1. 2021 Operating Results
During 2021, in addition to the continuing impact of COVID-19, the semiconductor industry experienced unprecedented supply shortages. These issues have put many markets and companies to the test. Alongside these black swan events, the world we live in is experiencing wave after wave of digital transformation. The demand for all types of connectivity products is rising rapidly, both for new products and because of the need to upgrade and improve existing products to meet the expectations and needs of customers.
The importance of semiconductor products to people's lives has become particularly obvious in the face of current supply shortages. In spite of the challenges created by the imbalance of supply and demand, Realtek achieved a new milestone in 2021, delivering another year of revenue growth and breaking the NT$100 billion mark. This has been attained through close collaboration with upstream suppliers and downstream customers, as well as the tremendous efforts provided by all Realtek employees.
Full-year 2021 consolidated revenue reached NT$105.5 billion, an increase of 35.7% from the previous year. Gross profit was NT$53.2 billion, an increase of 60.0% from the previous year; and net profit after tax was NT$16.8 billion, representing an increase of 91.7% compared to the previous year, with earnings per share of NT$33.00. According to IC Insights, worldwide semiconductor industry revenue in 2021 was US$613.9 billion, an increase of 25% compared to 2020, of which IC sales grew by 26%. Realtek once again marched forward at a speed outpacing the overall industry.
As well as economic performance, the industry continues to recognize Realtek's excellence in technological innovation and execution. According to the Taiwan Intellectual Property Office, Realtek submitted a new high of 442 patent applications in 2021, ranking fourth place among all domestic enterprises and the highest among all fabless IC design houses in Taiwan. At COMPUTEX 2021, Realtek received a Best Choice Golden Award for our Automotive Ethernet Switch (RTL9075AA/RTL9072AAD), and a Best Choice Category Award for our low-power AI IP camera SoC (RTS3916N). Additionally, the company's new generation gaming network total solution comprising 2.5GbE Gaming NIC (RTL8125BG) with its highly-praised ‘Dragon Feature’, Wi-Fi 6 (RTL8852AE), and 2.5G Intelligent Switch (RTL9313 + RTL8221B) was a 2021 COMPUTEX d&i awards winner.
Realtek puts corporate sustainability at its core, and is committed to meeting the expectations of various stakeholders. The company pays constant attention to corporate social responsibility-related initiatives, defines important indices, integrates internal resources, and formulates short, medium, and long-term goals. In 2021, material subjects included Corporate Governance and Law Compliance, Information Security, Economic Performance, Innovation and R&D, Talent Appointment and Development, Supplier Sustainability Management, and Climate Change Response. Responding to the continuing growth of the company and our responsibility to the environment, our two new offices (currently under construction) are being built with the goal of achieving the US Green Building Council's Leading Energy and Environmental Design (LEED) certification, providing employees with a high-efficiency, environmentally-friendly workplace. In order to increase our utilization of green energy, Realtek has also started to install solar panels on the roof of each building, and plans to purchase more renewable green energy over the years to come. In order to reduce the carbon footprint of our products, Realtek leverages its core technical capabilities to continuously launch products with higher performance and lower power consumption, while aiming at net zero carbon emissions as a long-term goal.
During the pandemic, Realtek comprehensively upgraded the company's IT infrastructure and information security to support the need for employees to work remotely in order to maintain the normal operation of the company, and to ensure the health and safety of employees. Leveraging our technical prowess and doing our share to fight against the pandemic, Realtek actively cooperated with the National Taiwan University Hospital to provide intelligent medical aid equipment required for isolation wards. Additionally, the ‘Free Hepatitis and Liver Cancer Screening’ joint project sponsored by Realtek, Taipei Longshan Temple, the Liver Disease Prevention and Treatment Research Foundation, and Yuan High-Tech was recognized by Enterprise Asia with the ‘Asia Responsible Enterprise Award (AREA) for Health Promotion’ in 2021.
2. 2022 Business Plan
The impact of COVID-19, and the semiconductor industry’s supply and demand issues, continue to linger. In spite of this, Realtek continues to vigorously pursue its commitment to using innovation to provide more competitive products to the market, while in turn delivering a better overall user experience to its customers. In 2022, Realtek will launch a series of new products to strengthen its product portfolio in key markets in order to maintain growth momentum and leadership in technology.
In relation to wireless network communication, over the course of 2021, Wi-Fi 6 has gradually replaced Wi-Fi 5 in both PC and router markets, and is expected to become mainstream during 2022. After the successful production of the first-generation Wi-Fi 6 solutions for the mass market in 2021, Realtek's Wi-Fi 6E solution has been designed into several customers' products with the gradual opening of the 6 GHz unlicensed band around the world. In 2022, Realtek will focus on the optimization and promotion of Wi-Fi 6 and 6E, while simultaneously accelerating the development of our next generation Wi-Fi 7. Realtek continues to cooperate with IoT market standard leaders to provide a development platform for first-line customers so that they can launch new products when the official version of the standard is released in 2023. Realtek's multipronged strategy on Bluetooth (BT) has proven to be very successful. The new generation of BT SoC for TWS (True Wireless Stereo) with Active Noise Cancellation (ANC), and BT5.2 BLE Audio technology will further enable a wide range of BT audio applications. Realtek BT NIC and BLE SoCs are the prime choices for major global brands in the BT audio remote controller and wearable markets. Looking to the future, in addition to focusing our attention on personal entertainment and smart homes, we will also be targeting industrial, medical, and automotive markets to provide cross-domain and diverse applications.
Over the past two years, the specifications for Ethernet in both the PC and Network markets have gradually moved up from 1GbE to 2.5GbE. Realtek 2.5GbE Ethernet controller chips have been widely adopted in gaming motherboards, mid-to-high-end PCs, switches, and network expansion accessories. In 2022, we will launch third generation 2.5GbE products and higher-speed 5GbE Ethernet solutions to meet the needs of the highly digitalized post-pandemic market. The demand for network bandwidth has rapidly increased with the popularization of Wi-Fi 6, and the speed of older mainstream 1GbE switches is no longer sufficient. A boom in 2.5GbE switches can be expected, and in 2022, Realtek expects to launch an easy-to-operate 8-port 2.5GbE switch with low-power consumption.
With the trend towards enterprise networks driven by the infrastructure upgrade of telecom operators in various countries, Realtek will launch a high-end, multi-port, multi-GbE managed switch product to provide a complete and competitive solution to the market. In broadband networks, users' demand for bandwidth is increasing, and global operators are accelerating the deployment and upgrade of optical fiber networks. Realtek has a complete portfolio of PON products to meet various needs, and that can compete in telco tender projects in many countries. Realtek is a major supplier of automotive Ethernet, and Automotive Ethernet has become the backbone of in-vehicle networks. With ever more stringent requirements for speed, interfaces, safety, and security, Realtek will strive to meet these needs and continue to provide innovative high-quality products, thereby increasing both revenue, and market share.
For PC peripheral products, as the pandemic eased up in the second half of 2021 the commercial segment replaced the consumer segment and became the main driver for the PC market. In 2022, Realtek will build on existing voice recognition, voice wake-up, and noise reduction technologies, and add deep learning to create a superb user experience in voice applications, rendering Realtek the best voice and audio solution for new generation PC products. In image signal processing, this year Realtek will launch a new generation of ISP solutions supporting 4K high picture quality with more user convenient features and superior clarity. For high-speed interface products, the Realtek Card Reader, Hub, USB Type-C, and high-speed Translators lead the industry in both portfolio breadth and compatibility, and are highly recognized and employed by customers.
With regard to multimedia products, the TV SoC supply cycle was disrupted due to both the epidemic and supply shortages, however, we will continue to do our best to meet our customer order demands. Realtek will also develop a new generation of TV SoC that supports 8K (7680x4320), and offers smart TV functions to provide users with the best experience in both audio and video. Responding to the trend towards higher resolution and multimedia network streaming, Realtek has developed a new generation of set-top-box products integrating HDR, 3D sound, and the latest encoding technologies. These software and hardware reference designs, complete with our in-house multimedia and network total solutions, help customers develop high-performance solutions that provide great value to the market. Regarding LCD monitors, Realtek continues to lead the industry in delivering various high-speed interface specifications, supporting the technologies that give rise to high resolution, high dynamic range, and high frame rate, providing customers with multiple product choices that more closely meet their requirements.
3. Strategy for Future Development and Impact by Competitive, Regulatory, and Macro Conditions
The world remains challenged by the semiconductor industry’s supply/demand imbalance and geopolitical conflicts. Nevertheless, there is still plenty of room for growth in the semiconductor market with the advancement and upgrade of 5G Communications, the Internet, and Artificial Intelligence. Realtek will continue to enhance its core competency in technology, make good use of diverse silicon IPs to create product differentiation, and establish mutual trust and lasting partnerships with customers. While creating greater economic performance, we are committed to strengthening corporate governance, corporate sustainability, and creating long-term increasing value for shareholders.
Realtek wishes to thank all shareholders for your continued support!
Chairman Chiu, Sun-Chien
President Yen, Kuang-Yu
Controller Chang, Jr-Neng