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Dear Shareholders,

 

In 2018, the global economy was almost the most turbulent year since the financial crisis. In addition, the US tariff policy and the corresponding retaliatory measures of other economic entities have also slowed down the overall economic growth. Only the United States still has strong economic performance, be an important engine for global growth; in the case of Japan’s failure of monetary policy, the economy has not improved significantly; emerging countries have been forced to bear pressure with the appreciation of the dollar; in the Eurozone, Brexit, the impact of Italy's confrontation with the EU, some crisis incrementally emerged.

The overall economic environment does not seem optimistic. There are also many unfavorable changes in the company's operations. For example, market competition has led to an increase in the volume of existing product mix, but prices have fallen, imbalances in supply and demand have led to unreasonable price cuts and alternative competition in the industry, product application technology has been accelerate replaced, tariff disputes impact customers’ strategy for production base. The demand of handset industry has stagnated due to no new product application to stimulate consumption, Networking and information products market demand is not as expected, trade war affects the overall automotive supply chain and consumption, coupled with the failure of the company's new products to be developed in time and in line with customer needs, has led to a decline in our revenue and profitability.

 

1. Consolidated revenue and net profit : Unit: NT$1,000
Items Year  2018 2017 Increase(Decrease)Amount Change Rate (%)
Net revenue 8,156,268 8,781,552 (625,284) (7.12)
Gross Profit 1,827,626 2,186,077 (358,451) (16.40)
Net Profit 644,350 962,655 (318,305) (33.07)

Consolidated statement of income and profitability:

item Year 2018 2017
Financial structure (%) Debt/assets ratio 30.34 31.62
Long-term capital/Fixed Asset Ratio 254.77 254.61
Debt-paying ability (%) Current Ratio 340.73 350.63
Quick ratio 250.96 277.70
Profitability (%) Return on Assets 5.09 6.86
Return on Equity 7.19 10.04
Earnings per Share(NT$) 2.08 3.11

2.Budget Execution:

In 2018, we set up internal budgeted target only without make public of the financial estimates. The overall turnover and profit were affected by changes in industries and product mix, Sales revenues came in NT$8,156,268,000 in 2018 and then resulted to achieving the operation target of 90.38%.

3.Research and Development:

The company continuously enhancing Temperature Compensating Control Quartz Oscillator (TCXO)、Temperature Sensing Quartz Crystal (TSX)、Miniature Constant Temperature Control Quartz Crystal Oscillator (OCXO), Miniature Quartz Crystal (XO)、Miniature Mobile Device Crystal(Crystal) 、Light sensors…etc. The development of miniaturized products focuses on the technologies such as wafer design and manufacturing and packaging testing, in response to the demand for high-drive, high-frequency and high-stability products. The development of new Sensor products will be developed towards miniaturization, integration and feature optimization to meet the needs of customers and the market. In terms of market development, we will focus resources on developing high-end products including AOM (high frequency), ACAP (vehicle products) and Sensors (sensing components), including new applications, new industries, new customers, and new product opportunities, in order to optimize product mix and increase growth momentum, and actively deploy the relevant customers of the 5G industry and the Internet of Things application, laying the foundation for the subsequent market growth momentum.

4.Results from execution of other projects:

(1) Green Enterprise: In addition to ongoing promotion of green enterprise certification and other activities including the Greenhouse Gas Inventory (ISO14064-1) and routine Carbon Footprint checks, TXC was given the EPA’s Product Carbon Footprint Emission Factor Database Establishment Award and earned low carbon marks. TXC has also been promoting kitchen waste and plastic bag use reduction activities. The company hands out environmentally-friendly bags to further reduce the use of environmentally hazardous plastic bags.
(2) Occupation Safety and Health TXC has continued to promote Occupational Health and Safety Assessment Series certification to uphold labor safety under the guidance of the Occupational Safety & Health Committee and Labor-Management Conference. A number of health promotion activities such as Getting to Know Metabolic Syndrome health lecture, pap smear testing, HPV virus awareness lecture, CPR and Heimlick maneuver instruction, workplace quit smoking activity, oral cancer screening activity, individual weight reduction activity, stress relief activity, blood pressure monitoring activity and flu vaccine inoculation activity were held by TXC to help employees take positive steps towards a healthy lifestyle. TXC will continue on working to create of a safe work environment to provide maximum safety to our employees.
(3) System Certification: With regard to the maintenance of various operating systems, TXC has received the following certifications: Quality Management System (ISO9001), Automotive Industry Quality Management System (ISO/TS16949), Environmental Management System (ISO14001), Taiwan Occupational Safety and Health Management System (CNS15506), Information Safety Management System (ISO/IEC27001), Hazardous Substance Process Management System (IECQ QC 080000:2012), Occupational Safety and Health Management System (OHSAS 18001:2007) as well as ISO 14064-1:2006 Greenhouse Gas Inventory, Product Carbon Footprint Verification (PAS 2050:2011) and Material Flow Cost Accounting Verification (ISO 14051:2011). TXC will continue to update its management systems to satisfy and surpass customer requirements
(4) Corporate Governance and Responsibility: TXC’s was ranked among the top 20% of all listed companies for corporate governance ratings and the company continues to strive forward by embracing the spirit of open mindedness, dedication, honesty and happiness. Due to the long-term services provided by our company to neighboring disadvantaged families and orphanages. In addition, the company participation in a number of volunteer activities to show concern for local neighborhoods was included the CSR report. TXC Foundation was established to provide variously kind of support.

1、Strengthening industrial deployment and increasing market share:

Consolidate existing markets to enhance competitiveness and maintain market share, actively develop new markets, new industries, new applications, and new products, deepen China and strengthen the European, American and Japanese markets.

2、Optimize product mix and increase profitability:

Combine production cost advantages to provide the best product mix and drive high-end, high-margin product sales. Through intelligent technology and big data analysis, we can instantly integrate information from various production bases to improve production yield and reduce quality costs.

3、Technical cooperation, strategic alliances, mergers and acquisitions and integration:

The future competitive market, shortened product life cycle, technology transfer and learning speed, accelerate the transfer of key technologies or capabilities and new technologies through technical cooperation, strategic alliances, mergers and acquisitions and integration The development speed of products and new processes can effectively enter new markets, enabling enterprises to have competitive advantages and expand the application of existing technologies or products to create synergies.

 

Looking forward 2019, with intelligent production, lean management and light asset management, the company hopes to face the challenges of this year with innovative thinking and efficient execution! Although the overall economic environment is still steep, we are convinced that the company with the efforts of the management team, we will be able to break through the status quo, open up new opportunities, and move forward.

 

Yours Sincerely,