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
Ramp up, Catch upand 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 majorchanges. Affected by the global COVID-19 epidemic, China’s economic development faced greaterchallenges and risks. Enterprises were also inevitably affected, which would accelerate industrialtransformation, upgrading and restructuring. To address the challenges, the government introducedthe policy that “domestic economic cycle plays a leading role while international economic cycleremains its extension and supplement”, and strengthened economic vitality by tax reduction andliquidity management. Meanwhile, it vigorously supported industrial development, expedited theimprovement 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 achievedrevenue growth in all the sectors by maximizing cost efficiency as well as improving quality andprofitability. 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 ofRMB1.21 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 onthe same basis.The semi-conductor display business is still at the bottom of the cycle. Although it has stabilizedand recovered, the prices of main products in the current period are still lower than those in thesame period of last year. TCL CSOT exerted its superb management capabilities by constantlyoptimizing its products and customer structures. As a result, the large-size panel business achievedprofit, while the small- and medium-size panel business improved significantly. In the first half of2020, TCL CSOT reported a revenue of RMB19.51 billion (up by 19.9% year-on-year), a deficit ofRMB133 million, and a net profit attributable to the parent company of RMB24 million.
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 ofsemi-conductor display industry. In the third quarter, prices of products are expected to rise at afaster 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 thedisplay technology of intelligent and digital manufacturing to develop strategically integratedtechnologies and products, aiming at establishing a leading layout of next-generation displaytechnologies, materials and processes. During the Reporting Period, the Company investedRMB2.88 billion in R&D, up by 28.9% year-on-year on the same basis. It established a jointlaboratory with San’an Optoelectronics to research a process solution for the mass production ofMicro-LED displays. It also acquired a strategic stake in JOLED Inc. of Japan to jointly promotethe industrial production of large-size inkjet-printing OLED displays. The PCT applications of theCompany increased by 838 and the accumulated PCT applications reached 12,113.Given the competitive advantages of TCL CSOT, the Group will seize opportunities to furtherexpand and develop itself through mergers and acquisitions, so as to secure its global leadership inthe semi-conductor display business.The industrial finance business of TCL developed steadily. It fulfilled the funding needs of theCompany’s key projects at a low cost, actively managed the industrial liquidity and global currencyrisks, and gradually built its capacity of global asset allocation. TCL Capital proactively madearrangements regarding new materials and technologies, established an ecological chain, andfostered new industries. Meanwhile, it acted a role in the sustainable and healthy development ofthe Company by achieving a favourable investment return.To develop new driving forces for the long-term growth, the Company entered new markets in thecapital- and technology-intensive strategic industries by taking its advantages of technology,management and capital. The Company acquired 100% equity of Tianjin Zhonghuan ElectronicsGroup Co., Ltd., whose main asset was the controlling stake in “Tianjin Zhonghuan SemiconductorCo., Ltd.” (stock code: 002129.SZ). The core business of “Zhonghuan Semiconductor” wassemi-conductor silicon-wafer & photovoltaic silicon-wafer and its modules. The Company believesthat the enterprise has a promising future with great potentials to lead the globe in the
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. Themanagement and operation of Zhonghuan Electronics is similar to that of the Company, so the twocan fully coordinate with and empower each other in terms of industrial chain, globalization as wellas management systems, thus accelerating their respective business development. The acquisitionalso included a controlling stake in “Tianjin Printronics Circuit Corp.” (stock code: 002134.SZ) andits 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 criticalphase along with the breakout of global epidemic, the risk of China-US. trade war and increasinguncertainties of the world economy. However, we firmly believe that enterprises with competitivestrength 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 andPhase III of t4 plant (G6-OLED) and the construction of t7 plant (G11-LCD), enhance thecompetitiveness 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 andSuzhou Industrial Park hold the remaining 10% and 30% equity, respectively) and 100% equity ofSamsung Display Suzhou Co., Ltd. The core business of these two plants are the production of G8.5TFT-LCD panel (with a production capacity of 120K/month) and modules (with a productioncapacity of 3.5M/month), respectively. The acquisition will promote TCL CSOT to further optimizeits industrial layout and product mix as well as the manufacturing and supply chain system, andenhance the competitiveness of the Company’s large-size display business to achievecomprehensive leadership in products, technologies, efficiency, manufacturing, and industrialecology 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 corecapabilities, so as to accomplish various tasks as planned and speed up the implementation ofZhonghuan Semiconductor’s globalization strategy.
The industrial finance business of TCL will support the semi-conductor display from variousaspects by constantly optimizing asset allocation. It will also boost the Company’s operationalefficiency and control the global operation risks. Meanwhile, TCL Capital will focus on investmentof industrial chain and other high-tech industries to promote the competitiveness of its industrialecology.The Company has established an optimistic operational budget this year. Despite the short-termeffect brought by COVID-19 epidemic on operational results, the Company still has confidence toovercome difficulties and challenges to achieve the annual business objectives under greatuncertainty of global economy in the second half of 2020. TCL Tech., in pursuit of the substantivedevelopment, will enhance the core competitiveness of China’s manufacturing industry andconcentrate all resources and efforts to stride toward a global leadership.
Li Dongsheng29 August 2020
Part I Important NotesThis Summary is based on the full text of the 2020 Interim Report of TCL Technology GroupCorporation (together with its consolidated subsidiaries, the “Group” or “Company”, except wherethe 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 fulltext 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 anydiscrepancies 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 | ||
| Office address | 19/F, Tower B, TCL Building, Gaoxin South First Road, Shenzhen High-Tech Industrial 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
| Serial No. | Item | H1 2020 | H1 2019 | Change (%) |
| 1 | Revenue (RMB)Note | 29,333,210,856 | 43,781,613,735 | -33.00 |
| Revenue on the same basis after the spin-off (RMB)Note | 29,333,210,856 | 26,119,468,731 | 12.30 | |
| 2 | EBITDA (RMB) | 6,143,106,318 | 8,436,689,169 | -27.19 |
| 3 | Net profit attributable to the listed company’s shareholders (RMB)Note | 1,208,065,986 | 2,092,348,692 | -42.26 |
| Net profit attributable to the listed company’s shareholders before non-recurring gains and losses (RMB) | 181,862,847 | 250,467,130 | -27.39 | |
| 4 | Basic earnings per share (RMB/share) | 0.0932 | 0.1569 | -40.60 |
| Diluted earnings per share (RMB/share) | 0.0893 | 0.1544 | -42.16 | |
| 5 | Weighted average return on equity (%) | 4.11 | 7.17 | -3.06 |
| 6 | Net cash generated from/used in operating activities (RMB) | 7,347,810,779 | 6,150,821,822 | 19.46 |
| Net cash per share generated from/used in operating activities (RMB/share) | 0.5431 | 0.4539 | 19.65 | |
| 30 June 2020 | 31 December 2019 | Change (%) | ||
| 7 | Total assets (RMB) | 184,833,234,677 | 164,844,884,926 | 12.13 |
| 8 | Total owners’ equity (RMB) | 64,891,825,753 | 63,883,145,340 | 1.58 |
| Owners’ equity attributable to the listed company’s shareholders (RMB) | 30,027,342,791 | 30,111,946,237 | -0.28 | |
| 9 | Share capital (share) | 13,528,438,719 | 13,528,438,719 | 0.00 |
| 10 | Equity per share attributable to the listed company’s shareholders (RMB/share) | 2.2196 | 2.2258 | -0.28 |
Note: In April 2019, the Company completed the handover of assets in a significant spin-off. Therefore, the H12019 data included the results of the spun-off assets for January-March 2019 and a gain of RMB1.15 billion onthe 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 shareholdervalue by spinning off the Educational Web business, which generated a gain of RMB234 million. Provided thatthe spin-off gains were excluded from both of the H1 2020 and H1 2019 data, the net profit attributable to thelisted 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 ordinary shareholders at the period-end | 522,933 | Number of preference shareholders with resumed voting rights at the period-end (if any) (see note 8) | 0 | |||||||
| 5% or greater ordinary shareholders or top 10 ordinary shareholders | ||||||||||
| Name of shareholder | Nature of shareholder | Shareholding percentage (%) | Total ordinary shares held at the period-end | Increase/decrease in the Reporting Period | Restricted ordinary shares held | Unrestricted ordinary shares held | Shares in pledge or frozen | |||
| Status | Shares | |||||||||
| Li Dongsheng and his acting-in-concert party | Domestic natural person/general legal person | 8.56 | 1,158,599,393 | -63,148,616 | 610,181,602 | 548,417,791 | Put in pledge by Li Dongsheng | 275,000,000 |
| Put in pledge by Jiutian Liancheng | 344,899,521 | |||||||
| Huizhou Investment Holding Co., Ltd. | State-owned legal person | 5.49 | 743,139,840 | -135,279,907 | - | 743,139,840 | - | - |
| Hong Kong Securities Clearing Company Ltd. | Foreign legal person | 3.19 | 431,613,255 | 78,123,401 | - | 431,613,255 | - | - |
| Tibet Tianfeng Enterprise Management Co., Ltd. | Domestic general legal person | 3.08 | 417,344,415 | -108,751,227 | - | 417,344,415 | - | - |
| China Securities Finance Corporation Limited | Domestic general legal person | 2.76 | 373,231,553 | - | - | 373,231,553 | - | - |
| Central Huijin Asset Management Co., Ltd. | State-owned legal person | 1.53 | 206,456,500 | - | - | 206,456,500 | - | - |
| National Social Security Fund-Portfolio 601 | Fund, wealth management product, etc. | 0.95 | 128,080,487 | 75,080,487 | - | 128,080,487 | - | - |
| Perseverance Asset Management L.L.P.－Perseverance Linshan Yuanwang Fund No. 1 | Fund, wealth management product, etc. | 0.74 | 100,000,000 | 40,000,000 | - | 100,000,000 | - | - |
| Industrial and Commercial Bank of China－E Fund Research Selected Stock Fund | Fund, wealth management product, etc. | 0.73 | 99,184,547 | 99,184,547 | - | 99,184,547 | - | - |
| Star Century Enterprises Limited | Foreign legal person | 0.67 | 90,532,347 | - | 90,532,347 | - | - | - |
| Related or acting-in-concert parties among the shareholders above | 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 resolved to reduce shareholdings in the Company corresponding to the shares of these partners in the partnership. And these partners would withdraw from the partnership. On 27 February 2020, Jiutian 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 | |||||||
| 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 any) | None |
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
| Bond name | Abbr. | Bond code | Value date | Maturity | Outstanding balance (RMB’0,000) | Coupon rate | Way of principal repayment and interest payment |
| TCL Corporation’s Corporate Bonds Publicly Offered in 2016 to Qualified Investors (Tranche 1) (Type 2) | 16TCL02 | 112353 | 16 March 2016 | 16 March 2021 | 150,000 | 3.56% | Interest payable annually and principal repayable in full upon maturity |
| TCL Corporation’s Corporate Bonds Publicly Offered in 2016 to Qualified Investors (Tranche 2) | 16TCL03 | 112409 | 7 July 2016 | 7 July 2021 | 200,000 | 3.50% | Interest payable annually and principal repayable in full upon maturity |
| TCL Corporation’s Corporate Bonds Publicly Offered in 2017 to Qualified Investors (Tranche 1) | 17TCL01 | 112518 | 19 April 2017 | 19 April 2022 | 100,000 | 3.40% | Interest payable annually and principal repayable in full upon maturity |
| TCL Corporation’s Corporate Bonds Publicly Offered in 2017 to Qualified Investors (Tranche 2) | 17TCL02 | 112542 | 7 July 2017 | 7 July 2022 | 300,000 | 4.93% | Interest payable annually and principal repayable in full upon maturity |
| TCL Corporation’s Corporate Bonds Publicly Offered in 2018 to Qualified Investors (Tranche 1) | 18TCL01 | 112717 | 6 June 2018 | 6 June 2023 | 100,000 | 5.48% | Interest payable annually and principal repayable in full upon maturity |
| TCL Corporation’s Corporate Bonds Publicly Offered in 2018 to Qualified Investors (Tranche 2) | 18TCL02 | 112747 | 20 August 2018 | 20 August 2023 | 200,000 | 5.30% | Interest payable annually and principal repayable in full upon maturity |
| TCL Corporation’s Corporate Bonds Publicly Offered in 2019 to Qualified Investors (Tranche 1) | 19TCL01 | 112905 | 20 May 2019 | 20 May 2024 | 100,000 | 4.33% | Interest payable annually and principal repayable in full upon maturity |
| TCL Corporation’s Corporate Bonds Publicly Offered in 2019 to Qualified Investors (Tranche 2) | 19TCL02 | 112938 | 23 July 2019 | 23 July 2024 | 100,000 | 4.30% | Interest payable annually and principal repayable in full upon maturity |
| TCL Corporation’s Corporate Bonds Publicly Offered in 2019 to Qualified Investors (Tranche 3) | 19TCL03 | 112983 | 21 October 2019 | 21 October 2024 | 200,000 | 4.20% | Interest payable annually and principal repayable in full upon maturity |
| TCL Technology Group Corporation’s Short-Term Corporate Bonds Publicly Offered in 2020 to Professional | 20TCLD1 | 149140 | 8 June 2020 | 5 December 2020 | 100,000 | 2.50% | Principal repayable in full upon maturity with interest |
(2) Relevant Financial Information as at the End of the Reporting Period
Investors(Tranche 1)
Item
| 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 Management Discussion and Analysis
1. Business Overview for the Reporting Period
I OverviewInternational political and economic environment has become more complex and volatile this year.The COVID-19 epidemic has further aggravated the anti-globalization sentiment, resulting inincreasing obstacles to foreign trade and technological cooperation. The cyclical recovery of thesemi-conductor display sector has been disturbed under the new phase of the global economy. In theface of such crises, the Company adheres to its solid and steady strategy, which is to build anemerging high-tech business group with global competitiveness, and concentrates on high-techindustries by maximizing efficiency.In the first half of 2020, on the same basis after the spin-off, the Company recorded revenue ofRMB29.33 billion, up by 12.3% year-on-year, and a net profit attributable to the listed company’sshareholders of RMB1.21 billion, down by 42.3% year-on year. Excluding the gain from thespin-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’sshareholders 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 theindustrial cycle. Under the negative impact on logistics and work resumption caused by theepidemic, the Company has maintained a relatively leading advantage in efficiency and benefit
by promoting refined management. 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 (inthe second quarter, there was an improvement of RMB215 million from the first quarter); and a netprofit attributable to the parent company of RMB24 million. The Company has a further investmentin R&D and intelligent manufacturing, aiming to develop strategically integrated technologies andproducts. 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 andother businesses sector recorded a net profit of RMB1.2 billion, stabilizing the Company’sprofitability during the industry downturn. The expansion of the global semi-conductor displayproduction is coming to the concluding phase, which leads to a reconstruction of the industry. Giventhe prices of display pannel in major sizes began to recover in July, the Company would imporoveits performance in the second half of the year.The Company’s semi-conductor display sector achieved a globally leading scale. During theReporting Period, the t1, t2, and t6 production lines of TCL CSOT maintained at full capacity andranked second globally in terms of the TV panel market share. The market share of 55-inch TVpanel 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-formproduct of the t4 flexible AMOLED production line was rapidly improved. Cooperation with globalleading brand customers was constantly deepened. Additionally, steady progress was made in t7project construction.In the meantime, TCL CSOT seized the opportunity of industrial restructuring to consolidate itsleading position in display panels through internal development and external M&A. With therelease 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 therapid scale growth and the improvement of industry, TCL CSOT will enter a dual-drivendevelopment 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 promotionof mobile Internet, requirements for the quality of electronics consumption keeps raising, and thedemand for distance education, online shopping and social entertainment increases. The Companyactively deepened cooperation with strategic suppliers and launched “smart screen”, “wisdomscreen” and other interactive products. Together with the partners of the industrial chain, the
Company promoted high-end display demand such as 8K/120Hz and built an IoT ecology ofmultiple scenarios.During the Reporting Period, the Company focused on the layout of the next-generationdisplay technologies and ecology. TCL CSOT established a joint laboratory with San’anOptoelectronics to develop Micro-LED display technology and formed a solution for commercialproduction of Micro-LED displays. The Company also invested in JOLED Inc. to accelerate theapplication of inkjet printing technology and to lead the construction of a global new displayindustrial ecology covering upstream equipment, materials and devices. TCL CSOT will promotethe development of Micro-LED and printed OLED displays and develop the independentintellectual 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 publicsecurity, but also increased the uncertainty of the global economy. Looking ahead, we will makepreparations for the new development pattern of "dual circulation" . As the foundation of theelectronic information industry, semi-conductor and semi-conductor display are strategic industriesrelated to the overall development of national economy and society. At present, the historicrelocation of global semi-conductor industry has already emerged, speeding up the industrialrestructuring.With an innovative and disruptive thinking, the Company will keep improving management to growinto a global leader. The Company will transform and upgrade itself from lean production toadvanced manufacturing that features intelligent and digital production. It will also introduce IPDand 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 thesemi-conductor display business. In addition, it will empower China’s semi-conductor and newenergy industries, which are rising at an accelerated pace, with industrial integration experience andglobal layout capabilities accumulated over the past 30 years. In high-tech, heavy-assset andlong-cycle fields, the Company will continuously consolidate the foundation to secure aworld-leading position, and constantly accumulate core assets in tech field.II Core Business ReviewDuring the Reporting Period, the principal business structure of TCL Tech. still consisted of thefollowing three segments: the semi-conductor display and materials business, the industrial finance
& investment business and the other businesses. The Company acquired 100% equity of TianjinZhonghuan Electronics Group Co., Ltd. After the Ownership transaction, the business structure ofCompany is planned to be adjusted as follows:
(I) Semi-conductor Display and Materials BusinessIn the first half of 2020, the sudden COVID-19 epidemic hit the semi-conductor display sectorbadly. The consumer demand was temporarily suppressed, the cyclical recovery of thesemi-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 strovefor survival through maximizing cost efficiency, thus maintaining its industry-leadingoperational efficiency and benefit. During the Reporting Period, TCL CSOT recorded productsales 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 withthe same period of last year. Affected by the historically low prices of display panels and theone-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 netprofit in the second quarter increased by RMB215 million from the first quarter, and the net profitof the large-size panel business in the second quarter increased by RMB110 million from the firstquarter. TCL CSOT’s profitability maintained a leading position in the industry.
Scale advantage was further enhanced, and supply chain control and manufacturingcapabilities were improved. The t1, t2, and t6 production lines operated at full capacity for strongsales, 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,
equipment was moved into the t7 production line as planned. It is expected that mass productionwill start in early 2021. In Huizhou, the high-generation module factory operated with a monthlyproduction capacity of more than 4 million pieces, and the Phase II construction of a smart factorythat mainly produces super-large panels of 8K and 80 inches or above was promoted. Massproduction can be expected by the end of 2020.As for the small- and medium-size panel business, such impact as material shortages and workresumption delay during the epidemic was overcome, which guaranteed safe productioncontinuously. The panel section of the t3 production line operated at full capacity, and theproduction capacity of the module section returned to normal in the second quarter. Moreover, thePhase I production capacity and yield rate of the t4 flexible AMOLED production line wereimproved as scheduled, products for brand manufacturers were mass produced and delivered, andthe construction of Phase II and Phase III was accelerated. The small- and medium-size panelbusiness recognized sales area of 0.53 million square meters, down by 19% year-on-year; andrevenue of RMB7.35 billion (including CDOT), up by 3.80% year-on-year.
Product and customer structures kept improving, while super-large TV, commercial displayand high-end notebook computer businesses grew rapidly. The G11 production line t6 of TCLCSOT 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 panelsranked the 1st in the world, that of 65-inch panels ranked the 2nd, and that of 75-inch panels alsoranked the 2nd. Commercial display business grew rapidly in the field of high-end gaming monitorsand interactive whiteboards. The shipment of 86-inch interactive whiteboards ranked 2nd in theworld. In the small- and medium-size panel business, the shipment of LTPS smart phone panelsranked the 3rd in the world; LTPS notebook computer panels were sold to a number of internationalbrand customers, and the annual shipment was expected to become the world’s 2nd; flexibleAMOLED 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 wascontinuously enhanced, the layout in the field of new display technologies and materials wasimproved, and a technological and ecological leadership advantage was formed. TCL CSOT
constantly consolidated the application advantages of HVA technology in large-size LCD high-endproducts, improved the shares of such high-end products as 8K/120Hz, and accelerated the massproduction of MLED product based on Mini-LED on Glass. In the LTPS application field, itincreased the proportion of Incell/COF/blind via product, and strengthened the development ofmass production technology for under-display/in-display fingerprint sensors to products with LCDscreens. 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-curvedperforated screens was successful, and the product performance met the demand of brandcustomers.TCL CSOT attaches great importance to the technological development of the next-generation newdisplay field. It has been investing in new display technologies such as printed OLED/QLED andMicro-LED. During the Reporting Period, TCL CSOT and San’an Semiconductor jointly investedin the establishment of a laboratory. Focusing on the development of Micro-LED technology, thetwo 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 DisplayInnovation Center” of the industry, focuses on the basic, key technology development and industrialapplications of printed display processes. China Ray develops new OLED key materials withindependent IP. Optical overlay (CPL) materials have been mass-produced and shipped, and theperformance 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 greenmaterials for QLED materials. The number of public patents in quantum dot electroluminescentfield ranks the 2nd in the world. In order to accelerate the industrialization process of printeddisplay 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 OLEDdisplays from all aspects including materials, equipments, processes and products, and will improvethe 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. Withthe approach of the sales season, downstream customers will actively stock up, panel prices willrebound, and industry operating profit will be improved. In the long run, the trend of steady growthin demand will remain unchanged, the exit of the industry’s inefficient production capacity will
accelerate, the restructuring and integration of the industry will speed up, and the industrialconcentration will further increase. The long-term development prospects are bright.TCL CSOT will grasp the opportunity of industry integration to expand its scale and enrichits product portfolio; continue to leverage the business synergy advantage, accelerate theprogress of localization, and make breakthroughs in cost reduction. In addition, it willexpedite the development of future-oriented capabilities, promote the IPD/LTC processsystem reform, improve digital-related capabilities and intelligent manufacturing quality, andmake its utmost efforts to achieve technology leadership and ecology leadership by improvingefficiency and product mix.
(II) Industrial Finance and Investment BusinessTCL’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 needsof 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 withdomestic financial institutions, continuously provided high quality and convenient receivablesfinancing services for small and medium enterprise partners affected by the epidemic, realizing thesound development of the industrial ecosystem. In the second half, the industrial finance businesswill stick to the service concept of “partner finance”, focus on real industrial needs, highlight theimprovement of user experience, and constantly enrich and deepen service.TCL Capital seek investment opportunities in key fields of technological industries, including newdisplay technology, semi-conductor and their relevant industry chain, as well as high end materialsand 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 byTCL’s venture capital business reached RMB8,989 million, and it invested in 121 projectscumulatively. Currently, it holds stocks of CATL, Dynanonic, Willsemi, Cambricon, DKEM, andother listed companies. Admiralty Harbour Capital obtained No. 6 license from HK SFCsuccessfully during the Reporting Period and became an investment bank with full licenses. In thefirst half of 2020, it completed 9 bonds issuing and underwriting projects and 4 debt managementprojects. Its investment banking and asset management business developed healthily. ChinaInnovative has invested in more than 110 listed companies cumulatively with steady growth inperformance. It invested in mature companies related to the Company’s businesses.
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 MethodsCompared to the Last Accounting PeriodThe Company has adopted the Accounting Standard No. 14 for Business Enterprises-Revenuerevised by the Ministry of Finance in 2017, since 1 January 2020.As required by the new revenue standard, retained earnings and other relevant financial statementitems at the beginning of the period when the new revenue standard was first adopted (1 January2020) should be adjusted according to the cumulative effects arising from the first adoption of thenew revenue standard, and data of the comparable periods should not be adjusted.When executing the new revenue standard, the Company considered adjustments only for thecumulative 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 contractsbefore the beginning of the earliest comparable period or before the beginning of 2020, butaccording to the final arrangements of the contract changes, identified the fulfilled and unfulfilledperformance obligations, determined the transaction price and distributed the transaction price tothe fulfilled and unfulfilled performance obligations. The effects of the adoption of the new revenuestandard on the presentation of the balance sheet items as at the beginning of the current period areas follows:
Unit: RMB
| Item | Carrying amount as per the former revenue standard | Effect of reclassification | Effect of remeasurement | Carrying amount as per the revised revenue standard |
| Advances from customers | 141,748,956 | -136,249,382 | 5,499,574 | |
| Contract liabilities | 133,818,206 | 133,818,206 | ||
| Other current liabilities | 69,021,962 | 2,431,176 | 71,453,138 |
(2) Retrospective Restatements due to the Correction of Material Accounting Errors in theReporting Period
□ Applicable √ Not applicable
No such cases.
(3) Changes in the Scope of the Consolidated Financial Statements Compared to the LastAccounting PeriodCompared with 2019, three subsidiaries (all newly incorporated) are newly included in and foursubsidiaries (three transferred and one de-registered) are excluded from the consolidated financialstatements of H1 2020.