20131101 mtk credit s

19
DISCLOSURE APPENDIX CONTAINS ANALYST CERTIFICATIONS AND THE STATUS OF NON US ANALYSTS. FOR OTHER IMPORTANT DISCLOSURES, visit https://rave.credit-suisse.com/disclosures or call +1 (877) 291-2683 US Disclosure: Credit Suisse does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. CREDIT SUISSE SECURITIES RESEARCH & ANALYTICS BEYOND INFORMATION ® Client-Driven Solutions, Insights, and Access 01 November 2013 Asia Pacific/Taiwan Equity Research Semiconductor Devices MediaTek Inc. (2454.TW / 2454 TT) INCREASE TARGET PRICE China position continues to strengthen 3Q13 upside to sales and profitability. Mediatek 3Q13 sales were already reported at NT$39 bn, +17.2% QoQ, above CS +14.5% QoQ and +5-13% QoQ guidance due to quad/dual core smartphone upside and feature phone share recovery. GMs reached 43.9% vs. our 43.7% and 42.5-44.5% guidance due to competitive cost structure on the new chips. 4Q13 upside strength continues. Mediatek guided flat to down 5% QoQ, better than our recent upward revision to -12% QoQ off a higher 3Q13 estimate in our preview last Monday. As noted in our recent supply chain updates, Mediatek's dual core is replacing competitor's dual core solutions and 3G tablets encroaching Chinese players, with optimism for octa-core for 5-7" phablets following a higher profile Nov 20th Shenzhen launch. Downstream smartphone makers and component suppliers are witnessing more than normal product launches tied to 4Q13 than the past and driving double digit 4Q unit growth for some China brands. Margins still improving. GMs were guided to 43-45% guidance for 4Q13, +10bp at the midpoint. The company has more cost competitive quad core (MT6582) ramping in 4Q13, a lower cost dual core (MT6571) in 2Q14 and mix benefit from octa-core (MT6592), with initial LTE volumes for 1H14 with 2-chip solution and SoC by year-end. Better mix and good competitive position is keeping ASPs only flat to down 5% vs. early -10% expectation. Maintain OUTPERFORM. On better pricing and margins, we raise 2013/14E EPS from NT$19.00/NT$22 to NT$20/NT$24 and our TP from NT$440 to NT$480, 19% further upside. We see upside driven by its leading position in the high-growth emerging market smartphone space, growth into TD-SCDMA and tablets, catalyst from LTE and octacore launching in the next month, and operating leverage from growth and improving GMs. Share price performance 60 80 100 120 200 300 400 500 600 Nov-11 Mar-12 Jul-12 Nov-12 Mar-13 Jul-13 Price (LHS) Rebased Rel (RHS) The price relative chart measures performance against the TAIWAN SE WEIGHTED INDEX which closed at 8388.18 on 01/11/13 On 01/11/13 the spot exchange rate was NT$29.39/US$1 Performance over 1M 3M 12M Absolute (%) 9.9 11.4 23.9 Relative (%) 7.8 7.9 7.1 Financial and valuation metrics Year 12/12A 12/13E 12/14E 12/15E Revenue (NT$ mn) 99,263.2 134,332.0 190,941.6 213,214.0 EBITDA (NT$ mn) 16,100.1 27,173.8 41,506.3 47,167.2 EBIT (NT$ mn) 12,403.6 24,240.2 38,482.7 44,101.6 Net profit (NT$ mn) 15,473.8 26,835.7 37,051.5 42,170.9 EPS (CS adj.) (NT$) 12.76 20.00 24.00 27.00 Change from previous EPS (%) n.a. 5.3 9.1 4.9 Consensus EPS (NT$) n.a. 18.8 23.6 26.7 EPS growth (%) 1.9 56.8 20.0 12.5 P/E (x) 31.7 20.2 16.9 15.0 Dividend yield (%) 2.1 2.2 3.2 4.4 EV/EBITDA (x) 28.9 16.6 10.6 9.2 P/B (x) 2.8 2.8 3.0 2.9 ROE (%) 10.6 14.5 18.5 20.0 Net debt/equity (%) net cash net cash net cash net cash Source: Company data, Thomson Reuters, Credit Suisse estimates. Rating OUTPERFORM* Price (01 Nov 13, NT$) 404.50 Target price (NT$) (from 440.00) 480.00¹ Upside/downside (%) 18.7 Mkt cap (NT$ mn) 545,859 (US$ 18,571) Enterprise value (NT$ mn) 450,913 Number of shares (mn) 1,349.47 Free float (%) 89.1 52-week price range 404.5 - 301.5 ADTO - 6M (US$ mn) 85.5 *Stock ratings are relative to the coverage universe in each analyst's or each team's respective sector. ¹Target price is for 12 months. Research Analysts Randy Abrams, CFA 886 2 2715 6366 [email protected] [email protected] Bryan Ong 11/02/13 07:14:04 AM STATS ChipPAC Ltd.

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Page 1: 20131101 mtk credit s

DISCLOSURE APPENDIX CONTAINS ANALYST CERTIFICATIONS AND THE STATUS OF NON US ANALYSTS. FOR OTHER IMPORTANT DISCLOSURES, visit https://rave.credit-suisse.com/disclosures or call +1 (877) 291-2683 US Disclosure: Credit Suisse does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.

CREDIT SUISSE SECURITIES RESEARCH & ANALYTICS BEYOND INFORMATION®

Client-Driven Solutions, Insights, and Access

01 November 2013

Asia Pacific/Taiwan

Equity Research

Semiconductor Devices

MediaTek Inc.

(2454.TW / 2454 TT) INCREASE TARGET PRICE

China position continues to strengthen

■ 3Q13 upside to sales and profitability. Mediatek 3Q13 sales were already

reported at NT$39 bn, +17.2% QoQ, above CS +14.5% QoQ and +5-13%

QoQ guidance due to quad/dual core smartphone upside and feature phone

share recovery. GMs reached 43.9% vs. our 43.7% and 42.5-44.5%

guidance due to competitive cost structure on the new chips.

■ 4Q13 upside strength continues. Mediatek guided flat to down 5% QoQ,

better than our recent upward revision to -12% QoQ off a higher 3Q13

estimate in our preview last Monday. As noted in our recent supply chain

updates, Mediatek's dual core is replacing competitor's dual core solutions

and 3G tablets encroaching Chinese players, with optimism for octa-core for

5-7" phablets following a higher profile Nov 20th Shenzhen launch.

Downstream smartphone makers and component suppliers are witnessing

more than normal product launches tied to 4Q13 than the past and driving

double digit 4Q unit growth for some China brands.

■ Margins still improving. GMs were guided to 43-45% guidance for 4Q13,

+10bp at the midpoint. The company has more cost competitive quad core

(MT6582) ramping in 4Q13, a lower cost dual core (MT6571) in 2Q14 and

mix benefit from octa-core (MT6592), with initial LTE volumes for 1H14 with

2-chip solution and SoC by year-end. Better mix and good competitive

position is keeping ASPs only flat to down 5% vs. early -10% expectation.

■ Maintain OUTPERFORM. On better pricing and margins, we raise

2013/14E EPS from NT$19.00/NT$22 to NT$20/NT$24 and our TP from

NT$440 to NT$480, 19% further upside. We see upside driven by its leading

position in the high-growth emerging market smartphone space, growth into

TD-SCDMA and tablets, catalyst from LTE and octacore launching in the

next month, and operating leverage from growth and improving GMs.

Share price performance

60

80

100

120

200

300

400

500

600

Nov-11 Mar-12 Jul-12 Nov-12 Mar-13 Jul-13

Price (LHS) Rebased Rel (RHS)

The price relative chart measures performance against the

TAIWAN SE WEIGHTED INDEX which closed at 8388.18 on

01/11/13

On 01/11/13 the spot exchange rate was NT$29.39/US$1

Performance over 1M 3M 12M Absolute (%) 9.9 11.4 23.9 Relative (%) 7.8 7.9 7.1

Financial and valuation metrics

Year 12/12A 12/13E 12/14E 12/15E Revenue (NT$ mn) 99,263.2 134,332.0 190,941.6 213,214.0 EBITDA (NT$ mn) 16,100.1 27,173.8 41,506.3 47,167.2 EBIT (NT$ mn) 12,403.6 24,240.2 38,482.7 44,101.6 Net profit (NT$ mn) 15,473.8 26,835.7 37,051.5 42,170.9 EPS (CS adj.) (NT$) 12.76 20.00 24.00 27.00 Change from previous EPS (%) n.a. 5.3 9.1 4.9 Consensus EPS (NT$) n.a. 18.8 23.6 26.7 EPS growth (%) 1.9 56.8 20.0 12.5 P/E (x) 31.7 20.2 16.9 15.0 Dividend yield (%) 2.1 2.2 3.2 4.4 EV/EBITDA (x) 28.9 16.6 10.6 9.2 P/B (x) 2.8 2.8 3.0 2.9 ROE (%) 10.6 14.5 18.5 20.0 Net debt/equity (%) net cash net cash net cash net cash

Source: Company data, Thomson Reuters, Credit Suisse estimates.

Rating OUTPERFORM* Price (01 Nov 13, NT$) 404.50 Target price (NT$) (from 440.00) 480.00¹ Upside/downside (%) 18.7 Mkt cap (NT$ mn) 545,859 (US$ 18,571) Enterprise value (NT$ mn) 450,913 Number of shares (mn) 1,349.47 Free float (%) 89.1 52-week price range 404.5 - 301.5 ADTO - 6M (US$ mn) 85.5

*Stock ratings are relative to the coverage universe in each

analyst's or each team's respective sector.

¹Target price is for 12 months.

Research Analysts

Randy Abrams, CFA

886 2 2715 6366

[email protected]

[email protected] Bryan Ong 11/02/13 07:14:04 AM STATS ChipPAC Ltd.

Page 2: 20131101 mtk credit s

01 November 2013

MediaTek Inc.

(2454.TW / 2454 TT) 2

Focus charts and tables Figure 1: Summary of our 3Q13/4Q13/1Q14 and 2013/2014 estimates for MediaTek

3Q13 4Q13 1Q14 2013 2014 2015

(NT$ mn) Actual CS(old) Street CS CS(old) Street Guidance CS CS(old) Street CS CS(old) Street CS CS(old) Street

Sales $39,008 $39,008 $37,869 $38,074 $34,331 $34,144 NT$37.1-$39.0bn $39,720 $38,116 $33,132 $134,332 $130,589 $129,298 $190,942 $183,046 $162,084

Chg 17.2% 17.2% 13.8% -2.4% -12.0% -12.5% Flat to -5% 4.3% 11.0% -3.0% 35.3% 31.6% 30.3% 42.1% 40.2% 25.4%

GM% 43.9% 43.7% 43.7% 44.1% 43.6% 43.5% 43-45% 44.2% 43.8% 43.6% 43.5% 43.2% 43.1% 44.7% 43.8% 43.5%

R&D 7,075 7,005 7,217 7,019 22.5-26.5% Opex 7,347 7,941 26,299 26,031 35,609 34,698

SG&A 2,200 2,130 2,178 2,108 2,501 2,450 7,870 7,730 11,197 10,740

OpM% 20.2% 20.3% 19.5% 19.4% 17.0% 18.4% 16.5-22.5% 19.4% 16.5% 16.1% 18.0% 17.4% 17.5% 20.2% 19.0% 20.0%

Net Inc. 8,428 8,526 8,019 7,943 6,499 6,900 7,674 6,443 6,568 26,836 25,489 25,418 37,051 33,970 33,869

EPS (NT$) $6.28 $6.35 $5.98 $5.92 $4.84 $5.05 $5.15 $4.33 $4.67 $20.00 $19.00 $18.81 $24.00 $22.00 $24.15 Source: Company data, Bloomberg consensus estimates, Credit Suisse estimates

Figure 2: More Android smartphone launches targeted after the October Golden Week helping 4Q13 seasonality Company Lenovo Lenovo TCL Huawei Huawei Oppo Micromax Coolpad Coolpad

Model name Vibe X S960 S5000 Y910 G610 G700 R819 Canvas Doodle 2 SII 8750 9970

Image

Technology HSDPA HSDPA WCDMA WCDMA WCDMA TD-WCDMA WCDMA TD-WCDMA CDMA

Operating System Android 4.2 Android 4.2 Android 4.2 Android 4.2 Android 4.2 Android 4.2 Android 4.2 Android 4.2 Android 4.2

Pixels 1920 x 1080 1280 x 800 1920 x 1080 960 x 540 1280 x 720 1280 x 720 1280 x 720 1920 x 1080 1920 x 1080

RAM 2GB 1GB 2GB 1GB 2GB 1GB 1GB 1GB 2GB

ROM 16GB 16GB 32GB 4GB 8GB 16GB 16GB 16GB 16GB

Display 5.0" 7.0" 6.0" 5.0" 5.0" 4.7" 5.7" 5.5" 5.9"

Camera 13MP+5MP 5MP+1.6MP 13MP+2.1MP 5MP+0.3MP 8MP+1.3MP 8MP+2MP 5MP+12NP 8MP+2MP 13mp

Battery 2,000mAh 3,450mAh 3,400mAh 2,150mAh 2,150mAh 2,000mAh 2,600mAh 2,500mAh 3,000mAh

CPU Speed 1.5GHz 1.2GHz 1.5GHz 1.2GHz 1.2GHz 1.2GHz 1.2GHz 1.2GHz 1.8GHz

Processor Chip MT6589T MT8389 MT6589T MT6589M MT6589 MT6589 MT6589 Marvell PXA1088 Nvidia Tegra 4

Price NA $260 NA $232 $330 2,298Rmb $315 1,999Rmb NA

Source: Company data, Credit Suisse estimates

Figure 3: Operating leverage returns as GMs improve Figure 4: Mediatek Inventory stays low in 4Q13

0%

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Revenue (NT$mn)

Feature phone sales Smartphone sales

Total GM% Op Margins

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Inventory DaysInventory (NT$mn)

Inventory Inventory Days

Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse research

Figure 5: Mediatek multi-core chipsets ramping Figure 6: Blended ASPs supported by improving mix

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Units (mn) ASPs (US$)

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Octa Units Single ASPs Dual ASPs

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Units (mn) ASPs (US$)

Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates

[email protected] Bryan Ong 11/02/13 07:14:04 AM STATS ChipPAC Ltd.

Page 3: 20131101 mtk credit s

01 November 2013

MediaTek Inc.

(2454.TW / 2454 TT) 3

3Q13 results: China position continues to strengthen Following another solid quarter, we stay OUTPERFORM on Mediatek and raise our target

price from NT$440 to NT$480 with guidance for above seasonal strength continuing into

4Q13. Our positive thesis on the stock is based on (1) a strong product cycle in the

emerging smartphone market and tablets that are only in the second year of a four-five

year growth cycle, (2) market leadership continuing to sustain in the face of tough

competition due to fast product innovation both on lower cost and higher performance

solutions, and (3) additional drivers from shift to multi-core/big.LITTLE, tablets and TD-

SCDMA this year and LTE over the next few years. Our NT$480 target price sets

Mediatek at 20x our revised 2014E EPS of NT$24.

3Q13 results top street, 4Q13 above seasonal

■ 3Q13 upside to sales and profitability. Mediatek 3Q13 sales were already reported

at NT$39 bn,+17.2% QoQ, above CS +14.5% QoQ and +5-13% QoQ guidance due to

quad/dual core smartphone upside and feature phone market share recovery. GMs

also reached the upper end of guidance at 43.9% versus our 43.7% and 42.5-44.5%

guidance as pricing has been reasonable and cost structure on the new chips

competitive. Product mix continues to improve with 55-60% smartphone, 20-25%

digital home, 10-15% Wifi and 15-20% from feature phones. Export ratio is rising to

30% but note in feature phones, China brands eventually reached 80% export mix, so

still a lot of growth is ahead for the export channel.

Figure 7: Mediatek 3Q13 in-line with CS, above street; 4Q13 guidance above CS/street in millions, unless otherwise stated

3Q13 4Q13 1Q14 2013

(NT$ mn) Actual CS(old) Street Guidance CS CS(old) Street Guidance CS CS(old) Street

Sales $39,008 $39,008 $37,869 NT$34.9-37.6bn $38,074 $34,331 $34,144 NT$37.1-$39.0bn $39,720 $38,116 $33,132

Chg 17.2% 17.2% 13.8% Up 5-13% -2.4% -12.0% -12.5% Flat to -5% 4.3% 11.0% -3.0%

GM% 43.9% 43.7% 43.7% 42.5-44.5% 44.1% 43.6% 43.5% 43-45% 44.2% 43.8% 43.6%

R&D 7,075 7,005 23-27% opex 7,217 7,019 22.5-26.5% Opex 7,347 7,941

SG&A 2,200 2,130 2,178 2,108 2,501 2,450

OpM% 20.2% 20.3% 19.5% 16.0-22.5% 19.4% 17.0% 18.4% 16.5-22.5% 19.4% 16.5% 16.1%

Net Inc. 8,428 8,526 8,019 7,943 6,499 6,900 7,674 6,443 6,568

EPS (NT$) $6.28 $6.35 $5.98 $5.92 $4.84 $5.05 $5.15 $4.33 $4.67 Source: Bloomberg, Company data, Credit Suisse estimates

■ 4Q13 upside strength continues. Mediatek guided sales flat to down 5% QoQ to

NT$37.1-$39.0 bn, better than our recent upward revision to -12% QoQ off a higher

3Q13 estimate in our preview on Monday this week. We noted in our Golden Week

preview that 4Q13 China handset sales is likely to be better than normal

seasonal, largely due to new smartphone product launches post October holidays.

Downstream smartphone makers and component suppliers are noting more than

normal product launches tied to 4Q13 than the past. The exhibit below shows new

smartphone models announced by Chinese / emerging market brands in the last

few weeks, including the recent IFA show in Berlin, slated for product launch in

4Q13. Lenovo and TCL Communications both target double-digit QoQ sales

growth in 4Q13 and Sunny Optical notes HCM orders are tracking flat-to-up in

4Q13, Lenovo, mainly due to new smartphone product launches by Huawei,

Oppo, and Coolpad.

Raising target price from

NT$440 to NT$480 based

on 20x our revised 2014

EPS

3Q13 sales upside +17%

QoQ, GMs reach the higher

end of guidance

4Q13 sales guided flat to

down 5% QoQ, better than

the normal double digit

decline

[email protected] Bryan Ong 11/02/13 07:14:04 AM STATS ChipPAC Ltd.

Page 4: 20131101 mtk credit s

01 November 2013

MediaTek Inc.

(2454.TW / 2454 TT) 4

Figure 8: More Android smartphone launches targeted after the October Golden Week holiday this year Company Lenovo Lenovo TCL Huawei Huawei Oppo Micromax Coolpad Coolpad

Model name Vibe X S960 S5000 Y910 G610 G700 R819 Canvas Doodle 2 SII 8750 9970

Image

Technology HSDPA HSDPA WCDMA WCDMA WCDMA TD-WCDMA WCDMA TD-WCDMA CDMA

Operating System Android 4.2 Android 4.2 Android 4.2 Android 4.2 Android 4.2 Android 4.2 Android 4.2 Android 4.2 Android 4.2

Pixels 1920 x 1080 1280 x 800 1920 x 1080 960 x 540 1280 x 720 1280 x 720 1280 x 720 1920 x 1080 1920 x 1080

RAM 2GB 1GB 2GB 1GB 2GB 1GB 1GB 1GB 2GB

ROM 16GB 16GB 32GB 4GB 8GB 16GB 16GB 16GB 16GB

Display 5.0" 7.0" 6.0" 5.0" 5.0" 4.7" 5.7" 5.5" 5.9"

Camera 13MP+5MP 5MP+1.6MP 13MP+2.1MP 5MP+0.3MP 8MP+1.3MP 8MP+2MP 5MP+12NP 8MP+2MP 13mp

Battery 2,000mAh 3,450mAh 3,400mAh 2,150mAh 2,150mAh 2,000mAh 2,600mAh 2,500mAh 3,000mAh

CPU Speed 1.5GHz 1.2GHz 1.5GHz 1.2GHz 1.2GHz 1.2GHz 1.2GHz 1.2GHz 1.8GHz

Processor Chip MT6589T MT8389 MT6589T MT6589M MT6589 MT6589 MT6589 Marvell PXA1088 Nvidia Tegra 4

Price NA $260 NA $232 $330 2,298Rmb $315 1,999Rmb NA

Source: Company data, Credit Suisse estimates

Margin improvement continues

GMs were guided to further improvement, with 43-45% guidance for 4Q13 suggesting 10

bp further improvement at the midpoint. The company has more cost competitive quad

core (MT6582) seeing broad adoption in 4Q13, a lower cost dual core (MT6571) in 2Q14

and some positive mix benefit from octa-core (MT6592) and more advanced quad core

refresh (MT6588), with initial LTE volumes for 1H14 with two-chip solution and SoC by

year-end. We are not seeing meaningful dual core or WCDMA competition yet from

Spreadtrum and still see local support, time to market, and aggressive roadmap keeping

Mediatek ahead of Qualcomm in the local channels.

Figure 9: Smartphones continue to improve Mediatek's margins in NT$millions, unless otherwise stated

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Feature phone sales Smartphone sales

Total GM% Op Margins Source: Company data, Credit Suisse estimates

A 20/16nm push puts Mediatek into the first-tier of

technology adopters and should benefit TSMC

The company has also moved away from a lagging edge low cost strategy on feature

phones to now push to 28nm to optimize die size and improve power/performance on its

smartphone chipsets. The company's octa-core will move to 28nm HPM and by next year

the company will introduce its first 20nm product, bringing it in-line with the leaders

launching in the first year of a new technology generation at TSMC.

Mediatek noted on its call its plans to make heavy use of 20nm/16nm for its performance

products, a key positive for TSMC as an aggressive Mediatek will prompt overseas fabless

suppliers to also push on the technology curve to remain competitive with Intel on one side

pushing to 14nm and Mediatek making its three top priorities of focusing on (1) getting

GMs improving with the

rapid introduction of new

smartphone solutions

Mediatek planning to shift its

performance products to

20/16nm in the next couple

years to improve

competitiveness in the

premium category

[email protected] Bryan Ong 11/02/13 07:14:04 AM STATS ChipPAC Ltd.

Page 5: 20131101 mtk credit s

01 November 2013

MediaTek Inc.

(2454.TW / 2454 TT) 5

LTE working, (2) improving high-end and premium products, and (3) pushing leading edge

geometries to be more competitive on power and performance.

Product roadmap enhancing Mediatek’s smartphone

and tablet competitiveness

Mediatek has accelerated its development cycle relative to feature phones to remain

competitive with global competitors Qualcomm, Broadcom and Marvell and stay ahead of

emerging Chinese competitors RDA and Spreadtrum. We estimate the company's market

share is moving up from 44% in 2012 to 48% in 2015 even in a high growth market with

multiple competitors.

Figure 10: Mediatek gaining shares among local brands

Smartphone chipsets 2011 2012 2013 2014 2015

Mediatek 10.0 109.8 220.4 315.5 447.0

Mediatek share (%) 14% 44% 45% 46% 48%

Spreadtrum 0.2 32.0 115.7 145.7 208.3

RDA - - - 24.3 49.8

Leadcore 3.0 5.0 15.0 22.5 30.0

Asian suppliers 13.2 146.8 351.1 508.0 735.1

YoY Growth 1009% 139% 45% 45%

Share 19% 59% 71% 75% 79%

Qualcomm 35.2 81.0 120.6 150.3 174.5

Broadcom 1.5 2.5 7.0 10.0 15.0

Marvell 12.0 15.0 13.0 12.0 10.0

ST-Ericsson 8.0 3.5 0.5 - -

Overseas suppliers 56.7 102.0 141.1 172.3 199.5

YoY Growth 80% 38% 22% 16%

Share 81% 41% 29% 25% 21%

Total 70.0 248.8 492.1 680.3 934.7

YoY Growth 256% 98% 38% 37%

Source: Gartner, Company data, Credit Suisse estimates

Mediatek’s market segmentation consists of the following chipsets and features:

■ Lower cost chipsets. Mediatek launched 2nd

generation dual (MT6572/MT6572M)

and quad core chipsets (6589M/6582M) in late 2Q13 to optimize cost structure of its

mainstream products. The new products offer slightly lower clock speeds, lower image

sensor and resolution capability but remain competitive with rival dual/quad cores on

the market from Qualcomm and Spreadtrum. Mediatek’s MT6572 ramped from 10%

to over 40% of its volume in a quarter by hitting the sweet spot of factory pricing

spanning from US$50 entry smartphones to US$120 mid-tier models. The company

moved dual core to 28nm with Cortex-A7 clocked at 1.2GHz, allowing support for 5MP

camera, QHD resolution (960x540) and HSPA+ release 8 plus TD-SCDMA and 30

FPS 720p video. The scaled down 6582M quad core drops in with 1.3GHz processor,

QHD resolution (960x540) and support for 8MP camera.

In dual core, we believe Mediatek will launch an even lower cost dual core chipset

(MT6571) in 2Q14 to address the low cost 3.5” FWVGA smartphone market to

compete with Spreadtrum and RDA’s single core solutions.

■ Higher performance products protecting ASPs. Mediatek's roadmap offers multiple

areas for innovation including (1) modem and connectivity (802.11ac, LTE), (2) power

and performance pushing leading geometries (28nm HPM in 4Q13 and 20nm in

2H14), (3) more advanced cores (octa-core, big.LITTLE), (4) higher clock rates for

CPU and GPU with turbo versions for better multimedia and graphics, and (5) improve

modem and connectivity (802.11ac, LTE).

Blended pricing only flat to

down 5% in 3Q/4Q

[email protected] Bryan Ong 11/02/13 07:14:04 AM STATS ChipPAC Ltd.

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MediaTek Inc.

(2454.TW / 2454 TT) 6

Figure 11: Mediatek octa-core and quad-core chipset specifications

MT6592 MT6589 MT6588 MT6582 MT6572 MT6571

Status NEW in 4Q13 Available (1Q13) NEW in 4Q13 NEW in 4Q13 Available (2Q13) New in 2Q14

Multi-core Octa-core Quad-core Quad-core Dual-core Dual-core Dual-core

CPU ARM Cortex-A7 ARM Cortex-A7 ARM Cortex-A7 ARM Cortex-A7 ARM Cortex-A7 ARM Cortex-A7

Clock speed 1.7-2.0GHz 1.2GHz 1.7GHz 1.3GHz 1.3GHz 1.0GHz

GraphicsARM Mali-450

700MHz

ARM Mali-400

500MHz

ARM Mali-450

600MHz

ARM Mali-400

500MHz

ARM Mali-400

500MHzARM Mali-400

MemoryLPDDR2 533MHz

LPDDR3 666MHz

32-bit 400Mbps LP-

DDR / 32-bit 1066

Mbps LP-DDR2

LPDDR2 533MHz

LPDDR3 666MHzLPDDR2 533MHz LPDDR2 266MHz LPDDR2 266MHz

Camera 13MP 13MP 13MP 13MP 5MP 5MP

Video Decode1080p 30fps

HEVC/VPS

1080p 30fps

HEVC/VP9

1080p 30fps

720p 30fps

HEVC/VPS

1080p 30fps 720p 30fps 720p 30fps

Video Encode 1080p 30fps 1080p 30fps 1080p 30fps 1080p 30fps 720p 30fps 720p 30fps

DisplayHD1080

1920 x 1080

HD1080

1920 x 1080

HD1080

1920 x 1080HD720 1280x720 qHD 960 x 540 qHD 960 x 540

ModemHSPA+ Rel. 8

21Mbps/5.76Mbps

HSPA+ Rel. 8

21Mbps/5.76Mbps

HSPA+ Rel. 8

21Mbps/5.76Mbps

HSPA+ Rel. 8

21Mbps/5.76Mbps

HSPA+ Rel. 8

21Mbps/5.76Mbps

HSPA+ Rel. 8

21Mbps/5.76Mbps

ConnectivityIntegrated Wifi

abgn/BT/FM/GPS

Integrated Wifi

bgn/BT/FM/GPS

Integrated Wifi

abgn/BT/FM/GPS

Integrated Wifi

bgn/BT/FM/GPS

Integrated Wifi

bgn/BT/FM/GPS

Integrated Wifi

bgn/BT/FM/GPS

Process node 28nm HPM 28nm 28nm HPM 28nm 28nm 28nm

Foundry TSMC TSMC TSMC TSMC TSMC GlobalFoundries Source: Company data, Credit Suisse estimates

■ High resolution phablets proliferating and moving toward octa-core. The Chinese

brands are proliferating a wide array of 5.7-6.5” phablet models with full HD 1920x1080

resolution for US$180-220 FOB prices and high specs including 5MP + 13 MP camera,

1-2GB DRAM and 8-16GB NAND. Most of these solutions use Mediatek’s MT6589 but

are providing a pin for pin compatible option between the new quad and octa-core

MT6592 for fast roll-out of new models on the new chipset once available late in the

year. Multiple customers are sampling the Octa-core in November and should launch

products after Mediatek's high profile launch event in Shenzhen on 20 November.

Figure 12: Mediatek octa-core MT6592 design wins

Company UMI ThL OKAL ZOPO G Five Goophone Mlais

Model name X2S ThL II N6592 Zopo II Kivu S4 Max MX69

Image

Technology WCDMA + TD WCDMA + TD WCDMA WCDMA WCDMA WCDMA WCDMA

Operating System Android 4.2 Android 4.2 Android 4.2 Android 4.2 Android 4.2 Android 4.2 Android 4.2

Pixels 1920 x 1080 1920 x 1080 1920 x 1080 1920 x 1080 1920 x 1080 1920 x 1080 1920 x 1080

RAM 2GB 2GB 2GB 2GB 2GB 2GB 2GB

ROM 32GB 16GB 16GB 16GB 16GB 32GB 32GB

Display 5.0" NA 5.5" NA 6.0" 6.44" 5.7"

Camera 13MP NA 5MP + 12MP NA 1.9MP+13MP 13MP+5MP NA

Battery NA NA NA NA NA NA NA

CPU Speed 1.5GHz 2GHz 2GHz 2GHz 2GHz 2GHz 2GHz

Processor Chip MT6592 MT6592 MT6592 MT6592 MT6592 MT6592 MT6592

Price $250 NA $150 NA NA $400 $350

Source: Company data, Credit Suisse estimates

[email protected] Bryan Ong 11/02/13 07:14:04 AM STATS ChipPAC Ltd.

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MediaTek Inc.

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Figure 13: Mediatek’s Octocore enables advanced tasks Figure 14: Octocore could improve power/performance

Source: Company data, Credit Suisse research Source: Company data, Credit Suisse estimates

■ New LTE chipsets on the roadmap for late 2013 sampling, with integration in

2014. Qualcomm is well ahead of the market and dominating tier-one business with its

integrated LTE Snapdragon chipsets. In this area, Mediatek is behind but should still

be in time to catch the growth in emerging markets. Mediatek’s first LTE modem

(MT6590) is sampling for 4Q13 to support both versions of LTE, TD-SCDMA, WCDMA

and TD-SCDMA. The company will also plan an integrated solution pairing its LTE

baseband to both its quad core and Octa-Core for sampling in 2Q/3Q and

launching by year-end.

Figure 15: Mediatek multi-core chipsets ramping Figure 16: Blended ASPs supported by improving mix

0.0

5.0

10.0

15.0

20.0

25.0

30.0

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

100.0

3Q

11

4Q

11

1Q

12

2Q

12

3Q

12

4Q

12

1Q

13

2Q

13

3Q

13

4Q

13E

1Q

14E

2Q

14E

3Q

14E

4Q

14E

Single Units Dual Units Quad UnitsOcta Units Single ASPs Dual ASPsQuad ASPs Octa ASPs Blended ASPs

Units (mn) ASPs (US$)

$0

$3

$6

$9

$12

$15

$18

$21

$24

$27

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

3Q11 1Q12 3Q12 1Q13 3Q13 1Q14E 3Q14ESingle Units Dual Units Quad Units

Octa Units Single ASPs Dual ASPs

Quad ASPs Octa ASPs Blended ASPs

Units (mn) ASPs (US$)

Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates

■ Tablets enhanced with new chipsets. Mediatek has created an extension of its

popular MT6589 quad core for smartphone chipset with its MT8125/MT8389/MT8382 for

tablets. The tablet chipset offers 1.5GHz speed, 1080p video playback, up to 13MP

support and DTV video technology and also is bundled with 3G HSPA+ modem and 4-

in-1 connectivity (Wifi, Bluetooth 4.0, GPS, FM) for a voice and always connected data

tablet. The product has secured designs with Asus for its Memo Pad HD7, Acer Iconia

family, Lenovo A-series and recently introduced Lenovo YogaPad 8" and 10" models.

The company also introduced its big.LITTLE chipset combining dual ARM Cortex A15

and dual Cortex A7 with Imagination PowerVR Series 6 graphics optimized by

Mediatek’s internal GPU team to allow branded tablet customers to be more competitive

with multi-core GPUs. We project Mediatek has grown share from less than 5% in 2012

to 20% share in 2013 and model doubling to 40 mn units and 25-30% market share in

2014, with potential for further upside as it rolls out lower cost dual/quad core chipsets

and higher end solutions using its octa-core and LTE connectivity.

Branded tablets including

the new Lenovo Yoga Pad

adopting Mediatek's

bundled solution

[email protected] Bryan Ong 11/02/13 07:14:04 AM STATS ChipPAC Ltd.

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01 November 2013

MediaTek Inc.

(2454.TW / 2454 TT) 8

Figure 17: Mediatek branded tablets launching

Company Asus Acer Acer Lenovo Lenovo Lenovo Lenovo (NEW)

Model nameMeMo Pad

HD7

Iconia Tab

A1-810Iconia B1 A71 IdeaTab A1000 IdeaTab A3000 IdeaTab S6000 Yoga Tablet

Processor MT8125 MT8125 MT8317 MT8317 MT8125 MT8125 MT8125

Retail price US$129 US$200 US$150 US$160 US$229 US$255 US$249 / $299

Display size 7.0" 7.9" 7.0" 7.0" 7.0" 10.1" 8.0" / 10.0"

Display resolution 1280 x 800 768 x 1024 1024 x 600 1024 x 600 1024 x 600 1280 x 800 1280 x 800

OS Android 4.2 Android 4.2 Android 4.1 Android 4.1 Android 4.2 Android 4.1 Android 4.2.2

Camera 5MP + 1.2MP 5MP +0.2MP 0.3MP NA + 0.3MP 5MP + 0.3MP 5MP + 0.3MP 5MP + 1.6MP

CPU speed 1.2GHz 1.2GHz 1.2GHz 1.2GHz 1.2GHz 1.2GHz 1.2GHz

Battery 4,720mAh 3,240mAh 2,710mAh 8hrs 8hrs 9hrs 16-18hrs Source: Company data, Credit Suisse estimates

Wearables including Android sport watches very early – but could add another potential driver

Several vendors (2G Pax, GBD) have creatively adopted Mediatek’s dual core MT6572

and MT6577 for a smart watch. The solutions offer a compact Android smartphone

experience in the watch for under US$100 FOB prices and include 3G calling, Bluetooth

connectivity for headsets, email/ browsing, and watch and calendar functions. The

wearable space is still in its infancy but we expect to see an emerging range of whitebox

and China built products using the Asian supply chain. The wearable is a bit like tablets

where some tablet makers were adopting Mediatek's existing smartphone chipsets for

tablets even before Mediatek was setting up a separate product line and team to

specifically address that market. We expect baseband, RF and connectivity suppliers

including Mediatek, RDA, Spreadtrum and Realtek could see an adjacent market emerge

here, joining a broad base of overseas MCU, connectivity and sensor manufacturers.

Rockchip also announced it will offer solutions for wearables in 2014 by seeing its partners

with reference designs and boards.

Figure 18: Mediatek powered watch interface Figure 19: Whitebox wearables emerging

Source: Company data, Credit Suisse research Source: Company data, Credit Suisse research

Key risk will still come from competition

Mediatek's competitive landscape remains fierce, with competitive chipsets from local

suppliers Spreadtrum, Leadcore, Hi-Silicon and RDA still emerging and from overseas

competitors Qualcomm, Broadcom, Marvell, Samsung and Intel and Chinese application

processor vendors Allwinner, Rockchip, Actions, AMLogic, Ingenic. The landscape shows

multiple solutions addressing the major single, dual, quad and octa-core areas with similar

Some whitebox watches

using Mediatek's dual core

chipset

[email protected] Bryan Ong 11/02/13 07:14:04 AM STATS ChipPAC Ltd.

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01 November 2013

MediaTek Inc.

(2454.TW / 2454 TT) 9

variations of ARM cores, processing speed, GPU and modem. Mediatek is still standing

out for the turnkey support, integration, fast product refreshes and time to market with new

designs. Mediatek should be able to spin a new version of Android within a quarter for

commercial production and roll out pin for pin compatible chipsets to its customer base for

finished products during the launch quarter of a new platform.

Figure 20: Competitive landscape has multiple vendors targeting solutions for emerging markets

Quad Core LTE

Single Core Dual Core

MediaTekMT6589/MT6582,

28nm, 1 GHz, 4 A7,

TD/HSPA+

Qualcomm

MSM8226, 28nm,

1.5GHz, 4 A7,

HSPA+

NVIDIA

Tegra 4, 28nm HPL,

4 A15, LTE Cat 4

MediaTek

MT6572, 28nm, 1-

1.5 GHz, 2 A7,

Power VR, TD+W

Spreadtrum

SC6825/8825, 40nm,

1.2GHz, 2 A5, TD /

EDGE

Qualcomm

MSM8926, 28nm,

1.2-1.4GHz, 4 A7,

LTE Cat 4

Qualcomm

MSM8210, 28nm,

1.2GHz, 2 A7,

TD+W

Marvell

PXA1088, 28nm,

1.0 GHz, 4 A7,

TD/HSPA+

Spreadtrum

SC6820/8820,

40nm, 1GHz, 1 A5,

TD / EDGE

MediaTek

MT6575, 40nm,

1GHz, 1 A9,

HSPA/EDGE

Intel

XMM7160, 28nm,

1.3GHz, 4 A7,

LTE/HSPA+ Cat 3

MediaTek

MT6290, 28nm,

1.4GHz, 4 A7, Mali

400, LTE Cat 3

Leadcore

LC1813, 40nm, 4

A7, TD

Hisilicon

Balong 710, 28nm,

1.5GHz, 4 A9, LTE

Cat 4

Qualcomm

MSM7227A, 45nm,

1GHz, 1 A5,

HSPA/EDGE

MarvellPXA 986(TD)/988(W),

1.2Ghz, 2 A9, Vivante

GC1000

Marvell

PXA1088 LTE,

28nm 1.2GHz, 4 A7,

LTE

Broadcom

BCM23550, 1.2GHz,

4 A7, TD/HSPA+

Broadcom

BCM21892, 40nm,

LTE Cat 4 modem

Broadcom

BCM28145, 1.2

GHz, 2 A9, HSPA+

RDA

RDA8810, 55nm,

1GHz, 1 A5, EDGE

Source: Company data, Credit Suisse estimates

We highlight a few recent developments in the landscape to monitor:

Intel engaging the local tablet suppliers more closely. Intel is putting more energy on

penetrating the low cost tablet market and now has reference models from design houses

such as Emdoor and smaller branded companies including Ramos and Vido. The

company is offering a thin and light reference design based on Clover Trail now with Bay

Trail rolling out in the next 45 days. Factory price for 10” with keyboard ranges from $250-

300 for Android and $300-$350 for Android + Wintel. 7.85” tablets are from Intel are now

appearing at US$150 factory price, the high-end of the US$50-135 range for tablets based

on Mediatek or the Chinese chipset suppliers. We are seeing more efforts from Intel to

penetrate several of these design houses on tablets, though presence is still very limited at

the local smartphone suppliers and threat to Mediatek still limited.

Figure 21: Intel Atom Z2580 design wins Company Ramos Ramos Ramos Ramos Breaconton Emdoor

Model name i8 i9 i10 i12 Breaconton EM-I8011

Image

Technology Wifi Wifi WCDMA + Wifi WCDMA + Wifi WCDMA + TD WCDMA

Operating System Android 4.2.2 Android 4.2.2 Android 4.2.2 Android 4.2.2 Windows 8Android 4.2.2 &

Win8 OS

Pixels 1280 x 800 1920 x 1200 1920 x 1200 1920 x 1080 1440 x 990 1280 x 800

RAM 1GB 2GB 2GB 2GB 2GB NA

ROM 16GB 16GB 16GB 16GB 32GB NA

Display 8.0" 8.9" 10.1" 11.6" 11.6" 10.1"

Camera 2MP + 5MP 2MP + 5MP 2MP + 5MP 2MP + 5MP 1.3MP + 5MP 2MP + 2MP

Battery 4500mAh 6500mAh 8000mAh 10,000mAh 8400mAh 7500mAh

CPU Speed 2 GHz 2 GHz 2 GHz 2 GHz 1.1-1.8GHz 1.8GHz

Processor Chip Atom Z2580 Atom Z2580 Atom Z2580 Atom Z2580 Atom Z2580 Bay Trail - T

Factory Price $147 $176 $209 $222 $300 $280 Source: Company data, Credit Suisse estimates

Intel is supplying Bay Trail

to some of its new whitebox

partners

[email protected] Bryan Ong 11/02/13 07:14:04 AM STATS ChipPAC Ltd.

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MediaTek Inc.

(2454.TW / 2454 TT) 10

Samsung will have fab capacity to push Exynos Octa-core – but more in tablets

over smartphones. Samsung has used its first to market timing with an Octa-core CPU in

its Exynos 5410 to secure design wins with tablet makers including Skyworth, Meizu, ASA,

Migo, Allfine, GBD and design house Emdoor among others. We believe Samsung will use

its fab capacity post Apple moving to TSMC to aggressively supply Exynos into its own

smartphones and also push it out to more Chinese suppliers. Feedback from suppliers

was the solution was good for more advanced whitebox tablets but viewed Mediatek's

upcoming Octacore as competitive on price/performance using 8 Cortex A7 cores rather

than big.LITTLE and added 3G modem capability could help it secure more connected 5-

7" phablets. Allwinner also is previewing it will have its A80 Octa-core solution in 2014

though still too early to see any tangible product or specification.

Figure 22: Samsung Octa-core Exynos 5410 design wins

Company Meizu ZDX Teamgee Seabright Connectme Tomato

Model name MX3 ZDX X6 TG Seabright Connectme T2

Image

Technology WCDMA WCDMA / LTE WCDMA WCDMA WCDMA WCDMA

Operating System Android 4.2.2 Android 4.2.2 Android 4.2 Android 4.2 Android 4.0 Android 4.2

Pixels 1800 x 1080 1920 x 1080 1280 x 800 1280 x 800 1280 x 800 1024 x 768

RAM 2GB 2GB 2GB 2GB 2GB 2GB

ROM 16GB 16GB 16GB 16GB 16GB 8GB

Display 5.1" 5.85" 8.0" 8.0" 8.0" 9.0"

Camera 2MP + 8 MP 2MP + 13 MP 2MP + 8 MP 2MP + 8 MP 2MP + 5 MP 2MP + 5 MP

Battery 2400mAh 3200mAh 4400mAh 4400mAh 4000mAh 4800mAh

CPU Speed 1638MHz 1.6GHz 1.8GHz 1638MHz 1.8GHz 1.6GHz

Processor Chip Exynos 5410 Exynos 5410 Exynos 5410 Exynos 5410 Exynos 5410 Exynos 5410

Price RMB 2499 $300 $500 $249 NA $316

Source: Company data, Credit Suisse estimates

Chinese tablet suppliers adapting their solutions for performance, cost and 4G

connectivity. Allwinner, Rockchip, Am Logic and Actions have adjusted their offerings to

stay competitive on price/performance due to more competition from Mediatek, Intel and

Samsung and also from branded OEMs (Amazon, Acer, Asus, Lenovo, HP) putting

pressure on local brands.

Figure 23: China whitebox Quad core chipsets Figure 24: China whitebox Dual core chipsets Allwinner Allwinner Rockchip Rockchip Actions

A31 A31s RK3188 RK3066 ATM7039

Technology 40nm 40nm 28HKMG 40nm NA

CPUQuad-core

Cortex A7

Quad-core

Cortex A7Quad-core A9 Quad-core A9 Quad-core A9

Frequency 1.3GHz 1.2GHz 1.6GHz 1.6GHz 1.6GHz

GPU SGX544MP2 SGX544MP2 Mali-400 MP4 Mali-400 MP4 PowerVR

Video Playback 4Kx2K 2160p 1080p NA 4Kx2K

Video captureH.264 HP

1080p@60fps

H.264 HP

1080p@30fps

720p@60fps

H.264 HP

1080p@60fpsNA

HVEC/H.265

video

Applications Tablet

Smart TVPhablet Tablet Tablet Tablet

Allwinner Allwinner Rockchip Actions

A23 A20 RK3026 ATM7021

Technology 40nm 40nm 40nm NA

CPUDual-core

Cortex A7Dual-core Dual-core A9 Dual-core A9

Frequency 1.5GHz 1.2GHz 1.0GHz 1.3GHz

GPU Mali400MP2 Mali400MP2 Mali-400 MP2 PowerVR

Video Playback 1080p 2160p NA 1080p

Video captureH.264 HP

1080p@60fps

H.264 HP

1080p@30fps

720p@60fps

NA HVEC/H.265

Applications TabletTablet

Smart TVTablet Entry-level tablet

Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates

Notably, Rockchip is focusing on integrating its quad core with LTE module from Sequans

and Altair for a 4G add on card for about US$40, upgrading from 3G add-on modules

currently from Huawei/Hi-Silicon. AM Logic is focused on a higher end solution with quad

core CPU + 8 core graphics manufactured on TSMC’s 28nm HPM process. Allwinner,

Rockchip and Allwinner are also all introducing lower cost dual core solutions, with

Rockchip, Actions, and

Allwinner all have refreshed

lower cost dual core

solutions; Rockchip

partnering with Sequans

and Altair for a LTE add on

module

[email protected] Bryan Ong 11/02/13 07:14:04 AM STATS ChipPAC Ltd.

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01 November 2013

MediaTek Inc.

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Allwinner introducing an A23 (lower cost from A20), Rockchip RK3026 (lower cost from

RK3066/RK3188) and Actions and ATM 7021 (lower cost than ATM 7023).

Raising 2013/2014 estimates

Following the better pricing and margins, we raise 2013/2014E EPS from

NT$19.00/$22.00 to NT$20.00/$24.00 versus street of NT$18.81/NT$24.15.

Figure 25: Raising MediaTek estimates 2013 2014 2015

(NT$ mn) CS CS(old) Street CS CS(old) Street CS CS(old) Street

Sales $134,332 $130,589 $129,298 $190,942 $183,046 $162,084 $213,214 $203,706 $180,692

Chg 35.3% 31.6% 30.3% 42.1% 40.2% 25.4% 11.7% 11.3% 11.5%

GM% 43.5% 43.2% 43.1% 44.7% 43.8% 43.5% 44.9% 44.0% 43.7%

R&D 26,299 26,031 35,609 34,698 39,647 36,671

SG&A 7,870 7,730 11,197 10,740 12,019 11,422

OpM% 18.0% 17.4% 17.5% 20.2% 19.0% 20.0% 20.7% 20.4% 21.8%

Net Inc. 26,836 25,489 25,418 37,051 33,970 33,869 42,172 40,220 37,785

EPS (NT$) $20.00 $19.00 $18.81 $24.00 $22.00 $24.15 $27.00 $25.75 $26.48 Source: Company data, Bloomberg consensus estimates, Credit Suisse estimates

Our key assumptions for Mediatek include:

■ Smartphones seeing a fast ramp: We model smartphones ramping from 110mn in

2012 to 220mn in 2013. We assume blended ASPs dropped from NT$10.82 in 2012 to

NT$9.75 in 2013 and NT$9.06 in 2014.

■ Tablets maintained. We maintain tablets at 23mn on whitebox and branded OEM

traction and launch of new stand-alone processors for this channel in 2H13.

■ Non-handsets roughly unchanged. We make small upward revisions to WLAN

(connectivity ramp and more to tablets and DTV (more smart TV).

Figure 26: Mediatek operating assumptions in millions, unless otherwise stated

Quarters Years

NT$mn unless noted 1Q13 2Q13 3Q13 4Q13E 2011 2012 2013F Prior 2014F 2015F

Feature phones (mn) 72.2 81.5 92.0 82.8 530.2 391.9 328.5 323.9 283.3 232.5

ASPs (US$) $1.95 $1.91 $1.87 $1.84 $3.58 $2.26 $1.89 $1.89 $1.66 $1.41

Smartphones (mn) 35.0 52.6 66.5 66.3 10.0 109.8 220.4 221.2 315.5 447.0

ASPs (US$) $9.71 $10.00 $9.75 $9.56 $13.33 $10.82 $9.75 $9.38 $9.06 $8.22

Tablets (mn) 2.0 6.0 7.5 7.5 0.0 0.0 23.0 22.6 40.2 61.4

ASPs (US$) $14.00 $12.60 $12.10 $11.73 $0.00 $0.00 $12.29 $12.03 $10.23 $8.33

Handset/Tablet Sales 15,003 22,501 27,163 25,945 59,512 61,419 90,612 87,905 111,466 134,579

DTV 3,435 4,087 4,646 4,789 10,722 13,490 16,957 16,515 42,272 41,653

PC Optical 2,403 2,701 2,790 2,628 10,596 11,489 10,523 10,526 8,719 6,994

Consumer DVD 782 888 995 877 4,160 3,515 3,542 3,545 3,181 2,944

WLAN (Ralink) 2,363 3,100 3,414 3,835 1,867 9,365 12,712 12,110 16,840 17,626

Total Sales 23,986 33,276 39,008 38,074 86,858 99,278 134,345 130,602 190,942 213,214

GM % 42.1% 43.2% 43.7% 44.1% 45.3% 41.4% 43.4% 43.2% 44.7% 44.9%

Op M% 12.9% 17.7% 20.2% 19.4% 14.2% 12.5% 18.0% 17.4% 20.2% 20.7%

EPS $2.79 $5.01 $6.28 $5.92 $12.52 $12.85 $20.00 $19.00 $24.00 $27.00 Source: Company data, Credit Suisse estimates

Smartphones growing from

110mn to 220 units in 2013,

tablets at 23 mn in 2013

[email protected] Bryan Ong 11/02/13 07:14:04 AM STATS ChipPAC Ltd.

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MediaTek Inc.

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Balance sheet remains solid, inventory drops

MediaTek retains a strong balance sheet with NT$93 bn net cash and investments

(NT$69/share). Inventory also stayed below average, growing NT$1.9 bn to NT$12.9 bn

but only up 1 day to 54 days, still below the long-term 67 day average. The company

should have some restocking demand into Chinese New Year and also for its upcoming

launch of octa-core and cost down MT6582 quad core.

Figure 27: Balance sheet summary

Balance Sheet (NT$ mn) 3Q13A 2Q13 Diff % 7 Yr Avg +/- Avg

Cash and Investments 113,192 112,748 0% 74,232 38,960

Total Debt 19,869 16,223 2,515 17,354

Net Cash and investments 93,323 96,525 -3% 71,718 21,605

Net Cash/Share 69.54 71.93 -2.39 60.72 8.82

Accts. Receivable 11,059 10,389 6% 6,871 4,188

Receivable Days 26 28 -3 28 -2

Inventory 12,938 10,956 18% 8,399 4,539

Inventory Days 54 53 1.1 67 -13

Accounts Payable Days 52 53 0 66 -14

Cash Conversion Cycle 28 29 -1 29 -2

SH Equity 185,057 178,315 4% 102,131 82,926

Book Value / Share 137.90 132.87 5.02 86.08 51.82 Source: Company data, Credit Suisse estimates

Figure 28: MediaTek inventory depletes following the strong 3Q13 shipments

0

20

40

60

80

100

120

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

2Q

00

1Q

01

4Q

01

3Q

02

2Q

03

1Q

04

4Q

04

3Q

05

2Q

06

1Q

07

4Q

07

3Q

08

2Q

09

1Q

10

4Q

10

3Q

11

2Q

12

1Q

13

Inventory DaysInventory (NT$mn)

Inventory Inventory Days

Source: Company data, Credit Suisse estimates

Free cash flow rebounding

MediaTek historically has generated strong free cash flow due to its high operating

margins and small requirements for capex only on buildings and engineering tools. The

company generated NT$14 bn free cash flow in 2011 and NT$9.0bn in 2012, down from

peak NT$54bn levels in 2009 due to the sharp drop those two years in feature phone

volumes. On the strong ramp of smartphone and tablet volumes, we project rebound to

NT$18.0bn in 2013 and NT$35bn in 2014.

MediaTek has 15% of its

market cap in cash and

investments

[email protected] Bryan Ong 11/02/13 07:14:04 AM STATS ChipPAC Ltd.

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Figure 29: Cash flow summary for MediaTek—2003-12, FY13E/14E

Annual (NT$mn) CY03 CY04 CY05 CY06 CY07 CY08 CY09 CY10 CY11 CY12 CY13E CY14E CY03-12 Avg

Revenue 38,064 40,054 46,491 52,942 74,779 90,402 115,512 113,522 86,857 99,263 134,332 190,942 75,789

Capital spending -292 -1,003 -1,823 -1,987 -1,127 -1,705 -1,574 -2,122 -2,585 -2,268 -2,049 -2,198 -1,648

Capex/Revenue (%) 0.8 2.5 3.9 3.8 1.5 1.9 1.4 1.9 3.0 2.3 1.5 1.2 2.3

Dep and amort 310 502 946 1,473 1,830 3,295 3,245 2,978 2,729 3,696 2,167 3,024 2,101

Depr/Revenue (%) 0.82 1.25 2.04 2.78 2.45 3.64 2.81 2.62 3.14 3.72 1.61 1.58 2.53

Operating cash flow 15,943 11,851 23,061 23,343 27,498 35,614 55,250 29,433 16,715 11,338 20,126 34,208 25,005

Free cash flow 15,651 10,848 21,239 21,356 26,371 33,910 53,677 27,310 14,130 9,069 18,077 32,009 23,356 Source: Company data, Credit Suisse estimates

The company’s free cash flow to enterprise value (based on the current stock price) is

projected at 5% in 2013 and 8% in 2014. The company paid an NT$9 dividend in 2013,

representing a 2.2% yield. Higher earnings at similar 75% payout range would support a

rising the dividend to NT$13 and raise yield to 3% in 2014.

Figure 30: Free cash flow and dividend yields for MediaTek, 2003-12, FY13E /FY14E FCF and Dividend Yields CY03 CY04 CY05 CY06 CY07 CY08 CY09 CY10 CY11 CY12 CY13E CY14E CY03-12 Avg

FCF / Share (NT$) 16.49 11.12 21.42 21.10 25.52 32.06 49.86 25.11 12.99 7.48 13.48 20.73 22.31

FCF Yield (%) 4.1 2.7 5.3 5.2 6.3 7.9 12.3 6.2 3.2 1.8 3.3 5.1 5.5

FCF / EV (%) 4.1 2.9 5.6 5.6 7.0 9.0 14.2 7.2 3.7 2.4 4.8 8.4 6.2

Dividend per share (NT$) 8.00 8.50 10.00 11.00 15.00 18.86 13.90 26.00 20.22 8.33 9.00 12.88 13.98

Dividend Yield (%) 3.2 5.1 3.4 4.1 2.5 6.6 3.1 6.4 5.0 2.1 2.2 3.2 4.1 Source: Company data, Credit Suisse estimates

Maintain OUTPERFORM

Following another solid quarter, we stay OUTPERFORM on Mediatek and raise our target

price from NT$440 to NT$480 with guidance for above seasonal strength continuing into

4Q13. Our positive thesis on the stock is based on (1) a strong product cycle in emerging

market smartphone and tablets that is only in the 2nd

year of a 4-5 year growth cycle, (2)

market leadership continuing to sustain in the face of tough competition due to fast product

innovation both on lower cost and higher performance solutions, and 3) additional drivers

from shift to multi-core/big.LITTLE, tablets and TD-SCDMA this year and LTE over the

next few years. Our NT$480 TP sets Mediatek at 20x our revised 2014E EPS of NT$24.

Figure 31: Mediatek trading at 18.0x 2014E EPS (14x ex-cash and interest on the cash)

10x

15x

20x

50

150

250

350

450

550

650

Jul/01 Jul/02 Jul/03 Jul/04 Jul/05 Jul/06 Jul/07 Jul/08 Jul/09 Jul/10 Jul/11 Jul/12 Jul/13

NT$ Mediatek US GAAP PE Band

ccccccccccccccccccccccc

25x

Source: Company data, Credit Suisse Research

Free cash rebounding,

dividend could rise from

NT$9 to NT$13 in 2014

[email protected] Bryan Ong 11/02/13 07:14:04 AM STATS ChipPAC Ltd.

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Figure 32: Asian fabless comparisons—MediaTek trading at the high-end of its peer group

Price Mkt Cap EV/Sales (x) P/E Multiple (x) P/B Multiple (x) ROE Trough/Peak (EV/Sales)

Company Ticker 10/31/2013 (US$mn) 2012 2013 2014 2012 2013 2014 2012 2013 2014 2012 2013 2014

Select Asian fabless semiconductors

MediaTek 2454.TW $402.00 $17,521 4.4 3.2 2.2 30.6 21.6 18.3 2.7 2.7 3.0 8.8 12.8 16.3

Spreadtrum SPRD $30.41 $1,515 2.0 1.5 1.4 13.3 14.3 17.3 n.a. 3.9 3.6 n.a. 27.2 20.6

MStar 3697.TW $303.50 $5,214 3.4 2.9 NA 25.2 21.8 NA 4.7 4.4 NA 18.7 20.2 NA

Realtek 2379.TW $68.40 $1,189 1.0 0.9 0.8 15.2 12.6 11.5 1.9 1.9 1.8 12.4 15.0 15.5

Median 2.0 1.5 1.1 15.2 14.3 14.4 3.3 3.9 2.7 15.6 20.2 18.1

Mean 2.1 1.8 1.1 17.9 16.2 14.4 3.3 3.4 2.7 15.6 20.8 18.1

Fabless semiconductors

Qualcomm QCOM $69.47 $113,819 4.5 3.5 2.7 18.7 15.3 13.7 3.6 3.5 2.8 19.3 22.7 20.2

Xilinx XLNX $45.42 $12,148 5.3 5.5 4.8 22.8 26.1 20.0 4.4 4.0 3.8 19.9 16.1 20.3

Altera ALTR $33.60 $11,527 5.1 5.1 4.3 20.5 25.5 20.2 3.3 3.0 2.6 16.0 11.7 13.0

PMCS PMCS $5.87 $1,310 2.1 2.2 2.0 15.4 16.2 12.2 1.8 1.8 1.4 n.a. 10.6 13.0

Nvidia NVDA $15.18 $8,945 1.3 1.2 1.3 16.1 16.9 21.3 2.2 NA NA 15.9 12.5 10.0

Broadcom BRCM $26.72 $13,796 1.7 1.5 1.2 9.1 9.7 9.5 2.0 1.7 1.3 22.5 18.2 15.0

Marvell MRVL $12.00 $5,396 1.4 1.5 1.4 9.5 13.9 13.4 1.5 1.5 1.4 15.9 11.1 10.3

Silicon Labs SLAB $40.22 $1,809 2.9 2.8 2.5 18.6 20.0 17.9 2.6 2.5 2.4 14.9 11.4 11.2

Median 2.5 2.5 2.3 17.4 16.5 15.8 2.4 2.5 2.4 16.0 12.1 13.0

Mean 3.0 2.9 2.5 16.4 18.0 16.0 2.7 2.6 2.2 17.7 14.3 14.1

RF Semiconductor Peers

Skyworks SWKS $25.78 $4,669 2.8 2.4 2.2 13.6 11.8 10.1 2.6 2.4 2.1 20.8 17.0 16.7

RFMD RFMD $5.25 $1,654 1.8 1.6 1.3 27.6 29.2 12.2 2.2 2.3 2.1 7.7 7.3 11.3

RDA RDA $14.85 $729 1.7 1.6 1.4 11.1 12.9 11.4 4.5 3.9 2.9 n.a. 54.0 43.3

Median 1.8 1.6 1.4 13.6 12.9 11.4 2.6 2.4 2.1 14.3 17.0 16.7

Mean 2.1 1.9 1.6 17.4 17.9 11.2 3.1 2.9 2.4 14.3 26.1 23.8

Median 2.1 1.9 1.4 15.8 15.7 13.4 2.6 2.5 2.2 16.0 15.5 15.0

Mean 2.6 2.4 2.1 16.9 17.6 14.7 2.9 2.8 2.3 16.7 18.2 17.0 Source: Company data, Bloomberg estimates for not covered companies, Credit Suisse estimates

Mediatek financials and operating metrics

Figure 33: Mediatek income statement in millions, unless otherwise stated Summary Income Statement 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13E 2011 2012 2013F 2014F 2015F

Net Sales 19,615 23,440 29,471 26,737 23,974 33,276 39,008 38,074 86,857 99,263 134,332 190,942 213,214

Sequential Change -13.3 19.5 25.7 -9.3 -10.3 38.8 17.2 -2.4

Y/Y Change -1.3 11.7 26.1 18.1 22.2 42.0 32.4 42.4 -23.5 14.3 35.3 42.1 11.7

Cost of Goods Sold 11,361 13,882 17,320 15,640 13,884 18,891 21,867 21,280 47,513 58,203 75,923 105,653 117,446

Gross Profits 8,254 9,558 12,151 11,097 10,090 14,385 17,141 16,793 39,344 41,060 58,409 85,289 95,768

Gross Margin 42.1 40.8 41.2 41.5 42.1 43.2 43.9 44.1 45.3 41.4 43.5 44.7 44.9

Operating Exp. Promotion 589 757 911 858 849 1,101 1,205 1,193 2,861 3,115 4,348 5,942 6,341

% of Sales 3.0 3.2 3.1 3.2 3.5 3.3 3.1 3.1 3.3 3.1 3.2 3.1 3.0

Operating Exp. Administrative 691 726 684 811 662 880 995 985 2,955 2,912 3,522 5,255 5,678

% of Sales 3.5 3.1 2.3 3.0 2.8 2.6 2.6 2.6 3.4 2.9 2.6 2.8 2.7

Operating Expense R&D 5,055 5,324 6,324 5,927 5,491 6,516 7,075 7,217 21,184 22,630 26,299 35,609 39,647

% of Sales 25.8 22.7 21.5 22.2 22.9 19.6 18.1 19.0 24.4 22.8 19.6 18.6 18.6

Total Operating Exp 6,335 6,807 7,919 7,596 7,003 8,497 9,275 9,395 26,999 28,657 34,169 46,806 51,666

Income from Operations 1,919 2,751 4,232 3,501 3,087 5,888 7,866 7,399 12,345 12,404 24,240 38,483 44,102

% of Sales 9.8 11.7 14.4 13.1 12.9 17.7 20.2 19.4 14.2 12.5 18.0 20.2 20.7

Non Operating Income 593 1,433 582 251 335 605 318 330 1,688 2,858 1,588 1,365 1,445

Net Investment Income/ (Loss) 60 54 290 818 500 650 851 754 170 1,223 2,755 381 200

Pretax Income 2,573 4,238 5,104 4,570 3,922 7,143 9,035 8,483 14,203 16,485 28,583 40,229 45,747

% of Sales 13.1 18.1 17.3 17.1 16.4 21.5 23.2 22.3 16.4 16.6 21.3 21.1 21.5

Income Taxes Exp. /(Gains) 98 565 187 91 186 427 619 551 587 941 1,784 3,226 3,623

Tax Rate 0.0 0.1 0.0 0.0 0.0 0.1 0.1 0.1 4.1 5.7 6.2 8.0 7.9

Net Income after Extraordinaries 2,477 3,683 4,927 4,496 3,741 6,723 8,428 7,943 13,623 15,583 26,836 37,051 42,172

% of Sales 12.6 15.7 16.7 16.8 15.6 20.2 21.6 20.9 15.7 15.7 20.0 19.4 19.8

Net EPS 2.17 3.23 3.97 3.37 2.79 5.01 6.28 5.92 12.52 12.85 20.00 24.00 27.00

Share Count (weighted) 1,140 1,140 1,240 1,333 1,340 1,342 1,342 1,342 1,088 1,213 1,342 1,544 1,562 Source: Company data, Credit Suisse estimates

[email protected] Bryan Ong 11/02/13 07:14:04 AM STATS ChipPAC Ltd.

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Figure 34: MediaTek—key operating metrics Revenue by product (NT$mn) 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13E 2011 2012 2013F 2014F 2015F

Handsets 11,067 14,019 19,303 17,030 14,177 20,255 24,460 23,332 59,512 61,419 82,223 99,199 119,326

DTV 3181 3,247 3,666 3,396 3435 4,087 4,646 4,789 10,722 13,490 16,957 42,272 41,653

PC Optical (traditional) 2,435 2,747 2,767 2,648 2,203 2,455 2,512 2,354 9,520 10,598 9,524 7,677 6,055

Blu-Ray Optical 207 222 239 222 200 246 279 274 1,076 891 999 1,043 939

DVD Player 516 582 689 615 500 550 561 466 2,866 2,401 2,077 1,536 1,157

Blu-Ray Player 227 256 303 328 282 337 434 411 1,294 1,114 1,465 1,645 1,787

WLAN (Ralink) 1,982 2,367 2,504 2,512 2,363 3,100 3,414 3,835 1,867 9,365 12,712 16,840 17,626

Total Revenue (NT$mn) 19615 23,440 29,471 26,752 23160 31,031 36,305 35,460 86,858 99,278 125,957 170,211 188,542

Handset Units (mn) 108 120 141 133 107 134 159 149 540 502 549 599 680

Handset ASPs (US$) 3.41 3.94 4.64 4.37 4.48 5.08 5.18 5.27 3.76 4.13 5.05 5.56 5.89

Handset Revenue (NT$mn) 11,067 14,019 19,303 17,030 14,177 20,255 24,460 23,332 59,512 61,419 82,223 99,199 119,326

2.5G units (mn - for all below) 98.3 99.3 102.3 92.0 72.2 81.5 92.0 82.8 518.5 391.9 328.5 278.3 207.3

WCDMA units 8.2 18.3 36.0 34.8 26.3 40.0 50.0 49.0 13.2 97.2 165.3 231.7 331.1

TD-SCDMA units 1.8 2.2 2.2 6.2 8.7 12.7 16.5 17.3 8.5 12.5 55.1 83.8 116.0

Feature phone units 98.3 99.3 102.3 92.0 72.2 81.5 92.0 82.8 530.2 391.9 328.5 283.3 232.5

Smartphone units 10.0 20.5 38.3 41.0 35.0 52.6 66.5 66.3 10.0 109.8 220.4 315.5 447.0

Tablet units 0.0 0.0 0.0 0.0 2.0 6.0 7.5 7.5 0.0 0.0 23.0 40.2 61.4

FX Rate (NT$/US$) 30.0 29.7 29.6 29.3 29.5 29.7 29.8 29.7 29.3 29.7 29.7 29.8 29.8 Source: Company data, Credit Suisse estimates

Figure 35: MediaTek—balance sheet summary NT$ mn 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13E 2011 2012 2013 2014 2015

Cash, Cash Equivalent 90,786 100,822 91,177 90,276 98,749 112,748 113,192 118,314 91,032 90,276 118,314 123,693 131,322

Inventories 9,853 11,074 12,091 13,867 12,844 10,956 12,938 13,993 9,392 13,867 13,993 22,890 24,589

Account receivables 7,372 7,659 8,216 6,585 6,795 10,389 11,059 13,352 7,384 6,585 13,352 17,727 19,085

Other current assets 4,434 4,759 6,379 7,343 5,377 7,008 6,104 5,958 4,234 7,343 5,958 7,910 8,516

Total current asset 112,445 124,314 117,863 118,071 123,766 141,102 143,293 151,616 112,042 118,071 151,616 172,221 183,512

LT investment 9,946 8,603 65,822 65,120 67,680 67,469 66,540 66,540 9,417 65,120 66,540 66,540 66,540

Fixed Assets 10,678 10,411 10,792 10,708 11,180 11,253 11,188 11,439 9,810 10,708 11,439 12,441 13,444

Intangible Assets 16,528 17,241 16,248 15,842 15,600 15,481 15,332 15,332 16,151 15,842 15,332 15,332 15,332

Other Assets 536 531 517 502 1,423 2,049 1,842 1,842 321 502 1,842 1,842 1,842

Total Non-Current Assets 37,688 36,786 93,379 92,172 95,884 96,251 94,902 95,153 35,699 92,172 95,153 96,155 97,158

Total assets 150,133 161,100 211,242 210,243 219,650 237,353 238,195 246,769 147,741 210,243 246,769 268,376 280,670

Accounts payable 8,204 10,280 12,054 9,047 7,373 10,873 12,520 12,184 9,022 9,047 12,184 15,946 17,129

Other current liabilities 15,426 25,475 14,302 14,916 15,058 29,871 18,690 18,242 17,299 14,916 18,242 24,220 26,076

Total current liabilities 31,121 47,979 36,887 32,873 35,246 56,858 50,970 50,187 30,428 32,873 50,187 59,926 62,964

Other LT liabilities 1,107 1,314 1,383 1,482 1,834 2,034 2,016 2,016 837 1,482 2,016 2,016 2,016

Total Long Term liabilities 1,245 1,446 1,505 1,595 1,943 2,143 2,125 2,125 985 1,595 2,125 2,125 2,125

Total Liabilities 32,366 49,425 38,392 34,469 37,188 59,001 53,095 52,312 31,413 34,469 52,312 62,051 65,089

Total Equity 117,719 111,636 172,818 175,740 182,438 178,315 185,057 194,414 116,278 175,740 194,414 206,282 215,537

Total Liabilities & Equity 150,133 161,100 211,242 210,243 219,650 237,353 238,195 246,769 147,741 210,243 246,769 268,376 280,670

Profitability Ratios 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13E 2011 2012 2013F 2014F 2015F

Return on Equity (ROE) 2.1 3.3 2.9 2.6 2.1 3.8 4.6 4.1 11.7 8.9 13.8 18.0 19.6

Return on Assets (ROA) 1.6 2.3 2.3 2.1 1.7 2.8 3.5 3.2 9.2 7.4 10.9 13.8 15.0

Return on Net Assets (RONA) 4.2 6.1 4.1 3.7 3.1 5.4 6.7 6.2 24.0 13.0 20.9 25.6 28.2

Return on Sales 12.6 15.7 16.7 16.8 15.6 20.2 21.6 20.9 15.7 15.7 20.0 19.4 19.8

Efficiency Ratios

Asset Turns (Annualized Sales / Assets) 0.5 0.6 0.6 0.5 0.4 0.6 0.7 0.6 0.6 0.5 0.5 0.7 0.8

Days sales outstanding (DSO) 34.3 29.8 25.4 22.5 25.9 28.5 25.9 32.0 31.0 24.2 36.3 33.9 32.7

Days of inventory 79.1 72.8 63.7 80.9 84.4 52.9 54.0 60.0 72.2 87.0 67.3 79.1 76.4

Cash conversion cycle 47.5 35.0 25.6 50.6 61.8 28.9 27.6 39.8 33.9 54.4 45.0 57.9 55.9

Working Capital -9,462 -24,487 -10,200 -5,078 -10,229 -28,504 -20,869 -16,884 -9,418 -5,078 -16,884 -11,398 -10,774

(Increase)/Decrease in working capital 44 15,025 (14,287) (5,122) 5,151 18,275 (7,635) (3,985) 4,154 (4,340) 11,806 (5,486) (624)

Per Share Values

Book Value per common share 103.29 97.95 139.37 131.84 136.15 132.87 137.90 144.87 106.89 144.87 144.92 133.61 137.98

Cash per common share 79.66 88.46 73.53 67.72 73.69 84.01 84.35 88.16 83.69 74.42 88.20 80.12 84.07

Net Cash per common share 72.96 77.62 64.94 60.95 64.05 71.93 69.54 73.36 79.77 66.98 73.38 67.25 71.35

[email protected] Bryan Ong 11/02/13 07:14:04 AM STATS ChipPAC Ltd.

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Companies Mentioned (Price as of 01-Nov-2013)

ARM Holdings (ARM.L, 985.5p) Acer Group (2353.TW, NT$18.95) Actions (ACTS.OQ, $2.43) Amazon com Inc. (AMZN.OQ, $364.03) Apple Inc (AAPL.OQ, $522.35) Asustek (2357.TW, NT$235.0) Broadcom Corp. (BRCM.OQ, $26.72) Hewlett Packard (HPQ.N, $24.37) HiSilicon (Unlisted) Huawei (002502.SZ, Rmb13.4) Imagination Technologies (IMG.L, 277.9p) Intel Corp. (INTC.OQ, $24.43) Lenovo Group Ltd (0992.HK, HK$8.44) Marvell Technology Group Ltd. (MRVL.OQ, $12.0) MediaTek Inc. (2454.TW, NT$404.5, OUTPERFORM, TP NT$480.0) QUALCOMM Inc. (QCOM.OQ, $69.47) RDA Microelectronics (RDA.OQ, $14.85) Realtek Semiconductor (2379.TW, NT$69.6) ST-Ericsson (Unlisted) Samsung Electronics (005930.KS, W1,500,000) Sony (6758.T, ¥1,668) Spreadtrum Communication (SPRD.OQ, $30.41) Sunny Optical Technology Group Co., Limited (2382.HK, HK$7.49) TCL Corp. (000100.SZ, Rmb2.43) Taiwan Semiconductor Manufacturing (2330.TW, NT$109.5) ZTE Corporation (0763.HK, HK$16.54)

Disclosure Appendix

Important Global Disclosures

I, Randy Abrams, CFA, certify that (1) the views expressed in this report accurately reflect my personal views about all of the subject companies and securities and (2) no part of my compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report.

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

2454.TW Closing Price Target Price

Date (NT$) (NT$) Rating

02-Nov-10 387.50 350.00 U

08-Mar-11 341.00 315.00

19-Apr-11 309.00 295.00

02-May-11 316.50 315.00 N

23-May-11 310.00 300.00

07-Jun-11 313.50 280.00 U

28-Jul-11 266.00 255.00

07-Sep-11 282.50 260.00

31-Oct-11 318.00 306.00

06-Jan-12 278.50 270.00

04-Apr-12 277.00 300.00 N

30-Apr-12 253.00 260.00

25-Jun-12 280.50 300.00

29-Jun-12 273.00 R

27-Jun-13 328.00 400.00 O

09-Sep-13 370.00 440.00

* Asterisk signifies initiation or assumption of coverage.

U N D ERPERFO RM

N EU T RA L

REST RICT ED

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.

[email protected] Bryan Ong 11/02/13 07:14:04 AM STATS ChipPAC Ltd.

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*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 attractiv e, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. As of 2nd October 2012, U.S. and Canadian as well as European ra tings 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 Ame rican and non-Japan Asia stocks, ratings are based on a stock’s total return relative to the average total return of the relevant country or regional benchmark; Australia, New Zealand are, and prior to 2nd October 2012 U.S. and Canadian ratings were based on (1) a stock’s absolute total return potential to its cur rent share price and (2) the relative attractiveness of a stock’s total return potential within an analyst’s coverage universe. For Australian and New Zealand stocks, 12 -month rolling yield is incorporated in the absolute total return calculation and a 15% and a 7.5% threshold replace the 10-15% level in the Outperform and Underperform stock rating definitions, respectively. The 15% and 7.5% thresholds replace the +10-15% and -10-15% levels in the Neutral stock rating definition, respectively. Prior to 10th December 2012, Japanese ratings were based on a stock’s total return relative to the average total return of the relevant country or regional benchmark.

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.

Volatility Indicator [V] : A stock is defined as volatile if the stock price has moved up or down by 20% or more in a month in at least 8 of the past 24 months or the analyst expects significant volatility going forward.

Analysts’ sector weightings are distinct from analysts’ stock ratings and are based on the analyst’s expectations for the fundamentals and/or valuation of the sector* relative to the group’s historic fundamentals and/or valuation:

Overweight : The analyst’s expectation for the sector’s fundamentals and/or valuation is favorable over the next 12 months.

Market Weight : The analyst’s expectation for the sector’s fundamentals and/or valuation is neutral over the next 12 months.

Underweight : The analyst’s expectation for the sector’s fundamentals and/or valuation is cautious over the next 12 months.

*An analyst’s coverage sector consists of all companies covered by the analyst within the relevant sector. An analyst may cover multiple sectors.

Credit Suisse's distribution of stock ratings (and banking clients) is:

Global Ratings Distribution

Rating Versus universe (%) Of which banking clients (%)

Outperform/Buy* 42% (55% banking clients)

Neutral/Hold* 41% (49% banking clients)

Underperform/Sell* 15% (40% banking clients)

Restricted 3%

*For purposes of the NYSE and NASD ratings distribution d isclosure 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 holdin gs, and other individual factors.

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Price Target: (12 months) for MediaTek Inc. (2454.TW)

Method: Our target price of NT$480 for MediaTek is based on a P/E (price-to-earnings) of 20x 2014E EPS of NT$24 (earnings per share), due to leading position in EM smartphones, growth into TD-SCDMA and tablets, LTE and octa-core launching by end 2013, and operating leverage.

Risk: Risks that could impede achievement of our NT$480 target price for Mediatek include: (1) share price volatility and potential downside from inventory and demand swings at its emerging market customer base; (2) competition pressuring pricing and margins more than expected; and (3) local news and market commentary swinging sentiment, typical for a stock with high retail interest in the Taiwan market.

Please refer to the firm's disclosure website at https://rave.credit-suisse.com/disclosures for the definitions of abbreviations typically used in the target price method and risk sections.

See the Companies Mentioned section for full company names

The subject company (2454.TW, MRVL.OQ, 2330.TW, INTC.OQ, 005930.KS, AAPL.OQ, AMZN.OQ, HPQ.N) currently is, or was during the 12-month period preceding the date of distribution of this report, a client of Credit Suisse.

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Credit Suisse provided investment banking services to the subject company (2454.TW, MRVL.OQ, INTC.OQ, 005930.KS, AMZN.OQ, HPQ.N) within the past 12 months.

Credit Suisse provided non-investment banking services to the subject company (INTC.OQ, 005930.KS, AAPL.OQ, HPQ.N) within the past 12 months

Credit Suisse has received investment banking related compensation from the subject company (2454.TW, MRVL.OQ, INTC.OQ, 005930.KS, AMZN.OQ, HPQ.N) within the past 12 months

Credit Suisse expects to receive or intends to seek investment banking related compensation from the subject company (2454.TW, MRVL.OQ, 2382.HK, INTC.OQ, 005930.KS, AAPL.OQ, AMZN.OQ, HPQ.N) within the next 3 months.

Credit Suisse has received compensation for products and services other than investment banking services from the subject company (INTC.OQ, 005930.KS, AAPL.OQ, HPQ.N) within the past 12 months

As of the date of this report, Credit Suisse makes a market in the following subject companies (MRVL.OQ, INTC.OQ, AAPL.OQ, AMZN.OQ, HPQ.N).

As of the end of the preceding month, Credit Suisse beneficially own 1% or more of a class of common equity securities of (2454.TW, MRVL.OQ, 2330.TW, 2379.TW).

Credit Suisse has a material conflict of interest with the subject company (2330.TW) . Credit Suisse is acting as the financial advisor to Motech Industries Inc in relation to the share subscription by Taiwan Semiconductor Manufacturing Co., Ltd.

As of the date of this report, an analyst involved in the preparation of this report has the following material conflict of interest with the subject company (AAPL.OQ). A Credit Suisse analyst involved in the preparation of this report has a long position in the common stock of AAPL.

Important Regional Disclosures

Singapore recipients should contact Credit Suisse AG, Singapore Branch for any matters arising from this research report.

The analyst(s) involved in the preparation of this report have not visited the material operations of the subject company (2454.TW, MRVL.OQ, ARM.L, 2382.HK, 2330.TW, 2379.TW, INTC.OQ, 005930.KS, AAPL.OQ, AMZN.OQ, HPQ.N) within the past 12 months

An analyst involved in the preparation of this report has visited certain material operations of the subject company (AAPL.OQ) within the past 12 months

The travel expenses of the analyst in connection with such visits were not paid or reimbursed by the subject company, other than de minimus local travel expenses.

Restrictions on certain Canadian securities are indicated by the following abbreviations: NVS--Non-Voting shares; RVS--Restricted Voting Shares; SVS--Subordinate Voting Shares.

Individuals receiving this report from a Canadian investment dealer that is not affiliated with Credit Suisse should be advised that this report may not contain regulatory disclosures the non-affiliated Canadian investment dealer would be required to make if this were its own report.

For Credit Suisse Securities (Canada), Inc.'s policies and procedures regarding the dissemination of equity research, please visit http://www.csfb.com/legal_terms/canada_research_policy.shtml.

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 (INTC.OQ, HPQ.N) within the past 3 years.

As of the date of this report, Credit Suisse acts as a market maker or liquidity provider in the equities securities that are the subject of this report.

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Taiwanese Disclosures: This research report is for reference only. Investors should carefully consider their own investment risk. Investment results are the responsibility of the individual investor. Reports may not be reprinted without permission of CS. Reports written by Taiwan based analysts on non-Taiwan listed companies are not considered recommendations to buy or sell securities under Taiwan Stock Exchange Operational Regulations Governing Securities Firms Recommending Trades in Securities to Customers.

To the extent this is a report authored in whole or in part by a non-U.S. analyst and is made available in the U.S., the following are important disclosures regarding any non-U.S. analyst contributors: The non-U.S. research analysts listed below (if any) are not registered/qualified as research analysts with FINRA. The non-U.S. research analysts listed below may not be associated persons of CSSU and therefore may not be subject to the NASD Rule 2711 and NYSE Rule 472 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.

Credit Suisse AG, Taipei Securities Branch ............................................................................................................................ Randy Abrams, CFA

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.

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