Strenuously Adheres to Five-year Strategic Planning

Ups Sales Target to Reflect the Group’s Unwavering Confidence in Development

Results Highlights

(25 March 2024, Hong Kong) xingkong星空体育中国官方网站|在线平台 (“Q Technology” orthe "Company", SEHK stock code: 1478.HK, or together with its subsidiaries collectively referred to as "the Group"), a world-leading manufacturer of mid-to-high-end camera module and fingerprint recognition module for smartphone devices, today announced the audited consolidated annual results of the Group for the year ended 31 December 2023 (the “Year”). 

During the Year, the global socio-economic situation remains unstable with challenging business environment due to geopolitical conflicts, consumer confidence issues, and persistently high levels of inflation in certain economies. Despite various unfavourable factors, the Group has consistently adhered to its strategy of upgrading its product structure, with a specific focus on the development of mid-to-high-end camera modules. With the trust and support of its customers and employees, the Group has actively pursued market expansion for camera modules with 32 megapixels and above, applied to smartphones and other fields. As a result, the sales volume for camera modules accounted for approximately 41.6% of the total, representing a year-on-year (“YoY”) increase of 11.6 percentage points. This achievement fully realizes the business target of product structure optimization.

The Group’s 2023 revenue amounted to approximately RMB12,530,799,000, down byapproximately 8.9% from last year (2022: approximately RMB13,759,170,000); gross profit margin recorded a slight increase to approximately 4.1% which was mainly due to: (i) the global sales volume of smartphones was negatively impacted by intensified market competition, rising manufacturing costs, and a decrease in unit prices and profit margins. As a result, there was an overall decline in sales performance, which subsequently led to a decrease in the Group's operating revenue as compared to that of the previous year; (ii) as the Group is currently still at the stage of investment and market development for the automotive camera module business, although it has made significant progress compared with the previous year, the utilization rate of production capacity has not yet improved, which affected the comprehensive gross profit margin; and (iii) the exchange rate of RMB against USD remained weak during the Year, with the central parity rate experiencing a depreciation of approximately 1.7%. The average exchange rate for the Year also recorded a depreciation of approximately 4.77% compared to the previous year. As a result, the high cost of USD denominated imported materials had a negative impact on the gross profit margin. However, the gross profit margin in the second half of the Year showed a significant recovery and rebound compared to the first half, indicating that the industry is poised to gradually bottom out.

During the Year, the sales volume of camera modules for mobile phones of the Group was approximately 365.95 million units, decreased by approximately 12.3% as compared with that of last year, with the fingerprint recognition modules slightly declining by 1.1% YoY to about 110.24million units. According to the International Data Corporation, the global smartphone shipment volume in 2023 was approximately 1.17 billion units, representing a decrease of approximately 3.2% YoY and setting the new lowest record in shipment volume since 2013, which demonstrated the direct impact of low demand in domestic and overseas markets on the sales of camera modules and fingerprint recognition modules applied to smartphones. However, the sales performance of the Group's camera module in the second half of the Year showed a significant improvement compared to the first half, reaching approximately 199.37 million units, representing a half-year-on-half-year growth of about 19.7% compared to the 166.58 million units in the first half, demonstrating a positive development in the sales of the Group's camera module products.

Additionally, the Group adopted the strategy of upgrading its product structure with a focus on the development of mid-to-high-end camera modules, including promoting the market expansion of mid-to-high-end camera modules such as those of 32 megapixels and above, with optical stabilization, periscope zoom, large-size Complementary Metal Oxide Semiconductor (CMOS), automotive modules, and IoT terminal application modules, driving the unit price of the Group’s camera modules to stop falling and rebound. The average sales unit price of camera modules for the Year increased to approximately RMB30.95 (2022: RMB29.63), of which the average unit price was approximately RMB29.49 for the first half of 2023 and approximately RMB32.16 for the second half of 2023, which showed a significant increase in the second half of the Year. This reflects that the camera module industry is returning to a trajectory of specification upgrades, and the Group's development strategy focusing on mid-to-high-end products is gradually yielding results.

New Energy Vehicles and Intelligent Driving Technologies Sustain a High Growth Cycleand Enhance the Group’s Local and International Collaborations for Automotive Businesses

The IoT and automotive camera modules in which the Group made strategical layout showed a significant increase in sales volume, representing an increase of approximately 15.4% as compared with 2022, and the proportion of revenue increased significantly. In terms of the automotive modules business, the Group has established business relationships with seven automobile brands which ranked among the top ten automobile brands in terms of the number of Q Technology Announces 2023 Annunew energy vehicles shipped in the PRC as announced by the China Passenger Cars Association (the “CPCA”) for the year 2023. The Group has also established business relationships with a number of leading intelligent driving system solution companies in Europe, the United States and the PRC, and has become a core automotive module supplier for various hot-selling new energy vehicles, providing various types of automotive modules for intelligent driving, such as advanced driving assistance system (ADAS), Surround View and Intelligent Cockpit. According to the CPCA, domestic retail sales of the new energy passenger vehicle market represented a growth of 36.2% YoY, while export sales represented an increase of 72.0% YoY. The rapid development of autonomous driving and driving assistance has provided a good opportunity for the accelerated growth of the automotive camera module industry.

Actively Optimizing Product and Revenue Structure, Fully Implementing Long-term Development Strategy

The Group’s strategic planning for the Five-Year (2021-2025) Operation and Development (“Five￾year Strategic Planning”) has entered its third year. Despite the impact of the macro environment and weak consumption on the global smartphone market, the management believed that being caught up in irrational price competition was not in line with the Group’s long-term development strategy. Thus, the Group is focusing on improving the product structure and enhancing the quality of revenue while vigorously expanding its overseas market. The Group has focused on strengthening the technological development and customer expansion of high-end products, particularly in promoting the market expansion of camera modules in the non-handset field such as smart cars and IoT intelligent terminals. The Group has successfully become the core camera module supplier of the world’s leading commercial drone brand during the Year. 

Looking ahead, the Group will continue to adhere to a customer-centric service strategy and strive to achieve the following targets: (i) the combined sales volume of camera modules with resolutions of 32 megapixels and above applied to mobile phones and camera modules applied to other fields accounting for more than 45% of the total sales volume of camera modules, which was approximately 40% during the Year; and (ii) a year-on-year increase of not less than 5% in the sales volume of camera modules applied to mobile phones; (iii)a year-on-year increase of not less than 50% in the sales volume of camera modules applied to the non-handset fields such as automotive and IoT.

Chairman and Executive Director of Q Technology, Mr. He Ningning said, "In the long run, development opportunities and challenges coexist in the intelligent vision industry in the future. The optical design, structural design and integration of key components and algorithms of camera modules have become more important and complex, and smart vision product manufacturers that can provide overall intelligent vision solutions that are both technology-rich and cost-advantaged are expected to keep up with the needs of the times and stand out in the fierce competition. From a long-term business environment perspective, the recovery of the macroeconomy is expected to drive market demand for smartphones, IoT terminal devices, and smart automobiles, thereby providing a new development impetus for the comprehensive development of the Group.”