随后，COVID-19大流行改变了世界，扰乱了我们的生活和工作方式，造成了可怕的人力成本。在GEs业务中，航空旅行的迅速下降和全球供应链的中断造成了沉重打击。在过去两年多的时间里，我经常见证我们的员工经受了战斗考验的决心和毅力。这一点在疫情面前表现得最为明显，我对他们深表感谢。在关键任务行业，ge员工从一开始就在第一线工作，从最初在中国武汉运送医院设备，到维护电力设备，为全球供电。以我们在英国切尔滕纳姆的航空团队为例为例。
2021-08-17
125页
5星级
I Goertek Inc.2021 Corporate Social Responsibility Report Stock Abbreviation:Goertek Stock Code:002241 March 29,2022 II About This Report This is the 12th Corporate Social Responsibility Report released by Goertek Inc.(hereinafter referred to as Goertek,the Company and we),covering the period from January 1,2021 to December 31,2021.The data from the Annual Report 2021,official documents and statistical reports of Goertek are included in this report.This report has been prepared in accordance with the Shenzhen Stock Exchange Social Responsibility Instructions to Listed Companies,and the Self-regulatory Guidelines for Listed Companies on Shenzhen Stock Exchange No.1-Standardized Operation of Companies Listed on the Main Board,with reference to the ISO 26000:Guidance on Social Responsibility,the Guidelines for Preparing Corporate Social Responsibility Reports in China from the Chinese Academy of Social Sciences,and the T/CESA 16003-2017 standard from the China Electronics Standardization Association.In addition,based on GRI Standards for Global Sustainability Reporting,this report focuses on presenting the CSR strategy,corporate governance,and performance improvement.This report is available in both print and electronic versions.To view the report online or obtain an electronic version,please visit the website of Goertek Inc.at http:/.Feedback For any suggestions or doubts about this report,you can provide the feedback by contacting us,and we appreciate your valuable feedback.Address:No.268 Dongfang Road,High-tech Industrial Development District,Weifang Tel:0536-3050543 E-mail: III Contents 1.Corporate Governance.1 1.1.Company Profile.1 1.2.Corporate Operating Mechanism.4 1.3.Stakeholder Communication.9 2.Technological Innovation and Service.11 2.1.Technological Innovation Input.11 2.2.Promotion of Green Products.14 3.Employee Care.16 3.1.Respect for Employees and Protection of Their Legal Rights and Interests According to Law.17 3.2.Compensation and Benefits.19 3.3.Career Development and Growth of Employees.25 3.4.Employee Engagement and Communication.32 4.Occupational Health and Safety.37 4.1.Hazard Identification and Control.38 4.2.Shaping A Sound Working Environment.39 4.3.Protection of Employee Safety and Health.44 4.4.Covid-19 Pandemic Prevention and Control.47 5.Adherence to Green Operation,and Continuous Efficiency Improvement and Emission Reduction.51 5.1.Environmental Management.51 5.2.Pollution Prevention and Control.51 5.3.Resource Recycling and Climate Change Mitigation.53 6.Integrity In Business.61 6.1.Integrity Concept.61 6.2.Fair Competition.62 6.3.Anti-Corruption and Anti-Fraud.62 6.4.Respect For Intellectual Property Rights.64 6.5.Client-Oriented.66 6.6.Promotion of Common Growth With Suppliers.70 7.Community Engagement.72 8.Outlook.74 Table of Corporate Honors In 2021.75 Appendix:Gri Sustainability Reporting Standards Index Table.78 General Disclosures.78 Materiality Disclosure.83 1 1.Corporate Governance 1.1.Company Profile Since its establishment in June 2001 and listing on the Shenzhen Stock Exchange in May 2008,Goertek Inc.has been a global high-tech innovator dedicated to serving the leading global clients in the technology and consumer electronics industry,providing them with vertically integrated product solutions of precision components and smart hardware,as well as the related design,R&D and manufacturing services.The Companys main business divides into three segments including precision components business,smart audio device business and smart hardware business.The precision components business focuses on acoustics,optics,microelectronics,structural components,and other precision components.The related products include micro speaker/receiver,speaker module,haptic component(actuator),wireless charging device,antenna,MEMS microphone,MEMS sensors,micro-system module,VR optical component and module,AR optical component,AR light engine,precision structural parts and etc.The above-mentioned products are widely applied in devices such as smartphones,tablets,smart wireless earphones,VR,AR,smart wearable and smart home devices.Smart audio device business focuses on providing products related to audio,voice interaction,artificial intelligence,and other technologies.The main products include smart wireless earphones(TWS),wired/wireless earphones,smart speakers,etc.Smart hardware business focuses on providing products related to entertainment,health and home security.The main products include VR,AR,smart wearable products,gaming consoles and accessories,smart home products,etc.The Company has innovative competitive advantages in the fields of acoustics,optics,MEMS microelectronics and precision manufacturing,and owns many intellectual property rights in the field of precision parts and components.In addition,the Company has accumulated rich experience in projects by cooperating with industry-leading clients in the field of smart audio device and smart hardware through ODM,JDM and other business modes.During the reporting period,the Company maintained a good,long-term cooperative relationship with leading clients in the global technology and consumer electronics industry,kept growing in the 2 number of patent applications and in technological capabilities.As a result,the company has been constantly recognized by global clients for its product solutions and service capability,and remains being an industry-leading manufacturer in the fields of micro speakers,MEMS microphones,MEMS sensors,TWS,VR products,smart wearable products,gaming console and accessories,etc.During the reporting period,due to the continuous growth of demand of smart hardware products such as VR,TWS,smart wearable products,gaming consoles and accessories,and the related precision components,the Company has achieved significant growth in revenue and net profit.At the same time,the Company further improved its position in the industry.During the reporting period,the Company won many honors,including being ranked the 3rd company in the Top-100 China electronic component enterprises based on comprehensive economic indexes,the 86th company in the Top-500 private enterprises in Chinas manufacturing industry,the 164th company in the Top-500 private enterprises in China,as well as being the executive member company of CITIF.For other information of the Company,see the Companys Annual Report 2021.Mission A better life enriched by technology Vision To be a great company Core values Client-orientation,employee development,trustworthy and pragmatic,cooperation and mutual benefits Management philosophy Cultivation and ingenuity,constant improvement,create core competence of leading reform.Cultural slogan 3 We make,we share,we thrive.Our mission is the overarching orientation of the Companys value of existence,ultimate goal and social responsibility.A better life that integrates health and beauty is the ultimate pursuit of mankind.It also serves as the ultimate goal of the Company that is committed to creating value for society with the application of technology.It has been our mission to develop cutting-edge modern technology,and to integrate humanistic spirit into product design,so as to create artistic products that lead future lifestyles,convey the concept of a better life,and satisfy peoples pursuit of a better life.Our vision is a general overview of the Companys prospect and development,as well as a long-term goal to be continuously pursued and a realm to be achieved in its future development.Our vision of To be a great company is not only an inheritance of the excellent cultural value of the past,but also an inherent demand and expectation for future development.With continuous endeavors in innovation,products,services and brand,the Company aims to become a world-class high-tech company,thus creating maximum value for clients,employees,partners and society,and earning their respect.Our core values are the basic value orientation followed by the Company,and also the core principle and value judgment standard for guiding employees behaviors.The consensus has been reached on the core values of client-orientation,employee development,trustworthy and pragmatic,cooperation and mutual benefits through extensive discussions.The core values are the beliefs to be revered,the purposes to be pursued and the judgment standard to be relied upon,which shall be continuously strengthened in the whole process of production and operation,thus enabling all employees to consciously bear values in mind and put them into actions.Our business philosophy is a philosophical reflection on the Companys business policy,business strategy and management style.The Company is committed to the relentless pursuit of high quality and ambitious goals,and dedicated to innovating product technology and manufacturing techniques,thus creating excellence with continuous improvement.Meanwhile,we actively embrace transformation,and efficiently keep accumulating the knowledge,skills,tools,methods and resource integration ability required for transformation,so as to lead the sustainable 4 development of the Company with transformation and shape our core competitiveness of leading power of transformation.We make,we share,we thrive is the cultural slogan of Goertek.The Company advocates the cultural concept of being together.Based on the common pursuit,the Company forms a community of shared cause,interests and destiny together with clients,employees,suppliers,and society,so as to create products for a better life together,share the achievements and honors together,and grow in the process of value creation together.Culture serves as the cornerstone of corporate survival and development,and an essential part of the core competitiveness of the Company.In 2021,based on the organizational culture assessment,the Company focused on the problems identified in the organizational culture assessment of each department and formulated improvement measures accordingly,so as to enhance the corporate culture recognition and employees experience.The cultural philosophy being promoted features integrity,loyalty,diligence,initiative,responsibility,objectivity,fairness,professionalism and pragmatism.The client-orientation strategy transformation project is carried out to closely integrate culture construction with business and enhance the management of the Company.In the meantime,the Company has strengthened the effect of honor incentives by upgrading its company-level honor system.This has refined the Companys concept of talents,and elevated employees sense of achievement,thus effectively guaranteeing the implementation of the Companys culture and forging consensus among all employees.1.2.Corporate Operating Mechanism 1.2.1.Operation of the Board of Directors During the reporting period,the Company continuously improved the corporate governance structure,the internal management and control system,and continued to carry out corporate governance activities in strict accordance with the requirements of relevant laws,regulations and normative documents such as Company Law,Securities Law,Corporate Governance of Listed Companies,Rules Governing the Listing of Shares on Shenzhen Stock Exchange as well as with relevant documents of China Securities Regulatory Commission and the relevant instructions of 5 Shandong Securities Regulatory Bureau,so as to further standardize the Companys operation and improve the level of corporate governance.By the end of the reporting period,the actual practice of corporate governance met the relevant requirements of the above laws,administrative regulations,departmental rules and normative documents on the governance of listed companies,and no documents concerning administrative supervision measures taken by the supervised departments was received.By the end of the reporting period,the details of actual practice of corporate governance are as follows:1.Shareholders and shareholders meetings:The Company has convened and held shareholders meetings in strict accordance with the Rules for General Meeting of Shareholders of Listed Companies and the Companys Rules of Procedure of Shareholders Meetings,so as to ensure that all shareholders,especially minority shareholders,enjoy equal status and fully exercise their rights;In addition,lawyers were engaged to witness the legitimacy of the convening,holding and voting procedures of each general meeting of shareholders.2.The Company and controlling shareholders:The Company,with independent business and operation autonomy,is independent of the controlling shareholders in business,personnel,assets,organizations and finance.The Board of Directors,Board of Supervisors and internal institutions of the Company operate independently.The controlling shareholders exercise their rights through shareholders meeting,and there was no direct or indirect interference with the Companys operations and decision-making beyond the general meeting of shareholders.3.Directors and the Board of Directors:The Company elects directors in strict accordance with the selection and appointment procedures stipulated in the Articles of Association.There are three independent directors in the Board,the number of directors and the composition of the Board of Directors meet the requirements of laws and regulations and the Articles of Association.All directors can carry out their work in accordance with Rules of Procedure of the Board of Directors and Working System for Independent Directors,they attended all the Board of Directors meetings,and all the related trainings as required.6 4.Supervisors and the Board of Supervisors:The election of supervisors and the composition of the Board of Supervisors were in strict accordance with relevant provisions of Company Law and Articles of Association.The Companys supervisors strictly followed the Rules of Procedure of the Board of Supervisors.All supervisors scrupulously attended the sessions,seriously fulfilled their duties diligently,and supervised and issued opinions for major issues,related-party transactions,and financial status.5.Performance appraisals and incentives:The Company has gradually improved its fair and transparent performance evaluation standards and incentive a restraint mechanisms for directors,supervisors and senior management.The appointment of Companys senior management is open and transparent,and in line with the provisions of laws and regulations.6.Stakeholders:The Company fully respects and safeguards the legitimate rights and interests of stakeholders,actively communicates and coordinates with stakeholders,to balance the interests of the society,shareholders,the Company,employees and other parties,and jointly promotes the Companys development in a sustainable and steady manner.7.Information disclosure and transparency:The Company duly performed the disclosure obligations in accordance with the provisions of Rules Governing the Listing of Shares on Shenzhen Stock Exchange,Articles of Association and Investor Relations Management Rules,and discloses information as per the law,so as to ensure that the information disclosure is true,timely,accurate and complete.All shareholders were given equal access to the information.The Company has gradually revised and improved the Insider Information Management Rules,further improved the insider information management,strengthened the confidentiality of insider information,maintained the fair principle of information disclosure and protected the legitimate rights and interests of investors.The Company has appointed the secretary of the Board of Directors as the head of investor relations management of the Company,responsible for the Companys information disclosure and investor relations management.The Company has designated Securities Times,China Securities Journal,Shanghai Securities News,Securities Daily and to disclose Companys information in a faithful,accurate and timely manner,strictly in accordance with relevant laws and regulations,so that all shareholders have a fair chance to get information.7 For other information on the operation of the Board of Directors and corporate governance of the Company,see Section IV:Corporate Governance of the Companys Annual Report 2021.1.2.2.Operation of the CSR Management Committee Upholding with the core values of client-orientation,employee development,trustworthy and pragmatic,cooperation and mutual benefits and the corporate social responsibility of law-abiding,employee respecting,sustainable developing,and give back to society,Goertek actively pursues the unity of corporate social responsibility and economic growth.Our CSR management philosophy defines that while pursuing profits,we should always act as a responsible global corporate citizen.We always take shareholders and creditors,employees,clients,communities and sustainable development as our own responsibility,actively facilitate the fulfillment of stakeholders social responsibilities,protect employees legitimate rights and interests,engage in environmental protection and public welfare activities,and boost the coordinated and harmonious development of the Company and society.Since its establishment,Goertek has gradually set up its quality,environmental and occupational health and safety management systems,and passed the certification of ISO9001,ISO14001 and ISO45001,and introduced the EU WEEE/RoHS Directives.In 2005,the Company was certified by the ISO/TS16949.In 2007,the Company founded its occupational health and safety management committee and a dedicated company-level division to take full responsibility for the OH&S system for employees.In 2009,a hazardous substances management system was set up and the Company was certified by the IECQ QC080000.It was further certified by the IEC17025 in 2010,and by National Integration of Informatization and Industrialization Management System,the China AEO Certificate by China Customs,the GB/T29490-2013,and the ISO/IEC27001:2013 Information Security Management System in 2016.In addition to these certifications,Goertek studied international CSR standards such as SA8000 and formally implemented the CSR system since 2011,and timely benchmarked with industry standards and obtained external opinions in line with ISO26000,China Electronics Standardization Association standard T/CESA 16003-2017 and other international standards(such as GRI Standards and RBA Code of Conduct),as well as requirements of various stakeholders.8 In order to facilitate its CSR efforts,Goertek formally established the CSR Management Committee in 2013.In 2021,the Company continued to optimize and improve the scope and responsibilities of the CSR Management Committee based on its business adjustment,so as to better meet the requirements of various stakeholders in the field of CSR.Moreover,we have established the committee operation mechanism to continuously upgrade the companys CSR governance and improve the overall decision-making and operational efficiency of the committee.The current organizational structure of the CSR Management Committee as follow:The President of the Company serves as the Head of the CSR Management Committee,and the core management of the Companys Vice President or above serves as the member of the Committee,who is responsible for decisions on the overall CSR policy of the Company.The CSR Management Committee consists of a dedicated team responsible for formulating CSR-related rules and regulations,and assisting in the formulation of CSR strategic objectives and work planning.The Committee coordinates the CSR work of various teams,provides guidance,coordination,supervision,inspection and evaluation of their work,and assists in the organization of CSR meetings,events and other CSR management coordination work.The CSR Management Committee convenes a decision-making meeting at least once a year to discuss relevant issues and report on work progress.All related professional teams communicate with stakeholders on CSR management concepts,objectives,policies and practices,and provide the feedback on the demands of stakeholders to the dedicated team of CSR Management Committee for review.The CSR Management Committee Related Professional Teams Human Resource(HR)EHS Ethics Investors/Clients Government/Supply Chain Business Group Steering Team Subsidiary/Platform Management Team 9 Business Group Management Team formulates annual work plans and regularly reviews work progress.In addition,a standardized CSR target indicators and management plan have been developed.The CSR Management Manual,as the overarching guideline for Goertek to advance its CSR work,covers various business areas,including targets for client satisfaction,employee satisfaction,intellectual property,electricity consumption per unit output value,number of environmental accidents,OH&S management,and HSPM which are integrated into the performance assessment of each department,thus strongly promoting the organic integration of social responsibility management and daily operation.1.3.Stakeholder Communication By continuing to dynamically identify stakeholders and maintain good communication with them,Goertek is able to promptly understand their reasonable expectations and demands,learn from their advanced ideas,and actively listen to their suggestions for the Companys development,which is crucial for the sustainable development of Goertek.In order to effectively communicate with stakeholders on a continuous basis,Goertek has set up various communication channels through departments of marketing,product technical support,securities,human resources,labor union,and sourcing,to engage with stakeholders around CSR management concepts,objectives,policies,and practices,which are then disclosed via this report and the corporate website.The following are the main stakeholders,communication channels and their main topics of concern:Stakeholders Major communication channels Main topics of concern Shareholders and creditors Shareholders meeting Board meeting Investor communication meeting and letter survey Business status and information on significant matters Survey on the fulfillment of corporate social responsibility 10 Bondholder meeting Clients Client satisfaction survey Client visit Special seminar Corporate development strategy and supply chain capabilities Compliance Employee health and safety Green products Product safety Employees Employee satisfaction survey Employee reception day Employee proposal system Employee seminar Suggestion box Corporate development strategy,and mid-and long-term planning Employee compensation and benefits Employee training and development Employee health and safety Suppliers Supplier conference Supplier review Special seminar Fair procurement,integrity and honesty Fulfillment of social responsibility commitments Green products Product safety Universities and research institutes Academic cooperation Seminar Science and technology innovation Intellectual property rights Talent cultivation Government Work meeting Work report Work inspection Compliance Corporate development strategy Corporate governance Job and employment Taxation compliance 11 2.Technological Innovation and Service 2.1.Technological Innovation Input 2.1.1.Innovation Culture Cultivation and ingenuity,constant improvement is Goerteks unremitting pursuit.Goertek actively implements the core value of employee development,and encourages technological innovation,placing great emphasis on technical research and craftsmanship.By establishing a refined and diversified career development path for R&D engineers,the Company continuously improves the professional skills and innovation ability of R&D engineers through job qualification requirements and a perfect training system and resources.Meanwhile,it clearly defines technological innovation achievements as a key criterion for employment and promotion,effectively stimulating the growth potential and innovation vitality of R&D engineers,and helping R&D engineers to continuously attain professional achievement and grow together with the Company.2.1.2.Gathering Talents Talent is the top resource for corporate development.In recent years,the Company has firmly adhered to the strategy of strengthening the Company by introducing,nurturing and employing talents,continuously optimizing the environment for talent development,and promoting the integration of the talent chain with the industry chain and innovation chain,which has Product quality Environmental protection and occupational safety Media Special interview Information disclosure Corporate development strategy Corporate governance Communities Public welfare activity Forum Participation in community projects Community progress and development Environmental protection Public welfare activity 12 provided solid intellectual support for the Company to become one of the top 500 enterprises in China and the only enterprise in China to rank among the global top 10 in the field of MEMS.Goertek insists on developing global channels to attract and recruit all types of domestic and international talents.With regard to attracting talents,Goertek has perfected its talent introduction mechanism,with the Chairman taking the lead as the talent introduction specialist.Relying on its HR department,the Company has appointed talent liaison officers to ensure a full chain of talent contact services.Its talent introduction plan is also implemented by category according to the characteristics of talents at different levels.In addition,the Company has innovated the talent introduction mode and set up R&D centers targeting the frontiers of the worlds scientific and technological innovation to attract world-class high-end technical talents locally.Besides,a platform for talent introduction has been established.Goertek has jointly established the research institute with the government and universities.In 2021,the Company was recognized as the outstanding municipal sci-tech innovation platform for introducing and nurturing talents,and the excellent provincial new R&D institution.Goertek actively builds a platform for talent development,and formulates differentiated development channels for new talents,and helps them draw up career development plans,thereby boosting the integration of talent value and career development.R&D platforms give full play to the innovation ability of talents.Goertek has approved 8 national and provincial innovation platforms,and jointly established the research institute with many well-known universities.Financial support has been granted to the scientific research projects carried out by talents relying on the platforms and institutes,and over 50 scientific research achievements have been industrialized successfully.A number of awards have been obtained,including the national champion of manufacturing,the fourth China Quality Award,and the first prize of the 6th Mayors Cup Industrial Design Competition.Through projects,talents are trained to command stronger breakthrough capacity.With a focus on 5G,AI and IoT technologies,the Company encourages all types of talents to build teams for independent innovation and problem solving,thus creating a high-grade,precision and advanced talent team.The Company has also joined hands with universities to shape the competence of talents.Exchange training programs are carried out jointly with top universities and research institutes at home and abroad,including the 13 joint training base for graduate students in industry-education integration with Shandong University,and the excellent engineer class for undergraduate students with the School of Opto-electronic Engineering at Changchun University of Science and Technology.Besides,a new model for skill cultivation has been developed,with the establishment of a three-level education and training system comprised of the Goertek College,workshop training and online classes.Expert lectures and technical trainings are held regularly.In addition,a 2 1 1 training model for undergraduate manufacturing engineers has been proposed.With heartfelt affection for talents,Goertek strives to create an excellent ecology for talent retention with the help of distinct positive incentives.With the launch of the talent performance improvement campaign,the Company has been honoring employees compensation according to their work performance.Some outstanding talents have their compensation doubled.Efforts have been made to create a favorable environment for employees in terms of training,housing subsidies,medical care,medals for seniority,employee hotlines,and loving assistance,so as to retain talents with satisfactory compensation,promising career development,and earnest affection.2.1.3.Innovation Mechanism and Investment As an innovative high-tech company with global presence,Goertek attaches great importance to its R&D investment and technological innovation.In order to promote technological competence,facilitate technological innovation and strengthen R&D capabilities,the Company has established its Technology Committee,with seven specialized technology sub-committees that are responsible for the enhancement of technological competence in each professional field.We have carried out the construction of Integrated Product Development(IPD)system in phases,and established a cross-discipline core team in the field of product development as well as strengthening the Decision Check Point(DCP)based on the comparison with industry benchmarks and our actual business,thus accumulating the best practices in the industry.The representatives of each field are responsible for the quality planning,acceptance and improvement in their own field.By minimizing the possible risks in the product design process,improving the market awareness of R&D personnel,and enhancing their foresight,we are able 14 to maximize corporate profits.Over the past five years,the Company has invested a total of over RMB 13 billion in R&D.Its R&D investment in 2021 totaled over RMB 4.3 billion,accounting for 5.50%of its operating income.The central research institute and system solution center have been established at the corporate level and business group level.With Weifang and Qingdao centers as the core,supplemented by Shenzhen and Dongguan centers,a global R&D model of double core multi-location synergy is created to stay close to forefront of technical talents,plan on promoting new technology research,and reserve technology and talents for the future development of the Company.Meanwhile,by closely following the frontiers of technological innovation,identifying potential opportunities of technology,and monitoring the technology trends in real time,we are able to steer the direction for the technology development of the Company.Our continuous increase in R&D investment has further enhanced the competence of our product solutions in the global market.2.2.Promotion of Green Products Goertek has always been committed to using safer materials to produce safer products.Our policy for the management of hazardous substances is Complying with laws and regulations,promoting green manufacturing,providing environmentally friendly products,and satisfying clients needs.The Company has established a professional team for green product management,thus gaining recognition from well-known clients in the industry.With great importance attached to environmental compliance,the green product management division has been under the direct supervision of the Company.In 2021,Goertek made numerous breakthroughs in its green product management,especially in term of raising the awareness of all employees on environmental compliance,the effective operation of the hazardous substances process management system,the comprehensive IT-based operation of the Companys environmental compliance data,and the interpretation and response to the latest dynamics of regulations and client requirement.In 2021,we inquired a total of 95 green product-related regulations and interpreted the updated hazardous substance specification of 8 key clients to effectively identify and ensure the 15 continuous compliance of our products.The Interpretation of Hazardous Substances Regulations for Electrical and Electronic Products was released for the first time in January as a monthly newsletter,totaling 12 issues.Study sessions were organized among all employees to facilitate learning of product environmental regulations.In July,the Company launched an online course on knowledge of environmental regulations,enabling online induction training for new employees.In November,when the pandemic situation was severe,the Company actively cooperated with third-parties,and implemented online environmental compliance training for suppliers for the first time,which effectively raised the environmental awareness of all employees and suppliers.In 2021,Goertek successfully passed the IECQ QC080000 system certification renewal audit,and also gained certifications for seven new product ranges.Our hazardous substances process management system was running effectively,with positive recognition from clients.The Company continues its vigorous efforts to optimize the IT-based management of data.By the end of 2021,all environmental compliance data of suppliers had been uploaded onto the Companys Supplier Collaboration System,enabling full IT-based management.In addition,the Company adequately owns 15 sets of XRF testing equipment,and a high-end chemical testing laboratory.Equipped with ICP-OES,GC-MS,IC,UV-Vis and other testing equipment,the laboratory passed the accreditation of China National Accreditation Service for Conformity Assessment in 2010 and obtained ISO/IEC 17025 laboratory qualification(certificate number:CNAS L4750).It passed the renewal re-accreditation in 2016 and the expansion re-accreditation in 2020,making its accreditation continuously valid.16 3.Employee Care People create the corporate value.Human resources is Goerteks key resources and fundamental components of Goerteks core competitiveness.On top of complying with laws and regulations and the Code of Conduct of the Responsible Business Alliance(RBA),Goertek further advocates the cultural slogan of We make,we share,we thrive,committed to creating a safe and comfortable working and living environment for its employees,protecting their legitimate rights and interests,and caring for their welfare and career development.Goertek listens to employees voices through various employee communication channels and,based on their feedback,tailors its compensation and benefits policies and improves its management system.In addition,the Company implements a first-class talent strategy,and builds multiple career training platforms and promotion channels to facilitate the training and development of human resources and achieve all-round care for employees in work and life,thereby achieving common growth with them.The total number of Goertek employees was 95,780 in 2021,serving in different businesses of Goertek,as detailed below:17 Employee Composition Position category The number of people in each section Production person 69,815 Sales person 670 Technical person 19,753 Financial person 306 Administrative person 5,236 Total 95,780 Education background Education background category The number of people Doctor 78 Master 3,435 Bachelor 16,170 Junior college 18,823 Below junior college 57,274 Total 95,780 3.1.Respect for Employees and Protection of their Legal Rights and Interests According to Law Goertek pursues the culture concept of We make,we share,we thrive and fully respects each and every employee.The Company fully implements the Labor Law of the Peoples Republic of China,the Labor Contract Law of the Peoples Republic of China,and the Social Insurance Law of the Peoples Republic of China,among other relevant laws and regulations,and has established corresponding management rules and regulations to ensure that all discrimination in relation to race,color,age,gender,sexual orientation,disability,pregnancy,religious belief,political affiliation,geography,association membership or marital status,and other factors that generate discrimination are prohibited in the recruitment,employment,training,promotion,compensation and benefits.The Company enters into labor contracts with its employees on the basis of equality,voluntariness,consensus,honesty and credibility in accordance with laws,and fully fulfills its labor contract obligations.In the context of the normalization of pandemic 18 prevention and control,the Company has innovated a new model of Internet labor contract and launched a nationwide electronic labor contract signing system to improve employees experience,effectively protect their legitimate rights,and realize the unity of employee value,company value and social value.We conduct employee management in compliance with laws and regulations,and strictly enforce the compensation standards as required by the government.Forced labor is strictly prohibited,and the three measures of process and system,training and communication,and supervision and inspection are applied to avoid forced labor,harassment and abuse,so that employees freedom of employment is respected and modern slavery is eliminated.In addition,the Company explicitly prohibits the employment of child labor in its recruitment system and adopts the five-step method of identity confirmation at interviews to ensure that employees identities are real and valid,so as to avoid child laborers from mistakenly joining the Company.Also,the Company has formulated remedial measures for child laborers to effectively implement its child labor protection obligations.Special employees are treated with great care in Goertek.In accordance with the Employment Promotion Law of the Peoples Republic of China and the Law of the Peoples Republic of China on the Protection of Disabled Persons,the Company respects equal employment opportunities for special groups such as disabled persons and guarantees fair and just treatment in terms of labor protection and job adjustment.Meanwhile,according to the Law of the Peoples Republic of China on the Protection of Womens Rights and Interests and the Special Rules on the Labor Protection of Female Employees,the Company strictly protects the legitimate rights and interests of female employees during the three periods,namely pregnancy,maternity leave and nursing period,and reduces the workload of pregnant female employees who are unable to take up their previous work or assigns them to other work that they can adapt to.The protection of employees legitimate rights and interests has further strengthened the cohesion of the Company,creating a multi-win pattern of harmonious labor relations.19 3.2.Compensation and Benefits Goertek practices the culture concept of We make,we share,we thrive.In 2021,the Company continued to emphasize the attraction,motivation and retention of talents,and implemented a competitive and high-performing compensation incentive policy and benefits care.Through optimizing the distribution mechanism,employees could share the growth of corporate profitability.Despite the challenges of the pandemic and the unfavorable economic environment in 2021,the Company still insisted on its annual compensation review and adjustment,resulting in continuous and stable growth of employees incomes.For core positions,key groups and high-end talents that support the strategic new business development of the Company,a special compensation adjustment policy has been implemented to effectively achieve the precision talent attraction and retention.To further reserve talents for the sustainable and sound development of the Company,the compensation level of fresh graduates has been continuously and vigorously raised,and a moat special retention incentive has been offered to the identified outstanding university students.In addition to providing competitive compensation,the Company has been providing stock and option incentive plans for its core employees,so that more and more core employees can share the value growth of the Company.The number of stockholders has further increased in recent years through the continuous innovation of the equity incentive mechanism.Benefiting from the continuous rise of the Companys share price in recent years,employees have enjoyed a steady increase in their annual exercise proceeds,and long-term incentives have become a key way to attract,retain and motivate employees to make joint efforts to boost company growth.The compensation of directors and supervisors of the Company is proposed by the Compensation and Appraisal Committee of the Board of Directors.After review and approval by the Board of Directors,it shall be submitted to the Shareholders Meeting of the Company for approval before implementation.The compensation standards of senior management shall be proposed by the Compensation and Appraisal Committee,and implemented after deliberation by the Board of Directors.In addition,allowances for independent directors shall be paid on a regular basis.20 In addition,Goertek is committed to building a diversified welfare system with its own characteristics.Free physical examination,accommodation,shuttle bus and tailored transit are provided to all employees;the 1st,3rd and 5th anniversary and 10-year and 20-year loyalty and diligence exclusive activities are carried out for employees;colorful employee activities,such as Cultural Street of Mid-Autumn Festival,mass wedding and employee family days are held;the Employee Assistance Program(EAP),legal aid,family mutual aid fund,and 99 public welfare days are offered to employees and their families,aiming to bring happiness to employees in all aspects and enhance their welfare satisfaction.To foster employees diversified interests and create a healthy living climate,each industrial park in Weifang is equipped with a variety of leisure and entertainment facilities,including outdoor soccer fields,basketball courts,running tracks,and fitness areas,as well as staff activity centers with standardized indoor facilities(table tennis,badminton,billiards,fitness facilities,staff library,dance/yoga rooms,consultation rooms,and club rooms).Moreover,12 interest clubs have been established based on employees interests,which include the empowerment and enhancement clubs,namely,the photography club,the reading club and the calligraphy and painting club,the sports and fitness clubs,namely,the basketball club,the soccer club,the badminton club,the table tennis club,the cycling association and the yoga club,and the quality of life clubs,namely,the matchmaker club,the singing and dancing club and the traveling club.Based on these clubs and corporate culture,the Company held a number of cultural activities in 2021,including Spring Festival couplet writing with blessings,Lantern Festival,mass wedding,youth bonding,basketball tournament,Cultural Street of Mid-Autumn Festival,New Years shopping Festival,ping pong and badminton league,and cycling,which greatly enriched the spare-time cultural life of employees.21 Besides the physical health,the mental health of its employees is also of great concern to the Company.To care for employees mental health and strengthen the humanistic care for them,the Labor Union,together with the Human Resources Department and the Employee Management Department,launched multifaceted explorations on how to enhance employees happiness in October 2020.After enterprise benchmarking,the EAP project was officially initiated in May 2021 under the guidance of professional consulting organizations.A special EAP project team was set up to carry out EAP services comprehensively.By the end of 2021,the EAP program had been running for half a year,with six service projects carried out altogether,including 7*24 hotline for psychological counseling,training of corporate mental health managers,holistic health counseling,mental health assessment,training for new employees known as Goertek Wings,and crisis intervention and management.In the coming years,we will also carry out EAP-themed training and empowerment program for different groups,so that EAP services can benefit more people and truly achieve maximum value.Employees may inevitably encounter legal disputes and traps in their life and work,which can cause various troubles.We aim to provide better legal services to employees and meet their needs for legal support,as well as to further educate employees on legal knowledge,so that they can truly enjoy the legal services at their doorstep.Starting from 2020,the Labor Union has joined 22 hands with the Legal and Intellectual Property Management Department of the Company to launch the Legal Service Day.In 2021,our legal service team continued to grow,with more than 10 legal experts in handling cases.In respect of civil and criminal services,the coverage was expanded from two parks,namely,Weifang Electroacoustic Park and Photoelectric Park,to the R&D building in Qingdao.On the Legal Service Day,two to three legal experts will be available in each industrial park to provide one-on-one legal consultation,offering professional and detailed legal advice to our employees.Over 240 cases of legal consultation were received in 2021,with the main topics of consultation being real estate disputes,marriage and family affairs,personal loans and traffic accident disputes.Experts will provide continuous legal services according to the actual situation of each employee.After two years of development,the Legal Service Day has successfully set up a bridge between the Company and its employees,not only helping employees to solve difficult legal disputes,but also educating them on common legal knowledge and promoting the sound culture of knowing the law,understanding the law and abiding by the law within the Company.As the legal awareness of employees continues to rise over time,the demand for legal advice will increase as well.The Legal Service Day will continue to follow the needs of employees,exert greater value and fulfill its role as a legal back-up for employees.In addition,the Company has built a platform offering universal benefit,Goertek Welfare Mall,by integrating internal and external resources,and regularly organizes group purchase activities for leisure and entertainment,life services,daily necessities,internal purchase of electronics and holiday stuff,so that employees can truly enjoy the benefits and convenience.In 2021,26 group purchase activities were conducted,with 700,000 views,100,000 visitors to the mall,35 23 newly introduced partners,and 20,000 participants,saving a total of more than 1.8 million RMB for employees.These activities,such as themed group purchase activities for traditional and electric vehicles,home appliances,Mid-Autumn Festival&Chinese New Year festival items,were highly popular among employees.In order to get employees fully involved in the brand growth of Goertek,the mascot of Goertek Goerboy was launched and its image was upgraded in 2021,reaping the love of many employees quickly with its three-dimensional image.Its lively and lovely image of intelligent robotic doll has deepened the emotional bond between Goertek and its employees.With the mascot as the spokesperson,a creative call for brand enhancement has been launched.Moreover,through such forms as Goerboys online science education videos,employees are able to promote their professional knowledge reserves.A variety of new peripheral products have been created modeling the mascot,such as dolls,dazzling laser bags,cartoon canvas bag sets,multifunctional cartoon card holders,metal keychains,cartoon balloons of Goerboy,refrigerator sticker sets,mugs,notebooks,emoji,calendars,and stickers,gaining great popularity among employees.Goerboy appeared in scenarios such as Goerteks 20th anniversary celebration,Goertek Sports 24 Meeting,Goertek mass wedding,Loyalty and Diligence Award Ceremony,Goertek Cultural Street of Mid-Autumn Festival,and all-media communication platforms,thus enabling employees to perceive a real connection with the mascot and experience Goerteks warmth,and thus enhancing their sense of belonging.In 2021,the Labor Union of our Vietnam subsidiary also organized a number of significant activities aiming to improve the welfare of employees.For example,gifts were provided to employees on International and Vietnamese Womens Day,Mid-Autumn Festival,Vietnam Liberation Day,International Labor Day and other such holidays;during the Chinese New Year,in addition to gifts for employees,a special bus was arranged to ensure that employees got home safely for the holiday;monthly birthday parties were hosted for all employees,with special birthday gifts prepared.Besides,lucky draws were arranged during the festival and annual meetings of the Vietnam subsidiary,and gifts were presented to those lucky ones.In order to recognize and encourage employees with significant contributions in their work,and to inspire their work enthusiasm,the Vietnamese subsidiary organized a Commendation Conference for Outstanding Employees in 2021.During the Conference,the outstanding employees were highly recognized for their dedication and efforts.The Company expected that they could maintain their 25 excellent characters,continuously improve their skills and professionalism in their work,and serve as benchmarks for more employees to learn from.In the process of production management,employees health is also a concern of the Vietnamese subsidiary.It organized various sports activities for employees in 2021,such as shuttlecock competition and soccer match.In order to appreciate and encourage employees contribution to the company,warm greetings and gifts were also given to employees with 5 years of service;furthermore,after learning that the roads posed difficulties to employees daily commute,the subsidiary and its labor union made timely funding for road renovation to ensure employees safety and convenience in their commute.In the meantime,Vietnam still faced grim pandemic conditions in 2021.Under this circumstance,the subsidiary continued to give top priority to protecting the rights and interests of its employees.To protect the safety of employees,the subsidiary set up a Pandemic Containment Command Center,and formulated various pandemic prevention measures and instructed employees to comply with them.Confirmed employees were sent to hospitals for treatment promptly,and each confirmed employee received a condolence allowance from the labor union in addition to his/her salary.3.3.Career Development and Growth of Employees As talent is the core competence of a company,Goertek attaches great importance to the growth and development of its employees.In 2021,the Company continued to carry out human 26 resources transformation projects,and established a special project for accelerated cultivation of talents for transformation,focusing on business needs,cultivation of talents in each tier,exerting the driving forces of culture,mechanism and policy,and continuously improving the career development channels for employees.Various learning,training and improvement channels were constructed for employees,and a sound learning system for employees was set up to develop the career development opportunities of employees.In 2021,the Companys investment in training increased by 52%year-on-year.The HR Department works with all business departments to carry out training programs for leaders,new employees,specialized talents,technical talents,and front-line employees,so as to help them keep learning and growing,and better realize their personal value and professional achievement.Through constant improvement of the business training mechanism,a pool of talent resources is established to supply a steady chain of talent output for the Company according to business needs.In 2021,the Company continued to implement a comprehensive and multi-disciplinary talent training strategy to fully inspire its organizational energy.The HR Headquarters is continuously upgrading training programs by coordinating the work among platforms of each specialized line.As a result,these specialized talent training programs have become increasingly well established.By continuously empowering specialized talents(via special training in finance and economics,quality,lean management,supply chain,and HR),the business foundation is continuously consolidated and the competence of each specialized list of talents is soundly improved.The Company has been continuously upgrading its new employee training system,with new employee training programs for campus recruitment(the Goertek Wings program and Wings 2000 program)and for social recruitment(HUG training),so as to facilitate the rapid integration of new employees,improve their professional capabilities comprehensively,and boost their steady growth.In 2021,the Company focused on the retention and development of employees in the Goertek Wings program,in order to facilitate their adaptation to and integration into the Company.Through the establishment of a Company-level project targeting employees in the Goertek Wings program,the HR department joins hands with business departments to manage the entire process from precise recruitment,training and development,to compensation and incentive,and care and retention,clarifying the career paths and various guarantee policies for 27 the development of employees in the Goertek Wings program,enhancing employees trust in and loyalty to the Company,and propelling common growth of both employees and the Company.Meanwhile,the HR department undertakes the senior-level employee training of the Company,and continues to strengthen the enforcement of senior-level employee standards and senior-level employee monitoring.Through the G-Plan and M-series training programs,the goals of identifying and training senior-level employees with great potential,enhancing and putting their abilities into use,and improving their ethics,so as to continuously produce and competent senior-level employees with good character for the Company.The key to the progress and development of a company lies in its talents.In order to strengthen the Companys core competencies,build a learning organization and refine the construction of a talent pipeline,the HR department took the lead in 2021,in collaboration with all business groups,to systematically upgrade the Companys training operations,sort out lecturers,courses and resources,and focus on improving lecturers professionalism and enhancing their sense of honor,while emphasizing the quality of courses and setting course levels and standards.In 2021,a total of 545 lecturers were certified,all of whom went through the TTT training to improve 28 their professionalism and effectiveness of their lecturing.404 courses were developed in 2021,17 of which were rated as excellent courses and 81 of which were company-level quality courses developed based on business needs.At all levels of the Company,talent cultivation is vigorously promoted in support of the Companys strategy.The Companys senior management played a leading role in offering lectures,registering a total of 6,923 lecturing hours,27.4 lecturing hours per capita,and an 87%increase in the frequency of lecturing.All employees receive training,with 45.8 hours of training per capita.To train primary-level managers and technical talents more effectively,and promote the sustainability of manufacturing manpower,Goertek gave full play to its role as an innovative entity in 2021,and carried out a series of cultivation and training activities related to manufacturing manpower,forming a unique mechanism for selecting,nurturing,employing and retaining talents,so that primary-level managers and technical talents can keep up with the development of this industry.For the employed manufacturing manpower,the Company continues to empower and optimize the manufacturing manpower structure by opening up the promotion path for primary-level managers,adjusting the remuneration structure and conducting a review of the entire manufacturing manpower.In 2021,the Company continued to train shift leaders and rate them with stars.1,373 shift leaders participated in the training.Moreover,instructors were appointed in business units for the first time to take charge of the training of primary-level managers,with 74 individuals having completed the training and 23 having passed the evaluation so far.To further enhance the stability of primary-level managers while continuously improving their capabilities,the Company further optimized the promotion paths for these managers in 2021 by upgrading the 5-level hierarchy to a 7-level hierarchy,so that it is possible for primary-level managers to be promoted to ministerial-level managers.As the manufacturing mode upgrades,requirements for technical talents are getting increasingly higher.In 2021,the Company continued to put effort into building a great team of technical talents,clarifying the positioning of craftsmen and improved the career path for them.195 craftsmen passed the evaluation,while 471 were trained under a.novel enterprise apprenticeship system jointly carried out with universities.The Company conducted internal empowerment 29 training for craftsmen,training camps for inexperienced craftsmen and training camps for skill development.Moreover,a systematic review was conducted for the technical talents in the Company,who were divided into 11 groups based on their technical specializations,with their job posts and specific requirements clarified.Meanwhile,the Company further benchmarked its skill level settings against those adopted by other enterprises,and continued to carry out independent evaluation,with a total of 2,558 employees evaluated in 2021.This further strengthened the efficiency of the occupational skill levels set for evaluating the Companys technical talents.In 2021,the Company continued to improve the quality and quantity of training for preparatory primary-level managers and technical talents,with strengthened joint training of craftsmen class between Goerteks Craftsman Training Center and various colleges and universities.215 craftsmen/technicians were trained in 2021,84%of whom were qualified by skill recognition,receiving the same pay level as an average graduate with a bachelors degree.The training has been strengthened continuously to enhance front-line management ability.In 2021,507 new front-line shift leaders were trained,and 470 employed shift leaders received rotational training.The management ability of these front-line shift leaders was systematically enhanced through theory learning and practicing.In 2021,the Company continued to explore the university-enterprise cooperation mode.On the basis of the 1 1 1 craftsman/technician class model,Goertek built a modern industrial college many universities and conducted training for the first batch of 112 undergraduates.Through the systematic training on manufacturing technology,process,mold,workflow,quality,and corporate culture,students are able to master the knowledge and capabilities required by enterprises while further deepening their understanding of employment and career choice.The Company was jointly recognized by the National 30 Development and Reform Commission and the Ministry of Education in June as one of the first batch of state-level industry-education integration enterprises integrating production and education;in December,it was recognized by the Department of Industry and Information Technology of Shandong Province as a public training base(demo category)for the new-generation highly skilled personnel in information technology.In 2021,oriented toward employee growth,the Vietnam subsidiary vigorously promoted the talent localization training program,with a focus on senior-level employees and employees in the Goertek Wings program,so as to orderly construct a localized talent pipeline.Despite the impact of the pandemic,various training programs were carried out in an orderly manner.In 2021,a new plan was made for the senior-level employee training system of the Vietnamese subsidiary,with upgraded internal and external resources,regulated operation and implementation,and standardized processes.A total of five senior-level employee training classes were set up,covering 306 people,including 231 Vietnamese nationals,with an accumulative 300 hours of lectures.As a strategic reserve of talents for the Companys future rapid development,an end-to-end management system for the Goertek Wings was established in early 2021.For the Goertek Wings candidates of previous years,a series of training and employee care activities were carried out by coordinating the efforts of various business groups;31 and for the Goertek Wings candidates of the present year,a comprehensively upgraded induction training camp was held,training 154 people.Through good management of the all-round entire-process training,a localized management ecology for the Goertek Wings initially took shape.In 2021,with continued adherence to the Companys strategic direction and focus on business development needs,the Goertek subsidiary in South China remained dedicated to the training of talents in each tier and development of a learning organization.In particular,the South China subsidiary empowered its team through a variety of senior-level employee training and front-line management improvement courses,which enhanced the management ability of the senior-level employee team and effectively stimulated their vitality.By optimizing the content and operation form of HUG training courses,new employees had better induction experience and integrate faster.English language courses were developed to improve the English of the business teams and thus enable them to serve clients more efficiently.The in-service growth program for the Goertek Wings candidates was developed and implemented,to facilitate the skill improvement of fresh graduates while they work and to quickly make them feel a sense of value.The Learning Together Day(LTD)program organized weekly learning on specific topics.Its rich content and flexible lectures won wide popularity among the employees of the South China subsidiary,and at the same time,everyone in the organization was encouraged to pursue personal development.As more people were engaged in learning,people are more convinced by the power of learning income growth.Through the project of Gathering Teachers for Extensive Education,internal lecturers of the South China subsidiary were selected and trained;this project also became a booster for corporate culture inheritance of the Company and skill improvement of the employees.In 2021,the South China subsidiary independently developed and introduced 42 excellent courses,organized 36 public courses at Company level,and trained 32 28 internal lecturers.The internal training covered 83.1%of senior-level employees;the number of voluntary participants grew by 211%;the per capita offline learning hours grew by 750%;and the average satisfaction of participants scored 4.91(out of 5).3.4.Employee Engagement and Communication In order to more widely and timely receive the suggestions and opinions of employees and more effectively solve their problems,Goertek continued to strengthen the function of its Labor Union in 2021 and set up a professional team to systematically manage issues such as employee care,employee rights protection,assistance for those in need,convenient facilities,inclusive services and cultural and sports activities.In July,the Weifang Campus of the Company held the Fourth Employees Congress,which was attended by the leaders including the Secretary Chief of the High-tech Zone,the Head of the HR department,the chairmen of all functional departments and business groups as well as employee representatives,with a total of more than 200 participants.The Congress heard the reports on the work of the Labor Union,the Funds Review Committee,human resources,administration and work safety in recent years,elected the members of the Fourth Labor Union Committee,the Chairman and the Vice Chairman of the Labor Union,the members and the Director of the Funds Review Committee and the members and the Director of the Female Workers Committee,and deliberated on the member composition of the Labor Dispute Mediation Committee.Moreover,12 rules and regulations were deliberated and approved by the Congress,including the code of conduct for employees,leave management,and the reward and punishment mechanism,to continuously improve the capacity of employees democratic engagement and give full play to the Employees Congress.33 The Labor Union has set up communication and feedback platforms such as the Labor Union Service Hotline,the Labor Union Email,the Goertek Staff Home official WeChat account,and satisfaction surveys,so as to hear the demands of employees and solve their pressing concerns in a timely manner,thus creating a harmonious labor relationship and forming a community of shared destiny between employees and the Company.In 2021,the Labor Union received 2,630 messages of feedback from employees through various channels such as WeChat,email and hotline,with a 100%closure rate.Timely and effective assistance was provided to employees in solving or responding to various problems they encountered,so that employees could truly turn to the Labor Union whenever in need.In addition,an internal supervisory organization has been established,with standardized internal complaint and appeal channels and handling mechanisms,maintaining strict confidentiality and protection measures for complainants and petitioners,and prohibiting any form of retaliation.Employees can complain about any problems,and the internal supervisory organization assists employees in solving problems through such ways as visits,investigations and employee talks.The year 2021 marks the 20th anniversary of Goertek.The employees jointly composed a theme song for the 20th anniversary-Together,with more than 300 employees contributing their ideas.The youthful and vigorous sound covered every corner of the Companys departments and campus,and its vibrant music video has also swept across the employees WeChat Moments.The theme song was also well received by platform users after being released on QQ Music,Netease Cloud Music and WeSing.At the same time,the Company carried out multiple creative activities for the 20th anniversary on the TikTok App,with a total of more than 2 million views on the topics,receiving enthusiastic responses from employees.In the#Shining Goerteker#activity,employees actively uploaded self-choreographed videos,with over 1,000 employees 34 participating in the shooting and interaction,showing their passion for life and work;in the#Singing Goertek#activity,hundreds of employees participated in the hand-gesture dance and danced to the theme song,showing their best dance moves.A variety of activities such as WeChat portrait customization,exclusive blessing poster customization and creative group photo challenge were launched on WeChat,engaging employees in the bustlw of the Companys celebration.In 2021,Goertek created its original workplace gymnastics as part of the Goertek Workplace Fitness Initiative,and called on all employees to spend five minutes every day on exercise.The workplace gymnastics comprises six moves to help employees enhance their physical fitness,exercise their body,and relax their muscles.The activity gave rise to a workout craze among employees.More than 30 teams from various departments within Goertek were formed to compete in the workplace gymnastics competition.Over 10,000 people participated in voting the best-performing team,making workplace gymnastics a featured activity for physical fitness within the Company.35 In 2021,the TV program Goertek TV was officially launched and broadcast in staff cafeterias,spaces in front of elevators and Goerteks intranet,with six episodes already aired.Goertek TV focuses on the latest news of the Company and the industry,and activities of various departments.Employees can also send blessings to their colleagues by ordering songs,which has been well received by employees once it was launched.Many ordered songs for their colleagues.The position of Goertek TV anchor is held by employees,becoming an opportunity for them to show their personal charisma.Currently,there are already more than 20 TV anchors.In 2021,the South China subsidiary set up a jukebox program to enable employees to better relax themselves and have more pleasant their break from work.387 songs were ordered throughout the year,and employees sense of engagement and sense of ownership within the Company was strengthened.Birthday parties were held for employees monthly with exclusive privileges for employees having birthdays.There are games,Karaoke,delicacies and cakes for the celebration.In traditional festivals such as the Mid-Autumn Festival and the Lantern Festival,joyful events were prepared to make employees feel the care and love of the Goertek family and to improve their sense of belonging and happiness.36 In addition,to enrich the leisure life of employees and to keep a good balance between work and leisure,the South China subsidiary actively carried out various activities,including movie screening,art performance,dating activity for the single,GBA three-player basketball match,flash mob where employees give Chinese New Year blessing in dialects and various team building activities.In 2021,the Vietnamese subsidiary continued to strengthen the functions of its Labor Union,and set up a professional team to systematically manage such affairs as employee care,assistance for those in need,convenient services,art and sports activities,and medical services.Feedback channels such as hotlines,emails,satisfaction surveys,employee suggestion boxes and talks were established by the Labor Union to fully and timely learn about the demands of employees and address their demands.In 2021,the Union received 83 messages of feedback from employees,mainly related to cafeterias,parking areas and union benefits,through emails,hotlines,employee suggestion boxes and face-to-face talks,with a 100%close rate.Through timely and effectively helping employees solve or answer various problems encountered in their work and life,the Union set up a bridge of communication with employees,enabling them to truly enjoy the benefits of Turning to the Labor Union whenever in need.To make it more convenient for employees to provide feedback more comprehensively,the Vietnamese 37 subsidiary opened an official WeChat account as a new feedback channel for employee suggestion boxes in 2021,which was used actively by employees.4.Occupational Health and Safety The safety management of Goertek is mainly about aspects such as employees occupational health and safety,environmental protection and fire safety.Since 2007,the Company has successfully passed the certification of ISO14001 environmental management systems and ISO45001(certified OHSAS18001 by 2019)Occupational Health and Safety Management Systems by DNV.GL for 15 consecutive years without any serious non-conformity.The Company conducts internal audits on a rolling basis every year covering the entire business process of all departments,to continuously improve and optimize the EHS management.The Company has passed the certification review of Level 2 Safety Production Standardization since 2015 by further strengthening its safety production management.The Safety Management Committee has been set up with 5 secondary management panels,totaling more than 40 registered safety engineers and about 10 registered fire engineers working together to ensure the safety of all employees and the surrounding areas.38 4.1.Hazard Identification and Control The Company actively carries out graded risk control and hidden danger investigation and management.The construction of the double prevention system has been taken as a key measure to prevent and resolve major risks in production,with its concept,method and means being continuously improved and perfected.Through targeted guidance and precise improvement,various types of supervision functions were coordinated to monitor the fulfillment of responsibilities and comprehensively improve the prevention and control of production accidents,so as to boost the steady and sustainable production safety of the Company.The Company follows the principle of moderate size,easy classification,independent functions,convenient management and clear scope.Based on the Hazard Identification and Risk Management Process and the Operation Guideline for Hazard Identification and Risk Evaluation,we use the Operation Activity List and the Equipment and Facilities List to investigate in all aspects and processes,and reasonably classify the risks in the Company that may lead to accidents,including equipment and facilities(including common facilities shared by various departments),operation behaviors,environmental conditions and construction sites.The Job Hazard Analysis(JHA) Evaluation Record and the Safety Checklist Analysis(SCL) Evaluation Record are respectively used for analysis and evaluation.According to the evaluation results,the level of risks is determined,and the Risk Grading and Control List for Operation Activities and Risk Grading and Control List for Equipment and Facilities are developed to clarify the control measures and control levels.As required by the Safety Inspection Management System,periodic inspection and remediation of risks at sites are conducted to continuously improve safety management by identifying and addressing problems.Inspection of chemicals Inspection of limited space 39 4.2.Shaping a Sound Working Environment 4.2.1.Working Environment and Condition Guarantee The Company provides employees with safe and sound working environment and conditions,with simultaneous planning and implementation of occupational disease prevention facilities and safety facilities at the beginning of construction projects.Production equipment is equipped with safety guards or interlocking devices,and employees engaged in jobs with occupational hazards are provided with free up-to-par personal protective equipment(PPE).Meanwhile,medical kits and first-aiders are available on site to provide emergency rescue for employees.In 2021,we focused on making improvements in terms of apartment safety and security,facility upgrades and environmental improvement to continuously better the employee accommodation experience and raise their sense of belonging.(1)Greater investment in safety The Company has always attached great importance to the safety of accommodation,with continuous increase in its investment in apartment safety facilities and intelligence.In 2021,the Company upgraded the common mesh for all apartment windows to diamond mesh,for greater safety and security,as well as beauty and uniformity.It spent substantial sums replacing all traditional mechanical door locks with intelligent ones to ensure safety at employees accommodation while making access more convenient for employees.By upgrading the traditional electricity meters to intelligent ones,the electricity use can be better monitored to ensure the safety of employees electricity use.While upgrading the hardware,attention was also Nighttime safety inspection Safety inspection of environmental protection 40 paid to strengthening safety management.The set-up of safety exits of the apartments complied with laws and regulations and design specifications,and daily inspections and spot checks were strictly implemented to ensure that safety exits are available and the escape routes are kept clear.(2)Upgraded facilities for service improvement The Company is committed to continuously improving the living conditions of its employees.With great concern for employees health,direct-drinking water collection points were set up at the apartment floors in 2021,with plans to further upgrade the water to mineral water of recognized brand in 2022,so that employees could enjoy high-quality and safe drinking water.For historical reasons,some of the apartment buildings were built long time ago,with centralized bathrooms at their initial planning and construction.After evaluation and validation,the Company launched an intelligent bath upgrade project to place bathrooms at all floors,making showering more convenient,efficient and private for employees and thus solving their worries over showering.Through practical actions,the Company honors its service concept of serving with heart and soul,and sharing a warm home,delivering quality services and joy to its employees.(3)Environmental beautification and cultural heritage The Company has made great efforts to improve the accommodation environment of employees.By cooperating with professional property management companies,the Company has increased the investment in human and material resources,and continuously improved the standard of hygiene and cleanliness,so as to create a neat and hygienic apartment environment.Designed by the Company and participated by employees,an apartment culture wall with Goerteks characteristics has been created,embellishing the accommodation environment while delighting the employees.The concept of integrity,pragmatism,and win-win cooperation has been embedded into the minds of all employees,enhancing their sense of ownership,so that Goerteks culture takes root in the hearts of every employee.4.2.2.Solid Promotion of Fire Safety Management 41 The Company always adheres to the fire safety management principle of prevention comes first,followed by defense and elimination.It conscientiously implements fire safety investigation,rectification,publicity,training and drill activities,putting fire safety work as the top priority,while taking various measures to ensure effective implementation of fire safety work.(1)Clearly define fire protection responsibilities By improving the grid-like management of fire safety,responsible persons and administrators for fire safety are assigned at all levels,so as to consolidate the organizational basis of fire safety management.A graded risk control system is implemented,and daily inspections of high-risk areas are intensified.Specific persons are designated to take charge of key fire protection areas,with clearly defined control responsibilities.Voluntary fire brigades of each department are established and improved,and a monthly centralized training mechanism is implemented to improve employees capability of putting out fire in factories at the incipient stage.(2)Step up the use of an IT-based fire fighting system The Company has established an intelligent firefighting Internet-of-Things system to realize 24/7 real-time monitoring of firefighting water level,water pressure and residual current of power distribution cabinets.Flame video detectors are used for video monitoring of fire information,which can track the area of fire automatically and transmit the live videos to management personnel,so as to effectively control hidden fire hazards through high-tech means.(3)Dutifully carry out fire evacuation drills In 2021,the Company organized more than 190 fire evacuation drills to ensure that all employees participate in at least one emergency evacuation drill every six months,through which employees could learn about fire emergency plans,master evacuation and escape skills as well as the use of fire-fighting equipment,and improve their emergency response capabilities.In May 2021,the Free Trade Zone Management Committee organized fire managers of enterprises under its jurisdiction to observe and learn from the Companys fire evacuation drills.This shows that the Company drove the improvement of fire evacuation drills capabilities of neighboring enterprises.42 (4)Provide proper fire safety education and training By inviting experts from fire-fighting branches(brigades)to the Company to train safety management personnel of each department,making posters and billboards,and showing fire safety films,the Company strictly implements the three-level safety training system and continuously enhances employees awareness of fire safety.The Company organized a fire safety road show in November to promote fire safety knowledge.Besides,the Company continued to organize fire safety training for all employees,focusing on explaining the Companys fire management rules,the use of fire-fighting equipment,and fire escape skills,so as to enhance employees awareness of fire safety.4.2.3.Establishment of a Sound Corporate Emergency Rescue System In order to ensure that the Company can quickly and effectively carry out on-site rescue and deal with the accident effectively in the event of an emergency,the Company improves emergency response capability,reduce casualties and property losses,protects the safety of the Company,society and employees,and safeguards lives and property.The Company has established and improved its emergency rescue system and emergency response plan.By the extent of the 43 damage,the scope of impact,the resources required for emergency disposal and the ability to deal with emergencies,the Companys emergency response can be divided into three levels:Level 3(grassroot team level),Level 2(corporate level)and Level 1(society level).With the principle of people-oriented and safety first and prevention-based,combined with defense efforts,the Company formulated the Comprehensive Contingency Plans for Work Safety Incidents in 2021,in accordance with the Production Safety Law of the Peoples Republic of China,Regulation on Emergency Responses to Work Safety Accidents,Measures for the Administration of Contingency Plans for Work Safety Incidents,Guidelines for Enterprises to Develop Emergency Response Plan for Work Place Accidents(GB/T29639-2020)and other laws,regulations and standards,and was approved by the President of the Company for release.In addition to the corporate-level contingency plan,the Company also prepared more than 20 dedicated contingency plans such as Fire Contingency Plan,Chemical Leakage Contingency Plan and Environmental Pollution Accident Contingency Plan for specific sites,devices or facilities according to different types of work safety accidents.In addition,more than 10 on-site handling plans were prepared,including Fire Site Handling Plan,Chemical Leakage Site Handling Plan,Electrocution Accident Site Handling Plan and Limited Space Accident Site Handling Plan,clarifying the description of accident risks,emergency work responsibilities,emergency handling measures and precautions,and prioritizing self-help and mutual help,information reporting and advance handling.A sound emergency response organization has been established,with emergency response groups of two levels,namely,the on-site emergency response group and the corporate emergency response group.The on-site emergency response group is composed of field personnel from each region.The specific composition is stated in the On-site Handling Plan of each region.The corporate emergency response group is composed of the emergency leadership team,emergency management office and emergency response team.In the meantime,the Emergency Address Book has been prepared,containing the list of members of each group and their contact information,so as to quickly get in contact during emergencies with group members.44 4.3.Protection of Employee Safety and Health 4.3.1.Hazard Source Notification According to the distribution of risk points,the Company has posted risk point distribution maps at the entrance or prominent position of each building/floor/workshop,provided information on the main risk points,risk categories,risk levels,control measures and emergency measures through risk point notification cards,and organized training for employees to ensure that they understand the basic situation of risk points and master preventive and emergency measures.For workplaces and jobs that may lead to accidents,alarm devices,on-site emergency equipment and facilities,evacuation routes,etc.are set up.4.3.2.Safety and Health Training Goertek always takes employees personal safety as a top priority.In 2021,it organized a variety of safety training and activities to enhance employees safety awareness and create a safety-oriented culture.The Company continued to promote the LOPA model management of hazardous chemical storage areas,and upgraded and optimized the WMS-HXP system to achieve early warning management of chemical storage quantity and dynamic management of storage types,thus upgrading the safety management capability and efficiency.In order to strengthen employees safety awareness and enhance their safety knowledge and skills,the Company has been carrying out regular training on injury prevention and creating a strong safety-oriented atmosphere.Over the years,the Company has been continuously reinforcing the building of a safety-oriented culture.With the theme of Fulfilling Safety Duties and Promoting Safe Development in 2021,the Safety Production Month and continuous safety improvement 45 activities were held.In addition,commercial insurances such as group insurance for personal accidents,aviation accidents and business travel accidents were purchased for all employees to protect their lives and properties.In order to improve all employees awareness of safety,enhance their safety knowledge and skills,and create a strong safety-oriented culture,the Company places emphasis on safety training and education for all employees.Specifically,such safety training includes regular training,targeted training,targeted consultation and external training.For regular training,the Company conducts monthly training themed around safety participated by relevant personnel within the Company,in addition to the three-level safety education and various targeted training required by national laws and regulations.The themes carried out in 2021 included traffic safety,holiday safety,special power equipment safety,occupational health,chemical safety,environmental protection,summer safety,food safety,production equipment safety,first aid knowledge,fire safety and public security,which improved the safety awareness and knowledge of relevant personnel,ensured 100%training coverage as required of personnel whose duties were relevant to safety and health,and achieved positive results.Work safety cartooning activity Emergency experience activity EHS comprehensive ability enhancement training Examination on safety knowledge 46 Moreover,special attention has also been given to training of safety management and learning of safety management rules for safety management personnel.In 2021,the Company organized special training on safety management,such as safety leadership training for middle and senior managers,EHS comprehensive ability enhancement training,safety management personnel rotating training,hazard source identification theory and field practice,compliance evaluation theory and field practice,and ISO14001&ISO45001 knowledge training.In addition,young talents with great potential in safety management of the Company were identified and invited to participate in the EHS 50 Professional Workshop in 2021,with elaborate professional comprehensive course plans to create a training system for EHS 50 trainees through integrating external teaching resources,targeted development of internal courses,and learning forms of both lectures and seminars.The various targeted training programs on safety management participated by a total of over 1,000 safety managers of the Company.Through theoretical learning plus on-site practice,the professional capability and competence of safety managers were continuously improved to ensure the long-term and stable development of the Companys safety management.4.3.3.Occupational Health Management Through workplace occupational hazards testing and occupational health evaluation,the Company is able to identify posts with occupational hazards,and regularly organize health checkups for employees in such posts.Moreover,various occupational health protection measures are taken to minimize the risk of occupational diseases.In terms of occupational health checkups,the Company has cooperated with hospitals to conduct regular pre-job,on-the-job and EHS internal reviewer training Environmental factor identification training 47 off-the-job medical checkups for employees in positions with exposure to occupational hazards.Not a single case of occupational diseases has emerged in the Company so far.4.4.COVID-19 Pandemic Prevention and Control Despite the generally stable COVID-19 pandemic situation in 2021,Vietnam still faced a severe condition,with clusters of associated cases in some parts of the country,and the transmission of Delta and Omicron variants made the situation worse.Goertek made active arrangements,all-round deployment and rapid response,and carried out comprehensive prevention and control,with corresponding measures implemented swiftly.4.4.1.Organization of Emergency Drills for COVID-19 In order to carry out the COVID-19 prevention and control and standardize the emergency response,emergency drills of COVID-19 prevention and control were conducted under the guidance of the government.The drill process was executed in an orderly manner according to the standardized handling process to ensure safety and efficiency of the drill.The drill teams made a proper division of duties,performed their respective duties and cooperated with each other smoothly.The drill significantly strengthened the Companys ability of emergency handling and teamwork in preventing any clustered outbreak.48 4.4.2.COVID-19 Vaccination The COVID-19 pandemic is still spreading worldwide and will continue for a relatively long time.Through vaccination,more people can be immunized and a population immunity barrier can be formed as early as possible in order to consolidate the hard-earned progress of pandemic prevention and control.Vaccination against COVID-19 pandemic also stands a good chance of preventing serious illnesses and deaths caused by COVID-19 infection.In 2021,the Companys Health Team for Pandemic Prevention contacted medics from various hospitals and coordinated a total of 208 times of COVID-19 vaccination.The vaccination rate for the first and second doses was 93.5%,and that for the booster dose was 83%.In 2022,the booster vaccination will continue to be promoted to achieve a vaccination rate of more than 90%,thus building up a stronger immunity barrier.The pandemic rapidly spread in Vietnam in 2021.In order to raise employees awareness of pandemic prevention,the Vietnamese subsidiary organized activities to motivate all employees to fight the pandemic together,praising those working on pandemic prevention,and awarded those with outstanding contributions to pandemic prevention.49 By the end of 2021,the vaccination rate for both the first and second doses of COVID-19 among Vietnamese subsidiary employees was 99%,and that for the booster dose was 82%.4.4.3.Emergency Response During the Spring Festival,the Company immediately contacted a third-party medical testing company to formulate a nucleic acid testing plan for employees return after the Spring Festival holiday according to the number of people returning to Weifang as reported by each campus,with 20 nucleic acid testing points set up in each campus to ensure the smooth operation of the Company after the festival.50 4.4.4.Guaranteed meals and commuting To avoid packed commuter public transportations at rush hours,staggered work schedules are arranged for employees,with corresponding flexible shifts,and online meetings recommended.All vehicles of the Company are disinfected twice before departure and after return,and all key areas such as the floor,windows,seats,handrails and air-conditioning openings are fully disinfected,no corners left unattended.Goerteks staff cafeteria continues to maintain normalized pandemic prevention and control.By improving its mechanisms and processes,scientific disinfection and protection measures,and personnel management,the cafeteria ensures zero COVID-19 case and safe meal provision.After each meal,the staff cafeteria is ventilated and disinfected,and employees must have their body temperatures taken every day and receive regular nucleic acid testing and health screening;the control over procurement of ingredients is strengthened,and cold-chain ingredients periodically go through nucleic acid testing;employees are encouraged to dine at staggered intervals,and panels are erected on tables to create individual dining spots,so as to ensure the safety of diners.51 5.Adherence to Green Operation,and Continuous Efficiency Improvement and Emission Reduction 5.1.Environmental Management Environmental protection has always been an integral part of Goerteks sustainability strategy.The Companys work in various aspects such as wastewater,noise,waste,green office,and greenhouse gas assessment has achieved good results.In recognition of the great significance of protecting the environment and creating a sustainable society,Goertek has integrated environmental protection into every aspect of its operations and throughout the life cycle of its products.According to ISO14001:2015,the Companys environmental management system has been established and applied to all stages of production,including design,development,manufacturing,delivery and service of its products.Environmental factors are identified and evaluated with respect to the life cycle of the products,and corresponding control measures are formulated for critical environmental factors.No environmental protection-related violations and related penalties have occurred since the establishment of the Company.5.2.Pollution Prevention and Control 5.2.1.Wastewater Management The Companys products are mainly assembled,with no industrial wastewater produced during the production process.Domestic wastewater mainly comes from drainage of the office bathrooms,dormitories and staff cafeteria.In 2021,approximately 3,939,000 tons of water was consumed in each campus of the Company in Weifang,of which the living area of Photoelectric Campus II was retrofitted with a water reuse system,with an annual recycling water volume of 46,000 tons,used for cleaning and greening in the campus.The wastewater is general domestic wastewater,uniformly discharged to the municipal pipe network,which complies with the GB/T31962-2015 Wastewater Quality Standard for Discharge to Municipal Sewers;the Vietnamese subsidiary complies with the Local National Sewage Discharge Standard(QCVN40:2011/BTNMT,Grade 1B(COD150mg/L,SS100mg/L).5.2.2.Waste Gas Management 52 The waste gas generated by the Company mainly comes from industrial waste gas in the production process and cooking fume waste gas from the cafeteria.The industrial waste gas is purified and treated tom meet the relevant standard through adsorption of activated carbon and treatment by other facilities,and then discharged through the exhaust duct at high altitude.All the waste gases discharged meet the Class II standards in Table 2 of the Comprehensive Emission Standard for Air Pollutants(GB 16297-1996);the Vietnamese subsidiary complies with the Emission Standard for Organic and Inorganic Waste Gases(QCVN19/2009/BTNMT&QCVN20/2009/BTNMT).5.2.3.Noise Management The major sources of noise in the Company include the operation noise of air conditioning units,air compressors,cooling towers,fans,pumps and other power equipment.Various measures,such as equipment renewal,process upgrading and noise source isolation,have been taken to control noise.According to the monitoring results of the noise within the plant boundary,all the noise within the plant boundary complies with the Class II standard in Table 1 of the Emission Standard for Industrial Enterprises Noise at Boundary(GB12348-2008);the Vietnamese subsidiary complies with the National Emission Standard for Environmental Noise in the country(QCVN24:2016/BYT).5.2.4.Waste Treatment Waste is collected and temporarily stored according to its forms and properties,which is generally categorized into general waste and hazardous waste.In waste management,the Company always upholds the principle of reduction,reuse and recycling,so as to achieve the integration of waste recycling and corporate social responsibility.General waste is uniformly contracted to professional recyclers for recycling and treatment,while hazardous waste is delivered for treatment to organizations with qualifications for hazardous waste treatment approved by the Environmental Protection Bureau.Waste electronic products are strictly listed as hazardous waste,and delivered to qualified hazardous waste partners for legal and compliant treatment in accordance with laws and regulations,in an effort to maximize waste recycling and resource conservation.In March 2018,the Company began to promote and implement the policy 53 advocating zero landfill of waste.By promoting this policy to recycling suppliers,the Company disposed approximately over 70,000 tons of waste from 2018 to 2021 through means other than landfill.In 2021,the Company continued to promote this policy,with approximately 20,000 tons of waste disposed of by non-landfill means,of which approximately 98%was recycled.The waste treatment in the Companys Vietnamese subsidiary is in full compliance with the instructions of the Vietnamese government(ND38/2015/NDCP)and the hazardous waste treatment is in compliance with the national government standard:QCVN6707:2009.5.3.Resource Recycling and Climate Change Mitigation As a major power-consuming enterprise,Goertek is well aware of limited resources and unlimited value.The Companys energy management policy featuring compliant energy use,efficient emission reduction,full participation and green development has been implemented across the Companys product manufacturing chain.With the energy management system as the basis of scientific management,the Company works to optimize the management organization across all channels,improve the mechanisms and processes,and implement the management tools to further explore the potential of energy saving and actively improve the overall energy efficiency,so as to integrate energy efficiency enhancement,emission reduction and green development into the internal operation of the Company.In order to accomplish the strategic goals of the Company on energy,the Companys energy management work involves a two-pronged approach,covering both management and technology.The main focus lies on the manufacturing process of products.Starting from the energy used,the Company insists on developing and promoting the use of clean energy to increase the proportion of green energy.Putting clients first,the Company participates in market-based power trading to satisfy clients demand for low-carbon production.Digital energy operation is promoted to identify the sources of carbon emissions and reduce negative impact on the environment through targeted control,so as to ultimately realize the development of the Company,enhance energy efficiency,protect environment,and slow down climate change.5.3.1.Optimize Energy Management Personnel Arrangement and Improve the Assessment Mechanism 54 Goertek has set up a three-tier energy management hierarchy,comprising the Energy Management Steering Panel,the Energy Management Team and each Energy Management Unit to ensure accountability.The energy management work is comprehensively consolidated by refining the energy management functions of relevant departments,improving the Companys energy management system,tapping deep into the energy-saving potential of each production scenario,and continuously promoting refined management and control.In 2021,the Company strengthened the development of the energy management specialization.The Company improved the capability of energy management personnel by for
2021-08-16
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Annual Report 2021 1/237 Stock Code:603899 Short Name:M&G Corporation SHANGHAI M&G STATIONERY INC.An.
2021-08-16
237页
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股 票 代 码：6 0 0 7 4 52021Social Responsibility ReportWingtech Technology Co.,Ltd.Social Responsibility.
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Goertek Inc.Annual Report 2021 1 Goertek Inc.Annual Report 2021 March 2022 Goertek Inc.Annual Report 2021 2 Section Important Notes,Contents and Interpretations The Board of Directors,the Board of Supervisors,directors,supervisors and senior management of the Company guarantee that the information presented in this report shall be together be wholly liable for the truthfulness,accuracy and completeness of its contents and free of any false records,misleading statements or material omissions,and will undertake individual and joint legal liabilities.Jiang Bin,the person in charge of the Company,and Li Yongzhi,the person in charge of accounting and the accounting department(accounting supervisor)guarantee that the financial report in this annual report is authentic,accurate and complete.All directors have attended the board meeting to review the annual report.The Company faces the risks in market,operation and management.Investors are kindly reminded to pay attention to possible investment risks.For details,see Section III Discussion and Analysis of Management of the Company,XI Outlook for the Future Development of the Company in this report.The future plans and some forward-looking statements mentioned herein are planned matters which shall not constitute a substantial commitment of the Company to investors.Therefore,both investors and relevant persons should maintain their risk awareness and understand the differences among plan,Goertek Inc.Annual Report 2021 3 forecast and commitment.Please pay attention to investment risks.The profit distribution proposal considered and approved by the Board of Directors of the Company is as follows:based on the total share capital registered on the record date of equity distribution minus the repurchased shares in the Companys special repurchase account,the Company will distribute cash dividend of RMB 2.00(tax inclusive)for per 10 shares to all the shareholders,as well as 0 bonus shares(tax inclusive),and there is no conversion of capital reserves into share capital.If any discrepancy between the English version and the Chinese version of the annual report,the Chinese version shall prevail.Goertek Inc.Annual Report 2021 4 Contents SectionImportant Notes,Contents and Interpretations.2 SectionCompany Information and Key Financial Indicators.8 Section III Discussion and Analysis of Management of the Company.13 Section IV Corporate Governance.48 Section V Environmental and social responsibilities.86 Section VI Important Matters.90 Section VII.Changes in Shares and Information about Shareholders.112 Section VIII Information of Preferred Shares.121 Section IX Information on the Bonds.122 Section X Financial Report.123 Goertek Inc.Annual Report 2021 5 Directory of Reference Files(1)Financial statements with signatures and seals of the legal representative,the person in charge of accounting and the person in charge of accounting department(accounting supervisor);(2)The originals of 2021 annual report and its abstract signed by the legal representative of the Company;(3)The originals of the audit report with the seal of Zhongxi Certified Public Accountants(special general partnership)Co.,Ltd.and the signature and seal of the certified public accountants;(4)The originals of all company documents and announcements publicly disclosed in newspapers designated by China Securities Regulatory Commission(CSRC)during the reporting period.Goertek Inc.Annual Report 2021 6 Interpretation Terms Refers to Content of interpretation Company,the Company,Goertek Inc.Refer to Goertek Inc.Goertek Group Refers to Goertek Group Co.,Ltd.,Controlling shareholder of the Company Weifang Goertek Refers to Weifang Goertek Electronics Co.,Ltd.,wholly owned subsidiary of the Company Weifang Goertek Microelectronics Refers to Weifang Goertek Microelectronics Co.,Ltd.,controlled subsidiary of the Company Goertek Optical Refers to Goertek Optical Technology Co.,Ltd.,wholly owned subsidiary of the Company Goertek Technology(Vietnam)Refers to Goertek Technology Vina Company Limited,wholly owned subsidiary of the Company ODM Refers to Original Design and Manufacturing JDM Refers to Joint Design and Manufacturing Micro speaker Refers to The micro electro-acoustic components that transform electrical signal into acoustic signal,generate driving force,through the magnetic line cutting of voice coil in magnetic field,to drive the diaphragm vibration,which then pushes the air for sounding.Compared with the micro receiver,its characterized by higher power,wide frequency response and high fidelity,which is generally used for playing the sound.MEMS Refers to Based on micron/nano technology,Micro electro mechanical system(MEMS)is a technology developed for designing,processing,manufacturing,measuring and controlling micron/nano materials.MEMS can integrate mechanical components,optical system and electric control system of driving components into a whole unit of micro system,featured with miniaturization,intelligence,multi-function,high integration and being suitable for mass production Speaker module Refers to The acoustic component composed of one or several micro speakers and other electronic devices,which are assembled together through an injection molded housing.Smart wearable devices Refers to A portable device that can be worn or carried directly,or integrated into the users clothes or accessories Virtual Reality/VR Refers to A computer simulation system that can create and experience virtual Goertek Inc.Annual Report 2021 7 world by using computer to generate a simulation environment into which the users immerse.Augmented Reality/AR Refers to A technology that perfectly integrates virtual information with the real world.By making extensive use of multimedia,3D modeling,real-time tracking and registration,intelligent interaction,sensing and other technical means,it applies the computer-generated text,images,3D models,music,video and other virtual information to the real world after simulation.These two kinds of information complement each other to enhance the real world.Smart wireless earphones Refers to The new types of smart wireless earphones represented by TWS(True Wireless Stereo)earphones connect the left and right earphones with smart phones and other terminal devices through Bluetooth technology to form an independent stereo system,which realizes touch control,voice control,body information collection and other functions by adding various sensors.Micro-system module Refers to Also known as SiP(System in Package)packaging module at the system level,it integrates multiple chips and passive components into the same package through advanced packaging such as technologies 3D packaging to form a module with whole or main functions of an electronic system,so as to realize the optimal combination of performance,volume,weight and other indicators.It is a comprehensive emerging microelectronics technology.Sensor Refers to A detection device that is capable of feeling the measured information,and able to transform the perceived information into electrical signals or other required forms of information for output based on certain rules,in order to meet the requirements of information transmission,processing,storage,display,recording and control.Company Law Refers to Company Law of the Peoples Republic of China Securities Law Refers to Securities Law of the Peoples Republic of China Articles of Association Refers to Articles of Association of Goertek Inc.CSRC Refers to China Securities Regulatory Commission RMB,RMB 10,000,RMB 100,000,000 Refer to yuan(RMB),ten thousand yuan(RMB),hundred million yuan(RMB)Reporting period Refers to January 1,2021 to December 31,2021 Explanation on Other Matters In this report,any difference between the sum of partial sums and the sum of detailed items is due to rounding.Goertek Inc.Annual Report 2021 8 Section II Company Information and Key Financial Indicators I.Company Information Stock abbreviation Goertek Inc.Stock code 002241 The stock exchange where stocks are listed Shenzhen Stock Exchange Name of the Company in Chinese 歌尔股份有限公司 Abbreviation of the Company in Chinese 歌尔股份 Name of the Company in English(if any)Goertek Inc.Abbreviation of the Company in English(if any)Goertek Legal representative of the Company Jiang Bin Registered address 268 Dongfang Road,High-tech Industrial Development District,Weifang Postal code of registered address 261031 Previous changes of registered address of the Company No change Business address 268 Dongfang Road,High-tech Industrial Development District,Weifang Postal code of business address 261031 Company website http:/ E-mail II.Contacts and Contact Information Board Secretary Securities Affairs Representative Name Jia Junan Xu Yanqing,Xu Dapeng Contact address 268 Dongfang Road,High-tech Industrial Development District,Weifang 268 Dongfang Road,High-tech Industrial Development District,Weifang Tel.0536-3055688 0536-3055688 Fax 0536-3056777 0536-3056777 E-mail Goertek Inc.Annual Report 2021 9 III.Information Disclosure and Place of the Report Website of the stock exchange for release of the Annual Report Shenzhen Stock Exchange(http:/)Name and website of the media for release of the Annual Report Securities Times,China Securities Journal,Shanghai Securities News,Securities Daily,CNINFO（http:/）Place where the Annual Report is available for inspection Office of Board of Directors of the Company IV.Changes in Registration Organization code 91370700729253432M The changes in main business since the Company was listed(if any)No change Changes of controlling shareholders of the Company(if any)No change V.Other Relevant Information Accounting firm engaged by the Company Name of the accounting firm Zhongxi Certified Public Accountants(special general partnership)Co.,Ltd.Business address Room 1101,No.11,Chongwenmenwai Street,Dongcheng District,Beijing Names of accountants signing the report Du Yeqin,Mou Huiling The sponsor institution engaged by the Company to perform continuous supervision during the reporting period Applicable Not applicable Name of the sponsor institution Business address of the sponsor institution Name of sponsor representative Duration of continuous supervision China Securities Co.,Ltd.9th Floor,Building B,Kayheng Center,No.2 Chaoyangmennei Street,Dongcheng District,Beijing Guan Feng,Huang Zhenyue From June 12,2020 to December 31,2021 The financial advisor engaged by the Company to perform continuous supervision during the reporting period Applicable Not applicable .Key Accounting Data and Financial Indicators Whether the Company performed a retrospective adjustment or restatement of previous accounting data Yes No 2021 2020 Year-on-year change 2019 Goertek Inc.Annual Report 2021 10 Operating revenue(RMB)78,221,418,618.02 57,742,742,893.96 35.475,147,806,427.74 Net profit attributable to shareholders of the Company(RMB)4,274,702,999.38 2,848,007,269.61 50.09%1,280,542,212.61 Net profit attributable to shareholders of the Company excluding non-recurring profits and losses(RMB)3,832,421,177.27 2,758,911,040.03 38.91%1,348,634,308.27 Net cash flow from operating activities(RMB)8,598,475,527.88 7,682,256,113.68 11.93%5,451,430,414.59 Basic earnings per share(RMB/share)1.29 0.89 44.94%0.40 Diluted earnings per share(RMB/share)1.28 0.89 43.82%0.40 Weighted average return on net assets 17.61.40%1.21%8.19cember 31,2021 December 31,2020 Year-on-year change December 31,2019 Total assets(RMB)61,079,051,133.27 49,117,826,313.41 24.354,660,304,627.21 Net assets attributable to shareholders of the Company(RMB)27,327,747,993.97 19,653,252,273.26 39.05,107,163,639.60 The Companys net profit before and after deducting non-recurring profits and losses in the last three fiscal years,whichever is lower,is negative,and the audit report of last year shows that there is uncertainty in companys ability to continue as a going concern.Yes No The net profit before and after deducting non-recurring profits and losses,whichever is lower,is negative.Yes No .Differences in accounting data between domestic and foreign accounting standards 1.Differences in net profits and net assets in the financial reports disclosed according to international accounting standards and Chinese accounting standards Applicable Not applicable During the reporting period,there is no difference in net profits and net assets in the financial reports disclosed pursuant to international accounting standards and Chinese accounting standards 2.Differences in net profits and net assets in the financial reports disclosed according to foreign accounting standards and Chinese accounting standards Applicable Not applicable During the reporting periods no differences in net profits and net assets in the financial reports disclosed according to foreign accounting standards and Chinese accounting standards at the same time Goertek Inc.Annual Report 2021 11.Key Quarterly Financial Indicators Unit:RMB The first quarter The second quarter The third quarter The fourth quarter Operating revenue 14,028,169,300.89 16,259,628,386.33 22,501,367,860.88 25,432,253,069.92 Net profit attributable to shareholders of the Company 965,953,650.11 765,076,109.61 1,601,494,203.24 942,179,036.42 Net profit attributable to shareholders of the Company excluding non-recurring profits and losses(RMB)601,329,147.56 808,228,696.46 1,609,128,973.48 813,734,359.77 Net cash flow from operating activities 873,274,388.66 3,108,904,252.54 1,776,650,281.67 2,839,646,605.01 Whether there is significant difference between the above individual or aggregate financial indicators and that of what disclosed in the quarterly reports and semi-annual reports disclosed by the Company Yes No .Items and Amounts of Non-recurring Profits and Losses Applicable Not applicable Unit:RMB Item 2021 2020 2019 Explanation Profits and losses on disposal of non-current assets(including the write-off portion of the provision for asset impairment)-122,148,708.58-219,544,001.32-195,445,840.66 Government subsidies included in the current profits and losses(except those closely related to the Companys normal business,comply with national policies and regulations,and continuously grant in accordance with a certain standard quota or quantity)464,119,437.91 221,372,903.17 177,315,056.36 In addition to the effective hedging business related to normal business of the Company,the profits and losses from the changes in fair value arising from holding held-for-trading financial assets and held-for-trading financial liabilities,as well as the investment income obtained from the disposal of held-for-trading financial assets,held-for-trading financial liabilities and 185,179,920.90 102,685,404.04-81,283,474.24 Goertek Inc.Annual Report 2021 12 available-for-sale financial assets Other non-operating revenue and expenditures other than those mentioned above 13,554,671.71 5,874,633.40 13,488,075.24 Other profit and loss items that meet the definition of non-recurring profit and loss 2,603,363.20 3,236,394.55 685,750.54 Less:Impact of income tax 84,270,186.15 21,159,380.84-17,148,337.10 Impact of minority shareholders interest(after tax)16,756,676.88 3,369,723.42 Total 442,281,822.11 89,096,229.58-68,092,095.66-Details of other profit and loss items that meet the definition of non-recurring profit and loss：Applicable Not applicable It mainly refers to returned service charge for withholding individual income tax and other fees.Description of defining the non-recurring profit and loss items,which are listed in Explanatory Announcement No.1 on Disclosure of the Information regarding the Companies Offering Their Securities to the Public-Non-recurring Profit and Loss,as recurring profit and loss Applicable Not applicable The Company did not classify any item of the non-recurring profit and loss items listed in the Explanatory Announcement No.1 on Disclosure of the Information regarding the Companies Offering Their Securities to the Public-Non-recurring Profit and Loss,as recurring profit and loss in the reporting period.Goertek Inc.Annual Report 2021 13 Section III Discussion and Analysis of Management of the Company.The situation of the industry during the reporting period During the reporting period,the Companys main business divides into three segments including precision components business,smart audio device business and smart hardware business.The main business of the company is categorized into the industry of the manufacturing of computer,communication,and other electronic equipment.The Companys main products include acoustics,optics,microelectronics,structural components and other precision components,as well as smart hardware products such as TWS smart earphones,virtual reality(VR)/augmented reality(AR)products,smart wearable devices,gaming console and accessories,and smart home products.The Company serves the leading global customers in the technology and consumer electronics industry by providing them with vertically integrated product solutions of precision components and smart hardware,as well as the related design,R&D and manufacturing services.In the mobile era when the smartphones became the core hardware devices,a large number of outstanding well-known enterprises in technology and consumer electronics industry had emerged worldwide based on the integration of advanced hardware devices,software content and innovative applications,and drove the whole industry and related enterprises in its industrial chain to achieve significant growth and enterprise development through a long period of time in the past.As the growth of the smartphone industry has slowed down in recent years,the global technology and consumer electronics industry has begun the transition from the mobile era to the post-mobile era.According to the statistics of IDC,a well-known consulting agency,the global smartphone shipment in 2021 reached about 1.35 billion units,with approximately 5.3%YoY increase,which has resumed growth in the post-epidemic era.But regarding to its overall performance in recent years,the growth of global smartphone industry has slowed down significantly.Therefore,the players in the global consumer electronics industry are actively exploring and planning on new opportunities of the future growth of the business.At the same time,advanced communication technologies such as 5G,along with AI,intelligent interaction,sensor,software algorithm are further integrated into the new generation of smart hardware products,thus creating a large number of new applications and demands.These new smart hardware products represented by VR/AR devices,smart wireless earphones,smart wearable devices and smart home products,have developed rapidly in recent years.According to the statistics of IDC,the global shipment of virtual reality(VR)products reached about 9.36 million units in 2021,with approximately 68.6%YoY increase.The global shipment of augmented reality(AR)products reached about 330,000 units,with approximately 13.8%YoY increase.The global VR industry continues its rapid development in 2021.More well-known Goertek Inc.Annual Report 2021 14 manufacturers in consumer electronics and Internet industries actively invest in VR,which promotes the continuous development of related hardware technology and software content.The global market size of AR products is still relatively small,and AR hardware technology still faces challenges in chips,optical display,communication,power consumption,size and weight.However,AR products have shown great market potential,and have attracted the global attention.According to the statistics of Futuresource,a famous consulting agency,the global shipment of TWS smart earphones reached about 300 million units in 2021,with approximately 37%YoY increase.With more mature intelligent voice interaction functions and continuous improvement of user experience,the penetration rate of TWS smart earphones in overall earphone market continues to increase and is expected to keep growing in future.According to the statistics of CCS Insight,another well-known consulting agency,the global shipment of smart wearable products represented by smart watches and smart bands reached about 232 million in 2021,with approximately 20.2%YoY increase.While the market size is growing steadily,high-accuracy health monitoring technology is also under developing and improvement,which is expected to create new applications and market demands for smart wearable products in the future.The rapid development of the new generation of smart hardware products has also boosted the demand for related precision components such as high-precision optical components and modules,precision acoustic components,MEMS sensors and micro-system modules,haptic components,and precision structural parts,thus creating new directions and market space for precision components products.With the new development stage of the industry and the rise of smart hardware products,the industry also shows a clearer competition pattern.From the perspective of brand and enterprises,the global technology and consumer electronics industry shows a centralized trend in the competition.The leading enterprises with strong competitiveness and brand awareness demonstrate clear competitive advantages by leveraging their resource in technologies,talents,funds,brands and industrial ecosystem,and thus lead the technology and product innovation in the industry to a certain extent.From the perspective of supply chain,global technology and consumer electronics industry continued to shift the middle-end of the supply chain to China and other developing countries.In particular,with the continuous improvement of Chinas political/economic environment,fundamental infrastructure,industrial layout,management/technical talent resources and other aspects,the overall competitiveness of electronic manufacturing enterprises of China is improved significantly,thus effectively undertake the demand of global industry,and obtain new development opportunities.II.The Companys main business during the reporting period The Company is committed to serve the leading customers in the global technology and consumer electronics industry by providing vertically integrated product solutions of precision components and smart hardware,as well as related design,R&D and Goertek Inc.Annual Report 2021 15 manufacturing services.The Companys main business divides into three segments including precision components business,smart audio device business and smart hardware business.The precision components business focuses on acoustics,optics,microelectronics,structural components,and other precision components.The related products include micro speaker/receiver,speaker module,haptic component(actuator),wireless charging device,antenna,MEMS microphone,MEMS sensors,micro-system module,VR optical component and module,AR optical component,AR light engine,precision structural parts and etc.The above-mentioned products are widely applied in devices such as smartphones,tablets,smart wireless earphones,VR,AR,smart wearable and smart home devices.Smart audio device business focuses on providing products related to audio,voice interaction,artificial intelligence,and other technologies.The main products include smart wireless earphones(TWS),wired/wireless earphones,smart speakers,etc.Smart hardware business focuses on providing products related to entertainment,health and home security.The main products include VR,AR,smart wearable products,gaming consoles and accessories,smart home products,etc.The Company has innovative competitive advantages in the fields of acoustics,optics,MEMS microelectronics and precision manufacturing,and owns many intellectual property rights in the field of precision parts and components.In addition,the Company has accumulated rich experience in projects by cooperating with industry-leading customers in the field of smart audio device and smart hardware through ODM,JDM and other business modes.During the reporting period,the Company maintained a good,long-term cooperative relationship with leading customers in the global technology and consumer electronics industry,kept growing in the number of patent applications and in technological capabilities.As a result,the company has been constantly recognized by global customers for its product solutions and service capability,and remains being an industry-leading manufacturer in the fields of micro speakers,MEMS microphones,MEMS sensors,TWS,VR products,smart wearable products,gaming console and accessories,etc.During the reporting period,due to the continuous growth of demand of smart hardware products such as VR,TWS,smart wearable products,gaming consoles and accessories,and the related precision components,the Company has achieved significant growth in revenue and net profit.At the same time,the Company further improved its position in the industry.During the reporting period,the Company won many honors,including being ranked the 3rd company in the Top-100 China electronic component enterprises based on comprehensive economic indexes,the 86th company in the Top-500 private enterprises in Chinas manufacturing industry,the 164th company in the Top-500 private enterprises in China,as well as being the executive member company of CITIF.Analysis of Core Competitiveness 1.Industry-leading precision and intelligent manufacturing capabilities Goertek Inc.Annual Report 2021 16 In technology and consumer electronics related fields,the Company has been widely recognized for precision manufacturing capabilities and obtains great reputation.Relying on the core capabilities and long-term experience in the field of precision manufacturing,the Company has continuously improved the processing accuracy,efficiency and quality of precision components and smart hardware products.The Company has in-house development capabilities of various core raw materials,and The Company adopted multiple advanced processes and technologies such as ultra-high-precision mold,high-precision metal/non-metal processing,ultrasonic technology and laser technology,to build industry-leading precision manufacturing capabilities in the production of precision optical components,MEMS microphones,MEMS sensors,micro-system modules and precision structural parts,thus ensuring the delivery of the products with high precision,high efficiency and high quality.At the same time,the Company actively explores the development of intelligent manufacturing mode based on the capacities of advanced equipment development and flexible automation production.In the fields of automation,machine vision and AI related to intelligent manufacturing,the Company has built a future-oriented core capability of intelligent manufacturing by continuing investing in independent R&D,introducing global advanced technologies,core equipment and best practice experience for system integration,thus improving the manufacturing in all aspects through the application of information,automation,artificial intelligence and other technologies.The Company promotes the transformation of its manufacturing to a more digitalized,connected,intelligent,and service-oriented model,and to build the core capabilities of future-oriented intelligent manufacturing.2.Multi-technologies integration platform and strong team of R&D personnel The Company has established a product R&D and manufacturing platform integrating materials,structures,electronic circuits,software algorithms,wireless communication,advanced technology,testing,automation and other technologies.Through cross-domain technology integration,the Company provides customers with advanced and systematic solutions for precision components and smart hardware products.The Company attaches great importance to the integration and cultivation of outstanding talents in the fields of acoustics,optics,microelectronics,wireless communication,precision manufacturing,automation,and other sectors around the world.The Company has set up a team of technical personnel with profound technical strength and rich experience in product projects,and has made a long-term cooperation with many well-known universities and scientific research institutions,such as Beijing University of Aeronautics and Astronautics,Tsinghua University,Shanghai Jiao Tong University,Harbin Institute of Technology,Nanjing University,Southeast University,Changchun Institute of Optics,Fine Mechanics and Physics(CIOMP),Shandong University,China Ocean University(OUC),Changchun University of Science and Technology and Dalian University of Technology,which forms an open and comprehensive technology R&D platform in support of continuous innovation and R&D of technologies and products.During the reporting period,the Company applied for 3,468 patents,including 2,539 invention patents.A total of 2,675 patents has been granted,including 1,036 invention patents.Till December 31,2021,the Company has totally applied for 25,818 patents Goertek Inc.Annual Report 2021 17(including 3,322 foreign patent applications),including 13,102 invention patents;Total of 15,525 patents have been granted,including 4,165 invention patents.3.Continuous strategic innovation and transformation,and stable high-value customer relationships Facing the complex macroeconomic situation of domestic and overseas and the slowdown in the growth of the smartphone industry,the management of the Company actively carries out strategical innovation and transformation.While continuing to consolidate the core competitive advantages in the conventional precision component business,the Company firmly grasps the innovation opportunities of smart hardware products in technology and consumer electronics industry.Relying on the high-value customer resources and good customer relationships worldwide,the Company focuses on the market and technology and continues to explore new business growth opportunities in the fields of TWS,VR/AR,gaming and accessories,smart wearable devices,etc.The Company optimizes the allocation of strategical resource,supports strategical product development,continues strengthening and further utilize the customer resource advantages by closely following the world-class customers,in an effort to transform the needs of high-value customers into an inexhaustible driving force for the Companys sustainable development.4.Excellent core management team Although the Company experiences a rapid and sound development,the core management team keeps a steady and efficient style as always.Facing the challenges and demands of smart hardware products in the post mobile era such as rapid development,high quality,high precision manufacturing,short delivery cycle and complex customer certification process,the core management team promptly response to the market and makes changes and innovations continuously,to keep and enhance the Companys capabilities of strategic management,operation,R&D,precision and intelligent manufacturing.The Company attaches importance to and promotes the internationalization,specialization and rejuvenation of its core management team,and actively brings in senior management talents and professionals from many international leading enterprises.At the same time,the Company has strengthened the echelon of its talent team,more and more young talents grow up into the Companys core management team through training and practice.The Company boasts a management team with both experience and vitality that continues to promote the Companys stable and fast development in the future.IV.Analysis of Main Business 1.Overview In 2021,the national economy was recovering after the outbreak of the epidemic,new changes presented in both domestic and overseas,and more challenges appeared in the process to maintain the stability of the economy.Under that situation,China government maintained the continuity and pertinence of macro policies,provided necessary support for economic recovery,and Goertek Inc.Annual Report 2021 18 adopted a series of effective measures,such as optimizing enterprise supporting policies,improving business environment,strengthening technology innovation and stabilizing the industry and supply chain,which finally supported Chinas economy to achieve a relatively high growth rate among its fellow countries.Facing the complex global political and economic environment,the repeated COVID-19 outbreaks in some countries and regions,as well as the challenges in global supply chain operation,the management and all staff of the Company made their best efforts to respond,and successfully completed business development,project delivery,epidemic prevention and control,operation improvement and other important work.Finally,the Company has achieved excellent business results with a remarkable growth in both revenues and profits in 2021.In recent years,the growth of the global smartphone market has slowed down.However,COVID-19 has impacted peoples lives and work style,bringing in significant increase of demand for smart hardware devices in the applications such as online telecommuting,social entertainment,sports and health.As a result,the emerging market of smart hardware products represented by VR,TWS,smart wearable,gaming consoles and accessories maintained a stable and rapid growth.Due to the Companys strategical investment in smart hardware business in recent years,the growth of the new smart hardware product market has accelerated the sound development of the Companys business,in both precision components,smart audio devices and smart hardware sectors.During the reporting period,the Company continued to uphold the product strategy of precision components smart hardware by actively promoting the business of precision components,such as acoustics,optics,microelectronics and structural parts,as well as smart hardware products such as VR/AR,smart wireless earphones(TWS),smart wearable and smart home devices.Especially,the businesses in VR,TWS,gaming consoles and accessories has experienced a rapid growth.By continuing to focus on leading customers in the technology and consumer electronics industry and to improve customer service and relationships,the Companys business development have also achieved fruitful results.The promotion of the internal reform of the Company has realized more efficient decision-making process,and the continuous improvement of the internal management and operation,lays a good foundation for the further development of the Company in the future.During the reporting period,the Company achieved a revenue of RMB 78,221.4186 million,with a 35.47%YoY increase.The Company realized a net profit attributable to shareholders of listed companies of RMB 4,274.703 million,with a 50.09%YoY increase.The operating cost of the Company was RMB 67,167.6667 million,with a 38.54%YoY increase.During the reporting period,the total amount of the Companys sales expenses,administrative expenses,R&D expenses and financial expenses was RMB 6,733.702 million,with an 11.81%YoY increase.During the reporting period,the Company further strengthened the development of new technologies,products and techniques,actively brought in high-level R&D talents,and invested RMB 4,301.3428 million in R&D,accounting for 5.50%of the revenue and 15.40%of the latest audited net assets of the Company.Goertek Inc.Annual Report 2021 19 During the reporting period,the net cash flow from operating activities of the Company was RMB 8,598.4755 million,with an 11.93%YoY increase.The main reasons are as follows:during the reporting period,the Company expanded the business scale,improved the operating cycle,and thus the net cash flow from operating activities increased.2.Revenue and cost 1)Composition of operating revenue Unit:RMB 2021 2020 Year-on-year change Amount Proportion in operating revenue Amount Proportion in operating revenue Total of operating revenue 78,221,418,618.02 100W,742,742,893.96 1005.47%Classified by industry Electronic components 76,946,324,805.73 98.37V,531,616,437.84 97.906.11%Other business income 1,275,093,812.29 1.63%1,211,126,456.12 2.10%5.28%Classified by product Precision components 13,840,133,491.33 17.69,205,410,031.94 21.13.39%Smart audio device 30,297,084,891.23 38.73&,674,264,183.42 46.20.58%Smart hardware 32,809,106,423.17 41.94,651,942,222.48 30.57.87%Other business income 1,275,093,812.29 1.63%1,211,126,456.12 2.10%5.28%Classified by region Domestic 7,571,525,782.78 9.68%6,999,168,774.17 12.12%8.18%Overseas 70,649,892,835.24 90.32P,743,574,119.79 87.889.23%Classified by sales mode Direct selling 77,770,329,729.13 99.42W,438,222,579.69 99.475.40%Distribution 451,088,888.89 0.5804,520,314.27 0.53H.13%(2)Industries,products,regions and sales modes accounting for more than 10%of the Companys operating revenue or operating profit Applicable Not applicable Unit:RMB Goertek Inc.Annual Report 2021 20 Operating revenue Operating cost Gross profit margin YoY change(%)of operating revenue YoY change(%)of operating cost YoY change(%)of gross profit margin Classified by industry Electronic components 76,946,324,805.73 66,054,072,404.35 14.166.119.24%-1.92%Classified by product Precision components 13,840,133,491.33 10,641,616,932.91 23.11.39.57%-0.79%Smart audio device 30,297,084,891.23 27,167,160,928.24 10.33.58.64%-4.54%Smart hardware 32,809,106,423.17 28,245,294,543.20 13.91.87.89%1.40%Classified by region Domestic 6,878,087,190.33 5,921,035,748.23 13.91%7.59%8.97%-1.10%Overseas 70,068,237,615.40 60,133,036,656.12 14.189.75C.15%-2.04%Classified by sales mode Direct selling 76,499,084,617.78 65,666,703,312.23 14.166.059.18%-1.93%Distribution 447,240,187.95 387,369,092.12 13.39G.68P.64%-1.70%If the statistical caliber of the Companys main business data has been adjusted in the reporting period,adjusted statistics of main business are based on the caliber at the end of the reporting period of last year.Applicable Not applicable (3)Whether the Companys revenue from physical products sales is greater than the revenue from providing services Yes No Classification of industry Item Unit 2021 2020 Year-on-year change Electronic components industry Sales volume Ten thousand PCS 540,341.87 413,499.31 30.68%Output volume Ten thousand PCS 546,976.95 416,352.11 31.37%Inventory volume Ten thousand PCS 34,036.09 27,401.01 24.21%Reasons for changes in the relevant data over 30%year-on-year Applicable Not applicable During the reporting period,both of the production volume and sales volume of the Company increased.(4)Fulfillment of major sales contracts and major procurement contracts signed by the Company as of the reporting period Applicable Not applicable Goertek Inc.Annual Report 2021 21 5)Composition of operating cost Classification of industry Unit:RMB Classification of industry Item 2021 2020 Year-on-year change Amount Proportion in operating cost Amount Proportion in operating cost Electronic components Direct materials 55,843,214,176.77 84.549,047,644,492.84 82.31C.01%Direct labor expenses 4,058,480,923.72 6.14%3,401,428,878.80 7.17.32%Manufacturing expenses 6,152,377,303.86 9.31%4,990,659,944.90 10.52#.28%Explanation During the reporting period,the Companys overall sales volume increased.At the same time,the sales revenue of Smart audio devices and intelligent hardware products with relatively high material cost increased.(6)Whether there is any change in consolidation scope during the reporting period Yes No During the reporting period,the Company established a subsidiary company GOERTEK MICROELECTRONICS KOREA CO.,LTD.(7)Significant changes or adjustments in the Companys business,products or services during the reporting period Applicable Not applicable (8)Major customers and suppliers Major customers of the Company Sales revenue from top five customer 67,695,045,138.61 Proportion of total sales revenue from top five customers in total annual sales amount 86.54%Proportion of sales revenue from related parties among top five customers in total annual sales amount 0.00%Information of top five customers No.Name of customer Sales amount(RMB)Proportion in total annual sales amount 1 Customer 1 33,238,529,094.59 42.49%Goertek Inc.Annual Report 2021 22 2 Customer 2 18,457,651,840.69 23.60%3 Customer 3 8,715,498,516.63 11.14%4 Customer 4 3,918,367,657.28 5.01%5 Customer 5 3,364,998,029.42 4.30%Total-67,695,045,138.61 86.54%Other information of major customers Applicable Not applicable The top five customers do not have associated relationship with the Company,and the Companys directors,supervisors,senior management,core technicians,shareholders holding more than 5%of total shares,actual controllers and other related parties do not directly or indirectly own rights and interests in the main customers.Major suppliers of the Company Total purchase amount from top five suppliers(RMB)19,062,697,560.63 Proportion of total purchase amount from top five suppliers in total annual purchase amount 30.54%Proportion of purchase amount from related parties among top five suppliers in total annual purchase amount 0.00%Information of top five suppliers No.Name of supplier Purchase amount(RMB)Proportion of total annual purchase amount 1 Supplier 1 7,471,595,122.65 11.97%2 Supplier 2 5,464,068,547.98 8.75%3 Supplier 3 2,732,526,729.39 4.38%4 Supplier 4 1,834,123,435.48 2.94%5 Supplier 5 1,560,383,725.13 2.50%Total-19,062,697,560.63 30.54%Other information of major suppliers Applicable Not applicable The top five suppliers do not have associated relationship with the Company,and the Companys directors,supervisors,senior management,core technicians,shareholders holding more than 5%of total shares,actual controllers and other related parties do not directly or indirectly own rights and interests in the main suppliers.3.Expenses Unit:RMB 2021 2020 Year-on-year change Note of significant change Goertek Inc.Annual Report 2021 23 Selling expenses 444,869,977.08 476,066,518.64-6.55%No significant change Administrative expenses 1,951,657,773.32 1,629,730,793.00 19.75%No significant change Financial expenses 167,099,982.36 490,688,772.09-65.95%The main reasons are as follows:Reduced loss on exchange during the reporting period;convertible bonds were converted into common stocks of the Company,interest expense reduced;interest income from money funds increased R&D expenses 4,170,074,282.10 3,425,971,011.65 21.72%No significant change 4.R&D Investment Applicable Not applicable Names of major R&D projects Purpose of project Status of project Objectives Expected benefits to future development of the Company R&D project of micro speaker module Develop a new generation of micro speaker module products with high sensitivity,low distortion,large amplitude,waterproof and dustproof features.In progress According to specific technical requirements of the customers,the Company has completed the research and development of a number of advanced micro speaker module products,and realized the mass production in smart phones,tablet computers,smart wearable and other products for main customers.The project helps consolidate the Companys competitive advantage and market share in the field of acoustic precision components.R&D project of MEMS sensor and micro system module Develop new generation of MEMS sensors and micro-system module products that are applied to smart wireless earphones,smart wearable devices and other products.In progress Complete the R&D,verification and mass production of MEMS sensors and micro-system module products for terminal products,such as TWS smart wireless earphones,smart wearable devices.The project facilitates the business expansion the Company in the field of MEMS sensors and micro-system modules,and further enhances the Companys comprehensive strength in the field of MEMS.R&D project of VR/AR precision optical components and modules Develop the precision optical components and module products by using emerging optical technologies such as“Pancake”folded-lightpath lenses and waveguide technology,and promote their application in In progress Complete the R&D and mass production of optical lens and module products for new generation of all-in-one VR products,and improve the ability of comprehensive solution of optical devices and light-engine modules for AR products.The project helps enhance the Companys competitive advantage and market share in the field of VR/AR precision optical components and modules,promote the Companys ability to provide customers with customized VR/AR optical solutions,and improve the Companys vertical integration Goertek Inc.Annual Report 2021 24 Names of major R&D projects Purpose of project Status of project Objectives Expected benefits to future development of the Company VR/AR products.ability and profitability in the field of VR/AR.R&D project of all-in-one VR HMD Develop lightweight all-in-one VR HMD products featured with high-definition display,precise motion tracking and other features.In progress Cooperate with customers to complete R&D,validation,mass production and delivery of a variety of new-generation all-in-one VR HMD products.The project helps consolidate the Companys competitive advantage and market share in the field of VR.R&D project of TWS smart wireless earphones Develop a new generation of TWS smart wireless earphones In progress Cooperate with customers to complete R&D,validation,mass production and delivery of a variety of new-generation of TWS smart wireless earphones It helps consolidate the Companys competitive advantage and market share in the field of TWS smart wireless earphones.R&D project of smart wearable devices for sport and health related applications Develop a new generation of smart wearable devices with functions of independent communication,health mornitoring features and etc.In progress Cooperate with customers to complete R&D,validation,mass production and delivery of a new generation of smart watches and smart bands.It helps consolidate the Companys competitive advantage and market share in smart wearable devices such as smart watches and smart bands,and supports the Companys smart wearable business for further growth.R&D project of smart wireless lightweight AR glasses Develop wireless lightweight AR glasses and their main functional modules for future AR applications.In progress Complete the R&D and trial production of a variety of AR glasses products that,with the functions of data processing and wireless communication,apply advanced precision optics and micro-display technologies such as optical waveguide and silicon-based LED,so as to develop the solution capability for AR glasses and their main functional modules.It helps enhance the Companys R&D experience and technology accumulation in the field of AR and facilitates the business expansion of the Company in AR field.R&D personnel of the Company 2021 2020 Year-on-year change Number of R&D personnel 12,895 12,177 5.90%Proportion of R&D personnel 13.46.94%-0.48ademic structure of R&D personnel Undergraduate 9,148 8,409 8.79%Goertek Inc.Annual Report 2021 25 Postgraduate 2,414 1,982 21.80%PhD 63 58 8.62%Age of R&D personnel Below the age of 30 5,105 4,821 5.89%Aged between 30 to 40 7,162 6,838 4.74%Over the age of 40 628 518 21.24%The Companys investment in R&D 2021 2020 Year-on-year change Amount of R&D Investment(RMB)4,301,342,763.66 3,532,801,720.56 21.75%Proportion of R&D investment in operating revenue 5.50%6.12%-0.62pitalized amount of R&D investment(RMB)662,993,650.30 541,498,060.65 22.44%Proportion of capitalized R&D investment in R&D investment 15.41.33%0.08%Reasons and impacts of significant changes in R&D personnel composition of the Company Applicable Not applicable Reasons for significant changes in the proportion of total R&D investment in operating revenue compared with that of previous year Applicable Not applicable Reasons and explanation of its reasonableness of significant changes in capitalized R&D investment Applicable Not applicable 5.Cash flow Unit:RMB Item 2021 2020 Year-on-year change Sub-total of cash inflow from operating activities 85,523,439,745.15 60,932,031,432.73 40.36%Sub-total of cash outflow from operating activities 76,924,964,217.27 53,249,775,319.05 44.46%Net cash flow from operating activities 8,598,475,527.88 7,682,256,113.68 11.93%Sub-total of cash inflow from investment activities 3,276,323,800.48 505,861,986.28 547.67%Sub-total of cash outflow from investment activities 10,044,700,261.35 5,806,999,821.95 72.98%Net cash flow from investing activities-6,768,376,460.87-5,301,137,835.67 27.68%Goertek Inc.Annual Report 2021 26 Sub-total of cash inflow from financing activities 14,003,754,499.97 15,780,475,210.72-11.26%Sub-total of cash outflow from financing activities 13,616,577,139.69 14,138,013,422.54-3.69%Net cash flow from financing activities 387,177,360.28 1,642,461,788.18-76.43%Net increase in cash and cash equivalents 2,224,708,917.50 3,818,588,192.22-41.74%Main influencing factors of significant year-on-year changes in relevant data Applicable Not applicable (1)The sub-total of cash inflow from operating activities was RMB 85,523.4397 million,with year-on-year increase of 40.36%,mainly due to the expansion of the Companys sales and the increase of sales receipts and advances received during the reporting period.(2)The sub-total of cash outflow from operating activities was RMB 76,924.9642 million,with year-on-year increase of 44.46%,mainly due to the increase of the Companys purchase of raw materials and payment of employee salaries during the reporting period.(3)The sub-total of cash inflow from investment activities was RMB 3,276.3238 million,with year-on-year increase of 547.67%,mainly due to the fact that the structural deposits purchased by the Company were collected at maturity during the reporting period.(4)The sub-total of cash outflow from investment activities was RMB 10,044.7003 million,with year-on-year increase of 72.98%,mainly due to the increase of the Companys purchase of fixed assets and other long-term assets,and purchase of structured deposits during the reporting period.(5)The net cash flow from financing activities was 387.1774 million,with a year-on-year decrease of 76.43%,mainly due to RMB 3,995 million in cash received by the Company from issuing bonds during the previous reporting period.The reason for significant difference between the net cash flow from the Companys operating activities during the reporting period and net profit in current year.Applicable Not applicable The net cash flow from operating activities exceeded the net profit of current year by 99.64%,mainly due to the improvement of the Companys refined operation capacity,optimization of operation cycle and reduction of capital occupation.V.Analysis of Non-main Business Applicable Not applicable Unit:RMB Amount Proportion in total Explanation of the cause Whether it is Goertek Inc.Annual Report 2021 27 profit sustainable Investment income 469,239,884.79 10.19%It is mainly due to the investment income obtained from transaction of foreign exchange and equity disposal of the Company No Gains from changes in fair value-48,848,625.93-1.06%It is mainly due to the change in valuation of the Companys stock foreign exchange derivatives No Asset impairment-241,075,506.45-5.23%It is mainly due to the provision for inventory depreciation No Non-operating revenue 22,444,738.18 0.49%It is mainly due to the unpayable payments and liquidated damages received No Non-operating expenditure 99,858,949.06 2.17%It is mainly due to the losses on scrapping of non-current assets of the Company No VI.Analysis of Assets and Liabilities 1.Major changes in asset composition Unit:RMB December 31,2021 January 1,2021 YoY change(%)Note of significant change Amount Proportion in total assets Amount Proportion in total assets Cash and bank balances 10,048,521,696.09 16.45%7,788,139,761.68 15.72%0.73%No significant change Accounts receivable 11,899,214,525.92 19.48%9,951,611,596.65 20.09%-0.61%No significant change Inventories 12,082,308,485.38 19.78%9,170,731,903.19 18.52%1.26%During the reporting period,inventory reserves increased along with business growth of the Company Long-term equity investments 437,402,203.91 0.7237,410,802.56 0.68%0.04%No significant change Fixed assets 18,123,352,480.76 29.67,674,535,924.15 29.63%0.04%During the reporting period,the Company raised funds to invest in projects,increased the purchase of production equipment,and transferred of part of the infrastructure projects reached usable state to fixed assets Goertek Inc.Annual Report 2021 28 Construction in progress 2,127,055,853.77 3.48%2,078,910,639.92 4.20%-0.72%No significant change Right-of-use assets 330,796,520.66 0.54F2,821,988.61 0.93%-0.39%No significant change Short-term borrowings 4,284,859,347.02 7.02%3,189,865,281.20 6.44%0.58%During the reporting period,the demand for daily operating funds increased and short-term borrowings increased Contract liabilities 2,210,825,761.69 3.62w2,033,187.85 1.56%2.06%During the reporting period,the goods were prepared for customers,and advance from customers increased Long-term borrowings 2,204,215,784.74 3.61%2,754,299,262.02 5.56%-1.95%No significant change Lease liabilities 210,209,955.40 0.34)8,830,498.84 0.60%-0.26%From January 1,2021,the Company implemented the new lease rules,and payed the rent as agreed Foreign assets account for a relatively high proportion Applicable Not applicable 2.Assets and liabilities measured at fair value Applicable Not applicable Unit:RMB Item Opening balance Profit and loss from changes in fair value in the report period Cumulative changes in fair value included in equity Impairment accrued in current period Purchase amount in the reporting period Sales amount in the reporting period Other changes Closing balance Financial assets 1.Held-for-trading financial assets(excluding derivative financial assets)125,327,442.62 64,914,061.44 2,745,091,734.73 2,635,098,910.00 300,234,328.79 2.125,462,174.67-104,999,182.31 20,462,992.36 Goertek Inc.Annual Report 2021 29 Derivative financial assets 3.Other debt investments 4.Investment in other equity instruments 357,307,056.65 53,916,285.45 129,080,638.64 64,601,040.12 465,677,764.54 Sub-total of financial assets 608,096,673.94-40,085,120.87 53,916,285.45 2,874,172,373.37 2,699,699,950.12 786,375,085.69 Total of above amounts 608,096,673.94-40,085,120.87 53,916,285.45 2,874,172,373.37 2,699,699,950.12 786,375,085.69 Financial liabilities 43,578,775.71-8,763,505.06 6,427,059.28 43,578,775.71 15,190,564.34 Other changes None Whether the measurement attributes of major assets of the Company have changed significantly during the reporting period Yes No 3.Restrictions on asset rights as of the end of reporting period Items Book value at year end(RMB)Reasons for restrictions Cash and bank balances 910,620,794.05 Deposit for bills and borrowings Notes receivable 6,095,782.39 Bill pledge and others Other non-current assets 122,540,194.44 When large-denomination certificates of deposit was pledged to the bank,the bank issued a financing guarantee Accounts receivable 5,000,000.00 Re-insurance accounts receivable not derecognized Total 1,044,256,770.88 .Analysis of Investment 1.Overall situation Applicable Not applicable Investment amount in 2021(RMB)Investment amount in 2020(RMB)YoY change(%)Goertek Inc.Annual Report 2021 30 533,092,515.56 207,730,344.46 156.63%2.Major equity investments acquired during the reporting period Applicable Not applicable Goertek Inc.Annual Report 2021 31 3.Major non-equity investments in progress during the reporting period Applicable Not applicable Unit:RMB Name of project Investment mode Whether it is the investment in fixed assets Project industry Amount invested during the reporting period Accumulated actual investment by the end of the reporting period Source of funds Project progress Estimated income Accumulated income by the end of the reporting period Reasons for failure to reach the planned progress and expected benefits Disclosure date(if any)Disclosure index(if any)Project of Dongguan Songshan Lake Goertek Industrial Park Self-built Yes Electronic components 119,630,009.50 310,725,561.33 Self-raised funds 13.93%Not applicable Not applicable Not applicable January 3,2019 For details,see Announcement of Goertek Inc.on Signing of Investment Cooperation Agreement between the Wholly-owned Subsidiary of the Company and the Management Committee of Dongguan Songshan Lake High-tech Industrial Development Zone published in the information disclosure media such as CNINFO(http:/),Securities Times,China Securities Journal,Goertek Inc.Annual Report 2021 32 Shanghai Securities News,Securities Daily.Total-119,630,009.50 310,725,561.33-4.Financial asset investment(1)Securities investment Applicable Not applicable Unit:RMB Type of security Security code Short name Initial investment cost Accounting measurement model Book value at the beginning Profit and loss from changes in fair value in the report period Cumulative changes in fair value included in equity Purchase amount in the reporting period Sales amount in the reporting period Profit and loss in the reporting period Book value at the end of the reporting period Accounting items Source of funds Domestic and foreign stocks KOPN KOPN 169,951,481.05 Fair value measurements 120,327,442.62 63,575,754.04 85,098,910.00 69,142,817.18 98,804,286.66 Held-for-trading financial assets Self-raised funds Total 169,951,481.05-120,327,442.62 63,575,754.04 85,098,910.00 69,142,817.18 98,804,286.66-Date of announcement disclosure by the Board of Directors for approval of securities investment February 11,2017 Date of announcement disclosure by shareholders meeting for approval of securities investment March 2,2017 Goertek Inc.Annual Report 2021 33(2)Derivatives investment Applicable Not applicable Unit:RMB 10,000 Name of derivative investment operator Associated relationship Whether it is related party transaction Type of derivatives investment Initial amount of derivative investment Start date End date Opening balance Amount of purchase during the reporting period Amount of sales during the reporting period Amount of provision for impairment(if any)Closing balance Proportion of investment amount in the Companys net asset at the end of the reporting period Actual profit and loss amount in the reporting period Bank Non associated relationship No Option 330,812.43 330,812.43 243,551.74 453,225.87 121,138.30 4.34%4,083.00 Bank Non associated relationship No Forward 515,467.10 515,467.10 1,288,528.97 1,285,014.09 518,981.98 18.58%,495.32 Bank Non associated relationship No Swap 214,630.06 214,630.06 191,271.00 227,381.46 178,519.60 6.39%4,766.87 Total 1,060,909.59-1,060,909.59 1,723,351.71 1,965,621.42 818,639.88 29.314,345.19 Source of funds for derivatives investment Self-raised funds Litigation involved(if any)None Date of announcement disclosure by the Board of Directors for approval of the investment in derivatives March 27,2021 Goertek Inc.Annual Report 2021 34 Date of announcement disclosure by shareholders meeting for approval of the investment in derivatives May 8,2021 Risk analysis and control measures for derivatives positions during the reporting period(including but not limited to market risk,liquidity risk,credit risk,operational risk,legal risk,etc.)1.The financial derivatives transactions carried out by the Company are for the purpose of fixing costs,avoiding and preventing risks of foreign exchange rate and interest rate,and prohibiting any risk speculation.The trading quota of the Companys financial derivatives shall not exceed the authorized quota as reviewed and approved by the Board of Directors or the general meeting of shareholders.2.The Company has formulated a strict management system for financial derivatives transactions,which clearly stipulates the operating principles,approval authority,responsible departments and persons,internal operating procedures,information isolation measures,internal risk reporting system and risk handling procedures,and information disclosure of financial derivatives transactions,in order to control trading risks arising therefrom.3.The Company shall carefully review the terms of contracts signed with qualified banks and other financial institutions,and strictly implement the risk management system to prevent legal risks.4.The Companys business personnel will continue to track the changes in the open market price or fair value of financial derivatives,timely assess the changes in risk exposure of financial derivatives transactions,and regularly report to the management of the Company.If any abnormal situation,inform the Board of Directors of the risk and take emergency measures accordingly.5.The internal audit department regularly conducts internal audit on the compliance of financial derivatives transactions.In case of changes in market price or fair value of invested derivatives during the reporting period,the analysis of fair value of the derivatives shall disclose the specific methods used and the setting of relevant assumptions and parameters Changes in the fair value of foreign exchange derivatives are calculated based on the difference between the fair market price and the contract price in the month of the settlement date determined by the Company.Description of whether the accounting policies and specific accounting principles for the Companys derivatives have changed significantly compared with that of previous reporting period The accounting policies and specific accounting principles for the Companys derivatives have no significant change compared with that of previous reporting period.Special opinions of independent directors on the Companys derivatives investment and risk control The Company carries out financial derivatives transactions mainly to avoid foreign exchange risks associated with RMB exchange rate fluctuations and effectively control the cost uncertainty caused by foreign exchange risks.The Company has formulated the Management System of Goerteks Financial Derivatives Trading Business,which is conducive to strengthen the management and control of the risks associated with financial derivatives transactions.The deliberation,approval,voting and other procedures of this proposal are in line with the relevant provisions of Company Law,Articles of Association,and overall interests of the Company,without damage to the legitimate rights and interests of minority shareholders.Therefore,the Company has been approved to carry out the Goertek Inc.Annual Report 2021 35 business above.Goertek Inc.Annual Report 2021 36 5.Use of raised funds Applicable Not applicable (1)Overall use of raised funds Applicable Not applicable Unit:RMB 10,000 Year of raising Means of raising Total fund raised The total amount of raised funds used during the reporting period Accumulated amount of raised funds that have been used Total amount of raised funds with changed purposes during the reporting period Accumulated total amount of raised funds with changed purposes Proportion of accumulated total amount of raised funds with changed purposes Total amount of raised funds that have not been yet used Purpose of the raised funds that have not been yet used The amount of raised funds that have been idle for more than two years 2020 Public issuance of convertible bonds 398,903.00 129,831.49 207,055.93 0.00 0.00 0.001,847.07 Supplementing working capital and deposited in the special account for raised funds 0.00 Total-398,903.00 129,831.49 207,055.93 0.00 0.00 0.001,847.07-0.00 Description of overall use of raised funds The Company actually invested RMB 1,298.3149 million in current period.As of December 31,2021,the Company had used a total of RMB 2,070.5593 million of raised funds.The amount of unused raised funds was RMB 1,918.4707 million(interest excluded),of which RMB 1,200 million was used to temporarily supplement the working capital,and the remaining funds was deposited in the special account for raised funds of the Company.(2)Projects in which the raised funds were proposed to be invested Applicable Not applicable Unit:RMB 10,000 Committed investment projects and investment of over-raised funds Whether the project has been Total committed investmeTotal investment after adjustmeAmount invested during the Accumulated investment Investment progress at the end The date on which the project Benefits realized during the Whether it achieved the Whether there is any significanGoertek Inc.Annual Report 2021 37 changed(including partial changes)nt of raised funds nt(1)reporting period amount at the end of the reporting period(2)of the period(3)(2)/(1)reaches its intended usage state reporting period expected benefits t change in the feasibility of the project Committed investment projects The project of true wireless smart earphones No 218,903 218,903 93,433 164,620.2 75.20%August 31,2022 33,365.12 Not applicable No AR/VR and related optical module project-AR/VR project No 60,000 60,000 30,375.77 30,375.77 50.63%August 31,2022 46,014.2 Yes No AR/VR and related optical module project-optical module project No 40,000 40,000 3,168.4 3,168.4 7.92%August 31,2022 825.17 Not applicable No Qingdao R&D center project No 80,000 80,000 2,854.32 8,891.56 11.11%August 31,2022 Not applicable Not applicable No Sub-total of committed investment projects-398,903 398,903 129,831.49 207,055.93-80,204.49-Direction of the investment with over raised funds Not applicable Total-398,903 398,903 129,831.49 207,055.93-80,204.49-Descriptions and reasons for failure of meeting the planned schedule or expected revenue(by project)Due to the impact of the project and the actual needs of the Company,the project of Qingdao R&D Center was behind schedule.The Company may accelerate subsequent investment according to the actual needs,and will strive to achieve the maximum efficiency of the raised funds.Description of significant change in the feasibility of the project Not applicable Amount,use of over-raised funds and progress of use thereof Not applicable Change in location of the project invested with raised funds Applicable Occurred in previous years On August 20,2020,the Company held the 8th meeting of the 5th Board of Directors and the 6th meeting Goertek Inc.Annual Report 2021 38 of the 5th Board of Supervisors,which reviewed and approved the Proposal on Changing the Implementation Subject and Implementation Location of Some Investment Projects with Raised Capital and Increasing the Capital of Wholly-owned Subsidiaries,and agreed to change:the implementation subject of AR/VR and related optical module projects from Goertek Inc.to wholly-owned subsidiaries Weifang Goertek and Goertek Optical;The implementation location was changed accordingly from Goertek Photoelectric Park in Weifang High-tech Zone to Weifang Goertek Plant,east of Gaoxin No.2 Road,south of Yuqing East Street in Weifang comprehensive free trade zone and Goertek Optical Plant,phase III of Goertek Photoelectric Park in Weifang High-tech Zone;The Company increased the capital to Weifang Goertek with the raised funds of RMB 600 million and increased the capital to Goertek Optical with the raised funds of RMB 400 million,for the purpose of specific implementation of above-mentioned investment projects.Adjustment on how to invest the projects with raised funds Not applicable Upfront investment of the project with raised funds and replacement thereof Applicable On July 9,2020,the Company held the 7th meeting of the 5th Board of Directors and the 5th meeting of the 5th Board of Supervisors,which reviewed and approved the Proposal on Replacing the Self-raised Funds Invested in the Projects in Advance with the Raised Funds,and agreed to use the raised funds to replace the self-raised funds of RMB 315.7238 million invested in the investment projects in advance.The fund replacement above has been verified by Zhongxi Certified Public Accountants(special general partnership)Co.,Ltd.,and an authentication report has been issued.Temporary replenishment of working capital with idle raised funds Applicable On July 9,2020,the Company held the 7th meeting of the 5th Board of Directors and the 5th meeting of the 5th Board of Supervisors,which reviewed and approved the Proposal on Temporary Replenishment of Working Capital with Idle Raised Funds.It was agreed that the Company shall use the idle raised funds not exceeding RMB 2.5 billion to temporarily supplement working capital.The use period shall not exceed 12 months from the date of approval by the Board of Directors.After expiration,it shall be returned to the special account for raised funds in a timely manner.The Company returned RMB 0.8 billion and RMB 1.7 billion of the raised funds to the special account for raised funds in advance on September 17,2020 and November 4,2020 respectively.On November 5,2020,the Company held the 11th meeting of the 5th Board of Directors and the 9th meeting of the 5th Board of Supervisors,which reviewed and approved the Proposal on Temporary Replenishment of Working Capital with Partial Idle Raised Funds.It was agreed that the Company temporarily supplements the working capital with idle raised funds of no more than RMB 2,500 million.The validity period shall not exceed 12 months from the date of approval by the Board of Directors.After expiration,it shall be returned to the special account for raised funds in a timely manner.The Company returned RMB 0.5 billion and RMB 2 billion of the raised funds to the special account for raised funds in advance on October 29,2021 and November 3,2021 respectively.On November 8,2021,the Company held the 24th meeting of the 5th Board of Directors and the 19th meeting of the 5th Board of Supervisors,which reviewed and approved the Proposal on Temporary Replenishment of Working Capital with Partial Idle Raised Funds.It was agreed that the Company temporarily supplements the working capital with idle raised funds of RMB 1,200 million.The validity period of which shall not exceed 12 months from the date of approval by the Board of Directors.After Goertek Inc.Annual Report 2021 39 expiration,it shall be returned to the special account for raised funds in a timely manner.Amount and reasons for the balance of raised funds in the implementation of the project Not applicable Purpose of the raised funds that have not been yet used The unused raised funds shall be deposited in the special account for raised funds.Problems or other situations in the use and disclosure of raised funds None(3)Changes in the projects in which the raised funds were proposed to be invested Applicable Not applicable There was no change in the projects in which the raised funds were proposed to be invested during the reporting period.Sales of major assets and equities 1.Sales of major assets Applicable Not applicable The Company did not sell any major assets during the reporting period.2.Sales of major equity Applicable Not applicable .Analysis of major subsidiaries and associates Applicable Not applicable Major subsidiaries and associates with an impact of more than 10%on the Companys net profit Unit:RMB Name of company Type of company Main business Registered capital Total assets Net asset Operating revenue Operating profit Net profit Weifang Goertek Subsidiary Electronic component 1,405,601,925.00 10,971,185,728.12 3,904,375,154.73 27,282,319,193.58 1,695,784,116.30 1,491,760,091.98 Goertek Inc.Annual Report 2021 40 manufacturing Goertek Technology(Vietnam)Subsidiary Electronic component manufacturing 362,762,400.00 9,395,840,422.98 2,096,244,381.21 20,651,380,536.59 1,285,740,959.38 1,280,038,474.51 Goertek(HongKong)Co.,Limited Subsidiary Electronic component manufacturing 1,542,045.00 6,835,046,824.10 1,075,332,121.44 19,422,367,892.29 836,073,059.54 706,793,733.63 Acquisition and disposal of subsidiaries during the reporting period Applicable Not applicable Name of company Approach on acquisition and disposal of subsidiaries during the reporting period Impact on overall production,operation and performance GOERTEK MICROELECTRONICS KOREA CO.,LTD.Newly established No significant impact Description of major subsidiaries and associates None.Structural Entities Controlled by the Company Applicable Not applicable XI.Outlook for the Future Development of the Company 1.Industry trend and competition In the mobile era,smartphones and related smart hardware products have been the main focus of innovation and the growth drivers of the global technology and consumer electronics industry over the past many years.However,the growth of smartphone industry has slowed down in recent years.According to the statistics of IDC,a well-known consulting agency,the global smartphone shipment in 2022 is expected to reach 1.39 billion units,with year-on-year increase of approximately 3%.It is predicted that the average annual compound growth rate of smartphone shipments around the world will be about 3%from 2022 to 2025.As the core hardware in the mobile era,the slowdown of smartphone market also reflects the transition to the post-mobile era of the global technology and consumer electronics industry.In the post-mobile era,along with the development of new technologies such as semiconductor,5G,micro-display,sensor,intelligent interaction,battery,cloud and edge computing,the new generation of smart hardware products are greatly improved in Goertek Inc.Annual Report 2021 41 functions,and are suitable for more diversified applications.Many new smart hardware devices with great potential have revealed themselves.In particular,the products such as VR/AR,smart wearable devices and smart wireless earphones have maintained a rapid growth in recent years,which attracts extensive attention in the global market.These products are expected to become the driving force for further development of global intelligent hardware market in the post-mobile era.According to the statistics of IDC,the global shipment of VR/AR products is expected to reach 19.10 million units in 2022,with approximately 67.5%YoY increase.The CAGR of global VR shipment from 2022 to 2025 is expected to be about 59.2%.The number of end users keeps growing steadily along with the upgrade of VR hardware.With the development and maturity of VR content and applications such as social networking,games,entertainment and live broadcasting,VR products are expected to boost in the next few years.According to the statistics of IDC,the global shipment of AR products is expected to reach 1.35 million units in 2022,with approximately 309%YoY increase.The CAGR of global AR shipment from 2022 to 2025 is expected to reach approximately 121.4%.With the concept of integration of virtual content and real life and the ability to seamlessly connect to smartphone ecosystem,AR product shows unlimited future possibilities and great market potentials,and is expected to become one of the core smart hardware products in consumer electronics industry in the post-mobile era.Many well-known brand companies and start-ups in the industry continue to explore and tackle the key technological roadblocks in semiconductor chips,optical waveguide,micro displays,new materials and other fields.The break-thru of those technologies are also expected to create a broader path for AR products in the next few years.According to the statistics of CCS Insight,a famous consulting agency,the global shipment of smart wearable products is expected to reach 270 million units in 2022,with approximately 16.4%YoY increase.In the post epidemic era,consumers pay greater attention to sports and health.For billions of people over the globe who may have hypertension,diabetes or other sub-health situations,high precision and reliable health monitoring technologies,especially blood pressure monitoring and non-invasive blood sugar level monitoring technology,are the focus of innovation in smart wearable devices,and have attracted significant amount of investment from many industry leaders.The maturity and application of above technologies are expected to bring dramatic growth for smart wearable products in future.According to the statistics of Futuresource,a well-known consulting agency,the global shipment of smart wireless earphones is expected to keep growing steadily in the next few years,and the CAGR of TWS earphones from 2021 to 2025 is expected to reach about 21.8%.With improved voice interaction function,more product choices,better features and user experience,the TWS product penetration in the global earphone market is expected to increase continuously.The rapid development of emerging intelligent hardware products has also boosted the demand for related precision components such as precision optics and modules,precision acoustic components,MEMS sensors and micro system modules,haptic components and precision structural parts,which creates new business opportunities for the precision components of the Company.Goertek Inc.Annual Report 2021 42 From the perspective of competition among brand companies,the global technology and consumer electronics industry may continue to demonstrate a centralized trend.In the post-mobile era,massive investment in technological innovation and R&D is required for the development of smart hardware products,for which the soft power of the ecosystem,such as developer base,user base,software applications,entertainment content,community loyalty and data monetization,becomes more and more crucial.The leading enterprises with capital,talent,technology and ecosystem advantages are expected to strengthen their competitive advantages,so as to lead technology and product innovation in the industry.From the perspective of supply chain,the middle-end of supply chain is expected to remain relying on developing countries.The electronic manufacturers in China are strengthening their overall competitiveness,and continue to expand their business in other countries.China manufacturers are expected to meet the needs of smart hardware production in the post-mobile era and gain the new opportunities of development.At the same time,we also need to pay attention to the development and changes of international political and economic situation.The changes in science,technology,trade and other policies between countries,as well as major international events and their development,may also have significant impact to the competition and supply chain of global industry.Therefore,we need to pay continuous attention and respond positively.2.Strategy for future development Looking into the future,the Company will actively respond to the strategy of actualizing innovation-driven development and accelerating the development of modern industrial system,and grasp the opportunities of transformation from the mobile era to the post-mobile era by closely following the development of 5G,AI,IoT,cloud computing and other advanced technologies.The Company will continue to strengthen its development in the field of advanced precision components and next generation smart hardware products,constantly consolidate the strategical cooperation with world-class customers,and earnestly fulfill the economic and social responsibilities of the enterprises,thus achieving a long-term,stable and healthy growth of the business,and maximize the enterprise value and the return to shareholders.(1)Actively grasp the new opportunities in the post-mobile era,and further promote the Companys strategy of precision components smart hardware.Further develop the businesses of precision components,such as acoustics,optics,microelectronics and structural parts,and the businesses of smart hardware devices,such as VR/AR,smart wireless earphones,smart wearable and smart home devices.Continue to strengthen the advantages of precision components business in smartphone and other traditional hardware,and actively develop precision components and system hardware business related to new generation of smart hardware products.Utilize the synergy between the Companys component and hardware device business,continue to strengthen the core competence in precision manufacturing and intelligent manufacturing,and provide customers with the first-class vertically integrated product solutions and one-stop R&D and manufacturing services.(2)Continue the key-account strategy,remain customer orientation,and utilize the Companys advantages in customer resource.Goertek Inc.Annual Report 2021 43 Focus on serving leading customers in the global technology and consumer electronics industry,and continue to consolidate long-term strategic cooperation with customers.Closely follow the strategical planning and development of world-class customers,and to create a global system of R&D,manufacturing and sales services accordingly.Continue to satisfy our customers with our business,technology,engineering,operation and delivery services,in order to achieve win-win cooperation and to grow with the world-class customers.(3)Adhere to technological innovation and continue to invest in R&D.Constantly improve the Companys technical competitiveness in acoustics,optics,microelectronics,precision manufacturing,automation,IT technology,software algorithm and so on,and actively expand the layout in emerging technologies such as micro system modules,optical waveguide,nano-imprinting,haptics and etc.,to build the core technical competitiveness of the enterprise.Firmly implement the talent strategy by integrating the outstanding talents in management and technology fields around the world,build and effectively motivate a first-class talent team,thus to provide sufficient talents for future development of the Company.(4)Constantly improve corporate governance and management,and promote the standardized and efficient internal operation.Continuously improve the internal structure,processes and internal management system.Strengthen the awareness of lean operation,improve the level of lean operation and seek benefits from it.Being market-oriented and customer-oriented,continues to push forward internal reform and innovation,and to build core competitiveness upon continuous reform and innovation activities.Create an excellent corporate culture,undertake the core values of customer orientation,personnel growth,integrity and pragmatism,win-win cooperation,and earnestly fulfill the economic and social responsibilities of the enterprise,to become a respected world-class enterprise.3.Business operation during the reporting period and business plan for next year In 2021,the Company grasped the business opportunities of the new generation of smart hardware such as VR,TWS,smart wearable devices,gaming consoles and accessories,implement the precision components smart hardware strategy and utilized the synergy between the components business and system device business.The Company adhered to customer-orientation philosophy and focused on key business accounts,provided customers with high-quality R&D and manufacturing“one-stop”service,and achieved customer satisfaction.The Company also explored new business opportunities in precision optical components and modules,micro-system modules,MEMS sensors,haptic components,etc.From internal operation perspective,the Company continuously improved the level of lean operation,and obtained solid progresses in input/output efficiency,operation cycle,inventory turnover,and capital cost.The Company continued to invest in R&D and technological innovation,increased the quantity of both patent applications and patent approvals,strengthened the capabilities of R&D and talent team,and thus further consolidated the core competitiveness in technology field.The Company also formulated and implemented effective systems and measures to ensure stable operation of business activities and control the risks.With all the measures above,the Company has finally achieved an excellent Goertek Inc.Annual Report 2021 44 business performance in 2021.Looking into the year of 2022,the Company still faces many challenges due to the ongoing global epidemic,the slow recovery of global economy,the high and fluctuated commodity prices,and other complexities and uncertainties that may applied to the external environment.On the bright side,there are also new opportunities in global technology and consumer electronics industry.With the further integration and development of advanced technologies such as 5G,AI and the new generation of smart hardware products,the Company faces new opportunities in both precision components and smart hardware business.The management and all staff of the Company will continue to implement our strategy and to achieve business objectives,so as to return the shareholders and investors with excellent business performance and continuous growth of enterprise value.(1)Maintain strategic focus and grasp development opportunities.The Company will seize the business opportunities of smart hardware products in the post-mobile era by adhering to the precision components smart hardware strategy and utilize the synergy between the components and system device business.With core technological capabilities and advanced precision component solutions,the Company will further enhance the effort in business development of smart hardware products.And through that business development,the Company will create more applications and demand for the precision components.By integrating the core capabilities in precision manufacturing and intelligent manufacturing,the Company will be able to provide first-class one-stop R&D and manufacturing services to global customers.(2)Adhere to the customer-orientation philosophy and key-accounts strategy,and identify and serve strategic customers.Follow the strategy and business plan of core customers,the Company will carry out corresponding business,products and capacity plans,work with the customer in their frameworks and schedules and provide industry-leading R&D and manufacturing services.The Company will continuously build excellent customer service team to satisfy our customers in long term in all aspects of business,technology,engineering,operation,and delivery,to enhance customer loyalty and achieve win-win cooperation with customers.(3)Empower business expansion and create new opportunities.Based on the consolidation of the existing business advantages in precision components and smart hardware products,the Company will further explore new directions and opportunities.By grasping the opportunities in micro-system modules,MEMS sensors,precision optical components and modules,haptic components,precision structured parts,VR,smart home products and other products,the Company will secure the key projects of core customers,and also follow up with new directions and opportunities in automotive electronics,advanced materials,micro-display technology and other fields with future potentials.(4)Improve lean operation and complete successful delivery of key projects.The Company will continue to promote the awareness and improve the level of lean operation,and to support the business objectives with high-quality and efficient operation.The Company will make thorough planning of its resources,ensure the delivery of key projects that closely related to the strategy and the business objectives,and to achieve the goals of the Company.Goertek Inc.Annual Report 2021 45(5)Continue to invest in R&D and technological innovation,strengthen core competitiveness with talent strategy.The Company will continue to invest in R&D and technological innovations centered on future strategic directions,and strengthen the technical capabilities in the fields of acoustics,optics,microelectronics,precision manufacturing,and intelligent manufacturing.The Company will embrace the management and technical talents globally,keep bringing in high-level talents,carry out solid efforts in the selection,cultivation,motivation and retention of talents,and to support the Companys strategic implementation and business development with high-quality talent echelon.(6)Effectively control risks and maintain healthy operation.The Company will continue to maintain a sound business strategy,strengthen risk awareness,pay close attention to changes in the external environment,perform effective control on risk indicators in production operation of the Company,take the initiative to identify and resolve potential risks,and ensure sustainable development of production and operation activities.4.The demand and planning of fund The Company maintains a healthy asset and liability structure,and obtained a good long-term cooperative relationship with banks and other major financial institutions.In 2021,the Company successfully completed the conversion and delisting of the previously issued convertible bonds,and successfully completed the signing of long-term loan agreements between its subsidiary companies and International Finance Corporation,which further improved the Companys balance sheet structure and cost of funds.The Company will continue to improve the management of cash,asset-liability ratio and debt structure,to actively avoid liquidity risks and foreign exchange risks,to control financial derivatives trading activities with strict standards,and thus providing stable and sufficient financial support to the development of the Company.5.Future risks(1)Macroeconomic risks COVID-19 pandemic has not yet stopped globally,and the global economy is still in recovery.Unfavorable factors that affecting investment and consumption still exist,which may hinder global technology and consumer electronics industry from rapid development in the short term.The world political and economic situation remains complex and grim.Trade disputes between major countries and geopolitical events have brought uncertainties to global economy,which may adversely affect the business of enterprises.The slow growth of some smart hardware products such as smartphones,may affect the market demand of precision components,which may bring negative impact to the Companys performance.(2)Operational risks Risks of concentrated customer structure The competitive pattern of global technology and consumer electronics industry,along with the Companys business model and key account strategy,determined a relatively concentrated customer structure.As a result,the business income from a few core Goertek Inc.Annual Report 2021 46 customers accounts for a large proportion of the Companys overall revenue.Although the above customers are global industry leaders who have significant competitive advantages and market position,and have maintained long-term and stable cooperative relations with the Company,under some special circumstances,they may bring fluctuations and risks to the Companys business if their business activities fluctuate.Risks of exchange rate fluctuation The export business accounts for a high proportion of the Companys overall revenue.At the same time,the Company also imports a considerable number of raw materials,equipment and other products from overseas.These import and export businesses are primarily settled in US dollars.Although the Company has adopted appropriate risk hedging tools,the significant fluctuation of RMB/US dollar exchange rate may still bring certain exchange rate risks to the Company.Risks of the leaving of core technical talents The technology and consumer electronics industry is a talent intensive industry.Therefore,the demand for core technical talents is strong,and the competition for talents is very fierce.Core technical talents are the key resources for the Company to continuously improve its core competitiveness and realize long-term development.For this reason,the Company will continue to improve various incentive and restraint mechanisms in order to retain core technical talents.But due to the fierce competition,loss of core technical talents may still occur,which may put the Company at a disadvantage in the competition and affect the business development in some cases.(3)Risks of management In recent years,the Company has successfully expanded its business in each product line.The business scale has been expanded significantly,as well as the variety of products and the size of the staff has grown rapidly.The growing business brings higher requirements to the Company in overall operation and management ability.The Company implements the strategic plan of developing core customer business and exploring new opportunities,which also requires the Companys management to maintain excellent abilities of judgment,execution and management.If the Companys management fails to match the business growth,or fails to be improved to meet the needs of the Companys development,it may affect the execution of strategic planning and the delivery of business objectives,thus bringing management risks to the Company.Reception,research,communication,interview and other activities during the reporting period Applicable Not applicable Reception time Reception place Reception mode Type of reception object Reception object Main content of discussion and information Index of basic information of survey Goertek Inc.Annual Report 2021 47 provided March 30,2021 The Company Other Institution Investors participating in the Companys performance presentation meeting of 2020 The Companys operation and business development Refer to the record of investor relations activities on March 30,2021 published on April 22,2021 The Company Communication over phone Institution E Fund,Bosera Fund,Dacheng Fund,Hua An Fund and other funds The Companys operation and business development Refer to the record of investor relations activities on April 22,2021 published on July 22,2021 The Company Communication over phone Institution SOOCHOW Fund,CR Yuanta Fund,BOC Fund,YINHUA Fund and other funds The Companys operation and business development Refer to the record of investor relations activities on July 22,2021 published on August 27,2021 The Company Communication over phone Institution Fullgoal Fund,Xingquan Fund,99 Fund,CCB Fund and other funds The Companys operation and business development Refer to the record of investor relations activities on August 27,2021 published on October 27,2021 The Company Communication over phone Institution E Fund,Hua An Fund,GF Securities,Harvest Fund and other funds The Companys operation and business development C,record of investor relations activities on October 27,2021 published on Goertek Inc.Annual Report 2021 48 Section IV Corporate Governance.Corporate Governance in Practice During the reporting period,the Company continuously improved the corporate governance structure,the internal management and control system,and continued to carry out corporate governance activities in strict accordance with the requirements of relevant laws,regulations and normative documents such as Company Law,Securities Law,Corporate Governance of Listed Companies,Rules Governing the Listing of Shares on Shenzhen Stock Exchange as well as with relevant documents of China Securities Regulatory Commission and the relevant instructions of Shandong Securities Regulatory Bureau,so as to further standardize the Companys operation and improve the level of corporate governance.By the end of the reporting period,the actual practice of corporate governance met the relevant requirements of the above laws,administrative regulations,departmental rules and normative documents on the governance of listed companies,and no documents concerning administrative supervision measures taken by the supervised departments was received.By the end of the reporting period,the details of actual practice of corporate governance are as follows:1.Shareholders and shareholders meetings:The Company has convened and held shareholders meetings in strict accordance with the Rules for General Meeting of Shareholders of Listed Companies and the Companys Rules of Procedure of Shareholders Meetings,so as to ensure that all shareholders,especially minority shareholders,enjoy equal status and fully exercise their rights;In addition,lawyers were engaged to witness the legitimacy of the convening,holding and voting procedures of each general meeting of shareholders.2.The Company and controlling shareholders:The Company,with independent business and operation autonomy,is independent of the controlling shareholders in business,personnel,assets,organisations and finance.The Board of Directors,Board of Supervisors and internal institutions of the Company operate independently.The controlling shareholders exercise their rights through shareholders meeting,and there was no direct or indirect interference with the Companys operations and decision-making beyond the general meeting of shareholders.3.Directors and the Board of Directors:The Company elects directors in strict accordance with the selection and appointment procedures stipulated in the Articles of Association.There are three independent directors in the Board,the number of directors and the composition of the Board of Directors meet the requirements of laws and regulations and the Articles of Association.All directors can carry out their work in accordance with Rules of Procedure of the Board of Directors and Working System for Independent Directors,they attended all the Board of Directors meetings,and all the related trainings as required.Goertek Inc.Annual Report 2021 49 4.Supervisors and the Board of Supervisors:The election of supervisors and the composition of the Board of Supervisors were in strict accordance with relevant provisions of Company Law and Articles of Association.The Companys supervisors strictly followed the Rules of Procedure of the Board of Supervisors,All supervisors scrupulously attended the sessions,seriously fulfilled their duties diligently,and supervised and issued opinions for major issues,related-party transactions,and financial status.5.Performance appraisals and incentives:The Company has gradually improving its fair and transparent performance evaluation standards and incentive a restraint mechanisms for directors,supervisors and senior management.The appointment of Companys senior management is open and transparent,and in line with the provisions of laws and regulations.6.Stakeholders:The Company fully respects and safeguards the legitimate rights and interests of stakeholders,actively communicates and coordinates with stakeholders,to r balance the interests of the society,shareholders,the Company,employees and other parties,and jointly promotes the Companys development in a sustainable and steady manner.7.Information disclosure and transparency:The Company duly performed the disclosure obligations in accordance with the provisions of Rules Governing the Listing of Shares on Shenzhen Stock Exchange,Articles of Association and Investor Relations Management Rules,and discloses information as per the law,so as to ensure that the information disclosure is true,timely,accurate and complete.All shareholders were given equal access to the information.The Company has gradually revised and improved the Insider Information Management Rules,further improved the insider information management,strengthened the confidentiality of insider information,maintained the fair principle of information disclosure and protected the legitimate rights and interests of investors.The Company has appointed the secretary of the Board of Directors as the head of investor relations management of the Company,responsible for the Companys information disclosure and investor relations management.The Company has designated Securities Times,China Securities Journal,Shanghai Securities News,Securities Daily and to disclose Companys information in a faithful,accurate and timely manner,strictly in accordance with relevant laws and regulations,so that all shareholders have a fair chance to get information.Whether there is any significant difference between actual situation of corporate governance and
2021-08-16
331页
5星级
Hangzhou Hikvision Digital Technology Co.,Ltd.2021 Annual Report April 16th 2022 Hikvision 2021 Ann.
2021-08-16
403页
5星级
Luxshare Precision Industry Co.,Ltd.Annual Report 2021 1 Luxshare Precision Industry Co.,Ltd.Annual Report 2021 2022-033 April 2022 This document is a translated version of the Chinese version Annual Report 2021 of Luxshare Precision Industry Co.,Ltd.(“立讯精密 2021年年度报告”),and the published Annual Report 2021 of Luxshare Precision Industry Co.,Ltd.in the Chinese version shall prevail.The complete published Chinese Annual Report 2021 of Luxshare Precision Industry Co.,Ltd.may be obtained at .Luxshare Precision Industry Co.,Ltd.Annual Report 2021 2 Section I Important Note,Table of Contents and Definitions The Board of Directors,the Board of Supervisors,directors,supervisors and executives of the Company hereby warrant that the information contained in this Annual Report is true,accurate and complete and this Annual Report is free from any misrepresentation,misleading statement or material omission,and agree to assume joint and several liability for this Annual Report.WANG Laichun,Principal of the Company,CFO WU Tiansong and Chief Accountant CHEN Huiyong hereby represent that the financial statements contained in this Annual Report are true,accurate and complete.All directors of the Company attended the meeting of the Board of Directors reviewing this Report.The relevant risks facing the Company are set out in“Section III Managements Discussion and Analysis-XI.Prospects for future development of the Company”.According to the profit distribution proposal approved by the Board of Directors,the Company will distribute a cash dividend of RMB1.10(inclusive of tax)per 10 shares to all shareholders on the basis of 7,084,301,477 shares,and will not distribute any bonus shares or transfer any capital reserve to the share capital for the reporting period.Luxshare Precision Industry Co.,Ltd.Annual Report 2021 3 Table of Contents Section I Important Note,Table of Contents and Definitions.2 Section II Company Profile and Financial Highlights.7 Section III Managements Discussion and Analysis.11 Section IV Corporate Governance.51 Section V Environment and Social Responsibilities.75 Section VI Significant Events.85 Section VII Changes in shares and shareholders.105 Section VIII Preference Shares.115 Section IX Bonds.116 Section X Financial Report.129 Luxshare Precision Industry Co.,Ltd.Annual Report 2021 4 List of References 1.Financial statements signed and chopped by the principal,CFO and Chief Accountant of the Company;2.Original of the auditors report stamped with the seal of the accounting firm and signed and chopped by the certified public accountants;3.Originals of all documents of the Company publicly disclosed on the website for information disclosure designated by the China Securities Regulatory Commission during the reporting period and related announcements;and 4.Other references.Luxshare Precision Industry Co.,Ltd.Annual Report 2021 5 Definitions Terms Definition We/us,the Company or Luxshare-ICT means Luxshare Precision Industry Co.,Ltd.Luxshare Limited means Luxshare Limited,founder and controlling shareholder of Luxshare-ICT.ICT-Lanto means ICT-Lanto Limited.Luxshare Precision means Luxshare Precision Limited.Luxshare Jiangsu means Luxshare Precision Industry(Jiangsu)Co.,Ltd.Luxshare Shanxi means Shanxi Luxshare Precision Industry Co.,Ltd.Luxshare Dongguan means Dongguan Luxshare Precision Industry Co.,Ltd.Luxshare Suzhou means Luxshare Precision Industry(Suzhou)Co.,Ltd.Luxshare Chuzhou means Luxshare Precision Industry(Chuzhou)Co.,Ltd.Luxshare Kunshan means Kunshan Luxshare Precision Industry Co.,Ltd.Luxshare Baoding means Luxshare Precision Industry(Baoding)Co.,Ltd.Luxshare Xuancheng means Xuancheng Luxshare Precision Industry Co.,Ltd.Luxshare Yancheng means Yancheng Luxshare Precision Industry Co.,Ltd.Luxshare Enshi means Luxshare Precision Industry(Enshi)Co.,Ltd.Luxshare Vietnam means Luxshare-ICT(Vietnam)Limited.Luxshare Van Trung means Luxshare-ICT(Van Trung)Company Limited.Luxshare Nghe An means Luxshare-ICT(Nghe An)Limited.Luxshare Electroacoustic means Shenzhen Luxshare Electroacoustic Technology Co.,Ltd.Luxshare Smart Manufacturing means Luxshare Smart Manufacturing(Zhejiang)Co.,Ltd.Luxshare-Merry means Guangdong Luxshare-Merry Electronics Co.,Ltd.ASAP Jiangxi means ASAP Technology(Jiangxi)Co.,Ltd.Xiexun Jiangxi means Xiexun Electronic(Jian)Co.,Ltd.Smart Manufacturing Jiangxi means Jiangxi Luxshare Smart Manufacturing Co.,Ltd.Lanto Bozhou means Bozhou Lanto Electronic Limited.Xuntao Bozhou means Bozhou Xuntao Electronic Limited.Meite Suzhou means Meite Technology(Suzhou)Co.,Ltd.Huzhou Jiuding means Huzhou Jiuding Electronic Co.,Ltd.Lanto Kunshan means Lanto Electronic Limited.Kunshan RF means Kunshan Luxshare Radio Frequency Technology Co.,Ltd.Liding Dongguan means Liding Electronic Technology(Dongguan)Co.,Ltd.Rikai Yancheng means Rikai Precision Technology(Yancheng)Co.,Ltd.Xiexun Wanan means Wanan Xiexun Electronic Co.,Ltd.Smart Manufacturing Changshu means Changshu Luxshare Smart Manufacturing Co.,Ltd.Fujian JK means Fujian JK Wiring Systems Co.,Ltd.Xingning Electronics means Xingning Luxshare Electronics Co.,Ltd.Luxsan Kunshan means Luxsan Technology(Kunshan)Co.,Ltd.BCS Suzhou means BCS Automotive Interface Solutions(Suzhou)Co.,Ltd.SpeedTech means SpeedTech Corp.Luxshare Precision Industry Co.,Ltd.Annual Report 2021 6 Luxshare Automation Jiangsu means Luxshare Automation(Jiangsu)Co.,Ltd.Dongguan Luxshare Technology means Dongguan Luxshare Technology Co.,Ltd.Luxshare Electronic Kunshan means Luxshare Electronic Technology(Kunshan)Co.,Ltd.Luxshare Electronic Enshi means Luxshare Electronic Technology(Enshi)Co.,Ltd.AOA means Articles of Association of Luxshare Precision Industry Co.,Ltd.Luxshare Precision Industry Co.,Ltd.Annual Report 2021 7 Section II Company Profile and Financial Highlights I.Company profile Stock short name Luxshare-ICT Stock code 002475 Stock exchange Shenzhen Stock Exchange Chinese name 立讯精密工业股份有限公司 Chinese short name 立讯精密 English name(if any)Luxshare Precision Industry Co.,Ltd.English short name(if any)Luxshare-ICT Legal representative WANG Laichun Registered address 2/F,Block A,Sanyang New Industrial Zone,West Haoyi,Shajing Street,Baoan District,Shenzhen Postal code of registered address 518104 History of changes in registered address N/A Office address No.313 Beihuan Road,Qingxi Town,Dongguan,Guangdong Postal code of office address 523642 Company website www.luxshare- Email Publicluxshare- II.Contact person and contact information Board Secretary Securities Affairs Representative Name HUANG Dawei LI Ruihao Address No.313 Beihuan Road,Qingxi Town,Dongguan,Guangdong No.313 Beihuan Road,Qingxi Town,Dongguan,Guangdong Telephone 0769-87892475 0769-87892475 Fax 0769-87732475 0769-87732475 E-mail David.Huangluxshare- Ray.Liluxshare- III.Media for information disclosure and place for keeping annual report Website of the stock exchange disclosing the Companys annual report Securities Times Media and website disclosing the Companys annual report Place for keeping annual report Securities Affairs Office of the Company IV.Changes in registration particulars Change in organization code Unified social credit code:91440300760482233Q Changes in main business since the listing No Luxshare Precision Industry Co.,Ltd.Annual Report 2021 8 of the Company(if any)Changes in controlling shareholder(if any)No V.Other related information Accounting firm engaged by the Company:Name of accounting firm BDO China Shu Lun Pan Certified Public Accountants LLP Office address of accounting firm Rooms 1,2&3,4/F,No.61 East Nanjing Road,Huangpu District,Shanghai Name of accountants signing this report LI Jing and WEI Gang Sponsor engaged by the Company that performs the duties of ongoing supervision over the Company during the reporting period:Applicable N/A Name of sponsor Office address of sponsor Names of sponsor representatives Period of ongoing supervision CITIC Securities Co.,Ltd.19/F,North Tower,Excellence Times Plaza(Phase II),No.8 3rd Central Road,Futian District,Shenzhen HE Feng and LIU Guanzhong From December 2,2020 to December 31,2021 Financial advisor engaged by the Company that performs the duties of ongoing supervision over the Company during the reporting period Applicable N/A VI.Key accounting data and financial indicators Did the Company need to retrospectively adjust or re-state any accounting data of prior accounting years?Yes No 2021 2020 Y/Y%Change 2019 Operating revenue(RMB)153,946,097,790.40 92,501,259,211.54 66.43b,516,314,588.42 Net profit attributable to shareholders of the listed company(RMB)7,070,520,386.57 7,225,462,752.58-2.14%4,713,820,644.90 Net profit attributable to shareholders of the listed company after deduction of extraordinary gain or loss(RMB)6,015,597,220.13 6,088,901,850.86-1.20%4,435,974,109.41 Net cash flows from operating activities(RMB)7,284,766,917.00 6,873,211,486.05 5.99%7,465,988,174.33 Basic earnings per share(RMB/share)1.01 1.03-1.94%0.68 Diluted earnings per share(RMB/share)0.99 1.01-1.98%0.67 Weighted average return on net assets 22.350.29crease by 7.94 percentage points 26.55cember 31,2021 December 31,2020 Y/Y%Change December 31,2019 Total assets(RMB)120,572,098,167.88 70,012,753,551.75 72.21I,377,910,671.23 Net assets attributable to shareholders of the listed company(RMB)35,288,554,748.72 28,101,816,234.56 25.57 ,296,618,968.52 Whether the lower of the net profit before and after deduction of extraordinary gain or loss in the past three accounting years has Luxshare Precision Industry Co.,Ltd.Annual Report 2021 9 been negative and the most recent annual auditors report indicates that the Companys ability to continue as a going concern is uncertain?Yes No Whether the lower of the net profit before and after deduction of extraordinary gain or loss is negative?Yes No VII.Differences in accounting data arising from adoption of Chinese and foreign accounting standards concurrently 1.Differences in net profit and net assets disclosed in the financial statements prepared according to the international accounting standards and the Chinese accounting standards Applicable N/A There was no difference in net profit and net assets disclosed in the financial statements for the reporting period prepared according to the international accounting standards and the Chinese accounting standards.2.Differences in net profit and net assets disclosed in the financial statements prepared according to the foreign accounting standards and the Chinese accounting standards Applicable N/A There was no difference in net profit and net assets disclosed in the financial statements for the reporting period prepared according to the foreign accounting standards and the Chinese accounting standards.VIII.Main quarterly financial indicators In RMB First quarter Second quarter Third quarter Fourth quarter Operating revenue 21,019,011,536.13 27,127,972,915.37 32,865,598,826.82 72,933,514,512.08 Net profit attributable to shareholders of the listed company 1,349,512,048.43 1,739,717,980.42 1,600,431,354.99 2,380,859,002.73 Net profit attributable to shareholders of the listed company after deduction of extraordinary gain or loss 1,167,112,633.01 1,355,153,041.64 1,471,991,374.50 2,021,340,170.98 Net cash flows from operating activities 663,348,870.24 1,524,553,521.56 5,419,705,921.15-322,841,395.95 Whether theres any significant difference between the financial indicators set forth above or aggregate amounts thereof and the corresponding financial indicators contained in any quarterly or semi-annual report already disclosed?Yes No IX.Items and amounts of extraordinary gains or losses Applicable N/A In RMB Luxshare Precision Industry Co.,Ltd.Annual Report 2021 10 Item 2021 2020 2019 Remark Gain or loss on disposal of non-current assets(including allowance for impairment of assets that has been written off)-57,241,855.39-35,503,173.93-110,085,527.48 Government grants recognized in profit or loss(excluding government grants that are closely related to the business of the Company and are provided in fixed amount or quantity continuously according to the applicable polices of the country)853,542,165.37 450,749,695.89 232,311,428.35 Interest in the fair value of the acquirees identifiable net assets at the date of acquisition in excess of the investment cost of the relevant subsidiaries,associates and joint ventures 16,559,223.33 Difference between the original carrying amount of long-term investment and fair value of newly consolidated subsidiaries upon change from the equity method to the cost method Gain or loss on assets under entrusted investment or management 95,298,693.93 113,778,335.78 89,722,710.32 Gain or loss on changes in fair value of financial assets held for trading and financial liabilities held for trading,and gain on disposal of financial assets held for trading,financial liabilities held for trading and available-for-sale financial assets,except for effective hedges held in the ordinary course of business 602,993,325.33 837,100,369.42 131,736,631.37 Other non-operating income and expenses-12,600,634.71 30,554,498.37-999,739.32 Other gain or loss within the meaning of extraordinary gain or loss-170,939,666.46 0.00 0.00 Mainly gain on derecognition of financial assets at amortized cost Less:Effect of income tax 211,043,425.20 214,489,873.68 55,533,801.99 Effect of minority interest(after tax)61,644,659.76 45,628,950.13 9,305,165.76 Total 1,054,923,166.44 1,136,560,901.72 277,846,535.49-Other items of gain or loss within the meaning of extraordinary gains or losses:Applicable N/A We do not have any other item of gain or loss within the meaning of extraordinary gains or losses.If the Company classifies any item of extraordinary gain or loss defined by or listed in the Explanatory Announcement No.1 on Information Disclosure for Companies Publicly Offering Securities-Extraordinary Gain or Loss as recurrent profit or loss,please explain the reason.Applicable N/A We have not classified any item of extraordinary gain or loss defined by or listed in the Explanatory Announcement No.1 on Information Disclosure for Companies Publicly Offering Securities-Extraordinary Gain or Loss as recurrent profit or loss in the reporting period.Luxshare Precision Industry Co.,Ltd.Annual Report 2021 11 Section III Managements Discussion and Analysis I.Situations of our industry in the reporting period During the reporting period,we are engaged in the research and development(R&D),manufacturing and sale of products in the fields of consumer electronics,communication,automotive electronics and healthcare,among others.Our products and businesses are diversified and vertically integrated,and cover components,modules and system assembly.(I)Consumer electronics In the industry of consumer electronics,the development and innovation of applied technologies and diversified growth of consumer demands jointly promote the upgrading of consumer electronic products and related product lines,and continued growth of the consumer electronics market size.According to Statista,the global consumer electronics market size grew at a compound annual growth rate(CAGR)of 2.90%from 2015 to 2020,and is expected to reach USD1,098 billion in 2025.The advancement of 5G and artificial intelligence(AI)technologies will promote the development of different kinds of smart mobile,smart wearable,AR/VR/MR,smart home,smart display and other IoT devices.The acceleration of upgrading of terminal products will drive the increase in the integration level of electronic components contained therein and improvement of technological level.The one-stop solution providers that are able to provide the brand customers with better production processes and higher integration level and require the input of less resources will get more orders for related components and finished products.Accordingly,the Companys business expansion and industrial operations are expected to fully benefit.(II)Communication and data center In the field of communication and data center,the series of technical innovation and emerging of new technologies promote the evolution from traditional IT infrastructure to data infrastructure,and along with the continuous development of the Internet,e-commerce,video,cloud computing and other Internet vertical industries have been rapidly springing up,and the global data center market has come into multiple periods of rapid growth.According to IDC,the shipments and sales of the global server market reached 13,539,000 units and USD99.22 billion in 2021,representing an increase of 6.9%and 6.4%respectively.The global Internet data center market size grew at a CAGR of more than 10%from 2012 to 2021.The ever increasing demands for new data centers by IT,telecommunication,banking,financial,service and investment(BFSI),e-government and smart city projects,and wide application of AI and IoT technologies in the future will further promote growth of the communication and data center market size.According to IDC,the global server market size is expected to reach USD126.5 billion in 2027.Global server shipments from 2016 to 2021 Global server shipments(10,000 units)Global server sales from 2016 to 2021 Global server sales(USD100 million)Luxshare Precision Industry Co.,Ltd.Annual Report 2021 12(III)Automotive electronics Smart electric vehicles represent an opportunity of the century for the automotive industry of China.China has the largest automotive market with the highest level of openness and inclusion and most consumers in the world,utilizes the most advanced smart vehicle technologies and attracts all major carmakers in the world.China ranks among the first in the world in terms of number of smart vehicle brands and models.At present,Chinas smart vehicle market is transiting from the policy-driven period to the period of market-driven high growth in an all-round way.In 2021,the sales volume of electric vehicles reached 3.52 million units in China,representing an increase of 160%as compared with 2020.China has ranked first in the world in terms of sales volume of electric vehicles for seven consecutive years,and the sales volume of electric vehicles in China is expected to further increase by 47%to about 5 million units in 2022.The penetration of electric vehicles increased from 7.2%at the beginning of 2021 to 19%at the end of 2021,representing an exponential growth as compared with 10 years ago,and showing great potentialities of growth.In addition to“electrification”,“intelligentization”and“interconnection”are also developing vigorously.Statistics show that about 20%new passenger cars are equipped with driver assistance system,the penetration of L2 driver assistance system into the electric vehicle market reaches 38%,electric vehicles has basically realized full coverage of Internet of Vehicles(IoV)functions,and some major carmakers have begun to sell new vehicles powered by V2X technology.Chinese consumers are more willing to accept smart electric vehicles,and medium-and high-end smart electric vehicles occupy increasingly greater shares on the business and consumer markets.Traditional smart mobile phone players begin to enter the smart electric vehicle sector;on the other hand,electric vehicle manufacturers begin to produce smart mobile phones.Along with the popularization of“intelligentization”,vehicles will become large-sized mobile smart and computing terminals.In the next stage,carmakers need to build ecosystems to break through the tight encirclement,connect vehicles with consumer electronics,create more consumption scenarios,and realize full coverage of“human-vehicle-home”scenarios.(IV)Our position in the industry During the reporting period,we ranked first on the 34th list of top 100 electronic component manufacturers of China(2021)published by the China Electronic Components Association,and were awarded the honorable titles of“Top 500 Private Enterprises Of China”,“Top 500 Private Manufacturers Of China”,and“2021 Model of Chinas Digital Economic Industry”,among others.In 2021,the penetration of electric vehicles began to increase rapidly in China and the transition to clean transportation is accelerating.Penetration of electric vehicles sales volume(k)Source:China Association of Automobile Manufacturers Luxshare Precision Industry Co.,Ltd.Annual Report 2021 13 II.Our main business in the reporting period We concentrate our efforts on the specialization in and optimization of underlying technologies,made in-depth deployments in acoustic,visual,power(wired/wireless),wireless communication and other fields to meet future demands.Our products have been widely applied in the fields of consumer electronics,communication and automotive.By comprehensively mastering the technologies relating to various components and modules,and super-precision manufacturing technologies accumulated over the years,we give full play to our advantages in vertical integration,and continuously restructure the supply chain in the field of system assembly,to create more value for our customers,thereby gaining customers support and confidence.In launching a new product,we focus on the product quality,yield rate and optimization of production costs on the basis of innovative production technology,intelligent automation and digital platform,thereby enabling us to make continuous and substantial breakthroughs in new markets,new customers and new products.In the implementation of related controls,there is no doubt that the automation technologies lay the strong foundation for our core competencies.Therefore,we attach great importance to the continuous exploration of automatic and smart manufacturing technologies.Our core teams spirit of in-depth exploration of processes and determination to accomplish all tasks assigned guarantee the success in the development and design of automation technologies.According to the requirements for appearance,size,functions and reliability of products,we disassemble and study all manufacturing processes,and make efforts to solve process challenges with reference to our past experience and advanced technologies available on the market.With the goal of zero loss and zero defect,we strive to realize the reasonableness,standardization and automation of designs in terms of yield rate,efficiency,cost,etc.After the completion of process study,we realize process design through automation,including automation of work stations,handling and positioning,testing,warehousing,logistics and production processes.Standardization is the prerequisite for automation,because standardized products cannot be made without the use of standardized equipment and processes.With respect to the products that have a low demand and change frequently,we mainly use man-machine flexible automation technologies.In the design of automatic equipment,we make plans for MES system,IoT access and key work station information flows needing to be controlled simultaneously,and build a model of digital factory on that basis.Thereafter,we convert all problems and phenomenon into data,and then process and judge the data systematically,and present the same in the form of visual reports,to realize whole-process traceability of products,materials,people,equipment,fixtures,process technology and quality information,among others,implement close-end control,and ensure the effective realization of automation.On that basis,we introduce digital models,use modeling approaches to connect production with data flows,and through the use of big data,cloud computing,AI,digital twin and other technologies,deeply explore the information and trends behind data,seek benefits from data,and finally realize intelligentization,and self-judgment,self decision-making,self-adjustment and self-execution by machines,so that the machines are able to solve tangible problems and predict intangible problems on their own,thereby achieving the long-term goal of smart manufacturing.Luxshare Precision Industry Co.,Ltd.Annual Report 2021 14 1.精益化 工艺的深度拆解和前瞻研究 设计的合理化、标准化和简单化 产线的精益布局规划 3.数字化 IOT、制造数字化集成 可视化控制中心和管理 运营流程自动化贯通 1.Leanness In-depth disassembly of and forward-looking research on processes Reasonableness,standardization and simplification of design Lean layout of production lines 3.Digitalization Digital integration of IoT and manufacturing Visual control center and management Automation of the whole operation process 2.自动化 搬运-加工-检测-物流-仓储的全流程自动化 柔性自动化系统分析 4.智能化 机器自感知、自学习、自决策、自执行 解决有形的问题和预测无形的问题 数据驱动管理决策 2.Automation Whole-process automation of handling,processing,testing,logistics and warehousing Analysis of flexible automation system 4.Intelligentization Self-sensing,self-learning,self decision-making and self-execution of machines Solve tangible problems and predict intangible problems Data-driven management decision-making 物理域 精益生产布局 精益工艺研究 工艺数字化 流程数字化 Physical field Lean production layout Lean process study Technological digitalization Process digitalization 精益化 数字化 智能制造 信息域 制成自动化 Leanness Digitalization Smart manufacturing Information field Manufacturing automation 自动化 智能化 预测性分析 物流自动化 高级决策支持 Automation Intelligentization Predictive analysis Logistics automation Advanced decision-making support(I)Consumer electronics business Luxshare Precision Industry Co.,Ltd.Annual Report 2021 15 From the perspective of applications,consumer electronics,communication and automotive are our main product and business segments.In the field of consumer electronics,we continue our product mix in prior years,follow the trends of metaverse,AIoT smart life and high-speed transmission,and enrich our product offerings in a steady and orderly manner.Our product offerings include acoustic products(such as TWS earphone),smart home products(such as 5G CPE and Wi-Fi 6 portable router),smart terminal products(such as wearable watch and wristband,AR/VR/MR),computer accessories(such as Dock),intelligent stylus,video conference equipment and wired and wireless high-watt rapid charging accessories for various PC/NB/mobile phone brands for retail sale.We have been engaged in the field of consumer electronics for years,while satisfying the customers demands,made continuous breakthroughs to build the strong capability to provide customers with comprehensive solutions.We have the advantages in intelligentization,digitalization and globalization on the vast consumer electronics market.We make dynamitic adjustments continuously,and clearly understand the existing market and the incremental market.With respect to the existing market,such as the business relating to PC and smart mobile phones,we have mature technical capabilities,capital equipment and customer resources.As the most trusted partner of our customers,we are not only able to,in conjunction with our premium customers,achieve self-worth in the field of premium products and the existing products we are good at,but also in the upgrading of products and technologies,leverage our mature resources,grasp the opportunities to enter the market of higher-level products at optimal cost,and maximize the rewards.With respect to the incremental market,such as health&wellness,metaverse and other applications,we believe that the premium customers on the existing market will continue to take the lead.By leveraging our good reputation and solid partnership with our customers built by us over the years,our management will continue to keep abreast of the market,analyze and accurately grasp the situations of technology development of the industry from the perspectives of consumers,brand customers and supply chain,continuously improve product attractions required by the incremental market,and make all-round deployments from components,modules to system.Though we face many external challenges,such as disengagement between China and the United States and geopolitics,we have high hopes for and are confident about the future development of our consumer electronics business.In the past ten years,through continuous upper-level industry guidance,development of designated customers,improvement of the quality and development of high-quality supply chain,and with the long-term and strong support and investments in different areas,China has gradually built the most complete and systemic consumer electronics supply chain in the world,and takes the lead in in-depth deployment,talent pool,policy support and other issues in respect of supply chain on all market segments.In view of our strong head start advantage and the competitive situation on the consumer electronics market,we keep improving and enhancing all kinds of capabilities,and on the basis of our global deployment completed over the years and our stable strategic focus,develop incremental businesses at home and abroad according to the development requirements of customers.The present and foreseeable situations show that the strong will be always strong.Our strategic goals conform to those of our customers.Luxshare Precision Industry Co.,Ltd.Annual Report 2021 16 智能音箱 快充适配器 VR眼镜 5G路由器 智能穿戴 机壳天线 Smart speaker Rapid charging adapter VR eyeglasses 5G router Smart wearable Casing antenan 电子烟 无线充模组 声学模组 震动马达 5G模组 天线 Electronic cigarette Wireless charging module Acoustic module Vibration motor 5G module Antenna 射频 线材线缆 机构件 连接器 核心工艺 智能制造 Radio frequency Wire and cable Mechanical components Connector Core technology Smart manufacturing(II)Communication business Driven by 5G,big data and edge computing technologies,the ICT industry puts forward higher requirements for data transmission,hardware equipment shows a tendency towards gradual opening of interfaces and high integration of functions,and interconnect components show a tendency towards high speed,high density,high reliability and low loss.On the basis of the application scenarios of our products in the field of data and communication,and centering on the application and development trend of data center,we have gradually enriched our product offerings,and on the basis of electric connection(high-speed electric connectors and cables),optical connection(AOC and optical modules),radio frequency(RF)communication(base station antennas,base station filters,tower mounted amplifiers,duplexer,combiners,RRUs,AAUs and small base stations),and other existing products,have developed thermal management(heat pipes,VC,axial fans,cold plates and water cooling radiators),industrial connection and other products,further increasing our product coverage.In 2022,we will develop server and other complete unit assembly business,center on the“complete unit core components”double development strategy,and strive to grow into a comprehensive solution provider offering all kinds of products in the field of data and communication.Luxshare Precision Industry Co.,Ltd.Annual Report 2021 17 电连接产品线 服务器 交换机 整机组装产品线 Electric connection products Server Switch Complete unit assemblies 光连接产品线 综合布线 基础设施 热管理产品线 Optical connection products Cabling system Infrastructure Thermal management products 汇聚交换机 接入交换机 数据中心机架群 机架内服务器群 Aggregation switch Access switch Data center rack cluster Server cluster inside rack We have focused on the development of core technological capabilities and basic R&D capabilities through research of simulation technology,new materials and new processes and application of testing technologies,and provide strong technical support for communication interconnect products in different forms.With respect to system-level products,through disassembly of modules and components contained in the products,and single-point manufacturing processes and technologies,we are able to realize highly or wholly automated,efficient and high-quality production and manufacturing of large and small batches of products.基础设施 服务器 综合布线 浸没机柜 Infrastructure Server Cabling system Immersion cabinet 精密模组 高速连接器 高速线缆 线缆模组 Precision module High-speed connector High-speed cable Cable module 滤波器 热管理 核心零部件 高速裸线开发 Luxshare Precision Industry Co.,Ltd.Annual Report 2021 18 Filter Thermal management Core components Development of high-speed bare wire 精密冲压和注塑 射频 散热部件 Precision stamping and injection molding Radio frequency Radiator 基础制造能力 压铸 机加 钣金 Basic manufacturing capability Die casting Tooling Sheet metal 冲压 注塑 表面处理 基础服务平台 Stamping Injection molding Surface treatment Basic service platform 本地工程服务中心 全球化采购 自动化设备开发 零件中心 Local engineering service center Global purchasing Development of automatic equipment Component center Due to the effect of disengagement between China and the United States and geopolitics,exports of the domestic communication and data center industries face certain shocks and challenges.With respect to the further exploitation of opportunities of external circulation,we always regard the technical capabilities as the foundation for business development,and driven by the technologies and with the support of our strong precision manufacturing capability,actively exploit the overseas market.In addition,we will firmly grasp the opportunities provided by the“Eastern Data,Western Computing”program and replacement with home-made goods,focus on internal circulation,and actively seek new opportunities in the domestic communication industry.We believe that we will get more and better business opportunities than traditional communication product manufacturers,as we will apply our rich experience accumulated in the consumer electronics precision manufacturing industry to the new communication industry.(III)Automotive business In view of the development of electric vehicles,we have made long-term plans for automotive business,and included wire harness,connection system,new energy,smart interconnect,smart cabin and smart manufacturing in our product offerings.线束 整车线束 特种线束 充电枪 Leverage the superior resources of the Group,enrich product offerings,and create driving force for the growth of automotive tier-1 business Luxshare Precision Industry Co.,Ltd.Annual Report 2021 19 Wire harness Vehicle wire harness Special wire harness Charging gun 连接器 低压连接器 高压连接器 高速连接器 Connector Low-voltage connector High-voltage connector High-speed connector 新能源 逆变器 智能网联 路测单元 New energy Inverter Smart interconnect Road-side unit 车载通讯单元 智能天线 智能驾舱 多媒体仪表 Telematics control unit Smart antenna Smart cabin Multi-media instrument panel 信息娱乐系统 域控制器 无线充电 电源网络隔离器 Infotainment system Domain controller Wireless charging Power and network isolator 智能制造 嵌件注塑 Smart manufacturing Insert molding Wire harness is an essential system-level component for a vehicle,is flexible,important and widely used,covers all configurations of a vehicle,and provides reliable power supply,signals and data to all electric appliances,so they serve as“arteries”of the“neural network”of a vehicle.According to Markets and Markets,the global automotive wire harness market size was expected to reach USD47 billion in 2021.Through vertical integration,we have grown into a comprehensive supplier specialized in the design,validation and manufacturing of low-voltage and high-voltage vehicle wire harnesses,special wire harnesses,charging guns and other products.We stick to the customer oriented service concept,and satisfy the customers demands with our efficient customized design and development,production facilities located in the neighborhood of our customers,and our strong precision manufacturing capabilities accumulated over the years.In additional to traditional carmakers,we have developed some major emerging customers.Automotive is one of the largest markets for connectors.Automotive connectors account for 22%in the global connector industry,where smart electric vehicles are the largest growth driver.According to Bishop&Associates,the global automotive connector market size was USD15.210 billion in 2019,and is expected to reach USD19.452 billion in 2025.We have designed and developed all kinds of connectors required on vehicles,including low-voltage connectors,high-voltage connectors,high-speed connectors and customized connection systems,among others.We exploit the existing customer market through our wire harness business,and enhance the synergistic effect with our existing consumer electronic and business-type products,to promote growth of business.Our proprietary gigabit Ethernet connector adopts a wholly shielded double cable connection structure,and can be widely used on infotainment systems,ADASs,domain controllers and other products.In order to satisfy the demands of the smart electric vehicle market,we launched key components of the power system of electric vehicles,including battery disconnect unit(BDU),power distribution unit(PDU)and inverters.In 2021,the global automotive PDU market size was USD7 billion,and the inverter market size was USD3 billion.PDU is designed to distribute and manage electric power in the high-voltage system of new energy vehicles,and can integrate MBS master control,charging module,DC module,PTC control module and other functions.BDU is specially designed for installation inside battery packs and is a kind of distribution box.Inverter is a device that converts direct current in batteries into three-phase alternating current required by electric motors,and a core component of new energy vehicles.The power output and battery life of electric motors directly depend on the performance of inverters.The IoV relies on the new-generation information communication technology,receives information from and transmits information to moving vehicles,and can play an important role in vehicle safety,traffic control,information service,smart city and intelligent transportation.At present,IoV applications are key projects of government and OEMs,and require coordination among multiple devices,such as road-side unit(RSU)which collects environment,traffic condition,traffic sign and other information and sends the same to vehicles,telematics control unit(TCU)which effects two-way communication between vehicles and external networks,central gateway(CGW)which connects all electronic devices on a vehicle,and other products.We focus on the development of wireless communication and automotive electronic products,and currently offer RSUs,TCUs and CGWs.Luxshare Precision Industry Co.,Ltd.Annual Report 2021 20 According to Visteon,the global smart cabin market size was about USD44.7 billion in 2020,and is expected to reach USD73.8 billion in 2025.The penetration of smart cabin into new vehicles in China is expected to exceed 75%in 2025.At present,the basic configuration of a smart cabin on the market includes digital instrument panel,streaming rearview mirror,HUD,rear seat screen and IoV modules,among others,which can provide passengers with navigation,environmental monitoring,entertainment and other directly perceivable information,satisfy diversified human-machine interaction requirements,provide better ride experience and create more consumption scenarios.Our products include AR-HUD,infotainment system,cabin entertainment domain,LCD instrument panel,driver monitoring system,power isolation module,etc.,and USB port and wireless charging module are relatively mature products.In the future,more consumer electronic functions will be applied in cabins,so we can fully leverage our technologies accumulated over the years in the field of consumer electronics.We also provide customers with smart manufacturing services,including insert molding,PCBA and other product services,by leveraging our economy of scale and lean production.In February 2022,we entered into a Strategic Cooperation Framework Agreement with Chery Holding Group,pursuant to which,we and Chery New Energy Automobile Co.,Ltd.will establish a joint venture specialized in R&D and manufacturing of new energy vehicles in the form of ODM.This business platform will produce vehicles for brand customers,provide a frontier R&D and mass production platform and access to the overseas market for our core automotive component business,and help us develop our tier-1 business.We have been engaged in the field of consumer electronics for years,and accumulated a solid industrial base and strong ODM capability,and are familiar with ODM operation and management model.Chery has rich experience in the field of traditional vehicles,and solid technological base.Our superior products will have an opportunity to grow from 0 to 1 through this joint venture ODM platform and the incremental business provided by Chery,and we will leverage our advantages to take part in the competition,in order to have our tier-1 products pass validation by the brand customers.Along with the wide application of consumer electronics products on vehicles,our technologies,experience and customer resources accumulated over the years in the field of consumer electronics will help our automotive business segment better grasp the trend,and develop more products and customers.We will keep pace with our premium customers at home and abroad,accurately grasp the development direction of technologies and the industry,and actively promote the technological upgrading of products and reduction of costs through technology,to continuously provide our customers with products and solutions that are competitive in both technology and business.Our medium-to-long term goal is to grow into a tier-1 manufacturer in the global automotive component industry in the next three to five years.Luxshare Precision Industry Co.,Ltd.Annual Report 2021 21 III.Analysis of core competencies(I)Smart manufacturing under the lean production mode Since our establishment,we have adhered to our original intention,focused on precision manufacturing,and through development and application of advanced digital tools and automatic production processes,and continuous optimization of system structure,organization and production mode,ensure our production system is able to rapidly adapt to the continuously expanding production lines and meet the constantly changing market demands.1.Modern optimization of smart process We implement the lean production mode pursuant to 7-S management standard,carry out production according to demands,meet the demands of different customers for different products with the optimal production rhythm,and have introduced many digital system tools,for example:(1)SAP system that connects all links in our internal operation,and connects customers through EDI system and suppliers through SRM system;(2)PLM system in respect of product R&D,that integrates product-related processes,designs software and simulation models,and scientifically manages product data in the entire life cycle from design,development,production,marketing,purchasing to after-sale services;(3)MES system in respect of production and manufacturing that integrates human,tooling,equipment,jigs,materials,customer demands and other factors,and uses AI and 5G technologies to implement optimal management of the whole process from receipt of customer demands to delivery of products;(4)WMS smart warehousing system that effectively deals with and manages our complicated inbound and outbound goods,improves the goods turnover and inventory turnover,greatly reduces overstock and occupation of funds,and make warehousing management more accurate,simple and efficient;and(5)Budget management and BI system in respect of financial and accounting operation that realizes efficient preparation of budgets and effective control,review and analysis,and manages and controls risks using big data.We continuously optimize our management processes and production processes,implement customer oriented precise,scientific and intelligent management,and constantly strive to improve our production efficiency and product yield.2.Advanced automatic process design and application As a global leading provider of diversified component solutions,high-quality precision manufacturing has always been one of our core competencies.Since our listing,our precision manufacturing capability has developed from“automation with passive positioning”to“automation with active positioning”and finally to“full automatic and smart”super-precision modularized manufacturing today.In the automatic manufacturing of products,we connect product design with the design of automatic manufacturing process seamlessly,and on the basis of ensuring our process capability at key work stations takes the lead in the industry,have introduced AI visual robots to realize positioning,error detection and judgment in the production process of precision electronic components,active and mutual positioning between components and jigs in the assembly process,and AI-assisted inspection of appearance of component products.We widely use automated guided vehicles(AGVs)on production lines and warehouses,to give support to modern smart logistics and warehousing system.In addition,we use big data and AI technologies,in conjunction with our proprietary algorithms,to feed back real-time measuring and testing data,thereby ensuring the reliable quality assurance and full traceability of products,and enabling the automatic production lines to have the deep learning capability,to realize close-end control over the automation technology,which marks that we have formally entered into the stage of“smart precision Luxshare Precision Industry Co.,Ltd.Annual Report 2021 22 manufacturing”from“precision manufacturing”in the early stage and“quality assured precision manufacturing”in the middle stage.3.Advanced comprehensive quality management system Quality is the foothold of a company,and one of the most important core values provided by a company to its customers.Since our establishment,we have adopted“quality is our lifeline”as one of our corporate values,established and improved the quality management system using scientific and effective quality management approaches,and integrated quality assurance into the whole process from design,manufacturing,inspection,packaging to transportation of products.We have a full set of advanced NPI(new product introduction)management process,and control quality from the development and design of products,to lay a solid basis for successful mass production of products.In the each stage of development of a new product,such as POC(proof of concept),Proto(model verification),EVT(engineering verification test),DVT(design verification test),PVT(process verification test)and MP(mass production),etc.,we take the highest requirement for mass production that each stage should satisfy as the criteria for approval of entry into the next stage.We attach great importance to quality precautions,and implement design quality controls focusing on quality,cost,manufacturing and automation,to shorten the period from engineering development to mass production.Due to our excellent quality assurance capability,we have received praise from our customers continuously,and enhanced customer adhesion.(II)Forward-looking strategic deployment Our management keeps abreast of market trends and developments of the industry,through industrial researches and internal seminars,reviews our development situations,makes in-depth analysis of the boundaries of our business and capabilities,enhances the implementation of the“three five-year”strategic plan,and continuously explores the ways of diversified innovations and development.Our development towards new products and new areas is based on multi-dimensional analysis of industrial development,customer demands,competitors,the value we can provide,the space we can play,profitability,return on investment and other aspects of the industries,customers and end users,and detailed sand table exercise by our core management.1.Vertically integrated one-stop service capability We focus on providing the market with perfect comprehensive solutions covering the entire industry chain.We provide full coverage products from core components,modules to system-level assembly.We have proprietary key process capabilities,including design and processing of molds/jigs,bare copper wire drawing,plastic particle molding,stamping/press forging,precision implant molding,surface treatment,SMT,SiP and system-level assembly testing.In addition,we have a number of national CNAS certification labs responsible for preliminary development validation,in-process quality inspection and failure analysis.Therefore,we have vertically integrated production capabilities for core components,modules to system-level assembly that are relatively complete,and have realized close-end management from key materials,parts,modules,core technologies to data of all stages,in respect of all core acoustic,optical and electric module products,such as acoustic modules,vibration motors,voice coil motors,antenna modules,wireless charging modules,and all kinds of terminal products,such as accessory system,IoT equipment,acoustic wearable devices,smart wearable devices and smart mobile phones.With our understanding of the market demands over the years,we are able to provide comprehensive one-stop professional services from product proposal,design,validation to mass production,and even to logistic cooperation,after-sale quality tracking and warranty,thus further enhancing our competitive advantage in rapid response to demands of customers,timely and efficient engineering cooperation and cost control with quality guaranteed.2.Industrial synergistic effect In order to provide the customers with greater and better values,in addition to our vertically integrated one-stop service capability,we manage and integrate purchasing,R&D and manufacturing activities of consumer electronics,communication,automotive,healthcare and other business segments in a centralized manner,to minimize the use of resources,accelerate trans-sector technological convergence,improve production efficiency and product yield,seek synergistic effect,reduce overall costs for customers,and ensure our return on investment.Luxshare Precision Industry Co.,Ltd.Annual Report 2021 23 3.Global service deployment Economic globalization is the profound background and fundamental trend of the development and evolution of global economy in the 21st century.As the players of economic globalization,transnational companies directly promote the development of economic globalization.From the perspective of market,in the era of global intelligentization,the electronics industry is the field with the most thorough allocation of global resources and market competition at present.After more than ten years development,we have gradually built a global system integrating development,sales,FAE(field application engineer)and manufacturing.We now have 16 sales&FAE offices abroad,which,in addition to providing services to our customers from nearby locations,actively attract sales,R&D and management talents of different fields throughout the world,to introduce fresh blood and draw out the potential capacities of the teams.This approach not only can be horizontally replicated in new product operation teams,but also can maintain the capability boundary of all functional teams and personnel at the same level.In addition,in order to optimize our cost structure,we have established industrial zones and manufacturing facilities in some foreign countries,to serve global brand customers.We are committed to satisfying the demands of customers,keep abreast of market demands through our global sales&FAE network,accelerate R&D of new products,produce high value-added products;leverage our local manufacturing capabilities throughout the world and advantages in smart manufacturing,shorten the production and transportation cycle of products,further enhance the cost advantage of products,and improve quality and efficiency,to provide our customers throughout the world with more competitive services.(III)R&D and technological innovation 1.Continuous increase in R&D investment Since our listing,we have placed R&D and innovation on an important position in our development,made continuous investments in technology R&D,vigorously upgraded traditional manufacturing processes,continuously improved the level of automatic production,and realized platformization of all precision manufacturing processes.We also attach great importance to the long-term development of underlying materials and innovative production technologies.Our R&D team has continuously learned and explored advanced precision manufacturing technologies and product applications in the countries and regions mastering frontier technologies,and established a number of advanced technology development labs with certain core customers,to jointly develop frontier technologies.We have established advanced production technology and manufacturing process R&D platforms in Dongguan,Kunshan,Taiwan and the United States,and own a R&D and smart manufacturing team taking the lead in the industry.Our R&D expenses are mainly classified into early stage R&D expenses and product upgrading expenses.Early stage R&D expenses are incurred in connection with medium-to-long term product and business planning and deployment,and consist of investments in new products and new areas and R&D expenses relating to underlying technologies,accounting for about 30%of our total R&D expenses.Product upgrading expenses are incurred in the process from concept to NPI(new product introduction)of new solutions and new products.All early stage R&D expenses and product upgrading expenses are expensed as incurred to reduce the pressure of asset amortization costs in the future.Our R&D expenses have been continuously increasing,and totaled RMB16.763 billion in the past three years.In the reporting period,our R&D expenses totaled RMB6.642 billion.2.Innovation capabilities and patents Innovation is the soul of the era of knowledge economy.As a hi-tech company,we always attach great importance to the management and protection of intellectual properties(IPs),have established and continuously improved our IP policy,complied with all IP laws and regulations,established IP department and engaged professionals to actively carry out application,protection,operation and maintenance activities in respect of IPs.We encourage our employees to actively make innovations,reduce product costs and increase our profits.On the other hand,we actively prevent risk of infringement,and protect our and our customers legitimate rights and interests.As of the end of this reporting period,we own 3090 valid patents,an increase of 44.46%as compared with the end of 2020.Luxshare Precision Industry Co.,Ltd.Annual Report 2021 24 We firmly believe that R&D and technological innovation are an important means to realize forward-looking deployment,and will drive our development.The continuous and steady R&D investments will not only consolidate our leading position and advantages in the industry,but also enhance our risk bearing capability in an ever-changing macro environment,and lay a solid foundation for our continuous and rapid development in the future.(IV)Corporate culture focusing on sustainable development 1.All-round customer-oriented culture Since our establishment,we have adhered to the philosophy of“customer first”,and been committed to providing our customers with complete and perfect comprehensive solutions,taking into comprehensive consideration response speed,engineering cooperation,service quality,flexible delivery,cost control and other factors.Our leading technologies and excellent quality assurance capability have helped us build a good brand image and reputation in the industry,and brought high-quality customers to us.After years of cultivation,we have established stable cooperation relationships with a lot of global leading brands and manufacturers in the fields of consumer electronics,communication and automotive.Over the years,we have kept pace with the strategic steps made by our major customers,cautiously assessed the development trends of the industry from the perspective of brand customers and end consumers,and made forward-looking deployments to occupy the new markets and new channels,to ensure that we maintain the lead.We think what customers think and are eager to help the customers in need.Under the guidance of the service philosophy of“customer first”,in addition to fulfilling the tasks assigned by the customers,we have also continuously identified the pain points of the customers in their applications,fully leveraged our resource and platform advantages,and taken the initiative to provide the customers with optimization proposals and suggestions,to highlight our competencies.Our commitment to fulfill all missions has been generally recognized in the industry.2.Spirit of workmanship that constantly strives for perfection We are unable to make continuous improvement in smart manufacturing,product R&D,internal management,social responsibility and other areas without our employees striving for perfection at work and accomplishment of each task in such manner that is higher than the customer standard,stricter than the industrial standard and more excellent than what has been done yesterday.That is the key internal driving force behind continuous recognition of us by the customers and our rapid development.In the future,we will remain true to our original aspiration,not only carry on the spirit of workmanship that constantly strives for perfection in our traditional superior fields,but also foster such spirit in our new teams and new business segments,strive to accomplish the strategic goals in the“three five-year”plan period with the spirit of enterprise,and achieve a win-win situation with our customers,shareholders and employees.3.Talent selection,training,use and retention mechanisms deeply integrated with corporate culture The core competencies of a company will be ultimately reflected in the soft power arising from in-depth integration and mutual nourishment of talents and corporate culture.Core talents are the basis for the sustainable development of a company and the cornerstone for cultivating the talents required by a company.We have adhered to the strategy of invigorating the business through talents,and continuously improved our talent echelon building system and talent pool mechanism.We vigorously recruit outstanding talents required in our development who recognize and conform to the distinctive characteristics of our corporate culture,to continuously augment our team of core talents.On the other hand,we continuously improve our talent training system and talent selection system.Along with the growth of our business,we continuously put forward new and reasonable requirements for our employees,encourage them to make self break-through in the boundary of their capabilities,and continuously improve their personal competencies and management capabilities,to contribute new energy to our development.Under the nurture of our corporate culture of being pragmatic and enterprising,constantly striving for perfection,and fulfilling the missions,we provide the key employees with a vast space to exercise their talents,and effectively stimulate their sense of mission,sense of achievement and sense of collective honor.At present,we have recruited outstanding talents in materials,automation,electronic information,molds,business Luxshare Precision Industry Co.,Ltd.Annual Report 2021 25 management and other fields throughout the world,to create a talent pool for our sustainable development.We clearly know how to attract and retain talents.To develop a virtuous circle of people creating the environment and the environment creating people through in-depth integration of talents and corporate culture is our strongest core competency.Through effective talent mechanisms,we have sufficient talents in our traditional superior fields,and have laid the foundation for our rapid development in new areas and businesses.IV.Analysis of main business 1.Overview In 2021,the external environment became more complicated and severe.The domestic and overseas economic development faced numerous pressures and was greatly affected by the changes unseen in a century and the epidemic disease of the century.During the reporting period,we faced more risks and challenges in our development,for example,the repeated outbreaks of COVID-19 at home and abroad causing interruption of the upstream supply chain and blockade of logistic routes,shortage of chips and materials throughout the world,sharp rise of the prices of staple commodities and logistic and transportation costs,and delay in the mass production and delivery of certain new products.In addition,the learning curve of some new products/businesses during rapid growth and the regular cycle of some existing products affected our financial indicators to a certain extent.During the reporting period,we invested in and controlled Rikai Precision Technology(Yancheng)Co.,Ltd.(“Rikai Yancheng”).Since 2021,due to great demands from customers for the precision display structure module products for mobile phones in the coming years,the scale of operation of Rikai Yancheng increased rapidly.However,the huge investment in the preliminary development and automation optimization in respect of the precision display structure module products for mobile phones and large proportion of raw materials to the total cost of such products greatly affected the overall product margin of Rikai Yancheng,and in turn affected the consolidated gross margin of Luxshare-ICT.In addition,after experiencing the strong demands from industries/market and consumers for smart wearable acoustic products,the shipments of our smart wearable acoustic products dropped sharply in 2021,which had a periodic effect on the operating revenue and net profit of this business.The development of this business is expected to become stable in 2022.We will continue to leverage our core competencies,give full play to our value as an important partner of our key customers,and promote the steady and high-quality development of this business.Facing the market competitions and internal and external pressures and challenges,we work hard to overcome the difficulties,focus on the formulation and implementation of the“three five-year”strategic plan,and further enhance short-,medium-and long-term forward-looking deployments taking into account the new situations and new opportunities.During the reporting period,we fully leveraged our advantages in smart,digital and modular high-end manufacturing and flexible management,further consolidated the foundation of the big precision and smart manufacturing platform,intensively implemented vertically integrated allocation of resources,and effective coordination of all product lines and business segments,improved the efficiency of internal organization,and made praise-worthy achievements in both existing and new businesses.(1)Consumer electronics business During the reporting period,we stuck to the strategy of diversified vertical integration and production penetration in the field of consumer electronics.In 2021,with respect to smart wearable healthcare products,as an important member of our family of system-level products,though the delivery of certain products was delayed due to the epidemic situation at home and abroad and shortage of materials,our excellent performance in product development,automatic production process,premium quality,flexible delivery and other areas was well recognized by our key customers,laying a solid foundation for the provision by us of in-depth and diversified services,such as system assembly and different kinds of core components,in respect of this product line.With respect to SiP products,despite the effect of overseas epidemic situation,our performance was generally mature and realized full coverage of smart wearable healthcare products.On the basis of thorough assessment of return on investment,utilization rate and other operating Luxshare Precision Industry Co.,Ltd.Annual Report 2021 26 metrics,and in-depth analysis of this technology development route,taking into account our strategy of access to the overseas market for system products,we will make further plans in respect of smart wearable acoustic products and peripheral functional module system packaging business in the short term,and develop chip/semiconductor module packaging business in the long term.With respect to system products for mobile phones,the joint venture platform established by us and our controlling shareholder vigorously promoted smart and digital practices,and built an integrated smart platform covering product scheduling,production process analysis,asset management,energy monitoring,personnel management,failure analysis,remote assistance and other activities,in order to continuously improve our operation and management level,and effectively satisfy our customers increasingly personalized,high quality and rapidly evolving demands.Our integrated smart development and production platform covering the whole process make full preparation for large-scale replication and group/global operation in the days to come.With respect to the vast consumer electronics market,we keep our eyes open,and wash grains of gold out of the sand.In the recent years,by leveraging our strong core competencies and the demonstration effect of big customers,through our premium services to many global well-known brand customers,we have made excellent achievements in smart terminal,smart life,computer accessory and other solutions,and accumulated strength for the diversified development of our consumer electronics business at the customer and product sides.Our products include acoustic,optical and electric modules,smart accessory system,acoustic system,IoT equipment,wearable devices,etc.Through in-depth market/customer researches,we have established executable development plans and growth objectives,and our cooperation with global customers having great potentialities has been upgraded from simple cooperation in components and modules to integrated and all-round cooperation in complete unit system solutions.At present,we are carrying out business as planned,with the support and recognition of the market and customers as what they did in the past.In view of the relatively fragmented market,we will further focus on resources and make thorough assessments in the future,and strive to develop related business into important drivers of our sustainable growth in the next five to ten years.(2)Automotive business In 2021,despite the weak market demand and chip shortage caused by the epidemic situation at home and abroad,the overall development of our automotive business generally meets the expectations of our management.Along with the continuous development of“electrification”,“intelligentization”and“interconnection”of vehicles,and trans-sector application of consumer electronic products and technologies on vehicles,we actively grasp market opportunities,and fully leverage our technologies and customer resources accumulated over the years in the fields of consumer electronics and communication,in order to ensure that our existing automotive business catches the trend more accurately,and to develop product lines and strategic customers in a more intensive and focused manner.At present,our main products cover automotive wire harnesses(vehicle wire harnesses,special wire harnesses,charging guns,etc.),connectors(high-voltage,low-voltage and high-speed connectors,Busbar,etc.),smart new energy(PDUs,BDUs,inverters,energy storage,etc.),smart interconnect(RSUs,TCUs,etc.),and smart cabin/control(domain controllers,infotainment system and multi-media instrument panels).We will,guided by the trend of technology development and strategy to focus on/enable customers,continuously provide our customers with products and solutions that are competitive in the world in both technical and commercial metrics,by leveraging our manufacturing facilities and product R&D centers distributed around the country,and the synergistic effect of domestic and overseas resources.(3)Communication business During the reporting period,our supercomputing center business grew rapidly,as a result of our continuous technology development in the field of communication.However,the unreasonable interference by foreign entities of the same trade in the context of China-US trade friction affected the continued development of our communication business in North America.On the basis of further improving our capabilities in respect of existing high/low-frequency electric connector,optical connector and RF communication products,during the reporting period,we focused on the development of thermal system management,industrial connector and other new products and new businesses,further enhanced vertical integration of industries,trans-sector technological convergence,and increased coverage of product lines,with a view to growing into a comprehensive data and communication solution Luxshare Precision Industry Co.,Ltd.Annual Report 2021 27 provider.The global market has continuous demands for communication equipment.Along with the further development of smart manufacturing,metaverse,smart driving and IoT,by virtue of our complete product lines and platforms,and our understanding and application of frontier technologies,we will continuous exploit the global market and increase our market shares.During the reporting period,our sales revenues totaled RMB153.946 billion,an increase of 66.43%year on year;profit totaled RMB8.143 billion,an increase of 0.09%year on year;and net profit attributable to the owners of the parent totaled RMB7.071 billion,a decrease of 2.14%year on year.2.Revenue and cost(1)Components of operating revenue In RMB 2021 2020 Y/Y%Change Amount%of operating revenue Amount%of operating revenue Total operating revenue 153,946,097,790.40 100,501,259,211.54 100f.43%By segment Computer interconnect products and precision components 7,856,595,729.78 5.10%3,521,361,712.58 3.813.11%Automotive interconnect products and precision components 4,142,675,174.19 2.69%2,844,031,362.75 3.07E.66%Communication interconnect products and precision components 3,269,476,642.60 2.12%2,265,420,000.59 2.45D.32%Consumer electronics 134,637,995,600.46 87.46,818,160,358.88 88.45d.56%Other connectors and other business 4,039,354,643.37 2.62%2,052,285,776.74 2.22.82%By product Computer interconnect products and precision components 7,856,595,729.78 5.10%3,521,361,712.58 3.813.11%Automotive interconnect products and precision components 4,142,675,174.19 2.69%2,844,031,362.75 3.07E.66%Communication interconnect products and precision components 3,269,476,642.60 2.12%2,265,420,000.59 2.45D.32%Consumer electronics 134,637,995,600.46 87.46,818,160,358.88 88.45d.56%Other connectors and other business 4,039,354,643.37 2.62%2,052,285,776.74 2.22.82%By region Domestic market 10,493,247,599.10 6.82%7,454,978,348.07 8.06.75%Overseas market 143,452,850,191.30 93.18,046,280,863.47 91.94h.68%By sales mode Direct sales 153,946,097,790.40 100.00,501,259,211.54 100.00f.43%(2)Segments,products or regions representing more than 10%of operating revenue or profit Applicable N/A In RMB Operating revenue Operating cost Gross margin Y/Y%Change in operating revenue Y/Y%Change in operating cost Y/Y%Change in gross margin By segment Consumer electronics 134,637,995,600.46 119,338,834,375.15 11.36d.56w.54%-6.48%By product Consumer electronics 134,637,995,600.46 119,338,834,375.15 11.36d.56w.54%-6.48%By region Domestic market 10,493,247,599.10 8,421,880,523.04 19.74.75D.47%-2.06%Overseas market 143,452,850,191.30 126,626,455,769.84 11.73h.68.05%-6.03%By sales mode Luxshare Precision Industry Co.,Ltd.Annual Report 2021 28 Direct sales 153,946,097,790.40 135,048,336,292.88 12.28f.43x.23%-5.81%In case of any adjustment to the statistic scale for main business data,the main business data of the most recent reporting period as adjusted according to the statistic scale applied at the end of the current reporting period:Applicable N/A (3)Whether the Companys revenue from sale of tangible goods is higher than the revenue from labor service?Yes No Segment Item Unit 2021 2020 Y/Y%Change Computer interconnect products and precision components Sales volume KPCS 692,107 510,910 35.47%Output KPCS 735,779 537,997 36.76%Inventories KPCS 43,672 27,087 61.23%Automotive interconnect products and precision components Sales volume 1000 sets 233,339 172,912 34.95%Output 1000 sets 256,542 184,502 39.05%Inventories 1000 sets 23,203 11,590 100.20%Communication interconnect products and precision components Sales volume KPCS 380,329 470,565-19.18%Output KPCS 413,793 514,389-19.56%Inventories KPCS 33,465 43,824-23.64%Consumer electronics Sales volume KPCS 3,495,842 3,299,993 5.93%Output KPCS 3,773,559 3,661,402 3.06%Inventories KPCS 277,717 361,409-23.16%Other connectors and other business Sales volume KPCS 467,754 312,258 49.80%Output KPCS 508,283 348,814 45.72%Inventories KPCS 40,529 36,556 10.87%Analysis of changes in the relevant data over 30%year on year:Applicable N/A During the reporting period,our output and sales volume increased as a result of increase in sales.(4)Performance of material sales contracts and material purchase contracts by the Company as of the end of the reporting period Applicable N/A (5)Components of operating cost Classification of segments In RMB Segment Item 2021 2020 Y/Y%Change Amount%of operating cost Amount%of operating cost Computer interconnect products and precision components 6,296,204,929.34 4.66%2,765,866,774.16 3.657.64%Automotive interconnect products and precision components 3,475,111,291.70 2.57%2,374,148,439.75 3.13F.37%Communication interconnect products and precision components 2,700,268,416.55 2.00%1,818,503,189.96 2.40H.49%Consumer electronics 119,338,834,375.15 88.37g,217,502,600.73 88.71w.54%Other connectors and other business 3,237,917,280.14 2.40%1,593,986,044.98 2.103.13%Analysis None Luxshare Precision Industry Co.,Ltd.Annual Report 2021 29(6)Change in the scope of consolidation during the reporting period Yes No Luxis Technology Limited,Yancheng Luxshare Precision Industry Co.,Ltd.,Hangzhou Xuntao Technology Co.,Ltd.,Rugao Luxshare Business Management Service Partnership(LP),Lianxun Smart Equipment(Rugao)Co.,Ltd.,Luxshare Technology(Xian)Co.,Ltd.,Luxshare Electronic Technology(Enshi)Co.,Ltd.,Luxis Technology(Kunshan)Co.,Ltd.,Luxshare Investment Co.,Ltd.,Yancheng Luxshare Business Management Service Partnership(LP),Luxshare Smart Equipment(Yancheng)Co.,Ltd.,Luxis Precision Intelligent Manufacturing(Kunshan)Co.,Ltd.,Luxshare Smart Manufacturing&Electronic Service(Kunshan)Co.,Ltd.,Liding Electronic Technology(Dongguan)Co.,Ltd.,Luxshare Technology(Nanjing)Co.,Ltd.,Henan Leader Precision Industry Co.,Ltd.and Changzhi Luxshare Precision Industry Ltd.,that were newly established by us,Rikai Precision Technology(Yancheng)Co.,Ltd.and Zhejiang Puson Electronic Technology Co.,Ltd.,that were acquired by us in cash,and Caldigit Holding(Cayman)and Taihan Precision Technology Co.,Ltd.,that were controlled by us by contract during the reporting period,are included in the scope of consolidation.Wuxi Huihong Electronics Co.,Ltd.,that was transferred by us,and Jian Jizhou Luxshare Electronics Co.,Ltd.,Speedtech(LS-ICT)Co.,Limited,Luxshare International Cable Co.,Ltd.and Luxshare-ICT International B.V.,that were liquidated and deregistered during the reporting period,are removed from the scope of consolidation.(7)Material changes or adjustments in respect of business,products or services of the Company during the reporting period Applicable N/A (8)Major customers and suppliers Major customers of the Company:Aggregate sales revenue from top 5 customers(RMB)128,399,408,091.77 Proportion of aggregate sales revenue from top 5 customers to annual sales revenue 83.41%Proportion of aggregate sales revenue from related parties among top 5 customers to annual sales revenue 0.00%Particulars of top 5 customers:No.Name of customer Sales revenue(RMB)%of annual sales revenue 1 Customer 1 114,055,710,068.00 74.09%2 Customer 2 5,033,592,065.75 3.27%3 Customer 3 3,621,465,625.47 2.35%4 Customer 4 3,188,059,176.36 2.07%5 Customer 5 2,500,581,156.19 1.62%Total -128,399,408,091.77 83.41%Other information of major customers:Applicable N/A Major suppliers of the Company:Aggregate purchase amount from top 5 suppliers(RMB)75,982,606,355.38 Proportion of aggregate purchase amount from top 5 suppliers to annual purchase cost 57.96%Proportion of aggregate purchase amount from related parties among top 5 suppliers to annual purchase cost 0.00%Particulars of top 5 suppliers:No.Name of supplier Purchase amount(RMB)%of annual purchase cost 1 Supplier 1 68,529,282,195.97 52.28%2 Supplier 2 2,220,179,015.43 1.69%3 Supplier 3 1,986,097,524.70 1.52%4 Supplier 4 1,718,167,435.10 1.31%Luxshare Precision Industry Co.,Ltd.Annual Report 2021 30 5 Supplier 5 1,528,880,184.17 1.17%Total -75,982,606,355.38 57.96%Other information of major suppliers:Applicable N/A 3.Expenses In RMB 2021 2020 Y/Y%Change Reason of material changes Sales expenses 789,908,163.80 477,047,875.58 65.58%Primarily due to increase in the scope of consolidation and business growth General expenses 3,741,908,783.50 2,463,953,208.63 51.87%Primarily due to increase in the scope of consolidation and business growth Financial expenses 554,665,874.05 904,828,142.89-38.70%Primarily due to fluctuations in foreign exchange rates R&D expenses 6,642,300,402.74 5,744,805,136.33 15.62%Primarily due to increase in the scope of consolidation and R&D investments Income tax expenses 322,238,643.64 644,764,928.70-50.02%Primarily due to increase in pre-tax deduction of differences in the exercise price of incentive shares,and additional deduction of R&D expenses 4.R&D investments Applicable N/A Description of major R&D project Purpose Progress Objectives Expected effect on the future development of Company Project relating to acoustic products To develop new functions and new processes of TWS earphones,headphones and other acoustic products,develop new products,and continuously improve production efficiency.In progress To optimize the functions of the relevant products and realize stable mass production with high quality.Our R&D and manufacturing capabilities in respect of acoustic products will be improved,R&D cycle of new products will be shortened,and our competencies will be enhanced.Project relating to smart wearable products To develop new functions of smart wearable products and improve the production process.Partially completed To improve the functions,automation level of production lines,production efficiency and product yield of the relevant products.While getting recognition from customers,the results of our smart wearable business will be increased and our competencies will be enhanced.Millimeter wave dielectric antenna To develop new products and new Completed To make breakthroughs in the use on traditional Our advantage in the vertical integration of Luxshare Precision Industry Co.,Ltd.Annual Report 2021 31 components project performance,and reduce production costs.millimeter wave antennas,reduce the dimensions of products and effectively lower ponents will be enhanced and market share of the relevant product lines will be increased.New-type linear motor project To optimize product mix and reduce R&D costs.In progress To optimize technical indicators and cooperate with the customers in the relevant tests,mass production and deliveries.Our advantage in the vertical integration of components will be enhanced and market share of the relevant product lines will be increased.SIP system level double side packaging project To develop new technologies and new processes,and improve production efficiency.In progress To upgrade our traditional SiP module packaging technology,fully fill the bottom space of chips,reduce the residue stress after packaging,ensure the reliability of package products,and improve the technical capabilities of product packaging.Our advantage in the vertical integration of components will be enhanced and market share of the relevant product lines will be increased.Project relating to optical module products To develop 400G high-speed optical modules and preliminary develop next-generation optical modules.In progress To expand the application scenarios and market for high-speed optical modules,develop product series,enrich high-speed product lines and realize mass production of the relevant products.Our advantage in the vertical integration of components will be enhanced and market share of the relevant product lines will be increased.Project relating to high-speed cables To develop transmission cable assemblies that provide high-speed signals for super data centers and 5G services.In progress To develop proprietary interfaces for servers,switches,high-performance computers and other products,and increase the speed.Our technical advantage in the communication and data center cable products will be enhanced and market share will be increased.Project relating to automotive wire To develop,improve and upgrade vehicle Partially completed To improve our technical capability to Our product lines and market share in the Luxshare Precision Industry Co.,Ltd.Annual Report 2021 32 harnesses wire harnesses,motor wire harnesses,automotive steering wire harnesses,new energy battery pack wire harnesses and other products.develop automotive wire harness products,satisfy different customization requirements,and increase operating revenue.field of automotive will be further increased.Project relating to automotive connectors To develop high and low voltage connectors,high-speed connectors,customized connector structures and other automotive connectors.Partially completed To improve our manufacturing capability and production efficiency.Our proprietary gigabit Ethernet connector adopts a wholly shielded double cable connection structure,and has been widely used on infotainment systems,ADASs,domain controllers and other products.Our product lines and market share in the field of automotive will be further increased.Project relating to power system of electric vehicles To develop high-voltage high-current battery disconnect control module,new-generation on-board bidirectional DC power supply and other power system products for electric vehicles.Partially completed To improve our manufacturing capability and production efficiency.The process development,trial production and PPAP certification in respect of our new-generation on-board bidirectional DC power supply have been completed.Our product lines and market share in the field of automotive will be further increased.Project relating to automotive smart interconnect products To develop RSU,TCU and other automotive interconnect products.Partially completed Our IoV smart RSU has realized remote coverage,short communication delay,high success rate of message sending and other functions.Our product lines and market share in the field of automotive will be further increased.Multi-cavity automatic sorting robot project The robot will change the operation mode of manual cavity-by-cavity plate feeding on the Completed To replace manual handling,identification,plate feeding and other labor intensive Through automation upgrading of production lines,our production efficiency Luxshare Precision Industry Co.,Ltd.Annual Report 2021 33 production lines for micro products in the injection molding workshop in the past,greatly improve workplace safety,realize automatic production,and promote automation upgrading in the industry.Through further upgrading of the equipment,to improve the stability of the equipment during production and finally realize automatic production of micro products in the injection molding workshop.operations,and realize cavity-by-cavity plate feeding for micro products made from injection molding.and product yield will be improved.AI automatic inspection system project The AI automatic inspection system will change the traditional operation mode of visual inspection,realize automatic inspection and promote automation upgrading in the industry.Through further upgrading of the equipment,to improve the reliability and stability of production,and finally realize unmanned workshops.Completed To replace manual handling,inspection and other labor intensive operations,and realize precise inspection of appearance,dimensions and other essential factors of precision components for electronic products.Through automation upgrading of production lines,our production efficiency and product yield will be improved.Particulars of R&D personnel:2021 2020 Y/Y%change Number of R&D personnel 16,103 15,154 6.26%Proportion of R&D personnel to total number of employees 7.06%8.79%-1.73ucation background of R&D personnel-Undergraduate 7,393 7,126 3.75%Master 260 256 1.56%Others 10,199 9,310 9.55%Ages of R&D personnel-Below 30 8,325 7,865 5.850-40 6,897 6,507 5.99%Luxshare Precision Industry Co.,Ltd.Annual Report 2021 34 Above 40 881 782 12.66%Particulars of R&D expenses:2021 2020 Y/Y%Change Amount of R&D expenses(RMB)6,642,300,402.74 5,744,805,136.33 15.62%Proportion of R&D expenses to operating revenue 4.31%6.21%-1.90%Amount of R&D expenses capitalized(RMB)0.00 0.00 0.00%Proportion of capitalized R&D expenses to total R&D expenses 0.00%0.00%0.00%Analysis of the cause and effect of significant change in the composition of R&D personnel:Applicable N/A Analysis of significant change in the proportion of R&D expenses to operating revenue compared with 2019:Applicable N/A Analysis and reasonableness of significant change in the proportion of R&D expenses capitalized:Applicable N/A 5.Cash flows In RMB Item 2021 2020 Y/Y%Change Cash provided by operating activities 152,974,773,173.48 101,344,544,382.43 50.95sh used in operating activities 145,690,006,256.48 94,471,332,896.38 54.22%Net cash flows from operating activities 7,284,766,917.00 6,873,211,486.05 5.99sh provided by investment activities 59,103,742,247.41 56,134,501,620.87 5.29sh used in investment activities 67,483,404,233.19 65,282,235,798.95 3.37%Net cash flows from investment activities-8,379,661,985.78-9,147,734,178.08-8.40sh provided by financing activities 42,545,854,141.42 31,843,182,893.74 33.61sh used in financing activities 42,935,782,234.50 25,056,689,251.71 71.35%Net cash flows from financing activities-389,928,093.08 6,786,493,642.03-105.75%Net increase in cash and cash equivalents-1,543,267,723.26 4,317,464,527.08-135.74%Analysis of main causes of material changes in the related data:Applicable N/A 1.The cash provided by operating activities was RMB152,974,773,200,an increase of 50.95%year on year,primarily due to an increase in sales,sales revenue collected and tax rebates received.2.The cash used in operating activities was RMB145690006300,an increase of 54.22%year on year,primarily due to an increase in the raw materials purchased and employee benefits paid.3.The net cash flows from financing activities was-RMB389928100,a decrease of 105.75%year on year,primarily due to repayment of short-term borrowings,loans and interest during the reporting period.Analysis of significant difference between net cash flows from operating activities during the reporting period and net profit in current year:Applicable N/A V.Analysis of non-main business Applicable N/A In RMB Luxshare Precision Industry Co.,Ltd.Annual Report 2021 35 Amount%of total profit Reason Whether or not sustainable Investment income 689,386,649.74 8.47%Income from investments and wealth management products classified as financial assets at fair value through profit or loss No Gain or loss on changes in fair value-115,737,751.66-1.42%Investment income on financial assets at fair value through profit or loss No Impairment loss on assets-162,790,335.12-2.00%Allowance for impairment of inventories and fixed assets No Non-operating income 21,096,536.60 0.26%Revenue from retirement of assets No Non-operating expenses 45,672,434.05 0.56%Loss on disposal of fixed assets No Gain on disposal of assets-45,266,592.65-0.56%Disposal of production equipment No Other gains 853,542,165.37 10.48%Government grants No Credit loss-26,875,504.69-0.33%Impairment loss on accounts receivable and other receivables No VI.Analysis of assets and liabilities 1.Material changes in components of assets In RMB December 31,2021 January 1,2021 Y/Y%Change Reason of material change Amount%of total assets Amount%of total assets Cash and bank balances 14,204,618,186.43 11.78,528,245,765.93 15.01%-3.23counts receivable 31,623,185,946.25 26.23,839,155,340.47 19.73%6.50%Business growth(including increase in the scope of consolidation)Contract assets 0.00%0.00%0.00%Inventories 20,900,755,733.15 17.33,211,009,381.15 18.83%-1.50%Increase in inventory storage level along with increase in our scale of operation(including increase in the scope of consolidation)Investment properties 59,000,690.72 0.05G,592,110.24 0.07%-0.02%Long-term equity investment 1,125,605,226.03 0.93%1,208,540,333.29 1.72%-0.79%Fixed assets 34,113,259,322.43 28.29,761,012,854.95 28.17%0.12%Increase in investment in factory buildings,dormitories and equipment(including increase in the scope of consolidation)Construction in progress 3,685,336,499.02 3.06%1,596,064,894.58 2.27%0.79ctory building,dormitory and workshop renovation projects in progress and equipment that has not yet been accepted(including increase in the scope of consolidation)Right of use assets 425,011,542.28 0.359,189,002.32 0.21%0.14option by us of the new lease accounting standard since January 1,2021 Short-term borrowings 11,919,635,337.99 9.89%7,577,068,798.49 10.80%-0.91%Replenishment of working capital(including increase in the scope of consolidation)Contract liabilities 268,506,246.98 0.222,512,971.36 0.22%0.00vances from clients Luxshare Precision Industry Co.,Ltd.Annual Report 2021 36 Long-term loans 5,025,096,193.09 4.17%1,495,199,238.41 2.13%2.04%Increase in loans to satisfy the requirements of new projects(including increase in the scope of consolidation)Lease liabilities 315,093,483.55 0.264,462,685.91 0.21%0.05option by us of the new lease accounting standard since January 1,2021 Financial assets held for trading 2,107,118,105.04 1.75%3,160,064,470.41 4.50%-2.75%Forward exchange facilities,wealth management and other investments Advances to suppliers 406,016,492.61 0.349,160,621.29 0.26%0.08%Prepayments for materials and customs deposits(including increase in the scope of consolidation)Other receivables 598,456,702.88 0.507,990,780.79 0.58%-0.08%Share transfer prices,export rebates and deposits,and insurance indemnities receivable Other current assets 2,161,055,820.73 1.79%1,804,485,645.49 2.57%-0.78%Input tax credits and prepaid and refundable income tax Long-term deferred expenses 733,015,722.42 0.61H8,087,044.97 0.70%-0.09ctory building and workshop renovation expenses(including increase in the scope of consolidation)Deferred tax assets 891,215,468.53 0.7455,834,434.21 0.51%0.23%Share-based payments,unrealized profit on internal asset transactions,government grants,deductible losses before tax and other timing differences Other non-current assets 1,904,305,181.49 1.58%1,223,199,642.61 1.74%-0.16%Prepayments for equipment,engineering projects and land(including increase in the scope of consolidation)Notes payable 234,500,590.93 0.198,572,111.54 0.18%0.01%Increase in note transactions Accounts payable 45,416,165,667.67 37.67#,051,557,603.83 32.86%4.81%Increase in raw materials purchased in order to fulfill orders along with our business growth(including increase in the scope of consolidation)Other payables 382,391,106.17 0.326,162,097.14 0.21%0.11crued expenses and security deposits payable Other current liabilities 3,623,423,072.87 3.01b3,257,555.89 0.89%2.12%Short-term bonds and inter-company trade account payable(including increase in the scope of consolidation)Deferred income 538,556,944.18 0.45B5,345,982.64 0.61%-0.16%Government grants relating to capital Deferred tax liabilities 1,272,092,467.86 1.066,092,212.95 1.38%-0.32celerated depreciation of fixed assets and temporary difference arising from increase in appraised value of business combinations not under common control Analysis of high proportion of overseas assets:Applicable N/A Luxshare Precision Industry Co.,Ltd.Annual Report 2021 37 2.Assets and liabilities at fair value Applicable N/A In RMB Item Beginning balance Gain or loss on changes in fair value Aggregate changes in fair value recorded in equity Impairment loss recognized in the current period Amount acquired in the reporting period Amount sold in the reporting period Other changes Ending balance Financial assets 1.Financial assets held for trading(excluding derivative financial assets)2,854,676,050.46 73,732,025.24 19,182,537,140.74 20,119,745,754.45 1,991,199,461.99 2.Derivative financial assets 305,388,419.95-189,469,776.90 115,918,643.05 3.Investment in other equity instruments 138,074,571.56 96,140,150.00 1,761,426.86 235,976,148.42 Subtotal of financial assets 3,298,139,041.97-115,737,751.66 96,140,150.00 19,182,537,140.74 20,119,745,754.45 1,761,426.86 2,343,094,253.46 Investment in equity instruments 5,700,000.00 5,700,000.00 Total 3,298,139,041.97-115,737,751.66 96,140,150.00 19,188,237,140.74 20,119,745,754.45 1,761,426.86 2,348,794,253.46 Financial liabilities 0.00 41,436.00 41,436.00 Other changes:Other changes are the principal of other equity instruments included due to increase in the scope of consolidation.Whether theres any material change in the measurement properties of main assets of the Company during the reporting period?Yes No 3.Encumbrances on assets as of the end of the reporting period On September 30,2021,the 4th meeting of the 5th Board of Directors considered and adopted the Proposal for Applying for an Acquisition Loan from the Banks and Pledging the Shares of the Subsidiary,pursuant to which,we intended to apply to four banks for a syndicated acquisition loan of up to RMB3.4 billion,for a term of five years,which would be mainly used to replace our capital contribution already made to Rikai Yancheng.We pledged 48.013%shares of Rikai Yancheng as security for such acquisition loan for a term of five years.The relevant information was disclosed in our Announcement on Applying for an Acquisition Loan from the Banks and Pledging the Shares of the Subsidiary(No.2021-080).During the reporting period,we completed the procedures relating to the pledge of the shares of Rikai Yancheng for a term of five years.See“Section X Financial Report VII.Notes to Items in Consolidated Financial Statements 81.Assets with restricted ownership or right of use”.Luxshare Precision Industry Co.,Ltd.Annual Report 2021 38 VII.Analysis of investments 1.Overall situation Applicable N/A Amount of investment in 2021(RMB)Amount of investment in 2020(RMB)Y/Y%Change 7,623,854,176.00 3,122,574,000.00 144.15%2.Major equity investments acquired in the reporting period Applicable N/A In RMB Investee Main business Method of investment Amount of investment Shareholding percentage Source of funds Partner Term of investment Product type Status as of the balance sheet date Expected income Investment income/loss in the reporting period Whether or not involved in any litigation Date of disclosure(if any)Disclosure reference(if any)Rikai Precision Technology(Yancheng)Co.,Ltd.Technology development,technical consulting and technical services in respect of computer accessories;design,R&D and production of precision stamping molds(precision 0.02mm),precision cavity molds(precision 0.05mm),metal product molds,non-metal product molds and standard parts for molds;production of high-temperature resistant molded insulating materials,stamped hardware parts,rivets,shafts,mechanical components and other components for 3C electronics products;industrial design,product design(exterior design,structural design,circuit Capital injection 6000,000,000.00 50.01%Self-owned funds N/A Long-term Electronic components Paid in full 0.00 0.00 No February 4,2021 Announcement No.2021-017 published on Luxshare Precision Industry Co.,Ltd.Annual Report 2021 39 design,graphic design,etc.);lease of own idle equipment;wholesale,commission agency(except auction),import,export and supporting services in respect of the aforesaid products and related components.Business not subject to licensing:manufacturing of computer software,hardware and peripherals.Total -6000,000,000.00-0.00 0.00-3.Major non-equity investments that have not yet been completed in the reporting period Applicable N/A 4.Investment in financial assets(1)Investment in securities Applicable N/A In RMB Type of security Security code Short name Initial investment cost Method of measurement Beginning carrying amount Gain or loss on changes in fair value in the reporting period Aggregate changes in fair value recorded in equity Amount acquired in the reporting period Amount sold in the reporting period Gain or loss in the reporting period Ending carrying amount Accounting item Source of funds Stock listed on domestic or overseas market 603595 Tony Electronic 22,500,000.00 Fair value 114,221,319.04 96,057,510.08 162,951,644.67 0.00 0.00 96,057,510.08 210,278,829.12 Investment in other equity instruments Self-owned funds Total 22,500,000.00-114,221,319.04 96,057,510.08 162,951,644.67 0.00 0.00 96,057,510.08 210,278,829.12-Disclosure date of the announcement of the Board of Directors approving the investment in securities Disclosure date of the announcement of the shareholders meeting approving the investment in Luxshare Precision Industry Co.,Ltd.Annual Report 2021 40 securities(if any)(2)Investment in derivatives Applicable N/A In RMB0000 Counterparty Affiliation Whether or not a related-party transaction Type of derivative Initial investment cost Date of commencement Date of termination Beginning balance Amount acquired in the reporting period Amount sold in the reporting period Allowance for impairment loss(if any)Ending balance%of ending balance to the net asset as at the end of the reporting period Actual gain or loss in the reporting period Bank Non-affiliate No Forward 48,545.26 48,545.26 534,737.11 578,098.28 5,184.08 0.15,739.28 Bank Non-affiliate No Option 463,920.39 463,920.39 1,659,594.71 1,725,671.42 397,843.68 11.27I,352.43 Total 512,465.65-512,465.65 2,194,331.82 2,303,769.7 403,027.76 11.42i,091.71 Source of funds Self-owned funds Whether or not involved in any litigation N/A Disclosure date of the announcement of the Board of Directors approving the investment in derivatives(if any)January 23,2021 Disclosure date of the announcement of the shareholders meeting approving the investment in derivatives(if any)Analysis of risks associated with the derivatives held in the reporting period(including without limitation market risk,liquidity risk,credit 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exposures of such foreign exchange derivatives,reports to the management on a regular basis,promptly reports the abnormal situations discove
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