Melexis N : 2021 - Melexis Annual Report

ANNUAL REPORT 2021

ON THE COVER: THE HONEY BEE

Thanks to its magnec compass, the fascinang honey bee has the ability to perceive the omnipresent magnec field (MF) of the Earth. Its magnec field sensivity matches this wonderful creature with our Triaxis® magnec sensors.

TABLE OF CONTENTS

1	Leer to our shareholders	4
2	Who we are	9
2.1 We engineer the best imaginable future	9
2.2 Our sites worldwide	10
2.3 Our key figures	12
2.4 Our industry associaons	14
3	What we do	16
3.1 We develop chips	16
3.2 We innovate for our customers	18
3.3 We cater to many different markets	19
3.4 Our soluons	20
4	What we stand for	28
4.1 Our guiding principles	28
5	Our strategy	30
5.1 We are going for 20 ICs per car	31
5.2 These applicaon trends drive our innovaon	32
5.3 We focus on ASSPs and ASICs	38
5.4 We want to be our customers' partner of choice	38
6	Our sustainability report	40
6.1 Our key material topics and concerns	40
6.2 Our stakeholder engagement	42
6.3 Our talents	44
6.4 Safety, health and well-being	52
6.5 Local communies	55
6.6 The environment	57
6.7 Responsible supply chain	63
6.8 Our business ethics	66

7	Our corporate governance	68
7.1 Shareholders	68
7.2 Management structure	69
7.3 Board of Directors	70
7.4 Commiees	72
7.5 Execuve Management	73
7.6 Remuneraon report	74
7.7 Policy on certain transacons	80
7.8 Internal control and risk assessment procedures in relaon to financial reporng	82
7.9 Elements pernent to a take-over bid	83
7.10 Auditor	84
7.11 Compliance with the 2020 Belgian Code on Corporate Governance	84
8	Financial report	85
8.1 Consolidated statement of financial posion	86
8.2 Consolidated income statement	88
8.3 Consolidated statement of comprehensive income	89
8.4 Consolidated statement of changes in equity	90
8.5 Consolidated statement of cash flows	92
8.6 Result of operaons	94
8.7 Liquidity, working capital and capital resources	95
8.8 Statement of the Board of Directors	95
8.9 Notes to the consolidated financial statements	96
9	Shareholder informaon	140
10	Excerpts from the Melexis nv statutory	142
11	Glossary	148
12	List of used acronyms	149
13	GRI content index	150
14	About this report	154

Dear Melexis shareholder,

As 2021 was a surprising year for all of us, we are sure you have plenty of quesons you would like to ask the Melexis leadership team. So we decided to organize a double interview with Françoise Chombar, Chair of the Board, and Marc Biron, our new CEO, to give you more insight into our strategy and the highlights of 2021.

Marc, Françoise, welcome to the both of you. 2021 was obviously a year of transion for Melexis. Marc became CEO and Françoise is the new Chair of the Board. What was your experience during this change in leadership? Did you noce a difference in approach or impact?

Françoise: Well, the CEO transion from myself to Marc was in fact very smooth. Of course there is a difference. There should be. Marc is a different person, but our mission, our strategy as a whole and our values are sll the same. It's good to have new leadership from me to me as this ensures a new boost. That was exactly one of the intenons of the swap. In my percepon the transion is a success. But maybe we have to ask other people (laughs).

Marc: I have the same impression. Françoise and I prepared the transion well. The goal is to keep the same strategy: an evoluon, not a revoluon. Of course, the change of leadership triggered some slight modificaons in policy.

Françoise, what is the main objecve of the Chair of the Board? How different is the impact you can make compared to being a CEO?

Françoise: Well, a CEO is of course extremely operaonal. As CEO you have to make sure that everything runs smoothly. As Chair, I can take the helicopter view from a distance. I make me to be a sounding board for the CEO and I'm sll an ambassador of Melexis to the outside world. I think it's a way to grow and expand my focus while sll helping to guide the company.

"Our strategic choices from the past are paying off"

Marc, in your opinion, what were the commercial highlights in 2021, which we know was a record year for Melexis? Marc: The COVID-19 pandemic and the chip shortage gave us a strong headwind, but we sll achieved great business success in 2021. It is a confirmaon that all our strategic decisions of the past were the correct ones. For example our success in applicaons for electrificaon of vehicles. We had many design wins and considerable revenue growth in the field of current sensors which monitor the state of the baery. The same goes for current sensors which opmize the performance of the DC/DC converter. Other successes were realized in the field of thermal management of electric vehicles.

"

Both in automove and adjacent markets we reach our goals of contribung to a beer planet

These systems require a lot of chips like embedded drivers and posion sensors. In ancipaon of the electrificaon trend, we developed these products and were ready for the market shiſt. Now we see this strategic choice is paying off.

Some years ago Françoise also set course for the development of soluons for what we call the adjacent market (non-automove). Here we have seen successes with temperature sensors for health monitoring. Our posion sensors have also done well in the gaming industry and latch and switch soluons have been incorporated into power tools. So also in this area, the organizaon is delivering according to the strategic intent.

A record year is without any doubt reason for pride. But we can imagine that this influences the goals set by the Board of Directors.

Françoise: When you are successful, you should not lower your goals. You should, based on actual knowledge, determine how to leverage the realized successes. You have to maintain a balance between sustainable growth and keeping the corporate values alive during that connued strive for success. Living the values is sll a condion sine qua non because they are the root of our growth. What's especially nice for me to see is that in both automove and adjacent markets we reach our goals of contribung to a beer planet.

Marc, what would be the most sasfying goal for you to see Melexis achieve by January 2023?

Marc: We have some challenges ahead and we should connue to manage them. The first challenge is the chip shortage. This will remain a tough situaon well into 2022. The huge demand for electronics will only intensify, which is of course good for Melexis. The digitalizaon of the world is a big demand driver. To manage the supply we are upscaling capacity in-house and at our suppliers, obviously in close

cooperaon with them. We've got sufficient new business opportunies to match the capacity as it gets built.

"Chips are not a commodity"

How do you combine these two? Managing a supply shortage while creang new business seems contradictory? Marc: It's indeed difficult to find the right balance. We have an exisng business where we need to deliver at least the minimum of what the market demands. But we also need to increase our footprint in the car of tomorrow. We won't let competors take our place there. How do we do this? By working from day to day with our suppliers so we can opmize the throughput in such a way that part of the new supply can go to the new markets. This is not easy but many people within Melexis are dedicated to this challenge. The mismatch between the supply and the demand is also an opportunity to select the businesses that fit our values and our strategic intents.

Françoise: I've been in semiconductors for more than 35 years. It's the first me ever that I see customers and car manufacturers being open to long-term commitments. They used to treat chips like commodies. Now they have discovered the truth: chips are not a commodity. It takes quite a bit of me to make them, even more me to qualify them and surely a lot of me to set up the right capacity. The mind shiſt towards long-term cooperaon is really a major game changer. People dealing with customers have to realize that they shouldn't stop booking new business. Because by the me the new customers will need their products, we will be able to deliver. In that sense this chip shortage is an opportunity for us. We have to take advantage of this mind shiſt right now. The momentum is there.