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TCL 科技:2020年年度报告摘要(英文版)2021-04-03  

                        TCL Technology Group Corporation                               Annual Report 2020 (Summary)




Stock Code: 000100                 Stock Name: TCL Tech.   Announce ment No. 2021-008




   TCL 科技集团股份有限公司
       TCL Technology Group Corporation




   ANNUAL REPORT 2020 (SUMMARY)
                                          11 March 2021




                                                 1
   TCL Technology Group Corporation                                          Annual Report 2020 (Summary)



                                    Ramp up, Catch up
                            and Go all out to be A Global Leader
                                       Chairman’s Statement

The year 2020 marked the start of our global leading strategy, as well as a critical turning point for
TCL. In face of the internal and external shocks at the beginning of the year, TCL adhered to the
established strategies and business plans, and put forward the business strategy of "Ramp up, Catch
up". It identified opportunities amid the challenges, scaled up business against headwinds, and
forged ahead to bring up the competitiveness to a new level.



Business Review for 2020

In the Reporting Period, on the same basis after the 2019 spin-off, the Group recorded a revenue of
RMB76.68 billion, up by 33.9% year-on-year; a net profit of RMB5.07 billion, up by 42.1%
year-on-year; a net profit attributable to the company’s shareholders of RMB4.39 billion, up by 67.6%
year-on-year; a debt/asset ratio of 65.1% and the net cash flow generated from operating activities
of RMB16.7 billion. As stated above, the operating efficiency of the Company continued to
improve and all the financial objectives were over-fulfilled for the year.

TCL CSOT maintained a leading operating efficiency in the current period, as demonstrated by its
revenue of RMB46.77 billion, rising by 37.6% year-on-year, and net profit of RMB2.42 billion, up
by 151.1% year-on-year. Through technological reform and efficiency enhancement, the capacity of
the t3 (LTPS) production line in Wuhan grew from 48K to 53K. The t4 production line (OLED)
Phase I produced at full capacity while Phases II and III were under rapid construction as scheduled.
The t1\t2 and t6 (G11) production lines in Shenzhen continued to operate at full capacity for strong
sales. Especially, the capacity of the t6 production line increased from 90K to 98K. The shipment
area of large-size products climbed by 32.9%. Thanks to the increasing market demand for LCD
products across the world, prices of large-size LCD panels began to rise in June, boosting the
operating profit of TCL CSOT month by month.

TCL CSOT constantly raised its R&D investments in new display technologies, such as printed
OLED, QLED, Micro-LED and related key materials and equipment, and made a great stride
forward. In the Reporting Period, the PCT applications of the Company increased by 1,536 and the
accumulated PCT applications reached 12,797. Meanwhile, the company made a strategic
investment in JOLED Inc., aiming to expand the footprint in next-generation display technologies.


                                                   2
   TCL Technology Group Corporation                                            Annual Report 2020 (Summary)



During the Reporting Period, the Group successfully acquired Tianjin Zhonghuan Electronics
Group Co., Ltd. (Zhonghuan Electronics), which holds a controlling interest in Tianjin Zhonghuan
Semiconductor Co., Ltd. (002129.sz) and Tianjin Printronics Circuit Corporation (002134.sz)
respectively, as well as other assets including Zhonghuan Computer. Following the acquisition in
late September, Zhonghuan Electronics has been included in the consolidated financial statements
since October 2020. Through the acquisition, the Group has entered the industries of
semi-conductor photovoltaic and semi-conductor materials.



Business Forecast for 2021

In 2021, imbalance between the suppl y and demand of LCD panel is expected to remain, due to the
short of chips and glass and the delayed new capacity. It is predicted that product prices will remain
high in the first half of the year, while the second half will witness a balance of supply and demand.
Higher demand for LTPS panels will come from vehicle display and IT products, as supply and
demand come close to a balance. In recent years, the OLED capacity has been raised quickly. The
monopolistic advantage of leading enterprises has turned increasingly apparent. Hence, the
competition will be extremely fierce.

Phase I of the t7(G11) plant of TCL CSOT in Shenzhen has been put into production. The LCD and
module plant of Samsung in Suzhou acquired by the Company are estimated to be consolidated in
the second quarter of this year. In view of this, the shipment and revenue of LCD panels will jump
significantly. The t3 (LTPS) production line of Wuhan CSOT has stepped into vehicle display and
IT industries with positive performance. A 39.95% non-controlling interest of the t3 production line
has been repurchased, lifting the profit in the current period. Though t4 still faces fierce competition
in OLED we will endeavor to improve our operating results. We expect a strong growth in both
revenue and profitability of TCL CSOT in 2021.

Zhonghuan Semiconductor will release its endogenous power through reform, while optimizing its
development strategy, promoting innovation in products and technologies forward, and reinforcing
quality and profitability. It is estimated that its business performance will go up continuously and
contribute more to the revenue and profit of the Group this year.

The industrial finance and investment business will help raise profit in line with the development
plan. The operating results of Highly, TPC, and other businesses are expected to rise steadily.

I am confident that the revenue and profit of the Group will increase remarkably this year.


                                                   3
   TCL Technology Group Corporation                                          Annual Report 2020 (Summary)




Strategic Development Planning

The Group has kept promoting business reform and transformation since 2017 to intensify its core
competitiveness. In 2019, it completed the spin-off of businesses like terminal products, and
focused on "high-tech, heavy-asset and long-cycle" industries. Business strategies, organizational
procedures, and resource allocation were adjusted accordingly. The Group will further its business
development in accordance with the operating strategy regarding "improving operating quality and
profitability, consolidating advantages and improving disadvantages, accelerating global layout, and
driving development via innovation".

The semi-conductor display business is a core business of the Group. Through the acquisition of
Zhonghuan Semiconductor, the Group extended its presence to the semi-conductor photovoltaic and
semi-conductor materials industry. The above two industries own the features of high technology,
huge investment, and a long industrial cycle. In the meantime, long-term strategic management,
business capacity across the industrial cycle, and constant financing ability are a must. Furthermore,
we must maintain a technological leadership, achieve the best business scale, and plan development
strategies with the goal of global leadership. These are exactly the core capabilities and business
logic of the Group.

The reason why we have chosen these two core industries lies in that China has built up an industry
scale and a competitive edge across the globe in the semi-conductor photovoltaic and in LCD field
of semi-conductor display industries. Moreover, Zhonghuan Semiconductor and TCL CSOT have
distinguished themselves to become industry leaders. With the growth in global demand and
industry concentration, more opportunities and challenges will be brought.

The "9205" five-year strategic development plan of the Group specifies that Zhonghuan
Semiconductor will reinforce its strengths in monocrystalline silicon products, improve its capacity
in the photovoltaic industrial chain, and intensify its global business capacity in order to meet the
dual goals of global leadership in the photovoltaic industry and national leadership in the
semi-conductor silicon-wafer industry. Meanwhile, TCL CSOT is expected to improve its strengths
in LCD and LTPS, make technical breakthroughs in new display technologies and materials so as to
become a leading player in the semi-conductor display industry worldwide.

TCL's industrial finance and investment business supports the development of the Group’s other
businesses and contributes steadily improving income. In terms of industrial finance, the Group
features both highly efficient internal fund management and external financing and supply chain

                                                  4
   TCL Technology Group Corporation                                           Annual Report 2020 (Summary)



financial services. With respect to capital and investment, TCL has established a differentiated
competitive edge in the corresponding field and turned capital and investment into a core business.

In short, the core businesses of the Group consist of three business segments, namely, the
semi-conductor display business, the semi-conductor photovoltaic and semi-conductor materials
business, and the industrial finance and investment business. TCL selects suitable projects related to
the core industrial chain and gradually perfects the industrial ecosystem. In addition, it aims to
achieve the strategic goal of global leadership in the two core businesses.

Subsidiaries including Highly and TPC embraced robust operations and sustainable profitability.
The Group will continuously support their independent development and business expansion.



Prospects

There are great uncertainties in global economic recovery. Trade protectionism and unilateral ism
aggravate. I believe that: the advantages of China include social stability, efficient governance,
sufficient economic vitality, huge domestic demand, rapid progress in science and technology, and
an apparent relative competitive advantage in manufacturing. However, China's disadvantages lie in
inadequate quality and profitability of economic development, insufficient core technical
capabilities, rapid growth in government debts, and huge risks in finance and enterprise debts,
which may affect China's economic progress.

This year, China has put forward and implemented the "14th Five-year Plan" to build a new
development pattern. The government will continue to vigorously support the real economy,
especially manufacturing, strengthen China's comparative advantage in manufacturing in the global
economy and improve the competitiveness and value of enterprises. More capital will flow to
manufacturing. In other words, the excellent manufacturing industry will access more resources.
China's manufacturing industry has shifted its competitive edge from efficiency and cost control to
products, technologies and global operations, and will usher in a new development period.

Manufacturing constitutes the basis of China's economic competitiveness. Based on the established
industry foundation and rapid growth in domestic demand, Chinese enterprises will catch up with
leading players in the high-tech manufacturing field and develop a competitive edge, which
signifies both challenges and opportunities. Personally, I am confident of the prospects of China's
high-tech manufacturing!

The semi-conductor display industry and the semi-conductor photovoltaic and semi-conductor


                                                   5
   TCL Technology Group Corporation                                        Annual Report 2020 (Summary)



materials industry, as two strategic and emerging industries, embrace huge markets and promising
prospects. We have laid a favorable foundation and accumulated strength in the two industries. TCL
will embark on new industry planning and distribution in conformity with the "9205" strategic plan.

The Board has proposed a final dividend of RMB1.20 per 10 shares, in light of the consistent
dividend payout policy of the Group.

I would like to express my sincere gratitude to all shareholders and partners for their trust and
support, and to thank all employees for their efforts!




                                                                               Li Dongsheng

                                                                               11 March 2021




                                                   6
   TCL Technology Group Corporation                                           Annual Report 2020 (Summary)



Part I Important Notes

This Summary is based on the full text of the 2020 Annual Report of TCL Technology Group
Corporation (together with its consolidated subsidiaries, the “Group” or “Company”, except where
the context otherwise requires). In order for a full understanding of the Company’s operating results,
financial position and future development plans, investors should carefully read the aforesaid full
text on the media designated by the China Securities Regulatory Commission (the “CSRC”).

All the directors of the Company attended in person the board meeting for the approval of this
Report.



Independent auditor’s modified opinion:

□ Applicable √ Not applicable

Board-approved final cash and/or stock dividend plan for ordinary shareholders:

√ Applicable □ Not applicable

Bonus issue from capital reserves:

□ Yes √ No

The Board has approved a final dividend plan for the ordinary shareholders as follows: based on the
share capital of 13,546,581,599 shares on 10 March 2021 that are eligible for profit distribution (the
total share capital of 14,030,788,362 shares minus the 484,206,763 shares in the Company’s special
securities account for repurchase that are not eligible for profit distribution), a cash dividend of
RMB1.2 (tax inclusive) per 10 shares is to be distributed to the shareholders, totaling
RMB1,625,589,791.88. The retained earnings of RMB7,145,804,477.12 will carry forward for
future distribution. Meanwhile, there will be no bonus issue from either profit or capital reserves for
the year under review.

Where any changes occur, before the implementation of the dividend plan, to the share capital of
the Company due to any convertible bonds-to-stock programs, share repurchases, exercises of
equity incentives, new share issues in refinancing, etc., the dividend will be adjusted according to
the principle of “adjusting the total payout amount under the same dividend ratio”, subject to the
actual payout amount.

Board-approved final cash and/or stock dividend plan for preference shareholders:

□ Applicable √ Not applicable

                                                   7
       TCL Technology Group Corporation                                                             Annual Report 2020 (Summary)



This Report and its summary have been prepared in both Chinese and English. Should there be any
discrepancies or misunderstandings between the two versions, the Chinese version shall prevail.


Part II Key Corporate Information

1. Stock Profile

Stock name                             TCL Tech.                     Stock code                     000100

Place of listing                       Shenzhen Stock Exchange

           Contact information                                              Board Secretary

Name                                   Liao Qian

                                       10/F, Tower G1, International E Town, TCL Science Park, 1001 Nanshan District,
Office address
                                       Shenzhen, Guangdong Province, China
Tel.                                   0755-3331 1666

Email address                          ir@tcl.com


2. Principal Activities or Products for the Reporting Period


During the Reporting Period, the Company acquired 100% equity of Tianjin Zhonghuan Electronics
Group Co., Ltd. Therefore, the businesses of the Company primarily consist of the semi-conductor
display business, the semi-conductor photovoltaic and semi-conductor materials business, the
industrial finance and investment business, as well as the other businesses.


                                                      TCL Tech


   Semi-conductor display        Semi-conductor photovoltaic &             Industrial finance &                   Other
                                   Semi-conductor materials                    investment

                                 Zhonghuan          Zhonghuan
 TCL CSOT          China Ray                                          TCL Financial   TCL Capital            Highly       TPC
                                 Photovol taic       Advanced


       Juhua        CDOT




For further information about the Company’s businesses, please refer to “Part III Directors’ Report”
herein.




                                                                 8
    TCL Technology Group Corporation                                                                       Annual Report 2020 (Summary)



3. Key Financial Information

(1) Key Financial Information of the Past Three Years


Indicate whether there is any retrospectively restated datum in the table below.
□ Yes √ No
                                                                                                                                   Unit: RMB
                                                                                                      2020-over-2019
                      Item                                 2020                     2019                                           2018
                                                                                                        change (%)
Revenue (RMB) (note)                                    76,677,238,079           74,933,085,688                      2.33   113,360,075,545
Revenue on the same basis after the spin-off
                                                        76,677,238,079           57,270,940,685                  33.89       48,240.376,808
(RMB) (note)
EBITDA (RMB)                                            19,059,818,227           14,224,327,742                  33.99       14,096,523,261

Net profit (RMB)                                         5,065,202,767            3,657,735,320                  38.48        4,065,194,164
Net profit attributable to the company’s
                                                         4,388,159,018            2,617,766,571                  67.63        3,468,207,407
shareholders (RMB) (note)
Net profit attributable to the company’s
shareholders on the same basis after the                 4,388,159,018            2,617,778,635                  67.63        3,153,044,155
spin-off (RMB) (note)
Net profit attributable to the company’s
shareholders before non-recurring gains and              2,933,248,153              235,119,321                1147.56        1,587,391,372
losses (RMB)
Basic earnings per share (RMB/share)                              0.3366                   0.1986                69.49                0.2566

Diluted earnings per share (RMB/share)                            0.3226                   0.1935                66.72                0.2562

Weighted average return on equity (%)                              13.75                     9.09                    4.66                 11.98
Net cash generated from/used in operating
                                                        16,698,282,775           11,490,096,405                  45.33       10,486,580,443
activities (RMB)
                                                                                                       Change of 31
                                                                                                      December 2020
                                                                                                                             31 December
                                                      31 December 2020      31 December 2019             over 31
                                                                                                                                 2018
                                                                                                      December 2019
                                                                                                           (%)
Total assets (RMB)                                     257,908,278,887          164,844,884,926                  56.46      192,763,941,739
Owners’ equity attributable to the company’s
                                                        34,107,795,454           30,111,946,237                  13.27       30,494,364,951
shareholders (RMB)
Note: In April 2019, the Company completed the handover of assets in a significant spin-off. Therefore, the 2019 data included the
results of the spun-off assets for January-March 2019 and a gain of RMB1.15 billion from the spin-off. Provided that the 2019 data
were on the same basis after the spin-off, revenue would be up by 33.9% year-on-year. In 2020, the Company continued to focus on
its core business and maximize shareholder’s value by spinning off the Educational Web business, which generated a gain of
RMB234 million. Provided that the spin-off gains were excluded from both of the 2020 and 2019 data, the net profit attributable to
the company’s shareholders would be up by 191.8% year-on-year on the same basis.


(2) Key Financial Information by Quarter

                                                                                                                                   Unit: RMB
                                                 Q1                        Q2                         Q3                      Q4

Revenue                                        13,742,129,162           15,591,081,694              19,376,776,395          27,967,250,828
Net profit attributable to the
                                                 408,125,802               799,940,184                817,109,760            2,362,983,272
company’s shareholders



                                                                    9
    TCL Technology Group Corporation                                                                      Annual Report 2020 (Summary)



Net profit attributable to the
company’s shareholders before                   -109,881,642             291,744,489               678,187,625               2,073,197,681
non-recurring gains and losses
Net cash generated from/used in
                                                2,299,183,493            5,048,627,286            4,523,259,350               4,827,212,646
operating activities

Indicate whether any of the quarterly financial data in the table above or their summations differs
materially from what have been disclosed in the Company’s quarterly or interim reports.

□ Yes √ No


4. Share Capital and Shareholder Information at the Period-End

(1) Numbers of Ordinary Shareholders and Preference Shareholders with Resumed Voting
Rights as well as Holdings of Top 10 Shareholders

                                                                                                                                     Unit: share
                                                                                                                Number of
                                                                                                                preference
                                                                                                                shareholder
                                 Number of                                                                      s with
                                 ordinary                                                                       resumed
                                                                         Number of preference
Number of                        shareholders                                                                   voting
                                                                         shareholders with
ordinary                         at the                                                                     Not rights at the                Not
                         481,178                                 542,531 resumed voting rights
shareholders at                  month-end                                                           applicable month-end             applicable
                                                                         at the period-end (if
the period-end                   prior to the                                                                   prior to the
                                                                         any) (see note 8)
                                 disclosure of                                                                  disclosure
                                 this Report                                                                    of this
                                                                                                                Report (if
                                                                                                                any) (see
                                                                                                                note 8)
                                             5% or greater shareholders or top 10 shareholders
                                    Shareh               Increase/decre                                            Shares in pledge or frozen
                                            Total shares
   Name of           Nature of      olding                  ase in the         Restricted       Unrestricted
                                             held at the
  shareholder       shareholder     percent                Reporting          shares held       shares held          Status           Shares
                                            period-end
                                      age                    Period
                                                                                                                      Put in
                                                                                                                   pledge by Li 224,000,000
Li Dongsheng       Domestic                                                                                         Dongsheng
and his            natural
                                      8.26 1,158,599,393        -63,875,598   613,931,602         544,667,791          Put in
acting-in-concer   person/genera
t party            l legal person                                                                                   pledge by
                                                                                                                                    344,899,521
                                                                                                                      Jiutian
                                                                                                                    Liancheng
Huizhou
Investment         State-owned
Holding Co.,       legal person
                                      5.30    743,139,840 -135,279,907                      -     743,139,840                   -              -
Ltd.
Hong Kong
Securities         Foreign legal
Clearing           person
                                      3.73    523,742,567     170,252,713                   -     523,742,567                   -              -
Company Ltd.
Wuhan Optics
Valley Industrial State-owned
Investment Co., legal person
                                      3.65     511,508,951      511,508,951   511,508,951                      -                -              -
Ltd.



                                                                    10
    TCL Technology Group Corporation                                                                 Annual Report 2020 (Summary)



China Securities
                 Domestic
Finance
Corporation
                 general legal      2.66    373,231,553                -               -     373,231,553              -               -
                 person
Limited
Tibet Tianfeng
                 Domestic
Enterprise
Management
                 general legal      2.54    355,863,715 -170,231,927                   -     355,863,715              -               -
                 person
Co., Ltd.
Central Huijin
Asset            State-owned
                                    1.47    206,456,500                -               -     206,456,500              -               -
Management       legal person
Co., Ltd.
National Social
                Fund, wealth
Security
Fund-Portfolio
                management          0.99   1,38,831,524      85,831,524                -    1,38,831,524              -               -
                product, etc.
601
Swiss Finance
                 Foreign legal
(Hong Kong)
                 person
                                    0.91    128,247,257    128,247,257                 -     128,247,257              -               -
Limited
Star Century
                 Foreign legal
Enterprises
                 person
                                    0.65     90,532,347                -    90,532,347                  -             -               -
Limited
                               Being acting-in-concert parties upon the signing of the Agreement on Acting in Concert, Mr. Li
Related or acting-in-concert
                               Dongsheng and Xinjiang Jiutian Liancheng Equity Investment Partnership (Limited Partnership)
parties among the shareholders
                               (hereinafter referred to as “Jiutian Liancheng”) are the biggest shareholder of the Company with a
above
                               total of 1,158.5994 million shares.
Top 10 ordinary shareholders
involved in securities margin    None
trading (if any)

Note: The top 10 shareholders in the table above do not include “The Securities Account of TCL Technology Group Corporation for
Repurchases”. As of the end of the Reporting Period, there were 528,066,412 shares in the account.


(2) Number of Preference Shareholders and Shareholdings of Top 10 of The m

□ Applicable √ Not applicable


(3) Ownership and Control Relations between the Actual Controller and the Company

□ Applicable √ Not applicable



5. Corporate Bonds

(1) Bond Profile

                                                                                                                         Way of
                                                                                     Outstanding                        principal
  Bond name          Abbr.         Bond code        Value date        Maturity        balance        Coupon rate     repayment and
                                                                                    (RMB’0,000)                         interest
                                                                                                                        payment
TCL                                                                                                                Interest
Corporation’s 16TCL02           112353           16 March 2016 16 March 2021              150,000           3.56% payable
Corporate                                                                                                          annually and
Bonds Publicly                                                                                                     principal


                                                                 11
    TCL Technology Group Corporation                                             Annual Report 2020 (Summary)



Offered in                                                                                    repayable in
2016 to                                                                                       full upon
Qualified                                                                                     maturity
Investors
(Tranche 1)
(Type 2)
TCL
Corporation’s                                                                               Interest
Corporate                                                                                    payable
Bonds Publicly                                                                               annually and
Offered in     16TCL03       112409    7 July 2016     7 July 2021     200,000         3.50% principal
2016 to                                                                                      repayable in
Qualified                                                                                    full upon
Investors                                                                                    maturity
(Tranche 2)
TCL
Corporation’s                                                                               Interest
Corporate                                                                                    payable
Bonds Publicly                                                                               annually and
Offered in     17TCL01       112518    19 April 2017   19 April 2022   100,000         3.40% principal
2017 to                                                                                      repayable in
Qualified                                                                                    full upon
Investors                                                                                    maturity
(Tranche 1)
TCL
Corporation’s                                                                               Interest
Corporate                                                                                    payable
Bonds Publicly                                                                               annually and
Offered in     17TCL02       112542    7 July 2017     7 July 2022      15,700         3.45% principal
2017 to                                                                                      repayable in
Qualified                                                                                    full upon
Investors                                                                                    maturity
(Tranche 2)
TCL
Corporation’s                                                                               Interest
Corporate                                                                                    payable
Bonds Publicly                                                                               annually and
Offered in     18TCL01       112717    6 June 2018     6 June 2023     100,000         5.48% principal
2018 to                                                                                      repayable in
Qualified                                                                                    full upon
Investors                                                                                    maturity
(Tranche 1)
TCL
Corporation’s                                                                               Interest
Corporate                                                                                    payable
Bonds Publicly                                                                               annually and
                                       20 August       20 August
Offered in     18TCL02       112747                                    200,000         5.30% principal
                                       2018            2023
2018 to                                                                                      repayable in
Qualified                                                                                    full upon
Investors                                                                                    maturity
(Tranche 2)
TCL
Corporation’s                                                                               Interest
Corporate                                                                                    payable
Bonds Publicly                                                                               annually and
Offered in     19TCL01       112905    20 May 2019     20 May 2024     100,000         4.33% principal
2019 to                                                                                      repayable in
Qualified                                                                                    full upon
Investors                                                                                    maturity
(Tranche 1)
TCL                                                                                          Interest
Corporation’s 19TCL02       112938    23 July 2019    23 July 2024    100,000         4.30% payable
Corporate                                                                                    annually and
Bonds Publicly                                                                               principal


                                                       12
    TCL Technology Group Corporation                                           Annual Report 2020 (Summary)



Offered in                                                                                  repayable in
2019 to                                                                                     full upon
Qualified                                                                                   maturity
Investors
(Tranche 2)
TCL
Corporation’s                                                                             Interest
Corporate                                                                                  payable
Bonds Publicly                                                                             annually and
                                       21 October    21 October
Offered in     19TCL03       112983                                  200,000         4.20% principal
                                       2019          2024
2019 to                                                                                    repayable in
Qualified                                                                                  full upon
Investors                                                                                  maturity
(Tranche 3)
TCL
Technology
Group
Corporation’s
                                                                                           Principal
Short-Term
                                                                                           repayable in
Corporate                                            5 December
               20TCLD1       149140    8 June 2020                         0         2.50% full upon
Bonds Publicly                                       2020
                                                                                           maturity with
Offered in
                                                                                           interest
2020 to
Professional
Investors
(Tranche 1)


(2) Latest Rating and Rating Change

According to the Follow-up Rating Report (2020) on TCL Technology Group Corporation’s
Corporate Bonds Publicly Offered in 2016 to Qualified Investors (Tranches 1 and 2) issued by
China Chengxin Securities Rating Co., Ltd. on 27 May 2020, the AAA credit status of TCL
Corporation and the said bonds was affirmed with a “Stable” outlook.

According to the Follow-up Rating Report (2020) on TCL Technology Group Corporation’s
Corporate Bonds Publicly Offered in 2017 to Qualified Investors (Tranches 1 and 2) and on TCL
Technology Group Corporation’s Corporate Bonds Publicly Offered in 2018 to Qualified Investors
(Tranches 1 and 2) issued by China Chengxin Securities Rating Co., Ltd. on 27 May 2020, the AAA
credit status of TCL Corporation and the said bonds was affirmed with a “Stable” outlook.

According to the Credit Rating Report on TCL Technology Group Corporation’s Corporate Bonds
Publicly Offered in 2019 to Qualified Investors (Tranches 1, 2 and 3) issued by China Chengxin
Securities Rating Co., Ltd. on 28 May 2020, the AAA credit status of TCL Corporation and the said
bonds was affirmed with a “Stable” outlook.

During the Reporting Period, the corporate credit ratings conducted on the Company in its programs
of corporate bonds and debt financing instrument issues arrived at the same results as its existing
corporate credit rating result.



                                                     13
    TCL Technology Group Corporation                                              Annual Report 2020 (Summary)



(3) Selected Financial Information of the Company in the Past Two Years

                       Item                  2020                  2019                     Change (%)

EBITDA (RMB’0,000)                                 1,905,982             1,422,433                      33.99%

Current ratio                                              0.92                1.12                      -19.34%

Debt/asset ratio (%)                                      65.08              61.25                          3.83

Quick ratio                                                0.66                0.85                      -18.82%

Debt/EBITDA ratio                                     11.36%                14.09%                       -2.73%

Interest cover (times)                                     2.58                2.16                      19.44%

Cash-to-interest cover (times)                             6.45                5.32                      21.24%

EBITDA-to-interest cover (times)                           5.98                5.17                      15.67%

Debt repayment ratio (%)                                   100                 100                             -

Interest payment ratio (%)                                 100                 100                             -


Part III Directors’ Report


(I) Business Overview for the Reporting Period

1. Overview

The year 2020 was extraordinary. The COVID-19 pandemic severely hit the global economy. Trade
frictions further impacted the global industrial chain layout. Consequently, technology enterprises
suffered from a complicated and changeable business environment. That said, de-globalization has
accelerated the optimization of the industrial layout and the structure of the supply chain. The gist
of the allocation of production factors lied in efficiency, profitability, and costs. The cluster effect
and management advantage of the Chinese manufacturing industry are gradually becoming
prominent. In the context of both opportunities and challenges, we adhered to our strategic target,
held the business bottom line of maximizing cost efficiency, and put forward the business
strategy of "Ramp up, Catch up". The Group identified opportunities among challenges and
achieved expansion against headwinds. Besides, TCL grasped opportunities in emerging strategic
industries. For instance, it acquired 100% equity of Zhonghuan Electronics to open up new markets.
The Group established the business layout consisting of three business segments, namely, the
semi-conductor display business, the semi-conductor photovoltaic and semi-conductor
materials business, and the industrial finance and investment business, laying a solid
foundation for becoming a global leading technology group.

In the Reporting Period, on the same basis after the 2019 spin-off, the Group recorded a revenue of

                                                     14
   TCL Technology Group Corporation                                           Annual Report 2020 (Summary)



RMB76.68 billion, up by 33.9% year-on-year; a net profit of RMB5.07 billion, up by 42.1%
year-on-year; and a net profit attributable to the company’s shareholders of RMB4.39 billion, up by
67.6% year-on-year. Especially, the net profit attributable to the company’s shareholders in Q4 2020
amounted to RMB2.36 billion, up by RMB2.32 billion year-on-year and 189.2% quarter-on-quarter,
thanks to the expanded scale, leading efficiency, improved industry cycle, and optimized product
structure of TCL CSOT as well as the incorporation of Zhonghuan Semiconductor into the
consolidated financial statements. Moreover, the Group continued to underline the development of
core technologies. R&D investments jumped by 41.2% year-on-year to RMB6.54 billion on the
same basis after the spin-off. In the Reporting Period, the PCT applications of the Company
increased by 1,536 and the accumulated PCT applications reached 12,797. The number of days of
cash turnover was reduced to 13. The net profit per capita surged by 45.4% to RMB108,000. The
debt/asset ratio was 65.1%. The net cash flow generated from operating activities was RMB16.7
billion. The Company enjoyed enhanced operating efficiency and a robust capital structure.



The global political and economic landscape enters a long-term game. The complex and changing
external environment leads to increasing uncertainties. That said, de-globalization has accelerated
the restructuring of the global economic pattern. The Chinese manufacturing industry will usher in
better development opportunities under China's new development pattern whereby "domestic and
foreign markets can boost each other". The year 2021 marks the 40th anniversary of TCL. Based on
its constant efforts in the manufacturing industry as well as transformation and innovation in the
past four decades, the Group will grasp the golden period for the adjustment of the global economic
pattern and progress of the Chinese manufacturing industry. It will regard "improving operating
quality and profitability, consolidating advantages and improving disadvantages, accelerating global
layout, and driving development via innovation" as its operating strategy and promote the two core
businesses, namely, the semi-conductor display business and the semi-conductor photovoltaic and
semi-conductor materials business in order to achieve its strategic goal of global leadership.

With respect to the semi-conductor display business, the Group will constantly push forward
management reform and consider leading efficiency and profitability as a solid foundation for
sustainable development. Besides, it will further perfect the strategic layout of businesses and the
plan of production lines, optimize the product structure and customer portfolios, make innovation
and breakthroughs in new display technologies and materials, and lead the global display indus try
in comprehensive competitiveness.



                                                  15
   TCL Technology Group Corporation                                                              Annual Report 2020 (Summary)



In regard to the semi-conductor photovoltaic business, the Group will enhance its strengths in the
field of monocrystalline silicon and wafer, drive product iteration via technological innovation, and
speed up the building of the photovoltaic industrial chain. In addition, it will intensify the
competitiveness in differentiated products, mainly overlapped-cell modules, and global capabilities
in order to become a leader in the semi-conductor photovoltaic industry across the world.

In terms of the semi-conductor materials business, the Group will keep exerting more efforts to
optimize the investment and products structures of Zhonghuan Advanced and orderly promote the
coverage of power semiconductors and integrated circuit chips of all kind. As the Group maintains
the leading superiority of 8-12-inch products of Zhonghuan Advanced in semi-conductor chips of
all powers, it will further improve 12-inch products for customers with the advanced production
process to raise market share. Meanwhile, it will firmly seize opportunities in China's integrated
circuit industry, focus on the angle of global competition, and accelerate to reinforce its core
capabilities. It will conscientiously extend and expand the semi-conductor industrial chain and catch
up with international standards.

TCL Tech. will embark on a new development phase and march forward with a stronger driving
force for development!


2. Core Business Analysis

During the Reporting Period, the Company acquired 100% equity of Tianjin Zhonghuan Electronics
Group Co., Ltd. Therefore, the business structure of the Company primarily consists of the
semi-conductor display business, the semi-conductor photovoltaic and semi-conductor materials
business, the industrial finance and investment business, as well as the other businesses.


                                                 TCL Tech


  Semi-conductor display     Semi-conductor photovoltaic &             Industrial finance &                 Other
                               Semi-conductor materials                    investment

                             Zhonghuan        Zhonghuan
 TCL CSOT      China Ray                                          TCL Financial    TCL Capital         Highly       TPC
                             Photovol taic     Advanced


   Juhua         CDOT




(1) Semi-conductor display business



                                                             16
   TCL Technology Group Corporation                                           Annual Report 2020 (Summary)



A turning point of the display industry occurred at the historical bottom in 2020. Prices of large-size
panels have kept rising since June 2020. Industry profitability has gradually recovered.

TCL CSOT de monstrated excellent anti-recession and anti-risk capabilities in a down cycle,
and improved its scale, market share, and profitability against headwinds, attributable to
maximized lean manage ment and business synergy. In the Reporting Period, TCL CSOT
recorded a product sales area of 29,097,000 square meters, up by 31.2% year-on-year; a revenue of
RMB46.77 billion, up by 37.6% year-on-year; and a net profit of RMB2.42 billion, up by 151.1%
year-on-year. In particular, the net profit in Q4 2020 stood at RMB1.86 billion, up by RMB2.19
billion year-on-year.

The large-size panel business maintained leading efficiency and profitability in the world,
continued to expand its scale advantage, and further promoted its market position. In the
Reporting Period, t1, t2 and t6 plants continued to operate at full capacity for strong sales. The t7
plant was put into production. The shipment of large-size products reached 27,675,000 square
meters, up by 32.9% year-on-year. 45,746,000 pieces were shipped with a year-on-year increase of
11.0%. Sales revenue was RMB28.98 billion, rising by 53.1% year-on-year. Globally, the Company
rose to second place in the ranking of market shares in TV panels. Besides, it was ranked first,
second, and second regarding the market shares in 55-inch, 32-inch, and 65-inch & 75-inch
products respectively. In terms of commercial displays, the shipment of interactive whiteboards
jumped to the top across the world. Market shares in rail transit products and Esports products
climbed swiftly.

For the medium-sized panel business, product and customer structures were optimized. For
the small-size panel business, close attention was paid to technological innovation and
enhance ment. Both businesses advanced quickly in high-end segments. In terms of the t3
production line, the shipment of LTPS mobile panels took third place globally. Multiple brands of
high-end notebooks, tablets, and vehicle displays were introduced to the medium-size panel
business, thus quickly developing the business. The shipment of LTPS notebook panels was ranked
second in the world. The t4 production line of flexible AMOLED displays produced at full capacity
in Phase I. Equipment for Phases II and III are being moved in. Foldable screens and double-curved
screens for brand manufacturers were mass produced and delivered. The Company successively
introduced global first-class brand customers. In the Reporting Period, the shipment area of small-
and medium-size products was 1,422,000 square meters with a year-on-year increase of 4.2%.
99,235,000 pieces were shipped, down by 12.8% year-on-year. The revenue amounted to
RMB17.79 billion, increasing by 18.1% year-on-year.

                                                  17
   TCL Technology Group Corporation                                           Annual Report 2020 (Summary)



During the historically low ebb of the semi-conductor display, TCL CSOT adhered to its strategic
focus, achieved countercyclical expansion, and marched toward the strategic goal of global
leadership. TCL CSOT adopted multiple measures to enhance its strengths: First, it acquired
Samsung Suzhou to reinforce the comprehensive competitiveness in the large-size panel business.
Second, it acquired a 39.95% non-controlling interest in the t3 plant to raise the contribution of the
small- and medium-size panel business to the Group’s earnings. Third, it acquired a stake in JOLED
Inc. in Japan to accelerate the industrialization of printed display technologies. Fourth, a laboratory
was jointly established by TCL CSOT and San'an Semiconductor, committed to Micro-LED
development. Fifth, it acquired Moka International Limited to offer customized and one-stop
services related to large-size TV and commercial displays, medium-size IT displays, and vehicle
displays.

Looking into the future, the long-term prospects of the semi-conductor display industry are
promising. The LCD industry has basically completed the relocation to Mainland China. At present,
industry capacity expansion is drawing to a close. The outdated capacity is being eliminated
gradually. Consequently, as industrial concentration is further improved, leading enterprises have
developed a high industry barrier.

TCL CSOT will continue intensifying its scale advantage through endogenous growth and
M&A deals and join hands with upstream suppliers and downstream customers to create an
industrial ecosystem featuring closer cooperation. In 2021, the t7 production line will continue
its production ramp-up. Phases II and III of the t4 production line are in progress as scheduled. The
takeover of Samsung Suzhou will be completed. TCL CSOT will expand its scale by over 50%,
further consolidating its market share and position. In the meantime, the Company will deepen the
cooperation with globally top-level brand customers, cultivate global industrial chain resources, and
build a supply chain system that is more resilient and competitive.

Product and revenue structures will be continuously optimized; a layout of high-end products
will be implemented to drive sustainable and quality progress. TCL CSOT will constantly raise
the proportions of high-end products, such as large-size products, 8K products and 120Hz products.
For medium-size products, it will accelerate to introduce products with high added value like
notebook and vehicle displays. Regarding small-size flexible OLED, priorities will be given to
differentiated technologies, such as under-display camera, foldable screen and LTPO, whereby TCL
CSOT has already enjoyed a competitive advantage. In 2021, it will successively start mass
production and delivery.



                                                  18
   TCL Technology Group Corporation                                         Annual Report 2020 (Summary)



The Group will actively expand its presence in next-generation display technologies and
materials to lead the future technology trend. TCL CSOT will accelerate the industrial
production and ecosystem construction of printed display processes, through its "National Printed
and Flexible Display Innovation Center"—Guangdong Juhua and JOLED Inc. where TCL CSOT
acquired a stake. China Ray will vigorously push forward the development of OLED and QLED
materials with independent intellectual property rights. It has submitted samples of R-prime and GH
materials to domestic panel manufacturers. Moreover, it has over 30 core patents in printed OLED
materials and is ranked second globally in terms of the number of public patents in the quantum dot
electroluminescent field.



(2) Semi-conductor photovoltaic and semi-conductor materials

In 2020, Zhonghuan Semiconductor continued promoting the goals of achieving global leadership
in the photovoltaic industry and domestic leadership in the semi-conductor silicon-wafer industry.
Additionally, it implemented reforms by adjusting the organizational structure, improving
management efficiency, and transforming the manufacturing model to drive quality development. In
the Reporting Period, Zhonghuan Semiconductor recorded a total revenue of RMB19.06 billion,
climbing by 12.8% year-on-year, and a net profit of RMB1.48 billion with a year-on-year increase
of 17.0%. Zhonghuan Semiconductor has been included in the consolidated financial statements
since Q4 2020.

① Semi-conductor photovoltaic business

In terms of new energy materials, the Company focused on the decline of LCOE and has developed
and promoted G12 photovoltaic silicon-wafer products and photovoltaic cells and components,
which have been widely recognized in the market. It has proposed multiple new technologies
related to the improvement of capacity, the upgrading of product quality, and cost reduction in order
to further reinforce the global competitiveness of photovoltaic products. Besides, the company has
developed patented technologies and know-how with independent intellectual property rights, as
well as further sped up Industry 4.0 application and upgrading, covering whole industrial
production procedures. The total capacity of monocrystalline silicon wafer amounted to 55GW/year
at the end of the Reporting Period, wherein nearly 20% was from the improvement of the original
capacity.

With respect to new energy photovoltaic cells and components, the Company has continued its
input and innovation to the overlapped-cell modules, which the company owns intellectual property

                                                 19
   TCL Technology Group Corporation                                         Annual Report 2020 (Summary)



and industry leadership. It has performed the R&D of the overlapped-cell 3.0 production line so as
to enhance the performance and reduce the costs of overlapped-cell modules. Collaborative and
joint innovation have been conducted with domestically leading G12 PERC cell manufacturers. The
capacity turned 4GW/year at the end of the Reporting Period. The Company considers global
manufacturing as an essential component of globalization, respects international commercial
practices and intellectual property, and strives to stand out among domestic peers. In the Reporting
Period, the Company and Total, a French company, jointly completed the incorporation of
MAXEON SOLAR that is registered in Singapore and listed on the NASDAQ market. MAXEON
features intellectual property rights and outstanding R&D capacities in IBC cells and components
and overlapped-cell modules. It will build up its manufacturing system of cells and components as
well as surface and distributed power stations worldwide.



② Semi-conductor materials business

Semi-conductor silicon-wafers are core and fundamental materials of integrated circuits. TCL has
grasped the opportunities brought by the industrial chain transfer, given full play to the synergy
effect of the semi-conductor display industry, and forged ahead toward the goal of domestic
leadership in the semi-conductor materials industry.

In the Reporting Period, the Group accelerated the product verification and customer development
in the semi-conductor materials industry and won recognition of major customers across the world.
8- and 12-inch products met the international standards and domestic leading customers highly
recognized their performance and quality. All launched production lines produced at full capacity.
With respect to product structure, the Group has emerged to be a major player regarding digital
logic and storage products, while consolidating the strengths of traditional semi-conductor products.
The year-on-year growth rate of the shipping area of silicon wafers surpassed 30% in 2020.
Meanwhile, the Group accelerated to perfect its global business landscape, actively built a network
of market channels, created a technical support platform, and improved services of its global system
in Europe, Japan and Taiwan where semiconductor businesses cluster. Its overseas sales accounted
for 40% in 2020.

(3) Industrial Finance and Investment Business

① TCL Financial

TCL’s industrial finance business mainly includes the Group’s finance and the supply chain finance.


                                                 20
    TCL Technology Group Corporation                                                          Annual Report 2020 (Summary)



The finance team focused on the funding needs of the Group’s key projects, strengthened the active
management of liquidity and currency risk, and gradually satisfied financial needs of business
globalization. The supply chain finance took full advantage of Internet platform. Jointly with
domestic financial institutions, it continuously provided high quality and convenient receivables
financing services for small and medium enterprises, realizing the sound development of the
industry.


② TCL Capital

TCL Capital seeks investment opportunities in key fields of high-tech industries, including new
display, semi-conductor industry chain, as well as key materials and process equipment. These
investments took a balanced approach to promote technology development and derive economic
benefits. By the end of the Reporting Period, the AUM of TCL Capital exceeded RMB9 billion, and
126 projects were invested cumulatively. Currently, it holds the stake of CATL, DKEM, Cambricon
and some other listed companies, in addition to interests in Tengyuan Cobalt, Shangtai Tech, ASR
Microelectronics, GalaxyCore, etc. As for Admiralty Harbour Capital, it has issued and
underwritten 18 bonds and 7 debt management projects. Its investment banking and asset
management business grew steadily. China Innovative focused on investment opportunities related
to the Company’s two core businesses, and it has invested in more than 130 listed companies
cumulatively with a steady growth in performance.

At the end of the Reporting Period, the Company holds a stake of several listed companies directly,
including the 712 Corp. (603712.SH), the Bank of Shanghai (601229.SH) and the Fantasia
Holdings (01777.HK).


(II) Significant Change to Principal Activities in the Reporting Period

□ Yes   √ No


(III) Product Category Contributing over 10% of Principal Business Revenue or Profit

                                                                                                                   Unit: RMB
                                                                                                             YoY change in
                                                        Gross profit     YoY change in    YoY change in
Product category       Revenue         Cost of sales                                                          gross profit
                                                          margin          revenue (%)    cost of sales (%)
                                                                                                              margin (%)
Semi-conductor
                   46,765,152,291.00 2,696,687,047.00         16.89%            37.57%           181.34%             6.55%
display devices
Distribution of
                   22,518,401,333.49   330,678,166.00            3.47%           8.08%              7.23%           -0.12%
electronics




                                                            21
   TCL Technology Group Corporation                                           Annual Report 2020 (Summary)



(IV) Business Seasonality that Calls for Special Attention

□ Yes    √ No


(V) Significant YoY Changes in Revenue, Cost of Sales and Net Profit Attributable to the
Listed Company’s Ordinary Shareholders or Their Compositions


□ Applicable     √ Not applicable

(VI) Possibility of Listing Suspension or Termination

□ Applicable     √ Not applicable

(VII) Matters Related to Financial Reporting

1. YoY Changes to Accounting Policies, Accounting Estimates and Measure ment Methods

For details, see “44. Changes to main accounting policies and estimates” in “V Significant
accounting policies and estimates” in “Part XI Financial Report” of the full text of the 2020 Annual
Report.


2. Retrospective Restatements due to the Correction of Material Accounting Errors in the
Reporting Period

□ Applicable     √ Not applicable

3. YoY Changes to the Scope of the Consolidated Financial Statements


Compared with 2019, 91 subsidiaries (11 newly incorporated and the other 80 over which the
Company newly obtained control) are newly included in and 6 subsidiaries (3 transferred and the
other 3 de-registered) are excluded from the consolidation scope of 2020.




                                                  22