Asia Handset Supply Chain Mediatek stock performance ...

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 Asia Pacific/Taiwan

Equity Research Technology

Asia Handset Supply Chain Research Analysts

Randy Abrams, CFA

886 2 2715 6366

[email protected]

Keon Han

82 2 3707 3740

[email protected]

Jerry Su

886 2 2715 6361

[email protected]

Thompson Wu

886 2 2715 6386

[email protected]

Pauline Chen

886 2 2715 6323

[email protected]

Sang Uk Kim

82 2 3707 3795

[email protected]

Haas Liu

886 2 2715 6365

[email protected]

Harvie Chou

886 2 2715 6364

[email protected]

Thurston Lee

886 2 2715 6352

[email protected]

SUPPLY CHAIN RESEARCH

Mobile World Congress 2017: A long-term

evolution in hardware Figure 1: Mediatek’s share performance around MWC vs sales YoY

Source: Company data, Credit Suisse estimates

The Mobile World Congress (MWC), the wireless industry’s largest annual event, took place this week in Barcelona. Our team met component, IC, smartphone OEM and infrastructure suppliers. We profile implications for the Asian supply chain.

■ Modest product launches unlikely to jumpstart momentum. Lack of exciting launches was evidenced by the most crowded new product demo—the Nokia 3310, a US$52 reborn feature phone. Among Android brands, Sony, LG and Huawei focused on camera with dual camera flagships and Lenovo/Motorola and TCL with mid-high-end incremental refreshes. Focus clears the way for Samsung’s GS8 announcement on 29 March and the new iPhone 8 anniversary edition with content upgrades adding US$50-100 to the BOM.

■ Mediatek contained by slowing China smartphones, Qualcomm leadership and a new Spreadtrum/Xiaomi 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 Meizu (June availability). Qualcomm maintains leadership on S600/S800 series, allowing it to stay aggressive pricing 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 Intel x86 based chipset scheduled for devices for Sept/holiday volumes. 10nm activity is modest with Huawei P10 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 4G 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).

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

Mediatek stock performance entering/exiting MWC (T-30 as benchmark)

2 March 2017

Asia Handset Supply Chain 2

Focus charts and tables

Figure 2: Mediatek’s share price performance

around MWC

Figure 3: Spreadtrum introduces its SC9861A

Source: Company data Source: Spreadtrum

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

yet

Source: Company data, Credit Suisse research

Figure 5: 4G merchant chipsets a duopoly, although Qualcomm continues holding share pretty well


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2010 2011 2012 2013 2014 2015 2016 2017



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" 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

Processor ChipSnapdragon

430/635Snapdragon 435 Snapdragon 625 Snapdragon 821 Snapdragon 821

MT6737/

Snapdragon 430MT6737M MT6737 MT6753 MT6737 Helio P10 Helio X30 HiSilicon Kirin 960 Xiaomi Surge S1

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

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 Archos Diamond 2+ Creo Mark 1 360 N4 LeEco Le 2S Asus 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 Nexus 6P 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 Huawei Nova NuAns NEO LG G4 Microsoft Lumia 950 XL Lenovo Zuk Z2

Philips S326 Imoo M1000 HTC One X9 LeEco Le2 Huawei Nova Plus Oppo R9 Plus LG Nexus 5X Motorola Droid Turbo 2 LeTV Le Max Pro

Rockcel Quartzo InFocus S1 Letv 1S Meizu M3 Lenovo Lemon 3 Sony Xperia X LG V10 Motorola Moto X LG G Flex 3

Samsung Galaxy 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 Vivo V3 Max Motorola Moto X Style Samsung Galaxy S6 Active LG G6

Xolo Era 1X LG X Power with Sprint Meizu MX5 QIKU N4 Micromax YU Yureka Vivo X7 Nextbit Ember Robin Sharp AQUOS ZETA LG V20

Meitu M6 Meizu MX6 Sharp Aquos Z2 Moto Z Vodafone Plat 7 Qiku Flagship Sony Xperia Z5 Moto X 2016

Meizu Blue Charm 2 OPPO R7 Plus Smartcong Flagship Motorola G5+ Xiaomi Mi Max Samsung Galaxy N5 edge Vivo Xshot 3s Nexus 6P

Meizu M3 Note PPTV PP King 7s Vernee Apollo Lite Oppo F1 Sony Xperia W+ Xiaomi Note One Plus 3

Meizu Note 6 Sony Xperia M5 Vivo X7 Oppo R7s Xiaomi 4C ZTE Axon Oppo Find 9

Motorola X 2016 Sony Xperia Z4 Compact Xiaomi Redmi 4 Samsung Galaxy A5 ZTE nubia Z9 Samsung Galaxy S7

Oppo R9 Xiaomi Redmi Note2 Xiaomi Redmi Pro Samsung Galaxy A8 Samsung Galaxy S8

Sony Xperia C6 Xiaomi Redmi Note3 ZOPO Speed 8 Samsung Galaxy C7 Sony Xperia X 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

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

2 March 2017


Figure 7: Major announcements by key chip companies and system houses at MWC

Source: Company data, Credit Suisse

Company Announcement Category Details

Broadened RF Front-end platform Mobile1st GaAs multiband power amplifier modules and TruSignal antenna performance enhancement

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

Introduced Tri-mode SoC with BTLE, 802.15.4 for IoT IoT QCA4020/QCA4024 for IoT applications

Introduced trial network for Industrial IoT IoTWorking with GE, Nokia on Industrial LTE network for advanced, low latency and robust wireless

connectivity solutions into verticals and industries

Introduced automotive design wins AutomotivePSA adopts Snapdragon 820A, upgradable heterogeneous architecture on 14nm, for infotainment

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

Lenovo Introduced new devices TechDetachable Miix 320, convertible PC Yoga 720 and 520, tablet Tab 4 and smartphone Mote G5 and

G5 Plus

Introduced new Gear VR Mobile The 1st Gear VR headset with a controller which provides better VR experience

Worked with AKG on multimedia improvement MobileSamsung Galaxy Tab S3 will debut with quad stereo-sound speakers tuned by AKG. With 4K video

playback and a Super AMOLED display, the device will offer a cinema-like experience.

Expanded strategic partnership with MSFT Enterprise mobileGalaxy Book, a new premium 2-in-1 device designed for the mobile enterprise customers and built on

Windows 10

Worked with China Mobile on 5G MobileHuawei and China Mobile published the progress of 5G Dual Connectivity and presented them with

AR/VR demos

Showcased the future connected car experience AutomotiveHuawei and Vodafone, demonstrated the C-V2X technology which enables rapid exchange of

information between vehicles, other road users and infrastructure.

Released the 1st 5G network slicing router NetworkingThe router provides 50GE base station access and seamless compatibility with 100GE, and achieves

physical isolation of port channels

Introduced LampSite3.0 NetworkingLampSite 3.0 for indoor mobile broadband enables full bandwidth on multi-frequency bands and

extends digital network sharing among operators to indoor scenarios

Demonstrated VoLTE call for Internet of Things IoT

AT&T and Qualcomm are the first to announce the performance of a successful VoLTE call for IoT on

existing mobile network infrastructure with new software activation and new modem device that

supports CAT-M1/LTE-M technology

Radio Dot System deployed by China Unicom IoTEricsson Radio Dot System enables China Unicom to deliver superior indoor connectivity in one of the

world's fastest growing cities

Delivered world's first cellular IoT-based factory IndustrialChina Mobile and Ericsson share outcomes of its ongoing connected factory trial using cellular IoT for

Industry 4.0 working with Intel

Demonstrated massive MIMO MobileNokia and Sprint demonstrated massive MIMO which allows data consumption from more users in a

dense area without requiring more radio spectrum or causing interference

Supplied high-speed fiber optic network to Xiaomi Networking

Nokia is providing Xiaomi with its data center interconnect (DCI) solution which enables the fast-

growing company to reduce bottlenecks in its data transport network and bring higher-speed, lower

latency Internet services to its customers

Introduced its 5G FIRST solution Networking

Nokia 5G FIRST comprises its radio access network (RAN) including Nokia AirScale massive MIMO

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, Moto G5/G5 Plus, LG G6, Blackberry KEYone, Xiaomi Mi 5C/Redmi 4X

Introduced FPC Sensetouch Mobile

FPC SenseTouch feature adds another dimension to Fingerprints’ high-performance biometric

fingerprint touch sensors, as it allows users to trigger activities using the pressure exerted with the

finger

Expands product portfolio to accelerate mid-tier

smartphone deploymentMobile

Qorvo’s new Gen-5 portfolio of RF Flex RFFEs combines high performance with design flexibility,

allowing manufacturers to rapidly develop and launch mid-tier smartphones that meet the challenging

requirements of carrier aggregation (CA).

Introduced industry’s First 5G Front End MobileQM19000 RFFE delivers high linearity, ultra-low latency, and extremely high throughput to meet or

exceed the developing requirements of upcoming 5G applications

Delivered solution for Pre-5G massive MIMO networks Networking

Combined with Qorvo’s GaN-based integrated driver and power amplifier module, the dual channel

switch-LNA modules provide a complete solution for infrastructure manufacturers to implement pre-5G

massive MIMO networks

Skyworks Introduced SkyOne Ultra 3.0 Mobile

SkyOne Ultra 3.0, a highly integrated front-end solution for premium mobile device and smartphone

manufacturers, is a front-end system that incorporates all of the high performance RF and analog

functionality including power amplification, duplex filtering and antenna switching into a single device. It

also supports CA

Introduced Helio X30 MobileMediaTek announced the commercial availability of Helio X30 which is entering mass production.

Smartphones powered by this flagship chipset will be available in Q2 2017

Announced CorePilot 4.0 in Helio X30 MobileCorePilot 4.0 manages smartphone tasks to deliver the perfect balance of processing power and

battery life - it can deliver up to 25% more power savings over the previous version

Collaborate with Nokia on 5G NetworkingMediaTek and Nokia announced to collaborate on the design of a 5G mobile communication system

and bring a 5G-ready ecosystem for network operators and end users.

Introduced new mobile SoC with Spreadtrum Mobile

Spreadtrum’s new integrated CAT 7 modem SoC (SC9861G-IA) provides higher security for smart

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

Announced progress on 5G trial with Ericsson and AT&T Networking

The companies plan to kick off another 5G trial in Spring 2017. The trial, based on the Intel 5G Mobile

Trial Platform, will enable residential and small-to-medium business customers to access enhanced

entertainment and broadband service

Delivered new secure element chip to protect private data Mobile/IoT

NXP brought industry's 1st 40nm embedded secure element chip to mass production which designed

to ease development and implementation of an extended range of secure applications for any platform

including smartphones, wearables and IoT

Advanced Secure Connections Automotive

NFC announced that five leading car OEMs will equip their future cars with NFC devices from NXP.

This technology will enable secure interactions between smartphones and smart cars such as

complementary car access, Bluetooth and Wi-Fi pairing and payment

Qualcomm

Samsung

Huawei

Ericsson

NXP

Nokia

Fingerprint Cards

Qorvo

Mediatek

Intel

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


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:

1. China smartphone outlook remains slow post Chinese New Year. Suppliers

we met at the show suggest China smartphones have not seen much recovery

post Chinese New Year, with the leading vendors Huawei, Oppo and Vivo

revising down forecasts from overly aggressive early targets as noted by Sam Li

in his update last week. We now estimate Huawei at 160mn, down from our prior

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

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%

Key flagship smartphones

announcements: Samsung’s Galaxy S7, LG G5, Sony Xperia X,

TCL Idol 4

https://plus.credit-suisse.com/r/V62BeF1AF-WElY95

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

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


2. Android brands make incremental refreshes. Samsung’s launch is delayed to

29 March this year and iPhone 8 should launch in early September, putting focus

on other Android brands launching new products, including Huawei, LG, Sony,

Motorola, TCL, Blackberry and the new Nokia phones by its licensee HMD. Sony

was the lone vendor to use Qualcomm’s new 10nm Snapdragon 835 due to still

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

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

(550)

(440)

(330)

(220)

(110)

-

110

220

330

440

550

Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec

2014 2015 20162017 2014 YTD YoY 2015 YTD YoY2016 YTD YoY 2017 YTD YoY

China smartphones (mn) YTD YoY %

Total Tech, 38.4

Semis, 74.6

Supply Chain, 32.1

25

35

45

55

65

75

85

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Total Tech Semis Supply Chain Fabless

Fabless, 72.9

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%

VR launches and 360 degree cameras shift

some focus away from the incremental

smartphone hardware innovations

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

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.

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

Processor ChipSnapdragon

430/635Snapdragon 435 Snapdragon 625 Snapdragon 821 Snapdragon 821

MT6737/

Snapdragon 430MT6737M MT6737 MT6753 MT6737 Helio P10 Helio X30 HiSilicon Kirin 960 Xiaomi Surge S1

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

2 March 2017


Figure 13: Qualcomm roadmap is staying competitive with new chipset introductions across tiers


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.

2015 2016 2017

1H 2H 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q

Pre

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ain

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600

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8992/ S808

20nm SoC

8994/ S810

20nm SoC

LTE CA X10 Cat 9, TD, 64-bit

LTE CA X10 Cat 9, TD, 64-bit

8908/ S210

28nm LP

8909/ S215

28nm LP

LTE CA Cat4, TD,Quad A7 1.1 GHz

TD-SCDMADual A7 1.1 GHz

8996/ S820

14FF

LTE CA 450Mbps, Hydra 64 bit

8976/ S620

28nm HPM

8956/S618

28nm HPM

Octa, 4 A72 + 4 A53, big.LITTLE, 1.4 GHz, CA, 4K, X8 CAT 7

Hexa, 2 A72 + 4 A53, X8 CAT 7, CA, 1.2 GHz, 4K

8929/ S42528nm LP

Octa A53, 1.4 GHz, 64-bit, Cat 4, FHD

8953/ S62514nm FF

Octa, 8 A53,, 64-bit, X9 Cat 7, CA, FHD8952/ S617

28nm LP

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

S412 / 891728nm LP

Quad, 4 A53, 1.4 GHz, 64-bit, X6 Cat 4, FHD

899810FF

8976 Pro28nm HPM

S4xxx / 894028nm LP

64-bit, X16 modem, Kryo, Cat 16, 4k 60fps

X9 LTE modem, Cat 7, QHD, 4A72 + 4 A53

X9 LTE modem, Cat 7, FHD, 4 A53 + 4 A53

8937 / S43028nm LP

Octa, 8 A53, 1.7 GHz, 64-bit, X6 modem Cat 4, FHD

S4xxx / 892028nm LP

X9 LTE modem, Cat 7, HD, 4 A53

S66014nm

S63014nm

890528nm LP

64-bit, 8 Kryo,, WQXGA 60fps

64-bit, 8 A53, QXGA 60fps

X5 LTE modem, Cat 4,, 2 A7

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


2 March 2017


7. Mobile players compete to control the connected vehicle. MWC similar to

CES is expanding into an automotive technology show as suppliers extend

mobility and connectivity into the vehicle electronics and driving functions. China

Mobile is striving for <1ms air interface delay and near 100% reliability. Intel

demonstrated its GO development platform featuring vehicle to everything

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


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

penetration to reach 65% by 2018E

Figure 21: Iris scanning module being

commercialised for smartphones

Source: Credit Suisse Estimates Source: Credit Suisse

Smartphone and PC makers introducing new 2-1 notebooks

Fingerprint solutions moving towards under

glass capability

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.

9. Dual camera penetration continues to rise. Dual camera technologies continue

to be adopted by more vendors to further enhance the user experience on the

camera. LG’s G6 dual camera included two 1/3” 13 MP sensors with a wide angle

lens with 71 degree angle and OIS and super wide angle with 125 degree angle

to capture a wider image. Huawei also implemented an advanced dual camera

using the Leica camera technology with 12 MP color sensor for the color details

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” touchscreen hybrid running on Android 7.1 with Qualcomm

Snapdragon 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.

More mid end models upgraded to 802.11ac Dual pixel focus and

dual camera being offered to bring more

DSLR features to smartphone cameras

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

Display & Touchscreen 5.5" Retina Display with in-cell touch:

1920x10805.8" OLED Display

Force touch Enhanced Force Touch

Application Processor64-bit A10 on 16nm with embedded M10

Co processor at TSMCA11 processor on TSMC 10nm

Modem - Baseband,

RFQCOM MDM9635M + WTR 3925 QCOM X16 10nm / INTC 7480 28nm

User Interface &

Sensors

Accelerometer (Bosch 3-axis, Invensense

6-axis), e-compass (AKM), Gyro (STM),

Temperature, Touch IC (BRCM

BCM5976 + TI 343S0694 transmitter)

3D sensing + Gesture recognition + Iris

Scan

Fingerprint sensor USI module + Authentec IC Under glass sensor (remove sapphire)

Cameras

12MP (Sony new sensor + Largan) + 7

MP (Sony, OVTI)

12MP + 12 MP for Dual camera

Dual camera adds Dual OIS

PCB10-layer Any Layer Stacked Via HDI PCB

+ flex PCBHDI + Flex PCB + Substrate Like PCB

Charger Wireless Charging

AcousticsAAC and Goertek speaker box, receiver,

microphone (Knowles)Dual speaker acoustics upgrade

CasingUnibody Al7000 (Top EMS, Catcher,

Jabil)

Stainless Steel frame $35-40 + 2.5D

Front Glass $5 + 2.5D back glass $5

2 March 2017


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


■ 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.

-60%

-45%

-30%

-15%

0%

15%

30%

45%

60%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

2010 2011 2012 2013 2014 2015 2016 2017



2 March 2017


Figure 26: Mediatek improvement will wait until its late 3Q17 cost down

versions


■ 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


2014 2015 2016

1H 2H 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q

Helio

-XM

ain

str

eam

4G

Entr

y 4G

Entr

y 3G

MT6572/M

MT6582M

28nm, 2x Cortex A7, 1.2GHz, 960x540

28nm, 4x Cortex A7, 1.3GHz, 960x540

28nm, 4x Cortex A7, 1.3GHz, qHD, 13MP

Octa core, 28nm, 8x A7, 1.7-2.0GHz/ 1.4GHz, HD1080/HD720, 16MP

MT6290 + MT6592/M

Octa, 2.2-2.5GHz, big.LITTLE, 28nm HPM, 4 A7+4 A17, 20 MP

MT6571 28nm, 1.0 GHz, 2 Cortex A7. Power VR, W+TD

MT6595LTE SoC

Octa, 1.7GHz, 28nm HPM, 8 A53, 16MP, 1080p30 HD 1080. LTE R9

Quad, 1.5GHz, 28nm HPM, 4 A53, 13MP, 1080p30 HD720. LTE R9 Cat4/HSPA+ (42/11)/TD, HD

MT6580

Dual A7, 1.3GHz, qHD, HSPA+ (21/5.76)/EDGE

MT6752LTE SoC; 64 bit

MT6732LTE SoC; 64 bit

64-bit Octa, 2.2GHz, 28nm HPM, 4 A57+4 A53, 20MP, H.265 4K2K 30fps video, 2560x1600, LTE R9 Cat4/HSPA+ (42/11)/TD, 21MP

X10 MT6795

MT6735P/MLTE + C2K SoC

Deca, Dual A72 + OctaA53, 64bit big.LITTLE, 20nm, 25MP, H.265 4K2K 30fps video, LTE R11 Cat-6, 2x20 CA+C2K SRLTE

MT6290 + MT6582/M

Octa, 1.3-1.5GHz, 8 A53, 28nm LP, 64 bit, 16 MP, 28nm LP, 1080p30, FHD, LTE R9 Cat4+ CDMA2000 1x/EVDO Rev. A

Quad A53, 1.3GHz, 13MP, 28nm LP, 64 bit, FHD (1920x1080), LTE R9 Cat4/HSPA+ (42/11)/TD, CDMA2000 1x/EVDO Rev. A

MT6753LTE + C2K SoC

Quad A53, 1.0GHz, HD (P) / qHD (M), 8MP, 1080p qHD, 28nm LP, 64 bit, LTE R9 Cat4+ CDMA2000

MT6570

Quad A7, 1.3GHz, HD720, HSPA+ (21/5.76)/EDGE

X20 MT6796

MT6735LTE + C2K SoC

P10MT6755

Octa A53, 28nm LP, 2.0 GHz, 21MP, 1080p30 video FHD (1920x1080), LTE R11 Cat6 2x20 CA + C2K SRLTE


MT6750/T

MT6737

Octa A53, 28nm HPM, 1.5 GHz, 16MP, HD Display, LTE Cat6 2xCA + C2K SRLTE

Quad A53, 1.3 -1.5 GHz,28nm, 13MP, HD Display, LTE Cat6 2xCA + C2K SRLTE

X30LTE Cat 6

w/ CA

Deca, HexaA72 + Quad A53, 64bit big.LITTLE, 10nm, 40MP, H.265 4K2K 30fps video

P20

Octa A53, 64bit big.LITTLE, 16nm

MT658x

MT657x

MT6738

Quad A53, 1.5 GHz, 28nm,13MP, HD Display, LTE Cat4

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

2 March 2017


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. Samsung Electronics (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 Bixby 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/Exynos 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

mailto:[email protected]

http://www.theverge.com/2017/3/1/14774426/samsung-galaxy-s8-photo-leak

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)

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.

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

(568ppi)

Super AMOLED 1440 x 2560

(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

2 March 2017


Figure 30: LGE – G6 full image (less bezel) Figure 31: LGE – G6 specs

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). Moto G 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.

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)

CPUQCOM Snapdragon 821

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

https://plus.credit-suisse.com/r/V61upi1AF-WElY95

https://plus.credit-suisse.com/r/V61upi1AF-WElY95

2 March 2017


Figure 32: New product launches for Lenovo at MWC

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.

Product Line PC 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)

Weight 1.3 - 2 kg 550 g 300 - 500 gG5: 145 g

G5 Plus: 155 g

Core internals

Processor Intel Core i7 Intel Atom x5 QCOM Snapdragon

425/625

QCOM Snapdragon

430/625Memory 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

Tablet

2 March 2017


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) Google (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.

2 March 2017


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

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.

N EU T RA L

U N D ERPERFO RM

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


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

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


N EU T RA L

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


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

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


O U T PERFO RM

REST RICT ED

2 March 2017


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


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

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


O U T PERFO RM

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 Eur opean 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 attractiv eness 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 Neut ral 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.

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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 m ost 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 holdin gs, and other individual factors.

2 March 2017


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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 may participate in events hosted by the subject company, including site visits. Credit Suisse does not accept or permit analysts to accept payment or reimbursement for travel expenses associated with these events. 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 https://www.credit-suisse.com/sites/disclaimers-ib/en/canada-research-policy.html. The following disclosed European company/ies have estimates that comply with IFRS: (NOKIA.HE, ERICb.ST). An analyst involved in the preparation of this report received third party benefits in connection with this research report from the subject company (HPQ.N) Credit Suisse has acted as lead manager or syndicate member in a public offering of securities for the subject company (000660.KS, 1357.HK, 0992.HK, AAPL.OQ, HPQ.N, 2303.TW) within the past 3 years. 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.

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2 March 2017


Taiwanese Disclosures: This research report is for reference only. Recipients should carefully consider their own investment risk and note they may be subject to the applicable rules and regulations in Taiwan, including the requirements under the Taiwan Stock Exchange Operational Regulations Governing Securities Firms Recommending Trades in Securities to Customers ("Taiwan Recommendation Rules") on conflicts of interest. Investment results are the responsibility of the individual investor. Reports written by Taiwan based analysts on non-Taiwan listed companies are not considered recommendations to buy or sell securities under Taiwan Recommendation Rules. Reports may not be reproduced without the permission of Credit Suisse. This research report is authored by: Credit Suisse Securities (Europe) Limited, Seoul Branch .............................................................................................. Keon Han ; Sang Uk Kim Credit Suisse AG, Taipei Securities BranchRandy Abrams, CFA ; Jerry Su ; Thompson Wu ; Pauline Chen ; Haas Liu ; Harvie Chou ; Thurston Lee 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 FINRA 2241 and NYSE Rule 472 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account. Credit Suisse Securities (Europe) Limited, Seoul Branch .............................................................................................. Keon Han ; Sang Uk Kim Credit Suisse AG, Taipei Securities BranchRandy Abrams, CFA ; Jerry Su ; Thompson Wu ; Pauline Chen ; Haas Liu ; Harvie Chou ; Thurston Lee

For Credit Suisse disclosure information on other companies mentioned in this report, please visit the website at https://rave.credit-suisse.com/disclosures or call +1 (877) 291-2683.

2 March 2017


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