Company code: 688347 Company abbreviation: Huahong company

Hua Hong Semiconductor Co., Ltd

Summary of the 2024 Annual Report

Section 1 Important Notice

1. The summary of this annual report is from the full text of the annual report, in order to fully understand the company's operating results, financial status and future development plan, investors should go to the http://www.sse.com.cn website to read the full text of the annual report carefully.

2. Major risk warning

In 2024, the company's operating income decreased by 11.36% from the same period of the previous year, and the net profit attributable to owners of the parent company decreased by 80.34%. The Company disclosed "4. Risk Factors" in "Section 4 Management Discussion and Analysis" and "(2) Risk of Significant Decline in Performance or Loss". For other risks of the Company, please refer to "IV. Risk Factors" of "Section 4 Management Discussion and Analysis" of this report.

3. The Board of Directors, directors and senior management of the Company guarantee the authenticity, accuracy and completeness of the contents of the annual report, and that there are no false records, misleading statements or material omissions, and bear individual and joint legal liabilities.

4. All directors of the company attend the meeting of the board of directors.

5. Ernst & Young Huaming Certified Public Accountants (Special General Partnership) issued a standard unqualified audit report for the company.

6. The company is not profitable and has not yet achieved profitability at the time of listing

□ Yes √ No

7. The profit distribution plan or the plan for the conversion of provident fund into share capital for the reporting period approved by the board of directors

After discussion and decision by the board of directors of the company, the company's profit distribution plan for 2024 is: no cash dividends, no bonus shares, no accumulation of share capital, and the remaining undistributed profits will be rolled over to the next year.

8. Whether there are special arrangements for corporate governance and other important matters

√ Applicable □ Not applicable

Special Arrangements for Corporate Governance:

√ the Company is a red-chip company

Section 2 Basic information of the company

1. Company profile

1.1 Company Shares

√ Applicable □ Not applicable

Company stock profile

Stock Type Stock Listed Exchange Stock Abbreviation Stock Code Stock Abbreviation Before the change

and plates

A-shares, SSE STAR Market, Huahong Company, 688347 Not applicable

Hong Kong Stocks Main Board of Hong Kong Stock Exchange Hua Hong Semiconductor 01347 Not applicable

1.2 Brief description of the Company's Depositary Receipts

□ Applicable √ Not applicable

1.3 Contacts and Contact Details

Secretary of the Board of Directors and Representative of Securities Affairs

Name: DanielYu-Cheng Wang(王鼎) Qian Lei

Address: 288 Halle Road, Pudong New Area, Shanghai, China 288 Halley Road, Pudong New Area, Shanghai, China

Tel: 86-21-38829909 86-21-50809908

Fax N/A N/A

E-mail IR@hhgrace.com IR@hhgrace.com

2. Brief introduction of the company's main business during the reporting period

2.1 Main business, main products or services

Hua Hong Semiconductor is the world's leading wafer foundry with characteristic processes, and it is also the wafer foundry with the most comprehensive coverage of characteristic process platforms in the industry. Based on the strategic goal of advanced "characteristic IC+ power devices", the company provides wafer foundry and supporting services including embedded/independent non-volatile memory, power devices, analog and power management, logic and RF and other diversified characteristic process platforms based on the expansion of characteristic process technology.

2.2 Main business model

1. Profit model

The company is mainly engaged in customizable semiconductor wafer foundry services based on a variety of process nodes and characteristic process platforms of different technologies to achieve revenue and profit.

2. R&D mode

The company's R&D strategy mainly relies on independent R&D to carry out technological innovation and upgrading of various process platforms. In order to standardize and strengthen the management of the project operation process, the company has established a relatively complete R&D system and project management process, clarified the responsibilities and objectives of the project team members, standardized the whole process of project establishment, R&D and project completion, and carried out phased and systematic management through the new project application process and product quality advance planning procedures.

3. Procurement mode

The company adopts a centralized procurement system, and the procurement department purchases raw materials, equipment and technical services required for semiconductor wafer foundry and supporting services from qualified suppliers. In order to improve production efficiency, reduce inventory hoarding and strengthen cost control, the company has established a sound procurement management system and procedures:

Inventory requisitions are made by the material planning department according to the production plan, inventory quantity and delivery cycle; The non-inventory requisition demand shall be put forward by the requisition department in the form of a requisition according to the actual demand within the budget limit.

After receiving the requisition demand, the procurement department checks the accuracy of the requisition, confirms that it is correct, selects the supplier according to the procurement demand, and signs the purchase order with the supplier through the operating procedures such as inquiry, quotation, negotiation or bidding, and is responsible for the delivery follow-up. The logistics department is responsible for the collection and storage of incoming materials, and the quality assurance department is responsible for the quality inspection of incoming materials.

For the procurement of engineering, equipment and services, the procurement personnel shall handle the requisition operation with the completion notice signed by the requisitioning department and/or the acceptance approval document; For other project procurement, the purchaser will open a requisition form in the requisition system with the system receipt confirmation. After the requisition form is approved, the purchaser will hand over the invoice to the finance department for payment operation.

4. Production mode

The company plans production capacity according to the sales forecast and determines the main production plan (i.e., the advance production plan, and plans the product production plan according to the market forecast and production capacity), and puts it into production according to the customer's order demand, as follows:

The company's products mainly go through four stages from production planning to finished product delivery, which are production planning stage, production preparation stage, production process management stage and product warehousing stage.

(1) Production planning stage

In the production planning stage, the sales department provides the future business forecast obtained from the customer and the business plan reached with the customer, and the planning department formulates the master production plan according to the business forecast and capacity planning, according to customer demand, customer orders, capacity and process technology readiness.

(2) Production preparation stage

In the production preparation stage, the material planning department formulates the raw material plan according to the master production plan and cooperates with the purchasing department to prepare the raw materials in a timely manner. The production planning department formulates the production plan according to the master production plan and the raw material plan.

(3) Production process management stage

In the production process management stage, the production department arranges and manages production according to the main production plan and production plan, the production planning department supervises the production cycle, production progress, output and other indicators, and the quality control department is responsible for the quality control of products.

(4) Product warehousing stage

In the product warehousing stage, the products that have completed the entire production process are put into storage after passing the inspection.

5. Sales model

The company adopts the direct sales model to carry out sales business, communicates directly with customers and forms solutions that meet customer needs, and finally reaches orders with customers.

2.3 The situation of the industry

(1). The development stage, basic characteristics and main technical thresholds of the industry

From a macro perspective, the global economy is characterized by "weak recovery and high differentiation", and the energy crisis caused by local geopolitical conflicts and the impact of currency fluctuations and other factors have led to insufficient global consumption momentum, with global GDP growth of about 3.2% in 2024. However, as inflationary pressures ease, central banks cut interest rates and implement loose monetary policies, the economy began to pick up.

In the past few quarters, there has been an inventory backlog of integrated circuit products, especially overseas automotive chips are still in the stage of inventory destocking, and the overall chips

The market remains challenging. According to IBS statistics for February 2025, the global semiconductor market sales in 2024 will be about $622 billion.

This represents a year-over-year increase of 22.4%.

The wafer foundry industry originates from the specialized division of labor in the semiconductor industry chain, and wafer foundry enterprises do not cover the chip design process, but are specifically responsible for wafer manufacturing and provide wafer foundry services for chip product companies. The wafer foundry industry is a technology, capital, and talent-intensive industry, which requires a large amount of capital expenditure and talent investment, and has high barriers to entry.

The wafer foundry industry in Chinese mainland started late, but with the support of national policies, with the development of the domestic economy and the improvement of science and technology, as well as the expansion of the terminal application market, the demand for wafer foundry services by domestic chip design companies is increasing, and the wafer foundry industry in Chinese mainland has achieved rapid development.

With the continuous emergence of new requirements in downstream application scenarios, the variety of semiconductor products continues to increase. In order to meet the market's demand for differentiated product functions, performance and other characteristics, IDM manufacturers and wafer foundries and other enterprises involved in the wafer manufacturing process continue to develop and innovate wafer manufacturing process technology, and evolve to form a differentiated manufacturing process. The wafer manufacturing process can be roughly divided into advanced logic process and characteristic process.

Unlike the advanced logic process, which continuously pursues transistor shrinkage along Moore's Law, the characteristic process does not completely pursue the shrinkage of the device, but continuously optimizes the device structure and manufacturing process to maximize the physical characteristics of different devices to improve product performance and reliability. The characteristic process is mainly used in the manufacture of power devices, MCUs, smart card chips, power management chips, RF chips, sensors, etc., which are widely used in automotive electronics, industrial intelligent manufacturing, communications, Internet of Things, new energy, consumer electronics and many other application fields.

(2). Analysis of the company's position in the industry and its changes

Huahong is one of the world's leading integrated circuit wafer foundry enterprises and a leader in the integrated circuit manufacturing industry in Chinese mainland, with industry-leading process manufacturing capabilities, production capacity advantages and service support. According to the latest sales in 2024 announced by global pure-play foundry companies, Huahong still ranks fifth in the world and second among Chinese mainland enterprises.

In 2025, with the full operation of Huahong's manufacturing production line and the ramp-up of production capacity, the company will deploy more advanced "characteristic IC + power devices" processes to "8-inch + 12-inch" production platforms. At the same time, the company focuses on promoting the construction of domestic industrial ecology and the implementation of the "Chinafor China" strategy with overseas customers, which will also help the development and mass production of the company's new business and new product platforms.

(3) The development and future development trend of new technologies, new industries, new forms of business and new models during the reporting period

(1) The development of new technologies in the semiconductor wafer foundry industry

Market development trends such as informatization, digitalization, intelligence, and networking have driven the continuous iteration and innovation of global semiconductor technology, and have also put forward higher technical requirements for other integrated circuits and semiconductor device types in addition to logic circuits.

(2) The development of the semiconductor wafer foundry industry in new industries

With the vigorous development of emerging industries such as new energy vehicles, industrial intelligent manufacturing, communications, Internet of Things, and new energy, chips, as the core components of intelligent hardware, are almost ubiquitous and play an important role in the birth and development of new industries. At the same time, the development of new industries will continue to put forward new requirements for the performance, power consumption, and size of chips, promote breakthroughs in wafer manufacturing technology and enrich process platforms, and bring new opportunities to the semiconductor wafer foundry industry.

(3) The development of the semiconductor industry in new formats and models

In the early stage of the development of the semiconductor midstream industry, due to the fact that the relevant technologies were mastered by a few large international enterprises, and the equipment, materials, and process technologies required for production were highly specialized, the enterprises in the industry mainly adopted the vertical integration model (IDM model). With the expansion of industrial scale, technological progress and the rise of market diversification, the midstream of semiconductors has gradually been limited to design, manufacturing, packaging and testing

The IDM model completed by the integration within the company has evolved into a number of professional subdivisions, and the industry has begun to show a vertical division of labor pattern. 3. The company's main accounting data and financial indicators

3.1 Key accounting data and financial indicators for the past 3 years

Unit: Yuan Currency: RMB

2024 2023 This year is compared to 2022

Increase/decrease (%)

Total assets 87,935,231,475.57 76,226,351,074.40 15.36 47,876,614,340.83

Attributable to the listed company

Net assets of shareholders 43,602,332,245.07 43,354,252,355.10 0.57 19,844,793,693.32

give birth

Operating income 14,388,307,712.89 16,231,874,037.72 -11.36 16,785,718,004.90

Attributable to the listed company

Net profit of shareholders 380,576,197.36 1,936,230,415.48 -80.34 3,008,612,623.47

moistening

Attributable to the listed company

Deductions for shareholders 245,280,545.42 1,614,028,155.76 -84.80 2,570,341,094.34

Non-recurring gains and losses

net profit

Business activities generated

Net cash flow 3,608,289,668.76 5,104,987,996.61 -29.32 5,524,293,421.02

forehead

Weighted average net assets decreased by 5.61 hundred

yield yield (% 0.88 6.49 points 16.30

）

Basic earnings per share 0.22 1.31 -83.21 2.31

(RMB/Share)

Diluted earnings per share 0.22 1.30 -83.08 2.29

(RMB/Share)

R&D investment accounted for 2.31 percent of revenue

Ratio of income 11.42 9.11 7.63

（%）

3.2 Key accounting data by quarter in the reporting period

Unit: Yuan Currency: RMB

Q1 Q2 Q3 Q4

(January-March) (April-June) (July-September) (October-December)

Operating income 3,297,290,706.10 3,434,868,055.00 3,770,124,116.54 3,886,024,835.25

Attributable to listing

221,743,445.57 43,172,833.28 313,011,678.51 -197,351,760.00 of the company's shareholders

Net profit

Attributable to listing 209,209,204.92 24,639,410.35 230,768,922.81 -219,336,992.66

of the shareholders of the company

Deduction of non-recurring

After sexual gains and losses

Net profit

Business activities

Generated cash flow 443,549,494.96 885,359,550.11 -33,393,409.26 2,312,774,032.95

Net amount

Explanation of the discrepancies between the quarterly data and the data disclosed in the periodic report

□ Applicable √ Not applicable

4. Shareholders

4.1 The total number of common shareholders, the total number of preferred shareholders whose voting rights have been restored, and the total number of shareholders holding special voting shares and the top 10

shareholders

Unit: Shares

The total number of ordinary shareholders (households) at the end of the reporting period was 51,360

The total number of common shareholders at the end of the previous month prior to the disclosure date of the annual report was 46,140

Total number of preferred shareholders whose voting rights have been restored as of the end of the reporting period -

Preferred shares whose voting rights were restored at the end of the previous month prior to the disclosure date of the annual report -

Total number of East (households)

Total number of shareholders holding special voting shares as of the end of the reporting period -

Holding special voting shares at the end of the previous month prior to the disclosure date of the annual report -

Total number of shareholders

Shareholdings of the top 10 shareholders (excluding shares lent through refinancing)

Stake, token, or freeze

knot situation

Name of Shareholder Number of Shares Held at the End of the Period Proportion Shareholding at the End of the Reporting Period Shareholding Limited Shareholder

(Full Name) Increase or Decrease Quantity (%) Nature of Conditional Shares

Number of shares Number of shares

state

Hong Kong Securities Clearing (Agency

Person) Limited 62,083,441 682,888,890 39.74 0 Unknown - Extraterritorial law

HKSCC people

NOMINEES LIMITED）

Shanghai Huahong International Company

Shanghai Hua 0 347,605,650 20.23 0 N/A - Foreign Law

Hong International, People

Inc.）

United International Co., Ltd. Foreign Law

( Sino-Alliance 0 160,545,541 9.34 0 N/A - Person.)

International, Ltd.）

Xinxin (Hong Kong) investment has

Limited Company ( Xinxin -60,209,986 118,495,939 6.90 0 N/A - Foreign Law

( Hongkong ) people

Capital Co., Limited）

Huaxin Investment Management Co., Ltd

Responsible Company - State Group Non-Residential

Investment base in the circuit industry 0 48,334,249 2.81 0 None - National law

Gold Phase II Co., Ltd

manage

Guoxin Investment Co., Ltd. 4,842,165 27,919,088 1.62 0 N/A - National law

person

The structure of China's state-owned enterprises is state-owned

Adjusted Fund II Shares 0 23,076,923 1.34 0 N/A - Person

Ltd

Shanghai International Group Assets 0 9,615,384 0.56 0 None - State Owned Law

Management Co., Ltd. people

China Insurance Investment Co., Ltd. is not in the country

Company - China Insurance Investment -4,903,767 8,557,771 0.50 0 None - National law

Fund (Limited Partnership) person

Haitong Innovation Securities Investment 0 8,155,000 0.47 8,155,000 N/A - National law

Ltd. people

Guotai Junan Zhengyu Investment 194,700 8,155,000 0.47 8,155,000 N/A - State-owned law

Ltd. people

Explanation of the above-mentioned shareholder affiliation or concerted action 1. Hua Hong International, Hua Hong Group, United International Co., Ltd., above

Hai International Group Asset Management Co., Ltd. is owned by Shanghai State-owned Assets

Commission control.

2. Xinxin (Hong Kong) Investment Co., Ltd. is a national integrated circuit industry

Industry Investment Fund Co., Ltd. invested through Xunxin (Shanghai).

A wholly-owned subsidiary held by a limited company. Huaxin Investment Management

The limited liability company acts as the fund manager under its respective mandate

The management agreement is respectively for the National Integrated Circuit Industry Investment Fund shares

Co., Ltd., National Integrated Circuit Industry Investment Fund Phase II

A company limited by shares.

In addition, the company does not know whether the above shareholders have other connections

It is also unknown whether it belongs to the "Acquisition Management of Listed Companies".

Measures.

Explanation of preferred shareholders whose voting rights have been restored and the number of shares held is not applicable

Holders of depositary receipts

□ Applicable √ Not applicable

The top 10 shareholders in terms of the number of voting rights as of the end of the reporting period

□ Applicable √ Not applicable

4.2 Block diagram of the property rights and control relationship between the company and the controlling shareholder

√ Applicable □ Not applicable

4.3 Block diagram of the property rights and control relationship between the company and the actual controller

√ Applicable □ Not applicable

4.4 The total number of preferred shareholders and the top 10 shareholders of the company at the end of the reporting period

□ Applicable √ Not applicable

5. Corporate bonds

□ Applicable √ Not applicable

Section 3: Important Matters

1. The company shall, in accordance with the principle of materiality, disclose the major changes in the company's operation during the reporting period, as well as the events that have a significant impact on the company's operation during the reporting period and are expected to have a significant impact in the future.

During the Reporting Period, the Group achieved operating income of RMB14.388 billion, representing a decrease of 11.36% over the same period last year. Realized attributable to shares of listed companies

RMB3.608 billion, down 29.32% from the same period last year; The cash paid for the purchase and construction of fixed assets, intangible assets and other long-term assets amounted to RMB19.782 billion, an increase of 209.29% over the same period last year.

2. If there is a delisting risk warning or termination of listing after the disclosure of the company's annual report, the reasons for the delisting risk warning or termination of listing shall be disclosed.

□ Applicable √ Not applicable