ITEQ : 2023 Annual Report

Ticker symbol: 6213

Innovation, Teamwork, Excellence, Quality

ITEQ Corporation

Annual Report 2023

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 version and Chinese version, the Chinese version shall prevail.

TWSE Market Observation Post System: https://mops.twse.com.tw

Designated website by FSC: https://sii.twse.com.tw

Company website: https: //www.iteq.com.tw

Published Date: March 31, 2024

1. DeputySpokesperson:SpokespersonHsin-HuiandTsaiActing Spokesman of the Company
   Position: CEO and General Manage
   Tel: [phone]
   E-MAIL: [e-mail]
   Acting Spokesperson: Jung-Tsan Chou
   Position: Senior Director
   Tel: [phone]
   E-MAIL: [e-mail]

II. Contact Information of He dquarters, Branches, and Plants
	Type	Name of Company		Address:		Tel:
	andHeadquartersplants	ITEQ Corporation		CountyNo. 17, Daluge Road, Xinpu Town, Hsinchu		[phone]
		ITEQ (Dongguan)		Zone,No.168,BeizhaDongfangVillage,Avenue,HumenNanfangTown, Dongguan,Industrial		0769-8900-6168
		Corporation		Guangdong Province
		ITEQ (Wuxi)		DevelopmentNo. 3, ChunhuiZone,MiddleDongtingRoad, XishanTown, EconomicXishan		0510-8826-7168
		Corporation		District, Wuxi, Jiangsu Province
	Branches and	ITEQ (Guangzhou)		GuangzhouNo. 2, HuafengEconomicRoad, Yongheand TechnologicalEconomic Zone,		020-6286-8088
	Corporation		Development Zone, Guangzhou Province
	Plants	ITEQ (Huangjiang)		HuangjiangNo. 13, BinheTown,Road,Dongguan,Tianxin Village,Guangdong		0769-3893-2168
		Corporation		Province
		ITEQ (Jiangxi)		Ganzhou Electronic Information Industry		0797-7322-888
		Electronic		Technology City, Longnan Economic and
		Technology Co., Ltd.		Technological Development Zone, Longnan,
III.		ITEQ Corporation		Ganzhou, Jiangxi Province		~ In Progress ~
Contact Informa ion of Stock		Transfer Agent~ In Progress ~
		(Thailand) Ltd.
	Name: Grand Fortune Securities Co., Ltd.
	Address: 6F., No. 6, Sec. 1, Zhongxiao W. Rd., Zhongzheng Dist., Taipei City
	Tel: [phone]

Website http://www.gfortune.com.tw

IV. CPANameforoftheCPA:FinancialChia-ChienStatementsTangand forYa-Lingthe MostChen Recent Year

Name of accounting firm: KPMG Taiwan

Address: 68 F, No. 7, Sec. 5, Xinyi Rd., Xinyi Dist., Taipei City 11049, Taiwan

Website:Tel: (02)8101https://www.kpmg.com.tw-6666

1. OverseasNone Securities Exchange Where Securities are Listed and Method of Inquiry:
   VI. Corporate Website: https://www.iteq.com.tw

Table of Contents

			Page
Chapter I.	Letter to Shareholders	1
Chapter II.	Company Profile	5
I.	Date of Incorporation	5
II.	Company History	5
Chapter III. Corporate Governance Report	14
I.	Organizational System	14
II.	Information of Directors, General Manager, Deputy General Manager, Senior Manager, and
	Managers of Departments and Branches	16
III. Operation Status of Corporate Governance	30
IV. Information on CPA	78
V.	Information on Replacement of CPA:	78
VI. Where the Company's Chairman, General Manager, or managerial officers from finance or
	accounting departments who have worked in the CPAs' audit firm or its affiliate companies
	in the last fiscal year: None	79
VII. Equity Transfer or Changes in	Equity Pledge of Directors, Managerial Officers, and
	Shareholders with Shareholding Percentage of 10% or More	79
VIII.Relationship information, if among the company's 10 largest shareholders any one is a
	related party or spouses, or relatives within the second degree of kinship	81
IX.	The number of shares held by the company, the company's directors and managers as well
	as the businesses directly or indirectly controlled by the company in the same one
	investment business, and the consolidated comprehensive shareholding ratio	82
Chapter IV.	Capital Overview	83
I.	Capital and Shares	83
II.	Issuance of corporate bonds	90
III.	Issuance of preferred shares	90
IV.	Issuance of global depository receipts	90
V.	Issuance of employees' warrants	90
VI.	Issuance of employees' restricted	res	90
VII. M&A or acceptance of the new shares issued by other companies	93
VIII.Implementation of Fund Utilization Plan	90
Chapter V.	Operational Highlights	......... ......... ......... ......... ......... .........	... 94
I.	Business Activities	.94
II.	Market Analysis and Status of Goods Production and sales	99
III.	Employees	104
IV.	Environmental Protection Expenditure	104
V.	Employment relations management	107
VI. Information and Communication Security	110
VII. Important Contracts	114
Chapter VI.	Financial Information	115
I.	Condensed Financial Information of the Most Recent 5 Years	115
II.	Financial Analysis for the Most Recent Five Years	120
III.	Audit Committee' Report for the Most Recent Year	123
IV.	The Financial Statements of the most recent year, together with CPAs' Audit Report	123
V.	Parent Company Only Financial Statements Certified by CPAs of the Most Recent Year ..	123

VI. Chapter VII.

I.

II.

III.

IV.

V.

VI.

VII. Chapter VIII.

I.

II.

III.

IV.

V.

[Appendix]

I.

II.

III.

IV.

V.

Any financial difficulties experienced by the Company or its affiliates in the most recent year
as of the publication date of the Annual Report:	123
Review and Analysis on Financial Status and Performance, and Risks	124
Review and Analysis on Financial Status	124
Review and Analysis on Financial Performance	125
Review and Analysis on Cash Flow	125
Impact of Significant Capital Expenditures on Finance and Business in the Most Recent Year
.................................................................................................................................................................	126
Reinvestment Policy in the Most Recent Year, Main Reasons for Profits or Losses Generated
Thereby, Improvement Plans, and Investment Plans for Coming Year	126
Risks	126
Other Important Matters:	130
Special Disclosure	131
Relevant Information about Affiliates	131
Private Placement of Securities in the Most Recent Year as of the Publication Date of the
Annual Report: None	135
The Company's Shares Held or Disposed by Subsidiaries in the Most Recent Year as of the
Publication Date of the Annual Report: None	135
Other Supplementary Description: None	135
Any Events in the Most Recent Year as of the Publication Date of the Annual Report that Had
Significant Impacts on Shareholders' Equity or Security Prices as Stated in Subparagraph 2,
Paragraph 3 of Article 36 of the Securities and Exchange Act : None	135
.........................................................................................................................................................	136
Report on Evaluating the Independence and Competence of the Accountants Employed by
the Company	136
2023 Statement of Internal Control System	138
Audit Committee' Report for the Most Recent Year	139
The Financial Statements of the most recent year, together with CPAs' Audit Report	140
The Parent company only financial statements of the Most Recent Year of the Company
which Financial Statements Audited by CPAs	141

Chapter I. Letter to Shareholders
Ladies and Gentlemen,
I.	2023 Business Results								Unit: NT$ thousand
	(I) Business Plan Implementation Results
			Operating Revenue				29,129,710		25,079,039		(13.91)
				Item				2022		20023		YoY (%)
			Operating Gross Profit				3,939,903		3,105,637		(21.17)
			Operating Income				1,896,419		994,869		(47.54)
			(orNonExpenses)-operating Income				418,706		157,427		(62.40)
			Net Income After Tax				1,855,173		676,626		(63.53)
												－
	(II)		PerformanceNet Profit Marginof Operating(%)			Budget	6.37%		2.70%
	The Corporation did not make public its forecast for 2023, so there is no need to
	disclose the operating budget performance. However, the overall actual operating
	conditions and performance are generally in line with the Corporation's internal
	operating plan.
	(III) Analysis of Financial Income and Expenditure and Profitability
					Item					2022	2023
	Financial	Debt ratio (%)									39.76	41.76
	Long-term Capital to Property, Plant and Equipment		328.23	282.87
	Structure	Ratio (%)
	Solvency	Current Ratio (%)						197.27	202.15
	Quick Ratio (%)									171.01	171.90
	Operating	Average Collection Days					159.00	172.00
	Ability	Average Inventory Turnover Days				62.00	54.00
				Return on Assets (ROA) (%)				5.57	2.37
				Return on Equity (%)					8.96	3.42
	Profitability	Net Profit Before Tax to Paid-in Capital Ratio (%)		63.79	31.75
				Net Profit Margin (%)					6.37	2.70
				Earnings Per Share After Tax (NT$)				4.94	1.86
	(IV) Research Development Status
	With the focus on the development of "High-end Electronic Materials", ITEQ has
	unremittingly developed multiple high-density interconnected copper foil laminates
	and carrier plate copper foil laminate materials, and applied them in diversified fields,
	including the latest AI servers, switches, and new-energy automative electronics.
	Relying on its core technologies, ITEQ has developed a new glass-free resin coated
	copper (RCC) printed circuit board (PCB) material. Resin coating has been directly
	applied for compression curing of this material, reducing the use of glass cloth,
	making PCB lighter and thinner, further lowering carbon emissions, and integrating
	the	thinking of green product;	the advantages of this material, including being
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lightweight, high conductivity, low transmission loss, and high thermal conductivity, making it applicable to the design of high-speed,high-frequency, and high-density circuits.

In addition to the attentive efforts exerted in the development of new materials, the Company will continue to improve the performance of high-frequency,high-speed, and low-loss transmission products, and deploy them in next-generation communication infrastructure, e.g., AI data centers, intelligent automative electronics, smartphones, AI PC/laptops, and other relevant products, aiming to consolidate its leading position as a global high-end laminate material supplier.

With respect to flexible PCBs, ITEQ will place continual emphasis on consumer electronics and new energy automotives. For consumer electronics, the Company will further improve existing low-loss materials and ion-migration-resistant materials, and introduce suitable laminates and cover films with high bending resistance on this basis in consideration of the gradual increase of application needs for foldable screens, etc. As for new energy automotives, the Company will develop high-reliability laminate and cover film products to meet the high graded requirements of material reliability for vehicles and energy storage.

ITEQ will further promote the research and development of ESG. In response to increasingly strict environmental regulations of each country, the Company will integrate the thinking of green products early in the selection stage of new raw materials during research and development, and further reduce or eliminate the use of materials that contain hazardous substances; in addition, considering the global Net Zero by 2050 trend, the Company will continue to review, reduce, and optimize the carbon footprint of raw materials in the hope that we can realize our commitment to corporate social responsibility and set a good example.

II. Summary of 2023 Business Plan

(I) Management Principles

1. With the focus on our existing business on "High-end Electronic Materials" and extending to integrate high-density interconnect copper foil laminate and carrier board's copper foil laminate, we are committed to becoming the leader of high- speed, high-frequency, and low-loss materials, high-reliability automotive materials, and halogen-free and environmentally friendly materials manufacturer. The applications of our products include AI server applications, 5G infrastructure, network communications, data centers, automotive electronics, smartphones, consumer electronics, and other related products. We are confident we can increase our market share in the high-end electronic copper foil laminate market.

2. Quality has been the foundation of our sustainable business development. We will continue to strengthen and improve the quality control system of the supply chain, including raw material supplier management, controlling the factory's manufacturing processes and center of the quality control group, continuously improving yield, and the quality and reliability monitoring of output to comply with international regulations and customers' incoming material regulations and standards. We have established a comprehensive manufacturing and quality assurance system and capabilities for the Group, and enhanced our capabilities in manufacturing high-end products. At the same time, we have reduced the production costs of mature products and minimized quality anomalies, aiming to strengthen the company's manufacturing quality and increase stable profitability.

3. Facing volatile geopolitical development, the division of technologies, and the post- pandemic era, global mainstream hardware markets are still expected to develop

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III.

IV.

towards high-end going forward. The development will be led by high-speed computing and automotive electronics. For high-speed computing, the generation of the processor chip will be upgraded, and bandwidth and speed increased, while for automotive electronics, electric vehicle policies are being promoted around the world, which will significantly stimulate the growth of electronic components; both will accelerate the growth of high-end electronic materials. ITEQ Corporation will continue to research and develop high-end materials, position itself globally based on geoeconomic strategies, and employ economies of scale to meet the enormous demand for high-end electronic materials.

4. To converge with international trends, ITEQ adheres to a corporate culture featuring the spirit of ESG, continually engages in the research and development of green products, low-carbon manufacturing and procurement, and green energy transformation, and exerts efforts in corporate governance, social care, and environmental protection in its implementation of sustainable management goals.

(II) Important Production and Sales Policy

1. Enhance the structure analysis of key product markets, to comprehend the changing trend of end markets, seize the market opportunities and adjust countermeasures.

2. Targeting at niche market, continuously develop ultra-low loss high-speed materials and increase the market share of high-speed materials.

3. Continuously carry out forward-looking technical cooperation with high-speed transmission infrastructure and network related customers, establish technical barriers, obtain end-customer certification and mass production orders.

4. Meet customers' needs for low-loss and high-density interconnect materials for vehicle electronic systems and high-voltage and heat-resistant materials for electric vehicle charging, and accelerate the certification of material-compatible products to meet the new demand for automotive electronics products in the future.

Future Development Strategies of the Company

(I) Continuously focus on the development of AI server, 5G infrastructure and networking equipment, such as high-speed/high-frequency, low dielectric constant halogen-free materials, and aggressively expand the development of eco-friendly products applied for 5G infrastructure, data center and cloud equipment.

(II) Promote and expand the market share of high-density interconnect materials to enter the new generation of high-density interconnect applications with high specifications.

(III) Actively promote niche products such as automotive electronic materials, high- frequency materials and high-voltage resistant materials for autonomous driving electronics, vehicle networking, and high-voltage charging applications.

(IV) Expand the Group's electronic materials capabilities to the packaging and semiconductor markets and launch semiconductor grade composites to expand into niche markets.

Affected by external competitive environment, regulatory environment and overall business environment

The geopolitics, such as the Russia-Ukraine War, the Israel-Hamas War and the Sino-US wrestling, are not yet clear, and terminal electronic consumption continuously be affected by the overall economic market; the global economy, with the exception of the U.S., which remains strong, is underperforming in all major economies, with GDP in the EU and Japan still falling short of expectations, and China's economy is not doing well. Not only 2023, but economies in 2024, with the exception of the U.S., still has a difficult future. In addition, the energy crisis of various natural resources continues to affect the uncertainty of global

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economic development.

The market speculates that the U.S. Federal Reserve will start to cut interest rates in the second half of 2024 at the earliest, and the economic situation has been slightly effective. Even so, in recent years, U.S. high-tech companies have slashed their workforce, and the trend of capital spending reductions outside of network infrastructure has been relatively clear.

Forecasting the future

(I) Global data traffic will increase significantly. The information transmission speed and quality will require improvement.

(II) The AI ecosystem supply chain will accelerate development. Major C.S.P and medium and large server manufacturers will continue to upgrade product specifications.

(III) The trend of automobile electronics and many electronic products such as AI, PC/NB towards high-frequency and high-speed transmission will be established.

We will benefit from this business opportunity and accelerate our business development. Although our business performance in 2023 was less focused on AI products than our peers, resulting in an unsatisfactory operating result, we still sincerely thank shareholders for continued support and encouragement. The Company will do its best to create maximum profit for all shareholders.

We wish you all good health and all the best.

Chairman Chin-Tsai Chen

March 31, 2024

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Chapter II. Company Profile

I.	Date of Incorporat on
II.	Company History
Approved for establishment on April 10, 1997.
	ITEQ was established and led by the senior technical team formed by experts including Dr.
	Hai-Wei Wan and Dr. Chi-Tsu Kao. The Company invited Sunsino Venture Group, Pacific
	Tone Invest. Ltd. and major shareholders to invest in the building of factories. Key
	milestones of the Company are as follows:
	1997:‧	ITEQ was established with a registered capital of 220,000 (thousand NTD). Main
		products include multi-layer printed circuit board basal materials and copper foil
	‧	laminate.
		Processed cash capital increase of NT$100,000,000 with the total capital increased to
	‧	NT$320,000,000.
	1998:‧	Permitted to re-launch public offering in October of the same year.
	‧	Official mass production and sales.
		Granted the aid for the Leading New Product Development Program from Industrial
	‧	Development Bureau, Ministry of Economic Affairs
	1999:‧	Received BSI ISO-9002 verification.
	Processed cash capital increase of NT$130,000,000 with the total capital increased to
	‧	NT$450,000,000.
		Granted the aid for the Industrial Technology Program from Industrial Development
	‧	Bureau, Ministry of Economic Affairs
		Applied to Taiwan, Japan and the United States for patent review of "Used in the
	‧	Synthesis of Epoxy Hardener".
	2000:‧	Completed the high Tg (180℃) product formulation and passed the UL94V certification
	for the Leading New Product Development Program.
	‧	Received BSI QS-9000 verification.
		The overflow of the hot kerosene storage tank caused the electric wire to catch a fire,
		resulting in damage to some of the plant, machinery, equipment and raw materials;
		After nearly half a year of reconstruction, it was fully put into mass production in
		September of the same year, and its production capacity and revenue had surpassed
	‧	the level before the fire.
		Purchased the land and buildings at Lot 331, Shanzai Ding Section, Taoyuan from
		Kingtel Electronics Co., Ltd. for post-disaster reconstruction and future operation
		expansion.

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2001‧

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‧

‧

2002:

‧

‧

2003:

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‧

‧

‧

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‧

2004:

‧

‧

‧

Obtained UL certification for High Tg, Low DK and Green Laminate.

Processed cash capital increase of NT$174,500,000 with the total capital increased to NT$624,500,000.

Processed surplus transfer into capital increase and capital surplus transfer into capital increase of NT$86,940,000 with the total capital increased to NT$711,440,000. Granted the aid for the Leading New Product Development Program from Industrial Development Bureau, Ministry of Economic Affairs to research and develop third- generation communication laminate film.

Released the new-generation Laser Drillabe Prepreg and high frequency communication materials by stacking method.

Processed cash capital increase of NT$100,000,000 with the total capital increased to NT$811,440,000.

Signed a "shareholder agreement" with overseas investment and development company, etc., to jointly invest and set up "ITEQ (Dongguan) Corporation" in Guangdong Province, mainland China, to engage in the R&D, manufacturing, sales and related businesses of copper clad laminates, films and multi-layer printed circuit board (PCB) laminates.

ITEQ (Dongguan) Corporation started mass production.

Processed surplus transfer into capital increase of NT$24,343,000 with the total capital increased to NT$835,783,000.

Issued the first domestic secured corporate bonds in the amount of NT$100,000,000 to repay the bank loans.

Issued the first domestic unsecured convertible corporate bonds in the amount of NT$200,000,000 to purchase machinery and equipment and repay the bank loans; and were fully converted into capital stock in January, 2004.

Replaced the CPAs with CPA Yang, Ming-Che, Zhang, Jih-Yen of Deloitte & Touche. Established ITEQ (Wuxi) Corporation to engage in the manufacturing and sales and related businesses of copper clad laminates, films and multilayer printed circuit board laminates.

Processed cash capital increase of NT$100,000,000 to set up the R&D center, purchase machinery and equipment and repay the bank loans, with the total capital increased to NT$1,125,306,000.

Issued the second domestic unsecured convertible corporate bonds in the amount of NT$500,000,000 to purchase machinery and equipment and repay the bank loans. Signed a 5-year NT$2 billion syndicated loan agreement with 14 banks including

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