Himax Technologies
Annual Report 2023

Plain-text annual report

Table of ContentsUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 20-F(Mark One)☐ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934OR☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2023OR☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934OR☐ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934Date of event requiring this shell company report ________________For the transition period from ________________ to ________________Commission file number: 000-51847HIMAX TECHNOLOGIES, INC.(Exact name of Registrant as specified in its charter)Not Applicable(Translation of Registrant’s name into English)CAYMAN ISLANDS(Jurisdiction of incorporation or organization)NO. 26, ZILIAN ROADXINSHI DISTRICT, TAINAN CITY 744092TAIWAN, REPUBLIC OF CHINA(Address of principal executive offices)Jessica PanChief Financial OfficerTelephone: +886-6-505-0880E-mail: jessica_pan@himax.com.twFacsimile: +886-6-507-0038No. 15, Zilian RoadXinshi District, Tainan City 744092Taiwan, Republic of China(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)Securities registered or to be registered pursuant to Section 12(b) of the Act:Title of each classTrading SymbolName of each exchange on which registeredOrdinary Shares, par value $0.3 per ordinary shareHIMXThe NASDAQ Global Select Market Inc.** Not for trading, but only in connection with the listing on the NASDAQ Global Select Market, Inc. of American Depositary Shares representing such Ordinary Shares.Securities registered or to be registered pursuant to Section 12(g) of the Act: NoneSecurities for which there is a reporting obligation pursuant to Section 15(d) of the Act: NoneIndicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report. 349,448,102 Ordinary Shares.Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ⌧ Yes ☐ NoIf this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. ☐ Yes ⌧ NoIndicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to filesuch reports), and (2) has been subject to such filing requirements for the past 90 days. ⌧ Yes ☐ NoIndicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter periodthat the registrant was required to submit such files). ⌧ Yes ☐ NoIndicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” and “emerging growth company” inRule 12b-2 of the Exchange Act. (Check one):Large accelerated filer☒Accelerated filer☐Non-accelerated filer ☐Emerging growth company☐If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accountingstandards† provided pursuant to Section 13(a) of the Exchange Act. ☐† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) bythe registered public accounting firm that prepared or issued its audit report.☒If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.☐Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive- based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to§240.10D-1(b).☐Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:U.S. GAAP ☐International Financial Reporting Standards as issuedOther ☐by the International Accounting Standards Board ⌧If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. ☐ Item 17 ☐ Item 18If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).☐ Yes ⌧ NoTable of Contents2TABLE OF CONTENTS Page SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS4CERTAIN CONVENTIONS4PART I7ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS7ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE7ITEM 3. KEY INFORMATION73.A. [Reserved]73.B. Capitalization and Indebtedness73.C. Reason for the Offer and Use of Proceeds73.D. Risk Factors7ITEM 4. INFORMATION ON THE COMPANY224.A. History and Development of the Company224.B. Business Overview234.C. Organizational Structure544.D. Property, Plants and Equipment55ITEM 4A. UNRESOLVED STAFF COMMENTS55ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS555.A. Operating Results555.B. Liquidity and Capital Resources675.C. Research and Development705.D. Trend Information705.E. Critical Accounting Estimates73ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES736.A. Directors and Senior Management736.B. Compensation756.C. Board Practices766.D. Employees786.E. Share Ownership816.F. Disclosure of a registrant's action to recover erroneously awarded compensation81ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS817.A. Major Shareholders817.B. Related Party Transactions827.C. Interests of Experts and Counsel83ITEM 8. FINANCIAL INFORMATION838.A. Consolidated Statements and Other Financial Information838.B. Significant Changes84ITEM 9. THE OFFER AND LISTING849.A. Offer and Listing Details849.B. Plan of Distribution859.C. Markets859.D. Selling Shareholders859.E. Dilution859.F. Expenses of the Issue85Table of Contents3ITEM 10. ADDITIONAL INFORMATION8510.A. Share Capital8510.B. Memorandum and Articles of Association8510.C. Material Contracts8610.D. Exchange Controls8610.E. Taxation8610.F. Dividends and Paying Agents8910.G. Statement by Experts8910.H. Documents on Display8910.I. Subsidiary Information8910.J. Annual Report to Security Holders89ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK89ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES9012.A. Debt Securities9012.B. Warrants and Rights9012.C. Other Securities9012.D. American Depositary Shares90PART II91ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES91ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS91ITEM 15. CONTROLS AND PROCEDURES91ITEM 16. [RESERVED]9416.A. Audit Committee Financial Expert9416.B. Code of Ethics9416.C. Principal Accountant Fees and Services9416.D. Exemptions from the Listing Standards for Audit Committees9416.E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers9516.F. Change in Registrant’s Certifying Accountant9516.G. Corporate Governance9516.H. Mine Safety Disclosure9516.I. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections9516.J. Insider Trading Policies9616.K. Cybersecurity96PART III96ITEM 17. FINANCIAL STATEMENTS96ITEM 18. FINANCIAL STATEMENTS97ITEM 19. EXHIBITS98Table of Contents4SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTSThis annual report on Form 20-F contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, asamended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that involvesignificant risks and uncertainties. Although these forward-looking statements, which may include statements regarding our future results ofoperations, financial condition, or business prospects, are based on our own information and information from other sources we believe to bereliable, you should not place undue reliance on these forward-looking statements, which apply only as of the date of this annual report. The words“anticipate,” “believe,” “expect,” “intend,” “plan,” “estimate” and similar expressions, as they relate to us, are intended to identify a number ofthese forward-looking statements. Our actual results of operations, financial condition or business prospects may differ materially from thoseexpressed or implied in these forward-looking statements for a variety of reasons, including, among other things and not limited to, our anticipatedgrowth strategies, our and our customers’ future business developments, results of operations and financial condition, our ability to develop newproducts, the future growth and pricing trend of the display driver markets, the future growth of end-use applications that use flat panel displays,particularly TFT-LCD panels, development of alternative flat panel display technologies, market acceptance and competitiveness of the driver andnon-driver products developed by us, our ability to protect intellectual property, changes in customer relations and preference, shortage in supply ofkey components, our ability to collect accounts receivable and manage inventory, changes in economic and financial market conditions, and otherfactors. For a discussion of these risks and other factors, please see “Item 3.D. Key Information—Risk Factors.”CERTAIN CONVENTIONSUnless otherwise indicated, all translations from U.S. dollars to NT dollars in this annual report were made at a rate of $1.00 to NT$30.62, theexchange rates set forth in the H.10 weekly statistical release of the Federal Reserve System of the United States (the “Federal Reserve Board”) onDecember 29, 2023. No representation is made that the NT dollar amounts referred to herein could have been or could be converted into U.S.dollars at any particular rate or at all. On March 29, 2024, the noon buying rate was $1.00 to NT$31.93.Unless otherwise indicated, in this annual report,“ADSs” refers to our American depositary shares, each of which represents two ordinary shares;“ADRs” refers to the American depositary receipts that evidence our ADSs;“AIoT” refers to Artificial Intelligence & Internet of Things;“AMOLED” refers to active matrix organic light-emitting diode;“AR” refers to the augmented reality;“ASIC” refers to application specific integrated circuit;“a-Si” refers to amorphous silicon;“CMOS” refers to complementary metal oxide semiconductor;“end-point AI” is the practice of running applications and storing data on devices located at the edge of a network. The aim is to reduce latencyand network bandwidth by performing processing and storage functions locally on the device. This approach can improve the performance,reliability, and security of applications and data.“head-mounted-display” refers to a display device, worn on the head or as part of a helmet, that has a small display optic in front of one oreach;“Himax Taiwan” refers to Himax Technologies Limited, our wholly owned subsidiary in Taiwan and our predecessor;“IC” refers to integrated circuit;Table of Contents5“IFRS” refers to The International Financial Reporting Standards as issued by the International Accounting Standards Board;“IGZO” refers to indium gallium zinc oxide;“Innolux” refers to Innolux Corporation, its predecessor and consolidated subsidiaries, unless the context otherwise requires;“large-sized panels” refers to panels that are typically above ten inches in diagonal measurement; All sizes of TV, monitor and notebookdisplays are identified as large.“LCoS” refers to liquid crystal on silicon;“LED” refers to light-emitting diode;“LTPS” refers to low temperature poly silicon;“MEMS” refers to micro-electro mechanical systems;“OLED” refers to organic light-emitting diode;“Panel Manufacturer” refers to panel manufacturers of either TFT-LCD or OLED panels, as well as those that produce both types collectively;“PRC” or “China” for purposes of this annual report refers to the People’s Republic of China, excluding the special administrative regions ofHong Kong and Macau;“processed tape” refers to polyimide tape plated with copper foil that has a circuit formed within it, which is used in tape-automated bondingpackaging;“ROC” or “Taiwan” refers to the island of Taiwan and other areas under the effective control of the Republic of China;“RSUs” refers to restricted share units;“semiconductor manufacturing service providers” refers to third-party wafer fabrication foundries, gold bumping houses, and assembly andtesting houses;“shares” or “ordinary shares” refer to our ordinary shares, par value $0.3 per share;“SLiM” refers to Structured Light Imaging Module, which is Himax homegrown structured light-based 3D sensing total solution;“small and medium-sized panels” refers to panels that are typically around ten inches or less in diagonal measurement. All sizes ofsmartphone, automotive and tablet displays are identified as small and medium;“Structured Light” refers to a 3D infrared structure light projector, which is composed of a laser light source, a collimated lens and a diffractiveoptics element (DOE);“TDDI” refers to touch display driver integrated circuit for advanced in cell touch display;“TFT-LCD” refers to thin film transistor liquid crystal display that may adopt a-Si, IGZO or LTPS technologies;“ToF” refers to a time-of-flight (ToF) 3D camera works by illuminating the scene with a modulated light source, and observing the reflectedlight;Table of Contents6“Ultralow power WiseEye smart image sensing” refers to Company’s WiseEyeTM AI image sensing solution which includes Himax’sproprietary computer vision AI processor, ultralow power Always-On CMOS image sensor and CNN-based AI algorithms – all equipped withultralow power design;“VGA” refers to Video Graphics Array;“VR” refers to the virtual reality;“wafer level optics” or “WLO” are optical products manufactured using semiconductor process on wafers;“we”, “us”, “our company”, “our”, “the Company” and “Himax” refers to Himax Technologies, Inc., its predecessor entities and subsidiaries;“WiseEye AI Processor” refers to a Himax AI processor designed with power-efficient and multi-level power schemes for real-time motiondetection, object detection and image processing, providing AI developers with possibilities of high performance and ultralow power.WiseEye1 is the first generation of WiseEye AI processor, where WiseEye2 is the second generation one.All references to “New Taiwan dollars”, “NT dollars” and “NT$” are to the legal currency of the ROC; andAll references to “dollars”, “U.S. dollars” and “$” are to the legal currency of the United States.On August 10, 2009, we effected: (i) a stock split in the form of a stock dividend of 5,999 ordinary shares for each ordinary share held byshareholders of record, followed by a consolidation of every 3,000 ordinary shares into one ordinary share; (ii) a change of the par value of ourordinary shares from $0.0001 each to $0.3 each; and (iii) a change in our ADS ratio from one ADS representing one ordinary share to one ADSrepresenting two ordinary shares. See “Item 7.A. Major Shareholders and Related Party Transactions—Major Shareholders” for more information.Unless otherwise indicated, all shares, per share and share equity data in this annual report have been retroactively adjusted to reflect the effect ofthe stock split and the change in par value for all periods presented.Table of Contents7PART IITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERSNot applicable.ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLENot applicable.ITEM 3. KEY INFORMATION3.A. [Reserved]3.B. Capitalization and IndebtednessNot applicable.3.C. Reason for the Offer and Use of ProceedsNot applicable.3.D. Risk FactorsRisks Relating to Our Financial Condition and BusinessOur suppliers may have increasing bargaining power as a result of industry consolidation, which could result in an increase in our averageunit cost and a decrease in our profit margin.There may be industry consolidation among our suppliers. Merger and acquisition activities will likely increase the size and market power ofthe relevant suppliers and reduce the number of suppliers we could use under a simpler supplier chain. Therefore, suppliers could be in a betterposition to bargain for higher prices, longer contract terms, higher deposit and/or higher contract breach penalties for their services and products,which could result in an increase in our average unit cost and/or penalty expenses. If we are unable to transfer any increase in average unit cost toour customers, our gross margin and results of operations could be adversely affected.We derive the majority of our net revenues from sales to the TFT-LCD and OLED panel industry, which is highly cyclical and subject to pricefluctuations. Such cyclicality and price fluctuations could negatively impact our business or results of operations.In 2022 and 2023, 86.8% and 85.1% of our revenues, respectively, were attributable to display drivers that were incorporated into TFT-LCDand OLED panels. We expect to continue to substantially depend on sales to the TFT-LCD and OLED panel industry for the foreseeable future. TheTFT-LCD and OLED panel industry is intensely competitive and is vulnerable to cyclical market conditions. The average selling prices of TFT-LCD and OLED panels generally decline with time as a result of, among other factors, drop in demand for end products that incorporate TFT LCDand OLED panels, new capacity ramp-up or factory utilization improvement, technological advancements and cost reduction with the exception ofthe new high end and high-resolution products.The merger of certain of our major customers could result in an increase in their bargaining power and therefore subject us to additionaldownward pricing pressure. We cannot assure you that in such periods in which we experience significant downward pricing pressure, we couldsufficiently reduce costs to completely offset the loss of revenues. In addition, a severe and prolonged industry downturn could also result in higherrisks to the collectability of our accounts receivable, the marketability and valuation of inventories, the impairment of our long-term non-financialassets, which consist of property, plant and equipment and intangible assets, and the stability of our supply chain. As a result, the cyclicality of theTFT-LCD and OLED panel industry could adversely affect our revenues, cost of revenues and results of operations.Table of Contents8Our strategy of expanding our product offerings to non-driver products may not be successful.We have devoted, and intend to continue to devote, financial and management resources to non-driver products’ development, manufacturingand marketing to further diversify our product portfolio and improve gross margin as non-driver products may have higher gross margin than ourdriver products. Our non-driver technologies cover Timing controller (TCON), LCoS microdisplay, CMOS image sensor, wafer level optics(“WLO”), 3D sensing and ultralow power WiseEye smart image sensing, etc.We offer TCON for large sized TV and monitor displays, automotive display and AMOLED panels. For our LCoS technology, at present ourmain focus areas for LCoS business are AR goggle devices, projectors and head-up-displays (HUD) for automotive. For CMOS image sensorbusiness, in addition to the current shipment for human vision applications, including notebook, multimedia and smart home cameras, we alsoextend the sensor business in machine vision application for the broad AI market. Our AoS CMOS image sensor is designed with proprietaryarchitectures, readout, and pixel, where the corresponding algorithms are integrated to contribute the always-on feature that consumes only severalmicro watts to enable people detection, eyeball tracking and many other features. On 3D sensing business, we focus on Structured Light and ToF3D module solution and 3D decoder ASIC key component, aiming at emerging markets such as facial recognition-based e-payment, businessaccess control, biomedical inspection device, 3D naked-eye display, eye-tracking, and hand gesture control applications. For our ultralow powerWiseEye smart image sensing business, we focus on providing leading end-point AI solutions, in both total solution and discrete key component, tomeet diversified customer and application needs. Himax’s ultralow power WiseEye smart image sensing solution integrates in-house AoS sensor,ultralow power AI processor and CNN-based AI algorithm from in house or third-party algorithm partners. Our WiseEye AI solution had alreadybeen adopted by one global leading notebook vendor and went into mass production from early 2022. We also see growing adoption of ourWiseEye technology in a broad range of applications, covering shared bike parking, automotive, door lock, battery-powered surveillance camera,panoramic video conferencing, and medical capsule endoscope among others. Some of these applications already commenced production since2022. As we focus on scaling adoption in this relatively untapped market, we also collaborate closely with numerous AI ecosystem partners andcommunities as well as system integration companies to make our AI solution more diverse and accessible. Progress has been made in areas suchas notebook, smart city / home / office, surveillance, healthcare, smart agriculture and smart retail. Himax is more committed than ever tostrengthening the Company’s WiseEye product roadmap and retaining the leadership position in ultralow power AI processor and image sensor forend-point AI applications.Developing and commercializing each of our non-driver products requires a significant amount of management, engineering and monetaryresources. For example, we have established certain in-house facilities for key manufacturing processes of our non-driver products including LCoSmicrodisplay, WLO and 3D sensing. Numerous uncertainties exist in developing new products and we cannot assure you that we will be able todevelop our non-driver products successfully. We may underestimate the amount of capital, personnel and other resources required to develop andcommercialize our non-driver products. We may also overestimate the market potential of the end products that are utilizing or will utilize our non-driver products. The failure or delay in the development, production or commercialization of any of our non-driver products, the occurrence of anyproduct defects or design flaws, or the low market acceptance of or demand for either of our products or the end devices using our products mayadversely affect the impairment of our long-term non-financial assets, which consist of property, plant and equipment and intangible assets, fornon-driver products, our results of operations and growth prospects. The lower capacity utilization rate of our factories will negatively affect ourgross margin and our results of operations. Moreover, we will be subject to higher ramp-up expenses in the early stage of mass production of ournon-driver products.The concentration of our revenues and accounts receivable and the extension of payment terms for certain of our customers exposes us toincreased credit risk and could harm our operating results and cash flows.In 2023, Customer A and its affiliates accounted for 28.7% of our revenues. Our two largest customers together accounted for over 39% of ourrevenues in 2023. See “Item 5.A. Operating Results—Description of Certain Statements of Profit or Loss Line Items—Revenues” for our revenuesdescription. Our results of operations and financial condition would be significantly linked to the success and purchase policy of any suchcustomer. As of December 31, 2023, our accounts receivable from Customer A and its affiliates were $67.1 million, which representedapproximately 28.5% of our accounts receivable, net. The concentration of our accounts receivable exposes us to increased credit risk. Moreover,we have at times agreed to extend the payment terms for certain of our customers. As a result, any loss of or a sharp reduction in any suchcustomer’s sales, a default by any such customer, a prolonged delay in the payment of accounts receivable or the extension of payment terms forour customers could adversely affect our cash flow, liquidity and operating results.Table of Contents9Our customers may experience a decline in profitability or may not be profitable at all, which could adversely affect our results of operationsand financial condition.Panel Manufacturers, including our customers, experience significant pressure on prices and profit margins, due largely to growing industrycapacity and fluctuations in demand for TFT-LCD and OLED panels. Some panel manufacturers have greater access to capital or greaterproduction, research and development, intellectual property, marketing or other resources than our customers, who may not be able to compete andsustain their market positions. Further, our customers’ business performance may fluctuate significantly due to a number of factors, many of whichare beyond their control, including and not limited to: (1) consumer demand and the general economic conditions, such as recent geopoliticaltensions relating to invasion of Ukraine by Russia and China city lockdowns due to Covid mandates; (2) the cyclical nature of the TFT-LCD andOLED industry in average selling price fluctuations, as well as its downstream industries; (3) the speed at which Panel Manufacturers expandproduction capacity; (4) brand companies’ continued needs for original equipment manufacturing services provided by Panel Manufacturers; (5)access to raw materials, components, equipment and utilities on a timely and economical basis; (6) technological changes; (7) the rescheduling andcancellation of large orders; (8) access to funding on satisfactory terms; and (9) fluctuations in the currencies of TFT-LCD and OLED panelsexporting countries against the U.S. dollar.We depend on sales of display drivers used in TFT-LCD and OLED panels, and the limited potential for further growth in both the marketsize of display drivers and the market share of our display drivers or the absence of continued market acceptance of our display drivers couldlimit our growth in revenues or harm our business.In 2022 and 2023, 86.8% and 85.1% of our revenues, respectively, were from the sale of display drivers used for large, small and medium-sized applications, and we expect to continue to derive a substantial portion of our revenues from these or related products. As the display driverindustry is relatively mature, there may be limited potential for the overall display drivers market to grow and for us to further grow our marketshare and revenues.Failure to grow our unit shipments for display drivers, coupled with a general decline in the average selling prices, could adversely andmaterially affect our results of operations. See also “—Risks Relating to Our Industry—The average selling prices of our products could decreaserapidly, which may negatively impact our revenues and operating results”. Therefore, the continued market acceptance of our display drivers iscritical to our future success. Failure to grow or maintain our revenues generated from the sales of display drivers could adversely and materiallyaffect our results of operations and financial condition.We face risks related to public health epidemics, including the novel coronavirus outbreaks.Our financial condition and results of operations may be adversely affected if a public health epidemic, such as the global Covid-19 pandemic,interferes with our ability, or that of our employees, suppliers, customers and other business partners to fulfill our and their respectiveresponsibilities and obligations related to the conduct of our business. The outbreak of Covid-19 has caused significant disruption not only to thefinancial markets but also to global supply chains, which can substantially depress global business activities, restrict access to capital and result in along-term economic downturn that would negatively affect our operating results.Extra export licenses may be needed for certain product or technology for certain customers. These licenses are regulated by ExportAdministration Regulations (EAR) which are administered by the U.S. Department of Commerce’s Bureau of Industry and Security (BIS).Our business is subject to various international laws and legal requirements from the U.S. Export Administration Regulations and otherjurisdictions’ applicable executive orders in packaging, product content, labor and import/export regulations, etc. These laws, regulations andorders are complex, may change frequently and with limited notice, have generally become more rigorous and have intensified under the currentU.S. administration, especially in recent geopolitical tensions with China. We may be required to incur significant expense to comply with, or toremedy violations of, these regulations. In addition, if our customers fail to comply with these regulations or our customers are sanctioned, oradded to the Entity List of EAR by BIS, we may be required to suspend sales to these customers, which could damage our reputation and materiallyand adversely impact our results of operations. If our foundry, tape, assembly and testing suppliers fail to comply with these regulations or oursuppliers are sanctioned or added to the Entity List of EAR by BIS, we may suspend their services and have to obtain alternative services in atimely manner. Considering the amount of time, it usually takes to qualify assembly and testing houses, we may experience significant delays inproduct shipments. Any problems that we may encounter with the delivery, quality or cost of our products could damage our reputation and resultin a loss of customers and orders. Moreover, the scarcity and importance of services may necessitate us making investments in foundry, tape,assembly and testing service providers in order to secure capacity, which would require us to substantially increase our capital outlays and possiblyraise additional capital, which may not be available to us on satisfactory terms, if at all.Table of Contents10Technological innovation may reduce the number of display drivers typically required for each panel, thereby reducing the number of displaydrivers we are able to sell per panel. If such a reduction in demand is not offset by the general growth of the industry, our market share oraverage selling prices, or our revenues may decline.In order to reduce costs, Panel Manufacturers generally seek to have display drivers with higher channel counts and new panel designs toreduce the number of display drivers required for each panel. We have been developing such innovative and cost-effective display driver solutionsin order to grow our market share, attract additional customers, increase our average selling prices and capture new design wins. However, wecannot assure you that we will successfully achieve these goals. If we fail to do so and the number of display drivers typically required per paneldecreases thereby reducing our unit shipments, our revenues may decline. Panel Manufacturers have developed several panel designs to reduce theusage of display drivers, including gate in panel, or GIP, amorphous silicon gate, or ASG, or simply gateless designs, which integrate the gatedriver function onto the glass and eliminate the need for gate drivers, as well as dual gate and triple gate panel designs, which would largely reducethe usage of source drivers. If such designs or technologies become widely adopted, demand for our display drivers may decrease significantly,which would adversely and materially affect our results of operations. The strategic relationships between certain of our competitors and theircustomers and the development of in-house capabilities by Panel Manufacturers may limit our ability to expand our customer base and our growthprospects.Certain of our competitors have established or may establish strategic or strong relationships with Panel Manufacturers that are also ourexisting or potential customers. Marketing our display drivers to such Panel Manufacturers that have established relationships with our competitorsmay be difficult. Moreover, several Panel Manufacturers have in-house design capabilities and therefore may not need to source semiconductorproducts from us. If our customers successfully develop in-house capabilities to design and develop semiconductors that can substitute for ourproducts, they would likely reduce or stop purchasing our products. To sell new products, we will likely need to target new market segments andnew customers with whom we do not have current relationships, which may require different strategies and may present difficulties that we havenot encountered before. Failure to broaden our customer base and attract new customers may limit our growth prospects.As OLED offers brighter color, near-perfect-black, less power consumption and is thinner and lighter than TFT-LCD, it gradually penetratesthe mid to high-end TFT-LCD market, especially the smartphone market. OLED display and related DDICs have been dominated by Koreancompanies. The marketplace is increasing utilization of the OLED display for smartphone and other electronics areas, including notebook, tablet,TV and automotive due to expanded OLED capacity. We continue to gear up for the AMOLED driver IC development in partnership with majorChinese and Korean panel makers. For tablet, we are seeing adoptions on the rise for premium models that adopt advanced OLED display, ofwhich Himax offers both DDIC and TCON and has commenced production to certain leading brands. For automotive OLED display, we continueto win project awards for our flexible AMOLED driver, TCON, and touch controller IC with both conventional car makers and EV/NEV vendors.Finally, we are making good progress with leading panel houses for the development of OLED display drivers for smartphone, TV and notebookapplications. However, we could not assure you of the success of our AMOLED driver IC as we are unable to penetrate into the mass volumeexisting Korean and China supplier chain and/or find new OLED panel manufactures to design-wins our solutions into. OLED process maturity forthe new manufactures and the possible specification change due to the immaturity of the OLED will also be a hurdle to our AMOLED driver sharegain and success.Himax’s solution for AMOLED includes driver ICs, TCON and touch controller ICs in automotive and tablet PC. In addition, there aremultiple AMOLED projects under development jointly with worldwide leading panel makers for other applications, including smart phones, TV,notebook PCs and many others. The growth momentum in AMOLED solution is promising, but the risk of high dependency on limited customerbase amid current macro uncertainty might result in fluctuation in sales performance.We depend primarily on third-party foundries to manufacture our wafers, and any failure to obtain sufficient foundry capacity or loss of anyof the foundries we use could significantly delay our ability to ship our products, causing us to lose revenues and damage our customerrelationships.Access to foundry capacity is crucial to our business because we do not manufacture our own wafers, instead relying primarily on third-partyfoundries. The ability of a foundry to manufacture our semiconductor products is limited by its available capacity. Access to capacity is especiallyimportant due to the limited availability of the high-voltage CMOS process technology required for the manufacture of wafers used in displaydrivers. If the primary third-party foundries that we rely upon are not able to meet our required capacity, or if our business relationships with thesefoundries are adversely affected, we would not be able to obtain the required capacity to meet increasing demand for our products. We may have toseek alternative foundries, which may not be available on commercially reasonable terms, or which may expose us to qualifying-new-foundryrisks, as further discussed below.Table of Contents11We use several foundries for different semiconductor products, and certain of our products are manufactured at only one of these foundries. Ifany one of the foundries is unable to provide the required capacity to us, or does not deliver in a timely manner, or the quality or pricing terms arenot acceptable to us, or any of the foundries experience financial difficulties or insolvency risks due to the impact of the global economic turmoil orany company-specific reasons or otherwise, if their operations are damaged or if there is any other disruption, directly or indirectly, of their foundryoperations and we cannot qualify an alternative foundry in a timely manner, we could experience significant delays in receiving the product beingmanufactured by that foundry or incur additional costs to obtain substitutes, or interruption in our supply of the affected products. If we choose touse a new foundry or process technology for a particular semiconductor product, it will take us several quarters to qualify the new foundry orprocess before we can begin shipping. If we cannot qualify a new foundry in a timely manner, we may experience and incur damages as abovementioned and harm our customer relationships.As a result of outsourcing the manufacturing of our wafers, we face several significant risks, including: (1) failure to secure manufacturingcapacity, or being able to obtain required capacity only at higher costs; (2) risks of our proprietary information leaking to our competitors throughthe foundries we use; (3) limited control of delivery schedules, quality assurance and control, manufacturing yields and wafer costs; (4) theunavailability of, or potential delays in obtaining access to, key process technologies; and (5) financial risks of certain of our foundry suppliers.To manufacture our display drivers used in TFT-LCD and OLED panels, we require foundries with high-voltage CMOS manufacturing processcapacity. As a result, our dependence on high-voltage CMOS foundries presents the following, additional risks: (1) potential capacity constraintsfaced by the limited number of high-voltage CMOS foundries and the lack of investment in new and existing high-voltage CMOS foundries; (2)difficulty in attaining consistently high manufacturing yields from high-voltage CMOS foundries; (3) delay and time required to qualify and rampup production at new high-voltage CMOS foundries; and (4) price increases.As a result, we may be required to use foundries with which we have no established relationships, which could expose us to potentiallyunfavorable pricing, unsatisfactory quality or insufficient capacity allocation. Moreover, the scarcity of high-voltage foundry capacity maynecessitate us making investments in foundries in order to secure capacity, which would require us to substantially increase our capital outlays andpossibly raise additional capital, which may not be available to us on satisfactory terms, if at all.Table of Contents12We generally do not enter long - term agreements with our foundry partners that guarantee production capacity, prices, lead times, or deliveryschedules. However, since 2020, due to the pandemic lockdown, the work-from-home and learn-from-home new lifestyles triggered increasingdemands for display and display drivers related products. The surging demand in display drivers caused the severe foundry capacity shortage, whilethe industry has no major expansion plan especially on the mature nodes we are primarily anchored to. To address the potential foundry capacityshortage worldwide, we had entered into strategic agreements with our foundry partners in order to secure capacity to fulfill our business needs.Under these strategic agreements, we are committed to purchasing a specific volume at fixed or variable prices. However, for both pricingagreements, there can be no assurance that these prices provided in the strategic agreements with our foundry partners will always remaincompetitive during the contract term. For example, in the event that the global semiconductor market changes due to foundry capacity expansionand/or shrunken customer demand, the fixed prices we agree to pay our foundry partners may become significantly higher than the then prevailingmarket price. The situation could materially adversely impact our pricing strategies, competitive position, profitability and results of operation. Wemay also be subject to contractual penalties if we are unable to purchase the committed volume from our foundry partners. In addition, since thesestrategic agreements with our foundry partners typically require us to make prepayments or refundable deposits to such foundry partners, our cashflow, liquidity and financial condition could be adversely affected.Our inability to secure sufficient capacity from any of our third-party tape, assembly and testing houses at reasonable and competitive pricescould disrupt our shipments, harm our customer relationships and reduce our sales.Access to third-party tape, assembly and testing capacity is critical to our business because we do not have in-house tape, assembly and testingcapabilities for commercial production and instead rely on third-party service providers. Access to these services is especially important to ourbusiness because display drivers require specialized tape, assembly and testing services. A limited number of third-party tape, assembly and testinghouses tape, assemble and test substantially all of our current products. Therefore, suppliers could be in a better position to bargain for higherprices, longer contract terms, higher deposit and/or higher contract breach penalties for their services and products, which could result in anincrease in our average unit cost and/or penalty expenses. If the primary tape, assembly and testing service providers that we rely upon are not ableto meet our requirements in price, quality, and service, or if our business relationships with these service providers were adversely affected, wewould not be able to obtain the required capacity and would have to seek alternative providers, which may not be available on commerciallyreasonable terms, or at all. As a result, we do not directly control our product delivery schedules, tape, assembly and testing costs, and qualityassurance and control. If any of these third-party tape, assembly and testing houses experiences capacity constraints, financial difficulties, suffersany damage to its facilities or if there is any disruption of its assembly and testing capacity, we may not be able to obtain alternative assembly andtesting services in a timely manner. Because of the amount of time, we usually take to qualify assembly and testing houses, we may experiencesignificant delays in product shipments if we are required to find alternative sources. Any problems that we may encounter with the delivery,quality or cost of our products could damage our reputation and result in a loss of customers and orders. Moreover, the scarcity and importance oftape, assembly and testing services may necessitate us making investments in tape, assembly and testing service providers in order to securecapacity, which would require us to substantially increase our capital outlays and possibly raise additional capital, which may not be available to uson satisfactory terms, if at all.Shortages of key components for our customers’ products could decrease demand for our products.Shortages of components and other materials that are critical to the design and manufacture of our customers’ products may limit our sales.These components and other materials include, but are not limited to, color filters, backlight modules, polarizers, printed circuit boards and glasssubstrates. In the past, companies that use our products in their production have experienced delays in the availability of key components fromother suppliers. In addition, component manufacturers may not be able to increase or maintain their component supply because of labor shortage inChina or otherwise and may shut down certain of their capacity from time to time because of weak demand, which may increase the instability oftimely delivery and the risk of shortage of components. Such shortages of components and other materials critical to the design and manufacture ofour customers’ products may cause a slowdown in demand for our products, resulting in a decrease in our sales and adversely affecting our resultsof operations. In addition, as a result of uncertain demand conditions, our customers may hesitate to build inventory on hand and tend to releaseorders on short notice.Table of Contents13We rely on the services of our key personnel, and if we are unable to retain our current key personnel and hire additional personnel, ourability to design, develop and successfully market our products could be harmed.We rely upon the continued service and performance of a relatively small number of key personnel, including Jordan Wu, our president andchief executive officer, and Dr. Biing-Seng Wu, our chairman, and certain engineering, technical and senior management personnel, in particular,who are critical to our corporate management, business operation strategy, operation execution, future technological and product innovations.Competition for these personnel is intense in the semiconductor industry in Taiwan. Moreover, our future success depends on the expansion of oursenior management team and the retention of key employees. Any of our key employees could leave our company with little or no prior notice inapplicable jurisdictions and could then work with a competitor. In addition, we do not have “key person” life insurance policies covering any of ouremployees. The loss of any key personnel or our inability to attract or retain qualified personnel, whether engineers or others, could delay thedevelopment and introduction of new products and would have a material adverse effect on our ability to sell our products and may impact ouroverall business and growth. We may also incur increased operating expenses and be required to divert the attention of other senior executivesaway from their original duties to recruiting replacements for key personnel.If we fail to forecast customer demand accurately, we may have excess or insufficient inventory, which may increase our operating costs andharm our business.The lead time required by the semiconductor manufacturing service providers is typically longer than the lead time that our customers providefor delivery of our products to them. To ensure availability of our products for our customers, we will typically ask our semiconductormanufacturing service providers to start manufacturing our products based on forecasts provided by our customers in advance of receiving theirpurchase orders. However, these forecasts are not binding purchase commitments, and we do not recognize revenues until they are delivered tocustomers. Moreover, for the convenience of our customers, we may agree to ship our inventory to warehouses located near our customers, so thatour products can be delivered to customers more quickly. In such cases, we will not recognize revenues until the control over a product is given toour customers based on the shipping terms. Hence, we incur inventory and manufacturing costs in advance of anticipated revenues.The anticipated demand for our products may not materialize; therefore, manufacturing based on customer forecasts exposes us to risks such ashigh inventory carrying costs, increased product obsolescence, erosion of the products’ market value as well as penalties incurred fromunfulfillment of committed orders from capacity agreements with the Company’s foundries and backend suppliers. If we overestimate demand forour products or if purchase orders are cancelled or shipments delayed, we may incur charges from agreements entered with foundries and backendsuppliers for securing capacity, excess inventory that we cannot sell, or may have to sell at low profit margins or even at a loss, which would harmour financial results. Conversely, if we underestimate demand, we may not have sufficient inventory and may lose market share and damagecustomer relationships, which also could harm our business. These inventory risks are exacerbated by the high level of customization of ourproducts, which limits our ability to sell excess inventory to other customers, which could eventually lead to write-down of these excessinventories.If we do not achieve additional design wins in the future, our ability to grow will be limited.Our future success depends on our customers designing our products into their products. To achieve design wins, we must design and delivercost-effective, innovative, reliable and integrated products for our customers’ needs. A panel manufacturer may be reluctant to change its source ofcomponents due to the significant costs and time associated with qualifying a new supplier. A design win is not a binding commitment by acustomer to purchase our products and may not result in large volume orders of our products. Rather, it is a decision by a customer to use ourproducts in the design process of that customer’s products. Accordingly, our failure to successfully design, develop and introduce new products andproduct enhancements could harm our business, financial condition and results of operations.Table of Contents14Our products are complex and may require modifications to resolve undetected errors or failures in order for them to function with panels atthe desired specifications, which could lead to higher costs, customer dispute, a loss of customers or a delay in market acceptance of ourproducts.Our products are highly complex and may contain undetected errors or failures. Our products must operate according to specifications with theother components used by our customers in their product manufacturing process. If our products are delivered with errors or defects, we couldincur additional development, repair or replacement costs, and our credibility and the market acceptance of our products could be harmed alongwith possible liability indemnification for defective product, customer disputes and lawsuits against us or our customers.Our highly integrated products are difficult to manufacture without defects. The existence of defects in our products could increase our costs,decrease our sales and damage our customer relationships and our reputation.The manufacture of our products that incorporate mixed analog and digital signal processing and embedded memory technology is complexand it is difficult for semiconductor foundries to manufacture them completely without defects. Minor deviations in the manufacturing processcould cause substantial reduction in yield and quality.Defective products can be caused by design, defective materials or component parts, or manufacturing difficulties. Thus, quality problems canbe identified only by analyzing and testing our display drivers in a system after they have been manufactured. Difficulties in achieving defect-freeproducts due to the increasing complexity of display drivers and the panel system may result in an increase in our costs and expenses, and delays inthe availability of our products. In addition, if the foundries that we use fail to deliver products of satisfactory quality in the volume and at the pricerequired, we will be unable to meet our customers’ demand or to sell those products at an acceptable profit margin, which could adversely affectour sales and margins and damage our customer relationships and our reputation.We may not have long-term purchase commitments from our customers, which may result in significant uncertainty and volatility withrespect to our revenues and could materially and adversely affect our results of operations and financial condition.We may not have long-term purchase commitments from our customers; our sales are made on the basis of individual purchase orders. Ourcustomers may also cancel or defer purchase orders. Our customers’ purchase orders may vary significantly from period-to-period, and it isdifficult to forecast future order quantities. In the event of a cancellation, postponement, or reduction of an order, we would likely not be able toreduce operating expenses sufficiently so as to minimize the impact of the lost revenues. Alternatively, subject to real ever-changing circumstancesover the periods, we may have excess inventory that we cannot sell, which would harm our operating results. In addition, changes in our customers’business may adversely affect the quantity of purchase orders that we receive by reducing or canceling their orders of our products, and/orrequesting higher-than-usual price concessions. We cannot assure you that any of our customers will continue to place purchase orders with us inthe future. We also cannot assure you that the volume of our customers’ purchase orders will be consistent with our expectations when we plan ourexpenditures. Our results of operations and financial condition may thus be materially and adversely affected. Additionally, purchase orderunissued, cancelations or negative alternation by customers may lead to a reduction in future earnings or cash flows subject to each event.Our corporate actions are substantially controlled by officers, directors and affiliated entities who may take actions that are not in, or mayconflict with, our or our public shareholders’ interests.As of March 31, 2024, Jordan Wu and Dr. Biing-Seng Wu (who are brothers) beneficially owned approximately 2.1% and 22.0% of ourordinary shares, respectively. For information relating to the beneficial ownership of our ordinary shares, see “Item 7.A. Major Shareholders andRelated Party Transactions—Major Shareholders.” These shareholders, acting together, could exert substantial influence over matters requiringapproval by our shareholders, including electing directors and approving mergers or other business combination transactions. This concentration ofownership may also discourage, delay or prevent a change in control of our company, which could deprive our shareholders of an opportunity toreceive a premium for their shares as part of a sale of our company and might reduce the price of our ADSs. Actions may be taken even if theywere opposed by our other shareholders.Table of Contents15Assertions against us by third parties for infringement of their intellectual property rights could result in significant costs and cause ouroperating results to suffer.The semiconductor industry is characterized by vigorous protection and pursuit of intellectual property rights and positions, which results inprotracted and expensive litigation for many companies. We have received, and expect to continue to receive, notices of infringement of third-partyintellectual property rights. We may receive claims from various industry participants alleging infringement of their patents, trade secrets or otherintellectual property rights in the future. Any lawsuit resulting from such allegations could subject us to significant liability for damages andinvalidate our proprietary rights. These lawsuits, regardless of their success, would likely be time-consuming and expensive to resolve and woulddivert management time and attention. Any potential intellectual property litigation also could force us to do one or more of the following: (1)desist and stop selling products or using technology or manufacturing processes that contain the allegedly infringing intellectual property; (2) paydamages to the party claiming infringement; (3) attempt to obtain a license for the relevant intellectual property, which may not be available oncommercially reasonable terms or at all; and (4) attempt to redesign those products that contain the allegedly infringing intellectual property withnon-infringing intellectual property, which may not be possible.The outcome of a dispute may result in our need to develop non-infringing technology or enter into royalty or licensing agreements. We haveto undertake the contractual obligations, product liabilities and tort liabilities in applicable law jurisdictions, and we have agreed to indemnifycertain customers for certain claims of infringement arising out of the sale of our products. Any intellectual property litigation could have amaterial adverse effect on our business, operating results or financial condition.Our ability to compete will be harmed if we are unable to protect our intellectual property rights adequately.We believe that the protection of our intellectual property rights is, and will continue to be, important to the success of our business. We relyprimarily on a combination of patents, trademarks, trade secrets and copyright laws and contractual restrictions to protect our intellectualproperties. These afford only limited protection. Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to obtain,copy or use information that we regard as proprietary, such as product design and manufacturing process expertise. Our pending patent applicationsand any future applications may not result in issued patents or may not be sufficiently broad to protect our proprietary technologies. Moreover,policing any unauthorized use of our products is difficult and costly, and we cannot be certain that the measures which we have implemented willprevent misappropriation or unauthorized use of our technologies, particularly in foreign jurisdictions where the laws may not protect ourproprietary rights as fully as the laws of the United States. Others may independently develop substantially equivalent intellectual properties orotherwise gain access to our trade secrets or intellectual properties. Our failure to protect our intellectual properties effectively could harm ourbusiness.We may undertake acquisitions or investments to expand our business that may pose risks to our business and dilute the ownership of ourexisting shareholders, and we may not realize the anticipated benefits of these acquisitions or investments.As part of our growth and product diversification strategy, we will continue to evaluate opportunities to acquire or invest in other businesses,intellectual property or technologies that would complement our current offerings, expand the breadth of markets we can address or enhance ourtechnical capabilities. Acquisitions or investments that we have completed or potentially may make in the future entail a number of risks that couldmaterially and adversely affect our business, operating and financial results, including: (1) problems integrating the acquired key employees,operations, technologies or products into our existing business and products; (2) diversion of management’s time and attention from our corebusiness; (3) adverse effects of losses of the acquired target upon our financial condition and results of operations; (4) adverse effects on existingbusiness relationships with customers; (5) the need for financial resources above our planned investment levels; (6) dilution of share ownership ofcurrent shareholders under share swap transactions; (7) risks associated with entering markets in which we lack experience; (8) potential write-offsof acquired assets; and (9) potential impairment charges related to the goodwill acquired.We may also face challenges in international acquisitions, such as compliance with local law and regulation, limited access to target companiesand cultural assimilation challenges. Our failure to address these risks successfully may have a material adverse effect on our financial conditionand results of operations. Any such acquisition or investment may require a significant amount of capital investment, which would decrease theamount of cash available for working capital or capital expenditures. In addition, if we use our equity securities to pay for acquisitions, the value ofour ADSs and the underlying ordinary shares may be diluted. If we borrow funds to finance acquisitions, such debt instruments may containrestrictive covenants that can, among other things, restrict us from distributing dividends.Table of Contents16System security risks, data protection breaches or unexpected system outages or failures could impact our business.Our computer systems and networks are vulnerable to damage or interruption from earthquakes, fires, power loss, telecommunications failures,cyber-attacks, computer viruses or other malicious attempts. The reliability and safety of our information technology infrastructure / software, andthe ability to continually expand and update technologies / software in response to dynamic changing needs and cybersecurity threats, are critical toour business. In recent years, there are increasing and evolving risks to cybersecurity and privacy, including criminal hackers, state-sponsoredintrusions, industrial espionage, employee malfeasance and human / technological errors. All of the above could result in the loss of our intellectualproperty, the leak of commercially sensitive information, and the misappropriation of confidential information of our employees, customers andsuppliers, and therefore could cause the interruption of our business. Failures to protect the privacy of employees, customers or suppliers’confidential data against breaches of network security could result in the loss of existing or potential customers, other financial loss, and damage toour reputation. In addition, the operational cost and consequences against breaches and remedial measures could be significant. While we seek toannually review and assess our cybersecurity policies and procedures to ensure their adequacy and effectiveness, we still cannot guarantee that wewill not be susceptible to new and emerging risks and attacks in the evolving landscape of cybersecurity threats. As of March 31, 2024, we are notaware of any material cyberattacks or incidents that had or would be expected to have a materially adverse effect on our business and operations,nor had we been involved in any legal proceedings or regulatory investigations related thereto.Our data centers are subject to the risk of break-ins and sabotage. Our disaster recovery plan cannot account for all eventualities. Consequently,the occurrence of a natural disaster or other unanticipated problems at our data centers could result in loss of production capabilities and lengthyinterruptions in our services and business. Some of our system services are based on public cloud services, which are also subject to interruptiondue to cloud service providers’ unexpected downtimes, cyberattacks or any type of failure, telecommunication failure and/or other unidentifiedproblems while connecting to cloud. These cloud services interruptions could result in loss of production capabilities and lengthy interruptions inour services and business. Cloud cybersecurity breaches could result in adverse effects on our customers, employees, suppliers, reputation, andbusiness.Risks Relating to Our IndustryThe average selling prices of our products could decrease rapidly, which may negatively impact our revenues and operating results.The price of each semiconductor product typically declines over its product life cycle, reflecting product obsolescence, decreased demand ascustomers shift to more advanced products, decreased unit costs due to advanced designs or improved manufacturing yields, excess inventorydestocking amidst low market demand, and increased competition as more semiconductor suppliers are able to offer similar products. We mayexperience substantial period-to-period fluctuations in future operating results if our average selling prices decline. We may reduce the average unitprice of our products in response to competitive pricing pressures, new product introductions by us or our competitors, and other factors. We expectthat these factors will create downward pressure on our average selling prices and operating results. If we are unable to offset any reductions in ouraverage selling prices by increasing our sales volumes and corresponding production cost reductions, or if we fail to develop and introduce newproducts and enhancements on a timely basis, our revenues and operating results will suffer.The semiconductor industry, in particular semiconductors used in flat panel displays, is highly competitive, and we cannot assure that we willbe able to compete successfully against our competitors.Increased competition in the semiconductor industry may result in pricing pressure, reduced profitability and loss of market share, any ofwhich could seriously harm our revenues and results of operations. We continually face intense competition from fabless display driver companiesand integrated device manufacturers. Some of our competitors have substantially greater financial and other resources to pursue engineering,manufacturing, marketing and distribution of their products. As a result, they may be able to respond more quickly to changing customer demandsor devote greater resources to the development, promotion and sales of their products. Some of our competitors are affiliated with, or aresubsidiaries of, our panel manufacturer customers. These relationships may also give our competitors significant advantages such as early access toproduct roadmaps and design-in priorities, which would allow them to respond more quickly to changing customer demands and achieve moredesign-wins than we can. We cannot assure you that we will be able to increase or maintain our revenues and market share or compete successfullyagainst our competitors in the semiconductor industry.Table of Contents17Our business could be materially and adversely affected if we fail to anticipate changes in evolving industry standards, fail to achieve andmaintain technological leadership in our industry or fail to develop and introduce new and enhanced products.Our products are generally based on industry standards, which are continually evolving. The emergence of new industry standards could renderour products or those of our customers unmarketable or obsolete and may require us to incur substantial unanticipated costs to comply with anysuch new standards. Our past sales and profitability have resulted, to a significant extent, from our ability to anticipate changes in technology andindustry standards, and to develop and introduce new and enhanced products in a timely fashion. If we do not anticipate these changes intechnologies and rapidly develop and introduce new and innovative technologies, we may not be able to provide advanced display semiconductorson competitive terms, and some of our customers may buy products from our competitors instead of from us. Our continued ability to adapt to suchchanges and anticipate future standards will be a significant factor in maintaining or improving our competitive position and our growth prospects.We cannot assure you that we will be able to anticipate evolving industry standards, successfully complete the design of our new products, havethese products manufactured at acceptable manufacturing yields, or obtain significant purchase orders for these products to meet new standards ortechnologies. If we fail to anticipate changes in technology and to introduce new products that achieve market acceptance, our business and resultsof operations could be materially and adversely affected.Risks Relating to Our Holding Company StructureOur ability to receive dividends and other payments or funds from our subsidiaries may be restricted by commercial, statutory and legalrestrictions, and thereby materially and adversely affect our ability to grow, fund investments, make acquisitions, pay dividends and otherwisefund and conduct our business.We are a holding company and our assets consist mainly of our 100% ownership interest in Himax Taiwan. We receive cash from HimaxTaiwan through intercompany borrowings. Himax Taiwan has not paid us cash dividends in the past. Nonetheless, dividends and interest onshareholder loans that we receive from our subsidiaries in Taiwan, if any, will be subject to withholding tax under ROC law. The ability of oursubsidiaries to provide us with loans, pay dividends, repay any shareholder loans from us or make other distributions to us is restricted by, amongother things, the availability of funds, the terms of various credit arrangements entered into by our subsidiaries, as well as statutory and other legalrestrictions. Any limitation on dividend payments by our subsidiaries could materially and adversely affect our ability to grow, finance capitalexpenditures, make acquisitions, pay dividends, and otherwise fund and conduct our business.Political, Geographical and Economic RisksClimate change and natural disasters could adversely affect our business.There is increasing concern that a gradual increase in global average temperatures due to increased concentration of carbon dioxide and othergreenhouse gases in the atmosphere has, and will continue to, cause significant changes in weather patterns around the globe and an increase in thefrequency and severity of natural disasters. Changes in weather patterns and an increased frequency, intensity and duration of extreme weatherconditions could, among other things, impair our production capabilities, disrupt the operation of our supply chain, and impact our customers andtheir demand for our services. There are inherent climate-related risks regardless of where we conduct our business. Climate-change-relatedweather events could negatively impact any of our locations or the locations of our customers, and may cause us to experience project delays,financial losses and/or additional costs to resume operations, including increased insurance costs or loss of coverage, legal liability and reputationallosses.Climate change concerns have also led to international legislative and regulatory initiatives directed at limiting carbon dioxide and othergreenhouse gas emissions. Proposed and existing efforts to address climate change by reducing greenhouse gas emissions could directly orindirectly affect our costs of compliance, including costs associated with changes to manufacturing processes or the procurement of raw materialsused in manufacturing processes, increased capital expenditures to improve facilities and equipment, and higher compliance and energy costs toreduce emissions, as well as increased indirect costs resulting from our customers, suppliers or both incurring additional compliance costs that arepassed on to us, which could harm our business and financial results by increasing our expenses or requiring us to alter our operations and productdesign activities.Table of Contents18In addition, climate change could cause certain natural disasters to occur more frequently or with greater intensity. Most of our operations, and the operations of many of our semiconductor manufacturing service providers, suppliers and customers are located in Taiwan, which is vulnerable to natural disasters, in particular, earthquakes and typhoons. Our principal foundries, tape and assembly and testing houses upon which we have relied to manufacture substantially all of our display drivers are located in Taiwan. As a result of this geographic concentration, disruption of operations at our facilities or the facilities of our semiconductor manufacturing service providers and suppliers for any reason, including work stoppages, power outages, water supply shortages, fire, typhoons, earthquakes or other natural disasters, could cause delays in production and shipments of our products. In addition, shortages or interruptions in electricity supply could further be exacerbated by changes in the energy policy of the government, such as to make Taiwan a nuclear-free country. Any delays or disruptions could result in our customers seeking to source products from our competitors. If such disruptions of operation occur at our customers’ facilities and our customers may be required to shut down temporarily or to substantially reduce the operations of their fabs, these events would seriously affect demand for our products. Disruptions in Taiwan’s political environment could negatively affect our business and ADSs market price.Our principal executive offices and a substantial amount of our assets are located in Taiwan, and a substantial portion of revenues is derivedfrom operations in Taiwan. Our business, financial condition and results of operations and our ADSs market price may be affected by changes inROC policies, taxation, inflation or interest rates, and by social instability and diplomatic issues that are outside of our control.Taiwan has a unique international political status. Since 1949, Taiwan and the PRC have been separately governed. The government of thePRC claims that it is the sole government in China and that Taiwan is part of China. Although significant economic and cultural relations have beenestablished during recent years between Taiwan and the PRC, the PRC government has refused to renounce the possibility that it may at some pointuse force to gain control over Taiwan. Furthermore, the PRC government adopted an anti-secession law relating to Taiwan. Relations between theROC and the PRC governments have been strained in recent years for a variety of reasons, including the PRC government’s position on the “OneChina” policy and tensions concerning arms sales to Taiwan by the United States government. Any tension between the ROC and the PRC, orbetween the United States and the PRC, could materially and adversely affect our ADSs market prices.A substantial portion of our sales are made to customers in the PRC, which may expose us to additional political, regulatory, and economicrisks.We have been increasingly selling our products to customers in the PRC. In 2022 and 2023, approximately 77.0% and 76.2% of our revenues,respectively, were from customers headquartered in the PRC. We expect to continue to increase our sales to customers in the PRC in the future.With regional customer concentration, we are particularly subject to economic and political events and other developments that affect ourcustomers in the PRC.The PRC economy differs from the economies of most developed countries in many respects, including the structure, level of governmentinvolvement, level of development, foreign exchange control and allocation of resources. The PRC economy has been transitioning from a plannedeconomy to a more market-oriented economy and is growing rapidly. For the past two decades, the PRC government has implemented economicreform measures emphasizing utilization of market forces in the development of the economy and also adjusted its macroeconomic control policiesfrom time to time. These policies have led and may continue to lead to changes in market conditions. Further, if new, US sanctions are imposed onChina and any new tariffs, legislation and/or regulations are implemented, or if existing trade agreements are renegotiated or, in particular, if theU.S. government takes retaliatory trade actions due to recent U.S.-China trade tensions, such changes could have an adverse effect on ourcustomers or suppliers in China. We cannot predict whether changes in the PRC’s political, economic and social conditions, laws, regulations andpolicies will have any adverse effect on our customers in the PRC. In addition, the interpretation of PRC laws and regulations involvesuncertainties. We cannot assure you that changes in such laws and regulations, or in their interpretation and enforcement, will not have a materialadverse effect on the businesses and operations of our customers in the PRC and consequently have a material adverse effect on our business andoperations.Table of Contents19Fluctuations in exchange rates could result in foreign exchange losses and affect our results of operations.Our functional and reporting currency is U.S. dollars. In 2023, more than 99% of our revenues and cost of revenues were denominated in U.S.dollars. However, we have foreign currency exposure and are primarily affected by fluctuations in exchange rates between the U.S. dollar and theNT dollar. This is because a majority portion of our employees and facilities are based in Taiwan and operating expenses are denominated in NTdollars and we maintain a portion of our cash in NT dollars for Taiwan working capital purposes. For example, in December 2023, approximately70% of our operating expenses were denominated in NT dollars, with a small percentage denominated in Japanese Yen, Korean Won and ChineseRenminbi, and the majority of the remainder in U.S. dollars. As a result, any significant fluctuations to our disadvantage in exchange rate of U.S.dollars against such currencies, in particular a weakening of the U.S. dollar against the NT dollar, would have an adverse impact on our operatingexpenses as expressed in U.S. dollar and adversely affect our operating profit.Changes in ROC tax laws would likely increase our tax expenditures and decrease our net income.The Company is incorporated in the Cayman Islands, a tax-free country; accordingly, pretax income generated by the group parent company isnot subject to local income tax. Substantially all of the Company's taxable income is derived from the operations in the ROC and we are exposedprimarily to taxes levied by the ROC government. Any unfavorable changes of tax laws and regulations in this jurisdiction could increase oureffective tax rate and have an adverse effect on our operating results. See “Item 5.A. Operating and Financial Reviews and Prospects -OperatingResults-Tax Credits” for further discussion of significant tax regulation changes.On July 12, 2016, the ROC Legislative Yuan passed the third reading of anti-avoidance to establish Article 43-3 Controlled Foreign Company(“CFC”) rules and Article 43-4 Place of Effective Management (“PEM”) rules of the Income Tax Act (“ITA”). Detailed introduction of the CFCand PEM rules are described as follows:(i)A profit-seeking enterprise (“PSE”) that directly or indirectly owns affiliated enterprises in low-tax jurisdictions outside the territory ofthe ROC shall recognize and include its pro rata share of affiliated enterprises’ annual profits as investment income in its income taxreturn for the year. Subsequent actual dividends and distributions from such affiliated enterprises that were previously recognized asinvestment income will then not be subject to income taxation; any surplus to previously recognized investment income shall be includedas taxable income in the allocated year. Low-tax jurisdictions are defined as countries where the PSE income tax rate is lower than 70%of the income tax rate of the PSE in the ROC (the statutory income tax rate is 20% from January 1, 2018) (Article 43-3 CFC rules); and(ii)A PSE is incorporated based on foreign legislation but its place of effective management (PEM) is maintained within the territory of theROC, and the head office of such PSE will be determined to be within the territory of the ROC and profit-seeking enterprise income taxshall be levied in accordance with the ITA and relevant tax regulations. The aforementioned PEM refers to a place where substantive keymanagement and commercial decisions of an entity’s business and its operations are made (Article 43-4 PEM rule).According to the legislative intent, the CFC and PEM rules, in principle, will not be put into force immediately, but will wait until the China-Taiwan Cross-Strait Tax Agreement is effectuated, the OECD’s Common Reporting and Due Diligence Standard (“CRS”) for the automaticexchange of information of financial accounts is widely implemented internationally, and the relevant bylaws of the CFC and PEM rules have beenadequately enacted and properly advocated. The date of implementation will be determined by the Executive Yuan. On January 14, 2022,Executive Yuan had announced the relevant bylaws of the CFC would be implemented from January 1, 2023 and we expect that CFC would haveno material impact to affect our operating profit.Additionally, dividend payments made by us are not subject to withholding tax in the Cayman Islands. However, if the relevant bylaws of thePEM rules have been adequately enacted and properly advocated, we may be determined to be within the territory of the ROC and our income taxshall be levied in accordance with the Income Tax Act and relevant tax regulations. Therefore, dividend payments made by us would be subject towithholding tax in the ROC.Table of Contents20We may be affected by the Cayman Economic Substance LawPursuant to the International Tax Co-operation (Economic Substance) Act (2021 Revision) (as amended) of the Cayman Islands (the “ESAct”), a “relevant entity” is required to satisfy the economic substance test set out in the ES Act. A “relevant entity” includes an exemptedcompany incorporated in the Cayman Islands as is our company. Based on the current interpretation of the ES Act, we believe that our company,Himax Technologies, Inc., is a pure equity holding company since it only holds equity participation in other entities and only earns dividends andcapital gains.Accordingly, for so long as our company is a “pure equity holding company”, it is only subject to the minimum substance requirements, whichrequire us to (i) comply with all applicable filing requirements under the Companies Act (2021 Revision) of the Cayman Islands; and (ii) haveadequate human resources and adequate premises in the Cayman Islands for holding and managing equity participations in other entities. However,there can be no assurance that we will not be subject to more requirements under the ES Act. Uncertainties over the interpretation andimplementation of the ES Act may have an adverse impact on our business and operations.Risks Relating to Our ADSs and Our Trading MarketThe market price for our ADSs is volatile.The market price for our ADSs is volatile and has ranged from a low of $5.22 to a high of $8.7 on the NASDAQ Global Select Market in2023.The market price is subject to wide fluctuations in response to various factors, including the following: (1) actual or anticipated fluctuations inour quarterly operating results; (2) changes in financial estimates by securities research analysts; (3) changes in the expectation of our productlaunch timing, forecast and estimates; (4) conditions in the TFT-LCD and OLED panel market; (5) changes in the economic performance or marketvaluations of other display semiconductor companies; (6) announcements by us or our competitors of new products, acquisitions, strategicpartnerships, joint ventures or capital commitments; (7) the addition or departure of key personnel; (8) fluctuations in exchange rates between theU.S. dollar and the NT dollar; (9) litigation related to our intellectual property; and (10) the release of lock-up or other transfer restrictions on ouroutstanding ADSs or sales of additional ADSs.In addition, the worldwide financial crisis, disruptions in business and manufacture due to sluggish demand, and global developments relatingto Russia's invasion of Ukraine, global stock markets have experienced extreme price and volume fluctuations. This volatility has had a significanteffect on the market prices of securities issued by many companies for reasons which may not be directly related to their operating performance,including but not limited to events such as tax-loss selling, mutual fund redemptions, hedge fund redemptions and margin calls. These marketfluctuations may also materially and adversely affect the market price of our ADSs.Future sales or perceived sales of securities by us, our executive officers, directors or major shareholders may hurt the price of our ADSs.The market price of our ADSs could decline as a result of sales of ADSs or shares or the perception that these sales could occur. As of March31, 2024, we had 349,448,102 outstanding shares and a significant number of our shares were beneficially owned by certain major shareholderssuch as our directors and executive officers. See “Item 7.A. Major Shareholders and Related Party Transactions—Major Shareholders.” If we, ourexecutive officers, or directors or our shareholders sell ADSs or shares, the market price for our shares or ADSs could decline.Table of Contents21You may not have the same voting rights as the holders of our ordinary shares and may not receive voting materials sufficiently in advance tobe able to exercise your right to vote.Except as described in the deposit agreement, holders of our ADSs will not be able to exercise voting rights attaching to the shares evidencedby our ADSs on an individual basis. Holders of our ADSs will appoint the depositary or its nominee as their representative to exercise the votingrights attaching to the shares represented by the ADSs. In certain circumstances, the depositary shall refrain from voting and any voting instructionsreceived from ADS holders shall lapse. Furthermore, in certain other circumstances, the depositary will give us a discretionary proxy to vote sharesevidenced by ADSs. You may not receive voting materials sufficiently in advance to instruct the depositary to vote or persons who hold their ADSsthrough brokers, dealers or other third parties will not have the opportunity to exercise a right to vote.You may not be able to participate in rights offerings and may experience dilution of your holdings as a result.We may from time to time distribute rights to our shareholders, including rights to acquire our securities. Under the deposit agreement for theADSs, the depositary will not offer those rights to ADS holders unless both the rights and the underlying securities to be distributed to ADS holdersare either registered under the Securities Act, or exempt from registration under the Securities Act with respect to all holders of ADSs. We areunder no obligation to file a registration statement with respect to any such rights or underlying securities or to endeavor to cause such aregistration statement to be declared effective. In addition, we may not be able to take advantage of any exemptions from registration under theSecurities Act. Accordingly, holders of our ADSs may be unable to participate in our rights offerings and may experience dilution in their holdingsas a result.You may be subject to limitations on transfer of your ADSs.Your ADSs represented by the ADRs are transferable on the books of the depositary. However, the depositary may close its transfer books atany time or from time to time whenever it deems expedient in connection with the performance of its duties. In addition, the depositary may refuseto deliver, transfer or register transfers of ADSs generally when books or the books of the depositary are closed, or at any time if we or thedepositary deem it necessary or advisable to do so because of any requirement of law, any government, governmental body, commission, or anysecurities exchange on which our ADSs or ordinary shares are listed, or under any provision of the deposit agreement or provisions of, orgoverning, the deposited securities or any meeting of our shareholders, or for any other reason.Your ability to protect your rights through the United States federal courts may be limited, because we are incorporated under CaymanIslands law, conduct a substantial portion of our operations in Taiwan, and all of our directors and officers reside outside the United States.We are incorporated in the Cayman Islands. However, a substantial portion of our operations is conducted in Taiwan through Himax Taiwan,our wholly owned subsidiary, and substantially all of our assets are located in Taiwan. All of our directors and officers reside outside the UnitedStates, and a substantial portion of the assets of those persons is located outside the United States. As a result, it may be difficult or impossible foryou to bring an action against us or against these individuals in the United States in the event that you believe that your rights have been infringedunder the securities laws or otherwise. Even if you are successful in bringing an action of this kind, the laws of the Cayman Islands and of Taiwanmay render you unable to enforce a United States judgment against our assets or the assets of our directors and officers. There is no statutoryrecognition in the Cayman Islands of judgments obtained in the United States, although a final and conclusive judgment in the federal or statecourts of the United States under which a sum of money is payable, other than a sum payable in respect of multiple damages, taxes, or othercharges of a like nature or in respect of a fine or other penalty, may be subject to enforcement proceedings as debt in the courts of the CaymanIslands under the common law doctrine of obligation, provided that (a) such federal or state courts of the United States had proper jurisdiction overthe parties subject to such judgment; (b) such federal or state courts of the United States did not contravene the rules of natural justice of theCayman Islands; (c) such judgment was not obtained by fraud; (d) the enforcement of the judgment would not be contrary to the public policy ofthe Cayman Islands; (e) no new admissible evidence relevant to the action is submitted prior to the rendering of the judgment by the courts of theCayman Islands; and (f) there is due compliance with the correct procedures under the laws of the Cayman Islands.Therefore, our public shareholders may have more difficulty in protecting their interests through actions against our management, directors ormajor shareholders than shareholders of a corporation incorporated in a jurisdiction in the United States.Table of Contents22You may face difficulties in protecting your interests as a shareholder because judicial precedents regarding shareholders’ rights are morelimited under Cayman Islands law than under U.S. law, and because Cayman Islands law generally provides less protection to shareholdersthan U.S. law.Our corporate affairs are governed by memorandum and articles of association, the Companies Law, Cap. 22 (Law 3 of 1961, as consolidatedand revised) of the Cayman Islands, or the Cayman Islands Companies Law, and the common law of the Cayman Islands. The rights ofshareholders to take action against directors, actions by minority shareholders and the fiduciary responsibilities of our directors to us under CaymanIslands law are to a large extent governed by the common law of the Cayman Islands. The common law is derived in part from comparativelylimited judicial precedent in the Cayman Islands as well as from English common law, which has persuasive, but not binding, authority on a courtin the Cayman Islands. The rights of shareholders and the fiduciary responsibilities of directors under Cayman Islands law are not as clearlyestablished as they would be under statutes or judicial precedent in some jurisdictions in the United States. In particular, the Cayman Islands have aless developed body of securities law than the United States.ITEM 4. INFORMATION ON THE COMPANY4.A. History and Development of the CompanyHimax Taiwan, our predecessor, was incorporated on June 12, 2001 as a limited liability company under the laws of the ROC. On April 26,2005, we established Himax Technologies Limited, an exempted company with limited liability under the Cayman Islands Companies Law, as aholding company to hold the shares of Himax Taiwan in connection with our reorganization and share exchange. On October 14, 2005, HimaxTaiwan became our wholly owned subsidiary through a share exchange consummated pursuant to the ROC Business Mergers and AcquisitionsLaw through which we acquired all of the issued and outstanding shares of Himax Taiwan, and we issued ordinary shares to the shareholders ofHimax Taiwan. Shareholders of Himax Taiwan received one of our ordinary shares in exchange for one Himax Taiwan common share. The shareexchange was unanimously approved by shareholders of Himax Taiwan on June 10, 2005 with no dissenting shareholders and by the ROCInvestment Commission on August 30, 2005 for our inbound investment in Taiwan, and on September 7, 2005 for our outbound investment outsideof Taiwan. We effected this reorganization and share exchange to comply with ROC laws, which prohibit a Taiwan incorporated company nototherwise publicly listed in Taiwan from listing its shares on an overseas stock exchange. Our reorganization enables us to maintain our operationsthrough our Taiwan subsidiary, Himax Taiwan, while allowing us to list our shares overseas through our holding company structure.On September 26, 2005, we changed our name to “Himax Technologies, Inc.,” and on October 17, 2005, Himax Taiwan changed its name to“Himax Technologies Limited” upon the approval of shareholders of both companies and amendments to the respective constitutive documents.We effected the name exchange in order to maintain continuity of operations and marketing under the trade name “Himax Technologies, Inc.,”which had been previously used by Himax Taiwan.Our ADSs have been listed on the NASDAQ Global Select Market since March 31, 2006. Our ordinary shares are not listed or publicly tradedon any trading markets.In February 2007, we completed the acquisition of Wisepal, currently known as Himax Semiconductor, Inc., a fabless semiconductor companyfocusing on the development of LTPS TFT-LCD drivers for small and medium-sized applications. This transaction strengthened our competitiveposition in the small and medium-sized product areas and further diversified our technology and product offerings. For management purpose,Himax Semiconductor Inc. was merged into Himax Taiwan on July 2, 2018.In March 2007, we established Himax Imaging, Inc., which develops and markets CMOS image sensors with an initial focus on cameraapplications used in cell phones and notebook computers.In July 2012, our subsidiary, Himax Display, completed the acquisition of Spatial Photonics, currently known as Himax Display (USA) Inc., aDelaware corporation engaged in the business of manufacturing and production of MEMS products.In June 2018, we completed the acquisition of Emza Visual Sense Ltd., or Emza, which is dedicated to the development of visual sensors thatinclude proprietary machine-vision algorithms and specific architectures that enable always-on visual sensing capabilities, achieving improvementin power consumption, price and form factor. On October 25, 2022, we disposed of 100% of our shareholdings in Emza to a third party.From time to time, we have also made minority investments in various companies for strategic purposes in the ordinary course of business.Table of Contents23Our principal executive offices are located at No. 26, Zilian Road, Xinshi District, Tainan City 744092, Taiwan, Republic of China. Ourtelephone number at this address is +886-6-505-0880. Our registered office in the Cayman Islands is located at Cricket Square, Hutchins Drive,P.O. Box 2681, Grand Cayman KY1-1111, Cayman Islands. Our telephone number at this address is +1-345-945-3901. In addition, we have officesin Hsinchu and Taipei, Taiwan; Foshan, Fuqing, Ningbo, Beijing, Shanghai, Shenzhen, Suzhou, Wuhan, Hefei, Chengdu, Fuzhou, Nanjing,Chongqing, Xi’an and Xiamen, China; Tokyo, Japan; Asan-si and Bundang-gu, South Korea; Munich, Germany and Irvine and San Jose,California, Minneapolis, Minnesota and Detroit, Michigan, USA.Investor inquiries should be directed to our Investor Relations department by email to hx_ir@himax.com.tw. The SEC maintains an Internetsite that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. Theaddress of the SEC’s Internet site is http://www.sec.gov. Our website is www.himax.com.tw. The information contained on our website is not partof this annual report.4.B. Business OverviewWe are a leading global fabless semiconductor solution provider dedicated to display imaging processing technologies. Our display driver ICsand timing controllers have been adopted at scale across multiple industries worldwide including TVs, PC monitors, laptops, mobile phones,tablets, automotive, ePaper devices, industrial displays, among others. As the global market share leader in automotive display technology, we offerinnovative and comprehensive automotive IC solutions, including traditional driver ICs, advanced in-cell Touch and Display Driver Integration(TDDI), Large Touch and Display Driver Integration (LTDI) and local dimming timing controllers (Local Dimming TCON), as well as andAMOLED solutions, including AMOLED drivers, TCONs and touch controller ICs. We are also a pioneer in tinyML visual-AI and opticaltechnology related fields. Our industry-leading WiseEyeTM Smart Sensing technology which incorporates Himax proprietary ultralow power AIprocessor, always-on CMOS image sensor, and CNN-based AI algorithm has been widely deployed in consumer electronics and AioT relatedapplications. While Himax optics technologies, such as wafer level optics (WLO), LCoS microdisplays and 3D sensing solutions, are critical forfacilitating emerging AR/VR/metaverse technologies. Besides, Himax designs and provides touch controllers, AMOLED ICs, LED drivers, EPDdrivers, power management ICs, and CMOS image sensors for diverse display application coverage.Industry BackgroundWe mainly operate in the flat panel display semiconductor industry. As the majority of our revenues derive from products that are criticalcomponents of flat panel displays, such as display drivers, timing controllers, power ICs and other semiconductor products, our industry is closelylinked to the trends and developments of the flat panel display industry.Flat Panel Display SemiconductorsFlat panel displays require different semiconductors depending upon the display technologies and the applications. Some of the most importantones include the following:●Display Driver. The display driver receives image data from the timing controller and delivers precise analog voltages or currents tocreate images on the display. The major application of display driver IC is used on TFT-LCDs. Other than display drivers for TFT-LCDs,we also offer display drivers for OLED and Electronic Paper (e-paper) Displays. OLED display is getting more and more popular inrecent years, starting from high-end smartphone and TV applications towards tablet, notebook and automotive, while e-paper displaymimics traditional paper sheet and holds static text and images indefinitely without electricity. Detailed display driver IC specification forLCD, OLED and e-paper are different due to panel characteristics. The two main types of display drivers for a display panel are gatedrivers and source drivers. Gate drivers turn on the transistor within each pixel cell on the horizontal line on the panel for data input ateach row. Source drivers receive image data from the timing controller and generate voltage that is applied to the liquid crystal withineach pixel cell on the vertical line on the panel for data input at each column. The combination determines the colors generated by eachpixel. Typically, multiple gate drivers and source drivers are installed separately on the panel. However, for certain small and medium-sized applications, gate drivers and source drivers are integrated into a single chip due to space and cost considerations. Large-sizedpanels typically have higher resolution and require more display drivers than small and medium-sized panels. In addition, TDDI ICintegrates both display driver and in-cell touch functions and is usually adopted by small and medium sized display applications, whereasTiming Controller feature is also embedded in TDDI.Table of Contents24●Timing Controller. The timing controller receives image data and converts the format for the source drivers’ input. The timing controlleralso generates controlling signals for gate and source drivers. Typically, the timing controller is a discrete semiconductor in TFT-LCD,OLED and e-paper panels. For certain small and medium-sized applications, however, the timing controller may be integrated withdisplay drivers.●Operational Amplifier. An operational amplifier supplies the reference voltage to source drivers in order to make their output voltageuniform.●Power IC. Power ICs include certain drivers, amplifiers, DC to DC converters and other semiconductors designed to enhance powermanagement, such as voltage regulation, voltage boosting and battery management.●Touch Controller IC. For touch screen applications, touch controller ICs enable touch interfaces, such as capacitive touch panels, toidentify, qualify and track user’s contacts with precision and sensibility. For TFT LCD panels, the touch controller may be integrated withdisplay drivers as an in - cell TDDI solution, commonly adopted in devices including smartphones, tablets, automotive displays, andnotebooks. In contrast, OLED panels typically adopt a discrete touch controller to realize touch functionality.●Others. Flat panel displays also require multiple general purposes semiconductors such as memory, power converters and inverters.Characteristics of the Display Driver MarketAlthough we operate in several distinct segments of the flat panel display semiconductor industry, our principal products are display drivers.Display drivers are critical components of flat panel displays. The display driver market has specific characteristics, including those discussedbelow.Concentration of Panel ManufacturersThe global TFT-LCD panel industry consists of a small number of manufacturers, substantially all of which are based in Asia. In recent years,Korean TFT-LCD panel makers have gradually undergone restructurings to shift their technology and manufacture focus from TFT-LCD to OLEDand TFT-LCD panel manufacturers, especially China-based manufacturers which have invested or are planning to invest heavily to establish,construct and ramp up additional fab capacity. The capital-intensive nature of the industry often results in TFT-LCD panel manufacturers operatingat a high level of capacity utilization in order to reduce unit costs. This tends to create a temporary oversupply of panels, which reduces the averageselling price of panels and puts pricing pressure on component companies including display driver companies. Moreover, the concentration ofpanel manufacturers permits major panel manufacturers to exert pricing pressure on display driver companies such as us. The small number ofpanel manufacturers exacerbates this situation as display driver companies, in addition to seeking to expand their customer base, must also focus onwinning a larger percentage of such customers’ display driver requirements.Customization RequirementsEach panel display has a unique pixel design to meet its particular requirements. To optimize the panel’s performance, display drivers have tobe customized for each panel design. The most common customization requirement is for the display driver company to optimize the gamma curveof each display driver for each panel design. Display driver companies must work closely with their customers to develop semiconductors that meettheir customers’ specific needs in order to optimize the performance of their products.Table of Contents25Mixed-Signal Design and High-Voltage CMOS Process TechnologyDisplay drivers have specific design and manufacturing requirements that are not standard in the semiconductor industry. Some display driversrequire mixed-signal design since they combine both analog and digital devices on a single semiconductor to process both analog signals anddigital data. Manufacturing display drivers require high-voltage CMOS process technology operating typically at 4.5 to 24 volts for source driversand 10 to 50 volts for gate drivers, levels of voltage which are not standard in the semiconductor industry. For display drivers, the driving voltagemust be maintained under a very high degree of uniformity, which can be difficult to achieve using standard CMOS process technology. Moreover,manufacturing display drivers does not require very small-geometry semiconductor processes. Typically, the manufacturing process for large paneldisplay drivers require geometries between 0.11 micron and 1 micron because the physical dimensions of a high-voltage device do not allow for theeconomical reduction in geometries below this range. We believe that there are a limited number of fabs with high-voltage CMOS processtechnology that are capable of high-volume manufacturing of display drivers.Special Assembly and Testing RequirementsManufacturing display drivers requires certain assembly and testing technologies and equipment that are not standard for other semiconductorsand are offered by a limited number of providers. The assembly of display drivers typically uses either tape-automated bonding, also known asTAB, or chip-on-glass, also known as COG, technologies. Display drivers also require gold bumping, which is a process in which gold bumps areplated onto each wafer to connect the die and the processed tape, in the case of TAB packages, and the glass, in the case of COG packages. TABmay utilize tape carrier packages, also known as TCP, or chip on film, also known as COF. The type of assembly used depends on the panelmanufacturer’s design, which is influenced by panel size and application and is typically determined by the panel manufacturers. Display driversfor large-sized applications typically require TAB package and, to a lesser extent, COG package types, whereas display drivers for smartphone,tablet and consumer electronics products typically require COG packages. The testing of display drivers also requires special testers that cansupport high-channel and high-voltage output semiconductors. Such testers are not standard in the semiconductor industry.Supply Chain ManagementThe manufacturing of display drivers is complex and requires several manufacturing stages such as wafer fabrication, gold bumping, andassembly and testing, and the availability of materials such as the processed tape used in TAB packaging. We refer to these manufacturing stagesand material requirements collectively as the “supply chain”. Panel manufacturers typically operate at high levels of capacity utilization and requirea reliable supply of display drivers. A shortage of display drivers, or a disruption to this supply, may disrupt panel manufacturers’ operations. As aresult, a company’s ability to deliver its products on a timely basis at the quality and quantity required is critical to satisfying its existing customersand winning new ones. Such supply chain management is particularly crucial to fabless display driver companies that do not have their own in-house manufacturing capacity. In the case of display drivers, supply chain management is further complicated by the high-voltage CMOS processtechnology and the special assembly and testing requirements that are not standard in the semiconductor industry. Access to this capacity alsodepends in part on display driver companies having received assurances of demand for their products since semiconductor manufacturing serviceproviders require credible demand forecasts before allocating capacity among customers and investing to expand their capacity to support growth.Need for Higher Level of IntegrationThe small form factor of smartphone, tablet, automotive and certain consumer electronics products restricts the space for components. Smalland medium-sized panel applications typically require one or more source drivers, one or more gate drivers and one timing controller, which can beinstalled as separate semiconductors or as an integrated single-chip driver. Customers are increasingly demanding higher levels of integration inorder to manufacture more compact panels, simplify the module assembly process and reduce unit costs. Display driver companies must be able tooffer highly integrated chips that combine the source driver, gate driver and timing controller, as well as semiconductors such as memory, powercircuit and image processors, into a single chip. Due to the size restrictions and stringent power consumption constraints of such display drivers,single-chip drivers are complex to design. For large-sized panel applications, integration is both more difficult to achieve and less important sincesize and weight are less of a priority. Lastly, as some of our TFT-LCD panel customers had turned to pure in-cell TDDI panel development forthinner display designs, we have developed a series of single chip touch display driver integrated circuit (TDDI) for advanced in-cell touch displaypanel.Table of Contents26Products and SolutionsWe have several principal product lines:●Display drivers and timing controllers;●Touch controller ICs;●ASIC service;●LCoS and MEMS products;●Power ICs;●CMOS image sensor products;●Wafer level optics products;●3D sensing business; and●Ultralow power WiseEye smart image sensing.Display Drivers and Timing ControllersDisplay Driver CharacteristicsDisplay drivers deliver precise analog voltages and currents that activate the pixels on panels. The following is a summary of certain displaydriver characteristics and their relationship to panel performance.●Resolution and Number of Channels. Resolution refers to the number of pixels per line multiplied by the number of lines, whichdetermines the level of fine detail within an image displayed on a panel. For example, a color display screen with 1,024 x 768 pixels has1,024 red columns, 1,024 green columns and 1,024 blue columns for a total of 3,072 columns and 768 rows. The red, green and bluecolumns are commonly referred to as “RGB.” Therefore, the display drivers need to drive 3,072 column outputs and 768 row outputs. Thenumber of display drivers required for each panel depends on the resolution of the panel and the number of channels per display driver.For example, an XGA (1,024 x 768 pixels) panel requires eight 384-channel source drivers (1,024 x 3 = 384 x 8) and three 256-channelgate drivers (768 = 256 x 3), while a full HD (1,920 x 1,080 pixels) panel requires eight 720-channel source drivers and four 270-channelgate drivers. The number of display drivers required can be reduced by using drivers with a higher number of channels. For example, afull HD panel can have six 960-channel source drivers instead of eight 720-channel source drivers. Thus, using display drivers with ahigher number of channels can reduce the number of display drivers required for each panel, although display drivers with a highernumber of channels typically have higher unit costs.●Color Depth. Color depth is the number of colors that can be displayed on a screen, which is determined by the number of shades of acolor, also known as gray scale, that can be shown by the panel. For example, a 6-bit source driver is capable of generating 26 x 26 x 26 =218, or 262K colors, and similarly, an 8-bit source driver is capable of generating 16 million colors. Typically, for TFT-LCD panelscurrently in commercial production, 262K, 16 million and 1 billion colors are supported by 6-bit, 8-bit and 10-bit source drivers,respectively.●Operational Voltage. A display driver operates with two voltages: the input voltage (which enables it to receive signals from the timingcontroller) and the output voltage (which, in the case of source drivers, is applied to liquid crystals and, in the case of gate drivers, is usedto switch on the TFT device). Source drivers typically operate at input voltages from 3.3 to 1.8 volts and output voltages ranging from 4.5to 24 volts. Gate drivers typically operate at input voltages from 3.3 to 1.8 volts and output voltages ranging from 10 to 50 volts. Lowerinput voltage saves power and lowers electromagnetic interference, or EMI. Output voltage may be higher or lower depending on thecharacteristics of the liquid crystal (or diode), in the case of source drivers, or TFT device, in the case of gate drivers.Table of Contents27●Gamma Curve. The relationship between the light passing through a pixel and the voltage applied to it by the source driver is nonlinearand is referred to as the “gamma curve” of the source driver. Different panel design and manufacturing processes require source driverswith different gamma curves. Display drivers need to adjust the gamma curve to fit the pixel design. Due to the materials and processesused in manufacturing, panels may contain certain imperfections which can be corrected by the gamma curve of the source driver, aprocess which is generally known as “gamma correction.” For certain types of liquid crystal, the gamma curves for RGB cells aresignificantly different and thus need to be independently corrected. Some advanced display drivers feature three independent gammacurves for RGB cells.●Driver Interface. Driver interface refers to the connection between the timing controller and display drivers. Display drivers increasinglyrequire higher bandwidth interface technology to address the larger data volume necessary for video images. Panels used for higher datatransmission applications, such as televisions, require more advanced interface technology. The principal types of interface technologiesare transistor-to-transistor logic, or TTL, reduced swing differential signaling, or RSDS, mini-low voltage differential signaling, or mini-LVDS, and point-to-point high-speed interface. Among these, RSDS, mini-LVDS and point-to-point interface were developed as lowpower, low noise and low amplitude methods for high-speed data transmission using fewer copper wires and resulting in lower EMI.Moreover, there are some panel manufacturers developing their proprietary point-to-point interfaces, such as embedded panel interface, orEPI, USI-T, iSP, CEDS, CHPI, CSPI and CMPI.●Package Type. The assembly of display drivers typically uses TAB and COG package types. COF and TCP are two types of TABpackages, of which COF packages have become predominantly used in recent years. Customers typically determine the package typerequired according to their specific mechanical and electrical considerations. In general, display drivers for small-sized panels mainly useCOG package types, whereas display drivers for large-sized panels primarily use TAB package types and, to a lesser extent, COGpackage types.Large-Sized ApplicationsWe provide source drivers, gate drivers, PMIC, P-gamma OP level shifter and timing controllers (TCON) for large-sized panels principallyused in desktop monitors, notebook computers and televisions. Display drivers used in large-sized applications feature different key characteristics,depending on the end-use application. For example, the industry trend for large-sized applications is generally toward super high channel, lowpower consumption, low cost, thin and light form factor, touch function, higher data transmission rate and higher driving capabilities. Higher speedinterface technologies are also key for 4Kx2K and 8Kx4K high-resolution TVs. Greater color depth, thermal solution, high data rate and highdriving, are particularly important for advanced televisions and certain monitors.Our large display driver IC business achieved several milestones since 2019. For example, we successfully added 12-inch fabs into the pool ofour foundry capacity for our large display driver ICs to ease the capacity shortage of 8” foundry where the vast majority of large panel driver ICsare fabricated. On high-end TV, Himax outpaced peers to lead the mass production of customized high-speed point-to-point (P2P) transmissionusing embedded panel intra interface such as iSP, CHPI, USI-T, CMPI, CEDS and CSPI for 4K TVs and 8K TV. On gaming monitor, we have highframe rate and high driving driver to meet various resolutions needs and frame rates such as UHD 240Hz, QHD 360Hz, FHD 480Hz, etc. We alsosuccessfully developed low power consumption driver applied in low power monitor to satisfied Energy Star 8.0 and even Energy Star 9.0. Lastly,our P2P driver and TCON ICs with 13.3” FHD can meet Intel 1W project requirements.We also made tremendous progress in TCON product lines in 2022. The UHD TV penetration rate is larger than 65% in 2022, and wedeveloped competitive UHD TV TCON to seize this market. Himax UHD TV TCON has mass production at all major China LCD makers. We alsoprovide gaming TCON for the new QHD 360Hz and UHD 240Hz gaming monitor and notebook. For high-end gaming requirement, we havedeveloped eDP 8.1G TCON to increase bandwidth.Table of Contents28The table below sets forth the features of our products for large-sized applications:Product FeaturesTFT-LCD Source Drivers ● 384 to 1920 output channels● 6-bit (262K colors), 8-bit (16 million colors) or 10-bit (1 billion colors)● one gamma-type driver● two gamma-type drivers to improve display quality● three gamma-type drivers (RGB independent gamma curve to enhance color image)● output driving voltage ranging from 7 up to 20V● input logic voltage ranging from standard 3.3V to low power 1.8V and support half VDDA● low power consumption and low EMI● support COF and COG package types● support TTL, RSDS, mini-LVDS (up to 460MHz), cascade modulated driver interface, or CMDI, point-to-point high speed interface (up to 4Gbps for 8K 120Hz) and customized interface technologies● support dual gate and triple gate panel designsTable of Contents29Product FeaturesTFT-LCD Gate Drivers ● 192 to 1600 output channels● output driving voltage ranging from 10 up to 40v● input logic voltage ranging from standard 3.3V to low power 1.8V● low power consumption● support COF and COG package types● support dual gate and triple gate panel designsTiming Controllers ● product portfolio supports a wide range of resolutions, from VGA (640 x 480 pixels) to full HD, UHDand 8K4K (1,920 x 1,080 pixels, 1,920 x 1,200 pixels, 3840 x 2160 and 7680 x 4320)● support mini-LVDS, point-to-point high speed interface and customized output interface technologies● embedded overdrive function to improve response time● support CABC and local dimming to save power and color engine to enhance color and sharpness● support LVDS, eDP, MIPI and V-by-one input interface technologies● support dual-gate, triple-gate, GOA (gate on array) and RGBW panel designs● support amorphous silicon, IGZO and LTPS panel● ASIC AMOLED Timing Controller● ASIC uLED Timing ControllerProgrammable Gamma OP● 8 to 16 channel gamma buffer outputs● channel VCOM buffer output● Internal non-volatile memory● 2 gamma bank selection, setting time < 3uS● Analog power supply voltage: 9.0V to 20.0V● Digital power supply voltage: 2.7V to 3.6V● Peak current on gamma channels: 200mA● Peak current on VCOM channel: 400mA● Programmable VCOM limit● 12C speed up to 1MHzSmall and Medium -Sized ApplicationsAutomotive Display ApplicationsWe offer source drivers, gate drivers, timing controllers and integrated drivers for the fast-ramping automotive display applications, such asinstrument cluster display (ICD), center stack display (CSD), head-up display (HUD), rear seat entertainment display (RSE), rearview mirrordisplay and sideview mirror display.Table of Contents30The automotive display drivers can support various display resolutions to meet the customized needs of automotive display, including GIPpanel and non-GIP panel, a-Si TFT panel and LTPS panel. Meanwhile, the automotive display drivers can support higher output driving voltage forhigher contrast ratio and faster liquid crystal response in automotive display applications. The automotive Timing Controller can support LocalDimming function for the goal of higher contrast ratio and thermal reduction in automotive display applications. We launched the world’s firstTDDI design for automotive displays technology which started shipping in 2019 with meaningful mass production shipment to industrial leadingautomotive panel house, Tier-1 and brands starting 2021.Himax is the market leader in automotive display driver business covering the entirespectrum of products and technologies, including the industry’s most comprehensive traditional DDIC product offerings as well as leadingsolutions for new technology areas such as TDDI, local dimming TCON, LTDI and AMOLED. Our automotive TDDI is broadly adopted by namedTier 1s and auto makers in their new launches of vehicles. Himax also have reached over 10 million units shipment accumulated in the third quarterof 2022, a milestone that demonstrates a robust growing trajectory moving forward. In 2023, Himax successfully supplied over 20 million units ofautomotive TDDI, and we are witnessing a continued expansion of TDDI design-wins across various segments. With the initiation of LTDI massproduction in the third quarter of 2023, we are poised for further growth in our overall market share within the automotive display driver market.Our unwavering commitment to technological innovation sets us apart from our competitors, positioning us as leaders in the development of next-generation automotive display solutions. In addition, on TCON ICs for automotives, we also have embedded local dimming feature in TCON forTFT-LCD to support higher contrast instrument panels needed for drivers to read the content of the meter quickly. Additionally, several key panelmakers have sought cooperation with Himax to develop AMOLED solutions for automotive applications. We have developed customizedAMOLED ASICs, including traditional DDICs and TCONs, for some of these key panel makers, with some already in mass production since 2021.Furthermore, a series of AMOLED Touch Controller ICs for Automotive OLED displays are available, with multiple design wins secured frompanel makers and OEMs across the board. Mass production is scheduled to begin in the second half of 2024. By combining these advancements,we can offer a comprehensive automotive AMOLED solution to our customers.The following table summarizes the features of our products used in automotive display applications:Product FeaturesTFT-LCD Source Drivers●642 to 1,920 output channels●6-bit (262K colors), 8-bit (16.7 million colors)●support RSDS, mini-LVDS, Point-to-Point interfaces●output driving voltage ranging up to 15V●support COG and COF package typeTFT-LCD Gate Drivers●100 to 1,600 output channels●output driving voltage ranging up to 40V●support COG and COF package typeTFT-LCD IntegratedDrivers●highly integrated chip embedded with source driver, timing controller and power circuit●support RGB, LVDS input interfaces●support Single Gate, Dual Gate, Triple Gate panel structure●support 2MUX, 3MUX, 4MUX, 6MUX LTPS panel structure●support GIP panel (a-TFT GIP or LTPS GIP or IGZO GIP) and non-GIP panel●support resolution up to 7680 RGBx810 with cascaded chips●source driver output driving voltage ranging up to ±6.6V or 16V●support Fail Detect Function, including CRC Function●support Local Dimming Function●support Telltale OSD function●support COG and COF package typeTable of Contents31Product FeaturesTiming Controllers●support LVDS, eDP 1.2 input interface●support mini-LVDS, Point-to-Point output interfaces●support Single Gate, Dual Gate, Triple Gate panel structure●support 2MUX, 3MUX, 6MUX LTPS panel structure●support GIP panel (a-TFT GIP or LTPS GIP or IGZO GIP) and non-GIP panel●support various resolutions up to 4K2K(ICD) or 8K1K(CID)●support Local Dimming Function●support Dual Cell Panel Structure Function●support Fail Detect Function, including CRC Function●support Over Driver & De-mura function●support Telltale OSD functionTFT-LCD TDDI●highly integrated chip embedded with source driver, timing controller, touch controller and power circuit●support LVDS input interfaces●support Single Gate, Dual Gate, Triple Gate a-TFT panel structure●support 2MUX, 3MUX, 4MUX and 6MUX LTPS panel structure●support GIP panel (a-TFT GIP or LTPS GIP) and non-GIP panel●support resolution up to 7680RBx900 with 4 chips cascaded●source driver output driving voltage ranging up to ±6.6V●support Fail Detect Function, including CRC Function●support Telltale OSD function●support Color Engine function●support COG package typeTFT-LCD LTDI●Large-sized Touch and Display Integration solution●support point-to-point iSP input interface●support resolution up to 12K1K with multi-chip cascaded●support COF and COG package typesOLED Drivers●High-voltage process●High channel and high speed interface●Embedded P-gamma OP●IGZO/AMOLED Solution●Low power solution●Support up to 4K2K/8K4K resolution●Customized ASICsOLED TCONs●support high resolution up to 7.6Kx1K at 120Hz w/ VRR●support eDP v1.4 1/2/4Lane 8.1Gbps, w/ DSC1.2a●support 2-chip cascade●passed AEC-Q100 Grade 2Smartphone and Tablet ApplicationsWe offer display drivers for small and medium-sized displays in smartphone and tablet applications that combine source driver, gate driver,timing controller, DC to DC circuits, and optional frame buffer into a single chip or cascades chips in various display technologies, such as TFT-LCD and OLED.Table of Contents32Smartphones and tablet have gained greater popularity among small and medium-sized display drivers and enjoyed high growth in recentyears. This has also contributed to increased demand for larger size and higher resolution smartphone displays. In 2016, Himax developed a seriesof single chip touch display driver integrated circuit (TDDI) for advanced in-cell touch display panel. Himax started the shipments of in-cell TDDIfor some smartphones in 2016 and extended TDDI solution to tablet application in 2017. In-cell TDDI, featuring thinner display, slimmer border,and better visual quality, has been getting popular, so we re-invented a new generation of TDDIs supporting COG and COF for 18:9 or wideraspect ratio with interlaced output pins, which makes the bottom border of the in-cell touch display even smaller to gain higher display to bodyratio. Our FHD+ and HD+ TDDI successfully gained design-wins with a few leading Korean and Chinese smartphone brands and panel makers.We started small volume shipments in the first half of 2018 with accelerating volume starting in the second half of 2018 into 2019 and beyond.Starting in 2020, Himax extended our product offerings with high frame rate TDDI solution and has started shipping to top-tier smartphone OEMs.A major development we are seeing in the marketplace is increased utilization of the OLED display for smartphone, smart watch, automotiveand tablet. We are collaborating closely with leading panel makers across China and Korea for AMOLED product development in smartphone,tablet, automotive and other consumer electronics. In the first quarter of 2022, the Company’s flexible AMOLED driver and TCON for automotivedisplay successfully ramped up for a customer’s flagship EV model, while in the second quarter of 2022, the Company commenced production ofAMOLED TCON and Driver IC chipsets for tablet applications for a leading OEM for their 11-inch and 12.6-inch flagship models. Concurrently,the number of awarded projects in AMOLED for automotive and tables with worldwide named vendors is increasing. Himax continues its R&Defforts to upgrade new TCON and OLED DDIC solutions for tablet PC applications. We believe AMOLED solutions, including driver ICs andTCONs, will become one of the major growth engines for the Company moving forward.On the other hand, the application of in-cell TDDI started to extend from mainstream smartphone to larger displays in 2018. Himax started tooffer various new TDDI solutions for tablet, smart speakers, and even some infotainment displays in automobiles. The first tablet TDDI withWXGA resolution went into mass production in 2018 and also extended to leading smart speaker applications as well. In 2019, Himax announced aseries of new driver and TDDIs for tablet application. The COF packaged driver IC solution enabled one leading tablet OEM to successfully launcha WQXGA resolution tablet with super slim bezel. We also added another new features to our TDDI that can support up to WUXGA and WQXGAresolution which has gained several design-wins from tablet OEMs across Korea and China in 2019. We also launched the first TDDI supportingactive stylus function in tablets which commenced mass production and contributed to our tablet application business in early 2020. With thedemand increase for bigger size display, higher resolution, and precise touch accuracy and stylus performance, Himax kept developing new tabletTDDIs to broaden the company’s product lineup to maintain our leading market position. We started mass production for the world’s first 12.4”WQXGA super high-resolution in-cell tablet PC with a leading end customer in 2021 and expanded collaborations with more brands into moremodels moving forward.Tablet in-cell TDDI offers the benefits of lower cost and a simplified supply chain that represents an easier manufacturing process for panelmakers. For consumers, it offers a lighter weight, slimmer and more stylish design as well as improved touch accuracy with added option for activestylus. Our active stylus in-cell technology is adopted in many launched tablet products. At present, we are the dominant supplier for literally allleading Android names. In 2020, tablet demand picked up significantly, fueled mainly by remote work and online learning demand due to thepandemic. TDDI for tablet application continues to broaden its market, representing a potential upside for Himax into 2023 and beyond.Table of Contents33The following table summarizes the features of our products for smartphone and tablet applications:Product FeaturesTFT-LCD TDDI forsmartphone and tablet●In-cell TDDI (Touch and Display Driver Integration) as a highly integrated single chip embedded with thesource driver, gate driver, power circuit, timing controller and memory, touch sensor ADCs andmicrocontroller●Mainstream smartphone single chip for HD+ (720RGB x Y pixels) or FHD+ (1080RGB x Y pixels)●Mainstream tablet PC resolutions for WXGA (800RGB x Y) with single chip or WUXGA (1200RGB xY), WQXGA (1600RGB x Y) with 2-chip cascaded●Conventional 60Hz and up to 144Hz new high frame rate solutions●Support MIPI interface and VESA DSC●Support up to 16 million colors●Support active stylus for tablet PC●COG and COF solutions for super slim bottom borderTFT-LCD Tablet DisplayDrivers●highly integrated single chip embedded with the source driver, power circuit and timing controller●suitable for a wide range of resolutions from WSVGA (600 x 1024), WXGA (800 x 1280), WUXGA(1200x1920) to WQXGA (1600 x 2560)●support up to 16 million colors●support RGB separated gamma adjustment●support CABC●support color enhancement features●support MIPI interface●touch display driver integrated circuit (TDDI) for advanced in-cell touch display●supporting TDDI with active stylus●COG and COF solutions for super slim bezelAMOLED Solutions●Smartphone single chip with sub-pixel rendering, Demura-IPs for FHD+ resolution with up to 144Hz highframe rate●Support MIPI interface and VESA DSC with 1 billion colors (10bit grayscale)●TCON and Source driver IC for tablet with high resolution of 3.2Kx2K 144Hz with VRR●customized ASICsElectronic Paper Display ApplicationsWe offer display driver for the Electronic Paper Display (EPD) applications, Electronic Shelf Label (ESL) and Signage Display. The ElectronicPaper Display (EPD) drivers can support various display resolutions to meet the customized needs of applications. We are collaborating withworld-leading e-paper customers for certain ASIC projects on their next generation products. This consolidates our market presence in theemerging e-reading and e-signage segments from 2022 and onward.Table of Contents34The following table summarizes the features of our Electronic Paper Display (EPD) solutions:Product FeaturesElectronicPaper Display (EPD) SourceDrivers●Features 320 to 1296 output channels●output driving voltage ranging from 15 up to 50v●input logic voltage ranging from standard 3.3V to low power 1.8V●low power consumption and low EMI●support TTL, mini-LVDS cascade modulated driver interface, or MIPI high-speed interface andcustomized interface technologies●support COF and COG package typesElectronic Paper Display(EPD) Gate Drivers●100 to 972 output channels●output driving voltage ranging from 10 up to 50v●input logic voltage ranging from standard 3.3V to low power 1.8V low power consumption●support COF and COG package typesElectronic Paper Display(EPD) Timing Controller●Support MIPI 4 lane input interface●Support TTL, mini-LVDS output interface●Support maximum resolution 3840x2160●Use USB/SPI/I2C control interface●Support LPDDR2 memoryElectronic Shelf Label (ESL)Integrated Drivers●Highly integrated chip embedded with source driver, timing controller and power circuit●Source driver output driving voltage ranging up to 30V●Support COG package typesTouch Controller ICsWe offer touch controller solutions for capacitive touch panels. Our touch controller solutions are suitable for touch panels in electronicdevices with TFT-LCD or OLED displays, such as smartphones, tablets, automotive displays, and notebooks. We commenced production ofcapacitive touch controller ICs for on-cell TFT-LCD displays with smartphone brand customer since 2011. Subsequently, we expanded ourcustomer base to include more well-known smartphone and tablet brands. In 2015, we developed a series of TDDI products for Tier 1 and panelmakers and commenced mass production for smartphone brands. Additionally, we began mass production of our TDDI for tablet and automotivedisplays in 2019. TDDI has gradually replaced on-cell touch controllers and discrete driver solutions, offering thinner displays, slimmer borders,and better visual quality, thus becoming the mainstream technology. We continue to expand our TDDI solutions to replace discrete DDICs andtouch controller ICs in the TFT-LCD display market.Since 2023, aligning with the market trend of OLED display proliferation, we embarked on developing AMOLED on-cell touch controllerstailored for tablets, notebooks, and automotive OLED displays. Our AMOLED on-cell capacitive touch controller boasts several innovations andmerits. It is meticulously engineered, featuring an industry-leading touch signal-to-noise ratio exceeding 45 dB, making it the ideal solution to meetthe demands of flexible OLED panels commonly required for automotive applications. It also offers improved sensitivity to challenging userconditions such as glove-wearing and wet finger operations, ensuring exceptional performance with display quality unaffected by touch-displayinteractions. Moreover, our touch controller not only supports multi-finger capacitive touch and is compatible with various types of OLED panels,but it can also cascade multiple chips to support displays larger than 20 inches. For consumer and IT applications, it boasts a 240Hz high touchreport rate at 5-finger operating conditions, and its embedded micro-controller single-chip solution reduces costs for flexible products. To supportthe state-of-the-art active stylus feature of tablet and notebook touchscreens, our AMOLED touch controller integrates multiple active stylusprotocols, such as USI, MPP, LPP, and HPP. Our AMOLED designs have garnered several design wins from leading customers and are set tocommence production in 2024.Table of Contents35The following table summarizes the features of our touch controller products:Product FeaturesAMOLED Capacitive TouchController●multi-finger (up to 10 fingers) capacitive touch for on-cell AMOLED●high touch SNR > 45dB, effectively reducing display interference and offering better display quality●high touch report rate: 240Hz @5 fingers●support large size panel (>20 inches)●supports multi-chip cascading without extra MCU●integrate multiple active stylus protocols: USI, MPP, LPP and HPP●low power consumption●(automotive) support glove-wearing (up to 4 mm) and wet finger operations●(automotive) CISPR25 Class-5 EMC qualified●(automotive) support temperature range from -40 °C to 105 °CASIC serviceFrom 2012, we successfully completed several ASIC service projects for Japan top TV, Projector and HMD makers with advanced and high-performance customized video processing chips. All of these chips are implemented with our proprietary video process platform that includes ourvideo process display IPs and high-speed transmission IPs. The process nodes adopted for these ASICs are usually 40nm, 55nm and even 28nmprocesses. From 2016, we also developed the depth sensing technology that aims 3D sensing and AR/VR markets.The following table summarizes the features of our ASIC service:Product FeaturesASIC Service●Well-established ASIC development platform, based on our unique video processor and image processingtechnologies.●offer a wide variety of video interface IPs, like LVDS, HDMI, DVI, V-by-one, Display port, MIPI, MHL,etc.●built-in 8/32- bit microprocessor built-in video processing algorithm like super-high resolution, sun-lightreadable, MEMC, FRC, etc.●built-in 3D feature technologies like 2D-to-3D, Glasses-free 3D, 3D multi-view, 3D visual protection, etc.●support 4K x 2K/ 5K x 2K/ 8K x 4K display●Depth sensing algorithm and hardware accelerator for 3D sensing and AR/VR applicationsLCoS and MEMS ProductsHimax Display, our subsidiary, has contributed to our microdisplay products lines: Color-filter LCoS, Color-sequential LCoS, Front-Lit LCoS,Phase modulation LCoS and MEMS.The latest development of Front-Lit LCoS enables an ultra-compact and extremely power-efficient optical engine by consolidating andintegrating LED illumination system and the polarization beam splitter (PBS) into the micro display module itself. Front-Lit LCoS enables a much-simplified optical engine design and assembly process that could successfully lowered customers’ manufacturing time and costs.Himax Display is one of the market leaders of the LCoS industry since 2012 with its whole product line patented. Himax Display has a massproduction ready liquid crystal assembly line, which is unique in the industry with mass production shipping volume. We have produced andshipped over 3 million units from this ISO certified line. Our customers use our products in various applications such as pico-projector,communication, toy projector, AR glasses, and AR-HUD for automotive.Table of Contents36The merits of our technology feature in resolution, power consumption, size, cost, optical engine design, and image quality. Many of ourindustry-leading customers have demonstrated their state-of-the-art products, including pico-projector, holographic display, AR glasses and ARHUD system, with Himax LCoS technology inside at the 2020 CES with positive market feedbacks. Our technology leadership and provenmanufacturing expertise have made us a preferred partner for customers in these emerging markets and their ongoing engineering projects in ARglasses and AR HUD for automotive applications. In May 2021, Himax Display revealed its proprietary LCoS 2.0 phase modulation technology,which enable features such as multi-focal plane images displaying along with less power consumption, lower cost and smaller form factor to enableholographic display applications for AR-HUD. In addition, phase modulation technology provides LiDAR for autonomous driving and WavelengthSelective Switch (“WSS”) for Wavelength-Division Multiplexing (“WDM”) optical communications networks. In May 2023, Himax Displayunveiled the cutting-edge color sequential Front-lit LCoS for advanced AR glasses solutions at Display Week. It’s a new technology that features alightweight, compact form factor and high brightness. Several tech giants in the industry have shifted their focus away from micro-LED to ourFront-Lit LCoS for their AR goggles after seeing Company’s live demo at the event. This shift is demonstrative of our exceptional achievements inboth performance and functionality, marked by breakthroughs not only in the luminance performance in full RGB color, but also in terms ofsuperior optical efficiency, tiny form factor and ultra-lightweight design. These factors are critical and represent technological advancements thatmay meet rigorous requirements to support next generation see-through goggles.We provide a rich products family for customers to choose for different applications, as each product has its own most important parameters toselect and Himax Display provides choices to customers. The following table shows certain details of our products:Product Size and ResolutionColor-Filter LCoSMicrodisplays●0.28” (320x3x240 pixels) QVGA●0.29” (800x3x480 pixels) WVGA●0.35” (1280x3x720 pixels) HD●Customized design Color-Sequential LCoSMicrodisplays●0.22” (640 x 360 pixels) nHD●0.37” (1366 x 768 pixels) WXGA●0.37” (1920 x 1080 pixels) Full HD●Customized design Front-Lit Color Filter LCoS●0.22” (640 x 3x 360 pixels) nHD●0.35” (1280 x3x 720 pixels) HD●Customized designFront-Lit Color SequentialLCoS●Low power and high efficiency●Display diagonal : 0.243”●Size(W*L*H) : 9*13.9*4 mm●Volume: 0.5 c.c.●Resolution: 1024x1024●Brightness: 110,000 nits (Typ.); 180,000 nits (Max.)●LED Power : 300 mW (Typ.); 500 mW (Max.)Phase Modulation LCoS●Selective phase range based on the required response time.●Analog drive scheme with 120Hz refresh frame rate to reduces optical flicker and provides stable phaseresponse over time.●Customized design●Operated in full phase modulation (0~2π) in visible range MEMS●0.55” (1280 x 800 pixels) WXGATable of Contents37Power ICsHimax provides TFT-LCD television, monitor and notebooks power management solutions. The main products are Power Managements ICs(PMIC), Programmable Gamma OP ICs (PGOP) and Level Shifter ICs (LS). In recent years, PMIC/PGOP 2-in-1 and PMIC/PGOP/LS 3-in-1PMIC have gradually become the mainstream solutions. Besides, Himax also provides power management solutions for OLED notebooks.Power Management ICsA power management IC integrates several power components to fulfill system power requirements. It may include step-up or step-down pulsewidth modulation, or PWM, DC-to-DC converters, low-dropout regulators, or LDO regulators, voltage detectors, operational amplifiers, p-gammaOP, level shifters, and/or other components. For panel module applications, a power management IC provides a reliable and precise voltage forsource drivers, gate drivers, timing controllers, and panel cells. Moreover, its built-in over-temperature and over-current protections help preventcomponents from being damaged under certain abnormal conditions. As integrating an increasing number of components into a power managementIC is likely to be a continuing trend, we believe power management ICs will continue to be critical components of a TFT-LCD and OLED panelmodule. The following table summarizes certain features of our power management IC products:Product FeaturesIntegrated Multi-ChannelPower Solutions for TFT-LCD and OLED Notebooks●PMIC, PGOP 2-in-1 and Level Shifter●2ch programmable gamma voltage inside●PAVDD Synchronous Boost Converter●NAVDD Synchronous Inverting Converter●VGH / VGL Synchronous SIBO Converter●3ch Vint OP for OLED Panel●built-in power MOSFET●step-up PWM converter●charge pump regulator●LDO regulator●programmable voltage detector●gate pulse modulator●Vcom operational amplifier●I2C programmable●low frame rate control for power saving solution●built in UVLO, UVP, OVP, SCP and OTP protectionIntegrated Multi-ChannelPower Solutions forMonitors●PMIC, PGOP and Level Shifter 3-in-1●built-in power MOSFET●step-up PWM converter●HV LDO regulator●programmable voltage detector●gate pulse modulator●programmable Vcom voltage / Vcom operational amplifier●programmable gamma voltage with operational amplifier●built in UVLO, UVP, OVP, SCP and OTP protectionTable of Contents38Integrated Multi-ChannelPower Solutions for TVs●PMIC, PGOP 2-in-1 and Level Shifter●built-in power MOSFET●step-up PWM converter●step-down PWM converter●charge pump and buck-boost regulator●HV LDO regulator●programmable voltage detector●gate pulse modulator●Vcom operational amplifier●I2C programmable●programmable gamma voltage with operational amplifier●built in UVLO, UVP, OVP, SCP and OTP protectionProgrammable Gamma OP ICsIt is a Programmable Gamma, DVR and VCOM IC. Each is controlled by a 10-bit digital analog converter (DAC). The user can easily selectone of the two gamma curves to compensate for the display. The PGOP also includes a channel DVR, VCOM buffer and built-in 7-bit DAC.Support 128-step to adjust the VCOM output voltage by I2C control setting automatically.Product Features14 channel PGOP for dualgate GOA TFT-LCD● Programmable gamma buffer DVR and VCOM buffer● 14 channel analog output gamma reference voltage● 10-bit Gamma DAC resolution● 2 Gamma bank register● 2 Gamma bank NVM● Built in output channel resister● I2C interfaceLevel shifterTFT-LCD panel manufacturers have developed panel designs to reduce the usage of display drivers, like gateless designs, which integrate thegate driver function onto the glass but needed level shifter. All level shifter channels feature the same input circuitry and are compatible with thestandard logic-level signals generated by timing controllers in typical applications. The level shifter converts the timing-controller (TCON) logic-level signals to the high-level signals needed by the GOA (gate on array) display. The output circuitry has been designed to achieve high rise andfall times when driving the capacitive loads typically encountered in TFT-LCD display applications.Product Features16- channel output levelshifter for GOA TFT-LCD● Support 1 or 2 or 6 input and 4/6/8/10 clock channel output● 2 channel STV● 2 channel LC● Reset and charge sharing function● OTP/ SCP and OCP function by I2C or Resistor adjustmentLED driverA light-emitting diode (LED) is a semiconductor light source that is widely used in lighting, display and TFT LCD backlight nowadays. Theadvantages of LEDs as light sources are the small size, fast switching, low power consumption and long lifetime etc.Table of Contents39LED driver IC is designed to dim the LEDs with critical features such as high current accuracy, high current matching, short LED protection,open LED protection, over voltage protection, ghosting effect reduction and current sink leakage protection etc.Product FeaturesNB backlight driver IC andlocal diming mini-LEDbacklight driver IC● ASIC by Customer SpecificationCMOS Image Sensor ProductsThe CMOS image sensor products are developed by our subsidiary, Himax Imaging. The products were designed firstly for camera-equippedmobile devices, such as mobile phones, tablets and notebook computers, with a focus on low light image and video quality. Although it seemsrelatively challenging for us to gain significant market share in conventional RGB camera, we do think there are various interesting and differentapplications in imaging. Based on the technologies and IP we developed, on top of legacy products for laptop and multimedia we have beensupplying, our product lines have been expanded to cover three domains: ultralow power computer vision- Always-On Sensor (“AoS”), NearInfrared (“NIR”) sensor, and big pixel BSI sensors in automotive and surveillance. In 2019, we further prioritized our focus on ultralow powercomputer vision- Always-On Sensor (“AoS”) as the demand for battery-powered smart device with AI intelligent sensing is rapidly growing.Together with the technologies we already developed, such as Near Infrared (“NIR”) sensor, we can provide our customers the best integratedsolutions for several specific domains.In specific video applications such as battery-powered surveillance cameras, doorbell cameras, and door-lock cameras, customers require notjust an ultralow power sensor for sensing or pre-rolling functions but also high-resolution video for end-users after an event occurs. Himax Imagingaddresses these needs by providing a 1/3” 4MP sensor with a 1:1 aspect ratio. This sensor features a 2048x2048 resolution tailored for doorbell anddoor-lock cameras, delivering a broad Field of View (FOV) in both horizontal and vertical directions. This capability allows users to observe avisitor's entire body, even when they stand very close to the camera. Himax Imaging can offer a variety of these 2-in-1 sensors, combining high-resolution video capabilities with low-resolution ultralow power imaging for the surveillance market.We’re dedicated to becoming one of the key players in the CMOS image sensor industry. We achieve this through ongoing investment inskilled human resources, optimizing our supply chain, and forging strategic technology advancements and partnerships.The following table sets forth the features of our CMOS image sensor products:Product Features4MP UltraSense 2 NIRSensor●1/3” format color type with high sensitivity BSI pixel●4MP resolution with 1:1 aspect ratio with Staggered HDR function at 30 frames per second for doorbellapplication,●Provide ultralow power mode to support pre-rolling function with Himax WiseEye1 AI processor●4-lane MIPI CSI2 outputs RAW8/10●ES target at 2023 Q2FHD 1/7” 1080p UltraSenseColor Image Sensor●1/7” format with high sensitivity BSI pixel●1080p FHD resolution at 60 frames per second●Support Always-on mode at 480x270 < 1mW @ 2fps and motion detection●Support line-based staggered HDR●2-lane MIPI CSI2 outputs●Frame-Sync control for multiple camera systemTable of Contents40Product FeaturesFHD 1/4” 1080pUltraSense Color ImageSensor●1/4” format with high sensitivity BSI pixel●1080p FHD resolution at 30 frames per second●Low power consumption●Provide high NIR sensitivity and 4x4 RGB-IR option●2-lane MIPI CSI2 and 10bit parallel DVP outputs●Frame-Sync control for multiple camera systemHD 720p UltraSense 2Color Image Sensor●1/9” format with high sensitivity BSI pixel●720p HD resolution at 30 frames per second●Low power consumption●Support LED-sync for Microsoft Windows Hello●1-lane MIPI CSI2 outputs RAW8/10HD 720p Ultra Low PowerColor Image Sensor●1/11” format with high sensitivity BSI pixel●720p HD resolution at 60 frames per second●Ultra slim design to meet 2.2mm narrow bezel notebook computer●Provide Ultralow Power mode <1mW for qqHD 3fps for human detection application●Provide RGB for video and W-IR version for AoS + Windows Hello●Support Motion Detection to save system power SPI and 1-lane MIPI CSI2 dual outputs for bothdetection and video1.3MP ClearSense EDRColor Image Sensorembedded with imageprocessor for Surveillance●1/4” format with ultra-high sensitivity●ClearSense achieves higher dynamic range in color up to 84dB with on-chip tone mapping●800p and 720p resolution at 30 frames per second●Flexi engine automatically controls dynamic range, exposure, gain, and white balance to balance colorfidelity and contrast●Color processing pipeline including lens shading correction, defect correction, edge enhancement, colorinterpolation and correction, gamma control, and saturation/hue adjustment.●Anti-blooming and dark sun cancellation●Built-in low dropout regulator and power on reset●10-bit parallel video data port supports RAW, YUV422, and RGB565/555/4441.2MP UltraSense 2 ColorImage Sensor embeddedwith image processor forAutomotive●1/4” format with ultra-high sensitivity●Ultrasense 2 BSI pixel offers higher sensitivity for low light condition●Operation up to 105ºC●960p and 720p resolution at 30 frames per second●Color processing pipeline including lens shading correction, defect correction, edge enhancement, colorinterpolation and correction, gamma control, and saturation/hue adjustment●Dynamic Range Optimizer offers best dynamic range of video●Anti-blooming and dark sun cancellation●Built-in low dropout regulator and power on reset●10-bit parallel video data port supports RAW, YUV422, and RGB565/555/444Table of Contents41Product FeaturesNTSC/PAL WVGA ColorImage System on embeddedwith image processor forAutomotive andSurveillance●High sensitivity, low noise VGA sensor operating up to 60FPS●Visible and near infrared sensitivity●Operation up to 105ºC●Ultra-compact automotive package●Advanced defect correction with built-in temperature sensor●Embedded ISP with programmable automatic exposure and white balance●Optical alignment pixel with crop and zoom to native resolution●4Kb OTP for sensor initialization, module storage, and overlay setting●Multi-color static overlay engineQVGA Ultralow PowerCMOS Color Image Systemfor Machine Vision andDetection●High sensitivity, low noise 1/11” 320x320 image area●Under 2.5mW at QVGA 30fps and 1mW at QQVGA 15fps●Embedded auto-exposure and motion detection●NeoPac and CSP package●Parallel 8bits, 4bits and 1bit data outputVGA Ultralow PowerCMOS Color Image Systemfor Machine Vision andDetection●High sensitivity, low noise 1/6” 640x480 image area●Operates approximately 7mA VGA 60FPS to 140µA in QVGA 2FPS mode●Provide high accurate motion detection●Pre-metered exposure provides well exposed first frame and after extended sleep (blanking) period●Automatic wake and sleep operation with programmable event interrupt to host processor●Parallel 8bits and 1-Lane MIPI CSI2 interfaceWafer Level Optics ProductsWafer level optics are optical products manufactured using semiconductor process on wafers. This innovative approach enables wafer leveloptics to manufacture micro/nano optics structure and high temperature resistance, making the compatible Surface-Mount Technology or SMTreflow process possible. We offer entire optical solutions for customers who need compact and easy-to-handle optical products on their electronicdevices.Combining traditional optical lens design, precise mold control and semiconductor manufacturing expertise, our WLO lens with integratedwaveguide, refractive optics and diffractive optical element (DOE) is one of the best solutions for next generation computational imaging modulefor 2D/3D illumination and 3D dot projector, which can be applied to 3D face recognition, 3D sensing, 3D reconstruction, and gesture control.Himax is a pioneer in high-precision diffraction optics technology with over 15 years of experience, having worked on very different designs over avariety of applications with some of the world’s most heavyweight tech names. With the innovative process and specific structure, our wafer leveloptics products provide small form factor and compact module size to be easily integrated into consumer products. The diffraction opticstechnology is now well adopted in 3D sensing, AR/VR devices, holographic display, automotive, biomedical inspection, optical communication,etc. We are seeing that DOE plays an even more decisive role for the next generation optical technology in light of its high-precision andlightweight characteristics.Our WLO technology is also adapted to form microstructures such as lens array, DOE and lenticular lenses for advanced applications in digitaland computational imaging fields. These technologies stand in a unique position to integral optical design, semiconductor manufacturing process,and compact packaging service, which are rarely covered by one single company. Deeply rooted in core wafer level optics technologies, weprovide highly customized optical solutions and high-volume manufacturing to many Tier-1 customers such as structured lighted and ToF 3Dsensing on mobile devices, AR/VR gadgets, automotive, biomedical devices and many other AIoT applications.Table of Contents42Our WLO business hit inflection in the middle of 2017 when we began mass shipment to an anchor customer. The overall 2018 shipmentincreased considerably year-over-year because of the customer’s large-scale adoption in more models. In 2019, we continued the strong shipmentmomentum from 2018 to fulfill an anchor customer’s higher demand with a significant year-over-year increase. We continued our shipment to ananchor customer for their legacy product and continue making progress on R&D projects with world-leading high-tech giants for ToF 3D sensing,AR/VR gadgets, automotive, biomedical devices and others, targeting their future generation products centered around our exceptional designknow-how and mass production expertise in WLO technology. One illustration is our WLO technology being deployed by one VR player toempower 3D perception sensing for precise controller-free gesture recognition. We initialed volume production starting in second quarter of 2023.The following table sets forth the features of our wafer level optics products:Product FeaturesRefractive Optical Lens●for Micro Lens Array(MLA) illumination diffuser, lighting control, flux illumination lens, collimationlens, and compact size camera lens●provide multi-layer solution including optical AR coating, IR-cutting filter coating, aspheric surface●double-side manufacture process●already in mass production Diffractive Optical Element(DOE)●computational imaging, flux illumination, dot projector for 3D sensing, 3D reconstruction, gesture andillumination control●using WLO process to integral multi-layers DOE and refractive lens●provide customized solution for specific application●the smallest form factor and reflowable component●eye safety detect circuit embedded Diffuser element for floodillumination and TOF●using WLO process to integral multi-layers DOE technology●the smallest form factor and reflowable component●eye safety detect circuit embeddedNear Infrared (NIR) ProjectorModule●dot projector module solution for computer vision, 3D sensing, 3D reconstruction, gesture andillumination control●integral NIR Laser (830/850/940nm), optical system (refractive+ diffractive lens) and high preciseactive alignment assembly solution to provide the smallest form factor●module design for smartphone and other mobile devices●provide customized module solution for different application●the smallest form factor and reflowable device●including active eye safety solution (Class-1)Flood illumination Module●provide customized solution for specific application integral NIR Laser (830/850/940nm), and highprecise active alignment assembly solution●module design for smartphone and other mobile devices●the smallest form factor and reflowable device●including active eye safety solution (Class-1)3D Sensing BusinessWe continue to participate in most of the smartphone OEMs’ ongoing time-of-flight (ToF) 3D sensing projects. In 2018, our structured light-based 3D sensing total solution targeting Android smartphone’s front-facing application was unsuccessful due to the high hardware cost of 3Dsensing, the long development lead time required to integrate it into the smartphone and the lack of killer applications which is limited to phoneunlock and online payment. Instead of 3D sensing, most of the Android phone makers have chosen the lower cost fingerprint technology which canachieve similar phone unlock and online payment functions with somewhat compromised user experience.Table of Contents43As a leading provider of 3D sensing technology, Himax is also an active participant in smartphone OEMs’ design projects for new devicesinvolving ToF technology. We are seeing increasing ToF adoption by smartphone makers for world-facing cameras to enable advancedphotography, distance/dimension measurement and 3D depth information generation for AR. Unlike structured light 3D sensing where we providetotal solution or just projector module or optics depending on customers’ needs, with ToF, we will only focus on transmitter module or opticscomponent by leveraging our WLO related expertise. Leveraging on our WLO technology, we have provided our partners with spot projectors oroptics components for their reference design.3D sensing can have a wide range of applications beyond smartphone. We have started to explore business opportunities in various industriesby leveraging our structured light 3D sensing total solution. Starting in 2021, we shipped small volume of business access control and biomedicalinspection devices. To strengthen our offers in 3D sensing total solution, we have been collaborating closely mainly with two types of partners:those with industry-leading expertise in facial recognition algorithm and those offering application processors with strong AI capability.Other than 3D sensing total solution, we also provide key component, including 3D decoder IC and 3D vision processors. Our proprietary 3Ddecoder IC can accelerate local image processing for face recognition and offer best-in-class security authentication, therefore it is particularlysuitable for customers who wish to design their own structured light-based 3D sensing solution. It was already certified by the leading Chineseelectronic payment standard with requirements of accurate data decoding, timely operation and strict privacy and now it’s well-adopted by manyChina e-payment solution providers. Our proprietary 3D decoder IC entered into volume production starting in 2020, followed by meaningfulvolume shipments into 2021 and 2022. In the light of increasing adoption of 3D sensing technologies in various aspect of our daily life, a series ofnext generation 3D vision processors is also under development to support a variety of state-of-the-art 3D sensing technologies in Time of Flight(”ToF”) and structured light, aiming to improve user experience when people interact with AR and VR applications.Our critical 3D sensing Technologies includes the following:Wafer Level Optics ProductsWLO is one of the key technologies enabling 3D sensing, AR goggle devices, and many other applications. Levering on our exceptionaldesign know-how and mass production experience in WLO technology, we are able to produce the world’s most compact optics required for 3Dsensing, while also achieving superior performance and lower costs.ASICOne of the critical elements of our 3D sensing total solution is an ASIC for 3D depth map generation. We are able to develop the ASIC thanksto our unique in-house capability in developing video ASICs for customers. Equipped with the ASIC, our 3D sensing total solution cansubstantially reduce the power consumed while processing 3D sensing, enhance personal data security, accelerate the 3D depth map generation,and provide superior depth data output that matches with our optical component. We consider this unique capability as our competitive advantage.It has been and will continue to be one of our key drivers in the success of our 3D sensing total solution.Active AlignmentWith much experience in optical assembly for AR and VR devices, our factory has developed a system to do active alignment for tinycomponents. From the incoming quality check, assembly process, and testing, all steps are monitored and checked. The precision assemblycapability gives us a very good foundation to do the optical assembly for DOE, WLO, and laser.Laser DriverBased on our expertise in projector, optics, and driver, we have designed a special Glass Broken Detection (“GBD”) mechanism on ourprojector. We also have a proprietary laser driver design that detect the connection of the GBD on the projector. When GBD connection isabnormal, which means glass was broken, the laser driver can cease the laser to prevent users from being exposed to higher power laser energyleaking from the broken glass.Table of Contents44The following table sets forth the features of our SLiM 3D sensing solutions:Product FeaturesSLiM 3D sensing totalsolution● Dot projector: More than 33,000 invisible dots, the highest in the industry, projected onto object to buildthe most sophisticated 3D depth map among all structured light solutions● Depth map accuracy: Error rate of < 0.5% within the entire operation range of 30cm-100cm● Face recognition: Enabled by the most sophisticated 3D depth data to build unique facial map that can beused for instant unlock and secure online payment● Indoor/outdoor sensitivity: Superior sensing capability even under total darkness or bright sunlight● Eye safety: Certified for IEC 60825 Class 1, the international laser product standard which governs laserproduct safety under all conditions of normal use with naked eyes● Glass broken detection: Patented glass broken detection mechanism in the dot projector whereby laser isshut down instantaneously in the event of broken glass in the projector● Power consumption: Less than 400mW for projector, sensor and depth decoding combined, making it thelowest power consuming 3D sensing device by far among all structured light solutions● Module size: the smallest structured light solution in the market, ideal for embedded and mobile deviceintegrationHV-II 3D Decoder ASIC●Himax 3D Depth Processor with high depth accuracy●Support up to HD resolution depth map for different applications●2D & 3D auto-exposure control for projector and sensor●Frame rate conversion for different application/capability of SOC●Scaling engine for different application/capability of SOC●Ambient light detection and removal●Embedded Security Engine●Power Management Engine for power shutdown●MIPI CSI-2 / DPHY interfaceUltralow power WiseEye Smart Image SensingThe demand for always-on battery-powered smart devices with AI intelligent sensing is rapidly growing. By combining an ultralow powerimage sensor with a custom computer vision ASIC and machine-learning algorithms, Himax ultralow power WiseEye smart image sensing solutionenriches connected edge devices with AI capability. The end-point AI system, which consumes only a few mW power consumptions, is leading theindustry for the next-generation of battery operated, clever computer vision applications. The ultralow power WiseEye smart image sensingsolution is being engaged in a variety of applications, such as notebook, home appliances, utility meter, automotive, door lock, battery-poweredsurveillance camera, panoramic video conferencing, and medical, just to name a few. Among Himax’s ultralow power WiseEye smart imagesensing businesses, our WiseEye for notebook solution features human presence detection and on-looker detection, offering power saving andenhancing privacy and security for notebook users. In 2021, we were highly encouraged by our WiseEye solution being officially awarded by Dell,with a sizable purchase order, for a series of their new models. This represented a remarkable achievement and an illustration of the robustness ofour AI solution. In 2023, we collaborated with the China smart door lock leader, DESMAN, marks a groundbreaking feature advancement in thedoor lock industry, as our ultralow power WiseEye AI, with remarkably low power consumption of just 1 mW, enables the world’s first smart doorlock featuring uninterrupted surveillance with 24/7 real-time sentry monitoring while at the same time significantly extending battery life.Meanwhile, we continue to support the mass production of Dell’s notebook and other end-point AI applications, such as shared bike parking, videoconference device, door lock and medical capsule endoscope and many others. We expect to see more design-wins awarded across a broadcustomer base and a high variety of applications leading to robust sales growth for this new high margin product line moving forward.Table of Contents45We are committed to strengthening our WiseEye product roadmap and retaining our leadership position in ultralow power AI processor andimage sensor for end-point AI applications and debuted our next generation AI processor WiseEye2 at CES 2023. WiseEye2 offers 40% peakpower saving and 30-fold inference speed, implying over 50 times power efficiency on a per inference basis compared to the first generationWiseEye1 processor which is already leading the industry among AI processors aiming for similar target markets. We are honored to report thatWiseEye2 was awarded the "2023 Best AI Product Award" by EE Awards Asia, further elevating Himax's WiseEye AI prominence in the industry.WiseEye2 is pioneering a new standard in endpoint AI benchmarks, earning recognition for its outstanding AI inference capability, industry-leading ultralow power efficiency, and advanced security features. In the realm of context-aware AI, WiseEye2 facilitates high-precision detectionwith features such as face mesh, facial landmark, hand gesture, and human pose and skeleton, which expands the intuitive, user-friendly scope ofinteractive applications in real-life, all achieved with minimal power consumption. Moreover, WiseEye2 streamlines the system integration with arich set of peripheral interfaces, effectively lowering the system cost for edge appliances by eliminating the need for costly, power-hungry discreteMCUs otherwise required to process various sensor data. Additionally, WiseEye2 boasts versatile sensor fusion capabilities, encompassing image,video, audio, vibration and thermal inputs. This enables sophisticated, integral and highly accurate detection with low latency, especially suitable inanomaly detection with timely warnings, making it an ideal solution for a range of industrial applications, notably in automated and unmannedfactories.The following table sets forth the features of our ultralow power WiseEye smart image sensing total solutions:Product FeaturesWiseEyeTM AI total solution●The total solution incorporates Himax proprietary ultralow power WiseEye AI processor, always-onCMOS image sensor, and CNN-based computer vision AI algorithm, featuring tinyML AI in tiny formfactor, ultralow power consumption, low latency, privacy protection and optimized cost.●Total solution supports use of a variety of Himax CMOS image sensors. Uniquely designed for ultralowpower Computer Vision applications with always on scanning as low as 100uW.●WiseEye AI processor (WiseEye1 / WiseEye2) is a uniquely designed ultralow power computer visionprocessing silicon, targeting always on applications with a sub 1mW capabilities. WiseEye is especiallysuitable for resource-constrained and battery powered context-aware application, such as motiondetection, human detection and face detection, face mesh, face landmark and gesture.●Computer vision algorithm is based on tiny machine learning framework, which is trainable for desireduse cases (human presence detection, attention detection and on-looker detection for notebookapplications; occupancy detection, gesture recognition etc. for AIoT applications) on ultralow power andresource-constrained compute platform (CPU clock, internal memory)For the other business model, we provide key components, such as proprietary ultralow power WiseEye1 AI processor or Always-On CMOSimage sensor (AoS). For our key component business model, we reinforced our go-to-market strategy by intensively participating in leading AIpartners’ infrastructures and ecosystems and/or AI communities. The Company collaborates with world-leading edge-to-cloud service providersand system integration companies, such as Google TensorFlow, Microsoft Azure, Arm AI Partner Program, tinyML Foundation, Seeed Studio andmany others, to enjoy the enormous network of these ecosystems partners and their numerous participants to drive further adoption on applicationssuch as smart home/ office, healthcare, agriculture, retail and many other applications. Additionally, we continued our marketing efforts throughjoint webinars and other online activities with several well-known platform partners such as Edge Impulse, Digi-Key and SparkFun. We continue toreceive inquiries from large corporations and individual developers alike with hundreds of evaluation boards and developments kits having beenpurchased online and distributed across the globe. We are very encouraged by the traction this relatively new product line has generated in a shortamount of time and expect to see increasing sales contribution moving forward.Table of Contents46The following table sets forth the features of our WiseEye product lines:ProductFeaturesWiseEye1 AI Processor●Ultralow power consumption: 40 uW/MHz●Support image, voice trigger simultaneously to wake up system●Optimized multi-layer power states for always-on applications●Ready-for- use software package and Machine Learning Library, including device driver, SDK andembARC Machine Learning Inference Library to support Google TensorFlow Lite Micro framework●ARC-EM9D 32-bit DSP: Frequency up to 400MHz,●Memory: Up to 2MByte SRAM●High performance pixel processing accelerator and JPEG codec●Security Engine: Support secure boot, secure FW update, secure debug mode, Support AES 128bits, RSA2048bits, Hash-256, TRNG, Secure key management●Peripheral: 1/4/8-bit camera interface, I2C/SPI master/slave, UART, PWM, GPIO with 5 wake-up pins,12-bit ADC with 4 channels, up to 1Msps, RTC Timer●Also support image pre-rolling feature for better security offering.WiseEye2 AI Processor●dual Arm Cortex-M55 CPU cores and an Arm Ethos-U55 micro NPU core are integrated to optimize thepower consumption across various workloads●memory: Up to 2MB SRAM, 512KB TCM●supports weight compression to significantly reduce model size●multi-layer power management architecture●embedded DC/DC converter and LDO●feature model quantization and pruning for AI model size is significantly reduction while retaining animpressive performance●support Physical Unclonable Function (PUF), Cryptography and TrustZone security●High performance pixel processing accelerator and JPEG codec●Security Engine: Support secure boot, secure FW update, secure debug mode, Support AES 128bits,RSA 2048bits, Hash-256, TRNG, Secure key management●Peripheral: MIPI CSI-2 RX/TX, 1/4/8-bit CPI, PDM/I2S/MIPI SoundWire,SPI/UART/PWM/GPIO/I2C/I3C, SD/SDIO●Also support image pre-rolling feature for better security offering.WiseEye Module●embedded WiseEye1 or WiseEye2 AI processors●support HM01B0 (320x240) and HM0360 (640x480) CMOS image sensors●small form factor (12.5mm x 17.0mm and 20.5mm*21.5mm)●plug-and-play design which support various types of connectors, such as ZIF FPC 24pin and 45-pingolden finger (model dependent)●rich sets of peripherals (UART/I2C/I2S/PDM/SPI/GPIO/MIPI) and JTAG for debug (model dependent)●provide SDK, development tool and technical documentations●support various pre-trained pre-loaded AI modelsTable of Contents47Core Technologies and Know-HowDriving System Technology. Through our collaboration with Panel Manufacturers, we have developed extensive knowledge of circuit design,TFT-LCD/OLED driving systems, high-voltage CMOS processes and display systems, all of which are important to the design of high-performance TFT-LCD/OLED display drivers. Our engineers have in-depth knowledge of the driving system technology, which is the architecturefor the interaction between the source driver, gate driver, timing controller and power systems as well as other passive components. We believe thatour understanding of the entire driving system has strengthened our design capabilities. Our engineers are highly skilled in designing powerefficient and compact display drivers that enhance the performance of TFT-LCD/OLED. We are leveraging our know-how of display drivers anddriving system technology to develop display drivers for panels utilizing other technologies such as next generation OLED and electronic paperdisplays.High-Voltage CMOS Circuit Design. Unlike most other semiconductors, TFT-LCD display drivers require a high output voltage of 3.3 to 50volts. We have developed circuit design technologies using a high-voltage CMOS process that enables us to produce high-yield, reliable andcompact drivers for high-volume applications. Moreover, our technologies enable us to keep the driving voltage at very high uniformity, which canbe difficult to achieve when using standard CMOS process technology.High-Bandwidth Interfaces. In addition to high-voltage circuit design, TFT-LCD display drivers require high bandwidth transmission forvideo signals. We have applied several high-speed interfaces, including transistor-transistor logic (“TTL”), Reduced Swing Differential Signaling(“RSDS”), mini low-voltage differential signaling (“LVDS”), dual-edge TTL (“DETTL”), turbo Reduced Swing Differential Signaling (“RSDS”),Mobile Industry Processor Interface (“MIPI”) and other customized interfaces in our display drivers. Moreover, we are developing additional driverinterfaces for special applications with optimized speed, lower EMI and higher system stability.Die Shrink and Low Power Technologies. Our engineers are highly skilled in employing their knowledge of driving technology and high-voltage CMOS circuit design to shrink the die size of our display drivers while leveraging their understanding of driving technology and panelcharacteristics to design display drivers with low power consumption. Die size is an important consideration for applications with size constraints.Smaller die size also reduces the cost of the chip. Lower power consumption is important for many portable devices such as notebook computers,smartphone, tablet and consumer electronics products.WiseEye Smart Image Sensing Technologies. These technologies are composed by an AoS sensor, an edge AI ASIC processor and computer-vision AI algorithm, all operated in ultralow power mode. Our industrial first AoS CMOS image sensor features ultralow power and low latencyback-illuminated solution for always on, intelligent visual sensing applications. With Himax’s exceptional low power know-how and ASICimplementation technologies, our WiseEye AI image processor featured different power domain and mode management schemes, together withadvanced image processing hardwired accelerators to construct different operating modes in balancing processor performance and powerconsumptions. The seamless and proprietary interface between our AoS sensor and AI processor ensure the efficient and fast-response sensor datatransmission and wake-up mechanism operating in ultralow power mode. The computer-vision AI algorithm, which benefits from highperformance and low power AI processor and image data from sensor, can therefore enable AI features such as powerful human detection,occupancy detection and motion classification for various application needs.LCoS Microdisplay Technologies. Compared to other microdisplay technologies, LCoS microdisplay offers smaller form factor, higherbrightness, and less power consumption. Himax Display has own proficient engineering team to develop patented industry-only non-captive LCoS,front-lit waveguide, and module design, along with an in-house ISO certified manufacture line, all of which positions us at the forefronts of leadingAR glasses and AR-HUD markets. The latest development of Front-Lit LCoS enables an ultra-compact and extremely power-efficient opticalengine by consolidating and integrating LED illumination system into the micro display module itself and makes the patented technology ideal forAR headsets. Furthermore, Himax Display provided phase modulation LCoS 2.0 technologies to offer high-efficient, low power and multi-focalplane displaying features to fit for holographic displaying needs in numerous leading applications.3D Technologies. Several technologies in Himax are integrated together to form our 3D solution. First, wafer level nanoimprinted technologyis used to design and manufacture DOE and Waveguide. Then, our in-house capability on semiconductors enables us to design IC that particularlymatches our optical component. Our expertise in precision assembly in optics also helps us to provide a more complete solution to our customers.Table of Contents48CustomersOur customers for display drivers are primarily Panel Manufacturers and mobile device module manufacturers, who in turn design and markettheir products to manufacturers of end-use products such as notebook computers, desktop monitors, televisions, smartphone, tablet, automotive andconsumer electronics products. We may sell our products through agents or distributors for certain products or in certain regions. As of December31, 2023, we sold our products to around 300 customers. Our ten largest customers together accounted for approximately 79.5%, 76.7% and 74.1%of our revenues in 2021, 2022 and 2023, respectively. In 2021, 2022 and 2023, our two largest customers accounted for 10% or more of our netrevenue: customer A and its affiliates accounted for 32.1%, 32.3% and 28.7% of our revenues, respectively; and customer C accounted for 19.1%,9.4% and 11.0%, respectively.Certain of our customers provide us with a long-term (twelve-month) forecast plus three-month rolling non-binding forecasts and confirmorders about one month ahead of scheduled delivery. In general, purchase orders are not cancellable by either party, although from time to time weand our customers have agreed to amend the terms of such orders.Sales and MarketingWe focus our sales and marketing strategy on establishing business and technology relationships principally with Panel Manufacturers, usingLTPS and a-Si TFT-LCD, and OLED technologies, mobile display module and mobile device manufacturers for smartphone, tablet andautomotive, and camera module houses in order to work closely with them on future semiconductor solutions that align with their product roadmaps. Our engineers collaborate with our customers’ engineers to create products that comply with their specifications and provide a high level ofperformance at competitive prices and also create customized features for end brand customers. Our end market is concentrated among a limitednumber of major Panel Manufacturers. We also market our products directly to TV, monitor, notebook and mobile, tablet and automotive devicemanufacturers so that our products can be qualified for their specifications and designed into their products. Furthermore, we extend our businessdevelopment with system and ODM companies by using strategic ASIC business model to not only develop ASIC product based on customerspecification but also jointly research and develop new technologies to meet customers' future product demand. Additionally, we form strategicpartnership with Tier 1 customers for our LCoS microdisplays, 3D sensing and WiseEye smart image sensing to penetrate into the emergingmarket. We believe we need close alliance with our customers to build up ecosystem for new applications.We primarily sell our products through our direct sales teams located in Taiwan, China, South Korea and Japan. We also have dedicated salesteams for certain of our most important current or prospective customers. We have offices in Tainan, Hsinchu, Taipei, Taiwan; and Shenzen andSuzhou, China. We have other sales and technical support offices in Hefei, Beijing, Shanghai, Fuzhou, Foshan, Fuqing, Ningbo, Wuhan, Nanjing,Chongqing, Chengdu, Xi’an and Xiamen, China; Tokyo, Japan; Asan-si and Bundang-gu, South Korea, Munich, Germany; and Irvine and SanJose, California, Minneapolis, Minnesota and Detroit, Michigan, USA, all in close proximity to our customers. For certain products or regions, wemay sell our products through agents or distributors.Our sales and marketing team possesses a high level of technical expertise and industry knowledge used to support a lengthy and complexsales process. This includes a highly trained team of product managers and field applications engineers. Our team is equipped with extensivestrategic marketing experience and a strong capability to identify market trends. We also provide technical support and assistance to potential andexisting customers in system/SoC architecture, designing, testing and qualifying display modules, camera modules and end application systems thatincorporate our products and ASICs. We believe that the depth and quality of this design support are key to improving customers’ time-to-marketand maintaining a high level of customer satisfaction.ManufacturingWe operate primarily in a fabless business model that utilizes substantially third-party foundry and assembly and testing capabilities. Weleverage our experience and engineering expertise to design high-performance semiconductors and rely on semiconductor manufacturing serviceproviders for wafer fabrication, gold bumping, assembly and testing. We also rely largely on third-party suppliers of processed tape used in TABpackaging. We engage foundries with high-voltage CMOS process technology for our display drivers and engage assembly and testing houses thatspecialize in TAB and COG packages, thereby taking advantage of the economies of scale and the specialization of such semiconductormanufacturing service providers. Our primarily fabless model enables us to capture certain financial and operational benefits, including reducedmanufacturing personnel, capital expenditures, fixed assets and fixed costs. It also gives us the flexibility to use the technology and serviceproviders that are the most suitable for any given product. Despite our reliance on outsourcing for CP testing, we have made investments in internalcapabilities for test program development, engineering testing, debugging capability and manufacturing support since 2022.Table of Contents49We operate a fab under Himax Display primarily for performing manufacturing processes for our LCoS microdisplays. Moreover, for betterintegration, we also established an in-house color filter facility under Himax Taiwan, which commenced shipments from 2010. The color filter lineis a critical and unique process for our proprietary single-panel color LCoS microdisplays. An in-house color filter facility enhances thecompetitiveness of our LCoS products and creates value for our customers. In addition, we have established an in-house WLO facility under HimaxTaiwan for the key process of our wafer level optics products, which started small-scale shipments from December 2009 and commenced massshipment to anchor customer from 2017 onwards. We began construction of our new building, Fab 2, in March 2017, located nearby the currentheadquarters to house additional WLO capacity, the new active alignment equipment needed for our 3D sensing business and to provide extraoffice space. The construction of Fab 2 was completed in the first half of 2018.Manufacturing StagesThe diagram below sets forth the various stages in manufacturing display drivers according to the two different types of assembly utilized:TAB or COG. The assembly type depends primarily on the application and design of the panel and is determined by our customers.Wafer Fabrication: Based on our design, the foundry provides us with fabricated wafers. Each fabricated wafer contains many chips, eachknown as a die.Gold Bumping: After the wafers are fabricated, they are delivered to gold bumping houses where gold bumps are plated on each wafer. Thegold bumping process uses thin film metal deposition, photolithography and electrical plating technologies. The gold bumps are plated onto eachwafer to connect the die to the processed tape, in the case of TAB package, or the glass, in the case of COG package.Table of Contents50Chip Probe Testing: Each die is electrically tested, or probed, for defects. Dies that fail this test are discarded.Assembly and Testing: Our display drivers use two types of assembly technology: TAB or COG. Display drivers for large-sized applicationstypically require TAB package types and to a lesser extent COG package types, whereas display drivers for smartphone, tablet and consumerelectronics products typically require COG package types.TAB AssemblyWe use two types of TAB technologies: TCP and COF. TCP and COF packages are both made of processed tape that is typically 35mm or48mm wide, plated with copper foil and has a circuit formed within it. TCP and COF packages differ, however, in terms of their chip connections.With TCP packages, a hole is punched through the processed tape in the area of the chip, which is connected to a flying lead made of copper. Bycontrast, with COF packages, the lead is mounted directly on the processed tape and there is no flying lead. In recent years, COF packages havebecome predominantly used in TAB technology.●Inner-Lead Bonding: The TCP and COF assembly process involves grinding the bumped wafers into their required thickness and cuttingthe wafers into individual dies, or chips. An inner lead bonder machine connects the chip to the printed circuit processed tape and thepackage is sealed with resin at high temperatures.●Final Testing: The assembled display drivers are tested to ensure that they meet performance specifications. Testing takes place onspecialized equipment using software customized for each product.COG AssemblyCOG assembly connects display drivers directly to LCD panels without the need for processed tape. COG assembly involves grinding thetested wafers into their required thickness and cutting the wafers into individual dies, or chips. Each individual die is picked and placed into a chiptray and is then visually or auto-inspected for defects. The dies are packed within a tray in an aluminum bag after completion of the inspectionprocess.Quality AssuranceWe maintain a comprehensive quality assurance system. Using a variety of methods, from conducting rigorous simulations during the circuitdesign process to evaluating supplier performance at various stages of our products’ manufacturing process, we seek to bring about improvementsand achieve customer satisfaction. In addition to monitoring customer satisfaction through regular reviews, we implement extensive supplierquality controls so that the products we outsource achieve our high standards. Prior to engaging a third party as our supplier, we perform a series ofaudits on their operations, and upon engagement, we hold frequent quality assurance meetings with our suppliers to evaluate such factors asproduct quality, production costs, technological sophistication and timely delivery.In November 2002, we received ISO 9001 certification, which was renewed in March 2024 and will expire in March 2027. In February 2006,we received ISO 14001 certification, which was renewed in December 2023 and will expire in December 2026. In addition, in March 2007, wereceived IECQ QC 080000 certification, which was renewed in February 2022 and will expire in March 2025.Environmental Management System and Safety and Health Management SystemHimax follows closely the global environmental trends, including energy saving and waste reduction, in its daily operations. The Company iscertified in accordance with ISO 14001, ISO 45001 and ISO 14064.Himax is a leader in its sector when it comes to the environment and safety, operating under measures much more stringent than domesticregulations. The Company aims to grow sustainably, delivering economic, social and environmental benefits with its healthy employees.Himax has also been tirelessly reducing impacts to the environment and improving safety in its operations, specifically targeting productdesign and waste handling.Table of Contents51Semiconductor Manufacturing Service Providers and SuppliersThrough our relationships with leading foundries, assembly, gold bumping and testing houses and processed tape suppliers, we believe wehave established a supply chain that enables us to deliver high-quality products to our customers in a timely manner.Access to semiconductor manufacturing service providers is critical as display drivers require high-voltage CMOS process technology andspecialized assembly and testing services, all of which are different from industry standards. We have obtained our foundry services from TSMC,UMC, Vanguard, Macronix, Globalfoundries Singapore, PSMC, Nexchip and SKHYSI in the past few years. These are among a select number ofsemiconductor manufacturers that provide high-voltage CMOS process technology required for manufacturing display drivers. We engageassembly and testing houses that specialize in TAB and COG packages such as Chipbond, Chipmore International trading company Ltd., ChipMOSTechnologies Inc., Nepes Corporation and King Yuan Electronics Co., Ltd, etc.We plan to strengthen our relationships with our existing semiconductor manufacturing service providers and diversify our network of suchservice providers in order to ensure access to sufficient cost-competitive and high-quality manufacturing capacity. We are selective in our choice ofsemiconductor manufacturing service providers. It takes a substantial amount of time to qualify alternative foundries, gold bumping, assembly andtesting houses for production. As a result, we expect that we will continue to rely on a limited number of semiconductor manufacturing serviceproviders for a substantial portion of our manufacturing requirements in the near future.The table below sets forth (in alphabetical order) our principal semiconductor manufacturing service providers and suppliers:Wafer Fabrication Gold BumpingGlobalfoundries Singapore Pte., Ltd.Chipbond Technology CorporationMacronix International Co., Ltd.Chipmore International Trading Company Ltd.Nexchip Semiconductor CorporationChipMOS Technologies Inc.Powerchip Semiconductor Manufacturing Corp.LB Semicon, Inc.SK hynix system icUnion Semiconductor Co., Ltd.Taiwan Semiconductor Manufacturing Company LimitedUnited Microelectronics Corporation Vanguard International Semiconductor Corporation Processed Tape for TAB Packaging Assembly and TestingJMC Electronics Co., Ltd.Ardentec CorporationLG Innotek Co., Ltd.Advanced Semiconductor Engineering Inc.Stemco., Ltd.Chipbond Technology CorporationChipbond Technology CorporationChipmore International Trading Company Ltd. ChipMOS Technologies Inc. Global Testing Corporation Greatek Electronics Inc. Jiangsu Changjiang Electronics Technology Co., Ltd. King Yuan Electronics Co., Ltd. Micro Silicon Electronics Corp. Nepes Corporation Taiwan IC Packaging Corporation LB Lusem Co., Ltd. Union Semiconductor Co., Ltd.Table of Contents52Chip Probe Testing Chipbond Technology CorporationChipmore International Trading Company Ltd.ChipMOS Technologies Inc.Global Testing CorporationGreatek Electronics Inc.King Yuan Electronics Co., Ltd.Micro Silicon Electronics Corp.LB Semicon, Inc.Union Semiconductor Co., Ltd.YoungTek Electronics Corp.Intellectual PropertyAs of March 31, 2024, we held a total of 2,772 patents, including 1,182 in Taiwan, 916 in the United States, 560 in China, and 114 in othercountries. The expiration dates of our patents range from 2024 to 2043. We also have a total of 48 pending patent applications in Taiwan, 112 in theUnited States and 238 in other jurisdictions, including the PRC, Japan, Korea, Israel and Europe. In addition, we have registered “Himax and logo”as trademarks in Taiwan, China, Europe, Singapore, Korea, Japan and the United States. “Omniwide Film and logo” as trademarks in China,Europe, Korea, Japan and the United States, “CMVT” as trademarks in Taiwan and China, as well as “WISEEYE” as trademark in Israel and theUnited States.CompetitionThe market characteristics for our products are, in general, intensely competitive, characterized by continuous technological change, evolvingindustry standards, and declining average selling prices. We believe key factors that differentiate the competition in our industry include:●customer relations;●product performance;●design customization;●development time / product release;●product integration;●technical services;●manufacturing costs;●supply chain management;●timely delivery;●economies of scale; and●broad product portfolio.Table of Contents53We continually face intense competition from fabless display driver companies, including Fitipower Integrated Technology, Inc., FocalTechSystems Co., Ltd., Novatek Microelectronics Corp., Raydium Semiconductor Corporation, Sitronix Technology Co., Ltd., Ilitek Corp., LXSemicon., ESWIN, Chipone, Newvision, Ribbon Display Japan, Hisilicon and Synaptics Incorporated. We also face competition from integrateddevice manufacturers, such as Rohm Co., Ltd.Some of our competitors are affiliated or have established cross relationships with other Panel Manufacturers. Some have longer operatinghistories, or greater brand recognition, or significantly greater financial, manufacturing, technological, sales and marketing, human and otherresources than we do. Additionally, we expect that as the flat panel semiconductor industry expands, more companies may enter and compete in ourmarkets.For In-cell TDDI, we compete with Novatek Microelectronics Cop., Synaptics Incorporated, FocalTech Systems Co., Ltd., ESWIN, Chipone,OmniVision and Ilitek Corp., etc.For LCoS microdisplay products, we face competition from OmniVision, Syndiant, Kopin, and RAONTECH. We also compete withalternative microdisplay technology providers such as Texas Instruments with DLP, Sony with Micro OLED and Bosch with scanning mirror.For power ICs, we face competition from Taiwan companies including Richtek Technology Corp., Global Mixed-mode Technology Inc.,Novatek Microelectronics Corp., Fitipower Integrated Technology Inc. We also compete with worldwide suppliers such as Silergy Corp., andRohm Co., Ltd.For CMOS image sensor products, our focus is on machine vision. Competition in this space is primarily from OmniVision Technologies Inc.,Galaxycore, Silicon Optronics, Inc (SOI), Pixart Imaging Inc. and Smartsens Technology (Shanghai) Co. LTD.For wafer level optics products, we face competition primarily from Heptagon that was acquired by ams AG and certain new optical designhouses from China, such as Angstrong Tech, Yuguang Science and Technology Development Co.For 3D sensing, Himax is one of the few companies that can provide the one-stop solution though there are more companies attempting tojump into the game. ams AG and Orbbec will be the main competitors we face in the worldwide.For ultralow power WiseEye smart image sensing, the main competition is Qualcomm with its “Glance” device. Few additional small sizecompanies develop AI base edge devises, such as Lattice, Eta Computing, Nuvoton, Altek, etc. However, Himax is the only vendor who can offer atruly in-house vertically integrated solution comprise with all three building blocks required by customers: CMOS sensor, purposely designedMCU and the AI algorithm.InsuranceWe maintain insurance policies on our buildings, equipment and inventories covering property damage and damage due to, among otherevents, fires, typhoons, earthquakes and floods. We maintain these insurance policies on our facilities and on transit of inventories. Additionally, wemaintain director and officer liability insurance. We do not have insurance for business interruptions, nor do we have key person insurance.Environmental MattersHimax is required to ensure its products are obligated to comply with valid regulations and governmental authorities’ regulatory directives inapplicable jurisdictions relating to environmental protection regulations and subject to the topic of Environmental Protection. Additionally, HimaxTaiwan maintains a CP tester facility, a color filter facility and a wafer level optics facility and Himax Display maintains a facility for our LCoSproducts. Himax IGI operates under the designated facility related for 3D mask production, where we have taken the necessary steps to obtain theappropriate permits and, to extents of Himax knowledge, believe that we are in compliance with the existing environmental laws and regulations inthe Taiwan ROC and US jurisdiction applicable. In addition, we have entered into various agreements with certain customers whereby we haveagreed to indemnify them, and in certain cases, their customers, for any claims made against them for hazardous material violations that are foundin our products.Table of Contents544.C. Organizational StructureThe following chart sets forth our corporate structure and ownership interest in each of our principal operating subsidiaries as of March 31,2024.The following table sets forth summary information for our subsidiaries as of March 31, 2024. Percentage of Jurisdiction of Our OwnershipSubsidiary Main Activities Incorporation InterestHimax Technologies Limited IC design and sales ROC 100.0%Himax Technologies Korea Ltd. IC design and sales South Korea 100.0%Himax Technologies (Samoa), Inc. Investments Samoa 100.0%(1)Himax Technologies (Suzhou) Co., Ltd. Sales and technical support PRC 100.0%(2)Himax Technologies (Shenzhen) Co., Ltd. Sales and technical support PRC 100.0%(2)Himax Display, Inc. LCoS and MEMS design, manufacturing and sales ROC 92.0%(1)Integrated Microdisplays Limited LCoS design Hong Kong 92.0%(3)Himax Display (USA) Inc. LCoS and MEMS design, sales and technical support Delaware, USA 92.0%(3)Himax Analogic, Inc. IC design and sales ROC 98.6%(1)Himax Imaging, Inc. Investments Cayman Islands 100.0%Himax Imaging, Ltd. IC design and sales ROC 98.4%(1)Himax Imaging Corp. IC design California, USA 98.4%(4)Harvest Investment Limited Investments ROC 100.0%(1)Himax Technologies Japan Ltd. Sales Japan 100.0%Himax Semiconductor (Hong Kong) Limited Investments Hong Kong 100.0%Liqxtal Technology Inc. LC Lens design and sales ROC 62.3%(1)Himax IGI Precision Ltd. 3D micro and nano structure mastering and prototype replication Delaware, USA 100.0%(1)CM Visual Technology Corp. (CMVT) Omniwide film products design and sales ROC 77.6%(1)Viewsil Microelectronics (Kunshan) LimitedIC design and salesPRC 49.0%Viewsil Technology LimitedIC salesBritish Virgin Islands 49.0%(5)(1)Indirectly, through our 100.0% ownership of Himax Technologies Limited.(2)Indirectly, through our 100.0% ownership of Himax Technologies (Samoa), Inc.(3)Indirectly, through our 92.0% ownership of Himax Display, Inc.Table of Contents55(4)Indirectly, through our 98.4% ownership of Himax Imaging, Ltd.(5)Indirectly, through our 49.0% ownership of Viewsil Microelectronics (Kunshan) Limited.4.D. Property, Plants and EquipmentOur corporate headquarters are located at a 22,172 square meter facility within the Tree Valley Industrial Park in Tainan, Taiwan. We beganconstruction of our new building, Fab 2, in March 2017, located nearby the current headquarters. The newly completed building, located at a42,619 square meter facility, houses additional WLO capacity, the new active alignment equipment needed for our 3D sensing business andprovides extra office space. The facilities house our research and development, engineering, sales and marketing, operations and generaladministrative staff.We also lease office space in Taipei and Hsinchu, Taiwan; Suzhou, Shenzhen, Foshan, Beijing, Shanghai, Ningbo, Wuhan, Hefei, Xiamen,Chongqing, Fuqing, China; Tokyo, Japan; Asan-si and Bundang-gu, South Korea; and Irvine and San Jose, California and Minneapolis, Minnesota,USA. The lease contracts may be renewed upon expiration.We have established an in-house WLO facility under Himax Taiwan for the key process of our products. The facility occupies 1,171 squaremeters of floor space in a building leased from Innolux, which was already produced and shipped over 50 million optics to Tier-1 customer since2010. However, the building lease was terminated early at the end of January 2024, and we relocated the WLO facility to our Fab 2. We have alsoexpanded certain facilities for LCoS and WLO products to accommodate new customers and new applications located at our headquarters inTainan, Taiwan. In addition, Himax Taiwan owns and operates a fab with 1,431 square meters of floor space in a building leased from Innolux inTainan, where it established an in-house color filter facility that commenced shipments from 2010. The building lease was terminated early at theend of January 2024, and we relocated the color filter facility to our Fab 2. This in-house facility provides color filter for CMOS image sensor andLCoS products. The color filter line is a critical and unique process for our proprietary single-panel color LCoS microdisplays. An in-house colorfilter facility enhances the competitiveness of our color-filter LCoS microdisplays products and creates value for our customers. To build up testprogram development, engineering testing, debugging capability and manufacturing support, we have established under Himax Taiwan an in-houseCP test facility from 2022.ITEM 4A. UNRESOLVED STAFF COMMENTSNot applicable.ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTSThe following discussion should be read in conjunction with our audited consolidated financial statements and their accompanying notesincluded elsewhere herein which are prepared in accordance with IFRS.5.A. Operating ResultsFor discussion related to our financial condition, changes in financial condition, and the results of operations for 2022 compared to 2021, referto “Part I, Item 5. Operating and Financial Review and Prospects,” in our Annual Report on Form 20-F for the fiscal year ended December 31,2022, which was filed with the United States Securities and Exchange Commission on April 6, 2023.Table of Contents56OverviewWe commenced operations through our predecessor, Himax Taiwan, in June 2001. We must, among other things, continue to expand anddiversify our customer base, broaden our product portfolio, maintain our leading technology position, achieve additional design wins and manageour costs to partially mitigate declining average selling prices and any other market risks in order to maintain our profitability. Moreover, we mustcontinue to address the challenges of being a growing technology company, including hiring and retaining managerial, engineering, operational andfinancial personnel and implementing and improving our existing administrative, financial and operations systems.We operate primarily in a fabless business model that utilizes substantially third-party foundry and assembly and testing capabilities. Weleverage our experience and engineering expertise to design high-performance semiconductors and rely largely on third-party semiconductormanufacturing service providers for wafer fabrication, gold bumping, assembly and testing with the exception of manufacturing of LCoSmicrodisplay, wafer level optics products and active alignment for 3D sensing, which we manufacture through our own factories. We are able totake advantage of the economies of scale and the specialization of our third-party semiconductor manufacturing service providers. Our primarilyfabless model enables us to capture certain financial and operational benefits, including reduced manufacturing personnel, capital expenditures,fixed assets and fixed costs. It also gives us the flexibility to use the technology and service providers that are the most suitable for any givenproduct. For LCoS microdisplay and wafer level optics products, our in-house factories enable us to protect our proprietary technologies andmanufacturing expertise in the effort to further expand these businesses.As our semiconductors are critical components of flat panel displays, our industry is closely linked to the trends and developments of the flatpanel display industry. The majority of our revenues in 2023 were derived from sales of display drivers that were eventually incorporated into TFT-LCD and OLED panels. We expect display drivers for TFT-LCD and OLED panels to continue to be our primary products. The TFT-LCD andOLED panel industry is intensely competitive and is vulnerable to cyclical market conditions. The average selling prices of TFT-LCD and OLEDpanels could decline for numerous reasons, which could in turn result in downward pricing pressure on our products. See “Item 3.D. KeyInformation—Risk Factors—Risks Relating to Our Financial Condition and Business—We derive the majority of our net revenues from sales tothe TFT-LCD and OLED panel industry, which is highly cyclical and subject to price fluctuations. Such cyclicality and price fluctuations couldnegatively impact our business or results of operations.” The revenue expansion of our non-driver products as well as TFT-LCD and AMOLEDproducts trending toward high resolution and any other new product introduction help to mitigate these risks.Factors Affecting Our PerformanceOur business, financial position and results of operations, as well as the period-to-period comparability of our financial results, aresignificantly affected by a number of factors, some of which are beyond our control, including:●average selling prices;●unit shipments;●product mix;●design wins;●cost of revenues and cost reductions;●supply chain management;●share-based compensation expenses and cash awards; and●tax credits.Table of Contents57Average Selling PricesOur performance is affected by the selling prices of each of our products. We price our products based on several factors, includingmanufacturing costs, life cycle stage of the product, competition, technical complexity of the product, size of the purchase order and ourrelationship with the customer. We typically are able to charge the highest price for a product when it is first introduced. Although from time totime we are able to raise our selling prices during times of supply constraints, our average selling prices typically decline over a product’s lifecycle, which may be offset by changes in conditions in the semiconductor industry such as constraints in foundry capacity. For example, from2020, the industry-wide tightening of foundry capacity has extended to backend facilities that include assembly and testing and appears to be along-term phenomenon. Robust demand pushed foundry capacity constraints to a more severe level and rose higher material cost which in turnenabled higher average selling prices. However, decades-high inflation, rapidly rising interest rates in addition to the ongoing war and unexpectedlockdowns from Covid-19 in China starting from the end of first quarter of 2022, brought widespread demand halt, resulting in sluggish demandacross every aspect of our business, followed by sales declined and average selling price erosion. The general trend in the semiconductor industryis for the average selling prices of semiconductors to decline over a product’s life cycle due to competition, production efficiencies, emergence ofsubstitutes and technological obsolescence. Our cost reduction efforts also contribute to this decline in average selling prices. See “—Cost ofRevenues and Cost Reductions.”Our average selling prices are affected by the size and bargaining power of our customers. As new China panel makers emerge in themarketplace and continue to expand their capacity, China panel makers’ bargaining power will increase accordingly, negatively impacting ouraverage selling price. Our average selling prices are also affected by the packaging type our customers choose as well as the level of productintegration. See “—Product Mix” below. Lastly, competition level affects our average selling prices as well. However, the impact of decliningaverage selling prices on our profitability might be offset or mitigated to a certain extent by increased volume as lower prices may stimulatedemand and thereby drive sales and TFT-LCD and OLED panel products trending toward higher resolution.Unit ShipmentsOur performance is also affected by the number of semiconductors we ship, or unit shipments. As our display drivers are critical componentsof flat panel displays, our unit shipments depend primarily on our customers’ panel shipments among other factors. Our unit shipments have grownsince our inception primarily as a result of our increased market share with certain major customers and their increased shipments of panels. Ourgrowth in unit shipments also reflected the demand for higher resolution panels which typically require more display drivers. However, thedevelopment of higher channel display drivers or new technologies, if successful, could potentially reduce the number of display drivers requiredfor each panel while achieving the same resolution. If such technologies become commercially available, the market for our display drivers will bereduced and we could experience a decline in revenue and profit. Our unit shipments also depend on the capacity we can get from our foundry,assembly and testing house.Product MixThe proportion of our revenues that is generated from the sale of different product types, also referred to as product mix, also affects ouraverage selling prices, revenues and profitability. Our display driver products vary depending on, among other things, the number of outputchannels, the level of integration and the package type. Variations in each of these specifications could affect the average selling prices of suchproducts. For example, the trend for display drivers for use in large-sized panels is toward products with a higher number of channels, whichtypically command higher average selling prices than traditional products with a lower number of channels. However, panels that use higher-channel display drivers typically require fewer display drivers per panel. As a result, our profitability will be adversely affected to the extent thatthe decrease in the number of display drivers required for each panel is not offset by increased total unit shipments and/or higher average sellingprices for display drivers with a higher number of channels. The level of integration of our display drivers also affects average selling prices, asmore highly integrated chips typically have higher selling prices. Additionally, average selling prices are affected by changes in the package typesused by our customers. For example, the chip-on-glass package type typically has lower material costs because no processed tape is required.Moreover, our different non-driver products vary in average selling prices and costs.Table of Contents58The proportion of non-driver business would also affect our financial position and results of operations. For the past few years, we haveexperienced operating losses from our non-driver business. This was partly due to low sales volume during these periods that led to insufficientrevenue to fully cover expenses such as research and development and operating expenses. We expect, however, to ramp up the volume productionand sales of our non-driver products in the future and generate positive operation income from such non-driver products. Typically, our non-driverproducts have higher gross margins as well as higher growth potential than our driver products, we expect the overall profit margin across ourproduct platform to improve.Design WinsAchieving design wins is important to our business, and it affects our unit shipments. Design wins occur when a customer incorporates ourproducts into their product designs. There are numerous opportunities for design wins, including, but not limited to, when panel manufacturers:●introduce new models to improve the cost and/or performance of their existing products or to expand their product portfolio;●establish new fabs and seek to qualify existing or new component suppliers; and●replace existing display driver companies due to cost or performance reasons.Design wins are not binding commitments by customers to purchase our products. However, we believe that achieving design wins is animportant performance indicator. Our customers typically devote substantial time and resources to designing their products as well as qualifyingtheir component suppliers and their products. Once our products have been designed into a system, the customer may be reluctant to change itscomponent suppliers due to the significant costs and time associated with qualifying a new supplier or a replacement component. Therefore, westrive to work closely with current and prospective customers in order to anticipate their requirements and product roadmaps and achieve additionaldesign wins.Cost of Revenues and Cost ReductionsWe strive to control our cost of revenues. Our cost of revenues as a percentage of total revenues in 2021, 2022 and 2023 was 51.6%, 59.5%and 72.1%, respectively. In 2023, as a percentage of Himax Taiwan’s total manufacturing costs, the cost of wafer fabrication was 50.5%, the cost ofprocessed tape was 4.5%, the cost of assembly and testing was 44.3%, and overhead was 0.7%. Our cost of revenues may increase as a result of anincrease in raw material prices, any failure to obtain sufficient foundry, assembly or testing capacity or any shortage of processed tape or failure toimprove our manufacturing utilization rate or production yield. Meanwhile, the long-term capacity agreements carries the risk of substantialinventory write-downs and/or contractual penalties resulted from unfulfillment of committed volume in the event of decreased end customerdemand. In second quarter of 2023, amidst strict muted market demand, we strategically terminated high-cost foundry capacity agreements, a one-time expense included in cost of revenues. As a result, our ability to manage our wafer fabrication costs, costs for processed tape, assembly andtesting costs and our manufacturing utilization rate or production yield is critical to our performance. In addition, to mitigate declining averageselling prices, we aim to reduce unit costs by, among other things:●improving product design (e.g., having smaller die size allows for a larger number of dies on each wafer, thereby reducing the cost ofeach die);●improving manufacturing yields through our close collaboration with our semiconductor manufacturing service providers and in our in-house manufacturing facilities; and●achieving better pricing from a diversified pool of semiconductor manufacturing service providers and suppliers, reflecting our ability toleverage our scale, volume requirements and close relationships as well as our strategy of sourcing from multiple service providers andsuppliers.Table of Contents59Supply Chain ManagementDue to the competitive nature of the flat panel display industry and our customers’ need to maintain high capacity utilization in order to reduceunit costs per panel, any delays in the delivery of our products could significantly disrupt our customers’ operations. To deliver our products on atimely basis and meet the quality standards and technical specifications our customers require, we must have assurances of high-quality capacityfrom our semiconductor manufacturing service providers. We therefore strive to manage our supply chain by maintaining close relationships withour key semiconductor manufacturing service providers and strive to provide credible forecasts of capacity demand and seek for newmanufacturing service providers in case of any manufacturer’s capacity shortage. Any disruption to our supply chain could adversely affect ourperformance and could result in a loss of customers as well as potentially damage our reputation.Share-Based Compensation Expenses and Cash AwardsOur results of operations have been affected by, and we expect our results of operations to continue to be affected by, our share-basedcompensation expenses and cash awards, which consist of charges taken relating to grants of mainly RSUs as well as stock options, non-vestedshares, and cash awards to employees.Restricted Share Units (RSUs). We adopted two long-term incentive plans in October 2005 and September 2011, respectively, which permit thegrant of options or RSUs to our employees and non-employees where each unit represents two ordinary shares. The actual awards will bedetermined by our compensation committee. The 2005 plan was terminated in October 2010. We recognized share-based compensation expensesregarding RSUs under the long-term incentive plan totaling $23.8 million, $20 million and $12.1 million in 2021, 2022 and 2023, respectively. Ofthe total share-based compensation expenses recognized, $23.2 million, $17.5 million and $9.5 million in 2021, 2022 and 2023, respectively, weresettled in cash. We measure and recognize compensation expense for all share-based payments at fair value.Set forth below is a summary of our historical share-based compensation plans for the years ended December 31, 2021, 2022 and 2023 asreflected in our consolidated financial statements. However, we did not grant RSUs in 2019 but granted stock options to employees instead.We made grants of 676,273 RSUs to our employees on September 26, 2018. The vesting schedule for such RSU grants is as follows: 97.15%of the RSU grants vested immediately and were settled by cash in the amount of $3.8 million on the grant date, with the remainder vesting equallyon each of September 30, 2019, 2020 and 2021, which will be settled by our ordinary shares, subject to certain forfeiture events.We made grants of 1,402,714 RSUs to our employees on September 28, 2020. The vesting schedule for such RSU grants is as follows: 98.68%of the RSU grants vested immediately and were settled by cash in the amount of $4.8 million on the grant date, with the remainder vesting equallyon each of September 30, 2021, 2022 and 2023, which will be settled by our ordinary shares, subject to certain forfeiture events.We made grants of 2,604,545 RSUs to our employees on September 28, 2021. The vesting schedule for such RSU grants is as follows: 85.63%of the RSU grants vested immediately and were settled by cash in the amount of $23.2 million on the grant date, with the remainder vesting equallyon each of September 30, 2022, 2023 and 2024, which will be settled by our ordinary shares, subject to certain forfeiture events.We made grants of 3,987,509 RSUs to our employees on September 28, 2022. The vesting schedule for such RSU grants is as follows: 86.41%of the RSU grants vested immediately and were settled by cash in the amount of $17.5 million on the grant date, with the remainder vesting equallyon each of September 30, 2023, 2024 and 2025, which will be settled by our ordinary shares, subject to certain forfeiture events.We made grants of 1,710,607 RSUs to our employees on September 26, 2023. The vesting schedule for such RSU grants is as follows: 97.45%of the RSU grants vested immediately and were settled by cash in the amount of $9.5 million on the grant date, with the remainder vesting equallyon each of September 30, 2024, 2025 and 2026, which will be settled by our ordinary shares, subject to certain forfeiture events.Table of Contents60The amount of share-based compensation expense with regard to the RSUs granted to our employees on September 26, 2018, September 28,2020, September 28, 2021, September 28, 2022 and September 26, 2023 was $5.76 per ADS, $3.44 per ADS, $10.39 per ADS, $5.09 per ADS and$5.68 per ADS, respectively, which was based on the trading price of our ADSs on that day.Employee stock options. We made grants of 2,226,690 units of stock option to purchase 2,226,690 units ADS to certain employees at anexercise price of $2.27 on September 30, 2019. The vesting schedule was that 50% of the options vest half year after the date of grant and 50% ofthe options vest one year after the date of grant. During 2020, 114,500 units, 39,000 units and 10,000 units of stock option to purchase 114,500units, 39,000 units and 10,000 units ADS were grant to certain employees at an exercise price of $2.74, $3.9 and $3.35 on March 31, 2020, August11, 2020 and September 25, 2020, respectively. The options granted in 2020 were fully vested on October 1, 2020. We recognized share-basedcompensation expenses regarding stock options under the long-term incentive plan totaling $0.7 million in 2020.Cash Awards. We made grants annual bonus by cash payouts totaling $47.7 million, $19.3 million and $0.7 million to the Company’semployees among which $1.6 million, $1.0 million and $0.2 million was immediately vested on September 28, 2021, September 28, 2022 andSeptember 26, 2023, respectively. The remainder will be equally vested at the first, second and third anniversaries of the grant date.Tax CreditsOur results of operations have been affected by, and we expect our results of operations to continue to be affected by, tax credits available tous.The Statute for Industrial Innovation entitles companies to tax credits for qualifying research and development expenses related to innovationactivities but limits the amount of tax credit to only up to 15% of the total qualifying research and development expenditure for the current year,subject to a cap of 30% of the income tax payable for the current year. Moreover, any unused tax credits provided under the Statute for IndustrialInnovation may not be carried forward.Based on the amendments to the above, effective from January 1, 2016 to December 31, 2019, further extended to December 31, 2029, ifcompanies choose to extend the tax credits to three years, the tax credit rate will be 10% of the total qualifying research and developmentexpenditure for the current year and subject to a cap of 30% of the income tax payable for each year.Description of Certain Statements of Profit or Loss Line ItemsRevenuesHistorically, we generated the majority of our revenues from sales of display drivers for large-sized applications and small and medium-sizedapplications. In addition, our product portfolio also includes timing controllers, operational amplifiers, LCoS microdisplay, power managementICs, CMOS image sensors, 3D sensing, ultralow power WiseEye smart image sensing, wafer level optics products and ASIC service.The 2023 full year revenues totaled $945.4 million, representing a 21.3% decline compared to 2022. Persistent subdued global demand,coupled with looming recession concerns, presented significant challenges to our operations throughout 2023. These market dynamics adverselyaffected both demand and procurement processes of panel customers, particularly in the realm of consumer electronics.Table of Contents61The following table sets forth, for the periods indicated, our revenues by amount and our revenues as a percentage of revenues by each productline:Year Ended December 31,20212022 2023 Percentage Percentage Percentageofof of Amount Revenues Amount Revenues Amount Revenues(in thousands, except percentages)Display drivers for large-sized applications$397,905 25.7$263,99222.0$175,66618.6Display drivers for small and medium-sizedapplications 963,537 62.3 778,94664.8629,17466.5Non-driver products(1) 185,655 12.0 158,40113.2140,58814.9Total$1,547,097 100.0$1,201,339100.0$945,428100.0Note: (1) Includes, among other things, timing controllers, LCoS projector solutions, power management IC, CMOS image sensors,programmable gamma OP, wafer level optics (WLO) products, ultralow power WiseEye smart image sensing, NRE incomes, andASIC service.A limited number of customers account for substantially all our revenues. For example, Customer A and its affiliates accounted for 32.1%,32.3% and 28.7% of our revenues in 2021, 2022 and 2023, respectively. Customer C accounted for 19.1%, 9.4% and 11.0% of our revenues in2021, 2022 and 2023, respectively.Year Ended December 31,20212022 2023 Percentage Percentage Percentageofof of Amount Revenues Amount Revenues Amount Revenues(in thousands, except percentages)Customer A and its affiliates$ 497,083 32.1$ 388,194 32.3$ 271,351 28.7Customer C 295,217 19.1 113,396 9.4 103,839 11.0Others 754,797 48.8 699,749 58.3 570,238 60.3Total$ 1,547,097 100.0$ 1,201,339 100.0$ 945,428 100.0The global TFT-LCD and OLED panel market is highly concentrated, with only a limited number of TFT-LCD and OLED panelmanufacturers producing TFT-LCD and OLED panels in high volumes. We sell panel display drivers to many of these panel manufacturers. Ourrevenues, therefore, will depend on our ability to capture an increasingly larger percentage of each panel manufacturer’s display driverrequirements. The sales to panel makers in China have become a significant portion of our revenue due to the Chinese panel maker businessexpansion which started in 2011. We derive substantially all of our revenues from sales to Asia-based customers whose end products are soldworldwide. In 2021, 2022 and 2023, approximately 14.2%, 14.6% and 15.0% of our revenues, respectively, were from customers headquartered inTaiwan and approximately 81.5%, 77.0% and 76.2% of our revenues, respectively, were from customers headquartered in China. We believe thatsubstantially all of our revenues will continue to be from customers located in Asia, where almost all of the panel manufacturers and mobile devicemodule manufacturers are located. As a result of the regional customer concentration, we expect to continue to be subject to economic and politicalevents and other developments that affect our customers in Asia. A substantial majority of our sales invoices are denominated in U.S. dollars.Costs and ExpensesOur costs and expenses consist of cost of revenues, research and development expenses, general and administrative expenses, sales andmarketing expenses, share-based compensation expenses and cash awards. Costs would be greatly affected by product mix.Cost of RevenuesThe principal items of our cost of revenues are:●cost of wafer fabrication;Table of Contents62●cost of processed tape used in TAB packaging;●cost of gold bumping, assembly and testing; and●other costs and expenses.We outsource the manufacturing of our semiconductors and semiconductor solutions to semiconductor manufacturing service providers. Thecosts of wafer fabrication, gold bumping, assembly and testing depend on the availability of capacity and demand for such services. The waferfabrication industry, in particular, is highly cyclical, resulting in fluctuations in the price of processed wafers depending on the available foundrycapacity and the demand for foundry services.Research and Development ExpensesResearch and development expenses consist primarily of research and development employee salaries, including related employee welfare costs, costs associated with prototype wafers, processed tape, masks, molding and tooling sets and depreciation on research and development equipment. We expect to continue increasing our spending on research and development in absolute dollar amounts in the future as we continue to increase our research and development headcount and associated costs to pursue additional product development opportunities. As a percentage of revenues, our research and development expenses in 2021, 2022 and 2023 were 9.8%, 14.6% and 18.1%, respectively.General and Administrative ExpensesGeneral and administrative expenses consist primarily of salaries of general and administrative employees, including related employee welfarecosts, depreciation on buildings, office furniture and equipment and professional fees. We anticipate that our general and administrative expenseswill increase in absolute dollar amounts as we expand our operations, hire additional administrative personnel and incur additional compliancecosts required of a publicly listed company in the United States.Sales and Marketing ExpensesOur sales and marketing expenses consist primarily of salaries of sales and marketing employees, including related employee welfare costs,travel expenses and product sample costs. We expect that our sales and marketing expenses will increase in absolute dollar amounts over the nextseveral years. However, we believe that as we continue to achieve greater economies of scale and operating efficiencies, our sales and marketingexpenses may decline over time as a percentage of our revenues.Share-Based Compensation ExpensesOur share-based compensation expenses consist of various forms of share-based compensation that we have historically issued to ouremployees and consultants, as well as share-based compensation issued to employees, directors and service providers under our 2005 and 2011long-term incentive plans. The 2005 plan was terminated in October 2010. We allocate such share-based compensation expenses to the applicablecost of revenues and expense categories as related services are performed. See note 20 to our consolidated financial statements. Under the long-term incentive plan, we granted RSUs on December 30, 2005 to our employees and directors and again on September 29, 2006, September 26,2007, September 29, 2008, September 28, 2009, September 28, 2010, September 28, 2011, September 26, 2012, September 26, 2013, September26, 2014, September 25, 2015, September 28, 2016, September 29, 2017, September 26, 2018, September 28, 2020, September 28, 2021,September 28, 2022 and September 26, 2023 to our employees. We did not grant RSUs in 2019 but granted stock options to employees instead.Share-based compensation expenses recorded regarding RSUs under the long-term incentive plan totaled $23.8 million, $20.0 million and $12.1million in 2021, 2022 and 2023, respectively.Cash Awards.We made grants annual bonus by cash payouts totaling $47.7 million, $19.3 million and $0.7 million to the Company’s employees amongwhich $1.6 million, $1.0 million and $0.2 million was immediately vested on September 28, 2021, September 28, 2022 and September 26, 2023,respectively. The remainder will be equally vested at the first, second and third anniversaries of the grant date.Table of Contents63Income TaxesSince we and our direct and indirect subsidiaries are incorporated in different jurisdictions, we file separate income tax returns. Under thecurrent laws of the Cayman Islands, we are not subject to income or capital gains tax. Additionally, dividend payments made by us are not subjectto withholding tax in the Cayman Islands. However, if the relevant bylaws of the PEM rules have been adequately enacted and properly advocated,we may be determined to be within the territory of the ROC and our income tax shall be levied in accordance with the Income Tax Act and relevanttax regulations. Therefore, dividend payments made by us would be subject to withholding tax in the ROC. We recognize income taxes at theapplicable statutory rates in accordance with the jurisdictions where our subsidiaries are located and as adjusted for certain items includingaccumulated losses carried forward, non-deductible expenses, research and development tax credits, as well as changes in our deferred tax assetsand liabilities.Critical Accounting Policies and EstimatesWe believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of ourconsolidated financial statements in accordance with IFRS.InventoryInventories are stated at the lower of cost and net realizable value, and we use judgment and estimate to determine the net realizable value ofinventory at the end of each reporting period. Due to the rapid technological changes, we estimate the net realizable value of inventory forobsolescence and unmarketable items at the end of reporting period and then writes down the cost of inventories to net realizable value. The netrealizable value of the inventory is mainly determined based on assumptions of future demand within a specific time horizon. The inventory write-downs in 2021, 2022 and 2023 were approximately $9.4 million, $22.2 million and $21.5 million, respectively, and were included in cost ofrevenues in our consolidated statements of profit or loss.Impairment of Non-financial Assets other than GoodwillWe routinely review our non-financial assets at the reporting date to determine whether there is any indication of impairment. If any suchindication exists, then the asset’s recoverable amount is estimated. The recoverable amount of an asset or cash-generating unit is the greater of itsvalue in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value usinga pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. However, due to thecyclical nature of our industry and changes in our business strategy, market requirements, or the needs of our customers, we may not always be in aposition to accurately anticipate declines in the utility of our equipment or acquired technology until they occur. Although we have the recurringlosses in non-Driver product segment, we remain positive on the long-term prospect of our non-Driver product segment, judging by the expandingcustomer list that covers some of the world’s biggest tech names, and the busy engineering activities going on with such customers. For the yearsended December 31, 2021, 2022 and 2023, we did not recognize any impairment loss on non-financial assets.GoodwillWe evaluate goodwill for impairment at least annually, or more frequently when there is an indication that the cash-generating unit (CGU) maybe impaired. For the purpose of impairment testing, goodwill is allocated to each of the Company’s CGU or groups of CGU that are expected tobenefit from the synergies of the combination. If the recoverable amount of a CGU is less than its carrying amount, the difference is allocated firstto reduce the carrying amount of any goodwill allocated to such CGU and then to the other assets of the CGU pro rata based on the carryingamount of each asset in the CGU. Any impairment loss for goodwill is recognized directly in profit or loss. An impairment loss recognized forgoodwill is not reversed in subsequent periods.The recoverable amount is the higher of fair value less costs of disposal and value in use. The assessment of impairment of goodwill requiresmanagement to make subjective judgment to determine the identified CGU, allocate the goodwill to relevant CGU and estimate the recoverableamount of relevant CGU. In the process of estimating the recoverable amount of relevant CGU, management is required to make subjectivejudgments in determining the discounted rate, the terminal growth rate, the independent cash flows, useful lives, expected future revenue andexpenses related to the CGU.As of December 31, 2022 and 2023, goodwill in Driver IC CGU and WLO CGU was $26,846 thousand and $1,292 thousand, respectively. Forthe years ended December 31, 2021, 2022 and 2023, we did not recognize any impairment loss on goodwill.Table of Contents64Income TaxesAccording to the ROC Income Tax Act, dividends distributed by a Taiwan company to its foreign shareholders are subject to ROC withholdingtax, currently at the rate of 21% on the amount of the distribution in the case of cash dividends or on the par value of the ordinary shares in the caseof stock dividends. The surtax rate for undistributed earnings is currently 5%. However, surtax paid on undistributed earnings can no longer beused to offset against the withholding tax imposed on the dividend distributed to foreign shareholders.As of December 31, 2023, we have not provided for retained earnings tax on the undistributed earnings of approximately $1,307.4 million ofour subsidiaries since we have specific plans to reinvest these earnings indefinitely. The undistributed earnings in our foreign subsidiaries aremainly from Himax Taiwan totaling approximately $1,305.9 million as of December 31, 2023. We intend to use accumulated and future earnings ofHimax Taiwan to expand operations in Taiwan.However, a deferred tax liability will be recognized when the Taiwanese company can no longer demonstrate that it plans to reinvestindefinitely these undistributed earnings. This amount becomes taxable when we execute other investments, share buybacks or shareholderdividends to be funded by cash distribution by our foreign subsidiaries. It is not practicable to estimate the amount of additional taxes that might bepayable on such undistributed earnings.We are a holding company located in the Cayman Islands and have paid dividends and repurchased outstanding shares. To fund such dividendsand repurchases, in the past years, we have received cash from bank loans and from Himax Taiwan through intercompany borrowings instead ofdividends distributed by Himax Taiwan.As part of the process of preparing our consolidated financial statements, our management is required to estimate income taxes and tax basesof assets and liabilities for us and our subsidiaries. This process involves estimating current tax exposure together with assessing temporarydifferences resulting from differing treatments of items for tax and accounting purposes and the amount of tax credits and tax loss carry-forward.These differences result in deferred tax assets and liabilities, which are included in the consolidated statements of financial position. Managementmust then assess deferred tax assets at each reporting date and reduce to the extent that it is no longer probable that the related tax benefit will berealized; such reductions are reversed when the probability of future taxable profits improves.Consolidated Results of OperationsThe following table sets forth a summary of our consolidated statements of profit or loss as a percentage of revenues:Year Ended December 31, 2021 2022 2023Revenues 100.0% 100.0% 100.0%Costs and expenses: Cost of revenues 51.6 59.5 72.1Research and development 9.8 14.6 18.1General and administrative 1.9 2.4 2.7Sales and marketing 1.5 2.1 2.5Total costs and expenses 64.8 78.6 95.4Operating income 35.2 21.4 4.6Non-operating income (loss) — 1.6 0.1Income tax expense (benefit) 7.2 3.4 (0.5)Profit for the year 28.0 19.6 5.2Loss attributable to noncontrolling interests 0.2 0.1 0.2Profit attributable to Himax stockholders 28.2 19.7 5.4Table of Contents65Year to Year Comparisons Year Ended December 31, % Change202120222023from 2022(in thousands, except for percentages)Consolidated Statements of Profit or Loss Data: Revenues$ 1,547,097$ 1,201,339$ 945,428 (21.3)%Costs and expenses: Cost of revenues 798,519 714,233 681,931 (4.5)%Research and development 151,386 175,557 171,392 (2.4)%General and administrative 29,281 28,503 25,037 (12.2)%Expected credit loss (190) — — —Sales and marketing 23,080 25,459 23,856 (6.3)%Total costs and expenses 1,002,076 943,752 902,216 (4.4)%Operating income 545,021 257,587 43,212 (83.2)%Non-operating income (loss) (429) 18,978 1,181 (93.8)%Income tax expense (benefit) . 110,657 41,098 (5,028) (112.2)%Profit for the year 433,935 235,467 49,421 (79.0)%Loss attributable to noncontrolling interest 2,961 1,515 1,195 (21.1)%Profit attributable to Himax stockholders$ 436,896$ 236,982$ 50,616 (78.6)%Year Ended December 31, 2023 Compared to Year Ended December 31, 2022Revenues. Our revenues decreased by 21.3% to $945.4 million in 2023 compared to $1,201.3 million in 2022. All three main business sectorsexperienced a year-over-year decline due to persistent subdued global demand, looming recession concerns, and price erosion, a requisite part ofthe inventory offloading process, all presented challenges to our operations throughout 2023. These market dynamics adversely affected both thedemand and procurement processes of panel customers, particularly in the realm of consumer electronics.●Large-sized Display Drivers. Revenues from display drivers for large-sized application decreased by 33.5% to $175.7 million in 2023from $264.0 million in 2022. The decline was predominantly driven by the prevailing weak macroeconomic conditions that our customersacross the board, from brands to panel houses, maintained their cautious approach with heightened procurement scrutiny on the backdropof slowing end market sell-through.●Small and Medium-sized Display Drivers. Revenues from small and medium-sized display drivers decreased by 19.2% to $629.2 millionin 2023 from $778.9 million in 2022. The decrease was primarily a result of lackluster demand in the market. Soft consumerconsumption, coupled with recession fears persists as a challenge to market demand and amplifies uncertainty in the tech industry. Salesof smartphones and tablets were particularly affected by these challenging conditions. Furthermore, our automotive sector sales declineddue to intensified electric vehicle price competition, especially in the second quarter of 2023, prompting major Chinese automakers to cutproduction and implement strict cost-saving measures. Despite these challenges, our optimism in the automotive business remains strong,with automotive TDDI sales experiencing a remarkable surge of over 50% in 2023, underscoring the resilience and potential of our largestbusiness segment. Our automotive TDDI business secured over 400 design-win projects, while our automotive LTDI product beganproduction for Geely Auto's NEVs in the third quarter of 2023, all solidifying our leadership as additional projects set to commenceproduction in the next 1 or 2 years.Table of Contents66●Non-Driver Products. Revenues from non-driver products decreased by 11.2% to $140.5 million in 2023 from $158.4 million in 2022.The decrease was mainly from the decline of TCON sales, hampered by decreased demand for both large display panels and OLEDdisplays for tablet, but partially offset by the increase of WLO and CMOS image sensor. Despite the soft market sentiment, we areactively developing the next generation TCON IC for OLED tablets, notebooks, and automotive applications, aiming to diversify ourofferings and strategically position ourselves for a resurgence in demand. In our automotive TCON business, our position remainsunchallenged in local dimming TCON, as evidenced by growing validation and widespread deployment globally in both premium andmainstream new car models. We plan to roll out a series of TCON products for automotive to expand our offerings catering to the diverseneeds of global customers. Local dimming technology has found increasing application in automotive displays, initially in high-end carmodels and gradually in mainstream vehicles, with emerging use cases in heads-up displays (HUD).Costs and Expenses. Costs and expenses decreased by 4.4% to $902.2 million in 2023 from $943.8 million in 2022. As a percentage ofrevenues, costs and expenses increased to 95.4% in 2023 compared to 78.6% in 2022.●Cost of Revenues. Cost of revenues decreased to $681.9 million in 2023 from $714.2 million in 2022, which was due primarily to a 3.1%decrease in unit shipments in 2023. As a percentage of revenues, cost of revenues increased to 72.1% in 2023 from 59.5% in 2022,mainly due to market price erosion on the backdrop of sluggish end market demand as well as cautious inventory management andrigorous procurement scrutiny by customers, particularly in the realm of consumer electronics. Aggressive destocking, strategictermination of certain high-cost foundry capacity agreements, and the write-down of unsold inventories due to market price declines haveall contributed to higher costs of revenues.●Research and Development. Research and development expenses decreased by 2.4% to $171.4 million in 2023 from $175.6 million in2022. This decrease was primarily attributable to the lower vested portion of the annual bonus compensation awarded to employees in2023 and preceding years, but partially offset by increased salaries and tape-out expenses. The increase in salary expense was dueprimarily to a larger headcount of research and development staff and higher average salaries, but partially offset by NT dollardepreciation against the US dollar as we pay the bulk of our employee salaries in NT dollars.●General and Administrative. General and administrative expenses decreased by 12.2% to $25.0 million in 2023 from $28.5 million in2022, primarily as a result of decreases in compensation awards to employees described in above Research and Development andprofessional fees.●Sales and Marketing. Sales and marketing expenses decreased by 6.3% to $23.9 million in 2023 from $25.5 million in 2022. Thisdecrease was primarily attributable to decrease in compensation awards to employees described in above Research and Development, butpartially offset by increase in travelling expense.Non-Operating Income (loss). We had net non-operating income of $1.2 million in 2023 compared to $19.0 million in 2022. The decrease wasprimarily due to a gain from disposal of a subsidiary in 2022, decrease in foreign currency exchange gains and increase in finance costs butpartially offset by an increase in interest income.Income Tax Expense (benefit). Our income tax benefit increased to $5.0 million in 2023 from income tax expense of $41.1 million in 2022.Our effective income tax rate decreased to (11.3%) in 2023 from 14.9% in 2022. The decrease in our effective income tax rate was primarilyattributable to the significant decrease in pre-tax profit, from $276.6 million in 2022 to $44.4 million in 2023 and income tax benefit for tax creditdecreased to $9.9 million in 2023 from $15.6 million in 2022. Additionally, there was a combined recognized income tax benefit of $4.0 million in2023 but income tax expense of $0.6 million in 2022, for changes in unrecognized tax benefits and variances resulting from prior years’ income.Profit for the year. As a result of the foregoing, our profit was $49.4 million in 2023, versus $235.5 million in 2022, and profit attributable toHimax stockholders was $50.6 million in 2023, versus $237.0 million in 2022.Table of Contents67Segment ResultsThe following table sets forth the revenues and operating results for our reportable segments for the periods indicated:Year Ended December 31, 2021 2022 2023(in thousands)Segment Revenues Driver IC$ 1,361,442$ 1,042,938$ 804,840Non-Driver Products 185,655 158,401 140,588Total$ 1,547,097$ 1,201,339$ 945,428Year Ended December 31, 2021 2022 2023(in thousands)Segment Operating Income (Loss) Driver IC$ 551,943$ 275,275$ 75,282Non-Driver Products (6,922) (17,688) (32,070)Total$ 545,021$ 257,587$ 43,212Driver IC SegmentYear Ended December 31, 2023 Compared to Year Ended December 31, 2022Segment revenues. Our revenues from the Driver IC segment decreased by 22.8% to $804.8 million in 2023 from $1,042.9 million in 2022.The decline stemmed from reduced sales of display drivers for both large-sized and small and medium-sized sectors, driven by the prevailing weakmacroeconomic conditions that adversely affected both the demand for and procurement processes of panel customers, especially within theconsumer electronics sector.Segment operating income. Operating income from the Driver IC segment decreased to $75.3 million in 2023 from $275.3 million in 2022.This decrease was primarily attributable to a decrease in revenues and lower gross margin, which was mainly attributable to pricing pressure,largely stemming from pricing pressure caused by the need to offload excess inventory levels amid challenging economic conditions.Non-Driver Products SegmentYear Ended December 31, 2023 Compared to Year Ended December 31, 2022Segment revenues. Our revenues from the Non-Driver Products segment decreased by 11.2% to $140.6 million in 2023 from $158.4 million in2022. The year-over-year decrease was mainly from decline in TCON revenues, but partially offset by the increase of WLO and CMOS imagingsensor.Segment operating loss. Operating loss from the Non-Driver Products segment increased to $32.1 million in 2023 from $17.7 million in 2022.The operating loss increases were attributable mainly to the decline in revenues and gross margin.5.B. Liquidity and Capital ResourcesWe need cash primarily for technology advancement, capacity expansion, paying dividends and working capital. We have historically beenable to meet our cash requirements through cash flow from operations and borrowings to pay dividends.Table of Contents68As of December 31, 2023, we had total current assets of $1,200.6 million, total current liabilities of $708.8 million and cash and cashequivalents of $191.7 million. As of December 31, 2023, we had short-term secured borrowings of $453.0 million with cash and time deposits of$453.0 million as collateral, and long-term unsecured borrowings of $40.5 million, of which $6.0 million was current portion. For enhancing theguaranty, our land, building and improvements of Fab 2 totaling $63.4 million were pledged as collateral for the long-term unsecured borrowings.As of December 31, 2023, we had total unused short-term credit lines of $206.5 million, of which $127.0 million belonging to the parent company,Himax Technologies, Inc., needs to be secured with an equal amount of cash and time deposits when borrowing money from banks. Further, wehad unused long-term credit lines of $139.5 million. We believe that our existing short-term and long-term credit lines, together with cashgenerated from our operations, are sufficient to meet our liquidity needs. We expect to meet our present working capital requirements through cashflow from operations and bank borrowings from time to time.The following table sets forth a summary of our cash flows for the periods indicated:Year Ended December 31, 2021 2022 2023(in thousands)Net cash provided by operating activities$ 388,276$ 82,908$152,841Net cash provided by (used in) investing activities (232,680) 14,998 (88,882)Net cash (used in) financing activities (4,487) (211,068) (93,591)Net increase (decrease) in cash and cash equivalents 151,086 (114,443) (29,832)Cash and cash equivalents at beginning of period 184,938 336,024 221,581Cash and cash equivalents at end of period 336,024 221,581 191,749Operating Activities. Net cash provided by operating activities in 2023 was $152.8 million compared to $82.9 million in 2022. This increase innet cash provided by operating activities in 2023 was mainly due to the substantial reduction in inventory across major product lines.Investing Activities. Net cash used in investing activities in 2023 was $88.9 million compared to net cash provided by investing activities $15.0million in 2022. This increase in net cash used in investing activities was due primarily to an increase of $50.8 million in refundable deposits madefor securing foundry capacity, an increase of $20.9 million in net cash used in acquisitions of financial assets at amortized cost in 2023 compared to2022 and an increase in cash used in acquisitions of property, plant and equipment of $11.6 million.Financing Activities. Net cash used in financing activities in 2023 was $93.6 million compared to $211.1 million in 2022. This change was dueprimarily to decrease in distribution of cash dividends in 2023 and a decrease of guarantee deposits received from customers.Our liquidity could be negatively impacted by a decrease in demand for our products that are subject to rapid technological change, amongother factors, which could result in revenue variability in future periods. In addition, we have at times agreed to extend the payment terms forcertain of our customers. The extension of payment terms for our customers could adversely affect our cash flow, liquidity and our operatingresults. Our subsidiaries’ ability to distribute dividends and other payments to us may be limited by ROC regulations. See “Risk Factors — RisksRelated to Our Holding Company Structure — Our ability to receive dividends and other payments or funds from our subsidiaries may be restrictedby commercial, statutory and legal restrictions, and thereby materially and adversely affect our ability to grow, fund investments, makeacquisitions, pay dividends and otherwise fund and conduct our business.”Table of Contents69During the 2021 timeframe, we took steps to address the ongoing foundry capacity shortage worldwide by entering into strategic agreementswith our foundry partners to secure the necessary capacity to meet our business requirements. Under these strategic agreements, we are committedto purchasing a specific volume at fixed prices or variable prices. Some of our customers, and even our indirect customers, are also entering intosimilar strategic agreements to secure their IC supplies with us. However, there can be no assurance that these prices provided in the strategicagreements with our foundry partners and our customers will always remain competitive during the contract term. For example, in the event thatthe global semiconductor market changes due to foundry capacity expansion and/or shrunken customer demand, the fixed prices we agree to payour foundry partners may become significantly higher than the then prevailing market price. On the other hand, if there continues to be foundrycapacity shortages and/or increases in customer demand, the fixed prices our customers agree to pay us may become significantly lower than thethen prevailing market price. Any of those situations could materially adversely impact our pricing strategies, competitive position, profitabilityand results of operation. We may also be subject to contractual penalties if we are unable to purchase the committed volume from our foundrypartners. However, after several quarters of aggressive destocking, our inventory has reached a comfortable level. In light of this, we strategicallyterminated certain high-cost foundry capacity agreements in the second quarter of 2023, prior to their expiration dates. This move aims to improveour cost structure for new wafer starts and maintain competitiveness. This, however, also has resulted in a significant one-time early terminationexpense incurred in the second quarter of 2023 and hit our gross margin. In addition, since these strategic agreements with our foundry partnerstypically require us to make prepayments or refundable deposits to such foundry partners, our cash flow, liquidity and financial condition could beadversely affected.We have entered into several wafer fabrication or assembly and testing service arrangements or multi-year purchase agreements with suppliers.We may be obligated to make payments for purchase orders entered into pursuant to these arrangements. Our purchase obligations also includeagreements to purchase goods or services, primarily inventory, that are enforceable and legally binding on us and that specify all significant terms,including fixed or minimum quantities to be purchased, fixed or variable price provisions, and the approximate timing of the transaction. Amongall these purchase agreements, the longest termination term shall expire in 2028. Purchase obligations exclude agreements that are cancelablewithout penalty. Contractual obligations resulting from above purchase orders and agreements with known amounts approximate $1,415 million asof December 31, 2023. Of obligations under above purchase orders and agreements, $589 million is expected to be paid in the next 12 months.Our capital expenditures were incurred primarily in connection with the purchase of property and equipment. Our capital expenditures totaled$7.6 million, $11.8 million and $23.4 million in 2021, 2022 and 2023, respectively. Capital expenditures of $23.4 million in 2023 was mainly forin-house testers for our IC design business as well as R&D related equipment.The capex budget will be funded through our internal resources and banking facilities, if so needed. We will continue to make capitalexpenditures to meet the expected growth of our operations. We believe that our working capital and borrowings under our existing and futurecredit lines should be sufficient for our present requirements.Table of Contents705.C. Research and DevelopmentOur research and development efforts focus on improving and enhancing our core technologies and know-how relating to the semiconductorsolutions we offer to the flat panel display industry. In particular, we have committed a significant portion of our resources to the research anddevelopment of non-driver products because we believe in the long-term business prospects of such products and are committed to continuing todiversify our product portfolio. Although a significant portion of the resources at our integrated circuit design center are invested in advancedresearch for future products, we continue to invest in improving the performance and reducing the costs of our existing products. Our applicationengineers, who provide on-system verification of semiconductors and product specifications, and field application engineers, who provide on-siteengineering support at our customers’ offices or factories, work closely with Panel Manufacturers to co-develop display solutions for theirelectronic devices. In 2021, 2022 and 2023, we incurred research and development expenses of $151.4 million, $175.6 million and $171.4 million,respectively, representing 9.8%, 14.6% and 18.1% of our revenues, respectively.5.D. Trend InformationIn 2023, Himax confronted challenges arising from subdued global demand, cautious procurement practices, and stringent controls by panelmakers and end customers, resulting in revenue decline and gross margin contraction. However, looking ahead to 2024 and beyond, we are poisedfor sustained growth, leveraging our automotive leadership, operational flexibility, and focus on high-value areas such as TCON, OLED, and AI.With these product lines boasting higher gross margins than our corporate average and some already securing market-leading positions, we are wellpositioned for the future. As the semiconductor supply chain gradually stabilizes and channel inventory returns to healthier levels, we anticipate apromising recovery ahead.Large-sized Display Driver IC SectorLooking towards the long-term horizon, Himax maintains a positive outlook on the prospects of our large display driver business. Supportedby a diversified and comprehensive product portfolio, we possess the agility to swiftly allocate production towards sectors demonstrating demand,in close collaboration with our customers and suppliers. Our alliances with leading end customers in the TV, monitor, and notebook markets areinstrumental in driving our focus towards higher-end displays. Recognizing the increasing demand for advanced displays and premium models, weoffer cutting-edge driver ICs and TCONs, providing a seamless one-stop shopping experience for leading end customers across these markets.Moreover, we facilitate feature enhancements for our customers' next-generation products, encompassing high-speed interfaces, low powerconsumption, higher refresh rates, ultra-large-sized displays, high-aspect-ratio screens, and curved-view designs. These initiatives collectivelyestablish a formidable barrier of entry, setting us apart from local competition in China.Small and Medium-Sized Display Driver IC SectorHimax remains the market share leader in display driver ICs for automotive and tablets. In the automotive market, we are deepening ourworking relationships with leading panel makers, Tier 1 players, and end customers across the globe. In 2024, we expect the automotive sector tocontinue as our single largest revenue contributor, representing over 40% of total sales. We maintain high optimism in our automotive business andmarket position due to our extensive product portfolio spanning mainstream LCD and emerging OLED technologies. Securing several hundreds ofdesign wins in TDDI and local dimming TCON for automotive LCD displays, with most slated for mass production within the next two years,highlights our market dominance in the coming years. Additionally, our foray into automotive OLED displays, including DDIC, TCON, and thenewly launched touch controller, strengthens our market share leadership by providing customers with integrated solutions.Himax also offers high-speed P2P bridge and LTDI solutions, specially designed for displays typically larger than 30 inches or pillar-to-pillardisplays. These solutions can cascade up to 30 chips in support of ultrahigh-resolution displays, offering high-precision touch sensitivity andcreating a high entry barrier for potential competitors. Our industry-leading, cutting-edge automotive LTDI product started mass production forGeely Auto’s NEVs in the third quarter of 2023. We are also witnessing a prominent emerging trend of more customers opting for our TDDI orLTDI, coupled with our local dimming TCON, as their standard development platform for crafting new automotive displays of various sizes. Thismovement has drawn the interest of leading panel makers, Tier 1s, and car makers across the spectrum, acknowledging the benefits of our supremebundle solution to accelerate their new panel development and elevate their product values. Given all the new demand for advanced automotivedisplay technologies, we expect decent sales growth to continue for our automotive sector in 2024.Table of Contents71On the tablet market, Himax still has a leading position, especially on the non-iOS market, as market adoption of TDDI continues. For OLEDpanel for tablet, Himax offers both DDIC and TCON where we commenced mass production in the first quarter of 2022. Despite the soft demandenvironment, we are actively working on the next generation IC for OLED tablet, aiming to broaden our offering and better position us for whendemand returns. Moreover, we are witnessing growing demand for LCD displays with higher frame rates, resolutions, screen sizes, and activestylus support, all of which align with our early mover advantage in the market. In the smartphone sector, we anticipate higher exposure once oursmartphone AMOLED solution becomes available. As expected, our traditional discrete driver ICs for smartphones and tablets are being rapidlyreplaced by TDDI technology.Himax is actively expanding our presence in the AMOLED market through strategic partnerships with leading panel makers in Korea andChina. Our comprehensive AMOLED portfolio now includes the newly launched on-cell touch controllers, enabling us to offer solutions forvarious applications, including automotive, tablets, and notebooks, among others. Additionally, our flexible AMOLED driver and TCON forautomotive display have successfully ramped up for a customer’s flagship EV model in the first quarter of 2022, with the number of awardedprojects with worldwide conventional car makers and EV vendors on the rise. We anticipate that AMOLED driver ICs will soon become one of themajor growth drivers for our business.Non-Driver IC SectorThe non-driver category has been our most exciting growth area and a differentiator for the Company. We are devoted to the development,manufacturing and marketing of non-driver products to diversify our customer base and product portfolio to offer total solutions of timingcontroller, image processing and human interface related technologies in addition to our driver IC products.In the timing controller sector, we are optimistic about the growth prospects, where we have successfully positioned ourselves for higher-endand higher value-added areas, including 4K/8K TV, gaming TV and monitors, low-power notebooks, in view of consumers’ pursuit of various newtypes of entertainment for film, television, and gaming, as well as automotive applications, particularly with the local dimming feature. With yearsof strenuous work on this high entry barrier technology, we have developed comprehensive local dimming TCON product offerings and have anunchallenged leading position, particularly in automotive areas, where we have secured over one hundred design-win projects from numerous Tier1s and car makers, initially in high-end car models and gradually into mainstream vehicles. Local dimming technology not only enhances displaycontrast for better viewing under bright daylight but also provides effective power saving, critical for larger displays and EV models. Our latestlocal dimming TCON features advanced image enhancement with a wide color spectrum, ensuring exceptional visual quality supportingresolutions of up to 12Kx1K, and dynamic contrast enhancement tailored to real-time display content, all while adhering to power efficiency andstringent automotive safety standards. In 2024, we expect very strong annual growth for the automotive local dimming TCON business, backed byquickly expanding design wins as well as already secured design wins set to commence mass production within the next two years. Additionally,we commenced mass production of AMOLED TCON together with DDIC in automotive and tablet applications starting in early 2022, where thedesign wins with leading tablet and NEV customers continue to expand. Meanwhile, we are actively developing the next generation TCON IC forOLED tablets, notebooks, and automotive applications, aiming to diversify our offerings and strategically position ourselves for a resurgence indemand. We believe the TCON sector will be one of the driving forces for our non-driver business moving forward.During 2016, our non-driver businesses experienced tremendous growth, primarily driven by the LCoS and WLO businesses due to shipmentsto one of our leading AR device customers. WLO shipments increased considerably year-over-year in 2018 because of the customer’s large-scaleadoption in more models. In 2023, we continued to fulfill anchor customer’s demand for the legacy product, albeit at a much lower volume. TheWLO technology continues to play an important role in shaping next generation optical applications. As an illustration, our WLO technology canbe deployed to empower 3D perception sensing for precise controller-free gesture recognition in VR devices and commenced volume production ofWLO technology to a leading North American customer starting in second quarter of 2023 for their new generation VR devices to enable 3Dgesture control. Our exceptional optical design knowledge, together with our production proven nanoimprinting capabilities and massmanufacturing experience, allow us to deliver high-quality solutions to meet the requirements of the future generation optical applications acrossautomotive, consumer, industrial, medical applications, AR/VR/ MR devices and many other applications.Table of Contents72Regarding ultralow power WiseEye smart image sensing, the demand for resource-constrained and battery-powered end point applicationswith AI intelligent sensing is rapidly growing. Our WiseEye AI solution is designed for a wide range of ultralow power use cases that aim tomodernize legacy endpoint devices, which lack AI capability, with ultralow power computer vision AI. The AI solution is capable of processingdata locally on the end device with just metadata output while avoiding the need to transport massive data to the cloud, thereby improving responsetime, saving bandwidth and power and, last but not least, enhancing data security. Our design-win with Dell for a series of new models that startedin 2021 saw meaningful shipment in 2022. We continue to support the mass production of Dell’s notebook and other endpoint AI applications, suchas shared bike parking, video conference device, smart door lock, smart agriculture, medical capsule endoscope among others. We are steadfast inour dedication to WiseEye, aiming to expand our ultralow-power AI solution across various end-point AI applications. Additionally, we arefocused on advancing energy-efficient AI processors and image sensors for these applications to uphold our leading position in the field. Wemaintain our leading position in the field of AI with active collaborations across various ecosystem partners and system integration companies,aimed at addressing diverse application needs and expanding the market presence of WiseEye AI. As official partners of prominent AI platformsincluding Google TensorFlow Lite for Microcontrollers, Microsoft Azure, Arm AI Partner Program, and the tinyML Foundation, we leverage theirextensive networks and participant base. We also provide development tools and robust AI models to streamline customer efforts and reduce costsfor AI product introduction. Our WiseEye Modules, integrating Himax's low-power CMOS image sensors, WiseEye AI processors, and AI modelsfrom in-house or third-party sources, exemplify this approach, aiming to scale adoption in this relatively untapped market. These modules featurecompact designs, high integration, and plug-and-play functionality, equipped with user-programmable AI models to facilitate seamless integrationand lower development barriers and costs. This initiative is particularly suitable for early-stage market applications and Modules is accessiblethrough online resellers such as DigiKey and other system integration partners. Collaborations with partners to introduce plug-and-play AI modulesincorporating advanced no-code/low-code AI solutions further enhance our ability to meet diverse development needs. Our collaboration withSeeed Studio at CES 2024 on the Grove Vision AI Module V2, a battery-powered endpoint AI vision processing module, highlights ourcommitment to making AI technology easily accessible. Additionally, our marketing efforts include joint webinars/promotions with well-knownplatform partners and SI companies like Edge Impulse, Digi-Key, SparkFun, Seeed Studio, and hackster.io and many others, to broaden our reachand establish direct contacts with more AI developers.Moving forward, we are more committed than ever to strengthening our WiseEye product roadmap and retaining our leadership position inultralow power AI processor and image sensor for end-point AI applications. WiseEye2, our latest AI processor, has earned the prestigious "2023Best AI Product Award" from EE Awards Asia, solidifying our leadership position in the industry. This achievement builds upon the success of ourpioneering WiseEye1 AI processor where WiseEye2 goes beyond setting a new standard in endpoint AI with exceptional inference capability,ultralow power efficiency, and advanced security features. It excels in context-aware AI with precise detection capabilities such as face mesh, faciallandmark, hand gesture, and human pose, all achieved with minimal power consumption, as well as simplifying system integration and lowers costsby offering a rich set of peripheral interfaces, eliminating the need for additional discrete MCUs. With versatile sensor fusion capabilities,WiseEye2 enables accurate detection across various inputs, making it ideal for various applications, including industrial. Collaboration with majorCPU and AP SOC players are in progress, facilitating integration into next-generation smart notebooks, AI PCs, surveillance systems, and beyond.WiseEye business is in a good position to enjoy rapid growth for years to come and we believe it will serve as a multi-year structural growth driverfor Himax.On 3D sensing, we offer both total solutions and key components for our customers. Our 3D decoder IC accelerates local image processing forface recognition, ensuring advanced and secured security authentication, thereby has been certified by leading Chinese electronic paymentstandards, meeting requirements for accurate data decoding, timely operation, and strict privacy. It's widely adopted by many Chinese e-paymentsolution providers with significant shipments starting 2022. At CES 2024, we showcased a range of 3D depth sensing solutions tailored for variousAR/VR applications. Our groundbreaking 3D naked-eye laptop is eye catching which features Himax's proprietary structured light vision AImodule for advanced real-time 3D eye and hand gesture tracking. With eye tracking, the AI module accurately detects the viewer's eye position in a3D coordinate system with minimal latency, as fast as 7 milliseconds. This allows the laptop display to dynamically adjust based on the viewer'sperspective, delivering vibrant, glasses-free 3D visuals without causing dizziness. Additionally, the module supports hand gesture tracking forintuitive, controller-free laptop operation, enhancing human-machine interaction.Table of Contents73For CMOS image sensors business, we continue to provide CMOS image sensors for web camera and notebook. Our industry-first 2-in-1CMOS image sensor that supports RGB mode for video conferencing and ultralow power AI mode for facial recognition has penetrated the laptopmarket for the most stylish super slim bezel designs. Given the rapid expansion of AI adoption across various industries, we have developed arange of ultralow-power Always-On CMOS image sensors specifically tailored for AI applications that require continuous sensing or monitoring,while maintaining minimal power consumption. We are receiving increasing feedback and seeing design adoptions from customers worldwide for avariety of markets, including surveillance, smart electric/water meters, drones, smart home/office solutions, medical devices, and various otherappliances.Lastly, we have committed years of R&D efforts to LCoS product. We continue to focus on AR goggle devices and AR HUD (head-up-displays) for automotive. Many of our industry-leading customers have demonstrated their state-of-the-art products with our technology embeddedin, including AR glasses and LiDAR system. Our proprietary front-lit LCoS microdisplay covers LCoS microdisplay, lightguide, and front-lit LED.Our latest Color Sequential Front-Lit LCoS Microdisplay stands out with its unmatched brightness of up to 180,000 nits, setting new standards formicrodisplay panel with vibrant RGB color displays. With superior optical power efficiency, compact design, and ultra-lightweight build, itemerges as the optimal choice for next-generation see-through AR devices, evidenced by several tech giants in the industry shifting their focusaway from micro-LED to our Front-Lit LCoS for their AR goggles. Presently, we actively engage in follow-up engineering endeavors incollaboration with key industry players, anticipating significant opportunities on the horizon.For more trend information, see “Item 5.A. Operating and Financial Review and Prospects—Operating Results.”5.E. Critical Accounting EstimatesThe preparation of the consolidated financial statements in conformity with IFRS requires management to make judgments, estimates andassumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual resultsmay differ from these estimates.Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period inwhich the estimates are revised and in any future periods affected.Note 4 to our audited consolidated financial statements contains a description that sets forth information about critical judgments, estimatesand assumptions in applying accounting policies that have the most significant effect on the amounts recognized in the consolidated financialstatements.ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES6.A. Directors and Senior ManagementMembers of our board of directors may be elected by our directors or our shareholders. Our board of directors consists of five directors, threeof whom are independent directors within the meaning of Rule 5605(a)(2) of the Nasdaq Rules. Other than Jordan Wu and Dr. Biing-Seng Wu,who are brothers, there are no family relationships between any of our directors and executive officers. The following table sets forth informationregarding our directors and executive officers as of March 31, 2024. Unless otherwise indicated, the positions or titles indicated in the table belowrefer to Himax Technologies, Inc.Directors and Executive Officers Age Position/TitleDr. Biing-Seng Wu66Chairman of the BoardJordan Wu63President, Chief Executive Officer and DirectorDr. Yan-Kuin Su75DirectorYuan-Chuan Horng72DirectorDr. Liang-Gee Chen67DirectorJessica Pan54Chief Financial OfficerHsien Chang Tsai53Vice President, Sales and OperationsEric Li60Chief IR/PR Officer and SpokespersonTable of Contents74DirectorsDr. Biing-Seng Wu is the chairman of our board of directors. Prior to our reorganization in October 2005, Dr. Wu served as president, chiefexecutive officer and a director of Himax Taiwan. Dr. Wu also served as the vice chairman of the board of directors of CMO prior to its mergerwith the predecessor of Innolux and TPO. Dr. Wu has been active in the TFT-LCD panel industry with profound experience and is a member of theboards of the Taiwan TFT-LCD Association and the Society for Information Display. Prior to joining CMO in 1998, Dr. Wu was senior director andplant director of Prime View International Co., Ltd., a TFT-LCD panel manufacturer, from 1993 to 1997, and a manager of Thin Film TechnologyDevelopment at the Electronics Research & Service Organization/Industry Technology Research Institute, or ERSO/ITRI, of Taiwan. Dr. Wu holdsa B.S. degree, an M.S. degree and a Ph.D. degree in electrical engineering from National Cheng Kung University. Dr. Wu is the brother ofMr. Jordan Wu, our president and chief executive officer.Jordan Wu is our president, chief executive officer and director. Prior to our reorganization in October 2005, Mr. Wu served as the chairman ofthe board of directors of Himax Taiwan, a position which he held since April 2003. Prior to joining Himax Taiwan, Mr. Wu served as chiefexecutive officer of TV Plus Technologies, Inc. and chief financial officer and executive director of DVN Holdings Ltd. in Hong Kong. Prior tothat, he was an investment banker at Merrill Lynch (Asia Pacific) Limited, Barclays de Zoete Wedd (Asia) Limited and Baring Securities, based inHong Kong and Taipei. Mr. Wu holds a B.S. degree in mechanical engineering from National Taiwan University and an M.B.A. degree from theUniversity of Rochester. Mr. Wu is the brother of Dr. Biing-Seng Wu, our chairman.Dr. Yan-Kuin Su is our director. He has retired from the president of Kun Shan University effective July 31, 2018 and also a professor in theDepartment of Electrical Engineering, National Cheng Kung University since 1983 and retired in 2011. Dr. Su currently also serves as the dean ofAcademy of Innovative Semiconductor and Sustainable Manufacturing at National Cheng Kung University, since August 2022. Dr. Su is devotedto the field of research in semiconductor engineering and devices, optoelectronic devices, and microwave device and integrated circuits. He is a lifefellow of the Institute of Electrical and Electronics Engineers, or IEEE. Dr. Su holds a B.S. degree and an M.S. degree and a Ph.D. degree inElectrical Engineering from National Cheng Kung University.Yuan-Chuan Horng is our director. Prior to our reorganization in October 2005, Mr. Horng served as a director of Himax Taiwan fromAugust 2004 to October 2005. Mr. Horng retired from the position of the vice president of the Finance Division of China Steel Corporation, aTWSE-listed Corporation, effective November 30, 2016. During his 40 years of services with China Steel Corporation Group, Mr. Horng heldvarious positions including general manager, assistant vice president and vice president in the Finance Divisions. Mr. Horng currently serves as anindependent director of President Securities Corporation, listed on TWSE, since June 2018. Mr. Horng holds a B.A. degree in economics fromSoochow University.Dr. Liang-Gee Chen is our director. He now serves as Emeritus Professor of Department of Electrical Engineering, National TaiwanUniversity. Dr. Chen holds a B.S. and M.S. and Ph.D. degree in Electrical Engineering from National Cheng Kung University. Dr. Chen hasprevious served several roles including as Minister of Ministry of Technology and Science, Deputy Minister of Ministry of Education, ExecutiveVice President for Academics and Research of NTU, Vice Dean Officer for College of Electrical Engineering and Computer Science of NTU, andPresident of National Applied Research Laboratories. Dr. Chen has thorough and extensive professional expertise and experience across theindustry, government, and academia. He has devoted the Electrical Engineering specificity on VLSI design for Multimedia Processing System. Hereceived the IEEE Fellow in 2001, TWAS Engineering Science Medal in 2010 and Fellow of National Academy of Innovators in 2016.Other Executive OfficersJessica Pan is our chief financial officer. Jessica joined Himax in 2006 with over 22 years of experience in finance and accounting. Jessica hasplayed an integral role at Himax on finance, accounting, financial planning and analysis, forecasting and tax, having served as interim ChiefFinancial Officer from October 2010 to January 2012. Prior to joining Himax, Jessica worked as Assistant Finance Manager for AdvancedSemiconductor Engineering, Inc. from 2002 to 2006 and as Auditor at Arthur Andersen LLP in Taiwan from 1998 to 2001. She holds a B.S. degreein Agriculture Chemistry from National Taiwan University and an M.B.A. degree from the State University of New York at Buffalo.Table of Contents75Hsien Chang Tsai is our vice president in charge of Sales and Operations. Mr. Tsai joined Himax in 2002 as Director of Himax OperationDivision initially before serving as Vice President of Himax Display, Inc. where he successfully led the acquisition of Spatial Photonics, Inc. Mostrecently, he concurrently served as Vice President of Himax Imaging, Ltd. and Vice President of Intelligent Sensing AI Product Center of Himax.Prior to Himax, Mr. Tsai served in the process integration and customer service department of TSMC. Mr. Tsai holds a B.S. degree and M.S. degreein Electrical Engineering from National Taiwan University and an executive M.B.A. degree from National Taiwan University.Eric Li is our chief IR/PR officer and Spokesperson. Joining Himax in 2012, Mr. Eric Li has an extensive experience in image processingrelated IC design, having worked in the areas of sales, marketing, R&D and served as Associate Vice President at Himax covering the IntelligentSensing AI product line. Mr. Li has previously worked in video processing ASIC service and TV/monitor ASSP products before he was put incharge of the fab construction and operation of Himax’s WLO advanced optics operation. Prior to Himax, Mr. Eric Li served in executive positionsof Cadence Design Systems, Socle Technology, Macronix International and Powerchip Semiconductor. He holds a B.S. degree in NuclearEngineering from National Tsing Hua University and an M.S. degree in Computer and Information Science from New Jersey Institute ofTechnology.Board DiversityOn August 6, 2021, the SEC approved the Nasdaq Stock Market’s proposal to amend its listing standards to encourage greater board diversityand to require board diversity disclosures for Nasdaq-listed companies. Pursuant to the amended listing standards, Himax, as a foreign privateissuer and with a smaller board having five members, is required to have at least one diverse board members or explain the reasons for not meetingthis objective. Furthermore, a board diversity matrix is required to be included in the annual report on Form 20-F, containing certain demographicand other information regarding members of our board of directors.The Company does not currently have any member of its board of directors who is Diverse within the meaning of Nasdaq Rule 5605(f)(2)(B).The Company takes various factors into consideration for candidate identification and selection, including qualifications, capabilities, insights,personal attributes and proficiency in relevant fields, for the purpose of meeting Company's current and future plans as well as objectives. TheCompany focuses on having a balanced and diverse workforce and will continue to consider all director candidates, including “diverse” directorcandidates based on their merits.The table below provides certain information regarding the diversity of our board of directors as of the date of this annual report.Board Diversity Matrix (As of March 31, 2024)Country of Principal Executive Offices TAIWAN, REPUBLIC OF CHINAForeign Private Issuer YesDisclosure Prohibited Under Home Country Law NoTotal Number of Directors 5FemaleMaleNon-BinaryDid Not DiscloseGenderPart I: Gender Identity Directors — 5 — —Part II: Demographic Background Underrepresented Individual in Home Country Jurisdiction —LGBTQ+ —Did Not Disclose Demographic Background —6.B. CompensationFor the year ended December 31, 2023, the aggregate cash compensation that we paid to our executive officers was approximately $1.8million. The aggregate share-based compensation that we paid to our executive officers was approximately $0.2 million. In 2023, our Chairman ofthe Board voluntarily abandon the number of RSUs to be granted proposed by the compensation committee and then compensate other employees.The goal is to provide competitive compensation to our employees. No executive officer is entitled to any severance benefits upon termination ofhis or her employment with us.Table of Contents76For the year ended December 31, 2023, the aggregate cash compensation that we paid to our independent directors was approximately$150,000. The aggregate share-based compensation that we paid to our independent directors was nil.The following table summarizes the RSUs and cash award that we granted in 2023 to our directors and executive officers under our 2011 long-term incentive plan. Each unit of RSU represents two ordinary shares. See “Item 6.D. Directors, Senior Management and Employees—Employees––Share-Based Compensation Plans” for more details regarding our RSU grants. Total Cash Ordinary Shares Award Ordinary Shares Underlying Unvested PortionTotal RSUs Granted Underlying Vested Unvested Portion of cash awardName Granted (in thousands) Portion of RSUs of RSUs (in thousands)Dr. Biing-Seng Wu — — — — —Jordan Wu 5,282 — 4,226 6,338 —Dr. Yan-Kuin Su — — — — —Yuan-Chuan Horng — — — — —Dr. Liang-Gee Chen — — — — —Jessica Pan 4,465 — 4,226 4,704 —Hsien Chang Tsai 2,113 28 4,226 — 28Eric Li 4,176 — 4,226 4,126 —6.C. Board PracticesGeneralOur board of directors consists of five directors, three of whom are independent directors within the meaning of Rule 5605(a)(2) of the NasdaqRules. We intend to comply with Rule 5605(b)(1) of the Nasdaq Rules that require boards of U.S. companies to have a board of directors which iscomprised of a majority of independent directors. We intend to follow home country practice that permits our independent directors not to holdregularly scheduled meetings at which only independent directors are present in lieu of complying with Rule 5605(b)(2). None of our non-executive directors has a service contract with us that provides for benefits upon termination of service.Committees of the Board of DirectorsTo enhance our corporate governance, we have established three committees under the board of directors: the audit committee, thecompensation committee and the nominating and corporate governance committee. We have adopted a charter for each of the three committees.Each committee’s members and functions are described below.Audit Committee. Our audit committee currently consists of Yuan-Chuan Horng, Dr. Yan-Kuin Su and Dr. Liang-Gee Chen. Our board ofdirectors has determined that all of our audit committee members are “independent directors” within the meaning of Rule 5605(a)(2) of the NasdaqRules and meet the criteria for independence set forth in Section 10A(m)(3)(B)(i) of the Exchange Act. Our audit committee will oversee ouraccounting and financial reporting processes and the audits of our financial statements. The audit committee will be responsible for, among otherthings:●selecting the independent auditors and pre-approving all auditing and non-auditing services permitted to be performed by the independentauditors;●reviewing with the independent auditors any audit problems or difficulties and management’s response;●reviewing and approving all proposed related party transactions, as defined in Item 404 of Regulation SK under the Securities Act;●discussing the annual audited financial statements with management and the independent auditors;●reviewing major issues as to the adequacy of our internal controls and any special audit steps adopted in light of significant deficienciesor material weaknesses in internal controls;Table of Contents77●annually reviewing and reassessing the adequacy of our audit committee charter;●meeting separately and periodically with management and the independent auditors;●reporting regularly to the board of directors; and●such other matters that are specifically delegated to our audit committee by our board of directors from time to time.Compensation Committee. Our current compensation committee consists of Yuan-Chuan Horng, Dr. Yan-Kuin Su and Dr. Liang-Gee Chen.Our compensation committee assists our board of directors in reviewing and approving the compensation structure, including all forms ofcompensation, relating to our directors and executive officers. Our chief executive officer may not be present at any committee meeting where hisor her compensation is deliberated. We intend to follow Rule 5605(d)(1)(B) and (2)(B) of the Nasdaq Rules which requires the compensationcommittees of U.S. companies to be comprised solely of independent directors. The compensation committee will be responsible for, among otherthings:●reviewing and making recommendations to our board of directors regarding our compensation policies and forms of compensationprovided to our directors and officers;●reviewing and determining bonuses for our officers and other employees;●reviewing and determining share-based compensation for our directors, officers, employees and consultants;●administering our equity incentive plans in accordance with the terms thereof; and●such other matters that are specifically delegated to the compensation committee by our board of directors from time to time.Nominating and Corporate Governance Committee. Our nominating and corporate governance committee assists the board of directors inidentifying individuals qualified to be members of our board of directors and in determining the composition of the board and its committees. Ourcurrent nominating and corporate governance committee consists of Yuan-Chuan Horng, Dr. Yan-Kuin Su and Dr. Liang-Gee Chen. We intend tofollow Rule 5605(e)(1)(B) of the Nasdaq Rules which requires that nominations committees of U.S. companies be comprised solely of independentdirectors. Our nominating and corporate governance committee will be responsible for, among other things:●identifying and recommending to our board of directors nominees for election or re-election, or for appointment to fill any vacancy;●reviewing annually with our board of directors the current composition of our board of directors in light of the characteristics ofindependence, age, skills, experience and availability of service to us;●reviewing the continued board membership of a director upon a significant change in such director’s principal occupation;●identifying and recommending to our board of directors the names of directors to serve as members of the audit committee and thecompensation committee, as well as the nominating and corporate governance committee itself;●advising the board periodically with respect to significant developments in the law and practice of corporate governance as well as ourcompliance with applicable laws and regulations, and making recommendations to our board of directors on all matters of corporategovernance and on any corrective action to be taken; and●monitoring compliance with our code of business conduct and ethics, including reviewing the adequacy and effectiveness of ourprocedures to ensure proper compliance.Table of Contents78Terms of Directors and OfficersUnder Cayman Islands law and our articles of association, each of our directors holds office until a successor has been duly elected orappointed, except where any director was appointed by the board of directors to fill a vacancy on the board of directors or as an addition to theexisting board, such director shall hold office until the next annual general meeting of shareholders at which time such director is eligible for re-election. Our directors are subject to periodic retirement and re-election by shareholders in accordance with our articles of association, resulting intheir retirement and re-election at staggered intervals. At each annual general meeting, one-third of our directors are subject to retirement byrotation, or if their number is not a multiple of three, the number nearest to one-third but not exceeding one-third shall retire from office. Anyretiring director is eligible for re-election. The chairman of our board of directors and/or the managing director will not be subject to retirement byrotation or be taken into account in determining the number of directors to retire in each year. Under our articles of association, which director willretire at each annual general meeting will be determined as follows: (i) any director who wishes to retire and not offer himself for re-election, (ii) ifno director wishes to retire, the director who has been longest in office since his last re-election or appointment, and (iii) if two or more directorshave served on the board the longest, then as agreed among the directors themselves or as determined by lot.6.D. EmployeesAs of December 31, 2021, 2022 and 2023, we had 2,083, 2,181 and 2,164 employees, respectively. The following is a breakdown of ouremployees by function as of December 31, 2023:Function NumberResearch and development(1) 1,451Engineering and manufacturing(2) 258Sales and marketing(3) 318General and administrative 137Total 2,164Notes: (1)Includes semiconductor design engineers, application engineers, assembly and testing engineers and quality control engineers.(2)Includes manufacturing personnel of Himax Taiwan, Himax Display, Himax IGI and CMVT, our subsidiaries focused on design andmanufacturing of WLO and LCoS products.(3)Includes field application engineers.Share-Based Compensation PlansHimax Technologies, Inc. 2005 and 2011 Long-Term Incentive PlanWe adopted two long-term incentive plans in October 2005 and September 2011, however, the 2005 plan was terminated in October 2010. Thefollowing description of the plan is intended to be a summary and does not describe all provisions of the plan.Purpose of the Plan. The purpose of the plan is to advance our interests and those of our shareholders by:●providing the opportunity for our employees, directors and service providers to develop a sense of proprietorship and personalinvolvement in our development and financial success and to devote their best efforts to our business; and●providing us with a means through which we may attract able individuals to become our employees or to serve as our directors or serviceproviders and providing us a means whereby those individuals, upon whom the responsibilities of our successful administration andmanagement are of importance, can acquire and maintain share ownership, thereby strengthening their concern for our welfare.Type of Awards. The plan provides for the grant of stock options and restricted share units.Table of Contents79Duration. Generally, the plan will terminate five years from the effective date of the plan. But, the amended and restated 2011 Plan was 3rdamended and restated by extending its duration for three (3) years to September 6, 2025, which was approved by our shareholders at the annualgeneral meeting held on August 16, 2022. After the plan is terminated, no awards may be granted, but any award previously granted will remainoutstanding in accordance with the plan.Administration. The plan is administered by the compensation committee of our board of directors or any other committee designated by ourboard to administer the plan. Committee members will be appointed from time to time by, and will serve at the discretion of, our board. Thecommittee has full power and authority to interpret the terms and intent of the plan or any agreement or document in connection with the plan,determine eligibility for awards and adopt such rules, regulations, forms, instruments and guidelines for administering the plan. The committee maydelegate its duties or powers.Number of Authorized Shares. We have authorized a maximum issuance of 36,153,854 shares in the 2005 plan and 20,000,000 shares in the2011 plan, and the 2005 plan was terminated in October 2010. As of the date of this annual report, there were no stock options or restricted shareunits outstanding under the plan except as described under “—Stock Options” and “—Restricted Share Units.”Eligibility and Participation. All of our employees, directors and service providers are eligible to participate in the plan. The committee mayselect from all eligible individuals those individuals to whom awards will be granted and will determine the nature of any and all terms permissibleby law and the amount of each award.Stock Options. The committee may grant options to participants in such number, upon such terms and at any time as it determines. Each optiongrant will be evidenced by an award document that will specify the exercise price, the maximum duration of the option, the number of shares towhich the option pertains, conditions upon which the option will become vested and exercisable and such other provisions which are notinconsistent with the plan.The exercise price for each option will be:●based on 100% of the fair market value of the shares on the date of grant;●set at a premium to the fair market value of the shares on the date of grant; or●indexed to the fair market value of the shares on the date of grant, with the committee determining the index.The exercise price on the date of grant must be at least equal to 100% of the fair market value of the shares on the date of grant.Each option will expire at such time as the committee determines at the time of its grant; however, no option will be exercisable later than the10th anniversary of its grant date. Notwithstanding the foregoing, for options granted to participants outside the United States, the committee canset options that have terms greater than ten years.Options will be exercisable at such times and be subject to such terms and conditions as the committee approves. A condition of the delivery ofshares as to which an option will be exercised will be the payment of the exercise price. Subject to any governing rules or regulations, as soon aspracticable after receipt of written notification of exercise and full payment, we will deliver to the participant evidence of book-entry shares or,upon his or her request, share certificates in an appropriate amount based on the number of shares purchased under the option(s). The committeemay impose such restrictions on any shares acquired pursuant to the exercise of an option as it may deem advisable.Each participant’s award document will set forth the extent to which he or she will have the right to exercise the options following terminationof his or her employment or services.We made grants of 2,226,690 units employee stock options to our certain employees on September 30, 2019 with exercise price $2.27 peroption. The vesting schedule is, 50% of the options vest half year after the date of grant and 50% of the options vest one year after the date of grant.During 2020, 114,500 units, 39,000 units and 10,000 units of stock option to purchase 114,500 units, 39,000 units and 10,000 units ADS were grantto certain employees at an exercise price of $2.74, $3.9 and $3.35 on March 31, 2020, August 11, 2020 and September 25, 2020, respectively. Theoptions granted in 2020 were fully vested on October 1, 2020.Table of Contents80Restricted Share Units. The committee may grant restricted share units to participants. Each grant will be evidenced by an award documentthat will specify the period(s) of restriction, the number of restricted share units granted and such other provisions as the committee determines.Generally, restricted share units will become freely transferable after all conditions and restrictions applicable to such shares have beensatisfied or lapse and restricted share units will be paid in cash, shares or a combination of the two, as determined by the committee.The committee may impose such other conditions or restrictions on any restricted share units as it may deem advisable, including arequirement that participants pay a stipulated purchase price for each restricted share unit, restrictions based upon the achievement of specificperformance goals and time-based restrictions on vesting.A participant will have no voting rights with respect to any restricted share units.Each award document will set forth the extent to which the participant will have the right to retain restricted share units following terminationof his or her employment or services.We made grants of 676,273 RSUs to our employees on September 26, 2018. The vesting schedule for such RSU grants is as follows: 97.15%of the RSU grants vested immediately and were settled by cash in the amount of $3.8 million on the grant date, with the remainder vesting equallyon each of September 30, 2019, 2020 and 2021, which will be settled by our ordinary shares, subject to certain forfeiture events.We made grants of 1,402,714 RSUs to our employees on September 28, 2020. The vesting schedule for such RSU grants is as follows: 98.68%of the RSU grants vested immediately and were settled by cash in the amount of $4.8 million on the grant date, with the remainder vesting equallyon each of September 30, 2021, 2022 and 2023, which will be settled by our ordinary shares, subject to certain forfeiture events.We made grants of 2,604,545 RSUs to our employees on September 28, 2021. The vesting schedule for such RSU grants is as follows: 85.63%of the RSU grants vested immediately and were settled by cash in the amount of $23.2 million on the grant date, with the remainder vesting equallyon each of September 30, 2022, 2023 and 2024, which will be settled by our ordinary shares, subject to certain forfeiture events.We made grants of 3,987,509 RSUs to our employees on September 28, 2022. The vesting schedule for such RSU grants is as follows: 86.41%of the RSU grants vested immediately and were settled by cash in the amount of $17.5 million on the grant date, with the remainder vesting equallyon each of September 30, 2023, 2024 and 2025, which will be settled by our ordinary shares, subject to certain forfeiture events.We made grants of 1,710,607 RSUs to our employees on September 26, 2023. The vesting schedule for such RSU grants is as follows: 97.45%of the RSU grants vested immediately and were settled by cash in the amount of $9.5 million on the grant date, with the remainder vesting equallyon each of September 30, 2024, 2025 and 2026, which will be settled by our ordinary shares, subject to certain forfeiture events.Dividend Equivalents. Any participant selected by the committee may be granted dividend equivalents based on the dividends declared onshares that are subject to any award, to be credited as of dividend payment dates, during the period between the date the award is granted and thedate the award is exercised, vests or expires, as determined by the committee. Dividend equivalents will be converted to cash or additional sharesby such formula and at such time and subject to such limitations as determined by the committee.On November 9, 2022, the Company's compensation committee made the unvested RSUs generally include forfeitable dividend-equivalentrights, which entitle holders of RSUs to the same dividend value per share as holders of common stock. The dividend-equivalent rights are subjectto the same vesting and other terms and conditions as the underlying RSUs.Transferability of Awards. Generally, awards cannot be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other thanby will or by the laws of descent and distribution.Table of Contents81Adjustments in Authorized Shares. In the event of any of the corporate events or transactions described in the plan, to avoid any unintendedenlargement or dilution of benefits, the committee has the sole discretion to substitute or adjust the number and kind of shares that can be issued orotherwise delivered.Forfeiture Events. The committee may specify in an award document that the participant’s rights, payments and benefits with respect to anaward will be subject to reduction, cancellation, forfeiture or recoupment upon the occurrence of certain specified events, in addition to anyotherwise applicable vesting or performance conditions of an award.If we are required to prepare an accounting restatement owing to our material noncompliance, as a result of misconduct, with any financialreporting requirement under the securities laws, then if the participant is one of the individuals subject to automatic forfeiture under Section 304 ofthe Sarbanes-Oxley Act of 2002, the participant will reimburse us the amount of any payment in settlement of an award earned or accrued duringthe twelve-month period following the first public issuance or filing with the SEC (whichever first occurred) of the financial document embodyingsuch financial reporting requirement.Amendment and Termination. Subject to, and except as, provided in the plan, the committee has the sole discretion to alter, amend, modify,suspend, or terminate the plan and any award document in whole or in part. Amendments to the plan are subject to shareholder approval, to theextent required by law, or by stock exchange rules or regulations.6.E. Share OwnershipThe following table sets forth the beneficial ownership of our ordinary shares, as of March 31, 2024, by each of our directors and executiveofficers. Beneficial ownership is determined in accordance with the rules and regulations of the SEC. Number of Shares Percentage of Shares Name Owned OwnedDr. Biing-Seng Wu 76,904,468 22.0%Jordan Wu 7,464,247 2.1%Dr. Yan-Kuin Su — —Yuan-Chuan Horng 916,104*Dr. Liang-Gee Chen — —Jessica Pan 95,738*Hsien Chang Tsai — —Eric Li 15,000**The sum of the number of ordinary shares held is less than 1.0% of our total outstanding shares.None of our directors or executive officers has voting rights different from those of other shareholders.6.F. Disclosure of a registrant’s action to recover erroneously awarded compensationNot applicable.ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS7.A. Major ShareholdersOn August 10, 2009, we effected certain changes in our capital stock structure in order to meet the Taiwan Stock Exchange’s primary listingrequirement that the par value of shares be NT$10 or $0.3 per share and in order to increase the number of outstanding ordinary shares to be listedon the Taiwan Stock Exchange. In particular, we increased our authorized share capital from $50,000 (divided into 500,000,000 shares of par value$0.0001 each) to $300,000,000 (divided into 3,000,000,000,000 shares of par value $0.0001 each) and distributed 5,999 bonus shares for eachshare of par value $0.0001 held by shareholders of record as of August 7, 2009. These were followed by a consolidation of every 3,000 shares ofpar value $0.0001 each into one ordinary share of par value $0.3 each. As a result, the number of ordinary shares outstanding was doubled and eachof our ordinary shares had a par value of $0.3.Table of Contents82In connection with the above changes, we also changed our ADS ratio effective August 10, 2009 from one ADS representing one ordinaryshare to one ADS representing two ordinary shares. Such change in ADS ratio was intended to adjust for the net dilutive effect due to the bonusshares distribution and the shares consolidation so that each ADS would represent the same percentage ownership in our share capital immediatelybefore and after the above changes. The number of ADSs also remained the same immediately before and after the above changes.As of March 31, 2024, 349,448,102 of our shares were outstanding. We believe that, of such shares, 211,972,946 shares in the form of ADSswere registered in the name of a nominee of JPMorgan Chase Bank, N.A., the depositary under our ADS deposit agreement. JPMorgan ChaseBank, N.A., advised us that, as of March 31, 2024, 105,986,473 ADSs, representing 211,972,946 common shares, were held of record by Cede &Co. and 10 other registered shareholders domiciled in and outside of the United States. We have no further information as to common shares held,or beneficially owned, by U.S. persons.The following table sets forth information known to us with respect to the beneficial ownership of our shares as of March 31, 2024, the mostrecent practicable date, by (i) each shareholder known by us to beneficially own more than 5% of our shares and (ii) all directors and executiveofficers as a group. Percentage of Number of SharesSharesName of Beneficial Owner Beneficially Owned(3) Beneficially Owned(3)Dr. Biing-Seng Wu(1) 76,904,468 22.0%Whei-Lan Teng(2) 22,847,370 6.5%All directors and executive officers as a group(3) 85,395,557 24.4%Note: (1) Dr. Biing-Seng Wu directly owns 315,322 ordinary shares. Dr. Biing-Seng Wu beneficially owns (a) 56,549,308 ordinary sharesthrough Sanfair Asia Investments Ltd., a wholly owned subsidiary of Taxus Technology Investment Pte. Ltd. and (b) 20,039,838ordinary shares through Chi-Duan Investment Co. Ltd. All of the three entities are investment companies controlled by Biing-SengWu. Accordingly, Dr. Biing-Seng Wu may be deemed to beneficially own an aggregate of 76,904,468 ordinary shares, representingapproximately 22.0% of the outstanding ordinary shares.(2)Whei-Lan Teng beneficially owns 5,434,918 ordinary shares through Renmar Finance Limited, a wholly owned subsidiary of PleioneTechnology Investment Pte. Ltd. Both of the entities are investment companies controlled by Whei-Lan Teng. In addition, Whei-LanTeng, may be attributed beneficial ownership of 17,412,452 ordinary shares held in trust by Corenmar Investment Limited for thebenefit of her children. Whei-Lan Teng therefore may be deemed to have shared power to vote or dispose of 22,847,370 ordinaryshares. Accordingly, Whei-Lan Teng may be deemed to beneficially own an aggregate of 22,847,370 ordinary shares, representingapproximately 6.5% of the outstanding ordinary shares.(3)Numbers of shares beneficially owned by all directors and executive officers as a group already include an aggregate of 76,904,468ordinary shares beneficially owned by Dr. Biing-Seng Wu.None of our major shareholders has voting rights different from those of other shareholders. We are not aware of any arrangement that may, ata subsequent date, result in a change of control of our company.7.B. Related Party TransactionsViewsil Technology Limited (VST)VST is a subsidiary of our equity method investee, Viewsil Microelectronics (Kunshan) Limited which became a subsidiary of theCompany from December 30, 2023. As of December 31, 2022, we made an interest free loan of $1.2 million to VST for short-term funding needs.The loan is repayable on demand. We may consider providing further future loans to VST.Table of Contents83Viewsil Microelectronics (Kunshan)Limited (Viewsil)Viewsil is an equity method investee of the Company, becoming a subsidiary of the Company from December 30, 2023. In 2021, 2022and 2023, Viewsil provided technical service on a new source driver chip and integrated circuit module for the Company’s research activities for afee of $1.4 million, $1.05 million and $1.14 million, respectively, which was charged to research and development expense. As of December 31,2022, the related payables were $2.45 million.Cheng Mei Materials Technology Corporation (CMMT)CMMT is an equity method investor of CMVT. In 2021, 2022 and 2023, the purchase of raw materials from CMMT was $3.5 million,$1.1 million and $1.3 million, respectively. As of December 31, 2022 and 2023, the related payable resulting from the purchase of raw materialswere $0.3 million and $0.9 million, respectively.7.C. Interests of Experts and CounselNot applicable.ITEM 8. FINANCIAL INFORMATION8.A. Consolidated Statements and Other Financial Information8.A.1. See “Item 18. Financial Statements” for our audited consolidated financial statements.8.A.2. See “Item 18. Financial Statements” for our audited consolidated financial statements, which cover the last three financial years.8.A.3. See page F-2 for the report of our independent registered public accounting firm.8.A.4. Not applicable.8.A.5. Not applicable.8.A.6. See Note 29 to our audited consolidated financial statements included in “Item 18. Financial Statements.”8.A.7. LitigationWe may be subject to legal proceedings, investigations and claims relating to the conduct of our business from time to time. We may alsoinitiate legal proceedings in order to protect our contractual and property rights. However, as of the date of this annual report, we are not currently aparty to, nor are we aware of, any legal proceeding, investigation or claim which, in the opinion of our management, is likely to have a materialadverse effect on our business, financial condition or results of operations.8.A.8. Dividends and Dividend PolicySubject to the Cayman Islands Companies Law, we may declare dividends in any currency, but no dividend may be declared in excess of theamount recommended by our board of directors. Whether our board of directors recommends any dividends and the form, frequency and amount ofdividends, if any, will depend upon our future operations and earnings, capital requirements and surplus, general financial condition, contractualrestrictions and other factors as the board of directors may deem relevant.Table of Contents84On June 27, 2008, we paid a cash dividend in the amount of $66.8 million, or the equivalent of $0.350 per ADS. In 2009, we paid a cashdividend on June 29, 2009 in the amount of $55.5 million, or the equivalent of $0.300 per ADS, and distributed a stock dividend on August 10,2009 of 5,999 ordinary shares of par value $0.0001 for each ordinary share of par value $0.0001 held by shareholders of record as of August 7,2009. On August 13, 2010, we paid a cash dividend in the amount of $44.1 million, or the equivalent of $0.250 per ADS. On July 20, 2011, wepaid a cash dividend in the amount of $21.2 million, or the equivalent of $0.120 per ADS. On July 25, 2012, we paid a cash dividend in the amountof $10.7 million, or the equivalent of $0.063 per ADS. On July 31, 2013, we paid a cash dividend in the amount of $42.4 million, or the equivalentof $0.250 per ADS. On July 23, 2014, we paid a cash dividend in the amount of $46.0 million, or the equivalent of $0.270 per ADS. On July 8,2015, we paid a cash dividend in the amount of $51.4 million, or the equivalent of $0.300 per ADS. On August 3, 2016, we paid a cash dividend inthe amount of $22.3 million, or the equivalent of $0.130 per ADS. On August 14, 2017, we paid a cash dividend in the amount of $41.3 million, orthe equivalent of $0.240 per ADS. On July 31, 2018, we paid a cash dividend in the amount of $17.2 million, or the equivalent of $0.10 per ADS.On July 12, 2021, we paid a cash dividend in the amount of $47.4 million, or the equivalent of $0.272 per ADS. On July 12, 2022, we paid a cashdividend in the amount of $217.9 million, or the equivalent of $1.25 per ADS. On July 12, 2023, we paid a cash dividend in the amount of $83.7million, or the equivalent of $0.48 per ADS. For more information on the stock dividend distribution, see “Item 7.A. Major Shareholders andRelated Party Transactions—Major Shareholders.” The dividends for any of these years should not be considered representative of the dividendsthat would be paid in any future periods or of our dividend policy.Our ability to pay cash or stock dividends will depend, at least partially, upon the amount of funds received by us from our direct and indirectsubsidiaries, which must comply with the laws and regulations of their respective countries and respective articles of association. We receive cashfrom Himax Taiwan through intercompany borrowings. Himax Taiwan has not paid us cash dividends in the past. In accordance with amendedROC Company Act and regulations and Himax Taiwan’s amended articles of incorporation, Himax Taiwan is permitted to distribute dividends afterallowances have been made for:●payment of taxes;●recovery of prior years’ deficits, if any;●legal reserve (in an amount equal to 10% of annual profits after having deducted the above items until such time as its legal reserve equalsthe amount of its total paid-in capital);●special reserve based on relevant laws or regulations, or retained earnings, if necessary; and●dividends for preferred shares, if any.Furthermore, if Himax Taiwan does not generate any profits for any year as determined in accordance with generally accepted accountingprinciples in Taiwan, it generally may not distribute dividends for that year.Any dividend we declare will be paid to the holders of ADSs, subject to the terms of the deposit agreement, to the same extent as holders ofour ordinary shares, to the extent permitted by applicable laws and regulations, less the fees and expenses payable under the deposit agreement.Any dividend we declare will be distributed by the depositary bank to the holders of our ADSs. Cash dividends on our ordinary shares, if any, willbe paid in U.S. dollars.8.B. Significant ChangesExcept as disclosed elsewhere in this annual report, we have not experienced any significant changes since the date of the annual financialstatements.ITEM 9. THE OFFER AND LISTING9.A. Offer and Listing DetailsOur ADSs have been quoted on the NASDAQ Global Select Market under the symbol “HIMX” since March 31, 2006.Table of Contents859.B. Plan of DistributionNot applicable.9.C. MarketsThe principal trading market for our shares is the NASDAQ Global Select Market, on which our shares are traded in the form of ADSs.9.D. Selling ShareholdersNot applicable.9.E. DilutionNot applicable.9.F. Expenses of the IssueNot applicable.ITEM 10. ADDITIONAL INFORMATION10.A. Share CapitalNot applicable.10.B. Memorandum and Articles of AssociationOur shareholders previously adopted the Amended and Restated Memorandum of Association on September 26, 2005 by a special resolutionpassed by the sole shareholder of our company and the Amended and Restated Articles of Association at an extraordinary shareholder meeting heldon October 25, 2005, both of which were filed as an exhibit to our registration statement on Form F-1 (file no. 333-132372) with the SEC onMarch 13, 2006.At our annual general meeting on August 6, 2009, our shareholders adopted the Second Amended and Restated Memorandum and Articles ofAssociation, which became effective on August 10, 2009 and were filed as exhibits to our current report on Form 6-K with the SEC on July 13,2009. These were adopted primarily in connection with our proposed Taiwan listing to meet the Taiwan Stock Exchange’s primary listingrequirement concerning protection of material shareholders’ rights under the ROC’s Company Act and Securities Exchange Act. At the same time,our shareholders also adopted the Third Amended and Restated Memorandum and Articles of Association, which were filed as an exhibit to ourannual report on Form 20-F for the fiscal year ended December 31, 2009 with the SEC on June 3, 2010 and are substantially the same as theAmended and Restated Memorandum and Articles of Association of our company except that our authorized share capital is stated to be$300,000,000 divided into 1,000,000,000 shares of nominal or par value of $0.3 each, on the condition that it shall become effective if theapplication made by our company to list its ordinary shares on the Taiwan Stock Exchange is rejected or aborted. On May 20, 2010, the ThirdAmended and Restated Memorandum and Articles of Association became effective as a result of the termination of our primary listing applicationto the Taiwan Stock Exchange.We incorporate by reference into this annual report the description of our Amended and Restated Memorandum and Articles of Association(except for provisions relating to our authorized share capital) contained in our F-1 registration statement (File No. 333-132372) filed with the SECon March 13, 2006. Such description sets forth a summary of certain provisions of our memorandum and articles of association as currently ineffect, which is qualified in its entirety by reference to the full text of the Third Amended and Restated Memorandum and Articles of Association.As of the date of this annual report, our authorized share capital is $300,000,000 divided into 1,000,000,000 shares of nominal or par value of $0.3each.Table of Contents8610.C. Material ContractsWe are not currently, and have not been in the last two years, party to any material contract, other than contracts entered into the ordinarycourse of business.10.D. Exchange ControlsWe have extracted from publicly available documents the information presented in this section. The information below may be applicablebecause our wholly owned operating subsidiary, Himax Taiwan, is incorporated in the ROC. Please note that citizens of the PRC and entitiesorganized in the PRC are subject to special ROC laws, rules and regulations, which are not discussed in this section.The ROC’s Foreign Exchange Control Statute and regulations provide that all foreign exchange transactions must be executed by banksdesignated to handle foreign exchange transactions by the Central Bank of the ROC. There is an annual limit on the amount of currency aTaiwanese entity may convert into, or out of, NT dollars other than for trade purposes. Current regulations favor trade-related foreign exchangetransactions.With regard to inward and outward remittances (foreign exchange purchased or sold), approval by the Central Bank of the ROC is generallyrequired for any conversion exceeding, in aggregate in each calendar year, $50 million (and /or its equivalent settlement) for companies and $5million (and/or its equivalent settlement) for Taiwanese citizen and long term 1 year-valid resident permit of foreign individuals. A requirement isalso imposed on all private enterprises to report all medium- and long-term foreign debt with the Central Bank of the ROC.In addition, a foreign person without an alien resident card or an unrecognized foreign entity may remit to and from Taiwan foreign currenciesof up to $100,000 per remittance if required documentation is provided to the ROC authorities. This limit applies only to remittances involving aconversion between NT dollars and U.S. dollars or other foreign currencies.10.E. TaxationCayman Islands TaxationThe Cayman Islands currently levies no taxes on individuals or corporations based upon profits, income, gains or appreciation, and there is notaxation in the nature of inheritance tax or estate duty. There are no other taxes likely to be material to us levied by the Government of the CaymanIslands except for stamp duties which may be applicable on instruments executed in, or brought within the jurisdiction of, the Cayman Islands. TheCayman Islands is not party to any double tax treaties. There are no exchange control regulations or currency restrictions in the Cayman Islands.We have, pursuant to Section 6 of the Tax Concessions Law (1999 Revision) of the Cayman Islands, obtained an undertaking from theGovernor-in-Council that:(a)no law which is enacted in the Cayman Islands imposing any tax to be levied on profits, income or gains or appreciations shall apply to usor our operations;(b)the aforesaid tax or any tax in the nature of estate duty or inheritance tax shall not be payable on our ordinary shares, debentures or otherobligations.The undertaking that we have obtained is for a period of 20 years from May 3, 2005.Table of Contents87United States Federal Income TaxationThe following is a description of material U.S. federal income tax consequences to the U.S. Holders described below of owning and disposingof ordinary shares or ADSs, but it does not purport to be a comprehensive description of all tax considerations that may be relevant to a particularperson’s decision to hold the securities. This discussion applies only to a U.S. Holder that holds ordinary shares or ADSs as capital assets for U.S.federal income tax purposes. This discussion does not address any aspect of the “Medicare contributions tax” on “net investment income.” Inaddition, it does not describe all of the tax consequences that may be relevant in light of the U.S. Holder’s particular circumstances, includingalternative minimum tax consequences and tax consequences applicable to U.S. Holders subject to special rules, such as:●certain financial institutions;●dealers or traders in securities who use a mark-to-market method of tax accounting;●persons holding ordinary shares or ADSs as part of a hedging transaction, straddle, wash sale, conversion transaction or integratedtransaction or persons entering into a constructive sale with respect to the ordinary shares or ADSs;●persons whose functional currency for U.S. federal income tax purposes is not the U.S. dollar;●entities classified as partnerships for U.S. federal income tax purposes;●tax-exempt entities, including “individual retirement accounts” or “Roth IRAs”;●persons that own or are deemed to own ten percent or more of our voting stock; or●persons holding ordinary shares or ADSs in connection with a trade or business conducted outside of the United States.If an entity that is classified as a partnership for U.S. federal income tax purposes owns ordinary shares or ADSs, the U.S. federal income taxtreatment of a partner will generally depend on the status of the partner and the activities of the partnership. Partnerships holding ordinary shares orADSs and partners in such partnerships should consult their tax advisers as to the particular U.S. federal income tax consequences of owning anddisposing of the ordinary shares or ADSs.This discussion is based on the Internal Revenue Code of 1986, as amended, administrative pronouncements, judicial decisions and final,temporary and proposed Treasury regulations, all as of the date hereof. These laws are subject to change, possibly on a retroactive basis. It is alsobased in part on representations by the depositary and assumes that each obligation under the deposit agreement and any related agreement will beperformed in accordance with its terms. You should consult your tax adviser concerning the U.S. federal, state, local and non-U.S. taxconsequences of owning and disposing of ordinary shares or ADSs in your particular circumstances.As used herein, a “U.S. Holder” is a person that is, for U.S. federal tax purposes, a beneficial owner of ordinary shares or ADSs and is: (i) acitizen or resident of the United States; (ii) a corporation, or other entity taxable as a corporation, created or organized in or under the laws of theUnited States or any political subdivision thereof; or (iii) an estate or trust the income of which is subject to U.S. federal income taxation regardlessof its source.In general, a U.S. Holder of ADSs will be treated for U.S. federal income tax purposes as the owner of the underlying ordinary sharesrepresented by those ADSs. Accordingly, no gain or loss will be recognized if a U.S. Holder exchanges ADSs for the underlying ordinary sharesrepresented by those ADSs.The U.S. Treasury has expressed concerns that parties to whom American depositary shares are released before delivery of shares to thedepositary (“pre-release”) may be taking actions that are inconsistent with the claiming of foreign tax credits for U.S. holders of Americandepositary shares. Such actions would also be inconsistent with the claiming of the preferred rates of tax, described below, applicable to dividendsreceived by certain non-corporate U.S. holders. Accordingly, the availability of the preferential tax rates for dividends received by certain non-corporate U.S. Holders, described below, could be affected by actions taken by parties to whom ADSs are pre-released.Table of Contents88This discussion assumes that we are not, and will not become, a passive foreign investment company (as discussed below).Taxation of DistributionsDistributions received by U.S. Holders with respect to the ordinary shares or ADSs, other than certain pro rata distributions of ordinary shares,will constitute foreign-source dividend income for U.S. federal income tax purposes to the extent paid out of our current or accumulated earningsand profits, as determined in accordance with U.S. federal income tax principles. We do not to maintain records of earnings and profits inaccordance with U.S. federal income tax principles, and therefore it is expected that distributions will generally be reported to U.S. Holders asdividends. Dividends will be included in a U.S. Holder’s income on the date of the U.S. Holder’s (or in the case of ADSs, the depository’s) receiptof the dividends. Subject to applicable limitations and the discussion above regarding concerns expressed by the U.S. Treasury, certain dividendspaid by qualified foreign corporations to certain non-corporate holders may be taxable at preferential tax rates applicable to long-term capital gains.A foreign corporation is treated as a qualified foreign corporation with respect to dividends paid on stock that is readily tradable on a securitiesmarket in the United States, such as the NASDAQ Global Select Market, where our ADSs are traded. Our ordinary shares are not traded on asecurities market in the United States. Non-corporate U.S. Holders of our ordinary shares or ADSs should consult their tax advisers regarding theireligibility for taxation at such preferential rates and whether they are subject to any special rules that limit their ability to be taxed at suchpreferential rates. Corporate U.S. Holders will not be entitled to claim the dividends-received deduction with respect to dividends paid by us.Sale and Other Disposition of Ordinary Shares or ADSsA U.S. Holder will generally recognize U.S.-source capital gain or loss for U.S. federal income tax purposes on the sale or other disposition ofordinary shares or ADSs, which will be long-term capital gain or loss if the ordinary shares or ADSs were held for more than one year. Long-termcapital gains of certain non-corporate U.S. Holders may be taxable at preferential rates. The amount of gain or loss will be equal to the differencebetween the amount realized on the sale or other disposition and the U.S. Holder’s tax basis in the ordinary shares or ADSs. The deductibility ofcapital losses is subject to limitations.Passive Foreign Investment Company RulesWe believe that we were not a passive foreign investment company (a “PFIC”) for U.S. federal income tax purposes for our taxable year endedDecember 31, 2023.In general, a non-U.S. company will be a PFIC for U.S. federal income tax purposes for any taxable year in which (i) 75% or more of its grossincome consists of passive income (such as dividends, interest, rents and royalties) or (ii) 50% or more of the average quarterly value of its assetsconsists of assets that produce, or are held for the production of, passive income (including cash). If a corporation owns at least 25% (by value) ofthe stock of another corporation, the corporation will be treated, for purposes of the PFIC tests, as owning its proportionate share of the 25%-ownedsubsidiary’s assets and receiving its proportionate share of the 25%-owned subsidiary’s income. As PFIC status depends upon the composition ofour income and assets and the value of our assets from time to time (and the value of our assets may be determined, in part, based on the marketprice of our shares and ADSs, which may fluctuate considerably from time to time given that market prices of certain technology companieshistorically have been volatile), there can be no assurance that we will not be a PFIC for any taxable year.If we were a PFIC for any taxable year during which a U.S. Holder held ordinary shares or ADSs, certain adverse U.S. federal income taxrules would apply on a sale or other disposition (including a pledge) of ordinary shares or ADSs by the U.S. Holder. In general, under those rules,gain recognized by the U.S. Holder on a sale or other disposition of ordinary shares or ADSs would be allocated ratably over the U.S. Holder’sholding period for the ordinary shares or ADSs. The amounts allocated to the taxable year of the sale or other disposition and to any year before webecame a PFIC would be taxed as ordinary income. The amount allocated to each other taxable year would be subject to tax at the highest rate ineffect for individuals or corporations, as appropriate, for that taxable year, and an interest charge would be imposed on the tax attributable to suchallocated amounts. Similar rules would apply to any distribution in respect of ordinary shares or ADSs to the extent in excess of 125% of theaverage of the annual distributions on ordinary shares or ADSs received by the U.S. Holder during the preceding three years or the U.S. Holder’sholding period, whichever is shorter. Certain elections may be available that would result in alternative treatments (such as a mark-to-markettreatment of the ADSs). U.S. Holders should consult their tax advisers to determine whether any of these elections would be available and, if so,what the consequences of the alternative treatments would be in their particular circumstances.Table of Contents89If we were a PFIC in a taxable year in which we pay a dividend or in the prior taxable year, the preferential tax rates discussed above withrespect to dividends received by certain non-corporate U.S. Holders would not apply.In addition, if a U.S. Holder owns ordinary shares or ADSs during any year in which we are a PFIC, the U.S. Holder may be required to filecertain information reports, containing such information as the U.S. Treasury may require.Information Reporting and Backup WithholdingPayments of dividends and sales proceeds that are made within the United States or through certain U.S.-related financial intermediariesgenerally are subject to information reporting, and may be subject to backup withholding, unless the U.S. Holder is an exempt recipient or, in thecase of backup withholding, the U.S. Holder provides a correct taxpayer identification number and certifies that it is not subject to backupwithholding. The amount of any backup withholding from a payment to a U.S. Holder will be allowed as a credit against the U.S. Holder’s U.S.federal income tax liability and may entitle the U.S. Holder to a refund, provided that the required information is timely furnished to the InternalRevenue Service.10.F. Dividends and Paying AgentsNot applicable.10.G. Statement by ExpertsNot applicable.10.H. Documents on DisplayIt is possible to read and copy documents referred to in this annual report that have been filed with the SEC at the SEC’s public referencerooms in Washington, D.C., New York and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further information on the referencerooms.10.I. Subsidiary InformationNot applicable.10.J. Annual Report to Security HoldersNot applicable.ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKInterest Rate Risk. Our exposure to interest rate risk for changes in interest rates is primarily the interest income generated by our cashdeposited with banks. In addition, we are exposed to interest rate risks related to bank borrowings.Foreign Exchange Risk. The U.S. dollar is our reporting currency. The U.S. dollar is also the functional currency for the majority of ouroperations. In 2023, more than 99% of our sales and cost of revenues were denominated in U.S. dollars. However, in December 2023approximately 70% of our operating expenses were denominated in NT dollars, with a small percentage denominated in Japanese Yen, KoreanWon and Chinese Renminbi, and the majority of the remainder denominated in U.S. dollars. We anticipate that we will continue to conductsubstantially all of our sales in U.S. dollars. We do not believe that we have a material currency risk with regard to the NT dollar. We believe themajority of any potential adverse foreign currency exchange impacts on our operating assets may be offset by a potential favorable foreigncurrency exchange impact on our operating liabilities. From time to time, we have engaged in, and may continue to engage in, forward contracts tohedge against our foreign currency exposure.As of December 31, 2023, no foreign currency exchange contracts are outstanding.Table of Contents90ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES12.A. Debt SecuritiesNot applicable.12.B. Warrants and RightsNot applicable.12.C. Other SecuritiesNot applicable.12.D. American Depositary SharesFees and Charges Payable by ADS HoldersPersons depositing or withdrawing shares or ADS holders must pay: For:$5.00 (or less) per 100 ADSs (or portion of 100 ADSs) Issuance of ADSs, including issuances resulting from a distribution of sharesor rights or other propertyCancellation of ADSs for the purpose of withdrawal, including if the depositagreement terminates $.05 (or less) per ADS Any cash distribution to ADS holders A fee equivalent to the fee that would be payable if securitiesdistributed to you had been shares and the shares had beendeposited for the issuance of ADSs Distribution of securities distributed to holders of deposited securities whichare distributed by the depositary to ADS holders $.05 (or less) per ADS per calendar year Depositary services Registration or transfer fees Transfer and registration of shares on our share register to or from the nameof the depositary or its agent when you deposit or withdraw shares Expenses of the depositary Cable, telex and facsimile transmissions (when expressly provided in thedeposit agreement) converting foreign currency to U.S. dollars Taxes and other governmental charges that the depositary orcustodian have to pay on any ADS or share underlying an ADS,e.g., stock transfer taxes, stamp duty or withholding taxes As necessary Any charges incurred by the depositary or its agents for servicingthe deposited securities As necessaryThe depositary collects its fees for delivery and surrender of ADSs directly from investors depositing shares or surrendering ADSs for thepurpose of withdrawal or from intermediaries acting for them. The depositary collects fees for making distributions to investors by deducting thosefees from the amounts distributed or by selling a portion of distributable property to pay the fees. The depositary may collect its annual fee fordepositary services by deduction from cash distributions or by directly billing investors or charging the book-entry system accounts of participantsacting for them. The depositary may collect any of its fees by deduction fromTable of Contents91any cash distribution payable to ADS holders that are obligated to pay those fees. The depositary may generally refuse to provide fee-attractingservices until its fees for those services are paid.From time to time, the depositary may make payments to us to reimburse and/or share revenue from the fees collected from ADS holders, orwaive fees and expenses for services provided, generally relating to costs and expenses arising out of establishment and maintenance of the ADSprogram. In performing its duties under the deposit agreement, the depositary may use brokers, dealers or other service providers that are affiliatesof the depositary and that may earn or share fees or commissions.Fees and Other Payments from the Depositary to UsIn 2023, we received $0.6 million netting of 30% withholding tax from the depositary relating to the ADR program. The payment from thedepositary would be intended to cover certain of our expenses incurred in relation to the ADR program for the year, including:●legal, audit and other fees incurred in connection with preparation of Form 20-F and annual reports and ongoing SEC compliance andlisting requirements;●director and officer insurance;●stock exchange listing fees;●non-deal roadshow expenses;●costs incurred by financial printer and share certificate printer;●postage for communications to ADR holders;●costs of retaining third-party public relations, investor relations and/or corporate communications advisory firms in the U.S.; and●costs incurred in connection with participation in retail investor shows and capital markets days.Appointment of New Depositary BankOn July 14, 2017, we appointed JPMorgan Chase Bank, N.A. as our new American depositary receipt bank. Effective the same day, our ADRprogram was officially transferred to JPMorgan Chase Bank, N.A. for a contract term of ten years.PART IIITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIESNot applicable.ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDSNot applicable.ITEM 15. CONTROLS AND PROCEDURESEvaluation of Disclosure Controls and ProceduresOur chief executive officer and chief financial officer, after evaluating the effectiveness of our disclosure controls and procedures (as definedin Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report, have concluded that based onTable of Contents92the evaluation of these controls and procedures required by Rule 13a-15(b) of the Exchange Act, our disclosure controls and procedures areeffective.Management’s Report on Internal Control Over Financial ReportingOur management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control overfinancial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financialstatements for external purposes in accordance with IFRS as issued by the IASB.Our internal control over financial reporting includes those policies and procedures that:●pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect our transactions and dispositions of our assets;●provide reasonable assurance that our transactions are recorded as necessary to permit preparation of our financial statements inaccordance with IFRS as issued by the IASB, and that our receipts and expenditures are being made only in accordance withauthorizations of our management and our directors; and●provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets thatcould have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of anyevaluation of internal control effectiveness to future periods are subject to the risk that controls may become inadequate because of changes inconditions, or that the degree of compliance with the policies or procedures may deteriorate.Management, with the participation of our chief executive and chief financial officers, assessed the effectiveness of our internal control overfinancial reporting (as defined in Rule 13a-15(f) under the Exchange Act) as of December 31, 2023 based on the criteria set forth in InternalControl – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on theassessment, our management believes that our internal control over financial reporting was effective as of December 31, 2023.Table of Contents93Attestation Report of the Independent Registered Public Accounting FirmReport of Independent Registered Public Accounting FirmTo the Stockholders and Board of DirectorsHimax Technologies, Inc.:Opinion on Internal Control Over Financial ReportingWe have audited Himax Technologies, Inc. and subsidiaries’ (the “Company”) internal control over financial reporting as of December 31, 2023,based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of theTreadway Commission (“COSO”). In our opinion, the Company maintained, in all material respects, effective internal control over financialreporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the COSO.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), theconsolidated statements of financial position of the Company as of December 31, 2022 and 2023, the related consolidated statements of profit orloss, other comprehensive income, changes in equity, and cash flows for each of the years in the three-year period ended December 31, 2023, andthe related notes (collectively, the “consolidated financial statements”), and our report dated April 2, 2024 expressed an unqualified opinion onthose consolidated financial statements.Basis for OpinionThe Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of theeffectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over FinancialReporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are apublic accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtainreasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internalcontrol over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a materialweakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit alsoincluded performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basisfor our opinion.Definition and Limitations of Internal Control Over Financial ReportingA company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Acompany’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, inreasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance thattransactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles,and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of thecompany; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of thecompany’s assets that could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of anyevaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or thatthe degree of compliance with the policies or procedures may deteriorate./s/ KPMG Hsinchu, Taiwan April 2, 2024 Table of Contents94Changes in Internal Control over Financial ReportingIn 2023, no change in our internal control over financial reporting has occurred during the period covered by this annual report that hasmaterially affected, or is reasonably likely to materially affect, our internal control over financial reporting.ITEM 16. [RESERVED]16.A. Audit Committee Financial ExpertOur board of directors has determined that Yuan-Chuan Horng is an audit committee financial expert, as that term is defined in Item 16A(b) ofForm 20-F and is independent for the purposes of Rule 5605(a)(2) of the Nasdaq Rules and Rule 10A-3 of the Exchange Act.16.B. Code of EthicsOur board of directors has adopted a code of business conduct and ethics that applies to our directors, officers and employees, including ourprincipal executive officer, principal financial officer, principal accounting officer or controller and any other persons who perform similarfunctions for us. We will provide a copy of our code of business conduct and ethics without charge upon written request to:Himax Technologies, Inc.Human Resources DepartmentNo. 26, Zilian Road, Xinshi District, Tainan City 744092Taiwan, Republic of China16.C. Principal Accountant Fees and ServicesKPMG, our independent registered public accounting firm, began serving as our independent auditor upon the formation of our company in2001.Our audit committee is responsible for the oversight of KPMG’s work. The policy of our audit committee is to pre-approve all audit and non-audit services provided by KPMG, including audit services, audit-related services, tax services and other services.We paid the following fees for professional services to KPMG for the years ended December 31, 2022 and 2023.Year ended December 31,Services 2022 2023Audit Fees(1)$ 805,000$ 805,000Tax Fees(2) 44,000 20,000All Other Fees(3) 7,000 7,000Total$ 856,000$ 832,000Note: (1) Audit Fees. This category includes the audit of our annual consolidated financial statements and internal control over financialreporting, quarterly review procedures, services that are normally provided by the independent auditors in connection with statutoryand regulatory filings or engagements for those fiscal years. This category also includes statutory audits required by the Tax Bureau ofthe ROC.(2)Tax Fees. This category consists of fees in relation to transfer pricing reports and tax compliance status.(3)All Other Fees. This category consists of fees in relation to audit of conflict mineral report.16.D. Exemptions from the Listing Standards for Audit CommitteesNot applicable.Table of Contents9516.E. Purchases of Equity Securities by the Issuer and Affiliated PurchasersOn November 1, 2007, our board of directors authorized a share buyback program allowing us to repurchase up to $40.0 million of our ADSsin the open market or through privately negotiated transactions. We concluded this share buyback program in the first quarter of 2008 andrepurchased a total of approximately $33.1 million of our ADSs (equivalent to approximately 7.7 million ADSs) from the open market.On November 14, 2008, our board of directors authorized another share buyback program allowing us to repurchase up to $50.0 million of ourADSs in the open market or through privately negotiated transactions. We concluded this share buyback program in the third quarter of 2010 andrepurchased a total of approximately $50.0 million of our ADSs (approximately 19.3 million ADSs) under this program from the open market.In April 2011, the Companies Law of the Cayman Islands was amended to permit treasury shares if so approved by the board of directors andto the extent that the articles do not prohibit treasury shares. Therefore, we would hold the treasury shares for future employee awards.On June 20, 2011, our board of directors authorized another share buyback program allowing us to repurchase up to $25.0 million of our ADSsin the open market or through privately negotiated transactions. We concluded this share buyback program in the fourth quarter of 2012 andrepurchased a total of approximately $13.4 million of our ADSs (approximately 9.5 million ADSs) under this program from the open market. Wedid not conduct any repurchase under this program in 2022.16.F. Change in Registrant’s Certifying AccountantNot applicable.16.G. Corporate GovernanceThe Nasdaq Rules provide that foreign private issuers may follow home country practice in lieu of the corporate governance requirements ofthe NASDAQ Stock Market LLC, subject to certain exceptions and requirements and except to the extent that such exemptions would be contraryto U.S. federal securities laws and regulations. The significant differences between our corporate governance practices and those followed by U.S.companies under the Nasdaq Rules are summarized as follows:●We follow home country practice that permits our independent directors not to hold regularly scheduled meetings at which onlyindependent directors are present in lieu of complying with Rule 5605(b)(2).16.H. Mine Safety DisclosureNot applicable.16.I. Disclosure Regarding Foreign Jurisdictions that Prevent InspectionsNot applicable.Table of Contents9616.J. Insider Trading PoliciesPursuant to applicable SEC transition rules, the disclosure required by Item 16J is not yet applicable to the Company.16.K. CybersecurityRisk Management and StrategyTo strengthen information security, our company collaborated with Deloitte Taiwan, a third-party consulting firm, in 2023. Furthermore, toenhance risk management procedures, our company is currently implementing deploys the Risk Assessment Work Instructions, the Network andCommunication Management Work Instructions, and the Emergency Response and Disaster Recovery Management Work Instructions. Theseinstructions are utilized for executing risk management and assessment strategies, implementing network control measures, and establishingprocedures for information security incident grading and reporting.As the frequency of network hacker attacks increases, our company continues to implement strict preventive measures against network attacks.These measures encompass firewall intrusion detection and prevention, internal and external network access control, regular updates of antivirussoftware, physical management of information equipment, and regular updates of information equipment. Our object is to ensure a secure R&Denvironment and mitigate operational risks.For additional information regarding risks to the Company from cybersecurity threats. See “Risk Factors — Risks Related to Our FinancialCondition and Business —System security risks, data protection breaches or unexpected system outages or failures could impact our business.”GovernanceOur company has established an information security committee, chaired by the Deputy General Manager of the Business and OperationCenter and composing representatives of the heads of each division of the Company. The committee coordinates various information securitycontrol measures and information security management strategies. Furthermore, the committee has formed a task-force emergency response team,tasked with severity of suspected information security incidents. In the event of a major network security incident, the team will conduct damagecontrol, restoration, root cause analysis, investigation, and improvement activities. Furthermore, the committee also has established an informationsecurity management team, encompassing representatives from the information department and each division of the Company. The team isresponsible for facilitating and implementing policy discussions, policy tracking, and other implementation tasks.Our company’s information security committee reports regularly to the Board of Directors annually on the outcome of the Company’sinformation security initiatives. The report includes internal and external environmental risks- related to information security incident investigationand handling, plans for managing high-risk information security incidents, and annual information security plans. The committee also conductsnetwork security awareness training for Board members every year to enhance the Board's expertise in information security governance.In 2023, our company did not experience any major information security incidents. In addition to annual information security awarenesstraining, our company conducted four information security tests to reinforce employee awareness. To ensure the effective implementation ofinformation security policies, all employees who participated in the information security tests successfully met the established qualification criteria.PART IIIITEM 17. FINANCIAL STATEMENTSNot applicable.Table of Contents97ITEM 18. FINANCIAL STATEMENTSOur consolidated financial statements and the report thereon by our independent registered public accounting firm listed below are attachedhereto as follows:(a)Report of Independent Registered Public Accounting Firm.(b)Consolidated Statements of Financial Position as of December 31, 2022 and 2023.(c)Consolidated Statements of Profit or Loss for the years ended December 31, 2021, 2022 and 2023.(d)Consolidated Statements of Other Comprehensive Income for the years ended December 31, 2021, 2022 and 2023.(e)Consolidated Statements of Changes in Equity for the years ended December 31, 2021, 2022 and 2023.(f)Consolidated Statements of Cash Flows for the years ended December 31, 2021, 2022 and 2023.(g)Notes to the Consolidated Financial Statements.Table of Contents98ITEM 19. EXHIBITSExhibit Number Description of Document1.1Third Amended and Restated Memorandum and Articles of Association of the Registrant, as currently in effect. (Incorporatedby reference to Exhibit 1.1 from our Annual Report on Form 20-F (file no. 000-51847) filed with the Securities and ExchangeCommission on June 3, 2010.)2.1Registrant’s Specimen American Depositary Receipt (included in Exhibit 2.3).2.2Registrant’s Specimen Certificate for Ordinary Shares. (Incorporated by reference to Exhibit 4.2 from our RegistrationStatement on Form F-1 (file no. 333-132372) filed with the Securities and Exchange Commission on March 13, 2006.)2.3Form of Deposit Agreement among the Registrant, JPMorgan Chase Bank, N.A., as depositary, and holders of the Americandepositary receipts. (Incorporated by reference to Exhibit (a) to the Registrant’s Registration Statement on Form F-6 (file no.333-219169) filed with the Securities and Exchange Commission on July 6, 2017.)2.4Description of Securities.4.1Himax Technologies, Inc. 2011 Long-Term Incentive Plan Amended and Restated as of August 31st day, 2016, 2nd Amendedand Restated as of August 28th day, 2019 and 3rd Amended and Restated as of August 16th day, 2022. (Incorporated herein byreference to Exhibit 99.4 to the Registrant’s report of foreign private issuer on Form 6-k filed on June 15, 2022.)4.2*Agreement and Plan of Merger dated November 8, 2010 among Himax Display, Inc., Spatial Photonics, Inc. and Wen Hsieh.(Incorporated herein by reference to Exhibit 4.3 from our Annual Report on Form 20-F (file no. 000-51847) filed with theSecurities and Exchange Commission on May 20, 2011.)8.1List of Subsidiaries.12.1Certification of Jordan Wu, President and Chief Executive Officer of Himax Technologies, Inc., pursuant to Section 302 of theSarbanes-Oxley Act of 2002.12.2Certification of Jessica Pan, Chief Financial Officer of Himax Technologies, Inc., pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.13.1Certification pursuant to 18 USC. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.15.1Consent of KPMG, Independent Registered Public Accounting Firm.97.1Compensation Clawback Policy.101.INSXBRL Instance Document101.SCHXBRL Taxonomy Extension Schema101.CALXBRL Taxonomy Extension Calculation Linkbase101.DEFXBRL Taxonomy Extension Definition Linkbase101.LABXBRL Taxonomy Extension Label Linkbase101.PREXBRL Taxonomy Extension Presentation Linkbase104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)*Confidential treatment has been requested for portions of this exhibit.Table of Contents99SIGNATURESPursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant certifies that it meets all of the requirementsfor filing on Form 20-F and has duly caused this annual report to be signed on its behalf by the undersigned, thereunto duly authorized. HIMAX TECHNOLOGIES, INC. By:/s/ Jordan Wu Name:Jordan Wu Title:President and Chief Executive OfficerDate: April 2, 2024Table of Contents100HIMAX TECHNOLOGIES, INC.INDEX TO CONSOLIDATED FINANCIAL STATEMENTS PageReport of Independent Registered Public Accounting Firm (KPMG, Hsinchu, Taiwan, PCAOB ID 1026)F-2Consolidated Statements of Financial Position as of December 31, 2022 and 2023F-4Consolidated Statements of Profit or Loss for the Years Ended December 31, 2021, 2022 and 2023F-6Consolidated Statements of Other Comprehensive Income for the Years Ended December 31, 2021, 2022 and 2023F-7Consolidated Statements of Changes in Equity for the Years Ended December 31, 2021, 2022 and 2023F-8Consolidated Statements of Cash Flows for the Years Ended December 31, 2021, 2022 and 2023F-11Notes to the Consolidated Financial StatementsF-13Table of ContentsF-1HIMAX TECHNOLOGIES, INC. AND SUBSIDIARIESConsolidated Financial StatementsDecember 31, 2021, 2022 and 2023(With Report of Independent RegisteredPublic Accounting Firm Thereon)Table of ContentsF-2Report of Independent Registered Public Accounting FirmTo the Stockholders and Board of DirectorsHimax Technologies, Inc.:Opinion on the Consolidated Financial StatementsWe have audited the accompanying consolidated statements of financial position of Himax Technologies, Inc. and subsidiaries (the “Company”) asof December 31, 2022 and 2023, the related consolidated statements of profit or loss, other comprehensive income, changes in equity, and cashflows for each of the years in the three-year period ended December 31, 2023, and the related notes (collectively, the “consolidated financialstatements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company asof December 31, 2022 and 2023, and the results of its operations and its cash flows for each of the years in the three-year period endedDecember 31, 2023, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), theCompany’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – IntegratedFramework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated April 2,2024 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.Basis for OpinionThese consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on theseconsolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to beindependent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of theSecurities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtainreasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Ouraudits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error orfraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amountsand disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significantestimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our auditsprovide a reasonable basis for our opinion.Critical Audit MatterThe critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that wascommunicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to theconsolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a criticalaudit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating thecritical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.Impairment assessment of non-financial asset, excluding goodwill in the Wafer Level Optics cash generating unitAs discussed in Note 14 and 15 to the consolidated financial statements, the balance of other intangible assets and property, plant andequipment were $816 thousand and $130,109 thousand, respectively as of December 31, 2023, a portion of which related to the Wafer LevelOptics cash generating unit (“CGU”). The Company’s non-financial assets excluding goodwill are reviewed at the reporting date to determinewhether there is any indication of impairment. If any such indication exists, impairment assessment will be performed by comparing thecarrying amount of the CGU with its recoverable amount, which is the higher of the fair value less costs of disposal and the value in use. Thevalue in use is determined by discounting the estimated future cash flows to their present value using a pre-tax discount rate that reflectscurrent market assessments of the time value of money and the risks specific to the asset.Table of ContentsF-3We identified the impairment assessment of non-financial assets excluding goodwill in the Wafer Level Optics CGU as a critical audit matterbecause of the high degree of subjective auditor’s judgment required in evaluating the forecasted future revenues and discount rateassumptions and minor changes to those assumptions could have a significant effect on the Company’s impairment assessment of non-financialassets in the Wafer Level Optics CGU. In addition, the evaluation of the discount rate involved specialized skills and knowledge.The primary procedures we performed to address this critical audit matter included the following. We tested certain internal controls over theCompany’s impairment assessment process of non-financial assets excluding goodwill, including controls related to the determination offorecasted future revenues and the assumptions used to develop the discount rate. We evaluated the Company’s forecasted future revenues bycomparing available subsequent purchase orders and industry revenue forecast. We compared the Company’s historical revenue forecasts toactual results to assess the Company’s ability to accurately forecast future revenues. We performed sensitivity analyses over the forecastedfuture revenues and discount rate to assess their impact on the recoverable amount of the CGU. In addition, we involved valuationprofessionals with specialized skills and knowledge, who assisted in evaluating the Company’s discount rate, by comparing it against anestimated discount rates developed independently based on market data and inputs./s/ KPMGWe have served as the Company’s auditor since 2001.Hsinchu, TaiwanApril 2, 2024Table of ContentsF-4HIMAX TECHNOLOGIES, INC. AND SUBSIDIARIESConsolidated Statements of Financial PositionDecember 31, 2022 and 2023(in thousands of US dollars)December 31, December 31, Note 2022 2023Assets Current assets: Cash and cash equivalents 7, 23$221,581 191,749Financial assets at amortized cost 8, 23 8,314 12,511Financial assets at fair value through profit or loss 9, 23 — 2,117Accounts receivable, net (including related parties) 11, 23, 26 261,148 235,829Inventories 12 370,933 217,308Income taxes receivable 23 31 1,454Restricted deposit 17, 23, 27 369,300 453,000Other receivable from related parties 23, 26 1,224 69Other current assets 23 104,277 86,548Total current assets 1,336,808 1,200,585Financial assets at fair value through profit or loss 9, 23 15,350 21,650Financial assets at fair value through other comprehensive income 10, 23 279 1,635Equity method investments 13 6,533 3,490Property, plant and equipment, net 15, 18, 27, 29, 30 126,138 130,109Deferred tax assets 22 11,797 14,196Goodwill4(k) 28,138 28,138Other intangible assets, net 6, 14, 30 1,094 816Restricted deposit 23, 27 32 32Refundable deposits23162,968222,025Other non-current assets 19 12,621 20,728 364,950 442,819Total assets$1,701,758 1,643,404The accompanying notes are an integral part of these consolidated financial statements.Table of ContentsF-5HIMAX TECHNOLOGIES, INC. AND SUBSIDIARIESConsolidated Statements of Financial Position (Continued)December 31, 2022 and 2023(in thousands of US dollars)December 31, December 31, Note 2022 2023Liabilities and Equity Current liabilities: Current portion of long-term unsecured borrowings18, 23, 27$6,0006,000Short-term secured borrowings 17, 23, 27 369,300 453,000Accounts payable (including related parties)23, 26122,042107,342Income taxes payable 22 69,383 15,309Other payable to related parties 23, 26 2,568 110Contract liabilities-current2949,16717,751Other current liabilities 5, 15, 16, 23 75,535 109,291Total current liabilities 693,995 708,803Long-term unsecured borrowings18, 23, 2740,50034,500Deferred tax liabilities 22 691 520Other non-current liabilities 15, 19, 23 72,751 35,879Total liabilities 807,937 779,702Equity Ordinary shares 21 107,010 107,010Additional paid-in capital 21 112,249 114,648Treasury shares (5,594) (5,157)Accumulated other comprehensive income 21 (218) (180)Retained earnings 679,125 640,447Equity attributable to owners of Himax Technologies, Inc. 892,572 856,768Noncontrolling interests 21 1,249 6,934Total equity 893,821 863,702Total liabilities and equity$1,701,758 1,643,404The accompanying notes are an integral part of these consolidated financial statements.Table of ContentsF-6HIMAX TECHNOLOGIES, INC. AND SUBSIDIARIESConsolidated Statements of Profit or LossFor the years ended December 31, 2021, 2022 and 2023(in thousands of US dollars, except per share data) Note 2021 2022 2023Revenues: Revenues from third parties, net$1,546,9721,201,124945,309Revenues from related parties, net125215119Total revenues26, 291,547,0971,201,339945,428Costs and expenses: Cost of revenues 12, 19, 20, 26, 30 798,519714,233 681,931Research and development 19, 20, 26, 30 151,386175,557 171,392General and administrative 19, 20, 26, 30 29,28128,503 25,037Reversal of credit losses 11 (190)— —Sales and marketing 19, 20, 26, 30 23,08025,459 23,856Total costs and expenses 1,002,076943,752 902,216Operating income 545,021257,587 43,212Non operating income (loss): Interest income 8764,813 8,746Changes in fair value of financial assets at fair value through profit or loss 9, 23 (284)1,246 1,655Foreign currency exchange gains (losses), net 1,0965,506 (768)Finance costs (1,074)(2,783) (6,080)Share of losses of associates 13 (1,392)(743) (598)Other gains (losses)5, 6—10,694(1,932)Other income 349245 158 (429)18,978 1,181Profit before income taxes 544,592276,565 44,393Income tax expense (benefit) 22 110,65741,098 (5,028)Profit for the year 433,935235,467 49,421Loss attributable to noncontrolling interests 2,9611,515 1,195Profit attributable to Himax Technologies, Inc. stockholders $436,896236,982 50,616Basic earnings per ordinary share attributable to Himax Technologies, Inc.stockholders 4(r)$1.250.68 0.15Diluted earnings per ordinary share attributable to Himax Technologies, Inc.stockholders 4(r)$1.250.68 0.14Basic earnings per ADS attributable to Himax Technologies, Inc. stockholders 4(r)$2.501.36 0.29Diluted earnings per ADS attributable to Himax Technologies, Inc. stockholders 4(r)$2.501.36 0.29The accompanying notes are an integral part of these consolidated financial statements.Table of ContentsF-7HIMAX TECHNOLOGIES, INC. AND SUBSIDIARIESConsolidated Statements of Other Comprehensive IncomeFor the years ended December 31, 2021, 2022 and 2023(in thousands of US dollars) Note 20212022 2023Profit for the year$433,935235,467 49,421Other comprehensive income: Items that will not be reclassified to profit or loss: 19, 21, 22, 23 Remeasurements of defined benefit pension plans 165684 10Unrealized gain (loss) on financial assets at fair value through othercomprehensive income (181)152 152Income tax related to items that will not be reclassified subsequently (27)(107) 1Items that may be reclassified subsequently to profit or loss: Foreign operations - foreign currency translation differences (72)(157) (123)Other comprehensive income for the year, net of tax (115)572 40Total comprehensive income for the year 433,820236,039 49,461Total comprehensive income attributable to noncontrolling interests 2,9581,391 1,193Total comprehensive income attributable to Himax Technologies, Inc.stockholders$436,778237,430 50,654The accompanying notes are an integral part of these consolidated financial statements.Table of ContentsF-8HIMAX TECHNOLOGIES, INC. AND SUBSIDIARIESConsolidated Statements of Changes in EquityFor the years ended December 31, 2021, 2022 and 2023(in thousands of US dollars and shares, except per share data)Attributable to owners of Himax Technologies, Inc.AccumulatedOrdinary sharesAdditionalTreasury sharesotherpaid-incomprehensiveRetainedNoncontrollingTotal Shares Amount capital Shares Amount income earnings Total interests EquityBalance at January 1, 2021 356,700$107,010 107,293 (9,166) (6,516) (548) 272,937 480,176 5,023 485,199Profit (loss) for the year——————436,896436,896(2,961)433,935Other comprehensive income — — — — — (118) —(118) 3 (115)Total comprehensive income for the year — — — — — (118) 436,896 436,778 (2,958) 433,820Contributions by and distributions to owners Declaration of cash dividends, $0.136 per share — — — — —— (47,404) (47,404) — (47,404)Share-based compensation expenses — — 662 — — — — 662 38 700Restricted stock vested — — (10) 15 10 — — — — —Employee stock options exercised——4991,049745——1,244—1,244 — — 1,151 1,064 755 — (47,404) (45,498) 38 (45,460)Changes in ownership interests Purchase of subsidiaries shares from noncontrollinginterest——————(1,789)(1,789)175(1,614)Dilution gain of equity method investment——397———(340)57—57Declaration of cash dividends by subsidiary————————(20)(20) — — 397 — — — (2,129) (1,732) 155 (1,577)Balance at December 31, 2021 356,700$107,010 108,841 (8,102) (5,761) (666) 660,300 869,724 2,258 871,982The accompanying notes are an integral part of these consolidated financial statements.Table of ContentsF-9HIMAX TECHNOLOGIES, INC. AND SUBSIDIARIESConsolidated Statements of Changes in Equity (Continued)For the years ended December 31, 2021, 2022 and 2023(in thousands of US dollars and shares, except per share data)Attributable to owners of Himax Technologies, Inc.AccumulatedOrdinary sharesAdditionalTreasury sharesotherpaid-incomprehensiveRetainedNoncontrollingTotal Shares Amount capital Shares Amount income earnings Total interests EquityProfit (loss) for the year — — — — — — 236,982 236,982 (1,515) 235,467Other comprehensive income — — — — — 448 —448 124 572Total comprehensive income for the year — — — — — 448 236,982 237,430 (1,391) 236,039Contributions by and distributions to owners Declaration of cash dividends, $0.625 per share — — — — — — (217,873) (217,873) — (217,873)Share-based compensation expenses — — 2,664 — — — — 2,664 140 2,804Restricted stock vested — — (167) 236 167 — — — — — — — 2,497 236 167 — (217,873) (215,209) 140 (215,069)Changes in ownership interests New shares issued by subsidiary — — 115 — — — — 115 445 560Dilution gain of equity method investment — — 796 — — — — 796 — 796Effect of Himax Media Solutions, Inc. merged intoHimax Taiwan——————(104)(104)(197)(301)Disposal of financial assets at fair value through othercomprehensive income——————(180)(180)(6)(186) — — 911 — — — (284) 627 242 869Balance at December 31, 2022 356,700$107,010 112,249 (7,866) (5,594) (218) 679,125 892,572 1,249 893,821The accompanying notes are an integral part of these consolidated financial statements.Table of ContentsF-10HIMAX TECHNOLOGIES, INC. AND SUBSIDIARIESConsolidated Statements of Changes in Equity (Continued)For the years ended December 31, 2021, 2022 and 2023(in thousands of US dollars and shares, except per share data)Attributable to owners of Himax Technologies, Inc.Accumulated Ordinary shares Additional Treasury shares other paid-in comprehensive Retained Noncontrolling Total Shares Amount capital Shares Amount income earnings Total interests EquityProfit (loss) for the year—————— 50,616 50,616 (1,195) 49,421Other comprehensive income ————— 38 — 38 2 40Total comprehensive income for the year————— 38 50,616 50,654 (1,193) 49,461Contributions by and distributions toowners Declaration of cash dividends, $0.24 pershare——————(83,720)(83,720)—(83,720)Dividend Equivalents——————(379)(379)—(379)Share-based compensation expenses — — 2,623 — — — — 2,623 40 2,663Restricted stock vested — — (437) 615 437 — — — — ——— 2,186 615 437—(84,099) (81,476) 40 (81,436)Changes in ownership interests New shares issued by subsidiary——————(5,098)(5,098)6,015917Purchase of subsidiaries shares fromnoncontrolling interest——————(21)(21)12(9)Dilution gain of equity method investment — — 213 — — — — 213 — 213Acquired the controlling power fromnoncontrolling interest————————811811Liquidation of financial assets at fair valuethrough other comprehensive income——————(76)(76)—(76)—— 213———(5,195) (4,982) 6,838 1,856Balance at December 31, 2023 356,700$107,010 114,648 (7,251) (5,157) (180) 640,447 856,768 6,934 863,702The accompanying notes are an integral part of these consolidated financial statements.Table of ContentsF-11HIMAX TECHNOLOGIES, INC. AND SUBSIDIARIESConsolidated Statements of Cash FlowsFor the years ended December 31, 2021, 2022 and 2023(in thousands of US dollars) 2021 2022 2023Cash flows from operating activities: Profit for the year$433,935235,467 49,421Adjustments for: Depreciation and amortization 21,34221,342 20,322Reversal of credit losses recognized on accounts receivable (190)— —Gain on disposal of subsidiary—(10,694)—Share-based compensation expenses 7003,096 2,663Gains on disposal of property, plant and equipment, net (147)— (368)Loss on re-measurement of the pre-existing relationships in a business combination——1,932Changes in fair value of financial assets at fair value through profit or loss 284(1,246) (1,655)Interest income (876)(4,813) (8,746)Finance costs 1,0742,783 6,080Income tax expense (benefit) 110,65741,098 (5,028)Share of losses of associates 1,392743 598Inventories write downs 9,44822,211 21,540Unrealized foreign currency exchange losses (gains) (953)(2,883) 624 576,666307,104 87,383Changes in: Accounts receivable (including related parties) (166,395)146,870 20,804Inventories (99,341)(194,544) 132,090Other receivable from related parties(17)(7)5Other current assets (7,633)10,099 (3,863)Other non-current assets(19,460)——Accounts payable (including related parties)74,954(124,870)7,676Other payable to related parties (931)927 (268)Contract liabilities41,2621,283(37,051)Other current liabilities 13,7361,831 1,246Other non-current liabilities (4,697)3,972 (4,602)Cash generated from operating activities 408,144152,665 203,420Interest received 8524,525 8,567Interest paid (1,074)(2,783) (6,080)Income tax paid (19,646)(71,499) (53,066)Net cash provided by operating activities 388,27682,908 152,841The accompanying notes are an integral part of these consolidated financial statements.Table of ContentsF-12HIMAX TECHNOLOGIES, INC. AND SUBSIDIARIESConsolidated Statements of Cash Flows (Continued)For the years ended December 31, 2021, 2022 and 2023(in thousands of US dollars) 2021 2022 2023Cash flows from investing activities: Acquisitions of property, plant and equipment$(7,562)(11,797) (23,378)Proceeds from disposal of property, plant and equipment —— 111Acquisitions of intangible assets (468)(331) (115)Acquisitions of financial assets at amortized cost (25,362)(8,763) (6,911)Proceeds from disposal of financial assets at amortized cost 8,01125,823 3,099Acquisitions of financial assets at fair value through profit or loss (23,417)(108,374) (82,628)Proceeds from disposal of financial assets at fair value through profit or loss 29,141110,283 75,539Proceeds from disposal of a subsidiary —14,769 —Acquisitions of financial assets at fair value through other comprehensive income——(1,379)Proceeds from disposal of financial assets at fair value through other comprehensive income—9699Acquisition of a subsidiary, net of cash acquired —— 433Proceeds from capital reduction of investment 151— 360Acquisitions of equity method investments (598)(3,264) —Increase in refundable deposits (213,056)(6,144) (56,933)Releases (pledges) of restricted deposit (2,595)2,700 —Cash received in advance from disposal of land3,075—2,821Net cash provided by (used in) investing activities (232,680)14,998 (88,882)Cash flows from financing activities: Payments of cash dividends (47,424)(217,873) (83,720)Payments of dividend equivalents ——(148)Proceeds from issuance of new shares by subsidiaries —487 916Purchases of subsidiary shares from noncontrolling interests(1,627)(301)(9)Proceeds from short-term unsecured borrowings 15,000— 47,226Repayments of short-term unsecured borrowings (15,000)— (47,226)Proceeds from long-term unsecured borrowings —40,000 —Repayments of long-term unsecured borrowings(6,000)(46,000)(6,000)Proceeds from short-term secured borrowings 611,6001,212,7001,383,300Repayments of short-term secured borrowings(564,200)(994,800)(1,299,600)Pledge of restricted deposit(47,400)(217,900)(83,700)Payment of lease liabilities(4,668)(4,294)(4,830)Guarantee deposits received54,05016,913200Proceeds from exercise of employee stock options1,182——Net cash used in financing activities (4,487)(211,068) (93,591)Effect of foreign currency exchange rate changes on cash and cash equivalents (23)(1,281) (200)Net increase (decrease) in cash and cash equivalents 151,086(114,443) (29,832)Cash and cash equivalents at beginning of year 184,938336,024 221,581Cash and cash equivalents at end of year$336,024221,581 191,749The accompanying notes are an integral part of these consolidated financial statements.Table of ContentsHIMAX TECHNOLOGIES, INC. AND SUBSIDIARIESNotes to Consolidated Financial StatementsFor the years ended December 31, 2021, 2022 and 2023F-13Note 1. Reporting entityHimax Technologies Limited, an exempted company with limited liability under the Cayman Islands Companies Law, was incorporatedon April 26, 2005 and changed the name to “Himax Technologies, Inc.” on September 26, 2005. Since March 2006, HimaxTechnologies, Inc.’s ordinary shares have been quoted on the NASDAQ Global Select Market under the symbol “HIMX” in the form ofADSs and two ordinary shares represent one ADS with effect from August 10, 2009.The registered office in the Cayman Islands is located at Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman KY1-1111,Cayman Islands. The principal executive office is located at No. 26, Zilian Road, Xinshi District, Tainan City 744092, Taiwan, Republicof China.The principal operating activities of Himax Technologies, Inc. and subsidiaries (collectively, the Company) are described in Note 4(b).Note 2. Basis of preparation(a)Statement of complianceThe consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) asissued by the International Accounting Standards Board (“IASB”).The consolidated financial statements were authorized for issuance by the Board of Directors on April 2, 2024.(b)Basis of measurementThe consolidated financial statements have been prepared on the historical cost basis except for the following material items in thestatement of financial position:1.Financial assets at fair value through profit or loss;2.Financial assets at fair value through other comprehensive income;3.The defined benefit liability (asset) is recognized as the fair value of the plan assets less the present value of the defined benefitobligation.Table of ContentsHIMAX TECHNOLOGIES, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements (Continued)For the years ended December 31, 2021, 2022 and 2023F-14Note 3. Application of new and revised IFRS as issued by the IASBa.Amendments to IFRSs and the new interpretation that are mandatorily effective for the current yearEffective DateNew, Revised or Amended Standards and Interpretations Announced by IASBAmendments to IAS 1 “Disclosure of Accounting Policies”January 1, 2023Amendments to IAS 8 “Definition of Accounting Estimates”January 1, 2023Amendments to IAS 12 “Deferred Tax related to Assets and Liabilities arising from a SingleTransaction”January 1, 2023Amendments to IAS 12 “International Tax Reform—Pillar Two Model Rules”May 23, 2023The Company believes that the adoption of the above amendments to IFRSs did not have a material impact on its consolidatedfinancial statements.b.New and revised standards, amendments and interpretations in issue but not yet effectiveIn preparing the accompanying consolidated financial statements, the Company has not adopted the following International FinancialReporting Standards (“IFRS”), International Accounting Standards (“IAS”), Interpretations developed by the International FinancialReporting Interpretations Committee (“IFRIC”) or the former Standing Interpretations Committee (“SIC”) issued by the InternationalAccounting Standards Board (“IASB”) (collectively, “IFRSs”).Effective DateNew, Revised or Amended Standards and Interpretations Announced by IASBAmendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets Between anInvestor and Its Associate or Joint Venture”Effective date to bedetermined by IASBIFRS16 “Requirements for Sale and Leaseback Transactions”January 1, 2024Amendments to IAS 1 “Classification of Liabilities as Current or Non-current”January 1, 2024Amendments to IAS 1 “Non-current Liabilities with Covenants”January 1, 2024Amendments to IAS 7 and IFRS 7 “Supplier Finance Arrangement”January 1, 2024Amendments to IAS 21 “Lack of Exchangeability”January 1, 2025As of the date of the consolidated financial statements were authorized for issue, the Company continues in assessing possibleimpacts that application of the abovementioned amendments will have on the Company’s financial position and financial performanceand will disclose these impacts when the assessment is completed.Note 4. Material accounting policiesThe material accounting policies applied in the preparation of these consolidated financial statements are set out as below. The accountingpolicies set out below have been applied consistently to all periods presented in these consolidated financial statements, except ifmentioned otherwise. The accounting policies have been applied consistently by consolidated entities.(a) Basis of ConsolidationThe accompanying consolidated financial statements include the accounts and operations of Himax Technologies, Inc. and itsmajority owned subsidiaries and entities that it has a controlling financial interest. The Company ‘controls’ an entity when it isexposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through itspower over the entity. All significant intercompany balances and transactions have been eliminated in consolidation.Table of ContentsHIMAX TECHNOLOGIES, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements (Continued)For the years ended December 31, 2021, 2022 and 2023F-15(b) List of Subsidiaries in the Consolidated Financial StatementsFollowing is general information about Himax Technologies, Inc.’s subsidiaries:Percentage of Ownership Jurisdiction ofDecember 31, December 31, Investor Subsidiary Main activities Incorporation 2022 2023 Himax Technologies, Inc. Himax Technologies Limited (“HimaxTaiwan”) IC design and sales ROC 100.00% 100.00%Himax Technologies, Inc. Himax Technologies Korea Ltd. IC design and sales South Korea 100.00% 100.00%Himax Technologies, Inc. Himax Technologies Japan Ltd. Sales Japan 100.00% 100.00%Himax Technologies, Inc. Himax Semiconductor (Hong Kong) Limited Investments Hong Kong 100.00% 100.00%Himax Technologies, Inc.Viewsil Microelectronics (Kunshan) Limited(“Viewsil”) (1)IC design and salesPRC—49.00%Viewsil Microelectronics (Kunshan)LimitedViewsil Technology Limited (1)IC salesBritish Virgin Islands—49.00%Himax Technologies Limited Himax Technologies (Samoa), Inc. Investments Samoa 100.00% 100.00%Himax Technologies (Samoa), Inc. Himax Technologies (Suzhou) Co., Ltd. Sales and technical support PRC 100.00% 100.00%Himax Technologies (Samoa), Inc.Himax Technologies (Shenzhen) Co., Ltd.Sales and technical supportPRC100.00% 100.00%Himax Technologies Limited Himax Display, Inc. LCoS and MEMS design,manufacturing and sales ROC 83.54% 92.08%Himax Display, Inc. Integrated Microdisplays Limited LCoS design Hong Kong 83.54% 92.08%Himax Display, Inc. Himax Display (USA) Inc. LCoS and MEMS design, sales andtechnical support Delaware, USA 83.54% 92.08%Himax Technologies Limited Himax Analogic, Inc. IC design and sales ROC 98.62% 98.62%Himax Technologies, Inc. Himax Imaging, Inc. Investments Cayman Islands 100.00% 100.00%Himax Technologies Limited Himax Imaging, Ltd. (“Imaging Taiwan”) IC design and sales ROC 98.42% 98.43%Himax Imaging, Ltd. Himax Imaging Corp. IC design California, USA 98.42% 98.43%Himax Technologies Limited Harvest Investment Limited Investments ROC 100.00% 100.00%Himax Technologies Limited Liqxtal Technology Inc. LC Lens design and sales ROC 62.26% 62.26%Himax Technologies Limited Himax IGI Precision Ltd. 3D micro and nano structure masteringand prototype replication Delaware, USA 100.00% 100.00%Himax Technologies Limited CM Visual Technology Corp. Omniwide film products design andsales ROC 66.71% 77.63%Note (1): On December 30, 2023, Himax Technologies, Inc. acquired the controlling interest in Viewsil and included it as the consolidated entity.Refer to Note 5 for further details.Table of ContentsHIMAX TECHNOLOGIES, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements (Continued)For the years ended December 31, 2021, 2022 and 2023F-16Principal ActivitiesThe Company is a leading global fabless semiconductor solution provider dedicated to display imaging processing technologies. TheCompany’s display driver ICs and timing controllers have been adopted at scale across multiple industries worldwide including TVs,PC monitors, laptops, mobile phones, tablets, automotive, ePaper devices, industrial displays, among others. As the global marketshare leader in automotive display technology, the Company offers innovative and comprehensive automotive IC solutions, includingtraditional driver ICs, advanced in-cell Touch and Display Driver Integration (TDDI), local dimming timing controllers (LocalDimming TCON), Large Touch and Display Driver Integration (LTDI) and AMOLED display technologies. The Company is also apioneer in tinyML visual-AI and optical technology related fields. The Company’s industry-leading WiseEyeTM Smart Sensingtechnology which incorporates Himax proprietary ultralow power AI processor, always-on CMOS image sensor, and CNN-based AIalgorithm has been widely deployed in consumer electronics and AIoT related applications. While the Company optics technologies,such as diffractive wafer level optics, LCoS micro-displays and 3D sensing solutions, are critical for facilitating emergingAR/VR/metaverse technologies. Besides, Himax designs and provides touch controllers, AMOLED ICs, LED drivers, EPD drivers,power management ICs, and CMOS image sensors for diverse display application coverage.(c) Foreign CurrencyThe reporting currency of the Company is the United States dollar (USD). The functional currency for the Company and its majoroperating subsidiaries is the USD. Accordingly, the assets and liabilities of subsidiaries whose functional currency is other than theUSD are included in the consolidation by translating the assets and liabilities into the reporting currency (the USD) at the exchangerates applicable at the end of the reporting period. Equity accounts are translated at historical rates. The statements of profit or lossand cash flows are translated at the average exchange rates at the date of transaction. Translation gains or losses are accumulated as aseparate component of equity in accumulated other comprehensive income.(d) Classification of Current and Noncurrent Assets and LiabilitiesCurrent assets are assets held for trading purposes and assets expected to be converted to cash, sold or consumed within one year fromthe end of the reporting period. Current liabilities are obligations incurred for trading purposes and obligations expected to be settledwithin one year from the end of the reporting period. Assets and liabilities that are not classified as current are noncurrent assets andliabilities, respectively.(e) Cash and Cash EquivalentsCash comprise cash balances and demand deposits. Cash equivalents comprise short-term highly liquid investments that are readilyconvertible into known amounts of cash and are subject to an insignificant risk of changes in their fair value. Deposits with anoriginal maturity of three months or less at the time of purchase but not for investments and other purposes and are qualified with theaforementioned criteria are classified as cash equivalent.(f) Financial InstrumentsThe Company shall recognize a financial asset or a financial liability in its statement of financial position when, and only when, theCompany becomes party to the contractual provisions of the instrument. A regular way purchase or sale of financial assets shall berecognized and derecognized, as applicable, using trade date accounting.Table of ContentsHIMAX TECHNOLOGIES, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements (Continued)For the years ended December 31, 2021, 2022 and 2023F-171.Financial Assets(i)Classification of financial assetsThe classification of financial assets depends on the nature and purpose of the financial assets and is determined at the timeof initial recognition. Financial assets are classified into the following categories: measured at amortized cost, measured atfair value through other comprehensive income (FVTOCI) and measured at fair value through profit or loss (FVTPL). Theclassification of financial assets is generally based on the business model in which a financial asset is managed and itscontractual cash flow characteristics. When, and only when, the Company changes its business model for managing financialassets it shall reclassify all affected financial assets.i.Financial assets measured at amortized costA financial asset is measured at amortized cost if it meets both of the following conditions and is not designated asmeasured at fair value through profit or loss:(i)the asset held within a business model whose objective is to hold assets to collect contractual cash flows; and(ii)the contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest onthe principal amount outstanding.Financial assets measured at amortized cost are subsequently measured at amortized cost using the effective interestmethod. The amortized cost is reduced by impairment losses. Interest income, foreign exchange gains and losses andimpairment are recognized in profit or loss. Any gain or loss on derecognition is recognized in profit or loss.ii.Financial assets measured at fair value through other comprehensive income (FVTOCI)On initial recognition of an equity investment that is not held for trading, the Company may irrevocably elect to presentsubsequent changes in the investment’s fair value in OCI. This election is made on an investment-by-investment basis.Equity investments at FVTOCI are subsequently measured at fair value. Dividends are recognized as income in profit orloss unless the dividend clearly represents a recovery of part of the cost of the investment. Other net gains and losses arerecognized in OCI. When an investment is derecognized, the cumulative gain or loss in equity will not be reclassified toprofit or loss, instead, is reclassified to retained earnings.iii.Financial assets measured at fair value through profit or loss (FVTPL)All financial assets not classified as measured at amortized cost or at fair value through other comprehensive income asdescribed above are measured at fair value through profit or loss.Such financial assets are initially recognized at fair value, and attributable transaction costs are recognized in profit orloss as incurred. Subsequent to initial recognition, they are measured at fair value and changes therein are recognized inprofit or loss.(ii)Impairment of financial assetsThe Company recognizes loss allowances for expected credit loss on financial assets measured at amortized cost (includingaccounts receivable).Table of ContentsHIMAX TECHNOLOGIES, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements (Continued)For the years ended December 31, 2021, 2022 and 2023F-18The loss allowance for accounts receivable is measured at an amount equal to lifetime expected credit losses. For financialassets at amortized cost and contract assets, when the credit risk on the financial instrument has not increased significantlysince initial recognition, a loss allowance is recognized at an amount equal to expected credit loss resulting from possibledefault events of a financial instrument within 12 months after the reporting date. If, on the other hand, there has been asignificant increase in credit risk since initial recognition, a loss allowance is recognized at an amount equal to expectedcredit loss resulting from all possible default events over the expected life of a financial instrument.When determining whether the credit risk of a financial instrument has increased significantly since initial recognition, theCompany considers reasonable and supportable information that is relevant. This includes both qualitative and quantitativeinformation and analysis, based on the Company’s historical experience and credit assessment as well as forward-lookinginformation.The Company recognizes an impairment gain or loss in profit or loss for all financial instruments with a correspondingadjustment to their carrying amount through a loss allowance account.(iii)Derecognition of financial assetsThe Company derecognizes a financial asset only when the contractual rights to the cash flows from the financial assetexpire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the financial asset toanother entity.On derecognition of a financial asset at amortized cost in its entirety, the difference between the asset’s carrying amount andthe sum of the consideration received and receivable is recognized in profit or loss. However, on derecognition of aninvestment in an equity instrument at FVTOCI, the cumulative gain or loss that had been recognized in other comprehensiveincome is transferred directly to retained earnings, without recycling through profit or loss.2.Financial Liabilities(i)Classification of financial liabilityThe Company classify all financial liabilities as measured at amortized cost, except for financial liabilities measured at fairvalue through profit or loss. Such liabilities, including derivatives that are liabilities, shall be subsequently measured at fairvalue.(ii)Derecognition of financial liabilityThe Company removes a financial liability from its statement of financial position when, and only when, it is extinguished-when the obligation specified in the contract is discharged or cancelled or expires.On derecognition of a financial liability at amortized cost in its entirety, the difference between the carrying amount of afinancial liability extinguished or transferred to another party and the consideration paid, including any non-cash assetstransferred or liabilities assumed, shall be recognized in profit or loss.Table of ContentsHIMAX TECHNOLOGIES, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements (Continued)For the years ended December 31, 2021, 2022 and 2023F-19(g) InventoriesInventories primarily consist of raw materials, work-in-process and finished goods awaiting final assembly and test and are stated atthe lower of cost and net realizable value. Cost is determined using the weighted-average method. For work-in-process andmanufactured inventories, cost consists of the cost of raw materials (primarily fabricated wafer and processed tape), direct labor andan appropriate proportion of production overheads. Net realizable value for raw materials is based on replacement cost. Net realizablevalue for finished goods and work in process is calculated based on the estimated selling price less all estimated costs of completionand necessary selling costs.(h) Equity Method InvestmentsEquity investments in entities where the Company has the ability to exercise significant influence over the operating and financialpolicy decisions of the investee but does not have a controlling financial interest in the investee, are accounted for using the equitymethod. The Company’s share of the net income or net loss of an investee is recognized in earnings from the date the significantinfluence commences until the date that significant influence ceases. The difference between the cost of an investment and the amountof underlying equity in net assets of an investee at investment date is allocated to related assets which are amortized over their usefullives. Any unallocated difference is treated as investor-level goodwill and is not amortized.The Company discontinues the use of the equity method from the date when the Company ceases to have significant influence overan associate, and then measures the retained interests at fair value at that date. The difference between the carrying amount of theinvestment at the date the equity method was discontinued and the fair value of the retained interests along with any proceeds fromdisposing of a part of the interest in the associate is recognized in profit or loss. When the Company discontinues the use of the equitymethod, the Company shall account for all amounts previously recognized in other comprehensive income in relation to thatinvestment on the same basis as would have been required if the investee had directly disposed of the related assets or liabilities.At the end of each reporting period, if there is any indication of impairment, the entire carrying amount of the investment includinggoodwill is tested for impairment as a single asset, by comparing its recoverable amount with its carrying amount. An impairment lossrecognized forms part of the carrying amount of the investment in associates. Accordingly, any reversal of that impairment loss isrecognized to the extent that the recoverable amount of the investment subsequently increases.(i) Property, Plant and EquipmentProperty, plant and equipment consists primarily of land, building and machinery and equipment used in the design and developmentof products, and is stated at cost less accumulated depreciation and any accumulated impairment loss. Depreciation on building andmachinery and equipment commences when the asset is ready for its intended use. Except for the following paragraph, depreciation isprimarily calculated on the straight-line method over the estimated useful lives of related assets which range as follows: building 25years, building improvements 4 to 16 years, machinery 4 to 10 years, research and development equipment 2 to 6 years, officefurniture and equipment 3 to 8 years, others 2 to 10 years. Leasehold improvements are amortized on a straight-line basis over theshorter of the lease term or the estimated useful life of the asset. Embedded software is amortized on a straight-line basis over theestimated useful lives ranging from 2 to 10 years. Land is not depreciated.If significant parts of an item of property, plant and equipment have different useful lives, then they are accounted for as separateitems (major components) of property, plant and equipment.Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.Table of ContentsHIMAX TECHNOLOGIES, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements (Continued)For the years ended December 31, 2021, 2022 and 2023F-20Property, plant and equipment that are highly probable to be recovered primarily through sale rather than through continuing use, arereclassified as held for sale. Immediately before classification as held for sale, the assets are measured at the lower of their carryingamount and fair value less costs to sell. Impairment losses on assets initially classified as held for sale and any subsequent gains orlosses on remeasurement are recognized in profit or loss. Gains are not recognized in excess of the cumulative impairment loss thathas been recognized. Once classified as held for sale, the property, plant and equipment are no longer depreciated.(j) Leasesa.Identifying a leaseA contract is, or contains, a lease when all the following conditions are satisfied:(i)the contract involves the use of an identified asset, and the supplier does not have a substantive right to substitute the asset;and(ii)the Company has the right to obtain substantially all of the economic benefits from use of the identified asset throughout theperiod of use; and(iii) the Company has the right to direct the use of the identified asset throughout the period of use.b.As a lesseePayments for leases of low-value assets and short-term leases are recognized as expenses on a straight-line basis during the leaseterm for which the recognition exemption is applied. Except for leases described above, a right-of-use asset and a lease liabilityshall be recognized for all other leases at the lease commencement date.The Company recognizes a right-of-use asset and a lease liability at the lease commencement date. The lease liability is initiallymeasured at the present value of the lease payments, discounted using the lessee’s incremental borrowing rate. The Companydetermines its incremental borrowing rate by obtaining interest rates from various external financing sources. The right-of-useasset is initially measured at cost, which comprises the initial amount of the lease liability, adjusted for any lease payments madeat or before the commencement date, less any lease incentives received, plus any initial direct costs incurred and an estimate ofcosts to be incurred in restoring the underlying asset.The right-of-use asset is subsequently depreciated using the straight-line method over the shorter of the useful life of the right-of-use asset or the lease term. The lease liability is subsequently measured at amortized cost using the effective interest method. It isremeasured (i) if there is a change in the lease term; (ii) if there is a change in future lease payments arising from a change in anindex or a rate; (iii) if there is a change in the amounts expected to be payable under a residual value guarantee; or (iv) if theCompany changes its assessment of whether it will exercise a purchase, extension or termination option. When the lease liabilityis remeasured in the circumstances aforementioned, a corresponding adjustment is made to the carrying amount of the right-of-use asset. However, if the carrying amount of the right-of-use asset is reduced to zero, any remaining amount of theremeasurement is recognized in profit or loss.Table of ContentsHIMAX TECHNOLOGIES, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements (Continued)For the years ended December 31, 2021, 2022 and 2023F-21Lease payments included in the measurement of the lease liability comprise the following:(i)fixed payments, including in-substance fixed payments.(ii)the exercise price under a purchase option that the Company is reasonably certain to exercise and lease payments in anoptional renewal period if the Company is reasonably certain to exercise an extension option.Moreover, the lease liability is remeasured when lease modifications occur that decrease the scope of the lease. The Companyaccounts for the remeasurement of the lease liability by decreasing the carrying amount of the right-of-use asset to reflect thepartial or full termination of the lease and recognizes in profit or loss any gain or loss relating to the partial or full termination ofthe lease.c.As a lessorLease income from an operating lease is recognized in profit or loss on a straight-line basis over the lease term. Initial direct costsincurred in negotiating and arranging an operating lease are added to the carrying amount of the asset leased.(k) GoodwillGoodwill is recognized when the purchase price exceeds the fair value of identifiable net assets acquired in a business combination.Goodwill is measured at cost less accumulated impairment losses, if any.Goodwill from acquisition of Himax Semiconductor, Inc. (formerly Wisepal Technologies, Inc., merged into Himax TechnologiesLimited on July 2, 2018) in 2007 amounting $26,846 thousand has been assigned to Driver IC cash generating unit (“CGU”) andgoodwill from acquisition of Himax Display (USA) Inc. in 2012 amounting $1,292 thousand has been assigned to WLO CGUbecause these CGUs are expected to benefit from the synergies of the business combinations.Goodwill is not amortized and instead is reviewed for impairment at least annually, or more frequently when there is an indicationthat the CGU may be impaired. For the purpose of impairment testing, goodwill is allocated to each of the Company’s CGU or groupsof CGU that are expected to benefit from the synergies of the combination. If the recoverable amount of a cash-generating unit is lessthan its carrying amount, the difference is allocated first to reduce the carrying amount of any goodwill allocated to such CGU andthen to the other assets of the CGU pro rata based on the carrying amount of each asset in the CGU. Any impairment loss for goodwillis recognized directly in profit or loss. An impairment loss recognized for goodwill is not reversed in subsequent periods.The recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in use which wascalculated based on the cash flow forecast from the financial budgets covering the future five-year period with the terminal growthrate. The annual discount rate was 11.98% and 9.95% in its test of Goodwill impairment for Driver IC CGU as of December 31, 2022and 2023, respectively, based on industry weighted average cost of capital. The annual discount rate for WLO CGU was 15.38% and13.96% as of December 31, 2022 and 2023, respectively. The terminal growth rate, based on following 5 years average Taiwaneconomic growth rate published by International Monetary Fund, was 2.18% and 2.6% used in the test for both CGUs as ofDecember 31, 2022 and 2023, respectively. The key assumptions abovementioned represents the management’s forecast of the futurefor the related industry by considering the history information from internal and external sources.For the years ended December 31, 2021, 2022 and 2023, the Company did not recognize any impairment loss on goodwill.Table of ContentsHIMAX TECHNOLOGIES, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements (Continued)For the years ended December 31, 2021, 2022 and 2023F-22(l) Other Intangible AssetsAcquired intangible assets include patents, intellectual property and developed technology acquired in a business combination. Theseintangible assets are amortized on a straight-line basis over the following estimated useful lives: software 2-10 years, patents 12-15years, intellectual property 10 years and technology 7 years.Amortization methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.(m) Impairment of Non-Financial AssetsThe Company’s long-term non-financial assets, which consist of property, plant and equipment and intangible assets, are reviewed atthe reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’srecoverable amount is estimated.The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. Inassessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflectscurrent market assessments of the time value of money and the risks specific to the asset. Considering the terminal growth rate if non-financial assets with an indefinite useful life are allocated to the CGU in comparison with its carrying amount.For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assetsthat generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets(the “cash-generating unit, or CGU”).The annual discount rate was 11.40% in its test of non-financial assets impairment with an indefinite useful life for CMOS CGU as ofDecember 31, 2021, based on industry weighted average cost of capital. The terminal growth rate, based on following 5 years averageTaiwan economic growth rate published by International Monetary Fund, was 2.46% used in the test as of December 31, 2021. Thekey assumptions abovementioned represents the management’s forecast of the future for the related industry by considering thehistory information from internal and external sources.An impairment loss is recognized if the carrying amount of an asset or its CGU exceeds its estimated recoverable amount. Impairmentlosses are recognized in profit or loss. When an impairment loss subsequently reverses, the carrying amount of the asset or a CGU isincreased to the revised estimate of its recoverable amount, but the increased carrying amount does not exceed the carrying amountthat would have been determined had no impairment loss been recognized for the asset or CGU in prior years. A reversal of animpairment loss is recognized immediately in profit or loss.(n) Revenue RecognitionIFRS 15 establishes principles for recognizing revenue that apply to all contracts with customers, using a five-step model frameworkto determine the method, timing and amount of revenue recognized. The Company generates revenue primarily from sale of goods orservices. Revenue from contracts with customers is disaggregated by primarily geographical market and major products.Under IFRS 15, the Company identifies the contract with the customers and recognizes revenue when performance obligations aresatisfied.Revenue is measured based on the consideration that the Company expects to be entitled in the transfer of goods or services to acustomer. The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product orservice to a customer. Customers obtain control of the product when the goods are delivered and accepted by customers. Invoices aregenerated at that point in time.Table of ContentsHIMAX TECHNOLOGIES, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements (Continued)For the years ended December 31, 2021, 2022 and 2023F-23The Company’s revenue recognition from product sales is measured at the amount that is highly probable that a significant reversal inthe amount of cumulative revenue recognized will not occur. Revenue is reduced for estimated rebates and other similar allowances.Trade receivable is recognized when the Company is entitled for unconditional right to receive payment upon delivery of goods tocustomers. The consideration received in advance from the customer but without delivery of goods is recognized as a contractliability, for which revenue is recognized when the control over the goods is transferred to the customer.The Company expects that the length of time when the Company transfers the goods or services to the customer and when thecustomer pays for those goods or services will be less than one year. Therefore, the amount of consideration is not adjusted for thetime value of money.(o) Employee Benefits1.Short-term employee benefitsShort-term employee benefits are expensed unless another policy allows or requires it to be capitalized. Liabilities recognized inrespect of short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in exchangefor service rendered by employees.2.Share-based payment arrangementsThe cost of employee services received in exchange for share-based compensation is measured based on the grant-date fair valueof the share-based instruments issued. The cost of employee services is equal to the grant-date fair value of shares issued toemployees and is recognized in earnings with a corresponding increase in equity over the service period by graded vesting.Compensation cost also considers the number of awards management believes will eventually vest. As a result, compensationcost is reduced by the estimated forfeitures. The estimate is adjusted each period to reflect the current estimate of forfeitures, andfinally, the actual number of awards that vest.3.Defined contribution plansObligations for contributions to defined contribution pension plans are recognized as an employee benefit expense in profit orloss in the periods during which services are rendered by employees.4.Defined benefit plansThe Company’s net obligation in respect of defined benefit pension plans is calculated separately for each benefit plan byestimating the amount of future benefit that employees have earned in the current and prior periods, discounting that amount anddeducting the fair value of any plan assets. For defined benefit retirement benefit plans, the cost of providing benefit isrecognized based on actuarial calculations. Defined benefit costs (including service cost, net interest and remeasurement) underthe defined benefit retirement benefit plans are determined using the Projected Unit Credit Method. Service cost (includingcurrent service cost), and net interest on the net defined benefit liability (asset) are recognized as employee benefits expense inprofit or loss in the period they occur. Remeasurement, comprising actuarial gains and losses and the return on plan assets(excluding interest), is recognized in other comprehensive income in the period in which they occur. Remeasurement recognizedin other comprehensive income is reflected immediately in retained earnings and will not be reclassified to profit or loss.(p) Income TaxesIncome tax expense comprises current and deferred taxes. It is recognized in profit or loss except to the extent that it relates to abusiness combination, or items recognized directly in equity or in other comprehensive income.Table of ContentsHIMAX TECHNOLOGIES, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements (Continued)For the years ended December 31, 2021, 2022 and 2023F-24The Company has adopted International Tax Reform – Pillar Two Model Rules (Amendments to IAS 12) upon their release on May23, 2023. The amendments provide a temporary mandatory exception from deferred tax accounting for the top-up tax, which iseffective immediately, and require new disclosures about the Pillar Two exposure.The mandatory exception applies retrospectively. However, because no new legislation to implement the top-up tax was enacted orsubstantially enacted on December 31, 2022 in any jurisdiction in which the Company operates and no related deferred tax wasrecognized at that date, the retrospective application has no impact on the Company’s consolidated financial statements.The Company has applied a temporary mandatory relief from deferred tax accounting for the impacts of the top-up tax and accountsfor it as a current tax when it is incurred. South Korea and Japan are the only two countries which represent jurisdictions where theCompany maintains subsidiaries’ operations and have already enacted tax legislation on December 31, 2023. The Company hasevaluated the current tax impact to be immaterial for the year ended 31 December 2023.1.Current taxCurrent taxes comprise the expected tax payable or receivable on the taxable income or losses for the year and any adjustments totax payable or receivable in respect of previous years. It is measured using tax rates enacted or substantively enacted tax rate atthe reporting date.2.Deferred taxDeferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the carryingamounts of existing assets and liabilities in the financial statements and their respective tax bases, and operating loss and taxcredit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable incomein the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets andliabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Deferred tax assets arereviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will berealized; such reductions are reversed when the probability of future taxable profits improves.(q) Business CombinationsAcquisitions of businesses are accounted for using the acquisition method. Acquisition-related costs are generally recognized in profitor loss as incurred. Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controllinginterests in the acquiree, and the fair value of the acquirer’s previously held equity interest in the acquiree over the net of theacquisition-date amounts of the identifiable assets acquired and the liabilities assumed. Non-controlling interests are initiallymeasured at the non-controlling interests’ proportionate share of the fair value of the acquiree’s identifiable net assets.Any contingent consideration payable is measured at fair value at the acquisition date. If the contingent consideration is classified asequity, then it is not remeasured and settlement is accounted for within equity. Otherwise, subsequent changes in the fair value ofcontingent consideration are recognized in profit or loss.When a business combination is achieved in stages, the Company’s previously held equity interest in the acquiree is remeasured tofair value at the acquisition date, and the resulting gain or loss is recognized in profit or loss.Table of ContentsHIMAX TECHNOLOGIES, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements (Continued)For the years ended December 31, 2021, 2022 and 2023F-25(r) Earnings Per Ordinary ShareBasic earnings per ordinary share is computed using profit or loss attributable to the shareholders and weighted average number ofordinary shares outstanding during the period. Diluted earnings per ordinary share is computed using the weighted average number ofordinary and diluted ordinary equivalent shares outstanding during the period. Ordinary equivalent shares are ordinary shares that arecontingently issuable upon the vesting of unvested restricted share units (RSUs) and employee stock options granted to employees.Basic and diluted earnings per ordinary share have been calculated as follows:Year Ended December 31, 2021 2022 2023Profits attributable to Himax Technologies, Inc. stockholders (in thousands)$436,896236,982 50,616Denominator for basic earnings per ordinary share: Weighted average number of ordinary shares outstanding (in thousands) 349,228349,448 348,990Basic earnings per ordinary share attributable to Himax Technologies, Inc. stockholders$1.250.68 0.15Basic earnings per ADS attributable to Himax Technologies, Inc. stockholders(1)$2.501.36 0.29Contingently issuable ordinary shares underlying the unvested RSUs and employee stock options granted to employees are includedin the calculation of diluted earnings per ordinary share based on treasury stock method.Year Ended December 31, 2021 2022 2023 Profits attributable to Himax Technologies, Inc. stockholders (in thousands)$436,896 236,98250,616Denominator for diluted earnings per ordinary share: Weighted average number of ordinary shares outstanding (in thousands)349,228 349,448348,990Unvested RSUs (in thousands)38 187576Employee stock options (in thousands)467——349,733 349,635349,566Diluted earnings per ordinary share attributable to Himax Technologies, Inc. stockholders$1.25 0.680.14Diluted earnings per ADS attributable to Himax Technologies, Inc. stockholders(1)$2.50 1.360.29Note (1): As the Company’s ordinary shares have been quoted on the NASDAQ Global Select Market under the symbol “HIMX” inthe form of ADSs and two ordinary shares represent one ADS with effect from August 10, 2009. The number of ADSequivalent outstanding is determined by dividing the number of ordinary shares by two. Therefore, the weighted averagenumber of ADS equivalent outstanding used in basic earnings per ADS for 2021, 2022 and 2023 is 174,614 thousand,174,724 thousand and 174,495 thousand, respectively. Additionally, the weighted average number of ADS equivalentoutstanding used in diluted earnings per ADS for 2021, 2022 and 2023 is 174,867 thousand, 174,817 thousand and 174,783thousand, respectively. The earnings per ADS is presented solely for the convenience of the reader and does not represent ameasure under IFRS.(s) Segment ReportingAn operating segment is a component of the Company that engages in business activities from which it may earn revenues and incurexpenses. All operating segments’ operating results are reviewed regularly by the Company’s chief operating decision maker(“CODM”) to make decisions about resources to be allocated to the segment and assess its performance, and for which discretefinancial information is available.Table of ContentsHIMAX TECHNOLOGIES, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements (Continued)For the years ended December 31, 2021, 2022 and 2023F-26The Company’s CODM has been identified as the Chief Executive Officer, who regularly reviews operating results to make decisionsabout allocating resources and assessing performance for the Company. Management has determined that the Company has twooperating segments: Driver IC and Non-driver products.The CODM assesses the performance of the operating segments based on segment sales and segment profit and loss. There are nointersegment sales in the segment revenues reported to the CODM. Segment profit and loss is determined on a basis that is consistentwith how the Company reports operating income (loss) in its consolidated statements of operations. Segment profit (loss) excludesincome taxes and items in non-operating income (loss).The Company does not report segment asset information to the Company’s CODM. Consequently, no asset information by segment ispresented.(t) Noncontrolling InterestsNoncontrolling interests are classified in the consolidated statements of profit or loss as part of profit (loss) for the period and theaccumulated amount of noncontrolling interests as part of equity in the consolidated statements of financial position. If a change inownership of a consolidated subsidiary results in loss of control and deconsolidation, any retained ownership interests are re-measured with the gain or loss reported in net earnings.(u) Use of Judgments and EstimatesThe preparation of the consolidated financial statements in conformity with IFRS requires management to make judgments, estimatesand assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses.Actual results may differ from these estimates.Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in theperiod in which the estimates are revised and in any future periods affected.Information about critical judgments, estimates and assumptions in applying accounting policies that have the most significant effecton the amounts recognized in the consolidated financial statements is included in the following notes:1.Valuation of inventoryInventories are stated at the lower of cost or net realizable value, and the Company uses judgment and estimate to determine thenet realizable value of inventory at the end of each reporting period.Due to the rapid technological changes, the Company estimates the net realizable value of inventory for obsolescence andunmarketable items at the end of reporting period and then writes down the cost of inventories to net realizable value. The netrealizable value of the inventory is mainly determined based on assumptions of future demand within a specific time horizon.2.Impairment of non-financial assets other than goodwillIn the process of evaluating the potential impairment of non-financial assets other than goodwill, the Company is required tomake subjective judgments in determining the independent cash flows, useful lives, expected future revenue and expenses relatedto the specific asset groups. Any changes in these estimates based on changed economic conditions or business strategies couldresult in significant impairment charges or reversal in future years.Table of ContentsHIMAX TECHNOLOGIES, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements (Continued)For the years ended December 31, 2021, 2022 and 2023F-273.Recognition of deferred tax assetsDeferred tax assets are recognized to the extent that it is probable that future taxable profits will be available against which thosedeferred tax assets can be utilized. Assessment of the realization of the deferred tax assets requires the Company’s subjectivejudgment and estimate, including the future revenue growth and profitability, the sources of taxable income, the amount of taxcredits that can be utilized and feasible tax planning strategies. Changes in the economic environment, the industry trends andrelevant laws and regulations may result in adjustments to the deferred tax assets.4.Impairment of goodwillThe assessment of impairment of goodwill requires the Company to make subjective judgment to determine the identified CGU,allocate the goodwill to relevant CGU and estimate the recoverable amount of relevant CGU. In the process of estimating therecoverable amount of relevant CGU, the Company is required to make subjective judgments in determining the discounted rate,the terminal growth rate, the independent cash flows, useful lives, expected future revenue and expenses related to the CGU.Note 5. ConsolidationThe Company holds 49% of the outstanding voting shares of Viewsil. One board director appointed by the one other shareholder resignedon December 30, 2023, and that other shareholder informed the Company that it would not appoint another board of director to fill thecasual vacancy in the future. Therefore, there would be 3 board directors in Viewsil and the Company would assign 2 board seats withobtaining more than half of the total number of Viewsil’s directors from December 30, 2023 without consideration paid. An investor haspower over an investee when the investor has existing rights that give it the current ability to direct the relevant activities that significantlyaffect the investee returns. The Company has the power to determine the major matters and the most important decisions that willsignificantly impact the operations and direct financial interests are resolved by majority vote of directors present in the meeting.Therefore, it is determined that the Company has controlling power over Viewsil from December 30, 2023, the acquisition date.The Company’s previously held equity interests in Viewsil was re-measured at fair value, which was determined according to the amountof underlying equity in net assets of Viewsil at acquisition date. The re-measurement loss on the previously held equity interests in Viewsilwas $1,932 thousand which is included in “other gains (losses)” in the consolidated statements of profit or loss.The results of Viewsil’s operations for 2023 have not been included in the Company’s consolidated financial statements since theacquisition date on December 30, 2023. If the consolidation had occurred on January 1, 2023, management estimates that consolidatedrevenue would have been $945,428 thousand (unaudited), and consolidated profit for the year would have been $50,641 thousand(unaudited). In determining these amounts, management has assumed that the fair value adjustments that arose on the date ofconsolidation would have been the same if the consolidation had occurred on January 1, 2023.Table of ContentsHIMAX TECHNOLOGIES, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements (Continued)For the years ended December 31, 2021, 2022 and 2023F-28The following table summarizes the amounts of estimated fair value of the assets obtained and liabilities assumed at the date ofconsolidation. Fair value(in thousands)Recognized amounts of identifiable assets obtained and liabilities assumed: Cash$433Current assets, other than cash 2,576Other assets 7Other current liabilities (1,425)Total identifiable net assets obtained 1,591Noncontrolling interests (811)$780Obtained assets were valued at estimates of their current fair values based on management’s estimate.Note 6. Disposal of subsidiaryThe Company had disposed its 100% shareholdings in Emza Visual Sense Ltd. (“EMZA”) to a third party with a consideration of $15,092thousand netting disposal related cost in October 2022. The Company derecognized EMZA from the date of disposal as its subsidiary. TheCompany derecognized the assets, liabilities and the related equity components of EMZA, and recognized a gain on disposal of $10,694thousand, and recorded it as other gains (losses).The carrying amount of assets and liabilities of EMZA on the date of disposal was as follow: EMZA(in thousands)Cash$323Current assets, other than cash 2,241Property, plant and equipment 179Other intangible assets 4,436Other non-current assets 587Other current and non-current liabilities (4,148)Net assets disposed of$3,618Note 7. Cash and Cash EquivalentsDecember 31, December 31, 2022 2023 (in thousands)Cash, demand deposits and checking accounts$217,181182,049Time deposits with less than three months maturity date 4,4009,700$221,581191,749Refer to Note 23 and Note 24 for the disclosure of credit risk, currency risk and sensitivity analysis of the financial assets and liabilities ofthe Company.As of December 31, 2022 and 2023, no cash and cash equivalents were pledged with banks as collaterals.Table of ContentsHIMAX TECHNOLOGIES, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements (Continued)For the years ended December 31, 2021, 2022 and 2023F-29Note 8. Financial Assets at Amortized CostDecember 31, December 31, 2022 2023 (in thousands)Time deposit with original maturities more than three months$8,31412,511The financial assets at amortized cost are in China Yuan (CNY) and US dollar denominated time deposits with original maturities of morethan three months and the expected holding period as of December 31, 2022 and 2023 is due in one year or less.As of December 31, 2022 and 2023, no financial assets at amortized cost were pledged with banks as collaterals.Note 9. Financial Assets at Fair Value Through Profit or LossFollowing is a summary of financial assets at fair value through profit or loss as of December 31, 2022 and 2023:December 31, December 31, 2022 2023 (in thousands)Money market fund$—2,117Equity securities-unlisted company 15,35021,650$15,35023,767Current$—2,117Non-current 15,35021,650$15,35023,767Net gain (loss) of ($284) thousand, $1,246 thousand and $1,655 thousand, was recognized under changes in fair value of financial assets atfair value through profit or loss in the consolidated statement of profit or loss for the years ended December 31, 2021, 2022 and 2023,respectively.As of December 31, 2022 and 2023, no financial assets at fair value through profit or loss were pledged with banks as collaterals.Note 10. Financial Assets at Fair Value Through Other Comprehensive IncomeThe equity securities are held for long-term strategies and therefore are accounted for as FVTOCI. Capital reduction from equity securityinvestments designated as at FVTOCI recognized for the years ended December 31, 2021, 2022 and 2023, were $151 thousand, $283thousand and $99 thousand, respectively, all related to investments held at the end of the reporting period.As of December 31, 2022 and 2023, no financial assets at fair value through other comprehensive income were pledged with banks ascollaterals.Table of ContentsHIMAX TECHNOLOGIES, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements (Continued)For the years ended December 31, 2021, 2022 and 2023F-30Note 11. Accounts Receivable, net (including related parties)December 31, December 31, 2022 2023(in thousands)Accounts receivable$261,112235,815Accounts receivable from related parties3614Less: Loss allowance ——$261,148235,829As of December 31, 2022 and 2023, the Company measures the loss allowance for accounts receivable using the simplified approachunder IFRS 9 with the lifetime expected credit losses. To measure the expected credit losses, accounts receivable have been grouped basedon the days past due, as well as incorporated forward looking information, including relevant industry information. Analysis of expectedcredit losses which was measured based on the aforementioned method, was as follows:December 31, 2022LossCarryingallowanceamount ofWeightedfor lifetimeaccountsaverage lossexpected receivable rate credit(in thousands)(in thousands)Not past due$258,9740%$—Past due within 30 days 1,8840%—Past due 31‑60 days 1210-32.15%—Past due 61‑90 days 750-47.02%—Past due 91‑120 days 940-77.69%—Past due over 121 days —100.00%—$261,148 $—December 31, 2023LossCarryingallowanceamount ofWeightedfor lifetimeaccountsaverage lossexpected receivable rate credit(in thousands)(in thousands)Not past due$231,6760% $—Past due within 30 days 3,5910% —Past due 31‑60 days 4620% —Past due 61‑90 days 90% —Past due 91‑120 days —0% —Past due over 121 days 910%-100.00% —$235,829 $—There were no changes in loss allowance as of December 31, 2022 and 2023.Table of ContentsHIMAX TECHNOLOGIES, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements (Continued)For the years ended December 31, 2021, 2022 and 2023F-31The activity in the loss allowance is as follows:Loss AllowanceBalance atAmountsBeginningCharges toutilized /Balance atPeriod of year earnings write-offs end of year (in thousands)Year 2021$190 (190) — —Year 2022$— — — —Year 2023$————Note 12. Inventories December 31, December 31, 2022 2023(in thousands)Finished goods$63,42547,468Work in process 169,16696,955Raw materials 138,08672,692Supplies 256193$370,933217,308The amounts of inventories that were charged to cost of revenues were $789,071 thousand, $692,022 thousand and $660,391 thousand, forthe years ended December 31, 2021, 2022 and 2023, respectively, and the charges for inventories written down to net realizable valueamounted to $9,448 thousand, $22,211 thousand and $21,540 thousand, for the years ended December 31, 2021, 2022 and 2023,respectively, which were also included in cost of revenues.As of December 31, 2022 and 2023, none of the Company’s inventories was pledged as collateral.Note 13. Equity Method InvestmentsAssociates consisted of the following:December 31, 2022December 31, 2023Place ofIncorporationPrincipalandCarryingHoldingCarryingHoldingName of Associate Activities Operation amount % amount %(in thousands)(in thousands)Ganzin Technology Corp. Eye tracking chip and module Taipei, Taiwan$— 35.72$— 32.21Iris Optronics Co., Ltd. E-paper manufacturing and sales Tainan, Taiwan 315 4.93 303 4.52Viewsil Microelectronics(Kunshan) Limited IC design and sales Kunshan, China 2,635 49.00 — —Guangzhou Pixtalks InformationTechnology Co., Ltd.3D structured light moduleGuangzhou, China28529.5015329.50Prilit Optronics, Inc.LCD panel componentsmanufacturingTainan, Taiwan3,29815.003,03414.95 $6,533 $3,490 Prilit Optronics, Inc. was purchased with original investment amount of $3,264 thousand in October 2022.Table of ContentsHIMAX TECHNOLOGIES, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements (Continued)For the years ended December 31, 2021, 2022 and 2023F-32There is no individually significant associate for the Company. The following table summarized the amount recognized by the Companyat its share of those associates:For the year ended December 31, 20212022 2023(in thousands)The Company’s share of losses of associates$(1,392)(743) (598)The Company’s share of other comprehensive income of associates$55(86) 20The Company’s share of total comprehensive income of associates$(1,337)(829) (578)The Company has not recognized losses of $24 thousand, $302 thousand and $691 thousand in relation to its interest in GanzinTechnology Corp. for the year ended December 31, 2021, 2022 and 2023, respectively, because the Company has no obligation in respectof the losses. As of December 31, 2023, the cumulative unrecognized losses in relation to the Company’s interest in Ganzin TechnologyCorp. was $1,017 thousand.As of December 31, 2022 and 2023, none of the Company’s equity method investments was pledged as collateral.Note 14. Other Intangible Assets Technology Software Others Total(in thousands)Cost Balance at January 1, 2022$13,171 5,664 3,423 22,258Additions — 331 — 331Disposals — (8) — (8)Disposal of subsidiary (6,282) — (2,182) (8,464)Effect of exchange rate changes — (18) (69) (87)Balance at December 31, 2022 6,889 5,969 1,172 14,030Additions — 115 — 115Consolidation through obtaining control of subsidiary—1—1Effect of exchange rate changes — (3) — (3)Balance at December 31, 2023$6,889 6,082 1,172 14,143Accumulated Amortization Balance at January 1, 2022$9,891 5,233 517 15,641Amortization for the year 887 323 168 1,378Disposals — (8) — (8)Disposal of subsidiary (3,889) — (139) (4,028)Effect of exchange rate changes — (17) (30) (47)Balance at December 31, 2022 6,889 5,531 516 12,936Amortization for the year—273121394Effect of exchange rate changes — (3) — (3)Balance at December 31, 2023$6,889 5,801 637 13,327Carrying amounts At December 31, 2022$— 438 656 1,094At December 31, 2023$— 281 535 816Others in other intangible assets includes the acquired trademark $1,800 thousand with an indefinite useful life. The Companyderecognized the trademark $1,800 thousand with the disposal of subsidiary in October 2022.Table of ContentsHIMAX TECHNOLOGIES, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements (Continued)For the years ended December 31, 2021, 2022 and 2023F-33Other intangible assets were amortized on a straight-line basis over their estimated useful lives as follows:Technology 7yearsSoftware 2-10yearsOthers (except for trademark) 7-15yearsNote 15. Property, Plant and Equipment(a)Prepaymentsfor purchaseResearchOfficeof equipmentBuildingandfurnitureandanddevelopmentandconstruction Land improvements Machinery equipment equipment Others in progress Total(in thousands)Cost Balance at January 1, 2022$41,828 75,383 77,441 49,227 13,127 46,442 447 303,895Additions—1,1292,7301,9461,3014,0302,21013,346Transfers — — 335 112 — — (447) —Disposals — (37) (2) (1,861) (152) (2,163) — (4,215)Disposal of subsidiary — — — — (103) (225) — (328)Effect of exchange rate changes — — — — (168) (371) — (539)Balance at December 31, 202241,828 76,475 80,504 49,42414,00547,7132,210312,159Additions — 1,239 14,977 2,4151,0105,9112,62128,173Consolidation through obtaining control ofsubsidiary — — — —6——6Transfers — 67 334 2——(403)—Reclassification to assets held for sale (4,175) — — —-——(4,175)Disposals——(1,084)(1,608)(1)(2,770)—(5,463)Effect of exchange rate changes — 1 1 —(29)(82)—(109)Balance at December 31, 2023$37,653 77,782 94,732 50,23314,99150,7724,428330,591Accumulated Depreciation Balance at January 1, 2022$— 28,800 63,395 40,941 10,859 26,664 — 170,659Depreciation for the year — 4,212 4,964 3,125 1,132 6,531 — 19,964Disposals — (37) (2) (1,861) (152) (1,969) — (4,021)Disposal of subsidiary — — — — (57) (92) — (149)Effect of exchange rate changes— — — — (141) (291) — (432)Balance at December 31, 2022 — 32,975 68,357 42,205 11,641 30,843 — 186,021Depreciation for the year — 4,325 4,985 3,241 1,054 6,323 — 19,928Disposals——(1,081)(1,596)(1)(2,711)—(5,389)Effect of exchange rate changes — — — — (25) (53) — (78)Balance at December 31, 2023$— 37,300 72,261 43,850 12,669 34,402 — 200,482Carrying amounts At December 31, 2022$41,828 43,500 12,147 7,219 2,364 16,870 2,210 126,138At December 31, 2023$37,653 40,482 22,471 6,383 2,322 16,370 4,428 130,109Others in property, plant and equipment includes mold equipment, leasehold improvements, right-of-use assets and other equipment.Table of ContentsHIMAX TECHNOLOGIES, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements (Continued)For the years ended December 31, 2021, 2022 and 2023F-34As of December 31, 2023, a piece of land $4,175 thousand was presented as assets held for sale following the commitment of theCompany’s management to sell the land before the end of 2024. The land held for sale has been included in “Other current assets” in theconsolidated statements of financial position.The Company incurred non-cash capital expenditures of $3,608 thousand, $2,551 thousand and $3,086 thousand in the years endedDecember 31, 2021, 2022 and 2023.The above items of property, plant and equipment are depreciated on a straight-line basis over their estimated useful lives as follows:Buildings 25 yearsBuilding improvements 4-16 yearsMachinery 4-10 yearsResearch and development equipment 2-6 yearsOffice furniture and equipment 3-8 yearsOthers 2-15 yearsFor the years ended December 31, 2021, 2022 and 2023, the Company did not recognize any impairment loss on property, plant andequipment.Information on property, plant and equipment that were pledged to bank as collateral is provided in Note 27.(b) Lease Arrangements(i) Right-of-use assetsAddition to right-of-use assets during 2022 and 2023 were $2,395 thousand and $4,398 thousand, respectively. The carrying amountsof right-of-use assets for offices and buildings lease included in Others in property, plant and equipment was $13,863 thousand and$13,559 thousand as of December 31, 2022 and 2023, respectively. Depreciation expense of right-of-use assets amounted to $4,554thousand, $4,810 thousand and $4,609 thousand in 2021, 2022 and 2023, respectively.(ii) Lease liabilities December 31, December 31,20222023 (in thousands)Current portion (classified under other current liabilities)$4,2184,636Non-current portion (classified under other non-current liabilities) 7,4576,744$11,67511,380(iii) Additional lease informationYear ended December 31, 2021 20222023(in thousands)Expenses relating to short-term leases$16236473Expenses relating to low-value asset leases$342113368Expenses relating to variable lease payments not included in themeasurement of lease liabilities$1,8742,9202,195Table of ContentsHIMAX TECHNOLOGIES, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements (Continued)For the years ended December 31, 2021, 2022 and 2023F-35The reconciliation of lease liabilities to cash flows arising from financing activities was as follows: Year ended December 31,2022 2023 (in thousands)Balance at beginning of year$15,86011,675Change from financing activities: Payment of lease liabilities (4,294)(4,830)Total change from financing activities (4,294)(4,830)Other changes: New lease 2,3954,267Interest expense 222167Interest paid (222)(167)Lease modifications(194)(75)Disposal of subsidiary(138)—Effect of exchange rate changes (1,954)343Total liability-related other changes 1094,535Balance at end of year$11,67511,380Note 16. Other Current Liabilities December 31, December 31, 20222023(in thousands)Accrued payroll and related expenses$22,586 26,329Guarantee deposit received14,25134,270Accrued mask, mold fees and other expenses for RD 10,330 14,813Received in advance from disposal of land — 7,383Accrued software maintenance 3,850 7,222Lease liabilities 4,218 4,636Payable for purchases of building and equipment2,6703,102Provision on onerous inventory contract5,791599Allowance for sales discounts2,180552Accrued insurance, welfare expenses, professional fee and others 9,659 10,385$75,535 109,291The activity in the sales discounts is as follows:Allowance for sales discountsBalance atBalance atbeginningCharges toAmountsend ofPeriod of year earnings utilized year (in thousands)Year 2021$80913,632(12,871)1,570Year 2022$1,570 26,830 (26,220) 2,180Year 2023$2,180 20,429(22,057) 552Table of ContentsHIMAX TECHNOLOGIES, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements (Continued)For the years ended December 31, 2021, 2022 and 2023F-36Note 17. Short-Term Borrowings December 31, December 31, 20222023 (in thousands) Secured borrowings$369,300 453,000Unused credit lines$323,212 206,483Interest rate-secured borrowings 0.35%~1.78% 0.3%~0.35%As of December 31, 2022 and 2023, cash and time deposits totaling $369,300 thousand and $453,000 thousand are pledged as collateral,respectively.As of December 31, 2023, unused credit lines will expire between February 2024 and October 2024. Among the unused credit lines,$27,244 thousand will expire before the end of March 2024, and $127,000 thousand belonging to the parent company, HimaxTechnologies, Inc., needs to be secured with equal amount of cash and time deposits when borrowing money from banks.The reconciliation of borrowings to cash flows arising from financing activities was as follows: Unsecured Securedborrowingsborrowings(in thousands)January 1, 2022$—151,400Change from financing activities:Proceeds from borrowings—1,212,700Repayments of borrowings—(994,800)Total changes from financing activities—217,900December 31,2022—369,300Change from financing activities:Proceeds from borrowings47,2261,383,300Repayments of borrowings(47,226)(1,299,600)Total changes from financing activities—83,700December 31,2023$— 453,000Note 18. Long-Term Borrowings December 31,December 31, 2022 2023 (in thousands)Unsecured borrowings $46,50040,500Less: current portion (6,000)(6,000)Total $40,50034,500Unused long-term credit lines $83,500139,500Interest rate 5.48%6.25%Duration2020/8/4~ 2030/9/22020/8/4~ 2030/9/2The Company entered into unsecured borrowings with Chang Hwa Bank, in the amount of $40,000 thousand on August 4, 2020 and$20,000 thousand on September 2, 2020, respectively, with a term of ten years. Funding from long-term unsecured borrowings was usedto repay the existing debts of financial institutions and broaden the Company’s working capital.Table of ContentsHIMAX TECHNOLOGIES, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements (Continued)For the years ended December 31, 2021, 2022 and 2023F-37As of December 31, 2022 and 2023, for enhancing the guaranty, land and building and improvements totaling $65,571 thousand and$63,352 thousand are pledged as collateral. Please refer to Note 27.The reconciliation of borrowings to cash flows arising from financing activities was as follows:Year ended December 31, 2022 2023(in thousands)Balance at beginning of year$52,50046,500Change from financing activities:Proceeds from borrowings 40,000—Repayments of borrowings (46,000)(6,000)Total changes from financing activities (6,000)(6,000)Balance at end of year$46,50040,500Note 19. Employee benefits1.Defined benefit plansPursuant to the ROC Labor Standards Law, the Company has established a defined benefit pension plan covering full-time employeesin the ROC that provides retirement benefits to retiring employees based on years of service and the average salary for the six-monthperiod before the employee’s retirement.Reconciliations of defined benefit obligation at present value and plan asset at fair value are as follows: December 31, December 31, 20222023(in thousands)Present value of the defined benefit obligations$3,0603,114Fair value of plan assets (4,307) (4,382)Prepaid pension costs$(1,247) (1,268)(i) Plan assetsThe Fund is administered by a pension fund monitoring committee (the “Committee”) and is deposited in the Committee’s namein the Bank of Taiwan. Under the ROC Labor Standards Law, the minimum return on the plan assets should not be lower than theaverage interest rate on two-year time deposits published by the local banks. As of December 31, 2023, the Funds deposited inthe Committee’s name in the Bank of Taiwan amounted to $4,382 thousand.Table of ContentsHIMAX TECHNOLOGIES, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements (Continued)For the years ended December 31, 2021, 2022 and 2023F-38(ii) Movements in present value of the defined benefit obligationsYear ended December 31, 2022 2023(in thousands)Balance at beginning of year$3,489 3,060Service costs 4 5Interest expense 27 42Remeasurements loss (gain): Actuarial loss (gain) arising from: -Changes in demographic assumptions 24 —-Experience adjustment 167 (20)-Change in financial assumptions (551) 42Effect of changes in exchange rates (100) (15)Balance at end of year$3,060 3,114(iii) Movements in the fair value of plan assetsYear ended December 31, 2022 2023(in thousands)Balance at beginning of year$4,065 4,307Interest income 3160Remeasurements gain: -Return on plan assets excluding interest income 305 31Actual benefits paid — (17)Effect of changes in exchange rate (94) 1Balance at end of year$4,307 4,382(iv) Expenses recognized in profit or lossYear ended December 31, 20212022 2023(in thousands)Current service costs$—4 5Interest income(2)(4) (18)$(2)— (13)Cost of revenues$63 —Research and development(8)(3) (13)General and administrative—— —Sales and marketing—— —$(2)— (13)(v) Remeasurement of net defined benefit liability recognized in other comprehensive incomeYear ended December 31, 2022 2023(in thousands)Balance at beginning of year$(22) (599)Recognized during the period (577) (11)Balance at end of year$(599) (610)Table of ContentsHIMAX TECHNOLOGIES, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements (Continued)For the years ended December 31, 2021, 2022 and 2023F-39(vi) Actuarial assumptionsThe principal actuarial assumptions were as follows: December 31, December 31, 20222023 Discount rate 1.4%-1.41%1.31%Rate of increase in compensation levels 3.00%3.00%The Company expects to make contribution of nil to the defined benefit plans in the next year starting from January 1, 2024.As at December 31, 2023, the weighted average duration of the defined benefits obligation was between 15 years to 16 years.(vii) Sensitivity analysisReasonably possible changes at December 31, 2022 and 2023 to one of the relevant actuarial assumptions, holding otherassumptions constant, would have affected the defined benefit obligation by the amounts shown below.December 31, 2022December 31, 2023 + 0.5% - 0.5% + 0.5% ‑0.5%(in thousands)Discount rate (238) 261 (230) 251Rate of increase in compensation levels 255 (235) 245 (227)2.Defined contribution plansBeginning July 1, 2005, pursuant to the newly effective ROC Labor Pension Act, the Company is required to make a monthlycontribution for full-time employees in the ROC that elected to participate in the Defined Contribution Plan at a rate no less than 6%of the employee’s monthly wages to the employees’ individual pension fund accounts at the ROC Bureau of Labor Insurance.Expenses recognized in 2021, 2022 and 2023, based on the contribution called for were $3,683 thousand, $3,828 thousand and $3,922thousand, respectively.The Company established a defined contribution plan in the United States that qualifies under Section 401(k) of the Internal RevenueCode. This plan covers substantially all employees who meet the service requirement. The Company’s contribution to the plan may bemade at the discretion of the board of directors. Expenses recognized in 2021, 2022 and 2023, based on the contribution called forwere nil, $47 thousand and $68 thousand, respectively.All PRC employees participate in employee social security plans, including pension and other welfare benefits, which are organizedand administered by governmental authorities. The Company has no other substantial commitments to employees. The premiums andwelfare benefit contributions that should be borne by the Company are calculated in accordance with relevant PRC regulations, andare paid to the labor and social welfare authorities. Expenses recognized based on this plan were $1,695 thousand, $2,088 thousandand $2,390 thousand for the years ended December 31, 2021, 2022 and 2023, respectively.Other foreign subsidiaries recognized pension expenses of $617 thousand, $564 thousand and $221 thousand for the years endedDecember 31, 2021, 2022 and 2023, respectively, for the defined contribution plans based on their respective local governmentregulations.Table of ContentsHIMAX TECHNOLOGIES, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements (Continued)For the years ended December 31, 2021, 2022 and 2023F-403.Cash awardOn September 28, 2021 and 2022, and September 26, 2023, the Company’s compensation committee granted annual bonuses by cashpayouts totaling $47,657 thousand, $19,346 thousand and $729 thousand, respectively to the Company’s employees among which$1,582 thousand, $1,015 thousand and $187 thousand, respectively was immediately vested on the grant date. The remainder will beequally vested at the first, second and third anniversaries of the grant date.The amounts of cash award expenses included in applicable costs of revenues and expense categories and related tax effects aresummarized as follows:Year ended December 31,202120222023(in thousands)Cost of revenues$511505174Research and development5,87620,79215,273General and administrative6782,2501,401Sales and marketing1,2234,1472,797Total compensation$8,28827,69419,645Income tax benefit$1,4445,6414,167Note 20. Share-Based CompensationThe amounts of share-based compensation expenses included in applicable costs of revenues and expense categories and related taxeffects are summarized as follows:Year ended December 31, 20212022 2023(in thousands)Cost of revenues$682 481 157Research and development17,662 15,345 9,414General and administrative2,367 2,193 1,108Sales and marketing3,163 2,612 1,453Total compensation$23,874 20,631 12,132Income tax benefit$4,896 4,201 2,545(a)Long-term Incentive Plan(i)Restricted share Units (RSUs)On September 7, 2011, the Company’s shareholders approved a long-term incentive plan. The amended and restated plan wasamended and restated by extending its duration to September 6, 2025, which was approved by the Company’s shareholders at theannual general meeting held on August 16, 2022. The plan permits the grants of options or RSUs to the Company’s employees,directors and service providers where each unit of RSU represents two ordinary shares of the Company.On September 26, 2018, the Company’s compensation committee made grants of 676,273 RSUs to the Company’s employees.The vesting schedule for the RSUs is as follows: 97.15% of the RSUs grant vested immediately on the grant date which wassettled by cash amounting to $3,778 thousand, a subsequent 0.95% will vest on each of September 30, 2019, 2020 and 2021which will be settled by the Company’s ordinary shares, subject to certain forfeiture events.Table of ContentsHIMAX TECHNOLOGIES, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements (Continued)For the years ended December 31, 2021, 2022 and 2023F-41On September 28, 2020, the Company’s compensation committee made grants of 1,402,714 RSUs to the Company’s employees.The vesting schedule for the RSUs is as follows: 98.68% of the RSUs grant vested immediately on the grant date which wassettled by cash amounting to $4,762 thousand, a subsequent 0.44% will vest on each of September 30, 2021, 2022 and 2023which will be settled by the Company’s ordinary shares, subject to certain forfeiture events.On September 28, 2021, the Company’s compensation committee made grants of 2,604,545 RSUs to the Company’s employees.The vesting schedule for the RSUs is as follows: 85.63% of the RSUs grant vested immediately on the grant date which wassettled by cash amounting to $23,174 thousand, a subsequent 4.79% will vest on each of September 30, 2022, 2023 and 2024which will be settled by the Company’s ordinary shares, subject to certain forfeiture events.On September 28, 2022, the Company’s compensation committee made grants of 3,987,509 RSUs to the Company’s employees.The vesting schedule for the RSUs is as follows: 86.41% of the RSUs grant vested immediately on the grant date which wassettled by cash amounting to $17,535 thousand, a subsequent 4.53% will vest on each of September 30, 2023, 2024 and 2025which will be settled by the Company’s ordinary shares, subject to certain forfeiture events.On September 26, 2023, the Company’s compensation committee made grants of 1,710,607 RSUs to the Company’s employees.The vesting schedule for the RSUs is as follows: 97.45% of the RSUs grant vested immediately on the grant date which wassettled by cash amounting to $9,468 thousand, a subsequent 0.85% will vest on each of September 30, 2024, 2025 and 2026which will be settled by the Company’s ordinary shares, subject to certain forfeiture events.On November 9, 2022, the Company’s compensation committee made the unvested RSUs generally include forfeitable dividend-equivalent rights, which entitle holders of RSUs to the same dividend value per share as holders of common stock. The dividend-equivalent rights are subject to the same vesting and other terms and conditions as the underlying RSUs.The amount of compensation expense from the long-term incentive plan was determined based on the estimated fair value andthe market price of ADS (one ADS represents two ordinary shares) underlying the RSUs granted on the date of grant, which were$5.76 per ADS, $3.44 per ADS, $10.39 per ADS, $5.09 per ADS and $5.68 per ADS on September 26, 2018, September 28,2020, September 28, 2021, September 28, 2022 and September 26, 2023, respectively.Table of ContentsHIMAX TECHNOLOGIES, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements (Continued)For the years ended December 31, 2021, 2022 and 2023F-42RSUs activity under the long-term incentive plan during the periods indicated is as follows: Number of WeightedUnderlyingAverage Grant Shares for RSUs Date Fair ValueBalance at January 1, 2021 22,889$3.88Granted2,604,54510.39Vested(2,237,499)10.37Forfeited(3,415)4.38Balance at December 31, 2021 386,520 10.17Granted 3,987,509 5.09Vested (3,563,177) 5.25Forfeited (18,643) 10.15Balance at December 31, 2022 792,209 6.71Granted1,710,6075.68Vested(1,974,496)5.91Forfeited(2,355)9.81Balance at December 31, 2023525,9656.36As of December 31, 2023, the total compensation cost related to the unvested RSUs not yet recognized was $1,415 thousand. Theweighted-average period over which it is expected to be recognized is 1.6 years.In 2021, 2022 and 2023, the Company settled RSUs release with shares buyback of 14,264 shares, 235,910 shares and 615,052shares, respectively.The allocation of compensation expenses and related tax effects from the RSUs granted to employees under the long-termincentive plan are summarized as follows:Year ended December 31, 20212022 2023(in thousands)Cost of revenues$676 472 153Research and development17,592 15,097 9,353General and administrative2,343 1,934 1,108Sales and marketing3,149 2,497 1,449Total compensation$23,760 20,000 12,063Income tax benefit$4,896 4,201 2,545(ii)Employee stock optionsOn September 23, 2019, the Company’s compensation committee approved a plan to grant stock options, the 2019 plan, tocertain employees. The 2019 plan authorizes grants to purchase up to 3,000,000 units ADS, representing 6,000,000 shares of theCompany’s ordinary share. 2,226,690 units of stock option to purchase 2,226,690 units ADS were grant to certain employees atan exercise price of $2.27 on September 30, 2019.Table of ContentsHIMAX TECHNOLOGIES, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements (Continued)For the years ended December 31, 2021, 2022 and 2023F-43The 2019 plan has two years contractual life and one year vesting period. Based on the vesting schedule, 50% of the options vesthalf year after the date of grant and 50% of the options vest one year after the date of grant. The Company recognizedcompensation expenses before 2021.During 2020, 114,500 units, 39,000 units and 10,000 units of stock option to purchase 114,500 units, 39,000 units and 10,000units ADS were grant to certain employees at an exercise price of $2.74, $3.9 and $3.35 on March 31, 2020, August 11, 2020 andSeptember 25, 2020, respectively. The options granted in 2020 were fully vested on October 1, 2020. The Company recognizedcompensation expenses before 2021.The calculated value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model thatused the weighted average assumptions in the following table. The Company uses the simplified method to estimate the expectedterm of the options as it does not have sufficient historical share option exercise experience and the exercise data relating toemployees of other companies is not easily obtainable. The risk-free rates for the expected term of the options are based on theinterest rates of 1 years and 1.5 years U.S. Treasury yield at the time of grant. 2019 plan Valuation assumptions: Expected dividend yield 3.5%Expected volatility 51.96%-57.79%Expected term (years) 1-1.5Risk-free interest rate 1.69%-1.75%Stock option activity during the periods indicated is as follows:WeightedWeightedaverageaverageremainingNumberexercisecontractual of Units price termBalance at January 1, 2021 578,468$2.36 0.54Exercised(524,387)2.37Expired(54,081)2.27Balance at December 31, 2021———Exercisable at December 31, 2021 ———(b)Employee stock options(i)On March 19, 2021, board of directors of CM Visual Technology Corp. approved a plan to grant stock options, the 2021 plan, tocertain employees. This plan authorizes grants to purchase up to 3,000,000 shares of CM Visual Technology Corp.’ authorizedbut unissued ordinary shares. The exercise price was NT$10 (US$0.36).The 2021 plan has four years contractual life and three years vesting period. Based on the vesting schedule, 50% of the optionsvest one and half years after the date of grant and 50% of the options vest three years after the date of grant.The Companyrecognized compensation expenses of $71 thousand, $76 thousand and $69 thousand in 2021, 2022 and 2023, respectively. Suchcompensation expense was recorded as cost of revenues, sales and marketing expenses, general and administrative expense andresearch and development expenses in the consolidated statements of income. There was no income tax benefit realized in theconsolidated statements of income for employee stock options for the years ended December 31, 2021, 2022 and 2023,respectively.Table of ContentsHIMAX TECHNOLOGIES, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements (Continued)For the years ended December 31, 2021, 2022 and 2023F-44The calculated value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model thatused the weighted average assumptions in the following table. CM Visual Technology Corp. uses the simplified method toestimate the expected term of the options as it does not have sufficient historical share option exercise experience and theexercise data relating to employees of other companies is not easily obtainable. Since CM Visual Technology Corp.’ shares arenot publicly traded and its shares are rarely traded privately, expected volatility is computed based on the average historicalvolatility of similar entities with publicly traded shares. The risk-free rate for the expected term of the options is based on theinterest rates of 2 years and 5 years ROC central government bond at the time of grant. 2021 planGranted inGranted in20212023Valuation assumptions:Expected dividend yield 0% 0%Expected volatility 43.82% 44.17%Expected term (years) 3.125 3.125Risk-free interest rate 0.223% 1.081%Stock option activity during the periods indicated is as follows: Weighted Weighted average average remainingNumber exercise contractualof shares price termBalance at January 1, 2021 —$—Granted 2,791,000 0.36 Exercised — — Forfeited (120,000) 0.36 Balance at December 31, 2021 2,671,000 0.36 3.5Exercised——Forfeited(380,000)0.36Balance at December 31, 20222,291,0000.362.5Granted288,0000.33Exercised——Effect of capital reduction(1,289,500)0.36Forfeited——Balance at December 31, 20231,289,5000.501.5Exercisable at December 31, 2023 572,750 0.50 1.5(ii)On June 28, 2021, board of directors of Liqxtal Technology Inc. approved a plan to grant stock options, the 2021 plan, to certainemployees. This plan authorizes grants to purchase up to 1,000,000 shares of Liqxtal Technology Inc.’ authorized but unissuedordinary shares. The exercise price was NT$18 (US$0.65).The 2021 plan has one and half years contractual life and one year vesting period. Based on the vesting schedule, 100% of theoptions vest one year after the date of grant. The Company recognized compensation expenses of $43 thousand and $33 thousandin 2021 and 2022, respectively. Such compensation expense was recorded as sales and marketing expenses, general andadministrative expense and research and development expenses in the consolidated statements of income. There was no incometax benefit realized in the consolidated statements of income for employee stock options for the years ended December 31, 2021and 2022, respectively.Table of ContentsHIMAX TECHNOLOGIES, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements (Continued)For the years ended December 31, 2021, 2022 and 2023F-45The calculated value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model thatused the weighted average assumptions in the following table. Liqxtal Technology Inc. uses the simplified method to estimate theexpected term of the options as it does not have sufficient historical share option exercise experience and the exercise datarelating to employees of other companies is not easily obtainable. Since Liqxtal Technology Inc.’ shares are not publicly tradedand its shares are rarely traded privately, expected volatility is computed based on the average historical volatility of similarentities with publicly traded shares. The risk-free rate for the expected term of the options is based on the interest rates of 2 yearsROC central government bond at the time of grant. 2021 planValuation assumptions:Expected dividend yield 0%Expected volatility 30.06%Expected term (years) 1.25Risk-free interest rate 0.107%Stock option activity during the periods indicated is as follows: Weighted Weighted average average remaining Number exercise contractual of shares price termBalance at January 1, 2021 —$— Granted 1,000,000 0.65 Exercised — — Forfeited (90,000) 0.65 Balance at December 31, 2021 910,000 0.65 1.0Exercised(840,000)0.65Forfeited(70,000)0.65Balance at December 31, 2022———Exercisable at December 31, 2022 — — —(iii) On January 28, 2022, board of directors of EMZA approved a plan to grant stock options, the 2022 Option Plan, tocertain employees. This plan authorizes grants to purchase up to 179,690 shares of EMZA’s authorized but unissuedordinary shares. The exercise price was $20.49.All Options granted under this 2022 Option Plan shall vest over a 4-year period, with 25% thereof vesting on the endof a 12-month period following the date of grant, and the remaining 75% thereof vesting in 12 equal portions at theend of each 3-month period thereafter. The Company recognized compensation expenses of $522 thousand in 2022,including 2022 Option Plan cancelled and recognized compensation expenses of $219 thousand. Such compensationexpense was recorded as sales and marketing expenses, general and administrative expense and research anddevelopment expenses in the consolidated statements of income. There was no income tax benefit realized in theconsolidated statements of income for employee stock options for the years ended December 31, 2022.Table of ContentsHIMAX TECHNOLOGIES, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements (Continued)For the years ended December 31, 2021, 2022 and 2023F-46The calculated value of each option award is estimated on the date of grant using the Black-Scholes option-pricingmodel that used the weighted average assumptions in the following table. EMZA uses the simplified method toestimate the expected term of the options as it does not have sufficient historical share option exercise experience andthe exercise data relating to employees of other companies is not easily obtainable. Since EMZA’s shares are notpublicly traded and its shares are rarely traded privately, expected volatility is computed based on the averagehistorical volatility of similar entities with publicly traded shares. The risk-free rate for the expected term of theoptions is based on the interest rates of 5 years Israel non-indexed government bond at the time of grant. 2022 Option Plan Valuation assumptions: Expected dividend yield 0%Expected volatility 54.05%Expected term (years) 6.11Risk-free interest rate 0.65%Stock option activity during the periods indicated is as follows: WeightedWeightedaverageaverageremainingNumberexercisecontractualof sharespricetermBalance at January 1, 2022 —$— Granted 150,940 20.49 6.11Exercised — — Forfeited (1,797) 20.49 Cancelled (149,143) 20.49 Balance at December 31, 2022 — — —Exercisable at December 31, 2022 — — —Table of ContentsHIMAX TECHNOLOGIES, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements (Continued)For the years ended December 31, 2021, 2022 and 2023F-47Note 21. Equity(a)Ordinary SharesThe Company’s authorized ordinary shares, with par value of $0.3 per share, were 1,000,000,000 shares at December 31, 2022 and2023.The Company’s issued and fully paid ordinary shares, with par value of $0.3 per share, were 356,699,482 shares at December 31,2022 and 2023. The outstanding ordinary shares were 348,833,050 shares and 349,448,102 shares at December 31, 2022 and 2023,respectively. 7,866,432 treasury shares and 7,251,380 treasury shares were held by the Company as of December 31, 2022 and 2023,respectively.The Company’s ordinary shares have been quoted on the NASDAQ Global Select Market under the symbol “HIMX” in the form ofADSs and two ordinary shares represent one ADS with effect from August 10, 2009.(b)Additional Paid-in CapitalBalance of additional paid-in capital as of December 31, 2022 and 2023 were as follows: December 31, December 31, 20222023(in thousands)From ordinary shares$93,341 93,341From treasury shares 6,744 6,307From share-based compensation 10,715 13,338From share of changes in equities of associates 1,449 1,662$112,249 114,648Table of ContentsHIMAX TECHNOLOGIES, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements (Continued)For the years ended December 31, 2021, 2022 and 2023F-48(c)Earnings distributionAs a holding company, the major asset of the Company is the 100% ownership interest in Himax Taiwan. Dividends received fromthe Company’s subsidiaries in Taiwan, if any, will be subjected to withholding tax under ROC law. The ability of the Company’ssubsidiaries to pay dividends, repay intercompany loans from the Company or make other distributions to the Company may berestricted by the availability of funds, the terms of various credit arrangements entered into by the Company’s subsidiaries, as well asstatutory and other legal restrictions. The Company’s subsidiaries in Taiwan are generally not permitted to distribute dividends or tomake any other distributions to shareholders for any year in which it did not have either earnings or retained earnings (excludingreserve). In addition, before distributing a dividend to shareholders following the end of a fiscal year, a Taiwan company must recoverany past losses, pay all outstanding taxes and set aside 10% of its annual net income (less prior years’ losses and outstanding taxes) asa legal reserve until the accumulated legal reserve equals its paid-in capital, and may set aside a special reserve.The accumulated legal and special reserve provided by Himax Taiwan as of December 31, 2022 and 2023 amounted to $131,490thousand and $154,743 thousand, respectively.For the year ended December 31, 2023, the Company declared the cash dividend of $0.24 per share, totaling $83,720 thousand, andwas paid on July 12, 2023.(d)Accumulated other comprehensive incomeChanges in accumulated other comprehensive income, net of tax, are as follows: Unrealized Defined AccumulatedForeigngainsbenefit othercurrency(losses) onpensioncomprehensivetranslationsecuritiesplansincome(in thousands)Beginning balance, January 1, 2021$216(869)105(548)Exchange differences arising on translation of foreign operations (72)——(72)Changes in fair value of financial assets —(179)—(179)Remeasurement of defined benefit pension plans ——133133Ending balance, December 31, 2021 144(1,048)238(666)Exchange differences arising on translation of foreign operations (245)——(245)Changes in fair value of financial assets —142—142Remeasurement of defined benefit pension plans ——551551Ending balance, December 31, 2022(101) (906) 789 (218)Exchange differences arising on translation of foreign operations(123)——(123)Changes in fair value of financial assets—152—152Remeasurement of defined benefit pension plans——99Ending balance, December 31, 2023$(224) (754) 798 (180)Table of ContentsHIMAX TECHNOLOGIES, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements (Continued)For the years ended December 31, 2021, 2022 and 2023F-49(e)Noncontrolling interestYear ended December 31, 20212022 2023(in thousands)Balance at the beginning of year$5,0232,258 1,249Equity attributable to non-controlling interests Loss for the year(2,961) (1,515) (1,195)Changes in fair value of financial assets(2) 10 —Remeasurement of defined benefit pension plans5 26 2Share-based compensation expenses38 140 40New shares issued by subsidiaries— 445 6,015Acquired the controlling power from noncontrolling interest——811Purchase of subsidiaries shares from noncontrolling interest175—12Effect of Himax Media Solutions, Inc. merged into Himax Taiwan—(197)—Disposal of financial assets at fair value through other comprehensiveincome—(6)—Exchange differences arising on translation of foreign operations— 88 —Declaration of cash dividends(20) — —Balance at the end of year$2,2581,249 6,934Note 22. Income TaxesThe Company is incorporated in the Cayman Islands, a tax-free country; accordingly, pretax income generated by the group parentcompany is not subject to local income tax. Substantially all of the Company’s taxable income is derived from the operations in the ROCand, therefore, substantially all of the Company’s income tax expense attributable to income from continuing operations is incurred in theROC. Other foreign subsidiary companies calculate income tax in accordance with local tax law and regulations.According to the amendments to the ROC Statute for Industrial Innovation in July 2022, in addition to providing 3 year extension for theexisting tax credits for smart machinery and 5G system expenditures, tax credit for cyber security expenditures was added as newincentive items. Tax credit for investment amount eligible for smart machinery and cyber security limited to 5% of expenditure for thecurrent year or 3% of expenditure within 3 consecutive years. Tax credit for smart machinery and cyber security combined with R&D taxcredit shall not exceed 50% of current year corporate income tax plus undistributed earnings tax payable.Table of ContentsHIMAX TECHNOLOGIES, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements (Continued)For the years ended December 31, 2021, 2022 and 2023F-50(a)Income tax expense (benefit) recognized in profit or loss for the years ended December 31, 2021, 2022 and 2023 consists of thefollowing:Year ended December 31, 20212022 2023(in thousands)Current tax expense Current period$102,297 48,808 155Adjustment for prior periods12 (2,723) (2,614)102,309 46,085 (2,459)Deferred tax expense Origination and reversal of temporary differences310 (5,742) 2,436Investment tax credits and operating loss carryforward8,038 755 (5,005)8,348 (4,987) (2,569)Total income tax expense (benefit)$110,657 41,098 (5,028)(b)Income taxes expense (benefit) recognized directly in other comprehensive income for the years ended December 31, 2021, 2022 and2023 consist of the following:Year ended December 31, 20212022 2023(in thousands)Items that will not be reclassified to profit or loss: Remeasurements of defined benefit pension plans$27 107 (1)(c)Reconciliation of the expected income tax expense computed based on the ROC statutory income tax rate of 20% compared with theactual income tax expense as reported in the consolidated statements of profit or loss for the years ended December 31, 2021, 2022and 2023 are summarized as follows:Years ended December 31,202120222023 RateAmount Rate Amount RateAmount(in thousands)(in thousands)(in thousands)Profit before income taxes $544,592 $276,565 $44,393Income tax expense calculated at the statutory rate 20.0%108,919 20.0%55,313 20.0%8,879Tax on undistributed earnings 4.2%22,648 3.9%10,668 4.4%1,931Tax benefit resulting from setting aside legal reserve from prior year’s income—(267)(0.8)%(2,215)(2.9)%(1,267)Tax benefit resulting from actual investment from prior year’s undistributed earnings—(161)(0.1)%(303)——Increase in tax credits (3.3)%(17,934) (5.6)%(15,556) (22.2)%(9,864)Effect of change of unrecognized deductible temporary differences and tax losses carryforwards 0.7%3,668 1.7%4,706 9.3%4,127Net of non-taxable income and non-deductible expense (2.0)%(10,680) (5.0)%(13,728) (16.0)%(7,090)Changes in unrecognized tax benefits 0.5%2,763 1.1%3,003 (3.1)%(1,380)Foreign tax rate differential 0.2%837 0.5%1,370 1.7%752Variance from audits, amendments and examinations of prior years’ income tax filings —440 (0.1)%(205) (3.0)%(1,347)Others —424 (0.7)%(1,955) 0.5%231Income tax expense (benefit) $110,657 $41,098 $(5,028)Effective tax rate 20.3% 14.9% (11.3)% Table of ContentsHIMAX TECHNOLOGIES, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements (Continued)For the years ended December 31, 2021, 2022 and 2023F-51(d)As of December 31, 2022 and 2023, the components of deferred tax assets and deferred tax liabilities were as follows: December 31, December 31, 20222023(in thousands)Deferred tax assets: Inventory$5,335 4,696Tax credit carryforwards — 5,005Accrued compensated absences 926 941Allowance for sales discounts 1,465 1,902Depreciation 641 1,149Others 3,430 503$11,797 14,196Deferred tax liabilities: Remeasurement of defined benefit plans$(250) (254)Unrealized foreign exchange gain (364) (261)Others(77)(5)$(691) (520)As of December 31, 2023, the Company has not provided for income taxes on undistributed earnings of approximately $1,307,415thousand of its foreign subsidiaries since the Company has specific plans to reinvest these earnings indefinitely. A deferred taxliability will be recognized when the Company can no longer demonstrate that it plans to indefinitely reinvest these undistributedearnings. This amount becomes taxable when the ultimate parent company, Himax Technologies, Inc., executes other investments,share buybacks or shareholder dividends to be funded by cash distribution by its foreign subsidiaries. It is not practicable to estimatethe amount of additional taxes that might be payable on such undistributed earnings because of the complexities of the hypotheticalcalculation.(e)Changes in deferred tax assets and liabilities were as follows: Recognized Recognized Recognizedin otherRecognizedin otherJanuary 1,in profit orcomprehensiveDecemberin profit orcomprehensiveDecember2022lossincome31, 2022lossincome31, 2023(in thousands)Inventory$2,955 2,380 — 5,335 (639) — 4,696Tax credit carryforwards — — — — 5,005 — 5,005Operating loss carryforward 755 (755) — — — — —Accrued compensated absences 901 25 — 926 15 — 941Allowance for sales discounts 720 745 — 1,465 437 — 1,902Depreciation 601 40 — 641 508 — 1,149Unrealized foreign exchange loss (71) (293) — (364) 103 — (261)Remeasurement of defined benefit plans (138) (5) (107) (250) (5) 1 (254)Acquired intangible assets (756) 756 — — — — —Others 1,259 2,094 — 3,353 (2,855) — 498Total$6,226 4,987 (107) 11,106 2,569 1 13,676Table of ContentsHIMAX TECHNOLOGIES, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements (Continued)For the years ended December 31, 2021, 2022 and 2023F-52(f)Unrecognized Deferred Tax AssetsGross amount of deferred tax assets have not been recognized in respect of the following items. December 31, December 31, 20222023(in thousands)Unused tax credits$1,560 1,560Unused operating loss carryforwards-statutory tax 206,259 215,956Unused operating loss carryforwards-undistributed earnings tax 271,093 288,301Others 29,413 19,468$508,325 525,285As of December 31, 2023, the unused investment tax credits with its expiration year from 2024 to 2035 from US operations were$1,560 thousand.Tax loss carryforwards is utilized in accordance with the relevant jurisdictional tax laws and regulations. Net losses from foreignsubsidiaries are approved by tax authorities in respective jurisdiction to offset future taxable profits. Under ROC Income Tax Acts, thetax loss carryforward in the preceding ten years is available to be deducted from tax income for Taiwan operations. The statutorylosses would be deducted for undistributed earnings tax and were not subject to expiration for Taiwan operations.As of December 31, 2023, the expiration period for abovementioned unrecognized deferred tax assets of unused operating losscarryforwards for statutory tax were as follows: Unrecognized Deductible amountdeferred tax assetsExpiration year(in thousands)Taiwan operations$106,123$21,225 2024~2028 94,342 18,868 2029~2033Hong Kong operations 1,815 150 IndefinitelyUS operations 13,676 3,810 2024~Indefinitely$44,053(g)Assessments by the tax authoritiesThe Company’s major taxing jurisdiction is Taiwan. All Taiwan subsidiaries’ income tax returns have been examined and assessed bythe ROC tax authorities through 2021. The income tax returns of 2022 for all Taiwan subsidiaries are open to examination by theROC tax authorities. Taiwanese entities are customarily examined by the tax authorities and it is possible that a future examinationwill result in a positive or negative adjustment to the Company’s unrecognized tax benefits within the next 12 months; however,management is unable to estimate a range of the tax benefits or detriment as of December 31, 2023.Table of ContentsHIMAX TECHNOLOGIES, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements (Continued)For the years ended December 31, 2021, 2022 and 2023F-53Note 23. Financial Instruments(a)Categories of financial instruments(i)Financial assets December 31, December 31, 20222023(in thousands)Financial assets measured at fair value through profit or loss (including currentand noncurrent)$15,350 23,767Financial assets measured at fair value through other comprehensive income2791,635Measured at amortized cost: Cash and cash equivalents 221,581 191,749Financial assets at amortized cost 8,314 12,511Accounts receivable and other receivables (including related parties) 263,767 241,390Restricted deposit (including current and noncurrent) 369,332 453,032Refundable deposits (including current and noncurrent) 237,475 265,991Subtotal 1,100,469 1,164,673Total$1,116,098 1,190,075(ii)Financial liabilities December 31, December 31, 20222023(in thousands)Measured at amortized cost: Short-term secured borrowings$369,300 453,000Accounts payables and other payables (including related parties) 177,593 174,769Long-term unsecured borrowings (including current portion)46,50040,500Lease liabilities (including current and noncurrent)11,67511,380Guarantee deposits 66,631 56,749Total$671,699 736,398Table of ContentsHIMAX TECHNOLOGIES, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements (Continued)For the years ended December 31, 2021, 2022 and 2023F-54(b)Liquidity riskThe following, except for payables (including related parties) that are repayable within a year, are the contractual maturities offinancial liabilities, including estimated interest payments of unsecured borrowings, secured borrowings and lease liabilities. Contractual Within 6 6‑12 Over 5(in thousands)cash flowsmonthsmonths1‑2 years2‑5 yearsyearsDecember 31, 2022 Non-derivative financial liabilities Short-term secured borrowings$369,658369,658————Long-term unsecured borrowings (including currentportion)56,434 4,290 4,159 8,059 22,186 17,740Lease liabilities 11,915 2,188 2,166 4,868 2,693 —Guarantee deposits 66,631 14,532 — 52,099 — —$504,638 390,668 6,325 65,026 24,879 17,740December 31, 2023 Non-derivative financial liabilities Short-term secured borrowings$453,324453,324————Long-term unsecured borrowings (including currentportion)49,476 4,282 4,133 7,966 22,025 11,070Lease liabilities 11,697 3,089 1,700 4,142 2,766 —Guarantee deposits 56,749 35,922 20,265 562 — —$571,246 496,617 26,098 12,670 24,791 11,070The Company does not expect the cash flows included in the maturity analysis to occur significantly earlier or at significantlydifferent amounts.(c)Currency riski. Exposure to foreign currency riskThe Company’s significant exposure to foreign currency risk was as follows:(in thousands)December 31, 2022December 31, 2023 Foreign Exchange Functional Foreign Exchange FunctionalcurrencyratecurrencycurrencyratecurrencyFinancial assets Monetary items NTD333,733 30.71 10,867 281,550 30.705 9,170CNY37,346 6.9669 5,360 38,528 7.0972 5,429JPY1,110,308132.14298,402993,351141.36747,027Financial liabilities Monetary items NTD2,900,73430.7194,4561,422,13730.70546,315JPY1,080,956 132.1429 8,180 824,224 141.3674 5,830ii. Sensitivity analysisThe Company’s exposure to foreign currency risk arises from the translation of the foreign currency exchange gains and losses oncash and cash equivalents, accounts receivable, other receivable, accounts payable, other payable and lease liabilities that aredenominated in foreign currency.Table of ContentsHIMAX TECHNOLOGIES, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements (Continued)For the years ended December 31, 2021, 2022 and 2023F-55Depreciation or appreciation of the USD by 10% against the New Taiwan Dollars (NTD), CNY and JPY at December 31, 2022and 2023, while all other variables were remained constant, would have increased or (decreased) the net profit before tax of$7,801 thousand and $3,052 thousand, respectively.iii. Interest rate riskThe Company’s short-term secured borrowings and long-term unsecured borrowings carried floating interest rates and fixedinterest rates. The Company’s exposure to changes in interest rates is mainly from floating-rate borrowings. Any change ininterest rates will cause the effective interest rates of borrowings to change and thus cause the future cash flows to fluctuate overtime.The following sensitivity analysis is determined based on the exposure to interest rate risk. For floating-rate debts, the analysisassumes that the balances of outstanding debts at the end of the reporting period had been outstanding for the entire year.For the Company’s floating-rate debts, assuming all other variables were remained constant, an increase or a decrease in theinterest rate by 0.25% would have resulted in a decrease or an increase in the net profit before tax for the years endedDecember 31, 2022 and 2023 by $116 thousand and $101 thousand, respectively.(d)Fair value informationi. Financial instruments not measured at fair valueThe Company considers that the carrying amounts of financial assets and financial liabilities measured at amortized costapproximate their fair values.ii. Financial instruments measured at fair value(1) Fair value hierarchyDecember 31, 2022CarryingFair Value(in thousands) Amount Level 1 Level 2 Level 3 TotalFinancial assets measured at fair value through profitor loss Equity securities-unlisted company$15,350 — — 15,350 15,350Subtotal 15,350 — — 15,350 15,350Financial assets measured at fair value through othercomprehensive income Equity securities-unlisted company 279 — — 279 279Total$15,629 — — 15,629 15,629Table of ContentsHIMAX TECHNOLOGIES, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements (Continued)For the years ended December 31, 2021, 2022 and 2023F-56 December 31, 2023CarryingFair Value(in thousands)Amount Level 1 Level 2 Level 3 TotalFinancial assets measured at fair value through profitor loss Money market fund$2,1172,117——2,117Equity securities-unlisted company21,650——21,65021,650Subtotal23,7672,117—21,65023,767Financial assets measured at fair value through othercomprehensive incomeEquity securities-listed company1,1281,128——1,128Equity securities-unlisted company507——507507Total$25,4023,245—22,15725,402(2) Valuation techniques and assumptions used in fair value measurementThe fair value of financial instruments traded in active markets is determined with reference to quoted market prices.The fair value of financial instruments is based on the valuation techniques. The fair value using valuation techniques refersto the current fair value of other financial instruments with similar conditions and characteristics, or using a discounted cashflow method, or other valuation techniques which include model calculating with observable market data at the reportingdate.The fair value of equity securities-unlisted company is determined by reference to market valuations for similar operatingentities quoted in an active market based on the net assets value of investees. The significant unobservable input is primarilythe liquidity discounts, 28% for 2023. The estimated fair value would increase (decrease) if the liquidity discount rate werelower (higher).(3) Transfer between levels of the fair value hierarchyThere were no transfers between levels for the years ended December 31, 2022 and 2023.Table of ContentsHIMAX TECHNOLOGIES, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements (Continued)For the years ended December 31, 2021, 2022 and 2023F-57(4) Movement in financial assets included in Level 3 of fair value hierarchy Financial assets Financial assetsat fair valueat fair valuethrough otherthrough profit orcomprehensive(in thousands) loss income TotalJanuary 1, 2022$13,66841014,078Addition500—500Disposal—(283)(283)Recognized in other comprehensive income—152152Recognized in profit or loss1,182—1,182December 31, 2022$15,35027915,629Financial assetsFinancial assetsat fair valueat fair valuethrough other through profit or comprehensive (in thousands)lossincomeTotalJanuary 1, 2023$15,350 279 15,629Addition 5,102 562 5,664Disposal — (99) (99)Capital reduction of investment(360)—(360)Recognized in other comprehensive income—(235)(235)Recognized in profit or loss 1,558 — 1,558December 31, 2023$21,650 507 22,157Note 24. Financial Risk Management(a)OverviewThe Company is exposed to the following risks due to usage of financial instruments:(1)Credit risk(2)Liquidity risk(3)Market riskHereinafter discloses information about the Company’s exposure to variable risks, and the goals, policies and procedures of theCompany’s risk measurement and risk management.(b)Risk management frameworkManagement of related divisions are appointed to review, control, trace and monitor the strategic risks, financial risks and operationalrisks faced by the Company. Management reports to executive officers the progress of risk controls from time to time and, ifnecessary, report to the board of directors, depending on the extent of impact of risks.(c)Credit riskCredit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet itscontractual obligations. The Company’s exposures to credit risk are primarily from cash and cash equivalents, financial assets atamortized cost and accounts receivable.Table of ContentsHIMAX TECHNOLOGIES, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements (Continued)For the years ended December 31, 2021, 2022 and 2023F-58The Company deposits its cash and cash equivalents with various reputable financial institutions. Financial assets at amortized costare time deposits with original maturities of greater than three months. The Company has not experienced any material losses ondeposits of the Company’s cash and cash equivalents and financial assets at amortized cost. Management performs periodicevaluations of the relative credit standing of these financial institutions and limits the amount of credit exposure with any oneinstitution. Management believes that there is a limited concentration of credit risk in cash and cash equivalent and financial assets atamortized cost.The Company derived substantially all of its revenues from sales of display drivers that are incorporated into TFT-LCD panels. TheTFT-LCD panel industry is intensely competitive and is vulnerable to cyclical market conditions and subject to price fluctuations.Management continuously evaluates and controls the credit quality, credit limit and financial strength of its customers to ensure anyoverdue receivables are taken necessary procedures.The Company depends on two customers for majority of its revenues. The Company’s sales to these two customers as a percentage ofrevenues are as follows:Year Ended December 31, 20212022 2023 Customer A and its affiliates 32.1%32.3%28.7%Customer C 19.1%9.4%11.0%The percentage of the Company’s accounts receivable accounted by customers, those representing more than 10% of total accountsreceivable balance, is summarized as follows:December 31, December 31, 2022 2023 Customer A and its affiliates 31.5%28.5%Customer C 10.3%10.3%Refer to Note 11 for aging analysis of accounts receivable and the movement in the loss allowance.In addition, the Company has at times agreed to extend the payment terms for certain of its customers. Other customers have alsorequested extension of payment terms, and the Company may grant such requests for extension in the future. As a result, a default byany such customer, a prolonged delay in the payment of accounts receivable, or the extension of payment terms for the Company’scustomers could adversely affect the Company’s cash flow, liquidity and operating results. Management performs ongoing creditevaluations of each customer and adjusts credit policy based upon payment history and the customer’s credit worthiness, asdetermined by the review of their current credit information.(d)Liquidity riskThe objective of liquidity risk management is to ensure the Company has sufficient liquidity to fund its business requirementsassociated with existing operations over the next 12 months. The Company manages its liquidity risk by maintaining adequateworking capital and unused credit facilities.At December 31, 2023, the Company’s working capital together with existing unused credit facilities under its existing loanagreements will be sufficient to fulfill all of its contractual obligations. Therefore, management believes that there is no liquidity riskresulting from incapable of financing to fulfill the contractual obligations.(e)Market riskMarket risk is the risk that changes in market prices, such as foreign exchange rates and interest rates, will affect the Company’sincome or the value of its holdings of financial instruments. The objective of market risk management is to manage and controlmarket risk exposures within acceptable parameters, while optimizing the return.Table of ContentsHIMAX TECHNOLOGIES, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements (Continued)For the years ended December 31, 2021, 2022 and 2023F-59(1)Currency riskThe Company is exposed to currency risk on operating activities that are denominated in a currency other than the respectivefunctional currency of the Company, the USD. The currencies used in these transactions are the NTD, CNY and JPY.(2)Interest rate riskThe Company is exposed to interest rate risk primarily related to its outstanding borrowings. The Company’s borrowings carriedfloating interest rates. To manage the interest rate risk, the Company periodically assesses the interest rates of bank loans andmaintains good relationships with financial institutions to obtain lower financing costs. The Company also strengthens themanagement of working capital to reduce the dependence on bank loans as well as the risk arising from fluctuation of interestrates.Note 25. Capital managementThrough clear understanding and managing of significant changes in external environment, related industry characteristics, and corporategrowth plan, the Company manages its capital structure in a manner to ensure it has sufficient financial resources to fund its workingcapital needs, capital expenditures, research and development activities, dividend payments and other business requirements associatedwith its existing operations over the next 12 months.There were no changes in the Company’s approach to capital management during the year ended December 31,2023. Neither theCompany nor its subsidiaries are subject to externally imposed capital managements.December 31, December 31, 2022 2023(in thousands)Total liabilities$807,937 779,702Less: cash and cash equivalents 221,581 191,749$586,356 587,953Equity attributable to owners of Himax Technologies, Inc.$892,572 856,768Note 26. Related-party Transactions(a)Name and relationshipName of related parties RelationshipViewsil Microelectronics (Kunshan) Limited (Viewsil)(1)AssociatesViewsil Technology Limited (VST)(1)AssociatesGanzin Technology Corp.AssociatesPrilit Optronics, Inc.(2)AssociatesIris Optronics Co., Ltd.AssociatesGuangzhou Pixtalks Information Technology Co., Ltd.AssociatesCheng Mei Materials Technology Corporation (CMMT)Other related partiesNingbo Cheng Mei Materials Technology Co., Ltd.Other related partiesNote 1: Equity method investee of the Company, becoming as a subsidiary of the Company from December 30, 2023. VST is thesubsidiary of Viewsil.Note 2: It became equity method investee of the Company in October 2022.Table of ContentsHIMAX TECHNOLOGIES, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements (Continued)For the years ended December 31, 2021, 2022 and 2023F-60(b)Significant transactions with related parties(i)Sales and accounts receivableYear ended December 31, 2021 2022 2023 (in thousands)Sales of goods Associates$——8Other related parties125 215 111$125215119 December 31, 2022 2023 (in thousands)Accounts receivable Other related parties$36 14(ii)Purchase and accounts payableYear ended December 31, 2021 2022 2023(in thousands)Purchase of raw materials CMMT$3,4691,0791,258Other related parties 63——$3,5321,0791,258December 31, 2022 2023(in thousands)Accounts payable CMMT$263911(iii)The Company made an interest-free loan of $1,200 thousand as of December 31, 2022 to VST for its short-term funding needs.The loan is repayable on demand. The Company may consider providing further future loans to VST.Table of ContentsHIMAX TECHNOLOGIES, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements (Continued)For the years ended December 31, 2021, 2022 and 2023F-61(iv)Others Year ended December 31, 2021 2022 2023 (in thousands)Revenue from miscellaneous serviceAssociates$63 181 78Other related parties 3 9 —$66 190 78Technical service fee Viewsil$1,400 1,050 1,140Miscellaneous fee CMMT$791 496 458Associates 4 — —$795 496 458 December 31, 2022 2023 (in thousands)Other receivableAssociates$24 12Other related parties — 54$24 66Other payable Viewsil$2,450 —Other related parties 118 110$2,568 110(c)Compensation of key management personnelFor the years ended December 31, 2021, 2022 and 2023, the aggregate cash compensation that the Company paid to the independentdirectors was $150 thousand, $150 thousand and $150 thousand, respectively. The aggregate share-based compensation that theCompany paid to the independent directors was nil.The compensation to key management personnel for the years ended December 31, 2021, 2022 and 2023 were as follows:Year ended December 31, 20212022 2023(in thousands)Short-term employee benefits$1,068 1,721 1,790Post-employment benefits 12 11 10Share-based compensation 671 363 202$1,751 2,095 2,002Table of ContentsHIMAX TECHNOLOGIES, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements (Continued)For the years ended December 31, 2021, 2022 and 2023F-62Note 27. Pledged assetsDecember 31, December 31, Pledged assets Pledged to secure 2022 2023(in thousands)Restricted cash and time deposit (1)Short-term secured borrowings$369,300 453,000Restricted time deposits (1)For customs duties 32 32Land (2)Long-term unsecuredborrowings 27,500 27,500Building and improvements (2)Long-term unsecuredborrowings38,07135,852$434,903516,384Note (1): The pledged assets are booked as restricted deposits and classified as current or noncurrent by its liquidity.Note (2): Guarantee and collateral for long-term unsecured borrowings.Note 28. Commitments and Contingencies(a)As of December 31, 2022 and 2023, the Company had entered into several contracts for the acquisition of equipment and computersoftware. Total contract prices amounted to $24,525 thousand and $7,564 thousand, respectively. As of December 31, 2022 and 2023,the remaining commitments were $22,682 thousand and $3,747 thousand, respectively.(b)As of December 31, 2023, amount of outstanding letters of credit for the purchase of machinery and equipment was $1,089 thousand.(c)The Company from time to time is subject to claims regarding the proprietary use of certain technologies. Currently, management isnot aware of any such claims that it believes could have a material adverse effect on the Company’s financial position or results ofoperations.(d)Since Himax Taiwan is not a listed company, it will depend on Himax Technologies, Inc. to meet its equity financing requirements inthe future. Any capital contribution by Himax Technologies, Inc. to Himax Taiwan may require the approval of the relevant ROCauthorities. The Company may not be able to obtain any such approval in the future in a timely manner, or at all. If Himax Taiwan isunable to receive the equity financing it requires, its ability to grow and fund its operations may be materially and adversely affected.(e)The Company has entered into several wafer fabrication or assembly and testing service arrangements or multi-year purchaseagreements with suppliers. The Company may be obligated to make payments for purchase orders entered into pursuant to thesearrangements. The Company’s purchase obligations also include agreements to purchase goods or services, primarily inventory, thatare enforceable and legally binding on us and that specify all significant terms, including fixed or minimum quantities to bepurchased, fixed or variable price provisions, and the approximate timing of the transaction. Among all these purchase agreements,the longest termination term shall expire in 2028. Purchase obligations exclude agreements that are cancelable without penalty.Contractual obligations resulting from above purchase orders and agreements with known amounts approximate $2,088 million and$1,415 million as of December 31, 2022 and 2023 respectively. Of obligations under above purchase orders and agreements, atDecember 31, 2023, $589 million is expected to be paid in the next 12 months. The refundable deposits of the long term contract forpurchase agreements with suppliers amounts approximate $237 million and $265 million as of December 31, 2022 and 2023,respectively.Table of ContentsHIMAX TECHNOLOGIES, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements (Continued)For the years ended December 31, 2021, 2022 and 2023F-63(f)The Company is involved in various claims arising in the ordinary course of business. In the opinion of management, the ultimatedisposition of these matters will not have a material adverse effect on the Company’s consolidated financial position, results ofoperations, or liquidity. As of December 31, 2023, management is not aware of any pending litigation against the Company.Note 29. Segment, Product and Geographic InformationThe Company has two operating segments: Driver IC and Non-driver Products. The Driver IC segment generally is engaged in the design,research, development and sale of displays driver for large-sized TFT-LCD panels, which are used in televisions and desktop monitors,and displays driver for small and medium-sized TFT-LCD panels, which are used in mobile handsets and consumer electronics products.The Non-driver segment primarily is engaged in the design, research, manufacturing and sale of non-driver products, such as timingcontrollers, 3D Sensing Solution, LCoS, CMOS Image Sensors and WLO.Year Ended December 31, 2021Non-driverConsolidated Driver IC products Total(in thousands)Segment revenues$1,361,442 185,655 1,547,097Segment operating income (loss)$551,943 (6,922) 545,021Non operating loss, net (429)Consolidated profit before income taxes $544,592Significant noncash items: Share-based compensation$424 276 700Depreciation and amortization$5,598 15,744 21,342Year Ended December 31, 2022Non-driverConsolidated Driver IC products Total(in thousands)Segment revenues$1,042,938158,4011,201,339Segment operating income (loss)$275,275(17,688)257,587Non operating income, net 18,978Consolidated profit before income taxes$276,565Significant noncash items: Share-based compensation$1,655 1,441 3,096Depreciation and amortization$8,261 13,081 21,342Year Ended December 31, 2023Non-driverConsolidated Driver IC products Total(in thousands)Segment revenues$804,840140,588945,428Segment operating income (loss)$75,282(32,070)43,212Non operating income, net 1,181Consolidated profit before income taxes$44,393Significant noncash items:Share-based compensation$1,608 1,055 2,663Depreciation and amortization$8,601 11,721 20,322Table of ContentsHIMAX TECHNOLOGIES, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements (Continued)For the years ended December 31, 2021, 2022 and 2023F-64The following tables summarize information pertaining to the segment revenues from customers in different geographic region (based oncustomer’s headquarter location):For the year ended December 31, 2021Non-driverConsolidated Driver IC products Total(in thousands)China$1,149,442 111,656 1,261,098Taiwan 167,728 51,378 219,106Other Asia Pacific (Philippines, Korea and Japan) 44,272 21,912 66,184Europe and America - 709 709$1,361,442 185,655 1,547,097For the year ended December 31, 2022Non-driverConsolidated Driver IC products Total(in thousands)China$828,75496,675925,429Taiwan 149,03726,507175,544Other Asia Pacific (Philippines, Korea, Japan and Israel) 64,52325,73590,258Europe and America6249,48410,108$1,042,938158,4011,201,339For the year ended December 31, 2023Non-driverConsolidatedDriver ICproductsTotal(in thousands)China$632,36388,395720,758Taiwan 119,28922,494141,783Other Asia Pacific (Philippines, Korea, Japan and Israel) 50,34717,35067,697Europe and America2,84112,34915,190$804,840140,588945,428The following tables summarize information pertaining to the segment revenues from major product lines:For the year ended December 31, 2021Non-driverConsolidated Driver IC products Total(in thousands)Display drivers for large-sized applications$397,905 — 397,905Display drivers for small and medium-sized applications 963,537 — 963,537Non-driver products — 185,655 185,655$1,361,442 185,655 1,547,097For the year ended December 31, 2022Non-driver Consolidated Driver IC products Total(in thousands)Display drivers for large-sized applications$263,992 — 263,992Display drivers for small and medium-sized applications 778,946 — 778,946Non-driver products — 158,401 158,401$1,042,938 158,401 1,201,339Table of ContentsHIMAX TECHNOLOGIES, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements (Continued)For the years ended December 31, 2021, 2022 and 2023F-65For the year ended December 31, 2023Non-driverConsolidated Driver IC products Total(in thousands)Display drivers for large-sized applications $175,666 — 175,666Display drivers for small and medium-sized applications 629,174 — 629,174Non-driver products — 140,588 140,588$804,840 140,588 945,428The carrying values of the Company’s property, plant and equipment are located in the following countries:December 31, December 31, 2022 2023(in thousands)Taiwan$123,361126,993U.S. 1,5951,396China 8341,442Korea 245239Japan 10339$126,138130,109Revenues from significant customers, those representing 10% or more of total revenue for the respective periods, are summarized asfollows:Year ended December 31,2021 2022 2023(in thousands)Driver IC segment: Customer A and its affiliates$443,930347,794234,581Customer C290,578112,231102,719$734,508460,025337,300Non-driver products segment:Customer A and its affiliates$53,15340,40036,770Customer C4,6391,1651,120$57,79241,56537,890Accounts receivable from significant customers, those representing 10% or more of total accounts receivable for the respective dates, issummarized as follows:December 31, December 31, 2022 2023(in thousands)Customer A and its affiliates$82,14467,135Customer C26,83824,303$108,98291,438The Company has recognized the following contract liabilities in relation to revenue from contracts with customers: December 31, December 31,20222023 (in thousands)Contract liabilities-current$49,16717,751Table of ContentsHIMAX TECHNOLOGIES, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements (Continued)For the years ended December 31, 2021, 2022 and 2023F-66Revenue recognized in the current reporting period amounted to $32,878 thousand was related to carried-forward contract liabilities forperformance obligations not satisfied in prior year.All of the service contracts are for periods of one year or less. As permitted under IFRS 15, the transaction price allocated to theseunsatisfied contracts is not disclosed. As of December 31, 2023, the Company did not recognize an asset in relation to costs to fulfill aservice contract.Note 30. The Nature of Expenses(a)Depreciation of property, plant and equipmentYear ended December 31, 2021 2022 2023(in thousands)Recognized in cost of revenues$6,0935,5864,680Recognized in operating expenses13,51114,37815,248$19,60419,96419,928(b)Amortization of intangible assetsYear ended December 31, 2021 2022 2023(in thousands)Recognized in cost of revenues$789372Recognized in operating expenses1,6601,285322$1,7381,378394(c)Employee benefits expenseYear ended December 31, 2021 2022 2023(in thousands)Salary$126,976142,564125,813Labor and health insurance7,2327,4217,548Pension5,9936,5276,588Others6,6086,4316,545$146,809162,943146,494Employee benefits expense summarized by functionRecognized in cost of revenues$7,8566,2734,515Recognized in operating expenses138,953156,670141,979$146,809162,943146,494Table of ContentsHIMAX TECHNOLOGIES, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements (Continued)For the years ended December 31, 2021, 2022 and 2023F-67Note 31. Himax Technologies, Inc. (the Parent Company only)As a holding company, dividends received from Himax Technologies, Inc.’s subsidiaries in Taiwan, if any, will be subjected towithholding tax under ROC law as well as statutory and other legal restrictions.The condensed separate financial information of Himax Technologies, Inc. is presented as follows:Condensed Statements of Financial PositionDecember 31, December 31, 2022 2023(in thousands)Cash$2,9463,639Financial asset at amortized cost 5,3305,419Other current assets 529581Financial asset at fair value through profit or loss 13,29019,095Investments in subsidiaries and affiliates 1,473,2341,530,298Total assets$1,495,3291,559,032Current liabilities$132524Current portion of long-term unsecured borrowings6,0006,000Short-term secured borrowings 369,300453,000Debt borrowing from a subsidiary 186,825208,240Long-term unsecured borrowings40,50034,500Total equity 892,572856,768Total liabilities and equity$1,495,3291,559,032Himax Technologies, Inc. had no guarantees as of December 31, 2022 and 2023.Condensed Statements of Profit or LossYear ended December 31,2021 20222023(in thousands)Revenues$— ——Costs and expenses 1,037486547Operating loss (1,037)(486)(547)Interest income 148166268Changes in fair value of financial assets at fair value through profit or loss (143)1,0211,639Foreign currency exchange gains (losses), net 115(487)(102)Finance costs (1,320)(4,944)(12,371)Loss on re-measurement of the pre-existing relationships in a businesscombination——(1,932)Share of profits of subsidiaries and affiliates 439,133241,71263,661Profit before income taxes 436,896236,98250,616Income tax expense ———Profit for the year$436,896236,98250,616Table of ContentsHIMAX TECHNOLOGIES, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements (Continued)For the years ended December 31, 2021, 2022 and 2023F-68Condensed Statements of Other Comprehensive IncomeYear Ended December 31, 20212022 2023(in thousands)Profit for the year$436,896 236,982 50,616Other comprehensive income: Items that will not be reclassified to profit or loss:Remeasurements of defined benefit pension plans160 658 8Unrealized gain (loss) on financial assets at fair value through othercomprehensive income(179) 142 152Income tax related to items that will not be reclassified subsequently(27) (107) 1Items that may be reclassified subsequently to profit or loss:Foreign operations - foreign currency translation differences(72) (245) (123)Other comprehensive income for the year, net of tax(118) 448 38Total comprehensive income for the year$436,778 237,430 50,654Table of ContentsHIMAX TECHNOLOGIES, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements (Continued)For the years ended December 31, 2021, 2022 and 2023F-69Condensed Statements of Cash FlowsYear ended December 31, 2021 2022 2023(in thousands)Cash flows from operating activities: Profit for the year$436,896236,982 50,616Adjustments for: Changes in fair value of financial assets at fair value through profit or loss143(1,021) (1,639)Interest income(148)(166) (268)Finance costs1,3204,944 12,371Share of profits of subsidiaries and affiliates(439,133)(241,712) (63,661)Loss on re-measurement of the pre-existing relationships in a businesscombination——1,932Unrealized foreign currency exchange losses (gains)(115)493 96(1,037)(480) (553)Changes in: Other current assets(72)(19) (1)Other current liabilities750(689) 96Cash generated from operating activities(359)(1,188) (458)Interest received139172 218Interest paid(858)(2,561) (5,891)Net cash used in operating activities(1,078)(3,577) (6,131)Cash flows from investing activities: Acquisitions of financial asset at amortized cost (139)(163) (185)Acquisitions of financial assets at fair value through profit or loss —— (4,166)Net cash used in investing activities (139)(163) (4,351)Cash flows from financing activities: Payments of cash dividends (47,404)(217,873) (83,720)Payments of dividend equivalents —— (148)Repayments of long-term unsecured borrowings(6,000)(6,000)(6,000)Proceeds from short-term secured borrowings 611,6001,212,700 1,383,300Repayments of short-term secured borrowings(564,200)(994,800)(1,299,600)Proceeds from issue of RSUs from subsidiaries 311,187 2,343Proceeds from exercise of employee stock options1,182——Proceeds from debt from a subsidiary 159,205197,955 182,230Repayments of debt from a subsidiary (154,205)(187,455) (167,230)Net cash provided by financing activities 2095,714 11,175Net increase (decrease) in cash (1,008)1,974 693Cash at beginning of year 1,980972 2,946Cash at end of year$9722,946 3,639 Exhibit 2.4DESCRIPTION OF SECURITIESREGISTERED UNDER SECTION 12 OF THE SECURITIES EXCHANGE ACT OF 1934 (THE “EXCHANGE ACT”)As of December 31, 2023, Himax Technologies, Inc. (“we,” “us,” and “our”) had the following series of securities registered pursuant toSection 12(b) of the Exchange Act:Title of each class Trading symbol Name of each exchange on which registeredAmerican depositary shares, each American depositaryshares represent two ordinary share, par value US$ 0.3per share HIMX The Nasdaq Global Select MarketOrdinary shares, par value US$0.3 per share* N/A The Nasdaq Global Select Market*Not for trading, but only in connection with the listing of the American depositary shares on the Nasdaq Global Select MarketAmerican Depositary Shares (“ADSs”), each American depositary ordinary shares represent two ordinary share, par value US$0.3 pershare (the “ordinary shares”), have been available in the US through an American Depositary Receipt (“ADR”) program since March 2006. Thisprogram was established pursuant to the Second Amended and Restated deposit agreement that we entered into with JPMorgan Chase Bank, N.A.(“JPMorgan Chase”), as depositary (“Deposit Agreement”). Our ADRs have been listed on the Nasdaq Global Select Market Inc. (“Nasdaq”) sinceMarch 2006 and are traded under the symbol HIMX. In connection therewith, the ordinary shares are registered under Section 12(b) of theExchange Act. This exhibit contains a description of the rights of (i) the holders of ordinary shares and (ii) ADR holders. The ordinary sharesunderlying the ADSs are held by JPMorgan Chase, the depositary, and holders of ADSs will not be treated as holders of the ordinary shares.DESCRIPTION OF ORDINARY SHARESThe following is a summary of material provisions of our currently effective Third Amended and Restated Memorandum and Articles ofAssociation (the “Third Memorandum and Articles of Association”), as well as the Companies Act (as amended) of the Cayman Islands (the“Companies Act”) insofar as they relate to the material terms of our ordinary shares. Notwithstanding this, becauseit is a summary, it may not contain all the information that you may otherwise deem important. For more complete information, you should read theentire Third Memorandum and Articles of Association, which has been filed with the Securities and Exchange Commission (the “SEC”) as anexhibit 1.1 from our Annual Report on Form 20-F (File No. 000-51847) filed with the SEC on June 3, 2010.Type and Class of SecuritiesEach of our ordinary shares has nominal value of US$0.3 per share. The respective number of our ordinary shares that have been issued asof December 31, 2023 is provided on the cover of the annual report on Form 20-F filed on April 2, 2024 (the “2023 Form 20-F”). Our ordinaryshares may be held in either certificated or uncertificated form. Certificates representing the ordinary shares are issued in registered form. We maynot issue share to bearer. Our shareholders may freely hold and transfer their ordinary shares in accordance with our Third Memorandum andArticles of Association. All of our ordinary shares have equal voting rights and carry equal entitlements to dividends. No participation certificates,non-voting equity securities or profit-sharing certificates have been issued.Preemptive RightsOur shareholders do not have preemptive rights.Rights of Ordinary SharesGeneralOur authorized share capital is US$300,000,000 divided into 1,000,000,000 ordinary shares of a nominal or par value of US$0.3 each inaccordance with our Third Memorandum and Articles of Association. Holders of our ordinary shares have the same rights. All of our issued andoutstanding ordinary shares are fully paid and non-assessable.DividendsThe holders of our ordinary shares are entitled to such dividends as may be declared by our board of directors subject to our ThirdMemorandum and Articles of Association and the Companies Act. No dividend may be declared and paid unless our directors determine that,immediately after the payment, we will be able to pay our debts as they become due in the ordinary course of business and we have funds lawfullyavailable for such purpose.Voting RightsIn respect of all matters subject to a shareholders’ vote, each ordinary share is entitled to one vote for each ordinary share registered in hisor her name on our register of members. Voting at any meeting of shareholders is by show of hands unless a poll is demanded. A poll may bedemanded by thechairman of such meeting, any three shareholders, any shareholder present holding not less than one-tenth of the total voting rights of allshareholders having the right to vote at the meeting or any shareholder present holding shares conferring a right to vote at the meeting being shareson which an aggregate sum has been paid up equal to not less than one-tenth of the total sum paid up on all shares conferring that right.A quorum required for a meeting of shareholders consists of two shareholders holding not less than one-third in nominal value of the totalissued voting shares present in person or by proxy or, if a corporation or other non-natural person, by its duly authorized representative. As aCayman Islands exempted company, we are not obliged by the Companies Act to call shareholders’ annual general meetings. However, our ThirdMemorandum and Articles of Association provide that we shall in each year hold a general meeting as our annual general meeting in which casewe will specify the meeting as such in the notices calling it, and the annual general meeting will be held at such time and place as may bedetermined by our directors. Each general meeting, other than an annual general meeting, shall be an extraordinary general meeting. Shareholders’annual general meetings and any other general meetings of our shareholders may be called by a majority of our board of directors or our chairman.Our Third Memorandum and Articles of Association do not provide our shareholders with any right to put any proposals before annual generalmeetings or extraordinary general meetings. Advance notice of at least ten (10) clear days is required for the convening of our annual generalmeeting and other general meetings unless such notice is waived in accordance with our articles of association.An ordinary resolution to be passed at a meeting by the shareholders requires the affirmative vote of a simple majority of the votesattaching to the ordinary shares cast by those shareholders entitled to vote who are present in person or by proxy at a general meeting, while aspecial resolution also requires the affirmative vote of no less than two-thirds of the votes attaching to the ordinary shares cast by thoseshareholders entitled to vote who are present in person or by proxy at a general meeting. A special resolution will be required for important matterssuch as making changes to our Third Memorandum and Articles of Association.Transfer of Ordinary SharesSubject to the restrictions in our Third Memorandum and Articles of Association as set out below, any of our shareholders may transfer allor any of his or her ordinary shares by an instrument of transfer in the usual or common form or any other form approved by our board of directors.Our board of directors may, in its absolute discretion, decline to register any transfer of any ordinary share which is not fully paid up or onwhich we have a lien. Our board of directors may also decline to register any transfer of any ordinary share unless:·a fee of such maximum sum as the Nasdaq may determine to be payable or such lesser sum as the Board may from time to time requireis paid to the Company in respect thereof;·the instrument of transfer is in respect of only one class of shares;·the instrument of transfer is lodged at the Office or such other place at which the Register is kept in accordance with the Companies Actor the Registration Office (as the case may be) accompanied by the relevant share certificate(s) and such other evidence as the Boardmay reasonably require to show the right of the transferor to make the transfer (and, if the instrument of transfer is executed by someother person on his behalf, the authority of that person so to do); and·if applicable, the instrument of transfer is duly and properly stamped.If our directors refuse to register a transfer they shall, within two months after the date on which the transfer was lodged, send to each ofthe transferor and the transferee notice of such refusal.The registration of transfers of shares or of any class of shares may, after notice has been given by advertisement in an appointednewspaper or any other newspapers or by any other means in accordance with the requirements of Nasdaq to that effect be suspended at such timesand for such periods (not exceeding in the whole thirty (30) days in any year) as the Board may determine.LiquidationOn a return of capital on winding up or otherwise (other than on conversion, redemption or purchase of ordinary shares), if the assetsavailable for distribution amongst our shareholders shall be more than sufficient to repay the whole of the share capital at the commencement of thewinding up, the surplus shall be distributed amongst our shareholders in proportion to the par value of the shares held by them at thecommencement of the winding up, subject to a deduction from those shares in respect of which there are monies due, of all monies payable to ourcompany for unpaid calls or otherwise. If our assets available for distribution are insufficient to repay all of the paid-up capital, the assets will bedistributed so that the losses are borne by our shareholders in proportion to the par value of the shares held by them. Any distribution of assets orcapital to a holder of ordinary share will be the same in any liquidation event.Requirements to Change the Rights of Holders of Ordinary SharesVariations of Rights of SharesAll or any of the special rights for the time being attached to the shares or any class of shares may, unless otherwise provided by the termsof issue of the shares of that class, from time to time, whether or not our company is being wound-up, may be varied with the sanction of a specialresolution passed at a separate meeting of the holders of the shares of such class by the holders of not less than two-thirdsof the votes cast at such a meeting. The rights conferred upon the holders of the shares of any class issued shall not, unless otherwise expresslyprovided by the terms of issue of the shares of that class, be deemed to be varied, modified or abrogated by the creation or issue of further sharesranking pari passu therewith.Limitations on the Rights to Own Ordinary SharesThere are no limitations under the laws of the Cayman Islands or under the Third Memorandum and Articles of Association that limit theright of non-resident or foreign owners to hold or vote ordinary shares.Ownership ThresholdThere are no provisions under the law of the Cayman Islands or under the Third Memorandum and Articles of Association that govern theownership threshold above which shareholder ownership must be disclosed.Differences between the Law of Different JurisdictionsWe were incorporated under, and are governed by, the laws of the Cayman Islands. The Companies Act is derived, to a large extent, fromthe older Companies Acts of England, but does not follow many recent English law statutory enactments. In addition, the Companies Act differsfrom laws applicable to United States corporations and their shareholders. Set forth below is a summary of the significant differences between theprovisions of the Companies Act applicable to us and the laws applicable to companies incorporated in the State of Delaware.Mergers and Similar ArrangementsThe Companies Act permits mergers and consolidations between Cayman Islands companies and between Cayman Islands companies andnon-Cayman Islands companies. For these purposes, (1) “merger” means the merging of two or more constituent companies and the vesting of theirundertaking, property and liabilities in one of such companies as the surviving company, and (2) a “consolidation” means the combination of twoor more constituent companies into a combined company and the vesting of the undertaking, property and liabilities of such companies to theconsolidated company.In order to effect such a merger or consolidation, the directors of each constituent company must approve a written plan of merger orconsolidation, which must then be authorized by (1) a special resolution of the shareholders of each constituent company, and (2) such otherauthorization, if any, as may be specified in such constituent company’s articles of association. The written plan of merger or consolidation must befiled with the Registrar of Companies together with a declaration as to the solvency of the consolidated or surviving company, a list of the assetsand liabilities of each constituent company and an undertaking that a copy of the certificate of merger or consolidation will be given tothe members and creditors of each constituent company and that notification of the merger or consolidation will be published in the CaymanIslands Gazette. Dissenting shareholders have the right to be paid the fair value of their shares (which, if not agreed between the parties, will bedetermined by the Cayman Islands court) if they follow the required procedures, subject to certain exceptions. Court approval is not required for amerger or consolidation which is effected in compliance with these statutory procedures.A merger between a Cayman parent company and its Cayman subsidiary or subsidiaries does not require authorization by a resolution ofshareholders of that Cayman subsidiary if a copy of the plan of merger is given to every member of that Cayman subsidiary to be merged unlessthat member agrees otherwise. For this purpose a company is a “parent” of a subsidiary if it holds issued shares that together represent at leastninety percent (90%) of the votes at a general meeting of the subsidiary.The consent of each holder of a fixed or floating security interest over a constituent company is required unless this requirement is waivedby a court in the Cayman Islands.Save in certain limited circumstances, a shareholder of a Cayman constituent company who dissents from the merger or consolidation isentitled to payment of the fair value of his shares (which, if not agreed between the parties, will be determined by the Cayman Islands court) upondissenting to the merger or consolidation, provide the dissenting shareholder complies strictly with the procedures set out in the Companies Act.The exercise of dissenter rights will preclude the exercise by the dissenting shareholder of any other rights to which he or she might otherwise beentitled by virtue of holding shares, save for the right to seek relief on the grounds that the merger or consolidation is void or unlawful.Separate from the statutory provisions relating to mergers and consolidations, the Companies Act also contains statutory provisions thatfacilitate the reconstruction and amalgamation of companies, provided that the arrangement is approved by a majority in number of each class ofshareholders or creditors with whom the arrangement is to be made, and who must in addition represent three- fourths in value of each such class ofshareholders or creditors, as the case may be, that are present and voting either in person or by proxy at a meeting, or meetings, convened for thatpurpose. The convening of the meetings and subsequently the arrangement must be sanctioned by the Grand Court of the Cayman Islands. While adissenting shareholder has the right to express to the court the view that the transaction ought not to be approved, the Grand Court can be expectedto approve the arrangement if it determines that:·the statutory provisions as to the required majority vote have been met;·the shareholders have been fairly represented at the meeting in question and the statutory majority are acting bona fide without coercionof the minority to promote interests adverse to those of the class;·the arrangement is such that may be reasonably approved by an intelligent and honest man of that class acting in respect of his interest;and·the arrangement is not one that would more properly be sanctioned under some other provision of the Companies Act.The Companies Act also contains a statutory power of compulsory acquisition which may facilitate the “squeeze out” of dissentientminority shareholder upon a tender offer. When a tender offer is made and accepted by holders of 90.0% of the shares affected within four months,the offeror may, within a two-month period commencing on the expiration of such four-month period, require the holders of the remaining shares totransfer such shares on the terms of the offer. An objection can be made to the Grand Court of the Cayman Islands but this is unlikely to succeed inthe case of an offer which has been so approved unless there is evidence of fraud, bad faith or collusion.If an arrangement and reconstruction is thus approved, the dissenting shareholder would have no rights comparable to appraisal rights,which would otherwise ordinarily be available to dissenting shareholders of Delaware corporations, providing rights to receive payment in cash forthe judicially determined value of the shares.Shareholders’ SuitsIn principle, we will normally be the proper plaintiff to sue for a wrong done to us as a company, and as a general rule a derivative actionmay not be brought by a minority shareholder. However, based on English authorities, which would in all likelihood be of persuasive authority inthe Cayman Islands, the Cayman Islands court can be expected to follow and apply the common law principles (namely the rule in Foss v.Harbottle and the exceptions thereto) which permit a minority shareholder to commence a class action against or derivative actions in the name ofthe company to challenge actions where:·a company acts or proposes to act illegally or ultra vires;·an action which requires a resolution with a qualified (or special) majority which has not been obtained; and·those who control the company are perpetrating a “fraud on the minority.”Indemnification of Directors and Executive Officers and Limitation of LiabilityCayman Islands law does not limit the extent to which a company’s memorandum and articles of association may provide forindemnification of officers and directors, except to the extent any such provision may be held by the Cayman Islands courts to be contrary to publicpolicy, such as to provide indemnification against civil fraud or the consequences of committing a crime. Our Third Memorandum and Articles ofAssociation provide that we shall indemnify our officers and directors against all actions, proceedings, costs, charges, expenses, losses, damages orliabilities incurred or sustained by such directors or officer, other than by reason of such person’s dishonesty, willful default or fraud, in or about theconduct of our company’s business or affairs (including as a result of any mistake of judgment) or in the execution or discharge of his duties,powers, authorities or discretions, including without prejudice to the generality of the foregoing, any costs, expenses, losses or liabilities incurredby such director or officer in defending (whether successfully or otherwise) any civil proceedings concerning our company or its affairs in anycourt whether in the Cayman Islands or elsewhere. This standard of conduct is generally the same as permitted under the Delaware GeneralCorporation Law for a Delaware corporation.In addition, we have entered into indemnification agreements with our directors and executive officers that provide such persons withadditional indemnification beyond that provided in our Third Memorandum and Articles of Association.Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers or persons controllingus under the foregoing provisions, we have been informed that in the opinion of the SEC, such indemnification is against public policy as expressedin the Securities Act and is therefore unenforceable.Directors’ Fiduciary DutiesUnder Delaware corporate law, a director of a Delaware corporation has a fiduciary duty to the corporation and its shareholders. This dutyhas two components: the duty of care and the duty of loyalty. The duty of care requires that a director act in good faith, with the care that anordinarily prudent person would exercise under similar circumstances. Under this duty, a director must inform himself of, and disclose toshareholders, all material information reasonably available regarding a significant transaction. The duty of loyalty requires that a director acts in amanner he reasonably believes to be in the best interests of the corporation. He must not use his corporate position for personal gain or advantage.This duty prohibits self-dealing by a director and mandates that the best interest of the corporation and its shareholders take precedence over anyinterest possessed by a director, officer or controlling shareholder and not shared by the shareholders generally. In general, actions of a director arepresumed to have been made on an informed basis, in good faith and in the honest belief that the action taken was in the best interests of thecorporation. However, this presumption may be rebutted by evidence of a breach of one of the fiduciary duties. Should suchevidence be presented concerning a transaction by a director, the director must prove the procedural fairness of the transaction, and that thetransaction was of fair value to the corporation.As a matter of Cayman Islands law, a director of a Cayman Islands company is in the position of a fiduciary with respect to the companyand therefore it is considered that he owes the following duties to the company—a duty to act bona fide in the best interests of the company, a dutynot to make a profit based on his position as director (unless the company permits him to do so), a duty not to put himself in a position where theinterests of the company conflict with his personal interest or his duty to a third party, and a duty to exercise powers for the purpose for which suchpowers were intended. A director of a Cayman Islands company owes to the company a duty to act with skill and care. It was previously consideredthat a director need not exhibit in the performance of his duties a greater degree of skill than may reasonably be expected from a person of hisknowledge and experience. However, English and Commonwealth courts have moved towards an objective standard with regard to the requiredskill and care and these authorities are likely to be followed in the Cayman Islands.Shareholder Action by Written ConsentUnder the Delaware General Corporation Law, a corporation may eliminate the right of shareholders to act by written consent byamendment to its certificate of incorporation. Under Cayman Islands law, a company may eliminate the ability of shareholders to approve corporatematters by way of written resolution signed by or on behalf of each shareholder who would have been entitled to vote on such matters at a generalmeeting without a meeting being held by amending the articles of association.Our Third Memorandum and Articles of Association do not allow shareholders to act by written resolutions.Shareholder ProposalsUnder the Delaware General Corporation Law, a shareholder has the right to put any proposal before the annual meeting of shareholders,provided it complies with the notice provisions in the governing documents. A special meeting may be called by the board of directors, or any otherperson authorized to do so in the governing documents, but shareholders may be precluded from calling special meetings.The Companies Act provide shareholders with only limited rights to requisition a general meeting and does not provide shareholders withany right to put any proposal before a general meeting. However, these rights may be provided in a company’s articles of association. Our ThirdMemorandum and Articles of Association do not allow our shareholders to requisite with any general meeting nor to put proposals before annualgeneral meetings or extraordinary general meetings. As an exempted Cayman Islands company, we are not obliged by law to call shareholders’annual general meetings, butwe are required to convene annual general meetings under the Third Memorandum and Articles of Association.Cumulative VotingUnder the Delaware General Corporation Law, cumulative voting for elections of directors is not permitted unless the corporation’scertificate of incorporation specifically provides for it. Cumulative voting potentially facilitates the representation of minority shareholders on aboard of directors since it permits the minority shareholder to cast all the votes to which the shareholder is entitled on a single director, whichincreases the shareholder’s voting power with respect to electing such director. There are no prohibitions in relation to cumulative voting under thelaws of the Cayman Islands but our Third Memorandum and Articles of Association do not provide for cumulative voting. As a result, ourshareholders are not afforded any less protections or rights on this issue than shareholders of a Delaware corporation.Removal of DirectorsUnder the Delaware General Corporation Law, a director of a corporation with a classified board may be removed only for cause with theapproval of a majority of the outstanding shares entitled to vote, unless the certificate of incorporation provides otherwise. Under our ThirdMemorandum and Articles of Association, directors may be removed with or without cause, by an ordinary resolution of our shareholders. Inaddition, a director’s office shall be vacated if the director (i) becomes bankrupt or has a receiving order made against him or suspends payment orcompounds with his creditors; (ii) becomes of unsound mind or dies; (iii) resigns his office by notice in writing; (iv) is prohibited by any applicablelaws or regulations from being a director; (v) without special leave of absence from our board of directors, is absent from six consecutive meetingsof the board and the board resolves that his office be vacated; or (vi) is removed from office pursuant to any other provisions of our ThirdMemorandum and Articles of Association.Transactions with Interested ShareholdersThe Delaware General Corporation Law contains a business combination statute applicable to Delaware corporations whereby, unless thecorporation has specifically elected not to be governed by such statute by amendment to its certificate of incorporation, it is prohibited fromengaging in certain business combinations with an “interested shareholder” for three years following the date that such person becomes aninterested shareholder. An interested shareholder generally is a person or a group who or which owns or owned 15% or more of the target’soutstanding voting share within the past three years. This has the effect of limiting the ability of a potential acquirer to make a two-tiered bid for thetarget in which all shareholders would not be treated equally. The statute does not apply if, among other things, prior to the date on which suchshareholder becomes an interested shareholder, the board of directors approves either the business combination or the transaction which resulted inthe personbecoming an interested shareholder. This encourages any potential acquirer of a Delaware corporation to negotiate the terms of any acquisitiontransaction with the target’s board of directors.Cayman Islands law has no comparable statute. As a result, we cannot avail ourselves of the types of protections afforded by the Delawarebusiness combination statute. However, although Cayman Islands law does not regulate transactions between a company and its significantshareholders, the directors of the company are required to comply with fiduciary duties which they owe to the company under Cayman Islandslaws, including the duty to ensure that, in their opinion, any such transactions must be entered into bona fide in the best interests of the company,and are entered into for a proper corporate purpose and not with the effect of constituting a fraud on the minority shareholders.Dissolution; Winding upUnder the Delaware General Corporation Law, unless the board of directors approves the proposal to dissolve, dissolution must beapproved by shareholders holding 100% of the total voting power of the corporation. Only if the dissolution is initiated by the board of directorsmay it be approved by a simple majority of the corporation’s outstanding shares. Delaware law allows a Delaware corporation to include in itscertificate of incorporation a supermajority voting requirement in connection with dissolutions initiated by the board.Under the Companies Act, a company may be wound up by either an order of the courts of the Cayman Islands or by a special resolutionof its members or, if the company is unable to pay its debts as they fall due, by an ordinary resolution of its members. The court has authority toorder winding up in a number of specified circumstances including where it is, in the opinion of the court, just and equitable to do so. Under theCompanies Act and our Third Memorandum and Articles of Association, our company may be dissolved, liquidated or wound up by a specialresolution of our shareholders.Variation of Rights of SharesUnder the Delaware General Corporation Law, a corporation may vary the rights of a class of shares with the approval of a majority of theoutstanding shares of such class, unless the certificate of incorporation provides otherwise. Under Cayman Islands law and our Third Memorandumand Articles of Association, if our share capital is divided into more than one class of shares, we may vary the rights attached to any class with thesanction of a special resolution passed at a separate meeting of the holders of the shares of that class by the holders of not less than two-thirds ofthe votes cast at such a meeting.Amendment of Governing DocumentUnder the Delaware General Corporation Law, a corporation’s governing documents may be amended with the approval of a majority ofthe outstanding shares entitled to vote, unless the certificate of incorporation provides otherwise. Under the Companies Act and our ThirdMemorandum andArticles of Association, our memorandum and articles of association may only be amended by a special resolution of our shareholders.Rights of Nonresident or Foreign ShareholdersThere are no limitations imposed by our Third Memorandum and Articles of Association on the rights of nonresident or foreignshareholders to hold or exercise voting rights on our shares. In addition, there are no provisions in our Third Memorandum and Articles ofAssociation governing the ownership threshold above which shareholder ownership must be disclosed.Exempted CompanyWe are an exempted company with limited liability under the Companies Act. The Companies Act distinguishes between ordinary residentcompanies and exempted companies. Any company that is registered in the Cayman Islands but conducts business mainly outside the CaymanIslands may apply to be registered as an exempted company. The requirements for an exempted company are essentially the same as for anordinary company except that an exempted company:·does not have to file an annual return of its shareholders with the Registrar of Companies of the Cayman Islands;·is not required to open its register of members for inspection;·does not have to hold an annual general meeting;·may issue bearer shares or shares with no par value;·may obtain an undertaking against the imposition of any future taxation (such undertakings are usually given for 20 years in the firstinstance);·may register by way of continuation in another jurisdiction and be deregistered in the Cayman Islands;·may register as a limited duration company; and·may register as a segregated portfolio company.“Limited liability” means that the liability of each shareholder is limited to the amount unpaid by the shareholder on that shareholder’sshares of the company, except in exceptional circumstances, suchas involving fraud, the establishment of an agency relationship or an illegal or improper purpose or other circumstances in which a court may beprepared to pierce or lift the corporate veil.Changes in CapitalWe may from time to time by ordinary resolution increase the share capital by such sum, to be divided into shares of such classes andamount, as the resolution shall prescribe. We may by ordinary resolution:·increase its share capital by new shares of such amount as the resolution shall prescribe and with such rights, priorities and privilegesannexed thereto, as we may determine in general meeting;·consolidate and divide all or any of its share capital into shares of a larger amount than its existing shares;·subdivide its shares, or any of them, into shares of an amount smaller than that fixed by our Third Memorandum and Articles ofAssociation; and·cancel any shares that, at the date of the passing of the resolution, have not been taken or agreed to be taken by any person and diminishthe amount of its share capital by the amount of the shares so cancelled.We may by special resolution reduce its share capital and any capital redemption reserve or other undistributable reserve in any mannerpermitted by the law.DESCRIPTION OF AMERICAN DEPOSITARY SHARESJPMorgan Chase, as depositary, issues the ADSs. Each ADS represent two ordinary shares, par value US$0.3 per share, deposited with thecustodian, as agent of the depositary, under the deposit agreement among ourselves, the depositary, ADR holders, and all beneficial owners of aninterest in the ADSs evidenced by ADRs from time to time.The depositary’s office is located at 383 Madison Avenue, Floor 11, New York, NY 10179.A beneficial owner is any person or entity having a beneficial ownership interest ADSs. A beneficial owner need not be the holder of theADR evidencing such ADS. If a beneficial owner of ADSs is not an ADR holder, it must rely on the holder of the ADR(s) evidencing such ADSsin order to assert any rights or receive any benefits under the deposit agreement. A beneficial owner shall only be able to exercise any right orreceive any benefit under the deposit agreement solely through the holder of the ADR(s) evidencing the ADSs owned by such beneficial owner.The arrangements between abeneficial owner of ADSs and the holder of the corresponding ADRs may affect the beneficial owner’s ability to exercise any rights it may have.An ADR holder shall be deemed to have all requisite authority to act on behalf of any and all beneficial owners of the ADSs evidenced bythe ADRs registered in such ADR holder’s name for all purposes under the deposit agreement and ADRs. The depositary’s only notificationobligations under the deposit agreement and the ADRs is to registered ADR holders. Notice to an ADR holder shall be deemed, for all purposes ofthe deposit agreement and the ADRs, to constitute notice to any and all beneficial owners of the ADSs evidenced by such ADR holder’s ADRs.Unless certificated ADRs are specifically requested, all ADSs are issued on the books of our depositary in book-entry form and periodicstatements are mailed to ADR holder which reflect such ADR holder’s ownership interest in such ADSs. In our description, references to Americandepositary receipts or ADRs shall include the statements ADR holder receive which reflect such ADR holder’s ownership of ADSs.An ADR holder may hold ADSs either directly or indirectly through such ADR holder’s broker or other financial institution. If ADRholder holds ADSs directly, by having an ADS registered in such ADR holder’s name on the books of the depositary, such ADR holders are anADR holder. This description assumes ADR holders hold the ADSs directly. If an ADR holder holds the ADSs through such ADR holder’s brokeror financial institution nominee, the ADR holder must rely on the procedures of such broker or financial institution to assert the rights of an ADRholder described in this section. An ADR holder should consult with his or her broker or financial institution to find out what those procedures are.We do not treat an ADR holder or beneficial owner as a shareholder of ours and such ADR holder or beneficial owner does not have anyshareholder rights. Cayman Island law governs shareholder rights. Because the depositary or its nominee is the shareholder of record for the sharesrepresented by all outstanding ADSs, shareholder rights rest with such record holder. An ADR holder’s or beneficial owner’s rights are those of anADR holder or of a beneficial owner. Such rights derive from the terms of the deposit agreement to be entered into among us, the depositary and allholders and beneficial owners from time to time of ADRs issued under the deposit agreement and, in the case of a beneficial owner, from thearrangements between the beneficial owner and the holder of the corresponding ADRs. The obligations of the depositary and its agents are also setout in the deposit agreement. Because the depositary or its nominee is actually the registered owner of the shares, an ADR holder or beneficialowner must rely on it to exercise the rights of a shareholder on his or her behalf.The deposit agreement and the ADSs are governed by New York law. Under the deposit agreement, by holding or owning an ADR orADS or an interest therein, ADR holders and beneficial owners each irrevocably agree that any legal suit, action or proceeding against or involvingADRholders or beneficial owners brought by us or the depositary, arising out of or based upon the deposit agreement, the ADSs, the ADRs or thetransactions contemplated thereby, may be instituted in a state or federal court in New York, New York, irrevocably waive any objection whichADR holders and beneficial owners may have to the laying of venue of any such proceeding, and irrevocably submit to the non-exclusivejurisdiction of such courts in any such suit, action or proceeding. By holding or owning an ADR or ADS or an interest therein, ADR holders andbeneficial owners each also irrevocably agree that any legal suit, action or proceeding against or involving the depositary brought by ADR holdersor beneficial owners, arising out of or based upon the deposit agreement, the ADSs, the ADRs or the transactions contemplated thereby, may onlybe instituted in a state or federal court in New York, New York. As a result, ADR holders may not initiate legal proceedings against or involvingthe depositary, arising out of or based upon the deposit agreement, the ADSs, the ADRs or the transactions contemplated therein or thereby, in anyjurisdictions outside of a state or federal court in New York, New York, while proceedings against the ADR holders may be initiated in a state orfederal court in New York, New York or other jurisdictions.The following is a summary of what we believe to be the material terms of the deposit agreement. Notwithstanding this, because it is asummary, it may not contain all the information that an ADS holder may otherwise deem important. For more complete information, an ADSholder should read the entire deposit agreement and the form of ADR which contains the terms of the ADSs. The deposit agreement has been filedwith the SEC as an exhibit to a Registration Statement on Form F-6 (File No. 333-219169) for the Company. The form of ADR has also been filedwith the SEC as an exhibit to our Registration Statement on Form F-6 (File No. 333-219169), as amended, initially filed with the SEC on July 6,2017.Share Dividends and Other DistributionsHow will ADS holders receive dividends and other distributions on the shares underlying their ADSs?We may make various types of distributions with respect to our securities. The depositary has agreed that, to the extent practicable, it willpay to an ADS holder the cash dividends or other distributions it or the custodian receives on shares or other deposited securities, after convertingany cash received into U.S. dollars (if it determines such conversion may be made on a reasonable basis) and, in all cases, making any necessarydeductions provided for in the deposit agreement. The depositary may utilize a division, branch or affiliate of JPMorgan Chase to direct, manageand/or execute any public and/or private sale of securities under the deposit agreement. Such division, branch and/or affiliate may charge thedepositary a fee in connection with such sales, which fee is considered an expense of the depositary. An ADS holder will receive these distributionsin proportion to the number of underlying securities that his or her ADSs represent.Except as stated below, the depositary will deliver such distributions to ADR holders in proportion to their interests in the followingmanner:·Cash. The depositary will distribute any U.S. dollars available to it resulting from a cash dividend or other cash distribution or the netproceeds of sales of any other distribution or portion thereof (to the extent applicable), on an averaged or other practicable basis, subjectto (i) appropriate adjustments for taxes withheld, (ii) such distribution being impermissible or impracticable with respect to certainregistered ADR holders, and (iii) deduction of the depositary’s and/or its agents’ expenses in (1) converting any foreign currency to U.S.dollars to the extent that it determines that such conversion may be made on a reasonable basis, (2) transferring foreign currency or U.S.dollars to the United States by such means as the depositary may determine to the extent that it determines that such transfer may bemade on a reasonable basis (3) obtaining any approval or license of any governmental authority required for such conversion or transfer,which is obtainable at a reasonable cost and within a reasonable time and (4) making any sale by public or private means in anycommercially reasonable manner. If exchange rates fluctuate during a time when the depositary cannot convert a foreign currency, anADS holder may lose some or all of the value of the distribution.·Shares. In the case of a distribution in shares, the depositary will issue additional ADRs to evidence the number of ADSs representingsuch shares. Only whole ADSs will be issued. Any shares which would result in fractional ADSs will be sold and the net proceeds willbe distributed in the same manner as cash to the ADR holders entitled thereto.·Rights to receive additional shares. In the case of a distribution of rights to subscribe for additional shares or other rights, if we timelyprovide evidence satisfactory to the depositary that it may lawfully distribute such rights, the depositary will distribute warrants or otherinstruments in the discretion of the depositary representing such rights. However, if we do not timely furnish such evidence, thedepositary may:(i)sell such rights if practicable and distribute the net proceeds in the same manner as cash to the ADR holders entitled thereto; or(ii)if it is not practicable to sell such rights by reason of the non-transferability of the rights, limited markets therefor, their short durationor otherwise, do nothing and allow such rights to lapse, in which case ADR holders will receive nothing and the rights may lapse.·Other Distributions. In the case of a distribution of securities or property other than those described above, the depositary may either (i)distribute such securities or property in any manner it deems equitable and practicable or (ii) to the extent the depositary deemsdistribution of such securities or property not to be equitable and practicable, sell such securities or property and distribute any netproceeds in the same way it distributes cash.If the depositary determines in its discretion that any distribution described above is not practicable with respect to any specific registeredADR holder, the depositary may choose any method of distribution that it deems practicable for such ADR holder, including the distribution offoreign currency, securities or property, or it may retain such items, without paying interest on or investing them, on behalf of the ADR holder asdeposited securities, in which case the ADSs will also represent the retained items.Any U.S. dollars will be distributed by checks drawn on a bank in the United States for whole dollars and cents. Fractional cents will bewithheld without liability and dealt with by the depositary in accordance with its then current practices.The depositary is not responsible if it fails to determine that any distribution or action is lawful or reasonably practicable.There can be no assurance that the depositary will be able to convert any currency at a specified exchange rate or sell any property, rights,shares or other securities at a specified price, nor that any of such transactions can be completed within a specified time period. All purchases andsales of securities will be handled by the depositary in accordance with its then current policies, which are currently set forth in the “DepositaryReceipt Sale and Purchase of Security” section of https://www.adr.com/Investors/FindOutAboutDRs, the location and contents of which thedepositary shall be solely responsible for.Deposit, Withdrawal and CancellationHow does the depositary issue ADSs?The depositary will issue ADSs if an ADS holder or his or her broker deposit shares or evidence of rights to receive shares with thecustodian and pay the fees and expenses owing to the depositary in connection with such issuance.Shares deposited in the future with the custodian must be accompanied by certain delivery documentation and shall, at the time of suchdeposit, be registered in the name of JPMorgan Chase Bank, N.A., as depositary for the benefit of holders of ADRs or in such other name as thedepositary shall direct.The custodian will hold all deposited shares for the account and to the order of the depositary, in each case for the benefit of ADR holders.ADR holders and beneficial owners thus have no direct ownership interest in the shares and only have such rights as are contained in the depositagreement. The custodian will also hold any additional securities, property and cash received on or in substitution for the deposited shares. Thedeposited shares and any such additional items are referred to as “deposited securities”.Deposited securities are not intended to, and shall not, constitute proprietary assets of the depositary, the custodian or their nominees.Beneficial ownership in deposited securities is intended to be and shall at all times during the term of the deposit agreement continue tobe, vested in the beneficial owners of the ADSs representing such deposited securities. Notwithstanding anything else contained herein, in thedeposit agreement, in the form of ADR and/or in any outstanding ADSs, the depositary, the custodian and their respective nominees are intended tobe and shall at all times during the term of the deposit agreement be, the record holder(s) only of the deposited securities represented by the ADSsfor the benefit of the ADR holders. The depositary, on its own behalf and on behalf of the custodian and their respective nominees, disclaims anybeneficial ownership interest in the deposited securities held on behalf of the ADR holders.Upon each deposit of shares, receipt of related delivery documentation and compliance with the other provisions of the deposit agreement,including the payment of the fees and charges of the depositary and any taxes or other fees or charges owing, the depositary will issue an ADR orADRs in the name or upon the order of the person entitled thereto evidencing the number of ADSs to which such person is entitled. All of theADSs issued will, unless specifically requested to the contrary, be part of the depositary’s direct registration system, and a registered holder willreceive periodic statements from the depositary which will show the number of ADSs registered in such holder’s name. An ADR holder canrequest that the ADSs not be held through the depositary’s direct registration system and that a certificated ADR be issued.How do ADR holders cancel an ADS and obtain deposited securities?When an ADR holder turns in his or her ADR certificate at the depositary’s office, or when an ADR holder provide proper instructionsand documentation in the case of direct registration ADSs, the depositary will, upon payment of certain applicable fees, charges and taxes, deliverthe underlying shares to an ADR holder or upon an ADR holder’s written order. Delivery of deposited securities in certificated form will be madeat the custodian’s office. At an ADR holder’s risk, expense and request, the depositary may deliver deposited securities at such other place as anADR holder may request.The depositary may only restrict the withdrawal of deposited securities in connection with:·temporary delays caused by closing our transfer books or those of the depositary or the deposit of shares in connection with voting at ashareholders’ meeting, or the payment of dividends;·the payment of fees, taxes and similar charges; or·compliance with any U.S. or foreign laws or governmental regulations relating to the ADRs or to the withdrawal of deposited securities.This right of withdrawal may not be limited by any other provision of the deposit agreement.Record DatesThe depositary may, after consultation with us if practicable, fix record dates (which, to the extent applicable, shall be as near aspracticable to any corresponding record dates set by us) for the determination of the registered ADR holders who will be entitled (or obligated, asthe case may be):·to receive any distribution on or in respect of deposited securities,·to give instructions for the exercise of voting rights at a meeting of holders of shares, or·to pay the fee assessed by the depositary for administration of the ADR program and for any expenses as provided for in the ADR,·to receive any notice or to act in respect of other matters,all subject to the provisions of the deposit agreement.Voting RightsHow do ADR holders vote?If the depositary asks an ADR holder to provide it with voting instructions, an ADR holder may instruct the depositary how to exercise thevoting rights for the shares which underlie an ADR holder’s ADSs. Subject to the next sentence, as soon as practicable after receiving notice fromus of any meeting at which the holders of shares are entitled to vote, or of our solicitation of consents or proxies from holders of shares, thedepositary shall fix the ADS record date in accordance with the provisions of the deposit agreement, provided that if the depositary receives awritten request from us and at least 30 days prior to the date of such vote or meeting, the depositary shall, at our expense, distribute to theregistered ADR holders a “voting notice” stating (i) final information particular to such vote and meeting and any solicitation materials, (ii) thateach ADR holder on the record date set by thedepositary will, subject to any applicable provisions of Cayman Islands law, be entitled to instruct the depositary as to the exercise of the votingrights, if any, pertaining to the deposited securities represented by the ADSs evidenced by such ADR holder’s ADRs and (iii) the manner in whichsuch instructions may be given, including instructions for giving a discretionary proxy to a person designated by us. Each ADR holder shall besolely responsible for the forwarding of voting notices to the beneficial owners of ADSs registered in such ADR holder’s name. There is noguarantee that ADR holders and beneficial owners generally or any holder or beneficial owner in particular will receive the notice described abovewith sufficient time to enable such ADR holder or beneficial owner to return any voting instructions to the depositary in a timely manner.Following actual receipt by the ADR department responsible for proxies and voting of ADR holders’ instructions (including, withoutlimitation, instructions of any entity or entities acting on behalf of the nominee for DTC), the depositary shall, in the manner and on or before thetime established by the Depositary for such purpose, endeavor to vote or cause to be voted the deposited securities represented by the ADSsevidenced by such ADR holders’ ADRs in accordance with such instructions insofar as practicable and permitted under the provisions of orgoverning deposited securities.To the extent we have provided the depositary with at least 30 days’ notice of a proposed meeting and the notice will be received by allholders and beneficial owners of interests in ADSs no less than 10 days prior to the date of the meeting and/or the cut-off date for the solicitation ofconsents, if voting instructions are not timely received by the depositary from any holder, such holder shall be deemed, and in the depositagreement the depositary is instructed to deem such holder, to have instructed the depositary to give a discretionary proxy to a person designated byus to vote the shares represented by their ADSs as desired, provided that no such instruction shall be deemed given and no discretionary proxy shallbe given unless (a) we inform the depositary in writing (and we agree to provide the depositary with such instruction promptly in writing) that(i) we wish such proxy to be given, (ii) there is no substantial opposition existing with respect to any agenda item for which the proxy would begiven and (iii) the agenda item(s), if approved, would not materially or adversely affect the rights of holders of shares and (b) with respect to suchmeeting, the depositary obtained an opinion of counsel, in form and substance satisfactory to the depositary, confirming that (a) the granting ofsuch discretionary proxy does not subject the depositary to any reporting obligations in the Cayman Islands, (b) the granting of such proxy will notresult in a violation of the laws, rules, regulations or permits of the Cayman Islands and (c) the voting arrangement and deemed instruction ascontemplated under the deposit agreement will be given effect under the laws, rules and regulations of the Cayman Islands and (d) the granting ofsuch discretionary proxy will not under any circumstances result in the shares represented by the ADSs being treated as assets of the depositaryunder the laws, rules or regulations of the Cayman Islands.The depositary may from time to time access information available to it to consider whether any of the circumstances described aboveexist, or request additional information from us in respect thereto. By taking any such action, the depositary shall not in any way be deemed orinferred to have been required, or have had any duty or responsibility (contractual or otherwise), to monitor or inquire whether any of thecircumstances described above existed. In addition to the limitations provided for in the deposit agreement, ADR holders and beneficial owners areadvised and agree that (a) the depositary will rely fully and exclusively on us to inform it of any of the circumstances set forth above, and(b) neither the depositary, the custodian nor any of their respective agents shall be obliged to inquire or investigate whether any of thecircumstances described above exist and/or whether we complied with our obligation to timely inform the depositary of such circumstances.Neither the depositary, the custodian nor any of their respective agents shall incur any liability to ADR holders or beneficial owners (i) as a resultof our failure to determine that any of the circumstances described above exist or our failure to timely notify the depositary of any suchcircumstances or (ii) if any agenda item which is approved at a meeting has, or is claimed to have, a material or adverse effect on the rights ofholders of shares.Holders are strongly encouraged to forward their voting instructions to the depositary as soon as possible. For instructions to be valid, theADR department of the depositary that is responsible for proxies and voting must receive them in the manner and on or before the time specified,notwithstanding that such instructions may have been physically received by the depositary prior to such time. The depositary will not itselfexercise any voting discretion in respect of deposited securities. The depositary and its agents will not be responsible for any failure to carry outany instructions to vote any of the deposited securities, for the manner in which any voting instructions are given, including instructions to give adiscretionary proxy to a person designated by us, for the manner in which any vote is cast, including, without limitation, any vote cast by a personto whom the depositary is instructed to grant a discretionary proxy, or for the effect of any such vote.Notwithstanding anything contained in the deposit agreement or any ADR, the depositary may, to the extent not prohibited by any law,regulation, or requirement of the stock exchange on which the ADSs are listed, in lieu of distribution of the materials provided to the depositary inconnection with any meeting of, or solicitation of consents or proxies from, holders of deposited securities, distribute to the registered holders ofADRs a notice that provides such holders with, or otherwise publicizes to such holders, instructions on how to retrieve such materials or receivesuch materials upon request (i.e., by reference to a website containing the materials for retrieval or a contact for requesting copies of the materials).We have advised the depositary that under the Cayman Islands law and our constituent documents, each as in effect as of the date of thedeposit agreement, voting at any meeting of shareholders is by show of hands unless a poll is (before or on the declaration of the results of theshowof hands) demanded. In the event that voting on any resolution or matter is conducted on a show of hands basis in accordance with our constituentdocuments, the depositary will refrain from voting and the voting instructions received by the depositary from holders shall lapse. The depositarywill not demand a poll or join in demanding a poll, whether or not requested to do so by holders of ADSs. There is no guarantee that an ADRholder will receive voting materials in time to instruct the depositary to vote and it is possible that an ADR holder, or persons who hold their ADSsthrough brokers, dealers or other third parties, will not have the opportunity to exercise a right to vote.Reports and Other CommunicationsWill ADR holders be able to view our reports?The depositary will make available for inspection by ADR holders at the offices of the depositary and the custodian the deposit agreement,the provisions of or governing deposited securities, and any written communications from us which are both received by the custodian or itsnominee as a holder of deposited securities and made generally available to the holders of deposited securities.Additionally, if we make any written communications generally available to holders of our shares, and we furnish copies thereof (or Englishtranslations or summaries) to the depositary, it will distribute the same to registered ADR holders.Reclassifications, Recapitalizations and MergersIf we take certain actions that affect the deposited securities, including (i) any change in par value, split-up, consolidation, cancellation orother reclassification of deposited securities or (ii) any distributions of ordinary shares or other property not made to holders of ADRs or (iii) anyrecapitalization, reorganization, merger, consolidation, liquidation, receivership, bankruptcy or sale of all or substantially all of our assets, then thedepositary may choose to, and shall if reasonably requested by us:·amend the form of ADR;·distribute additional or amended ADRs;·distribute cash, securities or other property it has received in connection with such actions;·sell by public or private sale any securities or property received; or·none of the above.If the depositary does not choose any of the above options, any of the cash, securities or other property it receives will constitute part ofthe deposited securities and each ADS will then represent a proportionate interest in such property.Amendment and TerminationHow may the deposit agreement be amended?We may agree with the depositary to amend the deposit agreement and the ADSs without an ADR holder’s consent for any reason. ADRholders must be given at least 30 days’ notice of any amendment that imposes or increases any fees or charges (other than stock transfer or othertaxes and other governmental charges, transfer or registration fees, SWIFT, cable, telex or facsimile transmission costs, delivery costs or other suchexpenses), or otherwise prejudices any substantial existing right of ADR holders or beneficial owners. Such notice need not describe in detail thespecific amendments effectuated thereby, but must identify to ADR holders and beneficial owners a means to access the text of such amendment. Ifan ADR holder continues to hold an ADR or ADRs after being so notified, such ADR holder and any beneficial owner are deemed to agree to suchamendment and to be bound by the deposit agreement as so amended. No amendment, however, will impair an ADR holder’s right to surrender hisor her ADSs and receive the underlying securities, except in order to comply with mandatory provisions of applicable law.Any amendments or supplements which (i) are reasonably necessary (as agreed by us and the depositary) in order for (a) the ADSs to beregistered on Form F-6 under the Securities Act of 1933 or (b) the ADSs or shares to be traded solely in electronic book-entry form and (ii) do notin either such case impose or increase any fees or charges to be borne by ADR holders, shall be deemed not to prejudice any substantial rights ofADR holders or beneficial owners. Notwithstanding the foregoing, if any governmental body or regulatory body should adopt new laws, rules orregulations which would require amendment or supplement of the deposit agreement or the form of ADR to ensure compliance therewith, we andthe depositary may amend or supplement the deposit agreement and the ADR at any time in accordance with such changed laws, rules orregulations. Such amendment or supplement to the deposit agreement in such circumstances may become effective before a notice of suchamendment or supplement is given to ADR holders or within any other period of time as required for compliance.Notice of any amendment to the deposit agreement or form of ADRs shall not need to describe in detail the specific amendmentseffectuated thereby, and failure to describe the specific amendments in any such notice shall not render such notice invalid, provided, however, that,in each such case, the notice given to the ADR holders identifies a means for ADR holders and beneficial owners to retrieve or receive the text ofsuch amendment (i.e., upon retrieval from the SEC’s, the depositary’s or our website or upon request from the depositary).How may the deposit agreement be terminated?The depositary may, and shall at our written direction, terminate the deposit agreement and the ADRs by mailing notice of suchtermination to the holders of ADRs at least 30 days prior to the date fixed in such notice for such termination; provided, however, if the depositaryshall have (i) resigned as depositary under the deposit agreement, notice of such termination by the depositary shall not be provided to the ADRholders unless a successor depositary shall not be operating under the deposit agreement within 90 days of the date of such resignation, and(ii) been removed as depositary under the deposit agreement, notice of such termination by the depositary shall not be provided to registeredholders of ADRs unless a successor depositary shall not be operating under the deposit agreement on the 90th day after our notice of removal wasfirst provided to the depositary.After the date so fixed for termination, (a) all direct registration ADRs shall cease to be eligible for the direct registration system and shallbe considered ADRs issued on the ADR register maintained by the depositary and (b) the depositary shall use its reasonable efforts to ensure thatthe ADSs cease to be DTC eligible so that neither DTC nor any of its nominees shall thereafter be a registered holder of ADRs. At such time as theADSs cease to be DTC eligible and/or neither DTC nor any of its nominees is a registered holder of ADRs, the depositary shall (a) instruct itscustodian to deliver all shares to us along with a general stock power that refers to the names set forth on the ADR register maintained by thedepositary and (b) provide us with a copy of the ADR register maintained by the depositary. Upon receipt of such shares and the ADR registermaintained by the depositary, we have agreed to use our best efforts to issue to each registered ADR holder a Share certificate representing theShares represented by the ADSs reflected on the ADR register maintained by the depositary in such registered ADR holder’s name and to deliversuch Share certificate to the registered ADR holder at the address set forth on the ADR register maintained by the depositary. After providing suchinstruction to the custodian and delivering a copy of the ADR register to us, the depositary and its agents will perform no further acts under thedeposit agreement or the ADRs and shall cease to have any obligations under the deposit agreement and/or the ADRs.Limitations on Obligations and Liability to ADR holdersLimits on our obligations and the obligations of the depositary; limits on liability to ADR holders and holders of ADSsPrior to the issue, registration, registration of transfer, split-up, combination, or cancellation of any ADRs, or the delivery of anydistribution in respect thereof, and from time to time in the case of the production of proofs as described below, we or the depositary or itscustodian may require:·payment with respect thereto of (i) any stock transfer or other tax or other governmental charge, (ii) any stock transfer or registrationfees in effect for the registration of transfers of shares or other deposited securities upon any applicable register and (iii) any applicablefees and expenses described in the deposit agreement;·the production of proof satisfactory to it of (i) the identity of any signatory and genuineness of any signature and (ii) such otherinformation, including without limitation, information as to citizenship, residence, exchange control approval, beneficial or otherownership of, or interest in, any securities, compliance with applicable law, regulations, provisions of or governing deposited securitiesand terms of the deposit agreement and the ADRs, as it may deem necessary or proper; and·compliance with such regulations as the depositary may establish consistent with the deposit agreement.The issuance of ADRs, the acceptance of deposits of shares, the registration, registration of transfer, split-up or combination of ADRs orthe withdrawal of shares, may be suspended, generally or in particular instances, when the ADR register or any register for deposited securities isclosed or when any such action is deemed advisable by the depositary; provided that the ability to withdraw shares may only be limited under thefollowing circumstances: (i) temporary delays caused by closing transfer books of the depositary or our transfer books or the deposit of shares inconnection with voting at a shareholders’ meeting, or the payment of dividends, (ii) the payment of fees, taxes, and similar charges, and(iii) compliance with any laws or governmental regulations relating to ADRs or to the withdrawal of deposited securities.The deposit agreement expressly limits the obligations and liability of the depositary, ourselves and our respective agents, provided,however, that no disclaimer of liability under the Securities Act of 1933 is intended by any of the limitations of liabilities provisions of the depositagreement. The deposit agreement provides that each of us, the depositary and our respective agents will:·incur or assume no liability if any present or future law, rule, regulation, fiat, order or decree of the United States, the Cayman Islands,Taiwan, the Republic of China, or any other country or jurisdiction, or of any governmental or regulatory authority or securitiesexchange or market or automated quotation system, the provisions of or governing any deposited securities, any present or futureprovision of our charter, any act of God, war, terrorism, nationalization, expropriation, currency restrictions, work stoppage, strike, civilunrest, revolutions, rebellions, explosions, computer failure or circumstance beyond our, the depositary’s or our respective agents’ directand immediate control shall prevent or delay, or shall cause any of them to be subject to any civil or criminal penalty in connection with,any act which the deposit agreement or the ADRs provide shall be done or performed by us, the depositary or our respective agents(including, without limitation, voting);·incur or assume no liability by reason of any non-performance or delay, caused as aforesaid, in the performance of any act or thingswhich by the terms of the deposit agreement it is provided shall or may be done or performed or any exercise or failure to exercisediscretion under the deposit agreement or the ADRs including, without limitation, any failure to determine that any distribution or actionmay be lawful or reasonably practicable;·incur or assume no liability if it performs its obligations under the deposit agreement and ADRs without gross negligence or willfulmisconduct;·in the case of the depositary and its agents, be under no obligation to appear in, prosecute or defend any action, suit or other proceedingin respect of any deposited securities the ADSs or the ADRs;·in the case of us and our agents, be under no obligation to appear in, prosecute or defend any action, suit or other proceeding in respectof any deposited securities the ADSs or the ADRs, which in our or our agents’ opinion, as the case may be, may involve it in expense orliability, unless indemnity satisfactory to us or our agent, as the case may be against all expense (including fees and disbursements ofcounsel) and liability be furnished as often as may be requested;·not be liable for any action or inaction by it in reliance upon the advice of or information from any legal counsel, any accountant, anyperson presenting shares for deposit, any registered holder of ADRs, or any other person believed by it to be competent to give suchadvice or information and/or, in the case of the depositary, us; or·may rely and shall be protected in acting upon any written notice, request, direction, instruction or document believed by it to be genuineand to have been signed, presented or given by the proper party or parties.Neither the depositary nor its agents have any obligation to appear in, prosecute or defend any action, suit or other proceeding in respect ofany deposited securities, the ADSs or the ADRs. We and our agents shall only be obligated to appear in, prosecute or defend any action, suit orother proceeding in respect of any deposited securities, the ADSs or the ADRs, which in our opinion may involve us in expense or liability, ifindemnity satisfactory to us against all expense (including fees and disbursements of counsel) and liability is furnished as often as may be required.The depositary and its agents may fully respond to any and all demands or requests for information maintained by or on its behalf in connectionwith the deposit agreement, any registered holder or holders of ADRs, any ADRs or otherwise related to the deposit agreement or ADRs to theextent such information is requested orrequired by or pursuant to any lawful authority, including without limitation laws, rules, regulations, administrative or judicial process, banking,securities or other regulators. The depositary shall not be liable for the acts or omissions made by, or the insolvency of, any securities depository,clearing agency or settlement system. Furthermore, the depositary shall not be responsible for, and shall incur no liability in connection with orarising from, the insolvency of any custodian that is not a branch or affiliate of JPMorgan Chase Bank, N.A.Notwithstanding anything to the contrary contained in the deposit agreement or any ADRs, the depositary shall not be responsible for, andshall incur no liability in connection with or arising from, any act or omission to act on the part of the custodian except to the extent that anyregistered ADR holder has incurred liability directly as a result of the custodian having (i) committed fraud or willful misconduct in the provisionof custodial services to the depositary or (ii) failed to use reasonable care in the provision of custodial services to the depositary as determined inaccordance with the standards prevailing in the jurisdiction in which the custodian is located. The depositary shall not have any liability for theprice received in connection with any sale of securities, the timing thereof or any delay in action or omission to act nor shall it be responsible forany error or delay in action, omission to act, default or negligence on the part of the party so retained in connection with any such sale or proposedsale.The depositary has no obligation to inform ADR holders or beneficial owners about the requirements of the laws, rules or regulations orany changes therein or thereto of the Cayman Islands, Taiwan, the Republic of China or any other country or jurisdiction or of any governmental orregulatory authority or any securities exchange or market or automated quotation system.Additionally, none of us, the depositary or the custodian shall be liable for the failure by any holder of registered ADRs or beneficialowner therein to obtain the benefits of credits or refunds of non-U.S. tax paid against such ADR holder’s or beneficial owner’s income tax liability.The depositary is under no obligation to provide the ADR holders and beneficial owners, or any of them, with any information about our tax status.Neither we nor the depositary shall incur any liability for any tax or tax consequences that may be incurred by registered ADR holders or beneficialowners on account of their ownership or disposition of ADRs or ADSs.Neither the depositary nor its agents will be responsible for any failure to carry out any instructions to vote any of the deposited securities,for the manner in which any voting instructions are given, including instructions to give a discretionary proxy to a person designated by us, for themanner in which any vote is cast, including, without limitation, any vote cast by a person to whom the depositary is instructed to grant adiscretionary proxy, or for the effect of any such vote. The depositary may rely upon instructions from us or our counsel in respect of any approvalor license required for any currency conversion, transfer or distribution. The depositary shall not incur any liability for the contentof any information submitted to it by us or on our behalf for distribution to ADR holders or for any inaccuracy of any translation thereof, for anyinvestment risk associated with acquiring an interest in the deposited securities, for the validity or worth of the deposited securities, for the credit-worthiness of any third party, for allowing any rights to lapse upon the terms of the deposit agreement or for the failure or timeliness of any noticefrom us. The depositary shall not be liable for any acts or omissions made by a successor depositary whether in connection with a previous act oromission of the depositary or in connection with any matter arising wholly after the removal or resignation of the depositary. Neither the depositarynor any of its agents shall be liable for any indirect, special, punitive or consequential damages (including, without limitation, legal fees andexpenses) or lost profits, in each case of any form incurred by any person or entity (including, without limitation holders or beneficial owners ofADRs and ADSs), whether or not foreseeable and regardless of the type of action in which such a claim may be brought.No provision of the deposit agreement or the ADRs is intended to constitute a waiver or limitation of any rights which an ADR holder orany beneficial owner may have under the Securities Act of 1933 or the Securities Exchange Act of 1934, to the extent applicable.The depositary and its agents may own and deal in any class of securities of our company and our affiliates and in ADRs.Disclosure of Interest in ADSsTo the extent that the provisions of or governing any deposited securities may require disclosure of or impose limits on beneficial or otherownership of, or interest in, deposited securities, other shares and other securities and may provide for blocking transfer, voting or other rights toenforce such disclosure or limits, ADR holders or beneficial owners agree to comply with all such disclosure requirements and ownershiplimitations and to comply with any reasonable instructions we may provide in respect thereof.Books of DepositaryThe depositary or its agent will maintain a register for the registration, registration of transfer, combination and split-up of ADRs, whichregister shall include the depositary’s direct registration system. Registered holders of ADRs may inspect such records at the depositary’s office atall reasonable times, but solely for the purpose of communicating with other ADR holders in the interest of the business of our company or a matterrelating to the deposit agreement. Such register may be closed at any time or from time to time, when deemed expedient by the depositary or, in thecase of the issuance book portion of the ADR Register, when reasonably requested by the Company solely in order to enable the Company tocomply with applicable law.The depositary will maintain facilities for the delivery and receipt of ADRs.AppointmentIn the deposit agreement, each registered holder of ADRs and each beneficial owner, upon acceptance of any ADSs or ADRs (or anyinterest in any of them) issued in accordance with the terms and conditions of the deposit agreement will be deemed for all purposes to:·be a party to and bound by the terms of the deposit agreement and the applicable ADR or ADRs,·appoint the depositary its attorney-in-fact, with full power to delegate, to act on its behalf and to take any and all actions contemplated inthe deposit agreement and the applicable ADR or ADRs, to adopt any and all procedures necessary to comply with applicable laws andto take such action as the depositary in its sole discretion may deem necessary or appropriate to carry out the purposes of the depositagreement and the applicable ADR and ADRs, the taking of such actions to be the conclusive determinant of the necessity andappropriateness thereof; and·acknowledge and agree that (i) nothing in the deposit agreement or any ADR shall give rise to a partnership or joint venture among theparties thereto, nor establish a fiduciary or similar relationship among such parties, (ii) the depositary, its divisions, branches andaffiliates, and their respective agents, may from time to time be in the possession of non-public information about us, ADR holders,beneficial owners and/or their respective affiliates, (iii) the depositary and its divisions, branches and affiliates may at any time havemultiple banking relationships with us, ADR holders, beneficial owners and/or the affiliates of any of them, (iv) the depositary and itsdivisions, branches and affiliates may, from time to time, be engaged in transactions in which parties adverse to us, ADR holders,beneficial owners and/or their respective affiliates may have interests, (v) nothing contained in the deposit agreement or any ADR(s)shall (A) preclude the depositary or any of its divisions, branches or affiliates from engaging in any such transactions or establishing ormaintaining any such relationships, or (B) obligate the depositary or any of its divisions, branches or affiliates to disclose any suchtransactions or relationships or to account for any profit made or payment received in any such transactions or relationships, (vi) thedepositary shall not be deemed to have knowledge of any information held by any branch, division or affiliate of the depositary and (vii)notice to an ADR holder shall be deemed, for all purposes of the deposit agreement and the ADRs, to constitute notice to any and allbeneficial owners of the ADSs evidenced by such ADR holder’s ADRs. For all purposes under the deposit agreement and the ADRs, theADR holders thereof shall be deemed to have all requisite authority to act on behalf of any and all beneficial owners of the ADSsevidenced by such ADRs.Governing LawThe deposit agreement, the ADSs and the ADRs are governed by and construed in accordance with the laws of the State of New York.In the deposit agreement, we have submitted to the non-exclusive jurisdiction of the courts of the State of New York and appointed anagent for service of process on our behalf. Any action based on the deposit agreement, the ADSs, the ADRs or the transactions contemplatedtherein or thereby may be instituted by the depositary against us in any competent court in the Cayman Islands, Taiwan, the Republic of China, theUnited States and/or any other court of competent jurisdiction.Under the deposit agreement, by holding or owning an ADR or ADS or an interest therein, ADR holders and beneficial owners eachirrevocably agree that any legal suit, action or proceeding against or involving ADR holders or beneficial owners brought by us or the depositary,arising out of or based upon the deposit agreement, the ADSs, the ADRs or the transactions contemplated thereby, may be instituted in a state orfederal court in New York, New York, irrevocably waive any objection which ADR holders and beneficial owners may have to the laying of venueof any such proceeding, and irrevocably submit to the non-exclusive jurisdiction of such courts in any such suit, action or proceeding. By holdingor owning an ADR or ADS or an interest therein, ADR holders and beneficial owners each also irrevocably agree that any legal suit, action orproceeding against or involving the depositary brought by ADR holders or beneficial owners, arising out of or based upon the deposit agreement,the ADSs, the ADRs or the transactions contemplated thereby, may only be instituted in a state or federal court in New York, New York. As aresult, ADR holders may not initiate legal proceedings against or involving the depositary, arising out of or based upon the deposit agreement, theADSs, the ADRs or the transactions contemplated therein or thereby, in any jurisdictions outside of a state or federal court in New York, New York,while proceedings against the ADR holders may be initiated in a state or federal court in New York, New York or other jurisdictions.Notwithstanding the foregoing, (i) the depositary may, in its sole discretion, elect to institute any dispute, suit, action, controversy, claimor proceeding directly or indirectly based on, arising out of or relating to the deposit agreement, the ADSs, the ADRs or the transactionscontemplated therein or thereby, including without limitation any question regarding its or their existence, validity, interpretation, performance ortermination, against any other party or parties to the deposit agreement (including, without limitation, against ADR holders and beneficial ownersof interests in ADSs), by having the matter referred to and finally resolved by an arbitration conducted under the terms described below, and (ii) thedepositary may in its sole discretion require, by written notice to the relevant party or parties, that any dispute, suit, action, controversy, claim orproceeding against the depositary by any party or parties to the deposit agreement (including, without limitation, by ADR holders and beneficialowners of interests in ADSs) shall be referred to and finally settled by an arbitration conducted under the terms described below. Any sucharbitration shall be conducted in the English language either in New York, New York in accordance with the Commercial Arbitration Rules of theAmericanArbitration Association or in Hong Kong following the arbitration rules of the United Nations Commission on International Trade Law(UNCITRAL). Notwithstanding the foregoing, such provisions do not prevent an ADS holder form pursuing claims under the United States federalsecurities laws in federal courts.Jury Trial WaiverIn the deposit agreement each party thereto (including, for avoidance of doubt, each holder and beneficial owner and/or holder of interestsin ADSs and ADRs) irrevocably waives, to the fullest extent permitted by applicable law, any right it may have to a trial by jury in any suit, actionor proceeding against the depositary and/or us directly or indirectly arising out of or relating to the shares or other deposited securities, the ADSs orthe ADRs, the deposit agreement or any transaction contemplated therein, or the breach thereof (whether based on contract, tort, common law orany other theory), including any claim under the U.S. federal securities laws.If we or the depositary were to oppose a jury trial demand based on such waiver, the court would determine whether the waiver wasenforceable in the facts and circumstances of that case in accordance with applicable state and federal law, including whether a party knowingly,intelligently and voluntarily waived the right to a jury trial. The waiver to right to a jury trial of the deposit agreement is not intended to be deemeda waiver by any holder or beneficial owner of ADSs of the Company’s or the depositary’s compliance with the U.S. federal securities laws and therules and regulations promulgated thereunder. Exhibit 8.1Himax Technologies, Inc.List of SubsidiariesSubsidiary Jurisdiction of Incorporation Percentage of Our Ownership InterestHimax Technologies LimitedROC100.0%Himax Technologies Korea Ltd.South Korea100.0%Himax Technologies (Samoa), Inc.Samoa100.0%(1)Himax Technologies (Suzhou) Co., Ltd.PRC100.0%(2)Himax Technologies (Shenzhen) Co., Ltd.PRC100.0%(2)Himax Display, Inc.ROC92.0%(1)Integrated Microdisplays LimitedHong Kong92.0%(3)Himax Display (USA) Inc.Delaware, USA92.0%(3)Himax Analogic, Inc.ROC98.6%(1)Himax Imaging, Inc.Cayman Islands100.0%Himax Imaging, Ltd.ROC98.4%(1)Himax Imaging Corp.California, USA98.4%(4)Harvest Investment LimitedROC100.0%(1)Himax Technologies Japan Ltd.Japan100.0%Himax Semiconductor (Hong Kong) LimitedHong Kong100.0%Liqxtal Technology Inc.ROC62.3%(1)Himax IGI Precision Ltd.Delaware, USA100.0%(1)CM Visual Technology Corp.ROC77.6%(1)Viewsil Microelectronics (Kunshan) LimitedPRC49.0%Viewsil Technology LimitedBritish Virgin Islands49.0%(5)(1) Indirectly, through our 100.0% ownership of Himax Technologies Limited.(2) Indirectly, through our 100.0% ownership of Himax Technologies (Samoa), Inc.(3) Indirectly, through our 92.0% ownership of Himax Display, Inc.(4) Indirectly, through our 98.4% ownership of Himax Imaging, Ltd.(5) Indirectly, through our 49.0% ownership of Viewsil Microelectronics (Kunshan) Limited. Exhibit 12.1CertificationI, Jordan Wu, certify that:1.I have reviewed this annual report on Form 20-F of Himax Technologies, Inc.;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to makethe statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period coveredby this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respectsthe financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;4.The company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as definedin Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and15d-15(f)) for the company and have:(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under oursupervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us byothers within those entities, particularly during the period in which this report is being prepared;(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles;(c)Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and(d)Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered bythe annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financialreporting; and5.The company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting,to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internalcontrol over financial reporting.Date: April 2, 2024By:/s/ Jordan WuName:Jordan WuTitle:President and Chief Executive Officer Exhibit 12.2CertificationI, Jessica Pan, certify that:1.I have reviewed this annual report on Form 20-F of Himax Technologies, Inc.;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to makethe statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period coveredby this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respectsthe financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;4.The company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as definedin Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and15d-15(f)) for the company and have:(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under oursupervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us byothers within those entities, particularly during the period in which this report is being prepared;(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles;(c)Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and(d)Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered bythe annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financialreporting; and5.The company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting,to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internalcontrol over financial reporting.Date: April 2, 2024By:/s/ Jessica PanName:Jessica PanTitle:Chief Financial Officer Exhibit 13.1CertificationApril 2, 2024The certification set forth below is being submitted to the Securities and Exchange Commission in connection with the Annual Report onForm 20-F for the year ended December 31, 2023 (the “Report”) for the purpose of complying with Rule 13a-14(b) or Rule 15d-14(b) of theSecurities Exchange Act of 1934 (the “Exchange Act”) and Section 1350 of Chapter 63 of Title 18 of the United States Code.Jordan Wu, the President and Chief Executive Officer of Himax Technologies, Inc., and Jessica Pan, the Chief Financial Officer of HimaxTechnologies, Inc., each certifies that, to the best of his or her knowledge:1.the Report fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act; and2.the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of HimaxTechnologies, Inc.By:/s/ Jordan WuName:Jordan WuTitle:President and Chief Executive OfficerBy:/s/ Jessica PanName:Jessica PanTitle:Chief Financial Officer Exhibit 15.1Consent of Independent Registered Public Accounting FirmWe consent to the incorporation by reference in the registration statements (No. 333-137585 and No. 333-176863) on Form S-8 and the registrationstatement (No. 333-189052) on Form F-3 of our reports dated April 2, 2024, with respect to the consolidated financial statements of HimaxTechnologies, Inc. and subsidiaries and the effectiveness of internal control over financial reporting./s/ KPMGHsinchu, TaiwanApril 2, 2024 1Exhibit 97.1Himax Technologies, Inc.Compensation Clawback PolicyThis Himax Technologies, Inc. Compensation Clawback Policy (the “Policy”) has been adopted by the Board of Directors (the “Board”) of HimaxTechnologies, Inc. (the “Company”) on November 21st, 2023. This Policy provides for the clawback of certain executive compensation in the event ofan accounting restatement resulting from material noncompliance with financial reporting requirements under U.S. federal securities laws in accordancewith the terms and conditions set forth herein. This Policy is intended to comply with the requirements of Section 10D of the Exchange Act (as definedbelow) and Section 5608 of the Nasdaq Listing Rules (the “Listing Rule”).1.Definitions. For the purposes of this Policy, the following terms shall have the meanings set forth below.(a)“Committee” means the compensation committee of the Board or any successor committee thereof. If there is no compensation committee ofthe Board, references herein to the “Committee” shall refer to the Company’s committee of independent directors that is responsible forexecutive compensation decisions, or in the absence of such a compensation committee, the independent members of the Board.(b)“Covered Compensation” means any Incentive-based Compensation “received” by a Covered Executive during the applicable ClawbackPeriod; provided that:(i)such Incentive-based Compensation was received by such Covered Executive (A) on or after the Effective Date, (B) after he or shecommenced service as an Executive Officer and (C) while the Company had a class of securities publicly listed on a United Statesnational securities exchange; and(ii)such Covered Executive served as an Executive Officer at any time during the performance period applicable to such Incentive-basedCompensation. For purposes of this Policy, Incentive-based Compensation is “received” by a Covered Executive during the fiscal periodin which the Financial Reporting Measure applicable to such Incentive-based Compensation (or portion thereof) is attained, even if thepayment or grant of such Incentive-based Compensation is made thereafter.(c)“Covered Executive” means any current or former Executive Officer.(d)“Effective Date” means the date on which the Listing Rule becomes effective.(e)“Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended.(f)“Executive Officer” means, with respect to the Company, (i) its president, (ii) its principal financial officer, (iii) its principal accounting officer(or if there is no such accounting officer, its controller), (iv) any vice-president in charge of a principal business unit, division or function (suchas sales, administration or finance), (v) any other officer who performs a policy-making function for the Company (including any officer of theCompany’s parent(s) or subsidiaries if they perform policy-making functions for the Company) and (vi) any other person who performssimilar policy-making functions for the Company. Policy-making function is not intended to include policy-making functions that are notsignificant. The determination as to an individual’s status as an Executive Officer shall be made by the Committee and such determinationshall be final, conclusive and binding on such individual and all other interested persons.(g)“Financial Reporting Measure” means any (i) measure that is determined and presented in accordance with the accounting principles used inpreparing the Company’s financial statements, (ii) stock price measure or (iii) total shareholder return measure (and any measures that arederived wholly or in part from any measure referenced in clause (i), (ii) or (iii) above). For the avoidance of doubt, any such measure does notneed to be presented within the Company’s financial statements or included in a filing with the U.S. Securities and Exchange Commission toconstitute a Financial Reporting Measure.(h)“Financial Restatement” means a restatement of the Company’s financial statements due to the Company’s material noncompliance with anyfinancial reporting requirement under U.S. federal securities laws that is required in order to correct:2(i)an error in previously issued financial statements that is material to the previously issued financial statements; or(ii)an error that would result in a material misstatement if the error were (A) corrected in the current period or (B) left uncorrected in thecurrent period.For purposes of this Policy, a Financial Restatement shall not be deemed to occur in the event of a revision of the Company’s financialstatements due to an out-of-period adjustment (i.e., when the error is immaterial to the previously issued financial statements and thecorrection of the error is also immaterial to the current period) or a retrospective (1) application of a change in accounting principles; (2)revision to reportable segment information due to a change in the structure of the Company’s internal organization; (3) reclassification due to adiscontinued operation; (4) application of a change in reporting entity, such as from a reorganization of entities under common control; (5)revision for stock splits, reverse stock splits, stock dividends or other changes in capital structure; or (6) adjustment to provisional amounts inconnection with a prior business combination.(i)“Incentive-based Compensation” means any compensation (including, for the avoidance of doubt, any cash or equity or equity-basedcompensation, whether deferred or current) that is granted, earned and/or vested based wholly or in part upon the achievement of a FinancialReporting Measure. For purposes of this Policy, “Incentive-based Compensation” shall also be deemed to include any amounts which weredetermined based on (or were otherwise calculated by reference to) Incentive-based Compensation (including, without limitation, any amountsunder any long-term disability, life insurance or supplemental retirement or severance plan or agreement or any notional account that is basedon Incentive-based Compensation, as well as any earnings accrued thereon).(j)“Nasdaq” means the NASDAQ Global Select Market, or any successor thereof.(k)“Clawback Period” means the three fiscal years completed immediately preceding the date of any applicable Clawback Trigger Date.Notwithstanding the foregoing, the Clawback Period additionally includes any transition period (that results from a change in the Company’sfiscal year) within or immediately following those three completed fiscal years, provided that a transition period between the last day of theCompany’s previous fiscal year end and the first day of its new fiscal year that comprises a period of nine (9) to twelve (12) months would bedeemed a completed fiscal year.(l)“Clawback Trigger Date” means the earlier of (i) the date that the Board (or a committee thereof or the officer(s) of the Company authorized totake such action if Board action is not required) concludes, or reasonably should have concluded, that the Company is required to prepare aFinancial Restatement, and (ii) the date on which a court, regulator or other legally authorized body directs the Company to prepare a FinancialRestatement.2.Clawback of Erroneously Awarded Compensation.(a)In the event of a Financial Restatement, if the amount of any Covered Compensation received by a Covered Executive (the “AwardedCompensation”) exceeds the amount of such Covered Compensation that would have otherwise been received by such Covered Executive ifcalculated based on the Financial Restatement (the “Adjusted Compensation”), the Company shall reasonably promptly recover from suchCovered Executive an amount equal to the excess of the Awarded Compensation over the Adjusted Compensation, each calculated on a pre-taxbasis (such excess amount, the “Erroneously Awarded Compensation”).(b)If (i) the Financial Reporting Measure applicable to the relevant Covered Compensation is stock price or total shareholder return (or anymeasure derived wholly or in part from either of such measures) and (ii) the amount of Erroneously Awarded Compensation is not subject tomathematical recalculation directly from the information in the Financial Restatement, then the amount of Erroneously AwardedCompensation shall be determined (on a pre-tax basis) based on the Company’s reasonable estimate of the effect of the Financial Restatementon the Company’s stock price or total shareholder return (or the derivative measure thereof) upon which such Covered Compensation wasreceived.(c)For the avoidance of doubt, the Company’s obligation to recover Erroneously Awarded Compensation is not dependent on (i) if or when therestated financial statements are filed or (ii) any fault of any Covered Executive for the accounting errors or other actions leading to aFinancial Restatement.(d)Notwithstanding anything to the contrary in Sections 2(a) through (c) hereof, the Company shall not be required to recover any ErroneouslyAwarded Compensation if both (x) the conditions set forth in either of the following clauses (i), (ii), or (iii) are satisfied and (y) the Committeehas determined that recovery of the Erroneously Awarded3Compensation would be impracticable:(i)the direct expense paid to a third party to assist in enforcing the recovery of the Erroneously Awarded Compensation under this Policywould exceed the amount of such Erroneously Awarded Compensation to be recovered; provided that, before concluding that it would beimpracticable to recover any amount of Erroneously Awarded Compensation pursuant to this Section 2(d), the Company shall have firstmade a reasonable attempt to recover such Erroneously Awarded Compensation, document such reasonable attempt(s) to make suchrecovery and provide that documentation to the Nasdaq;(ii)recovery of the Erroneously Awarded Compensation would violate the laws of the Cayman Islands to the extent such law was adoptedprior to November 28, 2022 (provided that, before concluding that it would be impracticable to recover any amount of ErroneouslyAwarded Compensation pursuant to this Section 2(d)), the Company shall have first obtained an opinion of home country counsel of theCayman Islands, that is acceptable to the Nasdaq, that recovery would result in such a violation, and the Company must provide suchopinion to the Nasdaq; or(iii)recovery of the Erroneously Awarded Compensation would likely cause an otherwise tax-qualified retirement plan, under which benefitsare broadly available to employees of the Company, to fail to meet the requirements of Sections 401(a)(13) or 411(a) of the U.S. InternalRevenue Code of 1986, as amended (the “Code”).(e)The Company shall not indemnify any Covered Executive, directly or indirectly, for any losses that such Covered Executive may incur inconnection with the recovery of Erroneously Awarded Compensation pursuant to this Policy, including through the payment of insurancepremiums or gross-up payments.(f)The Committee shall determine, in its sole discretion, the manner and timing in which any Erroneously Awarded Compensation shall berecovered from a Covered Executive in accordance with applicable law, including, without limitation, by (i) requiring reimbursement ofCovered Compensation previously paid in cash; (ii) seeking recovery of any gain realized on the vesting, exercise, settlement, sale, transfer orother disposition of any equity or equity-based awards; (iii) offsetting the Erroneously Awarded Compensation amount from any compensationotherwise owed by the Company or any of its affiliates to the Covered Executive; (iv) cancelling outstanding vested or unvested equity orequity-based awards; and/or (v) taking any other remedial and recovery action permitted by applicable law. For the avoidance of doubt, exceptas set forth in Section 2(d), in no event may the Company accept an amount that is less than the amount of Erroneously AwardedCompensation; provided that, to the extent necessary to avoid any adverse tax consequences to the Covered Executive pursuant to Section409A of the Code, any offsets against amounts under any nonqualified deferred compensation plans (as defined under Section 409A of theCode) shall be made in compliance with Section 409A of the Code.3.Administration. This Policy shall be administered by the Committee. All decisions of the Committee shall be final, conclusive and binding upon the Company andthe Covered Executives, their beneficiaries, executors, administrators and any other legal representative. The Committee shall have full power andauthority to (i) administer and interpret this Policy; (ii) correct any defect, supply any omission and reconcile any inconsistency in this Policy; and(iii) make any other determination and take any other action that the Committee deems necessary or desirable for the administration of this Policyand to comply with applicable law (including Section 10D of the Exchange Act) and applicable stock market or exchange rules and regulations.Notwithstanding anything to the contrary contained herein, to the extent permitted by Section 10D of the Exchange Act and the Listing Rule, theBoard may, in its sole discretion, at any time and from time to time, administer this Policy in the same manner as the Committee.4.Amendment/Termination. Subject to Section 10D of the Exchange Act and the Listing Rule, this Policy may be amended or terminated by the Board at any time. To theextent that any applicable law, or stock market or exchange rules or regulations require recovery of Erroneously Awarded Compensation incircumstances in addition to those specified herein, nothing in this Policy shall be deemed to limit or restrict the right or obligation of the Companyto recover Erroneously Awarded Compensation to the fullest extent required by such applicable law, stock market or exchange rules andregulations. Unless otherwise required by applicable law, this Policy shall no longer be effective from and after the date that the Company nolonger has a class of securities publicly listed on a United States national securities exchange.5.Interpretation. Notwithstanding anything to the contrary herein, this Policy is intended to comply with the requirements of Section 10D of the Exchange Act andthe Listing Rule (and any applicable regulations, administrative interpretations or stock market or exchange rules and regulations adopted inconnection therewith). The provisions of this Policy shall be4interpreted in a manner that satisfies such requirements and this Policy shall be operated accordingly. If any provision of this Policy wouldotherwise frustrate or conflict with this intent, the provision shall be interpreted and deemed amended so as to avoid such conflict.6.Other Compensation Clawback Rights. Any right of clawback under this Policy is in addition to, and not in lieu of, any other remedies, rights or requirements with respect to the clawbackof any compensation that may be available to the Company pursuant to the terms of any other clawback policy of the Company (or any of itsaffiliates) that may be in effect from time to time, any provisions in any employment agreement, offer letter, equity plan, equity award agreementor similar plan or agreement, and any other legal remedies available to the Company, as well as applicable law, stock market or exchange rules,listing standards or regulations; provided, however, that any amounts clawed back under any other policy that would be clawbackable under thisPolicy shall count toward any required clawback under this Policy and vice versa.7.Exempt Compensation. Notwithstanding anything to the contrary herein, the Company has no obligation under this Policy to seek clawback of amounts paid to a CoveredExecutive which are granted, vested or earned based solely upon the occurrence or non-occurrence of nonfinancial events. Such exemptcompensation includes, without limitation, base salary, time-vesting awards, compensation awarded on the basis of the achievement of metrics thatare not Financial Reporting Measures or compensation awarded solely at the discretion of the Committee or the Board, provided that such amountsare in no way contingent on, and were not in any way granted on the basis of, the achievement of any Financial Reporting Measure performancegoal.8.Miscellaneous.(a)Any applicable award agreement or other document setting forth the terms and conditions of any compensation covered by this Policy shall bedeemed to include the restrictions imposed herein and incorporate this Policy by reference and, in the event of any inconsistency, the terms ofthis Policy will govern. For the avoidance of doubt, this Policy applies to all compensation that is received on or after the Effective Date,regardless of the date on which the award agreement or other document setting forth the terms and conditions of the Covered Executive’scompensation became effective, including, without limitation, compensation received under any incentive-based compensation related plan orany modification, amendment and successor plan thereto.(b)This Policy shall be binding and enforceable against all Covered Executives and their beneficiaries, heirs, executors, administrators, or otherlegal representatives.(c)All issues concerning the construction, validity, enforcement and interpretation of this Policy and all related documents, including, withoutlimitation, any employment agreement, offer letter, equity award agreement or similar agreement, shall be governed by, and construed inaccordance with, the laws of Taiwan, without giving effect to any choice of law or conflict of law rules or provisions (whether of Taiwan orany other jurisdiction) that would cause the application of the laws of any jurisdiction other than Taiwan.(d)The Covered Executives, their beneficiaries, executors, administrators and any other legal representative and the Company shall initiallyattempt to resolve all claims, disputes or controversies arising under, out of or in connection with this Policy by conducting good faithnegotiations amongst themselves. To ensure the timely and economical resolution of disputes that arise in connection with this Policy, thecourts sitting within Taiwan shall be the sole and exclusive forums for any and all disputes, claims, or causes of action arising from or relatingto the enforcement, performance or interpretation of this Policy. The Covered Executives, their beneficiaries, executors, administrators and anyother legal representative and the Company, shall not commence any suit, action or other proceeding arising out of or based upon this Policyexcept in Tainan District Court, and hereby waive, and agree not to assert, by way of motion, as a defense or otherwise, in any such suit, actionor proceeding, any claim that such party is not subject to the jurisdiction of the above-named courts, that its property is exempt or immunefrom attachment or execution, that the suit, action or proceeding is brought in an inconvenient forum, that the venue of the suit, action orproceeding is improper or that this Policy or the subject matter hereof may not be enforced in or by such courts.(e)If any provision of this Policy is determined to be unenforceable or invalid under any applicable law, such provision will be applied to themaximum extent permitted by applicable law and shall automatically be deemed amended in a manner consistent with its objectives to theextent necessary to conform to any limitations required under applicable law.

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