With far-reaching ambitions in mind，we are not afraid of headwinds and bumping roads ahead

——Opening Speech by President Austin Na at O-Net Group 2022 Annual Meeting

     First of all, on behalf of O-Net Group, I would like to extend New Year greetings to our employees in China and worldwide. Thank you for your efforts and dedication to the development of our Group in 2022. Thank you!

O-Net 2022 -- Believe in ourselves and Create miracles

     Today, I would like to begin with a piece of good news. Last year, I am sure that many executives and colleagues were just as upset as I was. In 2021, O-Net Group actually suffered a setback. As you all know, in 2021 the company experienced losses with performance severely declined，which were very rare over the past ten years.  Entering Year 2022, the situation was still very tough with a lot of uncertainties.  However, we didn't feel like we were completely out of chance.  Standing on this day at the beginning of 2023, we are very proud to declare that we have done it!  In 2022, O-Net Group has achieved two 30% plus.  Firstly, the total revenue has increased by more than 30%.  Although the financial data for December has not yet come out, 30% plus is a sure number.  Secondly, our annual gross profit margin has returned to more than 30%, which is extremely encouraging.  O-Net people were once very proud of the fact that our average gross profit margin was higher than that of our industry peers, and now we have once again returned back to our position. 

The global optoelectronic industry in 2022 was still full of challenges

     Considering the overall macroeconomic environment in 2022, such achievements have not come easily. Firstly, the impact of the Covid epidemic on the industry is very severe. As we can see in the opening show, we experienced a factory lockdown at the beginning of the year 2022. Secondly, the international political situation has undermined our customers’ confidence. Our Sales and Marketing colleagues have found that we have a lot of normal business opportunities, which could be obtained in the past, but have become more complicated and difficult to retain. It takes a lot of extra effort to convince customers to do business with us. In addition, the supply chain issues have caused a significant impact on our business throughout the year. In 2022, our operation and even the sales marketing colleagues were involved in helping to solve all kinds of supply constraints, especially the IC shortages. In fact, the supply chain issues continued to haunt us until the end of the year. Therefore, in the face of so many adverse factors, the fact that we have achieved appreciable growth for both revenue and profit is an exceptional achievement.

Breakthroughs in key optoelectronic technologies

     O-Net Group has always been committed to developing core technologies. As we can see in the video show, our company has made significant progress in 2022 in many areas, especially in the core optoelectronic technology development. Here I only give a few representative examples. Our narrow linewidth Nano-ITLA is probably the smallest one in the world.  The nano-ITLA as a very advanced optoelectronic component can only be designed and manufactured by a couple of top-notch companies in the world.  As far as we know, we are the only Chinese company that can truly deliver samples that were endorsed by customers. Our successful development of ITLA has shown our courage to challenge world-class technology with great success, indicating that O-Net is standing at the forefront of the world in the optoelectronic technology industry.  Over the last year, we have successfully developed so many products, but today I don’t have time to get into the details.  Here I would like to just mention a few more.  For example, we have set up a team in a short time to develop DCO modules with a tightened schedule.  Now we are in a position to send samples to customers soon.  After years of efforts, the OLS team has lived up to expectations and submitted the system products for customer testing on time. Now everything is going smoothly. As we all know, although this product is a very complex system that we have never been involved in before, we are still determined to set up a team to develop the product to catch the customer’s verification window.  The OCM product is another major technical breakthrough in passive components development. The successful completion of these projects represents the implementation of our management philosophy of 'customer-first, business taken as the top priority'.  In 2022, our Group also established a new subsidiary company “O-Tech Automotive Technologies” to actively address the market of the Lidar and other sensors used in automobiles, such as HUD.  We have also set up another subsidiary 'Angcheng Instruments' to develop ion sources and other associated semiconductor manufacturing equipment. These have demonstrated O-Net’s commitment and determination to develop new optoelectronic products beyond the optical communication market.

Progress on Operation

     There has been a lot of progress made on the operation side. Let me give you a few examples. AOC was a bright star last year.  This product family has become a major product line with a fast growth rate within a short period of time and has made a considerable contribution to profits. In terms of team building, I am sure that you have seen many new faces this year. 2022 is a year with fruitful achievements in team building. We have introduced many world-class talents in R&D, Operation, Marketing, Sales, and Product Management, which has further strengthened our management team. In terms of the process and system construction, which was carried out as a quarterly cultural theme and activity, we took it as a fundamental task of the enterprise's long-term development.  The last one I would like to mention is the Pre-IPO found raising task that we have just completed.  Here I would like to thank the IPO team once again.  You may not fully appreciate how difficult the task is without understanding the financial market.  We only confirmed the lead investor on December 5th and required the funds to be in place before December 30th. Because if this day is exceeded, our IPO submission materials may be delayed by more than one quarter.  So I issued a mandate of deadline and demanded that all tasks must be completed before December 30th.  As a person with a background in finance, I know how difficult this task is.  In many financial institutions, it may take more than a month to make an appointment with an investment committee.  We just confirmed to start doing it on December 5th but required the funds to be in place on December 30th. That is, we only have 20 days in total to complete the task.  As we can see now, we just accomplished everything within such a short time. It's a miracle in financial markets. Once again, big applause to the company's IPO team.

The future is full of opportunities and challenges

Future opportunities

     There is good news and bad news about the future. The good news is that scientific and technological progress in human society is still on the ascendant with new technologies advancing at a fast pace. Artificial intelligence, cloud computing, Metaverse, machine vision, as well as high-performance computing, and other technologies are progressing daily.  The optoelectronic industry is an integrated part of these and is regarded as the key enabling technology behind it.  Therefore, optoelectronic technology will continue to thrive, which is the premise for a technology enterprise like O-Net.

Challenges in 2023

     However, in 2023, we will be still facing a very tough situation. First of all, the global political and economic environment is not going to get better.  In my opinion, it could be getting worse. Especially for Chinese technology companies like O-Net, it is more likely to face even more severe challenges and uncertainties.  As you have heard from the news and annalist, the global economic growth in 2023 is likely to be very poor.  Developed countries, such as the United States, are very likely to enter a rare economic recession. The entire macro-political and economic environment will have hurt us. Our colleagues in the Sales Marketing team may have already noticed or even have seen some preliminary effect.  What does that mean? It means that Chinese technology enterprises like ours must bring greater value to our customers through better products, better services, better quality, and more efficient operations to seize the opportunity and gain market recognition.

We don’t have two years!

     Here I would like to share with you one of my favorite videos. The video is about the story of NVIDIA founder Jen-Hsun Huang shared his experience of being on the verge of bankruptcy in the early stage of entrepreneurship. 

     This video has been edited and cut short as the original one is too long. Here I would like to recap the story very briefly. The video tells that under normal circumstances, the product they planned to make would take two years to develop, but the company only had nine months of money or time left.  Then they took some of the money to buy a piece of equipment, and the nine-month fund became six months.  Why buy the equipment?  It was to develop a product in six months that normally took two years to complete.  Finally they did it!  Because of this, NVIDIA has survived and has become a great company today. The key point of my telling this story is that I hope everyone to understand: We don't have two years! We must remember that we should take every project as our last chance.  Only through more efficient R&D and operations can we overcome the difficulties and complex political and economic environment that we are currently facing, and can we continue to thrive. 

Stay true to our core values

     We will continue to march along “The Road of O-Net,” which we have been sticking to for over 20 years. First of all, stay true to our core values. O-Net people believe that technologies change the world. Customer-first and business taken as the top priority is our management philosophy.  We emphasize the two principles: teamwork sharing weal and woe, and the ultimate pursuit of excellence.  The five virtues inspired by traditional management art: wisdom, trustworthiness, empathy, courage, and strictness are basic cultural elements of O-Net.  

     In terms of technology development, we are committed to long-term investment and development in core technologies. O-Net is not a company that seeks to make quick money. We believe in long-termism and do not shy away from making long-term investments seriously. We are not afraid of 'sitting on the bench for ten years'. We are willing to make long-term investments to develop world-class optoelectronic technology, and at the same time make real technologic contributions to the company and society.

     We adhere to the idea of 'creating and sharing values', which has always been our basic business operation principle. In 2022, we will significantly increase the proportion of year-end bonuses, which is a reflection of our value-sharing principle. On the other hand, our goal in 2023 is to complete the company's IPO. At that time, we will continue to launch our equity incentive plan, just like when it was listed in Hong Kong.  The key point is to enable hard-working employees to realize their value on the platform of O-Net. 

     Our goal in doing so is to accomplish the mission of creating value for customers by adhering to our core values, our long-term commitment, as well as our business operating principles. Moreover, creating value for customers will allow us to surpass all artificial barriers, and it is also the only way for us to win customers and market recognition. One of the most critical corporate goals in 2023 is to complete our IPO and create basic conditions for the next phase of O-Net's development.  At the same time, we will continue to pursue our moderate goal of ￥10 billion in annual revenue.  For O-Net people, this is not just a dream, but a goal that we can achieve down to earth.

With far-reaching ambitions in mind, we are not afraid of headwinds and bumping roads ahead. 

     In 2022, O-Net people withstood heavy pressure, bravely assumed responsibility, worked hard, and created a historic record that we are proud of!

In 2023, let us not forget our original aspirations, be determined, and fight hard, in facing the unfavorable international environment and the declining economic situation. We must have full confidence in ourselves. With 22 years of corporate history, we have gone through various difficulties and obstacles, and have built us into the A-Team in the world's optoelectronic industry! We will be able to overcome the difficulties in front of us and continue to make great strides!

     O-Net people, with far-reaching ambitions in mind, are not afraid of headwinds and bumping roads ahead!

     O-Net will win and must win!