Multi-Company Report

January 8, 2017 Equity Research

Chip Weekly: New Chips Showcased At CES

 Last week Intel filled out its lineup of its latest generation Kaby Lake processors by launching 49 new chips for desktops and notebooks. Qualcomm announced its 10nm Snapdragon 835 processor/baseband chip. At the Consumer Electronics Show (CES) various chip companies like Intel, Qualcomm and Nvidia highlighted Semiconductors chip technology for cars, artificial intelligence, IoT (internet-of-things), wearables

and virtual reality. AMD showcased its upcoming Zen desktop processor (Ryzen) and its high end Vega GPU (Graphics Processing Unit) family.  Last week Intel launched 49 new Kaby Lake processors for desktops, notebooks, and mobile workstations, and launched 8 new chipsets.  Qualcomm announced its latest premium-tier mobile platform, the Qualcomm Snapdragon 835 processor with X16 LTE (long term evolution). The Snapdragon 835 processor is the first mobile platform to be commercially manufactured using the 10nm FinFET process node. The Snapdragon 835 is in production now and is expected to ship in commercial devices in the first half of 2017.  Samsung expects December quarter consolidated sales of about 53 trillion Korean won (up 11% sequentially) and consolidated operating profit of about 9.2 trillion Korean won (+77% sequentially).  At CES in Las Vegas we were interested to see various chip companies like Intel, Qualcomm and Nvidia highlight chip technology for cars, artificial intelligence, IoT (internet-of-things), wearables and virtual reality. AMD has some important new products scheduled for 2017 which we think could help AMD continue along its path to recovery that it began in 2016. While we think Nvidia has strong product lines and a solid positioning in several key markets, we think the many positive elements of Nvidia’s business are already reflected in Nvidia’s stock price.  AMD provided preliminary details for its upcoming Vega GPU architecture, announced 16 high performance AM4 motherboards from five manufacturers, and showcased Ryzen processor-based PC designs from 17 top system integrators and third-party CPU (Central Processing Unit) cooler designs. AMD expects Vega-based GPU products to ship in the first half of 2017. AMD indicated that Ryzen processor-based PCs, AM4 motherboards, and cooling solutions are expected to be available in Q1 2017.  In the coming week, in month of December Taiwanese sales reports we expect our chip composites will continue to show continuing year/year growth. We are hopeful that the computer-related data might show solid PC build activity continued through the end of the December quarter.

David Wong, CFA, PhD, Senior Analyst (212) 214-5007 [email protected] Amit Chanda, Associate Analyst (314) 875-2045 [email protected] Keith Kan, CPA, Associate Analyst (212) 214-5066 [email protected] Joy Zhang, Associate Analyst (212) 214-8017 [email protected]

Please see page 12 for rating definitions, important disclosures and required analyst certifications. All estimates/forecasts are as of 01/08/17 unless otherwise stated. 01/08/17 21:50:12 ET Wells Fargo Securities, LLC 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 the report and investors should consider this report as only a single factor in making their investment decision.

WELLS FARGO SECURITIES, LLC Semiconductors EQUITY RESEARCH DEPARTMENT

Our View – many important new chip products showcased at CES last week.

Last week, January 4-6, 2017 at the Consumer Electronics Show (CES) in Las Vegas:

 Intel, Nvidia, and Qualcomm all highlighted their automotive efforts. There are some major long-term trends in the automotive markets such as autonomous driving that we think could be significant drivers of chip content growth in automobiles over the next several years. However, we also believe it is important to bear in mind that many chip companies are putting in a substantial amount of effort to grow their presence in automotive, creating competition in the space. o We think that Nvidia has established a strong product platform for autonomous driving which combines its GPU (graphics processor unit) and processor capabilities, but we believe that this is already reflected in Nvidia’s stock price. In our view, Intel has significant processor and FPGA (field programmable gate array) capabilities which it is using to define a set of autonomous driving products and we think that Intel’s future potential in the autonomous driving market is underestimated by many investors.

 Qualcomm and Intel highlighted 5G products. We think that over the next few years 5G will be an important driver of new applications associated with collection, transmission and analysis of data, fueling growth of the internet-of-things. o We think that Intel’s positioning in autonomous driving, 5G communications, internet-of- things and many other major themes of the future including virtual reality and artificial intelligence make Intel a good investment. We are reiterating our Outperform rating on Intel (INTC, $36.48), Intel is our Top Pick and a Priority List stock. o We think that Qualcomm’s strong positioning in wireless communications and its pending acquisition of NXPI which gives it an important footprint in automotive chips make Qualcomm an attractive investment. We are reiterating our Outperform rating on Qualcomm (QCOM, $65.53), Qualcomm is a Priority List stock.

 Intel launched a full lineup of its Kaby Lake Processors, 49 new chips following the launch of a small number of notebook Kaby Lake chips in August/September 2014. o We think the availability of new PCs with Intel’s latest Kaby Lake processors may well help stimulate PC demand in the first half of 2017. o Intel showed a 2-in-1 PC running Intel’s next generation, 10nm, Cannon Lake processor. Intel expects to ship Cannon Lake chips in 2017, we expect in the second half of the year. Qualcomm said its first 10nm chip, the Snapdragon 835 is in production now and is expected to ship in commercial devices in the first half of 2017. Although, for the most part, Intel does not compete directly against Qualcomm in processors, we think there is growing evidence that the once clear lead in technology manufacturing that Intel had over all other chip companies has been eroded away.

 AMD highlighted its next generation Zen processor for desktops (Ryzen), expected to be available in the March 2017 quarter, and its next generation Vega GPU discrete graphics chips, scheduled to first ship in 1H2017. o We think that AMD has important new products scheduled for 2017 which could help AMD continue along its path to recovery that it began in 2016. We are reiterating our Outperform rating on AMD (AMD, $11.32). o We think that AMD’s 2016 new GPU family Polaris and its 2017 GPU family Vega may well threaten Nvidia’s current dominant position in graphics chips for gaming. We remain cautious on Nvidia with an Underperform rating (NVDA, $103.10).

 Other themes that ran through various product announcements and booth displays included, much as we expected, wearables and virtual reality.

I on Intel

January 5, 2017. Intel announces new Compute Card. Intel announced its new Compute Card, which is a modular compute platform. Intel Compute Card features all the elements in a full computer including Intel SoC, memory, storage and wireless connectivity with flexible input/output options. Device makers can design a standard Intel Compute Card slot in their devices and use the best Intel Compute Card for their performance and price requirements. Intel noted that it is working with global partners including Dell, HP, Lenovo, and Sharp to help bring the new Compute Card into devices. Intel noted that its Compute Card is expected to be available in mid-2017 with processor options including the 7th Gen Intel Core processors.

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January 4, 2017. Intel: Launch of Full Lineup of Kaby Lake Processors. On January 4th, 2017, Intel issued a new price list, which includes the addition of 49 new Kaby Lake processors for desktops, notebooks, and mobile workstations, and launched 8 new chipsets. In late August and early September 2016, Intel launched its third generation 14-nanometer Kaby Lake chips for mainstream/performance notebooks and Apollo Lake for value notebooks and desktops. This latest launch expands the Kaby Lake lineup to a full range of processors for desktops and notebooks. We think the availability of new PCs with Intel’s latest Kaby Lake processors may well help stimulate PC demand in the first half of 2017. As indicated in our Intel 2017 Outlook, we think that in 2017 the PC end markets could continue to improve together with most other chip markets. We believe that Intel’s Client Group revenues could be flat to up in 2017, with rising operating margins. Intel launched 7th Gen Intel Core processors with TDPs (Thermal Design Power) ranging from 4.5W (Watt) to 91W, with some featuring its vPro technology (management and other features for business PCs), and Xeon processors for mobile workstations: 16 new high end desktop processors – three Core i7 chips, seven Core i5 chips, and six Core i3 chips, 19 new high end notebook processors – nine Core i7 chips, eight Core i5 chips, and two Core i3 chips, 2 new processors for mobile workstations – two new Kaby Lake E3 v6 chips for notebooks, and 12 new value processors for desktops and notebooks. In addition, Intel introduced 8 new chipsets. According to Intel, its 200 series of chipsets offers 15% more input/output lanes with port flexibility and are Intel Optane Memory ready.

January 4, 2017. Intel announces new 5G modem. In a press release, Intel announced its new 5G modem which enables businesses to develop and launch early 5G solutions. The modem’s baseband chip is matched with a new 5G transceiver which enables both sub-6 GHz (gigahertz) and mmWave capabilities. This combination features key 3GPP (3rd Generation Partnership Project) 5G NR (new radio) technology, which includes low latency frame structures, advanced channel coding and massive MIMO (Multiple Input and Multiple Output) to enable faster connectivity and ultra-responsiveness. The modem is expected to begin sampling in the second half of 2017.

January 4, 2017. Intel announces new Arria 10 FPGA automotive grade solution and new stereo vision solution using Intel Cyclone V SoC. Intel announced its new automotive-grade Arria 10GX mid- range FPGA for autonomous driving. According to Intel, the new FPGA offers a full one speed grad performance advantage over competing devices. Intel noted that this new FGPA utilizes 40% lower power than previous generation FPGAs and features hard floating-point digital signal processing blocks. The Arria 10 automotive-grade FPGA also features more than 320 Gbps (gigabit per second) of DDR4 (Double Data Rate) bandwidth and more than 200 Gbps of transceiver bandwidth. In addition, it also supports 12G (12 gigabit per second) serial protocols, 1.5K variable-precision DSP (Digital Signal Processor) blocks, and up to 24 transceivers. Intel and automotive supplier Denso announced a new stereo vision solution for automakers using the Intel Cyclone V SoC (System-on-Chip). The technology behind Denso’s offering is the Automated Emergency Braking ECU (Engine Control Unit) for image recognition and processing that assists in automated emergency braking. The stereo vision system is controlled by Intel Cyclone V SoC FPGA which handles the signal processing.

January 4, 2017. Intel introduces Intel GO. Intel introduced Intel GO, a new brand for its automotive solutions spanning car, connectivity, and cloud. The full Intel GO system is comprised of both hardware and software development kits and includes two versions of Intel GO In-Vehicle Development Platforms for automated driving. The two platforms scale from next-generation Intel Atom processors to Intel Xeon processors plus Arria 10 FPGAs (Field –Programmable Gate Array). The Intel GO System also includes 5G- ready development platform for automated driving (which is based upon Arria 10 FPGAs and advanced RFIC(Radio Frequency Integrated Circuit)) and Automotive SDK (Software Development Kit), which provides tools specific to the automated driving industry including deep learning tool kits.

January 4, 2017. Intel, BMW Group, and Mobileye announced that approximately 40 autonomous test vehicles will be on the roads by 2nd half of 2017. At CES 2017, Intel, BMW Group, and Mobileye announced that approximately 40 autonomous BMW vehicles will be on the road by the 2nd half of 2017. The companies noted that the fleet of vehicles will undergo tests under real traffic conditions in 2017. The companies also indicated that BMW 7 series will utilize Intel and Mobileye technologies during global trials starting in the U.S. and Europe. As part of the partnership, BMW Group is responsible for driving control

WELLS FARGO SECURITIES, LLC Semiconductors EQUITY RESEARCH DEPARTMENT dynamics, evaluation of overall functional safety, overall component integration, production of prototypes, and scaling the platform via deployment partners; Intel contributes high performance computing elements that span from the vehicle to the datacenter (Intel GO automated driving solutions, Intel GO system, Xeon and Xeon Phi processors, Nervana platform for artificial intelligence); Mobileye contributes its EyeQ5 high- performance computer vision processor and its reinforcement learning algorithms (used to equip the vehicle system with artificial intelligence to safely undergo complex driving situations), and is expected to collaborate with BMW Group to develop the sensor fusion solution. The partnership also plans to release hardware samples and software updates for the autonomous platform in the upcoming years. The BMW iNEXT model is expected to be introduced in 2021, and a range of highly automated models from BMW Group is expected to follow.

January 3, 2017. Intel announces plans to acquire 15% stake in HERE: Intel also announced plans to purchase a 15% ownership stake in HERE, a global provider of digital maps and location-based services for automotive and IoT (Internet of Things). HERE is a private company, indirectly wholly owned by AUDI AG, BMW AG, and Daimler AG. In conjunction with Intel’s acquisition of ownership stake, Intel and HERE have agreed to collaborate to research and develop a proof-of-concept architecture that supports real-time updates of HD maps for automated driving. In addition, the two companies expect to explore opportunities (such as IoT and machine learning) that result from supplying devices with location data. The transaction is expected to close in the first quarter of 2017 after regulatory approvals. Intel is to nominate Doug Davis, head of Automated Driving Group at Intel to HERE’s Supervisory Board of Directors after the transaction has been completed.

Data Roundup

In TI’s booth at CES we saw on display product solutions for:

 3D Time of Flight Sensing  Infotainment  ADAS  Hybrid/Electric Vehicles  Integrated Power  Body Electronics  Automotive Lighting  USB Type-C  DLP Pico Aftermarket  IoT Gateway  Energy Transfer  Battery Management  DLP Pico Display

Memory Pricing

Spot Market

Last week, memory spot prices were up, according to DRAMeXchange (see Figure 1).  The spot price for a 4Gb DDR4 chip increased to $3.04 versus $2.83 at the end of the prior week and up substantially from a low of $1.46 in early June 2016.  The spot price for an 8Gb DDR4 chip increased to $6.03 versus $5.73 at the end of the prior week.  The 64Gb MLC (multi-level cell) NAND spot price increased to $3.13 versus $3.12 at the end of the prior week.  The 128Gb MLC (multi-level cell) NAND spot price increased to $5.12 versus $5.04 at the end of the prior week.  The 256Gb MLC (multi-level cell) NAND spot price increased to $10.20 versus $10.08 at the end of the prior week.

Contract Market According to DRAMeXchange, the DRAM contract price for a DRAM 4Gb DDR3 chip increased to $1.94 in the second half of November compared to $1.88 in the second half of October and $1.50 in the second half of

WELLS FARGO SECURITIES, LLC Chip Weekly: New Chips Showcased At CES EQUITY RESEARCH DEPARTMENT

September. The contract price for a 4Gb DDR4 chip increased to $1.94 in the second half of November compared to $1.88 in the second half of October and $1.50 in the second half of September.

The contract price for a 128Gb NAND chip was $4.11 in the second half of November, compared to $3.98 in the second half of October and $3.75 in the second half of September. The contract price for a 64Gb NAND chip was $2.63 in the second half of November, compared to $2.59 in the second half of October and $2.49 in the second half of September.

Current quarter bit growth expectations:  For the December quarter SK Hynix expects DRAM bit shipments to grow 10% sequentially, while NAND bit shipments are expected to be flat sequentially.  For the December quarter, Samsung expects its DRAM bit growth to be flat sequentially, below the market, which is expected to grow in the low single digit. For the December quarter, Samsung expects NAND market bit growth to be about 10% and Samsung expects its NAND bit growth to be in the mid-teens percentage range.  For the December quarter, Inotera expects its DRAM bit shipment to grow in the range of 20-25% sequentially.

Figure 1. Memory Chip Prices 8Gb 256Gb 4Gb DDR4 64Gb NAND MLC DDR4 128Gb NAND MLC NAND MLC Date Spot Contract Spot Spot Contract Spot Contract Spot 01/06/2017 $3.04 $6.03 $3.13 $5.12 $10.20 12/30/2016 $2.83 $5.73 $3.12 $5.04 $10.08 12/23/2016 $2.83 $5.66 $3.10 $5.03 $10.08 12/16/2016 $2.81 $5.56 $3.07 $5.03 $10.04 12/09/2016 $2.73 $5.43 $3.06 $5.02 $10.00 12/02/2016 $2.61 $1.94 $5.28 $3.09 $2.63 $5.06 $4.11 $10.00 11/25/2016 $2.53 $5.16 $3.08 $4.97 $10.00 11/18/2016 $2.55 $5.23 $3.05 $4.85 $9.97 11/11/2016 $2.53 $5.15 $3.05 $4.83 $9.97 11/04/2016 $2.52 $5.09 $3.05 $4.83 $9.97 10/28/2016 $2.48 $1.88 $4.99 $3.01 $2.59 $4.81 $3.98 $9.95 10/21/2016 $2.53 $4.85 $2.93 $4.77 $9.93 10/14/2016 $2.38 $4.58 $2.89 $4.64 $9.88

10/07/2016 $2.30 $4.40 $2.89 $4.63 $9.96

9/30/2016 $2.17 $1.50 $4.33 $2.91 $2.49 $4.61 $3.75 $10.11 9/23/2016 $2.02 $4.14 $2.90 $4.61 $10.18

9/14/2016 $1.86 $3.80 $2.90 $4.61 $10.41

9/9/2016 $1.83 $3.74 $2.88 $4.60 $10.39

9/2/2016 $1.82 $1.38 $3.72 $2.90 $2.46 $4.60 $3.73 $10.39 8/26/2016 $1.88 $3.72 $2.92 $4.65 $10.40

8/19/2016 $1.88 $3.72 $2.94 $4.65 $10.29

8/12/2016 $1.86 $3.72 $2.98 $4.72 $10.39

8/5/2016 $1.86 $3.70 $2.92 $4.71 $10.39

7/29/2016 $1.84 $1.34 $3.66 $2.89 $2.32 $4.71 $3.66 $10.37 7/22/2016 $1.75 $3.63 $2.87 $4.68 $10.34

7/15/2016 $1.75 $3.63 $2.89 $4.63 $10.34

7/8/2016 $1.74 $3.63 $2.89 $4.62 $10.24

7/1/2016 $1.71 $1.31 $3.63 $2.92 $2.24 $4.63 $3.60 $10.24 6/24/2016 $1.55 $3.63 $2.80 $4.59 $10.22

Source: DRAMeXchange, Wells Fargo Securities, LLC

WELLS FARGO SECURITIES, LLC Semiconductors EQUITY RESEARCH DEPARTMENT

News Items: January 6, 2017. CES Trade Show: Spotlight on Automotive. At the Consumer Electronics Show (CES) in Las Vegas we were interested to see various chip companies like Intel, Qualcomm and Nvidia highlight chip technology for cars, artificial intelligence, IoT (internet-of-things), wearables and virtual reality. AMD has some important new products scheduled for 2017 which we think could help AMD continue along its path to recovery that it began in 2016. While we think Nvidia has strong product lines and a solid positioning in several key markets we believe that competitive pressures might grow for Nvidia in 2017. Intel, Nvidia and Qualcomm all highlighted their automotive efforts. There are some major long-term trends in the automotive markets such as autonomous driving that we think could be significant drivers of chip content growth in automobiles over the next several years. However, we also believe it is important to bear in mind that many chip companies are putting in a substantial amount of effort to grow their presence in automotive, creating competition in the space. We think that Nvidia has established a strong product platform for autonomous driving which combines its GPU (graphics processor unit) and processor capabilities. In our view, Intel has significant processor and FPGA (field programmable gate array) capabilities which it is using to define a set of autonomous driving products and we think that Intel’s future potential in the autonomous driving market is underestimated by many investors. Qualcomm and Intel highlighted 5G products. We think that over the next few years 5G will be an important driver of new applications associated with collection, transmission and analysis of data, fueling growth of the internet-of-things. AMD highlighted its next generation Zen processor for desktops (Ryzen), expected to be available in the March 2017 quarter, and its next generation Vega GPU discrete graphics chips, scheduled to first ship in 1H2017. We think that AMD’s 2016 new GPU family Polaris and its 2017 GPU family Vega may well threaten Nvidia’s current dominant position in graphics chips for gaming. Intel launched a full lineup of its Kaby Lake Processors, 49 new chips following the launch of a small number of notebook Kaby Lake chips in August/September 2014. We think the availability of new PCs with Intel’s latest Kaby Lake processors may well help stimulate PC demand in the first half of 2017. Intel showed a 2-in-1 PC running Intel’s next generation, 10nm, Cannon Lake processor. Intel expects to ship Cannon Lake chips in 2017, we expect in the second half of the year. Qualcomm said its first 10nm chip, the Snapdragon 835 is in production now and is expected to ship in commercial devices in the first half of 2017. Although, for the most part, Intel does not compete directly against Qualcomm in processors, we think there is growing evidence that the once clear lead in technology manufacturing that Intel had over all other chip companies has been eroded away. For additional details, please see our note dated January 6th.

January 6, 2017. Mercedes-Benz and Nvidia announce partnership for AI-powered car. At CES 2017, Mercedes-Benz and Nvidia announced a partnership to create an artificial intelligence-powered car. Mercedes-Benz expects to roll out a product with Nvidia within 12 months.

January 6, 2017. Dell introduces the Precision 5520 notebook. According to Fudzilla, Dell announced its Precision 5520 notebook at CES, which the company proclaims to be the lightest 15-inch mobile workstation to date. The Precision 5520 is a successor to the Precision 5510, which was launched last year, and features an UltraSharp PremierColor InfinityEdge 4K display, 7th-gen Intel Xeon and Kaby Lake processors (i5 7300HQ, i5 7440HQ, and i7 7700HQ), Nvidia Quadro professional graphics cards, Thunderbolt 3 connectivity, up to DDR4 2400MHz memory, up to 2TB of PCI-E SSD storage, and higher-capacity batteries. The Precision 5520 notebook weighs 3.93 pounds, down from Precision 5510’s weight of 4.6 pounds.

January 6, 2017. Samsung announces earnings guidance for the December 2016 quarter. Samsung expects December quarter consolidated sales of about 53 trillion Korean won (up 11% sequentially) and consolidated operating profit of about 9.2 trillion Korean won (+77% sequentially). Samsung estimated full year 2016 consolidated sales of about 201.5 trillion Korean won (flattish yr/yr) and consolidated operating profit of about 29.22 trillion Korean won (up 11% yr/yr).

January 5, 2017. AMD provides preliminary details on Vega architecture. At CES 2017, AMD provided preliminary details for its upcoming Vega GPU (Graphics Processing Unit) architecture, announced 16 high performance AM4 motherboards from five manufacturers, and showcased Ryzen processor-based PC designs from 17 top system integrators and third-party CPU (Central Processing Unit) cooler designs. AMD expects Vega-based GPU products to ship in the first half of 2017. AMD indicated that Ryzen processor-based PCs, AM4 motherboards, and cooling solutions are expected to be available in Q1 2017. AMD highlighted the following features of its Vega GPU architecture:  GPU memory architecture: AMD noted that Vega architecture is ideal for streaming large data sets and is compatible with a variety of memory types with up to 512TB (terabyte) of virtual address space. The Vega architecture features a new high-bandwidth cache and controller. The high-bandwidth cache features HBM2 (High-Bandwidth Memory) technology who can transfer terabytes of data every double, doubling the bandwidth-per-pin compared to the previous generation HBM technology, and enables greater capacity at less than 50% the footprint of GDDR5 (Graphics Double Data Rate)

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memory. The high-bandwidth cache controller in Vega-based GPUs can access on-package cache and off-package memories.  Next generation Geometry Pipeline: In addition, Vega’s geometry pipeline allows programmers to be efficient in processing complex geometry. According to AMD, Vega’s geometry pipeline delivers more than 200% throughput-per-clock over previous Radeon architectures, and features improved load-balancing with intelligent workload distributor.  Next-generation Compute Engine: Vega architecture features next-generation compute engine with flexible compute units that can process 8-bit, 16-bit, 32-bit or 64-bit operations natively in each clock cycle. According to AMD, these compute units can achieve significantly higher frequencies than previous generations.  Advanced Pixel Engine: Vega pixel engine features a Draw Stream Binning Rasterizer, optimized to improved performance and power efficiency. AMD noted that the Vega pixel engine uses smart on- chip bin cache and early culling of pixels invisible in a final scene to enable “fetch one, shade once” of pixels

January 5, 2017. Texas Instruments at CES. In TI’s booth at CES we saw on display product solutions for 3D Time of Flight Sensing, Infotainment, ADAS, Hybrid/Electric Vehicles, Integrated Power, Body Electronics, Automotive Lighting, USB (universal serial bus) Type-C, DLP (digital light projection) Pico Display, IoT Gateway, Energy Transfer, Battery Management.

January 4, 2017. Lenovo introduces Legion Y520 and Y720 notebooks. According to Fudzilla, Lenovo unveiled a new family of gaming notebooks called Legion at CES, which is aimed to appeal to both professional uses and gaming enthusiasts. The two new notebooks showed at CES are the 15.6-inch Legion Y520 and Legion Y720, which are priced at $899 and $1,399, respectively. The Legion 7520 is expected to launch in February, while the Legion Y720 is expected to launch in April. The Legion Y520 features a 1920x1080 IPS display, 7th-gen Intel Core i7 Kaby Lake processor, up to 16GB of DDR4, up to a Geforce GTX 1050 Ti, up to a 512GB PCI-E SSD or 2TB SATA HDD. The Legion Y720 offers 1920x1080p or 4K 3840x2160p resolution display, Intel Core i5 7300HQ or Core i7 7700HQ Kaby Lake processors, up to 16GB of DDR4, up to a Geforce GTX 1060 6GB VR-ready GPU, up to a 1TB PCI-E SSD or 2TB SATA HDD.

January 4, 2017. Panasonic Automotive and Qualcomm announce next generation in-vehicle infotainment concept system powered by Android. Panasonic Automotive Systems Company of America and Qualcomm announced they are working together to develop a next generation Android based in vehicle infotainment system. Using Qualcomm's Snapdragon 820Am processor, this concept system is based on the latest version of the Android operating system, which is designed to provide automakers with a superior, high performing platform to develop cloud connected infotainment systems. This is powered by the Snapdragon 820Am automotive processor, including integrated X12 LTE modem, quad core Qualcomm Kryo CPU, Qualcomm Hexagon 680 DSP, Qualcomm Adreno 530 GPU for video processing.

January 4, 2017. Maxim introduces remote tuner solution with single hardware platform supporting worldwide ratio standards for automotive applications. Maxim announced new remote tuner solution that works to simplify the head unit design of a vehicle and reduce cables. Maxim said that its MAX2175 RF to Bits tuner allow for the vehicles to support worldwide ratio standards without reworking its hardware. The tuner allows for any worldwide radio standard to be supported by changing the software. Maxim’s remote tuner solution includes the following Maxim products:  MAX2175 analog/digital hybrid radio receiver with RF to Bits front-end  MAX96708 14-bit deserializer  MAX96711 14-bit serializer  MAX15027 1A, low-dropout linear regulator  MAX20002 36V, 2A, synchronous buck converter

January 4, 2017. Nvidia Xavier AI car supercomputer uses Volta GPU. Nvidia announced that it has built an AI (Artificial Intelligence) car supercomputer called Xavier. Xavier is powered by an 8-core custom ARM64 CPU (Central Processing Unit), a 512-core Volta GPU. Nvidia noted that it can process 30 trillion operations a second in 30 watts. The chip is designed for ASIL D (Automotive Safety Integrity Level D) Functional safety. Nvidia also announced a new capability on the Nvidia AI car computer called AI Co-Pilot, which is aware of driver and state of passenger. Nvidia also created its self-driving car called BB8 using Xavier.

January 4, 2017. Nvidia introduces SHIELD TV. At CES 2017, Nvidia introduced its new SHIELD TV, an Android open-platform media streamer. According to Nvidia, SHIELD TV offers support for 4K HDR (High-Dynamic-Range) and has a rich catalog of media in 4K, with support for Netflix, YouTube, Google, Play Movies, and VUDU. SHIELD TV is expected to be expanded with a series of artificial intelligence capabilities in the coming months including Google Assistant integration on TV, SmartThings Hub technology integration,

WELLS FARGO SECURITIES, LLC Semiconductors EQUITY RESEARCH DEPARTMENT and Nvidia SPOT (an artificial intelligence mic accessory). Nvidia noted that its SHIELD TV is currently available for pre-order and will ship in U.S., Canada and select European regions later in January 2017 for USD$199.99, which includes controller and remote. SHIELD Pro is expected to be available later in January 2017 with controller, remote with headset jack, and 500GB of storage. A different version of SHIELD, with custom software optimized for China, is expected to be available later in 2017. The Nvidia SPOT mic accessory for SHIELD is sold for USD$49.99

January 4, 2017. Nvidia partners with ZENRIN to develop cloud-to-car HD map solution. Nvidia announced that it is partnering with ZENRIN, a Japanese leading mapping company, to develop a cloud-to-car HD (high definition) map solution for self-driving cars. The collaboration focuses on processing both in the car and in the cloud. In the car, Nvidia Drive PX 2 computer and Nvidia DriveWorks software can process data generated by camera and lidar sensors, and deep learning will allow real-time image recognition, feature detection, and classification to build environment models. In the cloud, Nvidia GPUs and MapWorks software can process complex datasets, compile and register data from vehicles, and create a 3D map. The collaboration allows ZENRIN to provide wider coverage of HD maps to automotive manufacturers with shorter lead time, and enables Nvidia to develop localization technology based on ZENRIN HD maps, which will be integrated into DriveWorks (this allows automakers using DRIVE PX 2 to integrate localization capabilities).

January 4, 2017. Nvidia extends collaboration with HERE. Nvidia and HERE announced that they extended their collaboration to develop HERE HD Live Map for autonomous vehicles. The collaboration includes the following three initiatives:  HERE is accelerating its HD Live MAP with Nvidia MapWorks AI technology  Nvidia is developing localization technology based on HERE HD Live Map, which will be integrated into DriveWorks software  HERE and Nvidia plans to collaborate on a HERE HD LiveMap-based-in-vehicle solution to update the map in cloud according to perceived changes in the environment

January 4, 2017. Nvidia collaborates with Audi to put AI cars on the road beginning in 2020. At CES 2017, Nvidia and Audi announced that they are collaborating to put AI cars on the road beginning in 2020. The first phase of this collaboration focuses on Nvidia Drive PX, the AI platform for automated cars. Nvidia and Audi demonstrated an Audi Q7 piloted driving concept where passengers rode in the vehicle’s back seat with no driver behind the wheel. Audi Q7, equipped with Drive PX 2 and running Nvidia DriveWorks software, the Q7 uses Nvidia Pilotnet, deep neural networks to recognize and understands its surrounding to drive safely. Audi is expected to release in the coming months its new A8, level 3 automated vehicle with its Traffic Jam Pilot system powered by zFAS (which integrated Nvidia hardware and software).

January 4, 2017. Qorvo and ubisys delivers IoTivity platform on a multi-stack chip. Qorvo collaborated with ubisys, a smart home and IoT company, to develop a new gateway solution that allows various devices to communicate by integrating a ZigBee 3.0 and Green Power-based smart home network within the Open Connectivity Foundation IoTivity network. The open-source IoTivity network provides specifications for device-to-device connectivity. The Qorvo IoTivity plug-ins will support a single multi-stack radio chip. The Qorvo GP712 chip handles multiple IoT network layers, which include Thread, ZigBee 3.0 with Green Power and RF4CE. Qorvo says the GP712 simplifies the design of IoT gateways, routers, and set-top boxes.

January 3, 2017. Qualcomm announces latest 835 Snapdragon processor with X16LTE modem. Qualcomm announced its latest premium-tier mobile platform, the Qualcomm Snapdragon 835 processor with X16 LTE. The Snapdragon 835 processor is the first mobile platform to be commercially manufactured using the 10nm FinFET process node. The Snapdragon 835 is designed to support premium-tier consumer and enterprise devices, including smartphones, VR/AR head mounted displays, IP cameras, tablets, mobile PCs and other devices running a variety of operating systems including Android and Windows 10 with support for legacy Win32 apps. The Snapdragon 835 features Kryo 280 CPU with 4 performance cores running at up to 2.45 GHz and 4 efficiency cores running up to 1.9GHz. Key components of the Snapdragon 835 processor include an integrated X16 LTE modem for Gigabit Class LTE connectivity, integrated 2x2 802.11ac Wave 2 Wi- Fi and Bluetooth 5, optional 802.11ad for multi-gigabit connectivity. Improved processing power and performance is supported with new Qualcomm Kryo 280 CPU and Qualcomm Hexagon 682 DSP, which includes support for TensorFlow for machine learning and Halide for image processing. The Snapdragon 835 includes substantial enhancements to the Qualcomm Adreno visual processing subsystem, including the new Adreno 540 GPU and Qualcomm Spectra 180 image sensor processor for next generation camera capabilities. Also new in the Snapdragon 835 processor is the Qualcomm Haven security platform with enhanced security for biometrics and device attestation. The Snapdragon 835 is in production now and is expected to ship in commercial devices in the first half of 2017.

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January 3, 2017. Qualcomm announces new platform solutions using the Snapdragon X16 LTE modem which helps automakers integrate all key connectivity technologies for connected cars. At CES 2017, Qualcomm announced it introduced a new variant of its connected car reference platform using the flagship Gigabit Class Qualcomm Snapdragon X16 LTE modem to help car manufacturers deliver the high speed, high quality and reliable connectivity required for advanced telematics and connected vehicle services. The platform also includes a module reference design for the Snapdragon X16 LTE modem to help automotive suppliers accelerate development and improve time to commercialization. Qualcomm Technologies developed a reference hardware module in two different band configurations, North America and Rest of World (including Europe). The new connected car reference platform using Snapdragon X16 LTE modem, including its corresponding reference module, is expected to be available in the first half of 2017. All major global automakers currently use products from Qualcomm Technologies’ broad portfolio of automotive solutions, including Qualcomm’s flagship Snapdragon automotive processors and modems. Across telematics, infotainment and connectivity, Qualcomm Technologies achieved more than 150 automotive design wins, car manufacturers across the globe have selected Snapdragon processors for their next generation infotainment solutions.

January 3, 2017. Qualcomm automotive solutions power next generation Infotainment for Volkswagen vehicles. Qualcomm announced the integration of Qualcomm Technologies chipsets in the next generation of Volkswagen AG vehicles. These chipsets include the Qualcomm Snapdragon 820A processor for advanced infotainment systems, as well as the Snapdragon X12 and X5 LTE modems, for connected car and telematics systems. Qualcomm Technologies is working closely with Volkswagen AG and other industry leaders to develop and produce one of the highest performing infotainment and telematics systems in the automotive industry. Volkswagen AG vehicles featuring the Snapdragon 820A processor are expected to be available in 2019, while vehicles utilizing Snapdragon X12 and X5 LTE modems are expected to be available in 2018. As infotainment systems become more relevant in purchase decisions, select lines of Volkswagen AG vehicles will be powered by the Snapdragon 820A processor, Qualcomm Technologies’ most advanced automotive grade processor. The processor is based on a 14nm FinFET advanced process node running on Qualcomm Technologies’ custom 64-bit Qualcomm Kryo CPU, Qualcomm Adreno 530 GPU and Qualcomm Hexagon 680 DSP Vector eXtension.

January 3, 2017. Consortium of leading automotive and telecom companies host 3GPP release 14 Cellular-V2X technology field trial in Germany. Qualcomm, SWARCO Traffic Systems and the University of Kaiserslautern, announced the formation of Connected Vehicle to Everything of Tomorrow (ConVeX)- a consortium to carry out the first announced Cellular-V2X (C-V2X) trial based upon the 3rd Generation Partnership Project’s (3GPP) Release 14, which includes Vehicle-to-Everything (V2X) communication. The trial efforts are expected to focus on Vehicle-to-Vehicle (V2V), Vehicle-to-Infrastructure (V2I) and Vehicle-to-Pedestrian (V2P) direct communication, as well as Vehicle-to-Network (V2N) wide area communications. ConVeX. The goal of the trial is to demonstrate the benefits of using a unified C-V2X connectivity platform, as defined by 3GPP Release 14, for the connected vehicle of tomorrow as well as to showcase C-V2X range, reliability and latency advantage for real-time V2X communications. The trial aims to highlight new use cases that help support traffic flow optimization, improve safety and pave the path to automated driving. Sensor fusion with V2X technology is expected to complement Radar, Lidar and camera systems and provide 360 degree non-line-of-sight (NLOS) awareness. Combined with Global Navigation Satellite System (GNSS), V2X technologies are expected to allow vehicles to share information with each other, as well as with infrastructure and to smartphones.

January 3, 2017. Qualcomm and Verizon introduce next chapter of growth for the Internet of Things. Qualcomm announced Verizon introduced ThingSpace ready modules from Quectel and Telit using Qualcomm Technologies’ MDM9206 Category M1 (Cat-M1) LTE modem. To further facilitate the creation of IoT solutions using Verizon’s ThingSpace platform on the MDM9206 LTE modem, Verizon is making available a development kit. The modules and development kit are expected to be available in early 2017.

January 3, 2017. Qualcomm, Ericsson and AT&T announce collaboration on 5G New Radio trials intended to accelerate wide-scale 5G deployments. Qualcomm, Ericsson and AT&T today announced plans to conduct interoperability testing and over the air field trials based on the expected 5G New Radio (NR) specifications being developed by 3GPP, which will form the basis of the global standards. The trials intend to help move the mobile ecosystem to faster 5G deployment based on standards compliant 5G NR infrastructure and devices once 3GPP completes the first release of the official specifications, which is expected as part of Release 15. The trials will support operation in millimeter Wave (mmWave) spectrum, aiming to accelerate commercial deployments in the 28GHz and 39GHz bands. In the trials, the companies will showcase new 5G NR mmWave technologies that utilize wide bandwidths available at these higher frequency bands to increase network capacity and expect to achieve multi-gigabit per second data rates. The interoperability testing and trials, which are planned to launch in the United States starting in the second half

WELLS FARGO SECURITIES, LLC Semiconductors EQUITY RESEARCH DEPARTMENT of 2017, are intended to track closely with the first 3GPP 5G NR specification that we expect to be part of Release 15, the global 5G standard that is expected to make use of both sub-6 GHz and mmWave spectrum bands.

January 3, 2017. Qualcomm Technologies announces enhancements to the Qualcomm Network with new IoT connectivity platform and expanded Wi-Fi SON features. Qualcomm announced two new important elements of the Qualcomm Network designed to deliver simple, consistent and seamless connected experiences. Qualcomm is introducing a suite of features, for deployment across IoT devices, IoT hubs, and network gateways that centralize and manage the complex and diverse connectivity technologies and ecosystems, the Qualcomm Network IoT Connectivity platform. Additionally, Qualcomm Technologies is further broadening the capabilities of its award winning Qualcomm Wi-Fi Self Organizing Network (SON) solution.

January 3, 2017. Qualcomm and ODG announce the first augmented Reality smartglasses powered by the new Snapdragon 835 processor. Qualcomm and ODG (Osterhout Design Group) announced that R-8 and R-9 will be the first announced devices powered by the Qualcomm Snapdragon 835 processor, which uses 10nm FinFET process technology to enable a new generation of premium consumer devices in small form factors with solid performance and solid power efficiency. R-8 is ODG’s first consumer mobile AR/VR smartglasses, targeted at the consumer early adopter, and R-9 is for a wide variety of wide field of view (FOV) experiences from light enterprise, to prosumer media consumption and as a development platform for sophisticated mobile AR/VR and smartglasses applications. The Snapdragon 835 combines Qualcomm Kryo 280 CPU with Qualcomm Technologies’ many additional low power, high performance processing technologies to support great battery life for user experiences. The Snapdragon 835 is in the production now and is expected to ship in commercial devices in the first half of 2017.

January 3, 2017. Qualcomm brings active noise cancelling technology into Ultra-Small Earbuds and Headphones. Qualcomm announced it introduced active noise cancelling (ANC) technology on its CSR8675 product platform, making it the world’s first Bluetooth audio system on chip to integrate such an advanced audio solution. Qualcomm is integrating ANC with CSR8675. The CSR8675 is a fully integrated Flash platform with embedded 120Mhz 24-bit DSP and also supports Qualcomm aptX and Qualcomm aptX HD audio technologies.

January 3, 2017. Qualcomm TrueWireless Stereo Technology drives innovation in Bluetooth stereo headset and hearables categories. Qualcomm announced it introduced the Qualcomm TrueWireless Stereo Headset Reference Design. The Qualcomm TrueWireless Stereo Headset Reference Design is based on the CSRA63120 audio ROM device which supports stereo Bluetooth headsets. The Qualcomm TrueWireless Reference Design is available to audio OEMs and headset manufacturers now.

January 3, 2017. Qorvo introduces multi-protocol system-on-chip. Qorvo announced a new complete system-on-chip (SoC) for smart home devices, which are used to deliver multi-protocol support with low power consumption. The GP695 SoC integrates multiple communication protocols, including IEEE 802.15.4, ZigBee 3.0, Thread and Bluetooth Low Energy (BLE) for sensors and actuators. The new SoC seeks to improve smart home networking by supporting the connectivity standards, which creates a single development platform and a single SKU. Applications of the SoC include unlocking doors using a cell phone’s BLE protocol and having the intelligent system automatically lock doors when it detects that no one is home. Qorvo is demonstrating the GP695 and other smart home solutions at its booth in the CES.

Upcoming Events

January 1-10, 2017. Month of December Taiwanese sales reports. We expect our chip composites will continue to show continuing year/year growth. We are hopeful that the computer-related data might show solid PC build activity continued through the end of the December quarter.

January 15-17, 2017. NRF (National Retail Federation) Big Show 2017. At NRF’s Big Show 2017 in New York, Intel is to showcase IoT technologies that will help retailers achieve more engaging customer experience, improve sales and lower operating costs..

Mergers and Acquisitions

The following is a list of what we consider to be some of the more significant mergers and acquisitions in the chip space that have been announced over the last 1-3 years.

WELLS FARGO SECURITIES, LLC Chip Weekly: New Chips Showcased At CES EQUITY RESEARCH DEPARTMENT

Table A: Recent M&A transactions

Transaction Date first Date Value Announced Closed Acquirer Target (US$MM) 12/21/2016 Pending TDK Invensense ~1,300 11/21/2016 Pending MACOM Technology Applied Micro Circuits 770 11/02/2016 Pending Broadcom Limited Brocade ~5,900 10/27/2016 Pending Qualcomm NXP Semiconductor ~47,000 9/12/2016 Pending Renesas Electronics Intersil ~3,200 8/17/2016 12/02/16 GlobalWafers SunEdison Semiconductor ~$683 6/27/2016 Pending Analog Devices Linear Technology ~14,800 07/17/2016 09/05/2016 SoftBank ARM Holdings ~32,000 12/14/2015 12/06/2016 Micron Inotera ~3,200 11/18/2015 9/19/16 ON Semiconductor Fairchild ~2,400 10/21/2015 5/12/16 Western Digital SanDisk ~19,000 10/21/2015 Terminated 10/5/16 LAM Research KLA-Tencor ~11,000 10/05/2015 01/15/16 Microsemi PMC-Sierra ~2,500 09/20/2015 04/04/16 Microchip Atmel ~4,600 09/07/2015 3/16 MediaTek RichTek ~900 06/01/2015 12/28/15 Intel Altera 15,359 05/28/2015 2/1/2016 Avago Broadcom ~34,000 05/07/2015 08/03/15 Microchip Micrel 702 03/18/2015 04/28/15 Microsemi Vitesse 348.6 03/08/2015 12/7/15 NXP Freescale 15,945 10/20/2014 07/01/15 GlobalFoundries IBM Semiconductor (1,500)* 08/20/2014 01/13/15 Infineon International Rectifier 2,255 06/09/2014 07/22/14 Analog Devices Hittite Microwave 2,500 02/24/2014 01/02/15 RF Micro Devices TriQuint Semi 1,646 12/16/2013 05/06/14 Avago LSI 6,600 *IBM paid $1.5 billion to GlobalFoundries Source: FactSet, Company Reports and Wells Fargo Securities, LLC

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Our Coverage

The following are the stocks we cover.

Table B: Stocks we cover/Dividend monitor: Annualized Price Annual Dividend Company Name Ticker 01/06/17 Dividend Yield Rating Advanced Micro Devices AMD $11.32 - - Outperform Analog Devices ADI $71.60 $1.68 2.3% Outperform Broadcom Limited AVGO $176.50 $4.08 2.3% Market Perform Intel INTC $36.48 $1.04 2.9% Outperform Linear Technology LLTC $62.10 $1.28 2.1% Market Perform Maxim Integrated Products MXIM $39.74 $1.32 3.3% Market Perform Micron Technology MU $22.04 - - Outperform Microsemi MSCC $55.31 - - Outperform Monolithic Power Systems MPWR $83.94 $0.80 1.0% Market Perform Nvidia Corporation NVDA $103.10 $0.56 0.5% Underperform Qualcomm QCOM $65.53 $2.12 3.2% Outperform Texas Instruments TXN $74.15 $2.00 2.7% Market Perform Xilinx XLNX $59.05 $1.32 2.2% Outperform Source: FactSet, Wells Fargo Securities, LLC

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