asian handset supply chain - credit suisse

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25 February 2016

Asia Pacific

Equity Research

Electronic Equipment & Instruments (Technology Hardware & Equipment)

Asian Handset Supply Chain SECTOR REVIEW

Mobile World Congress 2016: A long-term evolution in hardware

Figure 1: Mediatek’s share price performance—historical trend around MWC

vs sales YoY

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2010 2011 2012 2013 2014 2015 2016T-5 T+5 T+30 Sales YoY (%)

Mediatek stock performance entering/exiting MWC (T-30 as benchmark)

Source. Company data, Bloomberg consensus, Credit Suisse estimates

Mobile World Congress (MWC), the wireless industry’s largest annual event, took place this week in Barcelona. Our team met chipset, component and device companies, spanning tier 1, branded Chinese, and whitebox vendors. In this note, we profile Samsung, Lenovo, Asustek and Mediatek, and their implications for the Asian supply chain. The following are the key summary points:

■ Flagships led by Samsung’s fresh new look. Samsung’s unpacked event set the tone for the MWC where peripherals (VR, 360 Degree Cameras) shifted some focus from only modest upgrades to the flagship smartphone. Samsung forecasts higher sale volume compared to the GS6, and with similar components could realise efficiencies to maintain its 10% smartphone OPM target. VR drew substantial attention, though it remains niche until the interface and applications improve and price points drop.

■ A Mediatek-Qualcomm duopoly, but still competitive. The merchant 4G baseband market is a duopoly in 1H16 with BRCM/MRVL having exited, Spreadtrum only gaining traction on 4G low end, and Intel SoFIA 4G pushing out to 4Q16. QCOM's high-end design wins have recovered, leaving Mediatek supplying more of its mid- to high-end over its flagship x20. We see Mediatek stabilising near term, helped by strong China 4G adds and more Helio mix.

■ RF content story intact, fingerprint continues to proliferate. The RF content story highlighted in our GaAs foundry initiation in Nov 2015 continues to play out, with more models shifting to 802.11ac. China’s smartphones are growing content from US$3 to US$5-7 migrating from 3-mode to 6-mode. In fingerprint, penetration for non-Apple smartphone devices should reach 30% in 2016E (vs 16% in 2015), thanks to the push by Samsung and Chinese brands

■ Asian stock outlook. We stay selective on the mobile supply chain with preference on TSMC gaining share with Apple and benefiting from leaner inventory and better China trends, RF content increase with Win Semi, metal casing share gains with Catcher and Casetek, and Himax with improving core driver IC business and optionality on VR/AR with its LCOS, wafer level optics and OLED drivers. While dual camera is seeing small volumes with an LG model, we remain concerned about yield rates limited take-up and margins relative to bullish expectations. Our top pick in hardware is Lenovo, which is improving its offering in mobile and taking out cost to drive break-even.

Research Analysts

Randy Abrams, CFA

886 2 2715 6366

[email protected]

Jerry Su

886 2 2715 6361

[email protected]

Pauline Chen

886 2 2715 6323

[email protected]

Keon Han

82 2 3707 3740

[email protected]

Thompson Wu

886 2 2715 6386

[email protected]

Sam Li

852 2101 6775

[email protected]

Derrick Yang

886 2 2715 6367

[email protected]

Kyna Wong

852 2101 6950

[email protected]

Haas Liu

886 2 2715 6365

[email protected]

25 February 2016

Asian Handset Supply Chain 2

Focus charts and tables Figure 2: Mediatek’s share price performance around MWC Figure 3: Mediatek expanding its Helio family

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Source: Company data Source: Company data

Figure 4: New flagship LTE smartphones from global tier 1s at the MWC Company Samsung Samsung TCL TCL LG HP Sony

Model name Galaxy S7 Galaxy S7 Edge IDOL 4 IDOL 4S G5 Elite X3 Xperia X

Technology LTE LTE LTE LTE LTE LTE LTE

Operating System Android 6.0 Android 6.0 Android 6.0 Android 6.0 Android 6.0 Microsoft Windows 10 Android 6.0

Pixels 1440 x 2560 1440 x 2560 1920 x 1080 1920 x 1080 1440 x 2560 1440 x 2560 1920 x 1080

RAM 4GB 4GB 2/3GB 3GB 4GB 4GB 3GB

ROM 32/64GB 32/64GB Up to 200GB Up to 200GB 32GB 64GB 32/64GB

Display 5.1" 5.5" 5.2" 5.5" 5.3" 5.96" 5.0"

Camera 12MP +5MP 12MP +5MP 13MP + 8MP 16MP + 8MP 16MP +8MP 16MP + 8MP 23MP + 13MP

Battery 3000mAh 3600mAh 2610mAh 3000mAh 2800mAh 4150mAh 2620mAh

CPU Speed 2.3GHz 2.3GHz 1.7GHz 1.8GHz 2.3GHz 2.15GHz 1.8GHz

Processor Chip Snapdragon 820 Snapdragon 820 Snapdragon 617 Snapdragon 652 Snapdragon 820 Snapdragon 820 Snapdragon 650

Retail Price (USD) TBD TBD TBD TBD TBD TBD TBD

Availability March March 2Q16 2Q16 April 2Q16 2Q16 Source: Company data, Credit Suisse research

Figure 5: 4G merchant chipsets a duopoly, although Qualcomm is holding share pretty well this year Mediatek Qualcomm

Helio P10 Helio X10 Helio X20 Snapdragon 600x Sanpdragon 808 Snapdragon 810 Snapdragon 820

LEAGOO Elite 1 HTC One M9+ Smartcong Flagship Vivo X6SPlus Xiaomi 4C ZTE Axon Samsung Galaxy S7

Sony Xperia XA Meizu MX5 ZOPO Speed 8 NuAns NEO LG G4 Sony Xperia Z5 Xiaomi mi5

Lenovo K5 Note OPPO R7 Plus Meizu MX6 HTC One A9 LG V10 LeTV 1S Pro HTC M10

Elephone M3 Letv 1S Elephone P 9000 Lenovo Lemon 3 LG Nexus 5X OnePlus Two LG G5

Gionee W909 Sony Xperia M5 LeEco L2 Lenovo Vibo K5 Qiku Flagship Huawei Nexus 6P LeEco Le Max Pro

Gionee S8 Gionee E8 Elephone P 9000 TCL IDOL 4/4S Microsoft Lumix 950 Microsoft Lumia 950 XL Oppo Find 9

Archos Diamond 2+ Xiaomi Redmi Note3 Sony Xperia X Motorola Moto X Style ZTE nubia Z9 Vivo Xplay 5

Xiaomi Redmi Note2 Lenovo Vibe X3 Xiaomi Note HP Elite x3

Meitu V4 Acer Jade Primo Motorola Moto X Sony Xperia X Perf.

HTC One E9+ Blackberry Vienna Gigaset ME pro

HTC One ME Samsung Galaxy N5 edge Motorola Droid Turbo 2

PPTV PP King 7s Sony Xperia W+ Samsung Galaxy S6 Active

Sony Xperia Z4 Compact LG Angler HTC Butterfly 3

Elephone Vowney Acer Jade 2 Vivo Xshot 3s

HTC One X9 Sharp AQUOS ZETA Source: Company data, Credit Suisse estimates

25 February 2016


Figure 6: Valuation comparison

Market Cap Price Target Inv'ment Target P/E P/E P/B ROE Div Yld

US$mn 25-Feb Local Curcy Rating upside 2014 2015 2016 2015 2016 2015 2016

Asian semiconductor coverage

Foundry

TSMC 117,339 150.5 163.0 OPFM 8.3% 14.8 13.6 12.5 3.2 2.8 25.6% 24.2%

UMC 4,979 13.3 13.5 NTRL 1.9% 13.6 12.3 14.8 0.7 0.7 5.9% 4.9%

SMIC 3,742 0.67 0.93 OPFM 38.8% 18.5 13.0 15.8 1.0 1.0 8.5% 6.4%

Vanguard Semi 2,542 50.9 52.0 OPFM 2.2% 15.4 20.3 16.4 3.1 3.0 15.1% 18.4%

Hua Hong Semi 942 7.06 11.00 OPFM 55.8% 8.3 8.4 10.3 0.6 0.6 7.6% 5.9%

Total 129,544 14.9 13.5 12.6 2.9 2.5 22.7% 21.3%

Packaging & testing

Powertech 1,679 72.3 78.0 NTRL 7.9% 17.0 13.5 12.1 1.6 1.6 12.6% 13.3%

Amkor 1,181 5.0 5.5 OPFM 10.4% 5.7 20.5 51.0 1.0 1.0 5.0% 1.9%

Tianshui Huatian 1,774 14.1 18.5 OPFM 30.8% 33.1 35.2 25.6 2.5 2.3 9.4% 9.4%

Nantong Fujitsu 1,516 13.2 15.0 NTRL 13.3% 71.2 69.4 43.4 2.7 2.5 4.7% 5.9%

Total 14,803 13.9 17.8 15.7 1.7 1.6 10.2% 10.6%

IC design

MediaTek Inc. 10,847 234.5 230.0 NTRL -1.9% 7.9 14.1 15.1 1.5 1.4 10.5% 9.4%

Realtek Semiconductor 1,243 81.9 76.0 NTRL -7.2% 13.4 17.0 15.2 1.9 1.9 11.2% 12.5%

WPG Holdings Ltd 1,660 33.4 37.0 NTRL 10.9% 9.5 10.1 9.0 1.2 1.1 11.9% 12.4%

Total 13,751 8.4 13.6 14.4 1.8 1.5 10.6% 9.8%

Semiconductor equipment

ASM Pacific 3,198 61.6 75.0 OPFM 21.9% 13.4 24.2 22.2 3.2 3.0 13.2% 13.9%

Hermes 1,761 825.0 1,250.0 OPFM 51.5% 18.1 25.2 19.8 4.6 4.1 19.0% 21.9%

Total 4,959 16.3 25.8 21.3 3.5 3.3 13.6% 15.9%

China smartphone supply chain top picks

Driver IC

EgisTec 342 166.0 220.0 OPFM 32.5% n.m n.m 28.2 7.5 5.8 -3.9% 25.7%

Chipbond 1,011 51.8 56.0 OPFM 8.1% 13.2 16.1 13.0 1.4 1.4 8.9% 10.7%

Novatek 2,497 136.5 148.0 OPFM 8.4% 11.5 13.0 12.4 2.9 2.8 22.6% 22.9%

Total 3,850 13.4 15.2 13.2 2.7 2.4 15.8% 17.4%

RF Semiconductor

Win Semiconductor 953 53.3 63.0 OPFM 18.2% 16.1 11.8 10.6 1.9 1.7 16.3% 16.8%

VPEC 380 51.2 54.0 NTRL 5.5% 26.9 20.4 17.6 3.5 3.4 17.3% 19.6%

Total 1,333 22.6 16.5 14.9 3.0 2.8 16.5% 17.3%

Components

Hon Hai 36,479 78.5 103.0 OPFM 31.2% 8.9 8.2 8.4 1.3 1.2 15.5% 14.5%

Catcher 5,826 251.5 330.0 OPFM 31.2% 10.8 8.0 8.5 1.7 1.5 22.7% 18.3%

Casetek 1,813 177.5 200.0 OPFM 12.7% 12.2 10.7 10.4 1.9 1.8 18.8% 17.6%

Alps 3,146 1,807.0 3,250.0 OPFM 79.9% 24.8 10.2 7.9 1.8 1.4 21.9% 20.8%

Murata 24,800 13,180.0 20,900.0 OPFM 58.6% 29.9 16.6 12.8 2.5 2.2 16.1% 18.3%

Sony 26,525 2,383.0 3,500.0 OPFM 46.9% n.m n.m 17.9 1.2 1.2 -5.5% 7.2%

AAC 9,954 53.0 48.8 NTRL -7.8% 28.1 21.4 19.2 5.9 5.0 30.3% 28.3%

Sunny Optical 2,961 17.8 20.4 OPFM 14.7% 33.9 26.4 19.5 5.1 4.2 20.7% 23.7%

Goertek 6,942 29.7 39.1 OPFM 31.6% 27.3 33.8 26.2 4.8 4.1 15.0% 16.8%

FIH 2,727 2.7 3.6 OPFM 32.4% 15.9 12.1 9.8 5.2 4.9 5.6% 6.6%

Total 121,173 24.1 18.1 12.2 1.6 1.4 8.9% 12.3%

Handset brands

TCL 854 5.4 9.0 OPFM 67.6% 5.9 5.3 4.6 1.5 1.2 29.5% 28.6%

Lenovo 9,338 6.5 10.5 OPFM 60.6% 10.8 10.9 n.m 2.2 3.0 23.4% -3.2%

Total 10,192 9.7 8.9 14.0 2.2 2.1 26.4% 15.1% Source: Company data, Credit Suisse estimates

25 February 2016


Mobile World Congress 2016: A long-term evolution in hardware Mobile World Congress (MWC) 2016, the mobile industry’s largest annual event, featuring

over 94,000 attendees and 2,200 exhibitors, took place this week in Barcelona. Our team

met chipset, component, device and infrastructure suppliers, spanning tier 1, branded

Chinese and whitebox vendors. In this note, we profile developments at Asian suppliers

Samsung, Lenovo, Asustek, and Mediatek, and their implications for the supply chain. The

industry is in a lull of modest growth and modest improvements, with the big breakthrough

trends, including the move to 5G, virtual reality, Internet of Things, and ARM in the data

centre, evolving over the next five years. We stay selective on the mobile supply chain

with preference on TSMC gaining share with Apple and benefiting from leaner inventory

and better China trends, RF content increase with Win Semi, metal casing share gains

with Catcher and Casetek and Himax with improving core driver IC business and

optionality on VR/AR with its LCOS, wafer level optics and OLED drivers.

The following are our key takeaways from the show:

1. Demand stable, but China seeing better trends. Smartphone industry demand

looks on track to mild unit growth, with most component suppliers focusing on share or

content gains to outgrow base assumption for single-digit unit growth from here. Apple

builds from our team’s checks are broadly unchanged in the past few weeks since the

deep cuts in early January. China smartphones, however, are seeing some relative

strength noted by Qualcomm and Qurvo due to a higher push by carriers to stimulate

LTE for ARPU and compete with all three carriers now pushing 4G service. China

Mobile January 4G adds was 23.3 mn, above the 15.6 mn/month needed to reach its

500 mn target and the 18.5 mn run rate in 2015. China Telecom and China Unicom

also added 5 mn subscribers each, with Unicom starting to split out 4G adds as a

signal of more confidence in continued better uptake.

Figure 7: China Mobile's 3G+4G approaching the others Figure 8: LTE smartphones now most of China's units

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2G % 3G % LTE % Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates

2. Flagship smartphones roll out with modest upgrades. Samsung’s unpacked

event set the tone for the MWC where glossy peripherals shifted some attention

from only modest upgrades to the flagship smartphone. Samsung’s Unpacked event

sparked modest applause for the new phone features and far more interest in the

Gear VR headset under everyone’s seat, the 360 degree peripheral camera, and

Mark Zuckerberg’s surprise guest appearance highlighting VR’s long-term potential.

The new S7 refines the casing modestly, re-introduces waterproofing, moves to

higher performance 14nm Qualcomm S820 and Exynos 8890 and keeps similar

display. Samsung forecasts higher sale volume compared to the GS6 and with

similar components potentially realising efficiencies to maintain its 10% smartphone

OPM target.

Key flagship smartphones

announcements: Samsung’s

Galaxy S7, LG G5, Sony

Xperia X, TCL Idol 4

VR launches and 360

degree cameras shift some

focus away from the

incremental smartphone

hardware innovations

25 February 2016


Figure 9: Galaxy S6, S6 Edge versus S7& S7 Edge S6 S6 Edge S7 S7 Edge

Screen size (inch) 5.1 5.1 5.1 5.5

Resolution Super AMOLED 2560x1440 Super AMOLED 2560x1440 Super AMOLED 2560x1440 Super AMOLED 2560x1440

Dimensions (mm) 143.4x70.5x6.8 142.1x70.1x7.0 142.4x69.6x7.9 150.9x72.6x7.7

Processor Samsung Exynos 7420 Samsung Exynos 7420Samsung Exynos 8890,

Qualcomm Snapdragon 820

Samsung Exynos 8890,


CPU 2.1 GHz Octa-core 2.1 GHz Octa-core 2.3 GHz Octa-core 2.3 GHz Octa-core

Camera main

(MP)16 16 12 (Dual pixel) 12 (Dual pixel)

Camera sub (MP) 5 5 5 5

RAM (GB) 3 3 4 4

Battery (mAh) 2,250 2,600 3,000 3,600 Source: Company data, Credit Suisse research

The MWC saw several other flagships launched from LG, Sony, TCL, Gionee and market

re-entrant HP. LG made a similar leapfrog to Samsung’s GS6 shift to metal last year,

upgrading this year’s G5 flagship from plastic to metal casing, adding fingerprint sensor,

including same Snapdragon 820, dual camera with a wide-angle lens for better zooming

out, and also introducing a slot for peripheral modules, a throwback to the Handspring

Visor days. LG’s slot allows plug-in companions, including high-end speakers and

accessories for the camera. The show also saw several flagships or premium models with

some upgrades of processor, memory content, display, and support for latest Android 6.0.

Sony introduced Xperia X Performance also with Snapdragon 820, mid-high end version

with Snapdragon 650 and mid-range XA with Mediatek Helio P10. TCL also introduced a

refresh with its Idol 4 (with Snapdragon 600 series); Gionee held a press conference for its

S8 with Mediatek Helio P10, and Zopo is launching its Speed 8 with Mediatek’s Helio x20

10-core.

Figure 10: New flagship LTE smartphones from global tier 1s at the MWC Company Samsung Samsung TCL TCL LG HP Sony

Model name Galaxy S7 Galaxy S7 Edge IDOL 4 IDOL 4S G5 Elite X3 Xperia X

Technology LTE LTE LTE LTE LTE LTE LTE

Operating System Android 6.0 Android 6.0 Android 6.0 Android 6.0 Android 6.0 Microsoft Windows 10 Android 6.0

Pixels 1440 x 2560 1440 x 2560 1920 x 1080 1920 x 1080 1440 x 2560 1440 x 2560 1920 x 1080

RAM 4GB 4GB 2/3GB 3GB 4GB 4GB 3GB

ROM 32/64GB 32/64GB Up to 200GB Up to 200GB 32GB 64GB 32/64GB

Display 5.1" 5.5" 5.2" 5.5" 5.3" 5.96" 5.0"

Camera 12MP +5MP 12MP +5MP 13MP + 8MP 16MP + 8MP 16MP +8MP 16MP + 8MP 23MP + 13MP

Battery 3000mAh 3600mAh 2610mAh 3000mAh 2800mAh 4150mAh 2620mAh

CPU Speed 2.3GHz 2.3GHz 1.7GHz 1.8GHz 2.3GHz 2.15GHz 1.8GHz

Processor Chip Snapdragon 820 Snapdragon 820 Snapdragon 617 Snapdragon 652 Snapdragon 820 Snapdragon 820 Snapdragon 650

Retail Price (USD) TBD TBD TBD TBD TBD TBD TBD

Availability March March 2Q16 2Q16 April 2Q16 2Q16 Source: Company data, Credit Suisse research

3. Virtual Reality the latest push, but technology is early. Virtual Reality and

supporting 360 degree cameras received heavy focus at the event, with Samsung

unveiling its phone in a VR movie, HTC devoting half its booth space to HTC Vive VR

demos, LG launching a slimmed down VR glasses and even TCL/Alcatel introducing

VR content and accompanying glasses for its Idol 4 smartphone. The initial VR

devices span from US$99 and below basic headgear for inserting a smartphone as

the display and processing engine to US$500-700 for Oculus and HTC Vive headgear

that connect to a high-end PC for advanced graphics, and include high resolution

displays, cameras and positioning sensors.

VR seeing wide interest at

the show, but technology is

still early

https://www.ideo.com/work/visor

https://www.ideo.com/work/visor

25 February 2016


The technology has limitations in the mass market appeal of the expensive and bulky

headgear, limited applications now beyond gaming, and limitations on resolution. The

display immediately in front of a user requires far more than 4k resolution to avoid a

highly pixelated experience and also high-end graphics behind the imaging to smooth

the motion and avoid blur. The first-gen VR devices may only attract niche early

adopters and unlikely drive meaningful profitability, although the technology offers

long-term potential to drive the tech chain, as it can fuel investments to innovate on

display, graphics processing, sensors, hardware and applications to improve the user

experience.

Alongside the headgear, we are also seeing a seeding of the market of sophisticated

360 degree cameras that can create content for the new VR displays. Samsung and

LG both introduced 360 degree cameras to supplement their VR initiatives and Nokia

showcased its Ozo virtual reality camera for professionals with eight sensors and

US$60,000 price for stereoscopic 3D video and spatial audio through eight integrated

microphones. GoPro has also partnered with Google to create Odyssey which joins 16

GoPro cameras. LG also introduced a rolling bot to remotely view audio and video of

your house and also "torture" your dog with speakers, laser pointers and erratic

movements.

Figure 11: VR and 360 cams a major focus at the show Company Samsung LG Samsung LG HTC Alcatel Nokia LG

Model name Gear 360 360 Cam Gear VR 360 VR VIVE VR OZO Rolling Bot

Pixels 72*32 NA 2160 x 1200 NA 2160 x 1200 2160 x 1200 NA NA

RAM NA NA NA NA NA NA NA NA

ROM NA 4GB NA NA NA NA NA NA

Display 0.5'' NA NA NA NA NA NA NA

Camera Dual 15MP Dual 13MP NA NA NA NA NA 8MP

Battery 1350mAh 1200mAh NA NA NA NA NA NA

CPU Speed NA NA NA NA NA NA NA NA

Processor Chip NA NA NA NA NA NA NA NA

FOB Price (USD) NA NA NA NA $699 NA NA NA Source: Company data, Credit Suisse research

4. A fierce Mediatek-Qualcomm merchant contest in China as Spreadtrum/Intel 4G

delays. The merchant mobile processor market in China has consolidated in the past

two years following Broadcom and Marvell’s exit. While Spreadtrum and Intel have

loomed as potential threats, we only see limited low-end vendor samples at the show

for Spreadtrum’s 4G offering and Intel’s customers were now citing a 4Q16 launch of

SoFIA LTE, a six-month further delay in the timeline. Rockchip’s 4G solution will also

not be ready until 1Q17.

Figure 12: Mid-high end LTE smartphones all driven by Qualcomm and Mediatek Company HTC HTC Lenovo ZTE ZTE Gionee Acer Acer

Model name Desire 630 Desire 825 Vibe K5 Blade V7 Blade V7 Lite S8 Jade 2 Zest

Technology LTE LTE LTE LTE LTE LTE LTE LTE

Operating System Android 6.0 Android 6.0 Android 5.1 Android 6.0 Android 6.0 Android 6.0 Android 6.0 Android 6.0

Pixels 720 x 1280 720 x 1280 1920 x 1080 1920 x 1080 720 x 1280 1920 x 1080 1080 x 1920 720 x 1280

RAM 2GB 2GB 2GB 2GB 2GB 4GB 3GB NA

ROM 16GB 16GB 16GB 16GB 16GB 64GB 32GB NA

Display 5.0" 5.5" 5.0" 5.2" 5.0" 5.5" 5.5" 5.0"

Camera 13MP + 5MP 13MP + 5MP 13MP + 5MP 13MP + 5MP 8MP + 8MP 16MP + 8MP 21MP + 8MP 8MP + 5MP

Battery 2200mAh 2700mAh 2750mAh 2500mAh 2500mAh 3000mAh NA NA

CPU Speed 1.6GHz 1.6GHz 1.5GHz 1.3GHz 1.3GHz 1.3GHz NA 1.0GHz (LTE)

Processor Chip Snapdragon 400 Snapdragon 400 Snapdragon 616 MT6753 MT6735 Helio P10 Snapdragon 808 MT6735 (LTE)

Retail Price (USD) TBD TBD TBD TBD TBD TBD TBD $120

Availability March March 2Q16 TBD TBD March TBD 2Q16 Source: Company data, Credit Suisse estimates

25 February 2016


Despite a two-player race, competition between Qualcomm and Mediatek remains

fierce. We believe Qualcomm has stabilised or improved its design traction this year

after sharp gains from Mediatek in 2015. Most of the flagships are still led by

Snapdragon 820, but we note good traction for Snapdragon 400/600 series. Mediatek

continues to dominate the low-end and smaller brands with its MT6735 entry level and

is seeing design-traction with its Helio family, though most customers are skewing to

the lower cost P10 (US$20-25) versus the higher-end X20 10-core (US$25-30) and

reserving the flagship for Qualcomm.

Figure 13: 4G merchant chipsets a duopoly, though Qualcomm is holding share pretty well this year Mediatek Qualcomm

















5. More AMOLED-enabled smartphones expected for 2016. Samsung Display has

been aggressively promoting its AMOLED panels for external customers since 2H15.

At the MWC 2016, brands like Acer, TCL/Alcatel, and Gionee announced new

smartphone models with Samsung's AMOLED panel. This supports our view (click

here for our OLED primer) that the cost gap of AMOLED vs TFT for smaller size

screen has shrunk and is likely to become an alternative display technology for

premium smartphone and wearable devices. Although the smartphones announced at

the MWC 2016 that adopted AMOLED are mostly the flagship models, we would

expect to see more mid-range AMOLED smartphones (HD or FHD resolution) in the

China market in 2016-17. We did see several China brands promoting OLED on the

floor, with Konka indicating its 5.2̎" L850 FHD smartphone could have normal TFT at

US$140 factory price but upgrade to an AMOLED display for a US$30 premium.

Intel 4G offerings not yet

sampling

More AMOLED

smartphones expected for

2016

https://doc.research-and-analytics.csfb.com/docView?language=ENG&source=ulg&format=PDF&document_id=1057923551&serialid=N1R2wQiZ8haN9M41CNY88zjL%2fUSpdPd6OK6IStFJDlg%3d

https://doc.research-and-analytics.csfb.com/docView?language=ENG&source=ulg&format=PDF&document_id=1057923551&serialid=N1R2wQiZ8haN9M41CNY88zjL%2fUSpdPd6OK6IStFJDlg%3d

25 February 2016


Figure 14: More brands are adopting AMOLED panels for their flagship smartphones Company TCL TCL Acer Samsung Gionee LG Sony

Model name Idol 4 Idol 4S Liquid Jade 2 Galaxy S7 Elife S8 G5 Xperia X

Image

Technology LTE Cat 6 LTE Cat 4 LTE Cat 4 LTE Cat 9 LTE Cat 6 LTE Cat 9 LTE Cat 6

Operating System Android 6.0 Android 6.0 Android 6.0 Android 6.0 Android 6.0 Android 6.0 Android 6.0

Pixels 1980 x 1020 2560 x 1440 1980 x 1020 2560 x 1440 1980 x 1020 2560 x 1440 1980 x 1020

RAM 2GB/3GB 3GB 3GB 4GB 4GB 4GB 3GB

Storage 16GB 32GB 32GB 32GB/64GB 64GB 32GB 32GB/64GB

Display 5.2" IPS TFT 5.5" AMOLED 5.5" AMOLED 5.1" AMOLED 5.5" AMOLED 5.3" IPS TFT 5.0" IPS TFT

Camera 13MP + 8MP 16MP + 8MP 21MP + 8MP 12MP + 5MP 16MP + 8MP 16MP+8MP + 8MP 23MP + 13MP

WiFi 802.11a/b/g/n/ac 802.11a/b/g/n/ac 802.11a/b/g/n/ac 802.11a/b/g/n/ac 802.11a/b/g/n 802.11a/b/g/n/ac 802.11a/b/g/n/ac

Fingerprint sensor N N N Y Y Y Y

Force Touch N N N N Y N N

Battery 2610mAh 3000mAh TBD 3000mAh 3000mAh 2800mAh 2620mAh

CPU Speed 1.7GHz 1.8GHz 2GHz 2.2GHz 1.9GHz 2.2GHz 1.8GHz

Processor Chip Snapdragon 617 Snapdragon 652 Snapdragon 808 Snapdragon 820 MT6755 Helio P10 Snapdragon 820 Snapdragon 650

Multi-core Octa Octa Hexa Quad Octa Quad Hexa

Price (US$) TBD TBD TBD TBD TBD TBD 659 Source: Company data

Figure 15: AMOLED cost premiums for mobile devices are

shrinking

Figure 16: AMOLED is more likely to be adopted by

smartphone rather than TV

90%

95%

100%

105%

110%

115%

120%

125%

130%

5.5" Smartphone 7" Tablet PC

LCD LCD with QD film AMOLED

0%

5%

10%

15%

20%

25%

30%

35%

40%

0

500

1,000

1,500

2,000

2,500

3,000

3,500

Vivo X5Pro (5.0"

FHD OLED)

HuaweiMate S

64GB (5.1"FHD OLED)

iPad Air 264GB (9.7"2048x1536

TFT)

Galaxy S664GB (5.1"2K OLED)

iPhone 6+64GB (5.5"FHD TFT)

Vizio 55"4K TV

LG 55" 4KOLED TV

US$ Panel cost Set price panel as % of set (RHS)

Source: Company data, IHS, Credit Suisse estimates Source: Company data, IHS, Credit Suisse estimates

Chinese panel maker Tianma also showcased several AMOLED smartphone panels

at this year's MWC, including 5.5" HD, 5.5" FHD, and 4.97" FHD sizes. It expects an

end product with a 5.5" HD panel to be launched in the near term, and is working

mass production for the FHD panels. Tianma also demoed a 5.46" flexible AMOLED

panel with HD resolution at this year's MWC. We believe Himax will be a key

beneficiary of the OLED take-off since it will begin shipments for Samsung in late

1Q16 and could help it secure a lion's share at Chinese OLED makers.

25 February 2016


Figure 17: Tianma's 5.5" HD AMOLED smartphone panel Figure 18: Tianma's 4.97" FHD AMOLED smartphone

panel

Source: Company data Source: Company data

6. More 2-in-1 NBs announced. The tablet market had been weak in 2H15 on phablet cannibalisation, and several tablet OEMs are trying to diversify their businesses by entering the smartphone market or introducing 2-in-1 Windows-based tablets. During the 2016 MWC, multiple smartphone and PC makers announced new 2-in-1 NBs, aiming to take market share from conventional NB makers, MSFT Surface, and iPad Pro. Smartphone maker Huawei rolled out its 12" Matebook with 2K (2160 x 1440) resolution, while TCL also announced its 10.1" Plus 10 with FHD resolution and Lenovo also announced three 2-in-1 devices. These large-screen devices came with higher resolution due to the shorter view distance as it could be transformed into the tablet mode, and is 100% touch embedded, which we believe could benefit leading driver IC makers (Novatek and Himax), as well as touch panel makers like TPK.

Figure 19: More 2-in-1 NBs announced Company Huawei TCL Lenovo Lenovo Lenovo

Model name MateBook Plus 10 Yoga 710 Yoga 510 MIIX 310

Image

Dimension (mm) 278.8*194.1*6.9 259.3*156.2*8.35 14.73mm 20.8mm thick 9.2mm thick

Weight (g) 640 850 1040 / 1650 1750 / 2080 580

CPU Intel Core M Intel Atom X5 Intel Core M5 / Core i7 Intel Core i7 Intel Atom X5

Speed 3.1GHz 1.9GHz TBD TBD TBD

Operating System Windows 10 Windows 10 Windows 10 Windows 10 Windows 10

Display 12" IPS TFT 10.1" IPS TFT 11" / 14" 14" / 15" 10.1"

Resolution 2160 x 1440 1280 x 800 1920 x 1080 IPS TFT 1920 x 1080 IPS TFT 1920 x 1080 IPS TFT

Memory 4GB/8GB 2GB up to 8GB up to 8GB 5GB

Storage 128GB/256GB/512GB 32GB 256GB up to 1TB 128GB

Camera 5MP 5MP + 2MP 1MP 1MP 5MP + 2MP

WiFi 802.11a/b/g/n/ac 802.11b/g/n TBD TBD 802.11b/g/n

Fingerprint sensor Y N N N N

Force Touch N N N N N

USB Type-C Y N N/Y N N

Keyboard Detachable Detachable Y Y Detachable

Battery 4430mAh 5830mAh / 2580mAh 40Wh 52.5Wh TBD

Price (US$) 699 TBD 499/799 599/699 229 Source: Company data

7. New functions provided for fingerprint recognition. Fingerprint-enabled smartphone is expected to take-off in 2016, driven by mobile payment. Besides the well-known companies like Fingerprint Card and Synaptics, Egis, Goodix, Elan, and other fingerprint sensor suppliers also showcased their latest products and technologies, such as the under-glass sensing and live finger detection. Notably, Egis' touch and hybrid sensors are able to reach fingerprints under various conditions, such as wet and dry fingers, which we believe will offer better experience at a cheaper cost structure.

Smartphone and PC makers

introducing new 2-1

notebooks

Fingerprint solutions moving

towards under glass

capability

25 February 2016


LeTV also announced its LeMax Pro engineering sample, the first smartphone with

Qualcomm's ultrasonic fingerprint sensing technology, despite the ultrasonic

fingerprint scanner placed at the back of the device, versus expectation of under the

cover glass at the front of the phone. Nevertheless, leading fingerprint solution

providers Fingerprint Card and Synaptics both showcased their first-generation under-

glass solutions with detection through 0.3mm glass but targets to reach 0.4-0.6mm in

their future generations.

Overall, we estimate fingerprint penetration for non-Apple smartphone devices to

reach 30% in 2016E (vs 16% in 2015) and will further increase to 47% in 2017 and

56% by 2018, thanks to the push by Samsung and Chinese smartphone brands, as

well as declining component pricing and mobile payment proliferation.

Figure 20: Global transaction at POS vis smartphone to

see faster growth at 100% CAGR in 2015-2020E

Figure 21: Non-Apple smartphone fingerprint penetration

to reach 57% by 2018E

0%

50%

100%

150%

200%

250%

300%

350%

400%

0

100

200

300

400

500

600

700

800

2014 2015 2016 2017 2018 2019 2020

US$ bn Mobile wallet POS payments YoY

6%

16%

30%

47%

57%

0%

10%

20%

30%

40%

50%

60%

-

100

200

300

400

500

600

700

800

900

2014 2015E 2016E 2017E 2018E

mn units Non-Apple smartphone fingerprint shipments Penetration (RHS)

Source: Statista Source: Company data, Credit Suisse estimates

8. Upgrade in the Wi-Fi and cellular spec supporting RF. We see positive

implications for the RF component demand as the content increase story that we have

highlighted is playing out (see our initiation report in Nov 2015 and sector flash in Feb

2016). On the Wi-Fi front, more and more mid-end smartphone models, such as TCL

Idol 4, TCL Idol 4S, Acer Liquid Jade 2, and HTC One X9, are upgraded to the more

advanced 802.11ac standard for higher data rate vs the legacy 802.11n standard for

their predecessors. In addition, within the 802.11ac standard, we expect more mid to

high end models to migrate to the MIMO configuration to further upgrade in the

transmission rate. Although not released at the MWC 2016, our checks suggest that

HTC’s upcoming flagship model (likely named M10) could adopt this new feature in

1H16. The WiFi 802.11ac module requires higher RF content and the 802.11ac MIMO

configuration needs even higher RF content, proportionally to the number of antenna it

supports; both are positive to overall RF demand.

On the cellular front, flagship models like Samsung Galaxy S7 and LG G5 now

support LTE Cat 9 (450Mbps on the downlink and 50Mbps for the uplink) vs the LTE

Cat 6 supported in the previous generation in 2015. For smartphones supporting LTE

Cat 6 standard or above, carrier aggregation will be necessary to achieve the data

rate. Our checks suggest that current carrier aggregation is mostly on the downlink

side and could lead to US$1-1.5 incremental RF content. There could be more to

come when the uplink side also moves to incorporate the carrier aggregation function,

which could lead to another US$1.5 incremental RF content in the inter-band

aggregation configuration in 2017-18. In addition, China is moving faster to upgrade

from 3-mode to 6 mode smartphones now with all three carriers aggressively ramping

up commercial service. Qurvo believes 3 mode will decline from 50% to 33% of the

China market this year, with 5/6 mode moving up to 60% of the market, lifting content

of those phones from US$3 to US$5-7.

More mid end models

upgraded to 802.11ac

Flagship models now

supporting LTE Cat 9 and

some mid end supporting

LTE Cat 6, both enabled by

the carrier aggregation

technology

https://doc.research-and-analytics.csfb.com/docView?sourceid=em&document_id=x667828&serialid=iihuV%2bx5yiP1Si1JMH0wmKXRxpxt11iSVC3GPY%2b8hxY%3d

https://plus.credit-suisse.com/u/eiu6O0

25 February 2016


In the Taiwan compound semi space, we prefer Win Semi (3105.TWO,

OUTPERFORM), the largest RF foundry player in the world with 60%+ market share,

for its strong customer relationship and technology independence.

Figure 22: More smartphone models support 802.11ac and LTE Cat 6+ Company TCL TCL HTC Acer Samsung Gionee LG Sony

Model name Idol 4 Idol 4S X9 Liquid Jade 2 Galaxy S7 Elife S8 G5 Xperia X

Image

Technology LTE Cat 6 LTE Cat 4 LTE Cat 4 LTE Cat 4 LTE Cat 9 LTE Cat 6 LTE Cat 9 LTE Cat 6

Operating System Android 6.0 Android 6.0 Android 6.0 Android 6.0 Android 6.0 Android 6.0 Android 6.0 Android 6.0

Pixels 1980 x 1020 2560 x 1440 1980 x 1020 1980 x 1020 2560 x 1440 1980 x 1020 2560 x 1440 1980 x 1020

RAM 2GB/3GB 3GB 3GB 3GB 4GB 4GB 4GB 3GB

Storage 16GB 32GB 32GB 32GB 32GB/64GB 64GB 32GB 32GB/64GB

Display 5.2" IPS TFT 5.5" AMOLED 5.5" S-LCD 5.5" AMOLED 5.1" AMOLED 5.5" AMOLED 5.3" IPS TFT 5.0" IPS TFT

Camera 13MP + 8MP 16MP + 8MP 13MP + 5MP 21MP + 8MP 12MP + 5MP 16MP + 8MP 16MP+8MP + 8MP 23MP + 13MP

WiFi 802.11a/b/g/n/ac 802.11a/b/g/n/ac 802.11a/b/g/n/ac 802.11a/b/g/n/ac 802.11a/b/g/n/ac 802.11a/b/g/n 802.11a/b/g/n/ac 802.11a/b/g/n/ac

Fongerprint sensor N N N N Y Y Y Y

Force Touch N N N N N Y N N

Battery 2610mAh 3000mAh 3000mAh TBD 3000mAh 3000mAh 2800mAh 2620mAh

CPU Speed 1.7GHz 1.8GHz 2.2GHz 2GHz 2.2GHz 1.9GHz 2.2GHz 1.8GHz

Processor Chip Snapdragon 617 Snapdragon 652 MT6795 Helio P10 Snapdragon 808 Snapdragon 820 MT6755 Helio P10 Snapdragon 820 Snapdragon 650

Multi-core Octa Octa Octa Hexa Quad Octa Quad Hexa

Price (US$) TBD TBD 370 TBD TBD TBD TBD 659 Source: Company data, Credit Suisse research

9. Dual pixel and dual camera devices continue to emerge. Dual camera and

dual pixel technologies are being adopted by vendors to further enhance the user

experience on the camera. LG’s G5 includes a 75 degree field of view camera

with 16 MP sensor and a 2nd

wider 135 degree field of view camera with 8 MP

sensor to capture a wider image. Samsung is implementing the camera with dual

pixel autofocus, which still uses one camera lens but technology in every pixel for

better focusing similar to a more advanced mirrorless or DSLR camera sensor.

The camera sensor embeds a phase detection photodiode in every pixel to more

accurately and quickly focus on objects no matter where they are positioned

within the frame.

Mediatek at its booth was also showcasing upgrades to its image signal processor

(called Imagiq) that will improve phones built on its reference design. Mediatek

also has dual pixel auto focus that splits each pixel into two halves which can act

as phase-detect elements and fully capable image sensors for 4x faster focus.

The processor also enables a real-tie change in the depth map to focus at

different distances quickly, with phones launched with Helio x20/P20 by mid-2016.

The company will also introduce in phones by year-end a color + mono 13MP / 13

MP dual camera that can integrate images for better low light processing.

10. Continuous smartphone specs upgrades: Specs upgrades in key components

remain the main strategy for smartphone brands to differentiate in a more

homogenised market. We see continuous upgrades or rising adoptions in camera,

casing (including metal and 2.5D/3D glasses), Type C, and fingerprints, while

dual-cam, water-proof speaker box, and high-end accessories (such as DIY

module and VR glasses) are relatively new features.

11. VR on a rise: Following the exciting CES in January, we see several new VR

products launched in the MWC: Samsung Gear 360 camera, LG 360 VR glasses,

TCL VR glasses, and etc. We view smartphone brands' cross-selling or promotion

of VR accessories as a driver to the popularity of VR in mass market.

Prefer Win Semi with TP of

NT$63

Dual pixel focus and dual

camera being offered to

bring more DSLR features

to smartphone cameras

25 February 2016


Figure 23: New smartphones introduced at MWC

Company Samsung LG Sony Sony ZTE TCL/Alcatel TCL/Alcatel Gionee

Model Galaxy S7 G5 Xperia XP Xperia XA Blade V7 Idol 4S POP 4S Elife S8

CPU Snapdragon 820 Snapdragon

820

Snapdragon

820

Helio P10 MT6753 Snapdragon

652

MT6755M Helio P10

GPU Adreno 530/ Mali-

T880 MP12

Adreno 530 Adreno 530 Mali-T860MP2 Mali-

T720MP3

Adreno 510 n/a Mali-

T860MP2

OS Android 6.0 Android 6.0 Android 6.0.1 Android 6.0.1 Android 6.0 Android 6.0.1 Android 6.0 Android 6.0.1

RAM 4GB 4GB 3GB 2GB 2GB 3GB 2GB 4GB

Flash 32/64GB 32GB 32GB 16GB 16GB 32GB 16GB 64GB

Display 5.1" Quad HD

AMOLED

5.3" 1440x2560

IPS LCD

5.0" FHD IPS

LCD

5.0" HD IPS

LCD

5.2" FHD IPS

LCD

5.5"

2560x1440

AMOLED

5.5" FHD IPS

LCD

5.5" FHD

AMOLED

Front camera 5MP 8MP 13MP 8MP 5MP 8MP 5Mp 8MP

Rear camera 12MP 16MP + 8MP 23MP 13MP 13MP 16MP 13MP 16MP

USB micro USB v2.0 Type-C 1.0;

USB v3.0

micro USB

v2.0

micro USB

v2.0

micro USB

v2.0

micro USB

v2.0

micro USB

v2.0

micro USB

v2.0

Casing metal metal metal TBC metal metal edge plastic metal

Waterproof IP68 n/a IP68 n/a n/a n/a n/a n/a

Fingerprint yes yes yes no no no Yes Yes

Wireless charging Qi/PMA Qi (optional) n/a n/a n/a n/a n/a n/a

Battery 3600mAh 2800mAh 2700mAh 2300mAh 2500mAh 3000mAh 2960 mAh 3000mAh

Release date March 11, 2016 April 2016 TBC TBC TBC 2Q16 2Q16 March 2016

Source: Company data, Credit Suisse research

Figure 24: New VR products introduced at MWC

Samsung (Oculus) HTC LG

Gear VR Vive 360 VR

Price (US$) $99.99 $799.00 TBC

Availability Ready Feb 29, 2016 TBC Source: Company data, Credit Suisse research

25 February 2016


Asian company takeaways Mediatek: Working to stabilise profitability ■ MWC this year only a modest positive catalyst for the company. Mediatek scaled

back its marketing push at this year’s MWC, ending its recent run of splashy

conference kick-off parties to unveil its offerings for a more low key approach with

demonstrations at its booth and some industry press releases around the event. We

note that the MWC is only a catalyst in solid growth years for the company, with the

stock outperforming in the smartphone acceleration years from 2012 to 2014, but

underperforming when feature phones collapsed in 2010-11 and in 2015 when

currency volatility and price competition began to impact the company. We note that

this year offers hope for some stabilisation in margins with the mix shifting to higher-

end LTE and maturating rate of transition from 3G to 4G, and has so far seen stability

in the shares.

Figure 25: Mediatek’s share price performance around the MWC

-60%

-45%

-30%

-15%

0%

15%

30%

45%

60%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

2010 2011 2012 2013 2014 2015 2016

T-5 T+5 T+30 Sales YoY (%)


Source: Company data, Credit Suisse estimates

The company announced its newest Helio processor for mobile (P20), made several

announcements around its IoT offerings, and also formed a couple industry

partnerships with carriers and equipment vendors for next generation network testing.

In cellular, Mediatek’s latest P20 chipset was expected and is the lower-cost octa-core

version of the high-end deca-core x20 moved down to 16nm for lower power and

adding in support for LP DDR 4. In IoT, the company announced its MT2511 for bio-

sensing which can provide ECG and PPG read outs for heart rate, blood pressure and

pulse oximetry for production in 1H16 and integration in a SiP with its connectivity and

MCUs.

The company is also collaborating with Nokia on extended coverage enhanced GPRS

to allow IoT devices for very long life and cellular packet connectivity over 2G. In

networks, the company announced a partnership to collaborate with NTT DoCoMo on

developing chipsets that can support 5G devices on the network for chipset

developments from 2018 onwards. Mediatek is also partnering with equipment leader

Ericsson on WiFi calling over the network.

Mediatek had a more low

key presence due to cost

controls, but still made

several announcements

25 February 2016


Figure 26: Mediatek expanding its Helio family

Source: Company data

■ Mediatek’s Helio skewing to the lower cost P-Series versus the X-Series.

Mediatek’s design traction is slanting toward its mid-high end Helio P-Series versus its

flagship Helio x20 10-core chipset. At the MWC, the only flagship design for x20 we

saw was Zopo’s Speed 8 smartphone, paling next to Qualcomm which still commands

the flaghships for Samsung, LG, Xiaomi, Oppo, Vivo, Sony and LeEco with its

Snapdragon 820. We also believe that Qualcomm’s design traction on Snapdragon

600 is healthy this year with a number of brands (Oppo, Lenovo, Sony, TCL, Vivo)

adopting it for their new products and competing with Mediatek’s Helio P-Series, which

is also seeing more designs over its flagship x20. We saw smartphones launched from

Leagoo, Sony, Lenovo, Gionee and Konka supporting this product and should see

more rollouts in the coming weeks.

Figure 27: 4G merchant chipsets a duopoly, though Qualcomm is holding share pretty well this year Mediatek Qualcomm

















■ Rest of the platform refreshed in late spring. Mediatek did not yet show its new 3G

and entry 4G platforms, which should be launched in late 2Q16. Mediatek will refresh

to its third phase of products with a mainstream quad-core (MT6738) and octa-core

(MT6750) both upgrading to Mediatek’s CAT 6 modem. The company will also have

an entry-level MT6737 quad core with CAT 4 modem and CDMA 2000 support.

Mediatek is getting some relief in the entry tier as checks at the show still suggest no

commercial availability of Spreadtrum’s 4G chipsets at the China brands and a delay

of Intel’s 4G SoFIA to 4Q15.

25 February 2016


Figure 28: Mediatek smartphone roadmap focused on performance and cost down

2014 2015 2016

1H 2H 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q

Helio

-XM

ain

str

eam

4G

Entr

y 4

GE

ntr

y 3

G

MT6572/M

MT6582M

28nm, 2x Cortex A7, 1.2GHz, 960x540

28nm, 4x Cortex A7, 1.3GHz, 960x540

28nm, 4x Cortex A7, 1.3GHz, qHD, 13MP

Octa core, 28nm, 8x A7, 1.7-2.0GHz/ 1.4GHz, HD1080/HD720, 16MP

MT6290 + MT6592/M

Octa, 2.2-2.5GHz, big.LITTLE, 28nm HPM, 4 A7+4 A17, 20 MP

MT6571 28nm, 1.0 GHz, 2 Cortex A7. Power VR, W+TD

MT6595LTE SoC

Octa, 1.7GHz, 28nm HPM, 8 A53, 16MP, 1080p30 HD 1080. LTE R9

Quad, 1.5GHz, 28nm HPM, 4 A53, 13MP, 1080p30 HD720. LTE R9 Cat4/HSPA+ (42/11)/TD, HD

MT6580

Dual A7, 1.3GHz, qHD, HSPA+ (21/5.76)/EDGE

MT6752LTE SoC; 64 bit

MT6732LTE SoC; 64 bit

64-bit Octa, 2.2GHz, 28nm HPM, 4 A57+4 A53, 20MP, H.265 4K2K 30fps video, 2560x1600, LTE R9 Cat4/HSPA+ (42/11)/TD, 21MP

X10 MT6795

MT6735P/MLTE + C2K SoC

Deca, Dual A72 + OctaA53, 64bit big.LITTLE, 20nm, 25MP, H.265 4K2K 30fps video, LTE R11 Cat-6, 2x20 CA+C2K SRLTE

MT6290 + MT6582/M

Octa, 1.3-1.5GHz, 8 A53, 28nm LP, 64 bit, 16 MP, 28nm LP, 1080p30, FHD, LTE R9 Cat4+ CDMA2000 1x/EVDO Rev. A

Quad A53, 1.3GHz, 13MP, 28nm LP, 64 bit, FHD (1920x1080), LTE R9 Cat4/HSPA+ (42/11)/TD, CDMA2000 1x/EVDO Rev. A

MT6753LTE + C2K SoC

Quad A53, 1.0GHz, HD (P) / qHD (M), 8MP, 1080p qHD, 28nm LP, 64 bit, LTE R9 Cat4+ CDMA2000

MT6570

Quad A7, 1.3GHz, HD720, HSPA+ (21/5.76)/EDGE

X20 MT6796

MT6735LTE + C2K SoC

P10MT6755

Octa A53, 28nm LP, 2.0 GHz, 21MP, 1080p30 video FHD (1920x1080), LTE R11 Cat6 2x20 CA + C2K SRLTE


MT6750/T

MT6737

Octa A53, 28nm HPM, 1.5 GHz, 16MP, HD Display, LTE Cat6 2xCA + C2K SRLTE

Quad A53, 1.3 -1.5 GHz,28nm, 13MP, HD Display, LTE Cat6 2xCA + C2K SRLTE

X30LTE Cat 6

w/ CA

Deca, HexaA72 + Quad A53, 64bit big.LITTLE, 10nm, 40MP, H.265 4K2K 30fps video

P20

Octa A53, 64bit big.LITTLE, 16nm

MT658x

MT657x

MT6738

Quad A53, 1.5 GHz, 28nm,13MP, HD Display, LTE Cat4


■ Stock now factors in some stabilisation. We believe Mediatek’s business is on

track to guidance for a 7-15% QoQ decline and GMs stabilising at 37-40% after 1,000

bp erosion through last year. The company’s volumes are supported by better China

4G additions across carriers and some mix improvement toward Mediatek’s higher-

end P series products. We hold off getting more aggressive, as we have not yet seen

a change in the competitive landscape with Qualcomm seeing good design traction at

the MWC across its platforms, although Spreadtrum’s limited traction and Intel’s

continued push-out help. We maintain our estimates with the business tracking to

expectations and target price at NT$230, representing 15x 2016 EPS (11x ex-cash).

Figure 29: MediaTek 1Q16/2Q16 and 2016/2017 expectations 4Q15 1Q16 2Q16 2015 2016 2017

(NT$ mn) Actual CS Street Guidance CS Street CS Street CS Street CS Street

Sales $61,713 $55,549 $55,366 NT$52.5-57.4bn $59,429 $58,753 $213,255 $212,187 $240,088 $239,260 $245,956 $247,549

Chg 8.3% -10.0% -10.3% -7-15% QoQ 7.0% 6.1% 0.1% -0.4% 12.6% 12.8% 2.4% 3.5%

GM% 38.5% 38.5% 38.9% 37-40% 38.3% 38.8% 43.2% 43.7% 38.5% 38.9% 38.4% 39.2%

OpM% 6.1% 8.7% 9.1% 5.5-11.5% 9.2% 10.1% 12.1% 12.8% 9.4% 9.9% 8.8% 10.0%

Net Inc. 4,181 5,064 5,096 NT$33.5 5,387 5,892 25,711 26,747 22,944 23,733 22,200 25,109

EPS (NT$) $2.83 $3.42 $3.16 $3.64 $3.74 $16.60 $17.06 $15.50 $15.15 $15.00 $16.00 Source: Company data, Credit Suisse estimates

Samsung: GS7 focus on refinement

Keon Han (+82 2 3707 3740, [email protected])

Samsung's 2016 smartphone strategy is simple: maintain mix richness, improve the cost

structure and keep total OPM at 10%. The company already acknowledged that the

handset division is a cash-cow where it would be content with high-single digit YoY volume

growth and maintaining smartphone profitability The company has spent the better part of

the past 15 months clearing out discontinued older smartphones and trying to bring BOM

costs down related to GS6 products. On the high-end segment, the complete makeover of

GS6 represented higher component costs and absorption of higher product development

and marketing costs. Most of the low-/mid-end products were also redesigned and

Samsung targeting to

maintain 10% OpM by

maintaining its mix and

improving its cost structure

mailto:[email protected]

25 February 2016


launched, consolidated into fewer platforms and focus was to build volume by launching

common models globally in order to lower per unit fixed costs (as in the case of the J-

series and A-series). Product fatigue is less of a factor across all price segments in 2016.

At the MWC, GS7 and GS7 Edge were unveiled. The product will be available from 11

March—so about one month earlier than the GS6 version. Therefore, some positive impact

to 1Q16 earnings is expected. One incentive being offered for early orders is free Gear VR

virtual-reality headsets. GS7 is an evolutionary product. Major changes include larger battery

(back to GS5 density), return of the Micro SD card slot and water resistance. Evolutionary

changes were earlier indicated and not a major surprise to us, particularly given the platform

development and sharp rise in BOM GS6 endured going through a major product revamp.

We believe 2016 is an investment recovery and cost rationalisation year.

Focus is on three key areas

■ Design change: Fundamentally, the design has not changed much for GS6. Tweaks

have been assessed such as rounding away of the back side to offer a more refined

shape and better feel on the hand. Screen quality itself has not changed, but the mix of

glass and metal continues to give the premium feel to justify high-end pricing. Camera

change reduces the protruding look of the previous 16MP camera module. Water

resistance technology has been brought back.

■ Core A/P change: Galaxy S7 has adopted QCOM Snapdragon 820, as Samsung has

removed Qualcomm core in the previous Galaxy S6 model. Only the models shipped to

the US are expected to be using QCOM core. S7 and S7 Edge have both Samsung

Exynos 8890 and Qualcomm Sanpdragon 820. According to Samsung, CPU and GPU

run 30% and 60% faster, respectively, compared to GS6.

■ Memory: Samsung incorporated LG DDR4 to both S7 and S7 edge models and their

RAM has increased to 4 GB from 3 GB in the GS6 series. Therefore, it is a slight positive

for the DRAM industry. Storage offerings in the GS6 series were in 32, 64, and 128 GB

NAND variants with no microSD slot, but the S7 series will likely offer 32 GB and 64 GB

only, with a microSD card slot for extra storage (up to 200 GB), eliminating the need for

128 GB products.

■ Camera: Focus is on low-light photo quality. Samsung has reduced its camera pixel

from 16 MP to 12 MP. However, Samsung addresses that an aperture of f/1.7 combined

with larger pixels means the camera will have better resolution, allowing 95% more light

into the system. Front camera is still 5MP, same as the previous S6 model. S7 series is

the first one to adopt the Dual Pixel sensor.

■ Virtual Reality (VR): Samsung has provided VR headset Gear for the attendees to view

the MWC. Focus is to bring VR to the mass markets. In its presentation, Samsung has

claimed to cooperate with Facebook on the VR business. The company also showed

Gear 360, which can capture 360-degree video. It has dual fish-eye lenses and can

capture 3840x1920, a 30MP image. Samsung sees VR business as a growth driver

given that smartphone is becoming commoditized and has limited margins.

■ Shipment expectation: The pre-order is scheduled on 21 February and the general

release date is 11 March. The company also provides free VR headset to those placing

pre-orders. It will be available in 60 countries and the company expects its sales to

surpass shipments of the previous model, GS6.

■ Declining BOM: Dual-edge screens on GS6 have made the product very expensive on

lower yields and increased TACT time fusing three separate displays into one. As

GS6Edge volume substantially exceeded expectations, cost rose commensurately. The

metal casing on GS6 also added almost US$14 to the plastic casing offered on GS5.

However, since the GS6 launch, both volume and incremental costs have streamlined

and declined. GS7 is a continuation of same screens and metal casing, which we think

adds to the aggregate scale; therefore, will continue to lower per unit BOM costs.

25 February 2016


■ Conclusion: Not much change was expected as the previous version in GS6 was a

complete design overhaul; therefore, a radical change was not expected, given the

earlier product leaks. Generally, GS7 appears to be a product refinement and

consumer experience add-on is the VR (compared to Samsung Pay earlier). Feedback

is generally positive throughout various media outlets. The company forecasts higher

sale volume compared to the GS6. If realised, better volume of ultra-high end price

segment with better cost structure should help Samsung maintain its 10% OPM target

for the smartphone division in 2016.

Figure 30: Galaxy S6, S6 Edge versus S7& S7 Edge S6 S6 Edge S7 S7 Edge

Screen size (inch) 5.1 5.1 5.1 5.5

Resolution Super AMOLED 2560x1440 Super AMOLED 2560x1440 Super AMOLED 2560x1440 Super AMOLED 2560x1440

Dimensions (mm) 143.4x70.5x6.8 142.1x70.1x7.0 142.4x69.6x7.9 150.9x72.6x7.7

Processor Samsung Exynos 7420 Samsung Exynos 7420Samsung Exynos 8890,


Samsung Exynos 8890,


CPU 2.1 GHz Octa-core 2.1 GHz Octa-core 2.3 GHz Octa-core 2.3 GHz Octa-core

Camera main

(MP)16 16 12 (Dual pixel) 12 (Dual pixel)

Camera sub (MP) 5 5 5 5

RAM (GB) 3 3 4 4

Battery (mAh) 2,250 2,600 3,000 3,600 Source: Company data, Credit Suisse research

Lenovo shines in mobile; Quanta surprises in the

Cloud; Acer enables VR in business

Thompson Wu (+886 2 2715 6386, [email protected])

■ Lenovo (OUTPERFORM, 12M TP HK$0.68): Lenovo innovating across the board—

Lenovo was the most innovative amongst Asia PC Brands with new PC, tablet and

smartphone products. We believe support PC and mobile strategy should accelerate

design innovation and pace of new product, specifically with smartphones. Lenovo's is

pushing PC innovation bridging PC/tablet with hybrid 2:1 devices such as MIIX, and

increasing the functionality of traditional PC with multi-modes such as the Yoga

710/510. The Yoga 710 is the most compelling of the product launched, in our view.

The performance, size and weight are all better than the MacBook Air, and starts at

only US$499 (ships in May). In addition, Lenovo's Corporate VP and COO, Mr. Lanci

spoke to Bloomberg citing softness in China smartphones, and Lenovo's shift in focus

into non-China market growth. This is consistent with Lenovo's strategy and

comments last month during results (click here).

■ Acer (UNDERPERFORM, 12M TP NT$10.5): Acer enables VR with BYOC; partners

with Victorinox and new phones. Acer launched three business solutions under its

BYOC unit including Connected Car, smart home, business and education. Specific to

VR, Acer and its partner iStaging is designed VR for real estate agents to show

properties, and home furnishing. We are unclear how Acer generating revenue is.

Acer and Victorinox are designing smart watch accessories such as a watch strap;

they are not designing a smart watch (click here). Victorinox I.N.O.X. watches prices

start at US$495. Acer launched a new Liquid Jade 2 smartphone with a 5.5" AMOLED

display as the key new feature; along with 21MP main camera and 1TB of storage.

Acer also launched a mainstream series called Zest, which have 5" HD IPS display; 8

MP main camera; and available in EMEA April at a starting price of €109.

http://www.acer-group.com/public/News/2016/20160218.htm

25 February 2016


■ Quanta (UNDERPEFORM, 12M TP NT$46): Quanta enters in partnership with

Ericsson. Quanta is not an usual participant we'd expect to make headlines at the

MWC. Its partnership with Ericsson is positive, in our view. We believe it is a signal of

Quanta's hardware design and manufacturing leader within Open Compute Platform

(i.e. OCP). Ericsson also became a member of OCP and is partnering with Amazon

Web Services (client of Quanta) to accelerate cloud delivery for telecom carriers. Click

here for more details.

■ Asustek (NEUTRAL, 12M TP NT$270): Asus 2016 product roadmap launched at

CES. Their partnership with Ericsson is positive, in our view. We believe it is a signal

of Quanta's hardware design and manufacturing leader within Open Compute Platform

(i.e. OCP). Ericsson also became a member of OCP and is partnering with Amazon

Web Services (client of Quanta) to accelerate cloud delivery for telecom carriers. Click

here for more details.

Figure 31: New product launches for Lenovo at MWC Product Line

Model Yoga 710 Yoga 510 MIIX 310 detachable 2-in-1 Tab3 10 Business Tab3 7 Tab3 8 Vibe K5 Vibe K5 Plus

Announce date Feb-2016 Feb-2016 Feb-2016 Feb-2016 Feb-2016 Feb-2016 Feb-2016 Feb-2016

Ship date May-2016 April-2016 June-2016 June-2016 June-2016 June-2016 March-2016 March-2016

Form factor

Display size (inch) 11” & 14” 14” & 15” 10.1” 10" 7" 8" 5" 5"

Resolution (pixel) FHD 1920x1080 FHD 1920x1080 FHD (1920x1080) 1920x1080 1024 x 600 1280 x 800 720x1280 1080 x 1920

Display feature IPS Touch IPS Touch IPS Full HD IPS HD IPS HD IPS IPS capacitive touchscreen IPS capacitive touchscreen

Width x Depth x Height 0.58" (Height) 0.82" (Height) NA NA NA NA NA NA

Weight 11": 1.04 kg

14": 1.65 kg1.75 kg Tablet: 580g, Keyboard: 520g NA NA NA 1.42 kg 1.42 kg

Core internals

Processor Intel Core i7 Intel Core i7 Intel Atom X58300 CPUMediaTek 1.3GHz

quad-core

MediaTek 1GHz

quad-core

MediaTek 1GHz

quad-coreQualcomm Snapdragon 415 Qualcomm Snapdragon 616

MemoryUp to 8GB LP-DDR3 (11")

Up to 8GB DDR4 (14")Up to 8GB DDR4 Up to 4GB DDR3L 2GB 1GB 1GB 2 GB RAM 2 GB RAM

Operating system Windows 10 Windows 10 Windows 10 Andorid 6.0 Andorid 6.0 Andorid 6.0 Android 5.1 Android 5.1

Storage type/capacity Up to 256GB SSDUp to 1TB HDD or up to 256GB SSDUp to 64GB eMMC storage 16GB 16GB 16GB 16GB 16GB

Features

Camera NA NA 2MP front & 5MP rear camera 5MP front & 8MP rear 2MP front & 5MP rear 2MP front & 5MP rear 5MP front & 13MP gear 5MP front & 13MP gear

Battery life (hrs) NA 8.5 hrs 10 hrs 12 hrs NA NA NA NA

Retail Price ($USD)11-inch $499;

14-inch $799

14-inch $599;

15-inch $699$229 $199 $129 $149 $129 $149

PC Tablet Smartphone

Source: Company data, Credit Suisse research

Huawei: Boosting mobile target, stepping in NB

scope

■ First Huawei 2-in-1 NB launched. Huawei released its notebook, Matebook at MWC.

It is in NB-Tablet 2-in-1 design with a sales price of US$699 for the standard version.

The standard version of Matebook is powered by Intel Core M CPU and features 12"

2160x1440 IPS TFT LCD, Windows 10 O/S, 4 GB RAM, 128 GB SSD, 11ac WiFi, BT

4.1 and 5MP camera. The Matebook also embedded with many sensors including

ambient, fingerprint, accelerometer, gyroscope and hall sensors.

■ 30% shipment growth target for 2016. Huawei is reported to forecast 2016

smartphone shipment to grow more than 30% YoY (c.140 mn), and aims to take over

Apple and Samsung in market share by 2019/2021. The company shipped 108mn

smartphone in 2015 vs Apple 232mn and Samsung 317 mn.

http://www.ericsson.com/thecompany/press/releases/2016/02/1987932




25 February 2016


Figure 32: Huawei new 2-in-1 Matebook

Huawei 2-in-1 MateBook

Display 12-inch 2160 x 1440 IPS TFT LCD

CPU Intel® Core™ m processor, dual core up to 3.1GHz

OS Windows 10

Memory 4GB/8GB LPDDR3

Storage 128GB/256GB/512GB SSD

Connectivity WiFi 11ac MIMO, BT 4.1

Sensors Ambient light sensor, fingerprint, accelerometer, gyroscope, Hall sensor

Camera 5MP

Battery [email protected]

Power port USB-C

Source: Company data

25 February 2016


China smartphone components: Still focus on specs

upgrades

Sam Li (+852 2101 6775; [email protected])

■ Sunny Optical: continuous camera upgrades and the introduction of dual-cam.

We see the higher pixel definitions, large aperture, dual pixels, and OIS as proof of a

secular upgrade trend which supports our mix/margin improvement thesis for Sunny

Optical. In addition, we see mixed messages for dual-cam with the LG G5 launch but

recent yield issues in supply chain. For Sunny, we still see dual-cam as one of the

2016 drivers and believe our FY16 estimate of 16mn module shipment is achievable.

■ AAC: some implications for acoustic upgrade and RF+mechanical. We see

Samsung's adoption of water proof acoustic components in Galaxy S7/Edge to be

positive in two ways: (1) an earnings driver for 2Q16 as AAC is major supplier; and (2)

we estimate ASP meaningfully raised for water-proof and other features, which has

good implication for future products. On the other hand, we see the wide-adoption of

metal casing in China smartphones (including Le Max Pro) to be incrementally positive

to AAC's RF+mechanical segment.

■ GoerTek: VR industry on a rise with more participants. Although no direct earnings

implications for GoerTek's VR business, we see the multiple VR products launches at

the MWC to be a positive driver for the overall VR industry with more participants and

products. We expect VR contribution to gradually pick up from 2Q16E.

■ For other six stocks, we see slightly positive implications from rising adoptions of Type

C (on Luxshare), 2.5D/3D glasses (on Lens Tech), metal casing (on Tongda, FIH,

and BYDE), and fingerprint (on O-film).

China OSAT: Beneficiary of strong product rollouts

from China fabless

Kyna Wong (+852 2101 6950; [email protected])

■ TSHT: benefit from increasing products rollouts and fingerprint adoption.

Goodix announced three new products at MWC—the Live Finger Detection™

technology to enhance security, the force-sensitive Newton Touch™ panel and the

ultra-low power heart rate sensor for smart earphone. Fingerprint Card (FPC) also

showcased its new touch fingerprint sensor FPC1145. Goodix is one of key fingerprint

customers in TSHT while TSHT has started cooperation with FPC last year. Along with

customer ramp up, we expect Huatian to benefit from increasing fingerprint penetration

in non-Apple smartphones in next 2-3 years.

■ NFME: gaining orders from AP customers. We see major mobile processor

companies to announce new products at MWC including MediaTek, Spreadtrum and

Leadcore. We see MTK introduced its 6-mode CAT.6 Octa-core LTE SoC Helio P20

which is based on 16nm process with 25% better power efficiency. Spreadtrum

launched 16nm 5-mode Octa-core LTE SoC. Leadcore announced its 28nm LTE mobile

SoC few days ahead of MWC. Rockchip also showcased its IoT platforms with ultralow

power WiFi solutions. NFME is likely to gain orders from these customers with

increasing FCBGA demand. The company has been ramping FC production in Jiangsu

to meet the demand in 2016/17.

■ We prefer TSHT than NFME on better valuation. Given the rising demand on non-

Apple fingerprint and MEMS sensors on mobile applications. The stock is trading at

2.1x P/B below its mid-cycle P/B. We reiterate our OUTPERFORM rating on TSHT for

25 February 2016


its solid growth drivers and strong cash on hand. Our TP of Rmb18.5 is based on 2.8x

2017E P/B. We like NFME on its the strong growth momentum driven by increasing

FC customers demand and potential acquisition of AMD backend facilities, however,

we see higher exposure of risk on the inorganic growth and the stock is trading 2.4x

P/B in-line with its mid-to-upcycle P/B.

25 February 2016


Companies Mentioned (Price as of 24-Feb-2016)

AAC Technologies Holdings Inc (2018.HK, HK$52.95) ARM Holdings (ARM.L, 950.5p) Acer Group (2353.TW, NT$11.55, UNDERPERFORM, TP NT$10.5) Alcatel-Lucent (ALUA.PA, €3.17) Altera Corp. (ALTR.OQ, $53.96) Amkor Technology Inc. (AMKR.OQ, $4.95) Apple Inc (AAPL.OQ, $94.69) Asustek (2357.TW, NT$267.0, NEUTRAL, TP NT$270.0) BlackBerry (BBRY.OQ, $7.26) Broadcom Corp. (BRCM.OQ, $54.67) Casetek Holdings Limited (5264.TW, NT$175.0) China Mobile Limited (0941.HK, HK$84.1) Elan Microelectronics Corp (2458.TW, NT$42.0, NEUTRAL, TP NT$38.0) Ericsson (ERIC.OQ, $9.22) Ericsson (ERICb.ST, Skr78.4) HTC Corp (2498.TW, NT$78.1) Hisense Kelon Electrical Holdings (0921.HK, HK$2.83) Huawei (002502.SZ, Rmb29.2) Infineon Technologies AG (IFXGn.DE, €11.43) Intel Corp. (INTC.OQ, $28.8) Kinsus Interconnect Tech (3189.TW, NT$76.1, NEUTRAL, TP NT$81.0) LG Electronics Inc (066570.KS, W63,500, NEUTRAL, TP W49,000) Largan Precision (3008.TW, NT$2555.0) Lenovo Group Ltd (0992.HK, HK$6.54, OUTPERFORM, TP HK$10.5) Lite-On Technology (2301.TW, NT$37.75) Marcus&Millichap (MMI.N, $21.31) Marvell Technology Group Ltd. (MRVL.OQ, $9.26) MediaTek Inc. (2454.TW, NT$227.0, NEUTRAL, TP NT$230.0) Nationz (300077.SZ, Rmb36.2) Nokia (NOK1V.HE, €5.56) QUALCOMM Inc. (QCOM.OQ, $50.42) RDA Microelectronics (RDA.OQ^G14, $18.45) RDA Microelectronics (RDA.OQ^G14, $18.45) RDA Microelectronics (RDA.OQ^G14, $18.45) RDA Microelectronics (RDA.OQ, $18.45) Samsung Electronics (005930.KS, W1,172,000, OUTPERFORM, TP W1,550,000) Semiconductor Manufacturing International Corp. (0981.HK, HK$0.67, OUTPERFORM, TP HK$0.93) Sequans (SQNS.N, $2.17) Sony (6758.T, ¥2,398) Sunny Optical Technology Group Co., Limited (2382.HK, HK$17.78) TCL Communication Technology Holdings Limited (2618.HK, HK$5.37) TCL Corporation (000100.SZ, Rmb3.97) TPK Holdings (3673.TW, NT$70.0, OUTPERFORM[V], TP NT$100.0) TXC Corp. (3042.TW, NT$37.6, NEUTRAL, TP NT$37.0) Taiwan Semiconductor Manufacturing (2330.TW, NT$148.0, OUTPERFORM, TP NT$163.0) Wacom (6727.T, ¥480) ZTE Corporation (0763.HK, HK$13.16, OUTPERFORM, TP HK$24.0)

Disclosure Appendix

Important Global Disclosures

Randy Abrams, CFA, Pauline Chen, Thompson Wu, Keon Han, Jerry Su and Derrick Yang each certify, with respect to the companies or securities that the individual analyzes, that (1) the views expressed in this report accurately reflect his or her personal views about all of the subject companies and securities and (2) no part of his or her compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report.

25 February 2016


3-Year Price and Rating History for Acer Group (2353.TW)

2353.TW Closing Price Target Price

Date (NT$) (NT$) Rating

28-Feb-13 26.05 20.68 U

09-Aug-13 19.89 15.76

07-Nov-13 16.64 10.83

08-Aug-14 24.08 13.79

16-Mar-15 21.00 14.00

11-May-15 18.60 14.50

11-Jun-15 15.50 13.50

07-Sep-15 13.25 10.50

* Asterisk signifies initiation or assumption of coverage. UN D ERPERFO RM

3-Year Price and Rating History for Asustek (2357.TW)



28-Feb-13 360.00 380.00 O

06-Mar-13 368.00 380.00 N

06-May-13 358.50 370.00

27-Jun-13 272.50 210.00 U

12-Aug-13 229.50 179.00

13-Nov-13 223.00 183.00

09-Jan-14 279.00 191.00

17-Feb-14 286.00 230.00

07-May-14 331.50 220.00

12-Nov-14 319.50 300.00 N

13-Feb-15 324.50 288.00

11-Aug-15 250.50 277.00

22-Sep-15 285.00 278.00

12-Nov-15 280.00 265.00

18-Feb-16 276.50 270.00

* Asterisk signifies initiation or assumption of coverage.

O U T PERFO RM

N EU T RA L

U N D ERPERFO RM

3-Year Price and Rating History for Elan Microelectronics Corp (2458.TW)



23-Apr-13 73.30 92.00 O *

02-Aug-13 56.60 80.00

07-Aug-13 51.20 76.00

15-Sep-13 49.05 60.00

18-Feb-14 54.70 65.00

22-Apr-14 59.30 74.00

17-Jul-14 52.10 72.00

29-Jul-14 49.30 65.00

20-May-15 47.30 50.00 N

04-Aug-15 32.20 37.00

12-Nov-15 36.15 38.00


O U T PERFO RM

N EU T RA L

25 February 2016


3-Year Price and Rating History for Kinsus Interconnect Tech (3189.TW)



07-May-13 102.00 111.00 O

17-Jun-13 116.50 128.00 N

30-Jul-13 107.00 122.00

24-Oct-13 105.50 120.00

05-Feb-14 103.00 120.00 O

29-May-14 136.00 150.00

27-Oct-14 113.50 135.00

13-Jan-15 104.00 108.00 N

30-Apr-15 93.90 102.00

12-Jun-15 82.50 90.00

27-Jul-15 67.00 77.00

02-Feb-16 71.50 81.00


O U T PERFO RM

N EU T RA L

3-Year Price and Rating History for LG Electronics Inc (066570.KS)

066570.KS Closing Price Target Price

Date (W) (W) Rating

24-Apr-13 90,000 82,000 N

24-Oct-13 70,100 77,000

27-Jan-14 68,900 75,000

29-Apr-14 71,700 83,000 *

24-Jul-14 77,000 87,000

29-Oct-14 67,800 78,000

29-Jan-15 62,600 75,000

29-Apr-15 61,200 68,000

02-Jun-15 55,400 62,000

09-Jul-15 45,750 53,500

29-Jul-15 43,800 49,000

25-Aug-15 40,850 45,500

30-Oct-15 49,100 46,200

26-Jan-16 54,800 49,000


N EU T RA L

3-Year Price and Rating History for Lenovo Group Ltd (0992.HK)

0992.HK Closing Price Target Price

Date (HK$) (HK$) Rating

12-Apr-13 6.66 10.00 O

24-May-13 7.66 9.30

31-May-13 7.99 R

26-Jun-13 7.01 9.30 O

08-Nov-13 8.53 10.30

08-Jan-14 8.99 10.60

27-Jan-14 9.90 R

06-Nov-14 10.78 13.00 O

22-Apr-15 13.16 15.40

06-Jul-15 9.43 13.00

14-Aug-15 7.25 11.90

12-Nov-15 7.70 11.00

04-Feb-16 6.82 10.50


O U T PERFO RM

REST RICT ED

25 February 2016


3-Year Price and Rating History for MediaTek Inc. (2454.TW)



27-Jun-13 328.00 400.00 O

09-Sep-13 370.00 440.00

01-Nov-13 404.50 480.00

06-Jan-14 431.50 500.00

08-Apr-14 460.00 540.00

01-May-14 472.00 570.00

07-Oct-14 455.50 540.00

10-Feb-15 454.00 520.00

29-Mar-15 419.00 425.00 N

27-Apr-15 410.50 405.00

15-Jun-15 409.00 430.00

03-Aug-15 299.00 300.00

02-Nov-15 270.00 250.00

11-Jan-16 209.00 230.00


O U T PERFO RM

N EU T RA L

3-Year Price and Rating History for Samsung Electronics (005930.KS)

005930.KS Closing Price Target Price

Date (W) (W) Rating

03-Apr-13 1,521,000 1,900,000 O

27-Jan-14 1,292,000 1,760,000

07-Jul-14 1,292,000 1,740,000

08-Jul-14 1,295,000 1,720,000

28-Aug-14 1,242,000 1,700,000

07-Oct-14 1,162,000 1,680,000

03-Sep-15 1,122,000 1,630,000

29-Oct-15 1,325,000 1,785,000

11-Jan-16 1,152,000 1,690,000

28-Jan-16 1,145,000 1,550,000


O U T PERFO RM

3-Year Price and Rating History for Semiconductor Manufacturing International Corp. (0981.HK)



15-Apr-13 0.48 0.57 O

25-Apr-13 0.54 0.68

10-Jun-13 0.62 0.68 N

30-Apr-14 0.63 0.73

21-Jul-14 0.77 0.80

23-Mar-15 0.68 0.86 O

16-Apr-15 0.85 1.00

08-May-15 0.84 0.90 N

12-Aug-15 0.74 0.80

12-Nov-15 0.88 0.97 O

19-Feb-16 0.66 0.93


O U T PERFO RM

N EU T RA L

25 February 2016


3-Year Price and Rating History for TPK Holdings (3673.TW)



26-Feb-13 552.00 710.00 O

04-Jul-13 408.50 535.00

06-Aug-13 325.00 485.00

21-Oct-13 232.00 380.00

01-Nov-13 192.50 207.00 N

19-Feb-14 180.50 175.00

22-Apr-14 223.00 210.00

07-Jul-14 275.00 300.00

24-Jul-14 238.50 270.00

23-Oct-14 147.00 155.00

10-Feb-15 202.00 210.00

30-Apr-15 191.00 200.00

08-Jun-15 191.00 240.00 O

29-Jul-15 131.50 215.00

06-Oct-15 78.20 135.00

21-Jan-16 68.20 120.00

19-Feb-16 71.40 100.00


O U T PERFO RM

N EU T RA L

3-Year Price and Rating History for TXC Corp. (3042.TW)



25-Mar-13 44.50 56.00 O

30-Apr-13 46.00 56.00 *

05-Jun-13 43.85 51.00 *

05-Jul-13 39.75 48.50

06-Nov-13 32.30 36.00 N

05-May-14 45.00 43.50

06-Nov-14 35.70 40.00

23-Mar-15 40.60 41.50

11-Aug-15 34.10 37.00


O U T PERFO RM

N EU T RA L

3-Year Price and Rating History for Taiwan Semiconductor Manufacturing (2330.TW)



07-Mar-13 103.00 109.00 O

19-Apr-13 106.50 116.00

19-Feb-14 108.00 122.00

12-Mar-14 113.00 130.00

18-Apr-14 123.00 137.00

10-Jul-14 134.50 150.00

17-Jul-14 124.50 145.00

08-Jan-15 138.00 145.00 N

17-Jul-15 140.00 150.00

16-Oct-15 137.50 156.00

11-Dec-15 139.50 163.00 O


O U T PERFO RM

N EU T RA L

25 February 2016


3-Year Price and Rating History for ZTE Corporation (0763.HK)



14-Mar-13 12.33 14.37 O

01-Apr-13 11.17 13.75

26-Apr-13 10.33 13.08

05-Jul-13 10.00 10.42 N

05-Jun-14 12.75 15.83 O *

18-Aug-14 14.00 16.67

16-Oct-14 14.05 16.67 *

26-Mar-15 14.42 18.33

16-Apr-15 19.17 22.92

24-Apr-15 20.58 23.33

14-Jul-15 18.38 23.40

21-Jul-15 19.06 24.00


O U T PERFO RM

N EU T RA L

The analyst(s) responsible for preparing this research report received Compensation that is based upon various factors including Credit Suisse's total revenues, a portion of which are generated by Credit Suisse's investment banking activities

As of December 10, 2012 Analysts’ stock rating are defined as follows:

Outperform (O) : The stock’s total return is expected to outperform the relevant benchmark* over the next 12 months.

Neutral (N) : The stock’s total return is expected to be in line with the relevant benchmark* over the next 12 months.

Underperform (U) : The stock’s total return is expected to underperform the relevant benchmark* over the next 12 months.

*Relevant benchmark by region: As of 10th December 2012, Japanese ratings are based on a stock’s total return relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractiv e, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. As of 2nd October 2012, U.S. and Canadian as well as European ra tings are based on a stock’s total return relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. For Latin Ame rican and non-Japan Asia stocks, ratings are based on a stock’s total return relative to the average total return of the relevant country or regional benchmark; prior to 2nd October 2012 U.S. and Canadian ratings were based on (1) a stock’s absolute total return potential to its current share price and (2) the relative attractiveness of a stock’s total return potential within an analyst’s coverage universe. For Australian and New Zealand stocks, the expected total return (ETR) calculation includes 1 2-month rolling dividend yield. An Outperform rating is assigned where an ETR is greater than or equal to 7.5%; Underperform where an ETR less than or equal to 5%. A Neutral may be a ssigned where the ETR is between -5% and 15%. The overlapping rating range allows analysts to assign a rating that puts ETR in the context of associated risks. Prior to 18 May 2015, ETR ranges for Outperform and Underperform ratings did not overlap with Neutral thresholds between 15% and 7.5%, wh ich was in operation from 7 July 2011.

Restricted (R) : In certain circumstances, Credit Suisse policy and/or applicable law and regulations preclude certain types of communications, including an investment recommendation, during the course of Credit Suisse's engagement in an investment banking transaction and in certain other circumstances.

Volatility Indicator [V] : A stock is defined as volatile if the stock price has moved up or down by 20% or more in a month in at least 8 of the past 24 months or the analyst expects significant volatility going forward.

Analysts’ sector weightings are distinct from analysts’ stock ratings and are based on the analyst’s expectations for the fundamentals and/or valuation of the sector* relative to the group’s historic fundamentals and/or valuation:

Overweight : The analyst’s expectation for the sector’s fundamentals and/or valuation is favorable over the next 12 months.

Market Weight : The analyst’s expectation for the sector’s fundamentals and/or valuation is neutral over the next 12 months.

Underweight : The analyst’s expectation for the sector’s fundamentals and/or valuation is cautious over the next 12 months.

*An analyst’s coverage sector consists of all companies covered by the analyst within the relevant sector. An analyst may cover multiple sectors.

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Credit Suisse's distribution of stock ratings (and banking clients) is:

Global Ratings Distribution

Rating Versus universe (%) Of which banking clients (%)

Outperform/Buy* 56% (36% banking clients)

Neutral/Hold* 31% (29% banking clients)

Underperform/Sell* 12% (42% banking clients)

Restricted 1%

*For purposes of the NYSE and NASD ratings distribution disclosure requirements, our stock ratings of Outperform, Neutral, and Unde rperform most closely correspond to Buy, Hold, and Sell, respectively; however, the meanings are not the same, as our stock ratings are determined on a relative basis. (Please refer to definitions above.) An investor's decision to buy or sell a security should be based on investment objectives, current holdin gs, and other individual factors.

Credit Suisse’s policy is to update research reports as it deems appropriate, based on developments with the subject company, the sector or the market that may have a material impact on the research views or opinions stated herein.

Credit Suisse's policy is only to publish investment research that is impartial, independent, clear, fair and not misleading. For more detail please refer to Credit Suisse's Policies for Managing Conflicts of Interest in connection with Investment Research: http://www.csfb.com/research-and-analytics/disclaimer/managing_conflicts_disclaimer.html

Credit Suisse does not provide any tax advice. Any statement herein regarding any US federal tax is not intended or written to be used, and cannot be used, by any taxpayer for the purposes of avoiding any penalties.

Target Price and Rating Valuation Methodology and Risks: (12 months) for Acer Group (2353.TW)

Method: We maintain our UNDERPERFORM rating and NT$10.50 target price for Acer beacuse we expect Acer continues to lose PC market share, which hurts its supply chain positioning, margins, and cash flows. We believe this may lead to quarterly operating losses. We do not believe investments into Cloud (i.e. BYOC) materialize into a viable business over the next few years. Our TP is based on 0.7x 2016 TBV. We believe 0.7x is reasonable given the continued weak demand in PC market and ~3% ROEs.

Risk: The key risk to our UNDERPERFORM rating and NT$10.5 12 month target price include: (1) cer defines a clear turnaround startegy; (2) PC demand is stronger than forecadsted, or another PC brand miss-executes on a product cycle; (3) Cloud business generates postive cash flows; and (4) mergers with another PC brand, which impoves its scalein

Target Price and Rating Valuation Methodology and Risks: (12 months) for Asustek (2357.TW)

Method: We maintain our NEUTRAL rating and 12-month target price for Asustek of NT$270 because expect smartphones and higher profitability is offset by notebook share loss and motherboard declines. We believe Asus has a promising advantage to its Asia peers in VR and gaming. We believe a merger with Acer could be a greater possibility in 2016 given Acer's cash burn rate, and would be a positive catalyst for both company's shares. TP is based on 10x 2016E EPS.

Risk: Key risks to our NEUTRAL rating and NT$270 12-month target price for Asus include: (1) PC and motherboard market share loss, or share gains upply chain; (2) increase, or decrease in smartphone competition in Southeast markets; and (3) losses, or profits arising from new business (i.e. wearables/VR)..

Target Price and Rating Valuation Methodology and Risks: (12 months) for Elan Microelectronics Corp (2458.TW)

Method: Our target price of NT$38 for Elan Microelectronics is based on 15x 2016 P/E. The target P/E (price to earnings ratio) is based on its mid-cycle average P/E of 13-20x in the company's recent trading history vs fabless companies' average of 15-25x. We stay NEUTRAL on Elan, but would look for an entry point if it could execute on its fingerprint sensor strategy for 2016

Risk: Risks that could impede achievement of our NT$38 target price for Elan Microelectronics include: (1) ASP decline on market competition, (2) market share loss to competitors, (3) failure to lower its costs, and (4) weaker-than-expected demand for global NB market.

Target Price and Rating Valuation Methodology and Risks: (12 months) for Kinsus Interconnect Tech (3189.TW)

Method: Our target price of NT$81 for Kinsus Interconnect Tech is based on 1.3x P/B or 12x FY16 P/E. Our NEUTRAL rating for Kinsus Interconnect Tech is based on long-term concerns on substrates' growth outlook although Kinsus tends to outperform TAIEX in 1H.

Risk: Risks to our NT$81 target price for Kinsus may include: (1) margin compression due to more aggressive price competition or undisciplined capacity expansion; (2) weaker/better-than-expected handset and networking demand; (3) competition landscape change due to the change of FC-CSP material; (4) raw material prices hikes i.e. gold, and (5) faster/slower-than-expected progress in China base station

25 February 2016


installation Risks to our NEUTRAL rating for Kinsus may include (1) stronger/weaker end market demand, especially on smartphones and PLD, (2) faster/slower-than-expected progress in InFo technology, (3) heavier/softer pricing pressure due to competition, (4) unexpected changes in commodity prices i.e. copper/gold, and FX (NTD/USD), and (5) any potential M&A in the space.

Target Price and Rating Valuation Methodology and Risks: (12 months) for LG Electronics Inc (066570.KS)

Method: Our W49,000 target price for LG Electronics is based on the target P/B of 0.6x FY16E book which represents a 40% discount to average of 1x since 2010 on lower earnings and ROE profile. While recent stock price has moved up from trough on positive vehicle component

orders, meaningful contribution is a few years away on lack of scale. LGE’s handset business is also on the downturn with losses

incurred suffering from competition. As a result, we maintain our NEUTRAL rating.

Risk: Potential risks in reaching our current target price of W49,000 for LG Electronics stem from: (1) the overall macro environment given the consumer-oriented product nature of the company, (2) any unforeseen changes in the supply-demand dynamics of key products (especially in handsets and display products), and (3) foreign exchange changes given its export-driven earnings nature.

Target Price and Rating Valuation Methodology and Risks: (12 months) for Lenovo Group Ltd (0992.HK)

Method: Our HK$10.50 12 month target price is based on 11x our FY17 non-GAAP EPS. We expect pre-tax profit growth increases faster than the market expects this year. We expect the faster growth will be triggered by the PC/Server businesses and their synergies, which we believe the market continues to under-appreciate. Also, we believe the market is overly focused on smartphone and not accessing its restructuring plan, which eliminates at US$1.35 bn in cost/expense over the next twelve months. We, therefore, maintain our Outperform rating on Lenovo.

Risk: Risks to our OUTPERFORM rating and HK$10.50 12 month price target for Lenovo include: (1) execution on the restructuring plan and hitting the cost saving targets; (2) new China PC entrants from well-known brands Huawei and Xiaomi could impact Lenovo's China PC market share; and (3) Google and IBM's lock-up of their Lenovo's share expired in 2015. Google can sell its 519.1 mn Lenovo shares granted at a price of HK$11.22; IBM can sell 182 mn shares granted at HK$11.84.

Target Price and Rating Valuation Methodology and Risks: (12 months) for MediaTek Inc. (2454.TW)

Method: Our target price of NT$230 for Mediatek is based on 15x 2016E EPS (earnings per share), in-line with global peers. We maintain our conservative outlook as the company does yet control its destiny on pricing and margins due to fierce competition and thus have a NEUTRAL rating on Mediatek.

Risk: Risks that could cause the share price to diverge from our NT$230 target price and cause us to change our NEUTRAL rating for Mediatek include the impact of competitive products and pricing, timely design acceptance by its customers, timely introduction of new technologies, ability to ramp new products into volume, industry-wide shifts in supply and demand for semiconductor products, industry overcapacity, availability of manufacturing capacity, and financial stability in end markets.

Target Price and Rating Valuation Methodology and Risks: (12 months) for Samsung Electronics (005930.KS)

Method: Our 12-month target price of W1,550,000 for Samsung Electronics is based on a price-to-book (P/B) target multiple of 1.15x, which is the mid-cycle P/B multiple for the past ten years. Our TP of W1,550,000 implies an undemanding 1.15x 2016 P/B on ROE of 13%. The

dividend yield should rise for the next few years, driving P/E multiple expansion as Samsung’s yield approaches the global tech average

of about 2.5%. Maintain OUTPERFORM.

Risk: Risks that may impede achievement of our 12-month target price of W1,550,000 and Outperform for Samsung Electronics include: (1) Heavy earnings dependence on the strength of its smartphone products and its margin sustainability given the intensifying competition within the smartphone industry; (2) A meaningful downgrade in the PC and handset industry outlook; and (3) Samsung’s System LSI and OLED businesses which are ultimately tied to its handset business, and to a certain extent the growth of its key customers' businesses.

Target Price and Rating Valuation Methodology and Risks: (12 months) for Semiconductor Manufacturing International Corp. (0981.HK)

Method: Our HK$0.93 target price for Semiconductor Manufacturing International Corp. is based on 1.4x P/B (price-to-book), high-end of its 1-1.4x past 3 year range giving it a premium to book for its opportunity to benefit from China's push to support its local manufacturing and better execution filling its fabs to drive improving growth at good margins. We maintain Outperform on SMIC.

Risk: Risks that could impede achievement of our HK$0.93 target price and cause us to change our OUTPERFORM rating for SMIC include: (1) the global semiconductor up-cycle is not as strong as market expected, being an upstream company, SMIC tends to be more cyclical than

25 February 2016


other tech plays. (2) Price competition from peers are more severe than expected. (3) SMIC, like its peers will be affected by unexpected slow down of global economy. (4) The advanced technology products do not come out as the company scheduled to.

Target Price and Rating Valuation Methodology and Risks: (12 months) for TPK Holdings (3673.TW)

Method: Our 12-month target price of NT$100 for TPK Holdings is based on 12x 12M forward P/E (fully diluted), peak cycle multiple of 2012-13. We rate TPK OUTPERFORM as we think its better cost structure post the massive asset impairment in 3Q15 and the new projects should help support the profit recovery in 2016-17.

Risk: Our target price of NT$100 for TPK Holdings has the following risks: (1) high customer concentration (Apple), (2) competition heating up, (3) weaker demand on economic slowdown, and (4) shifts in technology trends.

Target Price and Rating Valuation Methodology and Risks: (12 months) for TXC Corp. (3042.TW)

Method: Our target price of NT$37 for TXC Corp. implies 12x 12-month forward P/E (price-to-earnings), with a historical trading range of 8-17x. We stay NEUTRAL on TXC as we think shares are fairly valued at this level.

Risk: Risks that could cause the share price to diverge from our NT$37 target price for TXC Corp. include: (1) timing of a PC/NB demand recovery; (2) the yen exchange rate; and (3) pricing pressure.

Target Price and Rating Valuation Methodology and Risks: (12 months) for Taiwan Semiconductor Manufacturing (2330.TW)

Method: Our NT$163 target price for TSMC is based on 13x average 2016E EPS (earnings per share), implying 3x P/B (price-to-book), near the midpoint of its average 11-15x and 2.5-3.5x range. We are seeing business outlook improving and technology leadership should keep market share and profitability intact and dividends will likely rise again as capex moderates and have an OUTPERFORM rating.

Risk: Risks that could impede achievement of our NT$163 target price and cause us to lower our OUTPERFORM rating for TSMC would include: fierce competition, demand failing to pick up or Apple orders not being as strong as expected.

Target Price and Rating Valuation Methodology and Risks: (12 months) for ZTE Corporation (0763.HK)

Method: Our target price of HK$24.0 for ZTE Corporation is based on a 20x 12M P/E (price-to-earnings), the peak P/E multiple in 2008-10 during China's 3G capex upcycle. We rate ZTE OUTPERFORM as we believe ZTE is underestimated for better 4G BTS builds for 2016, wireline upgrades, and government/enterprise projects..

Risk: Risks that could impede achievement of our target price of HK$24.0 and OUTPERFORM rating for ZTE Corporation include: (1) a delay in ramp or share loss of 4G BTS in China and other emerging markets; (2) unfavourable pricing for telecom equipment in the Chinese market; (3) severe price competition in smartphones in the domestic market; and (4) slower smartphone growth in the export channel.

Please refer to the firm's disclosure website at https://rave.credit-suisse.com/disclosures for the definitions of abbreviations typically used in the target price method and risk sections.

See the Companies Mentioned section for full company names

The subject company (005930.KS, 0992.HK, 2330.TW, 3673.TW, 066570.KS, 2454.TW, 2353.TW, 2357.TW, 2498.TW, RDA.OQ, NOK1V.HE, AAPL.OQ, ALUA.PA, MRVL.OQ, AMKR.OQ, IFXGn.DE, BRCM.OQ, ALTR.OQ, 5264.TW) currently is, or was during the 12-month period preceding the date of distribution of this report, a client of Credit Suisse.

Credit Suisse provided investment banking services to the subject company (0992.HK, NOK1V.HE, AAPL.OQ, ALUA.PA, MRVL.OQ, IFXGn.DE, BRCM.OQ, ALTR.OQ) within the past 12 months.

Credit Suisse provided non-investment banking services to the subject company (BRCM.OQ) within the past 12 months

Credit Suisse has managed or co-managed a public offering of securities for the subject company (0992.HK, AAPL.OQ, IFXGn.DE) within the past 12 months.

Credit Suisse has received investment banking related compensation from the subject company (0992.HK, NOK1V.HE, AAPL.OQ, ALUA.PA, MRVL.OQ, IFXGn.DE, BRCM.OQ, ALTR.OQ) within the past 12 months

Credit Suisse expects to receive or intends to seek investment banking related compensation from the subject company (005930.KS, 0992.HK, 3673.TW, 066570.KS, 2454.TW, 2458.TW, 2353.TW, 2357.TW, 2498.TW, RDA.OQ, QCOM.OQ, NOK1V.HE, AAPL.OQ, 3008.TW, ALUA.PA, MRVL.OQ, AMKR.OQ, 2301.TW, IFXGn.DE, BRCM.OQ, ALTR.OQ, 5264.TW, 2618.HK) within the next 3 months.

Credit Suisse has received compensation for products and services other than investment banking services from the subject company (BRCM.OQ) within the past 12 months

25 February 2016


As of the date of this report, Credit Suisse makes a market in the following subject companies (RDA.OQ, QCOM.OQ, 6758.T, AAPL.OQ, ALTR.OQ).

As of the end of the preceding month, Credit Suisse beneficially own 1% or more of a class of common equity securities of (3042.TW, 3673.TW, 3189.TW, 2454.TW, 2458.TW, 0763.HK, 2353.TW, 2357.TW, 2498.TW, 3008.TW, 2301.TW).

Credit Suisse has a material conflict of interest with the subject company (005930.KS) . Credit Suisse is acting as exclusive financial advisor to Samsung Electronics and Samsung Fine Chemicals in relation to the proposed sale of their ownership stakes in the semiconductor wafer joint ventures with SunEdison, SMP Ltd and MEMC Korea Company Ltd, to SunEdison.

Credit Suisse has a material conflict of interest with the subject company (0992.HK) . Credit Suisse is acting as financial advisor to Lenovo Group Limited for its proposed acquisition of Motorola Mobility Group from Google.

Credit Suisse has a material conflict of interest with the subject company (2330.TW) . Credit Suisse is acting as the financial advisor to Motech Industries Inc in relation to the share subscription by Taiwan Semiconductor Manufacturing Co., Ltd.

Credit Suisse has a material conflict of interest with the subject company (0981.HK) . Credit Suisse USA LLC is acting as an advisor to Atmel Corp on the potential transaction with Microchip Technology and On Semiconductor.

As of the date of this report, an analyst involved in the preparation of this report has the following material conflict of interest with the subject company (AAPL.OQ). A Credit Suisse analyst involved in the preparation of this report has a long position in the common stock of AAPL.

For other important disclosures concerning companies featured in this report, including price charts, please visit the website at https://rave.credit-suisse.com/disclosures or call +1 (877) 291-2683.

Important Regional Disclosures

Singapore recipients should contact Credit Suisse AG, Singapore Branch for any matters arising from this research report.

The analyst(s) involved in the preparation of this report may participate in events hosted by the subject company, including site visits. Credit Suisse does not accept or permit analysts to accept payment or reimbursement for travel expenses associated with these events.

Restrictions on certain Canadian securities are indicated by the following abbreviations: NVS--Non-Voting shares; RVS--Restricted Voting Shares; SVS--Subordinate Voting Shares.

Individuals receiving this report from a Canadian investment dealer that is not affiliated with Credit Suisse should be advised that this report may not contain regulatory disclosures the non-affiliated Canadian investment dealer would be required to make if this were its own report.

For Credit Suisse Securities (Canada), Inc.'s policies and procedures regarding the dissemination of equity research, please visit https://www.credit-suisse.com/sites/disclaimers-ib/en/canada-research-policy.html.

The following disclosed European company/ies have estimates that comply with IFRS: (NOK1V.HE, ALUA.PA, ERICb.ST).

Credit Suisse has acted as lead manager or syndicate member in a public offering of securities for the subject company (0992.HK, RDA.OQ, AAPL.OQ, ALUA.PA, AMKR.OQ, IFXGn.DE) within the past 3 years.

As of the date of this report, Credit Suisse acts as a market maker or liquidity provider in the equities securities that are the subject of this report.

Principal is not guaranteed in the case of equities because equity prices are variable.

Commission is the commission rate or the amount agreed with a customer when setting up an account or at any time after that.

Taiwanese Disclosures: This research report is for reference only. Investors should carefully consider their own investment risk. Investment results are the responsibility of the individual investor. Reports may not be reprinted without permission of CS. Reports written by Taiwan based analysts on non-Taiwan listed companies are not considered recommendations to buy or sell securities under Taiwan Stock Exchange Operational Regulations Governing Securities Firms Recommending Trades in Securities to Customers.

To the extent this is a report authored in whole or in part by a non-U.S. analyst and is made available in the U.S., the following are important disclosures regarding any non-U.S. analyst contributors: The non-U.S. research analysts listed below (if any) are not registered/qualified as research analysts with FINRA. The non-U.S. research analysts listed below may not be associated persons of CSSU and therefore may not be subject to the NASD Rule 2711 and NYSE Rule 472 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.

Credit Suisse Securities (Europe) Limited, Seoul Branch ...................................................................................................................... Keon Han

Credit Suisse AG, Taipei Securities Branch ............... Randy Abrams, CFA ; Pauline Chen ; Thompson Wu ; Jerry Su ; Haas Liu ; Derrick Yang

For Credit Suisse disclosure information on other companies mentioned in this report, please visit the website at https://rave.credit-suisse.com/disclosures or call +1 (877) 291-2683.

25 February 2016


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Investment principal on bonds can be eroded depending on sale price or market price. In addition, there are bonds on which investment principal can be eroded due to changes in redemption amounts. Care is required when investing in such instruments. When you purchase non-listed Japanese fixed income securities (Japanese government bonds, Japanese municipal bonds, Japanese government guaranteed bonds, Japanese corporate bonds) from CS as a seller, you will be requested to pay the purchase price only.

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