2 March 2017 Asia Pacific/Taiwan Equity Research Technology

Asia Handset Supply Chain Research Analysts SUPPLY CHAIN RESEARCH Randy Abrams, CFA 886 2 2715 6366 2017: A long-term [email protected] Keon Han evolution in hardware 82 2 3707 3740 [email protected] Figure 1: Mediatek’s share performance around MWC vs sales YoY

Jerry Su 20%Mediatek stock performance entering/exiting MWC (T-30 as benchmark) 60% 886 2 2715 6361 45% [email protected] 10% 30% 15% Thompson Wu 0% 0% 886 2 2715 6386 -15% [email protected] -10% -30% -45% Pauline Chen -20% -60% 886 2 2715 6323 2010 2011 2012 2013 2014 2015 2016 2017 [email protected] T-5 T+5 T+30 Sales YoY (%) Sang Uk Kim Source: Company data, Credit Suisse estimates 82 2 3707 3795 The Mobile World Congress (MWC), the wireless industry’s largest annual event, [email protected] took place this week in Barcelona. Our team met component, IC, OEM Haas Liu and infrastructure suppliers. We profile implications for the Asian supply chain. 886 2 2715 6365 [email protected] ■ Modest product launches unlikely to jumpstart momentum. Lack of exciting Harvie Chou launches was evidenced by the most crowded new product demo—the 886 2 2715 6364 3310, a US$52 reborn feature phone. Among Android brands, , LG and [email protected] focused on camera with dual camera flagships and / Thurston Lee and TCL with mid-high-end incremental refreshes. Focus clears the way for 886 2 2715 6352 ’s GS8 announcement on 29 March and the new iPhone 8 [email protected] anniversary edition with content upgrades adding US$50-100 to the BOM. ■ Mediatek contained by slowing , leadership and a new Spreadtrum/ chip. Mediatek’s new x30 flagship chipset on 10nm is seeing limited design traction with only planned launches from Vernee (late April availability), LeEco and (June availability). Qualcomm maintains leadership on S600/S800 series, allowing it to stay aggressive the entry tiers. Suppliers echoed sentiment that China smartphones remain slowed by excess inventory, rising panel/DRAM price and FX pressures in some emerging markets. Spreadtrum unveiled its x86 based chipset scheduled for devices for Sept/holiday volumes. 10nm activity is modest with using the 16nm Kirin 960 and only Sony using the 10nm Snapdragon 835, with LG using the mature 14nm S821. Xiaomi's Mi5C adopts in-house Surge S1, octa-core SoC on TSMC's 28nm HPC, to compete with QCOM/Mediatek in the mid to high-end. ■ Network spend in a lull ahead of 5G. CS forecasts a low single-digit decline in wireless network spend in 2017, consistent with OEMs at the show. Major carriers, equipment suppliers and chipset companies committed to pull in a non-standalone 5G standard that uses radio and packet elements to bring forward trials and first commercial chipsets/devices in 1H19. Nevertheless, full scale deployments and wide volume of 5G spec may take 1-3 years longer. ■ Stocks better on a pullback. We stay cautious on Mediatek with still a few quarters until its new architecture can lift profitability and recently trimmed TSMC estimates due to excess fabless and China smartphone inventory. We could see better entry on TSMC post results reset. In the meantime, we stay with component suppliers benefiting from rising content to offset slowing units including memory (Hynix), casing (Foxconn Tech, Lens Tech), acoustics (AAC), camera (Sunny Optical, Largan), and Hon Hai (high iPhone 8 share). DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES, ANALYST CERTIFICATIONS, LEGAL ENTITY DISCLOSURE 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.

2 March 2017

Focus charts and tables

Figure 2: Mediatek’s share price performance Figure 3: Spreadtrum introduces its SC9861A around MWC Mediatek stock performance entering/exiting MWC (T-30 as benchmark) 20% 60% 15% 45% 10% 30% 5% 15% 0% 0% -5% -15% -10% -30% -15% -45% -20% -60% 2010 2011 2012 2013 2014 2015 2016 2017

T-5 T+5 T+30 Sales YoY (%)

Source: Company data Source: Spreadtrum

Figure 4: New LTE smartphones from global tier 1s at the MWC – Mediatek still not penetrated into flagship yet

Company Lenovo Xiaomi BlackBerry LG Nokia Alcatel Alcatel Alcatel ZTE - Nubia Vernee Huawei Xiaomi Model name Motorola G5 / G5+ 4x KEYone G6 Cool S1 3/5/6 U5 A3 A5 LED N1 Lite A1/A1 Plus Apollo 2 P10/P10 Plus Mi5c

Announcement Feb-2017 Mar-2017 Feb-2017 Feb-2017 Mar-2017 Feb-2017 Feb-2017 Feb-2017 Feb-2017 Feb-2017 Feb-2017 Mar-2017 Feb-2017 Mar-2017 Shipment Mar-2017 TBD Apr-2017 1Q17 TBD 2Q17 TBD TBD TBD Mar-2017 Mar-2017 42,856 Mar-2017 TBD Android 7.0 Android 6.0 Android 7.1 Android 7.1 Android 6.0 Android 7.0/7.1 Android 6.0 Android 6.0 Android 6.0 Android 6.0 Android 7.0 Android 7.0 Android 7.0 Android 7.0 Display 5.5" TFT-LCD 5" TFT-LCD 4.5" TFT-LCD 5.7" TFT-LCD 5.5" TFT-LCD 5"/5.2"/5.5" TFT-LCD 5" TFT-LCD 5" TFT-LCD 5.2" TFT-LCD 5.5" TFT-LCD 5.5" AMOLED 5.5" TFT-LCD 5.1"/5.2"/5.5" AMOLED 5.15" TFT-LCD Pixels 1080*1920 720*1280 1080*1620 1440*2880 1080*1920 1080*1920 480*854 720*1280 720*1280 720*1280 1080*1920 1440*2560 1440*2560 720*1280 Camera 13 MP 13MP 12 MP Dual 13 MP 16 MP 16 MP 5MP 13MP 8MP 8MP 13MP 21 MP Dual 20 MP + 12 MP 12 MP Battery 2800/3000 mAh 4100 mAh 3505 mAh 3300 mAh 4070 mAh 3000 mAh 2050 mAh 2460 mAh 2800 mAh 3000 mAh 4010 mAh 4000 mAh 3750 mAh 2860 mAh RAM 3GB 2/3GB 3GB 4GB 4/6GB 2GB 1GB 1.5GB 1GB 2GB 4GB 6/8GB 4GB 3GB ROM 16GB/32GB 16/32GB 32GB 32GB 64/128GB 16GB 8GB 16GB 8GB 16GB 64GB 64/128GB 64GB 64GB Snapdragon MT6737/ Processor Chip Snapdragon 435 Snapdragon 625 Snapdragon 821 Snapdragon 821 MT6737M MT6737 MT6753 MT6737 Helio P10 Helio X30 HiSilicon Kirin 960 Xiaomi Surge S1 430/635 Snapdragon 430 Multi-core Octa Octa Octa Quad Quad Quad Quad Quad Octa Quad Octa Deca Octa Octa CPU Speed 1.4GHz 1.4GHz 2.0GHz 2.35GHz 2.35GHz 1.3/1.4GHz 1.1GHz 1.25GHz 1.5GHz 1.25GHz 2.0GHz 2.2GHz 2.4GHz 2.2GHz Retail Price (USD) $178/$273 $102/$130 $632 TBD TBD $150 TBD TBD TBD $180 $330 $405 TBD $220 Source: Company data, Credit Suisse research

Figure 5: 4G merchant chipsets a duopoly, although Qualcomm continues holding share pretty well Spreadtrum Mediatek Qualcomm SC9830/9832 Helio P10 / P20 Helio X10 Helio X20 / X25 Helio X30 Snapdragon 61x Snapdragon 65x Snapdragon 808 Snapdragon 810 Snapdragon 820 / 821 / 835 Infocus Bingo 21 Diamond 2+ Creo Mark 1 360 N4 LeEco Le 2S Zen Fone 3 Asus Zen Pad Z8 Acer Jade 2 Gigaset ME pro Asus ZenFone 3 Intex Cloud String Elephone M3 Elephone Vowney Alcatel Flash 3 Meizu Pro 7 Asus Zenfone Max Coolpad Cool1 Acer Jade Primo HTC Butterfly 3 Coolpad Cool S1 Lephone W7 Gionee A1 / A1 Plus Gionee E8 Elephone P 9000 Vernee Apollo 2 Blackberrt KEYone Gionee Elife S6 Blackberry Vienna Huawei HP Elite x3 Lephone W9 Gionee S6 Pro HTC One E9+ Elephone P9000 HTC One A9 Jide Remix Pro Lenovo Vibe X3 LeEco Cool 1 HTC M10 Micromax Canvas Mega 2 Gionee S8 HTC One M9+ InFocus M888 Huawei G9 Plus LeEco Le 2 LG Angler LeTV 1S Pro HTC Nexus Micromax Unite 4 Pro Gionee W909 HTC One ME LeEco L2 NuAns NEO LG G4 Lumia 950 XL Lenovo Zuk Z2 Philips S326 Imoo M1000 HTC One X9 LeEco Le2 Huawei Nova Plus R9 Plus LG Motorola 2 LeTV Le Max Pro Rockcel Quartzo InFocus S1 Letv 1S Meizu M3 Lenovo Lemon 3 X LG V10 Motorola LG G Flex 3 J2 LEAGOO Elite 1 Lumigon T3 Meizu MX6 Lenovo Phab Plus Sony Xperia XZ Microsoft Lumix 950 OnePlus Two LG G5 Samsung Z2 Lenovo K5 Note Meitu V4 Meizu Pro 6 Lenovo Vibo K5/Plus Max Motorola Active LG G6 Era 1X LG X Power with Sprint Meizu MX5 QIKU N4 Micromax YU Yureka Nextbit Ember Robin Sharp AQUOS ZETA LG V20 Meitu M6 Meizu MX6 Sharp Aquos Z2 Vodafone Plat 7 Qiku Flagship Moto X 2016 Meizu Blue Charm 2 Plus Smartcong Flagship Motorola G5+ Xiaomi Mi Max Samsung Galaxy N5 edge Vivo Xshot 3s Nexus 6P PPTV PP King 7s Vernee Apollo Lite Sony Xperia W+ Xiaomi Note One Plus 3 Meizu Note 6 Vivo X7 Xiaomi 4C ZTE Axon Oppo Find 9 Motorola X 2016 Sony Xperia Z4 Compact Xiaomi Redmi 4 ZTE nubia Z9 Oppo R9 Xiaomi Redmi Note2 Xiaomi Redmi Pro Sony Xperia C6 Xiaomi Redmi Note3 ZOPO Speed 8 Perf. Sony Xperia XA1 Sony Xperia M4 Sony XZ Premium TCL 750 TCL IDOL 4/4S Vivo Xplay 5 Umi Super Model Vivo X6SPlus Xiaomi Mi 6 Yu Yunicorn Xiaomi mi5 ZTE Nubia NX541 ZTE Nubia Z11

Source: Company data, Credit Suisse estimates

Asia Handset Supply Chain 2 2 March 2017

Figure 6: China smartphone supply chain valuation summary Price Target Investment Target Mkt Cap EV/EBITDA (x) P/E Multiple (x) P/B Multiple (x) ROE Trough/Peak (EV/Sales) Company Ticker 3/2/2017 Local Curcy Rating Upside (US$mn) 2016 2017 2018 2016 2017 2018 2016 2017 2018 2016 2017 2018 Fabless MediaTek 2454.TW 223.5 220.0 Neutral -2% $11,485 7.7 6.9 5.1 14.9 15.4 13.1 1.5 1.4 1.3 10.0 8.8 9.9 Realtek 2379.TW 108.5 133.5 Outperform 23% $1,779 -4.0 -34.5 -2.1 18.0 12.9 11.8 2.4 2.2 4.0 13.1 16.9 34.2 Novatek 3034.TW 115.0 134.0 Outperform 17% $2,273 -2.2 -1.8 -1.6 14.0 12.4 10.8 2.5 2.4 2.3 17.9 19.3 21.0 Focaltech 3545.TW 40.9 45.0 Outperform 10% $393 -10.6 -2.4 -2.6 98.6 13.8 11.3 1.1 1.0 1.0 1.1 7.4 8.7 Himax HIMX 7.2 7.5 Neutral 5% $1,231 14.0 18.9 13.1 24.2 23.7 17.7 2.6 2.6 2.4 10.6 10.9 13.8 Elan 2458.TW 38.3 37.0 Neutral -3% $539 -3.0 -2.6 -2.9 25.7 18.2 16.8 2.4 2.3 2.2 9.5 12.7 13.4 Egistec 6462.TWO 248.5 320.0 Outperform 29% $557 0.2 -1.1 -1.5 NA 11.6 8.4 11.4 5.8 3.8 7.7 49.6 44.5 Fabless Median -2.2 -1.8 -1.6 21.1 13.8 11.8 2.4 2.3 2.3 10.0 12.7 13.8 Fabless Mean 0.3 -2.4 1.1 32.6 15.4 12.8 3.4 2.5 2.4 10.0 17.9 20.8 Foundry TSMC 2330.TW 186.0 205.0 Outperform 10% $156,649 11.0 6.5 5.8 14.4 13.9 12.7 3.5 3.1 2.8 24.1 22.3 22.0 UMC 2303.TW 12.3 12.0 Neutral -2% $5,043 2.6 2.4 1.9 18.3 22.4 20.6 0.7 0.7 0.7 3.8 3.0 3.2 SMIC 0981.HK 10.1 10.8 Neutral 7% $5,911 0.8 0.7 0.6 16.8 19.5 15.2 1.4 1.2 1.1 8.0 6.3 7.4 Hua Hong 1347.HK 9.5 11.0 Outperform 16% $1,256 0.6 0.6 0.4 9.8 10.8 10.7 0.8 0.8 0.8 8.7 7.5 7.3 Win Semi 3105.TWO 123.5 125.0 Outperform 1% $1,615 8.3 7.2 6.1 16.4 15.1 12.6 2.8 2.6 2.4 17.2 17.2 18.7 Foundry Median 2.6 2.4 1.9 16.4 15.1 12.7 1.4 1.2 1.1 8.7 7.5 7.4 Foundry Mean 4.7 3.5 3.0 15.2 16.3 14.3 1.8 1.7 1.5 12.4 11.3 11.7 IDM Intel INTC 35.9 45.0 Outperform 25% $170,272 7.5 6.8 6.2 13.2 12.8 12.2 2.5 2.2 2.0 19.7 17.9 16.8 Samsung 005930.KS 1987000.0 2650000.0 Outperform 33% $244,879 5.1 4.0 3.6 12.3 8.5 7.9 1.3 1.2 1.0 10.9 13.6 13.1 IDM Median 6.3 5.4 4.9 12.8 10.7 10.1 1.9 1.7 1.5 15.3 15.8 14.9 IDM Mean 6.3 5.4 4.9 12.8 10.7 10.1 1.9 1.7 1.5 15.3 15.8 14.9 Back-end packaging Amkor AMKR 10.2 9.5 Neutral -6% $2,424 3.9 3.5 3.0 14.7 13.5 12.0 1.7 1.5 1.4 11.9 11.5 11.5 Chipbond 6147.TWO 47.4 57.0 Outperform 20% $1,000 5.9 4.9 4.3 15.4 11.9 11.2 1.3 1.2 1.2 8.4 10.4 10.5 Back-end Median 4.9 4.2 3.7 15.1 12.7 11.6 1.5 1.4 1.3 10.1 10.9 11.0 Back-end Mean 4.9 4.2 3.7 15.1 12.7 11.6 1.5 1.4 1.3 10.1 10.9 11.0 Panel AUO 2409.TW 12.0 17.0 Outperform 42% $3,735 3.1 2.4 3.0 14.7 4.1 14.1 0.6 0.6 0.6 4.3 13.5 4.1 Innolux 3481.TW 12.4 17.0 Outperform 38% $3,992 3.0 1.8 2.5 65.7 3.6 11.5 0.5 0.5 0.5 0.8 13.1 4.1 LG Display 034220.KS 27700.0 27000.0 Neutral -3% $8,683 2.5 2.0 2.0 12.2 9.7 13.4 0.8 0.8 0.8 6.7 8.4 6.2 Japan Display 6740.T 277.0 220.0 Neutral -21% $1,461 1.6 2.2 1.8 N/A N/A 18.0 0.4 0.5 0.5 -8.3 -0.7 2.8 Sharp 6753.T 341.0 120.0 Underperform -65% $14,874 -25.0 19.5 14.7 N/A N/A 145.5 19.2 -13.4 5.7 -299.7 -29.1 7.8 Panel Median 2.5 2.2 2.5 14.7 4.1 14.1 0.6 0.5 0.6 0.8 8.4 4.1 Panel Mean -3.0 5.6 4.8 30.9 5.8 40.5 4.3 -2.2 1.6 -59.2 1.0 5.0 Smartphone brands Coolpad 2369.HK 0.8 0.6 Underperform -20% $486 -3.2 35.4 9.1 N/A -17.2 25.2 0.7 0.7 0.7 -11.2 -4.2 2.8 ZTE 0763.HK 12.7 13.4 Neutral 6% $9,396 7.3 6.4 5.5 13.9 12.7 12.7 1.6 1.5 1.4 11.7 11.8 10.9 Lenovo 0992.HK 4.7 5.0 Neutral 7% $6,672 1.5 0.8 0.8 -55.8 15.5 12.1 2.2 2.2 2.0 -4.0 14.4 16.7 Smartphone brands Median 1.5 6.4 5.5 -20.9 12.7 12.7 1.6 1.5 1.4 -4.0 11.8 10.9 Smartphone brands Mean 1.9 14.2 5.1 -20.9 3.7 16.7 1.5 1.5 1.4 -1.1 7.3 10.1 Smartphone components Largan 3008.TW 4485.0 4800.0 Outperform 7% $19,540 19.1 13.3 10.4 26.5 18.5 15.9 8.9 6.5 4.9 33.5 35.3 31.0 Catcher 2474.TW 258.5 295.0 Outperform 14% $6,418 4.6 3.4 2.8 10.6 9.9 9.1 1.7 1.6 1.4 16.3 15.7 15.5 AAC 2018.HK 82.7 91.2 Outperform 10% $2,923 3.6 3.1 2.7 26.3 20.2 16.8 7.4 6.1 5.0 28.2 30.1 29.6 TXC 3042.TW 45.4 45.0 Neutral -1% $457 5.8 4.8 4.4 14.0 12.5 11.4 1.4 1.3 1.3 9.7 10.4 11.2 Merry 2439.TW 141.0 145.0 Neutral 3% $855 12.3 11.0 8.9 13.0 14.2 12.7 3.7 3.5 3.2 28.7 24.7 25.1 Sunny Optical 2382.HK 50.7 61.8 Outperform 22% $6,346 25.1 18.1 14.0 46.8 28.9 21.9 11.6 8.9 6.8 24.8 30.7 31.0 Tongda 0698.HK 2.6 2.2 Neutral -16% $1,962 10.5 8.1 6.8 17.1 14.1 12.6 3.5 3.1 2.7 20.5 21.7 21.1 O-Film 002456.SZ 33.3 40.7 Neutral 22% $4,665 21.6 15.8 12.2 43.6 27.3 15.9 3.8 3.4 2.9 8.7 12.4 18.1 Truly 0732.HK 3.4 3.3 Neutral -2% $1,262 6.3 5.9 4.7 13.4 12.2 10.5 1.3 1.2 1.1 9.7 9.9 10.8 FIH Mobile 2038.HK 3.1 3.3 Outperform 6% $3,204 0.9 0.7 0.7 22.7 11.9 10.5 0.9 0.8 0.8 3.8 7.1 8.0 BYDE 1211.HK 45.8 77.0 Outperform 68% $1,694 9.8 8.6 7.1 24.8 29.9 25.6 2.5 2.4 2.3 10.2 8.1 9.0 Smartphone components Median 9.8 8.1 6.8 22.7 14.2 12.7 3.5 3.1 2.7 16.3 15.7 18.1 Smartphone components Mean 10.9 8.4 6.8 23.5 18.1 14.8 4.2 3.5 2.9 17.6 18.7 19.1 Total Median 3.9 4.0 3.6 15.2 13.5 12.7 1.7 1.5 1.4 9.7 11.8 11.2 Total Mean 4.2 5.0 4.8 19.3 14.5 18.4 3.6 3.9 5.6 5.4 14.2 14.9 Source: Company data, Credit Suisse estimates

Asia Handset Supply Chain 3 2 March 2017

Figure 7: Major announcements by key chip companies and system houses at MWC Company Announcement Category Details 1st GaAs multiband power amplifier modules and TruSignal antenna performance enhancement Broadened RF Front-end platform Mobile support Carrier aggregation Introduced RF360 Holdings with TDK Mobile Expertise in RF filtering and modules, RF filters, duplexers, multiplexers and extractors Introduced 2nd gen GB LTE modem Mobile Snapdragon X20 LTE chip on 10nm supporting Cat 18. Sampling now and commercial in 1H18 Android Things support IoT Snapdragon 210 with X5 LTE modem for IoT applications Qualcomm Introduced Tri-mode SoC with BTLE, 802.15.4 for IoT IoT QCA4020/QCA4024 for IoT applications Working with GE, Nokia on Industrial LTE network for advanced, low latency and robust wireless Introduced trial network for Industrial IoT IoT connectivity solutions into verticals and industries PSA adopts Snapdragon 820A, upgradable heterogeneous architecture on 14nm, for infotainment Introduced automotive design wins Automotive system by 2020 Introduced 5G NR Trials at 3.5GHz spectrum Networking Working with China Mobile and ZTE on 5G for faster deployments in China Detachable Miix 320, convertible PC Yoga 720 and 520, tablet Tab 4 and smartphone Mote G5 and Lenovo Introduced new devices Tech G5 Plus Introduced new Gear VR Mobile The 1st Gear VR headset with a controller which provides better VR experience Samsung Galaxy Tab S3 will debut with quad stereo-sound speakers tuned by AKG. With 4K video Worked with AKG on multimedia improvement Mobile Samsung playback and a Super AMOLED display, the device will offer a cinema-like experience. Galaxy , a new premium 2-in-1 device designed for the mobile enterprise customers and built on Expanded strategic partnership with MSFT Enterprise mobile Windows 10 Huawei and China Mobile published the progress of 5G Dual Connectivity and presented them with Worked with China Mobile on 5G Mobile AR/VR demos Huawei and Vodafone, demonstrated the C-V2X technology which enables rapid exchange of Showcased the future connected car experience Automotive information between vehicles, other road users and infrastructure. Huawei The router provides 50GE base station access and seamless compatibility with 100GE, and achieves Released the 1st 5G network slicing router Networking physical isolation of port channels LampSite 3.0 for indoor mobile broadband enables full bandwidth on multi-frequency bands and Introduced LampSite3.0 Networking extends digital network sharing among operators to indoor scenarios AT&T and Qualcomm are the first to announce the performance of a successful VoLTE call for IoT on Demonstrated VoLTE call for Internet of Things IoT existing mobile network infrastructure with new activation and new modem device that supports CAT-M1/LTE-M technology Ericsson Ericsson Radio Dot System enables China Unicom to deliver superior indoor connectivity in one of the Radio Dot System deployed by China Unicom IoT world's fastest growing cities China Mobile and Ericsson share outcomes of its ongoing connected factory trial using cellular IoT for Delivered world's first cellular IoT-based factory Industrial Industry 4.0 working with Intel Nokia and Sprint demonstrated massive MIMO which allows data consumption from more users in a Demonstrated massive MIMO Mobile dense area without requiring more radio spectrum or causing interference Nokia is providing Xiaomi with its data center interconnect (DCI) solution which enables the fast- Supplied high-speed fiber optic network to Xiaomi Networking growing company to reduce bottlenecks in its data transport network and bring higher-speed, lower Nokia latency Internet services to its customers Nokia 5G FIRST comprises its radio access network (RAN) including Nokia AirScale massive MIMO Introduced its 5G FIRST solution Networking Adaptive Antennas, and mobile transport solutions as well as a full service using Intel architecture and Intel 5G modem for initial deployments starting in 2017 Multiple design wins in smartphones launched Mobile Huawei's P10, /G5 Plus, LG G6, Blackberry KEYone, Xiaomi Mi 5C/Redmi 4X FPC SenseTouch feature adds another dimension to ’ high-performance biometric Cards Introduced FPC Sensetouch Mobile fingerprint touch sensors, as it allows users to trigger activities using the pressure exerted with the finger Qorvo’s new Gen-5 portfolio of RF Flex RFFEs combines high performance with design flexibility, Expands product portfolio to accelerate mid-tier Mobile allowing manufacturers to rapidly develop and launch mid-tier smartphones that meet the challenging smartphone deployment requirements of carrier aggregation (CA). QM19000 RFFE delivers high linearity, ultra-low latency, and extremely high throughput to meet or Qorvo Introduced industry’s First 5G Front End Mobile exceed the developing requirements of upcoming 5G applications Combined with Qorvo’s GaN-based integrated driver and power amplifier module, the dual channel Delivered solution for Pre-5G massive MIMO networks Networking switch-LNA modules provide a complete solution for infrastructure manufacturers to implement pre-5G massive MIMO networks SkyOne Ultra 3.0, a highly integrated front-end solution for premium and smartphone manufacturers, is a front-end system that incorporates all of the high performance RF and analog Skyworks Introduced SkyOne Ultra 3.0 Mobile functionality including power amplification, duplex filtering and antenna switching into a single device. It also supports CA MediaTek announced the commercial availability of Helio X30 which is entering mass production. Introduced Helio X30 Mobile Smartphones powered by this flagship chipset will be available in Q2 2017 CorePilot 4.0 manages smartphone tasks to deliver the perfect balance of processing power and Mediatek Announced CorePilot 4.0 in Helio X30 Mobile battery life - it can deliver up to 25% more power savings over the previous version MediaTek and Nokia announced to collaborate on the design of a 5G mobile communication system Collaborate with Nokia on 5G Networking and bring a 5G-ready ecosystem for network operators and end users. Spreadtrum’s new integrated CAT 7 modem SoC (SC9861G-IA) provides higher security for smart Introduced new mobile SoC with Spreadtrum Mobile devices with Intel Virtualization Technology. The chip is scheduled for mass production on Intel's 14nm in the 2Q17 and targets the mid-level and premium smartphones Intel The companies plan to kick off another 5G trial in Spring 2017. The trial, based on the Intel 5G Mobile Announced progress on 5G trial with Ericsson and AT&T Networking Trial Platform, will enable residential and small-to-medium business customers to access enhanced entertainment and broadband service NXP brought industry's 1st 40nm embedded secure element chip to mass production which designed Delivered new secure element chip to protect private data Mobile/IoT to ease development and implementation of an extended range of secure applications for any platform including smartphones, wearables and IoT NXP NFC announced that five leading car OEMs will equip their future cars with NFC devices from NXP. Advanced Secure Connections Automotive This technology will enable secure interactions between smartphones and smart cars such as complementary car access, and Wi-Fi pairing and payment Source: Company data, Credit Suisse

Asia Handset Supply Chain 4 2 March 2017

Mobile World Congress 2017: A long-term evolution in hardware The Mobile World Congress (MWC) 2017, the mobile industry’s largest annual event, featuring 100,000 attendees and 2,200 exhibitors, took place this week in Barcelona. Our team met chipset, component, device and infrastructure suppliers, spanning tier-1, branded Chinese and whitebox vendors. In this note, we profile developments and their implications for the supply chain. Industry unit growth remains mature, so focus stays on incremental device spec upgrades and adjacent categories using connectivity including the automotive, digital home and growing IoT ecosystem applications in the industrial and public infrastructure. The lines for virtual reality were markedly lower this year as the immediate novelty wears off and the application for now settles back into its gaming niche. The next break-through around 5G roll-outs are still 3-4 years out, putting near-term focus on upgrades to security (fingerprint, iris scanning, facial recognition voice recognition), 3D sensing and camera upgrades (super slow motion from Sony, 5x zoom from Oppo, dual camera and dual frame previews from LG, and higher MP dual camera with Leica lens from Huawei). The show also added a retro element with Nokia’s reborn 3310 attracting large crowds and Blackberry KEYone bringing back an improved keyboard edition.

Figure 8: China smartphone brands decelerating from a high base in 2016 China brand units (mn) 2011 2012 2013 2014 2015 2016 2017E 2018E 15-18 CAGR Huawei 15.6 27.2 52.0 77.0 107.0 140.0 160.0 185.0 20% Oppo 0.1 3.1 11.0 30.0 40.0 95.0 125.0 160.0 59% Xiaomi 0.4 7.2 18.7 61.1 72.5 52.0 55.0 60.0 -6% Vivo 0.0 2.5 11.2 30.0 36.0 75.0 95.0 120.0 49% ZTE 10.5 26.8 40.0 48.0 50.0 45.0 48.0 50.0 0% Lenovo 3.7 23.7 45.5 59.4 43.5 30.0 32.0 34.0 -8% Lenovo's Moto 21.0 22.5 24.0 NM TCL/Alcatel 0.3 6.5 17.5 39.6 40.8 33.0 35.0 37.0 -3% Coolpad 3.9 16.1 35.0 43.5 28.7 18.0 19.5 21.0 -10% Meizu 1.0 2.0 3.0 5.2 24.8 17.5 20.0 23.0 -2% Gionee 0.0 6.8 11.4 16.0 12.8 30.0 34.0 37.0 42% Tecno - 1.0 2.0 4.0 7.5 11.0 13.0 15.0 26% 0.3 3.4 8.3 11.7 6.0 5.0 4.0 4.0 -13% Tianyu / K-Touch 0.4 7.4 13.3 11.2 4.3 2.3 1.5 1.0 -39% Bird 0.0 0.3 2.1 2.5 1.2 0.7 0.8 0.8 -13% G-Five 0.0 0.0 2.0 5.0 0.5 0.2 0.2 0.2 -26% Others 51.5 103.3 193.1 278.9 302.0 338.6 300.7 248.0 -6% China brand units (mn) 87.9 237.2 466.1 723.1 777.6 914.3 966.2 1,020.0 9% Growth (YoY) 170% 96% 55% 8% 18% 6% 6% Source: Company data, Credit Suisse estimates

The lack of exciting launches in the midst of an inventory correction keeps us conservative on the near-term outlook for our semiconductor coverage with risk of a pullback into results due to the recent TWD appreciation, excess fabless inventory and continued slow trends in China smartphones. We would be more aggressive on a pullback with iPhone 8 still looming as a catalyst into 2H17. In the meantime, top picks remain on content gainers that can offset slower units including memory (Hynix), casing (Foxconn Tech, Lens Tech), acoustics (AAC), camera (Sunny Optical, Largan), and Hon Hai (high iPhone 8 share). The following are our key takeaways from the show: Key flagship 1. China smartphone outlook remains slow post Chinese New Year. Suppliers smartphones we met at the show suggest China smartphones have not seen much recovery announcements: post Chinese New Year, with the leading vendors Huawei, Oppo and Vivo Samsung’s Galaxy S7, revising down forecasts from overly aggressive early targets as noted by Sam Li LG G5, Sony Xperia X, in his update last week. We now estimate Huawei at 160mn, down from our prior TCL Idol 4 forecast for 170mn, Oppo at 125mn, down from 140mn and Vivo at 95mn, down from 130mn. Suppliers are also pointing to still sluggish trends at the other China brands and also some export channels including Middle East and Africa and no

Asia Handset Supply Chain 5 2 March 2017

pick-up in India yet despite the heavy 4G carrier subsidies. The component price increase also led to higher smartphone ASPs, dampening demand. We would note memory alone added US$10 incremental cost to the smartphone BOM with 2GB mobile DRAM rising from US$7 in the middle of 2016 to US$13 and NAND pricing also went up from US$10 to US$14. Display ASPs for mid-end smartphones also increased by US$2-3. We now expect bottom’s up units for China built smartphones at +6% to 966mn in 2017, and +6% to 1,020mn in 2018, down from 980mn/1,090mn and +7%/+11% growth at the start of the year.

Figure 9: China 4G growth has a tough compare Figure 10: Fabless inventory is at the high-end China smartphones (mn) YTD YoY % 550 25% 85 Semis, 74.6 440 20% 330 15% 75 220 10% Fabless, 72.9 110 5% 65 - 0% 55 (110) -5% Total Tech, 38.4 (220) -10% 45

(330) -15% Days ofInventory 35 (440) -20% Supply Chain, (550) -25% 25 32.1 Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec

2014 2015 2016

1Q'13

1Q '97 1Q 1Q'96 1Q'98 1Q'99 1Q'00 1Q'01 1Q'02 1Q'03 1Q'04 1Q'05 1Q'06 1Q'07 1Q'08 1Q'09 1Q'10 1Q'11 1Q'12 1Q'14 1Q'15 1Q'16 2017 2014 YTD YoY 2015 YTD YoY 1Q'95 2016 YTD YoY 2017 YTD YoY Total Tech Semis Supply Chain Fabless Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates

The lower forecasts from the leading vendors and slowdown from high growth rates in 2017 also helped push up fabless inventory, which has been building up the past few quarters also in response to earlier tight 28nm capacity. Fabless inventory is now at the upper end of its range and up a week over the past quarter, a key factor which should slow wafer shipments in 2Q17 as chip companies bring inventory back closer to its long-term average.

Figure 11: China smartphone brands decelerating from a high base in 2016 China brand units (mn) 2011 2012 2013 2014 2015 2016 2017E 2018E 15-18 CAGR Huawei 15.6 27.2 52.0 77.0 107.0 140.0 160.0 185.0 20% Oppo 0.1 3.1 11.0 30.0 40.0 95.0 125.0 160.0 59% Xiaomi 0.4 7.2 18.7 61.1 72.5 52.0 55.0 60.0 -6% Vivo 0.0 2.5 11.2 30.0 36.0 75.0 95.0 120.0 49% ZTE 10.5 26.8 40.0 48.0 50.0 45.0 48.0 50.0 0% Lenovo 3.7 23.7 45.5 59.4 43.5 30.0 32.0 34.0 -8% Lenovo's Moto 21.0 22.5 24.0 NM TCL/Alcatel 0.3 6.5 17.5 39.6 40.8 33.0 35.0 37.0 -3% Coolpad 3.9 16.1 35.0 43.5 28.7 18.0 19.5 21.0 -10% Meizu 1.0 2.0 3.0 5.2 24.8 17.5 20.0 23.0 -2% Gionee 0.0 6.8 11.4 16.0 12.8 30.0 34.0 37.0 42% Tecno - 1.0 2.0 4.0 7.5 11.0 13.0 15.0 26% Hisense 0.3 3.4 8.3 11.7 6.0 5.0 4.0 4.0 -13% Tianyu / K-Touch 0.4 7.4 13.3 11.2 4.3 2.3 1.5 1.0 -39% Bird 0.0 0.3 2.1 2.5 1.2 0.7 0.8 0.8 -13% G-Five 0.0 0.0 2.0 5.0 0.5 0.2 0.2 0.2 -26% Others 51.5 103.3 193.1 278.9 302.0 338.6 300.7 248.0 -6% China brand units (mn) 87.9 237.2 466.1 723.1 777.6 914.3 966.2 1,020.0 9% Growth (YoY) 170% 96% 55% 8% 18% 6% 6% Source: Company data, Credit Suisse estimates

VR launches and 360 2. Android brands make incremental refreshes. Samsung’s launch is delayed to degree cameras shift 29 March this year and iPhone 8 should launch in early September, putting focus some focus away from on other Android brands launching new products, including Huawei, LG, Sony, the incremental Motorola, TCL, Blackberry and the new Nokia phones by its licensee HMD. Sony smartphone hardware was the lone vendor to use Qualcomm’s new 10nm Snapdragon 835 due to still innovations limited supply and allocation reserved for the upcoming Galaxy S8. Sony used the advanced processor to support its move to a 4k display in the smartphone and a new super slow motion video feature. LG also had a nice upgrade with its G6 with narrower bezel metal and glass design with 5.7” display and dual camera. Huawei

Asia Handset Supply Chain 6 2 March 2017

also advanced its camera in the P10 with a 12 MP color + 20 MP monochrome camera. Motorola, Nokia and TCL escaped from the high-end crowd by launching mainstream US$200-300 devices. Though Xiaomi did not attend MWC this year, the company also launched its smartphones Redmi 4X and Mi5C in China on 2 March. Xiaomi adopted Snapdragon 435 for the mainstream Redmi 4X featuring 13MP rear camera and 4,100mAh battery.

Figure 12: New LTE smartphones from global tier 1s at the MWC – Mediatek still not yet penetrated into flagship Company Lenovo Xiaomi BlackBerry LG Coolpad Nokia Alcatel Alcatel Alcatel ZTE - Nubia Gionee Vernee Huawei Xiaomi Model name Motorola G5 / G5+ Redmi 4x KEYone G6 Cool S1 3/5/6 U5 A3 A5 LED N1 Lite A1/A1 Plus Apollo 2 P10/P10 Plus Mi5c

Announcement Feb-2017 Mar-2017 Feb-2017 Feb-2017 Mar-2017 Feb-2017 Feb-2017 Feb-2017 Feb-2017 Feb-2017 Feb-2017 Mar-2017 Feb-2017 Mar-2017 Shipment Mar-2017 TBD Apr-2017 1Q17 TBD 2Q17 TBD TBD TBD Mar-2017 Mar-2017 42,856 Mar-2017 TBD Operating System Android 7.0 Android 6.0 Android 7.1 Android 7.1 Android 6.0 Android 7.0/7.1 Android 6.0 Android 6.0 Android 6.0 Android 6.0 Android 7.0 Android 7.0 Android 7.0 Android 7.0 Display 5.5" 5" 4.5" 5.7" 5.5" 5"/5.2"/5.5" 5" 5" 5.2" 5.5" 5.5" 5.5" 5.1"/5.2"/5.5" 5.15" Pixels 1080*1920 720*1280 1080*1620 1440*2880 1080*1920 1080*1920 480*854 720*1280 720*1280 720*1280 1080*1920 1440*2560 1440*2560 720*1280 Camera 13 MP 13MP 12 MP Dual 13 MP 16 MP 16 MP 5MP 13MP 8MP 8MP 13MP 21 MP Dual 20 MP + 12 MP 12 MP Battery 2800/3000 mAh 4100 mAh 3505 mAh 3300 mAh 4070 mAh 3000 mAh 2050 mAh 2460 mAh 2800 mAh 3000 mAh 4010 mAh 4000 mAh 3750 mAh 2860 mAh RAM 3GB 2/3GB 3GB 4GB 4/6GB 2GB 1GB 1.5GB 1GB 2GB 4GB 6/8GB 4GB 3GB ROM 16GB/32GB 16/32GB 32GB 32GB 64/128GB 16GB 8GB 16GB 8GB 16GB 64GB 64/128GB 64GB 64GB Snapdragon MT6737/ Processor Chip Snapdragon 435 Snapdragon 625 Snapdragon 821 Snapdragon 821 MT6737M MT6737 MT6753 MT6737 Helio P10 Helio X30 HiSilicon Kirin 960 Xiaomi Surge S1 430/635 Snapdragon 430 Multi-core Octa Octa Octa Quad Quad Quad Quad Quad Octa Quad Octa Deca Octa Octa CPU Speed 1.4GHz 1.4GHz 2.0GHz 2.35GHz 2.35GHz 1.3/1.4GHz 1.1GHz 1.25GHz 1.5GHz 1.25GHz 2.0GHz 2.2GHz 2.4GHz 2.2GHz Retail Price (USD) $178/$273 $102/$130 $632 TBD TBD $150 TBD TBD TBD $180 $330 $405 TBD $220 Source: Company data, Credit Suisse research

Mediatek was notably absent in the flagships again, with Qualcomm still embedded across devices with exception of Huawei again using its internal Hi- Silicon 960 still built on TSMC 16nm. The 10nm ramp remains modest with Apple iPad refresh still to come in 2Q17, Hi-Silicon not yet launching, Snapdragon 835 constrained, and Mediatek Helio x30 seeing limited design traction. 3. Mediatek not yet emerging as a turn-around. Mediatek has seen some investor interest after its lowered outlook on its results in late January in hopes earnings and margins were bottoming out. The company’s release at MWC was as expected with the long awaited 10nm Helio x30 with upgrade to CAT 10 modem released, though unfortunately without flagship devices to accompany it. The product remains caught between the more mainstream products supplied by its lower priced Helio p-series (US$15-20 versus $30+ for Helio x30) and the flagships still led by Qualcomm. The smartphone market has pushed up from the low-tier into the mid-range but not yet driving demand for this high-end series. Designs to date are limited to Vernee (launch in late April) Meizu (plan for June launch), and LeEco. Vernee is the only vendor we saw at MWC displaying a smartphone although the full model will only start shipping next month. While its high-end part is seeing limited traction, the entry tier cost structure will only improve from late 3Q17 with a long awaited more efficient modem design to reduce the chip size. In the meantime, Qualcomm will be refreshing chipsets across its Snapdragon 200, 400 and 600 series. The company in June will move two more chips to 14nm on Snapdragon 600 and also bring CAT 7 down to the Snapdragon 400 tier and have a new low-end quad core in the Snapdragon 200 tier, in addition to its flagship Snapdragon 835 refresh.

Asia Handset Supply Chain 7 2 March 2017

Figure 13: Qualcomm roadmap is staying competitive with new chipset introductions across tiers 2015 2016 2017 1H 2H 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 64-bit, X16 8994/ S810 8976/ S620 8996/ S820 LTE CA 450Mbps, 8998 10FF modem, Kryo, 20nm SoC 28nm HPM 14FF Hydra 64 bit Cat 16, 4k 60fps LTE CA X10 Cat 9, Octa, 4 A72 + 4 A53,

S800 TD, 64-bit big.LITTLE, 1.4 GHz, CA, 4K, X8 CAT 7 Premium Premium 8992/ S808 20nm SoC 8976 Pro 64-bit, 8 Kryo,, LTE CA X10 Cat 28nm HPM S660 9, TD, 64-bit WQXGA 60fps X9 LTE modem, Cat 7, 14nm S618 8956/ QHD, 4A72 + 4 A53 28nm HPM 8953/ S625 Octa, 8 A53,, 64-bit, S630 64-bit, 8 A53, 8952/ S617 14nm FF X9 Cat 7, CA, FHD 28nm LP Hexa, 2 A72 + 4 14nm QXGA 60fps

A53, X8 CAT 7, CA, Mainstream 1.2 GHz, 4K

Qualcomm S600 Qualcomm Octa, 8 A53, 1.5 GHz, X8 Cat 7, CA, FHD

8929/ S425 8937 / S430 28nm LP 28nm LP S4xxx / 8940 Octa A53, 1.4 GHz, 64- Octa, 8 A53, 1.7 GHz, 28nm LP bit, Cat 4, FHD 64-bit, X6 modem Cat 4, FHD X9 LTE modem, Cat 7,

FHD, 4 A53 + 4 A53 Entry Entry S400 S412 / 8917 28nm LP S4xxx / 8920 X9 LTE modem, Cat 7, 28nm LP HD, 4 A53 Quad, 4 A53, 1.4 GHz, 64-bit, X6 Cat 4, FHD

Source: Company data, Credit Suisse estimates 8909/ S215 LTE CA Cat4, TD, 28nm LP Quad A7 1.1 GHz

8908/ S210 TD-SCDMA 8905 X5 LTE modem, Cat

Low 28nm LP 4,, 2 A7 S200 Dual A7 1.1 GHz 28nm LP

Source: Company data, Credit Suisse estimates

4. Spreadtrum trying again to move up market, this time using Intel’s x86 core. Last year, Spreadtrum announced a Helio competitor in the SC9860 built on TSMC 16nm but never shipped into meaningful volume, keeping its LTE presence reserved for some local export brands with an entry level quad core SC9832 priced around US$6-7. The company at MWC co-announced with Intel its SC9861, a 14nm smartphone SoC built at Intel with 2GHz Intel Airmont Atom core, CAT 7 LTE modem and support up to QHD display and 26MP camera (or 13+13MP dual camera configurations). The product is planned for June shipments and September device launches in time for the Christmas holiday if it ramps into the market with better success than last year’s SC9860. Intel also announced its next thin modem, the XMM7560 to ship in 2018 smartphones (likely targeting iPhone 8S) and finally built on its internal 14nm process. We continue to expect this year’s iPhone to split allocation between an Intel 7480 chipset built on TSMC 28nm and a Qualcomm x16 modem built on Samsung 14nm. The following iPhone would see the Intel modem move into Intel’s fab, and Qualcomm’s modem may move to Samsung 10nm or TSMC 7nm. 5. Xiaomi catching up in smartphone SoC competition. The bright spot of Xiaomi's launch on Wednesday is the company adopted its in-house SoC, Surge S1, in its premium Mi5C smartphone. Surge S1 is an octa core 64-bit processor with 2.2GHz mx frequency which is built on TSMC's 28nm HPC process and ready for mass production. Xiaomi positions this chip for the mid to high-end market to compete with Qualcomm's Snapdragon 625 and Mediatek's Helio P10/P20.

Asia Handset Supply Chain 8 2 March 2017

Figure 7: Spreadtrum introduces its SC9861A Figure 15: Intel 14nm XMM7560 to target the 2018 iPhone

Source: Credit Suisse Source: Credit Suisse

6. 5G standards coming together, though still a couple years away. Many of the industry’s leading carriers, equipment vendors and chipset suppliers kicked off the show with an announcement to pull in 5G new radio in a non-standalone format that can also use the existing 4G radio and packet core as an anchor for coverage and mobility management while adding a 5G radio carrier to start enabling some 5G use cases. Qualcomm also plans to have its x50 5G chipset in some trial products for the 2018 Korea Winter Olympics and some commercial devices for 2019. The 5G ecosystem is moving toward supporting several deployment designs, including a high capacity mode for dense hot spots (stadiums, urban canyons, last mile coverage), a mission critical mode with low latency and high reliability (automotive), and a low power mode for large number of connections (IoT). The companies right now are driving toward some initial coverage in hot spots at launch and using mm wave also for backhaul, with the mission critical and IoT formats seeing a wide deployment a couple years later.

Figure 16: Accelerating the 5G new radio to 2019 Figure 17: 5G seeing several deployment modes

Source: Credit Suisse Source: Credit Suisse

Asia Handset Supply Chain 9 2 March 2017

Smartphone and PC 7. Mobile players compete to control the connected vehicle. MWC similar to makers introducing CES is expanding into an automotive technology show as suppliers extend new 2-1 notebooks mobility and connectivity into the vehicle electronics and driving functions. China Fingerprint solutions Mobile is striving for <1ms air interface delay and near 100% reliability. Intel moving towards under demonstrated its GO development platform featuring vehicle to everything glass capability communication, HD infotainment, in-vehicle connectivity and an autonomous driving system with sensing, processing, and learning. Qualcomm also showed its connected car platform with Gigabit LTE to the car from the network and Gb Ethernet and Wifi/Bluetooth networked systems within the car.

Figure 18: Qualcomm connected vehicle solution Figure 19: Intel connected vehicle

Source: Credit Suisse Source: Credit Suisse

8. New functions provided for fingerprint recognition/security. Fingerprint- enabled smartphones continue to expand penetration in 2017 driven by unlock convenience and mobile payments. Key suppliers including Fingerprint Card, Egis, Goodix, Elan, and module supplier Crucialtec showcased their latest products and technologies. The key evolution this year is toward under the glass, with Goodix and FPC dual sourcing in the Huawei P10 under a separate piece of glass (300- 400 micron thick) and Egis demonstrating an optical solution that can detect fingerprints under up to 800 microns glass, though commercially available in 2H17 (Synaptics also announced its optical solution in 4Q16, though it did not participate in this year’s MWC). Given the higher process cost for under glass, we estimate the ASP for under glass capacitive sensing solution will be US$2-3 higher than current design.

Figure 20: Non-Apple smartphone fingerprint Figure 21: Iris scanning module being penetration to reach 65% by 2018E commercialised for smartphones

Source: Credit Suisse Estimates Source: Credit Suisse

Asia Handset Supply Chain 10 2 March 2017

Overall, we estimate fingerprint penetration for non-Apple smartphone devices to reach 54% in 2017E (vs 30% in 2016) and expect it to further increase to 65% in 2018 as it continues to be a check mark item in smartphones. Beyond fingerprint, companies are developing other biometric solutions, with iris detection modules on display at Crucialtec and under development by Egis for 2H17 launch. Qualcomm also showed its software enabling under US$5 solution cost for iris scan that can detect iris through dark sunglasses. Many still see the limitations of iris scan including user convenience staring at the phone rather than a simple fingerprint touch, accuracy under bright lights and some challenges penetrating coloured contact lens or bifocal glasses, and so we view it as complementary rather than replacing the fingerprint scanner. More mid end models 9. Dual camera penetration continues to rise. Dual camera technologies continue upgraded to 802.11ac to be adopted by more vendors to further enhance the user experience on the Dual focus and camera. LG’s G6 dual camera included two 1/3” 13 MP sensors with a wide angle dual camera being lens with 71 degree angle and OIS and super wide angle with 125 degree angle offered to bring more to capture a wider image. Huawei also implemented an advanced dual camera DSLR features to using the Leica camera technology with 12 MP color sensor for the color details smartphone cameras and 20 MP black and white sensor for the monochrome detail. Oppo also demonstrated a 5x dual camera zoom allowing participants to zoom in at high resolution on an intricate toy village at its booth, although its commercial product launch may come with its new flagship launch planned for June. Sony also unveiled a flagship with single 19MP camera in its Xperia XZ Premium and Xperia XZ but enabling its motion eye system capable of capturing super slow motion video at 960 frames per second. 10. A Retro look from Nokia and Blackberry. MWC did save a place for two of the early leaders to re-emerge with device launches. Nokia’s partner HMD relaunched a US$52 feature phone version of the popular Nokia 3310 that sold 126 mn phones in 2000-2001. The new version for US$52 sports a 2.4” screen, 2MP camera, and 16 GB of NAND and 22 hour talk time. Blackberry also returned with a new keyboard + 4.5” hybrid running on Android 7.1 with 625 built by TCL. The keyboard functionality has been upgraded to support shortcuts that can control the display and camera upgraded to 12MP rear camera and 8MP front camera.

Figure 22: Old Nokia 3310 in 2000 Figure 23: Nokia refreshed 3310 feature at MWC

Source: Nokia Source: Nokia

11. Supply chain gearing up for Apple’s 2H refresh. The more anticipated refresh in the shadows is Apple’s iPhone Pro/Anniversary edition. Component suppliers with whom we met at MWC are anticipating the rising content with iPhone 8. We estimate significant feature upgrades for the new iPhone including (1) OLED display, (2) glass with steel frame, (3) more sensitive force touch, (4) 3D sensing, (5) gesture recognition, (6) wireless charging, (7) dual speaker acoustics upgrade, (8) under glass fingerprint sensor, (9) dual OIS on the dual camera and (10) 10nm TSMC built a11 chip.

Asia Handset Supply Chain 11 2 March 2017

Figure 24: iPhone 8 anniversary edition in 2H17 should feature multiple component upgrades iPhone 7 Plus iPhone 8 Pro Component Specs Specs 5.5" Retina Display with in-cell touch: Display & Touchscreen 5.8" OLED Display 1920x1080 Force touch Enhanced Force Touch 64-bit A10 on 16nm with embedded M10 Application Processor A11 processor on TSMC 10nm Co processor at TSMC Modem - Baseband, QCOM MDM9635M + WTR 3925 QCOM X16 10nm / INTC 7480 28nm RF (Bosch 3-axis, Invensense User Interface & 6-axis), e-compass (AKM), Gyro (STM), 3D sensing + Gesture recognition + Iris Sensors Temperature, Touch IC (BRCM Scan BCM5976 + TI 343S0694 transmitter) Fingerprint sensor USI module + Authentec IC Under glass sensor (remove sapphire) 12MP (Sony new sensor + Largan) + 7 Cameras MP (Sony, OVTI) Dual camera adds Dual OIS 12MP + 12 MP for Dual camera 10-layer Any Layer Stacked Via HDI PCB PCB HDI + Flex PCB + Substrate Like PCB + flex PCB Charger Wireless Charging AAC and speaker box, receiver, Acoustics Dual speaker acoustics upgrade microphone (Knowles) Unibody Al7000 (Top EMS, Catcher, Stainless Steel frame $35-40 + 2.5D Casing Jabil) Front Glass $5 + 2.5D back glass $5 Source: Company data, Credit Suisse estimates

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Asian company takeaways MediaTek Inc. (2454.TW, NT$225.00, NEUTRAL, TP NT$220.00): Turn-around will wait a bit longer

■ MWC lacked the excitement with limited high-end traction. Mediatek maintained a more toned down presence at MWC this year despite celebrating its 20th birthday on site. The company had a low key launch of its flagship x30 chipset, a product that demonstrates a significant move up in performance with CAT 10 modem and moved it to the advanced node faster than any prior node with a shift to TSMC’s 10nm as one of its only leading customers moving to that node. Despite the early move, the product has limited traction, as most high-end flagships are still using Qualcomm and mid-tier smartphones using the lower tier Helio p-series or Qualcomm Snapdragon 600 series. We note that the MWC is only a catalyst in solid growth years for the company, with the stock outperforming in the smartphone acceleration years from 2012 to 2014, but underperforming when feature phones collapsed in 2010-11 and in 2015 when currency volatility and price competition began to impact the company. We believe this year may stay slow for the company particularly through 1H17 with the entry tier still not cost optimised and the high-end chip seeing muted traction.

Figure 25: Mediatek’s share price performance around the MWC Mediatek stock performance entering/exiting MWC (T-30 as benchmark) 20% 60% 15% 45% 10% 30% 5% 15% 0% 0% -5% -15% -10% -30% -15% -45% -20% -60% 2010 2011 2012 2013 2014 2015 2016 2017

T-5 T+5 T+30 Sales YoY (%)

Source: Company data, Credit Suisse estimates

■ Mainstream refresh needed to improve the company’s profitability. Mediatek still targets launching a new modem architecture to close the cost gap with Qualcomm in late 3Q17 starting with the entry tier and then moving into the Helio tier in 2018. The company has built in more redundancies and merged different architectures with pieces over the years from ADI, Coresonic, Datang, Altair, NTT Docomo and internal development that it will re-architect for better efficiency. The new chipsets would likely only contribute to profitability from 4Q17 though we will need to monitor if Spreadtrum can reach better volumes on its new SC9861 built on Intel’s 14nm or view a competitive response from Qualcomm. Qualcomm, to date, has used its stronger position at the high-end to maintain a more aggressive pricing stance in the entry tiers to protect share but also impact Mediatek’s profitability in these segments where it ships 80% of its units.

Asia Handset Supply Chain 13 2 March 2017

Figure 26: Mediatek improvement will wait until its late 3Q17 cost down versions 2014 2015 2016 1H 2H 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q MT6595 Octa, 2.2- X10 X20 Deca, Dual A72 + Octa X30 X 2.5GHz, A53, 64bit big.LITTLE, - LTE SoC big.LITTLE, MT6795 MT6796 20nm, 25MP, H.265 LTE Cat 6 w/ CA 28nm HPM, 4 4K2K 30fps video, LTE 64-bit Octa, 2.2GHz, 28nm HPM, 4 A7+4 A17, 20 P10 R11 Cat-6, 2x20 Deca, Hexa Helio MP A57+4 A53, 20MP, H.265 4K2K 30fps CA+C2K SRLTE P20 video, 2560x1600, LTE R9 Cat4/HSPA+ MT6755 A72 + Quad A53, 64bit (42/11)/TD, 21MP Octa A53, 64bit Octa A53, 28nm LP, 2.0 big.LITTLE, big.LITTLE, 16nm MT6290 + GHz, 21MP, 1080p30 10nm, 40MP, MT6592/M Octa, 1.3-1.5GHz, 8 A53, 28nm video FHD (1920x1080),

4G H.265 4K2K LP, 64 bit, 16 MP, 28nm LP, LTE R11 Cat6 2x20 CA + 30fps video Octa core, 28nm, 8x A7, 1080p30, FHD, LTE R9 Cat4+ C2K SRLTE 1.7-2.0GHz/ 1.4GHz, CDMA2000 1x/EVDO Rev. A HD1080/HD720, 16MP MT6750/T Octa, 1.7GHz, 28nm MT6753

MT6752 HPM, 8 A53, 16MP, LTE + C2K SoC Octa A53, 28nm HPM, 1.5 GHz, Mainstream Mainstream LTE SoC; 64 bit 1080p30 HD 1080. 16MP, HD Display, LTE Cat6 LTE R9 2xCA + C2K SRLTE MT6290 + MT6735 MT6738 MT6582/M LTE + C2K SoC Quad A53, 1.5 GHz, 28nm, 13MP, HD Display, LTE Cat4 28nm, 4x Cortex A7, Quad A53, 1.3GHz, 13MP, 28nm 1.3GHz, qHD, 13MP LP, 64 bit, FHD (1920x1080), LTE R9 Cat4/HSPA+ (42/11)/TD, MT6732 CDMA2000 1x/EVDO Rev. A MT6737 LTE SoC; 64 bit

Entry Entry 4G MT6735P/M Quad A53, 1.3 -1.5 GHz, Quad, 1.5GHz, 28nm HPM, 4 LTE + C2K SoC 28nm, 13MP, HD Display, A53, 13MP, 1080p30 HD720. LTE Cat6 2xCA + C2K LTE R9 Cat4/HSPA+ Quad A53, 1.0GHz, HD (P) / qHD (M), SRLTE (42/11)/TD, HD 8MP, qHD, 28nm LP, 64 bit, LTE R9 Cat4+ CDMA2000 MT6582M 28nm, 4x Cortex A7, MT6580 Quad A7, 1.3GHz, HD720, 1.3GHz, 960x540 HSPA+ (21/5.76)/EDGE MT658x MT6572/M MT6571 28nm, 1.0 GHz, 2 Cortex MT6570 MT657x 28nm, 2x Cortex A7, A7. Power VR, W+TD Entry Entry 3G 1.2GHz, 960x540 Dual A7, 1.3GHz, qHD, Source: Company data, Credit Suisse estimates HSPA+ (21/5.76)/EDGE Source: Company data, Credit Suisse estimates

■ Sequential rebound may fall short of expectations. Due to continued slow China channel, we see potential that Mediatek may come in on the lower-end of its -14-22% QoQ guidance in 1Q17 and see milder growth in 2Q17 relative to street's +21% QoQ. GMs are also still on a flat to downward trajectory until the company can release its new lower cost architecture later in the year. We see support near NT$200 with the company’s cash position and equity portfolio but stay conservative with competitive landscape staying challenging, China smartphone volumes starting the year slow and the company’s high-end traction remaining modest and keeping more of its volumes in the mainstream to entry 4G tiers where pricing is more aggressive.

Figure 27: MediaTek 1Q17/2Q17 and 2017/2018 expectations 1Q17 2Q17 2016 2017 2018 (NT$ mn) CS Street Guidance CS Street Actual CS Street CS Street Sales $57,312 $62,269 NT$53.6-59.1bn $69,747 $72,718 $275,511 $289,702 $294,405 $304,316 $299,473 Chg -16.5% -10.6% -14-22% QoQ 21.7% 16.8% 29.2% 5.2% 6.3% 5.0% 8.1% GM% 34.1% 34.8% 32.5-35.5% 33.7% 34.8% 35.6% 34.2% 35.3% 35.2% 35.6% OpM% 4.1% 6.5% 1-8% 6.5% 8.5% 8.4% 7.9% 8.8% 9.1% 9.4% Net Inc. 2,795 5,728 FX: 31.8 4,584 6,091 23,463 22,673 27,898 26,583 28,300 EPS (NT$) $1.79 $3.62 $2.93 $3.89 $15.01 $14.50 $17.63 $17.00 $17.85 Source: Company data, Credit Suisse estimates

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Egis Technology Inc. (6462.TWO, NT$257.00, OUTPERFORM, TP NT$320.00): Diversification into new customers on track; optical sensing starts sampling in 2H17 Jerry Su (+886 2715 6361, [email protected])

■ Lenovo shipment to start in 1Q. Egis has won several projects at Lenovo for the Moto brand and management confirmed that the volume will start to pick up from March. The delivery will be in wafer-format, and hence it should help Egis' margins and cash conversion cycle. Based on the current order outlook, we expect Egis to ship ~20 mn units to Lenovo in 2017, and there could be some upside if it wins other projects. This will help Egis in entering new Chinese customers’ supply chain in 2H17, since its passive sensing technology has less IP concern and offers lower cost at module-level (chip ASP will be similar vs peers).

■ Upside on 1Q sales. Egis continues to see strong pull-in from its major customer Samsung in 1Q for the existing A/C/On models, despite GS8 and J-series launching in end-March and 2Q. Despite its February sales declining MoM on less working days and order pulled ahead, we think the strong demand for A/C/On models could lead to some upside to CS/latest street expectation of up 20%/24% QoQ. GM should be able to stay above 40% level as the ASP erosion should be offset by cost reduction for backend packaging.

■ Optical sensing to start sampling in 2H17. Egis has been working on under-glass fingerprint sensing with optical technology, as well as the conventional capacitive sensing. Its optical sensing technology is able to detect fingerprints under up to 800 microns of thick glass/protection cover. It targets to start sampling for customers in 2H17 and we believe this could contribute to its earnings as early as 2018. Besides optical sensing, it is also working on the on-display fingerprint sensing technologies which could be integrated with both TFT and OLED panels. Samsung (005930.KS) - rising excitement over GS8; LG (066570.KS) – all eyes on G6

Keon Han (+82 2 3707 3740, [email protected])

Sang Uk Kim (+82 2 3707 3795, [email protected]) 1. (OUTPERFORM, 12M TP W2.65mn). Samsung confirmed the 29 March date of its upcoming Galaxy S8 announcement at MWC 2017 where it showed its newest devices, the Galaxy Tab S3, Galaxy Book and new Gear VR.  Galaxy Book: A new premium 2-in-1 device designed for the mobile enterprise customers and built on Windows 10 (expanded strategic partnership with MSFT)  New Gear VR: The 1st Gear VR headset with a controller which provides a better VR experience Meanwhile, according to recent media reports (The Verge), GS8 is expected to adopt the iris scanner/camera, along with the volume rocker on the left, the dedicated AI button, and the power/standby button on the right side. Apart from the iris scanner, it has the Bixby button and a dual-edge design (along with the ultra-thin bezels). Alongside the 5.8-inch and 6.2-inch curved Super AMOLED panels, 8MP front/12MP dual pixel back camera combo and octa-core Qualcomm Snapdragon 835/ 8895 SoC, Samsung has said that it intends to bundle a pair of Harman AKG headphones into every Galaxy S8 box, which means that AKG audio is expanding beyond just the newly-announced Galaxy Tab S3. That said, we continue to believe the new flagship product cycle will

Asia Handset Supply Chain 15 2 March 2017

drive handset margin normalisation from 2Q17 (OPM: 14%) post a dip in 1Q17 (OPM: 9%) on GS8 development cost and rising marketing expenditure. We expect Samsung to build a total of 45 mn units of GS8 in 2017.

Figure 28: Samsung – Galaxy Book (w/ MSFT) Figure 29: SEC – Galaxy S8/S8+ (expected spec) Galaxy S8 Galaxy S8+ 5.8 (~84.4% screen-to-body ratio) 6.2 (~88.6% screen-to-body ratio) Super AMOLED 1440 x 2960 Super AMOLED 1440 x 2560 (568ppi) (474ppi)

140.1 x 72.2 x 7.3 152.4 x 78.5 x 7.9

Octacore(2.45 GHz Quad + 1.9GHz Quad) Octacore(2.45 GHz Quad + 1.9GHz Quad)

12MP (Dual pixel + OIS) 12MP (Dual pixel + OIS) 8MP 8MP

4GB DRAM, 64/128GB storage (up to 256GB) 4GB DRAM, 64/128GB storage (up to 256GB)

3,000 3,500

Expected announcemnt of March 29th 2017 Expected announcemnt of March 29th 2017 Source: Company, Source: GSMarena estimates, Credit Suisse

2. LG Electronics (NEUTRAL, 12M TP W52,000). LG Electronics unveiled its new high- end smartphone model of G6 at MWC 2017 (on 26 February). The new flagship smartphone will start selling in the Korean market on 10 March (pre-orders starts on 2 March) ahead of its global launch. The G6 is equipped with a 5.7" TFT LCD display (IPS, 564ppi) with 18:9 aspect ratio with reduction of bezel on the screen. It adopts a dual-camera module with 13MP (f/1.8, OIS, 3-axis) and 13MP (f/2.4). For memories, G6 comes out with 4GB DRAM with a storage option of 32/64GB. For A/P, it adopts a older version of QCOM's Snapdragon 821. All in all, the phone did not come out with any surprising factors, however it appears to have stressed much on the practicality of customers amid tight cost-control following the failures in the previous model, G5 in 2016. The company aims to ship 5 mn units of the new phone in 2017. After poor G5c sales, LGE expects that the more mainstream design of G6 will benefit it in stabilising the smartphone divisional margin.

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Figure 30: LGE – G6 full image (less bezel) Figure 31: LGE – G6 specs G6 Screen size (inch) 5.7 (~78.6% screen to body ratio)

Resolution 2880 x 1440 (~564 ppi)

Dimensions (mm) 148.9 x 71.9 x 7.9 (163g)

QCOM Snapdragon 821 CPU Quad-care (2x2.35GHz Kryo & 2x1.6 GHz Kyro) Camera main (MP) Dual-camera (13MP, OIS + 13MP) Camera sub (MP) 5MP

RAM (GB) 4GB LPDDR4 (storage: 32/64GB)

Battery (mAh) 3300mAh

Release Dates Mar-17

Source: GSMarena, Source: GSMarena, Credit Suisse Lenovo Group Ltd (0992.HK, HK$4.67, NEUTRAL, TP HK$5) - Nothing too alluring from MWC launch Thompson Wu (+886 2 2715 6386, [email protected])

■ Lenovo MWC product refresh. Lenovo introduced several new Yoga convertible notebooks (Yoga 520/720), hybrid (Miix 320 detachable), Tab 4 Series tablets, and Moto smartphones (Moto G5/G5 Plus). Lenovo Yoga 520 offers better price/performance than the MacBook Air and is equipped with a discrete graphics card to support tethered VR headsets. Yoga 520 is priced at €599 (~US$630) and ships in July vs Macbook Air’s US$999 price tag. Overall, Yoga and Miix models have helped boost Lenovo PC sales with over 91%/258% growth in the detachable and millennial categories last fiscal quarter (i.e. Dec-16). is the bestselling model in Motorola portfolio. Moto G shipments topped 15.2 mn in CY16 (70% of Motorola shipments and 30% of Lenovo’s combined smartphone shipments). We forecast Lenovo to ship 54/9.6/56.5 mn PCs, tablets and smartphones in CY17E (-2%, -6%, +11% YoY change) and implies 21%, 3%, and 4% market share. Acer and Asus did not make any major product announcements as of this report’s publication.

■ Lenovo at NEUTRAL. We downgraded Lenovo to NEUTRAL on 17 February (click here). We see risk of PCBG margins falling below 5% near term due to rising component prices and seasonally softer demand, but profits remain up YoY from product mix improvement. Margin should also return to the above-5% territory when cost pressure subsides. In addition, we also expect cost pressure from component shortage to push out Mobile and Data-center turnaround to FY19. Management has reiterated MBG and DCG turnaround by FY18; however, we have low confidence of this being achieved given the current component constraints, continued investment required for mobile sales channel, and the shift of converged system for DCG. Our HK$5.00 target price is based on 9x FY18E non-GAAP EPS, but we see intrinsic value closer to HK$7 once DCG generates profit and MBG breaks-even.

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Figure 32: New product launches for Lenovo at MWC Product Line PC Tablet Smartphone

Model Yoga 520/720 Miix 320 Tab 4 Series MOTO G5/G5 Plus Announce date Feb-2017 Feb-2017 Feb-2017 Feb-2017 Ship date April/July-2017 April-2017 May-2017 Mar-2017 Form factor Display size (inch) 13.3"/14”/15.6" 10.1" 8"/10.1" 5"/5.2" Resolution (pixel) Up to 3840 x 2160 1200 x 1920 Up to 1200 x 1920 1080 x 1920 Width x Depth x Height 0.56" - 0.78" (Height) 0.35" (Height) 0.28" - 0.33" (Height) 0.37"/0.30" (Height) G5: 145 g Weight 1.3 - 2 kg 550 g 300 - 500 g G5 Plus: 155 g Core internals QCOM Snapdragon QCOM Snapdragon Processor Intel Core i7 Intel Atom x5 425/625 430/625 Memory Up to 16 GB LP-DDR4 Up to 4 GB Up to 4 GB Up to 4 GB Operating system Windows 10 Windows 10 Android OS, v7.0 Android OS, v7.0 Storage type/capacity Up to 1 TB SSD Up to 128 GB eMMC Up to 64 GB Up to 64 GB Features Camera 720p 5 MP Up to 8 MP Up to 13 MP Battery life Up to 10 hr Up to 10 hr Up to 12 hr Full day usage Retail Price Starting at €999 Starting at €269 Starting at €169 Starting at €199 Source: Company data, Credit Suisse Largan (3008.TW; NT$4485; OUTPERFORM; TP NT$4800) – More dual camera phones launches Pauline Chen (+886 2 2715 6323, [email protected])

■ Rising dual camera adoption in new MWC product launches. Apart from the continued spec upgrade for both front and rear cameras, we see the rising adoption of dual-camera and OIS (Optical Image Stabilizer) in both front and rear cameras among various smartphone vendors continues to be key differentiating factors in 2017. We estimate the continued adoption of dual camera and OIS, coincides with various component vendors' higher capital intensity and continued efforts in capacity expansion. We are also starting to see more dual camera solutions in 2017 especially from the Android supply chain with their high-end models (Huawei's P10 and LG's G6 launched at MWC) and continue to expect more dual camera products to be launched later in the year. We estimate dual camera penetration in 2017 to increase to 15-20% from 3-5% in 2016 and Largan to be the a key beneficiary.

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Companies Mentioned (Price as of 02-Mar-2017) AAC Technologies Holdings Inc (2018.HK, HK$82.85) AU Optronics (2409.TW, NT$11.95) Acer Group (2353.TW, NT$14.5) Alcatel Lucent (ALUAn.PA^E11) Amkor Technology Inc. (AMKR.OQ, $10.15) Apple Inc (AAPL.OQ, $139.79) Asustek (2357.TW, NT$278.5) BYD Co Ltd (1211.HK, HK$45.5) BlackBerry (BBRY.OQ, $6.89) Catcher Technology (2474.TW, NT$258.5) Chipbond (6147.TWO, NT$47.4) Coolpad Group Limited (2369.HK, HK$0.73) Egis Technology Inc. (6462.TWO, NT$248.5) Elan Microelectronics Corp (2458.TW, NT$38.25) Ericsson (ERICb.ST, Skr59.5) FIH Mobile (2038.HK, HK$3.05) Fingerprint Card (Unlisted) FocalTech Corporation, Ltd. (3545.TW, NT$40.85) Foxconn Technology Corp (2354.TW, NT$91.6) (GOOAV.OQ^D14) HTC Corp (2498.TW, NT$77.7) Hewlett Packard (HPQ.N, $17.62) Hi Silicon (Unlisted) Himax Technologies, Inc. (HIMX.OQ, $7.16) Hon Hai Precision (2317.TW, NT$89.6) Hua Hong Semiconductor Limited (1347.HK, HK$9.6) Innolux Corporation (3481.TW, NT$12.35) Intel Corp. (INTC.OQ, $35.93) Japan Display (6740.T, ¥277) LG Display Co Ltd. (034220.KS, W27,700) LG Electronics Inc (066570.KS, W61,600) Largan Precision (3008.TW, NT$4485.0) Lenovo Group Ltd (0992.HK, HK$4.66) Lens Technology Co., Ltd (300433.SZ, Rmb28.51) Letv (Unlisted) MediaTek Inc. (2454.TW, NT$223.5) Meitu,Inc. (1357.HK, HK$9.97) Meizu (Unlisted) Merry Electronics Co. Ltd (2439.TW, NT$141.0) Micromax (Unlisted) Motorola Solutions (MSI.N, $79.98) Nokia (NOKIA.HE, €4.93) Novatek Microelectronics Corp Ltd (3034.TW, NT$115.0) Nubian Resources (NBR.V, C$0.26) QUALCOMM Inc. (QCOM.OQ, $57.01) Qorvo (QRVO.OQ, $67.85) Realtek Semiconductor (2379.TW, NT$108.5) SK Hynix Inc. (000660.KS, W47,700) Samsung Electronics (005930.KS, W1,986,000) Semiconductor Manufacturing International Corp. (0981.HK, HK$9.96) Sharp (6753.T, ¥341) Shenzhen O-film Tech Co., Ltd (002456.SZ, Rmb33.34) Skyworks Solutns (SWKS.OQ, $96.74) Sony (6758.T, ¥3,583) Spreadtrum (SPRD.B, $30.93) Sunny Optical Technology Group Co.Limited (2382.HK, HK$50.7) TCL (TCL.JS, J$63.0) TXC Corp. (3042.TW, NT$45.4) Taiwan Semiconductor Manufacturing (2330.TW, NT$186.0) Tongda Group Holdings Ltd (0698.HK, HK$2.58) Truly International (0732.HK, HK$3.29) United Microelectronics (2303.TW, NT$12.3) Win Semiconductors Corp (3105.TWO, NT$123.5) Xiaomi (Unlisted) ZTE Corporation (0763.HK, HK$12.54)

Disclosure Appendix Analyst Certification Randy Abrams, CFA, Keon Han, Jerry Su, Thompson Wu, Pauline Chen and Sang Uk Kim 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.

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3-Year Price and Rating History for LG Display Co Ltd. (034220.KS)

034220.KS Closing Price Target Price Date (W) (W) Rating 23-Apr-14 29,000 26,000 N * 15-Oct-14 32,250 26,000 U 04-Dec-14 34,500 27,000 28-Jan-15 36,050 29,000 18-Jun-15 26,450 27,000 N 23-Jul-15 22,950 26,000 31-Aug-15 23,050 25,800 22-Oct-15 23,550 25,600 06-Jan-16 23,100 25,300 27-Jan-16 22,800 24,000 NEUTRAL UNDERPERFORM 17-May-16 24,400 23,700 27-Jul-16 30,450 25,800 24-Jan-17 31,750 27,000 * Asterisk signifies initiation or assumption of coverage.

3-Year Price and Rating History for LG Electronics Inc (066570.KS)

066570.KS Closing Price Target Price Date (W) (W) Rating 29-Apr-14 71,700 83,000 N * 24-Jul-14 77,000 87,000 29-Oct-14 67,800 78,000 29-Jan-15 62,600 75,000 29-Apr-15 61,200 68,000 02-Jun-15 55,400 62,000 09-Jul-15 45,750 53,500 29-Jul-15 43,800 49,000 25-Aug-15 40,850 45,500

30-Oct-15 49,100 46,200 NEUTRAL 26-Jan-16 54,800 49,000 16-Mar-16 61,900 54,000 28-Apr-16 58,200 57,000 19-May-16 54,000 50,000 25-Jan-17 54,200 52,000 * Asterisk signifies initiation or assumption of coverage.

3-Year Price and Rating History for SK Hynix Inc. (000660.KS)

000660.KS Closing Price Target Price Date (W) (W) Rating 25-Apr-14 40,750 49,000 O 23-Jun-14 48,900 64,000 29-May-15 51,100 R 01-Jun-15 51,100 64,000 O 06-Jul-15 40,750 59,000 23-Jul-15 39,000 57,000 19-Aug-15 33,000 56,000 22-Oct-15 31,950 49,000 26-Jan-16 27,850 45,000 26-Apr-16 29,150 42,000 OUTPERFORM REST RICT ED 20-Sep-16 39,250 46,000 03-Oct-16 40,200 55,000 13-Jan-17 50,300 65,000 26-Jan-17 53,300 71,000 * Asterisk signifies initiation or assumption of coverage.

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3-Year Price and Rating History for Samsung Electronics (005930.KS)

005930.KS Closing Price Target Price Date (W) (W) Rating 06-May-14 1,346,000 1,760,000 O 07-Jul-14 1,292,000 1,740,000 08-Jul-14 1,295,000 1,720,000 28-Aug-14 1,242,000 1,700,000 07-Oct-14 1,162,000 1,680,000 03-Sep-15 1,122,000 1,630,000 29-Oct-15 1,325,000 1,785,000 11-Jan-16 1,152,000 1,690,000 28-Jan-16 1,145,000 1,550,000 01-Jun-16 1,333,000 1,702,000 OUTPERFORM

28-Jul-16 1,507,000 1,790,000 15-Dec-16 1,759,000 2,400,000 24-Jan-17 1,908,000 2,650,000 * 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 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 at tractive, and Underperforms the least attractive investment opportunities. 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 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, the expected total return (ETR) calculation includes 12-month rolling dividend yield. An Outperform rating is assigned where an ETR is greater than or equal to 7.5%; Underperform where an ETR less than or equal to 5%. A Neutral may be assigned where the ETR is between -5% and 15%. The overlapping rating range allows analysts to assign a rating that puts ETR in the context of associated risks. Prior to 18 May 2015, ETR ranges for Outperform and Underperform ratings did not overlap with Neutral thresholds between 15% and 7.5%, which was in operation from 7 July 2011. 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. Not Rated (NR) : Credit Suisse Equity Research does not have an investment rating or view on the stock or any other securities related to the company at this time. Not Covered (NC) : Credit Suisse Equity Research does not provide ongoing coverage of the company or offer an investment rating or investment view on the equity security of the company or related products. 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 of stock ratings (and banking clients) is:

Global Ratings Distribution Rating Versus universe (%) Of which banking clients (%) Outperform/Buy* 45% (64% banking clients) Neutral/Hold* 39% (60% banking clients) Underperform/Sell* 14% (53% banking clients) Restricted 2% *For purposes of the NYSE and FINRA 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.

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