Garmin 2009 Annual Report Download - page 46

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yIfdemandincreasesbeyondwhatweforecast,wewouldhavetorapidlyincreaseproduction.Wewould
dependonsupplierstoprovideadditionalvolumesofcomponentsandthosesuppliersmightnotbe
abletoincreaseproductionrapidlyenoughtomeetunexpecteddemand.
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yRapidincreasesinproductionlevelstomeetunanticipateddemandcouldresultinhighercostsfor
manufacturingandsupplyofcomponentsandotherexpenses.Thesehighercostscouldlowerour
profitmargins.Further,ifproductionisincreasedrapidly,manufacturingqualitycoulddecline,which
mayalsolowerourmarginsandreducecustomersatisfaction.
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yIfforecasteddemanddoesnotdevelop,wecouldhaveexcessproductionresultinginhigherinventories
offinishedproductsandcomponents,whichwouldusecashandcouldleadtowrite‐offsofsomeorall
oftheexcessinventories.Lowerthanforecasteddemandcouldalsoresultinexcessmanufacturing
capacityorreducedmanufacturingefficienciesatourfacilities,whichcouldresultinlowermargins.
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WehavebenefitedinthepastfromTaiwangovernmenttaxincentivesofferedoncertainhightechnology
capitalinvestmentsthatmaynotalwaysbeavailable.
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OureffectivetaxrateislowerthantheU.S.federalstatutoryrate,becausewehavebenefitedfrom
incentivesofferedinTaiwanrelatedtoourhightechnologyinvestmentsinTaiwan.Thelossofthesetaxbenefits
couldhaveasignificanteffectonourfinancialresultsinthefuture.
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WemayexperienceuniqueeconomicandpoliticalrisksassociatedwithcompaniesthatoperateinTaiwan.
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RelationsbetweenTaiwanandthePeople’sRepublicofChina,alsoreferredtoasthePRC,andother
factorsaffectingthepoliticaloreconomicconditionsofTaiwaninthefuturecouldmateriallyadverselyaffectour
business,financialconditionandresultsofoperationsandthemarketpriceandtheliquidityofourshares.Our
principalmanufacturingfacilitieswherewemanufactureallofourproducts,exceptourpanel‐mountedaviation
products,arelocatedinTaiwan.
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Taiwanhasauniqueinternationalpoliticalstatus.ThePRCassertssovereigntyoverallofChina,including
Taiwan,certainotherislandsandallofmainlandChina.ThePRCgovernmentdoesnotrecognizethelegitimacyof
theTaiwangovernment.Althoughsignificanteconomicandculturalrelationshavebeenestablishedduringrecent
yearsbetweenTaiwanandthePRC,thePRCgovernmenthasindicatedthatitmayusemilitaryforcetogain
controloverTaiwanincertaincircumstances,suchasthedeclarationofindependencebyTaiwan.Relations
betweenTaiwanandthePRChaveonoccasionadverselyaffectedthemarketvalueofTaiwanesecompaniesand
couldnegativelyaffectouroperationsinTaiwaninthefuture.
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Ourintellectualpropertyrightsareimportanttoouroperations,andwecouldsufferlossiftheyinfringeupon
other’srightsorareinfringeduponbyothers.
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Werelyonacombinationofpatents,copyrights,trademarksandtradesecrets,confidentialityprovisions
andlicensingarrangementstoestablishandprotectourproprietaryrights.Tothisend,weholdrightstoanumber
ofpatentsandregisteredtrademarksandregularlyfileapplicationstoattempttoprotectourrightsinnew
technologyandtrademarks.However,thereisnoguaranteethatourpatentapplicationswillbecomeissued
patents,orthatourtrademarkapplicationswillbecomeregisteredtrademarks.Moreover,evenifapproved,our
patentsortrademarksmaythereafterbesuccessfullychallengedbyothersorotherwisebecomeinvalidatedfora
varietyofreasons.Thus,anypatentsortrademarkswecurrentlyhaveormaylateracquiremaynotprovideusa
significantcompetitiveadvantage.
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Thirdpartiesmayclaimthatweareinfringingtheirintellectualpropertyrights.Suchclaimscouldhavea
materialadverseeffectonourbusinessandfinancialcondition.Fromtimetotimewereceivelettersalleging
infringementofpatents,trademarksorotherintellectualpropertyrights.Litigationconcerningpatentsorother
intellectualpropertyiscostlyandtimeconsuming.Wemayseeklicensesfromsuchparties,buttheycouldrefuse