Letter to Shareholders

LITE-ON's global consolidated revenue amounted to NT$177.954 billion in 2019. Operating profit was NT$9.35 billion, increasing 25% year-over-year. Net profit was NT$9.38 billion and earnings per share (EPS) was NT$4.03, the highest level in last three years, representing 18% year-on-year growth. The figures reflected LITE-ON's ongoing effort to focus on realigning revenue sources and creating stronger operations, thereby achieving successful upgrade and transformation.

 

Business Performance

In 2019, the LITE-ON Opto-electronics business segment reported steady growth as its LED components benefited from the demand for 5G and artificial intelligence of things (AIoT) applications and rising shipments of LED vehicle lighting. The Information Technology business segment continued to see rising shipments of AI smart home devices and game console power supply products, and reported market share gains in keyboards, mice and peripherals and streamlined shipments of all-in-one laser machines. LITE-ON's pillars for growth, cloud computing, LED components, LED vehicle and outdoor lighting, 5G, AIoT and other applications, accounted for more than 30% of the total revenue, and contributed more than 40% of the profit. On the operational side of business, we will focus on opportunities created by cloud computing, such as power supply, casing, network communication and other IoT applications, and growth in power supply and opto-electronics components in 5G and AIoT applications.

 

In the interest of effective specialization in the group, the business segments operate independently and follow a diversification strategy designed to improve the overall business performance and competitiveness. In 2019, an extraordinary general meeting passed a proposal to spin off the Solid-State Drive (SSD) Business Unit to a wholly owned subsidiary, Solid State Storage Technology Corporation. The Solid-State Drive Business Unit will be transferred to KIOXIA Holdings Corporation by sale of shares. The business to be sold is the operations and assets of the Solid-State Drive Business Unit, including inventory, machines and equipment, teams, technologies and intellectual property rights, and client/supplier relationships. The transaction price is US$165 million. (The actual amount will be subject to adjustment at settlement as provided in the agreement.)

 

In response to drastic changes in global geopolitical and economic conditions, LITE-ON has been investing heavily in establishing long term advantages, including automated production systems and robotic arms, accelerated smart manufacturing, strengthened integration of manufacturing platforms and capabilities to manage digital supply chains at production facilities around the world, and integration of internal talent and external partners. LITE-ON aims to build a supply chain for smart manufacturing and enhance the company's core competency of serving customers worldwide. Meanwhile, LITE-ON has been making more extensive use of the Microsoft productivity tool, "O-365", and introduced robotic process automations (RPA) to push for a complete digital transformation in the last two years. This year, we will take one step further to combine management data on the LITE-ON Cloud and implement AI in stages to turn LITE-ON into an AI-enabled smart manufacturing business.

 

Corporate Social Responsibility

As part of our ongoing effort to develop sustainable governance, increase our influence in the industry and achieve environmental sustainability, LITE-ON created the Corporate Sustainability Committee in 2019. The committee reports directly to the board of directors and serves to strengthen the sustainable governance mechanisms. Other responsibilities of the committee include optimization of key supplier criteria and improvement of the quality of sustainable supply chain management and the value of products. LITE-ON was one of the winners of the "Most Prestigious Sustainability Awards - Top Ten Domestic Corporates" by Taiwan Corporate Sustainability Awards (TCSA) in 2019. We were also a winner of the Corporate Sustainability Report Platinum Award and the Climate Leadership Award. LITE-ON has recently been rated "A" by the Carbon Disclosure Project (CDP 2019) at the beginning of 2020. The rating makes LITE-ON one of the leading companies worldwide in terms of information transparency and action to fight climate change. LITE-ON has been listed as a member of the Dow Jones Sustainability Index (DJSI) for nine years in a row since 2011, and has had a place on the MSCI ESG Leaders Index for six years in a row. In Taiwan, LITE-ON was ranked top 5% in the 2019 Corporate Governance Evaluation Survey jointly implemented by the Taiwan Stock Exchange (TWSE) and the Taipei Exchange (TPEx); listed as a constituent stock in the FTSE4Good TIP Taiwan ESG Index; awarded Commonwealth Magazine's Corporate Citizen Award in the large enterprise category for the 13th time; and named a winner in the electronics technology category of the Global Views Monthly Corporate Social Responsibility Survey 2019.

 

Future Outlook

Going forward, many uncertainties remain in the global economy, while the COVID-19 outbreak creates new ones for business operations. In addition to staying alert to changes and keeping flexibility in production capacity to meet the global demand, LITE-ON continues to focus on cloud computing, 5G, AIoT and other new applications in the medium to long term. We will invest and build up the company to become a competitive smart manufacturer that is always up to date with current developments. The goals include Industry 4.0 and Lighthouses. We will strive to put down strong roots and grow into a centenarian corporation. LITE-ON's investments in techniques, information communication technologies, digital transformation, and global human resources are intended to facilitate the development of new businesses. All employees are encouraged to share with open minds and keep learning, growing, and creating new things. Employees are also encouraged to acquire new skills such as digitization and supply chain management in smart manufacturing. We pay attention to details and do not take shortcuts so that we may take the company to the next level and be one of the best and most agile in the business. We would like to thank our shareholders for your long-term support and recognition. We look forward to having you by our side in 2020 as LITE-ON continues the progress toward becoming a centenarian corporation.

 

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