Dear Shareholders,

2023 proved a challenging year for the global economy, with the IMF recording that global growth almost halved from 2021 levels while inflation almost doubled over the same period. The US and Europe saw a significant slowdown, creating a more challenging business environment. However, HTC remained clearly focused on its VIVERSE vision, continuing to invest in the strategic technologies that will drive our vision and the ecosystem, while optimizing resources to streamline our operations.

HTC opened 2023 with the launch of the cutting-edge VR headset, the VIVE XR Elite at CES in January, where it received numerous “Best of CES 2023” awards from leading media such as CNET, CNN, and Wired. It also won “Most Innovative Product” and “Best Mixed Reality Solution” at the XR Awards 2023, as well as the IDEA Bronze Award in the Consumer Tech category, amongst many others, reflecting how the innovative design, high specification and clever ergonomics impressed media and industry alike. HTC closed the year with the announcement that the VIVE Focus 3 was launched into space by NASA and ESA to provide mental health and fitness applications for the astronauts heading to the International Space Station; a new frontier for VR and for HTC.

HTC continued to work on delivering more true-to-life virtual collaboration and improved human connections in VR through the launch of several tools and accessories in 2023, including a range of VR trackers for physical activity, face and eye movement. This move towards greater realism online is important for the wider adoption of VIVERSE, HTC’s total solution to help customers fully realize immersive digital transformations and applications across B2C and B2B markets. Built on our advanced XR technologies, VIVERSE is HTC’s secure, fully device-agnostic platform for the next generation of the internet that brings people together to connect, collaborate and explore in vivid 3D virtual worlds.

While geographical restrictions relating to the COVID-19 pandemic were completely lifted worldwide by the end of 2023, it is clear that some aspects of the digital revolution catalysed by the pandemic have sustained, such as remote and hybrid working, requiring the adoption of virtual meetings for work, schooling and professional training, as well as reduced business travel. HTC’s VIVE VR systems and VIVERSE are well positioned to take advantage of this societal shift, as more of our lives go online to an internet that is increasingly 3D.

HTC continued to fulfil its potential in 2023, creating innovative products and services with clear market focus. In anticipating the brave new world of the immersive internet, HTC stands ready to meet the challenges and develop the right technologies and products to expedite the future. The company structure of semi-autonomous business units announced in 2021 has firmly embedded, with each business demonstrating maturity of business model and leadership in their respective fields over 2023, while the mother company HTC continues to provide strategy guidance and functional support to each business, along with maintaining a strong focus on achieving sustainable efficiencies across all of its operations. This strategy is now showing returns, and we remain firm in our belief that this is the right path for growth for HTC.

Business Operations

Over the last few years, HTC’s business model has increasingly diversified to address new and emerging markets enabled by our core building block technologies of virtual and augmented reality, high speed connectivity such as 5G, artificial intelligence, and blockchain. 2023 proved no exception, with an innovative array of hardware, software, platforms and services.

VIVE Systems

HTC continues to set the industry standard in premium VR through high-quality systems and accessories, as well as complementary platforms, software and services.

The VIVE XR Elite, launched at CES, combines Mixed Reality (MR) and VR capabilities into one compact, lightweight, powerful and highly versatile device. The full-color passthrough camera and hand-tracking capabilities enable a whole new dimension of MR scenarios. The sleek modular design can easily be transformed into a glasses form factor for different use cases.

The VIVE Focus 3 all-in-one enterprise headset continued to go from strength to strength, and is now widely adopted as the de facto standard in large-scale business deployments.

VIVE continued to build out the ecosystem with new trackers. The compact, versatile VIVE Ultimate Tracker introduced new technology that made it “self-tracking”; ideal for HTC VIVE’s standalone headsets VIVE XR Elite and VIVE Focus 3. The VIVE Full Face Tracker brings face and mouth tracking to VIVE XR Elite, allowing facial movements to be represented naturally in XR, and spoken words matching facial expressions in real-time, while the VIVE Focus 3 Eye Tracker brings realistic eye movements to virtual avatars and opens new avenues for research, gaze control, and more natural interactions.

VIVERSE

The VIVERSE immersive internet platform continued to expand its product reach, develop innovative technologies and applications, and adhere to open and scalable standards. VIVERSE for Business was launched in 2023, providing customized metaverse solutions for enterprise comprising modular virtual spaces with a focus on data security and device compatibility. VIVERSE deepened its collaboration with e&, the United Arab Emirates' telco, to bring the Middle East's largest consumer electronics exhibition, GITEX GLOBAL, into the metaverse; the e& Universe became the first metaverse in the region to offer unique areas such as virtual personalized spaces, sporting events, and concerts.

VIVERSE collaborations in 2023 include BANDAI NAMCO Pictures with the second season of the original women's golf anime IP Birdie Wing – Golf Girls' Story and its first virtual fan meeting in VIVERSE; with ELLE Taiwan to extend ELLEverse with a college fashion course and NFTs; and with city governments on digital twins and smart city projects. VIVERSE won two international awards in 2023: the ICT Champion Awards’ "VR Platform of the Year" and the European Metaverse Awards’ "Best Consumer Metaverse Platform." These honors not only highlight VIVERSE's outstanding position in the industry, but also affirm its outstanding contributions in the metaverse area.

Finally, the VIVEPORT VR store continued to add high-quality PC VR games, MR/VR content and applications to its Infinity content library, and worked with China Mobile’s MIGU to launch the “Mobile Cloud VR PORT" store in 2023.

G REIGNS

G REIGNS continues to help drive the 5G private network industry with the O-RAN architecture based on industry-leading technology. It is committed to optimizing and integrating 5G private networks through its REIGN CORE series for portable 5G private networks that allow enterprises to deploy a 5G private network in just 30 minutes, lowering the threshold for digital transformation for enterprises and providing the most cost-effective way to conduct field demonstrations. The latest REIGN CORE S2 series increases coverage and enables large-scale cases to fulfill the requirements of various 5G applications. G REIGNS works on customized requirements, leveraging more than 20 years of experience in communication technology, enabling enterprises to retain the scalability of expansion.

HTC Smart Devices

HTC continues to create innovative smartphones for select markets. In May, the HTC U23 pro was launched to considerable acclaim. Featuring an all-day battery and wired or wireless charging, the HTC U23 pro is a camera for every situation. The HTC U23 pro boasts an 108MP OIS f/1.7 wide aperture main camera, an ultra-wide angle and a strong macro lens, and Super Night Mode for clearer images in low light. Record in crisp 4K on the 120Hz OLED display with image stabilisation for ultra smooth motion. For gaming, video processing or social media, or even streaming your favourite apps to a VIVE XR Elite headset for a cinematic experience, the HTC U23 pro delivers commanding performance with 12GB of RAM.

VIVE Arts

VIVE Arts is a global initiative aimed at enhancing artistic creation and understanding through the latest technologies. 2023 was an ambitious year for VIVE Arts, with the successful debut of a number of in-depth collaborations with internationally renowned art and cultural institutions, including Horizon of Khufu, an immersive exploration experience exhibition on the Egyptian pyramid of Khufu that opened to much acclaim in Shanghai; Eternal Notre-Dame, a virtual reconstruction of the fire-damaged cathedral in Paris, was exhibited at the National Museum of Science and Technology in Kaohsiung, Taiwan as the first stop of a global tour; and the award-winning Le Bal de Paris de Blanca Li was hugely popular at the Taiwan International Arts Festival, with real-life interaction and multi-person dancing. This experience is currently running as a repertory theater show in Taipei.

Supporting the major exhibition Van Gogh in Auvers-su-Oise: The Final Months at the Musée d'Orsay in Paris was La Palette de Van Gogh VR experience based on the last palette used by Van Gogh. VIVE Arts collaborations also included with London gallery Gazelli Art House on the first UK presentation of well-known multimedia artist Cheng Ran's first VR work Always I Distrust, and with VIVERSE, Gray Area and Leonardo on immersive art experience in metaverse by creators with disabilities.

VIVE ORIGINALS

VIVE Originals is devoted to producing original XR content and developing metaverse platforms with core technologies including volumetric capture, blockchain, and XR to explore the development of film, arts, music. It realizes profits through new business models such as the broadcast authorization of cross-domain content and exhibition and art collection transactions.

In 2023, VIVE Original’s BEATDAY music metaverse platform continued to collaborate with idols and singers, including renowned hip-hop singers to hold Taiwan's first 6DoF virtual concert that combines cloud rendering technology, and collaborated with cheerleader Mizuki Lin using 3D volumetric capture photography to launch Taiwan's first immersive interactive photobook. technology. BEATDAY also debuted collaboration with virtual idols this year, partnering with Taiwan's leading VTuber studio Spring Fish to co-present Taiwan's first online full-perspective VTuber concert Illusionary, where fans can interact with VTubers from all angles through avatars in a game-like manner during the concert.

DeepQ

DeepQ develops precision personalized medical products and services to reduce costs and improve the effectiveness of healthcare. In 2023, DeepQ expanded its popular ‘Disease Control Butler’ app by continuing to optimize natural language processing, and adding monkeypox and dengue fever epidemic information, vaccine and vaccination information for autumn and winter, and epidemic risk information push services for specific groups such as medical institutions and health centers. It also enhanced its “Dr. Lan” Healthcare Linebot with an AI health education Q&A function to accurately answer public health education questions in natural language and reduce the workload of medical staff, as well as augmenting its DeepQ AI Platform to dramatically reduce learning thresholds and the cost of AI model training.

Special Projects

The VIVE Mars series stands at the forefront of virtual production technology. In 2023, the VIVE Mars Cam introduced a number of innovations, including optimizations and enhancements, focusing on a user-friendly interface, improved tracking capabilities, and overall performance upgrades to simplify the virtual production process, making it more efficient and accessible.

In August, we launched and released FIZTrack, an encoder that tracks lens data and is deeply integrated with VIVE Mars CamTrack, allowing users to seamlessly control lens variations during the virtual product creation process. This year also saw the launch of a global reseller program to expand the global reach of the VIVE Mars series, and a series of honors and industry recognition, including the Best Show Award at IBC 2023, highlighting our leadership and innovative capabilities in the virtual production industry.

Financial Performance

HTC’s continued focus on improving resource and process efficiency across our operations again paid off in 2023, with the Company achieving a gross margin of 41.3%, up from 39.2% in 2022 and 31.1% in 2021; a strong achievement in a tough industry environment. Operating margin came in at -97.2%, up from last year.

Over the year, HTC earned revenues of NTD 4.42 billion, with a gross profit of NTD 1.82 billion, and operating loss of NTD 4.29 billion, which translated to an earnings per share of -NTD 4.09, also an increase on 2022.

By emphasizing the streamlining of operational processes and procedures, HTC continues to improve resource efficiencies while ensuring product quality and throughput across the board. At the same time, the diversification of HTC’s portfolio, from being traditionally hardware-centric to a company providing complete hardware, software, platform and content solutions, positions HTC well to continue expanding its revenue bases.

Environment, Social and Governance (ESG)

HTC’s ESG strategy, initiatives and achievements in sustainability in 2023 reflect HTC's continued commitment to reducing its environmental impact and increasing its social responsibility. HTC has committed to near-term and long-term company-wide emission reduction targets in line with the scenario set by the Science Based Targets initiative (SBTi), whose goal is to accelerate companies’ shift towards achieving net-zero emissions by 2050.

Our efforts to improve sustainable operations gained wide recognition in 2023, with HTC again selected as a constituent of the prestigious FTSE4Good Index Series, and winning a silver medal for the second year in sustainability from EcoVadis, one of the world's most trusted providers of business sustainability ratings, as well as Taiwan’s National Sustainability Development Award in the Enterprise category.

As a member of the CDP Supply Chain Member program, HTC works with its suppliers to address environmental risks to build a sustainable future. HTC improved its leadership level in both the CDP Supplier Engagement Rating and the Climate Change score in 2023. HTC also published its first stand-alone report on the Task Force on Climate-Related Financial Disclosures, reflecting the Company’s dedication to transparency and accountability in addressing climate-related risks and opportunities in business; this report was independently verified by 3rd party verification body SGS.

Finally, HTC received the Individual Performance award in Information Security Leadership at the 16th Taiwan Corporate Sustainability Awards, demonstrating its commitment to safeguarding sensitive information. These awards, which are linked to the United Nations’ Sustainable Development Goals, reflect HTC's holistic approach to corporate responsibility.

Throughout our operations, HTC strives for brilliance, both in how we work and how our customers use our products. We will continue to focus on innovation, execution, and efficiency across the organization, and by anticipating market trends and pioneering technology implementation, we believe that we are on the right path for growth. HTC sincerely thanks our shareholders for sharing our vision.

HTC Corporation

Chairwoman and CEO

Cher Wang