Goertek: This year will fully benefit from the accelerated vertical integration of the TWS headset market

At present, the TWS headset market has arrived. As the main supplier of Android TWS, Goertek maintains a leading position among Android customers and is expected to benefit from the popularity of Android TWS headsets and the dividends brought by new product upgrades in the future. With the rapid increase in terminal product sales and the continuous improvement of its own automation level, it will continue to be the company's next major performance booster.

In addition to the rapid development of TWS headphones, VR/AR is expected to become the largest application in the 5G era. As one of the important finished product sectors, Goertek has taken the lead in the ARVR field, with the ability to mass-produce optical waveguides, master DOE+, Fresnel, free-form surfaces and other design capabilities, occupying an advantageous position in the industry. In addition, the company is actively expanding production and plans to add 3.5 million sets of VR/AR products and 5 million precision optical lenses and modules through convertible bonds. The expansion of production capacity can bring new performance growth points to the company.

Jiwei.com: What is the customer distribution and gross profit margin of the company in terms of acoustic components? Are there any new layouts and plans for the future?

Goertek: In terms of acoustic complete machines, Goertek, as the main supplier of Android TWS, will continue to leverage its advantages in acoustics, seize the industry's rapid growth period, and continue to maintain its leading position in the field of TWS headphones. With the gradual commissioning of the early planned binaural true wireless smart headset project and the Qingdao R&D center, it is expected to bring a new round of high growth to Goertek. In the acoustic component part, the current competitive landscape of acoustic components for major international clients has stabilized, while there is still room for improvement on the Android side. As a leading supplier, Goertek's sector is a cash flow business, and it is expected that future revenue will be stable at around 10 billion.

Jiwei.com: According to the announcement, the company's performance forecast for the first quarter of this year is showing an upward trend. Which type of products are mainly responsible for this? At present, how is the company's product orders in April and May? Can you make a rough forecast of the company's Q2 performance this year?

Goertek: Compared with the same period last year, the company's first-quarter performance growth was mainly due to the increase in sales revenue of smart wireless headsets and improved profitability. Affected by the epidemic, the consumer electronics field has caused a certain degree of impact. The shipment forecast of TWS headsets in 2020 has been adjusted back, but with the improvement of technology maturity and user acceptance, it will continue to maintain rapid growth in the future. As a major supplier in the field of TWS headsets, the company has fully benefited from the popularity of Android TWS headsets this year. The yield and profit margin of its newly added production lines are climbing, contributing greatly to the business.

In the 5G era, the ARVR market has huge potential, and the company is actively developing the ARVR market. With the launch of Huawei VR glasses and the release of new products for VR customers, VR is expected to resume growth in 2020. Goertek has core optical components, systems and leading ODM capabilities in ARVR, and has comprehensively developed the virtual reality industry chain, which is expected to bring new growth momentum.

Jiwei.com: How does the company view the development trend of TWS headphones in the next two years? Are there any plans to expand production in the future?

Goertek: The hole-free trend of smartphones is driving the development of TWS earphones, making them the smart hardware product with the greatest market potential. Currently, TWS earphones are in a period of rapid growth, with high unit prices, high industry profit margins, large room for technological upgrades, and good extensibility of TWS earphone technology, which is expected to drive the development of peripheral products such as smart homes and automotive electronics, and have broad prospects.

Goertek entered the acoustic field in 2001 and has been developing smart headset related products with international customers since 2013. Thanks to its long-term accumulation in the fields of acoustic components, acoustic systems, precision manufacturing and intelligent manufacturing, Goertek can provide customers with headphone driver units, acoustic design, ID structure design, hardware design, software algorithms, and acoustic simulation. It now has thousands of patents, forming a strong strength in R&D and manufacturing, and has the ability to rapidly advance and develop in the field of smart headsets. It has now become a major supplier in the field of TWS headsets, so the company will seize the rapid growth period of the industry and continue to develop in the field of TWS headsets.

Actively respond to the impact of the epidemic and plan for the 5G "post-mobile era" in all directions

Jiwei.com: What is the production capacity and shipment of the company's smart wearable products? With the advent of the 5G era, how do you view the future development of this industry? What new layouts and plans will the company have in this business?

Goertek: The company has been developing smart wearable products since 2013 and has made great progress, becoming one of the company's important smart device businesses. In 2016, the "Smart Factory for Wearable Devices" project applied by Goertek was approved as a pilot demonstration of smart manufacturing by the Ministry of Industry and Information Technology. In 2017, the company's "Smart Factory Construction for Reconfigurable and Microservice Wearable Products" project was approved as a new model application project for smart manufacturing by the Ministry of Industry and Information Technology. At present, the company's main customers include Xiaomi and other well-known brands in the field of smart wearable products.

With the advent of the 5G era, consumer electronics are about to enter the "post-mobile era", with smart hardware combinations such as AR/VR glasses, TWS headphones, watches/bracelets, etc. gradually replacing some functions of mobile phones. Due to the impact of the epidemic, the growth rate of the smart wearable market has slowed down this year, but it is expected to rebound in 2021. The company will still regard it as one of its important smart machine businesses, continue to invest and actively explore the market.

Jiwei.com: What progress has the company made in strategically deploying MEMS sensors and SIP packaging business? What is the current customer distribution and shipment situation?

Goertek: With the advent of the post-mobile era, smart hardware products have increasingly higher requirements for system miniaturization and functional integration. Based on its own vertical integration capabilities and years of experience in MEMS technology, Goertek's SiP business focuses on the product development concept of "device systematization and system deviceization", and is committed to providing smart terminals (smart bracelets/watches, TWS headphones, VR/AR head displays, etc.) with smaller size, higher integration, low cost, and high performance one-stop overall SiP solutions. It has the overall service capabilities from system solution software and hardware development, packaging design and simulation to module testing.

At present, Goertek's SiP combination sensor has been put into mass production in 2017, serving many well-known brand manufacturers in the field of smart wearables. In addition, Goertek's smart sensor manufacturing project in Rongcheng, Shandong and its advanced packaging and testing center in Qingdao have been gradually put into use, which will provide important impetus for business growth and development.

Jiwei.com: How is the current progress of the "South China Base" construction plan launched by the company in November last year? Will the epidemic delay the completion and commissioning of this project? What is the actual planning and production line layout of the company's South China Base? 

Goertek: As the epidemic in my country eases, Goertek's smart manufacturing project in South China has resumed work in accordance with the requirements of the local government. Currently, the construction of the base is normal and has not caused any adverse effects.

The project mainly plans to build industry-leading experimental testing, automated production, intelligent warehousing and life supporting facilities, focusing on providing world-class customers with overall R&D and production solutions for products such as virtual reality, smart wearables, smart headphones, and smart speakers. It will then become Goertek's South China base. The project is scheduled to be put into use in 2021.

Jiwei.com: How has the company been affected by the epidemic this year? What is the current order and shipment status of various products?

Goertek: The epidemic has affected the macro-economy, business operations, and residents' lives, and has also had a certain degree of impact on the consumer electronics field in which the company is located. However, during the epidemic, industries such as online office, home fitness, and online games have developed rapidly, creating market opportunities for the company's smart wireless headphones, smart wearable products, home electronic game console accessories and other products.

Although in the short term, the epidemic will not have a significant adverse impact on the company's operating performance and development prospects, if the development of the epidemic exceeds expectations and shows a long-term trend, it may have a further adverse impact on the company's operating performance.

Jiwei.com: Overall, how does the company view the development trend of the global consumer electronics market this year? Under the influence of the epidemic, what measures will the company take in various aspects to reduce the uncertainty brought about by the performance?