Letter to Shareholders

Dear Shareholders,

 

LITE-ON's global consolidated revenue amounted to NT$207.1 billion in 2018. Pre-tax profit was NT$10.78 billion, after-tax profit was NT$7.96 billion, and earnings per share (EPS) was NT$3.42, representing a 203% year-on-year increase. Net profit for the third quarter, in particular, grew by 50%, the highest growth in the past two years, showing a return to normal growth in profitability. In recent years, LITE-ON has been committed to a self-transformation that seeks to elevate profitability with a realistic approach. With changes in operating models, adjustment to product portfolios, growth in revenue, and even creation of excellent profitability, LITE-ON is building on sustainable business development to become a centenarian corporation.

 

Business Performance

In 2018, LITE-ON's two pillars for growth — cloud applications, and LED component/ vehicle and outdoor LED lighting — reached nearly 30% of total revenue, for more than a 20% year-on-year gain. This demonstrates the achievement of LITE-ON's efforts in new business incubation and self-transformation. LITE-ON will continue to dedicate itself to using strategic perspectives for steady development of core areas, and will steadily and stably develop promising new business into long-term dynamics for growth.

 

In the opto-electronics business segment, market share in invisible LED applications and LED components continued to increase, while LED vehicle lighting shipments have continued smoothly. LED vehicle lighting and sensor components have gradually shown potential for growth, while vehicular camera modules are scheduled to officially commence mass production by the end of 2019. In the information technology business segment, high-end cloud computing servers and networked power management systems experienced steady market growth; market share in keyboards, mice and other computer peripherals rose as well. The storage business segment also benefited from cloud computing-related applications and grew steadily.

 

In response to the many changes in the global industrial environment in 2018, we have streamlined and focused LITE-ON’s business scope and business segments, and have successfully disposed two mobile phone-related businesses. The consistent goal is profitability, even steadier operations, and higher return on equity. At the beginning of 2018, LITE-ON transferred some of the key business operations and assets in the portable image business segment to LuxVisions Innovation Ltd. through a transfer of business operations. The transaction price was US$360 million, plus rights to a 10% stake in LuxVisions. In the third quarter of 2018, LITE-ON sold 100% of shares in three mobile mechanics business segment subsidiaries to Top Touch Electronics Co., Ltd., a subsidiary of Zhejiang Firstar Panel Technology Co., Ltd., which is a listed company based in Shenzhen. The equity transfer price was RMB 530 million.

 

Corporate Social Responsibility

The global trend of valuing sustainable investment remains in the ascendant. ESG performance has become an important reference for investors. LITE-ON has been listed as a member of the Dow Jones Sustainability Index (DJSI) for eight years in a row since 2011, and has had a place on the MSCI ESG Leaders Index for five years in a row. In 2018, LITE-ON was listed in the inaugural Thomson Reuters Top 100 Global Technology Leaders. In Taiwan, LITE-ON was ranked top 5% in the 2018 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 by for the 12th time in 2018; and was awarded the Platinum Award, the highest honor, in the electronic and information manufacturing category in the 2018 Corporate Sustainability Report Awards from TCSA.

 

Future Outlook

LITE-ON will continue to push for transformation by developing business areas including cloud computing, LED outdoor lighting, automobile electronics, smart manufacturing, and the Internet of Things. The pace of LITE-ON’s globalization will also accelerate, with the establishment of the Kaohsiung Operations Center and the asset expansion of the Huadong Operations Center. The new factory for automobile electronic and optical core business at the Huadong Operations Center commenced operation at the end of 2018, while the Kaohsiung Operations Center is scheduled to commence production in the middle of 2019. We are continuously accelerating our improvement of overall smart manufacturing, and strengthening LITE-ON's core competencies, mass production and the competitiveness and advantages in customer service. We also continue to speed up integration of new technologies, production line automation and digital transformation, as well as quality manufacturing and supply chain management. We value quality above cost, and we substantially realize internal system innovation that starts with product development.

 

Looking forward into 2019, uncertain factors and challenges such as China-U.S. trade negotiations, the highly globalized market environment, chain reactions brought by political and economic conditions, as well as changes in exchange rates and terminal market demands, may have unexpected impacts on LITE-ON, our customers, or the technology industry as a whole. LITE-ON hopes to hold a receptive and open attitude towards the changeable external environment, while taking an entrepreneurial approach to corporate responsibility and continuing to exploit our strategic capacity to overtake competitors through self-transformation. We strive for profitiable growth and operational excellence under One LITE-ON. We are grateful for the long-term support and recognition from our shareholders, colleagues, customers, suppliers and business partners, whom we hope will join hands with LITE-ON in 2019 as we continue our progress towards becoming a centenarian corporation.

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