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Nanya Technology Corporation Investor Presentation 2017

Aug 31, 2017

52061_rns_2017-08-31_42f6c3d6-52d7-44a5-8907-54e7a84532dd.pdf

Investor Presentation

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Nanya Technology Morgan Stanley Asia Corporate Day 2017

Presentation to Investors & Analysts, September 4[th] -5[th] , 2017 Dr. Pei Ing Lee, President & Spokesman

September 4-5 2017 © 2017 Nanya Technology Corp.

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Safe Harbor

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 forwardlooking 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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September 4-5 2017 © 2017 Nanya Technology Corp.

Outline

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01. DRAM Industry Landscape
02. NTC Overview
03. Business Strategy

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September 4-5 2017 © 2017 Nanya Technology Corp.

DRAM Essential to Electronic Devices

 Diversified applications create segmented opportunities

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IoT Servers
Tablets
Phones
Wearables IoT, AI
Smart Car
PC Era
Portable Big
Devices Data
Smart Home,
Smart Office,
Smart City
September 4-5 2017 © 2017 Nanya Technology Corp. 4
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Vigorous Development of New Data Era

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Smart Home Health
Care
Machine
Smart City
Learning
Smart
Smart
Vehicle
Industry
Smart
Devices
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  • New data era has been expediting the proliferation of semiconductor

  • Memory (DRAM and NAND) plays as key semiconductor components

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September 4-5 2017 © 2017 Nanya Technology Corp.

Strong Momentum of Semiconductor Industry

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Smart Phone + Server Smart Car + IoT
+ Consumer + PC + AI
400,000
Unit: US$ M
300,000
200,000
100,000
0
2015 2016 2017 2018 ( E ) 2019~
WW Semiconductor WW Memory Source: Gartner
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  • In 2017, 17% YoY and US$401.4B revenue of semiconductor is forecasted

  • In 2017, 52% YoY and US$121.7B market size of memory is predicted

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September 4-5 2017 © 2017 Nanya Technology Corp.

Stable DRAM Industry Structure
~2013 2013~2017 2018~
Market ASP
Fluctuation
Supply Supplier >40
(Keen
Competition)		 3 Major + 1 Medium
+ 2 Small
(Oligopoly)		 3 Major + 1 Medium +
2 Small
(New comers facing
enormous barrier)
Technology,
Cost &
Product		 Cost down due to
rapid technology
conversion		 Product portfolio
diversified and
technology
conversion slowed
down		 New generation
product and cost
reduction continue
slowing down
September 4-5 201
Demand		 Driving
Force		 PC Smart Phone,
Server, Consumer ,
PC		 Smart Phone, Server,
Consumer, PC, Smart
Car, IoT, AI
7 © 2017 Nanya Technology Co
Product
Spec.		 rp.
Standard module		 eMCP, Component,
Module, SiP		 7
eMCP、Component,
Module, SiP, TSV

Memory Capex Allocation Shift

Unit: US$ M

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25,000
20,000
15,000
10,000
5,000
-
2015 2016 2017 2018 ( E )
DRAM NAND
Source: Gartner
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  • Significant NAND capex expected for 3D NAND

  • DRAM capex mainly for technology conversion and maintaining current capacity level

  • Capacity non-exchangeable between NAND and DRAM

  • Annual bit growth forecast: DRAM 20%~25%, NAND>45%

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September 4-5 2017 © 2017 Nanya Technology Corp.

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WW DRAM Capacity
WW DRAM Wafer Start (K/M, 300mm)
1,500
1,304
1,213
1,161
1,098
1,082 1,096 1,135
1,058 1,072
1,000
500
0
2010 2011 2012 2013 2014 2015 2016 2017 2018 [(E)]
Source: DRAMexchange, NTC MKT
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  • WW DRAM capacity at the level of 1,100K/M

  • No major capacity expected to come on-line in 2018

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September 4-5 2017 © 2017 Nanya Technology Corp.

DRAM Supply and Demand Growth

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Qty (M, 4Gb eq.) Supply Demand Sufficiency Sufficiency (%)
30,000 110%
102%
101%
97.9% 98.0%
25,000 100%
20,000 90%
15,000 80%
10,000 70%
5,000 60%
0 50%
2015 2016 2017 2018 (E)
Source: Gartner, IHS, DRAMexchange, NTC MKT
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  • 2017~2018 DRAM market conditions are expected to stay stable

  • Supply growth contributed mainly by technology conversion

  • Demand growth driven by smart phone, server and specialty applications

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September 4-5 2017 © 2017 Nanya Technology Corp.

Outline

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01. DRAM Industry Landscape
02. NTC Overview
03. Business Strategy

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September 4-5 2017 © 2017 Nanya Technology Corp.

Nanya Technology Overview

IDM Company

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Technology & Capacity Partnerships

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  • Founded in 1995, • Technology : • IPO in 2000  Plan to ramp 20nm to 38K

  • • DRAM Process, Design, WSPM in 1H’18

  • 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 75.8% equity  2018: 68,000 WSPM(12” )

  • ownership (38K 20nm + 30K 30nm)

  • Technology license form MU

Option rights to license Micron 1x and 1y nm technologies and products.

Shareholding in Micron

( as of July 31st, 2017)

  • Sold 21.5% of Nanya original investment

  • Own 4.07% of Micron’s share

*WSPM: Wafer Starts Per Month

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September 4-5 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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September 4-5 2017 © 2017 Nanya Technology Corp.

Q2’17 P&L Results

*Percentage Points

Q2'17 Q1'17 QoQ
(PPT
Delta)*		 Difference
Amount in Million NT$ Audited Audited
Net Sales 12,626 12,231 +3.2% •
ASP increased 4.6% QoQ
•
Bit shipment increased 1.7% QoQ
•
FX impacted revenue -3.0%
Gross Margin (Loss)
Gross Margin(%)		 5,544
43.9%		 4,901
40.1%		 +3.8% •
Q2’17 Gross Margin increased NT$ 643M, mainly due to ASP increase
Operating Income (Loss)
Operating Margin(%)
4,167
33.0%		 3,853
31.5%		 +1.5% •
Approx. NT$ 356M R&D expense
increased (2.8% negative impact to
OPM) mainly for 20nm preparation and
product development
Net Income (Loss)
Net Margin (%)		 6,490
51.4%		 3,275
26.8%		 +24.6% •
NT$4,819M realized gain from MU share
disposal
•
Q2 recognized NT$ 1,731M surtax on
undistributed earnings and NT$ 228M
tax reduction for 2016 R&D Investment
•
ECB valuation negative NT$ 857M
(Q2’17: NT$ -1.013B, Q1’17: NT$ -156M)
•
Exchange loss decreased NT$ 489M
(Q2’17: NT$ -86M, Q1’17: NT$ -575M)

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September 4-5 2017 © 2017 Nanya Technology Corp.

P&L Results

NT$B: Billion
1H’2017 1H’2016 Growth Rate
Revenue 24.9B
10.4B
42.0%
8.0B
32.3%
3.3B
9.8B
39.3%		 19.3B
5.9B
30.7%
4.3B
22.2%
(1.4B)
2.2B
11.6%		 28.6%
76.0%
87.2%
334.9%
Gross Profit
Gross Margin (%)
Operating Income
Operating Margin (%)
Non-operating Income
Net Income
Net Margin (%)
Capital 27.5B 27.5B
EPS
3.55		 0.82

Company highlights

  • 1Q’17 Net Income of NT$ 3,275M, Net Margin 26.8%, EPS NT$ 1.19

  • 2Q’17 Net Income of NT$ 6,490M, Net Margin 51.4%, EPS NT$ 2.36

  • Financial numbers are reviewed by CPA

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September 4-5 2017 © 2017 Nanya Technology Corp.

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Financial Highlights
30,000 60%
Revenue (Million NT$) Net Income (Million NT$) Gross Margin(%) Operating Margin(%)
49%
48%
47%
44% 44%
42%
40% 40%
37%
42% 42%
40%
33%
31% 31%
36%
30%
34% 34% 28%
15,000 33% 30%
32%
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
Gross Margin (%)
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Financial Highlights

  • Gross Margin resumed to 40% in Q1’2017

 Better operating performance expected in Q3’17, due to seasonality and contribution from 20nm products

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September 4-5 2017 © 2017 Nanya Technology Corp.

Investment of Micron Private Placement

The Investment as of
2016/12/02
Realized Gain
(2017/06/14~2017/07/31)
Unrealized Gain
(2017/07/31)		 The Investment as of
2016/12/02
Realized Gain
(2017/06/14~2017/07/31)
Unrealized Gain
(2017/07/31)		 The Investment as of
2016/12/02
Realized Gain
(2017/06/14~2017/07/31)
Unrealized Gain
(2017/07/31)		 The Investment as of
2016/12/02
Realized Gain
(2017/06/14~2017/07/31)
Unrealized Gain
(2017/07/31)		 The Investment as of
2016/12/02
Realized Gain
(2017/06/14~2017/07/31)
Unrealized Gain
(2017/07/31)
Volume 57,780,138
shares		 Shares sold 12,396,617
shares		 Shares
held
45,383,521
Shares
Approx.4.07%of
Micron’s Interest
Purchase
price (per
share) & EX
rate		 US$ 17.29
(EX rate 31.488)		 Average
Sale
Price		 US$ 31.23
(Weighted average
EX rate 30.326)		 Market
Price
US$ 28.12
(EX rate 30.227)
Investment
amount		 NT$
31,457,097,237		 Realized
Gain
(A)		 NT$
4,982,801,244		 Unrealized
Gain
(B)
NT$
13,867,194,435
Share-
holding		 Approximately
5.26%of
Micron’s interest		 Total
Gain
(A + B)		 NT$ 18,849,995,679

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September 4-5 2017 © 2017 Nanya Technology Corp.

1H’17 Cash Flows 1H’17 Cash Flows
1H'17 2016 2015
(Unit: Million NT$)
Beginning Balance 9,102 3,104 7,268
Cash from Operating
Activities		 8,511 15,945 18,522
Capital expenditures -18,311 -22,336 -3,842
Long-term & Short-term
loans		 9,992* -6,351 -14,382
Investments and others 13,722** 18,740 -4,463
Ending Balance 23,015 9,102 3,104
Free Cash Flow(1) -9,800 -6,391 14,680

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

  • Mainly due NT$15.68 billion from ECB issuance & debt repayment

  • ** Mainly from the proceeds of Micron shares disposal of NT$11.0 billion Annual financial numbers are audited by CPA and approved by BoD

September 4-5 2017 © 2017 Nanya Technology Corp.

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Debt Ratio & CAPEX

Debt to Asset Ratio

CAPEX

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60.1%
47.3%
41.5%
38.9%
37.5%
2014 2015 2016 Q1'2017 Q2'2017
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  • Debt ratio 41.5% at the end of the 30th of June, 2017

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C
NT$ Billion
34.3
22.3
12.2
6.1
2016 2017(E)
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  • NT$55.7B CAPEX approved by BoD for 20nm 38K WSPM migration

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September 4-5 2017 © 2017 Nanya Technology Corp.

Prod
20nm		 Prod
20nm
20nm Monthly
Wafers Input Plan		 • >10K / month in Q3’17
• 30K / month in Q4’17
• 38K / month in 1H’18
Product Delivery • 4Gb DDR3 shipment commenced in Q2’17
• 8Gb DDR4, 2Gb DDR3 in 2H’17
• 8Gb LPDDR3 offering in 1H’18
• LPDDR4X offering in 2H’18
Monthly Wafer Capacity
*WSPM: wafer starts per month		 • 20nm technology to reach 38K WSPM in 2018.
• Total capacity will amount to 68K WSPM (20nm + 30nm)
Product Line-up • DDR3/DDR4
• LPDDR3/LPDDR4X
• Custom

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September 4-5 2017 © 2017 Nanya Technology Corp.

Bit Shipment

Annual Bit Shipment Quarterly Bit Shipment

Bit Shipment (4Gb equiv.)

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~45%
150,000
20%
16%
Flat
-8.6%
0
2014 2015 2016 2017(E) 2018(E) 1Q'17 2Q'17 3Q'17(E) 4Q'17(E) 1Q'18(E) 2Q'18(E) 3Q'18(E) 4Q'18(E)
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  • Q3’17 bit shipment forecast to increase by mid single digits % and Q4 bit shipment to grow double digits

  • 2017 bit shipment growth is expected to be flat

  • Expected ~45% bit shipment growth in 2018, mainly contributed by 20nm conversion

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September 4-5 2017 © 2017 Nanya Technology Corp.

Outline

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01. DRAM Industry Landscape
02. NTC Overview
03. Business Strategy

22

September 4-5 2017 © 2017 Nanya Technology Corp.

Nanya Established Stronghold in Specialty

2017 DRAM Demand

Specialty DRAM Market Characteristics

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Consumer
20%
Auto &
Industrial
3%
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14%
Server
22%
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  • Increased customers basis

  • Diversified product spec

  • Long-life and stable supply

  • Demand growth

  • Solid in Consumer

  • Strong in Auto

  • Emerging (IoT…)

Source: Gartner, NTC

  • 20nm enhances Nanya Technology competitiveness in specialty market as well as participation in other major segments

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September 4-5 2017 © 2017 Nanya Technology Corp.

2018 Specialty DRAM Driving Forces

Application System
Shipment
(M set)		 2018/2017
DRAM Demand
Growth		 DRAM
Driving Force
Networking 421 27%
STB 316 37%
231 82% 128GB
~
512GB
DTV 228 17%
Auto 95 101% Infotainment
ADAS

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Source: Gartner, IHS, NTC MKT

September 4-5 2017 © 2017 Nanya Technology Corp.

Nanya Specialty DRAM Product Portfolio

Technology 30/42nm 20nm • • DDR/DDR2/DDR3 DDR3/DDR4 • • Spec. LPDDR1/LPDDR2/LPDDR3 LPDDR3/LPDDR4X • • Custom Custom Density 512Mb/1Gb/2Gb/4Gb 1Gb/2Gb/4Gb/6Gb/8Gb Grade Commercial/Industrial/Automotive Lifecycle Long-life and stable supply

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September 4-5 2017 © 2017 Nanya Technology Corp.

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Key Takeaways

  • Tight supply continued in Q4’17, solid ASP movement

  • 2018 DRAM market in balance and overall healthy environment

  • Nanya Technology Operation Focuses:

  • 20nm execution better than expected, >10% QoQ bit shipment growth in Q4’17

  • 20nm capacity ramp-up, ~45% YoY bit output in 2018 forecasted

  • 20nm product design and production efficiency to further enhance competitiveness

  • 20nm + 30/42nm comprehensive product offering & long-term commitment to specialty DRAM market

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September 4-5 2017 © 2017 Nanya Technology Corp.

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Thanks & Questions

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September 4-5 2017 © 2017 Nanya Technology Corp.

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