2020 Annual Report Dear Shareholders
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2020 Annual Report Dear Shareholders, Looking back at 2020, it was a volatile year. The global economy and semiconductor industry were severely damaged by the outbreak of COVID-19 and overshadowed by the prolonged US-China trade tension. The market for electronics devices saw a strong turnaround in demand during the second half of 2020 fueled by new work-from-home and e-learning lifestyles. However, the demand surge also intensifed the ongoing capacity shortage in foundry, assembly and testing. Under these challenging conditions, Himax thrived, delivering strong business results with a much-improved product mix from our comprehensive product portfolio, diversifed customer base and long-term partnerships with suppliers. It was a fruitful year for Himax in 2020. We increased our market share and achieved record revenue and gross margin in the fourth quarter while maintaining our leadership positions in tablet and automotive. We also made signifcant progress in our promising ultralow power smart sensing solutions. For the longer term, we remain committed to investing across all our product segments to further solidify our leading position in the global marketplace. As we move forward, we are dedicated to high quality, strict reliability, and effcient execution to deliver shareholder value. Now let me review each of our major business segments in 2020. Starting with our driver business, despite the capacity shortage the overall display driver IC businesses demonstrated robust growth. Led by TDDI for tablet and smartphone, our small and medium-sized driver IC segment dominated this year’s strong growth. For our large display driver IC business, the prevailing work-from-home and distance education gave rise to strong growth in monitor and notebook businesses in 2020. However, TV sales declined due to weakness in the global TV market. As market dynamics embrace higher frame rate and higher resolution technologies, Himax has become a preferred integrated solution supplier providing extensive display driver and high-end Tcon solution to customers. This has resulted in our successful penetration into 4K/8K TV, gaming monitor and low power consumption notebook markets. For our small and medium-sized driver IC business, the tablet segment was the top sales contributor, posting the highest growth of all product lines in 2020. The substantial growth refected robust customer demand and rapid TDDI penetration, as well as our leading position in the Android tablet market. Himax pioneered the tablet TDDI technology and led mass production starting from the frst quarter of 2020. Our tablet TDDI offers a lighter weight, slimmer and more stylish design as well as improved touch accuracy with an active stylus specifcally geared for high quality writing and drawing. We are the dominant supplier of tablet TDDI for literally all leading Android names. In the smartphone market, we succeeded in regaining market share with our comprehensive product portfolio and capacity support. Turning to automotive segment. Global car sales were badly hit by the pandemic in frst half of 2020 but began to recover during Q3 2020 with sales for our automotive drivers showing decent growth in the fourth quarter. Himax, as a leader in the automotive driver IC market, foresees additional market share gains as the automotive market embraces new display technologies and shifts towards larger, more sophisticated, higher performing displays as well as more displays inside each car. We sustained our competitive position with a comprehensive product offering for advanced new features such as in-cell touch, local dimming, cascade- topology connection and P2P high-speed interface bridging function. Meanwhile, in anticipation of the unfolding display application demand, we have secured a meaningful capacity increase in automotive to support the long-term growth. Our non-driver IC segment progressed nicely in 2020. While WLO revenue decreased as shipment for legacy models to an anchor customer declined, we continued to work with key customers and partners for their next generation products with our leading nanoimprinting technologies and diffraction optics design. Looking at 3D sensing for smartphone, we offer our leading ToF optical components and team up with leading VCSEL suppliers, ToF sensor vendors, module makers and smartphone OEMs to develop a new world-facing 3D sensing camera targeting next generation Android smartphones. For non-smartphone 3D sensing, our structured 1 light-based 3D decoder ASIC was certifed by the leading Chinese electronic payment standard. A decent order pipeline and new design-in sockets are expected in 2021. In the ultralow power smart sensing, we made encouraging progress in both total solution and key component business models. For total solution that integrates Himax AoS sensor, ultralow power AI processor and computer-vision AI algorithm from our subsidiary EMZA or third-party algorithm partners, we are currently aiming at numerous applications, notably TV, notebook, air conditioner, automotive, utilities meter and AIoT applications, just to name a few. We expect a solid production ramp-up by the end of 2021. For key components, we partnered with world-leading AI and cloud service ecosystem providers, such as Google and Microsoft, to leverage their leading-edge AI frameworks. Following the successful adoption of our WE-I Plus AI processor in the Google TensorFlow Lite for Microcontrollers framework, our WE-I Plus AIoT platform was endorsed by Microsoft and was awarded the Azure IoT PnP certificate. We also promoted our key components with various partners including SparkFun, an online retail store, and Edge Impulse, a leading end-to-end AI developer platform provider, to build an extended and easily deployed network for emerging edge AI and AIoT markets that require ultralow power. We are excited about our progress and believe our smart sensing offerings will become a major contributor to our business growth soon. As we look forward, semiconductor foundry supply is not likely to see a signifcant increase soon with strong demand persisting and the capacity shortage becoming even more severe. By managing our foundry capacity for optimal allocation based on products where Himax is a market leader or has strong customer support, we are well positioned to meet this challenge and continue to deliver strong results. I am grateful for the support of our shareholders, customers, partners, and employees, and look forward with confdence to having a great year in 2021. Sincerely, Jordan Wu President and CEO Himax Technologies, Inc. 2 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 20-F (Mark One) REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 OR x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fscal year ended December 31, 2020 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________________ to ________________ OR SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of event requiring this shell company report ________________ Commission fle number: 000-51847 HIMAX TECHNOLOGIES, INC. (Exact name of Registrant as specifed in its charter) Not Applicable (Translation of Registrant’s name into English) CAYMAN ISLANDS (Jurisdiction of incorporation or organization) NO. 26, ZIH LIAN ROAD SINSHIH DISTRICT, TAINAN CITY 74148 TAIWAN, REPUBLIC OF CHINA (Address of principal executive offces) Jessica Pan Chief Financial Offcer Telephone: +886-6-505-0880 E-mail: [email protected] Facsimile: +886-6-507-0038 No. 15, Zih Lian Road Sinshih District, Tainan City 74148 Taiwan, Republic of China (Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person) Securities registered or to be registered pursuant to Section 12(b) of the Act: Title of each class Trading Symbol Name of each exchange on which registered Ordinary Shares, par value $0.3 per HIMX The NASDAQ Global Select ordinary share Market Inc.* * Not for trading, but only in connection with the listing on the NASDAQ Global Select Market, Inc. of American Depositary Shares representing such Ordinary Shares. 3 Securities registered or to be registered pursuant to Section 12(g) of the Act: None Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report. 347,534,102 Ordinary Shares. Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. x Yes No If this report is an annual or transition report, indicate by check mark if the registrant is not required to fle reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes x No Indicate by check mark whether the registrant (1) has fled all reports required to be fled by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to fle such reports), and (2) has been subject to such fling requirements for the past 90 days. x Yes No Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such fles). x Yes No Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non- accelerated fler, or an emerging growth company. See defnition of “large accelerated fler,” “accelerated fler,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.