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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F

(Mark One)

       REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

       ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2021

OR

       TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

       SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report ________________

For the transition period from ________________ to ________________

Commission file number: 000-51847

HIMAX TECHNOLOGIES, INC.

(Exact name of Registrant as specified in its charter)

Not Applicable

(Translation of Registrant’s name into English)

CAYMAN ISLANDS

(Jurisdiction of incorporation or organization)

NO. 26, ZIH LIAN ROAD

SINSHIH DISTRICT, TAINAN CITY 74148

TAIWAN, REPUBLIC OF CHINA

(Address of principal executive offices)

Jessica Pan

Chief Financial Officer

Telephone: +886-6-505-0880

E-mail: jessica_pan@himax.com.tw

Facsimile: +886-6-507-0038

No. 15, Zih Lian Road

Sinshih District, Tainan City 74148

Taiwan, Republic of China

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of each exchange on which registered

Ordinary Shares, par value $0.3 per ordinary share

HIMX

The NASDAQ Global Select Market Inc.*

*       Not for trading, but only in connection with the listing on the NASDAQ Global Select Market, Inc. of American Depositary Shares representing such Ordinary Shares.

Securities registered or to be registered pursuant to Section 12(g) of the Act: None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report. 348,597,140 Ordinary Shares.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.   Yes        No

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.   Yes        No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes        No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes        No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer

Accelerated filer

Non-accelerated filer  

Emerging growth company

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act.

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP

International Financial Reporting Standards as issued

Other

by the International Accounting Standards Board

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.   Item 17        Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes        No

TABLE OF CONTENTS

 

Page

 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

4

CERTAIN CONVENTIONS

4

PART I

7

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

7

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

7

ITEM 3. KEY INFORMATION

7

3.A. [Reserved]

7

3.B. Capitalization and Indebtedness

7

3.C. Reason for the Offer and Use of Proceeds

7

3.D. Risk Factors

7

ITEM 4. INFORMATION ON THE COMPANY

22

4.A. History and Development of the Company

22

4.B. Business Overview

23

4.C. Organizational Structure

52

4.D. Property, Plants and Equipment

53

ITEM 4A. UNRESOLVED STAFF COMMENTS

53

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

53

5.A. Operating Results

53

5.B. Liquidity and Capital Resources

64

5.C. Research and Development

67

5.D. Trend Information

67

5.E. Critical Accounting Estimates

69

ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

70

6.A. Directors and Senior Management

70

6.B. Compensation

71

6.C. Board Practices

72

6.D. Employees

74

6.E. Share Ownership

77

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

77

7.A. Major Shareholders

77

7.B. Related Party Transactions

78

7.C. Interests of Experts and Counsel

79

ITEM 8. FINANCIAL INFORMATION

79

8.A. Consolidated Statements and Other Financial Information

79

8.B. Significant Changes

80

ITEM 9. THE OFFER AND LISTING

80

9.A. Offer and Listing Details

80

9.B. Plan of Distribution

81

9.C. Markets

81

9.D. Selling Shareholders

81

9.E. Dilution

81

9.F. Expenses of the Issue

81

2

ITEM 10. ADDITIONAL INFORMATION

81

10.A. Share Capital

81

10.B. Memorandum and Articles of Association

81

10.C. Material Contracts

82

10.D. Exchange Controls

82

10.E. Taxation

82

10.F. Dividends and Paying Agents

85

10.G. Statement by Experts

85

10.H. Documents on Display

85

10.I. Subsidiary Information

85

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

85

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

85

12.A. Debt Securities

85

12.B. Warrants and Rights

86

12.C. Other Securities

86

12.D. American Depositary Shares

86

PART II

87

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

87

ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

87

ITEM 15. CONTROLS AND PROCEDURES

87

ITEM 16. [RESERVED]

90

16.A. Audit Committee Financial Expert

90

16.B. Code of Ethics

90

16.C. Principal Accountant Fees and Services

90

16.D. Exemptions from the Listing Standards for Audit Committees

90

16.E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers

91

16.F. Change in Registrant’s Certifying Accountant

91

16.G. Corporate Governance

91

16.H. Mine Safety Disclosure

91

16.I. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

91

PART III

91

ITEM 17. FINANCIAL STATEMENTS

91

ITEM 18. FINANCIAL STATEMENTS

91

ITEM 19. EXHIBITS

92

3

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This annual report on Form 20-F contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that involve significant risks and uncertainties. Although these forward-looking statements, which may include statements regarding our future results of operations, financial condition, or business prospects, are based on our own information and information from other sources we believe to be reliable, you should not place undue reliance on these forward-looking statements, which apply only as of the date of this annual report. The words “anticipate,” “believe,” “expect,” “intend,” “plan,” “estimate” and similar expressions, as they relate to us, are intended to identify a number of these forward-looking statements. Our actual results of operations, financial condition or business prospects may differ materially from those expressed or implied in these forward-looking statements for a variety of reasons, including, among other things and not limited to, our anticipated growth strategies, our and our customers’ future business developments, results of operations and financial condition, our ability to develop new products, the future growth and pricing trend of the display driver markets, the future growth of end-use applications that use flat panel displays, particularly TFT-LCD panels, development of alternative flat panel display technologies, market acceptance and competitiveness of the driver and non-driver products developed by us, our ability to protect intellectual property, changes in customer relations and preference, shortage in supply of key components, our ability to collect accounts receivable and manage inventory, changes in economic and financial market conditions, and other factors. For a discussion of these risks and other factors, please see “Item 3.D. Key Information—Risk Factors.”

CERTAIN CONVENTIONS

Unless otherwise indicated, all translations from U.S. dollars to NT dollars in this annual report were made at a rate of $1.00 to NT$27.74, the exchange rates set forth in the H.10 weekly statistical release of the Federal Reserve System of the United States (the “Federal Reserve Board”) on December 30, 2021. No representation is made that the NT dollar amounts referred to herein could have been or could be converted into U.S. dollars at any particular rate or at all. On March 18, 2022, the noon buying rate was $1.00 to NT$28.35.

Unless otherwise indicated, in this annual report,

“ADSs” refers to our American depositary shares, each of which represents two ordinary shares;

“ADRs” refers to the American depositary receipts that evidence our ADSs;

“AIoT” refers to Artificial Intelligence & Internet of Things;

“AMOLED” refers to active matrix organic light-emitting diode;

“AR” refers to the augmented reality;

“ASIC” refers to application specific integrated circuit;

“a-Si” refers to amorphous silicon;

“CMOS” refers to complementary metal oxide semiconductor;

“edge computing” refers to a distributed computing paradigm which brings data computation closer to the location it is needed, to reduce power consumption needed for data computation, improve response time and save bandwidth;

“head-mounted-display” refers to a display device, worn on the head or as part of a helmet, that has a small display optic in front of one or each;

“Himax Taiwan” refers to Himax Technologies Limited, our wholly owned subsidiary in Taiwan and our predecessor;

“IC” refers to integrated circuit;

4

“IFRS” refers to The International Financial Reporting Standards as issued by the International Accounting Standards Board;

“IGZO” refers to indium gallium zinc oxide;

“Innolux” refers to Innolux Corporation, its predecessor and consolidated subsidiaries, unless the context otherwise requires;

“large-sized panels” refers to panels that are typically above ten inches in diagonal measurement; All sizes of TV, monitor and notebook displays are identified as large.

“LCoS” refers to liquid crystal on silicon;

“LED” refers to light-emitting diode;

“LTPS” refers to low temperature poly silicon;

“MEMS” refers to micro-electro mechanical systems;

“OLED” refers to organic light-emitting diode;

“PRC” or “China” for purposes of this annual report refers to the People’s Republic of China, excluding the special administrative regions of Hong Kong and Macau;

“processed tape” refers to polyimide tape plated with copper foil that has a circuit formed within it, which is used in tape-automated bonding packaging;

“ROC” or “Taiwan” refers to the island of Taiwan and other areas under the effective control of the Republic of China;

“RSUs” refers to restricted share units;

“semiconductor manufacturing service providers” refers to third-party wafer fabrication foundries, gold bumping houses, and assembly and testing houses;

“shares” or “ordinary shares” refer to our ordinary shares, par value $0.3 per share;

“SLiM” refers to Structured Light Imaging Module, which is Himax homegrown structured light-based 3D sensing total solution;

“small and medium-sized panels” refers to panels that are typically around ten inches or less in diagonal measurement. All sizes of smartphone, automotive and tablet displays are identified as small and medium;

“Structured Light” refers to a 3D infrared structure light projector, which is composed of a laser light source, a collimated lens and a diffractive optics element (DOE);

“TDDI” refers to touch display driver integrated circuit for advanced in cell touch display;

“TFT-LCD” refers to thin film transistor liquid crystal display that may adopt a-Si, IGZO or LTPS technologies;

“ToF” refers to a time-of-flight (ToF) 3D camera works by illuminating the scene with a modulated light source, and observing the reflected light;

“Ultralow power AI image sensing” refers to Company’s AI image sensing solution which includes Himax’s proprietary computer vision AI processor, ultralow power Always-On CMOS image sensor and AI algorithms from third-party or Emza, Himax’s fully-owned subsidiary – all equipped with ultralow power design;

“VGA” refers to Video Graphics Array;

5

“VR” refers to the virtual reality;

“wafer level optics” or “WLO” are optical products manufactured using semiconductor process on wafers;

“we”, “us”, “our company”, “our”, “the Company” and “Himax” refers to Himax Technologies, Inc., its predecessor entities and subsidiaries;

“WE-I Plus” refers to an AI accelerator-embedded ASIC platform solution for application developers to develop and deploy CNN-based machine learning models on AIoT applications including smart home appliances, surveillance systems, etc.;

all references to “New Taiwan dollars”, “NT dollars” and “NT$” are to the legal currency of the ROC; and

all references to “dollars”, “U.S. dollars” and “$” are to the legal currency of the United States.

On August 10, 2009, we effected: (i) a stock split in the form of a stock dividend of 5,999 ordinary shares for each ordinary share held by shareholders of record, followed by a consolidation of every 3,000 ordinary shares into one ordinary share; (ii) a change of the par value of our ordinary shares from $0.0001 each to $0.3 each; and (iii) a change in our ADS ratio from one ADS representing one ordinary share to one ADS representing two ordinary shares. See “Item 7.A. Major Shareholders and Related Party Transactions—Major Shareholders” for more information. Unless otherwise indicated, all shares, per share and share equity data in this annual report have been retroactively adjusted to reflect the effect of the stock split and the change in par value for all periods presented.

6

PART I

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not applicable.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

ITEM 3. KEY INFORMATION

3.A. [Reserved]

3.B. Capitalization and Indebtedness

Not applicable.

3.C. Reason for the Offer and Use of Proceeds

Not applicable.

3.D. Risk Factors

Risks Relating to Our Financial Condition and Business

Our suppliers may have increasing bargaining power as a result of industry consolidation, which could result in an increase in our average unit cost and a decrease in our profit margin.

There may be industry consolidation among our suppliers. Merger and acquisition activities will likely increase the size and market power of the relevant suppliers and reduce the number of suppliers we could use under a simpler supplier chain. Therefore, suppliers could be in a better position to bargain for higher prices, longer contract terms, higher deposit and/or higher contract breach penalties for their services and products, which could result in an increase in our average unit cost and/or penalty expenses. If we are unable to transfer any increase in average unit cost to our customers, our gross margin and results of operations could be adversely affected.

We derive the majority of our net revenues from sales to the TFT-LCD panel industry, which is highly cyclical and subject to price fluctuations. Such cyclicality and price fluctuations could negatively impact our business or results of operations.

In 2020 and 2021, 85.2% and 88.0% of our revenues, respectively, were attributable to display drivers that were incorporated into TFT-LCD panels. We expect to continue to substantially depend on sales to the TFT-LCD panel industry for the foreseeable future. The TFT-LCD panel industry is intensely competitive and is vulnerable to cyclical market conditions. The average selling prices of TFT-LCD panels generally decline with time as a result of, among other factors, drop in demand for end products that incorporate TFT LCD panels, new capacity ramp-up or factory utilization improvement, technological advancements and cost reduction with the exception of the new high end and high-resolution products.

The merger of certain of our major customers could result in an increase in their bargaining power and therefore subject us to additional downward pricing pressure. We cannot assure you that in such periods in which we experience significant downward pricing pressure, we could sufficiently reduce costs to completely offset the loss of revenues. In addition, a severe and prolonged industry downturn could also result in higher risks to the collectability of our accounts receivable, the marketability and valuation of inventories, the impairment of our long-term non-financial assets, which consist of property, plant and equipment and intangible assets, and the stability of our supply chain. As a result, the cyclicality of the TFT-LCD panel industry could adversely affect our revenues, cost of revenues and results of operations.

7

Our strategy of expanding our product offerings to non-driver products may not be successful.

We have devoted, and intend to continue to devote, financial and management resources to non-driver products’ development, manufacturing and marketing to further diversify our product portfolio and improve gross margin as non-driver products may have higher gross margin than our driver products. Our non-driver technologies cover LCoS microdisplay, Always-on-Sensor (“AoS”) CMOS image sensor, wafer level optics (“WLO”), 3D sensing and ultralow power AI image sensing, etc.

For our LCoS technology, at present our main focus areas for LCoS business are AR goggle devices and head-up-displays (HUD) for automotive. AoS CMOS image sensor is a specific sensor which consumes only several micro watts to perform people detection, eyeball tracking and other features. The new sensor architectures, readout, pixel, and the corresponding slim algorithms are integrated together to contribute the always-on feature. For smartphone 3D sensing, we aggressively work with our partners from VCSEL, sensor, module and OEM fields, jointly participate in major ongoing Android smartphone projects covering time-of-flight (ToF) for world-facing camera. On non-smartphone 3D-sensing, with our Structured Light 3D SLiM solution and 3D decoder ASIC key component, we aim at emerging markets such as smart door lock, facial recognition-based e-payment, business access control, biomedical inspection device and eye-tracking applications. For our ultralow power AI image sensing solution, we focus on providing leading edge AI solutions, in both total solution and discrete key component, to meet diversified customer and application needs. Himax’s ultralow power AI image sensing solution integrates in-house AoS sensor, proprietary edge AI processor and AI-based algorithm from third party or Emza, one of Himax’s subsidiaries. Our AI image sensing solution is growing quickly in a broad range of applications, covering notebook, home appliances, utility meter, automotive, battery-powered surveillance camera, panoramic video conferencing, and medical. In addition, we also collaborate closely with edge-to-cloud platform partners in areas such as smart city, smart office, healthcare, agriculture, retail and factory automation.

Developing and commercializing each of our non-driver products requires a significant amount of management, engineering and monetary resources. For example, we have established certain in-house facilities for key manufacturing processes of our non-driver products including LCoS microdisplay, WLO and 3D sensing. Numerous uncertainties exist in developing new products and we cannot assure you that we will be able to develop our non-driver products successfully. We may underestimate the amount of capital, personnel and other resources required to develop and commercialize our non-driver products. We may also overestimate the market potential of the end products that are utilizing or will utilize our non-driver products. The failure or delay in the development, production or commercialization of any of our non-driver products, the occurrence of any product defects or design flaws, or the low market acceptance of or demand for either of our products or the end devices using our products may adversely affect the impairment of our long-term non-financial assets, which consist of property, plant and equipment and intangible assets, for non-driver products, our results of operations and growth prospects. The lower capacity utilization rate of our factories will negatively affect our gross margin and our results of operations. Moreover, we will be subject to higher ramp-up expenses in the early stage of mass production of our non-driver products.

The concentration of our revenues and accounts receivable and the extension of payment terms for certain of our customers exposes us to increased credit risk and could harm our operating results and cash flows.

In 2021, Customer A and its affiliates accounted for 32.1% of our revenues. Our two largest customers together accounted for over 50% of our revenues in 2021. See “Item 5.A. Operating Results—Description of Certain Statements of Profit or Loss Line Items—Revenues” for our revenues description. Our results of operations and financial condition would be significantly linked to the success and purchase policy of any such customer. As of December 31, 2021, our accounts receivable from Customer A and its affiliates were $160.1 million, which represented approximately 39.0% of our accounts receivable, net. The concentration of our accounts receivable exposes us to increased credit risk. Moreover, we have at times agreed to extend the payment terms for certain of our customers. As a result, any loss of or a sharp reduction in any such customer’s sales, a default by any such customer, a prolonged delay in the payment of accounts receivable or the extension of payment terms for our customers could adversely affect our cash flow, liquidity and our operating results.

8

Our customers may experience a decline in profitability or may not be profitable at all, which could adversely affect our results of operations and financial condition.

TFT-LCD panel manufacturers, including our customers, experience significant pressure on prices and profit margins, due largely to growing industry capacity and fluctuations in demand for TFT-LCD panels. Some panel manufacturers have greater access to capital or greater production, research and development, intellectual property, marketing or other resources than our customers, who may not be able to compete and sustain their market positions. Further, our customers’ business performance may fluctuate significantly due to a number of factors, many of which are beyond their control, including and not limited to: (1) consumer demand and the general economic conditions such as recent geopolitical tensions relating to invasion of Ukraine by Russia; (2) the cyclical nature of the TFT-LCD industry in average selling price fluctuations, as well as its downstream industries; (3) the speed at which TFT-LCD panel manufacturers expand production capacity; (4) brand companies’ continued needs for original equipment manufacturing services provided by TFT-LCD panel manufacturers; (5) access to raw materials, components, equipment and utilities on a timely and economical basis; (6) technological changes; (7) the rescheduling and cancellation of large orders; (8) access to funding on satisfactory terms; and (9) fluctuations in the currencies of TFT-LCD panels exporting countries against the U.S. dollar.

We depend on sales of display drivers used in TFT-LCD panels, and the limited potential for further growth in both the market size of display drivers and the market share of our display drivers or the absence of continued market acceptance of our display drivers could limit our growth in revenues or harm our business.

In 2020 and 2021, 85.2% and 88.0% of our revenues, respectively, from the sale of display drivers used for large, small and medium-sized applications, and we expect to continue to derive a substantial portion of our revenues from these or related products. As the display driver industry is relatively mature, there may be limited potential for the overall display drivers market to grow and for us to further grow our market share and revenues.

Failure to grow our unit shipments for display drivers, coupled with a general decline in the average selling prices, could adversely and materially affect our results of operations. See also “—Risks Relating to Our Industry—The average selling prices of our products could decrease rapidly, which may negatively impact our revenues and operating results”. Therefore, the continued market acceptance of our display drivers is critical to our future success. Failure to grow or maintain our revenues generated from the sales of display drivers could adversely and materially affect our results of operations and financial condition.

We face risks related to public health epidemics, including the recent novel coronavirus outbreaks.

Our financial condition and results of operations may be adversely affected if a public health epidemic interferes with our ability, or that of our employees, suppliers, customers and other business partners to perform our and their respective responsibilities and obligations related to the conduct of our business. Since November 2019, a novel strain of coronavirus (Covid-19) has spread across the world. To date, the Covid-19 outbreak has caused significant disruption to the financial markets and international supply chains, which can substantially depress global business activities, restrict access to capital and result in a long-term economic downturn that would negatively affect our operating results.

As a result of the pandemic, numerous unprecedented measures are in place to try to contain the virus, such as travel restrictions, quarantines, stay-at-home and social distancing orders, and shutdowns. These measures may further impact our workforce and operations, the operations of our customers and suppliers. The ultimate impact and efficacy of measures and potential future measures is currently unknown. We have experienced and will experience disruptions to our business operations resulting from quarantines, self-isolations, or other restrictions on the ability of our employees to perform their jobs that may impact our ability to develop and design our products in a timely manner. Our suppliers, sub-contractors and customers have been and will be disrupted by quarantines and social distancing measures, office and factory closures, disruptions to ports and other shipping infrastructure, border closures, or other travel-related restrictions. Depending on the magnitude of such effects on our suppliers’ manufacturing, assembling, and testing operations, our supply chain, manufacturing and product shipments will be delayed, which could adversely affect our business, operations and customer relationships.

9

We had a strong financial performance in 2021 despite the ongoing effects of the pandemic, coupled with foundry capacity shortages. Yet, those conditions also provided favorable conditions for IC vendors such as us, with overall market demand far outpacing supply. The gross margin year-over-year improvement was mainly a reflection of more favorable IC pricing resulted from the tight foundry capacity and product mix derived from high margin product lines on top of rising material costs across foundry, assembly and testing, of which all undergoing severe capacity shortages. Under limited capacity situation, we are unable to meet all demands, and strategically allocate our limited capacity toward the products with better margins. However, with a growing number of vaccinations or after the pandemic is over, the surge demand, the better pricing, the more favorable product mix as well as the better gross margin we currently enjoy may fade away or decrease progressively, which could materially and adversely affect our results of operations and financial condition.

Extra export license may be needed for certain product or technology for certain customers. These licenses are regulated by Export Administration Regulations (EAR) which is administered by the U.S. Department of Commerce’s Bureau of Industry and Security (BIS)

Our business is subject to various international laws and legal requirements from the U.S. Export Administration Regulations and other jurisdictions’ applicable executive orders in packaging, product content, labor and import/export regulations, etc. These laws, regulations and orders are complex, may change frequently and with limited notice, have generally become more rigorous and have intensified under the current U.S. administration, especially in recent geopolitical tensions with China. We may be required to incur significant expense to comply with, or to remedy violations of, these regulations. In addition, if our customers fail to comply with these regulations or our customers are sanctioned, or added to the Entity List of EAR by BIS, we may be required to suspend sales to these customers, which could damage our reputation and materially and adversely impact our results of operations. If our foundry, tape, assembly and testing suppliers fail to comply with these regulations or our suppliers are sanctioned or added to the Entity List of EAR by BIS, we may suspend their services and have to obtain alternative services in a timely manner. Considering the amount of time, it usually takes to qualify assembly and testing houses, we may experience significant delays in product shipments. Any problems that we may encounter with the delivery, quality or cost of our products could damage our reputation and result in a loss of customers and orders. Moreover, the scarcity and importance of services may necessitate us making investments in foundry, tape, assembly and testing service providers in order to secure capacity, which would require us to substantially increase our capital outlays and possibly raise additional capital, which may not be available to us on satisfactory terms, if at all.

Technological innovation may reduce the number of display drivers typically required for each panel, thereby reducing the number of display drivers we are able to sell per panel. If such a reduction in demand is not offset by the general growth of the industry, our market share or average selling prices, or our revenues may decline.

In order to reduce costs, TFT-LCD panel manufacturers generally seek to have display drivers with higher channel counts and new panel designs to reduce the number of display drivers required for each panel. We have been developing such innovative and cost-effective display driver solutions in order to grow our market share, attract additional customers, increase our average selling prices and capture new design wins. However, we cannot assure you that we will successfully achieve these goals. If we fail to do so and the number of display drivers typically required per panel decreases thereby reducing our unit shipments, our revenues may decline. TFT-LCD panel manufacturers have developed several panel designs to reduce the usage of display drivers, including gate in panel, or GIP, amorphous silicon gate, or ASG, or simply gateless designs, which integrate the gate driver function onto the glass and eliminate the need for gate drivers, as well as dual gate and triple gate panel designs, which would largely reduce the usage of source drivers. If such designs or technologies become widely adopted, demand for our display drivers may decrease significantly, which would adversely and materially affect our results of operations.

The strategic relationships between certain of our competitors and their customers and the development of in-house capabilities by TFT-LCD and AMOLED panel manufacturers may limit our ability to expand our customer base and our growth prospects.

Certain of our competitors have established or may establish strategic or strong relationships with TFT-LCD panel manufacturers that are also our existing or potential customers. Marketing our display drivers to such TFT-LCD panel manufacturers that have established relationships with our competitors may be difficult. Moreover, several TFT-LCD panel manufacturers have in-house design capabilities and therefore may not need to source semiconductor products from us. If our customers successfully develop in-house capabilities to design and develop semiconductors that can substitute for our products, they would likely reduce or stop purchasing our products. To sell new products, we will likely need to target new market segments and new customers with whom we do not have current relationships, which may require different strategies and may present difficulties that we have not encountered before. Failure to broaden our customer base and attract new customers may limit our growth prospects.

10

As AMOLED offer brighter color, near-perfect-black, less power consumption and are thinner and lighter than TFT-LCD, it gradually penetrates the mid to high-end TFT-LCD market, especially the smartphone market. AMOLED display and related DDICs have been dominated by Korean companies. The marketplace is increasing utilization of the AMOLED display for smartphone and other consumer electronics due to expanded AMOLED capacity. We continue to gear up for the AMOLED driver IC development in partnership with major Chinese and Korean panel makers. In the first quarter of 2022, our flexible AMOLED driver and Tcon for automotive application has successfully ramped up for a customer’s flagship EV model. In addition, our AMOLED for tablet is expected to commence mass production in 2022 with Chinese panel makers. As for smartphone, we continue to commit R&D resources to AMOLED driver ICs through engagement with top tier customers. However, we could not assure you the success of our AMOLED driver IC as we are unable to penetrate into the mass volume existing Korean supplier chain and/or find new AMOLED panel manufactures to design-wins our solutions into. AMOLED process maturity for the new manufactures and the possible specification change due to the immaturity of the AMOLED will also be a hurdle to our AMOLED share gain and success.

We depend primarily on third-party foundries to manufacture our wafers, and any failure to obtain sufficient foundry capacity or loss of any of the foundries we use could significantly delay our ability to ship our products, causing us to lose revenues and damage our customer relationships.

Access to foundry capacity is crucial to our business because we do not manufacture our own wafers, instead relying primarily on third-party foundries. The ability of a foundry to manufacture our semiconductor products is limited by its available capacity. Access to capacity is especially important due to the limited availability of the high-voltage CMOS process technology required for the manufacture of wafers used in display drivers. If the primary third-party foundries that we rely upon are not able to meet our required capacity, or if our business relationships with these foundries are adversely affected, we would not be able to obtain the required capacity to meet increasing demand for our products. We may have to seek alternative foundries, which may not be available on commercially reasonable terms, or which may expose us to qualifying-new-foundry risks, as further discussed below.

We use several foundries for different semiconductor products, and certain of our products are manufactured at only one of these foundries. If any one of the foundries is unable to provide the required capacity to us, or does not deliver in a timely manner, or the quality or pricing terms are not acceptable to us, or any of the foundries experience financial difficulties or insolvency risks due to the impact of the global economic turmoil or any company-specific reasons or otherwise, if their operations are damaged or if there is any other disruption, directly or indirectly, of their foundry operations and we cannot qualify an alternative foundry in a timely manner, we could experience significant delays in receiving the product being manufactured by that foundry or incur additional costs to obtain substitutes, or interruption in our supply of the affected products. If we choose to use a new foundry or process technology for a particular semiconductor product, it will take us several quarters to qualify the new foundry or process before we can begin shipping. If we cannot qualify a new foundry in a timely manner, we may experience and incur damages as above mentioned and harm our customer relationships.

As a result of outsourcing the manufacturing of our wafers, we face several significant risks, including: (1) failure to secure manufacturing capacity, or being able to obtain required capacity only at higher costs; (2) risks of our proprietary information leaking to our competitors through the foundries we use; (3) limited control of delivery schedules, quality assurance and control, manufacturing yields and wafer costs; (4) the unavailability of, or potential delays in obtaining access to, key process technologies; and (5) financial risks of certain of our foundry suppliers.

To manufacture our display drivers used in TFT-LCD panels, we require foundries with high-voltage CMOS manufacturing process capacity. As a result, our dependence on high-voltage CMOS foundries presents the following, additional risks: (1) potential capacity constraints faced by the limited number of high-voltage CMOS foundries and the lack of investment in new and existing high-voltage CMOS foundries; (2) difficulty in attaining consistently high manufacturing yields from high-voltage CMOS foundries; (3) delay and time required to qualify and ramp up production at new high-voltage CMOS foundries; and (4) price increases.

As a result, we may be required to use foundries with which we have no established relationships, which could expose us to potentially unfavorable pricing, unsatisfactory quality or insufficient capacity allocation. Moreover, the scarcity of high-voltage foundry capacity may necessitate us making investments in foundries in order to secure capacity, which would require us to substantially increase our capital outlays and possibly raise additional capital, which may not be available to us on satisfactory terms, if at all.

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Since 2020, due to the pandemic lockdown, the work-from-home and learn-from-home new lifestyles triggered increasing demands for display and display drivers related products. The surging demand in display drivers caused the severe foundry capacity shortage, while the industry has no major expansion plan especially on the mature nodes we are primarily anchored to. To address the continuing foundry capacity shortage worldwide, we have entered into strategic agreements with our foundry partners in order to secure capacity to fulfill our business needs. We expect to enter into more additional strategic agreements to secure additional foundry capacity. Under these strategic agreements, we are committed to purchasing a specific volume at fixed or variable prices. However, for both pricing agreements, there can be no assurance that these prices provided in the strategic agreements with our foundry partners will always remain competitive during the contract term. For example, in the event that the global semiconductor market changes due to foundry capacity expansion and/or shrunken customer demand, the fixed prices we agree to pay our foundry partners may become significantly higher than the then prevailing market price. The situation could materially adversely impact our pricing strategies, competitive position, profitability and results of operation. We may also be subject to contractual penalties if we are unable to purchase the committed volume from our foundry partners. In addition, since these strategic agreements with our foundry partners typically require us to make prepayments or refundable deposits to such foundry partners, our cash flow, liquidity and financial condition could be adversely affected.

Our inability to secure sufficient capacity from any of our third-party tape, assembly and testing houses at reasonable and competitive prices could disrupt our shipments, harm our customer relationships and reduce our sales.

Access to third-party tape, assembly and testing capacity is critical to our business because we do not have in-house tape, assembly and testing capabilities for commercial production and instead rely on third-party service providers. Access to these services is especially important to our business because display drivers require specialized tape, assembly and testing services. A limited number of third-party tape, assembly and testing houses tape, assemble and test substantially all of our current products. There has been an increased level of industry consolidation among our suppliers in recent years. Therefore, suppliers could be in a better position to bargain for higher prices, longer contract terms, higher deposit and/or higher contract breach penalties for their services and products, which could result in an increase in our average unit cost and/or penalty expenses. We do not have binding long-term supply arrangements with tape, assembly and testing service providers that guarantee us access to our required capacity. If the primary tape, assembly and testing service providers that we rely upon are not able to meet our requirements in price, quality, and service, or if our business relationships with these service providers were adversely affected, we would not be able to obtain the required capacity and would have to seek alternative providers, which may not be available on commercially reasonable terms, or at all. As a result, we do not directly control our product delivery schedules, tape, assembly and testing costs, and quality assurance and control. If any of these third-party tape, assembly and testing houses experiences capacity constraints, financial difficulties, suffers any damage to its facilities or if there is any disruption of its assembly and testing capacity, we may not be able to obtain alternative assembly and testing services in a timely manner. Because of the amount of time, we usually take to qualify assembly and testing houses, we may experience significant delays in product shipments if we are required to find alternative sources. Any problems that we may encounter with the delivery, quality or cost of our products could damage our reputation and result in a loss of customers and orders. Moreover, the scarcity and importance of tape, assembly and testing services may necessitate us making investments in tape, assembly and testing service providers in order to secure capacity, which would require us to substantially increase our capital outlays and possibly raise additional capital, which may not be available to us on satisfactory terms, if at all.

Shortages of key components for our customers’ products could decrease demand for our products.

Shortages of components and other materials that are critical to the design and manufacture of our customers’ products may limit our sales. These components and other materials include, but are not limited to, color filters, backlight modules, polarizers, printed circuit boards and glass substrates. In the past, companies that use our products in their production have experienced delays in the availability of key components from other suppliers. In addition, component manufacturers may not be able to increase or maintain their component supply because of labor shortage in China or otherwise and may shut down certain of their capacity from time to time because of weak demand, which may increase the instability of timely delivery and the risk of shortage of components. Such shortages of components and other materials critical to the design and manufacture of our customers’ products may cause a slowdown in demand for our products, resulting in a decrease in our sales and adversely affecting our results of operations. In addition, as a result of uncertain demand conditions, our customers may hesitate to build inventory on hand and tend to release orders on short notice.

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We rely on the services of our key personnel, and if we are unable to retain our current key personnel and hire additional personnel, our ability to design, develop and successfully market our products could be harmed.

We rely upon the continued service and performance of a relatively small number of key personnel, including Jordan Wu, our president and chief executive officer, and Dr. Biing-Seng Wu, our chairman, and certain engineering, technical and senior management personnel, in particular, who are critical to our corporate management, business operation strategy, operation execution, future technological and product innovations. Competition for these personnel is intense in the semiconductor industry in Taiwan. Moreover, our future success depends on the expansion of our senior management team and the retention of key employees. Any of our key employees could leave our company with little or no prior notice in applicable jurisdictions and could then work with a competitor. In addition, we do not have “key person” life insurance policies covering any of our employees. The loss of any key personnel or our inability to attract or retain qualified personnel, whether engineers or others, could delay the development and introduction of new products and would have a material adverse effect on our ability to sell our products and may impact our overall business and growth. We may also incur increased operating expenses and be required to divert the attention of other senior executives away from their original duties to recruiting replacements for key personnel.

If we fail to forecast customer demand accurately, we may have excess or insufficient inventory, which may increase our operating costs and harm our business.

The lead time required by the semiconductor manufacturing service providers is typically longer than the lead time that our customers provide for delivery of our products to them. To ensure availability of our products for our customers, we will typically ask our semiconductor manufacturing service providers to start manufacturing our products based on forecasts provided by our customers in advance of receiving their purchase orders. However, these forecasts are not binding purchase commitments, and we do not recognize revenues until they are delivered to customers. Moreover, for the convenience of our customers, we may agree to ship our inventory to warehouses located near our customers, so that our products can be delivered to customers more quickly. In such cases, we will not recognize revenues until the control over a product is given to our customers based on the shipping terms. Hence, we incur inventory and manufacturing costs in advance of anticipated revenues.

The anticipated demand for our products may not materialize; therefore, manufacturing based on customer forecasts exposes us to risks of high inventory carrying costs, increased product obsolescence, and erosion of the products’ market value. If we overestimate demand for our products or if purchase orders are cancelled or shipments delayed, we may incur excess inventory that we cannot sell, or may have to sell at low profit margins or even at a loss, which would harm our financial results. Conversely, if we underestimate demand, we may not have sufficient inventory and may lose market share and damage customer relationships, which also could harm our business. These inventory risks are exacerbated by the high level of customization of our products, which limits our ability to sell excess inventory to other customers, which could eventually lead to write-down of these excess inventory.

If we do not achieve additional design wins in the future, our ability to grow will be limited.

Our future success depends on our customers designing our products into their products. To achieve design wins, we must design and deliver cost-effective, innovative, reliable and integrated products for our customers’ needs. A panel manufacturer may be reluctant to change its source of components due to the significant costs and time associated with qualifying a new supplier. A design win is not a binding commitment by a customer to purchase our products and may not result in large volume orders of our products. Rather, it is a decision by a customer to use our products in the design process of that customer’s products. Accordingly, our failure to successfully design, develop and introduce new products and product enhancements could harm our business, financial condition and results of operations.

Our products are complex and may require modifications to resolve undetected errors or failures in order for them to function with panels at the desired specifications, which could lead to higher costs, customer dispute, a loss of customers or a delay in market acceptance of our products.

Our products are highly complex and may contain undetected errors or failures. Our products must operate according to specifications with the other components used by our customers in their product manufacturing process. If our products are delivered with errors or defects, we could incur additional development, repair or replacement costs, and our credibility and the market acceptance of our products could be harmed along with possible liability indemnification for defective product, customer disputes and lawsuits against us or our customers.

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Our highly integrated products are difficult to manufacture without defects. The existence of defects in our products could increase our costs, decrease our sales and damage our customer relationships and our reputation.

The manufacture of our products that incorporate mixed analog and digital signal processing and embedded memory technology is complex and it is difficult for semiconductor foundries to manufacture them completely without defects. Minor deviations in the manufacturing process could cause substantial reduction in yield and quality.

Defective products can be caused by design, defective materials or component parts, or manufacturing difficulties. Thus, quality problems can be identified only by analyzing and testing our display drivers in a system after they have been manufactured. Difficulties in achieving defect-free products due to the increasing complexity of display drivers and the panel system may result in an increase in our costs and expenses, and delays in the availability of our products. In addition, if the foundries that we use fail to deliver products of satisfactory quality in the volume and at the price required, we will be unable to meet our customers’ demand or to sell those products at an acceptable profit margin, which could adversely affect our sales and margins and damage our customer relationships and our reputation.

We may not have long-term purchase commitments from our customers, which may result in significant uncertainty and volatility with respect to our revenues and could materially and adversely affect our results of operations and financial condition.

We may not have long-term purchase commitments from our customers; our sales are made on the basis of individual purchase orders. Our customers may also cancel or defer purchase orders. Our customers’ purchase orders may vary significantly from period to period, and it is difficult to forecast future order quantities. In the event of a cancellation, postponement, or reduction of an order, we would likely not be able to reduce operating expenses sufficiently so as to minimize the impact of the lost revenues. Alternatively, we may have excess inventory that we cannot sell, which would harm our operating results. In addition, changes in our customers’ business may adversely affect the quantity of purchase orders that we receive by reducing or canceling their orders of our products, and/or requesting higher-than-usual price concessions. We cannot assure you that any of our customers will continue to place orders with us in the future. We also cannot assure you that the volume of our customers’ orders will be consistent with our expectations when we plan our expenditures. Our results of operations and financial condition may thus be materially and adversely affected. Additionally, purchase order cancelations or negative alternation by customers may lead to a reduction in future earnings or cash flows subject to each event.

Our corporate actions are substantially controlled by officers, directors and affiliated entities who may take actions that are not in, or may conflict with, our or our public shareholders’ interests.

As of February 28, 2022, Jordan Wu and Dr. Biing-Seng Wu (who are brothers) beneficially owned approximately 2.1% and 21.5% of our ordinary shares, respectively. For information relating to the beneficial ownership of our ordinary shares, see “Item 7.A. Major Shareholders and Related Party Transactions—Major Shareholders.” These shareholders, acting together, could exert substantial influence over matters requiring approval by our shareholders, including electing directors and approving mergers or other business combination transactions. This concentration of ownership may also discourage, delay or prevent a change in control of our company, which could deprive our shareholders of an opportunity to receive a premium for their shares as part of a sale of our company and might reduce the price of our ADSs. Actions may be taken even if they were opposed by our other shareholders.

Assertions against us by third parties for infringement of their intellectual property rights could result in significant costs and cause our operating results to suffer.

The semiconductor industry is characterized by vigorous protection and pursuit of intellectual property rights and positions, which results in protracted and expensive litigation for many companies. We have received, and expect to continue to receive, notices of infringement of third-party intellectual property rights. We may receive claims from various industry participants alleging infringement of their patents, trade secrets or other intellectual property rights in the future. Any lawsuit resulting from such allegations could subject us to significant liability for damages and invalidate our proprietary rights. These lawsuits, regardless of their success, would likely be time-consuming and expensive to resolve and would divert management time and attention. Any potential intellectual property litigation also could force us to do one or more of the following: (1) stop selling products or using technology or manufacturing processes that contain the allegedly infringing intellectual property; (2) pay damages to the party claiming infringement; (3) attempt to obtain a license for the relevant intellectual property, which may not be available on commercially reasonable terms or at all; and (4) attempt to redesign those products that contain the allegedly infringing intellectual property with non-infringing intellectual property, which may not be possible.

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The outcome of a dispute may result in our need to develop non-infringing technology or enter into royalty or licensing agreements. We have agreed to indemnify certain customers for certain claims of infringement arising out of the sale of our products. Any intellectual property litigation could have a material adverse effect on our business, operating results or financial condition.

Our ability to compete will be harmed if we are unable to protect our intellectual property rights adequately.

We believe that the protection of our intellectual property rights is, and will continue to be, important to the success of our business. We rely primarily on a combination of patents, trademarks, trade secrets and copyright laws and contractual restrictions to protect our intellectual properties. These afford only limited protection. Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to obtain, copy or use information that we regard as proprietary, such as product design and manufacturing process expertise. Our pending patent applications and any future applications may not result in issued patents or may not be sufficiently broad to protect our proprietary technologies. Moreover, policing any unauthorized use of our products is difficult and costly, and we cannot be certain that the measures which we have implemented will prevent misappropriation or unauthorized use of our technologies, particularly in foreign jurisdictions where the laws may not protect our proprietary rights as fully as the laws of the United States. Others may independently develop substantially equivalent intellectual properties or otherwise gain access to our trade secrets or intellectual properties. Our failure to protect our intellectual properties effectively could harm our business.

We may undertake acquisitions or investments to expand our business that may pose risks to our business and dilute the ownership of our existing shareholders, and we may not realize the anticipated benefits of these acquisitions or investments.

As part of our growth and product diversification strategy, we will continue to evaluate opportunities to acquire or invest in other businesses, intellectual property or technologies that would complement our current offerings, expand the breadth of markets we can address or enhance our technical capabilities. Acquisitions or investments that we have completed or potentially may make in the future entail a number of risks that could materially and adversely affect our business, operating and financial results, including: (1) problems integrating the acquired key employees, operations, technologies or products into our existing business and products; (2) diversion of management’s time and attention from our core business; (3) adverse effects of losses of the acquired target upon our financial condition and results of operations; (4) adverse effects on existing business relationships with customers; (5) the need for financial resources above our planned investment levels; (6) dilution of share ownership of current shareholders under share swap transactions; (7) risks associated with entering markets in which we lack experience; (8) potential write-offs of acquired assets; and (9) potential impairment charges related to the goodwill acquired.

We may also face challenges in international acquisitions, such as compliance with local law and regulation, limited access to target companies and cultural assimilation challenges. Our failure to address these risks successfully may have a material adverse effect on our financial condition and results of operations. Any such acquisition or investment may require a significant amount of capital investment, which would decrease the amount of cash available for working capital or capital expenditures. In addition, if we use our equity securities to pay for acquisitions, the value of our ADSs and the underlying ordinary shares may be diluted. If we borrow funds to finance acquisitions, such debt instruments may contain restrictive covenants that can, among other things, restrict us from distributing dividends.

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System security risks, data protection breaches or unexpected system outage or failures could impact our business.

Our computer systems and networks are vulnerable to damage or interruption from earthquakes, fires, power loss, telecommunications failures, cyber-attacks, computer viruses or other malicious attempts. The reliability and safety of our information technology infrastructure / software, and the ability to continually expand and update technologies / software in response to dynamic changing needs and cybersecurity threats, are critical to our business. In recent years, there are increasing and evolving risks to cybersecurity and privacy, including criminal hackers, state-sponsored intrusions, industrial espionage, employee malfeasance and human / technological errors. All of the above could result in the loss of our intellectual property, the leak of commercially sensitive information, and the misappropriation of confidential information of our employees, customers and suppliers, and therefore could cause the interruption of our business. Failures to protect the privacy of employees, customers or suppliers’ confidential data against breaches of network security could result in the loss of existing or potential customers, other financial loss, and damage to our reputation. In addition, the operational cost and consequences against breaches and remedial measures could be significant. While we seek to annually review and assess our cybersecurity policies and procedures to ensure their adequacy and effectiveness, we still cannot guarantee that we will not be susceptible to new and emerging risks and attacks in the evolving landscape of cybersecurity threats. As of February 28, 2022, we had not been aware of any material cyberattacks or incidents that had or would be expected to have a materially adverse effect on our business and operations, nor had we been involved in any legal proceedings or regulatory investigations related thereto.

Our data centers are subject to the risk of break-ins and sabotage. Our disaster recovery plan cannot account for all eventualities. Consequently, the occurrence of a natural disaster or other unanticipated problems at our data centers could result in loss of production capabilities and lengthy interruptions in our services and business. Some of our system services are based on public cloud services, which are also subject to interruption due to cloud service providers’ unexpected downtimes, cyberattacks or any type of failure, telecommunication failure and/or other unidentified problems while connecting to cloud. These cloud services interruptions could result in loss of production capabilities and lengthy interruptions in our services and business. Cloud cybersecurity breaches could result in adverse effects on our customers, employees, suppliers, reputation, and business.

Risks Relating to Our Industry

The average selling prices of our products could decrease rapidly, which may negatively impact our revenues and operating results.

The price of each semiconductor product typically declines over its product life cycle, reflecting product obsolescence, decreased demand as customers shift to more advanced products, decreased unit costs due to advanced designs or improved manufacturing yields, and increased competition as more semiconductor suppliers are able to offer similar products. We may experience substantial period-to-period fluctuations in future operating results if our average selling prices decline. We may reduce the average unit price of our products in response to competitive pricing pressures, new product introductions by us or our competitors, and other factors. We expect that these factors will create downward pressure on our average selling prices and operating results. If we are unable to offset any reductions in our average selling prices by increasing our sales volumes and corresponding production cost reductions, or if we fail to develop and introduce new products and enhancements on a timely basis, our revenues and operating results will suffer.

The semiconductor industry, in particular semiconductors used in flat panel displays, is highly competitive, and we cannot assure that we will be able to compete successfully against our competitors.

Increased competition in the semiconductor industry may result in pricing pressure, reduced profitability and loss of market share, any of which could seriously harm our revenues and results of operations. We continually face intense competition from fabless display driver companies and integrated device manufacturers. Some of our competitors have substantially greater financial and other resources to pursue engineering, manufacturing, marketing and distribution of their products. As a result, they may be able to respond more quickly to changing customer demands or devote greater resources to the development, promotion and sales of their products. Some of our competitors are affiliated with, or are subsidiaries of, our panel manufacturer customers. These relationships may also give our competitors significant advantages such as early access to product roadmaps and design-in priorities, which would allow them to respond more quickly to changing customer demands and achieve more design-wins than we can. We cannot assure you that we will be able to increase or maintain our revenues and market share or compete successfully against our competitors in the semiconductor industry.

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Our business could be materially and adversely affected if we fail to anticipate changes in evolving industry standards, fail to achieve and maintain technological leadership in our industry or fail to develop and introduce new and enhanced products.

Our products are generally based on industry standards, which are continually evolving. The emergence of new industry standards could render our products or those of our customers unmarketable or obsolete and may require us to incur substantial unanticipated costs to comply with any such new standards. Our past sales and profitability have resulted, to a significant extent, from our ability to anticipate changes in technology and industry standards, and to develop and introduce new and enhanced products in a timely fashion. If we do not anticipate these changes in technologies and rapidly develop and introduce new and innovative technologies, we may not be able to provide advanced display semiconductors on competitive terms, and some of our customers may buy products from our competitors instead of from us. Our continued ability to adapt to such changes and anticipate future standards will be a significant factor in maintaining or improving our competitive position and our growth prospects. We cannot assure you that we will be able to anticipate evolving industry standards, successfully complete the design of our new products, have these products manufactured at acceptable manufacturing yields, or obtain significant purchase orders for these products to meet new standards or technologies. If we fail to anticipate changes in technology and to introduce new products that achieve market acceptance, our business and results of operations could be materially and adversely affected.

Risks Relating to Our Holding Company Structure

Our ability to receive dividends and other payments or funds from our subsidiaries may be restricted by commercial, statutory and legal restrictions, and thereby materially and adversely affect our ability to grow, fund investments, make acquisitions, pay dividends and otherwise fund and conduct our business.

We are a holding company and our assets consist mainly of our 100% ownership interest in Himax Taiwan. We receive cash from Himax Taiwan through intercompany borrowings. Himax Taiwan has not paid us cash dividends in the past. Nonetheless, dividends and interest on shareholder loans that we receive from our subsidiaries in Taiwan, if any, will be subject to withholding tax under ROC law. The ability of our subsidiaries to provide us with loans, pay dividends, repay any shareholder loans from us or make other distributions to us is restricted by, among other things, the availability of funds, the terms of various credit arrangements entered into by our subsidiaries, as well as statutory and other legal restrictions. Any limitation on dividend payments by our subsidiaries could materially and adversely affect our ability to grow, finance capital expenditures, make acquisitions, pay dividends, and otherwise fund and conduct our business.

Political, Geographical and Economic Risks

We operate primarily in Taiwan that are vulnerable to natural disasters.

Most of our operations, and the operations of many of our semiconductor manufacturing service providers, suppliers and customers are located in Taiwan, which is vulnerable to natural disasters, in particular, earthquakes and typhoons. Our principal foundries, tape and assembly and testing houses upon which we have relied to manufacture substantially all of our display drivers are located in Taiwan. As a result of this geographic concentration, disruption of operations at our facilities or the facilities of our semiconductor manufacturing service providers and suppliers for any reason, including work stoppages, power outages, water supply shortages, fire, typhoons, earthquakes or other natural disasters, could cause delays in production and shipments of our products. In addition, shortages or interruptions in electricity supply could further be exacerbated by changes in the energy policy of the government, such as to make Taiwan a nuclear-free country. Any delays or disruptions could result in our customers seeking to source products from our competitors. If such disruption of operation at our customers’ facilities and our customers may be required to shut down temporarily or to substantially reduce the operations of their fabs, these would seriously affect demand for our products.

Disruptions in Taiwan’s political environment could negatively affect our business and ADSs market price.

Our principal executive offices and a substantial amount of our assets are located in Taiwan, and a substantial portion of revenues is derived from operations in Taiwan. Our business, financial condition and results of operations and our ADSs market price may be affected by changes in ROC policies, taxation, inflation or interest rates, and by social instability and diplomatic issues that are outside of our control.

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Taiwan has a unique international political status. Since 1949, Taiwan and the PRC have been separately governed. The government of the PRC claims that it is the sole government in China and that Taiwan is part of China. Although significant economic and cultural relations have been established during recent years between Taiwan and the PRC, the PRC government has refused to renounce the possibility that it may at some point use force to gain control over Taiwan. Furthermore, the PRC government adopted an anti-secession law relating to Taiwan. Relations between the ROC and the PRC governments have been strained in recent years for a variety of reasons, including the PRC government’s position on the “One China” policy and tensions concerning arms sales to Taiwan by the United States government. Any tension between the ROC and the PRC, or between the United States and the PRC, could materially and adversely affect our ADSs market prices.

A substantial portion of our sales are made to customers in the PRC, which may expose us to additional political, regulatory, and economic risks.

We have been increasingly selling our products to customers in the PRC. In 2020 and 2021, approximately 79.7% and 81.5% of our revenues, respectively, were from customers headquartered in the PRC. We expect to continue to increase our sales to customers in the PRC in the future. With regional customer concentration, we are particularly subject to economic and political events and other developments that affect our customers in the PRC.

The PRC economy differs from the economies of most developed countries in many respects, including the structure, level of government involvement, level of development, foreign exchange control and allocation of resources. The PRC economy has been transitioning from a planned economy to a more market-oriented economy and is growing rapidly. For the past two decades, the PRC government has implemented economic reform measures emphasizing utilization of market forces in the development of the economy and also adjusted its macroeconomic control policies from time to time. These policies have led and may continue to lead to changes in market conditions. Further, if new, US sanctions are imposed on China and any new tariffs, legislation and/or regulations are implemented, or if existing trade agreements are renegotiated or, in particular, if the U.S. government takes retaliatory trade actions due to recent U.S.-China trade tensions, such changes could have an adverse effect on our customers or suppliers in China. We cannot predict whether changes in the PRC’s political, economic and social conditions, laws, regulations and policies will have any adverse effect on our customers in the PRC. In addition, the interpretation of PRC laws and regulations involves uncertainties. We cannot assure you that changes in such laws and regulations, or in their interpretation and enforcement, will not have a material adverse effect on the businesses and operations of our customers in the PRC and consequently have a material adverse effect on our business and operations.

Fluctuations in exchange rates could result in foreign exchange losses and affect our results of operations.

Our functional and reporting currency is U.S. dollars. In 2021, more than 99% of our revenues and cost of revenues were denominated in U.S. dollars. However, we have foreign currency exposure and are primarily affected by fluctuations in exchange rates between the U.S. dollar and the NT dollar. This is because a majority portion of our employees and facilities are based in Taiwan and operating expenses are denominated in NT dollars and we maintain a portion of our cash in NT dollars for Taiwan working capital purposes. For example, in December 2021, approximately 67% of our operating expenses were denominated in NT dollars, with a small percentage denominated in Japanese Yen, Korean Won, Israel new shekel and Chinese Renminbi, and the majority of the remainder in U.S. dollars. As a result, any significant fluctuations to our disadvantage in exchange rate of U.S. dollars against such currencies, in particular a weakening of the U.S. dollar against the NT dollar, would have an adverse impact on our operating expenses as expressed in U.S. dollar and adversely affect our operating profit.

Changes in ROC tax laws would likely increase our tax expenditures and decrease our net income.

The Statute for Industrial Innovation entitles companies to tax credits for qualifying research and development expenses related to innovation activities but limits the amount of tax credit to only up to 15% of the total qualifying research and development expenditure for the current year, subject to a cap of 30% of the income tax payable for the current year. Moreover, any unused tax credits provided under the Statute for Industrial Innovation may not be carried forward. Based on the amendments to the above, effective from January 1, 2016 to December 31, 2019, further extended to December 31, 2029, if companies choose to extend the tax credits to three years, the tax credit rate will be 10% of the total qualifying research and development expenditure for the current year and subject to a cap of 30% of the income tax payable for each year.

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On July 12, 2016, the ROC Legislative Yuan passed the third reading of anti-avoidance to establish Article 43-3 Controlled Foreign Company (“CFC”) rules and Article 43-4 Place of Effective Management (“PEM”) rules of the Income Tax Act (“ITA”). Detailed introduction of the CFC and PEM rules are described as follows:

(i)A profit-seeking enterprise (“PSE”) that directly or indirectly owns affiliated enterprises in low-tax jurisdictions outside the territory of the ROC shall recognize and include its pro rata share of affiliated enterprises’ annual profits as investment income in its income tax return for the year. Subsequent actual dividends and distributions from such affiliated enterprises that were previously recognized as investment income will then not be subject to income taxation; any surplus to previously recognized investment income shall be included as taxable income in the allocated year. Low-tax jurisdictions are defined as countries where the PSE income tax rate is lower than 70% of the income tax rate of the PSE in the ROC (the statutory income tax rate is 20% from January 1, 2018) (Article 43-3 CFC rules); and
(ii)A PSE is incorporated based on foreign legislation but its place of effective management (PEM) is maintained within the territory of the ROC, and the head office of such PSE will be determined to be within the territory of the ROC and profit-seeking enterprise income tax shall be levied in accordance with the ITA and relevant tax regulations. The aforementioned PEM refers to a place where substantive key management and commercial decisions of an entity’s business and its operations are made (Article 43-4 PEM rule).

According to the legislative intent, the CFC and PEM rules, in principle, will not be put into force immediately, but will wait until the China-Taiwan Cross-Strait Tax Agreement is effectuated, the OECD’s Common Reporting and Due Diligence Standard (“CRS”) for the automatic exchange of information of financial accounts is widely implemented internationally, and the relevant bylaws of the CFC and PEM rules have been adequately enacted and properly advocated. The date of implementation will be determined by the Executive Yuan. On January 14, 2022, Executive Yuan had announced the relevant bylaws of the CFC would be implemented from January 1, 2023.

Additionally, dividend payments made by us are not subject to withholding tax in the Cayman Islands. However, if the relevant bylaws of the PEM rules have been adequately enacted and properly advocated, we may be determined to be within the territory of the ROC and our income tax shall be levied in accordance with the Income Tax Act and relevant tax regulations. Therefore, dividend payments made by us would be subject to withholding tax in the ROC.

We may be affected by the Cayman Economic Substance Law

Pursuant to the International Tax Co-operation (Economic Substance) Act (2021 Revision) (as amended) of the Cayman Islands (the “ES Act”), a “relevant entity” is required to satisfy the economic substance test set out in the ES Act. A “relevant entity” includes an exempted company incorporated in the Cayman Islands as is our company. Based on the current interpretation of the ES Act, we believe that our company, Himax Technologies, Inc., is a pure equity holding company since it only holds equity participation in other entities and only earns dividends and capital gains.

Accordingly, for so long as our company is a “pure equity holding company”, it is only subject to the minimum substance requirements, which require us to (i) comply with all applicable filing requirements under the Companies Act (2021 Revision) of the Cayman Islands; and (ii) have adequate human resources and adequate premises in the Cayman Islands for holding and managing equity participations in other entities. However, there can be no assurance that we will not be subject to more requirements under the ES Act. Uncertainties over the interpretation and implementation of the ES Act may have an adverse impact on our business and operations.

Risks Relating to Our ADSs and Our Trading Market

The market price for our ADSs is volatile.

The market price for our ADSs is volatile and has ranged from a low of $7.01 to a high of $17.88 on the NASDAQ Global Select Market in 2021.

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The market price is subject to wide fluctuations in response to various factors, including the following: (1) actual or anticipated fluctuations in our quarterly operating results; (2) changes in financial estimates by securities research analysts; (3) changes in the expectation of our product launch timing, forecast and estimates; (4) conditions in the TFT-LCD panel market; (5) changes in the economic performance or market valuations of other display semiconductor companies; (6) announcements by us or our competitors of new products, acquisitions, strategic partnerships, joint ventures or capital commitments; (7) the addition or departure of key personnel; (8) fluctuations in exchange rates between the U.S. dollar and the NT dollar; (9) litigation related to our intellectual property; and (10) the release of lock-up or other transfer restrictions on our outstanding ADSs or sales of additional ADSs.

In addition, as a result of the worldwide financial crisis and recent global developments relating to Russia's invasion of Ukraine, global stock markets have experienced extreme price and volume fluctuations. This volatility has had a significant effect on the market prices of securities issued by many companies for reasons which may not be directly related to their operating performance, including but not limited to events such as tax-loss selling, mutual fund redemptions, hedge fund redemptions and margin calls. These market fluctuations may also materially and adversely affect the market price of our ADSs.

Future sales or perceived sales of securities by us, our executive officers, directors or major shareholders may hurt the price of our ADSs.

The market price of our ADSs could decline as a result of sales of ADSs or shares or the perception that these sales could occur. As of February 28, 2022, we had 348,597,140 outstanding shares and a significant number of our shares were beneficially owned by certain major shareholders such as our directors and executive officers. See “Item 7.A. Major Shareholders and Related Party Transactions—Major Shareholders.” If we, our executive officers, or directors or our shareholders sell ADSs or shares, the market price for our shares or ADSs could decline.

You may not have the same voting rights as the holders of our ordinary shares and may not receive voting materials sufficiently in advance to be able to exercise your right to vote.

Except as described in the deposit agreement, holders of our ADSs will not be able to exercise voting rights attaching to the shares evidenced by our ADSs on an individual basis. Holders of our ADSs will appoint the depositary or its nominee as their representative to exercise the voting rights attaching to the shares represented by the ADSs. In certain circumstances, the depositary shall refrain from voting and any voting instructions received from ADS holders shall lapse. Furthermore, in certain other circumstances, the depositary will give us a discretionary proxy to vote shares evidenced by ADSs. You may not receive voting materials sufficiently in advance to instruct the depositary to vote or persons who hold their ADSs through brokers, dealers or other third parties will not have the opportunity to exercise a right to vote.

You may not be able to participate in rights offerings and may experience dilution of your holdings as a result.

We may from time to time distribute rights to our shareholders, including rights to acquire our securities. Under the deposit agreement for the ADSs, the depositary will not offer those rights to ADS holders unless both the rights and the underlying securities to be distributed to ADS holders are either registered under the Securities Act, or exempt from registration under the Securities Act with respect to all holders of ADSs. We are under no obligation to file a registration statement with respect to any such rights or underlying securities or to endeavor to cause such a registration statement to be declared effective. In addition, we may not be able to take advantage of any exemptions from registration under the Securities Act. Accordingly, holders of our ADSs may be unable to participate in our rights offerings and may experience dilution in their holdings as a result.

You may be subject to limitations on transfer of your ADSs.

Your ADSs represented by the ADRs are transferable on the books of the depositary. However, the depositary may close its transfer books at any time or from time to time whenever it deems expedient in connection with the performance of its duties. In addition, the depositary may refuse to deliver, transfer or register transfers of ADSs generally when books or the books of the depositary are closed, or at any time if we or the depositary deem it necessary or advisable to do so because of any requirement of law, any government, governmental body, commission, or any securities exchange on which our ADSs or ordinary shares are listed, or under any provision of the deposit agreement or provisions of, or governing, the deposited securities or any meeting of our shareholders, or for any other reason.

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Your ability to protect your rights through the United States federal courts may be limited, because we are incorporated under Cayman Islands law, conduct a substantial portion of our operations in Taiwan, and all of our directors and officers reside outside the United States.

We are incorporated in the Cayman Islands. However, a substantial portion of our operations is conducted in Taiwan through Himax Taiwan, our wholly owned subsidiary, and substantially all of our assets are located in Taiwan. All of our directors and officers reside outside the United States, and a substantial portion of the assets of those persons is located outside the United States. As a result, it may be difficult or impossible for you to bring an action against us or against these individuals in the United States in the event that you believe that your rights have been infringed under the securities laws or otherwise. Even if you are successful in bringing an action of this kind, the laws of the Cayman Islands and of Taiwan may render you unable to enforce a United States judgment against our assets or the assets of our directors and officers. There is no statutory recognition in the Cayman Islands of judgments obtained in the United States, although a final and conclusive judgment in the federal or state courts of the United States under which a sum of money is payable, other than a sum payable in respect of multiple damages, taxes, or other charges of a like nature or in respect of a fine or other penalty, may be subject to enforcement proceedings as debt in the courts of the Cayman Islands under the common law doctrine of obligation, provided that (a) such federal or state courts of the United States had proper jurisdiction over the parties subject to such judgment; (b) such federal or state courts of the United States did not contravene the rules of natural justice of the Cayman Islands; (c) such judgment was not obtained by fraud; (d) the enforcement of the judgment would not be contrary to the public policy of the Cayman Islands; (e) no new admissible evidence relevant to the action is submitted prior to the rendering of the judgment by the courts of the Cayman Islands; and (f) there is due compliance with the correct procedures under the laws of the Cayman Islands.

Therefore, our public shareholders may have more difficulty in protecting their interests through actions against our management, directors or major shareholders than shareholders of a corporation incorporated in a jurisdiction in the United States.

You may face difficulties in protecting your interests as a shareholder because judicial precedents regarding shareholders’ rights are more limited under Cayman Islands law than under U.S. law, and because Cayman Islands law generally provides less protection to shareholders than U.S. law.

Our corporate affairs are governed by memorandum and articles of association, the Companies Law, Cap. 22 (Law 3 of 1961, as consolidated and revised) of the Cayman Islands, or the Cayman Islands Companies Law, and the common law of the Cayman Islands. The rights of shareholders to take action against directors, actions by minority shareholders and the fiduciary responsibilities of our directors to us under Cayman Islands law are to a large extent governed by the common law of the Cayman Islands. The common law is derived in part from comparatively limited judicial precedent in the Cayman Islands as well as from English common law, which has persuasive, but not binding, authority on a court in the Cayman Islands. The rights of shareholders and the fiduciary responsibilities of directors under Cayman Islands law are not as clearly established as they would be under statutes or judicial precedent in some jurisdictions in the United States. In particular, the Cayman Islands have a less developed body of securities law than the United States.

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ITEM 4. INFORMATION ON THE COMPANY

4.A. History and Development of the Company

Himax Taiwan, our predecessor, was incorporated on June 12, 2001 as a limited liability company under the laws of the ROC. On April 26, 2005, we established Himax Technologies Limited, an exempted company with limited liability under the Cayman Islands Companies Law, as a holding company to hold the shares of Himax Taiwan in connection with our reorganization and share exchange. On October 14, 2005, Himax Taiwan became our wholly owned subsidiary through a share exchange consummated pursuant to the ROC Business Mergers and Acquisitions Law through which we acquired all of the issued and outstanding shares of Himax Taiwan, and we issued ordinary shares to the shareholders of Himax Taiwan. Shareholders of Himax Taiwan received one of our ordinary shares in exchange for one Himax Taiwan common share. The share exchange was unanimously approved by shareholders of Himax Taiwan on June 10, 2005 with no dissenting shareholders and by the ROC Investment Commission on August 30, 2005 for our inbound investment in Taiwan, and on September 7, 2005 for our outbound investment outside of Taiwan. We effected this reorganization and share exchange to comply with ROC laws, which prohibit a Taiwan incorporated company not otherwise publicly listed in Taiwan from listing its shares on an overseas stock exchange. Our reorganization enables us to maintain our operations through our Taiwan subsidiary, Himax Taiwan, while allowing us to list our shares overseas through our holding company structure.

On September 26, 2005, we changed our name to “Himax Technologies, Inc.,” and on October 17, 2005, Himax Taiwan changed its name to “Himax Technologies Limited” upon the approval of shareholders of both companies and amendments to the respective constitutive documents. We effected the name exchange in order to maintain continuity of operations and marketing under the trade name “Himax Technologies, Inc.,” which had been previously used by Himax Taiwan.

Our ADSs have been listed on the NASDAQ Global Select Market since March 31, 2006. Our ordinary shares are not listed or publicly traded on any trading markets.

In February 2007, we completed the acquisition of Wisepal, currently known as Himax Semiconductor, Inc., a fabless semiconductor company focusing on the development of LTPS TFT-LCD drivers for small and medium-sized applications. This transaction strengthened our competitive position in the small and medium-sized product areas and further diversified our technology and product offerings. For management purpose, Himax Semiconductor Inc. was merged into Himax Taiwan on July 2, 2018.

In March 2007, we established Himax Imaging, Inc., or Himax Imaging, which develops and markets CMOS image sensors with an initial focus on camera applications used in cell phones and notebook computers.

In July 2012, our subsidiary, Himax Display, completed the acquisition of Spatial Photonics, currently known as Himax Display (USA) Inc., a Delaware corporation engaged in the business of manufacturing and production of MEMS products.

In June 2018, we completed the acquisition of Emza Visual Sense Ltd., or Emza, which is dedicated to the development of visual sensors that include proprietary machine-vision algorithms and specific architectures that enable always-on visual sensing capabilities, achieving improvement in power consumption, price and form factor. From time to time, we have also made minority investments in various companies for strategic purposes in the ordinary course of business.

Our principal executive offices are located at No. 26, Zih Lian Road, Sinshih District, Tainan City 74148, Taiwan, Republic of China. Our telephone number at this address is +886-6-505-0880. Our registered office in the Cayman Islands is located at Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman KY1-1111, Cayman Islands. Our telephone number at this address is +1-345-945-3901. In addition, we have offices in Hsinchu and Taipei, Taiwan; Foshan, Fuqing, Ningbo, Beijing, Shanghai, Shenzhen, Suzhou, Wuhan, Hefei, Qingdao, Chongqing, Xi’an and Xiamen, China; Tokyo, Japan; Asan-si and Bundang-gu, South Korea; Givatayim, Israel; and Irvine and Campbell, California and Minneapolis, Minnesota, USA.

Investor inquiries should be directed to our Investor Relations department by email to hx_ir@himax.com.tw. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The address of the SEC’s Internet site is http://www.sec.gov. Our website is www.himax.com.tw. The information contained on our website is not part of this annual report.

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4.B. Business Overview

We are a fabless semiconductor solution provider dedicated to display imaging processing technologies. We are a worldwide market leader in display driver ICs and timing controllers used in TVs, laptops, monitors, mobile phones, tablets, automotive, digital cameras, car navigation, virtual reality (VR) devices and many other consumer electronics devices. Additionally, we design and provide controllers for touch sensor displays, in-cell Touch and Display Driver Integration (TDDI) single-chip solutions, LED driver ICs, power management ICs and LCoS micro-displays for augmented reality (AR) devices and heads-up displays (HUD) for automotive. We also offer CMOS image sensors, wafer level optics for AR devices, 3D sensing and ultralow power AI image sensing, which are used in a wide variety of applications such as mobile phone, tablet, laptop, TV, PC camera, automobile, security, medical devices, home appliance, AIoT, etc. For display drivers and display-related products, our customers are panel manufacturers, agents or distributors, module manufacturers, assembly houses or end customers. We also work with camera module manufacturers, optical engine manufacturers, and television system manufacturers for various non-driver products.

Industry Background

We mainly operate in the flat panel display semiconductor industry. As the majority of our revenues derive from products that are critical components of flat panel displays, such as display drivers, timing controllers, power ICs and other semiconductor products, our industry is closely linked to the trends and developments of the flat panel display industry.

Flat Panel Display Semiconductors

Flat panel displays require different semiconductors depending upon the display technologies and the applications. Some of the most important ones include the following:

Display Driver. The display driver receives image data from the timing controller and delivers precise analog voltages or currents to create images on the display. The major application of display driver IC is used on TFT-LCDs. Other than display drivers for TFT-LCDs, we also offer display drivers for AMOLED and Electronic Paper (e-paper) Displays. AMOLED display is getting more and more popular in recent years, starting from high-end smartphone and TV applications, while e-paper display mimics traditional paper sheet and holds static text and images indefinitely without electricity. Detailed display driver IC specification for LCD, AMOLED and e-paper are different due to panel characteristics. The two main types of display drivers for a display panel are gate drivers and source drivers. Gate drivers turn on the transistor within each pixel cell on the horizontal line on the panel for data input at each row. Source drivers receive image data from the timing controller and generate voltage that is applied to the liquid crystal within each pixel cell on the vertical line on the panel for data input at each column. The combination determines the colors generated by each pixel. Typically, multiple gate drivers and source drivers are installed separately on the panel. However, for certain small and medium-sized applications, gate drivers and source drivers are integrated into a single chip due to space and cost considerations. Large-sized panels typically have higher resolution and require more display drivers than small and medium-sized panels.
Timing Controller. The timing controller receives image data and converts the format for the source drivers’ input. The timing controller also generates controlling signals for gate and source drivers. Typically, the timing controller is a discrete semiconductor in large-sized TFT-LCD and AMOLED panels. For certain small and medium-sized applications, however, the timing controller may be integrated with display drivers.
Operational Amplifier. An operational amplifier supplies the reference voltage to source drivers in order to make their output voltage uniform.
Power IC. Power ICs include certain drivers, amplifiers, DC to DC converters and other semiconductors designed to enhance power management, such as voltage regulation, voltage boosting and battery management.
Touch controller IC. For touch screen applications, touch controller ICs enable touch interfaces, such as capacitive touch panels, to identify, qualify and track user’s contacts with precision and sensibility.
Others. Flat panel displays also require multiple general purposes semiconductors such as memory, power converters and inverters.

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Characteristics of the Display Driver Market

Although we operate in several distinct segments of the flat panel display semiconductor industry, our principal products are display drivers. Display drivers are critical components of flat panel displays. The display driver market has specific characteristics, including those discussed below.

Concentration of Panel Manufacturers

The global TFT-LCD panel industry consists of a small number of manufacturers, substantially all of which are based in Asia. In recent years, Korean TFT-LCD panel makers have gradually undergone restructurings to shift their technology and manufacture focus from TFT-LCD to OLED and TFT-LCD panel manufacturers, especially China-based manufacturers which have invested or are planning to invest heavily to establish, construct and ramp up additional fab capacity. The capital-intensive nature of the industry often results in TFT-LCD panel manufacturers operating at a high level of capacity utilization in order to reduce unit costs. This tends to create a temporary oversupply of panels, which reduces the average selling price of panels and puts pricing pressure on component companies including display driver companies. Moreover, the concentration of panel manufacturers permits major panel manufacturers to exert pricing pressure on display driver companies such as us. The small number of panel manufacturers exacerbates this situation as display driver companies, in addition to seeking to expand their customer base, must also focus on winning a larger percentage of such customers’ display driver requirements.

Customization Requirements

Each panel display has a unique pixel design to meet its particular requirements. To optimize the panel’s performance, display drivers have to be customized for each panel design. The most common customization requirement is for the display driver company to optimize the gamma curve of each display driver for each panel design. Display driver companies must work closely with their customers to develop semiconductors that meet their customers’ specific needs in order to optimize the performance of their products.

Mixed-Signal Design and High-Voltage CMOS Process Technology

Display drivers have specific design and manufacturing requirements that are not standard in the semiconductor industry. Some display drivers require mixed-signal design since they combine both analog and digital devices on a single semiconductor to process both analog signals and digital data. Manufacturing display drivers require high-voltage CMOS process technology operating typically at 4.5 to 24 volts for source drivers and 10 to 50 volts for gate drivers, levels of voltage which are not standard in the semiconductor industry. For display drivers, the driving voltage must be maintained under a very high degree of uniformity, which can be difficult to achieve using standard CMOS process technology. Moreover, manufacturing display drivers does not require very small-geometry semiconductor processes. Typically, the manufacturing process for large panel display drivers require geometries between 0.11 micron and 1 micron because the physical dimensions of a high-voltage device do not allow for the economical reduction in geometries below this range. We believe that there are a limited number of fabs with high-voltage CMOS process technology that are capable of high-volume manufacturing of display drivers.

Special Assembly and Testing Requirements

Manufacturing display drivers requires certain assembly and testing technologies and equipment that are not standard for other semiconductors and are offered by a limited number of providers. The assembly of display drivers typically uses either tape-automated bonding, also known as TAB, or chip-on-glass, also known as COG, technologies. Display drivers also require gold bumping, which is a process in which gold bumps are plated onto each wafer to connect the die and the processed tape, in the case of TAB packages, and the glass, in the case of COG packages. TAB may utilize tape carrier packages, also known as TCP, or chip on film, also known as COF. The type of assembly used depends on the panel manufacturer’s design, which is influenced by panel size and application and is typically determined by the panel manufacturers. Display drivers for large-sized applications typically require TAB package and, to a lesser extent, COG package types, whereas display drivers for smartphone, tablet and consumer electronics products typically require COG packages. The testing of display drivers also requires special testers that can support high-channel and high-voltage output semiconductors. Such testers are not standard in the semiconductor industry.

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Supply Chain Management

The manufacturing of display drivers is complex and requires several manufacturing stages such as wafer fabrication, gold bumping, and assembly and testing, and the availability of materials such as the processed tape used in TAB packaging. We refer to these manufacturing stages and material requirements collectively as the “supply chain”. Panel manufacturers typically operate at high levels of capacity utilization and require a reliable supply of display drivers. A shortage of display drivers, or a disruption to this supply, may disrupt panel manufacturers’ operations. As a result, a company’s ability to deliver its products on a timely basis at the quality and quantity required is critical to satisfying its existing customers and winning new ones. Such supply chain management is particularly crucial to fabless display driver companies that do not have their own in-house manufacturing capacity. In the case of display drivers, supply chain management is further complicated by the high-voltage CMOS process technology and the special assembly and testing requirements that are not standard in the semiconductor industry. Access to this capacity also depends in part on display driver companies having received assurances of demand for their products since semiconductor manufacturing service providers require credible demand forecasts before allocating capacity among customers and investing to expand their capacity to support growth.

Need for Higher Level of Integration

The small form factor of smartphone, tablet, automotive and certain consumer electronics products restricts the space for components. Small and medium-sized panel applications typically require one or more source drivers, one or more gate drivers and one timing controller, which can be installed as separate semiconductors or as an integrated single-chip driver. Customers are increasingly demanding higher levels of integration in order to manufacture more compact panels, simplify the module assembly process and reduce unit costs. Display driver companies must be able to offer highly integrated chips that combine the source driver, gate driver and timing controller, as well as semiconductors such as memory, power circuit and image processors, into a single chip. Due to the size restrictions and stringent power consumption constraints of such display drivers, single-chip drivers are complex to design. For large-sized panel applications, integration is both more difficult to achieve and less important since size and weight are less of a priority. Lastly, as some of our TFT-LCD panel customers had turned to pure in-cell TDDI panel development for thinner display designs, we have developed a series of single chip touch display driver integrated circuit (TDDI) for advanced in-cell touch display panel.

Products and Solutions

We have several principal product lines:

display drivers and timing controllers;
touch controller ICs;
ASIC service;
LCoS and MEMS products;
power ICs;
CMOS image sensor products;
wafer level optics products;
3D sensing business; and
Ultralow power AI image sensing.

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Display Drivers and Timing Controllers

Display Driver Characteristics

Display drivers deliver precise analog voltages and currents that activate the pixels on panels. The following is a summary of certain display driver characteristics and their relationship to panel performance.

Resolution and Number of Channels. Resolution refers to the number of pixels per line multiplied by the number of lines, which determines the level of fine detail within an image displayed on a panel. For example, a color display screen with 1,024 x 768 pixels has 1,024 red columns, 1,024 green columns and 1,024 blue columns for a total of 3,072 columns and 768 rows. The red, green and blue columns are commonly referred to as “RGB.” Therefore, the display drivers need to drive 3,072 column outputs and 768 row outputs. The number of display drivers required for each panel depends on the resolution of the panel and the number of channels per display driver. For example, an XGA (1,024 x 768 pixels) panel requires eight 384-channel source drivers (1,024 x 3 = 384 x 8) and three 256-channel gate drivers (768 = 256 x 3), while a full HD (1,920 x 1,080 pixels) panel requires eight 720-channel source drivers and four 270-channel gate drivers. The number of display drivers required can be reduced by using drivers with a higher number of channels. For example, a full HD panel can have six 960-channel source drivers instead of eight 720-channel source drivers. Thus, using display drivers with a higher number of channels can reduce the number of display drivers required for each panel, although display drivers with a higher number of channels typically have higher unit costs.
Color Depth. Color depth is the number of colors that can be displayed on a screen, which is determined by the number of shades of a color, also known as gray scale, that can be shown by the panel. For example, a 6-bit source driver is capable of generating 26 x 26 x 26 = 218, or 262K colors, and similarly, an 8-bit source driver is capable of generating 16 million colors. Typically, for TFT-LCD panels currently in commercial production, 262K, 16 million and 1 billion colors are supported by 6-bit, 8-bit and 10-bit source drivers, respectively.
Operational Voltage. A display driver operates with two voltages: the input voltage (which enables it to receive signals from the timing controller) and the output voltage (which, in the case of source drivers, is applied to liquid crystals and, in the case of gate drivers, is used to switch on the TFT device). Source drivers typically operate at input voltages from 3.3 to 1.8 volts and output voltages ranging from 4.5 to 24 volts. Gate drivers typically operate at input voltages from 3.3 to 1.8 volts and output voltages ranging from 10 to 50 volts. Lower input voltage saves power and lowers electromagnetic interference, or EMI. Output voltage may be higher or lower depending on the characteristics of the liquid crystal (or diode), in the case of source drivers, or TFT device, in the case of gate drivers.
Gamma Curve. The relationship between the light passing through a pixel and the voltage applied to it by the source driver is nonlinear and is referred to as the “gamma curve” of the source driver. Different panel design and manufacturing processes require source drivers with different gamma curves. Display drivers need to adjust the gamma curve to fit the pixel design. Due to the materials and processes used in manufacturing, panels may contain certain imperfections which can be corrected by the gamma curve of the source driver, a process which is generally known as “gamma correction.” For certain types of liquid crystal, the gamma curves for RGB cells are significantly different and thus need to be independently corrected. Some advanced display drivers feature three independent gamma curves for RGB cells.
Driver Interface. Driver interface refers to the connection between the timing controller and display drivers. Display drivers increasingly require higher bandwidth interface technology to address the larger data volume necessary for video images. Panels used for higher data transmission applications, such as televisions, require more advanced interface technology. The principal types of interface technologies are transistor-to-transistor logic, or TTL, reduced swing differential signaling, or RSDS, mini-low voltage differential signaling, or mini-LVDS, and point-to-point high-speed interface. Among these, RSDS, mini-LVDS and point-to-point interface were developed as low power, low noise and low amplitude methods for high-speed data transmission using fewer copper wires and resulting in lower EMI. Moreover, there are some panel manufacturers developing their proprietary point-to-point interfaces, such as embedded panel interface, or EPI, USI-T, iSP, CEDS, CHPI, CSPI and CMPI.

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Package Type. The assembly of display drivers typically uses TAB and COG package types. COF and TCP are two types of TAB packages, of which COF packages have become predominantly used in recent years. Customers typically determine the package type required according to their specific mechanical and electrical considerations. In general, display drivers for small-sized panels mainly use COG package types, whereas display drivers for large-sized panels primarily use TAB package types and, to a lesser extent, COG package types.

Large-Sized Applications

We provide source drivers, gate drivers, PMIC, P-gamma OP level shifter and timing controllers (TCON) for large-sized panels principally used in desktop monitors, notebook computers and televisions. Display drivers used in large-sized applications feature different key characteristics, depending on the end-use application. For example, the industry trend for large-sized applications is generally toward super high channel, low power consumption, low cost, thin and light form factor, touch function, higher data transmission rate and higher driving capabilities. Higher speed interface technologies are also key for 4Kx2K and 8Kx4K high-resolution TVs. Greater color depth, thermal solution, high data rate and high driving, are particularly important for advanced televisions and certain monitors.

Our large display driver IC business achieved several milestones from 2019. For example, we successfully added 12-inch fabs into the pool of our foundry capacity for our large display driver ICs to ease the capacity shortage of 8” foundry where the vast majority of large panel driver ICs are fabricated. On high-end TV, Himax outpaced peers to lead the mass production of customized high-speed point-to-point (P2P) transmission using embedded panel intra interface such as iSP, CHPI, USI-T, CMPI, CEDS and CSPI for 4K TVs and developed a 2-in-1 COF driver to meet the requirements of high channel count and heat dissipation for 8K TV. On gaming monitor, we have high frame rate and high driving driver to meet various resolutions needs and frame rates such as UHD 165Hz, QHD 240Hz, FHD 360Hz, etc. We also successfully developed low power consumption driver applied in low power monitor to satisfied Energy Star 8.0 and even Energy Star 9.0. Lastly, our P2P driver and TCON ICs with 13.3" FHD can meet Intel 1W project requirement.

We also made tremendous progress in TCON product lines in 2021. UHD TV penetration rate is larger than 60% since 2021, and we developed competitive UHD TV TCON to seize this market. Himax UHD TV TCON has mass production at all major China LCD makers and the revenues has double growth in 2021. We also provide gaming TCON for the new QHD 240Hz and UHD 144Hz gaming monitor and notebook. For high-end gaming requirement, we have developed eDP 8.1G TCON to increase bandwidth. We also have embedded local dimming in TCON ICs for TFT-LCD automotive applications to support higher contrast instrument panels needed for drivers to read the content of the meter quickly. Additionally, several key panel makers also seek Himax cooperation to develop AMOLED for automotive applications. We have developed certain customized AMOLED ASIC for these key panel makers and some of them started entering mass production in 2021.

The table below sets forth the features of our products for large-sized applications:

Product

    

Features

TFT-LCD Source Drivers

 

     384 to 1920 output channels

     6-bit (262K colors), 8-bit (16 million colors) or 10-bit (1 billion colors)

     one gamma-type driver

     two gamma-type drivers to improve display quality

     three gamma-type drivers (RGB independent gamma curve to enhance color image)

     output driving voltage ranging from 7 up to 20V

     input logic voltage ranging from standard 3.3V to low power 1.8V and support half VDDA

     low power consumption and low EMI

     support COF and COG package types

     support TTL, RSDS, mini-LVDS (up to 400MHz), cascade modulated driver interface, or CMDI, point-to-point high speed interface (up to 4Gbps for 8K 120Hz) and customized interface technologies

     support dual gate and triple gate panel designs

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Product

    

Features

TFT-LCD Gate Drivers

 

      192 to 1600 output channels

      output driving voltage ranging from 10 up to 50v

      input logic voltage ranging from standard 3.3V to low power 1.8V

      low power consumption

      support COF and COG package types

      support dual gate and triple gate panel designs

Timing Controllers

 

      product portfolio supports a wide range of resolutions, from VGA (640 x 480 pixels) to full HD, UHD and 8K4K (1,920 x 1,080 pixels, 1,920 x 1,200 pixels, 3840 x 2160 and 7680 x 4320)

     support mini-LVDS, point-to-point high speed interface and customized output interface technologies

      embedded overdrive function to improve response time

      support CABC and local dimming to save power and color engine to enhance color and sharpness

      support LVDS, eDP, G-sync, MIPI and V-by-one input interface technologies

      support dual-gate, triple-gate, GOA (gate on array) and RGBW panel designs

      support amorphous silicon, IGZO and LTPS panel

      ASIC AMOLED timing controller

Programmable Gamma OP

      8 to 16 channel gamma buffer outputs

      channel VCOM buffer output

      Internal non-volatile memory

      2 gamma bank selection, setting time < 3uS

      Analog power supply voltage: 9.0V to 20.0V

      Digital power supply voltage: 2.7V to 3.6V

      Peak current on gamma channels: 200mA

      Peak current on VCOM channel: 400mA

      Programmable VCOM limit

      12C speed up to 1MHz

Tablet Display Drivers

      highly integrated single chip embedded with the source driver, power circuit, and timing controller

      suitable for a wide range of resolutions from WSVGA (600 x 1024), WXGA (800 x 1280), WUXGA (1200x1920) to WQXGA (1600 x 2560)

      support up to 16 million colors

      support RGB separated gamma adjustment

      support CABC

      support color enhancement features

      support MIPI interface

      touch display driver integrated circuit (TDDI) for advanced in-cell touch display

      supporting TDDI with active stylus

      COG and COF solutions for super slim bezel

Small and Medium -Sized Applications

Automotive Display Applications

We offer source drivers, gate drivers, timing controllers and integrated drivers for the fast ramping automotive display applications, such as instrument cluster display (ICD), center stack display (CSD), head-up display (HUD), rear seat entertainment display (RSE), rearview mirror display and sideview mirror display.

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The automotive display drivers can support various display resolutions to meet the customized needs of automotive display, including GIP panel and non-GIP panel, a-Si TFT panel and LTPS panel. Meanwhile, the automotive display drivers can support higher output driving voltage for higher contrast ratio and faster liquid crystal response in automotive display applications. The automotive Timing Controller can support Local Dimming function for the goal of higher contrast ratio and thermal reduction in automotive display applications. We launched the world’s first TDDI design for automotive displays technology which started shipping in 2019 with meaningful mass production shipment to industrial leading automotive panel house, tier-1 and brands starting 2021.Himax is the market leader in automotive display driver business covering the entire spectrum of products and technologies, including the industry’s most comprehensive traditional DDIC product offerings as well as leading solutions for new technology areas such as TDDI, local dimming Tcon, LTDI and AMOLED. Our automotive TDDI is broadly adopted by named auto makers in their new launches of vehicles and had over 1 million units and 1.4 million units shipped in the third quarter and fourth quarter of 2021, respectively, demonstrating an exponentially growing trajectory. With the commencement of TDDI mass production and LTDI thereafter, we are confident that our overall market share in the automotive display driver market will continue to rise in the coming years and our technological prowess continues to separate us from peers for the next generation display for automotive.

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The following table summarizes the features of our products used in automotive display applications:

Product

 

Features

TFT-LCD Source Drivers

642 to 1,920 output channels
6-bit (262K colors), 8-bit (16.7 million colors)
support RSDS, mini-LVDS, Point-to-Point interfaces
output driving voltage ranging up to 15V
support COG and COF package type

TFT-LCD Gate Drivers

100 to 1,600 output channels
output driving voltage ranging up to 40V
support COG and COF package type

TFT-LCD Integrated Drivers

highly integrated chip embedded with source driver, timing controller and power circuit
support RGB, LVDS input interfaces
support Single Gate, Dual Gate, Triple Gate panel structure
support 2MUX, 3MUX, 6MUX LTPS panel structure
support GIP panel (a-TFT GIP or LTPS GIP or IGZO GIP) and non-GIP panel
support resolution up to 2880 RGBx1080 (or 3840 RGBx810) with cascaded chips
source driver output driving voltage ranging up to ±6.6V or 16V
support Fail Detect Function, including CRC Function
support Local Dimming Function
support Telltale OSD function
support COG and COF package type

Timing Controllers

support LVDS, eDP 1.2 input interface
support RSDS, mini-LVDS, Point-to-Point output interfaces
support Single Gate, Dual Gate, Triple Gate panel structure
support 2MUX, 3MUX, 6MUX LTPS panel structure
support GIP panel (a-TFT GIP or LTPS GIP or IGZO GIP) and non-GIP panel
support various resolutions up to 4K2K(ICD) or 7K1K(CID)
support Local Dimming Function
support Dual Cell Panel Structure Function
support Fail Detect Function, including CRC Function
support Telltale OSD function

TFT-LCD TDDI Drivers

highly integrated chip embedded with source driver, timing controller, touch controller and power circuit
support LVDS input interfaces
support Single Gate, Dual Gate, Triple Gate a-TFT panel structure
support 2MUX, 3MUX, 6MUX LTPS panel structure
support GIP panel (a-TFT GIP or LTPS GIP) and non-GIP panel
support resolution up to 5760RBx720 with cascaded chips
source driver output driving voltage ranging up to ±6.6V
support Fail Detect Function, including CRC Function
support Telltale OSD function
support Color Engine function
support COG package type

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Smartphone and Tablet Applications

We offer display drivers for small and medium-sized displays in smartphone and tablet applications that combine source driver, gate driver, timing controller, DC to DC circuits, and optional frame buffer into a single chip or cascades chips in various display technologies, such as TFT-LCD and AMOLED.

Smartphones and tablet have gained greater popularity among small and medium-sized display drivers and enjoyed high growth in recent years. This has also contributed to increased demand for larger size and higher resolution smartphone displays. In the past few years, we offered innovative handset display driver products by providing FWVGA (480 x 864), qHD (540 x 960), WSVGA (1024 x 600), HD720 (720 x 1280)/ WXGA (800 x 1280), FHD (1080 x 1920) / WUXGA (1200 x 1920) and up to QHD (1440 x 2560) / WQXGA (1600x2560) display driver ICs. We continue to update new products for this mainstream smartphone and tablet market with lower cost and new features, such as color enhancement and sun-light readability enhancement functions. In 2015, we developed new technologies and led the display industry with next generation display driver ICs, such as a-si FHD (1080 x 1920), AMOLED ASICs for HD and FHD and LTPS QHD (1440 x 2560) with sub-pixel rendering technologies. In 2016, Himax developed a series of single chip touch display driver integrated circuit (TDDI) for advanced in-cell touch display panel. Himax started the shipments of in-cell TDDI for some smartphones in 2016 and extended TDDI solution to tablet application in 2017. Smartphone display had a dramatic change in terms of aspect ratio, instead of resolution, in 2017. Though display resolution of entry smartphones kept moving up from WVGA or qHD to HD, high-end smartphone display may be stuck at FHD or QHD since it’s pixel per inch is good enough for normal consumers’ daily use. OEMs start to seek for differentiation with 18:9 or even wider aspect ratio, full front displays. Himax has designed conventional 16:9 HD and FHD DDICs capable of supporting 18:9 or wider HD+/FHD+ displays and achieved a number of design-wins with leading Chinese smartphone brands. As in-cell TDDI, featuring thinner display, slimmer border, and better visual quality, has been getting popular, we re-invented a new generation of TDDIs supporting COG and COF for 18:9 or wider aspect ratio with interlaced output pins, which makes the bottom border of the in-cell touch display even smaller to gain higher display to body ratio. Our FHD+ and HD+ TDDI successfully gained design-wins with a few leading Korean and Chinese smartphone brands and panel makers. We started small volume shipment in the first half of 2018 with accelerating volume started in the second half of 2018 into 2019 and beyond. In 2020 and 2021, Himax extended our product offerings with high frame rate TDDI solution and has started shipping to top-tier smartphone OEMs.

A major development we are seeing in the marketplace is increased utilization of the OLED display for smartphone, smart watch, automotive and tablet. This is due to investments on expanded AMOLED capacity as well as increased demand for under-display fingerprint technology that is only available in the AMOLED display for the time being. We are collaborating closely with leading panel makers across China for AMOLED product development in smartphone, tablet, automotive and other consumer electronics. We believe AMOLED driver ICs will soon become one of the major growth engines for our small and medium-sized panel driver IC business.

On the other hand, the application of in-cell TDDI started to extend from mainstream smartphone to larger displays in 2018. Himax started to offer various new TDDI solutions for tablet, smart speakers, and even some infotainment displays in automobiles. The first tablet TDDI with WXGA resolution went mass production in 2018 and also extended to leading smart speaker applications as well. In 2019, Himax announced a series of new driver and TDDIs for tablet application. The COF packaged driver IC solution enables one leading tablet OEM successfully launching WQXGA resolution tablet with super slim bezel. We also added another new features to our TDDI that can support up to WUXGA and WQXGA resolution has gained several design-win from tablet OEMs across Korea and China in 2019. We also launched the first TDDI supporting active stylus function in tablets which commenced mass production and contribute to our tablet application business in early 2020. With the demand increase for bigger size display, higher resolution, and precise touch accuracy and stylus performance, Himax kept developing new tablet TDDIs to broaden company’s product lineup to maintain our leading market position. We started mass production for the world’s first 12.4” WQXGA super high-resolution in-cell tablet PC with a leading end customer in 2021.

Tablet in-cell TDDI offers the benefits of lower cost and a simplified supply chain that represents an easier manufacturing process for panel makers. For consumers, it offers a lighter weight, slimmer and more stylish design as well as improved touch accuracy with added option for active stylus. Our active stylus in-cell technology is adopted in many launched tablet products. At present, we are the dominant supplier for literally all leading Android names. In 2020, tablet demand is picking up significantly fueled mainly by remote work and online learning demand due to the pandemic. TDDI for tablet application continues to represent a tremendous upside for Himax into 2022.

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The following table summarizes the features of our products for smartphone and tablet applications:

Product

    

Features

Smartphone Display Drivers

In-cell TDDI (Touch and Display Driver Integration) as a highly integrated single chip embedded with the source driver, gate driver, power circuit, timing controller and memory, touch sensor ADCs and microcontroller
Mainstream resolution with HD+ (720RGB x Y pixels) and FHD+ (1080RGB x Y pixels); extending from 16:9 to 18:9 or wider aspect ratio
support up to 16 million colors
support RGB separated gamma adjustment
support CABC
support color enhancement features including saturation, brightness, and sharpness enhancement
support MIPI interface for smartphone application
low power consumption and low EMI
fewer external components to reduce costs
slimmer die for compact module to fit smaller smartphone designs
application specific integrated circuits, or ASIC, can be designed to meet customized requirements for LCD or AMOLED
COG and COF solutions for super slim bottom border
Conventional 60Hz and up to 144Hz new high frame rate solution
AMOLED driver IC with sub-pixel rendering, Demura-IPs for FHD+

Electronic Paper Display Applications

We offer display driver for the Electronic Paper Display (EPD) applications, Electronic Shelf Label (ESL) and Signage Display. The Electronic Paper Display (EPD) drivers can support various display resolutions to meet the customized needs of applications. We are collaborating with world-leading e-paper customers for certain ASIC projects on their next generation products. This consolidates our market presence in the emerging e-reading and e-signage segments from 2022 and onward.

The following table summarizes the features of our Electronic Paper Display (EPD) solutions:

Product

    

Features

Electronic Paper Display (EPD) Source Drivers

Features 320 to 1296 output channels
output driving voltage ranging from 15 up to 50v
input logic voltage ranging from standard 3.3V to low power 1.8V
low power consumption and low EMI
support TTL, mini-LVDS cascade modulated driver interface, or MIPI high-speed interface and customized interface technologies
support COF and COG package types

Electronic Paper Display (EPD) Gate Drivers

100 to 972 output channels
output driving voltage ranging from 10 up to 50v 

input logic voltage ranging from standard 3.3V to low power 1.8V low power consumption
support COF and COG package types

Electronic Shelf Label (ESL) Integrated Drivers

Highly integrated chip embedded with source driver, timing controller and power circuit
source driver output driving voltage ranging up to 30V
Support COG package types

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Touch Controller ICs

We offer touch controller solutions for capacitive touch panels. Our touch controller solutions are suitable for up to 13” touch panel screens electronic devices, such as smartphones, mobile internet devices and tablet. In the third quarter of 2011, we commenced shipping capacitive touch controller ICs to a worldwide brand smartphone customer. In 2013, we expanded customers base to more well-known smartphone and tablet brand customers.

Our capacitive touch controller possesses certain innovations and merits. It could support sensing and tracking of up to ten points. The embedded micro-controller single chip solution reduced the cost for flexible product. Its auto calibration mechanism can meet strict validation requirements of leading smart phone brands. With sophisticated designed hardware and firmware supporting hybrid sensing combining merits of self-capacitance and mutual capacitance, Himax’s touch controller could support out-cell and on-cell with various sensor patterns and stack-ups.

In 2015, we shipped touch controller product as we successfully gain design-wins from several smartphone and tablet end brands. We continue to gain market share in out-cell and on-cell touch panel controller markets. Meanwhile, our technological capabilities are highly recognized by end brands and caught the attention of leading in-cell panel makers that they have some development engagement using our touch-display driver integrated circuit (TDDI). We have developed a series of TDDI products in 2015 and 2016 for these tier one in-cell touch panel makers and started mass production in smartphone brands. We also started the mass production of our TDDI in tablet and automotive displays in 2019. In-cell TDDI, featuring thinner display, slimmer border, and better visual quality, has become the mainstream technology. We kept expanding our TDDI solutions to replace discrete DDIC and touch controller IC.

The following table summarizes the features of our touch controller products:

Product

   

Features

Capacitive Touch Controller

complete single chip touch controller solutions for handheld devices, supporting smartphones and tablet
real multi-point capability support of up to 10 points
mass production with GG, GFF and one glass solution (“OGS”), and On-cell touch
support advanced functions such as passive stylus, glove, etc.
minimum components: simple, neat, and flexible mechanical design

ASIC service

From 2012, we successfully completed several ASIC service projects for Japan top TV, Projector and HMD makers with advanced and high-performance customized video processing chips. All of these chips are implemented with our proprietary video process platform that includes our video process display IPs and high-speed transmission IPs. The process nodes adopted for these ASICs are usually 40nm, 55nm and even 28nm processes. From 2016, we also developed the depth sensing technology that aims 3D sensing and AR/VR markets.

The following table summarizes the features of our ASIC service:

Product

   

Features

ASIC Service

Well-established ASIC development platform, based on our unique video processor and image processing technologies.
offer a wide variety of video interface IPs, like LVDS, HDMI, DVI, V-by-one, Display port, MIPI, MHL, etc.
built-in 8/32- bit microprocessor built-in video processing algorithm like super-high resolution, sun-light readable, MEMC, FRC, etc
built-in 3D feature technologies like 2D-to-3D, Glasses-free 3D, 3D multi-view, 3D visual protection, etc.
support 4K x 2K/ 5K x 2K/ 8K x 4K display
Depth sensing algorithm and hardware accelerator for 3D sensing and AR/VR applications

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LCoS and MEMS Products

Himax Display, our subsidiary, has contributed to our microdisplay products lines: Color-filter LCoS, Color-sequential LCoS, Front-Lit LCoS and MEMS.

The latest development of Front-Lit LCoS enables an ultra-compact and extremely power-efficient optical engine by consolidating and integrating LED illumination system and the polarization beam splitter (PBS) into the micro display module itself. Front-Lit LCoS enables a much-simplified optical engine design and assembly process that could successfully lowered customers’ manufacturing time and costs.

Himax Display is one of the market leaders of the LCoS industry since 2012 with the whole product line patented. Himax Display has a mass production ready liquid crystal assembly line, which is unique in the industry with mass production shipping volume. We have produced and shipped around 3 million units from this ISO certified line. Our customers use our products in various applications such as pico-projector, communication, toy projector, AR glasses, and AR-HUD for automotive.

The merits of our technology feature in resolution, power consumption, size, cost, optical engine design, and image quality. Many of our industry-leading customers have demonstrated their state-of-the-art products, including pico-projector, holographic display, AR glasses and AR HUD system, with Himax LCoS technology inside at the 2020 CES with positive market feedbacks. Our technology leadership and proven manufacturing expertise have made us a preferred partner for customers in these emerging markets and their ongoing engineering projects in AR glasses and AR HUD for automotive applications. In May 2021, Himax Display revealed its proprietary LCoS 2.0 phase modulation technology, which enable features multi-focal plane images displaying along with less power consumption, lower cost and smaller form factor to enable holographic display applications for AR-HUD. In addition, phase modulation technology provides LiDAR for autonomous driving and Wavelength Selective Switch (“WSS”) for Wavelength-Division Multiplexing (“WDM”) optical communications networks. In the near future, holographic display will provide a revolution to AR-glasses to achieve consumer friendly products (small size, light weight and low-power consumption).

We provide a rich products family for customers to choose for different applications, as each product has its own most important parameters to select and Himax Display provides choices to customers. The following table shows certain details of our products:

Product

    

Size and Resolution

Color-Filter LCoS Microdisplays

0.28” (320x240 pixels) QVGA
0.29” (800x480 pixels) WVGA
0.38” (640x360 pixels) nHD
0.44” (640x480 pixels) VGA
0.59” (800x600 pixels) SVGA
Customized design

 

 

Color-Sequential LCoS Microdisplays

0.22” (640 x 360 pixels) nHD
0.37” (1366 x 768 pixels) WXGA
0.37” (1920 x 10890 pixels) Full HD
0.45” (1024 x 768 pixels) XGA
Customized design

 

Front-Lit Color Filter LCoS

0.22” (640 x 360 pixels) nHD
0.37” (1280 x 768 pixels) HD
Customized design
Operated in full phase modulation (0~2π) in visible range.

Phase Modulation LCoS

Selective phase range based on the required response time.
Analog drive scheme with 120Hz refresh frame rate to reduces optical flicker and provides stable phase response over time.
Customized design

 

MEMS

0.55” (1280 x 800 pixels) WXGA

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Power ICs

Himax provides TFT-LCD television, monitor and notebooks power management solutions. The main products are Power Managements ICs (PMIC), Programmable Gamma OP ICs (PGOP) and Level Shifter ICs (LS). In recent years, PMIC/PGOP 2-in-1 and PMIC/PGOP/LS 3-in-1 PMIC have gradually become the mainstream solutions.

Power Management ICs

A power management IC integrates several power components to fulfill system power requirements. It may include step-up or step-down pulse width modulation, or PWM, DC-to-DC converters, low-dropout regulators, or LDO regulators, voltage detectors, operational amplifiers, p-gamma OP, level shifters, and/or other components. For panel module applications, a power management IC provides a reliable and precise voltage for source drivers, gate drivers, timing controllers, and panel cells. Moreover, its built-in over-temperature and over-current protections help prevent components from being damaged under certain abnormal conditions. As integrating an increasing number of components into a power management IC is likely to be a continuing trend, we believe power management ICs will continue to be critical components of a TFT-LCD panel module. The following table summarizes certain features of our power management IC products:

Product

    

Features

Integrated Multi-Channel Power Solutions for Notebooks

built-in power MOSFET
step-up PWM converter
charge pump regulator
LDO regulator
voltage detector
gate pulse modulator
Vcom operational amplifier
2ch programmable gamma voltage with operational amplifier
I2C programmable
low frame rate control for power saving solution

Integrated Multi-Channel Power Solutions for Monitors

PMIC/PGOP/Level Shifter 3-in-1
built-in power MOSFET
step-up PWM converter
HV LDO regulator
voltage detector
gate pulse modulator
programmable Vcom voltage / Vcom operational amplifier
programmable gamma voltage with operational amplifier
level shifter

Integrated Multi-Channel Power Solutions for TVs

PMIC/PGOP/Level Shifter 2-in-1
built-in power MOSFET
step-up PWM converter
step-down PWM converter
charge pump regulator
HV LDO regulator
voltage detector
gate pulse modulator
Vcom operational amplifier
2C programmable
programmable gamma voltage with operational amplifier

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Programmable Gamma OP ICs

It is a Programmable Gamma, DVR and VCOM IC. Each is controlled by a 10-bit digital analog converter (DAC). The user can easily select one of the two gamma curves to compensate for the display. The PGOP also includes a channel DVR, VCOM buffer and built-in 7-bit DAC. Support 128-step to adjust the VCOM output voltage by I2C control setting automatically.

Product

    

Features

14 channel PGOP for dual gate GOA TFT-LCD

      Programmable gamma buffer DVR and VCOM buffer

      14 channel analog output gamma reference voltage

      10-bit Gamma DAC resolution

      2 Gamma bank register

      2 Gamma bank NVM

      Built in output channel resister

      I2C interface

Level shifter

TFT-LCD panel manufacturers have developed panel designs to reduce the usage of display drivers, like gateless designs, which integrate the gate driver function onto the glass but needed level shifter. All level shifter channels feature the same input circuitry and are compatible with the standard logic-level signals generated by timing controllers in typical applications. The level shifter converts the timing-controller (TCON) logic-level signals to the high-level signals needed by the GOA (gate on array) display. The output circuitry has been designed to achieve high rise and fall times when driving the capacitive loads typically encountered in TFT-LCD display applications.

Product

    

Features

16- channel output level shifter for GOA TFT-LCD

      support 1 or 2 of T-con input signals

      Support 1 or 2 input and 4/6/8/10 clock channel output

      2 channel STV

      2 channel LC

      Reset function

      OTP/ SCP and OCP function by I2C or Resistor adjustment

LED driver

A light-emitting diode (LED) is a semiconductor light source that is widely used in lighting, display and TFT LCD backlight nowadays. The advantages of LEDs as light sources are the small size, fast switching, low power consumption and long lifetime etc.

LED driver IC is designed to dim the LEDs with critical features such as high current accuracy, high current matching, short LED protection, open LED protection, over voltage protection, ghosting effect reduction and current sink leakage protection etc.

Product

    

Features

Customer ASIC

      By Customer Specification

CMOS Image Sensor Products

The CMOS image sensor products are developed by our subsidiary, Himax Imaging. The products were designed firstly for camera-equipped mobile devices, such as mobile phones, tablets and notebook computers, with a focus on low light image and video quality. Although it seems relatively challenging for us to gain significant market share in conventional RGB camera, we do think there are various interesting and different applications in imaging. Based on the technologies and IP we developed, on top of legacy products for laptop and multimedia we have been supplying, our product lines have been expanded to cover three domains: ultralow power computer vision- Always-On Sensor (“AoS”), Near Infrared (“NIR”) sensor, and big pixel BSI sensors in automotive and surveillance. In 2019, we further prioritized our focus on ultralow power computer vision- Always-On Sensor (“AoS”) as the demand for battery-powered smart device with AI intelligent sensing is rapidly growing. Together with the technologies we already developed, such as Near Infrared (“NIR”) sensor, we can provide our customers the best integrated solutions for several specific domains.

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In addition to advancing our AoS sensor to drive the power as low as possible, we also devote ourselves to developing sensors that have industry leading small pixel (1.12um) with higher near infrared Quantum Efficiency (“QE”) to support the new generation cameras. Their superior performance hugely helps to reduce the system’s power consumption and therefore enhances the system performance. With the high QE in NIR band, we open the doors to building more sensor and camera systems for machine vision. For example, our HM11B1 is a critical part of Himax’s WiseEye notebook solution, an AI-based ultralow power AI image sensing total solution and has penetrated into the laptop ecosystem for the most stylish super slim bezel design. Given its slim dimension (narrower than 2mm of the chip itself) to support ultra-thin bezel, we originally combine IR sensor to support Windows Hello, and then added intelligent AoS sensor into a single silicon. This 2-in-1 sensor not only enables new features, but also greatly saves laptop makers’ effort in mechanical design and overall cost.

We are committed to be a key player in the CMOS image sensor business with continuous investment in experienced human resources, an efficient supply chain as well as strategic technology developments and partnerships to further increase the performance and improve features of small and specially designed pixel sensors.

The following table sets forth the features of our CMOS image sensor products:

Product

    

Features

5MP UltraSense 2 NIR Sensor

1/2.6” format color type with high sensitivity BSI pixel
5MP resolution at 45 frames per second, support QHD video at 60 frames per second
Compact die size design to support small modules
4x NIR sensitivity at 940nm

    4-lane MIPI CSI2 outputs RAW8/10

2.0MP ClearView Color Image Sensor

1/5” format color type
UXGA YUV output at 15 frames per second, RAW output at 30 frames per second
1-lane MIPI CSI2 outputs YUV, RAW8/10

FHD 1/7” 1080p UltraSense Color Image Sensor

1/7” format with high sensitivity BSI pixel
1080p FHD resolution at 60 frames per second
Support Always-on mode at 480x270 < 1mW @ 2fps and motion detection
Support line-based staggered HDR
2-lane MIPI CSI2 outputs
Frame-Sync control for multiple camera system

FHD 1/4” 1080p UltraSense Color Image Sensor

1/4” format with high sensitivity BSI pixel
1080p FHD resolution at 30 frames per second
Low power consumption
Provide high NIR sensitivity and 4x4 RGB-IR option
2-lane MIPI CSI2 and 10bit parallel DVP outputs
Frame-Sync control for multiple camera system

HD 720p UltraSense 2 Color Image Sensor

1/9” format with high sensitivity BSI pixel
720p HD resolution at 30 frames per second
Low power consumption
Support LED-sync for Microsoft Windows Hello
1-lane MIPI CSI2 outputs RAW8/10

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HD 720p Ultra Low Power Color Image Sensor

1/11” format with high sensitivity BSI pixel
720p HD resolution at 60 frames per second
Ultra slim design to meet 2.2mm narrow bezel notebook computer
Provide Ultralow Power mode <1mW for qqHD 3fps for human detection application
Provide RGB for video and W-IR version for AoS + Windows Hello
Support Motion Detection to save system power SPI and 1-lane MIPI CSI2 dual outputs for both detection and video

1.3MP ClearSense EDR Color Image Sensor embedded with image processor for Surveillance

1/4” format with ultra-high sensitivity
ClearSense achieves higher dynamic range in color up to 84dB with on-chip tone mapping
800p and 720p resolution at 30 frames per second
Flexi engine automatically controls dynamic range, exposure, gain, and white balance to balance color fidelity and contrast
Color processing pipeline including lens shading correction, defect correction, edge enhancement, color interpolation and correction, gamma control, and saturation/hue adjustment.
Anti-blooming and dark sun cancellation
Built-in low dropout regulator and power on reset
10-bit parallel video data port supports RAW, YUV422, and RGB565/555/444

1.2MP UltraSense 2 Color Image Sensor embedded with image processor for Automotive

1/4” format with ultra-high sensitivity
Ultrasense 2 BSI pixel offers higher sensitivity for low light condition
Operation up to 105ºC
960p and 720p resolution at 30 frames per second
Color processing pipeline including lens shading correction, defect correction, edge enhancement, color interpolation and correction, gamma control, and saturation/hue adjustment
Dynamic Range Optimizer offers best dynamic range of video
Anti-blooming and dark sun cancellation
Built-in low dropout regulator and power on reset
10-bit parallel video data port supports RAW, YUV422, and RGB565/555/444

NTSC/PAL WVGA Color Image System on embedded with image processor for Automotive and Surveillance

High sensitivity, low noise VGA sensor operating up to 60FPS
Visible and near infrared sensitivity
Operation up to 105ºC
Ultra-compact automotive package
Advanced defect correction with built-in temperature sensor
Embedded ISP with programmable automatic exposure and white balance
Optical alignment pixel with crop and zoom to native resolution
4Kb OTP for sensor initialization, module storage, and overlay setting
Multi-color static overlay engine

QVGA Ultralow Power CMOS Color Image System for Machine Vision and Detection

High sensitivity, low noise 1/11” 320x320 image area
Under 2.5mW at QVGA 30fps and 1mW at QQVGA 15fps
Embedded auto-exposure and motion detection
NeoPac and CSP package
Parallel 8bits, 4bits and 1bit data output

VGA Ultralow Power CMOS Color Image System for Machine Vision and Detection

High sensitivity, low noise 1/6” 640x480 image area
Operates approximately 7mA VGA 60FPS to 140µA in QVGA 2FPS mode
Provide high accurate motion detection
Pre-metered exposure provides well exposed first frame and after extended sleep (blanking) period
Automatic wake and sleep operation with programmable event interrupt to host processor
Parallel 8bits and 1-Lane MIPI CSI2 interface

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Wafer Level Optics Products

Wafer level optics are optical products manufactured using semiconductor process on wafers. This innovative approach enables wafer level optics to manufacture micro/nano optics structure and high temperature resistance, making the compatible Surface-Mount Technology or SMT reflow process possible. We offer entire optical solutions for customers who need compact and easy-to-handle optical products on their electronic devices.

Combining traditional optical lens design, precise mold control and semiconductor manufacturing expertise, our WLO lens with integrated waveguide, refractive optics and diffractive optical element (DOE) is one of the best solution for next generation computational imaging module for 2D/3D illumination and 3D dot projector, which can be applied to 3D face recognition, 3D sensing, 3D reconstruction, and gesture control. Himax is a pioneer in high-precision diffraction optics technology with 15 years of experience, having worked on very different designs over a variety of applications with some of the world’s most heavyweight tech names. With the innovative process and specific structure, our wafer level optics products provide small form factor and compact module size to be easily integrated into consumer products. The diffraction optics technology is now well adopted in 3D sensing, AR/VR devices, holographic display, biomedical inspection, optical communication, etc. We are seeing that DOE plays an even more decisive role for the next generation optical technology in light of its high-precision and lightweight characteristics.

Our WLO technology is also adapted to form microstructure such as lens array, DOE and lenticular lens for advanced applications in digital and computational imaging fields. These technologies stand in a unique position to integral optical design, semiconductor manufacturing process, and compact packaging service, which are rarely covered by one single company. Deeply rooted in core wafer level optics technologies, we provide highly customized optical solutions and high-volume manufacturing to many tier-one customers such as structured lighted and ToF 3D sensing on mobile device, AR/VR gadgets, biomedical devices and other applications.

Our WLO business hit inflection in the middle of 2017 when we began mass shipment to an anchor customer. The overall 2018 shipment increased considerably year-over-year because of the customer’s large-scale adoption in more models. In 2019, we continued the strong shipment momentum from 2018 to fulfill anchor customer’s higher demand with a significant year-over-year increase. In 2021, we continued our shipment to an anchor customer for their legacy product. We continue to make progress with ongoing R&D projects with world-leading high tech giants for ToF 3D sensing, AR/VR gadgets, biomedical devices and others, targeting their future generation products centered around our exceptional design know-how and mass production expertise in WLO technology.

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The following table sets forth the features of our wafer level optics products:

Product

    

Features

Refractive Optical Lens

      for Micro Lens Array(MLA) illumination diffuser, lighting control, flux illumination lens, collimation lens, and compact size camera lens

      provide multi-layer solution including optical AR coating, IR-cutting filter coating, aspheric surface

      double-side manufacture process

      already in mass production

 

 

Diffractive Optical Element (DOE)

      computational imaging, flux illumination, dot projector for 3D sensing, 3D reconstruction, gesture and illumination control

      using WLO process to integral multi-layers DOE and refractive lens

      provide customized solution for specific application

      the smallest form factor and reflowable component

      eye safety detect circuit embedded

 

 

Diffuser element for flood illumination and TOF

      using WLO process to integral multi-layers DOE technology

      the smallest form factor and reflowable component

      eye safety detect circuit embedded

Near Infrared (NIR) Projector Module

      dot projector module solution for computer vision, 3D sensing, 3D reconstruction, gesture and illumination control

      integral NIR Laser (830/850/940nm), optical system (refractive+ diffractive lens) and high precise active alignment assembly solution to provide the smallest form factor

      module design for smartphone and other mobile devices

      provide customized module solution for different application

      the smallest form factor and reflowable device

      including active eye safety solution (Class-1)

Flood illumination Module

      provide customized solution for specific application integral NIR Laser (830/850/940nm), and high precise active alignment assembly solution

      module design for smartphone and other mobile devices

      the smallest form factor and reflowable device

      including active eye safety solution (Class-1)

3D Sensing Business

We continue to participate in most of the smartphone OEMs’ ongoing time-of-flight (ToF) 3D sensing projects. In 2018, our structured light-based 3D sensing total solution targeting Android smartphone’s front-facing application was unsuccessful due to the high hardware cost of 3D sensing, the long development lead time required to integrate it into the smartphone and the lack of killer applications which is limited to phone unlock and online payment. Instead of 3D sensing, most of the Android phone makers have chosen the lower cost fingerprint technology which can achieve similar phone unlock and online payment functions with somewhat compromised user experience.

Being a leading provider of 3D sensing technology, Himax is also an active participant in smartphone OEMs’ design projects for new devices involving ToF technology. We are seeing increasing ToF adoption by smartphone makers for world-facing cameras to enable advanced photography, distance/dimension measurement and 3D depth information generation for AR. Unlike structured light 3D sensing where we provide total solution or just projector module or optics depending on customers’ needs, with ToF, we will only focus on transmitter module or optics component by leveraging our WLO related expertise. We continue to actively work with industry leading VCSEL provider, sensor company, module manufactures and smartphone makers for a new and advanced ToF 3D solution development, targeting Android smartphones. Leveraging on our WLO technology, we have provided our partners with spot projector or optics component for their reference design.

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3D sensing can have a wide range of applications beyond smartphone. We have started to explore business opportunities in various industries by leveraging our structured light 3D sensing total solution. In 2021, we shipped small volume of business access control and biomedical inspection devices with more design-ins and engagements currently under progress. To strengthen our offers in 3D sensing total solution, we have been collaborating closely mainly with two types of partners: those with industry-leading expertise in facial recognition algorithm and those offering application processors with strong AI capability.

Other than 3D sensing total solution, we provide key component, our proprietary 3D decoder IC, to customers who wish to design their own structured light-based 3D sensing solution. It was already certified by the leading Chinese electronic payment standard with requirements of accurate data decoding, timely operation and strict privacy and now it’s well-adopted by many China e-payment solution providers and entered into small volume production from 2020. Our 3D decoder can accelerate local image processing for face recognition and offer best-in-class security authentication. In 2021, we have shipped meaningful volume of 3D decoder ICs.

Our critical 3D sensing Technologies includes the following:

Wafer Level Optics Products

WLO is one of the key technologies enabling 3D sensing, AR goggle devices, and many other applications. Levering on our exceptional design know-how and mass production experience in WLO technology, we are able to produce the world’s most compact optics required for 3D sensing, meanwhile achieving superior performance and lower costs.

ASIC

One of the critical elements of our 3D sensing total solution is an ASIC for 3D depth map generation. We are able to develop the ASIC thanks to our unique in-house capability in developing video ASICs for customers. Equipped with the ASIC, our 3D sensing total solution can substantially reduce the power consumed while processing 3D sensing, enhance personal data security, accelerate the 3D depth map generation, and provide superior depth data output that matches with our optical component. We consider this unique capability as our competitive advantage. It has been and will continue to be one of our key drivers in the success of our 3D sensing total solution.

Active Alignment

With much experience in optical assembly for AR and VR devices, our factory has developed a system to do active alignment for tiny components. From the incoming quality check, assembly process, and testing, all steps are monitored and checked. The precision assembly capability gives us a very good foundation to do the optical assembly for DOE, WLO, and laser.

Laser Driver

Based on our expertise in projector, optics, and driver, we have designed a special Glass Broken Detection (“GBD”) mechanism on our projector. We also have a proprietary laser driver design that detect the connection of the GBD on the projector. When GBD connection is abnormal, which means glass was broken, the laser driver can cease the laser to prevent users from being exposed to higher power laser energy leaking from the broken glass.

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The following table sets forth the features of our SLiM 3D sensing solutions:

Product

    

Features

SLiM 3D sensing total solution

      Dot projector: More than 33,000 invisible dots, the highest in the industry, projected onto object to build the most sophisticated 3D depth map among all structured light solutions

      Depth map accuracy: Error rate of < 0.5% within the entire operation range of 30cm-100cm

      Face recognition: Enabled by the most sophisticated 3D depth data to build unique facial map that can be used for instant unlock and secure online payment

      Indoor/outdoor sensitivity: Superior sensing capability even under total darkness or bright sunlight

      Eye safety: Certified for IEC 60825 Class 1, the international laser product standard which governs laser product safety under all conditions of normal use with naked eyes

      Glass broken detection: Patented glass broken detection mechanism in the dot projector whereby laser is shut down instantaneously in the event of broken glass in the projector

      Power consumption: Less than 400mW for projector, sensor and depth decoding combined, making it the lowest power consuming 3D sensing device by far among all structured light solutions

     Module size: the smallest structured light solution in the market, ideal for embedded and mobile device integration

HV-II 3D Decoder ASIC

Himax 3D Depth Processor with high depth accuracy
Support up to HD resolution depth map for different applications
2D & 3D auto-exposure control for projector and sensor
Frame rate conversion for different application/capability of SOC
Scaling engine for different application/capability of SOC
Ambient light detection and removal
Embedded Security Engine
Power Management Engine for power shutdown
MIPI CSI-2 / DPHY interface

Ultralow power AI image sensing

The demand for always-on battery-powered smart devices with AI intelligent sensing is rapidly growing. By combining an ultralow power image sensor with a custom computer vision ASIC and machine-learning algorithms, Himax ultralow power AI image sensing solution enriches connected edge devices with AI capacity. The edge AI system, which consumes only few mW power consumptions, is leading the industry for the next-generation, battery operated, clever computer vision applications. The ultralow power AI image sensing solution is being engaged in a variety of applications, such as notebook, home appliances, utility meter, automotive, battery-powered surveillance camera, panoramic video conferencing, and medical, just to name a few. Among Himax’s ultralow power AI image sensing business, our WiseEye notebook solution provides a ‘laptop-ready’ 3-in-1 RGB/IR/AI solution that features respecting privacy and enhancing security for notebook users. At the CES 2020, several leading notebook OEMs and ODMs demonstrated our WiseEye notebook solution in their next generation premium notebooks with positive feedback. In 2021, one of our AI image sensing solutions was officially awarded a sizable purchase order from a top tier household name for a mainstream application. We started ramping up production for above mentioned applications by the end of 2021. We are highly encouraged by the success. We reached this major milestone just one year after we delivered the first samples, a remarkable achievement and an illustration of the robustness of our AI solution. We expect to see more design-wins awarded across a broad customer base and a high variety of applications leading to robust sales growth for this new high margin product line.

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The following table sets forth the features of our ultralow power AI image sensing total solutions:

Product

    

Features

WiseEye® notebook total solution

Ideal for battery operated devices enables always on mode of operation supporting both continuous operation and periodic wakeup mode, enabling long battery life
Total solution supports use of a variety of Himax CMOS image sensors –HM11B1 RGB/IR/AI hybrid sensor. Uniquely designed for ULP Computer Vision applications with always on scanning as low as 100uW.
Ultralow power CV MCU: WE-I Plus ASIC a unique ultralow power computer vision processing silicon that is targeting always on applications with a sub 1mW capabilities. Processing at the edge: motion detection, human detection and face detection.
Emza computer vision algorithms, a lean machine learning framework, which is trainable for desired use cases (human presence detection, attention detection and on-looker detection) and works on ultralow compute resources platform (CPU clock, internal memory)

AI image total solution

Ideal for battery operated devices enables always on mode of operation supporting both continuous operation and periodic wakeup mode, enabling long battery life
Total solution supports use of a variety of Himax CMOS image sensors – HM01B0 qVGA, HM0360 VGA and HM11B1 RGB/IR/AI hybrid sensor. Uniquely designed for ULP Computer Vision applications with always on scanning as low as 100uW.
Ultralow power AI processor: WE-I Plus ASIC a unique ultralow power computer vision processing silicon that is targeting always on applications with a sub 1mW capabilities. Processing at the edge: motion detection, human detection and face detection.
tinyML computer vision algorithms feature human presence detection, people counting, face detection, face recognition, digital meter recognition, gesture recognition, and voice command control. Also support image pre-rolling feature to save up to 8 seconds of images before triggering event for better security offering.
Total solutions for laptop always-on wake on approach and walk away lock, battery powered automatic meter reading, auto-framing video conference machine, image and voice triggered human machine interface devices.

For the other business model, we provide key components, such as proprietary ultralow power WE-I Plus AI processor or Always-On CMOS image sensor (AoS). For key component business model, we reinforced our go-to-market strategy by intensively participating in leading AI partners’ infrastructures and ecosystems. With our prominent AI platforms, we partnered with world leading edge-to-cloud service providers, such as Google TensorFlow, Microsoft Azure, Arm AI Partner Program, and tinyML Foundation, and enjoy the enormous network of these ecosystems and their numerous participants to drive further adoption on applications such as smart home, smart office, healthcare, agriculture, retail and factory automation. Additionally, we continued our marketing efforts through joint webinars and other online activities with several well-known platform partners such as Edge Impulse, Digi-Key and SparkFun. We continue to receive inquiries from large corporations and individual developers alike with hundreds of evaluation boards and developments kits having been purchased online and distributed across the globe. We are very encouraged by the traction this relatively new product line has generated in a short amount of time and expect to see increasing sales contribution through 2022 and beyond.

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The following table sets forth the features of our WE-I Plus ASIC product:

Product

Features

WE-I Plus ASIC

Ultralow power consumption: 40 uW/MHz
Support image, voice trigger simultaneously to wake up system
Optimized multi-layer power states for always-on applications
Ready-for- use software package and Machine Learning Library, including device driver, SDK and embARC Machine Learning Inference Library to support Google TensorFlow Lite Micro framework
ARC-EM9D 32-bit DSP: Frequency up to 400MHz,
Memory: Up to 2MByte SRAM
High performance pixel processing accelerator and JPEG codec
Security Engine: Support secure boot, secure FW update, secure debug mode, Support AES 128bits, RSA 2048bits, Hash-256, TRNG, Secure key management
Peripheral: 1/4/8-bit camera interface, I2C/SPI master/slave, UART, PWM, GPIO with 5 wake-up pins, 12-bit ADC with 4 channels, up to 1Msps, RTC Timer

Core Technologies and Know-How

Driving System Technology. Through our collaboration with panel manufacturers, we have developed extensive knowledge of circuit design, TFT-LCD driving systems, high-voltage CMOS processes and display systems, all of which are important to the design of high-performance TFT-LCD display drivers. Our engineers have in-depth knowledge of the driving system technology, which is the architecture for the interaction between the source driver, gate driver, timing controller and power systems as well as other passive components. We believe that our understanding of the entire driving system has strengthened our design capabilities. Our engineers are highly skilled in designing power efficient and compact display drivers that enhance the performance of TFT-LCD. We are leveraging our know-how of display drivers and driving system technology to develop display drivers for panels utilizing other technologies such as AMOLED and electronic paper displays.

High-Voltage CMOS Circuit Design. Unlike most other semiconductors, TFT-LCD display drivers require a high output voltage of 3.3 to 50 volts. We have developed circuit design technologies using a high-voltage CMOS process that enables us to produce high-yield, reliable and compact drivers for high-volume applications. Moreover, our technologies enable us to keep the driving voltage at very high uniformity, which can be difficult to achieve when using standard CMOS process technology.

High-Bandwidth Interfaces. In addition to high-voltage circuit design, TFT-LCD display drivers require high bandwidth transmission for video signals. We have applied several high-speed interfaces, including transistor-transistor logic (“TTL”), Reduced Swing Differential Signaling (“RSDS”), mini low-voltage differential signaling (“LVDS”), dual-edge TTL (“DETTL”), turbo Reduced Swing Differential Signaling (“RSDS”), Mobile Industry Processor Interface (“MIPI”) and other customized interfaces in our display drivers. Moreover, we are developing additional driver interfaces for special applications with optimized speed, lower EMI and higher system stability.

Die Shrink and Low Power Technologies. Our engineers are highly skilled in employing their knowledge of driving technology and high-voltage CMOS circuit design to shrink the die size of our display drivers while leveraging their understanding of driving technology and panel characteristics to design display drivers with low power consumption. Die size is an important consideration for applications with size constraints. Smaller die size also reduces the cost of the chip. Lower power consumption is important for many portable devices such as notebook computers, smartphone, tablet and consumer electronics products.

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AI Image Sensing Technologies. Composed by an AoS sensor, an edge AI ASIC processor and computer-vision AI algorithm, all operated in ultralow power mode. Our industrial first AoS CMOS image sensor features ultralow power and low latency back-illuminated solution for always on, intelligent visual sensing applications. With Himax exceptional low power know-how and ASIC implementation technologies, our AI image processor featured different power domain and mode management schemes, together with advanced image processing hardwired accelerators to construct different operating modes in balancing processor performance and power consumptions. The seamless and proprietary interface between our AoS sensor and AI processor ensure the efficient and fast-response sensor data transmission and wake-up mechanism operating in ultralow power mode. The computer-vision AI algorithm, which get benefit from high performance and low power AI processor and image data from sensor, can therefore enable AI features such as powerful human detection, occupancy detection and motion classification for various application needs.

LCoS Microdisplay Technologies. Compared to other microdisplay technologies, LCoS microdisplay offers smaller form factor, higher brightness, and less power consumption. Himax Display has own proficient engineering team to develop patented industry-only non-captive LCoS, front-lit waveguide, and module design, along with an in-house ISO certified manufacture line. All position us at the forefronts of leading AR glasses and AR-HUD markets. The latest development of Front-Lit LCoS enables an ultra-compact and extremely power-efficient optical engine by consolidating and integrating LED illumination system into the micro display module itself and makes the patented technology ideal for AR headsets. Furthermore, Himax Display provided phase modulation LCoS 2.0 technologies to offer high-efficient, low power and multi-focal plane displaying features to fit for holographic displaying needs in numerous leading applications.

3D Technologies. Several technologies in Himax are integrated together to form our 3D solution. First, wafer level nanoimprinted technology is used to design and manufacture DOE and Waveguide. Then, our in-house capability on semiconductor enables us to design IC particularly match our optical component. Our expertise in precision assembly in optics also help us to provide a more complete solution to our customers.

Customers

Our customers for display drivers are primarily panel manufacturers and mobile device module manufacturers, who in turn design and market their products to manufacturers of end-use products such as notebook computers, desktop monitors, televisions, smartphone, tablet, automotive and consumer electronics products. We may sell our products through agents or distributors for certain products or in certain regions. As of December 31, 2021, we sold our products to more than 200 customers. Our ten largest customers together accounted for approximately 75.6%, 77.7% and 79.5% of our revenues in 2019, 2020 and 2021, respectively. In 2019, 2020 and 2021, our two largest customers accounted for 10% or more of our net revenue: customer A and its affiliates accounted for 29.5%, 32.6% and 32.1% of our revenues, respectively; and customer C accounted for 5.6%, 12.7% and 19.1%, respectively.

Certain of our customers provide us with a long-term (twelve-month) forecast plus three-month rolling non-binding forecasts and confirm orders about one month ahead of scheduled delivery. In general, purchase orders are not cancellable by either party, although from time to time we and our customers have agreed to amend the terms of such orders.

Sales and Marketing

We focus our sales and marketing strategy on establishing business and technology relationships principally with TFT-LCD panel manufacturers, panel manufacturers using LTPS or OLED, or Oxide technologies, mobile display module and mobile device manufacturers for smartphone, tablet and automotive, and camera module houses in order to work closely with them on future semiconductor solutions that align with their product road maps. Our engineers collaborate with our customers’ engineers to create products that comply with their specifications and provide a high level of performance at competitive prices and also create customized features for end brand customers. Our end market for large-sized panels is concentrated among a limited number of major panel manufacturers. We also market our products directly to monitor, notebook and mobile device manufacturers so that our products can be qualified for their specifications and designed into their products. Furthermore, we extend our business development with system and ODM companies by using strategic ASIC business model to not only develop ASIC product based on customer specification but also jointly research and develop new technologies to meet customers’ future product demand. Additionally, we form strategic partnership with tier-1 customers for our LCoS microdisplays, 3D sensing and AI image sensing to penetrate into the emerging market. We believe we need close alliance with our customers to build up ecosystem for new applications.

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We primarily sell our products through our direct sales teams located in Taiwan, China, South Korea and Japan. We also have dedicated sales teams for certain of our most important current or prospective customers. We have offices in Tainan, Hsinchu, Taipei, Taiwan; and Shenzen and Suzhou, China. We have other sales and technical support offices in Hefei, Beijing, Shanghai, Fuzhou, Foshan, Fuqing, Ningbo, Wuhan, Chongqing, Chengdu, Xi’an and Xiamen, China; Tokyo, Japan; Asan-si and Bundang-gu, South Korea, Givatayim, Israel; and Irvine and Campbell, California and Minneapolis, Minnesota, USA, all in close proximity to our customers. For certain products or regions, we may sell our products through agents or distributors.

Our sales and marketing team possesses a high level of technical expertise and industry knowledge used to support a lengthy and complex sales process. This includes a highly trained team of product managers and field applications engineers. Our team is equipped with extensive strategic marketing experience and a strong capability to identify market trends. We also provide technical support and assistance to potential and existing customers in system/SoC architecture, designing, testing and qualifying display modules, camera modules and end application systems that incorporate our products and ASICs. We believe that the depth and quality of this design support are key to improving customers’ time-to-market and maintaining a high level of customer satisfaction.

Manufacturing

We operate primarily in a fabless business model that utilizes substantially third-party foundry and assembly and testing capabilities. We leverage our experience and engineering expertise to design high-performance semiconductors and rely on semiconductor manufacturing service providers for wafer fabrication, gold bumping, assembly and testing. We also rely largely on third-party suppliers of processed tape used in TAB packaging. We engage foundries with high-voltage CMOS process technology for our display drivers and engage assembly and testing houses that specialize in TAB and COG packages, thereby taking advantage of the economies of scale and the specialization of such semiconductor manufacturing service providers. Our primarily fabless model enables us to capture certain financial and operational benefits, including reduced manufacturing personnel, capital expenditures, fixed assets and fixed costs. It also gives us the flexibility to use the technology and service providers that are the most suitable for any given product.

We operate a fab under Himax Display primarily for performing manufacturing processes for our LCoS microdisplays. Moreover, for better integration, we also established an in-house color filter facility under Himax Taiwan, which commenced shipments from 2010. The color filter line is a critical and unique process for our proprietary single-panel color LCoS microdisplays. An in-house color filter facility enhances the competitiveness of our LCoS products and creates value for our customers. In addition, we have established an in-house WLO facility under Himax Taiwan for the key process of our wafer level optics products, which started small-scale shipments from December 2009 and commenced mass shipment to anchor customer from 2017 onwards. We began construction of our new building, Fab 2, in March 2017, located nearby the current headquarters to house additional WLO capacity, the new active alignment equipment needed for our 3D sensing business and to provide extra office space. The construction of Fab 2 was completed in the first half of 2018.

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Manufacturing Stages

The diagram below sets forth the various stages in manufacturing display drivers according to the two different types of assembly utilized: TAB or COG. The assembly type depends primarily on the application and design of the panel and is determined by our customers.

Graphic

Wafer Fabrication: Based on our design, the foundry provides us with fabricated wafers. Each fabricated wafer contains many chips, each known as a die.

Gold Bumping: After the wafers are fabricated, they are delivered to gold bumping houses where gold bumps are plated on each wafer. The gold bumping process uses thin film metal deposition, photolithography and electrical plating technologies. The gold bumps are plated onto each wafer to connect the die to the processed tape, in the case of TAB package, or the glass, in the case of COG package.

Chip Probe Testing: Each die is electrically tested, or probed, for defects. Dies that fail this test are discarded.

Assembly and Testing: Our display drivers use two types of assembly technology: TAB or COG. Display drivers for large-sized applications typically require TAB package types and to a lesser extent COG package types, whereas display drivers for smartphone, tablet and consumer electronics products typically require COG package types.

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TAB Assembly

We use two types of TAB technologies: TCP and COF. TCP and COF packages are both made of processed tape that is typically 35mm or 48mm wide, plated with copper foil and has a circuit formed within it. TCP and COF packages differ, however, in terms of their chip connections. With TCP packages, a hole is punched through the processed tape in the area of the chip, which is connected to a flying lead made of copper. By contrast, with COF packages, the lead is mounted directly on the processed tape and there is no flying lead. In recent years, COF packages have become predominantly used in TAB technology.

Inner-Lead Bonding: The TCP and COF assembly process involves grinding the bumped wafers into their required thickness and cutting the wafers into individual dies, or chips. An inner lead bonder machine connects the chip to the printed circuit processed tape and the package is sealed with resin at high temperatures.
Final Testing: The assembled display drivers are tested to ensure that they meet performance specifications. Testing takes place on specialized equipment using software customized for each product.

COG Assembly

COG assembly connects display drivers directly to LCD panels without the need for processed tape. COG assembly involves grinding the tested wafers into their required thickness and cutting the wafers into individual dies, or chips. Each individual die is picked and placed into a chip tray and is then visually or auto-inspected for defects. The dies are packed within a tray in an aluminum bag after completion of the inspection process.

Quality Assurance

We maintain a comprehensive quality assurance system. Using a variety of methods, from conducting rigorous simulations during the circuit design process to evaluating supplier performance at various stages of our products’ manufacturing process, we seek to bring about improvements and achieve customer satisfaction. In addition to monitoring customer satisfaction through regular reviews, we implement extensive supplier quality controls so that the products we outsource achieve our high standards. Prior to engaging a third party as our supplier, we perform a series of audits on their operations, and upon engagement, we hold frequent quality assurance meetings with our suppliers to evaluate such factors as product quality, production costs, technological sophistication and timely delivery.

In November 2002, we received ISO 9001 certification, which was renewed in March 2021 and will expire in March 2024. In February 2006, we received ISO 14001 certification, which was renewed in December 2020 and will expire in December 2023. In addition, in March 2007, we received IECQ QC 080000 certification, which was renewed in February 2019 and will expire in March 2022.

Environmental Management System and Safety and Health Management System

Himax follows closely the global environmental trends, including energy saving and waste reduction, in its daily operations. The Company is certified in accordance with ISO 14001, ISO 45001 and ISO 14064.

Himax is a leader in its sector when it comes to the environment and safety, operating under measures much more stringent than domestic regulations. The Company aims to grow sustainably, delivering economic, social and environmental benefits with its healthy employees.

Himax has also been tirelessly reducing impacts to the environment and improving safety in its operations, specifically targeting product design and waste handling.

Semiconductor Manufacturing Service Providers and Suppliers

Through our relationships with leading foundries, assembly, gold bumping and testing houses and processed tape suppliers, we believe we have established a supply chain that enables us to deliver high-quality products to our customers in a timely manner.

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Access to semiconductor manufacturing service providers is critical as display drivers require high-voltage CMOS process technology and specialized assembly and testing services, all of which are different from industry standards. We have obtained our foundry services from TSMC, UMC, Vanguard, Macronix, Globalfoundries Singapore, PSMC, Nexchip and SKHYSI in the past few years. These are among a select number of semiconductor manufacturers that provide high-voltage CMOS process technology required for manufacturing display drivers. We engage assembly and testing houses that specialize in TAB and COG packages such as Chipbond, Chipmore International trading company Ltd., ChipMOS Technologies Inc., Nepes Corporation and King Yuan Electronics Co., Ltd.

We plan to strengthen our relationships with our existing semiconductor manufacturing service providers and diversify our network of such service providers in order to ensure access to sufficient cost-competitive and high-quality manufacturing capacity. We are selective in our choice of semiconductor manufacturing service providers. It takes a substantial amount of time to qualify alternative foundries, gold bumping, assembly and testing houses for production. As a result, we expect that we will continue to rely on a limited number of semiconductor manufacturing service providers for a substantial portion of our manufacturing requirements in the near future.

The table below sets forth (in alphabetical order) our principal semiconductor manufacturing service providers and suppliers:

Wafer Fabrication

    

Gold Bumping

Globalfoundries Singapore Pte., Ltd.

Chipbond Technology Corporation

Macronix International Co., Ltd.

Chipmore International Trading Company Ltd.

Nexchip Semiconductor Corporation

ChipMOS Technologies Inc.

Powerchip Semiconductor Manufacturing Corp.

LB Semicon, Inc.

SK hynix system ic

Union Semiconductor Co., Ltd.

Taiwan Semiconductor Manufacturing Company Limited

United Microelectronics Corporation

 

Vanguard International Semiconductor Corporation

 

Processed Tape for TAB Packaging

    

Assembly and Testing

JMC Electronics Co., Ltd.

Ardentec Corporation

LG Innotek Co., Ltd.

Advanced Semiconductor Engineering Inc.

Stemco., Ltd.

Chipbond Technology Corporation

Chipbond Technology Corporation

Chipmore International Trading Company Ltd.

 

ChipMOS Technologies Inc.

 

Global Testing Corporation

 

Greatek Electronics Inc.

 

Jiangsu Changjiang Electronics Technology Co., Ltd.

 

King Yuan Electronics Co., Ltd.

 

Micro Silicon Electronics Corp.

 

Nepes Corporation

 

Taiwan IC Packaging Corporation

 

LB Lusem Co., Ltd.

 

Union Semiconductor Co., Ltd.

 

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Chip Probe Testing

    

Chipbond Technology Corporation

Chipmore International Trading Company Ltd.

ChipMOS Technologies Inc.

Global Testing Corporation

Greatek Electronics Inc.

King Yuan Electronics Co., Ltd.