MANAGEMENT REPORT - GOVERNANCE
21
of its sold products ultimately are delivered in Europe or
Japan, which are the two geographical areas which could
have the largest potential impact due to USD fluctua-
tion. Asetek believes that other factors in the end users’
buying decision play a larger role than price fluctuation
on the liquid cooling component. During 2021, the USD
strengthened against both the DKK and EUR by 8% and
strengthened against the Japanese Yen by 12%.
cations for Asetek’s cooling technology is also a focus, as
evidenced by the cooling products released during 2021.
The Company has entered into an information security
are waiting for new GPUs are delayed in purchasing new
liquid coolers.
risk insurance policy. This area is actively monitored by the
Board of Directors' Audit Committee.
Manufacturing supply. Asetek relies upon suppliers and
partners to supply products and services at competitive
prices. Supply constraints, such as the current global chip
shortage and ongoing disruptions in the global supply
chain have increased component costs and limited the
Company’s ability to fulfill customer demand.
Projects and contracts. It is important to Asetek’s overall
success that development projects are executed at high
quality and at predetermined timeframes and cost prices.
Risks are attached to the sale, analysis and design, develop-
ment and initial manufacturing phases. Asetek has
carefully defined the individual phases and the activities
contained therein, with a view to active risk management
and efficient implementation. Through project reviews
and ongoing analyses before, during, and after initiation,
Asetek works to ensure that agreements are adhered to
and that revenue and margins are as planned.
Taxation. The tax situation of the Company is complex. In
connection with its initial public offering in 2013, Asetek
moved its Parent company from the U.S. to Denmark.
However, USA – in a unilateral tax treaty override – still
considers Asetek A/S a U.S. tax subject, resulting in double
taxation of Group earnings. Asetek has approached both
countries’ tax authorities with the aim of resolving the
situation as per the double taxation treaty. However, a
determination may take several years, and the authorities
are not obligated to resolve the problem. The Company
continues to make progress in working with the tax authori-
ties of Denmark and U.S. to possibly resolve this issue.
Asetek’s raw materials are predominantly purchased
with USD, from vendors whose underlying currency is
CNY. The USD weakened against the CNY by 2% in 2021.
Asetek recognizes that USD appreciation can result in
sales price pressure for its suppliers. Historically, the Com-
pany has not seen significant reaction from its markets.
In addition, Asetek believes that competing products are
prone to the same exchange rate scenarios as Asetek.
Asetek’s Gaming and Enthusiast products have been
historically assembled in Xiamen, China by a single con-
tract manufacturer which may be difficult to substitute
in the short term if the need should arise. Suppliers are
proactively managed by the Company's operations teams
based in Xiamen and Aalborg.
IT security. Asetek continuously implements measures
to monitor and respond to data breaches and cyberat-
tacks. Management ensures that security assessments,
including vulnerability assessments and assumed breach
tests are performed on a regular basis. Additional security
measures to mitigate phishing and spam mails are deliv-
ered to employees and password policies are maintained-
to mitigate the risk of password dictionary attacks or other
forms of brute force hacking of individuals. The Company
maintains ongoing efforts with external specialists to con-
tinuously improve and strengthen the IT Infrastructure
security. Mandatory training in cybersecurity is carried out
for all employees, and the knowledge level of cyber-
security is thus being changed from awareness-based
to training- and compliance-based. Asetek has not
experienced any security breaches within the most recent
5 years.
U.S. import tariffs. The U.S. has imposed a 25% tariff on
imports of goods manufactured in China, which include
Asetek products. The existence of the tariff has contrib-
uted to the uncertainties in the Gaming & Enthusiast
market. The Company continues to work to minimize the
impact of the tariff on Asetek and its customers.
In June 2019, the U.S. released regulation for its Global
Intangible Low-Taxed Income (GILTI) inclusion for U.S.
taxation, effective beginning with tax year 2018. The GILTI
regulation requires U.S. companies to report foreign
corporation intangible income that exceeds 10% return
on foreign invested assets. Under prior law, U.S. owners
of foreign corporations were able to defer recognizing
taxable income until there was a distribution of earnings
back to U.S. owners. In 2020, the GILTI regulation caused
incremental utilization of the Company's available
A significant portion of Asetek's overhead costs are
incurred in DKK. As a result, fluctuations in USD vs. DKK
will continue to have an influence on results of operations
and financial position. The Group has not entered into any
forward exchange instruments.
Foreign exchange rates. Substantially all of Asetek’s
revenue is billed in USD. However, many customers resell
Asetek products to end users in countries where USD is
not the transactional currency. As a result, there is a risk
that fluctuations in currency will affect the cost of product
to the end user and negatively impact market demand for
Asetek products. Asetek estimates that about one third
Research and development, product innovation, market
development. The Company’s future success, including
the opportunities to ensure growth, depends on the ability
to continue developing new solutions and products adapt-
ed to the latest technology and the clients’ needs as well as
improving existing solutions and market position. As such,
the Company develops new releases on a regular basis,
with emphasis on higher performance, improved efficiency
and noise-reduction. Providing new and innovative appli-
deferred tax assets of approximately $0.4 million, but did
not materially impact deferred tax asset utilization in 2021.
Because of Asetek’s U.S. tax status as described above,
management believes that the impact of the GILTI reg-
ulation as it applies to the Company could be reformed
PERFORMANCE - PRECISION - PASSION
