乐鑫科技：EspressifSystemsQ12023Report

Q12023REPORT

Contents

AboutEspressif

BusinessHighlights (Unaudited)

ManagementReport

ConsolidatedFinancialStatements(Unaudited)

FurtherInformation

12 B2D2B Business Model

ConsolidatedBalance Sheet17 Consolidated Income

Statement

Consolidated CashFlow Statement

Terms and Conditionsof the Report20List of abbreviations

05 Financial Analysis

Key Products - AIoTChips

Business Strategy

13 Ownership of SecuritiesAIoT Chip Matrix

Developer CommunityContents

14 Risks and Uncertainties

07 Core Technologies

10 Market

FACTS ABOUT ESPRESSIFESPRESSIF SYSTEMS | Q1 2023 REPORT |

Espressif Systems is a public, multinational, fabless, semiconductor company focused on developing cutting-edge,wireless-communication, low-power chipsets. By leveraging wireless computing, we provide green, versatile and cost-effective AIoT solutions. We have accomplished a hardware-and-software, closed-loop development cycle for a seriesof core technologies, including RF, Wi-Fi & Bluetooth LE network protocol stacks, RISC-V MCUs, AI instruction setsand algorithms, operating systems, toolchains, compilers, IoT software application frameworks, Cloud, etc.We have a diverse team of engineers from around the world. All company branches employ about 600 members ofstaff from almost 30 countries and regions, +76% of whom are based in our Research & Development Department. Wehave eight R&D centers in ?ve countries, including China (4 out of 8), India, the Czech Republic, Brazil and Singapore.The company’s increasing reputation in recent years has been instrumental in attracting talented engineers from acrossthe world. Being united by our passion for technology, our diversity is our strength, as it allows the creative blending ofdifferent kinds of knowledge, perspectives and ways of thinking.

About Espressif

ABOUT ESPRESSIFESPRESSIF SYSTEMS | Q1 2023 REPORT |

* Market share data from TSR

Hefei

HefeiCzechRepublic

CzechRepublicOur R&D Centers

Our R&D CentersBrazil

Brazil

Wuxi

WuxiShanghai

Singapore

SingaporeIndia

IndiaChina

ChinaCampinas

CampinasBrno

BrnoPune

BUSINESS HIGHLIGHTS (UNAUDITED)ESPRESSIF SYSTEMS | Q1 2023 REPORT |

Key Financial Data (Unaudited)

Business Highlights (Unaudited)

Gross margin

Key Financial Indicators (Unaudited)

Earnings per share:

March 31, 2023

Three Months Ended

Non-GAAP Adjustment

BUSINESS HIGHLIGHTS (UNAUDITED)ESPRESSIF SYSTEMS | Q1 2023 REPORT |

Financial Analysis

Espressif’s total revenue in the ?rst quarter of the current ?scal year (2023) was CNY 318.12 million, marking anincrease of 10.10% from CNY 288.95 million in the ?rst quarter of 2022, due to the expansion of product categories.Therefore, the net income was CNY 31.09 million, which marked an increase of 11.62% quarter-on-quarter, mainly dueto the increase of revenue.The overall gross margin was 40.71% and remained stable. Customers in China’s mainland prefer purchasing chips,while customers from the rest of the world and their OEM or ODM in China’s mainland prefer modules. We keep thechip margin at a reasonable level, in order to support our future R&D expenditure.

26.9%

26.9%

8.2%

8.2%

10.8%

10.8%

36.7%

36.7%

48.4%

48.4%

40.7%

40.7%

25.9%

25.9%

7.8%

7.8%

11.7%

11.7%

36.3%

36.3%

50.0%

50.0%

41.0%

Q1 2022Q1 2023

Revenue byArea in Q1 2023

Revenue by SalesMode in Q1 2023

Top-5 CustomerConcentration Rate,2020 - Q1 2023

Revenue by Product Category in Q1 2023

Key Financial Indicators in Q1 2023

41.0%

Q1 2023

Q1 2023Q1 2022

64.6%

64.6%

34.4%

34.4%

34.2%

ChipModuleOthers

1.2%

0.7%

34.2%

69.5%

69.5%

China's !Mainland

Rest of !the World

China's !Mainland

Rest of !the World2020

30.8%

29.0%

29.0%

42.2%

42.2%

67.0%

67.0%

DirectIndirect

Business StrategyEspressif Systems’ business strategy emanates from our service/product areas and our engagement with thedeveloper ecosystem.Our product and service areas include AIoT chips, OS-level development environments, software tools, applicationsolutions, and value-added services, such as Cloud and Matter. The above-mentioned products ensure that we are inthe heart of numerous commercial AIoT applications in different markets, including smart home, consumer electronics,industrial automation, healthcare, etc.

Management Report

SoCs

SoCsModules

ModulesDevKits

DevKitsHMI Smart!Displays

Face!Recognition

Cloud !service

Cloud !serviceMatter !Solution

Matter !Solution

OS-level development environments & software tools

OS-level development environments & software toolsCustomers

Customers

Brands

…

ESPRESSIF SYSTEMS | Q1 2023 REPORT |Core Technologies

SoCs

AI

MANAGEMENT REPORTESPRESSIF SYSTEMS | Q1 2023 REPORT |

ESP8266, ESP32, ESP32-S, ESP32-C, ESP32-H and ESP32-P Series

Espressif offers integrated, reliable, andenergy-ef?cient SoCs for Wi-Fi,!Bluetooth Low Energy, Thread and Zigbeeto various segments of the IoT market.

Cloud

ESP RainMakerA comprehensive, development-free andmaintenance-free AIoT solution for privateCloud deployment.It is an all-inclusive solution that coverseverything from the underlying chip to device?rmware, third-party voice-assistantintegrations, mobile apps and the dashboard.Customers can build their own AIoT devicesand ecosystem, with ESP RainMaker.

Software

MatterOne-stop Matter SolutionThis is the culmination ofEspressif’s ongoing contribution tothe Matter platform in variousareas, including protocolformulation, core stackimplementation and certi?cationtest events.

OS

ESP-IDF

Espressif’s of?cial IoT Development Framework.It provides a self-suf?cient SDK for any genericapplication-development on these platforms,using programming languages such as C andC++.ESP-IDF currently powers millions of devices inthe ?eld, and enables building a variety ofnetwork-connected products, ranging fromsimple light bulbs and toys to major appliancesand industrial devices.

With our open-source software,such as Espressif's IoTDevelopment Framework ESP-IDF,Audio Development FrameworkESP-ADF, Mesh DevelopmentFramework ESP-MDF, CloudConnectivity Platform ESPRainMaker, Facial RecognitionDevelopment Framework ESP-WHO, and Voice-ControlledAssistant ESP-Skainet, we havedeveloped a framework forbuilding AIoT applications, whichis both complete and innovative.

3A Audio Algorithms

including Acoustic Echo Cancelation (AEC),Audio Noise Suppression (ANS) and AutomaticGain Control (AGC), which signi?cantly reducenoise and echo in calls, keeping high-qualityvoice intercoms stable at all times.

AFE (Audio Front-End) Algorithms

quali?ed as a"“Software Audio Front-EndSolution” for Amazon Alexa Built-in devices.

Key Products - AIoT ChipsEspressif is recognized as a market leader in the ?eld of Wi-Fi MCUs. We released our ?rst Wi-Fi MCU in 2014, and our?rst Wi-Fi/Bluetooth LE combo chip in 2016. In 2020, we successfully developed our own RISC-V MCU core, adding itto our product portfolio, while in 2021, we released our ?rst Thread/Zigbee/Bluetooth LE 5 combo chip and a 2.4GHzWi-Fi 6 chip. In 2022, we released our ?rst 2.4 & 5GHz Wi-Fi 6 chip and our product range has expanded to WirelessSoCs. In 2023, we revealed ESP32-P4, a dual-core RISC-V MCU, expanding the current portfolio to address the high-performance computation needs of IO-Rich, HMI, and AIoT applications.In fact, we have been constantly diversifying our product portfolio, introducing new solutions through our numerousinvestments. Thus, we now have various product lines in the main short- and medium-range connectivity technologies.Our core technologies are self-developed, including connectivity IPs, RF components, RISC-V IPs, softwareframeworks, tools, AI functions etc.We also provide IoT modules based on our chips. The bene?t for customers is that they can get direct support from us,shortening and optimizing their supply chain, even in case of chip shortages.

Wireless SoCWi-Fi 6E

Wi-Fi 6E5GHz Wi-Fi 6

RISC-V MCU

Technical Breadth

Technical BreadthIn progress

In progress32-bit Multiple-Core

32-bit Multiple-Core

Technical Depth

Technical DepthConnectivity

ConnectivityComputing

ComputingMedium Range

Medium RangeAI

32-bit Dual-Core 400MHz

32-bit Dual-Core 400MHzBluetooth 5.2 (LE)

Thread

Short Range

Short RangeBluetooth 5.3 (LE)

Dual-Core!

240 MHz

ESP

ESP

ESP8266

32-bit Xtensa MCU

32-bit Xtensa MCUESP32 -

ESP32 -S2

S2

Wi-Fi 4

Wi-Fi 42022

Single-Core!240 MHz

Single-Core!160 MHz

Single-Core!

120 MHz

Single-Core!

96 MHz

32-bit Xtensa MCUESP32 -

ESP32 -

S3

S3Wi-Fi 4

AI Functions

AI Functions32-bit RISC-V MCU

32-bit RISC-V MCUESP32 -

ESP32 -

C6

C6

2.4GHz Wi-Fi 6

32-bit RISC-V MCU

32-bit RISC-V MCUESP32 -

ESP32 -

C2

C2Wi-Fi 4

32-bit RISC-V MCU

32-bit RISC-V MCUESP32 -

ESP32 -

H2

H2

Bluetooth 5 (LE)

32-bit RISC-V MCU

32-bit RISC-V MCUESP32 -

ESP32 -

C5

C5

2.4&5 GHz Wi-Fi 6

32-bit RISC-V MCU

32-bit RISC-V MCUESP32 -

ESP32 -

C3

C3Wi-Fi 4

Key Products - AIoT Chip Matrix

32-bit RISC-V MCUESP32 -

ESP32 -

P4

P4

AI Functions

Dual-Core!

400 MHz

Market

The market for wireless SoCs is truly diverse, including applications for smart homes (e.g., smart lights, air conditioners,ovens, coffee machines, etc.), consumer electronics (e.g., smart speakers, drones, etc.), industrial automation (e.g.,mechanical arms), smart agriculture (e.g., soil PH detector, CO2 detector, etc.), healthcare (e.g., monitoring devices fordiabetes, blood pressure, etc.), energy control (solar energy devices, EV chargers, etc.), the internet of vehicles (OBDdevices, dashboards, etc.), and education (talking pens, interactive whiteboards, etc.).

Smart Home

Smart OvensSmart Speakers

IndustrialAutomation

Mechanical Arms

Healthcare

Medical DetectorsOBD DevicesTalking Pens

SmartAgriculture

Soil PH Detector

Internet ofVehiclesEnergyManagement

ConsumerElectronics

Education

Smart SolarPanels

Developer Community Contents

N.B.：

Statistical data derived from di?erent platforms may be based on di?erent collecting methods. It is possible for certain platforms to modify their algorithms fromtime to time and, therefore, impact the resulting statistical data. The above-mentioned data resulted from the Company’s research at the end of each quarterreported here, unless otherwise stated. !The search results of the keyword "ESP32" include the ESP32 series, ESP32-C series, ESP32-S series, and ESP32-H series.

Business Model

Espressif has deployed the Business-to-Developer type of marketing, not only because it has gained prominence inrecent years, but also because it has proven to be more effective since the in?uence of developers on organizations ofall sizes has gained traction. In other words, most developers are R&D employees in various companies and bring forthbusiness opportunities from the companies they work for."This way, the developer ecosystem we have created at Espressif demonstrates how the value of networks can growexponentially:

?The more developers we attract as customers, the more hardware and software solutions we generate.?The more successful hardware and software solutions we create, the more our reputation spreads with positivefeedback from happy customers/developers.?The above-mentioned interaction between people in our network prompts the creation of more content, which -inturn- attracts more users/developers searching for new content.?Likewise, other third-party development platforms join our ecosystem and bring in new developers, as our in?uencecontinues to grow.Having successfully applied the B2D2B model, Espressif can now focus on R&D investments, while maintaining a smallbusiness team that supports a large number of customers directly. In fact, most of our revenue is gained through directsales.

Business-to-Developer-to-Business (B2D2B)

Ownership of Securities

Shareholder Structure as of Mar 31, 2023

Basic information of securities

Espressif (Hong Kong) Investment Ltd.

Other public shareholders

Risks and Uncertainties

Financial Risk

The Company performs periodic credit evaluations of its customers’ ?nancialcondition and generally requires of its customers no collateral. The Companyprovides an allowance for expected credit losses, based on the net amountexpected to be collected on such receivables. Losses have not been signi?cantfor any of the periods presented.R&D RiskEspressif’s research and development strategy is focused on leveraging newtechnologies for the creation of innovative AIoT products. Any delays or changesin the development of these technologies by our industry partners, or a failure ofour products to achieve market acceptance, could compromise our competitiveposition.CompetitorsAs the market for AIoT products grows, we face an increasing antagonism fromrelatively large competitors, such as Realtek, MediaTek, In?neon, NXP, Qualcommand others. Intense competition from current players, as well as new entrants,such as Silicon Labs and Nordic, may reduce our product sales and market share.

SuppliersA signi?cant portion of the Company’s products is fabricated by the TaiwanSemiconductor Manufacturing Company Limited (TSMC). The inability of TSMC todeliver wafers to the Company in a timely manner could impact the production ofthe Company’s products for a certain period of time, which could have an adverseeffect on the Company’s business, ?nancial condition, results of operations andcash ?ow.

CustomersThe Company sells directly to end customers, distributors, solution providers andcontract manufacturers. Our customers are a mix of several big customers andnumerous small customers. The concentration ratio for our top-?ve customerswas 30.8% in the ?rst quarter of 2023.

MANAGEMENT REPORTESPRESSIF SYSTEMS | Q1 2023 REPORT |

CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)ESPRESSIF SYSTEMS | Q1 2023 REPORT |

Consolidated Balance Sheet (Unaudited)

Consolidated FinancialStatements (Unaudited)

Assets

AssetsCurrent assets:

Non-current assets:

Non-current assets:

Debt investment

Total assets

CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)ESPRESSIF SYSTEMS | Q1 2023 REPORT |

Consolidated Balance Sheet (Unaudited)

Liabilities & Shareholders’ Equity

Liabilities & Shareholders’ EquityCurrent liabilities:

Non-current liabilities:

Owners’ equity (or shareholders' equity):

Total liabilities and shareholders' equity

N.B.："Starting from 2023, the company will implement the "Accounting Treatment for Deferred Income Tax Related to Asset and Liability Arising from a Single TransactionThat Does Not Qualify for Initial Recognition Exemption" as stipulated in Interpretation No. 16 of the Enterprise Accounting Standards issued by the Ministry ofFinance. The company will adjust the application of this standard to single transactions that occurred between the beginning of the earliest period reported in the?nancial statements and the date of the ?rst implementation of this standard. This includes adjusting the lease liabilities, right-of-use assets, estimated liabilitiesrelated to disposal obligations and corresponding related assets that were recognized due to the application of this standard on the initial period reported in the?nancial statements when the standard was ?rst implemented. If there are temporary di?erences that result in taxable or deductible amounts related to the above-mentioned adjustments, the cumulative impact on retained earnings and other relevant ?nancial statement items at the beginning of the reporting period will beadjusted according to the provisions of this standard and Enterprise Accounting Standard No. 18 - Income Taxes. So, the amount of deferred income tax assets ofJanuary 1, 2023 exceeds the amount of December 31, 2022 disclosed in the 2022 annual report by CNY 3,720,742. The amount of deferred income tax liabilities isalso the same.

CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)ESPRESSIF SYSTEMS | Q1 2023 REPORT |

Consolidated Income Statement (Unaudited)

Revenue

Taxes and surcharges

Add: Other income

Net Income

Earnings per share

Three Months Ended

Net Income

Comprehensive income

CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)ESPRESSIF SYSTEMS | Q1 2023 REPORT |

Consolidated Cash Flow Statement (Unaudited)

Operating Activities

Cash paid for merchandise and services

Investing activities

Financing activities

Cash paid for the distribution of dividends and pro?ts, or payment of interests

Impact of ?uctuation in exchange rates on cash and cash equivalents

Cash and cash equivalents at the end of the period

FURTHER INFORMATIONESPRESSIF SYSTEMS | Q1 2023 REPORT |

Terms and Conditions of the Report

The Board of Directors, the Board of Supervisors and executive management of the Company warrant that thecontents of this report are true, accurate and complete, and do not contain any false information, misleadingstatements or material omissions, severally and jointly accepting any legal responsibility thereof. !Shanghai, 28 April 2023!Espressif Systems

Further Information

Board of DirectorsTeo Swee Ann

Ng Pei Chi

Teo Teck Leong

Xu Xin

Lan Yuzhe

Koh Chuan Koon

Lee Sze Chin

Board of Supervisors

Board of SupervisorsLv Zhihua

Fu Hanyu

Wang Yiwen

Executive Management

Executive ManagementTeo Swee Ann

Wang Jue

Shao Jingbo

ESPRESSIF

Declaration

S

Y

STEMS

Forward-looking Statements

This report contains forward-looking statements and/or assessments about the business,?nancial condition, performance and strategy of the Espressif Group. These statements and/or assessments are based on assumptions and management expectations resting uponcurrently available information and current estimates. These are subject to a multitude ofuncertainties and risks, many of which are partially or entirely beyond Espressif’s control.Espressif’s actual business development, ?nancial condition, performance and strategy may,therefore, di?er from what is discussed in this report.

Responsibility Statement

FURTHER INFORMATIONESPRESSIF SYSTEMS | Q1 2023 REPORT |

List of abbreviations

Investor Relations

Copyright ? 2023 Espressif Systems (Shanghai) Co., Ltd. All rights reserved. All trade names, trademarks and registered trademarksmentioned in this document are the property of their respective owners, and are hereby acknowledged. The term “Espressif” refers toEspressif Systems (Shanghai) Co., Ltd. and/or its subsidiaries. This report is written in both Chinese and English. In case of anydiscrepancies between Chinese and foreign interpretations, the Chinese version shall prevail.Copyright (c) 2011-2012, Julieta Ulanovsky (julieta.ulanovsky@gmail.com), with Reserved Font Names ‘Montserrat’. This FontSoftware is licensed under the SIL Open Font License, Version 1.1. This license is available with a FAQ at: http://scripts.sil.org/OFLAll amounts presented in these condensed Consolidated Financial Statements are shown in CNY unless stated otherwise. Slightdiscrepancies between the amounts presented may occur due to rounding.

Social Media

ir@espressif.com

Of?cial Platforms

www.espressif.comblog.espressif.comgithub.com/espressifesp32.comesp8266.com

bbs.espressif.com

twitter.com/EspressifSystemfacebook.com/espressiflinkedin.com/company/espressif-systemsyoutube.com/EspressifSystemsinstagram.com/espressif_systems_of?cialbilibili.espressif.com