乐鑫科技:Espressif Systems 2023 Q2 & Half-Year Report

Q2
Half-Year
Report
2023Contents
0304
About Message from the CEO
Espressif
0607
Facts About Core Technologies
Espressif
08
Business 08 Key Financial Data (Unaudited)
Highlights
08 Financial Indicators (Unaudited)
09 Financial Analysis
10
Management 10 Business Strategy 19 Developer Community Content
Report
11 Key Products - IoT Chips 20 Business Model
12 Key Products - AIoT Chip Matrix 21 Research and Development
13 Software Solutions 23 Ownership of Securities
15 Value-Added Services 24 Stock-Based Compensation
16 Market 25 Risks and Uncertainties
17 Core Competitiveness
26
Consolidated 26 Consolidated 29 Consolidated Cash Flow
Financial Balance Sheet Statement
Statements 28 Consolidated 30 Consolidated Statement of
(Unaudited) Income Statement Changes in Equity
31
Further 31 Terms and Conditions
Information of the Report
32 List of abbreviationsESPRESSIF SYSTEMS | 2023 Q2 & HALF-YEAR REPORT | FAABCOTUST A EBSOPURTE SESIPFRESSIF
About Espressif
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 around 600 members of
staff from almost 30 countries and regions +77% 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.global Wi-Fi MCU products distributed millions of users
market share* all over the world
Our R&D Centers
China
Shanghai Hefei
Suzhou Wuxi
Brazil India
Campinas Pune
Czech Singapore
Republic
Brno
* Market share data from TSR
3ESPRESSIF SYSTEMS | 2023 Q2 & HALF-YEAR REPORT | MESSAGE FROM THE CEO
?M级标e题ssage from
TEXtT he CEO“Espressif has consistently demonstrated its ability to thrivein the face of challenges and we are confident that this will
continue in 2023 and beyond. We remain committed to
seizing every opportunity to develop even better solutionsto address our customers' future needs.”
Teo Swee Ann
Espressif’s Founder & CEO
First and foremost I would like to highlight our achievement of sustained growth during the challenging
macroeconomic conditions in the second quarter of 2023.I would like to share some exciting updates regarding our flagship product the ESP32-S3 and its
remarkable growth in sales. In particular the ESP32-S3 has experienced a significant increase in demand
within the LCD-related applications and the AI-related voice control market. This achievement showcases
the exceptional capabilities of our product and its versatility across diverse industries.In addition to its existing capabilities ESP32-S3 now supports the integration of OpenAI APIs with IoT
devices. This integration opens up a world of possibilities enabling developers to harness the power of
OpenAI within their IoT applications. This achievement is a testament to our commitment to delivering
cutting-edge solutions that meet the evolving needs of our IoT customers.
4ESPRESSIF SYSTEMS | 2023 Q2 & HALF-YEAR REPORT | MESSAGE FROM THE CEO
We have also recently released an English book about ESP32-C3 "Wireless Adventure: A Comprehensive
Guide of IoT". This book has been warmly welcomed by developers' communities around the world. Its
comprehensive and detailed approach to understanding the ESP32-C3 SoC and our senior engineers’
knowledge of IoT has earned it praise and recognition from both seasoned professionals and aspiring
enthusiasts. Over a month since June 14 2023 the Espressif website recorded an impressive download
count of 323189 for the PDF book excluding any downloads from third-party platforms. Our efforts have
not only contributed to the knowledge sharing within our community but have also reinforced Espressif's
position as a leader in providing valuable resources to our stakeholders.Following ESP8266 and ESP32 ESP32-S3 and ESP32-C3 have now emerged as our new flagship
products contributing to our sustainable growth.With the adoption of the Matter standard and the completion of Matter certification by many of our
customers we are excited to announce that we will witness the launch of the first wave of Matter-
compliant products in Q3.In addition to our Wi-Fi product line meeting the requirements for Matter over Wi-Fi we are pleased to
announce that our ESP32-H2 product line has entered mass production. It is expected to meet the
requirements for Matter over Thread enabling us to capture new market share starting in Q3.Furthermore building on our successful achievements in the Wi-Fi 4 IoT area we are expanding into the
new markets of Wi-Fi 6 Bluetooth Thread and SoC. we will continue to invest in research and
development and technological innovation striving to deliver superior products and solutions. We will
closely collaborate with our customers and partners keeping pace with market demands and trends and
flexibly adjusting our operations. We firmly believe that with the capabilities and dedication of our team we
will continue to achieve even greater success.
5ESPRESSIF SYSTEMS | 2023 Q2 & HALF-YEAR REPORT | FACTS ABOUT ESPRESSIF
Facts About Espressif
8775913034
R&D R&D employee female
centers employees employees nationalities employees
92 K+
open-source Espressif-powered
projects
GitHub
3.87 M+
views of the most popular videos
of Espressif-powered projects
1.61 M+
community videos about ESP32
and ESP8266
ok Bo
200+
books written about Espressif’s
SoCs in 10+ languages
6
YouTubeESPRESSIF SYSTEMS | 2023 Q2 & HALF-YEAR REPORT | FCAOCRTES TAEBCOHUNTO ELSOPGRIESSIF
Core Technologies
TEXT
SoCs AI
AFE (Audio Front-End) AlgorithmsESP8266 ESP32 ESP32-S ESP32- qualified as a “Software Audio Front-EndC ESP32-H and ESP32-P Series Solution” for Amazon Alexa Built-in devices.Espressif offers integrated reliable and
energy-efficient SoCs for Wi-Fi         3A Audio Algorithms
Bluetooth Low Energy Thread and Zigbee including Acoustic Echo Cancelation (AEC)
to various segments of the IoT market. Audio Noise Suppression (ANS) and Automatic
Gain Control (AGC) which significantly reduce
noise and echo in calls keeping high-quality
voice intercoms stable at all times.OS
ESP-IDF Cloud
Espressif’s official IoT Development Framework.It provides a self-sufficient SDK for any generic ESP RainMaker
application-development on these platforms
using programming languages such as C and A comprehensive development-free and
C++. maintenance-free AIoT solution for private Cloud deployment.ESP-IDF currently powers millions of devices in
the field and enables building a variety of It is an all-inclusive solution that covers
network-connected products ranging from everything from the underlying chip to device
simple light bulbs and toys to major appliances firmware third-party voice-assistant
and industrial devices. integrations mobile apps and the dashboard.Customers can build their own AIoT devices
and ecosystem with ESP RainMaker.Software
With our open-source software Matter
such as Espressif's IoT
Development Framework ESP-IDF One-stop Matter Solution
Audio Development Framework
ESP-ADF Mesh Development This is the culmination of
Framework ESP-MDF Cloud Espressif’s ongoing contribution to
Connectivity Platform ESP the Matter platform in various
RainMaker Facial Recognition areas including protocol
Development Framework ESP- formulation core stack
WHO and Voice-Controlled implementation and certification
Assistant ESP-Skainet we have test events.developed a framework for
TEXbTuilding AIoT applications which is both complete and innovative. 7ESPRESSIF SYSTEMS | 2023 Q2 & HALF-YEAR REPORT | BUSINESS HIGHLIGHTS
Business Highlights
Key Financial Data (Unaudited)
Three Months Ended Six Months Ended
CNY Jun 30 2023 Jun 30 2022 Jun 30 2023 Jun 30 2022
Consolidated Statement of Income Data
Revenue 348880535 324870817 666997977 613818881
Gross profit 142936609 128253838 272454655 246843778
Selling expenses 13351348 10384806 25524250 19579687
General and administrative expenses 15031928 13548558 28946961 26953099
Research and development expenses 92701560 77606270 178184574 152454559
Net income 33482914 35423132 64570344 63275224
Earnings per share:
Basic 0.8059 0.7880
Diluted 0.8059 0.7880
Jun 30 2023 Dec 31 2022
Consolidated Balance Sheet Data
Cash cash equivalent and investments 1316868658 1200219436
Working capital 1340350591 1518383808
Total assets 2199681460 2082796825
Long-term obligations 69453238 65591788
Total shareholders’ equity 1941958962 1826677535
Three Months Ended Six Months Ended
June 30 2023 June 30 2022 June 30 2023 June 30 2022
Consolidated Cash Flow Data
Net cash flow from operating activities 66406199 7345663 99699642 -29524843
Non-GAAP Adjustment
Stock-based compensation 9643201 638729 12267568 5463737
Non-GAAP net income 43126115 36061861 76837912 68738961
Financial Indicators (Unaudited)
Three Months Ended Six Months Ended
Jun 30 2023 Jun 30 2022 Jun 30 2023 Jun 30 2022
Gross margin 40.97% 39.48% 40.85% 40.21%
R&D-to-sales ratio 26.57% 23.89% 26.71% 24.84%
EBITDA margin 9.74% 12.26% 10.26% 11.98%
Weighted ROE 3.43% 3.46%
8ESPRESSIF SYSTEMS | 2023 Q2 & HALF-YEAR REPORT | BUSINESS HIGHLIGHTS
Financial Analysis
Espressif’s total revenue in the first half of the current fiscal year (2023) was CNY 667.00 million marking an increase of
8.66% from CNY 613.82 million of H1 2022. Currently the economic environment is still filled with uncertainty and
there are no visible factors indicating a positive recovery for individual customers. The company's revenue growth relies
on attracting more customers. The net income was CNY 64.57 million which marked an increase of 2.05% year-on-
year due to our increased R&D expenditure.The overall gross margin is 40.85% with the IoT chip gross margin reaching 47.51%. This overall gross margin stability
aligns with our target of 40%.The customers in China’s mainland prefer purchasing chips while the customers from the rest of the world and their
OEM/ODM in China’s mainland prefer modules. The revenue proportion of the module business can approximately
represent the income we directly and indirectly obtain from overseas.Revenue by Revenue by Sales Top-5 Customer
Area of H1 2023 Mode of H1 2023 Concentration Rate
42.2%
29.0%29.2%
26.4%
72.1%68.4%
China's
Rest of
Direct Indirect 2020 2021 2022 H1 2023
Mainland the World
Revenue by Product Category
Chip Module Others
H1 2023 33.2% 65.6% 1.1%
H1 2022 30.5% 68.8% 0.6%
Key Financial Indicators
H1 2022 H1 2023
48.9%47.5%
40.2%40.8%
36.3%37.5%
24.8%26.7%
12.0%10.3%
7.6%8.2%
Overall GM Chip GM Module GM EBITDA
SG&A as % of ? R&D as % of ?
Margin sales sales
9ESPRESSIF SYSTEMS | 2023 Q2 & HALF-YEAR REPORT | MANAGEMENT REPORT
Management Report
Business Strategy
Espressif Systems’ business strategy emanates from our service/product areas and our engagement with the
developer ecosystem.Our product and service areas include IoT chips OS-level development environments software tools application
solutions and value-added services such as Cloud and Matter. The above-mentioned products ensure that we are in
the heart of numerous commercial AIoT applications in different markets including smart home consumer electronics
industrial automation healthcare etc.Products Solutions Value-added services
Cloud
SoCs HMI Smart
Audio
service
Displays Solutions
Modules
Matter
Face
Low-Power
Solution
Recognition Solutions
DevKits … …
OS-level development environments & software tools
Customers
Brands OEM/ODMs Module Houses Solution providers Makers
10ESPRESSIF SYSTEMS | 2023 Q2 & HALF-YEAR 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 product portfolio while in 2021 we released our first Thread/Zigbee/Bluetooth LE 5 combo chip and a 2.4GHz
Wi-Fi 6 chip. In 2022 we released our first 2.4 & 5GHz Wi-Fi 6 chip and our product range has expanded to Wireless
SoCs.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 the main short- and medium-range connectivity technologies.Our core technologies are self-developed including connectivity IPs RF components RISC-V IPs software
frameworks tools AI functions etc.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.Wireless SoC
Medium Range Short Range
Wi-Fi 6E Bluetooth 5.3 (LE) Thread
5GHz Wi-Fi 6 Bluetooth 5.2 (LE) Zigbee
Connectivity
2.4GHz Wi-Fi 6 Bluetooth 5 (LE)
Wi-Fi 4 Bluetooth 4.2
RISC-V MCU AI Multimedia
32-bit Single-Core 96MHz Voice Wake-up H.264 Encoding
32-bit Single-Core 120MHz Voice Control
32-bit Single-Core 160MHz Face Recognition AI
Computing 32-bit Single-Core 240MHz
32-bit Dual-Core 400MHz
32-bit Multiple-Core
Technical Breadth
In progress
11
Technical DepthESPRESSIF SYSTEMS | 2023 Q2 & HALF-YEAR REPORT | MANAGEMENT REPORT
Key Products - AIoT Chip Matrix
ESP32 - P4 AI
Dual-Core
32-bit RISC-V MCU
400 MHz H.264 encoding
ESP 32 ESP32 - S3 AI
32-bit Xtensa MCU 32-bit Xtensa MCU
Dual-Core
Wi-Fi 4 Wi-Fi 4
240 MHz Bluetooth 4.2 Bluetooth 5 (LE)
ESP32 -S2 ESP32 - C5
32-bit Xtensa MCU 32-bit RISC-V MCU
Single-Core
Wi-Fi 4 2.4&5 GHz Wi-Fi 6
240 MHz Bluetooth 5 (LE)
Thread
Zigbee
ESP 8266 ESP32 - C3 ESP32 - C6
Single-Core
32-bit Tensilica MCU 32-bit RISC-V MCU 32-bit RISC-V MCU
160 MHz Wi-Fi 4 Wi-Fi 4 2.4GHz Wi-Fi 6
Bluetooth 5 (LE) Bluetooth 5 (LE)
Thread
Zigbee
ESP32 - C2
Single-Core
120 MHz 32-bit RISC-V MCU
Wi-Fi 4
Bluetooth 5 (LE)
ESP32 -H2
Single-Core
32-bit RISC-V MCU
96 MHz Bluetooth 5 (LE)
Thread
Zigbee
2014201620192020202120222023
12ESPRESSIF SYSTEMS | 2023 Q2 & HALF-YEAR REPORT | MANAGEMENT REPORT
Software Solutions
HMI Smart Displays
The solution has an innovative user-interface that enables data visualization
touch or knob control voice wake-up and recognition multi-mode gateway etc.It is widely used in smart-home control home appliance screens healthcare
industrial control and educational devices for children.Espressif’s HMI smart displays based on ESP32-S3 and ESP32-C3 SoCs are
designed to support RGB and SPI interfaces respectively.The RGB display is a common interface for smart-home control. ESP32-S3 is an
excellent choice for RGB interface LCDs. ESP32-S3 has a dual-core CPU with
powerful Al features.SPI is a common interface for small displays. The state-of-the-art technology of
ESP32-C3 allows it to dynamically adjust the operating frequency and switch
over to low-power modes.The solution is supported by ESP-IDF Espressif’s mature IoT development
framework with which users can easily build new applications.Low-Power Solution
Smart Switch
Based on ESP32-C2/ESP32-C3 the ESP Smart Switch
Solution allows customers to easily build Wi-Fi switches
with low power-consumption excellent Wi-Fi performance
security and reliability.Ultra-Low Power No Anti-Flicker Required
ESP-NOW protocol
ESP-NOW is a connectionless communication protocol defined by
Espressif which enables a direct quick and low-power control of
smart devices without the need of a router.ESP-NOW can work with Wi-Fi and Bluetooth LE and supports
ESP8266 ESP32 ESP32-S and ESP32-C series of SoCs.It’s widely
used in smart appliances remote controls sensors etc.
13ESPRESSIF SYSTEMS | 2023 Q2 & HALF-YEAR REPORT | MANAGEMENT REPORT
Audio Solutions
AFE (Audio Front-End) Algorithms
have a solid voice-controlled performance even in
noisy environments. Customers can use these
algorithms with Espressif’s powerful ESP32 and
ESP32-S3 SoCs in order to build high-performance
yet low-cost products with a voice user interface.Espressif's AFE algorithms have been qualified by
Amazon as an “Audio Front End” solution for Alexa
built-in devices.Offline smart-voice assistant
supports a configurable wake-word engine
(WakeNet) and an offline speech-recognition engine
(MultiNet) with up to 200+ offline commands and
acoustic algorithms.Face Recognition
ESP-WHO
is a face detection and recognition development framework
based on ESP32 and ESP32-S3.You can use it with the ESP-EYE or the ESP-WROVER-KIT
development board. Then by adding only a few peripherals
such as cameras and screens you can easily create
complete AIoT applications.Security High Performance
Local memory 10 frames per second
Expandability
Cost-Effectiveness Object detection
Object tracking
Hand-gesture recognition
14ESPRESSIF SYSTEMS | 2023 Q2 & HALF-YEAR REPORT | MANAGEMENT REPORT
Value-Added Services
Cloud
ESP RainMaker
This is a complete yet light-weight AIoT solution that
enables private Cloud deployment for our customers’
business in a simple cost-effective and efficient manner.Espressif offers a turnkey solution that includes product
firmware private Cloud and a dashboard as well as a
voice assistant and mobile apps. This allows customers
to build their very own brand of an IoT business in an
efficient affordable and speedy way.Matter
One-stop Matter Solution
Espressif is an active contributor to the development of
the Matter protocol. Espressif with its unique
combination of connectivity SoCs software and
complete solutions makes it easy for our customers to
build Matter-enabled smart-home devices of various
types. Espressif provides the most comprehensive
solutions for Matter including support for Wi-Fi or
Thread end-point devices Thread Border Routers and
Matter gateway reference designs.TEXT 15ESPRESSIF SYSTEMS | 2023 Q2 & HALF-YEAR REPORT | MANAGEMENT REPORT
Market
The market for wireless SoCs is truly diverse including applications for smart homes (e.g. smart lights air conditioners
ovens coffee machines etc.) consumer electronics (e.g. smart speakers drones etc.) industrial automation (e.g.mechanical arms) smart agriculture (e.g. soil PH detector CO2 detector etc.) healthcare (e.g. monitoring devices for
diabetes blood pressure etc.) energy control (solar energy devices EV chargers etc.) the internet of vehicles (OBD
devices dashboards etc.) and education (talking pens interactive whiteboards etc.).Although the consumer market shrunk in 2022 due to various macroeconomic factors digitalization in the non-
consumer sectors has brought us many new customers. Moreover we are encouraged by the gradual recovery in
demand observed during the first half of 2023.Consumer Industrial Smart
Smart Home
Electronics Automation Agriculture
Smart Ovens Smart Speakers Mechanical Arms Soil PH Detector
Energy Internet of
Healthcare Management Vehicles Education
Medical Detectors Smart Solar Intelligent Panels instrument panel Talking Pens
16ESPRESSIF SYSTEMS | 2023 Q2 & HALF-YEAR REPORT | MANAGEMENT REPORT
Core Competitiveness
Chip System
Operating Systems
Connectivity Technology
Development Environment
Chip Design Capability
Software Tools
Ecosystem Software
Documentation Software Solutions
Developer Communities Business Applications
Internet Platforms Cloud Services
Chip Competitiveness
Espressif takes pride in the invaluable experience that our R&D team leaders have in the field of wireless-
communication chips. For example Mr. Teo Swee Ann Espressif's founder and CEO and a Fellow of the Academy of
Engineering Singapore (SAEng) has over 20 years of experience in the semiconductor industry. He has 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 mechanisms. 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 with the above-mentioned SoCs 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.
17ESPRESSIF SYSTEMS | 2023 Q2 & HALF-YEAR REPORT | MANAGEMENT REPORT
ESP-IDF has established a fastidious release process and a support policy which ensures that customers can choose
a stable release while also getting important updates. Each stable release undergoes a rigorous QA process that
ensures production readiness at all times. 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 network
stacks protocol implementations and examples of common use cases. These components help developers focus on
their business logic while the SDK provides most of the building blocks 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
The company provides numerous software solutions including AI-related ones (e.g. offline/online voice recognition and
smart control AI image recognition etc.) Wi-Fi Mesh BLE Mesh HMI functions various peripheral drivers and other
functions covering all the development needs of our customers. These solutions greatly reduce the cost of application
development for our customers.Espressif’s AI Lab has developed Audio Front-End (AFE) algorithms that have been qualified as a “Software AudioFront-End Solution” to Amazon-Alexa Built-in devices. This is the result of Espressif’s incessant focus not just on the
connectivity of its own AIoT solutions but also on high-performance Machine Learning on the edge. Furthermore in
2022 our AI Lab launched the so-called 3A Audio Algorithms i.e. Acoustic Echo Cancelation (AEC) Audio Noise
Suppression (ANS) and Automatic Gain Control (AGC). Based on Espressif's 3A audio algorithms Espressif-powered
Real-Time Communication applications benefit from significantly reduced noise and echo in calls and sustained
stability in high-quality voice intercoms.Our newly-launched one-stop Matter solution including the fully-customized ESP-Matter SDK and Cloud services can
simplify and accelerate the development process of Matter-compatible products significantly. This is the culmination of
our ongoing contribution to the Matter platform in various areas including protocol formulation core stack
implementation and certification test events.Furthermore ESP RainMaker is a one-stop development-free and maintenance-free AIoT solution for private Cloud
deployment which reduces R&D costs and accelerates time-to-market. More specifically this is a complete system for
building AIoT products with a minimal amount of code which enables our customers to deploy and develop secure
customized AIoT solutions. It covers all of Espressif’s chips and modules device firmware voice-assistant integrations
phone apps and Cloud backend. This helps our customers avoid expensive investments in Cloud capabilities gain
independence and focus on innovating their core-value offerings.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's technologies. For example on GitHub
which is the largest provider of Internet hosting for software development there are more than 92000 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 200 digital and
physical books about Espressif’s SoCs in more than ten languages. 18ESPRESSIF SYSTEMS | 2023 Q2 & HALF-YEAR REPORT | MANAGEMENT REPORT
Developer Community Content
ITEM June 30 2023 Dec 31 2022 change%
GitHub (Worldwide open-source development platform)
ESP32 Projects 50513 41891 21%
ESP8266 Projects 41733 39294 6%
Gitee (Chinese open-source development platform)
ESP32 Projects 2793 2629 6%
ESP8266 Projects 1954 1868 5%
CSDN (Chinese Tech-blog platform)
Search results for ESP32 104521 93242 12%
Search results for ESP8266 40072 36286 10%
Hackaday (open-source hardware platform)
ESP32 projects 5204 4702 11%
ESP8266 projects 6192 6101 1%
Reddit
ESP32 group members 67361 59619 13%
ESP8266 group members [1] / 59004
bilibili (Chinese video-sharing platform)
Official account followers 27686 24064 15%
Official account views 779199 658235 18%
YouTube
Official account subscribers 16800 14800 14%
Official account views [2] 798987 810523 -1%
ESP32 community videos 766901 641926 19%
ESP8266 community videos 850730 778090 9%
Views of the most watched ESP32 community video around 3.9m around 3.4m
Views of the most watched ESP8266 community video around 1.7m around 1.6m
N.B.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 quarter
reported here unless otherwise stated.The search results of the keyword "ESP32" include the ESP32 series ESP32-C series ESP32-S series and ESP32-H series.[1] On May 31 2023 Reddit announced a policy change that will kill essentially some third-party Reddit app now operating. There have been Reddit-wide
blackouts in protest to this and r/esp32 & r/esp8266 have gone private as well. So we will stop updating the member numbers of the Reddit.[2] Due to the conversion of certain previously published videos to private the views on the official YouTube account have decreased compared to the end of 2022.
19ESPRESSIF SYSTEMS | 2023 Q2 & HALF-YEAR REPORT | MANAGEMENT REPORT
Business Model
Business-to-Developer-to-Business (B2D2B)
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 effective since the influence of developers on organizations of
all sizes has gained traction. In other words most developers are R&D employees in various companies and bring forth
business opportunities from the companies they work for.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.* 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 our 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 supports a large number of customers directly. In fact most of our revenue is gained through direct
sales.Others 32.9% Regional Distribution of Overseas Developers
(148 countries and areas not Download statistics for the ESP32-C3 English book from Espressif's official website
including China Mainland)
Brazil 1.7%
United States 20.8% Poland 2.0%
Sweden 2.1%
Spain 2.8%
Australia 3.0%
United Kingdom 7.0%
Netherlands 3.1%
Canada 3.1%
France 5.9%
Czech Republic 3.1%
Germany 5.4% Italy 3.3%
India 3.7%
20ESPRESSIF SYSTEMS | 2023 Q2 & HALF-YEAR 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 178.18
million which marked a 16.88% increase compared with that of 2022. At the same time the R&D-to-sales ratio was
26.71% in the first half of this fiscal year (2023).
Espressif’s escalating R&D investment cost can be attributed to the increase in the number of R&D staff and their
subsequent compensation level which increased year-over-year.Six Months Ended
CNY June 30 2023 June 30 2022 change (%)
R&D Expenses 178184574 152454559 16.88
R&D-to-sales ratio 26.71% 24.84%
Intellectual Property
239
We seek to protect our technologies through a combination of patents software Applied for
copyright and commercial secrets. By the end of June 2023 the Company had
been granted 153 patents. We continue to submit new patent applications relating
to our recent R&D innovations. 153
Granted
List of Intellectual Property Rights Applied and Granted
H1 2023 Cumulative number
Applied for Granted Applied for Granted
Invention patents 5 8 129 80
Utility model patents 0 0 26 26
Design patents 0 0 1 1
Software copyright 0 3 23 23
Others 4 2 60 23
Total 9 13 239 153N.B. The number of patents that have been “applied for" does not include the rejected applications in China or the PCT patent applications not submitted to anyparticular country or any patent applications beyond the reporting period. The number of “granted" patents includes those with expired 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.
21ESPRESSIF SYSTEMS | 2023 Q2 & HALF-YEAR REPORT | MANAGEMENT REPORT
R&D Employees
We are proud of our talented diverse and multicultural workforce. By June 30 2023 across our eight branches
worldwide we had employed 591 people around 77% 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.Six Months Ended
June 30 2023 June 30 2022
R&D employees 455 428
R&D employees as a percentage of total employees 76.99% 76.29%
Total compensation of R&D employees (CNY in thousands) 135244 123837
Average compensation of R&D employees (CNY in thousands) 302 304
R&D Expenses R&D Employees
26.5%26.7%75.7%75.0%76.1%77.0%
71.3%
23.2%67.2%440455
19.6%388
337
15.8%15.8%340
272
246
193178
162
120
75
2018 2019 2020 2021 2022 H1 2023 2018 2019 2020 2021 2022 H1 2023
R&D expenses (in million) R&D-to-sales ratio R&D employees R&D employees %
22ESPRESSIF SYSTEMS | 2023 Q2 & HALF-YEAR REPORT | MANAGEMENT REPORT
Ownership of Securities
Basic information of securities
Share types Ordinary share
Share capital 80731207 (as of June 30 2023)
Listing Shanghai Stock Exchange (SSE)
Ticker 688018.SH
Listing Date 2019-07-22
Shareholder Structure as of Jun 30 2023
Shareholder Share Numbers Percentage (%)
Espressif (Hong Kong) Investment Ltd. 33047244 40.93
Shinvest Holding Ltd. 2226179 2.76
Dajia Life Insurance Co. Ltd. – Universal Products 1978918 2.45
Ningbo Meishan Free Trade Port Le Tun Investment Management
Partnership (Limited Partnership) 1046030 1.30
BOC - Franklin Templeton Sealand Fund 983092 1.22
Hong Kong Securities Clearing Company Limited 779013 0.96
GTJA Allianz CSI All-share Semi-conductor Product and
Equipment ETF 680818 0.84
Changjiang Securities Company Limited 509236 0.63
ABC - Franklin Templeton Sealand Fund 508981 0.63
BOC - Guangfa SME selected Equity Fund 476726 0.59
Top 10 shareholders 42236237 52.32
Other public shareholders 38494970 47.68
Total of outstanding shares 80731207 100.00
23ESPRESSIF SYSTEMS | 2023 Q2 & HALF-YEAR REPORT | MANAGEMENT REPORT
Stock-Based Compensation
Espressif has six 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
Number of Ratio of
Plan Award Type Underlying Underlying Grant Price
Shares Shares (%)* (CNY)
2019 restricted stock incentive plan Class II restricted stock 204400 0.2532 62.025
2020 restricted stock incentive plan Class II restricted stock 197872 0.2451 92.025
2021 restricted stock incentive plan Class II restricted stock 921592 1.1416 92.900
2022 restricted stock incentive plan Class II restricted stock 1022679 1.2668 118.400
2023 restricted stock incentive plan Class II restricted stock 62478 0.0774 60.000
2023 II restricted stock incentive plan Class II restricted stock 551130 0.6827 40.000
N.B. The above-mentioned numbers were calculated on June 30 2023.The grant price has been adjusted due to dividend distribution.Stock-Based Compensation
Six Months Ended
CNY June 30 2023 June 30 2022
Selling expenses 591697 290063
G&A expenses 535743 732517
R&D expenses 11140129 4441157
Total stock-based compensation 12267568 5463737
24ESPRESSIIF SYSTEMS || 2023 Q2 & HALF-YEAR REPORT || MANAGEMENT REPORT
Risks and Uncertainties
Financial Risk
The Company performs periodic credit evaluations of its customers’ financial
condition and generally requires of its customers no collateral. 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 and others.Intense competition from current players as well as new entrants such as Silicon
Labs and Nordic may reduce our product sales and market share.Suppliers
A significant portion of the Company’s products is fabricated by the Taiwan
Semiconductor Manufacturing Company Limited(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 certain 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 29.2% in H1 2023. The top-five customers include solution providers and
module manufacturers who also have a large number of dispersed downstream
customers similar to the Company itself.
25ESPRESSIF SYSTEMS | 2023 Q2 & HALF-YEAR REPORT | CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Consolidated Financial
Statements (Unaudited)
Consolidated Balance Sheet (Unaudited)
CNY June 30 2023 January 1 2023 December 31 2022
Assets
Current assets:
Cash and cash equivalents 391285979 350677354 350677354
Held for trading financial assets 298172379 461223082 461223082
Notes receivable 2297288 789099 789099
Accounts receivable net 269968500 198406116 198406116
Accounts receivable financing 12084421 1441520 1441520
Prepayments 9251381 9724045 9724045
Other receivables 11351984 9578753 9578753
Including: Interest receivable 2877754 838168 838168
Inventories 345743974 448981896 448981896
Other current assets 188463945 228089444 228089444
Total current assets 1528619852 1708911310 1708911310
Non-current assets:
Debt investment 482265600 212484600 212484600
Investment in other equity assets 35340648 35340648 35340648
Other non-current financial assets 19879347 19879347 19879347
Fixed assets 66179165 60243507 60243507
Construction work in progress
Right-of-use assets 21684595 21692767 21692767
Intangible assets 2022807 2412317 2412317
Long-term deferred expenses 9133434 6565887 6565887
Deferred income tax assets 34556013 18987186 15266444
Total assets 2199681460 2086517567 2082796825
00
26ESPRESSIF SYSTEMS | 2023 Q2 & HALF-YEAR REPORT | CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Consolidated Balance Sheet (Unaudited)
CNY June 30 2023 January 1 2023 December 31 2022
Liabilities & Shareholders’ Equity
Current liabilities:
Accounts payable 92198649 77918867 77918867
Contract liabilities 24942716 9044287 9044287
Payroll payable 44777989 85041335 85041335
Taxes payable 5017167 5211995 5211995
Other payable 9801092 2925552 2925552
Non-current liabilities due within one year 10698588 9607030 9607030
Other current liabilities 833059 778437 778437
Total current liabilities 188269260 190527502 190527502
Non-current liabilities:
Lease liabilities 11985150 12839126 12839126
Provisions 623241
Deferred income tax liabilities 56844847 56473404 52752662
Total liabilities 257722498 259840032 256119290
Owners’ equity (or shareholders' equity):
Share capital 80731207 80484430 80484430
Capital reserves 1345790809 1309813001 1309813001
Less: Treasury stock 40966012 40966012 40966012
Other comprehensive income 31432873 16946374 16946374
Surplus reserves 46570910 46570910 46570910
Retained earnings 478399175 413828832 413828832
Total shareholders’ equity 1941958962 1826677535 1826677535
Total liabilities and shareholders' equity 2199681460 2086517567 2082796825
27ESPRESSIF SYSTEMS | 2023 Q2 & HALF-YEAR REPORT | CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Consolidated Income Statement (Unaudited)
Three Months Ended Six Months Ended
CNY June 30 2023 June 30 2022 June 30 2023 June 30 2022
Revenue 348880535 324870817 666997977 613818881
Cost of Revenue 205943925 196616979 394543321 366975103
Gross Profit 142936609 128253838 272454655 246843778
Taxes and surcharges 1528087 1228517 3314588 1746949
Selling expenses 13351348 10384806 25524250 19579687
General and administrative expenses 15031928 13548558 28946961 26953099
Research and development expenses 92701560 77606270 178184574 152454559
Financial expenses -310276 2698487 -3959365 3266513
Including: Interest expenses 242706 184381 506822 397063
Interest income 2636628 841974 4650650 1538621
Add: Other income 187759 2979722 577635 3232469
Investment income (mark"-" for loss) 5228869 7305074 11487416 10485662
Income from changes in fair value (mark"-" for loss) 164550 -1095022 172379 1981219
Credit impairment losses (mark"-" for loss) - -3115 - -3115
Assets impairment losses (mark"-" for loss) -1722667 6989 -2660838 -405282
Assets disposal income (mark"-" for loss) -349 4390
Operating Income 24492125 31980849 50024629 58133924
Add: Non-operating revenue 164572 164572
Less: Non-operating expenses 3071 33405 5536 33405
Income before income taxes 24653626 31947444 50183665 58100519
Provision (benefit) for income taxes -8829288 -3475688 -14386678 -5174706
Net Income 33482914 35423132 64570344 63275224
Earnings per share
Basic 0.8059 0.7880
Diluted 0.8059 0.7880
Three Months Ended Six Months Ended
CNY June 30 2023 June 30 2022 June 30 2023 June 30 2022
Net Income 33482914 35423132 64570344 63275224
Other comprehensive income (loss) after tax
Changes to the fair value of investment in other
7264067140
equity instruments
Currency translation reserves 19755010 21128298 14486498 19488578
Other comprehensive income (loss) 19755010 21200938 14486498 19555718
Comprehensive income 53237924 56624070 79056842 82830942
28ESPRESSIF SYSTEMS | 2023 Q2 & HALF-YEAR REPORT | CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Consolidated Cash Flow Statement (Unaudited)
Three Months Ended Six Months Ended
CNY June 30 2023 June 30 2022 June 30 2023 June 30 2022
Operating Activities
Cash from sales of merchandise and provision of
351729950323433638668675823716230416
services
Tax refund 11113912 626261 33504703 27942635
Other received cash related to operational activities 4349276 3506621 10494111 12795208
Subtotal of cash inflow from operational activities 367193138 327566521 712674636 756968259
Cash paid for merchandise and services 177404495 220744919 322438347 556762874
Cash paid to and for employees 74283588 63047148 208755881 170766766
Cash paid for taxes and surcharges 22795807 18347307 36251089 25286124
Other paid cash related to operational activities 26303049 18081483 45529677 33677338
Subtotal of cash outflow from operational activities 300786939 320220858 612974994 786493102
Net cash provided by operating activities 66406199 7345663 99699642 -29524843
Investing activities
Cash arising from the disposal of investments 465055370 807335414 1282789551 1641103857
Cash arising from investment income 2075281 1465867 3829647 2893450
Net cash arising from the disposal of fixed assets intangible 1400 19250
assets and other long-term assets
Other received cash relating to investment activities 1342000 1653000
Subtotal of cash inflow from investment activities 468474051 808801281 1288291448 1643997307
Cash paid for the purchase and construction of fixed assets 10053768 2753972 24779027 15360524
intangible assets and other long-term assets
Cash paid for investments 488000000 783000000 1351000000 1538100000
Other paid cash relating to investment activities 300000 600000
Subtotal of cash outflow from investment activities 498353768 785753972 1376379027 1553460524
Net cash used by investment activities -29879716 23047309 -88087579 90536784
Financing activities
Cash arising from the issuance of common stock 23229130 5957003 23957017 26273338
Including: Cash arising from subsidiaries absorbing
investments by minority shareholders
Subtotal of cash inflow from financing activities 23229130 5957003 23957017 26273338
Cash paid for the distribution of dividends and profits or 128722856 128722856
payment of interests
Including: dividends and profits paid to minority
shareholders by subsidiaries
Other paid cash relating to financing activities 3732556 767795 7064234 2004407
Subtotal of cash outflow from financing activities 3732556 129490651 7064234 130727263
Net cash used for financing activities 19496574 -123533648 16892783 -104453925
Impact of fluctuation in exchange rates on cash and cash 10632571 11083046 12103780 8856092
equivalents
Net increase in cash and cash equivalents 66655628 -82057630 40608625 -34585891
Add: Cash and cash equivalent at the commencement
350677354367142726
of the period
Cash and cash equivalents at the end of the period 66655628 -82057630 391285979 332556835
29ESPRESSIF SYSTEMS | 2023 Q2 & HALF-YEAR REPORT | CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Consolidated Statement of Changes in Equity
(Unaudited)
Less: Other
Share Capital Treasury comprehensive Surplus Retained
CNY capital reserves stock income reserves earnings Total equity
Balance as of ?
December 31 2021 80158963 1266771034 -15711579 33462951 458336543 1823017913
Comprehensive income ?
net of tax
Net Income 63275224 63275224
Other comprehensive
income 19555718 19555718
Transactions with owners
Capital increase 292822 36133353 36426175
Stock-based
compensation -4689100 -4689100
Surplus reserves
Dividends -128722856 -128722856
Balance as of ?
June 30 2022 80451785 1298215288 3844139 33462951 392888912 1808863075
Less: Other
Share Capital Treasury comprehensive Surplus Retained
CNY capital reserves stock income reserves earnings Total equity
Balance as of ?
December 31 2022 80484430 1309813001 40966012 16946374 46570910 413828832 1826677535
Comprehensive income ?
net of tax
Net Income 64570344 64570344
Other comprehensive
income 14486498 14486498
Transactions with owners
Capital increase 246777 31856474 32103251
Stock-based
compensation 4121334 4121334
Surplus reserves
Dividends
Balance as of ?
June 30 2023 80731207 1345790809 40966012 31432873 46570910 478399175 1941958962
30ESPRESSIF SYSTEMS | 2023 Q2 & HALF-YEAR REPORT | FURTHER INFORMATION
Further Information
Terms and Conditions of the 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 28 July 2023
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
Wang Jue Wang Yiwen
Deputy General Manager Shareholder-elected
Teo Teck Leong
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 SPRESE SIF
Independent Director Financial Director
Declaration
Forward-looking Statements SYSTEMS
This report contains forward-looking statements and/or assessments about the 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 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 condition performance and strategy may
therefore differ from what is discussed in this report.
31ESPRESSIF SYSTEMS | 2023 Q2 & HALF-YEAR REPORT | FURTHER INFORMATION
List of abbreviations
AI Artificial Intelligence
AIoT Artificial Intelligence and Internet of Things
Bluetooth LE Bluetooth Low Energy
CEO Chief Executive Officer
CES Consumer Electronics Show
EBITDA Earnings Before Interest Taxes Depreciation and Amortization
Espressif ESPRESSIF SYSTEMS (SHANGHAI) CO. LTD.G&A General and Administrative
GM Gross Margin
IC Integrated Circuit
IoT Internet of Things
MCU Microcontroller Unit
OBD On-Board Diagnostics
R&D Research and Development
RF Radio Frequency
RISC-V Reduced Instruction Set Computer-V
ROE Return on Earnings
RTOS Real-Time Operating System
SG&A Selling General and Administrative
SH Shanghai
SoCs System on Chips
TSR Techno Systems Research
YoY Year-on-Year
32Investor Relations
Social Media
ir@espressif.com
twitter.com/EspressifSystem
Official Platforms
facebook.com/espressif
www.espressif.com linkedin.com/company/espressif-systems
blog.espressif.com youtube.com/EspressifSystems
github.com/espressif instagram.com/espressif_systems_official
esp32.com bilibili.espressif.com
Copyright ? 2023 Espressif Systems (Shanghai) Co. Ltd. All rights reserved. All trade names trademarks and registered trademarks
mentioned in this document are the 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 written in both Chinese and English. In case of any
discrepancies between Chinese and foreign interpretations the Chinese version shall prevail.Copyright (c) 2011-2012 Julieta Ulanovsky (julieta.ulanovsky@gmail.com) with Reserved Font Names ‘Montserrat’. This Font
Software is licensed under the SIL Open Font License Version 1.1. This license is available with a FAQ at: http://scripts.sil.org/OFL
All amounts presented in these condensed Consolidated Financial Statements are shown in CNY unless stated otherwise. Slight
discrepancies between the amounts presented may occur due to rounding. The term "overseas" mentioned in the report is in
reference to regions outside of China.