Stock Code: 000100 Stock Abbr.: TCL TECH. Announcement No.: 2024-017
TCL科技集团股份有限公司
TCL Technology Group Corporation
ANNUAL REPORT 2023
(Summary)
April 28, 2024
Amid rapids we beat the waves and sail steadily to reach far
ANNUAL REPORT 2023 Chairman's Statement
Amidst a tightening financial environment, intensifying geopolitical conflicts, and rapidrestructuring of global supply chain, the world economy slowed down in 2023. In the wake ofopportunities amid challenges, the economic restructuring brought new impetus to the transformationand upgrading of the technology industry, and the evolving global energy landscape furtherhighlighted the importantly strategic position of the new energy industry.With the strategic goal of becoming a global leading technology conglomerate, the Companypivoted on the development of high-tech, long-cycle, and capital-intensive businesses, strengthenedthe leading edge of its core businesses in display and new energy photovoltaics. Under the backdropof a complex operating environment, the Company cemented its foundation, enhanced riskmanagement capabilities, pursued extreme cost efficiency, and drove development throughtechnology innovation. In 2023, the Company achieved a revenue of RMB174.367 billion, up 4.69%year on year; net profits of RMB4.781 billion, up 167.37% year on year; net profit attributable toshareholders of the listed company of RMB2.215 billion, up 747.60% year on year; and net operatingcash flow of RMB25.315 billion.During the Reporting Period, the sales of display at user-end market remained sluggish. On thesupply side, the industry structure continued to optimize, competition tended to be benign, and theprices of major products rebounded amid stabilization. The Company's display business keptoptimizing business strategies, and continued to implement the high-end strategy, with a stablegrowth in the market share of major products. TCL CSOT remained top 2nd globally by its marketshare of TV products, while its market share of e-sports monitors and LTPS tablet products rankedfirst globally. The t9 production line, positioned at mid-sized IT and vehicle-mounted displayproducts, started serial production and shipments, and the proportion of OLED high-end productshipments rose quickly. During the Reporting Period, the display business achieved a revenue ofRMB83.655 billion, with a year-on-year increase of 27.26%, and a net profit of negative RMB7million, with a year-on-year improvement of RMB7.618 billion, among which a net profit ofRMB3.441 billion was recorded in the second half of 2023, indicating steadily improving profitability.
In 2023, the global new energy photovoltaic industry and corporate development embarked ona new pattern. Affected by the capacity centrally released alongside the industrial chain, the supplyand demand was unbalanced, with significant decline of product prices, and some low-efficientcapacity faced the pressure of elimination. Overall, the industry structure was expected to beoptimized. During the Reporting Period, TZE recorded a revenue of RMB59.146 billion, down by
11.74% year on year. Under the influence of the decreasing product price, loss from investees,
provision for impairment loss and other factors, TZE reported a year-on-year decrease of 44.88% innet profit to RMB3.899 billion throughout the year. In the face of challenges, TZE maintained itsstrategic resolve and strengthened its competitiveness. On the one hand, it leveraged its differentiatedadvantages in G12, N-type silicon wafers, shingle components and intelligent manufacturing, andaccelerated industry integration through technological innovation so as to pass through industrialcycles and achieve a sustained growth. On the other hand, TZE actively evaluated and explored thefeasibility on localized manufacturing (e.g. the United States, Europe, and the Middle East) in keycountries or regions around the world, and promoted the operational improvement of Maxeon toeffectively use its patented technology and unique advantages in overseas markets with entry barriers.TZE continued to facilitate its efforts to develop photovoltaic business and localized manufacturingon the international arena, seized the global opportunities for the development of the new energyindustry, and achieved a sustainable growth.
During the Reporting Period, the Company sustained robust operations and made steadyprogress in other business segments.
The Company has always emphasized research and development (R&D) investments in cutting-edge technologies and commercial application, with a focus on innovation to drive businesstransformation and upgrading. During the Reporting Period, the Company invested RMB10.309billion in R&D, accounted for 5.91% of the Company's revenue. In 2023, the Company filed 590 newPCT applications, in total of 15,331 applications applied. Notably, the Company ranked secondglobally in terms of patent applications in the field of quantum dot displays. Furthermore, throughcontinuous technological innovation, process advancements, and a strategic shift towards Industry
4.0 manufacturing, TZE has built its unique competitive edges in large-size, thin-film, and N-type
silicon wafers. To implement the technology ecosystem strategy, the Company has proactivelymarshaled resources, made a breakthrough in key technologies and industrial production. This
robusttechnology ecosystem serves as a cornerstone for the Company's continued technologicaldevelopment.
Looking ahead, with intensive integration of several promising techonologies, we will anticipatea surge of novel display applications and immersive scenarios, which will propel the growingdemands in display industry. The inter-country transfer of LCD industry has gradually drawn to anend, and the competitive landscape tends to stabilize. Companies are transitioning from a scale-drivengrowth model to a high-quality development stage fueled by technological innovation, productupgrading, and an eco-system layout. The Company's display business aims at becoming a "world-leading provider of display solutions". To achieve this, we are implementing a comprehensivestrategy that optimizes our business and product structure, strengthens our operational foundation,enhances operational excellence, differentiates our values, and drives continuous improvement inoperational efficiency.As climate change and energy issues escalate into pressing global challenges, there's a growingconsensus on the urgent need to accelerate the green and low-carbon transformation of the energysector. The photovoltaic industry will remain at the bottom of the market cycle in the near to mediumterm, featuring severely unbalanced supply and demand, acceleration of product and technologytransformation, and elimination of outdated production capacity driven by the Matthew effect. Taking"ranking No.1 in global silicon wafer market share and achieving comprehensive global leadership"as the strategic vision, the Company's new energy photovoltaic business sticks to technologicalinnovation, expands the leading edge in advanced production capabilities, strategically strengthens alayout across the photovoltaic industry chain, and capacity building worldwide, so as to go throughthe cycle by relative competitiveness and achieve a sustainable growth.
As a crucial pillar of the national economy, the manufacturing sector plays a key role in drivingeconomic transformation and development. Technological manufacturing is especially vital forfostering economic transformation and upgrading, and nurturing new engines of growth. TheCompany remains focused on its core businesses in displays and new energy photovoltaics,unwavering in its pursuit of global leadership. With the courage of "venturing midstream and strivingto win", embracing a culture of "relentless perseverance and decisive action", the Company guidesits business units to solidify their competitive edges, ensuring steady progress and positioning theCompany for long-term sustainable growth.
Committed to creating value for shareholders, the Company has a long-standing tradition ofmaintaining a prudent dividend policy. Following this commitment, the Board of Directors proposesa dividend of RMB0.80 per 10 shares for 2023, sharing the Company's growth success with allshareholders.I would like to express my sincere gratitude for the trust of all our shareholders, for the supportfrom all our partners and users, as well as for the efforts of all employees!
April 28, 2024
Part I Important NotesThis summary is based on the full text of the 2023 Annual Report of TCL Technology Group Corporation. To obtaina full picture of the operating results, financial position and future development plans of the Company, investorsshould carefully read through the annual report released on the media designated by the China Securities RegulatoryCommission.All the Company's directors attended the Board meeting for the review of this Report and its summary.This Report and its summary have been prepared in both Chinese and English. Should there be any discrepanciesor misunderstandings between the two versions, the Chinese version shall prevail.Independent auditor's modified opinion
□ Applicable ?Not Applicable
Profit distribution plan or plan to convert capital reserve into share capital approved by the Board of Directors? Applicable □ Not applicableAny share capital converted from capital reserve or not
□Yes ?No
The profit distribution plan approved by the meeting of the Board of Directors is as follows: For every 10 sharesheld, shareholders will receive a cash dividend of RMB0.8 (including tax) based on the total number of outstandingshares of 18,779,080,767(Any repurchased shares held by the company upon profit distribution are exclusive of thedistribution), without bonus shares or shares converted from capital reserve.Plans for profit distribution of preferred stock for the Reporting Period approved by the Board of Directors
□ Applicable ?Not Applicable
Part II Corporate Information
1. Stock Profile
Stock name TCL TECH. Stock code 000100Place of listing Shenzhen Stock Exchange
Contact information Board SecretaryName Liao QianOffice address
10/F, Tower G1, International E Town, TCL Science Park, 1001 Nanshan District,Shenzhen, Guangdong Province, ChinaTel. 0755-3331 1666Email addressir@tcl.com
2. Main businesses or products of the Company during the Reporting Period
The Company focused on the development of the core business of displays and new energy photovoltaics and other silicon
materials, and was committed to achieving the strategic goal of global leadership. For details of the Company's business, please referto "Part IV Report of the Board" herein.
3. Key Accounting Data and Financial Indicators
(1) Key accounting data and financial indicators in the past three years
Indicate whether there is any retrospectively adjusted or restated datum in the table below? Yes □ No
Unit: RMB
The end of 2023
The end of 2022 Change The end of 2021Beforeadjustment
After adjustment
Afteradjustment
Beforeadjustment
After adjustmentTotal assets 382,859,086,727359,996,232,668359,996,232,6686.35%308,733,133,305 308,749,696,062Owners'equityattributableto thecompany'sshareholders
52,921,867,08650,678,520,47750,678,520,4774.43%43,034,234,611 43,041,044,200
2023
2022
2023-Over-2022 Change
2021Beforeadjustment
After adjustment
Afteradjustment
Beforeadjustment
After adjustmentRevenue 174,366,657,015166,552,785,829166,552,785,8294.69%163,540,559,623 163,657,700,477Net profitattributableto thecompany'sshareholders
2,214,935,302261,319,451261,319,451747.60%10,057,443,528 10,064,253,118Net profitsattributableto thecompany'sshareholdersafter non-recurringgains andlosses
1,021,080,065-2,698,210,800-2,698,210,800137.84%9,437,240,976 9,444,050,566
Net cashgeneratedfromoperatingactivities
25,314,756,10518,426,376,60918,426,376,60937.38%32,878,450,437 32,878,450,437Basicearnings pershare(RMB/share)
0.11950.01910.0174586.78%0.7463 0.6789Dilutedearnings pershare(RMB/share)
0.11790.01850.0168601.79%0.7354 0.6690Weightedaveragereturn onequity (%)
4.270.520.52
Increase by
3.76
percentagepoints YoY
26.46 26.48
Reason for retrospective adjustment or restatement:
1. Shares were converted from capital reserve during the Reporting Period. The Company recalculated the basic earnings per share and
diluted earnings per share in accordance with accounting standards and other regulations.
2. In accordance with the requirements of the Interpretations of Accounting Standards for Business Enterprises No. 15, Interpretations
of Accounting Standards for Business Enterprises No. 16, and Explanatory Announcement No. 1 on Information Disclosure forCompanies Offering Their Securities to the Public—Non-Recurring Gain/Loss (Revised in 2023), the Company has implemented therelevant provisions. These adjustments have no material impact on the Company's financial position and operating results.
(2) Main accounting data by quarter
Unit: RMB
Q1 Q2 Q3 Q4Revenue 39,443,242,439 45,705,483,167 47,960,309,079 41,257,622,330Net profit attributable to the company'sshareholders
-548,999,154 889,492,743 1,270,918,405 603,523,308Net profits attributable to the company'sshareholders after non-recurring gains andlosses
-729,931,586 129,864,746 1,107,560,913 513,585,992Net cash generated from operatingactivities
4,495,356,538 5,920,811,609 5,727,844,866 9,170,743,092Indicate whether any of the quarterly financial data in the table above or their summations differs materially from what has beendisclosed in the Company's quarterly or interim reports.
□Yes ?No
4. Share capital and shareholders
(1) Table of the total number of ordinary shareholders and preferred shareholders with resumed voting rights as well as
shareholding of the top ten shareholders
Unit: ShareTotal number ofordinaryshareholders bythe end of thereporting period
600,087
Number ofordinaryshareholdersat the month-end prior tothe disclosureof this Report
578,652
Total number ofpreferredshareholders withresumed votingrights by the endof the reportingperiod
Number ofpreferredshareholders withresumed votingrights at themonth-end priorto the disclosureof this Report
Shareholdings of top 10 shareholders of ordinary shares(excluding the lending of shares under refinancing)Name ofshareholder
Nature ofshareholder
Shareholding
percentage
(%)
Number of shares held
Number ofrestricted sharesheld
Shares in pledge,marked or frozenStatus NumberLi Dongsheng
Domesticindividual/Domestic generallegal entity
6.73%1,264,053,189672,868,839
Ningbo JiutianLiancheng EquityInvestment
Pledge 293,668,015
Partnership(LimitedPartnership)
Hong KongSecuritiesClearingCompany Ltd.
Foreign legalentity
5.53%1,037,612,543HuizhouInvestmentHolding Co., Ltd.
Public legalentity
4.35% 817,453,824Wuhan OpticsValley IndustrialInvestment Co.,Ltd.
Public legalentity
2.83% 532,003,016 Pledge 249,000,000China SecuritiesFinanceCorporationLimited
Domesticgeneral legalentity
2.19% 410,554,710PerseveranceAssetManagementPartnership(LimitedPartnership) -Gaoyi XiaofengNo. 2 Zhixin Fund
Fund, wealthmanagementproduct, etc.
1.21%226,736,512
CITIC SecuritiesCo., Ltd.
FinancialInstitution
1.20%225,726,798Bank of ChinaLimited - Huatai-Pinebridge CSIPhotovoltaicIndustry ETF
Fund, wealthmanagementproduct, etc.
1.09%204,079,760China ForeignEconomy andTrade Trust Co.,Ltd. - Foreigntrade trust - GaoyiXiaofengHongyuanCollective FundTrust Scheme
Fund, wealthmanagementproduct, etc.
0.90%168,599,830
Strategic investor or general legalentity becoming top-10 ordinaryshareholders due to privateplacement of new shares
Not applicable
Note on the above shareholders'associations or concerted actions
Among the top 10 shareholders, Mr. Li Dongsheng and Ningbo Jiutian Liancheng EquityInvestment Partnership (Limited Partnership) became persons acting in concert by signing theAgreement on Concerted Action. Mr. Li Dongsheng holds 897,158,453 shares and NingboJiutian Liancheng Equity Investment Partnership (Limited Partnership) holds 366,894,736shares, representing 1,264,053,189 shares in total and becoming the largest shareholder of theCompany.Explain if any of the shareholdersabove was involved inentrusting/being entrusted with
Not applicable
voting rights or waiving votingrightsExplanation on repurchase accountsamong top 10 shareholders
Not applicableTop 10 shareholders participating in the lending of shares under the refinancing business? Applicable □ Not applicable
Unit: ShareTop 10 shareholders participating in the lending of shares under the refinancing business
Name ofshareholder(full name)
Shares in the ordinaryaccount and credit accountat the beginning of the
period
Shares lent underrefinancing at thebeginning of the period
that have not beenreturned
Shares in the ordinaryaccount and credit accountat the end of the period
Shares lent underrefinancing at the end ofthe period that have notbeen returnedTotalnumber
Proportionto totalshare capital
Totalnumber
Proportion to total
sharecapital
Totalnumber
Proportion
to totalsharecapital
Totalnumber
Proportion to total
sharecapitalHuizhouInvestmentHoldingCo., Ltd.
722,139,840 4.23% 21,000,0000.12%817,453,8244.35% 0 0%WuhanOpticsValleyIndustrialInvestmentCo., Ltd.
128,312,396 0.75% 430,240,0002.52%532,003,0162.83% 0 0%Bank ofChinaLimited -Huatai-PinebridgeCSIPhotovoltaicIndustryETF
Unknown
(note)
Unknown
(note)
00%204,079,7601.09% 1,602,800 0.01%
Note: The regular shareholder data provided by the China Securities Depository and Clearing Corporation
Limited does not containthis information.Change in the top 10 shareholders compared with the previous period? Applicable □ Not applicable
Unit: ShareChanges in the top 10 shareholders compared with the end of previous periodName of shareholder (full
name)
Addition/exit
during theReporting Period
Number of shares lent underrefinancing at the end of the
period that have not been
returned
Number of shares held in the ordinary
account, credit account and lendingthrough refinancing that have not beenreturned at the end of the periodTotalnumber
Proportion to
total share
Total number
Proportion to total
share capital
capitalWuhan Optics ValleyIndustrial Investment Co.,Ltd.
Addition 00%532,003,016 2.83%Perseverance AssetManagement Partnership(Limited Partnership) -Gaoyi Xiaofeng No. 2Zhixin Fund
Addition 00%226,736,512 1.21%Bank of China Limited -Huatai-Pinebridge CSIPhotovoltaic Industry ETF
Addition 1,602,8000.01%205,682,560 1.09%China Foreign Economy andTrade Trust Co., Ltd. -Foreign trade trust - GaoyiXiaofeng HongyuanCollective Fund TrustScheme
Addition 00%168,599,830 0.90%Guotai Junan Securities Co.,Ltd.
Exit 00%8,794,061 0.05%Everbright SecuritiesCompany Limited
Exit 00%10,414,915 0.06%UBS AG Exit 00%62,073,717 0.33%GF Securities Co., Ltd. Exit 00%53,191,566 0.28%Haitong Securities Co., Ltd. Exit
Unknown
(note)
Unknown (note)Unknown (note) Unknown (note)Note: The regular shareholder data provided by the China Securities Depository and Clearing Corporation Limited does not containthis information.
(2) Total number of preferred shareholders and shareholdings of the top 10 preferred shareholders
□ Applicable ?Not Applicable
During the Reporting Period, the Company did not have any preferred stock shareholder.
(3) Disclosure of property rights and control relationship between the Company and the actual controller with block diagram
□ Applicable ?Not Applicable
5. Existing bonds on the date of approval and disclosure of the annual report
? Applicable □ Not applicable
(1) General Information on Corporate Bonds
Bond name Abbr. Bond codeDate of issuance Maturity
Outstandingbalance(RMB0'000)
Coupon
rateTCL Corporation CorporateBonds Publicly Offered in2019 to Qualified Investors(Tranche 3)
19TCL03 112983.SZOctober 17, 2019
October 21,
2024
44,000 2.95%TCL Corporation CorporateBonds Publicly Offered in2019 to Qualified Investors(Tranche 2)
19TCL02 112938.SZJuly 19, 2019 July 23, 2024 100,000 3.05%
TCL Corporation CorporateBonds Publicly Offered in2019 to Qualified Investors(Tranche 1)
19TCL01 112905.SZMay 17, 2019 May 20, 2024 100,000 3.15%Payment of interests on bond issued by theCompany during the Reporting Period
During the Reporting Period, the Company paid the interests on bonds asscheduled.
(2) The latest tracking ratings and rating changes of bonds
No change
(3) Key accounting data and financial indicators of the Company for the past two years as at the end of the Reporting Period
Item
End of the Reporting
Period
December 31, 2022ChangeDebt/asset ratio
62.1%63.3%-1.23%
2023 2022 ChangeNet profit after deducting non-recurringgains and losses (RMB0'000)
220,705 -171,729228.52%Debt to EBITDA ratio
15.0%12.1%2.9%Interest coverage ratio 1.80 0.92 95.65%Part III. Significant Events
During the Reporting Period, the Company's business operations remained unchanged, and noevents that had a significant impact on the Company's operations.Part IV Report of the BoardI. Company-related industry outlook in the reporting periodIn 2023, the international political and economic situation was complex and volatile, withongoing geopolitical conflicts. The global industrial supply chain faced a restructuring, furtherexacerbating economic fragmentation. Meanwhile, some economies implemented tight monetarypolicy, which further slowed down global economy. In response to the complicated and ever-changing challenges, the Company continued to focus on the development of displays business andnew energy photovoltaic business, enhance the resilience of its business, and optimize its competitiveedge in pursuit of high-quality sustainable development. In 2023, TCL TECH. achieved a revenue ofRMB174.367 billion, up 4.69% year-on-year; net profit of RMB4.781 billion, up 167.37% year-on-year; net profit attributable to shareholders of the listed company of RMB2.215 billion, up 747.60%year-on-year; and a net operating cash flow of RMB25.315 billion.Major factors that influenced the Company's performance included: the positive turnaround ofthe supply-demand relationship in the display industry, the steady price appreciation of mainstreamproducts, the Company's proactive optimization of business strategies, improving business structure,
and significantly improved profitability. During the Reporting Period, the display business achieveda revenue of RMB83.655 billion, with a year-on-year increase of 27.26%, and a net profit of negativeRMB7 million, with a year-on-year reducting losss of RMB7.618 billion. The display business turnedlosses into profits in Q3 2023 and continued to achieve strong profitability in Q4 2023, which resultedin a total profit of RMB3.441 billion for H2 2023. Fueled by China's "Dual Carbon" strategy, demandin the new energy photovoltaic industry maintained growth. However, industry-wide supply-demandimbalances led to a decline in product pricing. Furthermore, the TZE's performance was impacted bythe investee Maxeon, such as investment losses associated with the Maxeon, as well as long-termequity investments and financial assets recognized as asset impairment loss and fair value change ,respectively. As a result, TZE reported a revenue of RMB59.146 billion for the Reporting Period,down 11.74% year-on-year; a net profit of RMB3.899 billion, reflecting a year-on-year decline of
44.88%.
Leveraging technological innovation as a primary driver, the Company is poised forbuilding a robust portfolio of proprietary and cutting-edge technologies to ensure sustainedindustry leadership and drive continuous industrial upgrading. During the Reporting Period, theCompany invested RMB10.309 billion in R&D, and filed 590 new PCT applications, for a total of15,331 applications applied. The Company's display business strategically amplified R&Dinvestments in ultra-large-sized, ultra-high-resolution, high refresh rate, and flexible displaytechnologies. Establishing new-type display technology and application innovation as its corecompetitivenesses, the Company strove toward the high-end of the value chain. The Company's newenergy photovoltaic business focused on groundbreaking innovation in solar cell technology withindependently developed intellectual property rights, and led the industry transition towardssignificantly improved energy conversion efficiency through its long-term technologicalaccumulation, ultimately securing high-quality development.
The Company ensured a steady and sustainable market position by fortifying corecompetencies and establishing a robust operational foundation, as well as optimizingproduction capacity and product structure. In conjunction with stable competition structure in thedisplay industry, leading manufacturers posses an advantage in terms of economies of scale. Duringthe Reporting Period, the Company strategically realigned its production capacity and productstructure on the basis of incremental markets and continuously increased its market share, with its
TV panel shipments ranking No. 2 globally, MNT panel shipments jumping to No. 3 globally, andflexible OLED shipments experiencing growth in leaps and bounds. At the end of the ReportingPeriod, the Company's photovoltaic materials business expanded its crystal wafer production capacityto 183GW, capturing a 23.4% market share of the global market. The company accounted for 60%of the large-sized (210 series) wafer external sales market, 65% of the overseas wafer external salesmarket, and 36.4% of the N-type wafer segment, maintained No.1 in photovoltaic wafer external salesmarket share, and further consolidated the Company's leadership within the industry.The Company implemented a strategic approach focused on fortifying its corecompetencies and rectifying shortcomings, to bolster the competitive advantage of its corebusiness segments, and increase both efficiency and effectiveness. The Company's displaybusiness capitalized on the technological capabilities of its high-gen production lines to actively drivethe development of larger-sized, higher-specification display products, and to grasp the iterativedemand for IT products fueled by the IT revolution, to fill the gap in its mid-sized production capacity(e.g., the t9 production line) and product layout. To enhance its operational efficiency, the small-sizedOLED business has implemented a high-end, differentiated product strategy. Relying on itsadvantages in leading G12 and N-type wafer technology, Industry 4.0 and flexible manufacturingprocesses, the Company's new energy photovoltaic business played a synergistic role across the entirephotovoltaic value chain, and ultimately shored up the relative advantages in cost efficiency.Promoting globalization strategy, the Company transitioned from product export toindustry capacity export, building a global industrial ecosystem. The Company's display businessimproved its layout in its panel module plant in India and overseas business platform, to strengthenits capacity to serve global customers and partners and satisfy the incremental needs of emergingmarkets worldwide. Due to the increasing complexity of the global economic and political landscape,the Company's new energy photovoltaic business prudently and steadfastly implemented itsglobalization strategy, where it actively evaluated and explored potential industrial projects in keyglobal markets, such as the United States, Europe, and the Middle East. Various projects were rolledout, such as comprehensive project planning, strategic partner negotiation, and thorough feasibilitystudies. Concurrently, the business collaborated with strategic partners to expand its photovoltaic celland module business in Malaysia, the Philippines, and other regions, further cementing its globalcompetitiveness within the new energy photovoltaic sector.
II. Main businesses of the Company during the Reporting PeriodThe Company focused on the development of the core business of displays and new energyphotovoltaics and other silicon materials, and was committed to achieving the strategic goal of globalleadership.
1. Display business
In 2023, the user-end demand for display products remained sluggish globally, and it showedseasonal fluctuation. However, the trend towards larger TV panels drove display area demand, whilea just-in-time (“JIT”) production strategy bacame a consensus among major enterprises, fosteringhealthy industry development amid an increasingly favorable competitive landscape. Large-sizedpanel prices exhibited a seasonal pattern with significant peak-season recovery and a slight declinein the off-season, while mid-sized panel prices stabilized at low levels and small-sized panelsexperienced structural price increases in the second half of the year.By leveraging its strengths in terms of scale and efficiency, TCL CSOT has consistentlyoptimized its business and product mix, insisted on JIT production, and accelerated their businesscycle. This, coupled with favorable price increases for key products, has significantly boostedoperating performance. During the Reporting Period, the display business achieved a revenue ofRMB83.655 billion, with a year-on-year increase of 27.26%, and a net profit of negative RMB7million, with a year-on-year reducing loss of RMB7.618 billion while recorded a profit ofRMB3.441 billion in H2 2023; The display business achieved a net cash flow from operatingactivities of RMB20.12 billion.In its large-sized products business, TCL CSOT leveraged its advantages in terms of high-gen production lines and synergy with the industry chain, and led the upgrading and high-enddevelopment of large-sized TV panels while actively developing commercial displays, such as
TCL TECH.
Display
New energy photovoltaicsand other silicon materials
Industrial finance and
investment
Others
TCL CSOT
JuhuaChina Ray
MokaTechnology
ZhonghuanPhotovoltaic
ZhonghuanAdvanced
TCLFinance
TCL CapitalHighlyTPC
interactive whiteboards, digital signage, and splicing screens. Capitalizing on the manufacturingefficiency and process advantages of its G8.5 and G11 high-gen production lines, TCL CSOTcollaborated with strategic customers to enhance the penetration of large-sized TVs in the market andelevate the value of key segments alongside the industry chain. The Company consolidated its No. 2position in terms of global market share of TV panels, 79% of the shipment area for products above55 inches, 51% of the shipment area for products above 65 inches; while the market share of 65-inchand above products increased to 51%; while 55-inch and 75-inch products ranked No. 1 in the world,the market share of 65-inch products ranked No. 2 globally. In commercial markets such as interactivewhiteboards, digital signage, and splicing screens, the Company ranked among the top three in termsof global market share.In its medium-sized product business, TCL CSOT accelerated its capacity construction inIT and vehicle-mounted screen products, while optimizing and enhancing product competitivenessand optimizing customer structure to create a new engine for business growth. Dedicated to mid-sizeddisplays for IT, vehicle-mounted devices and other business, the t9 production line (phase I) is nowrunning at full capacity, propelling the Company to being ranked third globally in terms of displayshipments. In this segment, the Company occupies the largest share in the global e-sports monitorsmarket, while its laptop and vehicle-mounted devices are on track for branded customer introductionsand gradual production increases. With the steady increase in 6th-gen LTPS capacity, the Companyranks No. 2 in LTPS laptop panels globally and No. 1 in LTPS tablets globally; and vehicle-mountedLTPS displays rank fifth worldwide. TCL CSOT's mid-sized business increased to 21% of itsrevenue, making it a key driver of future growth.In the small-sized display segment, TCL CSOT is targeting the mid-to-high-end marketwith a portfolio of LTPS and flexible OLED production lines, driving continuous improvementsin product competitiveness and market share. TCL CSOT ranked No. 3 in the world in terms ofLTPS mobile panel shipments from the t3 production line. The independently developed 1512 PPIMini-led LCD-VR screens achieved start of production (SoP) and shipment. The Company's t4flexible OLED production line has experienced a significant ramp-up in both utilization rate andshipments. This operational excellence secured the Company's position as the fourth-largest supplierof flexible OLED smartphone panels globally in Q4 2023. Product and customer mix have undergonestructural optimization, evidenced by the introduction of several brand customers during the
Reporting Period. The Company's leadership in flexible OLED technologies extends to foldable,LTPO, and Pol-Less displays, driving a continuous increase in the share of high-end products withinits portfolio. During the Reporting Period, the flexible OLED business segment achieved a two-foldgrowth in revenue, reflecting a sustained improvement in operational performance.Looking ahead into the future, as major information carriers and interactive interfaces in thedigital economy era, displays industry will endure industrial value in the long run and are expectedto unleash more value.In the large-sized and mid-sized segments, display technology has entered a period of slowiteration, while LCD technology will remain the mainstream technology in the long term. In recentyears, global TV sales have remained stable. Fueled by the size increase of large-sized screens,display area has maintained stable growth and industry cycle fluctuations have reduced. The supply-side industry has become further concentrated, and increasingly optimized competition will drive thebalanced development of industrial supply and demand. Corporate profitability will recover withreasonable business returns under favorable circumstances. Driven by product specification upgradessuch as high refresh rates and lower energy consumption, IT panels are poised for significantstructural growth. Capitalizing on this trend, the company’s 8th-gen production lines specialized forIT products will leverage their cutting-edge capabilities to gradually become the main force in keymarkets.Flexible OLED has firmly established its dominance in the smartphone market and graduallypenetrated into new application scenarios. Foldable OLED displays are poised for a new growthfrontier, fueled by rapidly unleashed demand. In the meantime, there exist certain factors that posechallenges to current capacity, manufacturing, and other aspects, such as capacity loss resulting fromnew technologies and the yield ramp-up of new products, which will further improve industry supplyand demand relationships.TCL CSOT, as a global leader in large-sized display panels, will continuously enhance itsrelative competitiveness and profitability; it will improve its medium-sized products portfolio,leverage the advantages of its high-generation production lines, seize the opportunities in incrementalmarkets for high-specification products, and increase market share and revenue scale; TCL CSOTwill optimize its small-sized products and customer structure, drive the high-end development ofproducts through technological innovation, achieve business improvement in flexible OLED, and
accelerate the transformation and upgrading from a large-sized display leader to leader across the fullsize of displays.
2. New energy photovoltaics and other silicon materials business
In response to such challenges as climate change, energy security, and environmental pollution,the global energy industry is experiencing a rapid shift towards a more sustainable model, whichdrives the fast-growing new energy photovoltaic industry. In 2023, the global installed capacitysurged by 72% year-on-year to 395GW, of which China accounted for approximately 216.9GW,while overseas markets contributed the remaining 178GW. The photovoltaic industry's compellingsustained growth prospects have spurred a wave of investment from both established players and newentrants. The influx of capital has accelerated capacity expansion across the photovoltaic industrialchain, leading to a product price downturn in major links while squeezing the profit margin of theindustry as a whole.In line with prudent accounting practices, the Company recognized long-term equity investmentsand financial assets in connection with the investee, Maxeon, as asset impairment losses and fairimpairment change losses, respectively. These factors, along with investment recognized under theequity method on a consolidated basis, contributed to a negative impact on TZE's fourth-quarterperformance. During the Reporting Period, TZE achieved a revenue of RMB59.146 billion, with ayear-on-year decrease of 11.74%, and a net profit of RMB3.899 billion, with a year-on-year decreaseof 44.88%. In the photovoltaic materials business, year-on-year shipment volume surged by 68% to114GW, capturing a leading market share of 23.4% for silicon wafers and generating RMB43.791billion in revenue. The comprehensive gross profit margin for this business also witnessed asignificant improvement of 2.8 percentage points year-on-year to 21.8%; year-on-year shipmentvolume for photovoltaic cells and modules grew by 29.8% year-on-year to 8.6GW, generatingRMB9.309 billion in revenue.With an imbalance between demand and supply throughout the industrial chain, competition isevident within the industry from the lowest levelized cost of energy (LCOE) for photovoltaic modulesto product (efficiency/power output) on the basis of integrated internal rate of return (IRR) and land-based balance-of-system (BOS) costs. Those products with higher energy conversion efficiency willbecome the mainstream in the industry. TZE prioritizes technological innovation, securing aleading position in G12 and N-type photovoltaic materials technology. Through continuous cost
reduction and efficiency optimization, the Company is actively strengthening its comparativecompetitiveness. At the end of the Reporting Period, with comparative competitiveness created bytechnical innovation and lean manufacturing, the Company led the upgrade of large-sized, wafer,thinfilm process technologies for crystals and wafers. Metrics such as the consumption rate of siliconematerials per crystalline unit, monthly crystal output per furnace, and wafer output quantities per kgare at the forefront of the industry and factor into the Company's ability to navigate industry chainfluctuations through sustainable technology and cost leadership. Leveraging its technologicalexpertise in N-type material products, and its flexible manufacturing capabilities, aligned with thedemands for the "multi-product, multi-customer, multi-process" in the N-type era, the Company isaccelerating its transition to N-type materials and shingled modules. With the world's No. 1 externalsales market share in N-type silicon wafer and a cost lower than the second-best cost in the industryat around RMB0.03/W, the Company is establishing a differentiated competitive edge in the industrychain for next-gen technologies.
With the pursuit of autonomous and controllable energy by countries worldwide, coupled withthe increasing localization of photovoltaic manufacturing and the reduction of international trade,there is a resulting degree of uncertainty in business operations. However, also present are novelstrategic opportunities for enterprises with the capacity to expand into overseas markets. TZEstrengthened its Industry 4.0 intelligent manufacturing capabilities, continued to impel itsglobal presence, developing industrial projects in key countries or regions around the world.Reliant upon its long-term investment and accumulation in intelligent manufacturing, the Companyhas secured industry-leading levels of automation and labor productivity, resulting in a competitiveadvantage in localized manufacturing on a global scale. During the Reporting Period, the Companyactively evaluated and pursued industrial expansion projects in key global markets, including theUnited States, Europe, and the Middle East. This included ongoing project planning, communicationand negotiation with potential partners, and research into project implementation. The Company alsoprudently recognized an impairment loss on its investment in Maxeon, a company significantlyimpacted by a confluence of factors in its core markets, including a rapid decline in photovoltaicproduct prices, adjustments to U.S. photovoltaic subsidy policies, and a high interest rate. TheCompany is actively driving operational excellence initiatives at Maxeon, with an aim to fullycapitalize on Maxeon's unique competitive advantages in its core markets and its proven
technological innovation capabilities. By fostering a collaborative ecosystem between globalproduction and distribution channels, the Company seeks to strengthen its competitive edge in theglobal marketplace.Looking ahead into 2024, we anticipate further optimization of the industry structure, along withsustained growth in user-end market demand for display area, which suggests a favorable industryoutlook, leading to enhanced operating performance within the Company's display business. Whilethe photovoltaic industry remains at the bottom of the cycle, the Company's new energy photovoltaicbusiness is taking a proactive stance. By strengthening its operational resilience, the Company aimsto navigate through the industry cycles with a competitive edge. By upholding the spirit of "VenturingMidstream and Striving to Win", the Company will firmly grasp the opportunities brought bytransformations in the technology manufacturing industry and the global energy structure, andcontinue to implement the business strategies of "improving operational quality and efficiency,enhancing strengths to shore up weaknesses, innovation-driven development as well as acceleratingglobal expansion" in order to achieve sustainable, high-quality development and take on a leadingrole in the global market.
TCL Technology Group Corporation
April 28, 2024