珠海格力电器股份有限公司2020年年度报告全文GREEELECTRICAPPLIANCES,INC.OFZHUHAIAnnualReport2020GREEELECTRICAPPLIANCES,INC.OFZHUHAIAnnualReport2020April2021GREEELECTRICAPPLIANCES,INC.OFZHUHAIAnnualReport20201SectionIImportantNotice,TableofContentsandParaphraseTheBoardofDirectors,BoardofSupervisors,alldirectors,supervisorsandSeniorManagementPersonneloftheCompanyherebyguaranteethatthecontentsareauthentic,accurateandcomplete,andtherearenofalserecords,misleadingrepresentationsormaterialomissionsintheAnnualReport,andshalltakeallthejointandseverallegalresponsibilities.DongMingzhu,theCompany'sresponsibleperson,LiaoJianxiong,responsiblepersoninchargeofaccountingworkandLiuYanzi,in-chargepersonofaccountinginstitution(accountingsuperintendent)herebydeclareandwarrantthatthefinancialreportintheReportisauthentic,accurateandcomplete.AllthedirectorsattendedthemeetingoftheBoardofDirectorsinrespectofdeliberationoftheReport.Theforward-lookingstatementssuchasfutureplansanddevelopmentstrategiesintheReportdonotconstituteasubstantivecommitmentoftheCompanytoinvestors.Investorsandrelevantpersonsshouldthereforebeawareofriskfactorsattendantininvestmentandunderstandthedifferencesbetweenplans,forecastsandcommitments.TheCompany'sprofitdistributionproposalpassedupondeliberationatthemeetingoftheBoardofDirectorsissetoutasbelow:Basedonthetotalnumberof5,832,851,217sharesoftheCompanyenjoyingprofitdistributionrightsasof28April,2021(thetotalstockcapitalof6,015,730,878sharesexcludingthe182,879,661sharesheldintherepurchaseaccountoftheCompany),theCompanyplanstodistributeallshareholdersacashdividendofRMB30(taxincluded)per10shares,butdoesnotplantogiveanybonusshareoruseanypublicreservefundsforcapitalization.GREEELECTRICAPPLIANCES,INC.OFZHUHAIAnnualReport20202TableofContentsSectionIImportantNotice,TableofContentsandParaphrase...................................................................................1SectionIICompanyProfileandMainFinancialIndices..............................................................................................4SectionIIICorporateBusinessOverview.......................................................................................................................9SectionIVDiscussionandAnalysisofBusinessOperation.........................................................................................17SectionVImportantEvents...........................................................................................................................................53SectionVIChangesinStockCapital&InformationofShareholders.......................................................................83SectionVIIRelatedInformationofPreferredStock...................................................................................................91SectionVIIIRelatedInformationofConvertibleCorporateBonds..........................................................................92SectionIXDirectors,Supervisors,SeniorManagementPersonnelandEmployees.................................................93SectionXCorporateGovernance................................................................................................................................109SectionXIRelatedInformationofCorporateBonds.................................................................................................114SectionXIIFinancialReport........................................................................................................................................115SectionXIIIReferences................................................................................................................................................274GREEELECTRICAPPLIANCES,INC.OFZHUHAIAnnualReport20203ParaphraseItemsMeansContentsCompany,theCompany,theenterprise,GREEELECTRICAPPLIANCESorGREEMeansGREEELECTRICAPPLIANCES,INC.OFZHUHAIGREEGROUPMeansZhuhaiGreeGroupCo.,Ltd.ZhuhaiMingjunMeansZhuhaiMingjunInvestmentPartnership(LimitedPartnership)FinanceCompanyMeansZhuhaiGreeGroupFinanceCompanyLimitedJinghaiInternetMeansJinghaiInternetTechnologyDevelopmentCo.,Ltd.YinlongMeansZhuhaiYinlongNewEnergyCo.,Ltd.CSRCMeansChinaSecuritiesRegulatoryCommissionReportPeriodMeans1January,2020to31December,2020GREEELECTRICAPPLIANCES,INC.OFZHUHAIAnnualReport20204SectionIICompanyProfileandMainFinancialIndicesI.CompanyinformationStockAbbreviationGREEELECTRICAPPLIANCESStockCode000651StockExchangeShenzhenStockExchangeNameinChinese珠海格力电器股份有限公司NameAbbreviationinChinese格力电器NameinForeignLanguage(ifany)GREEELECTRICAPPLIANCES,INC.OFZHUHAINameAbbreviationinForeignLanguage(ifany)GREELegalRepresentativeDongMingzhuRegisteredAddressJinjiWestRoad,Qianshan,ZhuhaiCity,GuangdongProvincePostCodeofRegisteredAddress519070OfficeAddressJinjiWestRoad,Qianshan,ZhuhaiCity,GuangdongProvincePostCodeofOfficeAddress519070WebsiteEmailgree@gree.com.cnII.ContactsandcontactinformationBoardSecretarySecuritiesAffairsRepresentativeNameDengXiaoboZhangZhouhu,YanZhangxiangAddressJinjiWestRoad,Qianshan,ZhuhaiCity,GuangdongProvinceJinjiWestRoad,Qianshan,ZhuhaiCity,GuangdongProvinceTel0756-86692320756-8669232Fax0756-86149980756-8614998Emailgree0651@cn.gree.comgree0651@cn.gree.comIII.InformationdisclosureandplaceofthereportMediadesignatedbytheCompanyforinformationdisclosureChinaSecuritiesJournal,SecuritiesTimes,ShanghaiSecuritiesNewsandSecuritiesDailyWebsitespecifiedbyCSRCforreleaseoftheAnnualGREEELECTRICAPPLIANCES,INC.OFZHUHAIAnnualReport20205ReportPlacewheretheAnnualReportisavailableforinspectionInvestmentManagementDepartmentoftheCompanyIV.AlterationofregistrationOrganizationcode91440400192548256NChanges(ifany)inthemainbusinesssincelistingoftheCompanyNochangeChanges(ifany)inthecontrollingshareholdersOn2December,2019,GreeGroupandZhuhaiMingjunsignedtheShareTransferAgreement.GreeGroupplannedtotransfer902,359,632sharesoftheCompanywithunlimitedsalesconditionsheldbyGreeGrouptoZhuhaiMingjunatapriceofRMB46.17/share(accountingfor15%oftheCompany'stotalequity);On13December,2019,theZhuhaiMunicipalPeople'sGovernmentandtheState-ownedAssetsSupervisionandAdministrationCommissionoftheStateCouncil(SASAC)ofZhuhaiCityseparatelyapprovedthesharetransfer.GreeGroupobtainedtheTransferRegistrationConfirmationissuedbyChinaSecuritiesDepositoryandClearingCorporationLimited(CSDC)ShenzhenBranchon3February,2020.Thesharetransferregistrationproceduresforthetransferofthisagreementhavebeencompleted,andthetransferdateis23January,2020.Afterthecompletionofthesharetransferregistration,theCompanyhasneitheracontrollingshareholdernoranactualcontroller.V.OtherrelatedinformationAccountingfirmengagedbytheCompanyNameoftheAccountingFirmUnionPowerCertifiedPublicAccountants(SpecialGeneralPartnership)OfficeAddressNo.169DonghuRoad,WuchangDistrict,WuhanCityNamesofAccountantsasSignatoriesHanZhenping,GengTingSponsorengagedbytheCompanytoperformcontinuoussupervisionduringtheReportPeriod√Applicable□NotapplicableNameofthesponsorOfficeaddressofthesponsorNameoftherecommendedrepresentativeContinuoussupervisionperiodHuataiUnitedSecuritiesCo.,Ltd.26F,CTSTower,No.4011,ShennanBoulevard,FutianDistrict,ShenzhenGuChongxiang,LiShijingFrom26July,2019to25July,2020FinancialadviserengagedbytheCompanytoperformcontinuoussupervisionduringtheReportPeriod□Applicable√NotapplicableGREEELECTRICAPPLIANCES,INC.OFZHUHAIAnnualReport20206VI.MainaccountingdataandfinancialindicesWhethertheCompanyhasretroactiveadjustmentorrestatementofpreviousaccountingdata□Yes√NoUnit:YuanItem20202019Increase/Decreaseoverthepreviousyear2018OperatingRevenue(Yuan)168,199,204,404.53198,153,027,540.35-15.12%198,123,177,056.84NetprofitattributabletoshareholdersoflistedCompany(Yuan)22,175,108,137.3224,696,641,368.84-10.21%26,202,787,681.42NetprofitattributabletoshareholdersoflistedCompanylessnon-recurringgainsandlosses(Yuan)20,285,816,036.0024,171,511,911.32-16.08%25,580,865,501.38Netcashflowgeneratedfromoperatingactivities(Yuan)19,238,637,309.1627,893,714,093.59-31.03%26,940,791,542.98Basicearningspershare(YuanperShare)3.714.11-9.73%4.36Dilutedearningspershare(YuanperShare)3.714.11-9.73%4.36Weightedaveragereturnonnetassets18.88%25.72%-6.84%33.36%ItemAttheendof2020Attheendof2019Increase/DecreaseoverthepreviousyearAttheendof2018Totalasset(Yuan)279,217,923,628.27282,972,157,415.28-1.33%251,234,157,276.81NetassetattributabletoshareholdersoflistedCompany(Yuan)115,190,211,206.76110,153,573,282.674.57%91,327,095,069.10VII.Accountingdatadifferencesunderdomesticandforeignaccountingstandards1.Differencesinnetprofitandnetassetsinthefinancialreportdisclosedunderinternationalaccountingstandardsandthatdisclosedunderdomesticaccountingstandards□Applicable√NotapplicableTherewasnodifferenceinnetprofitandnetassetsinthefinancialreportdisclosedunderinternationalaccountingstandardsandthatdisclosedunderdomesticaccountingstandardsduringtheReportPeriod.2.Differencesinnetprofitandnetassetsinthefinancialreportdisclosedunderoverseasaccountingstandardsandthatdisclosedunderdomesticaccountingstandards□Applicable√NotapplicableGREEELECTRICAPPLIANCES,INC.OFZHUHAIAnnualReport20207TherewasnodifferenceinnetprofitandnetassetsinthefinancialreportdisclosedunderoverseasaccountingstandardsandthatdisclosedunderdomesticaccountingstandardsduringtheReportPeriod.VIII.Quarter-basedmainfinancialindicatorsUnit:YuanQuarter1Quarter2Quarter3Quarter4Operatingincomes20,395,535,183.4249,106,787,186.5256,387,073,628.9942,309,808,405.60Netprofitattributabletoshareholdersoflistedcompany1,558,013,539.014,804,123,838.637,336,584,665.518,476,386,094.17Netprofitattributabletoshareholdersoflistedcompaniesafterdeductionofnon-recurringprofitandloss1,429,583,505.274,566,954,114.646,585,565,313.267,703,713,102.83Netcashflowsfromoperatingactivities-11,772,862,523.807,255,186,786.047,549,675,839.3016,206,637,207.62Whethermajordifferencesexistbetweentheabovefinancialindicatorsortheirsumandthoseinthedisclosedquarterlyreportandsemi-annualreport□Yes√NoIX.Non-recurringprofitandlossitemsandamounts√Applicable□NotapplicableUnit:YuanItemAmountin2020Amountin2019Amountin2018DescriptionGainsandlossesfromdisposalofnon-currentassets(includingtheprovisionforassetimpairmentwrite-offpart)-4,974,224.62-9,293,929.38-23,064,935.35Fordetails,seeNote(V)57,Note(V)58,andNote(V)59Governmentalsubsidiesrecordedintothecurrentgainsandlosses(excludingthegovernmentalsubsidiescloselyrelatingtothebusinessoftheenterpriseandenjoyedbyafixedquotaorafixedamountinaccordancewiththestatepolicies)1,346,168,393.381,215,852,371.66671,678,104.47Fordetails,seeNote(V)52andNote(V)58Capitaloccupationfeecollectedfromthenon-financialinstitutionandrecordedintothecurrentgainsandlosses883,505.62359,713.101,262,805.80Netprofitsorlossesofthesubsidiariesinthecurrentperiodfromthebeginningoftheperiodtothecombinationdatethataregeneratedbybusinesscombinationinvolving184,503.98GREEELECTRICAPPLIANCES,INC.OFZHUHAIAnnualReport20208enterprisesundercommoncontrolGainsandlossescausedbyfairvaluechangesfromtheholdingoftradingfinancialassets,derivativefinancialassets,tradingfinancialliabilitiesandderivativefinancialliabilities,andinvestmentincomeobtainedfromthedisposaloftradingfinancialassets,derivativefinancialassets,tradingfinancialliabilities,derivativefinancialliabilitiesandotherdebtinvestments,exceptfortheeffectivehedgingbusinessrelatedtotheCompany'snormalbusinessoperations877,450,950.741,449,722.86151,222,484.83Reversalofimpairmentprovisionfortheaccountsreceivableandcontractassetsforwhichanindependentimpairmenttestisconducted2,320,229.26Non-operatingincomesandexpendituresotherthantheaboveitems50,024,914.68-530,486,147.0332,323,207.44Fordetails,seeNote(V)58andNote(V)59Otherprofitandlossitemsthatconformtothedefinitionofnon-recurringprofitandloss17,915,425.64997,770.176,119,851.77Less:Influenceamountofincometax386,974,457.37147,189,032.83170,139,883.37Influenceamountofminorityequity(aftertax)11,202,406.756,561,011.0349,984,188.79Total1,889,292,101.32525,129,457.52621,922,180.04--Explanationshouldbegivenfornon-recurringprofitandlossitemsdefinedbytheCompanyaccordingtoExplanatoryAnnouncementNo.1onInformationDisclosureforCompaniesOfferingTheirSecuritiestothePublic--Non-recurringProfitandLossandfornon-recurringprofitandlossitemswhicharelistedinExplanatoryAnnouncementNo.1onInformationDisclosureforCompaniesOfferingTheirSecuritiestothePublic--Non-recurringProfitandLossanddefinedasrecurringprofitandlossitems.□Applicable√NotapplicableNonon-recurringprofitandlossitemswhicharedefinedorlistedinExplanatoryAnnouncementNo.1onInformationDisclosureforCompaniesOfferingTheirSecuritiestothePublic--Non-recurringProfitandLossweredefinedbytheCompanyasrecurringprofitandlossitemsduringtheReportPeriod.GREEELECTRICAPPLIANCES,INC.OFZHUHAIAnnualReport20209SectionIIICorporateBusinessOverviewI.MajorbusinessesengagedinduringtheReportPeriod(I)MajorbusinessesandpositioninindustryGreeElectricAppliances,Inc.ofZhuhaiisadiversifiedandtechnologicalglobalindustrialgroupandhasthreemajorbrands:Gree,TOSOTandKINGHOME.Itsproductshavebeenexpandedtocoverthetwomajorfieldsofhouseholdconsumergoodsandindustrialequipment,includingresidentialairconditioners,HVAC,refrigerators,washingmachines,waterheaters,kitchenappliances,environmentalappliances,communicationproducts,smartbuildings,andsmarthouseholdappliancesintheconsumptionfield;high-endequipment,precisionmoulds,freezersandrefrigerationequipment,motors,compressors,capacitors,semiconductordevices,precisioncastingequipment,basicmaterials,industrialenergystorages,andrenewableresourcesintheindustrialfieldGreeproductsaresoldinmorethan160countriesandregions,providingmorethan400millionuserswithsatisfactoryproductsandservices,forthepurposeofcreatingabetterlife.In2020,GreewasagainlistedintheFortuneGlobal500andrankedthe436thbyvirtueofitsoutstandingcomprehensivestrength;listedintheForbesGlobal2000–World'sBestEmployersandrankedthe246th,rising14placesfrom2019.AccordingtothedatareleasedbyHVACInformation,Greetooktheleadinthecentralairconditionermarketrelyingonamarketshareof13.9%andhasmaintainedthepositionfornineconsecutiveyearsintheChinesemarket;accordingtothe2020domesticsalesdataofairconditionerbrandspublishedbyChinaIOL.com,Greeairconditionersrankedthefirstinthefieldwithashareof36.9%,takingtheleadfor26years.Greetakes"TobeGlobalLeadingAirConditioningEnterprise"asitscorporatevision,and"carryingforwardtheindustrialspirit,masteringcoretechnologies,pursuingperfectquality,providingfirst-classservices,andachieving‘MadeinChina,LovedbytheWorld’"asitsmission.Byadheringtothemanagementphilosophythat"innovationneverstops",Greefocusesonindependentinnovationanddevelopment,inordertograspthepulseofthetimes,buildaworldbrandandcreateadevelopmentmodelwithChinesecharacteristicsforChinesemanufacturingenterprises.(II)Overviewofindustrydevelopment1.FieldofhouseholdappliancesAccordingtotheReportonChina'sHouseholdApplianceMarketin2020issuedbyChinaCenterforInformationIndustryDevelopment,thehouseholdappliancemarketofChinafirstunderwentadepressionandthenrecoveredin2020.TheretailsalesvolumeofhouseholdappliancesinthewholeyearwasRMB833.3billion,adecreaseof6.5%yearonyear,andtheretailsalesofairconditioners,refrigerators,washingmachines,andkitchenappliancesdecreasedtovaryingdegrees.DuetotheCOVID-19epidemic(theepidemicforshort),theproportionofpeopleworkingathomeincreased,andtheretailsalesofhomeappliancesincreasedby1.85%yearonyear.AccordingtothestatisticsofChinaIOL.com,thesalesvolumeofresidentialairconditionerswas141,460,000in2020,ayear-on-yeardecreaseof6.1%;whereinthedomesticsalesvolumewas80,280,000,decreasedby12.9%,andtheGREEELECTRICAPPLIANCES,INC.OFZHUHAIAnnualReport202010exportsalesvolumewas61,180,000,increasedby4.7%.Theepidemicsituationhaspromotedtherapiddevelopmentofonlineretails.In2020,theproportionofonlineretailstothetotalretailsalesofhouseholdappliancesmarketincreasedfrom41.17%in2019to50.4%,andthecontributionrateofe-commercechannelstohouseholdappliancesretailsexceeded50%forthefirsttime,furtherhighlightingtheimportanceofonlineretails.Theepidemichaschangedpeople'slifephilosophyandlifestyle.Forthehouseholdappliancesmarketin2020,theairconditionersfocusingonintelligence,comfortandhealth,refrigeratorsfocusingonlargevolume,healthydisinfectionandscientificstorage,andthewashingmachinesfocusingonlargecapacity,healthywashingandcare,andclothesdryinghavebeenrecognizedandacceptedbymoreandmoreconsumers.Smallhouseholdappliancessuchasdishwashers,hand-heldvacuumcleaners,andairfryerssoldwellatdifferentdegrees,notonlyenliveningthedullhouseholdappliancemarket,butalsostrengtheningtheroleofhouseholdappliancesinenhancingpeople'shappiness.Theremarkableretailsalesofconsumptionupgradinggoodsandsubdividedfunctionalhouseholdappliancesreflectedpeople'sdemandforimprovingthequalityoflifethroughconsumptionofhouseholdappliances,andtheupgradingofconsumptionandthetransformationofhouseholdappliancebusinesswerespeedingupatthesametime."Newconsumption"and"high-end"willbethemaininnovativeorientationofhouseholdappliancesin2021.2.IndustrialequipmentfieldThesectorofcoreairconditioningpartsbenefitedfromtheeffectivecontroloftheepidemic.Thecompressorfieldandthemotorfieldbegantorecovergraduallyinthesecondhalf,andaslightdeclinewasobservedthroughouttheyear.Accordingtothe2020statisticsofChinaIOL.com,thesalesvolumeofrotorcompressorsinChinawas211,551,000,ayear-on-yeardecreaseof1.69%;thesalesvolumeofrotorcompressorsinChinawas356,762,000,ayear-on-yeardecreaseofabout5.5%.Fortheintelligentequipmentsector,withtheproposalofthe"MadeinChina2025"strategy,theintelligentmanufacturingindustryhasusheredinanopportunityperiodofrapiddevelopmentinrecentyears.Accordingtothedatainthe2020StatisticalBulletinofNationalEconomicandSocialDevelopmentofthePRC,theaddedvalueofChina'sequipmentmanufacturingindustryincreasedby6.6%yearonyearin2020,accountingfor33.7%oftheaddedvalueofindustriesabovethedesignatedscale;theoutputofindustrialrobotswas212,000sets,ayear-on-yearincreaseof20.7%.Regardingtheproducttrendofindustrialrobots,manufacturershaveprobedintotheapplicationtothespecificindustriesandfieldssuchasmedicaltreatment,winemaking,sewing,andedgecutting,andlaunchedspecialrobots.Intermsoftechnologydevelopment,traditionalindustrialrobotsperformmorecomplexproductiontasksthroughthecollaborativeapplicationofforce,vision,tactile,andothersensors;fusiondevelopmentofthe5G,artificialintelligence,bigdata,cloudcomputing,intelligentsensing,andotheremergingtechnologieswithrobottechnologieswilldriveindustrialrobotstoevolvetowardsamoreintelligentandflexibledirection.Atpresent,thedevelopmentlevelofintelligentmanufacturingismaintainedatasustainedhighspeed,andthedevelopmentlevelofhigh-endintelligentequipmenthasbecomeacriterionformeasuringthedevelopmentlevelofacountry'smanufacturingindustry.However,theintelligentmanufacturingindustryofChinastartedrelativelylate,andthereisstillacertaingapcomparedwithdevelopedcountries.Fortunately,ChinahasgraduallyextricateditselffromthedependenceonforeignnewandhightechnologiesthroughunremittingindependentR&Dandindependentinnovationofcoretechnologies.Moreover,ChinawillincreaseitsinvestmentinR&Dinthefuture,improvethepolicyfordevelopmentofintelligentmanufacturingindustry,andpromoteintelligenttransformationGREEELECTRICAPPLIANCES,INC.OFZHUHAIAnnualReport202011oftheindustry.Theintelligentmanufacturingindustryshowsahugegrowthpotential.II.Significantchangesinmajorassets1.SignificantchangesinmajorassetsMajorassetsSignificantchangesFixedassetsAdecreaseof0.69%overtheendoflastyear.Nosignificantchangeismade.IntangibleassetsAnincreaseof10.80%overtheendoflastyear.Nosignificantchangeismade.ConstructioninProgressAnincreaseof65.20%overtheendoflastyear.Thisismainlycausedbytheincreaseofconstructioninprogressofthecurrentperiod.OthercurrentassetsAdecreaseof32.37%overtheendoflastyear.ThisismainlycausedbythematurityoftheCompany’sinvestmentinstructureddepositsandwealthmanagementproductsinthecurrentperiod.Long-termequityinvestmentAnincreaseof14.94%overtheendoflastyear.Nosignificantchangeismade.OtherequityinstrumentinvestmentsAnincreaseof67.69%overtheendoflastyear.ThisismainlycausedbytheincreaseoftheequityinvestmentinSan’anOptoelectronicsCo.,Ltd.andthechangeinthefairvalueoftheequityinvestment.2.Majoroverseasassets□Applicable√NotapplicableIII.CorecompetenceanalysisFacingnewopportunitiesandchallenges,Greetakes"masteringcoretechnologiesandforgingperfectquality"asthetwowheelsfordriving,transfersandimprovesthevaluethroughuniquemarketingmodel,stickstoindependentpeoplecultivation,independentinnovationandindependentproduction,andtakes"carryingforwardtheindustrialspirit,masteringcoretechnologies,pursuingperfectquality,providingfirst-classservices,andachievingMadeinChina,LovedbytheWorld"asitsmissiontostrideforward.(I)Worldfamousbrand,continuingtocreatevalueforthesocietyGreeisadiversifiedtechnologicalglobalindustrialgroupintegratingR&D,production,salesandservice.Greehaswonagreatnumberofhonorssuchas"WorldBrand","MostCompetitiveBrandintheMarket","NationalQualityAward","ExportInspectionExemptionEnterprise"and"ChinaBrandInnovationAward"overtheseyears.ForbesreleasedtheGlobal2000–World'sBestEmployersinMay2020.Greerankedthe246th,rising14placesfrom2019.Sincebecomingoneofthetop500ofthelistin2015,Gree'srankinghasrisenyearafteryear,anditsdevelopmentstrengthhasbeenrecognizedbytheworld.Theworldtop500listofFortunewasreleasedinAugust2020.GreewasagainlistedintheFortuneGlobal500GREEELECTRICAPPLIANCES,INC.OFZHUHAIAnnualReport202012andrankedthe436thbyvirtueofitsoutstandingcomprehensivestrength.Meanwhile,Greewaslistedinthe"China'sMostAdmiredCompaniesin2020"intheFortune,rankingtheseventhinthelistandtakingthefirstplaceinthehouseholdapplianceindustry.AccordingtothecustomersatisfactionsurveyresultsissuedbytheCustomerSatisfactionEvaluationCenterofChinaNationalInstituteofStandardization,thecustomersatisfactionofGreeairconditionersandalltheindexeswereatthefirstplaceintheindustry,rankingNo.1for10consecutiveyears.Greehasalwaysbeenadheringtothecoresenseofworthof“qualityfirst,customersatisfaction,goodfaithmanagement,andwin-winsituation”,andforgingitsbrandsandcreatingsocialvalue,environmentalvalueandeconomicvalueforthesocietyandconsumersdependingonitsperfectqualityandworld-leadingtechnologies.(II)ExcellentR&Dstrength,continuouslyleadingtechnologicalinnovationandproductupgradingoftheindustryGreeadherestothephilosophythat"scienceandtechnologychangelife;scienceandtechnologycreatelife"andinsistson"independentresearchanddevelopmentofcoretechnologies".Itfirmlybelievesthatonlytherealmasteryofcoretechnologiescanenableustograspthefateoftheenterpriseandrealizeindependentdevelopmentoftheenterprise.Meanwhile,Greehassetupatechnologicalinnovationsystemof"enterpriseregardedasthemainplayer,marketorientation,enterprise-university-researchcooperation".Itinsistsoninnovationdriving,cultivatesinnovativetalents,implementstheleaderstrategy,andconstantlyconsolidatesitsgloballeadingpositioninthefieldofrefrigeration.GreeboaststhelargestR&Dcenterofairconditionersintheworld,fournationalR&Dcenters,oneresearchandevaluationbaseoftheNationalNotificationEnquiryCenter,15researchinstitutes,nearly1,000laboratories,andnearly15,000R&Dmembers.ItsnationalR&DcentersaretheNationalKeyLaboratoryonAirConditioningEquipmentandEnergy-savingSystemOperation,NationalEngineeringResearchCenterofGreenRefrigerationEquipment,StateRecognizedEnterpriseTechnologyCenterandtheState-levelIndustrialDesignCenter.Meanwhile,ithasbeenrecognizedasthe"NationalDemonstrationBaseforStandardizationofConsumerGoods"and"NationalPilotEnterpriseforStandardizationofHigh-endEquipmentManufacturingIndustry".Inaddition,Greehasestablishedthe"MotorandControl"academicianworkstationandhasbeensuccessivelyapprovedtoestablishpost-doctoralresearchcentersanddoctoralworkstationsinGuangdongProvince.In2020,Greewasapprovedtoestablish"GuangdongKeyLaboratoryforEnterprisesofHigh-speedEnergySavingMotorSystem".GreeElectriccontinuedtoleadtheindustryintesting,certificationandstandards.Greehasbuiltmorethan300professionallaboratoriesforthermalbalance,noises,reliability,electricalsafety,electromagneticcompatibility,etc.,andhasbeensuccessivelyrecognizedbyavarietyofnationalorinternationalorganizations(includingCNAS,TUV,UL,CSA,VDE,ITS,SGS,BV,andAHRI),growingintothelargestexperimentalcenterintheindustrythatcanprovidethemostcompletetestsandreceivethelargestnumberofnationalandinternationalrecognitions.Greehasaccumulativelywon48national,provincialorministerialandindustrialawards.Bytheendof2020,Greehasaccumulativelyappliedfor79,014patents,including40,195patentsforinventions;won46Chinesepatentawardsintotal,includingonegoldawardforinventionandthreegoldawardsforappearance;won6goldawardsatInternationalExhibitionofInventionsofGenevaand5goldawardsatiENA.(III)LeadingPQAMperfectqualityassurancemode,achieving“MadeinChina,LovedbytheWorld”Greeregards"pursuingperfectquality"asthequalitypolicyand"zerodefect"and"bestservicenotrequiringGREEELECTRICAPPLIANCES,INC.OFZHUHAIAnnualReport202013after-salesservice"asthequalityobjectives,considersthe"five-stepmethodofqualityprevention"and"qualitytechnologyinnovationcycleD-CTFPmethod"asthemethodsforcontinuouslypromotingandrefiningtheperfectqualitymanagementmodeofGree.Fromthequalityconceptof"zerodefect"putforwardintheearlystageofdoingpioneeringworktotheconceptofperfectqualitynowadays,theconnotationofGree'qualitymanagementconcepthasbeenconstantlyenrichinganddeveloping.Greeadherestothequalitypolicyof"pursuingtheperfectquality,creatinganinternationalbrand,andforgingacenturyenterprise",stickstothequalitycultureof"strict,trueandnew"orientedtocustomerdemandandsocialresponsibility,setsnoupperlimitofinvestmentinthebasiccapacitybuildingofquality,implementsall-roundqualitytrainingforallstaff,andextensivelycarriesoutQCCqualityimprovementactivitiesandSixSigmaqualityimprovementprojects.Basedonthe"fourinone"systemofISO9001,ISO14001,ISO45001andQC080000,atotalqualitymanagementmodelwithindependentinnovationasthecorehasbeengraduallyformedintheprocessofintroduction,promotion,andpracticingtotalqualitymanagement,leanSixSigmamanagementandperformanceexcellencemodel.GreeparticipatedinthedraftinganddevelopmentoftheQualityManagement-InnovationCycleGuideBasedonCustomerDemandasanationalstandard,withaviewtopublicizingGree'sadvancedqualitymanagementexperiencethroughouttheindustryandpromotingcontinuousimprovementofthequalitylevelofthewholeindustry.ThequalitylevelofGree'sproductshasbeencontinuouslyimprovedbystrengtheningtheinternalqualitycontrol,andtheafter-salefailureratehasfallengreatlyforyears.From2014to2020,Greewon2firstprizes,22secondprizes,3thirdprizes,and61excellentprizesof“QualityTechnologyAward”ofChinaAssociationforQualityrespectivelyrelyingonitsleadingcoretechnologiesandexcellentqualitymanagementsystem;inNovember2018,Greewonthe“ThirdChinaQualityAward”relyingonitsperfectqualitymanagementmodeof"MadeinChina,LovedbytheWorld",gettingthehighesthonorinChina'squalityfield;Greewonthegoldawardofthe44thInternationalConventiononQualityControlCircles(ICQCC)in2019andthesecondawardofinnovationcategoryoflargeenterprisesintheQualityInnovationAward(QIA)in2020,becomingthefirsthouseholdapplianceenterpriseinChinathatwonthisaward.TheseawardshighlightedGree'ssolidstrengthinthefieldofqualitytechnologies.(IV)Onlineandofflineintegratednewretailsystem,meetingthenewneedsofconsumerswithdigitaltechnologiesGreeinsistsonthesaleschannelconstructionandsalesmodelofindependentmanagement,mutualbenefitandwin-winandcreatesasolidonlineandofflinebusinesslayout.Thetwochannelscomplementeachotherandaredeeplyintegratedtocreateafullchannelsalesplatform.Greehasestablishedanofflinesalesnetworkcoveringthewholecountry,providingserviceforconsumersthroughits27salescompaniesandmorethan30,000exclusivestores.“GreeDongMingzhu'sstore”hasbeentransformedandupgradedintoacomprehensiveonlineretaile-commerceplatform,sellinghighqualitycommoditiesofvariouscategoriesandvarietiessuchashouseholdappliances,foodandbeverage,beautyandpersonalcareproducts,clothingboutiques,andonlinetravelproducts.Asthemarketenvironmentchanges,Greehasstartedthe"newretail"marketingmodereformofonlineandofflineintegration.Theonlinethird-partye-commerceplatformand“GreeDongMingzhu'sstore”aredeeplyintegratedwithmorethan30,000offlinestorestoprovideonline-offlinelinkageintegratedservicesincludingofflineexperience,onlineordering,andnationwideunifieddistributionandinstallation.GREEELECTRICAPPLIANCES,INC.OFZHUHAIAnnualReport202014Information,digitalandintelligenttechnologieshavebeendeeplyappliedtoGree's"newretail"marketingmode.Thewholechainconstructionandoperationofnewretailincludingtheshoppingmallplatform,orderfulfillmentsystem,onlinewholesalesystem,andafter-salesdispatchsystemrealizesuserreachingofGree’snewretailonline,theinformatizationcapabilityempowersthechannelbusinesstodrivethedigitalupgradeofmarketing.RelyingontheInternetengineeringtechnologyandintegratingtheartificialintelligence,InternetofThingsandAR/VRtechnology,Greepromotesthedigitalupgradeofterminalstoresthroughtheintelligenttouchinteractionmodeoffline,achievesthefunctionsofproductsampling,priceadjustment,training,uservaluetagprecipitationandmanagementinthecloud,buildsGree’scharacteristicsmartshoppingguidestores,andconstantlyimprovesconsumers'shoppingexperience;usesthefunctionsofinventorydataanalysisandearlywarning,dynamicdisplayandanalysisofsalesdataandconductdata-drivenoperationtomeetthenewneedsofconsumerscontinuously.(V)Thefullseriesofhouseholdappliances,providingconsumerswithoverallsolutionsforhigh-qualitysmartlifeBy2020,Greehasprovided46categoriesofhouseholdappliances,including32categoriesofhomeappliances,whichcanmeetconsumers’all-roundneedsforhighqualitylife.In2020,Greelaunchednewtypesofhouseholdappliancessuchashand-heldwaterflosser,disinfectantmaker,sterilizationsmallsquaretube,heatpumpwasherdryer,automaticdrumwashingmachinewithdryingfunction,dishwasher,hand-heldvacuumcleaner,zero-cold-watergaswaterheater,baseboardheater,portableelectrickettle,electriclunchbox,andportablejuicer,enrichingthelifeofconsumers.In2020,GreeSmartHomebuilt“GreeZero-carbonHealthyHome”centeringonthegoalof"LinkGree,ConnectFree",andimplementedtheoverallsmartlifesolutionfeaturingenergyconservation,environmentalprotection,comfortandhealth,wisdomandhumanities,consistingofthesixintelligentmanagementsystemsofenergy,air,sleep,recipe,securityandlighting,covering61categoriesofintelligentproducts,andmeetconsumers'requirementforpursuingabetterlifedependingonintelligenthightechnologies.(VI)PreciseproductioncapacitylayoutandcompleteindustrialsupportabletoquicklymeettheneedsofconsumersGreeElectrichasestablished17productionbasesofhouseholdelectricalappliancesaroundtheworld,whicharelocatedinZhuhai,Chongqing,Hefei,Zhongshan,Zhengzhou,Wuhan,Shijiazhuang,Wuhu,Changsha,Hangzhou,Suqian,Luoyang,Nanjing,Chengdu,Ganzhou,Brazil,andPakistan.In2020,Greefurtherimprovedtheregionallayoutofproductioncapacityforvariouscategoriesofproducts,promotedtheupgradingofsaleslogisticsservicesandcoordinatedtoreducetheoveralllogisticsoperatingcostbasedonthechannelreformofnewretailmode.Inaddition,Greehasbuiltupstreamplantsforpartsofhouseholdappliances,forexample,compressors,motors,capacitorsandenameledwires,invariousbases,whichgreatlyenhancesthecontrolcapabilityoftheCompanyforupstreamanddownstreamsupplychain,guaranteestheefficientoperationofproductionandmeetstheneedsofconsumersinatimelymanner.Moreover,theCompanyhasbuiltsixrenewableresourcebasesinZhuhai,Changsha,Zhengzhou,Shijiazhuang,WuhuandTianjin,coveringthewholeindustrialchainfromupstreamproductiontodownstreamrecycling,andachievinggreen,cyclicandsustainabledevelopment.Meanwhile,Greealsoprovidesconvenientchannelsforconsumerstodisposeofwastehouseholdappliances.GREEELECTRICAPPLIANCES,INC.OFZHUHAIAnnualReport202015(VII)Self-madecorecomponentsandadvancedsupplychainmanagementlayasolidfoundationforsteadydevelopmentGreeshowcasesapowerfulself-developmentandself-makingcapabilityofcorecomponents,andtheproductioncapacity,technologiesandqualityofitswhollyownedsubsidiaries,LandaCompressor,KaibangMotor,XinyuanElectronicsandGreeElectricalstandinthefrontrankoftheindustry.Gree's10productsincludingtheHigh-efficiencyScrollCompressor,High-performanceLinearServoMotorandDriver,andHigh-performanceServoMotorandDriverforIndustrialRobotswereappraisedasthe"world-leading"levelbytheendof2020.ThepowerfulR&DandmanufacturingcapabilitiesofcorecomponentsvigorouslysupporttheleapfrogdevelopmentofGree.Aimingtocreatealeadingsupplychainintheindustry,Greehasestablishedalong-termwin-winstrategiccooperativerelationshipwithleadingsupportingenterprisesintheindustrytoeffectivelyguaranteethesupplyofrawmaterials.In2020,inthefaceofthecomplicateddomesticandoverseaspoliticalandeconomicenvironment,Greecontinuedtogivefullplaytoitsadvantageofscaleinthecentralizedprocurement,andtookmeasuressuchaslocalizationofsensitivematerialsandreplacementwithenvironmentallyfriendlymaterials,whicheffectivelyalleviatedthepressurecausedbyenvironmentalchangesonoperation,andshowedthepowerfulstrengthofGreeinsupplychainmanagement.(VIII)RefinedcostcontrolcapabilitytoprovideguaranteeforthesteadydevelopmentoftheCompanyGreeadherestotheorientationtomarketdemandanduserexperience,plansandcontrolstheproductcostinconsiderationoftheCompany'sbusinessobjectives,promotesproductdesigntoimplementingvalueengineeringbyrelyingontechnologicalinnovation,andrealizeswholeprocesscostcontrolandcreatesvalueforcustomersandshareholderswhilecompletingproductfunctionsandguaranteeingproductquality.In2020,Greefurtherpromotedcostreductionthroughproductdesignbytakingmeasuressuchasoptimizingtheproductstructuredesign,simplifyingtheprocessanddevelopingleanmodels;reducedthecostofmaterialprocurementbymeanssuchaspromotingsubstitutionschemes,lockingresourcesinadvanceandannualrebate;cutdowntheproductioncostofproductsbyincreasingtheutilizationrateofmaterials,boostingtheautomationlevelandimprovingtheproductionprocess.In2020,Greefurtherimprovedandpromotedtheleanmanufacturingsystem(GMS)withGreecharacteristics,builtanonlinelearningplatformofleanmanufacturing,reinforcedinnovationinthethreesectionsofnewproductdesign,logisticstechnologyandproductiontechnology,andfocusedontheworksuchaspromotingleandesign,leanproduction,andlowcostintelligentautomation(LCIA)ofnewproducts.ChinaInstituteofElectronicLaborawardedGreethehonorarytitleof“ExcellentEnterprisePracticingLeanManagement”inOctober2020.(IX)AdheretoindependenttrainingoftalentsandcontinuouslyupgradethetalentstructureGreealwaysadherestotheprincipleof"focusingonthestrategiclayoutoftheCompanyandadheringtoindependenttrainingoftalents"andgraduallyformsanindependenttalenttrainingmodewithindependenttalentintroductionchannel,independenttraininganddevelopmentmechanismandall-roundincentiveandguaranteesystemasthecorebasedonthedevelopmentexperienceandculturaldepositoftheCompany,strivingtomakeemployeesandtheCompanymakeprogressanddeveloptogether.Gree'stalentteamhasbeengrowinganditstalentstructurehasbeenupgradedovertheyears.Bytheendof2020,GREEELECTRICAPPLIANCES,INC.OFZHUHAIAnnualReport202016theCompanyhadabout84,000employees,including2leadingtalentsinscienceandtechnologyinnovationundertheNationalTenThousandTalentsProgram,3expertsenjoyingspecialallowancesfromtheStateCouncil,1winneroftheAwardofOutstandingContributiontoNanyue,1OutstandingTalentundertheGuangdongSpecialSupportProgram,and80high-leveltalentsofZhuhai,448outstandingyoungtalents,710scientificandtechnologicalexpertsevaluatedinsidetheCompany,andmorethan7,500intermediateandseniorengineers.Greebuiltadiversifiedindependenttrainingmechanismbysettingupatrainingsystemindependently,strengthenedthetrainingofinnovativetalentsandrealizedthesupplyofhighqualitytalents.In2020,Greecontinuedtostrengthentheindependentcultivationofinnovativetalents,deepenthesupporttocorebusinesses,setupanintelligentlearningorganization,createanempoweringecologyofvocationaleducation,speedupthetalentcultivationandsupplyofinnovationachievementtransformation,andpromotehighqualitydevelopmentoftheenterprise.In2020,Greeconductedmorethan120trainingsessionsandevolved8000person-timesinthefieldoftechnologyR&D;organizedandcarriedout12specialmarketingtrainingsessions,withatotalofmorethan25,000trainees,bettersupportingthefirst-tiermarketingandservice.EmployeesareanimportantdrivingforcefordevelopmentoftheCompany.TheCompanyseeksbenefitsforemployeesthroughmultiplechannelsincludingtalentsubsidies,talenthousingandGreeschool,improvingtheemployeesatisfactionandhappinessthroughcontinuousefforts.GREEELECTRICAPPLIANCES,INC.OFZHUHAIAnnualReport202017SectionIVDiscussionandAnalysisofBusinessOperationI.OverviewInfluencedbytheCOVID-19epidemicandotherfactorsin2020,theCompanywasconfrontedwithmanydifficultiesandchallengesinitsdevelopment.However,theCompanyinsistedontheprincipleofnotreducingthestaffandnotcuttingpay,upheldtheWorkguidingideologyof"dream,innovationandsolidwork",strengthenedself-relianceandindependentinnovation,acceleratedpromotionofthenewretailmodeofonlineandofflineintegration,andmadenewbreakthroughsoneafteranotherontheroadofhighqualitydevelopment.In2020,theCompanyachievedthetotaloperatingrevenueofRMB170.497billion,adecreaseof14.97%yearonyear,andanetprofitattributabletotheparentcompanyofRMB22.175billion,adecreaseof10.21%yearonyear.(I)Centeronusers,continuouslyimproveproductcompetitivenessandmeetnewneedsofusers1.ResidentialairconditionersectorGreeinsistsoncenteringonuserneedsfordevelopmentofnewproducts,createsperfectqualitymanagementandfullyconsidersnewneedsofusers.BasedontheproductR&Dideaof"Studyonegeneration,reserveonegenerationanddeveloponegeneration",Greedevelopedsixseriesofnewproductscenteringon“health”and“comfort”,coveringalltheusescenariosathome.Inthenormalizationbackgroundofepidemicprevention,Greehascompletedtheproductlinedevelopmentandtechnicallayoutofhealthyairconditioners,abletomeetvariousrequirementsofconsumersforindoorhealthyair.Focusingonimprovingthecomfort,Greerealizedthepopularizationofdistributedairsupplybyfloor-standingairconditioners,upgradedtheairsupplytechnologyandheatingtechnologyofsplit-typeairconditioners,andlaunchednewproductssuchasJewelfloor-standingaircond…