Fabrinet

Customer and revenue · Customer concentration and key customer dependence

We have depended, and will continue to depend, upon a small number of customers for a significant percentage of our revenues. During fiscal years 2026, 2025 and 2024, we had four, two and two customers, respectively, that each contributed 10% or more of our revenues. Such customers together accounted for 57.4%, 45.8% and 48.5% of our revenues during the respective periods.

Market position and competition · Industry consolidation and market concentration

Consolidation in the markets we serve has resulted in a reduction in the number of potential customers for our services. For example, Nokia Corporation completed its acquisition of Infinera Corporation in February 2025; Lumentum Holdings Inc. completed its acquisition of NeoPhotonics Corporation in August 2022; Coherent Corp. completed its acquisition of Coherent, Inc. in July 2022; and Cisco Systems, Inc. completed its acquisition of Acacia Communications, Inc. in March 2021.

Customer and revenue · Revenue concentration in specific products or segments

Revenues from data center products represented 47.9% and 46.2% of our revenues for fiscal year 2026 and fiscal year 2025, respectively. Revenues from communications infrastructure products represented 33.3% and 30.7% of our revenues for fiscal year 2026 and fiscal year 2025, respectively.

Market position and competition · Market cyclicality and demand volatility

Our quarterly revenues, gross profit margins, and operating results have fluctuated significantly and may continue to fluctuate significantly in the future. For example, any of the risks described in this 'Risk Factors' section and, in particular, the following factors, could cause our revenues, gross profit margins, and operating results to fluctuate from quarter to quarter: the cyclicality of the optical communications, automotive, industrial lasers, medical, and sensors markets.

Market position and competition · Competitive pressure and market share loss

We face significant competition in our business. Our current and prospective customers tend to evaluate our capabilities against the merits of their internal manufacturing as well as the capabilities of other third-party manufacturers. Many of our customers and potential competitors have longer operating histories, greater name recognition, larger customer bases and significantly greater resources than we have.

Customer and revenue · Customer retention and subscription renewal

Cancellations, delays or reductions of customer orders and the relatively short-term nature of the commitments of our customers could harm our business, financial condition and operating results. We do not typically obtain firm purchase orders or commitments from our customers that extend beyond 13 weeks.

Credit and liquidity · Credit risk and customer defaults

Many of our existing and potential customers have substantial debt burdens, have experienced financial distress or have static or declining revenues, all of which may be exacerbated by the current global economic downturn and subsequent adverse conditions in the credit markets. We generate significant accounts payable and inventory for the services that we provide to our customers, which could expose us to substantial and potentially unrecoverable costs if we do not receive payment from our customers.

International and currency · Foreign exchange and currency exposure

Volatility in the functional and non-functional currencies of our entities and the U.S. dollar could seriously harm our business, financial condition and operating results. The primary impact of currency exchange fluctuations is on our cash, receivables, and payables of our operating entities. For example, in the three months ended December 26, 2025, we experienced a $3.2 million foreign exchange loss.

International and currency · Emerging markets exposure

We expect to continue to invest in our manufacturing operations in the PRC, which will continue to expose us to risks inherent in doing business in the PRC. Because these operations are located in the PRC, they are subject to greater political, legal and economic risks than the geographies in which the facilities of many of our competitors and customers are located.

Supply chain and procurement · Supplier operation and dependance

We rely on a single source or a limited number of suppliers for critical materials used in a significant number of the products we manufacture. We generally purchase these single or limited source materials through standard purchase orders and do not maintain long-term supply agreements with our suppliers.

Supply chain and procurement · Raw material availability and cost volatility

The semiconductor supply chain is complex, and, in recent years, there has been a significant global shortage of semiconductors. Demand for consumer electronics surged during the COVID-19 pandemic, which in turn has increased the demand for semiconductors. A shortage of semiconductors or other key components can cause a significant disruption to our production schedule and have a substantial adverse effect on our business, financial condition and operating results.

Core operations · Capacity utilization and efficiency

If we fail to adequately expand our manufacturing capacity, we will not be able to grow our business, which would harm our business, financial condition and operating results. Conversely, if we expand too much or too rapidly, we may experience excess capacity, which would harm our business, financial condition and operating results.

Core operations · Quality control and product defects

If the products that we manufacture contain defects, we could incur significant correction costs, demand for our services may decline and we may be exposed to product liability and product warranty claims. Products that we manufacture may at times contain manufacturing or design defects, and our manufacturing processes may be subject to errors or fail to be in compliance with applicable statutory or regulatory requirements.

Human capital and workforce · Talent acquisition and retention

If we fail to attract additional skilled employees or retain key personnel, our business, financial condition and operating results could suffer. We have identified several areas where we intend to expand our hiring, including business development, finance, human resources, operations and supply chain management.

Human capital and workforce · Key personnel dependence and succession

Our future also depends on the continued contributions of our executive management team and other key management and technical personnel, each of whom would be difficult to replace. Although we have key person life insurance policies on some of our executive officers, the loss of any of our executive officers or key personnel or the inability to continue to attract qualified personnel could harm our business, financial condition and operating results.

Geopolitical and trade · Trade policies tariffs and sanctions

We are subject to risks associated with changes in international trade policies, regulations, and relationships. In recent years, multiple countries, including the United States, the PRC, and members of the European Union, among others have enacted tariffs, export controls, quotas, and other forms of trade restrictions on a variety of goods and services.

Geopolitical and trade · Political instability and government changes

The majority of our assets and manufacturing operations are located in Thailand. Thailand has a history of political unrest that includes the involvement of the military as an active participant in the ruling government. Any future political instability in Thailand could prevent shipments from entering or leaving the country, disrupt our ability to manufacture products in Thailand.

Natural and catastrophic events · Natural disasters and extreme weather

Natural disasters could severely disrupt our manufacturing operations and increase our supply chain costs. For example, the 2011 flooding in Thailand forced us to temporarily shut down all of our manufacturing facilities in Thailand and cease production permanently at our former Chokchai facility.

Natural and catastrophic events · Pandemic and public health crises

In some countries in which we operate, including the PRC, the U.S., and Thailand, outbreaks of infectious diseases such as COVID-19, H1N1 influenza virus, severe acute respiratory syndrome or bird flu could disrupt our manufacturing operations. For example, the outbreak of COVID-19 resulted in a two-week suspension of operations at our facility in Fuzhou, the PRC in February 2020.

Geopolitical and trade · International conflicts and tensions

Increased international political instability, the threat or occurrence of terrorist attacks, conflicts in the Middle East, Asia and Europe (including the U.S.-Iran war, the Israel-Hamas war, and the Russia-Ukraine war), strained international relations arising from these conflicts and the related decline in consumer confidence and economic weakness, may hinder our ability to do business.