v3.26.1
Income Taxes
 12 Months Ended
Dec. 31, 2025
Income Tax Disclosure [Abstract]  
Income Taxes
11. INCOME TAXES
Income Tax Provision
Income before income tax is comprised of the following:
 
 
  
Year Ended December 31
 
 
  
2023
 
  
2024
 
  
2025
 
 
  
US$
 
  
US$
 
  
US$
 
Cayman
      (17,082 )       (5,305 )       (21,802 ) 
Income recorded in Hong Kong
      23,741        34,983        14,208  
Income from other foreign operations
      54,389        77,731        147,721  
  
 
 
     
 
 
     
 
 
  
Income before taxes
      61,048        107,409        140,127  
  
 
 
     
 
 
     
 
 
  
The components of income tax provision (benefit) were as follows:
 
    
Year Ended December 31
  
    
2023
    
2024
    
2025
  
    
US$
    
US$
    
US$
  
Current taxes:
       
Hong Kong taxes — current
      3,983       5,428       1,728  
Foreign taxes — current
      3,764       13,154       15,937  
  
 
 
    
 
 
    
 
 
  
Total current taxes
      7,747       18,582       17,665  
Deferred taxes:
       
Hong Kong taxes — deferred
      —        —        —   
Foreign taxes — deferred
      428       (422 )      (173 ) 
  
 
 
    
 
 
    
 
 
  
Total deferred taxes
      428       (422 )      (173 ) 
  
 
 
    
 
 
    
 
 
  
Income tax expense
      8,175       18,160       17,492  
  
 
 
    
 
 
    
 
 
  
Effective tax rate
      13.4 %      16.9 %      12.5 % 
Effective Tax Rate Reconciliation
The Company adopted ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, on a prospective basis. The Company consists of a Cayman Islands parent company with various foreign and U.S. subsidiaries. Under the current laws of Cayman Islands, the Company is not subject tax on its income. The Company conducts its core business activities across East Asia, including China, Hong Kong, Macau, and Taiwan. The Hong Kong statutory income tax rate of
16.5%
reflects the Company’s economic and administrative center and most closely approximates the Company’s effective tax rate across its principal operating jurisdictions. While applicable statutory tax rates vary among these jurisdictions and may be subject to preferential regimes or adjustments, management believes that the Hong Kong statutory income tax rate provides the most representative measure of the Company’s overall tax profile. Accordingly, for purposes of reconciling statutory tax rate to effective income tax rate pursuant to ASU 2023-09, the Company has evaluated and determined to apply Hong Kong statutory tax rate of 16.5%, starting from 2025. The statutory tax rates in the jurisdictions the Company operates range from
12% to 21%. For the year ended December 31, 2025, the Company’s effective tax rate was 12.5%, a decrease from 13.4% and 16.9% in 2023 and 2024, respectively, 
 
primarily due to changes in the proportional income earned by operations in key jurisdictions. Effective tax rates in each jurisdiction are generally lower than statutory rates due to tax credits for research and development and other tax incentive programs and
are
determined by different government policies in each of the jurisdictions where the Company operates.
A reconciliation of the Hong Kong statutory rate of 16.5% to the Company’s effective tax rate for the year ended December 31, 2025 was as follows :
 
    
2025
  
    
US$
     
%
  
Tax at Hong Kong Statutory Rate
      23,121        16.5  
Other Jurisdiction Tax Effects
      
Cayman Islands
      
Statutory tax rate difference between Hong Kong and Cayman Islands
      (3,482 )       (2.5 ) 
Nontaxable or nondeductible items
      7,078        5.1  
Other
      290        0.2  
Macau
      
Statutory tax rate difference between Hong Kong and Macau
      (2,075 )       (1.5 ) 
Other
      (131 )       (0.1 ) 
China
      
Statutory tax rate difference between Hong Kong and China
      3,154        2.3  
Tax Credits
      (4,825 )       (3.4 ) 
Changes in Valuation Allowances
      762        0.5  
Other
      (202 )      (0.1 )
U.S.
      
Statutory tax rate difference between Hong Kong and U.S.
      (1,855 )      (1.3 )
Changes in Valuation Allowances
      2,589        1.9  
Other
      31        0.0  
Other Foreign Jurisdictions
      
Statutory tax rate difference between Hong Kong and Other Foreign Jurisdictions
      1,046        0.8  
Other
      638        0.5  
Changes in Unrecognized Tax Benefits
      (8,647 )       (6.2 ) 
  
 
 
     
 
 
  
Provision for income taxes and effective tax rate
      17,492        12.5  
  
 
 
     
 
 
  
A reconciliation of the Company’s income tax expense at Cayman statutory rate and provision for income tax prior to adoption of ASU 2023-09 is shown below:
 
    
2023
     
2024
  
    
US$
     
US$
  
Tax expense at Cayman statutory rate
      —         —   
Differences between Cayman and other statutory tax rates
      9,979        16,107  
Permanent differences
      206        365  
Temporary differences
      (1,614 )       (2,703 ) 
Alternative minimum tax
      1        1  
Income tax on undistributed earnings
      —         193  
Net changes in income tax credit
      (205 )       (101 ) 
Net changes in valuation allowance of deferred income tax assets
      3,260        5,014  
Net operating loss carryforwards
      (1,805 )       497  
Liabilities related to unrealized tax benefits
      5,482        (42 ) 
Adjustment of prior years’ taxes and others
      (7,129 )       (1,171 ) 
  
 
 
     
 
 
  
Income tax expense
      8,175        18,160  
  
 
 
     
 
 
  
 
Income Taxes Paids
The following table presents income taxes paid, net of refunds received, for the year ended December 31, 2025.
 
    
Year ended

December 31,
2025
  
    
US$
  
Hong Kong
      5,729  
Macau
      10,078  
Others
      906  
  
 
 
  
Total income tax paid, net of refunds
      16,713  
  
 
 
  
Deferred and Current Income Taxes
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts for income tax purposes.
Significant components of our deferred tax assets (liabilities) at the end of each period are as follows:
 
    
December 31
  
    
2024
     
2025
  
    
US$
     
US$
  
Stock-based compensation
      1,520        3,090  
Allowance for sales return
      1,024        472  
Inventory reserve
      3,122        1,939  
Foreign currency translation
      (126 )       7  
Property and equipment
      (628 )       (568 ) 
Investment tax credits
      3,596        3,603  
Net operating loss carryforwards
      21,607        24,636  
Others
      6,563        7,228  
Valuation allowance
      (27,800 )       (31,356 ) 
  
 
 
     
 
 
  
Net deferred tax assets
      8,878        9,051  
  
 
 
     
 
 
  
The valuation allowance shown in the table above relates to net operating loss carryforwards, tax credits and temporary differences for which the Company believes that realization is uncertain. Valuation allowance increased by US$4,680 thousand and US$3,556 thousand for the year ended December 31,
2024 and 
2025, respectively. The increase in valuation allowance in 2024 and 2025 had been based on all information
 that is currently available
, particularly the earnings history and forecasts of future taxable income in each respective jurisdiction.
As of December 31, 2025, the Company’s U.S. federal net operating loss carryforwards for federal income tax purposes were approximately US$23,605 thousand as of December 31, 2025, expiring at various times starting from 2026 through 2037 for federal losses generated through December 31, 2017, if not utilized. As a result of the U.S. Tax Cuts and Jobs Act (TCJA), all federal net operating losses of US$27,848 thousand that are generated beginning January 1, 2018 and beyond will carryforward indefinitely.
As of December 31, 2025, the Company’s U.S. federal and state research and development tax credit carryforwards for federal and state income tax purposes were approximately US$2,205 thousand and US$1,398 thousand, respectively. If not utilized, the federal tax credit carryforwards will expire starting in 2045, while the state tax credit carryforward has
no
expiration date in California.
 
Current U.S. federal and California state laws include substantial restrictions on the utilization of net operating losses and credits in the event of an “ownership change” of a corporation. Accordingly, the Company’s ability to utilize net operating loss and tax credit carryforwards may be limited as a result of such “ownership change”. Such a limitation could result in the expiration of carryforwards before they are utilized.
As of December 31, 2025, the Company had accumulated undistributed earnings from a foreign subsidiary of US$569 million. No deferred tax liability was recorded in respect of those amounts as these earnings are considered indefinitely reinvested. It is not practicable to estimate the amount of unrecognized deferred tax liabilities for these undistributed foreign earnings.
Unrecognized Tax Benefit
A reconciliation of the beginning and ending balances of the total amounts of unrecognized tax benefits is as follows:
 
    
Year Ended December 31
 
  
    
2023
    
2024
    
2025
  
    
US$
    
US$
    
US$
  
Balance, beginning of year
      37,105       43,764       43,584  
Increases in tax positions taken in current year
      16,054       4,376       6,328  
Decrease in tax position taken in prior year primarily related to the resolution of tax audit
      (9,395 )      (4,556 )      (14,654 ) 
  
 
 
    
 
 
    
 
 
  
Balance, end of year
      43,764       43,584       35,258  
  
 
 
    
 
 
    
 
 
  
At December 31, 2025, the Company had US$35,258 thousand of unrecognized tax benefits that if recognized would affect the effective tax rate. For the year ended December 31, 2023 the total amount of interest expense and penalties related to uncertain tax positions recorded in the provision for income tax expense was approximately US$1,072 thousand. For the years ended December 31, 2024 and 2025, the Company derecognized approximately US$1,053 thousand and US$ 465 thousand, respectively
,
for the interest expense and penalties
previously 
accrued because of a lapse in the statute of limitations. The total amount of accrued interest and penalties recognized as of December 31, 2024 and 2025 was US$6,797 thousand and US$6,332 thousand, respectively. The Company does not expect uncertain tax positions to change in the next twelve months, except in the case of settlements with tax authorities, the likelihood and timing of which are difficult to estimate.
The Company files income tax returns in the U.S. and foreign jurisdictions. The following table summarizes the Company’s major jurisdictions and tax years that remain subject to examination by tax authorities as of December 31, 2025:
 
Tax Jurisdiction
   
Tax Years
China
   
2022 and onward
Hong Kong
   
2022 and onward
Taiwan
   
2020 and onward
United States
   
2020 onward