Report date: July 30, 2015

Revenue breakdown by type in 2Q15: Substrate based wire bounding 25%, Bumping & Flip Chip 45%, Lead frame based 18%, Testing 12%.

Revenue breakdown by customers:

2Q15 Results: revenue +2% qoq, at the low end of guidance 2%~8%. Inline GM, missed OP. NP beat due to one-off. Weak China's demand for communications plus non-Apple lose share because of strong Apple, and weak PC are the main reasons why 2Q15 result was weak.

3Q15 guidance: revenue NTD19.1 bn, -10% qoq, -11.7% yoy (vs. original estimate 0~5% qoq). Worldwide semi growth 0%~3% in 2015.

vs. ASE (2311 TT)

• 2Q15: EPS below estimate due to lower GM (weak demand & ASP)
• 3Q15: revenue +5% qoq (better than SPIL -7%~-12%, Amkor -5%~+2%, due to customer mix difference. ASE relied more on Apple than the others). Adjusted down SiP revenue percentage from 30% to 25% in 4Q15 because lower than estimate Apple Watch sales volume.
• SiP sector: lower margin than OSAT because rely more on EMS;
  • Apple Watch S1 Chip (SiP): produced in ASE's subsidary USI (环旭电子 601231 CH). Low GM;
  • Finger Printer / Wifi Module: higher GM;
  • Force Touch / Camera Module SiP: start to mass ship in 3Q15. Low GM in the set-up stage;

Below estimate due to fiercer competition. 2Q15 EPS NTD 4.06 VS. BB estimate NTD 4.68. Lower margin is the main reason (GM 45.9% vs. BB estimate 46.5%; NM 14.6% vs. BB estimate 15.2% )

FY15 guidance:

• Total SP shipment cut from 450mn to 400mn; LTE shipment remains at 150mn units, ~40%/~20% of China/Global LTE market.
• Tablet total shipment cut to 45mn from 50mn;
• Revenue 5%-10% yoy decline
• SP ASP: yoy decline now vs. prior estimate of 0-5% growth;

3Q15 guidance: sales 10-18% qoq growth, 44% GPM, OPEX 28%-32% of total revenue, 110-120mn SP units shipment, tablet 15-20mn. Declining ASP & GM in the 2H15.

Qualcomm's 3Q15 guidance: sales drop of 2-19% QoQ on MSM chip shipment decline of 16-24% QoQ, & QCT OPM of only 2-4%.

Business: P10 in 3Q, X20 mass production in late 4Q15. ~20mn units for Helio in 2015, TAM for Helio is about 200mn+ (100-120mn in overseas market and 80-100mn in China alone). 16nm MP in 1Q16.

2Q15 EPS inline (2.1NTD vs. 2.095NTD). Demand from USA and China is strong, make up the weak demand from Europe and other developing countries. GM 39.7% (vs. 1Q15 40.9%), operating margin 16.3% (vs 1Q 15.4%, op expenses controlled well). 24X 15F P/E, 21X 16F P/E make stock not attractive.

2Q15 sales dropped 12.5% qoq (bit growth 1%, but ASP dropped 13%, FX affect 2%). GM declined from 50% in 1Q to 37% in 2Q15.

2Q15 analyst meetings conveyed all negative info:

• a further push-out of 20nm volume ramp (from 4Q15-->1Q16);
• DRAM prices to stay weak in 2H15;
• significant increase in 20nm start-up costs in 3Q15/4Q15 --> further downside to Inotera's GM in 2H15;
• Equal profit-sharing would start in 1Q16 --> most of the 20nm ramp benefits go to Micron.

Key things to watch: 20nm ramp time; DRAM supply & ASP; D&P change;

Advanced packaging: announced a joint development with ASE in April 2014 to provide silicon interposer foundry services for 2.5D IC solutions. Will enter into small-scale production in 1Q16, and it will not be a big revenue driver for Inotera in 2016.

2Q15 results below estimate. Overall 2Q15 revenues of NTD2,611mn, down 4% qoq and 11% yoy, below the revised mgmt guidance of flat qoq, due to one power pack model push out into 2H15 and lower ASP. 2Q15 GM declined 3.4pp to 15.4%, given less favourable product mix and ASP erosions.

3Q15: expect to see double-digit qoq top-line growth as Merry will start shipping for its customers' new product cycle, including the new smartphone, the new large-sized tablet project from its major US customers and multiple new models in the entertainment and power pack segments. 3Q15 GM should see sequential improvement

Date: August 5, 2015

2Q15 result was inline. Guidance:

• 3Q15: Single-digit growth;
• 4Q15: Chairman reiterated unchanged outlook for FY15, and guided 4Q15 will reach top with surprise with substantially growth on Apple's order. FY15 sales may surpass NTD80bn.

Date: August 5, 2015

2Q15 below estimate, due to weak PC/TV market. Margin & sales growth were all below. 3Q15 guidance:

• Sales: NTD 12.6~13bn (vs. BB consensus 14.2bn)
• GM: 27%~28% (vs. BB concensus 28.5%)
• OPM: 12.5%~13.5%

Date: August 4, 2015

Business: 8-inch foundry plant. Revenue breakdown in 2014: Large DDI 39%, small DDI 17%, PMIC 33%, others 11%.

2Q15: Revenue dropped 4% qoq, inline. GM dropped to 29.5% from 33.4% in 1Q15, due to utilisation problem. EPS 0.64 NTD, inline. Large-size DDI dropped 20% qoq, while small-size DDI & PMIC grew 7%/4% qoq respectively. CAPEX will be adjusted down and delayed to 2016 (2.2bn --> 1.7bn in 2015).

3Q15 guidance: conservative due to weak demand. 3Q15 revenue is estimated to decline 10%~15% qoq, large-size DDI will recover, PMIC have a small growth, small-size DDI & others (industrials/auto/sensor) will decline dramatically. GM 27%~30%.

New capacity: Plant 3, +33K/month (memeory 3K/month). Whole year cpapcity will go to 2.127mn (177.25K/month equivalent).

Valuation: 2X P/B (historial: 0.8X ~ 3.3X).

Valuation: 0.7X P/B (historically 0.68X~1.1X).

2Q15: Hua Hong reported in-line 2Q15 sales but higher GM at 33% on lower D&P costs. Discrete power devices (20% of total revenue) along with PMIC / analog IC (18.6% of total revenue in 2Q15) drove the growth. eNVM accounts for 42.7% of total revenue in 2Q15.

3Q15 guidance: flat qoq revenue. Near tearm drivers: bank card IC, discrete power devices (iGBT for power-switching applications of above 200V, which are used in automobiles, consumer applicances and automated assembly equipment; super junction MOSFET for converters, chargers and adapters, servers, and networking equipment), PMIC/analog IC.

Capacity: plans to expand its capacity from 129K wpm at the end of 2014, to 146K wpm by the end of 2015, to 169K wpm by the end of 2016.

Business:

• Reveue breakdown in 2Q15: NB touch IC 20%, Tablet TP IC 2%, SP TP IC 4%, touch pad IC 35%, non-touch IC 39% (including point stick ~10%, mouse/communication/MCU/other consumer electronics).
• FingerPrint Sensor: corperate with 星友科技 (pay commission). ASP has already dropped from 7USD to 5USD. Will start mass shipment since 2H16.

指纹识别产品包括光学式和电容式 (义隆电采用被动式电容技术), 其中光学式主攻NB与Tablet, 电容式主攻SP. 目前与星友合作, 以解锁算法为主, 出货有限; 8月3日起开始和瑞典厂商Precise Biometrics合作, 推出一系列与多数一线厂商采用的FPC大小相同的产品线, 功能由解锁扩大至移动支付. 由于2015年至2015年上半年机种已经定案, 义隆的SP指纹识别要延后到2016年下半年才有机会达到贡献获利达30%以上的目标.

2Q15 result (August 2015): revenue 1.52bn NTD, -10% qoq, -28% yoy, below estimation. Reasons are weak NB demand and fiercer competition. ASP dropped, and GM was only 42.4% in 2Q14 (vs. 44.9%+ guidance and 46.5% in 1Q15).

3Q15 guidance: NB touch pad shipment +10% qoq; SP touch IC shippment increase from 4mn to 5mn units in 3Q; Tablet touch IC flat; NB touch IC flat qoq. Revenue 1.6bn NTD, +6.5% qoq, GM decline a little to 42%.

Valuation: 2015 BB consensus EPS 2.2NTD. After 2Q15 result, EPS will be adjusted down to 1.7-1.8NTD. Given 12X 15F P/E, target price NTD 23 (Aug 6: NTD 30.6).

Report date: August 8, 2015

Business: NB accounts for 30-40% of total revenue, tablets accounts for ~50% currently.

2Q15: OPM 11%, EPS NTD 2.8, below consensus (OPM 15.5%, EPS NTD 3.0). Lower GM is due to increased new set-up business & higher labor cost.

3Q15 guidance: utilization will increase from 65%-75% in 1H15 to 90%+ in 3Q/4Q;

Key points:

• New iPhone products: +1000 CNC machine for SP. DB estimates sales contribution from SP (mainly iPhone) will increase from 4% in 2015 to 26% in 2016.
• iPad & Macbook mkt share: rising order allocation, from 34%/16% in 2014 to 42%/20% in 2015. The unit growth for iPad and Macbook are about -20%/11% in 2015.
• Dividend yield ratio: 6%.

Report date: August 8, 2015

2Q15 result: inline. Revenue NTD 33bn, NP -8bn.

3Q15 guidance: revenue NTD 19bn~22bn, down qoq & yoy, below BB consensus NTD 36bn dramatically.

New business: virtual reality... Too small now.