1、Luxshare Precision Industry Co.,Ltd.Annual Report 2021 1 Luxshare Precision Industry Co.,Ltd.Annual Report 2021 2022-033 April 2022 This document is a translated version of the Chinese version Annual Report 2021 of Luxshare Precision Industry Co.,Ltd.(“立讯精密 2021年年度报告”),and the published Annual Repor

2、t 2021 of Luxshare Precision Industry Co.,Ltd.in the Chinese version shall prevail.The complete published Chinese Annual Report 2021 of Luxshare Precision Industry Co.,Ltd.may be obtained at .Luxshare Precision Industry Co.,Ltd.Annual Report 2021 2 Section I Important Note,Table of Contents and Defi

3、nitions The Board of Directors,the Board of Supervisors,directors,supervisors and executives of the Company hereby warrant that the information contained in this Annual Report is true,accurate and complete and this Annual Report is free from any misrepresentation,misleading statement or material omi

4、ssion,and agree to assume joint and several liability for this Annual Report.WANG Laichun,Principal of the Company,CFO WU Tiansong and Chief Accountant CHEN Huiyong hereby represent that the financial statements contained in this Annual Report are true,accurate and complete.All directors of the Comp

5、any attended the meeting of the Board of Directors reviewing this Report.The relevant risks facing the Company are set out in“Section III Managements Discussion and Analysis-XI.Prospects for future development of the Company”.According to the profit distribution proposal approved by the Board of Dir

6、ectors,the Company will distribute a cash dividend of RMB1.10(inclusive of tax)per 10 shares to all shareholders on the basis of 7,084,301,477 shares,and will not distribute any bonus shares or transfer any capital reserve to the share capital for the reporting period.Luxshare Precision Industry Co.

7、,Ltd.Annual Report 2021 3 Table of Contents Section I Important Note,Table of Contents and Definitions.2 Section II Company Profile and Financial Highlights.7 Section III Managements Discussion and Analysis.11 Section IV Corporate Governance.51 Section V Environment and Social Responsibilities.75 Se

8、ction VI Significant Events.85 Section VII Changes in shares and shareholders.105 Section VIII Preference Shares.115 Section IX Bonds.116 Section X Financial Report.129 Luxshare Precision Industry Co.,Ltd.Annual Report 2021 4 List of References 1.Financial statements signed and chopped by the princi

9、pal,CFO and Chief Accountant of the Company;2.Original of the auditors report stamped with the seal of the accounting firm and signed and chopped by the certified public accountants;3.Originals of all documents of the Company publicly disclosed on the website for information disclosure designated by

10、 the China Securities Regulatory Commission during the reporting period and related announcements;and 4.Other references.Luxshare Precision Industry Co.,Ltd.Annual Report 2021 5 Definitions Terms Definition We/us,the Company or Luxshare-ICT means Luxshare Precision Industry Co.,Ltd.Luxshare Limited

11、means Luxshare Limited,founder and controlling shareholder of Luxshare-ICT.ICT-Lanto means ICT-Lanto Limited.Luxshare Precision means Luxshare Precision Limited.Luxshare Jiangsu means Luxshare Precision Industry(Jiangsu)Co.,Ltd.Luxshare Shanxi means Shanxi Luxshare Precision Industry Co.,Ltd.Luxshar

12、e Dongguan means Dongguan Luxshare Precision Industry Co.,Ltd.Luxshare Suzhou means Luxshare Precision Industry(Suzhou)Co.,Ltd.Luxshare Chuzhou means Luxshare Precision Industry(Chuzhou)Co.,Ltd.Luxshare Kunshan means Kunshan Luxshare Precision Industry Co.,Ltd.Luxshare Baoding means Luxshare Precisi

13、on Industry(Baoding)Co.,Ltd.Luxshare Xuancheng means Xuancheng Luxshare Precision Industry Co.,Ltd.Luxshare Yancheng means Yancheng Luxshare Precision Industry Co.,Ltd.Luxshare Enshi means Luxshare Precision Industry(Enshi)Co.,Ltd.Luxshare Vietnam means Luxshare-ICT(Vietnam)Limited.Luxshare Van Trun

14、g means Luxshare-ICT(Van Trung)Company Limited.Luxshare Nghe An means Luxshare-ICT(Nghe An)Limited.Luxshare Electroacoustic means Shenzhen Luxshare Electroacoustic Technology Co.,Ltd.Luxshare Smart Manufacturing means Luxshare Smart Manufacturing(Zhejiang)Co.,Ltd.Luxshare-Merry means Guangdong Luxsh

15、are-Merry Electronics Co.,Ltd.ASAP Jiangxi means ASAP Technology(Jiangxi)Co.,Ltd.Xiexun Jiangxi means Xiexun Electronic(Jian)Co.,Ltd.Smart Manufacturing Jiangxi means Jiangxi Luxshare Smart Manufacturing Co.,Ltd.Lanto Bozhou means Bozhou Lanto Electronic Limited.Xuntao Bozhou means Bozhou Xuntao Ele

16、ctronic Limited.Meite Suzhou means Meite Technology(Suzhou)Co.,Ltd.Huzhou Jiuding means Huzhou Jiuding Electronic Co.,Ltd.Lanto Kunshan means Lanto Electronic Limited.Kunshan RF means Kunshan Luxshare Radio Frequency Technology Co.,Ltd.Liding Dongguan means Liding Electronic Technology(Dongguan)Co.,

17、Ltd.Rikai Yancheng means Rikai Precision Technology(Yancheng)Co.,Ltd.Xiexun Wanan means Wanan Xiexun Electronic Co.,Ltd.Smart Manufacturing Changshu means Changshu Luxshare Smart Manufacturing Co.,Ltd.Fujian JK means Fujian JK Wiring Systems Co.,Ltd.Xingning Electronics means Xingning Luxshare Elect

18、ronics Co.,Ltd.Luxsan Kunshan means Luxsan Technology(Kunshan)Co.,Ltd.BCS Suzhou means BCS Automotive Interface Solutions(Suzhou)Co.,Ltd.SpeedTech means SpeedTech Corp.Luxshare Precision Industry Co.,Ltd.Annual Report 2021 6 Luxshare Automation Jiangsu means Luxshare Automation(Jiangsu)Co.,Ltd.Dongg

19、uan Luxshare Technology means Dongguan Luxshare Technology Co.,Ltd.Luxshare Electronic Kunshan means Luxshare Electronic Technology(Kunshan)Co.,Ltd.Luxshare Electronic Enshi means Luxshare Electronic Technology(Enshi)Co.,Ltd.AOA means Articles of Association of Luxshare Precision Industry Co.,Ltd.Lu

20、xshare Precision Industry Co.,Ltd.Annual Report 2021 7 Section II Company Profile and Financial Highlights I.Company profile Stock short name Luxshare-ICT Stock code 002475 Stock exchange Shenzhen Stock Exchange Chinese name 立讯精密工业股份有限公司 Chinese short name 立讯精密 English name(if any)Luxshare Precision

21、 Industry Co.,Ltd.English short name(if any)Luxshare-ICT Legal representative WANG Laichun Registered address 2/F,Block A,Sanyang New Industrial Zone,West Haoyi,Shajing Street,Baoan District,Shenzhen Postal code of registered address 518104 History of changes in registered address N/A Office address

22、 No.313 Beihuan Road,Qingxi Town,Dongguan,Guangdong Postal code of office address 523642 Company website www.luxshare- Email Publicluxshare- II.Contact person and contact information Board Secretary Securities Affairs Representative Name HUANG Dawei LI Ruihao Address No.313 Beihuan Road,Qingxi Town,

23、Dongguan,Guangdong No.313 Beihuan Road,Qingxi Town,Dongguan,Guangdong Telephone Fax E-mail David.Huangluxshare- Ray.Liluxshare- III.Media for information disclosure and place for keeping annual report Website of the stock exchange disclosing th

24、e Companys annual report Securities Times Media and website disclosing the Companys annual report Place for keeping annual report Securities Affairs Office of the Company IV.Changes in registration particulars Change in organization code Unified social credit code:982233Q Changes in main

25、business since the listing No Luxshare Precision Industry Co.,Ltd.Annual Report 2021 8 of the Company(if any)Changes in controlling shareholder(if any)No V.Other related information Accounting firm engaged by the Company:Name of accounting firm BDO China Shu Lun Pan Certified Public Accountants LLP

26、Office address of accounting firm Rooms 1,2&3,4/F,No.61 East Nanjing Road,Huangpu District,Shanghai Name of accountants signing this report LI Jing and WEI Gang Sponsor engaged by the Company that performs the duties of ongoing supervision over the Company during the reporting period:Applicable N/A

27、Name of sponsor Office address of sponsor Names of sponsor representatives Period of ongoing supervision CITIC Securities Co.,Ltd.19/F,North Tower,Excellence Times Plaza(Phase II),No.8 3rd Central Road,Futian District,Shenzhen HE Feng and LIU Guanzhong From December 2,2020 to December 31,2021 Financ

28、ial advisor engaged by the Company that performs the duties of ongoing supervision over the Company during the reporting period Applicable N/A VI.Key accounting data and financial indicators Did the Company need to retrospectively adjust or re-state any accounting data of prior accounting years?Yes

29、No 2021 2020 Y/Y%Change 2019 Operating revenue(RMB)153,946,097,790.40 92,501,259,211.54 66.43%62,516,314,588.42 Net profit attributable to shareholders of the listed company(RMB)7,070,520,386.57 7,225,462,752.58-2.14%4,713,820,644.90 Net profit attributable to shareholders of the listed company afte

30、r deduction of extraordinary gain or loss(RMB)6,015,597,220.13 6,088,901,850.86-1.20%4,435,974,109.41 Net cash flows from operating activities(RMB)7,284,766,917.00 6,873,211,486.05 5.99%7,465,988,174.33 Basic earnings per share(RMB/share)1.01 1.03-1.94%0.68 Diluted earnings per share(RMB/share)0.99

31、1.01-1.98%0.67 Weighted average return on net assets 22.35%30.29%Decrease by 7.94 percentage points 26.55%December 31,2021 December 31,2020 Y/Y%Change December 31,2019 Total assets(RMB)120,572,098,167.88 70,012,753,551.75 72.21%49,377,910,671.23 Net assets attributable to shareholders of the listed

32、company(RMB)35,288,554,748.72 28,101,816,234.56 25.57%20,296,618,968.52 Whether the lower of the net profit before and after deduction of extraordinary gain or loss in the past three accounting years has Luxshare Precision Industry Co.,Ltd.Annual Report 2021 9 been negative and the most recent annua

33、l auditors report indicates that the Companys ability to continue as a going concern is uncertain?Yes No Whether the lower of the net profit before and after deduction of extraordinary gain or loss is negative?Yes No VII.Differences in accounting data arising from adoption of Chinese and foreign acc

34、ounting standards concurrently 1.Differences in net profit and net assets disclosed in the financial statements prepared according to the international accounting standards and the Chinese accounting standards Applicable N/A There was no difference in net profit and net assets disclosed in the finan

35、cial statements for the reporting period prepared according to the international accounting standards and the Chinese accounting standards.2.Differences in net profit and net assets disclosed in the financial statements prepared according to the foreign accounting standards and the Chinese accountin

36、g standards Applicable N/A There was no difference in net profit and net assets disclosed in the financial statements for the reporting period prepared according to the foreign accounting standards and the Chinese accounting standards.VIII.Main quarterly financial indicators In RMB First quarter Sec

37、ond quarter Third quarter Fourth quarter Operating revenue 21,019,011,536.13 27,127,972,915.37 32,865,598,826.82 72,933,514,512.08 Net profit attributable to shareholders of the listed company 1,349,512,048.43 1,739,717,980.42 1,600,431,354.99 2,380,859,002.73 Net profit attributable to shareholders

38、 of the listed company after deduction of extraordinary gain or loss 1,167,112,633.01 1,355,153,041.64 1,471,991,374.50 2,021,340,170.98 Net cash flows from operating activities 663,348,870.24 1,524,553,521.56 5,419,705,921.15-322,841,395.95 Whether theres any significant difference between the fina

39、ncial indicators set forth above or aggregate amounts thereof and the corresponding financial indicators contained in any quarterly or semi-annual report already disclosed?Yes No IX.Items and amounts of extraordinary gains or losses Applicable N/A In RMB Luxshare Precision Industry Co.,Ltd.Annual Re

40、port 2021 10 Item 2021 2020 2019 Remark Gain or loss on disposal of non-current assets(including allowance for impairment of assets that has been written off)-57,241,855.39-35,503,173.93-110,085,527.48 Government grants recognized in profit or loss(excluding government grants that are closely relate

41、d to the business of the Company and are provided in fixed amount or quantity continuously according to the applicable polices of the country)853,542,165.37 450,749,695.89 232,311,428.35 Interest in the fair value of the acquirees identifiable net assets at the date of acquisition in excess of the i

42、nvestment cost of the relevant subsidiaries,associates and joint ventures 16,559,223.33 Difference between the original carrying amount of long-term investment and fair value of newly consolidated subsidiaries upon change from the equity method to the cost method Gain or loss on assets under entrust

43、ed investment or management 95,298,693.93 113,778,335.78 89,722,710.32 Gain or loss on changes in fair value of financial assets held for trading and financial liabilities held for trading,and gain on disposal of financial assets held for trading,financial liabilities held for trading and available-

44、for-sale financial assets,except for effective hedges held in the ordinary course of business 602,993,325.33 837,100,369.42 131,736,631.37 Other non-operating income and expenses-12,600,634.71 30,554,498.37-999,739.32 Other gain or loss within the meaning of extraordinary gain or loss-170,939,666.46

45、 0.00 0.00 Mainly gain on derecognition of financial assets at amortized cost Less:Effect of income tax 211,043,425.20 214,489,873.68 55,533,801.99 Effect of minority interest(after tax)61,644,659.76 45,628,950.13 9,305,165.76 Total 1,054,923,166.44 1,136,560,901.72 277,846,535.49-Other items of gai

46、n or loss within the meaning of extraordinary gains or losses:Applicable N/A We do not have any other item of gain or loss within the meaning of extraordinary gains or losses.If the Company classifies any item of extraordinary gain or loss defined by or listed in the Explanatory Announcement No.1 on

47、 Information Disclosure for Companies Publicly Offering Securities-Extraordinary Gain or Loss as recurrent profit or loss,please explain the reason.Applicable N/A We have not classified any item of extraordinary gain or loss defined by or listed in the Explanatory Announcement No.1 on Information Di

48、sclosure for Companies Publicly Offering Securities-Extraordinary Gain or Loss as recurrent profit or loss in the reporting period.Luxshare Precision Industry Co.,Ltd.Annual Report 2021 11 Section III Managements Discussion and Analysis I.Situations of our industry in the reporting period During the

49、 reporting period,we are engaged in the research and development(R&D),manufacturing and sale of products in the fields of consumer electronics,communication,automotive electronics and healthcare,among others.Our products and businesses are diversified and vertically integrated,and cover components,m

50、odules and system assembly.(I)Consumer electronics In the industry of consumer electronics,the development and innovation of applied technologies and diversified growth of consumer demands jointly promote the upgrading of consumer electronic products and related product lines,and continued growth of

51、 the consumer electronics market size.According to Statista,the global consumer electronics market size grew at a compound annual growth rate(CAGR)of 2.90%from 2015 to 2020,and is expected to reach USD1,098 billion in 2025.The advancement of 5G and artificial intelligence(AI)technologies will promot

52、e the development of different kinds of smart mobile,smart wearable,AR/VR/MR,smart home,smart display and other IoT devices.The acceleration of upgrading of terminal products will drive the increase in the integration level of electronic components contained therein and improvement of technological

53、level.The one-stop solution providers that are able to provide the brand customers with better production processes and higher integration level and require the input of less resources will get more orders for related components and finished products.Accordingly,the Companys business expansion and i

54、ndustrial operations are expected to fully benefit.(II)Communication and data center In the field of communication and data center,the series of technical innovation and emerging of new technologies promote the evolution from traditional IT infrastructure to data infrastructure,and along with the co

55、ntinuous development of the Internet,e-commerce,video,cloud computing and other Internet vertical industries have been rapidly springing up,and the global data center market has come into multiple periods of rapid growth.According to IDC,the shipments and sales of the global server market reached 13

56、,539,000 units and USD99.22 billion in 2021,representing an increase of 6.9%and 6.4%respectively.The global Internet data center market size grew at a CAGR of more than 10%from 2012 to 2021.The ever increasing demands for new data centers by IT,telecommunication,banking,financial,service and investm

57、ent(BFSI),e-government and smart city projects,and wide application of AI and IoT technologies in the future will further promote growth of the communication and data center market size.According to IDC,the global server market size is expected to reach USD126.5 billion in 2027.Global server shipmen

58、ts from 2016 to 2021 Global server shipments(10,000 units)Global server sales from 2016 to 2021 Global server sales(USD100 million)Luxshare Precision Industry Co.,Ltd.Annual Report 2021 12(III)Automotive electronics Smart electric vehicles represent an opportunity of the century for the automotive i

59、ndustry of China.China has the largest automotive market with the highest level of openness and inclusion and most consumers in the world,utilizes the most advanced smart vehicle technologies and attracts all major carmakers in the world.China ranks among the first in the world in terms of number of

60、 smart vehicle brands and models.At present,Chinas smart vehicle market is transiting from the policy-driven period to the period of market-driven high growth in an all-round way.In 2021,the sales volume of electric vehicles reached 3.52 million units in China,representing an increase of 160%as comp

61、ared with 2020.China has ranked first in the world in terms of sales volume of electric vehicles for seven consecutive years,and the sales volume of electric vehicles in China is expected to further increase by 47%to about 5 million units in 2022.The penetration of electric vehicles increased from 7

62、.2%at the beginning of 2021 to 19%at the end of 2021,representing an exponential growth as compared with 10 years ago,and showing great potentialities of growth.In addition to“electrification”,“intelligentization”and“interconnection”are also developing vigorously.Statistics show that about 20%new pa

63、ssenger cars are equipped with driver assistance system,the penetration of L2 driver assistance system into the electric vehicle market reaches 38%,electric vehicles has basically realized full coverage of Internet of Vehicles(IoV)functions,and some major carmakers have begun to sell new vehicles po

64、wered by V2X technology.Chinese consumers are more willing to accept smart electric vehicles,and medium-and high-end smart electric vehicles occupy increasingly greater shares on the business and consumer markets.Traditional smart mobile phone players begin to enter the smart electric vehicle sector

65、;on the other hand,electric vehicle manufacturers begin to produce smart mobile phones.Along with the popularization of“intelligentization”,vehicles will become large-sized mobile smart and computing terminals.In the next stage,carmakers need to build ecosystems to break through the tight encircleme

66、nt,connect vehicles with consumer electronics,create more consumption scenarios,and realize full coverage of“human-vehicle-home”scenarios.(IV)Our position in the industry During the reporting period,we ranked first on the 34th list of top 100 electronic component manufacturers of China(2021)publishe

67、d by the China Electronic Components Association,and were awarded the honorable titles of“Top 500 Private Enterprises Of China”,“Top 500 Private Manufacturers Of China”,and“2021 Model of Chinas Digital Economic Industry”,among others.In 2021,the penetration of electric vehicles began to increase rap

68、idly in China and the transition to clean transportation is accelerating.Penetration of electric vehicles sales volume(k)Source:China Association of Automobile Manufacturers Luxshare Precision Industry Co.,Ltd.Annual Report 2021 13 II.Our main business in the reporting period We concentrate our effo

69、rts on the specialization in and optimization of underlying technologies,made in-depth deployments in acoustic,visual,power(wired/wireless),wireless communication and other fields to meet future demands.Our products have been widely applied in the fields of consumer electronics,communication and aut

70、omotive.By comprehensively mastering the technologies relating to various components and modules,and super-precision manufacturing technologies accumulated over the years,we give full play to our advantages in vertical integration,and continuously restructure the supply chain in the field of system

71、assembly,to create more value for our customers,thereby gaining customers support and confidence.In launching a new product,we focus on the product quality,yield rate and optimization of production costs on the basis of innovative production technology,intelligent automation and digital platform,the

72、reby enabling us to make continuous and substantial breakthroughs in new markets,new customers and new products.In the implementation of related controls,there is no doubt that the automation technologies lay the strong foundation for our core competencies.Therefore,we attach great importance to the

73、 continuous exploration of automatic and smart manufacturing technologies.Our core teams spirit of in-depth exploration of processes and determination to accomplish all tasks assigned guarantee the success in the development and design of automation technologies.According to the requirements for app

74、earance,size,functions and reliability of products,we disassemble and study all manufacturing processes,and make efforts to solve process challenges with reference to our past experience and advanced technologies available on the market.With the goal of zero loss and zero defect,we strive to realize

75、 the reasonableness,standardization and automation of designs in terms of yield rate,efficiency,cost,etc.After the completion of process study,we realize process design through automation,including automation of work stations,handling and positioning,testing,warehousing,logistics and production proc

76、esses.Standardization is the prerequisite for automation,because standardized products cannot be made without the use of standardized equipment and processes.With respect to the products that have a low demand and change frequently,we mainly use man-machine flexible automation technologies.In the de

77、sign of automatic equipment,we make plans for MES system,IoT access and key work station information flows needing to be controlled simultaneously,and build a model of digital factory on that basis.Thereafter,we convert all problems and phenomenon into data,and then process and judge the data system

78、atically,and present the same in the form of visual reports,to realize whole-process traceability of products,materials,people,equipment,fixtures,process technology and quality information,among others,implement close-end control,and ensure the effective realization of automation.On that basis,we in

79、troduce digital models,use modeling approaches to connect production with data flows,and through the use of big data,cloud computing,AI,digital twin and other technologies,deeply explore the information and trends behind data,seek benefits from data,and finally realize intelligentization,and self-ju

80、dgment,self decision-making,self-adjustment and self-execution by machines,so that the machines are able to solve tangible problems and predict intangible problems on their own,thereby achieving the long-term goal of smart manufacturing.Luxshare Precision Industry Co.,Ltd.Annual Report 2021 14 1.精益化

81、 工艺的深度拆解和前瞻研究 设计的合理化、标准化和简单化 产线的精益布局规划 3.数字化 IOT、制造数字化集成 可视化控制中心和管理 运营流程自动化贯通 1.Leanness In-depth disassembly of and forward-looking research on processes Reasonableness,standardization and simplification of design Lean layout of production lines 3.Digitalization Digital integration of IoT and manuf

82、acturing Visual control center and management Automation of the whole operation process 2.自动化 搬运-加工-检测-物流-仓储的全流程自动化 柔性自动化系统分析 4.智能化 机器自感知、自学习、自决策、自执行 解决有形的问题和预测无形的问题 数据驱动管理决策 2.Automation Whole-process automation of handling,processing,testing,logistics and warehousing Analysis of flexible automatio

83、n system 4.Intelligentization Self-sensing,self-learning,self decision-making and self-execution of machines Solve tangible problems and predict intangible problems Data-driven management decision-making 物理域 精益生产布局 精益工艺研究 工艺数字化 流程数字化 Physical field Lean production layout Lean process study Technolog

84、ical digitalization Process digitalization 精益化 数字化 智能制造 信息域 制成自动化 Leanness Digitalization Smart manufacturing Information field Manufacturing automation 自动化 智能化 预测性分析 物流自动化 高级决策支持 Automation Intelligentization Predictive analysis Logistics automation Advanced decision-making support(I)Consumer elect

85、ronics business Luxshare Precision Industry Co.,Ltd.Annual Report 2021 15 From the perspective of applications,consumer electronics,communication and automotive are our main product and business segments.In the field of consumer electronics,we continue our product mix in prior years,follow the trend

86、s of metaverse,AIoT smart life and high-speed transmission,and enrich our product offerings in a steady and orderly manner.Our product offerings include acoustic products(such as TWS earphone),smart home products(such as 5G CPE and Wi-Fi 6 portable router),smart terminal products(such as wearable wa

87、tch and wristband,AR/VR/MR),computer accessories(such as Dock),intelligent stylus,video conference equipment and wired and wireless high-watt rapid charging accessories for various PC/NB/mobile phone brands for retail sale.We have been engaged in the field of consumer electronics for years,while sat

88、isfying the customers demands,made continuous breakthroughs to build the strong capability to provide customers with comprehensive solutions.We have the advantages in intelligentization,digitalization and globalization on the vast consumer electronics market.We make dynamitic adjustments continuousl

89、y,and clearly understand the existing market and the incremental market.With respect to the existing market,such as the business relating to PC and smart mobile phones,we have mature technical capabilities,capital equipment and customer resources.As the most trusted partner of our customers,we are n

90、ot only able to,in conjunction with our premium customers,achieve self-worth in the field of premium products and the existing products we are good at,but also in the upgrading of products and technologies,leverage our mature resources,grasp the opportunities to enter the market of higher-level prod

91、ucts at optimal cost,and maximize the rewards.With respect to the incremental market,such as health&wellness,metaverse and other applications,we believe that the premium customers on the existing market will continue to take the lead.By leveraging our good reputation and solid partnership with our c

92、ustomers built by us over the years,our management will continue to keep abreast of the market,analyze and accurately grasp the situations of technology development of the industry from the perspectives of consumers,brand customers and supply chain,continuously improve product attractions required b

93、y the incremental market,and make all-round deployments from components,modules to system.Though we face many external challenges,such as disengagement between China and the United States and geopolitics,we have high hopes for and are confident about the future development of our consumer electronic

94、s business.In the past ten years,through continuous upper-level industry guidance,development of designated customers,improvement of the quality and development of high-quality supply chain,and with the long-term and strong support and investments in different areas,China has gradually built the mos

95、t complete and systemic consumer electronics supply chain in the world,and takes the lead in in-depth deployment,talent pool,policy support and other issues in respect of supply chain on all market segments.In view of our strong head start advantage and the competitive situation on the consumer elec

96、tronics market,we keep improving and enhancing all kinds of capabilities,and on the basis of our global deployment completed over the years and our stable strategic focus,develop incremental businesses at home and abroad according to the development requirements of customers.The present and foreseea

97、ble situations show that the strong will be always strong.Our strategic goals conform to those of our customers.Luxshare Precision Industry Co.,Ltd.Annual Report 2021 16 智能音箱 快充适配器 VR眼镜 5G路由器 智能穿戴 机壳天线 Smart speaker Rapid charging adapter VR eyeglasses 5G router Smart wearable Casing antenan 电子烟 无线充

98、模组 声学模组 震动马达 5G模组 天线 Electronic cigarette Wireless charging module Acoustic module Vibration motor 5G module Antenna 射频 线材线缆 机构件 连接器 核心工艺 智能制造 Radio frequency Wire and cable Mechanical components Connector Core technology Smart manufacturing(II)Communication business Driven by 5G,big data and edge c

99、omputing technologies,the ICT industry puts forward higher requirements for data transmission,hardware equipment shows a tendency towards gradual opening of interfaces and high integration of functions,and interconnect components show a tendency towards high speed,high density,high reliability and l

100、ow loss.On the basis of the application scenarios of our products in the field of data and communication,and centering on the application and development trend of data center,we have gradually enriched our product offerings,and on the basis of electric connection(high-speed electric connectors and c

101、ables),optical connection(AOC and optical modules),radio frequency(RF)communication(base station antennas,base station filters,tower mounted amplifiers,duplexer,combiners,RRUs,AAUs and small base stations),and other existing products,have developed thermal management(heat pipes,VC,axial fans,cold pl

102、ates and water cooling radiators),industrial connection and other products,further increasing our product coverage.In 2022,we will develop server and other complete unit assembly business,center on the“complete unit+core components”double development strategy,and strive to grow into a comprehensive

103、solution provider offering all kinds of products in the field of data and communication.Luxshare Precision Industry Co.,Ltd.Annual Report 2021 17 电连接产品线 服务器 交换机 整机组装产品线 Electric connection products Server Switch Complete unit assemblies 光连接产品线 综合布线 基础设施 热管理产品线 Optical connection products Cabling sys

104、tem Infrastructure Thermal management products 汇聚交换机 接入交换机 数据中心机架群 机架内服务器群 Aggregation switch Access switch Data center rack cluster Server cluster inside rack We have focused on the development of core technological capabilities and basic R&D capabilities through research of simulation technology,n

105、ew materials and new processes and application of testing technologies,and provide strong technical support for communication interconnect products in different forms.With respect to system-level products,through disassembly of modules and components contained in the products,and single-point manufa

106、cturing processes and technologies,we are able to realize highly or wholly automated,efficient and high-quality production and manufacturing of large and small batches of products.基础设施 服务器 综合布线 浸没机柜 Infrastructure Server Cabling system Immersion cabinet 精密模组 高速连接器 高速线缆 线缆模组 Precision module High-spe

107、ed connector High-speed cable Cable module 滤波器 热管理 核心零部件 高速裸线开发 Luxshare Precision Industry Co.,Ltd.Annual Report 2021 18 Filter Thermal management Core components Development of high-speed bare wire 精密冲压和注塑 射频 散热部件 Precision stamping and injection molding Radio frequency Radiator 基础制造能力 压铸 机加 钣金 Ba

108、sic manufacturing capability Die casting Tooling Sheet metal 冲压 注塑 表面处理 基础服务平台 Stamping Injection molding Surface treatment Basic service platform 本地工程服务中心 全球化采购 自动化设备开发 零件中心 Local engineering service center Global purchasing Development of automatic equipment Component center Due to the effect of d

109、isengagement between China and the United States and geopolitics,exports of the domestic communication and data center industries face certain shocks and challenges.With respect to the further exploitation of opportunities of external circulation,we always regard the technical capabilities as the fo

110、undation for business development,and driven by the technologies and with the support of our strong precision manufacturing capability,actively exploit the overseas market.In addition,we will firmly grasp the opportunities provided by the“Eastern Data,Western Computing”program and replacement with h

111、ome-made goods,focus on internal circulation,and actively seek new opportunities in the domestic communication industry.We believe that we will get more and better business opportunities than traditional communication product manufacturers,as we will apply our rich experience accumulated in the cons

112、umer electronics precision manufacturing industry to the new communication industry.(III)Automotive business In view of the development of electric vehicles,we have made long-term plans for automotive business,and included wire harness,connection system,new energy,smart interconnect,smart cabin and

113、smart manufacturing in our product offerings.线束 整车线束 特种线束 充电枪 Leverage the superior resources of the Group,enrich product offerings,and create driving force for the growth of automotive tier-1 business Luxshare Precision Industry Co.,Ltd.Annual Report 2021 19 Wire harness Vehicle wire harness Specia

114、l wire harness Charging gun 连接器 低压连接器 高压连接器 高速连接器 Connector Low-voltage connector High-voltage connector High-speed connector 新能源 逆变器 智能网联 路测单元 New energy Inverter Smart interconnect Road-side unit 车载通讯单元 智能天线 智能驾舱 多媒体仪表 Telematics control unit Smart antenna Smart cabin Multi-media instrument panel

115、信息娱乐系统 域控制器 无线充电 电源网络隔离器 Infotainment system Domain controller Wireless charging Power and network isolator 智能制造 嵌件注塑 Smart manufacturing Insert molding Wire harness is an essential system-level component for a vehicle,is flexible,important and widely used,covers all configurations of a vehicle,and

116、provides reliable power supply,signals and data to all electric appliances,so they serve as“arteries”of the“neural network”of a vehicle.According to Markets and Markets,the global automotive wire harness market size was expected to reach USD47 billion in 2021.Through vertical integration,we have gro

117、wn into a comprehensive supplier specialized in the design,validation and manufacturing of low-voltage and high-voltage vehicle wire harnesses,special wire harnesses,charging guns and other products.We stick to the customer oriented service concept,and satisfy the customers demands with our efficien

118、t customized design and development,production facilities located in the neighborhood of our customers,and our strong precision manufacturing capabilities accumulated over the years.In additional to traditional carmakers,we have developed some major emerging customers.Automotive is one of the larges

119、t markets for connectors.Automotive connectors account for 22%in the global connector industry,where smart electric vehicles are the largest growth driver.According to Bishop&Associates,the global automotive connector market size was USD15.210 billion in 2019,and is expected to reach USD19.452 billi

120、on in 2025.We have designed and developed all kinds of connectors required on vehicles,including low-voltage connectors,high-voltage connectors,high-speed connectors and customized connection systems,among others.We exploit the existing customer market through our wire harness business,and enhance t

121、he synergistic effect with our existing consumer electronic and business-type products,to promote growth of business.Our proprietary gigabit Ethernet connector adopts a wholly shielded double cable connection structure,and can be widely used on infotainment systems,ADASs,domain controllers and other

122、 products.In order to satisfy the demands of the smart electric vehicle market,we launched key components of the power system of electric vehicles,including battery disconnect unit(BDU),power distribution unit(PDU)and inverters.In 2021,the global automotive PDU market size was USD7 billion,and the i

123、nverter market size was USD3 billion.PDU is designed to distribute and manage electric power in the high-voltage system of new energy vehicles,and can integrate MBS master control,charging module,DC module,PTC control module and other functions.BDU is specially designed for installation inside batte

124、ry packs and is a kind of distribution box.Inverter is a device that converts direct current in batteries into three-phase alternating current required by electric motors,and a core component of new energy vehicles.The power output and battery life of electric motors directly depend on the performan

125、ce of inverters.The IoV relies on the new-generation information communication technology,receives information from and transmits information to moving vehicles,and can play an important role in vehicle safety,traffic control,information service,smart city and intelligent transportation.At present,I

126、oV applications are key projects of government and OEMs,and require coordination among multiple devices,such as road-side unit(RSU)which collects environment,traffic condition,traffic sign and other information and sends the same to vehicles,telematics control unit(TCU)which effects two-way communic

127、ation between vehicles and external networks,central gateway(CGW)which connects all electronic devices on a vehicle,and other products.We focus on the development of wireless communication and automotive electronic products,and currently offer RSUs,TCUs and CGWs.Luxshare Precision Industry Co.,Ltd.A

128、nnual Report 2021 20 According to Visteon,the global smart cabin market size was about USD44.7 billion in 2020,and is expected to reach USD73.8 billion in 2025.The penetration of smart cabin into new vehicles in China is expected to exceed 75%in 2025.At present,the basic configuration of a smart cab

129、in on the market includes digital instrument panel,streaming rearview mirror,HUD,rear seat screen and IoV modules,among others,which can provide passengers with navigation,environmental monitoring,entertainment and other directly perceivable information,satisfy diversified human-machine interaction

130、requirements,provide better ride experience and create more consumption scenarios.Our products include AR-HUD,infotainment system,cabin entertainment domain,LCD instrument panel,driver monitoring system,power isolation module,etc.,and USB port and wireless charging module are relatively mature produ

131、cts.In the future,more consumer electronic functions will be applied in cabins,so we can fully leverage our technologies accumulated over the years in the field of consumer electronics.We also provide customers with smart manufacturing services,including insert molding,PCBA and other product service

132、s,by leveraging our economy of scale and lean production.In February 2022,we entered into a Strategic Cooperation Framework Agreement with Chery Holding Group,pursuant to which,we and Chery New Energy Automobile Co.,Ltd.will establish a joint venture specialized in R&D and manufacturing of new energ

133、y vehicles in the form of ODM.This business platform will produce vehicles for brand customers,provide a frontier R&D and mass production platform and access to the overseas market for our core automotive component business,and help us develop our tier-1 business.We have been engaged in the field of

134、 consumer electronics for years,and accumulated a solid industrial base and strong ODM capability,and are familiar with ODM operation and management model.Chery has rich experience in the field of traditional vehicles,and solid technological base.Our superior products will have an opportunity to gro

135、w from 0 to 1 through this joint venture ODM platform and the incremental business provided by Chery,and we will leverage our advantages to take part in the competition,in order to have our tier-1 products pass validation by the brand customers.Along with the wide application of consumer electronics

136、 products on vehicles,our technologies,experience and customer resources accumulated over the years in the field of consumer electronics will help our automotive business segment better grasp the trend,and develop more products and customers.We will keep pace with our premium customers at home and a

137、broad,accurately grasp the development direction of technologies and the industry,and actively promote the technological upgrading of products and reduction of costs through technology,to continuously provide our customers with products and solutions that are competitive in both technology and busin

138、ess.Our medium-to-long term goal is to grow into a tier-1 manufacturer in the global automotive component industry in the next three to five years.Luxshare Precision Industry Co.,Ltd.Annual Report 2021 21 III.Analysis of core competencies(I)Smart manufacturing under the lean production mode Since ou

139、r establishment,we have adhered to our original intention,focused on precision manufacturing,and through development and application of advanced digital tools and automatic production processes,and continuous optimization of system structure,organization and production mode,ensure our production sys

140、tem is able to rapidly adapt to the continuously expanding production lines and meet the constantly changing market demands.1.Modern optimization of smart process We implement the lean production mode pursuant to 7-S management standard,carry out production according to demands,meet the demands of d

141、ifferent customers for different products with the optimal production rhythm,and have introduced many digital system tools,for example:(1)SAP system that connects all links in our internal operation,and connects customers through EDI system and suppliers through SRM system;(2)PLM system in respect o

142、f product R&D,that integrates product-related processes,designs software and simulation models,and scientifically manages product data in the entire life cycle from design,development,production,marketing,purchasing to after-sale services;(3)MES system in respect of production and manufacturing that

143、 integrates human,tooling,equipment,jigs,materials,customer demands and other factors,and uses AI and 5G technologies to implement optimal management of the whole process from receipt of customer demands to delivery of products;(4)WMS smart warehousing system that effectively deals with and manages

144、our complicated inbound and outbound goods,improves the goods turnover and inventory turnover,greatly reduces overstock and occupation of funds,and make warehousing management more accurate,simple and efficient;and(5)Budget management and BI system in respect of financial and accounting operation th

145、at realizes efficient preparation of budgets and effective control,review and analysis,and manages and controls risks using big data.We continuously optimize our management processes and production processes,implement customer oriented precise,scientific and intelligent management,and constantly str

146、ive to improve our production efficiency and product yield.2.Advanced automatic process design and application As a global leading provider of diversified component solutions,high-quality precision manufacturing has always been one of our core competencies.Since our listing,our precision manufacturi

147、ng capability has developed from“automation with passive positioning”to“automation with active positioning”and finally to“full automatic and smart”super-precision modularized manufacturing today.In the automatic manufacturing of products,we connect product design with the design of automatic manufac

148、turing process seamlessly,and on the basis of ensuring our process capability at key work stations takes the lead in the industry,have introduced AI visual robots to realize positioning,error detection and judgment in the production process of precision electronic components,active and mutual positi

149、oning between components and jigs in the assembly process,and AI-assisted inspection of appearance of component products.We widely use automated guided vehicles(AGVs)on production lines and warehouses,to give support to modern smart logistics and warehousing system.In addition,we use big data and AI

150、 technologies,in conjunction with our proprietary algorithms,to feed back real-time measuring and testing data,thereby ensuring the reliable quality assurance and full traceability of products,and enabling the automatic production lines to have the deep learning capability,to realize close-end contr

151、ol over the automation technology,which marks that we have formally entered into the stage of“smart precision Luxshare Precision Industry Co.,Ltd.Annual Report 2021 22 manufacturing”from“precision manufacturing”in the early stage and“quality assured precision manufacturing”in the middle stage.3.Adva

152、nced comprehensive quality management system Quality is the foothold of a company,and one of the most important core values provided by a company to its customers.Since our establishment,we have adopted“quality is our lifeline”as one of our corporate values,established and improved the quality manag

153、ement system using scientific and effective quality management approaches,and integrated quality assurance into the whole process from design,manufacturing,inspection,packaging to transportation of products.We have a full set of advanced NPI(new product introduction)management process,and control qu

154、ality from the development and design of products,to lay a solid basis for successful mass production of products.In the each stage of development of a new product,such as POC(proof of concept),Proto(model verification),EVT(engineering verification test),DVT(design verification test),PVT(process ver

155、ification test)and MP(mass production),etc.,we take the highest requirement for mass production that each stage should satisfy as the criteria for approval of entry into the next stage.We attach great importance to quality precautions,and implement design quality controls focusing on quality,cost,ma

156、nufacturing and automation,to shorten the period from engineering development to mass production.Due to our excellent quality assurance capability,we have received praise from our customers continuously,and enhanced customer adhesion.(II)Forward-looking strategic deployment Our management keeps abre

157、ast of market trends and developments of the industry,through industrial researches and internal seminars,reviews our development situations,makes in-depth analysis of the boundaries of our business and capabilities,enhances the implementation of the“three five-year”strategic plan,and continuously e

158、xplores the ways of diversified innovations and development.Our development towards new products and new areas is based on multi-dimensional analysis of industrial development,customer demands,competitors,the value we can provide,the space we can play,profitability,return on investment and other asp

159、ects of the industries,customers and end users,and detailed sand table exercise by our core management.1.Vertically integrated one-stop service capability We focus on providing the market with perfect comprehensive solutions covering the entire industry chain.We provide full coverage products from c

160、ore components,modules to system-level assembly.We have proprietary key process capabilities,including design and processing of molds/jigs,bare copper wire drawing,plastic particle molding,stamping/press forging,precision implant molding,surface treatment,SMT,SiP and system-level assembly testing.In

161、 addition,we have a number of national CNAS certification labs responsible for preliminary development validation,in-process quality inspection and failure analysis.Therefore,we have vertically integrated production capabilities for core components,modules to system-level assembly that are relativel

162、y complete,and have realized close-end management from key materials,parts,modules,core technologies to data of all stages,in respect of all core acoustic,optical and electric module products,such as acoustic modules,vibration motors,voice coil motors,antenna modules,wireless charging modules,and al

163、l kinds of terminal products,such as accessory system,IoT equipment,acoustic wearable devices,smart wearable devices and smart mobile phones.With our understanding of the market demands over the years,we are able to provide comprehensive one-stop professional services from product proposal,design,va

164、lidation to mass production,and even to logistic cooperation,after-sale quality tracking and warranty,thus further enhancing our competitive advantage in rapid response to demands of customers,timely and efficient engineering cooperation and cost control with quality guaranteed.2.Industrial synergis

165、tic effect In order to provide the customers with greater and better values,in addition to our vertically integrated one-stop service capability,we manage and integrate purchasing,R&D and manufacturing activities of consumer electronics,communication,automotive,healthcare and other business segments

166、 in a centralized manner,to minimize the use of resources,accelerate trans-sector technological convergence,improve production efficiency and product yield,seek synergistic effect,reduce overall costs for customers,and ensure our return on investment.Luxshare Precision Industry Co.,Ltd.Annual Report

167、 2021 23 3.Global service deployment Economic globalization is the profound background and fundamental trend of the development and evolution of global economy in the 21st century.As the players of economic globalization,transnational companies directly promote the development of economic globalizat

168、ion.From the perspective of market,in the era of global intelligentization,the electronics industry is the field with the most thorough allocation of global resources and market competition at present.After more than ten years development,we have gradually built a global system integrating developme

169、nt,sales,FAE(field application engineer)and manufacturing.We now have 16 sales&FAE offices abroad,which,in addition to providing services to our customers from nearby locations,actively attract sales,R&D and management talents of different fields throughout the world,to introduce fresh blood and dra

170、w out the potential capacities of the teams.This approach not only can be horizontally replicated in new product operation teams,but also can maintain the capability boundary of all functional teams and personnel at the same level.In addition,in order to optimize our cost structure,we have establish

171、ed industrial zones and manufacturing facilities in some foreign countries,to serve global brand customers.We are committed to satisfying the demands of customers,keep abreast of market demands through our global sales&FAE network,accelerate R&D of new products,produce high value-added products;leve

172、rage our local manufacturing capabilities throughout the world and advantages in smart manufacturing,shorten the production and transportation cycle of products,further enhance the cost advantage of products,and improve quality and efficiency,to provide our customers throughout the world with more c

173、ompetitive services.(III)R&D and technological innovation 1.Continuous increase in R&D investment Since our listing,we have placed R&D and innovation on an important position in our development,made continuous investments in technology R&D,vigorously upgraded traditional manufacturing processes,cont

174、inuously improved the level of automatic production,and realized platformization of all precision manufacturing processes.We also attach great importance to the long-term development of underlying materials and innovative production technologies.Our R&D team has continuously learned and explored adv

175、anced precision manufacturing technologies and product applications in the countries and regions mastering frontier technologies,and established a number of advanced technology development labs with certain core customers,to jointly develop frontier technologies.We have established advanced producti

176、on technology and manufacturing process R&D platforms in Dongguan,Kunshan,Taiwan and the United States,and own a R&D and smart manufacturing team taking the lead in the industry.Our R&D expenses are mainly classified into early stage R&D expenses and product upgrading expenses.Early stage R&D expens

177、es are incurred in connection with medium-to-long term product and business planning and deployment,and consist of investments in new products and new areas and R&D expenses relating to underlying technologies,accounting for about 30%of our total R&D expenses.Product upgrading expenses are incurred

178、in the process from concept to NPI(new product introduction)of new solutions and new products.All early stage R&D expenses and product upgrading expenses are expensed as incurred to reduce the pressure of asset amortization costs in the future.Our R&D expenses have been continuously increasing,and t

179、otaled RMB16.763 billion in the past three years.In the reporting period,our R&D expenses totaled RMB6.642 billion.2.Innovation capabilities and patents Innovation is the soul of the era of knowledge economy.As a hi-tech company,we always attach great importance to the management and protection of i

180、ntellectual properties(IPs),have established and continuously improved our IP policy,complied with all IP laws and regulations,established IP department and engaged professionals to actively carry out application,protection,operation and maintenance activities in respect of IPs.We encourage our empl

181、oyees to actively make innovations,reduce product costs and increase our profits.On the other hand,we actively prevent risk of infringement,and protect our and our customers legitimate rights and interests.As of the end of this reporting period,we own 3090 valid patents,an increase of 44.46%as compa

182、red with the end of 2020.Luxshare Precision Industry Co.,Ltd.Annual Report 2021 24 We firmly believe that R&D and technological innovation are an important means to realize forward-looking deployment,and will drive our development.The continuous and steady R&D investments will not only consolidate o

183、ur leading position and advantages in the industry,but also enhance our risk bearing capability in an ever-changing macro environment,and lay a solid foundation for our continuous and rapid development in the future.(IV)Corporate culture focusing on sustainable development 1.All-round customer-orien

184、ted culture Since our establishment,we have adhered to the philosophy of“customer first”,and been committed to providing our customers with complete and perfect comprehensive solutions,taking into comprehensive consideration response speed,engineering cooperation,service quality,flexible delivery,co

185、st control and other factors.Our leading technologies and excellent quality assurance capability have helped us build a good brand image and reputation in the industry,and brought high-quality customers to us.After years of cultivation,we have established stable cooperation relationships with a lot

186、of global leading brands and manufacturers in the fields of consumer electronics,communication and automotive.Over the years,we have kept pace with the strategic steps made by our major customers,cautiously assessed the development trends of the industry from the perspective of brand customers and e

187、nd consumers,and made forward-looking deployments to occupy the new markets and new channels,to ensure that we maintain the lead.We think what customers think and are eager to help the customers in need.Under the guidance of the service philosophy of“customer first”,in addition to fulfilling the tas

188、ks assigned by the customers,we have also continuously identified the pain points of the customers in their applications,fully leveraged our resource and platform advantages,and taken the initiative to provide the customers with optimization proposals and suggestions,to highlight our competencies.Ou

189、r commitment to fulfill all missions has been generally recognized in the industry.2.Spirit of workmanship that constantly strives for perfection We are unable to make continuous improvement in smart manufacturing,product R&D,internal management,social responsibility and other areas without our empl

190、oyees striving for perfection at work and accomplishment of each task in such manner that is higher than the customer standard,stricter than the industrial standard and more excellent than what has been done yesterday.That is the key internal driving force behind continuous recognition of us by the

191、customers and our rapid development.In the future,we will remain true to our original aspiration,not only carry on the spirit of workmanship that constantly strives for perfection in our traditional superior fields,but also foster such spirit in our new teams and new business segments,strive to acco

192、mplish the strategic goals in the“three five-year”plan period with the spirit of enterprise,and achieve a win-win situation with our customers,shareholders and employees.3.Talent selection,training,use and retention mechanisms deeply integrated with corporate culture The core competencies of a compa

193、ny will be ultimately reflected in the soft power arising from in-depth integration and mutual nourishment of talents and corporate culture.Core talents are the basis for the sustainable development of a company and the cornerstone for cultivating the talents required by a company.We have adhered to

194、 the strategy of invigorating the business through talents,and continuously improved our talent echelon building system and talent pool mechanism.We vigorously recruit outstanding talents required in our development who recognize and conform to the distinctive characteristics of our corporate cultur

195、e,to continuously augment our team of core talents.On the other hand,we continuously improve our talent training system and talent selection system.Along with the growth of our business,we continuously put forward new and reasonable requirements for our employees,encourage them to make self break-th

196、rough in the boundary of their capabilities,and continuously improve their personal competencies and management capabilities,to contribute new energy to our development.Under the nurture of our corporate culture of being pragmatic and enterprising,constantly striving for perfection,and fulfilling th

197、e missions,we provide the key employees with a vast space to exercise their talents,and effectively stimulate their sense of mission,sense of achievement and sense of collective honor.At present,we have recruited outstanding talents in materials,automation,electronic information,molds,business Luxsh

198、are Precision Industry Co.,Ltd.Annual Report 2021 25 management and other fields throughout the world,to create a talent pool for our sustainable development.We clearly know how to attract and retain talents.To develop a virtuous circle of people creating the environment and the environment creating

199、 people through in-depth integration of talents and corporate culture is our strongest core competency.Through effective talent mechanisms,we have sufficient talents in our traditional superior fields,and have laid the foundation for our rapid development in new areas and businesses.IV.Analysis of m

200、ain business 1.Overview In 2021,the external environment became more complicated and severe.The domestic and overseas economic development faced numerous pressures and was greatly affected by the changes unseen in a century and the epidemic disease of the century.During the reporting period,we faced

201、 more risks and challenges in our development,for example,the repeated outbreaks of COVID-19 at home and abroad causing interruption of the upstream supply chain and blockade of logistic routes,shortage of chips and materials throughout the world,sharp rise of the prices of staple commodities and lo

202、gistic and transportation costs,and delay in the mass production and delivery of certain new products.In addition,the learning curve of some new products/businesses during rapid growth and the regular cycle of some existing products affected our financial indicators to a certain extent.During the re

203、porting period,we invested in and controlled Rikai Precision Technology(Yancheng)Co.,Ltd.(“Rikai Yancheng”).Since 2021,due to great demands from customers for the precision display structure module products for mobile phones in the coming years,the scale of operation of Rikai Yancheng increased rapi

204、dly.However,the huge investment in the preliminary development and automation optimization in respect of the precision display structure module products for mobile phones and large proportion of raw materials to the total cost of such products greatly affected the overall product margin of Rikai Yan

205、cheng,and in turn affected the consolidated gross margin of Luxshare-ICT.In addition,after experiencing the strong demands from industries/market and consumers for smart wearable acoustic products,the shipments of our smart wearable acoustic products dropped sharply in 2021,which had a periodic effe

206、ct on the operating revenue and net profit of this business.The development of this business is expected to become stable in 2022.We will continue to leverage our core competencies,give full play to our value as an important partner of our key customers,and promote the steady and high-quality develo

207、pment of this business.Facing the market competitions and internal and external pressures and challenges,we work hard to overcome the difficulties,focus on the formulation and implementation of the“three five-year”strategic plan,and further enhance short-,medium-and long-term forward-looking deploym

208、ents taking into account the new situations and new opportunities.During the reporting period,we fully leveraged our advantages in smart,digital and modular high-end manufacturing and flexible management,further consolidated the foundation of the big precision and smart manufacturing platform,intens

209、ively implemented vertically integrated allocation of resources,and effective coordination of all product lines and business segments,improved the efficiency of internal organization,and made praise-worthy achievements in both existing and new businesses.(1)Consumer electronics business During the r

210、eporting period,we stuck to the strategy of diversified vertical integration and production penetration in the field of consumer electronics.In 2021,with respect to smart wearable healthcare products,as an important member of our family of system-level products,though the delivery of certain product

211、s was delayed due to the epidemic situation at home and abroad and shortage of materials,our excellent performance in product development,automatic production process,premium quality,flexible delivery and other areas was well recognized by our key customers,laying a solid foundation for the provisio

212、n by us of in-depth and diversified services,such as system assembly and different kinds of core components,in respect of this product line.With respect to SiP products,despite the effect of overseas epidemic situation,our performance was generally mature and realized full coverage of smart wearable

213、 healthcare products.On the basis of thorough assessment of return on investment,utilization rate and other operating Luxshare Precision Industry Co.,Ltd.Annual Report 2021 26 metrics,and in-depth analysis of this technology development route,taking into account our strategy of access to the oversea

214、s market for system products,we will make further plans in respect of smart wearable acoustic products and peripheral functional module system packaging business in the short term,and develop chip/semiconductor module packaging business in the long term.With respect to system products for mobile pho

215、nes,the joint venture platform established by us and our controlling shareholder vigorously promoted smart and digital practices,and built an integrated smart platform covering product scheduling,production process analysis,asset management,energy monitoring,personnel management,failure analysis,rem

216、ote assistance and other activities,in order to continuously improve our operation and management level,and effectively satisfy our customers increasingly personalized,high quality and rapidly evolving demands.Our integrated smart development and production platform covering the whole process make f

217、ull preparation for large-scale replication and group/global operation in the days to come.With respect to the vast consumer electronics market,we keep our eyes open,and wash grains of gold out of the sand.In the recent years,by leveraging our strong core competencies and the demonstration effect of

218、 big customers,through our premium services to many global well-known brand customers,we have made excellent achievements in smart terminal,smart life,computer accessory and other solutions,and accumulated strength for the diversified development of our consumer electronics business at the customer

219、and product sides.Our products include acoustic,optical and electric modules,smart accessory system,acoustic system,IoT equipment,wearable devices,etc.Through in-depth market/customer researches,we have established executable development plans and growth objectives,and our cooperation with global cu

220、stomers having great potentialities has been upgraded from simple cooperation in components and modules to integrated and all-round cooperation in complete unit system solutions.At present,we are carrying out business as planned,with the support and recognition of the market and customers as what th

221、ey did in the past.In view of the relatively fragmented market,we will further focus on resources and make thorough assessments in the future,and strive to develop related business into important drivers of our sustainable growth in the next five to ten years.(2)Automotive business In 2021,despite t

222、he weak market demand and chip shortage caused by the epidemic situation at home and abroad,the overall development of our automotive business generally meets the expectations of our management.Along with the continuous development of“electrification”,“intelligentization”and“interconnection”of vehic

223、les,and trans-sector application of consumer electronic products and technologies on vehicles,we actively grasp market opportunities,and fully leverage our technologies and customer resources accumulated over the years in the fields of consumer electronics and communication,in order to ensure that o

224、ur existing automotive business catches the trend more accurately,and to develop product lines and strategic customers in a more intensive and focused manner.At present,our main products cover automotive wire harnesses(vehicle wire harnesses,special wire harnesses,charging guns,etc.),connectors(high

225、-voltage,low-voltage and high-speed connectors,Busbar,etc.),smart new energy(PDUs,BDUs,inverters,energy storage,etc.),smart interconnect(RSUs,TCUs,etc.),and smart cabin/control(domain controllers,infotainment system and multi-media instrument panels).We will,guided by the trend of technology develop

226、ment and strategy to focus on/enable customers,continuously provide our customers with products and solutions that are competitive in the world in both technical and commercial metrics,by leveraging our manufacturing facilities and product R&D centers distributed around the country,and the synergist

227、ic effect of domestic and overseas resources.(3)Communication business During the reporting period,our supercomputing center business grew rapidly,as a result of our continuous technology development in the field of communication.However,the unreasonable interference by foreign entities of the same

228、trade in the context of China-US trade friction affected the continued development of our communication business in North America.On the basis of further improving our capabilities in respect of existing high/low-frequency electric connector,optical connector and RF communication products,during the

229、 reporting period,we focused on the development of thermal system management,industrial connector and other new products and new businesses,further enhanced vertical integration of industries,trans-sector technological convergence,and increased coverage of product lines,with a view to growing into a

230、 comprehensive data and communication solution Luxshare Precision Industry Co.,Ltd.Annual Report 2021 27 provider.The global market has continuous demands for communication equipment.Along with the further development of smart manufacturing,metaverse,smart driving and IoT,by virtue of our complete p

231、roduct lines and platforms,and our understanding and application of frontier technologies,we will continuous exploit the global market and increase our market shares.During the reporting period,our sales revenues totaled RMB153.946 billion,an increase of 66.43%year on year;profit totaled RMB8.143 bi

232、llion,an increase of 0.09%year on year;and net profit attributable to the owners of the parent totaled RMB7.071 billion,a decrease of 2.14%year on year.2.Revenue and cost(1)Components of operating revenue In RMB 2021 2020 Y/Y%Change Amount%of operating revenue Amount%of operating revenue Total opera

233、ting revenue 153,946,097,790.40 100%92,501,259,211.54 100%66.43%By segment Computer interconnect products and precision components 7,856,595,729.78 5.10%3,521,361,712.58 3.81%123.11%Automotive interconnect products and precision components 4,142,675,174.19 2.69%2,844,031,362.75 3.07%45.66%Communicat

234、ion interconnect products and precision components 3,269,476,642.60 2.12%2,265,420,000.59 2.45%44.32%Consumer electronics 134,637,995,600.46 87.46%81,818,160,358.88 88.45%64.56%Other connectors and other business 4,039,354,643.37 2.62%2,052,285,776.74 2.22%96.82%By product Computer interconnect prod

235、ucts and precision components 7,856,595,729.78 5.10%3,521,361,712.58 3.81%123.11%Automotive interconnect products and precision components 4,142,675,174.19 2.69%2,844,031,362.75 3.07%45.66%Communication interconnect products and precision components 3,269,476,642.60 2.12%2,265,420,000.59 2.45%44.32%

236、Consumer electronics 134,637,995,600.46 87.46%81,818,160,358.88 88.45%64.56%Other connectors and other business 4,039,354,643.37 2.62%2,052,285,776.74 2.22%96.82%By region Domestic market 10,493,247,599.10 6.82%7,454,978,348.07 8.06%40.75%Overseas market 143,452,850,191.30 93.18%85,046,280,863.47 91

237、.94%68.68%By sales mode Direct sales 153,946,097,790.40 100.00%92,501,259,211.54 100.00%66.43%(2)Segments,products or regions representing more than 10%of operating revenue or profit Applicable N/A In RMB Operating revenue Operating cost Gross margin Y/Y%Change in operating revenue Y/Y%Change in ope

238、rating cost Y/Y%Change in gross margin By segment Consumer electronics 134,637,995,600.46 119,338,834,375.15 11.36%64.56%77.54%-6.48%By product Consumer electronics 134,637,995,600.46 119,338,834,375.15 11.36%64.56%77.54%-6.48%By region Domestic market 10,493,247,599.10 8,421,880,523.04 19.74%40.75%

239、44.47%-2.06%Overseas market 143,452,850,191.30 126,626,455,769.84 11.73%68.68%81.05%-6.03%By sales mode Luxshare Precision Industry Co.,Ltd.Annual Report 2021 28 Direct sales 153,946,097,790.40 135,048,336,292.88 12.28%66.43%78.23%-5.81%In case of any adjustment to the statistic scale for main busin

240、ess data,the main business data of the most recent reporting period as adjusted according to the statistic scale applied at the end of the current reporting period:Applicable N/A (3)Whether the Companys revenue from sale of tangible goods is higher than the revenue from labor service?Yes No Segment

241、Item Unit 2021 2020 Y/Y%Change Computer interconnect products and precision components Sales volume KPCS 692,107 510,910 35.47%Output KPCS 735,779 537,997 36.76%Inventories KPCS 43,672 27,087 61.23%Automotive interconnect products and precision components Sales volume 1000 sets 233,339 172,912 34.95

242、%Output 1000 sets 256,542 184,502 39.05%Inventories 1000 sets 23,203 11,590 100.20%Communication interconnect products and precision components Sales volume KPCS 380,329 470,565-19.18%Output KPCS 413,793 514,389-19.56%Inventories KPCS 33,465 43,824-23.64%Consumer electronics Sales volume KPCS 3,495,

243、842 3,299,993 5.93%Output KPCS 3,773,559 3,661,402 3.06%Inventories KPCS 277,717 361,409-23.16%Other connectors and other business Sales volume KPCS 467,754 312,258 49.80%Output KPCS 508,283 348,814 45.72%Inventories KPCS 40,529 36,556 10.87%Analysis of changes in the relevant data over 30%year on y

244、ear:Applicable N/A During the reporting period,our output and sales volume increased as a result of increase in sales.(4)Performance of material sales contracts and material purchase contracts by the Company as of the end of the reporting period Applicable N/A (5)Components of operating cost Classif

245、ication of segments In RMB Segment Item 2021 2020 Y/Y%Change Amount%of operating cost Amount%of operating cost Computer interconnect products and precision components 6,296,204,929.34 4.66%2,765,866,774.16 3.65%127.64%Automotive interconnect products and precision components 3,475,111,291.70 2.57%2,

246、374,148,439.75 3.13%46.37%Communication interconnect products and precision components 2,700,268,416.55 2.00%1,818,503,189.96 2.40%48.49%Consumer electronics 119,338,834,375.15 88.37%67,217,502,600.73 88.71%77.54%Other connectors and other business 3,237,917,280.14 2.40%1,593,986,044.98 2.10%103.13%

247、Analysis None Luxshare Precision Industry Co.,Ltd.Annual Report 2021 29(6)Change in the scope of consolidation during the reporting period Yes No Luxis Technology Limited,Yancheng Luxshare Precision Industry Co.,Ltd.,Hangzhou Xuntao Technology Co.,Ltd.,Rugao Luxshare Business Management Service Part

248、nership(LP),Lianxun Smart Equipment(Rugao)Co.,Ltd.,Luxshare Technology(Xian)Co.,Ltd.,Luxshare Electronic Technology(Enshi)Co.,Ltd.,Luxis Technology(Kunshan)Co.,Ltd.,Luxshare Investment Co.,Ltd.,Yancheng Luxshare Business Management Service Partnership(LP),Luxshare Smart Equipment(Yancheng)Co.,Ltd.,L

249、uxis Precision Intelligent Manufacturing(Kunshan)Co.,Ltd.,Luxshare Smart Manufacturing&Electronic Service(Kunshan)Co.,Ltd.,Liding Electronic Technology(Dongguan)Co.,Ltd.,Luxshare Technology(Nanjing)Co.,Ltd.,Henan Leader Precision Industry Co.,Ltd.and Changzhi Luxshare Precision Industry Ltd.,that we

250、re newly established by us,Rikai Precision Technology(Yancheng)Co.,Ltd.and Zhejiang Puson Electronic Technology Co.,Ltd.,that were acquired by us in cash,and Caldigit Holding(Cayman)and Taihan Precision Technology Co.,Ltd.,that were controlled by us by contract during the reporting period,are includ

251、ed in the scope of consolidation.Wuxi Huihong Electronics Co.,Ltd.,that was transferred by us,and Jian Jizhou Luxshare Electronics Co.,Ltd.,Speedtech(LS-ICT)Co.,Limited,Luxshare International Cable Co.,Ltd.and Luxshare-ICT International B.V.,that were liquidated and deregistered during the reporting

252、 period,are removed from the scope of consolidation.(7)Material changes or adjustments in respect of business,products or services of the Company during the reporting period Applicable N/A (8)Major customers and suppliers Major customers of the Company:Aggregate sales revenue from top 5 customers(RM

253、B)128,399,408,091.77 Proportion of aggregate sales revenue from top 5 customers to annual sales revenue 83.41%Proportion of aggregate sales revenue from related parties among top 5 customers to annual sales revenue 0.00%Particulars of top 5 customers:No.Name of customer Sales revenue(RMB)%of annual

254、sales revenue 1 Customer 1 114,055,710,068.00 74.09%2 Customer 2 5,033,592,065.75 3.27%3 Customer 3 3,621,465,625.47 2.35%4 Customer 4 3,188,059,176.36 2.07%5 Customer 5 2,500,581,156.19 1.62%Total -128,399,408,091.77 83.41%Other information of major customers:Applicable N/A Major suppliers of the C

255、ompany:Aggregate purchase amount from top 5 suppliers(RMB)75,982,606,355.38 Proportion of aggregate purchase amount from top 5 suppliers to annual purchase cost 57.96%Proportion of aggregate purchase amount from related parties among top 5 suppliers to annual purchase cost 0.00%Particulars of top 5

256、suppliers:No.Name of supplier Purchase amount(RMB)%of annual purchase cost 1 Supplier 1 68,529,282,195.97 52.28%2 Supplier 2 2,220,179,015.43 1.69%3 Supplier 3 1,986,097,524.70 1.52%4 Supplier 4 1,718,167,435.10 1.31%Luxshare Precision Industry Co.,Ltd.Annual Report 2021 30 5 Supplier 5 1,528,880,18

257、4.17 1.17%Total -75,982,606,355.38 57.96%Other information of major suppliers:Applicable N/A 3.Expenses In RMB 2021 2020 Y/Y%Change Reason of material changes Sales expenses 789,908,163.80 477,047,875.58 65.58%Primarily due to increase in the scope of consolidation and business growth General expens

258、es 3,741,908,783.50 2,463,953,208.63 51.87%Primarily due to increase in the scope of consolidation and business growth Financial expenses 554,665,874.05 904,828,142.89-38.70%Primarily due to fluctuations in foreign exchange rates R&D expenses 6,642,300,402.74 5,744,805,136.33 15.62%Primarily due to

259、increase in the scope of consolidation and R&D investments Income tax expenses 322,238,643.64 644,764,928.70-50.02%Primarily due to increase in pre-tax deduction of differences in the exercise price of incentive shares,and additional deduction of R&D expenses 4.R&D investments Applicable N/A Descrip

260、tion of major R&D project Purpose Progress Objectives Expected effect on the future development of Company Project relating to acoustic products To develop new functions and new processes of TWS earphones,headphones and other acoustic products,develop new products,and continuously improve production

261、 efficiency.In progress To optimize the functions of the relevant products and realize stable mass production with high quality.Our R&D and manufacturing capabilities in respect of acoustic products will be improved,R&D cycle of new products will be shortened,and our competencies will be enhanced.Pr

262、oject relating to smart wearable products To develop new functions of smart wearable products and improve the production process.Partially completed To improve the functions,automation level of production lines,production efficiency and product yield of the relevant products.While getting recognitio

263、n from customers,the results of our smart wearable business will be increased and our competencies will be enhanced.Millimeter wave dielectric antenna To develop new products and new Completed To make breakthroughs in the use on traditional Our advantage in the vertical integration of Luxshare Preci

264、sion Industry Co.,Ltd.Annual Report 2021 31 components project performance,and reduce production costs.millimeter wave antennas,reduce the dimensions of products and effectively lower ponents will be enhanced and market share of the relevant product lines will be increased.New-type linear motor proj

265、ect To optimize product mix and reduce R&D costs.In progress To optimize technical indicators and cooperate with the customers in the relevant tests,mass production and deliveries.Our advantage in the vertical integration of components will be enhanced and market share of the relevant product lines

266、will be increased.SIP system level double side packaging project To develop new technologies and new processes,and improve production efficiency.In progress To upgrade our traditional SiP module packaging technology,fully fill the bottom space of chips,reduce the residue stress after packaging,ensur

267、e the reliability of package products,and improve the technical capabilities of product packaging.Our advantage in the vertical integration of components will be enhanced and market share of the relevant product lines will be increased.Project relating to optical module products To develop 400G high

268、-speed optical modules and preliminary develop next-generation optical modules.In progress To expand the application scenarios and market for high-speed optical modules,develop product series,enrich high-speed product lines and realize mass production of the relevant products.Our advantage in the ve

269、rtical integration of components will be enhanced and market share of the relevant product lines will be increased.Project relating to high-speed cables To develop transmission cable assemblies that provide high-speed signals for super data centers and 5G services.In progress To develop proprietary

270、interfaces for servers,switches,high-performance computers and other products,and increase the speed.Our technical advantage in the communication and data center cable products will be enhanced and market share will be increased.Project relating to automotive wire To develop,improve and upgrade vehi

271、cle Partially completed To improve our technical capability to Our product lines and market share in the Luxshare Precision Industry Co.,Ltd.Annual Report 2021 32 harnesses wire harnesses,motor wire harnesses,automotive steering wire harnesses,new energy battery pack wire harnesses and other product

272、s.develop automotive wire harness products,satisfy different customization requirements,and increase operating revenue.field of automotive will be further increased.Project relating to automotive connectors To develop high and low voltage connectors,high-speed connectors,customized connector structu

273、res and other automotive connectors.Partially completed To improve our manufacturing capability and production efficiency.Our proprietary gigabit Ethernet connector adopts a wholly shielded double cable connection structure,and has been widely used on infotainment systems,ADASs,domain controllers an

274、d other products.Our product lines and market share in the field of automotive will be further increased.Project relating to power system of electric vehicles To develop high-voltage high-current battery disconnect control module,new-generation on-board bidirectional DC power supply and other power

275、system products for electric vehicles.Partially completed To improve our manufacturing capability and production efficiency.The process development,trial production and PPAP certification in respect of our new-generation on-board bidirectional DC power supply have been completed.Our product lines an

276、d market share in the field of automotive will be further increased.Project relating to automotive smart interconnect products To develop RSU,TCU and other automotive interconnect products.Partially completed Our IoV smart RSU has realized remote coverage,short communication delay,high success rate

277、of message sending and other functions.Our product lines and market share in the field of automotive will be further increased.Multi-cavity automatic sorting robot project The robot will change the operation mode of manual cavity-by-cavity plate feeding on the Completed To replace manual handling,id

278、entification,plate feeding and other labor intensive Through automation upgrading of production lines,our production efficiency Luxshare Precision Industry Co.,Ltd.Annual Report 2021 33 production lines for micro products in the injection molding workshop in the past,greatly improve workplace safety

279、,realize automatic production,and promote automation upgrading in the industry.Through further upgrading of the equipment,to improve the stability of the equipment during production and finally realize automatic production of micro products in the injection molding workshop.operations,and realize ca

280、vity-by-cavity plate feeding for micro products made from injection molding.and product yield will be improved.AI automatic inspection system project The AI automatic inspection system will change the traditional operation mode of visual inspection,realize automatic inspection and promote automation

281、 upgrading in the industry.Through further upgrading of the equipment,to improve the reliability and stability of production,and finally realize unmanned workshops.Completed To replace manual handling,inspection and other labor intensive operations,and realize precise inspection of appearance,dimens

282、ions and other essential factors of precision components for electronic products.Through automation upgrading of production lines,our production efficiency and product yield will be improved.Particulars of R&D personnel:2021 2020 Y/Y%change Number of R&D personnel 16,103 15,154 6.26%Proportion of R&

283、D personnel to total number of employees 7.06%8.79%-1.73%Education background of R&D personnel-Undergraduate 7,393 7,126 3.75%Master 260 256 1.56%Others 10,199 9,310 9.55%Ages of R&D personnel-Below 30 8,325 7,865 5.85%30-40 6,897 6,507 5.99%Luxshare Precision Industry Co.,Ltd.Annual Report 2021 34

284、Above 40 881 782 12.66%Particulars of R&D expenses:2021 2020 Y/Y%Change Amount of R&D expenses(RMB)6,642,300,402.74 5,744,805,136.33 15.62%Proportion of R&D expenses to operating revenue 4.31%6.21%-1.90%Amount of R&D expenses capitalized(RMB)0.00 0.00 0.00%Proportion of capitalized R&D expenses to t

285、otal R&D expenses 0.00%0.00%0.00%Analysis of the cause and effect of significant change in the composition of R&D personnel:Applicable N/A Analysis of significant change in the proportion of R&D expenses to operating revenue compared with 2019:Applicable N/A Analysis and reasonableness of significan

286、t change in the proportion of R&D expenses capitalized:Applicable N/A 5.Cash flows In RMB Item 2021 2020 Y/Y%Change Cash provided by operating activities 152,974,773,173.48 101,344,544,382.43 50.95%Cash used in operating activities 145,690,006,256.48 94,471,332,896.38 54.22%Net cash flows from opera

287、ting activities 7,284,766,917.00 6,873,211,486.05 5.99%Cash provided by investment activities 59,103,742,247.41 56,134,501,620.87 5.29%Cash used in investment activities 67,483,404,233.19 65,282,235,798.95 3.37%Net cash flows from investment activities-8,379,661,985.78-9,147,734,178.08-8.40%Cash pro

288、vided by financing activities 42,545,854,141.42 31,843,182,893.74 33.61%Cash used in financing activities 42,935,782,234.50 25,056,689,251.71 71.35%Net cash flows from financing activities-389,928,093.08 6,786,493,642.03-105.75%Net increase in cash and cash equivalents-1,543,267,723.26 4,317,464,527

289、.08-135.74%Analysis of main causes of material changes in the related data:Applicable N/A 1.The cash provided by operating activities was RMB152,974,773,200,an increase of 50.95%year on year,primarily due to an increase in sales,sales revenue collected and tax rebates received.2.The cash used in ope

290、rating activities was RMB0,an increase of 54.22%year on year,primarily due to an increase in the raw materials purchased and employee benefits paid.3.The net cash flows from financing activities was-RMB389928100,a decrease of 105.75%year on year,primarily due to repayment of short-term bo

291、rrowings,loans and interest during the reporting period.Analysis of significant difference between net cash flows from operating activities during the reporting period and net profit in current year:Applicable N/A V.Analysis of non-main business Applicable N/A In RMB Luxshare Precision Industry Co.,

292、Ltd.Annual Report 2021 35 Amount%of total profit Reason Whether or not sustainable Investment income 689,386,649.74 8.47%Income from investments and wealth management products classified as financial assets at fair value through profit or loss No Gain or loss on changes in fair value-115,737,751.66-

293、1.42%Investment income on financial assets at fair value through profit or loss No Impairment loss on assets-162,790,335.12-2.00%Allowance for impairment of inventories and fixed assets No Non-operating income 21,096,536.60 0.26%Revenue from retirement of assets No Non-operating expenses 45,672,434.

294、05 0.56%Loss on disposal of fixed assets No Gain on disposal of assets-45,266,592.65-0.56%Disposal of production equipment No Other gains 853,542,165.37 10.48%Government grants No Credit loss-26,875,504.69-0.33%Impairment loss on accounts receivable and other receivables No VI.Analysis of assets and

295、 liabilities 1.Material changes in components of assets In RMB December 31,2021 January 1,2021 Y/Y%Change Reason of material change Amount%of total assets Amount%of total assets Cash and bank balances 14,204,618,186.43 11.78%10,528,245,765.93 15.01%-3.23%Accounts receivable 31,623,185,946.25 26.23%1

296、3,839,155,340.47 19.73%6.50%Business growth(including increase in the scope of consolidation)Contract assets 0.00%0.00%0.00%Inventories 20,900,755,733.15 17.33%13,211,009,381.15 18.83%-1.50%Increase in inventory storage level along with increase in our scale of operation(including increase in the sc

297、ope of consolidation)Investment properties 59,000,690.72 0.05%47,592,110.24 0.07%-0.02%Long-term equity investment 1,125,605,226.03 0.93%1,208,540,333.29 1.72%-0.79%Fixed assets 34,113,259,322.43 28.29%19,761,012,854.95 28.17%0.12%Increase in investment in factory buildings,dormitories and equipment

298、(including increase in the scope of consolidation)Construction in progress 3,685,336,499.02 3.06%1,596,064,894.58 2.27%0.79%Factory building,dormitory and workshop renovation projects in progress and equipment that has not yet been accepted(including increase in the scope of consolidation)Right of u

299、se assets 425,011,542.28 0.35%149,189,002.32 0.21%0.14%Adoption by us of the new lease accounting standard since January 1,2021 Short-term borrowings 11,919,635,337.99 9.89%7,577,068,798.49 10.80%-0.91%Replenishment of working capital(including increase in the scope of consolidation)Contract liabili

300、ties 268,506,246.98 0.22%152,512,971.36 0.22%0.00%Advances from clients Luxshare Precision Industry Co.,Ltd.Annual Report 2021 36 Long-term loans 5,025,096,193.09 4.17%1,495,199,238.41 2.13%2.04%Increase in loans to satisfy the requirements of new projects(including increase in the scope of consolid

301、ation)Lease liabilities 315,093,483.55 0.26%144,462,685.91 0.21%0.05%Adoption by us of the new lease accounting standard since January 1,2021 Financial assets held for trading 2,107,118,105.04 1.75%3,160,064,470.41 4.50%-2.75%Forward exchange facilities,wealth management and other investments Advanc

302、es to suppliers 406,016,492.61 0.34%179,160,621.29 0.26%0.08%Prepayments for materials and customs deposits(including increase in the scope of consolidation)Other receivables 598,456,702.88 0.50%407,990,780.79 0.58%-0.08%Share transfer prices,export rebates and deposits,and insurance indemnities rec

303、eivable Other current assets 2,161,055,820.73 1.79%1,804,485,645.49 2.57%-0.78%Input tax credits and prepaid and refundable income tax Long-term deferred expenses 733,015,722.42 0.61%488,087,044.97 0.70%-0.09%Factory building and workshop renovation expenses(including increase in the scope of consol

304、idation)Deferred tax assets 891,215,468.53 0.74%355,834,434.21 0.51%0.23%Share-based payments,unrealized profit on internal asset transactions,government grants,deductible losses before tax and other timing differences Other non-current assets 1,904,305,181.49 1.58%1,223,199,642.61 1.74%-0.16%Prepay

305、ments for equipment,engineering projects and land(including increase in the scope of consolidation)Notes payable 234,500,590.93 0.19%128,572,111.54 0.18%0.01%Increase in note transactions Accounts payable 45,416,165,667.67 37.67%23,051,557,603.83 32.86%4.81%Increase in raw materials purchased in ord

306、er to fulfill orders along with our business growth(including increase in the scope of consolidation)Other payables 382,391,106.17 0.32%146,162,097.14 0.21%0.11%Accrued expenses and security deposits payable Other current liabilities 3,623,423,072.87 3.01%623,257,555.89 0.89%2.12%Short-term bonds an

307、d inter-company trade account payable(including increase in the scope of consolidation)Deferred income 538,556,944.18 0.45%425,345,982.64 0.61%-0.16%Government grants relating to capital Deferred tax liabilities 1,272,092,467.86 1.06%966,092,212.95 1.38%-0.32%Accelerated depreciation of fixed assets

308、 and temporary difference arising from increase in appraised value of business combinations not under common control Analysis of high proportion of overseas assets:Applicable N/A Luxshare Precision Industry Co.,Ltd.Annual Report 2021 37 2.Assets and liabilities at fair value Applicable N/A In RMB It

309、em Beginning balance Gain or loss on changes in fair value Aggregate changes in fair value recorded in equity Impairment loss recognized in the current period Amount acquired in the reporting period Amount sold in the reporting period Other changes Ending balance Financial assets 1.Financial assets

310、held for trading(excluding derivative financial assets)2,854,676,050.46 73,732,025.24 19,182,537,140.74 20,119,745,754.45 1,991,199,461.99 2.Derivative financial assets 305,388,419.95-189,469,776.90 115,918,643.05 3.Investment in other equity instruments 138,074,571.56 96,140,150.00 1,761,426.86 235

311、,976,148.42 Subtotal of financial assets 3,298,139,041.97-115,737,751.66 96,140,150.00 19,182,537,140.74 20,119,745,754.45 1,761,426.86 2,343,094,253.46 Investment in equity instruments 5,700,000.00 5,700,000.00 Total 3,298,139,041.97-115,737,751.66 96,140,150.00 19,188,237,140.74 20,119,745,754.45

312、1,761,426.86 2,348,794,253.46 Financial liabilities 0.00 41,436.00 41,436.00 Other changes:Other changes are the principal of other equity instruments included due to increase in the scope of consolidation.Whether theres any material change in the measurement properties of main assets of the Company

313、 during the reporting period?Yes No 3.Encumbrances on assets as of the end of the reporting period On September 30,2021,the 4th meeting of the 5th Board of Directors considered and adopted the Proposal for Applying for an Acquisition Loan from the Banks and Pledging the Shares of the Subsidiary,purs

314、uant to which,we intended to apply to four banks for a syndicated acquisition loan of up to RMB3.4 billion,for a term of five years,which would be mainly used to replace our capital contribution already made to Rikai Yancheng.We pledged 48.013%shares of Rikai Yancheng as security for such acquisitio

315、n loan for a term of five years.The relevant information was disclosed in our Announcement on Applying for an Acquisition Loan from the Banks and Pledging the Shares of the Subsidiary(No.2021-080).During the reporting period,we completed the procedures relating to the pledge of the shares of Rikai Y

316、ancheng for a term of five years.See“Section X Financial Report VII.Notes to Items in Consolidated Financial Statements 81.Assets with restricted ownership or right of use”.Luxshare Precision Industry Co.,Ltd.Annual Report 2021 38 VII.Analysis of investments 1.Overall situation Applicable N/A Amount

317、 of investment in 2021(RMB)Amount of investment in 2020(RMB)Y/Y%Change 7,623,854,176.00 3,122,574,000.00 144.15%2.Major equity investments acquired in the reporting period Applicable N/A In RMB Investee Main business Method of investment Amount of investment Shareholding percentage Source of funds P

318、artner Term of investment Product type Status as of the balance sheet date Expected income Investment income/loss in the reporting period Whether or not involved in any litigation Date of disclosure(if any)Disclosure reference(if any)Rikai Precision Technology(Yancheng)Co.,Ltd.Technology development

319、,technical consulting and technical services in respect of computer accessories;design,R&D and production of precision stamping molds(precision 0.02mm),precision cavity molds(precision 0.05mm),metal product molds,non-metal product molds and standard parts for molds;production of high-temperature res

320、istant molded insulating materials,stamped hardware parts,rivets,shafts,mechanical components and other components for 3C electronics products;industrial design,product design(exterior design,structural design,circuit Capital injection 6000,000,000.00 50.01%Self-owned funds N/A Long-term Electronic

321、components Paid in full 0.00 0.00 No February 4,2021 Announcement No.2021-017 published on Luxshare Precision Industry Co.,Ltd.Annual Report 2021 39 design,graphic design,etc.);lease of own idle equipment;wholesale,commission agency(except auction),import,export and supporting services in respect of

322、 the aforesaid products and related components.Business not subject to licensing:manufacturing of computer software,hardware and peripherals.Total -6000,000,000.00-0.00 0.00-3.Major non-equity investments that have not yet been completed in the reporting period Applicable N/A 4.Investment in financi

323、al assets(1)Investment in securities Applicable N/A In RMB Type of security Security code Short name Initial investment cost Method of measurement Beginning carrying amount Gain or loss on changes in fair value in the reporting period Aggregate changes in fair value recorded in equity Amount acquire

324、d in the reporting period Amount sold in the reporting period Gain or loss in the reporting period Ending carrying amount Accounting item Source of funds Stock listed on domestic or overseas market 603595 Tony Electronic 22,500,000.00 Fair value 114,221,319.04 96,057,510.08 162,951,644.67 0.00 0.00

325、96,057,510.08 210,278,829.12 Investment in other equity instruments Self-owned funds Total 22,500,000.00-114,221,319.04 96,057,510.08 162,951,644.67 0.00 0.00 96,057,510.08 210,278,829.12-Disclosure date of the announcement of the Board of Directors approving the investment in securities Disclosure

326、date of the announcement of the shareholders meeting approving the investment in Luxshare Precision Industry Co.,Ltd.Annual Report 2021 40 securities(if any)(2)Investment in derivatives Applicable N/A In RMB0000 Counterparty Affiliation Whether or not a related-party transaction Type of derivative I

327、nitial investment cost Date of commencement Date of termination Beginning balance Amount acquired in the reporting period Amount sold in the reporting period Allowance for impairment loss(if any)Ending balance%of ending balance to the net asset as at the end of the reporting period Actual gain or lo

328、ss in the reporting period Bank Non-affiliate No Forward 48,545.26 48,545.26 534,737.11 578,098.28 5,184.08 0.15%19,739.28 Bank Non-affiliate No Option 463,920.39 463,920.39 1,659,594.71 1,725,671.42 397,843.68 11.27%49,352.43 Total 512,465.65-512,465.65 2,194,331.82 2,303,769.7 403,027.76 11.42%69,

329、091.71 Source of funds Self-owned funds Whether or not involved in any litigation N/A Disclosure date of the announcement of the Board of Directors approving the investment in derivatives(if any)January 23,2021 Disclosure date of the announcement of the shareholders meeting approving the investment

330、in derivatives(if any)Analysis of risks associated with the derivatives held in the reporting period(including without limitation market risk,liquidity risk,credit risk,operational risk and legal risk)and related risk control measures 1.We conduct foreign exchange derivative transactions for the pur

331、pose of fixing costs,and avoiding and preventing foreign exchange and interest rate risks,and prohibit any speculation.2.We have established strict business management policy regarding financial derivative transactions,which contain explicit provisions on the principle of operation,approving power,i

332、nternal operating process,information segregation measures,internal risk controls,information disclosure and other issues relating to financial derivative transactions,to control the risks associated with such transactions.3.We carefully examine the terms of contracts entered into with the relevant

333、banks,and strictly implement the risk management policy to prevent legal risks.4.Our Finance Department continuously follows up on the changes in the market price or fair value of the relevant foreign exchange derivatives,promptly assesses the changes in risk exposures of such foreign exchange derivatives,reports to the management on a regular basis,promptly reports the abnormal situations discove