Recently, Luxshare Precision Industry Co., Ltd. (hereinafter referred to as "Luxshare Precision") held a general meeting of shareholders at the company's headquarters to interact and exchange ideas to accept the company's 2023 Ms. Wang Laichun, chairman/general manager, Ms. Song Yuhong, Ms. Zhang Ying, Mr. Liu Zhonghua, Ms. Hou Lingling (new) and other company representatives participated in the reception and answered the questions raised by the participating shareholders.

The interaction between the company's reception staff and shareholders is as follows:

Question 1: How does the company understand and participate in the AI strategy and hardware adoption of key customers?

Answer: The company's main major customers are relatively more pursuit of the ultimate, whether it is software development or hardware collocation has more advantages. in AI When the wave comes, the customer's products will be benchmarking and leading. For Luxshare, no matter which customer it is, we will give full play to our value. Whether it is the reserve of technology, the innovation of technology and the awareness of service, Luxshare is to let customers rest assured. In addition to tens of millions of products, the company also pays attention to and cooperates with customers in other segments. at In the era of AI, the sensing technology of hardware, such as sound and light, is also very important, which is also in line with the company's layout.

Q2:What is the company's strategy in the telecommunications and automotive sectors?

A: The company's communications sector has been developing its reserves for more than a decade, from simple server support to today's AI Optical connectivity, cooling, and power management on server integration. The challenge of foreign peers four years ago also proves the company's technical reserves in the communications industry. But in business, companies do get a bit of geopolitical influence. Now, with the acceleration of industry iteration and the growth of computing power demand, there are more and higher requirements for electrical connections, which is a good opportunity for Luxshare. The giants at home and abroad are the partners of the company, and the company is on the right path and will continue to do so. In the automotive sector, there is currently a trend that foreign customers or domestic brands and overseas markets need the global manufacturing capabilities of China's industrial chain, and Luxshare has been fully prepared for this through endogenous extension.

Q3:What is the company's layout in India?

A: At present, the company has two factories in India that meet the basic needs. The company has always focused on customer needs, but because of India's policy restrictions on foreign-funded enterprises, the company is not in a hurry to quickly promote industrial construction. Nevertheless, the company remains committed to a global development strategy in order to respond to market demands and ensure that business operations are not affected.

Question 4: Which areas are more promising for the company's future development?

Which field has more growth potential? A: In the future development of the company, the consumer electronics, automotive and communication industries have their own advantages. From the perspective of market prospects and growth, the consumer electronics market is still huge, and it is expected that there will be at least 10 years of room to grow. The company has accumulated a wealth of experience in the field of consumer electronics and actively expanded its customers beyond the large customers 3-5 years ago. We are confident in the field of consumer electronics in the future 3-5 Maintained rapid growth during the year and in the next 10 years Maintained steady growth during the year. The company's competitive advantage lies in its ability to complete the range from precision components to functional modules to system integration, as well as its outstanding performance in global manufacturing and simultaneous development with customers. In the automotive sector, large-scale production is for Chinese companies Tier1 There are significant opportunities at the supplier level. Although the automotive market may not be as large as consumer electronics in terms of absolute market size, it is growing faster and the profitability of the automotive industry is slightly higher than that of consumer electronics. The company's rapid growth in the automotive sector is based on its strong manufacturing and development capabilities, which positions us well in this fast-growing market. In terms of the communications industry, the company expects to achieve rapid growth early next year After 3-5 years, it will maintain a steady growth. In the next 10 In the middle of the year, consumer electronics and automobiles will contribute equally to the company, and the growth of the communications industry will also increase significantly, but the scale may not be as large as that of consumer electronics. In summary, the company's three major segments are expected to achieve rapid growth in the next few years and maintain a steady development trend in the long term.

Question 5: Is there any pressure on the internationalization process of geopolitical impact on Chinese companies?

Answer: In recent years, by going deep into the front line of overseas markets, we have gradually figured out the boundaries of geopolitical restrictions on business development, which can be seen in the company's original About 3%-5% of products will indeed be limited by geopolitics and can only be developed in China or in friendly countries with China, similar to ODM communication equipment products, server machines, etc., we have also made a corresponding reduction in investment resources for this part. And left 95% of the market can be divided into two parts, half of the business is completely unaffected, this part of the product is more advantageous for Chinese companies, or competitors are no longer involved; The other half of the business, although it needs to do better than non-Chinese enterprises in the process of development, as long as the team keeps ahead, it can win opportunities. So at the moment, there is a certain amount of pressure, but it is more of our motivation.

Question 6: With the advent of the robot age, will the global manufacturing cost be flattened in the future?

Answer: The continuous development of robots will bring a lot of help to production personnel and technicians, but for a small number of customized products, the cost of front-line personnel in the foreseeable time is still relatively high. To take the example of an automotive wiring harness, an automotive wiring harness used to be 700-800 loops, now there are more than 2000 loops, 30% of which can indeed be replaced with robots or equipment, but before the numerous loops on the architecture can be reduced to a few point-to-point, the rest 70% is still difficult to replace with robots.

Question 7: Can the company work with customers to achieve labor savings goals?

Answer: Many Chinese companies, including Luxshare, are leading in the ability to provide modular and automated solutions at the manufacturing end, but whether to use modularization and automation in actual production depends on the economic benefits of the product, and the utilization rate of some products in peak periods is that in other periods 4 times more capex if fully automated production is used The investment cannot be maximized, and the cost is increased accordingly, and this solution will not be the best choice for the customer. From the perspective of improving the automation rate, this itself is not technically difficult, but it needs to be based on the specific situation of customers, markets and products, and the economic benefits of small batches of products are not high due to a large number of modular and automated production, so many customers still prefer to use manual labor in flexible production.

Question 8: Is the gap narrowing between places like China and Southeast Asia amid the wave of automation?

Answer: the company is engaged in the subdivision of the industry is still in the leading position in the world, such as Vietnam, India, Mexico and other countries, can not replicate the development path of China's manufacturing industry, these countries also have a certain gap with China in the integration of the industrial chain, and China has been providing the best service in attracting investment, which makes China's position in the global manufacturing industry is still solid. Although some smaller, low-tech companies may be integrated due to the transfer of the industrial chain, on the whole, the company's competitiveness in the global high-tech and complex manufacturing sector is still strong.

Question 9: How do you view the relationship and ranking of employees, customers, and large and small shareholders?

Answer: There is no fundamental contradiction between the company's employees, customers and shareholders. Luxshare is a "ferryman", brand customers are "gold diggers", Luxshare ferries customers to pan for gold, Luxshare achieves customers, in order to achieve the company. When the company is good, the employees and shareholders can be good.

Question 10: How can the technology span from consumer electronics to automobiles, communications and other fields be realized?

A: In the field of consumer electronics, the in-depth cooperation between the company and the top customers is not due to luck. There are many companies that serve the top customers in the world, but Luxshare can seize the opportunity, hone itself, and seize the development opportunity. I often remind my team to think: Where are we going in the future? Where are you now? Why do you have a foothold in the market? There are many excellent peers in the industry, and we need to convey a confidence to our customers: there is nothing wrong with choosing Luxshare now, and Luxshare will not disappoint him in the future. These are the directions we have been thinking about. For example, in the field of automotive wiring harness, compared with some companies, Luxshare started late and had a small initial scale, but it is currently showing a leading trend in scale, supply capacity, and future expansion capacity. The reason is that Luxshare is seen by customers as a company with high-quality problem-solving capabilities. Especially in the era of smart cars, the complexity of automotive wiring harness products has increased, and Luxshare can still meet customer needs in the internal management system and intelligent manufacturing, and integrate a variety of product categories of the same production line to climb at a high speed in production capacity. Similar to the layout of high-speed cables, linear motors, cameras and other products, we will do full market research and comprehensive sand table deduction before entering a certain segment. In the past so many years, Luxshare has basically been able to achieve in which direction it wants to go, because it looks at the opportunity with awe and is fully prepared.

Q11:How does the company see the future growth of the key account business?

A: The first generation of new products can do this to a very good extent, and it has also been highly recognized by the industry for various technologies, and I personally believe that each new product may take at least three generations to make the consumer experience to the next level. Key customers are leading the way in terms of technology investment, content support, and vertical integration of software and hardware.

Q12:What are the company's ESG efforts?

A: ESG is similar to the physical examination report of an enterprise, which can present potential problems, so the company attaches great importance to it, and hopes to conduct a comprehensive health check on the enterprise itself through ESG management, so as to prevent and respond in a timely manner.

Q13:Are there any plans to introduce industry leaders in related fields such as Intel in the future?

A: If the timing is right, the value is appropriate, and at the same time they can empower each other, you can consider it. But investors will not be brought in purely because of the need for funds.

Issue. 14: Looking forward to the future, the company is committed to developing diversified growth points such as automobiles and communication sectors, will a large amount of investment in these two sectors extend the time for return on investment?

A: In previous years, the company's revenue and profit growth were steady, 24H1 It still maintained a growth rate of more than 20% in an unfavorable environment, which proves that the company has been making detailed planning and adequate preparations in advance. For the investment in a new industry, in addition to making detailed planning, we will also focus on the short, medium and long-term development of this new industry in the future ROE levels, we prefer those that can remain at the same level after a long period of stability More than 20% of the project. M&A is also very cautious, and the financial and management shortcomings of the seller may have an overall ROE for our purchaser company in the short term However, the company will strictly assess whether the impact is controllable, and the controllable will be promoted, so the ROE performance of both endogenous and epitaxial has been stable in the past few years. The investment in fixed assets is more invested in large customers, with more than 40 billion fixed assets 40% of the plant, 70-80% of the remaining 60% are more than 400 SMT lines, and the rest is CAPEX optimized for dynamic product iterations with each generation. CAPEX for Automotive and Communications In terms of investment, it is more flexible, because this branch is deeply involved in ODM. Last year, the $13.5 billion private placement was terminated because the company was confident in cash flow and growth.

Question 15: Is the company itself using AI to improve efficiency?

A: The company has been committed to applying artificial intelligence technology in improving efficiency. As early as the early stage of the company's development, we actively promoted the practice of intelligent manufacturing and smart office, which enabled us to achieve a double increase in production capacity and sales despite the reduction of the number of employees. All this is due to the company's early extensive application in production and management AI technology. In the future, the company will continue to increase the in-depth integration of artificial intelligence in all aspects of the enterprise, accelerate the innovative application of AI technology in the business, and help the enterprise to a new level.

Q16:Does the company have any plans for mergers and acquisitions in the future?

A: Over the years, the company has accumulated rich experience in mergers and acquisitions, and has a clear plan for future mergers and acquisitions. We understand that there will be some difficulties for the seller during the M&A process, so our assessment focuses on whether the target company can complement the company in the market and whether the team can achieve the desired change in a limited timeframe. We always adhere to the principle of "optimistic, understandable, and empowered". In recent years, the company has acquired a number of companies, and in most cases, the company has only organized a small team of professionals to assist them in terms of finance, organizational structure, etc. The company's M&A intentions are more based on business needs than purely financial considerations, especially those companies that already have a certain foundation and can complement the company's strategic layout. In addition, due to the company's abundant cash flow reserves, the company will not acquire a company by issuing bonds. In the future, we will continue to maintain this robust M&A strategy to ensure that each M&A can provide strong support for the company's long-term development.