6-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 6-K

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16

OR 15d-16 OF THE SECURITIES EXCHANGE ACT OF 1934

For the month of March, 2023

Commission File Number 000-23288

SILICOM LTD.

(Translation of Registrant’s name into English)

14 Atir Yeda St., P.O.Box 2164, Kfar-Sava 4464323, Israel

(Address of Principal Executive Offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F ☒     Form 40-F ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):___

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):___

On March 20, 2023, the Registrant released its Consolidated Financial Statements and registrant's review of its results of operations and financial condition as of and for the year ended December 31, 2022.

Attached hereto as Exhibit 99.1 are Consolidated Financial Statements as of and for the year ended December 31, 2022 (including the notes thereto).

Attached hereto as Exhibit 99.2 is the registrant’s review of its results of operations and financial condition as of and the year ended December 31, 2022.

Attached hereto as Exhibit 99.3 is Consent of Kesselman & Kesselman, Certified Public Accountants (Isr.), A member of PricewaterhouseCoopers International Limited.

Attached hereto as Exhibit 99.4 is Consent of Somekh Chaikin, Independent Registered Public Accounting Firm, a member firm of KPMG International.

Attached hereto as Exhibit 99.5 is Management's Annual Report on Internal Control over Financial Reporting

This Form 6-K, including all exhibits hereto, is hereby incorporated by reference into all effective registration statements filed by the registrant under the Securities Act of 1933.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	SILICOM LTD. (Registrant)
Date: March 20, 2023	By	/s/ Eran Gilad
	Eran Gilad
	Chief Financial Officer

EX-99.1

Exhibit 99.1

 

Silicom Ltd.

and its Subsidiaries

Consolidated

Financial Statements

As of and for the year ended

December 31, 2022

Silicom Ltd. and its Subsidiaries

Consolidated Financial Statements as of December 31, 2022

 

Contents

	Page
Report of Independent Registered Public Accounting Firm (PCAOB id: 1309)	F-2
Report of Independent Registered Public Accounting Firm (PCAOB id: 1057)	F-4
Consolidated Balance Sheets	F-5
Consolidated Statements of Operations	F-7
Consolidated Statements of Changes in Shareholders’ Equity	F-8
Consolidated Statements of Cash Flows	F-9
Notes to the Consolidated Financial Statements	F-10

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors of Silicom Ltd.:

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Silicom Ltd. and subsidiaries (the “Company”) as of December 31, 2022 and 2021, and the related consolidated statements of operations, changes in shareholders’ equity, and cash flows for each of the two years in the period ended December 31, 2022, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2022 in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Form 6-K. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

F - 2

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Capitalized internally developed software costs

As described in Note 2P to the consolidated financial statements, the Company has internally developed software costs of $9.1 million as of December 31, 2022. Management applied significant judgment in determining which software projects and activities within those projects qualify for capitalization, and the timing of establishing technological feasibility. In addition, management applied judgment in determining when to cease the capitalization of costs related to internal use software that will be placed in service.

The principal considerations for our determination that performing procedures relating to capitalized internally developed software costs is a critical audit matter are (i) there was a high degree of auditor judgment and subjectivity in applying procedures relating to capitalized internally developed software costs due to the significant amount of judgment by management when developing the estimates; (ii) significant audit effort was required in evaluating the significant assumptions relating to the estimates, such as the software projects qualification for capitalization, timing of establishing technological feasibility and time to cease capitalization;

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the financial statements. These procedures included testing the effectiveness of controls relating to capitalized internally developed software costs, including controls over the software projects qualification for capitalization, timing of establishing technological feasibility and time to cease capitalization. These procedures also included, among others, (i) inspection of the products documentation; (ii) testing management’s process for estimating the capitalized internally developed software costs; and (iii) testing management’s identification of accumulated time and costs, both internal and external, associated with internal software development activities and the Company's controls over when internal use software is placed in service and amortization started.

/s/ Kesselman & Kesselman

Certified Public Accountants (Isr.)

A member firm of PricewaterhouseCoopers International Limited

Tel-Aviv, Israel

March 20, 2023

We have served as the Company’s auditor since 2021

F - 3

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors of Silicom Ltd.:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated statements of operations, changes in shareholders’ equity, and cash flows of Silicom Ltd. and subsidiaries (the Company) for the year ended December 31, 2020, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the results of the Company’s operations and its cash flows for the year ended December 31, 2020 in conformity with U.S. generally accepted accounting principles.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Somekh Chaikin

Member Firm of KPMG International

We have served as the Company’s auditor since 1997 to 2021.

Tel Aviv, Israel

March 15, 2021

 

F - 4

Silicom Ltd. and its Subsidiaries

Consolidated Balance Sheets as of December 31

			2021		2022
	Note		US$ thousands		US$ thousands
Assets
Current assets
Cash and cash equivalents		3		29,285		30,734
Marketable securities		2F, 4		8,266		4,020
Accounts receivable:
Trade, net		2G		31,120		27,258
Other		5		4,693		3,620
Inventories		6		75,753		87,985
Total current assets				149,117		153,617
Marketable securities		2F, 4		23,773		15,163
Assets held for employees' severance benefits		11		1,882		1,715
Deferred tax assets		15G		1,616		502
Property, plant and equipment, net		7		4,576		4,488
Intangible assets, net		8		4,314		6,710
Operating leases right-of-use, net		10		8,765		8,441
Goodwill				25,561		25,561
Total assets				219,604		216,197

 

Avi Eizenman	Liron Eizenman	Eran Gilad
Chairman of the Board of Directors	Chief Executive Officer	Chief Financial Officer

Kfar-Saba, Israel

March 20, 2023

The accompanying notes are an integral part of these consolidated financial statements.

F - 5

Silicom Ltd. and its Subsidiaries

Consolidated Balance Sheets as of December 31 (Continued)

			2021			2022
	Note		US$ thousands			US$ thousands
Liabilities and shareholders' equity
Current liabilities
Trade accounts payable				29,918			15,922
Other accounts payable and accrued expenses		9		18,582			9,641
Operating lease liabilities		10		1,811			1,549
Total current liabilities				50,311			27,112
Long-term liabilities
Operating lease liabilities		10		7,377			6,291
Liability for employees' severance benefits		11		3,443			3,425
Deferred tax liabilities		15G		10			74
Total liabilities				61,141			36,902
Shareholders' equity		12
Ordinary shares, ILS 0.01 par value; 10,000,000 shares authorized; 7,670,033 and 7,670,033 issued as at December 31, 2021 and 2022, respectively;
6,709,528 and 6,738,706 outstanding as at December 31, 2021 and 2022, respectively				22			22
Additional paid-in capital				63,390			66,556
Treasury shares (at cost) 960,505 and 933,933 ordinary shares as at December 31, 2021 and 2022, respectively				(34,995	)		(34,896	)
Retained earnings				130,046			147,613
Total shareholders' equity				158,463			179,295
Total liabilities and shareholders’ equity				219,604			216,197

The accompanying notes are an integral part of these consolidated financial statements.

F - 6

Silicom Ltd. and its Subsidiaries

Consolidated Statements of Operations for the Year Ended December 31

			2020		2021			2022
			US$ thousands
	Note		Except for share and per share data
Sales		2N, 13		107,398		128,460			150,582
Cost of sales				73,632		84,072			98,626
Gross profit				33,766		44,388			51,956
Operating expenses
Research and development				17,244		20,091			20,563
Sales and marketing				6,209		6,599			6,990
General and administrative				4,065		4,641			4,477
Total operating expenses				27,518		31,331			32,030
Operating income				6,248		13,057			19,926
Financial income, net		14		1,034		(152	)		2,464
Income before income taxes				7,282		12,905			22,390
Income taxes		15		1,557		2,364			4,084
Net income				5,725		10,541			18,306
Income per share:
Basic income per ordinary share (US$)		2U		0.804		1.544			2.733
Diluted income per ordinary share (US$)				0.800		1.513			2.694
Weighted average number of ordinary shares used to compute basic income per share (in thousands)				7,118		6,826			6,697
Weighted average number of ordinary shares used to compute diluted income per share (in thousands)				7,157		6,969			6,796

The accompanying notes are an integral part of these consolidated financial statements.

F - 7

Silicom Ltd. and its Subsidiaries

Consolidated Statements of Changes in Shareholders' Equity

	Ordinary shares					Additional paid-in capital			Treasury shares(3)			Retained earnings			Total shareholders’ equity
	Number of shares(1)			US$ thousands
Balance at January 1, 2020		7,351,317			22		57,130			(8,009	)		113,780			162,923
Exercise of options and RSUs(2)		51,357			*-		276			-			-			276
Purchase of treasury shares		(503,159	)		-		-			(16,798	)		-			(16,798	)
Share-based compensation		-			-		2,711			-			-			2,711
Net income		-			-		-			-			5,725			5,725
Balance at December 31, 2020		6,899,515			22		60,117			(24,807	)		119,505			154,837
Purchase of treasury shares		(322,689	)		-		-			(14,291	)		-			(14,291	)
Reissuance of treasury shares under share-based compensation plan		132,702			*-		411			4,103			-			4,514
Share-based compensation		-			-		2,862			-			-			2,862
Net income		-			-		-			-			10,541			10,541
Balance at December 31, 2021		6,709,528			22		63,390			(34,995	)		130,046			158,463
Purchase of treasury shares		(80,120	)		-		-			(3,428	)		-			(3,428	)
Reissuance of treasury shares under share-based compensation plan		109,298			-		(411	)		3,527			(739	)		2,377
Share-based compensation		-			-		3,577			-			-			3,577
Net income		-			-		-			-			18,306			18,306
Balance at December 31, 2022		6,738,706			22		66,556			(34,896	)		147,613			179,295

(1)	Net of shares held by Silicom Inc. and Silicom Ltd.
(2)	Restricted share units (hereinafter - "RSUs")
(3)	Company shares held by the Company. Presented as a reduction of equity at their cost to the Company. The treasury shares have no rights.
*	Less than 1 thousand.

The accompanying notes are an integral part of these consolidated financial statements.

F - 8

Silicom Ltd. and its Subsidiaries

Consolidated Statements of Cash Flows for the Year Ended December 31

	2020			2021			2022
	US$ thousands
Cash flows from operating activities
Net income		5,725			10,541			18,306
Adjustments required to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		2,384			2,437			2,415
Impairment of intangible assets		1,657			-			-
Write-down of obsolete inventory		1,578			5,246			3,002
Changes in marketable securities		244			621			(20	)
Share-based compensation expense		2,711			2,862			3,577
Deferred taxes, net		(61	)		48			1,178
Changes in assets and liabilities:
Accounts receivable - trade		3,467			(9,472	)		3,695
Accounts receivable - other		(1,362	)		1,217			396
Change in liability for employees' severance benefits, net		153			138			149
Inventories		(13,336	)		(33,526	)		(15,289	)
Trade accounts payable		(2,076	)		15,031			(12,410	)
Other accounts payable and accrued expenses		3,872			5,936			(9,089	)
Net cash provided by (used in) operating activities		4,956			1,079			(4,090	)
Cash flows from investing activities
Proceeds from short term bank deposits, net		8,542			5,000			-
Purchase of property, plant and equipment		(1,694	)		(2,586	)		(2,089	)
Investment in intangible assets		(1,487	)		(3,572	)		(2,603	)
Proceeds from maturity of marketable securities		16,629			37,850			16,029
Purchases of marketable securities		(6,558	)		(19,927	)		(3,998	)
Other		-			-			934
Net cash provided by investing activities		15,432			16,765			8,273
Cash flows from financing activities
Exercise of options		276			-			-
Purchase of treasury shares		(16,798	)		(14,291	)		(3,428	)
Proceeds from reissuance of treasury shares upon exercise of options		-			4,514			2,377
Net cash used in financing activities		(16,522	)		(9,777	)		(1,051	)
Effect of exchange rate changes on cash balances held		341			542			(1,683	)
Increase in cash and cash equivalents		4,207			8,609			1,449
Cash and cash equivalents at beginning of year		16,469			20,676			29,285
Cash and cash equivalents at end of year		20,676			29,285			30,734
Supplementary cash flow information
A. Non-cash transactions:
Recognition of right of use assets and lease liabilities		7,201			451			1,433
Investments in property, plant and equipment		347			59			37
		7,548			510			1,470
B. Cash paid (received) during the year for:
Income taxes		1,284			2,371			(411	)

The accompanying notes are an integral part of these consolidated financial statements.

F - 9

Silicom Ltd. and its Subsidiaries

Notes to the Consolidated Financial Statements

Note 1 - General

Silicom Ltd. is an Israeli corporation engaged in designing, manufacturing, marketing and supporting high performance networking and data infrastructure solutions for a broad range of servers, server based systems and communications devices.

The Company's shares have been traded in the United States on the National Association of Securities Dealers Automated Quotation System ("NASDAQ") since February 1994. Since January 2, 2014 the Company's shares have been traded on the NASDAQ Global Select Market (prior thereto they were traded on the NASDAQ Global Market).

In these financial statements the terms "Company" or "Silicom" refer to Silicom Ltd. and its wholly owned subsidiaries, Silicom Connectivity Solutions, Inc. (hereinafter - "Silicom Inc.") and Silicom Denmark A/S (Fiberblaze A/S) (hereinafter – "Silicom Denmark"), whereas the term "subsidiaries" refers to Silicom Inc. and Silicom Denmark.

U.S. and global markets are experiencing volatility and disruption following the escalation of geopolitical tensions and the start of the military conflict between Russia and Ukraine. In February 2022, Russia launched a full-scale military invasion of Ukraine. Although the length and impact of the ongoing military conflict is highly unpredictable, the conflict in Ukraine could lead to market disruptions, including significant volatility in commodity prices, credit and capital markets. Additionally, Russia’s prior annexation of Crimea, recent recognition of two separatist republics in the Donetsk and Luhansk regions of Ukraine and subsequent military interventions in Ukraine have led to sanctions and other penalties being levied by the United States, European Union and other countries against Russia, Belarus, the Crimea Region of Ukraine, the so-called Donetsk People’s Republic, and the so-called Luhansk People’s Republic, including agreement to remove certain Russian financial institutions from the Society for Worldwide Interbank Financial Telecommunication (SWIFT) payment system. Additional potential sanctions and penalties have also been proposed and/or threatened. Russian military actions and the resulting sanctions could adversely affect the global economy and financial markets and lead to instability and lack of liquidity in capital markets. Any of the abovementioned factors could affect our business, financial condition, and operating results. The extent and duration of the military action, sanctions and resulting market disruptions are impossible to predict.

Note 2 - Summary of Significant Accounting Policies

The significant accounting policies, which are applied consistently throughout the periods presented, are as follows:

A. Financial statements in US dollars

Substantially all sales of the Company are made outside of Israel (see Note 13A regarding geographical distribution), in US dollars ("dollars"). Most purchases of materials and components, and a significant part of the marketing costs are made or incurred, primarily in dollars. Therefore, the dollar is the currency that represents the principal economic environment in which the Company operates and is thus its functional currency.

Transactions and balances originally denominated in dollars are presented at their original amounts. Balances in non-dollar currencies are translated into dollars using historical and current exchange rates for non-monetary and monetary balances, respectively. For non-dollar transactions reflected in the statement of income (loss), the transaction date exchange rates are used. Depreciation, amortization and other changes deriving from non-monetary items are based on historical exchange rates. The resulting transaction gains or losses are recorded as net financial income or expenses.

B. Basis of presentation

The accompanying consolidated financial statements have been prepared with accounting principles generally accepted in the United States of America and include the accounts of the Company and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

 

F - 10

Silicom Ltd. and its Subsidiaries

Notes to the Consolidated Financial Statements

Note 2 - Summary of significant Accounting Policies (cont’d)

C. Estimates and assumptions

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant items subject to such estimates and assumptions include revenue recognition over time, credit loss, income taxes, impairment of inventories, marketable securities, impairment of goodwill, intangible assets and the assumptions used to estimate the fair value of share-based compensation.

D. Cash and cash equivalents

The Company considers highly liquid investments with original maturities of three months or less from the date of deposit to be cash equivalents.

E. Short-term bank deposits

Short term bank deposits consist of bank deposits with original maturities of more than three months and up to twelve months.

F. Marketable securities

The Company classifies its marketable securities as held-to-maturity as they are debt securities in which the Company has the intent and ability to hold to maturity. Held-to-maturity (HTM) debt securities are recorded at amortized cost adjusted for the amortization or accretion of premiums or discounts.

Premiums and discounts on debt securities are amortized or accreted over the life of the related held-to-maturity security as an adjustment to yield using the effective interest method. Such amortization and accretion are included in the "Financial income, net" line item in the consolidated statements of operations.

The Company recognizes current expected credit losses for financial assets held at amortized cost. The Company uses forward-looking information to calculate credit loss estimates.

F - 11

Silicom Ltd. and its Subsidiaries

Notes to the Consolidated Financial Statements

Note 2 - Summary of significant Accounting Policies (cont’d)

G. Trade accounts receivable, net

Trade accounts receivable are recorded at the invoiced amount and do not bear interest. Amounts collected on trade accounts receivable are included in net cash provided by operating activities in the consolidated statements of cash flows.

The Company presents accounts receivable in the consolidated balance sheets net of allowance for expected credit losses for potential uncollectible amounts. The Company estimates the collectability of accounts receivable balances and adjust the allowance for expected credit losses based on the Company's assessment of collectability by reviewing accounts receivable on an aggregated basis where similar characteristics exist and on an individual basis when it identifies specific customers with known disputes or collectability issues. The Company also considers a number of factors to assess collectability, including the past due status, creditworthiness of the specific customer, payment history and reasonable and supportable forecasts of future economic conditions.

As of December 31, 2021 and 2022, allowance for credit losses amounted to US$ 20 thousand.

H. Inventories

Inventories are stated at the lower of cost and net realizable value. Cost is determined using the "weighted average-cost" method.

The Company writes down obsolete or slow moving inventory to its net realizable value.

I. Assets held for employees’ severance benefits  

Assets held for employees’ severance benefits represent contributions to severance pay funds and cash surrender value of insurance policies. The assets are recorded at their current cash redemption value.

J. Property, plant and equipment

Property, plant and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated on a straight-line basis over the estimated useful life of the assets at the following annual rates:

	%
Machinery and equipment	15 - 33
Office furniture and equipment	6 - 33
Leasehold improvements	*

*   Over the shorter term of the lease or the useful life of the asset

F - 12

Silicom Ltd. and its Subsidiaries

Notes to the Consolidated Financial Statements

Note 2 - Summary of significant Accounting Policies (cont’d)

K. Goodwill and other intangible assets

Goodwill reflects the excess of the purchase price of business acquired over the fair value of net assets acquired. Goodwill is not amortized but instead is tested for impairment at least annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired.

The Company operates in one operating segment and this segment comprises one reporting unit.

The Company may first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the Company performs a qualitative assessment and concludes that it is more likely than not that the fair value of a reporting unit exceeds its carrying value, goodwill is not considered impaired and the impairment test is not required. However, if the Company concludes otherwise, it is then required to perform a quantitative assessment for goodwill impairment.

The Company performs its quantitative goodwill impairment test by comparing the fair value of its reporting unit with its carrying value. If the reporting unit’s carrying value is determined to be greater than its fair value, an impairment charge is recognized for the amount by which the carrying value exceeds the reporting unit’s fair value. If the fair value of the reporting unit is determined to be greater than its carrying amount, the applicable goodwill is not impaired.

Intangible assets that are not considered to have an indefinite useful life are amortized over their estimated useful lives in proportion to the economic benefits realized. This accounting policy results in amortization of such intangible assets in the straight-line method.

For the years ended December 31, 2020, 2021 and 2022, no impairment losses were recorded.

L. Impairment of long-lived assets

In accordance with Impairment or Disposal of long-lived assets Subsections of FASB ASC Subtopic 360-10, Property, Plant, and Equipment – Overall. Long-lived assets, such as property, plant, equipment and purchased intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require a long-lived asset or an asset group to be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by that asset or asset group to its carrying value. If the carrying value of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying value exceeds its fair value. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values and third party independent appraisals, as considered necessary.

F - 13

Silicom Ltd. and its Subsidiaries

Notes to the Consolidated Financial Statements

Note 2 - Summary of significant Accounting Policies (cont’d)

M. Leases

The Company elected the short-term lease recognition exemption for all leases with a term shorter than 12 months. This means that for those leases, the Company does not recognize right-of-use ("ROU") assets or lease liabilities, but recognizes lease expenses over the lease term on a straight-line basis.

ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease.

Leases are classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement.

As of December 31, 2022, all of the company's leases are operating leases.

On the commencement date, the lease payments shall include variable lease payments that depend on an index (such as the Consumer Price Index), initially measured using the index at the commencement date. The Company does not remeasure the lease liability for changes in future lease payments arising from changes in an index unless the lease liability is remeasured for another reason. Therefore, after initial recognition, such variable lease payments are recognized in profit or loss as they are incurred.

Variable payments that depends on use of the underlying asset are not included in the lease payments. Such variable payments are recognized in profit or loss in the period in which the event or condition that triggers the payment occurs.

The Company’s incremental borrowing rate for a lease is the rate of interest that it would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment.

After lease commencement, the Company measures the lease liability at the present value of the remaining lease payments using the discount rate determined at lease commencement (as long as the discount rate hasn’t been updated as a result of a reassessment event). The Company subsequently measures the ROU asset at the present value of the remaining lease payments, adjusted for the remaining balance of any cumulative prepaid or accrued rent if the lease payments are uneven throughout the lease term.

The Company’s lease agreements have remaining lease terms of 2 to 10 years. Some of these agreements include options to terminate the leases immediately. Some of our vehicle lease agreements include rental payments based on the actual usage of the vehicles and other lease agreements include rental payments adjusted periodically for inflation. The agreements related to leases in Israel are in Israeli Shekel ("ILS") or in ILS linked to the Israeli Consumer Price Index or to the US Dollars. The agreements related to leases in the USA are in US Dollars and the agreements related to leases in Denmark are in Danish Krone ("DKK"). The Company’s lease agreements do not contain any residual value guarantees. See Note 10.

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Silicom Ltd. and its Subsidiaries

Notes to the Consolidated Financial Statements

Note 2 - Summary of significant Accounting Policies (cont’d)

N. Revenue recognition

The Company derives revenues primarily from the sale of networking and data infrastructure solutions.

The Company recognizes revenue upon transfer of control of the promised goods in a contract with a customer in an amount that reflects the consideration the Company expects to receive in exchange for those products. Transfer of control occurs once the customer has the contractual right to use the product, generally upon shipment or once delivery and risk of loss has transferred to the customer. The Company accounts for a contract with customer when it has approval and commitment from both parties, the rights of the parties and payment terms are identified, the contract has commercial substance and collectability of consideration is probable. Each of the Company's contracts includes one type of performance obligation. The Company evaluates each distinct performance obligation within a contract, whether it is satisfied at a point in time or over time. Most of the Company's revenues are recognized at a point in time. Revenue is recognized over time for sales of goods manufactured to unique customer specifications, in which the Company’s performance does not create an asset with an alternative use to the Company and the Company has an enforceable right to payment for performance completed to date if the customer were to terminate the contract. Revenue recognized over time is measured by the costs incurred to date relative to the estimated total direct costs to fulfill each contract. Incurred costs represent work performed, which corresponds with, and thereby best depicts, the transfer of control to the customer. Contract costs include labor, materials and overhead.

O. Cost of sales

Cost of sales consist primarily of production costs of finished goods manufactured by the company, with assistance of sub-contractors, from (i) components purchased from third parties, and (ii) sub-assemblies manufactured by sub-contractors under the Company’s directions and supervision as well as employee-related expenses and overhead expenses of the Company’s production lines.

P. Research and development costs and capitalized software development costs

Software development costs (mainly salary) related to programmable components incorporated into the Company's products, are charged to expense until technological feasibility has been established for the product. Once technological feasibility is established, all software costs are capitalized until the product is available for general release to customers. Judgment is required in determining when technological feasibility of a product is established. The Company has determined that technological feasibility for its software components of hardware products is reached after all high-risk development issues have been resolved through coding and testing. Amortization begins once the software is ready for its intended use, generally based on the pattern in which the economic benefits will be consumed. The amortization of these costs is included in cost of revenue over the estimated life of the products. Other costs incurred in the research and development of the Company’s products are expensed as incurred.

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Silicom Ltd. and its Subsidiaries

Notes to the Consolidated Financial Statements

Note 2 - Summary of significant Accounting Policies (cont’d)

Q. Allowance for product warranty

The Company grants assurance-type warranties related to certain products to end-users. The Company estimates its obligation for such warranties to be immaterial on the basis of historical experience. Accordingly, these financial statements do not include an accrual for warranty obligations.

R. Treasury shares

Treasury shares are recorded at cost and presented as a reduction of shareholders' equity. The Company reissues treasury shares under the Global Share Incentive Plan (2013), upon exercise of options and upon vesting of restricted stock units ("RSU"). Reissuance of treasury shares, based on the Company's policy of first-in, first-out (FIFO), is accounted for in accordance with ASC 505-30 whereby gains are credited to additional paid-in capital and losses are charged to additional paid-in capital to the extent that previous net gains are included therein and otherwise to retained earnings.

S. Income taxes

Deferred taxes are accounted for under the asset and liability method based on the estimated future tax effects of temporary differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases, and for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are presented as non-current assets and liabilities and measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the consolidated statements of operations in the period that includes the enactment date. The Company recognizes the effect of uncertain tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured as the largest amount that is greater than 50 percent likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. Taxes which would apply in the event of disposal of investments in foreign subsidiaries have not been taken into account in computing the deferred taxes, as the Company's intention is to hold, and not to realize the investments. As of December 31, 2022, the cumulative amount of earnings of foreign subsidiaries upon which deferred taxes have not been provided is approximately US$ 16.3 million. Determination of the amount of unrecognized deferred tax liability related to these earnings is not practicable.

T. Share-based compensation

The Company recognizes compensation expense based on estimated grant date fair value in accordance with ASC Topic 718, Compensation -Stock Compensation as follows:

When portions of an award vest in increments during the requisite service period (graded-vesting award), the Company’s accounting policy is to recognize compensation cost for the award over the requisite service period for each separately vesting portion of the award.

Equity awards granted to employees are accounted for using the grant date fair value method. The grant date fair value is determined as follows: for stock options using the Binomial option-pricing model and for restricted stock units (“RSUs”) based on the market value of the Company’s stock on the date of grant, less an estimate of dividends that will not accrue to RSUs holders prior to vesting. The fair value of share based payment awards is recognized as an expense over the vesting period. The expected average volatility represents a weighted average standard deviation rate for the price of the Company’s ordinary shares on the NASDAQ National Market. For awards with only market conditions, compensation expense is not reversed if the market conditions are not satisfied.

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Silicom Ltd. and its Subsidiaries

Notes to the Consolidated Financial Statements

Note 2 - Summary of significant Accounting Policies (cont’d)

U. Basic and diluted earnings per share

Basic income per ordinary share is calculated by dividing the net income attributable to ordinary shares, by the weighted average number of ordinary shares outstanding (net of treasury shares). Diluted income per ordinary share calculation is similar to basic income per ordinary share except that the weighted average of ordinary shares outstanding is increased to include outstanding potential ordinary shares during the period if dilutive. Potential ordinary shares arise from stock options and RSUs, and the dilutive effect is reflected by the application of the treasury stock method.

The following table summarizes information related to the computation of basic and diluted income per ordinary share for the years indicated.

	Year ended December 31
	2020		2021		2022
Net income attributable to ordinary shares (US$ thousands)		5,725		10,541		18,306
Weighted average number of ordinary shares outstanding used in basic income per ordinary share calculation		7,118,244		6,825,630		6,696,671
Add of outstanding dilutive potential ordinary shares		38,519		143,172		99,748
Weighted average number of ordinary shares outstanding used in diluted income per ordinary share calculation		7,156,763		6,968,802		6,796,419
Basic income per ordinary shares (US$)		0.804		1.544		2.733
Diluted income per ordinary shares (US$)		0.800		1.513		2.694
Weighted average number of shares related to options and RSUs excluded from    the diluted earnings per share calculation because of anti-dilutive effect		180,916		65,534		251,868

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Silicom Ltd. and its Subsidiaries

Notes to the Consolidated Financial Statements

Note 2 - Summary of Significant Accounting Policies (cont’d)

V. Comprehensive Income

For the years ended December 31, 2020, 2021 and 2022, comprehensive income equals net income.

W. Fair Value Measurements

The Company's financial instruments consist mainly of cash and cash equivalents, marketable securities, trade and other receivables and trade accounts payable. The carrying amounts of these financial instruments, except for marketable securities, approximate their fair value because of the short maturity of these investments. The fair value of marketable securities is presented in Note 4 to these consolidated financial statements. Assets held for severance benefits are recorded at their current cash redemption value.

The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Company determines fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:

Level 1 Inputs: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date.

Level 2 Inputs: Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.

Level 3 Inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at measurement date.

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Silicom Ltd. and its Subsidiaries

Notes to the Consolidated Financial Statements

Note 2 - Summary of Significant Accounting Policies (cont’d)

X. Concentrations of risks

(1)          Credit risk

Financial instruments, which potentially subject the Company to significant concentrations of credit risk, consist principally of cash and cash equivalents, marketable securities, trade receivables and assets held for employees’ severance benefits. Cash and cash equivalents balances of the Company, which are subject to credit risk, consist of cash accounts held with major financial institutions. Marketable securities consist of held to maturity marketable securities issued by highly rated corporations. As of December 31, 2021 and 2022, the ratings of the securities in the Company's portfolio was at least A-. Nonetheless, these investments are subject to general credit and counterparty risks (such as that the counterparty to a financial instrument fails to meet its contractual obligations). The Company closely monitors extensions of credit and has never experienced significant credit losses.

(2)          Significant customers

The Company's top four ultimate customers accounted for approximately 33% of its revenues in 2022. The Company expects that a small number of customers will continue to account for a significant portion of its revenues for the foreseeable future. See Note 13.

Y. Liabilities for loss contingencies

Liabilities for loss contingencies arising from claims, assessments, litigation, fines, and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred.

Note 3 - Cash and Cash Equivalents

	December 31
	2021		2022
	US$ thousands
Cash		25,368		24,016
Cash equivalents *		3,917		6,718
		29,285		30,734

*   Comprised mainly of bank deposits in ILS as at December 31, 2021 and 2022 carrying a weighted average interest rate of 0.03% and 3.10%, respectively.

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Silicom Ltd. and its Subsidiaries

Notes to the Consolidated Financial Statements

Note 4 - Marketable Securities

The Company's investment in marketable securities as of December 31, 2021 and 2022 are classified as ''held-to-maturity'' and consist of the following:

			Gross		Gross
			unrealized		unrealized
	Amortized		holding		holding			Aggregate
	cost basis**		gains		(losses)			fair value*
	US$ thousands
At December 31, 2022
Held to maturity:
Corporate debt securities and government debt securities
Current		4,038		-		(111	)		3,927
Non-Current (1 to 3 years)		15,283		-		(1,214	)		14,069
		19,321		-		(1,325	)		17,996
At December 31, 2021
Held to maturity:
Corporate debt securities and government debt securities
Current		8,300		43		(19	)		8,324
Non-Current (1 to 4 years)		23,966		10		(512	)		23,464
		32,266		53		(531	)		31,788

*	Fair value is being determined using Level 2 inputs.
**	Including accrued interest in the amount of US$ 227 thousand and US$ 138 thousand as of December 31, 2021 and 2022, respectively.
	The accrued interest is presented as part of other receivables on the balance sheet.

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Silicom Ltd. and its Subsidiaries

Notes to the Consolidated Financial Statements

Note 4 - Marketable Securities (Cont’d)

Activity in marketable securities in 2022	US$ thousands
Balance at January 1, 2021		50,810
Purchases of marketable securities		19,927
Changes in marketable securities, net		(621	)
Proceeds from maturity of marketable securities		(37,850	)
Balance at January 1, 2022		32,266
Purchases of marketable securities		3,998
Changes in marketable securities, net		(914	)
Proceeds from maturity of marketable securities		(16,029	)
Balance at December 31, 2022		19,321

The following table summarizes the gross unrealized losses or gains on investment securities and the fair value of those securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss or gain position, at December 31, 2022:

	Less than 12 months					12 months or more					Total
	Unrealized Losses			Fair value		Unrealized Losses			Fair value		Unrealized Losses			Fair value
Held to maturity:
Corporate debt securities and government debt securities		(301	)		4,595		(1,024	)		13,401		(1,325	)		17,996

The unrealized losses or gains on the investments were caused by changes in interest rate. The Company has the ability and intent to hold these investments until maturity and it is more likely than not that the Company will not be required to sell any of the securities before recovery.

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Silicom Ltd. and its Subsidiaries

Notes to the Consolidated Financial Statements

Note 5 - Other Receivables

	December 31
	2021		2022
	US$ thousands
Advances to suppliers		333		421
Government authorities		2,184		1,437
Prepaid expense		768		936
Other receivables		1,408		826
		4,693		3,620

Note 6 - Inventories

	December 31
	2021		2022
	US$ thousands
Raw materials and components		57,156		71,861
Products in process		11,186		12,417
Finished products		7,411		3,707
		75,753		87,985

In the years ended December 31, 2020, 2021 and 2022, the Company recorded inventory write-downs in the amount of US$ 1,578 thousand, US$ 5,246 thousand and US$ 3,002 thousand, respectively.

Note 7 - Property, Plant and Equipment, Net

	December 31
	2021			2022
	US$ thousands
Machinery and equipment		17,305			19,298
Office furniture and equipment		1,129			1,190
Leasehold improvements		3,406			3,472
Property, plant and equipment		21,840			23,960
Accumulated depreciation		(17,264	)		(19,472	)
Property, Plant and equipment, net		4,576			4,488

Depreciation expense for the years ended December 31, 2020, 2021 and 2022 were US$ 2,000 thousand, US$ 2,009 thousand and US$ 2,208 thousand, respectively.

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Silicom Ltd. and its Subsidiaries

Notes to the Consolidated Financial Statements

Note 8 - Intangible Assets

			December 31
			2021		2022
	Useful life		US$ thousands
Original cost:
Capitalization of software development costs		8		6,546		9,081
Licenses		3		565		633
				7,111		9,714
Accumulated amortization:
Capitalization of software development costs				2,366		2,431
Licenses				431		573
				2,797		3,004
Intangible assets, net:
Capitalization of software development costs				4,180		6,650
Licenses				134		60
				4,314		6,710

Amortization expense for the years ended December 31, 2020, 2021 and 2022 were US$ 378 thousand, US$ 428 thousand and US$ 207 thousand, respectively. The estimates amortization of capitalized software development costs in relation to developments that were available for general release to customers, as of December 31, 2022, are US$ 260 thousand in 2023 and US$ 247 thousand in each of the years 2024 through 2027.

Note 9 - Other accounts payable and accrued expenses

	December 31
	2021		2022
	US$ thousands
Accrued expenses		8,664		2,338
Employee benefits		6,562		5,958
Government authorities		577		663
Other payables		2,779		682
		18,582		9,641

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Silicom Ltd. and its Subsidiaries

Notes to the Consolidated Financial Statements

Note 10 - Leases

A. The components of operating lease cost for the year ended December 31, 2020, 2021 and 2022 were as follows:

	Year ended December 31
	2020		2021		2022
	US$ thousands
Operating lease costs (mainly plant and offices)		1,623		1,921		1,872
Variable lease payments not included in the lease liability		3		8		62
Short-term lease cost		285		278		273
Total operating lease cost		1,911		2,207		2,207

B. Supplemental cash flow information related to operating leases was as follows:

	Year ended December 31
	2020		2021		2022
	US$ thousands
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases		1,601		1,887		1,847
Right-of-use assets obtained in exchange for lease liabilities (non-cash):
Operating leases		7,201		451		1,269

C.          Supplemental balance sheet information related to operating leases was as follows:

	December 31
	2021		2022
	US$ thousands
Operating leases:
Operating leases right-of-use		8,765		8,441
Current operating lease liabilities		1,811		1,549
Non-current operating lease liabilities		7,377		6,291
Total operating lease liabilities		9,188		7,840

F - 24

Silicom Ltd. and its Subsidiaries

Notes to the Consolidated Financial Statements

Note 10 - Leases (cont’d)

D.         Supplemental balance sheet information related to operating leases was as follows (cont’d):

	December 31
	2021			2022
	US$ thousands
Weighted average remaining lease term (years)		7.3			7.7
Weighted average discount rate		2.3	%		2.9	%

E.          Future lease payments under non-cancellable leases as of December 31, 2022 were as follows:

	December 31, 2022
	US$ thousands
2023		1,793
2024		1,477
2025		1,057
2026		1,006
After 2026		3,416
Total operating lease payments		8,749
Less: imputed interest		(909	)
Present value of lease liabilities		7,840

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Silicom Ltd. and its Subsidiaries

Notes to the Consolidated Financial Statements

Note 11 - Assets Held and Liability for Employees' Severance Benefits

A. Under Israeli law and labor agreements, Silicom is required to make severance payments to retired or dismissed employees and to employees leaving employment in certain other circumstances.

In respect of the liability to the employees, individual insurance policies are purchased and deposits are made with recognized severance pay funds.

The liability for severance pay is calculated on the basis of the latest salary paid to each employee multiplied by the number of years of employment. The liability is covered by the amounts deposited including accumulated income thereon as well as by the unfunded provision.

B. According to Section 14 to the Severance Pay Law ("Section 14") the payment of monthly deposits by a company into recognized severance and pension funds or insurance policies releases it from any additional severance obligation to the employees that have entered into agreements with the company pursuant to such Section 14. Commencing July 1, 2008, the Company has entered into agreements with a majority of its employees in order to implement Section 14. Therefore, as of that date, the payment of monthly deposits by the Company into recognized severance and pension funds or insurance policies releases it from any additional severance obligation to those employees that have entered into such agreements and therefore the Company incurs no additional liability since that date with respect to such employees. Amounts accumulated in the pension funds or insurance policies pursuant to Section 14 are not supervised or administrated by the Company and therefore neither such amounts nor the corresponding accrual are reflected in the balance sheet.

C. Consequently, the assets held for employees' severance benefits reported on the balance sheet, in respect of deposits for those employees who have signed agreements pursuant to Section 14, represent the redemption value of deposits made through June 30, 2008. The liability for employee severance benefits, with respect to those employees, represents the liability of the Company for employees' severance benefits as of June 30, 2008.

As a result of the implementation of Section 14, as described above, the liability with respect to those employees is calculated on the basis of number of years of employment as of June 30, 2008, multiplied by the latest salary paid. The liability is covered by the amounts deposited, including accumulated income thereon, as well as by the unfunded provision. Such liability will be removed, either upon termination of employment or retirement.

D. Expenses recorded with respect to employees' severance payments for the years ended December 31, 2020, 2021 and 2022, mainly attributed to Section 14, were US$986 thousand, US$1,104 thousand and US$1,194 thousand, respectively.

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Silicom Ltd. and its Subsidiaries

Notes to the Consolidated Financial Statements

Note 12 - Shareholders' Equity

Capital and reserves

On May 2, 2019, the Company's Board of Directors authorized and began implementation of a one-year share repurchase plan to repurchase up to $15 million of the Company's ordinary shares. On April 30, 2020 the Company's Board of Directors authorized another one-year share repurchase plan allowing the Company to invest up to $15 million to repurchase its ordinary shares. This plan has begun as the previously announced $15 million one-year share repurchase plan was completed. On April 29, 2021 the Company's Board of Directors authorized another one-year share repurchase plan allowing the Company to invest up to $15 million to repurchase its ordinary shares. This plan has begun as the previously announced $15 million one-year share repurchase plan was completed. Repurchases may be made in the open market and will be in accordance with applicable securities laws and regulations. The timing and amount of each repurchase transaction may depend on a variety of factors. The share repurchase plan does not obligate the Company to acquire any specific number of ordinary shares and may be suspended or terminated at any time at management’s discretion.

Share based compensation

A.	On October 21, 2013 the Board resolved to adopt the Global Share Incentive Plan (2013) (the "2013 Plan") and to reserve up to 500,000 ordinary shares for issuance under the 2013 Plan to employees, directors, officers and consultants of the Company or of any subsidiary or affiliate of the Company. In January 2018, our Board approved the increase of the number of ordinary shares reserved for issuance under the 2013 Plan by 600,000 additional ordinary shares. Grants under the 2013 Plan, whether as options, restricted stock units, restricted stock or other equity based awards, including their terms, are subject to the Board of Directors' approval. Grants to directors and certain other officers are generally subject to the approvals of the Compensation Committee as well as Board of Directors, and grants to directors or a CEO (and under certain circumstances certain other officers) will also have to be approved by the Shareholders.
B.	Options or RSUs granted to Israeli residents may be granted under Section 102 of the Israeli Income Tax Ordinance pursuant to which the awards of options, or the ordinary shares issued upon their exercise, must be deposited with a trustee for at least two years following the date of grant. Under Section 102, any tax payable by an employee from the grant or exercise of the awards is deferred until the transfer of the awards or ordinary shares by the trustee to the employee or upon the sale of the awards or ordinary shares.
	Capital gains on awards granted under the plans are subjected to tax of 25% to be paid by the employee, and the Company is not entitled to a tax deduction.
	Gains which are not capital gains on awards under the plans are subjected to regular tax rates on individuals, and the Company is entitled to a tax deduction for such gains.

F - 27

Silicom Ltd. and its Subsidiaries

Notes to the Consolidated Financial Statements

Note 12 - Shareholders' Equity (cont'd)

Share based compensation (cont'd)

C. During 2017, 2020 and 2022, the Company granted 78,000, 86,000 and 16,000 RSUs respectively to certain of its directors, employees and consultants under the 2013 Plan. In relation to those grants:

1.	The vesting period of the RSUs ranges between 2 to 3 years from the date of grant.
2.	The fair value of RSUs is estimated based on the market value of the Company’s stock on the date of grant, less an estimate of dividends that will not accrue to RSUs holders prior to vesting.
3.	The Company recognizes compensation expenses on these RSUs based on estimated grant date fair value, with the following assumptions:

	2017	2020	2022
Expected dividend yield	2.68%	0%	0%

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Silicom Ltd. and its Subsidiaries

Notes to the Consolidated Financial Statements

Note 12 - Shareholders' Equity (cont'd)

Share based compensation (cont'd)

D. On January 31, 2019, the Company granted, in the aggregate, 141,928 options to certain of its directors and employees under the 2013 Plan. In relation to this grant:

1.	The exercise price for the options (per ordinary share) was US$ 33.83 and the Option expiration date was the earlier to occur of: (a) January 31, 2027; and (b) the closing price of the shares falling below US$ 16.92 at any time after the date of grant. The options vest and become exercisable on the second anniversary of the date of grant.
2.	The Company recognizes compensation expenses on these options based on estimated grant date fair value using the Binomial option-pricing model with the following assumptions:

Average Risk-free interest rate (a)	2.55%
Expected dividend yield	0.0%
Average expected volatility (b)	44.62%
Termination rate	9%
Suboptimal factor (c)	3.18

(a)	Risk-free interest rate represents risk free US$ zero-coupon US Government Bonds at time of grant.
(b)	Expected average volatility represents a weighted average standard deviation rate for the price of the Company’s ordinary shares on the NASDAQ National Market.
(c)	Suboptimal factor represents the multiple of the increase in the market share price on the day of grant of the option which, should it come to pass, will lead to exercise of the option by the employee. It is the average suboptimal factor of the Company and similar companies.

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Silicom Ltd. and its Subsidiaries

Notes to the Consolidated Financial Statements

Note 12 - Shareholders' Equity (cont'd)

Share based compensation (cont'd)

E. On June 8, 2020, the Company granted, in the aggregate, 148,426  options to certain of its directors and employees under the 2013 Plan. In relation to this grant:

1.	The exercise price for the options (per ordinary share) was US$ 32.54 and the Option expiration date was the earlier to occur of: (a) June 8, 2028; and (b) the closing price of the shares falling below US$ 16.27 at any time after the date of grant. The options vest and become exercisable on the second anniversary of the date of grant.
2.	The Company recognizes compensation expenses on these options based on estimated grant date fair value using the Binomial option-pricing model with the following assumptions:

Average Risk-free interest rate (a)	0.75%
Expected dividend yield	0.0%
Average expected volatility (b)	45.29%
Termination rate	9%
Suboptimal factor (c)	3.16

(a)	Risk-free interest rate represents risk free US$ zero-coupon US Government Bonds at time of grant.
(b)	Expected average volatility represents a weighted average standard deviation rate for the price of the Company’s ordinary shares on the NASDAQ National Market.
(c)	Suboptimal factor represents the multiple of the increase in the market share price on the day of grant of the option which, should it come to pass, will lead to exercise of the option by the employee. It is the average suboptimal factor of the Company and similar companies.

F - 30

Silicom Ltd. and its Subsidiaries

Notes to the Consolidated Financial Statements

Note 12 - Shareholders' Equity (cont'd)

Share based compensation (cont'd)

F. On June 3, 2021, the Company granted, in the aggregate, 133,925 options to certain of its directors and employees under the 2013 Plan. In relation to this grant:

1.	The exercise price for the options (per ordinary share) was US$ 41.84 and the Option expiration date was the earlier to occur of: (a) June 3, 2029; and (b) the closing price of the shares falling below US$ 20.92 at any time after the date of grant. The options vest and become exercisable on the second anniversary of the date of grant.
2.	The Company recognizes compensation expenses on these options based on estimated grant date fair value using the Binomial option-pricing model with the following assumptions:

Average Risk-free interest rate (a)	1.41%
Expected dividend yield	0.0%
Average expected volatility (b)	45.28%
Termination rate	9%
Suboptimal factor (c)	3.14

(a)	Risk-free interest rate represents risk free US$ zero-coupon US Government Bonds at time of grant.
(b)	Expected average volatility represents a weighted average standard deviation rate for the price of the Company’s ordinary shares on the NASDAQ National Market.
(c)	Suboptimal factor represents the multiple of the increase in the market share price on the day of grant of the option which, should it come to pass, will lead to exercise of the option by the employee. It is the average suboptimal factor of the Company and similar companies.

F - 31

Silicom Ltd. and its Subsidiaries

Notes to the Consolidated Financial Statements

Note 12 - Shareholders' Equity (cont'd)

Share based compensation (cont'd)

G. On January 27, 2022, the Company granted, in the aggregate, 121,508 options to certain of its employees under the 2013 Plan. In relation to this grant:

1.

The exercise price for the options (per ordinary share) was US$ 47.98 and the Option expiration date was the earlier to occur of: (a) January 27, 2030; and (b) the closing price of the shares falling below US$ 23.99 at any time after the date of grant and remains in such price or in a lower price for a period of at least 30 days. The options vest and become exercisable on the second anniversary of the date of grant.

2.

The Company recognizes compensation expenses on these options based on estimated grant date fair value using the Monte Carlo option-pricing model with the following assumptions:

Average Risk-free interest rate (a)	1.79%
Expected dividend yield	0.0%
Average expected volatility (b)	44.38%
Termination rate	9%
Suboptimal factor (c)	3.16

(a)	Risk-free interest rate represents risk free US$ zero-coupon US Government Bonds at time of grant.
(b)	Expected average volatility represents a weighted average standard deviation rate for the price of the Company’s ordinary shares on the NASDAQ National Market.
(c)	Suboptimal factor represents the multiple of the increase in the market share price on the day of grant of the option which, should it come to pass, will lead to exercise of the option by the employee. It is the average suboptimal factor of the Company and similar companies.

F - 32

Silicom Ltd. and its Subsidiaries

Notes to the Consolidated Financial Statements

Note 12 - Shareholders' Equity (cont'd)

Share based compensation (cont'd)

H. On June 7, 2022, the Company granted, in the aggregate, 26,666 options to certain of its directors and employees under the 2013 Plan. In relation to this grant:

1.

The exercise price for the options (per ordinary share) was US$ 35.69 and the Option expiration date was the earlier to occur of: (a) June 7, 2030; and (b) the closing price of the shares falling below US$ 17.85 at any time after the date of grant and remains in such price or in a lower price for a period of at least 30 days. The options vest and become exercisable on the second anniversary of the date of grant.

2.

The Company recognizes compensation expenses on these options based on estimated grant date fair value using the Monte Carlo option-pricing model with the following assumptions:

Average Risk-free interest rate (a)	3.01%
Expected dividend yield	0.0%
Average expected volatility (b)	43.93%
Termination rate	9%
Suboptimal factor (c)	3.14

(a)	Risk-free interest rate represents risk free US$ zero-coupon US Government Bonds at time of grant.
(b)	Expected average volatility represents a weighted average standard deviation rate for the price of the Company’s ordinary shares on the NASDAQ National Market.
(c)	Suboptimal factor represents the multiple of the increase in the market share price on the day of grant of the option which, should it come to pass, will lead to exercise of the option by the employee. It is the average suboptimal factor of the Company and similar companies.

F - 33

Silicom Ltd. and its Subsidiaries

Notes to the Consolidated Financial Statements

Note 12 - Shareholders' Equity (cont'd)

Share based compensation (cont'd)

I. On July 1, 2022, the Company granted, in the aggregate, 50,000 options to certain of its employee under the 2013 Plan. In relation to this grant:

1.

The exercise price for the options (per ordinary share) was US$ 34.90 and the Option expiration date was the earlier to occur of: (a) July 1, 2030; and (b) the closing price of the shares falling below US$ 17.45 at any time after the date of grant and remains in such price or in a lower price for a period of at least 30 days. The options vest and become exercisable on the second anniversary of the date of grant.

2.

The Company recognizes compensation expenses on these options based on estimated grant date fair value using the Monte Carlo option-pricing model with the following assumptions:

Average Risk-free interest rate (a)	2.91%
Expected dividend yield	0.0%
Average expected volatility (b)	44.02%
Termination rate	9%
Suboptimal factor (c)	3.14

(a)	Risk-free interest rate represents risk free US$ zero-coupon US Government Bonds at time of grant.
(b)	Expected average volatility represents a weighted average standard deviation rate for the price of the Company’s ordinary shares on the NASDAQ National Market.
(c)	Suboptimal factor represents the multiple of the increase in the market share price on the day of grant of the option which, should it come to pass, will lead to exercise of the option by the employee. It is the average suboptimal factor of the Company and similar companies.

F - 34

Silicom Ltd. and its Subsidiaries

Notes to the Consolidated Financial Statements

Note 12 - Shareholders' Equity (cont'd)

Share based compensation (cont'd)

J. The following table summarizes information regarding stock options as at December 31, 2022:

	Options outstanding				Options exercisable
			Weighted average				Weighted average
			remaining				remaining
Exercise price	Number		contractual life		Number		contractual life
US$	of options		(in years)		of options		(in years)
26.91		18,141		0.6		18,141		0.6
33.27		14,865		3.3		14,865		3.3
28.38		23,699		1.4		23,699		1.4
39.62		66,343		2.1		66,343		2.1
36.11		72,212		3.3		72,212		3.3
33.83		62,418		4.1		62,418		4.1
32.54		107,037		5.4		107,037		5.4
41.84		115,758		6.4		-		-
47.98		103,923		7.1		-		-
35.69		26,666		7.4		-		-
34.90		50,000		7.5		-		-
		661,062				364,715

The aggregate intrinsic value of options outstanding as of December 31, 2021 and 2022 is US$ 9,129 thousand and US$ 3,457 thousand, respectively.

The aggregate intrinsic value of options exercisable as of December 31, 2021 and 2022 is US$ 5,300 thousand and US$ 2,887 thousand, respectively.

The total intrinsic value of options exercised during the year ended December 31, 2021 and 2022, is US$ 2,334 thousand and US$ 600 thousand, respectively.

F - 35

Silicom Ltd. and its Subsidiaries

Notes to the Consolidated Financial Statements

Note 12 - Shareholders' Equity (cont'd)

Share based compensation (cont'd)

K. The stock option activity under the abovementioned plans is as follows:

						Weighted
				Weighted		average
	Number			average		grant date
	of options			exercise price		fair value
				US$		US$
Balance at January 1, 2020		465,247
Granted		148,426			32.54		14.82
Exercised		(12,357	)		22.38		8.63
Forfeited		(11,269	)		33.93		14.56
Balance at December 31, 2020		590,047
Granted		133,925			41.84		16.62
Exercised		(132,702	)		34.01		12.85
Forfeited		(11,749	)		35.79		15.39
Balance at December 31, 2021		579,521
Granted		198,174			40.82		15.13
Exercised		(66,298	)		33.09		13.21
Forfeited		(50,335	)		41.67		15.75
Balance at December 31, 2022		661,062
Exercisable at December 31, 2022		364,715

F - 36

Silicom Ltd. and its Subsidiaries

Notes to the Consolidated Financial Statements

Note 12 - Shareholders' Equity (cont'd)

Share based compensation (cont'd)

L. The Restricted Share Units activity under the abovementioned plans is as follows:

				Weighted
	Number of			average
	Restricted			grant date
	Share Units			fair value
				US$
Balance at January 1, 2020		39,000
Granted		86,000			35.33
Vested		(39,000	)		34.43
Balance at December 31, 2020		86,000
Granted		-			-
Vested		-			-
Balance at December 31, 2021		86,000
Granted		16,000			43.02
Forfeited		(2,000	)		35.33
Vested		(43,000	)		35.33
Balance at December 31, 2022		57,000

The aggregate intrinsic value of RSUs outstanding as of December 31, 2021 and December 31, 2022 is US$ 4,438 thousand and US$ 2,403 thousand, respectively.

F - 37

Silicom Ltd. and its Subsidiaries

Notes to the Consolidated Financial Statements

Note 12 - Shareholders' Equity (cont'd)

Share based compensation (cont'd)

M. During 2020, 2021 and 2022, the Company recorded share-based compensation expenses. The following summarizes the allocation of the stock-based compensation expenses:

	Year ended December 31
	2020		2021		2022
	US$ thousands
Cost of sales		535		480		638
Research and development costs		959		1,011		1,454
Selling and marketing expenses		602		697		774
General and administrative expenses		615		674		711
		2,711		2,862		3,577

As of December 31, 2022, there were US$ 3,994 thousand of unrecognized compensation costs related to outstanding stock options and RSUs to be recognized over a weighted average period of 1.2 years.

The total tax benefit recognized in the consolidated statements of operations related to share based compensation expenses amounted to US$ 42 thousand and US$ 40 thousand for the year ended December 31, 2021 and December 31, 2022.

F - 38

Silicom Ltd. and its Subsidiaries

Notes to the Consolidated Financial Statements

Note 13 - Geographic areas and major customers

A. Information on sales by geographic distribution:

The Company has one operating segment.

Sales are attributed to geographic distribution based on the location of the ultimate customer:

	Year ended December 31
	2020		2021		2022
	US$ thousands
USA		64,503		88,556		107,908
North America - other		639		964		836
Israel		12,362		9,936		13,586
Europe		23,208		19,383		20,715
Asia-Pacific		6,686		9,621		7,537
		107,398		128,460		150,582

B.   Sales to single ultimate customers exceeding 10% of sales (US$ thousands):

	Year ended December 31
	2020		2021		2022
	US$ thousands
Customer "A"		12,278		19,184		22,926
Customer "B"		13,468		7,788		8,519
Customer "C"		13,328		7,689		5,965

F - 39

Silicom Ltd. and its Subsidiaries

Notes to the Consolidated Financial Statements

Note 13 - Geographic areas and major customers (cont'd)

C.   Information on Long-Lived Assets - Property, Plant and Equipment and ROU assets by geographic areas:

The following table presents the locations of the Company’s long-lived assets as of December 31, 2021 and 2022:

	Year ended December 31
	2021		2022
	US$ thousands
North America		1,014	827
Europe		340	224
Israel		11,987	11,878
		13,341	12,929

F - 40

Silicom Ltd. and its Subsidiaries

Notes to the Consolidated Financial Statements

Note 14 - Financial Income (Expenses), Net

	Year ended December 31
	2020			2021			2022
	US$ thousands
Interest income		2,197			1,548			1,144
Changes in marketable securities, net		(244	)		(621	)		(914	)
Exchange rate differences, net		(748	)		(1,031	)		2,308
Bank charges		(171	)		(48	)		(74	)
		1,034			(152	)		2,464

F - 41

Silicom Ltd. and its Subsidiaries

Notes to the Consolidated Financial Statements

Note 15 - Taxes on Income

A.	Measurement of results for tax purposes under the Israeli Income Tax Regulations (Rules for Maintaining Accounting Records of Foreign Invested Companies and Certain Partnerships and Determining Their Taxable Income) - 1986
	As a "foreign invested company" (as defined in the Israeli Law for the Encouragement of Capital Investments-1959), the taxable income or loss and the tax basis of assets and liabilities of the Company’s Israeli operations are denominated in US Dollars.
B.	Corporate tax rate in Israel
	The regular corporate tax rate applied to taxable income of Israeli companies is 23% (as from 2018 onwards).
C.	Tax benefits under the Israeli Law for the Encouragement of Capital Investments, 1959 (hereinafter - the "Law")

1.

On December 29, 2010 the Knesset approved the Economic Policy Law for 2011-2012, which includes an amendment to the Law for the Encouragement of Capital Investments – 1959 (hereinafter – "the Amendment to the Law"). The Amendment to the Law is effective from January 1, 2011 and its provisions will apply to preferred income derived or accrued in 2011 and thereafter by a Preferred Company, per the definition of these terms in the Amendment to the Law.

Companies can choose to not be included in the scope of the Amendment to the Law and to stay in the scope of the law before its amendment until the end of the benefits period. Under the Amendment to the Law, upon an irrevocable election made by a company, a uniform corporate tax rate will apply to all preferred income of such company. The Company elected to apply the uniform corporate tax rate as of 2014.  From 2017 onwards, the uniform tax rate is to be 7.5% in areas in Israel designated as Development Zone A and 16% elsewhere in Israel. The company has two facilities in Israel of which one of them is located in Development Zone A. The profits of these Preferred Companies will be freely distributable as dividends, subject to a withholding tax of 20% (or a lower rate under an applicable tax treaty). Should the Company derive income from sources other than the Preferred Company, such income will be taxable at the regular corporate tax rates for the applicable year.

F - 42

Silicom Ltd. and its Subsidiaries

Notes to the Consolidated Financial Statements

Note 15 - Taxes on Income (cont’d)

C. Tax benefits under the Israeli Law for the Encouragement of Capital Investments, 1959 (hereinafter - the "Law") (cont'd)

On December 29, 2016 the Israeli Parliament (the "Knesset") enacted the "Economic Efficiency Law (Legislative Amendments for Achieving Budget Objectives in the Years 2017 and 2018) – 2016" in which the Law was also amended (hereinafter: “the Amendment”). The Amendment added new tax benefit tracks for a “preferred technological enterprise” and a “special preferred technological enterprise” which award reduced tax rates to a technological industrial enterprise for the purpose of encouraging activity relating to the development of qualifying intangible assets.

The benefits will be awarded to a “preferred company” that has a “preferred technological enterprise” or a “special preferred technological enterprise” with respect to taxable “preferred technological income” per its definition in the Law.

Preferred technological income that meets the conditions required in the law, will be subject to a reduced corporate tax rate of 12%, and if the preferred technological enterprise is located in "Development Area A" in Israel - to a reduced tax rate of 7.5%. A company that owns a special preferred technological enterprise will be subject to a reduced corporate tax rate of 6% regardless of the development area in which the enterprise is located. The Amendment is effective as from January 1, 2017.

On June 14, 2017 the Knesset Finance Committee approved "Encouragement of Capital Investment Regulations (Preferred Technological Income and Capital Gain of Technological Enterprise) – 2017" (hereinafter: “the Regulations”), which provides rules for applying the “preferred technological enterprise” and “special preferred technological enterprise” tax benefit tracks, including the Nexus formula that provides the mechanism for allocating the technological income eligible for the benefits.

Should the Company derive income from sources other than the “preferred technological enterprise”, such income will be taxable at the "Preferred Company" tax rate (for manufacturing activity in Israel) or regular corporate tax rates for the applicable year.

As a result of the aforesaid legislation, starting 2021 the Company implement the “preferred technological enterprise” tax benefit track.

F - 43

Silicom Ltd. and its Subsidiaries

Notes to the Consolidated Financial Statements

Note 15 - Taxes on Income (cont’d)

C. Tax benefits under the Israeli Law for the Encouragement of Capital Investments, 1959 (hereinafter - the "Law") (cont'd)

2.	In the event of distribution by the Company of dividends out of its retained earnings that were generated prior to the 2014 tax year and were tax exempt under the "Approved Enterprise" or "Benefited Enterprise" status, the Company would be subjected to a maximum of 25% corporate tax on the amount distributed, and a further 15% withholding tax would be deducted from the amounts distributed to the shareholders.
	Out of the Company’s retained earnings as of December 31, 2022, approximately US$ 49,612 thousand are tax-exempt, under our previous "Approved Enterprise" and "Benefited Enterprise" status. If such tax-exempt income is distributed as a dividend (including a liquidation dividend), it would be taxed at the regular corporate tax rate applicable to such profits (subject to a maximum rate of 25%) and an income tax liability of up to approximately US$ 12,403 thousand would be incurred as of December 31, 2022. The Company anticipates that any future dividends distributed pursuant to its dividend policy, will be distributed from income sources which will not impose additional tax liabilities on the Company. The Company intends to reinvest its tax-exempt income. Accordingly, no deferred tax liability has been recognized for income attributable to the Company’s previous "Approved Enterprise" or "Benefited Enterprise" status. If the Company was to declare a dividend from its tax-exempt income, an income tax expense would be recognized in the period a dividend is declared.
	On November 15, 2021, the Israeli Parliament released its 2021-2022 Budget Law (“2021 Budget Law”). The 2021 Budget Law introduces a new dividend ordering rule that apportions every dividend between previously tax-exempt and previously taxed income. Consequently, distributions (including deemed distributions as per Section 51(h)/51B of the Investment Law) may entail additional corporate tax liability to the distributing company. Effective August 15, 2021, dividend distributions will be treated as if made on a pro-rata basis from all types of earnings, including Exempt Profits. If such tax-exempt income is distributed, it would be taxed at the reduced corporate tax rate applicable to such income.

F - 44

Silicom Ltd. and its Subsidiaries

Notes to the Consolidated Financial Statements

Note 15 - Taxes on Income (cont’d)

D. Taxation of the subsidiaries

1.	The subsidiary Silicom Inc. files tax returns with US federal tax authorities and with state tax authorities in the states of New Jersey, California, Virginia, New York, New Mexico, Tennessee, Texas and Illinois.   The federal corporate income tax rate is 21% and the state corporate tax is approximately 9% in average.
2.	The subsidiary Silicom Denmark is taxed according to the tax laws in Denmark, subject to corporate tax of 22%.
3.	The Company has not provided for Israeli income tax and foreign withholding taxes on US$ 8,702 thousand of its non-Israeli subsidiaries' undistributed earnings as of December 31, 2022. The earnings could become subject to tax if earnings are remitted or deemed remitted as dividends or upon sale of a subsidiary. The Company currently has no plans to repatriate those funds and intends to indefinitely reinvest them in its non-Israeli operations. The unrecognized deferred tax liability associated with these temporary differences was approximately US$ 1,822 thousand at December 31, 2022.

E. Tax assessments

1.	For the Israeli jurisdiction the Company has final tax assessments for all years up to and including the tax year ended December 31, 2017.
2.	For the US federal jurisdiction, Silicom Inc. has final tax assessments for all years up to and including the tax year ended December 31, 2018. For the New Jersey and California state jurisdictions, Silicom Inc. has final tax assessments for all years up to and including the tax year ended December 31, 2017. For the Virginia, Tennessee, New York and New Mexico state jurisdictions, Silicom Inc. has final tax assessments for all years up to and including the tax year ended December 31, 2019. For the Texas state jurisdiction, Silicom Inc. has open tax assessments for the years 2018 through 2022. For the Illinois state jurisdiction, Silicom Inc. has open tax assessments for the years 2020 through 2022.
3.	For the Danish jurisdiction, Silicom Denmark has final tax assessments for all years up to and including the tax year ended December 31, 2016.

F - 45

Silicom Ltd. and its Subsidiaries

Notes to the Consolidated Financial Statements

Note 15 - Taxes on Income (cont’d)

F. Income before income taxes and income taxes expense (benefit) included in the consolidated statements of operations

	Year ended December 31
	2020			2021			2022
	US$ thousands
Income before income taxes:
Israel		5,565			7,486			17,915
Foreign jurisdictions		1,717			5,419			4,475
		7,282			12,905			22,390
Current taxes:
Israel		1,260			1,281			1,765
Foreign jurisdictions		506			1,192			1,198
		1,766			2,473			2,963
Current tax (benefits) expenses relating to prior years:
Israel		50			(10	)		(215	)
Foreign jurisdictions		(198	)		(147	)		158
		(148	)		(157	)		(57	)
Deferred taxes:
Israel		8			174			1,114
Foreign jurisdictions		(69	)		(126	)		64
		(61	)		48			1,178
Income tax expense		1,557			2,364			4,084

F - 46

Silicom Ltd. and its Subsidiaries

Notes to the Consolidated Financial Statements

Note 15 - Taxes on Income (cont’d)

G. Deferred tax assets and liabilities

The tax effects of significant items comprising the Company’s deferred tax assets and liabilities are as follows:

	December 31			December 31
	2021			2022
	US$ thousands			US$ thousands
Deferred tax assets:
Accrued employee benefits		420			362
Research and development costs		2,000			1,380
Share based compensation		427			391
Intangible assets		228			163
Operating lease liabilities		1,048			693
Other		-			54
Total deferred tax assets		4,123			3,043
Deferred tax liabilities:
Intangible assets		(169	)		(357	)
Goodwill*		(1,300	)		(1,511	)
Operating leases right-of-use, net		(1,000	)		(747	)
Other		(48	)		-
Total deferred tax liabilities		(2,517	)		(2,615	)
Net deferred tax assets		1,606			428
In Israel		1,616			502
Foreign jurisdictions		(10	)		(74	)
Net deferred tax assets		1,606			428
Non-current deferred tax assets		1,616			502
Non-current deferred tax liabilities		(10	)		(74	)

* The recognized goodwill is deductible for income tax purposes for 10 years.

F - 47

Silicom Ltd. and its Subsidiaries

Notes to the Consolidated Financial Statements

Note 15 - Taxes on Income (cont’d)

H. Reconciliation of the statutory tax expense to actual tax expense

	Year ended December 31
	2020			2021			2022
	US$ thousands
Income before income taxes		7,282			12,905			22,390
Statutory tax rate in Israel		23.0	%		23.0	%		23.0	%
		1,675			2,968			5,150
Increase (decrease) in taxes resulting from:
Non-deductible operating expenses		508			395			566
Prior years adjustments		(148	)		(157	)		(57	)
Tax effect due to "Preferred Enterprise" status		(533	)		(577	)		(1,949	)
Statutory rate differential		105			(86	)		168
Other		(50	)		(179	)		206
Income tax expense		1,557			2,364			4,084

F - 48

Silicom Ltd. and its Subsidiaries

Notes to the Consolidated Financial Statements

Note 15 - Taxes on Income (cont’d)

I. Accounting for uncertainty in income taxes The accounting literature clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. The standards prescribe a minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. It also requires significant judgment in determining what constitutes an individual tax position as well as assessing the outcome of each tax position.   During 2020, 2021 and 2022 the Company and its subsidiaries did not have any significant unrecognized tax benefits and thus, no related interest and penalties were accrued.   In addition, the Company and its subsidiaries do not expect that the amount of unrecognized tax benefits will change significantly within the next twelve months.

Note 16 - Subsequent Events

In March 2023, the Company’s compensation committee and board of directors, respectively, has approved the grant of a total of 137,911 options and 86,000 RSUs under the Global Share Incentive Plan (2013), of which options and RSUs granted to directors and office holders are subject to the approval of the Annual General Meeting, which is currently scheduled to convene no later than June 2023, as prescribed under the Israeli Companies Law, 1999 and the Company's Amended and Restated Articles of Association.

F - 49

EX-99.2

Exhibit 99.2

A. operating results:

You should read the following management's discussion and analysis of our financial condition and operating results in conjunction with the consolidated financial statements and the related notes thereto included in this annual report. The following table sets forth, for the periods indicated, the relationship (in percentages) of items from our Consolidated Statement of Operations Data to our total sales:

Year Ended December 31,	2020	2021	2022
Sales	100%	100%	100%
Cost of sales	68.6	65.4	65.5
Gross profit	31.4	34.6	34.5
Research and development expenses	16.1	15.6	13.7
Sales and marketing expenses	5.8	5.1	4.6
General and administrative expenses	3.7	3.6	3.0
Operating Income	5.8	10.2	13.2
Financial income, net	1.0	(0.1)	1.6
Income before income taxes	6.8	10	14.9
Income tax expenses	1.4	1.8	2.7
Net Income	5.4	8.2	12.2

Sales in 2022 increased by 17.2% to US$ 150,582 thousand compared to US$ 128,460 thousand in 2021, reflecting the continued high demand for our products and our success in mitigating the impacts of the global component shortage crisis. The increase in sales was mainly attributed to the success of our Smart Edge products, expanding our total addressable market for these products beyond SD-WAN to markets such as SASE, Dedicated Internet, as well as other markets.

Sales in 2021 increased by 19.6% to $128,460 thousand compared to $107,398 thousand in 2020, reflecting the combined impact of two opposite vectors: the significant increased demand for our products on one hand, and the growing global component shortages crisis on the other hand. The increase in demand and sales was mainly attributed to the continuous success of our Smart Edge products, especially in the SD-WAN market, and to our initial penetration to the 5G/O-RAN market. Both, SD-WAN and O-RAN, are part of the significant Disaggregation and Decoupling industry trends.

Gross profit in 2022 was US$ 51,956 thousand compared to US$ 44,388 thousand in 2021. Gross profit as a percentage of sales in 2022 was 34.5%, compared to 34.6% in 2021. The change in the gross profit percentage in 2022 compared to 2021 was mainly attributed to the mix of products that we sold in 2022, on which our gross profit is largely dependent. Gross profit was also affected by, among other factors, write-downs of inventory made with respect to any slow moving or obsolete inventory we can no longer use; the inventory write-downs as a percentage of sales in 2022 decreased to 2.0%, compared to 4.1% in 2021.

Gross profit in 2021 was US$ 44,388 thousand compared to US$ 33,766 thousand in 2020. Gross profit as a percentage of sales in 2021 was 34.6%, compared to 31.4% in 2020. The higher gross profit percentage in 2021 compared to 2020 was mainly attributed to: (i) a one-time US$ 1.7 million impairment of intangible assets in 2020, (ii) changes to the mix of products that we sold in 2021, on which our gross profit is largely dependent. Gross profit was also affected by, among other factors, write-downs of inventory made with respect to any slow moving or obsolete inventory we can no longer use; the inventory write-downs as a percentage of sales in 2021 increased to 4.1%, compared to 1.5% in 2020.

Research and development expenses in 2022 increased by 2.3% to US$ 20,563 thousand compared to US$ 20,091 thousand in 2021. This increase was mainly attributed to a decrease in capitalization of internal software development costs in the amount of US$ 2,547 thousand in 2022, compared to US$ 3,562 thousand in 2021, as well as an increase in the share-based compensation which amounted to approximately US$ 1,454 thousand in 2022, compared to US$ 1,011 thousand in 2021, offset by a strengthening of the US Dollar against the New Israeli Shekel and the Danish Krone (since a significant portion of our research and development expenses are incurred in New Israeli Shekels and Danish Krone), which amounted to approximately US$ 1,018 thousand.

Research and development expenses in 2021 increased by 16.5% to US$ 20,091 thousand compared to US$ 17,244 thousand in 2020. This increase was mainly attributed to an increase in our research and development employees' and subcontractors' related costs, required for our continued investment in new product development, enhancements to existing products and the development of new networking and connectivity technologies expanding our product offering to our target markets, which contributed approximately US$ 4,540 thousand to such increase, combined with the following factors: (i) capitalization of internal software development costs in the amount of US$ 3,562 thousand in 2021, compared to US$ 822 thousand in 2020, (ii) an increase in the share-based compensation which amounted to approximately US$ 1,011 thousand in 2021, compared to US$ 959 thousand in 2020, as well as to (iii) a weakening of the US Dollar against the New Israeli Shekel and the Danish Krone (since a significant portion of our research and development expenses are incurred in New Israeli Shekels and Danish Krone), which amounted to approximately US$ 995 thousand.

Sales and marketing expenses in 2022 increased by 5.9% to US$ 6,990 thousand compared to US$ 6,599 thousand in 2021. This increase was mainly attributed to our continued investment in the promotion of our networking and data infrastructure solutions, expanding our customer base and product offering, which contributed approximately US$ 484 thousand, as well as to an increase in the share-based compensation which amounted to approximately US$ 774 thousand in 2022, compared to US$ 697 thousand in 2021, offset by a strengthening of the US Dollar against the New Israeli Shekel and the Danish Krone (since a significant portion of our sales and marketing expenses are incurred in New Israeli Shekels and Danish Krone) which amounted to approximately US$ 170 thousand.

Sales and marketing expenses in 2021 increased by 6.3% to US$ 6,599 thousand compared to US$ 6,209 thousand in 2020. This increase was mainly attributed to our continued investment in the promotion of our networking and data infrastructure solutions, expanding our customer base and product offering, which contributed approximately US$ 110 thousand, as well as to an increase in the share-based compensation which amounted to approximately US$ 697 thousand in 2021, compared to US$ 602 thousand in 2020, as well as to a weakening of the US Dollar against the New Israeli Shekel and the Danish Krone (since a significant portion of our sales and marketing expenses are incurred in New Israeli Shekels and Danish Krone) which amounted to approximately US$ 185 thousand.

General and administrative expenses in 2022 decreased by 3.5% to US$ 4,477 thousand compared to US$ 4,641 thousand in 2021. This decrease was mainly attributed to a strengthening of the US Dollar against the New Israeli Shekel and the Danish Krone (since a significant portion of our general and administrative expenses are incurred in New Israeli Shekels and Danish Krone) which amounted to approximately US$ 228 thousand, offset by an increase in payroll related expenses attributed to general and administrative activity which amounted to approximately US$ 28 thousand,  as well as to an increase in the share-based compensation, which amounted to approximately US$ 710 thousand in 2022, compared to US$ 674 thousand in 2021.

General and administrative expenses in 2021 increased by 14.2% to US$ 4,641 thousand compared to US$ 4,065 thousand in 2020. This increase was mainly attributed to (i) an increase in payroll related expenses attributed to general and administrative activity which amounted to approximately US$ 313 thousand, (ii) to an increase in the share-based compensation, which amounted to approximately US$ 674 thousand in 2021, compared to US$ 615 thousand in 2020, as well as to (iii) a weakening of the US Dollar against the New Israeli Shekel and the Danish Krone (since a significant portion of our general and administrative expenses are incurred in New Israeli Shekels and Danish Krone) which amounted to approximately US$ 204 thousand.

Financial income, net in 2022 amounted to US$ 2,464 thousand compared to financial expenses, net of US$ 152 thousand in 2021. The change is mainly attributed to a strengthening of the US Dollar against the New Israeli Shekel and the Danish Krone, which created net financial income in US Dollars from exchange rate differences (a portion of our balance sheet assets and obligations are denominated in New Israeli Shekels as well as Danish Krone) of US$ 2,308 thousand in 2022 compared to financial expenses of US$ 1,031 thousand in 2021, offset by a decrease in income from investment in marketable securities and bank deposits, which was attributed to a decrease in funds available for investment, which amounted to US$ 230 thousand in 2022 compared to US$ 927 thousand in 2021.

Financial expenses, net in 2021 amounted to US$ 152 thousand compared to financial income, net of US$ 1,034 thousand in 2020. The change is mainly attributed to the following factors: (i) a decrease in income from investment in marketable securities and bank deposits, which was attributed to a decrease in funds available for investment, which amounted to US$ 927 thousand in 2021 compared to US$ 1,953 thousand in 2020, and (ii) a weakening of the US Dollar against the New Israeli Shekel and the Danish Krone, which created net financial expenses in US Dollars from exchange rate differences (a portion of our balance sheet assets and obligations are denominated in New Israeli Shekels as well as in Danish Krone) of US$ 1,031 thousand in 2021 compared to net financial expenses of US$ 748 thousand in 2020.

In 2022 we recorded current income tax expenses of US$ 2,963 thousand and deferred income tax expenses of US$ 1,178 thousand compared to current income tax expenses of US$ 2,473 thousand and deferred income tax expenses of US$ 48 thousand in 2021. The increase in our current income tax expenses was mainly attributed to an increase in our income and the resulting taxable income. The increase in the deferred income tax expenses was mainly attributed to the following factors: (i) deferred income tax expenses relating to research and development costs, which amounted to US$ 620 thousand in 2022 compared to deferred income tax benefit in the amount of US$ 141 thousand in 2021, (ii)  deferred tax expenses relating to intangible assets, which amounted to US$ 253 thousand in 2022 compared to deferred income tax expenses in the amount of US$ 25 thousand in 2021, (iii)  deferred income tax expenses relating to share-based compensation provided to our employees and directors, which amounted to US$ 36 thousand in 2022 compared to deferred income tax benefit in the amount of US$ 62 thousand in 2021, offset by (iv) a decrease in income tax expenses relating to tax loss carryforwards, which amounted to US$ 0 thousand in 2022 compared to income tax expenses which amounted to US$ 66 thousand in 2021. In addition, in 2022 we recorded an income tax benefit relating to prior years in the amount of US$ 57 thousand, compared to an income tax benefit relating to prior years In the amount of US$ 157 thousand in 2021.

In 2021 we recorded current income tax expenses of US$ 2,473 thousand and deferred income tax expenses of US$ 48 thousand compared to current income tax expenses of US$ 1,766 thousand and deferred income tax benefit of US$ 61 thousand in 2020. The increase in our current income tax expenses was mainly attributed to an increase in our income and the resulting taxable income. The change in the deferred income tax expenses was mainly attributed to the following factors: (i) a deferred income tax benefit relating to research and development costs, which amounted to US$ 141 thousand in 2021, compared to a deferred income tax benefit in the amount of US$ 262 thousand in 2020, (ii) deferred income tax expenses relating to intangible assets, which amounted to US$ 25 thousand in 2021, compared to a deferred income tax benefit in the amount of US$ 134 thousand in 2020, offset by (iii) a decrease in income tax expenses relating to tax loss carryforwards, which amounted to US$ 66 thousand in 2021, compared to deferred income tax expenses which amounted to US$130 thousand in 2020. (iv) a deferred income tax benefit relating to share-based compensation provided by us to our employees and directors, which amounted to US$ 62 thousand in 2021, compared to deferred income tax expenses in the amount of US$ 9 thousand in 2020. In addition, in 2021 we recorded an income tax benefit relating to prior years in the amount of US$ 157 thousand, compared to an income tax benefit relating to prior years in the amount of US$ 148 thousand in 2020.

In 2022 we recorded net income of US$ 18,306 thousand compared to net income of US$ 10,541 thousand in 2021, an increase of 73.7%. The increase was mainly attributed to the increase in our activity and sales.

In 2021 we recorded net income of US$ 10,541 thousand compared to net income of US$ 5,725 thousand in 2020, an increase of 84.1%. This increase was mainly attributed to the increase in our activity and sales.

Impact of Inflation and Currency Fluctuations on Results of Operations, Liabilities and Assets

Since the majority of our revenues are denominated and paid in U.S. Dollars, we believe that inflation in Israel and in Denmark and fluctuations in the U.S. dollar exchange rates do not have any material effect on our revenue. Inflation in Israel or Denmark and the Israeli and Danish currency as well as U.S. dollar exchange rate fluctuations, may however, have an effect on our expenses and, as a result, on our net income/loss. The cost of our Israeli and Danish operations, as expressed in U.S. Dollars, is influenced by the extent to which any change in the rates of inflation in Israel or Denmark are not offset (or are offset on a lagging basis) by a change in valuation of the NIS or DKK in relation to the U.S. dollar.

We do not presently engage in any hedging or other transactions intended to manage the risks relating to foreign currency exchange rate or interest rate fluctuations. However, we may in the future undertake such transactions, if management determines that it is necessary to offset such risks.

B. Liquidity and Capital Resources

As of December 31, 2022, we had working capital of US$ 126,505 thousand and our current ratio (current assets to current liabilities) was 5.67. Cash and cash equivalents as of December 31, 2022 increased by US$ 1,449 thousand to US$ 30,734 thousand, compared to US$ 29,285 thousand as of December 31, 2021. Short-term marketable securities decreased by US$ 4,246 thousand to US$ 4,020 thousand, compared to US$ 8,266 thousand as of December 31, 2021, and long-term marketable securities decreased by US$ 8,610 thousand to US$ 15,163 thousand, compared to US$ 23,773 thousand as of December 31, 2021. The net decrease of US$ 11,407 thousand in these three balance sheet items in 2022 was mainly attributed to the following factors: (i) purchase of treasury shares in the amount of approximately US$ 3,428 thousand, (ii) payments in relation to purchase of property, plant and equipment which amounted to US$ 2,089 thousand, and (iii) to investment in intangible assets which amounted to US$ 2,603 thousand, as well as negative cash used in operating activities in the amount of US$ 4,090 thousand.

Trade receivables decreased to US$ 27,258 thousand as of December 31, 2022, compared to US$ 31,120 thousand as of December 31, 2021. This decrease was mainly attributed to shorter customer payment cycles, as averaged out. Other receivables decreased to US$ 3,620 thousand as of December 31, 2022, compared to US$ 4,693 thousand as of December 31, 2021.

Trade payables decreased to US$ 15,922 thousand as of December 31, 2022, compared to US$ 29,918 thousand as of December 31, 2021. This decrease was mainly attributed to the reduction in purchasing of materials in the second half of 2022. Other payables and accrued liabilities decreased to US$ 9,641 thousand as of December 31, 2022, compared to US$ 18,582 thousand as of December 31, 2021. This decrease was mainly attributed to a decrease in our accrued expenses.

Inventories increased to US$ 87,985 thousand as of December 31, 2022, compared to US$ 75,753 thousand as of December 31, 2021. This increase was primarily the result of an increase in our inventory purchasing, in order to secure continuous production to support our customers' expectations of a swift delivery, making the readily available inventory pivotal to our business.

Cash used in operating activities in 2022 amounted to US$ 4,090 thousand compared to cash provided by operating activities in the amount of US$ 1,079 thousand in 2021. This was mainly attributed to an increase in our inventory, as well as a decrease of trade accounts payable and other accounts payable and accrued expenses, offset by an increase in our net income.

Capital expenditures on property and equipment for the year ended December 31, 2022 were US$ 2,121 thousand, compared to US$ 2,475 thousand as of December 31, 2021.

We have cash and cash equivalents that we believe are sufficient for our present requirements. Furthermore, our cash resources are sufficient to fund our operating needs for at least the next twelve months.

EX-99.3

Exhibit 99.3

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-193034, 333-249717 and 333-267488) of Silicom Ltd. of our report dated March 20, 2023 relating to the financial statements and the effectiveness of internal control over financial reporting, which appears in this Form 6-K.

/s/ Kesselman & Kesselman

Certified Public Accountants (Isr.)

A member of PricewaterhouseCoopers International Limited

Tel-Aviv, Israel

March 20, 2023

EX-99.4

Exhibit 99.4

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in registration statements No. 333-267488, No. 333- 193034 and No. 333-249717 on Form S-8 of our report dated March 15, 2021, with respect to the consolidated financial statements of Silicom Ltd. and its subsidiaries.

/s/ Somekh Chaikin

Somekh Chaikin

Member Firm of KPMG International

Tel Aviv, Israel

March 20, 2023

EX-99.5

Exhibit 99.5

Management's Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles.

Management assessed our internal control over financial reporting as of December 31, 2022, the end of our fiscal year. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in "Internal Control — Integrated Framework (2013)."

Based on our assessment, management has concluded that our internal control over financial reporting was effective as of December 31, 2022, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with U.S. generally accepted accounting principles. We reviewed the results of management's assessment with the audit committee of our Board of Directors.

This 6-K includes an attestation report of the Company's registered public accounting firm on management's assessment of the Company's internal control over financial reporting.

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Document And Entity Information	12 Months Ended
	Dec. 31, 2022
Document And Entity Information [Abstract]
Entity Registrant Name	SILICOM LTD.
Entity Central Index Key	0000916793
Document Type	6-K
Amendment Flag	false
Document Period End Date	Dec. 31, 2022
Current Fiscal Year End Date	--12-31
Entity File Number	000-23288
Entity Address, Address Line One	14 Atir Yeda St.
Entity Address, Address Line Two	P.O.Box 2164
Entity Address, Address Line Three	Kfar-Sava
Entity Address Country	IL
Entity Address, Postal Zip Code	4464323

XML

Consolidated Balance Sheets - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021
Current assets
Cash and cash equivalents	$ 30,734	$ 29,285
Marketable securities	4,020	8,266
Accounts receivable:
Trade, net	27,258	31,120
Other	3,620	4,693
Inventories	87,985	75,753
Total current assets	153,617	149,117
Marketable securities	15,163	23,773
Assets held for employees' severance benefits	1,715	1,882
Deferred tax assets	502	1,616
Property, plant and equipment, net	4,488	4,576
Intangible assets, net	6,710	4,314
Operating leases right-of-use, net	8,441	8,765
Goodwill	25,561	25,561
Total assets	216,197	219,604
Current liabilities
Trade accounts payable	15,922	29,918
Other accounts payable and accrued expenses	9,641	18,582
Operating lease liabilities	1,549	1,811
Total current liabilities	27,112	50,311
Long-term liabilities
Operating lease liabilities	6,291	7,377
Liability for employees' severance benefits	3,425	3,443
Deferred tax liabilities	74	10
Total liabilities	36,902	61,141
Shareholders' equity
Ordinary shares, ILS 0.01 par value; 10,000,000 shares authorized; 7,670,033 and 7,670,033 issued as at December 31, 2021 and 2022, respectively; 6,709,528 and 6,738,706 outstanding as at December 31, 2021 and 2022, respectively	22	22
Additional paid-in capital	66,556	63,390
Treasury shares (at cost) 960,505 and 933,933 ordinary shares as at December 31, 2021 and 2022, respectively	(34,896)	(34,995)
Retained earnings	147,613	130,046
Total shareholders' equity	179,295	158,463
Total liabilities and shareholders’ equity	$ 216,197	$ 219,604

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Consolidated Balance Sheets (Parenthetical) - ₪ / shares	Dec. 31, 2022	Dec. 31, 2021
Statement of Financial Position [Abstract]
Ordinary shares, par value	₪ 0.01	₪ 0.01
Ordinary shares, authorized	10,000,000	10,000,000
Ordinary shares, issued	7,670,033	7,670,033
Ordinary shares, outstanding	6,738,706	6,709,528
Ordinary shares, treasury shares	933,933	960,505

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Consolidated Statements of Operations - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Income Statement [Abstract]
Sales	$ 150,582	$ 128,460	$ 107,398
Cost of sales	98,626	84,072	73,632
Gross profit	51,956	44,388	33,766
Operating expenses
Research and development	20,563	20,091	17,244
Sales and marketing	6,990	6,599	6,209
General and administrative	4,477	4,641	4,065
Total operating expenses	32,030	31,331	27,518
Operating income	19,926	13,057	6,248
Financial income, net	2,464	(152)	1,034
Income before income taxes	22,390	12,905	7,282
Income taxes	4,084	2,364	1,557
Net income	$ 18,306	$ 10,541	$ 5,725
Income per share:
Basic income per ordinary share (US$)	$ 2.733	$ 1.544	$ 0.804
Diluted income per ordinary share (US$)	$ 2.694	$ 1.513	$ 0.8
Weighted average number of ordinary shares used to compute basic income per share (in thousands)	6,696,671	6,825,630	7,118,244
Weighted average number of ordinary shares used to compute diluted income per share (in thousands)	6,796,419	6,968,802	7,156,763

XML

Consolidated Statements of Changes In Shareholders' Equity - USD ($) $ in Thousands		Ordinary shares [Member]		Additional paid-in capital [Member]	Treasury shares [Member]	[1]	Retained earnings [Member]	Total
Balance at Dec. 31, 2019		$ 22		$ 57,130	$ (8,009)		$ 113,780	$ 162,923
Balance, shares at Dec. 31, 2019	[2]	7,351,317
Exercise of options and RSUs	[4]	$ 0	[3]	276	0		0	276
Exercise of options and RSUs, shares	[2],[4]	51,357
Purchase of treasury shares		$ 0		0	(16,798)		0	(16,798)
Purchase of treasury shares, shares	[2]	(503,159)
Share-based compensation		$ 0		2,711	0		0	2,711
Net income		0		0	0		5,725	5,725
Balance at Dec. 31, 2020		$ 22		60,117	(24,807)		119,505	154,837
Balance, shares at Dec. 31, 2020	[2]	6,899,515
Purchase of treasury shares		$ 0		0	(14,291)		0	(14,291)
Purchase of treasury shares, shares	[2]	(322,689)
Reissuance of treasury shares under share-based compensation plan		$ 0	[3]	411	4,103		0	4,514
Reissuance of treasury shares under share-based compensation plan, shares	[2]	132,702
Share-based compensation		$ 0		2,862	0		0	2,862
Net income		0		0	0		10,541	10,541
Balance at Dec. 31, 2021		$ 22		63,390	(34,995)		130,046	158,463
Balance, shares at Dec. 31, 2021	[2]	6,709,528
Purchase of treasury shares		$ 0		0	(3,428)		0	(3,428)
Purchase of treasury shares, shares	[2]	(80,120)
Reissuance of treasury shares under share-based compensation plan		$ 0		(411)	3,527		(739)	2,377
Reissuance of treasury shares under share-based compensation plan, shares	[2]	109,298
Share-based compensation		$ 0		3,577	0		0	3,577
Net income		0		0	0		18,306	18,306
Balance at Dec. 31, 2022		$ 22		$ 66,556	$ (34,896)		$ 147,613	$ 179,295
Balance, shares at Dec. 31, 2022	[2]	6,738,706

[1] Company shares held by the Company. Presented as a reduction of equity at their cost to the Company. The treasury shares have no rights.

[2] Net of shares held by Silicom Inc. and Silicom Ltd.

[3] Less than 1 thousand.

[4] Restricted share units (hereinafter - "RSUs")

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Consolidated Statements of Cash Flows - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Cash flows from operating activities
Net income	$ 18,306	$ 10,541	$ 5,725
Adjustments required to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization	2,415	2,437	2,384
Impairment of intangible assets	0	0	1,657
Write-down of obsolete inventory	3,002	5,246	1,578
Changes in marketable securities	(20)	621	244
Share-based compensation expense	3,577	2,862	2,711
Deferred taxes, net	1,178	48	(61)
Changes in assets and liabilities:
Accounts receivable - trade	3,695	(9,472)	3,467
Accounts receivable - other	396	1,217	(1,362)
Change in liability for employees' severance benefits, net	149	138	153
Inventories	(15,289)	(33,526)	(13,336)
Trade accounts payable	(12,410)	15,031	(2,076)
Other accounts payable and accrued expenses	(9,089)	5,936	3,872
Net cash provided by (used in) operating activities	(4,090)	1,079	4,956
Cash flows from investing activities
Proceeds from short term bank deposits, net	0	5,000	8,542
Purchase of property, plant and equipment	(2,089)	(2,586)	(1,694)
Investment in intangible assets	(2,603)	(3,572)	(1,487)
Proceeds from maturity of marketable securities	16,029	37,850	16,629
Purchases of marketable securities	(3,998)	(19,927)	(6,558)
Other	934	0	0
Net cash provided by investing activities	8,273	16,765	15,432
Cash flows from financing activities
Exercise of options	0	0	276
Purchase of treasury shares	(3,428)	(14,291)	(16,798)
Proceeds from reissuance of treasury shares upon exercise of options	2,377	4,514	0
Net cash used in financing activities	(1,051)	(9,777)	(16,522)
Effect of exchange rate changes on cash balances held	(1,683)	542	341
Increase in cash and cash equivalents	1,449	8,609	4,207
Cash and cash equivalents at beginning of year	29,285	20,676	16,469
Cash and cash equivalents at end of year	30,734	29,285	20,676
Supplementary cash flow information Non-cash transactions:
Recognition of right of use assets and lease liabilities	1,433	451	7,201
Investments in property, plant and equipment	37	59	347
Non-cash Transactions Including Investments and right of use assets and lease liabilities	1,470	510	7,548
Cash paid (received) during the year for:
Income taxes	$ (411)	$ 2,371	$ 1,284

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General

12 Months Ended

Dec. 31, 2022

Organization, Consolidation and Presentation of Financial Statements [Abstract]

General

Note 1 - General

Silicom Ltd. is an Israeli corporation engaged in designing, manufacturing, marketing and supporting high performance networking and data infrastructure solutions for a broad range of servers, server based systems and communications devices.

The Company's shares have been traded in the United States on the National Association of Securities Dealers Automated Quotation System ("NASDAQ") since February 1994. Since January 2, 2014 the Company's shares have been traded on the NASDAQ Global Select Market (prior thereto they were traded on the NASDAQ Global Market).

In these financial statements the terms "Company" or "Silicom" refer to Silicom Ltd. and its wholly owned subsidiaries, Silicom Connectivity Solutions, Inc. (hereinafter - "Silicom Inc.") and Silicom Denmark A/S (Fiberblaze A/S) (hereinafter – "Silicom Denmark"), whereas the term "subsidiaries" refers to Silicom Inc. and Silicom Denmark.

U.S. and global markets are experiencing volatility and disruption following the escalation of geopolitical tensions and the start of the military conflict between Russia and Ukraine. In February 2022, Russia launched a full-scale military invasion of Ukraine. Although the length and impact of the ongoing military conflict is highly unpredictable, the conflict in Ukraine could lead to market disruptions, including significant volatility in commodity prices, credit and capital markets. Additionally, Russia’s prior annexation of Crimea, recent recognition of two separatist republics in the Donetsk and Luhansk regions of Ukraine and subsequent military interventions in Ukraine have led to sanctions and other penalties being levied by the United States, European Union and other countries against Russia, Belarus, the Crimea Region of Ukraine, the so-called Donetsk People’s Republic, and the so-called Luhansk People’s Republic, including agreement to remove certain Russian financial institutions from the Society for Worldwide Interbank Financial Telecommunication (SWIFT) payment system. Additional potential sanctions and penalties have also been proposed and/or threatened. Russian military actions and the resulting sanctions could adversely affect the global economy and financial markets and lead to instability and lack of liquidity in capital markets. Any of the abovementioned factors could affect our business, financial condition, and operating results. The extent and duration of the military action, sanctions and resulting market disruptions are impossible to predict.

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Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2022

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Note 2 - Summary of Significant Accounting Policies

The significant accounting policies, which are applied consistently throughout the periods presented, are as follows:

A. Financial statements in US dollars

Substantially all sales of the Company are made outside of Israel (see Note 13A regarding geographical distribution), in US dollars ("dollars"). Most purchases of materials and components, and a significant part of the marketing costs are made or incurred, primarily in dollars. Therefore, the dollar is the currency that represents the principal economic environment in which the Company operates and is thus its functional currency.

Transactions and balances originally denominated in dollars are presented at their original amounts. Balances in non-dollar currencies are translated into dollars using historical and current exchange rates for non-monetary and monetary balances, respectively. For non-dollar transactions reflected in the statement of income (loss), the transaction date exchange rates are used. Depreciation, amortization and other changes deriving from non-monetary items are based on historical exchange rates. The resulting transaction gains or losses are recorded as net financial income or expenses.

B. Basis of presentation

The accompanying consolidated financial statements have been prepared with accounting principles generally accepted in the United States of America and include the accounts of the Company and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

 

C. Estimates and assumptions

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant items subject to such estimates and assumptions include revenue recognition over time, credit loss, income taxes, impairment of inventories, marketable securities, impairment of goodwill, intangible assets and the assumptions used to estimate the fair value of share-based compensation.

D. Cash and cash equivalents

The Company considers highly liquid investments with original maturities of three months or less from the date of deposit to be cash equivalents.

E. Short-term bank deposits

Short term bank deposits consist of bank deposits with original maturities of more than three months and up to twelve months.

F. Marketable securities

The Company classifies its marketable securities as held-to-maturity as they are debt securities in which the Company has the intent and ability to hold to maturity. Held-to-maturity (HTM) debt securities are recorded at amortized cost adjusted for the amortization or accretion of premiums or discounts.

Premiums and discounts on debt securities are amortized or accreted over the life of the related held-to-maturity security as an adjustment to yield using the effective interest method. Such amortization and accretion are included in the "Financial income, net" line item in the consolidated statements of operations.

The Company recognizes current expected credit losses for financial assets held at amortized cost. The Company uses forward-looking information to calculate credit loss estimates.

G. Trade accounts receivable, net

Trade accounts receivable are recorded at the invoiced amount and do not bear interest. Amounts collected on trade accounts receivable are included in net cash provided by operating activities in the consolidated statements of cash flows.

The Company presents accounts receivable in the consolidated balance sheets net of allowance for expected credit losses for potential uncollectible amounts. The Company estimates the collectability of accounts receivable balances and adjust the allowance for expected credit losses based on the Company's assessment of collectability by reviewing accounts receivable on an aggregated basis where similar characteristics exist and on an individual basis when it identifies specific customers with known disputes or collectability issues. The Company also considers a number of factors to assess collectability, including the past due status, creditworthiness of the specific customer, payment history and reasonable and supportable forecasts of future economic conditions.

As of December 31, 2021 and 2022, allowance for credit losses amounted to US$ 20 thousand.

H. Inventories

Inventories are stated at the lower of cost and net realizable value. Cost is determined using the "weighted average-cost" method.

The Company writes down obsolete or slow moving inventory to its net realizable value.

I. Assets held for employees’ severance benefits  

Assets held for employees’ severance benefits represent contributions to severance pay funds and cash surrender value of insurance policies. The assets are recorded at their current cash redemption value.

J. Property, plant and equipment

Property, plant and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated on a straight-line basis over the estimated useful life of the assets at the following annual rates:

	%
Machinery and equipment	15 - 33
Office furniture and equipment	6 - 33
Leasehold improvements	*

*   Over the shorter term of the lease or the useful life of the asset

K. Goodwill and other intangible assets

Goodwill reflects the excess of the purchase price of business acquired over the fair value of net assets acquired. Goodwill is not amortized but instead is tested for impairment at least annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired.

The Company operates in one operating segment and this segment comprises one reporting unit.

The Company may first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the Company performs a qualitative assessment and concludes that it is more likely than not that the fair value of a reporting unit exceeds its carrying value, goodwill is not considered impaired and the impairment test is not required. However, if the Company concludes otherwise, it is then required to perform a quantitative assessment for goodwill impairment.

The Company performs its quantitative goodwill impairment test by comparing the fair value of its reporting unit with its carrying value. If the reporting unit’s carrying value is determined to be greater than its fair value, an impairment charge is recognized for the amount by which the carrying value exceeds the reporting unit’s fair value. If the fair value of the reporting unit is determined to be greater than its carrying amount, the applicable goodwill is not impaired.

Intangible assets that are not considered to have an indefinite useful life are amortized over their estimated useful lives in proportion to the economic benefits realized. This accounting policy results in amortization of such intangible assets in the straight-line method.

For the years ended December 31, 2020, 2021 and 2022, no impairment losses were recorded.

L. Impairment of long-lived assets

In accordance with Impairment or Disposal of long-lived assets Subsections of FASB ASC Subtopic 360-10, Property, Plant, and Equipment – Overall. Long-lived assets, such as property, plant, equipment and purchased intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require a long-lived asset or an asset group to be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by that asset or asset group to its carrying value. If the carrying value of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying value exceeds its fair value. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values and third party independent appraisals, as considered necessary.

M. Leases

The Company elected the short-term lease recognition exemption for all leases with a term shorter than 12 months. This means that for those leases, the Company does not recognize right-of-use ("ROU") assets or lease liabilities, but recognizes lease expenses over the lease term on a straight-line basis.

ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease.

Leases are classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement.

As of December 31, 2022, all of the company's leases are operating leases.

On the commencement date, the lease payments shall include variable lease payments that depend on an index (such as the Consumer Price Index), initially measured using the index at the commencement date. The Company does not remeasure the lease liability for changes in future lease payments arising from changes in an index unless the lease liability is remeasured for another reason. Therefore, after initial recognition, such variable lease payments are recognized in profit or loss as they are incurred.

Variable payments that depends on use of the underlying asset are not included in the lease payments. Such variable payments are recognized in profit or loss in the period in which the event or condition that triggers the payment occurs.

The Company’s incremental borrowing rate for a lease is the rate of interest that it would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment.

After lease commencement, the Company measures the lease liability at the present value of the remaining lease payments using the discount rate determined at lease commencement (as long as the discount rate hasn’t been updated as a result of a reassessment event). The Company subsequently measures the ROU asset at the present value of the remaining lease payments, adjusted for the remaining balance of any cumulative prepaid or accrued rent if the lease payments are uneven throughout the lease term.

The Company’s lease agreements have remaining lease terms of 2 to 10 years. Some of these agreements include options to terminate the leases immediately. Some of our vehicle lease agreements include rental payments based on the actual usage of the vehicles and other lease agreements include rental payments adjusted periodically for inflation. The agreements related to leases in Israel are in Israeli Shekel ("ILS") or in ILS linked to the Israeli Consumer Price Index or to the US Dollars. The agreements related to leases in the USA are in US Dollars and the agreements related to leases in Denmark are in Danish Krone ("DKK"). The Company’s lease agreements do not contain any residual value guarantees. See Note 10.

N. Revenue recognition

The Company derives revenues primarily from the sale of networking and data infrastructure solutions.

The Company recognizes revenue upon transfer of control of the promised goods in a contract with a customer in an amount that reflects the consideration the Company expects to receive in exchange for those products. Transfer of control occurs once the customer has the contractual right to use the product, generally upon shipment or once delivery and risk of loss has transferred to the customer. The Company accounts for a contract with customer when it has approval and commitment from both parties, the rights of the parties and payment terms are identified, the contract has commercial substance and collectability of consideration is probable. Each of the Company's contracts includes one type of performance obligation. The Company evaluates each distinct performance obligation within a contract, whether it is satisfied at a point in time or over time. Most of the Company's revenues are recognized at a point in time. Revenue is recognized over time for sales of goods manufactured to unique customer specifications, in which the Company’s performance does not create an asset with an alternative use to the Company and the Company has an enforceable right to payment for performance completed to date if the customer were to terminate the contract. Revenue recognized over time is measured by the costs incurred to date relative to the estimated total direct costs to fulfill each contract. Incurred costs represent work performed, which corresponds with, and thereby best depicts, the transfer of control to the customer. Contract costs include labor, materials and overhead.

O. Cost of sales

Cost of sales consist primarily of production costs of finished goods manufactured by the company, with assistance of sub-contractors, from (i) components purchased from third parties, and (ii) sub-assemblies manufactured by sub-contractors under the Company’s directions and supervision as well as employee-related expenses and overhead expenses of the Company’s production lines.

P. Research and development costs and capitalized software development costs

Software development costs (mainly salary) related to programmable components incorporated into the Company's products, are charged to expense until technological feasibility has been established for the product. Once technological feasibility is established, all software costs are capitalized until the product is available for general release to customers. Judgment is required in determining when technological feasibility of a product is established. The Company has determined that technological feasibility for its software components of hardware products is reached after all high-risk development issues have been resolved through coding and testing. Amortization begins once the software is ready for its intended use, generally based on the pattern in which the economic benefits will be consumed. The amortization of these costs is included in cost of revenue over the estimated life of the products. Other costs incurred in the research and development of the Company’s products are expensed as incurred.

Q. Allowance for product warranty

The Company grants assurance-type warranties related to certain products to end-users. The Company estimates its obligation for such warranties to be immaterial on the basis of historical experience. Accordingly, these financial statements do not include an accrual for warranty obligations.

R. Treasury shares

Treasury shares are recorded at cost and presented as a reduction of shareholders' equity. The Company reissues treasury shares under the Global Share Incentive Plan (2013), upon exercise of options and upon vesting of restricted stock units ("RSU"). Reissuance of treasury shares, based on the Company's policy of first-in, first-out (FIFO), is accounted for in accordance with ASC 505-30 whereby gains are credited to additional paid-in capital and losses are charged to additional paid-in capital to the extent that previous net gains are included therein and otherwise to retained earnings.

S. Income taxes

Deferred taxes are accounted for under the asset and liability method based on the estimated future tax effects of temporary differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases, and for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are presented as non-current assets and liabilities and measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the consolidated statements of operations in the period that includes the enactment date. The Company recognizes the effect of uncertain tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured as the largest amount that is greater than 50 percent likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. Taxes which would apply in the event of disposal of investments in foreign subsidiaries have not been taken into account in computing the deferred taxes, as the Company's intention is to hold, and not to realize the investments. As of December 31, 2022, the cumulative amount of earnings of foreign subsidiaries upon which deferred taxes have not been provided is approximately US$ 16.3 million. Determination of the amount of unrecognized deferred tax liability related to these earnings is not practicable.

T. Share-based compensation

The Company recognizes compensation expense based on estimated grant date fair value in accordance with ASC Topic 718, Compensation -Stock Compensation as follows:

When portions of an award vest in increments during the requisite service period (graded-vesting award), the Company’s accounting policy is to recognize compensation cost for the award over the requisite service period for each separately vesting portion of the award.

Equity awards granted to employees are accounted for using the grant date fair value method. The grant date fair value is determined as follows: for stock options using the Binomial option-pricing model and for restricted stock units (“RSUs”) based on the market value of the Company’s stock on the date of grant, less an estimate of dividends that will not accrue to RSUs holders prior to vesting. The fair value of share based payment awards is recognized as an expense over the vesting period. The expected average volatility represents a weighted average standard deviation rate for the price of the Company’s ordinary shares on the NASDAQ National Market. For awards with only market conditions, compensation expense is not reversed if the market conditions are not satisfied.

U. Basic and diluted earnings per share

Basic income per ordinary share is calculated by dividing the net income attributable to ordinary shares, by the weighted average number of ordinary shares outstanding (net of treasury shares). Diluted income per ordinary share calculation is similar to basic income per ordinary share except that the weighted average of ordinary shares outstanding is increased to include outstanding potential ordinary shares during the period if dilutive. Potential ordinary shares arise from stock options and RSUs, and the dilutive effect is reflected by the application of the treasury stock method.

The following table summarizes information related to the computation of basic and diluted income per ordinary share for the years indicated.

	Year ended December 31
	2020		2021		2022
Net income attributable to ordinary shares (US$ thousands)		5,725		10,541		18,306
Weighted average number of ordinary shares outstanding used in basic income per ordinary share calculation		7,118,244		6,825,630		6,696,671
Add of outstanding dilutive potential ordinary shares		38,519		143,172		99,748
Weighted average number of ordinary shares outstanding used in diluted income per ordinary share calculation		7,156,763		6,968,802		6,796,419
Basic income per ordinary shares (US$)		0.804		1.544		2.733
Diluted income per ordinary shares (US$)		0.800		1.513		2.694
Weighted average number of shares related to options and RSUs excluded from    the diluted earnings per share calculation because of anti-dilutive effect		180,916		65,534		251,868

V. Comprehensive Income

For the years ended December 31, 2020, 2021 and 2022, comprehensive income equals net income.

W. Fair Value Measurements

The Company's financial instruments consist mainly of cash and cash equivalents, marketable securities, trade and other receivables and trade accounts payable. The carrying amounts of these financial instruments, except for marketable securities, approximate their fair value because of the short maturity of these investments. The fair value of marketable securities is presented in Note 4 to these consolidated financial statements. Assets held for severance benefits are recorded at their current cash redemption value.

The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Company determines fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:

Level 1 Inputs: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date.

Level 2 Inputs: Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.

Level 3 Inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at measurement date.

X. Concentrations of risks

(1)          Credit risk

Financial instruments, which potentially subject the Company to significant concentrations of credit risk, consist principally of cash and cash equivalents, marketable securities, trade receivables and assets held for employees’ severance benefits. Cash and cash equivalents balances of the Company, which are subject to credit risk, consist of cash accounts held with major financial institutions. Marketable securities consist of held to maturity marketable securities issued by highly rated corporations. As of December 31, 2021 and 2022, the ratings of the securities in the Company's portfolio was at least A-. Nonetheless, these investments are subject to general credit and counterparty risks (such as that the counterparty to a financial instrument fails to meet its contractual obligations). The Company closely monitors extensions of credit and has never experienced significant credit losses.

(2)          Significant customers

The Company's top four ultimate customers accounted for approximately 33% of its revenues in 2022. The Company expects that a small number of customers will continue to account for a significant portion of its revenues for the foreseeable future. See Note 13.

Y. Liabilities for loss contingencies

Liabilities for loss contingencies arising from claims, assessments, litigation, fines, and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred.

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Cash and Cash Equivalents

12 Months Ended

Dec. 31, 2022

Cash and Cash Equivalents [Abstract]

Cash and Cash Equivalents

Note 3 - Cash and Cash Equivalents

	December 31
	2021		2022
	US$ thousands
Cash		25,368		24,016
Cash equivalents *		3,917		6,718
		29,285		30,734

*   Comprised mainly of bank deposits in ILS as at December 31, 2021 and 2022 carrying a weighted average interest rate of 0.03% and 3.10%, respectively.

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Marketable Securities

12 Months Ended

Dec. 31, 2022

Investments, Debt and Equity Securities [Abstract]

Marketable Securities

Note 4 - Marketable Securities

The Company's investment in marketable securities as of December 31, 2021 and 2022 are classified as ''held-to-maturity'' and consist of the following:

			Gross		Gross
			unrealized		unrealized
	Amortized		holding		holding			Aggregate
	cost basis**		gains		(losses)			fair value*
	US$ thousands
At December 31, 2022
Held to maturity:
Corporate debt securities and government debt securities
Current		4,038		-		(111	)		3,927
Non-Current (1 to 3 years)		15,283		-		(1,214	)		14,069
		19,321		-		(1,325	)		17,996
At December 31, 2021
Held to maturity:
Corporate debt securities and government debt securities
Current		8,300		43		(19	)		8,324
Non-Current (1 to 4 years)		23,966		10		(512	)		23,464
		32,266		53		(531	)		31,788

*	Fair value is being determined using Level 2 inputs.
**	Including accrued interest in the amount of US$ 227 thousand and US$ 138 thousand as of December 31, 2021 and 2022, respectively.
	The accrued interest is presented as part of other receivables on the balance sheet.

Activity in marketable securities in 2022	US$ thousands
Balance at January 1, 2021		50,810
Purchases of marketable securities		19,927
Changes in marketable securities, net		(621	)
Proceeds from maturity of marketable securities		(37,850	)
Balance at January 1, 2022		32,266
Purchases of marketable securities		3,998
Changes in marketable securities, net		(914	)
Proceeds from maturity of marketable securities		(16,029	)
Balance at December 31, 2022		19,321

The following table summarizes the gross unrealized losses or gains on investment securities and the fair value of those securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss or gain position, at December 31, 2022:

	Less than 12 months					12 months or more					Total
	Unrealized Losses			Fair value		Unrealized Losses			Fair value		Unrealized Losses			Fair value
Held to maturity:
Corporate debt securities and government debt securities		(301	)		4,595		(1,024	)		13,401		(1,325	)		17,996

The unrealized losses or gains on the investments were caused by changes in interest rate. The Company has the ability and intent to hold these investments until maturity and it is more likely than not that the Company will not be required to sell any of the securities before recovery.

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Other Receivables

12 Months Ended

Dec. 31, 2022

Receivables [Abstract]

Other Receivables

Note 5 - Other Receivables

	December 31
	2021		2022
	US$ thousands
Advances to suppliers		333		421
Government authorities		2,184		1,437
Prepaid expense		768		936
Other receivables		1,408		826
		4,693		3,620

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Inventories

12 Months Ended

Dec. 31, 2022

Inventory Disclosure [Abstract]

Inventories

Note 6 - Inventories

	December 31
	2021		2022
	US$ thousands
Raw materials and components		57,156		71,861
Products in process		11,186		12,417
Finished products		7,411		3,707
		75,753		87,985

In the years ended December 31, 2020, 2021 and 2022, the Company recorded inventory write-downs in the amount of US$ 1,578 thousand, US$ 5,246 thousand and US$ 3,002 thousand, respectively.

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Property, Plant and Equipment, Net

12 Months Ended

Dec. 31, 2022

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment, Net

Note 7 - Property, Plant and Equipment, Net

	December 31
	2021			2022
	US$ thousands
Machinery and equipment		17,305			19,298
Office furniture and equipment		1,129			1,190
Leasehold improvements		3,406			3,472
Property, plant and equipment		21,840			23,960
Accumulated depreciation		(17,264	)		(19,472	)
Property, Plant and equipment, net		4,576			4,488

Depreciation expense for the years ended December 31, 2020, 2021 and 2022 were US$ 2,000 thousand, US$ 2,009 thousand and US$ 2,208 thousand, respectively.

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Intangible Assets

12 Months Ended

Dec. 31, 2022

Intangible Assets, Net (Excluding Goodwill) [Abstract]

Intangible Assets

Note 8 - Intangible Assets

			December 31
			2021		2022
	Useful life		US$ thousands
Original cost:
Capitalization of software development costs		8		6,546		9,081
Licenses		3		565		633
				7,111		9,714
Accumulated amortization:
Capitalization of software development costs				2,366		2,431
Licenses				431		573
				2,797		3,004
Intangible assets, net:
Capitalization of software development costs				4,180		6,650
Licenses				134		60
				4,314		6,710

Amortization expense for the years ended December 31, 2020, 2021 and 2022 were US$ 378 thousand, US$ 428 thousand and US$ 207 thousand, respectively. The estimates amortization of capitalized software development costs in relation to developments that were available for general release to customers, as of December 31, 2022, are US$ 260 thousand in 2023 and US$ 247 thousand in each of the years 2024 through 2027.

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Other accounts payable and accrued expenses

12 Months Ended

Dec. 31, 2022

Accounts Payable and Accrued Liabilities [Abstract]

Other accounts payable and accrued expenses

Note 9 - Other accounts payable and accrued expenses

	December 31
	2021		2022
	US$ thousands
Accrued expenses		8,664		2,338
Employee benefits		6,562		5,958
Government authorities		577		663
Other payables		2,779		682
		18,582		9,641

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Leases

12 Months Ended

Dec. 31, 2022

Leases [Abstract]

Leases

Note 10 - Leases

A. The components of operating lease cost for the year ended December 31, 2020, 2021 and 2022 were as follows:

	Year ended December 31
	2020		2021		2022
	US$ thousands
Operating lease costs (mainly plant and offices)		1,623		1,921		1,872
Variable lease payments not included in the lease liability		3		8		62
Short-term lease cost		285		278		273
Total operating lease cost		1,911		2,207		2,207

B. Supplemental cash flow information related to operating leases was as follows:

	Year ended December 31
	2020		2021		2022
	US$ thousands
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases		1,601		1,887		1,847
Right-of-use assets obtained in exchange for lease liabilities (non-cash):
Operating leases		7,201		451		1,269

C.          Supplemental balance sheet information related to operating leases was as follows:

	December 31
	2021		2022
	US$ thousands
Operating leases:
Operating leases right-of-use		8,765		8,441
Current operating lease liabilities		1,811		1,549
Non-current operating lease liabilities		7,377		6,291
Total operating lease liabilities		9,188		7,840

	December 31
	2021			2022
	US$ thousands
Weighted average remaining lease term (years)		7.3			7.7
Weighted average discount rate		2.3	%		2.9	%

E.          Future lease payments under non-cancellable leases as of December 31, 2022 were as follows:

	December 31, 2022
	US$ thousands
2023		1,793
2024		1,477
2025		1,057
2026		1,006
After 2026		3,416
Total operating lease payments		8,749
Less: imputed interest		(909	)
Present value of lease liabilities		7,840

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Assets Held and Liability for Employees' Severance Benefits

12 Months Ended

Dec. 31, 2022

Retirement Benefits [Abstract]

Assets Held and Liability for Employees' Severance Benefits

Note 11 - Assets Held and Liability for Employees' Severance Benefits

A. Under Israeli law and labor agreements, Silicom is required to make severance payments to retired or dismissed employees and to employees leaving employment in certain other circumstances.

In respect of the liability to the employees, individual insurance policies are purchased and deposits are made with recognized severance pay funds.

The liability for severance pay is calculated on the basis of the latest salary paid to each employee multiplied by the number of years of employment. The liability is covered by the amounts deposited including accumulated income thereon as well as by the unfunded provision.

B. According to Section 14 to the Severance Pay Law ("Section 14") the payment of monthly deposits by a company into recognized severance and pension funds or insurance policies releases it from any additional severance obligation to the employees that have entered into agreements with the company pursuant to such Section 14. Commencing July 1, 2008, the Company has entered into agreements with a majority of its employees in order to implement Section 14. Therefore, as of that date, the payment of monthly deposits by the Company into recognized severance and pension funds or insurance policies releases it from any additional severance obligation to those employees that have entered into such agreements and therefore the Company incurs no additional liability since that date with respect to such employees. Amounts accumulated in the pension funds or insurance policies pursuant to Section 14 are not supervised or administrated by the Company and therefore neither such amounts nor the corresponding accrual are reflected in the balance sheet.

C. Consequently, the assets held for employees' severance benefits reported on the balance sheet, in respect of deposits for those employees who have signed agreements pursuant to Section 14, represent the redemption value of deposits made through June 30, 2008. The liability for employee severance benefits, with respect to those employees, represents the liability of the Company for employees' severance benefits as of June 30, 2008.

As a result of the implementation of Section 14, as described above, the liability with respect to those employees is calculated on the basis of number of years of employment as of June 30, 2008, multiplied by the latest salary paid. The liability is covered by the amounts deposited, including accumulated income thereon, as well as by the unfunded provision. Such liability will be removed, either upon termination of employment or retirement.

D. Expenses recorded with respect to employees' severance payments for the years ended December 31, 2020, 2021 and 2022, mainly attributed to Section 14, were US$986 thousand, US$1,104 thousand and US$1,194 thousand, respectively.

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Shareholders' Equity

12 Months Ended

Dec. 31, 2022

Stockholders' Equity Note [Abstract]

Shareholders' Equity

Note 12 - Shareholders' Equity

Capital and reserves

On May 2, 2019, the Company's Board of Directors authorized and began implementation of a one-year share repurchase plan to repurchase up to $15 million of the Company's ordinary shares. On April 30, 2020 the Company's Board of Directors authorized another one-year share repurchase plan allowing the Company to invest up to $15 million to repurchase its ordinary shares. This plan has begun as the previously announced $15 million one-year share repurchase plan was completed. On April 29, 2021 the Company's Board of Directors authorized another one-year share repurchase plan allowing the Company to invest up to $15 million to repurchase its ordinary shares. This plan has begun as the previously announced $15 million one-year share repurchase plan was completed. Repurchases may be made in the open market and will be in accordance with applicable securities laws and regulations. The timing and amount of each repurchase transaction may depend on a variety of factors. The share repurchase plan does not obligate the Company to acquire any specific number of ordinary shares and may be suspended or terminated at any time at management’s discretion.

Share based compensation

A.	On October 21, 2013 the Board resolved to adopt the Global Share Incentive Plan (2013) (the "2013 Plan") and to reserve up to 500,000 ordinary shares for issuance under the 2013 Plan to employees, directors, officers and consultants of the Company or of any subsidiary or affiliate of the Company. In January 2018, our Board approved the increase of the number of ordinary shares reserved for issuance under the 2013 Plan by 600,000 additional ordinary shares. Grants under the 2013 Plan, whether as options, restricted stock units, restricted stock or other equity based awards, including their terms, are subject to the Board of Directors' approval. Grants to directors and certain other officers are generally subject to the approvals of the Compensation Committee as well as Board of Directors, and grants to directors or a CEO (and under certain circumstances certain other officers) will also have to be approved by the Shareholders.
B.	Options or RSUs granted to Israeli residents may be granted under Section 102 of the Israeli Income Tax Ordinance pursuant to which the awards of options, or the ordinary shares issued upon their exercise, must be deposited with a trustee for at least two years following the date of grant. Under Section 102, any tax payable by an employee from the grant or exercise of the awards is deferred until the transfer of the awards or ordinary shares by the trustee to the employee or upon the sale of the awards or ordinary shares.
	Capital gains on awards granted under the plans are subjected to tax of 25% to be paid by the employee, and the Company is not entitled to a tax deduction.
	Gains which are not capital gains on awards under the plans are subjected to regular tax rates on individuals, and the Company is entitled to a tax deduction for such gains.

C. During 2017, 2020 and 2022, the Company granted 78,000, 86,000 and 16,000 RSUs respectively to certain of its directors, employees and consultants under the 2013 Plan. In relation to those grants:

1.	The vesting period of the RSUs ranges between 2 to 3 years from the date of grant.
2.	The fair value of RSUs is estimated based on the market value of the Company’s stock on the date of grant, less an estimate of dividends that will not accrue to RSUs holders prior to vesting.
3.	The Company recognizes compensation expenses on these RSUs based on estimated grant date fair value, with the following assumptions:

	2017	2020	2022
Expected dividend yield	2.68%	0%	0%

D. On January 31, 2019, the Company granted, in the aggregate, 141,928 options to certain of its directors and employees under the 2013 Plan. In relation to this grant:

1.	The exercise price for the options (per ordinary share) was US$ 33.83 and the Option expiration date was the earlier to occur of: (a) January 31, 2027; and (b) the closing price of the shares falling below US$ 16.92 at any time after the date of grant. The options vest and become exercisable on the second anniversary of the date of grant.
2.	The Company recognizes compensation expenses on these options based on estimated grant date fair value using the Binomial option-pricing model with the following assumptions:

Average Risk-free interest rate (a)	2.55%
Expected dividend yield	0.0%
Average expected volatility (b)	44.62%
Termination rate	9%
Suboptimal factor (c)	3.18

(a)	Risk-free interest rate represents risk free US$ zero-coupon US Government Bonds at time of grant.
(b)	Expected average volatility represents a weighted average standard deviation rate for the price of the Company’s ordinary shares on the NASDAQ National Market.
(c)	Suboptimal factor represents the multiple of the increase in the market share price on the day of grant of the option which, should it come to pass, will lead to exercise of the option by the employee. It is the average suboptimal factor of the Company and similar companies.

E. On June 8, 2020, the Company granted, in the aggregate, 148,426  options to certain of its directors and employees under the 2013 Plan. In relation to this grant:

1.	The exercise price for the options (per ordinary share) was US$ 32.54 and the Option expiration date was the earlier to occur of: (a) June 8, 2028; and (b) the closing price of the shares falling below US$ 16.27 at any time after the date of grant. The options vest and become exercisable on the second anniversary of the date of grant.
2.	The Company recognizes compensation expenses on these options based on estimated grant date fair value using the Binomial option-pricing model with the following assumptions:

Average Risk-free interest rate (a)	0.75%
Expected dividend yield	0.0%
Average expected volatility (b)	45.29%
Termination rate	9%
Suboptimal factor (c)	3.16

(a)	Risk-free interest rate represents risk free US$ zero-coupon US Government Bonds at time of grant.
(b)	Expected average volatility represents a weighted average standard deviation rate for the price of the Company’s ordinary shares on the NASDAQ National Market.
(c)	Suboptimal factor represents the multiple of the increase in the market share price on the day of grant of the option which, should it come to pass, will lead to exercise of the option by the employee. It is the average suboptimal factor of the Company and similar companies.

F. On June 3, 2021, the Company granted, in the aggregate, 133,925 options to certain of its directors and employees under the 2013 Plan. In relation to this grant:

1.	The exercise price for the options (per ordinary share) was US$ 41.84 and the Option expiration date was the earlier to occur of: (a) June 3, 2029; and (b) the closing price of the shares falling below US$ 20.92 at any time after the date of grant. The options vest and become exercisable on the second anniversary of the date of grant.
2.	The Company recognizes compensation expenses on these options based on estimated grant date fair value using the Binomial option-pricing model with the following assumptions:

Average Risk-free interest rate (a)	1.41%
Expected dividend yield	0.0%
Average expected volatility (b)	45.28%
Termination rate	9%
Suboptimal factor (c)	3.14

(a)	Risk-free interest rate represents risk free US$ zero-coupon US Government Bonds at time of grant.
(b)	Expected average volatility represents a weighted average standard deviation rate for the price of the Company’s ordinary shares on the NASDAQ National Market.
(c)	Suboptimal factor represents the multiple of the increase in the market share price on the day of grant of the option which, should it come to pass, will lead to exercise of the option by the employee. It is the average suboptimal factor of the Company and similar companies.

G. On January 27, 2022, the Company granted, in the aggregate, 121,508 options to certain of its employees under the 2013 Plan. In relation to this grant:

1.

The exercise price for the options (per ordinary share) was US$ 47.98 and the Option expiration date was the earlier to occur of: (a) January 27, 2030; and (b) the closing price of the shares falling below US$ 23.99 at any time after the date of grant and remains in such price or in a lower price for a period of at least 30 days. The options vest and become exercisable on the second anniversary of the date of grant.

2.

The Company recognizes compensation expenses on these options based on estimated grant date fair value using the Monte Carlo option-pricing model with the following assumptions:

Average Risk-free interest rate (a)	1.79%
Expected dividend yield	0.0%
Average expected volatility (b)	44.38%
Termination rate	9%
Suboptimal factor (c)	3.16

(a)	Risk-free interest rate represents risk free US$ zero-coupon US Government Bonds at time of grant.
(b)	Expected average volatility represents a weighted average standard deviation rate for the price of the Company’s ordinary shares on the NASDAQ National Market.
(c)	Suboptimal factor represents the multiple of the increase in the market share price on the day of grant of the option which, should it come to pass, will lead to exercise of the option by the employee. It is the average suboptimal factor of the Company and similar companies.

H. On June 7, 2022, the Company granted, in the aggregate, 26,666 options to certain of its directors and employees under the 2013 Plan. In relation to this grant:

1.

The exercise price for the options (per ordinary share) was US$ 35.69 and the Option expiration date was the earlier to occur of: (a) June 7, 2030; and (b) the closing price of the shares falling below US$ 17.85 at any time after the date of grant and remains in such price or in a lower price for a period of at least 30 days. The options vest and become exercisable on the second anniversary of the date of grant.

2.

The Company recognizes compensation expenses on these options based on estimated grant date fair value using the Monte Carlo option-pricing model with the following assumptions:

Average Risk-free interest rate (a)	3.01%
Expected dividend yield	0.0%
Average expected volatility (b)	43.93%
Termination rate	9%
Suboptimal factor (c)	3.14

(a)	Risk-free interest rate represents risk free US$ zero-coupon US Government Bonds at time of grant.
(b)	Expected average volatility represents a weighted average standard deviation rate for the price of the Company’s ordinary shares on the NASDAQ National Market.
(c)	Suboptimal factor represents the multiple of the increase in the market share price on the day of grant of the option which, should it come to pass, will lead to exercise of the option by the employee. It is the average suboptimal factor of the Company and similar companies.

I. On July 1, 2022, the Company granted, in the aggregate, 50,000 options to certain of its employee under the 2013 Plan. In relation to this grant:

1.

The exercise price for the options (per ordinary share) was US$ 34.90 and the Option expiration date was the earlier to occur of: (a) July 1, 2030; and (b) the closing price of the shares falling below US$ 17.45 at any time after the date of grant and remains in such price or in a lower price for a period of at least 30 days. The options vest and become exercisable on the second anniversary of the date of grant.

2.

The Company recognizes compensation expenses on these options based on estimated grant date fair value using the Monte Carlo option-pricing model with the following assumptions:

Average Risk-free interest rate (a)	2.91%
Expected dividend yield	0.0%
Average expected volatility (b)	44.02%
Termination rate	9%
Suboptimal factor (c)	3.14

(a)	Risk-free interest rate represents risk free US$ zero-coupon US Government Bonds at time of grant.
(b)	Expected average volatility represents a weighted average standard deviation rate for the price of the Company’s ordinary shares on the NASDAQ National Market.
(c)	Suboptimal factor represents the multiple of the increase in the market share price on the day of grant of the option which, should it come to pass, will lead to exercise of the option by the employee. It is the average suboptimal factor of the Company and similar companies.

J. The following table summarizes information regarding stock options as at December 31, 2022:

	Options outstanding				Options exercisable
			Weighted average				Weighted average
			remaining				remaining
Exercise price	Number		contractual life		Number		contractual life
US$	of options		(in years)		of options		(in years)
26.91		18,141		0.6		18,141		0.6
33.27		14,865		3.3		14,865		3.3
28.38		23,699		1.4		23,699		1.4
39.62		66,343		2.1		66,343		2.1
36.11		72,212		3.3		72,212		3.3
33.83		62,418		4.1		62,418		4.1
32.54		107,037		5.4		107,037		5.4
41.84		115,758		6.4		-		-
47.98		103,923		7.1		-		-
35.69		26,666		7.4		-		-
34.90		50,000		7.5		-		-
		661,062				364,715

The aggregate intrinsic value of options outstanding as of December 31, 2021 and 2022 is US$ 9,129 thousand and US$ 3,457 thousand, respectively.

The aggregate intrinsic value of options exercisable as of December 31, 2021 and 2022 is US$ 5,300 thousand and US$ 2,887 thousand, respectively.

The total intrinsic value of options exercised during the year ended December 31, 2021 and 2022, is US$ 2,334 thousand and US$ 600 thousand, respectively.

K. The stock option activity under the abovementioned plans is as follows:

						Weighted
				Weighted		average
	Number			average		grant date
	of options			exercise price		fair value
				US$		US$
Balance at January 1, 2020		465,247
Granted		148,426			32.54		14.82
Exercised		(12,357	)		22.38		8.63
Forfeited		(11,269	)		33.93		14.56
Balance at December 31, 2020		590,047
Granted		133,925			41.84		16.62
Exercised		(132,702	)		34.01		12.85
Forfeited		(11,749	)		35.79		15.39
Balance at December 31, 2021		579,521
Granted		198,174			40.82		15.13
Exercised		(66,298	)		33.09		13.21
Forfeited		(50,335	)		41.67		15.75
Balance at December 31, 2022		661,062
Exercisable at December 31, 2022		364,715

L. The Restricted Share Units activity under the abovementioned plans is as follows:

				Weighted
	Number of			average
	Restricted			grant date
	Share Units			fair value
				US$
Balance at January 1, 2020		39,000
Granted		86,000			35.33
Vested		(39,000	)		34.43
Balance at December 31, 2020		86,000
Granted		-			-
Vested		-			-
Balance at December 31, 2021		86,000
Granted		16,000			43.02
Forfeited		(2,000	)		35.33
Vested		(43,000	)		35.33
Balance at December 31, 2022		57,000

The aggregate intrinsic value of RSUs outstanding as of December 31, 2021 and December 31, 2022 is US$ 4,438 thousand and US$ 2,403 thousand, respectively.

M. During 2020, 2021 and 2022, the Company recorded share-based compensation expenses. The following summarizes the allocation of the stock-based compensation expenses:

	Year ended December 31
	2020		2021		2022
	US$ thousands
Cost of sales		535		480		638
Research and development costs		959		1,011		1,454
Selling and marketing expenses		602		697		774
General and administrative expenses		615		674		711
		2,711		2,862		3,577

As of December 31, 2022, there were US$ 3,994 thousand of unrecognized compensation costs related to outstanding stock options and RSUs to be recognized over a weighted average period of 1.2 years.

The total tax benefit recognized in the consolidated statements of operations related to share based compensation expenses amounted to US$ 42 thousand and US$ 40 thousand for the year ended December 31, 2021 and December 31, 2022.

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Geographic areas and major customers

12 Months Ended

Dec. 31, 2022

Geographic areas and major customers [Abstract]

Geographic areas and major customers

Note 13 - Geographic areas and major customers

A. Information on sales by geographic distribution:

The Company has one operating segment.

Sales are attributed to geographic distribution based on the location of the ultimate customer:

	Year ended December 31
	2020		2021		2022
	US$ thousands
USA		64,503		88,556		107,908
North America - other		639		964		836
Israel		12,362		9,936		13,586
Europe		23,208		19,383		20,715
Asia-Pacific		6,686		9,621		7,537
		107,398		128,460		150,582

B.   Sales to single ultimate customers exceeding 10% of sales (US$ thousands):

	Year ended December 31
	2020		2021		2022
	US$ thousands
Customer "A"		12,278		19,184		22,926
Customer "B"		13,468		7,788		8,519
Customer "C"		13,328		7,689		5,965

C.   Information on Long-Lived Assets - Property, Plant and Equipment and ROU assets by geographic areas:

The following table presents the locations of the Company’s long-lived assets as of December 31, 2021 and 2022:

	Year ended December 31
	2021		2022
	US$ thousands
North America		1,014	827
Europe		340	224
Israel		11,987	11,878
		13,341	12,929

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Financial Income (Expenses), Net

12 Months Ended

Dec. 31, 2022

Other Income and Expenses [Abstract]

Financial Income (Expenses), Net

Note 14 - Financial Income (Expenses), Net

	Year ended December 31
	2020			2021			2022
	US$ thousands
Interest income		2,197			1,548			1,144
Changes in marketable securities, net		(244	)		(621	)		(914	)
Exchange rate differences, net		(748	)		(1,031	)		2,308
Bank charges		(171	)		(48	)		(74	)
		1,034			(152	)		2,464

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Taxes on Income

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Taxes on Income

Note 15 - Taxes on Income

A.	Measurement of results for tax purposes under the Israeli Income Tax Regulations (Rules for Maintaining Accounting Records of Foreign Invested Companies and Certain Partnerships and Determining Their Taxable Income) - 1986
	As a "foreign invested company" (as defined in the Israeli Law for the Encouragement of Capital Investments-1959), the taxable income or loss and the tax basis of assets and liabilities of the Company’s Israeli operations are denominated in US Dollars.
B.	Corporate tax rate in Israel
	The regular corporate tax rate applied to taxable income of Israeli companies is 23% (as from 2018 onwards).
C.	Tax benefits under the Israeli Law for the Encouragement of Capital Investments, 1959 (hereinafter - the "Law")

1.

On December 29, 2010 the Knesset approved the Economic Policy Law for 2011-2012, which includes an amendment to the Law for the Encouragement of Capital Investments – 1959 (hereinafter – "the Amendment to the Law"). The Amendment to the Law is effective from January 1, 2011 and its provisions will apply to preferred income derived or accrued in 2011 and thereafter by a Preferred Company, per the definition of these terms in the Amendment to the Law.

Companies can choose to not be included in the scope of the Amendment to the Law and to stay in the scope of the law before its amendment until the end of the benefits period. Under the Amendment to the Law, upon an irrevocable election made by a company, a uniform corporate tax rate will apply to all preferred income of such company. The Company elected to apply the uniform corporate tax rate as of 2014.  From 2017 onwards, the uniform tax rate is to be 7.5% in areas in Israel designated as Development Zone A and 16% elsewhere in Israel. The company has two facilities in Israel of which one of them is located in Development Zone A. The profits of these Preferred Companies will be freely distributable as dividends, subject to a withholding tax of 20% (or a lower rate under an applicable tax treaty). Should the Company derive income from sources other than the Preferred Company, such income will be taxable at the regular corporate tax rates for the applicable year.

On December 29, 2016 the Israeli Parliament (the "Knesset") enacted the "Economic Efficiency Law (Legislative Amendments for Achieving Budget Objectives in the Years 2017 and 2018) – 2016" in which the Law was also amended (hereinafter: “the Amendment”). The Amendment added new tax benefit tracks for a “preferred technological enterprise” and a “special preferred technological enterprise” which award reduced tax rates to a technological industrial enterprise for the purpose of encouraging activity relating to the development of qualifying intangible assets.

The benefits will be awarded to a “preferred company” that has a “preferred technological enterprise” or a “special preferred technological enterprise” with respect to taxable “preferred technological income” per its definition in the Law.

Preferred technological income that meets the conditions required in the law, will be subject to a reduced corporate tax rate of 12%, and if the preferred technological enterprise is located in "Development Area A" in Israel - to a reduced tax rate of 7.5%. A company that owns a special preferred technological enterprise will be subject to a reduced corporate tax rate of 6% regardless of the development area in which the enterprise is located. The Amendment is effective as from January 1, 2017.

On June 14, 2017 the Knesset Finance Committee approved "Encouragement of Capital Investment Regulations (Preferred Technological Income and Capital Gain of Technological Enterprise) – 2017" (hereinafter: “the Regulations”), which provides rules for applying the “preferred technological enterprise” and “special preferred technological enterprise” tax benefit tracks, including the Nexus formula that provides the mechanism for allocating the technological income eligible for the benefits.

Should the Company derive income from sources other than the “preferred technological enterprise”, such income will be taxable at the "Preferred Company" tax rate (for manufacturing activity in Israel) or regular corporate tax rates for the applicable year.

As a result of the aforesaid legislation, starting 2021 the Company implement the “preferred technological enterprise” tax benefit track.

2.	In the event of distribution by the Company of dividends out of its retained earnings that were generated prior to the 2014 tax year and were tax exempt under the "Approved Enterprise" or "Benefited Enterprise" status, the Company would be subjected to a maximum of 25% corporate tax on the amount distributed, and a further 15% withholding tax would be deducted from the amounts distributed to the shareholders.
	Out of the Company’s retained earnings as of December 31, 2022, approximately US$ 49,612 thousand are tax-exempt, under our previous "Approved Enterprise" and "Benefited Enterprise" status. If such tax-exempt income is distributed as a dividend (including a liquidation dividend), it would be taxed at the regular corporate tax rate applicable to such profits (subject to a maximum rate of 25%) and an income tax liability of up to approximately US$ 12,403 thousand would be incurred as of December 31, 2022. The Company anticipates that any future dividends distributed pursuant to its dividend policy, will be distributed from income sources which will not impose additional tax liabilities on the Company. The Company intends to reinvest its tax-exempt income. Accordingly, no deferred tax liability has been recognized for income attributable to the Company’s previous "Approved Enterprise" or "Benefited Enterprise" status. If the Company was to declare a dividend from its tax-exempt income, an income tax expense would be recognized in the period a dividend is declared.
	On November 15, 2021, the Israeli Parliament released its 2021-2022 Budget Law (“2021 Budget Law”). The 2021 Budget Law introduces a new dividend ordering rule that apportions every dividend between previously tax-exempt and previously taxed income. Consequently, distributions (including deemed distributions as per Section 51(h)/51B of the Investment Law) may entail additional corporate tax liability to the distributing company. Effective August 15, 2021, dividend distributions will be treated as if made on a pro-rata basis from all types of earnings, including Exempt Profits. If such tax-exempt income is distributed, it would be taxed at the reduced corporate tax rate applicable to such income.

D. Taxation of the subsidiaries

1.	The subsidiary Silicom Inc. files tax returns with US federal tax authorities and with state tax authorities in the states of New Jersey, California, Virginia, New York, New Mexico, Tennessee, Texas and Illinois.   The federal corporate income tax rate is 21% and the state corporate tax is approximately 9% in average.
2.	The subsidiary Silicom Denmark is taxed according to the tax laws in Denmark, subject to corporate tax of 22%.
3.	The Company has not provided for Israeli income tax and foreign withholding taxes on US$ 8,702 thousand of its non-Israeli subsidiaries' undistributed earnings as of December 31, 2022. The earnings could become subject to tax if earnings are remitted or deemed remitted as dividends or upon sale of a subsidiary. The Company currently has no plans to repatriate those funds and intends to indefinitely reinvest them in its non-Israeli operations. The unrecognized deferred tax liability associated with these temporary differences was approximately US$ 1,822 thousand at December 31, 2022.

E. Tax assessments

1.	For the Israeli jurisdiction the Company has final tax assessments for all years up to and including the tax year ended December 31, 2017.
2.	For the US federal jurisdiction, Silicom Inc. has final tax assessments for all years up to and including the tax year ended December 31, 2018. For the New Jersey and California state jurisdictions, Silicom Inc. has final tax assessments for all years up to and including the tax year ended December 31, 2017. For the Virginia, Tennessee, New York and New Mexico state jurisdictions, Silicom Inc. has final tax assessments for all years up to and including the tax year ended December 31, 2019. For the Texas state jurisdiction, Silicom Inc. has open tax assessments for the years 2018 through 2022. For the Illinois state jurisdiction, Silicom Inc. has open tax assessments for the years 2020 through 2022.
3.	For the Danish jurisdiction, Silicom Denmark has final tax assessments for all years up to and including the tax year ended December 31, 2016.

F. Income before income taxes and income taxes expense (benefit) included in the consolidated statements of operations

	Year ended December 31
	2020			2021			2022
	US$ thousands
Income before income taxes:
Israel		5,565			7,486			17,915
Foreign jurisdictions		1,717			5,419			4,475
		7,282			12,905			22,390
Current taxes:
Israel		1,260			1,281			1,765
Foreign jurisdictions		506			1,192			1,198
		1,766			2,473			2,963
Current tax (benefits) expenses relating to prior years:
Israel		50			(10	)		(215	)
Foreign jurisdictions		(198	)		(147	)		158
		(148	)		(157	)		(57	)
Deferred taxes:
Israel		8			174			1,114
Foreign jurisdictions		(69	)		(126	)		64
		(61	)		48			1,178
Income tax expense		1,557			2,364			4,084

G. Deferred tax assets and liabilities

The tax effects of significant items comprising the Company’s deferred tax assets and liabilities are as follows:

	December 31			December 31
	2021			2022
	US$ thousands			US$ thousands
Deferred tax assets:
Accrued employee benefits		420			362
Research and development costs		2,000			1,380
Share based compensation		427			391
Intangible assets		228			163
Operating lease liabilities		1,048			693
Other		-			54
Total deferred tax assets		4,123			3,043
Deferred tax liabilities:
Intangible assets		(169	)		(357	)
Goodwill*		(1,300	)		(1,511	)
Operating leases right-of-use, net		(1,000	)		(747	)
Other		(48	)		-
Total deferred tax liabilities		(2,517	)		(2,615	)
Net deferred tax assets		1,606			428
In Israel		1,616			502
Foreign jurisdictions		(10	)		(74	)
Net deferred tax assets		1,606			428
Non-current deferred tax assets		1,616			502
Non-current deferred tax liabilities		(10	)		(74	)

* The recognized goodwill is deductible for income tax purposes for 10 years.

H. Reconciliation of the statutory tax expense to actual tax expense

	Year ended December 31
	2020			2021			2022
	US$ thousands
Income before income taxes		7,282			12,905			22,390
Statutory tax rate in Israel		23.0	%		23.0	%		23.0	%
		1,675			2,968			5,150
Increase (decrease) in taxes resulting from:
Non-deductible operating expenses		508			395			566
Prior years adjustments		(148	)		(157	)		(57	)
Tax effect due to "Preferred Enterprise" status		(533	)		(577	)		(1,949	)
Statutory rate differential		105			(86	)		168
Other		(50	)		(179	)		206
Income tax expense		1,557			2,364			4,084

I. Accounting for uncertainty in income taxes The accounting literature clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. The standards prescribe a minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. It also requires significant judgment in determining what constitutes an individual tax position as well as assessing the outcome of each tax position.   During 2020, 2021 and 2022 the Company and its subsidiaries did not have any significant unrecognized tax benefits and thus, no related interest and penalties were accrued.   In addition, the Company and its subsidiaries do not expect that the amount of unrecognized tax benefits will change significantly within the next twelve months.

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Subsequent Events

12 Months Ended

Dec. 31, 2022

Subsequent Events [Abstract]

Subsequent Events

Note 16 - Subsequent Events

In March 2023, the Company’s compensation committee and board of directors, respectively, has approved the grant of a total of 137,911 options and 86,000 RSUs under the Global Share Incentive Plan (2013), of which options and RSUs granted to directors and office holders are subject to the approval of the Annual General Meeting, which is currently scheduled to convene no later than June 2023, as prescribed under the Israeli Companies Law, 1999 and the Company's Amended and Restated Articles of Association.

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Summary of Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2022

Accounting Policies [Abstract]

Financial statements in US dollars

A. Financial statements in US dollars

Substantially all sales of the Company are made outside of Israel (see Note 13A regarding geographical distribution), in US dollars ("dollars"). Most purchases of materials and components, and a significant part of the marketing costs are made or incurred, primarily in dollars. Therefore, the dollar is the currency that represents the principal economic environment in which the Company operates and is thus its functional currency.

Transactions and balances originally denominated in dollars are presented at their original amounts. Balances in non-dollar currencies are translated into dollars using historical and current exchange rates for non-monetary and monetary balances, respectively. For non-dollar transactions reflected in the statement of income (loss), the transaction date exchange rates are used. Depreciation, amortization and other changes deriving from non-monetary items are based on historical exchange rates. The resulting transaction gains or losses are recorded as net financial income or expenses.

Basis of presentation

B. Basis of presentation

The accompanying consolidated financial statements have been prepared with accounting principles generally accepted in the United States of America and include the accounts of the Company and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Estimates and assumptions

C. Estimates and assumptions

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant items subject to such estimates and assumptions include revenue recognition over time, credit loss, income taxes, impairment of inventories, marketable securities, impairment of goodwill, intangible assets and the assumptions used to estimate the fair value of share-based compensation.

Cash and cash equivalents

D. Cash and cash equivalents

The Company considers highly liquid investments with original maturities of three months or less from the date of deposit to be cash equivalents.

Short-term bank deposits

E. Short-term bank deposits

Short term bank deposits consist of bank deposits with original maturities of more than three months and up to twelve months.

Marketable securities

F. Marketable securities

The Company classifies its marketable securities as held-to-maturity as they are debt securities in which the Company has the intent and ability to hold to maturity. Held-to-maturity (HTM) debt securities are recorded at amortized cost adjusted for the amortization or accretion of premiums or discounts.

Premiums and discounts on debt securities are amortized or accreted over the life of the related held-to-maturity security as an adjustment to yield using the effective interest method. Such amortization and accretion are included in the "Financial income, net" line item in the consolidated statements of operations.

The Company recognizes current expected credit losses for financial assets held at amortized cost. The Company uses forward-looking information to calculate credit loss estimates.

Trade accounts receivable, net

G. Trade accounts receivable, net

Trade accounts receivable are recorded at the invoiced amount and do not bear interest. Amounts collected on trade accounts receivable are included in net cash provided by operating activities in the consolidated statements of cash flows.

The Company presents accounts receivable in the consolidated balance sheets net of allowance for expected credit losses for potential uncollectible amounts. The Company estimates the collectability of accounts receivable balances and adjust the allowance for expected credit losses based on the Company's assessment of collectability by reviewing accounts receivable on an aggregated basis where similar characteristics exist and on an individual basis when it identifies specific customers with known disputes or collectability issues. The Company also considers a number of factors to assess collectability, including the past due status, creditworthiness of the specific customer, payment history and reasonable and supportable forecasts of future economic conditions.

As of December 31, 2021 and 2022, allowance for credit losses amounted to US$ 20 thousand.

Inventories

H. Inventories

Inventories are stated at the lower of cost and net realizable value. Cost is determined using the "weighted average-cost" method.

The Company writes down obsolete or slow moving inventory to its net realizable value.

Assets held for employees' severance benefits

I. Assets held for employees’ severance benefits  

Assets held for employees’ severance benefits represent contributions to severance pay funds and cash surrender value of insurance policies. The assets are recorded at their current cash redemption value.

Property, plant and equipment

J. Property, plant and equipment

Property, plant and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated on a straight-line basis over the estimated useful life of the assets at the following annual rates:

	%
Machinery and equipment	15 - 33
Office furniture and equipment	6 - 33
Leasehold improvements	*

*   Over the shorter term of the lease or the useful life of the asset

Goodwill and other intangible assets

K. Goodwill and other intangible assets

Goodwill reflects the excess of the purchase price of business acquired over the fair value of net assets acquired. Goodwill is not amortized but instead is tested for impairment at least annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired.

The Company operates in one operating segment and this segment comprises one reporting unit.

The Company may first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the Company performs a qualitative assessment and concludes that it is more likely than not that the fair value of a reporting unit exceeds its carrying value, goodwill is not considered impaired and the impairment test is not required. However, if the Company concludes otherwise, it is then required to perform a quantitative assessment for goodwill impairment.

The Company performs its quantitative goodwill impairment test by comparing the fair value of its reporting unit with its carrying value. If the reporting unit’s carrying value is determined to be greater than its fair value, an impairment charge is recognized for the amount by which the carrying value exceeds the reporting unit’s fair value. If the fair value of the reporting unit is determined to be greater than its carrying amount, the applicable goodwill is not impaired.

Intangible assets that are not considered to have an indefinite useful life are amortized over their estimated useful lives in proportion to the economic benefits realized. This accounting policy results in amortization of such intangible assets in the straight-line method.

For the years ended December 31, 2020, 2021 and 2022, no impairment losses were recorded.

Impairment of long-lived assets

L. Impairment of long-lived assets

In accordance with Impairment or Disposal of long-lived assets Subsections of FASB ASC Subtopic 360-10, Property, Plant, and Equipment – Overall. Long-lived assets, such as property, plant, equipment and purchased intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require a long-lived asset or an asset group to be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by that asset or asset group to its carrying value. If the carrying value of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying value exceeds its fair value. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values and third party independent appraisals, as considered necessary.

Leases

M. Leases

The Company elected the short-term lease recognition exemption for all leases with a term shorter than 12 months. This means that for those leases, the Company does not recognize right-of-use ("ROU") assets or lease liabilities, but recognizes lease expenses over the lease term on a straight-line basis.

ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease.

Leases are classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement.

As of December 31, 2022, all of the company's leases are operating leases.

On the commencement date, the lease payments shall include variable lease payments that depend on an index (such as the Consumer Price Index), initially measured using the index at the commencement date. The Company does not remeasure the lease liability for changes in future lease payments arising from changes in an index unless the lease liability is remeasured for another reason. Therefore, after initial recognition, such variable lease payments are recognized in profit or loss as they are incurred.

Variable payments that depends on use of the underlying asset are not included in the lease payments. Such variable payments are recognized in profit or loss in the period in which the event or condition that triggers the payment occurs.

The Company’s incremental borrowing rate for a lease is the rate of interest that it would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment.

After lease commencement, the Company measures the lease liability at the present value of the remaining lease payments using the discount rate determined at lease commencement (as long as the discount rate hasn’t been updated as a result of a reassessment event). The Company subsequently measures the ROU asset at the present value of the remaining lease payments, adjusted for the remaining balance of any cumulative prepaid or accrued rent if the lease payments are uneven throughout the lease term.

The Company’s lease agreements have remaining lease terms of 2 to 10 years. Some of these agreements include options to terminate the leases immediately. Some of our vehicle lease agreements include rental payments based on the actual usage of the vehicles and other lease agreements include rental payments adjusted periodically for inflation. The agreements related to leases in Israel are in Israeli Shekel ("ILS") or in ILS linked to the Israeli Consumer Price Index or to the US Dollars. The agreements related to leases in the USA are in US Dollars and the agreements related to leases in Denmark are in Danish Krone ("DKK"). The Company’s lease agreements do not contain any residual value guarantees. See Note 10.

Revenue recognition

N. Revenue recognition

The Company derives revenues primarily from the sale of networking and data infrastructure solutions.

The Company recognizes revenue upon transfer of control of the promised goods in a contract with a customer in an amount that reflects the consideration the Company expects to receive in exchange for those products. Transfer of control occurs once the customer has the contractual right to use the product, generally upon shipment or once delivery and risk of loss has transferred to the customer. The Company accounts for a contract with customer when it has approval and commitment from both parties, the rights of the parties and payment terms are identified, the contract has commercial substance and collectability of consideration is probable. Each of the Company's contracts includes one type of performance obligation. The Company evaluates each distinct performance obligation within a contract, whether it is satisfied at a point in time or over time. Most of the Company's revenues are recognized at a point in time. Revenue is recognized over time for sales of goods manufactured to unique customer specifications, in which the Company’s performance does not create an asset with an alternative use to the Company and the Company has an enforceable right to payment for performance completed to date if the customer were to terminate the contract. Revenue recognized over time is measured by the costs incurred to date relative to the estimated total direct costs to fulfill each contract. Incurred costs represent work performed, which corresponds with, and thereby best depicts, the transfer of control to the customer. Contract costs include labor, materials and overhead.

Cost of sales

O. Cost of sales

Cost of sales consist primarily of production costs of finished goods manufactured by the company, with assistance of sub-contractors, from (i) components purchased from third parties, and (ii) sub-assemblies manufactured by sub-contractors under the Company’s directions and supervision as well as employee-related expenses and overhead expenses of the Company’s production lines.

Research and development costs and capitalized software development costs

P. Research and development costs and capitalized software development costs

Software development costs (mainly salary) related to programmable components incorporated into the Company's products, are charged to expense until technological feasibility has been established for the product. Once technological feasibility is established, all software costs are capitalized until the product is available for general release to customers. Judgment is required in determining when technological feasibility of a product is established. The Company has determined that technological feasibility for its software components of hardware products is reached after all high-risk development issues have been resolved through coding and testing. Amortization begins once the software is ready for its intended use, generally based on the pattern in which the economic benefits will be consumed. The amortization of these costs is included in cost of revenue over the estimated life of the products. Other costs incurred in the research and development of the Company’s products are expensed as incurred.

Allowance for product warranty

Q. Allowance for product warranty

The Company grants assurance-type warranties related to certain products to end-users. The Company estimates its obligation for such warranties to be immaterial on the basis of historical experience. Accordingly, these financial statements do not include an accrual for warranty obligations.

Treasury shares

R. Treasury shares

Treasury shares are recorded at cost and presented as a reduction of shareholders' equity. The Company reissues treasury shares under the Global Share Incentive Plan (2013), upon exercise of options and upon vesting of restricted stock units ("RSU"). Reissuance of treasury shares, based on the Company's policy of first-in, first-out (FIFO), is accounted for in accordance with ASC 505-30 whereby gains are credited to additional paid-in capital and losses are charged to additional paid-in capital to the extent that previous net gains are included therein and otherwise to retained earnings.

Income taxes

S. Income taxes

Deferred taxes are accounted for under the asset and liability method based on the estimated future tax effects of temporary differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases, and for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are presented as non-current assets and liabilities and measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the consolidated statements of operations in the period that includes the enactment date. The Company recognizes the effect of uncertain tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured as the largest amount that is greater than 50 percent likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. Taxes which would apply in the event of disposal of investments in foreign subsidiaries have not been taken into account in computing the deferred taxes, as the Company's intention is to hold, and not to realize the investments. As of December 31, 2022, the cumulative amount of earnings of foreign subsidiaries upon which deferred taxes have not been provided is approximately US$ 16.3 million. Determination of the amount of unrecognized deferred tax liability related to these earnings is not practicable.

Share-based compensation

T. Share-based compensation

The Company recognizes compensation expense based on estimated grant date fair value in accordance with ASC Topic 718, Compensation -Stock Compensation as follows:

When portions of an award vest in increments during the requisite service period (graded-vesting award), the Company’s accounting policy is to recognize compensation cost for the award over the requisite service period for each separately vesting portion of the award.

Equity awards granted to employees are accounted for using the grant date fair value method. The grant date fair value is determined as follows: for stock options using the Binomial option-pricing model and for restricted stock units (“RSUs”) based on the market value of the Company’s stock on the date of grant, less an estimate of dividends that will not accrue to RSUs holders prior to vesting. The fair value of share based payment awards is recognized as an expense over the vesting period. The expected average volatility represents a weighted average standard deviation rate for the price of the Company’s ordinary shares on the NASDAQ National Market. For awards with only market conditions, compensation expense is not reversed if the market conditions are not satisfied.

Basic and diluted earnings per share

U. Basic and diluted earnings per share

Basic income per ordinary share is calculated by dividing the net income attributable to ordinary shares, by the weighted average number of ordinary shares outstanding (net of treasury shares). Diluted income per ordinary share calculation is similar to basic income per ordinary share except that the weighted average of ordinary shares outstanding is increased to include outstanding potential ordinary shares during the period if dilutive. Potential ordinary shares arise from stock options and RSUs, and the dilutive effect is reflected by the application of the treasury stock method.

The following table summarizes information related to the computation of basic and diluted income per ordinary share for the years indicated.

	Year ended December 31
	2020		2021		2022
Net income attributable to ordinary shares (US$ thousands)		5,725		10,541		18,306
Weighted average number of ordinary shares outstanding used in basic income per ordinary share calculation		7,118,244		6,825,630		6,696,671
Add of outstanding dilutive potential ordinary shares		38,519		143,172		99,748
Weighted average number of ordinary shares outstanding used in diluted income per ordinary share calculation		7,156,763		6,968,802		6,796,419
Basic income per ordinary shares (US$)		0.804		1.544		2.733
Diluted income per ordinary shares (US$)		0.800		1.513		2.694
Weighted average number of shares related to options and RSUs excluded from    the diluted earnings per share calculation because of anti-dilutive effect		180,916		65,534		251,868

Comprehensive Income

V. Comprehensive Income

For the years ended December 31, 2020, 2021 and 2022, comprehensive income equals net income.

Fair Value Measurements

W. Fair Value Measurements

The Company's financial instruments consist mainly of cash and cash equivalents, marketable securities, trade and other receivables and trade accounts payable. The carrying amounts of these financial instruments, except for marketable securities, approximate their fair value because of the short maturity of these investments. The fair value of marketable securities is presented in Note 4 to these consolidated financial statements. Assets held for severance benefits are recorded at their current cash redemption value.

The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Company determines fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:

Level 1 Inputs: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date.

Level 2 Inputs: Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.

Level 3 Inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at measurement date.

Concentrations of risks

X. Concentrations of risks

(1)          Credit risk

Financial instruments, which potentially subject the Company to significant concentrations of credit risk, consist principally of cash and cash equivalents, marketable securities, trade receivables and assets held for employees’ severance benefits. Cash and cash equivalents balances of the Company, which are subject to credit risk, consist of cash accounts held with major financial institutions. Marketable securities consist of held to maturity marketable securities issued by highly rated corporations. As of December 31, 2021 and 2022, the ratings of the securities in the Company's portfolio was at least A-. Nonetheless, these investments are subject to general credit and counterparty risks (such as that the counterparty to a financial instrument fails to meet its contractual obligations). The Company closely monitors extensions of credit and has never experienced significant credit losses.

(2)          Significant customers

The Company's top four ultimate customers accounted for approximately 33% of its revenues in 2022. The Company expects that a small number of customers will continue to account for a significant portion of its revenues for the foreseeable future. See Note 13.

Liabilities for loss contingencies

Y. Liabilities for loss contingencies

Liabilities for loss contingencies arising from claims, assessments, litigation, fines, and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred.

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Summary of Significant Accounting Policies (Tables)

12 Months Ended

Dec. 31, 2022

Accounting Policies [Abstract]

Schedule of Depreciation of Property, Plant and Equipment

	%
Machinery and equipment	15 - 33
Office furniture and equipment	6 - 33
Leasehold improvements	*

*   Over the shorter term of the lease or the useful life of the asset

Schedule of Basic and Diluted Income Per Ordinary Share

	Year ended December 31
	2020		2021		2022
Net income attributable to ordinary shares (US$ thousands)		5,725		10,541		18,306
Weighted average number of ordinary shares outstanding used in basic income per ordinary share calculation		7,118,244		6,825,630		6,696,671
Add of outstanding dilutive potential ordinary shares		38,519		143,172		99,748
Weighted average number of ordinary shares outstanding used in diluted income per ordinary share calculation		7,156,763		6,968,802		6,796,419
Basic income per ordinary shares (US$)		0.804		1.544		2.733
Diluted income per ordinary shares (US$)		0.800		1.513		2.694
Weighted average number of shares related to options and RSUs excluded from    the diluted earnings per share calculation because of anti-dilutive effect		180,916		65,534		251,868

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Cash and Cash Equivalents (Tables)

12 Months Ended

Dec. 31, 2022

Cash and Cash Equivalents [Abstract]

Schedule of Cash and Cash Equivalents

	December 31
	2021		2022
	US$ thousands
Cash		25,368		24,016
Cash equivalents *		3,917		6,718
		29,285		30,734

*   Comprised mainly of bank deposits in ILS as at December 31, 2021 and 2022 carrying a weighted average interest rate of 0.03% and 3.10%, respectively.

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Marketable Securities (Tables)

12 Months Ended

Dec. 31, 2022

Investments, Debt and Equity Securities [Abstract]

Schedule of Held-to-Maturity Securities

			Gross		Gross
			unrealized		unrealized
	Amortized		holding		holding			Aggregate
	cost basis**		gains		(losses)			fair value*
	US$ thousands
At December 31, 2022
Held to maturity:
Corporate debt securities and government debt securities
Current		4,038		-		(111	)		3,927
Non-Current (1 to 3 years)		15,283		-		(1,214	)		14,069
		19,321		-		(1,325	)		17,996
At December 31, 2021
Held to maturity:
Corporate debt securities and government debt securities
Current		8,300		43		(19	)		8,324
Non-Current (1 to 4 years)		23,966		10		(512	)		23,464
		32,266		53		(531	)		31,788

*	Fair value is being determined using Level 2 inputs.
**	Including accrued interest in the amount of US$ 227 thousand and US$ 138 thousand as of December 31, 2021 and 2022, respectively.
	The accrued interest is presented as part of other receivables on the balance sheet.

Schedule of Reconciliation of Marketable Securities

Activity in marketable securities in 2022	US$ thousands
Balance at January 1, 2021		50,810
Purchases of marketable securities		19,927
Changes in marketable securities, net		(621	)
Proceeds from maturity of marketable securities		(37,850	)
Balance at January 1, 2022		32,266
Purchases of marketable securities		3,998
Changes in marketable securities, net		(914	)
Proceeds from maturity of marketable securities		(16,029	)
Balance at December 31, 2022		19,321

Schedule of Investment Securities in an Unrealized Loss Position

	Less than 12 months					12 months or more					Total
	Unrealized Losses			Fair value		Unrealized Losses			Fair value		Unrealized Losses			Fair value
Held to maturity:
Corporate debt securities and government debt securities		(301	)		4,595		(1,024	)		13,401		(1,325	)		17,996

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Other Receivables (Tables)

12 Months Ended

Dec. 31, 2022

Receivables [Abstract]

Schedule of Other Receivables

	December 31
	2021		2022
	US$ thousands
Advances to suppliers		333		421
Government authorities		2,184		1,437
Prepaid expense		768		936
Other receivables		1,408		826
		4,693		3,620

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Inventories (Tables)

12 Months Ended

Dec. 31, 2022

Inventory Disclosure [Abstract]

Schedule of Inventories

	December 31
	2021		2022
	US$ thousands
Raw materials and components		57,156		71,861
Products in process		11,186		12,417
Finished products		7,411		3,707
		75,753		87,985

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Property, Plant and Equipment, Net (Tables)

12 Months Ended

Dec. 31, 2022

Property, Plant and Equipment [Abstract]

Schedule of Property, Plant and Equipment, Net

	December 31
	2021			2022
	US$ thousands
Machinery and equipment		17,305			19,298
Office furniture and equipment		1,129			1,190
Leasehold improvements		3,406			3,472
Property, plant and equipment		21,840			23,960
Accumulated depreciation		(17,264	)		(19,472	)
Property, Plant and equipment, net		4,576			4,488

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Intangible Assets (Tables)

12 Months Ended

Dec. 31, 2022

Intangible Assets, Net (Excluding Goodwill) [Abstract]

Schedule of Net Intangible Assets

			December 31
			2021		2022
	Useful life		US$ thousands
Original cost:
Capitalization of software development costs		8		6,546		9,081
Licenses		3		565		633
				7,111		9,714
Accumulated amortization:
Capitalization of software development costs				2,366		2,431
Licenses				431		573
				2,797		3,004
Intangible assets, net:
Capitalization of software development costs				4,180		6,650
Licenses				134		60
				4,314		6,710

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Other accounts payable and accrued expenses (Tables)

12 Months Ended

Dec. 31, 2022

Accounts Payable and Accrued Liabilities [Abstract]

Schedule of other accounts payable and accrued expenses

	December 31
	2021		2022
	US$ thousands
Accrued expenses		8,664		2,338
Employee benefits		6,562		5,958
Government authorities		577		663
Other payables		2,779		682
		18,582		9,641

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Leases (Tables)

12 Months Ended

Dec. 31, 2022

Leases [Abstract]

Schedule of Operating Lease Cost

	Year ended December 31
	2020		2021		2022
	US$ thousands
Operating lease costs (mainly plant and offices)		1,623		1,921		1,872
Variable lease payments not included in the lease liability		3		8		62
Short-term lease cost		285		278		273
Total operating lease cost		1,911		2,207		2,207

Schedule of Supplemental Cash Flow Information Operating Lease

	Year ended December 31
	2020		2021		2022
	US$ thousands
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases		1,601		1,887		1,847
Right-of-use assets obtained in exchange for lease liabilities (non-cash):
Operating leases		7,201		451		1,269

Schedule of Supplemental Balance Sheet Information Operating Lease

	December 31
	2021		2022
	US$ thousands
Operating leases:
Operating leases right-of-use		8,765		8,441
Current operating lease liabilities		1,811		1,549
Non-current operating lease liabilities		7,377		6,291
Total operating lease liabilities		9,188		7,840

Schedule of Additional Information Related to Operating Leases

	December 31
	2021			2022
	US$ thousands
Weighted average remaining lease term (years)		7.3			7.7
Weighted average discount rate		2.3	%		2.9	%

Schedule of Future Minimum Lease Payments

	December 31, 2022
	US$ thousands
2023		1,793
2024		1,477
2025		1,057
2026		1,006
After 2026		3,416
Total operating lease payments		8,749
Less: imputed interest		(909	)
Present value of lease liabilities		7,840

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Shareholders' Equity (Tables)

12 Months Ended

Dec. 31, 2022

Stockholders' Equity Note [Abstract]

Schedule of assumptions used in estimation of grant date fair value of RSUs

	2017	2020	2022
Expected dividend yield	2.68%	0%	0%

Schedule of assumptions used in estimation of grant date fair value of options

Average Risk-free interest rate (a)	2.55%
Expected dividend yield	0.0%
Average expected volatility (b)	44.62%
Termination rate	9%
Suboptimal factor (c)	3.18

(a)	Risk-free interest rate represents risk free US$ zero-coupon US Government Bonds at time of grant.
(b)	Expected average volatility represents a weighted average standard deviation rate for the price of the Company’s ordinary shares on the NASDAQ National Market.
(c)	Suboptimal factor represents the multiple of the increase in the market share price on the day of grant of the option which, should it come to pass, will lead to exercise of the option by the employee. It is the average suboptimal factor of the Company and similar companies.

Average Risk-free interest rate (a)	0.75%
Expected dividend yield	0.0%
Average expected volatility (b)	45.29%
Termination rate	9%
Suboptimal factor (c)	3.16

(a)	Risk-free interest rate represents risk free US$ zero-coupon US Government Bonds at time of grant.
(b)	Expected average volatility represents a weighted average standard deviation rate for the price of the Company’s ordinary shares on the NASDAQ National Market.
(c)	Suboptimal factor represents the multiple of the increase in the market share price on the day of grant of the option which, should it come to pass, will lead to exercise of the option by the employee. It is the average suboptimal factor of the Company and similar companies.

Average Risk-free interest rate (a)	1.41%
Expected dividend yield	0.0%
Average expected volatility (b)	45.28%
Termination rate	9%
Suboptimal factor (c)	3.14

(a)	Risk-free interest rate represents risk free US$ zero-coupon US Government Bonds at time of grant.
(b)	Expected average volatility represents a weighted average standard deviation rate for the price of the Company’s ordinary shares on the NASDAQ National Market.
(c)	Suboptimal factor represents the multiple of the increase in the market share price on the day of grant of the option which, should it come to pass, will lead to exercise of the option by the employee. It is the average suboptimal factor of the Company and similar companies.

Average Risk-free interest rate (a)	1.79%
Expected dividend yield	0.0%
Average expected volatility (b)	44.38%
Termination rate	9%
Suboptimal factor (c)	3.16

(a)	Risk-free interest rate represents risk free US$ zero-coupon US Government Bonds at time of grant.
(b)	Expected average volatility represents a weighted average standard deviation rate for the price of the Company’s ordinary shares on the NASDAQ National Market.
(c)	Suboptimal factor represents the multiple of the increase in the market share price on the day of grant of the option which, should it come to pass, will lead to exercise of the option by the employee. It is the average suboptimal factor of the Company and similar companies.

Average Risk-free interest rate (a)	3.01%
Expected dividend yield	0.0%
Average expected volatility (b)	43.93%
Termination rate	9%
Suboptimal factor (c)	3.14

(a)	Risk-free interest rate represents risk free US$ zero-coupon US Government Bonds at time of grant.
(b)	Expected average volatility represents a weighted average standard deviation rate for the price of the Company’s ordinary shares on the NASDAQ National Market.
(c)	Suboptimal factor represents the multiple of the increase in the market share price on the day of grant of the option which, should it come to pass, will lead to exercise of the option by the employee. It is the average suboptimal factor of the Company and similar companies.

Average Risk-free interest rate (a)	2.91%
Expected dividend yield	0.0%
Average expected volatility (b)	44.02%
Termination rate	9%
Suboptimal factor (c)	3.14

(a)	Risk-free interest rate represents risk free US$ zero-coupon US Government Bonds at time of grant.
(b)	Expected average volatility represents a weighted average standard deviation rate for the price of the Company’s ordinary shares on the NASDAQ National Market.
(c)	Suboptimal factor represents the multiple of the increase in the market share price on the day of grant of the option which, should it come to pass, will lead to exercise of the option by the employee. It is the average suboptimal factor of the Company and similar companies.

Schedule of Stock Option Summary

	Options outstanding				Options exercisable
			Weighted average				Weighted average
			remaining				remaining
Exercise price	Number		contractual life		Number		contractual life
US$	of options		(in years)		of options		(in years)
26.91		18,141		0.6		18,141		0.6
33.27		14,865		3.3		14,865		3.3
28.38		23,699		1.4		23,699		1.4
39.62		66,343		2.1		66,343		2.1
36.11		72,212		3.3		72,212		3.3
33.83		62,418		4.1		62,418		4.1
32.54		107,037		5.4		107,037		5.4
41.84		115,758		6.4		-		-
47.98		103,923		7.1		-		-
35.69		26,666		7.4		-		-
34.90		50,000		7.5		-		-
		661,062				364,715

Schedule of Stock Option Activity

						Weighted
				Weighted		average
	Number			average		grant date
	of options			exercise price		fair value
				US$		US$
Balance at January 1, 2020		465,247
Granted		148,426			32.54		14.82
Exercised		(12,357	)		22.38		8.63
Forfeited		(11,269	)		33.93		14.56
Balance at December 31, 2020		590,047
Granted		133,925			41.84		16.62
Exercised		(132,702	)		34.01		12.85
Forfeited		(11,749	)		35.79		15.39
Balance at December 31, 2021		579,521
Granted		198,174			40.82		15.13
Exercised		(66,298	)		33.09		13.21
Forfeited		(50,335	)		41.67		15.75
Balance at December 31, 2022		661,062
Exercisable at December 31, 2022		364,715

Schedule of Restricted Share Units activity

				Weighted
	Number of			average
	Restricted			grant date
	Share Units			fair value
				US$
Balance at January 1, 2020		39,000
Granted		86,000			35.33
Vested		(39,000	)		34.43
Balance at December 31, 2020		86,000
Granted		-			-
Vested		-			-
Balance at December 31, 2021		86,000
Granted		16,000			43.02
Forfeited		(2,000	)		35.33
Vested		(43,000	)		35.33
Balance at December 31, 2022		57,000

Schedule of Allocation of the Stock-Based Compensation Expenses

	Year ended December 31
	2020		2021		2022
	US$ thousands
Cost of sales		535		480		638
Research and development costs		959		1,011		1,454
Selling and marketing expenses		602		697		774
General and administrative expenses		615		674		711
		2,711		2,862		3,577

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Geographic areas and major customers (Tables)

12 Months Ended

Dec. 31, 2022

Geographic areas and major customers [Abstract]

Schedule of Sales by Geographic Region

	Year ended December 31
	2020		2021		2022
	US$ thousands
USA		64,503		88,556		107,908
North America - other		639		964		836
Israel		12,362		9,936		13,586
Europe		23,208		19,383		20,715
Asia-Pacific		6,686		9,621		7,537
		107,398		128,460		150,582

Schedule of Sales to Single Customers Exceeding 10% of Sales

	Year ended December 31
	2020		2021		2022
	US$ thousands
Customer "A"		12,278		19,184		22,926
Customer "B"		13,468		7,788		8,519
Customer "C"		13,328		7,689		5,965

Schedule of Locations of Company's Long Lived Assets - Property, Plant and Equipment

	Year ended December 31
	2021		2022
	US$ thousands
North America		1,014	827
Europe		340	224
Israel		11,987	11,878
		13,341	12,929

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Financial Income (Expenses), Net (Tables)

12 Months Ended

Dec. 31, 2022

Other Income and Expenses [Abstract]

Schedule of Financial Income (Expenses), Net

	Year ended December 31
	2020			2021			2022
	US$ thousands
Interest income		2,197			1,548			1,144
Changes in marketable securities, net		(244	)		(621	)		(914	)
Exchange rate differences, net		(748	)		(1,031	)		2,308
Bank charges		(171	)		(48	)		(74	)
		1,034			(152	)		2,464

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Taxes on Income (Tables)

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Schedule of Income Before Income Taxes and Income Taxes Expense (Benefit) Included in The Consolidated Statements of Operations

	Year ended December 31
	2020			2021			2022
	US$ thousands
Income before income taxes:
Israel		5,565			7,486			17,915
Foreign jurisdictions		1,717			5,419			4,475
		7,282			12,905			22,390
Current taxes:
Israel		1,260			1,281			1,765
Foreign jurisdictions		506			1,192			1,198
		1,766			2,473			2,963
Current tax (benefits) expenses relating to prior years:
Israel		50			(10	)		(215	)
Foreign jurisdictions		(198	)		(147	)		158
		(148	)		(157	)		(57	)
Deferred taxes:
Israel		8			174			1,114
Foreign jurisdictions		(69	)		(126	)		64
		(61	)		48			1,178
Income tax expense		1,557			2,364			4,084

Schedule of Deferred Tax Assets and Liabilities

	December 31			December 31
	2021			2022
	US$ thousands			US$ thousands
Deferred tax assets:
Accrued employee benefits		420			362
Research and development costs		2,000			1,380
Share based compensation		427			391
Intangible assets		228			163
Operating lease liabilities		1,048			693
Other		-			54
Total deferred tax assets		4,123			3,043
Deferred tax liabilities:
Intangible assets		(169	)		(357	)
Goodwill*		(1,300	)		(1,511	)
Operating leases right-of-use, net		(1,000	)		(747	)
Other		(48	)		-
Total deferred tax liabilities		(2,517	)		(2,615	)
Net deferred tax assets		1,606			428
In Israel		1,616			502
Foreign jurisdictions		(10	)		(74	)
Net deferred tax assets		1,606			428
Non-current deferred tax assets		1,616			502
Non-current deferred tax liabilities		(10	)		(74	)

* The recognized goodwill is deductible for income tax purposes for 10 years.

Schedule of Reconciliation of the Statutory Tax Expense to Actual Tax Expense

	Year ended December 31
	2020			2021			2022
	US$ thousands
Income before income taxes		7,282			12,905			22,390
Statutory tax rate in Israel		23.0	%		23.0	%		23.0	%
		1,675			2,968			5,150
Increase (decrease) in taxes resulting from:
Non-deductible operating expenses		508			395			566
Prior years adjustments		(148	)		(157	)		(57	)
Tax effect due to "Preferred Enterprise" status		(533	)		(577	)		(1,949	)
Statutory rate differential		105			(86	)		168
Other		(50	)		(179	)		206
Income tax expense		1,557			2,364			4,084

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Summary of Significant Accounting Policies (Narrative) (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2022 USD ($) Customer Segment Unit	Dec. 31, 2021 USD ($)
Property, Plant and Equipment [Line Items]
Provision for doubtful accounts	$ 20	$ 20
Number of major customers | Customer	4
Percentage of revenue contributed by major customers	33.00%
Number of operating segments | Segment	1
Number of reporting units | Unit	1
Cumulative amount of earnings of foreign subsidiaries upon which deferred taxes not provided	$ 16,300
Minimum [Member]
Property, Plant and Equipment [Line Items]
Remaining lease terms	2 years
Maximum [Member]
Property, Plant and Equipment [Line Items]
Remaining lease terms	10 years

XML

Summary of Significant Accounting Policies (Depreciation of Property, Plant and Equipment) (Details)	12 Months Ended
	Dec. 31, 2022
Machinery and equipment [Member] | Minimum [Member]
Property, Plant and Equipment [Line Items]
Straight-line depreciation rate	15.00%
Machinery and equipment [Member] | Maximum [Member]
Property, Plant and Equipment [Line Items]
Straight-line depreciation rate	33.00%
Office Furniture and Equipment [Member] | Minimum [Member]
Property, Plant and Equipment [Line Items]
Straight-line depreciation rate	6.00%
Office Furniture and Equipment [Member] | Maximum [Member]
Property, Plant and Equipment [Line Items]
Straight-line depreciation rate	33.00%
Leasehold Improvements [Member]
Property, Plant and Equipment [Line Items]
Straight-line depreciation rate		[1]

[1] Over the shorter term of the lease or the useful life of the asset

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Summary of Significant Accounting Policies (Computation of Basic and Diluted Income Per Ordinary Share) (Details) - USD ($) $ / shares in Units, $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Accounting Policies [Abstract]
Net income attributable to ordinary shares (US$ thousands)	$ 18,306	$ 10,541	$ 5,725
Weighted average number of ordinary shares outstanding used in basic income per ordinary share calculation	6,696,671	6,825,630	7,118,244
Add of outstanding dilutive potential ordinary shares	99,748	143,172	38,519
Weighted average number of ordinary shares outstanding used in diluted income per ordinary share calculation	6,796,419	6,968,802	7,156,763
Basic income per ordinary shares (US$)	$ 2.733	$ 1.544	$ 0.804
Diluted income per ordinary shares (US$)	$ 2.694	$ 1.513	$ 0.8
Weighted average number of shares related to options and RSUs excluded from the diluted earnings per share calculation because of anti-dilutive effect	251,868	65,534	180,916

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Cash and Cash Equivalents (Details) - USD ($) $ in Thousands		12 Months Ended
		Dec. 31, 2022	Dec. 31, 2021
Cash and Cash Equivalents [Abstract]
Cash		$ 24,016	$ 25,368
Cash equivalents	[1]	6,718	3,917
Cash and cash equivalents		$ 30,734	$ 29,285
Weighted average interest rate of cash on deposit		3.10%	0.03%

[1] Comprised mainly of bank deposits in ILS as at December 31, 2021 and 2022 carrying a weighted average interest rate of 0.03% and 3.10%, respectively.

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Marketable Securities (Held-To-Maturity Securities) (Details) - USD ($) $ in Thousands		Dec. 31, 2022		Dec. 31, 2021		Dec. 31, 2020
Schedule of Held-to-maturity Securities [Line Items]
Gross unrealized holding gains		$ 0		$ 53
Gross unrealized holding (losses)		(1,325)		(531)
Aggregate fair value	[1]	17,996		31,788
Amortized cost basis		19,321	[2]	32,266	[2]	$ 50,810
Accrued interest on securities		138		227
Current [Member]
Schedule of Held-to-maturity Securities [Line Items]
Gross unrealized holding gains		0		43
Gross unrealized holding (losses)		(111)		(19)
Aggregate fair value	[1]	3,927		8,324
Amortized cost basis	[2]	4,038		8,300
Non Current [Member]
Schedule of Held-to-maturity Securities [Line Items]
Gross unrealized holding gains		0		10
Gross unrealized holding (losses)		(1,214)		(512)
Aggregate fair value	[1]	14,069		23,464
Amortized cost basis	[2]	$ 15,283		$ 23,966

[1] Fair value is being determined using Level 2 inputs.

[2] Including accrued interest in the amount of US$ 227 thousand and US$ 138 thousand as of December 31, 2021 and 2022, respectively.

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Marketable Securities (Schedule of Reconciliation of Marketable Securities) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022		Dec. 31, 2021		Dec. 31, 2020
Investments, Debt and Equity Securities [Abstract]
Balance	$ 32,266	[1]	$ 50,810
Purchases of marketable securities	3,998		19,927		$ 6,558
Changes in marketable securities, net	(914)		(621)		(244)
Proceeds from maturity of marketable securities	(16,029)		(37,850)		(16,629)
Balance	$ 19,321	[1]	$ 32,266	[1]	$ 50,810

[1] Including accrued interest in the amount of US$ 227 thousand and US$ 138 thousand as of December 31, 2021 and 2022, respectively.

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Marketable Securities (Summary of Investment Securities in an Unrealized Loss Position) (Details) $ in Thousands	Dec. 31, 2022 USD ($)
Investments, Debt and Equity Securities [Abstract]
Unrealized Losses, Less than 12 months	$ (301)
Unrealized Losses, 12 months or more	(1,024)
Unrealized Losses, Total	(1,325)
Fair value, Less than 12 months	4,595
Fair value, 12 months or more	13,401
Fair value, Total	$ 17,996

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Other Receivables (Details) - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021
Receivables [Abstract]
Advances to suppliers	$ 421	$ 333
Government authorities	1,437	2,184
Prepaid expense	936	768
Other receivables	826	1,408
Total other receivables	$ 3,620	$ 4,693

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Inventories (Details) - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021
Inventory Disclosure [Abstract]
Raw materials and components	$ 71,861	$ 57,156
Products in process	12,417	11,186
Finished products	3,707	7,411
Inventories	$ 87,985	$ 75,753

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Inventories (Narrative) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Inventory Disclosure [Abstract]
Inventory write-downs	$ 3,002	$ 5,246	$ 1,578

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Property, Plant and Equipment, Net (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Property, Plant and Equipment [Line Items]
Property, plant and equipment	$ 23,960	$ 21,840
Accumulated depreciation	(19,472)	(17,264)
Property, Plant and equipment, net	4,488	4,576
Depreciation	2,208	2,009	$ 2,000
Machinery and equipment [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment	19,298	17,305
Office Furniture and Equipment [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment	1,190	1,129
Leasehold Improvements [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment	$ 3,472	$ 3,406

XML

Intangible Assets (Schedule of net Intangible Assets) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2023
Finite-Lived Intangible Assets [Line Items]
Original cost	$ 9,714	$ 7,111
Accumulated amortization	3,004	2,797
Intangible assets, Net	6,710	4,314
Amortization expense	207	428	$ 378
Estimates amortization of capitalized software development costs	260			$ 247
Capitalization of software development costs [Member]
Finite-Lived Intangible Assets [Line Items]
Original cost	9,081	6,546
Accumulated amortization	2,431	2,366
Intangible assets, Net	$ 6,650	4,180
Useful life	8 years
Licenses [Member]
Finite-Lived Intangible Assets [Line Items]
Original cost	$ 633	565
Accumulated amortization	573	431
Intangible assets, Net	$ 60	$ 134
Useful life	3 years

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Other accounts payable and accrued expenses (Details) - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021
Accounts Payable and Accrued Liabilities [Abstract]
Accrued expenses	$ 2,338	$ 8,664
Employee benefits	5,958	6,562
Government authorities	663	577
Other payables	682	2,779
Other accounts payable and accrued expenses	$ 9,641	$ 18,582

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Leases (Schedule of Operating Lease Cost) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Leases [Abstract]
Operating lease costs (mainly plant and offices)	$ 1,872	$ 1,921	$ 1,623
Variable lease payments not included in the lease liability	62	8	3
Short-term lease cost	273	278	285
Total operating lease cost	$ 2,207	$ 2,207	$ 1,911

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Leases (Schedule of Supplemental Cash Flow Information Operating Lease) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Leases [Abstract]
Operating cash flows from operating leases	$ 1,847	$ 1,887	$ 1,601
Right-of-use assets obtained in exchange for lease liabilities (non-cash):
Operating leases	$ 1,269	$ 451	$ 7,201

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Leases (Schedule of Supplemental Balance Sheet Information Operating Lease) (Details) - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021
Operating leases:
Operating leases right-of-use	$ 8,441	$ 8,765
Current operating lease liabilities	1,549	1,811
Non-current operating lease liabilities	6,291	7,377
Total operating lease liabilities	$ 7,840	$ 9,188
Weighted average remaining lease term (years)	7 years 8 months 12 days	7 years 3 months 18 days
Weighted average discount rate	2.90%	2.30%

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Leases (Schedule of Future Minimum Lease Payments) (Details) - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021
Leases [Abstract]
2023	$ 1,793
2024	1,477
2025	1,057
2026	1,006
After 2026	3,416
Total operating lease payments	8,749
Less: imputed interest	(909)
Total operating lease liabilities	$ 7,840	$ 9,188

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Assets Held and Liability for Employees' Severance Benefits (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Retirement Benefits [Abstract]
Severance costs	$ 1,194	$ 1,104	$ 986

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Shareholders' Equity (Share Option Plan) (Details) - USD ($) $ in Millions	1 Months Ended	12 Months Ended
	Jan. 31, 2018	Dec. 31, 2022	Apr. 29, 2021	Apr. 30, 2020	May 02, 2019	Oct. 21, 2013
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Capital gains tax		25.00%
Value of shares authorized under one-year share repurchase plan					$ 15
Share Option Plan 2013 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares authorized						500,000
Additional shares authorized	600,000
Board of Directors [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Value of shares authorized under one-year share repurchase plan			$ 15	$ 15

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Shareholders' Equity (RSUs Granted in 2017 and 2020) (Narrative) (Details) - Restricted Stock Units (RSUs) [Member] - shares	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2017
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
RSUs grant	16,000	0	86,000	78,000
Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period from date of grant	2 years		2 years	2 years
Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period from date of grant	3 years		3 years	3 years

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Shareholders' Equity (Stock Options Granted in 2017 and 202020) (Narrative) (Details) - $ / shares					1 Months Ended		12 Months Ended
	Jul. 01, 2022	Jun. 07, 2022	Jun. 03, 2021	Jun. 08, 2020	Jan. 27, 2022	Jan. 31, 2019	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Exercise price of options							$ 40.82	$ 41.84	$ 32.54
Share Option Plan 2013 [Member] | $33.83 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options granted						141,928
Exercise price of options						$ 33.83
Expiration date						Jan. 31, 2027
Closing price to determine expiration date						$ 16.92
Share Option Plan 2013 [Member] | $32.54 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options granted				148,426
Exercise price of options				$ 32.54
Expiration date				Jun. 08, 2028
Closing price to determine expiration date				$ 16.27
Share Option Plan 2013 [Member] | $41.84 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options granted			133,925
Exercise price of options			$ 41.84
Expiration date			Jun. 03, 2029
Closing price to determine expiration date			$ 20.92
Share Option Plan 2013 [Member] | 47.98 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options granted					121,508
Exercise price of options					$ 47.98
Expiration date					Jan. 27, 2030
Closing price to determine expiration date					$ 23.99
Share Option Plan 2013 [Member] | $35.69 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options granted		26,666
Exercise price of options		$ 35.69
Expiration date		Jun. 07, 2030
Closing price to determine expiration date		$ 17.85
Share Option Plan 2013 [Member] | $34.90 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options granted	50,000
Exercise price of options	$ 34.9
Expiration date	Jul. 01, 2030
Closing price to determine expiration date	$ 17.45

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Shareholders' Equity (Fair Value Assumptions) (Details) - USD ($)						1 Months Ended		12 Months Ended
		Jul. 01, 2022	Jun. 07, 2022	Jun. 03, 2021	Jun. 08, 2020	Jan. 27, 2022	Jan. 31, 2019	Dec. 31, 2022	Dec. 31, 2020	Dec. 31, 2017
Restricted Stock Units (RSUs) [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected dividend yield								0.00%	0.00%	2.68%
$33.83 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Average risk-free interest rate	[1]						2.55%
Expected dividend yield							0.00%
Average expected volatility	[2]						44.62%
Termination rate							9.00%
Suboptimal factor	[3]						3.18
$32.54 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Average risk-free interest rate	[1]				0.75%
Expected dividend yield					0.00%
Average expected volatility	[2]				45.29%
Termination rate					9.00%
Suboptimal factor	[3]				3.16
$41.84 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Average risk-free interest rate	[1]			1.41%
Expected dividend yield				0.00%
Average expected volatility	[2]			45.28%
Termination rate				9.00%
Suboptimal factor	[3]			3.14
$47.98 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Average risk-free interest rate	[1]					1.79%
Expected dividend yield						0.00%
Average expected volatility	[2]					44.38%
Termination rate						9.00%
Suboptimal factor	[3]					3.16
$35.69 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Average risk-free interest rate	[1]		3.01%
Expected dividend yield			0.00%
Average expected volatility	[2]		43.93%
Termination rate			9.00%
Suboptimal factor	[3]		3.14
$34.90 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Average risk-free interest rate	[1]	2.91%
Expected dividend yield		0.00%
Average expected volatility	[2]	44.02%
Termination rate		9.00%
Suboptimal factor	[3]	3.14

[1] Risk-free interest rate represents risk free US$ zero-coupon US Government Bonds at time of grant.

[2] Expected average volatility represents a weighted average standard deviation rate for the price of the Company’s ordinary shares on the NASDAQ National Market.

[3] Suboptimal factor represents the multiple of the increase in the market share price on the day of grant of the option which, should it come to pass, will lead to exercise of the option by the employee. It is the average suboptimal factor of the Company and similar companies.

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Shareholders' Equity (Stock Option Summary) (Details) - $ / shares	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2019
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options outstanding, number of options	661,062	579,521	590,047	465,247
Options exercisable, number of options	364,715
$26.91 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Exercise price US$	$ 26.91
Options outstanding, number of options	18,141
Options outstanding, weighted average remaining contractual life (in years)	7 months 6 days
Options exercisable, number of options	18,141
Options exercisable, weighted average remaining contractual life (in years)	7 months 6 days
33.27 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Exercise price US$	$ 33.27
Options outstanding, number of options	14,865
Options outstanding, weighted average remaining contractual life (in years)	3 years 3 months 18 days
Options exercisable, number of options	14,865
Options exercisable, weighted average remaining contractual life (in years)	3 years 3 months 18 days
28.38 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Exercise price US$	$ 28.38
Options outstanding, number of options	23,699
Options outstanding, weighted average remaining contractual life (in years)	1 year 4 months 24 days
Options exercisable, number of options	23,699
Options exercisable, weighted average remaining contractual life (in years)	1 year 4 months 24 days
39.62 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Exercise price US$	$ 39.62
Options outstanding, number of options	66,343
Options outstanding, weighted average remaining contractual life (in years)	2 years 1 month 6 days
Options exercisable, number of options	66,343
Options exercisable, weighted average remaining contractual life (in years)	2 years 1 month 6 days
$36.11 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Exercise price US$	$ 36.11
Options outstanding, number of options	72,212
Options outstanding, weighted average remaining contractual life (in years)	3 years 3 months 18 days
Options exercisable, number of options	72,212
Options exercisable, weighted average remaining contractual life (in years)	3 years 3 months 18 days
$33.83 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Exercise price US$	$ 33.83
Options outstanding, number of options	62,418
Options outstanding, weighted average remaining contractual life (in years)	4 years 1 month 6 days
Options exercisable, number of options	62,418
Options exercisable, weighted average remaining contractual life (in years)	4 years 1 month 6 days
32.54 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Exercise price US$	$ 32.54
Options outstanding, number of options	107,037
Options outstanding, weighted average remaining contractual life (in years)	5 years 4 months 24 days
Options exercisable, number of options	107,037
Options exercisable, weighted average remaining contractual life (in years)	5 years 4 months 24 days
$41.84 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Exercise price US$	$ 41.84
Options outstanding, number of options	115,758
Options outstanding, weighted average remaining contractual life (in years)	6 years 4 months 24 days
Options exercisable, number of options	0
Options exercisable, weighted average remaining contractual life (in years)
47.98 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Exercise price US$	$ 47.98
Options outstanding, number of options	103,923
Options outstanding, weighted average remaining contractual life (in years)	7 years 1 month 6 days
Options exercisable, number of options	0
Options exercisable, weighted average remaining contractual life (in years)
$35.69 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Exercise price US$	$ 35.69
Options outstanding, number of options	26,666
Options outstanding, weighted average remaining contractual life (in years)	7 years 4 months 24 days
Options exercisable, number of options	0
Options exercisable, weighted average remaining contractual life (in years)
$34.90 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Exercise price US$	$ 34.9
Options outstanding, number of options	50,000
Options outstanding, weighted average remaining contractual life (in years)	7 years 6 months
Options exercisable, number of options	0
Options exercisable, weighted average remaining contractual life (in years)

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Shareholders' Equity (Intrinsic Value of Stock Options) (Narrative) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
Stockholders' Equity Note [Abstract]
Aggregate intrinsic value of options outstanding	$ 3,457	$ 9,129
Aggregate intrinsic value of options exercisable	2,887	5,300
Total intrinsic value of options exercised	$ 600	$ 2,334

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Shareholders' Equity (Stock Option Activity) (Details) - $ / shares	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Stockholders' Equity Note [Abstract]
Options, beginning balance	579,521	590,047	465,247
Options, granted	198,174	133,925	148,426
Options, exercised	(66,298)	(132,702)	(12,357)
Options, forfeited	(50,335)	(11,749)	(11,269)
Options, ending balance	661,062	579,521	590,047
Options, exercisable	364,715
Weighted average exercise price, granted	$ 40.82	$ 41.84	$ 32.54
Weighted average exercise price, exercised	33.09	34.01	22.38
Weighted average exercise price, forfeited	41.67	35.79	33.93
Weighted average grant date fair value, granted	15.13	16.62	14.82
Weighted average grant date fair value, exercised	13.21	12.85	8.63
Weighted average grant date fair value, forfeited	$ 15.75	$ 15.39	$ 14.56

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Shareholders' Equity (Schedule Of Restricted Share Units Activity) (Details) - RSUs [Member] - $ / shares	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2017
Number of Restricted Share Units
Restricted Share Units, beginning balance	86,000	86,000	39,000
Restricted Share Units, granted	16,000	0	86,000	78,000
Restricted Share Units, forfeited	(2,000)
Restricted Share Units, vested	(43,000)	0	(39,000)
Restricted Share Units, ending balance	57,000	86,000	86,000
Weighted average grant date fair value
Weighted average grant date fair value, granted	$ 43.02	$ 0	$ 35.33
Weighted average grant date fair value, Forfeited	35.33
Weighted average grant date fair value, vested	$ 35.33	$ 0	$ 34.43

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Shareholders' Equity (Intrinsic Value of Restricted Share Units) (Narrative) (Details) - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021
Restricted Stock Units (RSUs) [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Aggregate intrinsic value of RSUs outstanding	$ 2,403	$ 4,438

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Shareholders' Equity (Summary of Allocation of Stock-Based Compensation Expenses) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation expense	$ 3,577	$ 2,862	$ 2,711
Unrecognized compensation costs related to outstanding stock options and RSUs	$ 3,994
Unrecognized compensation costs related to outstanding stock options and RSUs, period for recognition	1 year 2 months 12 days
Tax benefit recognized in the consolidated statements of operations related to share based compensation expenses	$ 40	42
Cost of sales [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation expense	638	480	535
Research and development costs [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation expense	1,454	1,011	959
Selling and marketing expenses [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation expense	774	697	602
General and administrative expenses [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation expense	$ 711	$ 674	$ 615

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Geographic areas and major customers (Sales By Geographic Region) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Revenues from External Customers and Long-Lived Assets [Line Items]
Sales attributable based on geographic location	$ 150,582	$ 128,460	$ 107,398
USA [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Sales attributable based on geographic location	107,908	88,556	64,503
North America - other [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Sales attributable based on geographic location	836	964	639
Israel [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Sales attributable based on geographic location	13,586	9,936	12,362
Europe [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Sales attributable based on geographic location	20,715	19,383	23,208
Asia-Pacific [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Sales attributable based on geographic location	$ 7,537	$ 9,621	$ 6,686

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Geographic areas and major customers (Sales to Single Customers Exceeding 10% of Sales) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Revenue, Major Customer [Line Items]
Sales	$ 150,582	$ 128,460	$ 107,398
Customer A [Member]
Revenue, Major Customer [Line Items]
Sales	22,926	19,184	12,278
Customer B [Member]
Revenue, Major Customer [Line Items]
Sales	8,519	7,788	13,468
Customer C [Member]
Revenue, Major Customer [Line Items]
Sales	$ 5,965	$ 7,689	$ 13,328

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Geographic areas and major customers (Schedule of Locations of Company's Long Lived Assets) (Details) - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021
Revenues from External Customers and Long-Lived Assets [Line Items]
Long lived assets	$ 12,929	$ 13,341
North America [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Long lived assets	827	1,014
Europe [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Long lived assets	224	340
ISRAEL
Revenues from External Customers and Long-Lived Assets [Line Items]
Long lived assets	$ 11,878	$ 11,987

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Financial Income (Expenses), Net (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Other Income and Expenses [Abstract]
Interest income	$ 1,144	$ 1,548	$ 2,197
Changes in marketable securities, net	(914)	(621)	(244)
Exchange rate differences, net	2,308	(1,031)	(748)
Bank charges	(74)	(48)	(171)
Financial income, net	$ 2,464	$ (152)	$ 1,034

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Taxes on Income (Narrative) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Income Tax Disclosure [Line Items]
Tax rate	23.00%	23.00%	23.00%
Federal corporate income tax rate	21.00%
State corporate income tax rate	9.00%
Corporate tax on cash dividends distributed from exempted profits	25.00%
Withholding tax deduction from cash dividends distributed from benefited profits	20.00%
Capital Gains Tax	25.00%
Non-Israeli subsidiaries' undistributed earnings for which Company has not provided for Israeli income and foreign withholding taxes	$ 8,702
Assumed deferred tax liability attributable to taxable temporary differences from non-Israeli subsidiaries'' undistributed earnings	$ 1,822
Corporate tax rate	22.00%
Preferred Enterprise [Member]
Income Tax Disclosure [Line Items]
Reduction in corporate tax rate	12.00%
Preferred Enterprise [Member] | Development Area A [Member]
Income Tax Disclosure [Line Items]
Corporate statutory tax rate on 2017 and thereafter	7.50%
Reduction in corporate tax rate	7.50%
Preferred Enterprise [Member] | Rest Of Country [Member]
Income Tax Disclosure [Line Items]
Corporate statutory tax rate on 2017 and thereafter	16.00%
Reduction in corporate tax rate	6.00%
Israel Tax Reform [Member]
Income Tax Disclosure [Line Items]
Corporate statutory tax rate on 2018 and thereafter	23.00%
Corporate statutory tax rate on 2016	25.00%
Beneficial Enterprise [Member]
Income Tax Disclosure [Line Items]
Tax exemption	$ 49,612
Assumed income tax liability	$ 12,403

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Taxes on Income (Income Before Income Taxes and Income Taxes Expense (Benefit) Included in the Consolidated Statements of Operations) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Income Tax Disclosure [Abstract]
Income before income taxes, Israel	$ 17,915	$ 7,486	$ 5,565
Income before income taxes, foreign jurisdictions	4,475	5,419	1,717
Income before income taxes	22,390	12,905	7,282
Current taxes, Israel	1,765	1,281	1,260
Current taxes, foreign jurisdictions	1,198	1,192	506
Current taxes	2,963	2,473	1,766
Current tax (benefits) expenses relating to prior years, Israel	(215)	(10)	50
Current tax (benefits) expenses relating to prior years, foreign jurisdictions	158	(147)	(198)
Current tax (benefits) expenses relating to prior years	(57)	(157)	(148)
Deferred taxes, Israel	1,114	174	8
Deferred taxes, foreign jurisdictions	64	(126)	(69)
Deferred taxes	1,178	48	(61)
Income tax expense	$ 4,084	$ 2,364	$ 1,557

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Taxes on Income (Deferred Tax Assets and Liabilities) (Details) - USD ($) $ in Thousands		Dec. 31, 2022	Dec. 31, 2021
Deferred tax assets:
Accrued employee benefits		$ 362	$ 420
Research and development costs		1,380	2,000
Share based compensation		391	427
Intangible assets		163	228
Operating lease liabilities		693	1,048
Other		54	0
Total deferred tax assets		3,043	4,123
Deferred tax liabilities:
Intangible assets		(357)	(169)
Goodwill	[1]	(1,511)	(1,300)
Operating leases right-of-use, net		(747)	(1,000)
Other		0	(48)
Total deferred tax liabilities		(2,615)	(2,517)
Net deferred tax assets		428	1,606
In Israel		502	1,616
Foreign jurisdictions		(74)	(10)
Net deferred tax assets		428	1,606
Non-current deferred tax assets		502	1,616
Non-current deferred tax liabilities		$ (74)	$ (10)

[1] The recognized goodwill is deductible for income tax purposes for 10 years.

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Taxes on Income (Reconciliation of Statutory Tax Expense To Actual Tax Expense) (Details) - USD ($) $ / shares in Units, $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Income before income taxes	$ 22,390	$ 12,905	$ 7,282
Statutory tax rate in Israel	23.00%	23.00%	23.00%
Computed expected tax	$ 5,150	$ 2,968	$ 1,675
Non-deductible operating expenses	566	395	508
Prior years adjustments	(57)	(157)	(148)
Tax effect due to "Preferred Enterprise" status	(1,949)	(577)	(533)
Statutory rate differential	168	(86)	105
Other	206	(179)	(50)
Income tax expense	$ 4,084	$ 2,364	$ 1,557
Basic	$ 2.733	$ 1.544	$ 0.804
Diluted	$ 2.694	$ 1.513	$ 0.8

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Subsequent Events (Narrative) (Details) - Global Share Incentive Plan (2013) [Member] - Subsequent Event [Member]	1 Months Ended
	Mar. 31, 2023 shares
Options [Member]
Subsequent Event [Line Items]
Options and RSU approved for grant during period not yet issued	137,911
RSUs [Member]
Subsequent Event [Line Items]
Options and RSU approved for grant during period not yet issued	86,000