2023
ANNUAL
REPORT
Contents
03 04
About Message from the CEO
Espressif
07 08
Facts About Core Technologies
Espressif
09
Business 09 Key Financial Data
Highlights
09 Financial Indicators
10 Financial Analysis
12
Management 12 Business Strategy 19 Business Model
Report
13 Key Products - IoT Chips 21 Research and Development
14 Key Products - Product Map 23 Ownership of Securities
15 Market 24 Stock-Based Compensation
16 Core Competitiveness 25 Risks and Uncertainties
18 Developer Community Content
26
Consolidated 26 Consolidated 29 Consolidated Cash Flow
Financial Balance Sheet Statement
Statements 28 Consolidated 31 Consolidated Statement
Income Statement of Changes in Equity
32
Further 32 Terms and Conditions 37 List of abbreviations
Information of the Report
33 Independent Auditor’s
Report
ESPRESSIF SYSTEMS | 2023 ANNUAL REPORT | ABOUTABOUT ESPRESSIF
About Espressif
Espressif Systems is a public, multinational, fabless, semiconductor company focused on developing cu ting-edge,
wireless-communication, low-power chipsets. By leveraging wireless computing, we provide green, versatile and
cost-e fective AIoT solutions. We have accomplished a hardware-and-so tware, 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 so tware application frameworks, Cloud, etc.
We have a diverse team of engineers from around the world. All company branches employ about 625 members of
sta f from almost 30 countries and regions, +77% of whom are based in our Research & Development Department.
We have eight R&D centers in ve countries, including China, India, the Czech Republic, Brazil and Singapore. The
company’s increasing reputation in recent years has been instrumental in a tracting 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 di ferent kinds of knowledge, perspectives and ways of thinking.
1
global Wi-Fi MCU over 1 billion global millions of
market leader IoT chip shipments developers
Our R&D Centers
China
Shanghai Hefei
Suzhou Wuxi
Brazil India
Campinas Pune
Czech Singapore
Republic
Brno
3
ESPRESSIF SYSTEMS | 2023 ANNUAL REPORT | MESSAGE FROM THE CEO
Message
from the
CEO
“Espressif's strategic priorities are focused
on sustaining growth momentum,
expanding our market presence, and
fostering innovation. Key initiatives include
accelerating product development cycles,
strengthening partnerships with key
stakeholders, and enhancing operational
e ciency through digital transformation
initiatives.”
Teo Swee Ann
Espressif’s Founder & CEO
As the CEO of Espressif, I am pleased to present the 2023 Annual Report. Despite the various challenges,
geopolitical uncertainties, and economic uctuations, Espressif has maintained resilience and adaptability, further
improving our position to achieve sustained success. Our revenue has grown by 12.74%, and net prot by 39.95%.
In 2023, we unveiled the ESP -P at CES in Las Vegas, marking a signicant advancement in our SoC product. This
cu ting-edge device, driven by our proprietary dual-core RISC-V CPU with AI instruction extensions, features an
integrated H. encoder, a sophisticated memory subsystem for high throughput, and a comprehensive suite of
high-speed peripherals.
Designed to focus on high-performance Human-Machine Interface (HMI) applications, the ESP -P sets a new
standard for security and performance. By developing our own RISC-V processor and H. capabilities, Espressif
has positioned itself to di ferentiate from the competition, laying the groundwork for ongoing innovation in future
generations.
This is Espressif’s rst SoC that does not integrate wireless connectivity and also our rst chip to target the
multimedia market. This makes possible for ESP -P to be coupled with any of Espressif’s broad range of
connectivity chips, to adapt to di ferent application scenarios, including Wi-Fi, Bluetooth, ZigBee and Ma ter, making
this one of the most versatile pla forms in the market.
4
ESPRESSIF SYSTEMS | 2023 ANNUAL REPORT | MESSAGE FROM THE CEO
Our relatively new product lines, ESP -S and ESP -C , has both achieved high growth in 2023. We anticipate
these two product lines to continue on a similar growth trajectory in 2024. ESP -S targets the human-machine
interface market, while ESP -C is geared towards lightweight IoT control with connectivity applications. As our
product matrix expands, our commercialization e forts become more and more e cient, leveraging the synergy of
our common so tware pla form that serves these di ferent chips.
With the Ma ter 1.2 release in 2023 extending protocol support to 9 new device types, we anticipate further adoption
driven by new device type support and improved usability. Espressif’s SoC por folio o fers the most comprehensive
solutions covering Ma ter over Thread, Ma ter over Wi-Fi, Thread Border Routers and Ma ter bridge use cases.
ESP -H o fers a cost-e fective Ma ter over Thread solution whereas ESP -C , with its Wi-Fi 6 and Thread radio
support, helps customers to build multi-protocol Ma ter products with the same SoC. We anticipate our SoCs to
achieve signicant growth in the second half of 2024 to enable various Ma ter products.
In response to the macroeconomic recession in 2023 and the demand for more cost-e fective solutions, our
investments in no-frills, low-cost chip products, such as the ESP -C and ESP -C , have proven benecial. For
customers prioritizing cost reduction and seeking simplied functionalities, we have steered them towards these
cost-e fective product lines. This strategy has helped us maintain our market share and prot margins, despite price
cuts by competitors.
Espressif continues to drive innovation, with sustained investments in research and development leading to
signicant technological advancements across our product por folio. Key highlights include breakthroughs in AI-
driven processing capabilities, advancements in wireless connectivity, and enhancements in energy e ciency and
performance optimization. These innovations further solidied Espressif's position as a leader in cu ting-edge IoT
solutions.
Espressif remains commi ted to an innovation-driven growth strategy, leveraging its technological expertise and
market insights to anticipate evolving customer needs and industry trends.
We recognized the increasing convergence of AI, IoT, and connectivity technologies as a pivotal driver of industry
evolution. With the proliferation of smart devices and the growing demand for seamless connectivity and intelligent
functionality, Espressif positioned itself to capitalize on emerging opportunities in AIoT, edge computing, and IoT
ecosystems.
For the upcoming scal year, Espressif's strategic priorities are focused on sustaining growth momentum, expanding
our market presence, and fostering innovation. Key initiatives include accelerating product development cycles,
strengthening partnerships with key stakeholders, and enhancing operational e ciency through digital
transformation initiatives.
5
ESPRESSIF SYSTEMS | 2023 ANNUAL REPORT | MESSAGE FROM THE CEO
In the natural world, Darwinism underscores the relentless force of evolution, where only the test survive,
especially when shocks are introduced to the system, displacing the equilibrium. This is gradually becoming evident
in the business world where articial intelligence, AR/VR and digitalization are disrupting many industries with
unprecedented speed and scope. As these new technologies reshapes the way we live, work, and interact, it
demands that all companies adapt to these rapid changes and reinvent themselves in order to thrive. Those who are
unable to keep pace with the dynamic integration of AI risk obsolescence.
Today, Espressif stands at the forefront of the IOT revolution, wielding an comprehensive arsenal of innovations that
align perfectly with the demands of this new era. Espressif deep expertise in areas such as scalable and a fordable
wireless connectivity, human-machine interfaces (HMI), video processing, processor hardware, and cloud pla form
frameworks, low code solutions, along with a robust collection of tools and application so tware, has helped foster a
vibrant ecosystem of so tware developers who are in tune with the current technological zeitgeist, leveraging
collective insights and trends to drive progress.
This strategic positioning enables Espressif to signicantly inuence the evolution of AIoT and assist customers in
unlocking new value. Through collaboration with various partners, the company is dedicated to designing and
rening AI and IoT strategies. This commitment ensures that our partners are not just prepared to meet today's
challenges but are also at the forefront of tomorrow's innovations.
By forging these strategic partnerships, Espressif is laying the groundwork for a future in which technology is
intricately woven into the very fabric of our daily lives.
6
ESPRESSIF SYSTEMS | 2023 ANNUAL REPORT | FACTS ABOUT ESPRESSIF
Facts About Espressif
8 77 625 30 34
R&D R&D employee female
employees
centers employees nationalities employees
100 K+
open-source, Espressif-powered
projects
Git
Hub
4.1 M+
You
views of the most popular videos
of Espressif-powered projects
Tub
e
200+
k
Boo
books written about Espressif’s
SoCs in 10+ languages
d dit
Re
76 K+
members of
ESP32 groups
7
ESPRESSIF SYSTEMS | 2023 ANNUAL REPORT | FACTS TECHNOLOGIES
Core Technologies
TEXT
SoCs AI
AFE (Audio Front-End) Algorithms
ESP8266, ESP32, ESP32-S, ESP32-
qualied as a“Software Audio Front-End
C, ESP32-H and ESP32-P Series Solution” for Amazon Alexa Built-in devices.
Espressif offers integrated, reliable, and
energy-efcient SoCs for Wi-Fi, 3A Audio Algorithms
Bluetooth Low Energy, Thread and Zigbee including Acoustic Echo Cancelation (AEC),
to various segments of the IoT market. Audio Noise Suppression (ANS) and Automatic
Gain Control (AGC), which signicantly reduce
noise and echo in calls, keeping high-quality
voice intercoms stable at all times.
OS
ESP-IDF
Espressif’s ofcial IoT Development Framework.
Cloud
It provides a self-sufcient SDK for any generic ESP RainMaker
application-development on these platforms,
A comprehensive, development-free and
using programming languages such as C and
maintenance-free AIoT solution for private
C++.
Cloud deployment.
ESP-IDF currently powers millions of devices in
It is an all-inclusive solution that covers
the eld, and enables building a variety of
everything from the underlying chip to device
network-connected products, ranging from
rmware, third-party voice-assistant
simple light bulbs and toys to major appliances
integrations, mobile apps and the dashboard.
and industrial devices.
Customers can build their own AIoT devices
and ecosystem, with ESP RainMaker.
Software
With our open-source software,
Matter
such as Espressif's IoT
Development Framework ESP-IDF, One-stop Matter Solution
Audio Development Framework
ESP-ADF, Mesh Development This is the culmination of
Framework ESP-MDF, Cloud Espressif’s ongoing contribution to
Connectivity Platform ESP the Matter platform in various
RainMaker, Facial Recognition areas, including protocol
Development Framework ESP- formulation, core stack
WHO, and Voice-Controlled implementation and certication
Assistant ESP-Skainet, we have test events.
developed a framework for
building AIoT applications, which
TEXTis both complete and innovative. 8
ESPRESSIF SYSTEMS | 2023 ANNUAL REPORT | BUSINESS HIGHLIGHTS
Business Highlights
Key Financial Data
Fiscal Year
CNY 2023 2022 2021
Consolidated Statement of Income Data
Revenue 1,433,064,911 1,271,127,201 1,386,371,541
Gross prot 581,248,531 508,251,068 549,025,732
Selling expenses 52,583,650 49,323,100 41,815,693
General and administrative expenses 61,618,348 59,639,944 55,485,146
Research and development expenses 403,713,557 337,121,814 271,689,981
Net income 136,204,637 97,323,103 198,427,708
Earnings per share:
Basic 1.7012 1.2129 2.4775
Diluted 1.6929 1.2127 2.4566
Consolidated Balance Sheet Data
Cash, cash equivalents and nancial investments 1,397,511,953 1,200,219,436 1,114,558,363
Working capital 999,068,356 1,518,383,808 1,749,605,271
Total assets 2,203,800,366 2,082,796,825 2,129,056,143
Long-term obligations 74,166,946 65,591,788 68,244,392
Total shareholders’ equity 1,913,000,228 1,826,677,535 1,823,017,913
Consolidated Cash Flow Data
Net cash provided by operating activities 302,597,343 71,321,658 31,460,857
Non-GAAP Adjustment
Stock-based compensation 18,737,416 14,726,019 21,787,964
Non-GAAP net income 154,942,053 112,049,122 220,215,672
Key Financial Indicators
Fiscal Year
2023 2022 2021
Gross margin 40.56% 39.98% 39.60%
R&D-to-sales ratio 28.17% 26.52% 19.60%
EBITDA margin 10.01% 9.29% 16.78%
Weighted ROE 7.14% 5.36% 11.52%
Number of Espressif employees as of December 31 625 578 517
9
ESPRESSIF SYSTEMS | 2023 ANNUAL REPORT | BUSINESS HIGHLIGHTS
Financial Analysis
Espressif’s total revenue in 2023 was CNY , million, marking an increase of 12.74% from CNY , million in 2022.
Some of the existing customers saw growth while others experienced declines, leading to overall performance
remaining steady compared to 2022. The company's performance growth in 2023 was primarily a tributed to
securing design wins with new customers. Therefore, the net income was CNY million, which marked an
increase of 39.95% year-on-year, mainly due to our increased revenue.
The overall gross margin was 40.6%, in which the gross margin for IoT chips was 46.9%. The overall gross margin is
basically at in comparison with the previous year. We established a mid-term target of 40% for our overall gross
margin to facilitate funding for our future R&D expenses.
Revenue by Area Revenue by Top-5 Customer
Sales Mode Concentration Rate
51.0%
42.2%
29.0% 28.1%
26.4%
74.0% 69.8%
China's Rest of Direct Indirect 2019 2020 2021 2022 2023
Mainland the World
Revenue by Product Category
Chip Module Others
2023 38.2% 60.8% 1.0%
2022 31.9% 67.2% 0.9%
Key Financial Indicators
2022 2023
47.3% 46.9%
40.0% 40.6%
36.3% 36.4%
28.2%
26.5%
9.3% 10.0% 8.6% 8.0%
Overall GM Chip GM Module GM EBITDA SG&A as % of R&D as % of
Margin sales sales
10
ESPRESSIF SYSTEMS | 2023 ANNUAL REPORT | BUSINESS HIGHLIGHTS
As our product por folio continues to expand, Espressif's cost-e fective and high-performance product lines are
becoming increasingly diverse to meet the varying needs of users. During the reporting period, both the cost-
e fective and high-performance product lines showed growth trends.
User Portrait Product Selection
Focus on processing
performance High-Performance
Sophisticated so tware
solutions
Maintain or enhance
Choose High- functionality
Performance products
Hybrid to meet functional
requirements Streamline functionality
to reduce cost
Focus on connectivity
Lightweight so tware
applications
Cost-Effective
Sales Trends
The growth of the cost-eective product line in Revenue by user’s portrait, m
2023 was particularly notable. This was driven by
the market acceptance of the Wi-Fi+BLE combo 1600
ESP32-C3 and ESP32-C2 series, replacing the
Total
previous agship product, the single Wi-Fi MCU
ESP8266 (sold for 10 years), thereby becoming the 1200
main growth driver.
In the high-performance product line, the classic High-Performance 800
ESP32 has been continuously sold for 8 years.
Some customers have cost-reduction requirements,
which were smoothly transitioned to the ESP32-C3 400
business. Incremental sales mainly came from the Cost-E fective
new ESP32-S3 series, with its applications in HMI Others
0
driving business growth.
2019 20 21 22 23
11
ESPRESSIF SYSTEMS | 2023 ANNUAL REPORT | MANAGEMENT REPORT
Management Report
Business Strategy
Espressif Systems’ business strategy emanates from our service/product areas and our engagement with the
developer ecosystem.
Our product and service areas include AIoT chips, OS-level development environments, so tware tools, application
solutions, and value-added services, such as Cloud and Ma ter. The above-mentioned products ensure that we are
in the heart of numerous commercial AIoT applications in di ferent markets, including smart home, consumer
electronics, industrial automation, healthcare, etc.
Products Solutions Value-added services
Cloud
SoCs HMI Smart Audio service
Displays Solutions
Modules
Ma ter
Face Low-Power Solution
Recognition Solutions
DevKits
… …
OS-level development environments & software tools
Customers
Brands OEM/ODMs Module Houses Solution providers Makers
12
ESPRESSIF SYSTEMS | 2023 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 product por folio, while in 2021 we released our rst Thread/Zigbee/Bluetooth LE combo chip and
a 2. GHz Wi-Fi 6 chip. In 2022, we released our rst 2.4 & GHz Wi-Fi 6 chip and our product range has expanded to
Wireless SoCs. In 2023, we released our rst RISC-V multimedia SoC, integrated H. encoder, featuring AI
instructions extension.
In fact, we have been constantly diversifying our product por folio, introducing new solutions through our numerous
investments. Thus, we now have various product lines in the main short- and medium-range connectivity
technologies. Our core technologies are self-developed, including connectivity IPs, RF components, RISC-V IPs,
so tware frameworks, tools, AI functions etc.
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.
Key Technologies
Medium Range Short Range
Wi-Fi E Bluetooth 5.3 (LE) Thread
GHz Wi-Fi 6 Bluetooth 5.2 (LE) Zigbee
Connectivity
2. GHz Wi-Fi 6 Bluetooth 5 (LE)
Technical Depth
Wi-Fi 4 Bluetooth 4.2
RISC-V MCU AI Multimedia
32-bit Single-Core MHz Voice Wake-up H. Encoder
32-bit Single-Core 1 MHz Voice Control
32-bit Single-Core 1 MHz Face Recognition
Computing 32-bit Single-Core 2 MHz
32-bit Dual-Core 4 MHz AI
32-bit Multiple-Core
Technical Breadth
In progress
13
ESPRESSIF SYSTEMS | 2023 ANNUAL REPORT | MANAGEMENT REPORT
Key Products - Product Map
ESP 32 ESP32 - S3 AI ESP32 - P4 AI
32-bit Xtensa MCU 32-bit Xtensa MCU 32-bit RISC-V MCU
H. encoding
High- ESP32 - S2 ESP32 - H4
Performance 32-bit Xtensa MCU 32-bit RISC-V MCU
ESP 8266 ESP32 - C2 ESP32 - H2 ESP32 - C5
32-bit Tensilica MCU 32-bit RISC-V MCU 32-bit RISC-V MCU 32-bit RISC-V MCU
Cost-
Effective
ESP32 - C3 ESP32 - C6
32-bit RISC-V MCU 32-bit RISC-V MCU
Relatively
Classic New
New
14
ESPRESSIF SYSTEMS | 2023 ANNUAL REPORT | MANAGEMENT REPORT
Market
The market for wireless SoCs is truly diverse, including applications for smart homes (e.g., smart lights, air
conditioners, ovens, co fee machines, etc.), consumer electronics (e.g., smart speakers, drones, etc.), industrial
automation (e.g., mechanical arms), smart agriculture (e.g., soil PH detector, CO2 detector, etc.), healthcare (e.g.,
monitoring devices for diabetes, blood pressure, etc.), energy control (solar energy devices, EV chargers, etc.), the
internet of vehicles (OBD devices, dashboards, etc.), and education (talking pens, interactive whiteboards, etc.).
Due to macroeconomic uctuations, certain existing clients saw growth while others experienced decline,
contributing to overall stability in their business in 2023. Nonetheless, the company's overall performance growth
was mainly propelled by business from new clients.
Consumer Industrial Smart
Smart Home
Electronics Automation Agriculture
Smart Ovens Smart Speakers Mechanical Arms Soil PH Detector
Energy Internet of
Healthcare Education
Management Vehicles
Smart Solar Intelligent
Medical Detectors Talking Pens
Panels instrument panel
15
ESPRESSIF SYSTEMS | 2023 ANNUAL REPORT | MANAGEMENT REPORT
Core Competitiveness
Chip System
Operating Systems
Connectivity Technology
Development Environment
Chip Design Capability
So tware Tools
Ecosystem Software
Documentation So tware Solutions
Developer Communities Business Applications
Internet Pla forms Cloud Services
Chip Competitiveness
Espressif takes pride in the invaluable experience that our R&D team leaders have in the eld of wireless-
communication chips. For example, 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.
A ter 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 o ferings, 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 mechanisms. 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 o cial IoT Development Framework for all the ESP series of SoCs. It provides a self-
su cient SDK for any generic application development with the above-mentioned SoCs, 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.
16
ESPRESSIF SYSTEMS | 2023 ANNUAL REPORT | MANAGEMENT REPORT
ESP-IDF has established a fastidious release process, and a support policy which ensures that customers can
choose a stable release, while also ge ting important updates. Each stable release undergoes a rigorous QA process
that ensures production readiness at all times. Also, ESP-IDF comes with an extensive documentation for its so tware
components not only at the usage level but also at the design level. This helps developers to fully understand what
ESP-IDF o fers, and select whatever suits their applications best.
Furthermore, ESP-IDF supports a large number of so tware components, including RTOS, peripheral drivers, network
stacks, protocol implementations, and examples of common use cases. These components help developers focus
on their business logic, while the SDK provides most of the building blocks required for typical applications. Open-
source and freely-available developer tools, as well as o cially supported Eclipse and VSCode IDEs, ensure ease-of-
use for developers.
Software Competitiveness
The company provides numerous so tware solutions, including AI-related ones (e.g., o ine/online voice recognition
and smart control, AI image recognition, etc.), Wi-Fi Mesh, BLE Mesh, HMI functions, various peripheral drivers and
other functions covering all the development needs of our customers. These solutions greatly reduce the cost of
application development for our customers.
Espressif’s AI Lab has developed Audio Front-End (AFE) algorithms that have been qualied as a “So tware Audio
Front-End Solution” to Amazon-Alexa Built-in devices. This is the result of Espressif’s incessant focus not just on the
connectivity of its own AIoT solutions, but also on high-performance Machine Learning on the edge. Furthermore,
our AI Lab launched the so-called A Audio Algorithms, i.e., Acoustic Echo Cancelation (AEC), Audio Noise
Suppression (ANS), and Automatic Gain Control (AGC). Based on Espressif's A audio algorithms, Espressif-powered
Real-Time Communication applications benet from signicantly reduced noise and echo in calls, and sustained
stability in high-quality voice intercoms.
Our newly-launched, one-stop Ma ter solution, including the fully-customized ESP-Ma ter SDK and Cloud services,
can simplify and accelerate the development process of Ma ter-compatible products signicantly. This is the
culmination of our ongoing contribution to the Ma ter pla form in various areas, including protocol formulation, core
stack implementation and certication test events.
Furthermore, ESP RainMaker is a one-stop, development-free and maintenance-free AIoT solution for private Cloud
deployment, which reduces R&D costs and accelerates time-to-market. More specically, this is a complete system
for building AIoT products with a minimal amount of code, which enables our customers to deploy and develop
secure, customized AIoT solutions. It covers all of Espressif’s chips and modules, device rmware, voice-assistant
integrations, phone apps and Cloud backend. This helps our customers avoid expensive investments in Cloud
capabilities, gain independence and focus on innovating their core-value o ferings.
Ecosystem Competitiveness
Our company has brought together professionals and companies from across the AIoT industry, e.g., hardware and
so tware developers, business applications, and Cloud pla forms, as well as maker communities. Espressif’s own
so tware development pla forms 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's technologies. For example, on GitHub,
which is the largest provider of Internet hosting for so tware development, there are more than 100,000 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 above 10
languages including English, Chinese, German, Portuguese, Italian, Japanese, Russian, Serbo-Croatian, Thai
Language etc. There are more than 200 digital and physical books about Espressif’s SoCs in more than ten
languages.
17
ESPRESSIF SYSTEMS | 2023 ANNUAL REPORT | MANAGEMENT REPORT
Developer Community Content
ITEM Dec 31, 2023 Dec 31, 2022 change%
GitHub (Worldwide open-source development platform)
ESP Projects 59,100 41,891 41%
ESP Projects 43,700 39,294 11%
Gitee (Chinese open-source development platform)
ESP Projects 3,153 2,629 20%
ESP Projects 2,068 1,868 11%
CSDN (Chinese Tech-blog platform)
Search results for ESP 121,840 93,242 31%
Search results for ESP 48,213 36,286 33%
Hackaday (open-source hardware platform)
ESP projects 5,691 4,702 21%
ESP projects 6,252 6,101 2%
Reddit
ESP group members 76,046 59,619 28%
ESP group members 60,961 59,004 3%
bilibili (Chinese video-sharing platform)
O cial account followers 30,261 24,064 26%
O cial account views 942,075 658,235 43%
YouTube
O cial account subscribers 18,800 14,800 27%
Ofcial account views 968,573 810,523 19%
ESP community videos 819,109 641,926 28%
ESP community videos 872,026 778,090 12%
Views of most watched ESP community video around 4.1m around 3.4m
Views of most watched ESP community video around 1.7m around 1.6m
N.B.：
Statistical data derived from di ferent pla forms may be based on di ferent collecting methods. It is possible for certain pla forms 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 quarter reported here,
unless otherwise stated.
The search results of the keyword "ESP " include the ESP series, ESP -C series, ESP -S series, and ESP -H series.
18
ESPRESSIF SYSTEMS | 2023 ANNUAL REPORT | MANAGEMENT REPORT
Business Model
Business-to-Developer-to-Business (B2D2B)
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 e fective since the inuence of developers on organizations
of all sizes has gained traction. In other words, most developers are R&D employees in various companies and bring
forth business opportunities from the companies they work for.
This way, the developer ecosystem we have created at Espressif demonstrates how the value of networks can grow
exponentially:
The more developers we a tract as customers, the more hardware and so tware solutions we generate.
The more successful hardware and so tware 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 creation of more content, which -in
turn- a tracts more users/developers searching for new content.
Likewise, other third-party development pla forms join our ecosystem and bring in new developers, as our
inuence continues to grow.
Having successfully applied the B D B model, Espressif can now focus on R&D investments, while maintaining a
small business team that supports a large number of customers directly. In fact, most of our revenue is gained
through direct sales.
19
ESPRESSIF SYSTEMS | 2023 ANNUAL REPORT | MANAGEMENT REPORT
Books about ESP Products
More than 200 books on how to use ESP products can be found in the developer community and cover over a
dozen languages.
TEXT 20
ESPRESSIF SYSTEMS | 2023 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
million, which marked a 19.75% increase compared with that of 2023. At the same time, the R&D-to-sales ratio was
28.17% in 2023.
Espressif’s escalating R&D investment cost can be a tributed to the increase in the number of R&D sta f and their
subsequent compensation level, which increased signicantly year-over-year.
Fiscal Year
CNY 2023 2022 change (%)
R&D Expenses 403,713,557 337,121,814 19.75
R&D-to-sales ratio 28.17% 26.52%
Intellectual Property
250
We seek to protect our technologies through a combination of patents, so tware Applied for
copyright and trade secrets. By the end of 2023, the Company had been granted 167
patents. We continue to submit new patent applications relating to our recent R&D
innovations.
167
Granted
List of Intellectual Property Rights Applied and Granted
2023 Cumulative number
Applied for Granted Applied for Granted
Invention patents 17 17 136 89
Utility model patents 1 0 27 26
Design patents 0 0 1 1
So tware copyright 0 2 23 23
Others 8 7 63 28
Total 26 26 250 167
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 submi ted 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.
21
ESPRESSIF SYSTEMS | 2023 ANNUAL REPORT | MANAGEMENT REPORT
R&D Employees
We are proud of our talented, diverse and multicultural workforce. By December 31, 2023, across our eight branches
worldwide, we had employed 625 people, more than 77% of whom are in engineering roles. Meanwhile, we have
expanded our business beyond Wi-Fi MCUs, thus o fering 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 so tware and hardware are inextricably intertwined, we constantly invest in
so tware 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 o fering anything relating to hardware, so tware and the Cloud.
Fiscal Year
December 31, 2023 December 31, 2022
R&D employees 484 440
R&D employees as a percentage of total employees 77.44% 76.12%
Total compensation of R&D employees (CNY in thousands) 311,955 270,083
Average compensation of R&D employees (CNY in thousands) 675 652
R&D Expenses R&D Employees
28.2%
26.5% 75.7% 76.1% 77.4%
75.0%
71.3%
23.2%
484
404
19.6% 440
337 388
15.8%
272 340
193 246
120
2019 2020 2021 2022 2023 2019 2020 2021 2022 2023
R&D expenses (in million) R&D-to-sales ratio R&D employees R&D employees %
22
ESPRESSIF SYSTEMS | 2023 ANNUAL REPORT | MANAGEMENT REPORT
Ownership of Securities
Basic information of securities
Share types Ordinary share
Share capital 80,789,724 (as of December 31, 2023)
Listing Shanghai Stock Exchange (SSE)
Ticker 688018.SH
Listing Date 2019-07-22
Shareholder Structure as of December 31, 2023
Shareholder Share Numbers Percentage (%)
Espressif (Hong Kong) Investment Ltd. 33,047,244 40.91
Hong Kong Securities Clearing Company Limited 2,422,305 3.00
Shinvest Holding Ltd. 2,226,179 2.76
Dajia Life Insurance Co., Ltd. – Universal Products 1,978,918 2.45
Ningbo Meishan Free Trade Port Le Tun Investment Management
1,046,030 1.29
Partnership (Limited Partnership)
SPD - Debang Semiconductor Industry Hybrid Initiated Securities
702,322 0.87
Investment Fund
GTJA Futures - Guolian An CSI Semiconductor Products and
693,996 0.86
Equipment Tradable Open-ended Index Securities Investment Fund
Wisdomshire Asset Management Co., Ltd. - Wisdomshire Youfu
588,266 0.73
Private Equity Securities Investment Fund No.1
Wisdomshire Asset Management Co., Ltd. - Wisdomshire Youfu
493,595 0.61
Private Equity Securities Investment Fund No.3
BOC - Zhong Ou High-quality Enterprise Mixed Fund 489,956 0.61
Top 10 shareholders 43,688,811 54.09
Espressif Systems (Shanghai) Co., Ltd. Repurchase Special
1,473,900 1.82
Securities Account
Other public shareholders 37,100,913 45.91
Total of outstanding shares 80,789,724 100.00
23
ESPRESSIF SYSTEMS | 2023 ANNUAL REPORT | MANAGEMENT REPORT
Stock-Based Compensation
Espressif has four ongoing restricted stock incentive plans. The fair value of the restricted stock incentive plans is
calculated by 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
Number of Ratio of Number of
of Awarded Grant Price
Plan Award Type Underlying Underlying Employees
Employees (CNY)
Shares Shares (%) in the Plan
to Total (%)
2019 restricted stock Class II 189,700 0.2348 18 2.88 62.025
incentive plan restricted
2020 restricted stock stock II
Class 140,193 0.1735 120 19.20 92.025
incentive plan restricted
2021 restricted stock stock II
Class 670,319 0.8297 199 31.84 92.900
incentive plan restricted
2022 restricted stock stock II
Class 811,814 1.0048 148 23.68 118.400
incentive plan restricted
2023 I restricted stock stock II
Class 62,478 0.0773 22 3.52 60
incentive plan restricted
2023 II restricted stock II
Class 551,130 0.6822 53 8.48 40
stock incentive plan restricted
2023 III restricted stock II
Class 67,434 0.0835 7 1.12 64.5
stock incentive plan restricted
stock
N.B.:
The above-mentioned numbers were calculated on December 31, 2023.
The grant price has been adjusted due to dividend distribution.
Stock-Based Compensation
Fiscal Year
CNY December 31, 2023 December 31, 2022
Selling expenses 828,040 669,137
G&A expenses 172,349 1,398,357
R&D expenses 17,737,027 12,658,526
Total stock-based compensation 18,737,416 14,726,019
24
ESPRESSIF SYSTEMS | 2023 ANNUAL REPORT | MANAGEMENT REPORT
Risks and Uncertainties
Financial Risk
The Company performs periodic credit evaluations of its customers’ nancial
condition and generally requires of its customers no collateral. 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 in this report.
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, such as Silicon Labs and Nordic, may reduce our product sales and
market share.
Suppliers
A signicant portion of the Company’s products is fabricated by the Taiwan
Semiconductor Manufacturing Company Limited (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 certain period of time, which could have an
adverse e fect 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 28.1% in 2023.
25
ESPRESSIF SYSTEMS | 2023 ANNUAL REPORT | CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Financial
Statements
Consolidated Balance Sheet
CNY Dec 31, 2023 Jan 1, 2023 Dec 31, 2022
Assets
Current assets:
Cash and cash equivalents 464,011,234 350,677,354 350,677,354
Held for trading nancial assets 90,315,219 461,223,082 461,223,082
Notes receivable 42,082,006 789,099 789,099
Accounts receivable, net 251,641,263 198,406,116 198,406,116
Accounts receivable nancing 1,441,520 1,441,520
Prepayments 9,802,407 9,724,045 9,724,045
Other receivables 9,157,910 9,578,753 9,578,753
Including: Interest receivable 838,168 838,168
Inventories 242,352,587 448,981,896 448,981,896
Other current assets 106,338,922 228,089,444 228,089,444
Total current assets 1,215,701,548 1,708,911,310 1,708,911,310
Non-current assets:
Debt investment 753,024,500 212,484,600 212,484,600
Investment in other equity assets 36,079,840 35,340,648 35,340,648
Other non-current nancial assets 34,879,347 19,879,347 19,879,347
Fixed assets 76,401,004 60,243,507 60,243,507
Right-of-use assets 15,937,207 21,692,767 21,692,767
Intangible assets 1,633,298 2,412,317 2,412,317
Long-term deferred expenses 9,337,814 6,565,887 6,565,887
Deferred income tax assets 60,805,808 16,205,653 15,266,444
Total assets 2,203,800,366 2,083,736,034 2,082,796,825
26
ESPRESSIF SYSTEMS | 2023 ANNUAL REPORT | CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheet
CNY Dec 31, 2023 Jan 1, 2023 Dec 31, 2022
Liabilities & Shareholders’ Equity
Current liabilities:
Accounts payable 79,841,809 77,918,867 77,918,867
Contract liabilities 13,318,710 9,044,287 9,044,287
Payroll payable 102,238,914 85,041,335 85,041,335
Taxes payable 615,415 5,211,995 5,211,995
Other payable 11,525,208 2,925,552 2,925,552
Non-current liabilities due within one year 8,591,447 9,607,030 9,607,030
Other current liabilities 501,689 778,437 778,437
Total current liabilities 216,633,192 190,527,502 190,527,502
Non-current liabilities:
Lease liabilities 8,454,747 12,839,126 12,839,126
Provisions 627,089
Deferred income tax liabilities 65,085,110 53,691,871 52,752,662
Total liabilities 290,800,138 257,058,499 256,119,290
Owners’ equity (or shareholders' equity):
Share capital 80,789,724 80,484,430 80,484,430
Capital reserves 1,358,508,382 1,309,813,001 1,309,813,001
Less: Treasury stock 146,969,563 40,966,012 40,966,012
Other comprehensive income 24,067,306 16,946,374 16,946,374
Surplus reserves 55,460,195 46,570,910 46,570,910
Retained earnings 541,144,184 413,828,832 413,828,832
Total shareholders’ equity 1,913,000,228 1,826,677,535 1,826,677,535
Total liabilities and shareholders' equity 2,203,800,366 2,083,736,034 2,082,796,825
N.B.：
Starting from 2023, the company will implement the "Accounting Treatment for Deferred Income Tax Related to Asset and Liability Arising from a Single Transaction That
Does Not Qualify for Initial Recognition Exemption" as stipulated in Interpretation No. 16 of the Enterprise Accounting Standards issued by the Ministry of Finance. The
company will adjust the application of this standard to single transactions that occurred between the beginning of the earliest period reported in the nancial
statements and the date of the rst implementation of this standard. This includes adjusting the lease liabilities, right-of-use assets, estimated liabilities related to
disposal obligations and corresponding related assets that were recognized due to the application of this standard on the initial period reported in the nancial
statements when the standard was rst implemented. If there are temporary di ferences that result in taxable or deductible amounts related to the above-mentioned
adjustments, the cumulative impact on retained earnings and other relevant nancial statement items at the beginning of the reporting period will be adjusted
according to the provisions of this standard and Enterprise Accounting Standard No. 18 - Income Taxes. So, the amount of deferred income tax assets of January 1,
2023 exceeds the amount of December 31, 2022 disclosed in the 2022 annual report by CNY , . The amount of deferred income tax liabilities is also the same.
27
ESPRESSIF SYSTEMS | 2023 ANNUAL REPORT | CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Income Statement
End of Year
CNY December 31, 2023 December 31, 2022
Revenue 1,433,064,911 1,271,127,201
Cost of Revenue 851,816,379 762,876,133
Gross Prot 581,248,531 508,251,068
Taxes and surcharges 6,096,400 5,269,680
Selling expenses 52,583,650 49,323,100
General and administrative expenses 61,618,348 59,639,944
Research and development expenses 403,713,557 337,121,814
Financial expenses -9,630,438 1,370,257
Including: Interest expenses 918,131 768,965
Interest income 11,687,008 3,903,309
Add: Other income 13,750,216 10,304,212
Investment income (mark"-" for loss) 27,879,002 24,156,207
Income from changes in fair value (mark"-" for loss) 315,219 1,223,082
Credit impairment losses (mark"-" for loss) -312,780 -105,594
Assets impairment losses (mark"-" for loss) -3,230,539 -4,981,614
Assets disposal income (mark"-" for loss) -9,237
Operating Income 105,258,896 86,122,566
Add: Non-operating revenue 164,572 58,946
Less: Non-operating expenses 27,721 93,817
Income before income taxes 105,395,747 86,087,694
Provision (benet) for income taxes -30,808,890 -11,235,408
Net Income 136,204,637 97,323,103
Earnings per share
Basic 1.7012 1.2129
Diluted 1.6929 1.2127
End of Year
CNY December 31, 2023 December 31, 2022
Net Income 136,204,637 97,323,103
Other comprehensive income (loss), a ter tax
Changes to the fair value of investment in other 278,938 -1,269,304
equity instruments
Currency translation reserves 6,841,994 33,927,257
Other comprehensive income (loss) 7,120,932 32,657,953
Comprehensive income 143,325,569 129,981,056
28
ESPRESSIF SYSTEMS | 2023 ANNUAL REPORT | CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Cash Flow Statement
End of Year
CNY December 31, 2023 December 31, 2022
Operating Activities
Cash from sales of merchandise and provision of 1,503,910,409 1,493,812,070
services
Tax refund 65,278,538 66,050,716
Other received cash related to operational activities 17,610,269 18,771,365
Subtotal of cash inow from operational activities 1,586,799,216 1,578,634,151
Cash paid for merchandise and services 757,071,099 1,042,903,737
Cash paid to and for employees 363,845,426 312,650,430
Cash paid for taxes and surcharges 69,135,539 62,356,050
Other paid cash related to operational activities 94,149,809 89,402,275
Subtotal of cash ou ow from operational activities 1,284,201,873 1,507,312,493
Net cash provided by operating activities 302,597,343 71,321,658
Investing activities
Cash arising from the disposal of investments 1,838,441,681 2,938,975,287
Cash arising from investment income 6,953,903 6,724,461
Net cash arising from the disposal of xed assets, intangible 29,128
assets and other long-term assets
Other received cash relating to investment activities 2,415,500 1,936,000
Subtotal of cash inow from investment activities 1,847,840,212 2,947,635,748
Cash paid for the purchase and construction of xed assets, 49,360,096 26,220,587
intangible assets and other long-term assets
Cash paid for investments 1,901,160,000 2,867,100,000
Other paid cash relating to investment activities 2,100,000 2,050,000
Subtotal of cash ou ow from investment activities 1,952,620,096 2,895,370,587
Net cash provided by investment activities -104,779,884 52,265,160
Financing activities
Cash arising from the issuance of common stock 30,263,258 28,641,415
Including: Cash arising from subsidiaries absorbing
investments by minority shareholders
Subtotal of cash inow from nancing activities 30,263,258 28,641,415
Cash paid for the distribution of dividends and prots, or 128,722,856
payment of interests
Including: dividends and prots paid to minority
shareholders by subsidiaries
Other paid cash relating to nancing activities 120,112,997 51,360,071
Subtotal of cash ou ow from nancing activities 120,112,997 180,082,927
Net cash used for nancing activities -89,849,738 -151,441,512
Impact of uctuation in exchange rates on cash and cash 920,652 11,389,321
equivalents
Net increase in cash and cash equivalents 108,888,373 -16,465,372
Add: Cash and cash equivalent at the commencement 350,677,354 367,142,726
of the period
Cash and cash equivalents at the end of the period 459,565,727 350,677,354
29
ESPRESSIF SYSTEMS | 2023 ANNUAL REPORT | CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Cash Flow Statement
- Indirect Method
End of Year
CNY December 31, 2023 December 31, 2022
Additional information
Net income 136,204,637 97,323,103
Adjustments to cash provided by operating activities, for
the purpose of reconciling net income:
Add: provision for the impairment of assets 3,230,539 4,981,614
Credit impairment provision 312,780 105,594
Depreciation of xed assets 18,992,639 16,066,265
Depreciation of right-of-use assets 12,623,244 10,994,590
Amortization of intangible assets 779,019 779,019
Amortization of long-term prepaid expenses 4,751,710 3,351,764
Losses on disposal of xed assets, intangible assets 9,237
and other long-term assets (mark"-" for income)
Losses on scrapping of xed assets (mark"-" for 1,391
income)
Losses on fair value changes（mark"-" for income） -315,219 -1,223,082
Financial expenses（mark"-" for income） 1,528,459 4,960,685
Losses on investment（mark"-" for income） -27,879,002 -24,156,207
Decrease on deferred income tax assets（mark”-" -45,184,664 -8,891,574
for increase）
Increase on deferred income tax liabilities（mark"-" 11,526,848 -3,375,693
for decrease）
Changes in operating assets and liabilities:
Decrease in inventories（mark"-" for increase） 205,787,792 -118,521,370
Decrease in operational receivables（mark"-" for -66,257,845 122,514,414
increase）
Increase in operational payables（mark"-" for 27,748,362 -48,313,483
decrease）
Others 18,737,416 14,726,019
Net cash ow provided by operating activities 302,597,343 71,321,658
30
ESPRESSIF SYSTEMS | 2023 ANNUAL REPORT | CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statement of Changes in Equity
Less: Other
Share Capital Surplus Retained
Treasury comprehensive
CNY capital reserves reserves earnings Total equity
stock income
Balance as of
80,158,963 1,266,771,034 -15,711,579 33,462,951 458,336,543 1,823,017,913
December 31, 2021
Comprehensive income,
net of tax
Net Income 97,323,103 97,323,103
Other comprehensive
32,657,953 32,657,953
income
Transactions with owners
Capital increase 325,467 40,420,694 40,966,012 -219,850
Stock-based
2,621,273 2,621,273
compensation
Surplus reserves 13,107,959 -13,107,959
Dividends -128,722,856 -128,722,856
Balance as of
80,484,430 1,309,813,001 40,966,012 16,946,374 46,570,910 413,828,832 1,826,677,535
December 31, 2022
Comprehensive income, net
of tax
Net Income 136,204,637 136,204,637
Other comprehensive
7,120,932 7,120,932
income
Transactions with owners
Capital increase 305,294 39,167,386 106,003,551 -66,530,872
Stock-based
9,527,995 9,527,995
compensation
Surplus reserves 8,889,285 -8,889,285
Dividends 0
Balance as of
80,789,724 1,358,508,382 146,969,563 24,067,306 55,460,195 541,144,184 1,913,000,228
December 31, 2023
31
ESPRESSIF SYSTEMS | 2023 ANNUAL REPORT | FURTHER INFORMATION
Further Information
Terms and Conditions of the Report
Responsibility Statement
The Board of Directors, the Board of Supervisors and the executive management of the Company warrant that the
contents of this 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, 22 March 2024
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 O cer Shareholder-elected
Wang Jue Wang Yiwen
Deputy General Manager Shareholder-elected
Teo Teck Leong
Shareholder-elected Executive Management
Lan Yuzhe Teo Swee Ann
Independent Director Founder and CEO
Koh Chuan Koon Wang Jue
Independent Director Deputy General Manager
PRESSIF
ES
Lee Sze Chin Shao Jingbo
Independent Director Financial Director
Declaration
Forward-looking Statements
SY
This report contains forward-looking statements and/or assessments about the business, STE MS
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 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 condition, performance and strategy may, therefore, di fer from
what is discussed in this report.
32
ESPRESSIF SYSTEMS | 2023 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, 2023, the consolidated income
statement, the income statement, the consolidated cash ow statement, the cash ow statement, the consolidated
statement of changes in equity, and the 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 other nancial
positions of the company as of December 31, 2023, the consolidated and other results of company operations, and
the consolidated and other cash ows of the company for the year then ended.
Basis For the Opinion
We conducted our audit in accordance with China’s Standards on Auditing (the “CSA”). 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 su cient and appropriate for providing the
basis of our opinion.
Key Audit Matters
Key audit ma ters are those ma ters that, in our professional judgement, were of the greatest signicance in our
auditing of the nancial statements for the nancial year from January 1, 2023 to December 31, 2023. These ma ters
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 ma ters.
33
ESPRESSIF SYSTEMS | 2023 ANNUAL REPORT | FURTHER INFORMATION
Key Audit Matter How our audit addressed the Key Audit Matter
Revenue Recognition
Espressif’s main business includes the Our main auditing procedures for revenue recognition are as follows:
sales of chips and modules, which
> Understanding and evaluating the e fectiveness of the internal control design
created a revenue of CNY , , ,
relating to the revenue recognition of product sales, and testing the
in 2023. e fectiveness of the critical control point.
Since the operating revenue is a key > Evaluating the appropriateness of the sales revenue recognition policy by
performance indicator, there is an interviewing the management, reviewing the main terms of the sales contracts
inherent management risk when and the time point of major control transfers relating to the revenue recognition.
adjusting the time point of revenue
> Checking the origin of revenue by performing analytical procedures for the
recognition, in order for it to coincide
operating revenue, including monthly sales analysis, as well as gross prot
with certain goals or expectations.
analysis categorized by customers and products.
Therefore, we identify revenue
recognition, too, as a key auditing > Checking the authenticity of revenue by sampling supporting documents
ma ter. 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 f test to check whether the revenue recognition is
recorded within the correct accounting period.
Inventory
As of December 31, 2023, the inventory Our main auditing procedures for the inventory are as follows:
balance amounts to CNY , ,
> Evaluating the e fectiveness of the internal control design of the inventory
with provision for inventory impairment
management, and testing the e fectiveness of the critical control point.
CNY , , , and a net book value
amount of CNY , , . > Analyzing the rationality of the inventory balance uctuation at the end of the
reporting period by investigating its production cycle and stock policy.
Since most inventories are stored in
warehouses entrusted by external > Performing a conrmation procedure on the third-party warehouse.
processors and third parties, and the > Implementing a supervision on the inventory check at the end of the reporting
determination of provision for inventory period.
impairment involves signicant
management judgment and estimation, > Evaluating whether the provision for inventory impairment at the end of the
reporting period is fully accrued by conducting storage age analysis and by
we identify the existence of inventories
reviewing the calculation model and the results of provision for inventory
and the provision for inventory
impairment.
impairments as key ma ters.
> Calculating the inventory turnover and making a comparison to other similar
companies.
34
ESPRESSIF SYSTEMS | 2023 ANNUAL REPORT | FURTHER INFORMATION
Other Information
The management of Espressif Systems (Shanghai) Co., Ltd. (henceforth, “the management”) is responsible for any
information on all aspects of the 2023 company report, apart from the nancial statements and the auditor’s report
on them.
Our opinions on the nancial statements and the group management report do not cover the rest of the information
provided here, 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 rest of the information provided and, in so doing,
consider whether this 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
> 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.
Management's Responsibilities 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 ma ters related to ongoing concerns and using them as the basis of
accounting, unless the management either intends to liquidate the Company or cease its operations, having no
realistic alternative but to do so.
Auditor’s 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, due to either 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.
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:
35
ESPRESSIF SYSTEMS | 2023 ANNUAL REPORT | FURTHER INFORMATION
> Identify and assess the risks of substantial nancial misstatements, due to either fraud or errors; design and
perform auditing procedures in response to those risks, and obtain auditing evidence that is su cient 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.
> 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’ a tention 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 su cient 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 ma ters, on the planned auditing scope, timing
and signicant audit ndings, including any signicant deciencies in internal controls that we may identify during
our audit.
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 ma ters
that may reasonably be thought to bear on our independence and, where applicable, any other related protections.
From the ma ters communicated to those charged with governance, we determine which ma ters 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, 22 March 2024
Baker Tilly China
Ma Gang Yu Yanli
Chinese Certied Public Accountant Chinese Certied Public Accountant
36
ESPRESSIF SYSTEMS | 2023 ANNUAL REPORT | FURTHER INFORMATION
List of abbreviations
AI Articial Intelligence
AIoT Articial Intelligence and Internet of Things
Bluetooth LE Bluetooth Low Energy
CEO Chief Executive O cer
CES Consumer Electronics Show
EBITDA Earnings Before Interest, Taxes, Depreciation and Amortization
Espressif ESPRESSIF SYSTEMS (SHANGHAI) CO., LTD.
G&A General and Administrative
GM Gross Margin
HMI Human-Machine Interaction
IC Integrated Circuit
IoT Internet of Things
MCU Microcontroller Unit
OBD On-Board Diagnostics
R&D Research and Development
RF Radio Frequency
RISC-V Reduced Instruction Set Computer-V
ROE Return on Earnings
RTOS Real-Time Operating System
SG&A Selling, General and Administrative
SH Shanghai
SoCs System on Chips
YoY Year-on-Year
37
Investor Relations
ir@espressif.com
Ofcial Platforms Social Media
.espressif.com twi ter.com/EspressifSystem
blog.espressif.com facebook.com/espressif
github.com/espressif linkedin.com/company/espressif-systems
esp32.com youtube.com/EspressifSystems
instagram.com/espressif_systems_o cial
bilibili.espressif.com
Copyright 2024 Espressif Systems (Shanghai) Co., Ltd. All rights reserved. All trade names,
trademarks and registered trademarks mentioned in this document are the 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 wri ten in both Chinese and
English. In case of any discrepancies between Chinese and foreign interpretations, the
Chinese version shall prevail.
All amounts presented in these condensed Consolidated Financial Statements are shown in
CNY unless stated otherwise. Slight discrepancies between the amounts presented may
occur due to rounding.
