Quanta Computer Inc.

Annual Report 2016

- 2 -

Report to Shareholders

Enterprise operation faces tougher challenges as Internet access becomes more widely adopted and

changes in the market continues to accelerate. Facing new competition and dynamic market condition,

Quanta believes firmly in our ideology of Innovation, Change and Transcend, leveraging our positive

attitude to tackle challenges ahead through continuous exploration and strong desire to excel. We

believe doing so would inspire better product design ideas and deliver stronger business performance.

In recent years, Quanta continues to focus on advancing our core business, aside from introducing

light-weight and fully equipped notebook computers, the Company also introduces more advanced high

performance servers in response to the increasing needs in cloud computing industry. Moreover, the

Company further invests in Virtual Reality (VR), Augmented Reality (AR), and Mixed Reality (MR)

areas to capture new market opportunities. Furthermore, Quanta begins to develop solutions leveraging

advanced technology in medical field in order to explore new business potentials. Building on the

superior corporate value of Truthfulness, Kindness and Beauty, Quanta Computer continues to move

forward step by step in order to realize our Corporate vision in creating greater value for our

shareholders.

Quantas performance for FY2016 and outlook for FY2017 are as follow:

I. Revenue and Income

FY2016 was a tough year filled with harsh challenges for Quanta as industry competition

intensified and global market faced greater uncertainties. Although consolidated revenue of

NT$894BN in FY2016 was weaker than the previous year, gross margin and operating margin of

5.21% and 2.14% were both stronger than the previous year margins of 4.61% and 1.81% respectively.

Despite harsh environment the Company faced in 2016, core business profitability remained steady.

Net income after tax in FY2016 and FY2015 was NT$15.4BN and NT$17.7BN respectively. Net

income attributable to owners of parent in FY2016 and FY2015 was NT$15.1BN and NT$17.8BN

respectively. EPS in FY2016 was NT$3.93, while non-operating income was NT$1.2BN.

Facing the ever-changing challenges ahead, Quanta leverages its four principals of Superior

Quality, Superior Technology, Detailed Management, and Brighten Future to continue to innovate and

to excel ourselves. In terms of business operation, Quanta responds to new market trend towards

greater product variety at lesser volume by investing more resources in new technology advancement

and new product introduction. Doing so enables ourselves to tackle the challenge of different

technologies integration and to ensure the Companys sustainability and growth.

II. Outlook in 2017

Year 2017 is the year that Quanta continues to push for automation in overall manufacturing

process. Manufacturing techniques are expected to further advance and accelerate with upgraded

equipment. Quanta is aggressively reaching for the target of Industrial 4.0 and pushing for company-

wide detailed management. Quanta is able to effectively control cost structure through shortened

manufacturing process and simplified work flow.

Specific action plans include the following:

- 3 -

Solidify Industrial 4.0 Target

Through simplified new product design, smart manufacturing management, increased

material and shipment process efficiency, as well as instant feedback system implementation.

The Company further develops smart system to manage material and schedule, as well as

implements smart system and equipment to realize smart management and smart

manufacturing process.

Increase strategy flexibility and responsiveness

In response to fast changes in the market, Quanta maintains its leadership position through

responsive manufacturing, development and management process. We proactively identify

problems, take actions and maintain high flexibility to respond to changes.

Maintain speedy R&D capability

Cultivate a sense of judgment that accurately reflects current market condition, be

responsible and accountable even under the pressure of shortened product life cycle in order

to maintain speedy R&D capability.

Strict cost control

Production costs continue to hike year after year, making cost control a much tougher

challenge. At Quanta, we focus on deepened detail management, perfection in quality

control, attention to details in production management, detailed calculation in cost control

and express caring in man power management. Theres no limit in operation improvement.

Innovative thinking and demand creation

Facing the ever-changing industry and intensified competition, we continue to focus on

innovation and strengthening our R&D expertise. Not only do we aim to sustain our

leadership position, talents development and advancement are also crucial to our success. In

terms of talents management, we focus on professional knowledge enhancement and

deepened positive work attitude. Leverage innovative thinking as the fundamental to sustain

our leadership position in the market.

Maintain strong bond with customers

Market share allocation concentrated towards tier one companies has been a key market

trend in the technology industry, thus maintaining high customer satisfaction in our products

and services are crucial to our success.

Quanta has launched a company-wide exercise entitled 2B- To Be The propose of the 2B

exercise is to encourage employees To Be The Owners and for managers To Be The Leaders.

Through the 2B exercise, we hope to cultivate a work atmosphere that encourages employees to act

proactively and to have high self-discipline. The positive changes that each employee makes should

transit well into his/her daily work and continue to improve work attitude and to accelerate self-

expectation. Greater changes within the Company can then be achieved from the small changes each

employee makes. The 2B exercise is aim to create more competitive corporate culture, to sustain

business growth and to spark motivation.

We believe firmly that hard work brings prosperity. Through hard working, mindful thinking and

non-quitting spirit, fruitful outcome should eventually be realized. Opportunities may vanish at any

second, employees at Quanta should think of themselves as sponges to continue to absorb new

knowledge, to think fast and to continuously challenge themselves. Be well prepared so we can seize

- 4 -

the opportunity when it comes. With strong dedication and hard working spirit from the entire

Company, together we can achieve greater success and continue to accelerate Company value.

Chairman: Barry Lam

Vice Chairman: C.C. Leung

Chief Financial Officer: Elton Yang

- 5 -

* Note: ownership is 100% unless otherwise specified

Ref. to Chart 1)

99.99%

24.81%

75.19%

0.44%

29.78%

Quanta Computer Inc.

36.76%

0.81% Quanta

Venture Capital

Co., Ltd.

Quanta

Cloud Techology

Inc.

RoyalTek

Company

Ltd.

Quanta Computer

Technology Investment

Corp.

Quanta Micro-

Systems

Inc.

CloudCast

Technology

Inc.

Ref. to Chart 2)

Quanta

Intl

Ltd.

QCJ

Corp.

Quanta Cloud

Technology Japan

Inc.

Quanta

Storage

Inc.

FaceVsion

Technology

Inc.

FaceVsion Technology

USA LLC

FaceVsion

(Changshu)

Trading

Co., Ltd.

FaceVsion

Technology

Hong Kong

Ltd.

Royaltek

Trading

(Changshu)

Co., Ltd.

Royaltek International Enterprises

Ltd.

Quanta Cloud

Techology Germany GMbH

Inc.

- 6 -

Chart 1 Quanta Computer Inc.

19%

95%

Standard

(Shanghai)

Energy

Co., Ltd.

50%

Access

Intl

Co.

QCG

Computer

GMBH

Quanta

Asia

Ltd.

QCE

Computer

BV

Quanta Capital

Manage-

ment Ltd.

Exmore

Services

Holding

Ltd.

Quanta Development

(Hong Kong)

Ltd.

ThinkTech Ind. E

Com. DE Informatica

SA

QCT

Inc.

QCT

LLC

Quanta

Develop-

ment

Ltd.

QCT

Korea

Inc.

Quanta Intl Ltd.

Tech Chain

(Hong

Kong)

Ltd.

Gem-Tech (Shanghai) Precision Mold Co.,

Ltd.

Tech

Chain

Ltd.

Quanta

Intl

Technology

Ltd.

Q_Bus

Intl

Ltd.

Exmore Services Holding (Hong

Kong) Ltd.

Quanta

Service

Nashville

LLC

Quanta

Computer

Nashville

LLC

QCH

Nashville

LLC

Zhan Yun

(Shanghai)

Electronics

Co., Ltd

Zhan Yun

(Chongqing)

Electronics

Co., Ltd

Changshu

Zhan Yun

Electronics