Nordic Semiconductor Annual Report 2020

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FY2020 Annual Report · Nordic Semiconductor

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ANNUAL
RE P O RT

20
20

Content

This is Nordic

Message from the CEO

Report from the Board of Directors

Financial Statements

Declaration to the Annual Report

Standards of Corporate Governance

Auditor Opinion Letter

Board of Directors

Executive Management

Alternative Performance Measures (APM)

Executive Management 2020: Pål Elstad, Marianne Frydelund,
Svenn-Tore Larsen, Svein-Egil Nielsen, Ole Fredrik Morken, Geir Langeland,
Katarina Finneng, Kjetil Holstad and Ebbe Rømcke (Absent: Ståle Ytterdal)

This is Nordic

Nordic Semiconductor (“Nordic” or “the Group”) is a Norwegian fabless
semiconductor company specializing in wireless communication technology
that powers the Internet of Things (IoT).

The company was established in 1983 and has offices
across the globe. Nordic’s award-winning Bluetooth®
Low Energy (Bluetooth LE) solutions pioneered ultra-
low power wireless, making it the market leader. The
technology range was later supplemented by ANT+,
Thread, Zigbee and in 2018 the low power, compact
LTE-M/NB-IoT cellular IoT solutions was launched,
extending Nordic’s penetration of the IoT. The product
portfolio was further complemented by the acquisition
of Wi-Fi technology in 2020.

Nordic built its market reputation by supplying
leading-edge wireless technologies supported by
development tools that shield the designer from RF
complexity, allowing anyone with a bright idea to build
innovations based on the IoT platform. Today, these
award-winning, high-performance, yet easy to design-
in, Bluetooth LE solutions are used by the world’s
leading brands in a variety of products, including
wireless PC peripherals, gaming, sports and fitness,
mobile phone accessories, consumer electronics, toys,
healthcare and automation. Nordic is a member of the
ANT+ Alliance, Bluetooth SIG, Thread Group, Zigbee
Alliance, Wi-Fi Alliance, and GSMA.

Multiprotocol solutions ensures that companies will be
able to benefit from compatibility advancement
across different standards. This is becoming the
industry benchmark as a host of technology players are
focusing on an open connectivity platform rather than
the legacy 1-to-1 product to accessory model. This new

way of looking at connectivity will enable a tremendous
wave of product innovation driven by anything from an
early stage start-up to an established market
leading company - and right in the middle of it all, lies a
Nordic nRF System-on-Chip.

IoT is not merely standalone short-range connectivity, it
also entails the long-range cellular IoT which has been
in the making for the past few years. The nRF91® Series,
which was launched towards the end of 2018, is Nordic’s
first family of low power devices for cellular IoT.
Nordic’s solution has integrated LTE-M, NB-IoT, GPS, RF
Front End and power management into a very
small System-in-Package (SiP), under the highest
security standards and with significantly higher
energy-efficiency than any comparable products on
the market. The cellular IoT market is still in the early
stages of the commercialization phase, with Nordic
measuring its progress in the number of Telecom
operator certifications, development kit shipments
and customer pilot projects.

Nordic completed the acquisition of the Wi-Fi assets, IP
and the Wi-Fi development team of Imagination
Technologies at the end of 2020. The synergies between
this team’s unique expertise and Nordic’s low power
DNA philosophy will strengthen the future product
portfolio enabling the goal of becoming the global
leader of connectivity.

Message from the CEO

Despite a challenging environment in 2020 due to the pandemic, the year
became a breakthrough year for IoT solutions in many areas. We delivered
unprecedented growth, major global platform companies embraced our
Bluetooth and multiprotocol technologies and took important steps towards
a leading position in long range and Wi-Fi. More importantly, our people
and partners continued to deliver and to serve our customers with no
disrup-tions. The pandemic accelerated technology adoption and healthcare
companies expanded into a myriad of applications. Looking ahead, Nordic
is well positioned to further create value from the broad IoT market.

Entering 2020 with solid growth momentum, we soon
ran into a new and unknown challenge with the
Covid-19 pandemic. The main priority in such a situation
is the safety and welfare of our employees and partners
and their communities. We have operated in full
compliance with local and national rules and regulations
in all our locations, and I am glad that we have seen
very few Covid-19 cases across our global organization.

The other main priority was to secure business
continuity, as the restrictions on work, travel and cross-
border goods shipments tested the resilience of our
supply chain in Asia in the initial phase of the pandemic.
With hard work from our employees and our partners
we managed to tackle these challenges and fulfill our
delivery schedules throughout 2020.

Our concerns about the potential negative demand
effects of the pandemic have so far proved to be
unfounded, and our revenue overall increased by 41%
to USD 405 million in 2020. Bluetooth revenue increased
by 43%, significantly exceeding the 20%-30% growth
range we have earlier outlined. Our proprietary
products were also in high demand, and saw revenue
increasing by 27%. Cellular IoT revenue is still modest
although the technology is gaining traction with
revenue increasing more than fivefold.

The shift in demand might be even better illustrated by
the order backlog. We started the year with a backlog
of USD 107 million, primarily for delivery in the first and
second quarter of 2020. We ended the year with a
backlog of USD 492 million, with deliveries stretching
out over the entire 2021.

What does this growth in order backlog volumes tell
us? The strong backlog may be an indication that some

truly permeating

customers are placing early orders to secure supply
throughout 2021 and into 2022. However, it is also
evidence that the IoT wave is building momentum. In
my comment in the Annual Report 2019, I said that “a
global and
Internet of Things
represents a massive long-term market opportunity”,
and that we saw “upside potential in disruptive verticals
such as smart homes, smart lighting, drug delivery and
disease monitoring, and logistics and asset tracking”.
This is exactly what is happening as this market
opportunity now is beginning to materialize.

NORDIC SEMICONDUCTOR | ANNUAL REPORT 2020 | MESSAGE FROM THE CEOFour things stand out if I am to describe our development
in this market environment:

Firstly, we are seeing the effects of years of work to set
our sales, operations, and innovative capabilities up to
meet the demands of major global platform companies.
Our leading position in the broad market makes us an
attractive partner for these companies, and our
combined Bluetooth and multiprotocol products can
enable thousands of different devices to connect with
the smart home hubs and speakers that are driving the
growth in the smart home market. Our strong product
offering and customer relations in this market will
continue to support our growth in the years to come.

Secondly, we see that IoT for industrial applications is
gaining ground at a fast pace. The number of potential
applications is near endless within machine and
building automation, logistics and asset tracking, retail
solutions and more. Our technologies are ideally
positioned to take part in this growth.

Thirdly, we saw a breakthrough in technology adoption
in the healthcare market. Covid-19 generated a wave of
new products for testing, disease detection and
prevention, monitoring of social distancing, and more
recently vaccine delivery. Even more importantly for the
longer-term, the pandemic has fast-forwarded the
digitalization process in the sector by several years.
Patients, GPs, medical companies, and hospitals all see
that connected medical devices can add value, improve
convenience, and reduce costs compared to traditional
drug delivery and disease monitoring solutions.

Finally, we saw solid demand growth in our most
established end-product markets in consumer electronics
and wearables. Changes in work practices increased
the need for efficient home office solutions, supporting
growth for both Bluetooth and proprietary products,
and we also saw increased demand from the gaming
and entertainment industry.

The accelerating demand growth through 2020 put
pressure on the supply chain. As a fabless semiconductor
company, we rely on supplies of wafers and other
components from third parties and we have partnered
up with world-leading suppliers in Asia. However, the
increasing supply/demand imbalances through the
semiconductor value chain have temporarily limited the
global supply of wafers, and we and others have been
informed about caps to our wafer allocations in 2021.
Although the wafer suppliers are significantly increasing
their investments, this temporarily limits our ability to
take full advantage of the strong demand.

Despite the short-term challenges, the accelerated
adoption of IoT is a clear indication of a stronger long-
term market outlook, and we have the innovative
mindset, the technologies, the product portfolio, the
support ecosystem, and the sales and marketing
capabilities needed to exploit this opportunity.

We define ourselves as a leader in connectivity, and we
continue to dominate the Bluetooth lower energy broad
market in terms of new designs. Data compiled by DNB
Markets show that 45% of all new Bluetooth Low Energy
(LE) designs registered with Bluetooth Special Interest
Group (Bluetooth SIG) in 2020 had Nordic inside. This
fortifies the number 1 position we have built over the

NORDIC SEMICONDUCTOR | ANNUAL REPORT 2020 | MESSAGE FROM THE CEOyears. Bluetooth SIG has certified more than 2,450
different Bluetooth LE products built on Nordic
technology over the past five years.

We have the broadest portfolio of Bluetooth LE and
multiprotocol portfolio products, ranging from entry-
level Systems-on-Chip (SoCs) for cost constrained
applications to highly advanced SoCs for more complex
and demanding applications. This product breadth
offers a unique opportunity to tailor the offering to the
customers’ needs and maximize the portfolio value. In
2020, we also entered volume production with the first
products in our next generation nRF53® Series. With
dual core processors supporting Bluetooth Low Energy,
Thread, ZigBee, NFC, and Bluetooth mesh, this is a
product generation that will move the market forward
with significantly lower power consumption, increased
performance, and strengthened security.

(SiP) and

compact and power-efficient

We are early movers and pride ourselves on having the
most
connectivity
products in the emerging market for cellular IoT. Our
nRF9160 System-in-Package
the Nordic
Thingy:91® prototyping module are continuously being
improved with new versions and have received industry
regional and global
accolades and awards at
semiconductor events. The cellular IoT market needs to
be developed jointly with telecom operators and
network providers and other eco-system partners, and
we are making steady progress in this respect. Our
products have now been verified by a number of
telecom majors across North America, Europe, and the
largest Asian market, and globally by Deutsche Telecom
and Vodafone. The products have also been included
in reference IoT designs and several new cellular IoT
modules. We continue to see a wide array of future
cellular IoT applications being developed across both
consumer and industrial markets in the years to come.

In 2020 we also added cutting-edge Wi-Fi technologies
to our technology portfolio, completing a ‘technology
triangle’ comprising of leading short-range, mid-range
and long-range connectivity solutions. The acquisition
of the W-Fi team of 81 employees and Wi-Fi technology
assets of Imagination Technologies places us in the
forefront for the development of future low-power Wi-Fi
connectivity solutions. The entire portfolio of Bluetooth
LE and multiprotocol products and cellular IoT products
are already supported by one common software
solution on the nRF Connect Software Development Kit
(SDK), enabling end-product developers to use the
same software environment and tools for both short-
range and long-range applications. The addition of Wi-
Fi technology enables us to create a development
platform unifying all the wireless technologies in future
generations of Nordic products, which expands our
addressable market significantly.

to offer

We continue
industry-leading developer
support, and saw the number of development kit
shipments increase to almost 100,000 last year. Our
DevZone developer community remains vibrant, with
visits from some 90 000 developers over the course of
the year. Covid-19 stopped us from meeting developers
face-to-face on our Nordic Tech Tours, but we have
successfully replaced these with digital tools and well-
attended webinars. We want to remain ‘the engineers’
best friend’ and believe our collaboration with the
developer community is an invaluable part of our
customer-centric culture and company DNA.

We have a highly skilled sales and marketing
organization that time and again has shown the ability
to act as business developers as well as salespeople.
Many of our greatest customer successes are rooted in
the ability to turn the customers’ challenges, requests,
and demands into new products and solutions that add
significant value both for our customers and us. Our
success with global platform companies and vertical
market leaders are good examples.

Our R&D staff increased by 18% to 665 people last year
and further to 746 when including our Wi-Fi acquisition.
The sales and marketing staff increased by 10% to 125.
We also increased our supply chain management staff
by 24% to 57 people, recognizing the logistical
challenges of our growth profile. All in all, we counted
987 employees at the end of the year, which means we
have welcomed more than 220 new colleagues to
Nordic over the past year.

Competent people and innovative ideas will continue to
be the key building blocks to drive the business forward.
With 50 different nationalities represented
in 18
countries, I think Nordic fosters the kind of inclusive,
diverse, and ingenious company culture required to
continue to attract and retain top talent.

With increasing scale and high growth ambitions, we
are paying increasing attention to the sustainability
aspects of our operational value chain, business
models, and end-product markets, and have been
working to integrate sound ESG principles into our
strategic roadmap. IoT holds great potential to solve
some of the most pressing environmental and societal
challenges, and Nordic’s commitments and contributions
to the UN Sustainable Development Goals (SDGs) show
that we want to take an active part in this progress. At
the same time, we recognize our responsibilities with
regards to our own sourcing, manufacturing, and
business conduct, and measure ourselves to the highest
of standards. For information about our performance, I
recommend you read our separate 2020 ESG Report
which is issued in connection with the Annual Report.

NORDIC SEMICONDUCTOR | ANNUAL REPORT 2020 | MESSAGE FROM THE CEOSumming up, we see a long-term market outlook at the
end of 2020, that is stronger than what we saw at the
end of last year. Growth rates have been higher than
expected for our short-range business, and although
wafer supplies may hold us back in 2021 we have still
been allocated wafer volumes that will allow us to
increase our 2021 production by a minimum of 25%
versus 2020. We also remain confident in the huge
potential of cellular IoT, and the addition of Wi-Fi
capabilities completes our connectivity offering and
further expands our market opportunity.

In 2019 we set ourselves an ambitious goal to become a
USD 1 billion company within five years, and expected
increasing scale and high operational leverage to
generate gradual margin improvements towards a
long-term target of 20%. In my opinion the positive
demand trends and continued strengthening of the
customer base increase the confidence in this aspiration.

Revenue (USD million)

450

400

350

300

250

200

150

100

Short-range IoT

Wearables

PC Peripherals

Game controllers

Proprietary/ASIC

Bluetooth

Cellular

NORDIC SEMICONDUCTOR | ANNUAL REPORT 2020 | REPORT FROM THE BOARD OF DIRECTORSN ORD IC FAC TS
N ORD IC FAC TS

45%

Bluetooth LE
design listings

WO R K I N G S T U D E N T S
EVERY YEAR

≈1000

E M P LOY E E S

R&D

Sales

Supply

Admin

PMT

75%

11%

nationalities in

countries

world wide

1983

E s tab lis h e d in
by fo ur r es e ar ch e r s from Tr on dh eim

Male 86.2%
Female 13.8%

>1.000.000

Nordic
SoCs sold
daily

Report from the
Board of Directors

Nordic has remained fully operational during the Covid 19-pandemic. The
company experienced strong revenue growth across all technologies and end-
product markets in 2020, and improvements in gross margin. Combined with
operational leverage and cost control, this generated a solid improvement in
profitability compared with the previous year. The order backlog increased
almost fivefold to nearly USD 500 million at the end of the year.

Group Overview
Nordic Semiconductor is a fabless semiconductor company
designing, marketing, selling, and supporting hardware
products and embedded software that enable wireless
connectivity solutions.

Founded in 1983 as an integrated circuits manufacturer,
Nordic has been a long-standing pioneer within wireless
connectivity. Over the past 20 years, the company has
developed its technology base from proprietary 2.4 GHz
technology for PC accessories to also include a broad
portfolio of Bluetooth LE and multiprotocol solutions for
short-range connectivity and products and solutions for
the emerging long-range cellular IoT market. In 2020,
Nordic expanded into the medium-range connectivity
market through the acquisition of Wi-Fi assets, IP, and the
Wi-Fi development team of Imagination Technologies.

The product offering includes integrated circuits (ICs),
System-on-Chip (SoCs), System-in-Package (SiPs), and
Software Development Kits (SDKs). The components for
these products are manufactured by world-class
subcontractors in Asia and distributed to branded
electronics manufacturers through an extensive network
of global and regional partners.

and Retail also showed high growth with digitization
and automation processes driving demand
for
connectivity solutions.

Since the introduction of Bluetooth LE products in 2012,
Nordic has built a leading position in the broad market
and increasingly strong customer relationships with
global platform companies and other tier-1 customers.
These have been the main growth drivers behind
Nordic’s average annual revenue growth of 16% over
the past five years and the 41% revenue growth to USD
405 million in 2020.

The Company is headquartered in Trondheim (Norway)
with offices in Oslo (Norway), San Diego (USA), Beijing,
Shanghai, Shenzhen and Hong Kong (China), Taipei
(Taiwan), Manila (the Philippines), Yokohama (Japan),
Seoul (South Korea), Düsseldorf (Germany), Eindhoven
(the Netherlands) and London (UK). R&D activities are
carried out in Portland (USA), Krakow (Poland), Oulo,
Espoo, Tampere and Turku (Finland), Hyderabad (India),
Bristol and Hertfordshire (UK), Stockholm and Lund
(Sweden) and in Oslo and Trondheim (Norway).

Strategy and long term target

The end-product markets for Nordic’s products include
consumer electronics, wearables, building and retail,
and healthcare, with all verticals seeing an increasing
number of applications and designs. The company also
supplies products to module manufacturers.

Nordic’s mission is to be a world-leading supplier of
connectivity solutions, with ultra-low power proprietary
and Bluetooth technologies for short-range, Wi-Fi for
medium-range, and cellular IoT technology for the long-
range market.

All these end-product markets contributed to the
revenue growth in 2020. The company experienced
high demand both in its largest vertical in the consumer
electronics market and
the well-established
wearables vertical. However, the highest growth came
in
increasing
technology adoption in the medical community and
further accelerated by the Covid-19 pandemic. Building

the Healthcare vertical, driven by

Nordic builds its operations on six strategic pillars:

performance, feature-rich, reliable and robust

Lead on connectivity – low power, high
Scalable solutions – scalability across

technologies, markets, and customers

NORDIC SEMICONDUCTOR | ANNUAL REPORT 2020 | REPORT FROM THE BOARD OF DIRECTORS Excite developers and engage customers– ease-

of-use, value-add integration, and solutions, in
a combined broad market and tier-1 customer
engagement model

workforce

Attract talent – build and retain a high-quality
Early movers – innovate and invest early, and grow
Sustainable business – in own operation and

with high growth markets

throughout the value chain

Based on these strategic elements, the company has
developed a market-leading position in the short-range
connectivity space, with a broad portfolio of integrated
circuits, systems, and solutions. The company shipped
approximately 500 million units in 2020, to a wide
variety of applications and a broad customer base
ranging from single developers to globally leading
high-volume customers.

Nordic’s R&D, sales and marketing functions are both
intertwined with its industry leading developer support
and the very active and growing developer community
‘DevZone’. This now counts more than 90 000 user
profiles, and the company also shipped close to 100,000
development kits in 2020.

Nordic is recognized as a leader in the broad market
for Bluetooth LE products. According to data compiled
by DNB Markets, approximately 45% of all new
Bluetooth Low Energy designs approved by the
Bluetooth Special Interest Group (Bluetooth SIG) in
2020 had Nordic inside. Although Nordic continues to
attract new broad market clients, the company has
seen a shift in the customer mix over the past years.
Years of work to establish and develop customer
relationships with global platform companies and other
tier-1 customers has resulted in significantly increasing
order volumes from these customers, who typically
have higher volume designs with longer product
lifecycles than the average customer.

The cellular IoT product portfolio is dependent on
telecom operator certifications and relations to a
growing eco-system of IoT solutions providers. Nordic
maintains its high ambitions for this area and is ready
to deploy two decades of sales and distribution
experience from the short-range business to develop
the long-range market opportunity.

Given the size and growth opportunities in Nordic’s
markets and the company’s strong competitive position,
the Board of Directors believes that sound execution of
its strategic roadmap will enable strong long-term
profitable growth and value generation, in line with the
company’s high financial ambitions.

Operational review

Bluetooth and multiprotocol products
Nordic views its broad product portfolio of Bluetooth
and multiprotocol products and solutions as a clear
competitive advantage. The company offers alternatives
ranging from entry-level SoCs for cost-constrained
applications to highly advanced SoCs for more complex
high-performance applications. This enables
the
company to meet different customer requirements at
the right price points.

The company continued to add new variants to its
highly successful nRF52® Series also in 2020. The low-
end nRF52805 and the mid-range nRF52820 are both
multiprotocol SoCs combining Bluetooth LE with the
internet protocols Thread and Zigbee. The nRF52805
SoC is supplied in a wafer level chip scale package
(WLCSP) measuring only 2.48x2.46mm and is optimized
for cost-saving two-layer PCB-designs. Hence, the
product enables small and low-cost designs, which
normally would be design trade-offs. The nRF52 Series
now counts seven different SoCs.

The new generation nRF53 Series was introduced in
late 2019, with the first nRF5340 SoC going into volume
production towards the end of 2020. Offering the first
dual processor multiprotocol SoCs on the market, this
generation shifts the benchmark in terms of low power
consumption, performance, and security.

Cellular IoT
In the cellular IoT area, Nordic released several product
upgrades for its nRF9160 SiP and the Thingy:91 multi-
sensor prototyping tool in 2020, as well as improved
software solutions. The products are recognized in the
industry as market leading on low power consumptions
and size and form factor. The Thingy:91 in April won
“Most Competitive Development Tools in China” at the
2019 China Electronic Market (CEM) Editors’ Choice
Awards, whereas the nRF9160 in June was shortlisted as
a finalist in the ‘IoT Connectivity Solution’ category of
the IoT World Awards 2020.

1010

NORDIC SEMICONDUCTOR | ANNUAL REPORT 2020 | REPORT FROM THE BOARD OF DIRECTORSthrough 2020.

Nordic continued to make progress with its telecom
operator certification program
In
addition to general GCF certification and global
certifications from Deutsche Telecom and Vodafone,
the company has now obtained certifications from
Verizon in the US and Bell in Canada, Telstra in
Australia, China Telecom in China, KDDI and Softbank
in Japan, and LGU+ in Korea. Nordic has obtained all
necessary certifcations to market and sell cellular IoT
products in key markets.

the

same

to operate

Nordic expects cellular IoT to gain traction from the
launch of the unified and common nRF Connect
Software Development Kit (SDK) across the entire
portfolio of Bluetooth LE and multiprotocol products
and cellular IoT products in 2020. This enables
software
developers
environment for both short-range and long-range
applications, as well as for products combining the two.
A significant share of customers developing long-range
products are existing customers in the short-range
business that are looking to expand their reach.
Developers of new cellular IoT applications will also
benefit from Nordic’s launch of the faster and more
cost-efficient Power Profile Kit II for real-time power
measurement during wireless product development.
This kit can be used with all Nordic Development Kits
and custom designs, including the nRF9160.

Wi-Fi
In 2020, Nordic entered the medium-range connectivity
market through the acquisition of the entire Wi-Fi
development team, core Wi-Fi expertise, and the Wi-Fi
IP technology assets of Imagination Technologies
Group. The Wi-Fi assets include Wi-Fi 4, 5, and 6, and a
significant patent portfolio.

Wi-Fi has been requested by several customers and we
believe it will complement the current portfolio and be
an important differentiatior for Nordic. The acquisition
makes Nordic one of few companies offering all three
of the world’s most popular IoT technologies: Bluetooth,
Wi-Fi, and cellular IoT.

The acquisition will also enable Nordic to create a
development platform unifying all the wireless technologies
in future generations of Nordic products, which could
expand Nordic’s addressable market significantly.

The acquisition increased Nordic's R&D staff by 81
people across several locations in the UK, Sweden,
India, and Taiwan. The team also includes Bluetooth
Low Energy specialists who will further strengthen
Nordic's existing R&D team. Nordic expects annual R&D
spend to increase by USD 10-12 million due to the
acquisition and expects to see a meaningful revenue
contribution from Wi-Fi products within three years.

Suppy Chain
As a fabless semiconductor company, Nordic’s products
are manufactured and assembled at subcontractors in
Asia and delivered to customers by global and regional
distributor partners. Nordic in 2020 shipped around 500
million products, which was an increase of 35% from 2019.

In the first half of 2020, the resilience of the supply
chain was challenged by restrictions on travels and
cross-border goods shipments due to Covid-19. These
challenges were overcome with joint efforts of Nordic
and its partners, enabling the company to fulfil its
delivery schedules through 2020.

High and increasing demand generated increasing
imbalances in the supply/demand balance in the
semiconductor industry through the second half of
2020 and into 2021, with demand exceeding the supply
of wafers. Based on high order inflow, Nordic had
placed early orders for wafer volumes that would allow
for a significant production increase in 2021 but has
later been informed by its main wafer supplier in Taiwan
of limitations in the wafer allocation for 2021. The
secured wafer deliveries nevertheless allow Nordic to
increase production by a minimum of 25% from 2020 to
2021. The wafer shortage is expected to have the
largest impact in Q2 2021, with higher volumes expected
in the second half of the year.

Nordic has established excess capacity in crucial areas
such as in-house testing capabilities to ensure sufficient
backend production capacity
increased
demand.

to meet

1111

NORDIC SEMICONDUCTOR | ANNUAL REPORT 2020 | REPORT FROM THE BOARD OF DIRECTORSReview of the annual accounts
In accordance with the provisions of the Norwegian
Accounting Act, the Board of Directors confirms that
the accounts have been prepared on a going concern
basis and that the going concern assumption applies.
Nordic prepares consolidated annual accounts in
accordance with IFRS (International Financial Reporting
Standards) as approved by
relevant
interpretations, and the Norwegian Accounting Act. A
summary of internal controls related to the accounting
process can be found in the Corporate Governance
section of this Annual Report.

the EU,

Note that the Group has identified gross margin,
EBITDA, EBITDA margin, short-range EBITDA margin,
total operating expenses, cash operating expenses,
Performance
and order backlog as Alternative
Measures in addition to the financial information as
prepared in accordance with IFRS as adopted by the
EU. Please see page 91 for further details.

Income Statement
The Group classifies its revenues into the following
technologies:
components,
short-range wireless
including Bluetooth LE based and proprietary products,
IoT), ASIC components and
long range
Consulting services.

(cellular

Revenue by technology:

USDm

Bluetooth

2020

316.0

Proprietary wireless

76.1

2019 Change%

221.2

59.9

42.9%

27.0%

Short-range wire-
less components

392.0

281.1

39.5%

Cellular IoT

ASIC Components

Consulting services

6.5

6.3

0.2

1.0

6.0

0.2

524.3%

4.3%

6.6%

Total

405.2

288.4

40.5%

Total revenue increased by 40.5% to USD 405.2 million
in 2020, up from USD 288.4 million in 2019.

Revenue from Bluetooth and multiprotocol products
have increased by an average 23% over the past five
years and increased by 42.9% to USD 316 million last
year. Bluetooth accounted for 78% of Group revenue in
2020. The revenue increase reflects strong demand
across all end-product markets both
tier-1
customers and the broad market. Due to the Covid-19
pandemic, we have seen a more rapid digitization and
an accelerated technology adoption.

from

Revenue from Nordic’s proprietary products has been in
decline due to technology migration to Bluetooth LE
and other standards. However, revenue rebounded in
for mobile/PC
increased demand
2020 due
peripherals for home office solutions. Growing by 27%
to USD 76 million in 2020, proprietary revenues more or
less returned to the revenue levels seen in 2015-2018.
Proprietary solutions accounted for 19% of Group
revenue in 2020.

Split by end-product markets, revenue from the short-
range wireless components are divided into consumer
electronics, wearables, building & retail, healthcare,
and others.

Wireless components revenue by end-product
application, excluding cellular IoT:

USDm

2020

2019

Change %

Consumer
electronics

163.1

119.4

Wearables

63.0

50.4

Building/retail

Healthcare

Other

Total

81.9

37.8

46.4

392.2

51.6

19.7

40.0

281.1

36.6%

25.0%

58.7%

91.8%

16.0%

39.5%

Consumer electronics increased by 37% in 2020. Nordic
has had high deliveries of Bluetooth and proprietary
products for PC accessories for a growing home office
market in 2020. Gaming accessories have also been a
driver in Consumer Electronics over the last year.

Wearables revenue grew 25% in 2020, with strong pull
from the Chinese domestic market.

Building/retail revenue increased by 59% in 2020,
reflecting continued growth in home automation and
industrial applications.

Healthcare increased by 91.8% in 2020. The coronavirus
outbreak has generated strong momentum
for
connected medical devices. The revenue comes both
related applications and general
from Covid-19
connected healthcare devices.

The ‘Other’ segment increased by 16%. This mainly
reflects sales to module manufacturers servicing many
end-products in all markets and regions.

Revenue in the cellular IoT market increased more than
fivefold in 2020 to USD 6.5 million. This revenue reflects
both sales of development kits and initial sales of end-
IoT prototyping platform. Combined
user cellular

1212

NORDIC SEMICONDUCTOR | ANNUAL REPORT 2020 | REPORT FROM THE BOARD OF DIRECTORSshipments of the nRF9160 cellular IoT prototyping
platform amounted to approximately 11 000 units in
2020, up from 8 300 units in 2019.

Operating expenses amounted to USD 137.2 million in
2020, excluding depreciation and amortization. This
was an increase of 20.4% from USD 113.9 million in 2019.

Sales of ASIC products increased by 4.3% in 2020 to
USD 6.3 million. The Company has not designed new
ASICs since 2014, hence future revenue depends on
demand from existing customers and applications.

Gross profit

USDm

2020

2019

Change%

Gross Profit

213.9

146.8

Gross Margin

52.8%

50.9%

45.8%

1.9%p.p.

Gross profit amounted to USD 213.9 million, which was
an increase of 45.8% from the previous year. Hence, the
gross margin increased to 52.8% from 50.9% in 2019.

The margin levels in 2020 reflect good demand for high-
end, high-margin SoCs, positive scale effects, and
continuous cost improvements on recently launched
products. This was only partly offset by the negative
gross margin effects of a larger number of tier-1 customers
and cellular IoT revenue with lower gross margin.

Going forward the company expects to see changes
in product mix continuing to generate fluctuations
between quarters, and that higher tier-1 volumes will
translate into a reduction in gross margin for the short-
range business to 48%-50% in the medium term.

The long-range module-based business model is
expected to have lower gross margins in the range of
35%-40%, with the effect on the total gross margin for
the Group depending on the pace of the volume ramp.

Operating expenses

USDm

2020

2019 Change %

Payroll expenses

Other OPEX

101.2

36.0

80.3

33.7

OPEX excl. D&A

137.2

113.9

Depr. & Amort.

31.1

23.5

Total

168.3

137.5

26.1%

6.8%

20.4%

32.0%

22.4%

The higher expenses mainly reflect a 17% increase in the
number of employees from 767 to 897 during the year.
The increased workforce in turn reflects increased R&D
activity and strengthened sales efforts for both
Bluetooth and cellular IoT. 81 employees were added
through the acquisition of the Wi-Fi development team
of Imagination Technologies Group on December 31,
2020.
the number of
this acquisition,
employees was 978 at year end.

Including

Measured by function, expensed R&D accounted for
USD 89.0 million of operating expenses, compared to
USD 73.5 million in 2019. R&D is expected to continue to
increase in absolute terms for both the short-range and
long-range businesses. The R&D intensity, measured as
a percentage of revenue, declined by 3.5 percentage
points from a peak level in 2019 of 25% to 22% in 2020.

Sales, general and administration (SG&A) expenses
increased to USD 48.1 million from USD 40.5 million in
2019. SG&A is also expected to continue to increase in
absolute terms, as the Group builds up its long- range
organization. However, increased operational leverage
is expected to reduce the cost as a percentage of
revenue going forward. As a percentage of revenue,
SG&A decreased from 14% in 2019 to 12% in 2020.

Total cash operating expenses amounted to USD 141.2
million, when adjusting for non-cash items, capitalized
development expenses, equity-based compensation,
and depreciation and amortization. This was an increase
from USD 123.4 million in 2019. Cellular IoT accounted for
USD 34.9 million of total cash operating expenses in
2020, compared to USD 30.4 million in 2019.

Nordic capitalized USD 8.4 million in 2020, down from
USD 11.3 million in 2019. Equity based compensation was
USD 4.3 million, compared to USD 1.8 million in 2019.
Please see the section on Alternative Performance
Measures for more details.

1313

NORDIC SEMICONDUCTOR | ANNUAL REPORT 2020 | REPORT FROM THE BOARD OF DIRECTORSEBITDA and Operating profit

USDm

EBITDA

2020

2019

Change %

76.8

32.8

134.0%

EBITDA-margin

18.9%

11.4%

Short-range EBITDA

106.9

57.6

7.6%-p

85.6%

Short-range
EBITDA-margin

26.8% 20.0%

6.8%-p

Operating profit

45.7

9.3

393.0%

EBIT-margin

11.3%

3.2%

8.1%-p

The Group recognized tax charges of USD 4.5 million,
corresponding to an average tax rate of 10.5%. This
compares to USD 2.4 million and an average tax rate of
25% in 2019.

The company’s statutory tax rate is 22%. The low tax
rate in 2020 is a result of foreign exchange losses in the
statutory NOK accounts and tax deduction on option
gain payments.

Tax payable amounted to USD 5.3 million, compared to
USD 3.9 million in 2019, with the balance reflecting
changes in deferred tax and tax benefit.

interest,

Earnings before
tax, depreciation, and
amortization (EBITDA) amounted to USD 76.8 million,
an increase from USD 32.8 million in 2019. The
corresponding EBITDA-margin increased 7.6 percentage
points to 18.9%.

Financial position

Balance sheet
Nordic has total assets of USD 515.8 million at the end
of 2020, of which USD 401.9 million in current assets
and USD 113.9 million non-current assets.

Short-range EBITDA totaled USD 106.9 million and the
margin 26.8% in 2020. This compared to a short-range
EBITDA of USD 57.6 million and a margin of 20% in 2019.

These assets were financed by total equity of USD 402.5
million at the end of 2020, non-current liabilities of USD
21.7 million and current liabilities of USD 91.9 million.

Depreciation and amortization amounted to USD 31.1
million in 2020, compared to USD 23.5 million in 2019.

Operating profit (EBIT) hence amounted to USD
45.7 million, compared to USD 9.3 million in 2019. EBIT-
margin increased to 11.3% in 2020 from 3.2% in 2019.

Net financial items

USDm

Net interest

Net foreign exchange

Net financial items

2020

2019

-0.8

-2.0

-2.8

0.8

-0.4

0.4

Nordic had a negative net interest of USD 0.8 million in
2020 due to a USD 40 million drawdown on Revolving
Credit Facility in Q1 2020 as a precautionary move to
secure the liquidity. The loan was repaid during Q3
2020.

Profits and taxes

USDm

Profit before tax

Income tax expense

Net profit after tax

2020

2019

42.9

-4.5

38.4

9.7

-2.4

7.3

Current assets were USD 401.9 million at the end of
2020, compared to USD 219.6 million at the end of 2019.
This included cash and cash equivalents of USD 242.5
million at the end of the year, up from USD 90.6 million
at the end of 2019.

Inventory increased to USD 61.9 million from USD 53.1
million at the end of 2019 and accounts receivables to
USD 88.0 million from USD 64.5 million at the end of
2019, due to higher revenues.

Overall, net working capital amounted to 78.5 USD
million, compared to USD 70.2 million at the end of 2019.
Measured as a percentage of full year revenue, net
working capital decreased to 19.4% from 24.3% at the
end of 2019. This is mainly a result of a lower inventory in
percentage of revenue.

Non-current assets increased to USD 113.9 million at the
end of 2020 compared to USD 98.8 million end of 2019,
mainly reflecting intangible Wi-Fi assets acquired from
Imagination Technologies Group in Q4 2020.

Fixed assets totaled USD 28.3 million at year end, up
from USD 26.6 in 2019. Software and other intangible
assets increased to USD 19.9 million from 11.4 million,
due to the IP acquisition from Imagination Technologies.
Capitalized development expenses increased to USD
34.6 million from USD 34.0 million at the end of 2019.

1414

NORDIC SEMICONDUCTOR | ANNUAL REPORT 2020 | REPORT FROM THE BOARD OF DIRECTORSTotal shareholders’ equity amounted to USD 402.5
million at the end of 2020 up from USD 232.2 million at
the end of 2019. The Group equity ratio was hence 78%,
compared to 73% at the end of 2019. The significantly
strengthened equity position during 2020 primarily
reflects earnings in 2020 and a private placement
where the company in September 2020 issued 13 million
new shares at a subscription price of NOK 88 per share.
transaction generated gross proceeds of
The
approximately USD 125 million.

Total liabilities amounted to USD 113.3 million, compared
to USD 86.2 million at the end of 2019. Non-current
liabilities increased to USD 21.5 million from USD 20.2
million. Lease liabilities of USD 21.0 million are included
in the non-current liabilities.

Current liabilities increased to USD 91.9 million from USD
66.0 million. The increase is mainly explained by higher
accounts payable, volume rebates and short-term
employee benefit obligations and related taxes.

Cash flow and funding

USDm

2020

2019

Net cash flow from:

Operating activities

Investing activities

Financing activities

Currency adj.

Net change in cash and cash
equivalents

65.3

19.7

-38.0

-31.5

123.6

1.0

-1.5

151.9

-13.2

Cash and cash equivalents 1.1

90.6

103.9

Cash and cash equivalents 31.12

242.5

90.6

Cash flow from operating activities was USD 65.3
million in 2020, compared with USD 19.7 million in 2018.
The strong operating cash flow is a result of improved
earnings and lower percentage of net working capital.

Cash flow used for investing activities was USD 38.0
million in 2020, compared to USD 31.5 million in 2019.
This included USD 13.2 million related to the acquisition
of Wi-Fi technology and IP-assets from Imagination
Technologies Group. Capital expenditure decreased to
USD 16.5 million from USD 20.2 million, including
software, whereas capitalized development expenses
declined to USD 8.4 million from USD 11.3 million.

Cash inflow from financing activities was USD 123.6
million in 2020, mainly reflecting the share issue in
September 2020. In comparison, there was a cash
outflow of USD 1.5 million in 2019 from financing activities.

Including the effect of exchange rates, net change in
cash and cash equivalents was a cash inflow of USD
151.9 million in 2020, compared to a cash outflow of
USD13.2 million in 2019.

Cash and cash equivalents increased to USD 242.5
million at the end of 2020, from USD 90.6 million at the
end of 2019. The cash is mainly held in the Group’s
functional currency USD, in order to minimize the impact
of currency fluctuations.

In addition to cash at hand, Nordic has undrawn
revolving credit facilities (RCFs) of USD 65 million, and
an unutilized EUR 10 million overdraft facility with the
company’s main bank. Including these credit lines,
available cash amounted to approximately USD 320
million at the end of 2020, compared to approximately
USD 167 million at the end of 2019.

Available credits included a USD 40 million RCF and a
USD 25 million RCF expiring in November 2022. The
RCFs were refinanced in December 2019. The only
financial covenant on the RCFs is for the company to
maintain an equity ratio above 40%, which compares to
the actual equity ratio of 78% at the end of 2020.

Tight cash management is a key priority for the Group,
as a strong financial position is required to realize the
Company’s strategic priorities and growth opportunities.
The Board of Directors’ assesses the liquidity position as
adequate given the company current activity level,
investment plans, and business outlook.

Allocation of net profit for parent company

The parent company Nordic Semiconductor ASA has a
net profit after tax of USD 35.8 million in 2020,
compared to USD 4.3 million in 2019.

The entire net profit is attributable to the equity holders
of the parent. Net profit after tax corresponds with
ordinary earnings of USD 0.198 and fully diluted
earnings per share of USD 0.184 for 2020. This compares
to ordinary and fully diluted earnings per share in 2019
of USD 0.025 and 0.024, respectively.

Nordic pursues an ambitious long-term growth strategy
which requires significant investments in R&D and sales
and marketing. The Board of Directors recommends
that Nordic maintains a solid balance sheet with a high
equity ratio and a cash reserve that enables the
company to continue driving its technology and product
roadmap.

The Board of Directors will hence propose to the Annual
General Meeting that the net profit of the parent
company is transferred to ‘Other equity’, and that no
dividend is distributed for 2020.

Risk Management

The Board of Directors oversee the risk management
process and carries out biannual reviews of the Group’s
most important areas of exposure and internal controls
in addition to getting updates with regards to risks
in board meetings. Nordic complies fully with the
Norwegian Code of Practice for Corporate Governance.

1515

NORDIC SEMICONDUCTOR | ANNUAL REPORT 2020 | REPORT FROM THE BOARD OF DIRECTORSRisk Factors
Based on the information currently known to us, we
believe that the following information identifies the
most significant risks affecting our business. Any of the
factors described below, or any other risk factor
discussed elsewhere in this report, could have negative
impact on our results or on our outlook.

Four major groups of risks are identified within the
Group: Strategic, Operational, Financial, and Legal &
Compliance. Some of the risks are outside of Nordic’s
control, including industry and specific cyclical risks.

Strategic risk and external factors
Demand for semiconductors and electronic products is
sensitive to global economic conditions and international
trade flows. While the underlying, long-term market
trends point towards increasing demand for Nordic’s
products, the operations are exposed to a variety of
factors with real or perceived impact on the economy.

Geopolitical risk and trade tensions
Challenging global economic conditions and political
unrest and uncertainty can result in reduced demand
for our products. Geopolitical risks and trade frictions,
for example, the ongoing trade war between China
and the US, can have a negative impact on Nordic.

The overwhelming reliance on Taiwan for critical supply
to the semiconductor industry creates a critical situation
for the global economy.

Response: Nordic actively monitors the geopolitical
situation and is taking actions to reduce the impact on
the business, for example supporting our customers in
optimizing their value chain and placing early orders to
secure supply.

Coronavirus
The spreading of the coronavirus has increased the
uncertainty in our business outlook. The initial outbreak
in China disrupted industry supply channels, and
although this has normalized, the spreading of the virus
has made authorities in a number of countries enforce
strong measures that will affect global economic
activities for a period of time. This may affect demand
for end-user products in our industry, which in turn will
affect both Nordic’s products, distributor inventories,
and other parts of the industry supply chain. So far, the
pandemic has had limited impact on demand and
operations, but a prolonged period of reduced global
activity and product demand may have significant
negative effects on the company’s business and
financial results.

Response: Nordic has imposed strict travel restrictions
and work from home policies worldwide. Nordic is
continuously monitoring the situation and will make
necessary supply chain adjustments to optimize its own
production in alignment with any new signals from
governments, manufacturers, customers, and distributors.

Climate change and natural disasters
The nature of our business as a fabless manufacturer,
means that Nordic is heavily reliant on semiconductor
in Taiwan. Nordic's manufacturing
manufacturing
partners are exposed to adverse effects of climate
change and natural disasters.

Response: Nordic's manufacturing partners have
implemented multiple initiatives to understand and
manage the effects of climate change and natural
disasters on their own operations.

Changes in competitive landscape
Nordic Semiconductor’s strategic goal is to maintain or
preferably improve its market share and remain a
leading vendor of wireless connectivity and embedded
processing solutions for internet connected things.

Nordic has had a leading market share in Bluetooth LE.
The markets in which we operate are highly competitive
in terms of price, functionality, and software solutions. In
a growing market, we face tough competition from
existing competitors as well as new entrants, mainly from
China. With Bluetooth LE being adopted across more
than 25 identified market verticals, it is likely that more
focused and specialized competitors gain market shares,
especially in verticals where Nordic’s position is weaker.

Response: In order to stay competitive and gain market
share, Nordic continues to invest in both products,
software, and strategic partnerships. Over the past few
years the company has further developed its products to
include support for additional low power short-range
connectivity standards, such as Zigbee and Thread,
across its nRF52 Series and its new generation nRF53
Series. Nordic’s multiprotocol portfolio ensures that the
company is well positioned to benefit from projects
seeking to improve compatibility across the different
standards.

We depend upon the development of new products
and enhancements to our existing products, and the
success of our substantial research and development
activities can be uncertain. However, Nordic continues
to invest more than 20% of revenue in R&D. This is
required in order to stay competitive in this market.

Risk of Bluetooth being replaced
There is a risk that Bluetooth becomes unattractive
compared to other technologies or is bundled with non-
Nordic technologies. The biggest immediate threat
comes from various wi-fi standards tightly integrated
with Bluetooth in combo-chipset. There are other
wireless standards, like UWB, that may be a risk factor
longer term in some of the verticals where Bluetooth
plays a dominant role today.

Response: Nordic is a part of the Bluetooth Special
Interest Group (Bluetooth SIG), which is continuously
developing the Bluetooth standards. In addition, Nordic

1616

NORDIC SEMICONDUCTOR | ANNUAL REPORT 2020 | REPORT FROM THE BOARD OF DIRECTORShas developed Zigbee and Thread solutions and added
a Wi-Fi team and Wi-Fi assets. Nordic will continue to
monitor the trends in the market, keeping the product
portfolio relevant.

Cellular IoT
There is a risk that we may not be successful in executing
our strategy to capture the cellular IoT market opportunity
in terms of scale, time, and volume. Nordic launched the
nRF91 Series in the end of 2018, which is Nordic’s first
family of low power devices for cellular IoT. There is still a
risk that cellular IoT will not be as successful as Nordic
had hoped for, or that the market is skewed toward NB-
IoT. Customers may choose other low power wide area
network (LPWAN) technologies or cancel roll-out of
products due to lack of available technologies.

Response: Nordic’s solution has integrated LTE-M, NB-
IoT, GPS, RF Front-End and power management into a
very small System in Package (SiP), under the highest
security standards and with significantly higher energy
efficiency than any comparable products currently on
the market.

As carriers continue to roll out LTE-M and NB-IoT
capabilities and certification programs, there are more
and more customers looking at adopting these two
technologies. In order to mitigate the risk of cellular not
being as successful as Nordic had hoped for, Nordic
focuses on delivering user-friendly products and working
closely with regulators and carriers to remove barriers to
entry.

Key personnel
In order to deliver on the roadmap that we have
promised our customers, we depend on attracting the
best team. Our business is our employees. Losing key
employees and not attracting key competencies will
affect sales, quality of products, delay time to market,
and more.

Response: Nordic focuses on talent management and
succession planning and
to develop
organizational culture. We are continuously improving and
adapting our benefit policy to attract and keep key talent.

continues

1717

NORDIC SEMICONDUCTOR | ANNUAL REPORT 2020 | REPORT FROM THE BOARD OF DIRECTORSOperational risk
Product availability, quality, safety and integrity
Nordic is a fabless semiconductor company, outsourcing
component manufacturing and relying on distribution
partners for sales to the broad market of original
electronics manufacturers and to end-users.

Being “Fabless”, Nordic Semiconductor outsources the
capital-intensive production of silicon wafers, packaging
and testing of its products to third-party suppliers,
mainly in South-East Asia. The manufacturing pipeline
involves multiple stages with multiple suppliers. The
failure of any of these third-party vendors to deliver
products or otherwise perform as required could damage
revenue in the short-term, and customer relationships in
the long- term.

While execution is outsourced, the manufacturing
processes involved often depend on specific tooling’s
developed and provided by Nordic Semiconductor,
specifically the chip design itself, as well as certain test
programs and hardware used for quality screening.
Failure on Nordic Semiconductor’s end to provide good
quality or enough quantity of such tooling’s may have
the same consequences as outlined above.

Response: Nordic mitigates this risk of lack of products
by either keeping a buffer stock of wafers or finished
goods to cover short-term demand. For medium-term
requirements Nordic seeks to have second sourcing
and having insurance for supply disruptions related
to disasters. Nordic’s partners are selected through
extensive qualification programs. Lastly, Nordic has its
own testers, improving availability of the products and
ensuring the right quality.

Product ramp
There is a risk that Nordic is not able to ramp new
products according to customer requirements, either
resulting in not meeting customer volume demands or
resulting in high yield loss.

Response: Given the timetables for some key product
introductions, tight control over the New Product
Introduction process is imperative, including quality
assurance during high volume product ramps. In
addition, Nordic has invested heavily in its own failure
analysis lab, to be able solve any issues as quickly as
possible.

IT and cyber risk
Our operations are complex, several critical operations
are centralized and any disruptions to these operations
can have an impact on our ability to deliver products to
customers. Furthermore, Nordic’s operations are highly
dependent on a fully reliable IT-infrastructure and that
all systems operate 100%. Downtime can impact
development of new products (delay launch, day to
day support to customers, manufacturing and delivery
of end products to our end customers). Activities related
to cyber-attacks are a risk for our day to day operations.

Response: Significant effort is put into having the best
solutions for data protection available in the market,
and to reduce the risk related to human behavior by
providing awareness training to employees. Nordic has
implemented disaster recovery plans and backup
routines in order to mitigate any effects of potential
cyber-attacks, and seeks to maintain appropriate
insurance coverage.

Finally, Nordic has implemented disaster recovery plans
and backup routines in order to mitigate any effects of
cyber-attacks in addition to a cyber insurance that will
assist in handling eventual threats and attacks.

1818

NORDIC SEMICONDUCTOR | ANNUAL REPORT 2020 | REPORT FROM THE BOARD OF DIRECTORSFinancial risk
Nordic’s strategy and growth ambitions require an
adequate cash position to fund the R&D activities needed
to drive the technology and product roadmaps forward.

Maintaining a solid R&D cash coverage, measured as
cash holding divided by R&D spending, is also
necessary to pass the procurement due diligence of
tier-one customers, who are expected to make up an
increasing part of the revenue base going forward.

primarily are in NOK and EUR. Hence, fluctuations in
the exchange rates between these currencies may
impact profit margin.

Nordic does not use any financial instruments to hedge
the currency risk. A 1% increase in USD/NOK would –
all other things equal – translate into USD 0.8 million in
added profit before tax. The company presents its
accounts in USD, with profits translated into NOK for
taxation purposes.

At the end of 2020, the R&D cash coverage stood at
2.72x, up from 1.22x at the end of 2019. Nordic had
available cash of approximately USD 320 million at the
end of 2020, including credit facilities described above
under ‘Cash Flow and Funding’. The Board of Directors
assesses the current liquidity risk as low.

Credit risk
Nordic is exposed to credit risk related to both its
distributors and certain end-customers. The main
counterparties are leading international distributors of
electronic components based in Asia, and the company
has historically not suffered any significant credit losses.

Interest-rate risk
Nordic holds minimal interest-bearing debt, whereas
cash and cash equivalents are held as cash, mainly in
USD. We consider the direct risk associated with interest
rate fluctuations as low.

Foreign currency risk
Nordic is exposed to foreign exchange risk, as our sales
revenue and direct production costs are almost entirely
nominated in USD, whereas our operating expenses

Nordic’s 10 largest customers (distributors) accounted
for 90% of total revenue in 2020, with no significant
losses on receivables.

Credit monitoring routines are integrated into any new
credit lines, requiring security in the form of payment
guarantees or advance payment requirements
if
needed. The company’s receivables are not credit
insured. The credit risk is considered low.

1919

NORDIC SEMICONDUCTOR | ANNUAL REPORT 2020 | REPORT FROM THE BOARD OF DIRECTORSLegal and compliance
With an increasing global presence, the focus on
governance and ensuring compliance to foreign and
local requirements is important. Nordic recognizes the
importance of behaving as a good corporate citizen
across the globe and adopts international standards
for compliance. There is a risk that Nordic temporarily
will be non-compliant with new laws or regulations
and as a result be exposed to penalties or rulings
against us.

In the normal course of business, we might be involved in
legal proceedings related to commercial disagreements,
claims related to product quality, intellectual property
as well as governmental inquires. An unfavorable
ruling in any of these cases can have a material impact
on our results.

Our products are complex and vulnerabilities in our
products may not have been detected during product
development and manufacturing. This may result in
damages to our customers revenue and reputation if no
work-around is possible. Customer contracts regulate
our responsibilities, however there is a risk that legal
action can be brought forward representing a material
risk on our results.

Response: Nordic follows very high standards in terms
of quality assurance. Investing in lab equipment and
testers reduces time used on fault-finding, enables
workarounds to be implemented faster, and effectively
screens production defects. Nordic tries to limit the
contractual liability to an acceptable level in the
industry.

Nordic has implemented policies, training and audits in
order to secure that our zero- tolerance policy against
fraud, corruption and other unethical behavior are
adhered to. Our whistleblowing channel is open to the
public and handled by a trusted team including
representatives from the Executive Management Team.

Intellectual property rights
The current landscape of intellectual property rights
in and to patents that are essential for the radio
communication standards on which Nordic base its
products is difficult to navigate. Many owners of
standard essential patents have decided to only
license the end-device, leaving it up to Nordic’s
customers to get third party IP necessary for their
products, as opposed to licensing Nordic’s products.

Knowing that the royalty rate for such licenses will be
based on the end-product, Nordic has not followed the
same path of unacceptable risk-acceptance as many
competitors who have extended indemnification to
customers despite the lack of licenses. Instead, Nordic
has had open and honest conversations with its
customers and with the major patent owners on how to
solve this situation, with the goal of enabling access to
the relevant licenses through Nordic. Nordic’s customers
generally appreciate this approach which also enables
the customer to be compliant with relevant patent law.

rights, and

Nordic Semiconductor has never been prevented from
selling its established line of products under any
intellectual property
is continuously
investigating any new allegations by patent holders
that Nordic’s products infringe on intellectual property
of others. Nordic is taking steps to ensure that any such
allegations do not prevent the selling, purchasing and
use of our products.

The Bluetooth specifications are intended to be written
so that all patent claims which are necessary to
implement them are held by members of the Bluetooth
SIG. Any necessary claims held by members of the
Bluetooth SIG, are automatically licensed to members
like Nordic as a condition of membership. However,
there are other participants in the industry, that own
patents and are not members of the Bluetooth SIG,
who assert their patents towards companies like Nordic.

The current landscape of both LTE and Bluetooth are
considered when Nordic assesses potential loss in
connection with litigation. While we believe the risk of
loss is minimal due to the company’s vast experience
and prior art in working with Bluetooth and cellular
technology, we will defend any claims asserted against
Nordic vigorously, in light of the inherent uncertainties
of access to licensing on component level.

Response: Nordic is a willing licensee and invites the
owners of standard essential patents to NB-IoT and
LTE-M to license Nordic’s products on FRAND terms on
component level, or to enable access to such license to
its customers. Nordic Semiconductor ASA is a member
of the Fair Standards Alliance and plays an active part
in raising awareness around the implications which the
lack of licenses has on the industry. Furthermore,
Nordic is and has always been active in, and
contributing
setting organizations,
promoting openness and availability for all to standard
essential patents.

standard

to,

2020

NORDIC SEMICONDUCTOR | ANNUAL REPORT 2020 | REPORT FROM THE BOARD OF DIRECTORSPersonnel and organization
The Group had 978 employees at the end of 2020,
including 81 employees added through the acquisition
Imagination
of
Technologies Group in Q4 2020. The number of
employees increased 28% from 767 at the end of 2019.

the Wi-Fi development

team of

The increase reflects increased R&D efforts in both the
short-range business and cellular IoT, as well as
increased Sales & Marketing resources.

The number of R&D personnel increased by 18% to 665
during 2020, further to 746 when including the Wi-Fi
acquisition. R&D employees represent 76% of the total
number of employees. The Sales & Marketing staff
increased by 10% to 125 people at the end of the year,
with the remaining 107 working in administration, supply
chain and other staff functions.

At year end 2020, 529 or 54% of the employees were
employed outside of Norway, compared to 376 or 49%
of the employees at the end of 2019.

Sick leave (Norway specific)
Sick leave remained below industry averages in 2020
with absence due to illness of 1.4%, down from 2.4% in
2019. No occupational illnesses or injuries were reported
in 2020.

Non-discrimination, equality and diversity

The Board of Directors’ People and Compensation
Committee at Nordic Semiconductor work actively
together with the Executive Management Team to
enhance diversity and overall people focus.

Diversity is also on the agenda for internal audits as
well as the annual management business review.
Satisfaction surveys and Leadership surveys give
continuous feedback enabling the company to prioritize
actions for positive and relevant development.

Nordic Semiconductor’s business is based on a diverse
composition of a highly specialized and skilled
workforce. With 42 different nationalities represented at
the company’s headquarters, Nordic has a unique
position for fostering an inclusive and diverse company
culture based on innovation.

Nordic has also seen the need to expand its global
presence in order to hire desired and required skillsets.
This increases Nordic Semiconductor’s competitive edge
in a challenging marketplace for talent, thus
it
underscores the desire to hire competent employees
from across the world, regardless of ethnicity and
cultural background.

*Excludes the acquisition made in 2020
** Based on data from Statistics Norway from 2019

Nordic has implemented a Non-Discrimination Policy:

All Nordic Semiconductor employees shall be

treated equally and with dignity, courtesy,
and respect.

Nordic Semiconductor prohibits any form of

discrimination against and/or harassment of
employees or applicants for employment due
to race, color, nationality or ethnic origin,
age, religion, disability, political opinions,
gender or sexual orientation, as described by
ILO conventions.

Nordic Semiconductor’s organizational

culture shall be characterized by openness
and good internal communication so
that any misconduct or problems can be
addressed, discussed and resolved in a
timely manner.

Nordic Semiconductor’s employees are

encouraged to report any incident of
discrimination to their nearest leader or
through the applicable whistle-blower
channels. Retaliation against any employee
who has reported misconduct, is prohibited.
There shall be no unfavorable treatment to
any whistle blowers

In 2020 there were no reported discrimination issues, or
findings
indicated
discrimination or harassment in the organization.

internal

surveys

from

that

A detailed description of work done in relation to non-
discrimination, equality and diversity is included in the
ESG report for 2020 published on the Nordic webpage.

Employee gender distribution*
At the end of 2020, 13.8% of the total number of
employees were female, down from 14.4% in 2019.

In the Norwegian operation 16% of the workforce were
female, up from 15% in 2019. The relatively skewed
gender balance in the workforce must be viewed in an
industry context. In Norway, women working in the
private sector represent around 37%** of the work force,
but only around 14%** of electrical engineers and
computer science professionals.

The Executive Management consist of 8 men and 2
women, whereas the Board of Directors consists of 4
male and 3 female shareholder elected members, and
4 male employee-elected members.

2121

NORDIC SEMICONDUCTOR | ANNUAL REPORT 2020 | REPORT FROM THE BOARD OF DIRECTORSEmployee gender distribution*

2020

2019

Total percentage female
employees

13.8%

14.4%

Percentage of new female hires
globally

11.4%

14.5%

Percentage of new female hires
in Norway

21%

22%

Percentage of new female junior
hires in Norway

24%

17%

Promoted or hired females to
management positions

25%

Nordic participates in the Norwegian University of
Science and Technology’s “Jenteprosjektet Ada”, which
aims to recruit, motivate and educate females within
the Norwegian IT industry. Nordic also participates in
‘Womens Directory’, a Global Semiconductor Alliance
initiative targeted at women in the semiconductor industry.

The increase in percentage of new female junior hires in
Norway shows a positive effect of the initiatives aimed
at female applicants and the importance of continuing
with this focus globally going forward.

Gender equality is a fundamental principle for the
Group, and efforts are being made to ensure that there
is no gender bias in the recruitment processes.

Nordic continuously works on employer branding
development, with emphasis on promoting gender
equality and employee diversity, and sees an increase
in the number of applications from female students and
graduate candidates.

Age diversity*
Nordic Semiconductor aspires to be a healthy and
attractive workplace for employees in all age groups
and during all phases of life across the globe. The
company has implemented a Phase of Life Policy,
aiming
facilitate employee development and
knowledge growth throughout the employee journey.
The phase of life policy consists of three stages: Junior,
Middle and Senior stage. Each phase is based on the
perception that employees will have different needs
and selected priorities relevant to the various stages of
their lives. This gives us an opportunity as an employer
to accommodate
the personal needs and
requirements of our employees.

The policy was established in Norway at an early stage,
and further expanded to include several countries
during 2020. The global implementation process that
will continue in 2021.

*Excludes the acquisition made in 2020

The average age of permanent employees in Nordic
was 40.2 years old, with an age range between 21 years
old and 69 years old.

Equal pay
Nordic strives to ensure that work of equal value shall
receive equal pay, regardless of cultural diversity,
gender, etc. Salary levels are determined based on
objective measures, such as seniority, education,
experience, and local market expectations.

Career ladder
Close to 80% of the employees work within Research
and Development, and Nordic has developed a
standardized framework to determine and adjust salary
levels referred to as the Nordic Career Ladder. All salary
levels are fixed and illustrated by the advancement
through the Ladder.

The company aims to continuously develop employee
competence and ensure that all employees advance
according to personal and professional career goals.
This practice was revised for the Nordic countries in late
2020 and adopting and aligning similar practices
globally will be further analyzed during 2021.

The Career Ladder is applicable for all employees
within the Research and Development department,
including lower managerial levels, and is currently being
implemented across the board. Salary increases are
initiated through a globally aligned salary review
process. Employees are expected to advance through
the career ladder, where salary levels are adjusted
according to position and related responsibilities. This
decreases the risk of any subjective salary assessments
based solely on personal performance and preferences,
reducing the risk of making biased salary decisions.

Within the R&D department in Norway, the average
salary in 2020 for women is 92% of the average salary
for males. The average salary for female employees in
all departments was 77%, excluding executive
management. Within the top management, the average
salary of female employees was 76%.

The salary gap between women and men is largely due
to the fact that there is still a majority of men in the
company’s senior positions.

Furthermore, gender differences in salary are also
affected by department and location. A larger relative
proportion of the women in administrative functions are
based in the Philippines, where the salary level is below
the Group average.

Permanent employees in part time positions
Nordic has limited permanent employees in part time
positions (5.5%). All part time employees work in
reduced positions voluntarily, and at their own request.

2222

NORDIC SEMICONDUCTOR | ANNUAL REPORT 2020 | REPORT FROM THE BOARD OF DIRECTORSIn 2020, 62.5% of part-time employees were males and
37.5% females, two of the females were partially disabled,
working according to a percentage recommended by
medical personnel.

Part time employees are offered an opportunity to
reevaluate their working percentage during the annual
performance conversation with their manager, and
more often if desired.

Parental leave (Norway specific)
Since 1993, a part of the parental leave was devoted to
the father as a measurement to promoting gender
equality in the labor market in Norway. Nordic pays
parental benefits above and beyond the National
Insurance Scheme. While
Insurance
Scheme refunds annual salary up to 6 G, Nordic pays
up to 9 G, if the employee has been working for at least
6 of the past 10 months before the birth.

the national

During 2020, 29 employees in Nordic were on parental
leave, 23 of these were men and 8 women. The average
number of weeks on leave for men was 15.7 weeks,
while the average for women was 16.4. This shows a
healthy distribution of the parental leave across
genders.

Activity plan / goals for 2021
Nordic Semiconductor’s Board of Directors, Executive
Management Group and Working Environment
Committee will in 2021 continue to identify both risk and
opportunity measurements connected to diversity and
non-discrimination. The working environment committee
will include employee representatives in the work to
ensure a comprehensive and valuable dialogue through
diverse perspectives, both locally and globally.

Activity plan/goals for 2021:

Strengthen our focus on diversity and non-

discrimination through reviewing and updating
our current corporate employee policies, including
ethical guidelines for both employees and
managers

Continue to strive towards equal pay by

incorporating fair and appropriate benchmarking
processes across the board

Continue a close dialogue and collaboration

between employee representatives, HR and
management

topic in the employee satisfaction survey in 2021

Include gender equality, discrimination and as a
Increase the percentage of female employees for a
Promoting more women into management

more balanced overall gender distribution

positions through more hands-on HR support to
managers during internal recruitment processes
and promotions in addition to leadership mapping
and development

Corporate Social Responsibility (CSR)/
Environmental Social and Governance
(ESG)
Nordic has a high focus on environmental and social
responsibility. The company’s commitments to CSR and
ESG topics are established in adherence to the UN
Global Compact’s (UNGC) ten principles on human
rights, labor, environment and anti-corruption, the
Responsible Business Alliance’s (RBA) Code of Conduct
for social, environmental, and ethical issues in the
electronics
supply chain, and Nordic’s
Corporate Social Responsibility policy and other
company policies.

industry

The framework is established in the ISO-certification of
the company’s management systems for Quality (ISO
9001), Environmental (ISO 14001), Occupational Health
and Safety (ISO 45001), and Information Security (ISO
27001). These standards enable a systematic approach
to improvement of the company’s business processes
and performance on ESG
include
hazardous substances, GHG emissions, responsible
sourcing of minerals, diversity, health & safety, anti-
corruption, non-retaliation, IP-protection, data privacy,
responsible supply chain, and transparency.

topics. These

Along with the commitment to UN Global Compact
principles and its ambitions for greater engagement,
Nordic Semiconductor in 2019 started a program
the UN
supporting,
Sustainable Development Goals (SDGs).

identifying, and addressing

For further information, please refer to the separately
prepared ESG Report for 2020, which is prepared in
accordance with the UNGC, RBA Code of Conduct,
and the Norwegian Accounting Act, Section 3-3. The
report also
company’s official
Communication on Progress as a signatory to the UN
Global Compact.

represents

the

The ESG Report is available on www.nordicsemi.com,
along with the company’s CSR policy, the RBA Code of
Conduct, the ten principles of UN Global Compact, and
the UN Global Compact letter of commitment.

Corporate Governance

Nordic’s guidelines and practices for Corporate
Governance comply fully with the Norwegian Code
of Practice for Corporate Governance (“the Code”),
dated 17 October 2018.

The guidelines also meet the disclosure requirements of
the Norwegian Accounting Act and the Securities
Trading Act. A thorough review of the guidelines and
compliance with the Code is included as a separate
section in this Annual Report.

2323

NORDIC SEMICONDUCTOR | ANNUAL REPORT 2020 | REPORT FROM THE BOARD OF DIRECTORSShareholder Matters
The Nordic Semiconductor share is listed on the Oslo
Stock Exchange (OSE) under the ticker NOD. Total
return for the Nordic share was 148% in 2020, compared
to an 5% increase for the Oslo Stock Exchange (OSEBX)
and an 53%, increase for the PHLX Semiconductor
Sector Index (SOX).

The Nordic share closed at NOK 138.0 at year-end
2020, corresponding to a market capitalization of NOK
26.6 billion.

Nordic had 191.0 million shares outstanding at the end
of 2019, of which 1.8 million treasury shares. Purchase of
treasury shares is viewed as an effective way to cover
the obligations related to equity-based compensation.

On the Annual General Meeting in April 2020 the
Board was given the authorization to purchase own
shares, and to hold treasury shares within the limits of
the Norwegian Public Limited Liability Companies Act.
The company will seek the same approval on the 2021
Annual General Meeting.

Nordic had approximately 8 800 shareholders at the
end of 2020, compared to 3 300 at the end of 2019. The
top 20 shareholders held 58.6% of the registered
shares.

58.7% of the shares were held by institutions and
individuals based in Norway, down from 74.9% in 2019.
The below table outlines the geographical split of our
shareholder base. The geographical split is based on
results from our shareholder analysis vendor, based on
data as of December 15, 2020.

Region

Norway

USA

Other Europe

England

Sweden

Rest of World

December 15, 2020

58.7%

22.3%

8.1%

7.5%

2.5%

0.9%

Nordic aims to have an open dialog with shareholders
and investors. The company conducted virtual investor
roadshows both in Norway and internationally in
connection with the interim results and participated on
several industry and investment virtual seminars
during the year.

Through active communication with the capital market
and shareholders in 2020, Nordic ensured that all
relevant information required for external evaluation of
the company was published in accordance with
applicable rules and guidelines issued by the Oslo Stock
Exchange.

Environmental statement

Nordic is a fabless semiconductor company and does
not own or operate manufacturing facilities. Hence, the
direct environmental effect of the Group’s operations is
limited.

Manufacturing is outsourced to leading third-party
providers, required to operate in compliance with the
ISO 14001 environmental standards and under other
certifications and qualifications.

Nordic seeks to limit its resource consumption, prevent
unnecessary environmental pollution, and manage
waste in an environmentally friendly and resource
efficient manner.

The Group has established routines to monitor these
conditions under management systems certified under
ISO 9001, ISO 14001 and OHSAS 18001. Nordic complies
with all current applicable laws and regulations, and all
its products comply fully with the REACH and RoHS
hazardous substance directives. This allows the Group
to market itself as a “Green supplier”, which is an
to
advantage
stringent environmental standards of operation.

towards major customers subject

In line with the recommendation of the Oslo Stock
Exchange, the Board of Directors has prepared a
separate report on corporate social responsibility
including employee and environmental considerations.
The report can be downloaded from nordicsemi.com.

2424

NORDIC SEMICONDUCTOR | ANNUAL REPORT 2020 | REPORT FROM THE BOARD OF DIRECTORSOutlook
Nordic reported 41% revenue growth to USD 405 million
in 2020, and a shift in the order backlog from USD 107
million at the end of 2019 to USD 492 million at the end
of 2020. The high demand
reflects accelerated
technology adoption across the company’s end-product
markets, a widespread technology migration from
Bluetooth classic to Bluetooth Low Energy, and a
require
significant growth
multiprotocol solutions. Nordic has also seen a change
in its customer mix, with several global platform
companies and other tier-1 customers now placing more
orders for high-volume products with longer product
lifecycles.

in applications

that

Bluetooth revenue increased by 43% to USD 316 million
in 2020, exceeding the 20%-30% growth range the
company has earlier indicated for the Bluetooth and
multiprotocol product range. Proprietary revenue was
also higher
increasing by 27%,
supported by high demand for home office equipment.
Proprietary revenue is expected to show a percentage
decline in the high single-digits in 2021 as the technology
migration to Bluetooth continues.

than expected,

Based on increasing order volumes, Nordic placed early
orders for wafer volumes that would allow for a
significant increase in production also in 2021. The high
demand in the semiconductor market has, however, put
increasing strains on the global supply chain through
2020 and into 2021, and the demand/supply imbalances
temporarily limit the availability of wafers. Although the
main wafer suppliers have indicated significant capital
expenditures to increase capacity going forward, this
temporarily limits Nordic’s ability to take full advantage
of the strong demand. The wafer volumes the company
has been allocated nevertheless allow Nordic to
increase its production by a minimum of 25% in 2021.

The wafer shortage is expected to have the largest
impact in the second quarter 2021, with higher volumes
expected in the second half of the year. As described in
the interim report for the fourth quarter and full year
2020, Nordic guides for a revenue level of USD 130-140
million for the first quarter 2021. There is always inherent
uncertainty to future prospects.

Nordic’s gross margin improved to 52.8% in 2020 from
50.9% in 2019, with the company reporting a gross
margin of 52.7% for the fourth quarter 2020. The high
margin level reflects both a product mix with high
volumes of advanced high-margin products, and
continuous cost improvements on newly launched
products.

Nordic expects a gross margin of 50%-51% for the first
quarter 2021, and reiterates the expectation that a
higher share of sales to tier-1 customers will move the
gross margins for the short-range business into the
48%-50% range in the medium term.

The high demand underlines Nordic’s solid market
position and is a clear indication of the company’s
growth opportunities and market potential. In 2019,
Nordic presented a bold aspiration to build a USD 1
billion company within five years, and the positive
demand trends and continued strengthening of the
customer base increase the confidence in this aspiration.
The company sees continued growth beyond this
timeframe, as the evolvement of the Internet of Things
(IoT) is set to generate a massive long-term market
relying on robust and energy-efficient connectivity
solutions for billions of IoT products and solutions.

2525

NORDIC SEMICONDUCTOR | ANNUAL REPORT 2020 | REPORT FROM THE BOARD OF DIRECTORSOslo, March 16, 2021

Jan Frykhammar
Board member

Birger Steen
Chair

Anita Huun
Board member

Inger Berg Ørstavik
Board member

Svenn-Tore Larsen
Chief Executive Officer

Endre Holen
Board member

Øyvind Birkenes
Board member

Jon Helge Nistad
Board member, employee

Annastiina Hintsa
Board member

Joel Stapelton
Board member, employee

Susheel Raj Nuguru
Board member, employee

Morten Dammen
Board member, employee

2626

NORDIC SEMICONDUCTOR | ANNUAL REPORT 2020 | REPORT FROM THE BOARD OF DIRECTORSFinancial
Statements

Income statement (for the year ended December 31)

GROUP

PARENT

2020

2019 Amount in USD 1000

Note

2020

2019

405 217

288 395

Total Revenue

-190 690

-141 290 Cost of materials

-584

-351 Direct project costs

213 943

146 753 Gross profit

406 242

289 226

-190 690

-141 290

-584

-351

214 968

147 584

-101 211

-80 281

Payroll expenses

9/10/12/18

-61 444

-48 735

-35 954

-33 665 Other operating expenses

-31 063

-23 535 Depreciation

45 714

9 272 Operating profit

642

-1 416

-2 016

42 925

-4 534

38 391

1 910

Financial income

-1 102

Financial expenses

9 706

Profit before tax

-2 379

Income tax expense

7 327 Net profit after tax

Attributable to:

-375 Net foreign exchange gains (losses)

6/22

38 391

7 327

Equity holders of the parent

0,21

0,20

2020

38 391

-84

688

0,04 Ordinary earnings per share (USD)

0,04

Fully diluted earnings per share (USD)

2019

Statement of comprehensive income

7 327 Net profit after tax

-83

Actuarial gains (losses) on defined benefit plans
(before tax)

Income tax effect

-117 Currency translation differences

5/21

11/12/21

6/22/23

6/21/22/23

-84 325

-73 695

-27 128

42 071

642

-1 336

-2 014

39 363

-3 564

-19 789

5 365

1 910

-1 018

-373

5 885

-1 577

35 799

4 308

35 799

4 308

0,20

0,18

2020

35 799

-84

0,03

0,02

2019

4 308

-83

39 014

7 145

Total Comprehensive Income

35 734

4 243

Attributable to:

39 014

7 145

Equity holders of the parent

35 734

4 243

NORDIC SEMICONDUCTOR | ANNUAL REPORT 2020 | FINANCIAL STATEMENTSStatement of financial position (as of December 31)

GROUP

PARENT

2020

2019 Amount in USD 1000

Note

2020

2019

ASSETS

Non-current assets

2 393

0 Goodwill

34 563

33 990 Capitalized development expenses

11 408

Software and other intangible assets

2 813 Deferred tax assets

23 934

Right of use assets

26 625

Fixed assets

19 905

3 668

25 092

28 284

249

34 563

33 990

19 286

3 029

20 616

11 120

2 429

22 272

11/22/23

24 960

22 354

Shares in subsidiaries

1/13

1 590

113 906

98 770 Total non-current assets

104 294

92 208

Current assets

61 915

53 067

Inventory

88 034

64 519 Accounts receivable

9 372

11 359 Other current receivables

14/22/23

15/22/23

61 955

88 034

10 062

53 067

64 519

10 045

242 547

90 645 Cash and cash equivalents

16/22/23

238 615

89 205

401 909

219 589

Total current assets

515 814

318 359

TOTAL ASSETS

EQUITY

317

303

Share capital

235 448

113 355

Share Premium

166 727

118 551 Other components of equity

402 492

232 205

Total equity

LIABILITIES

Non-current liabilities

448

21 004

21 452

310

Pension liability

19 886 Non-current lease liabilities

20 196

Total non-current liabilities

Current liabilities

22 812

19 738 Accounts payable

4 976

8 789

5 520

302

3 136

Income taxes payable

3 761

Public duties

4 044 Current lease liabilities

0 Current financial liaibilities

398 666

216 836

502 960

309 044

317

303

235 448

113 355

153 501

108 101

389 266

221 754

448

18 338

18 785

21 059

4 889

7 777

3 616

302

310

19 085

19 396

17 988

2 886

3 181

3 142

21/22/23

20/22/23

21/22/23

22/23

49 472

35 279 Other current liabilities

15/20/23

57 265

40 696

91 871

65 958

Total current liabilities

113 323

86 155

Total liabilities

515 814

318 359

TOTAL EQUITY AND LIABILITY

94 908

113 694

67 894

87 289

502 960

309 044

NORDIC SEMICONDUCTOR | ANNUAL REPORT 2020 | FINANCIAL STATEMENTSOslo, March 16, 2021

Jan Frykhammar
Board member

Birger Steen
Chair

Anita Huun
Board member

Inger Berg Ørstavik
Board member

Svenn-Tore Larsen
Chief Executive Officer

Endre Holen
Board member

Øyvind Birkenes
Board member

Jon Helge Nistad
Board member, employee

Annastiina Hintsa
Board member

Joel Stapelton
Board member, employee

Susheel Raj Nuguru
Board member, employee

Morten Dammen
Board member, employee

Nordic Semiconductor Group

Consolidated statement of changes in equity

Amount in USD 1000

Share
capital

Treasury
shares

Share
premium

Other paid
in capital

Currency
translation
reserve

Retained
earnings

Total
equity

Equity as of 01.01.19

303

-5

113 355

3 307

-190

104 780

221 549

Net profit for the period

Other comprehensive
income

Sale of treasury shares
(option exercise)

Share based compensation

Equity as of 31.12.19

303

-5

113 355

Net profit for the period

Other comprehensive
income

Sale of treasury shares
(option exercise)

Share based compensation

Capital increase*

Equity as of 31.12.20

317

122 093

7 327

-119

-65

-184

2 106

1 407

-309

112 042

232 205

38 391

688

-65

623

5 899

3 265

122 108

2 105

1 407

6 819

5 897

3 265

-3

235 448

15 980

379

150 368

402 492

Nordic Semiconductor Parent

Consolidated statement of changes in equity

Amount in USD 1000

Share
capital

Treasury
shares

Share
premium

Other paid
in capital

Retained
earnings

Total
equity

Equity as of 01.01.19

303

-5

113 355

1 391

99 327

214 370

Net profit for the period

Other comprehensive income

Sale of treasury shares (option
exercise)

Share based compensation

Equity as of 31.12.19

Prior year adjustment

Net profit for the period

Other comprehensive income

Sale of treasury shares (option
exercise)

Share based compensation

Capital increase*

Equity as of 31.12.20

4 308

-65

2 106

1 033

103 570

221 754

-21

35 799

-65

5 899

3 792

122 108

2 105

1 033

4 530

5 897

3 792

303

-5

113 355

122 093

317

* The group increased the share capital with NOK 1 144 million, approximately USD 125 million.
The amount net of transaction cost was USD 122.1 after tax.

-2

235 448

14 219

139 283

389 266

NORDIC SEMICONDUCTOR | ANNUAL REPORT 2020 | FINANCIAL STATEMENTS

Statement of cash flows
for the year ended December 31

GROUP

PARENT

2020

2019 Amount in USD 1000

Note

2020

2019

Cash flows from operating activities

42 925

9 706

Profit before tax

39 363

5 885

-2 955

-4 846

Taxes paid for the period

-1 922

-4 208

31 063

23 535 Depreciation

11/12/21

27 128

19 789

-29 561

-13 798 Change in inventories, trade receivables and payables

4/14/20/22

-29 333

-14 816

3 151

138

1 100

Share-based compensation

31 Movement in pensions

20 530

3 950 Other operations related adjustments

65 292

19 678 Net cash flows from operating activities

Cash flows used in investing activities

-16 480

-20 182 Capital expenditures (including software)

-8 398

-13 158

-11 271 Capitalized development expenses

Business Combination, net of cash acquired

-38 035

-31 454 Net cash flows used in investing activities

10 455

121 277

-4 557

Cash flows from financing activities

2 412 Changes in treasury shares

- Capital increase

Cash settlement of options contract and issue of share
capital

-3 552

-3 906

Repayment of interest bearing debt

40 000

-40 000

RCF drawdown

RCF repayment

11/12

2 357

138

726

21 845

10 340

59 576

17 748

-14 752

-17 233

-8 398

-11 271

-11 694

-34 844

-28 504

10 455

121 277

-4 557

2 412

-2 496

-2 972

40 000

-40 000

123 622

-1 494 Net cash flows from financing activities

124 677

-560

1 024

Effects of exchange rate changes on cash and cash
equivalents

151 902

-13 232 Net change in cash and cash equivalents

90 645

103 876 Cash and cash equivalents as of 1.1.

149 409

-11 316

89 205

100 522

242 547

90 644 Cash and cash equivalents as of 31.12.

16/22

238 615

89 205

4 202

1 847

Restricted cash incl. in the cash and cash equivalents
as of 31.12.

4 202

1 847

NORDIC SEMICONDUCTOR | ANNUAL REPORT 2020 | FINANCIAL STATEMENTSNote 1: Background

1.1 Corporate information
Nordic Semiconductor ASA is a public limited company
whose ordinary shares are listed on the Oslo Stock
Exchange with ticker code NOD. The Company is domiciled
in Norway, and the registered head office is at Otto
Nielsens vei 12, 7052 Trondheim.

The Group includes the ultimate parent company Nordic
Semiconductor ASA and the wholly owned subsidiaries,
Nordic Semiconductor Norway AS, Nordic Semiconductor
UK Ltd, Nordic Semiconductor Inc., Nordic Semiconductor
Poland Sp. z.o.o, Nordic Semiconductor Finland OY, Nordic
Semiconductor
Japan KK and Nordic Semiconductor
Germany GmbH. In addition, on December 31, 2020, Nordic
completed the acquisition of 100% of the shares in
Imagination Technologies AB and Imagination Technologies
Hyderabad Pvt Ltd.

Nordic Semiconductor is a Norwegian fabless semiconductor
company specializing in wireless communication technology
that powers the Internet of Things (IoT). Nordic was
established in 1983 and has more than 1000 employees
across the globe. The company’s award-winning Bluetooth
Low Energy solutions pioneered ultra-low power wireless,
making it the global market leader. Nordic’s technology
range was later supplemented by ANT+, Thread and
Zigbee, and in 2018 Nordic launched its low power,
compact LTE-M/NB-IoT cellular IoT solutions to extend the
penetration of the IoT. The Nordic portfolio was further
complemented by Wi-Fi technology in 2021.

1.2 Basis for preperation

The financial accounts for the Group have been prepared
in accordance with
International Financial Reporting
Standards (“IFRS”) as endorsed by the European Union and
Norwegian authorities and are effective as of 31 December
2020. The consolidated financial statements also comply
with IFRS as issued by the International Accounting
Standards Board (“IASB”) and the disclosure requirements
the Norwegian Accounting Law
as specified under
(Regnskapsloven).

The consolidated financial statements are presented in US
dollars (“USD”), which is the functional currency of the
parent company. All USD amounts are rounded to the
nearest thousand, if nothing else is noted. As a result of
rounding differences, it is possible that amounts and
percentages do not add up to the total.

Gross profit is revenue less cost of materials and direct
project costs. Cost of materials include direct and indirect
cost of production. Nordic Semiconductor uses gross profit
for internal reporting and has therefore chosen to include it
in the external financial reporting.

The Group has only one operating segment. The group
does not report or monitor profitability on a lower level, but
breaks down its revenue into the following end product
markets: Consumer Electronics, Wearables, Healthcare,
Building and Retail, Others, Long-Range (cellular IoT), ASIC
components and Consulting Services. The Group also
breaks down its revenues in the geographical areas in
which its distributors are located.

The financial accounts were audited and approved for
publication by the Board of Directors on March 16 2021,
and will be presented for approval at the Annual General
Meeting on April 20, 2021.

1.3 Accounting standards adopted in 2020

In 2020, there are few revisions by the International
Accounting Standards Board to the financial reporting
requirements in accounting policies. The Group has adopted
the following amendments:

Amendments to IFRS 3 - Definition of a Business
In October 2018, the IASB issued amendments to IFRS 3
Business Combinations aimed at resolving the difficulties
that can arise when an entity determines whether it has
acquired a business or a group of assets.

The amendments will help the Group to determine whether
an acquisition made is of a business or a group of assets.
The amended definition emphasizes that the output of a
business is to provide goods and services to customers,
whereas the previous definition focused on returns in the
form of dividends, lower costs or other economic benefits
to investors and others. In addition to amending the
wording of the definition, the Board has provided
supplementary guidance.

Distinguishing between a business and a group of assets is
important because an acquirer recognizes goodwill only
when acquiring a business.

The amendments will be effective for business combinations
with an acquisition date on or after 1 January 2020.

Amendments to IFRS 16 - Covid-19-Related Rent
Concessions
The amendment exempts lessees from having to consider
individual lease contracts to determine whether rent
concessions occurring as a direct consequence of the
covid-19 pandemic are lease modifications and allows
lessees to account for such rent concessions as if they were
not lease modifications. It applies to covid-19-related rent
concessions that reduce lease payments due on or before
June 30, 2021.

In 2020, there has been one lease agreement with rent
concessions as a direct consequence of the covid-19
pandemic. The direct impact on profit and loss was not
material for the Group.

NORDIC SEMICONDUCTOR | ANNUAL REPORT 2020 | FINANCIAL STATEMENTSRevised Conceptual Framework for Financial Reporting
The IASB has issued a revised Conceptual Framework. The
effective date is January 1, 2020. The Group considers to be
in line with the Conceptual Framework, and there is no
need for any changes in accounting principles.

Note 2: Significant Accounting Principles

2.1 Basis of consolidation

The consolidated financial statements incorporate the
results, cash flows and assets and liabilities of the parent
company and its subsidiaries.

A subsidiary is an entity that is controlled, either directly or
indirectly, by the parent company. Control exists when the
parent company is exposed, or has rights, to variable
returns from its involvement with the investee and has the
ability to affect those returns through its power to direct the
relevant activities of the investee. Generally, such power
exists where the parent company holds a majority of the
voting rights of an investee.

Subsidiaries are consolidated from the date control is
obtained until the date that control ceases. All subsidiaries
are wholly owned by the parent company and there are no
non-controlling
transactions,
balances and unrealized gains on transactions between
group companies are eliminated.

Intercompany

interests.

2.2 Significant accounting judgements,
estimates and assumptions

The preparation of financial statements requires that
management uses judgement, estimates and assumptions
that effect the amounts reported in the financial statements
and its disclosures. Management bases its estimates and
judgement on previous experience and on various other
factors deemed to be reasonable and sensible given the
specific circumstances. The main areas of uncertainty for
assessments and estimates on the balance sheet date,
which represent a risk of creating significant changes to the
value of assets and liabilities, are discussed below.

Estimates are continuously reassessed based on changes
in the underlying assumptions. Changes in accounting
estimates are recognized in the period in which such
changes occur. If such changes also apply to future periods,
the effect is distributed between current and future periods.

Revenue recognition
Revenue recognition principles are described in Note 2.5

Nordic Semiconductor predominantly sells to electronic
distributors under a distribution agreement. The distributors
will hold a given level of Nordic Semiconductors inventory
that is subsequently shipped to an end customer. Nordic
Semiconductor uses a “sell in” model in connection with
revenue recognition to distribution customers. Under a “sell

in” model, management needs to make judgements and
estimates the amount that can affect the reported amounts
of revenues and expenses. The main judgments are
described as follows.

Variable consideration for “Ship and Debit”
When a distributor sells components to specified customer
accounts, the distributor will receive an additional rebate
after the sale is made, commonly known as a “Ship and
Debit” rebate. In estimating the variable consideration, the
Group is required to use the expected value method. The
Group estimate the rebate based on historical discounts to
each distributor, the distributors’ inventory level as of 31
December 2020 and expected sales mix. An estimate for
this rebate is provided in the accounts, reducing the
revenue and increasing refund liabilities. See Note 3.3.

Development costs
Development costs are capitalized in accordance with the
principles in Note 2.6.

In order to determine the amount to be capitalized, it is
necessary for management to make assumptions regarding
expected future cash flow, and the expected period of
benefits. Capitalized development costs are subject to
amortization on a straight-line basis over the period of
expected future benefits, normally 3-5 years. Uncertainty
exists with respect to the estimated period of expected
future benefit, as this depends on the future technological
development in the market. During 2020 USD 8.4 million
was capitalized. The carrying amount of capitalized
development costs as of December 31, 2020 and 2019 was
USD 37 million and USD 34 million respectively.

Leases - Estimating the incremental borrowing rate
The interest rate implicit in the lease cannot readily be
determined, therefore the incremental borrowing rate (IBR)
is used to measure lease liabilities.

The lessee's IBR is defined in IFRS 16 as “the rate of interest
that a lessee would have to pay to borrow over a similar
term, and with a similar security, the funds necessary to
obtain an asset of a similar value to the right-of-use asset
in a similar economic environment”

The Group has a centralized treasury department, and all
financing is from the parent company in order to minimize
the costs of finance. The subsidiaries are self-financed with
low credit risk due to cost-plus inter-company invoicing for
services, and do not enter into financing transactions into
third parties. The Group entities have stand-alone
arrangements for lease payments either with deposits or
bank guarantee.

The IBR reflects what the companies of the Group ‘would
have to pay’ , which requires estimation when no observable
rates are available (such as for subsidiaries that do not
enter into financing transactions) or when they need to be
adjusted to reflect the terms and conditions of the lease

NORDIC SEMICONDUCTOR | ANNUAL REPORT 2020 | FINANCIAL STATEMENTS(for example, when leases are not in the subsidiary’s
functional currency). The Group estimates the IBR using
observable inputs (such as market interest rates) when
available and is required to make certain entity-specific
estimates (such as the subsidiary’s standalone credit rating).

are translated according to monthly average exchange
rates. Changes in net assets resulting from exchange rate
movements are recognized in other comprehensive income
and taken to the currency translation reserve.

2.3 Business combination

A business combination is a transaction or other event in
which the Company obtains control of one or more businesses.

Business combinations are accounted for using the acquisition
method. Goodwill is the difference between consideration
transferred and net assets recognized and is classified as
an intangible asset. Consideration transferred represents
the sum of the fair values at the acquisition date of the
assets given and liabilities incurred or assumed.

Acquisition costs such as advisory, legal, accounting,
valuation and other professional fees are expensed to
profit or loss in the period in which they are incurred.

Identifiable assets and liabilities of the acquired business
are measured at their fair value at the acquisition date,
except for certain items that are measured in accordance
with the relevant Group accounting policy, such as leases
and deferred tax assets.

Right-of-use assets and lease liabilities for leases where
the target is the lessee are recognized at the present
value of the remaining lease payments as if the acquired
lease were a new lease at the acquisition date. The
acquirer measures the right-of-use asset at the same
amount as the lease liability.

2.4 Foreign currency translation

Each entity within the Group has a functional currency,
which is normally the currency in which the entity primarily
generates and expends cash. The parent company is the
most significant entity in the Group, and its functional
currency is USD.

At entity level, a foreign currency is a currency other than
the entity’s functional currency. Transactions in the profit
and loss statement denominated in foreign currencies are
recorded in the entity’s functional currency at the exchange
rate prevailing at the date of the transaction. Monetary
assets and liabilities denominated in foreign currencies are
translated at the exchange rate prevailing at the balance
sheet date. Currency translation differences arising at entity
level are recognized in profit or loss.

The Group’s presentation currency is USD, and foreign
operations are those of the parent company’s subsidiaries
and branches whose functional currency is not the USD.
On consolidation, assets and liabilities of foreign operations
are translated into USD according to the exchange rates
prevailing on the balance sheet date. Profit or loss items

2.5 Revenue recognition

The Group is in the business of developing and selling
integrated circuits. Revenue from customers is mainly
generated from sale of products. Services delivered consists
of consulting services. The Group and the customer do not
receive financing from the sales, and therefore there are no
significant financing components to be accounted for
separately from the revenue transaction. The normal credit
term is 30-60 days upon delivery. In other terms, the sale
contracts do not require the customer to pay in advance,
and the contract do not require the customer to pay
significantly after delivery.

Sale of products
Sales of products are mostly made direct to distributors
(“customer”). Revenue from the sale of products is
recognized when control of the goods is transferred to the
customer at an amount that reflects the consideration to
which the Group expects to be entitled in exchange for
those goods. The time of delivery, and the time where
control of goods is transferred, is usually the time when the
goods are transferred to the transport carrier. At the
delivery time, the Group has the right of payment for the
asset, the customer has legal title to the asset, physical
possession has been transferred to the customer and
customer has the significant risks and rewards of ownership
of the asset.

Revenue recognized on the sale of products is measured at
the fair value of the consideration received or receivable,
excluding sales taxes and after making allowance for
variable considerations such as rebates and product returns.

Ship and debit rebate
The Group sells products to certain distributor on “ship and
debit” terms. It means that the distributor may be entitled
to a rebate if the distributor sells the product to end
customers at a price lower than the price at which the
distributor purchased the products from the Group. The
difference in price is then claimed (debited) by the
distributor.

The Ship and Debit rebates are recognized as reduction in
revenue and increase in liabilities before the distributor do
their actual sale to end customers.

Stock rotation rights
Some distributors are entitled to limited rights of return,
referred to as stock rotation rights. The Group tracks the
distributor's inventory and can initiate a stock rotation
earlier if a certain product is selling better with another
distributor. As the products have similar margin, there are
no significant losses for the Group when stock rotations are

NORDIC SEMICONDUCTOR | ANNUAL REPORT 2020 | FINANCIAL STATEMENTSinitiated. The Group does not make provisions or
adjustments for stock rotation unless we expect the goods
returned to be obsolete. Stock rotation provisions are made
if necessary, based on most likely amount method.

End-customer volume rebates
Some end customers have entered into agreements with
Nordic to receive a rebate based on their purchase quantity
and price from the distributor. The rebates are recognized
as reduction in revenue and increase in liabilities before
payout is done to the end customer.

Sale of services
Revenue from services is recognized as the services are
rendered/delivered.

Contract balances
Contract assets
A contract asset is the right to consideration in exchange
for goods or services transferred to the customer. If the
Group performs by transferring goods or services to a
customer before the customer pays consideration or before
payment is due, a contract asset is recognized for the
earned consideration that is conditional.

Contract assets are subject to impairment assessment.
Refer to accounting policies on impairment of financial
assets in Note 2.9

Trade receivables
A receivable represents the Group’s right to an amount of
consideration that is unconditional (i.e., only the passage of
time is required before payment of the consideration is
due). Refer to accounting policies of financial assets in Note
2.10.

Contract liabilities
A contract liability is the obligation to transfer goods or
services to a customer for which the Group has received
consideration (or an amount of consideration is due) from
the customer. If a customer pays consideration before the
Group transfers goods or services to the customer, a
contract liability is recognized when the payment is made
or the payment is due (whichever is earlier). Contract
liabilities are recognized as revenue when the Group
performs under the contract.

Assets and liabilities arising from rights of return
Right of return asset
Right of return asset represents the Group’s right to recover
the goods expected to be returned by customers. The asset
is measured at the former carrying amount of the inventory,
less any expected costs to recover the goods, including any
potential decreases in the value of the returned goods.

The Group updates the measurement of the asset recorded
for any revisions to its expected level of returns, as well as
any additional decreases in the value of the returned
products. As the customers are only able to exchange the
goods, the Group does not have a right of return asset.

Refund liabilities
A refund liability is the obligation to refund some or all of
the consideration received (or receivable) from the customer
and is measured at the amount the Group ultimately
expects it will have to return to the customer. The Group
updates
the
corresponding change in the transaction price) at the end
of each reporting period.

its estimates of refund

liabilities

(and

Cost to obtain a contract
The Group does not pay commission to employees and all
costs related to getting a customer order is immediately
expensed. The amortization period for a contract asset
would be one year or less, hence the Group is able to use
the practical expedient and expense costs directly.

2.6 Intangible assets

Research and development expenditure
Research costs are expensed as incurred.

Costs associated with development are capitalized if the
following criteria are met in full:

cost elements can be identified and measured reliably;

The product or the process is clearly defined and the
The technical feasibility is demonstrated;
The product or the process will be sold or used in the
The asset will generate future financial benefits;
Sufficient technical, financial and other resources for

business;

project completion are in place.

Costs expensed in prior accounting periods will not be
capitalized. Depreciation begins when the product is
transferred from development to production. Depreciation
is calculated on a straight-line basis over 5 years.
Uncertainty exists with respect to the expected period of
benefits, as this depends on the future technological
development in the market.

Goodwill
Goodwill acquired in a business combination is carried at
cost as established at the acquisition date, less impairment
losses, if any.

in business

Other intangible assets
Other intangible assets comprise identifiable intangibles
acquired
(IP, developed
technology), licenses and computer software. The assets
held by the Group have finite useful lives determined by
the expected usage of the asset by the entity. The assets
are amortized on a straight-line basis over its estimated
useful lives, normally 3-5 years.

combination

The other intangible assets are carried at cost less
accumulated amortization and impairment losses, if any.
Cost comprises the purchase price of the asset (including

NORDIC SEMICONDUCTOR | ANNUAL REPORT 2020 | FINANCIAL STATEMENTSnon-refundable purchase taxes) and any costs directly
attributable to preparing the asset for its intended use. In
the case of an asset acquired in a business combination,
the cost is its fair value at the acquisition date.

The amortization period and the amortization method for
intangible assets are reviewed at least at the end of each
reporting period. Changes in the expected useful life or the
expected pattern of consumption of future economic
benefits embodied in the asset are considered to modify
the amortization period or method, as appropriate, and
are treated as changes in accounting estimates.

A CGU of one non-financial asset is the smallest group of
assets that includes the asset and generates cash inflows
that are largely independent of the cash inflows from other
assets or groups of assets. Goodwill does not generate
cash flows independently of other assets and is, therefore,
tested for impairment at the level of the CGU or group of
CGUs that are expected to benefit from the synergies of
the related business combination.

If any indication exists, the Group estimates the asset’s
recoverable amount. An asset’s recoverable amount is the
higher of an asset’s or cash generating unit’s (CGU) fair
value less costs of disposal and its value in use.

2.7. Government grants

Grants received are tax refunds and are classified as
operating grants. Operating grants are accounted for at
the same time as the costs they are intended to cover.
Tax refunds are accounted for as a cost reduction. See
Note 5 and 9.

The recoverable amount is determined for an individual
asset, unless the asset does not generate cash inflows that
are largely independent of those from other assets or groups
of assets. When the carrying amount of an asset or CGU
exceeds its recoverable amount, the asset is considered
impaired and is written down to its recoverable amount.

2.8 Property, plant and equipment

Property, plant and equipment is valued at the lower of
cost net of accumulated depreciation and net realizable
value. When an asset is sold or discontinued, the gain or
loss from the transaction is recognized in the income
statement. Cost comprises the purchase price of the asset
including fees/ taxes and any direct costs associated with
commissioning the asset for use.

Repair and maintenance costs are expensed when incurred.
If repair and maintenance increase the value of the asset,
the cost will be added to the asset on the balance sheet.
Depreciation is calculated on a straight-line basis over the
following periods of time:

Office and lab equipment

1-5 years

Computer equipment

3-5 years

Leasehold improvements

5 years

The assets’ residual value, useful lives and methods of
depreciation are reviewed on an ongoing basis and
adjusted prospectively, if necessary.

2.9 Impairment of non-financial assets

The Group’s non-financial assets includes:

Goodwill
Capitalized development expenses
Other intangible assets (software and IP)
Property, plant and equipment
Right-of-use assets

Non-financial assets are tested for impairment whenever
there is an indication that their carrying amounts may not
be recoverable. Goodwill and intangible assets still under
development are subject to an annual impairment test.

In determining fair value less costs of disposal, recent
market transactions are taken into account. If no such
transactions can be identified, an appropriate valuation
model is used. These calculations are corroborated by
valuation multiples or other available fair value indicators.

In assessing value in use, the estimated future cash flows
are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of
the time value of money and the risks specific to the asset.

2.10 Financial instruments

A financial instrument is any contract that gives rise to a
financial asset of one entity and a financial liability or
equity instrument of another entity.

The Group is recognizing a financial asset or liability when
it becomes a party to the instrument's contractual terms.

The Group’s financial assets and liabilities includes money
market fund, accounts receivable and other current
receivables, accounts payable, currency swap and other
current financial liabilities (borrowings, including bank
overdrafts).

Financial assets
Initial recognition and measurement
At initial recognition, the Group measures a financial asset
at its fair value plus or minus, in the case of a financial
asset not at fair value through profit or loss, transaction
costs that are directly attributable to the acquisition of the
asset. There is an exemption for accounts receivables, that
do not contain a significant financing component or for
which the Group has applied the practical expedient, are
measured at the transaction price determined under IFRS
15. Refer to the accounting policies in section 2.4 Revenue
recognition.

NORDIC SEMICONDUCTOR | ANNUAL REPORT 2020 | FINANCIAL STATEMENTSthe Group’s business model

Depending of the financial asset’s contractual cash flow
characteristics and
for
managing them, the assets are at initial recognition and
subsequently measured at amortized cost, fair value
through other comprehensive income (OCI) or fair value
through profit or loss.

Financial assets are classified and measured at amortized
cost or fair value through OCI, if it gives rise to cash flows
that are ‘solely payments of principal and interest (SPPI)’ on
the principal amount outstanding. This assessment is
referred to as the SPPI test and is performed at an
instrument level.

The Group’s business model for managing financial assets
refers to how it manages its financial assets in order to
generate cash flows. The business model determines
whether cash flows will result from collecting contractual
cash flows, selling the financial assets, or both.

Subsequent measurement
For purposes of subsequent measurement, financial assets
are classified in four categories:

Financial assets at amortized cost (debt instruments)
Financial assets at fair value through OCI with

recycling of cumulative gains and losses (debt
instruments)

Financial assets designated at fair value through OCI

with no recycling of cumulative gains and losses upon
derecognition (equity instruments)

Financial assets at fair value through profit or loss (held

for trading)

The categories relevant for the Group is amortized cost,
including accounts
current
receivables, and fair value through profit or loss (held for
trading), including money market fund.

receivables and other

The Group measures financial assets at amortized cost if
both of the following conditions are met:

The financial asset is held within a business model with

the objective to hold financial assets in order to collect
contractual cash flows, and

The contractual terms of the financial asset give

rise on specified dates to cash flows that are solely
payments of principal and interest on the principal
amount outstanding

Financial assets at amortized cost are subsequently
measured using the effective interest rate (EIR) method and
are subject to impairment. Gains and losses are recognized
in profit or loss when the asset is derecognized, modified or
impaired.

Financial assets at amortized cost are subsequently at fair value
with resulting gains and losses recognized in profit or loss.

Derecognition
A financial asset (or, where applicable, a part of a financial
asset or part of a group of similar financial assets) is
primarily derecognized (i.e., removed from the Group’s
consolidated statement of financial position) when:

expired, or

The rights to receive cash flows from the asset have
The Group has transferred the asset according to IFRS

9 paragraph 3.2.4 and 3.2.5

Impairment of financial assets
For trade receivables and contract assets, the Group
applies a simplified approach in calculating expected credit
losses (ECLs). The Group does not track changes in credit
risk, but instead recognizes a loss allowance based on
lifetime ECLs at each reporting date. The Group has
established a provision matrix that is based on its historical
credit loss experience, adjusted for forward-looking factors
specific to the debtors and the economic environment.

Financial liabilities
Initial recognition and measurement
All financial liabilities are recognized initially at fair value
and, in the case of loans and borrowings and accounts
payables, net of directly attributable transaction costs.

Subsequent measurement
All financial liabilities are measured at amortized cost, except
for financial liabilities at fair value through profit or loss.

After initial recognition, borrowings are subsequently
measured at amortized cost using the EIR method. Gains
and losses are recognized in profit or loss when the
liabilities are derecognized as well as through the EIR
amortization process.

Amortized cost is calculated by taking into account any
discount or premium on acquisition and fees or costs that
are an integral part of the EIR. The EIR amortization is
included as finance costs in the statement of profit or loss.

Financial liabilities at fair value through profit or loss include
financial liabilities held for trading and financial liabilities
designated upon initial recognition as at fair value through
profit or loss.

Financial liabilities are classified as held for trading if they
are incurred for the purpose of repurchasing in the near
term. This category includes derivative financial instruments
(currency swap) entered into by the Group that are not
designated as hedging instruments in hedge relationships
as defined by IFRS 9.

Gains or losses on liabilities held for trading are recognized
in the statement of profit or loss.

NORDIC SEMICONDUCTOR | ANNUAL REPORT 2020 | FINANCIAL STATEMENTSDerecognition
A financial liability is derecognized when the obligation
under the liability is discharged or cancelled or expires.
When an existing financial liability is replaced by another
from the same lender on substantially different terms, or
the terms of an existing liability are substantially modified,
such an exchange or modification is treated as the
derecognition of the original liability and the recognition of
a new liability. The difference in the respective carrying
amounts is recognized in the statement of profit or loss.

Offsetting of financial instruments
Financial assets and financial liabilities are offset and the
net amount is reported in the consolidated statement of
financial position if there is a currently enforceable legal
right to offset the recognized amounts and there is an
intention to settle on a net basis, to realize the assets and
settle the liabilities simultaneously.

2.11 Cash and cash equivalents

Cash and cash equivalents include cash at bank, short-
term deposits with an original maturity of three months or
less and money market fund. Money market funds are
defined as cash equivalents because they are highly liquid
and not subject to material fluctuations in value.

2.12 Inventory

Inventory is valued at the lower of cost and net realizable
value after deduction for obsolescence. Net realizable
value is estimated as the selling price less cost of completion
and the cost necessary to make the sale. Costs are
determined by using the FIFO method. Work in progress
includes variable cost and non-variable cost which can be
allocated to items based on normal capacity. Obsolete
inventory is written down completely.

2.13 Leases

The Group assesses at contract inception whether a
contract is, or contains, a lease. That is, if the contract
conveys the right to control the use of an identified asset
for a period of time in exchange for consideration.

The Group applies a single recognition and measurement
approach for all leases, except for short-term leases and
leases of low-value assets. The Group recognizes lease
liabilities to make lease payments and right-of-use assets
representing the right to use the underlying assets.

recognizes

right-of-use assets at

Right-of-use assets
The Group
the
commencement date of the lease (i.e., the date the
underlying asset is available for use). Right-of-use assets
are measured at cost, less any accumulated depreciation
and impairment losses. The cost of right-of-use assets
includes the amount of lease liabilities recognized, initial
direct costs incurred, and lease payments made at or

before the commencement date less any lease incentives
received. Right-of-use assets are depreciated on a
straight-line basis over the lease term. If ownership of the
leased asset transfers to the Group at the end of the
lease term or the cost reflects the exercise of a purchase
option, depreciation is calculated using the estimated
useful life of the asset.

The Group has used the optional exemption in IFRS 16 and
not accounted lease concessions, such as reduction in
lease payments, due to Covid-19 as a lease modification.
The following conditions are met:

less than the original consideration

The reversed consideration is substantially the same or
The reduction in lease payments relates to payments
No other substantive changes have been made to the

due on or before 30 June 2021

terms of the lease

That means reductions in lease payments are accounted
for as negative variable lease payments and be recognized
in profit and loss.

The right-of-use assets are also subject to impairment, see
note 2.9.

Lease liabilities
At the commencement date of the lease, the Group
recognizes lease liabilities measured at the present value of
lease payments to be made over the lease term. The lease
payments include fixed payments (including in substance
fixed payments) less any lease incentives receivable,
variable lease payments that depend on an index or a
rate, and amounts expected to be paid under residual
value guarantees. The lease payments also include the
exercise price of a purchase option reasonably certain to
be exercised by the Group and payments of penalties for
terminating the lease, if the lease term reflects the Group
exercising the option to terminate. Variable lease payments
that do not depend on an index or a rate are recognized
as expenses in the period in which the event or condition
that triggers the payment occurs.

lease

is not

readily determinable. After

In calculating the present value of lease payments, the
Group uses its incremental borrowing rate at the lease
commencement date because the interest rate implicit in
the
the
commencement date, the amount of lease liabilities is
increased to reflect the accretion of interest and reduced
for the lease payments made. In addition, the carrying
amount of lease liabilities is remeasured if there is a
modification, a change in the lease term, a change in the
lease payments (e.g., changes to future payments resulting
from a change in an index or rate used to determine such
lease payments) or a change in the assessment of an
option to purchase the underlying asset.

NORDIC SEMICONDUCTOR | ANNUAL REPORT 2020 | FINANCIAL STATEMENTSlease

the short-term

Short-term leases and leases of low-value assets
The Group applies
recognition
exemption to its short-term leases (i.e., those leases that
have a lease term of 12 months or less from the
commencement date and do not contain a purchase option)
and low-value assets. The low value election is made on a
lease-by-lease basis, and it refers to underlying assets with
a value in order of USD 5,000 or less. Lease payments on
short-term leases and leases of low value assets are
recognized as expense on a straight- line basis over the
lease term.

2.14 Income taxes

Income tax expenses consist of taxes due and changes to
the net deferred tax assets or liabilities.

Deferred tax assets and liabilities are calculated based on
the differences between the carrying value of assets and
liabilities in the financial accounts and their tax basis when
such differences are considered at temporary in nature.

Deferred tax assets are recognized to the extent that it is
probable that the individual company will have sufficient
taxable income in later periods to utilize the tax assets.

Deferred tax liabilities are accounted for at the nominal value
and classified as long-term obligations in the balance sheet.

Deferred income tax relating to items recognized in Other
Comprehensive Income (“OCI”) or directly in equity is
recognized outside profit or loss.

The parent company pays its tax obligation in NOK and
the fluctuations between the NOK and the USD impact the
financial items. The Group’s legal entities that do not have
their tax base in USD are exposed to changes in the USD/
tax base currency rates. Effects within the current year are
classified as tax expense.

2.15 Provisions

Provisions (such as legal claims and contractual severance)
are recognized when the Group has a present obligation
(legal or constructive) as a result of a past event, it is
probable that economic benefits will be required to settle
the obligation and a reliable estimate can be made.
Provisions are reviewed each balance sheet date and the
level reflects the best estimate of the obligation. When the
time value is insignificant, the amount of the provision will
be equal to the estimated expenditure required to settle
the obligation. When the time effect is significant, the
amount of the provision will be equal to the present value
of future estimated expenditures to settle the obligation.

2.16 Employee benefits
Defined benefit pension plans
The Group had a defined benefit pension plan for its
employees who were hired before December 31, 2007. The
group has also established a similar plan for employees in
the Philippines. This plan is still open. Pension plan assets
are valued at fair value. The defined benefit scheme in
Norway was converted to a defined contribution scheme.
In connection with the transfer, the employees received a
“Paid up benefit” for all earned benefits in the defined
benefit plan. As there exist certain obligations related to
retirees and employees on sick leave, an actuarial
calculation is performed and a liability for these employees
is included as of December 31, 2020.

Defined contribution pension plans
Employees hired after January 1, 2008 have a defined
contribution pension plan described in Note 18.

Share based compensation
The Group grants restricted stock units and other awards
over its ordinary shares to all employees. The cost of equity
-settled transactions is determined by the fair value at the
date when the grant is made using an appropriate valuation
model, further details of which are given in Note 19.

That cost is recognized in employee benefits expense,
together with a corresponding increase in equity (other
paid in capital), over the period in which the service and,
where applicable, the performance conditions are fulfilled
(the vesting period). See Note 19.

Accounting treatment of social security tax is not treated in
IFRS 2. Social security tax is accrued over the vesting period
based on the actual value of the stock unit.

2.17 Treasury shares

When treasury shares are purchased, the purchase price,
including directly attributable costs are recognized as
changes in equity. Treasury shares are presented as a
reduction of equity. Gains or losses on transactions in
treasury shares are not recognized in the income statement.

2.18 Cash flow statement

The cash flow statement is prepared in accordance with
the indirect method. Cash and cash equivalents include
cash, bank deposits and other short-term liquid investments.

2.19 Events after the balance sheet date

Information available after the balance sheet date and
applicable to conditions existing at the balance sheet date
is included in the preparation of the financial statements.
Events after the balance sheet date that do not affect the
Group’s financial position as of the balance sheet date, but
that will affect the Group’s financial position in the future,
are disclosed if they are significant. See Note 25.

NORDIC SEMICONDUCTOR | ANNUAL REPORT 2020 | FINANCIAL STATEMENTSNote 3: Revenues

All figures in USD 1000

3.1 Disaggregated revenue information

of sales versus 97.5% in 2019. In addition to standard
components,
the Group sells customer-specific ASIC
components (Application Specific Integrated Circuits) and
related Consulting Services.

Revenue classified by end product applications:
The Group focuses on the sale of standard components for
wireless communication. These wireless components are
broken into the following end product areas: Consumer
Electronics, Wearables, Building and Retail, Healthcare and
Others. In 2020, wireless components accounted for 96.8%

The Group recognized the first long-range (cellular IoT)
revenue in the second half of 2018. Most of Nordic’s cellular
IoT customers are still in the development phase and
revenue from this technology is mainly sale of development
kits. When cellular IoT revenue materialize, Nordic will
report the revenue in the relevant end product areas.

GROUP

2020

2019

Revenue

163 131

119 409 Consumer Electronics

62 967

50 386 Wearables

81 871

51 595

Building/Retail

37 830

19 725 Healthcare

46 364

39 979 Others

392 163

281 094 Wireless components

6 527

6 297

230

1 046

Long-range (cellular IoT)

6 039 ASIC components

216 Consulting services

- Management fee

PARENT

2020

2019

163 131

119 409

62 967

50 386

81 871

51 595

37 830

19 725

46 364

39 979

392 163

281 094

6 527

6 297

230

1 025

1 046

6 039

216

831

405 217

288 395

Total revenue from contracts with customers

406 242

289 226

Revenue classified by customers’ location:
The Group also classifies its revenues on a geographical basis according to its customers’ location.

GROUP

2020

2019

37 726

31 464

Europe

34 038

27 946 Americas

333 453

229 014 Asia/Pacific

405 217

288 395

Total revenue from contracts with customers

PARENT

2020

2019

38 519

32 090

34 234

28 094

333 488

229 042

406 242

289 226

The Group sells its components to distributors, which then sell components onward to electronics manufacturers which build
end products and sell them to customers across the world. Two distributors represented more than 10% of the Group’s total
revenues in 2020 with 30% and 11% of total revenues, respectively. These distributors are based in Asia. In comparison, one
distributor represented more than 10% of the Group’s total revenues in 2019 with 28%.

NORDIC SEMICONDUCTOR | ANNUAL REPORT 2020 | FINANCIAL STATEMENTSRevenue from contracts with customers classified by timing of revenue recognition:

2020

2019

404 987

288 179 Goods transferred at a point in time

230

216

Services transferred over time

405 217

288 395

Total revenue from contracts with customers

3.2 Contract balances

2020

2019

88 034

64 519

Trade receivables

2020

2019

404 987

288 179

1 255

1 047

406 242

289 226

2020

2019

88 034

64 519

Trade receivables are non-interest bearing and are generally on terms of 30 to 60 days. See note 22 for further details.

3.3 Right of return assets and refund liabilities

2020

16 184

2019

13 881

Refund liability – arising from ship & debit

Refund liability – arising from stock rotation

2020

16 184

2019

13 881

8 515

6 300

Refund liability – arising from end-customer volume rebates

8 515

6 300

3.4 Performance obligations
The performance obligations for the sale of components is normally satisfied upon the time of delivery. Payment is
generally due 30 to 60 days within delivery.

For the consulting services the performance obligation is satisfied over-time and the customer is generally invoiced at
month-end for the work performed.

The Group has decided to use the practical expedient and not disclose unsatisfied or partially unsatisfied performance
obligations. All remaining performance obligations are expected to be recognized within one year.

NORDIC SEMICONDUCTOR | ANNUAL REPORT 2020 | FINANCIAL STATEMENTSNote 4: Cost of materials / inventory

All figures in USD 1000

GROUP

2020

2019

199 578

151 677 Purchased materials

-8 888

-10 387 Changes in inventory

190 690

141 290 Cost of materials

18 751

19 699 Raw material

17 566

11 559 Work in Progress

25 638

21 808 Finished Goods

61 955

53 067 Total inventory

3 242

2 919 Amount written down

PARENT

2020

2019

199 578

151 677

-8 888

-10 387

190 690

141 290

18 751

19 699

17 566

11 559

25 638

21 808

61 955

53 067

3 242

2 919

As Nordic Semiconductor is a fabless manufacturer, all inventories, including raw materials and finished goods,
are located at sub-contractors.

Note 5: Other operating expenses

All figures in USD 1000

GROUP

2020

12 733

11 470

953

1 005

6 180

-22

2019

11 264

Service and maintenance

9 351 Other consultancy fees

1 428 Office rental expenses

1 095 Office equipment

5 236 Material and components

-15

Tax grant

-2 647

-3 495 Capitalized development expenses

1 246

5 036

4 023

Travel and meeting expenses

4 778 Other operating expenses

0 Other operating expenses intercompany

35 954

33 665

Total other operating expenses

Auditor remuneration, excl. of VAT

Fees to the auditor are included in consultancy fees above.

GROUP

2020

2019

Statutory audit services

Tax advisory services

44 Other audit related services

171

Total revenues

PARENT

2020

2019

11 877

10 605

8 059

615

797

5 581

-22

6 641

1 023

859

4 729

-15

-2 647

-3 495

891

4 780

2 635

4 459

54 394

46 254

84 325

73 695

PARENT

2020

2019

148

NORDIC SEMICONDUCTOR | ANNUAL REPORT 2020 | FINANCIAL STATEMENTSNote 6: Net financial items

All figures in USD 1000

GROUP

2020

2019

515

127

642

768

648

1 910

Interest income

- Other financial income

1 910 Financial income

834

Interest expenses on lease liabilities

268 Financial expense

2 016

375 Foreign exchange loss (net)

3 431

1 477 Financial expense

-2 790

433 Net financial income/expense

Note 7: Tax

All figures in USD 1000

GROUP

2020

2019

Tax expense consists of

-5 264

-3 852

Tax payable

730

1 473 Change in deferred tax / tax benefit

-4 534

-2 379

Tax expense

GROUP

2020

2019

Reconciliation of nominal and actual tax expense

42 925

9 706

Profit before tax

-9 444

-2 135

Tax at nominal rate 22 %

-62

2 551

-104

620

-39

Tax effect of different tax rates in other countries

155

Tax effect permanent differences

Tax effect of tax benefit not being recognized in the balance sheet

Excess tax provision previous year

1 904

-405 Currency effect from translation to USD

PARENT

2020

2019

515

127

642

768

568

2 014

1 910

750

268

373

3 350

1 391

-2 708

519

PARENT

2020

2019

-4 077

-2 833

513

-3 564

1 256

-1 577

PARENT

2020

39 363

-8 660

-99

2 694

620

1 881

2019

5 885

-1 295

-27

-398

-4 534

-2 379

Tax expense

-3 564

-1 577

NORDIC SEMICONDUCTOR | ANNUAL REPORT 2020 | FINANCIAL STATEMENTSBalance Sheet

Income Statement

Other Comp. income

2020

2019

2020

2019

2020

2019

GROUP

Deferred taxes:

Deferred tax benefit

Inventory

Fixed Assets

Leasing

Options (share based payments)

Pension obligation

Financial instrument

Accruals

494

1 825

157

982

145

645

1 408

707

Deferred tax benefit - gross

3 769

2 865

Gain and loss account

Net other tax-obligations

Deferred tax obligation - gross

Currency effect of translation to USD

101

Net deferred tax benefit (obligation)

3 668

2 813

Deferred tax expense

730

1 472

PARENT

Deferred taxes:

Deferred tax benefit

Inventory

Fixed Assets

Leasing

Options (share based payments)

Pension obligation

Financial instrument

Accruals

494

1 187

157

982

145

645

1 024

707

Deferred tax benefit - gross

3 130

2 481

Gain and loss account

Net other tax-obligations

Deferred tax obligation - gross

Currency effect of translation to USD

101

Net deferred tax benefit (obligation)

3 029

2 429

Deferred tax expense

513

1 256

-151

417

143

275

123

886

-9

-106

323

457

254

-11

1 037

-14

-409

-423

-151

162

143

275

123

631

-9

-69

323

241

254

-11

821

-14

-409

-423

Balance Sheet

Income Statement

Other Comp. income

2020

2019

2020

2019

2020

2019

NORDIC SEMICONDUCTOR | ANNUAL REPORT 2020 | FINANCIAL STATEMENTSGROUP

2020

2019

Reconciliation of net deferred tax benefit:

2 813

1 335 Opening balance as of 1.1

730

107

1 472

Tax expense/income recognized in profit and loss

Tax expense/income recognized in other comprehensive income

-12 Currency effect from translation to USD

3 668

2 813 Net deferred tax benefit 31.12

PARENT

2020

2019

2 429

513

1 168

1 256

-12

3 029

2 429

The group has not recognized net deferred tax benefit of USD 149 thousand related to the subsidiary in India and USD 104
thousand related to the subsidiary in Poland.

GROUP

2020

2019 Net deferred tax recognized in OCI as of 31.12:

18 Net gain/(loss) on actuarial gains and losses

Total tax other comprehensive income

Note 8: Shares outstanding

Basis for calculation of basic earnings per share

Earnings for the year (USD ‘000)

Weighted average number of outstanding shares (‘000)

Earnings per share (USD)

Basis for calculation of fully diluted earnings per share

Earnings for the year (USD ‘000)

Weighted average number of outstanding shares (‘000)

Earnings per share (USD)

The number of shares was as follows:

PARENT

2020

2019

2020

2019

38 391

181 021

0.21

7 327

175 313

0.04

38 391

7 327

194 704

176 394

0.20

0.04

Date

01.01.2020

31.12.2020

Number of shares issued

Shares outstanding

Balance at beginning of period

Balance at end of period

179 781 600

192 781 600

175 661 690

190 958 613

Options granted to employees are considered to be potential ordinary shares. They have been included in the determination
of diluted earnings per share if they have been vested at the reporting date, and to the extent to which they are dilutive. The
options have not been included in the determination of basic earning per share. Details relating to the options are set out in
note 19.

NORDIC SEMICONDUCTOR | ANNUAL REPORT 2020 | FINANCIAL STATEMENTSNote 9: Payroll expenses

All figures in USD 1000

GROUP

2020

2019

Combined expenses for salary and other compensation
are distributed as follows:

72 522

62 556

Salary and vacation pay

18 553

12 846 Other compensation

9 520

6 756

Payroll tax

-535

-497

Tax grant

6 898

6 396 Defined contribution pension

-5 747

-7 776 Capitalized development expenses (hourly costs)

101 211

80 281

Total

831

722 Weighted average number of full time employees

GROUP

2020

449

211

2019

Employees as of December 31, are distributed as follows:

391 Norway

188

Finland

Poland

39 USA

Taiwan

Philippines

16 Hong Kong

13 China

South Korea

Japan

Sweden

1 Germany

Spain

0 Australia

Switzerland

1 UK

The Netherlands

PARENT

2020

2019

42 462

37 968

12 804

9 007

-535

9 415

6 421

-497

3 453

3 204

-5 747

-7 776

61 444

48 735

520

461

PARENT

2020

449

2019

391

897

767

Total excluding business combination

559

485

977

Sweden

India

0 UK

Taiwan

Total from business combinations

767

Total

564

485

NORDIC SEMICONDUCTOR | ANNUAL REPORT 2020 | FINANCIAL STATEMENTSNote 10: Compensation to Group management and Board of Directors

All figures in USD 1000

Total compensation expensed for Board Members

Birger Steen, Chair

Inger Berg Ørstavik, Board Member

Endre Holen, Board Member

Jan Magnus Frykhammar, Board Member

Øyvind Birkenes, Board Member

Annastiina Hintsa, Board Member

Anita Huun, Board Member

Tore Valderhaug (Vice Chair until 24.4.19)

Craig Ochikubo, Board Member (until 24.4.19)

Jon Helge Nistad, Board Employee Representative (Board remuneration only)

Asbjørn Sæbø, Board Employee Representative (Board remuneration only)

Susheel Nuguru, Board Employee Representative (Board remuneration only)

Morten Dammen, Board Employee Representative (Board remuneration only)

Joel Stapleton, Board Employee Representative (Board remuneration only)

Joakim Ferm, former Board Employee Representative (Board remuneration only)

2020

120

2019

104

Total

473

446

NORDIC SEMICONDUCTOR | ANNUAL REPORT 2020 | FINANCIAL STATEMENTSTotal compensation* expensed during the year for the CEO and other executives:

2020

Salary

Bonus Options**

RSU

Other
Comp.

Pension
expenses

Total

Svenn-Tore Larsen, CEO

Pål Elstad, CFO

Svein-Egil Nielsen, CTO & Strategy Director

Geir Langeland, Sales & Marketing Director

Ebbe Rømcke, Quality Director

Ole Fredrik Morken, Supply Chain Director***

Marianne Frydenlund, Legal Director

Ståle Ytterdal, Director IR & Strategic Sales

Kjetil Holstad, Director of Product Management

Katarina Finneng, HR Director

412

245

278

262

173

299

152

200

173

190

584

356

388

376

247

394

213

275

240

262

Total

2019

Svenn-Tore Larsen, CEO

Pål Elstad, CFO

Svein-Egil Nielsen, CTO & Strategy Director

Geir Langeland, Sales & Marketing Director

Ebbe Rømcke, Quality Director

Ole Fredrik Morken, Supply Chain Director***

Marianne Frydenlund, Legal Director

Ståle Ytterdal, Director IR & Strategic Sales***

Kjetil Holstad, Director of Product Management

Katarina Finneng, HR Director (from 1.9.2019)

2 385

342

159

279

151

3 335

Salary

Bonus Options**

RSU

Other
Comp.

Pension
expenses

Total

394

240

279

255

168

314

130

325

142

583

368

412

383

253

427

190

390

188

Total

2 315

273

265

246

151

3 269

*Management compensation is paid in NOK. Exchange rate for 2020: 9,41 and 2019: 8.80
**Option cost is the expense of fair value of options based on Black Scholes calculation
***Includes expat allowances (housing, school, etc.)

NORDIC SEMICONDUCTOR | ANNUAL REPORT 2020 | FINANCIAL STATEMENTS
Executive Compensation 2020
The Board has established a People, Leadership and
Compensation Committee to recommend and evaluate
remuneration principles and execution for the CEO and to
guide and evaluate, principles and strategy for the
compensation of Executive Management. Furthermore, the
People, Leadership and Compensation Comittee evaluates
and oversees the overall compensation strategy for the
Group and provides deeper Board oversight other people
and organization
total
compensation, and any adjustments, is first reviewed by
the Committee and then approved by the Board. The
Board considers CEO compensation each year. The
compensation of the other members of the Executive
Management, including adjustments of these, are agreed
between the CEO and the respective manager in the
context of an overall compensation plan recommended by
the Committee and approved by the Board.

related matters. The CEO's

Nordic operates in a highly competitive international
technological market. The Board has approved a reward
strategy document that sets out the guiding principles of
Nordic’s remuneration strategy to support the attraction,
engagement and retention of the relevant talent.

Nordic’s remuneration strategy is based on the principles of
aligning remuneration arrangements with our strategic
drivers and rewarding executives and employees fairly for
their contribution. The Remuneration Strategy is underpinned
by Nordic’s values of Engagement, Contribution, Knowledge,
Respect and Responsibility.

The main principle of the Group’s policy for remuneration
and compensation is that the members of the Executive
Management team shall be offered competitive terms, to
attract and retain leaders with the desired competence to
the Group’s Executive Management team. Compensation
shall be split between fixed salary, short-term incentives
and long-term incentives. The mix between the short-term
and long-term incentives is set to reward the optimal value
creation for our shareholders.

The Group has established an annual performance bonus
program (“The Plan”) for the Executive Management team,
in which the executive must remain within his or her position
(not resigned) until the start of the following year in order
to be eligible. The bonuses are awarded as a direct cash
payment. The Plan's targets are set for the entire team to
recognize Nordic’s
and
interdependencies among the existing team members in
addition to individual KPIs. Company and team targets are
set by the People and Compensation Committee combined
with achievement of individual KPIs. Achievement of targets
will result in performance pay bonus of 25% of base salary.
The performance bonus is capped at 50% of base salary.

collaboration

culture,

2019, an amendment was made to the plan where part of
the options granted to executives was replaced by
Performance Shares.

For 2020, the Annual General Meeting approved to
replace the stock option program with a Restricted Stock
Unit (RSU) program for all employees, and a combination
of Restricted Stock Units and Performance Shares for
Executive Management.

The RSUs vest over 2 years and will be delivered to the
employee at the vesting date at par value.

For the Executive Management team of 10 people, 50% of
the LTI plan was given as Performance Shares. Executives
are granted Performance Shares which are conditional
upon the achievement of a certain set of objectives,
including revenue growth, EBITDA growth, individual KPIs
and Nordic’s share price performance relative to the
relevant indices.

The Performance Shares vest and will be delivered at par
value upon the completion of the performance period,
which is three years. Granting of shares is dependent on
achievement of at least 80% of the set performance
targets. At the threshold, 50% of the shares will be granted,
whilst on 120% achievement of targets a maximum 2 times
the shares will be granted.

The LTI rewards employees for creating shareholder value
over the long term. While the targets for the LTI is set at
Group level, the grant size per individual may differ given
the performance of the individual. The LTI is subject to an
absolute limit and fulfillment of performance criteria, both
decided by the Board at its discretion.

Refer to note 19 for details of grants made in 2020.

The Group offers pensions plans to all employees; managers
included. In addition, the Group provides managers with
other limited benefits in kind such as a company telephone.

The Group’s Chief Executive Officer has agreed to a 6-month
mutual resignation period, except that the resignation
period increases to 12 months in the event that the Group is
acquired or merged with another company. The rest of the
executive management team has a 3-month resignation
period and there are no severance pay agreements.

The guidelines for determination of salary and other
compensation for leading employees, as outlined for the
Annual General Meeting in 2020, have been complied with.

New guidelines for senior executives will be proposed for
the 2021 Annual General meeting and will be made
available on the company’s website.

In 2015, a long-term incentive plan (LTI) was introduced for
the Executive Management team and other employees,
structured as a 4-year option plan commencing in 2016. In

NORDIC SEMICONDUCTOR | ANNUAL REPORT 2020 | FINANCIAL STATEMENTS
The Group has granted executives and employee Board members the following options according to the terms:

Executives and employee Board members

RSU granted 2020*

Options granted 2019

Svenn-Tore Larsen, CEO

Pål Elstad, CFO

Geir Langeland, Sales Director

Svein-Egil Nielsen, CTO

Ebbe Rømcke, Quality Director

Ole Fredrik Morken, Supply Chain Director

10 621 RSU

6 345 RSU

6 621 RSU

7 172 RSU

4 276 RSU

5 241 RSU

38 163 stock options

23 163 stock options

24 767 stock options

28 144 stock options

15 761 stock options

19 701 stock options

Marianne Frydenlund, Legal Director

4 000 RSU

12 946 stock options

Ståle Ytterdal, Director IR & Strategic Sales

Kjetil Holstad, Director of Product Management

Katarina Finneng, HR Director

Morten Dammen, Board Employee Representative

Jon Helge Nistad, Board Employee Representative

Susheel Nuguru, Board Employee Representative

4 414 RSU

4 276 RSU

5 241 RSU

2 150 RSU

600 RSU

17 499 stock options

14 072 stock options

20 000 Stock options

3 559 stock options

2 781 stock options

2 563 stock options

Asbjørn Sæbø, Board Employee Representative

3 452 stock options

Joel Stapleton, Board Employee Representative

2 650 RSU

During 2020 the executives excercised the following options:

Executives

Svenn-Tore Larsen, CEO

Pål Elstad, CFO

Geir Langeland, Sales Director

Svein-Egil Nielsen, CTO

Ebbe Rømcke, Quality Director

Ole Fredrik Morken, Supply Chain Director

Ståle Ytterdal, Director IR & Strategic Sales

Kjetil Holstad, Director of Product Management

Grant year

Number of
options exercised

Strike price

Cash payout
in USD 1000

2017

2016
2017

2017

2016
2017

65 575

43 804

43 804
43 804

21 771
21 771

20 000
43 804

17 506

6 069
5 600

35.77

47.72
35.77

35.77

47.72
35.77

498

333

191
333

95
165

0***
333

133

34
24

*The RSU for management vest after three years for management two years for employees
** Not Board Employee Representative for this period
*** Purchased shares, no cash payout from the company

NORDIC SEMICONDUCTOR | ANNUAL REPORT 2020 | FINANCIAL STATEMENTSNote 11: Fixed assets

All figures in USD 1000

GROUP

2020

Opening balance

Additions

Addition from business combination

Office
and lab
equipment

Computer
equipment
and machinery

Fixture
and
fittings

Property

Total

25 113

4 881

45 386

4 735

333

75 568

8 025

814

13 721

124

Acquisition cost as of 31.12

30 055

53 470

5 556

333

89 414

Opening balance

Depreciation expenses

Accumulated depreciation as of 31.12

Net carrying value as of 31.12

12 957

5 768

18 725

11 330

33 670

5 632

39 302

14 168

2 317

787

3 104

2 453

48 943

12 188

61 131

333

28 284

PARENT

2020

Opening balance

Additions

Acquisition cost as of 31.12

Opening balance

Depreciation expenses

Accumulated depreciation as of 31.12

Net carrying value as of 31.12

Office
and lab
equipment

Computer
equipment
and machinery

Fixture
and
fittings

Property

Total

16 789

3 775

20 565

7 477

3 554

11 031

9 533

42 311

4 095

333

63 529

7 739

699

12 213

50 051

4 794

333

75 743

31 615

2 084

5 400

653

37 014

2 737

41 176

9 607

50 782

13 036

2 057

333

24 960

NORDIC SEMICONDUCTOR | ANNUAL REPORT 2020 | FINANCIAL STATEMENTSGROUP

2019

Opening balance

Additions

Acquisition cost as of 31.12

Opening balance

Depreciation expenses

Accumulated depreciation as of 31.12

Net carrying value as of 31.12

PARENT

2019

Opening balance

Additions

Acquisition cost as of 31.12

Opening balance

Depreciation expenses

Accumulated depreciation as of 31.12

Net carrying value as of 31.12

GROUP AND PARENT

Estimated useful life

Office
and lab
equipment

Computer
equipment
and machinery

Fixture
and
fittings

Property

Total

14 882

10 231

25 113

8 723

4 233

12 957

12 157

39 425

2 689

333

57 329

5 961

2 046

18 239

45 386

4 735

333

75 568

29 236

1 788

4 434

528

33 670

2 317

39 747

9 196

48 943

11 717

2 418

333

26 625

Office
and lab
equipment

Computer
equipment
and machinery

Fixture
and
fittings

Property

Total

8 907

7 882

16 789

5 509

1 968

7 447

9 312

36 594

2 269

333

48 103

5 717

1 827

15 426

42 311

4 095

333

63 529

27 395

1 668

34 573

4 219

416

31 615

2 084

6 603

41 176

10 697

2 012

333

22 354

3 – 5 years

3 – 4 years

5 years

Depreciation method

Straight-line

Straigth-
line

No
Depreciation

Total depreciation expenses consist of depreciation of fixed assets and depreciation of intangible assets (note 12).

Non-depreciable property assets:
The Parent company has an apartment in Trondheim for
use by employees in the Oslo office while in Trondheim. The
apartment is assessed at acquisition cost. The residual
value is expected to be at least equal to the book value.

Scrapped capital assets

All capital assets that are ready to be scrapped have been
fully depreciated and have no residual book value.

Capital assets temporarily out of operation

The Group has no capital assets that are temporary out
of operation.

Impairment
There has been no indications of impairment losses during
the year.

Change in estimate with respect to useful
lives and depreciation methods

There has been no basis for changing useful lives and
depreciation methods during the year.

NORDIC SEMICONDUCTOR | ANNUAL REPORT 2020 | FINANCIAL STATEMENTSNote 12: Intangible assets

All figures in USD 1000.

GROUP

2020

Acquisition cost

Opening balance

Additions

Addition from business combination

Accumulated cost as of 31.12

Accumulated depreciation

Opening balance

Depreciation expenses

Total accumulated depreciation as of 31.12

Net carrying amount

PARENT

2020

Acquisition cost

Opening balance

Additions

Addition from business combination

Accumulated cost as of 31.12

Accumulated depreciation

Opening balance

Depreciation expenses

Total accumulated depreciation as of 31.12

Net carrying amount

Software and other
intangible assets

Capitalized
Development
expenses

Godwill

Total

33 231

3 121

11 447

47 799

21 824

6 070

27 894

19 905

65 976

8 398

99 207

11 518

2 393

13 840

74 373

2 393

124 566

31 986

7 825

39 811

34 563

53 810

13 895

67 705

2 393

56 861

Software and other
intangible assets

Capitalized
Development
expenses

Goodwill

Total

32 533

2 539

11 445

46 517

21 413

5 818

27 231

19 286

65 976

8 398

74 373

31 985

7 825

39 811

34 563

GROUP

Non-capitalized R&D expenses:

65 242

23 796

89 038

97 436

Personnel expenses

Other operating expenses

Total cost recognized in income statement

Total cost for R&D (incl. capitalized development cost)

249

98 509

10 937

11 694

121 140

53 399

13 643

67 042

249

54 098

PARENT

34 968

16 607

51 575

59 973

NORDIC SEMICONDUCTOR | ANNUAL REPORT 2020 | FINANCIAL STATEMENTSGROUP

2019

Acquisition cost

Opening balance

Additions

Accumulated cost as of 31.12

Accumulated depreciation

Opening balance

Depreciation expenses

Total accumulated depreciation as of 31.12

Net carrying amount

PARENT

2019

Acquisition cost

Opening balance

Additions

Accumulated cost as of 31.12

Accumulated depreciation

Opening balance

Depreciation expenses

Total accumulated depreciation as of 31.12

Net carrying amount

Estimated useful life

Depreciation method

Purchased Software

Capitalized
Development
expenses

Total

31 368

1 863

33 231

16 305

5 519

21 824

11 407

54 704

86 073

11 271

13 134

65 976

99 207

27 018

43 324

4 967

10 486

31 986

53 810

33 990

45 398

Purchased Software

Capitalized
Development
expenses

Total

30 727

1 807

32 533

16 123

5 290

21 413

11 120

54 704

85 431

11 271

13 078

65 976

98 509

27 018

43 141

4 967

10 258

31 985

53 399

33 990

45 110

3 – 10 years

1 – 5 years

Straight-line

GROUP

48 973

24 515

73 487

84 758

Non-capitalized R&D expenses:

Personnel expenses

Other operating expenses

Total cost recognized in income statement

Total cost for R&D (incl. capitalized development cost)

PARENT

26 256

16 296

42 552

53 823

Expensed research and development activities relate to new technologies and new services and products.

Impairment

There has been no indications of impairment losses during the year.

Change in estimate with respect to useful lives and depreciation methods

There has been no basis for changing useful lives and depreciation methods during the year.

NORDIC SEMICONDUCTOR | ANNUAL REPORT 2020 | FINANCIAL STATEMENTSNote 13: Subsidiaries

All figures in USD 1000

The following subsidiaries have been included in the financial statements:

Subsidiaries consolidated in*

Nordic Semiconductor Inc

Nordic Semiconductor Poland S.P z o.o.

Nordic Semiconductor Finland OY

Nordic Semiconductor Japan KK

Nordic Semiconductor Germany GmbH

Nordic Semiconductor Norway AS

Nordic Semiconductor UK Limited

Established
Year

2006

2013

2014

2017

2018

2020

Location

USA

Poland

Finland

Japan

Germany

Norway

Share
Ownership

Voting Rights

100%

Subsidiaries as of 31 December 2020*

Ownership

Share of
votes

Net profit
2020

Equity
31. Dec 2020

Nordic Semiconductor Inc, USA

Nordic Semiconductor Poland S.p Z o.o.

Nordic Semiconductor Finland OY

Nordic Semiconductor Japan KK

Nordic Semiconductor Germany GmbH

Nordic Semiconductor Norway AS

Nordic Semiconductor UK Limited

100%

217

162

1 977

2 017

962

11 655

111

All intellectual property (IP) is owned by Nordic Semiconductor ASA. Nordic Semiconductor ASA is the ultimate parent

company of the Group. All subsidiaries operate as contract research and development centers and invoice Nordic
Semiconductor ASA according to the Group's transfer pricing policy.

R&D teams in the Group.

R&D department was also started.

Nordic Semiconductor Inc is a market development and product promotion and support company, but in 2016 a small
Nordic Semiconductor Poland Sp. z.o.o. is an extension of the software development team in the parent company.
Nordic Semiconductor Finland OY is a development company. This R&D team works closely alongside the rest of the
Nordic Semiconductor Japan KK is a market development and product promotion and support company,
Nordic Semiconductor Germany GmbH is a market development and product promotion and support company,
Nordic Semiconductor Norway AS is the parent company of Nordic Semiconductor UK Limited and the companies
Nordic Semiconductor UK limited was established in December 2020 and had no activity in 2020. It will have

acquired as part of the business combination 31.12.2020, see note 24 for more information.

development activities from 2021.

*In addition to the companies in the table, Nordic Semiconductor ASA acquired 100% of the shares of Imagination Technologies AB and
Imagination Technologies Hyderabad Pvt Ltd through Nordic Semiconductor Norway AS 31.12.2020. See not 24 for further information.

NORDIC SEMICONDUCTOR | ANNUAL REPORT 2020 | FINANCIAL STATEMENTSNote 14: Accounts Receivable

All figures in USD 1000

GROUP

2020

2019

88 034

64 519 Gross receivables

Provision for doubtful accounts

88 034

64 519 Accounts Receivable, net

Note 15: Intercompany

All figures in USD 1000

PARENT

Loan to group companies

Receivables group companies

Total

Payables

Accounts payable, group companies

Total

PARENT

Service fee for management services

Total revenue intercompany

Service fee for R&D and product promotion

Total intercompany expenses

Note 16: Cash and cash equivalents

All figures in USD 1000

GROUP

PARENT

2020

2019

88 034

64 519

88 034

64 519

2020

2019

2 551

1 070

3 621

224

17 268

10 586

17 268

10 586

2020

1 025

2019

831

54 394

46 254

54 394

46 254

PARENT

2020

2019 Cash and cash equivalents as of the balance sheet date were as follows:

2020

2019

183 644

88 797

Cash at bank

4 202

1 847

Restricted cash (witholding tax account)

54 701

Money market funds

179 712

87 358

4 202

1 847

54 701

242 547

90 645

Cash and cash equivalents in statement of financial position

238 615

89 205

Cash at banks earns interest at floating rates based on daily bank deposit rates.
The parent company presents total bank deposits in the international cash pool, while Nordic Semiconductor OY

presents its share of the international cash pool as a receivable from group company. Nordic Semiconductor ASA and
Nordic Semiconductor OY participate in the cash-pool, which is operated by Danske Bank.

not available for general use by the entities within the group.

Restricted deposits is held by Nordic Semiconductor ASA, and are subject to regulatory restrictions and are therefore
Interest on bank deposit is set to floating rates based on daily bank deposit rates.
For information on liquidity risk, see note 23.

NORDIC SEMICONDUCTOR | ANNUAL REPORT 2020 | FINANCIAL STATEMENTSNote 17: Share capital and shareholder information

Share capital
The share capital in Nordic Semiconductor as of December 31, 2020 consists of one share class with a total of 192 781 600
shares with a face value of NOK 0.01, with a total share capital of NOK 1 927 816. Each share grants the same rights in the
company, and in the event of any increase in capital, existing shareholders have pre-emptive rights for any new shares.

During the year the following changes have been made in the number of shares, share capital and share premium:

GROUP

Number of shares

Share capital
(USD 1000)

Treasury shares
(USD 1000)

Share premium
(USD 1000)

2020

2019

2020

2019

2020

2019

2020

2019

Holdings as of 1.1

179 781 600

303

Issue of share capital

13 000 000

Change in treasury shares

Holdings as of 31.12

192 781 600

179 781 600

317

303

-5

-2

-5

113 355

122 093

-5

235 448

113 355

Long-Term Incentive plan
With reference to the annual general meeting, on April 21,
2020, Nordic Semiconductor approved a Restricted Stock
Unit (RSU) program for all employees, and a combination of
RSUs and Performance Shares for Executive Management.

See note 19 for further information.

Dividend
No dividend was paid during 2020.

Treasury shares

1,822,987

treasury shares on
The Company owned
December 31, 2020. At January 1, 2020, the Company
owned 4,119,910 treasury shares. Based on a resolution of
the annual general meeting of April 21, 2020, the Board has
authority to purchase the company’s own shares with a
limit of a face value of NOK 179,000 through one or more
transactions. This authority is limited to 9.96% of the
company’s share capital, and the price per share that the
company may pay for shares shall not be lower than the
face value and not higher than NOK 200. This authority
applies until the company’s regular general meeting in 2021,
and by June 30, 2021 the latest.

NORDIC SEMICONDUCTOR | ANNUAL REPORT 2020 | FINANCIAL STATEMENTSShareholder overview

The largest shareholders in Nordic Semiconductor ASA were as follows as of December 31, 2020 (based on shareholder
register):

Shareholder

FOLKETRYGDFONDET

ACCELERATOR LTD

State Street Bank and Trust Comp

VERDIPAPIRFONDET ALFRED BERG GAMBA

DANSKE INVEST NORSKE INSTIT. II.

Morgan Stanley & Co. LLC

PASSESTA AS

JPMorgan Chase Bank, N.A., London

ALDEN AS

Euroclear Bank S.A./N.V.

CLEARSTREAM BANKING S.A.

Morgan Stanley & Co. LLC

VPF DNB AM NORSKE AKSJER

MP PENSJON PK

VERDIPAPIRFONDET DNB NORGE

TTC INVEST AS

State Street Bank and Trust Comp

VERDIPAPIRFONDET KLP AKSJENORGE IN

NORDIC SEMICONDUCTOR ASA

VERDIPAPIRFONDET KLP AKSJENORGE

Total for the 20 largest shareholders

Other shareholders

Total shares outstanding

Percentage

25 152 296

17 482 950

17 209 743

3 533 814

3 208 861

2 848 762

2 800 000

2 640 570

2 475 000

2 289 697

2 275 719

2 226 095

2 099 655

1 911 696

1 907 576

1 853 000

1 831 217

1 830 589

1 822 987

1 779 459

99 179 686

93 601 914

192 781 600

13.0 %

9.1 %

8.9 %

1.8 %

1.7 %

1.5 %

1.4 %

1.3 %

1.2 %

1.1 %

1.0 %

0.9 %

51 %

49 %

100 %

NORDIC SEMICONDUCTOR | ANNUAL REPORT 2020 | FINANCIAL STATEMENTSThe largest shareholders in Nordic Semiconductor ASA were as follows as of December 15, 2020 based on data provided by an
investor relations advisory service provider*, and is obtained through an analysis of benificial ownership and fund manager
information provided in replies to disclusure of ownership notices issued to all custodians on the Nordic VPS share register.

Shareholder

Folketrygdfondet

Accelerator LTD

Capital Group

Danske Bank Asset Management

Invesco

Alfred Berg

DNB Asset Management

Vanguard Group

KLP

Oberweis Asset Management

BlackRock

Contour Asset Management

Passesta AS

Alden AS

Storebrand Asset Management

BMO Global Asset Management (UK)

Skoien AS

MP Pensjon

TTC Invest AS

Nordic Semiconductor ASA

Total for the 20 largest shareholders

Other shareholders

Total shares outstanding

Percentage

25 430 896

17 482 950

13.2 %

9.1%

7 609 836

3.9%

6 858 718

6 802 690

6 315 564

6 126 443

4 703 245

4 222 815

3 981 785

3 182 775

3 074 707

2 800 000

2 475 000

2 221 956

2 085 179

2 050 000

1 911 696

1 853 000

1 822 987

113 012 242

79 769 358

3.6%

3.5%

3.3%

3.2%

2.4%

2.2%

2.1%

1.7%

1.6%

1.5%

1.3%

1.2%

1.1%

1.0%

0.9%

59%

41 %

192 781 600

100 %

Shares held by the Board of Directors and Executive Management were as follows as of December 31, 2020:

Board of Directors

Birger Steen

Inger Berg Ørstavik

Jan Frykhammar

Anita Huun

Endre Holen

Øyvind Birkenes

Annastiina Hintsa

Jon Helge Nistad

Joel Stapleton

Susheel Nuguru

Morten Dammen

Total

181 231

3 431

22 431

11 431

157 931

8 773

2 431

Executive Management

Svenn-Tore Larsen

Pål Elstad

Katarina Finneng

Geir Langeland

Svein-Egil Nielsen

Ebbe Rømcke

Ole Fredrik Morken

Ståle Ytterdal

Kjetil Holstad

Marianne Frydenlund

1 905 400

8 846

177 700

17 000

68 900

180 000

244 000

6 604

2 000

387 659

Total

2 590 450

*Every reasonable effort has been made to verify the data; however neither Nordic nor the investor relations advisory
service provider, can guarantee the accuracy of the analysis.

NORDIC SEMICONDUCTOR | ANNUAL REPORT 2020 | FINANCIAL STATEMENTSNote 18: Pensions

Defined benefit plan

The pension liability for the group consists of liabilities in
Norway and The Philippines. Nordic has set up a pension
plan for the Philippine office as of January 2014. The
retirement plan is unfunded and of the defined benefit type
which provides a retirement benefit calculated based on
number of years of credited service. At the end of 2020
the pension liability was USD 204 869.

For the company in Finland pensions are financed by
contributions from the insured employees and employers.
The Norwegian company in the Group is required to have
mandatory employment pension for employees in Norway,
according to the Mandatory Employment Pension Act.

The defined benefit plan was closed for new members
effective January 1, 2008 and from this point a new defined
contribution plan was established. The two different types
of pensions are described below:

Defined Pension Plan

Current service cost

Interest expense

Expected return on plan assets

Administration fee

Total pension expense excl. social security tax

Social security tax

Total pension expense incl. social security tax

Net pension obligation for the year was calculated as follows:

Pension obligations

Plan assets

Estimated net pension obligations

Social security tax

Total pension expense incl. social security tax

Total pension liability for the Group

Employees in Norway

Employees in Philippines

Total

2020

2019

-15

2020

1 174

961

213

243

2020

243

205

448

-23

2019

1 141

921

220

251

2019

251

310

Defined contribution pension plan
All employees in Norway have a defined contribution pension plan from 01.01.2016. The main benefit is a contribution of 7%
of salary up to 7.1 basis points (G) and 18% of salary between 7.1 and 12 basis points. Along with this the company has a
disability pension of approximately 66% of salary including estimated social security based on 40 years of full employment.
In 2020, the cost of the defined contribution pension was USD 3 380 522, and the plan had 469 members.

NORDIC SEMICONDUCTOR | ANNUAL REPORT 2020 | FINANCIAL STATEMENTSNote 19: Long-term incentive plans

On February 26, 2016, Nordic Semiconductor granted
1,590,000 share options to 320 employees. The options
were granted at a strike price of NOK 47.72 (10% above
volume weighted average share price the week following
Q4 2015 results). If the company’s share price exceeds a
cap of NOK 143.16, the company may settle the option
grant by compensating the employee the difference
between the cap and the strike price.

On February 22, 2017, Nordic Semiconductor granted
1,625,412 share options to 307 employees. The options were
granted at a strike price of NOK 35.77 (10% above volume
weighted average share price the week following Q4 2016
results). If the company’s share price exceeds a cap of
NOK 107.31, the company may settle the option grant by
compensating the employee the difference between the
cap and the strike price. These options reached cap in
2020, and outstanding options were settled in cash.

On February 27, 2018, Nordic Semiconductor granted
1,444,600 share options to 300 employees. The options
were granted at a strike price of NOK 47.27 (10% above
volume weighted average share price the week following
Q4 2017 results). If the company’s share price exceeds a
cap of NOK 141.81, the company may settle the option
grant by compensating the employee the difference
between the cap and the strike price

On March 15, 2019, Nordic Semiconductor granted 1,752,366
share options to 666 employees. The options were granted
at a strike price of NOK 39.44 (10% above volume weighted

average share price the five days prior to the grant date).
If the company’s share price exceeds a cap of NOK 118.32,
the company may settle the option grant by compensating
the employee the difference between the cap and the
strike price.

On May 3, 2019, Nordic Semiconductor granted 196,644
share options and 55,814 performance shares to the
management group. The options were granted at a strike
price of NOK 45.1 (10% above volume weighted average
share price the five days prior to the grant date If the
company’s share price exceeds a cap of NOK 135.3, the
company may settle the option grant by compensating the
employee the difference between the cap and the strike
price. The performance shares are issued conditional upon
the achievement of a certain set of objectives. The
performance shares vest and will be delivered at par value
upon the completion of the performance period, which is
three years.

On April 29, 2020, Nordic Semiconductor granted 754,224
Restricted Stock Units (RSUs) and Performance shares to
775 employees. A share price of NOK 58.4 was used as
basis for the calculation of RSUs and Performance Shares,
which was the weighted average share price the five
trading days after the Annual General Meeting. The RSUs
vest after two and three years. The performance shares are
issued conditional upon the achievement of a certain set of
objectives. The performance shares vest and will be
delivered at par value upon the completion of the
performance period, which is three years.

A summary of share option transactions during 2020 and 2019 is below:

2020

2019

Outstanding options 1.1

Granted

Forfeited

Exercised

Expired

Outstanding options 31.12

Of which exercisable

A summary of RSUs transactions during 2020 and 2019 is below:

Outstanding RSUs 1.1

Granted

Forfeited

Exercised

Outstanding RSUs 31.12

5 470 374

4 194 293

1 947 010

53 976

2 850 587

17 222

97 060

448 545

2 548 589

5 470 374

954 923

2 283 646

2020

696 017

5 400

690 617

2019

NORDIC SEMICONDUCTOR | ANNUAL REPORT 2020 | FINANCIAL STATEMENTSA summary of performance shares transactions during 2020 and 2019 is below:

Outstanding perormance shares 1.1

Granted

Forfeited

Exercised

2020

55 813

58 207

2019

55 813

Outstanding performance shares 31.12

114 020

55 813

The fair value of the options, RSUs and performance shares are set on the grant date and expensed over the vesting period.
USD 3 123 thousand was expensed during 2020 and USD 1 540 thousand in 2019.

The fair value per RSU and performance share without market condition granted in 2020 was NOK 60.95. The fair value of
the performance shares with Relative Total Shareholder Return performance condition granted in 2020 was NOK 84.5457.
The valuation is based on a Monte Carlo simulation model with the following assumptions:

Share price on the grant date
The closing share price of the company and peer group
companies (SOX Index) of NOK 60.95 and USD 1797.76,
respectively.

Risk-free interest rate
The risk-free interest rate is set equal to the relevant interest
rate on government bonds on the date of grant in 2020, i.e.
0.35 % in Norway and 0.23% in the US.

Volatility
It is assumed that historic volatility is an indication of future
volatility. The expected volatility is therefore stipulated to
be the same as the historic volatility, which equaled 45.33%
on the date of grant in 2020 for the company and 34.55%
for the SOX Index.

Expected lifetime
Performance shares vest on the April 29, 2023. Performance
end date is December 31, 2022, so as of vesting date the
quantity to vest is known. Performance shares expire 3
years from grant date, i.e. 29th of April 2023.

Correlation coefficients
Correlation coefficient quantifies the degree to which the
companies’ share prices jointly react to the news flow. The
historic correlation coefficients has been calculated by
using daily share price logarithmic returns of peer group.
companies in local currency.

NORDIC SEMICONDUCTOR | ANNUAL REPORT 2020 | FINANCIAL STATEMENTSNote 20: Current liabilities

All figures in USD 1000

GROUP

2020

2019

22 812

19 738

Accounts payable

Accounts payable from subsidiaries

4 976

3 136

Taxes payable

11 398

5 942

Employee benefit obligations

277

203

Board members benefit obligations

8 789

3 761

Social security tax and payroll tax

7 633

6 258

Holiday pay

16 184

13 881

Ship and debit rebate

8 515

6 300

End-customer rebate

362

- Contractual severance payment

5 520

4 044

Current lease liabilities

302

Currency swap

4 446

2 602

Accrued expenses

656

Other current liabilities

91 871

65 958

Total Current liabilities

PARENT

2020

2019

21 059

17 988

17 268

10 586

4 889

2 886

6 417

3 312

277

203

7 791

3 181

5 019

4 271

16 184

13 881

8 515

6 300

3 616

3 142

302

2 928

2 049

642

94 908

67 894

NORDIC SEMICONDUCTOR | ANNUAL REPORT 2020 | FINANCIAL STATEMENTSNote 21: Leases

All figures in USD 1000.

The Group is a lessee and has entered into agreements to
lease office space, office equipment, machinery and vehicles.

The Group's office leases range between 1 to 7 years,
equipment and machinery range between 3 to 5 years and
vehicles are leased for less than 3 years.

There are no leases with variable lease payments, other
than lease payments linked to an consumer price index.
Extension and termination options are included in a number
of property and equipment leases across the Group. These
are used to maximize operational flexibility in terms of
managing the assets used in the Group’s operations. The
majority of extension and termination options held are
exercisable only by the Group and not by the respective

lessor. Extension options have not been included in the
lease liability, because the Group could replace the assets
without significant cost or business disruption.

The Group also has certain leases of office buildings and
office equipment and machinery with lease terms of 12
months or less and leases of office equipment and
machinery and vehicles with low value. The Group applies
the ‘short-term lease’ and ‘lease of low-value assets’
recognition exemptions for these leases.

In 2020, there has not occurred any material rent concessions
as a direct consequence of the Covid-19 pandemic.

Minimum lease payments payable on leases are presented
in note 24 Financial assets and liabilities.

Amounts recognized in the balance sheet:
The balance sheet shows the following amounts relating to leases:

GROUP

31.12.2020

31.12.2019

Right of use assets

24 730

23 237 Property

362

696 Office equipment and machinery

25 092

23 934 Total

GROUP

31.12.2020

31.12.2019

Lease liabilities

5 520

4 044 Current

21 004

19 886 Non-Current

26 523

23 931 Total

PARENT

31.12.2020

31.12.2019

20 255

21 575

362

696

20 616

22 272

PARENT

31.12.2020

31.12.2019

3 616

3 142

18 337

19 085

21 953

22 227

NORDIC SEMICONDUCTOR | ANNUAL REPORT 2020 | FINANCIAL STATEMENTSGROUP

2020

2019

6 042

7 672 Additions to the right-of-use assets

845 Disposals to the right-of-use assets

Amounts recognized in the statement of profit or loss:
The statement of profit or loss shows the following amounts relating to leases:

GROUP

2020

2019 Depreciation charge of right-of-use assets

4 617

3 648 Properties

363

205 Office equipment and machinery

4 980

3 853 Total

844

339

523

837

Interest expense

470 Expenses relating to short-term leases

199 Expenses relating to leases of low-value

6 686

5 360 Total amount recognised in profit and loss

5 563

4 393 Total cash outflow for leases

Set out below are the carrying amounts of lease liabilities and the movements during the period:

GROUP Cash flow information for lease liabilities

23 931 Net liabilties as at 1 January 2020

-3 414 Cash flows from financing activities incl. foreign exchange adjustment

6 006 Acquisitions

- Disposals

26 523 Net liabilties as at 31 December 2020

PARENT

2020

2019

2 197

7 661

845

PARENT

2020

2019

3 514

2 723

363

205

3 878

2 928

768

169

296

753

357

5 111

4 132

4 358

3 420

PARENT

22 227

-2 471

2 197

21 953

NORDIC SEMICONDUCTOR | ANNUAL REPORT 2020 | FINANCIAL STATEMENTSNote 22: Financial instruments

All figures in USD 1000.

Capital structure
Nordic Semiconductor’s strategy relating to its capital
structure is to maintain sufficient cash and cash
equivalents to meet the Group’s requirements for ongoing
operations and for new investments. Management believes
that it is especially important to retain a strong credit
rating and significant liquidity as the Group competes in a
global market against larger companies.

Nordic Semiconductor manages its capital structure and
makes revisions in light of changes in the overall economy

and its operating assumptions. In order to maintain or
amend the capital structure, Nordic may purchase its own
shares on the market, pay dividends to shareholders, pay
back capital to shareholders or issue new shares.

In September, Nordic Semiconductor issued 13 million new
shares at a subscription price of NOK 88 per share. The
transaction generated gross proceeds of approximately
USD 12m.

Nordic Semiconductor targets to have an equity ratio
above 50% at all times, measured as total equity divided
by total assets.

GROUP

2020

2019

402 492

232 205

Total equity

515 814

318 359

Total assets

78%

73% Equity ratio

Financial assets
The group holds the following financial assets at amortised cost:

GROUP

2020

2019 Amortised cost

88 024

64 519 Accounts receivables

4 170

3 190 Other short-term receivables

187 846

90 645 Cash and cash equivalents

280 050

158 353

Total financial assets at amortised cost

GROUP

2020

2019

Fair value through profit or loss

54 701

- Money market fund

Total financial assets at fair value through profit or loss

Changes in financial assets at fair value through profit or loss:

GROUP

2020

2019

- As at 1 January 2020

51 809

2 805

54 701

Acquisition of financial instruments

Changes in fair value

- Currency translation difference

- As at 31 December 2020

PARENT

2020

2019

389 266

221 754

502 960

309 044

77%

72%

PARENT

2020

2019

88 034

64 519

2 322

183 914

83 237

274 270

159 575

PARENT

2020

2019

54 701

PARENT

2020

2019

51 809

2 805

54 701

NORDIC SEMICONDUCTOR | ANNUAL REPORT 2020 | FINANCIAL STATEMENTSFinancial liabilities

The group holds the following financial liabilities:

GROUP

2020

2019 Amortised cost

22 812

19 738 Accounts payable

49 472

35 279 Other current liabilities

Lease Liabilities

21 004

19 886 Non-current lease liabilties

5 520

4 044

Lease Liabilities

98 807

78 948

Total financial liabilities at amortised cost

GROUP

2020

2019

Fair value through profit or loss

302

- Currency swap

Total financial liabilities through profit or loss

Changes in financial liabilities at fair value through profit or loss:

GROUP

2020

2019

302

- As at 1 January 2020

- Changes in fair value

- As at 31 December 2020

PARENT

2020

2019

21 059

17 988

57 567

40 696

18 338

19 085

3 616

3 142

100 580

80 911

PARENT

2020

2019

302

PARENT

2020

2019

302

Interest-bearing loans and borrowings:
The Group has long-term revolving credit facilities ("RCF"),
which enables it to borrow up to USD 40m and USD 25m at
any time with an interest rate equal to LIBOR + margin. The
line of credit agreement of USD 40m and USD 25m expires
in November 2022. As of December 31, 2020, Nordic has
not drawn on any of the credit lines. The security is provided
by inventory, receivables and operating equipment with
book values as follows; inventories USD 62m, accounts
receivable USD 88m and operating equipment USD 23m.

The following financial covenants are included for the
revolving credit facilities:

Equity ratio shall not be lower than 40 %.

In addition to the two RCFs, the Group has a EUR 10m
bank overdraft facility with its main bank. This overdraft is
not utilized at the end of December. The remainder of the
Group’s financing is made through short-term, non-interest
bearing debt. This financing typically consists of debt to
suppliers, the public sector, employees and others. Nordic
has entered into a Tenancy Guarantee with Danske Bank
as unconditional guarantor for NOK 41m for the office in
Trondheim and SEK 0.4m for the office in Stockholm. The
first warranty is given to secure payments of up to 24
months of rent for the office in Trondheim.

Fair value measurement
The financial instruments that are carried at fair value are
revalued on a recurring basis. The financial instruments
are not designated at fair value through profit or loss on
intital recognition.

In 2020, the Group has invested in these financial assets
and liabilities using the following methods and assumptions:

Money market fund is defined as cash equivalents

because the asset is liquid and not subject to material
flucations in value. The asset is measured at quoted
market price in an active market at the balance sheet
date.

Currency swap represents the present value of the

future contractual cash flows. The fixed side is specified
in the swap agreement as the agreed currency rate
and the floating side is the observable spot exchange
rates.

NORDIC SEMICONDUCTOR | ANNUAL REPORT 2020 | FINANCIAL STATEMENTSNote 23: Financial risk management

All figures in USD 1000.

The Group's finance department is responsible for carrying
out the policies and guidelines for financial risk management
approved by the Board.

The Group is mainly exposed to counterparty credit risk,
liquidity risk, interest rate risk and foreign currency risk.

Credit risk

Credit risk is the risk that a counterparty will not meet its
obligations under a financial instrument or customer
contract, leading to a financial loss. The Group is exposed
to credit risk from its operating activities (primarily accounts
receivables) and from its financing activities, including
foreign exchange transactions, cash and cash equivalents
with banks and other financial institutions and other
financial instruments.

Age distribution of customer receivables was:

GROUP

2019

2019 Gross total

74 901

55 052 Not due

12 632

6 214

Past due 0-30 days

125

376

1 948

Past due 31-120 days

1 304 Over 120 days

88 034

64 519

Total

The Group’s sale of components takes place through its
distribution partners within defined geographic regions,
where Asia is the dominant region. The Group depends on
a relatively small number of customers. Customer credit risk
is managed by each region subject to the Group’s
established policy, procedures and control relating to
customer credit risk management. Credit quality of a
customer is assessed based on an extensive credit
evaluation and individual credit limits are defined in
accordance with this assessment. Outstanding accounts
receivables are regularly monitored and assurance from
distributors that end customer sales is secured through
letter of credits is obtained.

The Group make an allowances for expected credit losses
on receivables based on a provision matrix that is initially
based on the historical observed default rates. The Group
has calibrated the matrix to adjust the historical credit loss
experience with forward-looking information.

PARENT

2020

2019

74 901

55 052

12 632

125

376

6 214

1 948

1 304

88 034

64 519

Historically there has not been any significant credit losses. On a forward looking perspective, 85 percent of trade receivables
are within terms. On that basis, expected credit loss for trade receivables are limited and allowances for doubtful accounts
at 31 December 2020 equal 0.

The Group has a limited number of customers, regular contact and long-term relationships with most of its customer base.
Some of the customers are dependent on Nordic Semiconductor to stay in business.

Financial assets at fair value through profit or loss
The Group is also exposed to credit risk in relation to debt investments that are measured at fair value through profit and loss.

The maximum exposure to credit risk on the balance sheet date was:

GROUP

2020

2019

88 034

64 519 Accounts receivable

9 372

11 359 Other short-term receivables

97 406

75 878

Total

PARENT

2020

2019

88 034

64 519

10 062

10 045

98 096

74 563

NORDIC SEMICONDUCTOR | ANNUAL REPORT 2020 | FINANCIAL STATEMENTSLiquidity risk
Liqudity risk is the risk that the Group will encounter
difficulty in meeting financial obligations when due and to
close out market positions.

As of 31 December 2020, cash and cash equivalents
amounted to USD 242.5m (USD 90.6m), see note 16 for
details. The total balance includes money market fund at
fair value USD 54.7m.

Overall, we monitor cash flows at both Group and entity
level. The Group seeks to minimize risk when investing its
cash balances and . Investments can only be made in
securities which have been approved by the Board.

The Group has no externally imposed capital requirements
or agreements, and has no contracts or legal requirements
which are not being upheld. The Group has the following
due dates with regard to contracts for financial liabilities as
of December 31, 2020:

GROUP

Accounts payable

Currency swap

Other short-term liabilities

Lease liabilities*

Total

PARENT

Accounts payable

Payable to subsidiaries

Currency swap

Other short-term liabilities

Lease liabilities*

Total

Carrying
amount

Contractual
cash flow

Less than one
year

One to five
years

More than
five year

22 812

302

63 539

26 523

113 177

22 812

302

63 539

29 277

115 930

22 812

302

63 539

6 322

92 975

17 092

5 863

Carrying
amount

Contractual
cash flow

Less than one
year

One to five
years

More than
five year

21 059

4 618

302

65 313

21 953

21 059

4 618

302

65 313

27 116

113 245

118 408

21 059

4 618

302

65 313

4 345

95 637

14 362

5 863

*Lease liabilities is mainly office facility rent in Oslo and Trondheim

Interest rate risk
The Group’s liquidity requirements and risk assessment
determine its investment strategy and interest rate exposure.

The Group’s policy is to maintain a short-term investment
horizon for its surplus cash. The investment portfolio should
not have an average duration longer than six (6) months.

The Group has long-term revolving credit facilities, which
allows it to borrow up to a total of USD 65m at an interest
rate of LIBOR + margin. The line of credit agreement of
USD 40m and USD 25m expires end of November 2022.

If interest rates increase 1 basis point, the negative effect
on profit before tax given current utilization of the RCF is
USD 0 per year as the credit facility is not utilized.

Foreign exchange risk arises from future commercial
transactions and
liabilities
denominated in a currency that is not the functional currency
of the relevant group entity.

recognised assets and

The dominated functional currency for the Group is USD.
Nearly all revenues and cost of goods are in USD, but
approximately 50% and 20% of the Group’s operating
expenses (excluding depreciation and amortisation) and
tax cash flows are denominated in NOK and EUR. The
Group does not use hedging instruments to minimize its
exposure to foreign currency risk from operating activities
affecting profit and loss.

Below is a sensitivity analysis of changes in the NOK
exchange rate on Group balance sheet items, and their
impact on profit and loss:

Foreign currency risk

The Group is subject to foreign currency risk as it operates
internationally with development and commercial activities.

Profit before tax

NOK exchange rate +/- 10%

+/- 4 488

NORDIC SEMICONDUCTOR | ANNUAL REPORT 2020 | FINANCIAL STATEMENTSThe table below shows the Group's exposure in sales to foreign currency risk in the most significant currencies:

GROUP

2020

2019

Local
currency
(1000)

404 011

1 061

USD

EUR

Total

USD (1000)

Share of total
revenues in %

Local
currency (1000)

USD (1000)

Share of total
revenues in %

404 011

1 206

405 217

99.7 %

0.3 %

100.0 %

287 124

1 134

1 271

99.6 %

0.4 %

288 395

100.0 %

PARENT

2019

2018

Local
currency (1000)

USD (1000)

Share of total
revenues in %

Local
currency (1000)

USD (1000)

Share of total
revenues in %

USD

EUR

Other

Total

404 217

1 605

404 217

1 830

194

99.5 %

0.5 %

0.0 %

287 124

1 730

1 933

169

99.3 %

0.7 %

0.1 %

406 242

100.0 %

289 226

100.0 %

The Group uses derivative financial instruments to reduce its exposure to currency exchange rate movements and hold currency
swap in relation to fixed income fund investments. Derivatives are not held for speculative purposes.

All derivative financial instruments are recognized as assets and liabilities measured at fair value, and all fair value gains and
losses are recognized in profit or loss. Where the fair value of a derivative on initial recognition differs from the transaction
price, if any, the difference is recognized immediately in profit or loss only if the fair value is evidenced by a quoted price in an
active market or is based on a valuation technique that uses only data from observable markets.

The table below shows the Group's exposure at the end of reporting period in the most significant currencies: All amounts
stated in USD 1000.

GROUP

USD

EUR

NOK

Other

Total

PARENT

USD

EUR

NOK

Other

Total

2020

2019

Accounts
receivable

64 519

Accounts
receivable

Accounts
payable

87 731

300

19 898

2 007

480

427

88 034

22 812

64 519

2020

2019

Accounts payable

15 809

1 886

1 547

497

19 738

Accounts
receivable

Accounts
payable

Accounts
receivable

Accounts payable

87 731

300

19 898

64 519

351

480

330

88 034

21 059

64 519

15 809

109

1 547

523

17 988

NORDIC SEMICONDUCTOR | ANNUAL REPORT 2020 | FINANCIAL STATEMENTS

Determination of fair value
As of December 31, 2019 the Group had no financial assets or financial liabilities where there is considered to be a difference
between book value and fair value.

Below is an overview of Nordic’s financial instruments:

GROUP

2020

2019

Book value

Fair market value

Book value

Fair market value

Financial assets

Accounts receivables

Short-term receivables

Cash and cash equivalents

incl. money market fund

Financial liabilities

Accounts payable

Current financial liabilities

Other short-term liabilities

88 034

9 372

242 547

54 701

22 812

302

49 472

88 034

9 372

242 547

54 701

22 812

302

49 472

64 519

3 190

90 645

19 738

35 279

64 519

3 190

90 645

19 738

35 279

PARENT

2020

2019

Book value

Fair market value

Book value

Fair market value

Financial assets

Accounts receivables

Short-term receivables

Cash and cash equivalents

incl. money market fund

Financial liabilities

Accounts payable

Current financial liabilities

Other current liabilities

88 034

10 062

228 024

54 701

21 059

302

57 265

88 034

10 062

228 024

54 701

21 059

302

57 265

64 519

2 322

83 237

17 988

40 696

64 519

2 322

83 237

17 988

40 696

Book value is a reasonable estimate of fair value in cases where these numbers are identical.

NORDIC SEMICONDUCTOR | ANNUAL REPORT 2020 | FINANCIAL STATEMENTSNote 24: Business combination

On 31 December 2020, the Group completed the acquisition
of Imagination Technologies’ Wi-Fi business in UK, Taiwan,
the
India and Sweden. The acquisition
development team, 81 employees, associated Wi-Fi IP tech
assets and 100 % of the shares in Imagination Technologies
AB and Imagination Technologies Hyderabad Pvt Ltd.

included

Our provisional allocation of the purchase price to the
identifiable assets and liabilities and goodwill is set out below.

Identifiable intangible assets being transferred to the
Group as part of the transaction comprise of Wi-Fi 6, which
is still under development, Wi-Fi 5 and Wi-Fi 4. The goodwill
arising on this business combination can be attributed to
the skills and talent of the in-place work-force and the
synergies expected to be achieved from integrating the
acquired operations into the Group’s existing business.

Provisional fair value of net
assets acquired

Software and other intangible assets

Fixed Assets

Other current receivables

Accounts payable

Income taxes payable

Public duties

Other current liabilities

Net identifiable assets acquired

Goodwill arising on acquisition

Consideration

Satisfied by:

Cash consideration

Cash acquired

Total consideration

The acquisition date was December 31, 2020 meaning the
business acquired did not contribute to any profit and loss
in Q4-2020. During Q4 2020, we incurred transaction costs
of USD 296 254.

Expected economic lifetime of identifiable intangible asset
is 5 years for accounting and tax purposes.

Goodwill is acquired through business combination and
represent the fair value of know-how from the employee
related
Imagination
the Wi-fi business unit of
Technologies UK Ltd. We have only identified one business
unit that the acquired goodwill is allocated to, and that
represents the Nordic business as whole.

Goodwill is tested for impairment annually, first in Q3 2021,
at the level of the cash generating segment to which it is
allocated.

USD
thousand

11 447

125

397

(87)

151

271

(1 540)

10 765

2 393

13 158

14 245

(1 087)

13 158

Goodwill is deductive for tax purposes, with 20 % annual rate.

If the acquisition had occurred on 1 January 2020,
consolidated pro-forma
revenue would have been
unchanged and Group profit for the year ended 31
December 2020 would have been reduced by USD 8.4
million. The amounts have been calculated using the
subsidiary’s results and adjusting them for:

group and the subsidiary, and

differences in the accounting policies between the
the additional depreciation and amortisation that

would have been charged assuming the fair value
adjustments to property, plant and equipment and
intangible assets had applied from 1 January 2020,
together with the consequential tax effects.

NORDIC SEMICONDUCTOR | ANNUAL REPORT 2020 | FINANCIAL STATEMENTSCash flows in relation to business combination
The net cash outflow on the purchase of businesses was as follows:

Cash flows from investing activities (amount in USD thousand)

Cash consideration

Cash and cash equivalents acquired

Net cash consideration within
investment activities

14 245

(1 087)

13 158

Note 25: Events after the balance sheet date

There are no events after the balance sheet date with materially affect on the financial statements.

Note 26: Related party transactions

Nordic Semiconductor ASA, the ultimate parent company of the Group, is listed on Oslo Stock exchange. The Group has
no material transactions with related parties.

The ultimate parent company has transactions with its wholly-owned subsidiaries, see note 15 for further information.

NORDIC SEMICONDUCTOR | ANNUAL REPORT 2020 | FINANCIAL STATEMENTSDeclaration to
the Annual Report

Declaration to
the Annual Report

Responsibility Statement

The Chief Executive Officer and the Board of Directors confirm, to the best of our knowledge, that the financial

statements for 2020 have been prepared in accordance with current accounting standards and give a true
and fair view of the Parent company and the Group’s assets, liabilities, financial position and results of the
operations.

We also confirm that the report by the Board of Directors provides a fair overview of the parent company

and the Group and its development, financial results and position, and describes the Group’s key risks and
uncertainties.

Oslo, March 16, 2021

Jan Frykhammar
Board member

Birger Steen
Chair

Anita Huun
Board member

Inger Berg Ørstavik
Board member

Svenn-Tore Larsen
Chief Executive Officer

Endre Holen
Board member

Øyvind Birkenes
Board member

Jon Helge Nistad
Board member, employee

Annastiina Hintsa
Board member

Joel Stapelton
Board member, employee

Susheel Raj Nuguru
Board member, employee

Morten Dammen
Board member, employee

NORDIC SEMICONDUCTOR | ANNUAL REPORT 2020 | DECLERATION TO THE ANNUNAL REPORTStandards of corporate
governance

The Board of Directors ("Board") and Management of Nordic Semiconductor
ASA ("Nordic" or the "Company") aim to execute their respective tasks in
accordance with the highest standards for corporate governance.

standards

Nordic Semiconductor’s
for corporate
governance provide a critical foundation for the
company’s management. These principles must be
viewed in conjunction with the company’s efforts to
constantly promote a
sound corporate culture
throughout the organization. The company’s core
values of respect, trust, accountability and equal
treatment are central to the Board’s and management’s
efforts to build confidence in the company, both
internally and externally. Nordic Semiconductor is a UN
Global Compact (UNGC) signatory and is committed
to the Ten Principles as set forth by the UNGC in the
areas of Human Rights, Labor, Environment and Anti-
corruption. Nordic Semiconductor has adopted the
Responsible Business Alliance (RBA) Code of Conduct,
which specifically focuses on topics relevant for the
electronics industry, and promotes this to ensure
sustainable business operations and supply chain.
Additional information on this work can be read in the
annual Environmental, Social, Governance (ESG) report,
as published on Nordic Semiconductor’s website.

The Board’s statement on corporate governance is set
out below. It complies with the structure adopted by the
Norwegian Corporate Governance Board (NUES). The
statement also meets the information requirements set
out in Section 3-3b of the Accounting Act and Section
5-8a of the Securities Trading Act.

The Articles of Association do not contain provisions
that deviate from Chapter 5 of the Public Limited
Liability Companies Act. The information requirements
in the Accounting Act are integrated into the statement
below where appropriate. This also applies
to
information about matters related to shareholders.

Statement of corporate governance

The Company adheres to the NUES and is subject to
reporting requirements relating to corporate governance
according to Section 3-3b of the Accounting Act.

The Company's foundational values are described in
Nordic’s Company Policies, and the procedures and
guidelines for ethics and corporate responsibility have
been designed based on these policies. The company
has a separate annual report on ESG.

Deviations from the Code of Practice: None

Activities
The Articles of Association describe the objective and
set clear limits for the company’s business.

According to Nordic’s Articles of Association, “The
objective for which the company is established is the
development and sale of electronic components,
integrated circuits, design tools and related solutions.”

Nordic designs, sells and delivers integrated circuits and
related intellectual property for use in short and long-
range wireless applications. The company specializes in
ultra-low power components, based on its proprietary
2.4 GHz RF, various Bluetooth related standards and
emerging standards for cellular IoT communications like
NB-IoT and LTE-M. All manufacturing and direct
distribution of components are outsourced to specialist
subcontractors. The company is headquartered in
Trondheim, Norway, and has offices in USA, China,
Korea, India, Sweden, UK, Japan, Taiwan, Poland,
Finland, Germany and the Philippines.

for

form a basis

The Board sets clear objectives for the business with a
view to create value for shareholders. The Board leads
the company’s strategic planning and make decisions
the company’s executive
that
management to prepare and carry out investments to
drive future growth. Strategic plans are evaluated on an
ongoing basis, with a Board strategy review being
conducted annually in an off-site multi-day meeting.
New and updated long-term objectives, strategies and
risk profiles are agreed on towards the end of the year,
or in connection with major events.

rights and social matters,

The objectives include matters that relate to human
rights, employee
the
prevention of corruption, the working environment
equal treatment, discrimination and environmental
impact.; see the separate ESG report. The objectives
are revised and adopted annually. Objectives for the
coming year are revised and determined annually
towards the end of the current year.

Deviations from the Code of Practice: None

7777

NORDIC SEMICONDUCTOR | ANNUAL REPORT 2020 | STANDARDS OF CORPORATE GOVERNANCEEquity and dividends
The Board of Directors ensures that the company has a
capital structure that is appropriate to the Company’s
objectives, strategy and risk profile. The Company’s
growth philosophy, as well as the cyclicality of its
business, means that the Company will aim to maintain
a high equity ratio and considerable liquidity. The
Company aims primarily to provide shareholders with
returns in the form of appreciation of the shares and
has a long-term goal to pay dividends based on surplus
cash generated by the company, while taking longer
term growth targets into consideration. The company’s
dividend policy is reviewed each year by the Board of
Directors. The Annual General Meeting can mandate
the Board the authorization to pay dividends based on
the latest approved Annual Report. The justification for
this authorization needs to be explained and should
reflect the Company’s dividend policy.

The Board of Directors, in accordance with the
resolution of the Annual General Meeting held April 21,
20120 has been authorized to buy back up to 17,900,000
own shares for a total par value of NOK 179,000.00 in
one or more transactions. The authorization is limited to
10 percent of the Company’s share capital, and the
price per share which the Company may pay for shares
acquired in this manner shall not be less than the par
value nor greater than NOK 200. This power of attorney
will remain in effect until the company’s ordinary Annual
General Meeting in 2021. The Board believes that it is
expedient for the Board to be authorized to purchase
own shares, partly to fulfil the remuneration schemes
for employees, and partly so that shares can be used
as a consideration in connection with the acquisition of
businesses or for subsequent sale or cancellation. Such
authorization must be decided by the General Meeting
and will apply until 30 June the following year.

In accordance with the decision passed at the general
meeting held April 21, 2020, the Board of Directors has
the authority to increase the company’s share capital
by issuing up to 17,900,000 shares with a total par value
of NOK 179,000. The authority is to be used for purposes
defined in the Notice of the Annual General Meeting,
including strengthening the Company’s shareholder’s
equity, to execute share capital increases with one or
more strategic partners, or to complete a merger or
acquisition using shares or cash. This power of attorney
will remain in effect until the Company’s Annual General
Meeting in 2021, and can be implemented through a
private placement, rights issue or public offering.

Nordic Semiconductor has one class of shares, where
each share has one vote at
the Company’s
shareholders’ meeting. Nordic Semiconductor strictly
adheres to the principle of equal treatment of all
shareholders. The Company’s transactions in its own
shares are conducted in accordance with good stock
exchange practice in Norway.

If the Board wishes to quickly raise capital, the Board
has been authorized to direct a share capital increase
to selected investors chosen by the Board, up to the
limits quantified above. In this event, the Company will
notify
for
implementing a directed share placement. Existing
shareholders’ preemptive subscription rights under
§10-4 in the Norwegian Companies Act can be waived
under these circumstances.

the stock exchange of

reasons

its

Such capital increases shall be executed at or near the
current stock price listed on the Oslo Stock Exchange.
This authorization remains valid until the Company’s
ordinary annual general meeting in 2020

Deviations from the Code of Practice: None.

Equal treatment of shareholders and
transactions with close associates

The Company is generally cautious in regard to
transactions with shareholders, members of the Board
of Directors, senior employees or related parties to the
above. To ensure that the best code of conduct applies,
the Board requires notification and review of any
process or transaction in which both the company and
a senior employee or member of the Board of Directors
may have interests. Nordic Semiconductor will seek to
comply with the principles of equal treatment of related
parties and possible transactions with related parties
that are laid down in the Norwegian Code of Practice
for Corporate Governance.

The Company considers Shareholders’ preemption
rights in connection with an increase in share capital to
be an important and fundamental right in a healthy
shareholder community, and the preemption right can
only be waived in exceptional circumstances. Waiving
of this right will be based on the Company’s and
shareholders’ mutual interests. In such case, there will
be full transparency about the matter, and the shareholders
will receive identical information simultaneously through a
stock exchange announcement and subsequently on the
Company's website.

This also applies if the Board utilizes the authorizations
it has been granted.

The Company’s transactions in own shares must always
comply with the arm’s length principle and be on ordinary
market terms.

Deviations from the Code of Practice: None.

7878

NORDIC SEMICONDUCTOR | ANNUAL REPORT 2020 | STANDARDS OF CORPORATE GOVERNANCEFreely negotiable shares
Nordic Semiconductor’s shares are freely tradable and
there are no restrictions on the sale and purchase of
the Company’s shares beyond those pursuant to
Norwegian law.

Each share carries one vote.

Deviations from the Code of Practice: None.

General Meeting

The Annual General Meeting is the company’s highest
body and the shareholders exert their authority in the
company through the Annual General Meeting. Nordic
Semiconductor and
the Board encourages all
shareholders to participate and exercise their rights at
the Annual General Meeting.

The Board of Directors should ensure that the Annual
General Meeting is held in accordance with the
Norwegian Code of Practice for Corporate Governance
ensuring all shareholders the ability to participate. The
notice of the Annual General Meeting, including
relevant information shall be announced and distributed
at least 21 days in advance of the Annual General
Meeting, and
for notification of
attendance is one working day prior to the Annual
General Meeting. The Board of Directors should further
ensure that:

the final date

The resolutions and supporting information

distributed are sufficiently detailed, comprehensive
and specific to allow shareholders to form a view
on all matters to be considered at the meeting

Any deadline for shareholders to give notice of

their intention to attend the meeting is set as close
to the date of the meeting as possible

The Chair of the Board of Directors and the Chair

of the Nomination Committee are present at the
general meeting. In addition, the Chair of the Audit
Committee and the Compensation Committee
should attend the meeting

The general meeting is able to elect an

independent Chair for the general meeting. In 2020
and in 2021 the Annual General Meeting was held
as a video conference and all shareholders were
given the opportunity to both view and participate
in the meeting.

including on each

Shareholders should be able to vote on each individual
matter,
individual candidate
nominated for election. Shareholders who cannot
attend the meeting in person should be given the
opportunity to vote. The Company should design the
form for the appointment of a proxy to make voting on
each individual matter possible and should nominate a
person who can act as a proxy for shareholders.

Deviations from the Code of Practice: None.

Nomination Committee
Nordic Semiconductor has a Nomination Committee, as
provided for in the Articles of Association. The Annual
General Meeting stipulate guidelines for the duties of
the nomination committee, elect
the chair and
members, and stipulates the committee´s remuneration.

The Nomination Committee’s duties are to represent
the interests of the shareholders in general, and to
propose qualified candidates for the Annual General
Meeting’s election of the Board of Directors as well as
to propose the remuneration to the Board of Directors.

The Nomination Committee should justify why it is
proposing each candidate in the notice for the AGM
separately, including information on the candidates’
competence, capacity and independence.

The nomination committee holds regular meetings with
major shareholders as well as management and
individual shareholder elected Board members. In
addition, all shareholders can submit suggestions to the
nomination committee through a link on Nordic’s
webpage.

shareholders or who

The Nomination Committee consists of three members
who are
the
shareholders. The Company’s executive personnel are
not represented on the Nomination Committee. The
deadline for submitting proposals to the Nomination
Committee is one month before the Annual General
Meeting.

represent

The members of the Nomination Committee are:

John Harald Henriksen (Chair)
Viggo Leisner
Eivind Lotsberg

Deviations from the Code of Practice: None.

The composition and independence of
the Board of Directors

Norwegian companies can be governed by either a
one-tier or a two-tier board structure, consisting of a
board of directors and, in a two-tier structure, a
corporate assembly.

Any company with more than 200 employees is
generally required to have a corporate assembly, with
two-thirds of the members elected by shareholders and
one-third elected by the company's employees. If a
company agrees with its employees not to have a
corporate assembly, employees have the right to
appoint additional representatives to the board of
directors. The company has agreed with its employees
to not have a corporate assembly and thereby

7979

NORDIC SEMICONDUCTOR | ANNUAL REPORT 2020 | STANDARDS OF CORPORATE GOVERNANCEincreased the numbers of employees elected Board
members. In 2020, the Board consisted of 7 shareholder
elected Board Members and 3 employee elected Board
Members.

recommends

The Norwegian Code of Practice for Corporate
Governance
that a majority of
shareholder-elected directors are independent of the
Company and its executive management and that no
members of executive management serve as directors.

Furthermore, the Norwegian Public Companies Act
prohibits the CEO from serving as chair and requires
that public companies have boards of directors
consisting of at least 40% women.

Board is responsible, to the degree necessary, for
approving business strategies and budgets for the
company. The Board is also responsible for ensuring
executive
that
management with clear
internal distribution of
responsibility and work.

company has

competent

the

Each year, the Board of Directors adopts a specific
meeting and activity plan for the following year. This
plan covers strategic planning, monitoring of the
business, and other relevant business issues. The
Board’s activity plan for 2021 stipulates eight meetings,
two of which are scheduled as all day or multi-day
meetings
to discuss and explore strategy and
technology-specific issues.

The Board of Directors and the Chair of the Board of
Directors are elected by the shareholders at the Annual
General Meeting on the basis of proposals from the
Nomination Committee.

During 2020, the Board held 8 ordinary Board Meetings
and 5 extraordinary meetings. As a result of the
pandemic, all meetings except one were conducted
online. All Board Members attended all meetings.

The composition of the Board of Directors should
ensure that the Board can attend to the common
interests of all shareholders and meets the company’s
need for expertise, capacity and diversity. Attention
should be paid to ensuring that the Board can function
effectively as a collegiate body.

The composition of the Board of Directors should
ensure that it can operate independently of any special
interests. The majority of the shareholder-elected
members of the Board should be independent of the
Company’s executive personnel and material business
contacts. No executive personnel or representatives of
business associates are members of the Board. At least
40% of the shareholder elected Board Members are
female (in 2020 three out of seven or 43%).

The shareholder-elected Board members are elected, in
accordance with the Articles of Association, for one
year at a time. The employee representatives are
elected for two years at a time.

A more detailed description of the background,
qualifications, and term of service of each member of
the Board of Directors and the number of Nordic
Semiconductor shares they own are provided in the
annual report and on the Company’s webpage.

Members of the Board are encouraged to hold shares
in the company.

Deviations from the Code of Practice: None.

The work of the Board of Directors

The conduct of the Board of Directors is in accordance
with the Board instructions of Nordic Semiconductor
ASA. In accordance with the said instructions, the

The Board of Directors carries out an evaluation of its
activities each year and on this basis discusses
improvements in the organization and implementation
of its work.

The Board has established two board committees
comprising Board members – the Compensation
Committee and the Audit Committee. The committees’
mandates are based on a group perspective. The
board committees do not have decision-making power
but are charged with making proper preparations for
board meetings in the matters with which they are
concerned. In the Board's experience, the work of
board committees makes make the overall Board
more effective and efficient and has allows for
deeper and stronger involvement in the business’s
challenges and initiatives.

The Board has established a People and
Compensation Committee
recommend and
evaluate remuneration principles and execution for the
CEO, to guide and evaluate, principles and strategy
for the compensation of executive management and
to evaluate and oversee the overall compensation
strategy for the company. The committee consists of
four members and have had 5 meetings in 2020.

The People and Compensation committee consist of
the following Board Members:

Endre Holen (Chair)
Birger K. Steen
Jon Helge Nistad

The members of the People and Compensation
Committee are
the
compensation programs are fair and appropriate, but
also reflect the challenges related to attracting and

to ensure

selected

that

8080

NORDIC SEMICONDUCTOR | ANNUAL REPORT 2020 | STANDARDS OF CORPORATE GOVERNANCE
retaining key talent in a global technology market for
engineers. Therefore, the committee both consists of an
employee elected Board Member and two shareholder
elected Board Members with extensive experience from
the global technology space.

All members participated in all meetings.

The Audit Committee consists of three members of the
Board. The Committee collectively has the competence
required in the Public Limited Liability Companies Act §
6-42. Both members are independent according to §
6-42 Public Limited Liability Companies Act, and at
least one member has the required qualifications within
accounting or auditing. The Committee supports the
Board with respect to the assessment and control of
financial risk, financial reporting, auditing, control, and
prepares discussions and
for Board
meetings.

resolutions

The Audit Committee held 6 meetings in 2020 and has
been in regular contact with the Company’s auditor
regarding audits of the statutory accounts and it also
assesses and monitors the auditor’s independence,
including non-audit services provided by the auditor.

The Audit Committee consists of the following Board
Members:

Jan Frykhammar (Chair)
Inger Berg Ørstavik
Anita Huun

The members of the of the Audit Committee have
extensive experience to be able to properly oversee the
Company's accounting, financial reporting, and internal
and external audits; and general adherence
to
principles of good corporate governance.

One of the members has extensive experience from the
CFO role in a global technology company, one member
has experience from both investment banking and the
CFO role and the final member has experience as a
professor in Law.

All members participated in all meetings.

Deviations from the Code of Practice: None.

Risk Management and internal control

The Board and Management are committed to ensure
that the company maintains sound and effective
internal controls to safeguard the value of the enterprise,
as well as its principles of ethical conduct and corporate
risk
social
management system is fundamental to the achievement
of its financial goals.

responsibility. Nordic

Semiconductor’s

The Board complies with NUES’s recommendations in
its work on risk management and internal control. The
Company’s most important risk areas and the internal
control system are continuously reviewed.

The Company’s primary internal control routines related
to financial reporting are as follows: The finance team
prepares a monthly financial report which is distributed
to and reviewed by CEO and the Board of Directors. In
preparing the monthly financial report, the accounting
team conducts reconciliations of all major balance
sheet items, which are independently reviewed by a
second member of the team. Balance sheet items
subject to accounting estimates are regularly analyzed
to ensure that all assumptions relating to the accounting
estimate remain valid. As part of the monthly financial
report, the financial results are compared with the
company’s budget and prior forecast to analyze
variances and ensure that they are not the result of
incorrect reporting.

Each year, the external auditor performs tests of the
company’s internal control routines. The quarterly and
annual financial reports are also subject to review and
approval by the Board. In addition, the Board of
Directors performs annual review of the company’s
business strategy focusing on market development,
technology updates, competitive positioning and risk
factors. In addition, the Board reviews various aspects
of the company’s business throughout the year,
including performing a half yearly detailed risk review.

The Board presents an in-depth description and
analysis of the company’s financial status in the report
of the Board of Directors in the company’s annual
report. The report also describes the main drivers and
risks related to the operation of the business.

Deviations from the Code of Practice: None.

Remuneration to the Board of Directors

Remuneration to the Board of Directors is decided by
the Annual General Meeting based in the Nomination
Committees recommendation. All remuneration to the
Board of Directors is disclosed in Note 10 of the Nordic
Semiconductor Group
The
remuneration to Board members is not performance
based or linked to the company’s performance, and the
company does not provide share options to Board
members. Members of the Board of Directors receives
remuneration for work related to Board committees.

accounts.

annual

Deviations from the Code of Practice: None.

8181

NORDIC SEMICONDUCTOR | ANNUAL REPORT 2020 | STANDARDS OF CORPORATE GOVERNANCERemuneration to the Executive Management
Board of Directors discusses and approves the terms
and conditions for the CEO once a year and reviews
and monitors the general terms and conditions for
other senior employees of the group.

The main principle in the Company’s policy for
remuneration and compensation is that the leading
employees shall be offered competitive terms, so as to
ensure the Company continues to attract and retain the
desired and necessary talent . Compensation for
executive management is established in accordance
with the above-mentioned main principle.

The Company has established an annual performance
bonus for the executive management team, for which
the employee must remain within his position until the
start of the following year to be eligible. The bonuses
are awarded through a direct cash payment and, when
appropriate,
in the form of
restricted shares and/or stock options. Performance-
based compensation is subject to absolute payout limits
and fulfillment of performance criteria, both decided by
the Board at its discretion.

long-term

incentives

Deviations from the Code of Practice: None.

Information and Communications

The Board of Directors has established a communications
strategy for the company’s reporting of financial and
other information based on openness and taking into
account the requirement for equal treatment of all
participants in the securities market. The strategy has
been published on the Company’s investor relations
web pages (www.nordicsemi.com/About-us/Investor-
Relations).

Nordic Semiconductor aims to communicate actively,
openly and in a timely fashion with the financial market.
The Company's accounting procedures are highly
transparent and its financial statements are prepared
and presented in accordance with the International
Financial Reporting Standards (IFRS). The Board of
Directors monitors the company’s reporting.

Nordic Semiconductor’s financial reporting calendar for
2021 has been announced to the Oslo Stock Exchange
and can be found on the company’s website. The
company’s annual and quarterly
reports contain
extensive information about the various aspects of the
quarterly
company’s
presentations are transmitted directly on the internet and
may be found on Nordic Semiconductor’s investor relations
webpages together with the quarterly and annual reports
and a comprehensive and detailed presentation of other
information, reports and documents.

The Company’s

activities.

Nordic Semiconductor’s Chief Financial Officer
is
responsible for contact with shareholders outside of the
General Meeting. In addition the Investor Relations
Director has extensive contact with shareholders. The
Chief Financial Officer and Investor Relations Director

reports regularly to the Board about the Company’s
investor relations activities.

Deviations from the Code of Practice: None.

Takeovers

The Board of Directors have established guiding
principles for how it will act in the event of a takeover bid.

The Board of Directors will not seek to hinder or
obstruct any takeover bid for the Company’s activities
or shares. In the event of a takeover bid, as discussed in
item 14 of the Norwegian Code of Practice for
Corporate Governance, the Board of Directors will seek
to comply with the recommendations therein as well as
complying with relevant legislation and regulations.

If the Company is acquired, the CEO’s resignation
period extends to 12 months, and any remaining
retention bonus to the CEO will be paid in its entirety
following the closing of the acquisition, as described in
Note 10 of the Group financial statements. There are
otherwise no material obligations expected by the
Company as a result of an acquisition, aside from
normal legal and advisory fees.

Deviations from the Code of Practice: None.

Auditor

PWC was elected effective 2019 by the Annual General
Meeting to act as auditor to confirm to the Annual
General Meeting that Nordic Semiconductor’s annual
accounts have been prepared and presented in
accordance with current laws and regulations. Fees
paid to the auditor are approved at the Annual
General Meeting.

In the fall, the external auditor presents to the Audit
Committee an evaluation of risk, internal control and
the quality of reporting at Nordic Semiconductor, and
the audit plan for the current year. In addition, the
auditor meets the Audit Committee on a regular basis.
The external auditor also takes part in the Board’s
discussions on the annual financial statements. On both
occasions, the Board of Directors ensures that the
Board and the external auditor are able to discuss
relevant matters at a meeting at which the executive
management is not present.

The auditor shall be independent of the company.
Therefore, Nordic Semiconductor does not engage the
elected auditor for tasks other than the financial audit
required by law. Nevertheless, the auditor is used for
tasks that are naturally related to the audit, such as
technical assistance with tax returns, annual accounts,
understanding of accounting and tax rules and
confirmation of financial information in various contexts.
All other services than audit services performed by
PWC are approved by the Audit Committee.

Deviations from the Code of Practice: None.

8282

NORDIC SEMICONDUCTOR | ANNUAL REPORT 2020 | STANDARDS OF CORPORATE GOVERNANCEAuditor Opinion Letter

To the General Meeting of Nordic Semiconductor ASA

Independent Auditor’s Report

Report on the Audit of the Financial Statements

Opinion

We have audited the financial statements of Nordic Semiconductor ASA, which comprise:

• The financial statements of the parent company Nordic Semiconductor ASA (the Company),
which comprise the statement of financial position as at 31 December 2020, the income
statement, statement of changes in equity and statement of cash flows for the year then ended,
and notes to the financial statements, including a summary of significant accounting policies,
and

• The consolidated financial statements of Nordic Semiconductor ASA and its subsidiaries (the
Group), which comprise the statement of financial position as at 31 December 2020, the
income statement, statement of changes in equity and statement of cash flows for the year
then ended, and notes to the financial statements, including a summary of significant
accounting policies.

In our opinion:

• The financial statements are prepared in accordance with the law and regulations.

• The accompanying financial statements give a true and fair view of the financial position of the
Company as at 31 December 2020, and its financial performance and its cash flows for the
year then ended in accordance with International Financial Reporting Standards as adopted
by the EU.

• The accompanying consolidated financial statements give a true and fair view of the financial

position of the Group as at 31 December 2020, and its financial performance and its cash flows
for the year then ended in accordance with International Financial Reporting Standards as
adopted by the EU.

Basis for Opinion

We conducted our audit in accordance with laws, regulations, and auditing standards and practices
generally accepted in Norway, including International Standards on Auditing (ISAs). Our
responsibilities under those standards are further described in the Auditor’s Responsibilities for the
Audit of the Financial Statements section of our report. We are independent of the Company and the
Group as required by laws and regulations, and we have fulfilled our other ethical responsibilities in
accordance with these requirements. We believe that the audit evidence we have obtained is sufficient
and appropriate to provide a basis for our opinion.

PricewaterhouseCoopers AS, Dronning Eufemias gate 71, Postboks 748 Sentrum, NO-0106 Oslo
T: 02316, org. no.: 987 009 713 VAT, www.pwc.no
State authorised public accountants, members of The Norwegian Institute of Public Accountants, and
authorised accounting firm

8383

NORDIC SEMICONDUCTOR | ANNUAL REPORT 2020 | AUDITOR OPINION LETTER

Independent Auditor's Report - Nordic Semiconductor ASA

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in
our audit of the financial statements of the current period. These matters were addressed in the
context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we
do not provide a separate opinion on these matters.

The business activities are largely unchanged compared to last year. We have not identified regulatory
changes, transactions or other events that qualified as new key audit matters. Revenue recognition has
the same characteristics and risks this year as the previous year and consequently have been an area of
focus also for the 2020 audit

Key Audit Matter

How our audit addressed the Key Audit Matter

Revenue Recognition – ship and debit
provision

Revenue from contracts with customers is
recognized when control of the goods is
transferred to the customer (distributor).
The time of delivery, and the time where
control of goods is transferred, is usually
the time when the goods are transferred
to the transport carrier.

When a distributor sells components to
specified customer accounts, the
distributor will receive an additional
discount after the sale is made, commonly
known as a “Ship and Debit” discount.
The group uses the expected value
method for calculating the discount. The
method requires assessing historical
discounts to each distributor, the
distributors’ inventory level as of 31
December 2020 and expected sales mix.
An estimate for this discount is provided
for in the financial statements, reducing
revenue and increasing liabilities with
16,2 million USD as of 31 December
2020. Due to the judgements involved,
we determine the ship and debit
provision to be a key audit matter.

Refer to note 2.2, note 2.5 and note 3.3
where group management explain the
Group’s revenue recognition policy,
including significant judgements,
estimates and assumptions, and the
recorded ship and debit provision as of 31
December 2020.

We assessed the Group’s revenue recognition policy,
including revenue recognition for ship and debit sales.
Furthermore, we obtained an understanding of
management’s process for estimating the ship and debit
provision as of 31 December 2020 and reviewed a
sample of distributor sales agreements.

We performed a retrospective review of the monthly
ship and debit provisions throughout 2020 and
compared the monthly discount provision levels to
actual ship and debit discount levels. We compared the
estimated ship and debit provision as of 31 December
2020 to historical discount levels and discussed with
management to challenge their estimated distributor
discounts on an individual distributor basis. We
performed an assessment of the outcome of
management’s prior year estimates by comparing
actual discounts in 2020 to the prior year ship and
debit provision. We tested the mathematical accuracy
of the calculation of the provision.

We also obtained the actual ship and debit claims in
January 2021 and compared the ship and debit level to
the ship and debit provision as of 31 December 2020.

Based on our audit procedures we found management’s
assumptions to be reasonable.

We also assessed the information in note 2.2, note 2.5
and note 3.3 and found it appropriate.

(2)

8484

NORDIC SEMICONDUCTOR | ANNUAL REPORT 2020 | AUDITOR OPINION LETTER

Independent Auditor's Report - Nordic Semiconductor ASA

Other information

Management is responsible for the other information. The other information comprises information in
the annual report, except the financial statements and our auditor's report thereon.

Our opinion on the financial statements does not cover the other information and we do not express
any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other
information and, in doing so, consider whether the other information is materially inconsistent with
the financial statements or our knowledge obtained in the audit or otherwise appears to be materially
misstated.

If, based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of the Board of Directors and the Managing Director for the
Financial Statements

The Board of Directors and the Managing Director (Management) are responsible for the preparation
in accordance with law and regulations, including a true and fair view of the financial statements in
accordance with International Financial Reporting Standards as adopted by the EU, and for such
internal control as management determines is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Company’s and the
Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless management either intends to
liquidate the Group or to cease operations, or has no realistic alternative but to do so.

Auditor’s Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole
are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report
that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee
that an audit conducted in accordance with laws, regulations, and auditing standards and practices
generally accepted in Norway, including ISAs will always detect a material misstatement when it
exists. Misstatements can arise from fraud or error and are considered material if, individually or in
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the
basis of these financial statements.

As part of an audit in accordance with laws, regulations, and auditing standards and practices
generally accepted in Norway, including ISAs, we exercise professional judgment and maintain
professional scepticism throughout the audit. We also:

•

identify and assess the risks of material misstatement of the financial statements, whether due
to fraud or error. We design and perform audit procedures responsive to those risks, and
obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The
risk of not detecting a material misstatement resulting from fraud is higher than for one

(3)

8585

NORDIC SEMICONDUCTOR | ANNUAL REPORT 2020 | AUDITOR OPINION LETTER

Independent Auditor's Report - Nordic Semiconductor ASA

resulting from error, as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control.

• obtain an understanding of internal control relevant to the audit in order to design audit

procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's or the Group's internal control.

•

evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.

conclude on the appropriateness of management’s use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related to
events or conditions that may cast significant doubt on the Company and the Group's ability to
continue as a going concern. If we conclude that a material uncertainty exists, we are required
to draw attention in our auditor’s report to the related disclosures in the financial statements
or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the
audit evidence obtained up to the date of our auditor’s report. However, future events or
conditions may cause the Company and the Group to cease to continue as a going concern.

evaluate the overall presentation, structure and content of the financial statements, including
the disclosures, and whether the financial statements represent the underlying transactions
and events in a manner that achieves a true and fair view.

obtain sufficient appropriate audit evidence regarding the financial information of the entities
or business activities within the Group to express an opinion on the consolidated financial
statements. We are responsible for the direction, supervision and performance of the group
audit. We remain solely responsible for our audit opinion.

We communicate with the Board of Directors regarding, among other matters, the planned scope and
timing of the audit and significant audit findings, including any significant deficiencies in internal
control that we identify during our audit.

We also provide the Board of Directors with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, related
safeguards.

From the matters communicated with the Board of Directors, we determine those matters that were of
most significance in the audit of the financial statements of the current period and are therefore the
key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes
public disclosure about the matter or when, in extremely rare circumstances, we determine that a
matter should not be communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.

(4)

8686

NORDIC SEMICONDUCTOR | ANNUAL REPORT 2020 | AUDITOR OPINION LETTER

Independent Auditor's Report - Nordic Semiconductor ASA

Report on Other Legal and Regulatory Requirements

Opinion on the Board of Directors’ report

Based on our audit of the financial statements as described above, it is our opinion that the
information presented in the Board of Directors’ report and in the statements on Corporate
Governance and Corporate Social Responsibility concerning the financial statements, the going
concern assumption and the proposed allocation of the result is consistent with the financial
statements and complies with the law and regulations.

Opinion on Registration and Documentation

Based on our audit of the financial statements as described above, and control procedures we have
considered necessary in accordance with the International Standard on Assurance Engagements
(ISAE) 3000, Assurance Engagements Other than Audits or Reviews of Historical Financial
Information, it is our opinion that management has fulfilled its duty to produce a proper and clearly
set out registration and documentation of the Company’s accounting information in accordance with
the law and bookkeeping standards and practices generally accepted in Norway.

Oslo, 16 March 2021
PricewaterhouseCoopers AS

Eivind Nilsen
State Authorised Public Accountant

(This document is signed electronically)

(5)

8787

NORDIC SEMICONDUCTOR | ANNUAL REPORT 2020 | AUDITOR OPINION LETTER

Board of Directors &
Executive Management

Board of Directors

Birger Steen | Chair

Chair of the Board since 2018 and board member since 2017

Birger Steen is a technology investor based in Munich, Germany and serves as Principal
at Summa Equity AB. He served as CEO of Parallels, Inc. from 2010 to 2016. He was
Vice President of Worldwide SMB and Distribution at Microsoft Corp. in Redmond and
General Manager of Microsoft Russia and Microsoft Norway from 2002 to 2010. Prior
to joining Microsoft, Mr. Steen was CEO of Scandinavia Online and Vice President of
Business Development in Schibsted ASA, where he first served as a consultant while at
McKinsey & Company from 1993 to 1996. Mr. Steen received his MSc in Computer Science
and Industrial Engineering from the Norwegian Institute of Technology in Trondheim. He
also holds a degree in Russian language from the Defense School of Intelligence and
Security in Oslo and received his MBA from INSEAD in France. Mr. Steen has served as a
Non-Executive Director of Schibsted ASA since 2014, Nordea Bank AB since 2015, where
he chairs the Board Operations and Sustainability Committee, and at Cognite AS and
Pagero AB since 2019. He is the founder and Chair of the Nordic Innovation Summit in
Seattle and Chair of the Advisory Board at Digital Norway.

Current holdings in the company: 181 231 shares.

Inger Berg Ørstavik | Board Member

Board member since 2017

Inger Berg Ørstavik is a professor at the Department of Private Law, University of Oslo. She
has previously been a partner with Advokatfirmaet Schjødt AS and a lawyer at the office
of the Attorney General for Civil Affairs. Mrs. Ørstavik has a law degree from the University
of Oslo, a Ll.M. from Ruprecht-Karls-Universität in Heidelberg, Germany, and a Ph.D. from
the University of Oslo in the areas of intellectual property law and competition law. She
has taught international human rights law at Fudan University in Shanghai, China where
she resided from 2005 to 2009. Mrs. Ørstavik has experience as a member of the Board of
Directors in several listed companies.

Current holdings in the company: 3 431 shares.

Jan Frykhammar | Board Member

Board member since 2019

Jan Frykhammar is former interim CEO, CFO, Head of Professional Services and CFO
North America in Ericsson AB. He has extensive knowledge of the telecom market and
a broad experience in the accounting area in his former role as CFO.

Current holdings in the company: 22 431 shares.

NORDIC SEMICONDUCTOR | ANNUAL REPORT 2020 | BOARD OF DIRECTORSAnita Huun | Board Member

Board member since 2019

Anita Huun, currently CFO in Cappelen Damm and a former CFO of Microsoft
Norway with background as equity analyst with focus on IT companies. She has also
been a Director at Link Mobility ASA.

Current holdings in the company: 11 431 shares.

Endre Holen | Board Member

Board member since 2019

Endre Holen has more than 25 years consultancy experience from McKinsey & Co.
He has primarily worked with large international technology companies and has
been Managing Partner for McKinsey's Global Tech Media and Telecom team. Mr.
Holen also has a broad experience and a wide professional network from counseling
Fortune 1000 CEOs on topics like strategy, corporate performance, succession
planning, leadership and Board governance.

Current holdings in the company: 153 061 shares.

Øyvind Birkenes | Board Member

Board member since 2019

Øyvind Birkenes, currently the CEO at Airthings AS, and formerly General Manager
for Low Power RF at Texas Instruments (TI) in the USA, where he headed the product
lines that developed and sold ultra-low power wireless MCUs, radio transceivers and
System on Chips.

Current holdings in the company: 8 773 shares.

Annastiina Hintsa | Board Member

Board member since 2019

Annastiina Hintsa is the COO of Hintsa Performance in Finland, a company focusing
on enhancing the performance and leadership of client companies, best known for
working with Formula 1 teams. Ms. Hintsa also has experience from McKinsey & Co.
and from the Bank of Finland.

Current holdings in the company: 2 431 shares.

NORDIC SEMICONDUCTOR | ANNUAL REPORT 2020 | BOARD OF DIRECTORSEmployee Representatives

Jon Helge Nistad | Board Employee Representative

Board member since 2017

Jon Helge Nistad has a Master of Science degree in Electrical Engineering from
NTNU in Trondheim. Jon Helge has been employed in Nordic Semiconductor since
2006, where he has gained experience in application development, embedded
software design and project management. He is currently working as a Senior R&D
engineer in Nordic Semiconductor.

Current holdings in the company: 0 shares, 2 854 share options and 600 RSUs.

Joel Stapelton | Board Employee Representative

Board member since 2020

Joel Stapleton is an Engineer, graduating with honors from The Australian National
University in 2002. He joined Nordic in 2008 after working with GPS systems and
secure communication systems in Australia. At Nordic, Joel has had several roles as
an embedded SW Engineer, SW Architect, and since 2012, as a Technical Product
Manager specifying Wireless SoC and Bluetooth SW platform products working with
Nordic Sales and R&D teams and key customers.

Current holdings in the company: 0 shares, 3 889 shares options and 2 650 RSUs.

Susheel Ray Nuguru | Board Employee Representative

Board member since 2018

Susheel Raj Nuguru has a Master of Science in Electronics from Tampere University
of Technology. He has been with Nordic since 2012 but has been working with
embedded programming since 2004. His area of focus is the software side of real
time systems. Susheel is currently employed as a Technical Support senior engineer
at Nordic. During his employment with Nordic he has gained experience within sales,
marketing and R&D while working for various departments.

Current holdings in the company: 0 shares, 1 709 share options and 600 RSUs.

Morten Dammen | Board Employee Representative

Board member since 2019

Morten Dammen has a Master of Science degree in Electrical Engineering from
NTNU in Trondheim. Morten has been employed in Nordic Semiconductor since 2001,
with a seven-year break between 2007 and 2014. Morten is currently working as a
Senior Project Manager in IC development. Morten has also been working in Q-Free
ASA for 10 years, in several positions from project management, team management
to VP R&D.

Current holdings in the company: 0 shares, 4 073 share options and 2 150 RSUs.

NORDIC SEMICONDUCTOR | ANNUAL REPORT 2020 | BOARD OF DIRECTORSExecutive Management

Svenn-Tore Larsen | Chief Executive Officer

Mr. Larsen is an Electronic Engineer from the University of Strathclyde, UK. He was
appointed Chief Executive Officer of Nordic Semiconductor in February 2002. Mr.
Larsen has broad international experience in the semiconductor business, previously
as Director for the Nordic region for Xilinx Inc. He has also been working at Philips
Semiconductor. Larsen was member of the Board of Nordic Semiconductor from
2000-2002.

Holdings in the company: 1 905 400 shares, 46 109 share options, 10 621 RSUs and 24
057 performance shares.

Pål Elstad | Chief Financial Officer

Pål Elstad has held several senior financial positions, most recently as investor
relations responsible for REC Silicon ASA and Head of Finance for REC Solar in
Singapore. In addition, he has extensive manufacturing and supply-chain experience
from General Electric Healthcare. Mr. Elstad holds a Bachelor of Economics degree
from the Norwegian Business School (BI) and is a State Authorized Public Accountant
(CPA).

Holdings in the company: 18 846 shares, 29 761 share options, 6 345 RSUs and 12 747
performance shares.

Katarina Finneng | Human Resources Director

Mrs. Finneng has extensive international experience within management, Human
Resources and Communications/PR from several different sectors. Her most
recent position before being appointed HR Director in Nordic Semiconductor from
September 2019 was with Norwegian Air Shuttle ASA. Katarina Finneng holds a
Master of Political Science degree from the University of Gothenburg, Sweden, as
well as an Executive Master degree in Management from BI Norwegian Business
School. Mrs. Finneng is a Director of the Board in the real estate development
company Solon Eiendom ASA.

Holdings in the company: 0 shares, 13 334 share options, 5 241 RSUs and 5 241
performance shares.

Marianne Frydenlund | Legal Director

Mrs. Frydenlund holds a law degree from the University of Oslo and North
Dakota. She started her career in 2007 as a Warranty Responsible in StatoilHydro
(Equinor), before taking on various Legal Counsel and Contract Manager positions.
Her experience includes working for Huawei Technologies, Aker Engineering &
Technologies (Aker Solutions) and Nexans Norway. Marianne sits on the Board
of the Norwegian Company Lawyers Association and is on the committee for the
annual winter seminar for Industrijuristgruppen/Industry Lawyer Association. Mrs.
Frydenlund was appointed Legal Director at Nordic Semiconductor in February 2018,
and also acts as Secretary to the Board of Directors.

Holdings in the company: 2 200 shares, 10 298 share options, 4 000 RSUs and 7 506
performance shares.and 7 506 performance shares.

9292

NORDIC SEMICONDUCTOR | ANNUAL REPORT 2020 | EXECUTIVE MANAGEMENTKjetil Holstad | Director of Product Management

Mr. Holstad has a B.Sc degree in Electronics from Høgskolen i Sør-Trøndelag. After
working 15 years in various technical and marketing positions related to MCUs and
wireless technologies in Atmel Corporation and Texas Instruments, he joined Nordic
in 2015 as a Product Manager for the short range wireless business. In 2019 Kjetil was
appointed Director of Product Management.

Holdings in the company: 6 604 shares, 12 714 share options, 4 276 RSUs and 8 087
performance shares.

Geir Langeland | Sales and Marketing Director

Mr. Langeland has a B.eng Honours degree in Electronics from University of
Manchester Institute of Science and Technology (UMIST). He was appointed Product
Manager Standard Components at Nordic Semiconductor in October 1999, before
being appointed to Director Sales and Marketing September 2005. Before joining
Nordic, Mr. Langeland worked as Field Sales/Applications Engineer in Memec
Norway, a leading global electronic components distribution company.

Holdings in the company: 187 700 shares, 30 511 share options, 6 621 RSUs and 13 328
performance shares.

Ole-Fredrik Morken | Supply Chain Director

Mr. Morken joined the company as an Analog IC designer in 1994 and has since held
numerous positions related to Project- and Supply Chain Management, including
a brief employment for SensoNor ASA in 1999. He was appointed Supply Chain
Director in 2010 and is currently based in Taipei. Mr. Morken holds a Master’s degree
in Electronics Engineering from Norwegian University of Science and Technology
(NTNU).

Holdings in the company: 180 000 shares, 27 134 share options, 5 241 RSUs and 10
576 performance shares.

9393

NORDIC SEMICONDUCTOR | ANNUAL REPORT 2020 | EXECUTIVE MANAGEMENTSvein-Egil Nielsen | Chief Technology Officer & Director of Strategy

Mr. Nielsen holds MBA from the Haas School of Business at the University of
California, Berkeley and Bachelor of Engineering honors degree in Computer and
Electronics Systems from University of Strathclyde.He joined Nordic in 2001 as
Director of Sales and Marketing. He also held a position as R&D director from 2005
to 2006 and Director of Emerging Technologies and Strategic Partnerships from 2010
to 2012. Additionally, he served Innovation Norway as their Director of San Francisco
and Houston offices where he was in charge of promoting Norwegian technology
from 2007 to 2010. Prior to Nordic, he worked for Boston Consulting Group as a
consultant.

Holdings in the company: 17 000 shares, 32 763 share options, 7 172 RSUs and 14 794
performance shares.

Ebbe Rømcke | Quality Director

Mr. Rømcke has a M.Sc. degree in Electronics Engineering from Norwegian University
of Science and Technology (NTNU). He was appointed Quality Director of Nordic
Semiconductor in 2002. Prior to this Mr. Rømcke worked eight years in the company
as Digital Designer, Project Manager and Group Manager. He has also experience
from Digital Design and Project Management in Normarc AS (now Park Air Systems),
a leading manufacturer of aviation systems.

Holdings in the company: 68 900 shares, 17 507 share options, 4 276 RSUs and 8 544
performance shares.

Ståle "Steel" Ytterdal | Director Investor Relations

Mr. Ytterdal holds a Bachelor of Electronics Engineering and Business Administration
from NKI College of Engineering in Oslo, Norway. He worked several years in
Ericsson Standard Component before starting in Nordic as Regional Sales Manager
for Asia and the Pacific in 2001. Between 2004 and 2019, Mr. Ytterdal was stationed
in Hong Kong as Director of Sales&Marketing in APAC, establishing Nordic’s
presence in the region. He also held a position as Director of the Board of the
Norwegian Chamber of Commerce in Hong Kong from 2005-2008. Mr. Ytterdal is
from 2019 based in Oslo, Norway, appointed as Director IR.

Holdings in the company: 126 000 shares, 16 633 share options, 4 414 RSUs and 9 140
performance shares.

9494

NORDIC SEMICONDUCTOR | ANNUAL REPORT 2020 | EXECUTIVE MANAGEMENTAlternative Performance
Measures

The financial information is prepared in accordance with International
Financial Reporting Standards (IFRS) as adopted by EU. Additionally, it is
management’s intent to provide alternative performance measures (APM)
that are regularly reviewed by management to enhance the understanding
of the Group’s performance. An Alternative Performance Measure is a
measure of historical or future financial performance, financial position,
or cash flows other than a financial measure defined or specified in the
applicable financial reporting framework.

The Group has identified the following APMs used in reporting (amount in USD million):

Gross Margin. Gross Profit divided by Total

Revenue. Gross margin is presented as it is
the main financial KPI to measure the Group’s
operations performance.

EBITDA Margin. EBITDA divided by Total Revenue.

GROUP

Gross profit

Total revenue

Gross Margin

2020

2019

GROUP

213.9

146.8

EBITDA

405.2

288.4

Total Revenue

52.8% 50.9%

EBITDA Margin

2020

76.8

2019

32.8

405.2

288.4

18.9%

11.4%

EBITDA terms are presented as they are commonly
used by investors and financial analysts.

EBITDA. Earnings before interest, taxes (operating

profit), depreciation and amortization.

Short-range EBITDA Margin. EBITDA excluding

cellular IoT, divided by Total Revenue exluding
cellular IoT revenue. This APM shows Nordic's
profitability excluding products in an investment
phase with limited revenue.

GROUP

Operating profit

Depreciation

EBITDA

2020

2019

GROUP

45.7

31.1

76.8

9.3

23.5

32.8

Reported EBITDA

Long-range (cellular IoT)
EBITDA loss

2020

76.8

2019

32.8

30.2

24.7

Short-range EBITDA

106.9

57.6

Total revenue (excluding
cellular IoT revenue)

398.7

287.3

Short-range EBITDA margin

26.8% 20.0%

9595

NORDIC SEMICONDUCTOR | ANNUAL REPORT 2020 | ALTERNATIVE PERFORMANCE MEASURES
Cash Operating Expenses. Total payroll and other operating expenses adjusted for non-cash related

items including option expenses, receivable write-off and capitalization of development expenses. Nordic
management believes that this measurement best captures the expenses impacting the cash flow of the Group.

GROUP

Payroll expenses

Other operating expenses

Depreciation

Total operating expenses

Depreciation

Option expense

Capitalized expenses

Cash Operating Expenses

2020

101.2

35.9

31.1

168.2

-31.1

-4.3

8.4

141.2

2019

80.3

33.7

23.5

137.5

-23.5

-1.8

11.3

123.4

Last twelve months operating expenses exluding depreciation divided by last twelve months revenue.

Nordic’s business is seasonal and by dividing last twelve months operating expenses excl. depreciation by
last twelve months revenue, management is able to track cost level trends in relation to revenue. As a growth
business it is key to keep cost level under control while still growing the business, and this ratio keeps track on
that.

Total operating expenses

Depreciation

Operating expenses excluding depreciation

Total revenue

LTM opex / LTM revenue

2020

168.2

-31.1

137.2

405.2

33.8%

2019

137.4

-23.5

113.9

288.4

39.5%

Net working capital divided by last twelve months revenue. Net working capital is a measure of both a

company's efficiency and its short-term financial health, and by dividing the measure by last twelve months,
seasonal effects are excluded. Nordic management uses this ratio to report on liquidity management to the
financial market and internally to track performance.

Current assets

Cash and cash equivalents

Current liabilities

Current financial liabilities

Current lease liabilities

Income taxes payable

Net working capital

Total revenue

NWC / LTM revenue

2020

401.9

-242.5

-91.7

0.3

5.5

5.0

78.5

405.2

19.4%

2019

219.6

-90.6

-66.0

4.0

3.1

70.2

288.4

24.3%

Backlog. Customer orders placed by the end of the reporting period for delivery in next and following quarters.

This APM can be used as support for guidance for next quarter.

9696

NORDIC SEMICONDUCTOR | ANNUAL REPORT 2020 | ALTERNATIVE PERFORMANCE MEASURESNordic offices

TRONDHEIM, NORWAY

HEAD OFFICE

OSLO, NORWAY

OULU, FINLAND

STOCKHOLM, SWEDEN

TAMPERE, FINLAND

LUND, SWEDEN

UNITED KINGDOM

ESPOO, FINLAND

TURKU, FINLAND

KRAKOW, POLAND

DÜSSELDORF, GERMANY

PORTLAND, USA

SAN JOSE, USA

HYDERABAD, INDIA

HONG KONG, CHINA

Norway | TRONDHEIM
Otto Nielsens veg 12
7004 Trondheim, Norway
Phone: +47 72 89 89 00

Norway | OSLO
Karenslyst Allé 5
0213 Oslo, Norway
Phone: +47 22 51 10 50

BEIJING, CHINA

SEOUL, KOREA

SHENZHEN,

CHINA

YOKOHAMA, JAPAN

SHANGHAI, CHINA

TAIPEI, TAIWAN

MANILA,

PHILIPPINES