Letter to Shareholders

Despite the severe challenges in the global economy and the industry in 2020, efforts of each individual at LITEON made it possible for LITEON to reach historic highs in both profit margin and earnings per share (EPS). The achievement demonstrates LITEON's ongoing success in developing core competencies, creating stronger operations, and increasing profitability. LITEON's global consolidated revenue amounted to NT$157.134 billion in 2020. The gross profit margin was 17.4% for the year and the operating profit margin was 6.5%, which rose by 2ppt and 1.2ppt, respectively, year over year. The operating profits was NT$10.206 billion, which rose by 9% year over year. The net profit was NT$10.016 billion. The EPS was NT$4.31, which rose by 7% year over year.

 

Business Performance

With the arrival of 5G technology, the coronavirus induced "new norm" in the end user market, and the stay-at-home economy, LITEON's optoelectronics business segment benefited from increased sales of LED components in sensing technology, 5G, AIoT, and industrial control application in 2020. It also saw rising demand for LED in general healthcare and sterilization and disinfection UV lights as well as a higher shipment volume for outdoor LED lighting products. For the information and communications technology business segment, the demand for power management systems for cloud computing, high-end servers and network equipment as well as power supply products for laptop computers and gaming consoles kept growing. LITEON's market share in keyboards, mice and other peripherals also increased. The main growth and profitability drivers, cloud computing, 5G, AIoT and optoelectronics, contributed to more than 40% of the profit. In particular, cloud computing sales and profit had reached a certain size and achieved stable growth. Furthermore, LITEON sold the solid-state drive business unit (SSD BU) successfully to KIOXIA Holdings Corporation on July 1, 2020.

 

Global geopolitics and the pandemic were two sources of uncertainty in the macro environment. They had started pushing the world to shift actively toward decentralized manufacturing. Mass production has always been one of the core competencies that LITEON has spent years to develop. Faced with the huge supply chain challenges created by the pandemic in 2020, LITEON took active measures to allocate global production capacity as appropriate. The company also continued to expand production outside China in order to meet the global demand and to demonstrate strong operational and supply chain resilience. In the future, LITEON will be connecting production and operations centers to accelerate the implementation of advanced manufacturing and digitalized supply chain management. LITEON will also combine smart manufacturing capacity and product development capability of production facilities in different regions for even higher added production and operations value and optimized services for customers worldwide.

 

Corporate Social Responsibility

LITEON is a long-time participant in sustainable corporate governance and its development. The company takes an active approach to fulfilling its promises to the environment, the community, and the stakeholders. In following the UN Sustainable Development Goals (SDGs), LITEON supports initiatives in educational quality, industry, innovation and infrastructures, responsible consumption and production, climate action, aquatic ecosystem, and global partnership. In particular, LITEON has been hosting a series of "creative beach cleanup" under the "SEAHOPE Project" since 2018. LITEON works with domestic social enterprises that process styrofoam marine waste, the Penghu County Government, and the Industrial Technology Research Institute to modify recycled styrofoam marine waste into recycled plastics. In 2020, LITEON went on to sponsor the Penghu County Government and the Kinmen County Government in getting the world's first containers that could be processed on site and significantly reduce the transportation volume of styrofoam marine waste. Meanwhile, LITEON succeeded in using modified recycled plastics in LITEON's keyboard and mouse products. The company also obtained certification of 76% use of post-consumer recycled content and certification of origin. The certification made LITEON the world's first company to put styrofoam marine waste in electronic products.

 

Trends in global sustainable investing places an emphasis on a company's performance and results in different ESGs. LITEON has been included in the "Dow Jones Sustainability Index (DJSI)" for ten consecutive years and in the MSCI ESG Leaders Index for seven consecutive years. The company also received an A rating in the Carbon Disclosure Project (CDP 2019) in 2020. In Taiwan, LITEON in 2020 won seven TCSA Awards, including "Taiwan Top 10 Sustainable Company" in the overall performance category, "Platinum Award for e-Information Manufacturing" in the corporate sustainability reporting category, and "Creative Communication Award," "Climate Leadership Award," "Circular Economy Leadership Award," "Social Inclusion Award," and "Information Security Award" in the outstanding case category. Furthermore, LITEON was ranked top 5% in the 2020 Corporate Governance Evaluation Survey conducted jointly by the Taiwan Stock Exchange and the Taipei Exchange. In addition, LITEON was included in the FTSE4Good TIP Taiwan ESG Index. The company also won first prize in the electronics technology category of the Global Views Corporate Social Responsibility Survey 2020 as well as the Commonwealth Magazine's Corporate Citizen Award in the large enterprise category for the 14th time.

 

Business Development

LITEON founder and chairman Raymond Soong left office effective on July 30, 2020, but remained as a member of the Board . LITEON vice chairman and CEO Warren Chen left office, but remained a director of LITEON. The board of directors nominated LITEON director Tom Soong to be the chairman. His focus would be on corporate governance and board operations, training of core talents and long-term growth strategies, and the ongoing efforts to secure the company's core competencies and to pass on the corporate culture to new employees. Former power system business segment CEO Anson Chiu became LITEON president. He was tasked with leading the management team to integrate products, technologies, and services across different business segments in order to provide total solutions for customers. Anson Chiu would be responsible for new business development, global network and smart manufacturing optimization, and enhancement of LITEON's overall business performance and strong long-term growth.

 

Future Outlook

Since its establishment in 1975, LITEON always sets itself to "strive for excellence." While the world is changing fast and the organization is constantly being modified and refined, the company has never strayed from its initial beliefs and core values. The new management team will continue to promote the same philosophy, and help the company generate new growth momentum. The team will dedicate itself to growing LITEON into an honest and healthy century-old company.

 

Looking forward to a new year, we can anticipate many uncertainties and challenges in the market and in the supply chain. LITEON will continue to optimize profitability and create stronger operations and expand its business in three industry mega trends: cloud computing, 5G and AIoT, and automotive electronics and autonomous vehicles. Growth strategy will be market oriented and built with flexibility to meet maximum customer requirements. LITEON aims to provide total solutions for customers. Meanwhile, we are working hard to build a diverse talent base and shape a talent-centric corporate culture. The healthy work environment, compensation and remuneration, and training would make it easier for talent to fulfill their potential. We not only recruit professionals from different fields, but try to attract a younger generation of candidates to join LITEON. Each individual at the company works together to push LITEON up a new and sustainable operation peak and create more value for shareholders. We would like to thank you again for your care and support over the years. We look forward to working side by side with you and advance toward an energetic, prosperous, and brand-new vision.

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