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1、Buy,Buy,Buy,Date,Deutsche BankMarkets Research,AsiaTaiwanTechnologySemiconductor&Equipment,PeriodicalTaiwan SemiStrategy,Date2 October 2012Michael Chou,Jessica Chang,2013 themes,Research Analyst(+886)2 2192 2836,Research Analyst(+886)2 2192 2838,Selected names to outperform in 2013We expect four the
2、mes to drive continued earnings growth for selectedsemiconductor companies in Taiwan and lead these companies to see morestructural re-rating amid a weak demand environment for 2013.Our top picksinclude TSMC,MediaTek and Novatek.We continue to expect ASEs stock to,Kevin WangResearch Associate(+886)2
3、 2192,Daisy TsaiResearch Associate(+886)2 2192,play catch-up in the near term due to its relatively low valuation.Theme#1 Mobility to remain the key focus in 2013We project TSMC,ASE,SPIL,MediaTek,Novatek,Kinsus,and Unimicron tocapture the robust unit growth of smartphones and tablet PCs in 2013 in l
4、ightof their growing exposure to smartphones and tablet PCs.Notably,we expectthe accelerated uptake of mid/low-end smartphones and tablet PCs to benefitthese companies the most thanks to their cost-competitive solutions formid/low-end products.Theme#2 Secular market share gain and a growing 28nm TAM
5、We expect TSMCs sales market share among the top five foundries to risefrom 59%in 2012E to 60%in 2013E and 62%in 2014E.We attribute this toTSMCs strengthened leadership in 28nm vs.40/65nm(see our note,“AsianFoundry FITT Structural re-rating for the leader”,of 26 September 2012).Specifically,we proje
6、ct 28nm TAM(total addressable market)in 2013 to be56%larger than 40nm in 2011,led by strong growth of mobile devices and ahigher 28nm pricing premium vs.40nm.Theme#3-Earnings turnaroundWe remain bullish on MediaTek despite investors concerns about risingcompetition from Qualcomm for quad-core 3G low
7、-end and TD smartphonechips.We anticipate MediaTek will deliver a robust earnings turnaround in2013 after marginal growth in 2012 thanks to margin expansion and improvedproduct mix along with synergies from MStars integration.Also,we projectthe company to migrate to 28nm aggressively in 2013,which w
8、e believe willenable the company to:1)narrow the technology gap with Qualcomm,2)improve its product mix and margins and 3)expand market share in 2013.,Top picksTSMC(2330.TW),TWD89.60MediaTek(2454.TW),TWD322.00Novatek Microelectronics(3034.TW),TWD105.00Companies FeaturedTSMC(2330.TW),TWD89.60 Buy2011
9、A 2012E 2013EP/E(x)13.9 14.3 12.5EV/EBITDA(x)7.1 7.3 6.1Price/book(x)3.1 3.3 2.8MediaTek(2454.TW),TWD322.00 Buy2011A 2012E 2013EP/E(x)25.6 26.1 21.3EV/EBITDA(x)16.7 15.5 11.8Price/book(x)2.6 2.2 2.3Novatek Microelectronics Buy(3034.TW),TWD105.002011A 2012E 2013EP/E(x)13.5 14.6 12.8EV/EBITDA(x)8.6 9.
10、2 7.7Price/book(x)2.0 2.7 2.5Upside to our target price(inc.dividend),Theme#4 The upgrade cycle for infrastructure,Company,Target,Upside,We forecast continued 4G telecom network construction and public/private,price potential,cloud build-up to drive secular growth of networking products for TSMC,ASE
11、,SPIL and Kinsus in 2013-14,albeit moderately given a challenging macrobackdrop.We expect the areas of growth in 2013-14 to include FPGA(fieldprogrammable gate array),networking processors,10/40/100GE controllersand switch/router ICs.,TSMCMediaTekNovatekRelated recent research,TWD105TWD435TWD111,21%
12、38%11%,Valuation and risksWe use P/B or P/E multiples to reach our target prices.Sector risks relate todemand,currency,ASP,and capex.(See page 11 for details.),Asian Foundry FITT-Structuralre-rating for the leaderMichael ChouTaiwan Semi Strategy-,26 Sep 201210 Sep 2012,Outperformance of the mobility
13、theme to continue into 4Q12Michael Chou&Jessica Chang_Deutsche Bank AG/Hong KongAll prices are those current at the end of the previous trading session unless otherwise indicated.Prices are sourcedfrom local exchanges via Reuters,Bloomberg and other vendors.Data is sourced from Deutsche Bank and sub
14、jectcompanies.Deutsche Bank does and seeks to do business with companies covered in its research reports.Thus,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 maki
15、ng their investment decision.DISCLOSURES ANDANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1.MICA(P)072/04/2012.,Units:,mn,2 October 2012Semiconductor Figure 1).We estimate the penetration rate of smartphones andtablet PCs will rise from 29%and 35%in 2012 to 36%and 40%in 2013,respectively(Figure 2).
16、Specifically,we project mid/low-end smartphones and tablet PCs to contribute to themajority of unit increases in 2013(Figure 3).We forecast mid/low-end smartphones toaccount for 63%of total smartphone units in 2013 vs.57%in 2012,which wouldrepresent 49%YoY unit growth in 2013.We expect TSMC,ASE,SPIL
17、,MediaTek andNovatek to be the major beneficiaries of this favorable trend.In Figure 4 we list thesales portion of smartphone and tablet PC products for each company.,Figure 1:Global unit YoY growth of smartphones andtablet PCs,Figure 2:Global penetration rate of smartphones andtablet PCs,Global sma
18、rtphone shipmentsSmartphone unit growth(RHS),Global tablet PC shipmentsTablet PC unit growth(RHS),Global penetration rate of smartphonesGlobal penetration rate of tablet PCs,1,2001,000800,63%,100%90%80%70%60%,45%40%35%,35%,40%36%,43%40%,600400200,38%,48%,35%28%,26%20%,50%40%30%20%10%,30%25%20%,25%23
19、%,29%,0,2011,2012E,2013E,2014E,0%,15%,2011,2012E,2013E,2014E,Source:Deutsche Bank estimatesPage 2,Source:Deutsche Bank estimates.Note:penetration rate of tablet PCs is based on portable PC shipmentsDeutsche Bank AG/Hong Kong,2 October 2012Semiconductor&EquipmentTaiwan Semi StrategyFigure 3:Global sm
20、artphone shipments breakdown and YoY growth rate,2010,2011,2012E,2013E,2014E,2015E,Smartphone shipments(m units),FOB price below US$150FOB price US$150-300FOB price above US$300Total,28107210344,109133232474,169232302703,236359350946,2954773631,136,3475763861,309,%of total smartphone,FOB price below
21、 US$150FOB price US$150-300FOB price above US$300Total,8%31%61%100%,23%28%49%100%,24%33%43%100%,25%38%37%100%,26%42%32%100%,27%44%30%100%,YoY growth rate(%),FOB price below US$150FOB price US$150-300FOB price above US$300Total,nmnm17%71%,nm24%11%38%,55%75%30%48%,40%55%16%35%,25%33%4%20%,17%21%6%15%,
22、Source:Gartner,Deutsche Bank estimatesFigure 4:Smartphone and tablet PC sales portion for semiconductor names under our coverage,Company,Ticker,Smartphone sales portion in 2012E,Smartphone sales portion in 2013E,Tablet PC sales portion in 2012E Tablet PC sales portion in 2013E,Foundry,TSMC*UMC*,2330
23、.TW2303.TW,26%20%,30%22%,3%3%,5%5%,OSAT,ASE IC ATM*SPIL*Powertech*,2311.TW2325.TW6239.TW,26%16%23%,28%19%26%,3%4%4%,5%6%6%,Fabless,MediaTek*Mstar*Novatek*Elan*Orise*,2454.TW3697.TW3034.TW2458.TW3545.TW,29%1%10-12%5-6%55-60%,43%6%12-15%8-10%65-70%,0%N.A.8-10%8%10-15%,5%N.A.10-15%12%15-18%,IC Distribu
24、tion,WPG*,3702.TW,13-15%,15-20%,8-10%,10-13%,PCB/substrate,Unimicron*Kinsus(excl.PCB)*ZDT*Flexium*Career*,3037.TW3189.TW4958.TW6269.TW6153.TW,28%22%27%36%29%,32%24%29%41%28%,5%2%23%12%37%,7%3%24%13%39%,Source:Deutsche Bank estimatesNote:*represents the stocks covered by Michael Chou,*represents the
25、stocks covered by Jessica ChangTheme#2 Secular market share gain and a larger 28nm TAM vs.40nmSecular market share expansion for TSMCWe expect secular market share expansion for TSMC in 2013-14 based on 1)differentiated product lines,2)increased dominance in 28nm for 2013 and 20nm for2014 vs.65/40nm
26、,3)a customer-oriented open innovation platform,and 4)acomprehensive intellectual property library.Please see detailed analysis in our AsianFoundry FITT published on 26 September 2012.We anticipate TSMCs sales marketshare among top-five foundries could rise from 59%in 2012 to 60%in 2013 and 62%in201
27、4(Figure 5).We attribute this to TSMCs higher share in 28nm for 2013-14 vs.40nmand 65nm for the corresponding period(Figure 6).,Deutsche Bank AG/Hong Kong,Page 3,12.0,US$bn,2 October 2012Semiconductor&EquipmentTaiwan Semi Strategy,Figure 5:Major foundries total sales market share from2010-2014,Figur
28、e 6:TSMCs higher 32/28nm sales market share in2013-14 vs.45/40nm in 2011-12 and 65nm in 2009-10,Samsung foundry,Others,UMC,TSMC,TSMCs 65nm market share,TSMCs 45/40nm market share,100%80%,5%21%,9%19%,11%18%,12%16%,12%15%,TSMCs 32/28nm market share100%95%94%82%,60%,16%,14%,12%,11%,11%,80%60%,60%,74%,7
29、1%,68%67%69%,68%59%61%,40%,57%,58%,59%,60%,62%,40%,20%0%,20%0%,2010,2011,2012E,2013E,2014E,First year,Second year,Third year,Fourth year,Source:Company data,;Deutsche Bank estimates,Source:Company data,Deutsche Bank estimates,Growing 28nm TAMWe expect 28nm TAM(total addressable market)in 2013 to be
30、56%greater than 40nmTAM in 2011,driven by smartphones and tablet PCs as well as an increased pricingpremium in 28nm vs.40nm and 65nm(Figure 7).In addition,we project 28nm sales ofthe foundry sector to be 35%higher than 40nm sales in the first three years(Figure 8).In Figure 9 we show our expectation
31、 that TSMCs price-to-capex ratio in 28nm over40nm could reach 1.3x by end-4Q12 vs.the price-to-capex ratios of 1.2x in 40nm over65nm and 1.1x in 65nm over 90nm.In our view,this is attributable to TSMCs strengthin 28nm vs.40nm and 65nm including 1)more rapid yield rate improvement in 28nm,2)increasin
32、gly differentiated product lines and 3)widened technology gap with tier-twofoundries.,Figure 7:The 28nm TAM in 2013 to be 56%larger thanthe 40nm TAM in 2011,Figure 8:28nm aggregate sales to be 35%higher 40nmaggregate sales for the first three years,US$bn10.0,Total addressable market of 45/40nm for m
33、ajor foundriesTotal addressable market of 32/28nm for major foundries,Major foundries revenue for different nodes in the first three years10.8,8.06.04.0,2.6,3.0,5.0,7.8,10.08.06.04.0,4.5,6.6,8.0,2.00.0,0.4,0.1,2.00.0,2009/2011,2010/2012E,2011/2013E,90nm,65/55nm,45/40nm,32/28nm,Source:Company data,De
34、utsche Bank estimates,Source:Deutsche Bank estimates,Figure 9:TSMCs price-to-capex ratio in 28nm over 40nm could reach 1.3x by end-4Q12,65nm/90nm,40nm/65nm,28nm/40nm,ASPCapexASP/Capex,1.41.31.1,1.61.31.2,1.91.61.3,Source:Deutsche Bank estimates,Page 4,Deutsche Bank AG/Hong Kong,2 October 2012Semicon
35、ductor&EquipmentTaiwan Semi StrategyTheme#3 Earnings turnaroundWe expect an earnings turnaround to drive more stock re-rating for MediaTek in 2013.We project MediaTeks EPS to grow 40%YoY to NT$17.23(pro forma EPS integratingMStar with synergies)in 2013 after marginal 0.2%YoY growth in 2012.We believ
36、eMediaTeks earnings growth recovery in 2013 will stem from the following factors.A narrowing gap of product scope in smartphone chips compared to QualcommWe estimate MediaTeks product lines will overlap with 30%of Qualcomms productprofiles in 2012 and 40-45%in 2013.In Figure 10 we show a comparison
37、of MediaTeksand Qualcomms product profiles.We believe this may lead Qualcomm to be morereluctant to cut prices aggressively than before due to concerns over significant margincontraction.This should leave more room for MediaTeks market share expansion.Figure 10:MediaTeks and Qualcomms product profil
38、e in low-cost smartphone segment,Company,MediaTek,Qualcomm,Qualcomm,MediaTek,Qualcomm,MediaTek,MediaTek,Qualcomm,Qualcomm,Chip,MT6575,MSM7X25A,MSM7X27A MT6577,MSM8X25,MT6583,MT6589,MSM8X25Q,MSM8930,StageCore No.,Massproduction1,Mass production1,Massproduction1,Massproduction2,Massproduction2,R&D2,R&
39、D4,R&D4,R&D2,CPU archetecture,ARM CortexA9,ARM Cortex A5,ARM Cortex ARM CortexA5 A9,ARM CortexA5,ARM Cortex ARM Cortex ARM CortexA7 A7 A5,QCOM Krait,CPU frequencyProcess node,1GHz40nm,0.6-0.8GHz45nm,0.8-1GHz45nm,1GHz40nm,1GHz45nm,1.3GHz28nm,1.3GHz28nm,1GHz45nm,1.2GHz28nm,GPU,IMGSGX531,22M Adreno 200
40、,22Mtri/s,700M tri/s,133M pix/spix/s,Adreno200,22Mtri/s,133Mpix/s,IMGSGX531,22Mtri/s,700Mpix/s,Adreno203,49M tri/s,294M pix/s,IMGSGX544,55M tri/s,1600M pix/s,IMGSGX544,55Mtri/s,1600Mpix/s,Adreno Adreno203,49M tri/s,305,80M tri/s,294M pix/s 800M pix/s,ScreenVideo,QHD,960*540720p,HVGA,480*320VGA,FWVGA
41、,854*480FWVGA,QHD,960*540720p,FWVGA,854*480FWVGA,FWVGA,854*480720p,WXGA,1280*8001080p,720p720p,QHD,960*6401080p,Air interface,LTE FDD/TDD,WCDMA(HSP WCDMA(HSPA),A),CDMA 2000GSM/GPRS/E(1XEV-DODGE Rel.0/Rev.A),WCDMA(HSPA),CDMA2000(1XEV-DORel.0/Rev.A),WCDMA(HSPA),GSM/GPRS/EDGE,WCDMA(HS WCDMA(DCWCDMA(HSP
42、 PA+,HSPA+,WCDMA(HSPA),CDMA 21Mbps/42Mbps/11 A),CDMA2000(1XEV-5.76Mbps),Mbps),TD-2000(1XEV-DO TD-SCDMA,SCDMA,DORel.0/Rev.A/B)GSM/GPRS/E GSM/GPRS/E Rel.0/Rev.A/B)DGE DGE,Cat3.,WCDMA(DCHSPA+,42Mbps/11Mbps),CDMA2000(1XEV-DORel.0/Rev.A/B),TD-SCDMA,Connectivity,MT6620/6628,AR6003/5/WCN1314+WCN2243,AR6003
43、/5/WCN1314+WC MT6620/6628N2243,AR6005+WCN2243,MT6628,MT6628,AR6005+WC Integrated inN2243 SoC,MP time,2Q12,4Q11,4Q11,3Q12,3Q12,1Q13,1Q13,1Q13,1Q13,Source:Company data,Deutsche BankMargin expansion as a result of product mix improvement and merger synergyWe expect MediaTeks gross margin to rise from 4
44、1.7%in 2012 to 45.4%in 2013potentially,thanks to increasing shipments of higher-margin 28nm 3G mid/low-endsmartphone chips and MStars consolidation synergies.We project its 28nm 3Gsmartphone chips(MT6583-dual cores;MT6589-quad cores)to be positive for itsmargins in 2013.Improving execution in techno
45、logy migration and the pace of product introductionMediaTek has accelerated the pace of its advanced node adoption and product launchsince 1H12 and is starting to deliver robust shipments of 3G smartphone chips in 2H12.We forecast it will introduce 4G smartphone chips by end-2013.In our view,this sh
46、ouldfurther enhance its product lines and enable the company to gain more market share in,Deutsche Bank AG/Hong Kong,Page 5,2 October 2012Semiconductor&EquipmentTaiwan Semi Strategy2014.WE believe MediaTek has established a solid footprint in smartphone chipsegment in 2012.Theme#4 The upgrade cycle
47、for infrastructureWe expect continued 4G telecom network construction,as well as public/private cloudbuild-up,to drive secular growth in communication and PC products.We forecastTSMC,ASE,SPIL and Kinsus to be the major beneficiaries of these positive trends in2013-14 albeit moderately given a challe
48、nging macro backdrop.In Figure 11 we provideour forecasts for networking sales portions for the foundry,OSAT,and substratesectors in 2013.4G telecom networkWe expect solid demand for 4G smartphones and increasing introduction of 4Gsmartphones to force global telecom operators to build up 4G networks
49、 at a faster pacein 2013-14.We anticipate this will boost demand for Alteras and Xilinxs FPGA(fieldprogrammable gate array)and the other chip vendors networking processors in 2013-14,which should benefit TSMC and Kinsus.We estimate Altera/Xilinx to account for 4-5%and 19-21%of TSMCs and Kinsus sales
50、 in 2013.Figure 11:Networking sales portion for semiconductor names under our coverage,Company,Ticker,Networking sales portion in 2012E,Networking sales portion in 2013E,Foundry,TSMCUMC,2330.TW2303.TW,11%8%,12%9%,OSAT,ASE IC ATMSPILPowertech,2311.TW2325.TW6239.TW,9%12%3%,10%13%3%,PCB/substrate,Unimi
