1. 2020 Operating Results
The year 2020 was a very challenging year for the semiconductor industry, and of course, the entire world. Despite the uncertainties posed by international affairs and the impact of COVID-19, Realtek, relying on continuous enhancement of product competitiveness and flexible market strategies, maintained the pace towards its 34th consecutive year of growth. Full-year 2020 consolidated revenue reached NT$77.76 billion, an increase of 28.0% from the previous year; gross profit was NT$33.25 billion, an increase of 25.1% from the previous year; and net profit after tax was NT$8.79 billion, representing an increase of 29.5% compared to the previous year, with earnings per share of NT$17.24. According to IC Insights, worldwide semiconductor industry revenue in 2020 was US$480.9 billion, an increase of 8% compared to 2019, of which IC sales grew by 10%. Realtek ranked 11th amongst the global IC design companies in 2020, once again marching forward at a speed outpacing the overall industry.
Looking back on 2020, the needs for working from home and remote learning to cope with COVID-19 drove demand for productivity products such as personal computers, as well as home networks and network infrastructure. In addition, the market itself was pulled by megatrends such as 5G and Artificial Intelligence of Things (AIoT), thereby accelerating and expanding the demand for various connectivity solutions. With its comprehensive product portfolio and technological competitiveness, Realtek has delivered outstanding results in the PC, communications network, consumer electronics, and automotive electronics fields.
In terms of corporate social responsibility best practice, Realtek has set up a Nominating Committee and Corporate Governance Officer to strengthen the board's practices and intensify its management functions, thereby heightening its quality and efficiency. We identified various climate risks related to climate change issues of global concern, proposed actions in response, and integrated internal and external resources to actively manage energy usage, including setting targets for carbon reduction and greenhouse gas emissions, saving electricity, and harvesting green energy to reduce environmental impact. We also focused on our core competencies to develop innovative, high-performance, and low-power-consumption products. In 2020 we have continued to fulfill our promise to help create a greener, healthier environment by delivering many new products where power consumption (wattage) was reduced by more than 40% when compared with their predecessors. To promote social inclusion, Realtek proactively participates in charitable activities. In 2020 we sponsored free Low-Dose Computed Tomography lung cancer screening for Hsinchu County and City police forces, as well as offering free liver disease and liver cancer screening, and also a health questionnaire at Longshan Temple. The Longshan Temple event attracted more than 8,000 participants and was awarded a certificate for breaking a Guinness World Record. Regarding education, Realtek established the ‘Caring Rural Education and Boosting Student Learning Charity Project’ to provide rural schools with additional reading material to expand their horizons and promote learning through reading. In addition, Realtek continues to provide services to groups such as the Taiwan Fund for Children and Families, the Eden Social Welfare Foundation, and the Boyo Social Welfare Foundation, among others.
2. 2021 Business Plan
Having outperformed the market in 2020, Realtek will continue to launch more competitive products in 2021, strengthen the portfolio of each product line, and maintain our growth momentum and technological leadership.
In relation to wireless products, Realtek Wi-Fi 6 (11ax) wireless controller products successfully entered mass production in 2020, and have experienced great success in PC, router, and broadband applications. They are expected to gradually become an important growth driver in 2021. In addition to Wi‑Fi 6, the existing 11ac and 11n products will be optimized continually to provide more cost-effective solutions, which will help expand markets and increase overall market share while consolidating existing customers. For IoT controller chips, Realtek offers the most complete product portfolio. In addition to hardware specifications with high integration and ultra-low power consumption, Realtek also provides customers with complete software and hardware development kits through close cooperation with IoT-related organizations and leaders. This enabled rapid growth in both the number of customers and shipments in 2020, and this trend is expected to continue in 2021. With respect to Bluetooth products, COVID-19 impacted True Wireless Stereo (TWS) products, and there was a slight decline in growth in 2020. However, in 2021, a new wave of growth is expected, as the number of customers requiring Active Noise Cancellation (ANC) increases and the upcoming BT 5.2 TWS solution fulfills the market’s expectation for the evolution of Bluetooth headsets. Additionally, Bluetooth Low Energy single chips in voice remote controllers are now widely recognized by well-known brands at home and abroad. Realtek will continue to assist customers to migrate from infrared to Bluetooth remote controllers, and provide the market with appealing and high-value wearable applications. The promotion by intelligent voice ecosystem leaders to adopt Bluetooth Mesh Networking will further drive the growth of Bluetooth products.
Realtek's second-generation 2.5Gb Ethernet products have been designed into PCs and their peripherals. The bandwidth demanded by many applications is further reflected in the specification upgrade from 1GbE to 2.5GbE, which is expected to become one of the major growth drivers of our Ethernet product line in the near future. For Switch products, Realtek has been actively developing the smart switch market by investing resources to develop Layer 3 stackable managed and higher-speed switch controller chips, as well as deploying entry-level managed switches by offering low-power, cost-effective solutions, in order to increase both market visibility and market share. In addition, in response to the increasing demand for network bandwidth, an 8-port 2.5GbE single-chip switch is expected to be launched in 2021, providing low-power, easy-to-operate and cost-effective products to the market, which in turn should drive another wave of specification upgrades of consumer switches. For automotive Ethernet, the number of customers and shipments are growing steadily through persistent team effort. Other than the existing 100/1000BASE-T1 dual-mode high-port-count switches and physical layer (PHY) controllers, Realtek is also actively investing in the development of 10BASE-T1 and 2.5GBASE-T1 products, targeting the increased market demand foreseen for the years 2024 and 2025.
For TV SoCs, Realtek leads in end market demand due to superior system expertise and specifications that are highly recognized by customers, and has delivered steady sales growth throughout 2020. In 2021, we will continue to improve products by integrating 8K, AI, and other functions to enhance the consumer multimedia experience. With the rise of audiovisual streaming media, and its promotion by major operators, the demand for OTT set-top boxes continues to rise. To this end, Realtek will continually develop new generations of UHD multimedia controller chips for OTT set-top boxes by integrating the multi-CAS security requirements of various operators, and will combine its own multimedia and network total solutions to gain greater customer recognition and maintain stable growth.
Regarding Computer Peripheral products, as lifestyles around the world changed dramatically in 2020 due to COVID-19, working from home and remote learning became the norm, thereby enabling the PC market, notebooks in particular, to experience positive growth against the trend. In addition, sales of VoIP communication devices and noise reduction software capable of improving the quality of calls has shown strong growth. Realtek launched an environmental noise cancellation solution for PC audio peripheral devices, which combines AI algorithms to effectively eliminate background noise. In addition to the need for high-level voice call quality, a parallel demand for more convenient and clearer video images has also emerged. To meet these needs, Realtek will launch a series of PC camera ISP chips with HD/FHD/5M resolution, featuring dual-lens and Temporal Noise Reduction to bring consumers a first-class user experience. In terms of single-chip controllers for surveillance cameras, in response to the high growth being seen in the security industry, Realtek will launch a new generation of highly integrated, low-power single-chip camera products, supporting H.264/H.265 encoding, 5 million Pixel CMOS Sensor, and Video HDR wide dynamic range with long and short exposure specifications, in order to strengthen our product portfolio and provide customers with more competitive solutions.
3. Strategy for Future Development and Impact by Competitive, Regulatory, and Macro Conditions
The COVID-19 pandemic during 2020 heavily impacted people's daily lives; however, the semiconductor industry continued to grow steadily, both because of these lifestyle changes, and as a result of megatrends such as 5G and AIoT. Entering 2021, the industry will face challenges caused by supply-demand imbalances in the supply chain, in addition to the continuing impact of COVID-19 on the macro economy. Despite many uncertainties, Realtek will rise above the challenges to deliver market success through its highly flexible strategies, time-proven deep technical strength, and excellent customer support. In the face of future challenges, we will not only expand and construct our third office building this year, but also map out a plan for entering the biomedical industry to uphold our goal of steady growth and sustainable development.
We want to thank all shareholders for your ceaseless care and support. We also wish you great health and success.
Chairman Yeh, Nan-Horng
President Chiu, Sun-Chien
Controller Chang, Jr-Neng