07 July 2014 Asia Pacific/ Equity Research Technology/Semiconductor Devices (Semiconductor Devices/Electrical Equipment/Electric Components)/MARKET WEIGHT/MARKET WEIGHT/MARKET WEIGHT

Technology sector Research Analysts COMMENT Hideyuki Maekawa 81 3 4550 9723

[email protected] Focusing on components, cautious on SPE Shunsuke Tsuchiya ■ Summary: In our 18 June Asia feedback report, we presented our market 81 3 4550 9740 outlook for 2H 2014. In this report, we update our outlook and investment stance [email protected] based on recent surveys of sector companies. We think Chinese 3G and South Akinori Kanemoto Korean smartphone makers face a gap between demand and production plans. 81 3 4550 7363 Nonetheless, some components appear to be in short supply, and we have yet [email protected] to see revisions to demand forecasts. Despite lingering risk of inventory adjustments, we expect makers to move forward with production plans while still carrying current inventory levels in 2H. North American smartphone makers have begun procuring components for new models, and order balances at related components makers are likely to benefit from an improved orders environment. On the other hand, we see signs of adjustments in semiconductor plant utilization and demand for assembly equipment. Our summer investment recommendations therefore focus on memory-related stocks and component makers with high sales exposure to North American smartphone makers. We meanwhile have a cautious stance on semiconductor components and SPE makers. ■ Developments since our Asian market survey: We base our investment view on the following eight points. (1) Korean and Chinese smartphone makers have not made any major revisions to bullish Jul‒Sep production plans. (2) Makers are limiting supplies of some components. (3) A majority of the low-end Chinese LTE smartphones coming out in 2H 2014 are using Qualcomm application processors (APs). (4) foundries are adjusting operating rates on 40nm process lines as well as their 90/65nm lines. (5) New US-made smartphones are coming with 128GB of NAND. (6) Japanese panel makers’ output is increasingly shifting to 5.5-inch displays for US smartphone makers. (7) Negotiations on new front-end SPE orders have started as Korean DRAM makers look to add capacity and US foundry makers ramp up production on mass production 14nm FinFET lines, and (8) investment by Taiwan subcontractors has begun to slow in some areas. We provide further details on these points on page 2. ■ Stock calls: Looking at the share price performance of technology stocks over the past month (Figure 1), component makers have mostly underperformed. That said, we believe short-term orders momentum indicates they have the greatest upside potential among subsectors. Our top picks are (6502, TP ¥645), Murata Mfg (6981, TP ¥11,500), TDK (6762, TP ¥6,000), and Japan Aviation Electronics (6807, TP ¥3,000), all of which we rate OUTPERFORM. Although we maintain NEUTRAL ratings on Sharp (6753, TP ¥200) and (6740, TP ¥870), the share prices should receive support from earnings recoveries in the near term, driven by Sharp’s expanding sales of IGZO to Chinese smartphone makers and the rising share of 5.5-inch displays in Japan Display's production mix. Especially, the Japanese supply chain is lagging the Taiwanese supply chain for North American smartphone makers. We expect bullish comments from SPE makers at the upcoming Semicon West (8‒10 July) and forecast the orders environment for front-end SPE to move into a recovery cycle over the medium term. However, we think SPE stocks remain exposed to considerable downside risk in the short term due to concerns of adjustments in chipmakers’ capacity utilization.

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

07 July 2014

Update on our June Asian market survey

■ No major change in Chinese/Korean smartphone makers’ bullish production plans: As of the start of July, Chinese and South Korean smartphone makers have not revised their production plans. Chinese smartphone makers evidently still plan to produce a combined 120‒130mn handsets in Jul‒Sep and the same volume in Oct‒Dec (Apr‒Jun output totaled 120mn). Korean makers plan to make 90‒95mn units in Jul‒Sep (95–100mn units as of June survey) and likely to maintain plans for 100mn in Oct‒Dec. Korean makers' output in Apr‒Jun appears to total about 73‒74mn units (22‒24mn/month). Entering July, however, production of low-end and mid-market models in particular has increased, and the July output plan looks likely to stay at around 30mn units.

■ Supply of some components being limited: Makers of some key smartphone components, such as SAW/BAW devices and power amplifiers (PAs), continue to face supply shortages. We assume smartphone makers' and their Chinese agents' concerns about supply shortages in 2H 2014 are making it difficult for them to lower component demand forecasts. Chinese smartphone makers in particular appear to be adjusting production, but are unlikely to make significant changes to their component procurement plans.

■ Majority of low-end Chinese LTE smartphones using Qualcomm APs: We expect many low-end and mid-market LTE smartphones produced in China in 2H 2014 to come with Qualcomm’s MSM8916 (28nm Poly-Si process) AP. Low-end and mid- market smartphones with MediaTek’s MT6732 chipset are likely to hit the market in Nov‒Dec. High-end handsets featuring the company’s MT6595 chip are expected out around September, but we believe the MT6595 chip will be more expensive than the MSM8916 chip. Chinese smartphone makers evidently produced as many as 15mn LTE handsets in Jan‒Mar and 30mn in Apr‒Jun, and it appears that about 80% of these handsets were equipped with Qualcomm APs.

■ Taiwan foundries adjusting production rates on 40nm lines: Taiwan foundries are likely to undergo extended capacity utilization adjustments from their 90/65nm process lines to their 40nm lines in reaction to inventory adjustments for components used in low-end smartphones. With the APs for low-end and mid-market Chinese LTE smartphones now being produced on 28nm Poly-Si process lines, we are concerned that capacity utilization will decline for the 28nm HKMG process targeted at higher-end smartphones. The large adjustments for 28nm HKMG mid-July last year are still fresh in our mind.

■ New US smartphone models coming with 128GB: New US smartphone models will include some handsets loaded with 128GB of NAND. However, most will still be 16GB and 64GB, with some regional differences. We expect total output of these new models to reach 65‒70mn units within the year, with makers procuring components for about 85‒90mn handsets. From late June to early July, we have been hearing that handsets with 5.5-inch displays have been accounting for 40‒45% of all new smartphones.

■ 5.5-inch displays for new US smartphones accounting for larger share of Japanese panel makers’ output: With Korean panel makers delaying production of 5.5-inch displays, we expect Japanese makers’ production of 5.5-inch displays to account for a rising share of their total output in Jul‒Sep. As they are capable of full high-definition (FHD) resolutions, 5.5-inch displays have a higher surface area unit price than 4.7-inch displays. The increase in 5.5-inch production should improve the Japanese makers' product mix and boost profitability. Also, as models with 5.5-inch displays will likely be equipped with high capacity batteries and OIS, we think TDK, and are likely to benefit within the components sector.

Technology sector 2 07 July 2014

■ New talks started for front-end SPE: Korean DRAM makers planning to add new production capacity have begun negotiations with SPE makers. Meanwhile, US foundry makers are expanding production on 14nm FinFET mass production lines faster than we had expected.

■ Taiwan subcontractors cutting back on investment: We are seeing a rising trend in order cancellations by Taiwan subcontractors, with the number of canceled orders evidently greater than the number of new inquiries. We think this trend reflects the start of inventory adjustments, especially at midsize makers of APs for Chinese 3G smartphones. This trend coincides with capacity utilization adjustments on Taiwan foundries' 40nm lines.

Technology sector 3 07 July 2014 Share price performance and valuations

Figure 1: Main technology sector share performance Figure 2: Main technology sector share performance (1-month) (3-months) 1 month stock returns 3 month stock returns

ALPINE 25.8% 34.6% MITSUMI 24.3% SHINKO 26.8% SEIKO EPSON 17.6% 26.5% 17.0% ALPINE 22.6% 16.6% NGK SPARK PLUG 21.9% KOKUSAI 15.5% ALPS 16.7% SHARP 14.7% HITACHI KOKUSAI 12.6% DAINIPPON SCREEN 14.6% OLYMPUS 12.5% NEC 12.5% FUNAI 11.2% TOSHIBA 12.1% NEC 11.1% 10.9% MITSUMI 10.9% OLYMPUS 10.6% 9.7% 10.4% TDK 9.2% ADVANTEST 9.8% TOSHIBA 8.8% ALPS 9.4% HOYA 7.9% SHINKO 9.2% 7.7% 8.9% 6.5% MURATA 8.7% 6.1% TDK 8.5% TOPIX 5.7% TOKYO ELECTRON 7.7% NIDEC 5.1% FUJIFILM HDG. 7.3% 4.5% FUJITSU 7.0% TOPIX - ELEC APPLIANCES 4.4% HOYA 6.3% IBIDEN 3.5% HITACHI 5.9% PANASONIC 3.0% TOPIX - ELEC APPLIANCES 5.7% MURATA 2.5% KYOCERA 5.0% 2.5% MITSUBISHI ELECTRIC 4.2% CANON 2.4% HIROSE TOPIX 4.2% 2.3% SHARP 3.6% 1.8% FUJIFILM HDG. 1.5% NGK SPARK PLUG 3.2% DISCO 0.4% 2.7% -0.4% NIKKEI 225 2.5% DAINIPPON SCREEN -1.0% HIROSE 2.0% HITACHI -1.0% DISCO 0.7% -4.1% CANON -2.2% TAIYO YUDEN -10.9% NIKON -2.7% SONY-13.7% RICOH -6.0% -20% -10% 0% 10% 20% 30% 40% -10% -5% 0% 5% 10% 15% 20% 25% 30%

Source: Thomson Reuters (4 July closing price) Source: Thomson Reuters (4 July closing price)

Technology sector 4 07 July 2014

Figure 3: Main technology sector share performance Figure 4: Main technology sector share performance (6-months) (12-months)

6 month stock returns 12 month stock returns

SEIKO EPSON 226.3% SEIKO EPSON 57.0% FUJITSU 91.6% NEC 52.3% NIDEC 90.2% FUJITSU 43.0% ALPS 87.4% NIDEC 27.1% ALPINE 63.1% TOKYO ELECTRON 23.9% NEC 62.6% NGK SPARK PLUG 18.7% HOYA 61.4% ALPS 17.9% PANASONIC 54.4% HOYA 17.2% NGK SPARK PLUG 51.0% ALPINE 11.1% TOKYO ELECTRON 50.2% OLYMPUS 10.8% KONICA MINOLTA 38.8% TOSHIBA 9.1% TDK 38.2% SHINKO 8.0% IBIDEN 36.0% IBIDEN 7.3% FUJIFILM HDG. 29.1% RICOH 6.0% MITSUBISHI ELECTRIC 27.9% MURATA 5.8% HITACHI KOKUSAI 26.6% TOPIX - ELEC APPLIANCES 4.2% MURATA 26.2% PANASONIC 2.5% TOPIX - ELEC APPLIANCES 22.1% SHARP 0.6% OLYMPUS 18.3% HITACHI KOKUSAI 0.4% HITACHI 17.6% HIROSE 0.1% MITSUMI 13.3% CANON -0.9% HIROSE 11.0% TOPIX -1.3% NIKKEI 225 10.1% KONICA MINOLTA -1.4% TOPIX 9.8% MITSUBISHI ELECTRIC -2.3% FUNAI 8.2% ADVANTEST -2.3% DISCO 3.5% HITACHI -2.6% CANON -0.6% FUJIFILM HDG. -2.7% RICOH -0.8% DISCO -2.7% TOSHIBA -0.8% TDK -3.8% KYOCERA -4.0% NIKKEI 225 -5.2% DAINIPPON SCREEN -7.4% SONY -5.8% SHINKO -20.9% KYOCERA -6.0% SONY -21.1% MITSUMI -10.6% SHARP -21.7% DAINIPPON SCREEN -14.4% ADVANTEST -22.0% FUNAI -16.8% TAIYO YUDEN -25.2% TAIYO YUDEN -17.1% NIKON -30.0% NIKON -19.8% -100% -50% 0% 50% 100% 150% 200% 250% -40% -20% 0% 20% 40% 60% 80%

Source: Thomson Reuters (4 July closing price) Source: Thomson Reuters (4 July closing price)

Technology sector 5 07 July 2014

Figure 5: Technology sector coverage – Valuations Closing Closing Price: 07/04/14 Price: Mkt Price EPS Dvd EV / EV / Net Absolute Relative performance ROE PBR % to Yld Sales EBITDA D/E performance % % Cap Cur TP CS EPS P/E, x Company Code Rating TP 3/14 3/15 3/16 3/14 3/15 3/16 3/15 3/15 3/15 3/15 3/15 3/15 JPY, bn JPY JPY % 1M 3M 12M 1M 3M 12M A E1 E2 A E1 E2 % % x x x % IEC Hitachi 6501 OUTPERFORM 3,743 775 920 18.7 49.9 65.2 71.0 15.3 11.9 10.9 1.5 11.8 1.3 0.6 5.7 60.2 5.9 -1.0 17.6 1.7 -6.7 7.8 Toshiba 6502 OUTPERFORM 2,041 482 645 33.8 12.0 45.1 51.9 36.4 10.7 9.3 2.5 14.7 1.5 0.5 5.1 79.8 12.1 8.8 -0.8 7.9 3.1 -10.6 Mitsubishi Electric 6503 NEUTRAL 2,769 1,290 1,250 -3.1 69.8 82.4 92.5 16.6 15.7 13.9 1.6 11.9 1.8 0.7 6.6 2.7 4.2 6.5 27.8 0.0 0.8 18.1 NEC 6701 NEUTRAL 938 361 285 -21.1 13.0 20.0 24.2 24.4 18.1 14.9 1.1 7.5 1.4 0.5 7.7 63.1 12.5 11.1 62.6 8.3 5.4 52.8 Fujitsu 6702 NEUTRAL 1,610 778 680 -12.6 23.5 46.9 51.7 26.6 16.6 15.1 1.3 10.7 2.7 0.5 7.8 -24.2 7.0 26.5 91.6 2.9 20.8 81.8 Network Equipment 6754 OUTPERFORM 166 1,157 1,460 26.2 64.9 82.5 86.9 18.3 14.0 13.3 2.2 15.0 2.0 1.3 7.3 -23.5 6.1 -0.6 -6.2 2.0 -6.3 -16.0 SPE Hitachi Kokusai Electric 6756 OUTPERFORM 153 1,486 1,560 5.0 149.1 177.1 141.1 8.3 8.4 10.5 1.7 18.9 1.5 0.5 3.3 -63.8 15.5 12.6 26.6 11.3 6.9 16.8 Tokyo Electron 8035 OUTPERFORM 1,278 7,134 6,150 -13.8 -108.3 229.0 321.5 -58.4 31.1 22.2 0.8 6.7 2.0 1.6 11.6 -41.3 7.7 7.7 50.2 3.5 2.0 40.4 Dainippon Screen Mfg. 7735 OUTPERFORM 121 510 640 25.5 22.8 42.1 44.2 20.9 12.1 11.5 2.0 10.9 1.3 0.5 6.2 -0.3 14.6 -1.0 -7.4 10.5 -6.7 -17.2 Disco 6146 OUTPERFORM 229 6,790 7,450 9.7 356.6 412.5 433.2 18.0 16.5 15.7 2.5 11.1 1.8 1.9 7.7 -17.8 0.7 0.4 3.5 -3.4 -5.3 -6.3 Advantest 6857 UNDERPERFORM 222 1,277 960 -24.8 -204.1 2.3 -12.6 -5.5 555.7 -101.0 1.2 0.4 2.0 1.8 21.6 1.7 9.8 9.7 -22.0 5.6 4.0 -31.8 Consumer Electronics Panasonic 6752 OUTPERFORM 2,901 1,255 1,300 3.6 (326.3) 54.1 32.4 (2.0) 23.2 38.7 0.8 9.4 2.1 0.4 5.1 27 10.9 3.0 54.4 6.7 (2.8) 44.6 Sharp 6753 UNDERPERFORM 568 336 200 (40.5) (467.6) 1.9 11.0 (0.6) 172.6 30.5 0.0 2.0 3.0 0.5 6.3 446 14.7 1.8 (21.7) 10.5 (3.9) (31.5) Sony 6758 OUTPERFORM 1,795 1,720 2,600 51.2 (123.0) 67.9 132.5 (16.0) 25.3 13.0 1.5 3.0 0.8 0.3 3.6 15 3.6 (13.7) (21.1) (0.6) (19.4) (30.9) 6816 NEUTRAL 113 1,637 1,450 (11.4) 25.0 116.1 103.2 36.2 14.1 15.9 1.2 6.9 0.9 0.2 3.7 (44) 25.8 22.6 63.0 21.7 16.9 53.3 6952 NEUTRAL 415 1,489 1,200 (19.4) 59.5 71.4 76.6 20.5 20.8 19.4 1.5 10.4 2.2 1.2 10.6 2 3.4 20.6 66.7 (0.8) 14.9 57.0 Japan Display 6740 NEUTRAL 391 631 870 37.9 8.4 60.9 96.9 10.4 6.5 0.0 10.9 0.9 0.6 4.0 (2) 1.6 (22.2) ##### (2.5) (27.9) ##### Entertainment Software Namco Bandai 7832 NEUTRAL 524 2,384 2,300 (3.5) 144.4 141.5 146.0 11.5 16.8 16.3 1.8 12.3 2.0 0.8 6.0 (45) 4.1 1.1 45.1 (0.1) (4.6) 35.3 7974 NEUTRAL 1,516 12,805 12,000 (6.3) 55.5 (211.2) 202.7 180.5 (60.6) 63.2 0.8 (2.1) 1.4 1.9 (44.0) (37) 7.1 7.3 9.3 2.9 1.6 (0.5) Square Enix 9684 NEUTRAL 225 1,949 1,800 (7.6) (119.2) 53.0 80.0 (8.4) 36.8 24.4 1.5 5.0 1.8 1.2 10.1 (43) 19.4 (0.8) 60.4 15.2 (6.5) 50.6 Capcom 9697 OUTPERFORM 99 1,760 2,200 25.0 51.6 119.8 135.5 28.6 14.7 13.0 2.3 10.6 1.5 0.8 5.1 (29) 2.6 1.4 7.4 (1.6) (4.3) (2.4) 9766 OUTPERFORM 314 2,262 2,750 21.6 95.0 54.1 123.4 19.9 41.8 18.3 1.5 3.3 1.4 1.2 11.2 (20) (2.4) (5.0) 13.0 (6.6) (10.7) 3.3 Electric Components Ibiden 4062 NEUTRAL 291 2,109 1,850 (12.3) 16.2 142.3 136.1 90.7 14.8 15.5 1.4 6.8 1.1 0.9 4.3 (9) 10.4 3.5 36.0 6.3 (2.2) 26.2 NGK Spark Plug 5334 NEUTRAL 643 2,955 2,350 (20.5) 96.1 161.1 177.3 14.9 18.3 16.7 0.9 12.4 2.2 1.8 9.5 (12) 3.2 21.9 51.0 (0.9) 16.2 41.2 NIDEC 6594 OUTPERFORM 1,805 6,543 7,000 7.0 27.3 215.0 302.6 102.4 30.4 21.6 0.8 14.2 4.3 2.2 14.9 24 8.9 5.1 90.2 4.8 (0.6) 80.4 TDK 6762 OUTPERFORM 610 4,850 6,000 23.7 9.5 133.9 327.6 344.2 36.2 14.8 1.4 3.0 1.1 0.7 5.4 7 8.5 9.2 38.2 4.3 3.5 28.4 Mitsumi Electric 6767 NEUTRAL 69 784 760 (3.1) (132.0) 15.6 30.3 (3.9) 50.2 25.9 0.6 1.3 0.7 0.2 4.5 (37) 24.2 10.9 13.3 20.1 5.2 3.5 Alps Electric 6770 NEUTRAL 253 1,409 1,200 (14.8) (39.5) 70.9 85.6 (15.7) 19.9 16.5 0.0 11.0 1.9 0.5 6.2 40 9.4 16.7 87.4 5.2 11.0 77.6 Hirose Electric 6806 NEUTRAL 511 14,990 14,500 (3.3) 657.9 731.0 833.9 21.6 20.5 18.0 1.6 8.8 1.8 2.5 7.0 (58) 2.0 2.3 11.0 (2.2) (3.5) 1.2 Shinko Electric Industries 6967 NEUTRAL 127 942 730 (22.5) 21.3 67.5 40.9 35.9 14.0 23.0 2.1 6.8 0.9 0.5 3.1 (37) 9.2 26.8 (20.9) 5.0 21.1 (30.7) Kyocera 6971 NEUTRAL 1,811 4,937 5,100 3.3 181.2 234.9 248.9 24.3 21.0 19.8 1.6 5.1 1.1 0.9 7.0 (32) 5.0 4.5 (3.9) 0.9 (1.2) (13.7) Taiyo Yuden 6976 UNDERPERFORM 134 1,136 1,200 5.6 17.0 60.0 69.5 69.9 18.9 16.3 0.9 6.4 1.1 0.8 5.1 21 2.7 (10.9) (25.2) (1.4) (16.6) (34.9) 6981 OUTPERFORM 2,091 9,878 11,500 16.4 175.8 394.6 497.9 39.6 25.0 19.8 1.2 10.7 2.8 2.6 10.5 (18) 8.7 2.5 26.2 4.6 (3.2) 16.4 6727 UNDERPERFORM 96 574 460 (19.9) 31.4 28.4 34.8 23.1 20.2 16.5 3.1 14.0 2.8 0.9 8.0 (50) 4.7 (19.7) (50.9) 0.6 (25.4) (60.7) Japan Aviation 6807 OUTPERFORM 213 2,348 3,000 27.8 117.1 180.2 213.6 13.2 13.0 11.0 1.0 18.7 2.3 1.1 4.5 (19) 23.8 49.9 141.6 19.6 44.2 131.8 Nissha Printing 7915 NEUTRAL 68 1,579 1,520 (3.7) 92.5 130.5 172.2 14.7 12.1 9.2 0.6 10.3 1.3 0.5 3.8 (12) (0.5) 17.1 (16.3) (4.7) 11.4 (26.1) Source: Company data, Credit Suisse estimates

Figure 6: Relative to US smartphone makers absolute Figure 7: Relative to US smartphone makers absolute share performance (Taiwan) share performance (Japan) 200 180

180 SHARP 160 HON HAI PRECN.IND. MINEBEA

160 TOSHIBA CATCHER 140 TECHNOLOGY IBIDEN 140 LARGAN PRECISION TDK 120

120 TAIWAN ALPS ELECTRIC SEMICON.MNFG. TAIYO YUDEN 100 ADVANCED 100 SEMICON.ENGR. MURATA MANUFACTURING SIMPLO TECHNOLOGY MITSUMI ELECTRIC 80 80 JAPAN AVNS.ELTN.IND.

60 60 1-Jan-14 1-Feb-14 1-Mar-14 1-Apr-14 1-May-14 1-Jun-14 1-Jul-14 1-Jan-14 1-Feb-14 1-Mar-14 1-Apr-14 1-May-14 1-Jun-14 1-Jul-14 Source: Thomson Reuters Source: Thomson Reuters

Technology sector 6 07 July 2014

Companies Mentioned (Price as of 04-Jul-2014) Alps Electric (6770.T, ¥1,409) Japan Aviation Electronics Industry (6807.T, ¥2,348, OUTPERFORM, TP ¥3,000) Japan Display (6740.T, ¥631) MediaTek Inc. (2454.TW, NT$526.0) Mitsumi Electric (6767.T, ¥784) Murata Manufacturing (6981.T, ¥9,878, OUTPERFORM, TP ¥11,500) QUALCOMM Inc. (QCOM.OQ, $80.99) Sharp Corp. (6753.T, ¥336) TDK (6762.T, ¥4,850, OUTPERFORM, TP ¥6,000) Toshiba (6502.T, ¥482, OUTPERFORM, TP ¥645)

Disclosure Appendix Important Global Disclosures Hideyuki Maekawa, Shunsuke Tsuchiya and Akinori Kanemoto 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 Japan Aviation Electronics Industry (6807.T)

6807.T Closing Price Target Price Date (¥) (¥) Rating 12-Apr-12 678 750 N * 09-Jul-12 702 800 23-Oct-12 649 670 16-Jan-13 632 710 04-Mar-13 723 730 09-Jul-13 1,008 1,050 09-Oct-13 1,056 1,090 22-Jan-14 1,485 1,550 07-Apr-14 1,556 * 04-Jul-14 2,348 3,000 O NEUTRAL OUTPERFORM * Asterisk signifies initiation or assumption of coverage.

3-Year Price and Rating History for Murata Manufacturing (6981.T)

6981.T Closing Price Target Price Date (¥) (¥) Rating 04-Oct-11 3,990 4,400 N 08-Dec-11 4,245 4,000 24-Jan-12 4,160 4,150 05-Mar-12 4,590 5,400 O 12-Apr-12 4,715 5,800 20-Jul-12 4,005 4,600 31-Jul-12 3,960 4,400 30-Oct-12 3,825 4,300 06-Dec-12 4,605 5,500 29-Jan-13 5,410 6,400 NEUTRAL OUTPERFORM 22-Feb-13 5,970 6,900 18-Apr-13 7,920 9,000 12-Jul-13 7,780 8,200 N 28-Aug-13 6,980 7,500 27-Jan-14 9,911 11,500 O * Asterisk signifies initiation or assumption of coverage.

Technology sector 7 07 July 2014

3-Year Price and Rating History for TDK (6762.T)

6762.T Closing Price Target Price Date (¥) (¥) Rating 04-Oct-11 2,546 2,200 U 07-Dec-11 3,650 3,100 12-Apr-12 4,250 4,600 N 27-Jul-12 2,920 4,000 O 22-Oct-12 3,050 3,900 29-Jan-13 3,280 4,400 22-Feb-13 3,245 3,900 17-Apr-13 3,215 4,200 22-Jul-13 3,695 4,400

03-Sep-13 3,690 4,200 UNDERPERFORM 13-Dec-13 4,740 6,300 NEUTRAL OUTPERFORM 21-Jan-14 4,940 6,400 17-Apr-14 4,565 6,000 * Asterisk signifies initiation or assumption of coverage.

3-Year Price and Rating History for Toshiba (6502.T)

6502.T Closing Price Target Price Date (¥) (¥) Rating 30-Jan-12 329 300 N 05-Apr-12 353 350 27-Jul-12 257 270 14-Aug-12 261 280 04-Oct-12 267 290 27-Feb-13 406 560 O 29-May-13 505 610 27-May-14 401 645 * Asterisk signifies initiation or assumption of coverage. NEUTRAL OUTPERFORM

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 attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. As of 2nd October 2012, U.S. and Canadian as well as European ra tings are based on a stock’s total return relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. For Latin American and non-Japan Asia stocks, ratings are based on a stock’s total return relative to the average total return of the relevant country or regional benchmark; prior to 2nd October 2012 U.S. and Canadian ratings were based on (1) a stock’s absolute total return potential to its current share price and (2) the relative attractiveness of a stock’s total return potential within an analyst’s coverage universe. For Australian and New Zealand stocks, 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.

Technology sector 8 07 July 2014

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

Analysts’ sector weightings are distinct from analysts’ stock ratings and are based on the analyst’s expectations for the fundamentals and/or valuation of the sector* relative to the group’s historic fundamentals and/or valuation: Overweight : The analyst’s expectation for the sector’s fundamentals and/or valuation is favorable over the next 12 months. Market Weight : The analyst’s expectation for the sector’s fundamentals and/or valuation is neutral over the next 12 months. Underweight : The analyst’s expectation for the sector’s fundamentals and/or valuation is cautious over the next 12 months. *An analyst’s coverage sector consists of all companies covered by the analyst within the relevant sector. An analyst may cover multiple sectors.

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* 39% (49% banking clients) Underperform/Sell* 13% (47% 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 individual factors.

Credit Suisse’s policy is to update research reports as it deems appropriate, based on developments with the subject company, the sector or the market that may have a material impact on the research views or opinions stated herein. Credit Suisse's policy is only to publish investment research that is impartial, independent, clear, fair and not misleading. For more detail please refer to Credit Suisse's Policies for Managing Conflicts of Interest in connection with Investment Research: http://www.csfb.com/research and analytics/disclaimer/managing_conflicts_disclaimer.html Credit Suisse does not provide any tax advice. Any statement herein regarding any US federal tax is not intended or written to be used, and cannot be used, by any taxpayer for the purposes of avoiding any penalties.

Price Target: (12 months) for Toshiba (6502.T) Method: Our ¥645 target price for Toshiba is based on a P/E of 14.3x applied to our FY3/15 EPS estimate of ¥45.1. The 14.3x multiple is derived from a sum-of-the-parts approach based on recent valuations for 5–10 international and domestic peers per segment.

Risk: Risks that could impede achievement of our ¥645 target price for Toshiba: Downside risks include a protracted slump in NAND flash prices and a decline in 1Q operating margin to below 20% for NAND business, additional charges in overseas nuclear power, and equity financing accompanying major M&A.

Price Target: (12 months) for TDK (6762.T) Method: Our ¥6,000 target price for TDK Corp is derived by applying a zero-growth ROC model using FY3/15 as the base year (risk-free rate of 0.66%, RP 6.2%, beta of 1.3, ROC 6.0%). Risk: Risks that may impede achievement of our ¥6,000 target price for TDK Corp include deteriorating profitability for ITO films, slow results from restructuring, a downturn in hardware manufacturing, and erosion in HDD head market share.

Price Target: (12 months) for Japan Aviation Electronics Industry (6807.T)

Method: Our ¥3,000 TP is based on zero-growth ROC model (ROC/WACC = EV/IC). We set our TP based on our FY3/15 forecasts, a 6.5% ERP, 0.66% RFR and beta of 1.15 Risk: Downside risks include weakness in North American smartphone component orders' volume or pricing and revelation of greater-than- estimated overcharged expenses on Ministry of Defense contracts

Price Target: (12 months) for Murata Manufacturing (6981.T) Method: Our ¥11,500 target price for Murata Mfg is based on a zero-growth ROC model using FY3/15 as the base year (RF 0.66%, RP 6.2%, ROC12.1%, beta 0.9). Risk: Downside Risks that could cause the share price to diverge from our ¥11,500 target price for Murata Mfg. include:forex trends and the company’s performance in securing design wins with smartphone makers

Technology sector 9 07 July 2014

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

See the Companies Mentioned section for full company names The subject company (6762.T) currently is, or was during the 12-month period preceding the date of distribution of this report, a client of Credit Suisse. Credit Suisse provided non-investment banking services to the subject company (6762.T) within the past 12 months Credit Suisse expects to receive or intends to seek investment banking related compensation from the subject company (6502.T, 6762.T, 6981.T) within the next 3 months. Credit Suisse has received compensation for products and services other than investment banking services from the subject company (6762.T) within the past 12 months As of the date of this report, Credit Suisse makes a market in the following subject companies (6502.T). As of the end of the preceding month, Credit Suisse beneficially own 1% or more of a class of common equity securities of (6762.T). Credit Suisse has a material conflict of interest with the subject company (6502.T) . Credit Suisse Securities (USA) LLC is acting as an advisor to Landis+Gyr on the announced acquisition by Toshiba Corporation. This acquisition remains subject to regulatory approvals and other customary closing conditions. 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 (6502.T, 6762.T, 6807.T, 6981.T) 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. 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. To the extent this is a report authored in whole or in part by a non-U.S. analyst and is made available in the U.S., the following are important disclosures regarding any non-U.S. analyst contributors: The non-U.S. research analysts listed below (if any) are not registered/qualified as research analysts with FINRA. The non-U.S. research analysts listed below may not be associated persons of CSSU and therefore may not be subject to the NASD Rule 2711 and NYSE Rule 472 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account. Credit Suisse Securities (Japan) Limited ...... Hideyuki Maekawa ; Shunsuke Tsuchiya ; Akinori Kanemoto

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.

Technology sector 10 07 July 2014

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 () 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.

Tech sector_070714_Asia fb Technology sector followup_E.doc11