Nanya Technology Corporation — Investor Presentation 2017

Cathay Securities 1Q2017 Investor Summit

Presentation to Investors & Analysts, March 16[th] , 2017 Joseph Wu, AVP & Deputy Spokesman

March 16, 2017 © 2017 Nanya Technology Corp.

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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Outline

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Oligopoly in DRAM Market

 From 2013, DRAM market fluctuation stabilized

1990 (more than 16 suppliers)

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2017 (3 plus major suppliers)
others
3.5% 2.6%
19.9%
48.2%
25.8%
Source: Gartner, NTC
Consolidation
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March 16, 2017 © 2017 Nanya Technology Corp.

Rational DRAM Supply Growth

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WW DRAM Wafer Start (K/M, 300mm) WW DRAM Wafer Start (K/M, 300mm)
1,500
WW DRAM Wafer Start (K/M, 300mm)
WW DRAM Wafer Output (K/M, 300mm)
1,304
1,213
1,111
1,098 1,082 1,096
1,058 1,080
1,000
500
0
2010 2011 2012 2013 2014 2015 2016 2017
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 Limited supply growth contributed mainly by advanced process conversion

 About 20% supply growth in 2017 expected

Source: DRAMeXchange, NTC MKT

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Diversification of Demand

 22% yoy bit demand increase in 2017 projected

 Ongoing growth momentum from cloud computing and mobile applications

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Y2016 Y2017 YoY Auto +
Industrial, 0.1%
Consumer
Bit
Unit : QTY(Mu) ｜ C/B(GB) QTY, C/B QTY C/B QTY(Y/Y) C/B(Y/Y) Growth Tablet & others,13.5%
0.2%
Mobile Y2010
Cloud Server 17 110 17.6 133 3.5% 20.9% 25.2% 8.5% PC +
3.8Bn upgrade
modules
Server (4Gb eq) 64.3%
+ WS
11.6%
PC 270 5.1 263 5.6 -2.6% 9.8% 7.0%
Tablet 180 2.1 164 2.6 -8.9% 23.8% 12.8%
P2P
Consumer &
PC + upgrade
Smart Auto + others, 14.6% modules, 18.9%
1,480 2.1 1,482 2.7 0.1% 28.6% 28.7%
Phone Industrial, 3.8%
Tablet, 3.8% Y2017
LCD 21.8Bn
223 1.8 219 2.0 -1.8% 11.1% 9.1%
TV Server +
(4Gb eq) WS, 21.3%
Mobile, 37.5%
M2M Car 91.3 0.6 93.8 2.1 2.7% 250.0% 259.6%
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Source: Gartner, IHS, NTC MKT

March 16, 2017 © 2017 Nanya Technology Corp.

DRAM Essential to New Data Era

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IoT
Servers
Tablets
Phones
IoT,
Wearables
Smart Car
Video
PC Era
SiP
Portable Big
Devices Data
系統級
Smart Home,
記憶體封裝
Smart Office, Main DRAM Features
Main DRAM Features
Smart City
 High Density for big data
 Low power consumption
 High Bandwidth for data transition
 High Bandwidth for data transit
 Small form factor by stacking
 DRAM allotment by application needs
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DRAM Pricing Fluctuation Stabilized

$/4Gb equiv., PC DRAM

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12.0 2008 ~ 2012 2013 ~ 2016
10.0
8.0
6.0
4.0
2.0
0.0 Source: DRAMexchange, NTC
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•  Limited DRAM supply expected in 2017, leads to healthy market condition

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Nanya Technology Overview

IDM Company

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Technology & Capacity Partnerships

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• Founded in 1995, • Technology : • Technology license form MU IPO in 2000

• • DRAM Process, Design,  Starts 20nm piloting in Option rights to license Micron Production & Sales Jan.’17 1x and 1y nm technologies and

• • Headquarters:  Plan to ramp 20nm to 38K products. New Taipei, Taiwan WSPM in 1H’18 •

• • Shareholding in Micron Employees: >2,600 • Capacity:

• • Acquired about 5.26% of Focus on value-added DRAM market  Current: 60,000 WSPM(12” ) Micron’s share.

• • Formosa Plastic Group  2018: 68,000 WSPM(12” ) (FPG) has 75.8% equity (38K 20nm + 30K 30nm)

• ownership

*WSPM: Wafer Starts Per Month

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Strong Performance

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Net Income(NT$ billion) EPS (NT$)
30 28.2 14
23.7
11.77
20
17.2
8.67
7
7.07
10 8.1
3.40
0 0
Y2013 Y2014 Y2015 Y2016
Net Income
8.1 28.2 17.2 23.7
(NT$ Billion)
EPS(NT$ ) 3.40 11.77 7.07 8.67
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2016 P&L Results

Company highlights in 2016

• NT$ 23.72B net income of 2016, EPS NT$ 8.67.

• Shipment increased 20.3% yoy, ASP decreased 22.1% yoy.

• Recognized NT$ 17.94B from Inotera share disposal.

• Debt ratio 37.5% at the end of the 31st of Dec, 2016.

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Financial Highlights

 Q1’17 gross margin likely to improve QoQ due to favorable market condition.

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Revenue (Million NT$) Net Income (Million NT$) Gross Margin(%)
30,000 70%
49%
44% [48%] 47% 42%
40% 32.7%
37% 31.1% 31.1%
30% 28.4%
18%
13%
-4%
-30%
-31%
-85%
-30,000
-102%
Revenue, Net Income (Million NT$)
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-110%

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Dividend for Y2016

Subject Cash dividend of NT$ 1.5 per common share

BoD Approval

• BoD approved cash dividend of NT$ 1.5 per common share on 2017/3/9 .

• • Will be proposed to the AGM for approval scheduled on 2017/5/26

• Cash yields 3.32% (3/14 closing price NT$ 45.15)

Payout ratio

• 17.3% (NT$ 1.5 / EPS NT$ 8.67)

• • 70.8% (exclude disposal gain of Inotera, NT$ 1.5 / EPS NT$ 2.12)

• Exclude disposal gain of Inotera, EPS was NT$ 2.12 (EPS NT$ 8.67 – NT$ 6.55)

Remark

• Net cash in NT$ 16B (Disposal of IMI shares(NT$ 47.5B), Acquisition of Micron’s private placement (NT$ 31.5B)).

• Expect NT$ 34.4 billion CAPEX in 2017 for 20nm ramping.

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20nm CAPEX & Bit Shipment

CAPEX

Bit Shipment (YoY)

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NT$19.84B Phase 3
~45%
20%
Phase 1 16%
NT$35.9B
+
Phase 2
Flat down single
-8.6% digits%
2013 2014 2015 2016 2017(E) 2018(E)
Y2016 ~ Y2018E
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 Capital Expenditure (CAPEX)

• Anticipated CAPEX of NT$55.74B for 38K WSPM 20nm migration.

• BoD approved 3rd stage 20nm CAPEX of NT$19.84B. (as of Mar. 9th, 2017)

• Estimated 2017 CAPEX of NT$ 34.3B

• 2017 CAPEX mainly from: 1. Cash on hand 2. US$5B ECB, 3. Cash from operating activities

 Bit Shipment

• 2017 bit shipment down single digits. Bit shipment resume positive(2018 +45% yoy, 2019 +15% yoy).

• 20nm cost per bit expected to cross over by end of 2017

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20nm Plan

• Plan to convert 38K WSPM to 20nm Technology. Total capacity increase to 68K WSPM.

• • 20nm volume production schedule in Q3’17, 30K wafers input expected in Q4’17.

• Cost cross over expected by end of 2017.

• Initial offering DDR4 & LPDDR4X.

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8Gb 8Gb
DDR4 LPDDR4X
Jul, 2015 Oct, 2016 Jan, 2017 2H, 2017 2018
•
Ground breaking of new HQ Jan. 2017 Piloting of 20nm Starts Ramping up to 38k in 1H’18
and additional 12” Fab for 20nm • 8Gb LPDDR4X Mass
Production in Q3’18
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• Ramping up to 38k in 1H’18

• • 8Gb LPDDR4X Mass Production in Q3’18

• New 12” Fab (FAB-3A-N) complete

• 20nm Volume Production

• 8Gb DDR4 Mass Production in Q4’18

• Ramping up to 30K in Q4’17

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Focus on Specialty DRAM Business

Consumer & Specialty Auto & IT Low Power Commodity

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Applications Consumer & Specialty Auto & IT Low Power Commodity
100%
8.7% PC
~10%
22.4%
26.3%
Commodity 17.4%
Low Power
20~30%
12.3%
7.2%
12.1%
Low Power Auto & IT
6.4%
(Mobile) 4.5% 8~9%
50%
Auto &
Industrial grade Consumer
66.7%
& Specialty
57.1% 58.9%
51~62%
Consumer &
Specialty
0%
2014 2015 2016 2017(E)
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* Revenue portion by Application

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DDR4/LPDDR4:Dual Mainstream

% of unit shipment

Mobile DRAM %

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100% 100%
LPDDR5
LPDDR2 21.7%
32.0%
80% LPDDR3 80%
LPDDR4
15.9%
1.6%
60% 60%
31.3%
DDR3
40% 40%
DDR4
41.5%
20% 20%
21.2%
0% 0%
2012 2013 2014 2015 2016 2017 2018 2019 2020
Others DDR2 DDR3 DDR4 DDR5
LP DDR2 LP DDR3 LP DDR4 LP DDR5 Mobile DRAM %
Source: Gartner, IHS, & NTC MKT
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*Others include GDDR5, Wide I/O(I&II), SDRAM, DDR, & Mobile SDR/DDR

 20nm required for initial DDR4 and LPDDR4 offering.

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DDR4 and LPDDR4 Applications

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DDR4
Consumer
High
Automotive
PC
LP DDR4
Server
Smart
Phone
Low
2014 2015 2016 2017 2018
Penetration Rate
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 Consumer and Automotive to adopt DDR4 and LPDDR4 from 2018.

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NTC Business Focus

High

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2017~
2~3 years : Customized KGD; Automotive and Industrial
Consumer
2013~2016
12~18 months: Component, KGD and SiP
PC
Price Volatility
6 months: Modules
Low 1995~2012
Short Product Development and Customer Engagement Period Long
Business Stability
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 Continuously concentrating on premium and longevity markets.

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High Growth from Automotive Demand

 ADAS & Autonomous Driving to boost automotive DRAM demand.

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Comprehensive DRAM Portfolio

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Specialty Mobile Auto & IT Custom
•
• DDR4 ~ DDR • LPDDR3 ~ LPDDR DDR4 ~ DDR2 • Foundry
•
• Packaged & SiP • KGD, PoP & MCP LPDDR3 ~ LPDDR • 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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SiP = System in Package

KGD = Known Good Die PoP = Package on Package MCP = Multiple-Chip Package

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March 16, 2017 © 2017 Nanya Technology Corp.

Nanya Business Outlook

• Limited DRAM supply expected in 2017, leads to healthy market condition.

• Raised Q1’17 ASP guidance up 10-15% QoQ.

• 20nm volume production scheduled Q3’17, target 30K WSPM Q4’17.

• Target 38K WSPM of 20nm in 1H 2018 to better meet customers’ needs and improve cost structure.

• DDR4 & LPDDR4 new product engagement.

• Nanya offers a comprehensive portfolio of DRAM solutions and continues to focus on specialty DRAM business.

• *WSPM: Wafer Starts Per Month

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Thanks & Questions

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March 16, 2017 © 2017 Nanya Technology Corp.