TCL科技:2020年半年度报告摘要(英文版)

TCL Technology Group Corporation                            Interim Report 2020 (Summary)




Stock Code: 000100                 Stock Name: TCL Tech.   Announcement No. 2020-114




   TCL 科技集团股份有限公司
       TCL Technology Group Corporation




   INTERIM REPORT 2020 (SUMMARY)
                                         29 August 2020




                                                                                        1
   TCL Technology Group Corporation                                          Interim Report 2020 (Summary)



                                      Ramp up, Catch up
                          and Go all out to be A Global Leader
                                        Chairman’s Message



Dear shareholders, customers and partners,

In the first half of 2020, the global political and economic landscape constantly underwent major
changes. Affected by the global COVID-19 epidemic, China’s economic development faced greater
challenges and risks. Enterprises were also inevitably affected, which would accelerate industrial
transformation, upgrading and restructuring. To address the challenges, the government introduced
the policy that “domestic economic cycle plays a leading role while international economic cycle

remains its extension and supplement”, and strengthened economic vitality by tax reduction and
liquidity management. Meanwhile, it vigorously supported industrial development, expedited the
improvement of key technology, and enhanced the competitiveness of the manufacturing industry.
All of these were conducive to the business development of the Group.

Seeking opportunities from the crisis, the Company kept transforming and innovating. It achieved
revenue growth in all the sectors by maximizing cost efficiency as well as improving quality and
profitability. In the first half of 2020, TCL Tech. recorded revenue of RMB29.33 billion, up by 12.3%
year-on-year on the same basis, and a net profit attributable to the listed company’s shareholders of
RMB1.21 billion, down by 42.3% year-on-year. Excluding the effect of the gain from the spin-off,
the net profit attributable to the listed company’s shareholders increased by 7.6% year -on-year on

the same basis.

The semi-conductor display business is still at the bottom of the cycle. Although it has stabilized
and recovered, the prices of main products in the current period are still lower than those in the
same period of last year. TCL CSOT exerted its superb management capabilities by constantly
optimizing its products and customer structures. As a result, the large-size panel business achieved
profit, while the small- and medium-size panel business improved significantly. In the first half of
2020, TCL CSOT reported a revenue of RMB19.51 billion (up by 19.9% year-on-year), a deficit of
RMB133 million, and a net profit attributable to the parent company of RMB24 million.


                                                                                                         2
   TCL Technology Group Corporation                                          Interim Report 2020 (Summary)


Specifically, the net profit in the second quarter increased by RMB215 million from the first quarter.
The supply and demand would gradually balance as the market recovers, resulting in a rebound of
semi-conductor display industry. In the third quarter, prices of products are expected to rise at a
faster pace. Profitability of TCL CSOT in the second half of the year will continue to improve.

With technological innovation as the driving force, the Company has a further investment in the
display technology of intelligent and digital manufacturing to develop strategically integrated

technologies and products, aiming at establishing a leading layout of next-generation display
technologies, materials and processes. During the Reporting Period, the Company invested
RMB2.88 billion in R&D, up by 28.9% year-on-year on the same basis. It established a joint
laboratory with San’an Optoelectronics to research a process solution for the mass production of
Micro-LED displays. It also acquired a strategic stake in JOLED Inc. of Japan to jointly promote
the industrial production of large-size inkjet-printing OLED displays. The PCT applications of the
Company increased by 838 and the accumulated PCT applications reached 12,113.

Given the competitive advantages of TCL CSOT, the Group will seize opportunities to further
expand and develop itself through mergers and acquisitions, so as to secure its global leadership in
the semi-conductor display business.

The industrial finance business of TCL developed steadily. It fulfilled the funding needs of the
Company’s key projects at a low cost, actively managed the industrial liquidity and global currency
risks, and gradually built its capacity of global asset allocation. TCL Capital proactively made
arrangements regarding new materials and technologies, established an ecological chain, and
fostered new industries. Meanwhile, it acted a role in the sustainable and healthy development of
the Company by achieving a favourable investment return.

To develop new driving forces for the long-term growth, the Company entered new markets in the
capital- and technology-intensive strategic industries by taking its advantages of technology,
management and capital. The Company acquired 100% equity of Tianjin Zhonghuan Electronics
Group Co., Ltd., whose main asset was the controlling stake in “Tianjin Zhonghuan Semiconductor

Co., Ltd.” (stock code: 002129.SZ). The core business of “Zhonghuan Semiconductor” was
semi-conductor silicon-wafer & photovoltaic silicon-wafer and its modules. The Company believes
that the enterprise has a promising future with great potentials to lead the globe in the

                                                                                                         3
   TCL Technology Group Corporation                                           Interim Report 2020 (Summary)


semi-conductor and photovoltaic business. As the core and basic component of integrated circuits,
the semi-conductor silicon-wafer is in line with China’s integrated circuit development strategy. The
management and operation of Zhonghuan Electronics is similar to that of the Company, so the two
can fully coordinate with and empower each other in terms of industrial chain, globalization as well
as management systems, thus accelerating their respective business development. The acquisition
also included a controlling stake in “Tianjin Printronics Circuit Corp.” (stock code: 002134.SZ) and

its other assets, which would inject new momentum into the Company’s growth.

Looking ahead to the second half of 2020, enterprise development has reached another critical
phase along with the breakout of global epidemic, the risk of China-US. trade war and increasing
uncertainties of the world economy. However, we firmly believe that enterprises with competitive
strength can always adjust quickly in every crisis, take the initiative to change, seize opportunities,
and develop new capabilities.

In the second half of 2020, TCL CSOT will continue to promote the expansion of Phase II and
Phase III of t4 plant (G6-OLED) and the construction of t7 plant (G11-LCD), enhance the
competitiveness of the small- and medium-size panel business such as LTPS and flexible OLED,
and develop new display technologies and materials. TCL CSOT will complete the acquisition of 60%

equity of Samsung Electronics Suzhou LCD Co., Ltd. from Samsung Display (TCL CSOT and
Suzhou Industrial Park hold the remaining 10% and 30% equity, respectively) and 100% equity of
Samsung Display Suzhou Co., Ltd. The core business of these two plants are the production of G8.5
TFT-LCD panel (with a production capacity of 120K/month) and modules (with a production
capacity of 3.5M/month), respectively. The acquisition will promote TCL CSOT to further optimize
its industrial layout and product mix as well as the manufacturing and supply chain system, and
enhance the competitiveness of the Company’s large-size display business to achieve
comprehensive leadership in products, technologies, efficiency, manufacturing, and industrial
ecology construction.

The Company will further support and coordinate the semi-conductor and new energy business,

fully release the vitality of internal organizations with mechanisms, and improve its core
capabilities, so as to accomplish various tasks as planned and speed up the implementation of
Zhonghuan Semiconductor’s globalization strategy.

                                                                                                          4
   TCL Technology Group Corporation                                            Interim Report 2020 (Summary)


The industrial finance business of TCL will support the semi-conductor display from various
aspects by constantly optimizing asset allocation. It will also boost the Company’s operational
efficiency and control the global operation risks. Meanwhile, TCL Capital will focus on investment
of industrial chain and other high-tech industries to promote the competitiveness of its industrial
ecology.

The Company has established an optimistic operational budget this year. Despite the short-term

effect brought by COVID-19 epidemic on operational results, the Company still has confidence to
overcome difficulties and challenges to achieve the annual business objectives under great
uncertainty of global economy in the second half of 2020. TCL Tech., in pursuit of the substantive
development, will enhance the core competitiveness of China’s manufacturing industry and
concentrate all resources and efforts to stride toward a global leadership.




                                                                               Li Dongsheng
                                                                              29 August 2020




                                                                                                           5
       TCL Technology Group Corporation                                                        Interim Report 2020 (Summary)


Part I Important Notes

This Summary is based on the full text of the 2020 Interim Report of TCL Technology Group
Corporation (together with its consolidated subsidiaries, the “Group” or “Company”, except where
the context otherwise requires). In order for a full understanding of the Company’s operating results,
financial position and future development plans, investors should carefully read the aforesaid full
text on the media designated by the China Securities Regulatory Commission (the “CSRC”).


Independent auditor’s modified opinion:
□ Applicable √ Not applicable
Board-approved interim cash and/or stock dividend plan for ordinary shareholders:
□ Applicable √ Not applicable
The Company has no interim dividend plan, either in the form of cash or stock.
Board-approved interim cash and/or stock dividend plan for preference shareholders:
□ Applicable √ Not applicable
This Report and its summary have been prepared in both Chinese and English. Should there be any
discrepancies or misunderstandings between the two versions, the Chinese versions shall prevail.

Part II Key Corporate Information

1. Stock Profile

Stock name                            TCL Tech.                   Stock code                   000100

Place of listing                      Shenzhen Stock Exchange

           Contact information                                           Board Secretary

Name                                  Liao Qian
                                      19/F, Tower B, TCL Building, Gaoxin South First Road, Shenzhen High-Tech Industrial
Office address
                                      Park, Shenzhen, Guangdong Province, China
Tel.                                  0755-3331 1666

Email address                         ir@tcl.com



2. Key Financial Information


Indicate by tick mark whether there is any retrospectively restated datum in the table below.
□ Yes √ No
                                                                                                                  Unit: RMB

                                                                                                                            6
      TCL Technology Group Corporation                                                                  Interim Report 2020 (Summary)


Serial
                             Item                                   H1 2020                         H1 2019             Change (%)
 No.
                           Note
          Revenue (RMB)                                                   29,333,210,856        43,781,613,735                   -33.00
  1       Revenue on the same basis after the
                         Note                                             29,333,210,856        26,119,468,731                     12.30
          spin-off (RMB)
  2       EBITDA (RMB)                                                     6,143,106,318            8,436,689,169                -27.19
          Net profit attributable to the listed
                                             Note                          1,208,065,986            2,092,348,692                  -42.26
          company’s shareholders (RMB)
  3       Net profit attributable to the listed
          company’s shareholders before                                      181,862,847            250,467,130                   -27.39
          non-recurring gains and losses (RMB)
          Basic earnings per share (RMB/share)                                     0.0932                  0.1569                  -40.60
  4
          Diluted earnings per share (RMB/share)                                   0.0893                 0.1544                   -42.16

  5       Weighted average return on equity (%)                                      4.11                     7.17                  -3.06
          Net cash generated from/used in
                                                                           7,347,810,779            6,150,821,822                  19.46
          operating activities (RMB)
  6
          Net cash per share generated from/used
                                                                                   0.5431                  0.4539                  19.65
          in operating activities (RMB/share)
                                                                  30 June 2020               31 December 2019           Change (%)

  7       Total assets (RMB)                                             184,833,234,677       164,844,884,926                     12.13

          Total owners’ equity (RMB)                                     64,891,825,753        63,883,145,340                        1.58
  8
          Owners’ equity attributable to the listed
                                                                          30,027,342,791        30,111,946,237                      -0.28
          company’s shareholders (RMB)
  9       Share capital (share)                                           13,528,438,719        13,528,438,719                        0.00
          Equity per share attributable to the listed
 10                                                                                2.2196                 2.2258                    -0.28
          company’s shareholders (RMB/share)


Note: In April 2019, the Company completed the handover of assets in a significant spin-off. Therefore, the H1
2019 data included the results of the spun-off assets for January-March 2019 and a gain of RMB1.15 billion on
the spin-off. Provided that the H1 2019 data were on the same basis after the spin-off, revenue would be up by
12.3% year-on-year. In 2020, the Company continued to focus on its core business and maximize shareholder
value by spinning off the Educational Web business, which generated a gain of RMB234 million. Provided that
the spin-off gains were excluded from both of the H1 2020 and H1 2019 data, the net profit attributable to the
listed company’s shareholders would be up by 7.6% year-on-year on the same basis.


3. Shareholders and Their Holdings as at the end of the Reporting Period

                                                                                                                            Unit: share
                                                                  Number of preference
Number of ordinary                                                shareholders with resumed
                                                          522,933                                                                      0
shareholders at the period-end                                    voting rights at the period-end
                                                                  (if any) (see note 8)
                                  5% or greater ordinary shareholders or top 10 ordinary shareholders
                              Shareh                                                                     Shares in pledge or frozen
                                                    Increase/decre
                              olding Total ordinary                 Restricted        Unrestricted
   Name of         Nature of                           ase in the
                              percen shares held at                 ordinary           ordinary
  shareholder     shareholder                         Reporting
                               tage the period-end                 shares held        shares held         Status          Shares
                                                        Period
                               (%)



                                                                                                                                        7
    TCL Technology Group Corporation                                                                   Interim Report 2020 (Summary)


                                                                                                       Put in pledge
                 Domestic                                                                                  by Li           275,000,000
Li Dongsheng
                 natural                                                                                Dongsheng
and his
                 person/gener       8.56 1,158,599,393      -63,148,616 610,181,602      548,417,791
acting-in-concer                                                                                       Put in pledge
                 al legal
t party                                                                                                 by Jiutian         344,899,521
                 person
                                                                                                        Liancheng
Huizhou
Investment        State-owned
                                    5.49    743,139,840    -135,279,907              -   743,139,840                   -             -
Holding Co.,      legal person
Ltd.
Hong Kong
Securities        Foreign
                                    3.19    431,613,255      78,123,401              -   431,613,255                   -             -
Clearing          legal person
Company Ltd.
Tibet Tianfeng
                  Domestic
Enterprise
                  general legal     3.08    417,344,415    -108,751,227              -   417,344,415                   -             -
Management
                  person
Co., Ltd.
China Securities
                 Domestic
Finance
                 general legal      2.76    373,231,553                -             -   373,231,553                   -             -
Corporation
                 person
Limited
Central Huijin
Asset             State-owned
                                    1.53    206,456,500                -             -   206,456,500                   -             -
Management        legal person
Co., Ltd.
National Social   Fund,
Security          wealth
                                    0.95    128,080,487      75,080,487              -   128,080,487                   -             -
Fund-Portfolio    management
601               product, etc.
Perseverance
Asset
Management        Fund,
L.L.P.-          wealth
                                    0.74    100,000,000      40,000,000              -   100,000,000                   -             -
Perseverance      management
Linshan           product, etc.
Yuanwang Fund
No. 1
Industrial and
Commercial
                  Fund,
Bank of China
                  wealth
-E Fund                            0.73     99,184,547      99,184,547              -    99,184,547                   -             -
                  management
Research          product, etc.
Selected Stock
Fund
Star Century
                  Foreign
Enterprises                         0.67     90,532,347                -   90,532,347              -                   -             -
                  legal person
Limited
                                  Being acting-in-concert parties upon the signing of the Agreement on Acting in Concert, Mr. Li
                                  Dongsheng and Xinjiang Jiutian Liancheng Equity Investment Partnership (Limited Partnership)
                                  (hereinafter referred to as “Jiutian Liancheng”) are the biggest shareholder of the Company with a
                                  total of 1,158.5994 million shares. As certain partners of Jiutian Liancheng have quit from the
                                  company and as requested by these partners, the meeting of partners of Jiutian Liancheng has
Related or acting-in-concert      resolved to reduce shareholdings in the Company corresponding to the shares of these partners in the
parties among the                 partnership. And these partners would withdraw from the partnership. On 27 February 2020, Jiutian
shareholders above                Liancheng reduced its holdings of 63.876 million shares, accounting for 0.5% of the Company’s
                                  total share capital, through bulk trading. This shareholding reduction is in compliance with the
                                  Several Provisions on the Reduction of Shares Held in a Listed Company by the Shareholders,
                                  Directors, Supervisors and Senior Management of the Listed Company. With confidence in the
                                  future development of the Company, Mr. Li Dongsheng and the incumbent senior management of
                                  the Company do not reduce their direct or indirect shareholdings in the Company. On 28 April 2020,
                                  They have also undertaken not to reduce their shareholdings in the Company during the period, from

                                                                                                                                         8
    TCL Technology Group Corporation                                                                 Interim Report 2020 (Summary)


                                the date when announced the resolutions of the first Board meeting, which convened to review the
                                plan that acquire the 39.95% interest held by Wuhan Optics Valley Industrial Investment Co., Ltd. in
                                Wuhan China Star Optoelectronics Technology Co., Ltd. through share offering, convertible
                                corporate bonds offering and cash payment and raise the matching funds (hereinafter referred to as
                                the “Transaction”), to the date of the completion/termination of the Transaction.
Shareholders involved in
securities margin trading (if   None
any)



4. Change of the Controlling Shareholder or the Actual Controller

□ Applicable √ Not applicable

5. Number of Preference Shareholders and Shareholdings of Top 10 of Them

□ Applicable √ Not applicable
No preference shareholders in the Reporting Period.

6. Corporate Bonds

(1) Bond Profile

                                                                                                                         Way of
                                                                                      Outstanding                       principal
  Bond name           Abbr.         Bond code        Value date       Maturity         balance        Coupon rate    repayment and
                                                                                     (RMB’0,000)                        interest
                                                                                                                        payment
TCL
Corporation’s
                                                                                                                   Interest
Corporate
                                                                                                                   payable
Bonds Publicly
                                                                                                                   annually and
Offered in
               16TCL02            112353          16 March 2016 16 March 2021              150,000           3.56% principal
2016 to
                                                                                                                   repayable in
Qualified
                                                                                                                   full upon
Investors
                                                                                                                   maturity
(Tranche 1)
(Type 2)
TCL
Corporation’s                                                                                                     Interest
Corporate                                                                                                          payable
Bonds Publicly                                                                                                     annually and
Offered in     16TCL03            112409          7 July 2016      7 July 2021             200,000           3.50% principal
2016 to                                                                                                            repayable in
Qualified                                                                                                          full upon
Investors                                                                                                          maturity
(Tranche 2)
TCL
Corporation’s                                                                                                     Interest
Corporate                                                                                                          payable
Bonds Publicly                                                                                                     annually and
Offered in     17TCL01            112518          19 April 2017    19 April 2022           100,000           3.40% principal
2017 to                                                                                                            repayable in
Qualified                                                                                                          full upon
Investors                                                                                                          maturity
(Tranche 1)


                                                                                                                                       9
   TCL Technology Group Corporation                                           Interim Report 2020 (Summary)


TCL
Corporation’s                                                                             Interest
Corporate                                                                                  payable
Bonds Publicly                                                                             annually and
Offered in     17TCL02      112542    7 July 2017    7 July 2022    300,000          4.93% principal
2017 to                                                                                    repayable in
Qualified                                                                                  full upon
Investors                                                                                  maturity
(Tranche 2)
TCL
Corporation’s                                                                             Interest
Corporate                                                                                  payable
Bonds Publicly                                                                             annually and
Offered in     18TCL01      112717    6 June 2018    6 June 2023    100,000          5.48% principal
2018 to                                                                                    repayable in
Qualified                                                                                  full upon
Investors                                                                                  maturity
(Tranche 1)
TCL
Corporation’s                                                                             Interest
Corporate                                                                                  payable
Bonds Publicly                                                                             annually and
                                      20 August      20 August
Offered in     18TCL02      112747                                  200,000          5.30% principal
                                      2018           2023
2018 to                                                                                    repayable in
Qualified                                                                                  full upon
Investors                                                                                  maturity
(Tranche 2)
TCL
Corporation’s                                                                             Interest
Corporate                                                                                  payable
Bonds Publicly                                                                             annually and
Offered in     19TCL01      112905    20 May 2019    20 May 2024    100,000          4.33% principal
2019 to                                                                                    repayable in
Qualified                                                                                  full upon
Investors                                                                                  maturity
(Tranche 1)
TCL
Corporation’s                                                                             Interest
Corporate                                                                                  payable
Bonds Publicly                                                                             annually and
Offered in     19TCL02      112938    23 July 2019   23 July 2024   100,000          4.30% principal
2019 to                                                                                    repayable in
Qualified                                                                                  full upon
Investors                                                                                  maturity
(Tranche 2)
TCL
Corporation’s                                                                             Interest
Corporate                                                                                  payable
Bonds Publicly                                                                             annually and
                                      21 October     21 October
Offered in     19TCL03      112983                                  200,000          4.20% principal
                                      2019           2024
2019 to                                                                                    repayable in
Qualified                                                                                  full upon
Investors                                                                                  maturity
(Tranche 3)
TCL
Technology
Group                                                                                      Principal
Corporation’s                                                                             repayable in
Short-Term                                           5 December
               20TCLD1      149140    8 June 2020                   100,000          2.50% full upon
Corporate                                            2020
                                                                                           maturity with
Bonds Publicly                                                                             interest
Offered in
2020 to
Professional


                                                                                                           10
    TCL Technology Group Corporation                                                    Interim Report 2020 (Summary)


Investors
(Tranche 1)


(2) Relevant Financial Information as at the End of the Reporting Period

                Item                   30 June 2020           31 December 2019                 Change (%)

Current ratio                                          1.13                      1.12                        0.94%

Debt/asset ratio (%)                                  64.89                 61.25                              3.64

Quick ratio                                            0.87                      0.85                        2.25%

                                         H1 2020                  H1 2019                      Change (%)

EBITDA-to-interest cover (times)                       3.93                  5.66                           -30.57%

Debt repayment ratio (%)                               100                       100                           0.00

Interest payment ratio (%)                             100                       100                           0.00




Part III Manage ment Discussion and Analysis


1. Business Overview for the Reporting Period

I Overview
International political and economic environment has become more complex and volatile this year.
The COVID-19 epidemic has further aggravated the anti-globalization sentiment, resulting in
increasing obstacles to foreign trade and technological cooperation. The cyclical recovery of the
semi-conductor display sector has been disturbed under the new phase of the global economy. In the
face of such crises, the Company adheres to its solid and steady strategy, which is to build an
emerging high-tech business group with global competitiveness, and concentrates on high-tech
industries by maximizing efficiency.
In the first half of 2020, on the same basis after the spin-off, the Company recorded revenue of
RMB29.33 billion, up by 12.3% year-on-year, and a net profit attributable to the listed company’s
shareholders of RMB1.21 billion, down by 42.3% year-on year. Excluding the gain from the
spin-off, the net profit attributable to the listed company’s shareholders increased by 7.6%
year-on-year on the same basis. Specifically, the net profit attributable to the listed company’s
shareholders was RMB0.8 billion in the second quarter, up by 96% from the first quarter.
During the Reporting Period, the semi-conductor display sector remained at the bottom of the
industrial cycle. Under the negative impact on logistics and work resumption caused by the
epidemic, the Company has maintained a relatively leading advantage in efficiency and benefit

                                                                                                                     11
   TCL Technology Group Corporation                                         Interim Report 2020 (Summary)


by promoting refined manage ment. TCL CSOT reported a revenue of RMB19.51 billion, up by
19.9% year-on-year; a net loss of RMB133 million, down by RMB1,152 million year-on-year (in
the second quarter, there was an improvement of RMB215 million from the first quarter); and a net
profit attributable to the parent company of RMB24 million. The Company has a further investment
in R&D and intelligent manufacturing, aiming to develop strategically integrated technologies and
products. During the Reporting Period, the Company’s R&D investment reached RMB2.88 billion,
up by 28.9% year-on-year on the same basis. Meanwhile, the industrial finance, venture capital and
other businesses sector recorded a net profit of RMB1.2 billion, stabilizing the Company’s
profitability during the industry downturn. The expansion of the global semi-conductor display
production is coming to the concluding phase, which leads to a reconstruction of the industry. Given
the prices of display pannel in major sizes began to recover in July, the Company would imporove
its performance in the second half of the year.
The Company’s semi-conductor display sector achieved a globally leading scale. During the
Reporting Period, the t1, t2, and t6 production lines of TCL CSOT maintained at full capacity and
ranked second globally in terms of the TV panel market share. The market share of 55-inch TV
panel ranked the 1st in the world, while its 65-inch TV panel ranked the 2nd. Although the small-
and medium-size panel plants located in Wuhan, thanks to the well management of supply chain,
the LTPS panel of the t3 production line operated at full capacity, and the high-end, new-form
product of the t4 flexible AMOLED production line was rapidly improved. Cooperation with global
leading brand customers was constantly deepened. Additionally, steady progress was made in t7
project construction.
In the meantime, TCL CSOT seized the opportunity of industrial restructuring to consolidate its
leading position in display panels through internal development and external M&A. With the
release of production capacity of t4 and t7 and the integration of Suzhou Samsung’s production line,
by 2023, the compound annual growth rate of TCL CSOT’s capacity will reach 18.8%. Given the
rapid scale growth and the improvement of industry, TCL CSOT will enter a dual-driven
development stage.
Leading Technology is always the Company’s main driving force. As 5G technology develops,
the demand for large-size, 8K, Touch and other display products grows rapidly. With the promotion
of mobile Internet, requirements for the quality of electronics consumption keeps raising, and the
demand for distance education, online shopping and social entertainment increases. The Company
actively deepened cooperation with strategic suppliers and launched “smart screen”, “wisdom
screen” and other interactive products. Together with the partners of the industrial chain, the

                                                                                                      12
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Company promoted high-end display demand such as 8K/120Hz and built an IoT ecology of
multiple scenarios.
During the Reporting Period, the Company focused on the layout of the next-generation
display technologies and ecology. TCL CSOT established a joint laboratory with San’an
Optoelectronics to develop Micro-LED display technology and formed a solution for commercial
production of Micro-LED displays. The Company also invested in JOLED Inc. to accelerate the
application of inkjet printing technology and to lead the construction of a global new display
industrial ecology covering upstream equipment, materials and devices. TCL CSOT will promote
the development of Micro-LED and printed OLED displays and develop the independent
intellectual property rights of the new display technology field from materials, processes,
equipments and production line solutions, so as to lead the future display technologies.
The COVID-19 epidemic not only caused a crisis with considerable difficulties for global public
security, but also increased the uncertainty of the global economy. Looking ahead, we will make
preparations for the new development pattern of "dual circulation" . As the foundation of the
electronic information industry, semi-conductor and semi-conductor display are strategic industries
related to the overall development of national economy and society. At present, the historic
relocation of global semi-conductor industry has already emerged, speeding up the industrial
restructuring.
With an innovative and disruptive thinking, the Company will keep improving management to grow
into a global leader. The Company will transform and upgrade itself from lean production to
advanced manufacturing that features intelligent and digital production. It will also introduce IPD
and LTC to optimize process and improve the organizational capabilities as well as the talent pool.
The Company will continue to promote the vertical extension and horizontal integration of the
semi-conductor display business. In addition, it will empower China’s semi-conductor and new
energy industries, which are rising at an accelerated pace, with industrial integration experience and
global layout capabilities accumulated over the past 30 years. In high-tech, heavy-assset and
long-cycle fields, the Company will continuously consolidate the foundation to secure a
world-leading position, and constantly accumulate core assets in tech field.

II Core Business Review


During the Reporting Period, the principal business structure of TCL Tech. still consisted of the
following three segments: the semi-conductor display and materials business, the industrial finance


                                                                                                         13
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& investment business and the other businesses. The Company acquired 100% equity of Tianjin
Zhonghuan Electronics Group Co., Ltd. After the Ownership transaction, the business structure of
Company is planned to be adjusted as follows:




(I) Semi-conductor Display and Materials Business
In the first half of 2020, the sudden COVID-19 epidemic hit the semi-conductor display sector
badly. The consumer demand was temporarily suppressed, the cyclical recovery of the
semi-conductor display sector was delayed, and the panel prices fluctuated at the historical bottom.
In the face of the severe external challenges, TCL CSOT adhered to its strategic focus and strove
for survival through maximizing cost efficiency, thus maintaining its industry-leading
operational efficiency and benefit. During the Reporting Period, TCL CSOT recorded product
sales area of 14.2 million square meters, up by 47.9% year-on-year; revenue of RMB19.51 billion,
up by 19.9% year-on-year; and EBITDA of RMB4.63 billion, basically unchanged compared with
the same period of last year. Affected by the historically low prices of display panels and the
one-time expenditure brought about by the upgrade of epidemic prevention and control measures,
TCL CSOT had a deficit of RMB133 million during the Reporting Period. Specifically, the ne t
profit in the second quarter increased by RMB215 million from the first quarter, and the net profit
of the large-size panel business in the second quarter increased by RMB110 million from the first
quarter. TCL CSOT’s profitability maintained a leading position in the industry.


Scale advantage was further enhanced, and supply chain control and manufacturing
capabilities were improved. The t1, t2, and t6 production lines operated at full capacity for strong
sales, achieving large-size panel sales area of 13.67 million square meters, up by 52.9%
year-on-year, along with revenue of RMB12.16 billion, up by 32.3% year-on-year. In the meantime,

                                                                                                       14
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equipment was moved into the t7 production line as planned. It is expected that mass production
will start in early 2021. In Huizhou, the high-generation module factory operated with a monthly
production capacity of more than 4 million pieces, and the Phase II construction of a smart factory
that mainly produces super-large panels of 8K and 80 inches or above was promoted. Mass
production can be expected by the end of 2020.
As for the small- and medium-size panel business, such impact as material shortages and work
resumption delay during the epidemic was overcome, which guaranteed safe production
continuously. The panel section of the t3 production line operated at full capacity, and the
production capacity of the module section returned to normal in the second quarter. Moreover, the
Phase I production capacity and yield rate of the t4 flexible AMOLED production line were
improved as scheduled,       products for brand manufacturers were mass produced and delivered, and
the construction of Phase II and Phase III was accelerated. The small- and medium-size panel
business recognized sales area of 0.53 million square meters, down by 19% year-on-year; and
revenue of RMB7.35 billion (including CDOT), up by 3.80% year-on-year.


Product and customer structures kept improving, while super-large TV, commercial display
and high-end notebook computer businesses grew rapidly. The G11 production line t6 of TCL
CSOT operated at full capacity, driving the continued rapid growth of the large-size panel business.
The shipping area of 55-inch and larger-size products accounted for more than 70%. Specifically,
the TV panel market share rose to 2nd in the world rankings: the market share of 55-inch panels
ranked the 1st in the world, that of 65-inch panels ranked the 2nd, and that of 75-inch panels also
ranked the 2nd. Commercial display business grew rapidly in the field of high-end gaming monitors
and interactive whiteboards. The shipment of 86-inch interactive whiteboards ranked 2nd in the
world. In the small- and medium-size panel business, the shipment of LTPS smart phone panels
ranked the 3rd in the world; LTPS notebook computer panels were sold to a number of international
brand customers, and the annual shipment was expected to become the world’s 2nd; flexible
AMOLED smart phone panels were stably supplied to brand customers for their flagship products,
and the shipment surged to the 4th place in the world.


With technological innovation as the main driving force, product competitiveness was
continuously enhanced, the layout in the field of new display technologies and materials was
improved, and a technological and ecological leadership a dvantage was formed. TCL CSOT


                                                                                                      15
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constantly consolidated the application advantages of HVA technology in large-size LCD high-end
products, improved the shares of such high-end products as 8K/120Hz, and accelerated the mass
production of MLED product based on Mini-LED on Glass. In the LTPS application field, it
increased the proportion of Incell/COF/blind via product, and strengthened the development of
mass production technology for under-display/in-display fingerprint sensors to products with LCD
screens. For flexible AMOLED displays, the focus was placed on under-display shooting, folding,
LTPO and other special technologies. The yield rate ramp-up of foldable screens and double-curved
perforated screens was successful, and the product performance met the demand of brand
customers.
TCL CSOT attaches great importance to the technological development of the next-generation new
display field. It has been investing in new display technologies such as printed OLED/QLED and
Micro-LED. During the Reporting Period, TCL CSOT and San’an Semiconductor jointly invested
in the establishment of a laboratory. Focusing on the development of Micro-LED technology, the
two aim to promote the Company’s ecological layout in the field from materials, processes,
equipment and production line solutions to independent intellectual property rights.
Guangdong Juhua subordinate to the Company, as the only “National Printed and Flexible Display
Innovation Center” of the industry, focuses on the basic, key technology development and industri al
applications of printed display processes. China Ray develops new OLED key materials with
independent IP. Optical overlay (CPL) materials have been mass-produced and shipped, and the
performance of red and green light-emitting materials for printed OLED has been greatly improved.
Furthermore, breakthroughs have been made in key problems such as the lifetime of red and green
materials for QLED materials. The number of public patents in quantum dot electroluminescent
field ranks the 2nd in the world. In order to accelerate the industrialization process of printed
display technologies, TCL CSOT acquired a strategic stake in JOLED Inc. Through joint R&D,
patent cooperation, etc., the two will speed up the industrial mass production of printed OLED
displays from all aspects including materials, equipments, processes and products, and will improve
the Company’s ecology construction in the key processes of the printed display industrial chain,
with a view to leading the future technological development trend.


Looking ahead to the second half of 2020, the impact of the epidemic will gradually weaken. With
the approach of the sales season, downstream customers will actively stock up, panel prices will
rebound, and industry operating profit will be improved. In the long run, the trend of steady growth
in demand will remain unchanged, the exit of the industry’s inefficient production capacity will
                                                                                                      16
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accelerate, the restructuring and integration of the industry will speed up, and the industr ial
concentration will further increase. The long-term development prospects are bright.
TCL CSOT will grasp the opportunity of industry integration to expand its scale and enrich
its product portfolio; continue to leverage the business synergy advantage, accelerate the
progress of localization, and make breakthroughs in cost reduction. In addition, it will
expedite the developme nt of future-oriented capabilities, promote the IPD/LTC process
system reform, improve digital-related capabilities and intelligent manufacturing quality, and
make its utmost efforts to achieve technology leadership and ecology leadership by improving
efficiency and product mix.


(II) Industrial Finance and Investment Business
TCL’s industrial finance business mainly includes the Group’s finance and the supply chain finance.
In the first half of 2020, affected by the COVID-19, the finance team focused on the funding needs
of the Group’s key projects, and strengthened the active management of liquidity and currency risk.
The supply chain finance business took full advantage of Internet platform, and jointly with
domestic financial institutions, continuously provided high quality and convenient receivables
financing services for small and medium enterprise partners affected by the epidemic, realizing the
sound development of the industrial ecosystem. In the second half, the industrial finance business
will stick to the service concept of “partner finance”, focus on real industrial needs, highlight the
improvement of user experience, and constantly enrich and deepen service.
TCL Capital seek investment opportunities in key fields of technological industries, including new
display technology, semi-conductor and their relevant industry chain, as well as high end materials
and technological equipments that promote technology and create synergy. At the same time,
investment value was generated. By the end of the Reporting Period, the scale of funds managed by
TCL’s venture capital business reached RMB8,989 million, and it invested in 121 projects
cumulatively. Currently, it holds stocks of CATL, Dynanonic, Willsemi, Cambricon, DKEM, and
other listed companies. Admiralty Harbour Capital obtained No. 6 license from HK SFC
successfully during the Reporting Period and became an investment bank with full licenses. In the
first half of 2020, it completed 9 bonds issuing and underwriting projects and 4 debt management
projects. Its investment banking and asset management business developed healthily. China
Innovative has invested in more than 110 listed companies cumulatively with steady growth in
performance. It invested in mature companies related to the Company’s businesses.


                                                                                                        17
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At the end of the Reporting Period, the Company invests in some listed companies directly,
including a 19.07% interest in 712 Corp. (603712.SH), a 5.58% interest in Bank of Shanghai
(601229.SH) and a 20.06% interest in Fantasia Holdings (01777.HK).


2. Matters Related to Financial Reporting

(1) Changes in Accounting Policies, Accounting Estimates or Measurement Methods
Compared to the Last Accounting Period


The Company has adopted the Accounting Standard No. 14 for Business Enterprises-Revenue
revised by the Ministry of Finance in 2017, since 1 January 2020.
As required by the new revenue standard, retained earnings and other relevant financial statement
items at the beginning of the period when the new revenue standard was first adopted (1 January
2020) should be adjusted according to the cumulative effects arising from the first adoption of the
new revenue standard, and data of the comparable periods should not be adjusted.
When executing the new revenue standard, the Company considered adjustments only for the
cumulative effects in respect of the outstanding contracts on the date of the standard’s first adoption;
and did not make retrospective adjustments in respect of the changes that had occurred to contracts
before the beginning of the earliest comparable period or before the beginning of 2020, but
according to the final arrangements of the contract changes, identified the fulfilled and unfulfilled
performance obligations, determined the transaction price and distributed the transaction price to
the fulfilled and unfulfilled performance obligations. The effects of the adoption of the new revenue
standard on the presentation of the balance sheet items as at the beginning of the current period are
as follows:
                                                                                                        Unit: RMB

                       Carrying amount as per                                                 Carrying amount
                                                        Effect of          Effect of
         Item            the former revenue                                                   as per the revised
                                                     reclassification   remeasurement
                               standard                                                       revenue standard
Advances from
                                       141,748,956      -136,249,382                                       5,499,574
customers
Contract liabilities                                     133,818,206                                    133,818,206
Other current
                                       69,021,962          2,431,176                                      71,453,138
liabilities




                                                                                                                   18
   TCL Technology Group Corporation                                        Interim Report 2020 (Summary)


(2) Retrospective Restatements due to the Correction of Material Accounting Errors in the
Reporting Period


□ Applicable    √ Not applicable
No such cases.


(3) Changes in the Scope of the Consolidated Financial Statements Compared to the Last
Accounting Period

Compared with 2019, three subsidiaries (all newly incorporated) are newly included in and four
subsidiaries (three transferred and one de-registered) are excluded from the consolidated financial
statements of H1 2020.




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