Harvatek : 2022 annual company report

Stock Code: 6168

Harvatek Corporation

2022 Annual Report

Notice to readers

This English-version annual report is a summary translation of the Chinese version and is not an official document of the shareholders' meeting. If there is any discrepancy between the English and Chinese versions, the Chinese version shall prevail.

Taiwan Stock Exchange Market Observation Post System: http://newmops.twse.com.tw

Harvatek Annual Report is available at: http://www.harvatek.com

Printed on May 23, 2023

1.Spokesperson & Deputy Spokesperson：

Spokesperson	Deputy Spokesperson
Name：Yu Hui Su	Name：Chia Tzu Li
Title：Finance Dept. Deputy Director	Title：Administration Dept. Manager
Tel：[phone]	Tel：[phone]
E-mail：[e-mail]	E-mail：[e-mail]

2.Headquarters, Branches and Plant：

Headquarters

Address：No.18, Lane 522, Sec.5, Chung Hwa Road, Hsinchu City, Taiwan (R.O.C.) Hsinchu Science Park Branch

Address：1F, No.7, Chuangxin 1st Rd., Baoshan Township, Hsinchu County, Taiwan (R.O.C.)

Tel：[phone]

3. Common Share Transfer Agent and Registrar：

Company:：Horizon Securities Co., LTD.

Address：3F., No. 236, Sec. 4, Xinyi Rd., Xinyi Dist., Taipei City 110, Taiwan (R.O.C.)

Tel：[phone]

Website：www.honsec.com.tw

4. Auditors

Ernst & Young Global Limited

Auditors：Hans Chen、Hsin Min Hsu

Address：9F., No.333, Sec. 1, Keelung Rd., Xinyi Dist., Taipei City 110208, Taiwan (R.O.C.)

Tel：[phone]

Website：www.ey.com

5.Overseas Securities Exchange：None。

6.Corporate Website：http://www.harvatek.com

Contents

	Page
I. Letter to Shareholders
1

1. Company Profile

2.1 Date of Establishment………………………………………………………………………………….…. 4

1. Company History………………………………………………………………………………………...... 4

III. Corporate Governance Report

1. Organizational System….…………………………………………………………………………………. 9
2. Background Information on Directors, Supervisors, General Managers, Vice General,

Managers, Assistant Managers and Heads of Various Departments and

Branches……………………………………………………………………………………………..………. 14

3.3 Remunerations paid to directors, supervisors, general managers and vice general managers in

recent years………………………………………………………………………………………………….. 21

1. Status of Corporate Governance………………………………………………………………………... 23
2. Public Expenditure on CPAs……………………………………………………………………..……... 52
3. Information on Replacement of Accountants………………………………………………………... 52
4. Disclosure of Name, Position and Duration of Service at Firms or Their Associated

Enterprises within the Past Year of Chairman, General Manager, and Managers in Charge
of Financial or Accounting Affairs…………………………………………………………..…………	52
3.8 Transfer of Stock Options and Changes in Equity Pledge of Directors, Supervisors,
Managers and Shareholders Holding More Than 10% of Shares in the Latest Year and as
of the Date of Printing of the Annual Report………………………………………………………...	52
3.9 Information of Relationship among Top 10 Shareholders Who Are Related, Spouses, or
Relatives within the Second Degree of Kinship……………… …………………………………….	54
3.10 Shares Held by the Company, Directors, Supervisors, Managers of the Company and
Businesses Controlled Directly or Indirectly by the Company of the Same Reinvestment
Business and the Consolidated Calculation of the Comprehensive Shareholding Ratio	55
IV. Fundraising
4.1 Capital and Shares	56

4.2 Corporate Bonds, Special Stock, Special Shares, Global Depositary Receipts, Employee Stock

Option Certificates, Restricted Employee Shares and M&A and Implementation of Capital
Utilization Plan	59

1. Operational Status

5.1 Business Activities.………………………………………………………………………………….……. 60

5.2 Overview of Marketing and Production/Distribution………………………………..…………….. 68

5.3	Information of Employees…………………………………………………………………….….………	72
5.4	Information on Environmental Protection Expenditure……………………………………………	72

5.5 Employer-employeeRelations…………………………………………………………...……………... 73

5.6 Information Security Management Strategy and Framework…………………..……………….. 75

5.7 Important Contract………………………………………………………………………………..……….. 79

VI. Financial Status

6.1	Brief Balance Sheet and Income Statement for the Past Five Years………………..…………..	80
6.2	Financial Analysis of the Past Five Years………………………………………………………	84
6.3	Audit Committee Review Report of the most recent annual financial report………....…	87

1. Latest Financial Report……………………….…………………………………………………….. 87
2. Entity Financial Statement of the Latest Year Inspected and Authenticated by
   CPAs…….………………………………….....…………………………….…………………………….. 87
3. Impact of the Latest Financial Difficulties Encountered by the Company and its
   Associated Enterprises on the Company's Financial Standing as of the Date of Printing of
   the Annual Report.……………………….…………………………………….…………………………. 87

VII. Discussion and Analysis of Financial Standing and Financial Performance and Risks

1. Financial Standing………………………………………………………………………….…………….. 307
2. Financial Performance………………………………………………………………………………....... 308
3. Cash Flow………………………………………………………………………………………………….. 308

7.4 Impact of the Latest Major Capital Expenditures on Financial Business……………………..	309
7.5 Main Reasons for Profits or Losses of the Latest Re-investment Policy, Improvement
Plan and Investment Plan for the Coming Year………………………………………………..……	309

1. Analysis and Assessment of Risks…………………………………………………………………….. 309
2. Other important matters…………………………………………………………………………….……. 311

VIII. Special Notes

8.1 Information of associated enterprises…………………………………………………………………. 312

1. Organization of the Latest Private Placement Securities as of the Date of Printing of the
   Annual Report…………………………………….…….…….…….…….………………………………... 316
2. Holding or disposal of the Company's shares by its subsidiaries of the latest year and up
   to the date of printing of the Annual Report.……………………………………………………....... 317
3. Other matters requiring supplementary information……………………………………………….. 317

IX. Disclosures of Events Which May Have a Significant Influence on Stockholders' Equity or

317

Share Price.

1. Letter to Shareholders

Dear Shareholders：

In the first half of 2022, the global consumer market experienced a major shortage of chips and key components, while in the second half of the year, raw material prices and inflation continued to rise due to the ongoing Russia-Ukraine war, and weak demand and rising inventory of finished goods in the consumer market were caused by China's epidemic control policies. According to TrendForce's analysis, the output value of the LED market in 2022 decreased significantly by about 19% compared to the previous year. Except for the Mini LED backlight market, which grew by more than 40%, both the lighting and UV LED markets experienced a significant decline. Looking ahead to 2023, although the overall economy is still weak and there are many uncertainties, it is expected that the end-of-year inventory will back to a normal level, and this will drive order development. Therefore, it is expected that the output value of the LED market in 2023 will show single-digit growth.

In terms of visible light products, advanced technologies and penetration rate improvements of intelligent headlights, identification lights, ambient lights, Mini LED taillights, and Mini LED car displays for automotive applications are expected to boost the size of the automotive LED market. The demand growth of display screen LEDs in markets such as virtual shooting, enterprise meetings and education spaces, control rooms, and sports events will lift the size of the display screen LED market.

In terms of non-visible light products, with brands such as SONY and Apple launching augmented/virtual reality and equipped with eye-tracking technology; the EU New Car Safety Evaluation Association plans to introduce an active driving monitoring system in 2023 and officially implement it in 2025;The smartwatch will be equipped with new biometric sensing functions, including total body water contain and blood sugar monitoring, blood lipids and blood alcohol concentration, and the original heart rate and blood oxygen monitoring functions. It is expected that the number of emission components and receiving components will continue to increase, driving the IR LED market output value.

Our company constantly strives to improve process capability and can meet customer demands in product quality and delivery time. In addition to consumer applications, small-pitch display screen products, and IR LED, our business promotion also actively expands new application markets, such as wearable applications, smart home appliances, and automotive markets, which have higher profit margins. Additionally, we have invested in the production and sales of Mini LED and IC packaging.

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