HUA HONG SEMICONDUCTOR LIMITED
華虹半導體有限公司
(Incorporated in Hong Kong with limited liability)
(於香港註冊成立之有限公司)
(Stock Code: 1347)
(股份代號:1347)
氣勢如虹峰
勇攀高
Charging Ahead in High Spirit
ANNUAL年度報告REPORT 2020
Contents
Definitions | 2 |
Key Financials | 5 |
Letter to Shareholders | 6 |
Corporate Information | 8 |
Directors and Senior Management Team | 11 |
Corporate Governance Report | 18 |
Directors' Report | 28 |
2020 Environmental, Social and Governance Report | 58 |
Independent Auditors' Report | 191 |
Consolidated Statement of Profit or Loss | 199 |
Consolidated Statement of Comprehensive Income | 200 |
Consolidated Statement of Financial Position | 201 |
Consolidated Statement of Changes in Equity | 203 |
Consolidated Statement of Cash Flows | 205 |
Notes to Financial Statements | 207 |
Five Year Financial Summary | 320 |
2 HUA HONG SEMICONDUCTOR LIMITED ● Annual Report 2020
Definitions
In this annual report, unless otherwise required by the context, the following terms shall have the meanings set out below.
"Annual General Meeting" or | a hybrid annual general meeting of the Company to be held on 13 May 2021 at |
"AGM" | 2:00 p.m., with the combination of a physical meeting at Kowloon Shangri-La Hong |
Kong, 64 Mody Road, Kowloon, Hong Kong and a virtual meeting online; | |
"Board" | the Board of Directors of the Company; |
"China IC Fund" | China Integrated Circuit Industry Investment Fund Co., Ltd., a company |
incorporated in the PRC on 26 September 2014; its shareholders include the | |
Ministry of Finance, the enterprises in the Integrated Circuit Industry Cluster, large- | |
scale state-owned enterprises, certain financial institutions and private enterprises. | |
It mainly focuses on the manufacturing of semiconductor wafers and takes into | |
account the upstream and downstream links covering wafer and IC design, | |
package test, equipment and materials etc; | |
"China" or "the PRC" | the People's Republic of China, but for the purpose of this annual report and for |
geographical reference only and except where otherwise required by the context, | |
references in this annual report to "China" and the "PRC" do not include Taiwan, the | |
Macau Special Administrative Region and Hong Kong; | |
"Company" or "our Company" | Hua Hong Semiconductor Limited, a company incorporated in Hong Kong with |
limited liability on 21 January 2005 and, except where otherwise required by the | |
context, all of its subsidiaries, or its present subsidiaries where the context refers to | |
the time before it became the holding company of its present subsidiaries; | |
"Company Secretary" | the Company Secretary of the Company; |
"Director(s)" | the Director(s) of the Company; |
"EPS" | earnings per share; |
"Executive Director(s)" | the Executive Director(s) of our Company; |
"Extraordinary General Meeting" | an extraordinary general meeting of the Company; |
or "EGM" | |
"Grace Cayman" | Grace Semiconductor Manufacturing Corporation, an exempted company with |
limited liability incorporated in the Cayman Islands on 5 October 1999 and a wholly- | |
owned subsidiary of our Company; | |
"Grace Shanghai" | Shanghai Grace Semiconductor Manufacturing Corporation (上海宏力半導體製造有 |
限公司), a company incorporated in the PRC on 20 December 2000 and a wholly- | |
owned subsidiary of our Company. It was deregistered on 3 August 2018; |
Annual Report 2020 ● HUA HONG SEMICONDUCTOR LIMITED | 3 |
Definitions
"Group" | our Company and our subsidiaries or, where required by the context, with respect |
to the period before our Company became the holding company of our present | |
subsidiaries (or became such associated companies of our Company), the business | |
operated by such subsidiaries or their predecessors (as the case may be); | |
"HHGrace" | Shanghai Huahong Grace Semiconductor Manufacturing Corporation (上海華虹宏力 |
半導體製造有限公司), a company incorporated in the PRC on 24 January 2013 and | |
a wholly-owned subsidiary of our Company; | |
"HHNEC" | Shanghai Hua Hong NEC Electronics Co., Ltd. (上海華虹NEC電子有限公司), a |
company incorporated in the PRC on 17 July 1997 and a wholly-owned subsidiary | |
of our Company. It was deregistered on 3 August 2018; | |
"HK$" | Hong Kong dollars, the lawful currency of Hong Kong; |
"Hong Kong" | the Hong Kong Special Administrative Region of the PRC; |
"Huahong Group" | Shanghai Huahong (Group) Co., Ltd. (上海華虹(集團)有限公司), a company |
incorporated in the PRC on 9 April 1996 as Shanghai Hua Hong Microelectronics | |
Co., Ltd. and renamed as Shanghai Huahong (Group) Co., Ltd. in 1998, and a | |
controlling shareholder of our Company; | |
"Huahong Real Estate" | Shanghai Huahong Real Estate Co., Ltd. (上海華虹置業有限公司), a company |
incorporated in the PRC on 28 October 2011 and a wholly-owned subsidiary of | |
Huahong Technology Development; | |
"Huahong Technology | Shanghai Huahong Technology Development Co., Limited (上海華虹科技發展有限公 |
Development" | 司), a connected person, a company incorporated in the PRC on 10 May 2010, and |
a company 50% held by and consolidated with Huahong Group and 50% held by | |
HHGrace; | |
"Huali Integrated" | Shanghai Huali Integrated Circuit Corporation (上海華力集成電路製造有限公司), |
a company incorporated in the PRC on 8 August 2016. Its Shareholders include | |
Shanghai Huali Microelectronics Corporation, Shanghai Integrated Circuit Industry | |
Investment Fund Co., Ltd. and China Integrated Circuit Industry Investment Fund | |
Co., Ltd.; | |
"Hua Hong Wuxi" | Hua Hong Semiconductor (Wuxi) Limited, a company incorporated in the PRC on |
10 October 2017. Upon such incorporation, Hua Hong Wuxi was held 100% by | |
HHGrace, a wholly-owned subsidiary of the Company, and continues to be held | |
51.0% by the Group following the completion of the transactions under the JV | |
Agreement and the Capital Increase Agreement, of which 22.2% is held directly | |
by the Company and 28.8% is held indirectly by the Company through HHGrace; | |
China IC Fund and Wuxi Xi Hong Lian Xin hold 29.0% and 20.0% of Hua Hong | |
Wuxi, respectively; |
4 HUA HONG SEMICONDUCTOR LIMITED ● Annual Report 2020
Definitions
"Independent Non-Executive | the Independent Non-Executive Director(s) of our Company; |
Director(s)" | |
"INESA" | INESA (Group) Co., Ltd. (上海儀電(集團)有限公司), formerly known as INESA |
Holding Group (上 海 儀 電 控 股(集 團)有 限 公 司), a state-owned company | |
incorporated in the PRC in December 1993, and a controlling shareholder of our | |
Company prior to 17 December 2020; | |
"JV Agreement" | the JV Agreement dated 3 January 2018 entered into by the Company, HHGrace, |
Hua Hong Wuxi, China IC Fund and Wuxi Xi Hong Lian Xin; | |
"Listing Rules" | the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong |
Limited, as amended or supplemented from time to time; | |
"Merger" | the merger of Grace Cayman and Hua Hong Semiconductor (Cayman) Inc., an |
exempted company established by the Company in the Cayman Islands; | |
"NEC" | NEC Corporation, a company incorporated in Japan and founded in 1899 as |
Nippon Electric Company, Limited; | |
"Non-Executive Director(s)" | the Non-Executive Director(s) of our Company; |
"QST" | QST Corporation (上海矽睿科技有限公司), a company incorporated in the PRC on |
13 September 2012 and a connected person of the Company until 1 September | |
2020; | |
"RMB" | Renminbi, the lawful currency of the PRC; |
"SAIL" | Shanghai Alliance Investment Ltd (上海聯和投資有限公司), a company incorporated |
in the PRC on 26 September 1994, a substantial shareholder of our Company; | |
"SFC" | the Securities and Futures Commission of Hong Kong; |
"SFO" | the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong), as |
amended or supplemented from time to time; | |
"Shanghai Huali" | Shanghai Huali Microelectronics Corporation (上海華力微電子有限公司), a company |
incorporated in the PRC on 18 January 2010 and a connected person; | |
"Shareholders" | holders of ordinary shares in the capital of the Company; |
"Stock Exchange" | The Stock Exchange of Hong Kong Limited; and |
"Wuxi Xi Hong Lian Xin" | Wuxi Xi Hong Lian Xin Investment Co., Ltd., a professional investment company |
incorporated in the PRC on 19 December 2017, jointly established by municipal | |
and district-levelstate-owned enterprises. |
Revenue
US$ million
1000 | 961.3 | |
930.3 | 932.6 | |
Annual Report 2020 ● HUA HONG SEMICONDUCTOR LIMITED | 5 |
Gross Profit Margin
%
36
33.4
800 |
30
30.3
600
400
200
0
24
18
12
6
0
24.4
2018 | 2019 | 2020 |
Profit attributable to owners of the parent
US$ million
200
183.2
180 | |
160 | 162.2 |
140 | |
120 | |
100 | 99.4 |
80 |
60
40
20
0
2018 | 2019 | 2020 |
2018 | 2019 | 2020 |
EPS
US$
- 0.171
0.126 | ||
0.12 | ||
0.10 | ||
0.08 | 0. | 777 |
0.06
0.04
0.02
0
2018 | 2019 | 2020 |
6 HUA HONG SEMICONDUCTOR LIMITED ● Annual Report 2020
LETTER TO SHAREHOLDERS
Dear Shareholders,
2020 was a memorable year for everyone. The unexpected outbreak of COVID-19 brought about a roller-coaster of an economy. Although the pandemic was challenging to navigate at first, Hua Hong Semiconductor overcame obstacles by diligently pursuing our strategies with excellent teamwork and leadership. As a Company, we have been profitable for 40 consecutive quarters and continued to push boundaries this year in both Shanghai and Wuxi. The 8-inch wafer production line seized every opportunity and operated in the second half at full load; the 12-inch wafer production line rapidly developed and introduced products, starting mass production on several new platforms. Based on our development strategy of "IC + Discrete", the Company successfully provided new product solutions in various applications such as mobile communications, Internet of Things, electric vehicles, and green energy.
In 2020, the Company's revenue achieved another record high, reaching US$961.3 million, with a year-on-year increase of 3.1%. Gross margin was 24.4%; net profit attributable to the parent company was US$99.40 million; basic earnings per share (EPS) was US$0.077; and net operating cash flow was US$269.1 million, representing a year-on- year increase of 65.2%. With the impact of COVID-19 and the aggressive timeline for building a new 12-inch wafer production line, it was undoubtedly an effort for the team to accomplish the above results. To ensure the Company's rapid growth and sustainable profitability, we took proactive measures to expand capacity, secure customers, develop new technologies, manage costs, improve efficiency, and grow revenue. In 2020, our stock price rose by nearly 150%, which showed the market and investors' recognition of the Company's overall strategy and their confidence in our future.
2020 was the second year since the Hua Hong Semiconductor (Wuxi) Limited ("Hua Hong Wuxi") 12-inch fab became operational. Progress of the equipment installation, technology development, and customer engagement were significantly ahead of our original plan. The three major platforms of Embedded Non-Volatile Memory (eNVM), Logic
- RF, and Discrete have attained continuous mass production and shipments. In 2020, we reached more than 20,000 monthly wafer starts, setting a new industry record in terms of production ramp-up. Hua Hong Wuxi is now not only a leading specialty 12-inch wafer production line in China, but also the first 12-inch discrete foundry globally. With our years of successful manufacturing experience in the automotive business, the Company has established a zero-defect management system and obtained IATF16949 automotive quality certification, thereby positioning us comfortably for the coming surge in the automotive electronic market.
The Company has continued its commitment to scientific innovation and specialty semiconductor technology development, extending our long-term advantages in this field. The Company won the "2020 Excellent (Process) Solution Award for Low-Power MCU" awarded by CHINA ELECTRONICS NEWS for our industry-leading 0.11 micron eNVM technology. The Company also developed key 650V-1200V IGBT manufacturing technology in order to address market demand in white goods, industrial and automotive applications. As a result of this development, the Company won the "14th China Semiconductor Award for Innovative Products and Technologies". For implementation of the "Intelligent Big Data Analysis System - From Advanced Manufacturing to Intelligent Manufacturing", the Company won the "2020 National Quality Benchmark Award", becoming the only IC manufacturing enterprise to win since its establishment.
Annual Report 2020 ● HUA HONG SEMICONDUCTOR LIMITED | 7 |
LETTER TO SHAREHOLDERS
As Hua Hong looks ahead to 2021, we will continue on the path of "IC + Discrete", with the "8-inch + 12-inch" versatility to optimize the 8-inch product mix, expand the capacity of the 12-inch wafer production line, and provide customers with the best solutions. We expect a number of new products in 12-inch will come into production, such as the back-illuminated CIS product, power management IC, standalone memory, IGBT, and super-junction power devices, all of which will lead to increased revenue and profit.
2021 will be another year of innovation and growth for Hua Hong Semiconductor. We will continue to focus on research and development, rapidly expand our production capacity in the 12-inch fab using lean production methods, and exceed our customers' expectations so as to achieve superior performance and create greater value. We hereby take this opportunity to sincerely thank all the shareholders for your trust and support. Please continue to stand together with us as we start a promising new year!
Mr. Suxin Zhang
Chairman and Executive Director
Mr. Junjun Tang
President and Executive Director
Shanghai, PRC
25 March 2021
8 HUA HONG SEMICONDUCTOR LIMITED ● Annual Report 2020
Corporate Information
Corporate Culture
Vision
We empower our customers through continuous innovation
Mission
Creating value for shareholders, customers and employees through collaboration, innovation and being a good corporate citizen
Spirit
Disruptive Innovation, Confidence,
Initiative and Teamwork
Board of Directors
Executive Directors
Suxin Zhang (Chairman)
Junjun Tang (President)
Non-Executive Directors
Guodong Sun (appointed on 10 December 2020) Jing Wang
Jun Ye
Takayuki Morita (resigned on 25 September 2020) Yang Du (resigned on 10 December 2020)
Independent Non-Executive Directors
Stephen Tso Tung Chang
Kwai Huen Wong, JP
Long Fei Ye
Company Secretary
Sui Har Lee
Authorized Representatives
Junjun Tang
Sui Har Lee
Audit Committee
Stephen Tso Tung Chang (Chairman)
Long Fei Ye
Jun Ye
Remuneration Committee
Kwai Huen Wong, JP (Chairman)
Long Fei Ye
Jing Wang
Nomination Committee
Suxin Zhang (Chairman)
Kwai Huen Wong, JP
Long Fei Ye
Website
www.huahonggrace.com
Annual Report 2020 ● HUA HONG SEMICONDUCTOR LIMITED | 9 |
Corporate Information
Auditor
Ernst & Young
Certified Public Accountants
22nd Floor, CITIC Tower
1 Tim Mei Avenue, Central
Hong Kong
Legal Advisor
Herbert Smith Freehills
23/F, Gloucester Tower
15 Queen's Road Central
Hong Kong
Principal Banks
China Construction Bank Shanghai Branch
No. 900, Lujiazui Ring Road
Pudong New Area
Shanghai, PRC
China Development Bank Shanghai Branch
No. 68, Puming Road
Shanghai, PRC
China Construction Bank Corporation Hong Kong Branch 28/F, CCB Tower, 3 Connaught Road, Central
Hong Kong
Bank of Communications Co., Ltd. Hong Kong Branch
20 Pedder Street, Central
Hong Kong
China Development Bank Jiangsu Branch
No. 232, Middle Jiangdong Road
Nanjing, Jiangsu, PRC
Agricultural Bank of China Wuxi Xinwu Subbranch
No. 26, Hefeng Road
Xinwu District
Wuxi, Jiangsu, PRC
China Construction Bank Corporation Wuxi High-Tech
Industrial Development Zone Subbranch
No. 26, Hefeng Road
Xinwu District
Wuxi, Jiangsu, PRC
10 HUA HONG SEMICONDUCTOR LIMITED ● Annual Report 2020
Corporate Information
China CITIC Bank Corporation Wuxi New District
Subbranch
No. 26, Hefeng Road
Xinwu District
Wuxi, Jiangsu, PRC
Bank of China Wuxi High and New Technology Industrial
Development Zone Subbranch
No. 140, Wangzhuang Road
Xinwu District
Wuxi, Jiangsu, PRC
Share Registrar
Tricor Investor Services Limited
Level 54, Hopewell Centre
183 Queen's Road East
Hong Kong
Registered Office
Room 2212, Bank of America Tower
12 Harcourt Road, Central
Hong Kong
Principal Places of Business
288 Halei Road
Zhangjiang Hi-Tech Park
Shanghai, PRC
Postcode: 201203
No. 30, Xinzhou Road
Xinwu District
Wuxi, Jiangsu, PRC
Postcode: 214028
Stock Code
1347
Annual Report 2020 ● HUA HONG SEMICONDUCTOR LIMITED | 11 |
DIRECTORS AND SENIOR MANAGEMENT TEAM
Mr. Suxin Zhang, aged 57, was appointed on 11 March 2016 as an Executive Director and Chairman of our Company as well as a member of and Chairman of the nomination committee of the Company (the "Nomination Committee"). He is currently Chairman and Secretary of the Communist Party of Huahong Group, Chairman of Shanghai Huali, Chairman of Huali Integrated, and legal representative and Chairman of Hua Hong Wuxi. Mr. Zhang has extensive experience in hi-tech strategic development, energy strategy research, and the power equipment industry. Mr. Zhang held various positions, including President of Shanghai Turbine Co., Ltd., Executive Vice President of Shanghai Electric Power Generation Group, Chairman of Siemens Gas Turbine Parts Co., Ltd., Executive Director of Shanghai Electric Group Company Limited, Vice President of Shanghai Electric (Group) Corporation, Secretary of the Communist Party and General Manager of Shanghai Jinqiao (Holdings) Limited, Chairman and Secretary of the Communist Party of Shanghai Jinqiao Export Processing Zone Development Co., Ltd., and Deputy Director of both the Shanghai Municipal Development and Reform Commission and the Administration Commission of Shanghai Zhangjiang Hi-Tech Industrial Development Zone. Mr. Zhang graduated from Tsinghua University with a Bachelor's degree in Engineering and is a professor-level Senior Engineer.
Mr. Junjun Tang, aged 56, has served as the President and Executive Director of the Company since May 2019. Mr. Tang has extensive experience in the integrated circuit industry and management and possesses strong coordination and execution ability. Prior to joining the Company, Mr. Tang was the Secretary of the Party Committee, Vice President and Executive Vice President of Shanghai Huali from February 2010 to March 2019. He was concurrently the President of Huali Integrated from August 2016 to March 2019. During the period from July 2008 to February 2010, Mr. Tang was the Vice Secretary of the Party Committee, President of Trade Union and head of administrative and government relationships of Shanghai Huahong NEC Electronics Co., Ltd. (上海華虹NEC電子有限公司). Shanghai Huali, Huali Integrated and Huahong NEC are associates as defined by the Listing Rules of the Company. Prior to joining the Company, Mr. Tang successively held various positions, including Associate Chief Officer of Shanghai Bureau of Instrument and Telecommunications Industry (上海儀表電訊工 業局), Technologist of Shanghai Radio No.17 Factory (上海無線電十七廠 ) and Technologist of Shanghai Semiconductor Device No.4 Factory (上海半導體器件四廠 ). Mr. Tang graduated from Southwest Jiaotong University with an Undergraduate's degree in business administration. He also graduated from China Europe International Business School with a Master's degree in business administration, and is a Chief Senior Economist.
Mr. Yang Du, aged 43, acted as a Non-Executive Director of our Company from November 2018 to December 2020.
12 HUA HONG SEMICONDUCTOR LIMITED ● Annual Report 2020
DIRECTORS AND SENIOR MANAGEMENT TEAM
Mr. Guodong Sun, aged 44, was appointed as a Non-Executive Director of the Company with effect from 10 December 2020. Mr. Sun joined China Development Bank in 2000. From 2000 to 2014, Mr. Sun held various positions in China Development Bank, including Deputy Director of the Human Resources Systems Division, Deputy Director and Director of the Hubei Branch Human Resources Department, and Vice Minister and Minister of the Party Committee Organization Department. Mr. Sun had been the General Manager of the Human Resources Department of Sino-IC Capital Co., Ltd. (華芯投資管理有限責任公司) from December 2014 to July 2016, and has been the Managing Director of Sino-IC Capital Co., Ltd. since July 2016. Mr. Sun graduated from Beijing Institute of Technology in the PRC with a Bachelor's degree in computer application, and from Central University of Finance and Economics in the PRC with a Master's degree in business administration.
Mr. Takayuki Morita, aged 61, acted as a Non-Executive Director of our Company from July 2009 to September 2020.
Ms. Jing Wang, aged 50, has been a Non-Executive Director of our Company since June 2019. She is currently President and Deputy Secretary of the Communist Party Committee of Huahong Group, Vice Chairman of Shanghai Huali, a Director of Huali Integrated and a Director of Hua Hong Wuxi. Ms. Wang has extensive experience in management and economic development. During the period from December 2003 to December 2007, Ms. Wang was the Deputy Division Director of the Industrial Development Division of Shanghai Municipal Development and Reform Commission and from December 2007 to February 2014, she was the Division Director. From February 2014 to May 2018 she worked as a Deputy Director of China (Shanghai) Free Trade Zone Management Committee (中國(上海)自由貿易試驗區管委 會) and was concurrently the Deputy District Head of Shanghai Pudong New Area during the period from July 2015 to May 2018. She had also been employed by Shanghai Investment Consulting Corporation (上海投資諮詢公司), Shanghai Planning Commission (上海市計劃委員 會), Shanghai Comprehensive Economics Work Committee (上海市綜合經濟工作委員會) and Shanghai Municipal Development and Planning Commission (上海市發展計劃委) from 1992 to 2003. Prior to joining the Company, Ms. Wang was a Deputy Director at Shanghai Science and Technology innovation Centre Development Office (上海推進科技創新中心建設辦公室) and Shanghai Zhangjiang Hi-tech Industrial Development Zone Management Committee (上 海市張江高新技術產業開發區管委會) from May 2018 to May 2019. Ms. Wang graduated from Shanghai Jiao Tong University with a Bachelor's degree in technical economics in 1992. She also graduated from Fudan University with a Master's degree in World economics in 2003 and is a Senior Economist.
Annual Report 2020 ● HUA HONG SEMICONDUCTOR LIMITED | 13 |
DIRECTORS AND SENIOR MANAGEMENT TEAM
Mr. Jun Ye, aged 48, has been a Non-Executive Director of our Company since February 2012. Mr. Ye has more than 20 years of experience in finance and investment. Mr. Ye has successively held various positions in SAIL, including Manager of the Investment Banking Division and the Business Development Division, General Manager Assistant and Deputy General Manager since 1996 and General Manager since May 2018. Mr. Ye is also a Director at Bank of Shanghai, Chairman of Shanghai Zhaoxin Semiconductor Ltd., Sino Therapeutics Inc. and Sino-US United MetLife Insurance Company Limited. Mr. Ye obtained a Bachelor's degree in industrial and international trade and a Master's degree in business administration from Shanghai Jiao Tong University.
Mr. Stephen Tso Tung Chang, aged 72, is an Independent Non-Executive Director of our Company. Mr. Chang has extensive experience in accounting, auditing and financial management. He was a certified public accountant in Hong Kong and a member of the Hong Kong Society of Accountants from 1978 to the end of 2003. Mr. Chang is also a Fellow member of the Institute of Chartered Accountants in England and Wales since January 1983, and he held various positions at Ernst & Young starting in 1976. He became a Management Committee Member of Ernst & Young in 1989 and was actively involved in establishing and monitoring the firm's internal control and risk management policy and procedures. Prior to his promotion to Managing Partner of the Professional Services Department, he was Chairman of Ernst and Young's audit and advisory business services for four years. He was a Partner of Ernst and Young and the Chairman of Ernst and Young China and Hong Kong prior to his retirement in 2003. He is a member of the Investment Committee of Shanghai Fudan University Education Development Foundation and Fudan University Education Development Foundation (overseas). He is also an Independent Non-Executive Director of Kerry Properties Limited (stock code: 683.HK), and China Life Insurance Company Ltd. (stock code: 2628.HK) and was formerly an Independent Non-Executive Director of China Cinda Asset Management Co., Ltd. (stock code: 1359.HK). Mr. Chang obtained a Bachelor of Science degree in food science and chemistry from the University of London.
Mr. Kwai Huen Wong, BBS, JP, aged 69, is an Independent Non-Executive Director of our Company. Mr. Wong had served as the PRC Managing Partner of two international law firms for 15 years. Prior to that, he worked for the Lands Department, Department of Justice and Legislative Council of the Hong Kong SAR Government for a total of 10 years. He was appointed as a Member of Airport Authority Hong Kong, Hospital Authority, and the Competition Commission from 2011 to 2018. He was the former Chairman of the Hong Kong International Arbitration Centre, the former President of the Law Society of Hong Kong and Inter-Pacific Bar Association, and the former Chairman of Hong Kong Copyright Tribunal. He is presently the Chairmen of Hong Kong Inland Revenue Board of Review, the Director of the Hong Kong Mortgage Corporation Limited, and the Independent Non-Executive Director of Vinda International Holdings Limited (stock code: 3331.HK), China Oilfield Services Limited (stock codes: 2883.HK and 601808.SZ), and NWS Holdings Limited (stock code: 659.HK). In addition, he is the Honorary Lecturer, External Examiner, and Professor at The University of Hong Kong, The Chinese University of Hong Kong, City University of Hong Kong and Hong Kong Shue Yan University. Mr. Wong holds a Bachelor of Arts degree from The Chinese University of Hong Kong and a Bachelor of Law degree from the University of London.
14 HUA HONG SEMICONDUCTOR LIMITED ● Annual Report 2020
DIRECTORS AND SENIOR MANAGEMENT TEAM
Mr. Long Fei Ye, aged 79, is an Independent Non-Executive Director of our Company. Mr. Ye held various positions in the Shanghai Municipal Government. Mr. Ye relocated to Hong Kong in 1991, and served until 1995 as the Chief Executive of the "Shanghai Desk", which was a cooperation arrangement for promoting Shanghai between the Shanghai government and Arthur Andersen & Co. He then joined Kerry Holdings Limited in 1995, and served as the Chairman and Deputy Chairman of Shangri-La Asia Limited from October 2000 to August 2003 and August 2003 to March 2007, respectively. He was an advisor to Shangri-La Asia Limited from March 2007 to February 2018. Mr. Ye obtained a Bachelor's and a Master's degree, both in physics, from Fudan University.
Senior Management
As of the date of this report, the Company's senior management includes:
Mr. Suxin Zhang, aged 57, is an Executive Director and Chairman of our Company. For more information about Mr. Zhang's past experience and academic background, see the section headed "Directors and Senior Management Team-Board of Directors".
Mr. Junjun Tang, aged 56, is the President and Executive Director of the Company. For more information about Mr. Tang's past experience and academic background, see the section headed "Directors and Senior Management Team-Board of Directors".
Mr. Heng Fan, aged 59, is an Executive Vice President of our Company responsible for Sales and Marketing. Prior to joining the Company at the end of 2014, Mr. Fan was Director and President of Shanghai Huahong Jitong Smart System Co., Ltd. from 2003 to 2014. Before that, he held various positions including Research Analyst/Deputy Director of Shanghai Institute of Microsystem and Information Technology, Chinese Academy of Science, and Vice President of Shanghai Huahong Integrated Circuit Co., Ltd. Mr. Fan received his Bachelor's degree in microelectronics from the Electronic Engineering Department of Fudan University and his Master's degree in Semiconductor Physics and Semiconductor Device Physics from Shanghai Institute of Microsystem and Information Technology, Chinese Academy of Science.
Annual Report 2020 ● HUA HONG SEMICONDUCTOR LIMITED | 15 |
DIRECTORS AND SENIOR MANAGEMENT TEAM
Mr. Weiping Zhou, aged 54, is an Executive Vice President of manufacturing project and security management at the Company. Mr. Zhou joined the Company at the beginning of 2018. Prior to joining the Company, Mr. Zhou was the Executive Vice President of Shanghai Belling Corporation Limited, the general manager of Ningbo Shanshan Ulica Solar Technology Developing Company Limited, the General Manager of Shanghai Belling Microelectronics Manufacturing Company Limited, the Deputy Secretary to the Communist Party Committee, President, Chief Executive Officer, Secretary to the Communist Party Committee and Vice President of Advanced Semiconductor Manufacturing Corporation Limited. Mr. Zhou graduated from East China Normal University with a Bachelor's degree in solid state electronic technology, and subsequently obtained a Master's degree in business administration from Fudan University, and is a professor-level senior engineer.
Mr. Daniel Yu-ChengWang, aged 58, is an Executive Vice President of our Company overseeing finance, information technology, administration and compliance, listed company affairs and overseas human resources for our Group. He joined Grace Shanghai in April 2001 and played a central leadership role in each stage of Grace Shanghai's Development and in the preparation for and implementation of the Merger and the successful initial public offering of the Company. Mr. Wang has been Secretary of the Board of the Company since February 2012. Prior to joining Grace Shanghai, Mr. Wang worked at LSI Logic Corporation in San Jose, Silicon Valley, California from August 1995 to March 2001 as the Division Controller in the Broadband Entertainment Division. Before joining LSI Logic Corporation, Mr. Wang was employed by Franklin Templeton Investments in the U.S. Mr. Wang obtained a Bachelor's degree in industrial engineering and operations research from the College of Engineering, University of California, Berkeley, in the U.S. and a Master of Business Administration degree in finance and banking from the University of San Francisco. In the list of "All-Asia(Ex-Japan) Executive Team Ranking" published by Institutional Investor, an authoritative international financial magazine, he was named the "Best Chief Financial Officer" in the technology/ semiconductor industry for two consecutive years in 2018 and 2019.
Dr. Weiran Kong, aged 57, is an Executive Vice President of our Company and is in charge of technology development. He joined Grace Shanghai in March 2003 and has over 25 years' experience in the semiconductor industry, with a proven track record of driving innovations in the area of NOR Flash, Logic and embedded Flash. Before joining Grace Shanghai, Dr. Kong was based in the U.S. and has worked for Sun Microsystems, Inc., LSI Logic Corporation and ISSI. He obtained a Bachelor's degree in Physics from Nankai University in Tianjin and graduated with a Master's degree in electrical engineering and a Doctorate degree in applied physics from Oregon Graduate Institute of Science & Technology in the U.S.. Dr. Kong holds 13 U.S. patents, 66 PRC patents and co-authored over 20 technical papers.
Dr. Qi Li, aged 58, was a Vice President of our Company and was responsible for purchasing, logistics, testing, quality assurance, and planning until he resigned on 31 December 2020.
16 HUA HONG SEMICONDUCTOR LIMITED ● Annual Report 2020
DIRECTORS AND SENIOR MANAGEMENT TEAM
Mr. Guangping Hua, aged 54, is a Vice President of Operation at Fab 1 of the Company. He has over 20 years of working experience in the semiconductor industry and joined HHNEC in July 2007. Prior to this, Mr. Hua has worked for Chartered Semiconductor Manufacturing Limited (Singapore) and Advanced Semiconductor Manufacturing Corporation Limited. Mr. Hua graduated from Tsinghua University with a Master's degree in microelectronics engineering.
Mr. Liang Yao, aged 56, is a Vice President of Operation at Fab 2 of the Company. He has nearly 30 years of working experience in the semiconductor industry and joined HHNEC in August 1997. Before joining HHNEC, he worked for China Huajing Electronics Group Co., Ltd. from 1987 to October 1996. Mr. Yao received his Bachelor's degree in metal materials studies from Nanjing Institute of Technology.
Mr. Bill Lin, aged 52, is a Vice President of our Company and is currently responsible for our Fab 3 operations. He has over 20 years of working experience in the semiconductor industry and joined Grace Shanghai in August 2000. Before joining Grace Shanghai, he worked for Texas Instruments-Acer Inc. (later merged with Taiwan Semiconductor Manufacturing Company Limited) from 1995 to August 2000. Mr. Lin received his Master's degree in chemical engineering from the National Taiwan University of Science and Technology (previously known as National Taiwan Institute of Technology).
Mr. Lihua Ni, aged 52, is a Vice President of Operation at Fab 7 of the Company. He joined HHGrace in May 2018. Prior to joining the Company, Mr. Lihua Ni successively worked for Wuxi Huajing Group Co., Ltd. (無錫華晶集團公司), Shanghai Hua Hong Microelectronics Co., Ltd., Shanghai Hua Hong NEC Electronics Co., Ltd., and acted as a Department Manager at Shanghai Xinjin Semiconductor Fabrication Co., Ltd., department head at Shanghai Hua Hong NEC Electronics Co., Ltd. and Deputy Factory Director at Shanghai Huali. He graduated from Xidian University, with a Bachelor of Engineering degree, and obtained a Master of Engineering degree from Shanghai Jiao Tong University.
Ms. Ying Chen, aged 48, is a Vice President of our Company and is currently responsible for general administration, corporate image communication, and compliance. Ms. Chen joined Grace Shanghai in April 2001 and has 20 years of administrative experience. Prior to this, Ms. Chen worked at Shanghai Fudan Forward Science and Technology Co., Ltd.. Ms Chen graduated from Fudan University with a Bachelor's degree in law and subsequently obtained a Master's degree in business administration from Renmin University of China and is a Senior Economist.
Annual Report 2020 ● HUA HONG SEMICONDUCTOR LIMITED | 17 |
DIRECTORS AND SENIOR MANAGEMENT TEAM
Dr. Steven Lin, aged 59, is a vice president of sales at the Company for North America and Japan. He worked in various non-volatile memory technology development roles at several leading semiconductor companies in the U.S. and joined Grace Shanghai in August 2006. Dr. Lin received his Doctorate degree in electrical engineering from the California Institute of Technology.
Mr. Mirko Sonntag, aged 44, is a vice president of our Company and is currently responsible for sales operations and customer services and sales for Europe. His expertise encompasses demand and supply chain planning and business operations, with a strong foundation in business development. Mr. Sonntag joined Grace Shanghai in October 2008. Prior to that, he worked at Infineon Technologies AG in Germany. Mr. Sonntag obtained a diploma in process engineering and economics from the University of Applied Sciences Berlin and School of Economics Berlin, Germany.
Mr. Hongbin Yao, aged 48, is the vice president of domestic sales at the Company. He joined Shanghai Hua Hong Microelectronics in January 1997. Prior to joining the Company, Mr. Hongbin Yao worked for Sino Wealth Electronic (Shanghai) Ltd. (中穎電子(上海)有限公司), Shanghai Hua Hong Microelectronics Co., Ltd. and Shanghai Hua Hong NEC Electronics Co., Ltd. He was assigned to Japan NEC for a two-year advanced study during his employment with Shanghai Hua Hong NEC. Mr. Hongbin Yao graduated from Shanghai University with a Bachelor's degree in communication.
Company Secretary
Ms. Sui Har Lee, aged 43, has been serving as the Company Secretary of the Company since November 2019. Ms. Lee is currently a Partner of Jun He Law Offices. She has around 15 years of experience in general business practices and corporate financial transactions, such as assisting corporations in listing their shares on the Stock Exchange, merger and acquisitions, capital reorganization, and compliance and regulatory matters in relation to the Listing Rules of the Stock Exchange. Ms. Lee was admitted as a Solicitor of the High Court of Hong Kong in 2005. Ms. Lee graduated from City University of Hong Kong with the degree of Bachelor of Laws and obtained the degree of Master of Laws from University College London.
18 HUA HONG SEMICONDUCTOR LIMITED ● Annual Report 2020
CORPORATE GOVERNANCE REPORT
The Board is pleased to present this corporate governance report for the year ended 31 December 2020.
Corporate Governance Practices
The Company diligently practices good corporate governance and has established corporate governance procedures that comply with the principles in the Corporate Governance Code (the "Code") as set out in Appendix 14 to the Listing Rules.
The Company understands the importance of sound corporate governance practices and recognizes the changing regulatory environment. Therefore, the Company has continually monitored and updated its corporate governance practices, from implementing the Code and evaluating the effectiveness of its practices, to responding to continuous developments in the regulatory landscape.
Compliance with the Code Provisions
During the year ended 31 December 2020, the Company complied with the Code.
Securities Transactions by Directors
The Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers (the "Model Code") as set out in Appendix 10 to the Listing Rules as its own code of conduct regarding securities transactions by Directors. The Company has made specific enquiries with all of the Directors, each of whom has confirmed that he has, throughout the year ended 31 December 2020, complied with the required standards set out therein.
Board of Directors
The Board is entrusted with the overall responsibility of managing the business and affairs of the Company. It has the ultimate responsibility for the day-to-day management of the Company, which is delegated to the Chairman and management.
The eight-member Board currently comprises two Executive Directors, Mr. Suxin Zhang (Chairman) and Mr. Junjun Tang (President); three Non-Executive Directors, Mr. Jun Ye, Ms. Jing Wang and Mr. Guodong Sun (appointed on 10 December 2020) (Mr. Takayuki Morita resigned as a Non-Executive Director of the Company on 25 September 2020; Mr. Yang Du resigned as a Non-Executive Director of the Company on 10 December 2020); and three Independent Non-Executive Directors, Mr. Stephen Tso Tung Chang, Mr. Kwai Huen Wong, JP, and Mr. Long Fei Ye. More details of the Directors are disclosed on pages 11 to 14 of this annual report. The Company publishes and maintains on its website and on the Stock Exchange website an updated list of the Directors, identifying their roles and functions.
Each of the Non-Executive Directors of the Company is appointed for a specific term of three years and is subject to re-nomination and re-election by the Company in general meetings unless previously terminated in accordance with the terms and conditions of the relevant letter of appointment or Director's service contract.
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CORPORATE GOVERNANCE REPORT
The Board meets regularly throughout the year. All Directors are given the opportunity to put items on the agenda for regular Board meetings. All Directors have access to the Company Secretary to ensure that all Board procedures, rules and regulations are followed. Full minutes of Board meetings are kept by the Company Secretary and are available for inspection on reasonable notice. Any Director may, in furtherance of his duties, take independent professional advice, where necessary, at the expense of the Company.
The Board is responsible for setting the strategic direction and policies of the Group and supervising management. Some functions are reserved by the Board, including, inter alia, the monitoring and approval of material transactions; matters involving a conflict of interest with a substantial shareholder or a Director of the Company; the approval of the quarterly, interim and final results; other disclosures to the public or regulators; and the internal control system. Decisions relating to such matters shall be subject to formal decisions of the Board. Matters not specifically reserved to the Board and necessary for the daily operations of the Company are delegated to management under the supervision of the respective Director(s) and the leadership of the Chairman.
The roles of the Chairman and the President are separate. The Chairman is responsible for the overall management and operations of the Company and for proposing and reviewing the corporate directions and strategies of the Company. The Chairman is responsible for formulating business strategies and provides leadership to the Board, ensuring effective running of the Board, including that all appropriate issues are discussed by the Board in a timely manner. The Chairman ensures that all Directors are properly briefed on issues arising at Board meetings and all Directors receive adequate, complete and reliable information. The Chairman of the Board highly values communication with the Independent Non-Executive Directors and will hold meetings with them at least once each year without the presence of other Directors.
The President is responsible for the day-to-day management of the Company's business and operations as well as implementation of the Company's business strategies.
During the year ended 31 December 2020, the Board at all times complied with Rules 3.10(1), (2), and 3.10A of the Listing Rules relating to the appointment of at least three Independent Non-Executive Directors representing at least one-third of the Board; at least one of the Independent Non-Executive Directors is required to possess appropriate professional qualifications or accounting or related financial management expertise. Each of the Independent Non-Executive Directors has made an annual confirmation of independence pursuant to Rule 3.13 of the Listing Rules. The Company is of the view that all Independent Non-Executive Directors meet the independence guidelines set out in Rule 3.13 of the Listing Rules and are independent in accordance with the terms of the guidelines.
Directors'and Officers'Liabilities Insurance
Appropriate insurance has been arranged by the Company to cover potential liabilities of Directors and Officers of the Company regarding legal actions against said Directors and Officers of the Company and its subsidiaries, arising out of corporate activities of the Company.
20 HUA HONG SEMICONDUCTOR LIMITED ● Annual Report 2020
CORPORATE GOVERNANCE REPORT
Board Operation
During the year ended 31 December 2020, the Board held five Board meetings. The attendance record of each Board member at Board meetings, meetings of the audit committee of the Company (the "Audit Committee"), the Nomination Committee, and the remuneration committee of the Company (the "Remuneration Committee"), as well as the annual general meeting is set out below:
Audit | Nomination | Remuneration | Annual | ||
Board | Committee | Committee | Committee | General | |
meetings | meetings | meetings | meetings | Meeting | |
Executive Directors | |||||
Suxin Zhang | 5 | N/A | 1 | N/A | 1 |
Junjun Tang | 5 | N/A | N/A | N/A | 1 |
Non-Executive Directors | |||||
Jun Ye | 4 | 4 | N/A | N/A | 0 |
Jing Wang | 5 | N/A | N/A | 1 | 1 |
Guodong Sun (Note 1) | 0 | N/A | N/A | N/A | 0 |
Takayuki Morita (Note 2) | 4 | N/A | N/A | N/A | 1 |
Yang Du (Note 3) | 5 | N/A | N/A | N/A | 1 |
Independent Non-Executive | |||||
Directors | |||||
Stephen Tso Tung Chang | 5 | 5 | N/A | N/A | 1 |
Kwai Huen Wong, JP | 5 | N/A | 1 | 1 | 1 |
Long Fei Ye | 5 | 5 | 1 | 1 | 1 |
Note 1: Mr. Guodong Sun was appointed as a Non-Executive Director of the Company on 10 December 2020. The Company did not convene any Board meetings in 2020 after his appointment.
Note 2: Mr. Takayuki Morita resigned as a Non-Executive Director of the Company on 25 September 2020. Before his resignation, Mr. Takayuki Morita attended 4 Board meetings.
Note 3: Mr. Yang Du resigned as a Non-Executive Director of the Company on 10 December 2020. Before his resignation, Mr. Yang Du attended 5 Board meetings.
In place of physical meetings, the Board may circulate written resolutions for approval by the relevant members of the Board except for matters where a substantial shareholder or a Director has a conflict of interest that the Board has determined to be material, in which case the matter shall be dealt with by a physical Board meeting (rather than a written resolution) to comply with Article A.1.7 of the Code.
The Board, having considered the attendance records of the Directors, is satisfied that each Director spends sufficient time performing his responsibilities.
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CORPORATE GOVERNANCE REPORT
Continuous Professional Development
Directors shall keep abreast of their responsibilities as Directors and of the conduct, business activities, and development of the Company.
Under Code Provision A.6.5, the Directors should participate in appropriate continuous professional development programs to develop and refresh their knowledge and skills to ensure that their contribution to the Board remains informed and relevant. During the year ended 31 December 2020, all Directors were provided with timely updates on the Company's performance, financial position, prospects, and materials on new or salient changes to laws and regulations applicable to the Group, to enable the Board as a whole and each Director individually to discharge their duties. Internally-facilitated briefings for the Directors will be arranged in the next financial year and reading material on relevant topics will be issued to the Directors where appropriate. All Directors are encouraged to attend relevant training courses at the Company's expense.
The participation by each Director in continuous professional development for the year ended 31 December 2020 is set out below:
Reading related rules and | |
materials and/or | |
Name of Director | attending training |
Suxin Zhang (Chairman) | ✓ |
Junjun Tang (President) | ✓ |
Jun Ye | ✓ |
Jing Wang | ✓ |
Guodong Sun | ✓ |
Stephen Tso Tung Chang | ✓ |
Kwai Huen Wong, JP | ✓ |
Long Fei Ye | ✓ |
Remuneration Committee
The Remuneration Committee currently comprises one Non-Executive Director, Ms. Jing Wang, and two Independent Non-Executive Directors, Mr. Kwai Huen Wong, JP and Mr. Long Fei Ye. The Chairman of the Remuneration Committee is Mr. Kwai Huen Wong, JP. Each member is sufficiently experienced and is appropriately skilled in the issues of determining Executive compensation in public companies. The Board expects committee members to exercise independent judgement in conducting the business of the committee. The roles and functions of the Remuneration Committee include the determination of the specific remuneration packages of all Executive Directors and senior management, including benefits in kind, pension rights, and compensation payments, and making recommendations to the Board in connection with the remuneration of the Non-Executive Directors. The Remuneration Committee should consider factors such as the salaries paid by comparable companies, employment conditions elsewhere in the Group, and the desirability of performance-based remuneration. A copy of the terms of reference of the Remuneration Committee is available from the Company's website and the Stock Exchange's website. The Remuneration Committee shall meet at least once a year.
During the year ended 31 December 2020, one meeting of the Remuneration Committee was held to review and recommend the share option scheme of the Company, which was previously approved by an extraordinary general meeting of the Company held on 1 September 2015.
22 HUA HONG SEMICONDUCTOR LIMITED ● Annual Report 2020
CORPORATE GOVERNANCE REPORT
Details of the emoluments of the Directors are set out in note 8 to the Financial Statements.
Nomination Committee
The Nomination Committee currently comprises one Executive Director, Mr. Suxin Zhang, and two Independent Non-Executive Directors, Mr. Kwai Huen Wong, JP and Mr. Long Fei Ye. The Chairman of the Nomination Committee is Mr. Suxin Zhang. Each member is sufficiently experienced and is appropriately skilled in the issues of nomination of directors to the Board. The Company has provided the Nomination Committee with sufficient resources to perform its duties. The Nomination Committee may seek independent professional advice, at the Company's expense, to perform its responsibilities. The roles and functions of the Nomination Committee are to review the structure, size and composition of the Board, make recommendations on any proposed changes to the Board to complement the Company's corporate strategy, with due regard to the board diversity policy, identify individuals suitably qualified to become Board members, select or make recommendations to the Board on the selection of individuals nominated for directorships, assess the independence of Independent Non-Executive Directors, and make recommendations to the Board on the appointment or re-appointment of Directors and succession planning for Directors, in particular the Chairman and the President, and monitor the implementation of the board diversity policy and review such policy, as appropriate, to ensure its effectiveness. The Nomination Committee has established a specific written committee charter which deals clearly with its authority and duties. A copy of the terms of reference of the Nomination Committee is available from the Company's website and the Stock Exchange's website. The Nomination Committee shall meet at least once a year.
During the year ended 31 December 2020, one meeting of the Nomination Committee was held to assess the independence of Independent Non-Executive Directors of the Company, make recommendation to the Board on the retiring Directors' eligibility for re-election at the AGM, and approve the nomination of Mr. Guodong Sun to the Board for appointment as a Non-Executive Director of the Company to fill the vacancy arising from the resignation of Mr. Yang Du.
Pursuant to the articles of association of the Company (the "Articles"), any person appointed as a Director to fill a casual vacancy of the Board shall hold office only until the next following annual general meeting of the Company and shall then be eligible for re-election at the relevant general meeting, and any Director appointed as an addition to the existing Board shall hold office only until the next annual general meeting of the Company and shall then be eligible for re-election at the relevant general meeting. Every Director shall be subject to retirement by rotation at least once every three years and shall be eligible for re-election in accordance with the Articles. The Articles also allow for removal of a Director by an ordinary resolution.
Auditor's Remuneration
During the year ended 31 December 2020, the remuneration paid and payable to the auditors of the Company, Ernst
- Young, for the provision of audit services and non-audit related services to the Company were US$0.57 million and US$0.01 million, respectively. Details of significant non-audit related services include tax and risk management advisory services.
Annual Report 2020 ● HUA HONG SEMICONDUCTOR LIMITED | 23 |
CORPORATE GOVERNANCE REPORT
Audit Committee
At least one of the members of the Audit Committee has appropriate professional qualifications or accounting or related financial management expertise as required under the Listing Rules. None of the members of the Audit Committee was a former partner of the Company's existing external auditors within one year immediately prior to the dates of their respective appointments. All members have appropriate skills and experience in reviewing financial statements as well as addressing significant control and financial issues of the Company. The Board expects the members of the Audit Committee to exercise independent judgement and delegates the responsibilities of the corporate governance functions to the Audit Committee in order to comply with the requirement of the Code.
The Audit Committee currently comprises one Non-Executive Director, Mr. Jun Ye, and two Independent Non-Executive Directors, Mr. Stephen Tso Tung Chang and Mr. Long Fei Ye. The Chairman of the Audit Committee is Mr. Stephen Tso Tung Chang. The primary duties of the Audit Committee include the reviewing of the Company's financial reporting system, the nature and scope of the audit review as well as the effectiveness of the system of internal control procedures and risk management. The Audit Committee is also responsible for making recommendations in relation to the appointment, reappointment, and removal of the external auditors, and the reviewing and monitoring of the independence and objectivity of the external auditors. In addition, the Audit Committee discusses matters raised by the external auditors and regulatory bodies to ensure that appropriate recommendations are implemented. A copy of the terms of reference of the Audit Committee is available from the Company's website and the Stock Exchange's website. The Audit Committee shall meet at least twice a year.
During the year ended 31 December 2020, the Audit Committee held five meetings and a majority of the committee members were present at the meetings. The major work performed by the Audit Committee with respect to the year ended 31 December 2020 included reviewing and recommending the re-appointment of the external auditor, approving the terms of engagement (including the remuneration) of the external auditor and the audit plan, reviewing the unaudited quarterly results announcement, reviewing the unaudited interim report and interim results announcement for the six months ended 30 June 2020, reviewing the audited financial statements and final results announcement for the year ended 31 December 2019, reviewing the work of the Group's audit department and assessing the effectiveness of the Group's systems of risk management and internal control. The Audit Committee also discussed with management to ensure that the Company has adequate resources, qualified and experienced staff in the accounting and financial reporting function, training programs and budget.
Summary of the Board Diversity Policy
The Board adopted a board diversity policy (the "Policy") in compliance with Code provision A.5.6.
The Policy aims to set out the approach to achieve diversity on the Board and does not apply to diversity in relation to the employees of the Company, nor the board or the employees of any subsidiary of the Company. The Company sees increasing diversity at the Board level as an essential element in maintaining the Company's competitive advantage. In designing the Board's composition, Board diversity will be considered from several aspects, including without limitation, differences in the talents, skills, regional and industry experience, background, gender, age, and other qualities of the members of the Board, in order to maintain an appropriate range and balance of talents, skills, experience, and background on the Board. In recommending candidates for appointment to the Board, the Nomination Committee will consider candidates on merit against objective criteria and with due regard for the benefits of diversity on the Board. The Nomination Committee discussed and agreed on the measurable objectives for achieving diversity on the Board and recommended them to the Board for adoption. At any given time, the Board may seek to improve one or more aspects of its diversity and measure progress accordingly. The Company aims to maintain an appropriate balance of diversity perspectives of the Board that are relevant to the Company's business growth.
24 HUA HONG SEMICONDUCTOR LIMITED ● Annual Report 2020
CORPORATE GOVERNANCE REPORT
During the year ended 31 December 2020, the Nomination Committee took the view that the measurable objectives were achieved to a large extent. It paid particular attention to the cultural and educational background, professional and technical experience, and skills of the members of the Board and also reviewed the composition of Executive Directors and Independent Non-Executive Directors so as to ensure appropriate independence within the Board.
Corporate Governance Functions
The Board is responsible for performing the functions set out in provision D.3.1 of the Code.
The Board reviewed the Company's corporate governance policies and practices, the training and continuous professional development of Directors and senior management, the Company's policies and practices on compliance with legal and regulatory requirements, the compliance with the Model Code, and the Company's compliance with the Code and disclosure in this Corporate Governance Report.
Investor Relations
The Company maintains a website at www.huahonggrace.com with information and updates on the Company's business developments and operations, list of Directors and their roles and functions, constitutional documents, terms of reference of the Board and its committees, procedures for nomination of Directors for election, Shareholder rights and communication policy, corporate governance practices, announcements, circulars and reports released to the Stock Exchange, and other information. Information on the Company's website www.huahonggrace.com will be updated from time to time.
Company Secretary
Ms Sui Har Lee, the Company Secretary, is responsible to the Board for ensuring that the Board procedures are followed and that the Board activities are efficiently and effectively conducted. She is also responsible for ensuring that the Board is fully appraised of the relevant legislative, regulatory, and corporate governance developments relating to the Company and facilitating the induction and professional development of Directors.
The Company Secretary reports to the Chairman and the President, plays an essential role in the relationship between the Company and its Shareholders, and assists the Board in discharging its obligations to Shareholders pursuant to the Listing Rules.
During the year ended 31 December 2020, Ms Sui Har Lee attended relevant professional seminars to update her skills and knowledge and has complied with Rule 3.29 of the Listing Rules.
Shareholder Rights
The Company uses several formal channels to ensure fair disclosure and comprehensive and transparent reporting of its performance and activities. These include quarterly, interim and annual reports, announcements, and circulars.
The general meetings of the Company are a primary forum for communication between the Board and the Shareholders. The Company encourages its Shareholders to attend and participate in general meetings to ensure a high level of accountability and to keep Shareholders informed of Company strategy and goals. The Chairman of the Board, other Board members, and the Chairmen of all the Board committees, or in their absence, other members of the respective committees, are available to answer any questions from the Shareholders.
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CORPORATE GOVERNANCE REPORT
Procedures for Shareholders to Convene an Extraordinary General Meeting
Extraordinary general meetings may be convened by the Directors on requisition of Shareholder(s) holding not less than one-twentieth of the paid-up capital of the Company or by such Shareholder(s) who made the requisition (the "Requisitionist(s)") (as the case may be) pursuant to sections 566 to 568 of the Companies Ordinance (Chapter 622 of the laws of Hong Kong) (the "Companies Ordinance"). The objects of the meeting must be stated in the requisition, which must be signed by the Requisitionist(s) and deposited at the registered office of the Company. Shareholders should follow the requirements and procedures as set out in sections 580 to 583 of the Companies Ordinance for convening an extraordinary general meeting.
Procedures for Putting Forward Proposals at Shareholders' Meetings and Directing Enquiries from Shareholders to the Board
Shareholders may at any time send their written requests, proposals, enquiries, and concerns to the Company for the attention of Chairman of the Board or the Company Secretary whose contact details are as follows:
288 Halei Road, Zhangjiang Hi-Tech Park, Shanghai 201203, China
Tel: (86) 21 38829909
Fax: (86) 21 50809999
Email: IR@hhgrace.com
Voting by Poll
Pursuant to Rule 13.39(4) of the Listing Rules, any vote of Shareholders at a general meeting must be taken by poll.
Risk Management and Internal Monitoring
Risk Management and Internal Monitoring Objectives
Risk Management Objective
From a compliance perspective, the Company has implemented the provisions of the Corporate Governance Code issued by the Hong Kong Stock Exchange to ensure the compliance with relevant requirements in a timely manner.
From the perspective of operations, the management team well understands the risks that may be confronted by the Company as it undertakes future development. Therefore, the risk management objective of the Company is to identify and assess risks and take appropriate countermeasures to evade a risk entirely, if possible, otherwise to manage these risks to reduce their impact and keep them under control. The Company has constructed a robust risk control system working on a continuous basis, established a risk management platform, clarified risk management mechanisms, improved a risk map, and carried out an annual risk evaluation. We have developed a concise, scientific, practical, and efficient risk management and control model which complies with regulatory requirements under the Code and is in line with the Company's specific evolving circumstances.
26 HUA HONG SEMICONDUCTOR LIMITED ● Annual Report 2020
CORPORATE GOVERNANCE REPORT
Internal Control System Objective
The Company's internal control system has fully implemented the requirements for a risk management framework as set out by COSO (Committee of Sponsoring Organizations of the Treadway Commission) as well as the guidelines of Hong Kong Institute of Certified Public Accountants for risk management. We refined the three tiers of risk map in the processes and formed risk-oriented internal control evaluation by considering the Company's ongoing operational circumstances and business characteristics. The objective is to evaluate the effectiveness and applicability of our internal monitoring system and provide reasonable guarantees for the effectiveness of the Company's operating activities, the reliability of financial reports, and compliance with laws and regulations.
Risk Management and Internal Monitoring System
To ensure our risk management work develops efficiently and forms a long-term mechanism, the Company has established a risk management monitoring system comprising "three lines of defense". It covers the roles and duties of many different aspects as follows:
1st Line of Defense | Business Departments |
• Establish and maintain various departmental risk management mechanisms; | |
• Ongoing collection of risk data while performing day-to-day department tasks; | |
• Assist Risk Management Level in carrying out risk management work, including | |
providing necessary documents and samples, identify major risks related to the | |
department, and determine major risk countermeasures; |
2nd Line of Defense | Risk Management Level |
• Formulate/revise the Company's risk management systems and provisions, and | |
submit them to the Company's business management team and the Audit Committee | |
for deliberation; | |
• Set/update standardized risk management language terms to assure common | |
understanding of the risk management process, with timely acceptance and | |
implementation among relevant risk management departments; | |
• Based on annual risk assessment results, define the major risk factors and relevant | |
response responsibilities, organize and guide each department in making and | |
implementing response plans for major risks in its area, and follow up on the | |
implementation; |
3rd Line of Defense | Internal Audit Level |
• Independently inspect and supervise risk management activities conducted by the | |
Business Departments and the Risk Management Level, and evaluate whether the | |
Company's risk management mechanism is implemented effectively and efficiently; | |
• Urge departments or agencies to rectify problems discovered during the auditing | |
process and monitor the ongoing status of the rectification work; | |
• Report the auditing results to the Audit Committee of the Company. |
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CORPORATE GOVERNANCE REPORT
Risk Management and Internal Monitoring Statement
The Board is responsible for the Company's risk management and internal monitoring system, as well as ensuring a review of the system's effectiveness. The Board designated the Internal Auditing Department to perform the internal auditing function and granted it full independent responsibility and authority. The internal auditors audited the effectiveness of the Company's risk management and internal monitoring system every half year according to the approved auditing scope and in accordance with the provisions in C.2 of the Corporate Governance Code, and no material deficiency was found.
Based on audits by the Internal Auditing Department, the Board believes that the Company's risk management and internal monitoring system is adequate, trustworthy, and effective. However, one must recognize that the Company's risk management and internal monitoring framework can only manage rather than completely eliminate risks that may affect the Company's ability to accomplish its business objectives. Therefore, it provides a reasonable but not an absolute guarantee for the avoidance of material misstatement or loss.
With a view to identifying, handling, and disseminating inside information in compliance with the SFO, procedures, including pre-clearance on dealing in the securities of the Company by designated members of management, notification of regular blackout period and securities dealing restrictions to relevant Directors and employees, identification of projects by code name, and dissemination of information to stated purpose and on a need-to-know basis, have been implemented by the Group to guard against possible mishandling of inside information within the Group.
General
The Directors acknowledge their responsibility in preparing the Company's financial statements for each financial period to give a true and fair view of the state of affairs of the Company and in accordance with statutory requirements and applicable accounting standards. In preparing the financial statements for the year ended 31 December 2020, the Directors have selected suitable accounting policies and applied them consistently, made judgments and estimates that are prudent, fair, and reasonable, and prepared the financial statements on a going concern basis.
The responsibilities of the auditors with respect to the financial reporting are set out in the Independent Auditors' Report on pages 191 to 198 of this annual report.
On behalf of the Board
Mr. Suxin Zhang
Chairman
28 HUA HONG SEMICONDUCTOR LIMITED ● Annual Report 2020
Directors' report
The Directors present herewith the 2020 annual report and the audited financial statements of the Company for the period from 1 January 2020 to 31 December 2020 (the "Financial Statements").
Principal Activities
The Company was a pure-play 200mm and 300mm-wafer foundry throughout 2020. We focus on providing wafer manufacturing services to our customers based on our own differentiated semiconductor technologies. The Company successfully completed our plans for technology development, capacity expansion, and mass production of 300mm wafers in 2020 and will accelerate capacity expansion for production of 300mm wafers in 2021 to meet strong market demand. The activities of our principal subsidiaries are set out in note 1 to the Financial Statements (Page 207 to 208).
Business Review
Revenue Analysis
Revenue of Hua Hong Semiconductor for 2020 was US$961.3 million, an increase compared to the previous year. As of the end of 2020, the Company has been profitable for 40 consecutive quarters. 2020 was an unusual year in which the outbreak of COVID-19 affected the first-quarter results. In the second quarter, the domestic demand gradually increased due to China starting to bring the outbreak of COVID-19 under control and supply shortages as a result of the severe outbreak overseas. With the joint effort of shareholders, customers, suppliers, and all employees of the Company, there was a steady improvement in the results of Hua Hong Semiconductor. In the second half of 2020, strong demand resulted in all 8-inch fabs reaching full capacity utilization and the 12-inch fab utilization steadily improved while its capacity expanded. Our market-driven technology roadmap, continuous improvement, and innovative research and development with increasing wafer production capacity ensured these performance results. The Company created value for shareholders and the semiconductor industry, thanks to continuous production ramp-up on MCU, Split-Gate Trench (SGT) MOSFET, Super Junction MOSFET, IGBT, Power Management, and other technology platforms, mainly driven by increasing demand for local semiconductor manufacturing.
Revenue by service | ||||||
YoY | YoY | |||||
2020 | 2020 | 2019 | 2019 | Change | Change | |
US$'000 | % | US$'000 | % | US$'000 | % | |
Semiconductor wafers | 926,684 | 96.4% | 906,550 | 97.2% | 20,134 | 2.2% |
Others | 34,595 | 3.6% | 26,017 | 2.8% | 8,578 | 33.0% |
Total | 961,279 | 100.0% | 932,567 | 100.0% | 28,712 | 3.1% |
- In 2020, 96.4% of our revenue was from the sale of semiconductor wafers.
Revenue by customer | ||||||
YoY | YoY | |||||
2020 | 2020 | 2019 | 2019 | Change | Change | |
US$'000 | % | US$'000 | % | US$'000 | % | |
Systems and Fabless companies | 814,410 | 84.7% | 730,720 | 78.4% | 83,690 | 11.5% |
IDMs | 146,869 | 15.3% | 201,847 | 21.6% | (54,978) | (27.2)% |
Total | 961,279 | 100.0% | 932,567 | 100.0% | 28,712 | 3.1% |
- Revenue from systems and fabless companies increased by 11.5% over 2019 and accounted for 84.7% of our total revenue in 2020.
Annual Report 2020 ● HUA HONG SEMICONDUCTOR LIMITED | 29 |
DIRECTORS' REPORT
Revenue by geography | ||||||
YoY | YoY | |||||
2020 | 2020 | 2019 | 2019 | Change | Change | |
US$'000 | % | US$'000 | % | US$'000 | % | |
China | 624,407 | 64.9% | 546,029 | 58.5% | 78,378 | 14.4% |
Other Asia | 121,885 | 12.7% | 115,256 | 12.4% | 6,629 | 5.8% |
North America | 121,642 | 12.7% | 150,392 | 16.1% | (28,750) | (19.1)% |
Europe | 66,149 | 6.9% | 70,818 | 7.6% | (4,669) | (6.6)% |
Japan | 27,196 | 2.8% | 50,072 | 5.4% | (22,876) | (45.7)% |
Total | 961,279 | 100.0% | 932,567 | 100.0% | 28,712 | 3.1% |
- In 2020, China was our largest market, with 14.4% increased revenue over 2019.
- Revenue from Other Asia increased by 5.8%.
Revenue by technology type | ||||||
YoY | YoY | |||||
2020 | 2020 | 2019 | 2019 | Change | Change | |
US$'000 | % | US$'000 | % | US$'000 | % | |
eNVM | 334,663 | 34.8% | 350,477 | 37.5% | (15,814) | (4.5)% |
Discrete | 353,019 | 36.8% | 354,470 | 38.0% | (1,451) | (0.4)% |
Analog & PM | 135,581 | 14.1% | 123,945 | 13.3% | 11,636 | 9.4% |
Logic & RF | 124,952 | 13.0% | 91,012 | 9.8% | 33,940 | 37.3% |
Standalone NVM | 11,711 | 1.2% | 11,805 | 1.3% | (94) | (0.8)% |
Others | 1,353 | 0.1% | 858 | 0.1% | 495 | 57.7% |
Total | 961,279 | 100.0% | 932,567 | 100.0% | 28,712 | 3.1% |
- Embedded Non-Volatile Memory technology was one of the main revenue sources of the Company in 2020, with continuous and outstanding growth in the results for MCU products.
- Revenue from Discrete remained stable compared to 2019.
- Revenue from Analog & PM increased by 9.4%.
- Revenue from Logic & RF increased rapidly by 37.3%, mainly driven by CIS products.
30 HUA HONG SEMICONDUCTOR LIMITED ● Annual Report 2020
DIRECTORS' REPORT
Revenue by technology node | ||||||
YoY | YoY | |||||
2020 | 2020 | 2019 | 2019 | Change | Change | |
US$'000 | % | US$'000 | % | US$'000 | % | |
55nm & 65nm | 6,692 | 0.7% | 7,414 | 0.8% | (722) | (9.7)% |
90nm & 95nm | 100,315 | 10.4% | 43,313 | 4.6% | 57,002 | 131.6% |
0.11μm &0.13μm | 229,965 | 24.0% | 275,438 | 29.6% | (45,473) | (16.5)% |
0.15μm & 0.18μm | 141,317 | 14.7% | 117,308 | 12.6% | 24,009 | 20.5% |
0.25μm | 16,536 | 1.7% | 10,910 | 1.2% | 5,626 | 51.6% |
≥0.35μm | 466,454 | 48.5% | 478,184 | 51.2% | (11,730) | (2.5)% |
Total | 961,279 | 100.0% | 932,567 | 100.0% | 28,712 | 3.1% |
- Revenue from 90nm & 95nm technology nodes increased by 131.6%.
- Revenue from 0.15μm & 0.18μm technology nodes increased by 20.5%.
Revenue by end market | ||||||
YoY | YoY | |||||
2020 | 2020 | 2019 | 2019 | Change | Change | |
US$'000 | % | US$'000 | % | US$'000 | % | |
Consumer Electronics | 594,087 | 61.8% | 581,094 | 62.2% | 12,993 | 2.2% |
Industrial & Automotive Electronics | 203,890 | 21.2% | 212,278 | 22.8% | (8,388) | (4.0)% |
Communications | 127,413 | 13.3% | 99,537 | 10.7% | 27,876 | 28.0% |
Computing | 35,889 | 3.7% | 39,658 | 4.3% | (3,769) | (9.5)% |
Total | 961,279 | 100.0% | 932,567 | 100.0% | 28,712 | 3.1% |
- Consumer Electronics accounted for the largest share of the Company's revenue in 2020, with an increase of 2.2% compared to 2019.
- Revenue from Communications increased rapidly by 28.0%.
Annual Report 2020 ● HUA HONG SEMICONDUCTOR LIMITED | 31 |
DIRECTORS' REPORT
Capacity and Capacity Utilization
Fab (In thousands of wafers per month) | 2020 | 2019 | YoY Change |
Fab 1 | 65 | 65 | 0 |
Fab 2 | 60 | 60 | 0 |
Fab 3 | 53 | 53 | 0 |
Total monthly 8-inch wafer capacity | 178 | 178 | 0 |
Fab 7 (12-inch wafer capacity) | 20 | 10 | 10 |
Capacity Utilization (8-inch wafer equivalent) | 92.7% | 91.2% | 1.5% |
- In 2020, capacity utilization (8-inch wafer equivalent) was 92.7%.
Wafer shipments | |||
In thousands of wafers | 2020 | 2019 | YoY Change |
Wafer shipments (8-inch wafer equivalent) | 2,191 | 1,974 | 11.0% |
- In 2020, the Company's wafer shipments increased by 11.0% over 2019.
Research and Development
Hua Hong Semiconductor is committed to research and development (R&D), innovation, and optimization of differentiated technologies, with a focus on Embedded Non-Volatile Memory (eNVM), Discrete, Analog and Power Management, Logic and Radio Frequency (RF). It continues to provide customers with well-featured process technologies and services that meet market demand. In 2020, the "8-inch + 12-inch" strategic endeavour of Hua Hong Semiconductor was gradually extended and the 20,000 wafers per month capacity expansion was completed, while the "IC + Discrete" strategy continued to be implemented in the 12-inch technology platforms.
Embedded Non-Volatile Memory technology platforms remained one of the major revenue sources of Hua Hong Semiconductor in 2020, mainly for two applications: smart card IC and MCUs. 90nm embedded flash memory technology of the Company with independent intellectual property rights and competitive Flash cell size was successfully transferred to the 12-inch fab and smart card IC has gone into production in Fab 7. With respect to MCUs, double-digit growth in sales of embedded flash MCU continued in 2020, contributing to double-digit CAGR in sales and shipments for MCU products from 2014 to 2020. Our industry-leading8-inch 0.11µm and 90nm low power and ultra-low leakage embedded flash memory technology platforms have been widely recognized by customers around the world. Driven by the growing trend of smart devices and Internet of Things, an increasing number of new products are being launched on these platforms for general MCU, Type-C interface IC, image stabilization IC, touch controller, smart meter controller, and other products. In addition to technology development of the 12-inch 55nm high speed embedded flash memory technology platform for both smart card IC and MCUs, the Company also plans to further optimize its existing 12-inch 90nm embedded flash memory technology platform with additional features to meet the technical requirements and increase capacity for various MCU markets.
32 HUA HONG SEMICONDUCTOR LIMITED ● Annual Report 2020
DIRECTORS' REPORT
The Company has a leading foundry position in the power discrete industry. In 2020, the Company's long-term investment in the power discrete technology platform has allowed participation in markets which are experiencing rapid expansion, such as solar and wind power generation, next-generation telecommunications infrastructure, consumer electronics, and electric vehicles. High growth in IGBT technology for the past six consecutive years is the most striking. With optimization in terms of high current, high reliability, and small pitch size, the Company's IGBT technology shows competitive strength in the field of electric vehicle inverters and charging devices and stations. Market demand for power devices is accelerating due to development of new generation communication markets. Demand by these markets for energy conversion efficiency improvement is promoting our domestic industry-leading development of DMOS/SGT technology with smaller pitch size and lower on-resistance. In the consumer field, fast charging high- power supplies in mobile phones, laptops, etc. have stimulated the Company's development of Deep-Trench Super Junction (DT-SJ) MOSFET technology. There has been a breakthrough in DT-SJ research and development with on- resistance performance reaching the leading level in the industry. This distinctive new-generationdeep-trench process is in mass production. Meanwhile, mature SJ technology has been successfully adopted for On-Board Chargers (OBC) for electric vehicles. With regard to 12-inch power device manufacturing, the Company's existing four main power discrete technologies (DMOS/SGT/SJ/IGBT) have been upgraded from 8-inch to 12-inch. Fab 7's advanced equipment capabilities have improved the performance of these products and further expanded the Company's overall discrete production capacity for customers.
With the increasing variety and number of portable electronic devices and demand for increased performance of power management IC, Hua Hong Semiconductor's Analog and Power Management technology platform is developing more rapidly with wider technology portfolios and a larger customer base. In 2020, shipments from the BCD (Bipolar- CMOS-DMOS) platform show double-digit growth, including low and high voltage products. For low voltage products, analog power ICs, motor drivers, etc., the Company has developed a new-generation8-inch 0.18μm BCD process technology platform, with verified performance metrics at the most advanced level of the industry. In addition, the 12- inch 90nm BCD platform with better electrical performance has been developed and launched for digital power ICs and digital audio power amplifiers. For high voltage lighting control and AC-DC markets, the Company has developed the 700V BCD platform. Benefiting from the continued growth of the motor driver market for power tools and home appliances, we developed the 600V BCD platform. These platforms have successfully entered mass production.
In addition to the above main technology platforms, Hua Hong Semiconductor continues to expand into new differentiated technology fields. With an increasing demand for semiconductor products for smartphones, Internet of Things, automotive electronics, and other applications, the Company has further strengthened research and development of radio frequency, standalone memory, image sensing, and other technology platforms, which paid off in 2020. In terms of patents, it applied for 576 patents throughout the year and has been granted a total of over 3,600 Chinese and U.S. invention patents so far. The Company is committed to providing customers with a rich selection of technology platforms and extensive IP support.
While innovating and optimizing existing 8-inch technology, the Company cooperated with the Government of Wuxi, Jiangsu to establish Hua Hong Wuxi as an important step for Hua Hong Semiconductor to develop its business outside Shanghai as well as integrate into and serve the Yangtze River Delta integration strategy. Through efforts in 2020, Phase I production capacity steadily increased to 20,000 wafers per month, the number of products increased rapidly, and the number of talented employees gradually expanded. Established phased goals of technology development, and production capacity were fully met, which has paved the way for expansion of development in 2021. The 12-inch fab created excellent contributions to sales and production volume in 2020, fully enabling Hua Hong Semiconductor's "8-inch + 12-inch" strategic plan.
Annual Report 2020 ● HUA HONG SEMICONDUCTOR LIMITED | 33 |
DIRECTORS' REPORT
Outlook
Looking forward to 2021, the world is continuing to fight against the outbreak of COVID-19; however, Asia as the first recovery region has shown a positive effect on the global economy. According to the forecast of the World Bank in Global Economic Prospects, global GDP growth in 2021 will reach 4%, turning from negative to positive, and the GDP growth rate of China will reach 8.1%. The global semiconductor market is expected to grow continuously and vigorously in 2021, driven by economic recovery, anti-epidemic measures, and expanding markets, including new- generation mobile communication, online office, electric vehicles, ecologically friendly power generation, and other end applications. China, as the first country to control and recover from the outbreak, has provided a long-term high- quality business environment for the local semiconductor industry in terms of market demand, supply chain, and infrastructure. Benefiting from this environment, the Company expects its wafer foundry business will continue to grow.
In 2021, it is expected that 12-inch wafer production by Hua Hong Wuxi, with increasing production capacity, automotive certification, and newly developed technology, will result in growth for the Company. In response to the surge in demand for global wafer capacity, the Company will meet market demand by optimizing product mix on existing 8-inch platforms and expanding capacity of the 12-inch fab, in accordance with the "8-inch + 12- inch" strategy. In terms of products, Hua Hong Wuxi was IATF16949 quality system certified in 2020 and is ready to introduce automotive products into the 12-inch fab for production in 2021, thus supporting development of the automobile industry. In research and development of image sensors, the Company will continuously upgrade our technology for higher pixel density and higher quality products. In memory, the Company successfully introduced customers to standalone NOR-flash memory in 2020 and will step up wafer output in 2021, while actively developing the next-generation technologies and products. In power management IC, we expect more outstanding results will be achieved in 2021 for the 90nm BCD platforms with production for overseas and domestic customers. In power discrete, the Company has improved and optimized our super junction and IGBT technology platforms, strengthening our leading foundry position in these technologies.
2021 is the first year for the implementation of the national 14th Five-Year Plan. Responding to local demand and striving to improve its international competitiveness, the Company is continuing to focus on its differentiation strategy. Based on our product strategy of "IC + Discrete" and production strategy of "8-inch + 12-inch", the Company will optimize its 8-inch technology platforms and emphasize research and development in the 12-inch fab to broaden our offering of new products. These are essential parts of the Company's strategy to continue to maintain its position as the most valued wafer foundry enterprise in the specialty semiconductor industry.
34 HUA HONG SEMICONDUCTOR LIMITED ● Annual Report 2020
DIRECTORS' REPORT
Management Discussion and Analysis
Financial Performance
2020 | 2019 | Change | |
US$'000 | US$'000 | ||
Revenue | 961,279 | 932,567 | 3.1% |
Cost of sales | (726,486) | (650,107) | 11.7% |
Gross profit | 234,793 | 282,460 | (16.9)% |
Other income and gains | 57,313 | 69,091 | (17.0)% |
Fair value gain on an investment property | 198 | 163 | 21.5% |
Selling and distribution expenses | (8,169) | (8,828) | (7.5)% |
Administrative expenses | (261,139) | (169,796) | 53.8% |
Other expenses | (10) | (406) | (97.5)% |
Finance costs | (2,968) | (1,242) | 139.0% |
Share of profit of an associate | 26,059 | 10,131 | 157.2% |
Profit before tax | 46,077 | 181,573 | (74.6)% |
Income tax expense | (12,762) | (26,588) | (52.0)% |
Profit for the year | 33,315 | 154,985 | (78.5)% |
Attributable to: | |||
Owners of the parent | 99,443 | 162,237 | (38.7)% |
Non-controlling interests | (66,128) | (7,252) | 811.9% |
Revenue
Revenue was US$961.3 million, an all-time high and an increase of 3.1% from the prior year.
Cost of sales
Cost of sales was US$726.5 million, an increase of 11.7% from 2019, primarily due to increased wafer shipments and depreciation expenses.
Gross profit
Gross profit was US$234.8 million, a decrease of 16.9% compared to 2019, mainly due to decreased average selling price and increased labor and depreciation expenses.
Annual Report 2020 ● HUA HONG SEMICONDUCTOR LIMITED | 35 |
DIRECTORS' REPORT
Other income and gains
Other income and gains was US$57.3 million, a decrease of 17.0% compared to 2019, primarily due to decreased fair value gains on financial assets at fair value through profit or loss and interest income, partially offset by foreign exchange gain versus foreign exchange loss in the previous year.
Selling and distribution expenses
Selling and distribution expenses were US$8.2 million, a decrease of 7.5% from 2019, primarily due to decreased amortization expenses.
Administrative expenses
Administrative expenses were US$261.1 million, an increase of 53.8% from 2019, chiefly due to increased research and development, depreciation, and labor expenses.
Other expenses
Other expenses were US$0.01 million, a decrease of 97.5% compared to 2019, largely due to the foreign exchange loss in the previous year.
Finance costs
Finance costs were US$3.0 million, an increase of 139.0% from 2019, primarily due to increased bank borrowings.
Share of profit of an associate
Share of profit of an associate was US$26.1 million, an increase of 157.2% from 2019, due to increased profit realized by the associate, Shanghai Huahong Technology Development Co., Ltd.
Income tax expense
Income tax expense was US$12.8 million, a decrease of 52.0% compared to 2019, primarily due to decreased taxable profit.
Profit for the year
As a result of the cumulative effect of the above factors, profit for the year was US$33.3 million, compared to US$155.0 million in 2019. Net profit margin was 3.5%, compared to 16.6% in 2019.
36 HUA HONG SEMICONDUCTOR LIMITED ● Annual Report 2020
DIRECTORS' REPORT
Financial Status
31 December | 31 December | Change | |
2020 | 2019 | ||
US$'000 | US$'000 | ||
Non-current assets | |||
Property, plant and equipment | 2,510,442 | 1,558,283 | 61.1% |
Investment property | 180,476 | 168,615 | 7.0% |
Right-of-use assets | 79,221 | 74,526 | 6.3% |
Investment in an associate | 105,218 | 73,142 | 43.9% |
Equity instruments designated at fair value | |||
through other comprehensive income | 230,265 | 207,689 | 10.9% |
Other non-current assets | 56,706 | 34,437 | 64.7% |
Total non-current assets | 3,162,328 | 2,116,692 | 49.4% |
Current assets | |||
Inventories | 226,476 | 142,087 | 59.4% |
Trade and notes receivables | 120,952 | 164,968 | (26.7)% |
Due from related parties | 4,706 | 9,262 | (49.2)% |
Prepayments, other receivables and other assets | 130,979 | 113,453 | 15.4% |
Financial assets at fair value through profit or loss | - | 519,779 | (100.0)% |
Restricted and time deposits | 359 | 70,776 | (99.5)% |
Cash and cash equivalents | 922,786 | 476,286 | 93.7% |
Total current assets | 1,406,258 | 1,496,611 | (6.0)% |
Current liabilities | |||
Trade payables | 130,980 | 86,119 | 52.1% |
Due to related parties | 12,647 | 10,655 | 18.7% |
Other current liabilities | 469,402 | 372,343 | 26.1% |
Lease liabilities | 4,235 | 1,922 | 120.3% |
Interest-bearing bank borrowings | 47,784 | 4,300 | 1,011.3% |
Total current liabilities | 665,048 | 475,339 | 39.9% |
Net current assets | 741,210 | 1,021,272 | (27.4)% |
Non-current liabilities | |||
Interest-bearing bank borrowings | 518,391 | 21,502 | 2,310.9% |
Lease liabilities | 17,405 | 16,694 | 4.3% |
Deferred tax liabilities | 13,621 | 17,176 | (20.7)% |
Total non-current liabilities | 549,417 | 55,372 | 892.2% |
Net assets | 3,354,121 | 3,082,592 | 8.8% |
Annual Report 2020 ● HUA HONG SEMICONDUCTOR LIMITED | 37 |
DIRECTORS' REPORT
Explanation of items with a fluctuation of over 10% from 31 December 2019 to 31 December 2020
Property, plant and equipment
Property, plant and equipment increased from US$1,558.3 million to US$2,510.4 million, mainly as a result of the capacity expansion of Hua Hong Wuxi.
Investment in an associate
Investment in an associate increased from US$73.1 million to US$105.2 million, primarily due to profit shared from the associate, Shanghai Huahong Technology Development Co., Ltd., in the year.
Equity instruments designated at fair value through other comprehensive income
Equity instruments designated at fair value through other comprehensive income increased from US$207.7 million to US$230.3 million, primarily due to RMB appreciation and increase of fair value.
Other non-current assets
Other non-current assets increased from US$34.4 million to US$56.7 million, primarily due to increased intangible assets.
Inventories
Inventories increased from US$142.1 million to US$226.5 million, primarily due to increased demands from customers.
Trade and notes receivables
Trade and notes receivables decreased from US$165.0 million to US$121.0 million, benefiting from improved customer credit management.
Due from related parties
Due from related parties decreased from US$9.3 million to US$4.7 million, primarily due to increased collections of receivables from related companies.
Prepayments, other receivables and other assets
Prepayments, other receivables and other assets increased from US$113.5 million to US$131.0 million, primarily due to increased prepayments, partially offset by the decreased VAT refund receivables.
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss decreased from US$519.8 million to zero, primarily due to pay-out from investment in financial products.
Restricted and time deposits
Restricted and time deposits decreased from US$70.8 million to US$0.4 million, primarily due to pay-out from investment in time deposits.
Cash and cash equivalents
Cash and cash equivalents increased from US$476.3 million to US$922.8 million, mainly due to reasons stated in the cash flow analysis below.
Trade payables
Trade payables increased from US$86.1 million to US$131.0 million, primarily due to increased purchase of materials.
Due to related parties
Due to related parties increased from US$10.7 million to US$12.6 million, primarily due to increased trade payables to related suppliers.
38 HUA HONG SEMICONDUCTOR LIMITED ● Annual Report 2020
DIRECTORS' REPORT
Other current liabilities
Other current liabilities increased from US$372.3 million to US$469.4 million, primarily due to increased advances from customers, payables for capital expenditures and government grants.
Lease liabilities
Total lease liabilities increased from US$18.6 million to US$21.6 million, primarily due to renewed lease contracts.
Interest-bearing bank borrowings
Total interest-bearing bank borrowings increased from US$25.8 million to US$566.2 million, due to drawdowns of bank borrowings.
Deferred tax liabilities
Deferred tax liabilities, comprised largely of withholding tax accrued for dividend distribution, decreased from US$17.2 million to US$13.6 million, primarily due to a reversal of dividend withholding tax accrued for the prior year, partially offset by the accrual of dividend withholding tax in 2020.
Cash Flow
2020 | 2019 | Change | |
US$'000 | US$'000 | ||
Net cash flows generated from operating activities | 269,110 | 162,934 | 65.2% |
Net cash flows used in investing activities | (405,661) | (722,587) | (43.9)% |
Net cash flows generated from financing activities | 540,427 | 262,898 | 105.6% |
Net increase/(decrease) in cash and cash equivalents | 403,876 | (296,755) | (236.1)% |
Cash and cash equivalents at the beginning of the year | 476,286 | 777,000 | (38.7)% |
Effect of foreign exchange rate changes, net | 42,624 | (3,959) | (1,176.6)% |
Cash and cash equivalents at the end of the year | 922,786 | 476,286 | 93.7% |
Net cash flows generated from operating activities
Net cash flows generated from operating activities were US$269.1 million, an increase of 65.2% from 2019, mainly due to: receipts of the VAT return; stronger collections of trade and notes receivables; and increased government grants, partially offset by increased prepayments and payments for materials and labor costs.
Net cash flows used in investing activities
Net cash flows used in investing activities were US$405.7 million, primarily attributed to (i) US$1,087.3 million for capital investments, and (ii) US$738.2 million for investment in financial assets at fair value through profit or loss, offset by (i) pay-out of US$1,260.7 million from investment in financial assets at fair value through profit or loss, (ii) receipts of US$80.1 million of government grants, (iii) pay-out of US$70.0 million for investment in time deposits, and (iv) US$9.0 million of interest income.
Net cash flows generated from financing activities
Net cash flows generated from financing activities were US$540.4 million, including (i) US$893.2 million of proceeds from bank borrowings, and (ii) US$8.1 million of proceeds from issue of shares, offset by (i) US$354.4 million of repayments of bank borrowings, (ii) US$3.7 million payment of principal portion of lease payments, and (iii) US$2.8 million of interest payments.
Net increase in cash and cash equivalents
As a result of the cumulative effect of the above factors, cash and cash equivalents increased from US$476.3 million as of 31 December 2019 to US$922.8 million as of 31 December 2020.
Annual Report 2020 ● HUA HONG SEMICONDUCTOR LIMITED | 39 |
DIRECTORS' REPORT
Financial Risks
Foreign currency risk
We are exposed to foreign exchange risks, arising primarily from sales or purchases by our significant subsidiaries in Mainland China in US$ rather than in the subsidiaries' functional currency, which is RMB. As of 31 December 2020, if the US dollar had strengthened or weakened against the RMB by five percent, with all other variables held constant, our profit before tax for the year would have been approximately US$14.2 million lower or higher.
Credit risk
We trade only with recognized and creditworthy third parties and related parties. It is our policy that all customers who wish to trade on credit terms are subject to credit verification procedures. In addition, receivable balances are monitored on an ongoing basis, and our exposure to bad debts is not significant.
Our maximum exposure to credit risk in relation to our financial assets is: the carrying amounts of cash and cash equivalents, trade and notes receivables, financial assets included in prepayments, deposits and other receivables, amounts due from related parties, and restricted and time deposits included in the consolidated statement of financial position. We have no other financial assets which carry significant exposure to credit risk.
Liquidity risk
To meet liquidity requirements in the short and long term, our policy is to monitor regularly the current and expected liquidity requirements to ensure that we maintain sufficient reserves of cash and adequate committed lines of funding from major financial institutions.
Capital management
Our primary objectives of capital management are to safeguard our ability to continue as a going concern and to maintain healthy capital ratios to support our business and maximize shareholders' value.
We manage our capital structure and make adjustments in light of changes in economic conditions. To do this, we may adjust the dividend payment to shareholders, return capital to shareholders, or issue new shares. We are not subject to any externally imposed capital requirements. No changes were made in the objectives, policies, or processes for managing capital during the year.
Gearing Ratio
Details of the gearing ratio are set out in note 37 to the Financial Statements.
Results
The results of the Group for the year ended 31 December 2020 and the state of affairs at that date are set out in the Financial Statements on pages 199 to 202 of this report.
Final Dividends
In view of the Company's "8-inch + 12-inch" strategy and uncertainty in the impact of the Coronavirus pandemic on the global economy, the Company is maintaining a stable, prudent, and responsible policy for our shareholders. Based on the requirements for a sustainable operation and long-term development, the Board does not recommend payment of a dividend for the year ended 31 December 2020 (2019: Nil). The Company will retain sufficient cash to continue its investment activities, in preparation for a strong market recovery when the pandemic is contained and to maximize future benefits for our shareholders.
40 HUA HONG SEMICONDUCTOR LIMITED ● Annual Report 2020
DIRECTORS' REPORT
Dividend Policy
Subject to the approval of the Shareholders and the requirements of law, it has been decided that the Company will pay dividends to the Shareholders for the year of 2015 and onwards if the Group is profitable, the operations environment is stable, and there is no significant investment made by the Group. It is intended that the average of dividends paid in three consecutive years will be no less than 30% of the average distributable net profit of these three years. The remaining net profit will be used for the development and operations of the Group.
This dividend policy will continue to be reviewed from time to time and there can be no assurance that dividends will be paid in any amount for any given period. In the event that the Board recommends a dividend, the form and amount will depend on the assessment by the Directors of the factors affecting the Group from time to time.
Distributable Reserves
As of 31 December 2020, the Company had no distributable reserves available for distribution to our shareholders.
Bank Loans
The particulars of bank loans of the Group as of 31 December 2020 are set out in note 25 to the Financial Statements.
Financial Summary
A summary of the published results and the assets and liabilities of the Group for the past five financial years is set out on page 320. This summary does not form part of the audited financial statements.
Property, Plant and Equipment
Details of additions and other changes during the year ended 31 December 2020 in the property, plant and equipment, and investment property of the Group are set out in notes 13 and 14 to the Financial Statements.
In addition, details of the investment property are set out below:
Gross Floor Area | ||||
Location | Type of Use | Term of Lease | Group's Interest | (sq.m.) |
Portions of 9 buildings | Industrial use | Held under a land use | 100% | 91,563.11 |
No. 818 Guo Shou Jing Road | right for a term expiring | |||
Zhangjiang Hi-Tech Park | on 8 March 2051 | |||
Pudong New Area | ||||
Shanghai, PRC | ||||
Significant Events After the Reporting Period
There is no material subsequent event undertaken by the Group after 31 December 2020.
Annual Report 2020 ● HUA HONG SEMICONDUCTOR LIMITED | 41 |
DIRECTORS' REPORT
Share Capital and Share Option Scheme
Details of movement in the share capital of the Company during the year ended 31 December 2020 are set out in note 30 to the Financial Statements. Movements include the automatic inclusion of the amount standing to the share premium account into the share capital as from 3 March 2014 in accordance with section 37 of Schedule 11 to the New Companies Ordinance (Cap. 622), as part of the transition to the no-par value regime.
A share option scheme (the "Share Option Scheme") was approved by an extraordinary general meeting of the Company held on 1 September 2015. A summary of the Share Option Scheme is as follows:
Purpose of the Share | The purpose of the Share Option Scheme is to attract, retain and |
Option Scheme: | provide incentives to the Participants (defined below), to provide them |
with the opportunity to obtain Shares of the Company, and to link their | |
interests closely to the operating results and share performance of the | |
Company with the view to increasing the value of the Company. | |
Participants: | The participants of the Share Option Scheme ("Participants") |
include (1) existing Executive and Non-Executive Directors of any | |
member of the Group; or (2) senior management and key managerial | |
and technical personnel having a direct impact on the results of | |
operations and sustainable development of any member of the Group, | |
subject always to any limits and restrictions specified in the Share | |
Option Scheme, but shall not include any Independent Non-Executive | |
Directors. |
Maximum entitlement of each Participant:
If the total number of Shares allotted and which may fall to be allotted upon exercise of all the share options ("Share Options") granted and to be granted (including exercised, cancelled, and outstanding Share Options) to a Participant in any 12-month period in aggregate exceeds 1% of the issued share capital of the Company at the time, no further grant of Share Options shall be given to such Participant. Share Options may be granted to a Participant in excess of the individual limit of 1% in any 12-month period only with the approval of the Shareholders in a general meeting. No Share Option shall be granted to any person who holds over 5% of Shares which carry voting rights on the Grant Date (as defined in the Share Option Scheme) unless such grant is approved by shareholders in the general meeting.
Minimum period, if any, for which
- an option must be held before
- it can be exercised:
The amount payable on application
- or acceptance of the Share Option
- and the period within which payments
- or calls must be made or loans for
- such purposes must be paid:
Two years unless otherwise stated in the grant notice of the Share Option.
HK$1.00 is to be paid by each grantee as consideration for the grant of Share Option within 28 days from the date of offer.
Remaining life of the Share Option Scheme:
The Share Option Scheme shall be valid and effective for a period of seven (7) years commencing on the date of adoption and will expire on 1 September 2022.
As of the date of this report, the total number of shares available for issue under the Share Option Scheme is 36,898,062 shares, representing approximately 2.8% of the total number of shares in issue.
42 HUA HONG SEMICONDUCTOR LIMITED ● Annual Report 2020
DIRECTORS' REPORT
Share Options Granted under the Share Option Scheme
On 4 September 2015, the Company granted 30,250,000 share options (the "2015 Options") to subscribe for up to a total of 30,250,000 ordinary shares of the Company to certain individuals under the Share Option Scheme. Details of the 2015 Options are as follows:
Date of grant: | 4 September 2015 |
Exercise price of options granted: | HK$6.912 |
Number of options granted: | 30,250,000 (representing 2.33% of the issued shares of the Company as of 31 |
December 2020). | |
Validity period of the options: | From 4 September 2015 to 3 September 2022 (seven (7) years), both dates |
inclusive. | |
Vesting period of the options: | One third of the options shall vest on each of 4 September 2017, 4 September |
2018, and 4 September 2019. |
The exercise price of HK$6.912 per Share represents a premium of 0% over the higher of (i) the closing price of HK$6.87 per Share as stated in the daily quotation sheets issued by the Stock Exchange on the date of the grant; (ii) the average closing price of HK$6.912 per Share as stated in the daily quotation sheets issued by the Stock Exchange for the five trading days immediately preceding the date of the grant; and (iii) the closing price of HK$6.800 per Share as stated in the daily quotation sheets issued by the Stock Exchange on the day immediately before the grant date.
On 24 December 2018, the Company granted 34,500,000 share options (the "2018 Options") to subscribe for up to a total of 34,500,000 ordinary shares of the Company to certain individuals under the Share Option Scheme. Details of the 2018 Options are as follows:
Date of Grant: | 24 December 2018 |
Exercise price of options granted: | HK$15.056 |
Number of options granted: | 34,500,000 (representing 2.66% of the issued shares of the Company as of 31 |
December 2020) | |
Validity period of the options: | From 24 December 2018 to 23 December 2025 (seven (7) years), both dates |
inclusive | |
Vesting period of the options: | For employees at or above the level of the vice president of the Company (together |
with Directors), one fourth of the 2018 Options shall vest on each of 24 December | |
2020, 24 December 2021, 24 December 2022, and 24 December 2023; for the | |
other employees of the Company, one third of the 2018 Options shall vest on each | |
of 24 December 2020, 24 December 2021, and 24 December 2022 |
The exercise price of HK$15.056 per share represents the higher of (i) the closing price of HK$14.440 per share as stated in the daily quotation sheets issued by the Stock Exchange on the date of the grant; (ii) the average closing price of HK$15.056 per share as stated in the daily quotation sheets issued by the Stock Exchange for the five business days immediately preceding the date of the grant; (iii) the closing price of HK$14.380 per Share as stated in the daily quotation sheets issued by the Stock Exchange on the day immediately before the grant date; and (iv) the face value of the share.
Annual Report 2020 ● HUA HONG SEMICONDUCTOR LIMITED | 43 |
DIRECTORS' REPORT
On 29 March 2019, the Company granted 500,000 share options (the "March 2019 Options") to subscribe for up to a total of 500,000 ordinary shares of the Company to one individual under the Share Option Scheme. Details of the March 2019 Options are as follows:
Date of Grant: | 29 March 2019 |
Exercise price of options granted: | HK$18.400 |
Number of options granted: | 500,000(representing 0.04% of the issued shares of the Company as |
of 31 December 2020) | |
Validity period of the options: | From 29 March 2019 to 28 March 2026 (seven (7) years), both dates |
inclusive | |
Vesting period of the options: | One fourth of the options will vest on each of 29 March 2021, 29 |
March 2022, 29 March 2023, and 29 March 2024 |
The exercise price of HK$18.400 per share represents the higher of (i) the closing price of HK$18.400 per share as stated in the daily quotation sheets issued by the Stock Exchange on the date of the grant; (ii) the average closing price of HK$18.176 per share as stated in the daily quotation sheets issued by the Stock Exchange for the five business days immediately preceding the date of the grant; (iii) the closing price of HK$18.220 per share as stated in the daily quotation sheets issued by the Stock Exchange on the day immediately before the grant date; and (iv) the face value of the share.
On 23 December 2019, the Company granted 2,482,000 share options (the "December 2019 Options") to subscribe for up to a total of 2,482,000 ordinary shares of the Company to certain individuals under the Share Option Scheme. Details of the December 2019 Options are as follows:
Date of Grant: | 23 December 2019 |
Exercise price of options granted: | HK$17.952 |
Number of options granted: | 2,482,000 (representing 0.19% of the issued shares of the Company |
as of 31 December 2020) | |
Validity period of the options: | From 23 December 2019 to 22 December 2026 (seven (7) years), |
both dates inclusive | |
Vesting period of the options: | For employees at or above the level of the vice president of Hua Hong |
Wuxi, one fourth of the options will vest on each of 23 December | |
2021, 23 December 2022, 23 December 2023, and 23 December | |
2024; for the other employees of Hua Hong Wuxi, one third of the | |
options will vest on each of 23 December 2021, 23 December 2022, | |
and 23 December 2023 |
The exercise price of HK$17.952 per share represents the higher of (i) the closing price of HK$17.260 per share as stated in the daily quotation sheets issued by the Stock Exchange on the date of the grant; (ii) the average closing price of HK$17.952 per share as stated in the daily quotation sheets issued by the Stock Exchange for the five business days immediately preceding the date of the grant; (iii) the closing price of HK$17.200 per share as stated in the daily quotation sheets issued by the Stock Exchange on the day immediately before the grant date; and (iv) the face value of the share.
Among the 2015 Options, 2018 Options and March 2019 Options, 988,000(1), 680,000(2) and 500,000 share options were granted to the Directors of the Company, respectively, subject to their acceptance.
44 HUA HONG SEMICONDUCTOR LIMITED ● Annual Report 2020
DIRECTORS' REPORT
- Among these, 119,000 share options were granted to Mr. Takayuki Morita, who resigned as a Non-Executive Director of the Company as at 25 September 2020.
- Among these, 80,000 share options were granted to Mr. Takayuki Morita, who resigned as a Non-Executive Director of the Company as at 25 September 2020.
Details of the movements in the share options during the year ended 31 December 2020 are as follows:
Name or category of participants | |||||||
Directors | |||||||
Number of share options | Mr. Junjun Tang | Mr.Takayuki Morita# | Other employees | In aggregate | |||
Granted at 04.09.2015 | - | 119,000 | - | 30,131,000 | - | - | 30,250,000 |
Granted at 24.12.2018 | - | - | 80,000 | - | 34,420,000 | - | 34,500,000 |
Granted at 29.03.2019 | 500,000 | - | - | - | - | - | 500,000 |
Granted at 23.12.2019 | - | - | - | - | - | 2,482,000 | 2,482,000 |
Cancelled during the year 2015 | - | - | - | -130,000 | - | - | -130,000 |
Cancelled during the year 2016 | - | - | - | -1,458,000 | - | - | -1,458,000 |
Cancelled during the year 2017 | - | - | - | -1,353,399 | - | - | -1,353,399 |
Cancelled during the year 2018 | - | - | - | -754,595 | - | - | -754,595 |
Cancelled during the year 2019 | - | - | - | -58,000 | -1,635,000 | -36,000 | -1,729,000 |
Exercised during the period | - | - | - | 7,892,696 | 1,106,017 | - | 8,998,713 |
Cancelled during the period | - | -119,000 | - | - | -284 | - | -119,284 |
Lapsed during the period | - | - | -80,000 | - | -993,620 | -84,000 | -1,157,620 |
Outstanding at 01.01.2020 | 500,000 | 119,000 | 80,000 | 13,828,027 | 32,785,000 | 2,446,000 | 49,758,027 |
Outstanding at 31.12.2020 | 500,000 | - | - | 5,935,331 | 30,685,079 | 2,362,000 | 39,482,410 |
Exercise period of share options | Note 1 | Note 2 | Note 3 | Note 4 | Note 5 | Note 6 | |
Exercise price of share options | HK$18.400 | HK$6.912 | HK$15.056 | HK$6.912 | HK$15.056 | HK$17.952 | |
Weighted average closing price of | |||||||
the shares immediately before | |||||||
the dates on which the share options | |||||||
were exercised | HK$26.8661 | HK$45.4563 | |||||
Note 1 The exercise period of share options is from 29 March 2021 to 28 March 2026
Note 2 The exercise period of share options is from 04 September 2017 to 03 September 2022
Note 3 The exercise period of share options is from 24 December 2020 to 23 December 2025
Note 4 The exercise period of share options is from 04 September 2017 to 03 September 2022
Note 5 The exercise period of share options is from 24 December 2020 to 23 December 2025
Note 6 The exercise period of share options is from 23 December 2021 to 22 December 2026
- Mr. Takayuki Morita resigned as a Non-Executive Director of our Company on 25 September 2020.
Save as disclosed above, the Company has not adopted any other share option scheme during the year ended 31 December 2020.
Annual Report 2020 ● HUA HONG SEMICONDUCTOR LIMITED | 45 |
DIRECTORS' REPORT
Reserves
Details of movements in the reserves of the Group during the year ended 31 December 2020 are set out in the consolidated statement of changes in equity on pages 203 and 204 of this report.
Continuing Connected Transactions and Connected Transactions
Continuing Connected Transactions
The Group disclosed in the prospectus of the Company dated 3 October 2014 a series of continuing connected transactions relating to Huahong Zealcore, QST, INESA, Shanghai Huali, Huahong Real Estate, and Shanghai Huajin Property Management Co., Ltd. ("Huajin Property Management"). Certain details of such transactions are summarized in the table below. With respect to such transactions, the Company had applied for and the Stock Exchange had granted a waiver from, among others, strict compliance with the announcement and independent shareholders' approval requirement (as the case may be). Details of such continuing connected transactions of the Group together with certain other continuing connected transactions of the Group conducted during 2020 are as follows:
Actual | Proposed | |||||
Transaction | Transaction | Annual | ||||
Transaction | Date | Parties to the Transaction | Connected Relationship | Transaction | Amount 2020 | Caps 2020 |
(1) | 1 January 2017 | Huahong Zealcore (as purchaser) | Huahong Zealcore is 93.02% held by | Sales agreement between the Company | US$2,797,000 | US$5,000,000 |
and a subsidiary of Huahong Group, | as seller and Huahong Zealcore as | |||||
The Company (as seller) | the Company's controlling shareholder. | purchaser in relation to the sale of IC | ||||
and other semiconductor products to | ||||||
Huahong Zealcore. | ||||||
(2) | 1 January 2017 | QST (as purchaser) | QST was 35.39% held by SAIL, | Sales agreement between the Company | US$3,027,000 | US$8,000,000 |
the Company's then controlling | as seller and QST as purchaser in | |||||
The Company (as seller) | shareholder, of which 33.21% interest | relation to the sale of IC and other | ||||
was held directly by SAIL and 2.18% | semiconductor products to QST. | |||||
interest was held directly by HHGrace, | ||||||
a wholly-owned subsidiary of our | ||||||
Company, prior to 1 September 2020. | ||||||
(3) | 1 January 2017 | Huahong Zealcore (as seller) | Huahong Zealcore is 90.66% held by | Purchase agreement between Huahong | US$525,000 | US$870,000 |
and a subsidiary of Huahong Group, | Zealcore as seller and the Company as | |||||
The Company (as purchaser) | the Company's controlling shareholder. | purchaser in relation to the purchase | ||||
of materials used in the manufacturing | ||||||
process of the Group's semiconductor | ||||||
products. |
(4) | 1 January 2017 | INESA (on behalf of itself and its |
subsidiaries*) (as seller) |
The Company (as purchaser)
INESA was the Company's controlling | Purchase agreement between INESA US$3,874,000 | US$4,730,000 |
shareholder prior to 17 December | as seller (on behalf of itself and its | |
2020. | subsidiaries) and the Company as | |
purchaser in relation to the purchase of | ||
goods and services. |
- Including Shanghai INESA Intelligent Electronics Co., Ltd., Shanghai Nanyang Software System Integration Co., Ltd. and Shanghai Nanyang Wanbang Software Technology Co., Ltd..
46 HUA HONG SEMICONDUCTOR LIMITED ● Annual Report 2020
DIRECTORS' REPORT
Actual | Proposed | ||||||||
Transaction | Transaction | Annual | |||||||
Transaction | Date | Parties to the Transaction | Connected Relationship | Transaction | Amount 2020 | Caps 2020 | |||
(5) | 27 September | Shanghai Huali (as seller) | Shanghai Huali is 53.79% owned | Wafer foundry service | agreement | US$1,832,000 | US$5,000,000 | ||
2019 | by Huahong Group, the Company's | between Shanghai Huali and Hua Hong | |||||||
Hua Hong Wuxi (as purchaser) | controlling shareholder. | Wuxi in relation to process services and | |||||||
engineering wafer service to be provided | |||||||||
to Hua Hong Wuxi during the period of | |||||||||
the agreement. | |||||||||
(6) | 25 February | Shanghai Huali (as lessee) | Shanghai Huali is 53.79% owned | Lease agreement between Shanghai RMB90,053,000 | RMB97,000,000 | ||||
2010 | by Huahong Group, the Company's | Huali as lessee and the Company as | (approx. | (approx. | |||||
(together with | The Company (as lessor) | controlling shareholder. | lessor in relation to the factory premise | US$13,036,000) | US14,369,000) | ||||
supplemental | situated at Hill 2, 13th street, Zhangjiang | ||||||||
agreements | Hi-Tech park, Pudong New Area, | ||||||||
dated 10 June | Shanghai, PRC leased by the Company | ||||||||
2011 and | to Shanghai Huali for their 300mm wafer | ||||||||
25 July 2014) | production line. The total gross floor area | ||||||||
leased was 96,099.2 square meters. | |||||||||
(7) | 10 January | Huahong Real Estate (as lessor) | Huahong Real Estate is a wholly-owned | Lease agreement between Huahong RMB11,535,000 | RMB14,000,000 | ||||
2013 | subsidiary of Hua Hong Technology | Real Estate as lessor and the Company | (approx. | (approximately | |||||
(together with a The Company (as lessee) | Development, a company 50% held | as lessee in relation to the dormitory | US$1,669,000)* | US$2,074,000) | |||||
supplemental | by and consolidated with Huahong | premises situated at Hua Hong | |||||||
agreement | Group, our controlling shareholder, and | Innovation Park, Nong 2777, Jinxiu Road | |||||||
dated 10 June | 50% held by HHGrace, a wholly-owned | East, Pudong New Area, Shanghai, | |||||||
2014) | subsidiary of our Company. | PRC (Dormitory Premises) rented by the | |||||||
Company from Huahong Real Estate for | |||||||||
use as staff quarters for the Company's | |||||||||
employees. The total gross floor area | |||||||||
rented was 17,412.87 square meters. | |||||||||
(8) | 1 January 2020# | Huajin Property Management | Huajin Property Management is a | Property | management | agreement | RMB1,549,000 | RMB2,000,000 | |
(as property manager) | wholly-owned subsidiary of Hua Hong | between | Huajin Property | Management | (approx. | (approximately | |||
Technology Development, a company | as property manager and the | US$224,000) | US$296,000) | ||||||
The Company (as contractor) | 50% held by and consolidated with | Company as contractor in relation to | |||||||
Huahong Group, our controlling | the engagement of Huajin Property | ||||||||
shareholder, and 50% held by | Management by the Group to provide | ||||||||
HHGrace, a wholly-owned subsidiary of | property management services for the | ||||||||
our Company. | Dormitory Premises. | ||||||||
- The Group entered into a twenty-year lease with respect to certain dormitory properties from Huahong Real Estate. The amount of rent payable by the Group under the lease is US$1,669,000 per year. At 31 December 2020, the balances of those right-of-use assets and lease liabilities were US$15,426,000 and US$17,845,000, respectively.
- On 31 December 2020, the Group entered into a management agreement with Huajin Property Management ("2021 Huajin Management Agreement"), pursuant to which Huajin Property Management will continue to provide property management services for the Dormitory Premises for a term of two years from 1 January 2021 to 31 December 2022, subject to an annual cap of RMB2,000,000 for each of the years ending 31 December 2021 and 31 December 2022, respectively. Details of the 2021 Huajin Management Agreement were set out in the announcement of the Company dated 31 December 2020.
Annual Report 2020 ● HUA HONG SEMICONDUCTOR LIMITED | 47 |
DIRECTORS' REPORT
The price and terms of the continuing connected transactions as described above were determined in accordance with the pricing policies and guidelines as set out in the relevant announcements of the Company. The Board (including the Independent Non-Executive Directors) has reviewed the continuing connected transactions as described above and confirmed that such transactions did in fact continue in 2020:
- in the ordinary and usual course of business of the Company;
- either on normal commercial terms or, if there are no sufficient comparable transactions to judge whether they are on normal commercial terms, on terms no less favourable to the Company than terms available to or from (as appropriate) independent third parties; and
- in accordance with the relevant agreements on terms that are fair and reasonable and in the interests of the Shareholders of the Company as a whole.
The auditors of the Company have confirmed in a letter to the Board that, with respect to the aforesaid continuing connected transactions of 2020:
- nothing has come to their attention that causes the auditors to believe that the disclosed continuing connected transactions have not been approved by the Company's Board;
- for transactions involving the provision of goods or services by the Group, nothing has come to their attention that causes the auditors to believe that the transactions were not, in all material respects, in accordance with the pricing policies of the Company;
- nothing has come to their attention that causes the auditors to believe that the transactions were not entered into, in all material respects, in accordance with the relevant agreements governing such transactions; and
- with respect to the aggregate amount of each of the continuing connected transactions, nothing has come to their attention that causes the auditors to believe that the disclosed continuing connected transactions have exceeded the maximum aggregate annual value disclosed in the Prospectus with respect to each of the disclosed continuing connected transactions.
48 HUA HONG SEMICONDUCTOR LIMITED ● Annual Report 2020
DIRECTORS' REPORT
Connected Transactions
Joint Venture Agreement
On 20 November 2020, HHGrace, a wholly-owned subsidiary of the Company, entered into a joint venture agreement (the "Joint Venture Agreement") with Huahong Group and Shanghai Huali in relation to the proposed formation of a joint venture (the "Joint Venture").
As at the date of the Joint Venture Agreement, Huahong Group was a controlling shareholder of the Company and Shanghai Huali was 53.79% owned by Huahong Group. Accordingly, Huahong Group and Shanghai Huali were connected persons of the Company.
Pursuant to the Joint Venture Agreement, HHGrace agreed to make capital contribution of RMB96 million in cash, representing 20% of the total capital contribution of the Joint Venture, and Huahong Group and Shanghai Huali agreed to make capital contribution of RMB288 million and RMB96 million in cash, respectively, representing 60% and 20% of the total capital contribution of the Joint Venture. The Joint Venture shall engage in the investment (including equity investment, investment management and asset management), consultancy (including corporate, business and investment consultancy) and sales and services of integrated circuits.
Details of the Joint Venture Agreement were announced by the Company on 20 November 2020.
Technology Development Agreement
On 31 December 2020, HHGrace, a wholly-owned subsidiary of the Company, entered into a technology development agreement (the "Technology Development Agreement") with Hua Hong Wuxi, pursuant to which HHGrace agreed to provide Hua Hong Wuxi with a non-exclusive and non-transferable licence to use all the intellectual property rights and technological secrets related to the logic, embedded flash memory, analog & power management, power discrete, and other specialty technology platforms that were owned or licensed by HHGrace, including but not limited to patents and technological secrets, together with ancillary technical consulting services, to support the development of the production line of Hua Hong Wuxi. In consideration for such licence and services, Hua Hong Wuxi shall pay HHGrace a total of US$45,700,000 (exclusive of tax) in RMB.
As at the date of the Technology Development Agreement, Hua Hong Wuxi was a non-wholly owned subsidiary which was held approximately 29% by China IC Fund, a substantial shareholder of the Company. Accordingly, Hua Hong Wuxi was a connected subsidiary of the Company.
Details of the Technology Development Agreement were announced by the Company on 31 December 2020.
Related Party Transactions
During the year ended 31 December 2020, the Group entered into certain transactions with parties regarded as "related parties" under the applicable accounting standards. Details of the related party transactions entered into by the Group during the year ended 31 December 2020 are disclosed in note 34 to the financial statements. The Company has complied with the disclosure requirements in accordance with Chapter 14A of the Listing Rules. Save as disclosed in the section headed "Continuing Connected Transactions and Connected Transactions" in this annual report, the other related party transactions disclosed in note 35 were not regarded as connected transactions or were exempt from reporting, announcement and shareholder approval requirements under the Listing Rules.
Annual Report 2020 ● HUA HONG SEMICONDUCTOR LIMITED | 49 |
DIRECTORS' REPORT
Performance of the Equity Investments and FVTPL
The table below sets out the breakdown of the performance in respect of the Equity Investments and FVTPL during the year ended 31 December 2020.
Principal guaranteed | |||
structured deposits and | |||
wealth management | |||
products ("Products") | |||
Shanghai Huali | QST | purchased from banks | |
(USD'000) | (USD'000) | (USD'000) | |
Initial investment cost | 229,133 | 1,704 | - |
Book value at the beginning | |||
of the year | 205,344 | 2,345 | 519,779 |
Purchases | - | - | 738,163 |
Redemption | - | - | (1,260,733) |
Changes in fair value | 8,211 | - | 5,337 |
Exchange realignment | 14,202 | 163 | (2,546) |
Book value at the end of the year | 227,757 | 2,508 | - |
Dividends received | - | - | - |
Gain on disposals | - | - | 5,337 |
Percentage of shares* | 6.3428% | 0.7511% | N/A |
Size compared to the total | |||
assets of the Company | 5.0% | 0.1% | - |
- refers to the percentage of shares held by the Company in Shanghai Huali and QST respectively
During the year ended 31 December 2020, the Group did not dispose of any shares in Shanghai Huali or QST. Increases in the fair value of the Company's equity investment in Shanghai Huali and QST were US$8,211,000 and Nil, respectively.
Shanghai Huali was established in 2010. As an industry-leading IC wafer foundry company, Shanghai Huali has advanced process technologies and offers comprehensive solutions. It is devoted to providing one-stop wafer foundry technical services for process technology nodes from 65/55nm to 28/22nm for design companies, IDM companies, and other system companies. Shanghai Huali has two 12-inchfully-automated wafer fabs in China.
During the financial year of 2020, the book value of the Company's equity investment in Shanghai Huali increased by US$22,413,000, including an increase of US$8,211,000 in the fair value and a foreign currency statement gain of around US$14,202,000. Accordingly, the Board is of the view that the performance of Shanghai Huali during the financial year of 2020 has been in line with its expectations.
50 HUA HONG SEMICONDUCTOR LIMITED ● Annual Report 2020
DIRECTORS' REPORT
QST is committed to the research and development of high-performance sensors, emerging sensors, and intelligent sensor systems for internet-of-things, industrial, and automobile applications. In 2018, QST was awarded one of the Top 10 MEMS Enterprises of China. Similar to the investment in Shanghai Huali, the increase in exchange rate has caused a foreign currency statement gain of around US$163,000. As the business of QST is still in its early development stage, the Board is of the view that the performance and strategic planning of QST during 2020 have been consistent with its expectations.
With respect to FVTPL, the Products are generally principal-protected,short-term and low-risk investment products offering a better interest rate than prevailing rates. Their fair value increased by US$5,337,000 during 2020. Their performance in 2020 tracks the expected rate of return as contained in the terms and conditions of these financial products and are in line with management expectations.
The Company confirms that it has complied with the accounting policy of investments and other financial assets (policies under HKFRS 9, applicable since 1 January 2018) as contained in the annual report of the Company for the year end 31 December 2020.
The Company expects the future prospects of the aforementioned investments to be largely in line with that over the past year. No significant changes in investment strategy or source of funding are expected for the coming year.
Annual General Meeting
The AGM will be held on Thursday, 13 May 2021.
Closure of Register of Members
For determining the eligibility of Shareholders to attend and vote at the AGM | ||
Latest time to lodge transfer documents for registration | 4:30 p.m. on 7 | May 2021 |
Closure of register of members | 10 to 13 May 2021 (both dates inclusive) | |
Record date | 13 | May 2021 |
In order to be eligible to attend and vote at the Annual General Meeting, unregistered holders of shares should ensure all share transfer forms accompanied by the relevant share certificates are lodged with the Company's branch share registrar Tricor Investor Services Limited, at Level 54, Hopewell Centre, 183 Queen's Road East, Hong Kong for registration no later than the aforementioned latest time.
Annual Report 2020 ● HUA HONG SEMICONDUCTOR LIMITED | 51 |
DIRECTORS' REPORT
Directors and Directors' Service Contracts
The Directors of the Company during the year and up to the date of this report were:
Executive Directors:
Mr. Suxin Zhang (Chairman)
Mr. Junjun Tang (President)
Non-Executive Directors:
Mr. Guodong Sun
Ms. Jing Wang
Mr. Jun Ye
Independent Non-Executive Directors:
Mr. Stephen Tso Tung Chang
Mr. Kwai Huen Wong, JP
Mr. Long Fei Ye
Each of the Non-Executive Directors of the Company is appointed for a specific term of three years and is subject to re-nomination and re-election by the Company in general meetings, unless his appointment has been previously terminated in accordance with the terms and conditions of the relevant letter of appointment or director's service contract.
Mr. Suxin Zhang, Mr. Stephen Tso Tung Chang, Mr. Long Fei Ye, and Mr. Guodong Sun will retire by rotation from office as Directors at the Annual General Meeting, and Mr. Suxin Zhang, Mr. Stephen Tso Tung Chang, Mr. Long Fei Ye, and Mr. Guodong Sun, being eligible, will offer themselves for re-election pursuant to the articles of association of the Company.
None of the Directors proposed for re-election at the Annual General Meeting has a service contract which is not terminable by the Group within one year without payment of compensation, other than statutory compensation.
The Company has received annual confirmation of independence from each of the existing Independent Non-Executive Directors in accordance with Rule 3.13 of the Listing Rules. The Company considers that all the Independent Non-Executive Directors are independent in accordance with the Listing Rules.
Profiles of Directors and Senior Management
Profiles of Directors and senior management of the Company are set out on pages 11 to 17 of this report.
Highest Paid Individuals and the Remuneration of the Directors and Senior Management
Details of the Directors' remuneration and the five individuals with the highest emoluments are set out in notes 8 and 9 to the consolidated financial statements in this annual report, respectively.
52 HUA HONG SEMICONDUCTOR LIMITED ● Annual Report 2020
DIRECTORS' REPORT
Interests of the Directors and the Chief Executive in Shares and Underlying Shares of the Company
As of 31 December 2020, save as disclosed below, none of the Directors nor the Chief Executive of the Company had any interests or short positions in the shares, underlying shares, or debentures of the Company or any associated corporation (within the meaning of Part XV of the SFO), as recorded in the register kept under section 352 of the SFO, or as otherwise notified to the Company and the Stock Exchange pursuant to the Model Code contained in the Listing Rules.
Number of underlying | Approximate | ||
shares held in long | percentage | ||
Name of Director | Capacity | position(1) | of interests |
Mr. Junjun Tang | Beneficial owner | 500,000 | 0.04% |
Notes:
- Long position in the underlying shares of the Company under share options granted pursuant to the Share Option Scheme.
Interests of Directors in a Competing Business
During the year, none of the Directors of the Group had any interests in a business which competes, either directly, or indirectly, with the business of the Company or the Group.
Interests of Directors in Transactions, Arrangements or Contracts of Significance
No transaction, arrangement or contract of significance to which the Company or any of its subsidiaries or associates was a party and in which a Director or an entity connected with a Director has or had a material interest, whether directly or indirectly, subsisted at the end of the year ended 31 December 2020 or at any time during the year.
Directors' Securities Transactions
The Company has devised its own code of conduct regarding Directors dealing in the Company's securities (the "Company Code") on terms no less exacting than the Model Code. Specific enquiry has been made to all the Directors and the Directors have confirmed that they have complied with the Company Code and the Model Code throughout 2020.
Indemnity and Insurance
The Company provides directors and officers liabilities (D&O) insurance for the Directors and Officers. The D&O insurance covers day-to-day management liability and is renewed every year.
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DIRECTORS' REPORT
Director(s) of the Subsidiaries
The names of Directors who have served on the boards of the Company's subsidiaries during the year ended 31 December 2020, or during the period from the end of the year 2019 to the date of this report, were as follows:
Name of the Subsidiary | Place of Incorporation | Name of the Director(s) |
Grace Semiconductor Manufacturing Corporation | Cayman Islands | Mr. Suxin Zhang |
("Grace Cayman") | Mr. Jun Ye | |
Shanghai Huahong Grace Semiconductor | Shanghai, PRC | Mr. Suxin Zhang |
Manufacturing Corporation ("HHGrace") | Mr. Junjun Tang | |
Ms. Jing Wang | ||
Mr. Yuchuan Ma | ||
Mr. Takayuki Morita | ||
Mr. Jun Ye | ||
Mr. Stephen Tso Tung Chang | ||
Mr. Kwai Huen Wong, JP | ||
Mr. Long Fei Ye | ||
Global Synergy Technology Limited ("GST") | Hong Kong, PRC | Mr. Daniel Yu-Cheng Wang |
Mr. Cheng Fu | ||
HHGrace Semiconductor USA, Inc. | CA, USA | Mr. Daniel Yu-Cheng Wang |
("HHGrace USA") | Mr. Cheng Fu | |
HHGrace Semiconductor Japan Co., Ltd. | Tokyo, Japan | Ms. Maki Nakamura |
("HHGrace Japan") | Mr. Daniel Yu-Cheng Wang | |
Mr. Cheng Fu | ||
Shanghai Huajie IC Technology Service Co., Ltd. | Shanghai, PRC | Mr. Heng Fan |
("Shanghai Huajie") | ||
Hua Hong Semiconductor (Wuxi) Limited. | Wuxi, PRC | Mr. Suxin Zhang |
("Hua Hong Wuxi") | Mr. Jun Wei | |
Mr. Junjun Tang | ||
Mr. Linyi Wei | ||
Ms. Jing Wang | ||
Mr. Xingliang Tang | ||
Ms. Hongxia Yuan | ||
54 HUA HONG SEMICONDUCTOR LIMITED ● Annual Report 2020
DIRECTORS' REPORT
Interests of Substantial Shareholders and Other Persons in the Shares and Underlying Shares of the Company
As of 31 December 2020, persons other than a Director or Chief Executive of the Company, having interests of 5% or more or short positions in the shares and underlying shares of the Group, were as follows:
Approximate | |||
percentage of | |||
aggregate | |||
interests in | |||
Number of | issued share | ||
Substantial shareholders | Capacity and nature of interest | shares held | capital* |
Shanghai Hua Hong International, | Legal and beneficial owner | 350,401,100(1) | 27.00% |
Inc. ("Hua Hong International")(2) | |||
Shanghai Huahong (Group) Co., Ltd. | Interest in a controlled corporation | 350,401,100(1) | 27.00% |
(Huahong Group)(2) | |||
Sino-Alliance International, Ltd. | Legal and beneficial owner | 160,545,541(1)(3) | 12.37% |
("Sino-Alliance International") | |||
Sino-Alliance International, Ltd. | Interest in a controlled corporation | 34,919,354(1) | 2.69% |
("Sino-Alliance International") | |||
Shanghai Alliance Investment Ltd. ("SAIL") | Interest in a controlled corporation | 195,464,895(1)(4) | 15.06% |
Xinxin (Hong Kong) Capital Co., Limited | Legal and beneficial owner | 242,398,925(1) | 18.68% |
Xun Xin (Shanghai) Investment Co., Ltd. | Interest in a controlled corporation | 242,398,925(1) | 18.68% |
China Integrated Circuit Industry | Interest in a controlled corporation | 242,398,925(1) | 18.68% |
Investment Fund Co., Ltd. | |||
NEC Corporation(5) | Legal and beneficial owner | 99,038,800(1) | 7.63% |
Notes:
- Long positions in the shares of the Company.
- Hua Hong International is a wholly-owned subsidiary of Huahong Group.
- Including 3,084 shares held in escrow by Sino-Alliance International pursuant to an escrow arrangement.
- SAIL indirectly held interests in the Company through four wholly-owned subsidiaries, including Sino-Alliance International. Two of the wholly-owned subsidiaries disposed of their entire 6,503,748 shares on 5 January 2021, and thereafter, SAIL indirectly held interests in the Company through two wholly-owned subsidiaries, including Sino-Alliance International.
- According to a disclosure of interests notice filed on 19 February 2021, NEC Corporation disposed of its entire interest in the shares of the Company on that date.
- The percentages are calculated based on the total number of shares of the Company in issue as of 31 December 2020, i.e., 1,297,815,273 shares.
Save as disclosed above, so far as is known to any of the Directors and the Chief Executive of the Company, as of 31 December 2020, no other person or corporation other than a Director or Chief Executive of the Company had any interests or short positions in any shares or underlying shares of the Company which were recorded in the register required to be kept by the Company pursuant to section 336 of the SFO.
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DIRECTORS' REPORT
Arrangements to Purchase Shares or Debentures
At no time during the year ended 31 December 2020 were rights to acquire benefits by means of an acquisition of shares in or debentures of the Company granted to any of the Directors or their respective spouses or minor children, or were any such rights exercised by them, or was the Company or any of its holding companies, subsidiaries or fellow subsidiaries, a party to any arrangements to enable the Directors or their respective spouses or minor children to acquire such rights in any other body corporate.
Major Customers and Suppliers
For the year ended 31 December 2020, the purchases attributable to the Group's five largest suppliers combined were less than 30% of total purchases, and the turnover attributable to the Group's five largest customers combined was less than 30% of total turnover.
Emolument Policy
As of 31 December 2020, the Group had a total of 5,682 employees. The Group recruits and promotes individuals based on merit and their development potential. The emolument policy for the employees of the Group is set up by the Remuneration Committee on the basis of their merit, qualifications, and competence.
The emoluments of the Directors are decided by the Remuneration Committee, having regard to the Group's operating results and individual performance. The emoluments of the Directors on a named basis are set out in note 8 to the financial statements for the year ended 31 December 2020.
Purchase, Sale or Redemption of Securities
For the year ended 31 December 2020, neither the Company nor any of its subsidiaries purchased, sold, or redeemed any of the Company's listed securities.
Pre-Emptive Rights
There are no provisions for pre-emptive rights under the Company's articles of association, or the laws of Hong Kong, which would oblige the Company to offer new shares on a pro-rata basis to existing shareholders.
Corporate Governance
The Company is committed to maintaining a high standard of corporate governance to safeguard the interests of shareholders and to enhance corporate value and accountability.
Information on the corporate governance practices adopted by the Company is set out in the Corporate Governance Report in this annual report.
Compliance with the Relevant Laws and Regulations
As far as the Board is aware, the Company has complied in material respects with the relevant laws and regulations that have a significant impact on the business and operation of the Company.
56 HUA HONG SEMICONDUCTOR LIMITED ● Annual Report 2020
DIRECTORS' REPORT
Environmental and Social Responsibilities
Environmental, social and governance factors have been deeply integrated into the Company's strategy, management, and long-term development goal, and have been involved in the entire process of our business operations. The Company firmly believes that environmental, social, and governance initiatives can promote the long-term development of our business and help create and share value for all stakeholders. Detailed information on the environmental, social, and governance practices adopted by the Company in 2020 is set out in the 2020 Environmental, Social, and Governance Report.
The Company is committed to reducing the negative impact of its operations on the environment through green products and green production, thereby providing customers with more environment-friendly products. In active response to the Chinese government's goal of "Striving to Achieve Carbon Neutrality by 2060", the Company continued to increase investment in and implementation of energy conservation and emission reduction projects, and has endeavoured to promote the reduction of greenhouse gas emissions and to mitigate climate changes by constructing plants in line with green building standards at home and abroad. In 2020, the Company invested a total of approximately RMB6.51 million to improve energy conservation and emission reduction technologies, and its customers achieved 100% compliance with hazardous substances control. All manufacturing facilities of the Company have been verified as meeting the QC 080000 electronic components standards and hazardous substances reduction requirements.
In addition, as a responsible corporate citizen, the Company is committed to promoting the construction of a sustainable value chain, strengthening the management of suppliers' conflict minerals, and building up a harmonious industrial ecosystem. During the outbreak of COVID-19 in 2020, the Company has made full effort to protect the safety and health of employees and to guarantee stable and orderly production. We've also supported the anti-epidemic activities with practical actions by carrying out various voluntary services in communities.
Compliance with the Deed of Non-Competition and the Deed of Right of First Refusal
Huahong Group, SAIL, and INESA, being controlling shareholders of the Company, entered into a deed of non-competition (the "Deed of Non-Competition") dated 23 September 2014, details of which have been set out in the paragraph headed "Deed of Non-Competition" in the section headed "Relationship with Controlling Shareholders" of the Company's prospectus dated 3 October 2014 (the "Prospectus"). In addition, Huahong Group and SAIL also entered into a deed of right of first refusal (the "Deed of Right of First Refusal") dated 10 June 2014, details of which have been set out in the paragraph headed "Deed of Right of First Refusal" in the section headed "Relationship with Controlling Shareholders" of the Prospectus. The Company has reviewed the written declaration from each of the controlling shareholders mentioned above on their compliance with their undertakings under the Deed of Non-Competition and the Deed of Right of First Refusal (as the case may be) for the year ended 31 December 2020. The Independent Non-Executive Directors have reviewed the status of compliance and confirmed that all the undertakings under the Deed of Non-Competition and the Deed of Right of First Refusal (as the case may be) have been complied with by the relevant parties.
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DIRECTORS' REPORT
Sufficiency of Public Float
Based on the information that is publicly available to the Company and within the knowledge of the Directors as of the date of this report, the Directors are satisfied that the Company has maintained the prescribed minimum public float under the Listing Rules.
Auditors
A resolution will be submitted at the AGM to re-appoint Ernst & Young as auditors of the Company.
On behalf of the Board
Mr. Suxin Zhang
Chairman
25 March 2021
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Introduction
Our concept of sustainable development and the pursuit of long-term performance is to achieve these under consideration of economic, environmental, and social aspects, as these aspects interact with and support each other, enabling long-term, sustainable performance. We strictly comply with all local applicable laws and meet social expectations in our operations, and we align our standards for environmental protection to those of the leaders in international industry. We devote ourselves to sustainable cities and communities. In following our corporate vision of Continuous Innovation and Empowering the Future for Global Customers, we promptly respond to Stakeholders, including customers, employees, investors, communities, and countries where we operate, toward the goal of sustainable development of enterprises and society.
1 Social Responsibility Management System
1.1 Social Responsibility Management Policy
We believe fulfillment of corporate social responsibility first requires pro-active adherence to and implementation of the highest international standards of business and social ethics, while creating value for and sharing value with all Stakeholders. To this end, in addition to compliance with all laws, regulations, and rules of the state in terms of operation, we also incorporate environmental and social responsibilities directly into our business strategies and operations. We take a prudent approach to manage our environmental and social risks by perfecting our management system, improving supply chain performance, and reducing resource consumption and environmental emissions. We encourage innovation-driven development and foster innovative talents, thereby promoting social harmony.
Provided by the Board of Directors as the CSR Decision Maker, the following four aspects summarize the social responsibility of the corporate vision Continuous Innovation and Empowering the Future for Global Customers.
Empowering the Future
for Global Customers
Providing Quality Products
Guaranteeing Rights & Interests of Customers
Booming Industrial Economy
"Heart felt" Value for Employees
Respect for the Value of Employees Caring about the Growth of Employees Protecting Occupational Health
Responsibilitythe | y | ||||
Industr | for | ||||
for | Responsibilit | ||||
Investors | |||||
y | |||||
Continuous | |||||
Innovation Empowering | |||||
the Future for Global | |||||
s | Customers | ||||
Responsibility | for d | ||||
for | |||||
Livelihoo | |||||
Employee | Responsibility | ||||
People' |
"New" Profits for Shareholders
Development through Innovation Consolidate Operations with Integrity Sharing the Benefits of China's growth
"Prosperous" Environment for Society
Promoting Green Development
Utilizing Resources Efficiently
Jointly Promoting Social Harmony
Implementation Concentration of CSR Planning for Hua Hong Semiconductor Limited
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1.2 Social Responsibility Management Structure
Effective social responsibility management requires the ongoing attention of senior management and the involvement of all employees. We established a Corporate Social Responsibility ("CSR") working group to set up a CSR organization system that enables management to participate in and coordinate with functional departments horizontally and member companies vertically. The working group comprises responsible officers from diverse functional departments.
CSR Decision
Board of Directors
Management
CSR Executor
CSR Working Group
General | Marcom | General | Compliance | Internal | Purchase | QC | |||
Office | Department | Affairs | Department | Audit | Department | Department | |||
Department | Department | ||||||||
HR | EHS | M | |||||||
Planning | Human | EHS | Finance | Marketing | Labor | ||||
Department | Resources | Department | Department | Union |
Vision
Continuous Innovation, Empowering the Future for Global Customers
CSR Planning
"New" Profits for Shareholders
Empowering the Future for Global
Customers
"Heart-felt" Value for Employees
"Prosperous" Environment for Society
Structure for CSR Management
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1.3 Involvement of Stakeholders
Based on the business and operational characteristics of our Company and leveraging the experience and practices in industry at home and abroad, we have determined the following to be our Stakeholders: our shareholders; customers; employees; government agencies and regulators; partners; communities; and the public. Our Company actively communicates with all of these Stakeholders via various channels and methods, including websites, media, meetings, reports, and other business and social activities.
Expectations and Responses of Stakeholders
Key Stakeholders | Description | Issues concerned | Communications and responses |
Shareholders and | Domestic and foreign investors holding equity | |
senior | and debt investments in our Company, and | |
management | senior management members of the Company | |
Customers | IDMs, systems and fabless semiconductor | |
companies |
Risk management, economic performance, industrial development, customer communication and satisfaction
Protection of customer rights and information, product and service quality, customer communication and satisfaction
Shareholders' meetings, financial reports, performance reports, results road shows, etc.
Product exhibitions, customer research, technical seminars, B2B (such as E-tapeout systems, WIP report and WAT report, etc.), customer service hotlines and complaints, customer satisfaction surveys, etc.
Employees | Our employees and contract personnel who |
serve our Company on a continuous basis |
Employee interests and welfares, employee health and safety, employee development and training
Employee activities, Employee Representatives Congress, Intranet, trainings, self-service systems and employee manuals, internal publications, etc.
Government and | Industry, tax, environmental protection, |
regulators | security and other departments, local |
governments, SFC and other governmental or | |
regulatory authorities |
Compliant operation, green products, emissions management and energy utilization
On-site visit, official correspondences, policy enforcement, information disclosure, etc.
Partners | Suppliers, research institutions, industry | Industrial development, compliant operation, product |
associations, etc. | and service quality, customer satisfaction and | |
communication | ||
Communities and | Communities in which we operate, the public | Green products, emissions management, community |
the public | and media, etc. | and public benefit |
Public tender conferences, strategic cooperation negotiations, exchanges and visits, etc.
Community activities, employee volunteer activities, public welfare activities, social cause campaigns, etc.
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1.4 Identification and Analysis of Substantive Issues
We check social responsibility issues on a regular basis and identify the more substantive ones on which to focus our operations, reporting, and disclosures through periodic identification, evaluation, and screening. We consider both internal and external factors, such as our strategic and operational direction, Stakeholders' concerns and expectations, as well as national and international standards and policies.
In 2020, we have identified 20 substantial issues by reference to the Sustainability Reporting Standards (2016) issued by the Global Reporting Initiative (GRI) and according to focuses of internal and external stakeholders, policy researches and peer benchmarking analysis. Among them, the importance of energy consumption and water use has increased compared with the previous year.
High
decisions & assessments Stakeholder on Influence
Low
Economy
G | |||||
J | |||||
E | |||||
K | |||||
B | L | I | |||
Products | |||||
C | A | ||||
Q | F | ||||
S | H | ||||
P | D | ||||
M | O | Environment | |||
R | |||||
N | |||||
T | Employees | ||||
Significance of economic, | High | Community | |||
environmental & social impacts
- Risk management
- Compliance management
- Anti-corruption
- Economic performance
- Innovative operation
- Industry development
S Sustainable development management of supply chain
- Product/service safety
- Green products
I Customer communication and satisfaction
-
Customers' interests and information protection K Energy utilization
L Water resource utilization M Emissions management
- Reduction of and adaptation to climate changes
- Labor standards
- Employee interest and benefits
- Employee health and safety
- Employee development and training
T Community and social welfare
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2 Environmental Responsibilities
The Company takes environmental protection as its own duty; complies with laws, regulations, and industry standards in relation to environmental protection; makes efficient use of energy and other resources; attaches great importance to pollution prevention; continuously invests in the development and promotion of green products; reduces the negative impact of its own operation on the environment; and strives for the sustainable development of enterprises and society.
2.1 Environmental Management
The Company gradually shifted its focus from production management to control of product full-life cycles and risks; committed to improving environmental performance at every step of the process, including procurement of raw materials, production, and waste management; and passed the new ISO 14001:2015 environmental management system certification. In terms of supervision and management, we added a review and follow-up system to the security management system in the Company's intranet. This system collects and lists matters violating environmental protection regulations, which are identified daily by management, following up and recording subsequent actions through regular system reminders.
As of the end of the reporting period, the Company was not subject to any environmental complaints or penalties, or involved in any environmental pollution incidents.
Certification in Relation to Environmental Responsibilities
Environmental Management | Certification Authority | Date of First Certification |
ISO 14001:2015 | British Standards Institutions | |
Environmental Management | 26 April 2002 | |
(BSI) | ||
System | ||
Green Building | Certification Authority | Date of First Certification |
"Leadership in Energy | U.S. Green Building Council | |
and Environmental Design" | October 2019 | |
(USGBC) | ||
(LEED v4) Gold Award | ||
Two-Star Green Building | Chinese Society for Urban | December 2019 |
Design Label Certificate | Studies (中國城市科學研究院) | |
Green Products | Certification Authority | Date of First Certification |
QC 080000 Hazardous | ||
Substance Process | BSI | 18 November 2009 |
Management System | ||
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Overview on Environmental Management Performance
The Company's production and operation requires the use of such resources as energy, water, and other raw materials and generates emissions such as air emission, wastewater, and waste. In addition, we are planning to promote supplier environmental management and to provide low power consumption green products in an effort to achieve better environmental management performance throughout the value chain.
Water Resources | |
Total water consumed | 9,907,631 m3 |
Of which: Water from municipal water supply | 7,035,272 m3 |
Wastewater reused | 2,872,359 m3 |
Water consumed per unit product | 2.89 m3 per 8-inch wafer |
Volume of recycled water | 4,042,020 m3 |
Energy | |
Total electricity consumed | 720,840 MWh |
Electricity consumed per unit product | 313 kWh per 8-inch wafer |
Natural gas consumed | 10,312,006 m3 |
Natural gas consumed per unit product | 4.49 m3 per 8-inch wafer |
Packaging Materials | |
Total packaging materials used for finished products | 128 tons |
Other Raw Materials |
Silicon slice, quartz, target material, gas, chemicals, and other raw materials for production
Supplier environment | Product research | Green low power | ||
and development | ||||
and social management | consumption products | |||
and production operation | ||||
Waste | |
Total hazardous waste | 9,262 tons |
Hazardous waste produced per unit product | 3.96 kg per 8-inch wafer |
Total non-hazardous waste | 6,143 tons |
Non-hazardous waste produced per unit product | 2.67 kg per 8-inch wafer |
Air Emissions | |
Total air emissions | 17,737.40 million m3 |
Nitrogen oxide (NOx) emissions | 19,688 kg |
Sulfur Dioxide (SO2) emissions | 338 kg |
Greenhouse gas | |
GHG emissions | 448,614 tCO2e |
Of which: Direct GHG emissions | 18,135 tCO2e |
Indirect GHG emissions | 430,479 tCO2e |
GHG emissions per unit product | 0.23 tCO2e per 8-inch wafer |
Wastewater | |
Total wastewater discharge | 6.03 million m3 |
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Green Culture
We continuously promote the environmental use of science and technology in our daily environmental protection measures.
protection concept inside and outside the Company. We make good operations to implement the concept of sustainable development and
Practice in Green Culture | |
Saving paper around the office | • Implementing office informatization to reduce paper consumption. |
• Making efforts to promote the use of recycled paper, including for | |
printing business cards of employees, to support recycling. | |
Saving electricity | • Turning off the power supply when leaving work or for a long time. |
• Reasonably setting air conditioning temperature above 26℃ in summer | |
and below 20℃ in winter. | |
Saving water | • Developing employees' awareness of saving water and posting water |
saving tips. | |
Waste disposal | • Classifying domestic waste in each factory into 4 categories, namely |
dry, wet, recyclable, and harmful waste, and requiring all employees to | |
answer online waste classification questions. | |
• Participating in E-waste recycling activities at alah.com. | |
Commuting | • Encouraging employees to commute by public transport. |
• Using new energy vehicles as shuttle buses for the Company. | |
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2.2 Cleaner Production Air Emissions
We follow the regulations and relevant requirements related to environmental protection and have formulated improved management measures for the air emissions discharged during production, including sulfuric acid mist, hydrogen chloride, nitric oxide, ammonia, and volatile organic compounds.
Air Emissions Discharge Management
Type | Treatment Method | |
Air Emissions | Acid air emission | Up-to-standard discharge after removing most of the |
components through a washing tower | ||
Alkaline air emission (mainly ammonia gas) | Purification through a washing tower | |
Organic air emission | Purification through activated carbon adsorption, or | |
combustion after concentration | ||
Air Emissions containing dust (mainly small | Removal through a dust-extraction unit | |
particulate matters of silicon dioxide) | ||
Waste Discharge
Wafer production generates liquid hazardous waste, such as waste acid and isopropanol. We authorized a qualified third-party company for treatment of this waste, mainly by means of incineration, physical-chemical treatment and recycling. The Company has formulated a Waste Management Procedure to standardize waste management operations and recorded and managed waste treatment through the unified environmental protection management system of the government to ensure all transportation records are traceable and controllable. Non-hazardous solid waste, such as sludge generated in wastewater treatment, was treated by the waste disposal agency using landfill. Since 2017, the Company has carried out work to reduce the discharge of various hazardous wastes every year. In 2020, the Company carried out projects such as the recycling and reuse of sulfuric acid waste liquid and sodium hydroxide waste liquid, to constantly reduce the impact of hazardous waste emissions on the environment.
Management of Waste Discharge
Categories | Treatment Method | |
Non-hazardous | Domestic waste and kitchen garbage | Entrusting municipal environment and sanitation |
waste | departments for unified disposal on a regular basis. | |
Hazardous | Such as waste acid, waste isopropanol, | Recycling |
waste | and waste phosphoric acid | |
Such as waste glass bottles, 200L chemical | Physical-chemical treatment | |
barrels, and waste liquid from laboratory | ||
Such as cleaning cloths, plastic bottles, | Incineration | |
organic waste liquid, waste activated carbon, | ||
waste resin, and arsenic-containing waste | ||
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2020 Cleaner Production Work and Achievements
Measures | Achievements |
• Improving FIN control methods to reduce the use and emission of | 1,800 L/year |
hydrogen fluoride | Reduction of hydrogen fluoride emission |
• Use new burners to reduce nitrogen oxide emissions from boilers | 1,170 kg/year |
Reduction of NOx emission | |
Recycling and reuse of sulfuric acid waste liquid and | Achievements |
sodium hydroxide waste liquid |
The Company adheres to the concept of environmental protection and started in 2020 to implement a sulfuric acid waste liquid and reuse project. The sulfuric acid waste liquid treated as waste is reused as an industrial agent for the drainage system through recycling devices, thus reducing the discharge of waste liquid.
Factory equipment Production equipment
Sulfuric acid | Sodium hydroxide |
waste liquid | waste liquid |
Purchased | Purchased 30% |
30% sulfuric | sodium |
acid agent | hydroxide agent |
Wastewater treatment |
Reducing discharge of sulfuric acid waste liquid by 205 tons per year
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2.3 Sustainable Water Management
In the semiconductor manufacturing process, the Company uses ultrapure water containing no ions, particles, chlorine or silicon dioxide to manufacture semiconductors free of any impurities. Only after treatment can the used water be properly discharged or recycled. Therefore, the sustainable management of the utilization, recycle, treatment and discharge of water resources is a top priority for the Company.
Identification of water footprint
Water used by the Company comes from the municipal water supply to a large extent in addition to a smaller amount of recycled water and air conditioning condensate from the pure water manufacturing process.
In 2020, the Company conducted water footprint measurement of its 8 -inch fabs by reference to the Water Footprint Assessment Manual issued by the Water Footprint Network.
The Company is committed to optimizing its water-saving technologies and recycling of wastewater during the production and operation processes. It requires cooperative direct suppliers to disclose information with respect to sustainable management of water resources in supplier questionnaires, including water-saving measures and water- saving targets, so as to continuously reduce the water footprint of products.
For more information on the sustainable water management, please refer to "Management of Water Risks" and "Prevention of Water Pollution".
Management of Water Risks
In order to constantly monitor water risks, the Company assesses water pressure in Shanghai and Wuxi where we operate through the Aqueduct Water Risk Atlas, an external tool from the World Resources Institute (WRI). According to WRI data, the Company's Shanghai and Wuxi fabs are located in areas with high water stress. Relying on water monitoring sites for each fab, the Company has conducted water balance tests on a regular basis to calculate the process water, recycled water, wastewater, and domestic water of each fab and record the flow, volume and recycle of water resources, so as to analyze whether there is any abnormal utilization of water resources and predict the reasonable allocation of water resources among water-consuming units. In addition, the Company has formulated the Emergency Plan for Tap Water Rationing to regulate emergency response in case of any interruption in the municipal tap water supply network, so as to prevent impacts on its production and operation.
In order to effectively relieve the pressure in relation to the use of water, the Company has set the water saving target for 2030, and improved the water utilization efficiency through technical improvement and other methods, so as to ensure the achievement of the target. Moreover, the Company has used recycled water for the production process and air conditioning condensate water for replenishing the water in cooling towers, with a total recycled water consumption of over 2 million m3 for the year.
Water-saving Target in Operation for 2030
Water consumed per unit of product (m3/8-inch wafers) in 2030 will decrease by 12% as compared with 2015.
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2020 Water Efficiency Measures and Achievements
Measures | Achievements | |
• | Reducing water consumption of washing tower for waste gas | 50,000 tons |
Water saving for the year | ||
• | Using diluted RO concentrated water for disposing chemicals | 15,000 tons |
Water saving for the year | ||
• | Optimizing the recycle and washing time of the pure water system | 8,400 tons |
Water saving for the year | ||
• | Optimizing the MMF back-washing settings for the pure water system | 5,000 tons |
Water saving for the year | ||
Prevention of Water Pollution
In terms of waste water discharge, the Company has adopted the Grade B Standard of GBT 31962-2015 (Waste Water Quality Standards for Discharge to Municipal Sewers) since 2017 and reduced the discharge through recycling washing water used for production in the factory.
In terms of pollution discharge and information disclosure, the Company carried out online monitoring of waste water, with relevant data disclosed on the Environmental Information Disclosure Platform for Shanghai Enterprises and Public Institutions, thus improving transparency of environmental information for the Company.
Wastewater Discharge Management
Categories | Treatment Method |
Wastewater | Such as pH, COD, ammonia nitrogen, |
fluorine ion |
Discharged through a pipeline into a designated urban sewage pipe network after treatment and meeting relevant standards
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2.4 Energy Use and Climate Change
The emission of large amounts of greenhouse gases such as CO2 is the main contributor to global climate change. We realize that climate change mitigation is of great importance to enterprises and the globe. We actively took part in carbon emission trading by the Shanghai Municipal Development & Reform Commission to cut greenhouse gas emission and slow down climate change. In 2020, the Company completed settlement of carbon credits of approximately 448,614 tons for 2019. The Company also set an emission target according to the carbon trading management measure of the Shanghai Municipal Development & Reform Commission and reduced greenhouse gas emissions through energy saving and emission reduction projects. In 2020, it invested a total of approximately RMB6.51 million to improve energy saving and emission reduction technologies.
Energy Use Management
The energy consumed by the Company is mainly electric power, heat, natural gas, and a small amount of gasoline and diesel. It has formulated the Resource and Energy Management Procedure, clearly defining the principle of resource and energy management. Based on the principle of energy saving and emission and waste reduction, the Company shall carry out source control and continuous improvement while satisfying production requirements and improving productivity. These actions will reduce our impact on the environment while reducing production cost. Our efforts will promote sustainable development in harmony with the environment. In response to the 2020 goal of the Shanghai Municipal Government to control the total amount of energy and improve energy utilization efficiency, the Company has set its energy-saving target for the "13th Five-Year Plan" period. In 2020, the Company's comprehensive energy consumption per RMB10 thousand of revenue was 12% lower than that of 2015, and the energy consumption for 8-inch integrated circuit wafer production was 13% lower than that of 2015. The Company has engaged a third-party organization to conduct its energy audit and put forward a technical upgrade plan for energy conservation.
In addition, in order to build factories that meet domestic and international standards for green building, the Company introduced the ecological and environmental protection concept in the design stage to reduce resources consumption in the construction and operation stages. For example, the 12-inch IC production line (HH Fab 7) undertaken by Hua Hong Semiconductor (Wuxi) Co., Ltd. has been designed and constructed in strict compliance with LEED certification requirements and has won the "Leadership in Energy and Environmental Design" (LEED v4) Gold Award certified by the U.S. Green Building Council (USGBC) due to the green and energy-saving features of the building and supporting facility design. In the design and construction of the engineering building (E1), it adhered to the concept of green and energy conservation; made greater effort in innovation; and enhanced the promotion and application of new materials, new equipment, and new technologies. Finally, it won the "Two-Star Green Building Design Label Certificate" certified by the Chinese Society for Urban Studies, with its excellent environmental performance, such as the renewable energy utilization rate of 100% for domestic hot water, the building energy saving rate of 65%, and the non-traditional water utilization rate of 56.19%.
2020 Energy Saving Work and Achievements
Measures | Achievements | |
• | Renovating LED lamps for FAB1A 2F Power Room | 160,000 kWh |
Electricity saving for the year | ||
• | Transforming drying machines for the CDA system from non-thermal regeneration | 148,900 kWh |
technology to thermal regeneration technology to reduce power level | Electricity saving for the year | |
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2.5 Green Products
Facing risks arising out of global climate change and the increasingly vigorous demand for energy conservation and emission reduction in society, reducing the high energy consumption of electronic and electrical products has become a focus in industry. In the field of professional integrated circuit manufacturing services, the Company is committed to implementing full-life cycle environmental management covering processes from raw material procurement and production to disposal, so as to reduce the environmental impact of the products.
Environmental Management for the Full Life Cycle of Products
Warehousing of Raw materials
Product
Production
Product Transportation
End-user
Products
Disposal
- Carry out hazardous substance examination and systematic control on raw materials;
- Review the qualification and environmental compliance of suppliers and require suppliers to sign the Environmental Protection Undertaking.
- According to the pollution discharge permit management, promote material reduction projects;
- From the perspective of resource recycling, carry out allocation among systems in waste chemical plants to reduce the use of external resources;
- Implement water recovery projects to improve the overall recycling rate and reduce the water supply pressure of the pipe network.
- Recycle and reuse product packaging materials to reduce the consumption of packaging materials and waste generation.
- By helping customers produce low energy consumption products, reduce the environmental impact of the use of end-user electronic products.
- Wafers produced by the Company are monitored for harmful substances, which means that the end-user electronic products manufactured by using the chips from these wafers have less impact on the environment after disposal.
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Development of Low-power Products
By continuously optimizing its wafer manufacturing technology, reducing product volume; improving the energy efficiency of end-user products, and reducing the impact of scientific and technological progress on the environment, the Company is supporting construction of a low-carbon and environment-friendly society while creating competitive advantages in power consumption, efficiency, and chip size optimization for customers.
Control of Hazardous Substances
In accordance with: the regulation Restriction of Hazardous Substances (RoHS); the Registration, Evaluation, Authorization and Restriction of Chemicals (REACH) as formulated by the EU; as well as customer requirements, the company has established a hazardous substances management system and standard.
The Company has established an electronic system to manage different raw materials at different levels. Suppliers are required to provide a signed Commitment on Nonexistence of Hazardous Substances and relevant test reports on a regular basis, so as to ensure that their products comply with laws, regulations, and customers' requirements on the management of harmful substances, assuring control from the source.
The Company entrusted Sociéte Générale de Surveillance S.A. (SGS) to conduct tests for hazardous substances and achieved 100% compliance for control of hazardous substances in 2020. All manufactured devices of the Company are verified to comply with the standards and requirements of QC 080000 for reducing hazardous substances in electronic elements, apparatus, and products.
3 Employee-Related Responsibilities
Employees are valuable resources of the Company. We are committed to creating a harmonious, friendly, and win-win cultural atmosphere in accordance with relevant laws and regulations. In order to protect the rights and interests of our employees, we take various measures to ensure the occupational health and safety of employees. We build diversified career development paths and provide a warm and comfortable working environment to promote the realization of personal goals and corporate values.
As of the end of the reporting period, the Company did not infringe the rights and interests of its employees and was not subject to complaints or penalties by a regulatory authority.
3.1 Rights and Benefits of Employees
We strictly followed related laws and regulations such as the Labor Law of the People's Republic of China and the Special Rules on Labor Protection of Female Employees and resolutely prevented any compulsory labor practices. Furthermore, we have formulated and follow the guidelines described in "Employment Procedures and the Management Procedures for Trainees". We strictly check the identity information of our employees and do not employ children or adolescents under the age of 16 years. As of the end of the reporting period, the Company had 5,682 regular employees.
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Overview of Employee Rights and Interests and Benefit System
Recruitment and Dismissal
Recruitment: Adhering to the principle of fairness, equity and openness
Dismissal: The Company and employees go through the dismissal procedure according to relevant laws, regulations and the Dismissal Management Procedure.
Remuneration
The Company provides competitive salaries for employees, which are higher than the minimum wage in the place of operation.
Benefit
The Company provides endowment insurance, medical insurance, unemployment insurance, employment injury insurance, maternity insurance and housing provident fund, accident insurance and other commercial supplementary medical insurances, employee rehabilitation, festival gift, assistance in household registration of non-local employees, etc.
Working hours
The standard working hours system is adopted. The comprehensive working hours system or flexible working hours system is adopted for certain positions with the approval of the labor and personnel authority of the government.
Vacation
Based on holidays and festivals specified by the government, supplementary annual leaves are provided for employees.
Democratic Participation
Labor union, employee congress, etc.
Diversified and equal employment
Diversified and equal employees are the cornerstone of the Company, which enables us to provide valuable products and services for our customers. As of the end of the Reporting Period, 27% of the Company's workforce was female employees.
We insist on fair, equal, and open recruitment and employment. We are committed to providing equal opportunity in all our human resources activities such as employee selection, recruitment, promotion, transfer, and remuneration. We do not implement or engage in discriminatory policies or injurious actions for any reason, in particular nationality, region, color of skin, ethnicity, religion, age, family conditions, or other factors.
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Harmonious Relation
An unblocked communication channel and sincere care are vital for the establishment of harmonious labor relations. The Company has formulated the Employee Communication Rule and encouraged the fair, straight-out, and multi-way communication between the Company and employees, between officers and subordinate officers, and among employees through the creation of multiple communication channels.
In addition, we established the Employee Assistance Mechanism, under which we provide assistance for needy employees at special festivals such as Spring Festival, Labor Day, and Mid-Autumn Festival, in addition to routine expression of sympathy and solicitude to injured or families of diseased employees; and we give timely care and support to employees who suffer a significant misfortune and help them overcome their plight as soon as possible through multiple forms of assistance including donation, support, care, and nursing. We care for the welfare and development of female employees, annually organizing a special physical examination, continuously improving human-based management of lactating employees, and providing relevant service facilities to ensure convenience for pregnant employees and lactating employees at work.
3.2 Health, Safety and Employee Welfare
The Company has established an occupational health and safety system that meets the requirements of the ISO45001 standard, defining the occupational health and safety management policy, so as to provide its employees with a good working environment and ensure their occupational health.
Occupational Health and Safety Management System
Occupational Health and Safety Management Policy
The Company strictly complies with safety, health, and environmental protection regulations; makes efforts for clean production; carries out continuous improvement; creates a safe, healthy, and comfortable working environment for employees; and strenuously pursues the highest goal of "zero accidents" and sustainable operation, becoming a model citizen in the world.
Organizations | Establish | System | Require | Management | Emergency | Publicity and | Safety |
a safety | Construction | employees to | Items | response | Education | education | |
manufacturing | sign the Safety | to hazards/ | Safety | and training; | |||
committee and | Responsibility | risks and | Emergency | ||||
implement a | Statement | opportunities; | drill; | ||||
regular safety | and the Safety | Chemicals | "ANKANG" | ||||
meeting | Commitment | management; | labor | ||||
system. | Letter to | Special | competition | ||||
ensure the | equipment | events, etc. | |||||
performance | and positions; | ||||||
of the | Construction | ||||||
responsibilities | operations; | ||||||
for safe | Occupational | ||||||
production. | health, etc. |
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Safe Production
The Company mainly eliminated or controlled safety risks in production activities of employees from four major aspects, namely, fire-fighting equipment, alarm monitoring system, personal protection, and emergency measures.
In 2020, the Company carried out the "Safe Production Month" activity for all employees, and organized review, question bank learning and online assessment relating to safe production as well as training on labor protection and CPR & AED first aid, so as to constantly enhance employees' safety awareness and create a sound safety culture.
RMB44.82 million Safety-related investment
for the year
100% Rectification rate of potential safety hazards
100% Percentage of employees receiving safety trainings
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Measures for Prevention of Employee Safety Risks
Fire-fighting | Alarm Monitoring | Personal Protection | Emergency Measure | ||||
Equipment | System | ||||||
‧ A perfect fire- | ‧ There are toxic, | ‧ Providing necessary | ‧ | Establishing | |||
fighting system and | harmful and | personal protective | an emergency | ||||
an automatic alarm | inflammable gas | equipment and | rescue team | ||||
system have been | warning systems, | emergency | and formulating | ||||
established. | liquid leakage | protective | emergency plans for | ||||
detectors and ultra- | equipment; | different disasters; | |||||
high-sensitivity | Regularly checking | ||||||
smoke detectors in | whether there is | ‧ | Annually organizing | ||||
the clean workshop. | a complete set | special disaster | |||||
of equipment | prevention drills, | ||||||
and whether the | and in a timely | ||||||
equipment is | manner, correcting | ||||||
effective. | problems identified. |
Chemicals, including nitric acid and ammonia water, are used in the Company's operation. We have formulated relevant management policies, including the Chemicals Management Procedure and the Chemical Material Review Procedure. We regularly complete annual detection of harmful factors in workplaces, evaluation of current conditions, and carry out various emergency drills for safety production accidents. As of the end of the Reporting Period, the Company had no safety production accidents.
Employee health
In terms of protecting employees' health, we provide an annual health check-up for all employees, including multiple cancer screenings and other items, and we establish employee health records to systematically track the changes in employees' health status. In addition, the Company engages external organizations to test its production environment every year, analyze and rectify nonconformities, so as to ensure that the occupational exposure limits for harmful factors are not exceeded in the production environment, and the Company informs all employees of the test results.
During the COVID-19 outbreak in 2020, the Company formed an emergency management team for pandemic prevention and control and established an internal prevention and control system. We have undertaken a series of measures including adopting scientific measures, strengthening prevention and control education and carrying out massive prevention and control activities, with a view to comprehensively ensuring the health and safety of employees.
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Anti-pandemic Actions | |
Protection of employee health | Arranging employees to work from home; distributing masks and other anti- |
pandemic supplies to employees on a regular basis. | |
Prevention and control measures | Formulating prevention and control policies on entering and leaving |
for workplace | the factory during the outbreak; conscientiously implementing specific |
prevention and control measures including personnel management, | |
detection of body temperature and on-site disinfection. | |
Staff recognition | Launching a labor competition programme titled "United for a Hundred-Day |
Anti-pandemic Action"; commending and recognizing 70 advanced units | |
and 320 advanced individuals for their anti-pandemic work. | |
High-quality Working Environment
The Company is committed to creating better office and service facilities for employees and improving their happiness.
Office
- An air purification system was installed to improve office air quality;
- The green space was increased in office areas.
Diet
- There are staff canteens and coffee shops in factory zones;
- Establishing a food safety supervision team and the mode of centralized purchasing of food materials and qualified supplier management, and inviting employees and department representatives to carry out supervision;
- Publishing the canteen food cooking guideline to manage balanced nutrition, oil and salt control for the employees' diet in the canteens.
Accommodation
- Construction of dormitory with private bathrooms, 24-hour supply of hot water and WIFI network, etc.;
- The dormitory area, has a library, computer room, snooker room, laundry, TV room, HIVE BOX and other facilities.
Travel
- Providing all employees with travel allowance;
- Providing free commuter bus services between the park, subway stations and the dormitory;
- Creating a commuting route for employees living in the transit-challenged areas and arranging commuter bus services for departments which need to have such services on weekends.
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3.3 Training and Career Development Employee Training
The Company has impeccable training facilities (special training rooms and equipment), learning and sharing platforms (including online training registration management platform, training material and position-specific question bank and multimedia learning courseware, etc.), and where necessary, uses external resources for ensuring employees learning and development.
In addition, the Company has established a complete employee education and training system; formulated the Operating Procedure of Internal Training System Review, the Education and Training Procedure and department-level training procedures; and continuously enhanced the training effect according to the training cycle. The Company continuously carried out improvements according to strategic development and employees' needs.
In 2020, the Company organized the "Sailing Together for a Shared Future" Training Camp for newly-hired recent college graduates, which provided a variety of courses covering corporate culture, innovation era, innovation development, innovation talents and outward bound training. This helped its new employees quickly integrate into the team, preliminarily and comprehensively master semiconductor-related knowledge, and meet the challenges of their future work with full enthusiasm.
Employee Training Programs
Trainees | Training Contents | 2020 Performance |
Grass-roots managers | Role recognition, self-management, management of | 100% |
others, and working management | Percentage of employees | |
trained | ||
Front-line managers | Develop management skills of front-line shift and team | |
leaders, cultivate a front-line management team with | ||
high quality and high business ability, and lay a solid | ||
foundation for the Company's management |
Newly-employed university | Career quality, corporate culture, introduction to special |
students | skills and other courses |
Front-line employees | Courses about theory and practical training of the |
semiconductor manufacturing module |
100.1 hours
Average training hours per employee
Career Development
According to industrial characteristics, the Company has set three professional categories, namely, management, technology and functional support and has established corresponding positions. Employees may continuously develop their careers in a single professional title category according to their own specialties, potential, and desires, and in other professional title categories, such as a shift from technology to management, or function to technology.
In order to further enhance the overall quality of employees, the Company provides its employees with education allowances for on-the-job learning and vocational skills programs.
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4 Products and Customers
The Company keeps track of international treaties, local and foreign laws, and regulations that are relevant to our products and customers in places where our business operates; regularly updates our management policies governing products and services in terms of health, safety, labels, privacy, and other areas; and establishes quality assurance systems and customer service systems. As of the end of the reporting period, the Company had not been involved in any litigation regarding infringement of the interests of customers, nor did the Company receive any litigation from customers regarding product quality.
4.1 Product Responsibility
Quality Control
According to the philosophy of "quality is vital for the existence of an enterprise", the Company has formulated the Quality Management Policy, and successfully passed ISO9001 quality management system and IATF 16949 automotive quality management system certifications.
The Company implemented an inclusive quality management model in accordance with the Quality Management Policy covering the five far-reaching departments and sections of: quality systems and
customer satisfaction; supplier management and raw materials analysis; quality engineering; reliability assurance; and failure analysis. To reduce human error, we established multiple management systems, such as personnel management, equipment management, supply chain management, environment management, systems management, process management, and customer quality control. With these reliable management systems, we are able to achieve real-time monitoring and testing over our entire product cycles from product R&D to production and after-sales feedback; carry out failure analysis on anomalies that may arise during the production and application processes; dig out the nature of problems; and work out corresponding corrective and preventive measures. The Company has established an optimal product recall system, and our customers may return to us within the warranty period non-conforming products whose prescribed functions or hazardous substances fail to meet our specifications. As of 2020, the failure rate of the Company's products on the end-user side was less than one in a billion.
Product Responsibility-related Certification
Product Quality | Certification Authority | Date of First Certification |
ISO 9001 Quality Quality Management System | BSI | 6 November 2001 |
IATF 16949 Automotive Quality Management System | BSI | 2 August 2005 |
Information Security | Certification Authority | Date of First Certification |
ISO 27001 Information Security Management System | BSI | 2 July 2004 |
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Technological Innovation
The Company has always focused on technological innovation and a willingness to cooperate in the creation of ICs under independent innovation. The Company has established the first Academician Expert Workstation in the integrated circuit industry in Shanghai and the first Enterprise Association for Science and Technology. Through introducing high-end intelligence, deepening project cooperation, cultivating compound talents and actively developing technology exchange platforms, the Company endeavors to establish an industry-university-research system for technology innovation to promote the transformation of scientific and technological achievements into actual productivity.
Intellectual Property Protection
As a science-oriented enterprise, we advocate independent innovation and respect for intellectual property rights in our research and development of application-specific integrated circuits, including intelligent chips and information security chips. According to the Company's System for the Management of Intellectual Property, we actively filed applications for patents and investigated responsibility for any potential breaches of intellectual property rights. At the same time, we promise that we will never infringe upon the intellectual property rights of any enterprise or individuals and will keep confidential all technological information regarding products of upstream and downstream partners.
To reduce the risk of claims of infringement of third-party intellectual property rights against our manufacturing of semiconductor devices or end-user products, we only accept orders from reputable customers with no known potential risk of infringement. We have entered into several technology licensing agreements with major technology companies.
4.2 Customer Service and Protection of Customers' Interests Customer Service System
According to the philosophy of "providing customers with more convenient and safer services", the Company has established an impeccable customer service system, including three main aspects: customer communication; customer complaint; and customer satisfaction.
Customer
Communication
Adopt multiple methods of communication with customers, including customer survey, regular quarterly/annual business reviews, technical seminar and training.
Customer Service System
Customer Complaint
Establish customer complaint channels and formulate the Customer Complaint Handling Procedure.
Customer
Satisfaction Survey
Carry out satisfaction surveys on a sampling basis annually, and formulate an improvement plan according to the survey results.
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The Company has formulated the Customer Complaint Handling Rules to standardize customer complaint handling and the implementation of corrective and preventative measures. Customers may make a complaint and give feedback to the Company through e-mail, hotline, letter, fax, and other channels.
Customer Complaint Handling Process
Occurrence of a Complaint
- Normally, communicate and confirm with the customer within 24 hours after the occurrence of a complaint and give a preliminary reply.
Investigation into Failure Causes
- Complaints requiring product failure analysis will be submitted to relevant departments for handling. Corrective and preventative measures will be proposed according to the investigation results and a reply will be given to customers.
Correction and Prevention
- Relevant departments are required to implement corrective and preventative measures, and the rectification effect is supervised and evaluated by regularly sorting out and analyzing relevant
information given in customer complaints.
Protection of Customer Information
The Company attaches great importance to maintaining customer information security. We have established an ISMS information security management system, which controls information security risks from information asset management, personnel security, physical control, logic control, and other aspects to ensure information security and is ISO 27001 certified. An Information Security Committee was established within the Company with main responsibilities including: responding to and making decisions on major emergency safety accidents; regularly reviewing the information security management system; auditing our photomask partners to ensure the security of their data management and storage; returning to customers or destroying waste masks generated during the production process, thus preventing to the utmost disclosure of customer information on such waste masks. No incidents of infringement against laws or regulations concerning customer privacy occurred within the Company during the year.
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5 Compliance in Business Operation
The Company is in strict compliance with laws and regulations with respect to compliance in business operations including the Criminal Law of the People's Republic of China, the Civil Code of the People's Republic of China, and the Anti Unfair Competition Law of the People's Republic of China. We thereby strengthen the implementation of supplier review work and proactively engage in the promotion of clean and honest industrial practices and anti-corruption governance. As of the end of the reporting period, the Company had not been involved in any litigation with respect to any commercial bribery or corruption.
5.1 Responsible Value Chain
Creating the CSR value chain is an important strategy for long-term development of the Company. It has established an excellent value chain management system and has conducted comprehensive assessment, management, and control of the environmental and social risks of suppliers. It is committed to supporting the growth of suppliers to promote development of the chip industry in China.
Risk Assessment and Review
Suppliers are required to complete the Self-Assessment Questionnaire on Social Responsibility according to the Social Responsibility Requirements for Suppliers, so that the Company can assess the social responsibility risks at the side of the supply chain. The Company regularly audits suppliers in terms of environment, labor, ethics, etc.
Conflict Minerals
Management
We h a v e f o r m u l a t e d t h e Management Policy of Conflict Minerals and carry out annual due diligence on suppliers' use of conflict minerals.
CSR Value Chain
Management System
Management Policy
The Company has formulated the Social Responsibility Requirements for Suppliers according to the Code of Conduct of the Responsible Business Alliance (RBA), which covers the management of suppliers in terms of environment, labor, health and safety, and business integrity.
Continuous
Improvement
W e c a r r y o u t p r o m o t i o n activities and training on social responsibility and the Code of Conduct of the Responsible Business Alliance for suppliers every year. We actively help Chinese suppliers in improving their management ability and production level, so as to promote the development of the chip industry in China.
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Management Policy
The Company has for mulated the Social Responsibility Requirements for Suppliers according to the Code of Conduct of the Responsible Business Alliance (RBA), which covers five requirements for suppliers in terms of labor, health and safety, environmental protection, business integrity and management system.
In addition to the Social Responsibility Requirements for Suppliers which shall be complied with by all suppliers, the Company also requires its upstream suppliers to recognize and implement management measures according to the Social Responsibility Requirements for Suppliers.
The Code of Conduct of the Responsible Business Alliance aims to establish various standards for the electronics industry or industries with electronic products as a key element as well as their supply chains, so as to ensure the workplace safety, respect for and dignity of workers, and compliance with environmental and ethical requirements in business activities.
For more information, please refer to:
http://www.responsiblebusiness.org/
Overview of the Social Responsibility Requirements for Suppliers | |||||
• | Free choice of occupation | • | Salaries and benefits | ||
• | Youth employees | • | Humane treatment | • Free association | |
Labor | • | Working hours | • | Non-discrimination | |
• | Occupational safety | • | Hygiene management | |
• | Emergency plan | • | Physically demanding work | |
Health and | • | Occupational injuries and | • Machine-related protection | |
Safety | diseases | |||
- Public health, canteen and dormitories
- Communication of health and safety
• | Environment-related | • | Management of water | |||
permits and reports | • | Solid waste | ||||
resources | ||||||
• | Preventing pollution and | • | Air emissions | |||
Environmental | • | Energy consumption and | ||||
saving resources | • | Material restrictions | ||||
Protection | greenhouse gas emissions | |||||
• | Hazardous substances | |||||
• | Operation with integrity | • | Intellectual property rights | • | Responsible procurement | |
• | Fair trade, advertisement | |||||
• | No illegitimate interests | of minerals | ||||
and competition | ||||||
Business | • | Privacy | ||||
• | Information disclosure | • | Confidentiality on identities | |||
Integrity | ||||||
• | Duties and responsibilities | • | Performance indicators for | • | Employee feedback, | |
of management | ||||||
implementation plans and | participation and | |||||
• | Legal and customer | measures | complaints | |||
Management | requirements | • | Training | • | Review and assessment | |
• | Risk assessment and | |||||
System | • | Communication | • | Corrective measures | ||
management | ||||||
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Risk Assessment and Review
The Company has established sound assessment and review procedures for supplier risks to assess suppliers' performance with respect to health and safety, labor, and environment.
Assessment, Control and Review Procedures for Supplier Risks
For suppliers with a record of significant violations, the Company will require such suppliers to conduct a third-party social responsibility risk assessment and to provide compliance evidence, or the Company will cancel qualifications of such suppliers.
In 2020, the Company's risk assessment and monitoring covered 100% of suppliers. For problems identified in the risk assessment and review, the Company required suppliers to take corrective measures. As of the end of the Reporting Period, suppliers have implemented and completed all corrective measures.Assessment, Control and Review Procedures for Supplier Risks
Management system
Integrity
Health and
safety
Environment
Labor
Self-assessment questionnaire for suppliers
Review of suppliers
In case of any significant violations records
Requiring to provide evidence on third-party review, or canceling suppliers' qualification
Conflict Minerals Management
Conflict minerals refer to illegally mined and traded gold (Au), tantalum (Ta), tungsten (W), tin (Sn) and cobalt (Co) from the Democratic Republic of Congo and its neighboring countries. These metals are obtained by local armed militias by way of long-time forced labor, child labor, and damaging the environment and ecology. Such metals are also the main capital source of illegal armed organizations. According to the Dodd-Frank Wall Street Reform and Consumer Protection Act and research reports of certain international non-governmental organizations, such minerals are likely to be used for electronic and electrical products, such as mobile phones and computers, in ICT industries.
In order to effectively reduce the Company's risk in relation to conflict minerals, the Company has formulated the Conflict Minerals Management Policy, requiring all suppliers to verify that raw materials they used do not come from conflict minerals regions.
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Conflict Minerals Management Policy
HHGrace has always taken global social and environmental responsibility as our goal and carried out green procurement and has promised to undertake the following responsibilities in its metal supply chain:
- We undertake to assume social and environmental responsibilities.
- We undertake to not use gold (Au), tantalum (Ta), tungsten (W), tin (Sn) and cobalt (Co) from conflict minerals regions.
- We undertake to cause our product suppliers to provide the declaration that they do not use gold (Au), tantalum (Ta), tungsten (W), tin (Sn) and cobalt (Co) from"conflict minerals", and to carry out an investigation into conflict minerals, and complete the Conflict Minerals Reporting Template (CMRT) under the Responsible Minerals Initiative (RMI).
The Company has conducted due diligence on the use of conflict minerals by suppliers, and requires suppliers to disclose information on sources of minerals and smeltery, so as to ensure that our suppliers comply with the Company's management policies of conflict minerals. According to our review, we have found no use of conflict raw materials by suppliers in 2020.
Continuous Improvement
The Company carries out promotion activities and training on social responsibility and the Code of Conduct of the Responsible Business Alliance for suppliers every year. In 2020, such trainings were completed as planned.
In addition, we proactively support growth and development of our suppliers in China and constantly assist suppliers in improving their management capabilities and production levels. Meantime, we proactively encourage small and medium-sized enterprises to participate in the local supply of key raw materials, including, gases, chemicals, and silicon wafers. Therefore, we've cultivated a growing group of local raw material and equipment suppliers, thereby significantly promoting the development of the chip design industry in China.
5.2 Anti-corruption and Business Ethics
The Company is committed to the development of a business ethics culture, and has formulated the Undertaking System on Anti-Corruption and Business Ethics, explicitly specifying that companies having business dealings with the Company shall sign the Undertaking Against Commercial Bribery and that relevant internal personnel shall sign the Undertaking on Business Ethics, whether for external customers, manufacturers and stakeholders, or for employees, cadres and key personnel.
In terms of anti-corruption management for suppliers, the Company requires all suppliers who have a business relationship with the Company sign the Undertaking against Commercial Bribery, explicitly specifying that suppliers shall not give any commercial bribes in any form or conduct any conspiracy in any form seeking personal gains or harming the interests of the Company.
The Company carries out audits on anti-corruption and business ethics on a regular basis. In 2020, the Company has completed audits of internal management on anti-corruption and business ethics, and found no violation.
In addition, the Company is committed to creating a sound business ethics culture by regularly introducing warning articles and cases in internal publications and providing training activities on anti-corruption and business ethics for all employees.
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Anti-Corruption and Anti-bribery Policy
All employees (including part-time employees), senior management and Board members are required to abide by relevant laws and regulations, and practice integrity, diligence and self-discipline. Corruption and bribery in all forms are prohibited, including:
- prohibiting commercial bribery and maintaining fair competition order;
- prohibiting seeking for illegitimate benefits through taking advantage of influence in position and work;
- never violating financial management and operation regulations, or seeking personal gains in the name of the Company; prohibiting practicing fraud to undermine the legitimate interests and reputation of the Company;
- prohibiting any receipt of presents, cash gifts, securities and finances that may cause a negative influence on work.
Complaint and Reporting Management
The Company has set up convenient reporting channels and handled reported cases in a standardized and orderly manner. Through defined reporting channels including E-mail, hotline and mailbox, the Company can receive and properly handle reporting calls and letters at any time to achieve early detection, resolution, and control. In addition, the Company takes measures to protect the whistle-blower, including personal information and all reporting materials of the whistle-blower are kept strictly confidential.
Business Ethics Supervision and Report Handling Procedures
Complete the investigation | |||
02 | and evidence collection | 04 | |
within the specified time limit, | |||
Immediately record | draw preliminary conclusions | ||
any individual case | and report to management. | Give feedback to the | |
reported and received. | whistle blower. |
Arrange special personnel | Hold a special meeting to | ||||
or establish a special team | review the contents of the | ||||
01 | to understand the situation, | 03 | report and | investigation | 05 |
carry out an investigation | results, and come up with | ||||
and obtain evidence. | a solution. |
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5.3 Risk Management
We continuously improve our risk management system by upgrading relevant processes and policies, thereby effectively enhancing our risk management abilities. Since 2016, the Company has established procedures for risk management through the Internal Audit Department, which issued the guideline "Rules about Comprehensive Control of Risks", and launched related projects.
In 2020, the Company updated the existing risk management system according to the latest three-line model issued by the Institute of Internal Auditors (IIA). The Company carried out an annual comprehensive risk assessment covering Shanghai and Wuxi; interviewed management with regard to risks through risk questionnaires; identified major risk areas; and formed an annual risk management report. In addition, the Company carried out risk management training including discussing typical risk events.
Key Operational Risks and Countermeasures
Risk Category | Content | Countermeasures |
Strategy | Strategic planning | The Company formulated strategic objectives from top to |
bottom, appropriately deconstructed and implemented | ||
such objectives in specific business models of corporate | ||
operation, to ensure the accomplishment of strategic | ||
objectives | ||
Investment decision | We conduct prudent pre-investment analysis, continuous | |
process supervision, and effective post-investment | ||
evaluation to control the investment risk to an acceptable | ||
level in a multi-pronged manner | ||
Supervising and | Our well-organized systems and processes, together | |
management system | with the risk management system based on the three-line | |
model, can efficiently assure accomplishment of strategic | ||
objectives | ||
Operation | Reserve of Talents | We set up the talent resume database, carried out a talent |
inventory, continuously explored recruitment channels, | ||
optimized the salary structure, and comprehensively | ||
enhanced the Company's attraction and employee | ||
satisfaction by combining the synergies of brand building | ||
and cultural promotion | ||
Information security | Based on our Management Rules about Information | |
Security, the Company established its information security | ||
framework and management policy. We implement the risk | ||
evaluation procedure for information security every year to | ||
maintain the optimal interests of all Stakeholders | ||
Research and | The structured R&D closed-loop mechanism conducts | |
development | comprehensive monitoring on R&D initiation, implementation | |
and post-evaluation, and helps develop new products with | ||
commercial value continuously and in a timely fashion | ||
Intellectual property rights | Comprehensive intellectual property protection awareness | |
and management procedures protect the intellectual | ||
property rights of the Company and customers | ||
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Risk Category | Content | Countermeasures |
Finance | Cash flow | Monthly cash flow statements record cash flows and |
dispatch the same to relevant departments for follow-up | ||
actions | ||
Exchange fluctuations | Transactions denominated in foreign currencies are settled | |
in the same foreign currency whenever possible to reduce | ||
the need for foreign currency exchange, thus reducing risks | ||
arising from exchange rate fluctuations | ||
Environment and | Environment | We design management procedures based on our |
Safety | observation, assessment and control of environmental | |
factors, and list major environmental factors | ||
Safety check | Safety checks focusing on troubleshooting and fault | |
diagnosis are carried out continuously | ||
Occupational health | We have developed the goals, indicators and program | |
management forms for our environmental and occupational | ||
health and safety programs in accordance with the | ||
Company's established goals, indicators and program | ||
management procedures for health, safety and environment | ||
("HSE") | ||
Project risk | Wuxi project management | The Company's management has always attached great |
(Huahong Wuxi) | importance to Wuxi projects and has given priority to the | |
allocation of resources. Special personnel have been | ||
appointed to continuously monitor the project progress, | ||
investment expenditure, procurement compliance, follow- | ||
up measures and other important control points to ensure | ||
that the project progress, quality, and cost control meet | ||
established targets | ||
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6 Anti-pandemic and Public Welfare
During the sudden outbreak of COVID-19 in 2020, the Company cared for the life and health of everyone, the safety and happiness of every family, and the stability and development of society in the anti-pandemic war without gunpowder. The Company initiated a prevention and control mechanism and formed a pandemic prevention and control task organization in a timely manner. We strictly deployed and promptly implemented various prevention and control measures in line with the goal of "Protecting ourselves, our families, our employees and our Company", so as to ensure the safety and health of our employees and orderly production as well as fulfill our commitments to all customers.
The Company encourages employees to actively participate in voluntary services. The trade union department takes the lead in organizing various employee volunteer activities, which are specified in the Trade Union Member Benefit Policy.
Targeted Poverty Alleviation
In response to the call of Huahong Group for partner assistance, the Company established a partner assistance relationship with Youqiao Village, Shuxin Town, Chongming District. We visited local villagers regularly to understand its progress in people's livelihood, Party building and comprehensive governance and to define the focus of our partner assistance work, so as to establish a long-term, stable and comprehensive partner assistance relationship and effectively promote Youqiao Village's development in all respects.
In our efforts to care for children in mountainous areas and consolidate achievements of poverty alleviation, we helped realize 123 small aspirations of 123 children in Tanwan Primary School, Yangbi County, Yunnan Province, and donated books to a library of a local junior high school.
Anti-pandemic Action and Production Resumption
In the normal anti-pandemic action and production resumption in 2020, all employees attached great importance to the normal anti-pandemic work and were fully prepared for work and production to ensure the successful completion of our main responsibilities and targets and our work relating to Four Protections. Our employees took the lead in anti-pandemic actions, fought for our country and family and spared no effort in fulfilling responsibilities. Our employees contributed our part to society in the ordinary work, and showcased an excellent and touching image. Our frontline employees worked day and night in the production line, and our security and logistics employees made tireless effort to ensure the safety of our employees and factories.
Volunteer Service
We encourage our employees to serve the local community and express their solicitude, and we have established a volunteer team, with a total of 449 of volunteer services provided in 2020.
In 2020, our anti-pandemic voluntary service team participated in measuring body temperature and inspecting vehicles at checkpoints and providing convenience services for community residents in Chaoyang Community, Qitaihe, Heilongjiang Province. Our volunteers regularly visit nursing homes in Shanghai every year, and hold chatting meetings and parties to bring comfort to the elderly. In addition, volunteers from our factories have established public welfare teams to sort out shared bicycles and clean surrounding roads during lunch breaks.
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7 2020 Social Recognitions
No. Awards
National and Industrial Awards
- China Benchmarking Enterprise in Quality
- Low-powerMCU (Process) Solution Award
- Golden Ant Award of National Golden Card Project
- China Semiconductor Innovation Product and Technology Award
- Wafer OEM Enterprise with Outstanding Performance for the Year in 2019 China IC Design Achievement Award
-
The 14th (2019) China Semiconductor Innovation Product and Technology Award
Provincial and Departmental-level Awards - 2019 Shanghai Benchmarking Enterprise in Energy Saving and Emission Reduction
- 2019 Shanghai Top 100 Foreign-invested Enterprises in Terms of Import and Export Volume
- 2019 Shanghai Top 100 Foreign-invested Enterprises in Terms of Job Creation
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8 Performance Data
Environment
Performance Indicators1 | Unit | 2018 | 2019 | 2020 |
Emissions | ||||
Total air emissions | 10,000 m3 | 1,145,074 | 1,257,074 | 1,773,740 |
Nitrogen oxide (NOx) emissions | Kg | 26,821 | 19,383 | 19,688 |
Sulfur dioxide (SO2) emissions | Kg | 68 | 72.5 | 338 |
Total wastewater discharge | 10,000 m3 | 473 | 431 | 603 |
GHG emissions2 | Ton of CO2 equivalent | 434,834 | 449,343 | 448,614 |
Of which: Direct GHG emissions3 | Ton of CO2 equivalent/ | 15,783 | 16,954 | 18,135 |
8-inch wafers | ||||
Indirect GHG emissions4 | Ton of CO2 equivalent/ | 419,051 | 432,389 | 430,479 |
8-inch wafers | ||||
GHG emissions per unit output | Ton of CO2 equivalent/ | 0.21 | 0.23 | 0.23 |
8-inch wafers | ||||
Total hazardous waste | Ton | 5,122 | 5,013 | 9,262 |
Hazardous waste produced per unit output | Kg/8-inch wafers | 2.47 | 2.57 | 3.96 |
Total non-hazardous waste5 | Ton | 4,017 | 3,595 | 6,143 |
Non-hazardous waste produced per unit output | Kg/8-inch wafers | 2 | 1.80 | 2.67 |
Use of Resources | ||||
Total electricity consumed | MWh | 528,402 | 528,044 | 720,840 |
Electricity consumed per unit product | kWh/8-inch wafers | 259 | 271 | 313 |
Natural gas consumed | m3 | 7,481,586 | 8,138,435 | 10,312,006 |
Natural gas consumed per unit product | m3/8-inch wafers | 3.66 | 4.18 | 4.49 |
Total water consumed | m3 | 9,267,637 | 7,724,830 | 9,907,631 |
Of which: Water from municipal water supply | m3 | 6,325,999 | 4,791,336 | 7,035,272 |
Wastewater reused | m3 | 2,941,638 | 2,933,494 | 2,872,359 |
Water consumed per unit product6 | m3/8-inch wafers | 3.10 | 2.46 | 2.89 |
Recycled/reused water | m3 | 2,923,067 | 2,823,278 | 4,042,020 |
Total packaging materials used for | Ton | 78 | 110 | 128 |
the shipment of finished products | ||||
Total recycled packaging materials used | Ton | 16 | 8 | 22 |
for the shipment of finished products | ||||
Note:
- In addition to the GHG emission data, the scope of the environmental performance data in 2020 covers Huahong Semiconductor (Wuxi) Co., Ltd. (HH Fab 7), which was not covered in the previous two years.
- In accordance with the requirements of local regulatory authorities, the GHG emissions of the Company in the previous year are submitted to a third-party institution for verification every year.
- Sources of direct GHG emissions include natural gas and diesel.
- Sources of indirect GHG emissions include electricity and steam.
- Non-hazardouswaste is sludge produced in wastewater treatment.
- In calculation, water consumed per unit product only includes water from the municipal water supply.
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Employment and Labor Practice
Performance Indicators | Unit | 2018 | 2019 | 2020 |
Employment | ||||
Total number of employees | Individual | 4,512 | 5,138 | 5,682 |
Including: Number of male employees | Individual | 3,227 | 3,720 | 4,164 |
Number of female employees | Individual | 1,285 | 1,418 | 1,518 |
Number of employees working under a | Individual | 4,512 | 5,138 | 5,682 |
labor contract with the employer | ||||
Number of employees working under | Individual | 209 | 130 | 113 |
a labor contract with a labor dispatch | ||||
company | ||||
Part-time employees | Individual | 0 | 0 | 0 |
Number of employees aged under 30 | Individual | 2,129 | 2,354 | 2,542 |
Number of employees aged between | Individual | 2,284 | 2,676 | 3,018 |
30 and 50 | ||||
Number of employees aged above 50 | Individual | 99 | 108 | 122 |
Number of employees from Mainland | Individual | 4,503 | 5,129 | 5,673 |
China | ||||
Number of foreign employees | Individual | 9 | 9 | 9 |
Health and Safety | ||||
Occupational disease incidence | % | 0 | 0 | 0 |
Number of work-related fatalities | Individual | 0 | 0 | 0 |
Lost days due to work injury | Day | 206 | 23 | 235 |
Employee Training | ||||
Average training hours completed per employee | Hour | 77.0 | 99.5 | 100.1 |
Including: Average training hours completed per | Hour | 78.0 | 100.5 | 101.4 |
non-management employee | ||||
Average training hours completed per | Hour | 13.0 | 33.6 | 18.3 |
management member | ||||
Average training hours completed per | Hour | 66.0 | 87.7 | 96.8 |
female employee | ||||
Average training hours completed per | Hour | 82.0 | 104 | 101.3 |
male employee | ||||
Percentage of employees trained | % | 100 | 100 | 100 |
Including: The percentage of non-management | % | 100 | 100 | 100 |
employees trained | ||||
Percentage of management member | % | 100 | 100 | 100 |
trained | ||||
Percentage of female employees trained | % | 100 | 100 | 100 |
Percentage of male employees trained | % | 100 | 100 | 100 |
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Product Responsibility and Customer Service
Performance Indicators | Unit | 2018 | 2019 | 2020 |
Product Responsibility | ||||
Product return rate | % | 0.104 | 0.05 | 0.07 |
Percentage of products sold subject to recalls for | % | 0 | 0 | 0 |
safety and health reasons. | ||||
Customer Service | ||||
Customer complaint event | Case | 8 | 3 | 8 |
Percentage of customer complaints resolved | % | 100 | 100 | 100 |
Supply Chain Management | ||||
Performance Indicators | Unit | 2018 | 2019 | 2020 |
Supply Chain Management | ||||
Total number of suppliers | Supplier | 520 | 532 | 540 |
Number of local suppliers | Supplier | 393 | 399 | 402 |
Number of foreign suppliers | Supplier | 127 | 133 | 138 |
Number of suppliers assessed1 | Supplier | 112 | 110 | 110 |
Number of suppliers subject to rectification | Supplier | 0 | 0 | 0 |
Percentage of raw and auxiliary material suppliers | % | 100 | 100 | 100 |
signing the Environmental Protection Undertaking | ||||
Percentage of raw materials purchased from local | % | 26 | 28 | 29 |
suppliers2 | ||||
Note:
- The number of suppliers which were assessed by the Company in terms of labor, health and safety, environment, and business ethics.
- Raw materials purchased include silicon slices, quartz, target materials, gases, chemicals, and other raw materials for production.
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Anti-corruption
Performance Indicators | Unit | 2018 | 2019 | 2020 | |
Anti-corruption | |||||
Number of concluded legal cases regarding | Case | 0 | 0 | 0 | |
corrupt practices brought against the issuer or | |||||
its employees during the reporting period | |||||
Community Investment | |||||
Performance Indicators | Unit | 2018 | 2019 | 2020 | |
Community Investment | |||||
Number of employees participating in volunteer | Individual | 176 | 245 | 449 | |
services | |||||
Total hours of volunteer activities | Hour | 352 | 659 | 450 | |
Compliance | |||||
Fields | Names of Major Laws and Regulations | ||||
EHS | Environmental Protection Law of the | People's Republic of China, Law of the | |||
People's Republic of China on Prevention and Control of Atmospheric Pollution, | |||||
Urban and Rural Planning Law of the People's Republic of China, Production Safety | |||||
Law of the People's Republic of China, Marine Environment Protection Law of the | |||||
People's Republic of China, Energy Conservation Law of the People's Republic | |||||
of China, Law of the People's Republic of China on Prevention and Control of | |||||
Occupational Diseases, Law of the People's Republic of China on Employment | |||||
Contracts, Law of the People's Republic of China on Protection of Women's Rights | |||||
and Interests, Registration, Evaluation, | Authorization, and | Restriction | of Chemicals | ||
("REACH"), Waste Electrical and Electronic Equipment (WEEE) and Restriction of | |||||
Hazardous Substances ("RoHS") etc. | |||||
Information Security | Patent Law of the People's | Republic | of China, Copyright Law of | the People's | |
Republic of China, Trademark Law of the People's Republic of China, Cyber Security | |||||
Law of the People's Republic of China, Cryptography Law of the People's Republic | |||||
of China, Accounting Law of the People's Republic of China, and Regulation on the | |||||
Administration of Commercial Cipher Codes, etc. | |||||
Quality | Company Law of the People's Republic of China, Constitution of the PRC, Law of the | ||||
People's Republic of China on Product Quality, Customs Law of the PRC, Metrology | |||||
Law of the People's Republic of China, and Foreign Trade Law of the PRC, etc. | |||||
RBA | Anti-unfair Competition Law | of the People's Republic | of China, | Employment |
Promotion Law of the People's Republic of China, Social Insurance Law of the People's Republic of China, Civil Code of the People's Republic of China, Labor Law of the People's Republic of China, Criminal Law of the People's Republic of China, Measures for the Administration of Health Insurance, Measures for Application for and Payment of Unemployment Insurance Money, etc.
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9 Preparation
Report Overview
The 2020 ESG Report of Hua Hong Semiconductor Limited (hereinafter referred to as the "Report") discloses its principles in fulfilling CSR and the work carried out in 2020. It mainly addresses our Stakeholders about sustainable development regarding the relevant economic, environmental, and social issues.
Basis of Preparation
The Report was prepared in accordance with the Environmental, Social and Governance Reporting Guide published by The Stock Exchange of Hong Kong Limited, and by reference to the Sustainability Reporting Standards (2016) issued by the Global Reporting Initiative (GRI).
Scope of the Report | |
Organizational Scope: | The Report covers Hua Hong Semiconductor Limited and its subsidiaries (collectively |
the "Company" or "we"), and is in consistent with the scope of the annual consolidated | |
financial statements of the Company. | |
Reporting Period: | From 1 January 2020 to 31 December 2020. |
Report Cycle: | This is an annual report. |
Notes on the Data
Data and cases in the Report originate from original records and financial reports of the Company generated in actual operations. In case of any inconsistency, data in the financial reports shall prevail.
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10 Index Table of the Environmental, Social and Governance Reporting Guide of the Hong Kong Stock Exchange
Aspects, General Disclosures and KPIs | Section | |
A1.Emissions | ||
General Disclosure A1 | 2.1 | Cleaner Production |
2.3 | Use of Energy and Climate Change | |
8 Performance Data | ||
KPI A1.1 | 8 Performance Data | |
KPI A1.2 | 8 Performance Data | |
KPI A1.3 | 8 Performance Data | |
KPI A1.4 | 8 Performance Data | |
KPI A1.5 | 2.2 | Cleaner Production |
KPI A1.6 | 2.2 | Cleaner Production |
A2.Use of Resources | ||
General Disclosure A2 | 2.2 | Sustainable Water Management |
2.3 | Use of Energy and Climate Change | |
8 Performance Data | ||
KPI A2.1 | 8 Performance Data | |
KPI A2.2 | 8 Performance Data | |
KPI A2.3 | 2.3 | Use of Energy and Climate Change |
KPI A2.4 | 2.2 | Sustainable Water Management |
KPI A2.5 | 8 Performance Data | |
A3.The Environment and Natural Resources | ||
General Disclosure A3 | 2.4 | Green Products |
KPI A3.1 | 2.4 | Green Products |
A4.Climate Change | ||
General Disclosure A4 | 2.3 | Use of Energy and Climate Change |
KPI A4.1 | 2.3 | Use of Energy and Climate Change |
B1.Employment | ||
General Disclosure B1 | 3.1 | Rights and Benefits of Employees |
8 Performance Data | ||
KPI B1.1 | 8 Performance Data | |
KPI B1.2 | 8 Performance Data | |
B2.Health and Safety | ||
General Disclosure B2 | 3.2 | Health, Safety and Employee Welfare |
8 Performance Data |
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Aspects, General Disclosures and KPIs | Section | ||
KPI B2.1 | 8 | Performance Data | |
KPI B2.2 | 8 | Performance Data | |
KPI B2.3 | 3.2 | Health, Safety and Employee Welfare | |
B3.Development and Training | |||
General Disclosure B3 | 3.3 | Training and Career Development | |
KPI B3.1 | 8 | Performance Data | |
KPI B3.2 | 8 | Performance Data | |
B4.Labor Standards | |||
General Disclosure B4 | 8 | Performance Data | |
KPI B4.1 | 3.1 | Rights and Benefits of Employees | |
KPI B4.2 | 3.1 | Rights and Benefits of Employees | |
B5.Supply Chain Management | |||
General Disclosure B5 | 5.1 | Responsible Value Chain | |
KPI B5.1 | 8 | Performance Data | |
KPI B5.2 | 5.1 | Responsible Value Chain | |
KBI B5.3 | 5.1 | Responsible Value Chain | |
B6.Product Responsibility | |||
General Disclosure B6 | 4.2 | Customer Service and Protection of Customers' Interests | |
8 | Performance Data | ||
KPI B6.1 | 8 | Performance Data | |
KPI B6.2 | 4.2 | Customer Service and Protection of Customers' Interests | |
8 | Performance Data | ||
KPI B6.3 | 4.1 | Product Responsibility | |
KPI B6.4 | 4.1 | Product Responsibility | |
KPI B6.5 | 4.2 | Customer Service and Protection of Customers' Interests | |
B7.Anti-corruption | |||
General Disclosure B7 | 5.2 | Business Ethics | |
8 | Performance Data | ||
KPI B7.1 | 8 | Performance Data | |
KPI B7.2 | 5.2 | Anti-corruption | |
B8.Community Investment | |||
General Disclosure B8 | 6 | Social Welfare Causes and Public Communities | |
KPI B8.1 | 6 | Social Welfare Causes and Public Communities | |
KPI B8.2 | 8 | Performance Data | |
目錄
釋義 | 98 |
主要財務指標 | 101 |
致股東的信 | 102 |
公司資料 | 104 |
董事及高級管理層 | 107 |
企業管治報告 | 114 |
董事會報告 | 124 |
2020年環境、社會及管治報告 | 154 |
獨立核數師報告 | 191 |
綜合損益表 | 199 |
綜合全面收益表 | 200 |
綜合財務狀況表 | 201 |
綜合權益變動表 | 203 |
綜合現金流量表 | 205 |
財務報表附註 | 207 |
五年財務概覽 | 320 |
98 華虹半導體有限公司 ● 2020年年度報告
釋義
於本年報內,除非文義另有所指,否則下列詞彙具有下文所載涵義。
「股東週年大會」 本公司將於二零二一年五月十三日下午二時正舉行由假座香港九龍麼地道64號九龍 香格里拉大酒店舉行的現場會議以及在線虛擬會議結合而成的混合式股東週年大會;
「董事會」 | 本公司董事會; |
「國家集成電路產業基金」 | 國家集成電路產業投資基金股份有限公司,一家於二零一四年九月二十六日在中國 |
註冊成立的公司。公司股東包括中央財政、集成電路產業聚集區企業、大型國有企 | |
業、部份金融機構及民營企業,公司重點投向半導體晶圓製造業,兼顧芯片設計、 | |
封裝測試、設備及材料等上下游環節; | |
「中國」 | 中華人民共和國,但僅就本年報及作地理參考而言,除文義另有所指,否則,本年 |
報中對「中國」的提述不包括台灣、澳門特別行政區及香港; | |
「本公司」 | 華虹半導體有限公司,一家於二零零五年一月二十一日在香港註冊成立的有限公 |
司,除非文義另有所指,否則包括其所有子公司,或如文義指其成為其現有子公司 | |
的控股公司之前期間,則指其現有子公司; | |
「公司秘書」 | 本公司公司秘書; |
「董事」 | 本公司董事; |
「EPS」 | 每股盈利; |
「執行董事」 | 本公司執行董事; |
「股東特別大會」 | 本公司股東特別大會; |
「Grace Cayman」 | Grace Semiconductor Manufacturing Corporation,一家於一九九九年十月五日 |
在開曼群島註冊成立的獲豁免有限公司,為本公司的全資子公司; | |
「上海宏力」 | 上海宏力半導體製造有限公司,一家於二零零零年十二月二十日在中國註冊成立的 |
公司,為本公司的全資子公司。已經於二零一八年八月三日註銷; |
2020年年度報告 ● 華虹半導體有限公司 99
釋義
「本集團」 | 本公司及我們的子公司,或如文義所指為本公司成為我們現有子公司的控股公司之 |
前期間(或成為本公司的該等聯營公司),則指由該等子公司或其前身公司(視乎情 | |
況而定)所經營的業務; | |
「華虹宏力」 | 上海華虹宏力半導體製造有限公司,一家於二零一三年一月二十四日在中國註冊成 |
立的公司,為本公司的全資子公司; | |
「華虹NEC」 | 上海華虹NEC電子有限公司,一家於一九九七年七月十七日在中國註冊成立的公 |
司,為本公司的全資子公司。已經於二零一八年八月三日註銷; | |
「港元」 | 香港法定貨幣港元; |
「香港」 | 中華人民共和國香港特別行政區; |
「華虹集團」 | 上海華虹(集團)有限公司,一家於一九九六年四月九日在中國註冊成立為上海華 |
虹微電子有限公司的公司,並於一九九八年更名為上海華虹(集團)有限公司,為 | |
本公司控股股東; | |
「華虹置業」 | 上海華虹置業有限公司,一家於二零一一年十月二十八日在中國註冊成立的公司, |
為華虹科技發展的全資子公司; | |
「華虹科技發展」 | 上海華虹科技發展有限公司,一家於二零一零年五月十日在中國註冊成立的公司, |
一家由華虹集團持有50%並與其合併報表及由華虹宏力持有50%的公司,為關連人 | |
士; | |
「華力集成」 | 上海華力集成電路製造有限公司,一家於二零一六年八月八日在中國註冊成立的公 |
司,股東為上海華力微電子有限公司、上海集成電路產業投資基金股份有限公司、 | |
國家集成電路產業投資基金股份有限公司; | |
「華虹無錫」 | 華虹半導體(無錫)有限公司,一家於二零一七年十月十日在中國註冊成立的公 |
司。華虹無錫於註冊成立時由本公司的全資子公司華虹宏力擁有100%的權益。於 | |
合營協議及增資協議項下進行的交易完成後繼續由本集團持有51.0%的權益,其中 | |
22.2%由本公司直接持有及28.8%由本公司透過華虹宏力間接持有,而國家集成電路 | |
產業基金及無錫錫虹聯芯分別持有華虹無錫29.0%權益和20.0%權益; | |
「獨立非執行董事」 | 本公司獨立非執行董事; |
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Hua Hong Semiconductor Ltd. published this content on 13 April 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 13 April 2021 04:04:00 UTC.