Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☑    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in of the Exchange Act).    Yes  ☐    No  ☑

The aggregate market value of the voting and common equity of the registrant held by (for this purpose, persons and entities other than executive officers and directors) of the registrant, as of the registrant’s most recently completed second fiscal quarter (June 30, 2020) was approximately $1,454,187,000.

In this Annual Report on unless the context indicates otherwise, references to “Vicor,” “the Company,” “our company,” “we,” “us,” “our,” and similar references, refer to Vicor Corporation and its subsidiaries, unless otherwise specified.

The Company’s consolidated operating results are affected by a wide variety of factors that could materially and adversely affect revenues and profitability, including the risk factors described in Item 1A of this Annual Report on Form As a result of these and other factors, the Company may experience material fluctuations in future operating results on a quarterly or annual basis, which could materially and adversely affect its business, consolidated financial condition, operating results, and the share price of its listed common stock. This document and other documents filed by the Company with the Securities and Exchange Commission (“SEC”) include forward-looking statements regarding future events and the Company’s future results that are subject to the safe harbor afforded under the Private Securities Litigation Reform Act of 1995 and other safe harbors afforded under the Securities Act of 1933 and the Securities Exchange Act of 1934. All statements other than statements of historical fact are statements that could be deemed forward-looking statements. Forward-looking statements are based on our current beliefs, expectations, estimates, forecasts, and projections for the future performance of the Company and are subject to risks and uncertainties. Forward-looking statements are identified by the use of words denoting uncertain, future events, such as “anticipate,” “assume,” “believe,” “continue,” “could,” “estimate,” “expect,” “future,” “goal,” “if,” “intend,” “may,” “plan,” “potential,” “project,” “prospective,” “seek,” “should,” “target,” “will,” or “would,” as well as similar words and phrases, including the negatives of these terms, or other variations thereof. Forward-looking statements also include, but are not limited to, statements regarding: our expectations that we have adequate resources to respond to financial and operational risks associated with the novel coronavirus and our ability to effectively conduct business during the pandemic; our ongoing development of power conversion architectures, switching topologies, materials, packaging, and products; the ongoing transition of our business strategically, organizationally, and operationally from serving a large number of relatively low volume customers across diversified markets and geographies to serving a small number of relatively large volume customers; our intent to enter new market segments; the levels of customer orders overall and, in particular, from large customers and the delivery lead times associated therewith; anticipated new and existing customer wins; the financial and operational impact of customer changes to shipping schedules; the derivation of a portion of our sales in each quarter from orders booked in the same quarter; our intent to expand the percentage of revenue associated with licensing our intellectual property to third parties; our plans to invest in expanded manufacturing capacity, including the expansion of our Andover facility and the introduction of new manufacturing processes, and the timing, location, and funding thereof; our belief that cash generated from operations and the total of our cash and cash equivalents and short-term investments will be sufficient to fund operations and capital investments for the foreseeable future; our outlook regarding tariffs and the impact thereof on our business; our belief that we have limited exposure to currency risks; our intentions regarding the declaration and payment of cash dividends; our intentions regarding protecting our rights under our patents; and our expectation that no current litigation or claims will have a material adverse impact on our financial position or results of operations. These forward-looking statements are based upon our current expectations and estimates associated with prospective events and circumstances that may or may not be within our control and as to which there can be no assurance. Actual results could differ materially from those implied by forward-looking statements as a result of various factors, including but not limited to those described under Part I, Item 1 — “Business,” under Part I, Item 1A — “Risk Factors,” under Part I, Item 3 — “Legal Proceedings,” and under Part II, Item 7 — “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The discussion of our business contained herein, including the identification and assessment of factors that may influence actual results, may not be exhaustive. Therefore, the information presented should be read together with other documents we file with the SEC from time to time, including our Quarterly Reports on and our Current Reports on Form which may supplement, modify, supersede, or update the factors discussed in this Annual Report on Form We do not undertake any obligation to update any forward-looking statements as a result of future events or developments, except as required by law.

Vicor Corporation designs, develops, manufactures, and markets modular power components and power systems for converting electrical power (expressed as “watts,” and represented by the symbol “W”, with wattage being the product of voltage, expressed as “volts,” and represented by the symbol “V,” and current, expressed as “amperes,” and represented by the symbol “I”). In electrically-powered devices utilizing alternating current (“AC”) voltage from a primary AC source (for example, a wall outlet), a power system converts AC voltage into the stable direct current (“DC”) voltage necessary to power subsystems and/or individual applications and devices (known as “loads”). In many electronic devices, this DC voltage may be further converted to one or more voltages and currents required by a range of loads. In equipment utilizing DC voltage from a primary DC source (for example, a battery) or a secondary source (such as an converter), the initial DC voltage similarly may require further conversion. A power system most commonly incorporates four voltage conversion functions: transformation, isolation, rectification, and regulation.

Our website, www.vicorpower.com, sets forth detailed information describing our products, the applications for which they may be used, and our suite of design tools. The information contained on our website is not a part of, nor incorporated by reference into, this Annual Report on and shall not be deemed “filed” under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

All of our subsidiaries and their legal domicile are set forth in Exhibit 21.1 to this Annual Report on Form The activities of all of the above named entities are consolidated in the financial statements presented herein.

Power system performance is based primarily on conversion efficiency (i.e., the ratio of output power (i.e., watts) to input power) and power density (i.e., the amount of output power divided by the volume of the power system). Higher efficiency and density contribute to superior thermal performance, as the of power conversion and distribution is heat, which must be dissipated in order to assure the performance of the power system solution itself and the overall system to which it is delivering power. Power system performance also is based on the electrical characteristics of the power system (and their effect on and compatibility with the customer’s application). Important electrical characteristics include transient responsiveness (i.e., the reaction of a power system to a sudden change in voltage or current levels) and noise profile (i.e., the level of electromagnetic interference created by power conversion). We believe the superior performance of our power systems is the most important element of our differentiation strategy.

Our earliest market focus was on telecommunications infrastructure, which uses a standard DC distribution voltage of 48V (nominally 48V to 54V), the highest distribution voltage that meets Safety Voltage (“SELV”) standard requirements, while leaving sufficient margin for over-voltage protection circuits. While we offer products addressing other DC voltage standards (e.g., 380V for power distribution in data centers, 110V for rail applications, 28V for military and avionics applications, and 24V for industrial automation) and a broad range of customer requirements, we consider our core competencies to be associated with 48V distribution, which offers numerous inherent cost and performance advantages over lower distribution voltages, while remaining within the 60V SELV safety limit.

Our product portfolio also includes families of devices, which address applications requiring the transformation of AC voltages to regulated DC voltages. Examples of such applications include powering data center server racks, large-scale LED lighting, specialized laboratory, diagnostic, and test equipment, small-cell wireless base stations, and higher power equipment for defense and industrial use.

Given the growth profiles and performance requirements of the market segments served with Advanced Products and Brick Products, our strategy involves a transition in organizational focus, emphasizing investment in Advanced Products design and manufacturing, targeting high growth market segments with a high-volume operational model, while maintaining a profitable business in mature market segments we serve with Brick Products with a operational model.

We continue to invest in the research and development of power system technologies and product concepts addressing two accelerating trends, the first toward higher required conversion efficiencies, and the second toward more and diverse voltages, higher performance demands of complex loads, and, in particular, higher current requirements of those loads. These trends are most visible in the microprocessor-based applications we target with Advanced Products, for which energy consumption, energy efficiency, processor performance, and computing density are critical priorities. Recognizing the performance and scale limitations of conventional power distribution architectures and products, we introduced FPA and a range of enabling products incorporating our latest advances in power distribution concepts, switching topologies, materials, and packaging.

A typical FPA implementation for delivering 48V DC from a server backplane to a 1.0V microprocessor would consist of three modules: a PRM Module) regulator, a VTM (Voltage Transformation Module) current multiplier, and a proprietary communications controller. In contrast, a commodity IBA design for delivering 48V DC from a server backplane to a 1.0V microprocessor requires an additional conversion stage, to reduce 48V to 12V, and, at the point of load, a voltage regulation module (i.e., a “VRM” consisting of multiple switching regulators, each representing a phase and consisting of two switching transistors, one or more capacitors, and an inductor, with the transistors switched by pulse width modulation controller). For a 200W two stage, multiphase application, a 12V commodity IBA implementation would require an intermediate bus converter, to reduce 48V to 12V, and a VRM solution consisting of parallel phases (i.e., multiple switching regulators) to reduce and regulate the current for use at 1.0V by the microprocessor. Such a commodity IBA implementation requires a significantly higher component count, consumes more motherboard area, requires more copper conduit, generates more heat due to switching and distribution losses, offers inferior dynamic response, and can be meaningfully less efficient than a 48V FPA implementation.

The advantages of FPA over legacy power distribution architectures are most evident in high performance computing applications. Our power system solutions meet the computational performance requirements of artificial intelligence (“AI”). The microprocessors typically used in AI, particularly in more computationally demanding “machine learning” or “training” applications, are graphics processing units (“GPUs”) and custom application-specific integrated circuits (“ASICs”). Unlike central processing units (“CPUs”), which are designed for serial execution of complex and broad instruction sets, GPUs and AI ASICs are designed for massively parallel (i.e., concurrent) processing of repetitive transactions or calculations. As such, GPUs and AI ASICs generally operate at processing frequencies requiring the higher levels of average and peak current delivered by our solutions. Our most popular solution, consists of one MCD(Modular Current Driver) unit, providing high-bandwidth, regulation, and two MCM (Modular Current Multiplier) units, providing high performance current multiplication. delivers unprecedented current levels to GPUs and AI ASICs, in part due to the placement of the MCMs directly on the substrate onto which the processor is mounted, thereby minimizing distribution losses associated with high current levels. Placement of MCM units on the substrate also reduces the number of GPU or ASIC processor substrate pins required for power, allowing for their use by other functions (e.g., memory input/output (“I/O”)). This three-module laterally-mounted configuration, powering an AI accelerator card requiring 350W, delivers 0.7V, 650A average current, and up to 1,200A peak current to the GPU or AI ASIC, with superior transient response and unmatched power density.

We are unaware of any competitive solution for AI acceleration offering the power system performance and density of as solutions must increase the number of conversion phases to reach

Annual revenue associated with the sale of Advanced Products was approximately 35.8%, 28.6%, and 35.9% of the Company’s consolidated revenue for the years ended December 31, 2020, 2019, and 2018, respectively. Sales of Advanced Products recovered in 2020, reflecting the resumption of orders from both AI system vendors and hyperscalers, as the market segment recovered from an unexpected and sustained period of low demand across the computing market that began in 2018 and continued through 2019. This low demand was caused by the buildup of excess inventory levels at contract manufacturers during the second half of 2018 and planning uncertainty associated with the ongoing trade dispute between China and the U.S., the two largest geographic markets we serve. Despite the impact of the pandemic, the data center market has experienced relatively less disruption than other market segments we serve, as the rapid expansion of cloud-based computing and applications drove sustained demand for our solutions through 2020.    

Brick-format converters provide the integrated transformation, rectification, isolation, regulation, filtering, and/or input protection necessary to power and protect loads, across a range of conventional power architectures. We offer a wide range of brick-format converters, as well as complementary components providing AC line rectification, input filtering, power factor correction, and transient protection. Wide ranges of input voltages, output voltages, and output power are offered, allowing end users to select components appropriate to their individual applications. The products differ in dimensions, temperature grades, maximum power ratings, performance characteristics, pin configuration, and, in certain cases, characteristics specific to the targeted market.

We also integrate these converters and components into complete power systems representing standard or custom and solutions for our customers’ power needs. We refer to such standard products as our

The lead times between receipt and acceptance of an order and our shipment of the product have increased, largely as a consequence of the pandemic. Although demand visibility and supply chain conditions across the global electronics industry stabilized in 2019, the rapid onset of the pandemic during the first quarter of 2020 caused widespread delays in production and delivery. In response, during the second quarter of 2020, we extended our quoted lead times for delivery to customers to beyond 20 weeks. Since the second quarter of 2020, our supply chain has been stable, with limited instances of delays or interruptions. However, until the pandemic is substantially contained worldwide and supply chain uncertainties are further reduced, we intend to maintain these quoted lead times.

The size and growth characteristics of the markets we serve with Advanced Products and Brick Products also can differ significantly, and the range and quality of market data is problematic, making summary statements about these markets challenging. We believe our Advanced Products generally compete with power modules and power ICs developed and manufactured by IDMs and other fabless vendors of power semiconductors. We believe our Brick Products generally compete with similarly integrated switching power supply products developed and manufactured by large global competitors and a fragmented group of small regional competitors. The switching power supply market can be segmented by product type (i.e., converters, converters, and inverters), by output power levels, and by numerous vertical markets (i.e., industry-specific applications).

We reach and serve customers through several sales channels: a direct sales force; a network of independent sales representative organizations in North America and South America; independent, authorized distributors in Europe and Asia; and four authorized stocking distributors world-wide: Arrow Electronics, Inc., Corporation, Future Electronics Incorporated, and Mouser Electronics, Inc. All sales channels are supported by regional TSCs, each offering application engineering and sales support for our channel partners. Domestic TSCs are located in: Andover, Massachusetts; Lombard, Illinois; and Santa Clara, California. International TSCs are located in: Beijing, China; Hong Kong, China; Shanghai, China; Shenzhen, China; Munich, Germany; Bangalore, India; Milan, Italy; Tokyo, Japan; Seoul, South Korea; Taipei, Taiwan (Republic of China); and Camberley, United Kingdom. Customers do not place purchase orders with TSCs, but do so directly with the Company or with our channel partners. In Japan, customers place purchase orders with authorized distributors or, for certain custom products, VJCL.

We generally sell our products on the basis of our standard terms and conditions, and we most commonly warrant our products for a period of two years. Effective January 1, 2017, we extended the warranty period to three years for a range of H Grade, M Grade, and MI Family products sold after that date. In a limited number of circumstances, we have entered into supply contracts with certain high-volume customers calling for extended warranty terms. With our distribution partners, we also enter into contracts providing for our product warranties to transfer to the end customer upon final sale of our product(s) by the distributor.

Our resources are an important element of our efforts to interact with and support customers. Within our website, is a workspace of tools and references allowing engineers to select, architect, and implement power systems using our products. Our highly differentiated tool allows users to configure and analyze their own power system designs or those from an extensive library of designs addressing a wide range of applications. Users can modify the operating condition for each component of their design to match the intended application and perform efficiency and loss analysis of individual components

As previously disclosed, we partner with a highly-specialized third-party developer of metal finishing processes and equipment, which performs certain elements of our proprietary manufacturing process using equipment designed by the developer. In 2019 and 2020, we entered into service and equipment purchase agreements with this partner. While commodity services are available from numerous alternate providers, we entered into these agreements due to the level of our collaboration to date with the partner in the refinement of certain proprietary processes we employ and our joint commitment to environmentally sound manufacturing minimizing toxic waste. Approximately of the addition to our manufacturing facility will be allocated to installation of highly-automated equipment scheduled to be delivered by the partner, beginning the first half of 2021, which will enable the vertical integration of all manufacturing process steps for modules. We expect the qualification of this installed equipment will begin late during the first half of 2021, with production volumes to follow later in the year. We have relied on this partner’s services to meet our requirements for production to date, and we expect to do so through 2021, after which we expect to have fully-operational production capabilities on site.

Product quality and reliability are critical to our success and, as such, we emphasize quality and reliability in our design and manufacturing activities. We follow industry best practices in manufacturing and are compliant with ISO 9001 certification standards (as set forth by the International Organization for Standardization). Our quality assurance practices include rigorous testing and, as necessary, and temperature cycling (i.e., extended operation of a product to confirm performance) of our products using automated equipment. Incoming components, assemblies, and other parts are subjected to several levels of inspection procedures, and we maintain robust data on our raw material inventories in order to support our quality assurance procedures.

Components and materials used in our products are purchased from a variety of domestic and international vendors. Generally, the global electronics supply chain recovered during 2020 from the impact of the

We recruit from colleges and universities, with a focus on specific engineering disciplines. In collaboration with certain universities, we maintain a student program, whereby qualifying undergraduate and graduate students work at our Andover facilities for one or two semesters, receiving course credit towards their graduation. In recent years, we have had as many as approximately two dozen participants per semester, with a substantial percentage of participants receiving offers of full-time employment.

Our compensation program is designed to attract and reward talented individuals who possess the skills necessary to support our business objectives, assist in the achievement of our strategic goals, and create long-term value for our stockholders. We provide employees with compensation packages that include a competitive base salary or wage rate and benefits such as life and health (medical, dental, and vision) insurance, supplemental insurance, paid time off, paid parental leave, and a 401(k) plan (with Company match). Generally (and subject to local laws), new employees are awarded options for the purchase of the Company’s common stock. Depending on an employee’s role, he or she may be eligible for annual incentive bonuses and periodic awards of options based on the performance of the Company and that of the employee. We believe a compensation program with appropriate long-term incentives aligns employee and stockholder interests in increasing the value of the Company.

We emphasize and encourage employee development and training. To empower employees to reach their potential, we provide a range of development programs and opportunities, including training programs and tuition reimbursement for those pursuing outside certification or degrees.

We seek to support the communities in which we operate and believe this commitment contributes to our efforts to attract and retain employees. We support our employees in volunteer initiatives. We also partner with a range of organizations and have had notable success in our collaboration for over two decades with the Crest Collaborative of Methuen, MA, a local advocacy agency, in providing enriching employment opportunities for adults participating in that agency’s programs.

For more information on our employee and community initiatives, please see our Corporate Social Responsibility webpage at .

We maintain a website with the address www.vicorpower.com and make available free of charge through this website our Annual Reports on Quarterly Reports on Current Reports on

While our website sets forth extensive information, including information regarding our products and the applications in which they may be used, such information is not a part of, nor incorporated by reference into, this Annual Report on and shall not be deemed “filed” under the Exchange Act.

This Annual Report on contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act. Actual results could differ materially from those projected in the forward-looking statements as a result of, among other factors, the risk factors set forth below.

During 2020, economic conditions varied by region, and were rapidly and significantly influenced by the pandemic. The pandemic and the response of governments worldwide to contain its spread negatively influenced our financial and operational performance for all four quarters of 2020, and future developments may have a potentially more substantial negative influence on our financial and operational performance over an unknown period of time.

Our deliveries to and orders from North American industrial and defense electronics customers declined sharply at the onset of the pandemic, during the first quarter of 2020, given reduced manufacturing activity and broad uncertainty. The second half of 2020 saw a recovery of North American activity to levels. We believe domestic demand will further improve once the pandemic is substantially contained and uncertainties are reduced, but we cannot predict when this will occur.

Trading conditions in China (inclusive of Hong Kong, our largest international market), had deteriorated through 2019 due to macroeconomic and trade-related uncertainties. At the beginning of 2020, trading conditions were significantly further affected by the pandemic, with much of the country’s manufacturing disrupted for January and February 2020. By late March 2020, after aggressive measures to contain the coronavirus, the Chinese government quickly implemented economic stimulus measures, and we experienced a rapid recovery of demand from China and Hong Kong. This demand was sustained through the remainder of 2020. As addressed in our discussion herein of market characteristics, exports to China and Hong Kong for 2020 totaled approximately $93,000,000, representing approximately 31.4% of total revenue for the year. We believe this volume was primarily associated with the stimulus spending of the Chinese government, although we also believe an unquantifiable amount of this volume may have been associated with accelerated purchasing by customers anticipating further deterioration of the trade relationship between China and the U.S., which, if it were to occur, could substantially limit purchases by such customers. Our belief is based on input from our

We anticipate demand in 2021 from China and Hong Kong will approximate recent quarterly levels, based on information from our customers and distribution partners, and assuming the pandemic is substantially contained. Should China’s economic stimulus policies change or if there is a further deterioration of trade relations between the U.S. and China, such demand may decline. However, we cannot predict if or when circumstances may change, nor can we predict the amount by which bookings or shipments may change.

We have taken action to protect the health and safety of our workforce and to otherwise minimize the potential impact of the coronavirus on our operations, the costs of which, to date, have not had a material effect on our financial performance. We expect to maintain the measures put in place until we determine the pandemic is adequately contained for purposes of our business, and we may take further actions we consider to be in the best interests of our employees, customers, business partners, and suppliers or in response to government mandate or requirement. Such further actions may have a negative influence on our costs and productivity and, in turn, our financial and operational performance.

Our customers, business partners, and suppliers have been and may continue to be adversely affected by the pandemic, which also may contribute to a negative influence on our future financial and operational performance.

We continue to evaluate alternative sources of raw materials, and, in late 2020, we qualified vendors for certain high-volume raw materials and components. We anticipate a reduction in Section 301 Tariffs we incur during 2021, given the ongoing transition to vendors, but we are not able to estimate the amount of such reduction, if any. Similarly, we cannot predict if or when the U.S. government may reduce or eliminate Section 301 Tariffs.

Uncertain macroeconomic conditions, extended trade disputes, and the relative strength of the U.S. Dollar may reduce for our customers’ products and, in turn, their purchases of our products, thereby reducing our revenues and earnings. In addition, such adverse conditions may, among other things, result in increased price competition for our products, notably in our Brick Product categories, increased risk of excess and obsolete inventories, increased risk in the collectability of our accounts receivable from our customers, increased risk in potential reserves for doubtful accounts and write-offs of accounts receivable, and higher operating costs as a percentage of revenues.

We may choose, and have chosen, to mitigate our inventory risks by increasing the levels of inventory for certain components and materials. Such increased inventory levels may increase the potential risk for excess or obsolete inventories, should our forecasts fail to materialize or if there are negative factors impacting our customers’ end markets, leading to order cancellation. If we identify excess inventory or determine certain inventory is obsolete (i.e., unusable), we likely will record additional inventory reserves (i.e., expenses representing the of the excess or obsolete inventory), which could have an adverse effect on our gross margins and on our operating results.

If suppliers or subcontractors cannot provide their products or services on time or to our specifications, we may not be able to meet the demand for our products and our delivery times may be negatively affected. In addition, we cannot directly control the quality of the products and services provided by third parties. In order to expand revenue, we likely will need to identify and qualify new suppliers and subcontractors to supplant or replace existing suppliers and subcontractors, which may be a time-consuming and expensive process. In addition, any qualification of new suppliers may require customers of our products utilizing products and services from new suppliers and service providers to undergo a process. Such circumstances likely would lead to disruptions in our production, increased manufacturing costs, delays in shipping to our customers, and/or increases in prices paid to third parties for products and services.

As previously disclosed, we rely on a third-party partner to provide certain manufacturing steps associated with a proprietary Advanced Products packaging process. This process, developed with the third-party partner, involves complex metal surface finishing, performed on equipment developed by the third-party partner. An important, differentiating benefit of this proprietary process is that it does not generate problematic effluent, resulting in an environmentally safe approach to metal surface finishing, with minimal waste. We have entered into agreements with the third-party partner for production and transfer of technologies and process including the purchase of the enabling equipment developed by the third-party partner.

To date, we have successfully relied upon this third-party partner to perform these manufacturing steps, although we have experienced delivery delays associated with the third-party partner’s volume constraints. This experience caused us to accelerate our schedule for establishing our own high-volume capabilities modifying, in 2020, our construction plans to accommodate a dedicated, metal surface finishing facility. We expect to rely on our third-party partner for production requirements through the installation and qualification for production of the enabling equipment in the addition to our Andover manufacturing facility. We also expect to rely on our third-party partner in the future for surge capacity requirements.

We have been making and will continue to make capital investments for the expansion of manufacturing capacity for the production of Advanced Products at our Andover facility. Based on our extended long-term volume forecast, we anticipate additional capacity will be required to meet expected customer requirements. During the second quarter of 2020, we began construction of an approximately 90,000 square feet, addition to our existing plant, and that construction continues on schedule.

Our systems are designed to protect us from network security incidents and associated disruptions. However, as evidenced by the ransomware incident described above, we remain vulnerable to computer viruses and related software-based challenges to the integrity of our systems, unauthorized or illegal or malicious network hacking, equipment or software sabotage, acts of vandalism to our systems by third parties, and, in the extreme, forms of cyber-terrorism. Our security measures or those of our third party service provider detected, but did not prevent, the network security incident and the associated disruptions described above and may not detect or prevent such incidents and disruptions in the future.

As of December 31, 2020, we were compliant with the comprehensive requirements for the protection of controlled unclassified information (“CUI”) as set forth in Special Publication of the National Institute of Standards and Technology (“NIST”). The Company provides confidential information to third party business partners and/or receives confidential information from third party business partners in certain circumstances, when doing so is necessary to conduct business, particularly with departments of agencies of the U.S. Government. While we employ confidentiality agreements to protect other sensitive information (i.e., information not considered CUI), our own security measures or those of our third party service providers may not be sufficient to protect such information in the event the computing infrastructure of these third party business partners is compromised. Security incidents involving our computing and communications infrastructure or that of a third party business partner or service provider could result in the misappropriation or unauthorized release of confidential information belonging to us or to our employees, partners, customers or suppliers, which could result in an interruption to our operations, result in a violation of privacy or other laws, expose us to a risk of litigation, or damage our reputation, any of which could have a material and adverse effect on our operating results and financial condition. Our network segmented NIST environment was not impacted by the December 2019 ransomware incident, but there can be no assurance that it will not be impacted by similar incidents in the future, which could have a material and adverse effect on our operating results and financial condition for the reasons described above.

We have in the past and may in the future encounter legal action from customers, vendors, or others concerning product warranty or other claims. We generally offer a warranty from the date title passes from us for all of our standard products. Effective January 1, 2017, we extended the warranty period to three years for a range of H Grade, M Grade and MI Family legacy products sold after that date. In a limited number of circumstances, we have entered into supply contracts with certain high-volume customers calling for extended warranty terms. With our distribution partners, we also enter into contracts providing for our product warranties to transfer to the end customer upon final sale of our product(s) by the distributor.

Our future success depends substantially upon customer acceptance of our innovative Advanced Products, notably our concept in AI and other high-performance applications. As we have been in the early stages of market penetration for these and other Advanced Products, we have experienced lengthy periods during which we have focused our product development efforts on the specific requirements of a limited number of large customers, followed by further periods of delay before meaningful purchase orders are received. These lengthy development and sales cycle times increase the possibility a customer may decide to cancel or change product plans, which could reduce or eliminate our sales to that customer. As a result, we may incur significant product development expenses, as well as significant sales and marketing expenses, before we generate the related revenues for these products. Furthermore, we may never generate the anticipated revenues from a product after incurring such expenses if our customer cancels or changes its product plans.

We continue to shift our strategy to focus on larger opportunities with global OEMs, ODMs, and contract manufacturers. Our growth is therefore dependent on: the pace at which these OEMs and ODMs develop their own new products; the acceptance of our Advanced Products by these OEMs and ODMs; and the success of the customers’ products incorporating our Advanced Products. If we fail to anticipate changes in our customers’ businesses and their changing product needs or do not successfully identify and enter new markets, our results of operations and financial position could be negatively impacted.

From time to time, we may be subject to claims or litigation, including intellectual property litigation as described elsewhere in this Annual Report on Form Any such claims or litigation may be time-consuming and costly, divert management resources, require us to change our products, or have other adverse effects on our business. Any of the foregoing could have a material adverse effect on our operating results and could require us to pay significant monetary damages.

The ownership of our Common Stock is concentrated between Dr. Vinciarelli and a limited number of institutional investors. As of December 31, 2020, Dr. Vinciarelli was the beneficial owner of 10,014,454 shares of our Common Stock, plus 155,977 shares which Dr. Vinciarelli has the right to acquire upon exercise of options to purchase Common Stock within 60 days of December 31, 2020. He also holds 11,023,648 shares of our unregistered Class B Common Stock (which may only be sold or transferred after required conversion, on a basis, into registered shares of Common Stock), which together with his ownership of Common Stock, represents 49.6% of our total issued and outstanding shares of capital stock. Accordingly, the market float for our Common Stock and average daily trading volumes are relatively small, which may negatively impact investors’ ability to buy or sell shares of our Common Stock in a timely manner.

Current capital investments are focused on the expansion of manufacturing capacity for the production of Advanced Products at our Andover facility. Based on our long-term forecast of production levels, we anticipate substantial additional capacity will be required to meet expected requirements beyond 2023. During 2020, we began construction of a addition to our Andover manufacturing facility that is intended to expand the Advanced Products production area by approximately 90,000 square feet. Construction is proceeding on schedule, and we expect to take occupancy later this year. We also are proceeding with the evaluation of alternative projects for the addition of another, larger manufacturing facility to be focused on Advanced Products for automotive applications, should we anticipate the need based on our forecasts for capacity beyond 2023.

Our equity plan information required by this item is incorporated by reference to the information in Part III, Item 12 of this Annual Report on Form

The following selected consolidated financial data with respect to our statements of operations for the years ended December 31, 2020, 2019, and 2018, and with respect to our balance sheet as of December 31, 2020 and 2019, are derived from our audited Consolidated Financial Statements, which appear elsewhere in this Annual Report on Form The following selected consolidated financial data with respect to our statements of operations for the years ended December 31, 2017 and 2016, and with respect to our balance sheets as of December 31, 2018, 2017, and 2016, are derived from our Consolidated Financial Statements, which are not included herein. The data should be read in conjunction with the Consolidated Financial Statements, related notes and other financial information included herein.

The Brick Products category largely consists of our broad and well-established families of integrated power converters, incorporating multiple conversion stages, used in conventional power systems architectures. Given the growth profiles of the markets we serve with our Advanced Products line and our Brick Products line, our strategy involves a transition in organizational focus, emphasizing investment in our Advanced Products line and targeting high growth market segments with a high-volume operational model, while maintaining a profitable business in the mature market segments we serve with our Brick Products line with a operational model.

Our quarterly consolidated operating results can be difficult to forecast and have been subject to significant fluctuations. We plan our production and inventory levels based on management’s estimates of customer demand, customer forecasts, and other information sources. Customer forecasts, particularly those of OEM, ODM, and contract manufacturing customers to which we supply Advanced Products in high volumes, are subject to scheduling changes on short notice, contributing to operating inefficiencies and excess costs. In addition, external factors such as supply chain uncertainties, which are often associated with the cyclicality of the electronics industry, regional macroeconomic and trade-related circumstances, and events (most

recently evidenced by the pandemic), have caused our operating results to vary meaningfully. Our quarterly gross margin as a percentage of net revenues may vary, depending on production volumes, average selling prices, average unit costs, the mix of products sold during that quarter, and the level of importation of raw materials subject to tariffs. Our quarterly operating margin as a percentage of net revenues also may vary with changes in revenue and product level profitability, but our operating costs are largely associated with compensation and related employee costs, which are not subject to sudden or significant changes.

On January 30, 2020, the World Health Organization designated the outbreak a “Public Health Emergency of International Concern” (i.e., a health emergency requiring coordinated action by the governments of effected countries). On January 31, 2020, the U.S. Department of Health and Human Services declared a public health emergency for the entire United States, thereby facilitating a nationwide public health response. On March 11, 2020, was declared a pandemic by the World Health Organization, an indication of its global severity. Governments worldwide have responded with measures intended to contain the further spread of including mandatory closures of businesses, schools, and organizations.

On March 23, 2020, the Commonwealth of Massachusetts ordered businesses closed and prohibited gatherings of more than 10 people, extending the Commonwealth’s emergency declaration made on March 10, 2020. Our headquarters and primary manufacturing facility are located in Massachusetts. However, the Company is designated as essential by the U.S. Department of Homeland Security, given our role in supporting industrial sectors considered “critical infrastructure.” As such, we have continued to operate at, or close to, full manufacturing capacity, although there can be no assurance we will be able to continue to operate at such levels of manufacturing capacity.

Rates of absenteeism associated with employee self-quarantine due to exposure to were steady at a satisfactory level through the third quarter of 2020, but rose in December. The productivity of our factory may be reduced if quarantine rates increase or if the number of employees diagnosed with requires further implementation of restrictive health and safety measures, including factory closure. As of the date of this report, absenteeism rates have improved, we continue to operate with three shifts in our factory, and, with few exceptions, our engineering, sales, and administrative personnel are working from the Company’s offices.

We are monitoring the rapidly changing circumstances, and may take additional actions to address risks as they evolve. Because much of the potential negative impact of the pandemic is associated with risks outside of our control, we cannot estimate the extent of such impact on our financial or operational performance, or when such impact might occur.

Management’s Discussion and Analysis of Financial Condition and Results of Operations is based upon our Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and related disclosures of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates and assumptions, and our associated judgments, including those related to inventories, income taxes, contingencies, and litigation. We base our estimates, assumptions, and judgments on historical experience, knowledge of current conditions, and on various other factors we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We also have other policies we consider key accounting policies, (See Note 2 to the Consolidated Financial Statements — ). However, the application of these other policies does not require us to make significant estimates and assumptions difficult to support quantitatively.

net realizable value is based upon forecasted future usage which we derive based on backlog, historical consumption, and expected market conditions. For both Brick and Advanced product lines, the methodology used compares quantities to forecasted usage and historical consumption, such that amounts of inventory on hand in excess of management’s estimate of expected future utility, are fully reserved. While we have used our best efforts and believe we have used the best available information to estimate future demand, due to uncertainty in the economy and our business and the inherent difficulty in forecasting future usage, it is possible actual demand for our products will differ from our estimates. If actual future demand or market conditions are less favorable than those projected by management, additional inventory reserves for existing inventories may need to be recorded in future periods.

Significant management judgment is required in determining whether deferred tax assets will be realized in full or in part. We assess the need for a valuation allowance on a quarterly basis. We record a valuation allowance to reduce our deferred tax assets to the amount we believe is more likely than not to be realized. In assessing the need for a valuation allowance, we consider all positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies, and past financial performance. While recent positive operating results, as a result of increases in bookings, caused the Company to be in a cumulative income position as of December 31, 2020, the Company faces uncertainties in forecasting its operating results due to the continued impact of the pandemic on the Company’s supply chain, certain process issues with the production of Advanced Products and the unpredictability in certain markets. This operating uncertainty also makes it difficult to predict the availability and utilization of tax benefits over the next several years. As a result, management has concluded, at this time, is more likely than not the Company’s net domestic deferred tax assets will not be realized, and a full valuation allowance against all net domestic deferred tax assets is still warranted as of December 31, 2020. The valuation allowance against these deferred tax assets may require adjustment in the future based on changes in the mix of temporary differences, changes in tax laws, and operating performance. If the positive quarterly earnings and increases in bookings continue, and the Company’s concerns about industry uncertainty and world events, including the impact of the pandemic on the Company’s supply chain, and process issues with the production of Advanced Products are resolved, and the amount of tax benefits the Company is able to utilize to the point that the Company believes future taxable income can be more reliably forecasted, the Company may release all or a portion of the valuation allowance in the near-term. Certain state tax credits, though, will likely never be released by the valuation allowance. If and when the Company determines the valuation allowance should be released (i.e., reduced), the adjustment would result in a tax benefit reported in that period’s Consolidated Statements of Operations, the effect of which would be an increase in reported net income.

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) that we adopt as of the specified effective date. Unless otherwise discussed, we believe the impact of recently issued accounting standards will not have a material impact on our future financial condition and results of operations. See Note 2 — — , to the Consolidated Financial Statements for a description of recently issued and adopted accounting pronouncements, including the dates of adoption and expected impact on our financial position and results of operations.

See Note 19, to the Consolidated Financial Statements for a discussion of our change to segment reporting in the second quarter of 2019.

Gross margin for 2020 increased $8,481,000, or 6.9%, to $131,447,000 from $122,966,000 in 2019. Gross margin as a percentage of net revenues decreased to 44.3% in 2020 from 46.8% in 2019. Despite higher net revenues and gross margin dollars for the year ended December 31, 2020, gross margin as a percentage of net revenues decreased as compared to the year ended December 31, 2019, primarily due to an unfavorable change in product mix (i.e., a higher percentage of lower margin products were produced and shipped during the year ended December 31, 2020), a negative influence from production inefficiencies and cost variances associated with initial production volumes of new products, certain supply chain constraints associated with the pandemic, and higher tariff charges.

The provision for income taxes and the effective income tax rate for the years ended December 31 were as follows (dollars in thousands):

As of December 31, 2020, we had no sheet arrangements.

collateralized by student loans and guaranteed by the U.S. Department of Education under the Federal Family Education Loan Program, continued failure to sell at its periodic auction dates (i.e., reset dates) could negatively impact the carrying value of the investment, in turn leading to impairment charges in future periods. Periodic changes in the fair value of the Failed Auction Security attributable to credit loss (i.e., risk of the issuer’s default) are recorded through earnings as a component of “Other income (expense), net”, with the remainder of any periodic change in fair value not related to credit loss (i.e., temporary carrying value adjustments) recorded in “Accumulated other comprehensive loss”, a component of Vicor Corporation Stockholders’ Equity. Should we conclude a decline in the fair value of the Failed Auction Security is other than temporary, such losses would be recorded through earnings as a component of “Other income (expense), net”. We do not believe there was an “other-than-temporary” decline in value in this security as of December 31, 2020.

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assessing historical consumption as a predictor of future product demand by comparing it to trends in industry publications

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examining the historical accuracy of the Company’s prior estimates by considering subsequent sales and write off activity

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evaluating the adjustments made to forecast future demand based on historical usage data

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interviewing operational personnel of the Company involved in purchasing and manufacturing to evaluate product innovations, changes in customer mix, and other factors that may impact expected future sales and usage of raw material inventory.