistered Securities
Set forth below is information regardingDuring the three months ended December 31, 2023, ACM Research issued, pursuant to the exercise of stock options at a per share exercise price of $0.50 per share, an aggregate of 235,581 shares of capitalClass A common stock and options granted by us in 2017 that were not registered under the Securities Act of 1933.
(1) 
We granted stock options to purchase an aggregatebelieve the offer and sale of 336,671those shares of Class A common stock, with exercise prices ranging from $5.60 to $7.50 per share.
(2) 
We issued an aggregate of 472,889 shares of Class A common stock pursuant to the exercise of stock options at per share exercise prices ranging from $0.75 to $3.00.
(3) 
In March 2017 we issued a warrant to acquire 397,502 shares of Class A common stock for an aggregate purchase price of $2,981,265.
(4) 
In March 2017 we issued 4,998,508 shares of Series E convertible preferred stock for an aggregate purchase price of $5,800,000.
(5) 
In August 2017 we issued 1,119,576 shares of Class A common stock for an aggregate purchase price of $8,396,820.
(6) 
In August 2017 we issued 787,098 shares of Class A common stock for an aggregate purchase price of $5,903,235.
(7) 
In September 2017 we issued 133,334 shares of Class A common stock for an aggregate purchase price of $1,000,000.
(8) 
In November 2017 we issued 1,333,334 shares of Class A common stock in a concurrent private placement at a price of $5.60 per share.
(9) 
In November 2017 we issued warrants to acquire an aggregate of 80,000 shares of Class A common stock for an aggregate purchase price of $492,800.
The offers, sales, grants and issuances of the securities described in paragraphs (1) and (2) were deemed to be exempt from registration under the Securities Act of 1933 in reliance on Rule 701. The recipientsby virtue of such securities were our employees, officers, directors, bona fide consultants and advisors and received the securities under our 1998 Stock Option Plan, written compensation contracts or our 2016 Omnibus Incentive Plan. Appropriate legends were affixed to the securities issued in these transactions. Each of the recipients of securities in these transactions had adequate access, through employment, business or other relationships, to information about us.
The offer, sale and issuance of the securities described in paragraphs (3) through (9) were deemed to be exempt from registration under the Securities Act in reliance on Section 4(a)(2) of the Securities Act in that the issuance of the securities to the accredited investorsthereof (or Regulation D promulgated thereunder) because they did not involve a public offering. The recipients of the securities in these transactionsshares acquired the securities for investment only and not with a view to or for sale in connection with any distribution thereof, and appropriate legends were affixedrecorded with respect to the securities issued in these transactions.shares. The recipients of the securities in these transactionsshares were accredited investors under Rule 501 of Regulation D.
Sale DateExercised
Shares (Net)
November 3, 202326,821
November 14, 2023174,776
November 14, 202333,984
Total235,581
Use of Proceeds
Performance Graph
The Registration Statement on Form S-1 (File No. 333- 220451) forfollowing graph compares the IPO was declared effective bytotal return of an investment of $100 in cash at the SEC onclosing price of November 2, 2017. Shares of Class A3, 2017, which is the date our common stock first began trading on Nasdaq, through December 31, 2023 for (1) our common stock, (2) the Russell 1000 index, and (3) the Nasdaq Global Market on November 3, 2017.
The underwriters of the IPO were Roth Capital Partners, LLC, Craig-Hallum Capital Group LLC and The Benchmark Company, LLC. The offering commenced on November 2, 2017 and did not terminate until the saleComposite Index. All values assume reinvestment of all dividends. Stockholder returns over the indicated period are based on historical data and are not necessarily indicative of future stockholder returns.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN
Among ACM Research, Inc., the shares offered.
We paid to the underwriters of the IPO underwriting discounts and commissions totaling $841,036 in connection with the sale of 2,233,000 shares of Class A common stock. In addition, we incurred expenses of $1.9 million which, when added to the underwriting discounts and commissions, amounted to total expenses of $2.7 million. As a result, the IPO net proceeds, after deducting underwriting discounts and commissions and offering expenses, were $17.3 million. No offering expenses were paid directly or indirectly to any of our directors or officers (or their associates) or persons owning 10.0% or more of any class of our equity securities or to any other affiliates.
There has been no material change in the planned use of IPO proceeds from that described in the final prospectus filed with the Securities and Exchange Commission pursuant to Rule 424(b)(4) under the Securities Act of 1933 on November 3, 2017.
To date we have applied $7.8 million of the proceeds to purchase inventories and $1.0 million in our normal course of business operations.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
None.
Transfer Agent
The transfer agent and registrar for the Class A common stockNasdaq Index, and the Class B common stock is Computershare Trust Company, N.A.Russell 1000 Index
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Item 6: Selected Financial Data
Not applicable.

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Item 7:Item 7.    Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis should be read in conjunction with the audited consolidated financial statements and related notes included in this report. In addition to historical information, the following discussion contains forward-looking statements that involves risks, uncertainties and assumptions. See “Forward-Looking Statements and Statistical Data” at page 43 of this report. Please read “Item1A.“Item 1A. Risk Factors” for a discussion of factors that could cause our actual results to differ materially from our expectations.
expectations
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Overview
We develop, manufacture and sell single-wafer wet cleaning equipment, which semiconductor manufacturers can use in numerous manufacturing steps to remove particles, contaminants and other random defects, and thereby improve product yield, in fabricating advanced integrated circuits, or chips. Our Ultra C equipment is designed to remove random defects from a wafer surface effectively, without damaging a wafer or its features, even at an increasingly advanced process node (the minimum line width on a chip) of 22 nanometers, or nm, or less. Our equipment is based on our innovative, proprietary Space Alternated Phase Shift, or SAPS, and Timely Energized Bubble Oscillation, or TEBO, technologies. We developed our proprietary technologies to enable manufacturers to produce chips that reach their ultimate physical limitations while maintaining product yield, which is the percentage of chips on a wafer that meet manufacturing specifications
We seek to market our wet processing equipment by first establishing a referenceable base of leading logic and memory chip makers, whose use of our products can influence decisions by other manufacturers. We believe this process will help us to penetrate the mature integrated circuit manufacturing markets and to build credibility with industry leaders. We have placed evaluation SAPS equipment with selected memory and logic chip customers since 2009 and recognized revenue from SAPS equipment since 2011. Using a similar “demo-to-sales” process, we began placing TEBO evaluation equipment with selected customers in 2016 and recognized revenue from our initial sale of TEBO equipment in December 2016. As of December 31, 2017, we had sold and deployed more than 30 single-wafer wet cleaning tools. We recognized revenue from the selected customers’ purchases of single-wafer wet cleaning equipment totaling $27.1 million, or 74.2% of our revenue, in 2017 and $21.5 million, or 78.4% of our revenue, in 2016.
We market and sell our products worldwide using a combination of our direct sales force and third-party representatives. We employ direct sales teams in Asia, Europe and North America, and have located these teams near our customers, primarily in the People’s Republic of China, or PRC, Korea, Taiwan and the United States. To supplement our direct sales teams, we have contacts with several independent sales representatives in the PRC, Taiwan and Korea. We also provide after-sales services to our customers by installing new replacement parts as well as making small scale modifications to improve our customers’ product yields.
We established our operational center in Shanghai in 2006 to help us establish and build relationships with chip manufacturers in China and throughout Asia. In addition to our SAPS and TEBO tools, we offer a range of custom-made wafer assembly and packaging equipment, such as coaters and developers, to wafer assembly and packaging factories, principally in the PRC.
Corporate Background
ACM Research was incorporated in California in 1998 and redomesticated toin Delaware in November 2016. Key eventsWe perform strategic planning, marketing, and financial activities at our global corporate headquarters in Fremont, California. ACM Research is neither a mainland China operating company nor do we conduct our corporate developmentoperations in mainland China through the use of VIEs.
We supply advanced, innovative capital equipment developed for the global semiconductor industry. Fabricators of advanced integrated circuits, or chips, can use our wet-cleaning and other front-end processing tools in numerous steps to improve product yield, even at increasingly advanced process nodes. We have included:designed these tools for use in fabricating foundry, logic and memory chips, including DRAM 3D NAND-flash memory chips, power semiconductor and compound semiconductor chips. We also develop, manufacture and sell a range of advanced packaging tools to wafer assembly and packaging customers.
● 
Initially weWe are focused on developingbuilding a strategic portfolio of intellectual property to support and protect our key innovations. Our tools have been developed using our key proprietary technologies:
•SAPS technology for flat and patterned wafer surfaces, which employs alternating phases of megasonic waves to deliver megasonic energy in a highly uniform manner on a microscopic level;
•TEBO technology for patterned wafer surfaces at advanced process nodes, which provides effective, damage-free cleaning for 2D and 3D patterned wafers with fine feature sizes;
•Tahoe technology for cost and environmental savings, which delivers high cleaning performance using significantly less sulfuric acid and hydrogen peroxide than is typically consumed by conventional high-temperature single-wafer cleaning tools; and
•ECP technology for advanced metal plating, which includes Ultra ECP ap, or Advanced Packaging, technology for back-end assembly processes, Ultra ECP 3d for through-silicon-via, or tsv, and Ultra ECP map, or Multi-Anode Partial Plating, technology for front-end wafer fabrication processes.
In 2021, 2022 and 2023 we introduced and delivered a range of new tools intended to broaden our revenue opportunity with global semiconductor manufacturers. Product extensions include the Ultra SFP ap tool for advanced packaging solutions, the Ultra C VI 18-chamber single wafer cleaning tool for advanced memory devices, and the Ultra ECP 3d platform for through-silicon-via, or tsv, application. New product lines include the Ultra fn Furnace, our first dry processing tool, and a suite of semi-critical cleaning systems which include single wafer back side cleaning, scrubber, and auto bench cleaning tools.
We added two major new product categories in 2022 with the launch of the Ultra Pmax™ PECVD tool, which is equipped with a proprietary designed chamber, gas distribution unit and chuck, and is intended to provide better film uniformity, reduced film stress, and improved particle performance, and the introduction of the Ultra Track tool, a 300mm process tool that delivers uniform air downflow, fast robot handling and customizable software to address specific customer requirements, and has multiple features that enhance performance across defectivity, throughput, and cost of ownership.
We conduct a substantial majority of our product development, manufacturing, support and services in mainland China, with additional product development and subsystem production in Korea. Substantially all of our integrated tools are built to order at our manufacturing facilities in the Pudong region of Shanghai, which now encompass a total of 236,000 square feet of floor space for production capacity, with 100,000 square feet having been added in 2021 with the lease of a second building in the Pudong region of Shanghai. In May 2020 ACM Shanghai, through its wholly owned subsidiary ACM Shengwei, entered into an agreement for a land use right in the Lingang region of Shanghai. In 2020 ACM Shengwei began a multi-year construction project for a new 1,000,000 square foot development and production center that will incorporate state-of-the-art manufacturing systems and automation technologies and will provide floor space to support significantly increased production capacity and related R&D activities. We expect to complete construction of the first Lingang manufacturing building and commence initial production in the first half of 2024 timeframe. See “Item 2. Properties” of Part I of this report.
Our experience has shown that chip manufacturers in mainland China and throughout Asia demand equipment meeting their specific technical requirements and prefer building relationships with local suppliers. We will continue to seek to leverage our local presence to address the growing market for semiconductor manufacturing process steps involvingequipment in the integrationregion by working closely with regional chip manufacturers to understand their specific requirements, encourage them to adopt our SAPS, TEBO, Tahoe, ECP, furnace, PECVD, Track, and other technologies, and enable us to design innovative products and solutions to address their needs.
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Our Independent Registered Public Accounting Firm
The U.S. Holding Foreign Companies Accountable Act, or the HFCA Act, requires that the Public Company Accounting Oversight Board, or the PCAOB, determine whether it is unable to inspect or investigate completely registered public accounting firms located in a non-U.S. jurisdiction because of a position taken by one or more authorities in any non-U.S. jurisdiction. BDO China Shu Lun Pan Certified Public Accountants LLP, or BDO China, had been our independent registered public accounting firm in recent years, including for the year ended December 31, 2021. On June 22, 2021, the U.S. Senate passed the Accelerating Holding Foreign Companies Accountable Act, which was enacted on December 29, 2022 under the Consolidated Appropriations Act, 2023, as further described below. On December 16, 2021, the PCAOB reported its determination that it was unable to inspect or investigate completely registered public accounting firms headquartered in mainland China and copper. In the early 2000s, we sold toolsHong Kong, including BDO China, because of positions taken by mainland China authorities in those jurisdictions. On March 30, 2022, based on stress-free copper-polishing technology.this determination, ACM Research was transferred to the SEC’s “Conclusive list of issuers identified under the HFCAA.” See “Item 1A. Risk Factors—Risks Related to International Aspects of Our Business—We could be adversely affected if we are unable to comply with recent and proposed legislation and regulations regarding improved access to audit and other information and audit inspections of accounting firms operating in mainland China” of this report for more information. Under current regulations, if ACM Research were to be included on this list for two consecutive years due to our independent auditor being located in a jurisdiction that does not allow for PCAOB inspections, the SEC would prohibit trading in our securities and this ultimately could cause our securities to be delisted in the U.S., and their value may significantly decline or become worthless.
On December 15, 2022, the PCAOB announced that it was able to secure complete access to inspect and investigate PCAOB-registered public accounting firms headquartered in mainland China and Hong Kong in 2022 and vacated its previous December 16, 2021 determination to the contrary. However, whether the PCAOB will continue to be able to satisfactorily conduct inspections of PCAOB-registered public accounting firms headquartered in mainland China and Hong Kong is subject to uncertainty and depends on a number of factors out of our, and our auditor’s, control. mainland China authorities will need to ensure that the PCAOB continues to have full access for inspections and investigations in 2023 and beyond. Each year, the PCAOB will determine whether it can inspect and investigate completely audit firms in mainland China and Hong Kong, among other jurisdictions. If the mainland China authorities do not allow the PCAOB complete access for inspections and investigations for two consecutive years, the SEC would prohibit trading in the securities of issuers engaging those audit firms, as required under the HFCA Act. Further, on December 29, 2022, the Consolidated Appropriations Act, 2023, was signed into law by U.S. President Biden, which, among other things, amended the HFCA Act to reduce the number of consecutive non-inspection years that would trigger the trading prohibition under the HFCA Act from three years to two years (originally such threshold under the HFCA Act was three consecutive years), and so that any foreign jurisdiction could be the reason why the PCAOB does not have complete access to inspect or investigate a company’s public accounting firm (originally the HFCA Act only applied if the PCAOB’s ability to inspect or investigate was due to a position taken by an authority in the jurisdiction where the relevant public accounting firm was located).
On June 30, 2022, and June 15, 2023, stockholders of ACM Research ratified the appointment of Armanino as our independent auditor for the years ended December 31, 2022 and 2023, respectively. Armanino was neither headquartered in mainland China or Hong Kong nor was it subject to the determinations announced by the PCAOB on December 16, 2021, which determinations were vacated by the PCAOB on December 15, 2022. On July 21, 2023, we were informed by Armanino, that Armanino would resign as our independent auditor effective as of the earlier of (a) the date we engaged a new independent registered public accounting firm or (b) the filing of our Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2023.

On September 14, 2023, the Audit Committee completed a competitive selection process to select and appoint a new accounting firm to serve as our independent registered public accounting firm commencing with the audit of our financial statements for the fiscal year ended December 31, 2023. As a result of this process, the Audit Committee approved the engagement of E&Y as our independent registered public accounting firm for the fiscal year ended December 31, 2023. The engagement of E&Y became effective on September 20, 2023. E&Y is a PCAOB-registered firm that is headquartered in mainland China; however, we do not believe ACM Research will appear on the “Conclusive list of issuers identified under the HFCAA” for a second consecutive time, as the determinations announced by the PCAOB on December 16, 2021 were vacated by the PCAOB on December 15, 2022.
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● 
In 2006 we moved our operational center to Shanghai, where we began to conduct our business through our subsidiary ACM Shanghai. This move was made to help us establish and build relationships with chip manufacturers in the PRC. We have financed our operations in part through the sale of minority equity interests in ACM Shanghai.
● 
In 2007 we began to focus our development efforts on single-wafer wet-cleaning solutions for the front-end chip fabrication process.
STAR Listing and IPO
● 
In 2008 ACM Shanghai received an initial grant from local and central governmental authorities in the PRC. The grant relates to the development and commercialization of 65nm to 45nm stress-free polishing technology.
● 
In 2009 we introduced SAPS megasonic technology, which can be applied in wet wafer cleaning at numerous steps during the chip fabrication process.
● 
In 2011 ACM Shanghai formed a wholly owned subsidiary in the PRC, ACM Research (Wuxi), Inc., to manage sales and service operations.
● 
In 2014 ACM Shanghai received an additional grant from local and central governmental authorities in the PRC. The grant relates to the development of electro copper-plating technology.
● 
In March 2016 we introduced TEBO technology, which can be applied at numerous steps during the fabrication of small node conventional two-dimensional and three-dimensional patterned wafers.
● 
In March and August 2017, we entered into agreements pursuant to which we will acquire all of the outstanding minority equity interests in ACM Shanghai by no later than December 31, 2017, as described below under “—Recent Equity Transactions—Acquisition of Outstanding Minority Interests in Our Operating Company.”
● 
In June 2017 we formed a wholly owned subsidiary in Hong Kong, CleanChip Technologies Limited, to act on our behalf in Asian markets outside the PRC by, for example, serving as a trading partner between ACM Shanghai and its customers, procuring raw materials and components, performing sales and marketing activities, and making strategic investments.
● 
In September 2017, ACM effectuated a 1-for-3 reverse stock split, or the Reverse Split, of Class A and Class B common stock. Unless otherwise indicated, all share numbers, per share amount, share prices, exercise prices and conversion rates set forth in those notes and the accompanying condensed consolidated financial statements have been adjusted retrospectively to reflect the Reverse Split.
● 
InOn November 2017 ACM issued 2,233,000 shares of Class A common stock and received net proceeds of $11,664,000 from our initial public offering, or the IPO, and concurrently ACM issued additional 1,333,334 shares of Class A common stock through a private placement for net proceeds of $7,053,000.
Recent Equity Transactions
Issuance of Warrant
In December 2016 Shengxin (Shanghai) Management Consulting Limited Partnership, or SMC, delivered to our18, 2021, ACM’s operating subsidiary ACM Shanghai 20,123,500 RMB (approximately $3.0 million as of the date of funding) in cash,completed:
•a listing, which we refer to as the SMC Investment, for potential investment pursuantSTAR Listing, of shares of ACM Shanghai on the Shanghai Stock Exchange’s SciTech innovAtion boaRd, known as the STAR Market; and
•a concurrent initial public offering, which we refer to terms to be subsequently negotiated. SMC isas the STAR IPO, of ACM Shanghai shares in mainland China, at a PRC limited partnership owned by Jian Wang, our Vice President, Research and Developmentpre-offering valuation of not less than RMB 5.15 billion ($747.1 million).
Following the completion of the STAR IPO, ACM Shanghai’s shares began trading on the STAR Market under the stock code 688082. In the STAR IPO, ACM Shanghai issued 43,355,753 shares, representing ten percent of the total 433,557,100 shares outstanding after the STAR IPO. The shares were issued at a public offering price of RMB 85.00 per share, and the brother of our Chairproceeds of the Board, Chief Executive OfficerSTAR IPO totaled approximately $545.5 million, net of fees and President, David H. Wang,expenses. Upon completion of the STAR IPO, ACM owned approximately 82.5% of the outstanding ACM Shanghai shares. However, in May 2023, ACM's ownership declined to 82.1% due to the exercise of 2,150,309 stock options related to ACM Shanghai shares (note 18).
We believe the STAR Listing will continue to help scale our business in mainland China, and other employees of ACM Shanghai. In March 2017 we issuedcontinue to SMC a warrant exercisableseek to purchase 397,502 sharesbroaden our markets in Europe, Japan, Korea, Taiwan and the United States. Our global headquarters are located in Fremont, California, and we are committed to maintaining the listing of Class A common stock aton the Nasdaq Global Market.
ACM Shanghai Dividend
During year ended December 31, 2023, ACM Shanghai paid a pricedividend to the stockholders of $7.50ACM Shanghai (including ACM Research) in the amount of RMB 0.372 per share for aan aggregate total exercise price of approximately $3.0 million.RMB 161.28 million ($22.2 million).

Restrictions Imposed by the U.S. Department of Commerce on mainland China-Based Semiconductor Producers

In early October 2022 the U.S. government enacted new rules aimed at restricting U.S. support for mainland China’s ability to manufacture advanced semiconductors. The warrant may be exercisedrules included new export license requirements for cashexports, re-exports or on a cashless basis,transfers to or within mainland China of additional types of semiconductor manufacturing items, items for use in manufacturing designated types of semiconductor manufacturing equipment in mainland China, and semiconductor manufacturing equipment for use at certain IC manufacturing and development facilities in mainland China. In addition, the optionU.S. government imposed new restrictions by which U.S. persons anywhere in the world are effectively barred from engaging in certain activities related to the development and production of SMC,certain semiconductors at any time on or before May 17, 2023 to acquire all, but not less than all, of the shares of Class A common stockmainland China fabrication facilities meeting specified criteria, even if no items subject to the warrant.U.S. Export Administration Regulations (EAR) are involved. These restrictions were later updated to extend to Macau.

● In October 2023, the U.S. government revised and expanded the October 2022 controls with the release of additional rules. While the release primarily clarified the October 2022 regulations, certain changes have the potential to be more significant. In particular, the U.S. government expanded license requirements on additional types of semiconductors, semiconductor manufacturing items, and items for use in manufacturing certain types of semiconductor manufacturing equipment, and also expanded the scope to include additional countries beyond mainland China and Macau.
If SMC does not exercise the warrant by May 17, 2023,
ACM Shanghai will be obligated, subject to approvalhas determined that several of PRC governmental authoritiesits customers have mainland China-based facilities that meet the restricted criteria set out in the October 2022 and October 2023 rules, and has also determined that several of its products, and/or components for its products, may meet the parameters of export control classification numbers, or ECCNs, affected by the restrictions. ACM and ACM Shanghai’s equity holders,Shanghai have implemented modifications to deliver an equity interesttheir existing business policies and practices in response to the October 2022 restrictions, including by imposing limitations on the activities of 3.6394% (subjecttheir U.S. persons and undertaking measures in connection with their supply chains more broadly to dilution) in satisfaction ofcomply with the SMC Investment.
● 
If SMC exercises the warrant or SMC does not exercise the warrant and the issuance of the equity interest in new regulations. ACM Shanghai is continuing to assess the impact of the October 2023 changes, together with the October 2022 rules, and will continually adjust or modify its policies and practices as required to comply with these or other related updates. Based on our ongoing review, we believe these regulations may directly impact ACM Shanghai’s ability to meet its future production plans, or indirectly impact the spending plans of ACM Shanghai’s customer base. ACM may not completedbe able to import, or may face substantial restrictions in importing, certain parts from the United States or parts subject to U.S. export controls from outside the United States to support tool shipments to such facilities, or to be embedded into tools defined by August 17,affected ECCNs.

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ACM and ACM Shanghai believe that as a result of the October 2022 and October 2023 restrictions, several ACM Shanghai customers have significantly reduced production and related capital spending at facilities meeting the restricted advanced node capabilities. In addition, ACM Shanghai has experienced challenges as the companies in its supply chain adapt their policies to the new regulations. These factors had an adverse impact on ACM Shanghai’s shipments and sales for the twelve months ended December 30, 2023.

During the twelve months ended December 30, 2023, two prominent exporters of advanced semiconductor manufacturing equipment, the Netherlands and Japan, announced and began to implement plans to join the United States in imposing semiconductor-focused export controls.

On May 23, 2023, the Japanese government issued the final amendment to an ordinance implementing new export controls to require licensing for export of certain advanced semiconductor manufacturing equipment, effective as of July 23, 2023.The amendment expands the scope of export controls to prohibit (1) exporting twenty-three additional categories of items relating to semiconductor manufacturing and (2) providing technology relating to manufacturing, development or use of these categories of items, in both cases, without an advance license.While the expanded export controls apply to exports to any jurisdiction, exports to certain jurisdictions, such as the United States, are expected to be permitted by certain types of broad general licenses. However, it remains to be seen whether the Japanese government will authorize any exports of these items to mainland China by a limited general license or specific license, if at all.

On June 30, 2023, the Government of the Netherlands published additional export control measures for advanced semiconductor manufacturing equipment. The Regulation on Advanced Semiconductor Manufacturing Equipment took effect on September 1, 2023. From that point on, the export of certain advanced semiconductor manufacturing equipment, as specified in theAnnex to the Regulation, has been subject to a national export license authorization requirement by the Dutch Central Import and Export Service.

As a result of the new restrictions imposed by the Japanese and Dutch governments, ACM Shanghai and/or several of its customers in mainland China may be impacted by, and required to reduce their production capabilities due to, the inabilitylack of, the partiesor reduced, ability to obtain required governmental or equity holder approvals, then ACM Shanghai will be obligatedsource items relating to pay to SMC, in satisfaction of the SMC Investment, an amount equal to approximately $3.0 million.
In connection with the completion of IPO on November 2, 2017, we issued a five-year warrant to Roth Capital Partners, LLC, the Company's IPO underwriter, up to 80,000 shares ("Underwriter's Warrant) of the Company's Class A common stock at the exercise price of $6.16. The Underwriter's Warrant is immediately exercisable and expires on November 1, 2022. 
Acquisition of Outstanding Minority Interests in Our Operating Company
Until August 31, 2017, ACM Research owned 62.87% of the outstanding equity interests in ACM Shanghai and three PRC-based third-party investors held the remaining 37.13% of equity interests, which were reflected as “non-controlling interests” in our consolidated balance sheets and related notes. We took the following actions in order to enable ACM Research to acquire, consistent with requirements of arrangements previously entered into in connection with the investors’ acquisition of ACM Shanghai equity interests, the outstanding non-controlling interests in ACM Shanghai:
●
In March 2017 we entered into a securities purchase agreement with Shanghai Science and Technology Venture Capital Co., Ltd., or SSTVC, which held 18.77% of the ACM Shanghai equity interests. Pursuant to that agreement, effective as of August 31, 2017, we (a) acquired, for a purchase price of $5.8 million, SSTVC’s equity interests in ACM Shanghai and (b) issued to SSTVC, for a purchase price of $5.8 million, shares of Series E preferred stock that has converted, upon the closing of the IPO, into 1,666,170 shares of Class A common stock, at an effective purchase price of $3.48 per share.
●
In August 2017 we entered into a securities purchase agreement with Shanghai Pudong High-Tech Investment Co., Ltd., or PDHTI, and its subsidiary Pudong Science and Technology (Cayman) Co., Ltd., or PST, pursuant to which we (a) submitted the winning bid, in an auction process mandated by PRC regulations, to purchase PDHTI’s 10.78% equity interests in ACM Shanghai, which we completed on November 8, 2017, and (b) issued to PST, on September 8, 2017, 1,119,576 shares of Class A common stock for a purchase price of $7.50 per share, representing an aggregate purchase price of $8.4 million.
●
In August 2017 we entered into a securities purchase agreement with Shanghai Zhangjiang Science & Technology Venture Capital Co., Ltd., or ZSTVC, and its subsidiary Zhangjiang AJ Company Limited, or ZJAJ, pursuant to which we (a) submitted the winning bid, in an auction process mandated by PRC regulations, to purchase ZSTVC’s 7.58% equity interests in ACM Shanghai, which we completed on November 8, 2017, and (b) issued to ZJAJ, on September 8, 2017, 787,098 shares of Class A common stock for a purchase price of $7.50 per share, or an aggregate purchase price of $5.9 million.
Since November 8, 2017, ACM Research has owned all of the outstanding equity interests in ACM Shanghai.
Strategic Investment in Key Supplier
Ninebell Co., Ltd., or Ninebell, which is located in Seoul, Korea, is the principal supplier of robotic delivery system subassemblies used in our single-wafer cleaning equipment. On September 6, 2017 we and Ninebell entered into:
● 
an ordinary share purchase agreement, effective as of September 11, 2017, pursuant to which, contemporaneously with signing, Ninebell issued to us, for a purchase price of $1.2 million, ordinary shares representing 20% of Ninebell’s post-closing equity; and
● 
a common stock purchase agreement, effective as of September 11, 2017, pursuant to which, contemporaneously with signing, we issued 133,334 shares of Class A common stock to Ninebell for a purchase price of $7.50 per share, or an aggregate purchase price of $1.0 million.
In addition, under the ordinary share purchase agreement, Ninebell granted us a preemptive right for all future issuances of equity-related securities by Ninebellsemiconductor manufacturing from Japan and the founder of Ninebell, who isNetherlands.

See “Part II. Item 1A – Risk Factors – Regulatory Risks – Our ability to sell our tools to customers in mainland China has been impacted, and will likely continue to be materially and adversely impacted, by export license requirements, other regulatory changes, or other actions taken by the onlyU.S. or other equity holder of Ninebell, granted us a right of first refusal with respect to any future sales of his equity securities.governmental agencies” for more information.
Key Components of Results of Operations
Revenue
We develop, manufacture and sell single-wafer wet cleaning equipment and custom-made wafer assembly and packaging equipment. Because we currently sell ourinnovative capital equipment orto the global semiconductor industry. Since we sell tools to a small number of customers and we customize those tools to fulfill the customers’ specific requirements, our revenue generation fluctuates, depending on the length of the sales, development and evaluation phases:
•Sales and Development.Development. During the sale process we may, depending on a prospective customer’s specifications and requirements, need to perform additional research, development and testing to establish that a tool can meet the prospective customer’s requirements. We then host an in-house demonstration of the customized tool prototype. Sales cycles for orders that require limited customization and do not require that we develop new technology usually take from 6 to 12 months, while the product life cycle, including the initial design, demonstration and final assembly phases, for orders requiring development and testing of new technologies can take as long as 2 to 4 years. As we expand our customer base, we expect to gain more repeat purchase orders for tools that we have already developed and tested, which we believe will eliminatereduce the need for a demonstration phase and shorten the development cycle.
•Evaluation Periods. Periods. When a chip manufacturer proposes to purchase a particular type of tool from us for the first time, we offer the manufacturer an opportunity to evaluate the tool for a period that can extend for 24 months or longer. WeIn some cases, we do not receive any payment on first-time purchases until the tool is accepted. As a result, we may spend between $1.0 andmore than $2.0 million to produce a tool without receiving payment for more than 24 months or, if the tool is not accepted, without receiving any payment. Please see “Item 1A. Risk Factors—Risks Related to Our Business and Our Industry—We may incur significant expenses long before we can recognize revenue from new products, if at all, due to the costs and length of research, development, manufacturing and customer evaluation process cycles.”
•Purchase Orders. Orders. In accordance with industry practice, sales of our tools are made pursuant to purchase orders. Each purchase order from a customer for one of our tools contains specific technical requirements intended to ensure, among other things, that the tool will be compatible with the customer’s manufacturing process line. Until a
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purchase order is received, we do not have a binding purchase commitment. Our SAPS and TEBOSome of our customers to date have provided us with non-binding one- to two-year forecasts of their anticipated demands, and we expect future customers to furnish similar non-binding forecasts for planning purposes. Any of those forecasts would be subject to change, however, by the customer at any time, without notice to us.
Fulfillment. •Fulfillment. We seek to obtain a purchase order for a tool from three to four months in advance of the expected delivery date. Depending upon the nature of a customer’s specifications, the lead time for production of a tool generally will extend from two to four months. The lead-time can be as long asmore than six months, however, and in some cases, we may need to begin producing a tool based on a customer’s non-binding forecast, rather than waiting to receive a binding purchase order.
We expect our sales prices generally to range between $2.5from $0.5 million and $5.0to more than $5 million for SAPs tools and between $3.5 million and $6.5 million for TEBOour production tools. The sales price of a particular tool will vary depending upon the required specifications. We have designed equipment models using a modular configuration that we customize to meet customers’ technical specifications. For example, our Ultra C models for SAPS, TEBO and TEBOTahoe solutions use common modular configurations that enable us to create a wet-cleaning tool meeting a customer’s specific requirements, while using pre-existing designs for chamber, electrical, chemical delivery and other modules.
Because of the relatively largehigh purchase prices of our tools, customers generally pay in installments. For a customer’s repeat purchase of a particular type of tool, the specific payment terms are negotiated in connection with acceptance milestones of a purchase order. Based on our limited experience with repeat sales of SAPS and TEBOour tools, we expect that we will receive an initial payment upon delivery of a tool in connection with a repeat purchase, with the balance being paid onceafter the tool has been tested and accepted by the customer. Our sales arrangements for repeat purchases do not include a general right of return.
Since introducing SAPS technology in 2009, we have focused on selling SAPS-based tools and, beginning in 2016, TEBO-based tools. Our revenue from sales of single-wafer wet cleaning equipment totaled $27.1 million, or 74.2% of our revenue, in 2017 and $21.5 million, or 78.4% of our revenue, in 2016.
We have generated most of our revenue from a limited number of customers as the result of our strategy of initially placing SAPS- and TEBO-based equipment with a small number of leading chip manufacturers that are driving technology trends and key capability implementation. In 2017, 55.2% of our revenue was derived from four customers: SK Hynix Inc., a leading Korean memory chip company that accounted for 18.1% of our revenue; Shanghai Huali Integrated Circuit Research and Development Center Ltd., a public research consortia for the Chinese semiconductor industry that accounted for 14.1% of our revenue; JiangYin ChangDian Advanced Packaging Co. Ltd., a leading PRC foundry that accounted for 12.8% of our revenue; and Yangtze Memory Technologies Co., Ltd., a leading PRC memory chip company that, together with one of its subsidiaries, accounted for 10.2% of our revenue. In 2016 99.3% of our revenue was derived from four customers: Shanghai Huali Microelectronics Corporation, which accounted for 33.7% of our revenue; Semiconductor Manufacturing International Corporation, a leading PRC foundry that accounted for 25.0% of our revenue; SK Hynix Inc., which accounted for 24.0% of our revenue; and JiangYin ChangDian Advanced Packaging Co. Ltd., a leading PRC foundry that accounted for 16.6% of our revenue.
Based on our market experience, we believe that implementation of our equipment by one of our selected leading companies will attract and encourage other manufacturers to evaluate our equipment, because the leading company’s implementation will serve as validation of our equipment and will enable the other manufacturers to shorten their evaluation processes. We placed our first SAPS-based tool in 2009 as a prototype. We worked closely with the customer for two years in debugging and modifying the tool, and the customer then spent two more years of qualification and running pilot production before beginning volume manufacturing. We expect that the period from new product introduction to high volume manufacturing will be three years or less in the future. Please see “Item 1A. Risk Factors—Business—We depend on a small number of customers for a substantial portion of our revenue, and the loss of, or a significant reduction in orders from, one or more of our major customers could have a material adverse effect on our revenue and operating results. There are also a limited number of potential customers for our products.”
AllSubstantially all of our sales in 20162023, 2022, and 20172021 were to customers located in Asia, and we anticipate that a substantial majority of our revenue will continue to come from customers located in this region for the near future. We have increased our sales efforts to penetrate the markets in North America and Western Europe.
We utilize the guidanceASC 606 which was adopted in 2018 set forth in Accounting Standards Update, or ASU, No. 2014-09, Revenue from Contracts with Customers (Topic 606), of the FASB’s ASC Topic 605, Revenue Recognition,Financial Accounting Standards Board, or FASB, regarding the recognition, presentation and disclosure of revenue in our financial statements. We recognize revenue when: persuasive evidence of an arrangement exists; delivery has occurred and the major risks and remunerations of ownership have been transferred to the customer; collectability is probable; and the selling price is fixed or determinable,statements as described below under “—Critical Accounting Policies and Significant Judgments and Estimates—Revenue Recognition.”
We offer extended maintenance service contracts to provide services such as trouble-shooting or fine-tuning tools, and installing spare parts, following expiration of applicable initial standard assurance type warranty coverage periods, which for sales to date have extended from 12 to 36 months as described under “—Critical Accounting Policies and Significant Judgments and Estimates—Warranty.” A limited number of the single-wafer wet cleaning tools we have sold to date are no longer covered by their initial warranties. In 20162023, 2022, and 2017,2021, we received payments for parts and labor for service activities provided from time to time, but as of December 31, 20172023 we had not yet entered into extended maintenance service contracts with respect to anythe substantial majority of the tools for whichwhich initial warranty coverage had expired. We expect to enter into extended maintenance service contracts with customers as additional initial warranties expire, but we do not expect revenue from extended maintenance service contracts to represent a material portion of our revenue in the future.
The loss or delay of one or moremultiple large sale transactions in a quarter could impact our results of operations for that quarter and any future quarters for which revenue from that transaction is lost or delayed, as described under “Item 1A. Risk Factors—Risks Related to Our Business and Our Industry—Our quarterly operating results can be difficult to predict and can fluctuate substantially, which could result in volatility in the price of Class A common stock.” It is difficult to predict accurately when, or even if, we can complete a sale of a tool to a potential customer or to increase sales to any existing customer. Our tool demand forecasts are based on multiple assumptions, including non-binding forecasts received from customers years in advance, each of which may introduce error into our estimates. Difficulties in forecasting demand for our tools make it difficult for us to project future operating results and may lead to periodic inventory shortages or excess spending on inventory or on tools that may not be purchased, as further described in “Item 1A. Risk Factors—Risks Related to Our Business and Our Industry—Difficulties in forecasting demand for our tools may lead to periodic inventory shortages or excess spending on inventory items that may not be used.”
Cost of Revenue
Cost of revenue for capital equipment consists primarily of:
● 
•direct costs, which consist principally of costs of tool components and subassemblies purchased from third-party vendors;
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•compensation of personnel associated with our manufacturing operations, including stock-based compensation;
● 
•depreciation of manufacturing equipment;
● 
•amortization of costs of software used for manufacturing purposes;
● 
•other expenses attributable to our manufacturing department;
•inventory provision; and
● 
•allocated overhead for rent and utilities.
We are not party to any long-term purchasing agreements with suppliers. Please see “Item 1A. Risk Factors—Risks Related to Our Business and Our Industry—Our customers do not generally enter into long-term purchase commitments, and they may decrease, cancel or delay their projected purchases at any time.”
As our customer base and tool installations continue to grow, we willmay need to hire additional manufacturing personnel. The rates at which we add customers and install tools will affect the level and time of this spending. In addition, because we often import components and spare parts from the United States, we have experienced, and expect to continue to experience, the effect of the dollar’s growthcurrency fluctuations on our cost of revenue.
Gross Margin
Our gross margin was 47.2% in 2017 and 48.7% in 2016. Gross margin may vary from period to period, primarily related to the level of utilization and the timing and mix of purchase orders. We generally expect gross margin to berange between 40% and 45% for the foreseeable future, with direct manufacturing costs approximating 50% to 55% of revenue and overhead costs totaling approximatelyapproximately 5% of revenue. The higher margin in 2016 and 2017 were primarily due to two systems manufactured under governmental subsidies (see “—PRC Government Research and Development Funding” below), which were sold for $1.8 million and $3.7 million in 2016. Costs associated with these systems were recorded as research and development expenses as these systems were research and development in nature and had not reached the final product manufacture stage. The related research and development expense was recorded as reduction of our research and development expense as incurred.
We seek to maintain our gross margin by continuing to develop proprietary technologies that avoid pricing pressure for our wet cleaning equipment. We actively manage our operations through principles of operational excellence designed to ensure continuing improvement in the efficiency and quality of our manufacturing operations by, for example, implementing factory constraint management and change control and inventory management systems. In addition, our purchasing department actively seeks to identify and negotiate supply contracts with improved pricing to reduce cost of revenue.
A significant portion of our raw materials are denominated in Renminbi, orthe RMB, while the majority of our purchase orders are denominated in U.S. dollars. As a result, fluctuations in currency exchange rates may have a significant effect on our gross margin. For further information, please see “Exchange Rate Information.”
Operating Expenses
We have experienced, and expect to continue to experience, growth in the absolute dollar amount of our operating expenses, as we make investmentsinvest to support the anticipated growth of our customer base and the continued development of proprietary technologies. As we continue to grow our business, we expect operating expenses to increase in absolute dollars.
Sales and Marketing
Sales and marketing expense accounted for 15.1% of our revenue in 2017 and 14.3% of our revenue in 2016. Sales and marketing expense consists primarily of:
● 
•compensation of personnel associated with pre- and after-sales support and other sales and marketing activities, including stock-based compensation;
● 
•sales commissions paid to independent sales representatives;
● 
•fees paid to sales consultants;
● 
shipping and handling costs for transportation of products to customers;
● 
•cost of trade shows;
•cost of promotional tools to new potential customers;
● 
•travel and entertainment; and
● 
•allocated overhead for rent and utilities.
Sales and marketing expense can be significant and may fluctuate, in part because of the resource-intensive nature of our sales efforts and the length and variability of our sales cycle. The length of our sales cycle, from initial contact with a customer to the execution of a purchase order, is generally 6 to 24 months.
During the sales cycle, we expend significant time and money on sales and marketing activities, including educating customers about our tools, participating in extended tool evaluations and configuring our tools to customer-specific needs. Sales and marketing expense in a given period can be particularly affected by the increase in travel and entertainment expenses associated with the finalization of purchase orders or the installation of tools.
We expect that, for the foreseeable future, sales and marketing expense will increase in absolute dollars, as we continue to invest in sales and marketing by hiring additional employees and expanding marketing programs in existing or new markets. We must invest in sales and marketing processes in order to develop and maintain close relationships with customers. We are making dollar-based investments in dollars in order to support growth of our customer base in the United States, and the relative strength of the dollar could have a significant effect on our sales and marketing expense.
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Research and Development
Research and development expense accounted for 14.1% of our revenue in 2017 and 11.9% of our revenue in 2016. Research and development expense relates to the development of new products and processes and encompasses our research, development and customer support activities. Research and development expense consists primarily of:
● 
•compensation of personnel associated with our research and development activities, including stock-based compensation;
● 
•costs of components and other research and development supplies;
•costs of tools built for product development purposes;
● 
•travel expense associated with customer support;
the research of technical requirements for product development purposes and testing of concepts under consideration;
● 
•amortization of costs of software used for research and development purposes; and
● 
•allocated overhead for rent and utilities.
Some of our research and development has been funded by grants from the PRCmainland China government, as described in “—PRCmainland China Government Research and Development Funding” below.
We expect that, for the foreseeable future, research and development expense will increase in absolute dollars and will range between 10% and 12% of revenue, as we continue to invest in research and development to advance our technologies. We intend to continue to invest in research and development to support and enhance our existing single-wafer wet cleaning products and to develop future product offerings to build and maintain our technology leadership position.
General and Administrative
General and administrative expense accounted for 16.1% of our revenue in 2017 and 9.8% of our revenue in 2016. General and administrative expense consists primarily of:
● 
•compensation of executive, accounting and finance, human resources, information technology, and other administrative personnel, including stock-based compensation;
● 
•professional fees, including accounting and legal fees;
● 
•other corporate expenses; and
● 
•allocated overhead for rent and utilities.
We expect that, for the foreseeable future, general and administrative expense will increase in absolute dollars, as we incur additional costs associated with growing our business and operating as a public company.
Stock-Based Compensation Expense
We grant stock options to employees and non-employee consultants and directors, and we accountsaccount for those stock-based awards in accordance with Accounting Standards Codification, or ASC Topic 718, Compensation—Stock Compensation and ASC Subtopic 505-50, Equity-Based Payments to Non-Employees, each as adopted by the Financial Accounting Standards Board, or FASB..
● 
•Stock-based awards granted to employees and non-employees are measured at the fair value of the awards on the grant date and are recognized as expenses either (a) immediately on grant, if no vesting conditions are required, or (b) using the graded vesting method, net of estimated forfeitures, over the requisite service period. The fair value of stock options is determined using the Black-Scholes valuation model.model when there are service and performance condition attached, or the Monte Carlo valuation model when there is market condition attached. Stock-based compensation expense, when recognized, is charged to cost of revenue or to the category of operating expense corresponding to the employee’s service function.
● 
Stock-based awards granted to non-employees are accounted for at the fair valuefunction of the employee or non-employee.
•We also grant discounts to employees when they subscribe for the new shares of ACM Shanghai, and we account for those stock-based awards at the earlier of (a) the date at which a commitment for performance by the non-employee to earn the awards is reached and (b) the date at which the non-employee’s performance is complete. The fair value of such non-employee awards is re-measured at each reporting date using the fair value at each period end until the vesting date. Changes in fair value between the reporting dates are recognized by the graded vesting method.
accordance with Accounting Standards Codification, or ASC, Topic 718, Compensation—Stock Compensation
Cost of revenue and operating expenses during the periods presented below have included stock-based compensation as follows:
 
 
2017  
 
 
2016  
 
 
 
(in thousands)
 
Stock-Based Compensation Expense:
 
 
 
 
 
 
Cost of revenue
 $21 
 $11 
Sales and marketing expense
  53 
  5 
Research and development expense
  50 
  5 
General and administrative expense
  1,499 
  362 
 
 $1,623 
 $383 
We recognized stock-based compensation expense to employees of $271,000 in 2017 and $92,000 in 2016. As of December 31, 2017 and 2016, there was $729,000 and $726,000 of total unrecognized employee share-based compensation expense, net of estimated forfeitures, related to unvested share-based awards, which are expected to be recognized over a weighted-average period of 1.72 years and 2.25 years, respectively.
We recognized stock-based compensation expense to non-employees of $1.4 million in 2017 and $291,000 in 2016. The fair value of each option granted to a non-employee is re-measured at each period end until the vesting date.
PRCMainland China Government Research and Development Funding
ACM Shanghai has received three grants from local and central governmental authorities in the PRC.seven special government grants. The first grant, which was awarded in 2008, relates to the development and commercialization of 65nm to 45nm stress-free polishing technology. The second grant was awarded in 2009 to fund interest expense on short-term borrowings. The most recentthird grant was made in 2014 and relates to the development of electro copper-plating technology. PRCThe fourth grant was made in June 2018 and related to development of polytetrafluoroethylene. The fifth grant was made in 2020, and relates to the development of Tahoe single bench cleaning technologies. As of December 31, 2021, the fourth and fifth grants had been fully utilized. The sixth grant was made in 2020, and relates to the development of other cleaning technologies. The seventh grant was made in 2021, and relates to the development of the R&D and production center in the Lin-gang Special Area of Shanghai. These governmental authorities provide the majority of thesignificant funding, although ACM Shanghai and ACM Shengwei is also required to invest certain amounts in the projects.
The PRC governmental grants contain certain operating conditions, and we are required to go through a government due diligence process once the project is complete. The grants therefore are recorded as long-term liabilities upon receipt,
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although we are not required to return any funds we receive.ACM Shanghai receives. Grant amounts are recognized in our statements of operations and comprehensive income (loss) as follows:
● 
•Government subsidies relating to current expenses are reflectedrecorded as reductions of those expenses in the periods in which theythe current expenses are reported. Those reductions totaled $3.4 million in  2017recorded. For the years ended December 31, 2023, 2022, and $6.2 million in 2016.
● 
Government2021, related government subsidies for interest on short-term borrowings are reportedrecognized as reductions of interest expenserelevant expenses in the periods the interest is accrued. Those reductions totaled $0 in 2017consolidated statements of comprehensive income (loss) were $1.7 million, $1.2 million, and $99,000 in 2016.
$11.3 million, respectively.
● 
•Government grants usedsubsidies related to acquire depreciable assets are transferred from long-term liabilities to property, plant and equipment when the assets are acquired and then the recorded amounts of the assets are credited to other income over the useful lives of the assets. Relatedrelated assets for which the grant was received. For the years ended December 31, 2023, 2022, and 2021, related government subsidies recognized as other income totaled $135,000 in 2017the consolidated statements of comprehensive income (loss) were $0.5 million, $0.3 million, and $127,000$0.2 million, respectively.
Unearned government subsidies received are deferred for recognition and recorded as other long-term liabilities (see note 13 in 2016.
the Notes to Consolidated Financial Statements included herein under “Item 8. Financial Statements and Supplementary Data.”) in the consolidated balance sheet until the criteria for such recognition are satisfied.
Net Income Attributable to Non-Controlling Interests and Redeemable Non-Controlling Interests
Since 2006 we have conducted our business through our subsidiaryIn 2019 ACM Shanghai and we have financed our operations in part through salesold a total number of minority equity interests inshares representing 8.3% of its outstanding ACM Shanghai. From January 1, 2015 to August 31, 2017,Shanghai shares, after which ACM Research owned 62.87%held the remaining 91.7% of ACM Shanghai’s outstanding shares. In 2021 ACM Shanghai sold a total number shares representing an additional 10% of its outstanding ACM Shanghai shares in its STAR IPO, after which ACM Research held the equity interestsremaining 82.5% of ACM Shanghai’s outstanding shares. During the year-ended December 31,2023, ACM's ownership declined to 82.1% due to the exercise of 2,150,309 stock options related to ACM Shanghai shares (note 18). As a result, we reflect the portion of our net income allocable to the minority holders of ACM Shanghai and three non-controlling, unrelated investors held the remaining 37.13%. As described above under “—Recent Equity Transactions—Acquisition of Outstanding Minority Interests in Our Operating Company,” ACM Research (a) acquired an additional 18.77% equity interest from one of the minority investorsshares as of August 31, 2017 and (b) acquired the remaining non-controlling interests with the other two minority investors on November 8, 2017.
How We Evaluate Our Operations
We present information below with respect to three measures of financial performance:
● 
We define “adjusted EBITDA” as our net income excluding interest expense (net), income tax benefit (expense), depreciation and amortization, and stock-based compensation. We define adjusted EBITDA to also exclude restructuring costs, although we have not incurred any such costs to date.
● 
We define “free cash flow” as net cash provided by operating activities less purchases of property and equipment (net of proceeds from disposals) and of intangible assets.
● 
We define “adjusted operating income (loss)” as our income (loss) from operations excluding stock-based compensation.
These financial measures are not based on any standardized methodologies prescribed by accounting principles generally accepted in the United States, or GAAP, and are not necessarily comparable to similarly titled measures presented by other companies.
We have presented adjusted EBITDA, free cash flow and adjusted operating income (loss) because they are key measures used by our management and board of directors to understand and evaluate our operating performance, to establish budgets and to develop operational goals for managing our business. We believe that these financial measures help identify underlying trends in our business that could otherwise be masked by the effect of the expenses that we exclude. In particular, we believe that the exclusion of the expenses eliminated in calculating adjusted EBITDA and adjusted operating income (loss) can provide useful measures for period-to-period comparisons of our core operating performance and that the exclusion of property and equipment purchases from operating cash flow can provide a usual means to gauge our capability to generate cash. Accordingly, we believe that these financial measures provide useful information to investors and others in understanding and evaluating our operating results, enhancing the overall understanding of our past performance and future prospects, and allowing for greater transparency with respect to key financial metrics used by our management in its financial and operational decision-making.
Adjusted EBITDA, free cash flow and adjusted operating income (loss) are not prepared in accordance with GAAP, and should not be considered in isolation of, or as an alternative to, measures prepared in accordance with GAAP. There are a number of limitations related to the use of adjusted EBITDA rather than net income (loss), which is the nearest GAAP equivalent. Some of these limitations are:
● 
adjusted EBITDA excludes depreciation and amortization and, although these are non-cash expenses, the assets being depreciated or amortized may have to be replaced in the future;
● 
we exclude stock-based compensation expense from adjusted EBITDA and adjusted operating income (loss), although (a) it has been, and will continue to be for the foreseeable future, a significant recurring expense for our business and an important part of our compensation strategy and (b) if we did not pay out a portion of our compensation in the form of stock-based compensation, the cash salary expense included in operating expenses would be higher, which would affect our cash position;
● 
the expenses and other items that we exclude in our calculation of adjusted EBITDA may differ from the expenses and other items, if any, that other companies may exclude from adjusted EBITDA when they report their operating results;
● 
adjusted EBITDA does not reflect changes in, or cash requirements for, working capital needs;
● 
adjusted EBITDA does not reflect interest expense, or the requirements necessary to service interest or principal payments on debt;
● 
adjusted EBITDA does not reflect income tax expense (benefit) or the cash requirements to pay taxes;
● 
adjusted EBITDA does not reflect historical cash expenditures or future requirements for capital expenditures or contractual commitments;
● 
although depreciation and amortization charges are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and adjusted EBITDA does not reflect any cash requirements for such replacements; and
● 
adjusted EBITDA includes expense reductions and non-operating other income attributable to PRC governmental grants, which may mask the effect of underlying developments in net income (loss), including trends in current expenses and interest expense, and free cash flow includes the PRC governmental grants, the amount and timing of which can be difficult to predict and are outside our control.
non-controlling interests.
The following table reconciles net income (loss), the most directly comparable GAAP financial measure, to adjusted EBITDA:
 
 
Year Ended December 31,
 
 
 
2017
 
 
2016
 
 
 
(in thousands)
 
Adjusted EBITDA Data:
   
Net income (loss)
 $(872)
 $2,387 
Interest expense, net
  268 
  165 
Income tax expense
  547 
  595 
Depreciation and amortization
  271 
  187 
Stock-based compensation
  1,622 
  383 
Adjusted EBITDA
 $1,836 
 $3,717 
Adjusted EBITDA in 2017, as compared with 2016, reflected a decrease of $3.3 million in net income offset by an increase of $1.2 million in stock-based compensation. We do not exclude from adjusted EBITDA expense reductions and non-operating other income attributable to PRC governmental grants because we consider and incorporate the expected amounts and timing of those grants in incurring expenses and capital expenditures. If we did not receive the grants, our cash expenses therefore would be lower, and our cash position would not be affected, to the extent we have accurately anticipated the amounts of the grants. For additional information regarding our PRC grants, please see “—Key Components of Results of Operations—PRC Government Research and Development Funding.”
The following table reconciles net cash provided by operating activities, the most directly comparable GAAP financial measure, to free cash flow:
 
 
Year Ended December 31,
 
 
 
2017
 
 
2016
 
 
 
(in thousands)
 
Free Cash Flow Data:
 
 
 
Net cash (used in) provided by operating activities
 $(8,101)
 $(3,702)
Purchases of property and equipment, net of proceeds from disposals
  (651)
  (788)
Purchases of intangible assets
  (115)
  (22)
Free cash flow
 $(8,867)
 $(4,512)
Free cash flow in 2017, as compared with 2016, reflected, in addition to the factors driving net cash used by operating activities, (a) increases in accounts receivable offset by increases in accounts payable and (b) increases in stock-based compensation. Consistent with our methodology for calculating adjusted EBITDA, we do not adjust free cash flow for the effects of PRC government subsidies, because we take those subsidies into account in incurring expenses and capital expenditures.
Adjusted operating income (loss) excludes stock-based compensation from income (loss) from operations. Although stock-based compensation is an important aspect of the compensation of our employees and executives, determining the fair value of certain of the stock-based instruments we utilize involves a high degree of judgment and estimation and the expense recorded may bear little resemblance to the actual value realized upon the vesting or future exercise of the related stock-based awards. Furthermore, unlike cash compensation, the value of stock options, which is an element of our ongoing stock-based compensation expense, is determined using a complex formula that incorporates factors, such as market volatility, that are beyond our control. Management believes it is useful to exclude stock-based compensation in order to better understand the long-term performance of our core business and to facilitate comparison of our results to those of peer companies. The use of non-GAAP financial measures excluding stock-based compensation has limitations, however. If we did not pay out a portion of our compensation in the form of stock-based compensation, the cash salary expense included in operating expenses would be higher, which would affect our cash position. The following tables reflect the exclusion of stock-based compensation from line items comprising income (loss) from operations:

 
  Year Ended December 31,
 

 
    2017     
 
 
    2016     
 

 
Actual
 
   
 
Adjusted
 
 
Actual
 
   
 
Adjusted
 
 
 
(GAAP)
 
 
 
 
 
(Non-GAAP)
 
 
(GAAP)
 
 
 
 
 
(Non-GAAP)
 
 
 
(in thousands)
 
Revenue
 $36,506 
 $— 
 $36,506 
 $27,371 
 $— 
 $27,371 
Cost of revenue
  (19,281)
  (21)
  (19,260)
  (14,042)
  (11)
  (14,031)
Gross profit
  17,225 
  (21)
  17,246 
  13,329 
  (11)
  13,340 
Operating expenses:
    
    
    
    
    
    
Sales and marketing
  (5,500)
  (53)
  (5,447)
  (3,907)
  (5)
  (3,902)
Research and development
  (5,138)
  (50)
  (5,088)
  (3,259)
  (5)
  (3,254)
General and administrative
  (5,887)
  (1,499)
  (4,388)
  (2,673)
  (362)
  (2,311)
Income (loss) from operations
 $700 
 $(1,623)
 $2,323 
 $3,490 
 $(383)
 $3,873 
Adjusted operating loss in 2017, as compared with 2016, reflected an increase of $1.2 million in stock-based compensation expense.
Critical Accounting Policies and Significant Judgments and Estimates
The preparation ofIn preparing our consolidated financial statements in conformity with GAAP, requires management towe make estimatesassumptions, judgments and assumptionsestimates in applying our accounting policies that affectcan have a significant impact on our revenue, operating income and net income, as well as on the reported amountsvalue of assets, liabilities, revenue and expenses, and related disclosures of contingentcertain assets and liabilities.liabilities on our consolidated balance sheets. We base theseour assumptions, judgments and estimates and assumptions on historical experience and evaluate them on an on-going basisvarious other factors that we believe to ensure that they remainbe reasonable under current conditions.the circumstances. At least quarterly, we evaluate our assumptions, judgments and estimates and make changes as deemed necessary. Actual results could differ materially from those estimates. Thethese estimates under different assumptions or conditions.
We believe that the assumptions, judgments and estimates involved in the accounting for the following accounting policies that reflecthave the greatest potential impact on our moreconsolidated financial statements, and we therefore consider these to be our critical accounting estimates. For information on our significant estimates, judgments and assumptions and that we believe areaccounting policies, see Note 2 in the most criticalnotes to aid in fully understanding and evaluating our reportedconsolidated financial results include the following:statements.
Revenue Recognition
We derive revenue principally from the sale of semiconductor capital equipment. Revenue from contracts with customers is recognized using the following five steps pursuant to ASC Topic 606, Revenue from Contracts with Customers:
We utilize1.Identify the guidance set forthcontract(s) with a customer;
2.Identify the performance obligations in the FASB’s ASC Topic 605, Revenue Recognition, regardingcontract;
3.Determine the recognition, presentationtransaction price;
4.Allocate the transaction price to the performance obligations in the contract; and disclosure
5.Recognize revenue when, or as, a performance obligation is satisfied.

Identify the contract(s) with a customer. We generally consider written documentation including, but not limited to, signed purchase orders, master agreements, and sales orders as contracts, provided it has approval and commitment from the customer, the rights of the parties are identified, payment terms are identified, the contract has commercial substance, and collection is probable. Collectability is assessed based on our management’s assessment of the customer’s creditworthiness, historical payment experience, as well as other relevant factors.

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Identify the performance obligations in the contract. Performance obligations are accounted for separately if they are distinct. A good or service is distinct if the customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer, and the good or service is distinct in the context of the contract. Our performance obligations generally include sales of tools and spare parts. In addition, customer contracts can contain provisions for installation, training, software updates, most-favored pricing for spare parts, and other items which have been deemed immaterial in the context of the contract.

Determine the transaction price. The transaction price for our contracts with customers may include fixed and variable consideration. We include variable consideration in the transaction price to the extent that it is probable that a significant reversal of revenue will not occur in the future based on our financial statements. historical experience with similar arrangements.

Allocate the transaction price to the performance obligations in the contract. For contracts that contain multiple performance obligations, we allocate the transaction price to the performance obligations on a relative standalone selling price basis. We defer revenue associated with spare parts, sold together with its tools, based on its stand-alone observable selling prices or using an expected cost-plus-margin approach when a stand-alone selling price is not directly observable, and recognizes revenue upon subsequent delivery.

Recognize revenue when, or as, a performance obligation is satisfied. We recognize revenue when persuasive evidence of an arrangement exists; delivery has occurredfrom tools and the major risks and remunerations of ownership have been transferred to the customer; collectability is probable; and the selling price is fixed or determinable.
In general, we recognize revenue whenspare parts at a tool has been demonstrated to meet the customer’s predetermined specifications and is accepted by the customer. If terms of the sale provide for a lapsing customer acceptance period, we recognize revenue as of the earlier of the expiration of the lapsing acceptance period and customer acceptance. In the following circumstances, however, we recognize revenue upon shipment or delivery, when legal title to the tool is passed to a customer as follows:
● 
when the customer has previously accepted the same type of tool with the same specifications andpoint in time, when we can objectively demonstrate that the tool meets all of the required acceptance criteria;
● 
when the sales contract or purchase order does not contain an acceptance agreement or a lapsing acceptance provision and when we can objectively demonstrate that the tool meets all of the required acceptance criteria;
● 
when the customer withholds acceptance due to issues unrelated to producthave satisfied our performance in which case revenue is recognized when the system is performing as intended and meets predetermined specifications; or
● 
when ourobligation. Our sales arrangements do not include a general right of return.
Customization, production, installation and delivery are essential elements For shipments made to a customer that has not previously accepted a specific type of tool in the functionality of our deliveredpast, or first tools, but the related services we offer, principally warranty services, are not essential to tool functionality. We treat the customization, production, installation and delivery of tools, together with the provision of related warranty and other services, as a single unit of accounting in accordance with the FASB’s ASC Subtopic 605-25, Revenue Recognition—Multiple Element Arrangements. In 2017 and 2016 all of our tools were sold in stand-alone arrangements.
We offer post-warranty period services, which consist principally of the installation and replacement of parts and small-scale modifications to the equipment. The related revenue and costs of revenuerevenues are recognized when parts have been delivered and installed, riskthe goods are accepted by the customer. For shipments made to a customer that has previously accepted a specific type of loss has passed totool, revenues are recognized upon shipment or delivery because we can objectively demonstrate that the goods meet all the required customer and collection is probable. We do not expect revenue from extended maintenance service contracts to represent a material portion of our revenue in the future.specifications.
Stock-based compensation
Stock-Based Compensation

We account for grants of stock options based on their grant date fair value and recognize compensation expense over the vesting periods. We estimate the fair value of the stock options as ofgranted with a service period-based condition and/or performance condition at the date of grant using the Black-Scholes option pricing model. Stock options granted to non-employees are subject to periodic revaluation over their vesting terms.
Stock-based compensation expense represents the cost of the grant date fair value of employee stock option grants recognized over the requisite service period of the awards (usually the vesting period) on a straight-line basis, net of estimated forfeitures. We estimate the fair value of the stock options granted with a market-based condition at the date of grant using the Monte Carlo simulation model.

For options granted with a service period-based and/or performance condition, we estimate the fair value of these stock option grants using the Black-Scholes option pricing model, which requires the input of highly subjective assumptions, including (a)Fair value of share of common stock, (b)the risk-free interest rate, (b) the expected(c) volatility, of our stock, (c)and (d) the expected term of the award and (d) the expected dividend yield.award.

●
Prior to the IPO in November 2017, the board of directors considered a number of objective and subjective factors to determine the best estimate of the fair value of our common stock. The factors included: contemporaneous third-party valuations of our common stock; the prices, rights, preferences and privileges of our preferred stock relative to the common stock; the prices of convertible preferred stock sold by us to third-party investors; our operating and financial results; the lack of marketability of our common stock; the U.S. and global economic and capital market conditions and outlook; and the likelihood of achieving a liquidity event for the shares of common stock underlying these stock options, such as an initial public offering or sale of our company, given prevailing market conditions. Since the IPO, we have used•We use the market closing price for the Class A common stock as reported on the Nasdaq Global Market to determine the fair value of the Class A common stock.
We use the market closing price for the ACM Shanghai’s common stock as reported on the STAR Market to determine the fair value of ACM Shanghai’s common stock.
●
The•For options granted by ACM Research, risk-free interest rates for periods within the expected life of the option arerate is based on the yields of zero-coupon U.S. Treasury securities.
●
Duesecurities with maturities similar to a lackthe expected term of company-specific historical and implied volatility data, we havethe share options in effect at the time of grant. For options granted by ACM Shanghai, risk-free interest rate is based our estimate of expected volatility on the yields of RMB deposit in mainland China with maturities similar to the expected term of the share options in effect at the time of grant.
•We use historical volatility of a group of similar companies that are publicly traded. For these analyses, we have selected companies with comparable characteristicsour shares in the period equal to ours including enterprise value, risk profile, position within the industry, and with historical share price information sufficient to meet the expected life of the stock-based awards. We compute the historical volatility data using the daily closing prices for the selected companies’ shares during the equivalent period of the calculated expected term of our stock-based awards. We will continue to apply this process until a sufficient amount of historical information regarding the volatility of our own stock price becomes available.
each grant.
●
The expected term represents the period of time that options are expected to be outstanding. •The expected term of stockshare options is based on the average betweenof the vesting period and the contractual term for each grant according to Staff Accounting Bulletin No. 110.
●
The expected dividend yield is assumed to be 0%, based on the fact that we have never paid cash dividends and have no present intention to pay cash dividends.
For employee stock option grants made during the years ended December 31, 2017 and 2016, the weighted-average assumptions used in the Black-Scholes option pricing model to determine the fair value of those grants were as follows:
   Year Ended December 31,
 2017 2016
Risk-free interest rate
  2.21%-2.22%
 
  2.02% -2.32% 
Expected volatility  28.62%-29.18% 
 
   29.93%  
Expected term (in years)  6.25 
 
  5.75-6.25 
Expected dividend yield
  0%
 
  0%
For non-employee stock option grants made for the years ended December 31, 2017 and 2016, the weighted-average assumptions used in the Black-Scholes option pricing model to determine the fair value of those grants were as follows:
 Year Ended December 31,
 
2017  
 
2016  
Risk-free interest  rate
1.62%-2.43% 
   1.00% -2.25% 
Expected volatility
28.71%-29.41%
 
29.93% 
Expected term (in years)
3.58-6.25 
   2.11-6.24 
Expected dividend yield
  0%
 
     0% 
The following table summarizes by grant date the number of shares of common stock underlying stock options granted since January 1, 2015, as well as the associated per share exercise price and the estimated fair value per share of common stock on the grant date:
Grant Dates
 
Number of Common Shares Underlying Options Granted
 
 
Exercise Price per Common Share
 
 
Estimated Fair
Value per
Common Share
 
May 1, 2015
  783,338 
 $1.50 
 $1.50 
September 8, 2015
  263,335 
  1.50 
  1.50 
December 28, 2016
  1,424,596 
  3.00 
  2.28 
March 9, 2017
  33,334 
  7.50 
  7.50 
May 9, 2017
  183,335 
  7.50 
  7.50 
November 2, 2017
  120,002 
  5.60 
  5.60 
As of December 31, 2017, the unrecognized compensation cost related to outstanding options was $729,000 and is expected to be recognized as expense over a weighted-average of 1.77 years. As of December 31, 2016, the unrecognized compensation cost related to outstanding options was $726,000 and is expected to be recognized as expense over a weighted-average of 2.25 years.
As of December 31, 2017, we had outstanding stock options to acquire an aggregate of 3,372,292 shares of Class A common stock with an intrinsic value of $9.3 million. Of those outstanding options, (a) 1,765,112 shares had vested as of December 31, 2017, representing an intrinsic value of $6.4 million and (b) 1,607,180 shares were unvested, representing an intrinsic value of $2.9 million.
grant.
Inventory
Inventories consist of finished goods, raw materials, work-in-process and consumable materials. Finished goods are comprised of direct materials, direct labor, depreciation and manufacturing overhead. Inventory is stated at the lower of cost and net recognizablerealizable value of the inventory. The cost ofinventory on a general inventory item is determined using themoving weighted average method.basis. The cost of an inventory item purchased specifically for a customized tool is determined using the specific identification method. Market value is determined as the lower of replacement cost and net realizable value, which is the estimated selling price, in the ordinary course of business, less estimated costs to complete or dispose.

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We assess the recoverability of all inventories quarterly to determine if any adjustments are required. We write down excessrecognize a loss or impairment if in our judgement the inventory cannot be sold or used for production, if it has been damaged or should be considered as obsolete, tool-related inventoryor if the net realizable value is lower than the cost. We also assess the status of our raw materials. We recognize a loss or impairment for any raw materials aged more than three years. The three-year aging is based on management’s analysisour assessment of inventory levelstechnology change, our requirement to maintain stock for warranty coverage, and forecasted 12-month demand and technological obsolescence and spare parts inventory based on forecasted usage. These factors are affected by market and economic conditions, technology changes, new product introductions and changes in strategic direction, and they require estimates that may include uncertain elements.other factors. Actual demand may differ from forecasted demand, and those differences may have a material effect on recorded inventory values.
Our manufacturing overhead standards for product costs are calculated assuming full absorption of forecasted spending over projected volumes, adjusted for excess capacity. Abnormal inventory costs such as costs of idle facilities, excess freight and handling costs, and spoilage are recognized as current period charges.
Allowance for Doubtful AccountsCredit Losses

Accounts receivablereceivables are reflected in our consolidated balance sheets at their estimated collectible amounts. A substantial majority of our accounts receivable are derived from sales to large multinational semiconductor manufacturers in Asia.We followassess collectability by reviewing accounts receivable on a collective basis where similar characteristics exist and on an individual basis when we identify specific customers with known disputes or collectability issues. In determining the amount of the allowance methodfor credit losses, we consider historical collectability based on past due status, the age of recognizing uncollectiblethe accounts receivable pursuant to which we regularly assessbalances, credit quality of our customers based on ongoing credit evaluations, current economic conditions, reasonable and supportable forecasts of future economic conditions, and other factors that may affect our ability to collect from customers.
Income Taxes
Income taxes are accounted for using the liability method. Under this method, deferred income tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which these temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance would be provided for the deferred tax assets if it is more likely than not that the related benefit will not be realized.
On a quarterly basis, we provide income tax provisions based upon an estimated annual effective income tax rate. The effective tax rate is highly dependent upon the geographic composition of worldwide earnings, tax regulations governing each region, availability of tax credits and the effectiveness of our tax planning strategies. We carefully monitor the changes in many factors and adjust our effective income tax rate on a timely basis. If actual results differ from these estimates, this could have a material effect on our financial condition and results of operations.
We maintained a partial valuation allowance as of December 31, 2023 with respect to certain net deferred tax assets based on our estimates of recoverability. We determined that the partial valuation allowance was appropriate given our historical operating losses and uncertainty with respect to our ability to generate profits from our business model sufficient to take advantage of the deferred tax assets in all applicable tax jurisdictions.
The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax regulations. In accordance with the authoritative guidance on accounting for uncertainty in income taxes, we recognize liabilities for uncertain tax positions based on the two-step process. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained in audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than fifty percent likely of being realized upon ultimate settlement. We reevaluate these uncertain tax positions on a quarterly basis. This evaluation is based on factors including changes in facts or circumstances, changes in tax law, effectively settled issues under audit and new audit activity. Any change in these factors could result in the recognition of a tax benefit or an additional charge to the tax provision.
Interest and penalties related to uncertain tax positions are recorded in the provision for income tax expense on the consolidated statements of comprehensive income (loss).
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Warranty
We have provided standard assurance type warranty coverage on our tools for 12 to 36 months, covering labor and parts necessary to repair a tool during the warranty period. Warranty obligations are affected by historical failure rates and associated replacement costs. Utilizing historical warranty cost records, we calculate a rate of warranty expenses to revenue to determine the estimated warranty charge. We update these estimated charges on a regular basis. The actual product performance and field expense profiles may differ, and in those cases, we adjust our warranty accruals accordingly. As of December 31, 2023 and 2022, we had accrued $9.8 million and $8.8 million, respectively, in liability contingency for potential warranty claims.

Recent Accounting Pronouncements
For a discussion of recent accounting pronouncements we expect will have an impact when adopted, see note 2 in the Notes to Consolidated Financial Statements included herein under “Item 8. Financial Statements and Supplementary Data.”
Results of Operations
The following table sets forth our results of operations for the periods presented, as percentages of revenue.
Year Ended December 31,
202320222021
Revenue100.0 %100.0 %100.0 %
Cost of revenue50.5 52.8 55.8 
Gross margin49.5 47.2 44.2 
Operating expenses: 
Sales and marketing8.4 10.3 10.3 
Research and development16.6 16.0 13.2 
General and administrative7.3 5.8 5.9 
Total operating expenses, net32.3 32.0 29.4 
Income from operations17.2 15.2 14.8 
Interest income (expense), net1.0 1.8 (0.1)
Realized gain from sale of short-term investments1.6 0.3 - 
Unrealized gain (loss) on short-term investments(0.5)(2.0)0.2 
Other income (expense), net(0.3)0.9 (0.2)
Income from equity method investments1.8 1.2 1.8 
Income before income taxes20.8 17.4 16.5 
Income tax expense(3.5)(4.3)(0.1)
Net income17.3 13.0 16.4 
Less: Net income attributable to non-controlling interests3.5 2.9 2.0 
Net income attributable to ACM Research, Inc.13.8 %10.1 %14.4 %
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Comparison of Years Ended December 31, 2023, 2022, and 2021
Revenue
Year Ended December 31,
202320222021% Change
2023 v 2022		% Change
2022 v 2021
(in thousands)
Single wafer cleaning, Tahoe and semi-critical cleaning equipment$403,851 $272,939 $189,208 48.0 %44.3 %
ECP (front-end and packaging), furnace and other technologies103,356 77,482 33,210 33.4 %133.3 %
Advanced packaging (excluding ECP), services & spares50,516 38,411 37,333 31.5 %2.9 %
Total Revenue By Product Category$557,723 $388,832 $259,751 43.4 %49.7 %
Year Ended December 31,
202320222021
(in thousands)
Mainland China$540,969 $377,752 $258,615 
Other Regions16,754 11,080 1,136 
$557,723 $388,832 $259,751 
The increase in revenue for 2023 compared to 2022 was driven by higher sales of single wafer cleaning, Tahoe and semi-critical cleaning equipment, ECP (front-end and packaging), furnace and other technologies, and Advance packaging (excluding ECP), and services and spares. We attribute the revenue growth to continued investments in mature process nodes by current and new mainland China-based customers amidst an ongoing target to achieve a greater share of the global semiconductor market, incremental contribution from newly introduced tools, and better penetration of our product portfolio across our customer base.

The increase in revenue for 2022 compared to 2021 was driven primarily by higher sales of single wafer cleaning, Tahoe and semi-critical cleaning equipment, and increased contribution from newer ECP (front-end and packaging), furnace and other technologies. Our Shanghai production operations were adversely impacted in the first half of 2022 to COVID-19-related restrictions, with a return to more normal operations in the second half of the year. The U.S. export regulations imposed in October of 2022 had an adverse impact on ACM Shanghai’s shipments and sales in the fourth quarter of 2022.
Cost of Revenue and Gross Margin
Year Ended December 31,
202320222021% Change
2023 v 2022		% Change
2022 v 2021
(in thousands)
Cost of revenue$281,508 $205,217 $144,895 37.2 %41.6 %
Gross profit276,215 183,615 114,856 50.4 %59.9 %
Gross margin49.5 %47.2 %44.2 %2.30 3.00 
Cost of revenue and gross profit increased in 2023 as compared to 2022 due to the increased sales volume and an increase in gross margin. The increased gross margin versus the prior-year period was primarily due to improved gross margins for certain products, overall product mix, and a positive impact due to a change in the RMB to U.S. dollar currency exchange rate.
Cost of revenue and gross profit increased in 2022 as compared to 2021 due to the increased sales volume and an increase in gross margin. The increased gross margin versus the prior-year period was primarily due to a higher mix of ECP (front-
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end and packaging), furnace, and other technologies, and a positive impact due to a change in the RMB to U.S. dollar currency exchange rate.
Gross margin may vary from period to period, primarily related to the level of utilization and the timing and mix of revenue. We expect gross margin to be between 40.0% and 45.0% for the foreseeable future, with direct manufacturing costs approximating 50.0% to 55.0% of revenue and overhead costs totaling 5.0% of revenue.
Operating Expenses
Year Ended December 31,
202320222021% Change
2023 v 2022		% Change
2022 v 2021
(in thousands)
Sales and marketing expense$47,019 $39,889 $26,733 17.9 %49.2 %
Research and development expense92,709 62,226 34,207 49.0 %81.9 %
General and administrative expense40,648 22,465 15,214 80.9 %47.7 %
Total operating expenses$180,376 $124,580 $76,154 44.8 %63.6 %
Sales and marketing expense increased in 2023 as compared to 2022, and reflected an increase of $8.1 million due to higher costs for personnel, commissions, travel and entertainment and other costs, an increase of $4.7 million due to higher costs for professional services, outside services and other costs, and an increase of $3.8 million due to higher stock -based compensation, partly offset by a decrease of ($9.6 million) for the cost of tools built for promotional purposes.
Sales and marketing expense increased in 2022 as compared to 2021, and reflected an increase of $7.9 million due to higher costs of tools built for promotional purposes for potential new customers, and an increase of $5.3 million due to increased costs for personnel, commissions, outside services, travel and entertainment and other costs.
We expect that, for the foreseeable future, sales and marketing expense will increase in absolute dollars, as we continue to invest in sales and marketing by hiring additional employees and expanding marketing programs in existing or new markets. We must invest in sales and marketing processes in order to develop and maintain close relationships with customers. We are making dollar-based investments in order to support growth of our customer base in the United States, and the relative strength of the dollar could have a significant effect on our sales and marketing expense.
Research and development expense increased in 2023 as compared to 2022, reflecting an increase of $15.4 million in costs of components, costs of tools built for product development purposes, and costs of other research and development supplies, an increase of $7.1 million for personnel-related costs, an increase of $5.9 million in stock-based compensation, and an increase of $4.2 million in travel and entertainment costs to support product development, professional services, and other research and development related expenses, offset by a decrease of ($2.1 million) for outside services.
Research and development expense represented 16.6% and 16.0% of our revenue in the years ended December 31, 2023 and 2022, respectively. Without reduction by grant amounts received from mainland China governmental authorities (see “—mainland China Government Research and Development Funding”), gross research and development expense totaled $94.5 million, or 16.9% of total revenue, in the year ended December 31, 2023 as compared to $63.4 million, or 16.3% of revenue, in the corresponding period in 2022.
Research and development expense increased in 2022 as compared to 2021, reflecting an increase of $6.9 million in costs of components, costs of tools built for product development purposes, and costs of other research and development supplies, and an increase of $16.7 million for personnel, stock-based compensation, and travel and entertainment costs to support product development, and an increase of $4.4 million for outside services and other research and development related expenses.
We expect that, for the foreseeable future, research and development expense will increase in absolute dollars as compared to 2023, as we continue to invest in research and development to advance our technologies. We intend to continue to invest in research and development to support and enhance our cleaning, plating, advanced packaging, furnace and future product offerings to build and maintain our technology leadership position.
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General and administrative expense increased in 2023 as compared to 2022, reflecting an increase of $9.0 million in stock-based compensation, $3.3 million in personnel and professional services costs, $2.7 million in allowance for credit losses, and $3.1 million for travel & entertainment, depreciation and amortization, outside services, taxes and other general and administrative expenses.
General and administrative expense increased in 2022 as compared to 2021, primarily due to an increase in stock-based compensation, increased employee count, and an increase in legal, payroll tax and other fees.
We expect that, for the foreseeable future, general and administrative expense will increase in absolute dollars, as we incur additional costs associated with growing our business and operating as a public company.
Stock-Based Compensation Expense
Cost of revenue and operating expenses during the periods presented below have included stock-based compensation as follows:
Year Ended December 31,
202320222021
(in thousands)
Stock-Based Compensation Expense:
Cost of revenue$1,406 $520 $397 
Sales and marketing expense5,684 1,877 1,802 
Research and development expense8,459 2,565 1,115 
General and administrative expense11,789 2,768 1,803 
$27,338 $7,730 $5,117 
Interest income (expense), net, Other Income (expense), net
Year Ended December 31,
202320222021% Change
2023 v 2022		% Change
2022 v 2021
(in thousands)
Interest Income$8,354 $8,740 $505 -4.4 %1,630.7 %
Interest Expense(2,681)(1,655)(765)62.0 %116.3 %
Interest Income (expense), net$5,673 $7,085 $(260)-19.9 %-2,825.0 %
Other income (expense), net$(1,558)$3,315 $(631)-147.0 %-625.4 %
Interest income (expense), net, decreased in 2023 compared to 2022, principally as a result of reduced interest income from lower interest income on reduced cash balances, offset by increase in interest expenses incurred from a higher balance of total bank loans.
Interest income (expense), net, increased in 2022 compared to 2021, principally as a result of reduced interest income from lower interest rates on reduced cash balances, offset by increase in interest expenses incurred from short-term and long-term bank loans.
Other income (expense), net primarily reflects (a) gains or losses recognized from the impact of exchange rates on our foreign currency-denominated working-capital transactions and (b) depreciation of assets acquired with government subsidies, as described under “—Government Research and Development Funding” above. We realized $1.6 million of other expense in the year ended December 31, 2023, of which $2.0 million was due to loss realized from transactions that resulted from changes in the RMB-to-U.S. dollar exchange rate, as compared to a foreign exchange gain of 1.7 million in the corresponding period in 2022.
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Other income (expense) increased by $3.3 million in the year ended December 31, 2022, of which $1.7 million was due to gains realized from transactions that resulted from changes in the RMB-to-U.S. dollar exchange rate, as compared to a loss of ($0.6 million) in the corresponding period in 2021.
Realized gain and unrealized loss from short-term investments, and income from equity method investments .
Year Ended December 31,
202320222021% Change
2023 v 2022		% Change
2022 v 2021		Absolute Change
2023 v 2022
(in thousands)
Realized gain from sale of short-term investments$9,047 $1,116 $- 710.7 %100.0 %$7,931 
Unrealized gain (loss) on short-term investments$(2,737)$(7,855)$607 -65.2 %-1394.1 %$5,118 
Income from equity method investments$9,952 $4,666 $4,637 113.3 %0.6 %$5,286 
We recorded a realized gain on sale of short-term investments of $9.0 million for the year ended December 31, 2023 as compared to a realized gain of $1.1 million for the same period in 2022 primarily due to the sales of ACM Shanghai’s indirect investment in publicly traded shares.
We recorded an unrealized loss on short-term investments of $2.7 million for the year ended December 31, 2023 as compared to an unrealized loss of $7.9 million for the same period in 2022, due primarily to a change in market value of ACM Shanghai’s indirect investment in publicly traded shares.
We recorded an unrealized loss on short-term investments of $7.9 million for the year ended December 31, 2022 as compared to an unrealized gain of $0.7 million for the same period in 2021, due primarily to a change in market value of ACM Shanghai’s indirect investment in publicly traded shares.
Income from equity method investments for the year ended December 31, 2023 increased by $5.3 million compared to the year ended December 31, 2022 primarily due to higher net income from equity method investments.
Income from equity method investments for the year ended December 31, 2022 was unchanged versus the year ended December 31, 2021. Income from equity method investments increased by $4.0 million for the year ended December 31, 2021 due to higher net income from equity method investments.

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Tax Benefit (Expense)
Year Ended December 31,
202320222021
(in thousands)
Current:
U.S. federal$(12,757)$(479)$(91)
U.S. state(150)(18)(2)
Foreign(19,696)(11,139)(2,195)
Total current tax expense(32,603)(11,636)(2,288)
Deferred: 
U.S. federal7,316 (10,927)2,089 
U.S. state63 8 - 
Foreign5,860 5,757 65 
Total deferred tax benefit (expense)13,239 (5,162)2,154 
Total income tax expense$(19,364)$(16,798)$(134)
We recognized a tax expense of $19.4 million for the year ended December 31, 2023 as compared to a tax expense of $16.8 million for the prior year period. The increased tax expense in 2023 primarily resulted from the tax effect of increased operating profit generated.
As we collect and prepare necessary data, and interpret the guidance issued by the U.S. Treasury Department, the Internal Revenue Service, and other standard-setting bodies, we may make adjustments to the provisional amounts. Those adjustments may materially affect our provision for income taxes and effective tax rate in the period in which the adjustments are made. There were no adjustments made in 2023.
Our effective tax rate differs from statutory rates of 21% for U.S. federal income tax purposes and 12.5% to 25% for mainland China income tax purposes due to the effects of the valuation allowance and certain permanent differences as it pertains to book-tax differences in the treatment of stock-based compensation and non-U.S. research expenses. Our four mainland China subsidiaries, ACM Shanghai, ACM Wuxi, ACM Beijing, and ACM Lingang, are liable for mainland China corporate income taxes at the rates of 15%, 25%, 25%, and 15%, respectively. Pursuant to the Corporate Income Tax Law of mainland China, our mainland China subsidiaries generally would be liable for mainland China corporate income taxes at a rate of 25%. According to Guoshuihan 2009 No. 203, an entity certified as an “advanced and new technology enterprise” is entitled to a preferential income tax rate of 15%. ACM Shanghai was certified as an “advanced and new technology enterprise” in 2012 and again in 2016, 2018, and 2021, effective until December 31, 2023, and is expected to be re-certified for future years in 2024. In 2021, ACM Shanghai was certified as an eligible integrated circuit production enterprise and is entitled to a preferential income tax rate of 12.5% from January 1, 2020 to December 31, 2022.Certain entities which meet requirements according to the Policy of the Lingang New area in China (Shanghai) Pilot Free Trade Zone are entitled to a preferential income tax rate of 15%. ACM Lingang was certified for this in 2021, and this preferential income tax rate is valid from December 31, 2020 until December 31, 2024.
We file income tax returns in the United States and state and foreign jurisdictions. All tax returns will remain open for examination by the federal and state authorities for three and four years, respectively, from the date of utilization of any net operating loss or credits. Certain tax years are subject to foreign income tax examinations by tax authorities until the statute of limitations expire.
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Net Income Attributable to Non-Controlling Interests
Year Ended December 31,
202320222021% Change
2023 v 2022		% Change
2022 v 2021
(in thousands)
Net income attributable to non-controlling interests$19,503 $11,301 $5,164 72.6 %118.8 %

ACM Research owns 82.1% of ACM Shanghai’s (note 1) outstanding shares which is reflected in our consolidated financial statements (note 2). We reflect theportion of net income allocable to the minority holders of ACM Shanghai shares as net income attributable to non-controlling interests.
Foreign currency translation adjustment
Year Ended December 31,
202320222021% Change
2023 v 2022		% Change
2022 v 2021
(in thousands)
Foreign currency translation adjustment$(10,617)$(59,102)$4,695 -82.0 %-1358.8 %
We recorded a foreign currency translation adjustment of ($10.6 million) for the year ended December 31, 2023, as compared to $(59.1) million for 2022, based on the net effect of RMB to dollar exchange rate fluctuations for the period on the converted value of ACM Shanghai’s RMB-denominated balances to U.S. dollar equivalents. The 2022 amount was especially large due to a weakening of the RMB versus the U.S. dollar during the year ended December 31, 2022 together with a more significant RMB-denominated asset balance in 2022.
Comprehensive income (loss) attributable to non-controlling interests
Year Ended December 31,
202320222021% Change
2023 v 2022		% Change
2022 v 2021
(in thousands)
Comprehensive income (loss) attributable to non-controlling interests$17,689 $1,854 $5,607 854.1 %-66.9 %
Comprehensive income attributable to non-controlling interest increased by $15.8 million compared to a decrease of $(3.8) million for the years ended December 31, 2023 and 2022 compared to the prior year, due to a significant change in net income generated from the non-controlling interests as impacted from foreign exchange rate fluctuations.
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Liquidity and Capital Resources
The following chart depicts our corporate organization as of December 31, 2023:
image (5).jpg
A detailed description of how cash is transferred through our organization is set forth under “Note 2 – Summary of Significant Accounting Policies – Cash and Cash Equivalents” to the Consolidated Financial Statements of this report.
During the year ended December 31, 2023, we funded our technology development and operations principally through our beginning global cash balances, including the cash balances at ACM Shanghai, borrowings by ACM Shanghai from local financial institutions and our loan from China CITIC Bank. Cash and cash equivalents, restricted cash, short-term time deposits and long-term time deposits were $304.5 million at December 31, 2023, compared to $420.9 million at December 31, 2022. The ($116.4 million) decrease was primarily driven by ($75.3 million) of cash used in operations, ($60.2 million) used in investing activities excluding the change in time deposits, $18.5 million net cash provided by financing activities, a $1.7 million decrease from the effect of exchange rate on cash, cash equivalents and restricted cash, and a $2.4 million increase from the effect of exchange rate on time deposits.
The table below represents the cash and cash equivalents, restricted cash, and time deposits as of December 31, 2023 and 2022:
December 31,
20232022
(In thousands)
Cash and cash equivalents, restricted cash, and time deposits: 
Cash and cash equivalents and restricted cash$183,173 $248,451 
Short-term time deposits80,524 70,492 
Long-term time deposits40,818 101,956 
Total$304,515 $420,899 
Our future working capital needs beyond the next twelve months will depend on many factors, including the rate of our business and revenue growth, the payment schedules of our customers, the timing and magnitude of our capital expenditures, and the timing of investment in our research and development as well as sales and marketing. We believe our existing cash and cash equivalents and short-term and long-term time deposits, our cash flow from operating activities, and bank borrowings by us and ACM Shanghai will be sufficient to meet our anticipated cash needs within our longer-term planning horizon.
ACM Shanghai has historically participated in certain mainland China government-sponsored grant and subsidy programs, as described under “—Key Components of Results of Operations—mainland China Government Research and Development Funding” and “—Contractual Obligations” and we expect that ACM Shanghai will continue to take
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advantage of these programs when they are available and fit with our business strategy. ACM Shanghai generally applies for these grants and subsidies through the applicable mainland China government agency’s defined processes. Periodically, the public relations department researches the availability of these grants and subsidies through mainland China government agencies with whom ACM Shanghai files business surveys and taxes. Management of ACM Shanghai then assesses which grants and subsidies for which ACM Shanghai may be eligible and submits the relevant application. The decision to award the grant to ACM Shanghai is made by the relevant mainland China government agencies based on suitability and the merits of the application. Neither ACM Research, nor ACM Shanghai or any of our other subsidiaries, has any direct relationship with any mainland China government agency, and our anticipated cash needs for the next twelve months neither anticipate, nor require, receipt of any mainland China government grants or subsidies.
To the extent our cash and cash equivalents, cash flow from operating activities and short-term bank borrowings are insufficient to fund our future activities in accordance with our strategic plan, we may determine to raise additional funds through public or private debt or equity financings or additional bank credit arrangements. We also may need to raise additional funds in the event we determine in the future to effect one or more acquisitions of businesses, technologies and products. If additional funding is necessary or desirable, we may not be able to obtain bank credit arrangements or to affect an equity or debt financing on terms acceptable to us or at all.
Restrictions under mainland China laws and regulations as well as restrictions under ACM Shanghai’s bank loan agreements, may significantly restrict ACM Shanghai’s ability to transfer a portion of ACM Shanghai’s net assets to ACM Research, other subsidiaries of ACM Research and to holders of ACM Research Class A common stock. See “Item 1A. Risk Factors–Regulatory Risks–Mainland China’s currency exchange control and government restrictions on investment repatriation may impact our ability to transfer funds outside of mainland China, which could materially and adversely affect our ability to grow, make investments or acquisitions that could benefit our business, otherwise fund and conduct our business, or pay dividends on our common stock.”
For the years ended December 31, 2023 and 2022, with the exception of sales and services-related transfer-pricing payments in the ordinary course of business, and dividends paid by ACM Shanghai to ACM Research, no transfers or distributions have been made between ACM Research, and its subsidiaries, including ACM Shanghai, or to holders of ACM Research Class A common stock.
Our cash and cash equivalents at December 31, 2023 were held for working capital purposes and other potential investments. ACM Shanghai, our only direct mainland China subsidiary, is, however, subject to mainland China restrictions on distributions to equity holders. The use of proceeds raised by the STAR Market IPO, without further approvals, are limited to specific usage. We currently intend for ACM Shanghai to retain all available funds from any future earnings for use in the operation of its business and do not anticipate it paying any cash dividends. Our accounts receivable balance fluctuates from period to period, which affects our cash flow from operating activities. Fluctuations vary depending on cash collections, client mix, and the timing of shipment and acceptance of our tools.
We have never declared or paid cash dividends on our capital stock. We intend to retain all available funds and any future earnings to support the operation of and to finance the growth and development of our business and do not anticipate paying any cash dividends in the foreseeable future.
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Cash Flow Used in Operating Activities. Net cash used by operations of ($75.3 million) during the year ended December 31, 2023 consisted of:
Year Ended December 31,
202320222021
(in thousands)
Net Income$96,852 $50,564 $42,921 
 Non-cash operating lease cost3,580 2,816 2,451 
  Provision for inventory575 2,248 75 
  Provision for credit losses2,741 - - 
Gain on disposals of property plant and equipment(2)(12)- 
Depreciation and amortization8,092 5,366 2,353 
Realized gain on short-term investments(9,047)(1,116)- 
Income from equity method investments(9,952)(4,666)(4,637)
Unrealized loss (gain) on short-term investments2,737 7,855 (607)
Deferred income taxes(13,647)4,027 (1,840)
Stock-based compensation27,338 7,730 5,117 
Net changes in operating assets and liabilities:(184,590)(137,006)(85,926)
Net cash flow used in operating activities$(75,323)$(62,194)$(40,093)
Significant changes in operating asset and liability accounts during the year-ended December 31, 2023 included the following uses of cash: increases of inventories of $164.0 million (Note 5), and an increase of accounts receivable of $108.7 million (Note 4). As described under “—Key Components of Results of Operations—mainland China Government Research and Development Funding,” ACM Shanghai has received research and development grants from local and central mainland China governmental authorities. ACM Shanghai received $51,000 of payments related to such grants in the year ended December 31, 2023, as compared to cash receipts of $1.1 million in the same period of 2022.
The uses of cash are offset by the following significant sources of cash: an increase in advances from customers of $30.0 (Note 3), an increase in other payables and accrued expenses of $21.4 million, and an increase in accounts payable of $42.3 million.
Cash Flow Used in Investing Activities. Net cash used in investing activities for the year ended December 31, 2023, excluding net cash proceeds from the sale of time deposits, was ($60.2 million), primarily consisting of ($64.3 million) purchase of property and equipment and intangible assets, and ($7.5 million) purchase of long-term investments (note 14), partly offset by $3.4 million net proceeds from the sale of short-term investments, and $8.2 million of dividends received from long-term investments (note 14).
Cash Flow provided by Financing Activities. Net cash provided by financingfor the year ended December 31, 2023 was $18.5 million, primarily consisting of $16.3 million net proceeds from short and long-term borrowings, and $6.1 million in proceeds from the exercise of stock options, partly offset by ($4.0 million) of dividends paid by ACM Shanghai.
We and ACM Shanghai, together with the subsidiaries of ACM Shanghai, have short-term and long-term borrowings with six banks, as follows:
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LenderAgreement DateMaturity DateAnnual
Interest Rate		Maximum Borrowing
Amount(1)		Amount Outstanding
at December 31, 2023
(in thousands)
China CITIC Bank (2)July 2023Repayable by installments and the last installments repayable in December 20254.50 %RMB200,000RMB100,000
$28,240 $14,120 
China Everbright BankJuly 2021August 20243.00 %RMB150,000 RMB17,440
$21,180 $2,463 
 Bank of ChinaSeptember 2023September 20242.87 %RMB40,000RMB40,000
$5,648 5536$5,648 
China Merchants BankAugust 2023September 20243.00 %  RMB200,000 RMB153,000
$28,240 $21,603 
 China Merchants BankNovember 2020Repayable by installments and the last installments repayable in November 20303.95 %RMB128,500RMB94,633
$18,144 $13,362 
 Bank of ChinaJune 2021Repayable by installments and the last installments repayable in June 20242.60 %RMB10,000RMB7,500
$1,412 $1,059.00 
 Bank of ChinaSeptember, 2021Repayable by installments and the last installments repayable in September 20242.60 %RMB35,000RMB28,000
$4,942 $3,954 
 Bank of ShanghaiDecember,2022October 20242.85 %RMB100,000RMB100,000
$14,120 $14,120 
 China CITIC BankAugust 2023Repayable by installments and the last installments repayable in August 20253.10 %RMB100,000RMB100,000
$14,120 $14,120 
 Industrial Bank of KoreaJuly 2023July 20246.03 %KRW500,000KRW100,000
$386 $77 
 Industrial Bank of KoreaDecember 2023December 20244.27 %KRW2,000,000KRW2,000,000
$1,544 $1,544 
$137,976 $92,070 
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(1)Converted from RMB to dollars as of December 31, 2023. The loan from China Merchants Bank is secured by a pledge of the property of ACM Lingang and guaranteed by ACM Shanghai, as described above under “—Contractual Obligations.”
(2)This China CITIC bank facility agreement is with ACM Research, Inc.
Effect of exchange rate changes on cash, cash equivalents and restricted cash. The impact of fluctuations of the RMB to U.S. dollar currency exchange rate on a significant balance of our cash, and cash equivalents held in RMB-denominated accounts (Note 2) contributed to a $1.7 million decrease in the value of these items during the year ended December 31, 2023.
Contractual Obligations
Grant Contract for State-owned Construction Land Use Right in Shanghai City
In 2020 ACM Shanghai, through its wholly-owned subsidiary ACM Lingang, entered into a Grant Contract for State-owned Construction Land Use Right in Shanghai City (Category of R&D Headquarters and Industrial Projects), or the Grant Agreement, with the China (Shanghai) Pilot Free Trade Zone Lin-gang Special Area Administration, or the Grantor. ACM Lingang obtained rights to use approximately 43,000 square meters (10.6 acres) of land in the Lingang Heavy Equipment Industrial Zone of Lin-gang Special Area of China (Shanghai) Pilot Free Trade Zone, or the Land Use Right, for a period of fifty years, commencing on the date of delivery of the land in July 2020, which we refer to as the Delivery Date.
In exchange for its land use rights, ACM Lingang paid aggregate grant fees of RMB 61.7 million ($9.5 million), or the Grant Fees, and a performance deposit of RMB 12.3 million ($1.9 million), which is equal to 20% of the aggregate Grant Fees, to secure its achievement of the following performance milestones:
•the start of construction within 6 months after the Delivery Date (60% of the performance deposit), or Construction Start Milestone;
•the completion of construction within 30 months after the Delivery Date (20% of the performance deposit), or Construction Completion Milestone; and
•the start of production within 42 months after the Delivery Date (20% of the performance deposit), or Production Start Milestone.
Upon satisfaction of a milestone, the portion of the performance deposit attributable to that milestone will be repayable to ACM Shengwei within ten business days. If the achievement of any of the above milestones is delayed or abandoned, ACM Shengwei may be subject to additional penalties and may lose its rights to both the use of the granted land and any partially completed facilities on that land.
The status of the performance milestones for the period ended December 31, 2023 is as follows:
•ACM Lingang achieved the Construction Start Milestone and 60% of the performance deposit was refunded to ACM Shanghai in 2020.
•The Construction Completion Milestone was required to be met by January 9, 2024 but was not achieved. However, ACM Lingang believes it will receive the refund without penalty based on its explanation to the respective regulatory authorities of logistic-related delays, and expectations that it will meet the milestone before July 9, 2024. We cannot guarantee that ACM Lingang will achieve the missed milestone in 2024, or even if it does achieve the milestone in 2024, that it will be refunded some or all of the 20% portion of the performance deposit of RMB 2.5 million ($0.4 million).
Contractual penalties in the case of a delay of Construction Completion Milestone:
◦If ACM Lingang fails to complete the construction pursuant to the date agreed under the Grant Agreement or any extended completion date approved by the Grantor, ACM Lingang shall pay 50% of the deposit for timely completion of construction as liquidated damages;
◦If ACM Lingang delays the completion for more than six months beyond the date agreed under the Grant Agreement, or beyond any extended completion date approved by the Grantor, it shall pay the total deposit for timely completion of construction as liquidated damages.
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◦If the delay is more than one year, the Grantor is entitled to terminate the Grant Agreement and take back the Land Use Right. In such case, the Grantor shall refund the Grant Fees for the remaining land use term after deducting the deposit agreed under the Grant Agreement and refund the deposit for timely commencement of production and relevant bank interests in full to ACM Lingang.

•The Production Start Milestone is now required to be met by January 9, 2025. The Production Start Milestone was originally required to be met prior to January 9, 2024, but due to COVID-related delays, ACM filed multiple requests for extensions, the latest of which was granted on July 7, 2023. We cannot guarantee that ACM Lingang will meet any extended deadline or be refunded this 20% portion of the performance deposit.
Contractual penalties in the case of a delay of Production Start Milestone:
◦If ACM Lingang fails to commence production pursuant to the date agreed under the Grant Agreement or any extended commencement date approved by the Grantor, ACM Lingang shall pay the total deposit for timely commencement of production as liquidated damages;
◦If ACM Lingang fails to commence production pursuant to the extended commencement of production date (more than six months beyond the production start milestone), the Grantor is entitled to terminate the Grant Agreement and take back the Land Use Right. In such case, the Grantor shall refund the Grant Fees for the remaining land use term after deducting the deposit agreed under the Grant Agreement to ACM Lingang.
In addition to the milestones, covenants in the Grant Agreement require that, among other things, ACM Lingang will be required to pay liquidated damages in the event that:
(a)it does not make a total investment (including the costs of construction, fixtures, equipment and grant fees) of at least RMB 450.0 million ($63.4 million). ACM Lingang shall pay the liquidated damages equal to the same proportion of the Grant Fees as the proportion of the actual shortfall amount of investment in the total agreed investment amount or the investment intensity.
(b)within six years after the Delivery Date, or prior to July 9, 2026, it does not (i) generate a minimum specified amount of annual sales of products manufactured on the granted land or (ii) pay at least RMB 157.6 million ($22.2 million) in annual total taxes (including value-added taxes, corporate income tax, personal income taxes, urban maintenance and construction taxes, education surcharges, stamp taxes, and vehicle and shipping taxes) as a result of operations in connection with the granted land.
If the total tax revenue of the project fails to reach but is no less than 80% of the standard agreed under the Grant Agreement, ACM Lingang shall pay 20% of the actual shortfall amount of the tax revenue as liquidated damages. If the total tax revenue of the project fails to reach 80% of the standard agreed under the Grant Agreement within 1 month after the agreed date of reaching target production, the Grantor is entitled to terminate the Grant Agreement, take back the Land Use Right, and shall refund the Grant Fees for the remaining land use term to ACM Lingang.
If the Grant Agreement is terminated because of breach of any terms above, the Grantor shall take back the buildings, fixtures and auxiliary facilities on the land area and provide ACM Lingang with corresponding compensation according to the residual value of the buildings, fixtures and auxiliary facilities when they are taken back. The total cumulative investment of land, buildings and construction in progress related to ACM Lingang amounted to $116.9 million and $35.4 million at December 31, 2023 and December 31, 2022, respectively.
How We Evaluate Our Operations
We present information below with respect to four measures of financial performance:
•We define “shipments” of tools to include (a) a “repeat” delivery to a customer invoicesof a type of tool that the customer has previously accepted, for which we recognize revenue upon delivery, and (b) a “first-time” delivery of a “first tool” to a customer on an approval basis, for which we may recognize revenue in the future if contractual conditions are met, or if a purchase order is received.
•We define “adjusted EBITDA” as net income excluding interest expense (net), income tax benefit (expense), depreciation and amortization, unrealized (gain) loss on short-term investments, and stock-based compensation. We define adjusted EBITDA to also exclude restructuring costs, although we have not incurred any such costs to date.
•We define “free cash flow” as net cash provided by operating activities less purchases of property and equipment (net of proceeds from disposals).
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•We define “adjusted operating income (loss)” as our income (loss) from operations excluding stock-based compensation.
These financial measures are not based on any standardized methodologies prescribed by accounting principles generally accepted in the United States, or GAAP, and are not necessarily comparable to similarly titled measures presented by other companies.
We have presented shipments, adjusted EBITDA, free cash flow and adjusted operating income (loss) because they are key measures used by our management and board of directors to understand and evaluate our operating performance, to establish budgets and to develop operational goals for managing our business. We believe that these financial measures help identify underlying trends in our business that could otherwise be masked by the effect of the expenses that we exclude. In particular, we believe that the exclusion of the expenses eliminated in calculating adjusted EBITDA and adjusted operating income (loss) can provide useful measures for period-to-period comparisons of our core operating performance and that the exclusion of property and equipment purchases from operating cash flow can provide a usual means to gauge our capability to generate cash. Accordingly, we believe that these financial measures provide useful information to investors and others in understanding and evaluating our operating results, enhancing the overall understanding of our past performance and future prospects, and allowing for greater transparency with respect to key financial metrics used by our management in its financial and operational decision-making.
Shipments, adjusted EBITDA, free cash flow and adjusted operating income (loss) are not prepared in accordance with GAAP, and should not be considered in isolation of, or as an alternative to, measures prepared in accordance with GAAP.
Shipments
We consider shipments a key operating metric as it reflects the total value of products delivered to customers and prospective customers by our productive assets.
Shipments consist of two components:
•a shipment to a customer of a type of tool that the customer has previously accepted, for which we recognize revenue when the tool is delivered; and
•a shipment to a customer of a type of tool that the customer is receiving and evaluating for the first time, in each case a “first tool,” for which we may recognize revenue at a later date, subject to the customer’s acceptance of the tool upon the tool’s satisfaction of applicable contractual requirements or subject to the customer’s subsequent discretionary commitment to purchase the tool.
“First tool” shipments can be made to either an existing customer that has not previously accepted that specific type of tool in the past ─ for example, a delivery of a SAPS V tool to a customer that previously had received only SAPS II tools ─ or to a new customer that has never purchased any tool from us.
Shipments for the years ended December 31, 2023, 2022, and 2021 totaled $597 million, $539 million, and $372 million, respectively. Repeat tool shipments in the years ended December 31, 2023, 2022, and 2021 totaled $310 million, $288 million and $210 million, respectively. First tool shipments for the years ended December 31, 2023, 2022, and 2021 totaled $286 million, $251 million, and $162 million, respectively.
The dollar amount attributed to a “first tool” shipment is equal to the consideration we expect to receive if any and all contractual requirements are satisfied and the customer accepts the tool, or if the customer subsequently determines in its discretion to purchase the tool. There are a number of limitations related to the use of shipments in evaluating our business, including that customers have significant, or in some cases total, discretion in determining whether to accept or purchase our tools after evaluation and their decision not to accept or purchase delivered tools is likely to result in our inability to recognize revenue from the delivered tools. “First tool” shipments reflect the value of incremental new products under evaluation delivered to our customers or prospective customers for a given period and is used as an internal key metric to reflect future potential revenue opportunity. The cumulative cost of “first tool” shipments under evaluation at customers which have not been accepted by the customer is carried at cost and reflected in finished goods inventory (see note 5 to the condensed consolidated financial statements included in this report). “First tool” shipments exclude deliveries to customers for which ACM does not have a basis to expect future revenue.
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Adjusted EBITDA
There are a number of limitations related to the use of adjusted EBITDA rather than net income (loss), which is the nearest GAAP equivalent. Some of these limitations are:
•adjusted EBITDA excludes depreciation and amortization and, although these are non-cash expenses, the assets being depreciated or amortized may have to be replaced in the future;
•we exclude stock-based compensation expense from adjusted EBITDA and adjusted operating income (loss), although (a) it has been, and will continue to be for the foreseeable future, a significant recurring expense for our business and an important part of our compensation strategy and (b) if we did not pay out a portion of our compensation in the form of stock-based compensation, the cash salary expense included in operating expenses would be higher, which would affect our cash position;
•the expenses and other items that we exclude in our calculation of adjusted EBITDA may differ from the expenses and other items, if any, that other companies may exclude from adjusted EBITDA when they report their operating results;
•adjusted EBITDA does not reflect changes in, or cash requirements for, working capital needs;
•adjusted EBITDA does not reflect interest expense, or the requirements necessary to service interest or principal payments on debt;
•adjusted EBITDA does not reflect income tax expense (benefit) or the cash requirements to pay taxes;
•adjusted EBITDA does not reflect historical cash expenditures or future requirements for capital expenditures or contractual commitments;
•although depreciation and amortization charges are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and adjusted EBITDA does not reflect any cash requirements for such replacements; and
•adjusted EBITDA includes expense reductions and non-operating other income attributable to mainland China governmental grants, which may mask the effect of underlying developments in net income, including trends in current expenses and interest expense, and free cash flow includes the mainland China governmental grants, the amount and timing of which can be difficult to predict and are outside our control.
The following table reconciles net income, the most directly comparable GAAP financial measure, to adjusted EBITDA:
Year Ended December 31,
202320222021% Change
2023 v 2022		Absolute
Change 2023 v
2022
(in thousands)
Adjusted EBITDA Data:
Net Income$96,852 $50,564 $42,921 91.5 %$46,288 
Interest expense (income), net(5,673)(7,085)260 -19.9 %1,412 
Income tax expense19,364 16,798 134 15.3 %2,566 
Depreciation and amortization8,092 5,366 2,353 50.8 %2,726 
Stock based compensation27,338 7,730 5,117 253.7 %19,608 
Unrealized (gain) loss on short-term investments2,737 7,855 (607)-65.2 %(5,118)
Adjusted EBITDA$148,710 $81,228 $50,178 83.1 %$67,482 
The $67.5 million increase in adjusted EBITDA for the year ended December 31, 2023 as compared to the year ended December 31, 2022 reflected higher income tax expense, a decrease in unrealized loss on short-term investments, an increase in net income, an increase in stock-based compensation, and an increase in depreciation and amortization, partly offset by a negative impact from an increase in interest income, net.
We do not exclude from adjusted EBITDA expense reductions and non-operating other income attributable to mainland China governmental grants because we consider and incorporate the expected amounts and timing of those grants in incurring expenses and capital expenditures. If we did not receive the grants, our cash expenses therefore would be lower,
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and our cash position would not be affected, to the extent we have accurately anticipated the amounts of the grants. For additional information regarding our mainland China grants, please see “—Key Components of Results of Operations—mainland China Government Research and Development Funding.”
Free Cash Flow
The following table reconciles net cash provided by (used in) operating activities, the most directly comparable GAAP financial measure, to free cash flow:
Year Ended December 31,
202320222021% Change
2023 v 2022		Absolute
Change 2023 v
2022
(in thousands)
Free Cash Flow Data:
Net cash used in operating activities$(75,323)$(62,194)$(40,093)21.1 %$(13,129)
Purchase of property and equipment(61,876)(91,094)(9,153)-32.1 %29,218 
Purchase of long-term investments(7,508)(4,279)- 75.5 %(3,229)
Free cash flow$(144,707)$(157,567)$(49,246)-8.2 %$12,860 
The changes in free cash flow for the years ended December 31, 2023, 2022, and 2021 reflected the factors driving net cash used in operating activities, and an increase of purchases of property and equipment. Consistent with our methodology for calculating adjusted EBITDA, we do not adjust free cash flow for the effects of mainland China government subsidies, because we take those subsidies into account in incurring expenses and capital expenditures. We do not adjust free cash flow for the effects of time-deposits, which for our internal purposes are considered as largely similar to cash.
Adjusted Operating Income
Adjusted operating income excludes stock-based compensation from income from operations. Although stock-based compensation is an important aspect of the compensation of our employees and executives, determining the fair value of certain of the stock-based instruments we utilize involves a high degree of judgment and estimation and the expense recorded may bear little resemblance to the actual value realized upon the vesting or future exercise of the related stock-based awards. Furthermore, unlike cash compensation, the value of stock options, which is an element of our ongoing stock-based compensation expense, is determined using a complex formula that incorporates factors, such as market volatility, that are beyond our control. Management believes it is useful to exclude stock-based compensation in order to better understand the long-term performance of our core business and to facilitate comparison of our results to those of peer companies. The use of non-GAAP financial measures excluding stock-based compensation has limitations. If we did not pay out a portion of our compensation in the form of stock-based compensation, the cash salary expense included in
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operating expenses would be higher and our cash holdings would be less. The following tables reflect the exclusion of stock-based compensation, or SBC, from line items comprising income from operations:
Year Ended December 31,
202320222021
Actual
(GAAP)		SBCAdjusted
(Non-GAAP)		Actual
(GAAP)		SBCAdjusted
(Non-GAAP)		Actual
(GAAP)		SBCAdjusted
(Non-GAAP)
(in thousands)
Revenue$557,723 $- $557,723 $388,832 $- $388,832 $259,751 $- $259,751 
Cost of revenue(281,508)(1,406)(280,102)(205,217)(520)(204,697)(144,895)(397)(144,498)
Gross profit276,215 (1,406)277,621 183,615 (520)184,135 114,856 (397)115,253 
Operating expenses:  
Sales and marketing(47,019)(5,684)(41,335)(39,889)(1,877)(38,012)(26,733)(1,802)(24,931)
Research and development(92,709)(8,459)(84,250)(62,226)(2,565)(59,661)(34,207)(1,115)(33,092)
General and administrative(40,648)(11,789)(28,859)(22,465)(2,768)(19,697)(15,214)(1,803)(13,411)
Income (loss) from operations$95,839 $(27,338)$123,177 $59,035 $(7,730)$66,765 $38,702 $(5,117)$43,819 
Adjusted operating income for the year ended December 31, 2023, as compared with the year ended December 31, 2022, increased by $56.4 million due to a $36.8 million increase in income from operations and a $19.6 million increase in stock-based compensation expense. Adjusted operating income for the year ended December 31, 2022, as compared with the year ended December 31, 2021, increased by $22.9 million due to a $20.3 million increase in income from operations and a $2.6 million increase in stock-based compensation expense.
Item 7A.    Quantitative and Qualitative Disclosures About Market Risk
As a result of our operating, investing and financing activities, we are exposed to market risks such as interest rate risk and foreign currency exchange rate risk. We are also exposed to credit risk as a result of our normal business activities.
Foreign Currency Exchange Risk
Our consolidated financial statements are presented in U.S. dollars, which is our reporting currency, while the functional currency of our subsidiaries in mainland China is RMB, and the functional currency of our subsidiary in Korea is the Korean Won, or the KRW. Transactions in foreign currencies are initially recorded at the functional currency rate prevailing at the date of the transactions. Any difference between the initially recorded amount and the settlement amount is recorded as a gain or loss on foreign currency transaction in our consolidated statements of comprehensive income (loss). Monetary assets and liabilities denominated in a foreign currency are translated at the functional currency rate of exchange as of the date of a consolidated balance sheet. Any difference is recorded as a gain or loss on foreign currency translation in the appropriate consolidated statement of operations. In accordance with ASC Topic 830, Foreign Currency Matters, we translate the assets and liabilities into U.S. dollars from RMB using the rate of exchange prevailing at the applicable balance sheet date and the consolidated statements of comprehensive income (loss) and cash flows are translated at an average rate during the reporting period. Adjustments resulting from the translation are recorded in stockholders’ equity as part of accumulated other comprehensive income.
The majority of our business is conducted through our ACM Shanghai subsidiary that manufactures and sells our products in various global markets, and we also have operations in Korea, the Taiwan Region, the United States, and other countries. We sell the majority of our products in transactions denominated in U.S. dollars; however, we purchase raw materials, pay wages, and make payments to our supply chain in foreign currencies, primarily RMB, and also the KRW. As a result, our earnings, cash flows and cash balances are exposed to fluctuations in foreign currency exchange rates. For example, because of our significant manufacturing operations in mainland China, a weakening RMB is advantageous and a strengthening RMB is disadvantageous to our financial results. At this time, we have not established a formal hedging
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policy to attempt to reduce the inherent risks of potential currency fluctuations on our global operations. We report the impact of foreign exchange fluctuations in the other income (expense) line item of our Consolidated Statements of Comprehensive Income statements. For 2023, 2022, and 2021, the effect of fluctuations of foreign currencies contributed realized gains (losses) of $(2.0) million, 1.7 million, and ($0.6 million), respectively.
The mainland China government imposes significant exchange restrictions on fund transfers out of mainland China that are not related to business operations. To date these restrictions have not had a material impact on us because we have not engaged in any significant transactions that are subject to the restrictions.
Interest Rate Risk
As of December 31, 2023, 2022, and 2021, the balance of our short term bank borrowings (see note 9 in the Notes to Consolidated Financial Statements included herein under “Item 8. Financial Statements and Supplementary Data.”), mature at various dates within the following year and do not expose us to interest rate risk. As of December 31, 2023, the balance of our long-term borrowings (see note 12 in the Notes to Consolidated Financial Statements included herein under “Item 8. Financial Statements and Supplementary Data.”) carries a fixed interest rated and we may be exposed to fair value interest rate risk.
We have implemented policies and procedures to measure, manage, monitor and report risk exposures, which are reviewed regularly by management and the board of directors. We identify risk exposures and monitor and manage such risks on an ongoing basis.
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Item 8.    Financial Statements and Supplementary Data
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
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Report of Independent Registered Public Accounting Firm (Ernst & Young Hua Ming LLP, Shanghai, China, PCAOB ID#1408)
84
Report of Independent Registered Public Accounting Firm (Armanino LLP , San Ramon, CA, PCAOB ID#32)
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Report of Independent Registered Public Accounting Firm (BDO China Shu Lun Pan Certified Public Accountants LLP, Shenzhen, China, PCAOB ID#1818)88
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Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of ACM Research, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of ACM Research, Inc. (the Company) as of December 31, 2023, the related consolidated statements of comprehensive income, changes in stockholders' equity and cash flows for the year ended December 31, 2023, and the related notes(collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023, and the results of its operations and its cash flows for the year ended December 31, 2023, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework)and our report dated February 28, 2024 expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.


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Revenue Recognition
Description of the Matter
As described in Notes 2 to the consolidated financial statements, the Company recognizes revenue from tools and spare parts at a point in time, when the Company has satisfied its performance obligation. For shipments made to a customer that has not previously accepted a specific type of tool (“first tools”), revenues are recognized when the tools are accepted by the customer. For shipments made to a customer that have previously accepted a specific type of tool (“repeat shipments”), revenues are recognized upon shipment or delivery because the Company can objectively demonstrate that the tools meet all the required customer specifications.

Evaluating the sufficiency of audit evidence to validate whether the Company can objectively identify repeat shipments required auditor judgment and significant audit effort because the Company’s tools are highly customized for each customer.

How We Addressed the Matter in Our Audit
We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s revenue process. For example, we tested the controls over management’s review of the Company’s analysis to determine whether the repeat shipments identified have been previously accepted by the same customer.

To test whether the Company can objectively demonstrate that the highly customized tools are repeat shipments, our audit procedures, among others, included performing direct inquiries with the Company’s personnel from its sales and engineering department to understand the Company’s process of identifying repeat shipments and the quality control department to understand the quality control process. We applied auditor judgment to determine the nature and extent of procedures to be performed by testing all the sales transactions identified as repeat shipments during the year. Specifically for all repeat shipments, we obtained the quality control reports signed by the Company’s quality control department. We also identified the similar tools previously sold to and accepted by the same customer by comparing the executed contracts or purchase orders of both tools, and inspected the acceptance confirmation from the customer of the previous tools to verify that the Company was able to objectively demonstrate that repeat shipments meet all the required customer specifications with its established history of customer acceptance. We evaluated the overall sufficiency of audit evidence obtained by assessing the results of procedures performed over repeat shipments, including the appropriateness of the nature and extent of audit effort.

/s/ Ernst & Young Hua Ming LLP

We have served as the Company's auditor since 2023.

Shanghai, the People’s Republic of China

February 28, 2024












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Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of ACM Research, Inc.

Opinion on Internal Control Over Financial Reporting

We have audited ACM Research, Inc.’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, ACM Research, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Company as of December 31, 2023, the related consolidated statements of comprehensive income, changes in stockholders' equity and cash flows for the year ended December 31, 2023, and the related notesand our report dated February 28, 2024 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young Hua Ming LLP

Shanghai, the People’s Republic of China

February 28, 2024
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and
Stockholders of ACM Research, Inc.

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheet of ACM Research, Inc. and subsidiaries (the Company) as of December 31, 2022, and the related consolidated statements of comprehensive income (loss), changes in stockholders’ equity, and cash flows for the year ended December 31, 2022, and the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022, and the results of its operations and its cash flows for the year ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.

/s/Armanino LLP

We served as the Company’s auditor in 2022. In 2023, we became the predecessor auditor.

San Ramon, California

March 1, 2023
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logo1.jpg
Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors
ACM Research, Inc.
Fremont, California

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated statements of operations and comprehensive income, changes in stockholders’ equity, and cash flows of ACM Research, Inc. and subsidiaries (the “Company”) for the year ended December 31, 2021, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the results of its operations and its cash flows for the year ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/BDO China Shu Lun Pan Certified Public Accountants LLP

We served as the Company’s auditor from 2015 to 2022.

Shenzhen, The People’s Republic of China

March 1, 2022, exceptfor the effects of the common stock split discussed in Notes 1 and 2 to the consolidated financial statements, as to which the date is March 1, 2023.
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ACM RESEARCH, INC.
Consolidated Balance Sheets
(In thousands, except per share data)

December 31,
20232022
Assets
Current assets:
Cash and cash equivalents (note 2)$182,090 $247,951 
Restricted cash1,083 500 
Short-term time deposits (note 2)80,524 70,492 
Short-term investments (note 15)21,312 20,209 
Accounts receivable, net (note 4)283,186 182,936 
Other receivables40,065 29,617 
Inventories, net (note 5)545,395 393,172 
Advances to related party (note 16)2,432 3,322 
Prepaid expenses20,023 15,607 
            Total current assets1,176,110 963,806 
Property, plant and equipment, net (note 6)201,848 82,875 
Land use right, net (note 7)8,367 8,692 
Operating lease right-of-use assets, net (note 11)7,026 2,489 
Intangible assets, net2,538 1,255 
Long-term time deposits (note 2)40,818 101,956 
Deferred tax assets (note 19)20,271 6,703 
Long-term investments (note 14)27,880 17,459 
Other long-term assets (note 8)6,050 50,265 
                        Total assets$1,490,908 $1,235,500 
Liabilities and Equity
Current liabilities:
Short-term borrowings (note 9)$31,335 $56,004 
Current portion of long-term borrowings (note 12)6,783 2,322 
Related party accounts payable (note 16)11,407 14,468 
Accounts payable141,814 101,735 
Advances from customers181,368 153,773 
Deferred revenue3,687 4,174 
Income taxes payable (note 19)6,401 3,469 
FIN-48 payable (note 19)12,149 6,686 
Other payables and accrued expenses (note 10)102,951 52,201 
Current portion of operating lease liability (note 11)2,764 1,382 
            Total current liabilities500,659 396,214 
Long-term borrowings (note 12)53,952 18,687 
Long-term operating lease liability (note 11)4,262 1,107 
Other long-term liabilities (note 13)5,873 7,321 
                       Total liabilities564,746 423,329 
Commitments and contingencies (note 21)
Equity:
Stockholders’ equity:
Class A Common stock (note 17)6 5 
Class B Common stock (note 17)1 1 
Additional paid-in capital629,845 604,089 
Retained earnings156,827 94,426 
Statutory surplus reserve (note 2)30,060 16,881 
Accumulated other comprehensive loss(49,349)(40,546)
Total ACM Research, Inc. stockholders’ equity767,390 674,856 
Non-controlling interests158,772 137,315 
Total equity926,162 812,171 
               Total liabilities and equity$1,490,908 $1,235,500 
The accompanying notes are an integral part of these consolidated financial statements.
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ACM RESEARCH, INC.
Consolidated Statements of Comprehensive Income (Loss)
(In thousands, except per share data)
Year Ended December 31,
202320222021
Revenue (note 3)$557,723 $388,832 $259,751 
Cost of revenue, including cost of revenue from related party of $31,240 and $26,313 for the year ended December 31, 2023 and 2022, respectively (note 16)281,508 205,217 144,895 
Gross profit276,215 183,615 114,856 
Operating expenses:   
Sales and marketing47,019 39,889 26,733 
Research and development92,709 62,226 34,207 
General and administrative40,648 22,465 15,214 
Total operating expenses180,376 124,580 76,154 
Income from operations95,839 59,035 38,702 
Interest income8,354 8,740 505 
Interest expense(2,681)(1,655)(765)
Realized gain from sale of short-term investments9,047 1,116 — 
Unrealized gain (loss) on short-term investments(2,737)(7,855)607 
Other income (expense), net(1,558)3,315 (631)
Income from equity method investments9,952 4,666 4,637 
Income before income taxes116,216 67,362 43,055 
Income tax expense (note 19)(19,364)(16,798)(134)
Net income96,852 50,564 42,921 
Less: Net income attributable to non-controlling interests19,503 11,301 5,164 
Net income attributable to ACM Research, Inc.$77,349 $39,263 $37,757 
Comprehensive income (loss):   
Net income$96,852 $50,564 $42,921 
Foreign currency translation adjustment, net of tax(10,617)(59,102)4,695 
Comprehensive income (loss)86,235 (8,538)47,616 
Less: Comprehensive income attributable to non-controlling interests17,689 1,854 5,607 
Comprehensive income (loss) attributable to ACM Research, Inc.$68,546 $(10,392)$42,009 
Net income per common stock (note 2):
Basic$1.29 $0.66 $0.65 
Diluted$1.16 $0.59 $0.58 
Weighted average common stock outstanding used in computing per share amounts (note 2): 
Basic60,164,67059,235,97557,654,708
Diluted64,870,54365,341,77165,356,716

The accompanying notes are an integral part of these consolidated financial statements.
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ACM RESEARCH, INC.
Consolidated Statement of Changes in Stockholders’ Equity
(In thousands, except per share data)
Common
Stock Class A		Common
Stock Class B
SharesAmountSharesAmountAdditional Paid-
in Capital		Retained
Earnings		Statutory Surplus
Reserve		Accumulated Other
Comprehensive
Income (Loss)		Non-controlling
Interests		Total Equity
Balance at December 31, 202050,690,079$5 5,407,818$1 $102,000 $29,899 $4,388 $4,857 $67,020 $208,170 
Net income-- -- - 37,757 - - 5,164 42,921 
Appropriation to statutory surplus reserves-- -- - (3,924)3,924 - - — 
Foreign currency translation adjustment-- -- - - - 4,252 443 4,695 
Exercise of stock options1,870,803- -- 3,430 - - - - 3,430 
Stock-based compensation-- -- 5,117 - - - - 5,117 
Exercise of stock warrants728,043- 0- 1,820 - - - - 1,820 
Conversion of Class B common stock to Class A common stock320,004- (320,004)- - - - - - — 
Proceeds from a subsidiary equity issuance0- -- 482,678 - - - 62,834 545,512 
Balance at December 31, 202153,608,9295 5,087,8141 595,045 63,732 8,312 9,109 135,461 811,665 
Net income-- -- - 39,263 - - 11,301 50,564 
Appropriation to statutory surplus reserves-- -- - (8,569)8,569 - - - 
Foreign currency translation adjustment-- -- - - - (49,655)(9,447)(59,102)
Exercise of stock options980,354- -- 1,314 - - - - 1,314 
Stock-based compensation-- -- 7,730 - - - - 7,730 
Conversion of Class B common stock to Class A common stock66,003- (66,003)- - - - - - - 
Balance at December 31, 202254,655,2865 5,021,8111 604,089 94,426 16,881 (40,546)137,315 812,171 
Cumulative effect of change in accounting principle under ASC 326, net of tax(1,769)(1,769)
Net income-- -- - 77,349 - - 19,503 96,852 
Appropriation to statutory surplus reserves(13,179)13,179 
Foreign currency translation adjustment-- -- - - - (8,803)(1,814)(10,617)
Exercise of stock options1,380,8861 -- 2,303 - - - 3,834 6,138 
Stock-based compensation-- -- 23,453 - - - 3,885 27,338 
ACM Shanghai dividends- - -- - - - - (3,951)(3,951)
Balance at December 31, 202356,036,172$6 5,021,811$1 $629,845 $156,827 $30,060 $(49,349)$158,772 $926,162 
The accompanying notes are an integral part of these consolidated financial statements.
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ACM RESEARCH, INC.
Consolidated Statements of Cash Flows
(In thousands)
Year Ended December 31,
202320222021
Cash flows from operating activities:
Net income$96,852 $50,564 $42,921 
Adjustments to reconcile net income from operations to net cash used in operating activities
Non-cash operating lease cost3,580 2,816 2,451 
Depreciation and amortization8,092 5,366 2,353 
Gain on disposals of property, plant and equipment(2)(12)— 
Realized gain on short-term investments(9,047)(1,116)— 
Income from equity method investments(9,952)(4,666)(4,637)
Unrealized loss (gain) on short-term investments2,737 7,855 (607)
Inventory provision575 2,248 75 
Provision for credit losses2,741 — — 
Deferred income taxes(13,647)4,027 (1,840)
Stock-based compensation27,338 7,730 5,117 
Net changes in operating assets and liabilities:
Accounts receivable(108,749)(88,655)(47,624)
Income tax recoverable— — (1,082)
Other receivables(4,213)(7,331)(8,420)
Inventories(164,027)(195,562)(127,731)
Advances to related party (note 16)890 (939)(776)
Prepaid expenses(5,075)(3,695)(9,830)
Other long-term assets— 3,986 (4,521)
Related party accounts payable (note 16)(3,061)6,569 3,806 
Accounts payable42,343 17,501 61,405 
Advances from customers29,974 104,258 34,831 
Deferred revenue2,693 994 226 
Income taxes payable3,009 3,236 2,200 
FIN-48 payable5,463 4,404 10,551 
Other payables and accrued expenses21,375 23,406 3,180 
Operating lease liabilities(3,580)(2,816)(2,451)
Other long-term liabilities(1,632)(2,362)310 
Net cash used in operating activities(75,323)(62,194)(40,093)
Cash flows from investing activities:
Purchase of property and equipment(61,876)(91,094)(9,153)
Purchase of intangible assets(2,462)(1,426)(559)
Purchase of long-term investments (note 14)(7,508)(5,279)(1,568)
Purchase of short-term investments (note 15)(18,356)— — 
Purchase of time deposits(26,120)(172,448)— 
Proceeds from maturity of time deposits79,600 — — 
Proceeds from sale of short-term investments (note 15)21,735 4,577 — 
Proceeds from disposal of long-term investments8,242 — — 
Net cash used in investing activities(6,745)(265,670)(11,280)
Cash flows from financing activities:
Proceeds from short-term borrowings31,334 56,004 22,884 
Repayments of short-term borrowings(55,068)(9,224)(39,809)
Proceeds from long-term borrowings42,360 — 7,056 
Repayments of long-term borrowings(2,283)(2,223)(2,127)
ACM Shanghai dividends(3,951)- — 
Proceeds from exercise of stock options6,138 1,314 3,430 
Proceeds from a subsidiary equity issuance, net of issuance costs— — 545,512 
Proceeds from warrant exercise to common stock— — 1,820 
Net cash provided by financing activities18,530 45,871 538,766 
Effect of exchange rate changes on cash, cash equivalents and restricted cash$(1,740)$(32,623)$3,908 
Net increase (decrease) in cash, cash equivalents and restricted cash$(65,278)$(314,616)$491,301 
Cash, cash equivalents and restricted cash at beginning of period248,451 563,067 71,766 
Cash, cash equivalents and restricted cash at end of period$183,173 $248,451 $563,067 
Supplemental disclosure of cash flow information:   
Interest paid, net of capitalized interest$2,681 $1,655 $765 
Cash paid for income taxes$26,103 $3,586 $1,132 
Reconciliation of cash, cash equivalents and restricted cash in consolidated statements of cash flows:
Cash and cash equivalents$182,090 $247,951 $562,548 
Restricted cash1,083 500 519 
Cash, cash equivalents and restricted cash$183,173 $248,451 $563,067 
Non-cash financing activities:
Cashless exercise of stock options$333 $221 $137 
Non-cash investing activities:
Transfer from inventory to property, plant and equipment$4,379 $— $— 
Purchase property, plant and equipment through accounts payable and other payable$33,750 $— $— 
Transfer of prepayment for property to property, plant and equipment$— $41,497 $— 
The accompanying notes are an integral part of these consolidated financial statements.
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ACM RESEARCH, INC.
Notes to Consolidated Financial Statements
(in thousands, except share and per share data)
NOTE 1 – DESCRIPTION OF BUSINESS
ACM Research, Inc. (“ACM” or "ACM Research") and its subsidiaries (collectively with ACM, the “Company”) develop, manufacture and sell single-wafer wet cleaning equipment used to improve the manufacturing process and yield for advanced integrated chips. The Company markets and sells its single-wafer wet-cleaning equipment, under the brand name “Ultra C,” based on the Company’s proprietary Space Alternated Phase Shift (“SAPS”) and Timely Energized Bubble Oscillation (“TEBO”) technologies. These tools are designed to remove random defects from a wafer surface efficiently, without damaging the wafer or its features, even at increasingly advanced process nodes.
ACM was incorporated in California in 1998, and it initially focused on developing tools for manufacturing process steps involving the integration of ultra-low-K materials and copper. The Company’s early efforts focused on stress-free copper-polishing technology, and it sold tools based on that technology in the early 2000s.
In 2006, the Company established its operational center in Shanghai in the People’s Republic of China ("mainland China"), where it operates through ACM’s subsidiary, ACM Research (Shanghai), Inc. (“ACM Shanghai”). ACM Shanghai was formed to help establish and build relationships with integrated circuit manufacturers in mainland China, and the Company initially financed its Shanghai operations in part through sales of non-controlling equity interests in ACM Shanghai.
In 2007, the Company began to focus its development efforts on single-wafer wet-cleaning solutions for the front-end chip fabrication process. The Company introduced its SAPS megasonic technology, which can be applied in wet wafer cleaning at numerous steps during the chip fabrication process, in 2009. It introduced its TEBO technology, which can be applied at numerous steps during the fabrication of small node two-dimensional conventional and three-dimensional patterned wafers, in March 2016. The Company has designed its equipment models for SAPS and TEBO solutions using a modular configuration that enables it to create a wet-cleaning tool meeting the specific requirements of a customer, while using pre-existing designs for chamber, electrical, chemical delivery and other modules. In August 2018, the Company introduced its Ultra-C Tahoe wafer cleaning tool, which can deliver high cleaning performance with significantly less sulfuric acid than typically consumed by conventional high-temperature single-wafer cleaning tools. Based on its electro-chemical plating (“ECP”) technology, the Company introduced in March 2019 its Ultra ECP AP, or “Advanced Packaging,” tool for bumping, or applying copper, tin and nickel to semiconductor wafers at the die-level, and its Ultra ECP MAP, or “Multi-Anode Partial Plating,” tool to deliver advanced electrochemical copper plating for copper interconnect applications in front-end wafer fabrication processes. The Company also offers a range of custom-made equipment, including cleaners, coaters and developers, to back-end wafer assembly and packaging factories, principally in mainland China.
In 2011, ACM Shanghai formed a wholly owned subsidiary in mainland China, ACM Research (Wuxi), Inc. (“ACM Wuxi”), to manage sales and service operations.
In November 2016, ACM re-domesticated from California to Delaware pursuant to a merger in which ACM Research, Inc., a California corporation, was merged into a newly formed, wholly owned Delaware subsidiary, also named ACM Research, Inc.
In June 2017, ACM formed a wholly owned subsidiary in Hong Kong, CleanChip Technologies Limited (“CleanChip”), to act on the Company’s behalf in Asian markets outside mainland China by, for example, serving as a trading partner between ACM Shanghai and its customers, procuring raw materials and components, performing sales and marketing activities, and making strategic investments.
In August 2017, ACM purchased 18.77% of ACM Shanghai’s equity interests held by Shanghai Science and Technology Venture Capital Co., Ltd. On November 8, 2017, ACM purchased the remaining 18.36% of ACM Shanghai’s equity interest held by third parties, Shanghai Pudong High-Tech Investment Co., Ltd. (“PDHTI”) and Shanghai Zhangjiang Science & Technology Venture Capital Co., Ltd. (“ZSTVC”). At December 31, 2017, ACM owned all of the outstanding equity interests of ACM Shanghai, and indirectly through ACM Shanghai, owned all of the outstanding equity interests of ACM Wuxi.
On November 2, 2017, the Registration Statement on Form S-1 (File No. 333- 220451) for ACM’s initial public offering of Class A common stock (the “IPO”) was declared effective by the U.S. Securities and Exchange Commission. Shares of
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Class A common stock began trading on the Nasdaq Global Market on November 3, 2017, and the closing for the IPO was held on November 7, 2017.
In December 2017, ACM formed a wholly owned subsidiary in the Republic of Korea (“Korea”), ACM Research Korea CO., LTD. (“ACM Korea”), to serve customers based in Korea and perform sales, marketing, research and development activities for new products and solutions.
In March 2019, ACM Shanghai formed a wholly owned subsidiary in mainland China, Shengwei Research (Shanghai), Inc. (“ACM Shengwei”), to manage activities related to the addition of future long-term production capacity.
In June 2019, CleanChip formed a wholly owned subsidiary in California, ACM Research (CA), Inc. (“ACM California”), to provide procurement services on behalf of ACM Shanghai.
In June 2019, ACM announced plans to complete over the next three years a listing (the “STAR Listing”) of shares of ACM Shanghai on the Shanghai Stock Exchange’s new SciTech innovAtion boaRd,known as the STAR Market, and a concurrent initial public offering (the “STAR IPO”) of ACM Shanghai shares in mainland China. ACM Shanghai is currently ACM’s primary operating subsidiary, and at the time of announcement, was wholly owned by ACM. To meet a STAR Listing requirement that it have multiple independent stockholders in mainland China, ACM Shanghai completed private placements of its shares in June and November 2019, following which, as of September 30, 2020, the private placement investors held a total of 8.3% of the outstanding shares of ACM Shanghai and ACM Research held the remaining 91.7%. As part of the STAR Listing process, in June 2020 the ownership interests held by the private investors were reclassified from redeemable non-controlling interests to non-controlling interests as the redemption feature was terminated. In preparation for the STAR IPO, ACM completed a reorganization in December 2020 that included the sale of all of the shares of CleanChip by ACM to ACM Shanghai for $3,500. The reorganization and sale had no impact on ACM’s consolidated financial statements.
In August 2021, ACM formed a wholly owned subsidiary in Singapore, ACM research (Singapore) PTE, Ltd. to perform sales, marketing, and other business development activities.
In November 2021, ACM’s operating subsidiary ACM Shanghai, completed its STAR IPO and its shares began trading on the STAR Market. In the STAR IPO, ACM Shanghai issued 43,355,753 shares, representing 10% of the total 433,557,100 shares outstanding after the issuance. The shares were issued at a public offering price of RMB 85.00 per share, and the net proceeds of the STAR IPO, after issuance costs, totaled $545,512. Upon completion of the STAR IPO, ACM owned 82.5% of the outstanding ACM Shanghai shares. However, in May 2023, ACM's ownership declined to 82.1% due to the exercise of 2,150,309 stock options related to ACM Shanghai shares.
In February 2022, ACM Shanghai formed a wholly owned subsidiary in China, ACM Research (Beijing), Inc. (“ACM Beijing”), to perform sales, marketing and other business development activities.
In March 2022, ACM formed a wholly owned subsidiary in Korea, Hanguk ACM CO., LTD, to perform business development and other related activities.
In March 2022, the Board of Directors of ACM declared a 3-for-1 stock split of Class A and Class B common stock effected in the form of a stock dividend (the “Stock Split”). Each stockholder of record at the close of business on March 16, 2022, received a dividend of two additional shares of Class A common stock for each then-held share of Class A common stock and two additional shares of Class B common stock for each then-held share of Class B common stock, which were distributed after the close of trading on March 23, 2022. Unless otherwise indicated, all share numbers, per share amount, share prices, exercise prices and conversion rates set forth in these notes and the accompanying consolidated financial statements have been adjusted retrospectively to reflect the Stock Split.

In June 2023, ACM Shanghai formed a wholly-owned subsidiary in mainland China, Yusheng Micro Semiconductor (Shanghai), Co., Ltd, ("Yusheng Micro") to perform business development activities.

In June 2023, Yusheng Micro together with Wooil Flucon Co. (note 14) and a private investor established ACM-Wooil Microelectronics (Shanghai) Co., Ltd, ("ACM-Wooil"), a partially owned subsidiary based in mainland China to develop and produce key components for the semiconductor equipment industry.
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The Company has direct or indirect interests in the following subsidiaries:
Place and date of
incorporation		Effective interest held as at
December 31,
Name of subsidiaries20232022
ACM Research (Shanghai), Inc.Mainland China, May 200582.1%82.5%
ACM Research (Wuxi), Inc.Mainland China, July 201182.1%82.5%
CleanChip Technologies LimitedHong Kong, June 201782.1%82.5%
ACM Research Korea CO., LTD.Korea, December 201782.1%82.5%
ACM Research (Lingang), Inc. (1)Mainland China, March 201982.1%82.5%
ACM Research (CA), Inc.USA, April 201982.1%82.5%
ACM Research (Cayman), Inc.Cayman Islands, April 2019100.0%100.0%
ACM Research (Singapore) PTE. Ltd.Singapore, August 2021100.0%100.0%
ACM Research (Beijing), Inc.Mainland China, February 202282.1%82.5%
Hanguk ACM CO., LTDKorea, March 2022100.0%100.0%
Yusheng Micro Semiconductor (Shanghai) Co., Ltd.Mainland China, June 202382.1%-
ACM-Wooil Microelectronics (Shanghai) Co., Ltd.Mainland China, June 202359.4%-
(1) ACM Research (Lingang) Inc., or ACM Lingang, is the English name referred to by its Chinese language name Shengwei Research (Shanghai), Inc. in prior filings. ACM Research (Lingang), Inc. and Shengwei Research (Shanghai), Inc. refer to the same entity.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Principles of Consolidation
The Company’s consolidated financial statements include the accounts of ACM and its subsidiaries, including ACM Shanghai and its subsidiaries. ACM’s subsidiaries are those entities in which ACM, directly and indirectly, controls more than a majority of the voting power. All significant intercompany transactions and balances have been eliminated upon consolidation. The consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”)
Use of Estimates
The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the balance sheet date and the reported revenues and expenses during the reported period in the condensed consolidated financial statements and accompanying notes. The Company’s significant accounting estimates and assumptions include, but are not limited to, those used for revenue recognition and deferred revenue, the valuation and recognition of fair value of certain short-term and long-term investments, stock-based compensation arrangements, realization of deferred tax assets, assessment for impairment of long-lived assets and long-term investments, allowance for credit losses, inventory valuation, useful lives of property, plant and equipment and useful lives of intangible assets.
Management evaluates these estimates and assumptions on a regular basis. Actual results could differ from those estimates and assumptions.
Common Stock Split
All prior period share and per share amounts and common stock presented in the accompanying financial statements and these notes thereto has been retroactively adjusted to reflect the impact of the Stock Split. Proportional adjustments were also made to outstanding awards under the Company’s stock-based compensation plans.
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Reclassifications
Certain prior year amounts in the consolidated financial statements have been reclassified to conform with the current year presentation. These classifications had no impact on the Company’s results of operations.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash on hand and bank deposits that are unrestricted as to withdrawal and use, and highly liquid investments with an original maturity date of three months or less at the date of purchase. At times, cash deposits may exceed government-insured limits.
The following table presents cash and cash equivalents, according to jurisdiction as of December 31, 2023 and 2022:
December 31,
20232022
United States$43,614 $25,011 
Mainland China70,418 129,695 
China Hong Kong64,057 89,187 
Korea3,934 4,007 
Singapore67 51 
Total$182,090 $247,951 
The amounts in mainland China do not include short-term and long-term time deposits which totaled $121,342 and $172,448 at December 31, 2023 and 2022, respectively.
Cash held in the U.S. exceeds the Federal Deposit Insurance Corporation (“FDIC”) insurance limits and is subject to risk of loss. No losses have been experienced to date.
Cash amounts at the banks in mainland China are subject to a series of risk control regulatory standards from mainland China bank regulatory authorities. ACM’s subsidiaries in mainland China are required to obtain approval from the State Administration of Foreign Exchange (“SAFE”) to transfer funds into or out of mainland China. SAFE requires a valid agreement to approve the transfers, which are processed through a bank. Other than these mainland China foreign exchange restrictions, ACM’s subsidiaries in mainland China are not subject to any mainland China restrictions and limitations on its ability to transfer funds to ACM Research or among our other subsidiaries. However, cash held by ACM’s subsidiaries in mainland China does exceed applicable insurance limits and is subject to risk of loss, although no such losses have been experienced to date.
ACM California periodically procures goods and services on behalf of ACM Shanghai. For these transactions, ACM Shanghai makes cash payments to ACM California in accordance with applicable transfer pricing arrangements. For the years ended December 31, 2023 and December 31, 2022, cash payments from ACM Shanghai to ACM California for the procurement of goods and services were $42.5 million and $30.2 million, respectively. ACM California periodically borrows funds for working capital advances from its direct parent, CleanChip. ACM California repays or renews these intercompany loans in accordance with their terms.
For sales through CleanChip and ACM Research, a certain amount of sales or advance payments from customer proceeds is repatriated back to ACM Shanghai, a subsidiary, in accordance with applicable transfer pricing arrangements in the ordinary course of business. ACM Research provides services to certain customers located in the U.S., Europe and other regions outside of mainland China to support the evaluation of first tools and provide support for tools under warranty on behalf of ACM Shanghai. For these transactions, ACM Shanghai makes cash payments to ACM Research in accordance with applicable transfer pricing arrangements.
For the year ended December 31, 2023, ACM Shanghai paid $19,200 in dividends to ACM Research.
Subsequent to June 30, 2020, with the exception of sales and services-related transfer-pricing payments in the ordinary course of business, and dividends paid by ACM Shanghai to ACM Research, no cash transfers or other payments or distributions have been made between ACM Research and ACM Shanghai. ACM Research intends to retain any future
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earnings to finance the operations and expenses of the business, and do not expect to distribute earnings or declare or pay any dividends in the foreseeable future.
Amounts held in Korea exceed the Korea Deposit Insurance Corporation (“KDIC”) insurance limits and are subject to risk of loss. No losses have been experienced to date.
There is no additional restriction for the transfer of cash from bank accounts in the U.S., Korea, Singapore, and Hong Kong.
Time Deposits

Time deposits are deposited with banks in mainland China with fixed terms and interest rates which cannot be withdrawn before maturity, and are presented as short-term deposits and long-term deposits in the consolidated financial statements based on their expected time of collection. They are also subject to the risk control regulatory standards described above upon maturity. Time deposits consisted of the following:

December 31,
20232022
Deposit in China Merchant Bank which matured on January 29, 2023 with an annual interest rate of 2.25%$— $38,772 
Deposit in China Everbright Bank which matured on January 29, 2023 with an annual interest rate of 2.25%— 14,360 
Deposit in China Everbright Bank which matured on May 22, 2023 with an annual interest rate of 5.07%— 3,000 
Deposit in China Industrial Bank which matured on January 30, 2023 with an annual interest rate of 2.15%— 14,360 
Deposit in China Merchant Bank which matured on January 29, 2024 with an annual interest rate of 2.85%29,797 28,720 
Deposit in Bank of Ningbo which matured on February 17, 2024 with an annual interest rate of 2.85%44,630 43,080 
Deposit in Shanghai Pudong Development Bank which matures on October 20, 2025 with an annual interest rate of 3.10%7,322 7,180 
Deposit in Shanghai Pudong Development Bank which matures on November 14, 2025 with an annual interest rate of 3.10%7,307 7,180 
Deposit in Shanghai Pudong Development Bank which matures on December 8, 2025 with an annual interest rate of 3.10%4,376 4,308 
Deposit in Shanghai Pudong Development Bank which matures on December 15, 2025 with an annual interest rate of 3.10%4,373 4,308 
Deposit in Shanghai Pudong Development Bank which matures on December 30, 2025 with an annual interest rate of 3.10%2,912 7,180 
Deposit in China Industrial Bank which matures on January 30, 2026 with an annual interest rate of 3.15%14,528 — 
Deposit in China Everbright Bank which matured on January 5, 2024 with an annual interest rate of 5.38%3,079 — 
Deposit in China Everbright Bank which matures on May 22, 2024 with an annual interest rate of 5.38%3,018 — 
$121,342 $172,448 
For the years ended December 31, 2023 and 2022, respectively, interest income related to time deposits was $3,689 and $3,472, respectively.
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Accounts Receivable
Prior to adoption of Accounting Standards Update, or ASU, 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASC 326”), the Company reviews its accounts receivable on a periodic basis and makes general and specific allowances when there is doubt as to the collectability of individual balances. After adoption of ASC 326, as of January 1, 2023, the Company assesses collectability by reviewing accounts receivable. We providereceivable on a collective basis where similar characteristics exist and on an individual basis when the Company identifies specific customers with known disputes or collectability issues. In determining the amount of the allowance for doubtfulcredit losses, the Company considers historical collectability based on past due status, the age of the accounts when we determinereceivable balances, credit quality of the Company’s customers based on ongoing credit evaluations, current economic conditions, reasonable and supportable forecasts of future economic conditions, and other factors that may affect the collectionCompany’s ability to collect from customers. At December 31, 2023, and 2022, the Company, based on a review of its outstanding balances and its customers, determined the allowance for credit losses were $4,830 and $0, respectively.
Land Use Right, Net
The land use right represents the cost to purchase a right to use state-owned land in mainland China with lease terms of 50 years expiring in 2070, for which an upfront lump-sum payment was made during the year ended December 31, 2021. The land use rights are treated as operating lease. The Company classifies the land use right as non-current assets on the consolidated balance sheets (note 7).
Inventory
Inventory consists of raw materials and related goods, work-in-progress, finished goods, and other consumable materials such as spare parts.
Inventory was recorded at the lower of cost or net realizable value at December 31, 2023 and 2022.
•The cost of a general inventory item is determined using the moving weighted average method. The cost of an outstanding customer receivableinventory item purchased specifically for a customized product is not probable. The allowance for doubtful accountsdetermined using the specific identification method. Low-cost consumable materials and packaging materials are expensed as incurred.
•Net realizable value is reviewed on a quarterly basis to assess the adequacy of the allowance. We take into consideration (a) accounts receivable and historical bad debts experience, (b) any circumstances of which we are aware of a customer’s inability to meet its financial obligations, (c) changes in our customer payment history, and (d) our judgments as to prevailing economic conditionsestimated selling price, in the industryordinary course of business, less estimated costs to complete or dispose.
The Company assesses the recoverability of all inventories quarterly to determine if any adjustments are required. Potential excess or obsolete inventory is written down based on management’s analysis of inventory levels and the impactestimates of those conditions on our customers. If circumstances change, such that the financial conditions of our customers are adversely affectedfuture 12-month demand and they are unable to meet their financial obligations to us, we may need to record additional allowances, which would result in a reduction of our net income.
market conditions.
Property, Plant and Equipment, Net
Assets comprising property,Property, plant and equipment are recorded at cost.cost less accumulated depreciation and any provision for impairment in value. Depreciation begins when the asset is recorded on aplaced in service and is calculated by using the straight-line basismethod over the estimated useful liveslife of an asset (or, if shorter, over the assets and begins when the assets are placed in service.lease term). Betterments or renewals are capitalized when incurred. Maintenance
Estimated useful lives of assets are as follows:
Buildings and plants30 years
Computer and office equipment3 to 5 years
Furniture and fixtures5 years
Leasehold improvementsshorter of lease term or estimated useful life
Electronic equipment3 to 5 years
Manufacturing equipment
for small to medium-sized equipment, 5 to 10 years; for large equipment,
estimated by purchasing department at time of acceptance
Transportation equipment4 to 5 years
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Expenditures for maintenance and repairs with respect to an asset are expensed as incurred if theythat neither materially add to the value of the assetproperty nor appreciably prolong its life. Assets comprising plant,the life of the property and equipment are reviewed each yearcharged to determine whether any eventsexpense as incurred. Upon retirement or circumstances indicate thatsale of an asset, the carrying amountcost of the asset may not be recoverable.
and the related accumulated depreciation are eliminated from the accounts and any resulting gain or loss is credited or charged to income.
Intangible Assets,
Net
Intangible assets representconsist of purchase software. Assets are valued at cost at the fair valuetime of separately recognizable intangible assets acquired in connection with our business operations. We evaluate intangibles for impairment on an annual basis or whenever events or circumstances indicate that an impairment may have occurred.acquisition and are amortized over their beneficial periods.
ValuationResults of Long-Lived AssetsOperations
The following table sets forth our results of operations for the periods presented, as percentages of revenue.
Long-lived
Year Ended December 31,
202320222021
Revenue100.0 %100.0 %100.0 %
Cost of revenue50.5 52.8 55.8 
Gross margin49.5 47.2 44.2 
Operating expenses: 
Sales and marketing8.4 10.3 10.3 
Research and development16.6 16.0 13.2 
General and administrative7.3 5.8 5.9 
Total operating expenses, net32.3 32.0 29.4 
Income from operations17.2 15.2 14.8 
Interest income (expense), net1.0 1.8 (0.1)
Realized gain from sale of short-term investments1.6 0.3 - 
Unrealized gain (loss) on short-term investments(0.5)(2.0)0.2 
Other income (expense), net(0.3)0.9 (0.2)
Income from equity method investments1.8 1.2 1.8 
Income before income taxes20.8 17.4 16.5 
Income tax expense(3.5)(4.3)(0.1)
Net income17.3 13.0 16.4 
Less: Net income attributable to non-controlling interests3.5 2.9 2.0 
Net income attributable to ACM Research, Inc.13.8 %10.1 %14.4 %
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Comparison of Years Ended December 31, 2023, 2022, and 2021
Revenue
Year Ended December 31,
202320222021% Change
2023 v 2022		% Change
2022 v 2021
(in thousands)
Single wafer cleaning, Tahoe and semi-critical cleaning equipment$403,851 $272,939 $189,208 48.0 %44.3 %
ECP (front-end and packaging), furnace and other technologies103,356 77,482 33,210 33.4 %133.3 %
Advanced packaging (excluding ECP), services & spares50,516 38,411 37,333 31.5 %2.9 %
Total Revenue By Product Category$557,723 $388,832 $259,751 43.4 %49.7 %
Year Ended December 31,
202320222021
(in thousands)
Mainland China$540,969 $377,752 $258,615 
Other Regions16,754 11,080 1,136 
$557,723 $388,832 $259,751 
The increase in revenue for 2023 compared to 2022 was driven by higher sales of single wafer cleaning, Tahoe and semi-critical cleaning equipment, ECP (front-end and packaging), furnace and other technologies, and Advance packaging (excluding ECP), and services and spares. We attribute the revenue growth to continued investments in mature process nodes by current and new mainland China-based customers amidst an ongoing target to achieve a greater share of the global semiconductor market, incremental contribution from newly introduced tools, and better penetration of our product portfolio across our customer base.

The increase in revenue for 2022 compared to 2021 was driven primarily by higher sales of single wafer cleaning, Tahoe and semi-critical cleaning equipment, and increased contribution from newer ECP (front-end and packaging), furnace and other technologies. Our Shanghai production operations were adversely impacted in the first half of 2022 to COVID-19-related restrictions, with a return to more normal operations in the second half of the year. The U.S. export regulations imposed in October of 2022 had an adverse impact on ACM Shanghai’s shipments and sales in the fourth quarter of 2022.
Cost of Revenue and Gross Margin
Year Ended December 31,
202320222021% Change
2023 v 2022		% Change
2022 v 2021
(in thousands)
Cost of revenue$281,508 $205,217 $144,895 37.2 %41.6 %
Gross profit276,215 183,615 114,856 50.4 %59.9 %
Gross margin49.5 %47.2 %44.2 %2.30 3.00 
Cost of revenue and gross profit increased in 2023 as compared to 2022 due to the increased sales volume and an increase in gross margin. The increased gross margin versus the prior-year period was primarily due to improved gross margins for certain products, overall product mix, and a positive impact due to a change in the RMB to U.S. dollar currency exchange rate.
Cost of revenue and gross profit increased in 2022 as compared to 2021 due to the increased sales volume and an increase in gross margin. The increased gross margin versus the prior-year period was primarily due to a higher mix of ECP (front-
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end and packaging), furnace, and other technologies, and a positive impact due to a change in the RMB to U.S. dollar currency exchange rate.
Gross margin may vary from period to period, primarily related to the level of utilization and the timing and mix of revenue. We expect gross margin to be between 40.0% and 45.0% for the foreseeable future, with direct manufacturing costs approximating 50.0% to 55.0% of revenue and overhead costs totaling 5.0% of revenue.
Operating Expenses
Year Ended December 31,
202320222021% Change
2023 v 2022		% Change
2022 v 2021
(in thousands)
Sales and marketing expense$47,019 $39,889 $26,733 17.9 %49.2 %
Research and development expense92,709 62,226 34,207 49.0 %81.9 %
General and administrative expense40,648 22,465 15,214 80.9 %47.7 %
Total operating expenses$180,376 $124,580 $76,154 44.8 %63.6 %
Sales and marketing expense increased in 2023 as compared to 2022, and reflected an increase of $8.1 million due to higher costs for personnel, commissions, travel and entertainment and other costs, an increase of $4.7 million due to higher costs for professional services, outside services and other costs, and an increase of $3.8 million due to higher stock -based compensation, partly offset by a decrease of ($9.6 million) for the cost of tools built for promotional purposes.
Sales and marketing expense increased in 2022 as compared to 2021, and reflected an increase of $7.9 million due to higher costs of tools built for promotional purposes for potential new customers, and an increase of $5.3 million due to increased costs for personnel, commissions, outside services, travel and entertainment and other costs.
We expect that, for the foreseeable future, sales and marketing expense will increase in absolute dollars, as we continue to invest in sales and marketing by hiring additional employees and expanding marketing programs in existing or new markets. We must invest in sales and marketing processes in order to develop and maintain close relationships with customers. We are making dollar-based investments in order to support growth of our customer base in the United States, and the relative strength of the dollar could have a significant effect on our sales and marketing expense.
Research and development expense increased in 2023 as compared to 2022, reflecting an increase of $15.4 million in costs of components, costs of tools built for product development purposes, and costs of other research and development supplies, an increase of $7.1 million for personnel-related costs, an increase of $5.9 million in stock-based compensation, and an increase of $4.2 million in travel and entertainment costs to support product development, professional services, and other research and development related expenses, offset by a decrease of ($2.1 million) for outside services.
Research and development expense represented 16.6% and 16.0% of our revenue in the years ended December 31, 2023 and 2022, respectively. Without reduction by grant amounts received from mainland China governmental authorities (see “—mainland China Government Research and Development Funding”), gross research and development expense totaled $94.5 million, or 16.9% of total revenue, in the year ended December 31, 2023 as compared to $63.4 million, or 16.3% of revenue, in the corresponding period in 2022.
Research and development expense increased in 2022 as compared to 2021, reflecting an increase of $6.9 million in costs of components, costs of tools built for product development purposes, and costs of other research and development supplies, and an increase of $16.7 million for personnel, stock-based compensation, and travel and entertainment costs to support product development, and an increase of $4.4 million for outside services and other research and development related expenses.
We expect that, for the foreseeable future, research and development expense will increase in absolute dollars as compared to 2023, as we continue to invest in research and development to advance our technologies. We intend to continue to invest in research and development to support and enhance our cleaning, plating, advanced packaging, furnace and future product offerings to build and maintain our technology leadership position.
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General and administrative expense increased in 2023 as compared to 2022, reflecting an increase of $9.0 million in stock-based compensation, $3.3 million in personnel and professional services costs, $2.7 million in allowance for credit losses, and $3.1 million for travel & entertainment, depreciation and amortization, outside services, taxes and other general and administrative expenses.
General and administrative expense increased in 2022 as compared to 2021, primarily due to an increase in stock-based compensation, increased employee count, and an increase in legal, payroll tax and other fees.
We expect that, for the foreseeable future, general and administrative expense will increase in absolute dollars, as we incur additional costs associated with growing our business and operating as a public company.
Stock-Based Compensation Expense
Cost of revenue and operating expenses during the periods presented below have included stock-based compensation as follows:
Year Ended December 31,
202320222021
(in thousands)
Stock-Based Compensation Expense:
Cost of revenue$1,406 $520 $397 
Sales and marketing expense5,684 1,877 1,802 
Research and development expense8,459 2,565 1,115 
General and administrative expense11,789 2,768 1,803 
$27,338 $7,730 $5,117 
Interest income (expense), net, Other Income (expense), net
Year Ended December 31,
202320222021% Change
2023 v 2022		% Change
2022 v 2021
(in thousands)
Interest Income$8,354 $8,740 $505 -4.4 %1,630.7 %
Interest Expense(2,681)(1,655)(765)62.0 %116.3 %
Interest Income (expense), net$5,673 $7,085 $(260)-19.9 %-2,825.0 %
Other income (expense), net$(1,558)$3,315 $(631)-147.0 %-625.4 %
Interest income (expense), net, decreased in 2023 compared to 2022, principally as a result of reduced interest income from lower interest income on reduced cash balances, offset by increase in interest expenses incurred from a higher balance of total bank loans.
Interest income (expense), net, increased in 2022 compared to 2021, principally as a result of reduced interest income from lower interest rates on reduced cash balances, offset by increase in interest expenses incurred from short-term and long-term bank loans.
Other income (expense), net primarily reflects (a) gains or losses recognized from the impact of exchange rates on our foreign currency-denominated working-capital transactions and (b) depreciation of assets are evaluated for impairment whenever events oracquired with government subsidies, as described under “—Government Research and Development Funding” above. We realized $1.6 million of other expense in the year ended December 31, 2023, of which $2.0 million was due to loss realized from transactions that resulted from changes in circumstance indicatethe RMB-to-U.S. dollar exchange rate, as compared to a foreign exchange gain of 1.7 million in the corresponding period in 2022.
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Other income (expense) increased by $3.3 million in the year ended December 31, 2022, of which $1.7 million was due to gains realized from transactions that resulted from changes in the carryingRMB-to-U.S. dollar exchange rate, as compared to a loss of ($0.6 million) in the corresponding period in 2021.
Realized gain and unrealized loss from short-term investments, and income from equity method investments .
Year Ended December 31,
202320222021% Change
2023 v 2022		% Change
2022 v 2021		Absolute Change
2023 v 2022
(in thousands)
Realized gain from sale of short-term investments$9,047 $1,116 $- 710.7 %100.0 %$7,931 
Unrealized gain (loss) on short-term investments$(2,737)$(7,855)$607 -65.2 %-1394.1 %$5,118 
Income from equity method investments$9,952 $4,666 $4,637 113.3 %0.6 %$5,286 
We recorded a realized gain on sale of short-term investments of $9.0 million for the year ended December 31, 2023 as compared to a realized gain of $1.1 million for the same period in 2022 primarily due to the sales of ACM Shanghai’s indirect investment in publicly traded shares.
We recorded an unrealized loss on short-term investments of $2.7 million for the year ended December 31, 2023 as compared to an unrealized loss of $7.9 million for the same period in 2022, due primarily to a change in market value of ACM Shanghai’s indirect investment in publicly traded shares.
We recorded an unrealized loss on short-term investments of $7.9 million for the year ended December 31, 2022 as compared to an unrealized gain of $0.7 million for the same period in 2021, due primarily to a change in market value of ACM Shanghai’s indirect investment in publicly traded shares.
Income from equity method investments for the year ended December 31, 2023 increased by $5.3 million compared to the year ended December 31, 2022 primarily due to higher net income from equity method investments.
Income from equity method investments for the year ended December 31, 2022 was unchanged versus the year ended December 31, 2021. Income from equity method investments increased by $4.0 million for the year ended December 31, 2021 due to higher net income from equity method investments.

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Tax Benefit (Expense)
Year Ended December 31,
202320222021
(in thousands)
Current:
U.S. federal$(12,757)$(479)$(91)
U.S. state(150)(18)(2)
Foreign(19,696)(11,139)(2,195)
Total current tax expense(32,603)(11,636)(2,288)
Deferred: 
U.S. federal7,316 (10,927)2,089 
U.S. state63 8 - 
Foreign5,860 5,757 65 
Total deferred tax benefit (expense)13,239 (5,162)2,154 
Total income tax expense$(19,364)$(16,798)$(134)
We recognized a tax expense of $19.4 million for the year ended December 31, 2023 as compared to a tax expense of $16.8 million for the prior year period. The increased tax expense in 2023 primarily resulted from the tax effect of increased operating profit generated.
As we collect and prepare necessary data, and interpret the guidance issued by the U.S. Treasury Department, the Internal Revenue Service, and other standard-setting bodies, we may make adjustments to the provisional amounts. Those adjustments may materially affect our provision for income taxes and effective tax rate in the period in which the adjustments are made. There were no adjustments made in 2023.
Our effective tax rate differs from statutory rates of 21% for U.S. federal income tax purposes and 12.5% to 25% for mainland China income tax purposes due to the effects of the valuation allowance and certain permanent differences as it pertains to book-tax differences in the treatment of stock-based compensation and non-U.S. research expenses. Our four mainland China subsidiaries, ACM Shanghai, ACM Wuxi, ACM Beijing, and ACM Lingang, are liable for mainland China corporate income taxes at the rates of 15%, 25%, 25%, and 15%, respectively. Pursuant to the Corporate Income Tax Law of mainland China, our mainland China subsidiaries generally would be liable for mainland China corporate income taxes at a rate of 25%. According to Guoshuihan 2009 No. 203, an entity certified as an “advanced and new technology enterprise” is entitled to a preferential income tax rate of 15%. ACM Shanghai was certified as an “advanced and new technology enterprise” in 2012 and again in 2016, 2018, and 2021, effective until December 31, 2023, and is expected to be re-certified for future years in 2024. In 2021, ACM Shanghai was certified as an eligible integrated circuit production enterprise and is entitled to a preferential income tax rate of 12.5% from January 1, 2020 to December 31, 2022.Certain entities which meet requirements according to the Policy of the Lingang New area in China (Shanghai) Pilot Free Trade Zone are entitled to a preferential income tax rate of 15%. ACM Lingang was certified for this in 2021, and this preferential income tax rate is valid from December 31, 2020 until December 31, 2024.
We file income tax returns in the United States and state and foreign jurisdictions. All tax returns will remain open for examination by the federal and state authorities for three and four years, respectively, from the date of utilization of any net operating loss or credits. Certain tax years are subject to foreign income tax examinations by tax authorities until the statute of limitations expire.
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Net Income Attributable to Non-Controlling Interests
Year Ended December 31,
202320222021% Change
2023 v 2022		% Change
2022 v 2021
(in thousands)
Net income attributable to non-controlling interests$19,503 $11,301 $5,164 72.6 %118.8 %

ACM Research owns 82.1% of ACM Shanghai’s (note 1) outstanding shares which is reflected in our consolidated financial statements (note 2). We reflect theportion of net income allocable to the minority holders of ACM Shanghai shares as net income attributable to non-controlling interests.
Foreign currency translation adjustment
Year Ended December 31,
202320222021% Change
2023 v 2022		% Change
2022 v 2021
(in thousands)
Foreign currency translation adjustment$(10,617)$(59,102)$4,695 -82.0 %-1358.8 %
We recorded a foreign currency translation adjustment of ($10.6 million) for the year ended December 31, 2023, as compared to $(59.1) million for 2022, based on the net effect of RMB to dollar exchange rate fluctuations for the period on the converted value of ACM Shanghai’s RMB-denominated balances to U.S. dollar equivalents. The 2022 amount was especially large due to a weakening of the RMB versus the U.S. dollar during the year ended December 31, 2022 together with a more significant RMB-denominated asset balance in 2022.
Comprehensive income (loss) attributable to non-controlling interests
Year Ended December 31,
202320222021% Change
2023 v 2022		% Change
2022 v 2021
(in thousands)
Comprehensive income (loss) attributable to non-controlling interests$17,689 $1,854 $5,607 854.1 %-66.9 %
Comprehensive income attributable to non-controlling interest increased by $15.8 million compared to a decrease of $(3.8) million for the years ended December 31, 2023 and 2022 compared to the prior year, due to a significant change in net income generated from the non-controlling interests as impacted from foreign exchange rate fluctuations.
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Liquidity and Capital Resources
The following chart depicts our corporate organization as of December 31, 2023:
image (5).jpg
A detailed description of how cash is transferred through our organization is set forth under “Note 2 – Summary of Significant Accounting Policies – Cash and Cash Equivalents” to the Consolidated Financial Statements of this report.
During the year ended December 31, 2023, we funded our technology development and operations principally through our beginning global cash balances, including the cash balances at ACM Shanghai, borrowings by ACM Shanghai from local financial institutions and our loan from China CITIC Bank. Cash and cash equivalents, restricted cash, short-term time deposits and long-term time deposits were $304.5 million at December 31, 2023, compared to $420.9 million at December 31, 2022. The ($116.4 million) decrease was primarily driven by ($75.3 million) of cash used in operations, ($60.2 million) used in investing activities excluding the change in time deposits, $18.5 million net cash provided by financing activities, a $1.7 million decrease from the effect of exchange rate on cash, cash equivalents and restricted cash, and a $2.4 million increase from the effect of exchange rate on time deposits.
The table below represents the cash and cash equivalents, restricted cash, and time deposits as of December 31, 2023 and 2022:
December 31,
20232022
(In thousands)
Cash and cash equivalents, restricted cash, and time deposits: 
Cash and cash equivalents and restricted cash$183,173 $248,451 
Short-term time deposits80,524 70,492 
Long-term time deposits40,818 101,956 
Total$304,515 $420,899 
Our future working capital needs beyond the next twelve months will depend on many factors, including the rate of our business and revenue growth, the payment schedules of our customers, the timing and magnitude of our capital expenditures, and the timing of investment in our research and development as well as sales and marketing. We believe our existing cash and cash equivalents and short-term and long-term time deposits, our cash flow from operating activities, and bank borrowings by us and ACM Shanghai will be sufficient to meet our anticipated cash needs within our longer-term planning horizon.
ACM Shanghai has historically participated in certain mainland China government-sponsored grant and subsidy programs, as described under “—Key Components of Results of Operations—mainland China Government Research and Development Funding” and “—Contractual Obligations” and we expect that ACM Shanghai will continue to take
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advantage of these programs when they are available and fit with our business strategy. ACM Shanghai generally applies for these grants and subsidies through the applicable mainland China government agency’s defined processes. Periodically, the public relations department researches the availability of these grants and subsidies through mainland China government agencies with whom ACM Shanghai files business surveys and taxes. Management of ACM Shanghai then assesses which grants and subsidies for which ACM Shanghai may be eligible and submits the relevant application. The decision to award the grant to ACM Shanghai is made by the relevant mainland China government agencies based on suitability and the merits of the application. Neither ACM Research, nor ACM Shanghai or any of our other subsidiaries, has any direct relationship with any mainland China government agency, and our anticipated cash needs for the next twelve months neither anticipate, nor require, receipt of any mainland China government grants or subsidies.
To the extent our cash and cash equivalents, cash flow from operating activities and short-term bank borrowings are insufficient to fund our future activities in accordance with our strategic plan, we may determine to raise additional funds through public or private debt or equity financings or additional bank credit arrangements. We also may need to raise additional funds in the event we determine in the future to effect one or more acquisitions of businesses, technologies and products. If additional funding is necessary or desirable, we may not be fully recoverableable to obtain bank credit arrangements or to affect an equity or debt financing on terms acceptable to us or at all.
Restrictions under mainland China laws and regulations as well as restrictions under ACM Shanghai’s bank loan agreements, may significantly restrict ACM Shanghai’s ability to transfer a portion of ACM Shanghai’s net assets to ACM Research, other subsidiaries of ACM Research and to holders of ACM Research Class A common stock. See “Item 1A. Risk Factors–Regulatory Risks–Mainland China’s currency exchange control and government restrictions on investment repatriation may impact our ability to transfer funds outside of mainland China, which could materially and adversely affect our ability to grow, make investments or acquisitions that could benefit our business, otherwise fund and conduct our business, or pay dividends on our common stock.”
For the useful lifeyears ended December 31, 2023 and 2022, with the exception of sales and services-related transfer-pricing payments in the ordinary course of business, and dividends paid by ACM Shanghai to ACM Research, no transfers or distributions have been made between ACM Research, and its subsidiaries, including ACM Shanghai, or to holders of ACM Research Class A common stock.
Our cash and cash equivalents at December 31, 2023 were held for working capital purposes and other potential investments. ACM Shanghai, our only direct mainland China subsidiary, is, shorter than we had originally estimated. When these eventshowever, subject to mainland China restrictions on distributions to equity holders. The use of proceeds raised by the STAR Market IPO, without further approvals, are limited to specific usage. We currently intend for ACM Shanghai to retain all available funds from any future earnings for use in the operation of its business and do not anticipate it paying any cash dividends. Our accounts receivable balance fluctuates from period to period, which affects our cash flow from operating activities. Fluctuations vary depending on cash collections, client mix, and the timing of shipment and acceptance of our tools.
We have never declared or paid cash dividends on our capital stock. We intend to retain all available funds and any future earnings to support the operation of and to finance the growth and development of our business and do not anticipate paying any cash dividends in the foreseeable future.
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Cash Flow Used in Operating Activities. Net cash used by operations of ($75.3 million) during the year ended December 31, 2023 consisted of:
Year Ended December 31,
202320222021
(in thousands)
Net Income$96,852 $50,564 $42,921 
 Non-cash operating lease cost3,580 2,816 2,451 
  Provision for inventory575 2,248 75 
  Provision for credit losses2,741 - - 
Gain on disposals of property plant and equipment(2)(12)- 
Depreciation and amortization8,092 5,366 2,353 
Realized gain on short-term investments(9,047)(1,116)- 
Income from equity method investments(9,952)(4,666)(4,637)
Unrealized loss (gain) on short-term investments2,737 7,855 (607)
Deferred income taxes(13,647)4,027 (1,840)
Stock-based compensation27,338 7,730 5,117 
Net changes in operating assets and liabilities:(184,590)(137,006)(85,926)
Net cash flow used in operating activities$(75,323)$(62,194)$(40,093)
Significant changes occur, we evaluatein operating asset and liability accounts during the impairmentyear-ended December 31, 2023 included the following uses of cash: increases of inventories of $164.0 million (Note 5), and an increase of accounts receivable of $108.7 million (Note 4). As described under “—Key Components of Results of Operations—mainland China Government Research and Development Funding,” ACM Shanghai has received research and development grants from local and central mainland China governmental authorities. ACM Shanghai received $51,000 of payments related to such grants in the year ended December 31, 2023, as compared to cash receipts of $1.1 million in the same period of 2022.
The uses of cash are offset by the following significant sources of cash: an increase in advances from customers of $30.0 (Note 3), an increase in other payables and accrued expenses of $21.4 million, and an increase in accounts payable of $42.3 million.
Cash Flow Used in Investing Activities. Net cash used in investing activities for the year ended December 31, 2023, excluding net cash proceeds from the sale of time deposits, was ($60.2 million), primarily consisting of ($64.3 million) purchase of property and equipment and intangible assets, and ($7.5 million) purchase of long-term investments (note 14), partly offset by $3.4 million net proceeds from the sale of short-term investments, and $8.2 million of dividends received from long-term investments (note 14).
Cash Flow provided by Financing Activities. Net cash provided by financingfor the year ended December 31, 2023 was $18.5 million, primarily consisting of $16.3 million net proceeds from short and long-term borrowings, and $6.1 million in proceeds from the exercise of stock options, partly offset by ($4.0 million) of dividends paid by ACM Shanghai.
We and ACM Shanghai, together with the subsidiaries of ACM Shanghai, have short-term and long-term borrowings with six banks, as follows:
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LenderAgreement DateMaturity DateAnnual
Interest Rate		Maximum Borrowing
Amount(1)		Amount Outstanding
at December 31, 2023
(in thousands)
China CITIC Bank (2)July 2023Repayable by installments and the last installments repayable in December 20254.50 %RMB200,000RMB100,000
$28,240 $14,120 
China Everbright BankJuly 2021August 20243.00 %RMB150,000 RMB17,440
$21,180 $2,463 
 Bank of ChinaSeptember 2023September 20242.87 %RMB40,000RMB40,000
$5,648 5536$5,648 
China Merchants BankAugust 2023September 20243.00 %  RMB200,000 RMB153,000
$28,240 $21,603 
 China Merchants BankNovember 2020Repayable by installments and the last installments repayable in November 20303.95 %RMB128,500RMB94,633
$18,144 $13,362 
 Bank of ChinaJune 2021Repayable by installments and the last installments repayable in June 20242.60 %RMB10,000RMB7,500
$1,412 $1,059.00 
 Bank of ChinaSeptember, 2021Repayable by installments and the last installments repayable in September 20242.60 %RMB35,000RMB28,000
$4,942 $3,954 
 Bank of ShanghaiDecember,2022October 20242.85 %RMB100,000RMB100,000
$14,120 $14,120 
 China CITIC BankAugust 2023Repayable by installments and the last installments repayable in August 20253.10 %RMB100,000RMB100,000
$14,120 $14,120 
 Industrial Bank of KoreaJuly 2023July 20246.03 %KRW500,000KRW100,000
$386 $77 
 Industrial Bank of KoreaDecember 2023December 20244.27 %KRW2,000,000KRW2,000,000
$1,544 $1,544 
$137,976 $92,070 
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(1)Converted from RMB to dollars as of December 31, 2023. The loan from China Merchants Bank is secured by a pledge of the long-lived assetsproperty of ACM Lingang and guaranteed by comparingACM Shanghai, as described above under “—Contractual Obligations.”
(2)This China CITIC bank facility agreement is with ACM Research, Inc.
Effect of exchange rate changes on cash, cash equivalents and restricted cash. The impact of fluctuations of the carryingRMB to U.S. dollar currency exchange rate on a significant balance of our cash, and cash equivalents held in RMB-denominated accounts (Note 2) contributed to a $1.7 million decrease in the value of these items during the assetsyear ended December 31, 2023.
Contractual Obligations
Grant Contract for State-owned Construction Land Use Right in Shanghai City
In 2020 ACM Shanghai, through its wholly-owned subsidiary ACM Lingang, entered into a Grant Contract for State-owned Construction Land Use Right in Shanghai City (Category of R&D Headquarters and Industrial Projects), or the Grant Agreement, with the China (Shanghai) Pilot Free Trade Zone Lin-gang Special Area Administration, or the Grantor. ACM Lingang obtained rights to an estimateuse approximately 43,000 square meters (10.6 acres) of future undiscounted cash flows expectedland in the Lingang Heavy Equipment Industrial Zone of Lin-gang Special Area of China (Shanghai) Pilot Free Trade Zone, or the Land Use Right, for a period of fifty years, commencing on the date of delivery of the land in July 2020, which we refer to as the Delivery Date.
In exchange for its land use rights, ACM Lingang paid aggregate grant fees of RMB 61.7 million ($9.5 million), or the Grant Fees, and a performance deposit of RMB 12.3 million ($1.9 million), which is equal to 20% of the aggregate Grant Fees, to secure its achievement of the following performance milestones:
•the start of construction within 6 months after the Delivery Date (60% of the performance deposit), or Construction Start Milestone;
•the completion of construction within 30 months after the Delivery Date (20% of the performance deposit), or Construction Completion Milestone; and
•the start of production within 42 months after the Delivery Date (20% of the performance deposit), or Production Start Milestone.
Upon satisfaction of a milestone, the portion of the performance deposit attributable to that milestone will be generated fromrepayable to ACM Shengwei within ten business days. If the achievement of any of the above milestones is delayed or abandoned, ACM Shengwei may be subject to additional penalties and may lose its rights to both the use of the assetsgranted land and their eventual disposition. any partially completed facilities on that land.
The status of the performance milestones for the period ended December 31, 2023 is as follows:
•ACM Lingang achieved the Construction Start Milestone and 60% of the performance deposit was refunded to ACM Shanghai in 2020.
•The Construction Completion Milestone was required to be met by January 9, 2024 but was not achieved. However, ACM Lingang believes it will receive the refund without penalty based on its explanation to the respective regulatory authorities of logistic-related delays, and expectations that it will meet the milestone before July 9, 2024. We cannot guarantee that ACM Lingang will achieve the missed milestone in 2024, or even if it does achieve the milestone in 2024, that it will be refunded some or all of the 20% portion of the performance deposit of RMB 2.5 million ($0.4 million).
Contractual penalties in the case of a delay of Construction Completion Milestone:
◦If ACM Lingang fails to complete the construction pursuant to the date agreed under the Grant Agreement or any extended completion date approved by the Grantor, ACM Lingang shall pay 50% of the deposit for timely completion of construction as liquidated damages;
◦If ACM Lingang delays the completion for more than six months beyond the date agreed under the Grant Agreement, or beyond any extended completion date approved by the Grantor, it shall pay the total deposit for timely completion of construction as liquidated damages.
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◦If the sumdelay is more than one year, the Grantor is entitled to terminate the Grant Agreement and take back the Land Use Right. In such case, the Grantor shall refund the Grant Fees for the remaining land use term after deducting the deposit agreed under the Grant Agreement and refund the deposit for timely commencement of production and relevant bank interests in full to ACM Lingang.

•The Production Start Milestone is now required to be met by January 9, 2025. The Production Start Milestone was originally required to be met prior to January 9, 2024, but due to COVID-related delays, ACM filed multiple requests for extensions, the latest of which was granted on July 7, 2023. We cannot guarantee that ACM Lingang will meet any extended deadline or be refunded this 20% portion of the expected future undiscounted cash flowperformance deposit.
Contractual penalties in the case of a delay of Production Start Milestone:
◦If ACM Lingang fails to commence production pursuant to the date agreed under the Grant Agreement or any extended commencement date approved by the Grantor, ACM Lingang shall pay the total deposit for timely commencement of production as liquidated damages;
◦If ACM Lingang fails to commence production pursuant to the extended commencement of production date (more than six months beyond the production start milestone), the Grantor is entitled to terminate the Grant Agreement and take back the Land Use Right. In such case, the Grantor shall refund the Grant Fees for the remaining land use term after deducting the deposit agreed under the Grant Agreement to ACM Lingang.
In addition to the milestones, covenants in the Grant Agreement require that, among other things, ACM Lingang will be required to pay liquidated damages in the event that:
(a)it does not make a total investment (including the costs of construction, fixtures, equipment and grant fees) of at least RMB 450.0 million ($63.4 million). ACM Lingang shall pay the liquidated damages equal to the same proportion of the Grant Fees as the proportion of the actual shortfall amount of investment in the total agreed investment amount or the investment intensity.
(b)within six years after the Delivery Date, or prior to July 9, 2026, it does not (i) generate a minimum specified amount of annual sales of products manufactured on the granted land or (ii) pay at least RMB 157.6 million ($22.2 million) in annual total taxes (including value-added taxes, corporate income tax, personal income taxes, urban maintenance and construction taxes, education surcharges, stamp taxes, and vehicle and shipping taxes) as a result of operations in connection with the granted land.
If the total tax revenue of the project fails to reach but is no less than 80% of the carryingstandard agreed under the Grant Agreement, ACM Lingang shall pay 20% of the actual shortfall amount of the tax revenue as liquidated damages. If the total tax revenue of the project fails to reach 80% of the standard agreed under the Grant Agreement within 1 month after the agreed date of reaching target production, the Grantor is entitled to terminate the Grant Agreement, take back the Land Use Right, and shall refund the Grant Fees for the remaining land use term to ACM Lingang.
If the Grant Agreement is terminated because of breach of any terms above, the Grantor shall take back the buildings, fixtures and auxiliary facilities on the land area and provide ACM Lingang with corresponding compensation according to the residual value of the assets,buildings, fixtures and auxiliary facilities when they are taken back. The total cumulative investment of land, buildings and construction in progress related to ACM Lingang amounted to $116.9 million and $35.4 million at December 31, 2023 and December 31, 2022, respectively.
How We Evaluate Our Operations
We present information below with respect to four measures of financial performance:
•We define “shipments” of tools to include (a) a “repeat” delivery to a customer of a type of tool that the customer has previously accepted, for which we recognize revenue upon delivery, and (b) a “first-time” delivery of a “first tool” to a customer on an impairmentapproval basis, for which we may recognize revenue in the future if contractual conditions are met, or if a purchase order is received.
•We define “adjusted EBITDA” as net income excluding interest expense (net), income tax benefit (expense), depreciation and amortization, unrealized (gain) loss on short-term investments, and stock-based compensation. We define adjusted EBITDA to also exclude restructuring costs, although we have not incurred any such costs to date.
•We define “free cash flow” as net cash provided by operating activities less purchases of property and equipment (net of proceeds from disposals).
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•We define “adjusted operating income (loss)” as our income (loss) from operations excluding stock-based compensation.
These financial measures are not based on any standardized methodologies prescribed by accounting principles generally accepted in the excessUnited States, or GAAP, and are not necessarily comparable to similarly titled measures presented by other companies.
We have presented shipments, adjusted EBITDA, free cash flow and adjusted operating income (loss) because they are key measures used by our management and board of directors to understand and evaluate our operating performance, to establish budgets and to develop operational goals for managing our business. We believe that these financial measures help identify underlying trends in our business that could otherwise be masked by the effect of the carryingexpenses that we exclude. In particular, we believe that the exclusion of the expenses eliminated in calculating adjusted EBITDA and adjusted operating income (loss) can provide useful measures for period-to-period comparisons of our core operating performance and that the exclusion of property and equipment purchases from operating cash flow can provide a usual means to gauge our capability to generate cash. Accordingly, we believe that these financial measures provide useful information to investors and others in understanding and evaluating our operating results, enhancing the overall understanding of our past performance and future prospects, and allowing for greater transparency with respect to key financial metrics used by our management in its financial and operational decision-making.
Shipments, adjusted EBITDA, free cash flow and adjusted operating income (loss) are not prepared in accordance with GAAP, and should not be considered in isolation of, or as an alternative to, measures prepared in accordance with GAAP.
Shipments
We consider shipments a key operating metric as it reflects the total value overof products delivered to customers and prospective customers by our productive assets.
Shipments consist of two components:
•a shipment to a customer of a type of tool that the fair value. No impairment charge was recognized in 2015, 2016customer has previously accepted, for which we recognize revenue when the tool is delivered; and 2017.
Income Taxes
Income taxes are accounted for using•a shipment to a customer of a type of tool that the liability method. Under this method, deferred income tax assetscustomer is receiving and liabilities are recognizedevaluating for the future tax consequences attributablefirst time, in each case a “first tool,” for which we may recognize revenue at a later date, subject to temporary differences between the financial statement carrying amountscustomer’s acceptance of the tool upon the tool’s satisfaction of applicable contractual requirements or subject to the customer’s subsequent discretionary commitment to purchase the tool.
“First tool” shipments can be made to either an existing assetscustomer that has not previously accepted that specific type of tool in the past ─ for example, a delivery of a SAPS V tool to a customer that previously had received only SAPS II tools ─ or to a new customer that has never purchased any tool from us.
Shipments for the years ended December 31, 2023, 2022, and liabilities2021 totaled $597 million, $539 million, and their respective tax bases. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income$372 million, respectively. Repeat tool shipments in the years ended December 31, 2023, 2022, and 2021 totaled $310 million, $288 million and $210 million, respectively. First tool shipments for the years ended December 31, 2023, 2022, and 2021 totaled $286 million, $251 million, and $162 million, respectively.
The dollar amount attributed to a “first tool” shipment is equal to the consideration we expect to receive if any and all contractual requirements are satisfied and the customer accepts the tool, or if the customer subsequently determines in its discretion to purchase the tool. There are a number of limitations related to the use of shipments in evaluating our business, including that customers have significant, or in some cases total, discretion in determining whether to accept or purchase our tools after evaluation and their decision not to accept or purchase delivered tools is likely to result in our inability to recognize revenue from the delivered tools. “First tool” shipments reflect the value of incremental new products under evaluation delivered to our customers or prospective customers for a given period and is used as an internal key metric to reflect future potential revenue opportunity. The cumulative cost of “first tool” shipments under evaluation at customers which have not been accepted by the customer is carried at cost and reflected in finished goods inventory (see note 5 to the condensed consolidated financial statements included in this report). “First tool” shipments exclude deliveries to customers for which ACM does not have a basis to expect future revenue.
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Adjusted EBITDA
There are a number of limitations related to the use of adjusted EBITDA rather than net income (loss), which is the nearest GAAP equivalent. Some of these temporary differenceslimitations are:
•adjusted EBITDA excludes depreciation and amortization and, although these are expectednon-cash expenses, the assets being depreciated or amortized may have to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in incomereplaced in the period that includesfuture;
•we exclude stock-based compensation expense from adjusted EBITDA and adjusted operating income (loss), although (a) it has been, and will continue to be for the enactment date. A valuation allowanceforeseeable future, a significant recurring expense for our business and an important part of our compensation strategy and (b) if we did not pay out a portion of our compensation in the form of stock-based compensation, the cash salary expense included in operating expenses would be provided for higher, which would affect our cash position;
•the deferred tax assetsexpenses and other items that we exclude in our calculation of adjusted EBITDA may differ from the expenses and other items, if it is more likely thanany, that other companies may exclude from adjusted EBITDA when they report their operating results;
•adjusted EBITDA does not that the related benefit will not be realized.
On a quarterly basis, we provide income tax provisions based upon an estimated annual effective income tax rate. The effective tax rate is highly dependent upon the geographic composition of worldwide earnings, tax regulations governing each region, availability of tax credits and the effectiveness of our tax planning strategies. We carefully monitor thereflect changes in, many factors and adjust our effective income tax rateor cash requirements for, working capital needs;
•adjusted EBITDA does not reflect interest expense, or the requirements necessary to service interest or principal payments on a timely basis. If actual results differ from these estimates, this could have a material effect on our financial condition and results of operations.debt;
We maintained a partial valuation allowance as of December 31, 2017 with respect to certain net deferred tax assets based on our estimates of recoverability. We determined that the partial valuation allowance was appropriate given our historical operating losses and uncertainty with respect to our ability to generate profits from our business model sufficient to take advantage of the deferred tax assets in all applicable tax jurisdictions.
The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax regulations. In accordance with the authoritative guidance on accounting for uncertainty in income taxes, we recognize liabilities for uncertain tax positions based on the two-step process. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than•adjusted EBITDA does not that the position will be sustained in audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than fifty-percent likely of being realized upon ultimate settlement. We reevaluate these uncertain tax positions on a quarterly basis. This evaluation is based on factors including changes in facts or circumstances, changes in tax law, effectively settled issues under audit and new audit activity. Any change in these factors could result in the recognition of a tax benefit or an additional charge to the tax provision.
Interest and penalties related to uncertain tax positions are recorded in the provision forreflect income tax expense (benefit) or the cash requirements to pay taxes;
•adjusted EBITDA does not reflect historical cash expenditures or future requirements for capital expenditures or contractual commitments;
•although depreciation and amortization charges are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and adjusted EBITDA does not reflect any cash requirements for such replacements; and
•adjusted EBITDA includes expense reductions and non-operating other income attributable to mainland China governmental grants, which may mask the effect of underlying developments in net income, including trends in current expenses and interest expense, and free cash flow includes the mainland China governmental grants, the amount and timing of which can be difficult to predict and are outside our control.
The following table reconciles net income, the most directly comparable GAAP financial measure, to adjusted EBITDA:
Year Ended December 31,
202320222021% Change
2023 v 2022		Absolute
Change 2023 v
2022
(in thousands)
Adjusted EBITDA Data:
Net Income$96,852 $50,564 $42,921 91.5 %$46,288 
Interest expense (income), net(5,673)(7,085)260 -19.9 %1,412 
Income tax expense19,364 16,798 134 15.3 %2,566 
Depreciation and amortization8,092 5,366 2,353 50.8 %2,726 
Stock based compensation27,338 7,730 5,117 253.7 %19,608 
Unrealized (gain) loss on short-term investments2,737 7,855 (607)-65.2 %(5,118)
Adjusted EBITDA$148,710 $81,228 $50,178 83.1 %$67,482 
The $67.5 million increase in adjusted EBITDA for the year ended December 31, 2023 as compared to the year ended December 31, 2022 reflected higher income tax expense, a decrease in unrealized loss on short-term investments, an increase in net income, an increase in stock-based compensation, and an increase in depreciation and amortization, partly offset by a negative impact from an increase in interest income, net.
We do not exclude from adjusted EBITDA expense reductions and non-operating other income attributable to mainland China governmental grants because we consider and incorporate the consolidated statementsexpected amounts and timing of operations.those grants in incurring expenses and capital expenditures. If we did not receive the grants, our cash expenses therefore would be lower,
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and our cash position would not be affected, to the extent we have accurately anticipated the amounts of the grants. For additional information regarding our mainland China grants, please see “—Key Components of Results of Operations—mainland China Government Research and Development Funding.”
Free Cash Flow
The following table reconciles net cash provided by (used in) operating activities, the most directly comparable GAAP financial measure, to free cash flow:
Year Ended December 31,
202320222021% Change
2023 v 2022		Absolute
Change 2023 v
2022
(in thousands)
Free Cash Flow Data:
Net cash used in operating activities$(75,323)$(62,194)$(40,093)21.1 %$(13,129)
Purchase of property and equipment(61,876)(91,094)(9,153)-32.1 %29,218 
Purchase of long-term investments(7,508)(4,279)- 75.5 %(3,229)
Free cash flow$(144,707)$(157,567)$(49,246)-8.2 %$12,860 
The changes in free cash flow for the years ended December 31, 2023, 2022, and 2021 reflected the factors driving net cash used in operating activities, and an increase of purchases of property and equipment. Consistent with our methodology for calculating adjusted EBITDA, we do not adjust free cash flow for the effects of mainland China government subsidies, because we take those subsidies into account in incurring expenses and capital expenditures. We do not adjust free cash flow for the effects of time-deposits, which for our internal purposes are considered as largely similar to cash.
Adjusted Operating Income
Adjusted operating income excludes stock-based compensation from income from operations. Although stock-based compensation is an important aspect of the compensation of our employees and executives, determining the fair value of certain of the stock-based instruments we utilize involves a high degree of judgment and estimation and the expense recorded may bear little resemblance to the actual value realized upon the vesting or future exercise of the related stock-based awards. Furthermore, unlike cash compensation, the value of stock options, which is an element of our ongoing stock-based compensation expense, is determined using a complex formula that incorporates factors, such as market volatility, that are beyond our control. Management believes it is useful to exclude stock-based compensation in order to better understand the long-term performance of our core business and to facilitate comparison of our results to those of peer companies. The use of non-GAAP financial measures excluding stock-based compensation has limitations. If we did not pay out a portion of our compensation in the form of stock-based compensation, the cash salary expense included in
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operating expenses would be higher and our cash holdings would be less. The following tables reflect the exclusion of stock-based compensation, or SBC, from line items comprising income from operations:
Year Ended December 31,
202320222021
Actual
(GAAP)		SBCAdjusted
(Non-GAAP)		Actual
(GAAP)		SBCAdjusted
(Non-GAAP)		Actual
(GAAP)		SBCAdjusted
(Non-GAAP)
(in thousands)
Revenue$557,723 $- $557,723 $388,832 $- $388,832 $259,751 $- $259,751 
Cost of revenue(281,508)(1,406)(280,102)(205,217)(520)(204,697)(144,895)(397)(144,498)
Gross profit276,215 (1,406)277,621 183,615 (520)184,135 114,856 (397)115,253 
Operating expenses:  
Sales and marketing(47,019)(5,684)(41,335)(39,889)(1,877)(38,012)(26,733)(1,802)(24,931)
Research and development(92,709)(8,459)(84,250)(62,226)(2,565)(59,661)(34,207)(1,115)(33,092)
General and administrative(40,648)(11,789)(28,859)(22,465)(2,768)(19,697)(15,214)(1,803)(13,411)
Income (loss) from operations$95,839 $(27,338)$123,177 $59,035 $(7,730)$66,765 $38,702 $(5,117)$43,819 
Adjusted operating income for the year ended December 31, 2023, as compared with the year ended December 31, 2022, increased by $56.4 million due to a $36.8 million increase in income from operations and a $19.6 million increase in stock-based compensation expense. Adjusted operating income for the year ended December 31, 2022, as compared with the year ended December 31, 2021, increased by $22.9 million due to a $20.3 million increase in income from operations and a $2.6 million increase in stock-based compensation expense.
Item 7A.    Quantitative and Qualitative Disclosures About Market Risk
As a result of our operating, investing and financing activities, we are exposed to market risks such as interest rate risk and foreign currency exchange rate risk. We are also exposed to credit risk as a result of our normal business activities.
Foreign Currency TranslationExchange Risk
Our consolidated financial statements are presented in U.S. dollars, which is our reporting currency, while the functional currency of our subsidiaries in mainland China is RMB, and the PRCfunctional currency of our subsidiary in Korea is RMB.the Korean Won, or the KRW. Transactions in foreign currencies are initially recorded at the functional currency rate prevailing at the date of the transactions. Any difference between the initially recorded amount and the settlement amount is recorded as a gain or loss on foreign currency transaction in our consolidated statements of operations.comprehensive income (loss). Monetary assets and liabilities denominated in a foreign currency are translated at the functional currency rate of exchange as of the date of a consolidated balance sheet. Any difference is recorded as a gain or loss on foreign currency translation in the appropriate consolidated statement of operations. In accordance with the FASB’s ASC Topic 830, Foreign Currency Matters, we translate the assets and liabilities into U.S. dollars from RMB using the rate of exchange prevailing at the applicable balance sheet date and the consolidated statements of operationscomprehensive income (loss) and cash flows are translated at an average rate during the reporting period. Adjustments resulting from the translation are recorded in stockholders’ equity as part of accumulated other comprehensive income.
The majority of our business is conducted through our ACM Shanghai subsidiary that manufactures and sells our products in various global markets, and we also have operations in Korea, the Taiwan Region, the United States, and other countries. We sell the majority of our products in transactions denominated in U.S. dollars; however, we purchase raw materials, pay wages, and make payments to our supply chain in foreign currencies, primarily RMB, and also the KRW. As a result, our earnings, cash flows and cash balances are exposed to fluctuations in foreign currency exchange rates. For example, because of our significant manufacturing operations in mainland China, a weakening RMB is advantageous and a strengthening RMB is disadvantageous to our financial results. At this time, we have not established a formal hedging
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policy to attempt to reduce the inherent risks of potential currency fluctuations on our global operations. We report the impact of foreign exchange fluctuations in the other income (expense) line item of our Consolidated Statements of Comprehensive Income statements. For 2023, 2022, and 2021, the effect of fluctuations of foreign currencies contributed realized gains (losses) of $(2.0) million, 1.7 million, and ($0.6 million), respectively.
The PRCmainland China government imposes significant exchange restrictions on fund transfers out of the PRCmainland China that are not related to business operations. To date these restrictions have not had a material impact on us because we have not engaged in any significant transactions that are subject to the restrictions.
Interest Rate Risk
Warranty
As of December 31, 2023, 2022, and 2021, the balance of our short term bank borrowings (see note 9 in the Notes to Consolidated Financial Statements included herein under “Item 8. Financial Statements and Supplementary Data.”), mature at various dates within the following year and do not expose us to interest rate risk. As of December 31, 2023, the balance of our long-term borrowings (see note 12 in the Notes to Consolidated Financial Statements included herein under “Item 8. Financial Statements and Supplementary Data.”) carries a fixed interest rated and we may be exposed to fair value interest rate risk.
We have provided warranty coverageimplemented policies and procedures to measure, manage, monitor and report risk exposures, which are reviewed regularly by management and the board of directors. We identify risk exposures and monitor and manage such risks on an ongoing basis.
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Item 8.    Financial Statements and Supplementary Data
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
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Report of Independent Registered Public Accounting Firm (Ernst & Young Hua Ming LLP, Shanghai, China, PCAOB ID#1408)
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Report of Independent Registered Public Accounting Firm (Armanino LLP , San Ramon, CA, PCAOB ID#32)
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Report of Independent Registered Public Accounting Firm (BDO China Shu Lun Pan Certified Public Accountants LLP, Shenzhen, China, PCAOB ID#1818)88
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Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of ACM Research, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of ACM Research, Inc. (the Company) as of December 31, 2023, the related consolidated statements of comprehensive income, changes in stockholders' equity and cash flows for the year ended December 31, 2023, and the related notes(collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023, and the results of its operations and its cash flows for the year ended December 31, 2023, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework)and our report dated February 28, 2024 expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.


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Revenue Recognition
Description of the Matter
As described in Notes 2 to the consolidated financial statements, the Company recognizes revenue from tools and spare parts at a point in time, when the Company has satisfied its performance obligation. For shipments made to a customer that has not previously accepted a specific type of tool (“first tools”), revenues are recognized when the tools are accepted by the customer. For shipments made to a customer that have previously accepted a specific type of tool (“repeat shipments”), revenues are recognized upon shipment or delivery because the Company can objectively demonstrate that the tools meet all the required customer specifications.

Evaluating the sufficiency of audit evidence to validate whether the Company can objectively identify repeat shipments required auditor judgment and significant audit effort because the Company’s tools are highly customized for each customer.

How We Addressed the Matter in Our Audit
We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s revenue process. For example, we tested the controls over management’s review of the Company’s analysis to determine whether the repeat shipments identified have been previously accepted by the same customer.

To test whether the Company can objectively demonstrate that the highly customized tools are repeat shipments, our audit procedures, among others, included performing direct inquiries with the Company’s personnel from its sales and engineering department to understand the Company’s process of identifying repeat shipments and the quality control department to understand the quality control process. We applied auditor judgment to determine the nature and extent of procedures to be performed by testing all the sales transactions identified as repeat shipments during the year. Specifically for all repeat shipments, we obtained the quality control reports signed by the Company’s quality control department. We also identified the similar tools previously sold to and accepted by the same customer by comparing the executed contracts or purchase orders of both tools, and inspected the acceptance confirmation from the customer of the previous tools to verify that the Company was able to objectively demonstrate that repeat shipments meet all the required customer specifications with its established history of customer acceptance. We evaluated the overall sufficiency of audit evidence obtained by assessing the results of procedures performed over repeat shipments, including the appropriateness of the nature and extent of audit effort.

/s/ Ernst & Young Hua Ming LLP

We have served as the Company's auditor since 2023.

Shanghai, the People’s Republic of China

February 28, 2024












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Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of ACM Research, Inc.

Opinion on Internal Control Over Financial Reporting

We have audited ACM Research, Inc.’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, ACM Research, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Company as of December 31, 2023, the related consolidated statements of comprehensive income, changes in stockholders' equity and cash flows for the year ended December 31, 2023, and the related notesand our report dated February 28, 2024 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young Hua Ming LLP

Shanghai, the People’s Republic of China

February 28, 2024
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and
Stockholders of ACM Research, Inc.

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheet of ACM Research, Inc. and subsidiaries (the Company) as of December 31, 2022, and the related consolidated statements of comprehensive income (loss), changes in stockholders’ equity, and cash flows for the year ended December 31, 2022, and the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022, and the results of its operations and its cash flows for the year ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.

/s/Armanino LLP

We served as the Company’s auditor in 2022. In 2023, we became the predecessor auditor.

San Ramon, California

March 1, 2023
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logo1.jpg
Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors
ACM Research, Inc.
Fremont, California

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated statements of operations and comprehensive income, changes in stockholders’ equity, and cash flows of ACM Research, Inc. and subsidiaries (the “Company”) for the year ended December 31, 2021, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the results of its operations and its cash flows for the year ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/BDO China Shu Lun Pan Certified Public Accountants LLP

We served as the Company’s auditor from 2015 to 2022.

Shenzhen, The People’s Republic of China

March 1, 2022, exceptfor the effects of the common stock split discussed in Notes 1 and 2 to the consolidated financial statements, as to which the date is March 1, 2023.
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ACM RESEARCH, INC.
Consolidated Balance Sheets
(In thousands, except per share data)

December 31,
20232022
Assets
Current assets:
Cash and cash equivalents (note 2)$182,090 $247,951 
Restricted cash1,083 500 
Short-term time deposits (note 2)80,524 70,492 
Short-term investments (note 15)21,312 20,209 
Accounts receivable, net (note 4)283,186 182,936 
Other receivables40,065 29,617 
Inventories, net (note 5)545,395 393,172 
Advances to related party (note 16)2,432 3,322 
Prepaid expenses20,023 15,607 
            Total current assets1,176,110 963,806 
Property, plant and equipment, net (note 6)201,848 82,875 
Land use right, net (note 7)8,367 8,692 
Operating lease right-of-use assets, net (note 11)7,026 2,489 
Intangible assets, net2,538 1,255 
Long-term time deposits (note 2)40,818 101,956 
Deferred tax assets (note 19)20,271 6,703 
Long-term investments (note 14)27,880 17,459 
Other long-term assets (note 8)6,050 50,265 
                        Total assets$1,490,908 $1,235,500 
Liabilities and Equity
Current liabilities:
Short-term borrowings (note 9)$31,335 $56,004 
Current portion of long-term borrowings (note 12)6,783 2,322 
Related party accounts payable (note 16)11,407 14,468 
Accounts payable141,814 101,735 
Advances from customers181,368 153,773 
Deferred revenue3,687 4,174 
Income taxes payable (note 19)6,401 3,469 
FIN-48 payable (note 19)12,149 6,686 
Other payables and accrued expenses (note 10)102,951 52,201 
Current portion of operating lease liability (note 11)2,764 1,382 
            Total current liabilities500,659 396,214 
Long-term borrowings (note 12)53,952 18,687 
Long-term operating lease liability (note 11)4,262 1,107 
Other long-term liabilities (note 13)5,873 7,321 
                       Total liabilities564,746 423,329 
Commitments and contingencies (note 21)
Equity:
Stockholders’ equity:
Class A Common stock (note 17)6 5 
Class B Common stock (note 17)1 1 
Additional paid-in capital629,845 604,089 
Retained earnings156,827 94,426 
Statutory surplus reserve (note 2)30,060 16,881 
Accumulated other comprehensive loss(49,349)(40,546)
Total ACM Research, Inc. stockholders’ equity767,390 674,856 
Non-controlling interests158,772 137,315 
Total equity926,162 812,171 
               Total liabilities and equity$1,490,908 $1,235,500 
The accompanying notes are an integral part of these consolidated financial statements.
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ACM RESEARCH, INC.
Consolidated Statements of Comprehensive Income (Loss)
(In thousands, except per share data)
Year Ended December 31,
202320222021
Revenue (note 3)$557,723 $388,832 $259,751 
Cost of revenue, including cost of revenue from related party of $31,240 and $26,313 for the year ended December 31, 2023 and 2022, respectively (note 16)281,508 205,217 144,895 
Gross profit276,215 183,615 114,856 
Operating expenses:   
Sales and marketing47,019 39,889 26,733 
Research and development92,709 62,226 34,207 
General and administrative40,648 22,465 15,214 
Total operating expenses180,376 124,580 76,154 
Income from operations95,839 59,035 38,702 
Interest income8,354 8,740 505 
Interest expense(2,681)(1,655)(765)
Realized gain from sale of short-term investments9,047 1,116 — 
Unrealized gain (loss) on short-term investments(2,737)(7,855)607 
Other income (expense), net(1,558)3,315 (631)
Income from equity method investments9,952 4,666 4,637 
Income before income taxes116,216 67,362 43,055 
Income tax expense (note 19)(19,364)(16,798)(134)
Net income96,852 50,564 42,921 
Less: Net income attributable to non-controlling interests19,503 11,301 5,164 
Net income attributable to ACM Research, Inc.$77,349 $39,263 $37,757 
Comprehensive income (loss):   
Net income$96,852 $50,564 $42,921 
Foreign currency translation adjustment, net of tax(10,617)(59,102)4,695 
Comprehensive income (loss)86,235 (8,538)47,616 
Less: Comprehensive income attributable to non-controlling interests17,689 1,854 5,607 
Comprehensive income (loss) attributable to ACM Research, Inc.$68,546 $(10,392)$42,009 
Net income per common stock (note 2):
Basic$1.29 $0.66 $0.65 
Diluted$1.16 $0.59 $0.58 
Weighted average common stock outstanding used in computing per share amounts (note 2): 
Basic60,164,67059,235,97557,654,708
Diluted64,870,54365,341,77165,356,716

The accompanying notes are an integral part of these consolidated financial statements.
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ACM RESEARCH, INC.
Consolidated Statement of Changes in Stockholders’ Equity
(In thousands, except per share data)
Common
Stock Class A		Common
Stock Class B
SharesAmountSharesAmountAdditional Paid-
in Capital		Retained
Earnings		Statutory Surplus
Reserve		Accumulated Other
Comprehensive
Income (Loss)		Non-controlling
Interests		Total Equity
Balance at December 31, 202050,690,079$5 5,407,818$1 $102,000 $29,899 $4,388 $4,857 $67,020 $208,170 
Net income-- -- - 37,757 - - 5,164 42,921 
Appropriation to statutory surplus reserves-- -- - (3,924)3,924 - - — 
Foreign currency translation adjustment-- -- - - - 4,252 443 4,695 
Exercise of stock options1,870,803- -- 3,430 - - - - 3,430 
Stock-based compensation-- -- 5,117 - - - - 5,117 
Exercise of stock warrants728,043- 0- 1,820 - - - - 1,820 
Conversion of Class B common stock to Class A common stock320,004- (320,004)- - - - - - — 
Proceeds from a subsidiary equity issuance0- -- 482,678 - - - 62,834 545,512 
Balance at December 31, 202153,608,9295 5,087,8141 595,045 63,732 8,312 9,109 135,461 811,665 
Net income-- -- - 39,263 - - 11,301 50,564 
Appropriation to statutory surplus reserves-- -- - (8,569)8,569 - - - 
Foreign currency translation adjustment-- -- - - - (49,655)(9,447)(59,102)
Exercise of stock options980,354- -- 1,314 - - - - 1,314 
Stock-based compensation-- -- 7,730 - - - - 7,730 
Conversion of Class B common stock to Class A common stock66,003- (66,003)- - - - - - - 
Balance at December 31, 202254,655,2865 5,021,8111 604,089 94,426 16,881 (40,546)137,315 812,171 
Cumulative effect of change in accounting principle under ASC 326, net of tax(1,769)(1,769)
Net income-- -- - 77,349 - - 19,503 96,852 
Appropriation to statutory surplus reserves(13,179)13,179 
Foreign currency translation adjustment-- -- - - - (8,803)(1,814)(10,617)
Exercise of stock options1,380,8861 -- 2,303 - - - 3,834 6,138 
Stock-based compensation-- -- 23,453 - - - 3,885 27,338 
ACM Shanghai dividends- - -- - - - - (3,951)(3,951)
Balance at December 31, 202356,036,172$6 5,021,811$1 $629,845 $156,827 $30,060 $(49,349)$158,772 $926,162 
The accompanying notes are an integral part of these consolidated financial statements.
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ACM RESEARCH, INC.
Consolidated Statements of Cash Flows
(In thousands)
Year Ended December 31,
202320222021
Cash flows from operating activities:
Net income$96,852 $50,564 $42,921 
Adjustments to reconcile net income from operations to net cash used in operating activities
Non-cash operating lease cost3,580 2,816 2,451 
Depreciation and amortization8,092 5,366 2,353 
Gain on disposals of property, plant and equipment(2)(12)— 
Realized gain on short-term investments(9,047)(1,116)— 
Income from equity method investments(9,952)(4,666)(4,637)
Unrealized loss (gain) on short-term investments2,737 7,855 (607)
Inventory provision575 2,248 75 
Provision for credit losses2,741 — — 
Deferred income taxes(13,647)4,027 (1,840)
Stock-based compensation27,338 7,730 5,117 
Net changes in operating assets and liabilities:
Accounts receivable(108,749)(88,655)(47,624)
Income tax recoverable— — (1,082)
Other receivables(4,213)(7,331)(8,420)
Inventories(164,027)(195,562)(127,731)
Advances to related party (note 16)890 (939)(776)
Prepaid expenses(5,075)(3,695)(9,830)
Other long-term assets— 3,986 (4,521)
Related party accounts payable (note 16)(3,061)6,569 3,806 
Accounts payable42,343 17,501 61,405 
Advances from customers29,974 104,258 34,831 
Deferred revenue2,693 994 226 
Income taxes payable3,009 3,236 2,200 
FIN-48 payable5,463 4,404 10,551 
Other payables and accrued expenses21,375 23,406 3,180 
Operating lease liabilities(3,580)(2,816)(2,451)
Other long-term liabilities(1,632)(2,362)310 
Net cash used in operating activities(75,323)(62,194)(40,093)
Cash flows from investing activities:
Purchase of property and equipment(61,876)(91,094)(9,153)
Purchase of intangible assets(2,462)(1,426)(559)
Purchase of long-term investments (note 14)(7,508)(5,279)(1,568)
Purchase of short-term investments (note 15)(18,356)— — 
Purchase of time deposits(26,120)(172,448)— 
Proceeds from maturity of time deposits79,600 — — 
Proceeds from sale of short-term investments (note 15)21,735 4,577 — 
Proceeds from disposal of long-term investments8,242 — — 
Net cash used in investing activities(6,745)(265,670)(11,280)
Cash flows from financing activities:
Proceeds from short-term borrowings31,334 56,004 22,884 
Repayments of short-term borrowings(55,068)(9,224)(39,809)
Proceeds from long-term borrowings42,360 — 7,056 
Repayments of long-term borrowings(2,283)(2,223)(2,127)
ACM Shanghai dividends(3,951)- — 
Proceeds from exercise of stock options6,138 1,314 3,430 
Proceeds from a subsidiary equity issuance, net of issuance costs— — 545,512 
Proceeds from warrant exercise to common stock— — 1,820 
Net cash provided by financing activities18,530 45,871 538,766 
Effect of exchange rate changes on cash, cash equivalents and restricted cash$(1,740)$(32,623)$3,908 
Net increase (decrease) in cash, cash equivalents and restricted cash$(65,278)$(314,616)$491,301 
Cash, cash equivalents and restricted cash at beginning of period248,451 563,067 71,766 
Cash, cash equivalents and restricted cash at end of period$183,173 $248,451 $563,067 
Supplemental disclosure of cash flow information:   
Interest paid, net of capitalized interest$2,681 $1,655 $765 
Cash paid for income taxes$26,103 $3,586 $1,132 
Reconciliation of cash, cash equivalents and restricted cash in consolidated statements of cash flows:
Cash and cash equivalents$182,090 $247,951 $562,548 
Restricted cash1,083 500 519 
Cash, cash equivalents and restricted cash$183,173 $248,451 $563,067 
Non-cash financing activities:
Cashless exercise of stock options$333 $221 $137 
Non-cash investing activities:
Transfer from inventory to property, plant and equipment$4,379 $— $— 
Purchase property, plant and equipment through accounts payable and other payable$33,750 $— $— 
Transfer of prepayment for property to property, plant and equipment$— $41,497 $— 
The accompanying notes are an integral part of these consolidated financial statements.
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ACM RESEARCH, INC.
Notes to Consolidated Financial Statements
(in thousands, except share and per share data)
NOTE 1 – DESCRIPTION OF BUSINESS
ACM Research, Inc. (“ACM” or "ACM Research") and its subsidiaries (collectively with ACM, the “Company”) develop, manufacture and sell single-wafer wet cleaning equipment used to improve the manufacturing process and yield for advanced integrated chips. The Company markets and sells its single-wafer wet-cleaning equipment, under the brand name “Ultra C,” based on the Company’s proprietary Space Alternated Phase Shift (“SAPS”) and Timely Energized Bubble Oscillation (“TEBO”) technologies. These tools are designed to remove random defects from a wafer surface efficiently, without damaging the wafer or its features, even at increasingly advanced process nodes.
ACM was incorporated in California in 1998, and it initially focused on developing tools for 12manufacturing process steps involving the integration of ultra-low-K materials and copper. The Company’s early efforts focused on stress-free copper-polishing technology, and it sold tools based on that technology in the early 2000s.
In 2006, the Company established its operational center in Shanghai in the People’s Republic of China ("mainland China"), where it operates through ACM’s subsidiary, ACM Research (Shanghai), Inc. (“ACM Shanghai”). ACM Shanghai was formed to 36 months, covering laborhelp establish and parts necessarybuild relationships with integrated circuit manufacturers in mainland China, and the Company initially financed its Shanghai operations in part through sales of non-controlling equity interests in ACM Shanghai.
In 2007, the Company began to repair a toolfocus its development efforts on single-wafer wet-cleaning solutions for the front-end chip fabrication process. The Company introduced its SAPS megasonic technology, which can be applied in wet wafer cleaning at numerous steps during the warranty period. We accountchip fabrication process, in 2009. It introduced its TEBO technology, which can be applied at numerous steps during the fabrication of small node two-dimensional conventional and three-dimensional patterned wafers, in March 2016. The Company has designed its equipment models for SAPS and TEBO solutions using a modular configuration that enables it to create a wet-cleaning tool meeting the estimated warranty costspecific requirements of a customer, while using pre-existing designs for chamber, electrical, chemical delivery and other modules. In August 2018, the Company introduced its Ultra-C Tahoe wafer cleaning tool, which can deliver high cleaning performance with significantly less sulfuric acid than typically consumed by conventional high-temperature single-wafer cleaning tools. Based on its electro-chemical plating (“ECP”) technology, the Company introduced in March 2019 its Ultra ECP AP, or “Advanced Packaging,” tool for bumping, or applying copper, tin and nickel to semiconductor wafers at the die-level, and its Ultra ECP MAP, or “Multi-Anode Partial Plating,” tool to deliver advanced electrochemical copper plating for copper interconnect applications in front-end wafer fabrication processes. The Company also offers a range of custom-made equipment, including cleaners, coaters and developers, to back-end wafer assembly and packaging factories, principally in mainland China.
In 2011, ACM Shanghai formed a wholly owned subsidiary in mainland China, ACM Research (Wuxi), Inc. (“ACM Wuxi”), to manage sales and service operations.
In November 2016, ACM re-domesticated from California to Delaware pursuant to a merger in which ACM Research, Inc., a California corporation, was merged into a newly formed, wholly owned Delaware subsidiary, also named ACM Research, Inc.
In June 2017, ACM formed a wholly owned subsidiary in Hong Kong, CleanChip Technologies Limited (“CleanChip”), to act on the Company’s behalf in Asian markets outside mainland China by, for example, serving as a trading partner between ACM Shanghai and its customers, procuring raw materials and components, performing sales and marketing expenseactivities, and making strategic investments.
In August 2017, ACM purchased 18.77% of ACM Shanghai’s equity interests held by Shanghai Science and Technology Venture Capital Co., Ltd. On November 8, 2017, ACM purchased the remaining 18.36% of ACM Shanghai’s equity interest held by third parties, Shanghai Pudong High-Tech Investment Co., Ltd. (“PDHTI”) and Shanghai Zhangjiang Science & Technology Venture Capital Co., Ltd. (“ZSTVC”). At December 31, 2017, ACM owned all of the outstanding equity interests of ACM Shanghai, and indirectly through ACM Shanghai, owned all of the outstanding equity interests of ACM Wuxi.
On November 2, 2017, the Registration Statement on Form S-1 (File No. 333- 220451) for ACM’s initial public offering of Class A common stock (the “IPO”) was declared effective by the U.S. Securities and Exchange Commission. Shares of
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Class A common stock began trading on the Nasdaq Global Market on November 3, 2017, and the closing for the IPO was held on November 7, 2017.
In December 2017, ACM formed a wholly owned subsidiary in the Republic of Korea (“Korea”), ACM Research Korea CO., LTD. (“ACM Korea”), to serve customers based in Korea and perform sales, marketing, research and development activities for new products and solutions.
In March 2019, ACM Shanghai formed a wholly owned subsidiary in mainland China, Shengwei Research (Shanghai), Inc. (“ACM Shengwei”), to manage activities related to the addition of future long-term production capacity.
In June 2019, CleanChip formed a wholly owned subsidiary in California, ACM Research (CA), Inc. (“ACM California”), to provide procurement services on behalf of ACM Shanghai.
In June 2019, ACM announced plans to complete over the next three years a listing (the “STAR Listing”) of shares of ACM Shanghai on the Shanghai Stock Exchange’s new SciTech innovAtion boaRd,known as the STAR Market, and a concurrent initial public offering (the “STAR IPO”) of ACM Shanghai shares in mainland China. ACM Shanghai is currently ACM’s primary operating subsidiary, and at the time of announcement, was wholly owned by ACM. To meet a STAR Listing requirement that it have multiple independent stockholders in mainland China, ACM Shanghai completed private placements of its shares in June and November 2019, following which, as of September 30, 2020, the private placement investors held a total of 8.3% of the outstanding shares of ACM Shanghai and ACM Research held the remaining 91.7%. As part of the STAR Listing process, in June 2020 the ownership interests held by the private investors were reclassified from redeemable non-controlling interests to non-controlling interests as the redemption feature was terminated. In preparation for the STAR IPO, ACM completed a reorganization in December 2020 that included the sale of all of the shares of CleanChip by ACM to ACM Shanghai for $3,500. The reorganization and sale had no impact on ACM’s consolidated financial statements.
In August 2021, ACM formed a wholly owned subsidiary in Singapore, ACM research (Singapore) PTE, Ltd. to perform sales, marketing, and other business development activities.
In November 2021, ACM’s operating subsidiary ACM Shanghai, completed its STAR IPO and its shares began trading on the STAR Market. In the STAR IPO, ACM Shanghai issued 43,355,753 shares, representing 10% of the total 433,557,100 shares outstanding after the issuance. The shares were issued at a public offering price of RMB 85.00 per share, and the net proceeds of the STAR IPO, after issuance costs, totaled $545,512. Upon completion of the STAR IPO, ACM owned 82.5% of the outstanding ACM Shanghai shares. However, in May 2023, ACM's ownership declined to 82.1% due to the exercise of 2,150,309 stock options related to ACM Shanghai shares.
In February 2022, ACM Shanghai formed a wholly owned subsidiary in China, ACM Research (Beijing), Inc. (“ACM Beijing”), to perform sales, marketing and other business development activities.
In March 2022, ACM formed a wholly owned subsidiary in Korea, Hanguk ACM CO., LTD, to perform business development and other related activities.
In March 2022, the Board of Directors of ACM declared a 3-for-1 stock split of Class A and Class B common stock effected in the form of a stock dividend (the “Stock Split”). Each stockholder of record at the close of business on March 16, 2022, received a dividend of two additional shares of Class A common stock for each then-held share of Class A common stock and two additional shares of Class B common stock for each then-held share of Class B common stock, which were distributed after the close of trading on March 23, 2022. Unless otherwise indicated, all share numbers, per share amount, share prices, exercise prices and conversion rates set forth in these notes and the accompanying consolidated financial statements have been adjusted retrospectively to reflect the Stock Split.

In June 2023, ACM Shanghai formed a wholly-owned subsidiary in mainland China, Yusheng Micro Semiconductor (Shanghai), Co., Ltd, ("Yusheng Micro") to perform business development activities.

In June 2023, Yusheng Micro together with Wooil Flucon Co. (note 14) and a private investor established ACM-Wooil Microelectronics (Shanghai) Co., Ltd, ("ACM-Wooil"), a partially owned subsidiary based in mainland China to develop and produce key components for the semiconductor equipment industry.
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The Company has direct or indirect interests in the following subsidiaries:
Place and date of
incorporation		Effective interest held as at
December 31,
Name of subsidiaries20232022
ACM Research (Shanghai), Inc.Mainland China, May 200582.1%82.5%
ACM Research (Wuxi), Inc.Mainland China, July 201182.1%82.5%
CleanChip Technologies LimitedHong Kong, June 201782.1%82.5%
ACM Research Korea CO., LTD.Korea, December 201782.1%82.5%
ACM Research (Lingang), Inc. (1)Mainland China, March 201982.1%82.5%
ACM Research (CA), Inc.USA, April 201982.1%82.5%
ACM Research (Cayman), Inc.Cayman Islands, April 2019100.0%100.0%
ACM Research (Singapore) PTE. Ltd.Singapore, August 2021100.0%100.0%
ACM Research (Beijing), Inc.Mainland China, February 202282.1%82.5%
Hanguk ACM CO., LTDKorea, March 2022100.0%100.0%
Yusheng Micro Semiconductor (Shanghai) Co., Ltd.Mainland China, June 202382.1%-
ACM-Wooil Microelectronics (Shanghai) Co., Ltd.Mainland China, June 202359.4%-
(1) ACM Research (Lingang) Inc., or ACM Lingang, is the English name referred to by its Chinese language name Shengwei Research (Shanghai), Inc. in prior filings. ACM Research (Lingang), Inc. and Shengwei Research (Shanghai), Inc. refer to the same entity.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Principles of Consolidation
The Company’s consolidated financial statements include the accounts of ACM and its subsidiaries, including ACM Shanghai and its subsidiaries. ACM’s subsidiaries are those entities in which ACM, directly and indirectly, controls more than a majority of the voting power. All significant intercompany transactions and balances have been eliminated upon consolidation. The consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”)
Use of Estimates
The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the balance sheet date and the reported revenues and expenses during the reported period in the condensed consolidated financial statements and accompanying notes. The Company’s significant accounting estimates and assumptions include, but are not limited to, those used for revenue is recognized. Warranty obligations are affected by historical failure ratesrecognition and associated replacement costs. Utilizing historical warranty cost records, we calculate a ratedeferred revenue, the valuation and recognition of warranty expenses to revenue to determine the estimated warranty charge. We updatefair value of certain short-term and long-term investments, stock-based compensation arrangements, realization of deferred tax assets, assessment for impairment of long-lived assets and long-term investments, allowance for credit losses, inventory valuation, useful lives of property, plant and equipment and useful lives of intangible assets.
Management evaluates these estimated chargesestimates and assumptions on a regular basis. The actual product performanceActual results could differ from those estimates and field expense profilesassumptions.
Common Stock Split
All prior period share and per share amounts and common stock presented in the accompanying financial statements and these notes thereto has been retroactively adjusted to reflect the impact of the Stock Split. Proportional adjustments were also made to outstanding awards under the Company’s stock-based compensation plans.
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Reclassifications
Certain prior year amounts in the consolidated financial statements have been reclassified to conform with the current year presentation. These classifications had no impact on the Company’s results of operations.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash on hand and bank deposits that are unrestricted as to withdrawal and use, and highly liquid investments with an original maturity date of three months or less at the date of purchase. At times, cash deposits may differ, and in those cases we adjust our warranty accruals accordingly.
Recent Accounting Pronouncements
exceed government-insured limits.
The following description summarizes recent accounting pronouncements that wetable presents cash and cash equivalents, according to jurisdiction as of December 31, 2023 and 2022:
December 31,
20232022
United States$43,614 $25,011 
Mainland China70,418 129,695 
China Hong Kong64,057 89,187 
Korea3,934 4,007 
Singapore67 51 
Total$182,090 $247,951 
The amounts in mainland China do not include short-term and long-term time deposits which totaled $121,342 and $172,448 at December 31, 2023 and 2022, respectively.
Cash held in the U.S. exceeds the Federal Deposit Insurance Corporation (“FDIC”) insurance limits and is subject to risk of loss. No losses have adopted or will bebeen experienced to date.
Cash amounts at the banks in mainland China are subject to a series of risk control regulatory standards from mainland China bank regulatory authorities. ACM’s subsidiaries in mainland China are required to adoptobtain approval from the State Administration of Foreign Exchange (“SAFE”) to transfer funds into or out of mainland China. SAFE requires a valid agreement to approve the transfers, which are processed through a bank. Other than these mainland China foreign exchange restrictions, ACM’s subsidiaries in mainland China are not subject to any mainland China restrictions and limitations on its ability to transfer funds to ACM Research or among our other subsidiaries. However, cash held by ACM’s subsidiaries in mainland China does exceed applicable insurance limits and is subject to risk of loss, although no such losses have been experienced to date.
ACM California periodically procures goods and services on behalf of ACM Shanghai. For these transactions, ACM Shanghai makes cash payments to ACM California in accordance with applicable transfer pricing arrangements. For the years ended December 31, 2023 and December 31, 2022, cash payments from ACM Shanghai to ACM California for the procurement of goods and services were $42.5 million and $30.2 million, respectively. ACM California periodically borrows funds for working capital advances from its direct parent, CleanChip. ACM California repays or renews these intercompany loans in accordance with their terms.
For sales through CleanChip and ACM Research, a certain amount of sales or advance payments from customer proceeds is repatriated back to ACM Shanghai, a subsidiary, in accordance with applicable transfer pricing arrangements in the ordinary course of business. ACM Research provides services to certain customers located in the U.S., Europe and other regions outside of mainland China to support the evaluation of first tools and provide support for tools under warranty on behalf of ACM Shanghai. For these transactions, ACM Shanghai makes cash payments to ACM Research in accordance with applicable transfer pricing arrangements.
For the year ended December 31, 2023, ACM Shanghai paid $19,200 in dividends to ACM Research.
Subsequent to June 30, 2020, with the exception of sales and services-related transfer-pricing payments in the ordinary course of business, and dividends paid by ACM Shanghai to ACM Research, no cash transfers or other payments or distributions have been made between ACM Research and ACM Shanghai. ACM Research intends to retain any future
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earnings to finance the operations and expenses of the business, and do not expect to distribute earnings or declare or pay any dividends in the foreseeable future.
Amounts held in Korea exceed the Korea Deposit Insurance Corporation (“KDIC”) insurance limits and are subject to risk of loss. No losses have been experienced to date.
In February 2018,There is no additional restriction for the FASB issuedtransfer of cash from bank accounts in the U.S., Korea, Singapore, and Hong Kong.
Time Deposits

Time deposits are deposited with banks in mainland China with fixed terms and interest rates which cannot be withdrawn before maturity, and are presented as short-term deposits and long-term deposits in the consolidated financial statements based on their expected time of collection. They are also subject to the risk control regulatory standards described above upon maturity. Time deposits consisted of the following:

December 31,
20232022
Deposit in China Merchant Bank which matured on January 29, 2023 with an annual interest rate of 2.25%$— $38,772 
Deposit in China Everbright Bank which matured on January 29, 2023 with an annual interest rate of 2.25%— 14,360 
Deposit in China Everbright Bank which matured on May 22, 2023 with an annual interest rate of 5.07%— 3,000 
Deposit in China Industrial Bank which matured on January 30, 2023 with an annual interest rate of 2.15%— 14,360 
Deposit in China Merchant Bank which matured on January 29, 2024 with an annual interest rate of 2.85%29,797 28,720 
Deposit in Bank of Ningbo which matured on February 17, 2024 with an annual interest rate of 2.85%44,630 43,080 
Deposit in Shanghai Pudong Development Bank which matures on October 20, 2025 with an annual interest rate of 3.10%7,322 7,180 
Deposit in Shanghai Pudong Development Bank which matures on November 14, 2025 with an annual interest rate of 3.10%7,307 7,180 
Deposit in Shanghai Pudong Development Bank which matures on December 8, 2025 with an annual interest rate of 3.10%4,376 4,308 
Deposit in Shanghai Pudong Development Bank which matures on December 15, 2025 with an annual interest rate of 3.10%4,373 4,308 
Deposit in Shanghai Pudong Development Bank which matures on December 30, 2025 with an annual interest rate of 3.10%2,912 7,180 
Deposit in China Industrial Bank which matures on January 30, 2026 with an annual interest rate of 3.15%14,528 — 
Deposit in China Everbright Bank which matured on January 5, 2024 with an annual interest rate of 5.38%3,079 — 
Deposit in China Everbright Bank which matures on May 22, 2024 with an annual interest rate of 5.38%3,018 — 
$121,342 $172,448 
For the years ended December 31, 2023 and 2022, respectively, interest income related to time deposits was $3,689 and $3,472, respectively.
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Accounts Receivable
Prior to adoption of Accounting Standards Update, or ASU, No. 2018-02, Income Statement—Reporting Comprehensive Income2016-13, Financial Instruments-Credit Losses (Topic 220)326): ReclassificationMeasurement of Certain Tax Effects from Accumulated Other Comprehensive IncomeCredit Losses on Financial Instruments (“ASC 326”), which provides financial statement preparers with an optionthe Company reviews its accounts receivable on a periodic basis and makes general and specific allowances when there is doubt as to reclassify stranded tax effects within accumulated other comprehensive income to retained earnings in each period in which the effectcollectability of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act (or portion thereof) is recorded. The amendments in this ASU are effective for all entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Earlyindividual balances. After adoption of ASU 2018-02 is permitted, including adoption in any interim period forASC 326, as of January 1, 2023, the public business entities for reporting periods for which financial statements have not yet been issued. The amendments in this ASU should be applied either inCompany assesses collectability by reviewing accounts receivable on a collective basis where similar characteristics exist and on an individual basis when the period of adoptionCompany identifies specific customers with known disputes or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized. We are is currently evaluating the impact of the adoption of ASU No. 2018-02 on our consolidated financial statements.
collectability issues. In July 2017 the FASB issued ASU No. 2017-11, Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception, which addresses the complexity of accounting for certain financial instruments with down round features. Down round features are features of certain equity-linked instruments (or embedded features) that result in the strike price being reduced on the basis of the pricing of future equity offerings. Current accounting guidance creates cost and complexity for entities that issue financial instruments (such as warrants and convertible instruments) with down round features that require fair value measurement of the entire instrument or conversion option. For public business entities, the amendments in Part I of this update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. For all other entities, the amendments in Part I of this update are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. We are currently evaluating the impact of adoption of ASU 2017-11.
In May 2017 the FASB issued ASU No. 2017-09, Compensation – Stock Compensation (Topic 718): Scope of Modification Accounting, which provides guidance on determining which changes to the terms or conditions of share-based payment awards require an entity to apply modification accounting under Topic 718. The amendments in this ASU are effective for all entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted, including adoption in any interim period, for (a) public business entities for reporting periods for which financial statements have not yet been issued and (b) all other entities for reporting periods for which financial statements have not yet been made available for issuance. The amendments in this ASU should be applied prospectively to an award modified on or after the adoption date. We do not expect the adoption of ASU No. 2017-09 to have a material impact on our consolidated financial statements.
In February 2017 the FASB issued ASU No. 2017-05, Other Income —Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets, which clarifies the scope of nonfinancial asset guidance in Subtopic 610-20. This ASU also clarifies that derecognition of all businesses and nonprofit activities (except those related to conveyances of oil and gas mineral rights or contracts with customers) should be accounted for in accordance with the derecognition and deconsolidation guidance in Subtopic 810-10. The amendments in this ASU also provide guidance on the accounting for so-called “partial sales” of nonfinancial assets within the scope of Subtopic 610-20 and contributions of nonfinancial assets to a joint venture or other noncontrolled investee. The amendments in this ASU are effective for annual reporting reports beginning after December 15, 2017, including interim reporting periods within that reporting period. We do not expect the adoption of ASU No. 2017-05 to have a material impact on our consolidated financial statements.
In January 2017 the FASB issued ASU No. 2017-04, Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which removes Step 2 from the goodwill impairment test. An entity will apply a one-step quantitative test and record the amount of goodwill impairment as the excessallowance for credit losses, the Company considers historical collectability based on past due status, the age of the accounts receivable balances, credit quality of the Company’s customers based on ongoing credit evaluations, current economic conditions, reasonable and supportable forecasts of future economic conditions, and other factors that may affect the Company’s ability to collect from customers. At December 31, 2023, and 2022, the Company, based on a reporting unit’s carrying amount overreview of its fair value, notoutstanding balances and its customers, determined the allowance for credit losses were $4,830 and $0, respectively.
Land Use Right, Net
The land use right represents the cost to exceed the total amountpurchase a right to use state-owned land in mainland China with lease terms of goodwill allocated to the reporting unit. The new guidance does not amend the optional qualitative assessment of goodwill impairment. A business entity that is a U.S. Securities and Exchange Commission filer must adopt the amendments50 years expiring in this ASU2070, for its annual or any interim goodwill impairment test in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We do not expect the adoption of ASU No. 2016-18 to have a material impact on our consolidated financial statements.
In November 2016 the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, which requires that a statement of cash flows explain the changean upfront lump-sum payment was made during the period inyear ended December 31, 2021. The land use rights are treated as operating lease. The Company classifies the total of cash, cash equivalents, and amounts generally describedland use right as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shownnon-current assets on the statementconsolidated balance sheets (note 7).
Inventory
Inventory consists of cash flows. The amendments in this ASU do not provide a definition of restricted cash or restricted cash equivalents. The amendments in this ASU are effective for public business entities for fiscal years beginning after December 15, 2017,raw materials and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. We are currently evaluating the impact of the adoption of ASU No. 2016-18 on our consolidated financial statements.related goods, work-in-progress, finished goods, and other consumable materials such as spare parts.
In August 2016 the FASB issued Accounting Standards Update, or ASU, No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, which addresses the following cash flow issues: (a) debt prepayment or debt extinguishment costs; (b) settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; (c) contingent consideration payments made after a business combination; (d) proceeds from the settlement of insurance claims; (e) proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies; (f) distributions received from equity method investees; (g) beneficial interests in securitization transactions; and (h) separately identifiable cash flows and application of the predominance principle. The amendments in this ASU are effective for public business entities for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years and are effective for all other entities for fiscal years beginning after December 15, 2018 and interim periods within fiscal years beginning after December 15, 2019. Early adoption is permitted, including adoption in an interim period. We are currently evaluating the impact of the adoption of ASU No. 2016-15 on our consolidated financial statements.
In April 2016 the FASB issued ASU No. 2016-09, Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, which simplifies several aspects of the accounting for employee stock-based payment transactions. The areas for simplification in ASU No. 2016-09 include the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The amendments in this ASU will be effective for annual periods beginning after December 15, 2016 and interim periods within those annual periods. The adoption of ASU No. 2016-09 did not have a material impact on our consolidated financial statements.
In February 2016 the FASB issued ASU No. 2016-02, Leases (Topic 842). The amendments in this update create Topic 842, Leases, and supersede the leases requirements in Topic 840, Leases. Topic 842 specifies the accounting for leases. The objective of Topic 842 is to establish the principles that lessees and lessors shall apply to report useful information to users of financial statements about the amount, timing and uncertainty of cash flows arising from a lease. The main difference between Topic 842 and Topic 840 is the recognition of lease assets and lease liabilities for those leases classified as operating leases under Topic 840. Topic 842 retains a distinction between finance leases and operating leases. The classification criteria for distinguishing between finance leases and operating leases are substantially similar to the classification criteria for distinguishing between capital leases and operating leases in the previous leases guidance. The result of retaining a distinction between finance leases and operating leases is that under the lessee accounting model in Topic 842, the effect of leases in the statement of comprehensive income and the statement of cash flows is largely unchanged from previous GAAP. The amendments in ASU No. 2016-02 are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years for public business entities. Early application of the amendments in ASU No. 2016-02 is permitted. We are currently evaluating the impact of the adoption of ASU No. 2016-02 on our consolidated financial statements.
In November 2015 the FASB issued ASU No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes. Topic 740, Income Taxes, requires an entity to separate deferred income tax liabilities and assets into current and noncurrent amounts in a classified statement of financial position. Deferred tax liabilities and assets are classified as current or noncurrent based on the classification of the related asset or liability for financial reporting. Deferred tax liabilities and assets that are not related to an asset or liability for financial reporting are classified according to the expected reversal date of the temporary difference. To simplify the presentation of deferred income taxes, the amendments in ASU No. 2015-17 require that deferred income tax liabilities and assets be classified as noncurrent in a classified statement of financial position. For public business entities, the amendments in this update are effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The adoption of ASU No. 2015-17 did not have a material impact on our consolidated financial statements.
In July 2015 the FASB issued ASU No. 2015-11,Inventory (Topic 330): Simplifying the Measurement of Inventory. The amendments in this update require an entity to measure inventory within the scope of ASU No. 2015-11 (the amendments in ASU No. 2015-11 do not apply to inventory that is measured using last-in, first-out or the retail inventory method. The amendments apply to all other inventory, which includes inventory that is measured using first-in, first-out or average cost)was recorded at the lower of cost andor net realizable value. value at December 31, 2023 and 2022.
•The cost of a general inventory item is determined using the moving weighted average method. The cost of an inventory item purchased specifically for a customized product is determined using the specific identification method. Low-cost consumable materials and packaging materials are expensed as incurred.
•Net realizable value is the estimated selling pricesprice, in the ordinary course of business, less reasonably predictableestimated costs to complete or dispose.
The Company assesses the recoverability of completion, disposal and transportation. Subsequent measurementall inventories quarterly to determine if any adjustments are required. Potential excess or obsolete inventory is uncharged for inventory measured using last-in, first-out or the retail inventory method. The amendments in ASU No. 2015-11 more closely align the measurementwritten down based on management’s analysis of inventory levels and estimates of future 12-month demand and market conditions.
Property, Plant and Equipment, Net
Property, plant and equipment are recorded at cost less accumulated depreciation and any provision for impairment in GAAP withvalue. Depreciation begins when the measurementasset is placed in service and is calculated by using the straight-line method over the estimated useful life of inventory in International Financial Reporting Standards. ASU No. 2015-11 is effectivean asset (or, if shorter, over the lease term). Betterments or renewals are capitalized when incurred.
Estimated useful lives of assets are as follows:
Buildings and plants30 years
Computer and office equipment3 to 5 years
Furniture and fixtures5 years
Leasehold improvementsshorter of lease term or estimated useful life
Electronic equipment3 to 5 years
Manufacturing equipment
for small to medium-sized equipment, 5 to 10 years; for large equipment,
estimated by purchasing department at time of acceptance
Transportation equipment4 to 5 years
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Expenditures for public business entities for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. The amendments in ASU No. 2015-11 should be applied prospectively with earlier application permitted asmaintenance and repairs that neither materially add to the value of the beginningproperty nor appreciably prolong the life of the property are charged to expense as incurred. Upon retirement or sale of an interim or annual reporting period. The adoption of ASU No. 2015-11 did not have a material impact on our consolidated financial statements. The relevant descriptions have been included inasset, the inventory accounting policy.
In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements—Going Concern. The amendments in this update require management to evaluate whether there are conditions and events that raise substantial doubt about an entity’s ability to continue as a going concern for both annual and interim reporting. The guidance is effective for us for the annual period ended after December 15, 2016 and interim periods thereafter. Management performed an evaluationcost of the our ability to fund operationsasset and to continue as a going concern according to ASC Topic 205-40, Presentation of Financial Statements—Going Concern. The adoption of ASU No. 2014-15 did not have a material impact on our consolidated financial statements.
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). ASU No. 2014-09 supersedes the revenue recognition requirements in “Revenue Recognition (Topic 605)”, and requires entities to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. The FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date in August 2015. The amendments in ASU No. 2015-14 defer the effective date of ASU No. 2014-09. Public business entities, certain not-for-profit entities, and certain employee benefit plans should apply the guidance in ASU No. 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Earlier adoption is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period.Further to ASU No. 2014-09 and ASU No. 2015-14, the FASB issued ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net) in March 2016, ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing in April 2016, ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients, and ASU No. 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers, respectively. The amendments in ASU No. 2016-08 clarify the implementation guidance on principal versus agent considerations, including indicators to assist an entity in determining whether it controls a specified good or service before it is transferred to the customers. ASU No. 2016-10 clarifies guideline related to identifying performance obligations and licensing implementation guidance contained in the new revenue recognition standard. The updates in ASU No. 2016-10 include targeted improvements based on input the FASB receivedaccumulated depreciation are eliminated from the Transition Resource Group for Revenue Recognitionaccounts and other stakeholders. It seeksany resulting gain or loss is credited or charged to proactively address areas in which diversity in practice potentially could arise, as well as to reduceincome.
Intangible Assets, Net
Intangible assets consist of purchase software. Assets are valued at cost at the costtime of acquisition and complexity of applying certain aspects of the guidance both at implementation and on an ongoing basis. ASU No. 2016-12 addresses narrow-scope improvements to the guidance on collectability, non-cash consideration, and completed contracts at transition. Additionally, the amendments in this ASU provide a practical expedient for contract modifications at transition and an accounting policy election related to the presentation of sales taxes and other similar taxes collected from customers. The amendments in ASU No. 2016-20 represents changes to make minor corrections or minor improvements to the Codification that are not expected to have a significant effect on current accounting practice or create a significant administrative cost to most entities. The effective date and transition requirements for ASU No. 2016-08, ASU No. 2016-10, ASU No. 2016-12 and ASU No. 2016-20 are the same as ASU No. 2014-09. The Company will adopt ASU No. 2014-09, ASU No. 2016-08, ASU No. 2016-10, ASU No. 2016-12 and ASU No. 2016-20 at January 1, 2018. The Company has substantially completed the implementation of these ASUs and has identified the necessary changes to its policies, business processes, systems and controls. Whilst the Company has finalized the analysis of its revenue contracts applying the above guidance, and will adopt FASB ASC Topic 606, Revenue from Contracts with Customers, effective January 1, 2018, using the modified retrospective transition approach. Under this approach, FASB ASC Topic 606 would apply to all new contracts initiated on or after January 1, 2018. For existing contracts that have remaining obligations as of January 1, 2018, any difference between the recognition criteria in these ASUs and the Company's current revenue recognition practices would be recognized using a cumulative effect adjustment to the opening balance of accumulated deficit. The Company has concluded that its revenue recognition will remain the same as previously reported and will not have material impacts to its consolidated financial statements.amortized over their beneficial periods.
Results of Operations
The following table sets forth our results of operations for the periodsperiods presented, as percentages of revenue.
Year Ended December 31,
202320222021
Revenue100.0 %100.0 %100.0 %
Cost of revenue50.5 52.8 55.8 
Gross margin49.5 47.2 44.2 
Operating expenses: 
Sales and marketing8.4 10.3 10.3 
Research and development16.6 16.0 13.2 
General and administrative7.3 5.8 5.9 
Total operating expenses, net32.3 32.0 29.4 
Income from operations17.2 15.2 14.8 
Interest income (expense), net1.0 1.8 (0.1)
Realized gain from sale of short-term investments1.6 0.3 - 
Unrealized gain (loss) on short-term investments(0.5)(2.0)0.2 
Other income (expense), net(0.3)0.9 (0.2)
Income from equity method investments1.8 1.2 1.8 
Income before income taxes20.8 17.4 16.5 
Income tax expense(3.5)(4.3)(0.1)
Net income17.3 13.0 16.4 
Less: Net income attributable to non-controlling interests3.5 2.9 2.0 
Net income attributable to ACM Research, Inc.13.8 %10.1 %14.4 %
 
 
Year Ended December 31,
 
 
 
2017
 
 
2016
 
Revenue
  100.0%
  100.0%
Cost of revenue
  52.8
 
  51.3 
Gross margin
  47.2
 
  48.7
 
Operating expenses:
    
    
Sales and marketing
  15.1
 
  14.3
 
Research and development
  14.1
 
  11.9
 
General and administrative
  16.1
 
  9.7
 
Total operating expenses, net
  45.3
 
  35.9
 
Income from operations
  1.9
 
  12.8
 
Interest expense, net
  (0.7)
  (0.6)
Other income (expense), net
  (2.4)
  (1.3)
Income (loss) before income taxes
  (1.1)
  10.9
 
Income tax (expense) benefit
  (1.5)
  (2.2)
Net income (loss)
  (2.6)
  8.7
 
Less: Net income (loss) attributable to non-controlling interests
  (1.5)
  4.9
 
Net income (loss) attributable to ACM Research, Inc.
  (1.1)%
 3.8%
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Comparison of Year endedYears Ended December 31, 20172023, 2022, and 2016
2021
Revenue
Year Ended December 31,
202320222021% Change
2023 v 2022		% Change
2022 v 2021
(in thousands)
Single wafer cleaning, Tahoe and semi-critical cleaning equipment$403,851 $272,939 $189,208 48.0 %44.3 %
ECP (front-end and packaging), furnace and other technologies103,356 77,482 33,210 33.4 %133.3 %
Advanced packaging (excluding ECP), services & spares50,516 38,411 37,333 31.5 %2.9 %
Total Revenue By Product Category$557,723 $388,832 $259,751 43.4 %49.7 %
 
 
Year ended
December 31,  
 
 
% Change  
 
 
 
2017  
 
 
2016  
 
 
2016 v 2017  
 
 
 
(in thousands)
 
 
 
 
Revenue
 $36,506 
 $27,371 
  33%
Year Ended December 31,
202320222021
(in thousands)
Mainland China$540,969 $377,752 $258,615 
Other Regions16,754 11,080 1,136 
$557,723 $388,832 $259,751 
The increase in revenue for 2023 compared to 2022 was driven by higher sales of $9.1 million for 2017 reflected increasessingle wafer cleaning, Tahoe and semi-critical cleaning equipment, ECP (front-end and packaging), furnace and other technologies, and Advance packaging (excluding ECP), and services and spares. We attribute the revenue growth to continued investments in mature process nodes by current and new mainland China-based customers amidst an ongoing target to achieve a greater share of the global semiconductor market, incremental contribution from newly introduced tools, and better penetration of our product portfolio across our customer base.

The increase in revenue for 2022 compared to 2021 was driven primarily by higher sales of $5.6 million from single-wafersingle wafer cleaning, Tahoe and semi-critical cleaning equipment, $3.0 millionand increased contribution from advanced packaging equipmentnewer ECP (front-end and $500,000 from servicepackaging), furnace and parts.other technologies. Our revenue for 2017 comparedShanghai production operations were adversely impacted in the first half of 2022 to 2016 reflectedCOVID-19-related restrictions, with a return to more normal operations in the second half of the year. The U.S. export regulations imposed in October of 2022 had an adverse impact on ACM Shanghai’s shipments and sales in the fourth quarter of $8.8 million to two new customers and an increase of $300,000 in sales to existing customers.
2022.
Cost of Revenue and Gross Margin
Year Ended December 31,
202320222021% Change
2023 v 2022		% Change
2022 v 2021
(in thousands)
Cost of revenue$281,508 $205,217 $144,895 37.2 %41.6 %
Gross profit276,215 183,615 114,856 50.4 %59.9 %
Gross margin49.5 %47.2 %44.2 %2.30 3.00 
 
 
Year Ended
December 31,
 
 
% Change
 
 
 
2017
 
 
2016
 
 
2016 v 2017
 
 
 
(in thousands)
 
 
 
 
Cost of revenue
 $19,281 
 $14,042 
  37.3%
Gross profit
 $17,225
 $13,329 
  29.2 
Gross margin
  47.2%
  48.7%
  (1.5)%
Cost of revenue increased $5.2 million, and gross profit increased $3.9 million, for 2017in 2023 as compared to 2016, reflecting2022 due to the growthincreased sales volume and an increase in sales. Grossgross margin. The increased gross margin decreased 1.5%,versus the prior-year period was primarily due to improved gross margins for certain products, overall product mix, and a positive impact due to a change in the RMB to U.S. dollar currency exchange rate.
Cost of revenue and gross profit increased in 2022 as compared to 2021 due to the increased sales of relatively lower-margin tools to new customers for 2017.volume and an increase in gross margin. The higher margins in 2016 and 2017 wereincreased gross margin versus the prior-year period was primarily due to two systems manufactured under governmental subsidies (see “—PRC Government a higher mix of ECP (front-
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end and packaging), furnace, and other technologies, and a positive impact due to a change in the RMB to U.S. dollar currency exchange rate.
Gross margin may vary from period to period, primarily related to the level of utilization and the timing and mix of revenue. We expect gross margin to be between 40.0% and 45.0% for the foreseeable future, with direct manufacturing costs approximating 50.0% to 55.0% of revenue and overhead costs totaling 5.0% of revenue.
Operating Expenses
Year Ended December 31,
202320222021% Change
2023 v 2022		% Change
2022 v 2021
(in thousands)
Sales and marketing expense$47,019 $39,889 $26,733 17.9 %49.2 %
Research and development expense92,709 62,226 34,207 49.0 %81.9 %
General and administrative expense40,648 22,465 15,214 80.9 %47.7 %
Total operating expenses$180,376 $124,580 $76,154 44.8 %63.6 %
Sales and marketing expense increased in 2023 as compared to 2022, and reflected an increase of $8.1 million due to higher costs for personnel, commissions, travel and entertainment and other costs, an increase of $4.7 million due to higher costs for professional services, outside services and other costs, and an increase of $3.8 million due to higher stock -based compensation, partly offset by a decrease of ($9.6 million) for the cost of tools built for promotional purposes.
Sales and marketing expense increased in 2022 as compared to 2021, and reflected an increase of $7.9 million due to higher costs of tools built for promotional purposes for potential new customers, and an increase of $5.3 million due to increased costs for personnel, commissions, outside services, travel and entertainment and other costs.
We expect that, for the foreseeable future, sales and marketing expense will increase in absolute dollars, as we continue to invest in sales and marketing by hiring additional employees and expanding marketing programs in existing or new markets. We must invest in sales and marketing processes in order to develop and maintain close relationships with customers. We are making dollar-based investments in order to support growth of our customer base in the United States, and the relative strength of the dollar could have a significant effect on our sales and marketing expense.
Research and Development Funding” below), which were sold for $1.8development expense increased in 2023 as compared to 2022, reflecting an increase of $15.4 million in 2017costs of components, costs of tools built for product development purposes, and $3.7 million in 2016. Costs associated with these systems were recorded ascosts of other research and development expenses as these systems weresupplies, an increase of $7.1 million for personnel-related costs, an increase of $5.9 million in stock-based compensation, and an increase of $4.2 million in travel and entertainment costs to support product development, professional services, and other research and development in nature and had not reached the final product manufacture stage. The related research and development expense was recorded as reductionexpenses, offset by a decrease of our research and development expense as incurred.
($2.1 million) for outside services.
Operating Expenses
 
 
Year Ended
December 31,
 
 
% Change
 
 
 
2017
 
 
2016
 
 
2016 v 2017
 
 
 
(in thousands)
 
 
 
 
Sales and marketing expense
 $5,500 
 $3,907 
  40.77%
Research and development expense
  5,138 
  3,259 
  57.66 
General and administrative expense
  5,887 
  2,673 
  120.24
Total operating expenses, net
 $16,525 
 $9,839 
  67.95%
Sales and marketing expense increased $1.6 million in 2017 as compared to 2016, primarily due to an increase in employee salaries and sales services.
Research and development expense increased $1.9 million for 2017 as compared to 2016, principally as a result of increases in employee salaries and research and development parts. Research and development expense represented 14.1%16.6% and 16.0% of our revenue in 2017the years ended December 31, 2023 and 11.9% of our revenue in 2016.2022, respectively. Without reduction by grant amounts received from PRCmainland China governmental authorities (see “—Key Components of Results of Operations—PRCmainland China Government Research and Development Funding”), gross research and development expense totaled $8.6$94.5 million, or 23.4%16.9% of total revenue, in the year ended December 31, 2023 as compared to $63.4 million, or 16.3% of revenue, in 2017the corresponding period in 2022.
Research and $9.5million, or 34.7%development expense increased in 2022 as compared to 2021, reflecting an increase of revenue,$6.9 million in 2016.costs of components, costs of tools built for product development purposes, and costs of other research and development supplies, and an increase of $16.7 million for personnel, stock-based compensation, and travel and entertainment costs to support product development, and an increase of $4.4 million for outside services and other research and development related expenses.
We expect that, for the foreseeable future, research and development expense will increase in absolute dollars as compared to 2023, as we continue to invest in research and development to advance our technologies. We intend to continue to invest in research and development to support and enhance our cleaning, plating, advanced packaging, furnace and future product offerings to build and maintain our technology leadership position.
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General and administrative expense increased $3.2 million in 20172023 as compared to 2016, principally resulting from preparations to become a public company. These costs reflected increases2022, reflecting an increase of $1.2$9.0 million in stock-based compensation, expense, $1.3$3.3 million in personnel and professional fees,services costs, $2.7 million in allowance for credit losses, and $523,000$3.1 million for travel & entertainment, depreciation and amortization, outside services, taxes and other general and administrative expenses.
General and administrative expense increased in personnel costs2022 as compared to 2021, primarily due to an increase in stock-based compensation, increased employee count, and an increase in legal, payroll tax and other fees.
We expect that, for the foreseeable future, general and administrative expense will increase in absolute dollars, as we incur additional costs associated with growing our business and operating as a public company.
Stock-Based Compensation Expense
Cost of headcount.revenue and operating expenses during the periods presented below have included stock-based compensation as follows:
Year Ended December 31,
202320222021
(in thousands)
Stock-Based Compensation Expense:
Cost of revenue$1,406 $520 $397 
Sales and marketing expense5,684 1,877 1,802 
Research and development expense8,459 2,565 1,115 
General and administrative expense11,789 2,768 1,803 
$27,338 $7,730 $5,117 
Interest income (expense), net, Other Income and Expenses(expense), net
 
Year Ended
December 31,
 
 
% Change
 
Year Ended December 31,
2023
2023
202320222021% Change
2023 v 2022		% Change
2022 v 2021
(in thousands)
Interest Income
Interest Income
Interest Income$8,354 $8,740 $505 -4.4 %1,630.7 %
Interest ExpenseInterest Expense(2,681)(1,655)(765)62.0 %116.3 %
Interest Income (expense), netInterest Income (expense), net$5,673 $7,085 $(260)-19.9 %-2,825.0 %
 
2017
 
 
2016
 
 
2016 v 2017
 
 
(in thousands)
 
 
 
 
Interest expense, net
 $(268)
 $(165)
  62.4%
Other income (expense), net
  (792)
  (343)
  (131)
Other income (expense), net
Other income (expense), net$(1,558)$3,315 $(631)-147.0 %-625.4 %
Interest expense consists of interest incurred from outstanding short-term borrowings. Interest expense increasedincome (expense), net, decreased in 2023 compared to $277,000 in 2017 from $181,000 in 2016,2022, principally as a result of increased borrowings under short-term bank loans. We earnreduced interest income from depositary accounts. lower interest income on reduced cash balances, offset by increase in interest expenses incurred from a higher balance of total bank loans.
Interest income was nominal(expense), net, increased in 20172022 compared to 2021, principally as a result of reduced interest income from lower interest rates on reduced cash balances, offset by increase in interest expenses incurred from short-term and 2016.
long-term bank loans.
Other income (expense), net primarily reflects (a) gains or losses recognized from the effectimpact of exchange rates on our foreign currency-denominated assetworking-capital transactions and liability balances, (b) depreciation of assets acquired with government subsidies, as described under “—Key Components of Results of Operations—PRC Government Research and Development Funding” above,above. We realized $1.6 million of other expense in the year ended December 31, 2023, of which $2.0 million was due to loss realized from transactions that resulted from changes in the RMB-to-U.S. dollar exchange rate, as compared to a foreign exchange gain of 1.7 million in the corresponding period in 2022.
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Other income (expense) increased by $3.3 million in the year ended December 31, 2022, of which $1.7 million was due to gains realized from transactions that resulted from changes in the RMB-to-U.S. dollar exchange rate, as compared to a loss of ($0.6 million) in the corresponding period in 2021.
Realized gain and (c) losses we recognized upon dispositionsunrealized loss from short-term investments, and income from equity method investments .
Year Ended December 31,
202320222021% Change
2023 v 2022		% Change
2022 v 2021		Absolute Change
2023 v 2022
(in thousands)
Realized gain from sale of short-term investments$9,047 $1,116 $- 710.7 %100.0 %$7,931 
Unrealized gain (loss) on short-term investments$(2,737)$(7,855)$607 -65.2 %-1394.1 %$5,118 
Income from equity method investments$9,952 $4,666 $4,637 113.3 %0.6 %$5,286 
We recorded a realized gain on sale of fixed assets.short-term investments of $9.0 million for the year ended December 31, 2023 as compared to a realized gain of $1.1 million for the same period in 2022 primarily due to the sales of ACM Shanghai’s indirect investment in publicly traded shares.
We recorded an unrealized loss on short-term investments of $2.7 million for the year ended December 31, 2023 as compared to an unrealized loss of $7.9 million for the same period in 2022, due primarily to a change in market value of ACM Shanghai’s indirect investment in publicly traded shares.
We recorded an unrealized loss on short-term investments of $7.9 million for the year ended December 31, 2022 as compared to an unrealized gain of $0.7 million for the same period in 2021, due primarily to a change in market value of ACM Shanghai’s indirect investment in publicly traded shares.
Income Tax (Expense) Benefit
The following presents components of income tax (expense) benefitfrom equity method investments for the indicated periods:year ended December 31, 2023 increased by $5.3 million compared to the year ended December 31, 2022 primarily due to higher net income from equity method investments.
Income from equity method investments for the year ended December 31, 2022 was unchanged versus the year ended December 31, 2021. Income from equity method investments increased by $4.0 million for the year ended December 31, 2021 due to higher net income from equity method investments.
 
 
Year Ended December 31,
 
 
 
 2017 
 
 
2016
 
Current:
 
(in thousands)
 
U.S. federal
 $- 
 $- 
U.S. state
  - 
  (1)
Foreign
  - 
  - 
Total current tax expense
  - 
  (1)
Deferred:
    
    
U.S. federal
  - 
  - 
U.S. state
  - 
  - 
Foreign
  (547)
  (594)
Total deferred tax expense
  (547)
  (594)
Total income tax expense
 $(547)
 $(595)

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Tax Benefit (Expense)
Year Ended December 31,
202320222021
(in thousands)
Current:
U.S. federal$(12,757)$(479)$(91)
U.S. state(150)(18)(2)
Foreign(19,696)(11,139)(2,195)
Total current tax expense(32,603)(11,636)(2,288)
Deferred: 
U.S. federal7,316 (10,927)2,089 
U.S. state63 8 - 
Foreign5,860 5,757 65 
Total deferred tax benefit (expense)13,239 (5,162)2,154 
Total income tax expense$(19,364)$(16,798)$(134)
We recognized a tax expense of $19.4 million for the year ended December 31, 2023 as compared to a tax expense of $16.8 million for the prior year period. The increased tax expense in 2023 primarily resulted from the tax effect of increased operating profit generated.
As we collect and prepare necessary data, and interpret the guidance issued by the U.S. Treasury Department, the Internal Revenue Service, and other standard-setting bodies, we may make adjustments to the provisional amounts. Those adjustments may materially affect our provision for income taxes and effective tax rate in the period in which the adjustments are made. There were no adjustments made in 2023.
Our effective tax rate differs from statutory rates of 34%21% for U.S. federal income tax purposes and 15%12.5% to 25% for Chinesemainland China income tax purposepurposes due to the effects of the valuation allowance and certain permanent differences as it pertains to book-tax differences in the valuetreatment of client equity securities received for services.stock-based compensation and non-U.S. research expenses. Our two PRCfour mainland China subsidiaries, ACM Shanghai, ACM Wuxi, ACM Beijing, and ACM Wuxi,Lingang, are liable for PRCmainland China corporate income taxes at the rates of 15%, 25%, 25%, and 25%15%, respectively. Pursuant to the Corporate Income Tax Law of the PRC,mainland China, our PRCmainland China subsidiaries generally would be liable for PRCmainland China corporate income taxes asat a rate of 25%. According to Guoshuihan 2009 No. 203, an entity certified as an “advanced and new technology enterprise” is entitled to a preferential income tax rate of 15%. ACM Shanghai was certified as an “advanced and new technology enterprise” in 2012 and again in 2016, with2018, and 2021, effective until December 31, 2023, and is expected to be re-certified for future years in 2024. In 2021, ACM Shanghai was certified as an effective periodeligible integrated circuit production enterprise and is entitled to a preferential income tax rate of three years.12.5% from January 1, 2020 to December 31, 2022.Certain entities which meet requirements according to the Policy of the Lingang New area in China (Shanghai) Pilot Free Trade Zone are entitled to a preferential income tax rate of 15%. ACM Lingang was certified for this in 2021, and this preferential income tax rate is valid from December 31, 2020 until December 31, 2024.
We file income tax returns in the United States and state and foreign jurisdictions. ThoseAll tax returns will remain open for examination by the federal and state authorities for three and four years, respectively, from the date of utilization of any net operating loss or credits. Certain tax years are subject to foreign income tax returns are underexaminations by tax authorities until the statute of limitations subjectexpire.
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Net Income Attributable to tax examinations for 2009 through 2016. ToNon-Controlling Interests
Year Ended December 31,
202320222021% Change
2023 v 2022		% Change
2022 v 2021
(in thousands)
Net income attributable to non-controlling interests$19,503 $11,301 $5,164 72.6 %118.8 %

ACM Research owns 82.1% of ACM Shanghai’s (note 1) outstanding shares which is reflected in our consolidated financial statements (note 2). We reflect the extent we have tax attribute carryforwards, the tax years in which the attribute was generated may still be adjusted upon examination by the Internal Revenue Service or state or foreign tax authoritiesportion of net income allocable to the extent utilized in a future period.minority holders of ACM Shanghai shares as net income attributable to non-controlling interests.
Foreign currency translation adjustment
Year Ended December 31,
202320222021% Change
2023 v 2022		% Change
2022 v 2021
(in thousands)
Foreign currency translation adjustment$(10,617)$(59,102)$4,695 -82.0 %-1358.8 %
We intend to reinvest indefinitely our PRC earnings asrecorded a foreign currency translation adjustment of ($10.6 million) for the year ended December 31, 2017 outside2023, as compared to $(59.1) million for 2022, based on the net effect of RMB to dollar exchange rate fluctuations for the period on the converted value of ACM Shanghai’s RMB-denominated balances to U.S. dollar equivalents. The 2022 amount was especially large due to a weakening of the United States,RMB versus the U.S. dollar during the year ended December 31, 2022 together with a more significant RMB-denominated asset balance in 2022.
Comprehensive income (loss) attributable to non-controlling interests
Year Ended December 31,
202320222021% Change
2023 v 2022		% Change
2022 v 2021
(in thousands)
Comprehensive income (loss) attributable to non-controlling interests$17,689 $1,854 $5,607 854.1 %-66.9 %
Comprehensive income attributable to non-controlling interest increased by $15.8 million compared to a decrease of $(3.8) million for the years ended December 31, 2023 and we therefore have not provided for taxes with respect2022 compared to the remissions of such earningsprior year, due to a significant change in net income generated from the PRC to the United States.
On December 22, 2017, the 2017 Tax Cuts and Jobs Act was enacted into law. The new legislation contains several key tax provisions that affect us, including a one-time mandatory transition tax on accumulatednon-controlling interests as impacted from foreign earnings and a reduction of the corporate income taxexchange rate to 21% effective January 1, 2018. We are required to recognize the effect of the tax law changes in the period of enactment, such as determining the transition tax, remeasuring our U.S. deferred tax assets and liabilities as well as reassessing the net realizability of our deferred tax assets and liabilities.
fluctuations.
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Liquidity and Capital Resources
The following chart depicts our corporate organization as of December 31, 2023:
Initiallyimage (5).jpg
A detailed description of how cash is transferred through our organization is set forth under “Note 2 – Summary of Significant Accounting Policies – Cash and Cash Equivalents” to the Consolidated Financial Statements of this report.
During the year ended December 31, 2023, we funded our technology development and operations principally through issuances of four series of convertible preferred stock from our formation in 1998 through 2001 and issuances of convertible and term promissory notes in 2003 and 2004. We issued additional convertible and term promissory notes in 2005 and 2006 in anticipation of moving our operational center to Shanghai in 2006, and following that transition, our new subsidiarybeginning global cash balances, including the cash balances at ACM Shanghai, raised funds through sales of its non-controlling equity interests in 2007, 2008 and 2009. Prior to 2016, we also funded our operations with (a) subsidies received from PRC governmental authorities pursuant to grants made in 2008, 2009 and 2014, (b) short-term borrowings by ACM Shanghai from local financial institutions in 2009 and each year since 2011 through 2015, (c) additional issuances of term promissory notes in 2013, 2014 and 2015, and (d) operating cash flow in 2015. Since January 1, 2016, we have funded our technology development and operations through:
● 
issuances of two additional series of convertible preferred stock in 2016 and the third quarter of 2017;
● 
an investment deposit in 2016 made in connection with issuance of a Class A common stock warrant in March 2017;
● 
short-term borrowings by ACM Shanghailoan from local financial institutions in 2016 and the first nine months of 2017;
● 
operating cash flow in 2017; and
● 
the IPO and the concurrent private placement in November 2017.
We believe our existing cashChina CITIC Bank. Cash and cash equivalents, (including ourrestricted cash, short-term time deposits and long-term time deposits were $304.5 million at December 31, 2023, compared to $420.9 million at December 31, 2022. The ($116.4 million) decrease was primarily driven by ($75.3 million) of cash used in operations, ($60.2 million) used in investing activities excluding the change in time deposits, $18.5 million net proceedscash provided by financing activities, a $1.7 million decrease from the effect of exchange rate on cash, cash equivalents and restricted cash, and a $2.4 million increase from the IPOeffect of exchange rate on time deposits.
The table below represents the cash and cash equivalents, restricted cash, and the concurrent private placement), our cash flow from operating activitiestime deposits as of December 31, 2023 and short-term bank borrowings by ACM Shanghai will be sufficient to meet our anticipated cash needs for at least the next twelve months. We do not expect that our anticipated cash needs for the next twelve months will require our receipt of any PRC government subsidies. 2022:
December 31,
20232022
(In thousands)
Cash and cash equivalents, restricted cash, and time deposits: 
Cash and cash equivalents and restricted cash$183,173 $248,451 
Short-term time deposits80,524 70,492 
Long-term time deposits40,818 101,956 
Total$304,515 $420,899 
Our future working capital needs beyond the next twelve months will depend on many factors, including the rate of our business and revenue growth, the payment schedules of our customers, the timing and magnitude of our capital expenditures, and the timing of investment in our research and development as well as sales and marketing. We believe our existing cash and cash equivalents and short-term and long-term time deposits, our cash flow from operating activities, and bank borrowings by us and ACM Shanghai will be sufficient to meet our anticipated cash needs within our longer-term planning horizon.
ACM Shanghai has historically participated in certain mainland China government-sponsored grant and subsidy programs, as described under “—Key Components of Results of Operations—mainland China Government Research and Development Funding” and “—Contractual Obligations” and we expect that ACM Shanghai will continue to take
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advantage of these programs when they are available and fit with our business strategy. ACM Shanghai generally applies for these grants and subsidies through the applicable mainland China government agency’s defined processes. Periodically, the public relations department researches the availability of these grants and subsidies through mainland China government agencies with whom ACM Shanghai files business surveys and taxes. Management of ACM Shanghai then assesses which grants and subsidies for which ACM Shanghai may be eligible and submits the relevant application. The decision to award the grant to ACM Shanghai is made by the relevant mainland China government agencies based on suitability and the merits of the application. Neither ACM Research, nor ACM Shanghai or any of our other subsidiaries, has any direct relationship with any mainland China government agency, and our anticipated cash needs for the next twelve months neither anticipate, nor require, receipt of any mainland China government grants or subsidies.
To the extent our cash and cash equivalents, cash flow from operating activities and short-term bank borrowings are insufficient to fund our future activities in accordance with our strategic plan, we may needdetermine to raise additional funds through additional bank credit arrangements or public or private debt or equity financings.financings or additional bank credit arrangements. We also may need to raise additional funds in the event we determine in the future to effect one or more acquisitions of businesses, technologies and products. If additional funding is required,necessary or desirable, we may not be able to obtain bank credit arrangements or to affect an equity or debt financing on terms acceptable to us or at all.
SourcesRestrictions under mainland China laws and regulations as well as restrictions under ACM Shanghai’s bank loan agreements, may significantly restrict ACM Shanghai’s ability to transfer a portion of Funds
EquityACM Shanghai’s net assets to ACM Research, other subsidiaries of ACM Research and Equity-Related Securities
From January 1, 2016 to March 19, 2018, we have received gross proceedsholders of $54.2 million from sales of common stock, convertible preferred stock and a warrant, as described below.
Common Stock. We have sold shares of common stock as follows:
Issue Date
 
Transaction
 
Gross Proceeds
 
 
 
 
 
  (in thousands)
 
2016
 
Option exercises
 $584
 
2017
 
Option exercises
  396 
September 2017
 
Private placements
  15,300 
November 2017
 
IPO
  12,504 
November 2017
 
Concurrent private placement
  7,467 
2018
 
Option Exercises
 62
 
 
 
 $36,313
Convertible Preferred Stock. In 2016 we received gross proceeds of $9.0 million from sales of shares of Series F convertible preferred stock that converted, upon completion of the IPO, into 1,221,099 shares ofACM Research Class A common stock, for an effective purchase pricestock. See “Item 1A. Risk Factors–Regulatory Risks–Mainland China’s currency exchange control and government restrictions on investment repatriation may impact our ability to transfer funds outside of $7.50 per share. In 2017 we received gross proceedsmainland China, which could materially and adversely affect our ability to grow, make investments or acquisitions that could benefit our business, otherwise fund and conduct our business, or pay dividends on our common stock.”
For the years ended December 31, 2023 and 2022, with the exception of $5.8 million from sales and services-related transfer-pricing payments in the ordinary course of sharesbusiness, and dividends paid by ACM Shanghai to ACM Research, no transfers or distributions have been made between ACM Research, and its subsidiaries, including ACM Shanghai, or to holders of Series E convertible preferred stock that converted, upon completion of the IPO, into 1,666,170 shares ofACM Research Class A common stock, for an effective purchase price of $3.48 per share.
Warrant. In December 2016 SMC delivered to ACM Shanghai RMB 20,123,000 ($3.0 million as of the date of funding) in cash for potential investment pursuant to terms to be subsequently negotiated. In March 2017 we issued to SMC a warrant exercisable to purchase 397,502 shares of Class A common stock at a price of $7.50 per share, for a total exercise price of $3.0 million.
Indebtedness
ACM Shanghai Short-Term Loan Facilities. ACM Shanghai is a party to short-term borrowing with three banks, as follows:
Lender  Agreement Date   Maturity Date   Annual Interest Rate  Maximum Borrowing Amount(1)  Amount Outstanding at December 31, 2017(1) 
              
(in thousands)
 
Bank of China Pudong Branch  August 2017   March 2018   4.80%  RMB30,000  RMB14,500 
              $4,590  $2,219 
Bank of Shanghai Pudong Branch  August 2017   October 2018   5.66  RMB25,000  RMB13,800 
              $3,825  $2,111 
Shanghai Rural Commercial Bank  November 2017   November 2018   5.44-5.66  RMB5,000  RMB5,000 
              $765  $765  
              RMB60,000  RMB33,300 
              $9,180  $5,095 
(1) Converted to dollars as of December 31, 2017
All of the amounts owing under the line of credit with Bank of China Pudong Branch are secured by ACM Shanghai’s intellectual property. All of the amounts owing under the lines of credit with Bank of Shanghai Pudong Branch and Shanghai Rural Commercial Bank are guaranteed by David Wang, our Chair of the Board, Chief Executive Officer and President.
Cash Flow from Operating Activities
Our operations used cash flow of $3.7 million in 2016 and $8.1 million in 2017. Our cash flow from operating activities is influenced by (a) the amount of cash we invest in personnel and technology development to support anticipated future growth in our business, (b) increases in the number of customers using our products and services, and (c) the amount and timing of payments by customers.
Government Research and Development Grants
As described under “—Key Components of Results of Operations—PRC Government Research and Development Funding,” ACM Shanghai has received research and development grants from local and central PRC governmental authorities. ACM Shanghai received grants totaling $6.6 million in 2016 and $2.5 million in 2017. Not all grant amounts are received in the year in which a grant is awarded. Because of the nature and terms of the grants, the amounts and timing of payments under the grants are difficult to predict and vary from period to period. In addition, we expect to apply for additional grants when available in the future, but the grant application process can extend for a significant period of time and we cannot predict whether, or when, we will determine to apply for any such grants.
Working Capital
The following table sets forth selected working capital information:
December 31, 2017
(in thousands)
Cash and cash equivalents
$17,681
Accounts receivable, less allowance for doubtful amounts
26,762
Inventory
15,388
Working capital
41,097
stock.
Our cash and cash equivalents at December 31, 20172023 were unrestricted and held for working capital purposes.purposes and other potential investments. ACM Shanghai, our only direct PRCmainland China subsidiary, is, however, subject to PRCmainland China restrictions on distributions to equity holders. The use of proceeds raised by the STAR Market IPO, without further approvals, are limited to specific usage. We currently intend for ACM Shanghai to retain all available funds from any future earnings for use in the operation of its business and do not anticipate itsit paying any cash dividends.
We have not entered into, and do not expect to enter into, investments for trading or speculative purposes. Our accounts receivable balance fluctuates from period to period, which affects our cash flow from operating activities. Fluctuations vary depending on cash collections, client mix, and the timing of shipment and acceptance of our tools.
We have never declared or paid cash dividends on our capital stock. We intend to retain all available funds and any future earnings to support the operation of and to finance the growth and development of our business and do not anticipate paying any cash dividends in the foreseeable future.
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Cash Flow Used in Operating Activities. Net cash used by operations of ($75.3 million) during the year ended December 31, 2023 consisted of:
Uses
Year Ended December 31,
202320222021
(in thousands)
Net Income$96,852 $50,564 $42,921 
 Non-cash operating lease cost3,580 2,816 2,451 
  Provision for inventory575 2,248 75 
  Provision for credit losses2,741 - - 
Gain on disposals of property plant and equipment(2)(12)- 
Depreciation and amortization8,092 5,366 2,353 
Realized gain on short-term investments(9,047)(1,116)- 
Income from equity method investments(9,952)(4,666)(4,637)
Unrealized loss (gain) on short-term investments2,737 7,855 (607)
Deferred income taxes(13,647)4,027 (1,840)
Stock-based compensation27,338 7,730 5,117 
Net changes in operating assets and liabilities:(184,590)(137,006)(85,926)
Net cash flow used in operating activities$(75,323)$(62,194)$(40,093)
Significant changes in operating asset and liability accounts during the year-ended December 31, 2023 included the following uses of Funds
Capital Expenditures
During 2017 we continued to invest in equipmentcash: increases of inventories of $164.0 million (Note 5), and infrastructure improvements for our manufacturingan increase of accounts receivable of $108.7 million (Note 4). As described under “—Key Components of Results of Operations—mainland China Government Research and Development Funding,” ACM Shanghai has received research and development grants from local and central mainland China governmental authorities. ACM Shanghai received $51,000 of payments related to such grants in the year ended December 31, 2023, as compared to cash receipts of $1.1 million in the same period of 2022.
The uses of cash are offset by the following significant sources of cash: an increase in advances from customers of $30.0 (Note 3), an increase in other payables and accrued expenses of $21.4 million, and an increase in accounts payable of $42.3 million.
Cash Flow Used in Investing Activities. Net cash used in investing activities for the year ended December 31, 2023, excluding net cash proceeds from the sale of time deposits, was ($60.2 million), primarily consisting of ($64.3 million) purchase of property and equipment and intangible assets, and ($7.5 million) purchase of long-term investments (note 14), partly offset by $3.4 million net proceeds from the sale of short-term investments, and $8.2 million of dividends received from long-term investments (note 14).
Cash Flow provided by Financing Activities. Net cash provided by financingfor the year ended December 31, 2023 was $18.5 million, primarily consisting of $16.3 million net proceeds from short and long-term borrowings, and $6.1 million in proceeds from the exercise of stock options, partly offset by ($4.0 million) of dividends paid by ACM Shanghai.
We and ACM Shanghai, together with the subsidiaries of ACM Shanghai, have short-term and long-term borrowings with six banks, as follows:
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LenderAgreement DateMaturity DateAnnual
Interest Rate		Maximum Borrowing
Amount(1)		Amount Outstanding
at December 31, 2023
(in thousands)
China CITIC Bank (2)July 2023Repayable by installments and the last installments repayable in December 20254.50 %RMB200,000RMB100,000
$28,240 $14,120 
China Everbright BankJuly 2021August 20243.00 %RMB150,000 RMB17,440
$21,180 $2,463 
 Bank of ChinaSeptember 2023September 20242.87 %RMB40,000RMB40,000
$5,648 5536$5,648 
China Merchants BankAugust 2023September 20243.00 %  RMB200,000 RMB153,000
$28,240 $21,603 
 China Merchants BankNovember 2020Repayable by installments and the last installments repayable in November 20303.95 %RMB128,500RMB94,633
$18,144 $13,362 
 Bank of ChinaJune 2021Repayable by installments and the last installments repayable in June 20242.60 %RMB10,000RMB7,500
$1,412 $1,059.00 
 Bank of ChinaSeptember, 2021Repayable by installments and the last installments repayable in September 20242.60 %RMB35,000RMB28,000
$4,942 $3,954 
 Bank of ShanghaiDecember,2022October 20242.85 %RMB100,000RMB100,000
$14,120 $14,120 
 China CITIC BankAugust 2023Repayable by installments and the last installments repayable in August 20253.10 %RMB100,000RMB100,000
$14,120 $14,120 
 Industrial Bank of KoreaJuly 2023July 20246.03 %KRW500,000KRW100,000
$386 $77 
 Industrial Bank of KoreaDecember 2023December 20244.27 %KRW2,000,000KRW2,000,000
$1,544 $1,544 
$137,976 $92,070 
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(1)Converted from RMB to dollars as of December 31, 2023. The loan from China Merchants Bank is secured by a pledge of the property of ACM Lingang and guaranteed by ACM Shanghai, as described above under “—Contractual Obligations.”
(2)This China CITIC bank facility agreement is with ACM Research, Inc.
Effect of exchange rate changes on cash, cash equivalents and restricted cash. The impact of fluctuations of the RMB to U.S. dollar currency exchange rate on a significant balance of our cash, and cash equivalents held in RMB-denominated accounts (Note 2) contributed to a $1.7 million decrease in the value of these items during the year ended December 31, 2023.
Contractual Obligations
Grant Contract for State-owned Construction Land Use Right in Shanghai City
In 2020 ACM Shanghai, through its wholly-owned subsidiary ACM Lingang, entered into a Grant Contract for State-owned Construction Land Use Right in Shanghai City (Category of R&D Headquarters and Industrial Projects), or the Grant Agreement, with the China (Shanghai) Pilot Free Trade Zone Lin-gang Special Area Administration, or the Grantor. ACM Lingang obtained rights to use approximately 43,000 square meters (10.6 acres) of land in the Lingang Heavy Equipment Industrial Zone of Lin-gang Special Area of China (Shanghai) Pilot Free Trade Zone, or the Land Use Right, for a period of fifty years, commencing on the date of delivery of the land in July 2020, which we refer to as the Delivery Date.
In exchange for its land use rights, ACM Lingang paid aggregate grant fees of RMB 61.7 million ($9.5 million), or the Grant Fees, and a performance deposit of RMB 12.3 million ($1.9 million), which is equal to 20% of the aggregate Grant Fees, to secure its achievement of the following performance milestones:
•the start of construction within 6 months after the Delivery Date (60% of the performance deposit), or Construction Start Milestone;
•the completion of construction within 30 months after the Delivery Date (20% of the performance deposit), or Construction Completion Milestone; and
•the start of production within 42 months after the Delivery Date (20% of the performance deposit), or Production Start Milestone.
Upon satisfaction of a milestone, the portion of the performance deposit attributable to that milestone will be repayable to ACM Shengwei within ten business days. If the achievement of any of the above milestones is delayed or abandoned, ACM Shengwei may be subject to additional penalties and may lose its rights to both the use of the granted land and any partially completed facilities on that land.
The status of the performance milestones for the period ended December 31, 2023 is as follows:
•ACM Lingang achieved the Construction Start Milestone and 60% of the performance deposit was refunded to a lesser extent, leasehold improvements for our administrative facilities. Our capital expenditures totaled $766,000ACM Shanghai in 2017.
2020.
Our capital expenditures totaled $795,000•The Construction Completion Milestone was required to be met by January 9, 2024 but was not achieved. However, ACM Lingang believes it will receive the refund without penalty based on its explanation to the respective regulatory authorities of logistic-related delays, and expectations that it will meet the milestone before July 9, 2024. We cannot guarantee that ACM Lingang will achieve the missed milestone in 2016. Substantially2024, or even if it does achieve the milestone in 2024, that it will be refunded some or all of the 20% portion of the performance deposit of RMB 2.5 million ($0.4 million).
Contractual penalties in the case of a delay of Construction Completion Milestone:
◦If ACM Lingang fails to complete the construction pursuant to the date agreed under the Grant Agreement or any extended completion date approved by the Grantor, ACM Lingang shall pay 50% of the deposit for timely completion of construction as liquidated damages;
◦If ACM Lingang delays the completion for more than six months beyond the date agreed under the Grant Agreement, or beyond any extended completion date approved by the Grantor, it shall pay the total deposit for timely completion of construction as liquidated damages.
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◦If the delay is more than one year, the Grantor is entitled to terminate the Grant Agreement and take back the Land Use Right. In such case, the Grantor shall refund the Grant Fees for the remaining land use term after deducting the deposit agreed under the Grant Agreement and refund the deposit for timely commencement of production and relevant bank interests in full to ACM Lingang.

•The Production Start Milestone is now required to be met by January 9, 2025. The Production Start Milestone was originally required to be met prior to January 9, 2024, but due to COVID-related delays, ACM filed multiple requests for extensions, the latest of which was granted on July 7, 2023. We cannot guarantee that ACM Lingang will meet any extended deadline or be refunded this 20% portion of the performance deposit.
Contractual penalties in the case of a delay of Production Start Milestone:
◦If ACM Lingang fails to commence production pursuant to the date agreed under the Grant Agreement or any extended commencement date approved by the Grantor, ACM Lingang shall pay the total deposit for timely commencement of production as liquidated damages;
◦If ACM Lingang fails to commence production pursuant to the extended commencement of production date (more than six months beyond the production start milestone), the Grantor is entitled to terminate the Grant Agreement and take back the Land Use Right. In such case, the Grantor shall refund the Grant Fees for the remaining land use term after deducting the deposit agreed under the Grant Agreement to ACM Lingang.
In addition to the milestones, covenants in the Grant Agreement require that, among other things, ACM Lingang will be required to pay liquidated damages in the event that:
(a)it does not make a total investment (including the costs of construction, fixtures, equipment and grant fees) of at least RMB 450.0 million ($63.4 million). ACM Lingang shall pay the liquidated damages equal to the same proportion of the Grant Fees as the proportion of the actual shortfall amount of investment in the total agreed investment amount or the investment intensity.
(b)within six years after the Delivery Date, or prior to July 9, 2026, it does not (i) generate a minimum specified amount of annual sales of products manufactured on the granted land or (ii) pay at least RMB 157.6 million ($22.2 million) in annual total taxes (including value-added taxes, corporate income tax, personal income taxes, urban maintenance and construction taxes, education surcharges, stamp taxes, and vehicle and shipping taxes) as a result of operations in connection with the granted land.
If the total tax revenue of the project fails to reach but is no less than 80% of the standard agreed under the Grant Agreement, ACM Lingang shall pay 20% of the actual shortfall amount of the tax revenue as liquidated damages. If the total tax revenue of the project fails to reach 80% of the standard agreed under the Grant Agreement within 1 month after the agreed date of reaching target production, the Grantor is entitled to terminate the Grant Agreement, take back the Land Use Right, and shall refund the Grant Fees for the remaining land use term to ACM Lingang.
If the Grant Agreement is terminated because of breach of any terms above, the Grantor shall take back the buildings, fixtures and auxiliary facilities on the land area and provide ACM Lingang with corresponding compensation according to the residual value of the buildings, fixtures and auxiliary facilities when they are taken back. The total cumulative investment of land, buildings and construction in progress related to ACM Lingang amounted to $116.9 million and $35.4 million at December 31, 2023 and December 31, 2022, respectively.
How We Evaluate Our Operations
We present information below with respect to four measures of financial performance:
•We define “shipments” of tools to include (a) a “repeat” delivery to a customer of a type of tool that the customer has previously accepted, for which we recognize revenue upon delivery, and (b) a “first-time” delivery of a “first tool” to a customer on an approval basis, for which we may recognize revenue in the future if contractual conditions are met, or if a purchase order is received.
•We define “adjusted EBITDA” as net income excluding interest expense (net), income tax benefit (expense), depreciation and amortization, unrealized (gain) loss on short-term investments, and stock-based compensation. We define adjusted EBITDA to also exclude restructuring costs, although we have not incurred any such costs to date.
•We define “free cash flow” as net cash provided by operating activities less purchases of property and equipment (net of proceeds from disposals).
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•We define “adjusted operating income (loss)” as our income (loss) from operations excluding stock-based compensation.
These financial measures are not based on any standardized methodologies prescribed by accounting principles generally accepted in the United States, or GAAP, and are not necessarily comparable to similarly titled measures presented by other companies.
We have presented shipments, adjusted EBITDA, free cash flow and adjusted operating income (loss) because they are key measures used by our management and board of directors to understand and evaluate our operating performance, to establish budgets and to develop operational goals for managing our business. We believe that these financial measures help identify underlying trends in our business that could otherwise be masked by the effect of the expenses that we exclude. In particular, we believe that the exclusion of the expenses eliminated in calculating adjusted EBITDA and adjusted operating income (loss) can provide useful measures for period-to-period comparisons of our core operating performance and that the exclusion of property and equipment purchases from operating cash flow can provide a usual means to gauge our capability to generate cash. Accordingly, we believe that these financial measures provide useful information to investors and others in understanding and evaluating our operating results, enhancing the overall understanding of our past performance and future prospects, and allowing for greater transparency with respect to key financial metrics used by our management in its financial and operational decision-making.
Shipments, adjusted EBITDA, free cash flow and adjusted operating income (loss) are not prepared in accordance with GAAP, and should not be considered in isolation of, or as an alternative to, measures prepared in accordance with GAAP.
Shipments
We consider shipments a key operating metric as it reflects the total value of products delivered to customers and prospective customers by our productive assets.
Shipments consist of two components:
•a shipment to a customer of a type of tool that the customer has previously accepted, for which we recognize revenue when the tool is delivered; and
•a shipment to a customer of a type of tool that the customer is receiving and evaluating for the first time, in each case a “first tool,” for which we may recognize revenue at a later date, subject to the customer’s acceptance of the tool upon the tool’s satisfaction of applicable contractual requirements or subject to the customer’s subsequent discretionary commitment to purchase the tool.
“First tool” shipments can be made to either an existing customer that has not previously accepted that specific type of tool in the past ─ for example, a delivery of a SAPS V tool to a customer that previously had received only SAPS II tools ─ or to a new customer that has never purchased any tool from us.
Shipments for the years ended December 31, 2023, 2022, and 2021 totaled $597 million, $539 million, and $372 million, respectively. Repeat tool shipments in the years ended December 31, 2023, 2022, and 2021 totaled $310 million, $288 million and $210 million, respectively. First tool shipments for the years ended December 31, 2023, 2022, and 2021 totaled $286 million, $251 million, and $162 million, respectively.
The dollar amount attributed to a “first tool” shipment is equal to the consideration we expect to receive if any and all contractual requirements are satisfied and the customer accepts the tool, or if the customer subsequently determines in its discretion to purchase the tool. There are a number of limitations related to the use of shipments in evaluating our business, including that customers have significant, or in some cases total, discretion in determining whether to accept or purchase our tools after evaluation and their decision not to accept or purchase delivered tools is likely to result in our inability to recognize revenue from the delivered tools. “First tool” shipments reflect the value of incremental new products under evaluation delivered to our customers or prospective customers for a given period and is used as an internal key metric to reflect future potential revenue opportunity. The cumulative cost of “first tool” shipments under evaluation at customers which have not been accepted by the customer is carried at cost and reflected in finished goods inventory (see note 5 to the condensed consolidated financial statements included in this report). “First tool” shipments exclude deliveries to customers for which ACM does not have a basis to expect future revenue.
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Adjusted EBITDA
There are a number of limitations related to the use of adjusted EBITDA rather than net income (loss), which is the nearest GAAP equivalent. Some of these limitations are:
•adjusted EBITDA excludes depreciation and amortization and, although these are non-cash expenses, the assets being depreciated or amortized may have to be replaced in the future;
•we exclude stock-based compensation expense from adjusted EBITDA and adjusted operating income (loss), although (a) it has been, and will continue to be for the foreseeable future, a significant recurring expense for our business and an important part of our compensation strategy and (b) if we did not pay out a portion of our compensation in the form of stock-based compensation, the cash salary expense included in operating expenses would be higher, which would affect our cash position;
•the expenses and other items that we exclude in our calculation of adjusted EBITDA may differ from the expenses and other items, if any, that other companies may exclude from adjusted EBITDA when they report their operating results;
•adjusted EBITDA does not reflect changes in, or cash requirements for, working capital needs;
•adjusted EBITDA does not reflect interest expense, or the requirements necessary to service interest or principal payments on debt;
•adjusted EBITDA does not reflect income tax expense (benefit) or the cash requirements to pay taxes;
•adjusted EBITDA does not reflect historical cash expenditures or future requirements for capital expenditures were madeor contractual commitments;
•although depreciation and amortization charges are non-cash charges, the assets being depreciated and amortized will often have to purchase equipment or improve infrastructurebe replaced in the future, and adjusted EBITDA does not reflect any cash requirements for such replacements; and
•adjusted EBITDA includes expense reductions and non-operating other income attributable to mainland China governmental grants, which may mask the effect of underlying developments in net income, including trends in current expenses and interest expense, and free cash flow includes the mainland China governmental grants, the amount and timing of which can be difficult to predict and are outside our control.
The following table reconciles net income, the most directly comparable GAAP financial measure, to adjusted EBITDA:
Year Ended December 31,
202320222021% Change
2023 v 2022		Absolute
Change 2023 v
2022
(in thousands)
Adjusted EBITDA Data:
Net Income$96,852 $50,564 $42,921 91.5 %$46,288 
Interest expense (income), net(5,673)(7,085)260 -19.9 %1,412 
Income tax expense19,364 16,798 134 15.3 %2,566 
Depreciation and amortization8,092 5,366 2,353 50.8 %2,726 
Stock based compensation27,338 7,730 5,117 253.7 %19,608 
Unrealized (gain) loss on short-term investments2,737 7,855 (607)-65.2 %(5,118)
Adjusted EBITDA$148,710 $81,228 $50,178 83.1 %$67,482 
The $67.5 million increase in adjusted EBITDA for the year ended December 31, 2023 as compared to the year ended December 31, 2022 reflected higher income tax expense, a decrease in unrealized loss on short-term investments, an increase in net income, an increase in stock-based compensation, and an increase in depreciation and amortization, partly offset by a negative impact from an increase in interest income, net.
We do not exclude from adjusted EBITDA expense reductions and non-operating other income attributable to mainland China governmental grants because we consider and incorporate the expected amounts and timing of those grants in incurring expenses and capital expenditures. If we did not receive the grants, our cash expenses therefore would be lower,
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and our cash position would not be affected, to the extent we have accurately anticipated the amounts of the grants. For additional information regarding our mainland China grants, please see “—Key Components of Results of Operations—mainland China Government Research and Development Funding.”
Free Cash Flow
The following table reconciles net cash provided by (used in) operating activities, the most directly comparable GAAP financial measure, to free cash flow:
Year Ended December 31,
202320222021% Change
2023 v 2022		Absolute
Change 2023 v
2022
(in thousands)
Free Cash Flow Data:
Net cash used in operating activities$(75,323)$(62,194)$(40,093)21.1 %$(13,129)
Purchase of property and equipment(61,876)(91,094)(9,153)-32.1 %29,218 
Purchase of long-term investments(7,508)(4,279)- 75.5 %(3,229)
Free cash flow$(144,707)$(157,567)$(49,246)-8.2 %$12,860 
The changes in free cash flow for the years ended December 31, 2023, 2022, and 2021 reflected the factors driving net cash used in operating activities, and an increase of purchases of property and equipment. Consistent with our methodology for calculating adjusted EBITDA, we do not adjust free cash flow for the effects of mainland China government subsidies, because we take those subsidies into account in incurring expenses and capital expenditures. We do not adjust free cash flow for the effects of time-deposits, which for our researchinternal purposes are considered as largely similar to cash.
Adjusted Operating Income
Adjusted operating income excludes stock-based compensation from income from operations. Although stock-based compensation is an important aspect of the compensation of our employees and developmentexecutives, determining the fair value of certain of the stock-based instruments we utilize involves a high degree of judgment and manufacturing facilities.estimation and the expense recorded may bear little resemblance to the actual value realized upon the vesting or future exercise of the related stock-based awards. Furthermore, unlike cash compensation, the value of stock options, which is an element of our ongoing stock-based compensation expense, is determined using a complex formula that incorporates factors, such as market volatility, that are beyond our control. Management believes it is useful to exclude stock-based compensation in order to better understand the long-term performance of our core business and to facilitate comparison of our results to those of peer companies. The use of non-GAAP financial measures excluding stock-based compensation has limitations. If we did not pay out a portion of our compensation in the form of stock-based compensation, the cash salary expense included in
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We estimate thatoperating expenses would be higher and our capital expenditurescash holdings would be less. The following tables reflect the exclusion of stock-based compensation, or SBC, from line items comprising income from operations:
Year Ended December 31,
202320222021
Actual
(GAAP)		SBCAdjusted
(Non-GAAP)		Actual
(GAAP)		SBCAdjusted
(Non-GAAP)		Actual
(GAAP)		SBCAdjusted
(Non-GAAP)
(in thousands)
Revenue$557,723 $- $557,723 $388,832 $- $388,832 $259,751 $- $259,751 
Cost of revenue(281,508)(1,406)(280,102)(205,217)(520)(204,697)(144,895)(397)(144,498)
Gross profit276,215 (1,406)277,621 183,615 (520)184,135 114,856 (397)115,253 
Operating expenses:  
Sales and marketing(47,019)(5,684)(41,335)(39,889)(1,877)(38,012)(26,733)(1,802)(24,931)
Research and development(92,709)(8,459)(84,250)(62,226)(2,565)(59,661)(34,207)(1,115)(33,092)
General and administrative(40,648)(11,789)(28,859)(22,465)(2,768)(19,697)(15,214)(1,803)(13,411)
Income (loss) from operations$95,839 $(27,338)$123,177 $59,035 $(7,730)$66,765 $38,702 $(5,117)$43,819 
Adjusted operating income for the year ended December 31, 2023, as compared with the year ended December 31, 2022, increased by $56.4 million due to a $36.8 million increase in 2018 will total approximately $3.2 million. The extentincome from operations and a $19.6 million increase in stock-based compensation expense. Adjusted operating income for the year ended December 31, 2022, as compared with the year ended December 31, 2021, increased by $22.9 million due to a $20.3 million increase in income from operations and a $2.6 million increase in stock-based compensation expense.
Item 7A.    Quantitative and Qualitative Disclosures About Market Risk
As a result of these investments may be affected by the pace with whichour operating, investing and financing activities, we add new customersare exposed to market risks such as interest rate risk and obtain additional purchase orders.foreign currency exchange rate risk. We are also exposed to credit risk as a result of our normal business activities.
Foreign Currency Exchange Risk
Our consolidated financial statements are presented in U.S. dollars, which is our reporting currency, while the functional currency of our subsidiaries in mainland China is RMB, and the functional currency of our subsidiary in Korea is the Korean Won, or the KRW. Transactions in foreign currencies are initially recorded at the functional currency rate prevailing at the date of the transactions. Any difference between the initially recorded amount and the settlement amount is recorded as a gain or loss on foreign currency transaction in our consolidated statements of comprehensive income (loss). Monetary assets and liabilities denominated in a foreign currency are translated at the functional currency rate of exchange as of the date of a consolidated balance sheet. Any difference is recorded as a gain or loss on foreign currency translation in the appropriate consolidated statement of operations. In accordance with ASC Topic 830, Foreign Currency Matters, we translate the assets and liabilities into U.S. dollars from RMB using the rate of exchange prevailing at the applicable balance sheet date and the consolidated statements of comprehensive income (loss) and cash flows are translated at an average rate during the reporting period. Adjustments resulting from the translation are recorded in stockholders’ equity as part of accumulated other comprehensive income.
The majority of our business is conducted through our ACM Shanghai subsidiary that manufactures and sells our products in various global markets, and we also have operations in Korea, the Taiwan Region, the United States, and other countries. We sell the majority of our products in transactions denominated in U.S. dollars; however, we purchase raw materials, pay wages, and make payments to our supply chain in foreign currencies, primarily RMB, and also the KRW. As a result, our earnings, cash flows and cash balances are exposed to fluctuations in foreign currency exchange rates. For example, because of our significant manufacturing operations in mainland China, a weakening RMB is advantageous and a strengthening RMB is disadvantageous to our financial results. At this time, we have not currently partyestablished a formal hedging
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policy to any purchase contractsattempt to reduce the inherent risks of potential currency fluctuations on our global operations. We report the impact of foreign exchange fluctuations in the other income (expense) line item of our Consolidated Statements of Comprehensive Income statements. For 2023, 2022, and 2021, the effect of fluctuations of foreign currencies contributed realized gains (losses) of $(2.0) million, 1.7 million, and ($0.6 million), respectively.
The mainland China government imposes significant exchange restrictions on fund transfers out of mainland China that are not related to future capital expenditures.
Effects of Inflation
Inflation and changing pricesbusiness operations. To date these restrictions have not had a material effectimpact on our business, andus because we dohave not expectengaged in any significant transactions that they will materially affect our business inare subject to the foreseeable future. Any impact of inflation on cost of revenue and operating expenses, especially employee compensation costs, may not be readily recoverable in the price of our product offerings.restrictions.
Off-Balance Sheet Arrangements
Interest Rate Risk
As of December 31, 20172023, 2022, and 2016, we did not have any significant off-balance sheet arrangements, as defined in Item 303(a)(4)(ii)2021, the balance of Regulation S-K of the SEC.
Emerging Growth Company Status
We are an “emerging growth company” as definedour short term bank borrowings (see note 9 in the Jumpstart Our Business Startups Act, or JOBS Act,Notes to Consolidated Financial Statements included herein under “Item 8. Financial Statements and may take advantage of provisions that reduce our reportingSupplementary Data.”), mature at various dates within the following year and other obligations from those otherwise generally applicabledo not expose us to public companies. We may take advantage of these provisions until the earliestinterest rate risk. As of December 31, 2022 or such time that we have annual revenue greater than $1.0 billion,2023, the market valuebalance of our capital stock held by non-affiliates exceeds $700 million orlong-term borrowings (see note 12 in the Notes to Consolidated Financial Statements included herein under “Item 8. Financial Statements and Supplementary Data.”) carries a fixed interest rated and we have issued more than $1.0 billion of non-convertible debt in a three-year period. may be exposed to fair value interest rate risk.
We have chosenimplemented policies and procedures to take advantagemeasure, manage, monitor and report risk exposures, which are reviewed regularly by management and the board of some of these provisions,directors. We identify risk exposures and as a result we may not provide stockholders with all of the information that is provided by other public companies. We have, however, irrevocably elected not to avail ourselves, as would have been permitted by Section 107 of the JOBS Act, of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933 for complying with new or revised accounting standards,monitor and we therefore will be subject to the same new or revised accounting standards as public companies that are not emerging growth companies
Item 7A: Quantitative and Qualitative Disclosures about Market Risk
Not applicable.
manage such risks on an ongoing basis.
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ItemItem 8.Financial Statementsand Supplementary Data
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
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Report of Independent Registered Public Accounting Firm (Ernst & Young Hua Ming LLP, Shanghai, China, PCAOB ID#1408)
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Report of Independent Registered Public Accounting Firm (Armanino LLP , San Ramon, CA, PCAOB ID#32)
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(BDO China Shu Lun Pan Certified Public Accountants LLP, Shenzhen, China, PCAOB ID#1818)		74
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Report of Independent Registered Public Accounting Firm

TheTo the Shareholders and the Board of Directors and Stockholders of
ACM Research, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of ACM Research, Inc. (the Company) as of December 31, 2023, the related consolidated statements of comprehensive income, changes in stockholders' equity and cash flows for the year ended December 31, 2023, and the related notes(collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023, and the results of its operations and its cash flows for the year ended December 31, 2023, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework)and our report dated February 28, 2024 expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.


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Revenue Recognition
Description of the Matter
As described in Notes 2 to the consolidated financial statements, the Company recognizes revenue from tools and spare parts at a point in time, when the Company has satisfied its performance obligation. For shipments made to a customer that has not previously accepted a specific type of tool (“first tools”), revenues are recognized when the tools are accepted by the customer. For shipments made to a customer that have previously accepted a specific type of tool (“repeat shipments”), revenues are recognized upon shipment or delivery because the Company can objectively demonstrate that the tools meet all the required customer specifications.

Evaluating the sufficiency of audit evidence to validate whether the Company can objectively identify repeat shipments required auditor judgment and significant audit effort because the Company’s tools are highly customized for each customer.

How We Addressed the Matter in Our Audit
We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s revenue process. For example, we tested the controls over management’s review of the Company’s analysis to determine whether the repeat shipments identified have been previously accepted by the same customer.

To test whether the Company can objectively demonstrate that the highly customized tools are repeat shipments, our audit procedures, among others, included performing direct inquiries with the Company’s personnel from its sales and engineering department to understand the Company’s process of identifying repeat shipments and the quality control department to understand the quality control process. We applied auditor judgment to determine the nature and extent of procedures to be performed by testing all the sales transactions identified as repeat shipments during the year. Specifically for all repeat shipments, we obtained the quality control reports signed by the Company’s quality control department. We also identified the similar tools previously sold to and accepted by the same customer by comparing the executed contracts or purchase orders of both tools, and inspected the acceptance confirmation from the customer of the previous tools to verify that the Company was able to objectively demonstrate that repeat shipments meet all the required customer specifications with its established history of customer acceptance. We evaluated the overall sufficiency of audit evidence obtained by assessing the results of procedures performed over repeat shipments, including the appropriateness of the nature and extent of audit effort.

/s/ Ernst & Young Hua Ming LLP

We have served as the Company's auditor since 2023.

Shanghai, the People’s Republic of China

February 28, 2024












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Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of ACM Research, Inc.

Opinion on Internal Control Over Financial Reporting

We have audited ACM Research, Inc.’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, ACM Research, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Company as of December 31, 2023, the related consolidated statements of comprehensive income, changes in stockholders' equity and cash flows for the year ended December 31, 2023, and the related notesand our report dated February 28, 2024 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young Hua Ming LLP

Shanghai, the People’s Republic of China

February 28, 2024
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and
Stockholders of ACM Research, Inc.

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheetssheet of ACM Research, Inc. and its subsidiaries (the “Company”)Company) as of December 31, 20172022, and 2016, the related consolidated statements of comprehensive income (loss), changes in stockholders’ equity, and cash flows for the year ended December 31, 2022, and the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022, and the results of its operations and its cash flows for the year ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.

/s/Armanino LLP

We served as the Company’s auditor in 2022. In 2023, we became the predecessor auditor.

San Ramon, California

March 1, 2023
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logo1.jpg
Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors
ACM Research, Inc.
Fremont, California

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated statements of operations and comprehensive income, (loss), changes in redeemable convertible preferred stock and stockholders’ equity, (deficit), and cash flows of ACM Research, Inc. and subsidiaries (the “Company”) for each of the two years in the periodyear ended December 31, 2017,2021, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2017 and 2016, and the results of its operations and its cash flows for each of the two years in the periodyear ended December 31, 20172021,in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/BDO China Shu Lun Pan Certified Public Accountants LLP

We have served as the Company'sCompany’s auditor since 2015.from 2015 to 2022.

Shenzhen, The People’s Republic of China

March 22, 2018
1, 2022, exceptfor the effects of the common stock split discussed in Notes 1 and 2 to the consolidated financial statements, as to which the date is March 1, 2023.
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ACM RESEARCH, INC.
Consolidated Balance Sheets
(In thousands, except per share data)
 
 
December 31,
 
 
 
2017
 
 
2016
 
Assets
 
 (in thousands, except share data)
 
Current assets:
 
 
 
 
 
 
Cash and cash equivalents
 $17,681 
 $10,119 
Accounts receivable, less allowance for doubtful accounts of $0 and $0 as of December 31, 2017 and 2016, respectively (note 3)
  26,762 
  16,026 
Other receivables
  2,491 
  1,763 
Inventory (note 4)
  15,388 
  11,666 
Prepaid expenses
  546 
  720 
Other current assets
  46 
  53 
Total current assets
  62,914 
  40,347 
Property, plant and equipment, net (note 5)
  2,340 
  2,262 
Intangible assets, net
  106 
  17 
Deferred tax assets (note 17)
  1,294 
  1,841 
Investment in affiliates, equity method (note 11)
  1,237 
  - 
Total assets
 $67,891 
 $44,467 
 
    
    
Liabilities, Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)
    
    
Current liabilities:
    
    
Short-term borrowings (note 6)
 $5,095 
 $4,761 
Notes payable
  11 
  11 
Investors’ deposits (note 8)
  - 
  2,902 
Warrant liability (note 9)
  3,079 
  — 
Accounts payable (including amounts due to a related party of $2,118and $508 at December 31, 2017 and 2016, respectively (note 12))
  7,419 
  5,173 
Advances from customers
  143 
  215 
Income taxes payable
  44 
  44 
Other payables and accrued expenses (including amounts due to a related-party of $2,024 and $1,883 as of December 31, 2017 and 2016, respectively (note 12) (note 7))
  6,026 
  3,963 
 
    
    
Total current liabilities
  21,817 
  17,069 
Other long-term liabilities (note 10)
  6,217 
  6,879 
Total liabilities
  28,034 
  23,948 
 
    
    
Commitments and contingencies (Note 18)
    
    
Redeemable convertible preferred stock, with par value $0.0001 as of December 31, 2017 and 2016:
    
    
Series A: 385,000 shares authorized, no shares issued or outstanding as of December 31, 2017; 385,000 shares issued and outstanding as of December 31, 2016 (liquidation value of $0 and $308 at December 31, 2017 and 2016)
  - 
  288 
Series B: 1,572,000 shares authorized, no shares issued or outstanding as of December 31, 2017; 1,572,000 issued and outstanding as of December 31, 2016 (liquidation value of $0 and $1,572 at December 31, 2017 and 2016)
  - 
  1,572 
Series C: 1,360,962 shares authorized, no shares issued or outstanding as of December 31, 2017; 1,360,962 issued and outstanding as of December 31, 2016 (liquidation value of $0 and $2,041 at December 31,2017 and 2016).
  - 
  2,041 
Series D: 2,659,975 shares authorized, no shares issued or outstanding as of December 31, 2017; 1,326,642 shares issued and outstanding as of December 31, 2016 (liquidation value of $0 and $4,975 at December 31, 2017 and 2016)
  - 
  4,975 
Series E: 10,718,530 shares authorized, no shares issued or outstanding as of December 31, 2017 and 2016
  - 
  - 
Series F: 6,000,000 shares authorized, no shares issued or outstanding as of December 31, 2017; 3,663,254 issued and outstanding as of December 31, 2016 (liquidation value of $0 and $9,158 at December 31, 2017 and 2016)
  - 
  9,158 
Total redeemable convertible preferred stock (note 15)
  - 
  18,034 
Stockholders’ equity (deficit):
    
    
Common stock – Class A, with par value $0.0001: 100,000,000 shares authorized, 12,935,546 shares issued and outstanding as of December 31, 2017; 100,000,000 shares authorized and 2,228,740 shares issued and outstanding as of December 31, 2016 (note 14)
  1 
  1 
Common stock – Class B, with par value $0.0001: 7,303,533 shares authorized and 2,409,738 shares issued and outstanding as of December 31, 2017 and 2016 (note 14)
  - 
  1 
Additional paid in capital
  49,695 
  7,620 
Accumulated deficit
  (9,961)
  (9,643)
Accumulated other comprehensive income (loss)
  122 
  (413)
Total ACM Research, Inc. stockholders’ (deficit) equity
  39,857 
  (2,434)
Non-controlling interests
  - 
  4,919 
Total stockholders’ equity
  39,857 
  2,485 
 
    
    
Total liabilities, redeemable convertible preferred stock and stockholders’ equity
 $67,891 
 $44,467 

December 31,
20232022
Assets
Current assets:
Cash and cash equivalents (note 2)$182,090 $247,951 
Restricted cash1,083 500 
Short-term time deposits (note 2)80,524 70,492 
Short-term investments (note 15)21,312 20,209 
Accounts receivable, net (note 4)283,186 182,936 
Other receivables40,065 29,617 
Inventories, net (note 5)545,395 393,172 
Advances to related party (note 16)2,432 3,322 
Prepaid expenses20,023 15,607 
            Total current assets1,176,110 963,806 
Property, plant and equipment, net (note 6)201,848 82,875 
Land use right, net (note 7)8,367 8,692 
Operating lease right-of-use assets, net (note 11)7,026 2,489 
Intangible assets, net2,538 1,255 
Long-term time deposits (note 2)40,818 101,956 
Deferred tax assets (note 19)20,271 6,703 
Long-term investments (note 14)27,880 17,459 
Other long-term assets (note 8)6,050 50,265 
                        Total assets$1,490,908 $1,235,500 
Liabilities and Equity
Current liabilities:
Short-term borrowings (note 9)$31,335 $56,004 
Current portion of long-term borrowings (note 12)6,783 2,322 
Related party accounts payable (note 16)11,407 14,468 
Accounts payable141,814 101,735 
Advances from customers181,368 153,773 
Deferred revenue3,687 4,174 
Income taxes payable (note 19)6,401 3,469 
FIN-48 payable (note 19)12,149 6,686 
Other payables and accrued expenses (note 10)102,951 52,201 
Current portion of operating lease liability (note 11)2,764 1,382 
            Total current liabilities500,659 396,214 
Long-term borrowings (note 12)53,952 18,687 
Long-term operating lease liability (note 11)4,262 1,107 
Other long-term liabilities (note 13)5,873 7,321 
                       Total liabilities564,746 423,329 
Commitments and contingencies (note 21)
Equity:
Stockholders’ equity:
Class A Common stock (note 17)6 5 
Class B Common stock (note 17)1 1 
Additional paid-in capital629,845 604,089 
Retained earnings156,827 94,426 
Statutory surplus reserve (note 2)30,060 16,881 
Accumulated other comprehensive loss(49,349)(40,546)
Total ACM Research, Inc. stockholders’ equity767,390 674,856 
Non-controlling interests158,772 137,315 
Total equity926,162 812,171 
               Total liabilities and equity$1,490,908 $1,235,500 
The accompanying notes are an integral part of these consolidated financial statements.
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ACM RESEARCH, INC.
Consolidated Statements of Operations and Comprehensive Income (Loss)
(In thousands, except per share data)
 
 
Year Ended December 31,
 
 
 
2017
 
 
  2016 
 
 
 
(in thousands, except share and per share data)
 
Revenue
 $36,506 
 $27,371 
Cost of revenue
  19,281 
  14,042 
Gross profit
  17,225 
  13,329 
Operating expenses:
    
    
Sales and marketing
  5,500 
  3,907 
Research and development
  5,138 
  3,259 
General and administrative
  5,887 
  2,673 
Total operating expenses, net
  16,525 
  9,839 
Income from operations
  700 
  3,490 
Interest income
  9 
  16 
Interest expense
  (277)
  (181)
Other expense, net
  (794)
  (343)
Equity in net income of affiliates
  37 
  - 
Income (loss) before income taxes
  (325)
  2,982 
Income tax expense (note 17)
  (547)
  (595)
Net income (loss)
  (872)
  2,387 
Less: Net income (loss) attributable to non-controlling interests
  (554)
  1,356 
Net income (loss) attributable to ACM Research, Inc.
  (318)
  1,031 
Comprehensive income (loss):
    
    
Net income (loss)
  (872)
  2,387 
Foreign currency translation adjustment
  472 
  (522)
Comprehensive income (loss)
  (400)
  1,865 
Less: Comprehensive income (loss) attributable to non-controlling interests
  (369)
  1,161 
Total comprehensive income (loss) attributable to ACM Research, Inc. (note 2)
 $(31)
 $704 
Net income (loss) per common share (note 2):
    
    
Basic
 $(0.05)
 $0.30 
Diluted
  (0.05)
 $0.18 
Weighted-average common shares outstanding used in computing per share amounts (note 2):
    
    
Basic
  6,865,390 
  2,176,315 
Diluted
  6,865,390 
  3,792,137 
Year Ended December 31,
202320222021
Revenue (note 3)$557,723 $388,832 $259,751 
Cost of revenue, including cost of revenue from related party of $31,240 and $26,313 for the year ended December 31, 2023 and 2022, respectively (note 16)281,508 205,217 144,895 
Gross profit276,215 183,615 114,856 
Operating expenses:   
Sales and marketing47,019 39,889 26,733 
Research and development92,709 62,226 34,207 
General and administrative40,648 22,465 15,214 
Total operating expenses180,376 124,580 76,154 
Income from operations95,839 59,035 38,702 
Interest income8,354 8,740 505 
Interest expense(2,681)(1,655)(765)
Realized gain from sale of short-term investments9,047 1,116 — 
Unrealized gain (loss) on short-term investments(2,737)(7,855)607 
Other income (expense), net(1,558)3,315 (631)
Income from equity method investments9,952 4,666 4,637 
Income before income taxes116,216 67,362 43,055 
Income tax expense (note 19)(19,364)(16,798)(134)
Net income96,852 50,564 42,921 
Less: Net income attributable to non-controlling interests19,503 11,301 5,164 
Net income attributable to ACM Research, Inc.$77,349 $39,263 $37,757 
Comprehensive income (loss):   
Net income$96,852 $50,564 $42,921 
Foreign currency translation adjustment, net of tax(10,617)(59,102)4,695 
Comprehensive income (loss)86,235 (8,538)47,616 
Less: Comprehensive income attributable to non-controlling interests17,689 1,854 5,607 
Comprehensive income (loss) attributable to ACM Research, Inc.$68,546 $(10,392)$42,009 
Net income per common stock (note 2):
Basic$1.29 $0.66 $0.65 
Diluted$1.16 $0.59 $0.58 
Weighted average common stock outstanding used in computing per share amounts (note 2): 
Basic60,164,67059,235,97557,654,708
Diluted64,870,54365,341,77165,356,716

The accompanying notes are an integral part of these consolidated financial statements.
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ACM RESEARCH, INC.
Consolidated Statement of Changes in Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)
(In thousands, except per share data)
 
 
Redeemable Convertible Preferred Stock
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Series A
 
 
Series B
 
 
Series C
 
 
Series D
 
 
Series E
 
 
Series F
 
 
 
 
 
Common Stock
 
 
Common
Stock Class A
 
 
Common
Stock Class B
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
shares
 
 
Amount
 
 
Shares
 
 
Amount
 
 
Shares
 
 
Amount
 
 
Shares
 
 
Amount
 
 
Shares
 
 
Amount
 
 
Shares
 
 
Amount
 
 
Total Amount
 
 
Shares
 
 
Amount
 
 
Shares
 
 
Amount
 
 
Shares
 
 
Amount
 
 
Additional Paid-in
Capital
 
 
Accumulated Deficit
 
 
Accumulated
Other
Comprehensive
 Income
 
 
Non-controlling
Interest
 
 
Total Stockholders’ Equity (Deficit)
 
 
 
(in thousands, except share data)
 
Balance at January 1, 2016
  385,000 
 $288 
  1,572,000 
 $1,572 
  1,360,962 
 $2,041 
  1,326,642 
 $4,975 
  — 
 $— 
  — 
 $— 
 $8,876 
  2,047,403 
 $280 
  — 
 $— 
  — 
 $— 
 $2,243 
 $(10,675)
 $(84)
 $3,757 
 $(4,479)
Net income
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  1,031 
  — 
  1,356 
  2,387 
Foreign currency translation adjustment
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  (329)
  (193)
  (522)
Redomestication
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  (2,047,403)
  (280)
  — 
  — 
  2,047,403 
  1 
  279 
  — 
  — 
  — 
  — 
Issuance of stock
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  3,615,800 
  9,039 
  9,039 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
Debt conversion
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  47,454 
  119 
  119 
  — 
  — 
  1,812,069 
  1 
  — 
  — 
  4,131 
  — 
  — 
  — 
  4,132 
Exercise of stock option
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  416,671 
  — 
  362,335 
  — 
  584 
  — 
  — 
  — 
  584 
compensation
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  383 
  — 
  — 
  — 
  383 
 
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
Balance at December 31, 2016
  385,000 
 $288 
  1,572,000 
 $1,572 
  1,360,962 
 $2,041 
  1,326,642 
 $4,975 
  — 
 $— 
  3,663,254 
 $9,158 
 $18,034 
  — 
 $— 
  2,228,740 
 $1 
  2,409,738 
 $1 
 $7,620 
 $(9,643)
 $(413)
 $4,919 
 $2,485 
Net loss
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  (318)
  — 
  (554)
  (872)
Foreign currency translation adjustment
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  535 
  185 
  720 
Exercise of stock option
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  472,887 
  — 
  — 
  — 
  396 
  — 
  — 
  — 
  396 
Stock-based compensation
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  1,622 
  — 
  — 
  — 
  1,622 
Purchase of non-controlling interest
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  (16,258)
  — 
  — 
  (4,550)
  (20,808)
Issuance of Series E Preferred Stock
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  4,998,508 
 $5,800 
  — 
  — 
  5,800 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
Issuance of Common Stock to Ninebell
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  133,334 
  — 
  — 
  — 
  1,000 
  — 
  — 
  — 
  1,000 
Issuance of Common Stock to Shanghai and Pudong VC
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  1,906,674 
  — 
  — 
  — 
  14,299 
  — 
  — 
  — 
  14,299 
Convertible preferred shares converted to common shares in connection with initial public offering
  (385,000)
  (288)
  (1,572,000)
  (1,572)
  (1,360,962)
  (2,041)
  (1,326,642)
  (4,975)
  (4,998,508)
  (5,800)
  (3,663,254)
  (9,158)
  (23,834)
  — 
  — 
  4,627,577 
  — 
  — 
  — 
  23,834 
  — 
  — 
  — 
  23,834 
Issuance of Class A common stock in connection with initial public offering and concurrent private placement, net of issuance costs of $2,791 and underwriter's warrant of $137
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  3,566,334 
  — 
  — 
  — 
  17,044
 
  — 
  — 
  — 
  17,044
 
Issuance of underwriter's warrant
  —
 
  —
 
  —
 
  —
 
  —
 
  —
 
  —
 
  —
 
  —
 
  —
 
  —
 
  —
 
  —
 
  —
 
  —
 
  —
 
  —
 
  —
 
  —
 
  137
 
  —
 
  —
 
  — 
  137
 
Reclassification of reverse split par value
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  — 
  (1)
  1 
  — 
  — 
  — 
  — 
 
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
Balance at December 31, 2017
  - 
 $- 
  - 
 $- 
  - 
 $- 
  - 
 $- 
  - 
 $- 
  - 
 $- 
 $- 
  — 
 $— 
  12,935,546 
 $1 
  2,409,738 
 $- 
 $49,695 
 $(9,961)
 $122 
 $- 
 $39,857 
Common
Stock Class A		Common
Stock Class B
SharesAmountSharesAmountAdditional Paid-
in Capital		Retained
Earnings		Statutory Surplus
Reserve		Accumulated Other
Comprehensive
Income (Loss)		Non-controlling
Interests		Total Equity
Balance at December 31, 202050,690,079$5 5,407,818$1 $102,000 $29,899 $4,388 $4,857 $67,020 $208,170 
Net income-- -- - 37,757 - - 5,164 42,921 
Appropriation to statutory surplus reserves-- -- - (3,924)3,924 - - — 
Foreign currency translation adjustment-- -- - - - 4,252 443 4,695 
Exercise of stock options1,870,803- -- 3,430 - - - - 3,430 
Stock-based compensation-- -- 5,117 - - - - 5,117 
Exercise of stock warrants728,043- 0- 1,820 - - - - 1,820 
Conversion of Class B common stock to Class A common stock320,004- (320,004)- - - - - - — 
Proceeds from a subsidiary equity issuance0- -- 482,678 - - - 62,834 545,512 
Balance at December 31, 202153,608,9295 5,087,8141 595,045 63,732 8,312 9,109 135,461 811,665 
Net income-- -- - 39,263 - - 11,301 50,564 
Appropriation to statutory surplus reserves-- -- - (8,569)8,569 - - - 
Foreign currency translation adjustment-- -- - - - (49,655)(9,447)(59,102)
Exercise of stock options980,354- -- 1,314 - - - - 1,314 
Stock-based compensation-- -- 7,730 - - - - 7,730 
Conversion of Class B common stock to Class A common stock66,003- (66,003)- - - - - - - 
Balance at December 31, 202254,655,2865 5,021,8111 604,089 94,426 16,881 (40,546)137,315 812,171 
Cumulative effect of change in accounting principle under ASC 326, net of tax(1,769)(1,769)
Net income-- -- - 77,349 - - 19,503 96,852 
Appropriation to statutory surplus reserves(13,179)13,179 
Foreign currency translation adjustment-- -- - - - (8,803)(1,814)(10,617)
Exercise of stock options1,380,8861 -- 2,303 - - - 3,834 6,138 
Stock-based compensation-- -- 23,453 - - - 3,885 27,338 
ACM Shanghai dividends- - -- - - - - (3,951)(3,951)
Balance at December 31, 202356,036,172$6 5,021,811$1 $629,845 $156,827 $30,060 $(49,349)$158,772 $926,162 
The accompanying notes are an integral part of these consolidated financial statements.
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ACM RESEARCH, INC.
Consolidated Statements of Cash Flows
(In thousands)
 
 
Year Ended December 31,
 
 
 
2017
 
 
2016
 
 
 
(in thousands)
 
Cash flows from operating activities:
 
 
 
 
 
 
Net income (loss)
 $(872)
 $2,387 
Adjustments to reconcile net income (loss) from operations to net cash provided by operating activities:
    
    
Depreciation and amortization
  271 
  187 
Undistributed earnings from investments in equity method affiliates
  (37)
  - 
Loss on disposals of fixed assets, intangible assets and other long-term assets
  1 
  3 
Net loss from debt conversion and interest waiver
  - 
  1,608 
Deferred income taxes
  659 
  436 
Stock-based compensation
  1,622 
  383 
Net changes in operating assets and liabilities:
    
    
Accounts receivable
  (9,757)
  (4,724)
Other receivables
  332 
  (621)
Inventory
  (3,073)
  (3,055)
Prepaid expenses
  256 
  219 
Other current assets
 8 
  (47)
Accounts payable
  1,905 
  3,177 
Advances from customers
  (127)
  (4,078)
Other payables and accrued expenses
  1,789 
  276 
Other long-term liabilities
  (1,078)
  147 
Net cash used in operating activities
  (8,101)
  (3,702)
 
    
    
Cash flows from investing activities:
    
    
Purchase of property and equipment
  (651)
  (795)
Purchase of intangible assets
  (115)
  (22)
Proceed from disposal of property and equipment
  - 
  7 
Loan to related party
  (946)
  - 
Purchase of non-controlling interest
  (20,808)
  - 
Investment in affiliates, equity method
  (1,200)
  - 
Net cash used in investing activities
  (23,720)
  (810)
 
    
    
Cash flows from financing activities:
    
    
Proceeds from short-term borrowings
  11,154 
  5,918 
Repayments of short-term borrowings
  (11,110)
  (7,575)
Investors’ deposit
  - 
  2,902 
Proceeds from stock option exercise to common stock
  396 
  410 
Proceeds from issuance of Series E convertible preferred stock
  5,800 
  - 
Proceeds from issuance of Series F convertible preferred stock
  - 
  9,040 
Proceeds from issuance of common stock in connection with initial public offering and concurrent private placement, net of direct issuance expenses of $1,254
  18,717 
  - 
Payment of initial public offering expenses   
  (1,537)
  - 
Investment in affiliates, equity method
  1,000 
  - 
Repayments of notes payable
  - 
  (141)
Proceeds from issuance of common stock for non-controlling interest purchase
  14,300 
  - 
Net cash provided by financing activities
  38,720
 
  10,554 
 
    
    
Effect of exchange rate changes on cash and cash equivalents
  663
 
  (324)
 
    
    
Net increase in cash and cash equivalents
  7,562 
  5,718 
Cash and cash equivalents at beginning of period
  10,119 
  4,401 
Cash and cash equivalents at end of period
 $17,681 
 $10,119 
 
    
    
Supplemental disclosure of cash flow information:
    
    
Interest paid
 $277 
 $181 
 
    
    
Non-cash financing activities:
    
    
Debt conversion to Class A common stock
  - 
 $1,486 
Debt conversion to Series F convertible preferred stock
  - 
 $119 
Exercise of stock option in lieu of the cash repayment of notes payable
  - 
 $174 
Preferred stock conversion to common stock in connection with initial public offering
 $23,834 
  - 
Year Ended December 31,
202320222021
Cash flows from operating activities:
Net income$96,852 $50,564 $42,921 
Adjustments to reconcile net income from operations to net cash used in operating activities
Non-cash operating lease cost3,580 2,816 2,451 
Depreciation and amortization8,092 5,366 2,353 
Gain on disposals of property, plant and equipment(2)(12)— 
Realized gain on short-term investments(9,047)(1,116)— 
Income from equity method investments(9,952)(4,666)(4,637)
Unrealized loss (gain) on short-term investments2,737 7,855 (607)
Inventory provision575 2,248 75 
Provision for credit losses2,741 — — 
Deferred income taxes(13,647)4,027 (1,840)
Stock-based compensation27,338 7,730 5,117 
Net changes in operating assets and liabilities:
Accounts receivable(108,749)(88,655)(47,624)
Income tax recoverable— — (1,082)
Other receivables(4,213)(7,331)(8,420)
Inventories(164,027)(195,562)(127,731)
Advances to related party (note 16)890 (939)(776)
Prepaid expenses(5,075)(3,695)(9,830)
Other long-term assets— 3,986 (4,521)
Related party accounts payable (note 16)(3,061)6,569 3,806 
Accounts payable42,343 17,501 61,405 
Advances from customers29,974 104,258 34,831 
Deferred revenue2,693 994 226 
Income taxes payable3,009 3,236 2,200 
FIN-48 payable5,463 4,404 10,551 
Other payables and accrued expenses21,375 23,406 3,180 
Operating lease liabilities(3,580)(2,816)(2,451)
Other long-term liabilities(1,632)(2,362)310 
Net cash used in operating activities(75,323)(62,194)(40,093)
Cash flows from investing activities:
Purchase of property and equipment(61,876)(91,094)(9,153)
Purchase of intangible assets(2,462)(1,426)(559)
Purchase of long-term investments (note 14)(7,508)(5,279)(1,568)
Purchase of short-term investments (note 15)(18,356)— — 
Purchase of time deposits(26,120)(172,448)— 
Proceeds from maturity of time deposits79,600 — — 
Proceeds from sale of short-term investments (note 15)21,735 4,577 — 
Proceeds from disposal of long-term investments8,242 — — 
Net cash used in investing activities(6,745)(265,670)(11,280)
Cash flows from financing activities:
Proceeds from short-term borrowings31,334 56,004 22,884 
Repayments of short-term borrowings(55,068)(9,224)(39,809)
Proceeds from long-term borrowings42,360 — 7,056 
Repayments of long-term borrowings(2,283)(2,223)(2,127)
ACM Shanghai dividends(3,951)- — 
Proceeds from exercise of stock options6,138 1,314 3,430 
Proceeds from a subsidiary equity issuance, net of issuance costs— — 545,512 
Proceeds from warrant exercise to common stock— — 1,820 
Net cash provided by financing activities18,530 45,871 538,766 
Effect of exchange rate changes on cash, cash equivalents and restricted cash$(1,740)$(32,623)$3,908 
Net increase (decrease) in cash, cash equivalents and restricted cash$(65,278)$(314,616)$491,301 
Cash, cash equivalents and restricted cash at beginning of period248,451 563,067 71,766 
Cash, cash equivalents and restricted cash at end of period$183,173 $248,451 $563,067 
Supplemental disclosure of cash flow information:   
Interest paid, net of capitalized interest$2,681 $1,655 $765 
Cash paid for income taxes$26,103 $3,586 $1,132 
Reconciliation of cash, cash equivalents and restricted cash in consolidated statements of cash flows:
Cash and cash equivalents$182,090 $247,951 $562,548 
Restricted cash1,083 500 519 
Cash, cash equivalents and restricted cash$183,173 $248,451 $563,067 
Non-cash financing activities:
Cashless exercise of stock options$333 $221 $137 
Non-cash investing activities:
Transfer from inventory to property, plant and equipment$4,379 $— $— 
Purchase property, plant and equipment through accounts payable and other payable$33,750 $— $— 
Transfer of prepayment for property to property, plant and equipment$— $41,497 $— 
The accompanying notes are an integral part of these consolidated financial statements.
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ACM RESEARCH, INC.
Notes to Consolidated Financial Statements
(in thousands, except share and per share data)
NOTE 1 – DESCRIPTION OF BUSINESS
ACM Research, Inc. (“ACM” or "ACM Research") and its subsidiaries (collectively with ACM, the “Company”) develop, manufacture and sell single-wafer wet cleaning equipment used to improve the manufacturing process and yield for advanced integrated chips. The Company markets and sells its single-wafer wet-cleaning equipment, under the brand name “Ultra C,” lines of equipment based on the Company’s proprietary Space Alternated Phase Shift (“SAPS”) and Timely Energized Bubble Oscillation (“TEBO”) technologies. These tools are designed to remove random defects from a wafer surface efficiently, without damaging the wafer or its features, even at increasingly advanced process nodes.
ACM was incorporated in California in 1998, and it initially focused on developing tools for manufacturing process steps involving the integration of ultra low-Kultra-low-K materials and copper. The Company’s early efforts focused on stress-free copper-polishing technology, and it sold tools based on that technology in the early 2000s.
In 2006, the Company established its operational center in Shanghai in the People’s Republic of China (the “PRC”("mainland China"), where it operates through ACM’s subsidiary, ACM Research (Shanghai), Inc. (“ACM Shanghai”). ACM Shanghai was formed to help establish and build relationships with integrated circuit manufacturers in the PRC,mainland China, and the Company initially financed its Shanghai operations in part through sales of non-controlling equity interests in ACM Shanghai.
In 2007, the Company began to focus its development efforts on single-wafer wet-cleaning solutions for the front-end chip fabrication process. The Company introduced its SAPS megasonic technology, which can be applied in wet wafer cleaning at numerous steps during the chip fabrication process, in 2009. It introduced its TEBO technology, which can be applied at numerous steps during the fabrication of small node two-dimensional conventional and three-dimensional patterned wafers, in March 2016. The Company has designed its equipment models for SAPS and TEBO solutions using a modular configuration that enables it to create a wet-cleaning tool meeting the specific requirements of a customer, while using pre-existing designs for chamber, electrical, chemical delivery and other modules. In August 2018, the Company introduced its Ultra-C Tahoe wafer cleaning tool, which can deliver high cleaning performance with significantly less sulfuric acid than typically consumed by conventional high-temperature single-wafer cleaning tools. Based on its electro-chemical plating (“ECP”) technology, the Company introduced in March 2019 its Ultra ECP AP, or “Advanced Packaging,” tool for bumping, or applying copper, tin and nickel to semiconductor wafers at the die-level, and its Ultra ECP MAP, or “Multi-Anode Partial Plating,” tool to deliver advanced electrochemical copper plating for copper interconnect applications in front-end wafer fabrication processes. The Company also offers a range of custom-made equipment, including cleaners, coaters and developers, to back-end wafer assembly and packaging factories, principally in the PRC.
mainland China.
In 2011, ACM Shanghai formed a wholly owned subsidiary in the PRC,mainland China, ACM Research (Wuxi), Inc. (“ACM Wuxi”), to manage sales and service operations.
In November 2016, ACM redomesticatedre-domesticated from California to Delaware pursuant to a merger in which ACM Research, Inc., a California corporation, was merged into a newly formed, wholly owned Delaware subsidiary, also named ACM Research, Inc.
In June 2017, ACM formed a wholly owned subsidiary in Hong Kong, CleanChip Technologies Limited (“CleanChip”), to act on the Company’s behalf in Asian markets outside the PRCmainland China by, for example, serving as a trading partner between ACM Shanghai and its customers, procuring raw materials and components, performing sales and marketing activities, and making strategic investments.
In August 2017, ACM purchased 18.77% of ACM Shanghai’s equity interests held by Shanghai Science and Technology Venture Capital Co., Ltd.("SSTVC"). On November 8, 2017, ACM purchased the remaining 18.36% of ACM Shanghai’s equity interest held by third parties, Shanghai Pudong High-Tech Investment Co., Ltd. (“PDHTI”) and Shanghai Zhangjiang Science & Technology Venture Capital Co., Ltd. (“ZSTVC”). At December 31, 2017, and 2016, respectively, ACM owned 100% and 62.87%all of the outstanding equity interests of ACM Shanghai, and indirectly through ACM Shanghai, owned 100% and 62.87%all of the outstanding equity interests of ACM Wuxi, respectively.
Wuxi.
On September 13,November 2, 2017, the Registration Statement on Form S-1 (File No. 333- 220451) for ACM’s initial public offering of Class A common stock (the “IPO”) was declared effective by the U.S. Securities and Exchange Commission. Shares of
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Class A common stock began trading on the Nasdaq Global Market on November 3, 2017, and the closing for the IPO was held on November 7, 2017.
In December 2017, ACM effectuatedformed a 1-for-3 reversewholly owned subsidiary in the Republic of Korea (“Korea”), ACM Research Korea CO., LTD. (“ACM Korea”), to serve customers based in Korea and perform sales, marketing, research and development activities for new products and solutions.
In March 2019, ACM Shanghai formed a wholly owned subsidiary in mainland China, Shengwei Research (Shanghai), Inc. (“ACM Shengwei”), to manage activities related to the addition of future long-term production capacity.
In June 2019, CleanChip formed a wholly owned subsidiary in California, ACM Research (CA), Inc. (“ACM California”), to provide procurement services on behalf of ACM Shanghai.
In June 2019, ACM announced plans to complete over the next three years a listing (the “STAR Listing”) of shares of ACM Shanghai on the Shanghai Stock Exchange’s new SciTech innovAtion boaRd,known as the STAR Market, and a concurrent initial public offering (the “STAR IPO”) of ACM Shanghai shares in mainland China. ACM Shanghai is currently ACM’s primary operating subsidiary, and at the time of announcement, was wholly owned by ACM. To meet a STAR Listing requirement that it have multiple independent stockholders in mainland China, ACM Shanghai completed private placements of its shares in June and November 2019, following which, as of September 30, 2020, the private placement investors held a total of 8.3% of the outstanding shares of ACM Shanghai and ACM Research held the remaining 91.7%. As part of the STAR Listing process, in June 2020 the ownership interests held by the private investors were reclassified from redeemable non-controlling interests to non-controlling interests as the redemption feature was terminated. In preparation for the STAR IPO, ACM completed a reorganization in December 2020 that included the sale of all of the shares of CleanChip by ACM to ACM Shanghai for $3,500. The reorganization and sale had no impact on ACM’s consolidated financial statements.
In August 2021, ACM formed a wholly owned subsidiary in Singapore, ACM research (Singapore) PTE, Ltd. to perform sales, marketing, and other business development activities.
In November 2021, ACM’s operating subsidiary ACM Shanghai, completed its STAR IPO and its shares began trading on the STAR Market. In the STAR IPO, ACM Shanghai issued 43,355,753 shares, representing 10% of the total 433,557,100 shares outstanding after the issuance. The shares were issued at a public offering price of RMB 85.00 per share, and the net proceeds of the STAR IPO, after issuance costs, totaled $545,512. Upon completion of the STAR IPO, ACM owned 82.5% of the outstanding ACM Shanghai shares. However, in May 2023, ACM's ownership declined to 82.1% due to the exercise of 2,150,309 stock options related to ACM Shanghai shares.
In February 2022, ACM Shanghai formed a wholly owned subsidiary in China, ACM Research (Beijing), Inc. (“ACM Beijing”), to perform sales, marketing and other business development activities.
In March 2022, ACM formed a wholly owned subsidiary in Korea, Hanguk ACM CO., LTD, to perform business development and other related activities.
In March 2022, the Board of Directors of ACM declared a 3-for-1 stock split (the “Reverse Split”) of Class A and Class B common stock.stock effected in the form of a stock dividend (the “Stock Split”). Each stockholder of record at the close of business on March 16, 2022, received a dividend of two additional shares of Class A common stock for each then-held share of Class A common stock and two additional shares of Class B common stock for each then-held share of Class B common stock, which were distributed after the close of trading on March 23, 2022. Unless otherwise indicated, all share numbers, per share amount, share prices, exercise prices and conversion rates set forth in thosethese notes and the accompanying condensed consolidated financial statements have been adjusted retrospectively to reflect the ReverseStock Split.

In June 2023, ACM Shanghai formed a wholly-owned subsidiary in mainland China, Yusheng Micro Semiconductor (Shanghai), Co., Ltd, ("Yusheng Micro") to perform business development activities.

In June 2023, Yusheng Micro together with Wooil Flucon Co. (note 14) and a private investor established ACM-Wooil Microelectronics (Shanghai) Co., Ltd, ("ACM-Wooil"), a partially owned subsidiary based in mainland China to develop and produce key components for the semiconductor equipment industry.
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The Company has direct or indirect interests in the following subsidiaries:
On November 2, 2017, the Registration Statement on Form S-1 (File No. 333- 220451) for our initial public offering of Class A common stock, or IPO, was declared effective by the SEC. Shares of Class A common stock began trading on the Nasdaq Global Market on November 3, 2017.
Place and date of
incorporation		Effective interest held as at
December 31,
Name of subsidiaries20232022
ACM Research (Shanghai), Inc.Mainland China, May 200582.1%82.5%
ACM Research (Wuxi), Inc.Mainland China, July 201182.1%82.5%
CleanChip Technologies LimitedHong Kong, June 201782.1%82.5%
ACM Research Korea CO., LTD.Korea, December 201782.1%82.5%
ACM Research (Lingang), Inc. (1)Mainland China, March 201982.1%82.5%
ACM Research (CA), Inc.USA, April 201982.1%82.5%
ACM Research (Cayman), Inc.Cayman Islands, April 2019100.0%100.0%
ACM Research (Singapore) PTE. Ltd.Singapore, August 2021100.0%100.0%
ACM Research (Beijing), Inc.Mainland China, February 202282.1%82.5%
Hanguk ACM CO., LTDKorea, March 2022100.0%100.0%
Yusheng Micro Semiconductor (Shanghai) Co., Ltd.Mainland China, June 202382.1%-
ACM-Wooil Microelectronics (Shanghai) Co., Ltd.Mainland China, June 202359.4%-
In December 2017 ACM formed a wholly owned subsidiary in Republic of Korea,(1) ACM Research Korea CO.(Lingang) Inc., LTD. (“or ACM Korea”)Lingang, is the English name referred to by its Chinese language name Shengwei Research (Shanghai), Inc. in prior filings. ACM Research (Lingang), Inc. and Shengwei Research (Shanghai), Inc. refer to serve our customers based in Republic of Korea and perform sales, marketing, research and delveopment activities. ACM Korea has not yet commenced its operation during the year ended December 31, 2017.
same entity.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Principles of Consolidation
The accompanyingCompany’s consolidated financial statements ofinclude the Company have been prepared in accordance with accounting principles generally accepted in the United Statesaccounts of America (“GAAP”). The consolidated accounts include ACM and its subsidiaries, including ACM Shanghai ACM Wuxi, CleanChip and ACM Korea. Subsidiariesits subsidiaries. ACM’s subsidiaries are those entities in which ACM, directly and indirectly, controls more than one halfa majority of the voting power. All significant intercompany transactions and balances have been eliminated upon consolidation.
The consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”)
Use of Estimates
The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the balance sheet date and the reported revenues and expenses during the reported period in the condensed consolidated financial statements and accompanying notes. The Company’s significant accounting estimates and assumptions include, but are not limited to, those used for revenue recognition and deferred revenue, the valuation and recognition of fair value of certain short-term and long-term investments, stock-based compensation arrangements, and warrant liability, realization of deferred tax assets, assessment for impairment of long-lived assets and long-term investments, allowance for doubtful accounts,credit losses, inventory valuation, for excess and obsolete inventories, lower of cost and market value or net realizable value of inventories, depreciableuseful lives of property, plant and equipment and useful lifelives of intangible assets.
Management evaluates these estimates and assumptions on a regular basis. Actual results could differ from those estimates and assumptions.
Common Stock Split
All prior period share and per share amounts and common stock presented in the accompanying financial statements and these notes thereto has been retroactively adjusted to reflect the impact of the Stock Split. Proportional adjustments were also made to outstanding awards under the Company’s stock-based compensation plans.
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Reclassifications
Certain prior year amounts in the consolidated financial statements have been reclassified to conform with the current year presentation. These classifications had no impact on the Company’s results of operations.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash on hand and bank deposits that are unrestricted as to withdrawal and use, and highly liquid investments with an original maturity date of three months or less at the date of purchase. At times, cash deposits may exceed government-insured limits.
The following table presents cash and cash equivalents, according to jurisdiction as of December 31, 2023 and 2022:
December 31,
20232022
United States$43,614 $25,011 
Mainland China70,418 129,695 
China Hong Kong64,057 89,187 
Korea3,934 4,007 
Singapore67 51 
Total$182,090 $247,951 
The amounts in mainland China do not include short-term and long-term time deposits which totaled $121,342 and $172,448 at December 31, 2023 and 2022, respectively.
Cash held in the U.S. exceeds the Federal Deposit Insurance Corporation (“FDIC”) insurance limits and is subject to risk of loss. No losses have been experienced to date.
Cash amounts at the banks in mainland China are subject to a series of risk control regulatory standards from mainland China bank regulatory authorities. ACM’s subsidiaries in mainland China are required to obtain approval from the State Administration of Foreign Exchange (“SAFE”) to transfer funds into or out of mainland China. SAFE requires a valid agreement to approve the transfers, which are processed through a bank. Other than these mainland China foreign exchange restrictions, ACM’s subsidiaries in mainland China are not subject to any mainland China restrictions and limitations on its ability to transfer funds to ACM Research or among our other subsidiaries. However, cash held by ACM’s subsidiaries in mainland China does exceed applicable insurance limits and is subject to risk of loss, although no such losses have been experienced to date.
ACM California periodically procures goods and services on behalf of ACM Shanghai. For these transactions, ACM Shanghai makes cash payments to ACM California in accordance with applicable transfer pricing arrangements. For the years ended December 31, 2023 and December 31, 2022, cash payments from ACM Shanghai to ACM California for the procurement of goods and services were $42.5 million and $30.2 million, respectively. ACM California periodically borrows funds for working capital advances from its direct parent, CleanChip. ACM California repays or renews these intercompany loans in accordance with their terms.
For sales through CleanChip and ACM Research, a certain amount of sales or advance payments from customer proceeds is repatriated back to ACM Shanghai, a subsidiary, in accordance with applicable transfer pricing arrangements in the ordinary course of business. ACM Research provides services to certain customers located in the U.S., Europe and other regions outside of mainland China to support the evaluation of first tools and provide support for tools under warranty on behalf of ACM Shanghai. For these transactions, ACM Shanghai makes cash payments to ACM Research in accordance with applicable transfer pricing arrangements.
For the year ended December 31, 2023, ACM Shanghai paid $19,200 in dividends to ACM Research.
Subsequent to June 30, 2020, with the exception of sales and services-related transfer-pricing payments in the ordinary course of business, and dividends paid by ACM Shanghai to ACM Research, no cash transfers or other payments or distributions have been made between ACM Research and ACM Shanghai. ACM Research intends to retain any future
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earnings to finance the operations and expenses of the business, and do not expect to distribute earnings or declare or pay any dividends in the foreseeable future.
Amounts held in Korea exceed the Korea Deposit Insurance Corporation (“KDIC”) insurance limits and are subject to risk of loss. No losses have been experienced to date.
There is no additional restriction for the transfer of cash from bank accounts in the U.S., Korea, Singapore, and Hong Kong.
Time Deposits

Time deposits are deposited with banks in mainland China with fixed terms and interest rates which cannot be withdrawn before maturity, and are presented as short-term deposits and long-term deposits in the consolidated financial statements based on their expected time of collection. They are also subject to the risk control regulatory standards described above upon maturity. Time deposits consisted of the following:

December 31,
20232022
Deposit in China Merchant Bank which matured on January 29, 2023 with an annual interest rate of 2.25%$— $38,772 
Deposit in China Everbright Bank which matured on January 29, 2023 with an annual interest rate of 2.25%— 14,360 
Deposit in China Everbright Bank which matured on May 22, 2023 with an annual interest rate of 5.07%— 3,000 
Deposit in China Industrial Bank which matured on January 30, 2023 with an annual interest rate of 2.15%— 14,360 
Deposit in China Merchant Bank which matured on January 29, 2024 with an annual interest rate of 2.85%29,797 28,720 
Deposit in Bank of Ningbo which matured on February 17, 2024 with an annual interest rate of 2.85%44,630 43,080 
Deposit in Shanghai Pudong Development Bank which matures on October 20, 2025 with an annual interest rate of 3.10%7,322 7,180 
Deposit in Shanghai Pudong Development Bank which matures on November 14, 2025 with an annual interest rate of 3.10%7,307 7,180 
Deposit in Shanghai Pudong Development Bank which matures on December 8, 2025 with an annual interest rate of 3.10%4,376 4,308 
Deposit in Shanghai Pudong Development Bank which matures on December 15, 2025 with an annual interest rate of 3.10%4,373 4,308 
Deposit in Shanghai Pudong Development Bank which matures on December 30, 2025 with an annual interest rate of 3.10%2,912 7,180 
Deposit in China Industrial Bank which matures on January 30, 2026 with an annual interest rate of 3.15%14,528 — 
Deposit in China Everbright Bank which matured on January 5, 2024 with an annual interest rate of 5.38%3,079 — 
Deposit in China Everbright Bank which matures on May 22, 2024 with an annual interest rate of 5.38%3,018 — 
$121,342 $172,448 
For the years ended December 31, 2023 and 2022, respectively, interest income related to time deposits was $3,689 and $3,472, respectively.
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Accounts Receivable
Accounts receivable are presented netPrior to adoption of an allowance for doubtful accounts. TheAccounting Standards Update, or ASU, 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASC 326”), the Company reviews its accounts receivable on a periodic basis and makes general and specific allowances when there is doubt as to the collectability of individual balances. After adoption of ASC 326, as of January 1, 2023, the Company assesses collectability by reviewing accounts receivable on a collective basis where similar characteristics exist and on an individual basis when the Company identifies specific customers with known disputes or collectability issues. In evaluatingdetermining the collectabilityamount of individual receivable balances,the allowance for credit losses, the Company considers many factors, includinghistorical collectability based on past due status, the age of the balance, a customer’s historical payment history andaccounts receivable balances, credit worthiness, andquality of the Company’s customers based on ongoing credit evaluations, current economic trends. Accounts are written off after all collection efforts have been exhausted.conditions, reasonable and supportable forecasts of future economic conditions, and other factors that may affect the Company’s ability to collect from customers. At December 31, 20172023, and 2016,2022, the Company, based on a review of its outstanding balances and its customers, determined nothe allowance for doubtful accountscredit losses were $4,830 and $0, respectively.
Land Use Right, Net
The land use right represents the cost to purchase a right to use state-owned land in mainland China with lease terms of 50 years expiring in 2070, for which an upfront lump-sum payment was necessary.
made during the year ended December 31, 2021. The land use rights are treated as operating lease. The Company classifies the land use right as non-current assets on the consolidated balance sheets (note 7).
Inventory
Inventory consists of raw materials and related goods, work-in-progress, finished goods, and other consumable materials such as spare parts. Finished goods typically are shipped from the Company’s warehouse within one month of completion.
Inventory was recorded at the lower of cost or net realizable value at December 31, 20172023 and 2016.2022.
● 
•The cost of a general inventory item is determined using the moving weighted moving average method. Under the weighted moving average method, the Company calculates the new average price of all items of a particular inventory stock each time one or more items of that stock are purchased. The then-current average price of the stock is used for purposes of determining cost of inventory or cost of revenue. The cost of an inventory item purchased specifically for a customized product is determined using the specific identification method. Low-cost consumable materials and packaging materials are expensed as incurred.
● 
•Net realizable value is the estimated selling price, in the ordinary course of business, less estimated costs to complete or dispose.
The Company assesses the recoverability of all inventories quarterly to determine if any adjustments are required. Potential excess or obsolete inventory is written off baseddown based on management’s analysis of inventory levels and estimates of future 12-month demand and market conditions.
Property, Plant and Equipment, Net
Property, plant and equipment are recorded at cost less accumulated depreciation and any provision for impairment in value. Depreciation begins when the asset is placed in service and is calculated by using the straight-line method over the estimated useful life of an asset (or, if shorter, over the lease term). Betterments or renewals are capitalized when incurred. Plant, property and equipment is reviewed each year to determine whether any events or circumstances indicate that the carrying amount of the assets may not be recoverable.
Estimated useful lives of assets in the United States are as follows:
Buildings and plants30 years
Computer and office equipment3 to 5 years
Furniture and fixtures5 years
Leasehold improvementsshorter of lease term or estimated useful life
ACM’s subsidiaries follow regulations for depreciation of fixed assets implemented under the PRC’s Enterprise Income Tax Law, which state that the minimum useful lives used for calculating depreciation for fixed assets are as follows:
Electronic equipment3 to 5 years
Manufacturing equipment
for small to medium-sized equipment, 5 to 10 years; for large equipment,
estimated by purchasing department at time of acceptance
Furniture and fixtures5 years
Transportation equipment4 to 5 years
Electronic equipment3 years
Leasehold improvementsremaining lease term for improvements on leased fixed assets or, for large improvements, estimated useful life; not less than 3 years for non-fixed asset repairs
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Expenditures for maintenance and repairs that neither materially add to the value of the property nor appreciably prolong the life of the property are charged to expense as incurred. Upon retirement or sale of an asset, the cost of the asset and the related accumulated depreciation are eliminated from the accounts and any resulting gain or loss is credited or charged to income.
Intangible Assets, Net
Intangible assets consist of software used for finance, manufacturing, and research and development purposes.purchase software. Assets are valued at cost at the time of acquisition and are amortized over their beneficial periods. If a contract specifies a beneficial period, then the intangible asset is amortized over a term not exceeding the beneficial period. If the contract does not specify a beneficial period, then the intangible asset is amortized over a term not exceeding the valid period specified by local law. If neither the contract nor local law specifies a beneficial period, then the intangible asset is amortized over a period of up to 10 years. Currently, the software that the Company uses is amortized over a two-year period in accordance with the policy described above.
Valuation of Long-Lived Assets
Long-lived assets are evaluated for impairment whenever events or changes in circumstance indicate that the carrying value of the assets may not be fully recoverable or that the useful life of the assets is shorter than the Company had originally estimated. When these events or changes occur, the Company evaluates the impairment of the long-lived assets by comparing the carrying value of the assets to an estimate of future undiscounted cash flows expected to be generated from the use of the assets and their eventual disposition. If the sum of the expected future undiscounted cash flowflows is less than the carrying value of the assets, the Company recognizes an impairment loss based on the excess of the carrying value over the fair value. No impairment charge was recognized for either of the periods presented.
Leases
Each leaseThe Company determines if an arrangement is classified at the inception date as either a capital lease or an operating lease. For the lessee, a lease is a capitalat inception. Operating leases are included in operating lease if any ofright-of-use (“ROU”) assets, and operating lease liabilities in the following conditions exist: (a) ownership is transferredconsolidated balance sheets.
ROU assets represent the Company’s right to the lessee by the end of the lease term; (b) there is a bargain purchase option; (c)use an underlying asset for the lease term, isand lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at least 75% of the property’s estimated remaining economic life; or (d)commencement date based on the present value of the minimum lease payments atover the beginninglease term. As most of the lease term is 90% or more ofCompany’s leases do not provide an implicit rate, the fairCompany uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The Company uses the leased propertyimplicit rate when readily determinable. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. The Company’s lease terms may include options to extend or terminate the leasor atlease when it is reasonably certain that the inception date. A capitalCompany will exercise that option. Operating lease expense is accounted for as if there was an acquisition of an asset and an incurrence of an obligation at the inception of the lease. All other leases are accounted for as operating leases. Payments made under operating leases are charged to the consolidated statements of operations and comprehensive incomerecognized on a straight-line basis over the terms of underlying lease. The Company had no capital lease for either of the periods presented.
Redeemable Convertible Preferred Stock
The Company recorded each series of convertible preferred stock at fair value on the date of issuance, net of issuance costs. The convertible preferred stock is recorded outside of stockholders’ equity (deficit) because, in the event of certain deemed liquidation events considered not solely within the Company’s control (such as a merger, acquisition, or sale of all or substantially all of the Company’s assets), the convertible preferred stock will become redeemable at the option of the holders. The Company has not adjusted the carrying value of any series of convertible preferred stock to the liquidation preference of such series because it is uncertain whether or when an event would occur that would obligate the Company to pay the liquidation preferences to holders of convertible preferred stock. Subsequent adjustments to the carrying values to the liquidation preferences will be made only when it becomes probable that such a liquidation event will occur.
term.
Revenue Recognition
The Company recognizes revenue when all the following conditions are met:
● 
there is persuasive evidence of an arrangement;
● 
the product delivery has occurred and the Company has transferred major risks and remunerations over the ownership of the product to the buyer or a service has been fully rendered and completed;
● 
the collection of the receivable is probable; and
● 
the amount of the payment is fixed or determinable.
The Company derives revenue principally from salesthe sale of semiconductor capital equipment. Revenue from contracts with customers is recognized using the following five steps pursuant ASC Topic 606, Revenue from Contracts with Customers:
1.Identify the contract(s) with a customer;
2.Identify the performance obligations in the contract;
3.Determine the transaction price;
4.Allocate the transaction price to the performance obligations in the contract; and
5.Recognize revenue when (or as) the entity satisfies a performance obligation.

Identify the contract(s) with a customer. The Company generally considers written documentation including, but not limited to, signed purchase orders, master agreements, and sales orders as contracts, provided it has approval and commitment from the customer, the rights of the parties are identified, payment terms are identified, the contract has commercial substance, and collection is probable. Collectability is assessed based on management’s assessment of the customer’s creditworthiness, historical payment experience, as well as other relevant factors.

Identify the performance obligations in the contract. Performance obligations are accounted for separately if they are distinct. A good or service is distinct if the customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer, and the good or service is distinct in the context of the contract.The Company’s performance obligations generally include sales of tools and spare parts. In general,addition, customer contracts can contain provisions for installation, training, software updates, most-favored pricing for spare parts, and other items which have been deemed immaterial in the context of the contract.
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Determine the transaction price. The transaction price for the Company’s contracts with customers may include fixed and variable consideration. The Company includes variable consideration in the transaction price to the extent that it is probable that a significant reversal of revenue will not occur in the future based on the Company’s historical experience with similar arrangements.

Allocate the transaction price to the performance obligations in the contract.For contracts that contain multiple performance obligations, the Company allocates the transaction price to the performance obligations on a relative standalone selling price basis. The Company defers revenue associated with spare parts, sold together with its tools, based on its stand-alone observable selling prices or using an expected cost-plus-margin approach when a stand-alone selling price is not directly observable, and recognizes revenue upon subsequent delivery.

Recognize revenue when, or as, a performance obligation is satisfied. The Company recognizes revenue when the product has been demonstrated to meet the predetermined specificationsfrom tools and is accepted by the customer. If terms of the sale provide forspare parts at a lapsing customer acceptance period, the Company recognizes revenue upon the earlier of the expiration of the lapsing acceptance period and customer acceptance. In the following circumstances, however, the Company recognizes revenue upon shipment or delivery, when the legal title of the product is passed to a customer:
● 
when the customer has previously accepted the same tool with the same specifications andpoint in time, when the Company can objectively demonstrate that the tool meets all of the required acceptance criteria;
● 
when the sales contract or purchase order contains no acceptance agreement or no lapsing acceptance provision and when the Company can objectively demonstrate that the tool meets all of the required acceptance criteria;
● 
when the customer withholds acceptance due to issues unrelated to producthas satisfied its performance in which case revenue is recognized when the system is performing as intended and meets predetermined specifications; or
● 
theobligation. The Company’s sales arrangements do not include a general right of return.
For shipments made to a customer that has not previously accepted a specific type of tool (“first tools”), revenues are recognized when the tools are accepted by the customer. For shipments made to a customer that has previously accepted a specific type of tool ("repeat shipment"), revenues are recognized upon shipment or delivery because the Company can objectively demonstrate that the tools meet all the required customer specifications.

Customization, production, installationThe Company’s warranties provide assurance that its products will function as expected and delivery are essential elements of the functionality of a delivered machine; the services offered, principally the warranty, are not essential to the functionality of the machine. The Company treats the customization, production, installation and delivery of machines, together with the provision of related warranty and other services, as a single unit of accounting in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Subtopic 605-25, Revenue Recognition – Multiple-Element Arrangements. All ofcertain specifications. The Company’s warranties are intended to safeguard the Company’s products were sold in stand-alone arrangements during the year ended December 31, 2017customer against existing defects and 2016.
After the warranty period has expired, the Company will alsodo not provide customers with post-warranty services, which mainly include the installation and replacement of parts and small-scale modificationsany incremental service to the existing products. The related revenuecustomer. They are not separate performance obligations and costs are recognized as revenue and cost of revenue, respectively, when the parts have been delivered and installed, risk of loss has passedaccounted for under FASB ASC Topic 460, Guarantees.

Contract liabilities include payments received from customers prior to the customer,transfer of control of certain goods which are recorded as advances from customers, and collection of the resulting receivable is probable.
spare parts sold together with its tools which are recorded as deferred revenue.The Company does not have contract assets.
Cost of Revenue

Cost of revenue primarily consists of: direct materials, comprised principally of parts used in assembling equipment, together with crating and shipping costs; direct labor, including salaries and other labor related expenses attributable to the Company’s manufacturing department; and allocated overhead cost, such as personnel cost, depreciation expense, and allocated administrative costsexpenses associated with supply chain management and quality assurance activities, inventory provision, as well as shipping insurance premiums.
Research and Development Costs
Research and development costs relating to the development of new products and processes, including significant improvements and refinements to existing products or to the process of supporting customer evaluations of tools, includingand the development of new tools for evaluation by customers during the product demonstration process, are expensed as incurred.
Shipping and Handling Costs
Shipping and handling costs, which relate to transportation of products to customer locations, are charged to selling and marketing expense. For the yearyears ended December 31, 20172023, 2022 and 2016,2021, shipping and handling costs included in sales and marketing expenses were $139$1,582, $1,507, and $75,$923, respectively.
Borrowing Costs
Borrowing costs attributable directly to the acquisition, construction or production of qualifying assets that require a substantial period of time to be ready for their intended use or sale are capitalized as part of the cost of those assets. Income earned on temporary investments of specific borrowings pending their expenditure on those assets is deducted from borrowing costs capitalized. All other borrowing costs are recognized in interest expensesexpense in the consolidated statements of operations and comprehensive income (loss) in the period in which they are incurred. No borrowing costs were capitalized for the year ended December 31, 2017 or 2016.
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Warranty
For each of its products, the Company generally provides a standard assurance type warranty ranging from 12 to 36 months and covering replacement of the product during the warranty period. The Company accounts for the estimated warranty costs as sales and marketing expenses at the time revenue is recognized. Warranty obligations are affected by historical failure rates and associated replacement costs. Utilizing historical warranty cost records, the Company calculates a rate of warranty expenses to revenue to determine the estimated warranty charge. The Company updates these estimated charges on a regular basis. Warranty obligations are included in other payables and accrued expenses in the consolidated balance sheets. The following table shows changes in the Company’s warranty obligations for the yearyears ended December 31, 20172023, 2022 and 2016,2021, respectively.
 
Year Ended December 31,
 
 
2017
 
 
2016
 
Year Ended December 31,Year Ended December 31,
2023202320222021
Balance at beginning of period
 $290 
 $459 
Additions
  736 
  544 
Utilized
  (187)
  (713)
Balance at end of period
 $839 
 $290 
Government Subsidies
ACM Shanghai has been awarded three subsidies from local and centralreceived seven special government grants. The governmental authorities in the PRC. The first subsidy, which was awarded in October 2008, relates to the development and commercialization of 65-45 nanometer Stress Free Polishing technology. The second subsidy was awarded in April 2009 to fund interest expenses for short-term borrowings. The third subsidy was awarded in January 2014 and relates to the development of Electro Copper Plating technology. The PRC governmental authorities will provide the majority of the funding, although ACM Shanghai is also required to invest certain amounts in the projects.
The government subsidiesgrants contain certain operating conditions, and thereforethe Company is required to go through a government due diligence process once the project is complete. Unearned government subsidies received are deferred and recorded as other long-term liabilities upon receipt. The grant(note 13) in the consolidated balance sheet until the criteria for such recognition are satisfied. Grant amounts are recognized in theour statements of operations and comprehensive income:income (loss) as follows:
● 
•Government subsidies relating to current expenses are recorded as reductions of those expenses in the periods in which the current expenses are recorded. For the years ended December 31, 20172023, 2022, and 2016,2021, related government subsidies recognized as reductions of relevant expenses in the consolidated statements of operations and comprehensive income (loss) were $3,421$1,740, $1,201 and $6,244$11,260, respectively.
● 
Government subsidies for short-term borrowings’ interest expenses are reported as reductions of interest expenses in the period the interest is accrued, which were $0 and $99 for the years ended December 31, 2017 and 2016.
● 
•Government subsidies related to depreciable assets are credited to income over the useful lives of the related assets for which the grant was received. For the years ended December 31, 20172023, 2022, and 2016,2021, related government subsidies recognized as other income in the consolidated statements of operations and comprehensive income were $135 and $127,(loss) were $533, $306, and $200, respectively.
Unearned government subsidies received are deferred for recognition and recorded as other long-term liabilities (note 10) in the balance sheet until the criteria for such recognition are satisfied.
Stock-based Compensation
ACM and ACM Shanghai grants stock options to employees and non-employee consultants and directors and accounts for those stock-based awards in accordance with FASB ASC Topic 718, Compensation – Stock Compensation, and FASB ASC Subtopic 505-50, Equity-Based Payments to Non-Employees.
Compensation.
Stock-based awards granted to employees and non-employee consultants and directors are measured at the fair value of the awards on the grant date and are recognized as expenses either (a) immediately on grant, if no vesting conditions are required or (b) using the graded vesting method, net of estimated forfeitures, over the requisite service period. The fair value of stock options is determined using the Black-Scholes valuation model.model when there are service and performance condition attached or the Monte Carlo valuation model when there is market condition attached. Stock-based compensation expense, when recognized, is charged to the category of operating expense corresponding to the employee’s service function.
Stock-based awards granted to non-employees are accounted for at the fair valuefunction of the awards at the earlier of (a) the date at which a commitment for performance by theemployees and non-employee to earn the awards is reachedconsultants and (b) the date at which the non-employee’s performance is complete. The fair value of such non-employee awards is re-measured at each reporting date using the fair value at each period end until the vesting date. Changes in fair value between the reporting dates are recognized by the graded vesting method.
Operating and Financial Risks
Concentration of Credit Risk
Financial instruments that potentially subject to credit risk consist principally of cash and cash equivalents and accounts receivable. The Company deposits and invests its cash with financial institutions that management believes are creditworthy.
The Company is potentially subject to concentrations of credit risks in its accounts receivable. Four customers individually accounted for greater than ten percent of the Company’s revenue for the year ended 2017 and two of those customers individually accounted for greater than ten percent of the Company’s revenue in 2016:
 
 
Year ended December 31,
 
 
 
2017
 
 
2016
 
Customer A
  * 
  33.7%
Customer B
  18.10%
  25.00 
Customer C
  * 
  24.00 
Customer D
  12.77 
  16.60 
Customer E
  14.12 
  * 
Customer F
  10.23 
  * 
*  Customer accounted for less than 10% of revenue in the period.
Interest Rate Risk
As of December 31, 2017 and 2016, the balance of bank borrowings (note 6) was short-term in nature, matured at various dates within the following year and did not expose the Company to interest rate risk.
Liquidity Risk
The Company’s working capital at December 31, 2017 and 2016 was sufficient to meet its then-current requirements. The Company may, however, require additional cash due to changing business conditions or other future developments, including any investments or acquisitions the Company decides to pursue. In the long run, the Company intends to rely primarily on cash flows from operations and additional borrowings from financial institutions in order to meet its cash needs. If those sources are insufficient to meet cash requirements, the Company may seek to issue additional debt or equity.
Country Risk
The Company has significant investments in the PRC. The operating results of the Company may be adversely affected by changes in the political and social conditions in the PRC and by changes in Chinese government policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things.
Foreign Currency Risk and Translation
The Company’s consolidated financial statements are presented in U.S. dollars, which is the Company’s reporting currency, while the functional currency of ACM’s subsidiaries is the Chinese Renminbi (“RMB”). Changes in the relative values of U.S. dollars and Chinese RMB affect the Company’s reported levels of revenues and profitability as the results of its operations are translated from RMB into U.S. dollars for reporting purposes. Because the Company has not engaged in any hedging activities, it cannot predict the impact of future exchange rate fluctuations on the results of its operations and it may experience economic losses as a result of foreign currency exchange rate fluctuations.
Transactions of ACM’s subsidiaries involving foreign currencies are recorded in functional currency according to the rate of exchange prevailing on the date when the transaction occurs. The ending balances of the Company’s foreign currency accounts are converted into functional currency using the rate of exchange prevailing at the end of each reporting period. Net gains and losses resulting from foreign exchange transactions are included in the consolidated statements of operations and comprehensive income. Total exchange gain (loss) was, respectively, $1,052 and $ (746) for the years ended December 31, 2017 and 2016.
In accordance with FASB ASC Topic 830, Foreign Currency Matters, the Company translates assets and liabilities into U.S. dollars from RMB using the rate of exchange prevailing at the applicable balance sheet date and the consolidated statements of operations and comprehensive income and consolidated statements of cash flows are translated at an average rate during the reporting period. Adjustments resulting from the translation are recorded in stockholders’ (deficit) equity as part of accumulated other comprehensive income (loss). Any differences between the initially recorded amount and the settlement amount are recorded as a gain or loss on foreign currency transaction in the consolidated statements of operations and comprehensive income.
Consolidated balance sheets:
At December 31, 2017RMB 6.5359 to $1.00
At December 31, 2016RMB 6.9348 to $1.00
Consolidated statements of operations and comprehensive income:
Year ended December 31, 2017RMB 6.7522 to $1.00
Year ended December 31, 2016RMB 6.6401 to $1.00
Translations of amounts from RMB into U.S. dollars were made at the following exchange rates for the respective dates and periods:
directors.
Income Taxes
The Company accounts for income taxes using the liability method whereby deferred tax asset and liability account balances are determined based on differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company provides a valuation allowance, if necessary, to reduce deferred tax assets to their estimated realizable values.
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In evaluating the ability to recover its deferred income tax assets, the Company considers all available positive and negative evidence, including its operating results, ongoing tax planning and forecasts of future taxable income on a jurisdiction-by-jurisdiction basis. In the event the Company determines that it would be able to realize its deferred income tax assets in the future in excess of their net recorded amount, it would make an adjustment to the valuation allowance that would reduce the provision for income taxes. Conversely, in the event that all or part of the net deferred tax assets are determined not to be realizable in the future, an adjustment to the valuation allowance would be charged to earnings in the period such determination is made.
Tax benefits related to uncertain tax positions are recognized when it is more likely than not that a tax position will be sustained during an audit. Interest and penalties related to unrecognized tax benefits are included within the provision for income tax.
Basic and Diluted Net Income (Loss) per Share of Common Share
Stock
Basic and diluted net income (loss) per share of common sharestock is calculated as follows:
Year Ended December 31,
202320222021
Numerator:
Net income$96,852 $50,564 $42,921 
Less: Net income attributable to non-controlling interests19,503 11,301 5,164 
Net income available to common stockholders, basic$77,349 $39,263 $37,757 
Less: Dilutive effect arising from stock-based awards by ACM Shanghai1,841 584 108 
Net income available to common stockholders, diluted$75,508 $38,679 $37,649 
Weighted average shares outstanding, basic (1)60,164,67059,235,97557,654,708
Effect of dilutive securities4,705,8736,105,7967,702,008
Weighted average shares outstanding, diluted64,870,54365,341,77165,356,716
Net income per share of common stock:
Basic$1.29 $0.66 $0.65 
Diluted$1.16 $0.59 $0.58 
 
 
For the Year Ended
December 31,
 
 
 
2017
 
 
2016
 
Numerator:
 
 
 
 
 
 
Net income (loss)
 $(872)
 $2,387 
Net income (loss) attributable to non-controlling interest
  (554)
  1,356 
Net income allocated to participating securities
  - 
  386 
Net income (loss) available to common stockholders, basic and diluted
 $(318)
 $645 
Denominator:
    
    
Weighted average shares outstanding, basic
  6,865,390 
  2,176,315 
Effect of dilutive securities
  - 
  1,615,822 
Weighted average shares outstanding, diluted
  6,865,390 
  3,792,137 
Net income (loss) per common share:
    
    
Basic
 $(0.05)
 $0.30 
Diluted
 $(0.05)
 $0.18 
(1)The results for 2021 have been adjusted to reflect the three-for-one stock split effected in the form of a stock dividend in March 2022. See Note 2 for details.
Basic and diluted net income (loss) per share of common sharestock is presented using the two-class method, which allocates undistributed earnings to common stock and any participating securities according to dividend rights and participation rights on a proportionate basis. Under the two-class method, basic net income (loss) per share of common sharestock is computed by dividing the sum of distributed and undistributed earnings attributable to common stockholders by the weighted average number of shares of common stock outstanding during the period. Shares of ACM’s Series A, B, C, D, E and F convertible preferred stock areACM did not have any participating securities asoutstanding during the holders are entitled to participate in and receive the same dividends as may be declared for common stockholders on a pro-rata, if-converted basis.
three-year periods ending December 31, 2023.
ACM has been authorized to issue Class A and Class B common stock since redomesticating in Delaware in November 2016. The two classes of common stock are substantially identical in all material respects, except for voting rights. Since ACM did not declare any dividends for yearduring the years ended December 31, 20172023, 2022 and 2016,2021, the net income (loss) per share of common sharestock attributable to each class is the same under the “two-class” method. As such, the two classes of common stock have been presented on a combined basis in the consolidated statements of operations and comprehensive income (loss) and in the above computation of net income (loss) per share of common share.
stock.
Diluted net income (loss) per share of common sharestock reflects the potential dilution from securities, including stock options, that could share in ACM’s earnings. AllCertain potential dilutive securities including potentially dilutive convertible preferred stocks and stock options, if any, were excluded from the computationnet income per share calculation because the impact would be anti-dilutive. The number of dilutive net loss per common share for the year ended December 31, 2017 and 2016, as their effects are antidilutive due to our net loss for those periods. The potentially dilutive securitiesshares that were not included in
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the calculation of diluted net income per share in the periods presented where their inclusion would be anti-dilutive are as follows:
 
 
Year ended
December 31,
 
 
 
2017
 
 
2016
 
Series A convertible preferred stock
  - 
  128,334 
Series B convertible preferred stock
  - 
  524,003 
Series C convertible preferred stock
  - 
  482,288 
Series D convertible preferred stock
  - 
  605,244 
Series F convertible preferred stock
  - 
  1,221,099 
Stock options
  3,372,292 
  1,424,596 
Warrants
 477,502 
  - 
 
  3,849,794 
  4,385,564 
were 3,651,337, 1,795,340 and 98,800 the years ended December 31, 2023, 2022, and 2021, respectively.
Comprehensive Income (Loss) Attributable to the Company(loss)
The Company applies FASB ASC Topic 220, Comprehensive Income, which establishes standards for the reporting and display of comprehensive income or loss, requiring its components to be reported in a financial statement with the same prominence as other financial statements. The Company’s comprehensive income (loss) attributable toincludes net income and foreign currency translation adjustments and is presented in the Company was $(31) and $704 for the years ended December 31, 2017 and 2016, respectively.consolidated statements of comprehensive income (loss).
Appropriated Retained Earnings
Statutory Surplus Reserve
The income of ACM’s PRCmainland China subsidiaries is distributable to their shareholders after transfers to reserves as required under relevant PRCmainland China laws and regulations and the subsidiaries’ Articles of Association. As stipulated by the relevant laws and regulations in the PRC, the PRCmainland China, mainland China subsidiaries are required to maintain reserves, including reserves for statutory surpluses and public welfare funds that are not distributable to shareholders. A PRCmainland China subsidiary’s appropriations to the reserves are approved by its board of directors. At least 10% of annual statutory after-tax profits, as determined in accordance with PRCmainland China accounting standards and regulations, is required to be allocated to the statutory surplus reserves. If the cumulative total of the statutory surplus reserves reaches 50% of a PRCmainland China subsidiary’s registered capital, any further appropriation is optional.
Statutory surplus reserves may be used to offset accumulated losses or to increase the registered capital of a PRCmainland China subsidiary, subject to approval from the relevant PRCmainland China authorities, and are not available for dividend distribution to the subsidiary’s shareholders. The PRCmainland China subsidiaries are prohibited from distributing dividends unless any losses from prior years have been offset. Except for offsetting prior years’ losses, however, statutory surplus reserves must be maintained at a minimum of 25% of share capital after such usage. No retained earnings of either PRC subsidiary had been appropriated toACM Shanghai estimated a statutory surplus reserves as the PRC subsidiaries recordedreserve of $30,060 and $16,881 based on an accumulated lossesprofit as of December 31, 20172023 and 2016.2022, respectively, which is included in the statutory surplus reserve in the consolidated balance sheets.
Noncontrolling interests
Fair ValueA noncontrolling interest is recognized to reflect the portion of subsidiaries’ equity which is not attributable, directly or indirectly, to ACM Research. Consolidated net income on the consolidated statements of comprehensive income (loss) includes the net income attributable to noncontrolling interests. The cumulative results of operations attributable to noncontrolling interests are recorded as “noncontrolling interests” in the Company’s consolidated balance sheets.
Financial Instruments

Under the FASB’s authoritative guidance onThe Company periodically invests in equity securities, and maintains an investment portfolio of various holdings, types, and maturities. For equity investments that do not have a readily determinable fair value, measurements,the Company classified them as long-term investments, and records them using either: 1) the measurement alternative which measures the equity investments at cost minus impairment, if any, plus or minus changes resulting from qualifying observable price changes; or 2) the equity method whereby the Company recognizes its proportional share of the income or loss from the equity method investment. The equity method is utilized when the equity investments are common stock or in substance common stock, and the Company does not have the ability to control the investee but is deemed to have the ability to exercise significant influence over the investee’s operating or financial policies. For equity investments that have a readily determinable fair value, isthe Company classified them as short-term investments, and records them at fair market value on a recurring basis based upon quoted market prices. Realized and unrealized gains and losses resulting from application of the measurement alternative, the impact of the application of the equity method to the Company’s equity investments, and recognition of changes in fair market value, as applicable, are recognized as non-operating income (expenses), net in the condensed consolidated statements of comprehensive income (loss).

The Company defines fair value as the price that would be received to sellfrom selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. InWhen determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company uses various methods includingconsiders the principal or most advantageous market incomein which it would transact, and cost approaches. Based on these approaches, the Company often utilizes certainit considers assumptions that market participants would use inwhen pricing the asset or liability, including assumptions about risk and the risks inherent inliability.

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A fair value hierarchy has been established that prioritizes the inputs to the valuation technique. These inputs can be readily observable, market corroborated or generally unobservable inputs. The Company uses valuation techniques that maximize the useused to measure fair value. The level of observable inputs and minimize the use of unobservable inputs. Based on observability of the inputs usedan asset or liability in the valuation techniques,hierarchy is based on the Companylowest level of input that is required to provide the following information accordingsignificant to the fair value hierarchy. The fair value hierarchy ranks the quality and reliability of the information used to determine fair values. Financial assetsmeasurement. Assets and liabilities carried at fair value are classified and disclosed in one of the following three categories:

Level 1: Valuations for assets and liabilities tradedbased on quoted prices in active exchange markets. Valuations are obtained from readily available pricing sourcesmarkets for market transactions involving identical assets or liabilities.liabilities with sufficient volume and frequency of transactions.

Level 2: Valuations based on observable inputs other than Level 1 prices such as quoted prices for assets and liabilities traded in less active dealer or broker markets. Valuations are obtained from third party pricing services for identical or similar assets or liabilities, quoted prices in markets that are not active for identical assets or liabilities, or model-derived valuations techniques for which all significant inputs are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3: Valuations for assets and liabilitiesbased on unobservable inputs to the valuation methodology that are derived from other valuation methodologies, including option pricing models, discounted cash flow modelssignificant to the measurement of fair value of assets or liabilities and similar techniques, and not based on non-binding, broker-provided price quotes and may not have been corroborated by observable market exchange, dealer or broker traded transactions. Level 3 valuations incorporate certain unobservable assumptionsdata.

The Company’s primary financial instruments include its cash, cash equivalents, short term and projections in determining thelong term deposits, restricted cash, short-term and long-term investments, accounts receivable, other receivables, accounts payable, and short-term and long-term borrowings. The estimated fair value assignedof cash and cash equivalents, restricted cash, short-term time deposits, accounts receivable, other receivable, accounts payable, and short-term borrowings approximates their carrying value due to such assets.
the short period of time to their maturities.
All transfers between fair value hierarchy levels are recognized by the Company at the end of each reporting period. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement in its entirety, requires judgment and considers factors specific to the investment. The inputs or methodology used for valuing financial instruments are not necessarily an indication of the risks associated with investment in those instruments.
Fair Value Measured or Disclosed on a Recurring Basis
Short-term borrowings—Interest rates under the borrowing agreements with the lending parties were determined based on the prevailing interest rates in the market. The Company classifies the valuation techniques that use these inputs as Level 2 fair value measurement.
Warrant liability—The fair value of the warrant liability derives from the Black-Scholes valuation model which incorporates certain unobservable assumptions (note 9). The Company classifies the valuation techniques that use these inputs as Level 3 fair value measurement.
Other financial items for disclosure purpose—The fair value of other financial items of the Company for disclosure purpose, including cashAssets and cash equivalents, accounts receivable, other receivables, prepaid expenses, other current assets, notes payable, investors’ deposits, accounts payable, advances from customers, income taxes payable, and other payables and accrued expenses, approximate their carrying value due to their short-term nature.
As of December 31, 2017 and 2016, information about inputs into the fair value measurement of the Company’s liabilities that are measured and recorded at fair value on a recurring basis in periods subsequent to their initial recognition is as follows:basis:
Quoted Prices
in Active
Markets for
Identical
Liabilities (Level 1)		Significant
Other
Observable
Inputs (Level 2)		Significant
Unobservable
Inputs (Level 3)		Total
As of December 31, 2023
Assets
Cash and cash equivalents$182,090 $- $- $182,090 
Short-term investments21,312 - - 21,312 
$203,402  $-  $-  $203,402 
As of December 31, 2022
Assets
Cash and cash equivalents$247,951 $- $- $247,951 
Short-term investments20,209 - - 20,209 
$268,160 $- $- $268,160 
 
 
Fair Value Measurement at Reporting Date Using
 
 
 
Quoted Prices in Active Markets for Identical Liabilities (Level 1)
 
 
Significant Other Observable Inputs (Level 2)
 
 
Significant Unobservable Inputs (Level 3)
 
 
Total
 
 
 
(in thousands)
 
As of December 31, 2017:
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
Short-term borrowings
 $— 
 $5,095 
 $— 
 $5,095 
Warrant liability
  — 
  — 
  3,079 
  3,079 
 
    
    
    
    
 
  — 
  5,095 
  3,079 
  8,174 


As of December 31, 2016:
    
    
    
    
Liabilities:
    
    
    
    
Short-term borrowings
 $— 
 $4,761 
 $— 
 $4,761 

Fair Value Measured on a Non-Recurring Basis
The Company reviews long-lived assets for impairment annually or more frequently if events or changes in circumstances indicate the possibility of impairment. Long-lived assets areAssets and liabilities measured at fair value on a nonrecurring basis when there is an indicatornon-recurring basis:

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Quoted Prices
in Active
Markets for
Identical
Liabilities (Level 1)		Significant
Other
Observable
Inputs (Level 2)		Significant
Unobservable
Inputs (Level 3)		Total
As of December 31, 2023
Assets
Investments accounted for using measurement alternative$— $— $10,378 $10,378 
$— $— $10,378 $10,378 

The Company did not have any assets and they are recordedliabilities measured at fair value only when impairmenton a non-recurring basis as of December 31, 2022.

The non-recurring fair value measurements to the carrying amount of equity investments accounted for using measurement alternative usually requires management to estimate a price adjustment for the different rights and obligations between a similar instrument of the same issuer with an observable price change in an orderly transaction and the investment held by the Company. These non-recurring fair value measurements were measured by using the observable transaction price and other unobservable inputs (level 3) as of the observable transaction dates.

Refer to Note 12 for fair value information related to the Company’s outstanding long-term borrowings as of December 31, 2023 and December 31, 2022.
Operating and Financial Risks
Concentration of Credit Risk
Financial instruments that potentially subject the Company to credit risk consist principally of cash and cash equivalents, time deposits, and accounts receivable. The Company deposits and invests its cash with financial institutions that management believes are creditworthy.
The Company is recognized. In determiningpotentially subject to concentrations of credit risks in its accounts receivable and revenue. For the years ended December 31, 2023, 2022 and 2021 three customers accounted for 45.5%, three customers accounted for 43.8% of revenue, and two customers accounted for 48.9%, of revenue, respectively.
As of December 31, 2023 and 2022 four customers accounted for 59.1% and two customers accounted for 42.6%, respectively, of the Company’s accounts receivables. The Company believes that the receivable balances from these largest customers do not represent a significant credit risk based on past collection experience.
Interest Rate Risk
As of December 31, 2023 and 2022, the balance of the Company’s short term bank borrowings (note 9) were scheduled to mature at various dates within the following year and thus exposed the Company to modest interest rate risk. As of December 31, 2023, the Company’s long-term borrowings (note 12) carry a fixed interest rate, and the Company may be exposed to the fair value interest rate risk.
Liquidity Risk
The Company’s working capital at December 31, 2023 and 2022 was sufficient to meet its then-current requirements. The Company may, however, require additional cash due to changing business conditions or other future developments, including any investments or acquisitions the Company used projectionsdecides to pursue. In the long run, the Company intends to rely primarily on cash flows from operations and additional borrowings from financial institutions in order to meet its cash needs. If those sources are insufficient to meet cash requirements, the Company may seek to issue additional debt or equity.
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Country Risk
The Company has significant investments in mainland China. The operating results of the Company may be adversely affected either directly or indirectly by changes in the political and social conditions in mainland China, by changes in mainland China government policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, rates and methods of taxation, and export controls enacted by the U.S., Japan, and the Netherlands to restrict the sale of certain technology to mainland China, among other things.
Foreign Currency Risk and Translation
The Company’s consolidated financial statements are presented in U.S. dollars, which is the Company’s reporting currency, while the functional currency of ACM’s subsidiaries in mainland China and Korea are the Chinese Renminbi (“RMB”), and the Korean Won, respectively. Changes in the relative values of U.S. dollars and RMB affect the Company’s reported levels of revenues and profitability as the results of its operations are translated from RMB into U.S. dollars for reporting purposes. Since the Company has not engaged in any hedging activities, it cannot predict the impact of future exchange rate fluctuations on the results of its operations, and it may experience economic losses as a result of foreign currency exchange rate fluctuations.
Transactions of ACM’s subsidiaries involving foreign currencies are recorded in functional currency according to the rate of exchange prevailing on the date when the transaction occurs. The ending balances of the Company’s foreign currency accounts are converted into functional currency using the rate of exchange prevailing at the end of each reporting period. Net gains and losses resulting from foreign exchange fluctuations as marked to market at year-end are included in the consolidated statements of comprehensive income (loss).
In accordance with FASB ASC Topic 830, Foreign Currency Matters, the Company translates assets and liabilities into U.S. dollars from RMB or Korean Won using the rate of exchange prevailing at the applicable balance sheet date and the consolidated statements of comprehensive income (loss) and consolidated statements of cash flows directly associated with, and which are expected to arise as a direct result of, the use and eventual disposition of the assets. This approach required significant judgments including the Company’s projected net cash flows, which were derived using the most recent available estimate fortranslated at an average rate during the reporting unit containingperiod. Adjustments resulting from the assets tested. Several key assumptions included periodstranslation are recorded in stockholders’ equity as part of operation, projections of product pricing, production levels, product costs, market supply and demand, and inflation.accumulated other comprehensive income (loss).
RecentRecently Adopted Accounting Pronouncements
Accounting Pronouncements Recently Adopted in the Consolidated Financial Statements for the Year ended December 31, 2017
In AprilJune 2016, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASC 326”). ASC 326 replaced the pre-existing incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. ASC 326 requires use of a forward-looking expected credit loss model for accounts receivables, loans and other financial instruments.

In November 2019, the FASB issued ASU 2019-10, Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates. ASU 2019-10 defers the effective date of ASU 2016-13 for public filers that are considered small reporting companies (“ASU”SRC”) No. 2016-09, Compensation—Stock Compensation (Topic 718): Improvementsas defined by the SEC to Employee Share-Based Payment Accounting, which simplifies several aspects of the accounting for employee stock-based payment transactions. The areas for simplification in ASU No. 2016-09 include the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The amendments in this ASU were effective for annual periodsfiscal years beginning after December 15, 20162022, including interim periods within those fiscal years. Since the Company was eligible to be a SRC based on its SRC determination as of November 15, 2019 (which was the issuance date of ASU 2019-10) in accordance with SEC regulations, the Company adopted amendments in ASC 326 for the year beginning January 1, 2023. Adoption of the standard requires using a modified retrospective approach through a cumulative-effect adjustment to retained earnings as of the effective date to align existing credit loss methodology with the new standard. The cumulative-effect adjustment, net of tax impact, to retained earnings as of January 1, 2023 was $(1,769).

In June 2022, the FASB issued ASU 2022-03—Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions (“ASU 2022-03”) which clarifies how the fair values of equity securities subject to contractual sale restrictions is determined (Topic 820). The amendment clarifies that a contractual sale restriction should not be considered in measuring fair value. It also requires certain qualitative and quantitative disclosures related to equity securities subject to contractual sale restrictions. The new guidance is required to be applied prospectively with any adjustments from the adoption of the amendments recognized in earnings and disclosed on the date of adoption. This guidance is effective for the Company for fiscal year beginning after December 15, 2023, and interim periods within those annual periods.fiscal years. Early adoption is permitted. The adoptionCompany early adopted ASU 2022-03 in the third quarter of ASU No. 2016-092023, and the adoption did not have a material impact on the Company’s consolidated financial statements.position, results of operations and cash flows.
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Recently issued accounting pronouncements not yet adopted
In November 2015,2023, the FASB issued ASU No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification2023-07, Improvements to Reportable Segment Disclosures. This ASU updates reportable segment disclosure requirements by requiring disclosures of Deferred Taxes. Topic 740, Income Taxes,significant reportable segment expenses that are regularly provided to the Chief Operating Decision Maker (“CODM”) and included within each reported measure of a segment's profit or loss. This ASU also requires an entity to separate deferred income tax liabilities and assets into current and noncurrent amounts in a classified statement of financial position. Deferred tax liabilities and assets are classified as current or noncurrent based on the classificationdisclosure of the related asset or liability for financial reporting. Deferred tax liabilitiestitle and assets that are not related to an asset or liability for financial reporting are classified according to the expected reversal dateposition of the temporary difference. To simplifyindividual identified as the presentationCODM and an explanation of deferred income taxes,how the amendmentsCODM uses the reported measures of a segment’s profit or loss in assessing segment performance and deciding how to allocate resources. The ASU No. 2015-17 require that deferred income tax liabilities and assets be classified as noncurrent in a classified statement of financial position. For public business entities, the amendments in this update areis effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The adoption of ASU No. 2015-17 did not have a material impact on the Company’s consolidated financial statements.
In July 2015, the FASB issued ASU No. 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory. The amendments in this update require an entity to measure inventory within the scope of ASU No. 2015-11 (the amendments in ASU No. 2015-11 do not apply to inventory that is measured using last-in, first-out or the retail inventory method. The amendments apply to all other inventory, which includes inventory that is measured using first-in, first-out or average cost) at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Subsequent measurement is uncharged for inventory measured using last-in, first-out or the retail inventory method. The amendments in ASU No. 2015-11 more closely align the measurement of inventory in GAAP with the measurement of inventory in International Financial Reporting Standards. ASU No. 2015-11 is effective for public business entities for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. The amendments in ASU No. 2015-11 should be applied prospectively with earlier application permitted as of the beginning of an interim or annual reporting period. The adoption of ASU No. 2015-11 did not have a material impact on the Company’s consolidated financial statements. The relevant descriptions have been included in the inventory accounting policy.
In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements—Going Concern. The amendments in this update require management to evaluate whether there are conditions and events that raise substantial doubt about an entity’s ability to continue as a going concern for both annual and interim reporting. The guidance is effective for the Company for the annual period ended after December 15, 2016 and interim periods thereafter. Management performed an evaluation of the Company’s ability to fund operations and to continue as a going concern according to ASC Topic 205-40, Presentation of Financial Statements—Going Concern. The adoption of ASU No. 2014-15 did not have a material impact on the Company’s consolidated financial statements.
Recent Accounting Pronouncements Not Yet Adopted
In February 2018, the FASB issued ASU No. 2018-02, Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (“ASU 2018-02”), which provides financial statement preparers with an option to reclassify stranded tax effects within accumulated other comprehensive income to retained earnings in each period in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act (or portion thereof) is recorded. The amendments in this ASU are effective for all entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption of ASU 2018-02 is permitted, including adoption in any interim period for the public business entities for reporting periods for which financial statements have not yet been issued. The amendments in this ASU should be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized. The Company is currently evaluating the impact of the adoption of ASU No. 2018-02 on its consolidated financial statements.
In July 2017, the FASB issued ASU No. 2017-11, Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception, which addresses the complexity of accounting for certain financial instruments with down round features. Down round features are features of certain equity-linked instruments (or embedded features) that result in the strike price being reduced on the basis of the pricing of future equity offerings. Current accounting guidance creates cost and complexity for entities that issue financial instruments (such as warrants and convertible instruments) with down round features that require fair value measurement of the entire instrument or conversion option. For public business entities, the amendments in Part I of this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. For all other entities, the amendments in Part I of this Update are effective for fiscal years beginning after December 15, 2019,2023, and interim periods within fiscal years beginning after December 15, 2020.2024. Adoption of the ASU should be applied retrospectively to all prior periods presented in the financial statements. Early adoption is also permitted. The Company is currently evaluating the impactprovisions of this ASU and expect to adopt it for the adoption of ASU No. 2017-11 on its consolidated financial statements.year ending December 31, 2024.
In May 2017,December 2023, the FASB issued ASU No. 2017-09, Compensation—Stock Compensation2023-09, Improvements to Income Tax Disclosures (Topic 718): Scope of Modification Accounting, which provides guidance740). The ASU requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as additional information on determining which changes to the terms and conditions of share-based payment awards require an entity to apply modification accounting under Topic 718.income taxes paid. The amendments in this ASU areis effective on a prospective basis for all entities for annual periods, and interim periods within those annual periods beginning after December 15, 2017.2024. Retrospective application is permitted. Early adoption is also permitted including adoption in any interim period, for (1) public business entities for reporting periods for whichannual financial statements that have not yet been issued and (2) all other entities for reporting periods for which financial statements have not yet beenor made available for issuance. The amendments in this ASU should be applied prospectively to an award modified on or after the adoption date. The Company does not expect the adoption of ASU No. 2017-09 to have a material impact on its consolidated financial statements.
In February 2017, the FASB issued ASU No. 2017-05, Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets, which clarifies the scope of nonfinancial asset guidance in Subtopic 610-20. This ASU also clarifies that derecognition of all businesses and nonprofit activities (except those related to conveyances of oil and gas mineral rights or contracts with customers) should be accounted for in accordance with the derecognition and deconsolidation guidance in Subtopic 810-10. The amendments in this ASU also provide guidance on the accounting for so-called “partial sales” of nonfinancial assets within the scope of Subtopic 610-20 and contributions of nonfinancial assets to a joint venture or other noncontrolled investee. The amendments in this ASU are effective for annual reporting reports beginning after December 15, 2017, including interim reporting periods within that reporting period. The Company does not expect the adoption of ASU No. 2017-05 to have a material impact on its consolidated financial statements.
In January 2017, the FASB issued ASU No. 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which removes Step 2 from the goodwill impairment test. An entity will apply a one-step quantitative test and record the amount of goodwill impairment as the excess of a reporting unit’s carrying amount over its fair value, not to exceed the total amount of goodwill allocated to the reporting unit. The new guidance does not amend the optional qualitative assessment of goodwill impairment. A business entity that is a U.S. Securities and Exchange Commission filer must adopt the amendments in this ASU for its annual or any interim goodwill impairment test in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company is currently evaluating the impactprovisions of the adoption of ASU 2017-04 on its consolidated financial statements.this ASU.
In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, which requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The amendments in this ASU do not provide a definition of restricted cash or restricted cash equivalents. The amendments in this ASU are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. The Company does not expect the adoption of ASU No. 2016-18 to have a material impact on its consolidated financial statements.
In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, which addresses the following cash flow issues: (1) debt prepayment or debt extinguishment costs; (2) settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; (3) contingent consideration payments made after a business combination; (4) proceeds from the settlement of insurance claims; (5) proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies; (6) distributions received from equity method investees; (7) beneficial interests in securitization transactions; and (8) separately identifiable cash flows and application of the predominance principle. The amendments in this ASU are effective for public business entities for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years and are effective for all other entities for fiscal years beginning after December 15, 2018 and interim periods within fiscal years beginning after December 15, 2019. Early adoption is permitted, including adoption in an interim period. The Company is currently evaluating the impact of the adoption of ASU No. 2016-15 on its consolidated financial statements.
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The amendments in this update create Topic 842, Leases, and supersede the leases requirements in Topic 840, Leases. Topic 842 specifies the accounting for leases. The objective of Topic 842 is to establish the principles that lessees and lessors shall apply to report useful information to users of financial statements about the amount, timing, and uncertainty of cash flows arising from a lease. The main difference between Topic 842 and Topic 840 is the recognition of lease assets and lease liabilities for those leases classified as operating leases under Topic 840. Topic 842 retains a distinction between finance leases and operating leases. The classification criteria for distinguishing between finance leases and operating leases are substantially similar to the classification criteria for distinguishing between capital leases and operating leases in the previous leases guidance. The result of retaining a distinction between finance leases and operating leases is that under the lessee accounting model in Topic 842, the effect of leases in the statement of comprehensive income and the statement of cash flows is largely unchanged from previous GAAP. The amendments in ASU No. 2016-02 are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years for public business entities. Early application of the amendments in ASU No. 2016-02 is permitted. The Company is currently in the process of evaluating the impact of the adoption of ASU No. 2016-02 on its consolidated financial statements.
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). ASU No. 2014-09 supersedes the revenue recognition requirements in “Revenue Recognition (Topic 605)”, and requires entities to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. The FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date in August 2015. The amendments in ASU No. 2015-14 defer the effective date of ASU No. 2014-09. Public business entities, certain not-for-profit entities, and certain employee benefit plans should apply the guidance in ASU No. 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Earlier adoption is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. Further to ASU No. 2014-09 and ASU No. 2015-14, the FASB issued ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net) in March 2016, ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing in April 2016, ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients, and ASU No. 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers, respectively. The amendments in ASU No. 2016-08 clarify the implementation guidance on principal versus agent considerations, including indicators to assist an entity in determining whether it controls a specified good or service before it is transferred to the customers. ASU No. 2016-10 clarifies guideline related to identifying performance obligations and licensing implementation guidance contained in the new revenue recognition standard. The updates in ASU No. 2016-10 include targeted improvements based on input the FASB received from the Transition Resource Group for Revenue Recognition and other stakeholders. It seeks to proactively address areas in which diversity in practice potentially could arise, as well as to reduce the cost and complexity of applying certain aspects of the guidance both at implementation and on an ongoing basis. ASU No. 2016-12 addresses narrow-scope improvements to the guidance on collectability, non-cash consideration, and completed contracts at transition. Additionally, the amendments in this ASU provide a practical expedient for contract modifications at transition and an accounting policy election related to the presentation of sales taxes and other similar taxes collected from customers. The amendments in ASU No. 2016-20 represents changes to make minor corrections or minor improvements to the Codification that are not expected to have a significant effect on current accounting practice or create a significant administrative cost to most entities. The effective date and transition requirements for ASU No. 2016-08, ASU No. 2016-10, ASU No. 2016-12 and ASU No. 2016-20 are the same as ASU No. 2014-09. The Company will adopt ASU No. 2014-09, ASU No. 2016-08, ASU No. 2016-10, ASU No. 2016-12 and ASU No. 2016-20 at January 1, 2018. The Company has substantially completed the implementation of these ASUs and has identified the necessary changes to its policies, business processes, systems and controls. Whilst the Company has finalized the analysis of its revenue contracts applying the above guidance, and will adopt FASB ASC Topic 606, Revenue from Contracts with Customers, effective January 1, 2018, using the modified retrospective transition approach. Under this approach, FASB ASC Topic 606 would apply to all new contracts initiated on or after January 1, 2018. For existing contracts that have remaining obligations as of January 1, 2018, any difference between the recognition criteria in these ASUs and the Company's current revenue recognition practices would be recognized using a cumulative effect adjustment to the opening balance of accumulated deficit. The Company has concluded that its revenue recognition will remain the same as previously reported and will not have material impacts to its consolidated financial statements.
NOTE 3 – REVENUE FROM CONTRACTS WITH CUSTOMERS
The Company assesses revenues based upon the nature or type of goods or services it provides and the geographic location of the customer facility. The following tables present disaggregated revenue information:
Year Ended December 31,
202320222021
Single Wafer Cleaning, Tahoe and Semi-Critical Cleaning Equipment$403,851 $272,939 $189,208 
ECP (front-end and packaging), Furnace and Other Technologies103,356 77,482 33,210 
Advanced Packaging (excluding ECP), Services & Spares50,516 38,411 37,333 
Total Revenue By Product Category$557,723 $388,832 $259,751 
Year Ended December 31,
202320222021
Mainland China$540,969 $377,752 $258,615 
Other regions16,754 11,080 1,136 
$557,723 $388,832 $259,751 
Below are the accounts receivables and contract liabilities balances as of:
December 31,
2023		December 31,
2022
  
Accounts receivable$283,186 $182,936 
Advances from customers181,368 153,773 
Deferred revenue3,687 4,174 
During the year ended December 31, 2023, advances from customers increased by $27,595 primarily due to a net increase of payments made by customers for first tools under evaluation.
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Below are revenues recognized from amounts included in contract liabilities at the beginning of the year:
Year Ended December 31,
202320222021
Revenue recognized from amounts included in contract liabilities at the beginning of the year$97,370 $30,385 $13,425 

NOTE 4 – ACCOUNTS RECEIVABLE
At December 31, 20172023 and 2016,2022, accounts receivable consisted of the following:
December 31,
20232022
Accounts receivable$288,016 $182,936 
Less: Allowance for credit losses(4,830)- 
Total$283,186 $182,936 
 
 
December 31,
 
 
 
2017
 
 
2016
 
Accounts receivable
 $26,762 
 $16,026 
Less: Allowance for doubtful accounts
  — 
  — 
Total
 $26,762 
 $16,026 
The $100,250 increase in accounts receivable for the year ended December 31, 2023 corresponds to a $168,891 increase in revenue for the same period.
December 31,
20232022
Cumulative effect of change in accounting principle under ASC 326, before tax, as of January 1, 2023$(2,099)$— 
Provision for credit loss(2,731)— 
Allowance for credit losses, before tax, as of December 31, 2023$(4,830)$— 

The Company reviewsassesses collectability by reviewing accounts receivable on a periodicgeneral basis where similar characteristics exist and makes general andon an individual basis when the Company identifies specific allowances when there is doubt as tocustomers with known disputes or collectability issues. In determining the collectabilityamount of individual balances. Nothe allowance for doubtfulcredit losses, the Company considers historical collectability based on past due status, the age of the accounts is considered necessary atreceivable balances, credit quality of the Company’s customers based on ongoing credit evaluations, current economic conditions, reasonable and supportable forecasts of future economic conditions, and other factors that may affect the Company’s ability to collect from customers. As a result of the Company’s adoption of ASC 326 as of January 1, 2023 (Note 2), the Company recorded an allowance for credit losses as of December 31, 2017 and 2016. At2023, as compared to no allowance for credit losses as of December 31, 2017, accounts receivable of $1,805 (RMB 11,800) was pledged as collateral for borrowings from financial institutions (note 6).
NOTE 45 – INVENTORY
INVENTORIES
At December 31, 20172023 and 2016,2022, inventory consisted of the following:
December 31,
20232022
Raw materials$235,062 $167,135 
Work-in-process81,438 79,126 
Finished goods228,895 146,911 
Total inventory$545,395 $393,172 
 
 
December 31,
 
 
 
2017
 
 
2016
 
Raw materials
 $6,181
 $7,698 
Work in process
  4,328 
  1,260 
Finished goods
 4,879
  2,708 
 
    
    
Total inventory, gross
  15,388 
  11,666 
Inventory reserve
  — 
  — 
Total inventory, net
 $15,388 
 $11,666 
At December 31, 2023 and December 31, 2022, the value of finished goods inventory, which is comprised of first-tools at customer physical locations, for which customers were contractually obligated to take ownership upon acceptance, totaled $123,390 and $123,169, respectively.
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The Company did not set up any$70,239 increase in raw materials and work-in-process inventory reserve as ofat December 31, 20172023 compared to December 31, 2022 was due to additional purchase of supplies to support a higher level of expected total shipments for the next several quarters, and to reduce the risk of supply chain delays to meet anticipated customer demand for the Company’s products. The $81,984 increase in finished goods inventory at December 31, 2023 compared to December 31, 2022 reflects a higher value of completed tools at the Company's facilities, and a higher value of first-tools under evaluation by existing or 2016prospective customers, due to shipments made, net of customer acceptances during the period.
The Company’s products each require a certain degree of customization, and nothe substantial majority of the work-in-process inventory was pledgedand finished goods inventory is built to meet a specific customer order for repeat shipment or first tool delivery. At the end of each period, the Company assesses the status of each item in work-in-process and finished goods inventory. The Company recognizes a loss or impairment if in management’s judgement the inventory cannot be sold or used for production, if it has been damaged or should be considered as collateralobsolete, or if the net realizable value is lower than the cost.
At the end of each period, the Company also assesses the status of its raw materials. The Company recognizes a loss or impairment for borrowings from financial institutions.any raw materials aged more than three years. The three-year aging is based on the Company’s assessment of technology change, its requirement to maintain stock for warranty coverage, and other factors.
During the years ended December 31, 2023, 2022, and 2021, provision for inventory of $575, $2,248, and $75 were recognized in cost of revenue, respectively. Write-downs were due to an internal assessment that certain inventory could not be sold or used for production due to damage or obsolescence.
NOTE 56 – PROPERTY, PLANT AND EQUIPMENT, NET
At December 31, 20172023 and 2016,2022, property, plant and equipment consisted of the following:
December 31,
 20232022
Buildings and plants$83,109 $35,864 
Manufacturing equipment16,556 9,298 
Office equipment4,953 3,691 
Transportation equipment404 407 
Leasehold improvement7,889 7,173 
Total cost112,911 56,433 
Less: Total accumulated depreciation and amortization(17,503)(10,047)
Construction in progress106,440 36,489 
Total property, plant and equipment, net$201,848 $82,875 
 
 
December 31,
 
 
 
2017
 
 
2016
 
Manufacturing equipment
 $9,660 
 $8,566 
Office equipment
  463 
  410 
Transportation equipment
  203 
  191 
Leasehold improvement
  277 
  224 
Total cost
  10,603 
  9,391 
Less: Total accumulated depreciation
  (8,263)
  (7,562)
Construction in progress
  - 
  433 
Total property, plant and equipment, net
 $2,340 
 $2,262 

Depreciation expense was $243$6,912, $4,839, and $180$2,099 for the years ended December 31, 20172023, 2022, and 2016,2021, respectively. Buildings and plants represent Lingang housing property owned by ACM Shengwei at a value of RMB 249,746 ($35,264) as ofDecember 31, 2023, and facilities for the new headquarters of ACM Shanghai ("Zhangjiang New Building") at a value of RMB 338,848 ($47,845) as ofDecember 31, 2023. The Lingang housing property is pledged as security for loans from China Merchants Bank (Note 12).

Construction in progress primarily reflects costs incurred related to the construction of ACM Shanghai’s Lingang development and production center, and is scheduled to begin production in 2024.


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NOTE 67 – LAND USE RIGHT, NET
A summary of land use right is as follows:
December 31,
20232022
Land use right purchase amount$8,996 $9,149 
Less: accumulated amortization(629)(457)
Land use right, net$8,367 $8,692 
The amortization for the years ended December 31, 2023, 2022 and 2021 was $181, $189 and $199, respectively.
The annual amortization of land use right for each of the five succeeding years is as follows:
Year ending December 31,
2024$180 
2025180 
2026180 
2027180 
2028180 
2029 and thereafter7,467 
Total$8,367 
NOTE 8 – OTHER LONG-TERM ASSETS
At December 31, 2023 and 2022, other long-term assets consisted of the following:
December 31,
20232022
Prepayment for property, plant and equipment$3,380 $704 
Lease deposit834 393 
Security deposit for land use right696 708 
Prepayment for property - Zhangjiang New Building— 47,251 
Others1,140 1,209 
Total other long-term assets$6,050 $50,265 

Prepayment for property - Zhangjiang New Building is for the new corporate headquarters of ACM Shanghai.Pursuant to contractual agreements, ownership ofZhangjiang New Building was transferred to ACM Shanghai in February 2023 atvalue of RMB 338,848 ($47,201). Upon the transfer of ownership, Prepayment for property - Zhangjiang New Building was reclassified to property, plant and equipment (Note 6).
NOTE 9 – SHORT-TERM BORROWINGS
At December 31, 20172023 and 2016,December 31, 2022, short-term borrowings consisted of the following:
December 31,
20232022
Line of credit up to RMB 150,000 from China Everbright Bank,  
1)due on August 17, 2023 with an annual interest rate of 3.40%.— 8,616 
2)due on September 1, 2023 with an annual interest rate of 3.60%.— 8,616 
 
 
December 31,
2017
 
 
December 31,
2016
 
Borrowings from Bank of China, due on February 10, 2017 with annual interest rate of 4.8%, secured by certain of the Company’s intellectual property and fully repaid on February 13, 2017
 $- 
 $1,222 
Borrowings from Bank of Shanghai Pudong Branch, due on June 24, 2017 with an annual interest rate of 5.66%, guaranteed by the Company’s CEO and fully repaid on June 25, 2017
  - 
  281 
Line of credit up to $3,605 (RMB 25,000) from Bank of Shanghai Pudong Branch, due on July 3, 2017 with floating interest (interest rate of 5.66% at December 31, 2016), guaranteed by the Company’s CEO and fully repaid on May 18, 2017
  - 
  1,455 
Line of credit up to $3,670 from Bank of Shanghai Pudong Branch, due on July 3, 2017 with an annual interest rate of 3.2%, guaranteed by the Company’s CEO and fully repaid on June 7, 2017
  - 
  1,803 
Line of credit up to $4,590 (RMB 30,000) from Bank of China Pudong Branch, due on March 5, 2018 with floating interest rate (annual interest rate of 4.80% at December 31, 2017), secured by certain of the Company’s intellectual property
  2,219 
  - 
Line of credit up to $3,825 (RMB 25,000) from Bank of Shanghai Pudong Branch, various withdraws due in October 2018 with floating interest rate (annual interest rate of 5.66% at December 31, 2017), guaranteed by the Company’s CEO
  2,111 
  - 
Borrowings from Shanghai Rural Commercial Bank, due on November 21, 2018 with annual interest rate of 5.44%, pledged by ACM Shanghai’s accounts receivable (note 3) and guaranteed by the Company’s CEO.
  765 
  - 
Total
 $5,095 
 $4,761 
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   3)due on December 16, 2023 with an annual interest rate of 3.00%- 4,308 
4)due on August 29,2024 with an annual interest rate of 3.00%.2,463 - 
Line of credit up to RMB 100,000 from Bank of Communications,
1)due on August 11, 2023 with an annual interest rate of 3.60%.— 8,616 
2)due on September 5, 2023 with an annual interest rate of 3.50%.— 5,744 
Line of credit up to RMB 40,000 from Bank of China,
1)due on August 26, 2023 with an annual interest rate of 3.15%.— 5,744 
Line of credit up to RMB 40,000 from Bank of China,
 1)due on September 7, 2024 with an annual interest rate of 2.87%5,648 — 
Line of credit up to RMB 100,000 from China Merchants Bank,
1)due on July 21, 2023 with an annual interest rate of 3.50%— 1,292 
2)due on July 27, 2023 with an annual interest rate of 3.50%— 1,292 
3)due on August 1, 2023 with an annual interest rate of 3.50%— 1,292 
4)due on August 3, 2023 with an annual interest rate of 3.50%— 1,292 
5)due on August 7, 2023 with an annual interest rate of 3.50%— 1,293 
6)due on August 14, 2023 with an annual interest rate of 3.50%— 1,293 
7)due on August 15, 2023 with an annual interest rate of 3.50%— 1,293 
8)due on August 21, 2023 with an annual interest rate of 3.50%— 1,005 
9)due on August 28, 2023 with an annual interest rate of 3.50%— 1,292 
10)due on September 13, 2023 with an annual interest rate of 3.50%— 1,292 
11)due on September 20, 2023 with an annual interest rate of 3.50%— 1,293 
12)due on October 7, 2023 with an annual interest rate of 3.50%— 431 
Line of credit up to RMB 200,000 from China Merchants Bank,
1)due on August 7,2024 with an annual interest rate of 3.00%.1,271 - 
2)due on August 8,2024 with an annual interest rate of 3.00%.1,271 - 
3)due on August 9,2024 with an annual interest rate of 3.00%.1,271 - 
4)due on August 14,2024 with an annual interest rate of 3.00%.1,271 - 
5)due on August 17,2024 with an annual interest rate of 3.00%.1,271 - 
6)due on August 20,2024 with an annual interest rate of 3.00%.1,271 - 
7)due on August 21,2024 with an annual interest rate of 3.00%.1,271 - 
8)due on August 22,2024 with an annual interest rate of 3.00%.1,271 - 
9)due on August 24,2024 with an annual interest rate of 3.00%.1,271 - 
10)due on August 27,2024 with an annual interest rate of 3.00%.1,271 - 
11)due on August 29,2024 with an annual interest rate of 3.00%.1,271 - 
12)due on August 30,2024 with an annual interest rate of 3.00%.1,271 - 
13)due on September 3,2024 with an annual interest rate of 3.00%.1,271 - 
14)due on September 5,2024 with an annual interest rate of 3.00%.1,270 - 
15)due on September 6,2024 with an annual interest rate of 3.00%.1,270 - 
16)due on September 10,2024 with an annual interest rate of 3.00%.1,270 - 
17)due on September 12,2024 with an annual interest rate of 3.00%.1,270 - 
Line of credit up to KRW 500,000 from Industrial Bank of Korea,
1)due on July 12,2024 with an annual interest rate of 6.03%.77 - 
Line of credit up to KRW 2,000,000 from Industrial Bank of Korea,
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1)due on December 15,2024 with an annual interest rate of 4.27%.1,544 - 
Total$31,335 $56,004 
For the years ended December 31, 20172023, 2022 and 2016,2021, interest expense related to short-term borrowings amounted to $272$1,581, $810, and $179$700, respectively.
NOTE 710 – OTHER PAYABLEPAYABLES AND ACCRUED EXPENSES
At December 31, 20172023 and 2016,2022, other payablepayables and accrued expenses consisted of the following:
December 31,
20232022
Accrued commissions$15,572 $14,890 
Accrued warranty9,834 8,780 
Accrued payroll14,840 12,201 
Accrued professional fees696 724 
Accrued machine testing fees1,762 1,215 
Accrued machine sales fees6,010 5,874 
Accrued Lingang construction fees33,729 738 
Others20,508 7,779 
Total$102,951 $52,201 
 
 
December 31, 
 
 
 
2017
 
 
2016
 
Lease expenses and payable for leasehold improvement due to a related party (note 12)
 $2,024 
 $1,883 
Commissions
  836 
  757 
Accrued warranty
  839 
  290 
Accrued payroll
  745 
  398 
Accrued professional fees
  60 
  46 
Accrued machine testing fees
  684 
  - 
Others
  838 
  589 
Total
 $6,026 
 $3,963 
NOTE 811 – INVESTORS’ DEPOSITSLEASES
The Company leases space under non-cancelable operating leases for several office and manufacturing locations. These leases do not have significant rent escalation holidays, concessions, leasehold improvement incentives, or other build-out clauses. Further, the leases do not contain contingent rent provisions.
OnMost leases include one or more options to renew. The Company regularly evaluates the renewal options, and when they are reasonably certain of exercise, the Company includes the renewal period in its lease term.
The components of lease expense were as follows:
Year Ended December 31,
202320222021
Operating lease cost$3,580 $2,816 $2,451 
Short-term lease cost923 786 394 
Lease cost$4,503 $3,602 $2,845 
Supplemental cash flow information related to operating leases was as follows for the years ended December 9, 2016, Shengxin (Shanghai) Management Consulting Limited Partnership (“SMC”), a related party (note 12), delivered RMB 20,124 (approximately $2,98131, 2023, 2022, and 2021:
Year Ended December 31,
202320222021
Operating cash outflow from operating leases$3,580 $2,816 $2,451 
Operating lease right-of-use assets obtained in exchange for new operating lease liabilities$8,195 $1,054 $1,818 
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Maturities of lease liabilities for all operating leases were as follows as of December 31, 2023:
December 31,
2024$3,016 
20251,767 
20261,207 
20271,150 
2028 and thereafter595 
Total lease payments$7,735 
Less: Interest(709)
Present value of lease liabilities$7,026 
The weighted average remaining lease terms and discount rates for all operating leases were as follows as of December 31, 2023 and 2022:
December 31,
20232022
Remaining lease term and discount rate:
Weighted average remaining lease term (years)3.442.00
Weighted average discount rate3.91 %4.25 %


NOTE 12 – LONG-TERM BORROWINGS
At December 31, 2023 and 2022, long-term borrowings consisted of the closefollowing:
December 31,
20232022
Loan from China Merchants Bank$13,362 $15,265 
Loans from Bank of China5,013 5,744 
Loan from Bank of Shanghai14,120 — 
Loans from China CITIC Bank28,240 — 
Less: Current portion(6,783)(2,322)
$53,952 $18,687 
The loan from China Merchants Bank is for the purpose of business on such date)purchasing property in cash (the “SMC Investment”) toLingang, Shanghai. The loan is repayable in 120 installments with the last installment due in November 2030, with an annual interest rate of 4.65%. The loan is pledged by the property of ACM Shengwei and guaranteed by ACM Shanghai.
Two loans from Bank of China are for the purpose of funding ACM Shanghai project expenditures. The loans bear interest at an annual rate of 2.6% and are repayable in 6 installments, with the last installments due in June 2024 and September 2024.

The loan from Bank of Shanghai is for potential investment pursuant to terms to be subsequently negotiated. On March 14, 2017, ACM,the purpose of funding ACM Shanghai project expenditures. The loan bears interest at an annual rate of 2.85%, and SMC entered into a securities purchase agreement pursuant to which,will be fully repaid in exchangeApril 2025.

The first loan from China CITIC Bank is for the SMC Investment, ACM issued to SMC a warrant exercisable to purchase 397,502 sharespurpose of ACM’s Class A common stock at a price of $7.50 per share (note 9).
NOTE 9 – WARRANT LIABILITY
On December 9, 2016, SMC delivered the SMC Investment tofunding ACM Shanghai project expenditures. The loan bears interest at an annual rate of 3.40% and are repayable in 4 installments, with the last installment due in August 2025.
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The second loan from China CITIC bank is for potential investment pursuant to terms to be subsequently negotiated. the purpose of funding ACM's general corporate expenses and working capital. The loan bears interest at an annual rate of 4.50% payable quarterly, and the principal amount is repayable in 4 installments, with the last installment due in December 2025.

As of December 31, 2016,2023 and December 31, 2022, the termstotal carrying amount of the SMC Investment had not yet been negotiatedlong-term loans was $60,735 and the SMC Investment was recorded as investors’ deposit.
On March 14, 2017, ACM, ACM Shanghai$21,009, compared with an estimated fair value of $56,462 and SMC entered into a securities purchase agreement (the “SMC Agreement”) pursuant to which, in exchange for the SMC Investment, ACM issued to SMC a warrant exercisable, for cash or on a cashless basis, to purchase, at any time on or before May 17, 2023, all, but not less than all, of 397,502 shares of ACM’s Class A common stock at a price of $7.50 per share. Under the SMC Agreement, if SMC does not exercise the warrant by May 17, 2023, ACM Shanghai will be obligated, subject to approval of governmental authorities and ACM Shanghai’s equity holders, to deliver an equity interest of 3.6394% (subject to dilution) in satisfaction of the SMC Investment. If SMC exercises the warrant or if SMC does not exercise the warrant and the issuance of the equity interest in ACM Shanghai is not completed by August 17, 2023 due to the inability of the parties to obtain required governmental or equity holder approvals, then ACM Shanghai will be obligated to pay to SMC, in satisfaction of the SMC Investment, an amount equal to $2,981, converted into RMB at the lesser of 6.75 and the then-current RMB-to- US dollar exchange rate.
In accordance with FASB ASC 480, Distinguishing Liabilities from Equity, the warrant is classified as a liability as the warrant is conditional puttable.$18,538, respectively. The fair value of the warrantlong-term loans is adjustedestimated by discounting cash flows using interest rates currently available for changes indebts with similar terms and maturities (Level 2 fair value at each reporting period but cannot be lower than the proceedsmeasurement). Refer to Note 2 for an explanation of the SMC Investment. The corresponding non-cash gain or loss of the changes in fair value is recorded in earnings. The methodology usedhierarchy structure.

Scheduled principal payments for the outstanding long-term loans, including the current portion, as of December 31, 2023 are as follows:
Year ending December 31,
2024$6,783 
202544,087 
20261,855 
20271,929 
20282,007 
Thereafter4,074 
$60,735 
For the years ended December 31, 2023 and 2022, respectively, $1,100 and $845 of interest expense related to valuelong-term borrowings was incurred. For the warrantyear ended December 31, 2021, $1,040 of interest related to long-term borrowings was the Black-Scholes valuation model with the following assumptions:
95
incurred, of which $65 was charged to interest expense and $975 was capitalized as other long-term assets.
December 31,
2017
Fair value of common share (1)
$5.25
Expected term in years (2)
5.38
Volatility (3)
28.71%
Risk-free interest rate (4)
2.20%
Expected dividend (5)
0%
(1) Common stock price was the close price at December 31, 2017.
(2) Expected term of the warrant represents the period from the current balance sheet date to the warrant expiration date.
(3) Volatility is calculated based on the historical volatility of ACM’s comparable companies in the period equal to the expected term of the warrant.
(4) Risk-free interest rate is based on the yields of U.S. treasury securities with maturities similar to the expected term of the warrant.
(5) Expected dividend is assumed to be 0% as ACM has no history or expectation of paying a dividend on its common stock.
NOTE 1013 – OTHER LONG-TERM LIABILITIES
Other long-term liabilities represent government subsidies received from PRCmainland China governmental authorities for development and commercialization of certain technology but not yet recognized (note 2). As of December 31, 20172023 and 2016,2022, other long-term liabilities consisted of the following unearned government subsidies:
December 31,
20232022
Subsidies to Stress Free Polishing project, commenced in 2008 and 2017$475 $611 
Subsidies to other cleaning tools, commenced in 2020632 785 
Subsidies to SW Lingang R&D development in 20213,467 4,266 
Subsidies to CO2 Technology275 965 
Other1,024 694 
Total$5,873 $7,321 
 
 
December 31,
 
 
 
2017
 
 
2016
 
Subsidies to Stress Free Polishing project, commenced in 2008  and 2017
 $1,952 
 $1,958 
Subsidies to Electro Copper Plating project, commenced in 2014
  4,265 
  4,921 
Total
 $6,217 
 $6,879 
NOTE 1114 – EQUITY METHOD INVESTMENTLONG-TERM INVESTMENTS
On September 6, 2017, ACM and Ninebell Co., Ltd. (“Ninebell”), a Korean company that is one of the Company’s principal materialsmaterial suppliers, entered into an ordinary share purchase agreement, effective as of September 11, 2017, pursuant to which Ninebell issued to ACM ordinary shares representing 20% of Ninebell’s post-closing equity for a purchase price of $1,200, and a common stock purchase agreement, effective as of September 11, 2017, pursuant to which ACM issued 133,334400,002 shares of Class A common stock to Ninebell for a purchase price of $1,000 at $7.50$2.50 per share. The investment in Ninebell is accounted for under the equity method. Undistributed earnings attributable

On June 27, 2019, ACM Shanghai and Shengyi Semiconductor Technology Co., Ltd. (“Shengyi”), a company based in Wuxi, China that is one of the Company’s component suppliers, entered into an agreement pursuant to ACM’swhich Shengyi issued to ACM Shanghai shares representing 15% of Shengyi’s post-closing equity for a purchase price of $109. The investment in Shengyi is accounted for under the equity method. In September 2023, the Company invested additional
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RMB 6,100 ($900) to Shengyi. As the additional investment is not in substance common stock, the Company measures the additional investment in Shengyi at measurement alternative.
On September 5, 2019, ACM Shanghai entered into a Partnership Agreement with six other investors, as limited partners, and Beijing Shixi Qingliu Investment Co., Ltd., as general partner and manager, with respect to the formation of Hefei Shixi Chanheng Integrated Circuit Industry Venture Capital Fund Partnership (LP), a Chinese limited partnership based in Hefei, China. Pursuant to such Partnership Agreement, on September 30, 2019, ACM Shanghai invested RMB 30,000 ($4,200), which represented 10% of the partnership’s total subscribed capital. The investment in Hefei Shixi Chanheng Integrated Circuit Industry Venture Capital Fund Partnership (LP) is accounted for under the equity method investment represented $37in accordance with ASC 323-30-S99-1.
On October 29, 2021, ACM Shanghai and Waferworks (Shanghai) Co., Ltd, or Waferworks, a company based in Shanghai, China, and one of the Company’s customers, entered into an agreement pursuant to which Waferworks issued to ACM Shanghai shares representing 0.25% of Waferworks’ post-closing equity for a purchase price of $1,568. As the investment is not in substance common stock and there is no readily determinable fair value, the Company measures the investment in Waferworks at measurement alternative.
On August 17, 2022, ACM Singapore and Wooil Flucon Co., Ltd. (“Wooil”), a company based in Korea and a potential component supplier to the Company, entered into an agreement pursuant to which Wooil, on September 1, 2022, issued to ACM Singapore shares representing 20% of Wooil’s post-closing equity for a purchase price of $1,000. The investment in Wooil is accounted for under the equity method.

In September 2023, ACM Shanghai entered into a partnership agreement with Company A to invest RMB 30,000 ($4,200), which represented 4.37% of the partnership's total subscribed capital. Since there is no readily determinable fair value, the Company measures the investments at measurement alternative.

In November 2023, ACM Shanghai entered into a partnership agreement with Company B to invest RMB 6,600 ($930), which represented 1.38% of the partnership's total subscribed capital. Since there is no readily determinable fair value, the Company measures the investments at measurement alternative.

December 31,
Equity investee:20232022
Ninebell$5,632 $5,199 
Wooil1,003 1,011 
Shengyi1,693 1,168 
Hefei Shixi9,174 8,645 
Subtotal17,502 16,023 
Investments accounted for using measurement alternative:  
Waferworks1,412 1,436 
Shengyi857 — 
Company A4,236 — 
Company B932 — 
Other2,941 — 
Total$27,880 $17,459 

The Company recognized $1,465, nil, and nil (upward adjustments) resulting from observable price changes in orderly transactions for an identical or similar investment of the same issuer on the consolidated retained earnings atstatements of comprehensive income (loss) for the years ended December 31, 2017.2023, 2022, and 2021, respectively. No unrealized losses (downward adjustments) were recorded by the Company during the years ended December 31, 2023, 2022, and 2021.

NOTE 1215 – SHORT-TERM INVESTMENTS

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Pursuant to a Partnership Agreement dated June 9, 2020 (the “Partnership Agreement”) and a Supplementary Agreement thereto dated June 15, 2020 (the “Supplementary Agreement”), ACM Shanghai acquired shares of SMIC in July 2020. Shares of SMIC are listed on the STAR Market.

Pursuant to an Agreement entered into on September 19, 2022 (the ‘‘Agreement’’), ACM Shanghai became a limited partner of the Nuode Asset Fund Pujiang No. 783 Single Asset Management Plan (‘‘Nuode Asset Fund’’), a Chinese limited partnership formed by Nuode Asset Management Co., Ltd, a financial services firm based in Shanghai, China. Nuode Asset Fund was formed to establish a special fund with the purpose to participate in certain technology related investments in mainland China. Subsequent to the future purchase, any investment will be held by Nuode Asset Fund and restricted for a minimum period of nine months. The limited partners of the Nuode Asset Fund contributed a $22,160 to the fund, of which ACM Shanghai contributed $4,196, or 18.75% of the contribution on September 27, 2022.

In December 2022, the Nuode Asset Fund purchased shares in the secondary stock offering of a publicly traded mainland China-stock listing. The number of shares owned by Nuode Asset Fund was apportioned to all of the limited partners in proportion to their respective capital contributions which is 18.75% in the case of ACM Shanghai.

Pursuant to a Share Purchase Agreement dated June 2023, ACM Shanghai acquired shares of Huahong Semiconductor Limited (“Huahong”) in July 2023 with amount of $13,930. The shares held by ACM Shanghai are restricted for sale for a minimum period of twelve months. Huahong completed it STAR IPO in August 2023.

Pursuant to a Share Purchase Agreement dated August 2023, ACM Shanghai acquired shares of Zhongjuxin Limited Company (“Zhongjuxin”) in September 2023 with amount of RMB $4,179. The shares held by ACM Shanghai are restricted for sale for a minimum period of twelve months. Zhongjuxin completed it STAR IPO in September 2023.

The components of short-term investments were as follows:
December 31,
20232022
Short-term investments listed in Shanghai Stock Exchange
Cost$20,155 $14,779 
Market value$21,312 $20,209 

NOTE 16 – RELATED PARTY BALANCES AND TRANSACTIONS
Ninebell
On August 18, 2017,
Ninebell is an equity investee of ACM (Note 14) and is the Company’s principal supplier of robotic delivery system subassemblies used in our single-wafer cleaning equipment. The Company purchases equipment from Ninebell itsfor production in the ordinary course of business. The Company pays for a portion of the equipment in advance and is obligated for the remaining amounts upon receipt of the product.
Shengyi

Shengyi is an equity method investment affiliate (note 11), entered into a loan agreement, pursuant to which ACM made an interest-free loaninvestee of $946 to Ninebell, payable in 180 days or automatically extended another 180 days if in default. The loan is secured by a pledge of Ninebell’s accounts receivable due from ACM and all money that Ninebell receives from ACM. As of December 31, 2017 and 2016, accounts payable due to Ninebell was $2,118 and $508, respectively.
In 2007, ACM Shanghai entered into an operating lease agreement with Shanghai Zhangjiang Group Co., Ltd. (“Zhangjiang Group”), group company(Note 14) and is one of ZSTVC,the Company’s component suppliers in mainland China. The Company purchases components from Shengyi for production in the ordinary course of business. The Company incurs a service fee related to installation and hook-up fees which is our current investorrecorded within cost of revenue on the Company’s consolidated statements of comprehensive income (loss). The Company pays for a portion of the raw materials in advance and previous holderis obligated for the remaining amounts upon receipt of non-controlling intereststhe product.

All related party outstanding balances are short-term in ACM Shanghai (note 14),nature and are expected to lease manufacturing and office space locatedbe settled in Shanghai, China. Pursuant to the lease agreement, Zhangjiang Group provided $771 to ACM Shanghai for leasehold improvements. In September 2016, the lease agreement was amended to modify payment terms and extend the lease through December 31, 2017. During the year ended December 31, 2017 and 2016, the Company incurred leasing expenses under the lease agreement of $638 and $640, respectively. As of December 31, 2017, and December 31, 2016, payables to Zhangjiang Group for lease expenses and leasehold improvements recorded as other payables and accrued expenses, amounted to $2,024 and $1,883, respectively (note 7).
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On December 9, 2016, ACM Shanghai received the SMC Investment from SMC for potential investment pursuant to terms to be subsequently negotiated (notes 8 and 9). SMC is a limited partnership incorporated in the PRC, whose partners consist of employees of ACM Shanghai. As of December 31, 2017 and 2016, investors’ deposits from SMC amounted to $0, and $2,902, respectively. On March 14, 2017, ACM, ACM Shanghai and SMC entered into a securities purchase agreement (the “SMC Agreement”) pursuant to which, in exchange for the SMC Investment, ACM issued to SMC a warrant exercisable, for cash or on a cashless basis, to purchase, at any time on or before May 17, 2023, all, but not less than all, of 397,502 shares of ACM’s Class A common stock at a price of $7.50 per share, for a total exercise price of $2,981. Under the SMC Agreement, if SMC does not exercise the warrant by May 17, 2023, ACM Shanghai will be obligated, subject to approval of governmental authorities and ACM Shanghai’s equity holders, to deliver an equity interest of 3.6394% (subject to dilution) in satisfaction of the SMC Investment. If SMC exercises the warrant or if SMC does not exercise the warrant and the issuance ofThe following tables represent related party transactions with the equity interest in ACM Shanghai is not completed by August 17, 2023 due to the inability of the parties to obtain required governmental or equity holder approvals, then ACM Shanghai will be obligated to pay to SMC, in satisfaction of the SMC Investment, an amount equal to $2,981, converted into RMB at the lesser of 6.75 and the then-current RMB-to-US dollar exchange rate.
NOTE 13 – LEASES
ACM entered into a two-year lease agreement in March 2015 for office and warehouse space of approximately 3,000 square feet for its headquarters in Fremont, California, at a rate of $2 per month. On March 22, 2017, ACM amended the lease agreement to extend the lease term through March 31, 2019 and increase the base rent to $3 per month.
ACM Shanghai entered into an operating lease agreement with Zhangjiang Group (a related party, see note 12) in 2007 for manufacturing and office space of approximately 63,510 square feet in Shanghai, China. The lease terms and its payment terms are subject to modification and extension with Zhangjiang Group from time to time. The lease with Zhangjiang Group expired on December 31, 2017 and we are now leasing the property on a month-to-month basis as we negotiate the terms of the lease.
ACM Wuxi leases office space in Wuxi, China, at a rate of less than $1 per month.
Future minimum lease payments under non-cancelable lease agreementsinvestees as of December 31, 2017 were as follows:2023 and 2022:
December 31,
Advances to related party20232022
Ninebell$2,432 $3,322 
 
 
December 31,
2017
 
2018
 $50
2019
 22
Total
 $72
December 31,
Accounts payable20232022
Ninebell$7,624 $10,526 
Shengyi3,783 3,942 
Total$11,407 $14,468 
Year Ended December 31
Purchase of materials202320222021
Ninebell$42,737 $40,985 $33,659 
Shengyi5,006 5,350 2,434 
Total$47,743 $46,335 $36,093 
Rent expense was $670 an $675 for the years ended December 31, 2017 and 2016, respectively.
Year Ended December 31
Service fee charged by202320222021
Shengyi$820 $543 $561 
Total$820 $543 $561 
NOTE 1417 – COMMON STOCK
At December 31, 2023 and 2022, ACM iswas authorized to issue 100,000,000150,000,000 shares of Class A common stock and 7,303,5335,307,816 shares of Class B common stock, each with a par value of $0.0001. Each share of Class A common stock is entitled to one vote, and each share of Class B common stock is entitled to twenty votes and is convertible at any time into one share of Class A common stock. Shares of Class A common stock and Class B common stock are treated equally, identically and ratably with respect to any dividends if declared by the Board of Directors unless the Board of Directors declares different dividends to the Class A common stock and Class B common stock by getting approval from a majority of common stock holders.stockholders.
In August 2017During the year ended December 31, 2023, ACM entered into a securities purchase agreement with PDHTI and its subsidiary Pudong Science and Technology (Cayman) Co., Ltd. (“PST”), in which ACM agreed to bid, in an auction process mandated by PRC regulations, to purchase PDHTI’s 10.78% equity interests in ACM Shanghai and to sellissued 1,380,886 shares of Class A common stock to PST. On September 8, 2017,upon option exercises by employees and non-employees. During the year ended December 31, 2022, ACM issued 1,119,576980,354 shares of Class A common stock to PST for a purchase price of $7.50 per share, representingupon options exercises by certain employees and non-employees and an aggregate purchase price of $8,397.
In August 2017 ACM entered into a securities purchase agreement with  ZSTVC and its subsidiary Zhangjiang AJ Company Limited (“ZJAJ”), in which ACM agreed to bid, in an auction process mandated by PRC regulations, to purchase ZSTVC’s 7.58% equity interests in ACM Shanghai and to selladditional 66,003 shares of Class A common stock to ZJAJ. On September 8, 2017, ACM issued 787,098upon conversion of an equal number of shares of Class AB common stock to ZJAJ for a purchase price of $7.50 per share, or an aggregate purchase price of $5,903.
In September 2017 ACM issued 133,334 shares of Class A common stock to Ninebell for a purchase price of $7.50 per share, or an aggregate purchase price of $1,000 (note 11).
In November 2017 ACM issued 2,233,000 shares of Class A common stock and received net proceeds of $11,664 from IPO and concurrently ACM issued additional 1,333,334 shares of Class A common stock through a private placement for net proceeds of $7,053.
In connection with the completion of IPO on November 2, 2017, the Company issued a five-year warrant to Roth Capital Partners, LLC, the Company's IPO underwriter, up to 80,000 shares ("Underwriter's Warrant") of the Company's Class A common stock at the exercise price of $6.16. The Underwriter's Warrant is immediately exercisable and expires on November 1, 2022. The Underwriter's Warrant is equity classified and the fair value was $137 at the IPO offering date, using the Black Scholes model with the following assumptions: volatility - 28.26%, dividend rate - 0%, and risk free discount rate- 2%.
At various dates during 2017, ACM issued 472,889 shares of Class A common stock for options exercised by certain employee and non-employees.
stock.
At December 31, 20172023 and 2016,2022, the number of shares of Class A common stock issued and outstanding was 12,935,54656,036,172 and 2,228,740,54,655,286, respectively. At December 31, 20172023 and 2016,2022, the number of shares of Class B common stock issued and outstanding was 2,409,738.5,021,811 and 5,021,811, respectively.
NOTE 15 – REDEEMABLE CONVERTIBLE PREFERRED STOCK
Upon ACM’s redomestication in Delaware in November 2016, ACM had 22,696,467 authorized shares of preferred stock, of which 385,000, 1,572,000, 1,360,962, 2,659,975, 10,718,530, and 6,000,000 shares were designated as Series A, Series B, Series C, Series D, Series E and Series F preferred stock, respectively.
In March 2017 ACM entered into a securities purchase agreement, amended in July 2017, with SSTVC pursuant to which, effective as of August 31, 2017, ACM acquired SSTVC’s equity interests in ACM Shanghai for a purchase price of $6,154 (RMB 40,000) and issued to SSTVC 4,998,508 shares of Series E convertible preferred stock for a purchase price of $5,800.
The number of issued and outstanding shares of redeemable convertible preferred stock as of December 31, 2017 and 2016 were as follows:
 
 
2017
 
 
2016
 
Series A convertible preferred stock
  - 
  385,000 
Series B convertible preferred stock
  - 
  1,572,000 
Series C convertible preferred stock
  - 
  1,360,962 
Series D convertible preferred stock
  - 
  2,659,975 
Series E convertible preferred stock
  - 
  - 
Series F convertible preferred stock
  - 
  6,000,000 
 
  - 
  11,977,937 
Shares of ACM’s convertible preferred stock have rights, preferences and privileges as follows:
Voting Rights
Each share of Series A through Series F convertible preferred stock is entitled to a number of votes equal to the number of whole shares of common stock into which such share can be converted.
Dividends
Holders of Series A through Series F convertible preferred stock have a non-cumulative right to participate in and receive the same dividends as may be declared for common stockholders, as and if declared by the Board of Directors, payable out of funds legally available.
Conversion
Each share of Series A through Series F convertible preferred stock is convertible at any time, at the option of the holder. At November 3, 2017, the IPO date, each share of Series A, B, E and F convertible preferred stock was convertible into one-third share of Class A common stock, each share of Series C convertible preferred stock was convertible into 0.3544 shares of Class A common stock, and each share of Series D convertible preferred stock was convertible into 0.4562 shares of Class A common stock. All Series A through Series F convertible preferred stock converted automatically into a total of 4,625,577 shares of Class A common stock upon the closing of the IPO. At December 31, 2016, 2,960,968 shares of Class A common stock were reserved for issuance upon conversion of outstanding Series A through Series F convertible preferred stock.
Liquidation Preferences
Holders of Series A through Series F convertible preferred stock are entitled to receive specified liquidation amounts in the event of a liquidation, dissolution or winding-up of ACM or of certain deemed liquidation events. The deemed liquidation events generally include (a) a merger or stock sale after which new stockholders would own a majority of the voting stock of ACM and (b) a sale of all or substantially all of the assets of the Company.
In the event of a liquidation, dissolution or winding-up of ACM or a deemed liquidation, the holders of Series A through Series F convertible preferred stock shall be entitled to be paid, prior to and in preference to the holders of common stock, an amount equal to $0.80, $1.00, $1.50, $3.75, $1.00 and $2.50 per share of Series A through Series F convertible preferred stock, respectively, plus any accumulated and unpaid dividends as of the redemption date.
NOTE 1618 – STOCK-BASED COMPENSATION

On April 29, 1998, ACM adopted theACM’s stock-based compensation consists of employee and non-employee awards issued under its 1998 Stock Option Plan (the “1998 Plan”). The options issued under the Plan consisted of incentive stock options (“ISOs”) and nonstatutory stock options (“NSOs”) that should be determined at the time of grant. ISOs could be granted only to employees. NSOs could be granted to employees, directors and consultants. The option price of each ISO and each NSO could not be less than 100% or less than 85% of the fair market value of stock price at the time of grant, respectively.its 2016 Omnibus Incentive Plan. The vesting condition may consist of service period was to becondition or certain performance conditions, as determined by the Board of Directors for each grant.Directors. The total numberfair value of shares of common stock reserved under the 1998 Plan, as amended, was 766,667. If any option granted under the 1998 Plan expires or otherwise terminates without having been exercised in full, the shares of common stock subject to that option would become available for re-grant. At March 3, 2014, the 1998 Plan terminated and no further grants under the 1998 Plan could be made thereunder, although certain previously granted options remained outstanding in accordance with their terms.
On December 28, 2016, ACM adopted the 2016 Omnibus Incentive Plan (the “2016 Plan”). Under the 2016 Plan, the aggregate number of shares of Class A common stock that may be issued shall equal the sum of (a) 2,333,334 and (b) an annual increase on the first day of each year beginning in 2018 and ending in 2026 equal to the lesser of (i) 4% of the shares of Class A and Class B common stock outstanding (on an as-converted basis) on the last day of the immediately preceding year and (ii) such smaller number of shares as may be determined by the Board. A maximum of 2,333,334 shares is available for issuance as ISOs under the 2016 Plan. Besides the stock options granted with a service period based condition and/or performance condition is estimated at the 2016 Plan also authorizes issuancedate of grant using the Black-Scholes option pricing model. The fair value of the stock appreciation rights, restricted stock, restricted stock units, and other share-based and cash awards. The 2016 Plan will terminate on December 27, 2026.options granted with a market based condition is estimated at the date of grant using the Monte Carlo simulation model.

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Employee Awards
The following table summarizes the ACM’s employee share option activities:
 
 
  Number of Option Shares
 
 
  Weighted Average Grant Date Fair Value
 
 
  Weighted Average Exercise Price
 
 
  Weighted Average Remaining Contractual Term
 
Outstanding at December 31, 2015
  1,500,010 
 $0.48 
 $1.02 
  5.60 
Granted
  1,009,371 
  0.54 
  3.00 
    
Exercised
  (409,004)
  0.42 
  0.75 
    
Expired
  - 
  - 
  - 
    
Forfeited
  - 
  - 
  - 
    
Outstanding at December 31, 2016
  2,100,377 
  0.54 
  2.03 
  7.83 
Granted
  140,002 
  2.28 
  6.75 
    
Exercised
  (174,334)
  0.45 
  0.75 
    
Expired
  (3,752)
  0.54 
  3.00 
    
Forfeited
  (16,677)
  0.54 
  3.00 
    
Outstanding at December 31, 2017
  2,045,616 
 $0.66 
 $2.46 
  7.57 
Vested and exercisable at December 31, 2017
  1,010,313 
    
    
    
Duringactivities during the years ended December 31, 20172021, 2022 and 2016, ACM recognized employee stock-based compensation expense of $271 and $92, respectively. 2023:
Number of
Option Shares		Weighted
Average Grant
Date Fair Value		Weighted
Average
Exercise Price		Weighted Average
Remaining
Contractual Term
Outstanding at December 31, 20209,574,233$1.71 $4.24 7.13 years
Granted421,20016.05 35.38 
Exercised(1,431,174)0.82 2.10 
Forfeited/cancelled(162,012)8.32 19.03 
Outstanding at December 31, 20218,402,247$2.45 $5.88 6.53 years
Granted1,653,30010.31 22.41 
Exercised(416,546)1.20 2.97 
Forfeited/cancelled(427,360)11.41 25.24 
Outstanding at December 31, 20229,211,641$3.58 $8.24 6.36 years
Granted2,230,50010.38 13.91 
Exercised(1,080,952)0.90 2.28 
Forfeited/cancelled(362,552)11.24 22.92 
Outstanding at December 31, 20239,998,637$5.15 $9.47 6.17 years
Vested and exercisable at December 31, 20236,044,572 
As of December 31, 2017 and 2016, $729 and $726, respectively,2023, $27,152 of total unrecognized employee stock-based compensation expense, net of estimated forfeitures, related to stock-based awards werefor ACM was expected to be recognized over a weighted-average period of 1.77 years and 2.25 years, respectively.3.96 years. Total unrecognizedrecognized compensation cost may be adjusted for future changes in estimated forfeitures.

The aggregate intrinsic value of options exercised in the years ended December 31, 2023, 2022, and 2021 was $15,457, $6,429, and $43,356, respectively. The aggregate intrinsic value of options outstanding and exercisable as of December 31, 2023 were $108,771 and $82,848, respectively.
The fair value of each optionoptions granted to employeeemployees is estimated on the grant date using the Black-Scholes valuation model with the following assumptions.assumptions:
Year ended December 31,
202320222021
Fair value of common stock(1)$11.85-$17.23$16.83- 25.45$12.79- 17.02
Expected term in years(2)5.50-6.255.50-6.256.25
Volatility(3)84.95-86.45%49.43-50.87%48.53-49.47%
Risk-free interest rate(4)4.16%-4.69%1.70%-3.04%1.00%-1.44%
Expected dividend(5)0 %0 %0 %

December 31,  
 2017 2016
Fair value of common share(1)$5.60-7.59 $2.28
Expected term in years(2)6.25 5.75-6.25
Volatility(3)28.62% -29.18% 29.93%
Risk-free interest rate(4)2.21%-2.22% 2.02%-2.32%
Expected dividend(5)0% 0%
(1)
CommonClass A common stock value was the closeclosing market valueprice of the Class A common stock on December 31, 2017.
the grant date.
(2)
Expected term of share options is based on the average of the vesting period and the contractual term for each grant according to Staff Accounting Bulletin 110.
grant.
(3)
Volatility is calculated based on the historical volatility of ACM’s comparable companiesACM in the period equal to the expected term of each grant.
(4)
Risk-free interest rate is based on the yields of U.S. Treasury securities with maturities similar to the expected term of the share options in effect at the time of grant.
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(5)Expected dividend is assumed to be 0% as ACM has no history or expectation of paying a dividend on its common stock.
Non-employee Awards
Award
The following table summarizes ACM’sthe ACM's non-employee share option activities:

 
 
 
 
Weighted
 
 
Weighted
 
 
Weighted Average
 

 
Number of
 
 
Average Grant
 
 
Average Exercise
 
 
Remaining
 

 
Option Shares 
 
 
Date Fair Value 
 
 
Price 
 
 
Contractual Term
 
Outstanding at December 31, 2015
  1,533,343 
 $0.48 
 $0.99 
  5.53 
Granted
  415,225 
  0.54 
  3.00 
    
Exercised
  (370,003)
  0.45 
  0.75 
    
Expired
  - 
  - 
  - 
    
Forfeited
  - 
  - 
  - 
    
Outstanding at December 31, 2016
  1,578,565 
  0.51 
  1.58 
  6.81 
Granted
  196,669 
  2.25
 6.90
    
Exercised
  (298,555)
  0.39 
  0.93 
    
Expired
  (133,336)
  0.45 
  0.75 
    
Forfeited
  (16,667)
  2.58 
  7.50 
    
Outstanding at December 31, 2017
  1,326,676 
  0.78
  2.52
  7.54
Vested and exercisable at December 31, 2017
  754,799 
    
    
    
Duringactivities during the years ended December 31, 20172021, 2022 and 2016, the Company recognized2023:
Number of
Option Shares (1)		Weighted
Average Grant
Date Fair Value (1)		Weighted
Average
Exercise Price (1)		Weighted Average
Remaining
Contractual Term
Outstanding at December 31, 20202,508,114$0.34 $1.02 4.92 years
Exercised(439,629)0.37 1.28 
Forfeited/cancelled(1,467)0.11 0.28 
Outstanding at December 31, 20212,067,018$0.33 $0.97 3.98 years
Exercised(563,808)0.21 0.51 
Forfeited/cancelled(19,552)0.21 0.48 
Outstanding at December 31, 20221,483,658$0.38 $1.15 3.68 years
Exercised(299,934)0.24 0.55 
Forfeited/cancelled(12,929)0.22 0.50 
Outstanding at December 31, 20231,170,795$0.42 $1.31 2.66 years
Vested and exercisable at December 31, 20231,167,045  

As of December 31, 2023, $9 of total unrecognized non-employee stock-based compensation expense, net of $1,351estimated forfeitures, related to stock-based awards were both expected to be recognized over a weighted-average period of 0.20 year. Total recognized compensation cost may be adjusted for future changes in estimated forfeitures. The aggregate intrinsic value of options exercised in the years ended December 31, 2023, 2022 and $291,2021was $3,796, $9,110 and $11,993, respectively. The aggregate intrinsic value of options outstanding and exercisable as of December 31, 2023 were $21,342 and $21,301, respectively.
ACM Shanghai 2019 Option Grants

In January 2020, ACM Shanghai adopted a 2019 Stock Option Incentive Plan (the “2019 Subsidiary Stock Option Plan”) that provides for, among other incentives, the granting to officers, directors, employees of options to purchase shares of ACM Shanghai’s common stock. The vesting conditions consist of service periods conditions and performance conditions related to certain earning targets determined by the Board of Directors of ACM Shanghai.
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The following table summarizes the ACM Shanghai employee stock option activities during the years ended December 31, 2023, 2022 and 2021 :
Number of
Option Shares in
ACM Shanghai		Weighted
Average Grant
Date Fair Value		Weighted
Average
Exercise Price		Weighted Average
Remaining
Contractual Term
Outstanding at December 31, 20205,423,654
Forfeited/cancelled(46,154)0.24 2.04 2.50 years
Outstanding at December 31, 20215,377,500$0.24 $2.04 2.50 years
Outstanding at December 31, 20225,377,500$0.23 $1.93 1.76 years
 Exercised(2,150,309)0.20 1.85 
 Forfeited/cancelled(92,308)0.22 1.85 
Outstanding at December 31, 20233,134,883$0.24 $1.85 0.85 years
Vested and exercisable at December 31, 2023492,308   
The aggregate intrinsic value of options exercised in the years ended December 31, 2023 and 2022 and 2021 was $31,144, nil and nil, respectively. The aggregate intrinsic value of options outstanding and exercisable as of December 31, 2023 were $40,663 and $6,386, respectively.
ACM Shanghai 2023 Option Grants

In June 2023, ACM Shanghai adopted a 2023 Stock Option Incentive Plan ( the "2023 Subsidiary Stock Option Plan”) that provides for, among other incentives, the granting to officers, directors, employees of options to purchase shares of ACM Shanghai’s common stock. The vesting conditions consist of service periods conditions and performance conditions related to certain sales and research and development progress targets determined by the Board of Directors of ACM Shanghai.

The following table summarizes the ACM Shanghai 2023 Subsidiary Stock Option Plan’s stock option activities during the year ended December 31, 2023:

Number of Option Shares in ACM Shanghai
Weighted
Average Grant
Date Fair Value
Weighted
Average
Exercise Price
Weighted
Average
Remaining
Contractual Term
Outstanding at December 31, 2022— $— $— 0.00 years
Granted10,648,500$9.49 $7.06 
Forfeited/cancelled(73,000)$9.49 $7.06 3.09 years
Outstanding at December 31, 202310,575,500$9.49 $7.06 3.09 years
Vested and exercisable at December 31, 2023— 

The fair value of each optionoptions granted to non-employeesemployees is re-measured at each period end untilestimated on the vestinggrant date using the Black-Scholes valuation model with the following assumptions:
Year Ended December 31, 2023
Fair value of share of common stock (1)$14.87
Expected term in years (2)1.5-4.5
Volatility (3)60.00%-60.60%
Risk-free interest rate (4)1.50%-2.75%

December 31,
 2017 2016
Fair value of common share(1)$5.25-7.59 $2.28
Expected term in years(2)3.58-6.25 2.11-6.24
Volatility(3)28.71%-29.41% 29.93%
Risk-free interest rate(4)1.62%-2.43% 1.00%-2.25%
Expected dividend(5)0% 0%

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1.
Common stock value was the close market(1) Equal to closing value on December 31, 2017.
the grant date.
2.
(2) Expected term of share options is based on the average of the vesting period and the contractual term for each grant according to Staff Accounting Bulletin 110.
grant.
3.
(3) Volatility is calculated based on the historical volatility of ACM’s comparable companiesACM in the period equal to the expected term of each grant.
4.
(4) Risk-free interest rate is based on the yields of U.S. Treasury securitiesRMB deposit in mainland China with maturities similar to the expected term of the share options in effect at the time of grant.

5.The aggregate intrinsic value of options outstanding as of December 31, 2023 was $81,981.
Expected dividend is assumedAs of December 31, 2023, $79,882 of total unrecognized employee stock-based compensation expense, net of estimated forfeitures, related to ACM Shanghai stock-based awards were expected to be 0% as ACM has no history or expectationrecognized over a weighted-average period of paying a dividend on its common stock.
2.1 years. Total recognized compensation cost may be adjusted for future changes in estimated forfeitures.

The following table summarizes the components of stock-based compensation expense included in the consolidated statements of comprehensive income (loss):
Year Ended December 31,
202320222021
Stock-Based Compensation Expense:
Cost of revenue$1,406 $520 $397 
Sales and marketing expense5,684 1,877 1,802 
Research and development expense8,459 2,565 1,115 
General and administrative expense11,789 2,768 1,803 
 $27,338 $7,730 $5,117 
Year Ended December 31,
202320222021
Stock-based compensation expense by type:
Employee stock option plan$6,213 $7,346 $4,674 
Non-employee stock option plan46 46 94 
2019 and 2023 Subsidiary stock option plans21,079 338 349 
$27,338 $7,730 $5,117 

NOTE 1719 – INCOME TAXES
The following represent the U.S. and foreign components of income before income tax for the years ended December 31, 2023, 2022 and 2021:
Year Ended December 31,
202320222021
U.S. federal$10,420 $(3,456)$(4,389)
Foreign105,796 70,818 47,444 
Income before income taxes$116,216 $67,362 $43,055 
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The following represent components of the income tax benefit (expense) for the years ended December 31, 20172023, 2022 and 2016:2021:
 
Year Ended 
December 31, 
 
 
 2017  
 
 
2016
 
Year Ended December 31,Year Ended December 31,
2023202320222021
Current:
 
 
 
Current:  
U.S. federal
 $- 
U.S. state
  - 
  (1)
Total U.S. current tax benefit (expense)
Foreign
  - 
Total current tax expense
  - 
  (1)
Deferred:
    
Deferred:  
U.S. federal
  - 
U.S. state
  - 
Total U.S. deferred tax benefit (expense)
Foreign
  (547)
  (594)
Total deferred tax expense
  (547)
  (594)
Total deferred tax benefit
Total income tax expense
 $(547)
 $(595)
Tax effects of temporary differences that give rise to significant portions of the Company’s deferred tax assets at December 31, 20172023 and 20162022 are presented below:
 
 
December 31, 
 
 
 
2017
 
 
2016
 
Deferred tax assets:
 
 
 
 
 
 
Net operating loss carry forwards (offshore)
 $4,418 
 $1,029 
Net operating loss carry forwards (U.S.) and credit
  683 
  5,815 
Deferred revenue (offshore)
  656 
  840 
Accruals (U.S.)
  18 
  18 
Reserves and other (offshore)
  495 
  43 
Stock-based compensation (U.S.)
  453 
  342 
Property and equipment (U.S.)
  2 
  3 
Total gross deferred tax assets
  6,725 
  8,090 
Less: valuation allowance
  (5,431)
  (6,249)
Total deferred tax assets
  1,294 
  1,841 
Total deferred tax liabilities
  - 
  - 
Translation difference
  - 
  - 
Deferred tax assets, net
 $1,294 
 $1,841 
December 31,
20232022
Deferred tax assets:
Net operating loss carry forwards (offshore)$11,499 $1,456 
Net operating loss carry forwards (U.S.) and credit4,930 1,246 
Deferred revenue (offshore)2,277 1,826 
Accruals (U.S.)3,632 100 
Reserves and other (offshore)4,662 3,655 
Stock-based compensation (U.S.)2,455 2,060 
Stock-based compensation (offshore)4,393 1,229 
Lease liability1,252 414 
Total gross deferred tax assets35,100 11,986 
Less: valuation allowance(11,917)(1,782)
Total deferred tax assets23,183 10,204 
Deferred tax liabilities:
Fixed assets(1,325)(443)
Equity Investments and unrealized gain on short-term investments(1,587)(3,059)
Total deferred tax liabilities(2,912)(3,502)
Deferred tax assets, net$20,271 $6,702 
The Company considers all available evidence to determine whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become realizable. Management considers the scheduled reversal of deferred tax liabilities (including the impact of available carryback and carry-forward periods), and projected taxable income in assessing the realizability of deferred tax assets. In making such judgments, significant weight is given to evidence that can be objectively verified. Based on all available evidence, a partial valuation allowance
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has been established against some net deferred tax assets as of December 31, 20172023 and 2016,2022, based on estimates of recoverability. While the Company has optimistic plans for its business strategy, it determined that such a valuation allowance was necessary given its historical losses and the uncertainty with respect to its ability to generate sufficient profits from its business model from all tax jurisdictions. In order to fully realize the U.S. deferred tax assets, the Company must generate sufficient taxable income in future periods before the expiration of the deferred tax assets governed by the tax code. The valuation allowance in the U.S. decreased by $760 for the year ended December 31, 2017 and increased $264 for the year ended December 31, 2016. The valuation allowance in China decreased by $58 and $163 during the years ended December 31, 2017 and 2016, respectively.
The Company did not have any significant temporary differences relating to deferred tax liabilities as of December 31, 2017 or 2016.
As of December 31, 20172023 and 2016,2022, the Company had valuation allowances, respectively, of $29 and $49 for U.S. federal purposes, $279 and $277 for U.S. state purposes and $11,585 and $1,456 for mainland China income tax purposes.
As of December 31, 2023 and 2022, the Company had net operating loss carry-forwards of, respectively, $20,116$3,121 and $15,037$4,385 for U.SU.S. federal purposes, $536$593 and $204$545 for U.S. state purposes and $6,411$46,467 and $6,822$6,474 for Chinesemainland China income tax purposes. Such losses are set to expirebegin expiring in 2019,2036, 2032 and 20172025 for U.S. federal, U.S. state and Chinesemainland China income tax purposes, respectively.
AsUnder provisions of December 31, 2017 and 2016, the Company had research credit carry-forwards of $606 for U.S. federal purposes, and $377 for U.S. state purposes. Such credits are set to expire in 2025 for U.S. federal carry-forwards. There is no expiration date for U.S. state carry-forwards.
AInternal Revenue Code (the “IRC”), a limitation may applyapplies to the use of the U.S. net operating loss and credit carry-forwards under provisions of the U.S. Internal Revenue Code that would be applicable if ACM experiences an “ownership change.change,” Should these limitations apply, the carry-forwards would be subject to an annual limitation, resultingas defined in a substantial reduction in the gross deferred tax assets before considering the valuation allowance. As of December 31, 2017 and 2016, the Company had not performedIRC Section 382. ACM conducted an analysis to determine ifof its stock ownership under IRC Section 382 and $3,121 of the net operating loss and credit carry-forwards would becarryforwards are subject to such limitations.annual limitation as a result of the ownership change in 2017. The net operating loss carryforwards are not expected to expire before utilization.

The Company’s effective tax rate differs from statutory rates of 34%21% for U.S. federal income tax purposes and 15%-25%12.5% to 25% for Chinesemainland China income tax purpose due to the effects of the valuation allowance and certain permanent differences as it pertainsthey pertain to book-tax differences in employee stock-based compensation and non-US research expense. A new requirement to capitalize and amortize previously deductible research and experimental expenses resulting from a change in Section 174 made by the valueTax Cuts and Jobs Act of client shares received2017 (the “TCJA”) became effective on January 1, 2022. Under the TCJA, the Company is required to capitalize, and subsequently amortize R&D expenses over fifteen years for services.research activities conducted outside of the U.S. The capitalization of overseas R&D expenses resulted in a significant increase in the Company’s global intangible low-taxed income inclusion beginning in 2022. Pursuant to the Corporate Income Tax Law of the PRC,mainland China, all of the Company’s PRCmainland China subsidiaries are liable to PRCmainland China Corporate Income Taxes at a rate of 25%, except for ACM Shanghai.Shanghai and ACM Lingang. According to Guoshuihan 2009 No. 203, if an entity is certified as an “advanced and new technology enterprise,” itenterprise” is entitled to a preferential income tax rate of 15%. ACM Shanghai obtained the certificate ofwas certified as an “advanced and new technology enterprise” in 2012 and again in 2016, with2018, and 2021, effective until December 31, 2023, and is expected to be re-certified for future years in 2024. In 2022, ACM Shanghai was certified as an effective periodeligible integrated circuit production enterprise and was entitled to a preferential income tax rate of three years,12.5% from January 1, 2020 to December 31, 2022. Certain entities which meet requirements according to the Policy of the Lingang New area in China (Shanghai) Pilot Free Trade Zone are entitled to a preferential income tax rate of 15%. ACM Lingang was certified for this in 2021, and thethis preferential income tax rate is valid from January 1, 2020 until December 31, 2024. The provision for PRCmainland China corporate income tax for ACM Shanghai is calculated by applying the income tax rate of 15% for the yearsyear ended December 31, 20172023 and 2016.
Income tax (expense) benefit12.5% for the years ended December 31, 20172022 and 20162021.
Income tax expense for the years ended December 31, 2023, 2022 and 2021 differed from the amounts computed by applying the statutory U.S. federal income tax rate of 34%21% to pretax income (loss) as a result of the following:
Year Ended December 31,
202320222021
Effective tax rate reconciliation:
Income tax provision at statutory rate21.00 %21.00 %21.00 %
Stock Compensation(2.00)(2.72)(12.75)
Foreign rate differential(10.47)(9.43)(11.60)
Other permanent difference0.03 (0.26)(0.23)
Foreign income taxed in US7.39 19.86 10.32 
Foreign Research Expense(8.01)(4.79)(6.59)
Change in valuation allowance8.72 1.28 0.16 
Total income tax expense16.66 %24.94 %0.31 %
 
 
 Year ended 
December 31,  
 
 
 
2017
 
 
2016
 
Effective tax rate reconciliation:
 
 
 
 
 
 
Income tax provision at statutory rate
  34.00%
  (34.00%)
State taxes, net of Federal benefit
  - 
  - 
Foreign rate differential
  6.8 
  38.7 
Other permanent difference
  197.7 
  (20.9)
Effect of tax reform
  (757)
  - 
Change in valuation allowance
  349.9 
  (3.8)
Total income tax (expense) benefit
  (168.60%)
  (20.00%)
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Tax positions are evaluated in a two-step process. The Company first determines whether it is more likely than not that a tax position will be sustained upon examination. If a tax position meets the more-likely-than-not recognition threshold it is then measured to determine the amount of benefit to recognize in the financial statements. The tax position is measured as the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. The aggregate changes in the balance of gross unrecognized tax benefits, which excludes interest and penalties, for the years ended December 31, 20172023 and 2016, are2022, were as follows:
Year Ended December 31,
202320222021
Beginning balance$8,448 $6,066 $570 
Increase of unrecognized tax benefits taken in prior years199 — 52 
Increase of unrecognized tax benefits related to current year4,379 2,623 5,476 
Reductions for tax positions related to prior years— (241)(32)
Ending balance$13,026 $8,448 $6,066 
 
 
December 31,
 
 
 
2017
 
 
2016
 
Beginning balance
 $44 
 $44 
Increase/(Decrease) of unrecognized tax benefits taken in prior years
  - 
  - 
Increase/(Decrease) of unrecognized tax benefits related to current year
  - 
  - 
Increase/(Decreases) of unrecognized tax benefits related to settlements
  - 
  - 
Reductions to unrecognized tax benefits related to lapsing statute of limitations
  - 
  - 
Ending balance
 $44 
 $44 

The Company files income tax returnsis subject to taxation in the United States, and state, and foreign jurisdictions. TheAll tax returns will remain open for examination by the federal and state authorities for three and four years, respectively, from the date of utilization of any net operating loss or credits. Certain tax years are subject to foreign income tax returns are underexaminations by tax authorities until the statute of limitations subject to tax examinations for the tax years ended December 31, 2009 through December 31, 2017. To the extent the Company has tax attribute carry-forwards, the tax years in which the attribute was generated may still be adjusted upon examination by the U.S. Internal Revenue Service, state or foreign tax authorities to the extent utilized in a future period.
expire.
The Company had $44$13,026 and $8,448 of unrecognized tax benefits as of December 31, 20172023 and 2016.
2022, respectively.
The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. As of December 31, 20172023 and 2016,2022, respectively, the Company had $44 of accrued penalties$1,667 and $0$508 of accrued penalties related to uncertain tax positions, noneall of which has beenwas recognized in the Company’s consolidated statements of operations and comprehensive income (loss) for the years endedyear then ended. The amount of the unrecognized tax benefit that, if recognized, would impact the effective tax rate was $12,943 as of December 31, 2017 and 2016.2023. There were no ongoing examinations by taxing authorities as of December 31, 2017 and 2016.2023 or 2022.

104
The Company intendsPrior to indefinitely reinvest the PRC earnings outside of the U.S. as of December 31, 2017 and December 31, 2016. Thus, deferred taxes are not provided in the U.S. for unremitted earnings in the PRC.
On December 22, 2017, the 2017 Tax Cuts and Jobs Act of 2017 (the "Tax Act"), the Company asserted that all unremitted earnings of its foreign subsidiaries were considered indefinitely reinvested. As a result of the Tax Act) was enacted into lawAct, the Company reported and the new legislation contains several key tax provisions that affected us, including a one-time mandatory transitionpaid U.S. tax on accumulatedthe majority of its previously unremitted foreign earnings, and repatriations of foreign earnings will generally be free of U.S. federal tax, but may incur other taxes such as withholding or state taxes. As of December 31, 2023, the Company has not made a reductionprovision for U.S. or additional foreign withholding taxes on approximately $130 million of undistributed earnings of its foreign subsidiaries that is indefinitely reinvested. Generally, such amounts become subject to U.S. taxation upon the remittance of dividends and under certain other circumstances.
NOTE 20 – SEGMENT INFORMATION

The Company identifies operating segments according to how the business activities are managed and evaluated. The Company’s chief operating decision maker (“CODM”) has been identified as ACM’s Chief Executive Officer. The Company's operating segments include ACM Research and ACM Shanghai. As the Company is engaged in the developing, manufacture and sale of capital equipment to global semiconductor manufacturers, and each of the corporate income tax rate to 21% effective January 1, 2018, among others. We are required to recognizeoperating segments share similar economic and other qualitative characteristics, the effectresults of the tax law changes inCompany’s operating segments are aggregated into one reportable segment.
For geographical reporting, revenue by geographic location is determined by the periodlocation of enactment, such as determining the transition tax, remeasuring our U.S. deferred taxcustomers’ facilities to which products were shipped. Long-lived assets consist primarily of property, plant and equipment, other long-term assets, and
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right-of-use assets and liabilitiesare attributed to the geographic location in which they are located. Long-lived assets by geographic region as wellof the years ended were as reassessing the net realizability of our deferred tax assets and liabilities.
follows:
December 31,
20232022
Long-lived assets by geography:
Mainland China$209,725 $140,481 
Korea12,190 3,830 
United States1,276 10 
Total$223,191 $144,321 
NOTE 1821 – COMMITMENTS AND CONTINGENCIES
The Company leases offices and manufacturing locations under non-cancelable operating lease agreements. The rental expenses were $670 and $675 for the years ended December 31, 2017 and 2016, respectively. See note 1311 for future minimum lease payments under non-cancelable operating lease agreements with initial terms of one year or more.
As of December 31, 2023, the Company had $30,936 of open commitments to construction contracts and had additional $7,413 of capital investment commitments.
Covenants in ACM Shengwei’s Grant Contract for State-owned Construction Land Use Right in Shanghai City (Category of R&D Headquarters and Industrial Projects) with the China (Shanghai) Pilot Free Trade Zone Lingang Special Area Administration require, among other things, that ACM Shengwei pay liquidated damages in the event that (a) it does not make a total investment (including the costs of construction, fixtures, equipment and grant fees) of at least RMB 450.0 million ($63,400) or (b) within six years after the land use right is obtained, the Company does not (i) generate a minimum specified amount of annual sales of products manufactured on the granted land or (ii) pay to mainland China at least RMB 157.6 million ($22,000) in annual total taxes (including value-added taxes, corporate income tax, personal income taxes, urban maintenance and construction taxes, education surcharges, stamp taxes, and vehicle and shipping taxes) as a result of operations in connection with the granted land.

As of December 31, 2023 and December 31, 2022, the Company had incurred in total $116,932 and $35,376, respectively for its Lingang-related investments. The Construction Completion Milestone was required to be met by January 9, 2024 but was not achieved. However, ACM Lingang believes it will receive the refund without penalty based on its explanation to the respective regulatory authorities of logistics-related delays, and expectations that it will meet the milestone before July 9, 2024. The Company did not have any capital commitments duringcannot guarantee that ACM Lingang will achieve the reported periods.missed milestone in 2024, or even if it does achieve the milestone in 2024, that it will be refunded some or all of the 20% portion of the performance deposit of RMB 2.5 million ($0.4 million).
From time to timeIn the normal course of business, the Company is subject to contingencies, including legal proceedings includingand environmental claims inarising out of the ordinarynormal course of businessbusinesses that relate to a wide range of matters, including among others, contracts breach liability. The Company records accruals for such contingencies based upon the assessment of the probability of occurrence and, where determinable, an estimate of the liability. Management may consider many factors in making these assessments including past history, scientific evidence and the specifics of each matter. Some of these contingencies involve claims that are subject to substantial uncertainties and unascertainable damages.
The Company’s management has evaluated all such proceedings and claims with respect to patent infringements.
NOTE 19 – RESTRICTED NET ASSETS
In accordance with the PRC’s Foreign Enterprise Law, ACM Shanghai and ACM Wuxi are required to make contributions to a statutory surplus reserve (note 2).
As a result of PRC laws and regulations that require annual appropriations of 10% of net after-tax profits to be set aside prior to payment of dividends as general reserve fund or statutory surplus fund, ACM Shanghai is restricted in its ability to transfer a portion of its net assets to ACM (including any assets received as distributions from ACM Wuxi). Amounts restricted included paid-in capital and statutory reserve funds, as determined pursuant to PRC accounting standards and regulations, were $29,927existed as of December 31, 20172023 and 2016.2022. In the opinion of management, no provision for liability nor disclosure was required as of December 31, 2023 related to any claim against the Company because: (a) there is not a reasonable possibility that a loss exceeding amounts already recognized (if any) may be incurred with respect to such claim; (b) a reasonably possible loss or range of loss cannot be estimated; or (c) such estimate is immaterial.

As of December 31, 2023, the Company had no outstanding legal proceedings.
NOTE 20– SUBSEQUENT EVENTS
On January 12, 2018, ACM Shanghai entered into an operating lease for manufacturing space of approximately 103,318 square feet in Shanghai, China effective as of January 16, 2018.  The lease term is five years and expires on January 15, 2022. During the first year, the lease space is 51,659 square feet with monthly payments of RMB 270 starting from the second month of the lease. From January 16, 2019, the lease space will be increased to 103,318 square feet with monthly payments of RMB 390. The monthly payments for the third and four year is RMB 409 and RMB 430 for the fifth year.
On January 25, 2018, the Company’s board approved a total of 500,000 shares of stock options to its employees and consultants at the exercise price of $5.31 per share
NOTE 2122 – PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION
The Company performed a test on the restricted net assets of consolidated subsidiaries in accordance with Rule 4-08(e)(3) of Regulation S-X of the SEC and concluded that it was applicable for the Company to disclose the financial information
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for ACM only. Certain information and footnote disclosures generally included in financial statements prepared in accordance with GAAP have been condensed or omitted. The footnote disclosure contains supplemental information relating to the operations of ACM separately.
ACM’s subsidiaries did not pay any dividendsACM Shanghai paid a dividend to ACM during the periods presented.year ended December 31, 2023 (Note 2).
Except for long-term obligations, or guarantees, and loan borrowed by ACM didInc. from CITIC. (note 12), ACM does not have significant capital or other commitments, long-term obligations, or guarantees as of December 31, 2017 and 2016.
2023 or 2022.
The following represents condensed unconsolidated financial information of ACM only as of December 31, 2023 and 2022, and for the years ended December 31, 20172023, 2022 and 2016:
2021:
CONDENSED BALANCE SHEETSHEETS
 
December 31, 
 
 
2017
 
 
2016
 
December 31,December 31,
202320232022
Assets
 
 
 
Current assets:
 
 
 
Current assets:
Current assets:
Cash and cash equivalents
 $10,874 
 $7,264 
Accounts Receivable
  118 
  - 
Inventory
  565 
  1,042 
Cash and cash equivalents
Cash and cash equivalents
Accounts receivable
Due from intercompany
  12,669 
  1,986 
Other receivable
  50 
  3 
Prepaid expenses
Total current assets
  24,276 
  10,295 
Investment in unconsolidated subsidiaries
  15,476 
  6,583 
Due from related party
  946 
  - 
Deferred tax assets
Property, plant and equipment, net
Investment in consolidated subsidiaries and equity method investee
Total assets
  40,698 
  16,878 
Liabilities, Redeemable Convertible Preferred Stock and Stockholders’ Equity
    
Notes payable
  11 
  11 
Liabilities and Stockholders’ Equity
Liabilities and Stockholders’ Equity
Liabilities and Stockholders’ Equity
Loan borrowings
Loan borrowings
Loan borrowings
Accounts payable
  739 
  1,176 
Other payable
  47 
  47 
Other payables
Income taxes payable
  44 
  44 
FIN-48 payable
Total liabilities
  841 
  1,278 
Total redeemable convertible preferred stocks
  - 
  18,034 
Total stockholders’ equity (deficit)
  39,857 
  (2,434)
Total liabilities, redeemable convertible preferred stock and stockholders’ equity
 $40,698 
 $16,878 
Total stockholders’ equity
Total liabilities and stockholder’s equity
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CONDENSED STATEMENTSTATEMENTS OF OPERATIONS
 
Year Ended
December 31,
 
 
2017
 
 
2016
 
Year Ended December 31,Year Ended December 31,
2023202320222021
Revenue
 $6,985 
 $5,803 
Cost of revenue
  (6,394)
  (5,346)
Gross profit
  591 
  457 
Operating expenses:
    
Sales and marketing expenses
  (368)
  (64)
Sales and marketing expenses
Sales and marketing expenses
General and administrative expenses
  (3,961)
  (1,202)
Research and development expenses
  (50)
  (6)
Loss from operations
  (3,788)
  (815)
Equity in earnings of unconsolidated subsidiaries
  3,475 
  3,561 
Other income (expense), net
  - 
  (1,608)
Equity in earnings of consolidated subsidiaries and equity method investees
Interest income, net
Interest expense, net
  (5)
  (106)
Income (loss) before income taxes
  (318)
  1,032 
Income tax expense (benefit)
  - 
  (1)
Net income (loss)
 $(318)
 $1,031 
Other income, net
Income before income taxes
Income tax benefit
Net income
CONDENSED STATEMENTS OF CASH FLOWS
106
Year Ended December 31,
202320222021
Net cash provided by (used in) operating activities$1,489 $(5,997)$(5,902)
Net cash used in investing activities(149)(1,000)- 
Net cash provided by financing activities16,423 1,314 5,250 
Net increase (decrease) in cash and cash equivalents17,763 (5,683)(652)
Cash and cash equivalents, beginning of year23,853 29,536 30,188 
Cash and cash equivalents, end of year$41,616 $23,853 $29,536 
Condensed Statement of Cash Flows
 
 
Year Ended
December 31,
 
 
 
2017
 
 
2016
 
Net cash used in operating activities
 $(13,848)
 $(2,220)
Net cash used in investing activities
  (21,754)
  -
 
Net cash provided by financing activities
 38,676
  9,309 
Net increase in cash and cash equivalents
  3,074 
  7,089 
Cash and cash equivalents, beginning of year
  7,264 
  504 
Effect of exchange rate changes on cash and cash equivalents
  536 
  (329)
Cash and cash equivalents, end of year
 $10,874 
 $7,264 
ITEMItem 9.    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Dismissal of Previous Independent Registered Public Accounting Firm
None.
On July 21, 2023, we were informed by Armanino that it would resign as our independent auditor effective as of the earlier of (a) the date we engaged a new independent registered public accounting firm or (b) the filing of our Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2023. Armanino advised us that its decision to resign was due to Armanino’s decision to exit from the practice of providing financial statement audit services to all public companies. Armanino is not required to and did not seek our consent to its decision to resign as our independent registered public accounting firm. As a result, neither our Board of Directors nor the Audit Committee participated in Armanino’s decision to resign.

In light of Armanino’s determination, the Audit Committee initiated a process to select and appoint a new accounting firm to serve as our independent registered public accountant commencing with the audit of our financial statements for the fiscal year ended December 31, 2023.

Armanino’s audit report on our consolidated financial statements as of and for the year ended December 31, 2022 did not contain an adverse opinion or a disclaimer of opinion, and was not qualified or modified as to uncertainty, audit scope or accounting principles. Armanino was first appointed as our independent registered public accountant for the fiscal year ended December 31, 2022, and did not audit our financial statements for the fiscal year ended December 31, 2021 or any prior period.

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As disclosed in this report and in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, Armanino issued an adverse opinion on our internal control over financial reporting for the fiscal year ended December 31, 2022, as a result of material weaknesses identified by Armanino and our management. There were not any disagreements or differences of opinion between Armanino and us with respect to these material weaknesses or Armanino’s adverse opinion on our internal control over financial reporting.

During the year ended December 31, 2022, and through the date of Armanino’s notification of resignation, there were no (a) disagreements with Armanino on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to Armanino’s satisfaction, would have caused Armanino to make reference to the subject matter thereof in connection with its reports for such periods; or (b) except as described in the preceding paragraph, reportable events, as described under Item 304(a)(1)(v) of Regulation S-K.

We provided a copy of the foregoing disclosures to Armanino and requested that Armanino furnish us with a letter addressed to the SEC, pursuant to Item 304(a)(3) of Regulation S-K, stating whether or not Armanino agreed with the above disclosures. A copy of Armanino’s letter dated July 27, 2023 furnished pursuant to that request is filed as Exhibit 16.01.

Engagement of New Independent Registered Public Accounting Firm

On September 14, 2023, the Audit Committee completed a competitive selection process to select and appoint a new accounting firm to serve as our independent registered public accounting firm commencing with the audit of our financial statements for the fiscal year ended December 31, 2023. As a result of this process, the Audit Committee approved the engagement of Ernst & Young Hua Ming LLP as our independent registered public accounting firm for the fiscal year ended December 31, 2023. The engagement of Ernst & Young Hua Ming LLP became effective on September 20, 2023.

During the fiscal years ended December 31, 2022 and 2021 and the subsequent interim period from January 1, 2023 through September 20, 2023, neither we nor anyone on our behalf consulted with Ernst & Young Hua Ming LLP regarding either: (a) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on our financial statements, and no written report or oral advice was provided to us that Ernst & Young Hua Ming LLP concluded was an important factor considered by us in reaching a decision as to any accounting, auditing or financial reporting issue; or (b) any matter that was either the subject of a “disagreement” or a “reportable event”, as such terms are defined in Items 304(a)(1)(iv) and (v), respectively, of Regulation S‑K and the related instructions.

As previously disclosed in our Current Report on Form 8-K filed on July 27, 2023, Armanino informed us that it would resign as our independent registered public accounting firm effective as of the earlier of (a) the date we engaged a new independent registered public accounting firm or (b) the filing of our Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2023, as a result of Armanino’s decision to exit from the practice of providing financial statement audit services to all public companies. As a result, Armanino ceased to serve as our independent registered public accounting firm effective as of September 20, 2023.

We provided a copy of the foregoing disclosures to Armanino and requested that Armanino furnish us with a letter addressed to the SEC, pursuant to Item 304(a)(3) of Regulation S-K, stating whether or not Armanino agreed with the above disclosures. A copy of Armanino’s letter dated September 26, 2023 furnished pursuant to that request is filed as Exhibit 16.02.

Item 9A.    Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and our Chief AccountingFinancial Officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 (e) and 15d-14 (e) under the Securities Exchange Act of 1934, as of December 31, 2017. The evaluation included certain internal control areas in which we have made and are continuing to make changes to improve and enhance controls.amended (the “Exchange Act”). In designing and evaluating the disclosure controls and procedures, our management recognizedrecognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that our management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.
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Based on thatthis evaluation, our Chief Executive Officer and our Chief AccountingFinancial Officer concluded that, as of December 31, 2023, our disclosure controls and procedures arewere designed at a reasonable assurance level and were effective to provide reasonable assurance that the information we are required to disclose in reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and our Chief AccountingFinancial Officer, as appropriate, to allow timely decisions regarding required disclosure.
disclosures.
Management’s Report on Internal Control Over Financial Reporting
This report does not include a report of management’s assessment regarding internal control over financial reporting or an attestation report of our registered public accounting firm due to a transition period established by rules of the SEC for newly public companies.
Previously Identified Material Weaknesses in Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting for our company.reporting. Internal control over financial reporting is defined in Rule 13a-15(f) and 15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, a company's principal executiveour Chief Executive Officer and principal financial officers and effected by the company's board of directors, management and other personnel,Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP,generally accepted accounting principles and includes those policies and procedures that:
● 
that (1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company;
● 
our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures of the company are being made only in accordance with authorizations of our management and directors of the company; and
● 
(3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company'sour assets that could have a material effect on the financial statements.
Becauseour management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of its inherent limitations,the effectiveness of our internal control over financial reporting maybased on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Our management concluded that our internal control over financial reporting was effective as of December 31, 2023.
Attestation Report of Independent Registered Public Accounting Firm
The effectiveness of our internal control over financial reporting as of December 31, 2023 has been tested by Ernst & Young Hua Ming LLP, our independent registered public accounting firm, as stated in their report which is included in Part II, Item 8 of this report.
Remediation of Previously Reported Material Weaknesses

As previously reported in our Forms 10-Q for the quarters ended March 31, 2023, June 30, 2023 and September 30, 2023, and our Annual Report on Form 10-K for the year ended December 31, 2022, we previously identified the following material weaknesses in internal control over financial reporting:

(i) Management did not prevent or detect misstatements. Projectionsdesign and maintain effective risk assessment procedures, and monitoring activities. These deficiencies were attributed to insufficient identification and assessment of risks impacting the design, implementation, and operating effectiveness of internal control over financial reporting, and insufficient evaluation and determination as to whether components of internal control were present and functioning; and
(ii) Management did not design and maintain effective information technology controls related to (a) user access controls to ensure appropriate segregation of duties and adequately restrict user and privileged access to financial applications, programs, and data to appropriate personnel, (b) computer operations controls to ensure that critical information is monitored, and data backups are authorized and monitored, (c) appropriate controls to evaluate automated controls, and (d) appropriate controls to validate the completeness and accuracy of key reports used within controls across substantially all financial statement areas.

These material weaknesses did not result in any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In connection with its auditsmaterial misstatement of our consolidated financial statements as of and for the year ended December 31, 2016, BDO China Shu Lun Pan Certified Public Accountants LLP, or BDO China, informed us2022. Our management, under the oversight of the Audit Committee, has implemented the following remediation steps to address previously disclosed material weaknesses and to improve our internal control over financial reporting:

•Engaged a third-party Sarbanes-Oxley (“SOX”) compliance firm to assist management with (i) designing and maintaining effective risk assessment procedures and monitoring activities, (ii) reviewing our current processes, procedures, and systems and assessing the design of controls to identify opportunities to enhance the design of controls that it hadwould address relevant risks identified by management to assure the operating effectiveness of internal control over financial reporting, and (iii) enhancing and implementing protocols to retain sufficient documentary evidence of operating effectiveness of such controls.
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•Recruited qualified individuals for key positions within our internal audit, IT, and other support functions that have enhanced internal control capabilities, promoted segregation of duties, and provided appropriate oversight and reviews.
•Developed and delivered internal control training to management and finance/accounting personnel, focusing on a review of management and individual roles and responsibilities related to internal control over financial reporting.
•Restricted and monitored user access controls to ensure appropriate segregation of duties and adequately restricted user and privileged access of applications, programs, and data to appropriate personnel; implemented computer operations controls to ensure that critical information is monitored, and data backups are authorized and monitored; established appropriate controls to evaluate automated controls; and designed and monitored appropriate controls to validate the completeness and accuracy of key reports used within controls across substantially all financial statement areas.

During the quarter ended December 31, 2023, we completed our testing of the operating effectiveness of internal controls impacted by these remediation efforts and determined that as a result of the measures described above, the material weaknessweaknesses have been remediated as of December 31, 2023.

Changes in Internal Control over Financial Reporting

Other than in connection with the remediation process described above, no change in our internal control over financial reporting relating(as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the most recent fiscal quarter that has materially affected, or is reasonably likely to our lack of sufficient qualified financial reporting and accounting personnel with an appropriate level of expertise to properly address complex accounting issues under GAAP and to prepare and review our consolidated financial statements and related disclosures to fulfill GAAP and SEC financial reporting requirements. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.
Our management, including our Chief Executive Officer, who is our principal executive officer, and our Chief Accounting Officer and interim Chief Financial Officer, who is our principal financial officer, assessed the effectiveness ofmaterially affect, our internal control over financial reporting asreporting.

Item 9B.    Other Information

On December 13, 2023, Sotheara Cheav, Senior Vice President, Manufacturing of ACM Shanghai, adopted a Rule 10b5-1 trading arrangement, or the Cheav Plan, that is intended to satisfy the affirmative defense of Rule 10b5-1(c) of the Exchange Act. The Cheav Plan allows for the sale of up to 10,000 shares of Class A common stock, at specific market prices, commencing on the later of March 13, 2024 or the third business day following the disclosure of the Issuer’s financial results for the completed fiscal quarter in which the Cheav Plan was adopted, and continuing until (i) all such shares are sold, (ii) December 31, 2017. In making this assessment, our management used4, 2024, or (iii) such date that the criteria set forthCheav Plan is otherwise terminated according to its terms, whichever comes first.
Item 9C.    Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
(a)ACM Research was identified by the Committee of Sponsoring OrganizationsSEC pursuant to Section 104(i)(2)(A) of the Treadway CommissionSarbanes-Oxley Act of 2002 (15 U.S.C. 7214(i)(2)(A)) as having retained, for the preparation of the audit report on its financial statements included in Internal Control—An Integrated Framework (2013). As of, and duringits Annual Report on Form 10-K for the year ended December 31, 2017, we considered we were still2021, a registered public accounting firm that has a branch or office that is located in a transitional period to improveforeign jurisdiction and enhance the quality of our accounting and financial reporting function, we determined that the above mentioned material weaknessPCAOB had then determined it was unable to inspect or investigate completely because of a position taken by an authority in the foreign jurisdiction, which determination was vacated by the PCAOB on December 15, 2022. ACM Research herein confirms that it is not been fully remediated. Management concluded that, as of December 31, 2017, our internal control over financial reporting was not effective.owned or controlled by any governmental entity in such foreign jurisdiction.
Remediation Efforts
We have taken, and are continuing to take, remedial measures to improve the effectiveness of our controls, including by hiring additional accounting and finance personnel and by engaging outside consulting firms. In particular, in January 2018 we hired a new Chief Accounting Officer. Because the employment of our former Chief Financial Officer terminated in January 2018, our new Chief Accounting Officer is also serving as interim Chief Financial Officer while we conduct a search for a permanent Chief Financial Officer. We are continuing to add personnel and take other remedial steps, and management expects to remedy the identified material weakness by no later than the second quarter of 2018.
Item 9B. Other Information
None.
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(b)Not applicable.
PART III
ITEMItem 10.    Directors, Executive Officers and Corporate Governance
Information responsive to this item is incorporated herein by reference to ACM’s definitive proxy statement with respect to our 2018 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of the fiscal year covered by this report.
ITEM 11. Executive Compensation
Information responsive to this item is incorporated herein by reference to our definitive proxy statement with respect to our 20182024 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of the fiscal year covered by this report.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder MattersItem 11.    Executive Compensation
Information responsive to this item is incorporated herein by reference toour definitive proxy statement with respect to our 20182024 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of the fiscal year coveredby this report.
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Item 12.    Security Ownership of Certain RelationshipsBeneficial Owners and Management and Related Transactions, and Director IndependenceStockholder Matters
Information responsive to this item is incorporated herein by reference toour definitive proxy statement with respect to our 20182024 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of the fiscal year coveredby this report.
ITEM 14. Principal Accounting FeesItem 13.     Certain Relationships and ServicesRelated Transactions, and Director Independence
Information responsive to this item is incorporated herein by reference toour definitive proxy statement with respect to our 20182024 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of the fiscal year coveredby this report.
PARTItem14.     Principal Accounting Fees and Services
Information responsive to this item is incorporated herein by reference to our definitive proxy statement with respect to our 2024 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of the fiscal year covered by this report.
PART IV
ITEMItem 15.     Exhibits and Financial Statement Schedules
(a)
See “Item 8. Financial Statements and Supplementary Data─Data – Index to Consolidated Financial Statements” of Part II above and “Exhibit Index” below.
(b)
See “Exhibit Index” below.
(c)            
None.
ITEM 16. Form 10-K Summary
None.
EXHIBIT INDEX
Exhibits.
Exhibit No.
Exhibit
No.
Description
3.01#3.01(a)
Restated Certificate of Incorporation of ACM Research, Inc.
(incorporated herein by reference to Exhibit 3.01 to the Current Report on Form 8-K filed on November 14, 2017)
3.02#3.01(b)
Certificate of Amendment to Restated Certificate of Incorporation of ACM Research, Inc., dated July 13, 2021 (incorporated herein by reference to Exhibit 3.01 to the Current Report filed on July 13, 2021)
3.02
Restated Bylaws of ACM Research, Inc.
(incorporated herein by reference to Exhibit 3.02 to the Current Report on Form 8-K filed on November 14, 2017)
4.01
Senior Secured Promissory Note dated March 30, 2018 issued by Shengxin (Shanghai) Management Consulting Limited Partnership to ACM Research (Shanghai), Inc. (incorporated herein by reference to Exhibit 10.03 to the Quarterly Report on Form 10-Q filed on May 14, 2018)
4.024.01#
WarrantIntercompany Promissory Note dated March 14, 201730, 2018 issued by ACM Research (Shanghai), Inc. to ACM Research, Inc. (incorporated herein by reference to Exhibit 10.04 to the Quarterly Report on Form 10-Q filed on May 14, 2018)
4.03
Warrant Exercise Agreement dated March 30, 2018 by and among ACM Research, Inc., ACM Research (Shanghai), Inc., and Shengxin (Shanghai) Management Consulting Limited Partnership (incorporated herein by reference to Exhibit 10.02 to the Quarterly Report on Form 10-Q filed on May 14, 2018)
4.04‡
Warrant to Purchase Class A Common Stock issued to Shengxin (Shanghai) Management Consulting Limited Partnership dated July 29, 2020 (incorporated herein by reference to Exhibit 4.01 to the Quarterly Report on Form 10-Q filed on August 10, 2020)
4.05
4.02#Form of Warrant dated November 2, 2017 issued to the underwritersDescription of ACM Research, Inc.'s initial public offering exercisable for an aggregate of 80,000 shares of Class A common stock
’s Securities
10.01#10.01(a)
Lease dated March 22, 2017 between ACM Research, Inc. and D&J Construction, Inc.
(incorporated herein by reference to Exhibit 10.01 to the Registration Statement on Form S-1 filed on September 13, 2017)
10.02#10.01(b)
Lease Amendment dated February 28, 2018 between ACM Research, Inc. and D&J Construction, Inc. (incorporated herein by reference to Exhibit 10.06 to the Amended Quarterly Report on Form 10-Q/A filed on October 15, 2018)
10.01(c)
Lease Amendment dated February 4, 2019 between ACM Research, Inc. and D&J Construction, Inc. (incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on February 8, 2019)
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10.01(d)
Lease Amendment dated January 4, 2021 between ACM Research, Inc. and D&J Construction, Inc. (incorporated herein by reference to Exhibit 10.01(d) to the Annual Report on Form 10-K filed on March 1, 2022)
10.01(e)
Lease Amendment dated September 6, 2016February 1, 2023 between ACM Research, Inc. and D&J Construction, Inc
10.02
Lease Agreement dated April 26, 2018 between ACM Research (Shanghai), Inc. and Shanghai Zhangjiang Group Co., Ltd.
(incorporated herein by reference to Exhibit 10.01 to the Amended Quarterly Report on Form 10-Q/A filed on October 15, 2018)
10.03
10.03#UnderwritingLease Agreement dated November 2, 2017January 18, 2018 between ACM Research (Shanghai), Inc. and Roth Capital Partners, LLC, as representative ofShanghai Shengyu Culture Development Co., Ltd. (incorporated herein by reference to Exhibit 10.05 to the several underwriters namedAmended Quarterly Report on Schedule I thereto
Form 10-Q/A filed on October 15, 2018)
10.04#10.04
Securities Purchase Agreement dated March 14, 2017 by and among ACM Research, Inc., Shengxin (Shanghai) Management Consulting Limited Partnership and ACM Research (Shanghai), Inc.
(incorporated herein by reference to Exhibit 10.03 to the Registration Statement on Form S-1 filed on September 13, 2017)
10.05#10.05
Securities Purchase Agreement dated March 23, 2017 between ACM Research, Inc. and Shanghai Science and Technology Venture Capital Co., Ltd., as amended
(incorporated herein by reference to Exhibit 10.04 to the Amended Registration Statement on Form S-1/A filed on October 18, 2017)
10.06#10.06
Securities Purchase Agreement dated August 31, 2017 by and among ACM Research, Inc., Shanghai Pudong High-Tech Investment Co., Ltd. and Pudong Science and Technology (Cayman) Co., Ltd.
10.07#
Securities Purchase Agreement dated August 31, 2017 by and among ACM Research, Inc., Shanghai Zhangjiang Science & Technology Venture Capital Co., Ltd. and Zhangjiang AJ Company Limited
10.08#
Ordinary Share Purchase Agreement dated September 6, 2017 by and among ACM Research, Inc., Ninebell Co., Ltd. and Moon-Soo Choi
(incorporated herein by reference to Exhibit 10.07 to the Amended Registration Statement on Form S-1/A filed on October 18, 2017)
10.09#10.07
Class A Common Stock Purchase Agreement dated September 6, 2017 by and among ACM Research, Inc., Ninebell Co., Ltd. and Moon-Soo Choi
10.10#
Form of Second Amended and Restated Registration Rights Agreement to be entered into between ACM Research, Inc. and certain of its stockholders
10.11#
Stock Purchase Agreement, dated October 11, 2017, by and among ACM Research, Inc., XunxinXinxin (Shanghai) Capital Co., Limited, Xinxin (Hongkong) Capital Co., Limited and David H. Wang
 (incorporated herein by reference to Exhibit 10.10 to the Amended Registration Statement on Form S-1/A filed on October 18, 2017)
10.12#10.08
Stock PurchaseForm of Capital Increase Agreement dated October 16, 2017, by and between ACM Research, Inc. and Victorious Way Limited
certain investors (incorporated herein by reference to Exhibit 10.01 to the Quarterly Report on Form 10-Q filed on August 12, 2019)
10.13#10.08(a)
Schedule identifying agreements substantially identical to the form of Capital Increase Agreement filed as Exhibit 10.12 hereto (incorporated herein by reference to Exhibit 10.01(a) to the Quarterly Report on Form 10-Q filed on August 12, 2019)
10.09
NominationForm of Agreement between ACM Research, Inc. and Votingcertain Investors (incorporated herein by reference to Exhibit 10.02 to the Quarterly Report on Form 10-Q filed on August 12, 2019)
10.09(a)
Schedule identifying agreements substantially identical to the form of Agreement filed as Exhibit 10.13 hereto (incorporated herein by reference to Exhibit 10.02(a) to the Quarterly Report on Form 10-Q filed on August 12, 2019)
10.10
Partnership Agreement of Hefei Shixi Chanheng Integrated Circuit Industry Venture Capital Fund Partnership (LP) dated October 11, 2017,September 5, 2019 by and among Xinxin (Hongkong) CapitalInfotech National Emerging Industry Venture Investment Guidance Fund (LP), Hefei Guozheng Asset Management Co, Ltd., Hefei Economic and Technological Development Zone Industrial Investment Guidance Fund Co., Limited,Ltd., ACM Research (Shanghai), Inc., David H. Wang,Hefei Tongyi Equity Investment Partnership (LP), Shenzen Waitan Technology Development Co., Ltd., and Beijing Shixi Qingliu Investment Co., Ltd. (incorporated herein by reference to Exhibit 10.03 to the individuals named therein
Quarterly Report on Form 10-Q filed on November 13, 2019)
10.14#10.11
Voting Agreement, dated March 23, 2017, by and among Shanghai Technology Venture Capital Co., Ltd. (also known as Shanghai Science and Technology Venture Capital Co., Ltd.) and ACM Research, Inc.
10.15+#
2016 Omnibus Incentive Plan of ACM Research, Inc.
 (incorporated herein by reference to Exhibit 10.01 to the Quarterly Report on Form 10-Q filed on December 8, 2017)
10.15(a)10.11(a)+#
Form of Incentive Stock Option Grant Notice and Agreement under 2016 Omnibus Incentive Plan
 (incorporated herein by reference to Exhibit 10.10(a) to the Registration Statement on Form S-1 filed on September 13, 2017)
10.15(b)10.11(b)+#
Form of Non-qualified Stock Option Grant Notice and Agreement under 2016 Omnibus Incentive Plan
 (incorporated herein by reference to Exhibit 10.10(b) to the Registration Statement on Form S-1 filed on September 13, 2017)
10.15(c)10.11(c)+#
Form of Restricted Stock Unit Grant Notice and Agreement under 2016 Omnibus Incentive Plan
 (incorporated herein by reference to Exhibit 10.10(c) to the Registration Statement on Form S-1 filed on September 13, 2017)
10.16+#10.12+
Form of Nonstatutory Stock Option Agreement of ACM Research, Inc.
 (incorporated herein by reference to Exhibit 10.11 to the Registration Statement on Form S-1 filed on September 13, 2017)
10.17+#10.13+
1998 Stock Option Plan of ACM Research, Inc. (incorporated herein by reference to Exhibit 10.12 to the Registration Statement on Form S-1 filed on September 13, 2017)
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10.17(a)10.13(a)+#
Form of Incentive Stock Option Agreement under 1998 Stock Option Plan
 (incorporated herein by reference to Exhibit 10.12(a) to the Registration Statement on Form S-1 filed on September 13, 2017)
10.17(b)10.13(b)+#
Form of Non-statutory Stock Option Agreement under 1998 Stock Option Plan
 (incorporated herein by reference to Exhibit 10.12(b) to the Registration Statement on Form S-1 filed on September 13, 2017)
10.18#10.14
Form of Indemnification Agreement entered into between ACM Research, Inc. and certain of its directors and officers
 (incorporated herein by reference to Exhibit 10.13 to the Registration Statement on Form S-1 filed on September 13, 2017)
10.19+#10.15
Executive Retention AgreementLetter agreement dated November 14, 2016June 12, 2019 between ACM Research, Inc. and Min Xu
Mark McKechnie (incorporated herein by reference to Exhibit 10.02 to the Current Report on Form 8-K filed on August 13, 2019)
10.20#10.16+‡
Line of CreditEmployment Agreement dated August 21, 2017September 25, 2022 between ACM Research (Shanghai), Inc. and Lisa Feng (incorporated herein by reference to Exhibit 10.01 to the Quarterly Report on Form 10-Q filed on May 9, 2023)
10.17
Note Assignment and Cancellation Agreement dated April 30, 2020 by and among ACM Research, Inc., ACM Research (Shanghai), Inc. and Shengxin (Shanghai) Management Consulting Limited Partnership (incorporated herein by reference to Exhibit 10.02 to the Quarterly Report Form 10-Q filed on May 8, 2020)
10.18(a)
Share Transfer and Note Cancellation Agreement dated April 30, 2020 between ACM Research, Inc. and Shengxin (Shanghai) Management Consulting Limited Partnership (incorporated herein by reference to Exhibit 10.03 to the Quarterly Report on Form 10-Q filed on May 8, 2020)
10.18(b)
Amendment No. 1 to Share Transfer and Note Cancellation Agreement dated July 29, 2020 between ACM Research, Inc. and Shengxin (Shanghai) Management Consulting Limited Partnership (incorporated herein by reference to Exhibit 10.01 to the Quarterly Report on Form 10-Q filed on November 9, 2020)
10.19‡†
Grant Contract for State-owned Construction Land Use Right in Shanghai City (Category of R&D Headquarters and Industrial Projects) dated as of May 7, 2020 between ACM Research (Lingang), Inc. and China (Shanghai) Pilot Free Trade Zone Lin-gang Special Area Administration (incorporated herein by reference to Exhibit 10.01 to the Current Report on Form 8-K filed on May 13, 2020)
10.20†
Commitment Letter Regarding the Lock-up of Shares, effective as of May 26, 2020, of ACM Research, Inc. (incorporated herein by reference to Exhibit 10.01 to the Current Report on Form 8-K filed on June 1, 2020)
10.21†
Commitment Letter Regarding Shareholding Intent and Intent to Reduce Shareholding, effective as of May 26, 2020, of ACM Research, Inc. and David H. Wang (incorporated herein by reference to Exhibit 10.02 to the Current Report to Form 8-K filed on June 1, 2020)
10.22†
Commitment Letter Regarding the Plan and Binding Measures for Stabilizing the Stock Price of ACM Research (Shanghai), Inc. Within Three Years After Listing, effective as of May 26, 2020, of ACM Research, Inc., ACM Research (Shanghai), Inc., and certain individuals named therein (incorporated herein by reference to Exhibit 10.03 to the Current Report on Form 8-K filed on June 1, 2020)
10.23†
Commitment Letter Regarding Fraudulent Issuance of Listed Shares, effective as of May 26, 2020, of ACM Research, Inc., ACM Research (Shanghai), Inc. and David H. Wang (incorporated herein by reference to Exhibit 10.04 to the Current Report on Form 8-K filed on June 1, 2020)
10.24‡†
Commitment Letter Regarding the Lack of False Records, Misleading Statements or Major Omissions in the Preliminary Information Document, effective as of May 26, 2020, of ACM Research, Inc. (incorporated herein by reference to Exhibit 10.05 to the Current Report on Form 8-K filed on June 1, 2020)
10.25†
Commitment Letter Regarding Making Up for Diluted Immediate Returns, effective as of May 26, 2020, of ACM Research, Inc. (incorporated herein by reference to Exhibit 10.06 to the Current Report on Form 8-K filed on June 1, 2020)
10.26‡†
Commitment Letter Regarding Unfulfilled Commitment on Binding Measures, effective as of May 26, 2020, of ACM Research, Inc. and David H. Wang (incorporated herein by reference to Exhibit 10.07 to the Current Report on Form 8-K filed on June 1, 2020)
10.27†
Commitment Letter Regarding the Avoidance of Competition in the Same Industry, effective as of May 26, 2020, of ACM Research, Inc. (incorporated herein by reference to Exhibit 10.08 to the Current Report on Form 8-K filed on June 1, 2020)
10.28†
Commitment Letter Regarding the Standardization and Reduction of Related Transactions, effective as of May 26, 2020, of ACM Research, Inc. (incorporated herein by reference to Exhibit 10.09 to the Current Report on Form 8-K filed on June 1, 2020)
10.29†
Commitment Letter Regarding the Avoidance of Funds Occupation and Illegal Guarantee, effective as of May 26, 2020, of ACM Research, Inc. (incorporated herein by reference to Exhibit 10.10 to the Current Report on Form 8-K filed on June 1, 2020)
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10.30‡†
Statement and Commitment Letter, effective as of May 26, 2020, of ACM Research, Inc. (incorporated herein by reference to Exhibit 10.11 to the Current Report on Form 8-K filed on June 1, 2020)
10.31†
Commitment Letter Regarding Property Lease Matters, effective as of May 26, 2020, of ACM Research, Inc. (incorporated herein by reference to Exhibit 10.12 to the Current Report on Form 8-K filed on June 1, 2020)
10.32†
Commitment Letter Regarding Social Insurance and Housing Provident Fund Matters, effective as of May 26, 2020, of ACM Research, Inc. (incorporated herein by reference to Exhibit 10.13 to the Current Report on Form 8-K filed on June 1, 2020)
10.33†
Commitment Letter Regarding Foreign Exchange Matters, effective as of May 26, 2020, of ACM Research, Inc. (incorporated herein by reference to Exhibit 10.14 to the Current Report on Form 8-K filed on June 1, 2020)
10.34†
Confirmation and Commitment Letter Regarding the Historical Evolution Related Matters Regarding ACM Research (Shanghai), Inc., effective as of May 26, 2020, of ACM Research, Inc. (incorporated herein by reference to Exhibit 10.15 to the Current Report on Form 8-K filed on June 1, 2020)
10.35†
Confirmation Letter, effective as of May 26, 2020, of ACM Research, Inc. (incorporated herein by reference to Exhibit 10.16 to the Current Report on Form 8-K filed on June 1, 2020)
10.36‡†
Qingdao Fortune-Tech Xinxing Capital Partnership (L.P.) Partnership Agreement, dated June 9, 2020, among China Fortune Tech Capital Co., Ltd., as general partner, and the several limited partners named therein, including ACM Research (Shanghai), Inc. (incorporated herein by reference to Exhibit 10.01 to the Current Report on Form 8-K filed on July 7, 2020)
10.37‡†
Supplementary Agreement to Partnership Agreement of Qingdao Fortune-Tech Xinxing Capital Partnership (L.P.), dated June 15, 2020, among China Fortune Tech Capital Co., Ltd., as general partner, and the several limited partners named therein, including ACM Research (Shanghai), Inc. (incorporated herein by reference to Exhibit 10.02 to the Current Report on Form 8-K filed on July 7, 2020)
10.38†*
Form of Shanghai Public Rental Housing Overall Pre-Sale Contract (incorporated herein by reference to Exhibit 10.01 to the Current Report on Form 8-K filed on February 25, 2021)
10.38(a)
Schedule identifying agreements substantially identical to the form of Shanghai Public Rental Housing Overall Pre-Sale Contract filed as Exhibit 10.43 hereto (incorporated herein by reference to Exhibit 10.01(a) to the Current Report on Form 8-K filed on February 25, 2021)
10.39†
Loan and Mortgage Contract dated November 19, 2020 between China Merchants Bank Co., Ltd., Shanghai Pilot Free Trade Zone Lin-Gang Special Area Sub-branch and Shengwei Research (Shanghai), Inc. (incorporated herein by reference to Exhibit 10.02 to the Current Report on Form 8-K filed on February 25, 2021)
10.40†
Irrevocable Letter of Guarantee dated November 19, 2020 between China Merchants Bank Co., Ltd., Shanghai Pilot Free Trade Zone Lin-Gang Special Area Sub-branch and ACM Research (Shanghai), Inc. (incorporated herein by reference to Exhibit 10.03 to the Current Report on Form 8-K filed on February 25, 2021)
10.41‡†
Plant lease Contract dated as of February 1, 2021 between ACM Research (Shanghai), Inc. and Shanghai PudongShengyu Culture Development Zone Branch of Bank of China Limited
Co., Ltd. (incorporated herein by reference to Exhibit 10.01 to the Quarterly Report on Form 10-Q filed on May 7, 2021)
LineUnofficial English Translation of Credit AgreementRMB Working Capital Loan Contract dated August 21, 2017as of July 25, 2023, by and between ACM Research, (Shanghai), Inc. and China CITIC Bank of Shanghai Co., Ltd. Pudong Branch
Shanghai Bank (incorporated herein by reference to Exhibit 10.01 to the Current Report on Form 8-K filed on July 31, 2023)
Lease Agreement dated March 6, 2023, by and between Hillsboro 229, LLC and ACM Research, Inc. (incorporated herein by reference to Exhibit 10.02 to the Quarterly Report on Form 10-Q filed on August 7, 2023)
16.01
Letter from Armanino LLP dated July 27, 2023 to the Securities and Exchange Commission (incorporated herein by reference to Exhibit 16.1 to the Current Report on Form 8-K filed on July 27, 2023)
16.02
Letter from Armanino LLP dated September 26, 2023 to the Securities and Exchange Commission (incorporated herein by reference to Exhibit 16.1 to the Current Report on Form 8-K filed on September 26, 2023)
21.01
List of Subsidiaries of ACM Research, Inc.
23.01
Consent of Ernst & Young Hua Ming LLP
23.02
Consent of Armanino LLP
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23.03
Consent of BDO China Shu LanLun Pan Certified Public Accountants LLP
31.01
31.01
Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.02
31.02
Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.01
32.01
Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
97.01
ACM Research, Inc. Incentive-Based Compensation Recovery Policy
101.INS
99.01
Submission under Item 9C(a) of Form 10-K
101.INSInline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)
101.SCH
101.SCH
Inline XBRL Taxonomy Extension Schema Document
101.CAL
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document
104Cover Page Interactive Data File (formatted as inline XBRL and contained in exhibit 101)
# Previously filed.+
+    Indicates management contract or compensatory plan.
‡    Certain information in this exhibit was omitted by means of redacting a portion of the text and replacing it with [***]
†Unofficial English translation of original document prepared in Mandarin Chinese.
*Certain appendices have been omitted pursuant to Item 601(a)(5) of Regulation S-K. We hereby undertake to furnish copies of the omitted appendices upon request by the Securities and Exchange Commission, provided that we may request confidential treatment pursuant to Rule 24b‑2 of the Securities Exchange Act of 1934 for the appendices so furnished.
Item 16.    Form 10-K Summary
None.
135
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SIGNATURES
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, as of March 22, 2018.
February 28, 2024.
ACM RESEARCH, INC.
By:By:  /s/ David H. Wang
David H. Wang
Chief Executive Officer and President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons in the capacities indicated on March 22, 2018:
as of February 28, 2024:
Signature
Title
/s/ David H. Wang
David H. Wang
Chief Executive Officer, President and Director
David H. Wang
(Principal Executive Officer)
/s/ Lisa Feng
Mark A. McKechnie
Mark A. McKechnieInterim
Chief Financial Officer, Chief Executive Vice President and Treasurer
(Principal Financial and Accounting Officer and Treasurer
Lisa Feng
(Principal Accounting Officer)
/s/ Haiping Dun
Haiping DunDirector
Haiping Dun
/s/ Chenming Hu
Chenming Hu
Director
/s/ Tracy Liu
Tracy LiuDirector
Tracy Liu

/s/ Xiao Xing
/s/ Yinan Xiang
Xiao Xing
Director
 Yinan Xiang
112136