Taiwan Display Sector

DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES, ANALYST CERTIFICATIONS, LEGAL ENTITY DISCLOSURE AND THE STATUS OF NON-US ANALYSTS. US Disclosure: Credit Suisse does and seeks to do business with companies covered in its research reports. As a result, 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 making their investment decision.

12 June 2017 Asia Pacific/Taiwan

Equity Research Technology Hardware & Equipment

Taiwan Display Sector Research Analysts

Jerry Su

886 2 2715 6361

[email protected]

SUPPLY CHAIN RESEARCH

Beneficiaries from smartphone display

technology and form factor change

Figure 1: Smartphone display technologies continue to evolve

Source: Company data, Credit Suisse estimates

■ China smartphone build recovering. Recent data points and monthly sales suggest display component shipments for mid-end models have recovered since 2H of May. We expect the panel component pull in to sustain into 3Q for mid-end products (HD resolution, 16:9 aspect ratio), while new product launches with new technology (WQHD TFT, OLED) and 18:9 form factors starting from 3Q17 should support the 2H17 revenue recovery for the smartphone display supply chain. Our checks also suggest JDI is planning to adopt full in-cell design, on top of its current hybrid in-cell. We think FocalTech will be the major beneficiary on smartphone recovery.

■ 18:9 displays with in-cell touch to take off in 2H17. Panel makers and brands are working on the 18:9 aspect ratio smartphone displays to achieve bigger viewing area. We expect the display component shipment to start from July and volume to further ramp in 2H17. We believe the 18:9 designs will proliferate into mid-end segments as panel makers are developing HD+ (1440 x 720) resolution panels, as well as integrating with the in-cell touch feature. We think this trend will be positive for Taiwan driver IC makers as they have higher share and exposure for this segment.

■ DDI backend has more opportunity in OLED. Driver IC makers have been developing OLED DDI with panel makers, although we believe Samsung will still dominate the OLED shipments from now to 2020. We think driver IC backend could have more opportunities on OLED given they work with multiple design houses and there has been limited 12” bumping capacity additions in the past few years. Among the two backend makers, we prefer ChipMOS over Chipbond given it has been qualified by Samsung for OLED iPhone DDI bumping with new opportunities from Maganachip.

■ Top picks ChipMOS and FocalTech. We think ChipMOS and FocalTech are better plays for the smartphone demand recovery and display technology/form factor change. We rate ChipMOS with OUTPERFORM and TP of NT$40, based on 1.7x 12M P/B. We also have an OUTPERFORM rating on FocalTech and our TP of NT$44 is based on 15x 12M P/E.

2011 2012 2013 2014 2015 2106 2017 2018

Generation3G 4G Pre-5G

Display size<4" 4-5" 5"+

Display technologyTFT In-cell and OLED

Form factor16:9 18:9

12 June 2017

Taiwan Display Sector 2

Focus charts and table

Figure 2: China smartphone running at 5% YTD Figure 3: Hannstar revenue started recovering…

Source: MIITs Source: Company data

Figure 4: FocalTech is ahead of TW peers on TDDI Figure 5: In-cell TDDI/IDC lifting FocalTech’s GM

Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates

Figure 6: Samsung’s Galaxy S8 offers 84% screen to body ratio by adopting

18.5:9 aspect ratio OLED display

Source: Company data

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Display: 5.1" 2560 x 1440 Display: 5.8" 2960 x 1440

Aspect ratio: 16:9 Aspect ratio: 18.5:9

142.4 mm 148.9 mm

Substrate: Rigid OLED Substrate: flexible OLED

Scree to body ratio: 72% Scree to body ratio: 84%

Weight: 152 g Weight: 155 g

Galaxy S7 Galaxy S8

68.1 mm69.6 mm

5.1" 5.8"

12 June 2017


Beneficiaries from smartphone display technology and form factor change We believe the China smartphone demand has recovered since 2H of May, supported by

improving demand and inventory restocking for mid-end models. This is supported by the

improving May revenue for Novatek and HannStar. We expect the panel component pull in

to continue into June and the new product launches with new technology and form factors

should support the 2H17 revenue recovery for the display smartphone supply chain in

Taiwan.

OLED proliferation has been well expected by the industry but the limited OLED panel

supply to non-Samsung and non-Apple smartphone makers in 2017-18 will offer some

opportunities for the display supply chain as the smartphone design shifts toward in-cell

and 18:9 form factor. We expect to see more adoption of in-cell TFT smartphones with

both 16:9 and 18:9 design in 2H17, especially the proliferation into mid-end HD segment

could further drive the in-cell TDDI volume.

Figure 7: Smartphone display technologies continue to evolve


Within the Taiwan display universe, we believe driver IC supply chains are better plays

over panel makers for the in-cell TDDI and 18:9 form factor themes as smartphone only

accounts for 5-10% of AUO and INX’s revenue. We think ChipMOS and FocalTech could

benefit more over its peers on this theme given ChipMOS is already a supplier for TDDI's

backend and is entering Samsung’s DDI backend for OLED iPhone, while FocalTech is

further ahead on in-cell TDDI and has higher sales exposure over Novatek/Himax.

China smartphone panel build recovering; in-cell

TDDI shipment to further increase in 2H17

China smartphone builds have slowed down since late 1Q17 with leading vendors Huawei,

Oppo, Vivo, etc., revising down their forecasts from overly aggressive early targets and

inventory management, as well as delaying the new model launches to change the display

form factor from the 16:9 to 18:9 aspect ratio. The inventory overbuilt and delay product

launch have impacted the panel component shipments from late March but recent data

points and monthly sales suggest display component shipments for mid-end models have

recovered since 2H of May.

Based on our industry checks, we expect the panel component pull in to sustain into 3Q

for mid-end products (HD resolution, 16:9 aspect ratio) and new product launches with

new technology (WQHD TFT, OLED) and 18:9 form factors starting from 3Q17 to support

the 2H17 revenue recovery for the smartphone display supply chain.

2011 2012 2013 2014 2015 2106 2017 2018

Generation3G 4G Pre-5G

Display size<4" 4-5" 5"+

Display technologyTFT In-cell and OLED

Form factor16:9 18:9

China smartphone display build has

recovered since 2H of May

12 June 2017


Figure 8: China smartphone running at 5% YTD Figure 9: Hannstar revenue started recovering…

Source: MIITs Source: Company data

Taiwanese driver IC makers to catch up on TDDI

Our checks suggest Huawei, Oppo/Vivo, Xiaomi, etc., are launching more smartphone

models in 2H17 with in-cell panels. Although Synaptics (Not Covered) has been ahead of its

Taiwanese peers for in-cell TDDI shipments since 2H16, the aggressive ramp of less TFT

masks HD-resolution in-cell panel in 2H17 could be more favourable for FocalTech and

Novatek given the faster development progress and better pricing vs Synaptics. Based on the

comments from Chipbond and ChipMOS, total TDDI shipments by Taiwanese DDI makers is

~30% of Synaptics in 2Q17 but could catch up in 4Q17 (60% of Synaptics) as they ramp the

TDDI shipments for mid-end panels.

Among the Taiwan driver IC makers, we think FocalTech could be the major beneficiary

on China smartphone demand recovery and proliferation of TDDI as it has over 90% sales

exposed to smartphone (vs 20-25% for Novatek and Himax), while in-cell TDDI/IDC

volume will also see more significant growth in 2H17 as it ramps up the six-masks a-Si HD

TDDI/IDC. We estimate FocalTech to ship ~60 mn units of TDDI in 2017 and the volume

will double to ~120 mn units in 2018.

Figure 10: FocalTech is ahead of TW peers on TDDI Figure 11: In-cell TDDI/IDC lifting FocalTech’s GM

Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates

Japan Display is considering adopting full in-cell solution

Moreover our industry checks also suggest, Japan Display, who adopts the hybrid in-cell

structure with separate touch IC and DDI, is now considering adopting full in-cell with

single TDDI chip. We think this might be due to the lower cost structure of full in-cell

panels (less material and better productivity), and more efficient supply chain management

given adopting full in-cell will allow panel makers to sell open-cell to module makers.

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FocalTech, Novatek, and Himax to further

ramp their TDDI output in 2H17

JDI shifting to full in-cell could be positive

for FocalTech and Novatek

12 June 2017


Our checks indicated FocalTech and Novatek, among our covered names, could have

higher chances for supplying full in-cell TDDI to Japan Display given their TDDI chip is

ready and they are currently the touch IC or driver IC supplier for Japan Display’s hybrid

in-cell solution. We think Parade could be impacted as it currently supplies the touch IC for

hybrid in-cell but its TDDI solution is still under development.

Figure 12: Hybrid in-cell vs self-capacitance in-cell


18:9 displays with in-cell touch to take off in 2H17

High screen-body ratio handsets (18:9 form factor) from LG’s G6 and Samsung’s Galaxy

S8 have received strong pre-ordering in March-April. Compared to the conventional 16:9

form factor, 18:9 design offers the advantage of a bigger screen, narrow bezel, better

holding experience, and better ASP/margins. The drawbacks for the new form factor are

limited software/app support for the new screen format and supply constraint on panel

supply. The OLED iPhone that will be announced in 2H17 will also have a similar aspect

ratio, as well as other flagship models from LG (V30), Google (Pixel), and Samsung

(Galaxy Note 8). This has been forcing the Chinese smartphone makers to change their

design since March to meet this trend.

Figure 13: Multiple new models will adopt 18:9 display in 2H17

Brand LGE1 Samsung LGE Google Apple Samsung OPPO

Model G6 Galaxy S8 & S8+ V30 Pixel iPhone 8 Pro Note 8 TBD

Launch date Mar-2017 Apr-2017 Aug-2017 Sep-2017 Sep-2017 Sep-2017 Sep-2017

Display type LCD OLED OLED OLED OLED OLED LCD

Display size 5.7” 5.8” &6.2” 5.99” 5.99” 5.85” 6.2” 5.99”

Aspect ratio 18:9 18.5:9 18:9 18:9 19.5:9 18.5:9 18:9


Most of the panel makers in Taiwan and China are not prepared for this, as well as the

driver IC makers, and the supply of 18:9 smartphone panels was in shortage in 2Q.

Nevertheless, our industry checks suggest panel makers are catching up and AUO, BOE,

Tianma, etc., will have the panel ready in 2H17, while driver IC makers are starting to

prepare some shipment for Oppo/Vivo in early 3Q for their new product launch in late 3Q-

early 4Q.

TDDI/IDC

12 June 2017


More importantly, we believe the 18:9 designs will not just be adopted on the higher

resolution panels (FHD+/WQHD+), as our supply chain checks indicated many

smartphone makers are planning to adopt HD+ panels (1440 x 720) for mid-range

products. Panel makers also intends to integrate the in-cell touch function onto the new

18:9 HD+ displays, which we believe will benefit Taiwan driver IC makers as they have

higher market share and exposure for this segment.

Figure 14: Samsung’s Galaxy S8 offers 84% screen to body ratio by adopting

18.5:9 aspect ratio OLED display

Source: Company data

Based on our channel checks, we estimate over half of the new 18:9 TFT models in 2H17

will be adopting COG (chip-on-glass) bonding technology for mid-end applications, while

the balance (30-40%) will be using COF (chip-on-film) bonding technology for higher

resolution panels. Nevertheless, the one or two-layers metal film for COF bonding would

add US$1-3 additional material costs, and currently only Steco (Samsung’s subsidiary) is

able to supply the two-layer metal film. For flexible OLED display, the bonding technology

has already shifted to COP (chip on plastic).

Longer term, we think the bonding technology will further shift to COG for ~2mm bezel (vs

currently ~4mm) as panel makers and driver IC makers redesign the panels and chips for

further cost reduction. We think COF bonding will be limited to higher resolution TFT

(FHD/WQHD) and OLED panels for ultra slim design, and will also benefit driver IC

backend as they could enjoy better value-add on COF bonding processing. We think the

18:9 displays with in-cell touch will become the new selling point for the mid-range

smartphone starting from 2H17.

Display: 5.1" 2560 x 1440 Display: 5.8" 2960 x 1440

Aspect ratio: 16:9 Aspect ratio: 18.5:9

142.4 mm 148.9 mm

Substrate: Rigid OLED Substrate: flexible OLED

Scree to body ratio: 72% Scree to body ratio: 84%

Weight: 152 g Weight: 155 g

Galaxy S7 Galaxy S8

68.1 mm69.6 mm

5.1" 5.8"

18:9 designs could proliferate into mid-

range segment

COG will be the mainstream for DDI

bonding for 18:9, while COF/COP will be for

high-end designs

12 June 2017


Figure 15: High-end panels will adopt COF (TFT) and COP (OLED) to meet the

18:9 narrow bezel trend

Source: IHS, Credit Suisse estimates

DDI backend has more opportunity on OLED

Chinese panel makers have been aggressive on building new OLED fabs and the capacity

is expected to be on-line by 2018. Although Samsung will still dominate the OLED panel

output in the next several years, the ramp up of OLED capacity by LGD and other Chinese

makers benefit Taiwan driver IC supply chain as they have been engaged with these panel

makers on developing OLED driver ICs.

Figure 16: Summary of announced OLED fabs in Taiwan and China

Company name Fab location Substrate size (mm) Gen K Capacity/month Status

AUO Linko, Taiwan 620 x 750 3 8 MP

AUO Singapore 730 x 920 4.5 15 MP

BOE Ordos, China 1300 x 1500 5.5 4 MP

BOE Chengdu, China 1500 x 1850 6 24 (max 45) 1H18 MP

BOE Mianyang, China 1500 x 1850 6 48 2019 MP

Tianma Shanghai, China 1300 x 1500 5.5 4( max 15) MP

Tianma Wuhan, China 1500 x 1850 6 45 3Q17 MP

EverDisplay Shanghai, China 730 x 920 4.5 18 (21 max) MP

EverDisplay Shanghai, China 1500 x 1850 6 30 2019 MP

GoVisionox Kunshan, China 1300 x 1500 5.5 15 MP

GoVisionox Guan, China 1500 x 1850 6 30 Dec 2018 MP

Truly Huizhou, China 730 x 920 4.5 15 (max 30) 4Q16 MP

Truly Huizhou, China 1500 x 1850 6 TBC TBC

CSOT Wuhan, China 1500 x 1850 6 15 (30 max) 4Q19 MP

Royole Shenzhen, China 1300 x 1500 5.5 7.5 (15 max) 2H17


For the fabless IC makers, Himax shipped HD-resolution OLED DDI to Samsung in 1H16

but the volume dropped to a minimum as Samsung decided to keep the supplies in Korea

(Samsung LSI and Magnachip). Himax is now leveraging its experience for developing

OLED DDI with Samsung to work with Japanese and Chinese OLED makers for 2018

12 June 2017


projects. Novatek also developed a FHD OLED driver IC for Samsung in 2H16 but the

volume didn’t pick up for the same reason as mentioned. However, it has been working

with LGD and Chinese OLED makers (Tianma, BOE, EDO) in 2017 and could start seeing

some revenue contribution from 2H17. Its market share could further increase in 2018 if

these OLED customers successfully ramp up their output.

Other DDI makers like Raydium, Synaptics and Sino Wealth are also working on OLED

DDI with various panel customers. Synaptics has been working with LGD and Japan

Display on OLED panels, but the volume will likely remain small as compared to their

overall scale in 2017. Nevertheless, industry observers have indicated Synaptics is more

ahead than other vendors on high-end OLED DDI. Raydium and Sino Wealth are more

focused on Chinese OLED makers but we think they might face more competition from

Synaptics, Novatek, and Himax in 2018 as they have stronger technology and engineering

resources.

Figure 17: OLED capacity growth will be driven by Samsung and Chinese

makers


ChipMOS to benefit more over Chipbond

We think the driver IC backend makers could have more opportunities on OLED given

they work with multiple design houses and there has been limited 12” bumping capacity

additions in the past few years. We think ChipMOS will be a better play over Chipbond on

this theme, especially since it has just been qualified by Samsung for the iPhone OLED

DDI. We estimate this new business will account for 2% of ChipMOS’ monthly sales

initially and the revenue contribution could grow 2-3x by end of 2017 as Samsung

outsources more 12” bumping to ChipMOS. It is also engaged with Magnachip for the

OLED DDI and is currently under qualification process. We estimate the revenue

contribution for ChipMOS could be around 5-10% level as it will be providing turnkey

service (bumping, wafer testing, COG/COF, and final testing) for Magnachip (vs bumping

only for Samsung). We think it will take longer time to complete the qualification process

(~6 months) given the complexity of the reliability tests.

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2010 2011 2012 2013 2014 2015 2016 2017E 2018E 2019E 2020E

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Samsung Display LG Display AUO BOE GoVisionox EverDisplay JDI

DDI backend are better plays on OLED DDI

ramp

12 June 2017


Figure 18: ChipMOS – quarterly P/L

(NT$ mn) 3Q16 4Q16 1Q17 2Q17E 3Q17E 4Q17E 2016 2017E 2018E

Revenue 4,769 4,667 4,560 4,638 4,616 4,742 18,388 18,557 19,653

Gross profit 966 962 817 994 1,004 1,001 3,642 3,816 4,497

Operating profit 559 510 1,054 616 626 616 1,999 2,913 2,961

Net profit 255 614 2,380 358 462 493 1,532 3,694 2,368

EPS (NT$) 0.28 0.69 2.68 0.40 0.52 0.56 1.71 4.16 2.76

Gross margin (%) 20.3 20.6 17.9 21.4 21.7 21.1 19.8 20.6 22.9

Operating margin (%) 11.7 10.9 23.1 13.3 13.6 13.0 10.9 15.7 15.1

Net margin (%) 5.3 13.2 52.2 7.7 10.0 10.4 8.3 19.9 12.0


Chipbond has been the sole driver IC backend supplier for TFT iPhone in the past years

and we estimate this has accounted for ~12% of revenue in 2016. The adoption of OLED

from 2H17 will impact its revenue by 3% versus prior expectation of ~6% given the DDI

build for TFT iPhone remains strong in 1Q17-3Q17. We think the DDI build for TFT iPhone

will see greater decline from 4Q17, but we believe the revenue impact to Chipbond could

be offset by the increase TDDI volume and more RF bumping business from Avago.

Figure 19: Chipbond – quarterly P/L

(NT$ mn) 3Q16 4Q16 1Q17 2Q17E 3Q17E 4Q17E 2016 2017E 2018E

Revenue 4,660 4,872 4,229 4,277 4,777 4,893 17,256 18,177 18,927

Gross profit 1,266 1,191 955 966 1,200 1,261 4,169 4,381 4,654

Operating profit 927 885 672 676 871 939 2,769 3,158 3,366

Net profit 567 829 264 424 702 787 1,992 2,176 2,545

EPS (NT$) 0.87 1.28 0.41 0.65 1.08 1.21 3.07 3.35 3.92

Gross margin (%) 27.2 24.5 22.6 22.6 25.1 25.8 24.2 24.1 24.6


Net margin (%) 12.2 17.0 6.2 9.9 14.7 16.1 11.5 12.0 13.4


Top picks ChipMOS and FocalTech

We think ChipMOS and FocalTech could benefit more over its peers amid the OLED

proliferation, higher TDDI adoption, and China smartphone recovery. We favour ChipMOS

over Chipbond given ChipMOS is already a supplier for TDDI backend and is entering

Samsung’s DDI backend for OLED iPhone. We think FocalTech will benefit more over

Novatek and Himax as it is more ahead on in-cell TDDI and has higher sales exposure on

smartphone (90% vs 20-25% for Novatek/Himax). We rate ChipMOS with OUTPERFORM

and TP of NT$40, based on 1.7x 12M P/B. We also have an OUTPERFORM rating on

FocalTech and our TP of NT$44 is based on 15x 12M P/E.

Figure 20: FocalTech – quarterly P/L

NT$ mn 3Q16 4Q16 1Q17 2Q17E 3Q17E 4Q17E 2016 2017E 2018E

Revenue 3,056 2,694 2,161 2,506 3,138 3,207 11,018 11,011 11,903

Gross profit 628 627 498 563 758 825 2,266 2,643 3,106

Operating profit 103 112 16 60 243 310 210 629 1,096

Net profit 93 145 (8) 49 230 301 213 572 995

EPS (NT$) 0.32 0.49 (0.03) 0.16 0.78 1.01 0.72 1.93 3.35

Gross margin (%) 20.5 23.3 23.0 22.5 24.1 25.7 20.6 24.0 26.1


Net margin (%) 3.0 5.4 (0.4) 1.9 7.3 9.4 1.9 5.2 8.4


12 June 2017


Companies Mentioned (Price as of 09-Jun-2017) AU Optronics (2409.TW, NT$12.15) Alphabet (GOOGL.OQ, $1004.28) Apple Inc (AAPL.OQ, $154.99) BOE Technology Group Co. Ltd (000725.SZ, Rmb4.05) ChipMOS Technologies Inc. (8150.TW, NT$33.25, OUTPERFORM, TP NT$40.0) Chipbond (6147.TWO, NT$44.8) FocalTech Corporation, Ltd. (3545.TW, NT$35.6, OUTPERFORM, TP NT$44.0) Hannstar Display (6116.TW, NT$8.33) Himax Technologies, Inc. (HIMX.OQ, $8.53) Japan Display (6740.T, ¥206) LG Display Co Ltd. (034220.KS, W36,700) LG Electronics Inc (066570.KS, W88,300) Magnachip (MX.N, $9.2) Novatek Microelectronics Corp Ltd (3034.TW, NT$124.5) Raydium (3592.TWO, NT$66.49) Samsung Electronics (005930.KS, W2,305,000) Sino Wealth (300327.SZ, Rmb35.01) Synaptics (SYNA.OQ, $64.25) Tianma Microelectronics Co. Ltd (000050.SZ, Rmb17.89) Truly International (0732.HK, HK$2.68)

Disclosure Appendix

Analyst Certification I, Jerry Su, certify that (1) the views expressed in this report accurately reflect my personal views about all of the subject companies and securities and (2) no part of my compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report.

3-Year Price and Rating History for ChipMOS Technologies Inc. (8150.TW)

8150.TW Closing Price Target Price

Date (NT$) (NT$) Rating

11-Jul-14 40.70 52.00 O

12-Nov-14 38.85 53.00

13-Mar-15 47.00 56.50

11-Aug-15 30.25 42.00

09-Sep-15 33.90 R

08-Nov-16 24.00 NR

18-Nov-16 25.85 32.00 O

11-May-17 27.40 33.00

09-Jun-17 33.25 40.00

* Asterisk signifies initiation or assumption of coverage.

O U T PERFO RM

REST RICT ED

N O T RA T ED

3-Year Price and Rating History for FocalTech Corporation, Ltd. (3545.TW)

3545.TW Closing Price Target Price

Date (NT$) (NT$) Rating

24-Jul-14 65.43 457.34 O

13-Oct-14 52.47 368.42

25-Feb-15 48.28 50.82 N

16-Apr-15 42.11 38.11 U

18-May-15 35.95 35.57 N

05-Aug-15 27.76 32.40

04-Nov-15 35.83 25.50

19-Jan-16 28.75 31.00

03-Aug-16 30.50 33.00

02-Nov-16 31.95 45.00 O

02-Mar-17 40.85 47.00

01-May-17 37.30 45.00


O U T PERFO RM

N EU T RA L

U N D ERPERFO RM

12 June 2017


3-Year Price and Rating History for LG Display Co Ltd. (034220.KS)

034220.KS Closing Price Target Price

Date (W) (W) Rating

23-Jul-14 32,700 26,000 N

15-Oct-14 32,250 26,000 U

04-Dec-14 34,500 27,000

28-Jan-15 36,050 29,000

18-Jun-15 26,450 27,000 N

23-Jul-15 22,950 26,000

31-Aug-15 23,050 25,800

22-Oct-15 23,550 25,600

06-Jan-16 23,100 25,300

27-Jan-16 22,800 24,000

17-May-16 24,400 23,700

27-Jul-16 30,450 25,800

24-Jan-17 31,750 27,000

26-Apr-17 31,400 30,600


N EU T RA L

U N D ERPERFO RM

3-Year Price and Rating History for LG Electronics Inc (066570.KS)


Date (W) (W) Rating

24-Jul-14 77,000 87,000 N

29-Oct-14 67,800 78,000

29-Jan-15 62,600 75,000

29-Apr-15 61,200 68,000

02-Jun-15 55,400 62,000

09-Jul-15 45,750 53,500

29-Jul-15 43,800 49,000

25-Aug-15 40,850 45,500

30-Oct-15 49,100 46,200

26-Jan-16 54,800 49,000

16-Mar-16 61,900 54,000

28-Apr-16 58,200 57,000

19-May-16 54,000 50,000

25-Jan-17 54,200 52,000

16-Mar-17 68,100 59,000

27-Apr-17 72,300 65,000


N EUT RAL

12 June 2017


3-Year Price and Rating History for Samsung Electronics (005930.KS)


Date (W) (W) Rating

07-Jul-14 1,292,000 1,740,000 O

08-Jul-14 1,295,000 1,720,000

28-Aug-14 1,242,000 1,700,000

07-Oct-14 1,162,000 1,680,000

03-Sep-15 1,122,000 1,630,000

29-Oct-15 1,325,000 1,785,000

11-Jan-16 1,152,000 1,690,000

28-Jan-16 1,145,000 1,550,000

01-Jun-16 1,333,000 1,702,000

28-Jul-16 1,507,000 1,790,000

15-Dec-16 1,759,000 2,400,000

24-Jan-17 1,908,000 2,650,000

09-Mar-17 2,010,000 2,900,000

23-May-17 2,246,000 3,150,000


O UT PERFO RM

The analyst(s) responsible for preparing this research report received Compensation that is based upon various factors including Credit Suisse's total revenues, a portion of which are generated by Credit Suisse's investment banking activities

As of December 10, 2012 Analysts’ stock rating are defined as follows: Outperform (O) : The stock’s total return is expected to outperform the relevant benchmark* over the next 12 months. Neutral (N) : The stock’s total return is expected to be in line with the relevant benchmark* over the next 12 months. Underperform (U) : The stock’s total return is expected to underperform the relevant benchmark* over the next 12 months. *Relevant benchmark by region: As of 10th December 2012, Japanese ratings are based on a stock’s total return relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractiv e, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. As of 2nd October 2012, U.S. and Canadian as well as European ratings are based on a stock’s total return relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. For Latin Ame rican and non-Japan Asia stocks, ratings are based on a stock’s total return relative to the average total return of the relevant country or regional benchmark; prior to 2nd October 2012 U.S. and Canadian ratings were based on (1) a stock’s absolute total return potential to its current share price and (2) the relative attractiv eness of a stock’s total return potential within an analyst’s coverage universe. For Australian and New Zealand stocks, the expected total return (ETR) calculation includes 12 -month rolling dividend yield. An Outperform rating is assigned where an ETR is greater than or equal to 7.5%; Underperform where an E TR less than or equal to 5%. A Neutral may be assigned where the ETR is between -5% and 15%. The overlapping rating range allows analysts to assign a rating that puts ETR in the context of associated risks. Prior to 18 May 2015, ETR ranges for Outperform and Underperform ratings did not overlap with Neutral thresholds between 15% and 7.5%, which was in operation from 7 July 2011. Restricted (R) : In certain circumstances, Credit Suisse policy and/or applicable law and regulations preclude certain types of communications, including an investment recommendation, during the course of Credit Suisse's engagement in an investment banking transaction and in certain other circumstances. Not Rated (NR) : Credit Suisse Equity Research does not have an investment rating or view on the stock or any other securities related to the company at this time. Not Covered (NC) : Credit Suisse Equity Research does not provide ongoing coverage of the company or offer an investment rating or investment view on the equity security of the company or related products.

Volatility Indicator [V] : A stock is defined as volatile if the stock price has moved up or down by 20% or more in a month in at least 8 of the past 24 months or the analyst expects significant volatility going forward.

Analysts’ sector weightings are distinct from analysts’ stock ratings and are based on the analyst’s expectations for the fundamentals and/or valuation of the sector* relative to the group’s historic fundamentals and/or valuation: Overweight : The analyst’s expectation for the sector’s fundamentals and/or valuation is favorable over the next 12 months. Market Weight : The analyst’s expectation for the sector’s fundamentals and/or valuation is neutral over the next 12 months. Underweight : The analyst’s expectation for the sector’s fundamentals and/or valuation is cautious over the next 12 months. *An analyst’s coverage sector consists of all companies covered by the analyst within the relevant sector. An analyst may cov er multiple sectors.

Credit Suisse's distribution of stock ratings (and banking clients) is:

Global Ratings Distribution

Rating Versus universe (%) Of which banking clients (%) Outperform/Buy* 44% (64% banking clients) Neutral/Hold* 39% (61% banking clients) Underperform/Sell* 14% (55% banking clients) Restricted 2% *For purposes of the NYSE and FINRA ratings distribution disclosure requirements, our stock ratings of Outperform, Neutral, a nd Underperform most closely correspond to Buy, Hold, and Sell, respectively; however, the meanings are not the same, as our stock ratings are determined on a relative basis. (Please refer to definitions above.) An investor's decision to buy or sell a security should be based on investment objectives, current holdin gs, and other individual factors.

12 June 2017


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Target Price and Rating Valuation Methodology and Risks: (12 months) for ChipMOS Technologies Inc. (8150.TW)

Method: Our 12-month forward target price of NT$40 for ChipMOS is based on 1.7x 12M P/B (price-to-book), the average multiple since 2014. We like ChipMOS as we expects its earnings to recover from 2017 and turnaround of Shanghai affiliate; we therefore rate the stock OUTPERFORM.

Risk: Key risks to our target price of NT$40 and OUTPERFORM rating for ChipMOS include: (1) delay turnaround of ChipMOS Shanghai; (2) more competition on pricing; (3) end demand slow down; and (4) share loss to peers.

Target Price and Rating Valuation Methodology and Risks: (12 months) for FocalTech Corporation, Ltd. (3545.TW)

Method: Our target price of NT$44 for FocalTech Corporation is based on 15x of 12M forward P/E, at the lower end of 12-20x long-term range for fabless IC design houses in Taiwan. We rate FocalTech OUTPERFORM as it is ahead on the IDC product ramp, which will lead to strong profit recovery.

Risk: Risks that could impede achievement of our NT$44 target price and OUTPERFORM rating for FocalTech include: (1) Better-than-expected demand for smartphone, (2) early ramp of its new products, such as integrated driver IC (IDC) and fingerprint sensor, and (3) better pricing environment.

Please refer to the firm's disclosure website at https://rave.credit-suisse.com/disclosures/view/selectArchive for the definitions of abbreviations typically used in the target price method and risk sections.

See the Companies Mentioned section for full company names

Credit Suisse currently has, or had within the past 12 months, the following as investment banking client(s): 8150.TW, 005930.KS, HIMX.OQ, 3034.TW, 034220.KS, AAPL.OQ, 6740.T, 066570.KS, GOOGL.OQ Credit Suisse provided investment banking services to the subject company (8150.TW, 005930.KS, 034220.KS, AAPL.OQ, 066570.KS, GOOGL.OQ) within the past 12 months. Credit Suisse currently has, or had within the past 12 months, the following issuer(s) as client(s), and the services provided were non-investment-banking, securities-related: 005930.KS, 034220.KS, AAPL.OQ, 066570.KS, GOOGL.OQ Credit Suisse has managed or co-managed a public offering of securities for the subject company (GOOGL.OQ) within the past 12 months. Within the past 12 months, Credit Suisse has received compensation for investment banking services from the following issuer(s): 8150.TW, 005930.KS, 034220.KS, AAPL.OQ, 066570.KS, GOOGL.OQ Credit Suisse expects to receive or intends to seek investment banking related compensation from the subject company (8150.TW, 005930.KS, HIMX.OQ, 3034.TW, 034220.KS, AAPL.OQ, 6740.T, 066570.KS, 2409.TW, 0732.HK, GOOGL.OQ) within the next 3 months. Within the last 12 months, Credit Suisse has received compensation for non-investment banking services or products from the following issuer(s): 005930.KS, 034220.KS, AAPL.OQ, 066570.KS, GOOGL.OQ As of the date of this report, Credit Suisse makes a market in the following subject companies (AAPL.OQ). A member of the Credit Suisse Group is party to an agreement with, or may have provided services set out in sections A and B of Annex I of Directive 2014/65/EU of the European Parliament and Council ("MiFID Services") to, the subject issuer (3545.TW, 8150.TW, 005930.KS, HIMX.OQ, 3034.TW, 034220.KS, 6147.TWO, 6740.T, 066570.KS, 000050.SZ, 000725.SZ, 2409.TW, 0732.HK, GOOGL.OQ) within the past 12 months. As of the end of the preceding month, Credit Suisse beneficially own 1% or more of a class of common equity securities of (3034.TW, 6147.TWO, 2409.TW). Credit Suisse beneficially holds >0.5% long position of the total issued share capital of the subject company (005930.KS, 034220.KS, 066570.KS, GOOGL.OQ).

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