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AU OPTRONICS CORP. 2018 ANNUAL REPORT

-Notice to readers-

This is a translation of the 2018 annual report of AU Optronics Corp.The translation is for reference only. If there is any discrepancy between the English version and Chinese version, the Chinese version shall prevail.

Printed on March 22 , 2019

AU Optronics Corporation

2018 Annual Report

AUO Spokesperson

Name: Benjamin Tseng

Title: Chief Financial Officer

AUO Deputy Spokesperson

Name: Jack Juang

Title: Director of Financial Planning Div.

Tel: (03) 500-8800

Email: auo@auo.com

Corporate Headquarters, Branches, and Fabs

Corporate Headquarters: No.1, Li-Hsin 2nd Rd., East Dist., Hsinchu Science Park, Hsinchu

Taoyuan Branch: No.1, Xinhe Rd., Sanhe Vil., Longtan Dist.,Taoyuan City

Address of Fabs :

Fab L3B:

No.1, Li-Hsin 2nd Rd., East Dist., Hsinchu

Fab L3C(L5)

No.23, Li-Hsin Rd., East Dist., Hsinchu

Fab Longke:

No.228, Longke St./No.288, Longyuan 1st Rd./ No.338, Longyuan 1st Rd./ and

No.388-1, Longyuan 1st Rd., Longtan Dist.,Taoyuan City

Fab Longtan:

No.1, Xinhe Rd., Sanhe Vil., Longtan Dist.,Taoyuan

Fab Huaya:

No.189, Hwaya 2nd Rd.,Wenhua Vil., Guishan Dist.,Taoyuan City

Fab Taichung:

No.1, JhongKe Rd./ No.2, Keya Rd./ and No.3, Keya Rd., Xitun Dist.,Taichung City

Fab Houli:

No.1, Machang Rd., Houli Dist.,Taichung City

Fab Tainan:

No.36, Keji 1st Rd.,Yantian Vil., Annan Dist.,Tainan City

Fab Kaohsiung: No.9, Luke 3rd Rd., Luzhu Dist., Kaohsiung City

Tel: (03) 500-8800

Common Share Transfer Agent

Company: Stock-Affairs Agency Dept. of Taishin International Bank

Address: B1, No.96, Sec.1, Jianguo N. Rd.,Taipei City

Website: www.taishinbank.com.tw

Tel: (02) 2504-8125

Certified Public Accountant (CPA) and accounting firm for the financial statements of the most recent year: CPA: Hsin-Hai Wei & Chien-Hui Lu

Company: KPMG Certificated Public Accountants

Address: 68F, No.7, Sec.5, Xinyi Rd.,Taipei (TAIPEI 101Tower)

Website: www.kpmg.com/tw

Tel: (02) 8101-6666

Offshore secondary exchange and disclosure information available at:

New York Stock Exchange

Website: www.nyse.com

Company code: AUO

Company website: www.auo.com

Table of Contents

Table of Contents

Chapter 1

Letter to Shareholders

Chapter 2

Company Profile

Chapter 3

Corporate Governance

Chapter 4

Capital and Shares

Chapter 5

Operational Highlights

Chapter 6

Financial Highlights

Chapter 7

Review and Analysis of Financial Position and

Financial Performance, and Risk Management

Chapter 8

Special Notes

Appendix 1 Consolidated Financial Statements and Independent

Auditors' Report for the most recent years

Appendix 2

Parent Company Only Financial Statements and

Independent Auditors' Report for the most recent

years

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4

6

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AU Optronics

2018 Annual Report

1

Chapter 1 Letter to Shareholders

Dear Shareholders,

The overall business environment experienced a reversal in 2018, and the demand for display panels dropped precipitously since mid-2018. As new production capacity from China increased, the market anticipated an oversupply, which in turn led to a decline in display panel prices. Fortunately, AU Optronics Corp. (hereinafter "AUO") has shown positive results for its value transformation strategy. AUO has increased its proportion of revenue derived from non-commodity and high-end products, and has continued to optimize its product mix. Consequently, AUO's revenues experienced relatively less fluctuation in comparison with industry peers, as AUO has demonstrated robust operating performance and maintained profitability for six consecutive years. Consolidated revenue in 2018 amounted to NT$307.63 billion, a decline of 9.8% from 2017. Net operating profit was NT$6.67 billion, and net profit attributable to the parent company was NT$10.16 billion equating to basic earnings per share (EPS) of NT$1.06.

Looking back on 2018, AUO has achieved the following results owing to its cutting edge technological advancements:

AUO launched itsbezel-less ALCD TV display integrating high contrast quantum dot (QD) wide color gamut and industry-leading Gate on Array technology. AUO continued to be a pioneer by launching the world's largest 85-inch 8K4K ultra-high resolution bezel-less ALCD TV display with curved design (Note), a product that simultaneously boasts perfect viewing quality and a fashionable design. The product has immediately become the optimal choice among established TV brands around the world.

To rapidly grow High Spec Gaming displays, AUO integrated a high refresh rate, large screen size,ultra-high definition, QD, curved and a bezel-less design to build a comprehensive product line dedicated exclusively to gaming. AUO continues to maintain its leadership position (Note) for display panels for gaming monitors and gaming notebook PCs. In addition, AUO has launched a series of mini LED backlight gaming displays as well as the supersized 65-inch UHD 4K HDR gaming display with a 144Hz refresh rate. This product clearly possesses precise and fluent screen details allowing gamers to feel immersed in the game scenes.

AUO's Low TemperaturePoly-Silicon (LTPS) technology has advantages including high picture quality, ultra-thin bezel, lightweight form, and energy-efficiency. Aside from a continued dedication to high-end mobile phone displays, AUO also leads the industry in the introduction of this technology to UHD 4K high-end notebook PC displays. AUO successfully launched the world's first (Note) 13.3-inch UHD 4K narrow border LTPS LCD supporting the use of stylus, allowing users to enjoy the highest mobility possible. In addition to integrating a touch function into the panel production process, AUO has gradually introduced LTPS technology to high-end automotive, industrial, and commercial use display panels to enhance product value.

Top automotive brands now recognize AUO as one of the leaders in the industry. This was achieved by integrating AUO's core technology with its rich experience in R&D to producehigh-end automotive displays. This fusion of technologies gives AUO a comprehensive customer portfolio. Moreover, AUO has demonstrated the world's first (Note) 13.2-inchfree-form automotive display with a gate circuit in its active area to allow for free-formlaser-cutting at the side of the panel, which creates more room and flexibility for product design.AUO has also achieved promising results in a variety of automotive display applications including clusters, central information display, entertainment systems, and rear-view mirrors.

AUO has successfully developed the world's highest resolution (Note)full-color TFT driven 8-inch micro LED display, and was recognized by the Society for Information Display in 2018 by receiving the

"Best in Show" award.This provided further evidence of AUO's innovation strengths which is attributed to years of long-term strategic commitments to advancing display technologies.

As for solar products, AUO focused on the manufacturing and R&D ofhigh-efficiency module products. By utilizing multi-busbar technology, AUO has developed solar modules with stable, long-term power transmission and high energy-efficiency. In particular, products adding the feature of salt and humidity resistance were recognized by the Ministry of Economic Affairs by receiving the "Taiwan Excellent PV" award in 2018.

Further development trends in the display panel industry:

Display panel makers in China continue to expand their production capacities, which has had a significant impact on panel supply. In general, oversupply is expected to become "the norm" for the foreseeable future. However, capacity is no longer the sole factor indicating competitive advantage in theTFT-LCD industry. Technological enhancement, operational efficiency, and client management have all become more critical elements allowing panel makers to succeed over their competition.

AU Optronics

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2018 Annual Report

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AUO - AU Optronics Corporation published this content on 09 May 2019 and is solely responsible for the information contained herein. Distributed by Public, unedited and unaltered, on 09 May 2019 10:57:03 UTC