Motorola Solutions Inc

Our practice is to carry inventory levels to meet customers' delivery requirements. In 2023, we reduced our inventory carrying levels as compared to 2022, in response to improved supply conditions of semiconductors. We expect to continue to actively manage our inventory levels in the future, including by continuing to carry increased levels of inventory in targeted areas to support increased demand and customer requirements. We provide custom products that require the stocking of inventories and a large variety of piece parts and replacement parts in order to meet delivery and warranty requirements. To the extent supplier product life cycles are shorter than ours, stocking of lifetime buy inventories may be required to meet long-term warranty and contractual requirements. In addition, replacement parts are stocked for delivery on customer demand within a short delivery cycle.

Availability of required materials and components is generally dependable; however, particularly within the semiconductor market, fluctuations in supply and market demand in 2023 continued to cause selective shortages and increased costs driven by the need to purchase semiconductor components from alternative sources, including brokers. Due to the improvements in semiconductor supply in 2023, we reduced our need for alternative sources and brokers as compared to 2022, and we expect continued reductions in 2024. For a description of risks related to our supply chain, including relating to the semiconductor market, refer to “Part I. Item 1A. Risk Factors” in this Form 10-K.

We currently procure certain materials and components from single-source vendors. A material disruption from a single-source vendor may have a material adverse impact on our results of operations. If certain single-source suppliers were to become capacity constrained or insolvent, it could result in a reduction or interruption in supplies, or an increase in the price of supplies, and adversely impact our financial results.

In addition, we import materials and components that are subject to import duties. The duties and tariffs we are subject to do not have a significant impact on our financial results.

Labor is generally available in reasonable proximity to our manufacturing facilities and the manufacturing facilities of our largest outsourced manufacturing suppliers. In 2023, we finalized a strategic agreement to sell our video manufacturing operations to a contract manufacturer, including the transfer of employees. As needed, we may subcontract work to other companies to fulfill customer needs in geographical areas that we do not have coverage for or for additional services that we do not provide. For a description of risks related to our use of the services of subcontractors, refer to "Part I. Item 1A. Risk Factors" of this Form 10-K.

Natural gas, electricity and, to a lesser extent, oil are the primary sources of energy for our manufacturing operations. Each of these resources is currently in adequate supply for our operations. The cost to operate our facilities and freight costs are dependent on world oil prices and external third-party logistics rates for inbound and outbound air lanes. Difficulties in obtaining any of the aforementioned resources, or significant cost increases, could affect our financial results.