Hangzhou Hikvision Digital Technology : FY2023 Financial Report

Hangzhou Hikvision Digital Technology Co., Ltd.

2023 Annual Report

April 20, 2024

Hikvision 2023 Annual Report

To Shareholders

The business performance of Hikvision kept improving on a quarterly basis in 2023. Despite the uneven performance of the Company's five business groups-PBG, EBG, SMBG, overseas main business and the innovative business, greater stability in the operation has been achieved by Hikvision, in a complex and volatile business environment.

Regardless of our performance, Hikvision has resolutely increased investment in research and development as we have always believed in long-term efforts. Over the past eight years, Hikvision has gradually expanded perception technology from visible light to centimeter wave, millimeter wave, far-infrared, medium wave infrared, shortwave infrared, ultraviolet and X-ray, as well as to infrasound wave, acoustic wave, and ultrasonic wave. By combining perception with AI technologies, we have gradually built and improved our AIoT technology system, launched and improved the products and solutions, which contributed to the business growth. The survellience business is currently one of the business directions of the Company's AIoT strategy. We have enhanced our competitiveness in the survellience industry by increasing non-visible light detector product lines or integrating multiple detector product lines. Scenario-based digitalization, especially scenario-based digitalization for enterprises, is another direction of our AIoT strategy. Hikvision has launched some product lines in this field and is becoming an OT (Operational Technology) manufacturer. Looking digital transformation of various businesses. We seek to become a partner of varied businesses in their digital transformation journey by continuously improving our internal operational mechanisms and optimizing our operational processes. We believe that digital transformation of businesses is a long process that provides immense potential for our future business growth.

Hikvision has applied AI technology to various perception products and combined AI with big data technologies for use in system solutions. While exploring and developing industrial large models and industrial large multimodal models, we will continue to develop industry software to provide more suitable products and system solutions for users.

Hikvision is committed to the internationalization strategy. Although severely suppressed in some countries, the Company has been increasing investment in overseas markets, resulting in

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Hikvision 2023 Annual Report

continuous growth of our international business. We will further increase investment in overseas marketing and enhance our competitiveness in those markets.

Being customer-centric and creating value for customers are always Hikvision's original aspiration and core values. We stay dedicated to being open, transparent, and honest towards customers, shareholders, and employees.

Our sincere gratitude goes to all shareholders for your commitment to Hikvision and for your trust in the management team!

See far, go further!

Board of Directors of Hangzhou Hikvision Digital Technology Co., Ltd.

April, 2024

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Hikvision 2023 Annual Report

Section I Important Notes, Contents and Definitions

The Board of Directors, Board of Supervisors, directors, supervisors and senior management guarantee that the information presented in this report is true, accurate and complete without false records, misleading statements or material omissions, and will undertake individual and joint legal liabilities.

Chen Zongnian, the Company's legal representative, Jin Yan, the person in charge of the accounting work, and Zhan Junhua, the person in charge of accounting department (accounting supervisor) hereby declare and warrant that the financial statements in this annual report are true, accurate and complete.

All directors of the Company have attended the board meeting to review this report.

The profit distribution proposal passed upon deliberation at the meeting of the Board of Directors is set out as follows: Board of Directors based on the Company's current total share capital of 9,330,600,931 shares, the Company proposed to distribute cash dividend of RMB9 (tax inclusive) per each 10 shares to all shareholders, bonus share and share distribution from capital reserve is nil.

Note:

This document is a translated version of the Chinese version 2023 Annual Report ("2023 年年度报 告"), and the published announcements in the Chinese version shall prevail. The complete published Chinese 2023 Annual Report may be obtained at www.cninfo.com.cn.

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Hikvision 2023 Annual Report

Please read the full annual report and pay particular attention to the following risk factors:

1. Geopolitical risks: Global geopolitical uncertainty remains acute as the political landscape is being fragmented and reshaped, and local wars continue. In recent years, the Company has continuously strengthened our risk control and response capabilities, and flexibly adjusted resources based on business opportunities. However, our operations in some countries and regions may be adversely affected should geopolitical environment continues to deteriorate.
2. Global economic downside risks: In addition to slower growth and entrenched currency oversupply in some major economies, different regions across the world develop at different rates, presenting a hidden risk that is difficult to eliminate. The Company disperses the risk of operating in a single region with a wide business layout and conducts business based on the actual situation of various countries and regions. However, the Company's business will be impacted if another global economic recession arises
3. Risks of domestic economic structural transformation: The infrastructure and real estate markets in China continue to undergo adjustments. The exports of some commodities are restricted by trade protection policies of destination countries, and the advantage of a large labor force is weakened. The Chinese economy is in a process of transformation of development mode and alternation of new and old driving forces. The Company empowers the digital transformation of the economy and society with AIoT technologies and products, promoting new developments in productivity. However, economic transformation cannot be achieved overnight, and structural pressure and resistance will persist for a long time. Any problems that occur during the process will still affect the Company's business operations.
4. Supply chain risks: The integrity of the global supply system is undermined by geopolitics, and the timeliness of the supply chain is affected by business cycles. The Company strives to develop a diversified supply network and adjust inventory properly. However, our business stability may be affected if the supply chain is seriously interrupted.
5. Technology upgrading risks: With the rapid development of AI, big data, IoT and other technologies, technological applications are iterating quickly. The Company has some strength in technology fields such as IoT perception, AI, and big data, and keeps growing through business practices. However, if we cannot closely track the updates and changes of cutting-edge technologies and maintain business innovation and expansion, the uncertainty of the Company's future development will increase.

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Hikvision 2023 Annual Report

1. Risks of internal management: The Company's continual business expansion and development of new products and business services add complexity to internal management, posing new challenges to our management capabilities. The Company accumulates management experience through the development of systems and procedures with a focus on talent cultivation and construction. However, the Company's operations will be adversely affected if our management capabilities cannot keep up with the business expansion.
2. Legal and compliance risks: The world's multilateral trading system is greatly impacted by politics, and business activities are required to comply with the complex laws and regulations of various regions. The Company has constantly strengthened the legal compliance system since countries around the world have stricter requirements for data supervision and legal compliance capabilities. However, the Company's operations will be adversely affected if our legal compliance capabilities cannot keep up with the requirements.
3. Risks of exchange rate fluctuations: The Company operates in multiple countries and regions, where transactions are mainly settled in non-RMB currencies. Although the Company uses appropriate financial instruments to reduce risks, exchange rate fluctuations will affect our financial performance due to the foreign currency exposure arising from sales, procurement, and financing.
4. Financial risks caused by customers' reduced ability to pay: The flow of funds in commercial transactions is affected by the economic environment. The Company has accumulated some cash reserves due to our sound collection mechanism and stable business operations, and our financing costs are low. However, if the overall liquidity risk of the market increases, the Company's operations will be adversely affected as our payment collection maybe delayed.
5. Risks of cybersecurity: The Company has always emphasized cybersecurity and taken active measures to enhance the security of our products and systems. However, computer viruses, malicious software, hacker attacks and other security incidents that deliberately attempt to damage the Company's systems or products may take place, causing potential cybersecurity issues.
6. Risks of intellectual property (IP) rights: The Company has maintained considerable investment in R&D, and made significant technological achievements. We have also implemented robust IP protection measures. However, the risk of IP disputes and infringement still exists.

The above-mentioned alerts do not include all the potential risks for the Company. Investors are advised to invest with caution.

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	Hikvision 2023 Annual Report
CONTENTS
To Shareholders	1
Section I Important Notes, Contents and Definitions	3
Section II Corporate Profile & Key Financial Data	9
Section III Management Discussion and Analysis	16
Section IV Corporate Governance	148
Section V Environmental and Social Responsibility	183
Section VI Significant Events	184
Section VII Changes in Shares and Information about Shareholders	207
Section VIII Information of Preferred Shares	223
Section IX Bonds	224
Section X Financial Report	225
Section XI Documents Available for Reference	385

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		Hikvision 2023 Annual Report
		Definitions
	Term	Definition
	Reporting Period	From January 1, 2023 to December 31, 2023
	Articles of Associations	Articles of Associations for Hangzhou Hikvision Digital Technology Co., Ltd
	Hikvision, the Company, our	Hangzhou Hikvision Digital Technology Co., Ltd.
	Company, the Group
	CETC	China Electronics Technology Group Ltd., the actual controller of the Company
	CETHIK	CETHIK Group Co., Ltd. Controlling Shareholder of the Company
	EZVIZ, EZVIZ Network	Hangzhou EZVIZ Network Co., Ltd.(According to the context, also refers to the
		corresponding business)
	HikRobot, Robotic business	Hangzhou Hikrobot Technology Co., Ltd. (According to the context, also refers to
		the corresponding business)
	HikAuto, Auto electronics	Hangzhou Hikauto Technology Ltd. (According to the context, also refers to the
	business	corresponding business)
	HikMicro, Micro Sensing,	Hangzhou Hikmicro Sensing Technology Ltd. (According to the context, also refers
	Thermal imaging business	to the corresponding business)
	HikSemi, HikStorage,	Wuhan Hikstorage Technology Ltd. (According to the context, also refers to the
	Storage business	corresponding business)
	HikImaging	Hangzhou Hikimaging Technology Ltd. (According to the context, also refers to the
		corresponding business)
	HikFire	Hangzhou Hikfire Technology Ltd. (According to the context, also refers to the
		corresponding business)
	HikRayin,Rayin,	Hangzhou Rayin Technology Ltd. (According to the context, also refers to the
	HikSecurityCheck	corresponding business)
	Chengdu Science and	Located in Chengdu, Sichuan Province, the planned use is for R&D, office space
	Technology Park	and supporting facilities, etc.
	Xi'an Science and	Located in Xi'an, Shaanxi Province, the planned use is for R&D, office space and
	Technology Park	supporting facilities, etc.
	Wuhan Intelligence Industry	Located in Wuhan, Hubei Province, the planned use is for production plants,
	Park	warehouses and supporting facilities, etc.
	EZVIZ Intelligent	Located in Chongqing, the planned use is for production plants, warehouses and
	Manufacturing (Chongqing)
	Base	supporting facilities, etc.
	Shijiazhuang Science and	Located in Shijiazhuang, Hebei Province, the planned use is for R&D, office space
	Technology Park	and supporting facilities, etc.
	Hikvision Global	Located in Hangzhou City, Zhejiang Province, the planned use is for warehousing
	Warehousing and Logistics	and logistics buildings and supporting buildings, etc.

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Hikvision 2023 Annual Report

Term	Definition
Center
Industrialization Base of	Located in Hangzhou, Zhejiang Province, the planned use is for office, R&D sites
Infrared Thermal Imaging
and supporting facilities, etc.
Products
HikRobot Product	Located in Hangzhou, Zhejiang Province, the planned use is for office, R&D sites
Industrialization Base
and supporting facilities, etc.
Construction Project
HikRobot Intelligent	Located in Hangzhou, Zhejiang Province, the planned use is for factory buildings,
Manufacturing (Tonglu)
comprehensive office buildings and supporting facilities, etc.
Base Project
	A long investment cycle, business prospects uncertain, has the high risk and
	uncertainty, in need for direct or indirect investment in exploration, in order for the
	Company to timely enter into new areas of business. Initially disclosed in
Innovative Business	Announcement about Management Measures for Core Staff Investment in
Innovative Business (www.cninfo.com.cn).
	In this report, innovative business also refers to EZVIZ, HikRobot, HikAuto,
	HikMicro, HikSemi, HikImaging, HikFire, Rayin and their related business or
	products.

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Hikvision 2023 Annual Report

Section II Corporate Profile & Key Financial Data

I. Corporate Information

Stock abbreviation

HIKVISION

Stock code

002415

Stock exchange where the shares of the Company

Shenzhen Stock Exchange

are listed

Name of the Company in Chinese

杭州海康威视数字技术股份有限公司

Abbr. of the Company name in Chinese

海康威视

Name of the Company in English (if any)

HANGZHOU HIKVISION DIGITAL TECHNOLOGY CO., LTD

Abbr. of the Company name in English (if any)

HIKVISION

Legal representative

Chen Zongnian

Registered address

No. 555 Qianmo Road, Binjiang District, Hangzhou, Zhejiang Province

Postal code of Registered address

310051

The Company was listed on the Shenzhen Stock Exchange on May 28th 2010. The

Changes in the Company's registered address

original registered address was No. 36 MachengRoad, Xihu District, Hangzhou,

Zhejiang Province. In 2016, the Company's registered address was changed to No.

555 Qianmo Road, Binjiang District, Hangzhou, Zhejiang Province.

Business address

No. 518 WuLianWang Street, Binjiang District, Hangzhou

Postal code of Business address

310051

Company website

www.hikvision.com

E-mail

[e-mail]; [e-mail]

II. Contacts and Contact Information

Board Secretary

Securities Affairs Representative

Name

Huang Fanghong

Address

No. 518 WuLianWang Street, Binjiang

District, Hangzhou

Tel.

0571-88075998 ; 0571-89710492

Fax

0571-89986895

E-mail

[e-mail]

III. Information Disclosure and Place of the Report

The securities exchange website for the disclosure of the Annual

www.szse.cn

Report

Media and website for the disclosure of the Annual Report

Securities Times, China Securities Journal, Shanghai securities

Journal, www.cninfo.com.cn

Place where the Annual Report is available for inspection

Office of the Board of Directors of the Company

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