乐鑫科技:Espressif Systems 2021 Annual Report

ESPRESSIF SYSTEMS｜2021 ANNUAL REPORT｜
1Contents
3 About Espressif
4 Message from the CEO
6 Facts About Espressif
7 Business Highlights
8 Key Announcements
9 Management Report
9 Business Strategy
10 Key Products - IoT Chips
11 Applications
12 Core Competitiveness
15 Business Model
16 Financial Performance
18 Research and Development
20 Ownership of Securities
21 Stock-Based Compensation
22 Risks and Uncertainties
23 Consolidated Financial Statements
23 Consolidated Balance Sheet
25 Consolidated Income Statement
26 Consolidated Cash Flow Statement
27 Additional Information on Cash Flow Statement
28 Consolidated Statement of Changes in Equity
29 Further Information
29 Terms and Conditions of the Annual Report
30 Independent Auditor’s Report
35 List of abbreviationsESPRESSIF SYSTEMS｜2021 ANNUAL REPORT｜ABOUT ESPRESSIF
About Espressif
SHARE
A Leading AIoT Solution Provider
Espressif Systems is a public multinational fabless semiconductor company focused
on developing cutting-edge wireless-communication low-power chipsets. By
leveraging wireless computing we provide green versatile and cost-effective AIoT
solutions. We have accomplished a hardware-and-software closed-loop development
cycle for a series of core technologies including RF Wi-Fi & Bluetooth LE network
protocol stacks RISC-V MCUs AI instruction sets and algorithms operating systems
toolchains compilers IoT software application frameworks Cloud etc.We have a diverse team of engineers from around the world. All company branches
employ more than 500 members of staff from almost 30 countries and regions +75% of
whom are based in our Research & Development Department. We have eight R&D
centers in five countries including China (4 out of 8) India the Czech Republic Brazil
and Singapore. The company’s increasing reputation in recent years has been
instrumental in attracting talented engineers from across the world. Being united by our
passion for technology our diversity is our strength as it allows the creative blending of
different kinds of knowledge perspectives and ways of thinking.TOP 1
global Wi-Fi MCU
market share*
China
products distributed Czechia
all over the world Shanghai｜Suzhou
Wuxi｜Hefei
India
millions of users
Brazil Singapore
3
* Market share data from TSRESPRESSIF SYSTEMS｜2021 ANNUAL REPORT｜MESSAGE FROM THE CEO
Message from the CEO“We strive to make our chips operating systems frameworkssolutions Cloud business practices tools documentation
writings ideas etc. ever more relevant to the answers people
need in contemporary life’s most pressing problems. This isEspressif’s highest ambition and moral compass.”
Teo Swee Ann
Espressif’s Founder and Chief Executive Officer
In 2021 Espressif managed to successfully overcome the challenges which made
many in the AIoT industry be fraught with worry: global chip shortages and supply
chain disruptions geopolitical and trade issues climate crisis and the ongoing
COVID19 pandemic to name but a few. Despite all these challenges Espressif had a
truly productive year in 2021.We started the year with ESP32-S3 our AI-enabled series of SoCs supporting 200
offline commands with 2.4 GHz Wi-Fi and Bluetooth 5 (LE) powerful AI acceleration
and strong security features. Then having successfully launched ESP32-C3 with Wi-
Fi 4 and Bluetooth 5 (LE) we took our SoC offering to the next level with ESP32-C6
which has a 32-bit RISC-V core with Wi-Fi 6 and Bluetooth 5 (LE) capabilities for
securely connected devices. ESP32-C6 which was swiftly certified by the Wi-Fi
Alliance is unique in that not only does it pack a 2.4 GHz Wi-Fi 6 (802.11ax) radio
but it also supports the 802.11b/g/n standard for backward compatibility.Next came ESP32-S2-HMI-DevKit-1 which is specifically designed for human-
machine interaction. Furthermore we are particularly proud of Espressif's AudioFront-End Algorithms that have been qualified as a “Software Audio Front-EndSolution” for Amazon Alexa built-in devices. Later in 2021 we announced ESP32-H2
with IEEE 802.15.4 and Bluetooth 5 (LE) connectivity which was soon recognized
officially as a “Thread-certified component” and a “Zigbee-compliant platform”. E
4ESPRESSIF SYSTEMS｜2021 ANNUAL REPORT｜MESSAGE FROM THE CEO
All of the above-mentioned MCUs were complemented with firmware operating
system support certification documentation modules and customer sampling. The
same strategy will be implemented in the upcoming SoCs that we have in the
pipeline. I should also mention the considerable development of ESP RainMaker
Espressif’s turnkey solution to building AIoT products which has has now reached
the commercial stage. This along with the many ESP-IDF improvements in 2021
Espressif’s Eclipse IDE audio DSP AI voice-recognition suite ESP-Insight and tool
chain improvements have established Espressif as a unique one-stop AIoT solution-
provider of not just powerful hardware but also of innovative SDKs Firmware Cloud
backend phone apps and voice integrations.In summary not only did we increase our competitiveness in the AIoT arena but we
actually made inroads in the domains of Artificial Intelligence and Cloud computing.Thus our products today power more than 700 million devices across the whole wide
world. They are being used by independent developers and big companies alike
while Espressif is recognized as a leading force in the AIoT chip industry. Hence we
are now in a better position than ever before to further expand into new markets.In fact our revenue in 2021 increased by more than 60% compared to 2020 and our
customer base expanded accordingly. This was -in no small part- due to our
exceptional customer support based on the huge effort of our operations team to
secure adequate supplies during periods of serious disruptions in the global
semiconductor supply chain our reasonably-priced products and services and the
considerable amount of time that our account managers spent coordinating deliveries
to our customers.Our diverse hard-working dedicated staff is what makes us feel optimistic about the
future. So in 2022 we expect Espressif’s supply chain to be further strengthened
which will enable us to launch several new products. In terms of R&D we plan to
build more chips and continue making incremental changes to our current structures
in order to accommodate a larger variety of products that we can capitalize on.Most importantly though the purpose of our R&D is not just to generate more
revenue. Our primary goal both as a company and as individuals is to make
Espressif contribute to the world something useful. We strive to make our chips
operating systems frameworks solutions Cloud business practices tools
documentation writings ideas etc. ever more relevant to the answers people need
in contemporary life’s most pressing problems. This is Espressif’s highest ambition
and moral compass.
5ESPRESSIF SYSTEMS｜2021 ANNUAL REPORT｜FACTS ABOUT ESPRESSIF
Facts About Espressif
517 75 30 em% ployee natio
employees R&D employees
200+
834%
R&D centers female employees
millions of users in 200+ countries and regions
Forbes China >600000
Espressif included in the most innovative IoT companies Espressif SoCs sold daily
2020
ESP32
ESP8266
65 K+ 1.5 M+ Book Google
65 K+ open-source 1.5 M+ views for the most 100+ books written 31 M+ search results
Espressif-powered popular videos of Espressif- about Espressif’s SoCs for ESP8266 and
projects on GitHub powered projects on YouTube in 10+ languages ESP32 on Google
6
s
ali
tie
nESPRESSIF SYSTEMS｜2021 ANNUAL REPORT｜BUSINESS HIGHLIGHTS
Business Highlights
Key Financial Data
Fiscal Year
CNY 2021 2020 2019
Consolidated Statement of Income Data
Revenue 1386371541 831286490 757428577
Gross profit 549025732 343235573 356185901
Selling expenses 41815693 31485447 27131940
General and administrative expenses 55485146 46595295 54771687
Research and development expenses 271689981 192792044 119748689
Net income 198427708 104051961 158505350
Earnings per share:
Basic 2.4775 1.3006 2.3196
Diluted 2.4566 1.3006 2.3196
Consolidated Balance Sheet Data
Cash cash equivalent and investments 1114558363 1357770452 1406188938
Working capital 1749605271 1634809451 1603555663
Total assets 2129056143 1829631150 1725047426
Long-term obligations 68244392 50822540 38017703
Total shareholders’ equity 1823017913 1641130356 1609822892
Consolidated Cash Flow Data
Net cash flow from operating activities 31460857 36055511 102315848
Non-GAAP Adjustment
Stock-based compensation 21787964 18757990 2102821
Non-GAAP net income 220215672 122809951 160608171
Key Financial Indicators
Fiscal Year
202120202019
Gross margin 39.60% 41.29% 47.03%
Chip gross margin 48.94% 45.71% 50.33%
Module gross margin 33.48% 36.00% 39.35%
R&D-to-sales ratio 19.60% 23.19% 15.81%
EBITDA margin 16.78% 14.90% 24.01%
Weighted ROE 11.52% 6.47% 18.32%
Number of Espressif employees as of December 31 517 449 345
7ESPRESSIF SYSTEMS｜2021 ANNUAL REPORT｜KEY ANNOUNCEMENTS
Key Announcements
New SoCs AI
ESP32-H2 AFE (Audio Front-End)
officially certified as a “Thread-Certified Component” Espressif’s audio front-end algorithms have been
and a “Zigbee-Compliant Platform”
qualified for Amazon Alexa devices
ESP32-C6
a 2.4 GHz Wi-Fi 6 + Bluetooth 5 (LE) SoC with a ESP-DL
single-core 32-bit 160MHz RISC-V microcontroller a library for high-performance deep-learning resources dedicated to Espressif SoCs
OS
ESP-IDF
Espressif’s own IoT development
framework including RTOS has
been upgraded to v4.4 and has
won 8.2K stars on GitHub
NuttX / Zephyr
new operating systems
supported by Espressif SoCs
Cloud
ESP RainMaker
an AIoT cloud platform that enables customers to
quickly build their own solutions based on enterprise- Matter Standard
grade Cloud computing with a single-click
deployment
all Espressif chips apart from ESP8266 support
Matter the latest industry-unifying IP-based
ESP Insights connectivity protocol.a device observability framework that allows
developers to remotely peek into their firmware and
get detailed information about its execution and
debug errors
8ESPRESSIF SYSTEMS｜2021 ANNUAL REPORT｜MANAGEMENT REPORT
Management Report
Business Strategy
Espressif Systems’ business strategy emanates from our four key capabilities and our
four key services/products. More specifically the four key capabilities include
Espressif’s connectivity and chip design OS-level development software solutions and
our engagement with our ecosystem. Our four key services and products include our
development environment software tools cloud services and detailed documentation
support. The above-mentioned structure ensures that our products are the heart of
numerous commercial AIoT applications in different markets including smart home
consumer electronics industrial automation healthcare etc.IoT Overview
Amazon Google Apple Microsoft XiaoMi Baidu Alibaba Tencent Internet HomeKit Azure Platform
Smart Consumer Industrial Healthcare Internet of Energy Home Electronics Automation Vehicles Management Education …
Business
Application
Developer Open-source Social Video- Developer
Ecosystem platform Platform Techblog sharing TPPS …Platform Ecosystem
Peripheral Connect AI Mesh Speech AI Image Remote … Software Driver Control Control Recognition Monitor Solution
ESP IoT OS Support for Other OS Operating
ESP-IDF NuttX / Zephyr / Vela / OpenHarmony System
Wi-Fi 4/Wi-Fi 6 BLE 5.0/BLE 5.2 Thread/Zigbee Connectivity
Technology
&
Wireless SoC RISC-V AI Security Chip DesignAccelerator Encryption
9
Cloud Service
Documentation
Development Environment
Tools SoftwareESPRESSIF SYSTEMS｜2021 ANNUAL REPORT｜MANAGEMENT REPORT
Key Products - IoT Chips
Espressif is recognized as a market leader in the field of Wi-Fi MCUs. We released our
first Wi-Fi MCU in 2014 and our first Wi-Fi/Bluetooth LE combo chip in 2016. In 2020
we successfully developed our own RISC-V MCU core adding it to our products while
in 2021 we released our first Thread/Zigbee/Bluetooth LE 5 combo chip and a 2.4GHz
Wi-Fi 6 chip. In fact we have been constantly diversifying our product portfolio
introducing new solutions through our numerous investments. Thus we now have
various product lines in all the main short-range connectivity technologies.ESP ESP
dual-core 32 32-S3
240MHz * Wi-Fi 4｜Bluetooth 4.2
* Wi-Fi 4｜Bluetooth 5(LE)
* 32-bit Xtensa MCU * 32-bit Xtensa MCU｜AI Functions
ESP
single-core
240MHz 32-S2
* Wi-Fi 4
* 32-bit Xtensa MCU
ESP ESP ESP
single-core 8266 32-C3 32-C6
160MHz * Wi-Fi 4
* 32-bit Tensilica MCU * Wi-Fi 4｜Bluetooth 5(LE)
* Wi-Fi 6｜Bluetooth 5(LE)
* 32-bit RISC-V MCU * 32-bit RISC-V MCU
ESP
single-core 32-C2
120MHz
* Wi-Fi 4｜Bluetooth 5(LE)
* 32-bit RISC-V MCU
ESP
single-core 32-H2
96MHz * Thread｜Zigbee
* Bluetooth 5(LE)
* 32-bit RISC-V MCU
2014201620192020202120222022+
We also provide IoT modules based on our chips. The benefit for customers is that they
can get direct support from us shortening and optimizing their supply chain even in
case of chip shortages.
10ESPRESSIF SYSTEMS｜2021 ANNUAL REPORT｜MANAGEMENT REPORT
Applications
We sell our own IoT chips and modules enabling the connectivity between various
products ranging from simple devices -such as smart light bulbs- to complicated ones
such as robots. Our core connectivity chips are Wi-Fi MCUs and Wi-Fi /Bluetooth LE
(BLE) combo MCUs which account for 98% of our revenue.
The market for Wi-Fi MCUs or Wi-Fi/BLE combo MCUs is truly diverse including
applications for smart homes (smart lights air conditioners ovens coffee machines.etc.) consumer electronics (e.g. smart speakers) industrial automation (e.g.mechanical arms) healthcare (e.g. monitoring devices for diabetes blood pressure
COVID-19 etc.) energy control (solar energy devices EV chargers etc.) the internet of
vehicles (OBD devices dash boards etc.) education (talking pens interactive white
boards etc.) and others such as drones robots wireless POS and asset trackers.Smart Homes Consumer
Industrial Electronics Automation Healthcare
Smart speaker Medical detector
x
Smart oven Mechanical arm
Energy
Management Internet of Vehicles Education Others
Solar energy device Talking pen
OBD devices ……
11ESPRESSIF SYSTEMS｜2021 ANNUAL REPORT｜MANAGEMENT REPORT
Core CompetitivenessEspressif’s competitiveness stems from our previously-referred to “four key capabilitiesand four key services/products” —our business philosophy which helps us make a
difference on the market in terms of the chips operating systems and software that we
offer within our vibrant ecosystem.Chip Competitiveness
Espressif takes pride in the invaluable experience that our R&D team leaders have in the
field of wireless-communication chips. Additionally Espressif’s founder and CEO Mr
Teo Swee-Ann has over 20 years of experience in the semiconductor industry having
also registered over 40 IC and IoT-related patents under his name.After the huge success of our initial series of Wi-Fi MCUs our company expanded to
other wireless-connectivity technologies including Bluetooth LE and Thread/Zigbee.This development has further enhanced our Company's high-tech offerings thus
increasing our market opportunities while also keeping our customers spoiled for
choice.Our products are renowned for their high level of integration small size low power
consumption great computing power large memory space and strong security
mechanism. Our products power over 700 million devices across the whole wide world.They are being used by independent developers and big companies alike while
Espressif is recognized as a leading force in the AIoT chip industry.System Competitiveness
ESP-IDF is Espressif’s official IoT Development Framework for the ESP32 ESP32-S
ESP32-C and ESP32-H series of SoCs. It provides a self-sufficient SDK for any generic
application development on these platforms using programming languages such as C
and C++. ESP-IDF currently powers millions of devices in the field and enables building
a variety of network-connected products ranging from simple light bulbs and toys to
big appliances and industrial devices.ESP-IDF has a well-defined release process and a support policy which ensures that
customers can choose a stable release and that they continue getting important fixes
for their application. Each stable release undergoes a rigorous QA process that ensures
production readiness. Also ESP-IDF comes with an extensive documentation for its
software components not only at the usage level but also at the design level. This helps
developers to fully understand what ESP-IDF offers and select whatever suits their
applications best.Furthermore ESP-IDF supports a large number of software components including
RTOS peripheral drivers networking stack various protocol implementations and
helpers for common application use-cases. These components help developers to
focus on the business logic while the SDK provides most of the building blocks
12ESPRESSIF SYSTEMS｜2021 ANNUAL REPORT｜MANAGEMENT REPORT
required for typical applications. Open-source and freely-available developer tools as
well as officially supported Eclipse and VSCode IDEs ensure ease-of-use for
developers.Software Competitiveness
ESP-WIFI-MESH is a wireless communication network with nodes organized in a mesh
topology using the simultaneous AP-STA feature on Espressif SoCs. It provides a self-
forming and self-healing network with ease of deployment. The network topology of
ESP-WIFI-MESH can scale up to 1000 nodes in large areas without requiring any
support for specific Wi-Fi infrastructure. ESP-WIFI-MESH can also be used to cover Wi-
Fi blind spots in home-deployment scenarios where the Wi-Fi signal cannot be reached.We also provide ready-to-use yet customizable phone apps that facilitate the auto-
discovery of new nodes which allow their easy configuration with the Bluetooth LE
method. Finally ESP-WIFI-MESH is based on standard Wi-Fi connectivity and it can use
standard WPA2 network security among the mesh nodes to ensure communication
security.Additionally ESP-BLE-MESH is an open-source protocol stack based on Bluetooth
mesh. It is fully certified by the Bluetooth Special Interest Group and supports all the
functions and application models of the Bluetooth Mesh Specification v1.0.1. By using
the ESP-BLE-MESH technology different types of standard Bluetooth mesh devices
from different manufacturers can achieve interoperability communicating with one
another reliably and securely. In fact the big advantage of using the ESP-BLE-MESH
technology is that with an OTA upgrade on existing Bluetooth LE devices users can
implement a mesh network. This is why Bluetooth mesh has become so popular.Furthermore ESP RainMaker is a complete system for building AIoT products with a
minimal amount of code empowering our customers to develop and deploy secure
customized AIoT solutions. It covers all Espressif chips and modules device firmware
voice-assistant integrations phone apps and Cloud backend. This helps our customers
save a large investment in Cloud capabilities gain independence and focus on
innovating their core-value offering.Ecosystem Competitiveness
Our company has brought together professionals and companies from across the AIoT
industry e.g. hardware and software developers business applications and Cloud
platforms as well as maker communities. Espressif’s own software development
platforms and the accompanying documentation are entirely open-source thus making
our innovative products available to people from all walks of life.As a result thousands of third-party projects have been based on Espressif
technologies. For example on GitHub which is the largest provider of Internet hosting
for software development there are more than 65000 open-source projects based on
Espressif's IoT chips. Furthermore the popularity of our products has stimulated an
increasing number of authors who have produced teaching resources based on
Espressif chipsets in several languages including English Chinese German
Portuguese Japanese and Serbo-Croatian. At present there are more than 100 digital
and physical books about Espressif’s SoCs.
13ESPRESSIF SYSTEMS｜2021 ANNUAL REPORT｜MANAGEMENT REPORT
Ecosystem Competitiveness (continued)
DEVELOPER COMMUNITY CONTENTS
ITEM Dec 31 2021 Dec 31 2020 change%
GitHub (Worldwide open-source development platform)
ESP32 Projects 29007 19091 52%
ESP8266 Projects 35055 30161 16%
Gitee (Chinese open-source development platform)
ESP32 Projects 2592 *
ESP8266 Projects 1867 *
CSDN (Chinese Tech-blog platform)
Search results for ESP32 79188 65144 22%
Search results for ESP8266 30033 23563 27%
Hackaday (open-source hardware platform)
ESP32 projects 3816 *
ESP8266 projects 5789 *
Reddit
ESP32 group members 46540 *
ESP8266 group members 53523 *
bilibili (Chinese video-sharing platform)
Official account followers 17502 3352 422%
Official account views 390000 62000 529%
YouTube
Official account subscribers 11600 **
Official account views 556846 **
ESP32 community videos 466459 284505 64%
ESP8266 community videos 687155 544174 26%
Views of most watched ESP32 community video around 1.5m around 1.2m
Views of most watched ESP8266 community video around 1.5m around 1.4m
N.B.：
*The search results mentioned above were retrieved on Jan. 29 2022.**The search results mentioned above were retrieved on Apr. 10 2022.Statistical data derived from different platforms may be based on different collecting methods. It is possible for certain platforms
to modify their algorithms from time to time and therefore impact the resulting statistical data. The above-mentioned
data resulted from the Company’s research at the end of each fiscal year reported here unless otherwise stated.
14ESPRESSIF SYSTEMS｜2021 ANNUAL REPORT｜MANAGEMENT REPORT
Business Model
$
B2D2B Business
Business-to-Developer-to-Business
Espressif has deployed the Business-to-Developer type of marketing not only because
it has gained prominence in recent years but also because it has proven to be more
viable with the increased influence of developers on organizations of all sizes. In other
words most developers are R&D employees in various companies and bring about
business opportunities from the companies they work for.Developer
This way the developer ecosystem we have created at Espressif demonstrates how the
value of networks can grow exponentially:
* The more developers we attract as customers the more hardware and software
solutions we generate.* The more successful hardware and software solutions we create the more our
reputation spreads with positive feedback from happy customers/developers.Business
* The above-mentioned interaction between people in our network prompts the
creation of more content which -in turn- attracts more users/developers searching for
new content.* Likewise other third-party development platforms join the ecosystem and bring in
new developers as our influence continues to grow.Having successfully applied the B2D2B model Espressif can now focus on R&D
investments while maintaining a small business team that directly supports a large
number of customers. In fact most of our revenue is gained through direct sales.Number of Employees
11%
December 31 2021 2%3%9%
Employees by
R&D 388
Administration 56 function
Business 48
Finance 13
Supply Chain 12
Total 517 75%
R&D Administration Business
Finance Supply Chain
15ESPRESSIF SYSTEMS｜2021 ANNUAL REPORT｜MANAGEMENT REPORT
Financial Performance
The big picture
Espressif’s total revenue in 2021 was CNY 1386 million marking an increase of 66.77%
from CNY 831million in 2020 due to the company’s IoT sales growth. The ensuing net
income was CNY 198 million which marked an increase of 90.70% year-on-year.Given the chip shortages across the semiconductor industry the upstream cost of chips
and modules rose in 2021 passing this through to retail prices. The overall gross margin
was 39.6% in which the IoT chip gross margin was 48.94%. The overall gross margin
decreased due to the increased module shipment.Customers tend to select larger memory capacity for their applications which
correspondingly comes with higher cost thus resulting in a decrease in the gross
margin of the module. However we keep the chip margin to a reasonable level in order
to support our future R&D expenditure. The module margin fluctuates depending on its
memory capacity. Overall the gross profit of a module is higher than that of a chip.Gross Margin by Product Category Shipment by Product Category
Overall GM Chip GM Module GM Chip Module
60.0%
50.3%
47.0%48.9%45.7%
45.0%
39.4%41.3%
202164.3%35.7%
39.6%
36.0%33.5%
30.0%
202077.2%22.8%
15.0%
201985.6%14.4%
0.0%
201920202021
0.0%25.0%50.0%75.0%100.0%
Table of Production and Shipment
End-of-Year Increase of Increase of Increase of
pcs in million Production Shipment Inventory production YoY shipment YoY inventory YoY
Chip 170.53 145.71 41.50 27.55% 12.70% 148.89%
Module 85.35 80.79 7.60 116.88% 111.68% 150.16%
Total 255.88 226.50 49.10 47.87% 35.26% 149.09%
N.B.: Each module includes one Espressif chip. Therefore we have excluded the number of chips used in modules in the statistics of chips. We
delivered 226.50m chips in 2021 which marked an increase of 35.26% from 2020.
16ESPRESSIF SYSTEMS｜2021 ANNUAL REPORT｜MANAGEMENT REPORT
Main Business Operations
Changes in Key Aspects of Income and Cash Flow
Fiscal Year
CNY 2021 2020 Change (%)
Revenue 1386371541 831286490 66.77
Cost of revenue 837345809 488050917 71.57
Selling expenses 41815693 31485447 32.81
General and administrative expenses 55485146 46595295 19.08
Research and development expenses 271689981 192792044 40.92
Financial expenses -2312067 -3060677 -24.46
Net income 198427708 104051961 90.70
Non-GAAP net income 220215672 122809951 79.31
Net cash flow from operating activities 31460857 36055511 -12.74
Net cash flow from investing activities -119672349 423821658 -128.24
Net cash flow from financing activities -38832903 -68042287 -42.93
Revenues by Product Category
Chip Module Others
2021 39.9% 58.7% 1.5% 2021 Revenues
by Area
Mainland China
Rest of the world
202053.1%45.7%1.2%67%
0.0%30.0%60.0%90.0%120.0%
Key Financial Indicators
60.0%
Overall GM Chip GM EBITDA Margin SG&A as % of sales R&D as % of sales
50.0%48.9%
45.7%
41.3%
40.0%39.6%
30.0%
23.2%
20.0%19.6%16.8%
14.9%
10.0%9.4%7.0%
0.0%
2020202120202021202020212020202120202021
17ESPRESSIF SYSTEMS｜2021 ANNUAL REPORT｜MANAGEMENT REPORT
Research and Development
R&D Investment
R&D investment is at the heart of Espressif Systems’ development. During the reporting
period R&D cost CNY 271.69 million which marked a 40.92% increase compared to
2020. At the same time the R&D-to-sales ratio was 19.60% in 2021.
Espressif’s escalating R&D investment cost can be attributed to the increase in R&D
staff the implementation of the company’s stock incentive plans as well as software
and licensing fees which increased significantly year-over-year.Fiscal Year
CNY 2021 2020 change
R&D Expenses 271689981 192792044 40.92%
R&D-to-sales ratio 19.60% 23.19%
Intellectual Property 210
Applied for
We seek to protect our technology through a combination of patents software copyright
and trade secrets. By the end of December 2021 the Company had been granted 119
patents. We continue to submit new patent applications relating to our recent R&D 119
innovations. Granted
List of Intellectual Property Rights Applied and Granted
2021 Cumulative number
Applied for Granted Applied for Granted
Invention patents 13 18 114 62
Utility model patents 0 1 26 26
Design patents 0 0 1 1
Software copyright 1 had 2 19 19
Others 14 5 50 11
Total 28 26 210 119N.B.: The number of patents that have been “applied for" does not include the rejected applications in China or the PCT patent applications notsubmitted to any particular country or any patent applications beyond the reporting period. The number of “granted" patents includes those withexpired IP rights. The category of “others” includes overseas (non-Chinese) patent applications i.e. the PCT patent applications U.S. patent
applications through the PCT route or the Paris Convention route as well as patent applications in India.
18ESPRESSIF SYSTEMS｜2021 ANNUAL REPORT｜MANAGEMENT REPORT
R&D Employees
We are proud of our talented diverse and multicultural workforce. As of Dec 31 2021
across our eight branches worldwide we have employed 517 people more than 75% of
whom are in engineering roles. Meanwhile we have expanded our business beyond Wi-
Fi MCUs thus offering innovative solutions to wireless connectivity and processing
including AI RISC-V MCU Wi-Fi 6 Bluetooth LE Thread Zigbee and other IoT-related
technologies.Since the research and development of software and hardware are inextricably
intertwined we constantly invest in software technology too. Hence we are currently
focused on AIoT technologies including toolchains compilers operating systems
application frameworks AI algorithms Cloud products apps etc. Our aim is to make
Espressif a one-stop solution-provider offering anything relating to hardware software
and the Cloud.Fiscal Year
20212020
R&D employees 388 340
R&D employees as a percentage of total employees 75.05% 75.72%
Total compensation of R&D employees (CNY in thousands) 200254 143563
Average compensation of R&D employees (CNY in thousands) 550 490
272 million in R&D expenses
R&D Expenses R&D Employees
25%76%75%
23%27271%67%388
20%57%57%340
4018%.9%16%16%193388246
change% R&D employees
120
162
1975.6100%496875%
R&D-to-sales 30 R&D employee
ratio 2016 2017 2018 2019 2020 2021 2016 2017 2018 2019 2020 2021 percentage
R&D expenses (in million) R&D-to-sales ratio R&D employees R&D employees %
19ESPRESSIF SYSTEMS｜2021 ANNUAL REPORT｜MANAGEMENT REPORT
Ownership of Securities
Basic information of securities
Share types Ordinary share
Share capital 80158963 (as of December 31 2021)
Listing Shanghai Stock Exchange (SSE)
Ticker 688018.SH
Listing Date 2019-07-22
Shareholder Structure as of Dec 31 2021
Shareholder Share Numbers Percentage (%)
Espressif (Hong Kong) Investment Ltd. 34860000 43.49
Yadong Beichen Investment Management Co. Ltd. 3370061 4.20
Shinvest Holding Ltd. 2804446 3.50
BOC - Franklin Templeton Sealand Fund 1344085 1.68
ABC - Franklin Templeton Sealand Fund 1047539 1.31
Ningbo Meishan Free Trade Port Le Tun Investment Management
Partnership (Limited Partnership) 1046030 1.30
BOC - Taixin Medium and Small Cap Selected Stock Securities
Investment Fund 940000 1.17
Jingyang Wang 937210 1.17
New China Life Insurance Company Ltd.－Group Annuity Insurance－ 818651 1.02
018L－FH001 SH
BOC - Cathay Pacific CES Semiconductor Chip ETF 689695 0.86
Top ten shareholders 47857717 59.70
Other public shareholders 32301246 40.30
Total of outstanding shares 80158963 100.00
20ESPRESSIF SYSTEMS｜2021 ANNUAL REPORT｜MANAGEMENT REPORT
Stock-Based Compensation
Espressif has three ongoing restricted stock incentive plans. The fair value of the
restricted stock incentive plans is estimated using the Black-Scholes model. The
following table presents details of stock-based compensation costs acknowledged in
the Consolidated Statements of Income.Restricted Stock Incentive Plans
Proportion of
Number of Ratio of Number of Awarded
Underlying Underlying Employees in Employees to Grant Price
Plan Award Type Shares Shares (%) the Plan Total (%) (CNY)
2019 restricted stock Class II restricted
incentive plan stocks 288300 0.3597 21 4.06 63.625
2020 restricted stock Class II restricted
incentive plan stock 240787 0.3004 169 32.69 93.625
2021 restricted stock Class II restricted
incentive plan stock 1093164 1.3637 246 47.58 94.500
Stock-Based Compensation
Fiscal Year
CNY g 2021 2020 2019
Selling expenses 897990 588065
G&A expenses 1722458 1235804 164228
R&D expenses 19167516 16934121 1938593
Total stock-based compensation 21787964 18757990 2102821
21ESPRESSIF SYSTEMS｜2021 ANNUAL REPORT｜MANAGEMENT REPORT
Risks and Uncertainties
Financial Risk
The Company performs periodic credit evaluations of its customers’ financial condition
and generally requires no collateral from its customers. The Company provides an
allowance for expected credit losses based on the net amount expected to be collected
on such receivables. Losses have not been significant for any of the periods presented.R&D Risk
Espressif’s research and development strategy is focused on leveraging new technologies
for the creation of innovative AIoT products. Any delays or changes in the development of
these technologies by our industry partners or a failure of our products to achieve market
acceptance could compromise our competitive position.Competitors
As the market for AIoT products grows we face an increasing antagonism from relatively
large competitors such as Realtek MediaTek Infineon NXP Qualcomm and others.Intense competition from current players as well as new entrants may reduce our product
sales and market share.Suppliers
A significant portion of the Company’s products is fabricated by Taiwan Semiconductor
Manufacturing Co. (TSMC). The inability of TSMC to deliver wafers to the Company in a
timely manner could impact the production of the Company’s products for a substantial
period of time which could have an adverse effect on the Company’s business financial
condition results of operations and cash flow.Customers
The Company sells directly to end customers distributors solution providers and contract
manufacturers. Our customers are a mix of several big customers and numerous small
customers. The concentration ratio for our top-five customers was 29.05% 42.18% and
50.96% during the fiscal years of 2021 2020 and 2019 respectively. None of the
customers accounted for greater than 10% of our revenue during the fiscal year of 2021.
22ESPRESSIF SYSTEMS｜2021 ANNUAL REPORT｜CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Financial Statements
Consolidated Balance Sheet
CNY December 31 2021 December 31 2020
Assets
Current assets:
Cash and bank balances 367149078 503239989
Transactions of monetary assets 747409285 854530463
Notes receivable 11600177 3710773
Accounts receivable net 306823758 182138716
Prepayments 8172703 6312319
Other receivables 9519869 13884859
Including: Interest receivable 298796
Inventories 326168928 196155326
Other current assets 210555311 12515259
Total current assets 1987399110 1772487705
Non-current assets:
Investment in other equity assets 56600700 6646876
Fixed assets 46176368 24991572
Construction work in progress 4868345
Right-of-use assets 21731123
Intangible assets 3191335 4036053
Long-term deferred expenses 7582637 6714956
Deferred income tax assets 6374870 9885643
Total assets 2129056143 1829631150
00
23ESPRESSIF SYSTEMS｜2021 ANNUAL REPORT｜CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheet
CNY December 31 2021 December 31 2020
Liabilities & Shareholders’ Equity
Current liabilities:
Accounts payable 138572198 83093192
Contract liabilities 17184196 3569826
Payroll payable 66168763 49476684
Taxes payable 6472494 489933
Other payable 754261 1048619
Non-current liabilities due within one year 8641928
Total current liabilities 237793839 137678254
Non-current liabilities:
Lease liabilities 12116036
Deferred income tax liabilities 56128356 50822540
Total liabilities 306038230 188500794
Owners’ equity (or shareholders' equity):
Share capital 80158963 80030500
Capital reserves 1266771034 1235113896
Other comprehensive income -15711579 -7401076
Surplus reserves 33462951 15428165
Retained earnings 458336543 317958872
Total shareholders’ equity 1823017913 1641130356
Total liabilities and shareholders' equity 2129056143 1829631150
24ESPRESSIF SYSTEMS｜2021 ANNUAL REPORT｜CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Income Statement
End of Year
CNY December 31 2021 December 31 2020
Revenue 1386371541 831286490
Cost of Revenue 837345809 488050917
Gross Profit 549025732 343235573
Taxes and surcharges 3556395 849935
Selling expenses 41815693 31485447
General and administrative expenses 55485146 46595295
Research and development expenses 271689981 192792044
Financial expenses -2312067 -3060677
Including: Interest expenses 608767
Interest income 4379324 5535051
Add: Other income 4251502 5619810
Investment income (mark"-" for loss) 20794725 28328313
Incomes from changes in fair value (mark"-" for loss) 4509285 1530463
Credit impairment losses (mark"-" for loss) -13830 83916
Assets impairment losses (mark"-" for loss) 34567 322345
Assets disposal income (mark"-" for loss) -2124
Operating Income 208364710 110458376
Add: Non-operating revenues 66231 38227
Less: Non-operating expenses 100817 37409
Income before income taxes 208330124 110459194
Provision (benefit) for income taxes 9902416 6407233
Net Income 198427708 104051961
00
Earnings per share
Basic 2.4775 1.3006
Diluted 2.4566 1.3006
End of Year
CNY December 31 2021 December 31 2020
Net Income 198427708 104051961
Other comprehensive income (loss) after tax
Changes to the fair value of investment in other equity instruments 11929 -15150
Currency translation reserves -8322431 -23445049
Other comprehensive income (loss) -8310502 -23460199
Comprehensive income 190117205 80591761
25ESPRESSIF SYSTEMS｜2021 ANNUAL REPORT｜CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Cash Flow Statement
End of Year
CNY December 31 2021 December 31 2020
Operating Activities
Cash from sales of merchandise and provision of services 1453744622 869774621
Tax refund 37691770 20697886
Other received cash related to operational activities 8720037 12107089
Subtotal of cash inflow from operational activities 1500156429 902579596
Cash paid for merchandise and services 1105365342 615349137
Cash paid to and for employees 232723048 164201039
Cash paid for taxes and surcharges 41903120 16548700
Other paid cash related to operational activities 88704063 70425209
Subtotal of cash outflow from operational activities 1468695573 866524086
Net cash flow provided by operating activities 31460857 36055511
Investment activities
Cash arising from disposal of investments 3096596236 4337234513
Cash arising from investment income 3266350
Net cash arising from disposal of fixed assets intangible assets and other 12510
lOotnhge-rt erermce aivsesde tcsash related to investment activities 1535102
Subtotal of cash inflow from investment activities 3101410198 4337234513
Cash paid for purchase and construction of fixed assets intangible assets
and other long-term assets 31912546 21702855
Cash paid for investments 3187670000 3891710000
Other paid cash related to investment activities 1500000
Subtotal of cash outflow from investment activities 3221082546 3913412855
Net amount of cash flow provided by investment activities -119672349 423821658
Financing activities
Cash arising from the issuance of common stock 9997637 1957713
Including: Cash arising from subsidiaries absorbing investments by
Subtomtianlo orift yc asshhar ienhflooldwe rfsrom financing activities 9997637 1957713
Cash paid for distribution of dividends and profits or payment of interests 40015250 70000000
Including: dividends and profits paid to minority shareholders by
Othseur bpsaiiddi acraiessh related to financing activities 8815291
Subtotal of cash outflow from financing activities 48830541 70000000
Net cash flow provided by financing activities -38832903 -68042287
Impact of fluctuation in exchange rate on cash and cash equivalents -9052722 -24587777
Net increase in cash and cash equivalents -136097117 367247104
Add: Cash and cash equivalent at the commencement of the period 503239843 135992739
Cash and cash equivalents at the end of the period 367142726 503239843
26ESPRESSIF SYSTEMS｜2021 ANNUAL REPORT｜CONSOLIDATED FINANCIAL STATEMENTS
Additional Information on Cash Flow Statement
End of Year
CNY December 31 2021 December 31 2020
Additional information
Net income 198427708 104051961
Adjustments to reconcile net income to cash provided by operating activities:
Add: provision for impairment of assets -34567 -322345
Credit impairment provision 13830 -83916
Depreciation of fixed assets 11167228 9566370
Depreciation of right-of-use assets 7547081
Amortization 844718 761769
ofA inmtaonrtgizibalteio n of long-term prepaid expenses 4129969 3080182
Losses on disposal of fixed assets intangible assets and other long-term
assets (mark"-" for income) 2124
Losses on scrapping of fixed assets (mark"-" for income) 162 129
Losses on fair value changes（mark"-" for income） -4509285 -1530463
Financial expenses（mark"-" for income） 1700139 2185811
Losses on investment（mark"-" for income） -20794725 -28328313Decrease on deferred income tax assets（mark”-" for increase） 3568877 -7382277
Increase on deferred income tax liabilities（mark"-" for decrease） 5305815 12787379
Changes in operating assets and liabilities:
Decrease in inventories（mark"-" for increase） -129902049 -97761746
Decrease in operational receivables（mark"-" for increase） -159345382 -50969810
Increase in operational payables（mark"-" for decrease） 91379998 71242790
Others 21959215 18757990
Net cash flow provided by operating activities 31460856 36055511
27ESPRESSIF SYSTEMS｜2021 ANNUAL REPORT｜CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statement of Changes in Equity
Other
Capital comprehensive Surplus Retained
CNY Share capital reserves income reserves earnings Total equity
Balance as of December 31 2019 80000000 1214428693 16059123 11122473 288212604 1609822892
Comprehensive income net of tax
Net Income 104051961 104051961
Other comprehensive income -23460199 -23460199
Transactions with owners
Capital increase 30500 4399238 4429738
Stock-based compensation 16285965 16285965
Surplus reserves 4305692 -4305692
Dividends -70000000 -70000000
Balance as of December 31 2020 80030500 1235113896 -7401076 15428165 317958872 1641130356
Comprehensive income net of tax
Net Income 198427708 198427708
Other comprehensive income -8310502 -8310502
Transactions with owners
Capital increase 128463 20963006 21091469
Stock-based compensation 10694132 10694132
Surplus reserves 18034786 -18034786
Dividends -40015250 -40015250
Balance as of December 31 2021 80158963 1266771034 -15711578 33462951 458336543 1823017913
28ESPRESSIF SYSTEMS｜2021 ANNUAL REPORT｜FURTHER INFORMATION
Further Information
Terms and Conditions of the Annual Report
Responsibility Statement
The Board of Directors the Board of Supervisors and executive management of the
Company warrant that the contents of this annual report are true accurate and
complete and do not contain any false information misleading statements or material
omissions severally and jointly accepting any legal responsibility thereof.Shanghai 10 March 2022
Espressif Systems
Board of Directors Board of Supervisors
Teo Swee Ann Lv Zhihua
Founder and Chairman Employee elected
Ng Pei Chi Fu Hanyu
Information Technology Officer Shareholder elected
Teo Teck Leong Wang Yiwen
Shareholder elected Shareholder elected
Xu Xin
Shareholder elected Executive Management
Lan Yuzhe Teo Swee Ann
Independent Director Founder and CEO
Koh Chuan Koon Wang Jue
Independent Director Deputy General Manager
Lee Sze Chin Shao Jingbo
Independent Director Financial Director
Forward-looking Statements
This report contains forward-looking statements and/or assessments about the SPRESE SIF
business financial condition performance and strategy of the Espressif Group. These
statements and/or assessments are based on assumptions and management
expectations resting upon currently available information and current estimates. These Declaration
are subject to a multitude of uncertainties and risks many of which are partially or
entirely beyond Espressif’s control. Espressif’s actual business development financial S
condition performance and strategy may therefore differ from what is discussed in this YSTEMS
report.
29ESPRESSIF SYSTEMS｜2021 ANNUAL REPORT｜FURTHER INFORMATION
Independent Auditor’s Report
To the Shareholders of
Espressif Systems (shanghai) Co. Ltd.OpinionWe have audited the financial statements of Espressif Systems (Shanghai) Co. Ltd. (“theCompany”) which comprise the consolidated balance sheet and balance sheet as of
December 31 2021 the consolidated income statement income statement
consolidated cash flow statement cash flow statement the consolidated statement of
changes in equity and statement of changes in equity for the year then ended and the
notes to the financial statements.In our opinion the enclosed financial statements were prepared in accordance with the
Accounting Standards for Business Enterprises (the “ASBE”) in all material aspects and
present fairly the consolidated and the company's financial positions as of December
31 2021 the consolidated and the company’s results of operations and the
consolidated and the company's cash flows for the year then ended.Basis For the Opinion
AUDIT
We conducted our audit in accordance with China’s Standards on Auditing (the “CSA”).Our responsibilities under those standards are further described in the section of our
report detailing the “Auditor’s responsibilities for the audit of the financial statements”.We are independent of the Company in accordance with the CSA’s Code of Ethics for
Professional Accountants (the “Code”) and we have fulfilled our other ethical
responsibilities again in accordance with the Code. We believe that the audit evidence
we have obtained is sufficient and appropriate for providing the basis of our opinion.Key Audit Matters
Key audit matters are those matters that in our professional judgement were of the
greatest significance in our auditing of the financial statements for the financial year
from January 1 2021 to December 31 2021. These matters were addressed in the
context of our audit of the financial statements as a whole and in forming our opinion
thereon we do not provide a separate opinion on these matters.
30ESPRESSIF SYSTEMS｜2021 ANNUAL REPORT｜FURTHER INFORMATION
Key Audit Matter How our audit addressed the Key Audit Matter
Revenue Recognition
Espressif’s main business Our main auditing procedures for revenue recognition are as follows:
includes the sales of chips and
modules which created a > Understanding and evaluating the effectiveness of the internal control
revenue of CNY 1386371500 in design relating to the revenue recognition of product sales and testing
2021.
the effectiveness of the critical control point.Since the operating revenue is a > Evaluating the appropriateness of the sales revenue recognition policy
key performance indicator there by interviewing the management reviewing the main terms of the sales
is an inherent management risk contracts and the time point of major control transfers relating to the
when adjusting the time point of revenue recognition.revenue recognition in order for
it to coincide with certain goals > Checking the origin of revenue by performing analytical procedures for
or expectations. Therefore we the operating revenue including monthly sales analysis as well as gross
identify revenue recognition too profit analysis categorized by customers and products.as a key auditing matter. > Checking the authenticity of revenue by sampling supporting
documents related to revenue recognition such as sales contracts
shipping records and customer receipts.> Performing a confirmation procedure on the current amount of sales by
using the sampling method.> Checking commercial information and the transaction prices paid by
important customers in order to determine whether any abnormal
transactions were made by the company.> Performing a cut-off test to check whether the revenue recognition is
recorded within the correct accounting period.Inventory
As of December 31 2021 the Our main auditing procedures for the inventory are as follows:
inventory balance amounts to
CNY 332217135 with provision > Evaluating the effectiveness of the internal control design of the
for inventory impairment CNY inventory management and testing the effectiveness of the critical control
6048207 and the net book point.
value amounts to CNY
326168928.
> Analyzing the rationality of the inventory balance fluctuation at the end of the reporting period by investigating its production cycle and stock
Since most inventories are policy.stored in warehouses entrusted
by external processors and third > Performing a confirmation procedure on the third party warehouse.parties and the determination of > Implementing a supervision on the inventory check at the end of the
provision for inventory reporting period.impairment involves significant
management judgment and > Evaluating whether the provision for inventory impairment at the end of
estimation we identify the the reporting period is fully accrued by conducting storage age analysis
existence of inventories and the and by reviewing the calculation model and the results of provision for
provision for inventory inventory impairment.impairments as key matters.> Calculating the inventory turnover and making a comparison to other
similar companies.
31ESPRESSIF SYSTEMS｜2021 ANNUAL REPORT｜FURTHER INFORMATION
Other Information
The management of Espressif Systems (Shanghai) Co. Ltd. (“the management”) is
responsible for any other information comprising all components of the 2021 company
report apart from the financial statements and the auditor’s report about them.Our opinions on the financial statements and the group management report do not
cover the other information and consequently we do not express an opinion or any
other form of assurance conclusion thereof.In connection with our audit our responsibility is to read the other information and in so
doing consider whether the other information:
> is materially inconsistent with the consolidated financial statements with the group
management report information audited for content or our knowledge obtained in the
audit or
> otherwise appears to be materially misstated.If based on the work we have performed we conclude that there is a material
misstatement of this other information we are required to report that fact. However we
have nothing to report in this regard.Responsibilities of Management for the Financial
Statements
The management is responsible for the preparation of financial statements that give a
true and fair view in accordance with the ASBE and for the design implementation and $
maintenance of such internal controls as the management deems necessary to enable
the preparation of financial statements that are free from material misstatements
whether due to fraud or error.In preparing the financial statements the management is responsible for assessing the
Company’s ability to continue its operation disclosing as applicable any matters
related to ongoing concerns and using them as a basis of accounting unless the
management either intends to liquidate the Company or cease its operations having no
realistic alternative but to do so.Auditors’ Responsibilities for the Auditing of the
Financial Statements
Our objectives are to obtain reasonable assurances about whether the financial
statements as a whole are free from material misstatements either due to fraud or
errors and to issue an auditor’s report that includes our true opinion. Reasonable
assurances provide a high level of confidence but are not a guarantee that an audit
conducted in accordance with CSAs will always detect a material misstatement when
and where it exists.
32ESPRESSIF SYSTEMS｜2021 ANNUAL REPORT｜FURTHER INFORMATION
Misstatements can arise from fraud or errors and are considered substantial if
individually or in aggregate they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial statements.As part of an audit in accordance with CSAs we exercise our professional judgment
and maintain professional skepticism throughout the audit. We also:
> Identify and assess the risks of substantial financial misstatements either due to fraud
or errors; design and perform auditing procedures in response to those risks and obtain
auditing evidence that is sufficient and appropriate for providing a basis for our opinion.The risk of not detecting a material misstatement resulting from fraud is higher than one
resulting from error as fraud may involve collusion forgery intentional omissions
misrepresentations or the override of internal controls.> Obtain an understanding of internal controls relevant to the audit in order to design
auditing procedures that are appropriate to the circumstances but not for the purpose
of expressing an opinion on the effectiveness of the Company’s internal controls.> Evaluate the appropriateness of accounting policies used and the reasonableness of
accounting estimates and related disclosures made by the management.> Conclude on the appropriateness of the management’s use of a growing concern as
the basis of accounting and according to the auditing evidence obtained determine
whether a substantial uncertainty exists about events or conditions that may cast a
significant doubt on the Company’s ability to continue its operation. If we conclude that
there is substantial uncertainty we are required to draw users’ attention to our auditor’s
report on the related disclosures in the financial statements or if such disclosures are
inadequate to modify our opinion. Our conclusions are based on the auditing evidence
obtained up until the date of our auditor’s report. However future events or conditions
may force the Company to cease its operation altogether.> Evaluate the overall presentation structure and content of the financial statements
including the disclosures and determine whether the financial statements represent the
underlying transactions and events in a manner that achieves a fair presentation.> Obtain sufficient and appropriate auditing evidence about the financial information of
entities or business activities of the Company in order to express our auditing opinion
on the Company’s consolidated financial statements. We are responsible for directing
supervising and executing group audits and assume full responsibility for auditing
opinions.We communicate with those charged with governance among other matters on the
planned auditing scope timing and significant audit findings including any significant
deficiencies in internal controls that we may identify during our audit.
33ESPRESSIF SYSTEMS｜2021 ANNUAL REPORT｜FURTHER INFORMATION
We also provide those charged with governance with a statement that we have
complied with all relevant ethical requirements regarding our independence and we also
communicate with them all relationships and other matters that may reasonably be
thought to bear on our independence and where applicable any other related
protections.From the matters communicated to those charged with governance we determine
which matters are of the highest significance in the auditing of the financial statements
of the current period and are therefore the key auditing findings. We describe these
findings in our auditor’s report unless a law or regulation prohibits such public
disclosure about those findings or when -in extremely rare circumstances- we
determine that a finding should not be communicated in our report because the
adverse consequences of its disclosure would reasonably be expected to outweigh the
benefits of such communication for the public interest.Beijing 10 March 2022
Baker Tilly China
Ma Gang Li Xiaomin
Chinese Certified Public Accountant Chinese Certified Public Accountant
34ESPRESSIF SYSTEMS｜2021 ANNUAL REPORT｜FURTHER INFORMATION
List of abbreviations
AI Artificial Intelligence
AIoT Artificial Intelligence and Internet of Things
B2D2B Business-to-Developer-to-Business
Bluetooth LE Bluetooth Low Energy
CEO Chief Executive Officer
CES Consumer Electronics Show
COVID-19 Coronavirus Disease-2019
CSA China Standards on Auditing
EBITDA Earnings Before Interest Taxes Depreciation and Amortization
Espressif ESPRESSIF SYSTEMS (SHANGHAI) CO. LTD.ETF Exchange Traded Fund
EV Electric Vehicle
G&A General and Administrative
GM Gross Margin
IC Integrated Circuit
IoT Internet of Things
OBD On-Board Diagnostics
PCS Piece of Chips
POS Point of Sale
R&D Research & Development
RF Radio Frequency
RISC-V MCU Reduced Instruction Set Computer-V Microcontroller Unit
ROE Return on Earnings
RTOS Real-Time Operating System
SG&A Selling General and Administrative
SH Shanghai
SoCs System on Chips
TPPS Third-Party Plugins
TSR Techno Systems Research
YoY Year-on-Year
35ESPRESSIF SYSTEMS｜2021 ANNUAL REPORT｜
SHARE
INNOVATE
SHARE
Investor Relations
ir@espressif.com
Official Platforms
www.espressif.com
AIoT
blog.espressif.com
github.com/espressif
esp32.com I esp8266.com I bbs.espressif.com
Social Media
twitter.com/EspressifSystem
facebook.com/espressif
linkedin.com/company/espressif-systems
youtube.com/EspressifSystems
instagram.com/espressif_systems_official
bilibili.espressif.com
Copyright ? 2022 Espressif Systems (Shanghai) Co. Ltd. All rights reserved. All trade names trademarks and registered trademarks mentioned in this
document are property of their respective owners and are hereby acknowledged. The term “Espressif” refers to Espressif Systems (Shanghai) Co.Ltd. and/or its subsidiaries. This report is prepared in Chinese and English respectively. In case of any discrepancies between Chinese and foreign
interpretations the Chinese version shall prevail.