(4)Research and development status:

The Company’s product development mainly focuses on quartz components and micro-electromechanical sensing components. Quartz components include quartz crystals, general quartz oscillators, temperature compensated quartz oscillators, piezoelectric controlled quartz oscillators and differential output quartz crystal oscillators. The size of its miniaturized products is reduced from 2.0mm x 1.6mm, 1.6mm x 1.2mm to 1.2mm x 1.0mm; the accuracy can reach a frequency change of ±10~±50ppm under the operating temperature of -40~+150℃℃, meeting the needs of various fields such as consumer electronics products, network communications, and automotive applications. In terms of temperature-compensated quartz oscillators, its accuracy can reach 0.5ppm. Micro-electromechanical sensing components focus on the layout of product structure design and packaging technology.

At the same time, in response to changes in today's social activity patterns and the development of 5G networks, the application of communication technology is rapidly entering home appliances, vehicles, industry and other related fields. In view of this, the Company has not only strengthened the depth and breadth of its existing core products, but also introduced semiconductor material thinning processing technology and packaging processes, and applied them to ultra-high frequency chip manufacturing processes to improve product precision.

1. R&D achievements in 2023:

In terms of quartz components, the Company has currently completed the development of high-frequency quartz crystal 96Mhz and 80MHz 2.0mm×1.6mm, 1.2mm×1.0mm 80MHz products, among which the 2.0mm×1.6mm products have begun small-scale production. Quartz crystal oscillators and temperature-compensated quartz oscillators respectively completed product series such as 2.0mm x 1.6mm, 2.5mm x 2.0mm, 3.2mm x 2.5 and 2.0mm x 1.6mm wide-temperature automotive applications. In 2023, the production and shipment of sensing components accounted for approximately 7% of the total annual revenue.

2. R&D projects:

A. Miniaturization and high precision

Electronic products continue to develop vigorously, and product functions and application ranges are also increasing day by day. In response to this trend, products that are thin, light, power-saving, and have integrated functions have become the features that manufacturers compete for. In order to meet the needs of the end market, products with "miniaturization" and "low energy consumption" characteristics have become an important research topic for quartz component manufacturers, and it is also the direction of the Company's future efforts. The size of the Company's products can be reduced to 1.2mm×1.0mm, and we will continue to develop smaller specifications in the future. In particular, photo-Etching and miniaturization packaging technologies are newly introduced to the semiconductor industry to optimize the accuracy and stability of miniaturized and high-frequency products.

B. High frequency and advanced oscillators

At present, the frequency range of quartz chip is between 1~50 MHZ and the production technology is at the mature stage, while the frequency of mass production of the Company is between 1~212.5MHZ. The technology for producing high-frequency quartz components is mostly processed by frequency multiplication, but the jitter phenomenon is prone to occur, resulting in signal loss during transmission. In order to solve the above problems, the Company conducts research and development of advanced high-frequency chips with basic frequency on the basis of general size and miniaturized size, including small-sized, thin and higher-frequency chip production processes. In addition to horizontally expanding product lines at various frequency points, it is also developing high-order oscillation components with LVDS-PECL/HCSL output methods.

C. High precision development

The downstream terminal applications of quartz components were originally based on general household appliances, but have now shifted to AI artificial intelligence, information, network communications, and automotive products. As a result, the requirements for frequency precision and stability in various environments have increased. At present, the Company can mass-produce quartz components with a frequency deviation of ±0.5~±10ppm. It expects to continue to develop and improve product precision in the future.

1. 2023 operation plan summary

(1)Operation principles:

1. Actively develop the market, deepen service quality, and cultivate customer relationships.
2. Improve R&D technology, develop new products, and increase competitive advantage
3. Abide by the quality policy, introduce green products, and win the trust of customers.
4. Implement corporate governance, fulfill social responsibilities, and establish sustainable development.

(2)Expected sales volume:

(3)Key production and sale policies:

1. Build up intelligent production lines and strengthen product competitiveness, in order to improve the Company’s profitability.
2. Implementing supply chain management, improving quality requirements, and introducing green products in order to obtain customers’ trusts.
3. To develop international customers actively, to win orders extensively, and to deepen service quality, in order to increase market share.
4. Strengthen internal management and decision-making in order to quickly respond to market demand and changes.

1. The future development strategies of the Company, and the impacts of external competitive environment, regulatory environment and the overall business environment.

Looking forward to 2024, in response to the emergence of demand for information electronics, AI servers and automotive applications, quartz components are expected to grow in the new year compared with the previous year. The Company will continue to observe changes in the AI field, 5G communications, automotive electronics and Internet of Things (IoT) application markets, properly adjust its business strategies, and at the same time strengthen cost control and resource allocation to avoid unnecessary operational waste and create operational growth and shareholder interests.

I firmly believe that with the efforts of all colleagues and the support of all shareholders, Harmony Electronics will face various challenges with a steady business strategy in the new year. In addition, the Company will continue to promote environmental protection, social responsibility and corporate governance issues in order to become a sustainable development enterprise.

At last, best wishes for all of you!