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In 2020, Nan Ya Plastics Corp. (NPC) recorded a consolidated revenue of NT$ 273.35 billion, 4.5% lower than NT$ 286.30 billion in 2019; and a consolidated pre-tax income of NT$ 30.44 billion, a growth of 14.1% compared to NT$ 26.69 billion in 2019.

Facing the pandemic at the beginning of 2020, the industry made a transition—from a passive response to an active adaptation; and from lowering the impact to seeking a new economy and business opportunities. Therefore, despite a decrease in the cumulative revenue for the whole year and a significant drop in non-operating income generated from investments under the equity method due to unfavorable external factors such as the pandemic and fluctuation in oil prices, the operating profit of the business still increased quarter by quarter and reached the peak in the fourth quarter. With the profit generated from core business, the consolidated pre-tax income still grew amidst unfavorable conditions.

The four major product categories of NPC operations are plastic processing, chemicals, polyesters, and electronic materials.

For plastic processing products

NPC continued to engage in the research and development of new applications, new materials, and products that meet environmental protection trends and have unique specifications. It increased the proportion of production and sales of differentiated and high-value products and deployed automated monitoring equipment to ensure the quality stability of the production process. In addition, the Company expanded into high-end and emerging markets with potential through e-commerce and online marketing to boost sales volume, increase utilization rate, and lower costs. Furthermore, NPC provided customers with satisfying services by leveraging its advantages of domestic and overseas production sites in Taiwan, China, the United States, and Vietnam, and timely adjusting plants' production and sales. Although plastic processing products saw a slight decrease in revenue due to the challenges posed by the pandemic, the profit still increased thanks to the extensive efforts exerted by various parties.

In terms of petrochemical products

in line with vertical integration and division of labor in the Sixth Naphtha Cracking Plant in Mailiao, NPC's products, including ethylene glycol (EG), Bisphenol-A (BPA), 1,4-butylene glycol (1,4BG), plasticizers, phthalic anhydride (PA), 2-ethylhexanol (2EH), and epoxy resin (Epoxy), have been vertically integrated into upstream and downstream industries to form a complete supply chain that supports the development of downstream industries such as polyester, electronics, and plastic processing, respectively.

Due to the outbreak of COVID-19 in 2020, the overall petrochemical products were affected by the dramatic oil price drop and low raw material prices in the first half of the year, resulting in a decline in revenue of all products. However, from the second half of the year, Bisphenol-A (BPA) prices went up significantly because of the strong downstream demand for epoxy that is used for wind power applications, together with supply shortages in the market caused by the unexpected shutdowns of main competitors. Regarding the series products of plasticizers, the demand for pharmaceutical grade gloves surged because of measures to prevent COVID-19 and further drove up the prices of plasticizers such as 2EH, DOTP, and DEHP. Therefore, the overall petrochemical products saw growth in profit.

For polyester products

the sale of polyester products saw a drastic drop because the global economy was hit hard by the novel coronavirus pandemic in early 2020. However, as major countries restarted their economic activities and downstream brand companies resumed procurement, textile factories started to receive a large number of orders, especially orders for filament made from recycled PET bottles. With the adjustment of sales portfolio, the overall operation saw a significant improvement starting from the fourth quarter of 2020.

Because of the increasing awareness of environmental protection worldwide, there are unlimited business opportunities in recycling and the circular economy. NPC has been actively investing in the research and development of relevant products—those made with recycled materials from PET bottles, oceans, and textile, as well as biodegradable and green-energy products. It also expanded the application of fiber products to segment the market and to expand business scope; improved equipment; and made production adjustments in the hope of pursuing the optimal product portfolio and achieving profit growth.

In respect of electronic materials

the impact of the COVID-19 pandemic in 2020 gave rise to a new economy and new business opportunities such as the stay-at-home economy, and remote working and learning, which led to strong demand for computers, laptops, and network communication equipment. As a result, the market conditions in the electronic industry recovered month by month. Moreover, the demand for epoxy resins was strong because of China's policy support in wind power. Furthermore, starting from the fourth quarter, the automotive electronics market saw quick rebound while the market snapped up with supplies due to shortages in the overall supply chains. In addition, the volume and price of electronic materials were driven up by price hikes in copper. Therefore, the electronic materials recorded the highest revenue, with a significant increase in profit compared with 2019.

Countries will adopt stronger new energy vehicle policies in the future, which will accelerate the development of lithium batteries. Moreover, the promotion of the stay-at-home economy, 5G communications, vehicle panels, and innovative applications driven by the Internet will boost the demand for electronic materials and upstream raw materials. In light of this, NPC will leverage its comprehensive vertical integration between the upstream and downstream to accelerate the adjustment of production and sales strategies, respond to market development and trends through transformation, actively promote differentiated products, increase sales proportion of niche products with high added value and performance, flexibly adjust the production capacity in Taiwan and China in the hope of driving both revenue and profit growth again.

Nan Ya Printed Circuit Board Corp. (Nan Ya PCB), which is invested by NPC, has long been focusing on the development and production of circuit boards and IC package substrates. Being optimistic with the demand for 5G infrastructure, Nan Ya PCB has taken an advanced move in the development of related products. The sales of advanced network communication substrates continued to grow in 2020, and the sales of graphic chip substrates was better than expected because of COVID-19 that led to the demand for remote working, conference calls, and the stay-at-home economy. In addition, the demand for System-in-Package substrates increased significantly as more applications became available, and semiconductor companies scrambled for production capacity due to insufficient supplies of high-end IC panels worldwide, thereby making 2020 a remarkable year for Nan Ya PCB after its transformation.

In response to the future development trend of semiconductors, Nan Ya PCB has actively strengthened its research and development capabilities and continued to expand the production capacity of IC packaging substrates to increase its production proportion of high-density interconnection boards for the purpose of meeting the market demand. In the future, Nan Ya PCB will work closely with customers to obtain more orders for niche products, increase the proportion of high-value products, and continue to optimize the manufacturing processes to improve yield, so that its operational performance will continue to grow. Moreover, the Kuanshan factory that will begin ABF production in the first quarter of 2021 is expected to help increase revenue and profit due to demand brought by AI applications and 5G network deployments.

Nan Ya Technology Corp., another company invested by NPC, is committed to the development, manufacture, and sales of dynamic random-access memory (DRAM) products. As the global economic development was affected by the outbreak of COVID-19 in 2020, the overall DRAM market condition worsened than expected. In addition, the China-US trade war affected the delivery of DRAM to some customers in China. Meanwhile, the significant appreciation of the New Taiwan Dollar also affected revenue and profit. In the face of unfavorable external factors, the Company still leveraged its technological independence and innovation. Also, the Company successfully introduced its products to data center customers in the United States, China, and Europe by optimizing the 20nm product portfolio and strengthening the application of server products, and gradually launched a number of low power products to expand and diversify product applications. In addition, the Company actively deployed its own technologies, completed the installation of trial production lines for the manufacturing technologies of the first-generation 10nm (1A), and began the trial production of the first 8Gb DDR4.

In 2021, the Company will continue to focus on 1A leading products in terms of the certification and mass production of 8Gb DDR4 and the trial production of the next-generation DDR5 and simultaneously accelerate the manufacturing technologies and product development of the second-generation 10nm (1B). Meanwhile, the Company will optimize the 20nm product portfolio and enhance competitiveness to provide customers with the best memory solutions. In addition, the expansion project for new production capacity is in progress. The Company's operational performance is promising because in the future it will gradually increase the capacity to meet the market demand and satisfy the diversified applications required by the market by launching new products through the advanced manufacturing process.

Looking forward to 2021, although the world is still affected by the pandemic, the economy and demand are expected to gradually recover as many countries have granted market approval of vaccines and started vaccination programs. The global economic outlook in 2021 is optimistic compared to that of 2020 because of the price hike in global crude oil and raw materials, along with 5G application and promotion.

In terms of the trade war, it is expected that it is difficult to change the landscape of the China-US confrontation. However, the United States, a country that is still suffering from the challenges posed by COVID-19, will mainly focus on policies to control the pandemic and revive the economy. Thus, it is still not clear that if the U.S. will continue imposing sanctions on China. However, the global economy will still be impacted if the China-US conflicts in trade and technology continue or move to the next level.

In addition, the Regional Comprehensive Economic Partnership (RCEP), which covers 30% of global GDP and population, was signed in November 2020. However, Taiwan is excluded from RCEP. If China, Japan, and Korea carry out tariff reductions, the petrochemical industry could be impacted the most. Although Taiwan may not be impacted significantly in the short term, it could be hit in the long run due to the regional magnetic effect.

With the complex global situation, maintaining stable growth and profit is still the most important goal. Therefore, NPC will seize the opportunities to develop technological innovation and application, environmental protection, and the circular economy. In addition to continuously strengthening the four business focuses, the Company will also enhance its market expansion, increase capacity utilization, reduce costs, strengthen research and development capabilities, and increase the proportion of differentiated and high-value products to achieve profit growth. Meanwhile, the Company will integrate the circular economy into process optimization, and constantly improve and upgrade the efficiency of existing equipment/production lines by introducing AI in order to create maximum benefit with minimum investment, attain intellectualization in the production process, and achieve the goals of reduction, reuse, and resource recycling.

In addition, the Company will further perfect and expand the electronic material industry in terms of its integrity of vertical integration, supply stability, quality consistency, and product categories. The Company will strive to enhance the overall operating performance by taking electronic materials as the main driver for its core business.

In response to subsequent market demand, trade tariffs between the United States and China, and the localization of advanced materials, the Company will closely tap into market supply and demand through its diverse production deployments in Taiwan, China, the United States, and Vietnam. In addition to the new plant for ethylene glycol in Texas, USA, that has commenced production at the end of 2020, a number of investments will also be completed to start production this year, including high-value copper foil, polyester film, and high-end PP synthetic paper produced by plants in Taiwan, aluminum plastic film by plants in Nantong, China, and glass fiber by Huizhou plants. For the next several years, apart from the expansion projects of OL-3 plants in Texas and Louisiana of the United States through joint ventures, the Company also participates in the plant expansion projects for copper foil in Huizhou, China, and Bisphenol-A (BPA) in Ningbo. NPC will develop new products and increase production capacity based on the future market conditions to continuously drive the growth of the Company's business performance.