1. 2022 Operating Results
After the semiconductor industry experienced a supply shortage in 2021, the end market demand weakened. In 2022 the supply chain faced inventory problems due to geopolitics, epidemics, inflation, and other major environmental factors. According to Gartner's estimate, global semiconductor industry revenue in 2022 was US$601.7 billion, an increase of a mere 1.1% compared to 2021. Analog (19% year-over-year increase) and discrete (15% year-over-year increase) components were the main growth areas, neither of which were Realtek product areas.
Despite the many challenges, Realtek, working closely with upstream suppliers and downstream customers, took it upon ourselves, with the concerted effort of all employees, to deliver an annual revenue growth. Realtek Group’s annual consolidated revenue in 2022 was NT$111.79 billion, an increase of 6.0% from the previous year; gross operating profit was NT$54.64 billion, up 2.7% from the previous year; net profit after tax was NT$16.20 billion , a drop of 3.8% from the previous year, with earnings per share of NT$31.62.
In addition to the solid operating results, Realtek has been consistently recognized in the industry for its technological innovation and execution. According to Taiwan Intellectual Property Office's 2022 Statistical Rankings for Patent Applications and Grants, Realtek ranked 7th with 332 invention applications. Our patent portfolio has also been recognized in international assessments, and Realtek was selected as one of the ‘Top 100 Global Innovators’ by Clarivate for the first time in 2022. Through continuous technological innovation, Realtek products frequently stand out in major competitions in the industry. At 2022 COMPUTEX Taipei, Realtek AI Super Resolution Fidelity Recovery IC (RTD2892NND) won the 'Golden Award' and 'Best Choice of the Year Award'; our Bluetooth Dual Mode AUDIO Watch Solution (RTL8763E) won the 'IC and Component Best Choice' Category Award. The 2.5 Gigabit Ethernet controller won the 31st Taiwan Excellence Award. Realtek's first Edge AI USB Camera Controller (RTS5863) was awarded a 2022 Innovation Product Award from Hsinchu Science Park Administration. These awards reflect Realtek's efforts and achievements in continuously breaking through technical bottlenecks and optimizing product design.
Sustainable development of the enterprise is the core belief behind Realtek's continuous improvement, with the goal of becoming a sustainable enterprise that meets the expectations of all stakeholders. We continue to pay attention to international initiatives related to corporate sustainability, define material issues, formulate short-, mid-, and long-term goals, and push through various sustainable projects by optimizing management mechanisms and effective performance evaluation. Material issues in 2022 include corporate governance and compliance, environmental sustainability and climate change response, information security, economic performance, innovative R&D and product due diligence, customer relationship management, talent attraction and development, and supplier sustainability management. In order to mitigate the climate change crisis caused by the greenhouse effect, and actively respond to the international Net Zero Initiative, Realtek has committed to achieving the major goal of net zero carbon emissions by 2050. It plans to meet the goal by reducing total carbon emissions through various energysaving and carbon-reduction measures such as continuous development of low-carbon products, improvement of equipment energy efficiency, construction and certification of office buildings in accordance with green building standards, increased use of renewable energy, and implementation of MBO (Management by Objective) for supply chain carbon reduction.
2. 2023 Business Plan
Although the semiconductor industry is facing short-term headwinds and uncertainties, Realtek continues to optimize its product portfolio to meet the needs of various end markets, provide customers with more competitive products, and achieve the long-term goal of uninterrupted growth and continuous profitability. Looking forward into 2023, each main Business Group of Communications Network, Connected Media, Computer Peripheral, Smart Interconnect and Multimedia will respectively launch a series of new products to drive technical specification upgrades in the mainstream markets, and expand niche market applications.
For wireless communication, Wi-Fi 6 controllers have replaced Wi-Fi 5 in the personal computer and router markets, and have become the mainstream specification. In 2023, the Wi-Fi 6 specification is expected to penetrate into new end markets, such as AR/VR, printers, and consumer electronics, thereby further boosting the revenue contribution of Wi-Fi 6 and Wi-Fi 6E. Meanwhile, Wi-Fi 7 is becoming a highly contested new-generation specification for Wi-Fi applications. Realtek plans to launch the first generation Wi-Fi 7 products in 2023, with PCs as the first target market for 2024 mass production by key OEM customers.
With respect to IoT applications, Realtek continues to actively cooperate with IoT-related organizations and standard-setting companies to release the first generation of products in step with major customers. Additional new products will be released in 2023 to facilitate a complete smart home environment. Regarding Bluetooth chips, Realtek's new-generation Bluetooth 5.2 BLE Audio solutions have successfully entered the low-latency gaming headset/smartwatch with Bluetooth calling function markets, thereby gradually expanding its applications in the Bluetooth audio market. The BTNIC and BLE SoC Bluetooth series products also continue to develop the remote controls and wearable market while actively expanding new application markets, aiming at Electronic Shelf Labels (ESL), industrial applications, medical, and automotive markets to provide cross-field and diverse solutions for various customers.
In Ethernet, Realtek's 2.5GbE products have become the standard specification for flagship motherboards. They have also expanded to mid-to-high-end PC models, and have penetrated into the accessory market for switches and network interface extensions. To meet the highly digitalized market demand in the post-pandemic era, in 2023 Realtek will launch a higher-speed 5GbE Ethernet solution to provide more flexible choices for customers in different market segments.
For Ethernet switches, Realtek's Layer 3 managed switch products benefited from the substantial increase in demand for network communication equipment, and have been adopted by key customers. At the same time, PSE (Power Sourcing Equipment) products have also successfully entered the supply chain of major customers. With the gradual increase in Wi-Fi 6 penetration and the infrastructure upgrade of telecom operators in various countries in the past few years, Realtek's 5-port Gb Ethernet switch and PON product lines have achieved success. It is expected that 2.5 Gb Ethernet switches will gradually replace existing Gb Ethernet switches in 2023. The future goal is to strengthen the depth and breadth of the product portfolio to provide complete and competitive solutions in all areas of the market.
Automotive Ethernet has become the backbone of the automotive in-vehicle network, and Realtek has become one of the primary suppliers of automotive Ethernet. In order to support the needs of future intelligent networked vehicles, Realtek is investing resources to develop a new generation of physical layer chips that support the new 2.5GBASE-T1 standard, and to incorporating data security protection and support for high bandwidth interfaces into our product planning. It is expected that business revenue and market share will grow steadily.
As for Computer Peripheral and Smart Interconnect products, after the supply problems of relevant components gradually subsided in the first half of 2022, high inventory became a major challenge in the second half of the year due to a sharp fall in end market demand under an adverse overall environment. In the face of a market downturn, Realtek continued to improve and develop new generations of products in anticipation of a market rebound. Building on the AI Audio noise cancellation algorithm that has been well received by the market over the past two years, Realtek's new generation of products comprehensively improve the user experience of PCs, conference devices, and live broadcast devices while extending the application field from meetings to content creators. At the same time, in response to possible future PC audio interface specification changes, Realtek continues to actively participate in specification definition, and plans a complete product portfolio so that customers can switch specifications smoothly.
In terms of image signal processing ICs, Realtek, driven by the trend to high resolution, high image quality, and intelligence, has launched the world's first and only USB camera solution that integrates edge computing, and has strategically cooperated with major PC makers to deliver an HPD (Human Presence Detection) solution that supports 5MP with an expected launch date in the first half of 2023. As PC applications are concerned more and more about low power consumption and security, Realtek developed a highly integrated, low power embedded system controller chip with a high-end MCU and more memory than competitors, using an advanced manufacturing process with a built-in full hardware encryption engine. It meets the need for power saving and security at the same time. With the increasing popularity of the USB Type-C specification, this solution can provide customers with more comprehensive and better power control and data transmission solutions.
In terms of multimedia products, to meet the high-quality requirements of high-end 4K/8K TVs, Realtek has developed an AI super-resolution fidelity recovery single chip, which uses a neural network to identify image scenes and objects, dynamically and instantly removes innate noise in the picture, suppresses distortion, and enhances original low-resolution images to 4K/8K high-resolution images. This innovative technology won the 2022 COMPUTEX Taipei 'Golden Award' and ‘Best Choice of the Year Award'. Following the trend to network streaming media, and responding to changes in consumers' viewing habits that demand higher content quality, Realtek has developed a new generation of set-top box solutions that integrate High Dynamic Range, 3D audio, and a new generation of coding technology. These solutions, complete with a cost-competitive, low-power software-hardware reference design, can assist customers in developing high-performance set-top boxes.
In the LCD monitor field, Realtek continues to lead the industry in delivering various high-speed interface specifications, enabling high resolution, high dynamic range, high frame rate, wide color gamut, and true color reproduction, thereby providing customers with the widest product choice.
3. Strategy for Future Development and Impact by Competitive, Regulatory, and Macro Conditions
Semiconductor markets in the short term are facing challenges such as end market demand and inventory adjustment, impacted by geopolitics, pandemics, and inflation. Nevertheless, with the continuing advancement in Internet, artificial intelligence, and automotive applications, there are ample opportunities and room for growth in the medium and long term. Realtek actively practices sustainable corporate development, strengthens corporate governance, enhances product core technology competitiveness, builds a sustainable supply chain, and deepens mutual trust and partnership with customers to grow with them hand in hand, thereby continuously heightening shareholder value.
We want to thank all shareholders for your ceaseless care and support. We also wish you health and success in the future.
Chairman Chiu, Sun-Chien
President Yen, Kuang-Yu
Controller Chang, Jr-Neng