[Section I Important Notice, Table of Contents and Definitions](index=2&type=section&id=Section%20I%20Important%20Notice%2C%20Table%20of%20Contents%20and%20Definitions) This section outlines the company's commitment to report accuracy, highlights key risks, provides a comprehensive table of contents, and defines essential terminology for clarity [Important Notice](index=2&type=section&id=Important%20Notice) The company's board, supervisory board, and senior management affirm the annual report's truthfulness, accuracy, and completeness, assuming legal responsibility - The board of directors, supervisory board, and senior management guarantee the annual report's truthfulness, accuracy, and completeness, free from false records, misleading statements, or major omissions, assuming individual and joint legal liabilities[3](index=3&type=chunk) - Company head Zhang Shilong, chief accountant Zhang Xuan, and head of accounting department Zhang Xuan declare the financial report in this annual report to be true, accurate, and complete[3](index=3&type=chunk) [Risk Factors](index=2&type=section&id=Risk%20Factors) The company faces multiple risks including sustained innovation capability, new product R&D, talent loss, raw material and packaging/testing price fluctuations, intensified market competition, rising domestic labor costs, exchange rate volatility, and equity incentive plan costs, which could adversely affect its market competitiveness, profitability, and future development - The company faces the risk of declining market competitiveness due to an inability to maintain continuous innovation, potentially leading to a significant drop in gross profit margin or market elimination if it fails to keep up with technological trends, expand product lines, or invest sufficiently in R&D[4](index=4&type=chunk) - New product R&D carries risks such as long development cycles, misjudgment of market demand, incorrect assessment of technical development capabilities, and delayed market expansion, potentially leading to incorrect product positioning or inability to effectively recover costs[5](index=5&type=chunk)[6](index=6&type=chunk) - The integrated circuit design industry is technology-intensive, and the company faces the risk of technical personnel turnover, despite various incentive measures, due to intense competition for talent in the market[6](index=6&type=chunk) - Wafer and packaging/testing costs are major components of the company's product costs, and their price fluctuations will significantly impact the company's operating performance[7](index=7&type=chunk) - The company's business is primarily divided into domestic sales (RMB settlement) and export sales (foreign currency settlement, mainly USD); as of the end of the reporting period, the company held foreign currency financial assets equivalent to **RMB 290.0922 million** and foreign currency financial liabilities equivalent to **RMB 62.9386 million**, with future RMB to USD exchange rate fluctuations potentially having a significant impact on performance[10](index=10&type=chunk) [Table of Contents](index=7&type=section&id=Table%20of%20Contents) This section presents the complete directory structure of the annual report, covering all chapters from important notices to financial reports, providing investors with an overview of the report's content [Definitions](index=8&type=section&id=Definitions) This section provides definitions for common terms used in the report, including company and subsidiary names, industry-specific terminology (e.g., fabless semiconductor company, analog chip, signal chain, power management), and related technologies and standards, ensuring accurate reader comprehension - A 'fabless semiconductor company' refers to an enterprise that only engages in integrated circuit R&D and sales, outsourcing wafer manufacturing, packaging, and testing to specialized manufacturers[15](index=15&type=chunk) - An 'analog chip' is an integrated circuit chip that processes continuous analog signals, serving as a bridge between the real world and the digital virtual world, and is a key component for achieving green energy efficiency[15](index=15&type=chunk) - A 'signal chain' refers to all related parts in a complete signal processing flow, from signal reception/acquisition, amplification, conversion, transmission, and sending, up to the execution by corresponding power devices[15](index=15&type=chunk) - 'Power management' refers to components with functions such as monitoring, protecting, and efficiently distributing power to a system, which are crucial for battery-powered mobile devices[15](index=15&type=chunk) [Section II Company Profile and Key Financial Indicators](index=11&type=section&id=Section%20II%20Company%20Profile%20and%20Key%20Financial%20Indicators) This section provides essential company details, contact information, disclosure channels, and a comprehensive overview of key accounting data and financial performance indicators for the reporting period [Company Information](index=11&type=section&id=Company%20Information) SG-Micro Corp., stock abbreviation SG-Micro, stock code 300661, has Zhang Shilong as its legal representative, with its registered and office address at 3-1301, 13th Floor, No. 87 West 3rd Ring North Road, Haidian District, Beijing - Company stock abbreviation: SG-Micro, stock code: **300661**[18](index=18&type=chunk) - The company's legal representative is Zhang Shilong, and its registered and office address is 3-1301, 13th Floor, No. 87 West 3rd Ring North Road, Haidian District, Beijing[18](index=18&type=chunk) [Contact Person and Information](index=11&type=section&id=Contact%20Person%20and%20Information) The company's Board Secretary is Zhang Qin, Securities Affairs Representative is Zhao Yuanyuan, with disclosed contact address and phone number, and email address investors@sg-micro.com - Board Secretary: Zhang Qin; Securities Affairs Representative: Zhao Yuanyuan[19](index=19&type=chunk) - Contact address: 3-1301, 13th Floor, No. 87 West 3rd Ring North Road, Haidian District, Beijing; Phone: **010-88825397**; Email: investors@sg-micro.com[19](index=19&type=chunk) [Information Disclosure and Document Availability](index=11&type=section&id=Information%20Disclosure%20and%20Document%20Availability) The company designates Securities Times, China Securities Journal, and Shanghai Securities News as information disclosure media, Juchao Information Network as the disclosure website, and the company's Securities Department as the annual report's availability location - Selected information disclosure media: Securities Times, China Securities Journal, Shanghai Securities News[20](index=20&type=chunk) - Website designated by the China Securities Regulatory Commission for annual report publication: http://www.cninfo.com.cn/new/index[20](index=20&type=chunk) - Location for company annual report availability: Company Securities Department[20](index=20&type=chunk) [Other Relevant Information](index=11&type=section&id=Other%20Relevant%20Information) The company appointed Grant Thornton (Special General Partnership) for auditing, with signing accountants Wei Qiaopin and Zhang Liwen; during the reporting period, CITIC Securities Co., Ltd. fulfilled its continuous supervision duties as the sponsor institution - Auditing firm appointed by the company: Grant Thornton (Special General Partnership), signing accountants: Wei Qiaopin, Zhang Liwen[21](index=21&type=chunk)[22](index=22&type=chunk) - Sponsor institution appointed by the company: CITIC Securities Co., Ltd., sponsor representatives: Peng Jie, Ma Xiaofeng, with continuous supervision period from June 6, 2017, to December 31, 2020[23](index=23&type=chunk) [Key Accounting Data and Financial Indicators](index=12&type=section&id=Key%20Accounting%20Data%20and%20Financial%20Indicators) In 2020, the company achieved significant growth in operating revenue and net profit, a substantial increase in net cash flow from operating activities, and steady growth in total assets and net assets attributable to shareholders, indicating a strong operating performance Key Accounting Data and Financial Indicators for 2020 | Indicator | 2020 (RMB) | 2019 (RMB) | YoY Change | 2018 (RMB) | | :--- | :--- | :--- | :--- | :--- | | Operating Revenue | 1,196,546,817.33 | 792,494,891.33 | 50.98% | 572,392,694.37 | | Net Profit Attributable to Shareholders of Listed Company | 288,752,313.77 | 176,032,451.57 | 64.03% | 103,694,105.16 | | Net Profit Attributable to Shareholders of Listed Company (Excluding Non-recurring Gains/Losses) | 263,949,071.23 | 160,375,353.58 | 64.58% | 91,115,858.54 | | Net Cash Flow from Operating Activities | 324,130,609.27 | 144,515,528.33 | 124.29% | 83,674,688.46 | | Basic Earnings Per Share (RMB/share) | 1.8645 | 1.1411 | 63.39% | 0.6743 | | Diluted Earnings Per Share (RMB/share) | 1.8193 | 1.1224 | 62.09% | 0.6699 | | Weighted Average Return on Net Assets | 22.73% | 18.25% | 4.48% | 12.84% | | Total Assets (RMB) | 1,866,795,966.79 | 1,393,471,331.54 | 33.97% | 1,062,305,962.92 | | Net Assets Attributable to Shareholders of Listed Company (RMB) | 1,494,332,284.19 | 1,115,438,995.45 | 33.97% | 876,490,656.82 | [Key Quarterly Financial Indicators](index=13&type=section&id=Key%20Quarterly%20Financial%20Indicators) In 2020, quarterly operating revenue and net profit showed steady growth, with operating revenue peaking in the third quarter and net cash flow from operating activities significantly increasing in the fourth quarter Key Quarterly Financial Indicators for 2020 | Indicator | Q1 (RMB) | Q2 (RMB) | Q3 (RMB) | Q4 (RMB) | | :--- | :--- | :--- | :--- | :--- | | Operating Revenue | 192,854,110.43 | 272,654,851.96 | 397,270,663.28 | 333,767,191.66 | | Net Profit Attributable to Shareholders of Listed Company | 30,340,456.18 | 74,220,243.61 | 102,476,941.48 | 81,714,672.50 | | Net Profit Attributable to Shareholders of Listed Company (Excluding Non-recurring Gains/Losses) | 30,338,608.82 | 71,503,266.39 | 101,912,952.84 | 60,194,243.18 | | Net Cash Flow from Operating Activities | -21,073,542.31 | 74,936,589.18 | 88,064,644.91 | 182,202,917.49 | [Differences in Accounting Data under Domestic and International Accounting Standards](index=13&type=section&id=Differences%20in%20Accounting%20Data%20under%20Domestic%20and%20International%20Accounting%20Standards) During the reporting period, there were no differences in net profit and net assets between financial reports disclosed under International Accounting Standards or overseas accounting standards and those under Chinese Accounting Standards - During the reporting period, the company's financial reports disclosed under International Accounting Standards showed no differences in net profit and net assets compared to those under Chinese Accounting Standards[26](index=26&type=chunk) - During the reporting period, the company's financial reports disclosed under overseas accounting standards showed no differences in net profit and net assets compared to those under Chinese Accounting Standards[27](index=27&type=chunk) [Non-recurring Gains and Losses Items and Amounts](index=13&type=section&id=Non-recurring%20Gains%20and%20Losses%20Items%20and%20Amounts) In 2020, the company's total non-recurring gains and losses amounted to **RMB 24.8032 million**, primarily from government subsidies and gains/losses from entrusted investments or asset management, positively impacting net profit after deducting income tax effects Non-recurring Gains and Losses Items and Amounts for 2020 | Item | 2020 Amount (RMB) | 2019 Amount (RMB) | 2018 Amount (RMB) | | :--- | :--- | :--- | :--- | | Government subsidies recognized in current profit/loss (excluding those closely related to the company's business and enjoyed at fixed or quantitative standards) | 14,262,064.76 | 12,213,803.29 | 11,866,111.23 | | Gains/losses from entrusted investments or asset management | 14,712,050.96 | 5,095,053.20 | 2,110,811.24 | | Other non-operating income and expenses apart from the above | -1,346,795.86 | 83,696.25 | 0.00 | | Less: Income tax impact | 2,824,077.32 | 1,736,215.81 | 1,398,675.85 | | Total | 24,803,242.54 | 15,657,097.99 | 12,578,246.62 | [Section III Company Business Overview](index=15&type=section&id=Section%20III%20Company%20Business%20Overview) This section details the company's core business activities, provides an analysis of its industry position, highlights significant changes in major assets, and elaborates on its core competitive advantages [Main Business Activities during the Reporting Period](index=15&type=section&id=Main%20Business%20Activities%20during%20the%20Reporting%20Period) The company specializes in R&D and sales of high-performance, high-quality analog integrated circuits, offering over **1,600 products** across 25 categories in signal chain and power management, widely used in consumer electronics, communications, industrial control, medical, automotive electronics, and emerging electronic products; its sales model is primarily distribution-based, supplemented by direct sales, achieving steady performance growth through continuous innovation, enhanced brand influence, and strong market demand - The company is a high-tech enterprise specializing in the research, development, and sales of high-performance, high-quality analog integrated circuits[31](index=31&type=chunk) - Currently, it offers over **1,600 products** across 25 categories, covering both signal chain and power management fields[31](index=31&type=chunk) - Products are widely applied in consumer electronics, communication equipment, industrial control, medical instruments, automotive electronics, and emerging electronic product fields such as IoT, new energy, smart wearables, AI, smart home, smart manufacturing, and 5G communication[31](index=31&type=chunk) - The company adopts a sales model primarily based on distribution, supplemented by direct sales, with sales revenue during the reporting period mainly derived from the distribution model[34](index=34&type=chunk) - During the reporting period, the company achieved operating revenue of **RMB 1.197 billion**, a **50.98% year-on-year increase**; net profit attributable to parent company shareholders was **RMB 288.7523 million**, a **64.03% year-on-year increase**[35](index=35&type=chunk) - Performance growth was primarily driven by continuous new product launches (over **200 new products** added during the reporting period), ongoing customer expansion, and strong market demand[35](index=35&type=chunk)[36](index=36&type=chunk)[37](index=37&type=chunk) [Industry Analysis](index=16&type=section&id=Industry%20Analysis) The company operates in the semiconductor integrated circuit design industry, focusing on analog chip R&D and sales; in 2020, the global semiconductor market grew by an estimated **6.8%** due to 5G adoption, automotive recovery, and work-from-home demand, while China's IC industry expanded by **17%** in sales, driven by policy support and market demand, yet faces challenges of low self-sufficiency and insufficient high-end technology and talent - The company operates in the semiconductor integrated circuit industry, specifically the analog integrated circuit design sub-industry[40](index=40&type=chunk) - Global chip sales are estimated to grow by **6.8%** in 2020, reaching **$440.389 billion**, primarily driven by 5G adoption, automotive industry recovery, and demand for pandemic-related electronic devices[41](index=41&type=chunk) - In 2020, China's semiconductor industry continued to expand, achieving sales of **RMB 884.8 billion**, a **17% year-on-year increase**[42](index=42&type=chunk) - China's total integrated circuit imports were approximately **$350.04 billion**, with exports reaching **$116.6 billion**, resulting in a trade deficit exceeding **$230 billion**, indicating a still low self-sufficiency rate[42](index=42&type=chunk) - China's integrated circuit industry has significant shortcomings in high-end technical support required for manufacturing and design, with foreign companies still dominating the high-end market, and a severe shortage of high-end technical talent persists[42](index=42&type=chunk) [Significant Changes in Major Assets](index=17&type=section&id=Significant%20Changes%20in%20Major%20Assets) During the reporting period, the company's asset structure changed significantly, with substantial increases in cash and cash equivalents and financial assets held for trading, primarily due to increased sales collections and redemption of wealth management products; concurrently, inventory rose due to business growth, and construction in progress and fixed assets also grew significantly from investments in R&D equipment and buildings Significant Changes in Major Assets | Major Asset | Change Amount (RMB) | Explanation of Change | | :--- | :--- | :--- | | Equity Investments | 22,574,266.91 | Mainly due to the company's equity method accounting for Yutai Semiconductor | | Fixed Assets | 21,348,102.47 | Mainly due to the company's purchase of R&D testing equipment | | Construction in Progress | 59,502,199.99 | Mainly due to the company's purchase of buildings not yet reaching their intended use state | | Cash and Cash Equivalents | 517,311,788.32 | Mainly due to increased sales collections and the redemption of wealth management products purchased at the beginning of the period | | Financial Assets Held for Trading | 265,500,000.00 | Mainly due to the company's purchase of wealth management products not yet matured | | Inventories | 86,345,679.17 | Mainly due to business growth and corresponding increase in inventory preparation | | Other Current Assets | -560,820,458.51 | Mainly due to the redemption of wealth management products purchased by the company at the beginning of the period | - Hong Kong SG-Micro, as a wholly-owned subsidiary, has total assets of **RMB 126.455 million**, accounting for **8.46%** of the company's net assets, with a sound operating model and no significant impairment risks[45](index=45&type=chunk) [Analysis of Core Competencies](index=18&type=section&id=Analysis%20of%20Core%20Competencies) The company's core competencies include its commitment to independent innovation in R&D, steadily strengthening intellectual property, superior and rapidly updated product performance, advanced quality management systems and production processes, and high-quality upstream/downstream resources and talent advantages; during the reporting period, the company filed **160 new technical patent applications** and launched over **200 new products**, with some key technical indicators reaching international leading levels - The company adheres to an independent innovation R&D strategy, with all products being forward-designed, and its intellectual property strength is steadily increasing[46](index=46&type=chunk) - During the reporting period, the company launched over **200 new products** with complete independent intellectual property rights, and filed **160 new technical patent applications** (including **158 invention patents**), a **39% increase** compared to the same period in 2019[46](index=46&type=chunk) - The company's product performance and quality benchmark against world-class analog manufacturers, with some key performance indicators superior to foreign counterparts, and it continuously monitors market developments, actively strategizing in emerging fields[47](index=47&type=chunk)[48](index=48&type=chunk) - The company has established a comprehensive quality assurance system, ensuring product quality and performance through strict supplier selection and high-standard testing, and has successively obtained **ISO9001** and **ISO14001** certifications[49](index=49&type=chunk) - The company possesses high-quality upstream and downstream resources and talent advantages, with a core team composed of international senior experts, and its R&D and sales teams have been further strengthened and expanded[50](index=50&type=chunk) [Section IV Management Discussion and Analysis](index=20&type=section&id=Section%20IV%20Management%20Discussion%20and%20Analysis) This section provides an overview of the company's operational performance, detailed analysis of its main business, expenses, R&D investments, cash flow, and non-core business activities for the reporting period [Overview](index=20&type=section&id=Overview) In 2020, despite the COVID-19 pandemic, the company achieved high growth in operating revenue and profit, primarily driven by continuous technological innovation, core technology accumulation, intellectual property protection, steady growth in traditional sectors, and expansion into emerging markets, alongside increased talent recruitment and improved corporate governance; R&D investment reached **RMB 207.0753 million**, a **57.70% year-on-year increase**, with R&D personnel accounting for **66.08%** and over **200 new products** launched - In 2020, the company achieved relatively high growth in both operating revenue and profit, primarily benefiting from technological innovation, market expansion, and talent team building[51](index=51&type=chunk) - The company's R&D expenditure was **RMB 207.0753 million**, a **57.70% increase** year-on-year, accounting for **17.31%** of operating revenue[52](index=52&type=chunk) - R&D personnel reached **378 individuals**, accounting for **66.08%** of the total workforce, completing the development of over **200 new products**[52](index=52&type=chunk) - The company maintained stable growth in traditional sectors and actively strategized and expanded into emerging fields such as IoT, smart home, new energy, AI, and 5G[53](index=53&type=chunk) - The company intensified talent acquisition, strengthened internal training and compensation evaluation systems, significantly increased employee numbers, and continued to implement equity incentive plans to motivate team enthusiasm[54](index=54&type=chunk) [Analysis of Main Business](index=21&type=section&id=Analysis%20of%20Main%20Business) In 2020, the company's main business revenue grew by **50.98%** to **RMB 1.197 billion**; power management products contributed **70.87%** of revenue with a **54.02% year-on-year increase**, while signal chain products grew by **44.09%**; mainland China and Hong Kong were the primary revenue sources, accounting for **46.57%** and **50.68%** respectively; physical sales volume increased by **33.54%** and production volume by **32.10%**, mainly due to business growth Operating Revenue Composition for 2020 | Category | 2020 Amount (RMB) | Share of Operating Revenue | 2019 Amount (RMB) | Share of Operating Revenue | YoY Change | | :--- | :--- | :--- | :--- | :--- | :--- | | Total Operating Revenue | 1,196,546,817.33 | 100% | 792,494,891.33 | 100% | 50.98% | | **By Product** | | | | | | | Signal Chain Products | 348,602,744.41 | 29.13% | 241,941,455.98 | 30.53% | 44.09% | | Power Management Products | 847,944,072.92 | 70.87% | 550,553,435.35 | 69.47% | 54.02% | | **By Region** | | | | | | | Mainland China | 557,264,762.30 | 46.57% | 406,484,302.24 | 51.29% | 37.09% | | Hong Kong | 606,370,518.81 | 50.68% | 365,372,825.31 | 46.10% | 65.96% | Gross Profit Margin of Main Business for 2020 | Category | Operating Revenue (RMB) | Operating Cost (RMB) | Gross Profit Margin | YoY Change in Operating Revenue | YoY Change in Operating Cost | YoY Change in Gross Profit Margin | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Integrated Circuit Industry | 1,196,546,817.33 | 613,414,313.77 | 48.73% | 50.98% | 45.71% | 1.85% | | Signal Chain Products | 348,602,744.41 | 144,263,083.68 | 58.62% | 44.09% | 37.29% | 2.05% | | Power Management Products | 847,944,072.92 | 469,151,230.09 | 44.67% | 54.02% | 48.52% | 2.05% | | Mainland China | 557,264,762.30 | 256,127,505.08 | 54.04% | 37.09% | 27.77% | 3.35% | | Hong Kong | 606,370,518.81 | 344,442,790.93 | 43.20% | 65.96% | 62.98% | 1.04% | Physical Sales, Production, and Inventory for 2020 | Item | Unit | 2020 | 2019 | YoY Change | | :--- | :--- | :--- | :--- | :--- | | Sales Volume | units | 3,290,808,256 | 2,464,222,786 | 33.54% | | Production Volume | units | 3,426,383,390 | 2,593,775,906 | 32.10% | | Inventory Volume | units | 502,878,721 | 413,782,921 | 21.53% | - Sales volume increased by **33.54%** year-on-year, and production volume increased by **32.10%** year-on-year, primarily due to business growth and increased production demand during the reporting period[59](index=59&type=chunk) Operating Cost Composition for 2020 | Industry Category | Item | 2020 Amount (RMB) | Share of Operating Cost | 2019 Amount (RMB) | Share of Operating Cost | YoY Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Integrated Circuit Industry | Wafer | 252,631,614.05 | 41.18% | 174,138,124.46 | 41.37% | -0.19% | | Integrated Circuit Industry | Packaging and Testing | 336,830,920.79 | 54.91% | 233,037,205.65 | 55.36% | -0.45% | | Integrated Circuit Industry | Other | 23,951,778.93 | 3.90% | 13,798,662.16 | 3.28% | 0.62% | - Sales to the company's top five customers totaled **RMB 540.6991 million**, accounting for **45.18%** of total annual sales[64](index=64&type=chunk)[65](index=65&type=chunk) - Purchases from the company's top five suppliers totaled **RMB 716.348 million**, accounting for **98.05%** of total annual purchases[66](index=66&type=chunk) [Expenses](index=24&type=section&id=Expenses) In 2020, the company's selling and administrative expenses both increased by over **23%** year-on-year, financial expenses turned from negative to positive due to exchange rate fluctuations, and R&D investment surged by **57.70%**, indicating continuous increased investment in market expansion, operational management, and technological innovation Expenses for 2020 | Item | 2020 (RMB) | 2019 (RMB) | YoY Change | Explanation of Significant Change | | :--- | :--- | :--- | :--- | :--- | | Selling Expenses | 67,902,414.24 | 55,016,905.47 | 23.42% | | | Administrative Expenses | 39,813,446.83 | 32,305,741.00 | 23.24% | | | Financial Expenses | 9,553,825.48 | -5,287,055.48 | -280.70% | Mainly due to exchange rate fluctuations during the reporting period | | R&D Expenses | 207,075,303.73 | 131,309,449.13 | 57.70% | Mainly due to the company's increased R&D investment | [R&D Investment](index=25&type=section&id=R%26D%20Investment) The company consistently prioritizes R&D investment, with **RMB 207.0753 million** invested in 2020, a **57.70% year-on-year increase**, accounting for **17.31%** of operating revenue; R&D personnel increased to **378 individuals**, representing **66.08%** of the workforce, demonstrating the company's firm commitment to technological innovation and product line expansion, yielding multiple intellectual property achievements - R&D investment in 2020 amounted to **RMB 207.0753 million**, accounting for **17.31%** of operating revenue, a **57.70% increase** from 2019[70](index=70&type=chunk) - R&D personnel increased to **378 individuals**, accounting for **66.08%** of the total workforce, including **144 individuals** with master's degrees or higher, and **189 individuals** with **10 or more years** of experience in the integrated circuit industry[70](index=70&type=chunk) - During the reporting period, **7 new domestic authorized invention patents**, **5 utility model patents**, **12 integrated circuit layout design registration certificates**, and **13 domestic and international registered trademarks** were added[70](index=70&type=chunk) [Cash Flow](index=25&type=section&id=Cash%20Flow) In 2020, the company's cash inflow and net cash from operating activities both significantly increased, primarily due to higher sales revenue; net cash flow from investing activities turned positive, mainly due to the redemption of wealth management products; cash inflow from financing activities increased due to equity incentive payments, leading to a substantial rise in net increase in cash and cash equivalents Cash Flow for 2020 | Item | 2020 (RMB) | 2019 (RMB) | YoY Change | | :--- | :--- | :--- | :--- | | Subtotal Cash Inflow from Operating Activities | 1,381,504,850.16 | 819,962,220.19 | 68.48% | | Subtotal Cash Outflow from Operating Activities | 1,057,374,240.89 | 675,446,691.86 | 56.54% | | Net Cash Flow from Operating Activities | 324,130,609.27 | 144,515,528.33 | 124.29% | | Subtotal Cash Inflow from Investing Activities | 2,239,858,908.68 | 2,360,089,492.57 | -5.09% | | Subtotal Cash Outflow from Investing Activities | 2,010,694,861.47 | 2,459,036,100.79 | -18.23% | | Net Cash Flow from Investing Activities | 229,164,047.21 | -98,946,608.22 | -331.60% | | Subtotal Cash Inflow from Financing Activities | 34,198,278.78 | 11,092,738.02 | 208.29% | | Subtotal Cash Outflow from Financing Activities | 51,809,322.50 | 28,276,416.99 | 83.22% | | Net Cash Flow from Financing Activities | -17,611,043.72 | -17,183,678.97 | 2.49% | | Net Increase in Cash and Cash Equivalents | 517,311,788.32 | 29,533,668.72 | 1,651.60% | - Subtotal cash inflow from operating activities increased by **68.48%**, mainly due to sales growth and increased revenue[72](index=72&type=chunk) - Net cash flow from investing activities increased by **331.60%**, primarily due to the company's redemption of wealth management products[72](index=72&type=chunk) - Subtotal cash inflow from financing activities increased by **208.29%**, primarily due to the receipt of employee equity incentive payments during the current reporting period[72](index=72&type=chunk) [Non-Core Business Activities](index=26&type=section&id=Non-Core%20Business%20Activities) The company's non-core business primarily includes investment income, asset impairment, non-operating expenses, and government subsidies, with investment income accounting for **17.40%** of total profit, mainly from wealth management product returns and equity method accounting for Yutai's investment income; these items are generally not sustainable Non-Core Business Activities for 2020 | Item | Amount (RMB) | Share of Total Profit | Explanation of Cause | Sustainability | | :--- | :--- | :--- | :--- | :--- | | Investment Income | 52,224,946.09 | 17.40% | Income from wealth management products and equity method accounting for Yutai's investment income | No | | Asset Impairment | -19,408,511.96 | -6.47% | Provision for inventory depreciation | No | | Non-Operating Expenses | 1,346,795.86 | 0.45% | Donation expenses | No | | Other Income | 14,262,064.76 | 4.75% | Government subsidies | No | | Credit Impairment Losses | 854,329.56 | 0.28% | Provision for bad debts on accounts receivable and other receivables | No | [Section V Significant Events](index=34&type=section&id=Section%20V%20Significant%20Events) This section details the company's profit distribution plans, fulfillment of various commitments, explanations regarding profit forecasts, changes in accounting policies, auditor appointments, equity incentive implementations, significant related party transactions, major contracts, social responsibility performance, and other important matters [Profit Distribution of Ordinary Shares and Capital Reserve to Share Capital Conversion](index=34&type=section&id=Profit%20Distribution%20of%20Ordinary%20Shares%20and%20Capital%20Reserve%20to%20Share%20Capital%20Conversion) The company's 2020 profit distribution plan proposes a cash dividend of **RMB 5** (tax inclusive) per **10 shares**, along with a capital reserve conversion of **5 shares** per **10 shares**; the company adheres to an active profit distribution policy, prioritizing shareholder returns, and has executed the 2019 dividend plan during the reporting period, with cash dividends accounting for **29.43%** of that year's net profit - The company's 2020 profit distribution plan: based on **156,452,447 shares**, a cash dividend of **RMB 5** (tax inclusive) per **10 shares** to all shareholders, **0 bonus shares** (tax inclusive), and a capital reserve conversion of **5 shares** per **10 shares** to all shareholders[12](index=12&type=chunk)[103](index=103&type=chunk) - The company's basic principles for profit distribution policy: implement an active profit distribution policy, prioritize reasonable shareholder returns, maintain continuity and stability, primarily use cash dividends, and conduct profit distribution at least once a year[96](index=96&type=chunk) - In 2019, based on a total share capital of **103,618,645 shares**, the company distributed a cash dividend of **RMB 5.00** (tax inclusive) per **10 shares** to all shareholders, totaling **RMB 51,809,322.50** (tax inclusive) in cash dividends, and simultaneously converted **5 shares** per **10 shares** from capital reserve to all shareholders[100](index=100&type=chunk) Cash Dividends of Ordinary Shares in the Last Three Years | Dividend Year | Cash Dividend Amount (Tax Inclusive) (RMB) | Net Profit Attributable to Ordinary Shareholders of Listed Company in Consolidated Financial Statements for Dividend Year (RMB) | Ratio of Cash Dividend Amount to Net Profit Attributable to Ordinary Shareholders of Listed Company in Consolidated Financial Statements | | :--- | :--- | :--- | :--- | | 2020 | 78,226,223.50 | 288,752,313.77 | 27.09% | | 2019 | 51,809,322.50 | 176,032,451.57 | 29.43% | | 2018 | 27,831,543.25 | 103,694,105.16 | 26.84% | [Fulfillment of Commitments](index=37&type=section&id=Fulfillment%20of%20Commitments) During the reporting period, the company's controlling shareholder, actual controller, and other committing parties strictly fulfilled various commitments including share lock-up, share reduction, non-compete, related party transactions, fund occupation, and dividends; some share lock-up commitments have been completed, while share reduction and non-compete commitments are still being normally fulfilled - The share lock-up commitments of Hongda Yongtai, Baoli Hongya, Shanghai Shanyu, and Hongwei International were fulfilled on **June 6, 2020**[106](index=106&type=chunk) - The share reduction commitments of Hongda Yongtai, Baoli Hongya, Shanghai Shanyu, Hongwei International, and Lin Lin (reducing no more than **25%** of shares held at the end of the previous year annually) are being normally fulfilled, with the commitment period extending to **June 6, 2022**[106](index=106&type=chunk) - The company, controlling shareholder and actual controller, shareholders holding **5% or more** of shares, and all directors, supervisors, and senior management have committed to strictly follow the profit distribution policy stipulated in the company's articles of association for dividend decision-making and implementation, which is currently being normally fulfilled[107](index=107&type=chunk) - Controlling shareholder Hongda Yongtai and actual controller Zhang Shilong both committed not to engage in businesses or activities that constitute or may constitute direct or indirect competition with SG-Micro and its subsidiaries' main businesses, and to prioritize offering business opportunities to SG-Micro, which is currently being normally fulfilled[107](index=107&type=chunk)[108](index=108&type=chunk) - The company's IPO share price stabilization commitment was fulfilled on **June 6, 2020**[109](index=109&type=chunk) [Explanation on Assets or Projects with Profit Forecasts Still within the Forecast Period, and Achievement of Original Profit Forecasts and Reasons](index=43&type=section&id=Explanation%20on%20Assets%20or%20Projects%20with%20Profit%20Forecasts%20Still%20within%20the%20Forecast%20Period%2C%20and%20Achievement%20of%20Original%20Profit%20Forecasts%20and%20Reasons) Yutai Semiconductor, acquired by the company, significantly exceeded its profit forecast in 2020, with after-tax net profit excluding non-recurring gains/losses reaching **RMB 105.8904 million**, far surpassing the projected **RMB 35 million**, indicating strong operational performance - Yutai Semiconductor committed to an after-tax net profit of no less than **RMB 35 million** in 2020, excluding non-recurring gains/losses[112](index=112&type=chunk)[113](index=113&type=chunk) - In 2020, Yutai Semiconductor's audited after-tax net profit, excluding non-recurring gains/losses, was **RMB 105.8904 million**, significantly exceeding the forecasted performance[113](index=113&type=chunk)[114](index=114&type=chunk) [Board of Directors' Explanation on Changes in Accounting Policies, Accounting Estimates, or Correction of Material Accounting Errors during the Reporting Period](index=44&type=section&id=Board%20of%20Directors'%20Explanation%20on%20Changes%20in%20Accounting%20Policies%2C%20Accounting%20Estimates%2C%20or%20Correction%20of%20Material%20Accounting%20Errors%20during%20the%20Reporting%20Period) Effective January 1, 2020, the company adopted the newly revised 'Enterprise Accounting Standard No. 14 – Revenue,' unifying the revenue recognition model, introducing a five-step approach, and replacing risk and reward transfer with control transfer as the criterion for revenue recognition timing; this accounting policy change will not significantly impact the company's operating results or financial statements - The company adopted the newly revised 'Enterprise Accounting Standard No. 14 – Revenue' effective **January 1, 2020**[116](index=116&type=chunk) - Key changes in the new revenue standard include: integrating revenue and construction contract standards into a unified revenue recognition model; introducing a five-step approach for revenue recognition measurement; and replacing risk and reward transfer with control transfer as the criterion for determining the timing of revenue recognition[116](index=116&type=chunk) - The implementation of the new revenue standard will not significantly impact the company's operating results, nor will it lead to major changes in the company's revenue recognition methods or have a significant impact on the financial statements[116](index=116&type=chunk) [Appointment and Dismissal of Accounting Firms](index=44&type=section&id=Appointment%20and%20Dismissal%20of%20Accounting%20Firms) The company currently employs Grant Thornton (Special General Partnership) as its domestic accounting firm, which has served for **11 consecutive years** with a remuneration of **RMB 500,000**; the signing accountants are Wei Qiaopin and Zhang Liwen, with service years of **2 and 3 years** respectively; no change in accounting firm occurred during the reporting period - The company currently employs Grant Thornton (Special General Partnership) as its domestic accounting firm, with **11 consecutive years** of audit service[118](index=118&type=chunk) - Remuneration for the domestic accounting firm is **RMB 500,000**[118](index=118&type=chunk) - Names of signing accountants: Wei Q