05 December 2012 Asia Pacific/ Equity Research Technology Hardware & Equipment

Asia 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 : 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 production/design base. ARM has lowered the entry barrier with dual / quad core Cortex processors, with leading domestic Chinese fabless Allwinner, , Actions shipping dual-core now and quad-core in 1H13. For higher-end tablets, Mediatek is supplying MT6577/8377 and has 28nm on 2013 roadmap. CMOS sensors are led by Galaxycore, touch controller by Goodix, FocalTech, Elan, and Pixcir, connectivity by / RDA, driver ICs by Novatek, , 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 . 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

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 Galaxy 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 AM8726 Rockchip RK3066 3 Nvidia Tegra 4 TI OMAP 4 APL2498 Samsung 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 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, , AMLogic CMOS image sensor Omnivision GalaxyCore Touch screen controllers Elan, Goodix (Mediatek subsidiary) FocalTech, Pixcir Wireless Realtek, RDA /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 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 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 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 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 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 , with only a few high-end SKUs using more advanced precision assembly and high-end components. The bill of materials (BOM) and manufacturing cost of an entry level whitebox tablet (7” low-resolution, low-end single-core processor) is typically US$40, mid-range at US$100 (10” low-resolution, dual-core processor), and high- end at US$150 (10” high resolution, high-end dual-core). The BOM cost structure is much lower than mid-range branded tablets such as Amazon’s Kindle Fire at US$140 and an 8GB Nexus 7 at US$160.

Asia Semiconductor Sector 3 05 December 2012

Figure 8: iPad mini – better components and assembly Figure 9: Whitebox tablet – cheaper components/assembly

Source: iFixit Source: iFixit Pricing of key components such as , DRAM, and touch display panel is the Flash, DRAM, touch screen key swing factor of BOM cost, as these components collectively contribute over 60% of are swing factors while other BOM costs. Vendors can source these panels from local panel makers and use cheaper components are of lower film-based touch. Components such as the PCBA and electro-mechanical parts are also quality (20-50% cheaper) typically 20-50% cheaper (and of lower quality) than the ones adopted in smartphones.

Figure 10: BOM cost of whitebox tablets versus branded tablets Entry-level Mid-end White- High-end White- iPad mini (wifi 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 Apps processors from Asian fabless with optimised DRAM usage is a key enabler for lower BOM cost. For example, the free memory space after an Android 4.0 boot-up based on an MT8377 tablet is about 240MB while a only has 160MB. With the larger free memory, Mediatek-powered tablets only require 512MB DRAM versus branded ones which adopt 1MB DRAM for similar performance. Low computing penetration driving adoption Whitebox tablet demand is filling an opportunity in emerging markets that still have low PC A potential unfulfilled penetration rates and most users are only now migrating up from feature phones to their opportunity for tablets in first smartphones. Our checks with Shenzhen-based whitebox tablet makers indicate that emerging markets with low demand is particularly strong in Eastern Europe and the Middle Eastern markets, including PC penetration rate Saudi Arabia, Turkey, South Africa, Hungary, and Poland, with use primarily limited to media consumption and entertainment devices. Most vendors displaying tablets are showcasing music videos, movies and games. Given most of these tablets are powered by Media consumption is the Android 4.0, the abundance of apps makes these devices multi-functional. In many cases, main usage

Asia Semiconductor Sector 4 05 December 2012 they are used as a portable device for mobile Internet access, , video, gaming and social networking and can allow app usage across tablet and smartphones.

Figure 11: Whitebox tablet to benefit from low PC penetration rate in emerging markets

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47 48 49 50 45 40 37 40 34 29 29 30 26 27 27 28 20 22 20 17 17

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Chile

Brazil

Spain

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Russia

Turkey

Poland

Mexico

Greece

Portugal

Hungary

Thailand

Malaysia

Colombia

Argentina

Indonesia

South Africa South Saudi Arabia Saudi

PC Penetration (%)

Source: Gartner, World Bank Volumes ramp-up accelerating Based on our checks at application processor and connectivity suppliers, we expect about Expecting 50 mn units in 50 mn low-cost whitebox tablet shipments in 2012, of which volumes have increased 2012E sequentially from 6 mn in 1Q12 to 11 mn in 2Q12, 16 mn in 3Q12 and 17 mn units in 4Q12. We estimate that 10 mn units are domestic shipments into China while the remaining are exported, mainly to other emerging markets. Adding this to our global tablet unit shipments (which excludes whitebox) increases the total units in 2012E by 45% to 162mn. For 2013, we estimate 80 mn whitebox tablet shipments, taking our global tablet forecast from 171mn for tier-one up to 251mn for all devices.

Figure 12: 2012/13E global tablet unit shipment estimates (with / without whitebox) Mar-12 Jun-12 Sep-12 Dec-12E 2012E 2013E Apple 11,798 17,042 14,036 23,861 66,737 101,569 Samsung 1,900 2,391 5,100 5,000 14,391 25,000 0 0 300 2,200 2,500 7,000 RIM 500 260 130 150 1,040 600 Barnes & Noble 505 200 700 1,200 2,605 5,000 Motorola 300 250 400 300 1,250 1,000 25 25 25 25 100 100 Acer 200 250 450 900 1,800 5,000 ASUSTek 600 800 2,300 2,300 6,000 8,000 480 383 389 500 1,752 4,958 Amazon 729 1,252 2,500 3,500 7,981 10,000 HTC 300 350 500 500 1,650 2,000 Others (ex-whitebox) 929 1,822 2,198 -528 4,421 1,221 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 5 05 December 2012

The proliferation of whitebox tablets in the emerging markets is no mirage and it could be 2012/13 global tablet unit growing much stronger than expectations. (ACTS), a Chinese shipment could be 45-47% fabless company, expects the whitebox tablet (or Android MID) market shipments to grow understated from about 45 mn in 2012 to 90 mn in 2013 and other application processor suppliers see potential for well over 100mn units based on initial buyer forecasts. Some of the demand will be coming from replacement of Personal Media Players and derivatives. ACTS see the Volumes undercounted but total addressable market (TAM) for whitebox tablet apps processors increasing from accelerating towards 90 mn US$500 mn in 2012 to US$760 mn in 2013 based on ASPs for chipsets falling from in 2013 US$14.5 in 2012 to US$10.0 in 2013 (-31% YoY).

Figure 13: Whitebox tablet unit shipment understated Figure 14: 80% of whitebox tablets shipped internationally

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- 0 CY2012E CY2013E 2011E 2012E

Branded tablets (mn units) White-box tablets (mn units) China shipments Overseas shipments

Source: Credit Suisse estimates Source: EETimes

Figure 15: Market size of non-Apple media devices Figure 16: Addressable market - Non-Apple media devices

Source: Actions Semiconductor Source: Actions Semiconductor Greater China suppliers leading on the opportunity The development of a thriving semiconductor ecosystem to power these devices is Domestic Chinese fabless enabling the rapid volume growth of whitebox tablets. ARM and Imagination Technologies companies are key semi are the key silicon IP suppliers for CPU and GPU and have lowered the entry barrier. At suppliers our recent global technology conference ARM mentioned that its efforts in its Cortex A series have democratised computing and brought it to the masses by allowing multiple

Asia Semiconductor Sector 6 05 December 2012 fabless companies to come to market with cost competitive and low power architectures with rising functionality. Domestic Greater China fabless companies are leading in the semiconductor supply chain Domestic Greater China for whitebox tablets. Allwinner, Rockchip, Actions Semi (ACTS), AMLogic and NuFront are fabless companies leading key domestic Application processor vendors. More recently, we have seen the emergence in the semiconductor supply of Mediatek as many of its existing customers have adopted its dual core chain for whitebox tablets MT6577/MT8377 for the tablet market to offer 3G connectivity with the voice turned off. Mediatek has already enabled the Shenzhen ecosystem in smartphones so has a pre- existing channel to enable this manufacturing base to move into more advanced computing. MediaTek is upgrading its roadmap with 28nm and quad core processors and hiring both CPU and GPU engineers to optimise the ARM and Imagination PowerVR cores and speed binning experts to raise saleable chip output per wafer similar to ’s speed binning of processors. For other peripheral chipsets, the majority of CMOS image sensors in whitebox tablets are supplied by Shanghai based Galaxycore, with small volume also by US-listed Omnivision which now is devoting capacity to the fast growing local smartphone channel. Major touch controller IC suppliers include Goodix, FocalTech, Elan, and Pixcir. For WiFi connectivity, Realtek and RDA are main suppliers. Realtek also supplies audio chipsets, although at a lower spec, content is less than half its content in the higher-end Nexus. In the display panel segment, LGD, Sharp, CMI, and Hannstar are key suppliers to mid-to- Display related suppliers are high end whitebox tablet models offering IPS displays. The lower-end display panels are largely foreign companies, mainly provided by CPT, BOE, and Hydis. Due to cost sensitivity, touch panel suppliers except for touch panels (O- are dominated by domestic players including O-Film and Laibo Hi-Tech rather than Taiwan Film, Laibo) suppliers TPK which is busy with Apple and branded Android and Windows 8 tablets and notebooks. Given the lack of domestic suppliers, display driver ICs are mainly provided by foreign fabless companies such as Novatek, Himax, Orise and Silicon Works.

Figure 17: Whitebox tablet semiconductor supply chain map CPU silicon IP 3D GPU silicon IP Foundries

Apps Processors

Touch screen controllers

Wireless and audio

CMOS Apps processor image + baseband sensor

Source: Credit Suisse research

Asia Semiconductor Sector 7 05 December 2012

A crowded applications processor landscape Apps Processor suppliers are a key enabler of the rapid expansion of the whitebox tablet Enabled by Apps processor market by offering turnkey solutions to lower entry barriers to tablet vendors and speed up and reference designs from time-to-market from several months down to a few weeks. The market is dominated by Chinese suppliers Chinese vendors, with Allwinner and Rockchip having about 70% of designs, a mix of several vendors (Actions Semi, AMLogic, NuFront, Mediatek, Via) in about 20% and the remaining 10% from Nvidia Tegra, Samsung Exynos, and Freescale in the high end.

Figure 18: A fleet of Chinese applications processor companies are competing aggressively with advanced processors Company Allwinner Rockchip AMLogic Actions WonderMedia Ingenic NuFront Founded 2007 2001 1995 2001 1987 (Via) 2005 2004 Headquarters , China Fuzhou, China Santa Clara, CA Zhuhai, China Beijing, China Guangzhou, China Tablet AP A10/A13 RK3066 AML8726-M ATM7029 WM8950 JZ 4770 NS115 Multi-core Single-core Dual-core Dual-core Quad-core N/A Single-core Dual-core CPU ARM Cortex-A8 ARM Cortex-A9 ARM Cortex-A9 ARM Cortex ARM Cortex-A9 Xburst (MIPS32) ARM Cortex-A9 Clock speed 1.2GHz 1.6GHz 1.0GHz 1.2GHz 800 MHz 1.0GHz 1.5GHz Graphics ARM Mali-400 ARM Mali-400 ARM Mali-400 ARM Mali 400 ARM Mali-400 Vivante GPU ARM Mali-400 Process node 55nm 40nm 40nm 40nm N/A 40nm 40nm Source: Company data

Figure 19: Apps processors from overseas targeting the whitebox tablet market Company Freescale Samsung NVIDIA Mediatek Tablet AP i.MX6 Dual Exynos 4 Tegra 3 MT8377 Multi-core Dual-core Quad-core Quad-core Dual-core CPU ARM Cortex-A9 ARM Cortex-A9 ARM Cortex-A9 ARM Cortex-A9 Clock speed 1.2GHz 1.4/1.6 GHz 1.6GHz 1.0 GHz Graphics PowerVR ARM Mali GeForce PowerVR Process node N/A 32nm 40nm 40nm Source: Company data In 2011, tablets reached about 12mn units and started with primarily single-core ARM Single-core dominating low- Cortex A8-based processors with US$10 ASPs by companies like Amlogic, RockChip, end, but dual-core is ViMicro and AllWinner. In 2012, the adoption of dual-core A9 processors has picked up at ramping up similar prices to the original models, with ASPs of first generation single-core chipsets dropping to US$4-6. The new dual-core apps processors with higher performance can enable better multimedia features and smoothly run Android 4.0. Many IC design companies are now working on quad-core apps processors and we Quad-core APs starting expect to see them become mainstream in the higher-end segment of the whitebox tablet mass production in 1Q13 market in 2013. Domestic Chinese fabless companies including Allwinner, Rockchip, and Actions are rolling out quad-core chipsets in 4Q12 with mass production in tablets in 1Q13. Compared to foreign vendors like Freescale, Samsung, and Nvidia, domestic solutions offer much lower BOM costs. Our checks suggest that Allwinner’s quad-core A31 (including PMU) is at a disruptive US$15, substantially lower than equivalent quad-core products from Samsung, Nvidia and Freescale at ASP of US$25.

Figure 20: 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 RK3188 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 28nm 40nm Availability Oct-12 2H12 2H12 4Q12 4Q12 4Q12 Source: Company data

Asia Semiconductor Sector 8 05 December 2012

Supply chain stocks for the low-cost tablets

Figure 21: 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 Actions Semiconductor (ACTS) – reviving with quad-core Action Semiconductor (ACTS) is a leading audio / video fabless chipset company in China ACTS is reaccelerating with (Zhuhai) which spun out of Realtek in the early 2000s. It went public in November 2005. quad-core ATM702x The company saw strong revenue growth and profitability from 2005 to 1H07, driven by its MP3 SoC products. Its growth slowed down following the cannabilisation from smartphones, and competition from Rockchip substantially depressed prices. While ACTS tried to regain share in the whitebox tablets space back in 2011, its MIPS SoCs proved to be inferior as the market is dominated by the ARM architecture. Immediately after that, ACTS switched over to ARM. In 3Q12, ACTS ramped up the shipments of its first product family targeting the tablet market, the ATM701x. Shipments exceeded 200,000 units in 3Q12. ACTS claims that its tablet AP solution offers the most competitive total BOM costs and enables tablets with compelling price-to-performance ratio. During the 3Q12 results conference call, ACTS management expressed their enthusiasm about the growth opportunities for its next-generation tablet AP product and said they believe it will be a main driver of growth in 2013. ACTS recently announced its second generation tablet AP product family, ATM702x, noting plans to commence the volume shipments in 1Q13. The upcoming ATM7029 supports Android 4.1 (Jellybean) and includes a quad-core ARM Cortex CPU and a multi-core GPU. ACTS claims to be one of the first to integrate USB 3.0 PHY into tablet SoCs. ACTS is migrating its tablet APs towards 40/28nm process technology in 2013. ACTS fab partners include UMC and TSMC. Mediatek (2454.TW, NT$332.00, RESTRICTED) – aggressive 2013 tablet roadmap Mediatek is a relatively new entrant into the space with its initial product, the MT8377, Penetrating tablet by rebranded from its MT6577 dual-core chipset for smartphones. The majority of its tablet leveraging existing products are adopted by its existing smartphone customers who are entering the tablet smartphone customer base market, opening up a huge channel for Mediatek on a base that peaked over 500 mn units in 2010. Mediatek has 800 engineers working on Android development (50% in Taiwan, 50% overseas) and provides strong support for vendors to lower their tablet BOM costs. Examples of cost-down support Mediatek provides include Android 4.0 with optimised DRAM usage of below 512MB that allows low-cost makers to provide tablets with lower DRAM memory. Our checks show that Mediatek will target the tablet market with three chipsets in 2013. Aggressive tablet product Mediatek will target the high-end market with 28nm MT81xx that supports 4kx2k display or roadmap in 2013 3D display, with mass production scheduled for 2Q13. With an integrated baseband and AP, the MT838x will target the mid-end segment in 1H13. Mediatek addresses the low-end segment with MT8317 (based on its MT6517 EDGE dual core chipset), launched in 4Q12. While Chinese players such as Allwinner and Rockchip have dominated the market, strong Mediatek is likely to see unit volume growth still provides Mediatek with ample opportunities. While single-core APs shipment upside in 2013E such as Allwinner’s A10 is commoditising at an ASP of US$4, Mediatek is targeting the

Asia Semiconductor Sector 9 05 December 2012 higher end whitebox tablet market with multi-core solutions. Mediatek’s MT8377/8177 is priced competitively at around US$10 targeting the mid-to-high end segment, similar to Rockchip’s RK3066. With aggressive dual-core and quad-core processors product roadmap and lever of existing smartphone customer base, Mediatek is likely to see unit shipment upside in 2013E. We estimate 15mn tablets for Mediatek embedded in our 240mn smartphone/tablet shipment estimate for 2013.

Figure 22: 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 Realtek Semiconductor (2379.TW, NT$59.70, NEUTRAL [V], TP NT$60.40) - dominant WiFi supplier and gaining in audio chipsets Realtek works with all Chinese tablet AP vendors, including Allwinner and Rockchip on Realtek has over 50% share WiFi. We estimate that Realtek has over 50% WiFi market share in 2012E. While in whitebox tablet WiFi Realtek’s audio chipset business in tablets are more concentrated in branded devices, our checks indicates that Realtek is a key supplier in the whitebox supply chain. We estimate 5-10% of sales from these low-cost tablets for Wifi and audio codecs, helping offset a base of 60% of sales still tied to the traditional PC market. WPG – key tablet component distributor WPG is Asia’s largest IC distributor and counts many of the major Asian chipset suppliers including Mediatek and Rockchip as its vendors. Low-cost smartphones constitute 15% and tablets 10-15% of sales, creating a good incremental growth driver for the company. WPG has more content in a low-cost tablet (core and peripheral components) versus Apple related (discretes and analog) and sees this segment at least doubling in 2013, consistent with the momentum seen at local tablet vendors exporting to emerging markets. SMIC Chinese foundry capitalising on the whitebox tablet strength in its backyard We believe SMIC is seeing potential upside to 4Q12 guidance on strength from overseas (Broadcom/) and local Chinese fabless ramping on low-cost chipsets for smartphones and whitebox tablets. The company is continuing a turnaround from 10 years of mostly losses into a modestly profitable and sustainable operation. SMIC now targets 5% ROE by 2H13 as it ramps 40nm to 10-15% of sales and improves yield on 55/65nm and brings up its Shanghai 300mm line to scale, offering potential for the stock to move closer to 1x P/B. We see a good opportunity for the company as it has an inside track to Chinese fabless receiving subsidies and offers a lower cost manufacturing base for emerging market mobile devices. We rate SMIC NEUTRAL with HK$0.41 target price. RDA – low-cost handset component supplier expanding into tablets RDA is a fast emerging handset platform supplier with solid mixed signal and RF expertise that has allowed it to bring well integrated 2G baseband, transceiver, power amplifier, Bluetooth, Wifi, FM-tuner, analog and CMMB TV and DVB-S/T tuners into the market. The company is now supplying some if its wireless connectivity into this tablet market and could see a good expansion opportunity out of handsets. Novatek – a new extension for its mobile driver IC business Novatek is benefiting from a consolidating driver IC space and a trend to higher resolution, a trend even taking place in whitebox tablets, as higher-end IPS displays can offer a nice ASP uplift over the base model. Novatek garners 20-25% of sales from smartphones and

Asia Semiconductor Sector 10 05 December 2012

8-9% from tablets and is extending beyond its wins in multiple tier one tablets (Nexus, iPad Mini, Kindle Fire, Nook, Transformer, Yoga, Galaxy Tab) into whitebox devices. Private company beneficiaries We also profile a number of private semiconductor companies in the space that are emerging and their key offerings for tablets. Allwinner (private) – leading in pricing, performance, and turnkey support Founded in 2007 by ex-Actions Semi engineers in Zhuhai, Allwinner (private) is a leader in Allwinner – over 50% share media processing solutions. Its tablet APs are also known under the “Boxchip” brand and in whitebox tablets are widely adopted by low-priced tablet makers in China. With strong turnkey solution support, Allwinner’s A10 / A13 single-core ARM processors at 1.0GHz / 1.2GHz (55nm/40nm) are enabling 7-inch / 10-inch tablets priced at Rmb400-Rmb600. According to our checks, Allwinner has over 50% market share in whitebox tablets and shipped 3.5 mn apps processors in the month of August alone. Allwinner increased its shipments to 5.0 mn units in October, generating US$30 mn revenue (at a $6 ASP). Allwinner launched its new quad-core A31 chipset in November 2012. The A31 integrates Allwinner rolling out A31 quad-core ARM Cortex-A7, 8-core PowerVR SGX544 graphics core (supporting 4Kx2K quad-core processor display), 64-bit DDR3 (45% boost over 32-bit in memory read/write), and AXP221 power management companion chipset with 2.2A turbo-boost battery charging and supports advanced dynamic voltage and frequency scaling (DVFS) for advanced power savings. Our checks suggest that the pricing for both A31 (including PMU) is a disruptive US$15, substantially lower than equivalent quad-core products from Samsung, Nvidia and Freescale at ASP of US$25. Low-cost tablet makers that have announced products based on A31 include Onda, ICOO, AMPE, Ployer, and Teclast.

Figure 23: Ployer announced a tablet with Allwinner A31 Figure 24: A31 integrates Quad-core CPU + 8-core GPU

Source: Company data Source: Company data Rockchip (private) – aggressively migrating to 28nm quad-core Rockchip (private) is a leading Chinese fabless company that develops ARM based APs. Founded in 2001, Rockchip started as a developer of programmable (MCUs) for digital audio cassette players for the educational market, where it still maintains 70% share. Rockchip has its headquarter and main R&D centre in Fuzhou and sales and marketing offices in Beijing, Shanghai and Shenzhen. It employs over 500 people, of which 50% are software engineers. In the past few years, Rockchip has transformed itself from an AP vendor addressing the Rockchip – more aggressive media player and tablet markets with notable design win with . We estimate that with 28nm quad-core Rockhip has about 20% market share. In April 2012, Rockchip showcased its 40nm RK3166 RK3066, a dual-core ARM Cortex A9 chip with a quad-core ARM Mali-400 GPU. To be competitive, Rockchip is rolling out the 28nm RK3188 quad-core ARM Cortex-A9 (via GlobalFoundries). To support higher data transfer bandwidth between the quad-cores, Rockchip also licensed NoC (network on chip) Interconnect IP for RK3188. Cube

Asia Semiconductor Sector 11 05 December 2012

(private Shenzhen-based tablet maker) launched two new tablets based on Rockchip’s new 28nm quad-core RK3188 – 9.7” 2048x1536 Retina display and 10.1” 1920x1200. NuFront (private) – advanced multi-core push continues Founded in 2004 by a group of US returnees, NuFront (private) rose to fame in 2010 when NuFront developing chipsets it announced the development of a dual-core ARM Cortex-A9 implemented in 40nm with based on ARM’s newest clock speed exceeding 2Ghz. NuFront has offices in Shanghai, Guangzhou and Shenzhen Cortex A15 and has about 700 employees. Of that, it has 400 engineers, 200 of which are software engineers, while 150 are working on hardware systems, and 50 specifically focused on chipsets. Its latest AP is NS115 – 40nm dual-core ARM Cortex-A9 processor at 1.5GHz and Mali400. Nufront claims the NS115’s low power consumption (about 400 MW running at 1.5GHz) as its main competitive edge. Notable tablet win is Archo C908. In September, NuFront licensed the new array of high-end CPU/GPU cores from ARM, including ARM Cortex-A15 and Mali-T658. Nufront has plans to produce quad-cores at TSMC using 28nm process technology. NuFront is also rolling out a GSM/WCDMA chipset, the TeLink 7619, integrating digital RF, power management and baseband modem. Nufront aims to offer a complete smartphone solution in 2013, by adding its baseband modem to NS115. GalaxyCore – the leading CMOS image sensor vendor Galaxycore is a fabless CMOS Image Sensor (CIS) design company based in Shanghai Galaxycore has 50% share with 50% market share in the whitebox smartphone and tablet market. The company was in whitebox tablets founded in December 2003. Galaxycore offers CIS chips ranging from QVGA, VGA, SVGA, SXGA, UXGA. Galaxycore launched a 2-mega-pixel CIS, the GC2015, in 2011, and has been widely adopted in the Chinese market. With total unit shipments of about 600 mn in 2011, Galaxycore claims 75% of total CIS shipments in China, an increase of 70% from 350 mn units in 2010. Galaxycore claims to be one of SMIC’s largest customer in China. Huawei and Hisilicon – gaining through mobile broadband modules Huawei and its chipset subsidiary, Hisilicon, have started shipping mobile broadband Hisilicon supplying AP and modules to 3G-enabled whitebox tablets (with Hisilicon AP and baseband chipsets). Most baseband to 3G-enabled of Hisilicon’s chipset are manufactured at TSMC (40nm) and SMIC (65nm). whitebox tablets

Figure 25: Hisilicon’s K3V2 and Balong 710 Figure 26: Huawei mobile broadband modules

Source: Company data Source: Company data

Asia Semiconductor Sector 12 05 December 2012 Appendix: A large proliferation of tablet designs

Figure 27: A typical 7-inch entry-level whitebox tablet without 3G with FOB of US$53, and cost an extra US$32 for 3G

Wifi+GPS+BT+8GB storage 1024x600 pixels super HD screen

Pricing (8GB version, HD screen, wifi, BT, GPS) Sample unit US$68 100 unit US$62 1000 unit US$56 Elegant design, super slim 5000 unit US$53 Notes: 1. +$32 to upgrade to 3G vesion

Source: Company data, Credit Suisse estimates

Figure 28: Low-cost whitebox tablets – product line-up (1) Maysun T753 Maysun T732-2 Starworth SW-R07D-M39 Starworth SW-M07A-M38 Vivatel T1001 Core Dual A9 Single A8 Dual A9 Quad A9 Dual A9 CPU MTK 6577 Allwinner A10 Rockchip 2918 MTK6575 NVDIA Tegra 2 Operation System Android 4.0 Android 4.0 Android 4.1 Android 4.0 Android 4.0 Clock speed 1.0GHz 1.5GHz 1.0GHz 1.2GHz 1.0GHz Connectivity 3G (GSM+WCDMA)/Wifi 2G w/ calling function/ Wifi Wifi 3G/2G/Wifi 3G/Wifi Screen 7" 7" 7" TFT LCD 7" TFT LCD 10.1" Touch Capacitive Capacitive Capacitive Capacitive Capacitive Resolution 1024x600 800x480 1024x600 1280x800 NAND 4GB (up to 32GB option) 4GB(up to 32GB) 4GB NAND Flash (up to 32GB) 4GB NAND Flash (up to 32GB) 16GB external (up to 32GB) DDR2/DDR3 RAM 512MB (up to 4GB option) SDRAM 512MB 1GB DDR3 1GB DDR3 RAM 1GB

Front Camera 0.3-2.0MP N/A 0.3-2.0MP 0.3-2.0MP 2.0MP Back Camera 2.0-5.0MP 0.3-2.0MP 2.0-5.0MP 2.0-5.0MP 3.0MP ASP (US$)

Source: Company data, Credit Suisse estimates

Asia Semiconductor Sector 13 05 December 2012

Figure 29: Low-cost whitebox tablets – product line-up (2) 7 Flame II Ainol Novo 7 Venus Ainol Novo 7 Dragon Ainol Novo 7 Legend Operation System Android 4.1 Android 4.1 Android 4.1 Android 4.1 Connectivity Wifi External 3G/wifi External 3G/wifi Wifi Screen 7", IPS 7" , IPS 7" 7" Touch Capacitive Capacitive Capacitive Capacitive Resolution 1280x800 1280x800 800x480 800x600 NAND 16GB 8GB 8GB 8GB DDR2/DDR3 1GB DDR3 1GB DDR3 1GB DDR3 512MB DDR3 Front Camera 2MP 0.3MP 0.3-2.0MP 0.3-2.0MP Back Camera 5MP 2MP N/A N/A Bluetooth x x GPS x Battery 5000 mAh 4000 mAh 3700 mAh 3000 mAh ASP (US$) 180 150 90 99

Source: Company data

Figure 30: Low-cost whitebox tablets – product line-up (3) Ainol Novo 8 Dream Ainol Novo 10 Capitan Ainol Novo 10 Hero Ainol Novo 10 Hero II Operation System Android 4.1 Android 4.1 Android 4.1 Android 4.1 Connectivity External 3G/wifi External 3G/wifi External 3G/wifi External 3G/wifi Screen 8", IPS 10.1", IPS 10.1", IPS 10.1", IPS Touch Capacitive Capacitive Capacitive Capacitive Resolution 1024x768 1920x1200 1280x800 1280x800 NAND 8GB 16GB 16GB DDR2/DDR3 RAM 1GB 1GB DDR3 1GB DDR3 1 GB DDR3 Front Camera 0.3MP 0.3MP 0.3MP 2MP Back Camera 2MP 2MP 2MP N/A Bluetooth x x x x GPS x x x x Battery 6000 mAh 10000 mAh 8000 mAh 8000 mAh ASP (US$) 190 213 200 210

Source: Company data

Asia Semiconductor Sector 14 05 December 2012

Figure 31: Low-cost whitebox tablets – product line-up (4) Ramos W30 Sunty K2 Honesty Wi-Note JX006A Eken W70 Ramos Miumiu W1 Core Quad A9 Dual Dual A9 CPU Samsung Exynos 4412 AML8726-MX Boxchip A13 VIA WM8850 ATM7019 MIPS32 Operation System Android 4.0.3 Android 4.0 Android 4.04 Android 4.0 Android 4.0 Clock speed 1.2GHz 1.5GHz 1.0GHz Connectivity 3G/Wifi External 3G/Wifi External 3G/Wifi External 3G/Wifi Wifi Screen 10.1" 9.7" 9.2" 7" 7" Touch Capacitive Capacitive Capacitive Capacitive Capacitive Resolution 1280x800 1024x766 800x480 800x480 1024x600 NAND 4GB (up to 16GB) 8GB 4GB (up to 16GB) 4GB (up to 8GB) DDR2/DDR3 RAM 512 2GB DDR3 1 GB DDR3 512 MB DDR3 512 MB DDR3 512 MB DDR3

Front Camera 0.3MP 0.3MP 1.3MP 1.3MP Back Camera 2.0MP 2.0MP N/A N/A ASP (US$) 239.0 $79-104

Source: Company data, Credit Suisse estimates

Figure 32: Low-cost whitebox tablets – product line-up (5) Ugoos UG-LMW70 Novo 10 Hero uPlay C70 M70025 A816 Core Dual A9 Quad Dual A8 Single A8 CPU Via WM8850 ATM 7029 Allwinner A13 Vimicro VC0882 Samsung S5PV210 Operation System Android 4.0 Android 4.1 Android 4.0.3 Android 2.3 Android 2.2 Clock speed 1.2GHz 1.5GHz 1.2GHz 1.0GHz 1.2GHz Connectivity External 3G/Wifi External 3G/wifi Wifi Wifi Wifi Screen 7" 10.1" 7" 7" 8" Touch Capacitive Capacitive Capacitive Resistive Resistive Resolution 800x480 1280x800 800x480 800x480 800x600 NAND 4GB 16GB 4GB 4GB 4GB DDR2/DDR3 512MB 1GB DDR3 512MB DDR3 512MB DDR2 512MB DDR2

Front Camera 1.3MP 0.3MP 0.3MP 0.3MP 1.3MP Back Camera N/A 2.0MP N/A N/A N/A ASP (US$) 72.0 240.0 139.0 83.7 96.0

Source: Company data, Credit Suisse estimates

Figure 33: Low-cost whitebox tablets – product line-up (6) BLY-806 Howell AW103 Howell AW133 Honesty Q88 RK 901 Core A8 Dual A9 CPU Via WM8650 Allwinner A10 AllwinnerA13 Allwinner A13 RK 3066 Operation System Android 2.2 Android 4.0 Android 4.0 Android 4.0.3 Android 4.1 Clock speed 600MHz 1.2GHz 1.2GHz 1.2GHz 1.6GHz Connectivity Wifi Wifi Wifi External 3G/Wifi External 3G/Wifi Screen 8" 10.1" 7" 7" 9.7" Touch Resistive Capacitive Capacitive Capacitive Capacitive Resolution 800x600 1280x800 800x480 800x480 1024x768(4:3) NAND 2GB 8GB (up to 16GB) 4GB (up to 16GB) 2GB 8GB (up to 16GB) DDR2/DDR3 256MB DDR2 1GB 512MB 512MB DDR3 1GB DDR3

Front Camera N/A 0.3MP 0.3MP HD Camera 0.3MP Back Camera N/A 2.0MP N/A N/A 2.0MP ASP (US$) 78.0 103.0 42.3 44.7 120.0

Source: Company data, Credit Suisse estimates

Asia Semiconductor Sector 15 05 December 2012

Companies Mentioned (Price as of 04-Dec-2012) O-Film Tech (002456.SZ, Rmb38.01) (005930.KS, W1,430,000) LG Display Co Ltd. (034220.KS, W34,550) Semiconductor Manufacturing International Corp. (0981.HK, HK$0.38, NEUTRAL[V], TP HK$0.41) Lenovo Group Ltd (0992.HK, HK$7.25) Silicon Works (108320.KQ, W26,450) United Microelectronics (2303.TW, NT$11.1) Advanced Semicon. Engr. (2311.TW, NT$24.1) Siliconware Precision (2325.TW, NT$31.55) Taiwan Semiconductor Manufacturing (2330.TW, NT$96.6) Acer Group (2353.TW, NT$25.9) Asustek (2357.TW, NT$320.0) Realtek Semiconductor (2379.TW, NT$59.7, NEUTRAL[V], TP NT$60.4) Via Technologies (2388.TW, NT$23.9) MediaTek Inc. (2454.TW, NT$332.0, RESTRICTED [V]) Elan Microelectronics Corp (2458.TW, NT$47.9) CH Picture Tubes (2475.TW, NT$0.9) HTC Corp (2498.TW, NT$278.5) Novatek Microelectronics Corp Ltd (3034.TW, NT$118.5, OUTPERFORM, TP NT$135.0) TXC Corp. (3042.TW, NT$49.55, OUTPERFORM, TP NT$63.0) Chimei Innolux Corporation (3481.TW, NT$14.4) Orisetech (3545.TW, NT$38.85) TPK Holdings (3673.TW, NT$488.5) WPG Holdings Ltd (3702.TW, NT$39.05, NEUTRAL, TP NT$36.5) Hannstar Display (6116.TW, NT$2.61) Chipbond (6147.TWO, NT$55.0) Sharp Corp. (6753.T, ¥174) Apple Inc (AAPL.OQ, $575.85) Actions (ACTS.OQ, $1.62) Amazon com Inc. (AMZN.OQ, $252.53) ARM Holdings (ARM.L, 762.0p) Barnes & Noble, Inc. (BKS.N, $14.36) Dell Inc. (DELL.OQ, $10.33) Inc. (FSL.N, $9.18) Himax Technologies (HIMX.OQ, $2.32) Imagination Technologies (IMG.L, 400.0p) Holdings, Inc (MMI.N, $39.98) Microsoft Corporation (MSFT.OQ, $26.34) NVIDIA (NVDA.OQ, $12.1) OmniVision TECH (OVTI.OQ, $15.17) RDA Microelectronics (RDA.OQ, $10.2, OUTPERFORM[V], TP $17.0) Research In Motion Limited (RIMM.OQ, $11.55)

Disclosure Appendix

Important Global Disclosures Randy Abrams, CFA and Yan Taw Boon, 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.

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

0981.HK Closing Price Target Price Date (HK$) (HK$) Rating 11-Aug-11 0.38 0.35 N 09-Feb-12 0.44 0.41 * Asterisk signifies initiation or assumption of coverage.

NEUTRAL

Asia Semiconductor Sector 16 05 December 2012

Price and Rating History for Realtek Semiconductor (2379.TW)

2379.TW Closing Price Target Price Date (NT$) (NT$) Rating 11-Jan-10 92.64 112.87 O 03-Feb-10 84.89 115.84 04-May-10 80.48 111.88 05-Oct-10 69.70 63.37 U * 10-Jan-11 68.32 59.41 22-Apr-11 60.40 54.46 04-May-11 58.02 58.42 11-Jul-11 54.26 55.45 31-Oct-11 50.20 50.00

05-Jan-12 45.59 45.00 OUTPERFORM 06-Feb-12 54.16 60.00 N UNDERPERFORM NEUTRAL 11-May-12 62.97 70.00 01-Aug-12 52.48 61.00 31-Oct-12 55.00 60.40 * Asterisk signifies initiation or assumption of coverage.

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

2454.TW Closing Price Target Price Date (NT$) (NT$) Rating 02-Feb-10 497.00 509.00 N 01-Mar-10 516.96 513.00 22-Apr-10 558.88 660.00 O 03-May-10 536.92 678.00 16-Jun-10 514.97 * 17-Jun-10 500.00 547.00 N 02-Jul-10 424.65 475.00 28-Jul-10 442.00 440.00 07-Sep-10 472.00 475.00

06-Oct-10 412.50 370.00 U NEUTRAL 02-Nov-10 387.50 350.00 OUTPERFORM UNDERPERFORM 08-Mar-11 341.00 315.00 REST RICT ED 19-Apr-11 309.00 295.00 02-May-11 316.50 315.00 N 23-May-11 310.00 300.00 07-Jun-11 313.50 280.00 U 28-Jul-11 266.00 255.00 07-Sep-11 282.50 260.00 31-Oct-11 318.00 306.00 06-Jan-12 278.50 270.00 04-Apr-12 277.00 300.00 N 30-Apr-12 253.00 260.00 25-Jun-12 280.50 300.00 29-Jun-12 273.00 R * Asterisk signifies initiation or assumption of coverage.

Asia Semiconductor Sector 17 05 December 2012

Price and Rating History for Novatek Microelectronics Corp Ltd (3034.TW)

3034.TW Closing Price Target Price Date (NT$) (NT$) Rating 14-Dec-09 100.50 97.00 N 15-Dec-09 99.00 107.00 04-Feb-10 95.00 120.00 O 29-Apr-10 108.00 137.00 17-Jun-10 90.10 * 18-Jun-10 88.90 114.00 O 29-Jul-10 86.10 105.00 28-Oct-10 89.00 108.00 19-Jan-11 97.20 112.00

28-Jan-11 96.60 110.00 NEUTRAL 29-Apr-11 87.50 102.00 * OUTPERFORM REST RICT ED 05-Aug-11 70.30 88.00 22-Sep-11 73.80 90.00 23-Sep-11 69.20 * 07-Nov-11 81.00 90.00 O 02-Feb-12 94.40 107.00 07-Sep-12 100.00 R 11-Sep-12 100.50 118.00 O 28-Sep-12 106.00 123.00 06-Nov-12 115.00 135.00 * Asterisk signifies initiation or assumption of coverage.

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

3042.TW Closing Price Target Price Date (NT$) (NT$) Rating 06-Jun-12 41.95 57.00 O * 30-Oct-12 50.80 63.00 * Asterisk signifies initiation or assumption of coverage.

OUTPERFORM

Asia Semiconductor Sector 18 05 December 2012

Price and Rating History for WPG Holdings Ltd (3702.TW)

3702.TW Closing Price Target Price Date (NT$) (NT$) Rating 07-Jan-10 41.68 65.14 O 01-Feb-10 38.95 66.97 07-Apr-10 43.00 68.81 03-May-10 50.38 77.98 16-Jul-10 49.61 69.72 * 02-Aug-10 52.72 72.48 28-Sep-10 57.43 61.47 N 29-Oct-10 52.20 56.88 31-Jan-11 52.48 55.05 12-Jul-11 43.07 50.46 OUTPERFORM NEUTRAL 01-Aug-11 47.25 53.21 O 08-Sep-11 41.60 50.00 31-Oct-11 36.70 44.00 09-Jan-12 36.10 38.50 N 03-Feb-12 40.65 41.00 23-May-12 35.40 38.50 06-Aug-12 32.80 37.50 02-Nov-12 34.85 36.50 * Asterisk signifies initiation or assumption of coverage.

Price and Rating History for RDA Microelectronics (RDA.OQ)

RDA.OQ Closing Price Target Price Date (US$) (US$) Rating 07-Jan-11 14.55 17.00 O * 26-Apr-11 13.20 R 05-May-11 13.00 17.00 O 12-May-11 12.73 18.00 13-May-11 12.75 R 13-Jun-11 9.98 18.00 O 05-Aug-11 10.08 16.00 09-Nov-11 9.01 17.00 10-Feb-12 13.85 17.50 04-May-12 11.63 18.00 OUTPERFORM REST RICT ED 04-Jul-12 10.12 17.00 * Asterisk signifies initiation or assumption of coverage. 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 October 2, 2012 Analysts’ stock rating are defined as follows: Outperform (O) : The stock’s total return is expected to outperform the relevant * by at least 10-15% or more, (depending on perceived risk) over the next 12 months. Neutral (N) : The stock's total return is expected to be in line with the relevant benchmark* (range of ±10-15%) over the next 12 months. Underperform (U) : The stock's total return is expected to underperform the relevant benchmark* by 10-15% or more over the next 12 months. *Relevant benchmark by region: As of 2nd October 2012, U.S. and Canadian as well as European 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. For Latin American, Japanese, 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; Australia, New Zealand are, and 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. 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.

Asia Semiconductor Sector 19 05 December 2012

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* 42% (54% banking clients) Neutral/Hold* 39% (48% banking clients) Underperform/Sell* 15% (44% banking clients) Restricted 3% *For purposes of the NYSE and NASD ratings distribution disclosure requirements, our stock ratings of Outperform, Neutral, and Underperform most closely correspond to Buy, Hold, and Sell, respectively; however, the meanings are not the same, as our stock ratings are determined on a relative basis. (Please refer to definitions above.) An investor's decision to buy or sell a security should be based on investment objectives, current holdings, and other 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 Realtek Semiconductor (2379.TW) Method: Our target price of NT$60.4 is based on 11x our average 2013 EPS, versus 6-22x historical range. Realtek has concentrated exposure to competitive PC products seeing maturing growth and price erosion, overshadowing contribution from consumer, wireless and digital home applications with more potential. Risk: The major risk to Realtek achieiving our NT$60.4 target price is the company's business concentration on the PC industry. Realtek derives 66% of its sales supplying products into the PC industry, a sector known for standardization and focus on continuous cost reduction. Due to the large size and standard nature of the architecture, many of Realtek's products face competition and commoditization, placing risks on pricing and margins. The segment is also at risk of slowdown as the consumer purchasing shifts to tablets or other media consumption devices where Realtek may have less silicon designed in. Other risks include: 1) its capability to gain market share in key products; 2) its margins trends, and 3) foundry manufacturing risks, 4) inventory cycle risks to sales when channel inventories are at high levels.

Price Target: (12 months) for RDA Microelectronics (RDA.OQ) Method: Our target price of US$17 is based on 11x our average FY13 EPS and at the upper end of peers. We think the target price is justified because of the rapid growth of a low base in RF and connectivity and gross margin improvement from cost reduction.

Risk: Our target price of US$17 has following risks: 1) Concentration on handsets and small customers, 2) Lack of tier one customers, 3) Risk of bunding and integration from baseand competitors, 4)Risk of more agreessive price competition, 5) Technology migration risk, 6)Concentrated share ownership and 180 day lock-up, and 7) Litigation risk.

Price Target: (12 months) for Novatek Microelectronics Corp Ltd (3034.TW) Method: We believe Novatek deserves a discount to US fabless houses trading at 20-25x 2008 earnings due to its single product focus. We therefore apply an 14x multiple to our FY13 Taiwan GAAP EPS (Earnings per Share) estimates plus ~NT$5.5 cash dividend to arrive at a T/P of NT$135. Risk: Risks to our TP of NT$135 for Novatek include 1) risk of further inventory adjustments in panels, 2) market share losses to competitors, 3) a slowdown in monitor and LCD TV panel demand, and 4) margin erosion caused by competitive or customer pricing pressure.

Asia Semiconductor Sector 20 05 December 2012

Price Target: (12 months) for TXC Corp. (3042.TW) Method: Our target price of NT$63 implies 13x FY13E P/E (versus its historical trading range of 7-17x), justified by the market gain story in a positive product cycle.

Risk: Risk factors to our NT$63 target price include: 1) timing of PC/NB demand recovery, 2) 2H outlook overshadowed by macro uncertainty, and 3) heavier pricing pressure.

Price Target: (12 months) for Semiconductor Manufacturing International Corp. (0981.HK) Method: Our HK$0.41 target price for SMIC is based on 0.7x 2012 book value per share, in line with the mid point of the post Lehman crisis average forward P/B multiple of 0.6x. Risk: The risks that may impede achievement of our HK$0.41 target price are: (1) the 2012 global semiconductor up-cycle is not as strong as market expected, being an upstream company, SMIC tends to be more cyclical than other tech plays. (2) Price competition from peers are more severe than expected. (3) SMIC, like its peers will be affected by unexpected slow down of global economy. (4) The advanced technology products do not come out as the company scheduled to.

Price Target: (12 months) for WPG Holdings Ltd (3702.TW) Method: WPG's target price of NT$36.5 is based on 11x our average 2013 earnings per share (EPS), in-line with the midpoint of its ex-Lehman 9- 15x range from 2006-10. Our target price reflects the mild 2H10 outlook following a strong 1H10 and also due to the dilutive initial outcome of the Yosun merger.

Risk: The major risks to our 12-month target price of NT$36.5 for WPG (3702.TW) include: 1) Outlook of WPG's semiconductor distribution business is tied to the overall semiconductor demand. 2) Relationship with IC suppliers 3) Risk of excess component inventory and cash flow management 4) Financial costs and availability of bank credits.

Please refer to the firm's disclosure website at www.credit-suisse.com/researchdisclosures 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 (2454.TW, RDA.OQ, 3034.TW, 2330.TW, 2303.TW, 2311.TW) currently is, or was during the 12-month period preceding the date of distribution of this report, a client of Credit Suisse. Credit Suisse provided investment banking services to the subject company (2454.TW, RDA.OQ, 3034.TW, 2303.TW) within the past 12 months. Credit Suisse has managed or co-managed a public offering of securities for the subject company (3034.TW) within the past 12 months. Credit Suisse has received investment banking related compensation from the subject company (2454.TW, RDA.OQ, 3034.TW, 2303.TW) within the past 12 months Credit Suisse expects to receive or intends to seek investment banking related compensation from the subject company (2454.TW, RDA.OQ, 3034.TW, 2458.TW, 2330.TW, 2303.TW, 2311.TW) within the next 3 months. As of the date of this report, Credit Suisse makes a market in the following subject companies (RDA.OQ). As of the end of the preceding month, Credit Suisse beneficially own 1% or more of a class of common equity securities of (2454.TW, 2379.TW, 3034.TW, 3042.TW, 2458.TW, ARM.L, 2330.TW, 2303.TW, 2311.TW, 2325.TW). Credit Suisse has a material conflict of interest with the subject company (2454.TW). Credit Suisse is acting as the Joint non-exclusive financial advisor and facilitator to Mediatek on their announced tender offer for Mstar Semiconductor Inc. Credit Suisse has a material conflict of interest with the subject company (0981.HK). Credit Suisse USA LLC is acting as an advisor to Atmel Corp on the potential transaction with and On Semiconductor. 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 (2454.TW, 2379.TW, RDA.OQ, 3034.TW, 3042.TW, 0981.HK, 3702.TW, 2458.TW, 6147.TWO, 2330.TW, 2303.TW, 2311.TW, 2325.TW) within the past 12 months Restrictions on certain Canadian securities are indicated by the following abbreviations: NVS--Non-Voting shares; RVS--Restricted Voting Shares; SVS--Subordinate Voting Shares. Individuals receiving this report from a Canadian investment dealer that is not affiliated with Credit Suisse should be advised that this report may not contain regulatory disclosures the non-affiliated Canadian investment dealer would be required to make if this were its own report. For Credit Suisse Securities (Canada), Inc.'s policies and procedures regarding the dissemination of equity research, please visit http://www.csfb.com/legal_terms/canada_research_policy.shtml. 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.

Asia Semiconductor Sector 21 05 December 2012

Principal is not guaranteed in the case of equities because equity prices are variable. Commission is the commission rate or the amount agreed with a customer when setting up an account or at any time after that. Taiwanese Disclosures: This research report is for reference only. Investors should carefully consider their own investment risk. Investment results are the responsibility of the individual investor. Reports may not be reprinted without permission of CS. Reports written by Taiwan based analysts on non-Taiwan listed companies are not considered recommendations to buy or sell securities under Operational Regulations Governing Securities Firms Recommending Trades in Securities to Customers. To the extent this is a report authored in whole or in part by a non-U.S. analyst and is made available in the U.S., the following are important disclosures regarding any non-U.S. analyst contributors: The non-U.S. research analysts listed below (if any) are not registered/qualified as research analysts with FINRA. The non-U.S. research analysts listed below may not be associated persons of CSSU and therefore may not be subject to the NASD Rule 2711 and NYSE Rule 472 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account. Credit Suisse (Hong Kong) Limited ...... Yan Taw Boon Credit Suisse (Hong Kong) Limited Shanghai Representative Office...... Randy Abrams, CFA

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Asia Semiconductor Sector 22 05 December 2012 Asia Pacific/China Equity Research

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