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Nanya Technology Corporation Investor Presentation 2017

Jan 25, 2017

52061_rns_2017-01-25_b3649ded-236d-44a6-ae2f-e6ebd2110f07.pdf

Investor Presentation

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4Q’ 2016 Investor Conference Presentation to Investors and Analysts 25 Jan. 2017 Dr. Pei-Ing Lee , President & Spokesman

January 25, 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 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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January 25, 2017 © 2017 Nanya Technology Corp.

Agenda

01. Q4’16 Key Takeaways
02. Q4’16 Revenue & Results
03. 2016 Revenue & Results
04. Operations
05. Market Outlook
06. Business Outlook

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January 25, 2017 © 2017 Nanya Technology Corp.

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01

KEY TAKEAWAYS

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January 25, 2017 © 2017 Nanya Technology Corp.

Q4’16 Key Takeaways

  • Q4’16 Revenue of NT$ 12,096 million(M), 18.5% increased QoQ

  • ASP increased 12.1%

  • Gross margin 31.1%, Operating margin 21.2%

  • Recognized NT$ 20,045M pre-tax profit from Inotera share

disposal

  • Recognized NT$ 477M profit from Inotera’s earning in Q4’16

  • Completed the investment in Micron’s private placement with about 5.26% shareholding

  • Net income of NT$ 20,062M, Net margin 165.9%, EPS NT$ 7.33

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02 Q4’16 REVENUE & RESULTS

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January 25, 2017 © 2017 Nanya Technology Corp.

Financial Highlights

2015-2016 Quarterly Results

2016 Monthly Revenues

  • Unaudited number

  • Unaudited number

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＊
12,028 12,096
11,156
165.9% ＊
10,337 10,355 10,398 ＊
10,204 ＊ 4,263
8,933 3,758 3,496 [3,821 4,012 ]
3,3403,300
3,061 [3,252 ][3,456 ]
2,975 2,897
45.6%
52.3%
38.1% 18.1%17.8% 17.6%
13.7%
4.4%
Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Net operating revenues(Million NT$) Net Margin(%) Net operating revenues(Million NT$)
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Note:  17.6% net margin excluded IMI disposal gain

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January 25, 2017 © 2017 Nanya Technology Corp.

Quarterly Revenue Results

QoQ YoY
Q4 ’16 vs. Q3’16 Q4’16 vs. Q4’15
Revenue 18.5% 16.8%
Shipment 5.9% 17.7%
ASP 12.1% 2.2%
Exchange Rate -0.2% -2.9%

  • Revenue increase 18.5% quarter-over-quarter

  • Q4’16 bit shipment increased 5.9% and ASP increased 12.1% QoQ.

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January 25, 2017 © 2017 Nanya Technology Corp.

Q4’16 Financial Results Summary

Amount in Million NT$, Q4'16 Q3'16 QoQ Q4'15 YoY
except for EPS & BVPS Unaudited Audited Audited
Net Sales 12,096
100%		 10,204
100%		 18.5% 10,355_100%_16.8%
Gross Margin (Loss)Gross Margin(%) 3,767
31.1%		 3,171
_31.1%_18.8%		 3,089_29.8%_21.9%
Operating Income(Loss)Operating Margin(%)
2,570
21.2%		 1,699
_16.7%_51.2%		 1,860_18.0%_38.2%
EBITDA*EBITDA Margin (%) 4,075
33.7%		 3,215
_31.5%_26.7%		 3,326 _32.1%_22.5%
Non-operating Income (Expense) 18,842**155.8% -296
-2.9%
 25
0.2%
Income Tax Benefit (Expense) -1,347
-11.1%		 -2
0.0%
 -9
-0.1%
Net Income (Loss)Net Margin (%) 20,062
165.9%		 1,402
_13.7%_1331.3% 1,870_18.1%_973.0%
Earnings Per Share (NT$) 7.33*** 0.51
0.77
Book Value Per Share (NT$) 31.71 22.57
22.55
Shares Outstanding(million shares) 2,748 2,748
2,429

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

  • ** For Non-Operating income details, refer to page 10.

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

January 25, 2017 © 2017 Nanya Technology Corp.

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Q4’16 vs. Q3’16 Results Comparison

*Percentage Points

Q4'16 Q3'16 QoQ
(PPT*)		 Difference
Amount in Million NT$ Unaudited Audited
Net Sales 12,096 10,204 +18.5% •
ASP increased 12.1% QoQ
•
Bit shipment increased 5.9% QoQ
Gross Margin (Loss)
Gross Margin(%)		 3,767
31.1%		 3,17131.1%
0%		 •
20nm conversion impact to gross margin
•
Employee compensation
Operating Income (Loss)
Operating Margin(%)
2,570
21.2%		 1,69916.7%
+4.5%		 •
Operating expense decreased
NT$ 275M mainly from R&D expense
reduction
~~Januar 25 2017 © 2017 Nana T~~
Net Income (Loss)
Net Margin (%)		 ~~chnolo Cor~~
20,062165.9%		 1,40213.7% +152.2% ~~10~~
•
Recognized NT$ 20,045M (pre-tax) gain
on disposal of Inotera share
•
Recognized Inotera profit increased
NT$ 262M
(Q4: NT$ +477M, Q3: NT$ +215M)
•
Exchange gain increased NT$ 928M
(Q4: NT$ +480M, Q3: NT$ -448M)
•
Recognized NT$ 1,160M loss from asset
impairment
•
Recognized NT$ 872M estimated
remediation costs of Inotera's specific
environmental safety and facilities items
•
Q4 recognized NT$ 1,335M basic tax
expense of selling Inotera shares

~~10~~

~~January 25, 2017 © 2017 Nanya Technology Corp.~~

Operating Expenses

R&D Expenses

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(Million NT$)
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NT$2,478
NT$1,953
Q4, 579
Q4, 686
Q3, 1,030
Q3, 484
Q2, 354 Q2, 491
Q1, 429 Q1, 378
2015 2016
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Note: NT$ 539M R&D expense increased in Q3; mainly in 30nm design shrink mobile DRAM development and 20nm early preparation.

SG&A Expenses

(Million NT$)

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NT$1,866 NT$1,843
Q4, 543
Q4, 618
Q3, 421
Q3, 442
Q2, 425
Q2, 395
Q1, 477
Q1, 388
2015 2016
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Note: SG&G expense increased mainly from Employee compensation and other expense in Q4’16

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January 25, 2017 © 2017 Nanya Technology Corp.

Investment of Micron Private Placement

The Investment as of 2016/12/02 Accounting Treatment as of 2016/12/31 Accounting Treatment as of 2016/12/31
Volume
• 57,780,138 shares		 Account • Available-for-sales
financial assets
Purchase
price &
EX rate
• US$ 17.29 per share
(=NT$544.42752)
US$ 1: NT$ 31.488		 Market Price • US$ 21.92 per share
(=NT$707.55568)
US$ 1: NT$ 32.279
Investment
amount
• NT$ 31,457,097,237		 Market Value • NT$40,882,664,833
Shareholding
• about 5.26% of Micron’s
interest		 Measurement • Mark to market on
monthly basis
Lock-up
period
• Six months (till 2017/6/2)		 Unrealized
gain		 • NT$9,425,567,596

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January 25, 2017 © 2017 Nanya Technology Corp.

Q4’16 Cash Flows

Q4'16 Q3'16 Q4'15
(Unit: Million NT$) Unaudited &
Consolidated		 Audited &
Consolidated		 Audited &
Consolidated
Beginning Balance 13,248 15,961 3,747
Cash from Operating
Activities		 4,771 3,376 4,171
Capital expenditures -14,990 -4,791 -775
Long-term & Short-term
loans		 -8,463* 1,979 -3,994
Investments and others 14,471** -3,277 -46
Ending Balance 9,038 13,248 3,104
Free Cash Flow(1) -10,219 -1,415 3,397

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

  • Q4’16 Repayment on loan total NT$ 10.1B.

** Net proceeds NT$ 16B, (Disposal of IMI shares(NT$ 47.6B), Acquisition of Micron’s private placement (NT$ 31.5B)), Money market fund NT$ 2B.

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January 25, 2017 © 2017 Nanya Technology Corp.

Financial Highlights

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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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January 25, 2017 © 2017 Nanya Technology Corp.

Sales Breakdown by Application

Q4’16 Auto & IT accounted for 7.2% of total revenue.

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Auto
Auto
& IT
& IT
6.3%
Commodity 7.2% Commodity
Mobile 11.1% 7.9%
Mobile
18.4%
22%
Product Product
2016 Q3 2016 Q4
Consumer
Consumer
62.9%
64.2%
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03 2016 REVENUE & RESULTS

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2016 Financial Highlights

Net Income

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(Million NT$)
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Earnings Per Share

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(NT$)
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Book Value Per Share

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(NT$)
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＊
31.71
＊
＊
8.66
23,709 22.55
7.07
17,141
2015 2016 2015 2016 2015 2016
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  • Net income of NT$23.709B

  • Net Margin 57%

  • EPS NT$ 8.66, BVPS NT$ 31.71

  • Debt ratio 36.3% vs. 47% in 2015

  • Shipment up 20.3% YoY.

  • Cost /bit improved >10% YoY.

  • Recognized IMI disposal gain of

NT$ 20.04B

  • Unaudited number 17

January 25, 2017 © 2017 Nanya Technology Corp.

Annual Revenue & Net Margin

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* Unaudited number
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Net operating revenues(Million NT$) Net Margin(%)
57.5%
57.0%
39.1%
49,108
45,224
43,876
41,631
37,125 18%
33,882
-109% -111%
2011 2012 2013 2014 2015 2016
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January 25, 2017 © 2017 Nanya Technology Corp.

2016 Revenue Results

2016 vs. 2015
Revenue -5.1%
Shipment +20.3%
ASP -22.1%
Exchange Rate +1.2%

  • 2016 revenue decreased 5.1% YoY.

  • Bit shipments increased 20.3% YoY.

  • ASP decreased 22.1% YoY.

  • Revenue up 1.2% due to exchange rate.

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January 25, 2017 © 2017 Nanya Technology Corp.

2016 Income Statement

Y2016 Y2016 Y2015 Y2015 YoY
Amount: Million NT$ Unaudited &
Consolidated		 Audited &
Consolidated
Net Sales 41,631 100.0% 43,876 100.0% -5.1%
Cost of Goods Sold 28,757 69.1% 26,568 60.6%
Gross Margin 12,873 30.9% 17,308 39.4% -25.6%
SG&A Expenses 1,843 4.4% 1,867 4.3%
R&D Expenses 2,478 6.0% 1,954 4.5%
OperatingIncome 8,553 20.5% 13,487 30.7% -36.6%
Non-operating Income (Exp.) 17,160 41.2% 4,190 9.5%
Income before Tax 25,712 61.8% 17,677 40.3% 45.5%
Income Tax Benefit (Expense) -1,996 -4.8% -506 -1.2%
Profit from Continuing Operation 23,716 57.0% 17,171 39.1%
Income (Loss) from Discontinued
Operation		 0 0.0% 0 0.0%
Net income attributable to noncontrolling
interests		 7 0.0% 30 0.1%
Net Income attributable to NTC 23,709 57.0% 17,141 39.1% 38.3%
EPS(NT$) 8.66 7.07

January 25, 2017 © 2017 Nanya Technology Corp.

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04 OPERATIONS

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January 25, 2017 © 2017 Nanya Technology Corp.

2017 Revenue Breakdown Guidance

Applications Consumer & Specialty Auto & IT Low Power Server PC

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100%
8.7% PC
~10%
22.4%
Commodity 26.3%
17.4%
Low Power
20~30%
12.3%
7.2%
12.1%
Low Power Auto & IT
6.4%
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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January 25, 2017 © 2017 Nanya Technology Corp.

CAPEX & Bit Shipment

Capex

Bit Shipment (YoY)

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22.34
53%
NT$ Billion
11
14.99
28%
5.61 5.8 20%
3.84 16%
2 4.791
Down
1.689 Flat -8.6% High-single%
0.866
2011 2012 2013 2014 2015 2016 2011 2012 2013 2014 2015 2016 2017
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Capital Expenditure (CAPEX)

  • NT$ 14,990M Capex of Q4’16

  • NT$ 22,335M for 2016 Capex

  • Estimated 2017 CAPEX same level as 2016 (To be finalized in Q1’17)

  • Bit Shipment

  • Q4’16 bit shipment increased 5.9% QoQ

  • 2016 bit shipment increased 20.3% yoy

  • Estimated bit shipment decrease mid-teen % in Q1’17

  • 2017 bit shipment guidance to decrease high-single digits % yoy due to 20nm conversion

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January 25, 2017 © 2017 Nanya Technology Corp.

ECB Offering

Subject Issue US$ 500 million Zero Coupon Convertible Bond due 2022 Issue US$ 500 million Zero Coupon Convertible Bond due 2022
Issue Size & Coupon •
•		 Issue Amount: US$ 500 million
Coupon Rate: 0%
Listing • Singapore Exchange Securities Trading Limited
Issue Date • Jan. 24 2017
Maturity Date • Jan. 24, 2022
Initial Conversion Price • NT$ 52.47 per share
Yield to Put/ Maturity • 1.75%
Put Option Date • On January 24, 2020 (At the end of 3rdyear)
Call Option Period • At any time after January 24, 2020 (36 months from Issue Date)
• Converted Securities: The newly-issued common shares of Nanya Technology
Conversion • Conversion Period: At any time starting from the day immediately following the
40th day after the Issue Date to the 10th day prior to the Maturity Date.
(2017/3/6~2022/1/14)
Dilution Effect • If the bonds are fully converted, the dilution effect to original shareholders is
about 9.9%. (excluding book value adjustment)

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05 MARKET OUTLOOK

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DRAM Industry Environment

  • Limited supply growth contributed mainly by process conversion

Supply Side

  • Less than 20% supply growth in 2017 expected

  • DRAM demand relatively stable in 2017.

  • Mid-to-high end smartphones with high resolution and dual lens cameras requiring 4-6GB(8GB for flagship) driving DRAM demand.

Demand Side

  • Continues strong momentum in server market. Mobile devices including high-end, 2-in-1 ultra thin and gaming laptops demonstrating significant growth and 8GB as new standard.

  • Consumer DRAM content growth stimulated by high potentials from 4K TV over 30% penetration, IP cameras, smart watches and automotive applications, especially infotainment segment.

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06 BUSINESS OUTLOOK

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Business Outlook

  • 20nm on schedule to pilot run in Q1’17.

  • Expect Q1 2017 bit shipment to decrease due to 20nm

  • piloting.

Limited supply growth in DRAM and improving market conditions continue.

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Thanks & Questions

October 26, 2016 © 2016 Nanya Technology Corp.

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Q4’16 Consolidated Income Statement

Q4'16 Q3'16 QoQ Q4'15 YoY
Amount: Million NT$ Unaudited Audited Audited
Net Sales 12,096
100.0%		 10,204 100.0% 18.5% 10,355 100.0% 16.8%
Cost of Goods Sold 8,330
68.9%		 7,033
68.9%		 7,266
70.2%
Gross Margin 3,767
31.1%		 3,171
31.1%		 18.8% 3,089
29.8%		 21.9%
SG&A Expenses 618
5.1%		 442
4.3%		 543
5.2%
R&D Expenses 579
4.8%		 1,030
10.1%		 686
6.6%
Operating Income 2,570
21.2%		 1,699
16.7%		 51.2% 1,860
18.0%		 38.2%
Non-operating Income (Exp.) 18,842
155.8%		 -296
-2.9%		 25
0.2%
Income before Tax 21,412
177.0%		 1,403
13.8%		 1426.0%
1,885
18.2%		 1036.1%
Income Tax Benefit (Expense) -1,347
-11.1%		 -2
0.0%		 -9
-0.1%
Profit from Continuing Operation 20,065
165.9%		 1,401
13.7%		 1,876
18.1%
Income (Loss) from Discontinued
Operation		 0
0.0%		 0
0.0%		 0
0.0%
Net income attributable to
noncontrolling interests		 3
0.0%		 0
0.0%		 6
0.1%
Net Income attributable to NTC 20,062
165.9%		 1,402
13.7%		 1331.3%
1,870
18.1%		 973.0%
EPS(NT$) 7.33
 0.51 0.77
January 25, 2017 © 2017 Nanya Technology Corp.
Book Value Per Share(NT$)		 31.71
 22.57
 22.55 30

January 25, 2017 © 2017 Nanya Technology Corp.

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