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Nanya Technology Corporation Investor Presentation 2017

Oct 17, 2017

52061_rns_2017-10-17_87f46d4b-68ab-4ba4-9ec9-1dd3f6ae39f7.pdf

Investor Presentation

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Macquarie Taiwan Corporate Day

Presentation to Investors and Analysts, October 18[th] -19[th] , 2017 Dr. Pei Ing Lee, President & Spokesman

October 18-19, 2017 © 2017 Nanya Technology Corp.

Safe Harbor

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The information herein and the presentation made during the conference contain forward-looking statements and are provided for information purposes only. Neither Nanya Technology Corp. nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements or undertakes duty to update the statements. You are urged to review the information provided herein carefully, and please don’t distribute, reproduce or disclose the information in whole or in part without prior written permission of NANYA Technology Corp.

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October 18-19, 2017 © 2017 Nanya Technology Corp.

Agenda Agenda
01. Nanya Technology Overview
02. Q3’17 Revenue & Results
03. Operation Guidance
04. Q4’17 Market Outlook
05. Q4’17 Business Outlook

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October 18-19, 2017 © 2017 Nanya Technology Corp.

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01

NANYA TECHNOLOGY OVERVIEW

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October 18-19, 2017 © 2017 Nanya Technology Corp.

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Nanya Technology Overview

IDM Company Technology & Capacity • Founded in 1995, • Technology : • IPO in 2000  Target to ramp 20nm to 38K • DRAM Process, Design, WSPM by the end of 2017 Production & Sales •  20nm Product offerings: Headquarters: New Taipei, Taiwan DDR3/DDR4, LPDDR3/ • • Employees: >2,700 LPDDR4X • Focus on value-added • Capacity: DRAM market • Formosa Plastics Group  Current: 60,000 WSPM(12” ) (FPG) has 75.5% equity  2018: 68,000 WSPM(12” ) ownership as of Sep. 30th, (38K 20nm + 30K 30nm) 2017

Partnerships

Technology license form MU Option rights to license Micron 1x and 1y nm technologies and products. Shareholding in Micron ( as of Sep. 30th, 2017)  Sold 62% of Nanya original investment  Own 1.97% of Micron’s share

*WSPM: Wafer Starts Per Month

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October 18-19, 2017 © 2017 Nanya Technology Corp.

Worldwide Coverage & Location

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Dusseldorf, Tokyo,
Japan
Germany San Jose, USA
Tokyo, Japan San Jose, USA
Shenzhen, China
Dusseldorf, Burlington, USA
Germany
Houston, USA
Shenzhen, China
Hsinchu, Taiwan
HQs & 12”Fab,Taishan ,
New Taipei City, Taiwan
Headquarter & 12” Fab
Branch offices for Sales & FAE
Design Center (4 Teams in Total)
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October 18-19, 2017 © 2017 Nanya Technology Corp.

Nanya Specialty DRAM Product Portfolio

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Specialty Mobile Auto & IT Custom
•
DDR4 ~ DDR2
• • •
DDR4 ~ DDR LPDDR3 ~ LPDDR Foundry
•
LPDDR3 ~ LPDDR
• • •
Packaged & SiP KGD, PoP & MCP Non-JEDEC DRAM
•
Packaged & KGD
NW
IP Cam
STB
POS
Feature
Smart Phone
HDD Phone Car
Data
IP Cam Printer Card IPC NW
DSC Tablet
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October 18-19, 2017 © 2017 Nanya Technology Corp.

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02 Q3’17 REVENUE & RESULTS

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October 18-19, 2017 © 2017 Nanya Technology Corp.

Q3’17 Key Takeaways

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  • Q3’17 Revenue of NT$ 13,293 million(M), (+5.3% QoQ)

  • ASP increased 2.3%, Bit shipment increased 2.9%

  • Gross Margin 44.2%; Operating Margin 31.9%

  • Recognized NT$ 11,165M gain from Micron share disposal

  • Recognized NT$ 6,863M loss due to ECB valuation

  • Q3’17 Net Income of NT$ 8,574M, Net Margin 64.5%, EPS NT$ 3.12

  • Q1’17 ~ Q3’17 Net Income of NT$ 18,339M, Net Margin 48.1%,

EPS NT$ 6.67

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October 18-19, 2017 © 2017 Nanya Technology Corp.

Financial Highlights

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2015-2017 Quarterly Results

Monthly Revenues

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* Unaudited number
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  • Unaudited number

Net operating revenues(Million NT$)

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＊
13,293
12,096 [12,231 12,626]
12,028 165.9% ＊
11,15610,337 ＊ ＊ 4,644
10,355 [10,398] 10,204 4,193 [4,317 ]
4,115 [4,193 ] [4,297 ] [4,352 ]
4,067 3,970
8,933
64.5%
45.6%
51.5%
52.3%
38.1% 18.1%17.8% 13.7% 26.8%
4.4%
Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Jan Feb Mar Apr May Jun Jul Aug Sep
Net operating revenues(Million NT$)
Net operating revenues(Million NT$) Net Margin(%)
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October 18-19, 2017 © 2017 Nanya Technology Corp.

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Quarterly Revenue Results

QoQ YoY
Q3’17 vs. Q2’17 Q3’17 vs. Q3’16
Revenue 5.3% 30.3%
Shipment 2.9% -5.1%
ASP 2.3% 44.2%
Exchange Rate 0.0% -4.8%

 Q3’17 revenue increased by 5.3% QoQ

  • Q3’17 bit shipment increased by 2.9% QoQ

  • Q3’17 ASP increased by 2.3% QoQ

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October 18-19, 2017 © 2017 Nanya Technology Corp.

Q3’17 Financial Results Summary

Amount in Million NT$, Q3'17 Q2'17 QoQ Q3'16 YoY
except for EPS & BVPS Unaudited Audited Audited
Net Sales 13,293
100%		 12,626
100%		 5.3% 10,204
100%
30.3%
Gross Margin (Loss)Gross Margin(%) 5,882
44.2%		 5,544
43.9%		 6.1% 3,171
31.1% 85.5%
Operating Income(Loss)Operating Margin(%)
4,245
31.9%		 4,167
33.0%		 1.9% 1,699
16.7% 149.9%
EBITDA*EBITDA Margin (%) 6,400
48.1%		 6,098
48.3%		 5.0% 3,215_31.5%_
99.0%
Non-operating Income (Expense) 4,342
32.7%		 3,835
30.4%		 -296
-2.9%
Income Tax Benefit (Expense) -10
-0.1%		 -1,505
-11.9%		 -2
-0.0%
Net Income (Loss)Net Margin (%) 8,574
64.5%		 6,490
51.4%		 32.1% 1,402
13.7% 511.7%
Earnings Per Share (NT$) 3.12** 2.36 0.51
Book Value Per Share (NT$) 39.46*** 35.45 22.57
Shares Outstanding(million shares) 2,882**** 2,748 2,748

Note: * EBITDA = Operating income + Depreciation & Amortization Expenses

  • ** EPS is based on weighted average outstanding shares of 2,748M

  • *** BVPS Includes accumulated unrealized gain on Micron shares, and is calculated based on 2,882M outstanding shares

  • **** 2,882M shares Includes 131.8M shares resulted from ECB conversion as of Sep. 30, 2017

October 18-19, 2017 © 2017 Nanya Technology Corp.

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Q3’17 vs. Q2’17 Results Comparison

*Percentage Points

Q3'17 Q2'17 QoQ
(PPT
Delta)*		 Difference
Amount in Million NT$ Unaudited Audited
Net Sales 13,293 12,626 +5.3% •
ASP increased 2.3% QoQ
•
Bit shipment increased 2.9% QoQ
Gross Margin (Loss)
Gross Margin(%)		 5,882
44.2%		 5,544
43.9%		 +0.3% •
Q3’17 Gross Margin increased NT$ 338M, mainly due to ASP increase
Operating Income (Loss)
Operating Margin(%)
4,245
31.9%		 4,167
33.0%		 -1.1% •
Approx. NT$ 144M R&D expense
increased (1.1% negative impact to
OPM) mainly for 20nm products
development and deployment
Net Income (Loss)
Net Margin (%)		 8,574
64.5%		 6,490
51.4%		 +13.1% •
Micron share disposal gain positive
NT$6,346M (Q3’17: NT$+11,165M,
Q2’17: NT$ +4,819M)
•
ECB option valuation negative NT$ 5,850M (Q3’17: NT$ -6,863M, Q2’17:
NT$ -1,013M.)
•
Exchange positive NT$ 194M
(Q3’17: NT$ 108.7M, Q2’17: NT$ -
85.6M,)
•
Income tax positive NT$ 1,495M
(Q3’17: NT$ -10M, Q2’17: NT$ -1,505M,)

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October 18-19, 2017 © 2017 Nanya Technology Corp.

Operating Expenses

R&D Expenses

(Million NT$)

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SG&A Expenses

(Million NT$)

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NT$2,478
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Q4, 579
Q3, 1,026
Q3, 1,030
Q2, 882
Q2, 491
Q1, 527
Q1, 378
2016 2017
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Note: R&D expenses increased by NT$144M in Q3’17; mainly in 20nm products development and deployment

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NT$1,821
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Q4, 596
Q3, 610
Q3, 442
Q2, 495
Q2, 395
Q1, 521
Q1, 388
2016 2017
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Note: Increase of SG&A expenses in Q3’17 were mainly from Variable sales expense, Information security expense, employee compensation and other expense

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October 18-19, 2017 © 2017 Nanya Technology Corp.

Investment of Micron Private Placement

The Investment as of
2016/12/02
Realized Gain
(2017/06/14~2017/09/30)
Unrealized Gain
(2017/09/30)		 The Investment as of
2016/12/02
Realized Gain
(2017/06/14~2017/09/30)
Unrealized Gain
(2017/09/30)		 The Investment as of
2016/12/02
Realized Gain
(2017/06/14~2017/09/30)
Unrealized Gain
(2017/09/30)		 The Investment as of
2016/12/02
Realized Gain
(2017/06/14~2017/09/30)
Unrealized Gain
(2017/09/30)		 The Investment as of
2016/12/02
Realized Gain
(2017/06/14~2017/09/30)
Unrealized Gain
(2017/09/30)
Volume 57,780,138
shares		 Shares sold 35,813,996
shares		 Shares
held
21,966,142
Shares
Approx. 1.97%of
Micron’s Interest
Purchase
price (per
share) & EX
rate		 US$ 17.29
(EX rate 31.488)		 Average
Sale
Price		 US$ 32.81
(Weighted average
EX rate 30.223)		 Market
Price
US$ 39.33*
(EX rate 30.305)
Investment
amount		 NT$
31,457,097,237		 Realized
Gain
(A)		 NT$
15,983,917,367		 Unrealized
Gain
(B)
NT$
14,222,376,884
Share-
holding		 Approximately
5.26%of
Micron’s interest		 Total
Gain
(A + B)		 NT$ 30,206,294,251
  • 2017/9/29 Micron share price closed at US$ 39.33

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October 18-19, 2017 © 2017 Nanya Technology Corp.

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Update on ECB Conversion as of Oct. 17, 2017

Item Amount
(US$)		 % of total
Issuance		 Conversion
Price /
Share
(NT$)
Estimated/Actual
New Shares from
Conversion
Dilution Effect
Issuance Amount(a) 500,000,000 100.00% 50.94 311,052,218(E)
10.17%
Converted Amount
(b)		 296,200,000 59.24% 184,267,235(A) 6.28%
ECB Balance (a-b) 203,800,000 40.76% 126,784,884(E)

  • Nanya issued its ECB of US$500 million on Jan. 24, 2017, and pursuant to IFRS, has evaluated the ECB option value. The quarterly option value variation were recognized as non-operating expenses, and vice versa

  • Mainly due to NTC’s share price increases, the Company has recognized loss of NT$ 1,169M in 1H’17, and additional loss of NT$ 6,863M in Q3’17, resulting a total loss of NT$ 8,032M ( including NT$ 3,072M from the converted portion and NT$ 4,960M from outstanding ECB options, share price closed at NT$ 86.3 on Sep. 30, 2017)

  • As of Oct. 17, 2017, 59.24% of ECB were converted

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October 18-19, 2017 © 2017 Nanya Technology Corp.

Q3’17 Cash Flows
Q3'17 Q2'17 Q3'16
(Unit: Million NT$) Unaudited &
Consolidated		 Audited &
Consolidated		 Audited &
Consolidated
Beginning Balance 23,015 20,300 15,961
Cash from Operating
Activities		 4,864 3,404 3,376
Capital expenditures -8,219 -12,164 -4,791
Long-term & Short-term
loans
-12,354*		 7 1,979
Investments and others 17,265** 11,468 -3,277
Ending Balance 24,571 23,015 13,248
Free Cash Flow(1) -3,355 -8,760 -1,415

  • (1) Free Cash Flow = Cash from operating activities – Capital expenditures

  • Repaid FPG borrowing NT$ 10 billion, bank loan NT$ 2.4 billion

** Mainly from the proceeds of Micron shares disposal of NT$20.8 billion and cash dividend payout of NT$4.1 billion

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October 18-19, 2017 © 2017 Nanya Technology Corp.

Financial Highlights

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30,000 60%
Revenue (Million NT$) Net Income (Million NT$) Gross Margin(%) Operating Margin(%)
48% [49%]
47%
44% 44% [44%]
42%
40% 40%
37%
42% 42%
40%
33%
31% 31%
30%
34% [36%] 34% 28%
15,000 32% [33%] 32% 30%
28%
25%
21%
18% 18%
17%
0 0%
Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17
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October 18-19, 2017 © 2017 Nanya Technology Corp.

Sales Breakdown by Application

  • Q3’17 commodity DRAM revenue increased due to 20nm products launched

  • Q3’17 Auto & IT continue to grow to account for 9.1% of total revenue

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Auto
Auto
& IT,
& IT 9.1%
8.3% Commodity Commodity,
6.7%
Mobile 3.8%
Mobile,
18.9% 19.5%
Product Product
2017 Q2 2017 Q3
Consumer,
Consumer
64.7%
69%
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October 18-19, 2017 © 2017 Nanya Technology Corp.

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03 OPERATION GUIDANCE

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October 18-19, 2017 © 2017 Nanya Technology Corp.

CAPEX & Bit Shipment

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CAPEX

BIT SHIPMENT (YOY)

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NT$ Billion
31.1
~45%
22.3
8.2
20%
16%
12.2
Flat
-8.6%
6.1
2016 2017(E) 2014 2015 2016 2017(E) 2018(E)
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  • Capital Expenditure

  • (CAPEX)

  • Q3’17 CAPEX NT$ 8.2Billion (B)

  • Estimated 2017 CAPEX of NT$ 31.06B

  • Anticipated CAPEX of NT$55.7B for 38K WSPM 20nm migration. (2016 CAPEX NT$ 20.6B for 20nm)

Bit Shipment

  • Q3’17 bit shipment up 2.9%, Q4’17 bit shipment forecast to increase mid-teens %

  • Target 2017 bit shipment to be flat, 2018 to reach 45% bit shipment growth

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October 18-19, 2017 © 2017 Nanya Technology Corp.

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04 MARKET OUTLOOK

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October 18-19, 2017 © 2017 Nanya Technology Corp.

Q4’17 DRAM Market

 Q4’17: Limited bit growth from technology conversion

Supply Side

  • 2018: Supply growth expected to be moderate at 21% ~ 23% with limited new capacity

 Q4’17 Server / PC Market

  • Server / data center DRAM continues with increasing content growth; AI-enabled server will boost demand in long term. PC market sustained by enterprise PCs replacement

 Q4’17 Mobile Market

Demand Side

  • New launched smartphone will drive DRAM demand momentum. Flagship models requiring 3-6GB DRAM content

 Q4’17 Consumer Market

  • Consumer demand at seasonal high, TV/STB/NW continue to be strong, game consoles and smart speaker will also drive demand momentum

  • 2018: DRAM demand growth expected to be stable at 22% ~ 24%

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October 18-19, 2017 © 2017 Nanya Technology Corp.

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05 BUSINESS OUTLOOK

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Nanya Business Outlook

  • Limited DRAM supply growth through out 2017. Q4’17 ASP continue to grow, given product mix adjustment by DRAM vendors

  • 2018 DRAM market in balance and overall healthy environment

  • 20nm cost cross over in Q3’17, 20nm wafer input target to reach 38,000/month by end of 2017

  • 20nm 4Gb DDR3 already in volume shipment, 8Gb DDR4 mass production in Q4’17

  • Q4’17 bit shipment forecast to increase mid-teens % QoQ

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October 18-19, 2017 © 2017 Nanya Technology Corp.

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Thanks & Questions

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October 18-19, 2017 © 2017 Nanya Technology Corp.

Q3’17 Consolidated Income Statement

Q3'17 Q2'17 QoQ Q3'16 YoY
Amount: Million NT$ Unaudited Audited Audited
Net Sales 13,293
100.0%		 12,626 100.0% 5.3% 10,204 100.0% 30.3%
Cost of Goods Sold 7,412
55.8%		 7,082
56.1%		 7,033
68.9%
Gross Margin 5,882
44.2%		 5,544
43.9%		 6.1% 3,171
31.1%		 85.5%
SG&A Expenses 610
4.6%		 495
3.9%		 442
4.3%
R&D Expenses 1,026
7.7%		 882
7.0%		 1,030
10.1%
Operating Income 4,245
31.9%		 4,167
33.0%		 1.9% 1,699
16.7%		 149.9%
Non-operating Income (Exp.) 4,342
32.7%		 3,835
30.4%		 -296
-2.9%
Income before Tax 8,587
64.6%		 8,002
63.4%		 7.3% 1,403
13.8%		 512.0%
Income Tax Benefit (Expense) -10
-0.1%		 -1,505
-11.9%		 -2
0.0%
Net Income 8,577
64.5%		 6,497
51.5%		 1,401
13.7%
Net income attributable to
noncontrolling interests		 3
0.0%		 7
0.1%		 0
0.0%
Net Income attributable to NTC 8,574
64.5%		 6,490
51.4%		 32.1% 1,402
13.7%		 511.7%
EPS(NT$) 3.12 2.36 0.51
Book Value Per Share 39.46 35.45 22.57

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October 18-19, 2017 © 2017 Nanya Technology Corp.

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