July 19, 2011Asia Pacific: Technology: Semiconductors                                                                     ...
July 19, 2011                                                                              Asia Pacific: Technology: Semic...
July 19, 2011                                                                                                             ...
July 19, 2011                                                                                                             ...
July 19, 2011                                                                                                       Asia P...
July 19, 2011                                                                                                             ...
July 19, 2011                                                                                                             ...
July 19, 2011                                                                                                       Asia P...
July 19, 2011                                                                                                    Asia Paci...
July 19, 2011                                                                                                     Asia Pac...
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半導體0719

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半導體0719

  1. 1. July 19, 2011Asia Pacific: Technology: Semiconductors Equity ResearchAnother inventory correction: 3Q down, 4Q up; Buy TSMC (on CL)3Q outlook: Wafer -10% qoq, but packaging and semi up qoq OUR ASIA-PAC SEMI COVERAGEWe now estimate TSMC/UMC revenues to decline 6.5%/12% qoq in 3Q11, dueto the recent order cuts across nearly all applications. Further, semi packaging Upside/downside Stock & Ticker Rating 12m TP Price potentialorders have also weakened, but shipment is still tracking up 5% qoq in 3Q, TSMC (2330.TW) Buy* NT$90 NT$70.7 27.3% TSMC ADS (TSM) Buy* US$15 US$12.2 23.0%consistent with semi industry leader Fairchild’s 3Q guidance. For Mediatek and UMC (2303.TW) Neutral NT$14.9 NT$13.8 8.0% UMC ADS (UMC) Sell US$2.6 US$2.4 8.3%MStar, we expect rev to increase 12%-15% qoq with stable margins in 3Q11, Mediatek (2454.TW) Neutral NT$290 NT$258 12.4% MStar (3697.TW) Buy NT$250 NT$157 59.2%partially due to handset inventory restocking among Chinese handset makers.Meanwhile, our Asia-Pacific tech hardware team estimates about 15% qoq Note: *denotes stock is on our regional Conviction List. Stock prices are as of the market close of July 14, 2011.increase in most PC OEMs orders in 3Q11. In terms of visibility, PC OEM/semipackaging companies expect improving clarity in Aug/Sept. We revise our For important disclosures, please go to http://www.gs.com/research/hedge.html.2011E-2013E EPS for our coverage by -27.3% to +1.8% to reflect inventory Source: Datastream, Gao Hua Securities Researchcorrection, competition. Consequently, we lower our 12-m TPs by up to -14%. estimates. UPCOMING EVENTSInventory correction to end in 3Q; demand to pick up in 4QWe attribute the inventory correction in 3Q11 to overstocking post the Japan CY2Q11 result reporting schedule Company Name Ticker Dateearthquake, soft demand, and macro concerns leading to minimal inventory. TSMC 2330.TW Thursday, July 28 UMC 2303.TW Wednesday, August 3On a positive note, downstream is trending much better than upstream— Mediatek 2454.TW Wednesday, July 27indicating effective inventory clearing—Chinese handset makers have started MStar 3697.TW Early Augustto re-stock; Nokia component order should recover in late 3Q11 based on our Source: Company datasupply chain checks; and CNY is early in 2012 (late January).Maintain Buy (on CL) on TSMCWe note that TSMC outperformed when its utilization was low (as seensince late-April, TSMC +2% (incl. cash div) vs. TAIEX -6%). We expectTSMC’s capex to decrease from US$7.8 bn/US$6.5 bn to US$6.9 bn/US$6bn in 2011E/2012E given the inventory correction, potentially alleviatingmarket concerns over excess foundry capacity. We think TSMC’s 28 nmcapacity is on track to reach 10K WPM by end of 2011 for the next wave ofmobile computing and arrival of ARM-CPU. In our view, TSMC’s upcoming3Q guidance should help remove uncertainty over the demand outlook.Mediatek: Muted seasonal growth in 3Q11; maintain NeutralOur supply chain checks indicate healthy demand for 6252 (low-cost SOC) and6236 (EDGE smart feature phone), while 6253 is being potentially phased out.We expect Mediatek’s rev to increase 14% qoq in 3Q11 due to seasonality anda lacklustre 2Q. Mediatek has recently cut 6252/6253 prices, but its overall ASP,margin should remain stable due to increasing share of 6236 in the mix.Donald Lu, Ph.D Goldman Sachs does and seeks to do business with+86(10)6627-3123 donald.lu@ghsl.cn Beijing Gao Hua Securities Company LimitedLingling Hu companies covered in its research reports. As a result,+86(10)6627-3520 lingling.hu@ghsl.cn Beijing Gao Hua Securities Company Limited investors should be aware that the firm may have a conflict ofEvan Xu interest that could affect the objectivity of this report. Investors+86(10)6627-3176 evan.xu@ghsl.cn Beijing Gao Hua Securities Company Limited should consider this report as only a single factor in making their investment decision. For Reg AC see the end of the text. For other important disclosures, see the Disclosure Appendix, or go to www.gs.com/research/hedge.html. Analysts employed by non-US affiliates are not registered/qualified as research analysts with FINRA in the U.S.The Goldman Sachs Group, Inc. Global Investment Research
  2. 2. July 19, 2011 Asia Pacific: Technology: Semiconductors TSMC (2330.TW, Buy, on Conviction List) TSMC reported in-line 2Q11 sales of NT$110.5 bn (+4.9% qoq, +5.3% yoy), nearly reaching the high end of its guidance of NT$109-$111 bn. We expect TSMC to meet its margin guidance in 2Q11, as well. We estimate TSMC’s rev to decline 6.5% qoq in 3Q11 due to recent order cut across nearly all applications based on our industry checks. Therefore, we now forecast TSMC’s utilization rate to decline from 100% in 1Q11 to 98%/87% in 2Q11/3Q11, respectively. We attribute the 3Q weakness to inventory clearing after the restocking post the Japan earthquake, softening demand especially in Europe, and concerns over deteriorating economic growth leading to minimal inventory. In 3Q11, we expect foundry rev correction of 10% qoq vs. packaging (up 5% qoq), Mediatek and MStar (up 10%+ qoq), and most PC OEM’s current PC orders (up 15%-20% qoq). We believe this inventory correction is a typical pattern in the semiconductor supply chain. We still expect the correction to end mostly in 3Q11 and foundry wafer shipment to increase qoq in 4Q11 despite a weaker-than-expected 3Q11 for five reasons: (1) Most Chinese handset makers have cleared their excess inventory in 2Q11 so that their demand should increase almost seasonally in 3Q and 4Q11; (2) Nokia’s inventory correction should complete mostly in 3Q11 based on our supply chain checks and Nokia demand should normalize in 4Q11; (3) potential iPhone 5 introduction may stimulate iPhone replacement demand; (4) Our Asia-Pacific tech hardware team has recently indicated that PC ODM shipment is above expectations in 2Q11 and most PC OEMs (except Acer) expect 15%-20% qoq growth in PC orders in 3Q11; and (5) wafer inventory clearing seems decisive in 3Q11 on the aforementioned pattern of bifurcation of 3Q growth between upstream and downstream companies. We expect TSMC capex to decrease from US$7.8 bn/US$6.5 bn to US$6.9 bn/US$6 bn in 2011E/2012E, respectively given the inventory correction, alleviating some market concerns of foundry excess capacity. We note that GlobalFoundries (GF) has recently had a senior management restructuring partially due to weak execution in R&D, 32 nm yield, and 28 nm qualification. In addition, SMIC announced on July 18 that its COO has been promoted as SMIC’s chairman, Executive Director and acting CEO with effect from July 15. In our view, these recent management issues at GF and SMIC may result in reducing the effectiveness of capex, potentially alleviating concerns over excess supply in the near term. Furthermore, our new capex assumptions indicate TSMC’s depreciation increasing 30% in 2011E (which could be a cause for market concern) would decline to 5.5% in 2012E. We view 28nm dominance, mobile computing for smartphone and tablet, and ARM-based CPU for PC as TSMC’s major growth drivers in 2012E-2013E. We think TSMC’s 28nm capacity is on track to reach 10K WPM by end of 2011 for the next wave of mobile computing and arrival of ARM-CPU. In our view, GF or Samsung not having any significant foundry design-wins at 28nm may be partially due to their choice of gate-first technology. We expect 28nm to be TSMC’s fastest ramping node and believe that 28nm should generate healthier returns than 40nm node. Historically, we note that TSMC’s stock troughed at the beginning of each inventory correction and outperformed when its utilization was low (since late April, TSMC +2% (incl. cash div of NT$3 per share) vs. TAIEX -6%). The stock outperformed TAIEX from September 2008 to March 2009 when utilization rate had troughed (see Exhibit 2). In our view, TSMC’s upcoming 3Q guidance should help remove the uncertainty over the demand outlook. We revised our 2011E-2013E EPS by -6.3% to +1.8% to reflect inventory correction. Consequently, we lower our 12-month P/E-based TP for TSMC/ADS by 1% to NT$90/US$15. Key risks include USD depreciation.Goldman Sachs Global Investment Research 2
  3. 3. July 19, 2011 Asia Pacific: Technology: Semiconductors Exhibit 1: We revise down our EPS for 3Q11E by 14.6% due to worse-than-expected inventory correction TSMC estimates revisions TSMC 3Q2011E 2011E 2012E 2013E New Old Diff. New Old Diff. New Old Diff. New Old Diff. Revenue (NT$ mn) 103,266 112,794 -8.4% 430,781 449,011 -4.1% 499,513 529,289 -5.6% 560,010 573,321 -2.3% Gross margin (%) 43.0% 45.0% -197bps 45.9% 46.6% -67bps 47.4% 46.4% 99bps 45.6% 43.7% 188bps Operating margin (%) 30.2% 33.3% -305bps 33.8% 35.0% -116bps 35.7% 35.4% 33bps 34.1% 32.5% 161bps Net margin (%) 28.1% 30.1% -204bps 31.0% 31.7% -74bps 31.8% 31.4% 34bps 30.1% 28.9% 121bps EPS (NT$)-local $1.12 1.31 -14.6% 5.15 5.49 -6.3% 6.12 6.42 -4.6% $6.50 6.38 1.8% Source: Goldman Sachs Research estimates. Exhibit 2: We note that TSMC stock has generally troughed at the beginning of the first quarter of declining utilization TSMC stock price vs. utilization rate 120% 90 TSMC Quarterly Utilization Rate (LHS) TSMC Stock Price (RHS) 110% 80 100% 70 90% 60 Close Price (NT$) Utilization rate 80% 50 70% 40 60% 30 50% 20 40% 30% 10 20% 0 Jan-94 Nov-94 Jan-97 May-98 Sep-99 Jun-01 Jan-04 May-05 Sep-06 Feb-07 Jan-08 Nov-08 May-09 Jun-94 Aug-96 Jul-97 Feb-00 Jan-01 Nov-01 Aug-03 Jul-04 Aug-07 Jun-08 Dec-11 Mar-96 Dec-97 Jul-00 Mar-03 Dec-04 Aug-10 Feb-11 Apr-95 Oct-95 Oct-98 Apr-99 Apr-02 Oct-02 Oct-05 Apr-06 Oct-09 Mar-10 Jul-11 Source: Datastream, company data, Goldman Sachs Research estimates. Exhibit 3: We also note that TSMC’s stock outperformed when its utilization was low and underperformed when it reached 100% TSMC relative performance vs. utilization rate 120% 4.5 TSMC Quarterly Utilization Rate (LHS) TSMC relative performance to TWSE index (RHS) 110% 4.0 100% 3.5 90% Relative performance 3.0 Utilization rate 80% 2.5 70% 2.0 60% 1.5 50% 1.0 40% 30% 0.5 20% 0.0 Nov-94 Nov-08 Jan-94 Aug-96 Jan-97 May-98 Sep-99 Jun-01 Aug-03 Jan-04 May-05 Sep-06 Feb-07 Aug-07 Jan-08 May-09 Nov-01 Jun-94 Jul-97 Feb-00 Jan-01 Jul-04 Jun-08 Dec-11 Mar-96 Dec-97 Jul-00 Mar-03 Dec-04 Aug-10 Feb-11 Apr-95 Oct-95 Oct-98 Apr-99 Apr-02 Oct-02 Oct-05 Apr-06 Oct-09 Mar-10 Jul-11 Source: Datastream, company data, Goldman Sachs Research estimates.Goldman Sachs Global Investment Research 3
  4. 4. July 19, 2011 Asia Pacific: Technology: Semiconductors UMC (2303.TW, Neutral) UMC reported 2Q11 parent sales of NT$28.15 bn (+0.1% qoq, -5.4% yoy), slightly above GS forecast of NT$27.67 bn (-1.6% qoq, -7% yoy) and met company’s guidance of a flattish quarter during the 1Q11 earnings release. We expect UMC’s 2Q GPM to be largely in line with guidance at low-mid 20% and utilization rate at around 85% with 8” slightly higher than 12”. UMC is holding a conservative view about the 3Q11 outlook and has indicated that growth in 3Q is not likely to match the seasonal level due to macro slowdown concerns. The company noted that overall demand has not been strong since 2Q—relatively stable for STB, Digital TV, and handset components, but ODD is showing slowdown during the past few weeks. Communication (Baseband, Broadband, wireless infrastructure) demand is weak as well. We estimate UMC’s 3Q revenue to decline 12% qoq, partially due to its large exposure to Nokia. The company indicated that ASP for 65nm and above has been under pressure as the customers have more bargain power, while ASP of 40nm is relatively stable. So far, UMC has 45 tape-outs in 40nm, 22 in production and 16 customers. The company maintains its guidance that 40nm would account for 10% of total revenue in 2H11. Besides, UMC expects pilot production for one client in 28nm in 3Q11. We estimate that UMC would recognize higher non-operating income in 3Q due to the dividend income from its non-core holdings in Farady, SiS, and Novatek, etc. We are also reducing our capex estimates from US$1.8 bn/US$1.2 bn to US$1.5 bn/US$800 mn at UMC in 2011E and 2012E, respectively given the inventory correction. UMC has higher leverage than TSMC and has generally lost market share to TSMC when the industry saw a correction in inventory. We expect UMC’s stock to be lacklustre as the demand outlook remains uncertain and would await their 3Q guidance in late July/early August. In near term, we think the stock may see some weakness during the earnings season. We lower our 2011E-2013E EPS by 2%-27% to reflect inventory correction and market share loss. Consequently, we lower our 12-month P/B-based TP by 1% to NT$14.9. Risks: Upside - strong IDM outsourcing; downside – market share loss in 40nm and 28nm. Exhibit 4: We cut our estimates to reflect the demand and ASP pressures UMC estimates revisions UMC 3Q2011E 2011E 2012E 2013E New Old Diff. New Old Diff. New Old Diff. New Old Diff. Revenue (NT$ mn) 24,688 28,675 -13.9% 107,789 115,635 -6.8% 119,687 131,572 -9.0% 128,310 136,316 -5.9% Gross margin (%) 14.4% 22.3% -798bps 20.9% 24.6% -371bps 21.7% 23.8% -207bps 21.7% 21.7% 0bps Net margin (%) 8.6% 12.9% -430bps 10.4% 13.3% -293bps 10.7% 12.5% -179bps 10.6% 10.2% 44bps EPS (NT$)-local 0.17 0.30 -42.6% 0.90 1.23 -27.3% 1.03 1.33 -22.1% 1.10 1.12 -2.0% Wafer Shipment (K unit 1,004 1,131 -11.2% 4,339 4,582 -5.3% 4,812 5,239 -8.1% 5,319 5,609 -5.2% Utilization rate 74.7% 84.2% -946bps 82.4% 86.9% -455bps 86.8% 93.4% -654bps 91.9% 95.1% -324bps Source: Goldman Sachs Research estimates. Mediatek (2454.TW, Neutral) Mediatek released June quarter sales of NT$20.96 bn (+5.5% qoq, -30% yoy), in line with our estimate of NT$20.8 bn (+4.7% qoq, -30.6% yoy), at the low end of its guidance of NT$20.9bn-22.3bn. Our supply chain checks indicate that demand for 6252 (low cost SOC) and 6236 (EDGE smart feature phone solution) has been healthy, while 6253 is beingGoldman Sachs Global Investment Research 4
  5. 5. July 19, 2011 Asia Pacific: Technology: Semiconductors potentially phased out. We believe demand should improve significantly qoq in 3Q11 due to seasonal demand and a low base in 2Q11 when the industry had liquidated inventory and went through restructuring. Mediatek also recently cut prices on 6252 and 6253 to compete with Spreadtrum and MStar. But, we expect its overall handset ASP and margins to remain stable due to increasing higher-ASP 6235/6236 in the product mix. Mediatek indicated that the mix of 6235/6236 should increase from 15% in 1Q11 to 20% in 2Q11. We forecast Mediatek 3Q rev to increase 14% qoq in 3Q11. Mediatek sampled the second smartphone platform (HSUPA, 3.75G, 650MHz processor) with several clients in the second quarter and indicated that the customers may launch products in the near term at the earliest. This second platform is based on Android 2.3 OS. The company noted that it has shipped less than 2 mn smartphone so far in 2011, but maintained its full year target of 10 mn smartphones, implying a back-end loaded year. Mediatek also expects to ship 10mn WCDMA feature phones and 12mn TD chips. Besides, the company is positive on the TV SOC market and expects it to be the highest growth segment this year with a stable ASP outlook. On July 13, Mediatek announced a new share buyback program of 8mn shares (0.73% of its outstanding shares) at the price range of NT$247-371 within two months till Sep 13. Mediatek shares have contracted significantly post its cash div ex-date. We believe that its 3Q guidance and share buyback should help stabilize the share price near-term. However, the growth outlook of its 3G smartphone remains challenging due to Qualcomm’s intensifying competition. Unless its smart feature phone shipment could reach 30%-40% of product mix in the next 12 months, trading at 19X NTM consensus P/E, Mediatek’s valuation appear to lackluster (sector at 13.5X 2011E P/E), in our view. We maintain our Neutral rating. We lower our 2011E-2013E EPS by 2%-7% to reflect increasing competition. Consequently, we lower our 12-month P/E-based TP by 5% to NT$290. Key Risks: upside – fast smartphone adoption in emerging countries; downside – intensifying 2G competition. Exhibit 5: We lower our estimates due to weak demand in low-end feature phones and ASP pressure due to competition Mediatek estimates revisions Mediatek estimates 3Q2011E 2011E 2012E 2013E (GAAP) New Old Diff. New Old Diff. New Old Diff. New Old Diff. Revenue (NT$ mn) 23,900 24,863 -3.9% 89,221 90,680 -1.6% 102,491 106,641 -3.9% 106,448 110,740 -3.9% Gross margin (%) 46.8% 47.1% -102bps 46.6% 47.1% -50bps 47.4% 48.9% -146bps 47.4% 48.9% -149bps Operating margin (%) 19.3% 19.6% -340bps 17.8% 18.2% -45bps 20.7% 21.9% -124bps 21.3% 22.6% -127bps Net margin (%) 19.3% 19.6% -321bps 18.1% 18.5% -42bps 19.8% 21.0% -113bps 20.3% 21.5% -114bps EPS (NT$) 4.25 4.41 -3.8% 14.89 15.24 -2.3% 18.74 20.12 -6.9% 19.95 21.22 -6.0% Source: Goldman Sachs Research estimates. MStar (3697.TW, Buy) MStar’s 2Q11 sales stood at NT$8.35 bn (+1.8% qoq, +8.9% yoy), in line with our estimate of NT$8.3bn (+1% qoq, +8% yoy), reaching the mid range of its revenue guidance of NT$8.07bn-8.55bn. MStar indicated that its orders have been within expectations and stable in the past two weeks. The company indicated that 3Q is normally a seasonally high growth quarter, and expects to outperform the industry growth average with stable margins. We note that the European TV market has been muted and expect MStar’s 3Q rev to increase 12% qoq vs up 23% qoq in 3Q10.Goldman Sachs Global Investment Research 5
  6. 6. July 19, 2011 Asia Pacific: Technology: Semiconductors For the TV business, MStar indicated that its market share has increased among Japanese brands, and remained stable at domestic Chinese TV brands and LG. Meanwhile, our supply chain checks indicate that Novatek may have potentially secured Samsung’s (one of MStar’s customers) TV orders, but this appears to have largely come at the expense of Trident. MStar expects its overall TV market share to remain stable in 2011-2012. Our channel checks indicate that MStar is making progress in the handset market. Some of its major customers are ramping up volumes after testing its mid-range solutions for several months. We forecast MStar to ship 12 mn chipsets in 3Q11. MStar noted that handset shipment was up 30%-50% qoq in 2Q11, same as 1Q11, and expects the momentum to continue throughout 2011. According to the company, handset ICs contributed more than 5% of total revenue in 1H11 and is targeted to reach double digit revenue share for this year. MStar sampled TD IC with clients in 2Q11 and expects mass production in 4Q11 or early next year. The company also noted the expansion of its handset business in the emerging markets such as in India, where the number of customers increased significantly. Currently more than 50% of its handset shipment is for markets outside of China. MStar aims to sample its smartphone IC in 4Q11. But we believe that MStar’s handset cost is not competitive with that of Mediatek and so a fast handset volume ramp up could potentially have negative impact on margins. We lower our handset shipment forecasts from 45mn/120mn to 44mn/88mn in 2011E and 2012E, respectively. MStar announced another share buyback plan for 6mn shares till the end of July after it bought back 4mn during the last round from Jan 24 to Mar 18. It has completed 3.86mn out of the 6mn shares by June 24. We note that 40% of its shares were locked up immediately after its IPO in Dec 2010, of which 15% were unlocked 3 months post IPO in late March 2011 (among which 7%-8% were MStar employee shares). Around 10% is held by management and locked for two years. The rest 15% are held by institutional and other investors and would gradually unlocked through 3 months to 2 years post IPO. Upon its initial listing, employee shares accounted for about 50% of its total shares (10%-15% were locked up) and currently employees hold about 40% of the stake (10% is locked up). The company noted that it has not seen any significant shareholding changes yet. Despite our earnings cut, we maintain Buy on MStar based on its high ROE and healthy new product portfolio. We lower our 2011E-2013E EPS by 4%-13% to reflect slower-than- expected ramp up in handset segment. Consequently, we lower our 12-month TP by 14% to NT$250. Our TP is based on 14X NTM P/E, down from 16.5X as we estimate lower earnings growth CAGR (19% vs. previously 24%) for 2011E-2013E. Key risks include slower than expected volume ramp up in the handset market. Exhibit 6: We cut our MStar estimates due to its slower than expected ramp up in handsets segment MStar estimates revisions MStar estimates 3Q2011E 2011E 2012E 2013E New Old Diff. New Old Diff. New Old Diff. New Old Diff. Revenue (NT$ mn) 9,332 9,561 -2.4% 35,976 38,150 -5.7% 42,550 48,017 -11.4% 46,501 54,899 -15.3% Gross margin 41.7% 41.6% 0.1% 41.6% 41.6% 0.0% 41.8% 41.5% 0.3% 42.0% 41.7% 0.3% Operating margin 19.8% 19.7% 0.1% 19.8% 19.9% -0.1% 21.4% 21.1% 0.2% 21.7% 21.5% 0.2% Net margin 19.7% 18.8% 0.9% 19.7% 19.1% 0.5% 21.1% 20.2% 1.0% 21.4% 20.5% 0.9% Diluted EPS (NT$) 3.81 3.73 2.3% 14.58 15.12 -3.5% 18.47 19.96 -7.4% 20.15 23.05 -12.6% Diluted share account (mn) 483 483 0.0% 485 483 0.5% 487 485 0.3% 495 488 1.4% Source: Goldman Sachs Research estimates.Goldman Sachs Global Investment Research 6
  7. 7. July 19, 2011 Asia Pacific: Technology: SemiconductorsExhibit 7: Comp table of our semi coverage 12 month Market GH calendar Consensus calendar GH/Consensus GH/Consensus GH/Consensus Stock Stock 7/14/11 Target cap EPS estimates EPS estimates P/E (X) EV/EBITDA (X) ROE (%) P/B (X)Company name ticker rating price price (US$bn) 2010 2011E 2012E 2010 2011E 2012E 2010 2011E 2012E 2011E 2010 2011E 2012E 2011ETSMC (NT$) 2330.TW Buy* 70.7 90.0 63.57 6.24 5.15 6.12 6.24 6.13 6.62 11.3 13.7 11.5 6.5 30% 22% 24% 3.0TSM (US$) TSM Buy* 12.2 15.0 62.97 0.99 0.88 1.02 1.08 1.06 1.15 12.3 13.8 11.9 6.4 30% 22% 24% 3.0UMC (NT$) 2303.TW Neutral 13.8 14.9 6.20 1.91 0.90 1.03 1.68 1.48 1.66 7.2 15.3 13.3 3.5 11% 5% 6% 0.9UMC (US$) UMC Sell 2.4 2.6 6.23 0.31 0.15 0.17 0.29 0.26 0.29 7.8 15.5 13.9 3.5 11% 5% 6% 0.9SMIC (US$) SMI NC 3.9 N.A. 2.15 -0.17 0.17 0.24 N.M. 23.1 16.3 4.4 -4% 1% 2% 0.9SMIC (HK$) 0981.HK NC 0.6 N.A. 2.22 -0.03 0.03 0.04 N.M. 23.8 16.8 4.5 -4% 1% 2% 0.9Average 9.3 17.4 13.7 4.8 12% 10% 11% 1.6Median 9.3 15.3 13.3 4.4 11% 5% 6% 0.9GS/GH Fabless Comp Sheet 12 month Market GS/GH CY/FY Consensus CY/FY GS/GH/Consensus GS/GH/Consensus GS/GH/Consensus GS/GH/Consensus Stock Stock 7/14/11 Target cap EPS estimates EPS estimates P/E (X) EV/EBITDA (X) ROE (%) P/B (X) Company name ticker rating price price (US$bn) 2010 2011E 2012E 2010 2011E 2012E 2010 2011E 2012E 2011E 2010 2011E 2012E 2011E MediaTek (NT$) 2454.TW Neutral 258.0 290.0 9.8 28.44 14.89 18.74 29.84 17.35 21.24 9.1 17.3 13.8 11.2 28% 15% 18% 2.7 MStar (NT$) 3697.TW Buy 157.0 250.0 2.6 13.47 14.58 18.47 14.63 16.54 19.87 11.7 10.8 8.5 6.3 27% 22% 26% 2.3 RealTek (NT$) 2379.TW NC 49.7 N.A. 0.8 N.A. N.A. N.A. 4.03 4.65 6.18 12.3 10.7 8.0 4.2 11% 13% 16% 1.3 Broadcom (US$) BRCM Buy 32.9 48.0 15.9 2.24 2.10 2.50 2.71 2.93 3.12 14.7 15.7 13.2 10.7 25% 19% 20% 2.4 Marvell (US$) MRVL Neutral 14.7 18.0 9.0 0.78 1.46 1.40 1.65 1.71 1.82 18.7 10.1 10.5 6.7 12% 20% 16% 1.6 Qualcomm(US$) QCOM Buy* 54.9 68.0 91.7 2.03 2.67 3.18 2.77 3.05 3.10 27.1 20.6 17.3 14.0 16% 19% 19% 3.5 SPRD (US$) SPRD NC 15.7 N.A. 0.8 N.A. N.A. N.A. 1.23 1.63 1.63 12.8 9.6 9.6 8.6 42% 36% 36% 4.4 Average 15.2 13.5 11.6 8.8 23% 21% 22% 2.6 STDEV 6.0 4.3 3.3 3.4 11% 7% 7% 1.1 Median 12.8 10.8 10.5 8.6 25% 19% 19% 2.4*This stock is on our regional Conviction listNote: For important disclosures, please go to http://www.gs.com/research/hedge.html.Source: Datastream, company data, I/B/E/S, Goldman Sachs Research estimates.Other disclosure Research written by Donald Lu on companies listed in Taiwan is written by him in his capacity as consultant to Goldman Sachs (Asia) L.L.C.. Any other research is written in his capacity as employee of Beijing Gao Hua Securities Company Limited.Goldman Sachs Global Investment Research 7
  8. 8. July 19, 2011 Asia Pacific: Technology: SemiconductorsReg ACI, Donald Lu, Ph.D, hereby certify that all of the views expressed in this report accurately reflect my personal views about the subject company orcompanies and its or their securities. I also certify that no part of my compensation was, is or will be, directly or indirectly, related to the specificrecommendations or views expressed in this report.Investment ProfileThe Goldman Sachs Investment Profile provides investment context for a security by comparing key attributes of that security to its peer group andmarket. The four key attributes depicted are: growth, returns, multiple and volatility. Growth, returns and multiple are indexed based on compositesof several methodologies to determine the stocks percentile ranking within the regions coverage universe.The precise calculation of each metric may vary depending on the fiscal year, industry and region but the standard approach is as follows:Growth is a composite of next years estimate over current years estimate, e.g. EPS, EBITDA, Revenue. Return is a year one prospective aggregateof various return on capital measures, e.g. CROCI, ROACE, and ROE. Multiple is a composite of one-year forward valuation ratios, e.g. P/E, dividendyield, EV/FCF, EV/EBITDA, EV/DACF, Price/Book. Volatility is measured as trailing twelve-month volatility adjusted for dividends.QuantumQuantum is Goldman Sachs proprietary database providing access to detailed financial statement histories, forecasts and ratios. It can be used forin-depth analysis of a single company, or to make comparisons between companies in different sectors and markets.GS SUSTAINGS SUSTAIN is a global investment strategy aimed at long-term, long-only performance with a low turnover of ideas. The GS SUSTAIN focus listincludes leaders our analysis shows to be well positioned to deliver long term outperformance through sustained competitive advantage andsuperior returns on capital relative to their global industry peers. Leaders are identified based on quantifiable analysis of three aspects of corporateperformance: cash return on cash invested, industry positioning and management quality (the effectiveness of companies management of theenvironmental, social and governance issues facing their industry).Disclosure AppendixCoverage group(s) of stocks by primary analyst(s)Compendium report: please see disclosures at http://www.gs.com/research/hedge.html. Disclosures applicable to the companies included in thiscompendium can be found in the latest relevant published research.Company-specific regulatory disclosuresCompendium report: please see disclosures at http://www.gs.com/research/hedge.html. Disclosures applicable to the companies included in thiscompendium can be found in the latest relevant published research.Distribution of ratings/investment banking relationshipsGoldman Sachs Investment Research global coverage universe Rating Distribution Investment Banking Relationships Buy Hold Sell Buy Hold Sell Global 32% 54% 14% 52% 41% 37%As of July 1, 2011, Goldman Sachs Global Investment Research had investment ratings on 3,167 equity securities. Goldman Sachs assigns stocks asBuys and Sells on various regional Investment Lists; stocks not so assigned are deemed Neutral. Such assignments equate to Buy, Hold and Sell forthe purposes of the above disclosure required by NASD/NYSE rules. See Ratings, Coverage groups and views and related definitions below.Price target and rating history chart(s)Compendium report: please see disclosures at http://www.gs.com/research/hedge.html. Disclosures applicable to the companies included in thiscompendium can be found in the latest relevant published research.Goldman Sachs Global Investment Research 8
  9. 9. July 19, 2011 Asia Pacific: Technology: SemiconductorsRegulatory disclosuresDisclosures required by United States laws and regulationsSee company-specific regulatory disclosures above for any of the following disclosures required as to companies referred to in this report: manageror co-manager in a pending transaction; 1% or other ownership; compensation for certain services; types of client relationships; managed/co-managed public offerings in prior periods; directorships; for equity securities, market making and/or specialist role. 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