We rely on a large, skilled workforce to operate our semiconductor manufacturing facilities worldwide. A substantial portion of our global production capacity is concentrated in several of our manufacturing facilities, and our wafer fabrication output depends on their continued, uninterrupted operation.
Certain of our employees have formed or joined labor unions, and additional unionization efforts may occur in the future. Labor unions representing a portion of our workforce have been engaged in union organizing and collective bargaining activities, including formal mediations (which, if not successful, could permit strike actions), and public demands for revised incentive structures. Such disputes could escalate rapidly and affect manufacturing output across the industry.
A strike, work stoppage, slowdown, or other labor action at any of our manufacturing facilities could cause significant business interruption, including the temporary or prolonged cessation of production at one or more fabrication lines. Even a brief disruption could result in substantial losses of production volume, reduced manufacturing yields, damage to work-in-process inventory, and delays in fulfilling customer orders. Such disruptions could also impair our ability to meet delivery schedules under strategic customer agreements, which could result in contractual liability, loss of customer confidence, or diversion of customer demand to competing suppliers.
The resolution of labor disputes may require us to increase wages, benefits, or incentive compensation, implement new profit-sharing or bonus programs, or make other concessions, any of which could significantly increase our manufacturing costs. We may also incur substantial costs in connection with labor negotiations, mediation or arbitration proceedings, and related legal or advisory expenses. We may not be able to resolve labor disputes on terms acceptable to us, and any resolution may be materially more costly than our existing compensation arrangements.
We cannot predict whether or when a strike or other work stoppage may occur at our facilities, the duration or severity of any such action, or the extent of any resulting business interruption. Even without actual work stoppage, prolonged labor negotiations, threats of strike action, and related workforce uncertainty may adversely affect employee morale and productivity, increase attrition of skilled employees, complicate our ability to recruit and retain the skilled engineers and technicians essential to our operations, and harm our reputation. Any of the foregoing could have a material adverse effect on our business, results of operations, or financial condition.