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UNO Template 05 December 2012 Asia Pacific/China Equity Research Technology Hardware & Equipment Asia Semiconductor Sector Research Analysts SUPPLY CHAIN RESEARCH Randy Abrams, CFA 886 2 2715 6366 [email protected] Greater China IC Design powering the Yan Taw Boon 852 2101 7039 whitebox tablet ecosystem [email protected] Figure 1: Whitebox tablet builds at 50 mn in 2012 and 80-120 mn in 2013 CPU silicon IP 3D GPU silicon IP Foundries 300 250 Apps Processors 200 Touch screen controllers 150 100 Wireless and audio 50 - CY2012E CY2013E CMOS Apps processor image + baseband Branded tablets (mn units) White-box tablets (mn units) sensor Source: Company data, Credit Suisse estimates ■ Improving whitebox tablets expanding tablet TAM. The global tablet market is accelerating as whitebox tablets rapidly improve in functionality in the US$60-200 price range, below tier-one tablets. Initial demand is being led by Chinese makers exporting to emerging markets with low PC penetration, mainly for entertainment (games, movies, music) but have begun to offer productivity as keyboard attachments and apps proliferate. Whitebox tablets add 50 mn and 80-120 mn units to our 2012/13E global tablet estimate of 112 mn and 171 mn (45%/47% upside), respectively. Given cost sensitivity, pricing of Flash, DRAM, and touch display is the key swing factor to whitebox volumes. ■ Greater Chinese IC Design leading momentum. Greater China fabless leads in the space due to close ties to Shenzhen production/design base. ARM has lowered the entry barrier with dual / quad core Cortex processors, with leading domestic Chinese fabless Allwinner, Rockchip, Actions shipping dual-core now and quad-core in 1H13. For higher-end tablets, Mediatek is supplying MT6577/8377 and has 28nm chipsets on 2013 roadmap. CMOS sensors are led by Galaxycore, touch controller by Goodix, FocalTech, Elan, and Pixcir, wireless connectivity by Realtek / RDA, driver ICs by Novatek, Himax, Orise, Silicon Works, audio codec by Realtek and crystal by TXC. ■ Stocks to play on the theme. Low-cost computing is an emerging product cycle with legs in 2013 as common components span across tablets and smartphones. Most leveraged sales contribution to the expected doubling in low- cost tablet volumes in 2013 includes 10-15% of sales for SMIC and WPG, 5- 10% for Realtek and Mediatek and 5% for TXC, Chipbond, Novatek, and Himax. DISCLOSURE APPENDIX CONTAINS ANALYST CERTIFICATIONS AND THE STATUS OF NON US ANALYSTS. FOR OTHER IMPORTANT DISCLOSURES, visit www.credit-suisse.com/researchdisclosures or call +1 (877) 291-2683 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 05 December 2012 Focus tables Figure 2: BOM cost of whitebox tablets versus branded tablets Entry-level Mid-end White- High-end White- iPad mini (wifi Samsung Galaxy Nexus 7 Nexus 7 Kindle Fire (US$) White-box tablet box tablet box tablet only) Note (HSPA +) Memory 8GB 8GB 8GB 8GB 16GB 8GB 16GB 16GB Display and resolution 7" 1024x600 10" 1024x768 10" 1280x800 7" 1280x800 7" 1280x801 7" 1024x600 7.9" 1024x768 10.1" 1280x800 Processor Allwinner A10 Amlogic AM8726 Rockchip RK3066 Nvidia Tegra 3 Nvidia Tegra 4 TI OMAP 4 APL2498 Samsung Exynos 4 Camera 0.3MP 1.3MP 2.0MP 1.2MP 1.2MP N/A 5.0MP + 1.2MP 5.0MP + 2.0MP Memory 4.00 10.00 15.00 13.50 21.00 13.35 15.50 45.00 Display and Touchscreen 20.00 50.00 70.00 62.00 62.00 59.00 80.00 100.00 Processor 4.00 8.00 12.50 21.00 21.00 13.50 13.00 18.80 Camera 1.00 1.50 2.00 2.50 2.50 N/A 11.00 15.00 Wireless - BB/RF/PA N/A N/A N/A N/A N/A N/A N/A 15.00 User Interface / Combo Module (WLAN/BT/FM) 3.00 5.00 8.00 11.00 11.00 8.60 15.00 18.00 Power Management 1.00 2.00 4.00 5.50 5.50 5.00 7.50 12.00 Battery 3.00 8.00 12.00 12.75 12.75 12.75 13.50 18.00 Mechanical/Electro-Mechancial/Other 2.00 10.00 17.00 20.00 20.00 18.50 26.00 35.00 Box Contents 1.00 2.00 3.00 3.50 3.50 3.10 6.00 6.00 Manufacturing Cost 1.00 3.00 6.00 7.50 7.50 6.00 10.00 10.00 BOM + Manufacturing $ 40.00 $ 99.50 $ 149.50 $ 159.25 $ 166.75 $ 139.80 $ 197.50 $ 292.80 Source: iSuppli, Credit Suisse estimates Figure 3: Semiconductor suppliers benefiting from low-cost tablet adoption Segments Listed companies Private companies Foundries TSMC, SMIC, UMC Back-end ASE, SPIL Apps processors Mediatek, Ingenic Allwinner, Rockchip, Nufront, AMLogic CMOS image sensor Omnivision GalaxyCore Touch screen controllers Elan, Goodix (Mediatek subsidiary) FocalTech, Pixcir Wireless Realtek, RDA Huawei/Hisilicon Driver ICs Novatek, Himax, Orise Audio Realtek Silicon IP ARM, Imaginations technologies Vivante Source: Company data, Credit Suisse estimates Figure 4: Chinese fabless catching up with overseas players on quad-core for whitebox tablets by ramping in 1H13 Company Freescale Samsung NVIDIA Allwinner Rockchip Actions Tablet AP i.MX6 Quad Exynos 4 Tegra 3 A31 RK31XX ATM7029 Multi-core Quad-core Quad-core Quad-core Quad-core Quad-core Quad-core CPU ARM Cortex-A9 ARM Cortex-A9 ARM Cortex-A9 ARM Cortex-A7 ARM Cortex-A9 ARM Cortex Clock speed 1.5GHz 1.4/1.6 GHz 1.6GHz 1.5 GHz 1.6GHz 1.2GHz PowerVR PowerVR ARM Mali GeForce ARM Mali-400 ARM Mali-400 Graphics SGX543 Process node N/A 32nm 40nm 40nm 40nm 40nm Availability Oct-12 2H12 2H12 4Q12 4Q12 4Q12 Source: Company data Figure 5: Mediatek’s 2013 tablet chipset roadmap High-end Mid-end (BB+AP) Low-end Chipset model MT81xx MT838x MT8317 Process node 28nm 28nm 40nm CPU Quad-core Dual-core Dual-core CA9 Graphics Mutli-core Mutli-core PowerVR SGX531 GPU Key selling point 3D Video / 3D display 720p HD video@30fps Integrated baseband Source: Company data Figure 6: 2012/13E global tablet unit shipment estimates (with / without whitebox) Mar-12 Jun-12 Sep-12 Dec-12E 2012E 2013E Total (ex-whitebox) 18,266 25,024 29,028 39,908 112,227 171,449 Whitebox 6,000 11,000 16,000 17,000 50,000 80,000 Grand total 24,266 36,024 45,028 56,908 162,227 251,449 Grant total / ex-whitebox 33% 44% 55% 43% 45% 47% Source: Company data, Credit Suisse estimates Asia Semiconductor Sector 2 05 December 2012 Greater China IC Design powering the whitebox tablet ecosystem The global tablet market is seeing a new stage of growth similar to feature phones, and Low-cost whitebox tablets now smartphones, where a new class of whitebox tablets expands the global market into a momentum growing new entry level tier of products for emerging markets. The whitebox tablet ecosystem started gaining momentum in 2010 as digital photo frame and MP4 makers began adding features to their products with early versions of Android 2.x or Windows 7. The early devices had limited traction due to still buggy software and inadequate component supply. In 2012, we have seen an inflection point in this market with the introduction of Android 4.0, a release that standardised applications across smartphones and tablets and brought Android’s more successful ecosystem into the tablet market. At the same time, ARM is lowering the entry barrier for chip makers to enable low-cost computing, allowing multiple Chinese IC design companies to offer above 1 GHz single and dual-core products with GPU cores capable of processing multimedia video and games. The make-up of the entry level tablet We define the low-cost whitebox tablet as an unbranded or regionally branded mobile Internet device that (1) has touch-enabled screens ranging from 7” to 10”, (2) is powered by Android, (3) is equipped with WiFi or 3G connectivity, and (4) is retailing for US$50-200. Within that $50-100 price range, a 7-inch entry level WiFi only starts from US$53 in 5,000+ quantities or US$85 with 3G, US$110 with higher resolution IPS display and 3G and Mediatek dual core chipset, and $150-200 at the top end for 10” with Samsung Exynos or NVIDIA Tegra. In retail, these prices range from US$60-180. Please refer to Appendix for more whitebox tablet specifications. Figure 7: A 7-inch entry-level whitebox tablet with FOB of US$53 (an extra US$32 for 3G) Pricing (8GB version, HD screen, wifi, BT, GPS) Sample unit US$68 100 unit US$62 1000 unit US$56 5000 unit US$53 Notes: 1. +$32 to upgrade to 3G vesion Source: Company data Lean cost structure enabling lower price points Low-cost whitebox tablets have substantially lower cost structure and they target a much Entry level BOM cost is only lower price tier compared to their branded counterparts. The low-cost tablet makers US$40, mid-end at US$100, operate small and lean manufacturing in Shenzhen and locally source components in high-end at US$150 China and Taiwan, with only a few high-end SKUs using more advanced precision assembly and high-end components.
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