What Cognex Corporation told the SEC could break it.

U.S. export controls (Commerce/BIS) and expanded sanctions on Chinese semiconductor companies have had a negative impact on Cognex's revenue from China-based customers and may force costly supply-chain shifts.

“In addition to trade tariffs, U.S. export controls that place restrictions on the exportation of our products or a subset of our products, including applicable regulations promulgated by the U.S. Commerce Department's Bureau of Industry and Security, have had a negative impact on our revenue from customers based in China.”

U.S. tariffs on components imported from Chinese suppliers have raised product costs (not material to date) and contributed to the 2025 gross-margin decline.

“Furthermore, in recent years, trade tariffs imposed by the United States on certain components imported from Chinese suppliers resulted in higher costs for our products, which, to date, have not been material to our total cost of revenue.”

Sources components from China, uses third-party contract manufacturers primarily in Indonesia and Malaysia, and makes optical components at in-house plants in China and Vietnam — concentrating production and sourcing in Asia.

“In addition, we source components from suppliers located outside of the United States, including China, utilize third-party contract manufacturers, primarily located in Indonesia and Malaysia, to assemble certain of our products, and manufacture optical components at in-house production plants located in China and Vietnam.”

Cognex relies on a primary third-party contract manufacturer; a 2022 fire at its Indonesia plant destroyed significant Cognex inventory, illustrating the single-CM concentration risk.

“For example, in 2022, our primary contract manufacturer experienced a fire at its plant in Indonesia which destroyed a significant amount of Cognex inventories.”