asian semiconductor sector
TRANSCRIPT
DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES, ANALYST CERTIFICATIONS, AND THE STATUS OF NON-US ANALYSTS. US Disclosure: Credit Suisse does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.
CREDIT SUISSE SECURITIES RESEARCH & ANALYTICS BEYOND INFORMATION®
Client-Driven Solutions, Insights, and Access
09 September 2014
Asia Pacific
Equity Research
Semiconductor Devices (Technology - Foundries CN (Asia)/Technology -
Semiconductors CN (Asia)/Technology - IC Deisgn TW (Asia)/Small Cap HK
(Asia))
Asian Semiconductor Sector COMMENT
Semicon Taiwan targets IoT for the 10x growth
Figure 1: IoT the next driver after PC and mobile
Source: SEMI, Samsung
■ Semicon Taiwan looks to IoT as the next 10x driver for the industry. We
attended the annual Semicon Taiwan focusing on chip manufacturing
developments and drawing 40,000 participants. This year's event focused on
enabling the next 10x industry driver with the IoT with panels on 8"/specialty
foundry, 2.5D/3D, SiP and fan-out packaging, EUV lithography, advanced
flip chip bonders, memory, and a CFO panel on financial mgmt.
■ Fan-out/2.5D/3D packaging ready but costs keep it a high-end niche.
We published in 2012 that it was early and overblown to de-rate the back-
end from foundry competition on the advance to 2.5D/3D packaging and
continue to support that view. TSMC discussed its CoWoS/InFO
developments but higher costs vs. flip chip/wirebonding are still keeping it a
niche at 1-2% of the industry in 2015. ASE highlighted its rival aS3+ and SiP
process, where we believe USI has US$40 content in a flagship watch.
■ TCB bonding from ASM Pacific/K&S may add memory next. ASM
showcased its work with Intel commercializing TCB bonding for high-end
processors and K&S unveiled its tool with units shipped to two memory
customers. The companies believe memory would launch TCB next.
■ EUV making some progress, though TSMC also still developing E-
Beam. ASML and TSMC noted litho source power has reached 45W and
throughput 500 wafers "on a good day" and still hope for 125W by end 2015
to allow for a few layers on 10nm. TSMC is still spending R&D on e-Beam as
another option at 7nm, noting some cost and performance advantages. See
John Pitzer's separate report for more discussion on the litho updates.
■ CS ATC this week to provide the next read. We view ASE well positioned on SiP integration with opportunity more than offsetting some high-end push from TSMC into wafer level packaging. We also maintain ASM Pacific OUTPERFORM with TCB giving it a potential LT packaging driver. We look
ahead to CS ATC this week for updates from the 110 companies attending.
Research Analysts
Randy Abrams, CFA
886 2 2715 6366
Nickie Yue
886 2 2715 6364
09 September 2014
Asian Semiconductor Sector 2
Focus charts Figure 2: TSMC source power roadmap Figure 3: Multiple E-Beam cost may be lower than EUV
0
50
100
150
200
250
300
Q413 Q114 Q214 Q314 Q414 Q115 Q215 Q315 Q415
Source Power Watts
Cost of all layers of
7nm lithography 10nm 7nm
Lithography tool ArFi ArFi EUV EUV
Multiple E-
Beam
MEB cost
saving
Source Power 125W 250W
Case 1 1.00 2.10 2.40 2.00 1.70 -15%
Case 2 1.00 1.74 2.18 1.81 1.58 -13%
Case 3 1.00 1.49 1.56 1.45 1.40 -3%
Source: TSMC Source: TSMC data
Figure 4: Micron projects DRAM bit supply growth to slow
to 21% from '14-'18
Figure 5: Micron projects DRAM demand to still have 25%
YoY growth with growth from more applications
Source: Micron Source: Company data, Credit Suisse estimates
Figure 6: TSMC advanced packaging technologies Figure 7: TSMC advanced technology roadmap
Source: TSMC Source: TSMC
Figure 8: Chip attach assembly history Figure 9: Intel's next generation chip attach technology
Source: ASM, Intel Source: ASM, Intel
09 September 2014
Asian Semiconductor Sector 3
SEMICON Taiwan targets IoT for the next 10x growth SEMI, the chip equipment supplier’s member organisation hosted its annual Semicon
Taiwan starting yesterday featuring 40,000 industry representatives. The event provides a
view on technology trends from leading manufacturers and equipment suppliers though
not focused on financial updates. Key focus was on driving the industry to expand from the
2 bn unit smartphone market into the multi-billion unit Internet of Things market.
We attended sessions on 8"/specialty foundry technology, 2.5D/3D and system in
packaging, next generation lithography, advanced thermal compression flip chip bonders,
memory, and financial corporate management and present key themes and takeaways.
The Internet of Things as the next Semi growth driver
■ TSMC – Design ecosystem a key part of its grand alliance. TSMC’s Cliff Hou
provided several updates at his presentation on the design ecosystem and its ability to
enable the Internet of Things. The company featured several innovations including:
(1) Ultra low power 28nm (28nm ULP) – TSMC has developed an even lower process
suitable for the next wave of higher performance IoT devices, offering 30% lower
operating voltage, >40% lower active power and >75% lower standby power. The
company expects this process to move the sweet spot of IoT devices down from
40/55nm to 28nm and also will use this lower power process as the mainstream
alternative to challenge Samsung/GlobalFoundries licensing of FD-SOI for low power
28nm IoT ICs.
(2) Wafer level back-end packaging remains a key focus. TSMC will keep a joint track
for wafer level packaging including the very high-end CoWoS 2.5D stacking first
adopted by Xilinx but expensive for mass market applications and InFO for smaller
packages. We believe QCOM's RF 360 may use TSMC's InFO and Stats eWLB for its
initial fan-out application and have already seen Marvell produce with Marvell, though
revenue is still very small relative to flip chip and wirebonding.
(3) Virtual platform to integrate chip level and system level design. Cliff Hou also
discussed a new virtual platform to speed new chip and system level design. The
company noted its IP ecosystem is up to 7,500+ titles from 40 IP partners, giving it a
broad platform for customer engagement and expects to have this platform available
for customers by next year's show.
Figure 10: Silicon building blocks for the Internet of
Things
Figure 11: TSMC R&D pipeline for future opportunities
Source: TSMC Source: TSMC website
Semicon Taiwan technology
updates profiled
TSMC adds 28nm ULP to its
roadmap to offer a lower
power process to keep
competitive relative to
Samsung/GF with FD-SOI
09 September 2014
Asian Semiconductor Sector 4
■ ASE – Internet of Things has the building blocks – but needs to come together.
ASE’s COO Tien Wu highlighted the next major evolution of ICs is to grow the industry
with the next 10x move from the 2bn unit handset market to the 10+ bn IoT market
enabling machine to machine communication. ASE highlighted its ability to join
packaging and module design for SiPs for IC design and system companies as its
unique opportunity. The company is cautious however that more value is shifting to
software/services over ICs/hardware and doesn’t yet see a self-sustaining profitable
model to bring the pieces together for another big inflection for IoT volumes yet.
Figure 12: IoT the next 10x driver after PC and mobile
Source: SEMI, Samsung
■ UMC – IoT enables business for its 200mm (8") fabs. UMC noted that IoT
applications will drive the next wave after smartphones and PC. It believes it has a rich
portfolio of 8" technologies to support eNVM (65/55nm), CIS (65/55nm), HV
(65/55nm), PMIC (.18um), MEMS (.18um), and that it also has leadership on 12" for
55nm HV, CIS, eFlash.
■ SMIC – building technology platforms to meet the demand for 8" fabs. SMIC
sees three main types of demand supporting the growth of 8" fabs: 1) demand for
analog and mixed signal content for the mobile device market, 2) advanced up from
mature 6" IDM fabs (note Fairchild announced last week it would shut 6" capacity and
increase foundry outsourcing), and 3) injected by new wave applications (IoT,
wearable). The company also discussed its various technology offerings in its
specialty process generating one-third of sales: 1) CIS: SMIC has the top 5 unit
shipment, 1.75um and WLCSP ready and 3DIC CIS in development, 2) PMIC: .35um-
.18um in volume production, 3) eNVM (MCU, smart card): .18um – 55nm, 4) Flash
controller: 55/40nm with demonstrated yield, 5) MEMS: specialty process and total
TSV packaging solution.
Figure 13: UMC technology portfolio Figure 14: SMIC IoT applications and Technologies
Source: UMC Source: SMIC
ASE still sees some
developments needing to
come together to truly drive
the 10x growth from the IoT
market
09 September 2014
Asian Semiconductor Sector 5
2.5D & 3D to see more adoption next year, but cost is
still the hurdle to mass market adoption
We attended several forums at Semicon Taiwan's annual SiP forum focused mainly on
developments with next generation 2.5D & 3D packaging. Industry participants remain
more in agreement on some of the performance benefits, with integration of multiple chips
on a silicon interposer (commonly referred to as 2.5D or by TSMC as CoWoS) or directly
connected in a stack with Through Silicon Vias (referred to as 3D packaging). The
2.5D/3D stacks offer performance benefit in terms of higher memory density in a packaged
devices, higher bandwidth between logic and memory, lower power consumption, and
smaller form factor.
The industry is more confident in the 2.5D/3D technology readiness, but still sees conflicts
in ownership of the process between back-end and foundry and more importantly cost
continues to prohibit high volume application adoption relative to the mature flip chip and
wirebond processes. Key applications under development include homogeneous chips
(FPGA similar to Xilinx stacked interconnect), heterogeneous SiP (processor + memory) in
2016, cognitive computing SiP (multiple logic chips), wide I/O DRAM modules, CMOS
sensors and MEMS. Yole research expects to see start of production adoption of 3D IC in
2015 first by the memory companies (Micron, SK Hynix, and Samsung).
Figure 15: 2.5D/3D on the package roadmap from 2015 Figure 16: Industry readiness largely there now for 3D ICs
Source: ASE Source: ASE
■ ASE – maintains confidence in its SiP proposition and targets to support AMD
for 2.5D in 2015. ASE believes that it will lead the OSAT to capture opportunities in
the increasingly complex industry with its partnership combining Inotera's production
facility for the interposer production with ASE's packaging capability for the chip
connection and test. ASE noted that the 2.5D to 3D IC interconnection helps enrich
SiP solutions, which is driven by trends of hybrid sensors, connection, miniaturization,
minimum power consumption and effective cost. AMD is also going to 3D in FC-BGA
for its SoC effectiveness, wafer node efficiency, cost and yield concern, performance
and power efficiency. ASE also noted that AMD will have its first 2.5D shipping in
2015, supported by ASE.
2.5D/3D packaging more
ready now, but cost is still a
hurdle to lower cost
application adoption
ASE targets 3D work with
AMD in 2015
09 September 2014
Asian Semiconductor Sector 6
Figure 17: ASE 2D to 3D enriches its SiP solutions Figure 18: ASE working with AMD on 3D
Source: ASE Source: ASE
■ Inotera – forming a new business model for 2.5D with ASE, though capacity
looks limited. Inotera also believes that the industry is ready for 2.5D and 3D. 2.5D
with silicon interposer offers performance (yield & reliability), power and cost benefit
for advanced SiP. It also believes that its collaboration with ASE combines the
strength of an OSAT and a wafer foundry partner, and represents a competitive new
business model that offers a silicon interposer + assembly turnkey solution, which
simplifies supply chain management and offers large scale production efficiently.
We would caveat still that volumes may not be that material. Inotera has fully booked
out its 120k WPM capacity to Micron now and will lose 20% of its wafer capacity when
it shrinks from 30nm to 20nm over the next six quarters. Inotera may need to add new
capacity to materially grow its interposer production and make up for some of its
memory wafer capacity loss on 20nm.
Figure 19: ASE + Inotera partnering on 2.5D turnkey Figure 20: Inotera's new model as an Interposer foundry
Source: Inotera, ASE Source: Inotera, ASE
Thermal compression bonders from ASM Pacific and
KLIC battle out for advanced packaging business
A key enabler of advanced 2.5D and 3D packaging is the thermal compression flip chip
bonder. The product demand will be triggered by demand for finer pitch, thinner and more
complex packaging, high placement accuracy and die alignment as geometries shrink and
Moore's Law slows down. Both ASM Pacific and K&S held sessions to discuss the
opportunities they foresee in thermal compression bonding (TCB) and K&S was showing
its newly announced bonder in its customer meeting area on the Semicon Taiwan trade
ASE and Inotera partnership
for silicon interposers,
though Inotera is capacity
limited and will sacrifice
more to shrink to 20nm
ASM Pacific and Intel
demonstrate their TCB
bonders, K&S also
showcases its product
behind closed doors
09 September 2014
Asian Semiconductor Sector 7
show floor. The unique part of thermal compression bonding is it picks up the chip and
heats it up rapidly so it gets attached to the substrate locally without having to go through
a reflow oven. K&S launched its first TCB equipment called APAMA and noted that it is
able to heat it up and cool it down in 1 second.
Currently, Intel is using ASM's TCB tool as a high volume chip attach process. We expect
memory companies, including Micron, SK Hynix and Samsung, to be the next to adopt
thermal compression bonders as this technology is particularly suitable to meet the
technical requirements of 3D packaging.
However, larger scale roll out still hinges on the throughput (flip chip bonders process
3,000-5,000 units more per hour versus ~1,000 for thermal compression bonding) and
cost (a thermal compression bonder could cost 2-3x more than a flip chip bonder).
■ ASM Pacific – high-end thermal compression bonder in adoption by Intel. ASM
Pacific and Intel jointly presented the thermal compression bonding update, with use
now for high-end processors. The companies noted the benefits of thermal
compression bonding vs. traditional mass reflow are support for finer pitch, thinner and
better integrated system in packages, lower stress, and less warpage. However,
challenges include still relatively small installed base/maturity of process, throughput
and cost. Thermo compression bonding has been developed and implemented at Intel
towards high volume manufacturing starting in 2014. ASM believes its thermo
compression equipment provides unique features (high precision, large die handling
capability, portable, forward compatible) to enable high quality, fast and robust chip
attach process.
Figure 21: Chip attach assembly history Figure 22: Intel's next generation chip attach technology
Source: ASM, Intel Source: ASM, Intel
■ SPIL – technical session highlights its copper-silver alloy wirebonding
capability. On the other end of the spectrum, SPIL also discussed the benefits of
Silver-Copper alloy material as an alternative to gold or copper bonding. The
company cited silver’s lower hardness makes wire easier to bond with less force,
allowing higher throughput and still passing reliability, longevity and electrical tests.
The company has now converted 20-30% of its volume to silver alloy and 70% of
bonding to either silver alloy or copper, a key part of its margin improvement the past
few years transitioning from gold wirebonding.
Fan-out wafer-level packaging as a new solution to
advanced packaging, but still a niche market
TSMC also presented at Semicon on its roadmap on Wafer Level System Integration
(WLSI), with details on its advanced packaging technologies– CoWoS and INFO. TSMC
sees system integration as a new trend and opportunity, so it plans to do everything in
wafer form with its WLSI (wafer level system integration), which entails manufacturing,
design support, integrated services and also advanced packaging. TSMC believes this
SPIL highlights the merits of
its silver-copper alloy
09 September 2014
Asian Semiconductor Sector 8
total solution translates to competitiveness and its innovation and leadership technology
also help create values, scale, manufacturing efficiency, and capacity flexibility.
TSMC characterises WLSI as a "powerful and cool" technology, as it integrates chips and
packaging, reduces system size, shortens cycle times, increases customers' time to
money and also helps sustain Moore’s Law. It offers CoWoS for high performance, bigger
die size, suitable for 3D stacking, while InFO has a simpler architecture for smaller form
factor, and also supporting multi-chip integration but for more competitive cost.
TSMC noted strong interests from its big customers for its fan out technology, and that it
targets to maintain currently profitability levels even with the backend solutions. However,
we still expect challenges to wide adoption of CoWoS or even InFO in the near-term, as
both performance and cost must be optimised to be suitable for a wide range of
consumer/communication applications.
Figure 23: TSMC advanced packaging technologies Figure 24: TSMC advanced technology roadmap
Source: TSMC Source: TSMC
CoWoS designed for superior performance but also at high cost
TSMC's CoWoS (chip-on-wafer-on-substrate) enables high performance applications and
package sizes of 500mm2
and above with 1,000-4,000 I/O pin count. TSMC is moving its
CoWoS towards high function, bandwidth and data rate. It is also suitable for integrating
logic, DRAM and stacked DRAM chips that are on different nodes. It noted that CoWoS
has good yields and good thermal performance.
The benefit of having a substrate is that it helps achieve better performance, but the
substrate & bump also add to total thickness and cost. The only example of CoWoS has
been the project developed for Xilinx, which combined multiple 28nm die using an
interposer at very high cost but suitable for high-end applications.
TSMC targets to offer the next generation of InFO in 1H15
TSMC InFO (integrated fan out wafer level packaging) is designed for both single chip and
multi-chips, 2D & 3D, mobile application processor and baseband chips, linking logic to
memory and advanced & mature nodes. InFO also leverages on the wafer processing
technology and knowledge of CoWoS.
TSMC offering InFO for
mass market wafer level
packaging and CoWoS for
high-end packaging
09 September 2014
Asian Semiconductor Sector 9
Figure 25: TSMC InFO platforms – 2x2 mm2
upcoming
Source: TSMC, i-Micronews Source: TSMC, i-Micronews
TSMC claims that its InFO has a significantly thinner & lower profile package, tighter
bandwidth, better thermal performance for smaller form factor with much finer pitch (i.e.,
10um) and most importantly, at a lower cost. It noted that it targets to announce the next
generation InFO at 2x2 line spacing (L/S) in 1H15, a target that back-end companies only
aim for by end of 2015. Current InFO platforms include 8x8mm2
targeted at RF and WiFi
chips and the mid-sized platform (15x15mm2) for AP and baseband chips, the larger
25x25mm2 platform for multi-die could be for AP, GPU and networking applications. We
believe Qualcomm's RF 360 may be one of the first applications to adopt this package
type as it would allow for integration of multiple components in the package in a thin profile.
Figure 26: TSMC's InFO already qualified for production Figure 27: InFO architecture
Source: TSMC, i-Micronews Source: TSMC, i-Micronews
Besides TSMC, many backend/semis companies are also developing fan out wafer level
packaging, including STATS, Nanium, Amkor, ASE, STATS, Nepes, Freescale, Infineon,
J-Devices. According to Yole development estimates, the current Fan-out WLP technology
market size is roughly US$150 mn, or 1% of the US$25 bn OSAT total addressable
market, of which STATS has 58% market share and Nanium has 31%.
ASE highlighted aS3+ as ASE’s solution to provide a more cost effective coreless
substrate based flip chip or wirebond packaging that can use a lower density substrate as
an alternative to fan-out wafer level packaging (TSMC’s InFO or Stats eWLB). ASE noted
volumes have now passed 2 mn/month.
STATS also has its fan-out technology called Embedded Wafer Level Ball Grid Array
(eWLB) which has the design flexibility to accommodate an unlimited number of
interconnects, unconstrained by die size. STATS believe that its eWLB provides significant
performance, size and cost benefits. STATS' eWLB is offered for mass production – its
ASE's aS3+ an alternative
to wafer level packaging
09 September 2014
Asian Semiconductor Sector 10
key customers include Marvell now and we believe also may include Qualcomm for its RF
360 product alongside TSMC.
Figure 28: STATS' fan-out WLP technology - eWLB Figure 29: Stats 3D and eWLB packaging roadmap
Source: STATS Source: STATS
Memory demand drivers healthy and supply growth
still reasonable
Semicon Taiwan also featured several panels and sessions on the memory landscape.
Inotera's CEO Charles Kau and Micron Sr. Finance Director Kai Strohbecke reiterated
comments from Micron's recent Hong Kong analyst day focusing on structural
improvements in the memory sector. Charles Kau discussed improvements including (1)
supply constraints as technology migration now stretches cycle times and use more fab
space, thus lowering fab wafer capacity, (2) industry consolidation continues to improve
supply discipline and shift focus to returns over market share, (3) shipment growth is being
supplemented by new applications including mobile, Internet of Things, and in-memory
server computing, and (4) new memory types (LP DDR 4, 3D-ICs and ReRAM) have
potential in the coming couple of years to improve the value of memory by increasing
bandwidth and lowering latency.
The companies maintained their expectation for demand growth in DRAM sustaining
+25% YoY growth, outpacing a slowdown of bit growth from +30% YoY in 2014 to +21%
YoY average the next few years. Micron in the CFO session at the event also reiterated its
focus on efficient capital management and value creation. The company targets
investments over its 10% cost of capital, return driven investments with capex/sales
holding 20-25% and focusing investments on cost enablement and production efficiency
over market share.
Micron and Inotera reiterate
their expectation for slowing
bit growth in DRAM after
2014
09 September 2014
Asian Semiconductor Sector 11
Figure 30: Micron projects DRAM bit supply growth to
slow to 21% from '14-'18
Figure 31: Micron projects DRAM demand to still have
25% YoY growth with growth from more applications
Source: Micron Source: Micron
EUV making mild progress, although TSMC still
backing E-Beam as a 7nm and below alternative
TSMC and SEMI co-organised a Lithography and Mask technology symposium also
sponsored by ASML and featuring TSMC presentations on making lithography work for
7nm and beyond, multiple e-beam development toward 7nm and progress and challenges
of EUV for high volume manufacturing. We also attend sessions with updates on next
generation lithography from ASML, UMC, and Toshiba.
TSMC seeing some progress on EUV, but keeping a path toward E-Beam at 7nm as an
alternative
TSMC's Dr. Burn Lin, VP of R&D discussed limits and challenges on lithography on 7nm,
and noted the company would continue to work on EUV and e-Beam as options for 7nm
and below production. He acknowledged lithography has limits and many of these limits
are unexpected, making lithography work for 7nm "not a piece of cake".
The company outlined key limits on (1) overlay accuracy, (2) resolution, (3) defects and (4)
costs. He presented a case that e-Beam may provide some benefits over EUV in resolving
these issues, with e-Beam allowing (1) multiple additional high order turns to reduce
overlay error, (2) ability to avoid the problem of EUV mask flatness, (3) ability to resolve
some resolution limits, and (4) potentially better economics. The presentation showed
interesting data on cost comparison of ArF at 10nm vs 7nm cost for EUV of Multiple-E-
Beam. The data showed EUV is only lower cost than ArF at 250W but is still 3-15% more
expensive than e-Beam.
TSMC's Shy-Jay Lin presented on eBeam Direct Write Systems as a proponent to
continue industry development for possible production by 7nm. The company has
demonstrated a module and delivered a chip on 40nm using CMOS+MEMs and believes
e-Beam is still marching toward 7nm, with massive beams and multiple platforms possible
to enable the technology by 2017.
TSMC's Jack J.H. Chen, Department Manager of the company's next generation
lithography was more constructive on EUV's progress and challenges. He indicated the
company had achieved 45 watt performance in 2Q14 and was targeting 80 watts by 4Q14,
125 by 2Q15 and 250 watts by 4Q15, a level necessary to reach its 125 wafers per hour
for 300mm production. The company has improved tool availability of its first NXE 3100
systems from 50% in 2013 to 70-80% in 2014 and indicated it was one of the customers
ASML indicated was reaching 500 wafers processed "on a good day".
TSMC still doing R&D work
on e-Beam for 7nm next
generation lithography,
though also have the
mainstream EUV path still in
development
09 September 2014
Asian Semiconductor Sector 12
Figure 32: TSMC source power roadmap Figure 33: Multiple E-Beam cost may be lower than EUV
0
50
100
150
200
250
300
Q413 Q114 Q214 Q314 Q414 Q115 Q215 Q315 Q415
Source Power Watts
Cost of all layers of
7nm lithography 10nm 7nm
Lithography tool ArFi ArFi EUV EUV
Multiple E-
Beam
MEB cost
saving
Source Power 125W 250W
Case 1 1.00 2.10 2.40 2.00 1.70 -15%
Case 2 1.00 1.74 2.18 1.81 1.58 -13%
Case 3 1.00 1.49 1.56 1.45 1.40 -3%
Source: TSMC Source: TSMC data
ASML seeing customers progress toward EUV insertion at 10nm
ASML's Senior Product Manager Dr Kars Troost also provided an update on customer
status on EUV, with key message that multiple customers are now qualifying EUV for
insertion at the 10nm logic node. Dr Troost noted that a number of customers are now
getting to 500+ wafers per day with 40+ Watts source power and will allow the company to
reach that consistent target by year-end. The company remains confident in 2016 it will
provide customers with the production capability for volume production at 1,500
wafers/day. The company has six NXE 3300B systems fully qualified and shipped and five
more being integrated. The company's 4th generation NXE3350B has integration on-going.
TSMC financial session focused on managing return
on investment across the cycle
A newly added financial seminar featured TSMC CFO Lora Ho and Micron's Sr. Finance
Director Kai Strohbecke. Lora Ho highlighted three challenges foundries are facing in their
financial management:
(1) the economic challenges pursuing Moore's Law including rising technical challenges,
higher R&D/capex burden and fewer customers pushing down each node
(2) business challenge from slowing growth of mobile and uncertain timing and magnitude
of the next big thing (IoT), and
(3) intensifying need for risk management due to fast product cycles, and volatility of the
business and macro.
The company highlighted its ability to answer these challenges by growing 10%+ PBT the
past 5 years at 20%+ ROE with early engagement on new technology, accelerated tool
productivity, Grand Alliance ecosystem with IP, fabless, equipment and EDA, a
broadening spectrum of technology and financial discipline.
While the company acknowledged slowing growth in mobile, it still believes growth will
moderate to a still reasonable pace and be joined by continued growth in low-mid end
devices and Internet of Things. The company is increasing emphasis on its broader
technology platform including Ultra Low Power 28nm, sensors, embedded memory and
RF to capture the momentum on the Internet of Things. The company continues to
seriously consider increasing the dividend in 2015 and will target keeping low debt
leverage to maintain it’s A+ credit rating, targeting to take the debt ratio down from 33% to
30% this year and further next year.
ASML and TSMC have
achieved 40+ watt source
power and 500+ wafers per
day
TSMC seriously considers
increasing its dividend in
2015, investment emphasis
will expand to its broader
technology platform of
specialty and ultra-low
power technology
09 September 2014
Asian Semiconductor Sector 13
Companies Mentioned (Price as of 05-Sep-2014)
ASM Pacific Tech. (0522.HK, HK$81.0) ASML Holding N.V. (ASML.AS, €75.48) Advanced Micro Devices, Inc. (AMD.N, $4.15) Advanced Semicon. Engr. (2311.TW, NT$36.1) Freescale Semiconductor Inc. (FSL.N, $21.35) Infineon Technologies AG (IFXGn.DE, €9.047) Inotera Memories Inc. (3474.TW, NT$48.0) Intel Corp. (INTC.OQ, $35.0) Kulicke & Soffa (KLIC.OQ, $14.95) Marvell Technology Group Ltd. (MRVL.OQ, $14.13) Micron Technology Inc. (MU.OQ, $32.94) QUALCOMM Inc. (QCOM.OQ, $75.81) SK Hynix Inc. (000660.KS, W43,200) STATS (STTS.SI, S$0.595) Samsung Electronics (005930.KS, W1,201,000) Semiconductor Manufacturing International Corp. (0981.HK, HK$0.73) Siliconware Precision (2325.TW, NT$43.8) Taiwan Semiconductor Manufacturing (2330.TW, NT$127.0) Toshiba (6502.T, ¥465) United Microelectronics (2303.TW, NT$13.3) Xilinx (XLNX.OQ, $43.06)
Disclosure Appendix
Important Global Disclosures
Randy Abrams, CFA and Nickie Yue, each certify, with respect to the companies or securities that the individual analyzes, that (1) the views expressed in this report accurately reflect his or her personal views about all of the subject companies and securities and (2) no part of his or her compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report.
3-Year Price and Rating History for ASM Pacific Tech. (0522.HK)
0522.HK Closing Price Target Price
Date (HK$) (HK$) Rating
30-Oct-11 95.40 68.00 U
08-Mar-12 98.95 79.50
25-Apr-12 103.10 89.50 N
27-Jul-12 101.10 77.50 U
22-Aug-12 85.05 73.50
26-Oct-12 86.70 67.50
07-Mar-13 101.60 93.00 N
24-Apr-13 78.80 72.50
26-Jul-13 86.20 75.50
04-Nov-13 68.05 55.20 U
27-Feb-14 70.25 78.00 O
13-Mar-14 67.50 *
24-Apr-14 82.80 97.00 O
* Asterisk signifies initiation or assumption of coverage.
U N D ERPERFO RM
N EU T RA L
O U T PERFO RM
09 September 2014
Asian Semiconductor Sector 14
3-Year Price and Rating History for Advanced Semicon. Engr. (2311.TW)
2311.TW Closing Price Target Price
Date (NT$) (NT$) Rating
31-Oct-11 23.64 29.83 O
23-Apr-12 25.40 31.58
26-Jul-12 19.48 27.20
26-Apr-13 25.85 31.00
16-Jul-13 25.35 R
29-Aug-13 25.45 31.00 O
09-Oct-13 29.00 34.00
20-Dec-13 27.25 31.50
10-Feb-14 29.15 32.50
08-Apr-14 33.45 40.00
28-Apr-14 34.75 42.00
08-Jul-14 39.90 47.00
* Asterisk signifies initiation or assumption of coverage.
O U T PERFO RM
REST RICT ED
3-Year Price and Rating History for Taiwan Semiconductor Manufacturing (2330.TW)
2330.TW Closing Price Target Price
Date (NT$) (NT$) Rating
03-Oct-11 68.60 77.00 O
27-Oct-11 71.90 79.00
19-Mar-12 83.70 90.00
27-Apr-12 86.00 95.00
19-Jul-12 77.50 87.00
08-Oct-12 89.10 95.00 N
06-Dec-12 96.60 109.00 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
* Asterisk signifies initiation or assumption of coverage.
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 cove red 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 Oc tober 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, 12 -month rolling yield is incorporated in the absolute total return calculation and a 15% and a 7.5% threshold replace the 10-15% level in the Outperform and Underperform stock rating definitions, respectively. The 15% and 7.5% thresholds replace the +10-15% and -10-15% levels in the Neutral stock rating definition, respectively. Prior to 10th December 2012, Japanese ratings were based on a stock’s total return relative to the average total return of the relevant country or regional benchmark.
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.
09 September 2014
Asian Semiconductor Sector 15
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 sector s.
Credit Suisse's distribution of stock ratings (and banking clients) is:
Global Ratings Distribution
Rating Versus universe (%) Of which banking clients (%)
Outperform/Buy* 44% (54% banking clients)
Neutral/Hold* 40% (51% banking clients)
Underperform/Sell* 13% (44% banking clients)
Restricted 3%
*For purposes of the NYSE and NASD ratings distribution disclosure requirements, our stock ratings of Outperform, Neutral, and Underperform 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 holdings, and other indivi dual 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.
See the Companies Mentioned section for full company names
The subject company (2330.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 expects to receive or intends to seek investment banking related compensation from the subject company (0522.HK) within the next 3 months.
As of the end of the preceding month, Credit Suisse beneficially own 1% or more of a class of common equity securities of (2311.TW, 2330.TW).
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.
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 have not visited the material operations of the subject company (0522.HK, 2311.TW, 2330.TW) within the past 12 months
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 http://www.csfb.com/legal_terms/canada_research_policy.shtml.
Credit Suisse has acted as lead manager or syndicate member in a public offering of securities for the subject company (2311.TW) 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.
09 September 2014
Asian Semiconductor Sector 16
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 AG, Taipei Securities Branch ........................................................................................................ Randy Abrams, CFA ; Nickie Yue
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.
09 September 2014
Asian Semiconductor Sector 17
References in this report to Credit Suisse include all of the subsidiaries and affiliates of Credit Suisse operating under its investment banking division. For more information on our structure, please use the following link: https://www.credit-suisse.com/who_we_are/en/This report may contain material that is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would subject Credit Suisse AG or its affiliates ("CS") to any registration or licensing requirement within such jurisdiction. All material presented in this report, unless specifically indicated otherwise, is under copyright to CS. None of the material, nor its content, nor any copy of it, may be altered in any way, transmitted to, copied or distributed to any other party, without the prior express written permission of CS. All trademarks, service marks and logos used in this report are trademarks or service marks or registered trademarks or service marks of CS or its affiliates. The information, tools and material presented in this report are provided to you for information purposes only and are not to be used or considered as an offer or the solicitation of an offer to sell or to buy or subscribe for securities or other financial instruments. CS may not have taken any steps to ensure that the securities referred to in this report are suitable for any particular investor. CS will not treat recipients of this report as its customers by virtue of their receiving this report. The investments and services contained or referred to in this report may not be suitable for you and it is recommended that you consult an independent investment advisor if you are in doubt about such investments or investment services. Nothing in this report constitutes investment, legal, accounting or tax advice, or a representation that any investment or strategy is suitable or appropriate to your individual circumstances, or otherwise constitutes a personal recommendation to you. CS does not advise on the tax consequences of investments and you are advised to contact an independent tax adviser. Please note in particular that the bases and levels of taxation may change. Information and opinions presented in this report have been obtained or derived from sources believed by CS to be reliable, but CS makes no representation as to their accuracy or completeness. CS accepts no liability for loss arising from the use of the material presented in this report, except that this exclusion of liability does not apply to the extent that such liability arises under specific statutes or regulations applicable to CS. This report is not to be relied upon in substitution for the exercise of independent judgment. CS may have issued, and may in the future issue, other communications that are inconsistent with, and reach different conclusions from, the information presented in this report. Those communications reflect the different assumptions, views and analytical methods of the analysts who prepared them and CS is under no obligation to ensure that such other communications are brought to the attention of any recipient of this report. Some investments referred to in this report will be offered solely by a single entity and in the case of some investments solely by CS, or an associate of CS or CS may be the only market maker in such investments. Past performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or implied, is made regarding future performance. Information, opinions and estimates contained in this report reflect a judgment at its original date of publication by CS and are subject to change without notice. The price, value of and income from any of the securities or financial instruments mentioned in this report can fall as well as rise. The value of securities and financial instruments is subject to exchange rate fluctuation that may have a positive or adverse effect on the price or income of such securities or financial instruments. Investors in securities such as ADR's, the values of which are influenced by currency volatility, effectively assume this risk. Structured securities are complex instruments, typically involve a high degree of risk and are intended for sale only to sophisticated investors who are capable of understanding and assuming the risks involved. The market value of any structured security may be affected by changes in economic, financial and political factors (including, but not limited to, spot and forward interest and exchange rates), time to maturity, market conditions and volatility, and the credit quality of any issuer or reference issuer. Any investor interested in purchasing a structured product should conduct their own investigation and analysis of the product and consult with their own professional advisers as to the risks involved in making such a purchase. Some investments discussed in this report may have a high level of volatility. High volatility investments may experience sudden and large falls in their value causing losses when that investment is realised. Those losses may equal your original investment. Indeed, in the case of some investments the potential losses may exceed the amount of initial investment and, in such circumstances, you may be required to pay more money to support those losses. Income yields from investments may fluctuate and, in consequence, initial capital paid to make the investment may be used as part of that income yield. Some investments may not be readily realisable and it may be difficult to sell or realise those investments, similarly it may prove difficult for you to obtain reliable information about the value, or risks, to which such an investment is exposed. This report may provide the addresses of, or contain hyperlinks to, websites. Except to the extent to which the report refers to website material of CS, CS has not reviewed any such site and takes no responsibility for the content contained therein. Such address or hyperlink (including addresses or hyperlinks to CS's own website material) is provided solely for your convenience and information and the content of any such website does not in any way form part of this document. Accessing such website or following such link through this report or CS's website shall be at your own risk. This report is issued and distributed in Europe (except Switzerland) by Credit Suisse Securities (Europe) Limited, One Cabot Square, London E14 4QJ, England, which is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. This report is being distributed in Germany by Credit Suisse Securities (Europe) Limited Niederlassung Frankfurt am Main regulated by the Bundesanstalt fuer Finanzdienstleistungsaufsicht ("BaFin"). This report is being distributed in the United States and Canada by Credit Suisse Securities (USA) LLC; in Switzerland by Credit Suisse AG; in Brazil by Banco de Investimentos Credit Suisse (Brasil) S.A or its affiliates; in Mexico by Banco Credit Suisse (México), S.A. (transactions related to the securities mentioned in this report will only be effected in compliance with applicable regulation); in Japan by Credit Suisse Securities (Japan) Limited, Financial Instruments Firm, Director-General of Kanto Local Finance Bureau (Kinsho) No. 66, a member of Japan Securities Dealers Association, The Financial Futures Association of Japan, Japan Investment Advisers Association, Type II Financial Instruments Firms Association; elsewhere in Asia/ Pacific by whichever of the following is the appropriately authorised entity in the relevant jurisdiction: Credit Suisse (Hong Kong) Limited, Credit Suisse Equities (Australia) Limited, Credit Suisse Securities (Thailand) Limited, regulated by the Office of the Securities and Exchange Commission, Thailand, having registered address at 990 Abdulrahim Place, 27th Floor, Unit 2701, Rama IV Road, Silom, Bangrak, Bangkok 10500, Thailand, Tel. +66 2614 6000, Credit Suisse Securities (Malaysia) Sdn Bhd, Credit Suisse AG, Singapore Branch, Credit Suisse Securities (India) Private Limited (CIN no. U67120MH1996PTC104392) regulated by the Securities and Exchange Board of India (registration Nos. INB230970637; INF230970637; INB010970631; INF010970631), having registered address at 9th Floor, Ceejay House, Dr.A.B. Road, Worli, Mumbai - 18, India, T- +91-22 6777 3777, Credit Suisse Securities (Europe) Limited, Seoul Branch, Credit Suisse AG, Taipei Securities Branch, PT Credit Suisse Securities Indonesia, Credit Suisse Securities (Philippines ) Inc., and elsewhere in the world by the relevant authorised affiliate of the above. Research on Taiwanese securities produced by Credit Suisse AG, Taipei Securities Branch has been prepared by a registered Senior Business Person. Research provided to residents of Malaysia is authorised by the Head of Research for Credit Suisse Securities (Malaysia) Sdn Bhd, to whom they should direct any queries on +603 2723 2020. This report has been prepared and issued for distribution in Singapore to institutional investors, accredited investors and expert investors (each as defined under the Financial Advisers Regulations) only, and is also distributed by Credit Suisse AG, Singapore branch to overseas investors (as defined under the Financial Advisers Regulations). By virtue of your status as an institutional investor, accredited investor, expert investor or overseas investor, Credit Suisse AG, Singapore branch is exempted from complying with certain compliance requirements under the Financial Advisers Act, Chapter 110 of Singapore (the "FAA"), the Financial Advisers Regulations and the relevant Notices and Guidelines issued thereunder, in respect of any financial advisory service which Credit Suisse AG, Singapore branch may provide to you. This research may not conform to Canadian disclosure requirements. In jurisdictions where CS is not already registered or licensed to trade in securities, transactions will only be effected in accordance with applicable securities legislation, which will vary from jurisdiction to jurisdiction and may require that the trade be made in accordance with applicable exemptions from registration or licensing requirements. Non-U.S. customers wishing to effect a transaction should contact a CS entity in their local jurisdiction unless governing law permits otherwise. U.S. customers wishing to effect a transaction should do so only by contacting a representative at Credit Suisse Securities (USA) LLC in the U.S. Please note that this research was originally prepared and issued by CS for distribution to their market professional and institutional investor customers. Recipients who are not market professional or institutional investor customers of CS should seek the advice of their independent financial advisor prior to taking any investment decision based on this report or for any necessary explanation of its contents. This research may relate to investments or services of a person outside of the UK or to other matters which are not authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority or in respect of which the protections of the Prudential Regulation Authority and Financial Conduct Authority for private customers and/or the UK compensation scheme may not be available, and further details as to where this may be the case are available upon request in respect of this report. CS may provide various services to US municipal entities or obligated persons ("municipalities"), including suggesting individual transactions or trades and entering into such transactions. Any services CS provides to municipalities are not viewed as "advice" within the meaning of Section 975 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. CS is providing any such services and related information solely on an arm's length basis and not as an advisor or fiduciary to the municipality. In connection with the provision of the any such services, there is no agreement, direct or indirect, between any municipality (including the officials, management, employees or agents thereof) and CS for CS to provide advice to the municipality. Municipalities should consult with their financial, accounting and legal advisors regarding any such services provided by CS. In addition, CS is not acting for direct or indirect compensation to solicit the municipality on behalf of an unaffiliated broker, dealer, municipal securities dealer, municipal advisor, or investment adviser for the purpose of obtaining or retaining an engagement by the municipality for or in connection with Municipal Financial Products, the issuance of municipal securities, or of an investment adviser to provide investment advisory services to or on behalf of the municipality. If this report is being distributed by a financial institution other than Credit Suisse AG, or its affiliates, that financial institution is solely responsible for distribution. Clients of that institution should contact that institution to effect a transaction in the securities mentioned in this report or require further information. This report does not constitute investment advice by Credit Suisse to the clients of the distributing financial institution, and neither Credit Suisse AG, its affiliates, and their respective officers, directors and employees accept any liability whatsoever for any direct or consequential loss arising from their use of this report or its content. Principal is not guaranteed. Commission is the commission rate or the amount agreed with a customer when setting up an account or at any time after that.
Copyright © 2014 CREDIT SUISSE AG and/or its affiliates. All rights reserved.
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.
TC2033