ESPRESSIF SYSTEMS｜2021 ANNUAL REPORT｜
1
Contents
3 About Espressif
4 Message from the CEO
6 Facts About Espressif
7 Business Highlights
8 Key Announcements
9 Management Report
9 Business Strategy
10 Key Products - IoT Chips
11 Applications
12 Core Competitiveness
15 Business Model
16 Financial Performance
18 Research and Development
20 Ownership of Securities
21 Stock-Based Compensation
22 Risks and Uncertainties
23 Consolidated Financial Statements
23 Consolidated Balance Sheet
25 Consolidated Income Statement
26 Consolidated Cash Flow Statement
27 Additional Information on Cash Flow Statement
28 Consolidated Statement of Changes in Equity
29 Further Information
29 Terms and Conditions of the Annual Report
30 Independent Auditor’s Report
35 List of abbreviations
ESPRESSIF SYSTEMS｜2021 ANNUAL REPORT｜ABOUT ESPRESSIF
About Espressif SHARE
A Leading AIoT Solution Provider
Espressif Systems is a public, multinational, fabless, semiconductor company focused
on developing cutting-edge, wireless-communication, low-power chipsets. By
leveraging wireless computing, we provide green, versatile and cost-eective AIoT
solutions. We have accomplished a hardware-and-software, closed-loop development
cycle for a series of core technologies, including RF, Wi-Fi & Bluetooth LE network
protocol stacks, RISC-V MCUs, AI instruction sets and algorithms, operating systems,
toolchains, compilers, IoT software application frameworks, Cloud, etc.
We have a diverse team of engineers from around the world. All company branches
employ more than 500 members of sta from almost 30 countries and regions, +75% of
whom are based in our Research & Development Department. We have eight R&D
centers in ve countries, including China (4 out of 8), India, the Czech Republic, Brazil
and Singapore. The company’s increasing reputation in recent years has been
instrumental in attracting talented engineers from across the world. Being united by our
passion for technology, our diversity is our strength, as it allows the creative blending of
dierent kinds of knowledge, perspectives and ways of thinking.
TOP 1
global Wi-Fi MCU
market share*
Czechia China
products distributed
all over the world
Shanghai｜Suzhou
Wuxi｜Hefei
India
millions of users
Singapore
Brazil
* Market share data from TSR
3
ESPRESSIF SYSTEMS｜2021 ANNUAL REPORT｜MESSAGE FROM THE CEO
Message from the CEO
“We strive to make our chips, operating systems, frameworks,
solutions, Cloud, business practices, tools, documentation,
writings, ideas, etc., ever more relevant to the answers people
need in contemporary life’s most pressing problems. This is
Espressif’s highest ambition and moral compass.”
Teo Swee Ann,
Espressif’s Founder and Chief Executive Ocer
In 2021 Espressif managed to successfully overcome the challenges which made
many in the AIoT industry be fraught with worry: global chip shortages and supply
chain disruptions, geopolitical and trade issues, climate crisis and the ongoing
COVID19 pandemic, to name but a few. Despite all these challenges, Espressif had a
truly productive year in 2021.
We started the year with ESP32-S3, our AI-enabled series of SoCs supporting 200
oine commands, with 2.4 GHz Wi-Fi and Bluetooth 5 (LE), powerful AI acceleration,
and strong security features. Then, having successfully launched ESP32-C3 with Wi-
Fi 4 and Bluetooth 5 (LE), we took our SoC oering to the next level with ESP32-C6,
E
which has a 32-bit RISC-V core with Wi-Fi 6 and Bluetooth 5 (LE) capabilities for
securely connected devices. ESP32-C6, which was swiftly certied by the Wi-Fi
Alliance, is unique in that not only does it pack a 2.4 GHz Wi-Fi 6 (802.11ax) radio,
but it also supports the 802.11b/g/n standard for backward compatibility.
Next came ESP32-S2-HMI-DevKit-1, which is specically designed for human-
machine interaction. Furthermore, we are particularly proud of Espressif's Audio
Front-End Algorithms that have been qualied as a “Software Audio Front-End
Solution” for Amazon Alexa built-in devices. Later in 2021, we announced ESP32-H2
with IEEE 802.15.4 and Bluetooth 5 (LE) connectivity, which was soon recognized
ocially as a “Thread-certied component” and a “Zigbee-compliant platform”.
4
ESPRESSIF SYSTEMS｜2021 ANNUAL REPORT｜MESSAGE FROM THE CEO
All of the above-mentioned MCUs were complemented with rmware, operating
system support, certication, documentation, modules, and customer sampling. The
same strategy will be implemented in the upcoming SoCs that we have in the
pipeline. I should also mention the considerable development of ESP RainMaker,
Espressif’s turnkey solution to building AIoT products, which has has now reached
the commercial stage. This, along with the many ESP-IDF improvements in 2021,
Espressif’s Eclipse IDE, audio DSP, AI voice-recognition suite, ESP-Insight, and tool
chain improvements, have established Espressif as a unique, one-stop, AIoT solution-
provider of not just powerful hardware, but also of innovative SDKs, Firmware, Cloud
backend, phone apps, and voice integrations.
In summary, not only did we increase our competitiveness in the AIoT arena, but we
actually made inroads in the domains of Articial Intelligence and Cloud computing.
Thus, our products today power more than 700 million devices across the whole wide
world. They are being used by independent developers and big companies alike,
while Espressif is recognized as a leading force in the AIoT chip industry. Hence, we
are now in a better position than ever before to further expand into new markets.
In fact, our revenue in 2021 increased by more than 60% compared to 2020, and our
customer base expanded accordingly. This was -in no small part- due to our
exceptional customer support, based on the huge eort of our operations team to
secure adequate supplies during periods of serious disruptions in the global
semiconductor supply chain, our reasonably-priced products and services, and the
considerableamount of time that our account managers spent coordinating deliveries
to our customers.
Our diverse, hard-working, dedicated sta is what makes us feel optimistic about the
future. So, in 2022, we expect Espressif’s supply chain to be further strengthened,
which will enable us to launch several new products. In terms of R&D, we plan to
build more chips, and continue making incremental changes to our current structures,
in order to accommodate a larger variety of products that we can capitalize on.
Most importantly, though, the purpose of our R&D is not just to generate more
revenue. Our primary goal, both as a company and as individuals, is to make
Espressif contribute to the world something useful. We strive to make our chips,
operating systems, frameworks, solutions, Cloud, business practices, tools,
documentation, writings, ideas, etc., ever more relevant to the answers people need
in contemporary life’s most pressing problems. This is Espressif’s highest ambition
and moral compass.
5
ESPRESSIF SYSTEMS｜2021 ANNUAL REPORT｜FACTS ABOUT ESPRESSIF
Facts About Espressif
517
employees
75
R&D employees
% 30 emp
loy
ee
na
tio
na
liti
es
200+
8
R&D centers
34 %
female employees
millions of users in 200+ countries and regions
Forbes China
Espressif included in the most innovative IoT companies
>600,000
Espressif SoCs sold daily
2020
ESP32
ESP8266
65 K+ 1.5 M+ Book Google
65 K+ open-source, 1.5 M+ views for the most 100+ books written 31 M+ search results
Espressif-powered popular videos of Espressif- about Espressif’s SoCs for ESP8266 and
projects on GitHub powered projects on YouTube in 10+ languages ESP32 on Google
6
ESPRESSIF SYSTEMS｜2021 ANNUAL REPORT｜BUSINESS HIGHLIGHTS
Business Highlights
Key Financial Data
Fiscal Year
CNY 2021 2020 2019
Consolidated Statement of Income Data
Revenue 1,386,371,541 831,286,490 757,428,577
Gross prot 549,025,732 343,235,573 356,185,901
Selling expenses 41,815,693 31,485,447 27,131,940
General and administrative expenses 55,485,146 46,595,295 54,771,687
Research and development expenses 271,689,981 192,792,044 119,748,689
Net income 198,427,708 104,051,961 158,505,350
Earnings per share:
Basic 2.4775 1.3006 2.3196
Diluted 2.4566 1.3006 2.3196
Consolidated Balance Sheet Data
Cash, cash equivalent and investments 1,114,558,363 1,357,770,452 1,406,188,938
Working capital 1,749,605,271 1,634,809,451 1,603,555,663
Total assets 2,129,056,143 1,829,631,150 1,725,047,426
Long-term obligations 68,244,392 50,822,540 38,017,703
Total shareholders’ equity 1,823,017,913 1,641,130,356 1,609,822,892
Consolidated Cash Flow Data
Net cash ow from operating activities 31,460,857 36,055,511 102,315,848
Non-GAAP Adjustment
Stock-based compensation 21,787,964 18,757,990 2,102,821
Non-GAAP net income 220,215,672 122,809,951 160,608,171
Key Financial Indicators
Fiscal Year
2021 2020 2019
Gross margin 39.60% 41.29% 47.03%
Chip gross margin 48.94% 45.71% 50.33%
Module gross margin 33.48% 36.00% 39.35%
R&D-to-sales ratio 19.60% 23.19% 15.81%
EBITDA margin 16.78% 14.90% 24.01%
Weighted ROE 11.52% 6.47% 18.32%
Number of Espressif employees as of December 31 517 449 345
7
ESPRESSIF SYSTEMS｜2021 ANNUAL REPORT｜KEY ANNOUNCEMENTS
Key Announcements
New SoCs AI
ESP32-H2 AFE (Audio Front-End)
ocially certied as a“Thread-Certied Component” Espressif’s audio front-end algorithms have been
and a “Zigbee-Compliant Platform”
qualied for Amazon Alexa devices
ESP32-C6 ESP-DL
a 2.4 GHz Wi-Fi 6 + Bluetooth 5 (LE) SoC, with a
a library for high-performance deep-learning resources
single-core, 32-bit 160MHz RISC-V microcontroller
dedicated to Espressif SoCs
OS
ESP-IDF
Espressif’s own IoT development
framework, including RTOS, has
been upgraded to v4.4 and has
won 8.2K stars on GitHub
NuttX / Zephyr
new operating systems
supported by Espressif SoCs
Cloud
ESP RainMaker
an AIoT cloud platform that enables customers to
quickly build their own solutions based on enterprise-
Matter Standard
grade Cloud computing, with a single-click
deployment
all Espressif chips, apart from ESP8266, support
Matter, the latest industry-unifying, IP-based
connectivity protocol.
ESP Insights
a device observability framework that allows
developers to remotely peek into their rmware and
get detailed information about its execution and
debug errors
8
ESPRESSIF SYSTEMS｜2021 ANNUAL REPORT｜MANAGEMENT REPORT
Management Report
Business Strategy
Espressif Systems’ business strategy emanates from our four key capabilities and our
four key services/products. More specically, the four key capabilities include
Espressif’s connectivity and chip design, OS-level development, software solutions, and
our engagement with our ecosystem. Our four key services and products include our
development environment, software tools, cloud services, and detailed documentation
support. The above-mentioned structure ensures that our products are the heart of
numerous commercial AIoT applications in dierent markets, including smart home,
consumer electronics, industrial automation, healthcare, etc.
IoT Overview
Apple Microsoft Internet
Amazon Google XiaoMi Baidu Alibaba Tencent
HomeKit Azure Platform
Smart Consumer Industrial Internet of Energy Business
Healthcare Education …
Home Electronics Automation Vehicles Management Application
Video-
Developer Open-source Social Developer
Techblog sharing TPPS …
Ecosystem platform Platform Ecosystem
Platform
Development Environment
Peripheral Connect AI Remote Software
Mesh Speech AI Image …
Driver Control Recognition Monitor Solution
Documentation
Control
Cloud Service
Tools Software
ESP IoT OS Support for Other OS Operating
ESP-IDF NuttX / Zephyr / Vela / OpenHarmony System
Wi-Fi 4/Wi-Fi 6 BLE 5.0/BLE 5.2 Thread/Zigbee Connectivity
Technology
&
AI Security Chip Design
Wireless SoC RISC-V
Accelerator Encryption
9
ESPRESSIF SYSTEMS｜2021 ANNUAL REPORT｜MANAGEMENT REPORT
Key Products - IoT Chips
Espressif is recognized as a market leader in the eld of Wi-Fi MCUs. We released our
rst Wi-Fi MCU in 2014, and our rst Wi-Fi/Bluetooth LE combo chip in 2016. In 2020,
we successfully developed our own RISC-V MCU core, adding it to our products, while
in 2021, we released our rst Thread/Zigbee/Bluetooth LE 5 combo chip and a 2.4GHz
Wi-Fi 6 chip. In fact, we have been constantly diversifying our product portfolio,
introducing new solutions through our numerous investments. Thus, we now have
various product lines in all the main short-range connectivity technologies.
ESP ESP
dual-core
32 32-S3
240MHz Wi-Fi 4｜Bluetooth 4.2
32-bit Xtensa MCU
Wi-Fi 4｜Bluetooth 5(LE)
32-bit Xtensa MCU｜AI Functions
ESP
single-core
240MHz
32-S2
Wi-Fi 4
32-bit Xtensa MCU
ESP ESP ESP
single-core 8266 32-C3 32-C6
160MHz Wi-Fi 4
32-bit Tensilica MCU Wi-Fi 4｜Bluetooth 5(LE)
Wi-Fi 6｜Bluetooth 5(LE)
32-bit RISC-V MCU 32-bit RISC-V MCU
ESP
single-core 32-C2
120MHz
Wi-Fi 4｜Bluetooth 5(LE)
32-bit RISC-V MCU
ESP
single-core 32-H2
96MHz Thread｜Zigbee
Bluetooth 5(LE)
32-bit RISC-V MCU
2014 2016 2019 2020 2021 2022 2022+
We also provide IoT modules based on our chips. The benet for customers is that they
can get direct support from us, shortening and optimizing their supply chain, even in
case of chip shortages.
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ESPRESSIF SYSTEMS｜2021 ANNUAL REPORT｜MANAGEMENT REPORT
Applications
We sell our own IoT chips and modules, enabling the connectivity between various
products, ranging from simple devices -such as smart light bulbs- to complicated ones,
such as robots. Our core connectivity chips are Wi-Fi MCUs and Wi-Fi /Bluetooth LE
(BLE) combo MCUs, which account for 98% of our revenue.
The market for Wi-Fi MCUs or Wi-Fi/BLE combo MCUs is truly diverse, including
applications for smart homes (smart lights, air conditioners, ovens, coee machines.
etc.), consumer electronics (e.g., smart speakers), industrial automation (e.g.,
mechanical arms), healthcare (e.g., monitoring devices for diabetes, blood pressure,
COVID-19, etc.), energy control (solar energy devices, EV chargers, etc.), the internet of
vehicles (OBD devices, dash boards, etc.), education (talking pens, interactive white
boards, etc.) and others, such as drones, robots, wireless POS, and asset trackers.
Smart Homes Consumer
Industrial Healthcare
Electronics Automation
Smart speaker Medical detector
x
Smart oven Mechanical arm
Energy
Internet of Vehicles Education Others
Management
Solar energy device Talking pen
OBD devices ……
11
ESPRESSIF SYSTEMS｜2021 ANNUAL REPORT｜MANAGEMENT REPORT
Core Competitiveness
Espressif’s competitiveness stems from our previously-referred to “four key capabilities
and four key services/products” —our business philosophy, which helps us make a
dierence on the market in terms of the chips, operating systems and software that we
oer, within our vibrant ecosystem.
Chip Competitiveness
Espressif takes pride in the invaluable experience that our R&D team leaders have in the
eld of wireless-communication chips. Additionally, Espressif’s founder and CEO, Mr
Teo Swee-Ann, has over 20 years of experience in the semiconductor industry, having
also registered over 40 IC and IoT-related patents under his name.
After the huge success of our initial series of Wi-Fi MCUs, our company expanded to
other wireless-connectivity technologies, including Bluetooth LE and Thread/Zigbee.
This development has further enhanced our Company's high-tech oerings, thus
increasing our market opportunities, while also keeping our customers spoiled for
choice.
Our products are renowned for their high level of integration, small size, low power
consumption, great computing power, large memory space and strong security
mechanism. Our products power over 700 million devices across the whole wide world.
They are being used by independent developers and big companies alike, while
Espressif is recognized as a leading force in the AIoT chip industry.
System Competitiveness
ESP-IDF is Espressif’s ocial IoT Development Framework for the ESP32, ESP32-S,
ESP32-C and ESP32-H series of SoCs. It provides a self-sucient SDK for any generic
application development on these platforms, using programming languages such as C
and C++. ESP-IDF currently powers millions of devices in the eld, and enables building
a variety of network-connected products, ranging from simple light bulbs and toys to
big appliances and industrial devices.
ESP-IDF has a well-dened release process and a support policy which ensures that
customers can choose a stable release and that they continue getting important xes
for their application. Each stable release undergoes a rigorous QA process that ensures
production readiness. Also, ESP-IDF comes with an extensive documentation for its
software components not only at the usage level but also at the design level. This helps
developers to fully understand what ESP-IDF oers, and select whatever suits their
applications best.
Furthermore, ESP-IDF supports a large number of software components, including
RTOS, peripheral drivers, networking stack, various protocol implementations, and
helpers for common application use-cases. These components help developers to
focus on the business logic, while the SDK provides most of the building blocks
12
ESPRESSIF SYSTEMS｜2021 ANNUAL REPORT｜MANAGEMENT REPORT
required for typical applications. Open-source and freely-available developer tools, as
well as ocially supported Eclipse and VSCode IDEs ensure ease-of-use for
developers.
Software Competitiveness
ESP-WIFI-MESH is a wireless communication network with nodes organized in a mesh
topology using the simultaneous AP-STA feature on Espressif SoCs. It provides a self-
forming and self-healing network, with ease of deployment. The network topology of
ESP-WIFI-MESH can scale up to 1,000 nodes in large areas, without requiring any
support for specic Wi-Fi infrastructure. ESP-WIFI-MESH can also be used to cover Wi-
Fi blind spots in home-deployment scenarios where the Wi-Fi signal cannot be reached.
We also provide ready-to-use, yet customizable, phone apps that facilitate the auto-
discovery of new nodes which allow their easy conguration with the Bluetooth LE
method. Finally, ESP-WIFI-MESH is based on standard Wi-Fi connectivity and it can use
standard WPA2 network security among the mesh nodes to ensure communication
security.
Additionally, ESP-BLE-MESH is an open-source protocol stack based on Bluetooth
mesh. It is fully certied by the Bluetooth Special Interest Group and supports all the
functions and application models of the Bluetooth Mesh Specication v1.0.1. By using
the ESP-BLE-MESH technology, dierent types of standard Bluetooth mesh devices
from dierent manufacturers can achieve interoperability, communicating with one
another reliably and securely. In fact, the big advantage of using the ESP-BLE-MESH
technology is that, with an OTA upgrade on existing Bluetooth LE devices, users can
implement a mesh network. This is why Bluetooth mesh has become so popular.
Furthermore, ESP RainMaker is a complete system for building AIoT products with a
minimal amount of code, empowering our customers to develop and deploy secure,
customized AIoT solutions. It covers all Espressif chips and modules, device rmware,
voice-assistant integrations, phone apps and Cloud backend. This helps our customers
save a large investment in Cloud capabilities, gain independence and focus on
innovating their core-value oering.
Ecosystem Competitiveness
Our company has brought together professionals and companies from across the AIoT
industry, e.g., hardware and software developers, business applications, and Cloud
platforms, as well as maker communities. Espressif’s own software development
platforms and the accompanying documentation are entirely open-source, thus making
our innovative products available to people from all walks of life.
As a result, thousands of third-party projects have been based on Espressif
technologies. For example, on GitHub, which is the largest provider of Internet hosting
for software development, there are more than 65,000 open-source projects based on
Espressif's IoT chips. Furthermore, the popularity of our products has stimulated an
increasing number of authors who have produced teaching resources based on
Espressif chipsets in several languages including English, Chinese, German,
Portuguese, Japanese, and Serbo-Croatian. At present, there are more than 100 digital
and physical books about Espressif’s SoCs.
13
ESPRESSIF SYSTEMS｜2021 ANNUAL REPORT｜MANAGEMENT REPORT
Ecosystem Competitiveness (continued)
DEVELOPER COMMUNITY CONTENTS
ITEM Dec 31, 2021 Dec 31, 2020 change%
GitHub (Worldwide open-source development platform)
ESP32 Projects 29,007 19,091 52%
ESP8266 Projects 35,055 30,161 16%
Gitee (Chinese open-source development platform)
ESP32 Projects 2,592 *
ESP8266 Projects 1,867 *
CSDN (Chinese Tech-blog platform)
Search results for ESP32 79,188 65,144 22%
Search results for ESP8266 30,033 23,563 27%
Hackaday (open-source hardware platform)
ESP32 projects 3,816 *
ESP8266 projects 5,789 *
Reddit
ESP32 group members 46,540 *
ESP8266 group members 53,523 *
bilibili (Chinese video-sharing platform)
Ocial account followers 17,502 3,352 422%
Ocial account views 390,000 62,000 529%
YouTube
Ocial account subscribers 11,600 **
Ocial account views 556,846 **
ESP32 community videos 466,459 284,505 64%
ESP8266 community videos 687,155 544,174 26%
Views of most watched ESP32 community video around 1.5m around 1.2m
Views of most watched ESP8266 community video around 1.5m around 1.4m
N.B.：
*The search results mentioned above were retrieved on Jan. 29, 2022.
**The search results mentioned above were retrieved on Apr. 10, 2022.
Statistical data derived from dierent platforms may be based on dierent collecting methods. It is possible for certain platforms
to modify their algorithms from time to time and, therefore, impact the resulting statistical data. The above-mentioned
data resulted from the Company’s research at the end of each scal year reported here, unless otherwise stated.
14
ESPRESSIF SYSTEMS｜2021 ANNUAL REPORT｜MANAGEMENT REPORT
Business Model
B2D2B
Business-to-Developer-to-Business
B $
usiness
Espressif has deployed the Business-to-Developer type of marketing, not only because
it has gained prominence in recent years, but also because it has proven to be more
D
viable with the increased inuence of developers on organizations of all sizes. In other
words, most developers are R&D employees in various companies and bring about
business opportunities from the companies they work for.
eveloper
This way, the developer ecosystem we have created at Espressif demonstrates how the
value of networks can grow exponentially:
The more developers we attract as customers, the more hardware and software
solutions we generate.
The more successful hardware and software solutions we create, the more our
reputation spreads with positive feedback from happy customers/developers.
The above-mentioned interaction between people in our network prompts the
B usiness
creation of more content, which -in turn- attracts more users/developers searching for
new content.
Likewise, other third-party development platforms join the ecosystem and bring in
new developers, as our inuence continues to grow.
Having successfully applied the B2D2B model, Espressif can now focus on R&D
investments, while maintaining a small business team that directly supports a large
number of customers. In fact, most of our revenue is gained through direct sales.
Number of Employees
December 31, 2021
11%
2%
3%
9%
Employees by
R&D 388
function
Administration 56
Business 48
Finance 13
Supply Chain 12
Total 517
75%
R&D Administration Business
Finance Supply Chain
15
ESPRESSIF SYSTEMS｜2021 ANNUAL REPORT｜MANAGEMENT REPORT
Financial Performance
The big picture
Espressif’s total revenue in 2021 was CNY 1,386 million, marking an increase of 66.77%
from CNY 831million in 2020, due to the company’s IoT sales growth. The ensuing net
income was CNY 198 million, which marked an increase of 90.70% year-on-year.
Given the chip shortages across the semiconductor industry, the upstream cost of chips
and modules rose in 2021, passing this through to retail prices. The overall gross margin
was 39.6%, in which the IoT chip gross margin was 48.94%. The overall gross margin
decreased due to the increased module shipment.
Customers tend to select larger memory capacity for their applications, which
correspondingly comes with higher cost, thus resulting in a decrease in the gross
margin of the module. However, we keep the chip margin to a reasonable level, in order
to support our future R&D expenditure. The module margin uctuates depending on its
memory capacity. Overall, the gross prot of a module is higher than that of a chip.
Gross Margin by Product Category Shipment by Product Category
Overall GM Chip GM Module GM Chip Module
60.0%
50.3% 48.9%
47.0% 45.7%
45.0% 41.3% 2021 64.3% 35.7%
39.4% 39.6%
36.0%
33.5%
30.0%
2020 77.2% 22.8%
15.0%
2019 85.6% 14.4%
0.0%
2019 2020 2021
0.0% 25.0% 50.0% 75.0% 100.0%
Table of Production and Shipment
End-of-Year Increase of Increase of Increase of
pcs in million Production Shipment Inventory production YoY shipment YoY inventory YoY
Chip 170.53 145.71 41.50 27.55% 12.70% 148.89%
Module 85.35 80.79 7.60 116.88% 111.68% 150.16%
Total 255.88 226.50 49.10 47.87% 35.26% 149.09%
N.B.: Each module includes one Espressif chip. Therefore, we have excluded the number of chips used in modules in the statistics of chips. We
delivered 226.50m chips in 2021, which marked an increase of 35.26% from 2020.
16
ESPRESSIF SYSTEMS｜2021 ANNUAL REPORT｜MANAGEMENT REPORT
Main Business Operations
Changes in Key Aspects of Income and Cash Flow
Fiscal Year
CNY 2021 2020 Change (%)
Revenue 1,386,371,541 831,286,490 66.77
Cost of revenue 837,345,809 488,050,917 71.57
Selling expenses 41,815,693 31,485,447 32.81
General and administrative expenses 55,485,146 46,595,295 19.08
Research and development expenses 271,689,981 192,792,044 40.92
Financial expenses -2,312,067 -3,060,677 -24.46
Net income 198,427,708 104,051,961 90.70
Non-GAAP net income 220,215,672 122,809,951 79.31
Net cash ow from operating activities 31,460,857 36,055,511 -12.74
Net cash ow from investing activities -119,672,349 423,821,658 -128.24
Net cash ow from nancing activities -38,832,903 -68,042,287 -42.93
Revenues by Product Category
Chip Module Others
2021 39.9% 58.7% 1.5% 2021 Revenues
by Area
Mainland China
Rest of the world
2020 53.1% 45.7% 1.2%
67%
0.0% 30.0% 60.0% 90.0% 120.0%
Key Financial Indicators
60.0%
Overall GM Chip GM EBITDA Margin SG&A as % of sales R&D as % of sales
50.0% 48.9%
45.7%
41.3%
39.6%
40.0%
30.0%
23.2%
19.6%
20.0%
16.8%
14.9%
10.0% 9.4%
7.0%
0.0%
2020 2021 2020 2021 2020 2021 2020 2021 2020 2021
17
ESPRESSIF SYSTEMS｜2021 ANNUAL REPORT｜MANAGEMENT REPORT
Research and Development
R&D Investment
R&D investment is at the heart of Espressif Systems’ development. During the reporting
period, R&D cost CNY 271.69 million, which marked a 40.92% increase compared to
2020. At the same time, the R&D-to-sales ratio was 19.60% in 2021.
Espressif’s escalating R&D investment cost can be attributed to the increase in R&D
sta, the implementation of the company’s stock incentive plans, as well as software
and licensing fees, which increased signicantly year-over-year.
Fiscal Year
CNY 2021 2020 change
R&D Expenses 271,689,981 192,792,044 40.92%
R&D-to-sales ratio 19.60% 23.19%
Intellectual Property 210
Applied for
We seek to protect our technology through a combination of patents, software copyright
and trade secrets. By the end of December 2021, the Company had been granted 119
patents. We continue to submit new patent applications relating to our recent R&D 119
innovations. Granted
List of Intellectual Property Rights Applied and Granted
2021 Cumulative number
Applied for Granted Applied for Granted
Invention patents 13 18 114 62
Utility model patents 0 1 26 26
had
Design patents 0 0 1 1
Software copyright 1 2 19 19
Others 14 5 50 11
Total 28 26 210 119
N.B.: The number of patents that have been “applied for" does not include the rejected applications in China, or the PCT patent applications not
submitted to any particular country, or any patent applications beyond the reporting period. The number of “granted" patents includes those with
expired IP rights. The category of “others” includes overseas (non-Chinese) patent applications, i.e. the PCT patent applications, U.S. patent
applications through the PCT route or the Paris Convention route, as well as patent applications in India.
18
ESPRESSIF SYSTEMS｜2021 ANNUAL REPORT｜MANAGEMENT REPORT
R&D Employees
We are proud of our talented, diverse and multicultural workforce. As of Dec 31, 2021,
across our eight branches worldwide, we have employed 517 people, more than 75% of
whom are in engineering roles. Meanwhile, we have expanded our business beyond Wi-
Fi MCUs, thus oering innovative solutions to wireless connectivity and processing,
including AI, RISC-V MCU, Wi-Fi 6, Bluetooth LE, Thread, Zigbee and other IoT-related
technologies.
Since the research and development of software and hardware are inextricably
intertwined, we constantly invest in software technology, too. Hence, we are currently
focused on AIoT technologies, including toolchains, compilers, operating systems,
application frameworks, AI algorithms, Cloud products, apps, etc. Our aim is to make
Espressif a one-stop solution-provider oering anything relating to hardware, software
and the Cloud.
Fiscal Year
2021 2020
R&D employees 388 340
R&D employees as a percentage of total employees 75.05% 75.72%
Total compensation of R&D employees (CNY in thousands) 200,254 143,563
Average compensation of R&D employees (CNY in thousands) 550 490
272 million in R&D expenses
R&D Expenses R&D Employees
25% 76% 75%
23% 272 71%
67% 388
20%
388
57% 57% 340
40.9
18%
16% 16% 193
% 246
R&D employees
change%
120
162
19.6 %
R&D-to-sales
30
49
75
68
100
75 %
R&D employee
ratio 2016 2017 2018 2019 2020 2021 2016 2017 2018 2019 2020 2021 percentage
R&D expenses (in million) R&D-to-sales ratio R&D employees R&D employees %
19
ESPRESSIF SYSTEMS｜2021 ANNUAL REPORT｜MANAGEMENT REPORT
Ownership of Securities
Basic information of securities
Share types Ordinary share
Share capital 80,158,963 (as of December 31, 2021)
Listing Shanghai Stock Exchange (SSE)
Ticker 688018.SH
Listing Date 2019-07-22
Shareholder Structure as of Dec 31, 2021
Shareholder Share Numbers Percentage (%)
Espressif (Hong Kong) Investment Ltd. 34,860,000 43.49
Yadong Beichen Investment Management Co., Ltd. 3,370,061 4.20
Shinvest Holding Ltd. 2,804,446 3.50
BOC - Franklin Templeton Sealand Fund 1,344,085 1.68
ABC - Franklin Templeton Sealand Fund 1,047,539 1.31
Ningbo Meishan Free Trade Port Le Tun Investment Management
1,046,030 1.30
Partnership (Limited Partnership)
BOC - Taixin Medium and Small Cap Selected Stock Securities
940,000 1.17
Investment Fund
Jingyang Wang 937,210 1.17
New China Life Insurance Company Ltd.－Group Annuity Insurance－
818,651 1.02
018L－FH001 SH
BOC - Cathay Pacic CES Semiconductor Chip ETF 689,695 0.86
Top ten shareholders 47,857,717 59.70
Other public shareholders 32,301,246 40.30
Total of outstanding shares 80,158,963 100.00
20
ESPRESSIF SYSTEMS｜2021 ANNUAL REPORT｜MANAGEMENT REPORT
Stock-Based Compensation
Espressif has three ongoing restricted stock incentive plans. The fair value of the
restricted stock incentive plans is estimated using the Black-Scholes model. The
following table presents details of stock-based compensation costs acknowledged in
the Consolidated Statements of Income.
Restricted Stock Incentive Plans
Proportion of
Number of Ratio of Number of Awarded
Underlying Underlying Employees in Employees to Grant Price
Plan Award Type Shares Shares (%) the Plan Total (%) (CNY)
2019 restricted stock Class II restricted
288,300 0.3597 21 4.06 63.625
incentive plan stocks
2020 restricted stock Class II restricted
240,787 0.3004 169 32.69 93.625
incentive plan stock
2021 restricted stock Class II restricted
1,093,164 1.3637 246 47.58 94.500
incentive plan stock
Stock-Based Compensation
Fiscal Year
CNY g 2021 2020 2019
Selling expenses 897,990 588,065
G&A expenses 1,722,458 1,235,804 164,228
R&D expenses 19,167,516 16,934,121 1,938,593
Total stock-based compensation 21,787,964 18,757,990 2,102,821
21
ESPRESSIF SYSTEMS｜2021 ANNUAL REPORT｜MANAGEMENT REPORT
Risks and Uncertainties
Financial Risk
The Company performs periodic credit evaluations of its customers’ nancial condition
and generally requires no collateral from its customers. The Company provides an
allowance for expected credit losses based on the net amount expected to be collected
on such receivables. Losses have not been signicant for any of the periods presented.
R&D Risk
Espressif’s research and development strategy is focused on leveraging new technologies
for the creation of innovative AIoT products. Any delays or changes in the development of
these technologies by our industry partners, or a failure of our products to achieve market
acceptance could compromise our competitive position.
Competitors
As the market for AIoT products grows, we face an increasing antagonism from relatively
large competitors, such as Realtek, MediaTek, Inneon, NXP, Qualcomm and others.
Intense competition from current players as well as new entrants may reduce our product
sales and market share.
Suppliers
A signicant portion of the Company’s products is fabricated by Taiwan Semiconductor
Manufacturing Co. (TSMC). The inability of TSMC to deliver wafers to the Company in a
timely manner could impact the production of the Company’s products for a substantial
period of time, which could have an adverse eect on the Company’s business, nancial
condition, results of operations and cash ow.
Customers
The Company sells directly to end customers, distributors, solution providers and contract
manufacturers. Our customers are a mix of several big customers and numerous small
customers. The concentration ratio for our top-ve customers was 29.05%, 42.18% and
50.96% during the scal years of 2021, 2020 and 2019, respectively. None of the
customers accounted for greater than 10% of our revenue during the scal year of 2021.
22
ESPRESSIF SYSTEMS｜2021 ANNUAL REPORT｜CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Financial Statements
Consolidated Balance Sheet
CNY December 31, 2021 December 31, 2020
Assets
Current assets:
Cash and bank balances 367,149,078 503,239,989
Transactions ofmonetaryassets 747,409,285 854,530,463
Notes receivable 11,600,177 3,710,773
Accounts receivable, net 306,823,758 182,138,716
Prepayments 8,172,703 6,312,319
Other receivables 9,519,869 13,884,859
Including: Interest receivable 298,796
Inventories 326,168,928 196,155,326
Other current assets 210,555,311 12,515,259
Total current assets 1,987,399,110 1,772,487,705
Non-current assets:
Investment in other equity assets 56,600,700 6,646,876
Fixed assets 46,176,368 24,991,572
Construction work in progress 4,868,345
Right-of-use assets 21,731,123
Intangible assets 3,191,335 4,036,053
Long-term deferred expenses 7,582,637 6,714,956
Deferred income tax assets 6,374,870 9,885,643
Total assets 2,129,056,143 1,829,631,150
0 0
23
ESPRESSIF SYSTEMS｜2021 ANNUAL REPORT｜CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheet
CNY December 31, 2021 December 31, 2020
Liabilities & Shareholders’ Equity
Current liabilities:
Accounts payable 138,572,198 83,093,192
Contract liabilities 17,184,196 3,569,826
Payroll payable 66,168,763 49,476,684
Taxes payable 6,472,494 489,933
Other payable 754,261 1,048,619
Non-current liabilities due within one year 8,641,928
Total current liabilities 237,793,839 137,678,254
Non-current liabilities:
Lease liabilities 12,116,036
Deferred income tax liabilities 56,128,356 50,822,540
Total liabilities 306,038,230 188,500,794
Owners’ equity (or shareholders' equity):
Share capital 80,158,963 80,030,500
Capital reserves 1,266,771,034 1,235,113,896
Other comprehensive income -15,711,579 -7,401,076
Surplus reserves 33,462,951 15,428,165
Retained earnings 458,336,543 317,958,872
Total shareholders’ equity 1,823,017,913 1,641,130,356
Total liabilities and shareholders' equity 2,129,056,143 1,829,631,150
24
ESPRESSIF SYSTEMS｜2021 ANNUAL REPORT｜CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Income Statement
End of Year
CNY December 31, 2021 December 31, 2020
Revenue 1,386,371,541 831,286,490
Cost of Revenue 837,345,809 488,050,917
Gross Prot 549,025,732 343,235,573
Taxes and surcharges 3,556,395 849,935
Selling expenses 41,815,693 31,485,447
General and administrative expenses 55,485,146 46,595,295
Research and development expenses 271,689,981 192,792,044
Financial expenses -2,312,067 -3,060,677
Including: Interest expenses 608,767
Interest income 4,379,324 5,535,051
Add: Other income 4,251,502 5,619,810
Investment income (mark"-" for loss) 20,794,725 28,328,313
Incomes from changes in fair value (mark"-" for loss) 4,509,285 1,530,463
Credit impairment losses (mark"-" for loss) -13,830 83,916
Assets impairment losses (mark"-" for loss) 34,567 322,345
Assets disposal income (mark"-" for loss) -2,124
Operating Income 208,364,710 110,458,376
Add: Non-operating revenues 66,231 38,227
Less: Non-operating expenses 100,817 37,409
Income before income taxes 208,330,124 110,459,194
Provision (benet) for income taxes 9,902,416 6,407,233
Net Income 198,427,708 104,051,961
0 0
Earnings per share
Basic 2.4775 1.3006
Diluted 2.4566 1.3006
End of Year
CNY December 31, 2021 December 31, 2020
Net Income 198,427,708 104,051,961
Other comprehensive income (loss), after tax
Changes to the fair value of investment in other equity instruments 11,929 -15,150
Currency translation reserves -8,322,431 -23,445,049
Other comprehensive income (loss) -8,310,502 -23,460,199
Comprehensive income 190,117,205 80,591,761
25
ESPRESSIF SYSTEMS｜2021 ANNUAL REPORT｜CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Cash Flow Statement
End of Year
CNY December 31, 2021 December 31, 2020
Operating Activities
Cash from sales of merchandise and provision of services 1,453,744,622 869,774,621
Tax refund 37,691,770 20,697,886
Other received cash related to operational activities 8,720,037 12,107,089
Subtotal of cash inow from operational activities 1,500,156,429 902,579,596
Cash paid for merchandise and services 1,105,365,342 615,349,137
Cash paid to and for employees 232,723,048 164,201,039
Cash paid for taxes and surcharges 41,903,120 16,548,700
Other paid cash related to operational activities 88,704,063 70,425,209
Subtotal of cash outow from operational activities 1,468,695,573 866,524,086
Net cash ow provided by operating activities 31,460,857 36,055,511
Investment activities
Cash arising from disposal of investments 3,096,596,236 4,337,234,513
Cash arising from investment income 3,266,350
Net cash arising from disposal of xed assets, intangible assets and other 12,510
long-term assetscash related to investment activities
Other received 1,535,102
Subtotal of cash inow from investment activities 3,101,410,198 4,337,234,513
Cash paid for purchase and construction of xed assets, intangible assets
31,912,546 21,702,855
and other long-term assets
Cash paid for investments 3,187,670,000 3,891,710,000
Other paid cash related to investment activities 1,500,000
Subtotal of cash outow from investment activities 3,221,082,546 3,913,412,855
Net amount of cash ow provided by investment activities -119,672,349 423,821,658
Financing activities
Cash arising from the issuance of common stock 9,997,637 1,957,713
Including: Cash arising from subsidiaries absorbing investments by
minority shareholders
Subtotal of cash inow from nancing activities 9,997,637 1,957,713
Cash paid for distribution of dividends and prots or payment of interests 40,015,250 70,000,000
Including: dividends and prots paid to minority shareholders by
subsidiaries
Other paid cash related to nancing activities 8,815,291
Subtotal of cash outow from nancing activities 48,830,541 70,000,000
Net cash ow provided by nancing activities -38,832,903 -68,042,287
Impact of uctuation in exchange rate on cash and cash equivalents -9,052,722 -24,587,777
Net increase in cash and cash equivalents -136,097,117 367,247,104
Add: Cash and cash equivalent at the commencement of the period 503,239,843 135,992,739
Cash and cash equivalents at the end of the period 367,142,726 503,239,843
26
ESPRESSIF SYSTEMS｜2021 ANNUAL REPORT｜CONSOLIDATED FINANCIAL STATEMENTS
Additional Information on Cash Flow Statement
End of Year
CNY December 31, 2021 December 31, 2020
Additional information
Net income 198,427,708 104,051,961
Adjustments to reconcile net income to cash provided by operating activities:
Add: provision for impairment of assets -34,567 -322,345
Credit impairment provision 13,830 -83,916
Depreciation of xed assets 11,167,228 9,566,370
Depreciation of right-of-use assets 7,547,081
Amortization 844,718 761,769
intangible
ofAmortization of long-term prepaid expenses 4,129,969 3,080,182
Losses on disposal of xed assets, intangible assets and other long-term
2,124
assets (mark"-" for income)
Losses on scrapping of xed assets (mark"-" for income) 162 129
Losses on fair value changes（mark"-" for income） -4,509,285 -1,530,463
Financial expenses（mark"-" for income） 1,700,139 2,185,811
Losses on investment（mark"-" for income） -20,794,725 -28,328,313
Decrease on deferred income tax assets（mark”-" for increase） 3,568,877 -7,382,277
Increase on deferred income tax liabilities（mark"-" for decrease） 5,305,815 12,787,379
Changes in operating assets and liabilities:
Decrease in inventories（mark"-" for increase） -129,902,049 -97,761,746
Decrease in operational receivables（mark"-" for increase） -159,345,382 -50,969,810
Increase in operational payables（mark"-" for decrease） 91,379,998 71,242,790
Others 21,959,215 18,757,990
Net cash ow provided by operating activities 31,460,856 36,055,511
27
ESPRESSIF SYSTEMS｜2021 ANNUAL REPORT｜CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statement of Changes in Equity
Other
Capital comprehensive Surplus Retained
CNY Share capital reserves income reserves earnings Total equity
Balance as of December 31, 2019 80,000,000 1,214,428,693 16,059,123 11,122,473 288,212,604 1,609,822,892
Comprehensive income, net of tax
Net Income 104,051,961 104,051,961
Other comprehensive income -23,460,199 -23,460,199
Transactions with owners
Capital increase 30,500 4,399,238 4,429,738
Stock-based compensation 16,285,965 16,285,965
Surplus reserves 4,305,692 -4,305,692
Dividends -70,000,000 -70,000,000
Balance as of December 31, 2020 80,030,500 1,235,113,896 -7,401,076 15,428,165 317,958,872 1,641,130,356
Comprehensive income, net of tax
Net Income 198,427,708 198,427,708
Other comprehensive income -8,310,502 -8,310,502
Transactions with owners
Capital increase 128,463 20,963,006 21,091,469
Stock-based compensation 10,694,132 10,694,132
Surplus reserves 18,034,786 -18,034,786
Dividends -40,015,250 -40,015,250
Balance as of December 31, 2021 80,158,963 1,266,771,034 -15,711,578 33,462,951 458,336,543 1,823,017,913
28
ESPRESSIF SYSTEMS｜2021 ANNUAL REPORT｜FURTHER INFORMATION
Further Information
Terms and Conditions of the Annual Report
Responsibility Statement
The Board of Directors, the Board of Supervisors and executive management of the
Company warrant that the contents of this annual report are true, accurate and
complete, and do not contain any false information, misleading statements or material
omissions, severally and jointly accepting any legal responsibility thereof.
Shanghai, 10 March 2022
Espressif Systems
Board of Directors Board of Supervisors
Teo Swee Ann Lv Zhihua
Founder and Chairman Employee elected
Ng Pei Chi Fu Hanyu
Information Technology Ocer Shareholder elected
Teo Teck Leong Wang Yiwen
Shareholder elected Shareholder elected
Xu Xin
Shareholder elected Executive Management
Lan Yuzhe Teo Swee Ann
Independent Director Founder and CEO
Koh Chuan Koon Wang Jue
Independent Director Deputy General Manager
Lee Sze Chin Shao Jingbo
Independent Director Financial Director
Forward-looking Statements
This report contains forward-looking statements and/or assessments about the SPRESSIF
E
business, nancial condition, performance and strategy of the Espressif Group. These
statements and/or assessments are based on assumptions and management
expectations resting upon currently available information and current estimates. These Declaration
are subject to a multitude of uncertainties and risks, many of which are partially or
entirely beyond Espressif’s control. Espressif’s actual business development, nancial SY
condition, performance and strategy may, therefore, dier from what is discussed in this STE MS
report.
29
ESPRESSIF SYSTEMS｜2021 ANNUAL REPORT｜FURTHER INFORMATION
Independent Auditor’s Report
To the Shareholders of
Espressif Systems (shanghai) Co., Ltd.
Opinion
We have audited the nancial statements of Espressif Systems (Shanghai) Co., Ltd. (“the
Company”), which comprise the consolidated balance sheet and balance sheet as of
December 31, 2021, the consolidated income statement, income statement,
consolidated cash ow statement, cash ow statement, the consolidated statement of
changes in equity, and statement of changes in equity for the year then ended, and the
notes to the nancial statements.
In our opinion, the enclosed nancial statements were prepared in accordance with the
Accounting Standards for Business Enterprises (the “ASBE”) in all material aspects, and
present fairly the consolidated and the company's nancial positions as of December
31, 2021, the consolidated and the company’s results of operations, and the
consolidated and the company's cash ows for the year then ended.
Basis For the Opinion
We conducted our audit in accordance with China’s Standards on Auditing (the “CSA”).
AUDIT
Our responsibilities under those standards are further described in the section of our
report detailing the “Auditor’s responsibilities for the audit of the nancial statements”.
We are independent of the Company, in accordance with the CSA’s Code of Ethics for
Professional Accountants (the “Code”), and we have fullled our other ethical
responsibilities, again, in accordance with the Code. We believe that the audit evidence
we have obtained is sucient and appropriate for providing the basis of our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of the
greatest signicance in our auditing of the nancial statements for the nancial year
from January 1, 2021 to December 31, 2021. These matters were addressed in the
context of our audit of the nancial statements as a whole, and in forming our opinion
thereon, we do not provide a separate opinion on these matters.
30
ESPRESSIF SYSTEMS｜2021 ANNUAL REPORT｜FURTHER INFORMATION
Key Audit Matter How our audit addressed the Key Audit Matter
Revenue Recognition
Espressif’s main business Our main auditing procedures for revenue recognition are as follows:
includes the sales of chips and
modules, which created a > Understanding and evaluating the eectiveness of the internal control
revenue of CNY 1,386,371,500 in design relating to the revenue recognition of product sales, and testing
2021.
the eectiveness of the critical control point.
Since the operating revenue is a > Evaluating the appropriateness of the sales revenue recognition policy
key performance indicator, there by interviewing the management, reviewing the main terms of the sales
is an inherent management risk contracts and the time point of major control transfers relating to the
when adjusting the time point of revenue recognition.
revenue recognition, in order for
> Checking the origin of revenue by performing analytical procedures for
it to coincide with certain goals
the operating revenue, including monthly sales analysis, as well as gross
or expectations. Therefore, we
prot analysis categorized by customers and products.
identify revenue recognition, too,
as a key auditing matter. > Checking the authenticity of revenue by sampling supporting
documents related to revenue recognition, such as sales contracts,
shipping records and customer receipts.
> Performing a conrmation procedure on the current amount of sales by
using the sampling method.
> Checking commercial information and the transaction prices paid by
important customers, in order to determine whether any abnormal
transactions were made by the company.
> Performing a cut-o test to check whether the revenue recognition is
recorded within the correct accounting period.
Inventory
As of December 31, 2021, the Our main auditing procedures for the inventory are as follows:
inventory balance amounts to
CNY 332,217,135 with provision > Evaluating the eectiveness of the internal control design of the
for inventory impairment CNY inventory management, and testing the eectiveness of the critical control
6,048,207, and the net book point.
value amounts to CNY
> Analyzing the rationality of the inventory balance uctuation at the end
326,168,928.
of the reporting period by investigating its production cycle and stock
Since most inventories are policy.
stored in warehouses entrusted
> Performing a conrmation procedure on the third party warehouse.
by external processors and third
parties, and the determination of > Implementing a supervision on the inventory check at the end of the
provision for inventory reporting period.
impairment involves signicant
management judgment and > Evaluating whether the provision for inventory impairment at the end of
estimation, we identify the the reporting period is fully accrued by conducting storage age analysis
existence of inventories and the and by reviewing the calculation model and the results of provision for
provision for inventory inventory impairment.
impairments as key matters.
> Calculating the inventory turnover and making a comparison to other
similar companies.
31
ESPRESSIF SYSTEMS｜2021 ANNUAL REPORT｜FURTHER INFORMATION
Other Information
The management of Espressif Systems (Shanghai) Co., Ltd. (“the management”) is
responsible for any other information comprising all components of the 2021 company
report, apart from the nancial statements and the auditor’s report about them.
Our opinions on the nancial statements and the group management report do not
cover the other information, and consequently we do not express an opinion or any
other form of assurance conclusion thereof.
In connection with our audit, our responsibility is to read the other information and, in so
doing, consider whether the other information:
> is materially inconsistent with the consolidated nancial statements, with the group
management report information audited for content or our knowledge obtained in the
audit, or
> otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material
misstatement of this other information, we are required to report that fact. However, we
have nothing to report in this regard.
Responsibilities of Management for the Financial
Statements
The management is responsible for the preparation of nancial statements that give a
true and fair view, in accordance with the ASBE, and for the design, implementation and $
maintenance of such internal controls as the management deems necessary, to enable
the preparation of nancial statements that are free from material misstatements,
whether due to fraud or error.
In preparing the nancial statements, the management is responsible for assessing the
Company’s ability to continue its operation, disclosing, as applicable, any matters
related to ongoing concerns and using them as a basis of accounting, unless the
management either intends to liquidate the Company or cease its operations, having no
realistic alternative but to do so.
Auditors’ Responsibilities for the Auditing of the
Financial Statements
Our objectives are to obtain reasonable assurances about whether the nancial
statements as a whole are free from material misstatements, either due to fraud or
errors, and to issue an auditor’s report that includes our true opinion. Reasonable
assurances provide a high level of condence, but are not a guarantee that an audit
conducted in accordance with CSAs will always detect a material misstatement when
and where it exists.
32
ESPRESSIF SYSTEMS｜2021 ANNUAL REPORT｜FURTHER INFORMATION
Misstatements can arise from fraud or errors and are considered substantial if,
individually or in aggregate, they could reasonably be expected to inuence the
economic decisions of users, taken on the basis of these nancial statements.
As part of an audit in accordance with CSAs, we exercise our professional judgment
and maintain professional skepticism throughout the audit. We also:
> Identify and assess the risks of substantial nancial misstatements, either due to fraud
or errors; design and perform auditing procedures in response to those risks, and obtain
auditing evidence that is sucient and appropriate for providing a basis for our opinion.
The risk of not detecting a material misstatement resulting from fraud is higher than one
resulting from error, as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal controls.
> Obtain an understanding of internal controls relevant to the audit, in order to design
auditing procedures that are appropriate to the circumstances, but not for the purpose
of expressing an opinion on the eectiveness of the Company’s internal controls.
> Evaluate the appropriateness of accounting policies used and the reasonableness of
accounting estimates and related disclosures made by the management.
> Conclude on the appropriateness of the management’s use of a growing concern as
the basis of accounting and, according to the auditing evidence obtained, determine
whether a substantial uncertainty exists about events or conditions that may cast a
signicant doubt on the Company’s ability to continue its operation. If we conclude that
there is substantial uncertainty, we are required to draw users’ attention to our auditor’s
report on the related disclosures in the nancial statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the auditing evidence
obtained up until the date of our auditor’s report. However, future events or conditions
may force the Company to cease its operation altogether.
> Evaluate the overall presentation, structure and content of the nancial statements,
including the disclosures, and determine whether the nancial statements represent the
underlying transactions and events in a manner that achieves a fair presentation.
> Obtain sucient and appropriate auditing evidence about the nancial information of
entities or business activities of the Company, in order to express our auditing opinion
on the Company’s consolidated nancial statements. We are responsible for directing,
supervising and executing group audits and assume full responsibility for auditing
opinions.
We communicate with those charged with governance, among other matters, on the
planned auditing scope, timing and signicant audit ndings, including any signicant
deciencies in internal controls that we may identify during our audit.
33
ESPRESSIF SYSTEMS｜2021 ANNUAL REPORT｜FURTHER INFORMATION
We also provide those charged with governance with a statement that we have
complied with all relevant ethical requirements regarding our independence, and we also
communicate with them all relationships and other matters that may reasonably be
thought to bear on our independence and, where applicable, any other related
protections.
From the matters communicated to those charged with governance, we determine
which matters are of the highest signicance in the auditing of the nancial statements
of the current period and are, therefore, the key auditing ndings. We describe these
ndings in our auditor’s report, unless a law or regulation prohibits such public
disclosure about those ndings, or when -in extremely rare circumstances- we
determine that a nding should not be communicated in our report, because the
adverse consequences of its disclosure would reasonably be expected to outweigh the
benets of such communication for the public interest.
Beijing, 10 March 2022
Baker Tilly China
Ma Gang Li Xiaomin
Chinese Certied Public Accountant Chinese Certied Public Accountant
34
ESPRESSIF SYSTEMS｜2021 ANNUAL REPORT｜FURTHER INFORMATION
List of abbreviations
AI Articial Intelligence
AIoT Articial Intelligence and Internet of Things
B2D2B Business-to-Developer-to-Business
Bluetooth LE Bluetooth Low Energy
CEO Chief Executive Ocer
CES Consumer Electronics Show
COVID-19 Coronavirus Disease-2019
CSA China Standards on Auditing
EBITDA Earnings Before Interest, Taxes, Depreciation and Amortization
Espressif ESPRESSIF SYSTEMS (SHANGHAI) CO., LTD.
ETF Exchange Traded Fund
EV Electric Vehicle
G&A General and Administrative
GM Gross Margin
IC Integrated Circuit
IoT Internet of Things
OBD On-Board Diagnostics
PCS Piece of Chips
POS Point of Sale
R&D Research & Development
RF Radio Frequency
RISC-V MCU Reduced Instruction Set Computer-V Microcontroller Unit
ROE Return on Earnings
RTOS Real-Time Operating System
SG&A Selling, General and Administrative
SH Shanghai
SoCs System on Chips
TPPS Third-Party Plugins
TSR Techno Systems Research
YoY Year-on-Year
35
ESPRESSIF SYSTEMS｜2021 ANNUAL REPORT｜
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Investor Relations
ir@espressif.com
Ocial Platforms
www.espressif.com
AIoT
blog.espressif.com
github.com/espressif
esp32.com I esp8266.com I bbs.espressif.com
Social Media
twitter.com/EspressifSystem
facebook.com/espressif
linkedin.com/company/espressif-systems
youtube.com/EspressifSystems
instagram.com/espressif_systems_ocial
bilibili.espressif.com
Copyright 2022 Espressif Systems (Shanghai) Co., Ltd. All rights reserved. All trade names, trademarks and registered trademarks mentioned in this
document are property of their respective owners, and are hereby acknowledged. The term “Espressif” refers to Espressif Systems (Shanghai) Co.,
Ltd. and/or its subsidiaries. This report is prepared in Chinese and English respectively. In case of any discrepancies between Chinese and foreign
interpretations, the Chinese version shall prevail.
