Our Revenues.We generate revenues by licensing portions of our intellectual property to other manufacturers of wireless products (such as wireless phones and other devices and the hardwareinfrastructure required to establish and operate a wireless network). Revenues are generated throughWe receive licensing fees and royalties on products sold by our licensees that incorporate our patented technologies. We also sell and license products and services, which include the following, all of which are described in greater detail below:include:

     Our Integrated Circuits Business.We develop and supply CDMA-based integrated circuits and system software for wireless voice and data communications, multimedia functions and global positioning system products. We also design and create multimode and multiband integrated circuits incorporating other wireless standards for roaming in global roaming markets. Our integrated circuit products and system software are used in wireless devices, particularly mobile phones, laptops, data modules, handheld wireless computers, data cards and infrastructure equipment. The integrated circuits for wireless phonesdevices include the baseband Mobile Station Modem (MSM), Radio Frequency (RF)Mobile Data Modem (MDM), Qualcomm Single Chip (QSC), Qualcomm Snapdragon (QSD), RF, PM and Power Management (PM)Bluetooth devices, as well as the system software whichthat enables the other phonedevice components to interface with the integrated circuit products and is the foundation software enabling phonedevice manufacturers to develop handsets utilizing the functionality within the integrated circuits. These integrated circuits for wireless phonesdevices and system software perform voice and data communication, multimedia and global positioning functions, radio conversion between RF and baseband signals and power management. Our infrastructure equipment Cell Site Modem (CSM) integrated circuits and system software perform the core baseband CDMA modem functionality in the wireless operator’s equipment.base station equipment providing wireless standards-compliant processing of voice and data signals to and from wireless devices. Because of our broad and unique experience in designing and developing CDMA-based products, we not only design the baseband integrated circuit, but the supporting system as well, including the RF devices, PM devices and accompanying software products. This approach enables us to optimize the performance of the wireless phone itselfdevice with improved product features, as well as the integration and performance of the network system. Our design of the system also allows CDMA systems and devices manufactured by our customers to come to market faster. We provide our integrated circuits and system software, including reference designs and tools, to many of the world’s leading wireless phonedevice and infrastructure equipment manufacturers. We plan to add additional features and capabilities to our future integrated circuit products to help our customers reduce the costs and size of their products and to simplify our customers’ design processes. We also design and create multimode and multiband integrated circuits incorporating other wireless standards for global roaming markets. In addition, we will continue to provide high quality support to enable our customers to reduce the time required to design their products and bring their products to market faster. We plan to add additional features and capabilities to our integrated circuit products to help our customers reduce the costs and size of their products, to simplify our customers’ design processes and to enable more wireless devices and services.

     Our PhoneLicensing Business.We grant licenses to use portions of our intellectual property portfolio, which includes certain patent rights essential to and/or useful in the manufacture and sale of certain wireless products, and collect license fees and royalties in partial consideration for such licenses.

Our Wireless Device Software and Related Services Business.We provide oursoftware products and services for the global wireless industry. Our BREW (Binary Runtime Environment for Wireless) productsservices enable wireless operators, device manufacturers and servicessoftware developers to support the development ofprovide over-the-air and pre-loaded wireless applications and services. We provide BREW toOur Plaza suite of products, which includes Plaza Retail and Plaza Mobile Internet, enable wireless network operators, handsetdevice manufacturers and software developers. The BREWpublishers to create and distribute mobile content across a wide variety of platforms and devices. We also offer Xiam wireless content discovery and recommendation products and services include the BREW software development kit (SDK) for developers; the BREW applications platform (i.e. software programs) and interface tools for device manufacturers; and the uiOne customized user interface product and services and the deliveryOne Content Distribution System to help wireless operators to enable the distributionimprove usage and adoption of digital content and applications to the market, while also providing the settlement of the billing and payment process. The BREW platform is a software application that provides an open, standard platform for wireless devices, which means that BREW can be made to interface with many software applications, including those developed by others. We make the BREW SDK available, free of charge, to any qualified person or company interested in developing a new software application for wireless communications. BREW leverages the capabilities available in integrated circuits and system software, enabling our customers to develop feature-rich applications and content while reducing memory and maximizing system performance of the wireless phone itself. In addition to CDMA2000, BREW can be used on wireless phones and other devices that support other wireless technologies, such as GSM, General Packet Radio System (GPRS), Enhanced Data Rates for GSM Evolution (EDGE) and WCDMA.services. We also provide QChat, which enables virtually instantaneous push-to-talk functionality on CDMA-based wireless devices, anda push to talk product optimized for 3G networks, as well as QPoint, which enables wireless operators to offer enhanced 911 (E-911) wireless emergency and other location-based applications and services.

     Subscriber Growth. Based on reports by Wireless Intelligence, an independent source of wireless operator data, the wireless telecommunications industry continued to grow at a rapid pace during fiscal 2006, with worldwide wireless subscribers growing by more than 24% to reach approximately 2.5 billion as of September 2006. CDMA-based subscribers, including both 2G (cdmaOne) and 3G (CDMA2000, 1xEV-DO and WCDMA), represent approximately 17% of total worldwide wireless subscribers. In September 2006, Strategy Analytics, a global research and consulting firm, forecast that there will be approximately 3 billion mobile phone users, also referred to as subscribers, by the end of calendar year 2007 and that the figure will grow to more than 3.8 billion globally by the end of 2011.

     Our MediaFLO USA continues to prepareTechnologies (MFT) division is developing MediaFLO technology and marketing it for the launch of its commercial service. Its San Diego Broadcast Operation Center and Network Operations Center are currently operating, while construction of the initial phase of its network is nearing completion in several major markets. In addition to Verizon Wireless, which announced its intention to launch the MediaFLO USA service in early calendar 2007, MediaFLO USA is actively engaged in discussions with multiple domestic wireless operators on how they might utilize the MediaFLO USA service.

     Giving Back.Our Display Business.At QUALCOMM, we are not only committed to being good corporate citizens, but also good neighbors inWe develop display technology for the communities we call home. We contribute collectively as a corporation, and we participate in ways that touch people’s livesfull range of consumer-targeted mobile products. Our interferometric modulator (IMOD) display technology, based on a personal level. We encourage our employeesMEMS structure combined with thin film optics and sold under the “mirasol” brand, is expected to give their timeprovide performance, power consumption and considerable talentscost benefits as compared to the community, and their significant volunteer efforts are evident in, for example, schools, the arts, feeding the homeless and serving on the advisory boards of not-for-profit organizations. We make donations to community causes, with a focus on programs that promote education, health and human services, and culture and the arts. Our charitable giving programs include our active and ongoing employee matching grant program, which matches a certain level of donations made by employees to qualifying organizations, and educational giving, such as engineering partnerships with universities intended to make a sustainable difference in educational systems in the various regions in which we do business. Our charitable giving and volunteer programs are based on respect for community organizations, cooperative leadership development and philanthropic creativity.

     The International Telecommunications Union (ITU) is a telecommunication standards setting organization that is recognized as an impartial, international organization within which governments and the private sector work together to advance the development of international standards for communications technology. The ITU’s standardization activities foster the growth of new technologies, such as mobile telephony, mobile broadcast and mobile Internet, as well as the emerging global information infrastructure, which handles a mix of voice, data and multimedia signals. The ITU develops internationally agreed-upon technical and operating standards to foster seamless interconnection of the world’s communication networks and their subsystems. As the world of telecommunications, information technology and media content distribution rapidly converge, the role of the ITU is to forge new recommendations that promote the interoperability of equipment and facilitate the development of advanced communication networks. The ITU identifies sound technical recommendations and develops them into internationally recognized ITU standards.

     In addition to the tremendous demand for wireless voice services, wireless service providers are increasingly focused on providing broadband wireless access to the Internet, as well as e-mail, multimedia, entertainment, messaging, social networking, mobile commerce and position location services. These services have been aided by the development and commercialization of 3Gthird-generation (3G) wireless networks and 3G handsetsdevices which are capable of supporting higher data rates that incorporate an ever-increasing array of new features and functionality, such as assisted GPS-basedGlobal Positioning System (GPS)-based position location, digital cameras with flash and zoom capabilities, internet browsers, email,e-mail, mobile widgets, interactive games, music and video downloads and software download capability (e.g. our BREW, application stores platform). In June 2006,September 2009, the Yankee Group, a global market intelligence and advisory firm in the technology and telecommunications industries, estimated that more than 1.93.6 billion people will be using mobile data services by 20102013, and the revenue produced from these services will account for 23%25% of total wireless service revenue worldwide. We believe the growing availability of 3G-enabled handsetsdevices capable of performing a wide variety of consumer and enterprise applications will accelerate the demand for many wireless data services on a global basis and thus lead to an increased replacement rate of second-generation (2G) mobile devices to those3G mobile devices using our technologies and integrated circuits. Affordable wireless broadband

     Second Generation.As the deployment of mobile phoneCompared to first generation analog systems, grew, the limitations of analog technology drove the development of second generation, digital-based technologies. Second generation2G digital technology provided for significantly enhanced efficiency within a fixed spectrum as well asresulting in greatly increased voice capacity compared to analog systems. Second generationcapacity. 2G technologies also enabled numerous enhanced services, including paging, e-mail, facsimile, connections to computer networks, greater privacy, lower prices, a greater number of service options and greater fraud protection. However, data services (email,(e-mail, fax, computer connections) were generally limited to low speed transmission rates. The main second-generation2G digital cellular technologies are CDMA, called cdmaOne or IS-95A/B, a technology we developed and patented, North American TDMA, PDC (Personal Digital Cellular—Cellular, a variant of North American TDMA), and GSM, also a form of TDMA. Sales of North American TDMA and PDC phones have been discontinued with subscribers being moved to GSM or 3G technologies. Wireless operators have shut down, or are planning to shut down, usage of these 2G systems. Similarly, analog systems have been shut down in most places.

     The three ITU 3G CDMA radio interfaces are all based on the underlying core principles of CDMA technology; however, the CDMA2000 mode enables a direct and more economical conversion for current cdmaOne networks. Most cdmaOne operators have deployed CDMA2000 1X and have augmented their networks with 1xEV-DO. While the WCDMA wireless air interface does use CDMA technology for communications between the wireless device and the network, the infrastructurecore network has been specifically designed to be compatible with theis an upgraded GSM core network, which is why it is expected that most GSM operators will migrate todeploy WCDMA rather than to CDMA2000.We will continue to develop integrated circuits for CDMA2000 and WCDMA and expect to develop integrated circuits for all 3G versions based on CDMA when commercially worthwhile. In addition, ourCDMA2000. Our intellectual property rights include a valuable patent portfolio that includes patents essential to implementation of each of the 3G CDMA alternative standards and patents that are useful for commercially successful product implementations. Generally, we have licensed substantially all of our patents to our CDMA licensees. Under each of our existing license

     These 3G CDMA versions (CDMA2000, WCDMA, TD-CDMA and TD-SCDMA) from a technological perspective require separate implementations and are not interchangeable. While the fundamental core technologies are derived from CDMA and, in addition to other features and functionality, are covered by our patents, they each require unique infrastructure products, network design and management. However, subscriber roaming amongst systems using different air interfaces is made possible through multimode wireless devices.

     Our gpsOne position-locationposition location technology is in more than 200500 million gpsOne-enabled handsetsgpsOne enabled devices sold worldwide. Enabling a wide range of consumer and enterprise location-based services around the globe, gpsOne supports four modes of operation across a variety of terrains: Hybrid Mobile Station-Assisted GPS (Global Positioning System) enables a location fix whenever a call can be placed; Mobile Station-Assisted GPS provides extreme sensitivity to GPS signals across a broad range of environments; Mobile Station-Based GPS provides repetitive fix capabilities that are ideal for navigation, tracking and games; and Standalone GPS enables positioning in off-network scenarios. Compatible with all major air interfaces, theour gpsOne technology is the industry’s only fully-integrated wireless baseband and assisted GPS product and has enabled CDMA system operators to cost-effectively meet the FCC’s E911E-911 mandate.

     WeOur integrated circuit products span all market tiers, from entry-level solutions for emerging markets up to the very high-end device tier. Our chipsets integrate unique combinations of features — such as multi-megapixel cameras, videotelephony, streaming multimedia, audio, interactive 3D graphics, advanced position-location capabilities through integrated gpsOne technology and peripheral connectivity — to enable a wide range of devices.

     The Snapdragon platform of chipset products is designed to enable computing-centric devices that also offer a broad portfoliofull range of power management integrated circuitswireless connectivity capabilities. Leveraging the Scorpion low-power high-performance microprocessor, the Snapdragon platform expands Qualcomm’s reach beyond the traditional wireless market by targeting not only the very high-end smartphone market but also the smartbook category of consumer products.

     Multimode Gobi modules are designed to provide optimized system performance for each MSM platform. In fiscal 2006, we announced and began to ship samples of the PM7500, a power management product which supports the advanced capabilities of our Convergence Platform chipsets. Our portfolio of PM integrated circuits delivers enhanced performance, time-to-market advantages and reduced power demands ondeliver embedded mobile wireless handsets when combined with MSM integrated circuits.

     QCT also offers chipsets for WLAN networks,and Bluetooth, complementary connectivity technologies to its core 3G products. For WLAN, QCT offers both the WCN1320 chip that delivers up to four 802.11n spatial streams for high-speed connectivity in residential settings and the WCN1312 chip for handsets and other mobile devices. QCT’s Bluetooth chips support Bluetooth connectivity for handsets and headsets.

     QCT’s current competitors include, but are not limited to, major companies such as Freescale, Infineon, Marvell, Mediatek, ST-Ericsson, Texas Instruments and VIA Telecom, as well as to existing wireless networks,major telecommunication equipment companies such as Ericsson, Matsushita and will feature compatibility with 802.11b and 802.11g protocols on both CDMA2000 and WCDMA networks.

     QUALCOMMQualcomm Government Technologies (QGOV).The QGOV division provides development, hardware and analytical expertise involving wireless communications technologies to United States government (USG) agencies involving wireless communications technologies. We have developed, producedagencies. QGOV adapts, integrates and shipped second generationships CDMA2000 1X and EV-DO deployable base stations to the USG. QGOV also ships 2G CDMA secure wireless terrestrial phones for the USG that operate in enhanced security modes (referred to as Type 1) and incorporate end-to-end encryption. In fiscal 2006, QGOV adapted, integrated and shipped CDMA2000 1X deployable base stationsencryption to the USG. Additionally, OmniTRACS products and services are being used for USG worldwide applications and were sold to the USG during fiscal 2006. Based on the percentage of QGOV revenues to our total consolidated revenues, the USG is not a major customer.

     QUALCOMMOther Businesses.

Qualcomm MEMS Technologies (QMT).QMT is developing display technology for the full range of consumer-targeted mobile products. QMT’s interferometric modularIMOD display (iMoD) technology, based on a micro-electro-mechanical-systems (MEMS)MEMS structure combined with thin film optics and sold under the “mirasol” brand, is expected to provide substantial performance, power consumption and cost benefits as compared to current display technologies. We expect the iMoD product to deliver a vivid and realistic display image quality that can withstand extreme temperatures and be viewed in virtually any environment, including bright sunlight. Displays have become a key factor in the overall power consumption of wireless devices, with the increasing use of vibrant color screens and multimedia applications that generate rapidly changing images. The iMoD product is expected to offer significantly lower power consumption than existing display products, thereby extending the battery life of wireless devices. With the inclusion of color displays in all types of wireless phones,devices, including models at the low end of the market, the cost of the display has become an even more significant factor in the overall cost of the handset.device. An iMoDIMOD display should cost less to manufacture than a comparable liquid crystal display because it requires fewer components and processing steps, thus enablingsupporting advanced multimedia capabilities on all tiers of mobile devices.

     QUALCOMMQualcomm Flarion Technologies (QFT).QFT is the developer and provider of FLASH-OFDM,fast low-latency access with seamless handoff-OFDM (FLASH-OFDM), the wireless industry’s first and only fully mobile OFDMOFDMA offering. We acquired Flarion Technologies, Inc. in January 2006 to expand our already extensive portfolio of OFDMA intellectual property and enhance our research and development organization with expertise in OFDMA technology and products. FLASH-OFDM is an air interface technology designed for the delivery of advanced Internetinternet services in the mobile environment. The technology is based on the OFDM airlink, a wireless access method that combines the attributes of its two predecessors, TDMA and CDMA, to address the unique demands posed by mobile users of broadband data and packetized voice applications. Through FLASH-OFDM, QFT has created an end-to-end network offering for mobile operators, which includes the RadioRouter base station product line, wireless modems, embedded chipsets and system software. The all-IP wireless network will supportsupports both broadband data and packetized voice applications. QFT’s considerable

     Competition to our operating segments is discussed under Operating Segments in Item 1. Competition in the telecommunicationswireless industry throughout the world continues to increase at a rapid pace as consumers, businesses and governments realize the market potential of wireless telecommunications products and services. We have facilitated competition in the CDMAwireless market by licensing and enabling a large number of manufacturers. Although we have attained a majorsignificant position in the industry, many of our current and potential competitors may have advantages over us, including:

     We rely on a combination of patents, copyrights, trade secrets, trademarks and proprietary information to maintain and enhance our competitive position. WeIn the United States, we have filed approximately 5,100 United States11,600 granted patents and pending patent applications, of which approximately 1,9003,600 patents have been issued.granted. The vast majority of such patents and patent applications relate to digital wireless communications technologies, including patents that are essential or useful formay be relevant to CDMA2000, UMTS,WCDMA (UMTS), TD-SCDMA, TD-CDMA and OFDMA products. We also have and will continue to actively file for broad patent protection outside the United States. We have filed approximately 25,80054,100 foreign granted patents and pending patent applications, of which approximately 7,40018,500 patents have been issued, withgranted, that have broad coverage throughout most of the world, including China, Japan, South Korea, Europe, Brazil, India, Taiwan and elsewhere.

     The standardsStandards bodies and the ITU have been informed that we hold patents that might be essential intellectual property rights for all 3G standards that are based on CDMA. We have committed to the ITUsuch standards bodies that we will offer to license our essential patents for these CDMA standards on a fair and reasonable basis free from unfair discrimination. We have also informed the standards bodies that we may hold essential intellectual property rights for certain standards that are based on OFDMA technology e.g.(e.g., 802.16e, 802.16m and 802.20.LTE).

     Marvin Blecker,Andrew M. Gilbert, age 59,46, has served as an Executive Vice President and President of QUALCOMM Technology Licensing (QTL)Qualcomm Internet Services (QIS) and Qualcomm Europe since April 2005. From November 2001 to April 2005, heMay 2009. He served as General Manager of QTL, as well as Senioran Executive Vice President of that division from October 1995 to November 2001. He holds B.S. and M.S. degrees in Mathematics and a M.S. degree in Electrical Engineering-Systems Science from the Polytechnic Institute of Brooklyn, New York (now Polytechnic University).

     Margaret “Peggy” L. Johnson, age 44,47, has served as Executive Vice President of the Americas and India since January 2008 and as an Executive Vice President since December 2006. She served as President of QUALCOMM Internet Services (QIS) since July 2001MFT from December 2005 to January 2008 and as President of QUALCOMM MediaFLO Technologies since December 2005.QIS from July 2001 to January 2008. She served as Senior Vice President and General Manager of QIS from September 2000 to July 2001. Ms. Johnson holds a B.S. degree in Electrical Engineering from San Diego State University.

     Louis M. Lupin,William E. Keitel, age 51,56, has served as an Executive Vice President since December 2003 and as Chief Financial Officer since February 2002. He previously served as a Senior Vice President and as our General Counsel since September 2000.Corporate Controller from May 1999 to February 2002. Mr. Lupin receivedKeitel holds a B.A. degree in Business Administration from Swarthmore Collegethe University of Wisconsin and an M.B.A. from Arizona State University.

     Our business and the deployment of our technologies, products and services are dependent on the success of our customers, licensees and CDMA-based wireless operators, as well as the timing of their deployment of new services. Our licensees and CDMA-based wireless operators may incur lower operatinggross margins on products or services based on our technologies than on products using alternative technologies due toas a result of greater competition in the relevant market or other factors. If CDMA-based wireless operators, phonewireless device and/or infrastructure manufacturers exit thecease providing CDMA-based markets,products and/or services, the deployment of CDMA technology could be negatively affected, and our business could suffer.

     Six companies (Nokia, Ericsson, Panasonic, Texas Instruments, Broadcom and NEC) submitted separate formal complaints to the Competition Directorate of the EC accusing our business practices, with respect to licensing of patents and sales of chipsets, to be in violation of Article 82 of the EC treaty. We received the complaints, submitted a response and have submittedcooperated with the EC in its investigation. On October 1, 2007, the EC announced that it had initiated a response.proceeding. To date, the EC has not announced whether it would issue a Statement of Objections or whether it has made any conclusions as to the merits of the complaints. On July 23, 2008, we entered into an agreement with Nokia in which Nokia agreed to withdraw its complaint as part of the settlement of disputes between the parties, and on April 26, 2009, we entered into an agreement with Broadcom in which Broadcom agreed to withdraw its complaint as part of the settlement of disputes between the parties; however, although Nokia and

     We rely primarily on patent, copyright, trademark and trade secret laws, as well as nondisclosure and confidentiality agreements and other methods, to protect our proprietary information, technologies and processes, including our patent portfolio. Policing unauthorized use of our products and technologies is difficult and time consuming. We cannot be certain that the steps we have taken will prevent the misappropriation or unauthorized use of our proprietary information and technologies, particularly in foreign countries where the laws may not protect our proprietary intellectual property rights as fully or as readily as United States laws. We cannot be certain that the laws and policies of any country, including the United States, or the practices of any of the international standards bodies, foreign or

     Our currently pending or future patent applications for iMoD may not result in issued patents. In addition, our issued iMoD patents may not contain claims sufficiently broad to protect us against third parties with similar technologies or products or from third parties infringing our patents or misappropriating our trade secrets or provide us with any competitive advantage.

     QCT Segment.A supplier’s ability to meet our product manufacturing demand is limited mainly by their overall capacity and current capacity availability. Although we have entered into long-term contracts with our suppliers, most of these contracts do not provide for long-term capacity commitments.commitments, except as may be provided in a particular purchase order that has been accepted by our supplier. To the extent that we do not have firm commitments from our suppliers over a specific time period, or in any specific quantity, our suppliers may allocate, and in the past have allocated, capacity to the production and testing of products for their other customers while reducing capacity to manufacture our products. Accordingly, capacity for our products may not be available when we need it or available at reasonable prices. We have experienced capacity limitations from our suppliers, which resulted in the past and may experience it in the future. During fiscal 2004 and the first quarter of fiscal 2005, we experienced supply constraints which resulted inand our inability to meet certain customer demand. While we were able to alleviate these supply constraints and improve the supply and delivery of integrated circuits by working with our existing suppliers to increase available manufacturing capacity, and by increasing and extending our firm orders to our suppliers, thereThere can be no assurance that we will not experience these or other supply constraints in the future, which could result in our failure to meet customer demand.

     While our goal is to establish alternate suppliers for technologies that we consider critical, some of our integrated circuits products are only available from single sources, with which we do not have long-term contracts.capacity commitments. Our reliance on solesole- or limited-source vendorssuppliers involves significant risks including possible shortages of manufacturing capacity, poor product performance and reduced control over delivery schedules, manufacturing capability and yields, quality assurance, quantity and costs. Our arrangements with our suppliers may oblige us to incur costs to manufacture and test our products that do not decrease at the same rate as decreases in pricing to our customers which may result in lowering our operating margins. In addition, the timely readiness of our foundry suppliers to support transitions to smaller geometry process technologies could impact our ability to meet customer demand, revenues and cost expectations. The timing of acceptance of the smaller technology designs by our customers may subject us to the risk of excess inventories of earlier designs.

     In the event of a loss of, or a decision to change, a key third partythird-party supplier, qualifying a new foundry supplier and commencing volume production or testing could involve delay and expense, resulting in lost revenues, reduced operating margins and possible loss of customers. We work closely with our customers to expedite their processes for evaluating new integrated circuits from our foundry suppliers; however, in some instances, transition of integrated circuit production to a new foundry supplier may cause a temporary decline in shipments of specific integrated circuits to individual customers.

     Under our Integrated Fabless Manufacturing (IFM) model, we purchase die from semiconductor manufacturing foundries, contract with separate third-party manufacturers for back-end assembly and test services and ship the completed integrated circuits to our customers. We are unable to directly control the services provided by our semiconductor assembly and test (SAT) suppliers, including the timely procurement of packaging materials for our products, availability of assembly and test capacity, manufacturing yields, quality assurance and product delivery schedules. We have a limited history of working with the SAT suppliers under the IFM model, and we cannot guarantee that our lack of control will not cause disruptions in our operations that could harm our ability to meet our delivery obligations to our customers, reduce our revenues or increase our cost of sales.

QMT Division.QMT needs to form and maintain reliable business relationships with flat panel display manufacturers or other targeted partners to support the manufacture of iMoDIMOD displays in commercial volumes. All of our current relationships have been for the development and limited production of certain iMoDIMOD display panels and/or modules. Some or all of these relationships may not succeed or, even if they are successful, may not result in the display manufacturers’ entering into material supply relationships with us.

We are expanding our manufacturing modelFLO TV Business.FLO TV depends on a limited number of third-party suppliers to purchase completed die from semiconductor manufacturing foundries and to contract directly with third party manufacturers for assemblymanufacture and test services. This new production model may increase costscomponent parts, subassemblies and lower our control over the manufacturing process.

     Our products are inherently complex and may contain defects and errors that are detected only when the products are in use. Further, becauseFor example, as our chipset product complexities increase, we are required to migrate to integrated circuit technologies with smaller geometric feature sizes. The design process interface issues are more complex as we enter into these new domains of technology, which adds risk to yields and reliability. Because our products and services are responsible for critical functions in our customers’ products and/or networks, such defects or errors could have a serious impact on our customers, which could damage our reputation, harm our customer relationships and expose us to liability. Defects or impurities in our components, materials or software or those used by our customers or licensees, equipment failures or other difficulties could adversely affect our ability, and that of our customers and licensees, to ship products on a timely basis as well as customer or licensee demand for our products. Any such shipment delays or declines in demand could reduce our revenues and harm our ability to achieve or sustain desired levels of profitability. We and our customers or licensees may also experience component or software failures or defects that could require significant product recalls, reworksrework and/or repairs whichthat are not covered by warranty reserves