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SkyWater Technology, Inc.

2401 East 86th Street

Bloomington, Minnesota 55425

September 25, 2023

VIA EDGAR

United States Securities and Exchange Commission

Division of Corporation Finance

100 F Street, NE

Washington, D.C.  20549

Attn:    Dale Welcome

Anne McConnell

Re:    SkyWater Technology, Inc.

Form 10-K for the Fiscal Year Ended January 1, 2023

Filed March 15, 2023

Form 10-Q for the Fiscal Quarter Ended July 2, 2023

Filed August 11, 2023

Form 8-K filed August 7, 2023

File No. 001-40345

Dear Mr. Welcome and Ms. McConnell:

The Staff of the Division of Corporation Finance (the “Staff”) of the Securities and Exchange Commission (the “Commission”) provided comments by letter, September 1, 2023, regarding the above-referenced filings of SkyWater Technology, Inc.  We are providing our responses to those comments below.  For the Staff’s convenience in reviewing our responses, each comment also has been set forth below.

Form 10-K for the Fiscal Year Ended January 1, 2023

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

Factors and Trends Affecting our Business and Results of Operations, page 39

1.We note you indicate supply chain disruptions impacted your business during the periods presented and may continue to impact your business. In future filings, please address whether supply chain disruptions have materially affected your outlook or business goals. Specifically discuss whether these challenges have materially impacted your results of operations or capital resources and quantify, to the extent possible, how sales, profits, and/or liquidity have been impacted. Additionally, discuss known trends or uncertainties resulting from mitigation efforts undertaken, if any, and explain whether any mitigation efforts introduce material new risks, including risks related to quality, reliability, or approval.

Response:

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The Company acknowledges the Staff’s comment and will disclose in future filings whether supply chain disruptions materially affected the Company’s outlook and business goals, specifically related to our results of operations or capital resources. Additionally, if the impacts of supply chain disruptions are material, we will quantify, to the extent possible, and disclose how sales, profits, and/or liquidity have been impacted. We will also discuss any known trends or uncertainties resulting from any mitigation efforts the Company undertakes and explain whether any such mitigation efforts introduce any material new risks to the Company.

Critical Accounting Policies and Estimates - Long-lived Assets, page 47

2.We note your Form 10-K is incorporated by reference into your registration statement on Form S-3. We also note your disclosures imply you relied on third-party appraisers to estimate the fair value of your long-lived asset group. Please tell us, and revise future filings to clarify, the role of third-party appraisers and the extent to which management relied on their work, including your consideration of providing a consent from these third- party appraisers. Alternatively, please clarify your references to relying on third-party appraisers. Refer to Question 141.02 of the Division of Corporation Finance’s Compliance & Disclosure Interpretations on Securities Act Sections.

Response:

The Company acknowledges the Staff’s comment. Consistent with our Long-Lived Asset Critical Accounting Policy, as defined in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 360, “Property, Plant and Equipment” (“ASC 360”), due to our sustained operating losses and operating cash outflows, we identified impairment indicators that necessitated completion of an impairment assessment pursuant to ASC 360.  In conjunction with the completion of this impairment assessment, management prepared fair value estimates of our land, building and equipment with the assistance of third-party valuation experts.  The valuations were completed at the direction of management with management providing data inputs to the valuations, approving valuation methods and techniques suggested by the third-party valuation experts, approving significant valuation assumptions derived by the third-party valuation experts, and approving the concluded values calculated by the third-party valuation experts.

While third-party valuation experts assisted us in performance of the impairment assessment, management was responsible for, and ultimately determined, the estimated fair value of the Company’s long-lived asset group included in our disclosures. As a result, consistent with Question 141.02 of the Division of Corporation Finance’s Compliance & Disclosure Interpretations on Securities Act Sections, we do not believe our critical accounting policies included “expertised” disclosures pursuant to Section 11(a) of the Securities Act of 1933, as amended.  We therefore did not obtain, nor file as an exhibit to the Annual Report on Form 10-K for the fiscal year ended January 1, 2023 (the “Form 10-K”), consents from the third-party valuation experts that assisted us.  In acknowledgement of the Staff’s comment, in future filings, we will more clearly describe the role third-party valuation experts play in deriving accounting estimates.

Non-GAAP Financial Measure, page 47

3.We note you exclude an inventory write-down that occurred during the year ended January 1, 2022 from non-GAAP financial measures in your Form 10-K and earnings releases filed under Form 8-K. Given the nature of your business, which appears to include designing and providing specialized products and services to significant customers, it is not clear to us how

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you determined this non-GAAP adjustment is appropriate and consistent with the requirements of Question 100.01 of the Division of Corporation Finance’s Compliance & Disclosure Interpretations on Non-GAAP Financial Measures. Although this inventory-write off may be unusual due to its size, based on the nature of this adjustment and your business, it appears to us that risks related to inventory and significant customers are normal operating expenses that arise in the ordinary course of your business. Please advise or revise.

Response:

The Company acknowledges the Staff’s comment and informs the Staff that it has considered the guidance in Question 100.01 of the Division of Corporation Finance’s Compliance & Disclosure Interpretations on Non-GAAP Financial Measures (“CD&I 100.01”). The nature of our business includes designing and providing specialized products and services to customers and there are risks related to our inventory. As appropriate, and through the ordinary course of our business, we write down inventory, from time to time, due to net realizable value below inventory cost, excess inventory, obsolete inventory, unsellable inventory as well as inventory that is scrapped during the manufacturing process. With the exception of the inventory write-off referenced by the Staff, our prior and subsequent disclosures of non-GAAP financial measures, including Adjusted EBITDA, do not include adjustments for inventory write-offs.

We utilize Adjusted EBITDA for items that are not indicative of our ongoing performance as we believe it is a useful performance measure that allows for an effective evaluation and understanding of our ongoing operating performance. We believe that excluding this inventory write-off when calculating Adjusted EBITDA for the fiscal year ended January 2, 2022 (“fiscal year 2021”) allowed for an effective evaluation and understanding of our operating performance given our short existence as a company and the limited availability of the Company’s historical financial information.

In the fiscal year ended January 3, 2021, we contracted with a specific customer to manufacture wafers to be used in wearable temperature differential sensing devices that would be used by both the public and healthcare workers to identify patients who may have contracted COVID-19. As a result of the speed with which the COVID-19 vaccines were released and the lessening need for such wearable devices, the customer’s product became less marketable and expected demand decreased. Accordingly, the customer was unable to obtain financing for its COVID-19-related business and did not meet its contractual payment obligations to us. We wrote-off inventory associated with this customer in fiscal year 2021.  Our efforts to assist with the response to the global COVID-19 pandemic were not part of our normal operating activities.  Accordingly, we determined this inventory write-off was not a normal operating expense and was not indicative of our ongoing performance.  We therefore determined it was appropriate to exclude this item from the calculation of Adjusted EBITDA for fiscal year 2021.

Item 8. Financial Statements and Supplementary Data

Audited Consolidated Financial Statements for the Years Ended January 1, 2023 and January 2, 2022

Note 3. Summary of Significant Accounting Policies

Revenue Recognition, page 63

4.We refer to wafer services. We note your disclosure that for a significant wafer services customer, due to a change in contract terms, you began recognizing revenue under a bill and hold arrangement in fiscal 2021. Your disclosure indicates, under this arrangement, control transfers over time during the fabrication process; however, it is not clear to us when you recognize revenue under the bill and hold arrangement. If you recognize revenue

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under this arrangement “during the fabrication process”, please more fully explain to us how you determined your policy is appropriate. In this regard, to the extent the only change in this arrangement was related to the customer's ability to request and agree to purchase product to be delivered at a later date, although it may be appropriate to recognize such revenue prior to shipment, it is not clear to us why it would be appropriate to recognize such revenue prior to completion of electrical testing and products being separately identified as belonging to the customer and ready for shipment, absent other changes in contract terms. Please clarify or revise.

Response:

The Company acknowledges the Staff’s comment and notes that our Wafer Services revenue recognition policies disclosed in the Form 10-K can be clarified as to the terms and conditions supporting our revenue recognition with this customer. To clarify the matter, it is important to note that one of the customers for whom we currently use the over-time revenue recognition method is our largest and longest standing Wafer Services customer (“Significant Customer”).  Our relationship with Significant Customer predates our initial public offering and contractual terms with Significant Customer have evolved substantially over time and have necessitated changes in the method in which we recognize revenues for wafers produced for Significant Customer, including a change from point in time revenue recognition method to the current over-time revenue recognition method beginning in March 2022.  Key changes in our contractual arrangements with Significant Customer are summarized as follows:

•Prior to fiscal year 2021, control of the wafers we produced for Significant Customer transferred, and revenue recognition occurred, as completed wafers were shipped to Significant Customer (pursuant to Ex Works shipping point terms).

•In fiscal year 2021, Significant Customer requested that it be able to purchase wafers and for those wafers to be delivered to Significant Customer at a later date (i.e., bill and hold provisions).  Where we previously recognized revenue for Significant Customer at the point of shipment, following the change in contract terms to bill and hold, we recognized revenue at the point post-manufacturing electrical testing was completed.  Significant Customer determined the quantities of wafers and/or wafer lots it wanted shipped and when they wanted them shipped; we retained all remaining wafers until Significant Customer requested shipment.  Wafers that we retained for Significant Customer were separately identified as belonging to Significant Customer, the wafers were denoted as ready for shipment to Significant Customer in their then current form, and we did not have the ability to direct or sell the wafers to a different customer. Upon completion of post-manufacturing electrical testing, we had the right to invoice Significant Customer, Significant Customer obtained legal title, and Significant Customer obtained the risks and rewards of ownership.  As the period we typically stored wafers for Significant Customer was short, we concluded that storage was not a significant performance obligation and did not separately account for storage services.

•In fiscal year 2022, terms with Significant Customer were further changed such that orders are now non-cancellable, and we have an enforceable right to Significant Customer’s performance under the contract, including payment for the costs of any in-process wafers, plus a reasonable margin. Given that the wafers produced for Significant Customer are for customer-specific applications with no alternative use, the introduction of these contract terms demonstrated that control of the wafers transfers to Significant Customer over time as the wafers are manufactured pursuant to ASC Topic 606, “Revenue from Contracts with Customers” (“ASC 606”).  As control is transferred over time, we use the input method of revenue recognition (as described in our revised discussions of Wafer Services revenue

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recognition policy below) to recognize revenue over time.  As there have been no further changes in contract provisions since fiscal year 2022, we continue to use this method of revenue recognition for Significant Customer as of the date of this letter.

In recognition of the Staff’s comment, we will revise our discussions of our Wafer Services revenue recognition policies in future filings to the following:

Wafer Services

Wafers are goods that are generally customer specific, highly customized and have no alternative use to us. Our Wafer Services customers contract with us to manufacture wafers based on their manufacturing design specifications.  The terms of our Wafer Services contracts dictate when control over wafers is transferred to our customers.

For contracts where orders are non-cancelable and we thereby maintain enforceable rights to customer performance, including rights to payment for partially completed wafers at reasonable margins, control over wafers transfers to our customers as we manufacture wafers.  For these contracts, we recognize revenue using an input method.  This method measures the percentage of completion of wafers still in the manufacturing process by comparing total costs incurred to date to the total estimated costs to manufacture the wafers.  We record that proportion of the transaction price as revenue in the period.  Our input method provides the best method of progress as it considers the steps and activities needed to manufacture a wafer and the costs associated with those steps.  Costs include labor costs, manufacturing costs, material costs, and other direct costs required to manufacture our customers’ wafers. The estimation of total costs requires significant judgment and any adjustment to our estimates of cost to complete manufacturing may impact the proportion of completion achieved and could result in cumulative adjustments of revenue.

When our contracts allow for orders to be canceled and we do not maintain enforceable rights to customer performance on canceled orders, including a right to payment for partially completed wafers at reasonable margins, control of wafers transfers to our customers at the point in time when wafer manufacturing is complete, and wafers have been shipped to the customer.  In these instances, we recognize revenue based on the agr